Page 206 - TSMC 2018 Annual Report

c. Retained earnings and dividend policy
TSMC’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year,
TSMC shall first offset its losses in previous years and then set aside the following items accordingly: 1) Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve
equals TSMC’s paid-in capital;
2) Special capital reserve in accordance with relevant laws or regulations or as requested by the
authorities in charge;
3) Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.
TSMC’s Articles of Incorporation provide the policy about the profit sharing bonus to employees, please refer to Note 33.
TSMC’s Articles of Incorporation also provide that profits of TSMC may be distributed by way of cash
dividend and/or stock dividend. However, distribution of earnings shall be made preferably by way of cash dividend. Distribution of earnings may also be made by way of stock dividend, provided that the ratio for stock dividend shall not exceed 50% of the total distribution.
Any appropriations of the profits are subject to shareholders’ approval in the following year.
The appropriation for legal capital reserve shall be made until the reserve equals the Company’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends in cash or stocks for the portion in excess of 25% of the paid-in capital if the Company incurs no loss.
Pursuant to existing regulations, the Company is required to set aside additional special capital reserve equivalent to the net debit balance of the other components of stockholders’ equity, such as the accumulated balance of foreign currency translation reserve, unrealized valuation gain or loss from fair value through other comprehensive income financial assets, unrealized valuation gain or loss from available-for-sale financial assets, gain or loss from changes in fair value of hedging instruments in cash flow hedges, etc. For the subsequent decrease in the deduction amount to stockholders’ equity, any special reserve appropriated may be reversed to the extent that the net debit balance reverses.
The appropriations of 2017 and 2016 earnings had been approved by TSMC’s shareholders in its meetings held on June 5, 2018 and June 8, 2017, respectively. The appropriations and dividends per share were as follows:
Appropriation of Earnings
Dividends Per Share (NT$)
For Fiscal Year 2017
For Fiscal Year 2016
For Fiscal Year 2017
$8
For Fiscal Year 2016
$7
Legal capital reserve
Special capital reserve
Cash dividends to shareholders
$
$ 268,661,719
34,311,148
$
$ 214,937,381
26,907,527 207,443,044
33,424,718 - 181,512,663
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