| ☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Taiwan Semiconductor Manufacturing Company Limited |
Republic of China | |
(Translation of Registrant’s Name Into English) |
(Jurisdiction of Incorporation or Organization) |
Title of Each Class |
Trading Symbol(s) |
Name of Each Exchange on Which Registered | ||
Common Shares, par value NT$10.00 each* |
TSM |
The New York Stock Exchange, Inc. |
Large Accelerated Filer ☑ |
Accelerated Filer ☐ |
Non-Accelerated Filer ☐ |
Emerging Growth Company ☐ |
U.S. GAAP ☐ |
International Financial Reporting Standards as issued by the International Accounting Standards Board ☑ |
Other ☐ |
* |
Not for trading, but only in connection with the listing on the New York Stock Exchange, Inc. of American Depositary Shares (“ADS”) representing such Common Shares |
| EX-2a.1 DESCRIPTION OF SECURITIES REGISTERED UNDER SECTION 12 OF THE EXCHANGE ACT |
EX-4.47 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO FAB14 & FAB18 LOCATED IN SOUTHERN TAIWAN SCIENCE PARK (EFFECTIVE JANUARY 1, 2022 TO DECEMBER 31, 2041) (ENGLISH SUMMARY) |
EX-4.48 LAND LEASE WITH CENTRAL SCIENCE PARK ADMINISTRATION RELATING TO TCZWM LOCATED IN TAICHUNG SCIENCE PARK (EFFECTIVE JUNE 21, 2021 TO JUNE 20, 2041) (ENGLISH SUMMARY) |
| • | general local and global economic conditions; |
| • | the political stability of our local region; |
| • | outlook of the major and emerging end markets for our products, such as smartphones, high performance computing, internet of things (“IoT”), automotive and digital consumer electronics; |
| • | the volatility of the semiconductor and electronics industry; |
| • | our ability to develop new technologies successfully and remain a technological leader; |
| • | the increased competition from other companies and our ability to retain and increase our market share; |
| • | overcapacity in the semiconductor industry; |
| • | our reliance on certain major customers; |
| • | the reliability of our information technology systems and resilience to any cyberattacks; |
| • | our ability to maintain control over expansion and facility modifications; |
| • | our ability to generate growth and profitability; |
| • | our ability to hire and retain qualified personnel; |
| • | our ability to acquire required equipment and supplies necessary to meet business needs; |
| • | our ability to protect our technologies, intellectual property rights and third-party licenses; |
| • | disruptive events, such as earthquakes or droughts; |
| • | the COVID-19 pandemic; |
| • | power and other utility shortages; |
| • | construction issues as we expand our capacity; and |
| • | fluctuations in foreign currency rates, in particular, any material appreciation of the NT dollar against the U.S. dollar, and our ability to manage such risks. |
ITEM 1. |
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS |
ITEM 2. |
OFFER STATISTICS AND EXPECTED TIMETABLE |
ITEM 3. |
KEY INFORMATION |
| • | significant penalties and legal liabilities, such as the denial of import or export permits or third party private lawsuits, criminal or administrative proceedings; |
| • | the temporary or permanent suspension of production of the affected products; |
| • | the temporary or permanent inability to procure or use certain production critical chemicals or materials; |
| • | unfavorable alterations in our manufacturing, fabrication and assembly and test processes; |
| • | challenges from our customers that place us at a significant competitive disadvantage, such as loss of actual or potential sales contracts in case we are unable to satisfy the applicable legal standard or customer requirement; |
| • | restrictions on our operations or sales; |
| • | loss of tax benefits, including termination of current tax incentives, disqualification of tax credit application and repayment of the tax benefits that we are not entitled to; and |
| • | damages to our goodwill and reputation. |
ITEM 4. |
INFORMATION ON THE COMPANY |
| Fab (1) |
Year of commencement of commercial production |
Wafer size |
The most advanced technology for volume production (2) | |||
| 2 |
1990 | 6-inch |
450 | |||
| 3 |
1995 | 8-inch |
150 | |||
| 5 |
1997 | 8-inch |
150 | |||
| 6 |
2000 | 8-inch |
110 | |||
| 8 |
1998 | 8-inch |
110 |
| Fab (1) |
Year of commencement of commercial production |
Wafer size |
The most advanced technology for volume production (2) | |||
| 10 |
2004 | 8-inch |
150 | |||
| 11 |
1998 | 8-inch |
150 | |||
| 12 |
2001 | 12-inch |
5 | |||
| 14 |
2004 | 12-inch |
16 | |||
| 15 |
2012 | 12-inch |
7 | |||
| 16 |
2018 | 12-inch |
16 | |||
| 18 |
2020 | 12-inch |
5 |
(1) |
Fabs 2, 3, 5, 8 and Fab 12 are located in Hsinchu Science Park. Fab 6, Fab 14, and Fab 18 are located in the Southern Taiwan Science Park. Fab 15 is located in Central Taiwan Science Park. Fab 11 is located in the Washington State, United States. Fab 10 is located in Shanghai, China and Fab 16 is located in Nanjing, China. |
(2) |
In nanometers, as of 2021 year-end. |
| • | installing and expanding capacity, mainly for 5-nanometer and 3-nanometer nodes, including building/facility expansion for Fab 21 and Fab 18; |
| • | expanding capacity for specialty technologies and advanced packaging, including building/facility expansion for the Kumamoto fab in Japan; and |
| • | investing in research and development projects for new process technologies. |
Year ended December 31, |
||||||||||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||||||||||
| Geography |
Net Revenue |
Percentage |
Net Revenue |
Percentage |
Net Revenue |
Percentage |
||||||||||||||||||
(NT$ in millions, except percentages) |
||||||||||||||||||||||||
| North America |
640,335 | 60% | 827,511 | 62% | 1,035,982 | 65% | ||||||||||||||||||
| Asia Pacific (1) |
96,512 | 9% | 144,448 | 11% | 225,950 | 14% | ||||||||||||||||||
| China |
208,101 | 20% | 233,783 | 17% | 164,552 | 10% | ||||||||||||||||||
| EMEA (2) |
67,568 | 6% | 70,214 | 5% | 89,010 | 6% | ||||||||||||||||||
| Japan |
57,469 | 5% | 63,299 | 5% | 71,921 | 5% | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
1,069,985 | 100% | 1,339,255 | 100% | 1,587,415 | 100% | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(1) |
China and Japan are excluded from Asia Pacific. |
(2) |
EMEA stands for Europe, Middle East, and Africa. |
Year ended December 31, |
||||||||||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||||||||||
| Platform |
Net Revenue |
Percentage |
Net Revenue |
Percentage |
Net Revenue |
Percentage |
||||||||||||||||||
(NT$ in millions, except percentages) |
||||||||||||||||||||||||
| Smartphone |
523,613 | 49% | 645,304 | 48% | 695,091 | 44% | ||||||||||||||||||
| High Performance Computing |
315,822 | 30% | 439,810 | 33% | 587,780 | 37% | ||||||||||||||||||
| Internet of Things |
86,343 | 8% | 110,355 | 8% | 133,006 | 8% | ||||||||||||||||||
| Automotive |
47,914 | 4% | 44,367 | 3% | 67,077 | 4% | ||||||||||||||||||
| Digital Consumer Electronics |
53,733 | 5% | 54,556 | 4% | 55,577 | 4% | ||||||||||||||||||
| Others |
42,560 | 4% | 44,863 | 4% | 48,884 | 3% | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
1,069,985 | 100% | 1,339,255 | 100% | 1,587,415 | 100% | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| • | customer-oriented culture through multi-level interaction with customers; |
| • | ability to deliver products of consistent quality, competitive ramp-up speed and fast yield improvement; |
| • | responsiveness to customers’ issues and requirements, such as engineering change and special wafer handling requests; |
| • | flexibility in manufacturing processes, supported by our competitive technical capability and production planning; |
| • | dedication to help reduce customer costs through collaboration and services, such as our multi-project wafer program, which combines multiple designs on a single mask set for cost-saving; and |
| • | availability of our online service which provides necessary information in design, engineering and logistics to ensure seamless services to our customers throughout the product life cycle. |
ITEM 4A. |
UNRESOLVED STAFF COMMENTS |
ITEM 5. |
OPERATING AND FINANCIAL REVIEWS AND PROSPECTS |
| • | worldwide demand and capacity supply for semiconductor products; |
| • | pricing; |
| • | production capacity; |
| • | technology development; and |
| • | fluctuation in foreign currency exchange rates. |
Year ended December 31, | ||||||
2019 |
2020 |
2021 | ||||
| Resolution |
Percentage of total wafer revenue (1) |
Percentage of total wafer revenue (1) |
Percentage of total wafer revenue (1) | |||
| 5-nanometer |
— | 8% | 19% | |||
| 7-nanometer |
27% | 33% | 31% | |||
| 10-nanometer |
3% | — | — | |||
| 16-nanometer |
20% | 17% | 14% | |||
| 20-nanometer |
1% | 1% | — | |||
| 28-nanometer |
16% | 13% | 11% | |||
| 40/45-nanometer |
10% | 9% | 7% | |||
| 65-nanometer |
8% | 5% | 5% | |||
| 90-nanometer |
3% | 2% | 2% | |||
| 0.11/0.13 micron |
2% | 3% | 3% | |||
| 0.15/0.18 micron |
8% | 7% | 6% | |||
| ≥0.25 micron |
2% | 2% | 2% | |||
| Total |
100% | 100% | 100% | |||
(1) |
The figure represents wafer revenue from a certain technology as a percentage of the total wafer revenue. |
| • | significant underperformance relative to historical or projected future operating results; |
| • | significant changes in the manner of our use of the acquired assets or our overall business strategy; and |
| • | significant unfavorable industry or economic trends. |
For the year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
| Net revenue |
100.0% | 100.0% | 100.0% | |||||||||
| Cost of revenue |
(54.0)% | (46.9)% | (48.4)% | |||||||||
| Gross profit |
46.0% | 53.1% | 51.6% | |||||||||
| Operating expenses |
||||||||||||
| Research and development |
(8.6)% | (8.2)% | (7.9)% | |||||||||
| General and administrative |
(2.0)% | (2.1)% | (2.3)% | |||||||||
For the year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
| Marketing |
(0.6 | )% | (0.5 | )% | (0.5 | )% | ||||||
| Total operating expenses |
(11.2 | )% | (10.8 | )% | (10.7 | )% | ||||||
| Other operating income and expenses, net |
0.0 | % | 0.0 | % | 0.0 | % | ||||||
| Income from operations |
34.8 | % | 42.3 | % | 40.9 | % | ||||||
| Income before income tax |
36.4 | % | 43.7 | % | 41.8 | % | ||||||
| Income tax expense |
(3.3 | )% | (5.5 | )% | (4.5 | )% | ||||||
| Net income |
33.1 | % | 38.2 | % | 37.3 | % | ||||||
| Other comprehensive loss for the year, net of income tax |
(1.1 | )% | (2.3 | )% | (0.4 | )% | ||||||
| Total comprehensive income for the year |
32.0 | % | 35.9 | % | 36.9 | % | ||||||
| Net income attributable to shareholders of the parent |
33.1 | % | 38.1 | % | 37.3 | % | ||||||
| Net income attributable to non-controlling interests |
0.0 | % | 0.1 | % | 0.0 | % | ||||||
For the year ended December 31, |
||||||||||||||||||||||||
2019 |
2020 |
% Change in NT$ from 2019 |
2021 |
% Change in NT$ from 2020 |
||||||||||||||||||||
NT$ |
NT$ |
NT$ |
US$ |
|||||||||||||||||||||
(in millions, except for percentages and wafer shipment) |
||||||||||||||||||||||||
| Net revenue |
1,069,985 | 1,339,255 | 25.2 | % | 1,587,415 | 57,225 | 18.5 | % | ||||||||||||||||
| Cost of revenue |
(577,283 | ) | (628,125 | ) | 8.8 | % | (767,878 | ) | (27,681 | ) | 22.2 | % | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||||||
| Gross profit |
492,702 | 711,130 | 44.3 | % | 819,537 | 29,544 | 15.2 | % | ||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||||||
| Gross margin percentage |
46.0 | % | 53.1 | % | — | 51.6 | % | 51.6 | % | — | ||||||||||||||
| Wafer (12-inch equivalent) shipment(1) |
10,068 | 12,398 | — | 14,179 | 14,179 | — | ||||||||||||||||||
(1) |
In thousands. |
For the year ended December 31, |
||||||||||||||||||||||||
2019 |
2020 |
% Change in NT$ from 2019 |
2021 |
% Change in NT$ from 2020 |
||||||||||||||||||||
NT$ |
NT$ |
NT$ |
US$ |
|||||||||||||||||||||
(in millions, except percentages) |
||||||||||||||||||||||||
| Research and development |
91,419 | 109,486 | 19.8% | 124,735 | 4,497 | 13.9% | ||||||||||||||||||
| General and administrative |
21,737 | 28,457 | 30.9% | 36,929 | 1,331 | 29.8% | ||||||||||||||||||
| Marketing |
6,349 | 7,113 | 12.0% | 7,559 | 272 | 6.3% | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||||||
| Total operating expenses |
119,505 | 145,056 | 21.4% | 169,223 | 6,100 | 16.7% | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||||||
| Percentage of net revenue |
11.2% | 10.8% | — | 10.7% | 10.7% | — | ||||||||||||||||||
| Other operating income and expenses, net |
(496 | ) | 710 | — | (333 | ) | (13 | ) | (146.9 | )% | ||||||||||||||
| Income from operations |
372,701 | 566,784 | 52.1% | 649,981 | 23,431 | 14.7% | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Margin |
34.8% | 42.3% | — | 40.9% | 40.9% | — | ||||||||||||||||||
For the year ended December 31, |
||||||||||||||||||||||||
2019 |
2020 |
% Change in NT$ from 2019 |
2021 |
% Change in NT$ from 2020 |
||||||||||||||||||||
NT$ |
NT$ |
NT$ |
US$ |
|||||||||||||||||||||
(in millions, except percentages) |
||||||||||||||||||||||||
| Share of profits of associates |
2,861 | 3,562 | 24.5 | % | 5,513 | 199 | 54.8 | % | ||||||||||||||||
| Interest income |
16,190 | 9,018 | (44.3 | )% | 5,708 | 206 | (36.7 | )% | ||||||||||||||||
| Other income |
417 | 661 | 58.5 | % | 973 | 35 | 47.2 | % | ||||||||||||||||
| Foreign exchange gain (loss), net |
2,095 | (3,303 | ) | (257.7 | )% | 13,663 | 492 | — | ||||||||||||||||
| Finance costs |
(3,251 | ) | (2,082 | ) | (36.0 | )% | (5,414 | ) | (195 | ) | 160.0 | % | ||||||||||||
| Other gains and losses, net |
(1,151 | ) | 10,106 | — | (7,388 | ) | (266 | ) | (173.1 | )% | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||||||
| Net non-operating income |
17,161 | 17,962 | 4.7 | % | 13,055 | 471 | (27.3 | )% | ||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||||||
For the year ended December 31, |
||||||||||||||||||||||||
2019 |
2020 |
% Change in NT$ from 2019 |
2021 |
% Change in NT$ from 2020 |
||||||||||||||||||||
NT$ |
NT$ |
NT$ |
US$ |
|||||||||||||||||||||
(in millions, except percentages) |
||||||||||||||||||||||||
| Income tax expense |
(35,835 | ) | (73,738 | ) | 105.8 | % | (70,155 | ) | (2,529 | ) | (4.9 | )% | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||||||
| Net income |
354,027 | 511,008 | 44.3 | % | 592,881 | 21,373 | 16.0 | % | ||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||||||
| Net income attributable to shareholders of the parent |
353,948 | 510,744 | 44.3 | % | 592,359 | 21,354 | 16.0 | % | ||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||||||
| Net margin attributable to shareholders of the parent |
33.1% | 38.1% | — | 37.3% | 37.3% | — | ||||||||||||||||||
For the year ended December 31, |
||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||
NT$ |
NT$ |
NT$ |
US$ |
|||||||||||||
(in millions) |
||||||||||||||||
| Net cash generated by operating activities |
615,139 | 822,667 | 1,112,161 | 40,092 | ||||||||||||
| Net cash used in investing activities |
(458,802 | ) | (505,782 | ) | (836,366 | ) | (30,150 | ) | ||||||||
| Net cash generated by (used in) financing activities |
(269,639 | ) | (88,615 | ) | 136,608 | 4,925 | ||||||||||
| Effect of exchange rate changes on cash and cash equivalents |
(9,114 | ) | (23,498 | ) | (7,584 | ) | (274 | ) | ||||||||
| Net increase (decrease) in cash and cash equivalents |
(122,416 | ) | 204,772 | 404,819 | 14,593 | |||||||||||
| • | installing and expanding capacity, mainly for 5-nanometer and 3-nanometer nodes; |
| • | expanding capacity for advanced packaging and specialty technologies; |
| • | expanding buildings/facilities for Fab 18 and a 300mm wafer fab in Arizona, U.S.; and |
| • | investing in research and development projects for new process technologies. |
Long-term debt |
||||
(in NT$ millions) |
||||
| During 2022 |
13,764 | |||
| During 2023 |
28,020 | |||
| During 2024 |
16,999 | |||
| During 2025 |
61,756 | |||
| During 2026 and thereafter |
637,361 | |||
Payments Due by Period |
||||||||||||||||||||
| Contractual Obligations |
Total |
Less than 1 Year |
1-3 Years |
3-5 Years |
More than 5 Years |
|||||||||||||||
(in NT$ millions) |
||||||||||||||||||||
| Short-Term Loans (1) |
114,767 | 114,767 | — | — | — | |||||||||||||||
| Long-Term Debt (2) |
757,900 | 13,764 | 45,019 | 192,612 | 506,505 | |||||||||||||||
| Capital Leases (3) |
24,302 | 2,372 | 3,896 | 3,385 | 14,649 | |||||||||||||||
| Other Obligations (4) |
185,994 | 30,613 | 155,381 | — | — | |||||||||||||||
| Capital Purchase or Other Purchase Obligations (5) |
1,280,304 | 1,185,814 | 94,490 | — | — | |||||||||||||||
| Total Contractual Cash Obligations |
2,363,267 | 1,347,330 | 298,786 | 195,997 | 521,154 | |||||||||||||||
(1) |
The maximum amount and average amount of short-term loans outstanding during the year ended December 31, 2021 were NT$154,439 million and NT$121,036 million, respectively. See note 18 to our consolidated financial statements for further information regarding interest rates and future repayment dates. |
(2) |
Represents corporate bonds payable and long-term bank loans. See note 19 and note 20 to our consolidated financial statements for further information regarding interest rates and future repayment of long-term debts. |
(3) |
Capital lease obligations are described in note 6, note 16, note 31 and note 33 to our consolidated financial statements. |
(4) |
Represents advance temporary receipts from customer. See “Item 4. Information on The Company — Commitments by Customers” and note 23 to our consolidated financial statements for further information. |
(5) |
Represents commitments for construction or purchase of equipment, raw material and other property or services. These commitments were not recorded on our statement of financial position as of December 31, 2021, as we had not received related goods or taken title of the property. |
For the year ended December 31, 2021 |
||||||||
NT$ |
US$ |
|||||||
(in millions) |
||||||||
| Net sales – external |
533,649 | 19,237 | ||||||
| Net sales – to subsidiaries outside of the Obligor Group |
1,041,097 | 37,531 | ||||||
| Total net sales |
1,574,746 | 56,768 | ||||||
| Gross profit |
788,629 | 28,429 | ||||||
| Income from continuing operations |
625,383 | 22,544 | ||||||
| Net income |
592,359 | 21,354 | ||||||
| Net income attributable to Obligor Group |
592,359 | 21,354 | ||||||
As of December 31, 2021 |
||||||||
NT$ |
US$ |
|||||||
(in millions) |
||||||||
| Assets |
||||||||
| Current assets – external |
753,642 | 27,168 | ||||||
| Current assets – due from subsidiaries outside of the Obligor Group |
143,110 | 5,159 | ||||||
| Total current assets |
896,752 | 32,327 | ||||||
| Non-current assets—external |
2,047,339 | 73,804 | ||||||
| Non-current assets – due from subsidiaries outside of the Obligor Group |
564,084 | 20,335 | ||||||
| Total non-current assets |
2,611,423 | 94,139 | ||||||
| Total assets |
3,508,175 | 126,466 | ||||||
| Liabilities |
||||||||
| Current liabilities – external |
701,370 | 25,284 | ||||||
| Current liabilities – due from subsidiaries outside the Obligor Group |
28,782 | 1,038 | ||||||
| Total current liabilities |
730,152 | 26,322 | ||||||
| Non-current liabilities – external |
501,401 | 18,075 | ||||||
| Non-current liabilities – due from subsidiaries outside of the Obligor Group |
127,362 | 4,591 | ||||||
| Total non-current liabilities |
628,763 | 22,666 | ||||||
| Total liabilities |
1,358,915 | 48,988 | ||||||
ITEM 6. |
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
| Name |
Position with our company |
Term Expires |
Years with our company |
|||||||
| Mark Liu |
Chairman |
2024 | 29 | |||||||
| C.C. Wei |
Vice Chairman/ Chief Executive Officer |
2024/ — | 24 | |||||||
| Ming-Hsin Kung |
Director (Representative of the National Development Fund) |
2024 | 2 | |||||||
| F.C. Tseng |
Director |
2024 | 35 | |||||||
| Sir Peter L. Bonfield |
Independent Director |
2024 | 20 | |||||||
| Kok-Choo Chen |
Independent Director |
2024 | 11 | |||||||
| Michael R. Splinter |
Independent Director |
2024 | 7 | |||||||
| Moshe N. Gavrielov |
Independent Director |
2024 | 3 | |||||||
| Yancey Hai |
Independent Director |
2024 | 2 | |||||||
| L. Rafael Reif (1) |
Independent Director |
2024 | 1 | |||||||
| Lora Ho |
Senior Vice President, Europe & Asia Sales and Human Resources |
— | 23 | |||||||
| Wei-Jen Lo |
Senior Vice President, Research & Development |
— | 18 | |||||||
| Rick Cassidy |
Senior Vice President, Corporate Strategy Office/ CEO & President, TSMC Arizona | — | 25 | |||||||
| Y.P. Chin |
Senior Vice President, Operations |
— | 35 | |||||||
| Y.J. Mii |
Senior Vice President, Research & Development |
— | 28 | |||||||
| J.K. Lin |
Senior Vice President, Information Technology and Materials Management & Risk Management | — | 35 | |||||||
| J.K. Wang |
Senior Vice President, Corporate Planning Organization | — | 35 | |||||||
| Cliff Hou |
Senior Vice President, Europe & Asia Sales and Research & Development/ Corporate Research | — | 25 | |||||||
| Kevin Zhang |
Senior Vice President, Business Development | — | 6 | |||||||
| Sylvia Fang |
Vice President, Legal and General Counsel/ Corporate Governance Officer |
— | 27 | |||||||
| Name |
Position with our company |
Term Expires |
Years with our company |
|||||||
| Connie Ma |
Vice President, Human Resources | — | 8 | |||||||
| Y.L. Wang |
Vice President, Operations/ Fab Operations I | — | 30 | |||||||
| Doug Yu |
Vice President, Pathfinding for System Integration & TSMC Distinguished Fellow | — | 28 | |||||||
| T.S. Chang |
Vice President, Operations/ Advanced Technology and Mask Engineering & TSMC Fellow | — | 27 | |||||||
| Michael Wu |
Vice President, Research & Development/ Platform Development | — | 26 | |||||||
| Min Cao |
Vice President, Research & Development/ Pathfinding | — | 20 | |||||||
| Marvin Liao |
Vice President, Operations/ Advanced Packaging Technology and Service | — | 20 | |||||||
| Y.H. Liaw |
Vice President, Operations/ Fab Operations II | — | 34 | |||||||
| Simon Jang |
Vice President, Research & Development/ Advanced Tool and Module Development | — | 29 | |||||||
| Wendell Huang |
Vice President, Finance and Chief Financial Officer/ Spokesperson | — | 23 | |||||||
| C.S. Yoo |
Vice President, Research and Development/ More than Moore Technologies | — | 34 | |||||||
| Jun He |
Vice President, Quality and Reliability | — | 5 | |||||||
| Geoffrey Yeap |
Vice President, Research & Development/ Platform Development | — | 6 | |||||||
| Chris Horng-Dar Lin |
Vice President, Corporate Information Technology and Chief Information Officer | — | 1 | |||||||
| Jonathan Lee (2) |
Vice President, Corporate Planning Organization | — | 15 | |||||||
| Arthur Chuang (3) |
Vice President, Operations/ Facility | — | 33 | |||||||
| L.C. Lu (3) |
Vice President, Research & Development/ Design & Technology Platform & TSMC Fellow | — | 22 | |||||||
| K.C. Hsu (4) |
Vice President, Research & Development/ Integrated Interconnect & Packaging | — | 1 | |||||||
(1) |
Dr. L. Rafael Reif joined our Board of Directors on July 26, 2021. |
(2) |
Mr. Jonathan Lee was promoted to Vice President on June 9, 2021. |
(3) |
Dr. Arthur Chuang and Dr. L.C. Lu were promoted to Vice President on August 10, 2021. |
(4) |
Mr. K.C. Hsu was hired on November 1, 2021, and was promoted to Vice President on November 9, 2021. |
| Name of Shareholders (1) |
Number of Common Shares Owned (2) |
Percentage of Outstanding Common Shares (2) |
||||||
| Mark Liu, Chairman |
12,913,114 | 0.05 | % | |||||
| C.C. Wei, Vice Chairman and Chief Executive Officer |
5,879,207 | 0.02 | % | |||||
| Ming-Hsin Kung, Director (Representative of the National Development Fund) (3) |
1,653,709,980 | 6.38 | % | |||||
| F.C. Tseng, Director |
29,472,675 | 0.11 | % | |||||
| Sir Peter L. Bonfield, Independent Director |
— | — | ||||||
| Kok-Choo |
— | — | ||||||
| Michael R. Splinter, Independent Director |
— | — | ||||||
| Moshe N. Gavrielov, Independent Director |
— | — | ||||||
| Yancey Hai, Independent Director |
— | — | ||||||
| L. Rafael Reif, Independent Director |
— | — | ||||||
| Lora Ho, Senior Vice President |
4,570,080 | 0.02 | % | |||||
| Wei-Jen |
1,441,127 | 0.01 | % | |||||
| Rick Cassidy, Senior Vice President/ CEO & President of TSMC Arizona |
— | — | ||||||
| Y.P. Chin, Senior Vice President |
6,920,122 | 0.03 | % | |||||
| Y.J. Mii, Senior Vice President |
1,000,419 | 0.00 | % | |||||
| J.K. Lin, Senior Vice President |
12,648,251 | 0.05 | % | |||||
| J.K. Wang, Senior Vice President |
2,603,947 | 0.01 | % | |||||
| Cliff Hou, Senior Vice President |
384,676 | 0.00 | % | |||||
| Kevin Zhang, Senior Vice President |
70,000 | 0.00 | % | |||||
| Sylvia Fang, Vice President & General Counsel/ Corporate Governance Officer |
700,285 | 0.00 | % | |||||
| Connie Ma, Vice President |
236,000 | 0.00 | % | |||||
| Y.L. Wang, Vice President |
218,535 | 0.00 | % | |||||
| Doug Yu, Vice President & TSMC Distinguished Fellow |
250,000 | 0.00 | % | |||||
| T.S. Chang, Vice President & TSMC Fellow |
173,781 | 0.00 | % | |||||
| Michael Wu, Vice President |
483,501 | 0.00 | % | |||||
| Min Cao, Vice President |
363,152 | 0.00 | % | |||||
| Marvin Liao, Vice President |
90,485 | 0.00 | % | |||||
| Y.H. Liaw, Vice President |
370,000 | 0.00 | % | |||||
| Simon Jang, Vice President |
350,695 | 0.00 | % | |||||
| Wendell Huang, Vice President & Chief Financial Officer/ Spokesperson |
1,651,756 | 0.01 | % | |||||
| C.S. Yoo, Vice President |
1,703,690 | 0.01 | % | |||||
| Jun He, Vice President |
9,000 | 0.00 | % | |||||
| Geoffrey Yeap, Vice President |
22,000 | 0.00 | % | |||||
| Chris Horng-Dar |
16,000 | 0.00 | % | |||||
| Jonathan Lee, Vice President |
334,458 | 0.00 | % | |||||
| Arthur Chuang,Vice President |
2,602,981 | 0.01 | % | |||||
| L.C. Lu, Vice President & TSMC Fellow |
130,227 | 0.00 | % | |||||
| K.C. Hsu, Vice President |
16,000 | 0.00 | % | |||||
(1) |
None of our directors and executive officers owned any stock option as of February 28, 2022. |
(2) |
The disclosed number of shares owned by the directors and executive officers did not include any common shares held in the form of ADS by such individuals as such individual ownership of ADSs had not been disclosed or otherwise made public. The disclosed number of shares owned by the directors and executive officers also did not include shares owned by their related parties. As of February 28, 2022, we held 1,387,000 of our common shares in treasury as a result of repurchases made pursuant to the Share Repurchase Program, and such repurchased shares are not included in the total number of outstanding common shares. See “Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers” for a further discussion. Except for the number of shares held by the National Development Fund, Executive Yuan, each of these individuals owned less than one percent of all common shares outstanding as of February 28, 2022. |
(3) |
Represented shares held by the National Development Fund, Executive Yuan. |
| Name |
Common Shares Underlying Outstanding RSAs (1) |
Exercise Price |
Grant Date |
Expiration Date |
||||||||||||
| C.C. Wei, Vice Chairman and Chief Executive Officer |
||||||||||||||||
| Lora Ho, Senior Vice President |
||||||||||||||||
| Wei-Jen Lo, Senior Vice President |
||||||||||||||||
| Y.P. Chin, Senior Vice President |
||||||||||||||||
| Y.J. Mii, Senior Vice President |
||||||||||||||||
| J.K. Lin, Senior Vice President |
||||||||||||||||
| J.K. Wang, Senior Vice President |
||||||||||||||||
| Cliff Hou, Senior Vice President |
||||||||||||||||
| Kevin Zhang, Senior Vice President |
||||||||||||||||
| Sylvia Fang, Vice President & General Counsel/ Corporate Governance Officer |
||||||||||||||||
| Connie Ma, Vice President |
||||||||||||||||
| Y.L. Wang, Vice President |
||||||||||||||||
| Doug Yu, Vice President & TSMC Distinguished Fellow |
||||||||||||||||
| T.S. Chang, Vice President & TSMC Fellow |
||||||||||||||||
| Michael Wu, Vice President |
1,387,000 | — | March 1, 2022 | — | ||||||||||||
| Min Cao, Vice President |
||||||||||||||||
| Marvin Liao, Vice President |
||||||||||||||||
| Y.H. Liaw, Vice President |
||||||||||||||||
| Simon Jang, Vice President |
||||||||||||||||
| Wendell Huang, Vice President & Chief Financial Officer/ Spokesperson |
||||||||||||||||
| C.S. Yoo, Vice President |
||||||||||||||||
| Jun He, Vice President |
||||||||||||||||
| Geoffrey Yeap, Vice President |
||||||||||||||||
| Chris Horng-Dar Lin, Vice President & Chief Information Officer |
||||||||||||||||
| Jonathan Lee, Vice President |
||||||||||||||||
| Arthur Chuang, Vice President |
||||||||||||||||
| L.C. Lu, Vice President & TSMC Fellow |
||||||||||||||||
| K.C. Hsu, Vice President |
||||||||||||||||
| Y.C. Huang (2) |
||||||||||||||||
(1) |
The RSAs granted under the Employee Restricted Stock Awards Rules for Year 2021 held by each of these directors and executives represent less than one percent of our total outstanding common shares. |
(2) |
Dr. Y.C. Huang is an eligible executive in accordance with the Employee Restricted Stock Awards Rules for Year 2021 but is not an executive officer. |
| Name/Title |
Fees Earned or Paid in Cash |
Stock Awards |
All Other Compensation (2) |
Total |
||||||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
US$ |
||||||||||||||||
(in millions) |
||||||||||||||||||||
| Mark Liu, Chairman |
398.7 | — | 1.6 | 400.4 | 14.4 | |||||||||||||||
| F.C. Tseng, Director (1) |
10.6 | — | 1.3 | 11.9 | 0.4 | |||||||||||||||
| Ming-Hsin Kung, Director (Representative of National Development Fund, Executive Yuan) |
10.6 | — | — | 10.6 | 0.4 | |||||||||||||||
| Sir Peter L. Bonfield, Independent Director |
14.8 | — | — | 14.8 | 0.5 | |||||||||||||||
| Stan Shih, Independent Director |
7.5 | — | — | 7.5 | 0.3 | |||||||||||||||
| Kok-Choo Chen, Independent Director |
13.2 | — | — | 13.2 | 0.5 | |||||||||||||||
| Michael R. Splinter, Independent Director |
14.8 | — | — | 14.8 | 0.5 | |||||||||||||||
| Moshe N. Gavrielov, Independent Director |
14.8 | — | — | 14.8 | 0.5 | |||||||||||||||
| Yancey Hai, Independent Director |
13.2 | — | — | 13.2 | 0.5 | |||||||||||||||
| L. Rafael Reif, Independent Director |
6.4 | — | — | 6.4 | 0.2 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
504.4 | — | 2.9 | 507.3 | 18.3 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
(1) |
In addition to the above, F.C. Tseng received NT$11.0 million of compensation from non-consolidated affiliates and NT$15.1 million of Advisor Fee from TSMC. |
(2) |
Included pensions funded according to applicable law and expenses for company cars, but did not include compensation paid to car drivers made available to directors. |
| Name/Title |
Salary |
Bonus (6) |
Stock Awards |
All Other Compensation (7) |
Total |
|||||||||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
US$ |
|||||||||||||||||||
(in millions) |
||||||||||||||||||||||||
| C.C. Wei, Chief Executive Officer |
13.3 | 381.9 | — | 5.1 | 400.3 | 14.4 | ||||||||||||||||||
| Wendell Huang, Vice President & Chief Financial Officer/ Spokesperson |
5.2 | 54.3 | — | 1.5 | 61.1 | 2.2 | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Lora Ho, Senior Vice President |
||||||||||||||||||||||||
| Wei-Jen Lo, Senior Vice President |
||||||||||||||||||||||||
| Rick Cassidy, Senior Vice President/ CEO & President of TSMC Arizona |
||||||||||||||||||||||||
| Y.P. Chin, Senior Vice President |
||||||||||||||||||||||||
| Y.J. Mii, Senior Vice President |
||||||||||||||||||||||||
| J.K. Lin, Senior Vice President |
||||||||||||||||||||||||
| J.K. Wang, Senior Vice President |
||||||||||||||||||||||||
| Cliff Hou, Senior Vice President |
||||||||||||||||||||||||
| Kevin Zhang, Senior Vice President |
||||||||||||||||||||||||
| Sylvia Fang, Vice President & General Counsel/ Corporate Governance Officer |
||||||||||||||||||||||||
| Connie Ma, Vice President |
||||||||||||||||||||||||
| Y.L. Wang, Vice President |
||||||||||||||||||||||||
| Doug Yu, Vice President & TSMC Distinguished Fellow |
137.6 | 1,728.6 | — | 50.6 | 1,916.8 | 69.1 | (8) | |||||||||||||||||
| T.S. Chang, Vice President & TSMC Fellow |
||||||||||||||||||||||||
| Michael Wu, Vice President |
||||||||||||||||||||||||
| Min Cao, Vice President |
||||||||||||||||||||||||
| Marvin Liao, Vice President |
||||||||||||||||||||||||
| Y.H. Liaw, Vice President |
||||||||||||||||||||||||
| Simon Jang, Vice President |
||||||||||||||||||||||||
| C.S. Yoo, Vice President |
||||||||||||||||||||||||
| Jun He, Vice President |
||||||||||||||||||||||||
| Geoffrey Yeap, Vice President (2) |
||||||||||||||||||||||||
| Chris Horng-Dar Lin, Vice President and Chief Information Officer(2) |
||||||||||||||||||||||||
| Jonathan Lee, Vice President (3) |
||||||||||||||||||||||||
| Arthur Chuang, Vice President (4) |
||||||||||||||||||||||||
| L.C. Lu, Vice President & TSMC Fellow (4) |
||||||||||||||||||||||||
| K.C. Hsu, Vice President (5) |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
156.2 | 2,164.8 | — | 57.3 | 2,378.2 | 85.7 | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(1) |
The total compensation paid to the executive officers is decided based on their job responsibility, contribution, company performance and projected future risks the Company will face. It is reviewed by the Compensation Committee then submitted to the Board of Directors for approval. |
(2) |
Dr. Geoffrey Yeap and Dr. Chris Horng-Dar Lin were promoted to Vice President, effective February 9, 2021. These amounts did not include compensation for the period before their promotion. |
(3) |
Mr. Jonathan Lee was promoted to Vice President, effective June 9, 2021. These amounts did not include compensation for the period before his promotion. |
(4) |
Dr. Arthur Chuang and Dr. L.C. Lu were promoted to Vice President, effective August 10, 2021. These amounts did not include compensation for the period before their promotion. |
(5) |
Mr. K.C. Hsu was promoted to Vice President, effective November 9, 2021. These amounts did not include compensation for the period before his promotion. |
(6) |
Included cash bonus and profit sharing bonus. |
(7) |
Included pensions funded according to applicable law and expenses for company cars. |
(8) |
Aggregate amount for executive officers other than C.C. Wei and Wendell Huang. |
As of December 31, |
||||||||||||
| Function |
2019 |
2020 |
2021 |
|||||||||
| Managers |
5,364 | 5,857 | 6,635 | |||||||||
| Professionals |
24,416 | 27,767 | 31,920 | |||||||||
| Assistant Engineers/Clericals |
4,357 | 4,832 | 6,620 | |||||||||
| Technicians |
17,160 | 18,375 | 19,977 | |||||||||
| |
|
|
|
|
|
|||||||
| Total |
51,297 | 56,831 | 65,152 | |||||||||
| |
|
|
|
|
|
|||||||
As of December 31, |
||||||||||||
| Location of Facility and Principal Offices |
2019 |
2020 |
2021 |
|||||||||
| Hsinchu Science Park, Taiwan |
24,442 | 25,776 | 27,382 | |||||||||
| Southern Taiwan Science Park, Taiwan |
12,771 | 16,114 | 20,428 | |||||||||
| Central Taiwan Science Park, Taiwan |
7,333 | 7,668 | 8,486 | |||||||||
| Taoyuan County, Taiwan |
1,475 | 1,661 | 1,701 | |||||||||
| Miaoli County, Taiwan |
— | — | 628 | |||||||||
| China |
3,679 | 3,859 | 4,131 | |||||||||
| North America |
1,513 | 1,620 | 2,188 | |||||||||
| Europe |
50 | 52 | 54 | |||||||||
| Japan |
32 | 78 | 152 | |||||||||
| Korea |
2 | 3 | 2 | |||||||||
| |
|
|
|
|
|
|||||||
| Total |
51,297 | 56,831 | 65,152 | |||||||||
| |
|
|
|
|
|
|||||||
ITEM 7. |
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
| Names of Shareholders |
Number of Common Shares Owned |
Percentage of Total Outstanding Common Shares (1) |
||||||
| National Development Fund, Executive Yuan |
1,653,709,980 | 6.38 | % | |||||
| BlackRock, Inc. (2) |
1,317,566,696 | 5.08 | % | |||||
| Directors and executive officers as a group (3) |
87,626,164 | 0.34 | % | |||||
(1) |
As of February 28, 2022, we held 1,387,000 of our common shares in treasury as a result of repurchases made pursuant to the Share Repurchase Program, and such repurchased shares are not included in the number of total outstanding common shares. See “Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers” for a further discussion. |
(2) |
According to the Schedule 13G of BlackRock, Inc. filed with the U.S. SEC on February 7, 2022, BlackRock, Inc. is the parent holding company or control person of several entities with interests in us. We do not have further information with respect to BlackRock, Inc.’s ownership in us subsequent to its Schedule 13G filed on February 7, 2022. |
(3) |
Excluded ownership of the National Development Fund, Executive Yuan. |
ITEM 8. |
FINANCIAL INFORMATION |
| Period |
Approved Date |
Payment Date |
Cash Dividends Per Share (NT$) |
Total Amount (NT$) | ||||
| First quarter of 2021 |
June 9, 2021 | October 14, 2021 | 2.75 | 71,308,546,260 | ||||
| Second quarter of 2021 |
August 10, 2021 | January 13, 2022 | 2.75 | 71,308,546,260 | ||||
| Third quarter of 2021 |
November 9, 2021 | April 14, 2022 | 2.75 | 71,308,546,260 | ||||
| Fourth quarter of 2021 |
February 15, 2022 | July 14, 2022 | 2.75 | 71,308,546,260 |
ITEM 9. |
THE OFFER AND LISTING |
ITEM 10. |
ADDITIONAL INFORMATION |
| • | issuance of new shares upon conversion of convertible bonds; and |
| • | offerings of new shares through a private placement approved at a shareholders’ meeting. |
| • | dividends or free distributions of shares; |
| • | the exercise by holders of existing depositary receipts of their pre-emptive rights in connection with capital increases for cash; or |
| • | if permitted under the deposit agreement and custody agreement, the deposit of common shares purchased by any person directly or through a depositary bank on the Taiwan Stock Exchange or the Taipei Exchange (as applicable) or held by such person for deposit in the depositary receipt facility. |
| • | open a securities trading account with a local securities brokerage firm; |
| • | open an NT dollars bank account; |
| • | pay taxes; |
| • | remit funds; and |
| • | exercise rights on securities and perform other matters as may be designated by the holder. |
| • | converted by bondholders, other than citizens of the P.R.C. and entities organized under the laws of the P.R.C. save for QDII or those that have obtained the approval of the Investment Commission of the R.O.C. Ministry of Economic Affairs, into shares of R.O.C. companies; or |
| • | subject to R.O.C. FSC approval, converted into depositary receipts issued by the same R.O.C. company or by the issuing company of the exchange shares, in the case of exchangeable bonds. |
| • | an individual who is not an R.O.C. citizen, who owns ADSs and who is not physically present in the R.O.C. for 183 days or more during any calendar year; or |
| • | a corporation or a non-corporate body that is organized under the laws of a jurisdiction other than the R.O.C. and has no fixed place of business or business agent in the R.O.C. |
| • | dealers or traders in securities or foreign currencies; |
| • | banks and certain other financial institutions; |
| • | brokers; |
| • | traders in securities that elect to use a mark-to-market |
| • | tax-exempt organizations, retirement plans, individual retirement accounts and other tax-deferred accounts; |
| • | life insurance companies; |
| • | persons that actually or constructively own 10% or more of the combined voting power of our voting stock or of the total value of our stock; |
| • | persons that hold common shares or ADSs as part of a straddle or a hedging or conversion or integrated transaction for United States federal income tax purposes; |
| • | persons who are former citizens or former long-term residents of the United States, or |
| • | U.S. holders (as defined below) whose functional currency is not the U.S. dollar. |
| • | a citizen or resident of the United States; |
| • | a United States domestic corporation, or other entity subject to United States federal income tax as a domestic corporation; |
| • | an estate whose income is subject to United States federal income tax regardless of its source; or |
| • | a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust. |
| • | at least 75% of our gross income for the taxable year is passive income; or |
| • | at least 50% of the value, determined on the basis of a quarterly average, of our assets is attributable to assets that produce or are held for the production of passive income. |
| • | any gain you realize on the sale or other disposition of your common shares or ADSs; and |
| • | any excess distribution that we make to you (generally, any distributions to you during a single taxable year that are greater than 125% of the average annual distributions received by you in respect of the common shares or ADSs during the three preceding taxable years or, if shorter, the portion of your holding period for the common shares or ADSs that preceded the taxable year in which you receive the distribution). |
| • | the gain or excess distribution will be allocated ratably over your holding period for the common shares or ADSs, |
| • | the amount allocated to the taxable year in which you realized the gain or excess distribution will be taxed as ordinary income, |
| • | the amount allocated to each prior year, with certain exceptions, will be taxed at the highest tax rate in effect for that year, and |
| • | the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year. |
ITEM 11. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS |
ITEM 12D. |
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
Service |
Fees | |
| Issuance of ADS | Up to US$0.05 (or fractions thereof) per ADS issued | |
| Cancellation of ADS | Up to US$0.05 (or fractions thereof) per ADS cancelled | |
Distribution of cash proceeds (i.e., upon sale of rights and other entitlements) |
Up to US$0.02 (or fractions thereof) per ADS held | |
Distribution of ADS rights or other free distributions of Stock (excluding stock dividends) |
Up to US$0.05 (or fractions thereof) per ADS issued | |
ITEM 13. |
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
ITEM 14. |
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
ITEM 15. |
CONTROLS AND PROCEDURES |
/s/ Deloitte & Touche |
Taipei, Taiwan |
Republic of China |
April 14, 2022 |
ITEM 16A. |
AUDIT COMMITTEE FINANCIAL EXPERT |
ITEM 16B. |
CODE OF ETHICS |
ITEM 16C. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES |
For the year ended December 31, |
||||||||
2020 |
2021 |
|||||||
NT$ |
NT$ |
|||||||
(In thousands) |
||||||||
Audit Fees |
60,253 | 63,871 | ||||||
Audit Related Fees |
9,982 | 23,197 | ||||||
All Other Fees |
81 | 75 | ||||||
Total |
70,316 | 87,143 | ||||||
ITEM 16D. |
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
ITEM 16E. |
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
Period |
Total number of common shares purchased |
Average price paid per common share |
Total number of common shares purchased as part of publicly announced plans or programs |
Maximum number (or approximate dollar value) of common shares that may yet be purchased under the plans or programs |
||||||||||||
(number of common shares) |
(NT$) |
(number of shares) |
(number of common shares) |
|||||||||||||
February, 2022 (From February 16, 2022 to February 25, 2022) |
1,387,000 | 628 | 1,387,000 | — | ||||||||||||
Total |
1,387,000 | 628 | 1,387,000 | — | ||||||||||||
ITEM 16F. |
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT |
ITEM 16G. |
CORPORATE GOVERNANCE |
NYSE Standards for US Companies under Listed Company Manual Section 303A |
TSMC Corporate Practices | |
NYSE Section 303A.01 |
Taiwan law does not require a board of directors of publicly traded companies to consist of a majority of independent directors. Taiwan law requires public companies meeting certain criteria to have at least two independent directors but no less than one fifth of the total number of directors on its board of directors. In addition, Taiwan law requires public companies to disclose information pertaining to their directors, including their independence status. Please see TSMC’s annual report and Form 20-F for the relevant year filed with the Taiwan authorities and the U.S. SEC (both of which are available online at www.tsmc.com ) for information on the total number of TSMC directors and directors who would be considered independent under NYSE Section 303A.02 and Taiwan law. | |
NYSE Section 303A.02 |
Taiwan law establishes comparable standards to evaluate director independence. For further information, please consult TSMC’s Taiwan annual report for the relevant year. | |
NYSE Section 303A.03 non-management directors to meet at regularly scheduled executive meetings that are not attended by management. |
Taiwan law does not contain such a requirement. Except for meetings of sub-committees of the board of directors and those held by managing directors, Taiwan law does not allow separate board meetings of part but not all of the board of directors. | |
NYSE Section 303A.04 |
Taiwan law does not contain such a requirement. However, TSMC’s directors must be nominated either by the shareholders or by the entire board of directors. | |
NYSE Section 303A.05(a) |
Taiwan law requires certain public companies, such as us, to establish a compensation committee by September 30, 2011. TSMC, however, has established its compensation committee since 2003, which has met the requirements under the Taiwan law. Taiwan law permits a non-director independent member, appointed by the board of directors, to serve as a member on the compensation committee, so long as such member meets the independent and other requirements under the relevant Taiwan law. Also, as required by the TWSE, the compensation committee of the companies listed on the TWSE must consist of a majority of independent directors, and all the members of the compensation committee shall elect an independent director to act as the convener and the chairperson of the meeting. Please see TSMC’s annual report and Form 20-F for the relevant year filed with the Taiwan authorities and the U.S. SEC (both of which are available online at www.tsmc.com ) for further information regarding the composition and functions of its compensation committee. | |
NYSE Section 303A.05(b) |
Taiwan law requires certain public companies, such as us, to establish a compensation committee by September 30, 2011. TSMC, however, has established its compensation committee since 2003, which has met the requirements under the Taiwan law, and TSMC’s compensation committee charter contains the same responsibilities as those provided under NYSE Section 303A.05(b)(i) and mandates the committee to review the adequacy of its charter annually. | |
NYSE Section 303A.06 10A-3 under the Exchange Act. Foreign private issuers must satisfy the requirements of Rule 10A-3 under the Exchange Act by July 31, 2005. |
TSMC voluntarily established its audit committee before the promulgation of related Taiwan law. Our audit committee fully complies with both local law requirements and corporate governance standards. Please see TSMC’s annual report and Form 20-F for the relevant year filed with the Taiwan authorities and the U.S. SEC (both of which are available online at www.tsmc.com ) for further information regarding the composition of its audit committee. TSMC’s audit committee members are all financially literate and are assisted by a financial expert consultant. | |
NYSE Section 303A.07(a) |
Taiwan law requires all independent directors of a public company to be members of the audit committee if the company has established such a committee of which at least one shall have accounting or financial expertise. Please see TSMC’s annual report and Form 20-F for the relevant year filed with the Taiwan authorities and the U.S. SEC (both of which are available online at www.tsmc.com ) for further information regarding the composition of its audit committee. TSMC’s audit committee members are all financially literate and are assisted by a financial expert consultant. | |
NYSE Section 303A.07(a) 10-K filed with the U.S. SEC. |
Taiwan law does not contain such requirement. Taiwan law requires all independent directors of a public company to be members of the audit committee if the company has established such a committee. Taiwan law forbids an independent director from serving as an independent director on a total of more than four Taiwan public companies. | |
NYSE Section 303A.07(a) |
Taiwan law requires all independent directors of a public company to be members of the audit committee if the company has established such a committee. | |
NYSE Section 303A.07(b) 10A-3(b)(2), (3), (4) & (5) of the Exchange Act. |
Taiwan law requires comparable standards. TSMC currently has a written audit committee charter containing the same duties and responsibilities as those provided under Section 10A-3(b)(1) of the Exchange Act. | |
NYSE Section 303A.07(b)(iii)(B) and (C) |
TSMC’s written audit committee charter establishes the same audit committee objectives. | |
NYSE Section 303A.07(b)(iii)(G) |
Taiwan law does not contain such requirement. | |
NYSE Section 303A.07(c) |
Taiwan law requires public companies to establish an internal audit function. Internal auditors are subject to strict qualification standards under Taiwan law, which require the board of directors to approve the appointment of the head of a company’s internal audit function. TSMC’s internal audit function has substantially the same responsibilities as provided under NYSE Section 303A.07(d). | |
NYSE Section 303A.08 |
Taiwan law imposes a similar requirement. Employee stock option plans (“ESOPs”) are required to be approved by the board of directors. Shareholders’ approval is not required if the number of options granted under the relevant ESOP does not exceed the reservation made in TSMC’s Articles of Incorporation and if the exercise price is not below the price as determined by relevant regulations. Otherwise, any change to such reservation in the Articles requires shareholders’ approval. Employee restricted stock awards are required to be approved by the board of directors and the shareholders’ meeting with a quorum of holders of at least two-thirds of all issued and outstanding shares of common stock at which the holders of at least a majority of the common stock represented at the meeting vote in favor thereof. However, in the case of a publicly held company such as TSMC, such a resolution by the shareholders’ meeting may be adopted by the holders of at least two-thirds of the shares of common stock represented at a shareholders’ meeting at which holders of at least a majority of the issued and outstanding shares of common stock are present. TSMC currently has one equity-based compensation plan in effect, which was approved by the Board of Directors on April 22, 2021, and by the shareholders on July 26, 2021. | |
NYSE Section 303A.09 |
Taiwan law does not contain such requirement. Under Taiwan law, if a listed company has voluntarily adopted corporate governance guidelines, it must set up a dedicated section on its website to disclose the relevant information and inform investors how to access such guidelines. | |
NYSE Section 303A.09 |
Starting from 2020, companies listed on the TWSE are required by TWSE’s new rule to conduct self-assessment or peer assessment on the performance of the board of directors and each director every year and to submit the assessment results to TWSE by the end of the first quarter of the next year. TSMC has been conducting annual self-assessment on its Audit Committee’s performance since 2011 and on its board of directors as well as each director since 2020 in compliance with TWSE’s requirements. | |
NYSE Section 303A.10 |
Taiwan law does not contain such requirement. But, because of sound corporate governance principles, TSMC has adopted an “Ethics and Business Conduct Policy”, which complies with the Sarbanes-Oxley Act’s requirements concerning financial officers and CEO accountability. | |
NYSE Section 303A.12(a) |
Taiwan law does not contain such a requirement. But, in order to comply with relevant U.S. SEC regulations, TSMC’s CEO is required to certify in TSMC’s 20-F annual report that, to his or her knowledge the information contained therein fairly represents in all material respects the financial condition and results of operation of TSMC. | |
NYSE Section 303A.12(b) non-fulfillment of any applicable provision under NYSE Section 303A. |
Taiwan law does not contain such requirement. But, in order to be consistent with the corporate governance principles established under the Sarbanes-Oxley Act of 2002, TSMC’s CEO complies with the notice provision as set forth under NYSE Section 303A.12(b). | |
NYSE Section 303A.12(c) |
Taiwan law does not contain such requirement. But, in order to comply with the corporate governance principles established under the Sarbanes-Oxley Act of 2002, TSMC complies with NYSE Section 303A.12(c). | |
ITEM 16H. |
MINE SAFETY DISCLOSURE |
ITEM 16I. |
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
ITEM 17. |
FINANCIAL STATEMENTS |
ITEM 18. |
FINANCIAL STATEMENTS |
ITEM 19. |
EXHIBITS |
(1) |
Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2019, filed by TSMC on April 15, 2020. |
(2) |
Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2012, filed by TSMC on April 2, 2013. |
(3) |
Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2001, filed by TSMC on May 9, 2002. |
(4) |
Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2017, filed by TSMC on April 19, 2018. |
(5) |
Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2018, filed by TSMC on April 17, 2019. |
(6) |
Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2013, filed by TSMC on April 14, 2014. |
(7) |
Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2015, filed by TSMC on April 11, 2016. |
(8) |
Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2016, filed by TSMC on April 13, 2017. |
(9) |
Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 1998, filed by TSMC on April 30, 1999. |
(10) |
Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2020, filed by TSMC on April 16, 2021. |
(11) |
Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2014, filed by TSMC on April 13, 2015. |
| (P) | Paper filing. |
| TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED | ||
| By: | /s/ Wendell Huang | |
| Name: | Wendell Huang | |
| Title: | Vice President, Finance and Chief Financial Officer / Spokesperson | |
Page |
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| Consolidated Financial Statements of Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries |
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F-1 |
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F-2 |
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F-4 |
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F-6 |
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F-8 |
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F-9 |
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F-12 |
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1. |
We read the Company’s policy and understood the criteria used to determine when to commence depreciation. |
2. |
We tested the effectiveness of the controls over the evaluation of when to commence depreciation of EUI/CIP. |
3. |
We sampled the year-end balance of EUI/CIP and performed the following for each selection: |
a. |
Evaluated whether the selection did not meet the criteria specified by the Company for commencement of depreciation. |
b. |
Observed the assets and evaluated their status. |
4. |
We sampled and evaluated whether the selection of EUI/CIP met the criteria specified by the Company for commencement of depreciation during the year. |
5. |
We sampled and evaluated whether the selection of EUI/CIP met the criteria specified by the Company for commencement of depreciation subsequent to year end. |
| The accompanying notes are an integral part of the consolidated financial statements. | (Concluded) |
Equity Attributable to Shareholders of the Parent |
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Others |
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| Foreign Currency Translation Reserve |
Unrealized Gain (Loss) on Financial Assets at Fair Value Through Other Comprehensive Income |
Gain (Loss) on Hedging Instruments |
Unearned Stock-Based Employee Compensation |
Total |
Total |
Non-controlling Interests |
Total Equity |
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| Capital Stock - Common Stock |
Retained Earnings |
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| Shares (In Millions) |
Amount |
Capital Surplus |
Legal Capital Reserve |
Special Capital Reserve |
Unappropriated Earnings |
Total |
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| BALANCE, JANUARY 1, 2019 |
25,930.3 | $ | 259,303.8 | $ | 56,316.0 | $ | 276,033.9 | $ | 26,907.5 | $ | 1,057,317.5 | $ | 1,360,258.9 | $ | (12,042.4 | ) | $ | (3,429.3 | ) | $ | 23.6 | $ | (1.8 | ) | $ | (15,449.9 | ) | $ | 1,660,428.8 | $ | 676.3 | $ | 1,661,105.1 | |||||||||||||||||||||||||||
| Appropriations of earnings |
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| Legal capital reserve |
— | — | — | 35,113.1 | — | (35,113.1 | ) | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Special capital reserve |
— | — | — | — | (16,232.4 | ) | 16,232.4 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends to shareholders |
— | — | — | — | — | (388,955.7 | ) | (388,955.7 | ) | — | — | — | — | — | (388,955.7 | ) | — | (388,955.7 | ) | |||||||||||||||||||||||||||||||||||||||||
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| Total |
— | — | — | 35,113.1 | (16,232.4 | ) | (407,836.4 | ) | (388,955.7 | ) | — | — | — | — | — | (388,955.7 | ) | — | (388,955.7 | ) | ||||||||||||||||||||||||||||||||||||||||
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| Net income in 2019 |
— | — | — | — | — | 353,948.0 | 353,948.0 | — | — | — | — | — | 353,948.0 | 79.0 | 354,027.0 | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) in 2019, net of income tax |
— | — | — | — | — | 217.1 | 217.1 | (14,829.0 | ) | 2,898.5 | (109.7 | ) | — | (12,040.2 | ) | (11,823.1 | ) | (0.4 | ) | (11,823.5 | ) | |||||||||||||||||||||||||||||||||||||||
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| Total comprehensive income (loss) in 2019 |
— | — | — | — | — | 354,165.1 | 354,165.1 | (14,829.0 | ) | 2,898.5 | (109.7 | ) | — | (12,040.2 | ) | 342,124.9 | 78.6 | 342,203.5 | ||||||||||||||||||||||||||||||||||||||||||
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| Disposal of investments in equity instruments at fair value through other comprehensive income |
— | — | — | — | — | 162.1 | 162.1 | — | (162.1 | ) | — | — | (162.1 | ) | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Basis adjustment for gain on hedging instruments |
— | — | — | — | — | — | — | — | — | 82.3 | — | 82.3 | 82.3 | — | 82.3 | |||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to share of changes in equities of associates |
— | — | 19.4 | — | — | — | — | — | — | — | 1.6 | 1.6 | 21.0 | 0.2 | 21.2 | |||||||||||||||||||||||||||||||||||||||||||||
| From share of changes in equities of subsidiaries |
— | — | 0.3 | — | — | — | — | — | — | — | — | — | 0.3 | (0.3 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Donation from shareholders |
— | — | 4.0 | — | — | — | — | — | — | — | — | — | 4.0 | — | 4.0 | |||||||||||||||||||||||||||||||||||||||||||||
| Decrease in non-controlling interests |
— | — | — | — | — | — | — | — | — | — | — | — | — | (73.1 | ) | (73.1 | ) | |||||||||||||||||||||||||||||||||||||||||||
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| BALANCE, DECEMBER 31, 2019 |
25,930.3 | $ | 259,303.8 | $ | 56,339.7 | $ | 311,147.0 | $ | 10,675.1 | $ | 1,003,808.3 | $ | 1,325,630.4 | $ | (26,871.4 | ) | $ | (692.9 | ) | $ | (3.8 | ) | $ | (0.2 | ) | $ | (27,568.3 | ) | $ | 1,613,705.6 | $ | 681.7 | $ | 1,614,387.3 | ||||||||||||||||||||||||||
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| Appropriations of earnings |
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| Special capital reserve |
— | — | — | — | 31,584.0 | (31,584.0 | ) | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends to shareholders |
— | — | — | — | — | (259,303.8 | ) | (259,303.8 | ) | — | — | — | — | — | (259,303.8 | ) | — | (259,303.8 | ) | |||||||||||||||||||||||||||||||||||||||||
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| Total |
— | — | — | — | 31,584.0 | (290,887.8 | ) | (259,303.8 | ) | — | — | — | — | — | (259,303.8 | ) | — | (259,303.8 | ) | |||||||||||||||||||||||||||||||||||||||||
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| Net income in 2020 |
— | — | — | — | — | 510,744.0 | 510,744.0 | — | — | — | — | — | 510,744.0 | 264.0 | 511,008.0 | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) in 2020, net of income tax |
— | — | — | — | — | (3,121.8 | ) | (3,121.8 | ) | (30,130.2 | ) | 2,906.0 | 24.1 | — | (27,200.1 | ) | (30,321.9 | ) | 0.1 | (30,321.8 | ) | |||||||||||||||||||||||||||||||||||||||
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| Total comprehensive income (loss) in 2020 |
— | — | — | — | — | 507,622.2 | 507,622.2 | (30,130.2 | ) | 2,906.0 | 24.1 | — | (27,200.1 | ) | 480,422.1 | 264.1 | 480,686.2 | |||||||||||||||||||||||||||||||||||||||||||
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| Disposal of investments in equity instruments at fair value through other comprehensive income |
— | — | — | — | — | (108.7 | ) | (108.7 | ) | — | 108.7 | — | — | 108.7 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Basis adjustment for loss on hedging instruments |
— | — | — | — | — | — | — | — | — | (20.3 | ) | — | (20.3 | ) | (20.3 | ) | — | (20.3 | ) | |||||||||||||||||||||||||||||||||||||||||
| Adjustments to share of changes in equities of associates |
— | — | 0.3 | — | — | — | — | — | — | — | 0.2 | 0.2 | 0.5 | — | 0.5 | |||||||||||||||||||||||||||||||||||||||||||||
| Donation from shareholders |
— | — | 7.2 | — | — | — | — | — | — | — | — | — | 7.2 | — | 7.2 | |||||||||||||||||||||||||||||||||||||||||||||
| Increase in non-controlling interests |
— | — | — | — | — | — | — | — | — | — | — | — | — | 6.7 | 6.7 | |||||||||||||||||||||||||||||||||||||||||||||
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| BALANCE, DECEMBER 31, 2020 |
25,930.3 | $ | 259,303.8 | $ | 56,347.2 | $ | 311,147.0 | $ | 42,259.1 | $ | 1,220,434.0 | $ | 1,573,840.1 | $ | (57,001.6 | ) | $ | 2,321.8 | $ | — | $ | — | $ | (54,679.8 | ) | $ | 1,834,811.3 | $ | 952.5 | $ | 1,835,763.8 | |||||||||||||||||||||||||||||
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| Appropriations of earnings |
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| Special capital reserve |
— | — | — | — | 17,045.1 | (17,045.1 | ) | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends to shareholders |
— | — | — | — | — | (278,751.6 | ) | (278,751.6 | ) | — | — | — | — | — | (278,751.6 | ) | — | (278,751.6 | ) | |||||||||||||||||||||||||||||||||||||||||
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| Total |
— | — | — | — | 17,045.1 | (295,796.7 | ) | (278,751.6 | ) | — | — | — | — | — | (278,751.6 | ) | — | (278,751.6 | ) | |||||||||||||||||||||||||||||||||||||||||
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| Net income in 2021 |
— | — | — | — | — | 592,359.2 | 592,359.2 | — | — | — | — | — | 592,359.2 | 521.4 | 592,880.6 | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) in 2021, net of income tax |
— | — | — | — | — | 167.5 | 167.5 | (6,301.7 | ) | (1,559.8 | ) | 72.1 | — | (7,789.4 | ) | (7,621.9 | ) | 2.5 | (7,619.4 | ) | ||||||||||||||||||||||||||||||||||||||||
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| Total comprehensive income (loss) in 2021 |
— | — | — | — | — | 592,526.7 | 592,526.7 | (6,301.7 | ) | (1,559.8 | ) | 72.1 | — | (7,789.4 | ) | 584,737.3 | 523.9 | 585,261.2 | ||||||||||||||||||||||||||||||||||||||||||
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| Disposal of investments in equity instruments at fair value through other comprehensive income |
— | — | — | — | — | 187.7 | 187.7 | — | (187.7 | ) | — | — | (187.7 | ) | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Basis adjustment for gain on hedging instruments |
— | — | — | — | — | — | — | — | — | 48.5 | — | 48.5 | 48.5 | — | 48.5 | |||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to share of changes in equities of associates |
— | — | 4.8 | — | — | — | — | — | — | — | — | — | 4.8 | — | 4.8 | |||||||||||||||||||||||||||||||||||||||||||||
| From difference between the consideration received and the carrying amount of the subsidiaries’ net assets during actual disposal |
— | — | 8,406.3 | — | — | — | — | — | — | — | — | — | 8,406.3 | 1,045.5 | 9,451.8 | |||||||||||||||||||||||||||||||||||||||||||||
| From share of changes in equities of subsidiaries |
— | — | (7.9 | ) | — | — | — | — | — | — | — | — | — | (7.9 | ) | 7.9 | — | |||||||||||||||||||||||||||||||||||||||||||
| Donation from shareholders |
— | — | 11.1 | — | — | — | — | — | — | — | — | — | 11.1 | 0.1 | 11.2 | |||||||||||||||||||||||||||||||||||||||||||||
| Increase in non-controlling interests |
— | — | — | — | — | — | — | — | — | — | — | — | — | (107.4 | ) | (107.4 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Effect of acquisition of subsidiary |
— | — | — | — | — | — | — | — | — | — | — | — | — | 0.2 | 0.2 | |||||||||||||||||||||||||||||||||||||||||||||
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| BALANCE, DECEMBER 31, 2021 |
25,930.3 | $ | 259,303.8 | $ | 64,761.5 | $ | 311,147.0 | $ | 59,304.2 | $ | 1,517,351.7 | $ | 1,887,802.9 | $ | (63,303.3 | ) | $ | 574.3 | $ | 120.6 | $ | — | $ | (62,608.4 | ) | $ | 2,149,259.8 | $ | 2,422.7 | $ | 2,151,682.5 | |||||||||||||||||||||||||||||
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| BALANCE, DECEMBER 31, 2021 (IN MILLIONS OF US$ - Note 3) |
$ | 9,347.7 | $ | 2,334.6 | $ | 11,216.5 | $ | 2,137.9 | $ | 54,699.0 | $ | 68,053.4 | $ | (2,282.0 | ) | $ | 20.7 | $ | 4.3 | $ | — | $ | (2,257.0 | ) | $ | 77,478.7 | $ | 87.3 | $ | 77,566.0 | ||||||||||||||||||||||||||||||
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2019 |
2020 |
2021 |
||||||||||||||
NT$ |
NT$ |
NT$ |
US$ |
|||||||||||||
(Note 3) |
||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||||||||||
| Income before income tax |
$ | 389,862.1 | $ | 584,746.3 | $ | 663,036.0 | $ | 23,901.8 | ||||||||
| Adjustments for: |
||||||||||||||||
| Depreciation expense |
281,411.8 | 324,538.4 | 414,187.7 | 14,931.1 | ||||||||||||
| Amortization expense |
5,472.4 | 7,186.2 | 8,207.2 | 295.9 | ||||||||||||
| Expected credit losses recognized (reversal) on investments in debt instruments |
1.7 | 3.7 | (2.7 | ) | (0.1 | ) | ||||||||||
| Finance costs |
3,250.9 | 2,081.5 | 5,414.2 | 195.2 | ||||||||||||
| Share of profits of associates |
(2,861.0 | ) | (3,562.0 | ) | (5,512.7 | ) | (198.7 | ) | ||||||||
| Interest income |
(16,189.4 | ) | (9,018.4 | ) | (5,708.8 | ) | (205.8 | ) | ||||||||
| Share-based compensation |
2.8 | 6.6 | 7.8 | 0.3 | ||||||||||||
| Loss (gain) on disposal or retirement of property, plant and equipment, net |
950.0 | (188.9 | ) | 273.6 | 9.9 | |||||||||||
| Loss on disposal or retirement of intangible assets, net |
2.4 | 0.6 | 1.2 | — | ||||||||||||
| Impairment loss (reversal of impairment loss) on property, plant and equipment |
(301.4 | ) | 10.2 | 274.4 | 9.9 | |||||||||||
| Loss (gain) on financial instruments at fair value through profit or loss, net |
955.7 | (3.0 | ) | — | — | |||||||||||
| Gain on disposal of investments in debt instruments at fair value through other comprehensive income, net |
(537.8 | ) | (1,439.4 | ) | (93.2 | ) | (3.4 | ) | ||||||||
| Loss from disposal of subsidiaries |
4.6 | — | — | — | ||||||||||||
| Gain on foreign exchange, net |
(5,228.2 | ) | (1,372.6 | ) | (16,115.9 | ) | (581.0 | ) | ||||||||
| Dividend income |
(417.3 | ) | (637.6 | ) | (362.3 | ) | (13.1 | ) | ||||||||
| Gain arising from fair value hedges, net |
(13.1 | ) | — | — | — | |||||||||||
| Others |
(5.5 | ) | 13.5 | (414.2 | ) | (15.0 | ) | |||||||||
| Changes in operating assets and liabilities: |
||||||||||||||||
| Financial instruments at fair value through profit or loss |
848.8 | (2,965.2 | ) | 2,649.2 | 95.5 | |||||||||||
| Notes and accounts receivable, net |
(18,119.6 | ) | (8,082.7 | ) | (52,105.9 | ) | (1,878.4 | ) | ||||||||
| Receivables from related parties |
(277.7 | ) | 304.0 | (157.2 | ) | (5.7 | ) | |||||||||
| Other receivables from related parties |
13.4 | 7.6 | (10.9 | ) | (0.4 | ) | ||||||||||
| Inventories |
20,249.8 | (54,372.2 | ) | (55,748.9 | ) | (2,009.7 | ) | |||||||||
| Other financial assets |
3,383.5 | 1,389.5 | (8,236.9 | ) | (296.9 | ) | ||||||||||
| Other current assets |
(76.3 | ) | (1,358.1 | ) | (3,899.0 | ) | (140.6 | ) | ||||||||
| Accounts payable |
5,860.1 | 404.6 | 8,298.3 | 299.2 | ||||||||||||
| Payables to related parties |
58.4 | 672.8 | (670.5 | ) | (24.2 | ) | ||||||||||
| Salary and bonus payable |
1,800.9 | 3,798.9 | 3,730.9 | 134.5 | ||||||||||||
| Accrued profit sharing bonus to employees and compensation to directors and supervisors |
(332.2 | ) | 12,032.1 | 843.7 | 30.4 | |||||||||||
| Accrued expenses and other current liabilities |
(2,372.0 | ) | 20,617.4 | 84,322.7 | 3,039.8 | |||||||||||
| Other noncurrent liabilities |
— | — | 154,086.0 | 5,554.7 | ||||||||||||
| Net defined benefit liability |
(215.0 | ) | (785.2 | ) | (635.2 | ) | (22.9 | ) | ||||||||
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| Cash generated from operations |
667,182.8 | 874,028.6 | 1,195,658.6 | 43,102.3 | ||||||||||||
| Income taxes paid |
(52,044.1 | ) | (51,362.4 | ) | (83,497.9 | ) | (3,010.0 | ) | ||||||||
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| Net cash generated by operating activities |
615,138.7 | 822,666.2 | 1,112,160.7 | 40,092.3 | ||||||||||||
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2019 |
2020 |
2021 |
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NT$ |
NT$ |
NT$ |
US$ |
|||||||||||||
(Note 3) |
||||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||||||||||
| Acquisitions of: |
||||||||||||||||
| Financial instruments at fair value through profit or loss - debt instruments |
$ | (124.7 | ) | $ | — | $ | — | $ | — | |||||||
| Financial assets at fair value through other comprehensive income |
(257,558.2 | ) | (262,637.5 | ) | (255,888.7 | ) | (9,224.5 | ) | ||||||||
| Financial assets at amortized cost |
(313.9 | ) | (4,302.8 | ) | (3,799.7 | ) | (137.0 | ) | ||||||||
| Property, plant and equipment |
(460,422.2 | ) | (507,238.7 | ) | (839,195.7 | ) | (30,252.2 | ) | ||||||||
| Intangible assets |
(9,329.9 | ) | (9,542.4 | ) | (9,040.7 | ) | (325.9 | ) | ||||||||
| Proceeds from disposal or redemption of: |
||||||||||||||||
| Financial instruments at fair value through profit or loss - debt instruments |
2,418.2 | 30.0 | — | — | ||||||||||||
| Financial assets at fair value through other comprehensive income |
230,444.5 | 266,931.9 | 254,604.5 | 9,178.2 | ||||||||||||
| Financial assets at amortized cost |
14,349.2 | 285.2 | 9,368.3 | 337.7 | ||||||||||||
| Property, plant and equipment |
287.3 | 606.7 | 390.4 | 14.1 | ||||||||||||
| Proceeds from return of capital of investments in equity instruments at fair value through other comprehensive income |
1.1 | 51.1 | 115.6 | 4.2 | ||||||||||||
| Derecognition of hedging financial instruments |
(436.6 | ) | (308.8 | ) | 276.3 | 10.0 | ||||||||||
| Interest received |
16,875.0 | 9,775.1 | 5,990.9 | 216.0 | ||||||||||||
| Proceeds from government grants - property, plant and equipment |
2,565.3 | 1,044.3 | 821.3 | 29.6 | ||||||||||||
| Proceeds from government grants - land use right and others |
850.6 | 25.4 | 6.6 | 0.2 | ||||||||||||
| Other dividends received |
320.2 | 735.1 | 362.3 | 13.1 | ||||||||||||
| Dividends received from investments accounted for using equity method |
1,719.0 | 2,752.1 | 2,136.4 | 77.0 | ||||||||||||
| Increase in prepayments for leases |
— | (4,693.4 | ) | (1,200.0 | ) | (43.3 | ) | |||||||||
| Refundable deposits paid |
(1,465.8 | ) | (726.9 | ) | (1,997.3 | ) | (72.0 | ) | ||||||||
| Refundable deposits refunded |
1,019.3 | 1,431.9 | 683.7 | 24.6 | ||||||||||||
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| Net cash used in investing activities |
(458,801.6 | ) | (505,781.7 | ) | (836,365.8 | ) | (30,150.2 | ) | ||||||||
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| CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||||||||||
| Increase (decrease) in short-term loans |
31,804.3 | (31,571.6 | ) | 35,668.4 | 1,285.8 | |||||||||||
| Proceeds from short-term bills payable |
— | 7,485.3 | — | — | ||||||||||||
| Repayments of short-term bills payable |
— | (7,500.0 | ) | — | — | |||||||||||
| Proceeds from issuance of bonds |
— | 236,725.7 | 364,592.8 | 13,143.2 | ||||||||||||
| Repayment of bonds |
(34,900.0 | ) | (31,800.0 | ) | (2,600.0 | ) | (93.7 | ) | ||||||||
| Proceeds from long-term bank loans |
— | 2,000.0 | 1,510.0 | 54.5 | ||||||||||||
| Payments for transaction costs attributable to the issuance of bonds |
— | (390.7 | ) | (737.7 | ) | (26.6 | ) | |||||||||
| Repayment of the principal portion of lease liabilities |
(2,930.6 | ) | (2,615.7 | ) | (1,985.3 | ) | (71.6 | ) | ||||||||
| Interest paid |
(3,597.1 | ) | (1,781.1 | ) | (3,833.6 | ) | (138.2 | ) | ||||||||
| Guarantee deposits received |
62.2 | 145.6 | 469.0 | 16.9 | ||||||||||||
| Guarantee deposits refunded |
(701.3 | ) | (16.1 | ) | (36.8 | ) | (1.3 | ) | ||||||||
| Cash dividends |
(259,303.8 | ) | (259,303.8 | ) | (265,786.4 | ) | (9,581.3 | ) | ||||||||
| Disposal of ownership interests in subsidiaries (without losing control) |
— | — | 9,451.8 | 340.7 | ||||||||||||
| Donation from shareholders |
4.0 | 7.3 | 11.3 | 0.4 | ||||||||||||
| Decrease in non-controlling interests |
(75.9 | ) | — | (115.0 | ) | (4.2 | ) | |||||||||
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| Net cash generated by (used in) financing activities |
(269,638.2 | ) | (88,615.1 | ) | 136,608.5 | 4,924.6 | ||||||||||
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| (Continued) |
2019 |
2020 |
2021 |
||||||||||||||
NT$ |
NT$ |
NT$ |
US$ |
|||||||||||||
(Note 3) |
||||||||||||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
$ | (9,114.2 | ) | $ | (23,498.1 | ) | $ | (7,583.8 | ) | $ | (273.3 | ) | ||||
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| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
(122,415.3 | ) | 204,771.3 | 404,819.6 | 14,593.4 | |||||||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR |
577,814.6 | 455,399.3 | 660,170.6 | 23,798.5 | ||||||||||||
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| CASH AND CASH EQUIVALENTS, END OF YEAR |
$ | 455,399.3 | $ | 660,170.6 | $ | 1,064,990.2 | $ | 38,391.9 | ||||||||
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| The accompanying notes are an integral part of the consolidated financial statements. | (Concluded) |
1. |
GENERAL |
2. |
THE AUTHORIZATION OF FINANCIAL STATEMENTS |
3. |
U.S. DOLLAR AMOUNTS |
4. |
APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS), INTERNATIONAL ACCOUNTING STANDARDS (IAS), IFRIC INTERPRETATIONS (IFRIC), AND SIC INTERPRETATIONS (SIC) ISSUED BY THE INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) (collectively, “IFRSs”). |
| a. | Amendments to IFRSs and the new interpretation that are mandatorily effective for the current year |
| New, Revised or Amended Standards and Interpretations |
Effective Date Issued by IASB | |
| | ||
| Amendments to IFRS 9, IAS 39, IFRS 7 and IFRS 16 “Interest Rate Benchmark Reform - Phase 2” |
January 1, 2021 (Note 1) | |
| Amendment to IFRS 16 “Covid-19-Related |
April 1, 2021 (Note 2) |
| Note 1: | The Company shall apply these amendments retrospectively for annual reporting periods beginning on or after January 1, 2021. |
| Note 2: | The Company shall apply these amendments for annual reporting periods beginning on or after April 1, 2021. The Company has early adopted the amendments on January 1, 2021. |
| b. | New and revised standards, amendments and interpretations in issue but not yet effective |
| New, Revised or Amended Standards and Interpretations |
Effective Date Issued by IASB | |
| Annual Improvements to IFRS Standards 2018–2020 Cycle |
January 1, 2022 | |
| Amendments to IFRS 3 “Reference to the Conceptual Framework” |
January 1, 2022 | |
| Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” |
To be determined by IASB | |
| Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” |
January 1, 2023 | |
| Amendments to IAS 1 “Disclosure of Accounting Policies” |
January 1, 2023 | |
| Amendments to IAS 8 “Definition of Accounting Estimates” |
January 1, 2023 | |
| Amendments to IAS 12 “Deferred Tax related to Assets and Liabilities arising from a Single Transaction” |
January 1, 2023 | |
| Amendments to IAS 16 “Property, Plant and Equipment - Proceeds before Intended Use” |
January 1, 2022 | |
| Amendments to IAS 37 “Onerous Contracts–Cost of Fulfilling a Contract” |
January 1, 2022 |
5. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| a. | the aggregate of the fair value of consideration received and the fair value of any retained interest at the date when control is lost; and |
| b. | the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interest. |
Percentage of Ownership |
||||||||||||
Name of Investor |
Name of Investee |
Main Businesses and Products |
Establishment and Operating Location |
December 31, 2020 |
December 31, 2021 |
Note | ||||||
TSMC |
TSMC North America | Sales and marketing of integrated circuits and other semiconductor devices |
San Jose, California, U.S.A. |
100% | 100% | — | ||||||
| TSMC Europe B.V. (TSMC Europe) | Customer service and supporting activities |
Amsterdam, the Netherlands |
100% | 100% | a) | |||||||
| TSMC Japan Limited (TSMC Japan) | Customer service and supporting activities |
Yokohama, Japan |
100% | 100% | a) | |||||||
| TSMC Design Technology Japan, Inc. (TSMC JDC) | Engineering support activities |
Yokohama, Japan |
100% | 100% | a) | |||||||
| TSMC Japan 3DIC R&D Center, Inc. (TSMC 3DIC) | Engineering support activities |
Yokohama, Japan |
— | 100% | a), b) | |||||||
| TSMC Korea Limited (TSMC Korea) | Customer service and supporting activities |
Seoul, Korea |
100% | 100% | a) | |||||||
| TSMC Partners, Ltd. (TSMC Partners) | Investing in companies involved in the semiconductor design and manufacturing, and other investment activities |
Tortola, British Virgin Islands |
100% | 100% | a) | |||||||
| TSMC Global, Ltd. (TSMC Global) | Investment activities |
Tortola, British Virgin Islands |
100% | 100% | — | |||||||
| TSMC China Company Limited (TSMC China) | Manufacturing, sales, testing and computer-aided design of integrated circuits and other semiconductor devices |
Shanghai, China |
100% | 100% | — | |||||||
| TSMC Nanjing Company Limited (TSMC Nanjing) | Manufacturing, sales, testing and computer-aided design of integrated circuits and other semiconductor devices |
Nanjing, China |
100% | 100% | — | |||||||
Percentage of Ownership |
||||||||||||
Name of Investor |
Name of Investee |
Main Businesses and Products |
Establishment and Operating Location |
December 31, 2020 |
December 31, 2021 |
Note | ||||||
TSMC |
VisEra Technologies Company Ltd. (VisEra Tech) | Research, design, development, manufacturing, sales, packaging and test of color filter |
Hsin-Chu , |
87% | 73% | c) | ||||||
| TSMC Arizona Corporation (TSMC Arizona) | Manufacturing, sales and testing of integrated circuits and other semiconductor devices |
Phoenix, Arizona, U.S.A . |
100% | 100% | d) | |||||||
| Japan Advanced Semiconductor Manufacturing, Inc. (JASM) | of integrated circuits and other semiconductor device |
Kumamoto, Japan |
— | 100% | a), e) | |||||||
| VentureTech Alliance Fund II, L.P. (VTAF II) | Investing in technology start-up companies |
Cayman Islands |
98% | 98% | a) | |||||||
| VentureTech Alliance Fund III, L.P. (VTAF III) | Investing in technology start-up companies |
Cayman Islands |
98% | 98% | a) | |||||||
| Emerging Fund L.P. (Emerging Fund) | Investing in technology start-up companies |
Cayman Islands |
— | 99.9% | a), f) | |||||||
TSMC Partners |
TSMC Development, Inc. (TSMC Development) | Investing in companies involved in semiconductor manufacturing |
Delaware, U.S.A. |
100% | 100% | — | ||||||
| TSMC Technology, Inc. (TSMC Technology) | Engineering support activities |
Delaware, U.S.A. |
100% | 100% | a) | |||||||
| TSMC Design Technology Canada Inc. (TSMC Canada) | Engineering support activities |
Ontario, Canada |
100% | 100% | a) | |||||||
TSMC Development |
WaferTech, LLC (WaferTech) | Manufacturing, sales and testing of integrated circuits and other semiconductor devices |
Washington, U.S.A. |
100% | 100% | — | ||||||
VTAF III |
Growth Fund Limited (Growth Fund) | Investing in technology start-up companies |
Cayman Islands |
100% | 100% | a) | ||||||
| Note a: | This is an immaterial subsidiary for which the consolidated financial statements are not audited by the Company’s independent auditors. |
| Note b: | TSMC 3DIC is established in March 2021. |
| Note c: | To facilitate VisEra’s IPO in Taiwan, 39.5 million common shares of VisEra at a price of NT$240 were sold by TSMC and an increase of NT$8,406.3 million in capital surplus was recognized. TSMC’s shareholding in VisEra decreased from 87% to 73%. This disposal was accounted for as an equity transaction since the transaction did not change TSMC’s control over VisEra. |
| Note d: | Under the terms of the development agreement entered into between TSMC Arizona and the City of Phoenix, the City of Phoenix commits approximately US$205 million toward various public infrastructure projects in the area of the proposed manufacturing facility, conditioned on TSMC Arizona’s achieving a minimum project scale with defined spending and job-creation thresholds. |
| Note e: | JASM is established in December 2021 and has increased its capital in January 2022. After the increase in capital, TSMC’s shareholding in JASM decreased from 100% to 81%. This transaction was accounted for as an equity transaction since the transaction did not change TSMC’s control over JASM. |
| Note f: | Emerging fund is established in January 2021. |
| a. | Category of financial assets and measurement |
| 1) | Financial asset at FVTPL |
| 2) | Investments in debt instruments at FVTOCI |
| 3) | Investments in equity instruments at FVTOCI |
| 4) | Measured at amortized cost |
| b. | Impairment of financial assets |
| c. | Derecognition of financial assets |
| a. | Fair value hedge |
| b. | Cash flow hedge |
6. |
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY |
7. |
CASH AND CASH EQUIVALENTS |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Cash and deposits in banks |
$ | 653,580.6 | $ | 1,058,808.1 | ||||
| Repurchase agreements |
1,750.4 | 5,275.3 | ||||||
| Government bonds |
3,716.1 | 906.8 | ||||||
| Commercial paper |
1,123.5 | — | ||||||
| |
|
|
|
|||||
| $ | 660,170.6 | $ | 1,064,990.2 | |||||
| |
|
|
|
|||||
8. |
FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Financial assets |
||||||||
| Mandatorily measured at FVTPL |
||||||||
| Forward exchange contracts |
$ | 2,259.4 | $ | 159.0 | ||||
| |
|
|
|
|||||
| Financial liabilities |
||||||||
| Held for trading |
||||||||
| Forward exchange contracts |
$ | 94.1 | $ | 681.9 | ||||
| |
|
|
|
|||||
Maturity Date |
Contract Amount (In Millions) | |||
| December 31, 2020 |
||||
| Sell NT$ |
to | NT$144,698.0 | ||
| Sell US$ |
to | US$1,176.9 | ||
| December 31, 2021 |
||||
| Sell NT$ |
to |
NT$132,734.5 | ||
| Sell US$ |
to | US$2,009.1 | ||
9. |
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Investments in debt instruments at FVTOCI |
||||||||
| Corporate bonds |
$ | 56,593.6 | $ | 57,253.2 | ||||
| Agency bonds/Agency mortgage-backed securities |
43,977.1 | 32,070.1 | ||||||
| Government bonds |
13,459.5 | 21,345.8 | ||||||
| Asset-backed securities |
8,368.3 | 8,660.4 | ||||||
| |
|
|
|
|||||
| |
122,398.5 |
|
|
119,329.5 |
| |||
| |
|
|
|
|||||
| Investments in equity instruments at FVTOCI |
||||||||
| Non-publicly traded equity investments |
4,514.9 | 5,887.9 | ||||||
| Publicly traded stocks |
50.0 | 189.8 | ||||||
| |
|
|
|
|||||
| 4,564.9 | 6,077.7 | |||||||
| |
|
|
|
|||||
| $ |
126,963.4 |
|
$ |
125,407.2 |
| |||
| |
|
|
|
|||||
| Current |
$ | 122,448.5 | $ | 119,519.3 | ||||
| Noncurrent |
4,514.9 | 5,887.9 | ||||||
| |
|
|
|
|||||
| $ | 126,963.4 | $ | 125,407.2 | |||||
| |
|
|
|
|||||
10. |
FINANCIAL ASSETS AT AMORTIZED COST |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
Corporate bonds |
$ | 10,977.3 | $ | 5,310.1 | ||||
Less: Allowance for impairment loss |
(7.1 | ) | (3.1 | ) | ||||
$ |
10,970.2 |
$ |
5,307.0 |
|||||
Current |
$ | 6,598.0 | $ | 3,773.6 | ||||
Noncurrent |
4,372.2 | 1,533.4 | ||||||
| $ | 10,970.2 | $ | 5,307.0 | |||||
11. |
HEDGING FINANCIAL INSTRUMENTS |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
Financial assets- current |
||||||||
Fair value hedges |
||||||||
Interest rate futures contracts |
$ | 0.1 | $ | — | ||||
Cash flow hedges |
||||||||
Forward interest rate contracts |
— | 13.5 | ||||||
| $ | 0.1 | $ | 13.5 | |||||
Financial liabilities- current |
||||||||
Fair value hedges |
||||||||
Interest rate futures contracts |
$ |
1.2 |
$ |
9.6 |
||||
Hedging Instruments |
Contract Amount (US$ in Millions) |
Maturity | ||
Interest rate futures contracts - US Treasury futures |
US$88.7 | March 2021 | ||
Hedged Items |
Asset Carrying Amount |
Accumulated Amount of Fair Value Hedge Adjustments | ||
NT$ |
NT$ | |||
(In Millions) |
(In Millions) | |||
Financial assets at FVTOCI |
$ 6,198.7 | $ 1.1 | ||
Hedging Instruments |
Contract Amount (US$ in Millions) |
Maturity | ||
Interest rate futures contracts - US Treasury futures |
US$53.9 | March 2022 | ||
Hedged Items |
Asset Carrying Amount |
Accumulated Amount of Fair Value Hedge Adjustments | ||
NT$ |
NT$ | |||
(In Millions) |
(In Millions) | |||
Financial assets at FVTOCI |
$ 4,079.3 | $ 9.6 | ||
Hedging Instruments/Hedged Items |
Increase (Decrease) in Value Used for Calculating Hedge Ineffectiveness |
|||||||||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
Hedging Instruments |
||||||||||||
Interest rate futures contracts - US Treasury futures |
$ | (164.7 | ) | $ | (353.6 | ) | $ | 148.8 | ||||
Hedged Items |
||||||||||||
Financial assets at FVTOCI |
177.8 | 353.6 | (148.8 | ) | ||||||||
| $ | 13.1 | $ | — | $ | — | |||||||
Hedging Instruments |
Contract Amount (In Millions) |
Maturity |
Balance in Other Equity (Continuing Hedges) NT$ (In Millions) |
|||||||
| Forward interest rate contracts |
US$ | 328.0 | January 2022 | $ | 128.2 | |||||
Hedging Instruments/Hedged Items |
Increase (Decrease) in Value Used for Calculating Hedge Ineffectiveness |
|||||||||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Hedging Instruments |
||||||||||||
| Forward exchange contracts (capital expenditures) |
$ | (109.6 | ) | $ | 24.1 | $ | (41.4 | ) | ||||
| |
|
|
|
|
|
|||||||
| Forward interest rate contracts (issuance of debts) |
$ | — | $ | — | $ | 132.5 | ||||||
| |
|
|
|
|
|
|||||||
| Hedged Items |
||||||||||||
| Forecast transaction (capital expenditures) |
$ | 109.6 | $ | (24.1 | ) | $ | 41.4 | |||||
| |
|
|
|
|
|
|||||||
| Forecast transaction (issuance of debts) |
$ | — | $ | — | $ | (132.5 | ) | |||||
| |
|
|
|
|
|
|||||||
12. |
NOTES AND ACCOUNTS RECEIVABLE, NET |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| At amortized cost |
||||||||
| Notes and accounts receivable |
$ | 142,771.6 | $ | 193,733.2 | ||||
| Less: Loss allowance |
(246.6 | ) | (347.0 | ) | ||||
| |
|
|
|
|||||
| 142,525.0 | 193,386.2 | |||||||
| At FVTOCI |
2,955.3 | 4,199.9 | ||||||
| |
|
|
|
|||||
| $ | 145,480.3 | $ | 197,586.1 | |||||
| |
|
|
|
|||||
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Not past due |
$ | 140,933.6 | $ | 191,740.0 | ||||
| Past due |
||||||||
| Past due within 30 days |
4,784.4 | 6,186.8 | ||||||
| Past due 31-60 days |
8.7 | 6.2 | ||||||
| Past due 61-120 days |
0.1 | 0.1 | ||||||
| Past due over 121 days |
0.1 | — | ||||||
| Less: Loss allowance |
(246.6 | ) | (347.0 | ) | ||||
| |
|
|
|
|||||
| $ | 145,480.3 | $ | 197,586.1 | |||||
| |
|
|
|
|||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Balance, beginning of year |
$ | 7.3 | $ | 325.3 | $ | 246.6 | ||||||
| Provision (Reversal) |
318.2 | (78.5 | ) | 100.4 | ||||||||
| Effect of exchange rate changes |
(0.2 | ) | (0.2 | ) | — | |||||||
| |
|
|
|
|
|
|||||||
| Balance, end of year |
$ | 325.3 | $ | 246.6 | $ | 347.0 | ||||||
| |
|
|
|
|
|
|||||||
13. |
INVENTORIES |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Finished goods |
$ | 21,705.6 | $ | 32,562.8 | ||||
| Work in process |
91,672.9 | 137,700.4 | ||||||
| Raw materials |
14,716.0 | 11,111.1 | ||||||
| Supplies and spare parts |
9,258.9 | 11,728.0 | ||||||
| |
|
|
|
|||||
| $ | 137,353.4 | $ | 193,102.3 | |||||
| |
|
|
|
|||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Inventory losses (reversal of write-down of inventories) |
$ | (1,983.0 | ) | $ | 3,664.5 | $ | 533.0 | |||||
| |
|
|
|
|
|
|||||||
14. |
INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD |
| Place of Incorporation and Operation |
Carrying Amount |
% of Ownership and Voting Rights Held by the Company | ||||||||||||||
Name of Associate |
Principal Activities |
December 31, 2020 |
December 31, 2021 |
December 31, 2020 |
December 31, 2021 | |||||||||||
NT$ |
NT$ |
|||||||||||||||
(In Millions) |
(In Millions) |
|||||||||||||||
| Vanguard International Semiconductor Corporation (VIS) |
Manufacturing, sales, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing and design service of masks |
Hsinchu, Taiwan | $ | 8,964.1 | $ | 10,469.2 | 28% | 28% | ||||||||
| Systems on Silicon Manufacturing Company Pte Ltd. (SSMC) |
Manufacturing and sales of integrated circuits and other semiconductor devices |
Singapore | 5,900.2 | 6,795.7 | 39% | 39% | ||||||||||
| Xintec Inc. (Xintec) |
Wafer level chip size packaging and wafer level post passivation interconnection service |
Taoyuan, Taiwan | 2,522.3 | 3,012.3 | 41% | 41% | ||||||||||
| Global Unichip Corporation (GUC) |
Researching, developing, manufacturing, testing and marketing of integrated circuits |
Hsinchu, Taiwan | 1,315.4 | 1,462.1 | 35% | 35% | ||||||||||
| Mutual-Pak Technology Co., Ltd. (Mutual-Pak) |
Manufacturing of electronic parts, wholesaling and retailing of electronic materials, and researching, developing and testing of RFID |
New Taipei, Taiwan |
28.2 | 22.9 | 28% | 28% | ||||||||||
| |
|
|
|
|||||||||||||
| $ | 18,730.2 | $ | 21,762.2 | |||||||||||||
| |
|
|
|
|||||||||||||
December 31, 2020 |
December 31, 2021 |
|||||||||
NT$ |
NT$ |
|||||||||
Name of Associate |
(In Millions) |
(In Millions) |
||||||||
| VIS |
$ | 53,849.9 | $ | 73,347.3 | ||||||
| |
|
|
|
|||||||
| GUC |
$ | 15,827.2 | $ | 27,359.1 | ||||||
| |
|
|
|
|||||||
| Xintec |
$ | 20,420.2 | $ | 15,913.3 | ||||||
| |
|
|
|
|||||||
15. |
PROPERTY, PLANT AND EQUIPMENT |
December 31, 2019 |
December 31, 2020 |
December 31, 2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Assets used by the Company |
$ | 1,352,313.9 | $ | 1,554,585.9 | $ | 1,975,114.0 | ||||||
| Assets subject to operating leases |
63.5 | 1,003.2 | 4.7 | |||||||||
| |
|
|
|
|
|
|||||||
| $ | 1,352,377.4 | $ | 1,555,589.1 | $ | 1,975,118.7 | |||||||
| |
|
|
|
|
|
|||||||
| a. | Assets used by the Company |
Land and Land Improvements |
Buildings |
Machinery and Equipment |
Office Equipment |
Equipment under Installation and Construction in Progress |
Total |
|||||||||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
|||||||||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
|||||||||||||||||||
| Cost |
||||||||||||||||||||||||
| Balance at January 1, 2019 |
$ | 4,011.4 | $ | 418,151.7 | $ | 2,728,760.2 | $ | 48,382.2 | $ | 172,911.0 | $ | 3,372,216.5 | ||||||||||||
| Additions |
— | 21,448.5 | 179,798.4 | 7,415.0 | 355,621.1 | 564,283.0 | ||||||||||||||||||
| Disposals or retirements |
— | (159.0 | ) | (17,381.6 | ) | (1,043.3 | ) | — | (18,583.9 | ) | ||||||||||||||
| Transfers from right-of-use |
— | — | 619.8 | — | — | 619.8 | ||||||||||||||||||
| Effect of disposal of subsidiary |
— | — | — | (0.5 | ) | — | (0.5 | ) | ||||||||||||||||
| Effect of exchange rate changes |
(19.6 | ) | (1,366.2 | ) | (5,173.8 | ) | (142.0 | ) | (237.0 | ) | (6,938.6 | ) | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance at December 31, 2019 |
$ | 3,991.8 | $ | 438,075.0 | $ | 2,886,623.0 | $ | 54,611.4 | $ | 528,295.1 | $ | 3,911,596.3 | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Accumulated depreciation and impairment |
||||||||||||||||||||||||
| Balance at January 1, 2019 |
$ | 550.6 | $ | 217,899.2 | $ | 2,049,279.0 | $ | 32,525.1 | $ | — | $ | 2,300,253.9 | ||||||||||||
| Additions |
1.6 | 26,026.6 | 246,724.2 | 6,012.5 | — | 278,764.9 | ||||||||||||||||||
| Disposals or retirements |
— | (144.4 | ) | (12,880.8 | ) | (1,042.1 | ) | — | (14,067.3 | ) | ||||||||||||||
| Transfers from right-of-use |
— | — | 20.7 | — | — | 20.7 | ||||||||||||||||||
| Reversal of impairment |
— | — | (301.4 | ) | — | — | (301.4 | ) | ||||||||||||||||
| Effect of disposal of subsidiary |
— | — | — | (0.5 | ) | — | (0.5 | ) | ||||||||||||||||
| Effect of exchange rate changes |
(13.5 | ) | (722.1 | ) | (4,575.7 | ) | (76.6 | ) | — | (5,387.9 | ) | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance at December 31, 2019 |
$ | 538.7 | $ | 243,059.3 | $ | 2,278,266.0 | $ | 37,418.4 | $ | — | $ | 2,559,282.4 | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Carrying amounts at December 31, 2019 |
$ | 3,453.1 | $ | 195,015.7 | $ | 608,357.0 | $ | 17,193.0 | $ | 528,295.1 | $ | 1,352,313.9 | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Cost |
||||||||||||||||||||||||
| Balance at January 1, 2020 |
$ | 3,991.8 | $ | 438,075.0 | $ | 2,886,623.0 | $ | 54,611.4 | $ | 528,295.1 | $ | 3,911,596.3 | ||||||||||||
| Additions (deductions) |
— | 84,882.5 | 729,943.3 | 15,112.9 | (304,218.0 | ) | 525,720.7 | |||||||||||||||||
| Disposals or retirements |
— | (41.5 | ) | (6,397.3 | ) | (734.1 | ) | — | (7,172.9 | ) | ||||||||||||||
| Transfers from assets subject to operating leases |
— | 23.1 | — | — | — | 23.1 | ||||||||||||||||||
| Transfers to assets subject to operating leases |
— | — | (1,199.0 | ) | — | — | (1,199.0 | ) | ||||||||||||||||
| Effect of exchange rate changes |
(49.2 | ) | (491.7 | ) | (1,964.3 | ) | (127.5 | ) | (111.7 | ) | (2,744.4 | ) | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance at December 31, 2020 |
$ | 3,942.6 | $ | 522,447.4 | $ | 3,607,005.7 | $ | 68,862.7 | $ | 223,965.4 | $ | 4,426,223.8 | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Accumulated depreciation and impairment |
||||||||||||||||||||||||
| Balance at January 1, 2020 |
$ | 538.7 | $ | 243,059.3 | $ | 2,278,266.0 | $ | 37,418.4 | $ | — | $ | 2,559,282.4 | ||||||||||||
| Additions |
1.5 | 29,209.1 | 285,393.6 | 7,216.9 | — | 321,821.1 | ||||||||||||||||||
| Disposals or retirements |
— | (27.9 | ) | (6,012.9 | ) | (732.4 | ) | — | (6,773.2 | ) | ||||||||||||||
| Transfers from assets subject to operating leases |
— | 8.2 | — | — | — | 8.2 | ||||||||||||||||||
| Transfers to assets subject to operating leases |
— | — | (202.6 | ) | — | — | (202.6 | ) | ||||||||||||||||
| Impairment |
— | — | 10.2 | — | — | 10.2 | ||||||||||||||||||
| Effect of exchange rate changes |
(34.1 | ) | (449.2 | ) | (1,924.3 | ) | (100.6 | ) | — | (2,508.2 | ) | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance at December 31, 2020 |
$ | 506.1 | $ | 271,799.5 | $ | 2,555,530.0 | $ | 43,802.3 | $ | — | $ | 2,871,637.9 | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Carrying amounts at December 31, 2020 |
$ | 3,436.5 | $ | 250,647.9 | $ | 1,051,475.7 | $ | 25,060.4 | $ | 223,965.4 | $ | 1,554,585.9 | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Land and Land Improvements |
Buildings |
Machinery and Equipment |
Office Equipment |
Equipment under Installation and Construction in Progress |
Total |
|||||||||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
|||||||||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
|||||||||||||||||||
| Cost |
||||||||||||||||||||||||
| Balance at January 1, 2021 |
$ | 3,942.6 | $ | 522,447.4 | $ | 3,607,005.7 | $ | 68,862.7 | $ | 223,965.4 | $ | 4,426,223.8 | ||||||||||||
| Additions |
2,587.2 | 53,971.3 | 401,659.0 | 7,643.0 | 369,545.8 | 835,406.3 | ||||||||||||||||||
| Disposals or retirements |
— | (41.1 | ) | (26,192.2 | ) | (333.4 | ) | — | (26,566.7 | ) | ||||||||||||||
| Transfers from assets subject to operating leases |
— | 35.5 | 1,443.6 | — | — | 1,479.1 | ||||||||||||||||||
| Transfers to assets subject to operating leases |
— | — | (244.6 | ) | — | — | (244.6 | ) | ||||||||||||||||
| Effect of exchange rate changes |
(41.6 | ) | 184.7 | 1,077.7 | (18.1 | ) | (355.5 | ) | 847.2 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance at December 31, 2021 |
$ | 6,488.2 | $ | 576,597.8 | $ | 3,984,749.2 | $ | 76,154.2 | $ | 593,155.7 | $ | 5,237,145.1 | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Accumulated depreciation and impairment |
||||||||||||||||||||||||
| Balance at January 1, 2021 |
$ | 506.1 | $ | 271,799.5 | $ | 2,555,530.0 | $ | 43,802.3 | $ | — | $ | 2,871,637.9 | ||||||||||||
| Additions |
1.3 | 34,331.6 | 368,777.7 | 8,373.3 | — | 411,483.9 | ||||||||||||||||||
| Disposals or retirements |
— | (36.5 | ) | (22,230.1 | ) | (332.6 | ) | — | (22,599.2 | ) | ||||||||||||||
| Transfers from assets subject to operating leases |
— | 15.1 | 436.8 | — | — | 451.9 | ||||||||||||||||||
| Transfers to assets subject to operating leases |
— | — | (68.3 | ) | — | — | (68.3 | ) | ||||||||||||||||
| Impairment |
— | — | 274.4 | — | — | 274.4 | ||||||||||||||||||
| Effect of exchange rate changes |
(7.6 | ) | 55.6 | 818.9 | (16.4 | ) | — | 850.5 | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance at December 31, 2021 |
$ | 499.8 | $ | 306,165.3 | $ | 2,903,539.4 | $ | 51,826.6 | $ | — | $ | 3,262,031.1 | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Carrying amounts at December 31, 2021 |
$ | 5,988.4 | $ | 270,432.5 | $ | 1,081,209.8 | $ | 24,327.6 | $ | 593,155.7 | $ | 1,975,114.0 | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| b. | Assets subject to operating leases |
Buildings |
Machinery and Equipment |
Total |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Cost |
||||||||||||
| Balance at January 1, 2019 |
$ | 562.6 | $ | — | $ | 562.6 | ||||||
| |
|
|
|
|
|
|||||||
| Balance at December 31, 2019 |
$ | 562.6 | $ | — | $ | 562.6 | ||||||
| |
|
|
|
|
|
|||||||
| Accumulated depreciation |
||||||||||||
| Balance at January 1, 2019 |
$ | 474.9 | $ | — | $ | 474.9 | ||||||
| Additions |
24.2 | — | 24.2 | |||||||||
| |
|
|
|
|
|
|||||||
| Balance at December 31, 2019 |
$ | 499.1 | $ | — | $ | 499.1 | ||||||
| |
|
|
|
|
|
|||||||
| Carrying amounts at December 31, 2019 |
$ | 63.5 | $ | — | $ | 63.5 | ||||||
| |
|
|
|
|
|
|||||||
| Cost |
||||||||||||
| Balance at January 1, 2020 |
$ | 562.6 | $ | — | $ | 562.6 | ||||||
| Disposals or retirements |
(311.9 | ) | — | (311.9 | ) | |||||||
| Transfers to assets used by the Company |
(23.1 | ) | — | (23.1 | ) | |||||||
| Transfers from assets used by the Company |
— | 1,199.0 | 1,199.0 | |||||||||
| |
|
|
|
|
|
|||||||
| Balance at December 31, 2020 |
$ | 227.6 | $ | 1,199.0 | $ | 1,426.6 | ||||||
| |
|
|
|
|
|
|||||||
| Accumulated depreciation |
||||||||||||
| Balance at January 1, 2020 |
$ | 499.1 | $ | — | $ | 499.1 | ||||||
| Additions |
16.3 | 19.4 | 35.7 | |||||||||
| Disposals or retirements |
(305.8 | ) | — | (305.8 | ) | |||||||
| Transfers to assets used by the Company |
(8.2 | ) | — | (8.2 | ) | |||||||
| Transfers from assets used by the Company |
— | 202.6 | 202.6 | |||||||||
| |
|
|
|
|
|
|||||||
| Balance at December 31, 2020 |
$ | 201.4 | $ | 222.0 | $ | 423.4 | ||||||
| |
|
|
|
|
|
|||||||
| Carrying amounts at December 31, 2020 |
$ | 26.2 | $ | 977.0 | $ | 1,003.2 | ||||||
| |
|
|
|
|
|
|||||||
| Cost |
||||||||||||
| Balance at January 1, 2021 |
$ | 227.6 | $ | 1,199.0 | $ | 1,426.6 | ||||||
| Transfers to assets used by the Company |
(35.5 | ) | (1,443.6 | ) | (1,479.1 | ) | ||||||
| Transfers from assets used by the Company |
— | 244.6 | 244.6 | |||||||||
| |
|
|
|
|
|
|||||||
| Balance at December 31, 2021 |
$ | 192.1 | $ | — | $ | 192.1 | ||||||
| |
|
|
|
|
|
|||||||
| Accumulated depreciation |
||||||||||||
| Balance at January 1, 2021 |
$ | 201.4 | $ | 222.0 | $ | 423.4 | ||||||
| Additions |
1.1 | 146.5 | 147.6 | |||||||||
| Transfers to assets used by the Company |
(15.1 | ) | (436.8 | ) | (451.9 | ) | ||||||
| Transfers from assets used by the Company |
— | 68.3 | 68.3 | |||||||||
| |
|
|
|
|
|
|||||||
| Balance at December 31, 2021 |
$ | 187.4 | $ | — | $ | 187.4 | ||||||
| |
|
|
|
|
|
|||||||
| Carrying amounts at December 31, 2021 |
$ | 4.7 | $ | — | $ | 4.7 | ||||||
| |
|
|
|
|
|
|||||||
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Year 1 |
$ | 149.1 | $ | 18.0 | ||||
| Year 2 |
17.0 | — | ||||||
| |
|
|
|
|||||
| $ | 166.1 | $ | 18.0 | |||||
| |
|
|
|
|||||
16. |
LEASE ARRANGEMENTS |
| a. | Right-of-use |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Carrying amounts |
||||||||
| Land |
$ | 25,141.9 | $ | 29,778.6 | ||||
| Buildings |
2,544.8 | 2,918.1 | ||||||
| Machinery and equipment |
— | 3.4 | ||||||
| Office equipment |
41.8 | 34.3 | ||||||
| |
|
|
|
|||||
| $ | 27,728.5 | $ | 32,734.4 | |||||
| |
|
|
|
|||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Additions to right-of-use |
$ | 1,033.0 | $ | 13,481.2 | $ | 7,769.8 | ||||||
| |
|
|
|
|
|
|||||||
| Depreciation of right-of-use |
||||||||||||
| Land |
$ | 957.1 | $ | 1,312.9 | $ | 1,825.7 | ||||||
| Buildings |
458.8 | 569.5 | 707.9 | |||||||||
| Machinery and equipment |
1,184.4 | 775.8 | 0.5 | |||||||||
| Office equipment |
22.4 | 23.4 | 22.1 | |||||||||
| |
|
|
|
|
|
|||||||
| $ | 2,622.7 | $ | 2,681.6 | $ | 2,556.2 | |||||||
| |
|
|
|
|
|
|||||||
| Income from subleasing right-of-use |
$ | 55.0 | $ | 79.6 | $ | 82.0 | ||||||
| |
|
|
|
|
|
|||||||
| b. Lease liabilities |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Carrying amounts |
||||||||
| Current portion (classified under accrued expenses and other current liabilities) |
$ | 1,828.0 | $ | 2,176.5 | ||||
| Noncurrent portion |
20,560.6 | 20,764.2 | ||||||
| |
|
|
|
|||||
| $ | 22,388.6 | $ | 22,940.7 | |||||
| |
|
|
|
|||||
| Ranges of discount rates for lease liabilities are as follows: | ||||
| December 31, 2020 |
December 31, 2021 |
|||||
| Land |
0.48%-2.14% |
0.39%-2.14 |
% | |||
| Buildings |
0.54%-3.88% |
0.39%-3.88 |
% | |||
| Machinery and equipment |
— | 0.71% | ||||
| Office equipment |
0.28%-3.88% |
0.28%-3.88 |
% | |||
| c. Material terms of right-of-use The Company leases land and buildings mainly for the use of plants and offices with lease terms of 1 to 36 years. The lease contracts for land located in the R.O.C. specify that lease payments will be adjusted every 2 years on the basis of changes in announced land value prices. The Company does not have purchase options to acquire the leasehold land and buildings at the end of the lease terms. d. Subleases The Company subleases the right to use its buildings and machinery and equipment under operating leases with lease terms of 1 to 6 years. The maturity analysis of lease payments receivable under operating subleases is as follows: |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Year 1 |
$ | 144.1 | $ | 60.8 | ||||
| |
|
|
|
|||||
| e. | Other lease information |
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Expenses relating to short-term leases |
$ | 5,007.1 | $ | 3,153.5 | $ | 5,250.3 | ||||||
| |
|
|
|
|
|
|||||||
| Expenses relating to variable lease payments not included in the measurement of lease liabilities |
$ | 195.1 | $ | 257.0 | $ | 168.7 | ||||||
| |
|
|
|
|
|
|||||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Total cash outflow for leases |
$ | 7,724.4 | $ | 6,354.6 | $ | 7,510.8 | ||||||
| |
|
|
|
|
|
|||||||
17. |
INTANGIBLE ASSETS |
Goodwill |
Technology License Fees |
Software and System Design Costs |
Patent and Others |
Total |
||||||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
||||||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||||||||
| Cost |
||||||||||||||||||||
| Balance at January 1, 2019 |
$ | 5,795.5 | $ | 10,974.5 | $ | 29,594.6 | $ | 7,656.3 | $ | 54,020.9 | ||||||||||
| Additions |
— | 4,879.6 | 3,710.4 | 647.8 | 9,237.8 | |||||||||||||||
| Disposals or retirements |
— | — | (260.9 | ) | — | (260.9 | ) | |||||||||||||
| Effect of exchange rate changes |
(102.1 | ) | 0.9 | (20.1 | ) | (1.2 | ) | (122.5 | ) | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance at December 31, 2019 |
$ | 5,693.4 | $ | 15,855.0 | $ | 33,024.0 | $ | 8,302.9 | $ | 62,875.3 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Accumulated amortization and impairment |
||||||||||||||||||||
| Balance at January 1, 2019 |
$ | — | $ | 8,756.0 | $ | 23,023.7 | $ | 5,239.1 | $ | 37,018.8 | ||||||||||
| Additions |
— | 1,066.9 | 3,747.3 | 658.2 | 5,472.4 | |||||||||||||||
| Disposals or retirements |
— | — | (258.6 | ) | — | (258.6 | ) | |||||||||||||
| Effect of exchange rate changes |
— | 0.9 | (10.3 | ) | (0.9 | ) | (10.3 | ) | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance at December 31, 2019 |
$ | — | $ | 9,823.8 | $ | 26,502.1 | $ | 5,896.4 | $ | 42,222.3 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Carrying amounts at December 31, 2019 |
$ | 5,693.4 | $ | 6,031.2 | $ | 6,521.9 | $ | 2,406.5 | $ | 20,653.0 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Cost |
||||||||||||||||||||
| Balance at January 1, 2020 |
$ | 5,693.4 | $ | 15,855.0 | $ | 33,024.0 | $ | 8,302.9 | $ | 62,875.3 | ||||||||||
| Additions |
— | 6,308.9 | 3,275.8 | 2,974.8 | 12,559.5 | |||||||||||||||
| Disposals or retirements |
— | — | (60.5 | ) | — | (60.5 | ) | |||||||||||||
| Effect of exchange rate changes |
(256.8 | ) | (2.2 | ) | (0.3 | ) | (0.1 | ) | (259.4 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance at December 31, 2020 |
$ | 5,436.6 | $ | 22,161.7 | $ | 36,239.0 | $ | 11,277.6 | $ | 75,114.9 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Accumulated amortization and impairment |
||||||||||||||||||||
| Balance at January 1, 2020 |
$ | — | $ | 9,823.8 | $ | 26,502.1 | $ | 5,896.4 | $ | 42,222.3 | ||||||||||
| Additions |
— | 2,404.5 | 3,669.2 | 1,112.5 | 7,186.2 | |||||||||||||||
| Disposals or retirements |
— | — | (59.9 | ) | — | (59.9 | ) | |||||||||||||
| Effect of exchange rate changes |
— | (2.1 | ) | 0.3 | — | (1.8 | ) | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance at December 31, 2020 |
$ | — | $ | 12,226.2 | $ | 30,111.7 | $ | 7,008.9 | $ | 49,346.8 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Carrying amounts at December 31, 2020 |
$ | 5,436.6 | $ | 9,935.5 | $ | 6,127.3 | $ | 4,268.7 | $ | 25,768.1 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Goodwill |
Technology License Fees |
Software and System Design Costs |
Patent and Others |
Total |
||||||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
||||||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||||||||
Cost |
||||||||||||||||||||
Balance at January 1, 2021 |
$ | 5,436.6 | $ | 22,161.7 | $ | 36,239.0 | $ | 11,277.6 | $ | 75,114.9 | ||||||||||
Additions |
— | 1,372.8 | 7,726.2 | 219.5 | 9,318.5 | |||||||||||||||
Disposals or retirements |
— | — | (318.7 | ) | — | (318.7 | ) | |||||||||||||
Effect of exchange rate changes |
(57.4 | ) | (0.5 | ) | 4.5 | 0.1 | (53.3 | ) | ||||||||||||
Balance at December 31, 2021 |
$ | 5,379.2 | $ | 23,534.0 | $ | 43,651.0 | $ | 11,497.2 | $ | 84,061.4 | ||||||||||
Accumulated amortization and impairment |
||||||||||||||||||||
Balance at January 1, 2021 |
$ | — | $ | 12,226.2 | $ | 30,111.7 | $ | 7,008.9 | $ | 49,346.8 | ||||||||||
Additions |
— | 2,686.8 | 4,323.9 | 1,196.5 | 8,207.2 | |||||||||||||||
Disposals or retirements |
— | — | (317.5 | ) | — | (317.5 | ) | |||||||||||||
Effect of exchange rate changes |
— | (0.6 | ) | 3.5 | 0.3 | 3.2 | ||||||||||||||
Balance at December 31, 2021 |
$ | — | $ | 14,912.4 | $ | 34,121.6 | $ | 8,205.7 | $ | 57,239.7 | ||||||||||
Carrying amounts at December 31, 2021 |
$ | 5,379.2 | $ | 8,621.6 | $ | 9,529.4 | $ | 3,291.5 | $ | 26,821.7 | ||||||||||
18. |
SHORT-TERM LOANS |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
Unsecured loans |
||||||||
Amount |
$ | 88,559.0 | $ | 114,921.3 | ||||
Loan content |
||||||||
US$ (in millions) |
$ | 200.0 | $ | — | ||||
EUR (in millions) |
2,398.0 | 3,652.9 | ||||||
Annual interest rate |
(0.54)%-0.33 |
% | (0.73)%-0 | % | ||||
Maturity date |
Due by 2021 |
|
Due by 2022 |
| ||||
19. |
BONDS PAYABLE |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
Domestic unsecured bonds |
$ | 173,197.0 | $ | 312,448.0 | ||||
Overseas unsecured bonds |
84,291.0 | 304,414.0 | ||||||
Less: Discounts on bonds payable |
(782.9 | ) | (2,391.4 | ) | ||||
Less: Current portion |
(2,600.0 | ) | (4,400.0 | ) | ||||
| $ | 254,105.1 | $ | 610,070.6 | |||||
Issuance |
Tranche |
Issuance Period |
Total Amount NT$ (In Millions) |
Coupon Rate |
Repayment and Interest Payment | |||||||||||
NT$ unsecured bonds |
||||||||||||||||
101-3 |
— | October 2012 to October 2022 | $ | 4,400.0 | 1.53 | % | Bullet repayment; interest payable annually | |||||||||
101-4 |
B | January 2013 to January 2020 | 10,000.0 | 1.35 | % | above | ||||||||||
| C | January 2013 to January 2023 | 3,000.0 | 1.49 | % | above | |||||||||||
102-1 |
B | February 2013 to February 2020 | 11,600.0 | 1.38 | % | above | ||||||||||
| C | February 2013 to February 2023 | 3,600.0 | 1.50 | % | above | |||||||||||
102-2 |
A | July 2013 to July 2020 | 10,200.0 | 1.50 | % | above | ||||||||||
| B | July 2013 to July 2023 | 3,500.0 | 1.70 | % | above | |||||||||||
102-4 |
D | September 2013 to March 2021 | 2,600.0 | 1.85 | % | Bullet repayment; interest payable annually (interest for the six months prior to maturity will accrue on the basis of actual days and be repayable at maturity) | ||||||||||
| E | September 2013 to March 2023 | 5,400.0 | 2.05 | % | above | |||||||||||
| F | September 2013 to September 2023 | 2,600.0 | 2.10 | % | Bullet repayment; interest payable annually | |||||||||||
109-1 |
A | March 2020 to March 2025 | 3,000.0 | 0.58 | % | above | ||||||||||
| B | March 2020 to March 2027 | 10,500.0 | 0.62 | % | above | |||||||||||
| C | March 2020 to March 2030 | 10,500.0 | 0.64 | % | above | |||||||||||
Issuance |
Tranche |
Issuance Period |
Total Amount NT$ (In Millions) |
Coupon Rate |
Repayment and Interest Payment | |||||||||
| 109-2 |
A | April 2020 to April 2025 |
$ | 5,900.0 | 0.52 | % | Bullet repayment; interest payable annually | |||||||
| B | April 2020 to April 2027 |
10,400.0 | 0.58 | % | above | |||||||||
| C | April 2020 to April 2030 |
5,300.0 | 0.60 | % | above | |||||||||
| 109-3 |
A | May 2020 to May 2025 |
4,500.0 | 0.55 | % | above | ||||||||
| B | May 2020 to May 2027 |
7,500.0 | 0.60 | % | above | |||||||||
| C | May 2020 to May 2030 |
2,400.0 | 0.64 | % | above | |||||||||
| 109-4 |
A | July 2020 to July 2025 |
5,700.0 | 0.58 | % | Two equal installments in last two years; interest payable annually | ||||||||
| B | July 2020 to July 2027 |
6,300.0 | 0.65 | % | above | |||||||||
| C | July 2020 to July 2030 |
1,900.0 | 0.67 | % | above | |||||||||
| 109-5 |
A | September 2020 to September 2025 |
4,800.0 | 0.50 | % | above | ||||||||
| B | September 2020 to September 2027 |
8,000.0 | 0.58 | % | above | |||||||||
| C | September 2020 to September 2030 |
2,800.0 | 0.60 | % | above | |||||||||
| 109-6 (green bond) |
A | December 2020 to December 2025 |
1,600.0 | 0.40 | % | above | ||||||||
| B | December 2020 to December 2027 |
5,600.0 | 0.44 | % | above | |||||||||
| C | December 2020 to December 2030 |
4,800.0 | 0.48 | % | above | |||||||||
| 109-7 |
A | December 2020 to December 2025 |
1,900.0 | 0.36 | % | above | ||||||||
| B | December 2020 to December 2027 |
10,200.0 | 0.41 | % | above | |||||||||
| C | December 2020 to December 2030 |
6,400.0 | 0.45 | % | above | |||||||||
| 110-1 |
A | March 2021 to March 2026 |
4,800.0 | 0.50 | % | Bullet repayment; interest payable annually | ||||||||
| B | March 2021 to March 2028 |
11,400.0 | 0.55 | % | above | |||||||||
| C | March 2021 to March 2031 |
4,900.0 | 0.60 | % | above | |||||||||
| 110-2 |
A | May 2021 to May 2026 |
5,200.0 | 0.50 | % | above | ||||||||
| B | May 2021 to May 2028 |
8,400.0 | 0.58 | % | above | |||||||||
| C | May 2021 to May 2031 |
5,600.0 | 0.65 | % | above | |||||||||
Issuance |
Tranche |
Issuance Period |
Total Amount NT$ (In Millions) |
Coupon Rate |
Repayment and Interest Payment | |||||||||||
| 110-3 |
A | June 2021 to June 2026 |
$ | 6,900.0 | 0.52 | % | Bullet repayment; interest payable annually | |||||||||
| B | June 2021 to June 2028 |
7,900.0 | 0.58 | % | above | |||||||||||
| C | June 2021 to June 2031 |
4,900.0 | 0.65 | % | above | |||||||||||
| 110-4 |
A | August 2021 to August 2025 |
4,000.0 | 0.485 | % | above | ||||||||||
| B | August 2021 to August 2026 |
8,000.0 | 0.50 | % | above | |||||||||||
| C | August 2021 to August 2028 |
5,400.0 | 0.55 | % | above | |||||||||||
| D | August 2021 to August 2031 |
4,200.0 | 0.62 | % | above | |||||||||||
| 110-6 |
A | October 2021 to April 2026 |
3,200.0 | 0.535 | % | above | ||||||||||
| B | October 2021 to October 2026 |
6,900.0 | 0.54 | % | above | |||||||||||
| C | October 2021 to October 2028 |
4,600.0 | 0.60 | % | above | |||||||||||
| D | October 2021 to October 2031 |
1,600.0 | 0.62 | % | above | |||||||||||
| 110-7 |
A | December 2021 to December 2026 |
7,700.0 | 0.65 | % | above | ||||||||||
| B | December 2021 to June 2027 |
3,500.0 | 0.675 | % | above | |||||||||||
| C | December 2021 to December 2028 |
5,500.0 | 0.72 | % | above | |||||||||||
| (Concluded) | ||||||||||||||||
Issuance |
Tranche |
Issuance Period |
Total Amount US$ (In Millions) |
Coupon Rate |
Repayment and Interest Payment | |||||||||||
| US$ unsecured bonds |
||||||||||||||||
| 109-1 |
— | September 2020 to September 2060 |
US$ | 1,000.0 | 2.70 | % | Bullet repayment (callable on the 5th anniversary of the issue date and every anniversary thereafter); interest payable annually | |||||||||
| 110-5 |
— | September 2021 to September 2051 |
1,000.0 | 3.10 | % | above | ||||||||||
Issuance Period |
Total Amount US$ (In Millions) |
Coupon Rate |
Repayment and Interest Payment | |||||||
September 2020 to September 2025 |
US$ | 1,000.0 | 0.75 | % | Bullet repayment (callable at any time, in whole or in part, at the relevant redemption price according to relevant agreements); interest payable semi-annually | |||||
September 2020 to September 2027 |
750.0 | 1.00 | % | above | ||||||
September 2020 to September 2030 |
1,250.0 | 1.375 | % | above | ||||||
April 2021 to April 2026 |
1,100.0 | 1.25 | % | above | ||||||
April 2021 to April 2028 |
900.0 | 1.75 | % | above | ||||||
April 2021 to April 2031 |
1,500.0 | 2.25 | % | above | ||||||
October 2021 to October 2026 |
1,250.0 | 1.75 | % | above | ||||||
October 2021 to October 2031 |
1,250.0 | 2.50 | % | above | ||||||
October 2021 to October 2041 |
1,000.0 | 3.125 | % | above | ||||||
October 2021 to October 2051 |
1,000.0 | 3.25 | % | above | ||||||
Issuance |
Tranche |
Issuance Period |
Total Amount NT$ (In Millions) |
Coupon Rate |
Repayment and Interest Payment | |||||||||||
NT$ unsecured bonds |
||||||||||||||||
111-1 (green bond) |
A | January 2022 to January 2027 |
$ | 2,100.0 | 0.63 | % | Bullet repayment; interest payable annually | |||||||||
| B | January 2022 to January 2029 |
3,300.0 | 0.72 | % | above | |||||||||||
111-2 |
A |
March 2022 to September 2026 |
3,000.0 |
0.84 |
% |
above | ||||||||||
B |
March 2022 to March 2027 |
9,600.0 |
0.85 |
% |
above | |||||||||||
C |
March 2022 to March 2029 |
1,600.0 |
0.90 |
% |
above | |||||||||||
20. |
LONG-TERM BANK LOANS |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
Unsecured loans |
$ | 2,000.0 | $ | 3,510.0 | ||||
Less: Discounts on government grants |
(32.4 | ) | (34.2 | ) | ||||
Less: Current portion |
— | (166.7 | ) | |||||
| $ | 1,967.6 | $ | 3,309.1 | |||||
Loan content |
||||||||
Annual interest rate |
0.4% | 0.4%-0.9% |
||||||
Maturity date |
Due by September 2025 |
|
Due by September 2026 |
| ||||
21. |
RETIREMENT BENEFIT PLANS |
| a. | Defined contribution plans |
| b. | Defined benefit plans |
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Current service cost |
$ | 135.6 | $ | 123.3 | $ | 145.3 | ||||||
| Net interest expense |
124.0 | 81.6 | 47.2 | |||||||||
| |
|
|
|
|
|
|||||||
| Components of defined benefit costs recognized in profit or loss |
259.6 | 204.9 | 192.5 | |||||||||
| |
|
|
|
|
|
|||||||
| Remeasurement on the net defined benefit liability: |
||||||||||||
| Return on plan assets (excluding amounts included in net interest expense) |
(124.4 | ) | (139.2 | ) | (73.3 | ) | ||||||
| Actuarial loss (gain) arising from experience adjustments |
(438.0 | ) | 494.1 | 94.3 | ||||||||
| Actuarial loss (gain) arising from changes in demographic assumptions |
(233.2 | ) | — | 277.4 | ||||||||
| Actuarial loss (gain) arising from changes in financial assumptions |
541.7 | 3,161.9 | (540.5 | ) | ||||||||
| |
|
|
|
|
|
|||||||
| Components of defined benefit costs recognized in other comprehensive income |
(253.9 | ) | 3,516.8 | (242.1 | ) | |||||||
| |
|
|
|
|
|
|||||||
| Total |
$ | 5.7 | $ | 3,721.7 | $ | (49.6 | ) | |||||
| |
|
|
|
|
|
|||||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Cost of revenue |
$ | 157.8 | $ | 126.3 | $ | 124.5 | ||||||
| Research and development expenses |
72.7 | 57.3 | 52.8 | |||||||||
| General and administrative expenses |
25.1 | 18.2 | 12.5 | |||||||||
| Marketing expenses |
4.0 | 3.1 | 2.7 | |||||||||
| |
|
|
|
|
|
|||||||
| $ | 259.6 | $ | 204.9 | $ | 192.5 | |||||||
| |
|
|
|
|
|
|||||||
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Present value of defined benefit obligation |
$ | 16,980.3 | $ | 16,585.5 | ||||
| Fair value of plan assets |
(5,066.2 | ) | (5,548.6 | ) | ||||
| |
|
|
|
|||||
| Net defined benefit liability |
$ | 11,914.1 | $ | 11,036.9 | ||||
| |
|
|
|
|||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Balance, beginning of year |
$ | 13,662.7 | $ | 13,484.1 | $ | 16,980.3 | ||||||
| Current service cost |
135.6 | 123.3 | 145.3 | |||||||||
| Interest expense |
175.4 | 118.8 | 66.7 | |||||||||
| Remeasurement: |
||||||||||||
| Actuarial loss (gain) arising from experience adjustments |
(438.0 | ) | 494.1 | 94.3 | ||||||||
| Actuarial loss (gain) arising from changes in demographic assumptions |
(233.2 | ) | — | 277.4 | ||||||||
| Actuarial loss (gain) arising from changes in financial assumptions |
541.7 | 3,161.9 | (540.5 | ) | ||||||||
| Benefits paid from plan assets |
(344.1 | ) | (399.0 | ) | (431.8 | ) | ||||||
| Benefits paid directly by the Company |
(16.0 | ) | (2.9 | ) | (6.2 | ) | ||||||
| |
|
|
|
|
|
|||||||
| Balance, end of year |
$ | 13,484.1 | $ | 16,980.3 | $ | 16,585.5 | ||||||
| |
|
|
|
|
|
|||||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Balance, beginning of year |
$ | 4,011.3 | $ | 4,301.6 | $ | 5,066.2 | ||||||
| Interest income |
51.4 | 37.2 | 19.5 | |||||||||
| Remeasurement: |
||||||||||||
| Return on plan assets (excluding amounts included in net interest expense) |
124.4 | 139.2 | 73.3 | |||||||||
| Contributions from employer |
458.6 | 987.2 | 821.4 | |||||||||
| Benefits paid from plan assets |
(344.1 | ) | (399.0 | ) | (431.8 | ) | ||||||
| |
|
|
|
|
|
|||||||
| Balance, end of year |
$ | 4,301.6 | $ | 5,066.2 | $ | 5,548.6 | ||||||
| |
|
|
|
|
|
|||||||
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Cash |
$ | 632.8 | $ | 1,001.0 | ||||
| Equity instruments |
2,926.7 | 2,951.8 | ||||||
| Debt instruments |
1,506.7 | 1,595.8 | ||||||
| |
|
|
|
|||||
| $ | 5,066.2 | $ | 5,548.6 | |||||
| |
|
|
|
|||||
| Measurement Date | ||||
| December 31, 2020 |
December 31, 2021 | |||
| Discount rate |
0.40% | 0.75% | ||
| Future salary increase rate |
3.00% (Note) | 3.00% | ||
| 1) | Investment risk: The pension funds are invested in equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the government’s designated authorities or under the mandated management. However, under the R.O.C. Labor Standards Law, the rate of return on assets shall not be less than the average interest rate on a two-year time deposit published by the local banks and the government is responsible for any shortfall in the event that the rate of return is less than the required rate of return. |
| 2) | Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the debt investments of the plan assets. |
| 3) | Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation. |
22. |
EQUITY |
| a. | Capital stock |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Authorized shares |
28,050.0 | 28,050.0 | ||||||
| |
|
|
|
|||||
| Authorized capital |
$ | 280,500.0 | $ | 280,500.0 | ||||
| |
|
|
|
|||||
| Issued and paid shares |
25,930.3 | 25,930.3 | ||||||
| |
|
|
|
|||||
| Issued capital |
$ | 259,303.8 | $ | 259,303.8 | ||||
| |
|
|
|
|||||
| b. | Capital surplus |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Additional paid-in capital |
$ | 24,185.0 | $ | 24,185.0 | ||||
| From merger |
22,804.5 | 22,804.5 | ||||||
| From convertible bonds |
8,892.9 | 8,892.9 | ||||||
| From difference between the consideration received and the carrying amount of the subsidiaries’ net assets during actual disposal |
— | 8,406.3 | ||||||
| From share of changes in equities of subsidiaries |
121.8 | 113.9 | ||||||
| From share of changes in equities of associates |
302.5 | 307.2 | ||||||
| Donations |
40.5 | 51.7 | ||||||
| |
|
|
|
|||||
| $ | 56,347.2 | $ | 64,761.5 | |||||
| |
|
|
|
|||||
| c. | Retained earnings and dividend policy |
First Quarter of 2019 |
Second Quarter of 2019 |
Third Quarter of 2019 |
Fourth Quarter of 2019 |
|||||||||||||
NT$ (In Millions) |
NT$ (In Millions) |
NT$ (In Millions) |
NT$ (In Millions) |
|||||||||||||
Resolution date of TSMC’s Board of Directors in its meeting |
, 2019 |
, 2019 |
, 2019 |
, 2020 |
||||||||||||
Special capital reserve |
$ | (4,724.0 | ) | $ | (3,338.2 | ) | $ | 3,289.2 | $ | 16,893.0 | ||||||
Cash dividends to shareholders |
$ | 51,860.8 | $ | 64,826.0 | $ | 64,826.0 | $ | 64,826.0 | ||||||||
Cash dividends per share (NT$) |
$ | 2.0 | $ | 2.5 | $ | 2.5 | $ | 2.5 | ||||||||
First Quarter of 2020 |
Second Quarter of 2020 |
Third Quarter of 2020 |
Fourth Quarter of 2020 |
|||||||||||||
NT$ (In Millions) |
NT$ (In Millions) |
NT$ (In Millions) |
NT$ (In Millions) |
|||||||||||||
Resolution date of TSMC’s Board of Directors in its meeting |
, 2020 |
, 2020 |
10, 2020 |
, 2021 |
||||||||||||
Special capital reserve |
$ | (2,694.8 | ) | $ | 11,884.5 | $ | 5,501.3 | $ | 12,420.7 | |||||||
Cash dividends to shareholders |
$ | 64,826.0 | $ | 64,826.0 | $ | 64,826.0 | $ | 64,826.0 | ||||||||
Cash dividends per share (NT$) |
$ | 2.5 | $ | 2.5 | $ | 2.5 | $ | 2.5 | ||||||||
First Quarter of 2021 |
Second Quarter of 2021 |
Third Quarter of 2021 |
Fourth Quarter of 2021 |
|||||||||||||
NT$ (In Millions) |
NT$ (In Millions) |
NT$ (In Millions) |
NT$ (In Millions) |
|||||||||||||
Resolution date of TSMC’s Board of Directors in its meeting |
, 2021 |
, 2021 |
, 2021 |
, 2022 |
||||||||||||
Special capital reserve |
$ | (6,287.0 | ) | $ | 10,201.2 | $ | 710.2 | $ | 3,304.3 |
|||||||
Cash dividends to shareholders |
$ | 71,308.5 | $ | 71,308.5 | $ | 71,308.5 | $ | 71,308.5 |
||||||||
Cash dividends per share (NT$) |
$ | 2.75 | $ | 2.75 | $ | 2.75 | $ | 2.75 |
||||||||
| d. | Others |
Year Ended December 31, 2019 |
||||||||||||||||||||
Foreign Currency Translation Reserve |
Unrealized Gain (Loss) on Financial Assets at FVTOCI |
Gain (Loss) on Hedging Instruments |
Unearned Stock-Based Employee Compensation |
Total |
||||||||||||||||
NT$ (In Millions) |
NT$ (In Millions) |
NT$ (In Millions) |
NT$ (In Millions) |
NT$ (In Millions) |
||||||||||||||||
Balance, beginning of year |
$ | (12,042.4 | ) | $ | (3,429.3 | ) | $ | 23.6 | $ | (1.8 | ) | $ | (15,449.9 | ) | ||||||
Exchange differences arising on translation of foreign operations |
(14,693.5 | ) | — | — | — | (14,693.5 | ) | |||||||||||||
Unrealized gain (loss) on financial assets at FVTOCI |
||||||||||||||||||||
Equity instruments |
— | 334.5 | — | — | 334.5 | |||||||||||||||
Debt instruments |
— | 3,097.3 | — | — | 3,097.3 | |||||||||||||||
Cumulative unrealized gain (loss) of equity instruments transferred to retained earnings due to disposal |
— | (162.1 | ) | — | — | (162.1 | ) | |||||||||||||
Cumulative unrealized gain (loss) of debt instruments transferred to profit or loss due to disposal |
— | (537.8 | ) | — | — | (537.8 | ) | |||||||||||||
Loss allowance adjustments from debt instruments |
— | 6.9 | — | — | 6.9 | |||||||||||||||
Gain (loss) arising on changes in the fair value of hedging instruments |
— | — | (109.6 | ) | — | (109.6 | ) | |||||||||||||
Other comprehensive income transferred to profit or loss due to disposal of subsidiary |
4.6 | — | — | — | 4.6 | |||||||||||||||
Transferred to initial carrying amount of hedged items |
— | — | 82.3 | — | 82.3 | |||||||||||||||
Share of other comprehensive income (loss) of associates |
(140.1 | ) | (11.8 | ) | (0.1 | ) | — | (152.0 | ) | |||||||||||
Share of unearned stock-based employee compensation of associates |
— | — | — | 1.6 | 1.6 | |||||||||||||||
Income tax effect |
— | 9.4 | — | — | 9.4 | |||||||||||||||
Balance, end of year |
$ | (26,871.4 | ) | $ | (692.9 | ) | $ | (3.8 | ) | $ | (0.2 | ) | $ | (27,568.3 | ) | |||||
Year Ended December 31, 2020 |
||||||||||||||||||||
Foreign Currency Translation Reserve |
Unrealized Gain (Loss) on Financial Assets at FVTOCI |
Gain (Loss) on Hedging Instruments |
Unearned Stock-Based Employee Compensation |
Total |
||||||||||||||||
NT$ (In Millions) |
NT$ (In Millions) |
NT$ (In Millions) |
NT$ (In Millions) |
NT$ (In Millions) |
||||||||||||||||
Balance, beginning of year |
$ | (26,871.4 | ) | $ | (692.9 | ) | $ | (3.8 | ) | $ | (0.2 | ) | $ | (27,568.3 | ) | |||||
Exchange differences arising on translation of foreign operations |
(29,846.8 | ) | — | — | — | (29,846.8 | ) | |||||||||||||
Unrealized gain (loss) on financial assets at FVTOCI |
||||||||||||||||||||
Equity instruments |
— | 423.2 | — | — | 423.2 | |||||||||||||||
Debt instruments |
— | 3,907.0 | — | — | 3,907.0 | |||||||||||||||
Cumulative unrealized gain (loss) of equity instruments transferred to retained earnings due to disposal |
— | 108.7 | — | — | 108.7 | |||||||||||||||
Cumulative unrealized gain (loss) of debt instruments transferred to profit or loss due to disposal |
— | (1,439.4 | ) | — | — | (1,439.4 | ) | |||||||||||||
Loss allowance adjustments from debt instruments |
— | (0.9 | ) | — | — | (0.9 | ) | |||||||||||||
Gain (loss) arising on changes in the fair value of hedging instruments |
— | — | 24.1 | — | 24.1 | |||||||||||||||
Transferred to initial carrying amount of hedged items |
— | — | (20.3 | ) | — | (20.3 | ) | |||||||||||||
Share of other comprehensive income (loss) of associates |
(283.4 | ) | 15.5 | — | — | (267.9 | ) | |||||||||||||
Share of unearned stock-based employee compensation of associates |
— | — | — | 0.2 | 0.2 | |||||||||||||||
Income tax effect |
— | 0.6 | — | — | 0.6 | |||||||||||||||
Balance, end of year |
$ | (57,001.6 | ) | $ | 2,321.8 | $ | — | $ | — | $ | (54,679.8 | ) | ||||||||
Year Ended December 31, 2021 |
||||||||||||||||||||
Foreign Currency Translation Reserve |
Unrealized Gain (Loss) on Financial Assets at FVTOCI |
Gain (Loss) on Hedging Instruments |
Unearned Stock-Based Employee Compensation |
Total |
||||||||||||||||
NT$ (In Millions) |
NT$ (In Millions) |
NT$ (In Millions) |
NT$ (In Millions) |
NT$ (In Millions) |
||||||||||||||||
Balance, beginning of year |
$ | (57,001.6 | ) | $ | 2,321.8 | $ | — | $ | — | $ | (54,679.8 | ) | ||||||||
Exchange differences arising on translation of foreign operations |
(6,181.7 | ) | — | — | — | (6,181.7 | ) | |||||||||||||
Unrealized gain (loss) on financial assets at FVTOCI |
||||||||||||||||||||
Equity instruments |
— | 1,898.2 | — | — | 1,898.2 | |||||||||||||||
Debt instruments |
— | (3,339.9 | ) | — | — | (3,339.9 | ) | |||||||||||||
Cumulative unrealized gain (loss) of equity instruments transferred to retained earnings due to disposal |
— | (187.7 | ) | — | — | (187.7 | ) | |||||||||||||
Cumulative unrealized gain (loss) of debt instruments transferred to profit or loss due to disposal |
— | (93.2 | ) | — | — | (93.2 | ) | |||||||||||||
Loss allowance adjustments from debt instruments |
— | 1.3 | — | — | 1.3 | |||||||||||||||
Gain (loss) arising on changes in the fair value of hedging instruments |
— | — | 90.2 | — | 90.2 | |||||||||||||||
Transferred to initial carrying amount of hedged items |
— | — | 48.5 | — | 48.5 | |||||||||||||||
Share of other comprehensive income (loss) of associates |
(120.0 | ) | 30.0 | (14.7 | ) | — | (104.7 | ) | ||||||||||||
Income tax effect |
— | (56.2 | ) | (3.4 | ) | — | (59.6 | ) | ||||||||||||
Balance, end of year |
$ | (63,303.3 | ) | $ | 574.3 | $ | 120.6 | $ | — | $ | (62,608.4 | ) | ||||||||
| e. | Treasury stock |
23. |
NET REVENUE |
| a. | Disaggregation of revenue from contracts with customers |
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
Product |
(In Millions) |
(In Millions) |
(In Millions) |
|||||||||
Wafer |
$ | 927,317.3 | $ | 1,178,456.3 | $ | 1,405,300.3 | ||||||
Others |
142,668.1 | 160,798.5 | 182,114.7 | |||||||||
| $ | 1,069,985.4 | $ | 1,339,254.8 | $ | 1,587,415.0 | |||||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
Geography |
(In Millions) |
(In Millions) |
(In Millions) |
|||||||||
Taiwan |
$ | 84,255.2 | $ | 129,082.9 | $ | 203,963.7 | ||||||
United States |
634,713.0 | 817,911.0 | 1,015,996.4 | |||||||||
China |
208,101.4 | 233,783.3 | 164,552.1 | |||||||||
Europe, the Middle East and Africa |
67,568.2 | 70,213.4 | 89,010.1 | |||||||||
Japan |
57,468.6 | 63,299.2 | 71,920.8 | |||||||||
Others |
17,879.0 | 24,965.0 | 41,971.9 | |||||||||
| $ | 1,069,985.4 | $ | 1,339,254.8 | $ | 1,587,415.0 | |||||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
Platform |
(In Millions) |
(In Millions) |
(In Millions) |
|||||||||
Smartphone |
$ | 523,612.9 | $ | 645,303.6 | $ | 695,091.2 | ||||||
High Performance Computing |
315,822.3 | 439,810.0 | 587,780.1 | |||||||||
Internet of Things |
86,342.7 | 110,355.2 | 133,006.0 | |||||||||
Automotive |
47,914.5 | 44,367.5 | 67,076.4 | |||||||||
Digital Consumer Electronics |
53,733.4 | 54,555.7 | 55,577.2 | |||||||||
Others |
42,559.6 | 44,862.8 | 48,884.1 | |||||||||
| $ | 1,069,985.4 | $ | 1,339,254.8 | $ | 1,587,415.0 | |||||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
Resolution |
(In Millions) |
(In Millions) |
(In Millions) |
|||||||||
| 5-nanometer |
$ | — | $ | 90,934.5 | $ | 262,327.4 | ||||||
| 7-nanometer |
249,548.1 | 394,837.0 | 440,383.1 | |||||||||
| 10-nanometer |
23,266.4 | 3,403.1 | 660.0 | |||||||||
| 16-nanometer |
186,700.9 | 197,959.0 | 191,058.9 | |||||||||
| 20-nanometer |
9,535.8 | 8,450.9 | 5,668.8 | |||||||||
| 28-nanometer |
149,578.7 | 149,367.7 | 153,066.6 | |||||||||
| 40/45-nanometer |
93,366.3 | 103,176.5 | 103,413.6 | |||||||||
| 65-nanometer |
69,250.0 | 61,226.7 | 66,467.9 | |||||||||
| 90-nanometer |
25,624.2 | 29,380.4 | 32,260.3 | |||||||||
| 0.11/0.13 micron |
22,947.3 | 33,197.1 | 40,558.5 | |||||||||
| 0.15/0.18 micron |
77,564.5 | 86,008.5 | 86,700.3 | |||||||||
| 0.25 micron and above |
19,935.1 | 20,514.9 | 22,734.9 | |||||||||
| |
|
|
|
|
|
|||||||
| Wafer revenue |
$ | 927,317.3 | $ | 1,178,456.3 | $ | 1,405,300.3 | ||||||
| |
|
|
|
|
|
|||||||
| b. | Contract balances |
January 1, 2020 |
December 31, 2020 |
December 31, 2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Contract liabilities (classified under accrued expenses and other current liabilities) |
$ | 6,784.3 | $ | 13,775.1 | $ | 39,762.6 | ||||||
| |
|
|
|
|
|
|||||||
| c. | Temporary receipts from customers |
| d. | Refund liabilities |
24. |
INTEREST INCOME |
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Interest income |
||||||||||||
| Bank deposits |
$ | 11,454.0 | $ | 5,139.1 | $ | 2,834.8 | ||||||
| Financial assets at FVTPL |
339.5 | 2.5 | — | |||||||||
| Financial assets at FVTOCI |
3,476.2 | 3,121.9 | 2,192.5 | |||||||||
| Financial assets at amortized cost |
919.7 | 754.9 | 681.5 | |||||||||
| |
|
|
|
|
|
|||||||
| $ | 16,189.4 | $ | 9,018.4 | $ | 5,708.8 | |||||||
| |
|
|
|
|
|
|||||||
25. |
FINANCE COSTS |
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Interest expense |
||||||||||||
| Corporate bonds |
$ | 1,139.9 | $ | 1,337.3 | $ | 5,203.0 | ||||||
| Lease liabilities |
240.9 | 227.8 | 193.3 | |||||||||
| Bank loans |
1,869.4 | 500.9 | 17.6 | |||||||||
| Others |
0.7 | 15.5 | 0.3 | |||||||||
| |
|
|
|
|
|
|||||||
| $ | 3,250.9 | $ | 2,081.5 | $ | 5,414.2 | |||||||
| |
|
|
|
|
|
|||||||
26. |
OTHER GAINS AND LOSSES, NET |
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Gain on disposal of financial assets, net |
||||||||||||
| Investments in debt instruments at FVTOCI |
$ | 537.8 | $ | 1,439.4 | $ | 93.2 | ||||||
| Loss on disposal of subsidiaries |
(4.6 | ) | — | — | ||||||||
| Gain (loss) on financial instruments at FVTPL, net |
||||||||||||
| Mandatorily measured at FVTPL |
(2,360.7 | ) | 8,244.5 | (7,973.6 | ) | |||||||
| Gain arising from fair value hedges, net |
13.1 | — | — | |||||||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| The reversal (accrual) of expected credit loss of financial assets |
||||||||||||
| Investments in debt instruments at FVTOCI |
$ | (6.9 | ) | $ | 0.9 | $ | (1.3 | ) | ||||
| Financial assets at amortized cost |
5.2 | (4.6 | ) | 4.0 | ||||||||
| Other gains, net |
665.1 | 426.2 | 489.7 | |||||||||
| |
|
|
|
|
|
|||||||
| $ | (1,151.0 | ) | $ | 10,106.4 | $ | (7,388.0 | ) | |||||
| |
|
|
|
|
|
|||||||
27. |
INCOME TAX |
| a. | Income tax expense recognized in profit or loss |
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Income before tax |
$ | 389,862.1 | $ | 584,746.3 | $ | 663,036.0 | ||||||
| |
|
|
|
|
|
|||||||
| Income tax expense at the statutory rate |
$ | 79,056.5 | $ | 118,831.3 | $ | 134,595.2 | ||||||
| Tax effect of adjusting items: |
||||||||||||
| Nondeductible (deductible) items in determining taxable income |
(4,183.5 | ) | 1,015.9 | 11,279.5 | ||||||||
| Tax-exempt income |
(39,808.1 | ) | (65,988.1 | ) | (89,852.9 | ) | ||||||
| Additional income tax under the Alternative Minimum Tax Act |
10,367.9 | 18,872.8 | 32,852.7 | |||||||||
| Additional income tax on unappropriated earnings |
7,628.1 | 14,747.3 | 18,849.5 | |||||||||
| The origination and reversal of temporary differences |
(1,065.1 | ) | (6,275.2 | ) | (17,530.0 | ) | ||||||
| Income tax credits |
(5,925.4 | ) | (26.5 | ) | (5,651.3 | ) | ||||||
| |
|
|
|
|
|
|||||||
| 46,070.4 | 81,177.5 | 84,542.7 | ||||||||||
| Income tax adjustments on prior years |
(10,193.8 | ) | (7,589.4 | ) | (14,539.5 | ) | ||||||
| Other income tax adjustments |
(41.5 | ) | 150.2 | 152.2 | ||||||||
| |
|
|
|
|
|
|||||||
| Income tax expense recognized in profit or loss |
$ | 35,835.1 | $ | 73,738.3 | $ | 70,155.4 | ||||||
| |
|
|
|
|
|
|||||||
| b. | Income tax expense recognized in other comprehensive income |
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Deferred income tax benefit (expense) |
||||||||||||
| Related to remeasurement of defined benefit obligation |
$ | (30.4 | ) | $ | 422.1 | $ | (29.1 | ) | ||||
| Related to unrealized gain/loss on investments in equity instruments at FVTOCI |
9.4 | 0.6 | (56.2 | ) | ||||||||
| Related to gain/loss on cash flow hedges |
— | — | (3.4 | ) | ||||||||
| |
|
|
|
|
|
|||||||
| $ | (21.0 | ) | $ | 422.7 | $ | (88.7 | ) | |||||
| |
|
|
|
|
|
|||||||
| c. | Deferred income tax balance |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Deferred income tax assets |
||||||||
| Temporary differences |
||||||||
| Depreciation |
$ | 19,354.4 | $ | 34,720.7 | ||||
| Refund liability |
3,755.1 | 5,986.2 | ||||||
| Investment tax credits |
— | 5,621.7 | ||||||
| Net defined benefit liability |
1,342.1 | 1,237.1 | ||||||
| Unrealized loss on inventories |
858.5 | 899.0 | ||||||
| Deferred compensation cost |
330.3 | 374.0 | ||||||
| Investments in equity instruments at FVTOCI |
66.3 | 10.1 | ||||||
| Others |
251.5 | 305.1 | ||||||
| |
|
|
|
|||||
| $ | 25,958.2 | $ | 49,153.9 | |||||
| |
|
|
|
|||||
| Deferred income tax liabilities |
||||||||
| Temporary differences |
||||||||
| Unrealized exchange gains |
$ | (866.5 | ) | $ | (706.3 | ) | ||
| Others |
(863.4 | ) | (1,167.6 | ) | ||||
| |
|
|
|
|||||
| $ | (1,729.9 | ) | $ | (1,873.9 | ) | |||
| |
|
|
|
|||||
Year Ended December 31, 2019 |
||||||||||||||||||||
Recognized in |
||||||||||||||||||||
Balance, Beginning of Year |
Profit or Loss |
Other Comprehensive Income |
Effect of Exchange Rate Changes |
Balance, End of Year |
||||||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
||||||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||||||||
| Deferred income tax assets |
||||||||||||||||||||
| Temporary differences |
||||||||||||||||||||
| Depreciation |
$ | 11,839.2 | $ | 1,727.8 | $ | — | $ | (19.8 | ) | $ | 13,547.2 | |||||||||
| Refund liability |
2,594.0 | (443.2 | ) | — | (0.4 | ) | 2,150.4 | |||||||||||||
| Net defined benefit liability |
1,084.9 | (38.2 | ) | (30.4 | ) | — | 1,016.3 | |||||||||||||
| Unrealized loss on inventories |
751.0 | (280.8 | ) | — | (0.8 | ) | 469.4 | |||||||||||||
| Deferred compensation cost |
271.7 | 59.4 | — | (8.0 | ) | 323.1 | ||||||||||||||
| Investments in equity instruments at FVTOCI |
56.2 | 0.1 | 9.4 | — | 65.7 | |||||||||||||||
| Others |
209.4 | 151.1 | — | (4.2 | ) | 356.3 | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 16,806.4 | $ | 1,176.2 | $ | (21.0 | ) | $ | (33.2 | ) | $ | 17,928.4 | |||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Deferred income tax liabilities |
||||||||||||||||||||
| Temporary differences |
||||||||||||||||||||
| Unrealized exchange gains |
$ | (61.7 | ) | $ | (271.9 | ) | $ | — | $ | — | $ | (333.6 | ) | |||||||
| Others |
(171.6 | ) | 160.8 | — | — | (10.8 | ) | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | (233.3 | ) | $ | (111.1 | ) | $ | — | $ | — | $ | (344.4 | ) | ||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Year Ended December 31, 2020 |
||||||||||||||||||||
Recognized in |
||||||||||||||||||||
Balance, Beginning of Year |
Profit or Loss |
Other Comprehensive Income |
Effect of Exchange Rate Changes |
Balance, End of Year |
||||||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
||||||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||||||||
| Deferred income tax assets |
||||||||||||||||||||
| Temporary differences |
||||||||||||||||||||
| Depreciation |
$ | 13,547.2 | $ | 5,824.0 | $ | — | $ | (16.8 | ) | $ | 19,354.4 | |||||||||
| Refund liability |
2,150.4 | 1,606.1 | — | (1.4 | ) | 3,755.1 | ||||||||||||||
| Net defined benefit liability |
1,016.3 | (96.3 | ) | 422.1 | — | 1,342.1 | ||||||||||||||
| Unrealized loss on inventories |
469.4 | 391.1 | — | (2.0 | ) | 858.5 | ||||||||||||||
| Deferred compensation cost |
323.1 | 27.4 | — | (20.2 | ) | 330.3 | ||||||||||||||
| Investments in equity instruments at FVTOCI |
65.7 | — | 0.6 | — | 66.3 | |||||||||||||||
| Others |
356.3 | (91.6 | ) | — | (13.2 | ) | 251.5 | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 17,928.4 | $ | 7,660.7 | $ | 422.7 | $ | (53.6 | ) | $ | 25,958.2 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Deferred income tax liabilities |
||||||||||||||||||||
| Temporary differences |
||||||||||||||||||||
| Unrealized exchange gains |
$ | (333.6 | ) | $ | (532.9 | ) | $ | — | $ | — | $ | (866.5 | ) | |||||||
| Others |
(10.8 | ) | (852.6 | ) | — | — | (863.4 | ) | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | (344.4 | ) | $ | (1,385.5 | ) | $ | — | $ | — | $ | (1,729.9 | ) | ||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Year Ended December 31, 2021 |
||||||||||||||||||||
Recognized in |
||||||||||||||||||||
Balance, Beginning of Year |
Profit or Loss |
Other Comprehensive Income |
Effect of Exchange Rate Changes |
Balance, End of Year |
||||||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
||||||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||||||||
| Deferred income tax assets |
||||||||||||||||||||
| Temporary differences |
||||||||||||||||||||
| Depreciation |
$ | 19,354.4 | $ | 15,365.7 | $ | — | $ | 0.6 | $ | 34,720.7 | ||||||||||
| Refund liability |
3,755.1 | 2,231.5 | — | (0.4 | ) | 5,986.2 | ||||||||||||||
| Investment tax credits |
— | 5,621.7 | — | — | 5,621.7 | |||||||||||||||
| Net defined benefit liability |
1,342.1 | (75.9 | ) | (29.1 | ) | — | 1,237.1 | |||||||||||||
| Unrealized loss on inventories |
858.5 | 41.0 | — | (0.5 | ) | 899.0 | ||||||||||||||
| Deferred compensation cost |
330.3 | 49.2 | — | (5.5 | ) | 374.0 | ||||||||||||||
| Investments in equity instruments at FVTOCI |
66.3 | — | (56.2 | ) | — | 10.1 | ||||||||||||||
| Others |
251.5 | 59.1 | — | (5.5 | ) | 305.1 | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 25,958.2 | $ | 23,292.3 | $ | (85.3 | ) | $ | (11.3 | ) | $ | 49,153.9 | |||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Deferred income tax liabilities |
||||||||||||||||||||
| Temporary differences |
||||||||||||||||||||
| Unrealized exchange gains |
$ | (866.5 | ) | $ | 160.2 | $ | — | $ | — | $ | (706.3 | ) | ||||||||
| Others |
(863.4 | ) | (300.8 | ) | (3.4 | ) | — | (1,167.6 | ) | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | (1,729.9 | ) | $ | (140.6 | ) | $ | (3.4 | ) | $ | — | $ | (1,873.9 | ) | |||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| d. | The deductible temporary differences for which no deferred income tax assets have been recognized |
| e. | Unused tax-exemption information |
Tax-exemption Period | ||
| Construction and expansion of 2009 by TSMC |
2018 to 2022 |
| f. | The information of unrecognized deferred income tax liabilities associated with investments |
| g. | Income tax examination |
28. |
EARNINGS PER SHARE |
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
(NT$) |
(NT$) |
(NT$) |
||||||||||
Basic EPS |
$ | 13.65 | $ | 19.70 | $ | 22.84 | ||||||
Diluted EPS |
$ | 13.65 | $ | 19.70 | $ | 22.84 | ||||||
Amounts (Numerator) NT$ (In Millions) |
Number of Shares (Denominator) (In Millions) |
EPS (NT$) |
||||||||||
Year Ended December 31, 2019 |
||||||||||||
Basic/Diluted EPS |
||||||||||||
Net income available to common shareholders of the parent |
$ | 353,948.0 | 25,930.3 | $ | 13.65 | |||||||
Year Ended December 31, 2020 |
||||||||||||
Basic/Diluted EPS |
||||||||||||
Net income available to common shareholders of the parent |
$ | 510,744.0 | 25,930.3 | $ | 19.70 | |||||||
Year Ended December 31, 2021 |
||||||||||||
Basic/Diluted EPS |
||||||||||||
Net income available to common shareholders of the parent |
$ | 592,359.2 | 25,930.3 | $ | 22.84 | |||||||
29. |
SHARE-BASED PAYMENT ARRANGEMENTS |
| a. | Employee restricted stock awards |
| 1) | The RSAs granted to a key management personnel can only be vested if |
| • | the key management personnel remains employed by TSMC on the last date of each vesting period; |
| • | during the vesting period, the key management personnel may not breach any agreement with the TSMC or violate the TSMC’s work rules; and |
| • | certain key management personnel performance metrics and the TSMC’s business performance metrics are met. |
| 2) | The maximum percentage of granted RSAs that may be vested each year shall be as follows: one-year anniversary of the grant: 50%; two-year anniversary of the grant: 25%; and three-year anniversary of the grant: 25%; provided that the actual percentage and number of the RSAs to be vested in each year will be calculated based on the achievement of the TSMC’s business performance metrics. |
| 3) | The maximum number of RSAs that may be vested in each year will be set as 110%, among which 100% will be subject to a calculation based on the TSMC’s relative Total Shareholder Return (”TSR”, including capital gains and dividends) achievement to determine the number of RSAs to be vested; this number will be further subject to a modifier to increase or decrease up to 10% based on the Compensation Committee’s evaluation of the TSMC’s Environmental, Social, and Governance (”ESG”) achievements. The number of shares so calculated should be rounded down to the nearest integral. |
TSMC’s TSR relative to the TSR of S&P 500 IT Index |
Ratio of Shares to be Vested | |
| Above the Index by X percentage points | 50% + X * 2.5%, with the maximum of 100% | |
| Equal to the Index | 50% | |
| Below the Index by X percentage points | 50% - X * 2.5%, with the minimum of 0% |
| 1) | During each vesting period, no key management personnel granted RSAs, except for inheritance, may sell, pledge, transfer, give to another person, create any encumbrance on, or otherwise dispose of, any shares under the unvested RSAs. |
| 2) | Before the vesting conditions are fulfilled, the attendance, proposal rights, speech rights, voting rights and etc. shall be exercised by the engaged trustee/custodian on the key management personnel’s behalf. Any other shareholder rights including but not limited to the entitlement to any distribution regarding dividends, bonuses and capital reserve, and the subscription right of the new shares issued for any capital increase, are the same as those of holders of common shares of TSMC. |
| 3) | Granted RSAs shall be deposited in a trust/custody account. |
| b. | Cash-settled share-based payment arrangements |
30. |
ADDITIONAL INFORMATION OF EXPENSES BY NATURE |
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
a. Depreciation of property, plant and equipment and right-of-use |
||||||||||||
Recognized in cost of revenue |
$ | 256,530.9 | $ | 299,311.4 | $ | 386,103.9 | ||||||
Recognized in operating expenses |
24,856.7 | 25,191.3 | 27,936.2 | |||||||||
Recognized in other operating income and expenses |
24.2 | 35.7 | 147.6 | |||||||||
| $ | 281,411.8 | $ | 324,538.4 | $ | 414,187.7 | |||||||
b. Amortization of intangible assets |
||||||||||||
Recognized in cost of revenue |
$ | 3,069.9 | $ | 4,837.7 | $ | 5,574.3 | ||||||
Recognized in operating expenses |
2,402.5 | 2,348.5 | 2,632.9 | |||||||||
| $ | 5,472.4 | $ | 7,186.2 | $ | 8,207.2 | |||||||
c. Employee benefits expenses |
||||||||||||
Post-employment benefits |
||||||||||||
Defined contribution plans |
$ | 2,609.7 | $ | 2,809.5 | $ | 3,711.0 | ||||||
Defined benefit plans |
259.6 | 204.9 | 192.5 | |||||||||
| 2,869.3 | 3,014.4 | 3,903.5 | ||||||||||
Other employee benefits |
107,115.3 | 137,803.0 | 161,043.6 | |||||||||
| $ | 109,984.6 | $ | 140,817.4 | $ | 164,947.1 | |||||||
Employee benefits expense summarized by function |
||||||||||||
Recognized in cost of revenue |
$ | 64,702.0 | $ | 83,099.0 | $ | 98,012.8 | ||||||
Recognized in operating expenses |
45,282.6 | 57,718.4 | 66,934.3 | |||||||||
| $ | 109,984.6 | $ | 140,817.4 | $ | 164,947.1 | |||||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
Profit sharing bonus to employees |
$ | 23,165.7 | $ | 34,753.2 | $ | 35,601.5 | ||||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
Resolution Date of TSMC’s Board of Directors in its meeting |
February 11, 2020 |
February 9, 2021 |
February 15, 2022 |
|||||||||
Profit sharing bonus to employees |
$ | 23,165.7 | $ | 34,753.2 | $ | 35,601.5 | ||||||
Compensation to directors |
$ | 360.4 | $ | 509.8 | $ | 487.5 | ||||||
31. |
CASH FLOW INFORMATION |
| a. | Non-cash transactions |
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
Additions of financial assets at FVTOCI |
$ | 257,824.5 | $ | 268,653.5 | $ | 253,613.9 | ||||||
Conversion of convertible bonds into equity securities |
— | (120.5 | ) | — | ||||||||
Exchange of equity instruments |
— | — | (106.2 | ) | ||||||||
Changes in accrued expenses and other current liabilities |
(266.3 | ) | (5,895.5 | ) | 2,381.0 | |||||||
Payments for acquisition of financial assets at FVTOCI |
$ | 257,558.2 | $ | 262,637.5 | $ | 255,888.7 | ||||||
Disposal of financial assets at FVTOCI |
$ | 229,525.1 | $ | 269,011.8 | $ | 251,201.4 | ||||||
Changes in other financial assets |
919.4 | (2,079.9 | ) | 3,509.3 | ||||||||
Exchange of equity instruments |
— | — | (106.2 | ) | ||||||||
Proceeds from disposal of financial assets at FVTOCI |
$ | 230,444.5 | $ | 266,931.9 | $ | 254,604.5 | ||||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Additions of property, plant and equipment |
$ | 564,283.0 | $ | 525,720.7 | $ | 835,406.3 | ||||||
| Changes in other financial assets |
472.5 | 584.7 | 1,934.0 | |||||||||
| Exchange of assets |
(3,287.1 | ) | (1.1 | ) | (3,256.5 | ) | ||||||
| Changes in payables to contractors and equipment suppliers |
(100,963.9 | ) | (19,085.9) | 5,153.3 | ||||||||
| Transferred to initial carrying amount of hedged items |
(82.3 | ) | 20.3 | (41.4 | ) | |||||||
| |
|
|
|
|
|
|||||||
| Payments for acquisition of property, plant and equipment |
$ | 460,422.2 | $ | 507,238.7 | $ | 839,195.7 | ||||||
| |
|
|
|
|
|
|||||||
| Additions of intangible assets |
$ | 9,237.7 | $ | 12,559.5 | $ | 9,318.5 | ||||||
| Changes in other financial assets |
22.2 | 10.5 | 2.9 | |||||||||
| Changes in account payable |
70.0 | 191.4 | — | |||||||||
| Changes in accrued expenses and other current liabilities |
— | (3,219.0 | ) | (280.7 | ) | |||||||
| |
|
|
|
|
|
|||||||
| Payments for acquisition of intangible assets |
$ | 9,329.9 | $ | 9,542.4 | $ | 9,040.7 | ||||||
| |
|
|
|
|
|
|||||||
| b. | Reconciliation of liabilities arising from financing activities |
Non-cash changes |
||||||||||||||||||||||||
Balance as of January 1, 2019 |
Financing Cash Flow |
Foreign Exchange Movement |
Leases Modifications |
Other Changes (Note) |
Balance as of December 31, 2019 |
|||||||||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
|||||||||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
|||||||||||||||||||
| Short-term loans |
$ | 88,754.7 | $ | 31,804.3 | $ | (2,036.7 | ) | $ | — | $ | — | $ | 118,522.3 | |||||||||||
| Bonds payable |
91,800.0 | (34,900.0 | ) | — | — | — | 56,900.0 | |||||||||||||||||
| Lease liabilities |
19,903.6 | (3,174.0 | ) | (73.3 | ) | 419.7 | 240.9 | 17,316.9 | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | 200,458.3 | $ | (6,269.7 | ) | $ | (2,110.0 | ) | $ | 419.7 | $ | 240.9 | $ | 192,739.2 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Non-cash changes |
||||||||||||||||||||||||
Balance as of January 1, 2020 |
Financing Cash Flow |
Foreign Exchange Movement |
Leases Modifications |
Other Changes (Note) |
Balance as of December 31, 2020 |
|||||||||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
|||||||||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
|||||||||||||||||||
| Short-term loans |
$ | 118,522.3 | $ | (31,571.6 | ) | $ | 1,608.3 | $ | — | $ | — | $ | 88,559.0 | |||||||||||
| Bonds payable |
56,900.0 | 204,535.0 | (4,758.6 | ) | — | 28.7 | 256,705.1 | |||||||||||||||||
| Long-term bank loans |
— | 2,000.0 | — | — | (32.4 | ) | 1,967.6 | |||||||||||||||||
| Lease liabilities |
17,316.9 | (2,819.7 | ) | (78.5 | ) | 7,742.2 | 227.7 | 22,388.6 | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | 192,739.2 | $ | 172,143.7 | $ | (3,228.8 | ) | $ | 7,742.2 | $ | 224.0 | $ | 369,620.3 | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Non-cash changes |
||||||||||||||||||||||||
Balance as of January 1, 2021 |
Financing Cash Flow |
Foreign Exchange Movement |
Leases Modifications |
Other Changes (Note) |
Balance as of December 31, 2021 |
|||||||||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
|||||||||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
|||||||||||||||||||
| Short-term loans |
$ | 88,559.0 | $ | 35,668.4 | $ | (8,777.5 | ) | $ | — | $ | (528.6 | ) | $ | 114,921.3 | ||||||||||
| Bonds payable |
256,705.1 | 361,255.1 | (3,646.9 | ) | — | 157.3 | 614,470.6 | |||||||||||||||||
| Long-term bank loans |
1,967.6 | 1,510.0 | — | — | (1.8 | ) | 3,475.8 | |||||||||||||||||
| Lease liabilities |
22,388.6 | (2,178.3 | ) | (82.3 | ) | 2,619.4 | 193.3 | 22,940.7 | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | 369,620.3 | $ | 396,255.2 | $ | (12,506.7 | ) | $ | 2,619.4 | $ | (179.8 | ) | $ | 755,808.4 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Note: | Other changes include discounts on short-term loans, amortization of bonds payable, amortization of long-term bank loan interest subsidy and financial cost of lease liabilities. |
32. |
CAPITAL MANAGEMENT |
33. |
FINANCIAL INSTRUMENTS |
| a. | Categories of financial instruments |
December 31, 2020 |
December 31, 2021 |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Financial assets |
||||||||
| FVTPL (Note 1) |
$ | 2,259.4 | $ | 159.0 | ||||
| FVTOCI (Note 2) |
129,918.7 | 129,607.1 | ||||||
| Hedging financial assets |
0.1 | 13.5 | ||||||
| Amortized cost (Note 3) |
826,293.6 | 1,283,715.7 | ||||||
| |
|
|
|
|||||
| $ | 958,471.8 | $ | 1,413,495.3 | |||||
| |
|
|
|
|||||
| Financial liabilities |
||||||||
| FVTPL (Note 4) |
$ | 94.1 | $ | 681.9 | ||||
| Hedging financial liabilities |
1.2 | 9.6 | ||||||
| Amortized cost (Note 5) |
748,129.3 | 1,355,957.2 | ||||||
| |
|
|
|
|||||
| $ | 748,224.6 | $ | 1,356,648.7 | |||||
| |
|
|
|
|||||
| Note 1: | Financial assets mandatorily measured at FVTPL. | |
| Note 2: | Including notes and accounts receivable (net), equity and debt investments. | |
| Note 3: | Including cash and cash equivalents, financial assets at amortized cost, notes and accounts receivable (including related parties), other receivables and refundable deposits. | |
| Note 4: | Held for trading. |
| Note 5: | Including short-term loans, accounts payable (including related parties), payables to contractors and equipment suppliers, cash dividends payable, accrued expenses and other current liabilities, bonds payable, long-term bank loans, guarantee deposits and other noncurrent liabilities. |
| b. | Financial risk management objectives |
| c. | Market risk |
| d. | Credit risk management |
| Category |
Description |
Basis for Recognizing Expected Credit Loss |
Expected Credit Loss Ratio |
|||||
| Performing |
Credit rating is investment grade on valuation date |
12 months expected credit loss |
0—0.1 | % | ||||
| Doubtful |
Credit rating is non-investment grade on valuation date | Lifetime expected credit loss-not credit impaired | — | |||||
| In default |
Credit rating is CC or below on valuation date |
Lifetime expected credit loss-credit impaired |
— | |||||
| Write-off |
There is evidence indicating that the debtor is in severe financial difficulty and the Company has no realistic prospect of recovery |
Amount is written off |
— | |||||
| e. | Liquidity risk management |
Less Than 1 Year |
1-3 Years |
3-5 Years |
More Than 5 Years |
Total |
||||||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
||||||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||||||||
| December 31, 2021 |
||||||||||||||||||||
| Non-derivative financial liabilities |
||||||||||||||||||||
| Short-term loans |
$ | 114,767.0 | $ | — | $ | — | $ | — | $ | 114,767.0 | ||||||||||
| Accounts payable (including related parties) |
48,722.8 | — | — | — | 48,722.8 | |||||||||||||||
| Payables to contractors and equipment suppliers |
145,742.2 | — | — | — | 145,742.2 | |||||||||||||||
| Accrued expenses and other current liabilities |
120,240.4 | — | — | — | 120,240.4 | |||||||||||||||
| Bonds payable |
13,580.6 | 42,801.4 | 191,458.1 | 506,505.0 | 754,345.1 | |||||||||||||||
| Long-term bank loans |
183.7 | 2,217.1 | 1,153.9 | — | 3,554.7 | |||||||||||||||
| Lease liabilities (including those classified under accrued expenses and other current liabilities) (Note) |
2,371.6 | 3,896.2 | 3,385.3 | 14,649.2 | 24,302.3 | |||||||||||||||
| Others |
— | 164,991.9 | — | — | 164,991.9 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| 445,608.3 | 213,906.6 | 195,997.3 | 521,154.2 | 1,376,666.4 | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Derivative financial instruments |
||||||||||||||||||||
| Forward exchange contracts |
||||||||||||||||||||
| Outflows |
187,708.0 | — | — | — | 187,708.0 | |||||||||||||||
| Inflows |
(187,631.9 | ) | — | — | — | (187,631.9 | ) | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| 76.1 | — | — | — | 76.1 | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 445,684.4 | $ | 213,906.6 | $ | 195,997.3 | $ | 521,154.2 | $ | 1,376,742.5 | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
5-10 Years |
10-15 Years |
15-20 Years |
More Than 20 Years |
Total |
||||||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
NT$ |
||||||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||||||||
| December 31, 2020 |
||||||||||||||||||||
| Lease liabilities |
$ | 7,402.0 | $ | 5,253.9 | $ | 2,255.2 | $ | 156.8 | $ | 15,067.9 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| December 31, 2021 |
||||||||||||||||||||
| Lease liabilities |
$ | 7,513.9 | $ | 5,043.1 | $ | 1,972.7 | $ | 119.5 | $ | 14,649.2 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| f. | Fair value of financial instruments |
| 1) | Fair value measurements recognized in the consolidated statements of financial position |
| • | Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; |
| • | Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and |
| • | Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
| 2) | Fair value of financial instruments that are measured at fair value on a recurring basis |
December 31, 2020 |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
|||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
|||||||||||||
| Financial assets at FVTPL |
||||||||||||||||
| Mandatorily measured at FVTPL |
||||||||||||||||
| Forward exchange contracts |
$ | — | $ | 2,259.4 | $ | — | $ | 2,259.4 | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Financial assets at FVTOCI |
||||||||||||||||
| Investments in debt instruments |
||||||||||||||||
| Corporate bonds |
$ | — | $ | 56,593.6 | $ | — | $ | 56,593.6 | ||||||||
| Agency bonds/Agency mortgage-backed securities |
— | 43,977.1 | — | 43,977.1 | ||||||||||||
| Government bonds |
13,279.2 | 180.3 | — | 13,459.5 | ||||||||||||
| Asset-backed securities |
— | 8,368.3 | — | 8,368.3 | ||||||||||||
| Investments in equity instruments |
||||||||||||||||
| Non-publicly traded equity investments |
— | — | 4,514.9 | 4,514.9 | ||||||||||||
| Publicly traded stocks |
50.0 | — | — | 50.0 | ||||||||||||
| Notes and accounts receivable, net |
— | 2,955.3 | — | 2,955.3 | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| $ | 13,329.2 | $ | 112,074.6 | $ | 4,514.9 | $ | 129,918.7 | |||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Hedging financial assets |
||||||||||||||||
| Fair value hedges |
||||||||||||||||
| Interest rate futures contracts |
$ | 0.1 | $ | — | $ | — | $ | 0.1 | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Financial liabilities at FVTPL |
||||||||||||||||
| Held for trading |
||||||||||||||||
| Forward exchange contracts |
$ | — | $ | 94.1 | $ | — | $ | 94.1 | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Hedging financial liabilities |
||||||||||||||||
| Fair value hedges |
||||||||||||||||
| Interest rate futures contracts |
$ | 1.2 | $ | — | $ | — | $ | 1.2 | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
December 31, 2021 |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
|||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
|||||||||||||
| Financial assets at FVTPL |
||||||||||||||||
| Mandatorily measured at FVTPL |
||||||||||||||||
| Forward exchange contracts |
$ | — | $ | 159.0 | $ | — | $ | 159.0 | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
December 31, 2021 |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
NT$ |
NT$ |
NT$ |
NT$ |
|||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
(In Millions) |
|||||||||||||
| Financial assets at FVTOCI |
||||||||||||||||
| Investments in debt instruments |
||||||||||||||||
| Corporate bonds |
$ | — | $ | 57,253.2 | $ | — | $ | 57,253.2 | ||||||||
| Agency bonds/Agency mortgage-backed securities |
— | 32,070.1 | — | 32,070.1 | ||||||||||||
| Government bonds |
21,267.0 | 78.8 | — | 21,345.8 | ||||||||||||
| Asset-backed securities |
— | 8,660.4 | — | 8,660.4 | ||||||||||||
| Investments in equity instruments |
||||||||||||||||
| Non-publicly traded equity investments |
— | — | 5,887.9 | 5,887.9 | ||||||||||||
| Publicly traded stocks |
189.8 | — | — | 189.8 | ||||||||||||
| Notes and accounts receivable, net |
— | 4,199.9 | — | 4,199.9 | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| $ | 21,456.8 | $ | 102,262.4 | $ | 5,887.9 | $ | 129,607.1 | |||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Hedging financial assets |
||||||||||||||||
| Cash flow hedges |
||||||||||||||||
| Forward interest rate contracts |
$ | — | $ | 13.5 | $ | — | $ | 13.5 | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Financial liabilities at FVTPL |
||||||||||||||||
| Held for trading |
||||||||||||||||
| Forward exchange contracts |
$ | — | $ | 681.9 | $ | — | $ | 681.9 | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Hedging financial liabilities |
||||||||||||||||
| Fair value hedges |
||||||||||||||||
| Interest rate futures contracts |
$ | 9.6 | $ | — | $ | — | $ | 9.6 | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
Years Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
NT$ |
NT$ |
NT$ |
||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||
| Balance, beginning of year |
$ | 3,910.7 | $ | 4,208.9 | $ | 4,514.9 | ||||||
| Additions |
372.3 | 175.2 | 319.2 | |||||||||
| Recognized in profit or loss |
— | (3.8 | ) | — | ||||||||
| Recognized in other comprehensive income or loss |
129.5 | 409.0 | 1,821.8 | |||||||||
| Disposals and proceeds from return of capital of investments |
(76.5 | ) | (51.1 | ) | (700.2 | ) | ||||||
| Transfers out of level 3 (Note) |
(43.6 | ) | — | — | ||||||||
| Effect of exchange rate changes |
(83.5 | ) | (223.3 | ) | (67.8 | ) | ||||||
| |
|
|
|
|
|
|||||||
| Balance, end of year |
$ | 4,208.9 | $ | 4,514.9 | $ | 5,887.9 | ||||||
| |
|
|
|
|
|
|||||||
| • | The fair values of corporate bonds, agency bonds, agency mortgage-backed securities, asset-backed securities and government bonds are determined by quoted market prices provided by third party pricing services. |
| • | The fair values of forward contracts are measured using forward rates and discount rates derived from quoted market prices. |
| • | The fair value of accounts receivable classified as at FVTOCI is determined by the present value of future cash flows based on the discount rate that reflects the credit risk of counterparties. |
| 3) | Fair value of financial instruments that are not measured at fair value |
December 31, 2020 |
||||||||
Carrying |
Level 2 |
|||||||
Amount |
Fair Value |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Financial assets |
||||||||
| Financial assets at amortized costs |
||||||||
| Corporate bonds |
$ | 10,970.2 | $ | 11,053.6 | ||||
| |
|
|
|
|||||
| Financial liabilities |
||||||||
| Financial liabilities at amortized costs |
||||||||
| Bonds payable |
$ | 256,705.1 | $ | 257,551.2 | ||||
| |
|
|
|
|||||
December 31, 2021 |
||||||||
Carrying |
Level 2 |
|||||||
Amount |
Fair Value |
|||||||
NT$ |
NT$ |
|||||||
(In Millions) |
(In Millions) |
|||||||
| Financial assets |
||||||||
| Financial assets at amortized costs |
||||||||
| Corporate bonds |
$ | 5,307.0 | $ | 5,318.0 | ||||
| |
|
|
|
|||||
| Financial liabilities |
||||||||
| Financial liabilities at amortized costs |
||||||||
| Bonds payable |
$ | 614,470.7 | $ | 613,514.7 | ||||
| |
|
|
|
|||||
34. |
RELATED PARTY TRANSACTIONS |
| a. | Related party name and categories |
| Related Party Name |
Related Party Categories | |
| GUC | Associates | |
| VIS | Associates | |
| SSMC | Associates | |
| Xintec | Associates | |
| TSMC Education and Culture Foundation | Other related parties | |
| TSMC Charity Foundation | Other related parties |
| b. | Net revenue |
Years Ended December 31 |
||||||||||||||
2019 |
2020 |
2021 |
||||||||||||
NT$ |
NT$ |
NT$ |
||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||||
| Item |
Related Party Categories |
|||||||||||||
| Net revenue from sale of goods |
Associates | $ | 6,253.9 | $ | 8,129.8 | $ | 8,475.9 | |||||||
| |
|
|
|
|
|
|||||||||
| c. | Purchases |
Years Ended December 31 |
||||||||||||||
2019 |
2020 |
2021 |
||||||||||||
NT$ |
NT$ |
NT$ |
||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||||
| Related Party Categories |
||||||||||||||
| Associates |
$ | 6,301.4 | $ | 7,606.4 | $ | 7,569.8 | ||||||||
| |
|
|
|
|
|
|||||||||
| d. | Receivables from related |
December 31, 2020 |
December 31, 2021 |
|||||||||
NT$ |
NT$ |
|||||||||
(In Millions) |
(In Millions) |
|||||||||
| Item |
Related Party Name/Categories |
|||||||||
| Receivables from related |
GUC | $ | 370.6 | $ | 597.8 | |||||
| parties |
Xintec | 187.5 | 117.5 | |||||||
| |
|
|
|
|||||||
| $ | 558.1 | $ | 715.3 | |||||||
| |
|
|
|
|||||||
| Other receivables from related |
SSMC | $ | 45.3 | $ | 50.4 | |||||
| parties |
VIS | 4.3 | 11.1 | |||||||
| Other associates | 1.0 | — | ||||||||
| |
|
|
|
|||||||
| $ | 50.6 | $ | 61.5 | |||||||
| |
|
|
|
|||||||
| e. | Payables to related parties |
December 31, 2020 |
December 31, 2021 |
|||||||||
NT$ |
NT$ |
|||||||||
(In Millions) |
(In Millions) |
|||||||||
| Item |
Related Party Name/Categories |
|||||||||
| Payables to related parties |
Xintec | $ | 1,358.6 | $ | 725.3 | |||||
| VIS | 311.4 | 357.2 | ||||||||
| SSMC | 400.8 | 349.2 | ||||||||
| Other associates | 36.9 | 5.5 | ||||||||
| |
|
|
|
|||||||
| $ | 2,107.7 | $ | 1,437.2 | |||||||
| |
|
|
|
|||||||
| f. | Accrued expenses and other current liabilities |
December 31, 2020 |
December 31, 2021 |
|||||||||
NT$ |
NT$ |
|||||||||
(In Millions) |
(In Millions) |
|||||||||
| Item |
Related Party Categories |
|||||||||
| Contract liabilities |
Associates | $ | — | $ | 726.4 | |||||
| |
|
|
|
|||||||
| g. | Others |
Years Ended December 31 |
||||||||||||||
2019 |
2020 |
2021 |
||||||||||||
NT$ |
NT$ |
NT$ |
||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||||
| Item |
Related Party Categories |
|||||||||||||
| Manufacturing expenses |
Associates | $ | 2,823.0 | $ | 5,440.0 | $ | 5,459.9 | |||||||
| |
|
|
|
|
|
|||||||||
| h. | Compensation of key management personnel |
Years Ended December 31 |
||||||||||||||
2019 |
2020 |
2021 |
||||||||||||
NT$ |
NT$ |
NT$ |
||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||||
| Short-term employee benefits |
|
$ | 1,922.2 | $ | 2,666.7 | $ | 2,886.8 | |||||||
| Post-employment benefits |
2.7 | 2.3 | 2.9 | |||||||||||
| |
|
|
|
|
|
|||||||||
| $ | 1,924.9 | $ | 2,669.0 | $ | 2,889.7 | |||||||||
| |
|
|
|
|
|
|||||||||
35. |
PLEDGED ASSETS |
36. |
SIGNIFICANT CONTINGENT LIABILITIES AND |
| 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 December 31, 2021, 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 December 31, 2021. |
| c. | TSMC entered into long-term purchase agreements of materials and supplies and agreements of waste disposal with multiple suppliers. The relative minimum fulfillment quantity and price are specified in the agreements. |
| d. | TSMC entered into a long-term purchase agreement of equipment. The relative fulfillment quantity and price are specified in the agreement. |
| e. | TSMC entered into long-term energy purchase agreements with multiple suppliers. The relative fulfillment period, quantity and price are specified in the agreements. |
| f. | Amounts available under unused letters of credit as of December 31, 2020 and 2021 were NT$56.2 million and NT$136.7 million, respectively. |
37. |
SIGNIFICANT OPERATION LOSSES |
38. |
OPERATING SEGMENTS INFORMATION |
| a. | Operating segments, segment revenue and operating results |
| b. | Geographic and major customers’ information were as follows: |
| 1) | Geographic information |
December 31, |
December 31, |
|||||||
2020 |
2021 |
|||||||
Noncurrent Assets |
NT$ (In Millions) |
NT$ (In Millions) |
||||||
| Taiwan |
$ | 1,569,080.4 | $ | 1,953,007.7 | ||||
| United States |
9,455.5 | 41,208.7 | ||||||
| China |
34,456.4 | 41,895.2 | ||||||
| Europe, the Middle East and Africa |
174.2 | 143.9 | ||||||
| Japan |
327.2 | 1,011.0 | ||||||
| Others |
3.0 | 0.5 | ||||||
| |
|
|
|
|||||
| $ | 1,613,496.7 | $ | 2,037,267.0 | |||||
| |
|
|
|
|||||
| 2) | Major customers representing at least 10% of net revenue |
Years Ended December 31 |
||||||||||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||||||||||
Amount |
% |
Amount |
% |
Amount |
% |
|||||||||||||||||||
NT$ |
NT$ |
NT$ |
||||||||||||||||||||||
(In Millions) |
(In Millions) |
(In Millions) |
||||||||||||||||||||||
| Customer A |
$ | 247,213.3 | 23 | $ | 336,775.5 | 25 | $ | 405,403.0 | 26 | |||||||||||||||
| Customer B |
NA (Note) | NA | NA | NA | 153,740.8 | 10 | ||||||||||||||||||
| Customer C |
152,876.9 | 14 | 167,390.8 | 12 | NA | NA | ||||||||||||||||||
| Note: | Revenue less than 10% of the Company’s net revenue. |
EXHIBIT 2a.1
DESCRIPTION OF SECURITIES
REGISTERED UNDER SECTION 12 OF THE EXCHANGE ACT
As of December 31, 2021, Taiwan Semiconductor Manufacturing Company Limited (“TSMC”, the “Company”, “we”, “us” and “our”) had the following series of securities registered pursuant to Section 12 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”):
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
| Common Shares, par value NT$10.00 each* | TSM | The New York Stock Exchange, Inc. | ||
| American Depositary Shares, each representing five (5) Common Shares | TSM | The New York Stock Exchange, Inc. | ||
| Guaranteed Notes due 2026 | N/A | Singapore Exchange Securities Trading Limited | ||
| Guaranteed Notes due 2031 | N/A | Singapore Exchange Securities Trading Limited | ||
| Guaranteed Notes due 2041 | N/A | Singapore Exchange Securities Trading Limited | ||
| Guaranteed Notes due 2051 | N/A | Singapore Exchange Securities Trading Limited |
| * | Not for trading and registered only in connection with the registration of the American Depositary Shares (“ADS”) representing such common shares, pursuant to the requirement of the U.S. Securities and Exchange Commission (the “SEC”). |
Capitalized terms used but not defined herein have the meanings given to them in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2021 (the “2021 Form 20-F”). Section headings referenced herein are to those set forth in the 2021 Form 20-F.
A. Description of Common Shares
The following description of our common shares is a summary and does not purport to be complete. This summary is subject to and qualified in its entirety by reference to our Articles of Incorporation, the R.O.C. Company Act, the R.O.C. Securities and Exchange Law and the regulations promulgated thereunder, each as amended from time to time. See also “Item 10. Additional Information – Description of Common Shares”.
Title and Class
Our authorized share capital is NT$280,500,000,000, divided into 28,050,000,000 common shares (par value NT$10.00 each). See “Item 10. Additional Information – Description of Common Shares – General”.
Dividend Rights
See “Item 10. Additional Information – Description of Common Shares – Dividends and Distributions”.
Redemption of Shares
See “Item 10. Additional Information – Description of Common Shares – Acquisition of Common Shares by Us”.
Voting Rights
See “Item 10. Additional Information – Description of Common Shares – Voting Rights”.
Liquidation Rights
See “Item 10. Additional Information – Description of Common Shares – Liquidation Rights”.
Preemption Rights
See “Item 10. Additional Information – Description of Common Shares – Preemptive Rights and Issues of Additional Common Shares”.
Limitations on the Rights to Own Shares
See “Item 10. Additional Information – Foreign Investment in the R.O.C.”.
Provisions Affecting Any Change of Control
See “Item 10. Additional Information – Description of Common Shares – Other Rights of Shareholders” relating to appraisal rights under the R.O.C. Company Act and other shareholder rights.
Transfer Restrictions
See “Item 10. Additional Information – Description of Common Shares – Transaction Restrictions”.
Amendments to Shareholder Rights
See “Item 10. Additional Information – Description of Common Shares – Voting Rights”.
B. Description of the ADSs
The following description of our ADSs is a summary and does not purport to be complete. This summary is subject to and qualified in its entirety by reference to our registration statement on Form F-6, filed with the SEC on November 16, 2007, including any exhibits thereto. In the following description, references to “you” are to the person registered with the Depositary (as defined below).
General
We have appointed Citibank, N.A. (the “Depositary”) as the depositary bank for our ADSs pursuant to the Deposit Agreement, entered into among us, the Depositary and the holders and owners of beneficial interests in our ADSs (the “Deposit Agreement’). The Depositary’s offices are located at 388 Greenwich Street, 14th Floor, New York, New York 10013. The Depositary typically appoints a custodian to safekeep the securities on deposit. In this case, the custodian is Citibank, N.A. Taipei Branch, located at B1, No. 16, Nanking E. Road, Section 4, Taipei, Taiwan, R.O.C.
Each ADS represents ownership of five common shares on deposit with the custodian. The ADSs are normally evidenced by certificates that are commonly known as American Depositary Receipts (“ADRs”). If you become an owner of ADSs, you will become a party to the Deposit Agreement and therefore will be bound to its terms and to the terms of the ADR that represents your ADSs. As a holder of ADSs, you appoint the Depositary to act on your behalf in certain circumstances.
As an owner of ADSs, you may hold your ADSs either by means of an ADR registered in your name or through a brokerage or safekeeping account. If you decide to hold your ADSs through your brokerage or safekeeping account, you must rely on the procedures of your broker or bank to assert your rights as an ADS owner. Please consult with your broker or bank to determine what those procedures are. This summary description assumes you have opted to own the ADSs directly by means of an ADR registered in your name and, as such, we will refer to you as the “holder”. When we refer to “you”, we assume the reader owns ADSs or will own ADSs at the relevant time.
Voting Rights and Procedures
You may direct the exercise of voting rights with respect to the common shares represented by the ADSs only in accordance with the provisions of the Deposit Agreement and applicable R.O.C. law.
Except as described below, you will not be able to exercise the voting rights attaching to the common shares represented by your ADSs on an individual basis. According to the Deposit Agreement, the voting rights attaching to the common shares represented by ADSs must be exercised as to all matters subject to a vote of shareholders by the Depositary or its nominee, who represents all holders of ADSs, collectively in the same manner, except in the case of an election of directors, if such election is done by means of cumulative voting. Directors are elected by cumulative voting unless our Articles of Incorporation stipulate otherwise.
We will provide the Depositary with copies (including English translations) of notices of meetings of our shareholders and the agenda of these meetings, including an indication of the number of directors to be elected if an election of directors is to be held at the meeting. The Depositary has agreed to request and we will, therefore, also provide a list of the candidates who have expressed their intention to run for an election of directors. The Depositary will mail these materials, together with a voting instruction form to holders as soon as practicable after the Depositary receives the materials from us. In order to validly exercise its voting rights, the holder of ADSs must complete, sign and return to the Depositary the voting instruction form by a date specified by the Depositary.
Subject to the provisions described in the second paragraph of this subsection, which will apply to the election of directors done by means of cumulative voting, if persons together holding at least 51% of the ADSs outstanding at the relevant record date instruct the Depositary to vote in the same manner in respect of one or more resolutions to be proposed at the meeting (other than the election of directors), the Depositary will notify the instructions to the chairman of our board of directors or a person the chairman may designate. The Depositary will appoint the chairman or designated person to serve as the voting representative of the Depositary or its nominee and the holders. The voting representative will attend such meeting and vote all the common shares represented by ADSs to be voted in the manner so instructed by such holders in relation to such resolution or resolutions.
If, for any reason, the Depositary has not by the date specified by it, received instructions from persons together holding at least 51% of all the ADSs outstanding at the relevant record date to vote in the same manner in respect of any resolution specified in the agenda for the meeting (other than the election of directors done by means of cumulative voting), then the holders will be deemed to have instructed the Depositary or its nominee to authorize and appoint the voting representative as the representative of the Depositary and the holders to attend such meeting and vote all the common shares represented by all ADSs as the voting representative deems appropriate with respect to such resolution or resolutions, which may not be in your interests; provided, however, that the Depositary or its nominee will not give any such authorization and appointment unless it has received an opinion of R.O.C. counsel addressed to the Depositary and in form and substance satisfactory to the Depositary, at its sole expense, to the effect that, under R.O.C. law (i) the Deposit Agreement is valid, binding and enforceable against us and the holders and (ii) the Depositary will not be deemed to be authorized to exercise any discretion when voting in accordance with the Deposit Agreement and will not be subject to any potential liability for losses arising from such voting. We and the Depositary will take such actions, including amendment of the provisions of the Deposit Agreement relating to voting of common shares, as we deem appropriate to endeavor to provide for the exercise of voting rights attached to the common shares at shareholders’ meetings in a manner consistent with applicable R.O.C. law.
The Depositary will notify the voting representative of the instructions for the election of directors received from holders and appoint the voting representative as the representative of the Depositary and the owners to attend such meeting and vote the common shares represented by ADSs as to which the Depositary has received instructions from holders for the election of directors, subject to any restrictions imposed by R.O.C. law and our Articles of Incorporation. Holders who by the date specified by the Depositary have not delivered instructions to the Depositary will be deemed to have instructed the Depositary to authorize and appoint the voting representative as the representative of the Depositary or its nominee and the holders to attend such meeting and vote all the common shares represented by ADSs as to which the Depositary has not received instructions from the holders for the election of directors as the voting representative deems appropriate, which may not be in your best interests. Candidates standing for election as representatives of a shareholder may be replaced by such shareholder prior to the meeting of the shareholders, and the votes cast by the holders for such candidates shall be counted as votes for their replacements.
By accepting and continuing to hold ADSs or any interest therein, you will be deemed to have agreed to the voting provisions set forth in the Deposit Agreement, as such provisions may be amended from time to time to comply with applicable R.O.C. law.
There can be no assurance that you will receive notice of shareholders’ meetings sufficiently prior to the date established by the Depositary for receipt of instructions to enable you to give voting instructions before the cutoff date.
Moreover, in accordance with the Deposit Agreement, holders that individually or together with other holders hold at least 51% of the ADSs outstanding at the relevant record date are entitled to submit each year one written proposal for voting at the general meeting of shareholders; provided, that (i) such proposal is in Chinese language and does not exceed 300 Chinese characters, (ii) such proposal is submitted to the Depositary at least two business days prior to the expiry of the relevant submission period, which shall be publicly announced by us each year in a report on Form 6-K submitted to SEC prior to the commencement of the 60 days closed period for general meetings of shareholders, (iii) such proposal is accompanied by a written certificate to the Depositary, in the form required by the depository bank, certifying that such proposal is being submitted by holders that individually or together with other holders hold at least 51% of the ADSs outstanding at the date of the submission and, if the date of the submission is on or after the relevant record date, also certifying that the holders who submitted the proposal held at least 51% of the ADSs outstanding as of the relevant record date, (iv) if the date of the submission is prior to the relevant record date, the holders who submitted the proposal must also provide, within five business days after the relevant record date, a second written certificate to the Depositary, in the form required by the Depositary, certifying that the holders who submitted the proposal continued to hold at least 51% of the ADSs outstanding at the relevant record date, (v) such proposal is accompanied by a joint and several irrevocable undertaking of all submitting holders to pay all fees and expenses incurred in relation to the submission (including the costs and expenses of the Depositary or its agent to attend the general meeting of the shareholders) as such fees and expenses may be reasonably determined and documented by the Depositary or us, and (vi) such proposal shall only be voted upon at the general meeting of shareholders if such proposal is accepted by our board of directors as eligible in accordance with applicable law for consideration at a shareholders meeting.
Dividends and Distributions
As a holder, you generally have the right to receive the distributions we make on the securities deposited with the custodian. Your receipt of these distributions may be limited, however, by practical considerations, legal limitations and the terms of the Deposit Agreement. Holders will receive such distributions under the terms of the Deposit Agreement in proportion to the number of ADSs held as of a specified record date.
Distributions of Cash. Whenever we make a cash distribution for the securities on deposit with the custodian, the Depositary will arrange for the funds to be converted into U.S. dollars and for the distribution of the U.S. dollars to the holders subject to any restrictions imposed by applicable laws and regulations.
The conversion into U.S. dollars will take place only if practicable and only if the U.S. dollars are transferable to the United States. The amounts distributed to holders will be net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the Deposit Agreement.
Distributions of Shares. Subject to applicable laws, whenever we declare a dividend in or make a free distribution of common shares for the securities on deposit with the custodian, the Depositary may, and will upon our request, distribute to holders new ADSs representing the common shares deposited. Only whole new ADSs will be distributed. Fractional entitlements will be sold and the proceeds of such sale will be distributed as in the case of a cash distribution. If additional ADSs are not distributed, the ADS-to-common share ratio will be modified subject to applicable R.O.C. law, in which case each ADS you hold will represent rights and interests in the additional common shares so deposited.
The distribution of new ADSs or the modification of the ADS-to-common share ratio upon a distribution of common shares will be made net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the Deposit Agreement. In order to pay such taxes or governmental charges, the Depositary may sell all or a portion of the new common shares so distributed.
No such distribution of new ADSs or modification of the ADS-to-common share ratio will be made if it would violate a law (i.e., U.S. securities laws). If the Depositary does not distribute new ADSs or modify the ADS-to-common share ratio as described above, it is expected to use its best efforts to sell the common shares received and would distribute the proceeds of the sales as in the case of a distribution in cash.
Distributions of Rights. Subject to applicable laws, whenever we distribute rights to purchase additional common shares, we will assist the Depositary in determining whether it is lawful and reasonably practicable to distribute rights to purchase additional ADSs to holders.
The Depositary will establish procedures to distribute rights to purchase additional ADSs to holders if it is lawful and reasonably practicable to make the rights available to holders of ADSs, and if we provide all of the documentation contemplated in the Deposit Agreement (including opinions to address the legality of the transaction). You may have to pay fees, expenses, taxes and other governmental charges to subscribe for the new ADSs upon the exercise of your rights.
In circumstances in which rights would not otherwise be distributed, if you request the distribution of warrants or other instruments in order to exercise the rights allocable to your ADSs, the Depositary will make such rights available to you as allowed by applicable law upon written notice from us. Our notice to the Depositary must indicate that:
| • | we have elected in our sole discretion to permit the rights to be exercised; and |
| • | you have executed such documents as we have determined in our sole discretion are reasonably required under applicable law. |
The Depositary may sell the rights that are not exercised or not distributed if such sale is lawful and reasonably practicable. The proceeds of such sale will be allocated to the account of the holders otherwise entitled to the rights. If the Depositary is unable to sell the rights, it will allow the rights to lapse.
Other Distributions. Subject to applicable laws, whenever we distribute property other than cash, common shares or rights in respect of the deposited securities, the Depositary will determine whether such distribution to holders is feasible. If it is feasible to distribute such property to you, the Depositary will distribute the property to the holders in a manner it deems practicable. If the Depositary considers such distribution not to be feasible, it may sell all or a portion of the property received. The proceeds of such a sale will be distributed to holders as in the case of a distribution in cash.
Any distribution will be made net of fees, expenses, taxes and governmental charges payable by holders under the terms of the Deposit Agreement.
Transmittal of Notices, Reports and Communications
The Depositary will make available for inspection by holders at its principal office any reports and communications received from us which are both (a) received by the Depositary as representative of the holder of record of the deposited securities, and (b) made generally available to the holders of such deposited securities by us. The Depositary will also promptly provide or make available to the holders copies of such reports and communications when furnished by us pursuant to the Deposit Agreement. In addition, we are subject to the periodic reporting requirements of the Exchange Act and, accordingly, file certain reports with the SEC. Such reports and documents can be retrieved from the SEC’s website (www.sec.gov).
Issuance of ADSs upon Deposit of Common Shares
Under current R.O.C. law, no deposit of common shares may be made into the depositary facility, and no ADSs may be issued against such deposits, without specific approval by the R.O.C. Financial Supervisory Commission, except in connection with (i) dividends on or free distributions of common shares, (ii) the exercise by holders of existing ADSs of their pre-emptive rights in connection with rights offerings or (iii) if permitted under the Deposit Agreement and the custodian agreement, the deposit of common shares purchased by any person directly or through the Depositary on the Taiwan Stock Exchange or the Taipei Exchange (formerly the Gre Tai Securities Market) (as applicable) or held by such person for deposit in the depositary facility; provided that the total number of ADSs outstanding after an issuance described in clause (iii) above does not exceed the number of issued ADSs previously approved by the R.O.C. Financial Supervisory Commission (plus any ADSs created pursuant to clauses (i) and (ii) above) and subject to any adjustment in the number of common shares represented by each ADS. Under current R.O.C. law, issuances under clause (iii) above will be permitted only to the extent that previously issued ADSs have been cancelled and the underlying shares have been withdrawn from the ADR facility. The Depositary will refuse to accept common shares for deposit pursuant to clause (iii) unless it receives satisfactory legal opinions as described in the Deposit Agreement. In addition, the Depositary may, or if so directed by us, will, refuse to accept common shares for deposit whenever we have notified the Depositary that (i) there are outstanding common shares with rights, including rights to dividends, that are different from the common shares held by the Depositary, (ii) we have restricted the transfer of these common shares to comply with delivery, transfer or ownership restrictions referred to in the Deposit Agreement or under applicable law or otherwise or (iii) we have otherwise restricted the deposit of common shares pursuant to the Deposit Agreement.
The Depositary may create ADSs on your behalf if you or your broker deposits common shares with the custodian and meets the foregoing requirements. The Depositary will deliver these ADSs to the person you indicate only after you pay any applicable fees, charges and taxes payable for the transfer of the common shares to and the issuance and delivery of the ADSs by the Depositary or custodian.
The issuance of ADSs may be delayed until the Depositary or the custodian receives confirmation that all required approvals have been given and that the common shares have been duly transferred to the custodian. The Depositary will only issue ADSs in whole numbers.
When you make a deposit of common shares, you will be responsible for transferring good and valid title to the Depositary. As such, you will be deemed to represent and warrant that:
| • | the common shares are duly and validly authorized, issued and outstanding, fully paid and non-assessable and free of any preemptive rights; |
| • | you are duly authorized to deposit the common shares; and |
| • | the common shares are not restricted securities and your deposit of common shares is not restricted by United States federal securities laws and does not violate the Deposit Agreement. |
If any of the representations or warranties are incorrect in any way, we and the Depositary may, at your cost and expense, take any and all actions necessary to correct the consequences of the misrepresentations.
Changes Affecting Common Shares
The common shares held on deposit for your ADSs may change from time to time. For example, there may be a change in nominal or par value, a split-up, consolidation or reclassification of such common shares, or a recapitalization, reorganization, merger, consolidation or sale of assets.
If any such change were to occur, your ADSs would, to the extent permitted by law, represent the right to receive the property received or exchanged in respect of the common shares held on deposit. The Depositary may in such circumstances deliver new ADSs to you or call for the exchange of your existing ADSs for new ADSs. If the Depositary may not lawfully distribute such property to you, the Depositary may sell such property and distribute the net proceeds to you in cash.
Amendments and Termination
We may agree with the Depositary to modify the Deposit Agreement at any time without your consent. We undertake to give holders 30 days’ prior notice of any modifications that would prejudice any of their substantial rights under the Deposit Agreement (except in very limited circumstances enumerated in the Deposit Agreement).
You will be bound by the modifications to the Deposit Agreement if you continue to hold your ADSs after the modifications to the Deposit Agreement become effective. The Deposit Agreement cannot be amended to prevent you from withdrawing the common shares represented by your ADSs (except to comply with applicable law).
We have the right to direct the Depositary to terminate the Deposit Agreement. Similarly, the Depositary may in certain circumstances on its own initiative terminate the Deposit Agreement. In either case, the Depositary must give notice to the holders at least 60 days before termination.
Upon termination, the following will occur under the Deposit Agreement:
| • | for a period of six months after termination, you will be able to request the cancellation of your ADSs and the withdrawal of the common shares represented by your ADSs and the delivery of all other property held by the Depositary in respect of those common shares on the same terms as prior to the termination. During this six-month period, the Depositary will continue to collect all distributions received on the common shares on deposit (i.e., dividends) but will not distribute any property to you until you request the cancellation of your ADSs; and |
| • | after the expiration of the six-month period, the Depositary may sell the securities held on deposit. The Depositary will hold the proceeds from such sale and any other funds then held for the holders of ADSs in a non-interest bearing account. At that point, the Depositary will have no further obligations to holders other than to account for the funds then held for the holders of ADSs still outstanding. |
Rights to Inspect the Books of the Depositary and the List of Holders
The Depositary will maintain ADS holder records at its depositary office. You may inspect such records at that office during regular business hours, but solely for the purpose of communicating with other holders in the interest of our business or matters relating to the ADSs and the Deposit Agreement.
The Depositary will maintain in The City of New York facilities to record and process the execution and delivery, registration, registration of transfers and surrender of ADRs. These facilities may be closed from time to time, to the extent not prohibited by law.
Withdrawal of Common Shares Upon Cancellation of ADSs
You may withdraw and hold the common shares represented by your ADSs unless you are a citizen of the PRC, or an entity organized under the laws of the PRC or request the Depositary to sell the common shares represented by your ADSs. If you are a non-R.O.C. person and elect to withdraw common shares and hold the withdrawn common shares, you will be required to appoint a tax guarantor as well as an agent and a custodian in the R.O.C.
In order to withdraw the common shares represented by your ADSs, you will be required to pay to the depositary the fees for cancellation of ADSs and any charges and taxes payable upon the transfer of the common shares being withdrawn. You assume the risk for delivery of all funds and securities upon withdrawal. Once cancelled, the ADSs will not have any rights under the Deposit Agreement.
If you hold any ADSs registered in your name, the Depositary may ask you to provide proof of citizenship, residence, tax payer status, exchange control approval, payment of taxes and other governmental charges, compliance with applicable laws and regulations and certain other documents as the Depositary may deem appropriate before it will effect any withdrawal of the common shares represented by such ADS. The withdrawal of the common shares represented by your ADSs may be delayed until the Depositary receives satisfactory evidence of compliance with all applicable laws and regulations. If the common shares are withdrawn to or for the account of any person other than the person receiving the proceeds from the sale of ADSs, such evidence may include the disclosure of:
| • | your name; |
| • | the name and nationality (and the identity number, if such person is an R.O.C. citizen) of any person in whose name the common shares you are withdrawing will be registered; |
| • | the number of common shares such person will receive upon such withdrawal; |
| • | the aggregate number of common shares such person has received upon all withdrawals since the establishment of the depositary facility; and |
| • | any other information that we or the Depositary may deem necessary or desirable to comply with any R.O.C. disclosure or reporting requirements. |
The Depositary will only accept ADSs for cancellation that represent a whole number of common shares on deposit. If you surrender a number of ADSs for withdrawal representing other than a whole number of common shares the Depositary will either return the number of ADSs representing any remaining fractional common shares or sell the common shares represented by the ADSs you surrendered and remit the net proceeds of that sale to you as in the case of a distribution in cash.
You will have the right to withdraw the securities represented by your ADSs at any time subject to the requirements listed above and:
| • | temporary delays that may arise because (i) the transfer books for the shares or ADSs are closed, or (ii) common shares are immobilized on account of a shareholders’ meeting, a payment of dividends or rights offering; |
| • | obligations to pay fees, taxes and similar charges; and |
| • | restrictions imposed because of laws or regulations applicable to ADSs or the withdrawal of securities on deposit. |
The Deposit Agreement may not be modified to impair your right to withdraw the securities represented by your ADSs except to comply with mandatory provisions of law.
Pre-Release Transactions
The Depositary may, to the extent permitted by applicable laws and regulations, issue ADSs before receiving a deposit of common shares. These transactions are commonly referred to as “pre-release transactions”. The Deposit Agreement limits the aggregate size of pre-release transactions and imposes a number of conditions on such transactions (i.e., the need to receive collateral, the type of collateral required, the representations required from brokers, etc.). The Depositary may retain the compensation received from the pre-release transactions.
Limitations on Obligations and Liabilities
The Deposit Agreement is governed by New York law. However, our obligations to the holders of common shares will continue to be governed by the laws of the R.O.C., which may be different from the laws in the United States. The Deposit Agreement limits our obligations and the Depositary’s obligations to you. Please note the following:
| • | We and the Depositary are obligated only to take the actions specifically stated in the depositary agreement without negligence and in good faith. |
| • | The Depositary disclaims any liability for any failure to carry out voting instructions, for any manner in which a vote is cast or for the effect of any vote, provided it acts in good faith and in accordance with the terms of the Deposit Agreement. |
| • | The Depositary disclaims any liability to monitor or enforce our obligations under the Deposit Agreement, including our obligation to replace the certificate of payment in respect of common shares. |
| • | We and the Depositary will not be obligated to perform any act that is not set forth in the Deposit Agreement. |
| • | We and the Depositary disclaim any liability if we are prevented or forbidden from acting on account of any law or regulation, any provision of our Articles of Incorporation, any provision of any securities on deposit or by reason of any act of God or war or other circumstances beyond our control. |
| • | We and the Depositary disclaim any liability by reason of any exercise of, or failure to exercise, any discretion provided for in the Deposit Agreement. |
| • | We and the Depositary further disclaim any liability for any action or inaction in reliance on the advice or information received from legal counsel, accountants, any person presenting common shares for deposit, any holder of ADSs or authorized representative thereof, or any other person believed by either of us in good faith to be competent to give such advice or information. |
| • | We and the Depositary also disclaim liability for the inability by a holder to benefit from any distribution, offering, right or other benefit which is made available to holders of common shares but is not, under the terms of the Deposit Agreement, made available to that holder. |
| • | We and the Depositary may rely without any liability upon any written notice, request or other document believed to be genuine and to have been signed or presented by the proper parties. |
C. Description of the Guaranteed Notes due 2026, the Guaranteed Notes due 2031, the Guaranteed Notes due 2041 and the Guaranteed Notes due 2051
The 1.750% notes due 2026 (the “Guaranteed Notes due 2026”), the 2.500% notes due 2031 (the “Guaranteed Notes due 2031”), the 3.125% notes due 2041 (the “Guaranteed Notes due 2041”) and the 3.250% notes due 2051 (the “Guaranteed Notes due 2051” and, together with the Guaranteed Notes due 2026, the Guaranteed Notes due 2031 and the Guaranteed Notes due 2051, the “Notes”) are issued by TSMC Arizona Corporation (the “Issuer”) under an indenture (the “Indenture”), dated as of October 18, 2021, among itself, Taiwan Semiconductor Manufacturing Company Limited, as guarantor (the “Guarantor”) and Citibank, N.A., as trustee (the “Trustee”). The Notes are unconditionally and irrevocably guaranteed (the “Guarantees”) as to payment of principal, interest and premium, if any, by the Guarantor. The following description is a summary of the material provisions of the Indenture, the Notes and the Guarantees, does not purport to be complete and is qualified in its entirety by reference to the provisions thereof. Capitalized terms used and not defined herein have the meanings assigned to them in the Indenture, the Notes and the Guarantees, as applicable.
The Notes have the respective maturity dates, interest rates and interest payment dates as specified in the table below.
| Notes |
Interest Rate |
Maturity |
Interest |
Interest | ||||||
| 1.750% Guaranteed Notes due 2026 |
1.750 | % | October 25, 2026 | October 25, 2021 | April 25 and October 25 | |||||
| 2.500% Guaranteed Notes due 2031 |
2.500 | % | October 25, 2031 | October 25, 2021 | April 25 and October 25 | |||||
| 3.125% Guaranteed Notes due 2041 |
3.125 | % | October 25, 2041 | October 25, 2021 | April 25 and October 25 | |||||
| 3.250% Guaranteed Notes due 2051 |
3.250 | % | October 25, 2051 | October 25, 2021 | April 25 and October 25 | |||||
The Guaranteed Notes due 2026 will mature on October 25, 2026, unless redeemed prior to their maturity pursuant to the terms thereof and of the Indenture, the Guaranteed Notes due 2031 will mature on October 25, 2031, unless redeemed prior to their maturity pursuant to the terms thereof and of the Indenture, the Guaranteed Notes due 2041 will mature on October 25, 2041, unless redeemed prior to their maturity pursuant to the terms thereof and of the Indenture, and the Guaranteed Notes due 2051 will mature on October 25, 2051, unless redeemed prior to their maturity pursuant to the terms thereof and of the Indenture. The Guaranteed Notes due 2026 bear interest at the rate of 1.750% per annum, the Guaranteed Notes due 2031 bear interest at the rate of 2.500% per annum, the Guaranteed Notes due 2041 bear interest at the rate of 3.125% per annum, and the Guaranteed Notes due 2051 bear interest at the rate of 3.250% per annum, in each case, payable semi-annually in arrears on April 25 and October 25 of each year, beginning on April 25, 2022, to the persons in whose names the Notes are registered at the close of business on the preceding April 10 and October 10, respectively. At maturity, the Notes are payable at their principal amount plus accrued and unpaid interest thereon. In any case where the payment of principal of, or interest on, the Notes is due on a date that is not a New York Business Day, then payment of principal of or interest on the Notes, as the case may be, will be made on the next succeeding New York Business Day and no interest will accrue with respect to such payment for the period from and after such date that is not a New York Business Day to such next succeeding New York Business Day. Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The Notes will not be subject to, nor entitled to the benefit of, any sinking fund.
No service charge will be made for any registration of transfer or exchange of the Notes, but the Issuer, the Guarantor, the transfer agent or the registrar may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith. The Guarantor fully, unconditionally and irrevocably guarantee to each holder of a Guaranteed Note due 2026, each holder of a Guaranteed Note due 2031, each holder of a Guaranteed Note due 2041, and each holder of a Guaranteed Note due 2051 the full and prompt payment of the principal of, and premium (if any) and interest on, such Notes (including any Additional Amounts payable in respect thereof) when and to the extent that such amounts shall become due and payable as provided in such Notes.
The principal of, interest on, and all other amounts payable under the Notes will be payable, and the Notes may be exchanged or transferred, at the office or agency of the Issuer which initially will be the corporate office of the Trustee, as paying agent, transfer agent and registrar (collectively in such capacities, the “Agents”), located at 388 Greenwich Street, New York, NY 10013. The principal of, premium (if any) and interest on the Notes will be payable in U.S. dollars (or in such other coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts) in immediately available funds. Payments of interest, premium (if any) and principal with respect to interests in the Global Notes will be credited to the accounts of the holders of such interests with DTC, Euroclear or Clearstream, as the case may be.
Ranking
The Notes:
| • | constitute senior unsecured obligations of the Issuer; |
| • | at all times rank pari passu and without any preference or priority among themselves and at least equally with all other present and future senior unsecured obligations of the Issuer, except as may be required by mandatory provisions of law; |
| • | are be senior in right of payment to all future subordinated obligations of the Issuer; and |
| • | are be effectively subordinated to secured obligations of the Issuer, to the extent of the assets serving as security therefor. |
Further Issues
In accordance with the terms of the Indenture, the Issuer may, from time to time, without the consent of the holders of the Notes, create and issue further securities having the same terms and conditions as each series of the Notes in all respects (or in all respects except for the issue date, the issue price, the first payment of interest on them and, to the extent necessary, certain temporary securities law transfer restrictions). Additional Notes issued in this manner will be consolidated and form a single series with the previously outstanding Notes of the relevant series to constitute a single series of Notes. The Issuer may only issue any Additional Notes of each series with the same CUSIP number as the relevant series of Notes issued hereunder if such further issuance would be treated as part of the same “issue” as the relevant series of Notes issued hereunder within the meaning of United States Treasury regulation section 1.1275-1(f) or 1.1275-2(k) or would otherwise be fungible with the relevant series of Notes issued hereunder for United States federal income tax purposes.
The Guarantees
The Guarantor will fully, unconditionally and irrevocably guarantee to each holder of a Guaranteed Note due 2026, each holder of a Guaranteed Note due 2031, each holder of a Guaranteed Note due 2041, and each holder of a Guaranteed Note due 2051, the full and prompt payment of the principal of, and premium (if any) and interest on, such Notes (including any Additional Amounts payable in respect thereof) when and as the same shall become due and payable as provided in such Notes. The Guarantor will (i) agree that its obligations under the Guarantees will be enforceable irrespective of any invalidity, irregularity or unenforceability of the Notes or the Indenture and (ii) waive its right to require the Trustee to pursue or exhaust its legal or equitable remedies against the Issuer prior to exercising its rights under the Guarantees. Moreover, if at any time any amount paid under a Note or the Indenture is rescinded or must otherwise be restored, the rights of the holders of the Notes under the Guarantees will be reinstated with respect to such payments as though such payment had not been made. Each Guarantee constitutes a separate obligation of the Guarantor and will relate solely to the payment of the principal of, and premium (if any) and interest on, the relevant series of Notes (including any Additional Amounts payable in respect thereof).
The Guarantees:
| • | constitute senior unsecured obligations of the Guarantor; |
| • | at all times rank at least equally with all other present and future senior unsecured obligations of the Guarantor, except as may be required by mandatory provisions of law; |
| • | are senior in right of payment to all future subordinated obligations of the Guarantor; and |
| • | are effectively subordinated to secured obligations of the Guarantor, to the extent of the assets serving as security therefor. |
The Guarantor will be released from and relieved of its obligations under a Guarantee in the event (i) of repayment in full of the relevant series of Notes; or (ii) that there is a Legal Defeasance of the relevant series of Notes, provided that the transaction is otherwise carried out pursuant to and in accordance with all other applicable provisions of the Indenture.
No release of the Guarantor from its obligations under a Guarantee will be effective against the Trustee or the holders of the relevant series of Notes until the Issuer has delivered to the Trustee an Officers’ Certificate and the opinion of Independent Legal Counsel, each stating that all covenants and conditions precedent relating to such release have been complied with and that such release is authorized and permitted by the Indenture.
Tax Redemption
Each series of Notes may be redeemed at any time, at the option of the Issuer, in whole but not in part, upon notice as described below, at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest, if any, to, but not including, the date fixed for redemption (for the avoidance of doubt, along with Additional Amounts, if any, then due and which will become due on the date fixed for redemption), if (i) as a result of any change in, or amendment to, the laws or regulations of a Relevant Jurisdiction (or, in the case of Additional Amounts payable by a successor Person to the Issuer or the Guarantor, the applicable Successor Jurisdiction), or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after the Issue Date (or, in the case of Additional Amounts payable by a successor Person to the Issuer or the Guarantor, the date on which such successor Person became such pursuant to the applicable provisions of the Indenture), the Issuer or the Guarantor or any such successor Person is, or would be, obligated to pay Additional Amounts upon the next payment of principal or interest in respect of such Notes or the next payment under the relevant Guarantee, as applicable, and (ii) such obligation cannot be avoided by the Issuer or the Guarantor or such successor Person, as applicable, taking reasonable measures available to it.
Prior to the giving of any notice of redemption of a series of Notes pursuant to the foregoing, the Issuer or the Guarantor or any such successor Person to the Issuer or the Guarantor, as applicable, shall deliver to the
Trustee (i) a notice of such redemption election, (ii) an opinion of an Independent Legal Counsel or an opinion of an Independent Tax Consultant to the effect that the Issuer or the Guarantor or any such successor Person is, or would become, obligated to pay such Additional Amounts as the result of a Tax Change and (iii) an Officers’ Certificate of the Issuer or the Guarantor or such successor Person, stating that such amendment or change has occurred, describing the facts leading thereto and stating that such requirement cannot be avoided by the Issuer or the Guarantor or the relevant successor Person, as applicable, taking reasonable measures available to it.
Notice of redemption of a series of Notes as provided above shall be given to the holders (with a copy to the Trustee) not less than 10 nor more than 60 days prior to the date fixed for redemption. Notice having been given, the relevant Notes shall become due and payable on the date fixed for redemption and will be paid at the redemption price, together with accrued and unpaid interest, if any, to, but not including, the date fixed for redemption, at the place or places of payment and in the manner specified in the relevant Notes.
From and after the redemption date, if moneys for the redemption of such Notes shall have been made available as provided in the Indenture for redemption on the redemption date, such Notes shall cease to bear interest, and the only right of the holders of such Notes shall be to receive payment of the redemption price and accrued and unpaid interest, if any, to, but not including, the date fixed for redemption.
Optional Redemption
The Issuer may, at any time upon giving not less than 10 nor more than 60 days’ notice to holders of a series of Notes (with a copy to the Trustee), redeem such series of Notes, in whole or in part; provided that the principal amount of any Note remaining outstanding after redemption in part shall be US$200,000 or an integral multiple of US$1,000 in excess thereof. The redemption price for any Notes to be redeemed prior to the Applicable Par Call Date will be equal to the greater of (i) 100% of the aggregate principal amount of the Notes to be redeemed and (ii) the sum, as determined by the Independent Investment Banker based on the Reference Treasury Dealer Quotations, of the present values of the Remaining Scheduled Payments, discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) using a discount rate equal to the Treasury Rate plus 10 basis points, in the case of the Guaranteed Notes due 2026, 15 basis points, in the case of the Guaranteed Notes due 2031, 20 basis points, in the case of the Guaranteed Notes due 2041, and 20 basis points, in the case of the Guaranteed Notes due 2051, plus, in the case of each of clause (i) or (ii), accrued and unpaid interest thereon to, but not including, the redemption date for such Notes. On or after the Applicable Par Call Date, the redemption price will be equal to 100% of the aggregate principal amount of the Guaranteed Notes due 2026, the Guaranteed Notes due 2031, the Guaranteed Notes due 2041 or the Guaranteed Notes due 2051, as the case may be, to be redeemed, plus accrued and unpaid interest thereon to, but not including, the redemption date for such Notes. Neither the Trustee nor the paying agent shall be responsible for verifying or calculating the redemption price payable to holders.
If only some of the Notes of any series are to be redeemed, the Notes of such series to be redeemed will be selected, while such Notes are in global form, by the applicable clearing system and/or stock exchange requirements, or while such Notes are in certificated form, by the Trustee on a pro rata basis, by lot or by such method as the Trustee in its sole discretion deems fair and appropriate, unless otherwise required by law.
Any notice of redemption of Notes as described in this “—Optional Redemption” section shall state the redemption price (if known) or the formula pursuant to which the redemption price is to be determined if the redemption price cannot be determined at the time the notice is given. If the redemption price cannot be determined at the time such notice is to be given, the actual redemption price, calculated as described in clause (ii) of the first paragraph under “—Optional Redemption” above, shall be set forth in an Officers’ Certificate delivered to the Trustee no later than two New York Business Days prior to the redemption date.
Any notice of redemption of Notes as described in this “—Optional Redemption” section may, at the Issuer’s discretion, be given subject to one or more conditions precedent, including, but not limited to, the completion of a corporate transaction that is pending (such as an equity or equity-linked offering, an incurrence of indebtedness or an acquisition or other strategic transaction involving a change of control in the Issuer or another entity). If such redemption is so subject to the satisfaction of one or more conditions precedent, such notice shall describe each such condition, and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied or otherwise waived on or prior to the New York Business Day immediately preceding the relevant redemption date. The Issuer shall notify holders and the Trustee of any such rescission as soon as reasonably practicable after it determines that such conditions precedent will not be able to be satisfied or the Issuer shall not be able or willing to waive such conditions precedent. Once the notice of redemption is mailed or sent, subject to the satisfaction of any conditions precedent provided in the notice of redemption, the Notes called for redemption will become due and payable on the redemption date and at the applicable redemption price as described in this “—Optional Redemption” section.
Payment of Additional Amounts
All payments of principal, premium and interest made by the Issuer in respect of the Notes of any series or the Guarantor in respect of the Guarantees will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or other governmental charges of whatever nature (including penalties, interest and any other additions thereto) (“Taxes”) imposed or levied by or on behalf of the R.O.C., the U.S., or any political subdivision thereof or any authority therein having power to tax (a “Relevant Jurisdiction”), unless such withholding or deduction of such Taxes is required by law or by regulation. If the Issuer or the Guarantor (or their paying agents) is required to make such withholding or deduction, the Issuer or the Guarantor, as applicable, will withhold such Taxes and pay them to the relevant government authority, and the Issuer or the Guarantor, as applicable, will pay such additional amounts in respect of Taxes as will result (i) with respect to the Issuer, in the receipt by the holders or beneficial owners of the Notes of such series of such amounts as would have been received by such holders or beneficial owners had no such withholding or deduction of such Taxes been required or (ii) with respect to the Guarantor, in the receipt by the holders or beneficial owners of the Notes of such series of such amounts as would have been received by such holders or beneficial owners in respect of payments under the related Guarantee had no such withholding or deduction of such Taxes been required (such additional amounts payable by the Issuer or the Guarantor, the “Additional Amounts”), except that no such Additional Amounts shall be payable:
(i) in respect of any such Taxes that would not have been imposed, deducted or withheld but for the existence of any connection (whether present or former) between the holder or beneficial owner of a Note and any Relevant Jurisdiction other than merely holding such Notes or receiving principal or interest in respect thereof (including such holder or beneficial owner being or having been a national, domiciliary or resident of such Relevant Jurisdiction or treated as a resident thereof or being or having been physically present or engaged in a trade or business therein or having currently or having had a permanent establishment therein);
(ii) to the extent that any Taxes with respect to a Note would not have been so imposed or levied but for the fact that, where presentation is required in order to receive payment, the applicable Notes or Guarantees were presented more than 30 days after the date on which such payment became due and payable or the date on which payment thereof provided for and notice thereof given to the holders of the applicable Notes, whichever is later, except to the extent that the holder or beneficiary thereof would have been entitled to such Additional Amounts on presenting the same for payment on the last day of such 30-day period;
(iii) in respect of any failure of the holder or beneficial owner of a Note or a Guarantee to comply with a timely request of the Issuer or the Guarantor, as applicable, addressed to the holder or beneficial owner to provide information concerning such holder’s or beneficial owner’s nationality, residence, identity or connection with any Relevant Jurisdiction, if and to the extent that due and timely compliance with such request is required under the tax laws, statutes, treaties, regulations or administrative practices of any Relevant Jurisdiction in order to reduce or eliminate any withholding or deduction as to which Additional Amounts would have otherwise been payable to such holder or beneficial owner;
(iv) in respect of any Taxes imposed as a result of any Notes or Guarantees being presented for payment (where presentation is required) in the Relevant Jurisdiction, unless any such Notes or such Guarantees, as applicable, could not have been presented for payment elsewhere;
(v) in respect of any estate, inheritance, gift, sales, transfer, personal property or similar Taxes;
(vi) to any holder of a Note or beneficiary of a Guarantee that is a fiduciary, partnership or person other than the sole beneficial owner of any payment to the extent that such payment would be required to be included in the income under the laws of a Relevant Jurisdiction, for tax purposes, of a beneficiary or settlor with respect to the fiduciary, or a member of that partnership or a beneficial owner who would not have been entitled to such Additional Amounts had that beneficiary, settlor, partner or beneficial owner been the holder thereof;
(vii) in respect of any Taxes imposed as a result of the holder or beneficial owner of a Note or Guarantee being or having been a personal holding company, a passive foreign investment company or a controlled foreign corporation for U.S. federal income tax purposes, a foreign tax exempt organization, or a corporation that has accumulated earnings to avoid U.S. federal income tax;
(viii) in respect of any Taxes imposed as a result of the holder or beneficial owner of a Note or Guarantee being or having been a “10-percent shareholder,” as defined in section 871(h)(3) of the Internal Revenue Code of 1986 (the “Code”), or any successor provision, of the Issuer;
(ix) in respect of any Taxes imposed as a result of the holder or beneficial owner of a Note being a bank receiving payments on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business, within the meaning of section 881(c)(3) of the Code or any successor provision;
(x) in respect of any Taxes imposed by reason of the failure of the holder or beneficial owner of a Note, including any intermediary that holds a Note, to fulfill the statement requirements of section 871(h) or section 881(c) of the Code or any successor provision;
(xi) in respect of any Taxes imposed pursuant to section 871(h)(6) or section 881(c)(6) of the Code (or any successor provisions);
(xii) in respect of any Taxes that are payable otherwise than by deduction or withholding from payments on or in respect of any Notes or Guarantees; or
(xiii) in the case of any combination of the above listed items.
In addition, any amounts to be paid on the applicable Notes will be paid net of any deduction or withholding imposed or required pursuant to Sections 1471 through 1474 of the Code, any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code, and no Additional Amounts will be required to be paid on account of any such deduction or withholding.
In the event that any withholding or deduction for or on account of any Taxes is required in respect of any payment of principal of or interest on the Notes of any series or any payment under the related Guarantee, at least five New York Business Days prior to the date of such payment, the Issuer or the Guarantor, as applicable, will furnish to the Trustee and the paying agent, if other than the Trustee, an Officers’ Certificate specifying the amount required to be withheld or deducted on such payment, certifying that the Issuer or the Guarantor, as applicable, shall pay such amounts required to be withheld to the appropriate governmental authority and certifying the fact that the Additional Amounts will be payable and the amounts so payable to each holder (unless such Additional Amounts are not required to be paid pursuant to the exceptions described above), and that the Issuer or the Guarantor, as applicable, will pay to the Trustee or such paying agent the Additional Amounts required to be paid; provided that no such Officers’ Certificate will be required prior to any date of payment of principal of or interest on any such Notes or any such Guarantees, as applicable, if there has been no change with respect to the matters set forth in a prior Officers’ Certificate. The Trustee and each paying agent may rely on the fact that any Officers’ Certificate contemplated by this paragraph has not been furnished as evidence of the fact that no withholding or deduction for or on account of any Taxes is required. The Issuer and the Guarantor covenant to indemnify the Trustee and any paying agent for and to hold them harmless against any loss, liability or expense reasonably incurred without fraudulent activity, gross negligence or willful misconduct on their part arising out of or in connection with actions taken or omitted by any of them in reliance on any such Officers’ Certificate furnished pursuant to this paragraph or on the fact that any Officers’ Certificate contemplated by this paragraph has not been furnished.
Whenever there is mentioned, in any context, the payment of amounts based upon the principal amount of any applicable Notes or of principal, premium or interest in respect of any applicable Notes, such mention shall be deemed to include the payment of Additional Amounts provided for in the Indenture, to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to the Indenture.
The foregoing provisions apply in the same manner with respect to the jurisdiction in which any successor Person to the Issuer or the Guarantor is organized or resident for tax purposes or any authority therein or thereof having the power to tax (a “Successor Jurisdiction”), substituting such Successor Jurisdiction for the applicable Relevant Jurisdiction.
The Issuer’s and the Guarantor’s respective obligations to make payments of Additional Amounts under the terms and conditions described above will survive any termination, defeasance or discharge of the Indenture.
Certain Covenants
The Indenture sets forth limited covenants that apply to each series of Notes. However, these covenants do not, among other things:
| • | limit the amount of indebtedness or lease obligations that may be incurred by the Issuer, the Guarantor or any Subsidiary of the Guarantor; |
| • | limit the ability of the Issuer, the Guarantor or any Subsidiary of the Guarantor to issue, assume or guarantee indebtedness secured by liens; or |
| • | limit the Issuer, the Guarantor or any Subsidiary of the Guarantor from paying dividends or making distributions on such Person’s Capital Stock or purchasing or redeeming such Person’s Capital Stock. |
Consolidation, Merger and Sale of Assets
Prior to the satisfaction and discharge of the Indenture, the Guarantor and the Issuer may not consolidate with or merge into any other Person in a transaction or, directly or indirectly, convey, transfer or lease all or substantially all of its properties and assets to any Person, unless either:
(i) in the case of a consolidation or merger, the Guarantor or the Issuer is the continuing and surviving Person and no Default or Event of Default shall have occurred and be continuing; or
(ii)(a) the Person formed by such consolidation or into which the Issuer or the Guarantor is merged or to whom the Issuer or the Guarantor has conveyed, transferred or leased all or substantially all of its properties and assets expressly assumes by an indenture supplemental to the Indenture all the obligations of the Issuer or the Guarantor, as applicable, under the Indenture and the applicable Notes and Guarantee, including the obligation to pay Additional Amounts, with any jurisdiction in which the Person is organized or resident for tax purposes also being considered a “Relevant Jurisdiction” for purposes of the Additional Amounts provision;
(b) immediately before and after giving effect to the transaction, no Default or Event of Default under the applicable series of Notes shall have occurred and be continuing; and
(c) the Issuer or the Guarantor, as applicable, has delivered to the Trustee an Officers’ Certificate and an opinion of Independent Legal Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and such supplemental indenture comply with the Indenture and that all conditions precedent therein provided for relating to such transaction have been complied with.
An assumption of the Issuer’s obligations under a series of Notes by any Person might be deemed for U.S. federal income tax purposes to be an exchange of such Notes for new Notes by the beneficial owners thereof, resulting in the recognition of gain or loss for such purposes and possibly certain other adverse tax consequences. Investors should consult their tax advisors regarding the tax consequences of such an assumption.
Open Market Purchases
The Issuer or the Guarantor or any of the Guarantor’s Subsidiaries may, in accordance with all applicable laws and regulations, at any time purchase the Notes in the open market or otherwise at any price, so long as such purchase does not otherwise violate the terms of the Indenture. The Notes so purchased, while held by or on behalf of the Issuer or the Guarantor or any of the Guarantor’s Subsidiaries, shall not be deemed to be outstanding for the purposes of determining whether the holders of the requisite principal amount of outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder.
Modification and Waiver
The Indenture contains provisions permitting the Issuer, the Guarantor and the Trustee, without the consent of the holders of a series of Notes, to execute supplemental indentures for certain enumerated purposes in the Indenture and, with the consent of the holders of not less than a majority in aggregate principal amount of the relevant series of Notes then outstanding under the Indenture, to add, change, eliminate or modify in any way the provisions of the Indenture or any supplemental indentures or to change or modify in any manner the rights of the holders of Notes of such series. The Issuer, the Guarantor and the Trustee may not, however, without the consent of each holder of the Notes of the series affected thereby:
(i) change the Stated Maturity of such series of Notes;
(ii) reduce the principal amount of, payments of interest on or stated time for payment of interest on any Notes of such series;
(iii) change any obligation of the Issuer or the Guarantor to pay Additional Amounts with respect to such series of Notes or the related Guarantee, respectively;
(iv) change any obligation of the Guarantor to make payments under the Guarantee with respect to such series of Notes;
(v) change the currency of payment of the principal of or interest on such series of Notes;
(vi) impair the right to receive payment of the principal of or interest on (including Additional Amounts) such series of Notes on the stated maturity date for such payment expressed in such series of Notes or to institute suit for the enforcement of such payment;
(vii) reduce the above stated percentage of outstanding Notes of such series necessary to modify or amend the Indenture;
(viii) reduce the percentage of the aggregate principal amount of outstanding Notes of such series necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain Defaults;
(ix) modify the provisions of the Indenture with respect to modification and waiver; or
(x) reduce the amount of the premium payable upon the redemption or repurchase of any Notes of such series or change the time at which any Notes of such series may be redeemed or repurchased as described above under “—Optional Redemption” whether through an amendment or waiver of provisions in the covenants, definitions or otherwise.
The holders of not less than a majority in principal amount of a series of Notes may on behalf of all holders of that series of Notes waive any existing or past Default or Event of Default and its consequences under the Indenture, except a continuing Default or Event of Default (i) in the payment of principal of, or interest on (or Additional Amounts payable in respect of), the relevant Notes then outstanding or the payment of any amounts due under the relevant Guarantee, in which event the consent of all holders of that series of Notes is required; or (ii) in respect of a covenant or provision that under the Indenture cannot be modified or amended without the consent of each holder of that series of Notes then outstanding affected thereby. Any such waivers will be conclusive and binding on all holders of the relevant series of Notes, whether or not they have given consent to such waivers, and on all future holders of such series of Notes, whether or not notation of such waivers is made upon the relevant Notes. Any instrument given by or on behalf of any holder of any Notes in connection with any consent to any such waiver will be irrevocable once given and will be conclusive and binding on all subsequent holders of any such Notes.
Notwithstanding the foregoing, without the consent of any holder, the Issuer, the Guarantor and the Trustee may amend the Indenture, the Notes of each series and the Guarantees to, among other things:
(i) cure any ambiguity, omission, defect or inconsistency; provided, however, that such amendment does not materially and adversely affect the rights of holders of the relevant series of Notes;
(ii) provide for the assumption by a successor Person of the obligations of the Issuer or the Guarantee under the Indenture and a series of Notes in accordance with “—Consolidation, Merger and Sale of Assets”;
(iii) provide for or facilitate the issuance of uncertificated Notes in addition to or in place of certificated Notes; provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code;
(iv) comply with the rules of any applicable depositary;
(v) make any change that does not adversely affect the legal rights under the Indenture of any holder in any material respect;
(vi) evidence and provide for the acceptance of an appointment under the Indenture of a successor trustee; provided that the successor trustee is otherwise qualified and eligible to act as such under the terms of the Indenture;
(vii) conform the text of the Indenture, the Notes or the Guarantees to any provision under “Description of the Notes and the Guarantees” in the prospectus supplement relating to the Notes;
(viii) make any amendment to the provisions of the Indenture relating to the transfer and legending of Notes or the Guarantees as permitted by the Indenture, including, but not limited to, amendments made to facilitate the issuance and administration of the Notes or the Guarantees or, if incurred in compliance with the Indenture, Additional Notes; provided, however, that (a) compliance with the Indenture as so amended would not result in the Notes or the Guarantees being transferred in violation of the Securities Act or any applicable securities law and (b) such amendment does not materially and adversely affect the rights of holders to transfer the Notes and the Guarantees as described in the prospectus supplement relating to the notes;
(ix) to provide for the issuance of Additional Notes of each series in accordance with the limitations set forth in the Indenture;
(x) to evidence the succession of another Person to the Issuer or the Guarantor, and the assumption by any such successor of the covenants of the Issuer or the Guarantor, respectively;
(xi) to establish the form or terms of a new series of notes;
(xii) to reduce or otherwise limit the aggregate principal amount of notes that may be authenticated and delivered under the Indenture;
(xiii) to supplement any of the provisions of the Indenture to such extent as shall be necessary to permit or facilitate the defeasance and discharge of any series of Notes, provided that any such action shall not adversely affect the interests of the holders of any Notes then outstanding;
(xiv) to amend or supplement any provision contained herein or in any supplemental indenture, provided that no such amendment or supplement shall adversely affect the interests of the holders of any Notes then outstanding; and
(xv) to comply with the requirements of the SEC in order to maintain the qualification of the Indenture under the Trust Indenture Act.
The consent of the holders is not necessary under the Indenture to approve the particular form of any proposed amendment, supplement or waiver. It is sufficient if such consent approves the substance of the proposed amendment or supplement. A consent to any amendment, supplement or waiver under the Indenture by any holder given in connection with a tender of such holder’s Notes will not be rendered invalid by such tender. After an amendment, supplement or waiver under the Indenture becomes effective, the Issuer is required to give to the holders of the affected Notes a notice briefly describing such amendment, supplement or waiver. However, the failure to give such notice to all such holders, or any defect in the notice will not impair or affect the validity of the amendment, supplement or waiver.
Events of Default
For each series of Notes, each of the following shall constitute an Event of Default under the Indenture for such series of Notes:
(i) failure to pay principal or premium in respect of any Notes of such series by the due date for such payment, but in the case of technical or administrative difficulties, only if the default continues for a period of two days;
(ii) failure to pay interest on any Notes of such series within 30 days after the due date for such payment;
(iii) the Issuer or the Guarantor defaults in the performance of or breaches its obligations under the “—Consolidation, Merger and Sale of Assets” covenant;
(iv) the Issuer or the Guarantor defaults in the performance of or breaches any covenant or agreement in the Indenture or under such series of Notes (other than a default specified in clause (i), (ii) or (iii) above) and such default or breach continues for a period of 90 consecutive days after written notice to the Issuer and the Guarantor, as applicable, by the Trustee or the holders of 25% or more in aggregate principal amount of such series of Notes then outstanding;
(v) the entry by a court having jurisdiction in the premises of (a) a decree or order for relief in respect of the Issuer or the Guarantor in an involuntary case or proceeding under any applicable bankruptcy, insolvency or other similar law or (b) a decree or order adjudging the Issuer or the Guarantor bankrupt or insolvent, or approving as final and nonappealable a petition seeking reorganization, arrangement, adjustment, or composition of or in respect of the Issuer or the Guarantor under any applicable bankruptcy, insolvency or other similar law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator, or other similar official of the Issuer or the Guarantor or of any substantial part of their respective property, or ordering the winding up or liquidation of their respective affairs (or any similar relief granted under any foreign laws), and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 90 consecutive calendar days;
(vi) the commencement by the Issuer or the Guarantor of a voluntary case or proceeding under any applicable state or foreign bankruptcy, insolvency or other similar law or of any other case or proceeding to be adjudicated bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Issuer or the Guarantor in an involuntary case or proceeding under any applicable bankruptcy, insolvency or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief with respect to the Issuer or the Guarantor under any applicable bankruptcy, insolvency or other similar law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator, or other similar official of the Issuer or the Guarantor or of any substantial part of their respective property pursuant to any such law, or the making by the Issuer or the Guarantor of a general assignment for the benefit of creditors in respect of any indebtedness as a result of an inability to pay such indebtedness as it becomes due, or the admission by the Issuer or the Guarantor in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Issuer or the Guarantor that resolves to commence any such action; and
(vii) the relevant series of Notes, the relevant Guarantee or the Indenture is or becomes or is claimed to be unenforceable, invalid, ceases to be in full force and effect by the Issuer or the Guarantor, as applicable, or is deemed to contravene, breach or violate the laws of any relevant jurisdiction.
However, a default under subparagraph (iv) above will not constitute an Event of Default until the Trustee or the holders of 25% in aggregate principal amount of the then outstanding Notes of the relevant series notify the Issuer and the Guarantor of the default and the Issuer or the Guarantor, as applicable, does not cure such default within the time specified in subparagraph (iv) above after receipt of such notice.
If an Event of Default (other than an Event of Default described in subparagraphs (v) and (vi) above) shall occur and be continuing, either the Trustee or the holders of at least 25% in aggregate principal amount of the relevant series of Notes then outstanding by written notice to the Issuer and the Guarantor (and to the Trustee if such notice is given by the holders) as provided in the Indenture may, or the Trustee acting on the directions of the holders of at least 25% in aggregate principal amount of the relevant series of Notes then outstanding (subject to receipt of indemnity and/or security satisfactory to the Trustee) shall, declare the unpaid principal amount of the Notes of such series and any accrued and unpaid interest thereon (and any Additional Amount payable in respect thereof) to be due and payable immediately upon receipt of such notice. If an Event of Default in subparagraphs (v) or (vi) above shall occur, the unpaid principal amount of all the Notes of such series then outstanding and any accrued and unpaid interest thereon will automatically, and without any declaration or other action by the Trustee or any holder of such Notes, become immediately due and payable. After a declaration of acceleration but before a judgment or decree for payment of the money due has been obtained by the Trustee, the holders of at least a majority in aggregate principal amount of the affected Notes then outstanding may, under certain circumstances, waive all past Defaults and rescind and annul such acceleration if (1) rescission would not conflict with any judgment or decree of a court of competent jurisdiction and (2) all Events of Default in respect of such series of Notes, other than the non-payment of principal, premium, if any, or interest on such Notes that became due solely because of the acceleration of such Notes, have been cured or waived.
Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default of a series of Notes shall occur and be continuing, the Trustee will be under no obligation to exercise any of the trusts or powers vested in it by the Indenture at the written request, order or direction of any of the holders of such Notes, unless such number of holders shall have instructed in writing and offered to the Trustee security and/or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby. Subject to certain provisions, including those requiring security and/or indemnification of the Trustee, the holders of a majority in aggregate principal amount of such Notes then outstanding will have the right to direct in writing the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. No holder of any Notes will have any right to institute any proceeding, judicial or otherwise, with respect to the Indenture, the Notes or the Guarantee, or for the appointment of a receiver or a trustee, or for any other remedy thereunder, unless (i) such holder has previously given to the Trustee written notice of a continuing Event of Default, (ii) the holders of at least 25% in aggregate principal amount of such series of Notes then outstanding have made written request to the Trustee to institute such proceeding, (iii) such holder or holders have instructed in writing and offered indemnity and/or security satisfactory to the Trustee and (iv) the Trustee has failed to institute such proceeding, and has not received from the holders of a majority in aggregate principal amount of such series of Notes then outstanding a written direction inconsistent with such request, within 60 days after such notice, request and offer. However, such limitations do not apply to a suit instituted by a holder of a Note for the enforcement of the right to receive payment of the principal of or interest on any such Notes on or after the applicable due date specified in any such Notes. The Trustee shall not be required to expend its funds in following such direction if it does not reasonably believe that reimbursement or indemnity and/or security is assured to it.
If the Trustee collects any money pursuant to the Indenture, it shall pay out the money in the following order:
First, to the Trustee and the Agents to the extent necessary to reimburse the Trustee and the Agents for any expenses incurred in connection with the collection or distribution of such amounts held or realized and any fees and expenses (including indemnity payments) incurred in connection with carrying out its functions under the Indenture (including reasonable legal fees);
Second, to the payment of the amounts then due and unpaid for principal of and premium, if any, and interest on the Notes of the relevant series in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes of such series for principal and premium, if any, and interest, respectively; and
Third, any surplus remaining after such payments will be paid to the Issuer or to whomever may be lawfully entitled thereto.
The Trustee
Pursuant to the Indenture, Citibank, N.A. is designated as the initial Trustee and initial paying and transfer agent and registrar for the Notes. The corporate trust office of the Trustee is currently located at 388 Greenwich Street, New York, NY 10013.
The Indenture provides that the Trustee, except during the continuance of an Event of Default, undertakes to perform such duties and only such duties as are specifically set forth in such Indenture, and no implied covenant or obligation shall be read into the Indenture against the Trustee. If an Event of Default has occurred and is continuing, the Trustee will exercise such of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.
Furthermore, each Holder, by accepting the Notes will agree, for the benefit of the Trustee, that it is solely responsible for its own independent appraisal of, and investigation into, all risks arising under or in connection with the Notes and has not relied on and will not at any time rely on the Trustee in respect of such risks.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect when:
(i) either:
(a) all of the Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has been deposited in trust and thereafter repaid to the Issuer, have been delivered to the Trustee for cancellation; or
(b) all of the Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Issuer or the Guarantor has irrevocably deposited or caused to be deposited with the Trustee, as trust funds in trust solely for the benefit of the holders of the Notes, cash in U.S. dollars, U.S. Government Obligations, or a combination of cash in U.S. dollars and U.S. Government Obligations, in amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge all amounts outstanding on the Notes not delivered to the Trustee for cancellation for principal, premium and accrued interest to the date of maturity or redemption;
(ii) no Default or Event of Default under the Indenture has occurred and is continuing with respect to the Notes on the date of the deposit referred to in clause (i)(a) or (i)(b) above (other than a Default or Event of Default resulting from or related to the borrowing of funds to be applied to such deposit) and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Issuer is a party or by which it is bound;
(iii) the Issuer has paid or caused to be paid all sums payable by it under the Indenture with respect to the Notes; and
(iv) the Issuer has delivered irrevocable instructions to the Trustee under the Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be.
In addition, the Issuer must deliver an Officers’ Certificate and an opinion of Independent Legal Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.
Legal Defeasance and Covenant Defeasance
The Indenture provides that the Issuer may, at its option and at any time, elect to have all of its (and the Guarantor’s) obligations discharged with respect to the outstanding Notes of a series and the related Guarantees (“Legal Defeasance”) except for:
(i) the rights of holders of the Notes of the relevant series that are then outstanding to receive payments in respect of the principal of, or interest or premium on the Notes of the relevant series when such payments are due from the trust referred to below;
(ii) the Issuer’s obligations with respect to the Notes of the relevant series concerning issuing temporary notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment and money for security payments held in trust;
(iii) the rights, powers, trusts, duties, indemnities and immunities of the Trustee for the relevant series of Notes, and the Issuer’s obligations in connection therewith; and
(iv) the Legal Defeasance and Covenant Defeasance (as defined below) provisions of the Indenture for the relevant series of Notes.
The Indenture provides that the Issuer may, at its option and at any time, elect to have its (and the Guarantor’s) obligations with respect to the outstanding Notes of the relevant series and the related Guarantee released with respect to certain covenants that are described in the Indenture (“Covenant Defeasance”) and thereafter any omission to comply with those covenants will not constitute a Default or Event of Default. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under the caption “—Events of Default” will no longer constitute an Event of Default in respect of such series of Notes.
The Indenture will also provide that, in order to exercise either Legal Defeasance or Covenant Defeasance:
(i) the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the holders of all the Notes subject to Legal Defeasance or Covenant Defeasance, cash in U.S. dollars, U.S. Government Obligations, or a combination of cash in U.S. dollars and U.S. Government Obligations, in amounts as will be sufficient, in the opinion of an internationally recognized investment bank, appraisal firm or firm of independent public accountants, to pay the principal of, or interest and premium on such Notes as are then outstanding on the Stated Maturity or on the applicable redemption date, as the case may be, and the Issuer must specify whether such Notes are being defeased to maturity or to a particular redemption date;
(ii) in the case of Legal Defeasance, the Issuer must deliver to the Trustee an opinion of Independent Legal Counsel reasonably acceptable to the Trustee confirming that (a) the Issuer has received from, or there has been published by, the U.S. Internal Revenue Service a ruling or (b) since the date of the Indenture, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such opinion of Independent Legal Counsel will confirm that, the holders of the then outstanding Notes of the affected series will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Issuer must deliver to the Trustee an opinion of Independent Legal Counsel reasonably acceptable to the Trustee confirming that the holders of the then outstanding Notes of the affected series will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default with respect to the Notes of the affected series must have occurred and be continuing on the date of the deposit referred to in clause (i) above (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit);
(v) the Issuer must deliver to the Trustee an Officers’ Certificate stating that the deposit referred to in clause (i) above was not made by it with the intent of preferring the holders of Notes of the affected series over the Issuer’s other creditors with the intent of defeating, hindering, delaying or defrauding its creditors or others; and
(vi) the Issuer must deliver to the Trustee an Officers’ Certificate and an opinion of Independent Legal Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.
No Personal Liability of Directors, Officers, Employees and Shareholders
No director, officer, employee, incorporator or shareholder of the Issuer or the Guarantor, as such, will have any liability for any obligations of the Issuer or the Guarantor under the Notes, the Indenture or the Guarantees,
or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the U.S. federal securities laws.
Currency Indemnity
To the fullest extent permitted by law, the obligations of the Issuer or the Guarantor to any holder of the Notes under the Indenture or the Notes or the Guarantees, as the case may be, shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than U.S. dollars (the “Agreement Currency”), be discharged only to the extent that on the Business Day following receipt by such holder or the Trustee, as the case may be, of any amount in the Judgment Currency, the Agreement Currency may in accordance with normal banking procedures be purchased with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the amount originally to be paid to such holder or the Trustee, as the case may be, in the Agreement Currency, the Issuer and the Guarantor agree, as a separate obligation and notwithstanding such judgment, to pay the difference and if the amount of the Agreement Currency so purchased exceeds the amount originally to be paid to such holder, such holder or the Trustee, as the case may be, agrees to pay to or for the account of the Issuer or the Guarantor such excess, provided that such holder shall not have any obligation to pay any such excess as long as a default by the Issuer or the Guarantor in its obligations under the Indenture or the relevant series of Notes or the related Guarantee has occurred and is continuing, in which case such excess may be applied by such holder to such obligations.
Notices
All notices or demands required or permitted by the terms of the Notes or the Indenture to be given by the holders of the Notes are required to be in writing and may be given or served by being sent by prepaid courier or first-class mail, if intended for the Issuer or the Guarantor, addressed to the Issuer or the Guarantor, as applicable, if intended for the Trustee, at the corporate trust office of the Trustee.
Any notices required to be given to the holders of the Notes will be given to DTC, as the registered holder of the Global Notes. In the event that the Global Notes are exchanged for individual Notes in certificated form, notices to holders of the Notes will be sent by prepaid courier or first-class mail addressed to such holder at such holder’s last address as it appears in the Register.
Governing Law and Consent to Jurisdiction
The Notes, the Guarantees and the Indenture are governed by and will be construed in accordance with the laws of the State of New York. The Issuer and the Guarantor have agreed that any action arising out of or based upon the Indenture, the Notes or the Guarantees may be instituted in any U.S. federal or New York State court located in the Borough of Manhattan, the City of New York, and have irrevocably submitted to the non-exclusive jurisdiction of any such court in any such action. Prior to the delivery of the Notes, the Issuer and the Guarantor shall irrevocably appoint TSMC North America as their agent upon which process may be served in any such action.
Each of the Issuer and the Guarantor has agreed that, to the extent that it is or becomes entitled to any sovereign or other immunity, it will waive such immunity in respect of its obligations under the Indenture.
Certain Definitions
Set forth below are definitions of certain of the terms used herein. Additional terms are defined elsewhere above or in the Indenture.
“Applicable Par Call Date” means with respect to the (i) Guaranteed Notes due 2026, September 25, 2026, (ii) Guaranteed Notes due 2031, July 25, 2031, (iii) Guaranteed Notes due 2041, April 25, 2041 and (iv) Guaranteed Notes due 2051, April 25, 2051.
“Authorized Officer” means a director, the chairman of the board, the chief executive officer, the chief financial officer or treasurer of the Issuer or any other person duly authorized by the board of directors of the Issuer to act in respect of matters relating to the Indenture.
“Business Day” means a day other than a Saturday, Sunday or a day on which banking institutions or trust companies in the State of New York and Hong Kong are authorized or obligated by law, regulation or executive order to remain closed.
“Capital Stock” of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Shares and limited liability or partnership interests (whether general or limited), but excluding any debt securities convertible or exchangeable into such equity, prior to conversion or exchange.
“Code” means the U.S. Internal Revenue Code of 1986, as amended.
“Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having an actual or interpolated maturity comparable to the Remaining Term of the applicable Notes to be redeemed as described under “—Optional Redemption” section that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the Remaining Term of such Notes.
“Comparable Treasury Price” means, with respect to any redemption date as described under “—Optional Redemption” section, (1) the arithmetic average of the applicable Reference Treasury Dealer Quotations for such redemption date after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (2) if the Issuer obtains fewer than four applicable Reference Treasury Dealer Quotations, the arithmetic average of all applicable Reference Treasury Dealer Quotations for such redemption date.
“CUSIP” means the identification number provided by Committee on Uniform Securities Identification Procedures.
“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.
“DTC” means the Depository Trust Company, a subsidiary of the Depository Trust & Clearing Corporation.
“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.
“Global Notes” means, collectively, each series of Notes issued in definitive, fully registered global form.
“holder” and “Noteholder” in relation to a Note, means the Person in whose name a Note is registered in the Register.
“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Issuer from time to time to act in such capacity.
“Independent Legal Counsel” means an independent legal firm of internationally recognized standing that is reasonably acceptable to the Trustee.
“Independent Tax Consultant” means an independent accounting firm or consultant of internationally recognized standing that is reasonably acceptable to the Trustee, provided that the Trustee shall have no liability for the selection or approval of such agent.
“Issue Date” means October 25, 2021.
“New York Business Day” means a day other than a Saturday, Sunday or a day on which banking institutions or trust companies in the State of New York are authorized or obligated by law, regulation or executive order to remain closed.
“Officer” means a director or the chairman of the board, the chief executive officer, the vice chairman, the chief financial officer, any vice president (whether or not designated by a number or numbers or word or words added before or after the title “vice president”), the treasurer or the secretary of the Guarantor or any other officer duly authorized by the board of directors of the Guarantor to act in respect of matters relating to the Indenture or, in the case of the Issuer, any Authorized Officer, or in the case of any successor Person to the Issuer or the Guarantor, a director of such successor Person.
“Officers’ Certificate” means a certificate signed by two Officers of each of the Issuer or the Guarantor or any successor Person to the Issuer or the Guarantor, as applicable, one of whom is the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of such Issuer or Guarantor.
“Person” means any individual, corporation, firm, limited liability company, partnership, joint venture, undertaking, association, joint stock company, trust, unincorporated organization, trust, state, government or any agency or political subdivision thereof or any other entity (in each case whether or not being a separate legal entity).
“Preferred Shares,” as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) that is preferred as to the payment of dividends upon liquidation, dissolution or winding up.
“Primary Treasury Dealer” means a primary U.S. Government securities dealer in the United States of America.
“Reference Treasury Dealer” means (1) Goldman Sachs & Co. LLC and its successors; provided, however, that if Goldman Sachs & Co. LLC and its successors cease to be a Primary Treasury Dealer, the Issuer will substitute another Primary Treasury Dealer and (2) any other Primary Treasury Dealers selected by the Issuer.
“Reference Treasury Dealer Quotations” means, with respect to the Reference Treasury Dealer and any redemption date, the arithmetic average, as determined by the Issuer, of the bid and asked prices for the applicable Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Issuer by such Reference Treasury Dealer as of 5:00 p.m., New York City time, on the third New York Business Day preceding such redemption date.
“Register” means the register of Noteholders maintained by the registrar for the Notes.
“Remaining Scheduled Payments” means, with respect to any Note to be redeemed, the remaining scheduled payments of the principal thereof and interest thereon that would be due after the related redemption date but for such redemption (assuming such Note matured on the Applicable Par Call Date); provided, however, that, if such redemption date is not an Interest Payment Date with respect to such Note, the amount of the next scheduled interest payment thereon will be reduced by the amount of interest accrued thereon to such redemption date.
“Remaining Term” means, with respect to any Note to be redeemed as described under the “—Optional Redemption” section, the period from the relevant redemption date to the Applicable Par Call Date.
“R.O.C.” means the Republic of China.
“SEC” means the U.S. Securities and Exchange Commission.
“Stated Maturity” means October 25, 2026, in the case of the Guaranteed Notes due 2026, October 25, 2031, in the case of the Guaranteed Notes due 2031, October 25, 2041, in the case of the Guaranteed Notes due 2041, and October 25, 2051, in the case of the Guaranteed Notes due 2051.
“Subsidiary” of any Person means (i) any corporation, association or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50% of the total ordinary voting power of shares of Voting Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof (or Persons performing similar functions) or (ii) any partnership, joint venture, limited liability company or similar entity of which more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, is, in the case of clauses (i) and (ii), at the time owned or controlled, directly or indirectly, by (1) such Person, (2) such Person and one or more Subsidiaries of such Person or (3) one or more Subsidiaries of such Person. Unless otherwise specified herein, each reference to a Subsidiary will refer to a Subsidiary of the Guarantor.
“Treasury Rate” means, with respect to any redemption date as described under the “—Optional Redemption” section, the rate per annum equal to the semi-annual equivalent yield to maturity (computed as of the third New York Business Day immediately preceding that redemption date) of the applicable Comparable Treasury Issue. In determining this rate, the Issuer will assume a price for the applicable Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the applicable Comparable Treasury Price for such redemption date.
“Trustee” means Citibank, N.A., in its capacity as trustee under the Indenture, who will act as the trustee under the Indenture for the Notes.
“U.S. Government Obligations” means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, and shall also include a depositary receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depositary receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depositary receipt.
“Voting Stock” of a Person means all classes of Capital Stock of such Person then outstanding and normally entitled to vote in the election of directors, managers or trustees, as applicable, of such Person.
EXHIBIT 4.47
(English Summary)
LEASE 202112220040
Parties:
SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION OF MINISTRY OF SCIENCE AND TECHNOLOGY (the “Lessor”)
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED (the “Lessee”)
Lease Premises:
The government-owned land containing 19,832 square meters, located in Tainan Science Park.
Lease Term:
Commencing January 1, 2022 and expiring on December 31, 2041.
Rental:
The rental should be Thirty-one New Taiwan Dollars and eighteen cents (NT$31.18) per square meter per month.
The total amount of monthly rental shall be Six Hundred and Eighteen Thousand, Three Hundred, Sixty-one New Taiwan Dollars (NT$618,361).
After the commencement of this Lease, the Lessee shall pay the rental amount of NT$$618,361 including applicable taxes, each month in the manner prescribed by the Lessor.
If Lessee, with Lessor’s consent, uses the land before the execution date of this Lease, the above-mentioned rental should be calculated from the starting date of use.
If Lessee fails to make monthly rental according to the agreed schedule and Lessor’s procedures for payment, certain punitive fine may apply according to the Lease.
Lessee must adhere to the terms and conditions set forth under this Lease concerning the use of the Lease Premises, including Waste Disposal Act, Air Pollution Control Act, Soil and Groundwater Pollution Remediation Act, Act for Establishment and Administration of Science Parks and other relevant rules and regulations.
During the term of the Lease, should the government adjust the rental in accordance with relevant regulations or for any reasons, Lessee agrees to an adjustment of the rent to become effective immediately upon the confirmation of the adjustment. Any deficit/overpayment of rent shall be pursued/reimbursed.
Termination by Lessor:
Lessor may terminate the lease at any time if any of the following shall happen:
| a. | Lessee is disqualified from operating or providing service in the park and ordered by the Lessor to withdraw from the Tainan Science Park; |
| b. | Lessee violates any term or provision of this Lease pertaining to the use of the land and the execution of this Lease while fails to provide remedy after receiving Lessor’s written notice within limited time; |
| c. | Lessee has defaulted in the payment of rent for period or amount exceeding relevant rules and regulations; |
| d. | Lessee fails to apply for construction license within three months from execution of this Lease; after the Lessor has set a time for such application and the Lessee continues failing to do so; or the application is inadequate and the Lessee has been ordered to supplement the application and fails to do so within such time limit; |
| e. | Lessee fails to complete the construction according to the schedule and fails to provide remedy during the extended period granted by the Lessor. |
| f. | Lessee violates the term and provision pertaining to the restrictions on sub-leasing. |
Miscellaneous:
The Lease term shall automatically expire unless Lessor and Lessee renew this Lease.
This Lease shall be effective from the execution date of the Lease, however, if the Lessee uses the land before the execution date of this Lease, the Lease shall be effective from the date when the Lessor consent to Lessee’s use of the land.
Should any suits arise from this Lease, Lessor and Lessee agree that the governing law shall be the laws of Republic of China and the Taiwan Tainan District Court shall be the competent court of jurisdiction in the first instance.
EXHIBIT 4.48
(English Summary)
LEASE 202106080019 and 202201270018
Parties:
CENTRAL TAIWAN SCIENCE PARK ADMINISTRATION OF MINISTRY OF SCIENCE AND TECHNOLOGY (the “Lessor”)
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED (the “Lessee”)
Lease Premises:
The government-owned land containing 25,965 square meters, located in Tainan Science Park.
Lease Term:
Commencing June 21, 2021 and expiring on June 20, 2041.
Rental:
The rental should be Thirty-three New Taiwan Dollars and Twenty-five cents (NT$33.25) per square meter per month.
The total amount of monthly rental shall be Eight Hundred and Sixty-three Thousand, Three Hundred, Thirty-six New Taiwan Dollars (NT$863,336).
After the commencement of this Lease, the Lessee shall pay the rental amount of NT$863,336 including applicable taxes, each month in the manner prescribed by the Lessor.
If Lessee, with Lessor’s consent, uses the land before the execution date of this Lease, the above-mentioned rental should be calculated from the starting date of use.
If Lessee fails to make monthly rental according to the agreed schedule and Lessor’s procedures for payment, certain punitive fine may apply according to the Lease.
Lessee must adhere to the terms and conditions set forth under this Lease concerning the use of the Lease Premises, including Waste Disposal Act, Air Pollution Control Act, Soil and Groundwater Pollution Remediation Act, Act for Establishment and Administration of Science Parks and other relevant rules and regulations.
During the term of the Lease, should the government adjust the rental in accordance with relevant regulations or for any reasons, Lessee agrees to an adjustment of the rent to become effective immediately upon the confirmation of the adjustment. Any deficit/overpayment of rent shall be pursued/reimbursed.
Termination by Lessor:
Lessor may terminate the lease at any time if any of the following shall happen:
| a. | Lessee is disqualified from operating or providing service in the park and ordered by the Lessor to withdraw from the Tainan Science Park; |
| b. | Lessee violates any term or provision of this Lease pertaining to the use of the land and the execution of this Lease while fails to provide remedy after receiving Lessor’s written notice within limited time; |
| c. | Lessee has defaulted in the payment of rent for period or amount exceeding relevant rules and regulations; |
| d. | Lessee fails to apply for construction license within three months from execution of this Lease; after the Lessor has set a time for such application and the Lessee continues failing to do so; or the application is inadequate and the Lessee has been ordered to supplement the application and fails to do so within such time limit; |
| e. | Lessee fails to complete the construction according to the schedule and fails to provide remedy during the extended period granted by the Lessor. |
| f. | Lessee violates the term and provision pertaining to the restrictions on sub-leasing. |
Miscellaneous:
The Lease term shall automatically expire unless Lessor and Lessee renew this Lease.
This Lease shall be effective from the execution date of the Lease, however, if the Lessee uses the land before the execution date of this Lease, the Lease shall be effective from the date when the Lessor consent to Lessee’s use of the land.
Should any suits arise from this Lease, Lessor and Lessee agree that the governing law shall be the laws of Republic of China and the Taiwan Tainan District Court shall be the competent court of jurisdiction in the first instance.
EXHIBIT 4.49
(English Summary)
LEASE 202112270027
Parties:
SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION OF MINISTRY OF SCIENCE AND TECHNOLOGY (the “Lessor”)
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED (the “Lessee”)
Lease Premises:
The government-owned land containing 1,352.59 square meters, located in Tainan Science Park.
Lease Term:
Commencing January 1, 2022 and expiring on December 31, 2041.
Rental:
The rental should be Thirty-one New Taiwan Dollars and eighteen cents (NT$31.18) per square meter per month.
The total amount of monthly rental shall be Forty-two Thousand, One Hundred, Seventy-four New Taiwan Dollars (NT$42,174).
After the commencement of this Lease, the Lessee shall pay the rental amount of NT$42,174 including applicable taxes, each month in the manner prescribed by the Lessor.
If Lessee, with Lessor’s consent, uses the land before the execution date of this Lease, the above-mentioned rental should be calculated from the starting date of use.
If Lessee fails to make monthly rental according to the agreed schedule and Lessor’s procedures for payment, certain punitive fine may apply according to the Lease.
Lessee must adhere to the terms and conditions set forth under this Lease concerning the use of the Lease Premises, including Waste Disposal Act, Air Pollution Control Act, Soil and Groundwater Pollution Remediation Act, Act for Establishment and Administration of Science Parks and other relevant rules and regulations.
During the term of the Lease, should the government adjust the rental in accordance with relevant regulations or for any reasons, Lessee agrees to an adjustment of the rent to become effective immediately upon the confirmation of the adjustment. Any deficit/overpayment of rent shall be pursued/reimbursed.
Termination by Lessor:
Lessor may terminate the lease at any time if any of the following shall happen:
| a. | Lessee is disqualified from operating or providing service in the park and ordered by the Lessor to withdraw from the Tainan Science Park; |
| b. | Lessee violates any term or provision of this Lease pertaining to the use of the land and the execution of this Lease while fails to provide remedy after receiving Lessor’s written notice within limited time; |
| c. | Lessee has defaulted in the payment of rent for period or amount exceeding relevant rules and regulations; |
| d. | Lessee fails to apply for construction license within three months from execution of this Lease; after the Lessor has set a time for such application and the Lessee continues failing to do so; or the application is inadequate and the Lessee has been ordered to supplement the application and fails to do so within such time limit; |
| e. | Lessee fails to complete the construction according to the schedule and fails to provide remedy during the extended period granted by the Lessor. |
| f. | Lessee violates the term and provision pertaining to the restrictions on sub-leasing. |
Miscellaneous:
The Lease term shall automatically expire unless Lessor and Lessee renew this Lease.
This Lease shall be effective from the execution date of the Lease, however, if the Lessee uses the land before the execution date of this Lease, the Lease shall be effective from the date when the Lessor consent to Lessee’s use of the land.
Should any suits arise from this Lease, Lessor and Lessee agree that the governing law shall be the laws of Republic of China and the Taiwan Tainan District Court shall be the competent court of jurisdiction in the first instance.
Exhibit 4.50
Taiwan Semiconductor Manufacturing Company, Ltd.
Employee Restricted Stock Awards Rules for Year 2021
| I | Purpose |
To attract and retain corporate executives and to link their compensation with shareholders’ interests and Environmental, Social, Governance (ESG) achievements, the Company hereby establishes these Employee Restricted Stock Awards Rules (these “Rules”) in accordance with Article 267 of the Company Act and the Regulations Governing the Offering and Issuance of Securities by Securities Issuers promulgated by the Financial Supervisory Commission.
| II. | Issuance Period |
The Restricted Stock Awards (RSAs) will be granted one or more times over a period of one year from the date of receipt of the notice of effective registration of the competent authority. The Board of Directors may determine, or may authorize Chairman to determine, the actual issuance date and relevant matters.
| III. | Eligibility and the number of shares employees may be granted |
| 1. | Only the Company’s full-time executives who are employed as of the date of the granting of the RSAs and who meet certain performance requirements are eligible for this incentive plan. Eligible executives must also be those who (a) have a significant influence on the Company’s operational decisions or (b) are the Company’s critical talents for its future core technologies and strategy development. |
| 2. | The number of shares granted to eligible executives will be determined by Chairman and CEO and approved by the Compensation Committee and the Board of Directors by reference to the Company’s business performance and the employee’s job grade, performance, and other factors as deemed appropriate. |
| IV. | Expected total shares to be issued |
The total number of shares to be issued under these Rules will not exceed 2,600,000 common shares, with a par value of NT$10 per share. The actual number of shares to be issued will be resolved by the Board of Directors after the issuance of RSAs is approved by the shareholders’ meeting and the competent authority.
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| V. | Terms and conditions of the RSAs and restrictions imposed on the rights vested in such RSAs |
| 1. | Expected issue price: Grants will be made free of charge. |
| 2. | Class of the shares to be issued: The Company’s common shares. |
| 3. | Vesting conditions: |
| • | The RSAs granted to an executive can only be vested if (a) the executive remains employed by the Company on the last date of each vesting period; (b) during the vesting period, the executive may not breach any agreement with the Company or violate the Company’s work rules; and (c) certain executive performance metrics (a year-end performance rating of at least “S” Note or above for the year immediately preceding the expiration of each vesting period) and the Company’s business performance metrics are met. (Note: “S” stands for “Successful”) |
| • | The maximum percentage of granted RSAs that may be vested each year shall be as follows: one-year anniversary of the grant: 50%; two-year anniversary of the grant: 25%; and three-year anniversary of the grant: 25%; provided that the actual percentage and number of the RSAs to be vested in each year will be calculated based on the achievement of the Company’s business performance metrics, as detailed in the following point. |
| • | The maximum number of RSAs that may be vested in each year will be set as 110%, among which 100% will be subject to a calculation based on the Company’s relative TSRNote achievement (see table below) to determine the number of RSAs to be vested; this number will be further subject to a modifier to increase or decrease up to 10% based on the Compensation Committee’s evaluation of the Company’s ESG achievements. The number of shares so calculated should be rounded down to the nearest integral. |
| The Company’s TSR relative to the TSR of S&P 500 IT Index |
Ratio of shares to be vested | |||
| Above the Index by X percentage points |
50% + X * 2.5%, with the maximum of 100% | |||
| Equal to the Index |
50% | |||
| Below the Index by X percentage points |
50% — X * 2.5%, with the minimum of 0% | |||
Note: TSR: Total Shareholder Return (including capital gains and dividends)
| 4. | Measures to be taken where employees fail to meet the vesting conditions or in the event of inheritance: |
| (1) | The Company will reclaim the granted RSAs and cancel the same at no extra cost to the Company, where an executive fails to meet the vesting conditions set forth in Paragraph 3 of this Article V of these Rules. |
| (2) | Voluntary Separation, separation with a severance, or involuntary discharge: |
Any unvested RSAs will be forfeited on the effective date of separation due to a voluntary separation, separation with a severance, or involuntary discharge of such executives. The Company will reclaim the RSAs granted to them and cancel the same at no extra cost to the Company.
| (3) | Leave Without Pay: |
All the rights and obligations in connection with the unvested RSAs will not be affected as a result of executives taking extended leave without pay. However, the actual number of shares that may be vested will not only be calculated according to the vesting conditions set forth in Paragraph 3 of this Article V of these Rules but also be prorated based on the number of months of their service during the year prior to the applicable vesting day. If such executives are on leave without pay on any vesting day, it shall be deemed that they fail to meet the vesting conditions, and the Company will reclaim the RSAs granted to them and cancel the same at no extra cost to the Company.
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| (4) | Retirement: |
All the rights and obligations in connection with the unvested RSAs will not be affected as a result of an employee’s retirement. However, the actual number of shares that may be vested shall be calculated according to the vesting condition specified in Paragraph 3 of this Article V of these Rules, and the performance rating granted to them shall be deemed “S”.
| (5) | Employment Termination Due to Death or Physical Disability Caused by Occupational Accidents: |
The unvested RSAs shall be deemed immediately vested in the case of death or physical disability due to an occupational accident, where the RSAs vested shall be based on the assumption that the Company’s TSR equals to the TSR of S&P 500 IT Index and there is no further adjustment for the Company’s ESG achievements. In the case of death, the respective heir(s) may apply for entitlement to those inheritable shares after completing all necessary legal procedures and providing relevant supporting documents. In the case of physical disability caused by occupational injury, the vested RSAs will be received by such executives.
| (6) | Position Transfer: |
| A. | Where any executives apply for transferring to any of the Company’s subsidiaries, affiliates, or other companies, the measures to be taken with respect to their unvested RSAs will be the same as those specified in Subparagraph (2) “Voluntary Separation” of this Paragraph 4 of Article V of these Rules. |
| B. | Where any executives are assigned by the Company to a position in any of the Company’s subsidiaries, affiliates, or other companies, all the rights and obligations in connection with the unvested RSAs will not be affected as a result. However, subject to the vesting conditions specified in Paragraph 3 of this Article V of these Rules, such executives shall continue working in the assigned subsidiaries, affiliates, or other companies on the vesting dates. Otherwise, they will be considered to fail to meet the vesting conditions, and the Company will reclaim the RSAs granted to them and cancel the same at no extra cost to the Company. With respect to the evaluation of the achievement of individual performance goals, Chairman and Chief Executive Officer will determine whether the vesting conditions are met by reviewing the evaluation of the executives’ performance provided by the assigned subsidiaries, affiliates, or other companies. |
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| (7) | Where any executives declare to voluntarily relinquish the granted RSAs with a written statement, the Company will reclaim the RSAs granted to them and cancel the same at no extra cost to the Company. |
| (8) | Where any executives, after being granted the RSAs, breach any agreement with the Company employment agreement or violate the Company’s work rules, the Company will reclaim the RSAs granted to them and cancel the same at no extra cost to the Company. |
| (9) | Where any executives terminate or revoke their authorization given to the Company regarding the executive’s RSA trust/custody account (see Subparagraph (1) of Paragraph 5 and Paragraph 7 of this Article V below for such trust/custody account), the Company will reclaim their unvested RSAs and cancel the same at no extra cost to the Company. |
| 5. | Restrictions imposed on the executives’ rights in the RSAs before the vesting conditions are fulfilled: |
| (1) | Upon the grant of the RSAs, the RSAs shall be deposited in a trust/custody account. Before the vesting conditions are fulfilled, the executives cannot request the trustee/custodian to return to them the RSAs for any reasons or by any means. |
| (2) | During each vesting period, no executives granted RSAs may sell, pledge, transfer, give to another person, create any encumbrance on, or otherwise dispose of, any shares under the unvested RSAs. |
| (3) | Subject to the restrictions mentioned above, the rights of the executives with regard to the unvested RSAs granted under these Rules before the fulfillment of the vesting conditions, including but not limited to the entitlement to any distribution regarding dividends, bonuses and capital reserve, and the subscription right of the new shares issued for any capital increase, are the same as those of holders of common shares of the Company. The relevant matters shall be handled in accordance with the RSA trust/custody agreement. |
| (4) | Before the vesting conditions are fulfilled, the attendance, proposal rights, speech rights, voting rights and any other shareholder rights shall be exercised by the engaged trustee/custodian on the executives’ behalf. |
| (5) | During each vesting period, if the Company conducts a capital reduction for cash return, capital reduction for loss offset, or other non-statutory capital reduction, the unvested RSAs shall be cancelled proportionally by the ratio of such capital reduction. If the Company conducts a capital reduction for cash return, the returned cash shall be deposited in a trust/custody account and shall not be delivered to the executives until the vesting conditions are fulfilled; otherwise, the cash will be returned to the Company. |
| 6. | Mergers and Acquisitions: All the rights and obligations in connection with any unvested RSAs will not be affected as a result or may be modified based on the relevant agreements or plans for the mergers and acquisitions. |
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| 7. | Other terms and conditions: During the period when the granted RSAs are deposited in a trust/custody account, each executive must enter into an agreement authorizing the Company to, among others, negotiate, execute, modify, extend, rescind, and terminate the trust/custody agreement with the trustee/custodian, and give instructions to deliver, use, and dispose of any of the properties under the trust/custody, on their behalf, with full power and authority. |
| VI. | Signing of Contracts and Confidentiality |
| 1. | Those executives who have been granted the RSAs shall sign the “Agreement of Restricted Stock Awards” and complete all the trust/custody management process upon receipt of the notification from the Company. Any executives who do not complete such signing of relevant documents will be considered to forfeit the RSAs. |
| 2. | Those executives who receive the RSAs and the related rights through these Rules shall comply with these Rules and the “Agreement of Restricted Stock Awards”. In the event of any breach thereof, they will be deemed to fail to fulfill the vesting conditions. They shall comply with the confidentiality clauses as well. Except as required by laws and regulations or by any competent authority, they are not allowed to inquire any other about or disclose to any other any information about the number of the RSAs granted to them and any relevant matters, nor may they inform any other of any relevant content of these Rules or any of their rights or interest under these Rules. In the event of any breach thereof, the Company is entitled to reclaim their unvested RSAs and cancel the same at no extra cost to the Company. |
| VII. | Tax |
Any tax matters incurred in connection with the RSAs under these Rules shall be handled under the then-current laws and regulations of the R.O.C.
VIII. Miscellaneous
| 1. | Before these Rules may be implemented, it shall be approved by the Compensation Committee and by the majority votes in a meeting of the Board of Directors in which two-thirds or more directors are present and shall become effective after effective registration with the competent authority. If any amendment hereto is necessary due to any change of any laws or regulations or any requirement of the competent authority, Chairman is authorized to make any necessary amendment hereto and submit the revised Rules to the Compensation Committee and the Board of Directors for acknowledgement, before the RSAs may be granted. |
| 2. | Any other matters not set forth in these Rules shall be dealt with in accordance with the applicable laws and regulations. |
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Exhibit 4.51
Taiwan Semiconductor Manufacturing Company, Ltd.
Employee Restricted Stock Awards Rules for Year 2022
| I | Purpose |
To attract and retain corporate executives and critical talents and to link their compensation with shareholders’ interests and Environmental, Social, Governance (ESG) achievements, the Company hereby establishes these Employee Restricted Stock Awards Rules (these “Rules”) in accordance with Article 267 of the Company Act and the Regulations Governing the Offering and Issuance of Securities by Securities Issuers promulgated by the Financial Supervisory Commission.
| II. | Issuance Period |
The Restricted Stock Awards (RSAs) will be granted one or more times over a period of one year from the date of receipt of the notice of effective registration of the competent authority. The Board of Directors may determine, or may authorize Chairman to determine, the actual issuance date and relevant matters.
| III. | Eligibility and the number of shares employees may be granted |
| 1. | Only the Company’s full-time executive officers or the Company’s and the Company’s subsidiaries’ selected critical talents who are employed as of the date of the granting of the RSAs and who meet certain performance requirements are eligible for this incentive plan. Eligible employees must also be those who (a) have a significant influence on the Company’s or the Company’s subsidiaries’ operational decisions or (b) are the Company’s or the Company’s subsidiaries’ selected critical talents for its future core technologies and strategy development. |
| 2. | The number of shares granted to eligible employees will be determined by Chairman and CEO and approved by the Compensation Committee and the Board of Directors by reference to the Company’s business performance and the employee’s job grade, performance, and other factors as deemed appropriate. |
| IV. | Expected total shares to be issued |
Based on a budget capped at 0.3% of prior year’s Net Income, the total number of shares to be issued under these Rules will not exceed 3,065,000 common shares, with a par value of NT$10 per share. The actual number of shares to be issued will be resolved by the Board of Directors after the issuance of RSAs is approved by the shareholders’ meeting and the competent authority.
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| V. | Terms and conditions of the RSAs and restrictions imposed on the rights vested in such RSAs |
| 1. | Expected issue price: Grants will be made free of charge. |
| 2. | Class of the shares to be issued: The Company’s common shares. |
| 3. | Vesting conditions: |
| • | The RSAs granted to an employee can only be vested if (a) the employee remains employed by the Company or the Company’s subsidiaries on the last date of each vesting period; (b) during the vesting period, the employee may not breach any agreement with the Company or the Company’s subsidiaries or violate the Company’s or the Company’s subsidiaries’ work rules; and (c) certain employee performance metrics (a year-end performance rating of at least “S” Note or above for the year immediately preceding the expiration of each vesting period) and the Company’s business performance metrics are met. (Note: “S” stands for “Successful”) |
| • | The maximum percentage of granted RSAs that may be vested each year shall be as follows: one-year anniversary of the grant: 50%; two-year anniversary of the grant: 25%; and three-year anniversary of the grant: 25%; provided that the actual percentage and number of the RSAs to be vested in each year will be calculated based on the achievement of the Company’s business performance metrics, as detailed in the following points. |
| • | For eligible executive officers of the Company: The maximum number of RSAs that may be vested in each year will be set as 110%, among which 100% will be subject to a calculation based on the Company’s relative TSRNote achievement (see table below) to determine the number of RSAs to be vested; this number will be further subject to a modifier to increase or decrease up to 10% based on the Compensation Committee’s evaluation of the Company’s ESG achievements. The number of shares so calculated should be rounded down to the nearest integral. |
| The Company’s TSR relative to the TSR of S&P 500 IT Index |
Ratio of shares to be vested | |||
| Above the Index by X percentage points |
50% + X * 2.5%, with the maximum of 100% | |||
| Equal to the Index |
50% | |||
| Below the Index by X percentage points |
50% — X * 2.5%, with the minimum of 0% | |||
Note: TSR: Total Shareholder Return (including capital gains and dividends)
| • | For eligible employees who are not executive officers of the Company and the Company’s subsidiaries: The number of RSAs to be vested in each year will be calculated in accordance with the below table based on the Company’s audited consolidated financial statements for the year prior to the vesting year. The number of shares so calculated should be rounded down to the nearest integral. |
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| 4. | Measures to be taken where employees fail to meet the vesting conditions or in the event of inheritance: |
| (1) | The Company will reclaim the granted RSAs and cancel the same at no extra cost to the Company, where an employee fails to meet the vesting conditions set forth in Paragraph 3 of this Article V of these Rules. |
| (2) | Voluntary Separation, separation with a severance, or involuntary discharge: Any unvested RSAs will be forfeited on the effective date of separation due to a voluntary separation, separation with a severance, or involuntary discharge of such employees. The Company will reclaim the RSAs granted to them and cancel the same at no extra cost to the Company. |
| (3) | Leave Without Pay: |
All the rights and obligations in connection with the unvested RSAs will not be affected as a result of employees taking extended leave without pay. However, the actual number of shares that may be vested will not only be calculated according to the vesting conditions set forth in Paragraph 3 of this Article V of these Rules but also be prorated based on the number of months of their service during the year prior to the applicable vesting day. If such employees are on leave without pay on any vesting day, it shall be deemed that they fail to meet the vesting conditions, and the Company will reclaim the RSAs granted to them and cancel the same at no extra cost to the Company.
| (4) | Retirement: |
All the rights and obligations in connection with the unvested RSAs will not be affected as a result of an employee’s retirement, provided that the employee complies with both of the following conditions after his/her retirement. If any of the following conditions is not met, any unvested RSAs will be forfeited. Exemption could be made case by case by Chairman and CEO.
| A. | Not to get any full-time job; and |
| B. | Not to engage in competition with the Company or the Company’s subsidiaries, including without limitation: to join a competitor, to provide any competitive services, to establish any company or business that would involve a competitive foundry process or service, or to employ, induce, or attempt to induce any TSMC employee to undertake competitive services. |
For retired employees, the actual number of shares that may be vested shall be calculated according to the vesting condition specified in Paragraph 3 of this Article V of these Rules, and the performance rating granted to them shall be deemed “S”.
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| (5) | Employment Termination Due to Death or Physical Disability Caused by Occupational Accidents: |
The unvested RSAs shall be deemed immediately vested in the case of death or physical disability due to an occupational accident. For eligible executive officers of the Company, the RSAs vested shall be based on the assumption that the Company’s TSR equals to the TSR of S&P 500 IT Index and there is no further adjustment for the Company’s ESG achievements. For eligible employees who are not executive officers of the Company and the Company’s subsidiaries, the RSAs vested shall be based on the assumption that the Company’s Revenue growth, Gross Margin, and ROE are all equal to Threshold. In the case of death, the respective heir(s) may apply for entitlement to those inheritable shares after completing all necessary legal procedures and providing relevant supporting documents. In the case of physical disability caused by occupational injury, the vested RSAs will be received by such employees.
| (6) | Position Transfer: |
| A. | Where any employees apply for transferring to any of the Company’s subsidiaries, affiliates, or other companies, the measures to be taken with respect to their unvested RSAs will be the same as those specified in Subparagraph (2) “Voluntary Separation” of this Paragraph 4 of Article V of these Rules. |
| B. | Where any employees are assigned by the Company or the Company’s subsidiaries to a position in any of the Company’s subsidiaries, affiliates, or other companies, all the rights and obligations in connection with the unvested RSAs will not be affected as a result. However, subject to the vesting conditions specified in Paragraph 3 of this Article V of these Rules, such employees shall continue working in the assigned subsidiaries, affiliates, or other companies on the vesting dates. Otherwise, they will be considered to fail to meet the vesting conditions, and the Company will reclaim the RSAs granted to them and cancel the same at no extra cost to the Company. With respect to the evaluation of the achievement of individual performance goals, Chairman and Chief Executive Officer will determine whether the vesting conditions are met by reviewing the evaluation of the employees’ performance provided by the assigned subsidiaries, affiliates, or other companies. |
| (7) | Where any employees declare to voluntarily relinquish the granted RSAs with a written statement, the Company will reclaim the RSAs granted to them and cancel the same at no extra cost to the Company. |
| (8) | Where any employees, after being granted the RSAs, breach any agreement with the Company or the Company’s subsidiaries or violate the Company’s or the Company’s subsidiaries’ work rules, the Company will reclaim the RSAs granted to them and cancel the same at no extra cost to the Company. |
| (9) | Where any employees terminate or revoke their authorization given to the Company regarding the executive’s RSA trust/custody account (see Subparagraph (1) of Paragraph 5 and Paragraph 7 of this Article V below for such trust/custody account), the Company will reclaim their unvested RSAs and cancel the same at no extra cost to the Company. |
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| 5. | Restrictions imposed on the employees’ rights in the RSAs before the vesting conditions are fulfilled: |
| (1) | Upon the grant of the RSAs, the RSAs shall be deposited in a trust/custody account. Before the vesting conditions are fulfilled, the employees cannot request the trustee/custodian to return to them the RSAs for any reasons or by any means. |
| (2) | During each vesting period, no employees granted RSAs may sell, pledge, transfer, give to another person, create any encumbrance on, or otherwise dispose of, any shares under the unvested RSAs. |
| (3) | Subject to the restrictions mentioned above, the rights of the employees with regard to the unvested RSAs granted under these Rules before the fulfillment of the vesting conditions, including but not limited to the entitlement to any distribution regarding dividends, bonuses and capital reserve, and the subscription right of the new shares issued for any capital increase, are the same as those of holders of common shares of the Company. The relevant matters shall be handled in accordance with the RSA trust/custody agreement. |
| (4) | Before the vesting conditions are fulfilled, the attendance, proposal rights, speech rights, voting rights and any other shareholder rights shall be exercised by the engaged trustee/custodian on the employees’ behalf. |
| (5) | During each vesting period, if the Company conducts a capital reduction for cash return, capital reduction for loss offset, or other non-statutory capital reduction, the unvested RSAs shall be cancelled proportionally by the ratio of such capital reduction. If the Company conducts a capital reduction for cash return, the returned cash shall be deposited in a trust/custody account and shall not be delivered to the employees until the vesting conditions are fulfilled; otherwise, the cash will be returned to the Company. |
| 6. | Mergers and Acquisitions: All the rights and obligations in connection with any unvested RSAs will not be affected as a result or may be modified based on the relevant agreements or plans for the mergers and acquisitions. |
| 7. | Other terms and conditions: During the period when the granted RSAs are deposited in a trust/custody account, each executive must enter into an agreement authorizing the Company to, among others, negotiate, execute, modify, extend, rescind, and terminate the trust/custody agreement with the trustee/custodian, and give instructions to deliver, use, and dispose of any of the properties under the trust/custody, on their behalf, with full power and authority. |
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| VI. | Signing of Contracts and Confidentiality |
| 1. | Those employees who have been granted the RSAs shall sign the “Agreement of Restricted Stock Awards” and complete all the trust/custody management process upon receipt of the notification from the Company. Any employees who do not complete such signing of relevant documents will be considered to forfeit the RSAs. |
| 2. | Those employees who receive the RSAs and the related rights through these Rules shall comply with these Rules and the “Agreement of Restricted Stock Awards”. In the event of any breach thereof, they will be deemed to fail to fulfill the vesting conditions. They shall comply with the confidentiality clauses as well. Except as required by laws and regulations or by any competent authority, they are not allowed to inquire any other about or disclose to any other any information about the number of the RSAs granted to them and any relevant matters, nor may they inform any other of any relevant content of these Rules or any of their rights or interest under these Rules. In the event of any breach thereof, the Company is entitled to reclaim their unvested RSAs and cancel the same at no extra cost to the Company. |
| VII. | Tax |
Any tax matters incurred in connection with the RSAs under these Rules shall be handled under the then-current laws and regulations of the R.O.C. and the countries where the employees reside.
| VIII. | Miscellaneous |
| 1. | Before these Rules may be implemented, it shall be approved by the Compensation Committee and by the majority votes in a meeting of the Board of Directors in which two-thirds or more directors are present and shall become effective after effective registration with the competent authority. If any amendment hereto is necessary due to any change of any laws or regulations or any requirement of the competent authority, Chairman is authorized to make any necessary amendment hereto and submit the revised Rules to the Compensation Committee and the Board of Directors for acknowledgement, before the RSAs may be granted. |
| 2. | Any other matters not set forth in these Rules shall be dealt with in accordance with the applicable laws and regulations. |
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Exhibit 8.1
Subsidiaries of Taiwan Semiconductor Manufacturing Company Ltd.*
| Jurisdiction of Incorporation | ||
| TSMC Global Ltd. | The British Virgin Islands |
| * | Pursuant to Item 601(b)(21)(ii) of Regulation S-K, the names of other subsidiaries of Taiwan Semiconductor Manufacturing Company Ltd. are omitted because, considered in the aggregate, they would not constitute a significant subsidiary as of December 31, 2021. |
Exhibit 12.1
I, C.C. Wei, certify that:
| 1. | I have reviewed this annual report on Form 20-F of Taiwan Semiconductor Manufacturing Company Limited; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of company’s board of directors (or persons performing the equivalent function): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
| 6. | The company’s other certifying officer(s) and I have indicated in the report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
| Date: April 14, 2022 |
||||||
| By: | /s/ C.C. Wei | |||||
| Name: C.C. Wei Title: Chief Executive Officer |
Exhibit 12.2
CERTIFICATIONS
I, Wendell Huang, certify that:
| 1. | I have reviewed this annual report on Form 20-F of Taiwan Semiconductor Manufacturing Company Limited; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of company’s board of directors (or persons performing the equivalent function): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
| 6. | The company’s other certifying officer(s) and I have indicated in the report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
| Date: April 14, 2022 | ||||||||
| By: | /s/ Wendell Huang | |||||||
| Name: | Wendell Huang | |||||||
| Title: | Vice President, Finance and Chief Financial Officer / Spokesperson | |||||||
Exhibit 13.1
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
Certification
Pursuant to 18 U.S.C. § 1350, the undersigned, C.C. Wei, Chief Executive Officer of Taiwan Semiconductor Manufacturing Company Limited (the “Company”), hereby certifies, to his knowledge, that the Company’s annual report on Form 20-F for the year ended December 31, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: April 14, 2022 | ||||||||
| By: | /s/ C.C. Wei | |||||||
| Name: | C.C. Wei | |||||||
| Title: | Chief Executive Officer | |||||||
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.
Exhibit 13.2
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
Certification
Pursuant to 18 U.S.C. § 1350, the undersigned, Wendell Huang, Vice President, Finance and Chief Financial Officer / Spokesperson of Taiwan Semiconductor Manufacturing Company Limited (the “Company”), hereby certifies, to his knowledge, that the Company’s annual report on Form 20-F for the year ended December 31, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: April 14, 2022 | ||||||||
| By: | /s/ Wendell Huang | |||||||
| Name: | Wendell Huang | |||||||
| Title: | Vice President, Finance and Chief Financial Officer / Spokesperson | |||||||
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.
Exhibit 17
Issuers of Guaranteed Securities
Each of the following securities issued by TSMC Arizona Corporation, a wholly-owned subsidiary of Taiwan Semiconductor Manufacturing Company Limited, is unconditionally and irrevocably guaranteed by Taiwan Semiconductor Manufacturing Company Limited:
1.750% Notes due 2026
2.500% Notes due 2031
3.125% Notes due 2041
3.250% Notes due 2051