English Translation of Financial Statements Originally Issued in Chinese

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

Consolidated Financial Statements for the

Years Ended December 31, 2022 and 2021 and

Independent Auditors’ Report

- 0 -

REPRESENTATION LETTER

The entities that are required to be included in the combined financial statements of Taiwan Semiconductor Manufacturing Company Limited as of and for the year ended December 31, 2022, under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with the International Financial Reporting Standard 10, “Consolidated Financial Statements”. In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries do not prepare a separate set of combined financial statements.

Very truly yours,

Taiwan Semiconductor Manufacturing Company Limited

By

MARK LIU 

Chairman

February 14, 2023

1

勤業眾信

勤業眾信聯合會計師事務所

11073 台北市信義區松仁路100號20樓

Deloitte & Touche

20F, Taipei Nan Shan Plaza

No. 100, Songren Rd.,

Xinyi Dist., Taipei 11073, Taiwan

Tel :+886 (2) 2725-9988

Fax:+886 (2) 4051-6888

www.deloitte.com.tw

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

Opinion

We have audited the accompanying consolidated financial statements of Taiwan Semiconductor Manufacturing Company Limited and its subsidiaries (the “Company”), which comprise the consolidated balance sheets as of December 31, 2022 and 2021, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022 and 2021, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and the Standards on Auditing of the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2022. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

2

Key audit matter for the Company’s consolidated financial statements for the year ended December 31, 2022 is stated as follows:

Property, plant and equipment (PP&E) – commencement of depreciation related to PP&E classified as equipment under installation and construction in progress (EUI/CIP)

Refer to Notes 4, 5 and 14 to the consolidated financial statements.

The Company’s evaluation of when to commence depreciation of EUI/CIP involves determining when the assets are available for their intended use. The criteria the Company uses to determine whether EUI/CIP are available for their intended use involves subjective judgments and assumptions about the conditions necessary for the assets to be capable of operating in the intended manner. Changes in these assumptions could have a significant impact on when depreciation is recognized.

Given the subjectivity in determining the date to commence depreciation of EUI/CIP, performing audit procedures to evaluate the reasonableness of the Company’s judgments and assumptions required a high degree of auditor judgment. Consequently, the validity of commencement of depreciation related to PP&E classified as EUI/CIP is identified as a key audit matter.

Our audit procedures related to the evaluation of when to commence depreciation of EUI/CIP included the following, among others:

1. We read the Company’s policy and understood the criteria used to determine when to commence depreciation.

2. We tested the effectiveness of the controls over the evaluation of when to commence depreciation of EUI/CIP.

3. We sampled the year-end balance of EUI/CIP and performed the following for each selection:

a. Evaluated whether the selection did not meet the criteria specified by the Company for commencement of depreciation.

b. Observed the assets and evaluated their status.

4. We sampled and evaluated whether the selection of EUI/CIP met the criteria specified by the Company for commencement of depreciation during the year.

5. We sampled and evaluated whether the selection of EUI/CIP met the criteria specified by the Company for commencement of depreciation subsequent to year end.

Other Matter

We have also audited the parent company only financial statements of Taiwan Semiconductor Manufacturing Company Limited as of and for the years ended December 31, 2022 and 2021 on which we have issued an unmodified opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS, IAS, IFRIC, and SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

3

In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including members of the Audit Committee) are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Standards on Auditing of the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the Standards on Auditing of the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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6. Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2022 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audits resulting in this independent auditors’ report are Mei Yen Chiang and Shang Chih Lin.

Deloitte & Touche

Taipei, Taiwan

Republic of China

February 14, 2023

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally applied in the Republic of China.

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

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

	December 31, 2022						December 31, 2021
ASSETS	Amount				%		Amount				%
CURRENT ASSETS
Cash and cash equivalents (Note 6)	$		1,342,814,083			27	$		1,064,990,192			29
Financial assets at fair value through profit or loss (Note 7)		1,070,398				-		159,048				-
Financial assets at fair value through other comprehensive income (Note 8)		122,998,543				2		119,519,251				3
Financial assets at amortized cost (Note 9)		94,600,219				2		3,773,571				-
Hedging financial assets (Note 10)		2,329				-		13,468				-
Notes and accounts receivable, net (Note 11)		229,755,887				5		197,586,109				5
Receivables from related parties (Note 34)		1,583,958				-		715,324				-
Other receivables from related parties (Note 34)		68,975				-		61,531				-
Inventories (Notes 5 and 12)		221,149,148				4		193,102,321				5
Other financial assets (Note 35)		25,964,428				1		16,630,611				1
Other current assets		12,888,776				-		10,521,481				-
Total current assets		2,052,896,744				41		1,607,072,907				43
NONCURRENT ASSETS
Financial assets at fair value through other comprehensive income (Note 8)		6,159,200				-		5,887,892				-
Financial assets at amortized cost (Note 9)		35,127,215				1		1,533,391				-
Investments accounted for using equity method (Note 13)		27,641,505				1		21,963,418				1
Property, plant and equipment (Notes 5 and 14)		2,693,836,970				54		1,975,118,704				53
Right-of-use assets (Notes 5 and 15)		41,914,136				1		32,734,537				1
Intangible assets (Notes 5 and 16)		25,999,155				1		26,821,697				1
Deferred income tax assets (Notes 5 and 26)		69,185,842				1		49,153,886				1
Refundable deposits		4,467,022				-		2,624,854				-
Other noncurrent assets		7,551,089				-		2,592,169				-
Total noncurrent assets		2,911,882,134				59		2,118,430,548				57
TOTAL	$		4,964,778,878			100	$		3,725,503,455			100
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Notes 17 and 31)	$		-			-	$		114,921,333			3
Financial liabilities at fair value through profit or loss (Note 7)		116,215				-		681,914				-
Hedging financial liabilities (Note 10)		813				-		9,642				-
Accounts payable		54,879,708				1		47,285,603				1
Payables to related parties (Note 34)		1,642,637				-		1,437,186				-
Salary and bonus payable		36,435,509				1		23,802,100				1
Accrued profit sharing bonus to employees and compensation to directors (Note 29)		61,748,574				1		36,524,741				1
Payables to contractors and equipment suppliers		213,499,613				4		145,742,148				4
Cash dividends payable (Note 21)		142,617,093				3		142,617,093				4
Income tax payable (Notes 5 and 26)		120,801,814				3		59,647,152				2
Long-term liabilities - current portion (Notes 18, 19 and 31)		19,313,889				-		4,566,667				-
Accrued expenses and other current liabilities (Notes 5, 15, 22, 31 and 34)		293,170,952				6		162,267,779				4
Total current liabilities		944,226,817				19		739,503,358				20
NONCURRENT LIABILITIES
Bonds payable (Notes 18 and 31)		834,336,439				17		610,070,652				16
Long-term bank loans (Notes 19 and 31)		4,760,047				-		3,309,131				-
Deferred income tax liabilities (Notes 5 and 26)		1,031,383				-		1,873,877				-
Lease liabilities (Notes 5, 15 and 31)		29,764,097				-		20,764,214				1
Net defined benefit liability (Note 20)		9,321,091				-		11,036,879				-
Guarantee deposits		892,021				-		686,762				-
Others (Note 22)		179,958,116				4		167,525,377				5
Total noncurrent liabilities		1,060,063,194				21		815,266,892				22
Total liabilities		2,004,290,011				40		1,554,770,250				42
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
Capital stock (Notes 4 and 21)		259,303,805				5		259,303,805				7
Capital surplus (Notes 4, 21 and 28)		69,330,328				1		64,761,602				2
Retained earnings (Notes 4 and 21)
Appropriated as legal capital reserve		311,146,899				6		311,146,899				8
Appropriated as special capital reserve		3,154,310				-		59,304,212				2
Unappropriated earnings		2,323,223,479				47		1,536,378,550				41
		2,637,524,688				53		1,906,829,661				51
Others (Notes 4, 21 and 28)		(20,505,626		)		-		(62,608,515		)		(2	)
Equity attributable to shareholders of the parent		2,945,653,195				59		2,168,286,553				58
NON - CONTROLLING INTERESTS		14,835,672				1		2,446,652				-
Total equity		2,960,488,867				60		2,170,733,205				58
TOTAL	$		4,964,778,878			100	$		3,725,503,455			100

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

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

	2022						2021
	Amount				%		Amount				%
NET REVENUE (Notes 5, 22, 34 and 39)	$		2,263,891,292			100	$		1,587,415,037			100
COST OF REVENUE (Notes 5, 12, 29 and 34)		915,536,486				40		767,877,771				48
GROSS PROFIT		1,348,354,806				60		819,537,266				52
OPERATING EXPENSES (Notes 5, 29 and 34)
Research and development		163,262,208				7		124,734,755				8
General and administrative		53,524,898				2		36,929,588				2
Marketing		9,920,446				1		7,558,591				1
Total operating expenses		226,707,552				10		169,222,934				11
OTHER OPERATING INCOME AND EXPENSES, NET (Notes 14 and 29)		(368,403		)		-		(333,435		)		-
INCOME FROM OPERATIONS (Note 39)		1,121,278,851				50		649,980,897				41
NON-OPERATING INCOME AND EXPENSES
Share of profits of associates		7,798,359				-		5,603,084				-
Interest income (Note 23)		22,422,209				1		5,708,765				-
Other income		947,697				-		973,141				-
Foreign exchange gain, net (Note 37)		4,505,784				-		13,662,655				1
Finance costs (Note 24)		(11,749,984		)		-		(5,414,218		)		-
Other gains and losses, net (Note 25)		(1,012,198		)		-		(7,388,010		)		-
Total non-operating income and expenses		22,911,867				1		13,145,417				1
INCOME BEFORE INCOME TAX		1,144,190,718				51		663,126,314				42
INCOME TAX EXPENSE (Notes 5 and 26)		127,290,203				6		66,053,180				4
NET INCOME		1,016,900,515				45		597,073,134				38
OTHER COMPREHENSIVE INCOME (LOSS) (Notes 5, 20, 21 and 26)
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit obligation		(823,060		)		-		242,079				-
Unrealized gain/(loss) on investments in equity instruments at fair value through other comprehensive income		(263,749		)		-		1,900,797				-
Loss on hedging instruments		-				-		(41,416		)		-
Share of other comprehensive income (loss) of associates		154,457				-		(30,194		)		-
Income tax benefit (expense) related to items that will not be reclassified subsequently		733,956				-		(85,269		)		-
		(198,396		)		-		1,985,997				-

(Continued)

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

	2022						2021
	Amount				%		Amount				%
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising on translation of foreign operations	$		50,845,614			2	$		(6,181,830	)		(1	)
Unrealized loss on investments in debt instruments at fair value through other comprehensive income		(10,102,658		)		-		(3,431,791		)		-
Gain on hedging instruments		1,329,231				-		131,535				-
Share of other comprehensive income (loss) of associates		550,338				-		(119,997		)		-
Income tax benefit (expense) related to items that may be reclassified subsequently		6,036				-		(3,370		)		-
		42,628,561				2		(9,605,453		)		(1	)
Other comprehensive income (loss), net of income tax		42,430,165				2		(7,619,456		)		(1	)
TOTAL COMPREHENSIVE INCOME	$		1,059,330,680			47	$		589,453,678			37
NET INCOME ATTRIBUTABLE TO:
Shareholders of the parent	$		1,016,530,249			45	$		596,540,013			38
Non-controlling interests		370,266				-		533,121				-
	$		1,016,900,515			45	$		597,073,134			38
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Shareholders of the parent	$		1,059,124,890			47	$		588,918,059			37
Non-controlling interests		205,790				-		535,619				-
	$		1,059,330,680			47	$		589,453,678			37
EARNINGS PER SHARE (NT$, Note 27)
Basic earnings per share	$		39.20				$		23.01
Diluted earnings per share	$		39.20				$		23.01

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

(Concluded)

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars)

	Equity Attributable to Shareholders of the Parent
																			Others
																						Unrealized
																						Gain (Loss) on
																						Financial
																						Assets at Fair
																			Foreign			Value Through					Unearned
	Capital Stock - Common Stock							Retained Earnings											Currency			Other			Gain (Loss) on		Stock-Based
	Shares							Legal Capital		Special Capital			Unappropriated						Translation			Comprehensive			Hedging		Employee					Treasury					Non-controlling			Total
	(In Thousands)		Amount		Capital Surplus			Reserve		Reserve			Earnings			Total			Reserve			Income			Instruments		Compensation		Total			Stock		Total			Interests			Equity
BALANCE, JANUARY 1, 2021		25,930,380	$	259,303,805	$	56,347,243		$	311,146,899	$	42,259,146		$	1,235,280,036		$	1,588,686,081		$	(57,001,627	)	$	2,321,754		$	-	$	-	$	(54,679,873	)	$	-	$	1,849,657,256		$	964,743		$1,850,621,999
Appropriations of earnings
Special capital reserve		-		-		-			-		17,045,066			(17,045,066	)		-			-			-			-		-		-			-		-			-		-
Cash dividends to shareholders		-		-		-			-		-			(278,751,590	)		(278,751,590	)		-			-			-		-		-			-		(278,751,590	)		-		(278,751,590)
Total		-		-		-			-		17,045,066			(295,796,656	)		(278,751,590	)		-			-			-		-		-			-		(278,751,590	)		-		(278,751,590)
Net income		-		-		-			-		-			596,540,013			596,540,013			-			-			-		-		-			-		596,540,013			533,121		597,073,134
Other comprehensive income (loss), net of income tax		-		-		-			-		-			167,503			167,503			(6,301,734	)		(1,559,790	)		72,067		-		(7,789,457	)		-		(7,621,954	)		2,498		(7,619,456)
Total comprehensive income (loss)		-		-		-			-		-			596,707,516			596,707,516			(6,301,734	)		(1,559,790	)		72,067		-		(7,789,457	)		-		588,918,059			535,619		589,453,678
Disposal of investments in equity instruments at fair value through other comprehensive income		-		-		-			-		-			187,654			187,654			-			(187,654	)		-		-		(187,654	)		-		-			-		-
Basis adjustment for gain on hedging instruments		-		-		-			-		-			-			-			-			-			48,469		-		48,469			-		48,469			-		48,469
Adjustments to share of changes in equities of associates		-		-		4,796			-		-			-			-			-			-			-		-		-			-		4,796			-		4,796
From difference between the consideration received and the carrying amount of the subsidiaries' net assets during actual disposal		-		-		8,406,282			-		-			-			-			-			-			-		-		-			-		8,406,282			1,045,516		9,451,798
From share of changes in equities of subsidiaries		-		-		(7,891	)		-		-			-			-			-			-			-		-		-			-		(7,891	)		7,891		-
Donation from shareholders		-		-		11,172			-		-			-			-			-			-			-		-		-			-		11,172			110		11,282
Decrease in non-controlling interests		-		-		-			-		-			-			-			-			-			-		-		-			-		-			(107,382	)	(107,382)
Effect of acquisition of subsidiary		-		-		-			-		-			-			-			-			-			-		-		-			-		-			155		155
BALANCE, DECEMBER 31, 2021		25,930,380		259,303,805		64,761,602			311,146,899		59,304,212			1,536,378,550			1,906,829,661			(63,303,361	)		574,310			120,536		-		(62,608,515	)		-		2,168,286,553			2,446,652		2,170,733,205
Appropriations of earnings
Special capital reserve		-		-		-			-		(56,149,902	)		56,149,902			-			-			-			-		-