English Translation of Financial Statements Originally Issued in Chinese

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

Consolidated Financial Statements for the

Three Months Ended March 31, 2023 and 2022 and

Independent Auditors’ Review Report

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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’ REVIEW REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

Introduction

We have reviewed the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and its subsidiaries (collectively, the “Company”) as of March 31, 2023 and 2022, the related consolidated statements of comprehensive income, changes in equity and cash flows for the three months then ended, and the related notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as 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 International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

We conducted our reviews in accordance with the Standards on Review Engagements of the Republic of China 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2023 and 2022, its consolidated financial performance and its consolidated cash flows for the three months ended March 31, 2023 and 2022 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

1

The engagement partners on the reviews resulting in this independent auditors’ review report are Shih Tsung Wu and Shang Chih Lin.

Deloitte & Touche

Taipei, Taiwan

Republic of China

May 9, 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 review such consolidated financial statements are those generally applied in the Republic of China.

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

2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

	March 31, 2023 (Reviewed)							December 31, 2022 (Audited)							March 31, 2022 (Reviewed)
ASSETS	Amount					%		Amount					%		Amount				%
CURRENT ASSETS
Cash and cash equivalents (Note 6)	$	1,385,232,810					27	$	1,342,814,083					27	$	1,151,589,646				29
Financial assets at fair value through profit or loss (Note 7)			982,014				-			1,070,398				-			758,452			-
Financial assets at fair value through other comprehensive income (Note 8)			129,541,034				3			122,998,543				2			120,995,765			3
Financial assets at amortized cost (Note 9)			73,428,595				2			94,600,219				2			8,425,386			-
Hedging financial assets (Note 10)			70				-			2,329				-			286,824			-
Notes and accounts receivable, net (Note 11)			147,715,125				3			229,755,887				5			212,846,891			5
Receivables from related parties (Note 32)			332,554				-			1,583,958				-			581,010			-
Other receivables from related parties (Note 32)			76,608				-			68,975				-			58,165			-
Inventories (Note 12)			216,067,981				4			221,149,148				4			200,118,682			5
Other financial assets (Note 33)			26,007,016				1			25,964,428				1			16,243,656			1
Other current assets			16,343,714				-			12,888,776				-			10,333,155			-
Total current assets			1,995,727,521				40			2,052,896,744				41			1,722,237,632			43
NONCURRENT ASSETS
Financial assets at fair value through other comprehensive income (Note 8)			6,918,090				-			6,159,200				-			6,011,937			-
Financial assets at amortized cost (Note 9)			34,512,468				1			35,127,215				1			15,605,898			-
Investments accounted for using equity method (Note 13)			28,483,064				1			27,641,505				1			24,119,008			1
Property, plant and equipment (Note 14)			2,833,396,892				56			2,693,836,970				54			2,104,330,654			53
Right-of-use assets (Note 15)			42,018,656				1			41,914,136				1			32,922,146			1
Intangible assets (Note 16)			24,296,839				-			25,999,155				1			25,620,051			1
Deferred income tax assets (Note 4)			68,775,652				1			69,185,842				1			53,903,541			1
Refundable deposits			4,218,206				-			4,467,022				-			4,073,354			-
Other noncurrent assets			7,496,960				-			7,551,089				-			3,852,446			-
Total noncurrent assets			3,050,116,827				60			2,911,882,134				59			2,270,439,035			57
TOTAL	$	5,045,844,348					100	$	4,964,778,878					100	$	3,992,676,667				100
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Notes 17 and 30)	$			-			-	$			-			-	$	144,550,897				4
Financial liabilities at fair value through profit or loss (Note 7)			620,967				-			116,215				-			2,203,138			-
Hedging financial liabilities (Note 10)			39,108				-			813				-			-			-
Accounts payable			46,302,185				1			54,879,708				1			48,653,183			1
Payables to related parties (Note 32)			1,079,764				-			1,642,637				-			1,450,896			-
Salary and bonus payable			24,518,981				1			36,435,509				1			21,077,111			1
Accrued profit sharing bonus to employees and compensation to directors (Note 28)			74,158,512				1			61,748,574				1			48,766,534			1
Payables to contractors and equipment suppliers			157,374,807				3			213,499,613				4			122,915,512			3
Cash dividends payable (Note 20)			142,617,093				3			142,617,093				3			142,617,093			4
Income tax payable (Note 4)			157,215,093				3			120,801,814				3			87,693,132			2
Long-term liabilities - current portion (Notes 18, 19 and 30)			8,040,000				-			19,313,889				-			16,791,667			-
Accrued expenses and other current liabilities (Notes 15, 21, 30 and 32)			261,123,411				5			293,170,952				6			186,148,544			5
Total current liabilities			873,089,921				17			944,226,817				19			822,867,707			21
NONCURRENT LIABILITIES
Bonds payable (Notes 18 and 30)			848,637,481				17			834,336,439				17			629,650,221			16
Long-term bank loans (Notes 19 and 30)			6,147,668				-			4,760,047				-			3,087,714			-
Deferred income tax liabilities (Note 4)			726,005				-			1,031,383				-			1,899,315			-
Lease liabilities (Notes 15 and 30)			29,984,875				1			29,764,097				-			21,065,933			-
Net defined benefit liability (Note 4)			8,602,302				-			9,321,091				-			8,533,290			-
Guarantee deposits			915,592				-			892,021				-			706,708			-
Others (Note 21)			184,842,906				4			179,958,116				4			183,397,025			5
Total noncurrent liabilities			1,079,856,829				22			1,060,063,194				21			848,340,206			21
Total liabilities			1,952,946,750				39			2,004,290,011				40			1,671,207,913			42
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
Capital stock (Notes 20)			259,320,710				5			259,303,805				5			259,317,675			6
Capital surplus (Notes 20 and 27)			69,894,441				1			69,330,328				1			65,215,135			2
Retained earnings (Notes 20)
Appropriated as legal capital reserve			311,146,899				6			311,146,899				6			311,146,899			8
Appropriated as special capital reserve			20,320,473				1			3,154,310				-			62,608,515			1
Unappropriated earnings			2,441,820,698				48			2,323,223,479				47			1,664,506,123			42
			2,773,288,070				55			2,637,524,688				53			2,038,261,537			51
Others (Notes 20 and 27)			(24,269,263		)		-			(20,505,626		)		-			(47,492,685	)		(1	)
Treasury shares (Notes 20)			-				-			-				-			(871,566	)		-
Equity attributable to shareholders of the parent			3,078,233,958				61			2,945,653,195				59			2,314,430,096			58
NON - CONTROLLING INTERESTS			14,663,640				-			14,835,672				1			7,038,658			-
Total equity			3,092,897,598				61			2,960,488,867				60			2,321,468,754			58
TOTAL	$	5,045,844,348					100	$	4,964,778,878					100	$	3,992,676,667				100

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

3

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

	Three Months Ended March 31
	2023						2022
	Amount				%		Amount				%
NET REVENUE (Notes 21, 32 and 37)	$	508,632,973				100	$	491,075,873				100
COST OF REVENUE (Notes 12, 28 and 32)			222,132,581			44			217,872,707			44
GROSS PROFIT			286,500,392			56			273,203,166			56
OPERATING EXPENSES (Notes 28 and 32)
Research and development			39,157,036			8			36,048,540			7
General and administrative			13,475,948			3			10,500,027			2
Marketing			2,676,360			-			2,062,623			1
Total operating expenses			55,309,344			11			48,611,190			10
OTHER OPERATING INCOME AND EXPENSES, NET (Notes 14 and 28)			47,109			-			(801,858	)		-
INCOME FROM OPERATIONS (Note 37)			231,238,157			45			223,790,118			46
NON-OPERATING INCOME AND EXPENSES
Share of profits of associates			1,038,817			-			1,725,490			-
Interest income (Note 22)			13,617,818			3			1,673,879			-
Other income			87,910			-			308,383			-
Foreign exchange gain (loss), net (Note 35)			(44,363	)		-			1,742,888			-
Finance costs (Note 23)			(2,963,686	)		-			(2,140,766	)		-
Other gains and losses, net (Note 24)			1,300,278			-			(268,296	)		-
Total non-operating income and expenses			13,036,774			3			3,041,578			-
INCOME BEFORE INCOME TAX			244,274,931			48			226,831,696			46
INCOME TAX EXPENSE (Notes 4 and 25)			37,325,895			7			23,958,322			5
NET INCOME			206,949,036			41			202,873,374			41
OTHER COMPREHENSIVE INCOME (LOSS) (Notes 20 and 25)
Items that will not be reclassified subsequently to profit or loss:
Unrealized gain on investments in equity instruments at fair value through other comprehensive income			560,573			-			315,959			-
Gain on hedging instruments			38,810			-			-			-
Share of other comprehensive income (loss) of associates			(4,435	)		-			43,839			-
Income tax expense related to items that will not be reclassified subsequently			(24	)		-			(15	)		-
			594,924			-			359,783			-

(Continued)

4

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

	Three Months Ended March 31
	2023								2022
	Amount					%			Amount				%
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising on translation of foreign operations	$			(5,201,209	)		(1	)	$	19,345,591				4
Unrealized gain/(loss) on investments in debt instruments at fair value through other comprehensive income			1,351,881				-				(5,105,144	)		(1	)
Gain (loss) on hedging instruments			(17,963		)		-				693,828			-
Share of other comprehensive income (loss) of associates			(23,406		)		-				164,459			-
Income tax expense related to items that may be reclassified subsequently			-				-				(47,300	)		-
			(3,890,697		)		(1	)			15,051,434			3
Other comprehensive income (loss), net of income tax			(3,295,773		)		(1	)			15,411,217			3
TOTAL COMPREHENSIVE INCOME	$	203,653,263					40		$	218,284,591				44
NET INCOME ATTRIBUTABLE TO:
Shareholders of the parent	$	206,986,561					41		$	202,732,975				41
Non-controlling interests			(37,525		)		-				140,399			-
	$	206,949,036					41		$	202,873,374				41
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Shareholders of the parent	$	203,834,717					40		$	218,283,654				44
Non-controlling interests			(181,454		)		-				937			-
	$	203,653,263					40		$	218,284,591				44
EARNINGS PER SHARE (NT$, Note 26)
Basic earnings per share	$	7.98							$	7.82
Diluted earnings per share	$	7.98							$	7.82

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

(Concluded)

5

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

	Equity Attributable to Shareholders of the Parent
																										Others
																													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, 2022		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		-				-				-				-			3,304,303			(3,304,303	)			-			-				-				-			-			-			-				-				-				-
Cash dividends to shareholders		-				-				-				-			-			(71,308,546	)			(71,308,546	)		-				-				-			-			-			-				(71,308,546	)			-				(71,308,546	)
Total		-				-				-				-			3,304,303			(74,612,849	)			(71,308,546	)		-				-				-			-			-			-				(71,308,546	)			-				(71,308,546	)
Net income		-				-				-				-			-			202,732,975				202,732,975			-				-				-			-			-			-				202,732,975				140,399				202,873,374
Other comprehensive income (loss), net of income tax		-				-				-				-			-			-				-			19,649,475				(4,778,602	)			679,806			-			15,550,679			-				15,550,679				(139,462	)			15,411,217
Total comprehensive income (loss)		-				-				-				-			-			202,732,975				202,732,975			19,649,475				(4,778,602	)			679,806			-			15,550,679			-				218,283,654				937				218,284,591
Share-based payment arrangements		1,387				13,870				438,029				-			-			-				-			-				-				-			(425,224	)		(425,224	)		-				26,675				-				26,675
Treasury stock acquired		-				-				-				-			-			-				-			-				-				-			-			-			(871,566	)			(871,566	)			-				(871,566	)
Disposal of investments in equity instruments at fair value through other comprehensive income		-				-				-				-			-			7,447				7,447			-				(7,447	)			-			-			(7,447	)		-				-				-				-
Basis adjustment for loss on hedging instruments		-				-				-				-			-			-				-			-				-				(2,178	)		-			(2,178	)		-				(2,178	)			-				(2,178	)
Adjustments to share of changes in equities of associates		-				-				30				-			-			-				-			-				-				-			-			-			-				30				-				30
From share of changes in equities of subsidiaries		-				-				15,474				-			-			-				-			-				-				-			-			-			-				15,474				4,587,381				4,602,855
Increase in non-controlling interests		-				-				-				-			-			-				-			-				-				-			-			-			-				-				3,688				3,688
BALANCE, MARCH 31, 2022		25,931,767		$	259,317,675			$	65,215,135			$	311,146,899		$	62,608,515		$	1,664,506,123			$	2,038,261,537			$	(43,653,886	)	$		(4,211,739	)	$	798,164			$	(425,224	)	$	(47,492,685	)	$	(871,566	)	$	2,314,430,096			$	7,038,658			$	2,321,468,754
BALANCE, JANUARY 1, 2023		25,930,380		$	259,303,805			$	69,330,328			$	311,146,899		$	3,154,310		$	2,323,223,479			$	2,637,524,688			$	(11,743,301	)	$		(10,056,353	)	$	1,479,181			$	(185,153	)	$	(20,505,626	)	$	-		$	2,945,653,195			$	14,835,672			$	2,960,488,867
Appropriations of earnings
Special capital reserve		-				-				-				-			17,166,163			(17,166,163	)			-			-				-				-			-			-			-				-				-				-
Cash dividends to shareholders		-				-				-				-			-			(71,308,546	)			(71,308,546	)		-				-				-			-			-			-				(71,308,546	)			-				(71,308,546	)
Total		-				-				-				-			17,166,163			(88,474,709	)			(71,308,546	)		-				-				-			-			-			-				(71,308,546	)			-				(71,308,546	)
Net income		-				-				-				-			-			206,986,561				206,986,561			-				-				-			-			-			-				206,986,561				(37,525	)			206,949,036
Other comprehensive income (loss), net of income tax		-				-				-				-			-			-				-			(5,080,466	)			1,915,947				12,675			-			(3,151,844	)		-				(3,151,844	)			(143,929	)			(3,295,773	)
Total comprehensive income (loss)		-				-				-				-			-			206,986,561				206,986,561			(5,080,466	)			1,915,947				12,675			-			(3,151,844	)		-				203,834,717				(181,454	)			203,653,263
Retirement of employee restricted stock		(419	)			(4,195	)			4,195				-			-			4,614				4,614			-				-				-			-			-			-				4,614				-				4,614
Share-based payment arrangements		2,110				21,100				564,868				-			-			-				-			-				-				-			(490,185	)		(490,185	)		-				95,783				-				95,783
Disposal of investments in equity instruments at fair value through other comprehensive income		-				-				-				-			-			80,753				80,753			-				(80,753	)			-			-			(80,753	)		-				-				-				-
Basis adjustment for loss on hedging instruments		-				-				-				-			-			-				-			-				-				(40,855	)		-			(40,855	)		-				(40,855	)			-				(40,855	)
Adjustments to share of changes in equities of associates		-				-				109				-			-			-				-			-				-				-			-			-			-				109				-				109
From share of changes in equities of subsidiaries		-				-				(5,059	)			-			-			-				-			-				-				-			-			-			-				(5,059	)			5,059				-
Increase in non-controlling interests		-				-				-				-			-			-				-			-				-				-			-			-			-				-				4,363				4,363
BALANCE, MARCH 31, 2023		25,932,071		$	259,320,710			$	69,894,441			$	311,146,899		$	20,320,473		$	2,441,820,698			$	2,773,288,070			$	(16,823,767	)	$		(8,221,159	)	$	1,451,001			$	(675,338	)	$	(24,269,263	)	$	-		$	3,078,233,958			$	14,663,640			$	3,092,897,598

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

6

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

	Three Months Ended March 31
	2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax	$	244,274,931			$	226,831,696
Adjustments for:
Depreciation expense			108,083,376				108,934,265
Amortization expense			2,239,265				2,167,798
Expected credit losses recognized on investments in debt instruments			6,164				11,768
Finance costs			2,963,686				2,140,766
Share of profits of associates			(1,038,817	)			(1,725,490	)
Interest income			(13,617,818	)			(1,673,879	)
Share-based compensation			100,772				27,453
Loss on disposal or retirement of property, plant and equipment, net			114,442				48,257
Gain on disposal or retirement of intangible assets, net			(769	)			-
Impairment loss on property, plant and equipment			-				790,740
Gain on financial instruments at fair value through profit or loss, net			(23,522	)			-
Loss on disposal of investments in debt instruments at fair value through other comprehensive income, net			135,693				140,778
Loss (gain) on foreign exchange, net			(1,319,013	)			2,074,789
Dividend income			(72,021	)			(75	)
Others			85,997				(258,328	)
Changes in operating assets and liabilities:
Financial instruments at fair value through profit or loss			633,098				918,808
Notes and accounts receivable, net			82,040,768				(15,260,809	)
Receivables from related parties			1,251,404				134,314
Other receivables from related parties			(7,633	)			3,366
Inventories			5,081,167				(7,016,361	)
Other financial assets			813,274				1,229,128
Other current assets			(3,559,651	)			(1,132,181	)
Accounts payable			(8,577,523	)			1,367,580
Payables to related parties			(562,873	)			13,710
Salary and bonus payable			(11,916,528	)			(2,724,989	)
Accrued profit sharing bonus to employees and compensation to directors			12,409,938				12,241,793
Accrued expenses and other current liabilities			(42,056,749	)			5,607,202
Other noncurrent liabilities			9,168,965				40,423,182
Net defined benefit liability			(718,789	)			(2,503,589	)
Cash generated from operations			385,931,234				372,811,692
Income taxes paid			(686,489	)			(642,004	)
Net cash generated by operating activities			385,244,745				372,169,688
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Financial instruments at fair value through profit or loss			(121,692	)			-
Financial assets at fair value through other comprehensive income			(13,849,515	)			(37,834,407	)
Financial assets at amortized cost			(20,921,355	)			(18,155,340	)
Property, plant and equipment			(302,498,628	)			(262,134,719	)
Intangible assets			(285,784	)			(583,003	)

(Continued)

7

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

	Three Months Ended March 31
	2023				2022
Proceeds from disposal or redemption of:
Financial assets at fair value through other comprehensive income	$	8,752,678			$	29,254,025
Financial assets at amortized cost			42,297,509				-
Property, plant and equipment			73,607				609,153
Intangible assets			769				-
Proceeds from return of capital of investments in equity instruments at fair value through other comprehensive income			122				-
Derecognition of hedging financial instruments			20,623				536,873
Interest received			12,281,197				1,526,825
Proceeds from government grants - property, plant and equipment			1,766,902				64,544
Proceeds from government grants - others			1,130				3,085
Other dividends received			62,648				75
Increase in prepayments for leases			(20,565	)			-
Refundable deposits paid			(12,726	)			(1,670,390	)
Refundable deposits refunded			221,285				309,488
Net cash used in investing activities			(272,231,795	)			(288,073,791	)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term loans			-				30,529,474
Proceeds from issuance of bonds			19,300,000				19,600,000
Repayment of bonds			(12,000,000	)			-
Proceeds from long-term bank loans			2,450,000				-
Repayment of long-term bank loans			(329,444	)			-
Payments for transaction costs attributable to the issuance of bonds			(20,274	)			(21,200	)
Treasury stock acquired			-				(871,566	)
Repayment of the principal portion of lease liabilities			(709,158	)			(523,177	)
Interest paid			(1,871,200	)			(1,103,792	)
Guarantee deposits received			128,666				8,502
Guarantee deposits refunded			(131,062	)			(1,648	)
Cash dividends			(71,308,546	)			(71,308,546	)
Increase in non-controlling interests			3,988				4,605,765
Net cash used in financing activities			(64,487,030	)			(19,086,188	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			(6,107,193	)			21,589,745
NET INCREASE IN CASH AND CASH EQUIVALENTS			42,418,727				86,599,454
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			1,342,814,083				1,064,990,192
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,385,232,810			$	1,151,589,646

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

(Concluded)

8

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

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

(Reviewed, Not Audited)

1.    GENERAL

Taiwan Semiconductor Manufacturing Company Limited (TSMC), a Republic of China (R.O.C.) corporation, was incorporated on February 21, 1987. TSMC is a dedicated foundry in the semiconductor industry which engages mainly in the manufacturing, sales, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing of masks.

On September 5, 1994, TSMC’s shares were listed on the Taiwan Stock Exchange (TWSE). On October 8, 1997, TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs).

The address of its registered office and principal place of business is No. 8, Li-Hsin Rd. 6, Hsinchu Science Park, Taiwan. The principal operating activities of TSMC’s subsidiaries are described in Note 4.

2.    THE AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements were approved and authorized for issue by the Board of Directors on May 9, 2023.

3.    APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

a.    Initial application of the amendments to the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC)

The initial application of the amendments to the IFRSs endorsed and issued into effect by the FSC did not have a significant effect on the accounting policies of TSMC and its subsidiaries (collectively as the “Company”).

b.The IFRSs issued by International Accounting Standards Board (IASB), but not yet endorsed and issued into effect by the FSC

New, Revised or Amended Standards and Interpretations	Effective Date Issued by IASB
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”	To be determined by IASB
Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” and “Non-current Liabilities with Covenants”	January 1, 2024

As of the date the accompanying consolidated financial statements were issued, the Company continues in evaluating the impact on its financial position and financial performance from the initial adoption of the aforementioned standards or interpretations and related applicable period. The related impact will be disclosed when the Company completes its evaluation.

9

4.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except for the following, the accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2022.

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

Statement of Compliance

The accompanying consolidated financial statements have been prepared in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34, “Interim Financial Reporting,” endorsed and issued into effect by the FSC. The consolidated financial statements do not present all the disclosures required for a complete set of annual consolidated financial statements prepared under the IFRSs endorsed and issued into effect by the FSC (collectively, “Taiwan-IFRSs”).

Basis of Consolidation

The basis of preparation and the basis for the consolidated financial statements

The basis of preparation and the basis for the consolidated financial statements applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2022.

The subsidiaries in the consolidated financial statements

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

			Establishment	Percentage of Ownership
Name of Investor	Name of Investee	Main Businesses and Products	and Operating Location	March 31, 2023		December 31, 2022		March 31, 2022		Note
TSMC	TSMC North America	Sales and marketing of integrated circuits and other semiconductor devices	San Jose, California, U.S.A.		100%		100%		100%	-
	TSMC Europe B.V. (TSMC Europe)	Customer service and supporting activities	Amsterdam, the Netherlands		100%		100%		100%	a)
	TSMC Japan Limited (TSMC Japan)	Customer service and supporting activities	Yokohama, Japan		100%		100%		100%	a)
	TSMC Design Technology Japan, Inc. (TSMC JDC)	Engineering support activities	Yokohama, Japan		100%		100%		100%	a)
	TSMC Japan 3DIC R&D Center, Inc. (TSMC 3DIC)	Engineering support activities	Yokohama, Japan		100%		100%		100%	a)
	TSMC Korea Limited (TSMC Korea)	Customer service and supporting activities	Seoul, Korea		100%		100%		100%	a)
	TSMC Partners, Ltd. (TSMC Partners)	Investing in companies involved in the semiconductor design and manufacturing, and other investment activities	Tortola, British Virgin Islands		100%		100%		100%	-
	TSMC Global, Ltd. (TSMC Global)	Investment activities	Tortola, British Virgin Islands		100%		100%		100%	-
	TSMC China Company Limited (TSMC China)	Manufacturing, sales, testing and computer-aided design of integrated circuits and other semiconductor devices	Shanghai, China		100%		100%		100%	-
	TSMC Nanjing Company Limited (TSMC Nanjing)	Manufacturing, sales, testing and computer-aided design of integrated circuits and other semiconductor devices	Nanjing, China		100%		100%		100%	-
	VisEra Technologies Company Ltd. (VisEra Tech)	Research, design, development, manufacturing, sales, packaging and test of color filter	Hsin-Chu, Taiwan		68%		68%		73%	b)
	TSMC Arizona Corporation (TSMC Arizona)	Manufacturing, sales and testing of integrated circuits and other semiconductor devices	Phoenix, Arizona, U.S.A.		100%		100%		100%	c)
	Japan Advanced Semiconductor Manufacturing, Inc.（JASM）	Manufacturing, sales, testing and computer-aided design of integrated circuits and other semiconductor devices	Kumamoto, Japan		71%		71%		81%	a), d)
	VentureTech Alliance Fund II, L.P. (VTAF II)	Investing in technology start-up companies	Cayman Islands		98%		98%		98%	a)
	VentureTech Alliance Fund III, L.P. (VTAF III)	Investing in technology start-up companies	Cayman Islands		98%		98%		98%	a)

(Continued)

10

			Establishment	Percentage of Ownership
Name of Investor	Name of Investee	Main Businesses and Products	and Operating Location	March 31, 2023		December 31, 2022		March 31, 2022		Note
TSMC	Emerging Fund L.P. (Emerging Fund)	Investing in technology start-up companies	Cayman Islands		99.9%		99.9%		99.9%	a)
TSMC Partners	TSMC Development, Inc. (TSMC Development)	Investing in companies involved in semiconductor manufacturing	Delaware, U.S.A.		100%		100%		100%	-
	TSMC Technology, Inc. (TSMC Technology)	Engineering support activities	Delaware, U.S.A.		100%		100%		100%	a)
	TSMC Design Technology Canada Inc. (TSMC Canada)	Engineering support activities	Ontario, Canada		100%		100%		100%	a)
TSMC Development	WaferTech, LLC (WaferTech)	Manufacturing, sales and testing of integrated circuits and other semiconductor devices	Washington, U.S.A.		100%		100%		100%	-
VTAF III	Growth Fund Limited (Growth Fund)	Investing in technology start-up companies	Cayman Islands		100%		100%		100%	a)

(Concluded)

Note a:    This is an immaterial subsidiary for which the consolidated financial statements are neither reviewed nor audited by the Company’s independent auditors.

Note b:     VisEra has increased its capital in June 2022. After the increase in capital, TSMC’s shareholding in VisEra decreased from 73% to 68%. This transaction was accounted for as an equity transaction since the transaction did not change TSMC’s control over VisEra.

Note c:    Under the terms of the development agreement entered into between TSMC Arizona and the City of Phoenix, the City of Phoenix commits approximately US$205 million toward various public infrastructure projects in the area of the proposed manufacturing facility, conditioned on TSMC Arizona’s achieving a minimum project scale with defined spending and job-creation thresholds.

Note d:    JASM increased its capital by issuing noncumulative preferred shares and common shares in April 2022, TSMC’s shareholding in JASM decreased from 81% to 71% and the proportion of voting right remain 81%. The aforementioned transactions were accounted for as an equity transaction since the transaction did not change TSMC’s control over JASM.

Retirement Benefits

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. The interim period income tax expense is accrued using the tax rate that would be applicable to expected total annual earnings, that is, the estimated average annual effective income tax rate applied to the pre-tax income of the interim period.

5.    CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY

The same critical accounting judgments and key sources of estimates and uncertainty have been followed in these consolidated financial statements as were applied in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2022.

6.    CASH AND CASH EQUIVALENTS

	March 31, 2023			December 31, 2022			March 31, 2022
Cash and deposits in banks	$	1,376,643,700		$	1,327,884,602		$	1,148,906,061
Commercial paper			4,552,665			9,566,430			999,273
Money market funds			2,696,994			1,406,792			1,112,377
Repurchase agreements			1,265,191			1,133,310			-
Government bonds			74,260			2,451,570			571,935
Corporate bonds			-			371,379			-
	$	1,385,232,810		$	1,342,814,083		$	1,151,589,646

Deposits in banks consisted of highly liquid time deposits that were readily convertible to known amounts of cash and were subject to an insignificant risk of changes in value.

11

7.    FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

	March 31, 2023			December 31, 2022			March 31, 2022
Financial assets
Mandatorily measured at FVTPL
Forward exchange contracts	$	860,326		$	947,546		$	758,452
Convertible bonds			121,688			122,852			-
	$	982,014		$	1,070,398		$	758,452
Financial liabilities
Held for trading
Forward exchange contracts	$	620,967		$	116,215		$	2,203,138

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

Outstanding forward exchange contracts consisted of the following:

		Contract Amount
	Maturity Date	(In Thousands)
March 31, 2023
Sell NT$	April 2023 to May 2023	NT$		114,069,212
Sell US$	April 2023 to May 2023	US$	736,501
Sell RMB	April 2023	RMB	1,033,673
December 31, 2022
Sell NT$	January 2023 to March 2023	NT$	79,610,590
Sell US$	January 2023 to March 2023	US$	752,486
Sell RMB	January 2023 to March 2023	RMB	1,448,371
March 31, 2022
Sell NT$	April 2022 to June 2022	NT$	118,373,692
Sell US$	April 2022 to May 2022	US$	1,674,736

12

8.    FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

	March 31, 2023			December 31, 2022			March 31, 2022
Investments in debt instruments at FVTOCI
Corporate bonds	$	68,601,115		$	66,116,166		$	59,119,180
Agency bonds/Agency mortgage-backed securities			31,299,500			28,399,890			32,024,446
Government bonds			19,925,888			18,929,924			20,392,667
Asset-backed securities			9,425,896			9,274,697			8,938,231
			129,252,399			122,720,677			120,474,524
Investments in equity instruments at FVTOCI
Non-publicly traded equity investments			6,918,090			6,159,200			6,011,937
Publicly traded stocks			288,635			277,866			521,241
			7,206,725			6,437,066			6,533,178
	$	136,459,124		$	129,157,743		$	127,007,702
Current	$	129,541,034		$	122,998,543		$	120,995,765
Noncurrent			6,918,090			6,159,200			6,011,937
	$	136,459,124		$	129,157,743		$	127,007,702

These investments in equity instruments are held for medium to long-term purposes and therefore are accounted for as FVTOCI. For dividends recognized from these investments, please refer to consolidated statements of cash flows. All of the dividends are mainly from investments held at the end of the reporting period.

For the three months ended March 31, 2023 and 2022, as the Company adjusted its investment portfolio, equity investments designated at FVTOCI were divested for NT$126,582 thousand and NT$36,025 thousand, respectively. The related other equity-unrealized gain/loss on financial assets at FVTOCI of NT$80,753 thousand and NT$7,447 thousand were transferred to increase retained earnings, respectively.

As of March 31, 2023 and 2022, the cumulative loss allowance for expected credit loss of NT$40,933 thousand and NT$34,972thousand was recognized under investments in debt instruments at FVTOCI, respectively. Refer to Note 31 for information relating to the credit risk management and expected credit loss.

9.    FINANCIAL ASSETS AT AMORTIZED COST

	March 31, 2023				December 31, 2022				March 31, 2022
Corporate bonds	$	95,364,767			$	81,041,056			$	24,045,849
Commercial paper			12,634,954				48,742,817				-
Less: Allowance for impairment loss			(58,658	)			(56,439	)			(14,565	)
	$	107,941,063			$	129,727,434			$	24,031,284
Current	$	73,428,595			$	94,600,219			$	8,425,386
Noncurrent			34,512,468				35,127,215				15,605,898
	$	107,941,063			$	129,727,434			$	24,031,284

13

Refer to Note 31 for information relating to credit risk management and expected credit loss for financial assets at amortized cost.

10.    HEDGING FINANCIAL INSTRUMENTS

	March 31, 2023				December 31, 2022			March 31, 2022
Financial assets - current
Fair value hedges
Interest rate futures contracts	$			-	$	2,329		$	78,343
Cash flow hedges
Forward exchange contracts			70				-			-
Forward interest rate contracts			-				-			208,481
	$	70			$	2,329		$	286,824
Financial liabilities - current
Fair value hedges
Interest rate futures contracts	$	37,929			$	813		$			-
Cash flow hedges
Forward exchange contracts			1,179				-			-
	$	39,108			$	813		$			-

Fair value hedge

The Company entered into interest rate futures contracts, which are used to partially hedge against the fair value changes caused by interest rate fluctuation in the Company’s fixed income investments. The hedge ratio is adjusted in response to the changes in the financial market and capped at 100%.

On the basis of economic relationships, the value of the interest rate futures contracts and the value of the hedged financial assets change in opposite directions in response to movements in interest rates.

The main source of hedge ineffectiveness in these hedging relationships is the credit risk of the hedged financial assets, which is not reflected in the fair value of the interest rate futures contracts. No other sources of ineffectiveness emerged from these hedging relationships during the hedging period. Amount of hedge ineffectiveness recognized in profit or loss is classified under other gains and losses, net.

The following tables summarize the information relating to the hedges of interest rate risk.

March 31, 2023

Hedging Instruments	Contract Amount (US$ in Thousands)		Maturity
Interest rate futures contracts - US Treasury futures	US$	51,300	June 2023

14

Hedged Items	Asset Carrying Amount		Accumulated Amount of Fair Value Hedge Adjustments
Financial assets at FVTOCI	$	3,247,800	$	37,929

December 31, 2022

Hedging Instruments	Contract Amount (US$ in Thousands)		Maturity
Interest rate futures contracts - US Treasury futures	US$	74,300	March 2023

Hedged Items	Asset Carrying Amount		Accumulated Amount of Fair Value Hedge Adjustments
Financial assets at FVTOCI	$	4,008,179	$	(1,516	)

March 31, 2022

Hedging Instruments	Contract Amount (US$ in Thousands)		Maturity
Interest rate futures contracts - US Treasury futures	US$	95,100	June 2022

Hedged Items	Asset Carrying Amount		Accumulated Amount of Fair Value Hedge Adjustments
Financial assets at FVTOCI	$	4,849,920	$	(78,343	)

The effect for the three months ended March 31, 2023 and 2022 is detailed below: