3.1 Overview

3.2 Board of Directors

TSMC advocates and acts upon the principles of operational transparency and respect for shareholder rights. We believe that thebasis for successful corporate governance is a sound and effective Board of Directors. In line with this principle, TSMC Board of
Directors set up the “Audit Committee” and the “Compensation Committee” in 2002 and 2003 respectively. To continue to makeour corporate governance more comprehensive, the TSMC Board took a step further in February 2023 to expand and strengthen thefunctions and responsibilities of its committees, including renaming the “Audit Committee” to the “Audit and Risk Committee”, andthe renaming the “Compensation Committee” to the “Compensation and People Development Committee”. In addition, in order tostrengthen the selection mechanism for directors, build diversified and professional board, TSMC’s Board of Directors approved theestablishment of the “Nominating, Corporate Governance and Sustainability Committee” referencing international practices. Each
Committee supports the Board to fulfill its responsibilities and each Committee’s chairperson regularly reports to the Board on its
activities and recommendations.

Board Structure
TSMC’s Board of Directors consists often distinguished members with a great
breadth of experience as world-classbusiness leaders or professionals. We deeply
rely on them for their diverse knowledge,
personal perspectives, and solid businessjudgment. Six of those ten members are
Independent Directors: former British
Telecommunications Chief Executive Officer,
Sir Peter L. Bonfield; former Chairmanof National Performing Arts Center andformer Advisor of Executive Yuan, R.O.C.,
Ms. Kok-Choo Chen; former Chairmanof Applied Materials, Inc., Mr. Michael R.
Splinter; former Chief Executive Officerof Xilinx, Inc., Mr. Moshe N. Gavrielov;
currently Chairman of Delta Electronics Inc.,
Mr. Yancey Hai; and former President ofMIT, Mr. L. Rafael Reif.

2022 Corporate Governance Awards and Ratings
Organization

AwardsDow Jones Sustainability Indices (DJSI)Dow Jones Sustainability World Index for the 22nd consecutive year
Dow Jones Sustainability Emerging Markets Index

MSCI ESG Indexes

MSCI ACWI ESG Leaders Index component
MSCI ESG Research – AAA Ratings
MSCI ACWI SRI Index component
MSCI ACWI Islamic Index component
MSCI Emerging Markets ESG Leaders Index

Sustainalytics

Company ESG Risk Ratings: Low ESG Risk – Semiconductor Industry

ISS ESG“Prime” Rated by ISS ESG Corporate Rating

FTSE4Good Index

FTSE4Good Emerging Index component
FTSE4Good All-World Index component
FTSE4Good TIP Taiwan ESG Index component

Corporate Knights

2022 Global 100 Most Sustainable Corporations
Semiconductor Company Top 100

Taiwan Stock Exchange

Top 5% in Corporate Governance Evaluation of Listed Companies for the 8th consecutive year

CommonWealth Magazine

Excellence in Corporate Social Responsibility Award – Honorable Legion of Corporate Sustainability
Semiconductor Company Top 100

Board Responsibilities

Institutional Investor Magazine

Most Honored Company (Technology/Semiconductors) – All-Asia
Best Overall ESG (Technology/Semiconductors) – 1st Place (buy-side and sell-side) – All-Asia

ForbesThe World’s Top 10 Largest Technology Companies in 2022
World’s Best Employers

Inheriting the spirit of TSMC’s Founder, Dr. Morris Chang’s philosophy on corporate governance, under the leadership of Chairman
Dr. Mark Liu and CEO & Vice Chairman Dr. C.C. Wei, TSMC’s Board of Directors takes a serious and forthright approach to its duties
and is a dedicated, competent and independent Board.

FORTUNE

2022 World’s Most Admired Companies
Fortune Global 500

Asiamoney

2022 Asia’s Outstanding Companies – Semiconductors & Semiconductor Equipment Sector for the 5th consecutive year

Taiwan Institute of Sustainable Energy

Taiwan Top 10 Sustainability Exemplary Awards for the 7th consecutive year

IFI Claims Patent Services

Ranked as 3rd in 2022 Top 50 US Patent Assignees

TSMC’s Board is comprised of a diverse group of professionals from different backgrounds in industries, academia, law, etc. These
professionals include citizens from Taiwan, Europe and the U.S. with world-class business operating experience, one of whom isfemale. Independent Directors constitute 60% of the Board.

The Board’s primary duty is to supervise the Company’s compliance with relevant laws and regulations, financial transparency,
timely disclosure of material information, and maintaining of the highest integrity. TSMC’s Board of Directors strives to performthese responsibilities through its Audit Committee and the Compensation Committee, the hiring of a financial expert consultant for
the Audit Committee, and coordination with our Internal Audit department.
The second duty of the Board of Directors is to appoint and dismiss officers of the Company when necessary, to evaluate themanagement’s performance and to review the succession plan for senior executives. TSMC’s management has maintained a healthy
and functional communication with the Board of Directors, has been devoted in executing guidance of the Board, and is dedicatedin running the business operations, all to achieve the best interests for TSMC shareholders.
The third duty of the Board of Directors is to resolve critical matters, such as capital appropriations, investment activities, dividends,
etc.

042

043

The fourth duty of the Board of Directors is to provide guidance to the Company’s management team and risk management. In
each quarter, TSMC’s management reports to the Board on various subjects (including ESG programs) and strategies, and spends
substantial time and effort to communicate with the Board. The Board would comment on the risk and probabilities for success ofthe proposed corporate strategies. The Board also periodically oversees those strategies’ implementation and outcomes, and may
suggest the management team to make adjustments to the strategic goals and objectives if necessary.
Nomination and Election of Directors
TSMC envisions the membership of its esteemed Board of Directors to be composed of highly ethical professionals with thenecessary knowledge, experience as world-class business leaders and understanding from diverse backgrounds. TSMC hasestablishes the “Guidelines for Nomination of Directors” that set out the procedures and criteria for the nomination, qualificationand evaluation of Director candidates to be nominated by the Board of Directors, and provide that “Nominating, Corporate
Governance and Sustainability Committee” will propose independent director candidates to the Board of Directors. The
independence of each independent director candidate is also considered and assessed under relevant laws.
Directors shall be elected pursuant to the candidate nomination system specified in Article 192-1 of the R.O.C. Company Law. The
tenure of office for Directors shall be three years. The independence of each independent director candidate is also considered andassessed under relevant law such as the Taiwan “Regulations Governing Appointment of Independent Directors and Compliance
Matters for Public Companies”. Under R.O.C. law, in which TSMC was incorporated, any shareholders holding one percent ormore of our total outstanding common shares may nominate their own candidate to stand for election as a Board member. This
democratic mechanism allows our shareholders to become involved in the selection and nomination process of Board candidates.
The final slate of candidates is put to the shareholders for voting at the relevant annual shareholders’ meeting.
There are no limits on the number of terms that a director may serve. We believe the Company benefits from the contributions of
directors who have over their years of dedicated service acquired unique insights into the operations and financial developments of
the Company. The Company reviews the appropriateness of each director’s continued service to ensure there are new viewpoints
available to the Board.
Directors’ Compensation
According to TSMC’s Articles of Incorporation, the Board of Directors is authorized to determine the salary for the Chairman, Vice
Chairman and Directors, taking into account the extent and value of the services provided for the management of the Corporationand the standards of the industry within the R.O.C. and overseas.
TSMC’s Articles of Incorporation also state that not more than 0.3 percent of our annual profits may be distributed as compensation
to our directors. In addition, directors who also serve as executive officers of the Company are not entitled to receive any director
compensation. According to TSMC’s Compensation Committee Charter, the distribution of compensation to directors shall be madein accordance with TSMC’s “Rules for Distribution of Compensation to Directors” based on the following principles: (1) directors
who also serve as executive officers of the Company are not entitled to receive compensation; (2) the compensation for independent
directors may be higher than other directors, as all independent directors also serve as members of the Audit Committee andCompensation Committee and thus participate in the discussions as well as resolutions of related committee meetings in accordancewith the charter of each committee; and (3) the compensation for overseas independent directors may be higher than domestic
independent directors, as they require additional time to attend quarterly meetings in Taiwan.

044

Directors’ Professional Qualifications and Independent Directors’ Independence Status
Criteria
Professional Qualification and Experience

Independent Directors’ Independence Status

For Directors’ professional qualification andexperience, please refer to “2.4.1 Information
Regarding Board Members” on page 24-29 of thisAnnual Report.

Not Applicable

Name/Title
Mark Liu
Chairman
C.C. Wei
Vice Chairman
Ming-Hsin Kung
Director
F.C. Tseng
Director
Sir Peter L. Bonfield
Independent Director
Kok-Choo Chen
Independent Director
Michael R. SplinterIndependent Director
Moshe N. Gavrielov
Independent Director
Yancey Hai
Independent Director
L. Rafael Reif
Independent Director

Number of Other
Taiwanese PublicCompanies Concurrently
Serving as an Independent
Director
00None of the Directors has been in or is under any
circumstances stated in Article 30 of the Company
Law. (Note 1)00
All of the following situations apply to each and every of the Independent Directors:
1. Satisfy the requirements of Article 14-2 of “Securities and Exchange Act” and“Regulations Governing Appointment of Independent Directors and Compliance
Matters for Public Companies” (Note 2) issued by Taiwan’s Securities and Futures
Bureau2. Independent Director (or nominee arrangement) as well as his/her spouse and minor
children do not hold any TSMC common shares
3. Received no compensation or benefits for providing commercial, legal, financial,accounting services or consultation to the Company or to any its affiliates within
the preceding two years, and the service provided is either an “audit service” or a“non-audit service”

0
0
0
0
1
0

Note 1: A person shall not act in a management capacity for a company, and if so appointed, must be immediately discharged if they have been:
1. C onvicted for a violation of the Statutes for the Prevention of Organizational Crimes and: has not started serving the sentence; has not completed serving the sentence; or five years have not elapsed sincecompletion of serving the sentence, expiration of probation, or pardon;
2. C onvicted for fraud, breach of trust or misappropriation, with imprisonment for a term of more than one year, and: has not started serving the sentence; has not completed serving the sentence; or two years
have not elapsed since completion of serving the sentence, expiration of probation, or pardon;
3. C onvicted for violation of the Anti-Corruption Act, and: has not started serving the sentence; has not completed serving the sentence; or two years have not elapsed since completion of serving the sentence,
expiration of probation, or pardon;
4. A djudicated bankrupt or adjudicated to commence a liquidation process by a court, and having not been reinstated to his or her rights and privileges;
5. S anctioned for unlawful use of credit instruments, and the term of such sanction has not expired yet;
6. if she/he does not have any or limited legal capacity; or
7. if she/he has been adjudicated to require legal guardianship and such requirement has not been revoked yet.
Note 2: 1. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.
2. Not serving concurrently as an independent director on more than three other Taiwanese public companies in total.
3. During the two years before being elected and during the term of office, meet any of the following situations:(1) Not an employee of the company or any of its affiliates;(2) Not a director or supervisor of the company or any of its affiliates;(3) N ot a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of one percent
or more of the total number of issued shares of the company or ranks as one of its top ten shareholders;(4) N ot a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the officer in the preceding (1) subparagraph, or of any of the above persons in thepreceding subparagraphs (2) and (3);(5) N ot a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the company, ranks as of its top five
shareholders, or has representative director(s) serving on the company’s board based on Article 27 of the Company Law;(6) N ot a director, supervisor, or employee of a company of which the majority of board seats or voting shares is controlled by a company that also controls the same of the company;(7) N ot a director, supervisor, or employee of a company of which the chairman or CEO (or equivalent) themselves or their spouse also serve as the company’s chairman or CEO (or equivalent);(8) N ot a director, supervisor, officer, or shareholder holding five percent or more of the shares of a specified company or institution that has a financial or business relationship with the company; and(9) O ther than serving as a compensation committee member of the company, not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership,company, or institution that, provides commercial, legal, financial, accounting services or consultation to the company or to any affiliate of the company, or a spouse thereof, and the service provided isan “audit service” or a “non-audit service which total compensation within the recent two years exceeds NT$500,000”.

045

Board Diversity and Independence
TSMC establishes the “Guidelines for Nomination of Directors” that set out the procedures and criteria for the nomination,
qualification and evaluation of candidates for Directors. The members of TSMC Board of Directors are nominated via rigorous
selection processes. It not only considers background diversity, professional competence and experience, but also attaches great
importance to his/her personal reputation on ethics and leadership. The Company aims to have at least of 50% independent
directors and at least one female director to serve on the Board. Presently, the ten members of the Board of Directors represent
diversified perspectives, including a complementary mix of skills, experiences, and backgrounds such as that from the industry,
academia, and in law. These professionals, including a female board member, are citizens from Taiwan, Europe and the U.S. withworld-class business operating experiences. The six Independent Directors constitute 60% of the Board, and there is no maritalor is within the second degree of kinship relationship between or among the Directors. As such, the Board of Directors carries
independence. The following table demonstrates the implementation of the diversity policy for Board members:
Implementation of the Diversity Policy for Board Members
Title

Chairman

Vice
Chairman

NameMark Liu

C.C. Wei

GenderMale

Male

Nationality

U.S.

R.O.C.

Age

66-70

66-70

76-80

Employed by TSMC

Director
F.C. Tseng

Independent Director

Ming-Hsin
Kung

Sir Peter L.
Bonfield

Kok-ChooChen

Michael R.
SplinterMoshe N.
Gavrielov

Yancey Hai

L. Rafael Reif

Male

Male

Male

FemaleMale

R.O.C.

R.O.C.

UK

R.O.C.

U.S.

Male

Male

Male

U.S.

R.O.C./U.S.

U.S.

56-60

76-80

71-75

71-75

66-70

71-75

71-75

V

V

V

V

V

V

V

V

Professional Knowledge and Expertise
Business

V

V

V

Technology

V

V

V

Finance/Accounting

V

V
V

V

V

Legal
Sales and MarketingV

3.2.1 Audit Committee
The Audit Committee assists the Board in fulfilling its oversight of the quality and integrity of the accounting, auditing, reporting,and financial control practices, as well as risk management of the Company.
The Audit Committee is responsible to review the following major matters:● Financial reports;● Auditing and accounting policies and procedures;● Internal control systems and related policies and procedures;● Material asset or derivatives transactions;● Material lending funds, endorsements or guarantees;● Offering or issuance of any equity-type securities;● Derivatives and cash investments;● Legal compliance;● Related-party transactions and potential conflicts of interests involving executive officers and directors;● Ombudsman reports;● Fraud prevention and investigation reports;● Corporate information security;● Corporate risk management;● Performance, independence, qualification of independent auditor;● Hiring or dismissal of an attesting CPA, or the compensation given thereto;● Appointment or discharge of financial, accounting, or internal auditing officers;● Assessment of Committee Charter and fulfillment of Audit Committee duties;● Self-assessment of the Committee’s performance; and● Any other matters that shall be reviewed by the Audit Committee Meeting as required by relevant laws and regulations or the
Audit Committee Charter, or that are deemed to be material by the regulatory authorities.

V
V

V

V

V

Cybersecurity

V

V

V

V

V

OthersInnovation/
R&D/
Education/
Training

Skills and Experience
Leadership Skill

V

V

V

V

V

V

V

V

V

V

Strategic Decision-making

V

V

V

V

V

V

V

V

V

V

Global Market Perspective

V

V

V

V

V

V

V

V

Industry Experience

V

V

V

V

V

Financial

V

V

V

V

V

V

V

Operating andManufacturing

V

V

V

V

V

V

V

Business Development

V

V

V

V

V

V

V

V

Risk/Crisis Management

V

V

V

V

V

V

V

V

V

V

Environmental Sustainability

V

V

V

V

V

V

V

V

V

V

Social Engagement

V

V

V

V

V

V

V

V

V

V

V
V

V

V
V

Under R.O.C. law, the membership of Audit Committee shall consist of all independent directors. TSMC’s Audit Committee
satisfies this statutory requirement. The Committee also engaged a financial expert consultant in accordance with the rules of
the U.S. Securities and Exchange Commission. The Audit Committee annually conducts self-evaluation to assess the Committee’s
performance and identify areas for further attention.
TSMC’s Audit Committee is empowered by its Charter to conduct any study or investigation it deems appropriate to fulfill its
responsibilities. It has direct access to TSMC’s internal auditors, the Company’s independent auditors, and all employees of theCompany. The Committee is authorized to retain and oversee special legal, accounting, or other consultants as it deems appropriate
to fulfill its mandate.
3.2.2 Compensation Committee
The Compensation Committee assists the Board in discharging its responsibilities related to TSMC’s compensation and benefits
policies, plans and programs, and in the evaluation and compensation of TSMC’s directors of the Board and executives.
The members of the Compensation Committee are appointed by the Board as required by R.O.C. law. According to its charter, thecommittee shall consist of no fewer than three independent directors of the Board, whereas the actual committee is comprised ofall six independent directors. The Chairman of the Board and the Chief Executive Officer are invited by the committee to attend all
meetings and are excused from the committee’s discussion of their own compensation.
TSMC’s Compensation Committee is authorized by its charter to retain an independent consultant to assist in the evaluation ofCEO’s or executive officer’s compensation.

046

047

Information Regarding Compensation Committee Members
Criteria
Name/Title
Michael R. Splinter (Chair)
Independent Director
Sir Peter L. Bonfield
Independent Director

Professional Qualification and Experience

TSMC’s Compensation Committee is comprisedof all six independent directors. For members
professional qualification and experience, pleaserefer to “2.4.1 Information Regarding Board
Members” on page 24-29 of this Annual Report.

Kok-Choo Chen
Independent Director
Moshe N. Gavrielov
Independent Director
Yancey Hai
Independent Director

Independent Directors’ Independence Status

All the Compensation Committee members meet any of the following situations:
1. Satisfy the requirements of Article 14-6 of “Securities and Exchange Act” andthe requirements of “Regulations Governing the Appointment and Exercise ofPowers by the Compensation Committee of a Company Whose Stock is Listed on
the Taiwan Stock Exchange or the Taipei Exchange” (Note) issued by Taiwan’s
Securities and Futures Bureau
2. Independent Director (or nominee arrangement) as well as his/her spouse andminor children do not hold any TSMC common shares
3. Received no compensation or benefits for providing commercial, legal, financial,accounting services or consultation to the Company or to any its affiliates within
the preceding two years, and the service provided is either an “audit service” ora “non-audit service”

L. Rafael Reif
Independent Director

Number of Other
Taiwanese PublicCompanies Concurrently
Serving as a Compensation
Committee Member
0
0

Title

0
1
0

3.2.3 Corporate Governance Officer
The Board of Directors appointed Ms. Sylvia Fang, the Vice President of Legal and General Counsel of TSMC, as the Corporate
Governance Officer responsible for corporate governance matters, including handling of matters relating to Board, Audit
Committee, Compensation Committee and Shareholders’ meetings in compliance with law, assistance in onboarding andcontinuing education of directors, provision of information required for performance of duties by directors, and assistance indirectors’ compliance of law, etc.
For details on performance of duties by the Corporate Governance Officer, please refer to “3. Corporate Governance” on page
40-66 of this Annual Report.
3.2.4 Director and Committees Members’ AttendanceEach Director is expected to attend every Board meeting and the committees meeting on which he or she serves. In 2022,
the average Board Meeting attendance rate was 100% and the attendance rate for the Audit Committee and Compensation
Committee’s Meetings were 93% and 97% respectively.

Attendance in
PersonName

By ProxyAttendance Rate
in Person (%)

Notes

ChairmanMark Liu

5

0

100%

None

Vice Chairman

C.C. Wei

5

0

100%

None

Director

Ming-Hsin Kung
(Representative of National Development Fund, Executive
Yuan)

5

0

100%

None

0

Note: During the two years before being elected and during the term of office, meet any of the following situations:(1) N ot an employee of the company or any of its affiliates;(2) N ot a director or supervisor of the company or any of its affiliates;(3) N ot a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of one percent ormore of the total number of issued shares of the company or ranks as one of its top ten shareholders;(4) N ot a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the officer in the preceding (1) subparagraph, or of any of the above persons in thepreceding subparagraphs (2) and (3);(5) N ot a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the company, ranks as of its top five shareholders,or has representative director(s) serving on the company’s board based on Article 27 of the Company Law;(6) N ot a director, supervisor, or employee of a company of which the majority of board seats or voting shares is controlled by a company that also controls the same of the company;(7) N ot a director, supervisor, or employee of a company of which the chairman or CEO (or equivalent) themselves or their spouse also serve as the company’s chairman or CEO (or equivalent);(8) N ot a director, supervisor, officer, or shareholder holding five percent or more of the shares of a specified company or institution that has a financial or business relationship with the company; and(9) O ther than serving as a compensation committee member of the company, not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership,company, or institution that, provides commercial, legal, financial, accounting services or consultation to the company or to any affiliate of the company, or a spouse thereof, and the service provided is an“audit service” or a “non-audit service which total compensation within the recent two years exceeds NT$500,000”.

048

Board of Directors Meeting Status
Tenures of the Board of Directors members are from July 26, 2021 to July 25, 2024. Dr. Mark Liu, TSMC’s Chairman of the Board of
Directors convened four regular meetings and one special meeting in 2022. The directors’ attendance status is as follows.

Director

F.C. Tseng

5

0

100%

None

Independent Director

Sir Peter L. Bonfield

5

0

100%

None

Independent Director

Kok-Choo Chen

5

0

100%

None

Independent Director

Michael R. Splinter

5

0

100%

None

Independent Director

Moshe N. Gavrielov

5

0

100%

None

Independent Director

Yancey Hai

5

0

100%

None

Independent Director

L. Rafael Reif

5

0

100%

None

Annotations:A. (1) M
 atters listed in the Securities and Exchange Act §14-3: The Securities and Exchange Act §14-3 is not be applicable because the Company has established the Audit Committee. For relevant information,please refer to the “Audit Committee Meeting Status” in this Annual Report.
(2) T here were no other written or otherwise recorded resolutions on which an independent director had an objection or reservation.
B. Recusals of Directors due to conflicts of interests: Directors recused themselves from the discussion and voting of their compensation resolution.
C. Measures taken to strengthen the functionality of the Board:- TSMC’s Directors are composed of diverse backgrounds, including professional backgrounds in different industries, academic and legal, etc.; nationalities in different countries in Taiwan, Europe and the U.S.;
world-class business operating experience; and one Director is female. Our Board has six independent directors who constitute 60% of the Board.
- The Chairman of the Board of Directors is not executive officer of the Company.
- TSMC established “Guidelines for Nomination of Directors”, which describes the procedures and criteria for the nomination, qualification and evaluation of candidates for Directors.

Audit Committee Meeting Status
Tenures of the Audit Committee members are from July 26, 2021 to July 25, 2024. Sir Peter L. Bonfield, Chairman of the Audit
Committee, convened four regular meetings in 2022. In addition to these meetings, he also convened one special meeting andthree telephone conferences to discuss the Company’s Annual Report to be filed with the Taiwan and U.S. authorities and investor
conference materials with management. The Committee members and consultant’s attendance status is as follows.
Title

Name

Attendance in
PersonBy ProxyAttendance Rate in
Person (%)

Telephone
Conferences

Attendance Rateof Telephone
Conferences (%)

Notes

Chair

Sir Peter L. Bonfield

5

0

100%

3

100%

None

Member

Kok-Choo Chen

5

0

100%

3

100%

None

MemberMichael R. Splinter

5

0

100%

2

67%

None

MemberMoshe N. Gavrielov

5

0

100%

3

100%

None

MemberYancey Hai

5

0

100%

3

100%

None

Member

L. Rafael Reif

3

2

60%

2

67%

None

Financial Expert
Consultant

Jan C. Lobbezoo

5

0

100%

3

100%

None
(Continued)049

Annotations:A. (1) Resolutions related to Securities and Exchange Act §14-5:

Audit Committee Meeting
Date

Resolution

2022 1st Regular Meeting●February 14

2021 annual financial statements
2021 business report
2021 fourth quarter earnings distribution
Amendments to TSMC’s “Procedures for Acquisition or Disposal of Assets”
Issuance of total 1,387,000 shares of 2021 employee restricted stock awards
Issuance of 2022 employee restricted stock awards
Ratification of the comfort letter service already provided for the 3.5 billion U.S. bond issuance by Deloitte
Additional 2022 service fees to Deloitte for TSMC Japan 3DIC R&D Center
2021 Statement of Internal Control System

Compensation Committee Meeting Status
Tenures of the Compensation Committee members are from July 26, 2021 to July 25, 2024. Mr. Michael R. Splinter, Chairman of
the Compensation Committee, convened four regular meetings and one special meeting in 2022. Committee member attendance is
as follows.

●

●

Title

Name

Attendance in Person

By ProxyAttendance Rate in Person (%)

Notes

●

●

●

●

●

Chair

Michael R. Splinter

5

0

100%

None

MemberSir Peter L. Bonfield

5

0

100%

None

Member

Kok-Choo Chen

5

0

100%

None

MemberMoshe N. Gavrielov

5

0

100%

None

●

2022 1st Special Meeting
April 122022 2nd Regular Meeting
May 9

Amendments to the issuance of 2022 employee restricted stock awards●2022 first quarter financial statements
2022 first quarter business report
2022 first quarter earnings distribution
Amendments to TSMC’s internal control related policies and procedures

●

●

●

●

2022 3rd Regular Meeting
August 82022 second quarter financial statements
2022 second quarter business report
2022 second quarter earnings distribution
Ratification of TSMC’s security investments classified as non-current assets
Ratification of additional 2022 service fees and out-of-pocket expenses to Deloitte for Global Employee Stock Purchase Plan and TSMC Nanjing
The comfort letter service, and the additional service & service fee for the review of IFRS interim financial statements by Deloitte for the planned U.S. bond issuance

●

●

●

●

●

●

2022 4th Regular Meeting

November 72022 third quarter financial statements
2022 third quarter business report
2022 third quarter earnings distribution
Mr. Jimmy Wu as the new engagement partner of Deloitte for TSMC starting from 2023, and 2023 service fees and out-of-pocket expenses for Deloitte

●

●

●

●

Independent directors’ objections, reservations or major suggestions: None.
Resolution of the Audit Committee and the Company’s response to the Audit Committee’s Opinion: The members of the Audit Committee unanimously approved all the resolutions, and the Board of Directors
approved all such resolutions recommended by the Audit Committee.
(2) T here were no other resolutions which was not approved by the Audit Committee but was approved by two thirds or more of all directors in 2022.
B. There were no recusals of independent directors due to conflicts of interests in 2022.
C. Descriptions of the communications between the independent directors, the internal auditors, and the independent auditors in 2022 (which should include the material items, channels, and results of the audits
on the corporate finance and/or operations, etc.):(1) T he internal auditors have sent the audit reports to the members of the Audit Committee periodically and presented the findings of all audit reports in the quarterly meetings of the Audit Committee.
The head of Internal Audit will immediately report to the members of the Audit Committee any material matters. During 2022, the head of Internal Audit did not report any such material matters. The
communication channel between the Audit Committee and the internal auditor functioned well.
(2) T he Company’s independent auditors have presented the findings of their quarterly review or audits on the Company’s financial results. Under applicable laws and regulations, the independent auditors arealso required to immediately communicate to the Audit Committee any material matters that they have discovered. During 2022, the Company’s independent auditors did not report any irregularity. The
communication channel between the Audit Committee and the independent auditors functioned well.
The communications between the independent directors, the internal auditors, and the independent auditors are listed in the table below.

Audit Committee MeetingDate2022 1st Regular Meeting
February 14

Communications between the Independent Directors andthe Internal Auditors
Internal Auditor’s report (Closed Door Session)
Report on SOX 404 self-testing results for the year 2021 (Closed
Door Session)
2021 Statement of Internal Control System (Closed Door Session)

2022 3rd Regular Meeting
August 82022 4th Regular Meeting
November 7External auditor relationship (i.e. qualification, performance and independence)
Report of regulatory developments
Any audit problems or difficulties and management’s response in connection with 2021
annual financial statements (Closed Door Session)

●

●

●

●

●

2022 2nd Regular Meeting
May 9

Communications between the Independent Directors and the Independent
Auditors

Internal Auditor’s report (Closed Door Session)
Amendments to TSMC’s internal control related policies andprocedures (Closed Door Session)●The result of 2021 CPA evaluation questionnaire
Report of regulatory developments
Any review problems or difficulties and management’s response in connection with 2022
first quarter financial statements (Closed Door Session)

●

●

●

●

Internal Auditor’s report (Closed Door Session)●●

Report of regulatory developments
Any review problems or difficulties and management’s response in connection with 2022
second quarter financial statements (Closed Door Session)●●Internal Auditor’s report (Closed Door Session)
2023 internal audit plan (Closed Door Session)

Report of regulatory developments
Any review problems or difficulties and management’s response in connection with 2022
third quarter financial statements (Closed Door Session)

●

●

●

●

Result: all of the above matters were reviewed and/or approved by the Audit Committee whereupon independent directors raised no objection.

050

MemberYancey Hai

5

0

100%

None

Member

L. Rafael Reif

4

1

80%

None

Annotations:
A. In 2022, the Compensation Committee conducted four regular meetings on February 14, May 9, August 8 as well as November 7. The Committee also conducted one special meeting on April 12. The discussion
items were as follows:- Report on matters related to employee compensation- Total amount of quarterly business performance bonus- Total amount of annual profit sharing- The amount of quarterly business performance bonus for executive officers, CEO and Chairman- The annual compensation of directors and executive officers, and the disclosure of same in the Annual Report- Grant of Employee restricted stock awards for 2021
- Employee restricted stock awards rules for 2022
- Global Employee Stock Purchase Plan
- Organization and Succession Discussion
All of the above matters were reviewed and/or approved by the Compensation Committee.
B. The Board of Directors adopted all recommendations of the Compensation Committee without modification.
C. There were no written or otherwise recorded resolutions on which any member of the Compensation Committee had an objection or reservation opinion.

Board of Directors’ Performance Evaluation Implementation Status
Evaluation Cycle

Evaluation Period

AnnualFrom January 1, 2022 to December
31, 2022

Evaluation Scope
The Board of Directors as awhole
The individual directors
The Audit Committee

Evaluation Method

Evaluation Aspect

Internal assessment of the
Board
Self-assessments by eachboard member

The Board of Directors are assessed on the following five aspects:
1. Involvement in the Company’s operation
2. Enhancement of the quality of the board’s decision-making
3. Makeup and structure of the board
4. Election of board members and continuing knowledge
development
5. Internal controls

●

●

●

●

●

The individual directors are assessed on the following six aspects:
1. Understanding of the Company’s goals and mission
2. Awareness of director’s duties
3. Involvement in the Company’s operations
4. Internal relationship and communication
5. Director’s professionalism and continuing knowledge
development
6. Internal controls
The Audit Committee is assessed on the following five aspects:
1. Involvement in the Company’s operation
2. Awareness of the audit committee’s duties
3. Enhancement of the quality of the audit committee’s decisionmaking
4. Makeup of the audit committee and election of its members
5. Internal controls

The Company completed self-assessments of Board performance in 2022 and reported the results to the Board of Directors at its
first quarter meeting in 2023 for review and improvement. The weighted average score for the overall performance of the Boardof Directors is 4.76 out of 5, that included an average score of 4.9 on a particular assessment item “The board has sufficient
discussions over the Company’s involvement in the implementation of ESG programs”. The weighted average score for the
performance of the individual directors is 4.9 out of 5. As demonstrated, the overall board’s operation has been effective. Membersof the Audit Committee’s self-assessment results also 100% satisfied with the evaluation criteria.

051

3.3 M ajor Decisions of Shareholders’ Meeting and Board Meetings
3.3.1 M ajor Resolutions of Shareholders’ Meeting and Implementation Status
TSMC held 2022 Annual Shareholders’ Meeting in Hsinchu, Taiwan on June 8, 2022. At the meeting, shareholders present inperson or by proxy approved the following resolutions:(1) T he 2021 Business Report and Financial Statements. Consolidated revenue totaled NT$1,587.42 billion and net income was
NT$596.54 billion, with diluted earnings per share of NT$23.01;(2) T he revisions to TSMC’s Articles of Incorporation; and(3) T he issuance of employee restricted stock awards for year 2022.
Implementation Status
All the resolutions of the Shareholders’ Meeting have been fully implemented in accordance with the resolutions.
3.3.2 M ajor Resolutions of Board Meetings
During 2022 and as of the date of this Annual Report, major resolutions approved at Board meetings are summarized below:(1) B oard Meeting of February 14 & 15, 2022:● approving the 2021 Business Report and Financial Statements;● approving the distribution of a NT$2.75 per share cash dividend for the fourth quarter of 2021, and setting June 22, 2022 as
the record date for common stock shareholders entitled to participate in this cash dividend distribution;● approving distribution of employees’ business performance bonus and profit sharing for 2021;● approving capital appropriations of approximately US$20,944.17 million for purposes including: 1. Installation and upgradeof advanced technology capacity; 2. Installation of mature and specialty technology capacity; 3. Installation of advanced
packaging capacity; 4. Fab construction, and installation of fab facility systems; 5. Second quarter through fourth quarter 2022
R&D capital investments and sustaining capital expenditures;● approving the issuance of unsecured corporate bonds in the domestic market for an amount not to exceed NT$60 billion, andthe issuance of US dollar-denominated unsecured corporate bonds in Taiwan’s International Bond Market for an amount not
to exceed US$1 billion, to finance TSMC’s capacity expansion and/or pollution prevention related expenditures;● approving the issuance of 1,387,000 shares of 2021 employee restricted stock awards (RSAs). In order to offset dilution fromthe increase of outstanding shares due to the above-mentioned issuance, the board approved a share buyback program for
TSMC to buy back its common shares on the Taiwan Stock Exchange. In addition, approving the issuance of no more than
2,960,000 common shares of RSAs for the year 2022, which will be submitted to the 2022 Annual Shareholders’ Meeting for
approval; and● convening the 2022 Annual Shareholders’ Meeting.
(2) R egular Board Meeting of May 9 & 10, 2022:● approving the distribution of a NT$2.75 per share cash dividend for the first quarter of 2022, and setting September 21, 2022
as the record date for common stock shareholders entitled to participate in this cash dividend distribution;● approving capital appropriations of approximately US$16,757.67 million for purposes including: 1. Installation and upgradeof advanced technology capacity; 2. Installation of mature and specialty technology capacity; 3.Installation and upgrade ofadvanced packaging capacity; 4.capitalized leased assets; and● approving the Global Employee Stock Purchase Plan which applies to all regular employees of TSMC and its wholly owned
subsidiaries.
(3) R egular Board Meeting of August 8 & 9, 2022:● approving the distribution of a NT$2.75 per share cash dividend for the second quarter of 2022, and setting December 21,
2022 as the record date for common stock shareholders entitled to participate in this cash dividend distribution;● approving capital appropriations of approximately US$9,234.73 million for purposes including: 1. Installation and expansion ofadvanced technology capacity; 2. Installation of mature and specialty technology capacity; and● approving the provision of a guarantee to TSMC Arizona, a wholly-owned subsidiary of TSMC, for its issuance of US
dollar-denominated senior unsecured corporate bonds for an amount not to exceed US$4 billion, to finance TSMC’s capacity
expansion.

052

(4) R
 egular Board Meeting of November 7 & 8, 2022:● approving the distribution of a NT$2.75 per share cash dividend for the third quarter of 2022, and setting March 22, 2023 as
the record date for common stock shareholders entitled to participate in this cash dividend distribution; and● approving capital appropriations of approximately US$5,717.19 million for purposes including: 1. Installation and upgradeof advanced technology capacity; 2. Installation of specialty technology capacity; 3. Fab construction, and installation of fab
facility systems; 4. 2023 R&D capital investments and sustaining capital expenditures; 5. 2023 capitalized leased assets.
(5) Regular Board Meeting of February 13 & 14, 2023:● approving the 2022 Business Report and Financial Statements;● approving the distribution of a NT$2.75 per share cash dividend for the fourth quarter of 2022, and setting June 21, 2023 as
the record date for common stock shareholders entitled to participate in this cash dividend distribution;● approving distribution of employees’ business performance bonus and profit sharing for 2022;● approving capital appropriations of approximately US$6,959.5 million for purposes including: 1. Installation and upgradeof advanced technology capacity; 2. Installation of specialty technology capacity; 3. Fab construction, and installation of fab
facility systems;● approving the capital injection of not more than US$3.5 billion to TSMC Arizona, a wholly-owned subsidiary of TSMC;● approving the issuance of unsecured corporate bonds in the domestic market for an amount not to exceed NT$60 billion tofinance TSMC’s capacity expansion and/or pollution prevention related expenditures;● approving the issuance of 2,110,000 shares of 2022 employee restricted stock awards (RSAs). In addition, approving theissuance of no more than 6,249,000 common shares of RSAs for the year 2023, which will be submitted to the 2023 Annual
Shareholders’ Meeting for approval; and● convening the 2023 Annual Shareholders’ Meeting.
3.3.3 M ajor Issues of Record or Written Statements Made by Any Director Dissenting to Important Resolutions Passedby the Board of Directors in 2022 and as of the Date of this Annual Report: None.

3.4 T
 aiwan Corporate Governance Implementation as Required by Taiwan Financial Supervisory
Commission
Assessment Item

Implementation Status
Yes

1. Does Company follow “Taiwan Corporate Governance Implementation” toestablish and disclose its corporate governance practices?

2. Shareholding Structure & Shareholders’ Rights(1) Does Company have Internal Operation Procedures for handlingshareholders’ suggestions, concerns, disputes and litigation matters. Ifyes, has these procedures been implemented accordingly?

No

Explanation

V

TSMC has always followed excellent corporate governance practices, provided
the utmost in operational transparency and safeguarded shareholders’ equity.
Although the Company does not have a formal code of practice for corporate
governance, however TSMC has always been highly regarded as an industry leader
in implementing comprehensive corporate governance practices. In addition,
the Company also has a world-class Board of Directors. The Company believes
that corporate governance is based on integrity, professional management andimplementation. TSMC has been proving its excellent corporate governance inits operating performance and continued winning of domestic and international
awards on best corporate governance company.

V(1) TSMC has designated appropriate departments, such as Investor Relations
Division, Public Relations Division, Shareholders Services & SEC ComplianceDepartment, Legal, etc., to handle shareholder suggestions, concerns, disputes
or litigation matters.

(2) D oes Company possess a list of major shareholders and beneficial ownersof these major shareholders?

V(2) TSMC tracks the shareholdings of directors, officers, and top ten shareholders.

(3) H as the Company built and executed a risk management system and“firewall” between the Company and its affiliates?

V(3) TSMC has set up internal rules in the Company’s Internal Control System and
Affiliated Corporations Management.

(4) H as the Company established internal rules prohibiting insider trading on
undisclosed information?

V(4) TSMC has established its “Insider Trading Policy” that applies to all employees,
officers and members of the Board of Directors of the Company and to any
other person having a duty of trust or confidence, with respect to transactionsin the Company’s securities. This policy prohibits any insider trading and theCompany regularly provides internal training on this issue.

Nonimplementation
and Its Reason(s)Same as explanation

None(Continued)053

Assessment Item
3. Composition and Responsibilities of the Board of Directors(1) Has the Board of Directors established a diversity policy, set goals, andimplemented them accordingly?

Implementation Status
Yes

No

Explanation

V(1) Please refer to “3.2 Board of Directors – Board Diversity and Independence” onpage 46 of this Annual Report.

(2) Other than the Compensation Committee and the Audit Committee
which are required by law, does the Company plan to set up other Board
committees?

V(2) Audit Committee (founded in 2002); Compensation Committee (foundedin 2003); Nominating, Corporate Governance and Sustainability Committee(founded in 2023); ESG Steering Committee (founded in 2019): is formed by
the Company’s management team and chaired by Chairman Mark Liu; ESG
Committee (founded in 2011): is formed by the Company’s executive teamand reports quarterly to the Board of Directors on the implementation of plans
and results.

(3) Has the Company established methodology for evaluating theperformance of its Board of Directors, on an annual basis, reported theresults of performance to the Board of Directors, and use the results as
reference for directors’ remuneration and renewal?

V(3) As TSMC’s corporate governance concept, the Board of Director’s primary
responsibility is to supervise, evaluate the management’s performance anddismiss officers of the Company when necessary, resolve the important,concrete matters and provide guidance to the management team. TSMC’s
Board of Directors consists of distinguished members with a great breadth ofexperience as world-class business leaders or professionals and adhere highethical standards and commitment to the Company. Each quarter’s Board
Meeting is last for two days. Company’s resolutions are determined in board
meeting, also business strategy and future orientation are discussed in themeeting, in order to create best interest for shareholders. Based on TSMC’s
operating performance and local/international awards of best corporate
governance, it certainly proves the Company’s excellent performance of Boardof Directors.

Nonimplementation
and Its Reason(s)None

The Board of Directors are assessed on the following five aspects:
1. Involvement in the Company’s operation
2. Enhancement of the quality of the board’s decision-making
3. Makeup and structure of the board
4. Election of board members and continuing knowledge development
5. Internal controls
The individual directors are assessed on the following six aspects:
1. Understanding of the Company’s goals and mission
2. Awareness of director’s duties
3. Involvement in the Company’s operations
4. Internal relationship and communication
5. Director’s professionalism and continuing knowledge development
6. Internal controls
The Audit Committee is assessed on the following five aspects:
1. Involvement in the Company’s operation
2. Awareness of the audit committee’s duties
3. Enhancement of the quality of the audit committee’s decision-making
4. Makeup of the audit committee and election of its members
5. Internal controls(4) The Audit Committee annually evaluates the independence of external auditors
and reports the same to the Board of Directors. Please refer to “3.9.4 Evaluationof the External Auditor’s Independence and Suitability” on page 66 of thisAnnual Report.

4. Does the Company appoint competent and appropriate corporate
governance personnel and corporate governance officer to be in chargeof corporate governance affairs (including but not limited to furnishing
information required for business execution by directors, assisting directors’
compliance of law, handling matters related to board meetings andshareholders’ meetings according to law, and recording minutes of board
meetings and shareholders’ meetings)?

V

The Board of Directors appointed the Vice President of Legal and General Counselof TSMC as the Corporate Governance Officer. TSMC’s Corporate & Compliance
Legal Division, which directly reports to the General Counsel, is in charge ofassisting in related affairs, including handling of matters relating to Board, Audit
Committee, Compensation Committee and Shareholders’ meetings in compliancewith law, assistance in onboarding and continuing education of directors,
provision of information required for performance of duties by directors, andassistance in directors’ compliance of law, etc.

No

Explanation

Nonimplementation
and Its Reason(s)V

Depending on the situation, the Company’s Investor Relations Division, Public
Relations Division, Shareholders Services & SEC Compliance Department, Human
Resources Organization, Customer Service Department, Procurement Department
and ESG will communicate with stakeholders. We also have publicly disclosed thecontact information of our corporate spokesperson and relevant departments.
Also, we have a stakeholder section on our corporate website to address oursustainability and any other issues. For details, please refer to “7. Environmental,
Social and Governance (ESG)” on page 148-173 of this Annual Report and“Materiality Analysis and Stakeholder Communication” of TSMC’s Sustainability
Report.

None

6. Has the Company appointed a professional registrar for its Shareholders’Meetings?

V

We have appointed China Trust as registrar for our Shareholders’ Meetings.

None

V

(1) TSMC discloses its financials business and corporate governance status on its
website at http://www.tsmc.com (in Chinese and English). TSMC’s American
Depositary Receipt (ADR) is listed on the New York Stock Exchange (NYSE).
As a foreign issuer, TSMC must comply with NYSE’s rules. We have been
operating in accordance with NYSE listing standards, and have been disclosing
the major differences between our corporate governance practices and U.S.
corporate governance practices. Please see https://www.tsmc.com/download/
ir/NYSE_Section_303A.pdf.

(2) Does the Company use other information disclosure channels (e.g.
maintaining an English-language website, designating staff to handle
information collection and disclosure, appointing spokespersons,
webcasting investors conference etc.)?

V(2) TSMC has designated appropriate departments (e.g. the Investor Relations
Division, Public Relations Division, Shareholders Services & SEC ComplianceDepartment, etc.) to handle the collection and disclosure of information as
required by the relevant laws and regulations of Taiwan and other jurisdictions.
TSMC has designated Spokesperson and Deputy Spokesperson as required byrelevant regulations. TSMC provides live audio webcasts and replays of investor
conferences on its website.

(3) Does the Company announce and report the annual financial statements
within two months after the end of the fiscal year, and announce andreport the first, second, and third quarter financial statements as well as
the operating status of each month before the prescribed deadline?

V(3) TSMC follows relevant laws and regulations to announce and report theannual financial statements within two months after the end of the fiscal
year, and announce and report the first, second, and third quarter financial
statements as well as the operating status of each month before theprescribed deadline. Please refer to Market Observation Post System for the
aforementioned disclosure.

8. Has the Company disclosed other information to facilitate a better
understanding of its corporate governance practices (e.g. including but
not limited to employee rights, employee wellness, investor relations,
supplier relations, rights of stakeholders, directors’ training records, theimplementation of risk management policies and risk evaluation measures,the implementation of customer relations policies, and purchasing insurance
for directors)?

V(1) For employee rights and employee wellness, please refer to “5.6 Human
Capital” on page 109-116 of this Annual Report.
(2) For investor relations, supplier relations and rights of stakeholders, please refer
to “7. Environmental, Social and Governance (ESG)” on page 148-173 of thisAnnual Report.
(3) For Directors’ training records, please refer to “Continuing Education/Trainingof Directors in 2022” on page 55-56 of this Annual Report.
(4) For Risk Management Policies and Risk Evaluation, please refer to “6.3 Risk
Management” on page 131-146 of this Annual Report.
(5) For Customer Relations Policies, please refer to “5.4 Customer Trust” on page106-108 of this Annual Report.
(6) TSMC maintains D&O Insurance for its directors and officers.

None

None

9. The improvement status for the result of Corporate Governance Evaluation announced by Taiwan Stock Exchange

The Company completed self-assessments of Board performance in 2022 andreported the results to the Board of Directors at its first quarter meeting in
2023 for review and improvement. The weighted average score for the overall
performance of the Board of Directors is 4.76 out of 5, that included anaverage score of 4.9 on a particular assessment item “The board has sufficient
discussions over the Company’s involvement in the implementation of ESG
programs”. The weighted average score for the performance of the individual
directors is 4.9 out of 5. As demonstrated, the overall board’s operation has
been effective. Members of the Audit Committee’s self-assessment results also
100% satisfied with the evaluation criteria.
V

Implementation StatusYes

5. Has the Company established a means of communicating with its
Stakeholders (including but not limited to shareholders, employees,
customers, suppliers, etc.) or created a Stakeholders Section on its Company
website? Does the Company respond to stakeholders’ questions on
corporate responsibilities?

7. Information Disclosure(1) Has the Company established a corporate website to disclose information
regarding its financials, business and corporate governance status?

Each year, TSMC conducts regular Board performance self-evaluation in formof written questionnaires for the Board, individual directors, and the Audit
Committee.

(4) Does the Company regularly evaluate its external auditors’ independence?

Assessment Item

TSMC was ranked in top 5% in Corporate Governance Evaluation over the years. The improvement status in 2022 is as follows:(1) T he TSMC Board set up the “Audit Committee” and the “Compensation Committee” in 2002 and 2003 respectively. In order to make our corporate governance more comprehensive, the TSMC Board took astep further in February 2023 to expand and strengthen the functions and responsibilities of its committees, including renaming the “Audit Committee” to the “Audit and Risk Committee”, and the renamingthe “Compensation Committee” to the “Compensation and People Development Committee”. It also established a “Nominating, Corporate Governance and Sustainability Committee” of the Board of
Directors.
(2) ESG Quarterly Report: Regularly report to the Board of Directors on a quarterly basis.

Continuing Education/Training of Directors in 2022
The major training methods of Directors include:● At quarterly Board meetings, TSMC management presents updates on the Company’s business, regulatory developments andother information;● The Company arranges speeches on politics, economics, and regulatory compliance, etc.;● At quarterly Audit Committee meetings, TSMC’s General Counsel and the Company’s independent auditors provide regulatory
update reports and legal compliance status; and● Directors participate in externally-provided training courses as needed.
In addition, from time to time, Directors are invited by other parties to give speeches on corporate governance and related topics.

None(Continued)

054

055

Name

Date

Host by

Training/Speech Title

Duration

Mark Liu (Note)

03/16

East Asia Economic Caucus (EAEC)

Global Semiconductor Industry Trends and TSMC’s Development in Japan

0.75 hour

05/19

Taiwan Semiconductor Industry Association (TSIA)

2022 World Semiconductor Council (WSC) Meeting

2 hours

07/13

SEMI

SEMICON West 2022 Hybrid – Global Sustainability Summit

0.25 hour

11/30

The Third Wednesday Club

Opportunities and Challenges for Taiwan Semiconductor Industry

1 hour

F.C. Tseng

04/28

Taiwan Corporate Governance Association

Making Sustainability the New Normal

3 hours

12/13

Taiwan Corporate Governance Association

The Risk and Opportunities of Climate Change

3 hours

Michael R. Splinter

06/13

SolarEdge Technologies

Executive Training – Leadership (Note)

2 hours

06/15

NASDAQ

Regulation and Governance Trends

4 hours

11/02

NASDAQ

Director Knowledge Exchange – Trends in Boardroom (Note)

2 hours

Moshe N. Gavrielov

09/21-23

McKinsey & Company

T-30 Semiconductor Executive/Board Member Event

16 hours

Yancey Hai

02/24

Taiwan Corporate Governance Association

Latest Developments and Legislative Amendment Trends in International andDomestic Tax

3 hours

07/28

Taiwan Corporate Governance Association

Net-zero Emissions, Carbon Neutrality, and Corporate Compliance

3 hours

Note: Selected speeches on corporate governance and related topics.

Continuing Education/Training of Corporate Governance Officer in 2022
Name

Date

Host by

Training/Speech Title

Duration

Vice President andGeneral Counsel
Corporate Governance
Officer
Sylvia Fang

04/22
10/19

Taiwan Corporate Governance Association

Net-zero Emissions, Carbon Neutrality, and Corporate Compliance

3 hours

Taiwan Corporate Governance Association

The 18th Corporate Governance Summit Forum – Boosting Board Directors’Competencies for Effective Sustainable Corporate Governance

6 hours

12/21

Taiwan Corporate Governance Association

Introduction of Hostile Takeovers and Regulation Compliance

3 hours

3.5 Code of Ethics and Business Conduct
Ethics at TSMC
“Integrity” is TSMC’s most important core value. TSMC strictly adheres to the highest standards of integrity and promotes good
ethical behavior to sustain the hard-earned trust and confidence of its shareholders, customers, suppliers, employees and thegeneral public – constantly and vigilantly promoting integrity, fairness, and transparency in all that we say and do. We have zerotolerance for corruption, refrain from bribery, fraud, abuse or embezzlement of corporate assets, and prohibit the advancementof personal interests at the expense of or in conflict with TSMC. At the heart of our corporate governance culture is the “TSMC
Ethics and Business Conduct Policy” (Ethics Code). The Ethics Code requires that each employee bear a heavy personal responsibility
to preserve and to protect TSMC’s ethical values and reputation. At the same time, we have formulated the “TSMC’s Supplier
Code of Conduct” as well to ensure our suppliers understand and follow the Ethics Code and together fulfill our corporate social
responsibilities.
Specifically, every TSMC employee must adhere to the following:● Do not advance personal interests at the expense of or in conflict with the Company;● Refrain from corruption (including collusion with others), bribery, unfair competition, fraud, extortion, embezzlement, and waste
or abuse of corporate assets;● Avoid any improper efforts to influence the decisions of anyone, including government officials, agencies, as well as TSMC’s
customers and suppliers;● Do not undertake any practices detrimental to TSMC, to the environment, or to society;● Procure all of our raw materials from socially responsible sources;● Protect proprietary information of TSMC, our customers and suppliers; and● Abide by the letter of all applicable laws, rules and regulations.

056

The protection of intellectual properties is also an important part of the Ethics Code. In order to build and sustain an environmentof innovation, technology leadership, and sustainable profitable growth, the Ethics Code requires that TSMC promotes business
relationships founded upon an unwavering respect for the intellectual property rights, proprietary information and trade secrets of
TSMC, our customers, and others.
With regarding to public disclosures, TSMC’s officers, especially our CEO, CFO, and General Counsel, with oversight from our Board,
are responsible for the full, fair, accurate, timely, and understandable financial accounting and financial disclosure in reports anddocuments filed by the Company with securities authorities and in all TSMC public communications and disclosures. TSMC has avariety of measures in place to ensure compliance with these disclosure obligations.
Any modification to the Ethics Code requires the approval of our Audit Committee to ensure our ethics compliance program isindependently reviewed against corporate best practices.
Ethics Code Implementation
High Standard of Ethics Culture: Our ethics program is implemented in four ways by all of TSMC’s Board members, officers, andemployees. First, the TSMC management team sets the “tone from top” by acting in accordance with the Ethics Code so that they
will be an example to all stakeholders. Second, working-level managers are responsible for ensuring their staff’s understandingof and compliance with applicable rules and regulations. Third, TSMC encourages an environment of open communications in
discussing any questions related to the Ethics Code. Any employee may consult his or her direct supervisors, Human Resources orLegal to obtain timely advice. Lastly, TSMC requires all employees to stay vigilant and report any noncompliance by anyone to theirsupervisors, the function head of Human Resources, the responsible corporate senior management appointed by CEO that oversees
the Ombudsman system, or to the Chairman of the Company’s Audit Committee directly.
Self-Assessment of All Departments and Employees: Self-assessment of all departments and employees is an important part ofour ethics compliance program. All TSMC departments and subsidiaries are required to conduct Control Self-Assessment (CSA) tests
annually in reviewing employees’ awareness of the Ethics Code, and to evaluate and strengthen the effectiveness of internal control
related to the Ethics Code. The CSA results are reviewed to track the results of our compliance program. In addition, all employees
must disclose any matters that cause, or may cause, actual or potential conflict of interest. In addition to this proactive disclosure
requirement, employees with specific job grades or job responsibilities must annually declare any relationships that may constitute a
conflict of interest, which enables TSMC to take necessary arrangements and report the results to the Audit Committee.
Internal Auditing: The Internal Auditor of TSMC plays a critical role in ensuring the Company’s compliance with the Ethics Codeand relevant rules and regulations. To ensure that our financial, managerial, and operating information is accurate, reliable, andtimely and that our employees’ actions are in compliance with applicable policies, standards, procedures, laws and regulations, ourInternal Auditor conducts audits of various control points within the Company in accordance with its annual audit plan approved by
the Board of Directors and subsequently reports its audit findings and remedial issues to the Board and management on a regularbasis.
Training and Promotion: To promote awareness to our employees of their responsibilities under the Ethics Code, we publish our
Ethics Code and related policies and documents on our intranet and, provide training courses, posters, emails, and other diversified
ways to advocate the Company’s core values and compliance system. In terms of training courses, TSMC not only provides annual
online course on the Ethics Code and requires all employees to complete the training, as well as face-to-face training courses
delving into more specific ethics-related topics for targeted employees. In 2022, there were 67,922 attendances that completed
the“Annual Ethics and Compliance Training Course” (mandatory 0.5 hour online course) at TSMC and its subsidiaries, reaching
99.9% completion rate.

057

In addition to our internal compliance efforts, we expect and assist our business partners such as customers and suppliers, and anyother entities with whom we deal (include consultants or third party agents who act for or on behalf of TSMC) to recognize andunderstand TSMC’s ethical standards to fulfill our responsibilities as a corporate citizen. For instance, we require all of our suppliers
to declare in writing that they will respect and comply with TSMC’s ethical standards and culture. TSMC is a full member of the
Responsible Business Alliance (RBA, formerly the (Electronic Industry Citizenship Coalition, EICC)), dedicated to global supply chain
sustainability. In addition to adopting the RBA Code of Conduct at all of its facilities, TSMC applied the RBA’s standards to enhance
our audit program of our suppliers and relevant business partners. We provide training and communicate our ethical culture to our
suppliers through live seminars and online programs to prevent any unethical conduct and detect any sign of Ethics Code violations.
In 2022, we held a sustainable supply chain ESH forum to share/exchange practical experiences on topics such as the Ethics Code,environmental protection, and occupational safety. We also exchange views on appropriate business conduct and TSMC’s ethicalstandards and implementation status with our customers as part of customer audit programs.
Reporting Channels and Whistleblower Protection
TSMC has established and published its “Complaint Policy and Procedure for Certain Accounting & Legal Matters” and pledges
to comply with the relevant regulations in the policy. Open and multiple reporting channels are available for internal and external
voices to protect the rights and interests of stakeholders and the Company. All reported incidents collected from reporting channels
inside or outside of TSMC are properly recorded and traced. TSMC also prohibits any form of retaliation by providing proper
protection for any individual who in good faith reports a suspected violation or participates in an investigation. In 2022, the Ethics
Committee held a total six meetings to examine major reported incidents under investigation.

Ethics Code Violation Disciplinary Action
We do not tolerate any violation of the Ethics Code and treat every possible violation incident seriously. Each violator of the
Ethics Code (or relevant regulations) will be severely disciplined to the full extent of our policies and the law, up to and including
immediate dismissal, termination of business relationship, and judicial prosecution as appropriate.
3.5.1 T aiwan Corporate Conduct and Ethics Implementation as Required by the Taiwan Financial Supervisory
Commission
Assessment Item
1. Establishment of Corporate Conduct and Ethics Policy and Implementation
Measures(1) D oes the company have a clear ethical corporate management policy
approved by its Board of Directors, and bylaws and publicly available
documents addressing its corporate conduct and ethics policy andmeasures, and commitment regarding implementation of such policy
from the Board of Directors and the top management team?

(2) W hether the company has established an assessment mechanism forthe risk of unethical conduct; regularly analyzes and evaluates within abusiness context, the business activities with a higher risk of unethicalconduct; has formulated a program to prevent unethical conduct witha scope no less than the activities prescribed in paragraph 2, Article 7of the Ethical Corporate Management Best Practice Principles for TWSE/
GTSM Listed Companies?

Implementation Status
Yes

In 2022, the incidents reported through the Audit Committee Whistleblower System, Ombudsman System, and Irregular BusinessConduct Reporting System totaled 335. Among them, 217 cases were related to people management/employee relations, 107 cases
were categorized as others (e.g., asking personal questions or private matters), and 11 cases were related to ethics. Four incidents
were verified upon investigation and determined for disciplinary action by the Ethics Committee. In 2022, TSMC leveraged the four
violations to strengthen ethics promotion for all employees in supplier-related activities. Below is a summary of reported incidents.
Year

FY2018FY2019FY2020

FY2021

FY2022

Total reported cases
Ethics-related cases
Cases investigated and verified as ethics violations

150
14
1

205
26
2

246
22
6

327
17
4

335
11
4 (Note 1)

Sexual Harassment Investigation Committees Formed
Cases investigated and verified as violations

3
3

4
4

4
2

14
11

19
14 (Note 2)

Note 1: O f the four verified cases: One incident involved employees who failed to notice the price listed on order was different from the Company’s quotation and one employee received major demerit and one
employee received warning. One incident involved employees who approached vendors for business without authorization in pursuit of personal interest. The Company took progressive disciplinary actions
according to the nature and severity of each misconduct, including dismissal for one employee. One incident involved an employee who engaged in inappropriate interactions and received a probation. One
incident involved an employee who asked vendor to provide services for personal benefit and received warning.
Note 2: E mployees who violated Company sexual prevention policy (the “Policy”) were disciplined by the Company based on the case-by-case nature and severity of the verified misbehaviors. Since these violations
involved various inappropriate behaviors, the Company leveraged the violations and summarized the Policy to educate employees what kinds of behaviors could be viewed as sexual harassment and theconsequences in 2022 TMSC annual sexual harassment prevention training so as to raise employees’ awareness.

058

Summary

Causes for the
Difference
NoneV(1) Integrity is the most important core value of TSMC’s culture. TSMC is committed
to acting ethically in all aspects of our business. We have established TSMC Codeof Ethics and Business Conduct (the “Ethics Code”) to require that each employee
bears a heavy personal responsibility to uphold TSMC’s ethics value. For moredetails on the Ethics Code and the measures that TSMC Board of Directors (the“Board”) and the management team take to ensure compliance of the Ethics Codeplease refer to TSMC’s Annual Report and the Sustainability Report.

V

(2) A
 t the heart of our corporate governance culture is the Ethics Code that applies
to TSMC and its subsidiaries, and this Ethics Code requires that each employee
bears a heavy personal responsibility to preserve and to protect TSMC’s ethicalvalues and reputation and to comply with various applicable laws and regulations.
Specific requirements under the Ethics Code could be found in our Annual Report.
In addition, to educate and remind our employees of their responsibilities under
the Ethics Code, we publish our Ethics Code, relevant policies and documents on
our intranet and promote its awareness through training courses, posters, emails,
and other diversified ways to advocate the company’s core values and compliance.
Furthermore, to ensure that our conduct meets relevant legal requirements andthe highest ethical standards under the Ethics Code, TSMC provides multiple
channels for reporting business conduct concerns. Please refer to Assessment Item
3 for details.

TSMC investigates each individual case according to its characteristics through specific divisions, and treats every received caseseriously, carefully, and effectively to ensure the accuracy of the investigation. The TSMC Ethics Committee will evaluate each caseto determine whether it is an exceptional case or whether it results from systemic issues of insufficient awareness in ethics. This
allows TSMC to continue evaluating whether it is necessary to improve its management and internal control procedures. Awarenesssuch as emails to employees describing the violations and disciplinary actions in each quarter are conducted to promote employees’
awareness and avoid recurrence of similar incidents.
In 2022, TSMC did not receive any reports related to finance, accounting or antitrust matters, nor did we receive any complaints
concerning breach of customer privacy and loss of customer data, or any material regulatory violations (where a fine exceeds NT$1
million), including non-monetary sanctions.

No

We do not tolerate any violation of the Ethics Code and treat every possible
violation incident seriously. Each violator of the Ethics Code (or relevant
regulations) will be severely disciplined to the full extent of our policies andthe law, up to and including immediate dismissal, termination of business
relationship, and judicial prosecution as appropriate.
(3) W hether the company has established relevant policies that are duly
enforced to prevent unethical conduct, provided implementation
procedures, guidelines, consequences of violation and complaint
procedures, and periodically reviews and revises such policies?

V

(3) U
 nder the framework of the Ethics Code, TSMC has established a regulatorycompliance program that includes policies, guidelines and procedures in otherpolicy areas, including: Corporate Governance, Securities Laws, Anti-corruption,
Anti-harassment, Anti-discrimination, Labor Laws, Antitrust (fair competition),
Environmental Protection, Safety and Health, Export Control, Financial Reporting,
Insider Trading, Intellectual Property, Proprietary Information Protection,
Personal Data Protection, Record Retention and Disposal, as well as procuringcertain raw materials from socially responsible sources (Conflict-free Minerals).
The above-mentioned policies are crucial in facilitating overall compliance with
the Ethics Code. TSMC provided an “Annual Ethics and Compliance Training
Course”(mandatory 0.5 hour online course) covering various important regulatorycompliance topics and a total of 67,922 employees (including employees insubsidiaries) completed this training course, 99.9% completion rate. TSMC, its
employees and its subsidiaries are expected to fully understand and comply withall laws and regulations that govern our businesses, as well as relevant policies,
guidelines and procedures, and make ethical decisions in every circumstance.
The Internal Auditor of TSMC also plays a critical role in ensuring the Company’s
compliance with the Ethics Code and relevant rules and regulations. To ensurethat our financial, managerial, and operating information is accurate, reliable, andtimely and that our employee’s actions are in compliance with applicable policies,
standards, procedures, laws and regulations, our Internal Auditor conducts auditsof various control points within the Company in accordance with its annual
audit plan approved by the Board of Directors and subsequently reports its audit
findings and remedial issues to the Board and Management on a regular basis.
(Continued)059

Assessment Item
2. Ethic Management Practice(1) W hether the company has assessed the ethics records of whom it has
business relationship with and include business conduct and ethics
related clauses in the business contracts?

(2) W hether the company has set up a unit which is dedicated to promoting
the company’s ethical standards and regularly (at least once a year)
reports directly to the Board of Directors on its ethical corporate
management policy and relevant matters, and program to prevent
unethical conduct and monitor its implementation?

Implementation Status
Yes
V

V

No

Summary(1) W e expect and assist our customers, suppliers, business partners, and any otherentities with whom we deal (such as consultant or third party agents who act
for or on behalf of TSMC) to understand and act in accordance with TSMC’s
ethical standards. For instance, we require all of our suppliers to declare in writingthat they will respect and comply with TSMC’s ethical standards and culture.
In addition to periodic audit, we provide training and communicate our ethicalculture to our suppliers through live seminars or online programs to prevent any
unethical conduct. We exchange views on appropriate business conduct and
TSMC’s ethical standards with our customers as part of customer audit programs.

V(3) T SMC requires newly hired employees to declare any conflict of interest situation
as appropriate. In addition, according to the Ethics Code, all employees must
declare any actual or potential conflict of interest). Furthermore, employeeswith specific job grades or positions need to complete the conflict of interest
declarations annually.

(4) T o implement relevant policies on ethical conducts, has the company
established effective accounting and internal control systems, audit
plans based on the assessment of unethical conduct, and have its ethicalconduct program audited by internal auditors or CPA periodically?

V(4) T SMC continues maintaining the integrity of its financial reporting processes
and controls and establishes appropriate internal control systems for preventing
higher potential unethical conduct, and the Internal Auditors formulate annual
audit plans based on the results of the risk assessment and subsequently reports
its audit findings and remedial issues to the Board and Management on a regularbasis. In addition, all departments and subsidiaries of TSMC are also required to
conduct Control Self-Assessment (CSA) tests annually to review the effectiveness of
the internal control system.

(5) D oes the company provide internal and external ethical conduct training
programs on a regular basis?

V(5) T raining is a major component of our compliance program, conducted
throughout the year to refresh TSMC’s employees’ commitment to ethicalconduct, and to get updated information on laws and regulations related to their
daily operations. Please refer to Assessment Item 1 for more information regarding
the training courses. As for our suppliers, we communicate our ethical culture to
our business partners through live seminars or online programs to ensure theirfully understanding of our commit to ethical conduct.

V(1) T SMC’s Audit Committee approved and TSMC has implemented the“Complaint Policy and Procedures for Certain Accounting and Legal Matters”
and “Procedures for Ombudsman System” that allow employees or any
whistleblowers with relevant evidence to report any financial, legal, or ethicalirregularities anonymously through either the Ombudsman or directly to the
Audit Committee. TSMC also requires all employees to stay vigilant and whistleblow any noncompliance by anyone to their supervisors, the function head of
Human Resources, the responsible corporate senior manager that oversees the
Ombudsmen system, or to the Chairman of the Company’s Audit Committee
directly.

(2) W hether the company has established standard operation proceduresfor investigating the complaints received, follow-up measures afterinvestigation are completed, and ensuring such complaints are handled ina confidential manner?

V(2) T SMC treats any complaint and the investigation thereof in a confidential andsensitive manner, as is clearly stated in our bylaws.

(3) D oes the company adopt proper measures to prevent a complainant from
retaliation for his/her filing a complaint?

V(3) T SMC strictly prohibits any form of retaliation against any individual who in goodfaith reports or helps with the investigation of any complaint, as is clearly statedin our bylaws.

Assessment Item
4. Information Disclosure
Does the company disclose its guidelines on business ethics as well as
information about implementation of such guidelines on its website andMarket Observation Post System (“MOPS”)?

None

Implementation Status
Yes
V

No

Summary
TSMC provides the guidelines and informative articles related to ethics and honorable
business conduct on its internal website (in both Chinese and English) for employees’easy access. In addition, TSMC posts its Annual Report (which is also available at theMOPS) and Sustainability Report on its external website (in both Chinese and English,
available at: http://www.tsmc.com) to disclose TSMC Ethics Code and the information
about implementation of the Ethics Codes.

Causes for the
DifferenceNone

5. If the company has established corporate governance policies based on Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, please describe any discrepancy between thepolicies and their implementation.
TSMC has established the Ethics Code to require that all employees, officers and board members comply with the Ethics Code and the other policies and procedures. There is no discrepancy between the Ethics
Code, including its affiliate policies and procedures, and its implementation. For more details, please refer to “3.5 Code of Ethics and Business Conduct” on page 56-61 of this Annual Report.

(2) T SMC’s Board of Directors strives to perform the responsibilities of supervising thecorporate conduct and ethics compliance practice through the Audit Committee
and the Compensation Committee, the hiring of a financial expert consultant for
the Audit Committee, and coordination with the Internal Audit department. The
General Counsel and the Corporate & Compliance Legal Division (which directly
reports to the General Counsel) promotes, the Company’s ethical standards,
and the General Counsel reports quarterly to the Board on the implementation
status. In addition, both the responsible senior manager appointed by the CEO
to oversee the Ombudsmen system and Internal Auditors update the Board on
ethical standards and compliance issues on a regular basis. Moreover, TSMC’s
officers, especially our CEO, CFO, and General Counsel, with oversight from our
Board, are responsible for the full, fair, accurate, timely, and understandable
financial accounting and financial disclosure in reports and documents filed by
the Company with securities authorities and in all TSMC public communications
and disclosures.

(3) W hether the company has established policies to prevent conflict ofinterests, provide appropriate communication and complaint channels
and implement such policies properly?

3. Implementation of Complaint Procedures(1) D oes the company establish specific complaint and reward procedures,
set up conveniently accessible complaint channels, and designate
responsible individuals to handle the complaint received?

Causes for the
Difference

6. Other important information to facilitate better understanding of the company’s corporate conduct and ethics compliance practices (e.g., review the company’s corporate conduct and ethics policy).
For details on the implementation of TSMC’s corporate conduct and ethics, please refer to “3.5 Code of Ethics and Business Conduct” on page 56-61 of this Annual Report.

3.6 Regulatory Compliance
TSMC’s compliance systems are comprised of a series of legislation monitoring, developing and implementation of effective
compliance policies and programs, training, and maintaining open reporting channels.
Legislative Monitoring
TSMC operates in many countries. To comply with governing legislation, applicable laws, regulations and regulatory expectations,
we closely monitor domestic and foreign government policies and regulatory developments that could materially impact TSMC’s
business and financial operations. Our Legal organization periodically updates our relevant internal departments, management
and the Audit Committee of applicable regulatory changes so that internal teams ensure compliance with new regulatory
requirements in a timely manner. We are also a proactive advocate for legislative and regulatory reform, and our comments andrecommendations on legal reforms to the government have been accepted constructively. TSMC is increasingly dedicated to
identifying potential regulatory issues and will continue to be involved in advocating public policy changes that foster a positive andfair business environment.
Policy and Compliance Program Development and Implementation
Under the framework of the Ethics Code, TSMC has established a regulatory compliance program that includes policies, guidelines
and procedures in different compliance areas, including: Corporate Governance, Securities Laws, Anti-corruption, Anti-harassment,
Anti-discrimination, Labor Laws, Antitrust (fair competition), Environmental Protection, Safety and Health, Export Control, Financial
Reporting, Insider Trading, Intellectual Property, Proprietary Information Protection, Personal Data Protection, Record Retention and
Disposal, as well as procuring certain raw materials from socially responsible sources (Conflict-free Minerals). It is our belief thatthese policies are crucial in strengthening overall compliance with the Ethics Code and compliance program. TSMC, its employees
and its subsidiaries are expected to fully understand and comply with all laws and regulations that govern our businesses, as well asinternal relevant policies, guidelines and procedures, and make ethical decisions in every circumstance.

None(Continued)

060

061

Compliance Awareness Training
Training is one of the major components of our regulatory compliance program. To get updated information on laws andregulations related to their daily operations and to strengthen TSMC’s employees’ commitment to ethical conduct through regularpromotion and training courses. Highlights of our training include:● Multiple types for training and promotion: TSMC enriches employees’ information sources for regulatory compliance throughvarious promotion activities. Awareness promotion emails to employees, posters at our facilities, and compliance guidelines, news
articles, tips and FAQs which our employees can access through our intranet.
● Customized face-to-face training courses for different business attributes: Face-to-face seminars focusing on specific topics such as
Anti-Corruption, Proprietary Information Protection, Intellectual Property, Personal Data Protection, Export Control Management
and Antitrust (fair competition). Training is made mandatory for those employees whose jobs are especially relevant to a particular
topic to ensure sufficient awareness of relevant laws and internal policies.
● Various on-line courses available to employees at any time: On-line learning programs updated frequently to provide most
up-to-date information and timely and flexible access for employees to understand the law and key compliance issues, covering
topics of Corporate Governance, Securities Laws, Anti-corruption, Anti-harassment, Anti-discrimination, Labor Laws, Antitrust(fair competition), Environmental Protection, Safety and Health, Export Control, Financial Reporting, Insider Trading, Intellectual
Property, Proprietary Information Protection, Personal Data Protection, Record Retention and Disposal, as well as “Conflict-free
Minerals“ among others. The course contents will be updated with changes in applicable laws or TSMC internal policies to ensure
the timeliness and accuracy of the course contents.
● Continuous training of the Legal team: TSMC’s Legal team actively participate in external professional courses held in Taiwan orabroad to receive current developments of new laws and regulations and track the latest developments in various professional
legal fields, and for its lawyers to comply with applicable continuing legal education requirements. External experts are also invited
to give in-house lectures on key issues.
Reporting Channels
TSMC provides multiple channels for reporting business conduct concerns to ensure that our conduct meets relevant legal
requirements and the highest ethical standards under the Ethics Code. For more details about the reporting channels, please refer to“3.5 Code of Ethics and Business Conduct” on page 56-61 of this Annual Report.
Major Accomplishments
In 2022, TSMC achieved several major accomplishments in regulatory compliance. Externally, in addition to fulfilling theCompany’s obligations toward regulatory compliance matters, TSMC exercised its civic duties as a responsible corporate citizen byproviding feedback on current regulations and regulations in legislation, with the intent to improve Taiwan’s industrial investment
environment, enhance economic development, and help align domestic laws with international law. Furthermore, TSMC continues
to focus on the topics related to the Company Law, the Securities and Exchange Act, intellectual property protection andenvironment protection. In addition, TSMC shared its practices and experiences on trade secrets, labor rights, regulatory compliancesystem and reporting channel with outside institutions.

Export Compliance: TSMC’s export management system (EMS) and policy have been in place for a number of years, and wascertified by the Bureau of Foreign Trade, the Taiwan regulator, as a qualified Internal Compliance Program (ICP) exporter. It aims
to ensure that TSMC and its subsidiaries comply with all applicable regulations covering the export of information, technologies,
products, materials and equipment. In addition, TSMC implements “No ECCN, No Shipment” control and customers are required
to provide end use and export control classification number (ECCN) of their products, among other required information, for TSMC
to apply for applicable export licenses. To further enhance relevant employees’ awareness of the export control requirements,
in 2022 TSMC altogether provided 12 face-to-face meeting sessions and a targeted on-line learning program to employees in
relevant functions.
● Supplier Management: TSMC shares and exchanges practical experiences with suppliers with sales offices in Taiwan by holding asustainable supply chain ESH forums on topics such as Ethics Code, environmental protection and occupational safety. In total,
354 attendees from 116 suppliers were participated (including through on-line meeting) in these activities.
● Conflict-Free Supply Chain: As a recognized global leader in the Hi-tech supply chain, we acknowledge our corporate social
responsibility to strive to procure conflict-free minerals in an effort to recognize humanitarian and ethical social principles that
protect the dignity of all persons. Meanwhile, we have implemented a series of compliance safeguards in accordance with industry
leading practices, requesting suppliers to fill in the “Conflict Minerals Reporting Template” and sign the “TSMC Conflict-Free
Minerals Declaration” every year. TSMC will continuously make progress to ensure a conflict-free supply chain.
● Personal Data Protection: Because of the importance of personal data protection, TSMC periodically reviews the Rules of Privacy
and Personal Data Protection and external and internal privacy policies to identify the needs to update such documents. Based on
current personal data protection laws and risks, TSMC conducts an annual training on privacy and personal data protection toenhance employees’ awareness and compliance. In addition, the Personal Data Protection Committee composed of Legal, Human
Resources, and IT divisions convene on an annual basis to assist the implementation of and monitoring compliance with the rules.
● Antitrust Compliance: Based on annual antitrust risk assessment results, TSMC identified functions with potential higher risk froman antitrust perspective. To enhance targeted functions’ employee awareness of the importance of competition and antitrust laws
and issues during daily operations, TSMC established antitrust training programs and conducted several antitrust trainings, via
either face-to-face or on-line training sessions, for global sales personnel at Taiwan, North America, Europe, Asia Pacific, Japan andmainland China areas, and employees in other relevant departments.
● Insider Trading Compliance: To implement insider trading regulatory compliance, TSMC revisited and updated training materialof the insider trading on-line program (0.5 hour-length course), and designated managers at R&D Organization and oversea fabsof Operations Organizations as trainees – a total of 1,950 managers completed this on-line program (97.7% completion rate) as
requested. Each year going forward, TSMC will designate employees from different departments to take insider trading on-line
program to strengthen employees’ awareness and compliance with insider trading laws.
● Internally, TSMC provides multiple courses about legal and regulatory compliance. The important achievements are as follows:
Ethics and Compliance: TSMC provided an “Annual Ethics and Compliance Training Course”(mandatory 0.5 hour online course)
covering various important regulatory compliance topics and a total of 67,922 employees (including employees in subsidiaries)
completed this training course (reaching 99.9% completion rate) – with all production staffs were starting from 2019.

● 

062

063

3.7 Internal Control System Execution Status

3.8 Status of Personnel Responsible for the Company’s Financial and Business Operation

3.7.1 Statement of Internal Control System

3.8.1 R
 esignation or Dismissal of Chairman, President, and Heads of Accounting, Finance, Internal Audit, Corporate
Governance Officer and R&D in 2022 and as of the Date of this Annual Report: None.

Taiwan Semiconductor Manufacturing Company Limited
Statement of Internal Control System
February 14, 2023
Based on the findings of a self-assessment, Taiwan Semiconductor Manufacturing Company Limited (TSMC) states thefollowing with regard to its internal control system during the year 2022:
1. T SMC’s Board of Directors and management are responsible for establishing, implementing, and maintaining an adequate
internal control system. Internal control system is designed to provide reasonable assurance over the effectiveness andefficiency of our operations (including profitability, performance and safeguarding of assets), reliability, timeliness,transparency and regulatory compliance of our reporting, and compliance with applicable rulings, laws and regulations.
2. A
 n internal control system has inherent limitations. No matter how perfectly designed, an effective internal control system
can provide only reasonable assurance of accomplishing its stated objectives. Moreover, the effectiveness of an internal
control system may be subject to changes due to extenuating circumstances beyond our control. Nevertheless, our internal
control system contains self-monitoring mechanisms, and TSMC takes immediate remedial actions in response to any
identified deficiencies.
3. T SMC evaluates the design and operating effectiveness of its internal control system based on the criteria provided in theRegulations Governing the Establishment of Internal Control Systems by Public Companies (herein below, the “Regulations”).
The criteria adopted by the Regulations identify five key components of managerial internal control: (1) control environment,(2) risk assessment, (3) control activities, (4) information and communication, and (5) monitoring activities. Each component
also includes several items which can be found in the Regulations.
4. T SMC has evaluated the design and operating effectiveness of its internal control system according to the aforesaid
Regulations.
5. B ased on the findings of such evaluation, TSMC believes that, on December 31, 2022, it has maintained, in all material
respects, an effective internal control system (that includes the supervision and management of our subsidiaries), to provide
reasonable assurance over our operational effectiveness and efficiency, reliability, timeliness, transparency and regulatorycompliance of reporting, and compliance with applicable rulings, laws and regulations.
6. T his Statement is an integral part of TSMC’s annual report and prospectus, and will be made public. Any falsehood,concealment, or other illegality in the content made public will entail legal liability under Articles 20, 32, 171, and 174 of the
Securities and Exchange Law.

3.8.2 C ertification of Employees Whose Jobs are Related to the Release of the Company’s Financial Information
Number of Employees

Certification
Certified Public Accountants (CPA)

Internal Audit

Finance

251

US Certified Public Accountants (US CPA)

4

20

Certified Internal Auditor (CIA)13

3

Chartered Financial Analyst (CFA)-

2

Certified Management Accountant (CMA)-

2

Financial Risk Manager (FRM)-

1

Certification in Control Self-Assessment (CCSA)

2-

Certification in Risk Management Assurance (CRMA)

3-

Certified Information Systems Auditor (CISA)

7

1

Certified Fraud Examiner (CFE)

2-

3.9 Information Regarding TSMC’s Independent Auditor
3.9.1 Audit Fees
The Audit Committee approves all fees payable to TSMC’s independent auditor and recommends the same to the Board of Directors
for further approval. The Board of Directors has authorized the Audit Committee to approve any increase not exceeding 10% of theapproved fees.
Unit: NT$ thousands

Accounting Firm

Name of CPA

CPA’s Audit Period

Deloitte & Touche

Mei-Yen Chiang,
Shang-Chih Lin, and others

01/01/2022 – 12/31/2022

Audit Fee
(Note 1)

Non-audit Fee(Note 2)

Total

Remark

51,777

27,372

79,149-Note 1: C ompared with last year, there is a NT$8,345 thousands decrease, or a 14% year-over-year decrease, in the annual audit fees payment. This is mainly due to a portion of audit fees, NT$14,450 thousands, wereactually paid in January 2023. If such payment is included, the total audit fees in 2022 will be higher than last year.
Note 2: The fees were mainly related to the bond offering that was borne by the underwriter and audit of annual income tax returns.

7. T his Statement was passed by the Board of Directors in their meeting held on February 14, 2023, with none of the ten
attending directors expressing dissenting opinions, and the remainder all affirming the content of this Statement.
Taiwan Semiconductor Manufacturing Company Limited

Mark Liu,
Chairman

C.C. Wei,
Chief Executive Officer

3.7.2 If CPA Was Engaged to Conduct a Special Audit of Internal Control System, Provide Its Audit Report: None.

064

065

3.9.2 CPA’s information(1) Former CPAs
Date of Change

Approved by BOD on November 8, 2022

Reasons and Explanation of Changes

In compliance with regulatory requirements on rotation, the engagement partner Mei-Yen Chiang will be replaced by Shih-Tsung Wu startingfrom 2023. The co-signing partner will remain to be Shang-Chih Lin.

State Whether the Appointment is Terminated or
Rejected by the Consignor or CPAs

CPA

Consignor

Appointment terminated automatically

Not available

Not available

Appointment rejected (discontinued)

Not available

Not available

StatusThe Opinions Other than Unmodified Opinion
Issued in the Last Two Years and the Reasons for
the Said Opinions (Note)

None

Is There Any Disagreement in Opinion with theIssuerYes

ClientAccounting principle or practiceDisclosure of financial statements
Auditing scope or procedures
OthersˇNo
Explanation

Supplementary Disclosure (Disclosures Specified in
Article 10.6.1.4~7 of the Standards)

None(2) Successor CPAs
Accounting Firm

Deloitte & Touche

CPA

Shih-Tsung Wu and Shang-Chih Lin

Date of Engagement

Approved by BOD on November 8, 2022

Prior to the Formal Engagement, Any Inquiry or Consultation on the Accounting
Treatment or Accounting Principles for Specific Transactions, and the Type of Audit
Opinion that Might be Rendered on the Financial Report

None

Written Opinions from the Successor CPAs that are Different from the Former CPA’s
Opinions

None(3) The Reply of Former CPAs on Article 10.6.1 and Article 10.6.2.3 of the Standards: None.
3.9.3 T
 SMC’s Chairman, Directors, Chief Executive Officer, Chief Financial Officer, and Managers in Charge of Its
Finance and Accounting Operations Did Not Hold Any Positions within TSMC’s Independent Audit Firm or Its
Affiliates in the Most Recent Year.
3.9.4 Evaluation of the External Auditor’s Independence and Suitability
The Audit Committee annually monitors the independence and Suitability TSMC’s external auditor by conducting the following
evaluation standards and reports the same to the Board of Directors:
1. T he auditor’s independence declaration
2. T he Audit Committee pre-approves all audit and non-audit services conducted by the auditor to ensure that the non-audit
services do not influence the results of the audit
3. E
 nsure the audit partner rotates every five years
4. A nnually evaluate the independence and suitability of the external auditor based on the results of the auditor survey and the
Audit Quality Indicator (AQI) released by Financial Supervisory Commission (FSC) regarding its financial interests, commercial
relations, employment relations, etc.

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