TSMC (NYSE: TSM) 2025 profit hits NT$1.72T on surging revenue

Rhea-AI Filing Summary

Taiwan Semiconductor Manufacturing Company Limited reported strong 2025 results under Taiwan-IFRS. Net revenue rose to NT$3,809,054,272 thousand from NT$2,894,307,699 thousand, lifting gross margin to 60% from 56% and income from operations to NT$1,936,091,677 thousand.

Net income attributable to shareholders increased to NT$1,717,882,627 thousand, with basic earnings per share of NT$66.26, up from NT$45.25. Cash and cash equivalents grew to NT$2,767,856,402 thousand, supported by net cash from operating activities of NT$2,274,975,625 thousand despite heavy capital expenditures of NT$1,272,410,529 thousand on property, plant and equipment.

Positive

• Strong earnings growth: Net income attributable to shareholders rose to NT$1,717,882,627 thousand in 2025, with basic EPS increasing to NT$66.26 from NT$45.25, reflecting materially stronger profitability.
• Robust cash generation and reinvestment: Net cash from operating activities reached NT$2,274,975,625 thousand in 2025, supporting NT$1,272,410,529 thousand of property, plant and equipment additions while still increasing cash and cash equivalents to NT$2,767,856,402 thousand.

Negative

• None.

Insights

Equity analyst – semiconductors

TSMC delivered sizable 2025 growth with strong cash generation and heavy reinvestment.

TSMC grew net revenue to NT$3,809,054,272 thousand, up sharply from 2024, expanding gross margin to 60%. Income from operations reached NT$1,936,091,677 thousand, while net income attributable to shareholders climbed to NT$1,717,882,627 thousand, driving basic EPS to NT$66.26.

Operating cash flow was robust at NT$2,274,975,625 thousand for 2025. The company reinvested heavily, acquiring property, plant and equipment of NT$1,272,410,529 thousand, and still ended the year with cash and cash equivalents of NT$2,767,856,402 thousand. Total equity rose to NT$5,460,795,283 thousand, reflecting accumulated earnings.

The audit opinion from Deloitte & Touche is unmodified, indicating the consolidated financial statements for 2025 and 2024 present fairly in all material respects under Taiwan-IFRS. Future filings may detail how ongoing high capital spending and global fab projects translate into revenue and margin trends.

Form 6-K: How Foreign Companies Report to the SEC →

1934 Act Registration No. 1-14700

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________

FORM 6-K

_____________________________

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the month of February 2026

(Commission File Number: 001-14700)

_____________________________

Taiwan Semiconductor Manufacturing Company Limited

(Translation of Registrant’s Name Into English)

_____________________________

No. 8, Li-Hsin Road 6

Hsinchu Science Park

Hsinchu 300-096, Taiwan

Republic of China

(Address of Principal Executive Offices)

_____________________________

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  x            Form 40-F  o

Indicate by check mark if the registrant is submitting the Form 6-K in papers as permitted by Regulation S-T Rule 101(b)(1): o

Indicate by check mark if the registrant is submitting the Form 6-K in papers as permitted by Regulation S-T Rule 101(b)(7): o

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Taiwan Semiconductor Manufacturing Company Limited

Date:   February 26, 2026

By

/s/ Wendell Huang

Wendell Huang

Senior Vice President and Chief Financial Officer

Exhibits

			Exhibit Number			Exhibit Description
			99.1			Consolidated Financial Statements for the Years Ended December 31, 2025 and 2024 and Independent Auditors’ Report pursuant to International Financial Reporting Standards adopted by ROC ("Taiwan-IFRSs")
			99.2			Parent Company Only Financial Statements for the Years Ended December 31, 2025 and 2024 and Independent Auditors’ Report pursuant to International Financial Reporting Standards adopted by ROC ("Taiwan-IFRSs")

English Translation of Financial Statements Originally Issued in Chinese

ㄅㄡ

Taiwan Semiconductor Manufacturing

Company Limited and Subsidiaries

Consolidated Financial Statements for the

Years Ended December 31, 2025 and 2024 and

Independent Auditors’ Report

- 1 -

REPRESENTATION LETTER

The companies required to be included in the consolidated financial statements of affiliates in

accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business

Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended

December 31, 2025 are all the same as the companies required to be included in the consolidated

financial statements of parent and subsidiary companies as provided in International Financial

Reporting Standard 10 “Consolidated Financial Statements”. Relevant information that should be

disclosed in the consolidated financial statements of affiliates has all been disclosed in the

consolidated financial statements of parent and subsidiary companies. Hence, Taiwan

Semiconductor Manufacturing Company Limited and Subsidiaries do not prepare a separate set of

consolidated financial statements of affiliates.

Very truly yours,

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED

By

C.C. Wei 

Chairman

February 10, 2026

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勤業眾信

勤業眾信聯合會計師事務所

110016 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 110016, 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, 2025 and 2024, 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 material

accounting policy information (collectively referred to as the “consolidated financial statements”).

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, 2025 and 2024, 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 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 Financial Statement Audit and Attestation

Engagements of 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, 2025. 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.

- 3 -

Key audit matter for the Company’s consolidated financial statements for the year ended December 31, 2025 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, 2025 and 2024 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,

- 4 -

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.

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 and Risk 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.

- 5 -

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, 2025 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 Shih Tsung Wu and Shang

Chih Lin.

Deloitte & Touche

Taipei, Taiwan

Republic of China

February 10, 2026

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.

- 6 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

		December 31, 2025				December 31, 2024
		Amount		%		Amount		%
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 6)		$ 2,767,856,402		35		$ 2,127,627,043		32
Financial assets at fair value through profit or loss (Note 7)		100,200		-		207,700		-
Financial assets at fair value through other comprehensive income (Note 8)		175,692,690		2		192,202,657		3
Financial assets at amortized cost (Note 9)		124,945,519		2		101,971,322		1
Hedging financial assets (Note 10)		-		-		10,959		-
Notes and accounts receivable, net (Note 11)		279,051,553		3		270,683,235		4
Receivables from related parties (Note 33)		2,739,500		-		1,404,473		-
Other receivables from related parties (Note 33)		268,115		-		251		-
Inventories (Notes 5 and 12)		288,109,485		4		287,868,810		4
Other financial assets (Notes 29, 30 and 34)		59,702,922		1		63,138,316		1
Other current assets (Notes 29 and 30)		118,664,431		1		43,237,354		1
Total current assets		3,817,130,817		48		3,088,352,120		46
NONCURRENT ASSETS
Financial assets at fair value through profit or loss (Note 7)		15,032,128		-		15,199,842		-
Financial assets at fair value through other comprehensive income (Note 8)		8,797,170		-		7,822,884		-
Financial assets at amortized cost (Note 9)		110,507,804		1		88,596,542		1
Investments accounted for using equity method (Note 13)		38,033,271		1		37,421,105		1
Property, plant and equipment (Notes 5, 14 and 29)		3,691,840,916		47		3,234,980,070		48
Right-of-use assets (Notes 5 and 15)		43,918,910		1		40,128,391		1
Intangible assets (Notes 5 and 16)		24,952,615		-		26,282,520		1
Deferred income tax assets (Notes 5 and 25)		62,940,253		1		65,943,300		1
Refundable deposits		4,242,553		-		5,495,862		-
Other noncurrent assets (Notes 29 and 30)		115,627,441		1		81,715,364		1
Total noncurrent assets		4,115,893,061		52		3,603,585,880		54
TOTAL		$ 7,933,023,878		100		$ 6,691,938,000		100
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Financial liabilities at fair value through profit or loss (Note 7)		$ 3,083,883		-		$ 466,539		-
Hedging financial liabilities (Note 10)		817		-		-		-
Accounts payable		82,551,595		1		72,800,558		1
Payables to related parties (Note 33)		1,778,730		-		1,426,001		-
Salary and bonus payable		63,872,882		1		47,451,509		1
Accrued profit sharing bonus to employees and compensation to directors (Note 28)		103,355,278		1		70,871,150		1
Payables to contractors and equipment suppliers		177,730,306		2		192,635,173		3
Cash dividends payable (Note 20)		285,258,060		4		220,418,821		3
Income tax payable (Notes 5 and 25)		202,337,872		2		147,438,423		2
Long-term liabilities - current portion (Notes 17, 18 and 30)		136,925,710		2		59,857,879		1
Accrued expenses and other current liabilities (Notes 5, 15, 21 and 30)		401,124,156		5		451,158,911		7
Total current liabilities		1,458,019,289		18		1,264,524,964		19
NONCURRENT LIABILITIES
Bonds payable (Notes 17 and 30)		856,227,503		11		926,604,506		14
Long-term bank loans (Notes 18 and 30)		39,834,496		1		31,824,386		-
Deferred income tax liabilities (Notes 5 and 25)		3,888,795		-		3,988,482		-
Lease liabilities (Notes 15)		31,594,992		-		28,755,342		-
Net defined benefit liability (Note 19)		6,012,286		-		7,580,657		-
Guarantee deposits		764,178		-		845,581		-
Others (Note 21)		75,887,056		1		104,238,217		2
Total noncurrent liabilities		1,014,209,306		13		1,103,837,171		16
Total liabilities		2,472,228,595		31		2,368,362,135		35
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
Capital stock (Note 20)		259,325,245		3		259,327,332		4
Capital surplus (Notes 20 and 27)		73,445,601		1		73,260,765		2
Retained earnings (Note 20)
Appropriated as legal capital reserve		311,146,899		4		311,146,899		4
Appropriated as special capital reserve		87,284,496		1		-		-
Unappropriated earnings		4,705,070,165		59		3,606,105,124		54
		5,103,501,560		64		3,917,252,023		58
Others (Notes 20 and 27)		(16,676,412)		-		38,705,047		-
Equity attributable to shareholders of the parent		5,419,595,994		68		4,288,545,167		64
NON - CONTROLLING INTERESTS		41,199,289		1		35,030,698		1
Total equity		5,460,795,283		69		4,323,575,865		65
TOTAL		$ 7,933,023,878		100		$ 6,691,938,000		100

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

(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)

		2025				2024
		Amount		%		Amount		%
NET REVENUE (Notes 5, 21, 33 and 39)		$ 3,809,054,272		100		$ 2,894,307,699		100
COST OF REVENUE (Notes 5, 12, 28, 33 and 36)		1,527,760,293		40		1,269,954,135		44
GROSS PROFIT		2,281,293,979		60		1,624,353,564		56
OPERATING EXPENSES (Notes 5, 28 and 33)
Research and development		246,427,264		7		204,181,823		7
General and administrative		82,304,290		2		83,744,968		3
Marketing		16,918,076		-		13,143,524		-
Total operating expenses		345,649,630		9		301,070,315		10
OTHER OPERATING INCOME AND EXPENSES, NET (Notes 14, 28 and 36)		447,328		-		(1,230,199)		-
INCOME FROM OPERATIONS (Note 39)		1,936,091,677		51		1,322,053,050		46
NON-OPERATING INCOME AND EXPENSES
Share of profits of associates		5,496,594		-		4,879,367		-
Interest income (Note 22)		105,739,081		3		87,213,399		3
Other income		591,729		-		566,879		-
Foreign exchange gain, net (Note 37)		13,831,351		-		10,000,653		-
Finance costs (Note 23)		(12,370,387)		-		(10,495,320)		-
Other gains and losses, net (Note 24)		(7,717,205)		-		(8,379,393)		-
Total non-operating income and expenses		105,571,163		3		83,785,585		3
INCOME BEFORE INCOME TAX		2,041,662,840		54		1,405,838,635		49
INCOME TAX EXPENSE (Notes 5 and 25)		326,266,060		9		233,406,876		8
NET INCOME		1,715,396,780		45		1,172,431,759		41
OTHER COMPREHENSIVE INCOME (LOSS) (Notes 5, 19, 20 and 25)
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit obligation		(693,271)		-		144,365		-
Unrealized gain on investments in equity instruments at fair value through other comprehensive income		745,272		-		5,091,916		-
Gain (loss) on hedging instruments		(31,030)		-		5,041		-
Share of other comprehensive loss of associates		(113,192)		-		(69,435)		-
Income tax benefit (expense) related to items that will not be reclassified subsequently		138,654		-		(38,869)		-
		46,433		-		5,133,018		-

- 8 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

		2025				2024
		Amount		%		Amount		%
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising on translation of foreign operations		$ (60,951,662)		(1)		$ 64,299,685		2
Unrealized gain on investments in debt instruments at fair value through other comprehensive income		4,688,956		-		1,949,865		-
Loss on hedging instruments		(81,229)		-		(80,198)		-
Share of other comprehensive income (loss) of associates		(29,017)		-		283,276		-
		(56,372,952)		(1)		66,452,628		2
Other comprehensive income (loss), net of income tax		(56,326,519)		(1)		71,585,646		2
TOTAL COMPREHENSIVE INCOME		$ 1,659,070,261		44		$ 1,244,017,405		43
NET INCOME ATTRIBUTABLE TO:
Shareholders of the parent		$ 1,717,882,627		45		$ 1,173,267,703		41
Non-controlling interests		(2,485,847)		-		(835,944)		-
		$ 1,715,396,780		45		$ 1,172,431,759		41
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Shareholders of the parent		$ 1,661,253,891		44		$ 1,245,836,616		43
Non-controlling interests		(2,183,630)		-		(1,819,211)		-
		$ 1,659,070,261		44		$ 1,244,017,405		43
EARNINGS PER SHARE (NT$, Note 26)
Basic earnings per share		$ 66.26				$ 45.25
Diluted earnings per share		$ 66.25				$ 45.25

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

- 9 -

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
		Capital Stock - Common Stock						Retained Earnings								Foreign Currency Translation Reserve		Unrealized Gain (Loss) on Financial Assets at Fair Value Through Other Comprehensive Income		Gain (Loss) on Hedging Instruments		Unearned Stock-Based Employee Compensation
		Shares						Legal Capital		Special Capital		Unappropriated												Total		Treasury Stock		Total		Non-controlling Interests		Total Equity
		(In Thousands)		Amount		Capital Surplus		Reserve		Reserve		Earnings		Total
BALANCE, JANUARY 1, 2024		25,932,071		$ 259,320,710		$ 69,876,381		$ 311,146,899		$ -		$ 2,846,883,893		$ 3,158,030,792		$ (25,316,769)		$ (4,099,928)		$ 1,395,875		$ (293,434)		$ (28,314,256)		$ -		$ 3,458,913,627		$ 24,349,220		$ 3,483,262,847
Appropriations of earnings
Cash dividends to shareholders		-		-		-		-		-		(414,915,586)		(414,915,586)		-		-		-		-		-		-		(414,915,586)		-		(414,915,586)
Total		-		-		-		-		-		(414,915,586)		(414,915,586)		-		-		-		-		-		-		(414,915,586)		-		(414,915,586)
Net income		-		-		-		-		-		1,173,267,703		1,173,267,703		-		-		-		-		-		-		1,173,267,703		(835,944)		1,172,431,759
Other comprehensive income (loss), net of income tax		-		-		-		-		-		126,040		126,040		65,579,764		6,948,818		(85,709)		-		72,442,873		-		72,568,913		(983,267)		71,585,646
Total comprehensive income (loss)		-		-		-		-		-		1,173,393,743		1,173,393,743		65,579,764		6,948,818		(85,709)		-		72,442,873		-		1,245,836,616		(1,819,211)		1,244,017,405
Employee restricted shares retired		(1,402)		(14,018)		14,018		-		-		19,934		19,934		-		-		-		-		-		-		19,934		-		19,934
Share-based payment arrangements		5,313		53,130		2,584,257		-		-		-		-		-		-		-		(1,414,645)		(1,414,645)		-		1,222,742		-		1,222,742
Treasury stock acquired		-		-		-		-		-		-		-		-		-		-		-		-		(3,089,177)		(3,089,177)		-		(3,089,177)
Treasury stock retired		(3,249)		(32,490)		(7,080)		-		-		(3,049,607)		(3,049,607)		-		-		-		-		-		3,089,177		-		-		-
Disposal of investments in equity instruments at fair value through other comprehensive income		-		-		-		-		-		3,772,747		3,772,747		-		(4,009,066)		-		-		(4,009,066)		-		(236,319)		236,319		-
Basis adjustment for gain on hedging instruments		-		-		-		-		-		-		-		-		-		141		-		141		-		141		-		141
Adjustments to share of changes in equities of associates		-		-		870,000		-		-		-		-		-		-		-		-		-		-		870,000		-		870,000
From difference between the consideration received and the carrying amount of the subsidiaries' net assets during actual disposal		-		-		5,284		-		-		-		-		-		-		-		-		-		-		5,284		(4,263)		1,021
From share of changes in equities of subsidiaries		-		-		(90,978)		-		-		-		-		-		-		-		-		-		-		(90,978)		6,918,796		6,827,818
Donation from shareholders		-		-		8,883		-		-		-		-		-		-		-		-		-		-		8,883		64		8,947
Increase in non-controlling interests		-		-		-		-		-		-		-		-		-		-		-		-		-		-		5,349,773		5,349,773
BALANCE, DECEMBER 31, 2024		25,932,733		259,327,332		73,260,765		311,146,899		-		3,606,105,124		3,917,252,023		40,262,995		(1,160,176)		1,310,307		(1,708,079)		38,705,047		-		4,288,545,167		35,030,698		4,323,575,865
Appropriations of earnings
Special capital reserve		-		-		-		-		87,284,496		(87,284,496)		-		-		-		-		-		-		-		-		-		-
Cash dividends to shareholders		-		-		-		-		-		(531,618,438)		(531,618,438)		-		-		-		-		-		-		(531,618,438)		-		(531,618,438)
Total		-		-		-		-		87,284,496		(618,902,934)		(531,618,438)		-		-		-		-		-		-		(531,618,438)		-		(531,618,438)
Net income		-		-		-		-		-		1,717,882,627		1,717,882,627		-		-		-		-		-		-		1,717,882,627		(2,485,847)		1,715,396,780
Other comprehensive income (loss), net of income tax		-		-		-		-		-		(559,857)		(559,857)		(61,282,139)		5,308,767		(95,507)		-		(56,068,879)		-		(56,628,736)		302,217		(56,326,519)
Total comprehensive income (loss)		-		-		-		-		-		1,717,322,770		1,717,322,770		(61,282,139)		5,308,767		(95,507)		-		(56,068,879)		-		1,661,253,891		(2,183,630)		1,659,070,261
Employee restricted shares retired		(209)		(2,087)		2,087		-		-		4,007		4,007		-		-		-		-		-		-		4,007		-		4,007
Share-based payment arrangements		-		-		(21,859)		-		-		-		-		-		-		-		1,231,078		1,231,078		-		1,209,219		-		1,209,219
Disposal of investments in equity instruments at fair value through other comprehensive income		-		-		-		-		-		541,198		541,198		-		(557,108)		-		-		(557,108)		-		(15,910)		15,910		-
Basis adjustment for gain on hedging instruments		-		-		-		-		-		-		-		-		-		13,450		-		13,450		-		13,450		-		13,450
Adjustments to share of changes in equities of associates		-		-		192,854		-		-		-		-		-		-		-		-		-		-		192,854		-		192,854
From share of changes in equities of subsidiaries		-		-		(14,959)		-		-		-		-		-		-		-		-		-		-		(14,959)		7,994		(6,965)
Donation from shareholders		-		-		26,713		-		-		-		-		-		-		-		-		-		-		26,713		67		26,780
Increase in non-controlling interests		-		-		-		-		-		-		-		-		-		-		-		-		-		-		8,328,250		8,328,250
BALANCE, DECEMBER 31, 2025		25,932,524		$ 259,325,245		$ 73,445,601		$ 311,146,899		$ 87,284,496		$ 4,705,070,165		$ 5,103,501,560		$ (21,019,144)		$ 3,591,483		$ 1,228,250		$ (477,001)		$ (16,676,412)		$ -		$ 5,419,595,994		$ 41,199,289		$ 5,460,795,283

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

- 10 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

		2025		2024
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax		$ 2,041,662,840		$ 1,405,838,635
Adjustments for:
Depreciation expense		679,683,958		653,610,486
Amortization expense		8,412,412		9,186,149
Expected credit losses recognized (reversal) on investments in debt		(3,946)		49,907
Finance costs		12,370,387		10,495,320
Share of profits of associates		(5,496,594)		(4,879,367)
Interest income		(105,739,081)		(87,213,399)
Share-based compensation		1,246,070		1,242,719
Loss on disposal or retirement of property, plant and equipment, net		1,581,001		2,597,927
Loss on disposal or retirement of intangible assets, net		4,548		34
Impairment loss on property, plant and equipment		782,005		1,150,485
Loss (gain) on financial instruments at fair value through profit or loss, net		(353,087)		137,694
Loss from disposal of subsidiary		167,986		-
Loss on disposal of investments in debt instruments at fair value through other comprehensive income, net		200,194		683,117
Gain on disposal of investments accounted for using equity method, net		-		(7,126)
Loss on foreign exchange, net		4,308,948		4,576,295
Dividend income		(591,729)		(566,879)
Others		1,049,215		(435,644)
Changes in operating assets and liabilities:
Financial instruments at fair value through profit or loss		8,436,241		842,623
Notes and accounts receivable, net		(8,368,318)		(69,369,394)
Receivables from related parties		(1,335,027)		(780,022)
Other receivables from related parties		(267,864)		71,620
Inventories		(240,675)		(36,871,722)
Other financial assets		64,524,848		(2,377,515)
Other current assets		(74,620,318)		(15,537,261)
Other noncurrent assets		(38,798,107)		(3,862,018)
Accounts payable		9,751,037		17,073,801
Payables to related parties		352,732		(140,299)
Salary and bonus payable		16,421,373		14,250,946
Accrued profit sharing bonus to employees and compensation to directors		32,484,128		20,154,206
Accrued expenses and other current liabilities		(103,215,542)		74,659,388
Other noncurrent liabilities		385,084		16,768,683
Net defined benefit liability		(2,261,642)		(1,532,202)
Cash generated from operations		2,542,533,077		2,009,817,187
Income taxes paid		(267,557,452)		(183,640,119)
Net cash generated by operating activities		2,274,975,625		1,826,177,068
				(Continued)

- 11 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

		2025		2024
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Financial instruments at fair value through profit or loss		$ (260,086)		$ (1,178,766)
Financial assets at fair value through other comprehensive income		(66,823,227)		(87,787,521)
Financial assets at amortized cost		(188,288,632)		(151,656,371)
Hedging financial instruments		(631,620)		-
Investments accounted for using equity method		-		(3,738,753)
Property, plant and equipment		(1,272,410,529)		(956,006,536)
Intangible assets		(10,146,942)		(8,875,660)
Proceeds from disposal or redemption of:
Financial assets at fair value through other comprehensive income		80,052,393		67,684,556
Financial assets at amortized cost		138,203,740		118,350,898
Property, plant and equipment		797,045		894,573
Intangible assets		-		57,182
Derecognition of derivative financial instruments		(5,703,098)		-
Proceeds from return of capital of investments in equity instruments at fair value through other comprehensive income		101,486		325,952
Derecognition of hedging financial instruments		566,873		118,320
Interest received		98,954,730		76,434,070
Proceeds from government grants - property, plant and equipment		76,258,790		75,163,982
Proceeds from government grants - others		-		267
Other dividends received		635,098		541,803
Dividends received from investments accounted for using equity method		3,304,492		2,965,201
Increase in prepayments for leases		(39,840)		(99,427)
Refundable deposits paid		(420,179)		(1,304,815)
Refundable deposits refunded		1,456,099		3,268,276
Net cash used in investing activities		(1,144,393,407)		(864,842,769)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in hedging financial liabilities - bank loans		335,106		(26,496,570)
Proceeds from issuance of bonds		86,900,000		34,300,000
Repayment of bonds		(54,310,000)		(7,000,000)
Proceeds from long-term bank loans		10,658,400		30,897,000
Repayment of long-term bank loans		(2,710,000)		(2,295,556)
Payments for transaction costs attributable to the issuance of bonds		(90,308)		(35,681)
Treasury stock acquired		-		(3,089,177)
Repayment of the principal portion of lease liabilities		(3,496,528)		(2,873,640)
Interest paid		(19,128,799)		(18,751,233)
Guarantee deposits received		3,000		4,990
Guarantee deposits refunded		(48,549)		(93,332)
Cash dividends		(466,779,199)		(363,055,226)
Disposal of ownership interests in subsidiaries (without losing control)		-		1,021
Donation from shareholders		26,780		8,947
Increase in non-controlling interests		8,295,405		12,177,547
Net cash used in financing activities		(440,344,692)		(346,300,910)
				(Continued)

- 12 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

		2025		2024
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		$ (50,008,167)		$ 47,165,901
NET INCREASE IN CASH AND CASH EQUIVALENTS		640,229,359		662,199,290
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		2,127,627,043		1,465,427,753
CASH AND CASH EQUIVALENTS, END OF YEAR		$ 2,767,856,402		$ 2,127,627,043
The accompanying notes are an integral part of the consolidated financial statements.				(Concluded)

- 13 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024

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

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 issuance by the

Board of Directors on February 10, 2026.

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, “IFRS Accounting Standards”) endorsed and issued into effect by the Financial

Supervisory Commission (FSC)

The initial application of the amendments to the IFRS Accounting Standards endorsed and issued into

effect by the FSC did not have a material impact on the accounting policies of TSMC and its

subsidiaries (collectively as the “Company”).

b.The IFRS Accounting Standards issued by International Accounting Standards Board (IASB) and

endorsed by the FSC with effective date starting 2026

New, Amended and Revised Standards and Interpretations		Effective Date Issued by IASB
Amendments to IFRS 9 and IFRS 7 “Amendments to the Classification and Measurement of Financial Instruments” - the amendments to the application guidance of classification of financial assets		January 1, 2026
Annual Improvements to IFRS Accounting Standards - Volume 11		January 1, 2026
Amendments to IFRS 9 and IFRS 7 “Contracts Referencing Nature- dependent Electricity”		January 1, 2026

- 14 -

c.The IFRS Accounting Standards issued by IASB, but not yet endorsed and issued into effect by the FSC

New, Amended and Revised 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
IFRS 18 “Presentation and Disclosure in Financial Statements”		January 1, 2027 (Note)

Note : On September 25, 2025, the FSC announced that IFRS 18 will take effect starting from January

1, 2028. Domestic entities could elect to apply IFRS 18 for an earlier period after the

endorsement of IFRS 18 by the FSC.

IFRS 18 “Presentation and Disclosure in Financial Statements” and consequential amendments

IFRS 18 will supersede IAS 1“ Presentation of Financial Statements”. The main changes comprise:

•Items of income and expenses included in the statement of profit or loss shall be classified into the

operating, investing, financing, income taxes and discontinued operations categories.

•The statement of profit or loss shall present totals and subtotals for operating profit or loss, profit or

loss before financing and income taxes and profit or loss.

•Provides guidance to enhance the requirements of aggregation and disaggregation: The Company

shall identify the assets, liabilities, equity, income, expenses and cash flows that arise from

individual transactions or other events and shall classify and aggregate them into groups based on

shared characteristics, so as to result in the presentation in the primary financial statements of line

items that have at least one similar characteristic. The Company shall disaggregate items with

dissimilar characteristics in the primary financial statements and in the notes. The Company labels

items as “other” only if it cannot find a more informative label.

In addition, a consequential amendment has been made to IAS 7 “Statement of Cash Flows”, requiring

the Company to use operating profit or loss as the starting point when presenting cash flows from

operating activities under the indirect method.

Except for the above impact, as of the date the accompanying consolidated financial statements were

issued, the Company continues in evaluating other impacts of the above amended standards and 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.

4. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION

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 the IFRS Accounting

- 15 -

Standards endorsed by the FSC with the effective dates (collectively, “Taiwan-IFRS Accounting

Standards”).

Basis of Preparation

The accompanying consolidated financial statements have been prepared on the historical cost basis except

for financial instruments that are measured at fair values, as explained in the accounting policies below.

Historical cost is generally based on the fair value of the consideration given in exchange for the assets.

Basis of Consolidation

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

The consolidated financial statements incorporate the financial statements of TSMC and entities controlled

by TSMC (its subsidiaries).

Income and expenses of subsidiaries acquired or disposed of are included in the consolidated statement of

comprehensive income from the effective date of acquisition and up to the effective date of disposal, as

appropriate. Total comprehensive income of subsidiaries is attributed to the shareholders of the parent and

to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting

policies into line with those used by the Company.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing

control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the

Company’s interests and the non-controlling interests are adjusted to reflect the changes in their relative

interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are

adjusted and the fair value of the consideration paid or received is recognized directly in equity and

attributed to shareholders of the parent.

When the Company loses control of a subsidiary, a gain or loss is recognized in profit or loss and is

calculated as the difference between:

a.the aggregate of the fair value of consideration received and the fair value of any retained interest at the

date when control is lost; and

b.the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any

non-controlling interest.

The Company shall account for all amounts recognized in other comprehensive income in relation to the

subsidiary on the same basis as would be required if the Company had directly disposed of the related assets

and liabilities.

The fair value of any investment retained in the former subsidiary at the date when control is lost is

regarded as the cost on initial recognition of an investment in an associate.

The subsidiaries in the consolidated financial statements

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

- 16 -

Establishment

Percentage of Ownership

Name of Investor

Name of Investee

Main Businesses and Products

and Operating Location

December 31, 2025

December 31, 2024

Note

TSMC

TSMC North America

Sales and marketing of integrated circuits and other semiconductor devices

San Jose, California, U.S.A.

100%

100%

-

TSMC Europe B.V. (TSMC Europe)

Customer service and supporting activities

Amsterdam, the Netherlands

100%

100%

a)

TSMC Japan Limited (TSMC Japan)

Customer service and supporting activities

Yokohama, Japan

100%

100%

a)

TSMC Design Technology Japan, Inc. (TSMC JDC)

Engineering support activities

Yokohama, Japan

100%

100%

a)

TSMC Japan 3DIC R&D Center, Inc. (TSMC 3DIC)

Engineering support activities

Yokohama, Japan

100%

100%

a)

TSMC Korea Limited (TSMC Korea)

Customer service and supporting activities

Seoul, Korea

100%

100%

a)

TSMC Partners, Ltd. (TSMC Partners)

Investing in companies involved in the semiconductor design and manufacturing, and other investment activities

Tortola, British Virgin Islands

100%

100%

-

TSMC Global Ltd. (TSMC Global)

Investment activities

Tortola, British Virgin Islands

100%

100%

-

TSMC China Company Limited (TSMC China)

Manufacturing, sales, testing and computer-aided design of integrated circuits and other semiconductor devices

Shanghai, China

100%

100%

-

TSMC Nanjing Company Limited (TSMC Nanjing)

Manufacturing, sales, testing and computer-aided design of integrated circuits and other semiconductor devices

Nanjing, China

100%

100%

-

VisEra Technologies Company Ltd. (VisEra Tech)

Research, design, development, manufacturing, sales, packaging and test of color filter

Hsinchu, Taiwan

67%

67%

-

TSMC Arizona Corporation (TSMC Arizona)

Manufacturing, sales and testing of integrated circuits and other semiconductor devices

Phoenix, Arizona, U.S.A.

100%

100%

-

Japan Advanced Semiconductor Manufacturing, Inc. (JASM)

Manufacturing, sales and testing of integrated circuits and other semiconductor devices

Kumamoto, Japan

73%

73%

-

European Semiconductor Manufacturing Company (ESMC) GmbH (ESMC)

Manufacturing, sales and testing of integrated circuits and other semiconductor devices

Dresden, Germany

70%

70%

-

VentureTech Alliance Fund II, L.P. (VTAF II)

Investing in technology start-up companies

Cayman Islands

-

98%

b), c)

VentureTech Alliance Fund III, L.P. (VTAF III)

Investing in technology start-up companies

Cayman Islands

-

98%

b), c)

Emerging Fund, L.P. (Emerging Fund)

Investing in technology start-up companies

Cayman Islands

99.9%

99.9%

b)

TSMC Partners

TSMC Development, Inc. (TSMC Development)

Investing in companies involved in semiconductor manufacturing

Delaware, U.S.A.

100%

100%

-

TSMC Technology, Inc. (TSMC Technology)

Engineering support activities

Delaware, U.S.A.

100%

100%

a)

TSMC Design Technology Canada Inc. (TSMC Canada)

Engineering support activities

Ontario, Canada

100%

100%

a)

VTAF III

Growth Fund Limited (Growth Fund)

Investing in technology start-up companies

Cayman Islands

-

100%

b), c)

TSMC Development

TSMC Washington, LLC (TSMC Washington)

Manufacturing, sales and testing of integrated circuits and other semiconductor devices

Washington, U.S.A.

100%

100%

-

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: This is an immaterial subsidiary for which the consolidated financial statements for the year ended, are audited by the Company’s independent auditors.

Note c: VTAF II/VTAF III and the Growth Fund have completed the liquidation procedures respectively in the first quarter and the second quarter of 2025.

Foreign Currencies

The financial statements of each individual consolidated entity were expressed in the currency which

reflected its primary economic environment (functional currency). The functional currency of TSMC and

presentation currency of the consolidated financial statements are both New Taiwan Dollars (NT$). In

preparing the consolidated financial statements, the operating results and financial positions of each

consolidated entity are translated into NT$.

In preparing the financial statements of each individual consolidated entity, transactions in currencies other

than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing

- 17 -

at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign

currencies are retranslated at the rates prevailing at that date. Such exchange differences are recognized in

profit or loss in the year in which they arise. Non-monetary items measured at fair value that are

denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was

determined. Exchange differences arising on the retranslation of non-monetary items are included in profit

or loss for the year except for exchange differences arising on the retranslation of non-monetary items in

respect of which gains and losses are recognized directly in other comprehensive income, in which case, the

exchange differences are also recognized directly in other comprehensive income. Non-monetary items that

are measured in terms of historical cost in foreign currencies are not retranslated.

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Company’s

foreign operations are translated into NT$ using exchange rates prevailing at the end of each reporting

period. Income and expense items are translated at the average exchange rates for the period. Exchange

differences arising, if any, are recognized in other comprehensive income and accumulated in equity

(attributed to non-controlling interests as appropriate).

Classification of Current and Noncurrent Assets and Liabilities

Current assets are assets held for trading purposes and assets expected to be converted to cash, sold or

consumed within one year from the end of the reporting period. Current liabilities are obligations incurred

for trading purposes and obligations expected to be settled within one year from the end of the reporting

period. Assets and liabilities that are not classified as current are noncurrent assets and liabilities,

respectively.

Cash Equivalents

Cash equivalents, for the purpose of meeting short-term cash commitments, consist of highly liquid time

deposits and investments that are readily convertible to known amounts of cash and which are subject to an

insignificant risk of changes in value.

Financial Instruments

Financial assets and liabilities shall be recognized when the Company becomes a party to the contractual

provisions of the instruments.

Financial assets and liabilities are initially recognized at fair values. Transaction costs that are directly

attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets

and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of

the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly

attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are

recognized immediately in profit or loss.

Financial Assets

The classification of financial assets depends on the nature and purpose of the financial assets and is

determined at the time of initial recognition. Regular way purchases or sales of financial assets are

recognized and derecognized on a trade date or settlement date basis for which financial assets were

classified in the same way, respectively. Regular way purchases or sales are purchases or sales of financial

assets that require delivery of assets within the time frame established by regulation or convention in the

marketplace.

a.Category of financial assets and measurement

Financial assets are classified into the following categories: financial assets at FVTPL, investments in

debt instruments and equity instruments at FVTOCI, and financial assets at amortized cost.

- 18 -

1)Financial asset at FVTPL

For certain financial assets which include debt instruments that do not meet the criteria of amortized

cost or FVTOCI, it is mandatorily required to measure them at FVTPL. Any gain or loss arising

from remeasurement is recognized in profit or loss. The net gain or loss recognized in profit or loss

incorporates any interest earned on the financial asset.

2)Investments in debt instruments at FVTOCI

Debt instruments with contractual terms specifying that cash flows are solely payments of principal

and interest on the principal amount outstanding, together with objective of collecting contractual

cash flows and selling the financial assets, are measured at FVTOCI.

Interest income calculated using the effective interest method, foreign exchange gains and losses

and impairment gains or losses on investments in debt instruments at FVTOCI are recognized in

profit or loss. Other changes in the carrying amount of these debt instruments are recognized in

other comprehensive income and will be reclassified to profit or loss when these debt instruments

are disposed.

3)Investments in equity instruments at FVTOCI

On initial recognition, the Company may irrevocably designate investments in equity investments

that is not held for trading as at FVTOCI.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains

and losses arising from changes in fair value recognized in other comprehensive income and

accumulated in other equity.

Dividends on these investments in equity instruments at FVTOCI are recognized in profit or loss

when the Company’s right to receive the dividends is established, unless the Company’s rights

clearly represent a recovery of part of the cost of the investment.

4)Measured at amortized cost

Cash and cash equivalents, commercial paper, debt instrument investments, notes and accounts

receivable (including related parties), other receivables, refundable deposits and temporary

payments (including those classified under other current assets and other noncurrent assets) are

measured at amortized cost.

Debt instruments with contractual terms specifying that cash flows are solely payments of principal

and interest on the principal amount outstanding, together with objective of holding financial assets

in order to collect contractual cash flows, are measured at amortized cost.

Subsequent to initial recognition, financial assets measured at amortized cost are measured at

amortized cost, which equals to carrying amount determined by the effective interest method less

any impairment loss.

- 19 -

b.Impairment of financial assets

At the end of each reporting period, a loss allowance for expected credit loss is recognized for financial

assets at amortized cost (including accounts receivable) and for investments in debt instruments that are

measured at FVTOCI.

The loss allowance for accounts receivable is measured at an amount equal to lifetime expected credit

losses. For financial assets at amortized cost and investments in debt instruments that are measured at

FVTOCI, when the credit risk on the financial instrument has not increased significantly since initial

recognition, a loss allowance is recognized at an amount equal to expected credit loss resulting from

possible default events of a financial instrument within 12 months after the reporting date. If, on the

other hand, there has been a significant increase in credit risk since initial recognition, a loss allowance

is recognized at an amount equal to expected credit loss resulting from all possible default events over

the expected life of a financial instrument.

The Company recognizes an impairment loss in profit or loss for all financial instruments with a

corresponding adjustment to their carrying amount through a loss allowance account, except for

investments in debt instruments that are measured at FVTOCI, for which the loss allowance is

recognized in other comprehensive income and does not reduce the carrying amount of the financial

asset.

c.Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the

financial asset expire, or when it transfers the financial asset and substantially all the risks and rewards

of ownership of the financial asset to another entity.

On derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s

carrying amount and the sum of the consideration received and receivable is recognized in profit or loss.

On derecognition of an investment in a debt instrument at FVTOCI, the difference between the asset’s

carrying amount and the sum of the consideration received and receivable and the cumulative gain or

loss that had been recognized in other comprehensive income is recognized in profit or loss. However,

on derecognition of an investment in an equity instrument at FVTOCI, the cumulative gain or loss that

had been recognized in other comprehensive income is transferred directly to retained earnings, without

recycling through profit or loss.

Financial Liabilities and Equity Instruments

Classification as debt or equity

Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity

in accordance with the substance of the contractual arrangements and the definitions of a financial liability

and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after

deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds

received, net of direct issue costs.

Financial liabilities

Financial liabilities are subsequently measured either at amortized cost using effective interest method or at

FVTPL.

- 20 -

Financial liabilities are classified as at fair value through profit or loss when the financial liability is either

held for trading or is designated as at fair value through profit or loss.

Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or losses

arising on remeasurement recognized in profit or loss.

Financial liabilities other than those held for trading purposes and designated as at FVTPL are subsequently

measured at amortized cost at the end of each reporting period.

Derecognition of financial liabilities

The Company derecognizes financial liabilities when, and only when, the Company’s obligations are

discharged, cancelled or they expire. The difference between the carrying amount of the financial liability

derecognized and the consideration paid and payable is recognized in profit or loss.

Derivative Financial Instruments

Derivative financial instruments are initially recognized at fair value at the date the derivative contracts are

entered into and are subsequently remeasured to their fair value at the end of each reporting period. The

resulting gain or loss is recognized in profit or loss immediately unless the derivative financial instrument is

designated and effective as a hedging instrument, in which event the timing of the recognition in profit or

loss depends on the nature of the hedge relationship.

Hedge Accounting

a.Fair value hedge

The Company designates certain hedging instruments, such as interest rate futures contracts, to partially

hedge against the fair value change caused by interest rates fluctuation in the Company’s fixed income

investments. Changes in the fair value of hedging instruments that are designated and qualify as fair

value hedges are recognized in profit or loss immediately, together with any changes in the fair value of

the hedged items that are attributable to the hedged risk.

b.Cash flow hedge

The Company designates certain hedging instruments, such as forward exchange contracts and bank

deposits denominated in foreign currency, to partially hedge its foreign exchange rate risks associated

with certain highly probable forecast transactions (e.g. capital expenditures). The effective portion of

changes in the fair value of hedging instruments is recognized in other comprehensive income. When

forecast transactions actually take place, the accumulated gains or losses that were recognized in other

comprehensive income are transferred from equity to the initial cost of the hedged items, or reclassified

to finance costs of hedged items in the same period or periods during which the hedged expected future

cash flows affect profit or loss. The gains or losses from hedging instruments relating to the ineffective

portion are recognized immediately in profit or loss.

The Company prospectively discontinues hedge accounting only when the hedging relationship ceases

to meet the qualifying criteria; for instance, when the hedging instrument expires or is sold, terminated

or exercised.

c.Hedges of net investments in foreign operations

The Company designates certain hedging instruments, such as bank loans denominated in foreign

currency, as a hedge of net investments in foreign operations to manage the exchange differences

arising on translation of foreign operations due to currency fluctuations. Any gains or losses on the

hedging instrument relating to the effective portion of the hedge are recognized in other comprehensive

- 21 -

income and accumulated under the heading of foreign currency translation reserve. The gains or losses

relating to the ineffective portion are recognized immediately in profit or loss.

The gains and losses on the hedging instrument relating to the effective portion of the hedge, which

were accumulated in the foreign currency translation reserve, are reclassified to profit or loss on the

disposal or partial disposal of a foreign operation.

Inventories

Inventories are stated at the lower of cost or net realizable value. Inventories are recorded at standard cost

and adjusted to approximate weighted-average cost at the end of the reporting period. Net realizable value

represents the estimated selling price of inventories less all estimated costs of completion and costs

necessary to make the sale.

Investments Accounted for Using Equity Method

Investments accounted for using the equity method are investments in associates.

An associate is an entity over which the Company has significant influence and that is neither a subsidiary

nor a joint venture. Significant influence is the power to participate in the financial and operating policy

decisions of the investee but is not control or joint control over those policies.

The operating results and assets and liabilities of associates are incorporated in these consolidated financial

statements using the equity method of accounting. Under the equity method, an investment in an associate

is initially recognized in the consolidated statements of financial position at cost and adjusted thereafter to

recognize the Company’s share of profit or loss and other comprehensive income of the associate as well as

the distribution received. The Company also recognizes its share in the changes in the equities of associates.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable

assets, liabilities and contingent liabilities of an associate recognized at the date of acquisition is recognized

as goodwill, which is included within the carrying amount of the investment. Any excess of the Company’s

share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of

acquisition, after reassessment, is recognized immediately in profit or loss.

When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment

as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to

sell) with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the

investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of

the investment subsequently increases.

The Company discontinues the use of the equity method from the date when the Company ceases to have

significant influence over an associate. When the Company retains an interest in the former associate, the

Company measures the retained interest at fair value at that date. The difference between the carrying

amount of the associate at the date the equity method was discontinued, and the fair value of any retained

interest and any proceeds from disposing of a part interest in the associate is included in the determination

of the gain or loss on disposal of the associate. In addition, the Company shall account for all amounts

recognized in other comprehensive income in relation to that associate on the same basis as would be

required if the associate had directly disposed of the related assets or liabilities. If the Company’s ownership

interest in an associate is reduced as a result of disposal, but the investment continues to be an associate, the

Company should reclassify to profit or loss only a proportionate amount of the gain or loss previously

recognized in other comprehensive income.

- 22 -

When the Company subscribes to additional shares in an associate at a percentage different from its existing

ownership percentage, the resulting carrying amount of the investment differs from the amount of the

Company’s proportionate interest in the net assets of the associate. The Company records such a difference

as an adjustment to investments with the corresponding amount charged or credited to capital surplus. If the

Company’s ownership interest is reduced due to the additional subscription to the shares of associate by

other investors, the proportionate amount of the gains or losses previously recognized in other

comprehensive income in relation to that associate shall be reclassified to profit or loss on the same basis as

would be required if the associate had directly disposed of the related assets or liabilities.

When a consolidated entity transacts with an associate, profits and losses resulting from the transactions

with the associate are recognized in the Company’s consolidated financial statements only to the extent of

interests in the associate that are not owned by the Company.

Property, Plant and Equipment

Property, plant and equipment are measured at cost less accumulated depreciation and accumulated

impairment. Costs include any incremental costs that are directly attributable to the construction, acquisition

of the item of property, plant and equipment or borrowing costs eligible for capitalization.

Property, plant and equipment in the course of construction for production, supply or administrative

purposes are carried at cost, less any recognized impairment loss. Such assets are classified to the

appropriate categories of property, plant and equipment when completed and ready for intended use.

Depreciation of these assets, on the same basis as other identical categories of property, plant and

equipment, commences when the assets are available for their intended use.

Depreciation is recognized so as to write off the cost of the assets less their residual values over their useful

lives, and it is computed using the straight-line method mainly over the following estimated useful lives:

land improvements - 10 to 20 years; buildings (assets used by the Company and assets subject to operating

leases) - 10 to 20 years; machinery and equipment (assets used by the Company and assets subject to

operating leases) - 5 years; and office equipment - 5 years. The estimated useful lives, residual values and

depreciation method are reviewed at the end of each reporting period, with the effect of any changes in

estimates accounted for on a prospective basis. Land is not depreciated.

An item of property, plant and equipment is derecognized upon disposal or when no future economic

benefits are expected to arise from the continued use of the assets. Any gain or loss arising on the disposal

or retirement of an item of property, plant and equipment is determined as the difference between the sales

proceeds and the carrying amount of the asset and is recognized in profit or loss.

Leases

For a contract that contains a lease component and non-lease component, the Company may elect to account

for the lease and non-lease components as a single lease component.

The Company as lessor

Rental income from operating lease is recognized on a straight-line basis over the term of the lease.

The Company as lessee

Except for payments for low-value asset leases and short-term leases (leases of machinery and equipment

and others) which are recognized as expenses on a straight-line basis, the Company recognizes right-of-use

assets and lease liabilities for all leases at the commencement date of the lease.

- 23 -

Right-of-use assets are measured at cost. The cost of right-of-use assets comprises the initial measurement

of lease liabilities adjusted for lease payments and initial direct costs made at or before the commencement

date, plus an estimate of costs needed to restore the underlying assets. Subsequent measurement is

calculated as cost less accumulated depreciation and accumulated impairment loss and adjusted for changes

in lease liabilities as a result of lease term modifications or other related factors. Right-of-use assets are

presented separately in the consolidated balance sheets.

Right-of-use assets are depreciated using the straight-line method from the commencement dates to the

earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms. If the lease

transfers ownership of the underlying assets to the Company by the end of the lease terms or if the cost of

right-of-use assets reflects that the Company will exercise a purchase option, the Company depreciates the

right-of-use assets from the commencement dates to the end of the useful lives of the underlying assets.

Lease liabilities are measured at the present value of the lease payments. Lease payments comprise fixed

payments, variable lease payments which depend on an index or a rate and the exercise price of a purchase

option if the Company is reasonably certain to exercise that option. The lease payments are discounted

using the lessee’s incremental borrowing rates.

Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with

interest expense recognized over the lease terms. When there is a change in a lease term, a change in future

lease payments resulting from a change in an index or a rate used to determine those payments, or a change

in the assessment of an option to purchase an underlying asset, the Company remeasures the lease liabilities

with a corresponding adjustment to the right-of-use assets. Lease liabilities are presented on a separate line

in the consolidated balance sheets.

Intangible Assets

Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of

the business less accumulated impairment losses, if any.

Other intangible assets

Other separately acquired intangible assets with finite useful lives are carried at cost less accumulated

amortization and accumulated impairment losses. Amortization is recognized using the straight-line method

over the following estimated useful lives: Technology license fees - the estimated life of the technology or

the term of the technology transfer contract; software and system design costs - 3 years or contract period;

patent and others - the economic life or contract period. The estimated useful life and amortization method

are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted

for on a prospective basis.

Impairment of Tangible Assets, Right-of-use Assets and Intangible Assets

Goodwill

Goodwill is not amortized and instead is tested for impairment annually, or more frequently when there is

an indication that the cash generating unit may be impaired. For the purpose of impairment testing,

goodwill is allocated to each of the Company’s cash-generating units or groups of cash-generating units that

are expected to benefit from the synergies of the combination. If the recoverable amount of a cash-

generating unit is less than its carrying amount, the difference is allocated first to reduce the carrying

amount of any goodwill allocated to such cash generating unit and then to the other assets of the cash

generating unit pro rata based on the carrying amount of each asset in the cash generating unit. Any

impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for

goodwill is not reversed in subsequent periods.

- 24 -

Tangible assets, right-of-use assets and other intangible assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible assets

(property, plant and equipment), right-of-use assets and other intangible assets to determine whether there is

any indication that those assets have suffered an impairment loss. If any such indication exists, the

recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When

it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the

recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and

consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-

generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a

reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use,

the estimated future cash flows are discounted to their present value using a pre-tax discount rate that

reflects current market assessments of the time value of money and the risks specific to the asset for which

the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying

amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An

impairment loss is recognized immediately in profit or loss.

When an impairment loss subsequently reverses, the carrying amount of the asset or a cash-generating unit

is increased to the revised estimate of its recoverable amount, but the increased carrying amount does not

exceed the carrying amount that would have been determined had no impairment loss been recognized for

the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized immediately

in profit or loss.

Revenue Recognition

The Company recognizes revenue when performance obligations are satisfied. The performance obligations

are satisfied when customers obtain control of the promised goods, which is generally when the goods are

delivered to the customers’ specified locations.

Revenue from sale of goods is measured at the fair value of the consideration received or receivable.

Revenue is reduced for estimated customer returns, rebates and other similar allowances. Estimated sales

returns and other allowances is generally made and adjusted based on historical experience and the

consideration of varying contractual terms to recognize refund liabilities, which is classified under accrued

expenses and other current liabilities.

In principle, payment term granted to customers is due 30 days from the invoice date or 15 days from the

end of the month of when the invoice is issued. Due to the short term nature of the receivables from sale of

goods with the immaterial discounted effect, the Company measures them at the original invoice amounts

without discounting.

Employee Benefits

Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount

of the benefits expected to be paid in exchange for service rendered by employees.

- 25 -

Retirement benefits

For defined contribution retirement benefit plans, payments to the benefit plan are recognized as an expense

when the employees have rendered service entitling them to the contribution. For defined benefit retirement

benefit plans, the cost of providing benefit is recognized based on actuarial calculations.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit

retirement benefit plans are determined using the Projected Unit Credit Method. Service cost (including

current service cost), and net interest on the net defined benefit liability (asset) are recognized as employee

benefits expense in the period they occur. Remeasurement, comprising actuarial gains and losses and the

return on plan assets (excluding interest), is recognized in other comprehensive income in the period in

which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in

retained earnings and will not be reclassified to profit or loss.

Net defined benefit liability represents the actual deficit in the Company’s defined benefit plan.

Treasury Stock

Treasury stock represents the outstanding shares that the Company buys back from market, which is stated

at cost and shown as a deduction in shareholders’ equity. When the Company retires treasury stock, the

treasury stock account is reduced and the common stock as well as the capital surplus - additional paid-in

capital are reversed on a pro rata basis. When the book value of the treasury stock exceeds the sum of the

par value and additional paid-in capital, the difference is charged to capital surplus - treasury stock

transactions and to retained earnings for any remaining amount.

Share-based payment arrangements

a.Equity-settled share-based payment arrangements

Restricted shares for employees are expensed on a straight-line basis over the vesting period, based on

the fair value at the grant date and the Company’s best estimate of the number expected to ultimately

vest, with a corresponding increase in other equity - unearned stock-based employee compensation.

When restricted shares for employees are issued, other equity - unearned stock-based employee

compensation is recognized on the grant date, with a corresponding increase in capital surplus -

restricted shares for employees. Dividends paid to employees on restricted shares which do not need to

be returned if employees resign in the vesting period are recognized as expenses upon the dividend

declaration with a corresponding adjustment in retained earnings.

At the end of each reporting period, the Company revises its estimate of the number of restricted shares

for employees that are expected to vest. The impact from such revision is recognized in profit or loss so

that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to capital

surplus - restricted shares for employees.

b.Cash-settled share-based payment arrangements

For cash-settled share-based payments, a liability is recognized for the services acquired, measured at

the fair value of the liability incurred. At the end of each reporting period until the liability is settled,

and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value

recognized in profit or loss.

- 26 -

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

Income tax on unappropriated earnings (excluding earnings from foreign consolidated subsidiaries) is

expensed in the year the shareholders approved the appropriation of earnings which is the year subsequent

to the year the earnings are generated.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities

in the consolidated financial statements and the corresponding tax bases used in the computation of taxable

profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax

assets are generally recognized for all deductible temporary differences, net operating loss carryforwards

and tax credits arising from purchases of machinery and equipment and research and development

expenditures to the extent that it is probable that taxable profits will be available against which those

deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in

subsidiaries and associates, except where the Company is able to control the reversal of the temporary

difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets arising from deductible temporary differences associated with such investments are only

recognized to the extent that it is probable that there will be sufficient taxable profits against which to

utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to

the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of

the deferred tax asset to be recovered. The deferred tax assets which originally not recognized is also

reviewed at the end of each reporting period and recognized to the extent that it is probable that sufficient

taxable profits will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the year in

which the liability is settled or the asset is realized, based on tax rates (and tax laws) that have been enacted

or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and

assets reflects the tax consequences that would follow from the manner in which the Company expects, at

the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax for the year

Current and deferred tax are recognized in profit or loss, except when they relate to items that are

recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax

are also recognized in other comprehensive income or directly in equity, respectively.

- 27 -

Government Grants

Government grants are not recognized until there is reasonable assurance that the Company will comply

with the conditions attaching to them and that the grants will be received.

Government grants whose primary condition is that the Company should purchase, construct or otherwise

acquire noncurrent assets (mainly including land use right and depreciable assets) are recognized as a

deduction from the carrying amount of the related assets and recognized as a reduced depreciation or

amortization charge in profit or loss over the contract period or useful lives of the related assets.

Government grants that are receivables as compensation for expenses already incurred are deducted from

incurred expenses in the period in which they become receivables.

5. MATERIAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND

UNCERTAINTY

In the application of the aforementioned Company’s accounting policies, the Company is required to make

judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not

readily apparent from other sources. The estimates and associated assumptions are based on historical

experience and other factors that are considered to be relevant. Actual results may differ from these

estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognized in the year in which the estimate is revised if the revision affects only that year, or

in the year of the revision and future years if the revision affects both current and future years.

Material Accounting Judgments

Revenue Recognition

The Company recognizes revenue when the conditions described in Note 4 are satisfied.

Commencement of Depreciation Related to Property, Plant and Equipment Classified as Equipment

under Installation and Construction in Progress (EUI/CIP)

As described in Note 4, commencement of depreciation related to 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.

Key Sources of Estimation and Uncertainty

Estimation of Sales Returns and Allowances

Sales returns and other allowance is estimated and recorded based on historical experience and in

consideration of different contractual terms. The amount is deducted from revenue in the same period the

related revenue is recorded. The Company periodically reviews the reasonableness of the estimates.

- 28 -

Valuation of Inventory

Inventories are stated at the lower of cost or net realizable value, and the Company uses estimate to

determine the net realizable value of inventory at the end of each reporting period.

The Company estimates the net realizable value of inventory for normal waste, obsolescence and

unmarketable items at the end of reporting period and then writes down the cost of inventories to net

realizable value. The net realizable value of the inventory is determined mainly based on assumptions of

future demand within a specific time horizon.

Impairment of Tangible Assets, Right-of-use Assets and Intangible Assets Other than Goodwill

In the process of evaluating the potential impairment of tangible assets, right-of-use assets and intangible

assets other than goodwill, the Company determines the independent cash flows, useful lives, expected

future revenue and expenses related to the specific asset groups with the consideration of the nature of

semiconductor industry. Any change in these estimates based on changed economic conditions or business

strategies could result in significant impairment charges or reversal in future years.

Realization of Deferred Income Tax Assets

Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be

available against which those deferred tax assets and unused tax losses can be utilized. Assessment of the

realization of the deferred tax assets requires subjective judgment and estimate, including the future revenue

growth and profitability, tax holidays, the amount of tax credits can be utilized and feasible tax planning

strategies. Any changes in the global economic environment, the industry trends and relevant laws and

regulations could result in significant adjustments to the deferred tax assets.

6. CASH AND CASH EQUIVALENTS

		December 31, 2025		December 31, 2024
Cash and deposits in banks		$ 2,761,829,868		$ 2,120,674,818
Government bonds/Agency bonds		2,627,142		-
Money market funds		2,056,733		2,826,701
Repurchase agreements		1,342,659		2,126,975
Commercial paper		-		1,998,549
		$ 2,767,856,402		$ 2,127,627,043

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.

- 29 -

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

		December 31, 2025		December 31, 2024
Financial assets
Convertible preferred stocks		$ 13,608,819		$ 14,181,839
Mutual funds		1,297,533		886,931
Simple agreement for future equity		125,776		131,072
Forward exchange contracts		100,200		207,700
		$ 15,132,328		$ 15,407,542
Current		$ 100,200		$ 207,700
Noncurrent		15,032,128		15,199,842
		$ 15,132,328		$ 15,407,542
Financial liabilities
Forward exchange contracts		$ 3,083,883		$ 466,539

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)
December 31, 2025
Sell US$		January 2026 to March 2026		US$ 9,234,000
Sell JPY		January 2026		JPY 6,095,977
December 31, 2024
Sell US$		January 2025 to March 2025		US$ 3,331,445
Sell JPY		January 2025		JPY 45,233,963

- 30 -

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

		December 31, 2025		December 31, 2024
Investments in debt instruments at FVTOCI
Corporate bonds		$ 88,636,098		$ 108,612,082
Agency mortgage-backed securities		49,150,771		46,611,373
Government bonds/Agency bonds		25,437,560		20,645,877
Asset-backed securities		8,512,188		11,490,511
		171,736,617		187,359,843
Investments in equity instruments at FVTOCI
Non-publicly traded equity investments		8,797,170		7,822,884
Publicly traded stocks		3,956,073		4,842,814
		12,753,243		12,665,698
		$ 184,489,860		$ 200,025,541
Current		$ 175,692,690		$ 192,202,657
Noncurrent		8,797,170		7,822,884
		$ 184,489,860		$ 200,025,541

These investments in equity instruments are held for medium to long-term purposes and therefore are

accounted for as financial assets at 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 years ended December 31, 2025 and 2024, as the Company adjusted its investment portfolio, equity

investments designated at FVTOCI were divested for NT$940,822 thousand and NT$6,189,982 thousand,

respectively. The related other equity-unrealized gain/loss on financial assets at FVTOCI of NT$541,198

thousand and NT$3,772,747 thousand were transferred to increase retained earnings, respectively.

As of December 31, 2025 and 2024, the cumulative loss allowance for expected credit loss of NT$43,815

thousand and NT$63,092 thousand was recognized under investments in debt instruments at FVTOCI,

respectively. Refer to Note 32 for information relating to the credit risk management and expected credit

loss.

9. FINANCIAL ASSETS AT AMORTIZED COST

		December 31, 2025		December 31, 2024
Corporate bonds		$ 231,374,019		$ 172,091,958
Government bonds/Agency bonds		4,213,491		4,379,527
Commercial paper		-		14,221,737
Less: Allowance for impairment loss		(134,187)		(125,358)
		$ 235,453,323		$ 190,567,864
				(Continued)

- 31 -

		December 31, 2025		December 31, 2024
Current		$ 124,945,519		$ 101,971,322
Noncurrent		110,507,804		88,596,542
		$ 235,453,323		$ 190,567,864
				(Concluded)

Refer to Note 32 for information relating to credit risk management and expected credit loss for financial

assets at amortized cost.

10. HEDGING FINANCIAL INSTRUMENTS

		December 31, 2025		December 31, 2024
Financial assets - current
Fair value hedges
Interest rate futures contracts		$ -		$ 10,959
Financial liabilities - current
Fair value hedges
Interest rate futures contracts		$ 817		$ -

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 have 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 risks.

- 32 -

December 31, 2025

Hedging Instruments		Contract Amount (US$ in Thousands)		Maturity
Interest rate futures contracts - US Treasury futures		US$ 23,700		March 2026

Hedged Items		Asset Carrying Amount		Accumulated Amount of Fair Value Hedge Adjustments
Financial assets at FVTOCI		$ 711,878		$  817

December 31, 2024

Hedging Instruments		Contract Amount (US$ in Thousands)		Maturity
Interest rate futures contracts - US Treasury futures		US$ 40,400		March 2025

Hedged Items		Asset Carrying Amount		Accumulated Amount of Fair Value Hedge Adjustments
Financial assets at FVTOCI		$ 3,129,235		$  (10,959)

The effect for the years ended December 31, 2025 and 2024 is detailed below:

Hedging Instruments/Hedged Items		Change in Value Used for Calculating Hedge Ineffectiveness
		Years Ended December 31
		2025		2024
Hedging Instruments
Interest rate futures contracts - US Treasury futures		$ (45,747)		$ 174,128
Hedged Items
Financial assets at FVTOCI		45,747		(174,128)
		$ -		$ -

- 33 -

Cash flow hedge

The Company has designated the bank deposits denominated in foreign currency and forward exchange

contracts to partially hedge foreign exchange rate risks associated with certain highly probable forecast

transactions (capital expenditures). The hedge ratio is adjusted in response to the changes in the financial

market and capped at 100%. The forward exchange contracts and foreign currency deposits have maturities

of 12 months or less.

On the basis of economic relationships, the Company expects that the value of forward exchange contracts

and the foreign currency deposits will move in opposite directions to the value of hedged transactions in

response to foreign exchange rates movements.

The main source of hedge ineffectiveness in these hedging relationships is driven by the effect of the

counterparty’s own credit risk on the fair value of forward exchange contracts and foreign currency

deposits. No other sources of ineffectiveness have emerged from these hedging relationships during the

hedging period. Refer to Note 20 (d) for gain or loss arising from changes in the fair value of hedging

instruments and hedged item affects profit or loss, and the amount transferred to initial carrying amount of

hedged items.

The effect for the years ended December 31, 2025 and 2024 is detailed below:

Hedging Instruments/Hedged Items	Change in Value Used for Calculating Hedge Ineffectiveness
	Years Ended December 31
	2025		2024
Hedging Instruments
Forward exchange contracts	$ -		$ 5,041
Foreign currency deposits	$ (31,030)		$ -
Hedged Items
Forecast transaction (capital expenditures)	$ 31,030		$ (5,041)

Hedges of net investments in foreign operations

TSMC has designated the bank loans denominated in foreign currency as a hedge of net investments in

foreign operations to manage its foreign currency risk arising from investment in overseas subsidiaries.

The main source of hedge ineffectiveness in these hedging relationships is driven by the material difference

between the notional amount of bank loans denominated in foreign currency and the net investment in

foreign operations. No other sources of ineffectiveness have emerged from these hedging relationships

during the hedging period. Refer to Note 20 (d) for gain or loss arising from changes in the fair value of

hedging instruments.

The effect for the years ended December 31, 2025 and 2024 is detailed below:

- 34 -

	Change in Value Used for Calculating Hedge Ineffectiveness
Hedging Instruments/Hedged Items	Years Ended December 31
	2025		2024
Hedging Instruments
Bank loans	$ 335,106		$ 793,830
Hedged Items
Net investments in foreign operations	$ (335,106)		$ (793,830)

11. NOTES AND ACCOUNTS RECEIVABLE, NET

		December 31, 2025		December 31, 2024
At amortized cost
Notes and accounts receivable		$ 271,835,077		$ 265,223,660
Less: Loss allowance		(478,617)		(453,009)
		271,356,460		264,770,651
At FVTOCI		7,695,093		5,912,584
		$ 279,051,553		$ 270,683,235

The Company signed a contract with the bank to sell certain accounts receivable without recourse and

transaction cost required. These accounts receivable are classified as at FVTOCI because they are held

within a business model whose objective is achieved by both collecting contractual cash flows and selling

financial assets.

In principle, the payment term granted to customers is due 30 days from the invoice date or 15 days from

the end of the month when the invoice is issued. Aside from recognizing impairment loss for credit-

impaired accounts receivable, the Company recognizes loss allowance based on the expected credit loss

ratio of customers by different risk levels with consideration of factors of historical loss ratios and

customers’ financial conditions, competitiveness and business outlook. For accounts receivable past due

over 90 days without collaterals or guarantees, the Company recognizes loss allowance at full amount.

Aging analysis of notes and accounts receivable

		December 31, 2025		December 31, 2024
Not past due		$ 263,766,991		$ 255,669,647
Past due
Past due within 30 days		15,762,377		15,464,122
Past due over 31 days		802		2,475
Less: Loss allowance		(478,617)		(453,009)
		$ 279,051,553		$ 270,683,235

All of the Company’s accounts receivable classified as at FVTOCI were not past due.

- 35 -

Movements of the loss allowance for accounts receivable

		Years Ended December 31
		2025		2024
Balance, beginning of year		$ 453,009		$ 531,554
Provision (Reversal)		25,628		(78,618)
Effect of exchange rate changes		(20)		73
Balance, end of year		$ 478,617		$ 453,009

For the years ended December 31, 2025 and 2024, the changes in loss allowance were mainly due to the

variations in the balance of accounts receivable of different risk levels.

12. INVENTORIES

		December 31, 2025		December 31, 2024
Finished goods		$ 29,412,948		$ 35,177,009
Work in process		188,014,421		181,198,808
Raw materials		45,863,351		46,449,249
Supplies and spare parts		24,818,765		25,043,744
		$ 288,109,485		$ 287,868,810

Write-down of inventories to net realizable value (excluding earthquake losses) and reversal of write-down

of inventories resulting from the increase in net realizable value were included in the cost of revenue, which

were as follows. Please refer to related earthquake losses in Note 36.

		Years Ended December 31
		2025		2024
Net inventory losses		$ 2,125,914		$ 888,682

13. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Associates consisted of the following:

Place of

Carrying Amount

% of Ownership and Voting Rights Held by the Company

Name of Associate

Principal Activities

Incorporation and Operation

December 31, 2025

December 31, 2024

December 31, 2025

December 31, 2024

Vanguard International Semiconductor Corporation (VIS)

Manufacturing, sales, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing and design service of masks

Hsinchu, Taiwan

$ 18,166,267

$ 18,300,373

28%

28%

Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)

Manufacturing and sales of integrated circuits and other semiconductor devices

Singapore

12,419,167

11,387,185

39%

39%

(Continued)

- 36 -

Place of

Carrying Amount

% of Ownership and Voting Rights Held by the Company

Name of Associate

Principal Activities

Incorporation and Operation

December 31, 2025

December 31, 2024

December 31, 2025

December 31, 2024

Xintec Inc. (Xintec)

Wafer level chip size packaging and wafer level post passivation interconnection service

Taoyuan, Taiwan

$ 4,495,255

$ 4,220,609

41%

41%

Global Unichip Corporation (GUC)

Researching, developing, manufacturing, testing and marketing of integrated circuits

Hsinchu, Taiwan

2,952,582

3,512,938

35%

35%

$ 38,033,271

$ 37,421,105

(Concluded)

As of December 31, 2025 and 2024, no investments in associates are individually material to the Company.

Please refer to the consolidated statements of comprehensive income for recognition of share of both profit

(loss) and other comprehensive income (loss) of associates that are not individually material.

The market prices of the associates’ ownership held by the Company in publicly traded stocks calculated

base on the closing price are summarized as follows. The closing price represents the quoted price in active

markets, the level 1 fair value measurement.

Name of Associate		December 31, 2025		December 31, 2024
GUC		$ 99,211,700		$ 63,495,488
VIS		$ 46,667,928		$ 50,620,261
Xintec		$ 15,468,187		$ 22,033,821

14. PROPERTY, PLANT AND EQUIPMENT

		December 31, 2025		December 31, 2024
Assets used by the Company		$ 3,690,642,070		$ 3,234,778,389
Assets subject to operating leases		1,198,846		201,681
		$ 3,691,840,916		$ 3,234,980,070

Assets used by the Company

		Land and Land Improvements		Buildings		Machinery and Equipment		Office Equipment		Equipment under Installation and Construction in Progress		Total
Cost
Balance at January 1, 2025		$ 13,054,161		$ 959,133,864		$ 5,852,202,689		$ 105,434,750		$ 1,080,284,237		$ 8,010,109,701
Additions		331,489		248,048,391		451,764,917		21,154,083		439,678,870		1,160,977,750
Disposals or retirements		-		(164,101)		(56,155,040)		(1,768,409)		-		(58,087,550)
Reclassification		-		(1,181,470)		-		-		-		(1,181,470)
Effect of exchange rate changes		60,122		(13,974,864)		(11,134,850)		(556,304)		(966,897)		(26,572,793)
Balance at December 31, 2025		$ 13,445,772		$ 1,191,861,820		$ 6,236,677,716		$ 124,264,120		$ 1,518,996,210		$ 9,085,245,638
												(Continued)

- 37 -

		Land and Land Improvements		Buildings		Machinery and Equipment		Office Equipment		Equipment under Installation and Construction in Progress		Total
Accumulated depreciation and impairment
Balance at January 1, 2025		$ 608,531		$ 440,369,241		$ 4,262,882,850		$ 70,679,950		$ 790,740		$ 4,775,331,312
Additions		19,744		71,348,050		590,058,063		13,943,195		-		675,369,052
Disposals or retirements		-		(107,649)		(53,440,071)		(1,760,469)		-		(55,308,189)
Reclassification		-		(127,932)		-		-		-		(127,932)
Impairment losses (reversed)		-		1,459		1,571,286		-		(790,740)		782,005
Effect of exchange rate changes		(24,419)		(188,843)		(1,150,606)		(78,812)		-		(1,442,680)
Balance at December 31, 2025		$ 603,856		$ 511,294,326		$ 4,799,921,522		$ 82,783,864		$ -		$ 5,394,603,568
Carrying amounts at December 31, 2025		$ 12,841,916		$ 680,567,494		$ 1,436,756,194		$ 41,480,256		$ 1,518,996,210		$ 3,690,642,070
Cost
Balance at January 1, 2024		$ 7,621,997		$ 817,822,975		$ 5,384,985,648		$ 99,825,084		$ 908,289,751		$ 7,218,545,455
Additions		5,542,937		141,097,129		490,799,015		13,719,182		147,349,074		798,507,337
Disposals or retirements		(278,309)		(119,819)		(34,140,462)		(8,334,071)		-		(42,872,661)
Reclassification		-		(197,752)		56,487		-		-		(141,265)
Effect of exchange rate changes		167,536		531,331		10,502,001		224,555		24,645,412		36,070,835
Balance at December 31, 2024		$ 13,054,161		$ 959,133,864		$ 5,852,202,689		$ 105,434,750		$ 1,080,284,237		$ 8,010,109,701
Accumulated depreciation and impairment
Balance at January 1, 2024		$ 558,074		$ 387,013,911		$ 3,699,008,492		$ 66,749,979		$ 790,740		$ 4,154,121,196
Additions		13,577		52,205,135		585,635,125		12,047,479		-		649,901,316
Disposals or retirements		-		(114,665)		(30,823,269)		(8,332,458)		-		(39,270,392)
Reclassification		-		(14,367)		53,721		-		-		39,354
Impairment losses		-		47,539		1,102,946		-		-		1,150,485
Effect of exchange rate changes		36,880		1,231,688		7,905,835		214,950		-		9,389,353
Balance at December 31, 2024		$ 608,531		$ 440,369,241		$ 4,262,882,850		$ 70,679,950		$ 790,740		$ 4,775,331,312
Carrying amounts at December 31, 2024		$ 12,445,630		$ 518,764,623		$ 1,589,319,839		$ 34,754,800		$ 1,079,493,497		$ 3,234,778,389
												(Concluded)

The significant part of the Company’s buildings includes main plants, mechanical and electrical power

equipment and clean rooms, and the related depreciation is calculated using the estimated useful lives of 20

years, 10 years and 10 years, respectively.

In the first quarter of 2025 and second quarter of 2024, the Company recognized impairment losses due to

partial plant facilities and machinery and equipment damage caused by earthquakes, which rendered them

unusable. Please refer to the related earthquake losses in Note 36.

The Company assesses impairment and recognizes impairment losses or reversal gains based on the asset's

usage status and expected usage plan. These are recorded under other operating income and expenses.  

Information about capitalized interest is set out in Note 23.

- 38 -

15. LEASE ARRANGEMENTS

a.Right-of-use assets

		December 31, 2025		December 31, 2024
Carrying amounts
Land		$ 39,873,344		$ 36,980,971
Buildings		4,005,321		3,103,902
Office equipment		40,245		43,518
		$ 43,918,910		$ 40,128,391

		Years Ended December 31
		2025		2024
Additions to right-of-use assets		$ 9,115,188		$ 4,579,647
Depreciation of right-of-use assets
Land		$ 3,001,993		$ 2,541,876
Buildings		1,233,455		1,114,297
Office equipment		23,084		23,334
		$ 4,258,532		$ 3,679,507

b.Lease liabilities

		December 31, 2025		December 31, 2024
Carrying amounts
Current portion (classified under accrued expenses and other current liabilities)		$ 3,833,015		$ 3,049,032
Noncurrent portion		31,594,992		28,755,342
		$ 35,428,007		$ 31,804,374

Ranges of discount rates for lease liabilities are as follows:

		December 31, 2025		December 31, 2024
Land		0.39%-3.50%		0.39%-2.30%
Buildings		0.40%-6.52%		0.40%-6.52%
Office equipment		0.28%-6.46%		0.28%-6.46%

- 39 -

c.Material terms of right-of-use assets

The Company leases land and buildings mainly for the use of plants and offices with lease terms of 1 to

36. The lease contracts for land located in the R.O.C. specify that lease payments will be adjusted every

2 years on the basis of changes in announced land value prices. The Company does not have purchase

options to acquire the leasehold land and buildings at the end of the lease terms.

d.Other lease information

		Years Ended December 31
		2025		2024
Total cash outflow for leases		$ 4,186,207		$ 3,415,463

16. INTANGIBLE ASSETS

		Goodwill		Technology License Fees		Software and System Design Costs		Patent and Others		Total
Cost
Balance at January 1, 2025		$ 6,070,864		$ 28,566,518		$ 53,279,044		$ 13,133,519		$ 101,049,945
Additions		-		1,218,118		5,846,742		317,492		7,382,352
Disposals or retirements		-		(82,470)		(667,707)		(74,922)		(825,099)
Effect of exchange rate changes		(179,782)		255		(6,695)		(39,004)		(225,226)
Balance at December 31, 2025		$ 5,891,082		$ 29,702,421		$ 58,451,384		$ 13,337,085		$ 107,381,972
Accumulated amortization and   impairment
Balance at January 1, 2025		$ -		$ 23,186,748		$ 40,100,685		$ 11,479,992		$ 74,767,425
Additions		-		1,408,633		6,447,363		556,416		8,412,412
Disposals or retirements		-		(82,470)		(663,159)		-		(745,629)
Effect of exchange rate changes		-		255		(5,437)		331		(4,851)
Balance at December 31, 2025		$ -		$ 24,513,166		$ 45,879,452		$ 12,036,739		$ 82,429,357
Carrying amounts at December 31, 2025		$ 5,891,082		$ 5,189,255		$ 12,571,932		$ 1,300,346		$ 24,952,615
										(Continued)

- 40 -

		Goodwill		Technology License Fees		Software and System Design Costs		Patent and Others		Total
Cost
Balance at January 1, 2024		$ 5,796,438		$ 26,221,351		$ 49,317,031		$ 12,347,434		$ 93,682,254
Additions		-		2,378,392		9,166,377		977,434		12,522,203
Disposals or retirements		-		(32,460)		(5,235,383)		(210,570)		(5,478,413)
Effect of exchange rate changes		274,426		(765)		31,019		19,221		323,901
Balance at December 31, 2024		$ 6,070,864		$ 28,566,518		$ 53,279,044		$ 13,133,519		$ 101,049,945
Accumulated amortization and   impairment
Balance at January 1, 2024		$ -		$ 20,490,070		$ 39,846,671		$ 10,578,769		$ 70,915,510
Additions		-		2,729,998		5,470,204		985,947		9,186,149
Disposals or retirements		-		(32,460)		(5,235,349)		(102,000)		(5,369,809)
Effect of exchange rate changes		-		(860)		19,159		17,276		35,575
Balance at December 31, 2024		$ -		$ 23,186,748		$ 40,100,685		$ 11,479,992		$ 74,767,425
Carrying amounts  at December 31, 2024		$ 6,070,864		$ 5,379,770		$ 13,178,359		$ 1,653,527		$ 26,282,520
										(Concluded)

The Company’s goodwill has been tested for impairment at the end of the annual reporting period and the

recoverable amount is determined based on the value in use. The value in use was calculated based on the

cash flow forecast from the financial budgets covering the future five-year period, and the Company used

annual discount rates of 9.5% and 9.3% in its test of impairment as of December 31, 2025 and 2024,

respectively, to reflect the relevant specific risk in the cash-generating unit.

For the years ended December 31, 2025 and 2024, the Company did not recognize any impairment loss on

goodwill.

17. BONDS PAYABLE

		December 31, 2025		December 31, 2024
Domestic unsecured bonds		$ 538,388,000		$ 478,536,000
Overseas unsecured bonds		455,938,000		507,904,000
Less: Discounts on bonds payable		(2,292,509)		(2,687,615)
Less: Current portion		(135,805,988)		(57,147,879)
		$ 856,227,503		$ 926,604,506

The major terms of domestic unsecured bonds are as follows:

- 41 -

Issuance		Tranche		Issuance Period		Total Issue Amount		Coupon Rate		Repayment and Interest Payment
NT$ unsecured   bonds
109-1		A		March 2020 to March 2025		$ 3,000,000		0.58%		Bullet repayment; interest payable annually
		B		March 2020 to March 2027		10,500,000		0.62%		The same as above
		C		March 2020 to March 2030		10,500,000		0.64%		The same as above
109-2		A		April 2020 to April 2025		5,900,000		0.52%		The same as above
		B		April 2020 to April 2027		10,400,000		0.58%		The same as above
		C		April 2020 to April 2030		5,300,000		0.60%		The same as above
109-3		A		May 2020 to May 2025		4,500,000		0.55%		The same as above
		B		May 2020 to May 2027		7,500,000		0.60%		The same as above
		C		May 2020 to May 2030		2,400,000		0.64%		The same as above
109-4		A		July 2020 to July 2025		5,700,000		0.58%		Two equal installments in last two years; interest payable annually
		B		July 2020 to July 2027		6,300,000		0.65%		The same as above
		C		July 2020 to July 2030		1,900,000		0.67%		The same as above
109-5		A		September 2020 to September 2025		4,800,000		0.50%		The same as above
		B		September 2020 to September 2027		8,000,000		0.58%		The same as above
		C		September 2020 to September 2030		2,800,000		0.60%		The same as above
109-6 (Green bond)		A		December 2020 to December 2025		1,600,000		0.40%		The same as above
		B		December 2020 to December 2027		5,600,000		0.44%		The same as above
		C		December 2020 to December 2030		4,800,000		0.48%		The same as above
109-7		A		December 2020 to December 2025		1,900,000		0.36%		The same as above
		B		December 2020 to December 2027		10,200,000		0.41%		The same as above
		C		December 2020 to December 2030		6,400,000		0.45%		The same as above
										(Continued)

- 42 -

Issuance		Tranche		Issuance Period		Total Issue Amount		Coupon Rate		Repayment and Interest Payment
110-1		A		March 2021 to March 2026		$ 4,800,000		0.50%		Bullet repayment; interest payable annually
		B		March 2021 to March 2028		11,400,000		0.55%		The same as above
		C		March 2021 to March 2031		4,900,000		0.60%		The same as above
110-2		A		May 2021 to May 2026		5,200,000		0.50%		The same as above
		B		May 2021 to May 2028		8,400,000		0.58%		The same as above
		C		May 2021 to May 2031		5,600,000		0.65%		The same as above
110-3		A		June 2021 to June 2026		6,900,000		0.52%		The same as above
		B		June 2021 to June 2028		7,900,000		0.58%		The same as above
		C		June 2021 to June 2031		4,900,000		0.65%		The same as above
110-4		A		August 2021 to August 2025		4,000,000		0.485%		The same as above
		B		August 2021 to August 2026		8,000,000		0.50%		The same as above
		C		August 2021 to August 2028		5,400,000		0.55%		The same as above
		D		August 2021 to August 2031		4,200,000		0.62%		The same as above
110-6		A		October 2021 to April 2026		3,200,000		0.535%		The same as above
		B		October 2021 to October 2026		6,900,000		0.54%		The same as above
		C		October 2021 to October 2028		4,600,000		0.60%		The same as above
		D		October 2021 to October 2031		1,600,000		0.62%		The same as above
110-7		A		December 2021 to December 2026		7,700,000		0.65%		The same as above
		B		December 2021 to June 2027		3,500,000		0.675%		The same as above
		C		December 2021 to December 2028		5,500,000		0.72%		The same as above
111-1 (Green bond)		A		January 2022 to January 2027		2,100,000		0.63%		The same as above
		B		January 2022 to January 2029		3,300,000		0.72%		The same as above
										(Continued)

- 43 -

Issuance		Tranche		Issuance Period		Total Issue Amount		Coupon Rate		Repayment and Interest Payment
111-2		A		March 2022 to September 2026		$ 3,000,000		0.84%		Bullet repayment; interest payable annually
		B		March 2022 to March 2027		9,600,000		0.85%		The same as above
		C		March 2022 to March 2029		1,600,000		0.90%		The same as above
111-3 (Green bond)		-		May 2022 to May 2027		6,100,000		1.50%		The same as above
111-4 (Green bond)		A		July 2022 to July 2026		1,200,000		1.60%		The same as above
		B		July 2022 to July 2027		10,100,000		1.70%		The same as above
		C		July 2022 to July 2029		1,200,000		1.75%		The same as above
		D		July 2022 to July 2032		1,400,000		1.95%		The same as above
111-5		A		August 2022 to June 2027		2,000,000		1.65%		The same as above
		B		August 2022 to August 2027		8,900,000		1.65%		The same as above
		C		August 2022 to August 2029		2,200,000		1.65%		The same as above
		D		August 2022 to August 2032		2,500,000		1.82%		The same as above
111-6 (Green bond)		A		October 2022 to October 2027		5,700,000		1.75%		The same as above
		B		October 2022 to October 2029		1,000,000		1.80%		The same as above
		C		October 2022 to October 2032		3,500,000		2.00%		The same as above
112-1 (Green bond)		A		March 2023 to March 2028		12,200,000		1.54%		The same as above
		B		March 2023 to March 2030		2,300,000		1.60%		The same as above
		C		March 2023 to March 2033		4,800,000		1.78%		The same as above
112-2 (Green bond)		A		May 2023 to May 2028		13,100,000		1.60%		The same as above
		B		May 2023 to May 2030		2,300,000		1.65%		The same as above
		C		May 2023 to May 2033		5,300,000		1.82%		The same as above
										(Continued)

- 44 -

Issuance		Tranche		Issuance Period		Total Issue Amount		Coupon Rate		Repayment and Interest Payment
112-3		A		June 2023 to June 2028		$ 11,400,000		1.60%		Bullet repayment; interest payable annually
		B		June 2023 to June 2030		2,600,000		1.65%		The same as above
		C		June 2023 to June 2033		6,000,000		1.80%		The same as above
112-4		A		August 2023 to August 2028		7,300,000		1.60%		The same as above
		B		August 2023 to August 2030		700,000		1.65%		The same as above
		C		August 2023 to August 2033		7,900,000		1.76%		The same as above
112-5		A		October 2023 to October 2028		4,300,000		1.62%		The same as above
		B		October 2023 to October 2033		5,500,000		1.76%		The same as above
113-1 (Green bond)		A		March 2024 to March 2029		12,000,000		1.64%		The same as above
		B		March 2024 to March 2034		10,800,000		1.76%		The same as above
113-2 (Green bond)		A		May 2024 to May 2029		4,900,000		1.98%		The same as above
		B		May 2024 to May 2034		6,600,000		2.10%		The same as above
114-1 (Green bond)		A		March 2025 to March 2030		12,000,000		1.90%		The same as above
		B		March 2025 to March 2035		7,200,000		2.05%		The same as above
114-2 (Green bond)		A		June 2025 to June 2030		12,500,000		1.92%		The same as above
		B		June 2025 to June 2035		1,600,000		2.05%		The same as above
114-3 (Green bond)		A		July 2025 to July 2030		8,300,000		1.92%		The same as above
		B		July 2025 to July 2035		4,000,000		2.05%		The same as above
114-4		A		September  2025 to September 2030		13,800,000		1.66%		The same as above
		B (Green bond)		September 2025 to September 2035		4,000,000		1.73%		The same as above
										(Continued)

- 45 -

Issuance		Tranche		Issuance Period		Total Issue Amount		Coupon Rate		Repayment and Interest Payment
114-5 (Green bond)		A		November  2025 to November 2030		$ 14,000,000		1.50%		Bullet repayment; interest payable annually
		B		November  2025 to November 2032		3,000,000		1.53%		The same as above
		C		November  2025 to November 2035		6,500,000		1.58%		The same as above
										(Concluded)

Issuance		Tranche		Issuance Period		Total Issue Amount (US$ in Thousands)		Coupon Rate		Repayment and Interest Payment
US$ unsecured   bonds
109-1		-		September 2020 to September 2060		US$ 1,000,000		2.70%		Bullet repayment (callable on the 5th anniversary of the issue date and every anniversary thereafter); interest payable annually
110-5		-		September 2021 to September 2051		1,000,000		3.10%		The same as above

The major terms of overseas unsecured bonds are as follows:

Issuance Period		Total Issue Amount (US$ in Thousands)		Coupon Rate		Repayment and Interest Payment
September 2020 to September 2025		US$ 1,000,000		0.75%		Bullet repayment (callable at any time, in whole or in part, at the relevant redemption price according to relevant agreements); interest payable semi-annually
September 2020 to September 2027		750,000		1.00%		The same as above
September 2020 to September 2030		1,250,000		1.375%		The same as above
April 2021 to April 2026		1,100,000		1.25%		The same as above
April 2021 to April 2028		900,000		1.75%		The same as above
April 2021 to April 2031		1,500,000		2.25%		The same as above
						(Continued)

- 46 -

Issuance Period		Total Issue Amount (US$ in Thousands)		Coupon Rate		Repayment and Interest Payment
October 2021 to October 2026		US$ 1,250,000		1.75%		Bullet repayment (callable at any time, in whole or in part, at the relevant redemption price according to relevant agreements); interest payable semi-annually
October 2021 to October 2031		1,250,000		2.50%		The same as above
October 2021 to October 2041		1,000,000		3.125%		The same as above
October 2021 to October 2051		1,000,000		3.25%		The same as above
April 2022 to April 2027		1,000,000		3.875%		The same as above
April 2022 to April 2029		500,000		4.125%		The same as above
April 2022 to April 2032		1,000,000		4.25%		The same as above
April 2022 to April 2052		1,000,000		4.50%		The same as above
July 2022 to July 2027		400,000		4.375%		The same as above
July 2022 to July 2032		600,000		4.625%		The same as above
						(Concluded)

18. LONG-TERM BANK LOANS

		December 31, 2025		December 31, 2024
NT$ unsecured loans		$ 1,700,833		$ 4,410,833
JPY unsecured loans		39,253,500		30,124,800
Less: Discounts on government grants		(115)		(1,247)
Less: Current portion		(1,119,722)		(2,710,000)
		$ 39,834,496		$ 31,824,386
Loan content
Annual interest rate		0.79%-1.78%		0.13%-1.78%
Maturity date		Due by December 2030		Due by December 2030

The long-term bank loans of the Company are used for plants setup, procurement of machinery and

equipment, and operating capital. The partial long-term bank loans are with preferential interest rates

subsidized by the government, and the loans are used to fund capital expenditure qualifying for the subsidy.

The Company is required to maintain certain financial covenants during the borrowing period, including the

annual equity of the subsidiary receiving the loan not to fall below a specific amount; its debt-to-equity ratio

must not exceed a certain ratio; and the ratio of the Company’s annual debt to earnings before interest,

taxes, depreciation, and amortization (EBITDA) not to exceed a certain multiple.

- 47 -

19. RETIREMENT BENEFIT PLANS

a.Defined contribution plans

The plan under the R.O.C. Labor Pension Act (the “Act”) is deemed a defined contribution plan.

Pursuant to the Act, TSMC and VisEra Tech have made monthly contributions equal to 6% of each

employee’s monthly salary to employees’ pension accounts. Furthermore, TSMC North America,

TSMC Europe, TSMC Japan, TSMC JDC, TSMC 3DIC, TSMC China, TSMC Nanjing, TSMC

Arizona, JASM, ESMC, TSMC Technology and TSMC Canada also make monthly contributions at

certain percentages of the basic salary of their employees. Accordingly, the Company recognized

expenses of NT$6,707,459 thousand and NT$5,932,269 thousand for the years ended December 31,

2025 and 2024, respectively.

b.Defined benefit plans

TSMC has defined benefit plans under the R.O.C. Labor Standards Law that provide benefits based on

an employee’s length of service and average monthly salary for the six-month period prior to retirement.

The Company contributes an amount equal to 2% of salaries paid each month to their respective pension

funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the

Committee) and deposited in the Committee’s name in the Bank of Taiwan. Before the end of each

year, the Company assesses the balance in the Funds. If the amount of the balance in the Funds is

inadequate to pay retirement benefits for employees who conform to retirement requirements in the next

year, the Company is required to fund the difference in one appropriation that should be made before

the end of March of the next year. The Funds are operated and managed by the government’s designated

authorities; as such, the Company does not have any right to intervene in the investments of the Funds.

Amounts recognized in respect of these defined benefit plans were as follows:

		Years Ended December 31
		2025		2024
Current service cost		$ 150,593		$ 153,020
Net interest expense		106,331		122,660
Components of defined benefit costs recognized in profit or loss		256,924		275,680
Remeasurement on the net defined benefit liability:
Return on plan assets (excluding amounts included in net interest expense)		(764,266)		(774,583)
Actuarial loss arising from experience adjustments		539,527		911,752
Actuarial loss arising from changes in demographic assumptions		581,499		-
Actuarial (gain) loss arising from changes in financial assumptions		336,511		(281,534)
Components of defined benefit costs recognized in other comprehensive income		693,271		(144,365)
Total		$ 950,195		$ 131,315

- 48 -

The pension costs of the aforementioned defined benefit plans were recognized in profit or loss by the

following categories:

		Years Ended December 31
		2025		2024
Cost of revenue		$ 169,175		$ 178,507
Research and development expenses		69,532		75,259
General and administrative expenses		15,148		18,424
Marketing expenses		3,069		3,490
		$ 256,924		$ 275,680

The amounts arising from the defined benefit obligation of the Company were as follows:

		December 31, 2025		December 31, 2024
Present value of defined benefit obligation		$ 19,339,129		$ 18,332,160
Fair value of plan assets		(13,326,843)		(10,751,503)
Net defined benefit liability		$ 6,012,286		$ 7,580,657

Movements in the present value of the defined benefit obligation were as follows:

		Years Ended December 31
		2025		2024
Balance, beginning of year		$ 18,332,160		$ 17,995,066
Current service cost		150,593		153,020
Interest expense		281,084		242,788
Remeasurement:
Actuarial loss arising from experience adjustments		539,527		911,752
Actuarial (gain) loss arising from changes in financial assumptions		336,511		(281,534)
Actuarial loss arising from changes in demographic assumptions		581,499		-
Benefits paid from plan assets		(803,342)		(679,084)
Benefits paid directly by the Company		(78,903)		(9,848)
Balance, end of year		$ 19,339,129		$ 18,332,160

- 49 -

Movements in the fair value of the plan assets were as follows:

		Years Ended December 31
		2025		2024
Balance, beginning of year		$ 10,751,503		$ 8,737,842
Interest income		174,753		120,128
Remeasurement:
Return on plan assets (excluding amounts included in net interest expense)		764,266		774,583
Contributions from employer		2,439,663		1,798,034
Benefits paid from plan assets		(803,342)		(679,084)
Balance, end of year		$ 13,326,843		$ 10,751,503

The fair value of the plan assets by major categories at the end of reporting period was as follows:

		December 31, 2025		December 31, 2024
Cash		$ 1,652,528		$ 1,569,719
Equity instruments		8,223,995		6,245,548
Debt instruments		3,450,320		2,936,236
		$ 13,326,843		$ 10,751,503

The actuarial valuations of the present value of the defined benefit obligation were carried out by

qualified actuaries. The principal assumptions of the actuarial valuation were as follows:

		Measurement Date
		December 31, 2025		December 31, 2024
Discount rate		1.40 %		1.60 %
Future salary increase rate		4.00 %		4.00 %

Through the defined benefit plans under the R.O.C. Labor Standards Law, the Company is exposed to

the following risks:

1)Investment risk: The pension funds are invested in equity and debt securities, bank deposits, etc.

The investment is conducted at the discretion of the government’s designated authorities or under

the mandated management. However, under the R.O.C. Labor Standards Law, the rate of return on

assets shall not be less than the average interest rate on a two-year time deposit published by the

local banks and the government is responsible for any shortfall in the event that the rate of return is

less than the required rate of return.

2)Interest risk: A decrease in the government bond interest rate will increase the present value of the

defined benefit obligation; however, this will be partially offset by an increase in the return on the

debt investments of the plan assets.

- 50 -

Assuming a hypothetical decrease in interest rate at the end of the reporting period contributed to a

decrease of 0.5% (and not below 0.0%) in the discount rate and all other assumptions were held

constant, the present value of the defined benefit obligation would increase by NT$883,727

thousand and NT$717,535 thousand as of December 31, 2025 and 2024, respectively.

3)Salary risk: The present value of the defined benefit obligation is calculated by reference to the

future salaries of plan participants. As such, an increase in the salary of the plan participants will

increase the present value of the defined benefit obligation.

Assuming the expected salary rate increases by 0.5% at the end of the reporting period and all other

assumptions were held constant, the present value of the defined benefit obligation would increase

by NT$857,260 thousand and NT$697,715 thousand as of December 31, 2025 and 2024,

respectively.

The sensitivity analysis presented above may not be representative of the actual change in the defined

benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one

another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit

obligation has been calculated using the projected unit credit method at the end of the reporting period,

which is the same as that applied in calculating the defined benefit obligation liability.

The Company expects to make contributions of NT$2,537,250 thousand to the defined benefit plans in

the next year starting from December 31, 2025. The weighted average duration of the defined benefit

obligation is 9 years.

20. EQUITY

a.Capital stock

		December 31, 2025		December 31, 2024
Authorized shares (in thousands)		28,050,000		28,050,000
Authorized capital		$ 280,500,000		$ 280,500,000
Issued and paid shares (in thousands)		25,932,524		25,932,733
Issued capital		$ 259,325,245		$ 259,327,332

The par value of issued common shares is NT$10 per share. A holder of common shares has one vote

for each common share and is entitled to receive dividends.

The authorized shares include 500,000 thousand shares allocated for the exercise of employee stock

options.

On September 1, 2024 and March 1, 2024, TSMC issued employee restricted stock awards (RSAs) for

its employees in a total of 2,353 thousand shares and 2,960 thousand shares, respectively, with a par

value of NT$10 per share. The aforementioned issuance of new shares was approved by the relevant

authority and the registration has been completed.

During the third quarter of 2025, the first quarter of 2025 and 2024, TSMC reclaimed 91 thousand, 118

thousand and 1,402 thousand employee restricted shares, respectively, that were unvested. On

November 11, 2025, May 13, 2025 and June 5, 2024, TSMC’s Board of Directors resolved to cancel the

- 51 -

aforementioned shares. Subsequently, TSMC completed the registration for share cancellation. Refer to

Note 27 for information on RSAs.

On August 13, 2024, TSMC’s Board of Directors resolved to cancel 3,249 thousand treasury shares.

Refer to Note 20(e) for further information.

As of December 31, 2025, TSMC’s total issued and outstanding ADSs were 1,062,719 thousand units,

representing 5,313,593 thousand common shares.

b.Capital surplus

The categories of uses and the sources of capital surplus based on regulations were as follows:

		December 31, 2025		December 31, 2024
May be used to offset a deficit, distributed as cash dividends, or transferred to share capital
Additional paid-in capital		$ 26,343,550		$ 24,809,704
From merger		22,800,434		22,800,434
From convertible bonds		8,891,257		8,891,257
From difference between the consideration received and the carrying amount of the subsidiaries’ net assets during actual disposal		8,411,566		8,411,566
Donations - donated by shareholders		11,280		11,275
May only be used to offset a deficit
From share of changes in equities of subsidiaries		4,093,999		4,108,958
From share of changes in equities of associates		1,365,250		1,172,396
Donations - unclaimed dividend		105,684		78,976
May not be used for any purpose
Employee restricted shares		1,422,581		2,976,199
		$ 73,445,601		$ 73,260,765

If such capital surplus is distributed as transferred to share capital, it is limited to a certain percentage of

the Company’s paid-in capital each year.

c.Retained earnings and dividend policy

TSMC’s Articles of Incorporation provide that, earnings distribution may be made on a quarterly basis

after the close of each quarter. Distribution of earnings by way of cash dividends should be approved by

TSMC’s Board of Directors and reported to TSMC’s shareholders in its meeting. When allocating

earnings, TSMC shall first estimate and reserve the taxes to be paid, offset its losses, set aside a legal

capital reserve at 10% of the remaining earnings (until the accumulated legal capital reserve equals

TSMC’s paid-in capital), then set aside a special capital reserve in accordance with relevant laws or

regulations or as requested by the authorities in charge. Any balance left over shall be allocated

according to relevant laws and TSMC’s Articles of Incorporation.

- 52 -

TSMC’s Articles of Incorporation also provide that profits of TSMC may be distributed by way of cash

dividend and/or stock dividend. However, distribution of earnings shall be made preferably by way of

cash dividend. Distribution of earnings may also be made by way of stock dividend, provided that the

ratio for stock dividend shall not exceed 50% of the total distribution.

The legal capital reserve may be used to offset a deficit, or be distributed as dividends in cash or stocks

for the portion in excess of 25% of the paid-in capital if the Company incurs no loss.

Pursuant to existing regulations, the Company is required to set aside an additional special capital

reserve equivalent to the net debit balance of the other components of stockholders’ equity, such as the

accumulated balance of the foreign currency translation reserve, the effectiveness of hedges of net

investments in foreign operations, unrealized valuation gain or loss from fair value through other

comprehensive income financial assets, gain or loss from changes in fair value of hedging instruments

in cash flow hedges, etc. For the subsequent decrease in the deduction amount to stockholders’ equity,

any special reserve appropriated may be reversed to the extent that the net debit balance reverses.

The appropriations of 2025, 2024 and 2023 quarterly earnings have been approved by TSMC’s Board of

Directors in its meeting, respectively. The appropriations and cash dividends per share were as follows:

		Fourth Quarter		Third Quarter		Second Quarter		First Quarter
Resolution Date of TSMC’s		of 2025		of 2025		of 2025		of 2025
Board of Directors in its		February 10,		November 11,		August 12,		May 13,
meeting		2026		2025		2025		2025
Special capital reserve		$ (71,085,085)		$ (94,270,352)		$ 181,554,848		$ -
Cash dividends to shareholders		$ 155,595,147		$ 155,595,147		$ 129,662,913		$ 129,663,078
Cash dividends per share (NT$)		$ 6.00		$ 6.00		$ 5.00		$ 5.00

		Fourth Quarter		Third Quarter		Second Quarter		First Quarter
Resolution Date of TSMC’s		of 2024		of 2024		of 2024		of 2024
Board of Directors in its		February 12,		November 12,		August 13,		May 10,
meeting		2025		2024		2024		2024
Special capital reserve		$ -		$ -		$ -		$ (28,020,822)
Cash dividends to shareholders		$ 116,697,300		$ 116,697,300		$ 103,721,521		$ 103,734,517
Cash dividends per share (NT$)		$ 4.50		$ 4.50		$ 4.00		$ 4.00

		Fourth Quarter		Third Quarter		Second Quarter		First Quarter
Resolution Date of TSMC’s		of 2023		of 2023		of 2023		of 2023
Board of Directors in its		February 6,		November 14,		August 8,		May 9,
meeting		2024		2023		2023		2023
Special capital reserve		$ 28,020,822		$ (17,228,363)		$ (6,365,562)		$ 3,273,452
Cash dividends to shareholders		$ 90,762,248		$ 90,762,248		$ 77,796,213		$ 77,796,213
Cash dividends per share (NT$)		$ 3.50		$ 3.50		$ 3.00		$ 3.00

The special capital reserve for 2025 is to be presented for approval in TSMC’s shareholders’ meeting to

be held on June 4, 2026 (expected).

The quarterly cash dividends per share is affected by the subsequent number of outstanding ordinary

shares, the information of the actual payout is available at the Market Observation Post System website.

- 53 -

d.Others

Changes in others were as follows:

		Year Ended December 31, 2025
		Foreign Currency Translation Reserve		Unrealized Gain (Loss) on Financial Assets at FVTOCI		Gain (Loss) on Hedging Instruments		Unearned Stock-Based Employee Compensation		Total
Balance, beginning of year		$ 40,262,995		$ (1,160,176)		$ 1,310,307		$ (1,708,079)		$ 38,705,047
Exchange differences arising on translation of foreign operations		(61,588,228)		-		-		-		(61,588,228)
Gain (loss) on hedging instruments designated as hedges of net investments in foreign operations		335,106		-		-		-		335,106
Unrealized gain (loss) on financial assets at FVTOCI
Equity instruments		-		744,515		-		-		744,515
Debt instruments		-		4,505,899		-		-		4,505,899
Disposal of investments in equity instruments at FVTOCI		-		(557,108)		-		-		(557,108)
Cumulative unrealized gain (loss) of debt instruments at FVTOCI transferred to profit or loss due to disposal		-		200,194		-		-		200,194
Loss allowance adjustments from debt instruments at FVTOCI		-		(17,137)		-		-		(17,137)
Gain (loss) arising on changes in the fair value of hedging instruments and hedged item affects profit or loss		-		-		(112,259)		-		(112,259)
Transferred to initial carrying amount of hedged items		-		-		13,450		-		13,450
Share-based payment expenses recognized		-		-		-		1,231,078		1,231,078
Share of other comprehensive income (loss) of associates		(29,017)		(124,704)		16,752		-		(136,969)
Balance, end of year		$ (21,019,144)		$ 3,591,483		$ 1,228,250		$ (477,001)		$ (16,676,412)

		Year Ended December 31, 2024
		Foreign Currency Translation Reserve		Unrealized Gain (Loss) on Financial Assets at FVTOCI		Gain (Loss) on Hedging Instruments		Unearned Stock-Based Employee Compensation		Total
Balance, beginning of year		$ (25,316,769)		$ (4,099,928)		$ 1,395,875		$ (293,434)		$ (28,314,256)
Exchange differences arising on translation of foreign operations		64,502,658		-		-		-		64,502,658
Gain (loss) on hedging instruments designated as hedges of net investments in foreign operations		793,830		-		-		-		793,830
Unrealized gain (loss) on financial assets at FVTOCI
Equity instruments		-		5,078,380		-		-		5,078,380
Debt instruments		-		1,254,491		-		-		1,254,491
Disposal of investments in equity instruments at FVTOCI		-		(4,009,066)		-		-		(4,009,066)
										(Continued)

- 54 -

		Year Ended December 31, 2024
		Foreign Currency Translation Reserve		Unrealized Gain (Loss) on Financial Assets at FVTOCI		Gain (Loss) on Hedging Instruments		Unearned Stock-Based Employee Compensation		Total
Cumulative unrealized gain (loss) of debt instruments at FVTOCI transferred to profit or loss due to disposal		$ -		$ 683,117		$ -		$ -		$ 683,117
Loss allowance adjustments from debt instruments at FVTOCI		-		12,257		-		-		12,257
Gain (loss) arising on changes in the fair value of hedging instruments and hedged item affects profit or loss		-		-		(75,157)		-		(75,157)
Transferred to initial carrying amount of hedged items		-		-		141		-		141
Issuance of employee restricted stock		-		-		-		(2,637,387)		(2,637,387)
Share-based payment expenses recognized		-		-		-		1,222,742		1,222,742
Share of other comprehensive income (loss) of associates		290,402		(69,431)		(10,552)		-		210,419
Other comprehensive income transferred to profit or loss due to decline of equity method		(7,126)		-		-		-		(7,126)
Income tax effect		-		(9,996)		-		-		(9,996)
Balance, end of year		$ 40,262,995		$ (1,160,176)		$ 1,310,307		$ (1,708,079)		$ 38,705,047
										(Concluded)

The aforementioned other equity includes the changes in other equities of TSMC and TSMC’s share of

its subsidiaries and associates.

e.Treasury stock

For TSMC’s shareholders’ interests, TSMC’s Board of Directors approved a share buyback program on

June 5, 2024 to repurchase 3,249 thousand shares. TSMC has completed this share buyback program

during the second quarter of 2024. On August 13, 2024, TSMC’s Board of Directors resolved to cancel

the 3,249 thousand shares and set September 1, 2024 as the record date for capital reduction. The

registration for share cancellation was completed on September 11, 2024.

21. NET REVENUE

a.Disaggregation of revenue from contracts with customers

		Years Ended December 31
Product		2025		2024
Wafer		$ 3,272,553,470		$ 2,514,461,292
Others		536,500,802		379,846,407
		$ 3,809,054,272		$ 2,894,307,699

- 55 -

		Years Ended December 31
Geography		2025		2024
Taiwan		$ 299,445,782		$ 270,413,546
United States		2,834,692,138		1,992,280,443
China		327,502,739		331,673,315
Japan		150,427,931		144,239,882
Europe, the Middle East and Africa		126,584,061		102,760,879
Others		70,401,621		52,939,634
		$ 3,809,054,272		$ 2,894,307,699

The Company categorized the net revenue mainly based on the countries where the customers are

headquartered.

		Years Ended December 31
Platform		2025		2024
High Performance Computing		$ 2,192,931,014		$ 1,476,890,566
Smartphone		1,110,816,364		1,005,130,484
Internet of Things		191,046,793		165,516,214
Automotive		186,666,990		139,323,096
Digital Consumer Electronics		47,996,476		47,960,415
Others		79,596,635		59,486,924
		$ 3,809,054,272		$ 2,894,307,699

		Years Ended December 31
Resolution		2025		2024
3-nanometer		$ 794,341,375		$ 459,530,166
5-nanometer		1,179,907,181		861,318,861
7-nanometer		459,258,062		416,790,303
16-nanometer		215,722,121		202,383,718
20-nanometer		4,304,867		4,077,241
28-nanometer		225,134,161		188,155,011
40/45-nanometer		95,582,674		108,468,215
65-nanometer		120,399,264		93,120,068
90-nanometer		21,358,729		21,509,306
0.11/0.13 micron		48,846,156		52,442,826
0.15/0.18 micron		88,293,741		90,796,791
0.25 micron and above		19,405,139		15,868,786
Wafer revenue		$ 3,272,553,470		$ 2,514,461,292

- 56 -

b.Contract balances

		December 31, 2025		December 31, 2024		January 1, 2024
Contract liabilities (classified under accrued expenses and other current liabilities)		$ 49,954,384		$ 89,435,361		$ 52,736,430

The changes in the contract liability balances primarily result from the timing difference between the

satisfaction of performance obligation and the customer’s payment.

The Company recognized revenue from the beginning balance of contract liability, which amounted to

NT$57,567,091 and NT$51,578,433 for the years ended December 31, 2025 and 2024, respectively.

c.Temporary receipts from customers

		December 31, 2025		December 31, 2024
Current portion (classified under accrued expenses and other current liabilities)		$ 146,559,275		$ 198,602,570
Noncurrent portion (classified under other noncurrent liabilities)		43,298,936		92,499,262
		$ 189,858,211		$ 291,101,832

The Company’s temporary receipts from customer are payments made by customers to the Company to

retain the Company’s capacity. When the terms and conditions set forth in the agreements are

subsequently satisfied, the treatment of temporary receipts, either by refund or by accounts receivable

offsetting, will be determined by mutual consent.

d.Refund liabilities

Estimated sales returns and other allowances is made and adjusted based on historical experience and

the consideration of varying contractual terms. As of December 31, 2025 and 2024, the aforementioned

refund liabilities amounted to NT$79,293,379 and NT$63,185,197 (classified under accrued expenses

and other current liabilities), respectively.

22. INTEREST INCOME

		Years Ended December 31
		2025		2024
Interest income
Cash and cash equivalents		$ 86,642,964		$ 72,126,247
Financial assets at amortized cost		10,182,766		8,458,156
Financial assets at FVTOCI		7,301,519		6,628,996
Government grants receivable		1,611,832		-
		$ 105,739,081		$ 87,213,399

- 57 -

23.  FINANCE COSTS

		Years Ended December 31
		2025		2024
Interest expense
Corporate bonds		$ 19,148,157		$ 19,278,120
Lease liabilities		453,631		373,383
Bank loans		378,479		150,752
Others		5,971		3,352
Less: Capitalized interest under property, plant and equipment		(7,615,851)		(9,310,287)
		$ 12,370,387		$ 10,495,320

Information about capitalized interest is as follows:

		Years Ended December 31
		2025		2024
Capitalization rate		1.32%-3.34%		1.20%-3.34%

24. OTHER GAINS AND LOSSES, NET

		Years Ended December 31
		2025		2024
Loss on disposal of financial assets, net
Investments in debt instruments at FVTOCI		$ (200,194)		$ (683,117)
Gain on disposal of investments accounted for using equity method, net		-		7,126
Loss on disposal of subsidiaries		(167,986)		-
Loss on financial instruments at FVTPL, net		(8,083,154)		(8,204,688)
Reversal of (provision for) expected credit loss of financial assets
Investments in debt instruments at FVTOCI		17,137		(12,257)
Financial assets at amortized cost		(13,191)		(37,650)
Other gains, net		730,183		551,193
		$ (7,717,205)		$ (8,379,393)

25. INCOME TAX

a.Income tax expense recognized in profit or loss

Income tax expense consisted of the following:

- 58 -

		Years Ended December 31
		2025		2024
Current income tax expense
Current tax expense recognized in the current year		$ 336,146,212		$ 238,079,019
Income tax adjustments on prior years		(12,690,029)		(7,229,862)
Other income tax adjustments		126,657		371,403
		323,582,840		231,220,560
Deferred income tax expense (benefit)
The origination and reversal of temporary differences		6,472,803		915,964
Income tax adjustments on prior years		(65,124)		3,925,320
Operating loss carryforward		(3,724,459)		(2,654,968)
		2,683,220		2,186,316
Income tax expense recognized in profit or loss		$ 326,266,060		$ 233,406,876

A reconciliation of income before income tax and income tax expense recognized in profit or loss was

as follows:

		Years Ended December 31
		2025		2024
Income before tax		$ 2,041,662,840		$ 1,405,838,635
Income tax expense at the statutory rate		414,948,107		280,827,733
Tax effect of adjusting items:
Adjusting items in determining taxable income		(23,177,516)		(5,647,246)
Additional income tax on unappropriated earnings		-		6,483,623
Unrecognized deductible temporary differences		-		729,232
Unrecognized operating loss carryforward		6,637,745		2,263,127
The origination and reversal of temporary differences		6,472,803		915,964
Operating loss carryforward		(3,724,459)		(2,654,968)
Income tax credits		(62,262,124)		(46,577,450)
		338,894,556		236,340,015
Income tax adjustments on prior years		(12,755,153)		(3,304,542)
Other income tax adjustments		126,657		371,403
Income tax expense recognized in profit or loss		$ 326,266,060		$ 233,406,876

For the years ended December 31, 2025 and 2024, the Company applied a tax rate of 20% for entities

subject to the R.O.C. Income Tax Law; for other jurisdictions, taxes are calculated using the applicable

tax rate for each individual jurisdiction.

- 59 -

b.Deferred income tax balance

The analysis of deferred income tax assets and liabilities was as follows:

		December 31, 2025		December 31, 2024
Deferred income tax assets
Temporary differences
Depreciation		$ 25,924,020		$ 33,319,836
Refund liability		16,438,718		13,274,374
Unrealized exchange losses		6,094,374		9,078,242
Others		8,418,044		7,656,403
Operating loss carryforward		6,065,097		2,614,445
		$ 62,940,253		$ 65,943,300
Deferred income tax liabilities
Temporary differences
Subsidiary’s projected earnings distribution		$ (3,860,196)		$ (3,925,320)
Others		(28,599)		(63,162)
		$ (3,888,795)		$ (3,988,482)

		Year Ended December 31, 2025
				Recognized in
		Balance, Beginning of Year		Profit or Loss		Other Comprehensive Income		Effect of Exchange Rate Changes		Balance, End of Year
Deferred income tax assets
Temporary differences
Depreciation		$ 33,319,836		$ (7,366,594)		$ -		$ (29,222)		$ 25,924,020
Refund liability		13,274,374		3,165,922		-		(1,578)		16,438,718
Unrealized exchange losses		9,078,242		(2,983,868)		-		-		6,094,374
Others		7,656,403		677,275		138,654		(54,288)		8,418,044
Operating loss carryforward		2,614,445		3,724,459		-		(273,807)		6,065,097
		$ 65,943,300		$ (2,782,806)		$ 138,654		$ (358,895)		$ 62,940,253
Deferred income tax liabilities
Temporary differences
Subsidiary’s projected earning distribution		$ (3,925,320)		$ 65,124		$ -		$ -		$ (3,860,196)
Others		(63,162)		34,462		-		101		(28,599)
		$ (3,988,482)		$ 99,586		$ -		$ 101		$ (3,888,795)

- 60 -

		Year Ended December 31, 2024
				Recognized in
		Balance, Beginning of Year		Profit or Loss		Other Comprehensive Income		Effect of Exchange Rate Changes		Balance, End of Year
Deferred income tax assets
Temporary differences
Depreciation		$ 41,094,712		$ (7,787,586)		$ -		$ 12,710		$ 33,319,836
Refund liability		9,414,971		3,856,774		-		2,629		13,274,374
Unrealized exchange losses		7,100,019		1,978,223		-		-		9,078,242
Others		6,566,085		1,045,037		(38,869)		84,150		7,656,403
Operating loss carryforward		-		2,654,968		-		(40,523)		2,614,445
		$ 64,175,787		$ 1,747,416		$ (38,869)		$ 58,966		$ 65,943,300
Deferred income tax liabilities
Temporary differences
Subsidiary’s projected earning distribution		$ -		$ (3,925,320)		$ -		$ -		$ (3,925,320)
Others		(53,856)		(8,412)		-		(894)		(63,162)
		$ (53,856)		$ (3,933,732)		$ -		$ (894)		$ (3,988,482)

c.The operating loss carryforward and deductible temporary differences for which no deferred income tax

assets have been recognized

		December 31, 2025		December 31, 2024
Operating loss carryforward-No expiry date		$ 32,143,719		$ 11,896,888
Deductible temporary differences		$ 64,904,467		$ 83,705,608

d.The information of unrecognized deferred income tax liabilities associated with investments

As of December 31, 2025 and 2024, the aggregate taxable temporary differences associated with

investments in subsidiaries not recognized as deferred income tax liabilities amounted to

NT$329,889,192 thousand and NT$327,787,523 thousand, respectively.

e.Income tax examination

The tax authorities have examined income tax returns of TSMC through 2023. All investment tax credit

adjustments assessed by the tax authorities have been recognized accordingly.

26. EARNINGS PER SHARE

		Years Ended December 31
		2025		2024
Basic EPS		$ 66.26		$ 45.25
Diluted EPS		$ 66.25		$ 45.25

- 61 -

EPS is computed as follows:

		Years Ended December 31
		2025		2024
Basic EPS
Net income available to common shareholders of the parent		$ 1,717,882,627		$ 1,173,267,703
Weighted average number of common shares outstanding used in the computation of basic EPS (in thousands)		25,928,262		25,927,556
Basic EPS (in dollars)		$ 66.26		$ 45.25
Diluted EPS
Net income available to common shareholders of the parent		$ 1,717,882,627		$ 1,173,267,703
Weighted average number of common shares outstanding used in the computation of basic EPS (in thousands)		25,928,262		25,927,556
Effects of all dilutive potential common shares (in thousands)		2,295		2,089
Weighted average number of common shares used in the computation of diluted EPS (in thousands)		25,930,557		25,929,645
Diluted EPS (in dollars)		$ 66.25		$ 45.25

27. SHARE-BASED PAYMENT ARRANGEMENTS

a.Equity-settled share-based payment- RSAs

The RSAs in each year are as follows:

		2024 RSAs		2023 RSAs		2022 RSAs		2021 RSAs
Resolution Date of TSMC’s shareholders in its meeting		June 4, 2024		June 6, 2023		June 8, 2022		July 26, 2021
Resolution Date of TSMC’s Board of Directors in its meeting		August 13, 2024		February 6, 2024		February 14, 2023		February 15, 2022
Issuance of stocks (in thousands)		2,353		2,960		2,110		1,387
Available for issuance (in thousands)		1,832		-		-		-
Eligible employees		Executive officers		Executive officers		Executive officers		Executive officers
Grant date/Issuance date		September 1, 2024		March 1, 2024		March 1, 2023		March 1, 2022

Vesting conditions of the aforementioned arrangement are as follow:

1)The RSAs granted to eligible employees can only be vested if

•the employee remains employed by the Company on the last date of each vesting period;

•during the vesting period, the employee may not breach any agreement with the Company or

violate the Company’s work rules; and

•certain employee performance metrics and TSMC’s business performance metrics are met.

2)The maximum percentage of granted RSAs that may be vested each year shall be as follows: one-

year anniversary of the grant: 50%; two-year anniversary of the grant: 25%; and three-year

anniversary of the grant: 25%; provided that the actual percentage and number of the RSAs to be

vested in each year will be calculated based on the achievement of TSMC’s business performance

metrics.

- 62 -

3)For eligible executive officers of TSMC: The maximum number of RSAs that may be vested in

each year will be set as 110%, among which 100% will be subject to a calculation based on

TSMC’s relative Total Shareholder Return (“TSR”, including capital gains and dividends)

achievement to determine the number of RSAs to be vested; this number will be further subject to a

modifier to increase or decrease up to 10% based on the Compensation and People Development

Committee’s evaluation of TSMC’s Environmental, Social, and Governance (“ESG”) achievements.

The number of shares so calculated should be rounded down to the nearest integral.

TSMC’s TSR relative to the TSR of S&P 500 IT Index	Ratio of Shares to be Vested
Above the Index by X percentage points	50% + X * 2.5%, with the maximum of 100%
Equal to the Index	50%
Below the Index by X percentage points	50% - X * 2.5%, with the minimum of 0%

4)Restrictions imposed on the employees’ rights in the RSAs before the vesting conditions are

fulfilled:

•During each vesting period, no employee granted RSAs, except for inheritance, may sell,

pledge, transfer, give to another person, create any encumbrance on, or otherwise dispose of,

any shares under the unvested RSAs.

•Before the vesting conditions are fulfilled, the attendance, proposal rights, speech rights, voting

rights and etc. shall be exercised by the engaged trustee/custodian on the employee’s behalf.

Any other shareholder rights including but not limited to the entitlement to any distribution

regarding dividends, bonuses and capital reserve, and the subscription right of the new shares

issued for any capital increase, are the same as those of holders of common shares of TSMC.

5)Details of granted RSAs in each year are as follows:

		2024 RSAs		2023 RSAs		2022 RSAs		2021 RSAs
		Number of Shares (In Thousands)		Number of Shares (In Thousands)		Number of Shares (In Thousands)		Number of Shares (In Thousands)
Balance, beginning of year		2,353		2,960		1,055		347
Vested shares		(1,102)		(1,406)		(501)		(330)
Canceled shares		(91)		(74)		(27)		(17)
Balance, end of year		1,160		1,480		527		-
Weighted-average fair value of RSAs (in dollars)		$ 662.42		$ 364.43		$ 277.71		$ 325.81

The RSAs in each year are measured at fair value at grant date by using the binominal tree

approach. Relevant information is as follows:

		2024 RSAs		2023 RSAs		2022 RSAs		2021 RSAs
		September 1, 2024		March 1, 2024		March 1, 2023		March 1, 2022
Stock price at measurement date (in dollars)		$ 944		$ 689		$ 511		$ 604
Expected price volatility		25.51%-29.87%		24.77%-26.12%		29.34%-32.11%		25.34%-28.28%
Expected life		1-3 years		1-3 years		1-3 years		1-3 years
Risk-free interest rate		1.40 %		1.16 %		1.06 %		0.57 %

Refer to Note 28 for the compensation costs of the RSAs recognized by TSMC.

- 63 -

b.Cash-settled share-based payment arrangements

The cash-settled share-based payment arrangements in each year are as follows:

		2023 Plan		2022 Plan		2021 Plan
Resolution Date of TSMC’s Board of Directors in its meeting		February 6, 2024		February 14, 2023		February 15, 2022
Issuance of units (in thousands) (Note)		550		400		236
Grant date		March 1, 2024		March 1, 2023		March 1, 2022

Note: One unit of the right represents a right to the market value of one TSMC’s common share when

vested.

The vesting conditions and the ratio of units to be vested for key management personnel of the plan are

the same as the aforementioned RSAs.

The fair value of compensation costs for the cash-settled share-based payment was measured by using

binominal tree approach and will be measured at each reporting period until settlement. Relevant

information is as follows:

		Years Ended December 31
		2025				2024
		2023 Plan		2022 Plan		2023 Plan		2022 Plan		2021 Plan
Stock price at measurement date (in dollars)		$ 1,510		$ 1,510		$ 1,090		$ 1,090		$ 1,090
Expected price volatility		23.67%-30.35%		23.67%-30.35%		25.61%-30.78%		25.61%-30.78%		25.61%-30.78%
Residual life		1-2 years		1 year		1-3 years		1-2 years		1 year
Risk-free interest rate		1.22 %		1.20 %		1.45 %		1.41 %		1.37 %

Refer to Note 28 for the compensation costs of the cash-settled share-based payment recognized by

TSMC. As of December 31, 2025 and 2024, the liabilities under cash-settled share-based payment

arrangement amounted to NT$330,836 thousand and NT$455,728 thousand, respectively.

28. ADDITIONAL INFORMATION OF EXPENSES BY NATURE

		Years Ended December 31
		2025		2024
a.Depreciation of property, plant and equipment and right-of-use assets
Recognized in cost of revenue		$ 638,013,540		$ 616,390,408
Recognized in operating expenses		41,614,044		37,190,415
Recognized in other operating income and expenses		56,374		29,663
		$ 679,683,958		$ 653,610,486

- 64 -

		Years Ended December 31
		2025		2024
b.Amortization of intangible assets
Recognized in cost of revenue		$ 5,361,977		$ 6,342,310
Recognized in operating expenses		3,050,435		2,843,839
		$ 8,412,412		$ 9,186,149
c.Employee benefits expenses
Post-employment benefits
Defined contribution plans		$ 6,707,459		$ 5,932,269
Defined benefit plans		256,924		275,680
		6,964,383		6,207,949
Share-based payments
Equity-settled		1,246,070		1,242,719
Cash-settled		304,140		403,486
		1,550,210		1,646,205
Other employee benefits		387,600,296		293,967,896
		$ 396,114,889		$ 301,822,050
Employee benefits expense summarized by function
Recognized in cost of revenue		$ 235,604,067		$ 163,657,133
Recognized in operating expenses		160,510,822		138,164,917
		$ 396,114,889		$ 301,822,050

According to TSMC’s Articles of Incorporation, TSMC shall allocate compensation to directors and profit

sharing bonus to employees of TSMC not more than 0.3% and not less than 1% of annual profits during the

period, respectively (among which not less than 30% as profit sharing bonuses to entry-level employees).

TSMC accrued profit sharing bonus to employees based on a percentage of net income before income tax,

profit sharing bonus to employees and compensation to directors during the period; compensation to

directors was expensed based on estimated amount payable. If there is a change in the proposed amounts

after the annual consolidated financial statements are authorized for issue, the differences are recorded as a

change in accounting estimate. Accrued profit sharing bonus to employees is illustrated below:

		Years Ended December 31
		2025		2024
Profit sharing bonus to employees		$ 103,072,958		$ 70,296,283

- 65 -

TSMC’s accrued profit sharing bonus to employees and compensation to directors 2025, 2024 and 2023 are

illustrated below:

		Years Ended December 31
		2025		2024		2023
Profit sharing bonus to employees		$ 103,072,958		$ 70,296,283		$ 50,090,533
Compensation to directors		$ 156,305		$ 358,989		$ 551,955

There is no significant difference between the aforementioned amounts and the amounts charged against

earnings of 2025, 2024 and 2023, respectively.

The information about the appropriations of TSMC’s profit sharing bonus to employees and compensation

to directors is available at the Market Observation Post System website.

29. GOVERNMENT GRANTS

Subsidiaries such as TSMC Arizona, ESMC, JASM and TSMC Nanjing received subsidies from the

governments of the United States, Germany, Japan and China, respectively, for local plant setup and

operation, which were mainly used to subsidize the purchase costs of property, plant and equipment, as well

as partial costs and expenses incurred from plant construction and production. For the years ended

December 31, 2025 and 2024, TSMC received a total of NT$76,258,790 thousand and NT$75,164,249

thousand as government grants respectively.

The aforementioned subsidiaries have signed grant agreements with the local government. The agreements

include the construction timelines and other conditions that must be complied with. TSMC Arizona is also

eligible to apply for a 25% investment grant for its qualified investments.

30. CASH FLOW INFORMATION

a.Non-cash transactions

		Years Ended December 31
		2025		2024
Additions of property, plant and equipment		$ 1,160,977,750		$ 798,507,337
Changes in other receivables		93,113,184		140,289,660
Exchange of assets		(169,549)		(109,273)
Changes in payables to contractors and equipment suppliers		12,550,400		(17,988,093)
Changes in accrued expenses and other current liabilities		13,585,625		44,612,151
Transferred to initial carrying amount of hedged items		(31,030)		5,041
Capitalized interests		(7,615,851)		(9,310,287)
Payments for acquisition of property, plant and equipment		$ 1,272,410,529		$ 956,006,536

- 66 -

b.Reconciliation of liabilities arising from financing activities

						Non-cash Changes
		Balance as of January 1, 2025		Financing Cash Flow		Foreign Exchange Movement		Other Changes (Note)		Balance as of  December 31, 2025
Bonds payable		$ 983,752,385		$ 32,499,692		$ (24,602,630)		$ 384,044		$ 992,033,491

						Non-cash Changes
		Balance as of January 1, 2024		Financing Cash Flow		Foreign Exchange Movement		Other Changes (Note)		Balance as of  December 31, 2024
Bonds payable		$ 920,897,553		$ 27,264,319		$ 35,202,758		$ 387,755		$ 983,752,385

Note: Other changes include amortization of bonds payable.

31. CAPITAL MANAGEMENT

The objective of the Company’s capital management is to maintain a capital structure that ensures liquidity

and supports a solid investment grade credit rating. The capital structure includes both debt and equity. The

Company adjusts its capital structure mainly through changes in the level of debt and adjustments of

dividend payout to shareholders.

The Company’s capital management policy remained unchanged in 2025. TSMC’s current credit ratings are

AA- from S&P Global Ratings and Aa3 from Moody’s, same as those as of December 31, 2024.

32. FINANCIAL INSTRUMENTS

a.Categories of financial instruments

		December 31, 2025		December 31, 2024
Financial assets
FVTPL		$ 15,132,328		$ 15,407,542
FVTOCI (Note 1)		192,184,953		205,938,125
Hedging financial assets		-		10,959
Amortized cost (Note 2)		3,368,760,773		2,721,319,255
		$ 3,576,078,054		$ 2,942,675,881
Financial liabilities
FVTPL		$ 3,083,883		$ 466,539
Hedging financial liabilities		817		-
Amortized cost (Note 3)		1,974,710,221		1,963,297,264
		$ 1,977,794,921		$ 1,963,763,803

- 67 -

Note 1: Including notes and accounts receivable (net), equity and debt investments.

Note 2: Including cash and cash equivalents, financial assets at amortized cost, notes and accounts

receivable (including related parties), other receivables, refundable deposits and temporary

payments (including those classified under other current assets and other noncurrent assets).

Note 3: Including accounts payable (including related parties), payables to contractors and equipment

suppliers, cash dividends payable, accrued expenses and other current liabilities, bonds

payable, long-term bank loans, guarantee deposits and other noncurrent liabilities.

b.Financial risk management objectives

The Company manages its exposure to foreign currency risk, interest rate risk, equity price risk, credit

risk and liquidity risk with the objective to reduce the potentially adverse effects the market

uncertainties may have on its financial performance.

The plans for material treasury activities are reviewed by the Audit and Risk Committee and/or Board

of Directors in accordance with procedures required by relevant regulations or internal controls. During

the implementation of such plans, the Company must comply with certain treasury procedures that

provide guiding principles for overall financial risk management and segregation of duties.

c.Market risk

The Company is exposed to the financial market risks, primarily changes in foreign currency exchange

rates, interest rates and equity prices. A portion of these risks is hedged.

Foreign currency risk

Substantially all the Company’s sales are denominated in U.S. dollars and over half of its capital

expenditures are denominated in currencies other than NT dollars, primarily in U.S. dollars, Japanese

yen and Euros. As a result, any significant fluctuations to its disadvantage in the exchanges rate of NT

dollar against such currencies, in particular a weakening of U.S. dollar against NT dollar, would have an

adverse impact on the revenue and operating profit as expressed in NT dollars. The Company uses

foreign currency derivative contracts, such as currency forwards or currency swaps, and non-derivative

financial instruments, such as foreign currency denominated debts and foreign currency deposits, to

protect against currency exchange rate risks associated with non-NT dollar-denominated monetary

assets and liabilities, net investments in foreign operations, and certain forecasted transactions. These

hedges reduce, but do not entirely eliminate, the effect of foreign currency exchange rate movements on

the assets and liabilities.

Based on a sensitivity analysis performed on the Company’s total monetary assets and liabilities for the

years ended December 31, 2025 and 2024, a hypothetical adverse foreign currency exchange rate

change of 10% would have decreased its net income by NT$1,986,507 thousand and NT$1,906,338

thousand, respectively, after taking into account hedges and offsetting positions.

Interest rate risk

The Company is exposed to interest rate risks primarily in relation to its investment portfolio and

outstanding debt. Changes in interest rates affect the interest earned on the Company’s cash and cash

equivalents and fixed income securities, the fair value of those securities, as well as the interest paid on

its debt.

The majority of the Company’s fixed income investments are fixed-rate securities, which are classified

as financial assets at FVTOCI or at amortized cost. For those fixed income investments classified as

financial assets at FVTOCI, changes in their fair value are recognized through other comprehensive

- 68 -

income; for those classified as financial assets at amortized cost, changes in their fair value are not

reflected in the carrying amount. Both classifications recognized in profit or loss if the assets are sold.

Based on a sensitivity analysis performed on the Company’s fixed income investments at the end of the

reporting period, interest rates increase of 100 basis points (1.00%) across all maturities would have

decreased the Company’s other comprehensive income by NT$4,081,048 thousand and NT$4,500,899

thousand  for the years ended December 31, 2025 and 2024, respectively.

The majority of the Company’s debt is fixed-rate and measured at amortized cost and as such, changes

in interest rates would not affect future cash flows or the carrying amount.

The Company has entered and may in the future enter into interest rate derivatives to partially hedge the

interest rate risk on its fixed income investments and anticipated debt issuance. However, these hedges

can offset only a limited portion of the financial impact from movements in interest rates.

Other price risk

The Company is exposed to convertible preferred stocks, equity instrument investments, and other

investments price risk arising from financial assets at FVTPL and FVTOCI.

Assuming a hypothetical decrease of 10% in prices of the investments mentioned above at the end of

the reporting period, the net income would have decreased by NT$1,202,570 thousand and

NT$1,215,987 thousand for the years ended December 31, 2025 and 2024, respectively, and the other

comprehensive income would have decreased by NT$1,020,259 thousand and NT$1,013,256 thousand

for the years ended December 31, 2025 and 2024, respectively.

d.Credit risk management

Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in

financial losses to the Company. The Company is exposed to credit risks from operating activities,

primarily accounts receivable, and from investing activities, primarily deposits, fixed-income

investments and other financial instruments with banks. Credit risk is managed separately for business

related and financial related exposures. As of the end of the reporting period, the Company’s maximum

credit risk exposure is equal to the carrying amount of financial assets.

Business related credit risk

The Company’s accounts receivable are from its customers worldwide. The majority of the Company’s

outstanding accounts receivable are not covered by collaterals or guarantees. While the Company has

procedures to monitor and manage credit risk exposure on accounts receivable, there is no assurance

such procedures will effectively eliminate losses resulting from its credit risk. This risk is heightened

during periods when economic conditions worsen.

As of December 31, 2025 and 2024, the Company’s ten largest customers accounted for 84% and 93%

of accounts receivable, respectively. The Company considers the concentration of credit risk for the

remaining accounts receivable not material.

- 69 -

Financial credit risk

The Company mitigates its financial credit risk by selecting counterparties with investment grade credit

ratings and by limiting the exposure to any individual counterparty. The Company regularly monitors

and reviews the limit applied to counterparties and adjusts the limit according to market conditions and

the credit standing of the counterparties.

The objective of the Company’s investment policy is to achieve a return that will allow the Company to

preserve principal and support liquidity requirements. The policy generally requires securities to be

investment grade and limits the amount of credit exposure to any one issuer. The Company assesses

whether there has been a significant increase in credit risk in the invested securities since initial

recognition by reviewing changes in external credit ratings, financial market conditions and material

information of the issuers.

The Company assesses the 12-month expected credit loss and lifetime expected credit loss based on the

probability of default and loss given default provided by external credit rating agencies. The current

credit risk assessment policies are as follows:

Category		Description		Basis for Recognizing Expected Credit Loss		Expected Credit Loss Ratio
Performing		Credit rating is investment grade on valuation date		12 months expected credit loss		0-0.1%
Doubtful		Credit rating is non-investment grade on valuation date		Lifetime expected credit loss-not credit impaired		-
In default		Credit rating is CC or below on valuation date		Lifetime expected credit loss-credit impaired		-
Write-off		There is evidence indicating that the debtor is in severe financial difficulty and the Company has no realistic prospect of recovery		Amount is written off		-

For the years ended December 31, 2025 and 2024, The expected credit loss decreased NT$10,449

thousand and increased NT$58,477 thousand, respectively. The changes were mainly due to adjusted

investment portfolio and fluctuations in exchange rates.

e.Liquidity risk management

The objective of liquidity risk management is to ensure the Company has sufficient liquidity to fund its

business operations over the next 12 months. The Company manages its liquidity risk by maintaining

adequate cash and cash equivalents, financial assets at FVTOCI-current, financial assets at amortized

cost-current and sufficient cost-efficient funding.

The table below summarizes the maturity profile of the Company’s financial liabilities based on

contractual undiscounted payments, including principal and interest.

- 70 -

		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years		Total
December 31, 2025
Non-derivative financial liabilities
Accounts payable (including related parties)		$ 84,330,325		$ -		$ -		$ -		$ 84,330,325
Payables to contractors and equipment suppliers		177,730,306		-		-		-		177,730,306
Accrued expenses and other current liabilities		344,034,962		-		-		-		344,034,962
Bonds payable		155,291,157		310,496,642		209,405,344		512,306,851		1,187,499,994
Long-term bank loans		1,530,435		11,349,870		29,477,805		-		42,358,110
Lease liabilities (including those classified under accrued expenses and other current liabilities) (Note)		4,381,382		6,573,701		5,804,479		22,709,939		39,469,501
Others		-		35,208,665		6,060,461		8,333,478		49,602,604
		767,298,567		363,628,878		250,748,089		543,350,268		1,925,025,802
Derivative financial instruments
Forward exchange contracts
Outflows		279,876,485		-		-		-		279,876,485
Inflows		(276,880,302)		-		-		-		(276,880,302)
		2,996,183		-		-		-		2,996,183
		$ 770,294,750		$ 363,628,878		$ 250,748,089		$ 543,350,268		$ 1,928,021,985

		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years		Total
December 31, 2024
Non-derivative financial liabilities
Accounts payable (including related parties)		$ 74,226,559		$ -		$ -		$ -		$ 74,226,559
Payables to contractors and equipment suppliers		192,635,173		-		-		-		192,635,173
Accrued expenses and other current liabilities		358,165,686		-		-		-		358,165,686
Bonds payable		76,460,812		335,240,849		197,389,127		587,602,550		1,196,693,338
Long-term bank loans		2,935,154		2,275,524		27,044,881		3,151,180		35,406,739
Lease liabilities (including those classified under accrued expenses and other current liabilities) (Note)		3,483,523		5,794,816		4,826,752		20,782,694		34,887,785
Others		-		86,979,515		11,737,085		-		98,716,600
		707,906,907		430,290,704		240,997,845		611,536,424		1,990,731,880
Derivative financial instruments
Forward exchange contracts
Outflows		109,525,448		-		-		-		109,525,448
Inflows		(109,251,526)		-		-		-		(109,251,526)
		273,922		-		-		-		273,922
		$ 708,180,829		$ 430,290,704		$ 240,997,845		$ 611,536,424		$ 1,991,005,802

- 71 -

Note: Information about the maturity analysis for lease liabilities more than 5 years:

		5-10 Years		10-15 Years		15-20 Years		More Than 20 Years		Total
December 31, 2025
Lease liabilities		$ 10,974,203		$ 7,513,615		$ 4,002,476		$ 219,645		$ 22,709,939
December 31, 2024
Lease liabilities		$ 10,296,927		$ 6,821,624		$ 3,547,316		$ 116,827		$ 20,782,694

f.Fair value of financial instruments

1)Fair value measurements recognized in the consolidated balance sheets

Fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value

is observable:

•Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active

markets for identical assets or liabilities;

•Level 2 fair value measurements are those derived from inputs other than quoted prices

included within Level 1 that are observable for the asset or liability, either directly (i.e. as

prices) or indirectly (i.e. derived from prices); and

•Level 3 fair value measurements are those derived from valuation techniques that include inputs

for the asset or liability that are not based on observable market data (unobservable inputs).

The timing of transfers between levels within the fair value hierarchy is at the end of reporting

period.

2)Fair value of financial instruments that are measured at fair value on a recurring basis

Fair value hierarchy

The following table presents the Company’s financial assets and liabilities measured at fair value on

a recurring basis:

		December 31, 2025
		Level 1		Level 2		Level 3		Total
Financial assets at FVTPL
Convertible preferred stocks		$ -		$ -		$ 13,608,819		$ 13,608,819
Mutual funds		-		-		1,297,533		1,297,533
Simple agreement for future equity		-		-		125,776		125,776
Forward exchange contracts		-		100,200		-		100,200
		$ -		$ 100,200		$ 15,032,128		$ 15,132,328
								(Continued)

- 72 -

		December 31, 2025
		Level 1		Level 2		Level 3		Total
Financial assets at FVTOCI
Investments in debt instruments
Corporate bonds		$ -		$ 88,636,098		$ -		$ 88,636,098
Agency mortgage-backed securities		-		49,150,771		-		49,150,771
Government bonds/Agency bonds		25,437,560		-		-		25,437,560
Asset-backed securities		-		8,512,188		-		8,512,188
Investments in equity instruments
Non-publicly traded equity investments		-		-		8,797,170		8,797,170
Publicly traded stocks		3,956,073		-		-		3,956,073
Notes and accounts receivable, net		-		7,695,093		-		7,695,093
		$ 29,393,633		$ 153,994,150		$ 8,797,170		$ 192,184,953
Financial liabilities at FVTPL
Forward exchange contracts		$ -		$ 3,083,883		$ -		$ 3,083,883
Hedging financial liabilities
Fair value hedges
Interest rate futures contracts		$ 817		$ -		$ -		$ 817
								(Concluded)

		December 31, 2024
		Level 1		Level 2		Level 3		Total
Financial assets at FVTPL
Convertible preferred stocks		$ -		$ -		$ 14,181,839		$ 14,181,839
Mutual funds		-		-		886,931		886,931
Forward exchange contracts		-		207,700		-		207,700
Simple agreement for future equity		-		-		131,072		131,072
		$ -		$ 207,700		$ 15,199,842		$ 15,407,542
Financial assets at FVTOCI
Investments in debt instruments
Corporate bonds		$ -		$ 108,612,082		$ -		$ 108,612,082
Agency mortgage-backed securities		-		46,611,373		-		46,611,373
Government bonds/Agency bonds		20,645,877		-		-		20,645,877
Asset-backed securities		-		11,490,511		-		11,490,511
Investments in equity instruments
Non-publicly traded equity investments		-		-		7,822,884		7,822,884
Publicly traded stocks		4,842,814		-		-		4,842,814
Notes and accounts receivable, net		-		5,912,584		-		5,912,584
		$ 25,488,691		$ 172,626,550		$ 7,822,884		$ 205,938,125
Hedging financial assets
Fair value hedges
Interest rate futures contracts		$ 10,959		$ -		$ -		$ 10,959
								(Continued)

- 73 -

		December 31, 2024
		Level 1		Level 2		Level 3		Total
Financial liabilities at FVTPL
Forward exchange contracts		$ -		$ 466,539		$ -		$ 466,539
								(Concluded)

Reconciliation of Level 3 fair value measurements of financial assets

The financial assets measured at Level 3 fair value were financial assets at FVTPL and equity

investments classified as financial assets at FVTOCI. Reconciliations for the years ended December

31, 2025 and 2024 are as follows:

		Years Ended December 31
		2025		2024
Balance, beginning of year		$ 23,022,726		$ 20,849,566
Additions		915,360		2,007,343
Recognized in profit or loss		353,087		(137,694)
Recognized in other comprehensive income or loss		1,251,874		(499,041)
Disposals and proceeds from return of capital of investments		(750,456)		(347,769)
Transfers out of level 3 (Note)		(89,730)		(164,860)
Effect of exchange rate changes		(873,563)		1,315,181
Balance,  end of year		$ 23,829,298		$ 23,022,726

Note: The transfer from level 3 to level 1 is because quoted prices (unadjusted) in active markets

data became available for the equity investments.

Valuation techniques and assumptions used in Level 2 fair value measurement

The fair values of financial assets and financial liabilities are determined as follows:

•The fair values of corporate bonds, agency bonds, agency mortgage-backed securities, asset-

backed securities and government bonds are determined by quoted market prices provided by

third party pricing services.

•The fair values of forward exchange contracts are measured using forward rates and discount

rates derived from quoted market prices.

•The fair value of accounts receivable classified as at FVTOCI is determined by the present

value of future cash flows based on the discount rate that reflects the credit risk of

counterparties.

Valuation techniques and assumptions used in Level 3 fair value measurement

The fair values of convertible preferred stocks, convertible bonds, simple agreement for future

equity, mutual funds and non-publicly traded equity investments are mainly determined by using

the asset approach, income approach or market approach.

- 74 -

The asset approach takes into account the net asset value measured at the fair value. On

December 31, 2025, and 2024, the Company uses unobservable inputs derived from discount for

lack of marketability of 10%. When other inputs remain equal, the fair value will decrease by

NT$64,123 thousand and NT$56,163 thousand, respectively, if discounts for lack of marketability

increase by 1%.

The income approach utilizes discounted cash flows to determine the present value of the expected

future economic benefits that will be derived from the investment. On December 31, 2025, and

2024, the Company mainly uses unobservable inputs, which include expected returns, discount rate

of 8.9% and 8.6%, respectively and discount for lack of marketability of 20%. With other inputs

remain equal, if discount rate increases by 1%, the fair value will decrease by NT$1,812,408

thousand and NT$1,606,927 thousand, respectively; if discount for lack of marketability increases

by 1%, the fair value will decrease by NT$133,626 thousand and NT$140,819 thousand,

respectively.

For the remaining few investments, the market approach is used to arrive at their fair values, for

which the recent financing activities of investees, the market transaction prices of the similar

companies and market conditions are considered.

3)Fair value of financial instruments that are not measured at fair value

Except as detailed in the following table, the Company considers that the carrying amounts of

financial instruments in the consolidated financial statements that are not measured at fair value

approximate their fair values.

Fair value hierarchy

The table below sets out the fair value hierarchy for the Company’s financial assets and liabilities

which are not required to be measured at fair value:

		December 31, 2025
		Carrying		Fair Value
		Amount		Level 1		Level 2		Total
Financial assets
Financial assets at amortized costs
Corporate bonds		$ 231,239,832		$ -		$ 232,259,166		$ 232,259,166
Government bonds/Agency bonds		4,213,491		4,284,607		-		4,284,607
		$ 235,453,323		$ 4,284,607		$ 232,259,166		$ 236,543,773
Financial liabilities
Financial liabilities at amortized costs
Bonds payable		$ 992,033,491		$ -		$ 939,475,287		$ 939,475,287

- 75 -

		December 31, 2024
		Carrying		Fair Value
		Amount		Level 1		Level 2		Total
Financial assets
Financial assets at amortized costs
Corporate bonds		$ 171,980,179		$ -		$ 172,518,474		$ 172,518,474
Commercial paper		14,208,158		-		14,222,713		14,222,713
Government bonds/Agency bonds		4,379,527		4,353,434		-		4,353,434
		$ 190,567,864		$ 4,353,434		$ 186,741,187		$ 191,094,621
Financial liabilities
Financial liabilities at amortized costs
Bonds payable		$ 983,752,385		$ -		$ 900,344,663		$ 900,344,663

Valuation techniques and assumptions used in Level 2 fair value measurement

The fair values of corporate bonds, the Company’s bonds payable and agency bonds are determined

by quoted market prices provided by third party pricing services.

The fair value of commercial paper is determined by the present value of future cash flows based on

the discounted curves that are derived from the quoted market prices.

33. RELATED PARTY TRANSACTIONS

Intercompany balances and transactions between TSMC and its subsidiaries, which are related parties of

TSMC, have been eliminated upon consolidation; therefore, those items are not disclosed in this note. The

following is a summary of significant transactions between the Company and other related parties:

a.Related party name and categories

Related Party Name		Related Party Categories
GUC and its subsidiaries (GUC)		Associates
VIS and its subsidiaries (VIS)		Associates
SSMC		Associates
Xintec		Associates
TSMC Charity Foundation		Other related parties
TSMC Education and Culture Foundation		Other related parties

b.Net revenue

				Years Ended December 31
				2025		2024
Item		Related Party Categories
Sales revenue		Associates		$ 33,226,357		$ 15,034,149

- 76 -

c.Purchases

		Years Ended December 31
		2025		2024
Related Party Categories
Associates		$ 4,991,607		$ 4,619,621

d.Receivables from related parties

				December 31, 2025		December 31, 2024
Item		Related Party Name
Receivables from related parties		GUC		$ 1,651,010		$ 610,027
		VIS		945,224		626,638
		Others		143,266		167,808
				$ 2,739,500		$ 1,404,473
Other receivables from related parties		VIS		$ 267,808		$ -
		SSMC		307		251
				$ 268,115		$ 251

e.Payables to related parties

				December 31, 2025		December 31, 2024
Item		Related Party Name
Payables to related parties		Xintec		$ 1,298,672		$ 987,992
		SSMC		374,088		308,424
		Others		105,970		129,585
				$ 1,778,730		$ 1,426,001

f.Accrued expenses and other current liabilities

				December 31, 2025		December 31, 2024
Item		Related Party Categories
Temporary receipts		Associates		$ 638,804		$ 4,271,492

- 77 -

g.Others

				Years Ended December 31
				2025		2024
Item		Related Party Categories
Manufacturing expenses		Associates		$ 5,448,254		$ 5,232,777

The sales prices and payment terms to related parties were not significantly different from those of sales

to third parties. For other related party transactions, price and terms were determined in accordance with

mutual agreements.

The Company leased factory and office from associates. The lease terms and prices were both

determined in accordance with mutual agreements. The rental expenses were paid to associates

monthly; the related expenses were both classified under manufacturing expenses.

h.Compensation of key management personnel

The compensation to directors and other key management personnel were as follows:

		Years Ended December 31
		2025		2024
Short-term employee benefits		$ 5,332,419		$ 4,447,508
Post-employment benefits		3,269		3,830
Share-based payments		3,888,675		1,357,432
		$ 9,224,363		$ 5,808,770

The compensation to directors and other key management personnel were determined by the

Compensation and People Development Committee of TSMC in accordance with the individual

performance and market trends.

34. PLEDGED ASSETS

The Company provided certificate of deposits recorded in other financial assets as collateral mainly for

building lease agreements. As of December 31, 2025 and 2024, the aforementioned other financial assets

amounted to NT$129,385 thousand and NT$132,077 thousand, respectively.

35. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

Significant contingent liabilities and unrecognized commitments of the Company as of the end of the

reporting period, excluding those disclosed in other notes, were as follows:

a.Under a technical cooperation agreement with Industrial Technology Research Institute, the R.O.C.

Government or its designee approved by TSMC can use up to 35% of TSMC’s capacity provided

TSMC’s outstanding commitments to its customers are not prejudiced. The term of this agreement is for

five years beginning from January 1, 1987 and is automatically renewed for successive periods of five

years unless otherwise terminated by either party with one year prior notice. As of the end of reporting

period, the R.O.C. Government did not invoke such right.

- 78 -

b.Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30,

1999, the parties formed a joint venture company, SSMC, which is an integrated circuit foundry in

Singapore. TSMC’s equity interest in SSMC was 32%. Nevertheless, in September 2006, Philips spun-

off its semiconductor subsidiary which was renamed as NXP B.V. Further, TSMC and NXP B.V.

purchased all the SSMC shares owned by EDB Investments Pte Ltd. pro rata according to the

Shareholders Agreement on November 15, 2006. After the purchase, TSMC and NXP B.V. currently

own approximately 39% and 61% of the SSMC shares, respectively. TSMC and NXP B.V. are required,

in the aggregate, to purchase at least 70% of SSMC’s capacity, but TSMC alone is not required to

purchase more than 28% of the capacity. If any party defaults on the commitment and the capacity

utilization of SSMC falls below a specific percentage of its capacity, the defaulting party is required to

compensate SSMC for all related unavoidable costs. There was no default from the aforementioned

commitment as of the end of reporting period.

c.In February 2025, Longitude Licensing Ltd. and Marlin Semiconductor Limited (collectively, “Marlin”)

filed complaints with the U.S. International Trade Commission (“ITC”) and the U.S. District Court for

the Eastern District of Texas alleging that TSMC and its customers infringe five U.S. patents. The ITC

instituted an investigation on March 21, 2025 and the lawsuit in the Eastern District Court for Texas

was statutorily stayed on April 23, 2025 pending the ITC investigation.Marlin dropped 2 asserted

patents in the ITC investigation in October and November 2025. The outcome cannot be determined,

and we cannot make a reliable estimate of the contingent liability at this time.

d.TSMC entered into long-term purchase agreements of materials and supplies, manufacturing services

and agreements of waste disposal with multiple suppliers. The relative minimum fulfillment quantity

and price are specified in the agreements.

e.TSMC entered into long-term purchase agreement of equipment and maintenance service. The relative

fulfillment period, quantity and price are specified in the agreement.

f.TSMC entered into long-term energy purchase agreements with multiple suppliers. The relative

fulfillment period, quantity and price are specified in the agreements.

g.Amounts available under unused letters of credit as of December 31, 2025 and 2024 were NT$438,643

thousand and NT$489,882 thousand, respectively.

h.The company entrusted financial institutions to provide performance guarantees mainly for import and

export of goods, lease agreement and apply for subsidy. As of December 31, 2025 and 2024, the

aforementioned guarantee amounted to NT$23,375,215 thousand and NT$10,315,609 thousand,

respectively.

36. SIGNIFICANT LOSS FROM DISASTER

In January 2025, several earthquakes struck Taiwan. The resulting damage was mostly to inventories,

machinery and equipment. In the first quarter of 2025, the Company recognized related earthquake losses to

be approximately NT$5.3 billion, net of insurance claim. Such losses were primarily included in the cost of

revenue and other operating income and expenses in net amounts.

On April 3, 2024, an earthquake struck Taiwan. The resulting damage was mostly to inventories, plant

facilities and machinery and equipment. In the second quarter of 2024, the Company recognized related

earthquake losses to be approximately NT$3 billion, net of insurance claim. Such losses were primarily

included in the cost of revenue and other operating income and expenses in net amounts.

- 79 -

37. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND

LIABILITIES

The following information was summarized according to the foreign currencies other than the functional

currency of the Company. The exchange rates disclosed were used to translate the foreign currencies into

the functional currency. The significant financial assets and liabilities denominated in foreign currencies

were as follows:

		Foreign Currencies (In Thousands)		Exchange Rate (Note 1)			Carrying Amount (In Thousands)
December 31, 2025
Financial assets
Monetary items
USD		$ 20,847,509		31.444			$ 655,529,057
EUR		1,110,573		37.003			41,094,543
JPY		132,541,455		0.2013			26,680,595
Financial liabilities
Monetary items
USD		12,688,419		31.444			398,974,654
EUR		1,016,157		37.003			37,600,861
JPY		131,018,646		0.2013			26,374,053
December 31, 2024
Financial assets
Monetary items
USD		18,726,635		32.768			613,634,377
EUR		596,978		34.102			20,358,132
EUR		169,266		1.041	(Note 2)		5,772,303
JPY		128,926,508		0.2092			26,971,425
Financial liabilities
Monetary items
USD		16,255,804		32.768			532,670,186
EUR		821,105		34.102			28,001,335
EUR		168,550		1.041	(Note 2)		5,747,886
JPY		129,345,682		0.2092			27,059,117

Note 1: Except as otherwise noted, exchange rate represents the number of NT dollar for which one

foreign currency could be exchanged.

Note 2: The exchange rate represents the number of U.S. dollar for which one Euro could be exchanged.

- 80 -

Please refer to the consolidated statements of comprehensive income for the total of realized and unrealized

foreign exchange gain and loss for the years ended December 31, 2025 and 2024, respectively. Since there

were varieties of foreign currency transactions and functional currencies within the subsidiaries of the

Company, the Company was unable to disclose foreign exchange gain (loss) towards each foreign currency

with significant impact.

38. ADDITIONAL DISCLOSURES

Following are the additional disclosures required by the Securities and Futures Bureau for TSMC:

a.Financings provided: See Table 1 attached;

b.Endorsement/guarantee provided: See Table 2 attached;

c.Marketable securities held (excluding investments in subsidiaries and associates): there are no

significant securities that need to be listed separately;

d.Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital:

See Table 3 attached;

e.Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital:

See Table 4 attached;

f.Others: The business relationship between the parent and the subsidiaries and significant transactions

between them: See Table 5 attached;

g.Names, locations, and related information of investees over which TSMC exercises significant influence

(excluding information on investment in mainland China): See Table 6 attached;

h.Information on investment in mainland China

1)The name of the investee in mainland China, the main businesses and products, its issued capital,

method of investment, information on inflow or outflow of capital, percentage of ownership,

income (losses) of the investee, share of profits/losses of investee, ending balance, amount received

as dividends from the investee, and the limitation on investee: See Table 7 attached.

2)Significant direct or indirect transactions with the investee, its prices and terms of payment,

unrealized gain or loss, and other related information which is helpful to understand the impact of

investment in mainland China on financial reports: See Table 5 attached.

39. OPERATING SEGMENTS INFORMATION

a.Operating segments, segment revenue and operating results

TSMC’s chief operating decision makers periodically review operating results, focusing on operating

income generated by foundry segment. Operating results are used for resource allocation and/or

performance assessment. As a result, the Company has only one operating segment, the foundry

segment. The foundry segment engages mainly in the manufacturing, sales, packaging, testing and

computer-aided design of integrated circuits and other semiconductor devices and the manufacturing of

masks.

- 81 -

The basis for the measurement of income from operations is the same as that for the preparation of

financial statements. Please refer to the consolidated statements of comprehensive income for the

related segment revenue and operating results.

b.Geographic and major customers’ information were as follows:

1)Geographic information

		December 31,		December 31,
Noncurrent Assets		2025		2024
Taiwan		$ 3,102,343,043		$ 2,613,112,149
United States		540,057,427		541,836,347
Japan		117,403,224		126,600,621
China		65,019,872		82,405,764
Europe, the Middle East and Africa		51,515,151		19,150,044
Others		1,165		1,420
		$ 3,876,339,882		$ 3,383,106,345

Noncurrent assets include property, plant and equipment, right-of-use assets, intangible assets and

other noncurrent assets.

2)Major customers representing at least 10% of net revenue

		Years Ended December 31
		2025				2024
		Amount		%		Amount		%
Customer A		$ 726,974,278		19		$ 352,271,213		12
Customer B		645,178,671		17		624,345,477		22

- 82 -

TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

FINANCINGS PROVIDED

FOR THE YEAR ENDED DECEMBER 31, 2025

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

No.

Financing Company

Counterparty

Financial Statement Account

Related Party

Maximum Balance for the Period (Foreign Currencies in Thousands) (Note 3)

Ending Balance (Foreign Currencies in Thousands) (Note 3)

Amount Actually Drawn (Foreign Currencies in Thousands)

Interest Rate

Nature for Financing

Transaction Amounts

Reason for Financing

Allowance for Bad Debt

Collateral

Financing Limits for Each Borrowing Company (Notes 1 and 2)

Financing Company’s Total Financing Amount Limits (Notes 1 and 2)

Item

Value

1

TSMC China

TSMC Nanjing

Other receivables from related parties

Yes

$ 41,142,000

$ 15,295,580

$ 15,295,580

1.50%

The need for long-term financing

$ -

Operating capital

$ -

-

$ -

$ 122,744,745

$ 122,744,745

(RMB 6,000,000 )&

(RMB 3,400,000 )

(RMB 3,400,000 )

(US$ 450,000 )

2

TSMC Development

TSMC Washington

Other receivables from related parties

Yes

1,886,640

1,886,640

1,886,640

-

The need for short-term financing

-

Operating capital

-

-

-

33,875,210

33,875,210

(US$ 60,000 )

(US$ 60,000 )

(US$ 60,000 )

Note 1: The aggregate amount available for lending to TSMC Nanjing from TSMC China and the aggregate amount of lending from TSMC China shall not exceed the net worth of TSMC China.

Note 2: The aggregate amount available for lending to TSMC Washington from TSMC Development and the aggregate amount of lending from TSMC Development shall not exceed the net worth of TSMC Development.

Note 3: The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.

- 83 -

TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE YEAR ENDED DECEMBER 31, 2025

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

No.

Endorsement/ Guarantee Provider

Guaranteed Party

Limits on Endorsement/ Guarantee Amount Provided to Each Guaranteed Party (Notes 1 and 2)

Maximum Balance for the Period (Foreign Currencies in Thousands) (Note 3)

Ending Balance (Foreign Currencies in Thousands) (Note 3)

Amount Actually Drawn (US$ in Thousands)

Amount of Endorsement/ Guarantee Collateralized by Properties

Ratio of Accumulated Endorsement/ Guarantee to Net Equity per Latest Financial Statements

Maximum Endorsement/ Guarantee Amount Allowable (Notes 1 and 2)

Guarantee Provided by Parent Company

Guarantee Provided by A Subsidiary

Guarantee Provided to Subsidiaries in Mainland China

Name

Nature of Relationship

0

TSMC

TSMC North America

Subsidiary

$ 2,167,838,398

$ 2,616,559

$ 2,616,559

$ 2,616,559

$ -

0.05%

$ 2,167,838,398

Yes

No

No

(US$ 83,213 )

(US$ 83,213 )

(US$ 83,213 )

TSMC Global

Subsidiary

2,167,838,398

235,830,000

204,386,000

204,386,000

-

3.77%

2,167,838,398

Yes

No

No

(US$ 7,500,000 )

(US$ 6,500,000 )

(US$ 6,500,000 )

TSMC Arizona

Subsidiary

2,167,838,398

471,578,859

471,476,919

343,737,521

-

8.70%

2,167,838,398

Yes

No

No

(US$ 14,997,420 )

(US$ 14,994,178 )

(US$ 10,931,736 )

1

TSMC Japan

TSMC JDC

The same parent company

322,906

265,716

-

-

-

-

322,906

No

No

No

(JPY 1,320,000 )

Note 1: TSMC's individual endorsement/guarantee limits for TSMC North America, TSMC Global, and TSMC Arizona, as well as the total external endorsement/guarantee limits for TSMC and its subsidiaries, shall not exceed forty percent (40%) of TSMC’s net worth.

Note 2: The total amount of the endorsement/guarantee provided by TSMC Japan to TSMC JDC and the total amount of the endorsement/guarantee provided by TSMC Japan shall not exceed two hundred and fifty percent (250%) of TSMC Japan’s net worth.

Note 3: The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.

- 84 -

TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2025

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

Company Name	Related Party	Nature of Relationships	Transaction Details				Abnormal Transaction		Notes/Accounts Payable or Receivable		Note
			Purchases/ Sales	Amount (Foreign Currencies in Thousands)	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance (Foreign Currencies in Thousands)	% to Total
TSMC	TSMC North America	Subsidiary	Sales	$ 2,931,832,801	77	Net 30 days from invoice date (Note)	-	-	$ 206,855,118	81
	TSMC Arizona	Subsidiary	Sales	1,558,414	-	Net 30 days from the end of the month of when invoice is issued	-	-	86,254	-
	JASM	Subsidiary	Sales	1,026,858	-	Net 30 days from the end of the month of when invoice is issued	-	-	396,245	-
	TSMC Nanjing	Subsidiary	Sales	158,188	-	Net 30 days from the end of the month of when invoice is issued	-	-	7,430	-
	GUC	Associate	Sales	6,014,200	-	Net 30 days from invoice date	-	-	387,902	-
	VIS	Associate	Sales	1,467,380	-	Net 30 days from the end of the month of when invoice is issued	-	-	945,224	-
	SSMC	Associate	Sales	299,174	-	Net 30 days from the end of the month of when invoice is issued	-	-	97,263	-
	TSMC Nanjing	Subsidiary	Purchases	73,652,776	27	Net 30 days from the end of the month of when invoice is issued	-	-	(2,934,085)	3
	TSMC Arizona	Subsidiary	Purchases	67,096,542	25	Net 30 days from the end of the month of when invoice is issued	-	-	(9,127,301)	10
	TSMC China	Subsidiary	Purchases	26,581,060	10	Net 30 days from the end of the month of when invoice is issued	-	-	(2,261,531)	2
	TSMC Washington	Indirect subsidiary	Purchases	7,233,381	3	Net 30 days from the end of the month of when invoice is issued	-	-	(578,662)	1
	SSMC	Associate	Purchases	4,113,439	2	Net 30 days from the end of the month of when invoice is issued	-	-	(374,089)	-
	VIS	Associate	Purchases	878,168	-	Net 30 days from the end of the month of when invoice is issued	-	-	(91,947)	-
TSMC North America	GUC	Associate of TSMC	Sales	25,079,357	1	Net 30 days from invoice date	-	-	1,263,109	1
				(US$ 805,964)					(US$ 40,170)
VisEra Tech	Xintec	Associate of TSMC	Sales	366,246	4	Net 60 days from the end of the month of when invoice is issued	-	-	46,003	4

Note: The tenor is determined by the payment terms granted to its clients by TSMC North America.

- 85 -

TABLE 4

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

December 31, 2025

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

Company Name	Related Party	Nature of Relationships	Ending Balance (Foreign Currencies in Thousands)	Turnover Days (Note 1)	Overdue		Amounts Received in Subsequent Period	Allowance for Bad Debts
					Amount	Action Taken
TSMC	TSMC North America	Subsidiary	$ 210,872,604	26	$ -	-	$ -	$ -
	JASM	Subsidiary	397,110	Note 2	-	-	-	-
	VIS	Associate	1,213,033	Note 2	-	-	-	-
	GUC	Associate	387,902	25	-	-	-	-
TSMC North America	TSMC	Parent company	149,819	Note 2	-	-	-	-
			(US$ 4,765)
	GUC	Associate of TSMC	1,263,109	10	-	-	-	-
			(US$ 40,170)
TSMC Europe	TSMC	Parent company	112,840	Note 2	-	-	-	-
			(EUR 3,049)
TSMC China	TSMC	Parent company	2,261,531	27	-	-	-	-
			(RMB 502,702)
	TSMC Nanjing	The same parent company	15,388,856	Note 2	-	-	-	-
			(RMB 3,420,734)
TSMC Nanjing	TSMC	Parent company	2,934,085	18	-	-	-	-
			(RMB 652,200)
TSMC Arizona	TSMC	Parent company	9,127,301	26	-	-	-	-
			(US$ 290,272)
TSMC Technology	TSMC	The ultimate parent of the Company	1,248,835	Note 2	-	-	-	-
			(US$ 39,716)
TSMC Development	TSMC Washington	Subsidiary	1,886,640	Note 2	-	-	-	-
			(US$ 60,000)
TSMC Washington	TSMC	The ultimate parent of the Company	578,662	27	-	-	-	-
			(US$ 18,403)

Note 1: The calculation of turnover days excludes other receivables from related parties.

Note 2: The ending balance is primarily consisted of royalty receivables and other receivables, which is not applicable for the calculation of turnover days.

- 86 -

TABLE 5

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE YEAR ENDED DECEMBER 31, 2025

(Amounts in Thousands of New Taiwan Dollars)

No.	Company Name	Counterparty	Nature of Relationship (Note 1)	Intercompany Transactions
				Financial Statements Item	Amount	Terms (Note 2)	Percentage of Consolidated Net Revenue or Total Assets
0	TSMC	TSMC North America	1	Sales revenue	$ 2,931,832,801	－	77%
				Receivables from related parties	206,855,118	－	3%
				Accrued expenses and other current liabilities	83,105,600	－	1%
				Other noncurrent liabilities	23,553,166	－	-
		TSMC China	1	Purchases	26,581,060	－	1%
		TSMC Nanjing	1	Purchases	73,652,776	－	2%
		TSMC Arizona	1	Purchases	67,096,542	－	2%

Note 1: No. 1 represents the transactions from parent company to subsidiary.

Note 2: The sales prices and payment terms of intercompany sales are not significantly different from those to third parties. For other intercompany transactions, prices and terms are determined in accordance with mutual agreements.

- 87 -

TABLE 6

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE (EXCLUDING INFORMATION ON INVESTMENT IN MAINLAND CHINA)

FOR THE YEAR ENDED DECEMBER 31, 2025

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

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount		Balance as of December 31, 2025			Net Income (Losses) of the Investee (Foreign Currencies in Thousands)	Share of Profits/Losses of Investee (Note 1) (Foreign Currencies in Thousands)	Note
				December 31, 2025 (Foreign Currencies in Thousands)	December 31, 2024 (Foreign Currencies in Thousands)	Shares (In Thousands)	Percentage of Ownership	Carrying Value (Foreign Currencies in Thousands)
TSMC	TSMC Global	Tortola, British Virgin Islands	Investment activities	$ 1,178,213,709	$ 616,839,509	37	100	$ 1,351,374,238	$ 51,520,610	$ 51,520,610	Subsidiary
	TSMC Arizona	Phoenix, Arizona, U.S.A.	Manufacturing, sales and testing of integrated circuits and other semiconductor devices	672,616,510	565,786,810	21,250	100	644,037,295	16,141,125	14,599,365	Subsidiary
	TSMC Partners	Tortola, British Virgin Islands	Investing in companies involved in the semiconductor design and manufacturing, and other investment activities	31,456,130	31,456,130	988,268	100	75,809,127	2,172,398	2,172,398	Subsidiary
	JASM	Kumamoto, Japan	Manufacturing, sales and testing of integrated circuits and other semiconductor devices	68,384,148	68,384,148	3,011	73	48,148,122	(9,767,064)	(7,095,772)	Subsidiary
	ESMC	Dresden, Germany	Manufacturing, sales and testing of integrated circuits and other semiconductor devices	38,221,667	18,112,326	805	70	39,474,813	(688,621)	(482,035)	Subsidiary
	VIS	Hsinchu, Taiwan	Manufacturing, sales, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing and design service of masks	13,919,430	13,919,430	506,709	28	18,166,267	7,907,503	2,172,713	Associate
	SSMC	Singapore	Manufacturing and sales of integrated circuits and other semiconductor devices	5,120,028	5,120,028	314	39	12,419,167	3,752,313	1,455,522	Associate
	VisEra Tech	Hsinchu, Taiwan	Research, design, development, manufacturing, sales, packaging and test of color filter	4,224,082	4,224,082	213,619	67	11,921,700	1,273,995	803,176	Subsidiary
	TSMC North America	San Jose, California, U.S.A.	Sales and marketing of integrated circuits and other semiconductor devices	333,718	333,718	11,000	100	8,770,383	1,194,222	1,194,222	Subsidiary
	Xintec	Taoyuan, Taiwan	Wafer level chip size packaging and wafer level post passivation interconnection service	1,988,317	1,988,317	111,282	41	4,495,255	1,353,534	555,073	Associate
	Emerging Fund	Cayman Islands	Investing in technology start-up companies	3,014,372	2,688,915	-	99.9	4,138,575	158,117	157,959	Subsidiary
	GUC	Hsinchu, Taiwan	Researching, developing, manufacturing, testing and marketing of integrated circuits	386,568	386,568	46,688	35	2,952,582	3,769,566	1,313,286	Associate
	TSMC 3DIC	Yokohama, Japan	Engineering support activities	1,144,356	1,144,356	49	100	1,502,144	216,635	216,635	Subsidiary
	TSMC Europe	Amsterdam, the Netherlands	Customer service and supporting activities	15,749	15,749	-	100	767,420	77,134	77,134	Subsidiary
	TSMC JDC	Yokohama, Japan	Engineering support activities	410,680	410,680	15	100	433,326	31,851	31,851	Subsidiary
	TSMC Japan	Yokohama, Japan	Customer service and supporting activities	83,760	83,760	6	100	129,152	5,123	5,123	Subsidiary
	TSMC Korea	Seoul, Korea	Customer service and supporting activities	13,656	13,656	80	100	44,447	1,670	1,670	Subsidiary
	VTAF III  (Note 3)	Cayman Islands	Investing in technology start-up companies	-	561,975	-	-	-	445	436	Subsidiary
TSMC Partners	TSMC Development	Delaware, U.S.A.	Investing in companies involved in semiconductor manufacturing	18,455,704	18,455,704	-	100	38,469,935	114,205	Note 2	Subsidiary
				(US$ 586,939)	(US$ 586,939)			(US$ 1,223,443)	(US$ 3,617)
	TSMC Technology	Delaware, U.S.A.	Engineering support activities	449,084	449,084	-	100	1,911,742	408,763	Note 2	Subsidiary
				(US$ 14,282)	(US$ 14,282)			(US$ 60,798)	(US$ 13,211)
	TSMC Canada	Ontario, Canada	Engineering support activities	72,321	72,321	2,300	100	472,275	44,729	Note 2	Subsidiary
				(US$ 2,300)	(US$ 2,300)			(US$ 15,020)	(US$ 1,439)
VTAF III	Growth Fund (Note 3)	Cayman Islands	Investing in technology start-up companies	-	38,862	-	-	-	445	Note 2	Subsidiary
					(US$ 1,236)				(US$ 14)
TSMC Development	TSMC Washington	Washington, U.S.A.	Manufacturing, sales and testing of integrated circuits and other semiconductor devices	-	-	293,637	100	4,571,303	(401,529)	Note 2	Subsidiary
								(US$ 145,379)	(US$ (12,888))

Note 1: The share of profits/losses of investee includes the effect of unrealized gross profit on intercompany transactions.

Note 2: The share of profits/losses of the investee company is not reflected herein as such amount is already included in the share of profits/losses of the investor company.

Note 3: VTAF III and the Growth Fund have completed the liquidation procedures respectively in the first quarter and the second quarter of 2025.

- 88 -

TABLE 7

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR YEAR ENDED DECEMBER 31, 2025

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

Investee Company	Main Businesses and Products	Total Amount of Paid-in Capital (RMB in Thousands)	Method of Investment	Accumulated Outflow of Investment from Taiwan as of January 1, 2025 (US$ in Thousands)	Investment Flows		Accumulated Outflow of Investment from Taiwan as of December 31, 2025 (US$ in Thousands)	Net Income (Losses) of the Investee Company	Percentage of Ownership	Share of Profits/Losses	Carrying Amount as of Balance as of December 31, 2025	Accumulated Inward Remittance of Earnings as of December 31, 2025
					Outflow (US$ in Thousands)	Inflow
TSMC China	Manufacturing, sales, testing and computer-aided design of integrated circuits and other semiconductor devices	$ 18,939,667	(Note 1)	$ 18,939,667	$ -	$ -	$ 18,939,667	$ 11,571,415	100%	$ 11,638,257	$ 122,572,394	$ -
		(RMB      4,502,080)		(US$        596,000)			(US$    596,000)			(Note 2)
TSMC Nanjing	Manufacturing, sales, testing and computer-aided design of integrated circuits and other semiconductor devices	30,521,412	(Note 1)	30,521,412	-	-	30,521,412	27,605,732	100%	27,453,918	145,609,673	-
		(RMB      6,650,119)		(US$      1,000,000)			(US$ 1,000,000)			(Note 2)

Accumulated Investment in Mainland China as of December 31, 2025                                (US$ in Thousands)	Investment Amounts Authorized by Investment Commission, MOEA (US$ in Thousands)	Upper Limit on Investment
$    49,461,079	$  119,412,667	$  3,276,477,170
(US$ 1,596,000)	(US$ 3,596,000)	(Note 3)

Note 1: TSMC directly invested US$596,000 thousand in TSMC China and US$1,000,000 thousands in TSMC Nanjing.

Note 2: Amount was recognized based on the audited financial statements.

Note 3: The upper limit on investment in mainland China is determined by sixty percent (60%) of the Company's consolidated net worth.

English Translation of Financial Statements Originally Issued in Chinese

Taiwan Semiconductor Manufacturing

Company Limited

Parent Company Only Financial Statements for the

Years Ended December 31, 2025 and 2024 and

Independent Auditors’ Report

- 1 -

勤業眾信

勤業眾信聯合會計師事務所

110016 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 110016, 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 parent company only financial statements of Taiwan Semiconductor

Manufacturing Company Limited (the “Company”), which comprise the parent company only balance sheets as

of December 31, 2025 and 2024, and the parent company only statements of comprehensive income, changes in

equity and cash flows for the years then ended, and notes to the parent company only financial statements,

including material accounting policy information (collectively referred to as the “parent company only financial

statements”).

In our opinion, the accompanying parent company only financial statements present fairly, in all material

respects, the parent company only financial position of the Company as of December 31, 2025 and 2024, and

its parent company only financial performance and its parent company only cash flows for the years then ended

in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Financial Statement Audit and

Attestation Engagements of 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 Parent Company Only 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 parent company only financial statements for the year ended December 31, 2025. These matters were

addressed in the context of our audit of the parent company only financial statements as a whole, and in

forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter for the Company’s parent company only financial statements for the year ended December 31,

2025 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 13 to the parent company only financial statements.

- 2 -

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.

Responsibilities of Management and Those Charged with Governance for the Parent Company Only

Financial Statements

Management is responsible for the preparation and fair presentation of the parent company only financial

statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities

Issuers, and for such internal control as management determines is necessary to enable the preparation of parent

company only financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the parent company only 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 and Risk Committee) are responsible for

overseeing the Company’s financial reporting process.

- 3 -

Auditors’ Responsibilities for the Audit of the Parent Company Only Financial Statements

Our objectives are to obtain reasonable assurance about whether the parent company only 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 parent company only 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 parent company only 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 parent company only 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 parent company only financial statements,

including the disclosures, and whether the parent company only financial statements represent the

underlying transactions and events in a manner that achieves fair presentation.

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 parent company only 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.

- 4 -

From the matters communicated with those charged with governance, we determine those matters that were of

most significance in the audit of the parent company only financial statements for the year ended December 31,

2025 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 Shih Tsung Wu and

Shang Chih Lin.

Deloitte & Touche

Taipei, Taiwan

Republic of China

February 10, 2026

Notice to Readers

The accompanying parent company only financial statements are intended only to present the 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 parent company only financial statements are those generally applied in the

Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying parent company only

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

parent company only financial statements shall prevail.

- 5 -

Taiwan Semiconductor Manufacturing Company Limited

PARENT COMPANY ONLY BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

		December 31, 2025				December 31, 2024
ASSETS		Amount		%		Amount		%
CURRENT ASSETS
Cash and cash equivalents (Note 6)		$ 1,067,035,432		15		$ 1,035,061,499		17
Financial assets at fair value through profit or loss (Note 7)		54,890		-		13,174		-
Financial assets at amortized cost (Note 8)		-		-		14,208,158		-
Notes and accounts receivable, net (Note 10)		46,702,679		1		39,497,003		1
Receivables from related parties (Note 30)		208,783,038		3		210,300,175		4
Other receivables from related parties (Note 30)		4,325,893		-		5,313,087		-
Inventories (Notes 5 and 11)		252,320,369		3		270,716,472		4
Other financial assets		15,334,569		-		4,927,482		-
Other current assets		36,398,294		-		29,528,046		1
Total current assets		1,630,955,164		22		1,609,565,096		27
NONCURRENT ASSETS
Financial assets at fair value through other comprehensive income		1,086,940		-		1,058,347		-
Investments accounted for using equity method (Note 12)		2,492,766,080		34		1,758,587,882		29
Property, plant and equipment (Notes 5 and 13)		2,991,673,431		41		2,537,292,611		42
Right-of-use assets (Notes 5 and 14)		41,870,717		1		37,899,147		1
Intangible assets (Notes 5 and 15)		19,574,877		-		20,452,082		-
Deferred income tax assets (Notes 5 and 23)		53,147,642		1		60,178,345		1
Refundable deposits		3,836,610		-		3,783,511		-
Other noncurrent assets		41,302,872		1		8,432,279		-
Total noncurrent assets		5,645,259,169		78		4,427,684,204		73
TOTAL		$ 7,276,214,333		100		$ 6,037,249,300		100
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Financial liabilities at fair value through profit or loss (Note 7)		$ 3,070,087		-		$ 439,110		-
Accounts payable		74,198,152		1		64,054,077		1
Payables to related parties (Note 30)		18,524,963		-		10,137,811		-
Salary and bonus payable		48,967,710		1		37,440,411		1
Accrued profit sharing bonus to employees and compensation to directors (Note 26)		103,097,239		1		70,520,129		1
Payables to contractors and equipment suppliers		168,648,840		2		150,280,751		3
Cash dividends payable (Note 18)		285,258,060		4		220,418,821		4
Income tax payable (Notes 5 and 23)		201,492,741		3		146,420,994		2
Long-term liabilities - current portion (Notes 16 and 27)		61,940,126		1		24,397,381		-
Accrued expenses and other current liabilities (Notes 5, 14, 19, 27 and 30)		340,755,301		5		449,236,841		7
Total current liabilities		1,305,953,219		18		1,173,346,326		19
NONCURRENT LIABILITIES
Bonds payable (Notes 16 and 27)		476,131,202		7		453,839,281		8
Deferred income tax liabilities (Notes 5 and 23)		3,860,196		-		3,925,320		-
Lease liabilities (Note 14)		30,289,119		-		27,206,865		1
Net defined benefit liability (Note 17)		6,012,286		-		7,580,657		-
Guarantee deposits		756,871		-		837,379		-
Others (Notes 19 and 30)		33,615,446		1		81,968,305		1
Total noncurrent liabilities		550,665,120		8		575,357,807		10
Total liabilities		1,856,618,339		26		1,748,704,133		29
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
Capital stock (Note 18)		259,325,245		3		259,327,332		4
Capital surplus (Notes 18 and 25)		73,445,601		1		73,260,765		2
Retained earnings (Note 18)
Appropriated as legal capital reserve		311,146,899		4		311,146,899		5
Appropriated as special capital reserve		87,284,496		1		-		-
Unappropriated earnings		4,705,070,165		65		3,606,105,124		60
		5,103,501,560		70		3,917,252,023		65
Others (Notes 18 and 25)		(16,676,412)		-		38,705,047		-
Total equity		5,419,595,994		74		4,288,545,167		71
TOTAL		$ 7,276,214,333		100		$ 6,037,249,300		100

The accompanying notes are an integral part of the parent company only financial statements.

- 6 -

Taiwan Semiconductor Manufacturing Company Limited

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME

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

		2025				2024
		Amount		%		Amount		%
NET REVENUE (Notes 5, 19 and 30)		$ 3,784,388,760		100		$ 2,880,383,350		100
COST OF REVENUE (Notes 5, 11, 26, 30 and 32)		1,564,313,067		41		1,306,140,916		45
GROSS PROFIT		2,220,075,693		59		1,574,242,434		55
OPERATING EXPENSES (Notes 5, 26 and 30)
Research and development		237,020,711		7		198,449,799		7
General and administrative		68,029,114		2		50,832,908		2
Marketing		7,871,571		-		6,264,188		-
Total operating expenses		312,921,396		9		255,546,895		9
OTHER OPERATING INCOME AND EXPENSES, NET (Notes 13, 26 and 32)		(663,339)		-		(1,549,447)		-
INCOME FROM OPERATIONS		1,906,490,958		50		1,317,146,092		46
NON-OPERATING INCOME AND EXPENSES
Share of profits of subsidiaries and associates (Note 12)		107,791,541		3		66,000,702		2
Interest income (Note 20)		28,458,200		1		27,338,300		1
Other income		215,960		-		199,890		-
Foreign exchange gain, net (Note 33)		13,418,209		-		9,988,417		-
Finance costs (Note 21)		(4,354,189)		-		(5,400,986)		-
Other gains and losses, net (Note 22)		(8,030,997)		-		(7,663,446)		-
Total non-operating income and expenses		137,498,724		4		90,462,877		3
INCOME BEFORE INCOME TAX		2,043,989,682		54		1,407,608,969		49
INCOME TAX EXPENSE (Notes 5 and 23)		326,107,055		9		234,341,266		8
NET INCOME		1,717,882,627		45		1,173,267,703		41
OTHER COMPREHENSIVE INCOME (LOSS) (Notes 5, 12, 17, 18 and 23)
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit obligation		(693,271)		-		144,365		-
Unrealized gain on investments in equity instruments at fair value through other comprehensive income		28,593		-		97,396		-
Gain (loss) on hedging instruments		(31,030)		-		5,041		-
Share of other comprehensive income of subsidiaries and associates		602,730		-		4,911,549		-
Income tax benefit (expense) related to items that will not be reclassified subsequently		138,654		-		(38,869)		-
		45,676		-		5,119,482		-
(Continued)

- 7 -

Taiwan Semiconductor Manufacturing Company Limited

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME

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

		2025				2024
		Amount		%		Amount		%
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising on translation of foreign operations		$ (61,273,206)		(2)		$ 65,330,074		2
Share of other comprehensive income of subsidiaries and associates		4,598,794		-		2,119,357		-
		(56,674,412)		(2)		67,449,431		2
Other comprehensive income (loss), net of income tax		(56,628,736)		(2)		72,568,913		2
TOTAL COMPREHENSIVE INCOME		$ 1,661,253,891		43		$ 1,245,836,616		43
EARNINGS PER SHARE (NT$, Note 24)
Basic earnings per share		$ 66.26				$ 45.25
Diluted earnings per share		$ 66.25				$ 45.25

The accompanying notes are an integral part of the parent company only financial statements.                            (Concluded)

- 8 -

Taiwan Semiconductor Manufacturing Company Limited

PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars)

																Others
		Capital Stock - Common Stock						Retained Earnings								Foreign Currency Translation Reserve		Unrealized Gain (Loss) on Financial Assets at Fair Value Through Other Comprehensive Income		Gain (Loss) on Hedging Instruments		Unearned Stock-Based Employee Compensation		Total
		Shares (In Thousands)		Amount		Capital Surplus		Legal Capital Reserve		Special Capital Reserve		Unappropriated Earnings		Total												Treasury Stock		Total Equity
BALANCE, JANUARY 1, 2024		25,932,071		$ 259,320,710		$ 69,876,381		$ 311,146,899		$ -		$ 2,846,883,893		$ 3,158,030,792		$ (25,316,769)		$ (4,099,928)		$ 1,395,875		$ (293,434)		$ (28,314,256)		$ -		$ 3,458,913,627
Appropriations of earnings
Cash dividends to shareholders		-		-		-		-		-		(414,915,586)		(414,915,586)		-		-		-		-		-		-		(414,915,586)
Total		-		-		-		-		-		(414,915,586)		(414,915,586)		-		-		-		-		-		-		(414,915,586)
Net income		-		-		-		-		-		1,173,267,703		1,173,267,703		-		-		-		-		-		-		1,173,267,703
Other comprehensive income (loss), net of income tax		-		-		-		-		-		126,040		126,040		65,579,764		6,948,818		(85,709)		-		72,442,873		-		72,568,913
Total comprehensive income (loss)		-		-		-		-		-		1,173,393,743		1,173,393,743		65,579,764		6,948,818		(85,709)		-		72,442,873		-		1,245,836,616
Employee restricted shares retired		(1,402)		(14,018)		14,018		-		-		19,934		19,934		-		-		-		-		-		-		19,934
Share-based payment arrangements		5,313		53,130		2,584,257		-		-		-		-		-		-		-		(1,414,645)		(1,414,645)		-		1,222,742
Treasury stock acquired		-		-		-		-		-		-		-		-		-		-		-		-		(3,089,177)		(3,089,177)
Treasury stock retired		(3,249)		(32,490)		(7,080)		-		-		(3,049,607)		(3,049,607)		-		-		-		-		-		3,089,177		-
Disposal of investments in equity instruments at fair value through other comprehensive income		-		-		-		-		-		3,772,747		3,772,747		-		(4,009,066)		-		-		(4,009,066)		-		(236,319)
Basis adjustment for gain on hedging instruments		-		-		-		-		-		-		-		-		-		141		-		141		-		141
Adjustments to share of changes in equities of associates		-		-		870,000		-		-		-		-		-		-		-		-		-		-		870,000
From difference between the consideration received and the carrying amount of the subsidiaries' net assets during actual disposal		-		-		5,284		-		-		-		-		-		-		-		-		-		-		5,284
From share of changes in equities of subsidiaries		-		-		(90,978)		-		-		-		-		-		-		-		-		-		-		(90,978)
Donation from shareholders		-		-		8,883		-		-		-		-		-		-		-		-		-		-		8,883
BALANCE, DECEMBER 31, 2024		25,932,733		259,327,332		73,260,765		311,146,899		-		3,606,105,124		3,917,252,023		40,262,995		(1,160,176)		1,310,307		(1,708,079)		38,705,047		-		4,288,545,167
Appropriations of earnings
Special capital reserve		-		-		-		-		87,284,496		(87,284,496)		-		-		-		-		-		-		-		-
Cash dividends to shareholders		-		-		-		-		-		(531,618,438)		(531,618,438)		-		-		-		-		-		-		(531,618,438)
Total		-		-		-		-		87,284,496		(618,902,934)		(531,618,438)		-		-		-		-		-		-		(531,618,438)
Net income		-		-		-		-		-		1,717,882,627		1,717,882,627		-		-		-		-		-		-		1,717,882,627
Other comprehensive income (loss), net of income tax		-		-		-		-		-		(559,857)		(559,857)		(61,282,139)		5,308,767		(95,507)		-		(56,068,879)		-		(56,628,736)
Total comprehensive income (loss)		-		-		-		-		-		1,717,322,770		1,717,322,770		(61,282,139)		5,308,767		(95,507)		-		(56,068,879)		-		1,661,253,891
Employee restricted shares retired		(209)		(2,087)		2,087		-		-		4,007		4,007		-		-		-		-		-		-		4,007
Share-based payment arrangements		-		-		(21,859)		-		-		-		-		-		-		-		1,231,078		1,231,078		-		1,209,219
Disposal of investments in equity instruments at fair value through other comprehensive income		-		-		-		-		-		541,198		541,198		-		(557,108)		-		-		(557,108)		-		(15,910)
Basis adjustment for gain on hedging instruments		-		-		-		-		-		-		-		-		-		13,450		-		13,450		-		13,450
Adjustments to share of changes in equities of associates		-		-		192,854		-		-		-		-		-		-		-		-		-		-		192,854
From share of changes in equities of subsidiaries		-		-		(14,959)		-		-		-		-		-		-		-		-		-		-		(14,959)
Donation from shareholders		-		-		26,713		-		-		-		-		-		-		-		-		-		-		26,713
BALANCE, DECEMBER 31, 2025		25,932,524		$ 259,325,245		$ 73,445,601		$ 311,146,899		$ 87,284,496		$ 4,705,070,165		$ 5,103,501,560		$ (21,019,144)		$ 3,591,483		$ 1,228,250		$ (477,001)		$ (16,676,412)		$ -		$ 5,419,595,994

The accompanying notes are an integral part of the parent company only financial statements.

- 9 -

Taiwan Semiconductor Manufacturing Company Limited

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

		2025		2024
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax		$ 2,043,989,682		$ 1,407,608,969
Adjustments for:
Depreciation expense		613,432,596		625,747,423
Amortization expense		7,984,252		9,129,469
Reversal of expected credit losses on investments in debt instruments		(13,579)		(2,551)
Finance costs		4,354,189		5,400,986
Share of profits of subsidiaries and associates		(107,791,541)		(66,000,702)
Interest income		(28,458,200)		(27,338,300)
Share-based compensation		1,213,225		1,242,676
Loss on disposal or retirement of property, plant and equipment, net		1,093,208		2,458,920
Gain on disposal or retirement of intangible assets, net		(1,258)		(6,206)
Impairment loss on property, plant and equipment		633,296		1,102,946
Gain on disposal of investments accounted for using equity method, net		-		(7,126)
Loss of disposal of subsidiary		167,986		-
Loss (gain) on foreign exchange, net		4,920,460		(11,760,189)
Dividend income		(215,960)		(199,890)
Others		1,107,314		(458,276)
Changes in operating assets and liabilities:
Financial instruments at fair value through profit or loss		8,134,179		1,029,990
Notes and accounts receivable, net		(7,205,676)		(5,939,724)
Receivables from related parties		1,517,137		(55,038,298)
Other receivables from related parties		987,194		(938,597)
Inventories		18,396,103		(32,457,277)
Other financial assets		(10,278,940)		(167,618)
Other current assets		(6,068,586)		(19,891,135)
Other noncurrent assets		(34,149,903)		(3,360,036)
Accounts payable		10,144,075		16,410,584
Payables to related parties		8,375,310		20,011
Salary and bonus payable		11,527,299		9,685,669
Accrued profit sharing bonus to employees and compensation to directors		32,577,110		19,877,641
Accrued expenses and other current liabilities		(159,167,274)		115,859,695
Other noncurrent liabilities		3,518,593		10,344,601
Net defined benefit liability		(2,261,642)		(1,532,202)
Cash generated from operations		2,418,460,649		2,000,821,453
Income taxes paid		(264,129,528)		(181,322,787)
Net cash generated by operating activities		2,154,331,121		1,819,498,666
(Continued)

- 10 -

Taiwan Semiconductor Manufacturing Company Limited

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

		2025		2024
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Financial assets at amortized cost		$ (5,998,859)		$ (44,368,311)
Hedging financial instruments		(631,620)		-
Investments accounted for using equity method		-		(3,738,753)
Property, plant and equipment		(1,045,509,843)		(644,734,446)
Intangible assets		(9,877,172)		(8,053,430)
Proceeds from disposal or redemption of:
Financial assets at amortized cost		20,340,000		48,840,000
Property, plant and equipment		2,651,999		1,634,456
Intangible assets		-		8,323
Derecognition of derivative financial instruments		(5,544,918)		-
Derecognition of hedging financial instruments		600,590		-
Interest received		28,334,951		26,599,749
Other dividends received		215,960		199,890
Dividends received from investments accounted for using equity method		4,134,651		5,097,471
Refundable deposits paid		(403,543)		(312,809)
Refundable deposits refunded		216,207		278,903
Net cash used in investing activities		(1,011,471,597)		(618,548,957)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in hedging financial liabilities - bank loans		335,106		(26,496,570)
Proceeds from issuance of bonds		86,900,000		34,300,000
Repayment of bonds		(24,400,000)		(7,000,000)
Payments for transaction costs attributable to the issuance of bonds		(90,308)		(35,681)
Treasury stock acquired		-		(3,089,177)
Repayment of the principal portion of lease liabilities		(2,932,532)		(2,257,534)
Interest paid		(6,409,298)		(5,864,077)
Guarantee deposits received		3,000		4,677
Guarantee deposits refunded		(47,731)		(93,242)
Cash dividends		(466,779,199)		(363,055,226)
Disposal of ownership interests in subsidiaries (without losing control)		-		1,021
Payment of partial acquisition of interests in subsidiaries		(688,946,487)		(528,037,569)
Proceeds from partial disposal of interests in subsidiaries		308,227		946,001
Donation from shareholders		26,574		8,752
Net cash used in financing activities		(1,102,032,648)		(900,668,625)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(8,852,943)		16,076,703
NET INCREASE IN CASH AND CASH EQUIVALENTS		31,973,933		316,357,787
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		1,035,061,499		718,703,712
CASH AND CASH EQUIVALENTS, END OF YEAR		$ 1,067,035,432		$ 1,035,061,499

The accompanying notes are an integral part of the parent company only financial statements. (Concluded)

- 11 -

Taiwan Semiconductor Manufacturing Company Limited

NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024

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

1.    GENERAL

Taiwan Semiconductor Manufacturing Company Limited (the “Company” or “TSMC”), a Republic of

China (R.O.C.) corporation, was incorporated on February 21, 1987. The Company 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, the Company’s shares were listed on the Taiwan Stock Exchange (TWSE). On

October 8, 1997, the Company 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.

2.    THE AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying parent company only financial statements were approved and authorized for issuance

by the Board of Directors on February 10, 2026.

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, “IFRS Accounting Standards”) endorsed and issued into effect by the Financial

Supervisory Commission (FSC)

The initial application of the amendments to the IFRS Accounting Standards endorsed and issued into

effect by the FSC did not have a material impact on the accounting policies of the Company.

b.The IFRS Accounting Standards issued by International Accounting Standards Board (IASB) and

endorsed by the FSC with effective date starting 2026

New, Amended and Revised Standards and Interpretations		Effective Date Issued by IASB
Amendments to IFRS 9 and IFRS 7 “Amendments to the Classification and Measurement of Financial Instruments” - the amendments to the application guidance of classification of financial assets		January 1, 2026
Annual Improvements to IFRS Accounting Standards - Volume 11		January 1, 2026
Amendments to IFRS 9 and IFRS 7 “Contracts Referencing Nature- dependent Electricity”		January 1, 2026

- 12 -

c.The IFRS Accounting Standards issued by IASB, but not yet endorsed and issued into effect by the

FSC

New, Amended and Revised 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
IFRS 18 “Presentation and Disclosure in Financial Statements”		January 1, 2027 (Note)

Note : On September 25, 2025, the FSC announced that IFRS 18 will take effect starting from January

1, 2028. Domestic entities could elect to apply IFRS 18 for an earlier period after the

endorsement of IFRS 18 by the FSC.

IFRS 18 “Presentation and Disclosure in Financial Statements” and consequential amendments

IFRS 18 will supersede IAS 1“ Presentation of Financial Statements”. The main changes comprise:

•Items of income and expenses included in the statement of profit or loss shall be classified into the

operating, investing, financing, income taxes and discontinued operations categories.

•The statement of profit or loss shall present totals and subtotals for operating profit or loss, profit

or loss before financing and income taxes and profit or loss.

•Provides guidance to enhance the requirements of aggregation and disaggregation: The Company

shall identify the assets, liabilities, equity, income, expenses and cash flows that arise from

individual transactions or other events and shall classify and aggregate them into groups based on

shared characteristics, so as to result in the presentation in the primary financial statements of line

items that have at least one similar characteristic. The Company shall disaggregate items with

dissimilar characteristics in the primary financial statements and in the notes. The Company labels

items as “other” only if it cannot find a more informative label.

In addition, a consequential amendment has been made to IAS 7 “Statement of Cash Flows”, requiring

the Company to use operating profit or loss as the starting point when presenting cash flows from

operating activities under the indirect method.

Except for the above impact, as of the date the accompanying parent company only financial

statements were issued, the Company continues in evaluating other impacts of the above amended

standards and 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.

4.    SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION

For the convenience of readers, the accompanying parent company only 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 parent company only financial statements shall

prevail.

- 13 -

Statement of Compliance

The accompanying parent company only financial statements have been prepared in conformity with the

Regulations Governing the Preparation of Financial Reports by Securities Issuers (the “Accounting

Standards Used in Preparation of the Parent Company Only Financial Statements”).

Basis of Preparation

The accompanying parent company only financial statements have been prepared on the historical cost

basis except for financial instruments that are measured at fair values, as explained in the accounting

policies below. Historical cost is generally based on the fair value of the consideration given in exchange

for the assets.

When preparing the parent company only financial statements, the Company account for subsidiaries and

associates by using the equity method. In order to agree with the amount of net income, other

comprehensive income and equity attributable to shareholders of the parent in the consolidated financial

statements, the differences of the accounting treatment between the parent company only basis and the

consolidated basis are adjusted under the heading of investments accounted for using equity method, share

of profits of subsidiaries and associates and share of other comprehensive income of subsidiaries and

associates in the parent company only financial statements.

Foreign Currencies

In preparing the parent company only financial statements, transactions in currencies other than the

entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the

dates of the transactions. At the end of each reporting period, monetary items denominated in foreign

currencies are retranslated at the rates prevailing at that date. Such exchange differences are recognized in

profit or loss in the year in which they arise. Non-monetary items measured at fair value that are

denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value

was determined. Exchange differences arising on the retranslation of non-monetary items are included in

profit or loss for the year except for exchange differences arising on the retranslation of non-monetary

items in respect of which gains and losses are recognized directly in other comprehensive income, in

which case, the exchange differences are also recognized directly in other comprehensive income. Non-

monetary items that are measured in terms of historical cost in foreign currencies are not retranslated.

For the purposes of presenting parent company only financial statements, the assets and liabilities of the

Company’s foreign operations are translated into NT$ using exchange rates prevailing at the end of each

reporting period. Income and expense items are translated at the average exchange rates for the period.

Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in

equity.

Classification of Current and Noncurrent Assets and Liabilities

Current assets are assets held for trading purposes and assets expected to be converted to cash, sold or

consumed within one year from the end of the reporting period. Current liabilities are obligations incurred

for trading purposes and obligations expected to be settled within one year from the end of the reporting

period. Assets and liabilities that are not classified as current are noncurrent assets and liabilities,

respectively.

Cash Equivalents

Cash equivalents, for the purpose of meeting short-term cash commitments, consist of highly liquid time

deposits and investments that are readily convertible to known amounts of cash and which are subject to

an insignificant risk of changes in value.

- 14 -

Financial Instruments

Financial assets and liabilities shall be recognized when the Company becomes a party to the contractual

provisions of the instruments.

Financial assets and liabilities are initially recognized at fair values. Transaction costs that are directly

attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets

and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of

the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly

attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss

are recognized immediately in profit or loss.

Financial Assets

The classification of financial assets depends on the nature and purpose of the financial assets and is

determined at the time of initial recognition. Regular way purchases or sales of financial assets are

recognized and derecognized on a trade date or settlement date basis for which financial assets were

classified in the same way, respectively. Regular way purchases or sales are purchases or sales of financial

assets that require delivery of assets within the time frame established by regulation or convention in the

marketplace.

a.Category of financial assets and measurement

Financial assets are classified into the following categories: financial assets at FVTPL, investments in

equity instruments at FVTOCI and financial assets at amortized cost.

1)Financial asset at FVTPL

For certain financial assets which include debt instruments that do not meet the criteria of

amortized cost or FVTOCI, it is mandatorily required to measure them at FVTPL. Any gain or loss

arising from remeasurement is recognized in profit or loss. The net gain or loss recognized in profit

or loss incorporates any interest earned on the financial asset.

2)Investments in equity instruments at FVTOCI

On initial recognition, the Company may irrevocably designate investments in equity investments

that is not held for trading as at FVTOCI.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains

and losses arising from changes in fair value recognized in other comprehensive income and

accumulated in other equity.

Dividends on these investments in equity instruments at FVTOCI are recognized in profit or loss

when the Company’s right to receive the dividends is established, unless the Company’s rights

clearly represent a recovery of part of the cost of the investment.

3)Measured at amortized cost

Cash and cash equivalents, commercial paper, notes and accounts receivable (including related

parties), other receivables, refundable deposits and temporary payments (including those classified

under other current assets and other noncurrent assets) are measured at amortized cost.

Subsequent to initial recognition, financial assets measured at amortized cost are measured at

amortized cost, which equals to carrying amount determined by the effective interest method less

any impairment loss.

- 15 -

b.Impairment of financial assets

At the end of each reporting period, a loss allowance for expected credit loss is recognized for

financial assets at amortized cost (including accounts receivable).

The loss allowance for accounts receivable is measured at an amount equal to lifetime expected credit

losses. For financial assets at amortized cost, when the credit risk on the financial instrument has not

increased significantly since initial recognition, a loss allowance is recognized at an amount equal to

expected credit loss resulting from possible default events of a financial instrument within 12 months

after the reporting date. If, on the other hand, there has been a significant increase in credit risk since

initial recognition, a loss allowance is recognized at an amount equal to expected credit loss resulting

from all possible default events over the expected life of a financial instrument.

The Company recognizes an impairment loss in profit or loss for all financial instruments with a

corresponding adjustment to their carrying amount through a loss allowance account.

c.Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from

the financial asset expire, or when it transfers the financial asset and substantially all the risks and

rewards of ownership of the financial asset to another entity.

On derecognition of a financial asset at amortized cost in its entirety, the difference between the

asset’s carrying amount and the sum of the consideration received and receivable is recognized in

profit or loss. However, on derecognition of an investment in an equity instrument at FVTOCI, the

cumulative gain or loss that had been recognized in other comprehensive income is transferred directly

to retained earnings, without recycling through profit or loss.

Financial Liabilities and Equity Instruments

Classification as debt or equity

Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity

in accordance with the substance of the contractual arrangements and the definitions of a financial liability

and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after

deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds

received, net of direct issue costs.

Financial liabilities

Financial liabilities are subsequently measured either at amortized cost using effective interest method or

at FVTPL.

Financial liabilities are classified as at fair value through profit or loss when the financial liability is either

held for trading or is designated as at fair value through profit or loss.

Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or losses

arising on remeasurement recognized in profit or loss.

Financial liabilities other than those held for trading purposes and designated as at FVTPL are

subsequently measured at amortized cost at the end of each reporting period.

- 16 -

Derecognition of financial liabilities

The Company derecognizes financial liabilities when, and only when, the Company’s obligations are

discharged, cancelled or they expire. The difference between the carrying amount of the financial liability

derecognized and the consideration paid and payable is recognized in profit or loss.

Derivative Financial Instruments

Derivative financial instruments are initially recognized at fair value at the date the derivative contracts are

entered into and are subsequently remeasured to their fair value at the end of each reporting period. The

resulting gain or loss is recognized in profit or loss immediately unless the derivative financial instrument

is designated and effective as a hedging instrument, in which event the timing of the recognition in profit

or loss depends on the nature of the hedge relationship.

Hedge Accounting

a.Cash flow hedge

The Company designates certain hedging instruments, such as forward exchange contracts and bank

deposits denominated in foreign currency, to partially hedge its foreign exchange rate risks associated

with certain highly probable forecast transactions (e.g. capital expenditures). The effective portion of

changes in the fair value of hedging instruments is recognized in other comprehensive income. When

forecast transactions actually take place, the accumulated gains or losses that were recognized in other

comprehensive income are transferred from equity to the initial cost of the hedged items. The gains or

losses from hedging instruments relating to the ineffective portion are recognized immediately in

profit or loss.

The Company prospectively discontinues hedge accounting only when the hedging relationship ceases

to meet the qualifying criteria; for instance, when the hedging instrument expires or is sold, terminated

or exercised.

b.Hedges of net investments in foreign operations

The Company designates certain hedging instruments, such as bank loans denominated in foreign

currency, as a hedge of net investments in foreign operations to manage the exchange differences

arising on translation of foreign operations due to currency fluctuations. Any gains or losses on the

hedging instrument relating to the effective portion of the hedge are recognized in other

comprehensive income and accumulated under the heading of foreign currency translation reserve.

The gains or losses relating to the ineffective portion are recognized immediately in profit or loss.

The gains and losses on the hedging instrument relating to the effective portion of the hedge, which

were accumulated in the foreign currency translation reserve, are reclassified to profit or loss on the

disposal or partial disposal of a foreign operation.

Inventories

Inventories are stated at the lower of cost or net realizable value. Inventories are recorded at standard cost

and adjusted to approximate weighted-average cost at the end of the reporting period. Net realizable value

represents the estimated selling price of inventories less all estimated costs of completion and costs

necessary to make the sale.

- 17 -

Investments Accounted for Using Equity Method

Investments accounted for using the equity method include investments in subsidiaries and associates.

Investment in subsidiaries

A subsidiary is an entity that is controlled by the Company.

Under the equity method, an investment in a subsidiary is initially recognized at cost and adjusted

thereafter to recognize the Company’s share of profit or loss and other comprehensive income of the

subsidiary as well as the distribution received. The Company also recognized its share in the changes in

the equity of subsidiaries.

Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing

control over the subsidiaries are accounted for as equity transactions. Any difference between the carrying

amount of the subsidiary and the fair value of the consideration paid or received is recognized directly in

equity.

When the Company loses control of a subsidiary, any retained investment of the former subsidiary is

measured at the fair value at that date. A gain or loss is recognized in profit or loss and calculated as the

difference between (a) the aggregate of the fair value of consideration received and the fair value of any

retained interest at the date when control is lost; and (b) the previous carrying amount of the investments

in such subsidiary. In addition, the Company shall account for all amounts previously recognized in other

comprehensive income in relation to the subsidiary on the same basis as would be required if the

subsidiary had directly disposed of the related assets and liabilities.

When the Company transacts with its subsidiaries, profits and losses resulting from the transactions with

the subsidiaries are recognized in the Company’s parent company only financial statements only to the

extent of interests in the subsidiaries that are not owned by the Company.

Investment in associates

An associate is an entity over which the Company has significant influence and that is neither a subsidiary

nor a joint venture. Significant influence is the power to participate in the financial and operating policy

decisions of the investee but is not control or joint control over those policies.

The operating results and assets and liabilities of associates are incorporated in these parent company only

financial statements using the equity method of accounting. Under the equity method, an investment in an

associate is initially recognized in the statement of financial position at cost and adjusted thereafter to

recognize the Company’s share of profit or loss and other comprehensive income of the associate as well

as the distribution received. The Company also recognizes its share in the changes in the equities of

associates.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable

assets, liabilities and contingent liabilities of an associate recognized at the date of acquisition is

recognized as goodwill, which is included within the carrying amount of the investment. Any excess of the

Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over

the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

When necessary, the entire carrying amount of the investment (including goodwill) is tested for

impairment as a single asset by comparing its recoverable amount (higher of value in use and fair value

less costs to sell) with its carrying amount. Any impairment loss recognized forms part of the carrying

amount of the investment. Any reversal of that impairment loss is recognized to the extent that the

recoverable amount of the investment subsequently increases.

- 18 -

When the Company subscribes to additional shares in an associate at a percentage different from its

existing ownership percentage, the resulting carrying amount of the investment differs from the amount of

the Company’s proportionate interest in the net assets of the associate. The Company records such a

difference as an adjustment to investments with the corresponding amount charged or credited to capital

surplus. If the Company’s ownership interest is reduced due to the additional subscription to the shares of

associate by other investors, the proportionate amount of the gains or losses previously recognized in other

comprehensive income in relation to that associate shall be reclassified to profit or loss on the same basis

as would be required if the associate had directly disposed of the related assets or liabilities.

When the Company transacts with an associate, profits and losses resulting from the transactions with the

associate are recognized in the Company’s parent company only financial statements only to the extent of

interests in the associate that are not owned by the Company.

Property, Plant and Equipment

Property, plant and equipment are measured at cost less accumulated depreciation and accumulated

impairment. Costs include any incremental costs that are directly attributable to the construction,

acquisition of the item of property, plant and equipment or borrowing costs eligible for capitalization.

Property, plant and equipment in the course of construction for production, supply or administrative

purposes are carried at cost, less any recognized impairment loss. Such assets are classified to the

appropriate categories of property, plant and equipment when completed and ready for intended use.

Depreciation of these assets, on the same basis as other identical categories of property, plant and

equipment, commences when the assets are available for their intended use.

Depreciation is recognized so as to write off the cost of the assets less their residual values over their

useful lives, and it is computed using the straight-line method mainly over the following estimated useful

lives: buildings (assets used by the Company and assets subject to operating leases) - 10 to 20 years;

machinery and equipment (assets used by the Company and assets subject to operating leases) - 5 years;

and office equipment - 5 years. The estimated useful lives, residual values and depreciation method are

reviewed at the end of each reporting period, with the effect of any changes in estimates accounted for on

a prospective basis. Land is not depreciated.

An item of property, plant and equipment is derecognized upon disposal or when no future economic

benefits are expected to arise from the continued use of the assets. Any gain or loss arising on the disposal

or retirement of an item of property, plant and equipment is determined as the difference between the sales

proceeds and the carrying amount of the asset and is recognized in profit or loss.

Leases

For a contract that contains a lease component and non-lease component, the Company may elect to

account for the lease and non-lease components as a single lease component.

The Company as lessor

Rental income from operating lease is recognized on a straight-line basis over the term of the lease.

The Company as lessee

Except for payments for low-value asset leases and short-term leases (leases of machinery and equipment

and others) which are recognized as expenses on a straight-line basis, the Company recognizes right-of-

use assets and lease liabilities for all leases at the commencement date of the lease.

Right-of-use assets are measured at cost. The cost of right-of-use assets comprises the initial measurement

of lease liabilities adjusted for lease payments and initial direct costs made at or before the commencement

- 19 -

date, plus an estimate of costs needed to restore the underlying assets. Subsequent measurement is

calculated as cost less accumulated depreciation and accumulated impairment loss and adjusted for

changes in lease liabilities as a result of lease term modifications or other related factors. Right-of-use

assets are presented separately in the parent company only balance sheets.

Right-of-use assets are depreciated using the straight-line method from the commencement dates to the

earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms. If the lease

transfers ownership of the underlying assets to the Company by the end of the lease terms or if the cost of

right-of-use assets reflects that the Company will exercise a purchase option, the Company depreciates the

right-of-use assets from the commencement dates to the end of the useful lives of the underlying assets.

Lease liabilities are measured at the present value of the lease payments. Lease payments comprise fixed

payments, variable lease payments which depend on an index or a rate and the exercise price of a purchase

option if the Company is reasonably certain to exercise that option. The lease payments are discounted

using the lessee’s incremental borrowing rates.

Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with

interest expense recognized over the lease terms. When there is a change in a lease term, a change in

future lease payments resulting from a change in an index or a rate used to determine those payments, or a

change in the assessment of an option to purchase an underlying asset, the Company remeasures the lease

liabilities with a corresponding adjustment to the right-of-use assets. Lease liabilities are presented on a

separate line in the parent company only balance sheets.

Intangible Assets

Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition

of the business less accumulated impairment losses, if any.

Other intangible assets

Other separately acquired intangible assets with finite useful lives are carried at cost less accumulated

amortization and accumulated impairment losses. Amortization is recognized using the straight-line

method over the following estimated useful lives: Technology license fees - the estimated life of the

technology or the term of the technology transfer contract; software and system design costs - 3 years or

contract period; patent and others - the economic life or contract period. The estimated useful life and

amortization method are reviewed at the end of each reporting period, with the effect of any changes in

estimate being accounted for on a prospective basis.

Impairment of Tangible Assets, Right-of-use Assets and Intangible Assets

Goodwill

Goodwill is not amortized and instead is tested for impairment annually, or more frequently when there is

an indication that the cash generating unit may be impaired. For the purpose of impairment testing,

goodwill is allocated to each of the Company’s cash generating units or groups of cash-generating units

that are expected to benefit. If the recoverable amount of a cash-generating unit is less than its carrying

amount, the difference is allocated first to reduce the carrying amount of any goodwill allocated to such

cash generating unit and then to the other assets of the cash generating unit pro rata based on the carrying

amount of each asset in the cash generating unit. Any impairment loss for goodwill is recognized directly

in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

- 20 -

Tangible assets, right-of-use assets and other intangible assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible assets

(property, plant and equipment), right-of-use assets and other intangible assets to determine whether there

is any indication that those assets have suffered an impairment loss. If any such indication exists, the

recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When

it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the

recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and

consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-

generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a

reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use,

the estimated future cash flows are discounted to their present value using a pre-tax discount rate that

reflects current market assessments of the time value of money and the risks specific to the asset for which

the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying

amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An

impairment loss is recognized immediately in profit or loss.

When an impairment loss subsequently reverses, the carrying amount of the asset or a cash-generating unit

is increased to the revised estimate of its recoverable amount, but the increased carrying amount does not

exceed the carrying amount that would have been determined had no impairment loss been recognized for

the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized

immediately in profit or loss.

Revenue Recognition

The Company recognizes revenue when performance obligations are satisfied. The performance

obligations are satisfied when customers obtain control of the promised goods, which is generally when

the goods are delivered to the customers’ specified locations.

Revenue from sale of goods is measured at the fair value of the consideration received or receivable.

Revenue is reduced for estimated customer returns, rebates and other similar allowances. Estimated sales

returns and other allowances is generally made and adjusted based on historical experience and the

consideration of varying contractual terms to recognize refund liabilities, which is classified under accrued

expenses and other current liabilities.

In principle, payment term granted to customers is due 30 days from the invoice date or 15 days from the

end of the month of when the invoice is issued. Due to the short term nature of the receivables from sale of

goods with the immaterial discounted effect, the Company measures them at the original invoice amounts

without discounting.

Employee Benefits

Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount

of the benefits expected to be paid in exchange for service rendered by employees.

- 21 -

Retirement benefits

For defined contribution retirement benefit plans, payments to the benefit plan are recognized as an

expense when the employees have rendered service entitling them to the contribution. For defined benefit

retirement benefit plans, the cost of providing benefit is recognized based on actuarial calculations.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit

retirement benefit plans are determined using the Projected Unit Credit Method. Service cost (including

current service cost), and net interest on the net defined benefit liability (asset) are recognized as employee

benefits expense in the period they occur. Remeasurement, comprising actuarial gains and losses and the

return on plan assets (excluding interest), is recognized in other comprehensive income in the period in

which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in

retained earnings and will not be reclassified to profit or loss.

Net defined benefit liability represents the actual deficit in the Company’s defined benefit plan.

Treasury Stock

Treasury stock represents the outstanding shares that the Company buys back from market, which is stated

at cost and shown as a deduction in shareholders’ equity. When the Company retires treasury stock, the

treasury stock account is reduced and the common stock as well as the capital surplus - additional paid-in

capital are reversed on a pro rata basis. When the book value of the treasury stock exceeds the sum of the

par value and additional paid-in capital, the difference is charged to capital surplus - treasury stock

transactions and to retained earnings for any remaining amount.

Share-based payment arrangements

a.Equity-settled share-based payment arrangements

Restricted shares for employees are expensed on a straight-line basis over the vesting period, based on

the fair value at the grant date and the Company’s best estimate of the number expected to ultimately

vest, with a corresponding increase in other equity - unearned stock-based employee compensation.

When restricted shares for employees are issued, other equity - unearned stock-based employee

compensation is recognized on the grant date, with a corresponding increase in capital surplus -

restricted shares for employees. Dividends paid to employees on restricted shares which do not need to

be returned if employees resign in the vesting period are recognized as expenses upon the dividend

declaration with a corresponding adjustment in retained earnings.

At the end of each reporting period, the Company revises its estimate of the number of restricted

shares for employees that are expected to vest. The impact from such revision is recognized in profit or

loss so that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to

capital surplus - restricted shares for employees.

b.Cash-settled share-based payment arrangements

For cash-settled share-based payments, a liability is recognized for the services acquired, measured at

the fair value of the liability incurred. At the end of each reporting period until the liability is settled,

and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value

recognized in profit or loss.

- 22 -

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

Income tax on unappropriated earnings is expensed in the year the shareholders approved the

appropriation of earnings which is the year subsequent to the year the earnings are generated.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities

in the parent company only financial statements and the corresponding tax bases used in the computation

of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences.

Deferred tax assets are generally recognized for all deductible temporary differences, net operating loss

carryforwards and tax credits arising from purchases of machinery and equipment and research and

development  expenditures to the extent that it is probable that taxable profits will be available against

which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in

subsidiaries and associates, except where the Company is able to control the reversal of the temporary

difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets arising from deductible temporary differences associated with such investments are

only recognized to the extent that it is probable that there will be sufficient taxable profits against which to

utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to

the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of

the deferred tax asset to be recovered. The deferred tax assets which originally not recognized is also

reviewed at the end of each reporting period and recognized to the extent that it is probable that sufficient

taxable profits will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the year in

which the liability is settled or the asset is realized, based on tax rates (and tax laws) that have been

enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax

liabilities and assets reflects the tax consequences that would follow from the manner in which the

Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets

and liabilities.

Current and deferred tax for the year

Current and deferred tax are recognized in profit or loss, except when they relate to items that are

recognized in other comprehensive income or directly in equity, in which case, the current and deferred

tax are also recognized in other comprehensive income or directly in equity, respectively.

5.    MATERIAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND

UNCERTAINTY

In the application of the aforementioned Company’s accounting policies, the Company is required to make

judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not

readily apparent from other sources. The estimates and associated assumptions are based on historical

- 23 -

experience and other factors that are considered to be relevant. Actual results may differ from these

estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognized in the year in which the estimate is revised if the revision affects only that year,

or in the year of the revision and future years if the revision affects both current and future years.

Material Accounting Judgments

Revenue Recognition

The Company recognizes revenue when the conditions described in Note 4 are satisfied.

Commencement of Depreciation Related to Property, Plant and Equipment Classified as Equipment

under Installation and Construction in Progress (EUI/CIP)

As described in Note 4, commencement of depreciation related to 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.

Key Sources of Estimation and Uncertainty

Estimation of Sales Returns and Allowances

Sales returns and other allowance is estimated and recorded based on historical experience and in

consideration of different contractual terms. The amount is deducted from revenue in the same period the

related revenue is recorded. The Company periodically reviews the reasonableness of the estimates.

Valuation of Inventory

Inventories are stated at the lower of cost or net realizable value, and the Company uses estimate to

determine the net realizable value of inventory at the end of each reporting period.

The Company estimates the net realizable value of inventory for normal waste, obsolescence and

unmarketable items at the end of reporting period and then writes down the cost of inventories to net

realizable value. The net realizable value of the inventory is determined mainly based on assumptions of

future demand within a specific time horizon.

Impairment of Tangible Assets, Right-of-use Assets and Intangible Assets Other than Goodwill

In the process of evaluating the potential impairment of tangible assets, right-of-use assets and intangible

assets other than goodwill, the Company determines the independent cash flows, useful lives, expected

future revenue and expenses related to the specific asset groups with the consideration of the nature of

semiconductor industry. Any change in these estimates based on changed economic conditions or business

strategies could result in significant impairment charges or reversal in future years.

Realization of Deferred Income Tax Assets

Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be

available against which those deferred tax assets can be utilized. Assessment of the realization of the

deferred tax assets requires subjective judgment and estimate, including the future revenue growth and

profitability, tax holidays, the amount of tax credits can be utilized and feasible tax planning strategies.

Any changes in the global economic environment, the industry trends and relevant laws and regulations

could result in significant adjustments to the deferred tax assets.

- 24 -

6.    CASH AND CASH EQUIVALENTS

		December 31, 2025		December 31, 2024
Cash and deposits in banks		$ 1,065,903,440		$ 1,031,883,302
Commercial paper		-		1,998,549
Repurchase agreements		1,131,984		1,179,648
Money market funds		8		-
		$ 1,067,035,432		$ 1,035,061,499

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.

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

		December 31, 2025		December 31, 2024
Financial assets
Forward exchange contracts		$ 54,890		$ 13,174
Financial liabilities
Forward exchange contracts		$ 3,070,087		$ 439,110

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)
December 31, 2025
Sell US$		January 2026 to March 2026		US$ 9,005,000
December 31, 2024
Sell US$		January 2025 to March 2025		US$ 3,256,945

- 25 -

8.    FINANCIAL ASSETS AT AMORTIZED COST

		December 31, 2025		December 31, 2024
Commercial paper		$ -		$ 14,221,737
Less: Allowance for impairment loss		-		(13,579)
		$ -		$ 14,208,158

Refer to Note 29 for information relating to the credit risk management and expected credit loss for

financial assets at amortized cost.

9.    HEDGING FINANCIAL INSTRUMENTS

Cash flow hedge

The Company has designated the bank deposits denominated in foreign currency and forward exchange

contracts to partially hedge foreign exchange rate risks associated with certain highly probable forecast

transactions (capital expenditures). The hedge ratio is adjusted in response to the changes in the financial

market and capped at 100%. The forward exchange contracts and foreign currency deposits have

maturities of 12 months or less.

On the basis of economic relationships, the Company expects that the value of forward exchange contracts

and the foreign currency deposits will move in opposite directions to the value of hedged transactions in

response to foreign exchange rates movements.

The main source of hedge ineffectiveness in these hedging relationships is driven by the effect of the

counterparty’s own credit risk on the fair value of forward exchange contracts and foreign currency

deposits. No other sources of ineffectiveness have emerged from these hedging relationships during the

hedging period. Refer to Note 18 (d) for gain or loss arising from changes in the fair value of hedging

instruments and the amount transferred to initial carrying amount of hedged items.

The effect for the years ended December 31, 2025 and 2024 is detailed below:

		Change in Value Used for Calculating Hedge Ineffectiveness
		Years Ended December 31
Hedging Instruments/Hedged Items		2025		2024
Hedging Instruments
Forward exchange contracts		$ -		$ 5,041
Foreign currency deposits		$ (31,030)		$ -
Hedged Items
Forecast transaction (capital expenditures)		$ 31,030		$ (5,041)

Hedges of net investments in foreign operations

The Company has designated the bank loans denominated in foreign currency as a hedge of net

investments in foreign operations to manage its foreign currency risk arising from investment in overseas

subsidiaries.

- 26 -

The main source of hedge ineffectiveness in these hedging relationships is driven by the material

difference between the notional amount of bank loans denominated in foreign currency and the net

investment in foreign operations. No other sources of ineffectiveness have emerged from these hedging

relationships during the hedging period. Refer to Note 18 (d) for gain or loss arising from changes in the

fair value of hedging instruments.

The effect for the years ended December 31, 2025 and 2024 is detailed below:

		Change in Value Used for Calculating Hedge Ineffectiveness
		Years Ended December 31
Hedging Instruments/Hedged Items		2025		2024
Hedging Instruments
Bank loans		$ 335,106		$ 793,830
Hedged Items
Net investments in foreign operations		$ (335,106)		$ (793,830)

10.  NOTES AND ACCOUNTS RECEIVABLE, NET

		December 31, 2025		December 31, 2024
At amortized cost
Notes and accounts receivable		$ 41,975,948		$ 34,036,332
Less: Loss allowance		(477,512)		(451,913)
		41,498,436		33,584,419
At FVTOCI		5,204,243		5,912,584
		$ 46,702,679		$ 39,497,003

The Company signed a contract with the bank to sell certain accounts receivable without recourse and

transaction cost required. These accounts receivable are classified as at FVTOCI because they are held

within a business model whose objective is achieved by both collecting contractual cash flows and selling

financial assets.

In principle, the payment term granted to customers is due 30 days from the invoice date or 15 days from

the end of the month when the invoice is issued. Aside from recognizing impairment loss for credit-

impaired accounts receivable, the Company recognizes loss allowance based on the expected credit loss

ratio of customers by different risk levels with consideration of factors of historical loss ratios and

customers’ financial conditions, competitiveness and business outlook. For accounts receivable past due

over 90 days without collaterals or guarantees, the Company recognizes loss allowance at full amount.

- 27 -

Aging analysis of notes and accounts receivable

		December 31, 2025		December 31, 2024
Not past due		$ 46,831,242		$ 38,633,320
Past due
Past due within 30 days		348,949		1,315,596
Less: Loss allowance		(477,512)		(451,913)
		$ 46,702,679		$ 39,497,003

All of the Company’s accounts receivable classified as at FVTOCI were not past due.

Movements of the loss allowance for accounts receivable

		Years Ended December 31
		2025		2024
Balance, beginning of year		$ 451,913		$ 530,139
Provision (Reversal)		25,599		(78,226)
Balance, end of year		$ 477,512		$ 451,913

For the years ended December 31, 2025 and 2024, the changes in loss allowance were mainly due to the

variations in the balance of accounts receivable of different risk levels.

11.  INVENTORIES

		December 31, 2025		December 31, 2024
Finished goods		$ 26,782,971		$ 33,980,459
Work in process		170,000,320		178,296,363
Raw materials		43,318,957		44,017,395
Supplies and spare parts		12,218,121		14,422,255
		$ 252,320,369		$ 270,716,472

Write-down of inventories to net realizable value (excluding earthquake losses) and reversal of write-

down of inventories resulting from the increase in net realizable value were included in the cost of

revenue, which were as follows. Please refer to related earthquake losses in Note 32.

		Years Ended December 31
		2025		2024
Net inventory losses (reversal of write-down of inventories)		$ 2,887,437		$ (79,431)

- 28 -

12.  INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments accounted for using the equity method consisted of the following:

		December 31, 2025		December 31, 2024
Subsidiaries		$ 2,454,732,809		$ 1,721,166,777
Associates		38,033,271		37,421,105
		$ 2,492,766,080		$ 1,758,587,882

a.Investments in subsidiaries

Subsidiaries consisted of the following:

				Place of		Carrying Amount				Percentage of Ownership
Name of Associate		Principal Activities		Incorporation and Operation		December 31, 2025		December 31, 2024		December 31, 2025		December 31, 2024
TSMC Global Ltd. (TSMC Global)		Investment activities		Tortola, British Virgin Islands		$ 1,351,374,238		$ 772,437,954		100%		100%
TSMC Arizona Corporation (TSMC Arizona)		Manufacturing, sales and testing of integrated circuits and other semiconductor devices		Phoenix, Arizona, U.S.A.		644,037,295		544,359,678		100%		100%
TSMC Nanjing Company Limited (TSMC Nanjing)		Manufacturing, sales, testing and computer-aided design of integrated circuits and other semiconductor devices		Nanjing, China		145,609,673		116,846,280		100%		100%
TSMC China Company Limited (TSMC China)		Manufacturing, sales, testing and computer-aided design of integrated circuits and other semiconductor devices		Shanghai, China		122,572,394		110,272,686		100%		100%
TSMC Partners, Ltd. (TSMC Partners)		Investing in companies involved in the design, manufacture, and other related business in the semiconductor industry and other investment activities		Tortola, British Virgin Islands		75,809,127		76,694,630		100%		100%
Japan Advanced Semiconductor Manufacturing, Inc. (JASM)		Manufacturing, sales and testing of integrated circuits and other semiconductor devices		Kumamoto, Japan		48,148,122		57,173,512		73%		73%
European Semiconductor Manufacturing Company (ESMC) GmbH (ESMC)		Manufacturing, sales and testing of integrated circuits and other semiconductor devices		Dresden, Germany		39,474,813		17,510,070		70%		70%
VisEra Technologies Company Ltd. (VisEra Tech)		Research, design, development, manufacturing, sales, packaging and test of color filter		Hsinchu, Taiwan		11,921,700		12,204,760		67%		67%
TSMC North America		Selling and marketing of integrated circuits and other semiconductor devices		San Jose, California, U.S.A.		8,770,383		7,856,923		100%		100%
Emerging Fund, L.P. (Emerging Fund)		Investing in technology start-up companies		Cayman Islands		4,138,575		3,214,022		99.9%		99.9%
TSMC Japan 3DIC R&D Center, Inc. (TSMC 3DIC)		Engineering support activities		Yokohama, Japan		1,502,144		1,343,370		100%		100%
TSMC Europe B.V. (TSMC Europe)		Customer service and supporting activities		Amsterdam, the Netherlands		767,420		631,939		100%		100%
TSMC Design Technology Japan, Inc. (TSMC JDC)		Engineering support activities		Yokohama, Japan		433,326		418,383		100%		100%
TSMC Japan Limited (TSMC Japan)		Customer service and supporting activities		Yokohama, Japan		129,152		129,226		100%		100%
TSMC Korea Limited (TSMC Korea)		Customer service and supporting activities		Seoul, Korea		44,447		43,764		100%		100%
VentureTech Alliance Fund III, L.P. (VTAF III)		Investing in technology start-up technology companies		Cayman Islands		-		23,334		-		98%
VentureTech Alliance Fund II, L.P.  (VTAF II)		Investing in technology start-up technology companies		Cayman Islands		-		6,246		-		98%
						$ 2,454,732,809		$ 1,721,166,777

- 29 -

The Company increased its investment in TSMC Global for the amount of NT$561,374,200  thousand

and NT$261,677,200 thousand in both of 2025 and 2024, respectively.

The Company increased its investment in TSMC Arizona for the amount of NT$106,829,700 thousand

and NT$236,121,500 thousand in both of 2025 and 2024, respectively.

The Company increased its investment in JASM for the amount of  NT$15,754,106 thousand in 2024.

The Company increased its investment in ESMC for the amount of NT$20,109,341 thousand and

NT$13,299,041 thousand in both of 2025 and 2024, respectively.

VTAF II, VTAF III and Growth Fund have completed the liquidation procedures respectively in the

first quarter and the second quarter of 2025.

b.Investments in associates

Associates consisted of the following:

				Place of		Carrying Amount				% of Ownership and Voting Rights Held by the Company
Name of Associate		Principal Activities		Incorporation and Operation		December 31, 2025		December 31, 2024		December 31, 2025		December 31, 2024
Vanguard International Semiconductor Corporation (VIS)		Manufacturing, sales, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing and design service of masks		Hsinchu, Taiwan		$ 18,166,267		$ 18,300,373		28%		28%
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)		Manufacturing and sales of integrated circuits and other semiconductor devices		Singapore		12,419,167		11,387,185		39%		39%
Xintec Inc. (Xintec)		Wafer level chip size packaging and wafer level post passivation		Taoyuan, Taiwan		4,495,255		4,220,609		41%		41%
Global Unichip Corporation (GUC)		Researching, developing, manufacturing, testing and marketing of integrated		Hsinchu, Taiwan		2,952,582		3,512,938		35%		35%
						$ 38,033,271		$ 37,421,105

As of December 31, 2025 and 2024, no investments in associates are individually material to the

Company. Please refer to the parent company only statements of comprehensive income for

recognition of share of both profit (loss) and other comprehensive income (loss) of associates that are

not individually material.

The market prices of the associates’ ownership held by the Company in publicly traded stocks

calculated base on the closing price are summarized as follows. The closing price represents the

quoted price in active markets, the level 1 fair value measurement.

Name of Associate		December 31, 2025		December 31, 2024
GUC		$ 99,211,700		$ 63,495,488
VIS		$ 46,667,928		$ 50,620,261
Xintec		$ 15,468,187		$ 22,033,821

- 30 -

13.  PROPERTY, PLANT AND EQUIPMENT

		December 31, 2025		December 31, 2024
Assets used by the Company		$ 2,991,673,422		$ 2,537,292,598
Assets subject to operating leases		9		13
		$ 2,991,673,431		$ 2,537,292,611

Assets used by the Company

		Land		Buildings		Machinery and Equipment		Office Equipment		Equipment under Installation and Construction in Progress		Total
Cost
Balance at January 1, 2025		$ 3,212,000		$ 814,289,467		$ 5,561,479,710		$ 94,303,529		$ 575,842,844		$ 7,049,127,550
Additions		-		56,810,759		280,934,655		12,328,762		718,154,856		1,068,229,032
Disposals or retirements		-		(161,737)		(62,784,539)		(1,448,617)		-		(64,394,893)
Balance at December 31, 2025		$ 3,212,000		$ 870,938,489		$ 5,779,629,826		$ 105,183,674		$ 1,293,997,700		$ 8,052,961,689
Accumulated depreciation and impairment
Balance at January 1, 2025		$ -		$ 404,675,421		$ 4,041,389,852		$ 64,978,939		$ 790,740		$ 4,511,834,952
Additions		-		50,894,740		547,425,136		11,421,410		-		609,741,286
Disposals or retirements		-		(106,703)		(59,366,464)		(1,448,100)		-		(60,921,267)
Impairment losses (reversed)		-		-		1,424,036		-		(790,740)		633,296
Balance at December 31, 2025		$ -		$ 455,463,458		$ 4,530,872,560		$ 74,952,249		$ -		$ 5,061,288,267
Carrying amounts at December 31, 2025		$ 3,212,000		$ 415,475,031		$ 1,248,757,266		$ 30,231,425		$ 1,293,997,700		$ 2,991,673,422
Cost
Balance at January 1, 2024		$ 3,212,000		$ 758,806,526		$ 5,131,811,792		$ 92,701,801		$ 396,791,113		$ 6,383,323,232
Additions		-		55,597,044		467,354,678		9,549,218		179,051,731		711,552,671
Disposals or retirements		-		(114,103)		(37,743,247)		(7,947,490)		-		(45,804,840)
Reclassification		-		-		56,487		-		-		56,487
Balance at December 31, 2024		$ 3,212,000		$ 814,289,467		$ 5,561,479,710		$ 94,303,529		$ 575,842,844		$ 7,049,127,550
Accumulated depreciation and impairment
Balance at January 1, 2024		$ -		$ 356,622,537		$ 3,510,736,003		$ 61,719,223		$ 790,740		$ 3,929,868,503
Additions		-		48,163,277		563,408,071		11,207,118		-		622,778,466
Disposals or retirements		-		(110,393)		(33,910,889)		(7,947,402)		-		(41,968,684)
Reclassification		-		-		53,721		-		-		53,721
Impairment losses		-		-		1,102,946		-		-		1,102,946
Balance at December 31, 2024		$ -		$ 404,675,421		$ 4,041,389,852		$ 64,978,939		$ 790,740		$ 4,511,834,952
Carrying amounts at December 31, 2024		$ 3,212,000		$ 409,614,046		$ 1,520,089,858		$ 29,324,590		$ 575,052,104		$ 2,537,292,598

The significant part of the Company’s buildings includes main plants, mechanical and electrical power

equipment and clean rooms, and the related depreciation is calculated using the estimated useful lives of

20 years, 10 years and 10 years, respectively.

- 31 -

In the first quarter of 2025 and second quarter of 2024, the Company recognized impairment losses due to

partial machinery and equipment damage caused by earthquakes, which rendered them unusable. Please

refer to the related earthquake losses in Note 32.

The Company assesses impairment and recognizes impairment losses or reversal gains based on the asset's

usage status and expected usage plan. These are recorded under other operating income and expenses.  

Information about capitalized interest is set out in Note 21.

14.  LEASE ARRANGEMENTS

a.Right-of-use assets

		December 31, 2025		December 31, 2024
Carrying amounts
Land		$ 39,492,131		$ 36,615,988
Buildings		2,357,915		1,262,910
Office equipment		20,671		20,249
		$ 41,870,717		$ 37,899,147

		Years Ended December 31
		2025		2024
Additions to right-of-use assets		$ 8,624,633		$ 3,809,970
Depreciation of right-of-use assets
Land		$ 2,972,023		$ 2,523,492
Buildings		703,268		421,268
Office equipment		16,015		16,383
		$ 3,691,306		$ 2,961,143

b.Lease liabilities

		December 31, 2025		December 31, 2024
Carrying amounts
Current portion (classified under accrued expenses and other current liabilities)		$ 3,241,718		$ 2,497,939
Noncurrent portion		30,289,119		27,206,865
		$ 33,530,837		$ 29,704,804

(Continued)

- 32 -

Ranges of discount rates for lease liabilities are as follows:

		December 31, 2025		December 31, 2024
Land		0.39%~2.30%		0.39%~2.30%
Buildings		0.40%~2.04%		0.40%~2.04%
Office equipment		0.28%~1.80%		0.28%~1.74%

c.Material terms of right-of-use assets

The Company leases land and buildings mainly for the use of plants and offices with lease terms of 1

to 22 years. The lease contracts for land located in the R.O.C. specify that lease payments will be

adjusted every 2 years on the basis of changes in announced land value prices. The Company does not

have purchase options to acquire the leasehold land and buildings at the end of the lease terms.

d.Other lease information

		Years Ended December 31
		2025		2024
Total cash outflow for leases		$ 3,574,065		$ 2,807,980

15.  INTANGIBLE ASSETS

		Goodwill		Technology License Fees		Software and System Design Costs		Patent and Others		Total
Cost
Balance at January 1, 2025		$ 1,567,756		$ 28,545,782		$ 51,369,728		$ 13,132,229		$ 94,615,495
Additions		-		1,218,118		5,693,541		199,937		7,111,596
Disposals or retirements		-		-		(667,413)		-		(667,413)
Balance at December 31, 2025		$ 1,567,756		$ 29,763,900		$ 56,395,856		$ 13,332,166		$ 101,059,678
Accumulated amortization and impairment
Balance at January 1, 2025		$ -		$ 23,166,013		$ 39,442,474		$ 11,554,926		$ 74,163,413
Additions		-		1,408,632		6,019,169		556,451		7,984,252
Disposals or retirements		-		-		(662,864)		-		(662,864)
Balance at December 31, 2025		$ -		$ 24,574,645		$ 44,798,779		$ 12,111,377		$ 81,484,801
Carrying amounts at December 31, 2025		$ 1,567,756		$ 5,189,255		$ 11,597,077		$ 1,220,789		$ 19,574,877

(Continued)

- 33 -

		Goodwill		Technology License Fees		Software and System Design Costs		Patent and Others		Total
Cost
Balance at January 1, 2024		$ 1,567,756		$ 26,166,275		$ 47,949,736		$ 12,216,770		$ 87,900,537
Additions		-		2,379,507		8,602,555		923,349		11,905,411
Disposals or retirements		-		-		(5,182,563)		(7,890)		(5,190,453)
Balance at December 31, 2024		$ 1,567,756		$ 28,545,782		$ 51,369,728		$ 13,132,229		$ 94,615,495
Accumulated amortization and impairment
Balance at January 1, 2024		$ -		$ 20,436,014		$ 39,211,353		$ 10,569,106		$ 70,216,473
Additions		-		2,729,999		5,413,650		985,820		9,129,469
Disposals or retirements		-		-		(5,182,529)		-		(5,182,529)
Balance at December 31, 2024		$ -		$ 23,166,013		$ 39,442,474		$ 11,554,926		$ 74,163,413
Carrying amounts at December 31, 2024		$ 1,567,756		$ 5,379,769		$ 11,927,254		$ 1,577,303		$ 20,452,082

(Concluded)

The Company’s goodwill has been tested for impairment at the end of the annual reporting period and the

recoverable amount is determined based on the value in use. The value in use was calculated based on the

cash flow forecast from the financial budgets covering the future five-year period, and the Company used

annual discount rates of 9.5% and 9.3% in its test of impairment as of December 31, 2025 and 2024,

respectively, to reflect the relevant specific risk in the cash-generating unit.

For the years ended December 31, 2025 and 2024, the Company did not recognize any impairment loss on

goodwill.

16.  BONDS PAYABLE

		December 31, 2025		December 31, 2024
Domestic unsecured bonds		$ 538,388,000		$ 478,536,000
Less: Discounts on bonds payable		(316,672)		(299,338)
Less: Current portion		(61,940,126)		(24,397,381)
		$ 476,131,202		$ 453,839,281

The major terms of domestic unsecured bonds are as follows:

Issuance		Tranche		Issuance Period		Total Issue Amount		Coupon Rate		Repayment and Interest Payment
NT$ unsecured   bonds
109-1		A		March 2020 to March 2025		$ 3,000,000		0.58%		Bullet repayment; interest payable annually
		B		March 2020 to March 2027		10,500,000		0.62%		The same as above
		C		March 2020 to March 2030		10,500,000		0.64%		The same as above

(Continued)

- 34 -

Issuance		Tranche		Issuance Period		Total Issue Amount		Coupon Rate		Repayment and Interest Payment
109-2		A		April 2020 to April 2025		$ 5,900,000		0.52%		Bullet repayment; interest payable annually
		B		April 2020 to April 2027		10,400,000		0.58%		The same as above
		C		April 2020 to April 2030		5,300,000		0.60%		The same as above
109-3		A		May 2020 to May 2025		4,500,000		0.55%		The same as above
		B		May 2020 to May 2027		7,500,000		0.60%		The same as above
		C		May 2020 to May 2030		2,400,000		0.64%		The same as above
109-4		A		July 2020 to July 2025		5,700,000		0.58%		Two equal installments in last two years; interest payable annually
		B		July 2020 to July 2027		6,300,000		0.65%		The same as above
		C		July 2020 to July 2030		1,900,000		0.67%		The same as above
109-5		A		September 2020 to September 2025		4,800,000		0.50%		The same as above
		B		September 2020 to September 2027		8,000,000		0.58%		The same as above
		C		September 2020 to September 2030		2,800,000		0.60%		The same as above
109-6 (Green bond)		A		December 2020 to December 2025		1,600,000		0.40%		The same as above
		B		December 2020 to December 2027		5,600,000		0.44%		The same as above
		C		December 2020 to December 2030		4,800,000		0.48%		The same as above
109-7		A		December 2020 to December 2025		1,900,000		0.36%		The same as above
		B		December 2020 to December 2027		10,200,000		0.41%		The same as above
		C		December 2020 to December 2030		6,400,000		0.45%		The same as above
110-1		A		March 2021 to March 2026		4,800,000		0.50%		Bullet repayment; interest payable annually
		B		March 2021 to March 2028		11,400,000		0.55%		The same as above
		C		March 2021 to March 2031		4,900,000		0.60%		The same as above
110-2		A		May 2021 to May 2026		5,200,000		0.50%		The same as above
		B		May 2021 to May 2028		8,400,000		0.58%		The same as above
		C		May 2021 to May 2031		5,600,000		0.65%		The same as above

(Continued)

- 35 -

Issuance		Tranche		Issuance Period		Total Issue Amount		Coupon Rate		Repayment and Interest Payment
110-3		A		June 2021 to June 2026		$ 6,900,000		0.52%		Bullet repayment; interest payable annually
		B		June 2021 to June 2028		7,900,000		0.58%		The same as above
		C		June 2021 to June 2031		4,900,000		0.65%		The same as above
110-4		A		August 2021 to August 2025		4,000,000		0.485%		The same as above
		B		August 2021 to August 2026		8,000,000		0.50%		The same as above
		C		August 2021 to August 2028		5,400,000		0.55%		The same as above
		D		August 2021 to August 2031		4,200,000		0.62%		The same as above
110-6		A		October 2021 to April 2026		3,200,000		0.535%		The same as above
		B		October 2021 to October 2026		6,900,000		0.54%		The same as above
		C		October 2021 to October 2028		4,600,000		0.60%		The same as above
		D		October 2021 to October 2031		1,600,000		0.62%		The same as above
110-7		A		December 2021 to December 2026		7,700,000		0.65%		The same as above
		B		December 2021 to June 2027		3,500,000		0.675%		The same as above
		C		December 2021 to December 2028		5,500,000		0.72%		The same as above
111-1 (Green bond)		A		January 2022 to January 2027		2,100,000		0.63%		The same as above
		B		January 2022 to January 2029		3,300,000		0.72%		The same as above
111-2		A		March 2022 to September 2026		3,000,000		0.84%		The same as above
		B		March 2022 to March 2027		9,600,000		0.85%		The same as above
		C		March 2022 to March 2029		1,600,000		0.90%		The same as above
111-3 (Green bond)		-		May 2022 to May 2027		6,100,000		1.50%		The same as above
111-4 (Green bond)		A		July 2022 to July 2026		1,200,000		1.60%		The same as above
		B		July 2022 to July 2027		10,100,000		1.70%		The same as above
		C		July 2022 to July 2029		1,200,000		1.75%		The same as above
		D		July 2022 to July 2032		1,400,000		1.95%		The same as above

(Continued)

- 36 -

Issuance		Tranche		Issuance Period		Total Issue Amount		Coupon Rate		Repayment and Interest Payment
111-5		A		August 2022 to June 2027		$ 2,000,000		1.65%		Bullet repayment; interest payable annually
		B		August 2022 to August 2027		8,900,000		1.65%		The same as above
		C		August 2022 to August 2029		2,200,000		1.65%		The same as above
		D		August 2022 to August 2032		2,500,000		1.82%		The same as above
111-6 (Green bond)		A		October 2022 to October 2027		5,700,000		1.75%		The same as above
		B		October 2022 to October 2029		1,000,000		1.80%		The same as above
		C		October 2022 to October 2032		3,500,000		2.00%		The same as above
112-1 (Green bond)		A		March 2023 to March 2028		12,200,000		1.54%		The same as above
		B		March 2023 to March 2030		2,300,000		1.60%		The same as above
		C		March 2023 to March 2033		4,800,000		1.78%		The same as above
112-2 (Green bond)		A		May 2023 to May 2028		13,100,000		1.60%		The same as above
		B		May 2023 to May 2030		2,300,000		1.65%		The same as above
		C		May 2023 to May 2033		5,300,000		1.82%		The same as above
112-3		A		June 2023 to June 2028		11,400,000		1.60%		The same as above
		B		June 2023 to June 2030		2,600,000		1.65%		The same as above
		C		June 2023 to June 2033		6,000,000		1.80%		The same as above
112-4		A		August 2023 to August 2028		7,300,000		1.60%		The same as above
		B		August 2023 to August 2030		700,000		1.65%		The same as above
		C		August 2023 to August 2033		7,900,000		1.76%		The same as above
112-5		A		October 2023 to October 2028		4,300,000		1.62%		The same as above
		B		October 2023 to October 2033		5,500,000		1.76%		The same as above
113-1 (Green bond)		A		March 2024 to March 2029		12,000,000		1.64%		The same as above
		B		March 2024 to March 2034		10,800,000		1.76%		The same as above
113-2 (Green bond)		A		May 2024 to May 2029		4,900,000		1.98%		The same as above
		B		May 2024 to May 2034		6,600,000		2.10%		The same as above
114-1 (Green bond)		A		March 2025 to March 2030		12,000,000		1.90%		The same as above
		B		March 2025 to March 2035		7,200,000		2.05%		The same as above

- 37 -

Issuance		Tranche		Issuance Period		Total Issue Amount		Coupon Rate		Repayment and Interest Payment
114-2 (Green bond)		A		June 2025 to June 2030		$ 12,500,000		1.92%		Bullet repayment; interest payable annually
		B		June 2025 to June 2035		1,600,000		2.05%		The same as above
114-3 (Green bond)		A		July 2025 to July 2030		8,300,000		1.92%		The same as above
		B		July 2025 to July 2035		4,000,000		2.05%		The same as above
114-4		A		September  2025 to September 2030		13,800,000		1.66%		The same as above
		B (Green bond)		September 2025 to September 2035		4,000,000		1.73%		The same as above
114-5 (Green bond)		A		November  2025 to November 2030		14,000,000		1.50%		The same as above
		B		November  2025 to November 2032		3,000,000		1.53%		The same as above
		C		November  2025 to November 2035		6,500,000		1.58%		The same as above
										(Concluded)

Issuance		Tranche		Issuance Period		Total Issue Amount (US$ in Thousands)		Coupon Rate		Repayment and Interest Payment
US$ unsecured   bonds
109-1		-		September 2020 to September 2060		US$ 1,000,000		2.70%		Bullet repayment (callable on the 5th anniversary of the issue date and every anniversary thereafter); interest payable annually
110-5		-		September 2021 to September 2051		1,000,000		3.10%		The same as above

17.  RETIREMENT BENEFIT PLANS

a.Defined contribution plans

The plan under the R.O.C. Labor Pension Act (the “Act”) is deemed a defined contribution plan.

Pursuant to the Act, the Company has made monthly contributions equal to 6% of each employee’s

monthly salary to employees’ pension accounts. Accordingly, the Company recognized expenses of

NT$5,174,306 thousand and NT$4,537,289 thousand for the years ended December 31, 2025 and

2024, respectively.

b.Defined benefit plans

The Company has defined benefit plans under the R.O.C. Labor Standards Law that provide benefits

based on an employee’s length of service and average monthly salary for the six-month period prior to

retirement. The Company contributes an amount equal to 2% of salaries paid each month to their

- 38 -

respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory

Committee (the Committee) and deposited in the Committee’s name in the Bank of Taiwan. Before the

end of each year, the Company assesses the balance in the Funds. If the amount of the balance in the

Funds is inadequate to pay retirement benefits for employees who conform to retirement requirements

in the next year, the Company is required to fund the difference in one appropriation that should be

made before the end of March of the next year. The Funds are operated and managed by the

government’s designated authorities; as such, the Company does not have any right to intervene in the

investments of the Funds.

Amounts recognized in respect of these defined benefit plans were as follows:

		Years Ended December 31
		2025		2024
Current service cost		$ 150,593		$ 153,020
Net interest expense		106,331		122,660
Components of defined benefit costs recognized in profit or loss		256,924		275,680
Remeasurement on the net defined benefit liability:
Return on plan assets (excluding amounts included in net interest expense)		(764,266)		(774,583)
Actuarial loss arising from experience adjustments		539,527		911,752
Actuarial loss arising from changes in demographic assumptions		581,499		-
Actuarial (gain) loss arising from changes in financial assumptions		336,511		(281,534)
Components of defined benefit costs recognized in other comprehensive income		693,271		(144,365)
Total		$ 950,195		$ 131,315

The pension costs of the aforementioned defined benefit plans were recognized in profit or loss by the

following categories:

		Years Ended December 31
		2025		2024
Cost of revenue		$ 169,175		$ 178,507
Research and development expenses		69,532		75,259
General and administrative expenses		15,148		18,424
Marketing expenses		3,069		3,490
		$ 256,924		$ 275,680

The amounts arising from the defined benefit obligation of the Company were as follows:

		December 31, 2025		December 31, 2024
Present value of defined benefit obligation		$ 19,339,129		$ 18,332,160
Fair value of plan assets		(13,326,843)		(10,751,503)
Net defined benefit liability		$ 6,012,286		$ 7,580,657

- 39 -

Movements in the present value of the defined benefit obligation were as follows:

		Years Ended December 31
		2025		2024
Balance, beginning of year		$ 18,332,160		$ 17,995,066
Current service cost		150,593		153,020
Interest expense		281,084		242,788
Remeasurement:
Actuarial loss arising from experience adjustments		539,527		911,752
Actuarial (gain) loss arising from changes in financial assumptions		336,511		(281,534)
Actuarial loss arising from changes in demographic assumptions		581,499		-
Benefits paid from plan assets		(803,342)		(679,084)
Benefits paid directly by the Company		(78,903)		(9,848)
Balance, end of year		$ 19,339,129		$ 18,332,160

Movements in the fair value of the plan assets were as follows:

		Years Ended December 31
		2025		2024
Balance, beginning of year		$ 10,751,503		$ 8,737,842
Interest income		174,753		120,128
Remeasurement:
Return on plan assets (excluding amounts included in net interest expense)		764,266		774,583
Contributions from employer		2,439,663		1,798,034
Benefits paid from plan assets		(803,342)		(679,084)
Balance, end of year		$ 13,326,843		$ 10,751,503

The fair value of the plan assets by major categories at the end of reporting period was as follows:

		December 31, 2025		December 31, 2024
Cash		$ 1,652,528		$ 1,569,719
Equity instruments		8,223,995		6,245,548
Debt instruments		3,450,320		2,936,236
		$ 13,326,843		$ 10,751,503

The actuarial valuations of the present value of the defined benefit obligation were carried out by

qualified actuaries. The principal assumptions of the actuarial valuation were as follows:

		Measurement Date
		December 31, 2025		December 31, 2024
Discount rate		1.40%		1.60%
Future salary increase rate		4.00%		4.00%

- 40 -

Through the defined benefit plans under the R.O.C. Labor Standards Law, the Company is exposed to

the following risks:

1)Investment risk: The pension funds are invested in equity and debt securities, bank deposits, etc.

The investment is conducted at the discretion of the government’s designated authorities or under

the mandated management. However, under the R.O.C. Labor Standards Law, the rate of return on

assets shall not be less than the average interest rate on a two-year time deposit published by the

local banks and the government is responsible for any shortfall in the event that the rate of return is

less than the required rate of return.

2)Interest risk: A decrease in the government bond interest rate will increase the present value of the

defined benefit obligation; however, this will be partially offset by an increase in the return on the

debt investments of the plan assets.

Assuming a hypothetical decrease in interest rate at the end of the reporting period contributed to a

decrease of 0.5% (and not below 0.0%) in the discount rate and all other assumptions were held

constant, the present value of the defined benefit obligation would increase by NT$883,727

thousand and NT$717,535 thousand as of December 31, 2025 and 2024, respectively.

3)Salary risk: The present value of the defined benefit obligation is calculated by reference to the

future salaries of plan participants. As such, an increase in the salary of the plan participants will

increase the present value of the defined benefit obligation.

Assuming the expected salary rate increases by 0.5% at the end of the reporting period and all

other assumptions were held constant, the present value of the defined benefit obligation would

increase by NT$857,260 thousand and NT$697,715 thousand as of December 31, 2025 and 2024,

respectively.

The sensitivity analysis presented above may not be representative of the actual change in the defined

benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one

another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit

obligation has been calculated using the projected unit credit method at the end of the reporting period,

which is the same as that applied in calculating the defined benefit obligation liability.

The Company expects to make contributions of NT$2,537,250 thousand to the defined benefit plans in

the next year starting from December 31, 2025. The weighted average duration of the defined benefit

obligation is 9 years.

18.  EQUITY

a.Capital stock

		December 31, 2025		December 31, 2024
Authorized shares (in thousands)		28,050,000		28,050,000
Authorized capital		$ 280,500,000		$ 280,500,000
Issued and paid shares (in thousands)		25,932,524		25,932,733
Issued capital		$ 259,325,245		$ 259,327,332

- 41 -

The par value of issued common shares is NT$10 per share. A holder of common shares has one vote

for each common share and is entitled to receive dividends.

The authorized shares include 500,000 thousand shares allocated for the exercise of employee stock

options.

On September 1, 2024 and March 1, 2024, the Company issued employee restricted stock awards

(RSAs) for its employees in a total of 2,353 thousand shares and 2,960 thousand shares, respectively,

with a par value of NT$10 per share. The aforementioned issuance of new shares was approved by the

relevant authority and the registration has been completed.

During the third quarter of 2025, the first quarter of 2025 and 2024, TSMC reclaimed 91 thousand,

118 thousand and 1,402 thousand employee restricted shares, respectively, that were unvested. On

November 11, 2025, May 13, 2025 and June 5, 2024,  the Company’s Board of Directors resolved to

cancel the aforementioned shares. Subsequently, TSMC completed the registration for share

cancellation. Refer to 25 for information on RSAs.

On August 13, 2024, the Company’s Board of Directors resolved to cancel 3,249 thousand treasury

shares. Refer to Note 18(e) for further information.

As of December 31, 2025, the Company’s total issued and outstanding ADSs were 1,062,719 thousand

units, representing 5,313,593 thousand common shares.

b.Capital surplus

The categories of uses and the sources of capital surplus based on regulations were as follows:

		December 31, 2025		December 31, 2024
May be used to offset a deficit, distributed as cash dividends, or transferred to share capital
Additional paid-in capital		$ 26,343,550		$ 24,809,704
From merger		22,800,434		22,800,434
From convertible bonds		8,891,257		8,891,257
From difference between the consideration received and the carrying amount of the subsidiaries’ net assets during actual disposal		8,411,566		8,411,566
Donations - donated by shareholders		11,280		11,275
May only be used to offset a deficit
From share of changes in equities of subsidiaries		4,093,999		4,108,958
From share of changes in equities of associates		1,365,250		1,172,396
Donations - unclaimed dividend		105,684		78,976
May not be used for any purpose
Employee restricted shares		1,422,581		2,976,199
		$ 73,445,601		$ 73,260,765

If such capital surplus is distributed as transferred to share capital, it is limited to a certain percentage

of the Company’s paid-in capital each year.

- 42 -

c.Retained earnings and dividend policy

The Company’s Articles of Incorporation provide that, earnings distribution may be made on a

quarterly basis after the close of each quarter. Distribution of earnings by way of cash dividends

should be approved by the Company’s Board of Directors and reported to the Company’s shareholders

in its meeting. When allocating earnings, the Company shall first estimate and reserve the taxes to be

paid, offset its losses, set aside a legal capital reserve at 10% of the remaining earnings (until the

accumulated legal capital reserve equals the Company’s paid-in capital), then set aside a special

capital reserve in accordance with relevant laws or regulations or as requested by the authorities in

charge. Any balance left over shall be allocated according to relevant laws and the Company’s Articles

of Incorporation.

The Company’s Articles of Incorporation also provide that profits of the Company may be distributed

by way of cash dividend and/or stock dividend. However, distribution of earnings shall be made

preferably by way of cash dividend. Distribution of earnings may also be made by way of stock

dividend, provided that the ratio for stock dividend shall not exceed 50% of the total distribution.

The legal capital reserve may be used to offset a deficit, or be distributed as dividends in cash or stocks

for the portion in excess of 25% of the paid-in capital if the Company incurs no loss.

Pursuant to existing regulations, the Company is required to set aside an additional special capital

reserve equivalent to the net debit balance of the other components of stockholders’ equity, such as the

accumulated balance of the foreign currency translation reserve, the effectiveness of hedges of net

investments in foreign operations, unrealized valuation gain or loss from fair value through other

comprehensive income financial assets and gain or loss from changes in fair value of hedging

instruments in cash flow hedges, etc. For the subsequent decrease in the deduction amount to

stockholders’ equity, any special reserve appropriated may be reversed to the extent that the net debit

balance reverses.

The appropriations of 2025, 2024 and 2023 quarterly earnings have been approved by the Company’s

Board of Directors in its meeting, respectively. The appropriations and cash dividends per share were

as follows:

		Fourth Quarter		Third Quarter		Second Quarter		First Quarter
Resolution Date of TSMC’s		of 2025		of 2025		of 2025		of 2025
Board of Directors in its		February 10,		November 11,		August 12,		May 13,
meeting		2026		2025		2025		2025
Special capital reserve		$ (71,085,085)		$ (94,270,352)		$ 181,554,848		$ -
Cash dividends to shareholders		$ 155,595,147		$ 155,595,147		$ 129,662,913		$ 129,663,078
Cash dividends per share (NT$)		$ 6.00		$ 6.00		$ 5.00		$ 5.00

		Fourth Quarter		Third Quarter		Second Quarter		First Quarter
Resolution Date of TSMC’s		of 2024		of 2024		of 2024		of 2024
Board of Directors in its		February 12,		November 12,		August 13,		May 10,
meeting		2025		2024		2024		2024
Special capital reserve		$ -		$ -		$ -		$ (28,020,822)
Cash dividends to shareholders		$ 116,697,300		$ 116,697,300		$ 103,721,521		$ 103,734,517
Cash dividends per share (NT$)		$ 4.50		$ 4.50		$ 4.00		$ 4.00

- 43 -

		Fourth Quarter		Third Quarter		Second Quarter		First Quarter
Resolution Date of TSMC’s		of 2023		of 2023		of 2023		of 2023
Board of Directors in its		February 6,		November 14,		August 8,		May 9,
meeting		2024		2023		2023		2023
Special capital reserve		$ 28,020,822		$ (17,228,363)		$ (6,365,562)		$ 3,273,452
Cash dividends to shareholders		$ 90,762,248		$ 90,762,248		$ 77,796,213		$ 77,796,213
Cash dividends per share (NT$)		$ 3.50		$ 3.50		$ 3.00		$ 3.00

The special capital reserve for 2025 is to be presented for approval in the Company’s shareholders’

meeting to be held on June 4, 2026 (expected).

The quarterly cash dividends per share is affected by the subsequent number of outstanding ordinary

shares, the information of the actual payout is available at the Market Observation Post System

website.

d.Others

Changes in others were as follows:

		Year Ended December 31, 2025
		Foreign Currency Translation Reserve		Unrealized Gain (Loss) on Financial Assets at FVTOCI		Gain (Loss) on Hedging Instruments		Unearned Stock-Based Employee Compensation		Total
Balance, beginning of year		$ 40,262,995		$ (1,160,176)		$ 1,310,307		$ (1,708,079)		$ 38,705,047
Exchange differences arising on translation of foreign operations		(61,608,312)		-		-		-		(61,608,312)
Gain (loss) on hedging instruments designated as hedges of net investments in foreign operations		335,106		-		-		-		335,106
Unrealized gain (loss) on financial assets at FVTOCI
Equity instruments		-		28,593		-		-		28,593
Disposal of investments in equity instruments at FVTOCI		-		(557,108)		-		-		(557,108)
Gain (loss) arising on changes in the fair value of hedging instruments		-		-		(31,030)		-		(31,030)
Transferred to initial carrying amount of hedged items		-		-		13,450		-		13,450
Share-based payment expenses recognized		-		-		-		1,231,078		1,231,078
Share of other comprehensive income (loss) of subsidiaries and associates		(8,933)		5,280,174		(64,477)		-		5,206,764
Balance, end of year		$ (21,019,144)		$ 3,591,483		$ 1,228,250		$ (477,001)		$ (16,676,412)

- 44 -

		Year Ended December 31, 2024
		Foreign Currency Translation Reserve		Unrealized Gain (Loss) on Financial Assets at FVTOCI		Gain (Loss) on Hedging Instruments		Unearned Stock-Based Employee Compensation		Total
Balance, beginning of year		$ (25,316,769)		$ (4,099,928)		$ 1,395,875		$ (293,434)		$ (28,314,256)
Exchange differences arising on translation of foreign operations		64,536,244		-		-		-		64,536,244
Gain (loss) on hedging instruments designated as hedges of net investments in foreign operations		793,830		-		-		-		793,830
Unrealized gain (loss) on financial assets at FVTOCI
Equity instruments		-		97,396		-		-		97,396
Disposal of investments in equity instruments at FVTOCI		-		(4,009,066)		-		-		(4,009,066)
Gain (loss) arising on changes in the fair value of hedging instruments		-		-		5,041		-		5,041
Transferred to initial carrying amount of hedged items		-		-		141		-		141
Issuance of employee restricted stock		-		-		-		(2,637,387)		(2,637,387)
Share-based payment expenses recognized		-		-		-		1,222,742		1,222,742
Share of other comprehensive income (loss) of subsidiaries and associates		249,690		6,861,418		(90,750)		-		7,020,358
Income tax effect		-		(9,996)		-		-		(9,996)
Balance, end of year		$ 40,262,995		$ (1,160,176)		$ 1,310,307		$ (1,708,079)		$ 38,705,047

The aforementioned other equity includes the changes in other equities of the Company and the

Company’s share of its subsidiaries and associates.

e.Treasury stock

For the Company’s shareholders’ interests, the Company’s Board of Directors approved a share

buyback program on June 5, 2024 to repurchase 3,249 thousand shares. The Company has completed

this share buyback program during the second quarter of 2024. On August 13, 2024, the Company’s

Board of Directors resolved to cancel the 3,249 thousand shares and set September 1, 2024 as the

record date for capital reduction. The registration for share cancellation was completed on September

11, 2024.

19.  NET REVENUE

a.Disaggregation of revenue from contracts with customers

		Years Ended December 31
Product		2025		2024
Wafer		$ 3,255,146,998		$ 2,510,017,254
Others		529,241,762		370,366,096
		$ 3,784,388,760		$ 2,880,383,350

- 45 -

		Years Ended December 31
Geography		2025		2024
Taiwan		$ 299,445,782		$ 270,413,546
United States		2,826,188,062		1,986,303,602
China		327,502,739		331,673,315
Japan		135,646,991		144,239,882
Europe, the Middle East and Africa		126,584,061		102,760,879
Others		69,021,125		44,992,126
		$ 3,784,388,760		$ 2,880,383,350

The Company categorized the net revenue mainly based on the countries where the customers are

headquartered.

		Years Ended December 31
Platform		2025		2024
High Performance Computing		$ 2,185,635,278		$ 1,468,508,854
Smartphone		1,094,191,863		1,000,995,664
Internet of Things		191,037,402		164,847,295
Automotive		186,345,604		138,885,986
Digital Consumer Electronics		47,879,565		47,850,715
Others		79,299,048		59,294,836
		$ 3,784,388,760		$ 2,880,383,350

		Years Ended December 31
Resolution		2025		2024
3-nanometer		$ 793,771,655		$ 456,947,662
5-nanometer		1,179,092,880		859,687,087
7-nanometer		458,485,675		416,558,462
16-nanometer		215,783,533		202,383,587
20-nanometer		4,294,513		4,076,441
28-nanometer		210,008,919		188,214,493
40/45-nanometer		95,688,151		108,591,498
65-nanometer		120,743,718		93,007,404
90-nanometer		21,351,286		21,525,204
0.11/0.13 micron		48,698,641		52,372,598
0.15/0.18 micron		88,236,071		90,757,845
0.25 micron and above		18,991,956		15,894,973
Wafer revenue		$ 3,255,146,998		$ 2,510,017,254

- 46 -

b.Contract balances

		December 31, 2025		December 31, 2024		January 1, 2024
Contract liabilities (classified under accrued expenses and other current liabilities)		$ 34,734,928		$ 81,204,467		$ 47,760,098

The changes in the contract liability balances primarily result from the timing difference between the

satisfaction of performance obligation and the customer’s payment.

The Company recognized revenue from the beginning balance of contract liability, which amounted to

NT$51,715,323 thousand and NT$46,809,520 thousand for the years ended December 31, 2025 and

2024, respectively.

c.Temporary receipts from customers

		December 31, 2025		December 31, 2024
Current portion (classified under accrued expenses and other current liabilities)		$ 145,207,051		$ 198,602,570
Noncurrent portion (classified under other noncurrent liabilities)		26,924,438		75,410,459
		$ 172,131,489		$ 274,013,029

The Company’s temporary receipts from customer are payments made by customers to the Company

to retain the Company’s capacity. When the terms and conditions set forth in the agreements are

subsequently satisfied, the treatment of temporary receipts, either by refund or by accounts receivable

offsetting, will be determined by mutual consent.

d.Refund liabilities

Estimated sales returns and other allowances is made and adjusted based on historical experience and

the consideration of varying contractual terms. As of December 31, 2025 and 2024, the

aforementioned refund liabilities amounted to NT$75,708,756 thousand and NT$60,197,285 thousand

(classified under accrued expenses and other current liabilities), respectively.

20.  INTEREST INCOME

		Years Ended December 31
		2025		2024
Interest income
Cash and cash equivalents		$ 28,338,796		$ 27,032,709
Financial assets at amortized cost		119,404		305,591
		$ 28,458,200		$ 27,338,300

(Continued)

- 47 -

21.  FINANCE COSTS

		Years Ended December 31
		2025				2024
Interest expense
Corporate bonds		$ 6,764,582				$ 6,057,480
Lease liabilities		410,214				331,894
Others		25,391				1,271
Less: Capitalized interest under property, plant and equipment		(2,845,998)				(989,659)
		$ 4,354,189				$ 5,400,986

Information about capitalized interest is as follows:

		Years Ended December 31
		2025				2024
Capitalization rate		1.32%-1.44%				1.20%-1.32%

22.  OTHER GAINS AND LOSSES, NET

		Years Ended December 31
		2025		2024
Gain (loss) on disposal of investments accounted for using equity method, net		$ (167,986)		$ 7,126
Loss on financial instruments at FVTPL, net		(8,134,179)		(7,881,159)
Reversal of expected credit loss for financial assets
Financial assets at amortized cost		13,579		2,551
Other gains, net		257,589		208,036
		$ (8,030,997)		$ (7,663,446)

23.  INCOME TAX

a.Income tax expense recognized in profit or loss

Income tax expense consisted of the following:

		Years Ended December 31
		2025		2024
Current income tax expense
Current tax expense recognized in the current year		$ 332,750,114		$ 235,089,738
Income tax adjustments on prior years		(14,137,218)		(7,144,098)
Other income tax adjustments		389,926		331,459
		319,002,822		228,277,099

- 48 -

		Years Ended December 31
		2025		2024
Deferred income tax expense
Income tax adjustments on prior years		$ (65,124)		$ 3,925,320
The origination and reversal of temporary differences		7,169,357		2,138,847
		7,104,233		6,064,167
Income tax expense recognized in profit or loss		$ 326,107,055		$ 234,341,266

(Concluded)

A reconciliation of income before income tax and income tax expense recognized in profit or loss was

as follows:

		Years Ended December 31
		2025		2024
Income before tax		$ 2,043,989,682		$ 1,407,608,969
Income tax expense at the statutory rate		$ 408,797,936		$ 281,521,794
Tax effect of adjusting items:
Adjusting items in determining taxable income		(13,557,812)		(6,175,639)
Additional income tax on unappropriated earnings		-		6,483,623
The origination and reversal of temporary differences		7,169,357		2,138,847
Income tax credits		(62,490,010)		(46,740,040)
		339,919,471		237,228,585
Income tax adjustments on prior years		(14,202,342)		(3,218,778)
Other income tax adjustments		389,926		331,459
Income tax expense recognized in profit or loss		$ 326,107,055		$ 234,341,266

For the years ended December 31, 2025 and 2024, the Company applied a tax rate of 20% subject to

the R.O.C. Income Tax Law.

b.Deferred income tax balance

The analysis of deferred income tax assets and liabilities was as follows:

		December 31, 2025		December 31, 2024
Deferred income tax assets
Temporary differences
Depreciation		$ 24,552,052		$ 32,784,174
Refund liability		16,298,641		13,146,474
Unrealized exchange losses		6,094,375		9,078,243
Others		6,202,574		5,169,454
		$ 53,147,642		$ 60,178,345
Deferred income tax liabilities
Temporary differences
Subsidiary’s projected earnings distribution		$ (3,860,196)		$ (3,925,320)

- 49 -

		Year Ended December 31, 2025
				Recognized in
		Balance, Beginning of Year		Profit or Loss		Other Comprehensive Income		Balance, End of Year
Deferred income tax assets
Temporary differences
Depreciation		$ 32,784,174		$ (8,232,122)		$ -		$ 24,552,052
Refund liability		13,146,474		3,152,167		-		16,298,641
Unrealized exchange losses		9,078,243		(2,983,868)		-		6,094,375
Others		5,169,454		894,466		138,654		6,202,574
		$ 60,178,345		$ (7,169,357)		$ 138,654		$ 53,147,642
Deferred income tax liabilities
Temporary differences
Subsidiary’s projected earning distribution		$ (3,925,320)		$ 65,124		$ -		$ (3,860,196)

		Year Ended December 31, 2024
				Recognized in
		Balance, Beginning of Year		Profit or Loss		Other Comprehensive Income		Balance, End of Year
Deferred income tax assets
Temporary differences
Depreciation		$ 40,726,261		$ (7,942,087)		$ -		$ 32,784,174
Refund liability		9,348,138		3,798,336		-		13,146,474
Unrealized exchange losses		7,096,229		1,982,014		-		9,078,243
Others		5,185,433		22,890		(38,869)		5,169,454
		$ 62,356,061		$ (2,138,847)		$ (38,869)		$ 60,178,345
Deferred income tax liabilities
Temporary differences
Subsidiary’s projected earning distribution		$ -		$ (3,925,320)		$ -		$ (3,925,320)

c.The deductible temporary differences for which no deferred income tax assets have been recognized

As of December 31, 2025 and 2024, the aggregate deductible temporary differences for which no

deferred income tax assets have been recognized amounted to NT$64,904,467 thousand and

NT$52,979,425 thousand, respectively.

d.The information of unrecognized deferred income tax liabilities associated with investments

As of December 31, 2025 and 2024, the aggregate taxable temporary differences associated with

investments in subsidiaries not recognized as deferred income tax liabilities amounted to

NT$329,889,192 thousand and NT$327,787,523 thousand, respectively.

- 50 -

e.Income tax examination

The tax authorities have examined income tax returns of the Company through 2023. All investment

tax credit adjustments assessed by the tax authorities have been recognized accordingly.

24.  EARNINGS PER SHARE

		Years Ended December 31
		2025		2024
Basic EPS		$ 66.26		$ 45.25
Diluted EPS		$ 66.25		$ 45.25

EPS is computed as follows:

		Years Ended December 31
		2025		2024
Basic EPS
Net income available to common shareholders		$ 1,717,882,627		$ 1,173,267,703
Weighted average number of common shares outstanding used in the computation of basic EPS (in thousands)		25,928,262		25,927,556
Basic EPS (in dollars)		$ 66.26		$ 45.25
Diluted EPS
Net income available to common shareholders		$ 1,717,882,627		$ 1,173,267,703
Weighted average number of common shares outstanding used in the computation of basic EPS (in thousands)		25,928,262		25,927,556
Effects of all dilutive potential common shares (in thousands)		2,295		2,089
Weighted average number of common shares used in the computation of diluted EPS (in thousands)		25,930,557		25,929,645
Diluted EPS (in dollars)		$ 66.25		$ 45.25

25.  SHARE-BASED PAYMENT ARRANGEMENTS

a.Equity-settled share-based payment- RSAs

The RSAs in each year are as follows:

		2024 RSAs		2023 RSAs		2022 RSAs		2021 RSAs
Resolution Date of TSMC’s shareholders in its meeting		June 4, 2024		June 6, 2023		June 8, 2022		July 26, 2021
Resolution Date of TSMC’s Board of Directors in its meeting		August 13, 2024		February 6, 2024		February 14, 2023		February 15, 2022
Issuance of stocks (in thousands)		2,353		2,960		2,110		1,387
Available for issuance (in thousands)		1,832		-		-		-
Eligible employees		Executive officers		Executive officers		Executive officers		Executive officers
Grant date/Issuance date		September 1, 2024		March 1, 2024		March 1, 2023		March 1, 2022

- 51 -

Vesting conditions of the aforementioned arrangement are as follow:

1)The RSAs granted to eligible employees can only be vested if

•the employee remains employed by the Company or the subsidiaries on the last date of each

vesting period;

•during the vesting period, the employee may not breach any agreement with the Company or

the subsidiaries or violate the Company’s work rules; and

•certain employee performance metrics and the Company’s or the subsidiaries’ business

performance metrics are met.

2)The maximum percentage of granted RSAs that may be vested each year shall be as follows: one-

year anniversary of the grant: 50%; two-year anniversary of the grant: 25%; and three-year

anniversary of the grant: 25%; provided that the actual percentage and number of the RSAs to be

vested in each year will be calculated based on the achievement of the Company’s business

performance metrics.

3)For eligible executive officers of the Company: The maximum number of RSAs that may be vested

in each year will be set as 110%, among which 100% will be subject to a calculation based on the

Company’s relative Total Shareholder Return (“TSR”, including capital gains and dividends)

achievement to determine the number of RSAs to be vested; this number will be further subject to

a modifier to increase or decrease up to 10% based on the Compensation and People Development

Committee evaluation of the Company’s Environmental, Social, and Governance (“ESG”)

achievements. The number of shares so calculated should be rounded down to the nearest integral.

The Company’s TSR relative to the TSR of S&P 500 IT Index	Ratio of Shares to be Vested
Above the Index by X percentage points	50% + X * 2.5%, with the maximum of 100%
Equal to the Index	50%
Below the Index by X percentage points	50% - X * 2.5%, with the minimum of 0%

4)Restrictions imposed on the employees’ rights in the RSAs before the vesting conditions are

fulfilled:

•During each vesting period, no employee granted RSAs, except for inheritance, may sell,

pledge, transfer, give to another person, create any encumbrance on, or otherwise dispose of,

any shares under the unvested RSAs.

•Before the vesting conditions are fulfilled, the attendance, proposal rights, speech rights,

voting rights and etc. shall be exercised by the engaged trustee/custodian on the employee’s

behalf. Any other shareholder rights including but not limited to the entitlement to any

distribution regarding dividends, bonuses and capital reserve, and the subscription right of the

new shares issued for any capital increase, are the same as those of holders of common shares

of the Company.

- 52 -

5)Details of granted RSAs in each year are as follows:

		2024 RSAs		2023 RSAs		2022 RSAs		2021 RSAs
		Number of Shares (In Thousands)		Number of Shares (In Thousands)		Number of Shares (In Thousands)		Number of Shares (In Thousands)
Balance, beginning of year		2,353		2,960		1,055		347
Vested shares		(1,102)		(1,406)		(501)		(330)
Canceled shares		(91)		(74)		(27)		(17)
Balance, end of year		1,160		1,480		527		-
Weighted-average fair value of RSAs (in dollars)		$ 662.42		$ 364.43		$ 277.71		$ 325.81

The RSAs in each year are measured at fair value at grant date by using the binominal tree

approach. Relevant information is as follows:

		2024 RSAs		2023 RSAs		2022 RSAs		2021 RSAs
		September 1, 2024		March 1, 2024		March 1, 2023		March 1, 2022
Stock price at measurement date (in dollars)		$ 944		$ 689		$ 511		$ 604
Expected price volatility		25.51%-29.87%		24.77%-26.12%		29.34%-32.11%		25.34%-28.28%
Expected life		1-3 years		1-3 years		1-3 years		1-3 years
Risk-free interest rate		1.40%		1.16%		1.06%		0.57%

Refer to Note 26 for the compensation costs of the RSAs recognized by the Company.

b.Cash-settled share-based payment arrangements

The cash-settled share-based payment arrangements in each year are as follows:

		2023 Plan		2022 Plan		2021 Plan
Resolution Date of the Company’s Board of Directors in its meeting		February 6, 2024		February 14, 2023		February 15, 2022
Issuance of units (in thousands) (Note)		550		400		236
Grant date		March 1, 2024		March 1, 2023		March 1, 2022

Note: One unit of the right represents a right to the market value of one the Company’s common share

when vested.

The vesting conditions and the ratio of units to be vested for key management personnel of the plan

are the same as the aforementioned RSAs.

The fair value of compensation costs for the cash-settled share-based payment was measured by using

binominal tree approach and will be measured at each reporting period until settlement. Relevant

information is as follows:

		Years Ended December 31
		2025				2024
		2023 Plan		2022 Plan		2023 Plan		2022 Plan		2021 Plan
Stock price at measurement date (in dollars)		$ 1,510		$ 1,510		$ 1,090		$ 1,090		$ 1,090
Expected price volatility		23.67%-30.35%		23.67%-30.35%		25.61%-30.78%		25.61%-30.78%		25.61%~30.78%
Residual life		1-2 years		1 year		1-3 years		1-2 years		1 year
Risk-free interest rate		1.22%		1.20%		1.45%		1.41%		1.37%

- 53 -

Refer to Note 26 for the compensation costs of the cash-settled share-based payment recognized by the

Company. As of December 31, 2025 and 2024, the liabilities under cash-settled share-based payment

arrangement amounted toNT$330,836 thousand and NT$455,728 thousand, respectively.

26.  ADDITIONAL INFORMATION OF EXPENSES BY NATURE

		Years Ended December 31
		2025		2024
a.Depreciation of property, plant and equipment and right-of- use assets
Recognized in cost of revenue		$ 574,475,240		$ 590,881,553
Recognized in operating expenses		38,957,352		34,858,056
Recognized in other operating income and expenses		4		7,814
		$ 613,432,596		$ 625,747,423
b.Amortization of intangible assets
Recognized in cost of revenue		$ 4,989,782		$ 6,320,646
Recognized in operating expenses		2,994,470		2,808,823
		$ 7,984,252		$ 9,129,469
c.Employee benefits expenses
Post-employment benefits
Defined contribution plans		$ 5,174,306		$ 4,537,289
Defined benefit plans		256,924		275,680
		5,431,230		4,812,969
Share-based payments
Equity-settled		1,213,225		1,242,676
Cash-settled		304,140		403,486
		1,517,365		1,646,162
Other employee benefits		333,559,549		248,455,483
		$ 340,508,144		$ 254,914,614
Employee benefits expense summarized by function
Recognized in cost of revenue		$ 207,103,346		$ 152,156,491
Recognized in operating expenses		133,404,798		102,758,123
		$ 340,508,144		$ 254,914,614

According to the Company’s Articles of Incorporation, the Company shall allocate compensation to

directors and profit sharing bonus to employees of the Company not more than 0.3% and not less than 1%

of annual profits during the period, respectively (among which not less than 30% as profit sharing bonuses

to entry-level employees).

- 54 -

The Company accrued profit sharing bonus to employees based on a percentage of net income before

income tax, profit sharing bonus to employees and compensation to directors during the period;

compensation to directors was expensed based on estimated amount payable. If there is a change in the

proposed amounts after the annual parent company only financial statements are authorized for issue, the

differences are recorded as a change in accounting estimate. Accrued profit sharing bonus to employees is

illustrated below:

		Years Ended December 31
		2025		2024
Profit sharing bonus to employees		$ 103,072,958		$ 70,296,283

The Company’s accrued profit sharing bonus to employees and compensation to directors 2025, 2024 and

2023 are illustrated below:

		Years Ended December 31
		2025		2024		2023
Profit sharing bonus to employees		$ 103,072,958		$ 70,296,283		$ 50,090,533
Compensation to directors		$ 156,305		$ 358,989		$ 551,955

There is no significant difference between the aforementioned amounts and the amounts charged against

earnings of 2025 ,2024 and 2023, respectively.

The information about the appropriations of the Company’s profit sharing bonus to employees and

compensation to directors is available at the Market Observation Post System website.

27.  CASH FLOW INFORMATION

a. Non-cash transactions

		Years Ended December 31
		2025		2024
Additions of property, plant and equipment		$ 1,068,229,032		$ 711,552,671
Exchange of assets		(169,549)		(109,273)
Changes in payables to contractors and equipment suppliers		(19,672,612)		(65,724,334)
Transferred to initial carrying amount of hedged items		(31,030)		5,041
Capitalized interests		(2,845,998)		(989,659)
Payments for acquisition of property, plant and equipment		$ 1,045,509,843		$ 644,734,446

b. Reconciliation of liabilities arising from financing activities

						Non-cash Changes
		Balance as of January 1, 2025		Financing Cash Flow		Foreign Exchange Movement		Other Changes (Note)		Balance as of  December 31, 2025
Bonds payable		$ 478,236,662		$ 62,409,692		$ (2,645,436)		$ 70,410		$ 538,071,328

- 55 -

						Non-cash Changes
		Balance as of January 1, 2024		Financing Cash Flow		Foreign Exchange Movement		Other Changes (Note)		Balance as of  December 31, 2024
Bonds payable		$ 446,867,565		$ 27,264,319		4,038,045		$ 66,733		$ 478,236,662

Note: Other changes include amortization of bonds payable.

28.  CAPITAL MANAGEMENT

The objective of the Company’s capital management is to maintain a capital structure that ensures liquidity

and supports a solid investment grade credit rating. The capital structure includes both debt and equity. The

Company adjusts its capital structure mainly through changes in the level of debt and adjustments of

dividend payout to shareholders.

The Company’s capital management policy remained unchanged in 2025. TSMC’s current credit ratings are

AA- from S&P Global Ratings and Aa3 from Moody’s, same as those as of December 31, 2024.

29.  FINANCIAL INSTRUMENTS

a.Categories of financial instruments

		December 31, 2025		December 31, 2024
Financial assets
FVTPL		$ 54,890		$ 13,174
FVTOCI (Note 1)		6,291,183		6,970,931
Amortized cost (Note 2)		1,365,551,783		1,306,159,488
		$ 1,371,897,856		$ 1,313,143,593
Financial liabilities
FVTPL		$ 3,070,087		$ 439,110
Amortized cost (Note 3)		1,418,165,257		1,370,620,974
		$ 1,421,235,344		$ 1,371,060,084

Note 1:Including notes and accounts receivable (net) and equity investments.

Note 2:Including cash and cash equivalents, financial assets at amortized cost, notes and accounts

receivable (including related parties), other receivables, refundable deposits, and temporary

payments (including those classified under other current assets and other noncurrent assets).

Note 3:Including accounts payable (including related parties), payables to contractors and equipment

suppliers, cash dividends payable, accrued expenses and other current liabilities, bonds

payable, guarantee deposits and other noncurrent liabilities.

- 56 -

b.Financial risk management objectives

The Company manages its exposure to foreign currency risk, interest rate risk, equity price risk, credit

risk and liquidity risk with the objective to reduce the potentially adverse effects the market

uncertainties may have on its financial performance.

The plans for material treasury activities are reviewed by the Audit and Risk Committee and/or Board

of Directors in accordance with procedures required by relevant regulations or internal controls.

During the implementation of such plans, the Company must comply with certain treasury procedures

that provide guiding principles for overall financial risk management and segregation of duties.

c.Market risk

The Company is exposed to the financial market risks, primarily changes in foreign currency exchange

rates, interest rates and equity prices. A portion of these risks is hedged.

Foreign currency risk

Substantially all the Company’s sales are denominated in U.S. dollars and over half of its capital

expenditures are denominated in currencies other than NT dollars, primarily in U.S. dollars, Japanese

yen and Euros. As a result, any significant fluctuations to its disadvantage in the exchanges rate of NT

dollar against such currencies, in particular a weakening of U.S. dollar against NT dollar, would have

an adverse impact on the revenue and operating profit as expressed in NT dollars. The Company uses

foreign currency derivative contracts, such as currency forwards or currency swaps, and non-derivative

financial instruments, such as foreign currency denominated debts and foreign currency deposits, to

protect against currency exchange rate risks associated with non-NT dollar-denominated monetary

assets and liabilities, net investments in foreign operations, and certain forecasted transactions. These

hedges reduce, but do not entirely eliminate, the effect of foreign currency exchange rate movements

on the assets and liabilities

Based on a sensitivity analysis performed on the Company’s total monetary assets and liabilities for

the years ended December 31, 2025 and 2024, a hypothetical adverse foreign currency exchange rate

change of 10% would have decreased its net income by NT$ 1,945,331 thousand and NT$ 2,471,332

thousand, respectively, after taking into account hedges and offsetting positions.

Interest rate risk

The Company is exposed to interest rate risks primarily in relation to its bank deposits and outstanding

debt. Changes in interest rates affect the interest earned on the Company’s bank deposits, as well as

the interest paid on its debt. Because all of the Company’s bonds issued are fixed-rate and measured at

amortized cost, changes in interest rates would not affect the future cash flows or the carrying amount.

Other price risk

The Company is exposed to equity price risk arising from financial assets at FVTOCI.

Assuming a hypothetical decrease of 10% in prices of the equity investments at the end of the

reporting period for the years ended December 31, 2025 and 2024, the other comprehensive income

would have decreased by NT$ 86,955 thousand and NT$ 84,668 thousand, respectively.

d.Credit risk management

Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in

financial losses to the Company. The Company is exposed to credit risks from operating activities,

primarily accounts receivable, and from investing activities, primarily deposits, fixed-income

- 57 -

investments and other financial instruments with banks. Credit risk is managed separately for business

related and financial related exposures. As of the end of the reporting period, the Company’s

maximum credit risk exposure is equal to the carrying amount of financial assets.

Business related credit risk

The Company’s accounts receivable are from its customers worldwide. The majority of the

Company’s outstanding accounts receivable are not covered by collaterals or guarantees. While the

Company has procedures to monitor and manage credit risk exposure on accounts receivable, there is

no assurance such procedures will effectively eliminate losses resulting from its credit risk. This risk is

heightened during periods when economic conditions worsen.

As of December 31, 2025 and 2024, the Company’s ten largest customers accounted for 79% and 84%

of accounts receivable, respectively. The Company considers the concentration of credit risk for the

remaining accounts receivable not material.

Financial credit risk

The Company mitigates its financial credit risk by selecting counterparties with investment grade

credit ratings and by limiting the exposure to any individual counterparty. The Company regularly

monitors and reviews the limit applied to counterparties and adjusts the limit according to market

conditions and the credit standing of the counterparties.

The Company assesses the 12-month expected credit loss and lifetime expected credit loss based on

the probability of default and loss given default provided by external credit rating agencies. The

current credit risk assessment policies are as follows:

Category		Description		Basis for Recognizing Expected Credit Loss		Expected Credit Loss Ratio
Performing		Credit rating is investment grade on valuation date		12 months expected credit loss		0-0.1%
Doubtful		Credit rating is non-investment grade on valuation date		Lifetime expected credit loss-not credit impaired		-
In default		Credit rating is CC or below on valuation date		Lifetime expected credit loss-credit impaired		-
Write-off		There is evidence indicating that the debtor is in severe financial difficulty and the Company has no realistic prospect of recovery		Amount is written off		-

For the years ended December 31, 2025 and 2024, the expected credit loss decreased NT$13,579

thousand and decrease NT$2,551 thousand, respectively. The changes were mainly due to adjusted

investment portfolio.

e.Liquidity risk management

The objective of liquidity risk management is to ensure the Company has sufficient liquidity to fund

its business operations over the next 12 months. The Company manages its liquidity risk by

maintaining adequate cash and cash equivalents, financial assets at amortized cost-current and

sufficient cost-efficient funding.

- 58 -

The table below summarizes the maturity profile of the Company’s financial liabilities based on

contractual undiscounted payments, including principal and interest.

		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years		Total
December 31, 2025
Non-derivative financial liabilities
Accounts payable (including related parties)		$ 92,723,115		$ -		$ -		$ -		$ 92,723,115
Payables to contractors and equipment suppliers		168,648,840		-		-		-		168,648,840
Accrued expenses and other current liabilities		299,478,937		-		-		-		299,478,937
Bonds payable		69,338,831		195,356,808		137,889,133		214,886,970		617,471,742
Lease liabilities (including those classified under accrued expenses and other current liabilities) (Note)		3,753,257		5,711,960		5,167,272		22,507,850		37,140,339
Others		-		32,504,216		723,890		-		33,228,106
		633,942,980		233,572,984		143,780,295		237,394,820		1,248,691,079
Derivative financial instruments
Forward exchange contracts
Outflows		271,448,689		-		-		-		271,448,689
Inflows		(268,430,750)		-		-		-		(268,430,750)
		3,017,939		-		-		-		3,017,939
		$ 636,960,919		$ 233,572,984		$ 143,780,295		$ 237,394,820		$ 1,251,709,018

		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years		Total
December 31, 2024
Non-derivative financial liabilities
Accounts payable (including related parties)		$ 74,191,888		$ -		$ -		$ -		$ 74,191,888
Payables to contractors and equipment suppliers		150,280,751		-		-		-		150,280,751
Accrued expenses and other current liabilities		365,027,676		-		-		-		365,027,676
Bonds payable		30,503,009		164,569,011		133,348,645		228,284,664		556,705,329
Lease liabilities (including those classified under accrued expenses and other current liabilities) (Note)		2,895,659		4,998,837		4,397,192		20,373,710		32,665,398
Others		-		80,424,861		1,202,936		-		81,627,797
		622,898,983		249,992,709		138,948,773		248,658,374		1,260,498,839
Derivative financial instruments
Forward exchange contracts
Outflows		97,621,287		-		-		-		97,621,287
Inflows		(97,162,228)		-		-		-		(97,162,228)
		459,059		-		-		-		459,059
		$ 623,358,042		$ 249,992,709		$ 138,948,773		$ 248,658,374		$ 1,260,957,898

- 59 -

Note: Information about the maturity analysis for lease liabilities more than 5 years:

		5-10 Years		10-15 Years		15-20 Years		More Than 20 Years		Total
December 31, 2025
Lease liabilities		$ 10,791,835		$ 7,497,181		$ 3,999,189		$ 219,645		$ 22,507,850

December 31, 2024
Lease liabilities		$ 9,910,952		$ 6,805,189		$ 3,540,742		$ 116,827		$ 20,373,710

f.Fair value of financial instruments

1)Fair value measurements recognized in the parent company only balance sheets

Fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value

is observable:

•Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active

markets for identical assets or liabilities;

•Level 2 fair value measurements are those derived from inputs other than quoted prices

included within Level 1 that are observable for the asset or liability, either directly (i.e. as

prices) or indirectly (i.e. derived from prices); and

•Level 3 fair value measurements are those derived from valuation techniques that include

inputs for the asset or liability that are not based on observable market data (unobservable

inputs).

2) Fair value of financial instruments that are measured at fair value on a recurring basis

Fair value hierarchy

The following table presents the Company’s financial assets and liabilities measured at fair value

on a recurring basis:

December 31, 2025
		Level 2		Level 3		Total
Financial assets at FVTPL
Forward exchange contracts		$ 54,890		$ -		$ 54,890
Financial assets at FVTOCI
Investments in equity instruments
Non-publicly traded equity investments		$ -		$ 1,086,940		$ 1,086,940
Notes and accounts receivable, net		5,204,243		-		5,204,243
		$ 5,204,243		$ 1,086,940		$ 6,291,183
Financial liabilities at FVTPL
Forward exchange contracts		$ 3,070,087		$ -		$ 3,070,087

- 60 -

December 31, 2024
		Level 2		Level 3		Total
Financial assets at FVTPL
Forward exchange contracts		$ 13,174		$ -		$ 13,174
Financial assets at FVTOCI
Investments in equity instruments
Non-publicly traded equity investments		$ -		$ 1,058,347		$ 1,058,347
Notes and accounts receivable, net		5,912,584		-		5,912,584
		$ 5,912,584		$ 1,058,347		$ 6,970,931
Financial liabilities at FVTPL
Forward exchange contracts		$ 439,110		$ -		$ 439,110

Reconciliation of Level 3 fair value measurements of financial assets

The financial assets measured at Level 3 fair value were equity investments classified as financial

assets at FVTOCI. Reconciliations for the years ended December 31, 2025 and 2024 were as

follows:

		Years Ended December 31
		2025		2024
Balance, beginning of year		$ 1,058,347		$ 960,950
Recognized in other comprehensive income or loss		28,593		97,397
Balance, end of year		$ 1,086,940		$ 1,058,347

Valuation techniques and assumptions used in Level 2 fair value measurement

The fair values of financial assets and financial liabilities are determined as follows:

•The fair values of forward exchange contracts are measured using forward exchange rates and

discount rates derived from quoted market prices.

•The fair value of accounts receivable classified as at FVTOCI is determined by the present

value of future cash flows based on the discount rate that reflects the credit risk of

counterparties.

Valuation techniques and assumptions used in Level 3 fair value measurement

The fair values of non-publicly traded equity investments are mainly determined by using the asset

approach or market approach.

The asset approach takes into account the net asset value measured at the fair value.

- 61 -

The market approach is used to arrive at their fair values, for which the recent financing activities

of investees, the market transaction prices of the similar companies and market conditions are

considered.

3) Fair value of financial instruments that are not measured at fair value

Except as detailed in the following table, the Company considers that the carrying amounts of

financial instruments in the parent company only financial statements that are not measured at fair

value approximate their fair values.

Fair value hierarchy

The table below sets out the fair value hierarchy for the Company’s financial assets and liabilities

which are not required to be measured at fair value:

		December 31, 2025
		Carrying		Level 2
		Amount		Fair Value
Financial liabilities
Financial liabilities at amortized costs
Bonds payable		$ 538,071,328		$ 513,630,359

		December 31, 2024
		Carrying		Level 2
		Amount		Fair Value
Financial assets
Financial assets at amortized costs
Commercial paper		$ 14,208,158		$ 14,222,713
Financial liabilities
Financial liabilities at amortized costs
Bonds payable		$ 478,236,662		$ 444,114,272

Valuation techniques and assumptions used in Level 2 fair value measurement

The fair value of the Company’s bonds payable is determined by quoted market prices provided by

third party pricing services.

The fair value of commercial paper is determined by the present value of future cash flows based

on the discounted curves that are derived from the quoted market prices.

- 62 -

30.  RELATED PARTY TRANSACTIONS

The significant transactions between the Company and its related parties, other than those disclosed in

other notes, are summarized as follows:

a.Related party name and categories

Related Party Name		Related Party Categories
TSMC Arizona		Subsidiaries
TSMC China		Subsidiaries
TSMC Nanjing		Subsidiaries
JASM		Subsidiaries
ESMC		Subsidiaries
VisEra Tech		Subsidiaries
TSMC North America		Subsidiaries
TSMC 3DIC		Subsidiaries
TSMC Europe		Subsidiaries
TSMC JDC		Subsidiaries
TSMC Japan		Subsidiaries
TSMC Korea		Subsidiaries
TSMC Design Technology Canada Inc. (TSMC Canada)		Indirect Subsidiaries
TSMC Technology, Inc. (TSMC Technology)		Indirect Subsidiaries
TSMC Washington, LLC (TSMC Washington)		Indirect Subsidiaries
GUC and its subsidiaries (GUC)		Associates
VIS and its subsidiaries (VIS)		Associates
SSMC		Associates
Xintec		Associates

b.Net revenue

				Years Ended December 31
				2025		2024
Item		Related Party Name/Categories
Sales revenue		TSMC North America		$ 2,931,832,801		$ 2,057,313,208
		Associates		7,780,754		7,080,991
		Other subsidiaries		2,813,382		1,688,771
				$ 2,942,426,937		$ 2,066,082,970

- 63 -

c.Purchases

		Years Ended December 31
		2025		2024
Related Party Categories
Subsidiaries		$ 174,601,114		$ 104,615,531
Associates		4,991,607		4,619,621
		$ 179,592,721		$ 109,235,152

d.Receivables from related parties

				December 31, 2025		December 31, 2024
Item		Related Party Name/Categories
Receivables from related parties		TSMC North America		$ 206,855,118		$ 209,056,572
		Associates		1,430,389		1,120,441
		Other subsidiaries		497,531		123,162
				$ 208,783,038		$ 210,300,175
Other receivables from related parties		TSMC North America		$ 4,017,486		$ 5,050,233
		Associates		268,115		251
		Other subsidiaries		40,292		262,603
				$ 4,325,893		$ 5,313,087

e.Payables to related parties

				December 31, 2025		December 31, 2024
Item		Related Party Name/Categories
Payables to related parties		TSMC Arizona		$ 9,127,301		$ 630,869
		TSMC Nanjing		2,934,085		4,473,370
		TSMC China		2,261,532		1,848,450
		Other subsidiaries		2,423,315		1,759,124
		Other associates		1,778,730		1,425,998
				$ 18,524,963		$ 10,137,811

- 64 -

f.Accrued expenses and other current liabilities

				December 31, 2025		December 31, 2024
Item		Related Party Name/Categories
Temporary receipts		TSMC North America		$ 81,506,672		$ 178,396,827
		Associates		638,804		672,001
				$ 82,145,476		$ 179,068,828

g.Other noncurrent liabilities

				December 31, 2025		December 31, 2024
Item		Related Party Name
Temporary receipts		TSMC North America		$ 23,553,166		$ 71,433,597
		Associates		393,050		409,600
				$ 23,946,216		$ 71,843,197

h.Others

				Years Ended December 31
				2025		2024
Item		Related Party Categories
Manufacturing expenses		Associates		$ 5,442,941		$ 5,221,103
		Subsidiaries		18,367		17,189
				$ 5,461,308		$ 5,238,292
Research and development expenses		Subsidiaries		$ 9,129,882		$ 7,181,542
		Associates		277,221		397,058
				$ 9,407,103		$ 7,578,600

The sales prices and payment terms to related parties were not significantly different from those of

sales to third parties. For other related party transactions, price and terms were determined in

accordance with mutual agreements.

The Company leased factory and office from associates. The lease terms and prices were both

determined in accordance with mutual agreements. The rental expenses were paid to associates

monthly; the related expenses were both classified under manufacturing expenses.

- 65 -

The Company deferred the disposal gain or loss derived from sales of property, plant and equipment to

related parties using equity method, and then recognized such gain or loss over the depreciable lives of

the disposed assets.

i.Compensation of key management personnel

The compensation to directors and other key management personnel were as follows:

		Years Ended December 31
		2025		2024
Short-term employee benefits		$ 5,154,980		$ 4,230,478
Post-employment benefits		2,748		3,135
Share-based payments		3,888,675		1,357,432
		$ 9,046,403		$ 5,591,045

The compensation to directors and other key management personnel were determined by the

Compensation and People Development Committee of the Company in accordance with the individual

performance and market trends.

31.  SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

Significant contingent liabilities and unrecognized commitments of the Company as of the end of the

reporting period, excluding those disclosed in other notes, were as follows:

a.Under a technical cooperation agreement with Industrial Technology Research Institute, the R.O.C.

Government or its designee approved by the Company can use up to 35% of the Company’s capacity

provided the Company’s outstanding commitments to its customers are not prejudiced. The term of

this agreement is for five years beginning from January 1, 1987 and is automatically renewed for

successive periods of five years unless otherwise terminated by either party with one year prior notice.

As of the end of reporting period, the R.O.C. Government did not invoke such right.

b.Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March

30, 1999, the parties formed a joint venture company, SSMC, which is an integrated circuit foundry in

Singapore. The Company’s equity interest in SSMC was 32%. Nevertheless, in September 2006,

Philips spun-off its semiconductor subsidiary which was renamed as NXP B.V. Further, the Company

and NXP B.V. purchased all the SSMC shares owned by EDB Investments Pte Ltd. pro rata according

to the Shareholders Agreement on November 15, 2006. After the purchase, the Company and NXP

B.V. currently own approximately 39% and 61% of the SSMC shares, respectively. The Company and

NXP B.V. are required, in the aggregate, to purchase at least 70% of SSMC’s capacity, but the

Company alone is not required to purchase more than 28% of the capacity. If any party defaults on the

commitment and the capacity utilization of SSMC falls below a specific percentage of its capacity, the

defaulting party is required to compensate SSMC for all related unavoidable costs. There was no

default from the aforementioned commitment as of the end of reporting period.

- 66 -

c.In February 2025, Longitude Licensing Ltd. and Marlin Semiconductor Limited (collectively,

“Marlin”) filed complaints with the U.S. International Trade Commission (“ITC”) and the U.S.

District Court for the Eastern District of Texas alleging that the Company and its customers infringe

five U.S. patents. The ITC instituted an investigation on March 21, 2025 and the lawsuit in the Eastern

District Court for Texas was statutorily stayed on April 23, 2025 pending the ITC investigation.Marlin

dropped 2 asserted patents in the ITC investigation in October and November 2025. The outcome

cannot be determined, and we cannot make a reliable estimate of the contingent liability at this time.

d.The Company entered into long-term purchase agreements of materials and supplies, manufacturing

services and agreements of waste disposal with multiple suppliers. The relative minimum fulfillment

quantity and price are specified in the agreements.

e.The Company entered into long-term purchase agreement of equipment and maintenance service. The

relative fulfillment period, quantity and price are specified in the agreement.

f.The Company entered into long-term energy purchase agreements with multiple suppliers. The relative

fulfillment period, quantity and price are specified in the agreements.

g.As of the end of reporting period, the Company provided endorsement guarantees of NT$2,616,559

thousand to its subsidiary, TSMC North America, in respect of providing endorsement guarantees for

office leasing contract.

h.As of the end of reporting period, the Company provided a NT$235,830,000 thousand endorsement

guarantee for its subsidiary, TSMC Global, in respect of its issuance of US dollar-denominated senior

unsecured corporate bonds.

i.As of the end of reporting period, the Company provided a NT$471,578,859 thousand endorsement

guarantee for its subsidiary, TSMC Arizona, in respect of its issuance of US dollar-denominated senior

unsecured corporate bonds and operation needs.

j.The Company entrusted financial institutions to provide performance guarantees mainly for import and

export of goods and lease agreement. As of December 31, 2025 and 2024, the aforementioned

guarantee amounted to NT$9,218,256 thousand and NT$10,315,609 thousand, respectively.

32.  SIGNIFICANT LOSS FROM DISASTER

In January 2025, several earthquakes struck Taiwan. The resulting damage was mostly to inventories,

machinery and equipment. In the first quarter of 2025, the Company recognized related earthquake losses

to be approximately NT$5.3 billion, net of insurance claim. Such losses were primarily included in the

cost of revenue and other operating income and expenses in net amounts.

On April 3, 2024, an earthquake struck Taiwan. The resulting damage was mostly to inventories,

machinery and equipment. In the second quarter of 2024, the Company recognized related earthquake

losses to be approximately NT$3 billion, net of insurance claim. Such losses were primarily included in

the cost of revenue and other operating income and expenses in net amounts.

- 67 -

33.  EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND

LIABILITIES

The following information was summarized according to the foreign currencies other than the functional

currency of the Company. The exchange rates disclosed were used to translate the foreign currencies into

the functional currency. The significant financial assets and liabilities denominated in foreign currencies

were as follows:

		Foreign				Carrying
		Currencies		Exchange Rate		Amount
		(In Thousands)		(Note )		(In Thousands)
December 31, 2025
Financial assets
Monetary items
USD		$ 19,955,387		31.444		$ 627,477,202
EUR		1,061,338		37.003		39,272,688
JPY		125,963,643		0.2013		25,356,481
Financial liabilities
Monetary items
USD		11,973,221		31.444		376,485,962
EUR		965,399		37.003		35,722,667
JPY		124,677,971		0.2013		25,097,676
December 31, 2024
Financial assets
Monetary items
USD		17,852,987		32.768		585,006,683
EUR		585,645		34.102		19,971,653
JPY		116,712,205		0.2092		24,416,193
Financial liabilities
Monetary items
USD		15,423,526		32.768		505,398,116
EUR		732,065		34.102		24,964,882
JPY		117,290,411		0.2092		24,537,154

Note: Exchange rate represents the number of NT dollar for which one foreign currency could be

exchanged.

Please refer to the parent company only statements of comprehensive income for the total of realized and

unrealized foreign exchange gain and loss for the years ended December 31, 2025 and 2024, respectively.

Since there were varieties of foreign currency transactions of the Company, the Company was unable to

disclose foreign exchange gain (loss) towards each foreign currency with significant impact.

- 68 -

34.  ADDITIONAL DISCLOSURES

Following are the additional disclosures required by the Securities and Futures Bureau for the Company:

a.Financings provided: See Table 1 attached;

b.Endorsement/guarantee provided: See Table 2 attached;

c.Marketable securities held (excluding investments in subsidiaries and associates): there are no

significant securities that need to be listed separately;

d.Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in

capital: See Table 3 attached;

e.Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital:

See Table 4 attached;

f.Names, locations, and related information of investees over which the Company exercises significant

influence (excluding information on investment in mainland China): See Table 5 attached;

g.Information on investment in mainland China

1)The name of the investee in mainland China, the main businesses and products, its issued capital,

method of investment, information on inflow or outflow of capital, percentage of ownership,

income (losses) of the investee, share of profits/losses of investee, ending balance, amount received

as dividends from the investee, and the limitation on investee: See Table 6 attached.

2)Significant direct or indirect transactions with the investee, its prices and terms of payment,

unrealized gain or loss, and other related information which is helpful to understand the impact of

investment in mainland China on financial reports: See Note 30.

35.  OPERATING SEGMENTS INFORMATION

The Company has provided the operating segments disclosure in the consolidated financial statements.

- 69 -

TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Investees

FINANCINGS PROVIDED

FOR THE YEAR ENDED DECEMBER 31, 2025

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

No.

Financing Company

Counterparty

Financial Statement Account

Related Party

Maximum Balance for the Period (Foreign Currencies in Thousands) (Note 3)

Ending Balance (Foreign Currencies in Thousands) (Note 3)

Amount Actually Drawn (Foreign Currencies in Thousands)

Interest Rate

Nature for Financing

Transaction Amounts

Reason for Financing

Allowance for Bad Debt

Collateral

Financing Limits for Each Borrowing Company (Notes 1 and 2)

Financing Company’s Total Financing Amount Limits (Notes 1 and 2)

Item

Value

1

TSMC China

TSMC Nanjing

Other receivables from related parties

Yes

$ 41,142,000

$ 15,295,580

$ 15,295,580

1.50%

The need for long-term financing

$ -

Operating capital

$ -

-

$ -

$ 122,744,745

$ 122,744,745

(RMB 6,000,000 )&

(RMB 3,400,000 )

(RMB 3,400,000 )

(US$ 450,000 )

2

TSMC Development

TSMC Washington

Other receivables from related parties

Yes

1,886,640

1,886,640

1,886,640

-

The need for short-term financing

-

Operating capital

-

-

-

33,875,210

33,875,210

(US$ 60,000 )

(US$ 60,000 )

(US$ 60,000 )

Note 1: The aggregate amount available for lending to TSMC Nanjing from TSMC China and the aggregate amount of lending from TSMC China shall not exceed the net worth of TSMC China.

Note 2: The aggregate amount available for lending to TSMC Washington from TSMC Development and the aggregate amount of lending from TSMC Development shall not exceed the net worth of TSMC Development.

Note 3: The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.

- 70 -

TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Investees

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE YEAR ENDED DECEMBER 31, 2025

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

No.

Endorsement/ Guarantee Provider

Guaranteed Party

Limits on Endorsement/ Guarantee Amount Provided to Each Guaranteed Party (Notes 1 and 2)

Maximum Balance for the Period (Foreign Currencies in Thousands) (Note 3)

Ending Balance (Foreign Currencies in Thousands) (Note 3)

Amount Actually Drawn (US$ in Thousands)

Amount of Endorsement/ Guarantee Collateralized by Properties

Ratio of Accumulated Endorsement/ Guarantee to Net Equity per Latest Financial Statements

Maximum Endorsement/ Guarantee Amount Allowable (Notes 1 and 2)

Guarantee Provided by Parent Company

Guarantee Provided by A Subsidiary

Guarantee Provided to Subsidiaries in Mainland China

Name

Nature of Relationship

0

TSMC

TSMC North America

Subsidiary

$ 2,167,838,398

$ 2,616,559

$ 2,616,559

$ 2,616,559

$ -

0.05%

$ 2,167,838,398

Yes

No

No

(US$ 83,213)

(US$ 83,213)

(US$ 83,213)

TSMC Global

Subsidiary

2,167,838,398

235,830,000

204,386,000

204,386,000

-

3.77%

2,167,838,398

Yes

No

No

(US$ 7,500,000)

(US$ 6,500,000)

(US$ 6,500,000)

TSMC Arizona

Subsidiary

2,167,838,398

471,578,859

471,476,919

343,737,521

-

8.70%

2,167,838,398

Yes

No

No

(US$ 14,997,420)

(US$ 14,994,178)

(US$ 10,931,736)

1

TSMC Japan

TSMC JDC

The same parent company

322,906

265,716

-

-

-

-

322,906

No

No

No

(JPY 1,320,000)

Note 1: TSMC's individual endorsement/guarantee limits for TSMC North America, TSMC Global, and TSMC Arizona, as well as the total external endorsement/guarantee limits for TSMC and its subsidiaries, shall not exceed forty percent (40%) of TSMC’s net worth.

Note 2: The total amount of the endorsement/guarantee provided by TSMC Japan to TSMC JDC and the total amount of the endorsement/guarantee provided by TSMC Japan shall not exceed two hundred and fifty percent (250%) of TSMC Japan’s net worth.

Note 3: The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.

- 71 -

TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Investees

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2025

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

Company Name	Related Party	Nature of Relationships	Transaction Details				Abnormal Transaction		Notes/Accounts Payable or Receivable		Note
			Purchases/ Sales	Amount (Foreign Currencies in Thousands)	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance (Foreign Currencies in Thousands)	% to Total
TSMC	TSMC North America	Subsidiary	Sales	$ 2,931,832,801	77	Net 30 days from invoice date (Note)	-	-	$ 206,855,118	81
	TSMC Arizona	Subsidiary	Sales	1,558,414	-	Net 30 days from the end of the month of when invoice is issued	-	-	86,254	-
	JASM	Subsidiary	Sales	1,026,858	-	Net 30 days from the end of the month of when invoice is issued	-	-	396,245	-
	TSMC Nanjing	Subsidiary	Sales	158,188	-	Net 30 days from the end of the month of when invoice is issued	-	-	7,430	-
	GUC	Associate	Sales	6,014,200	-	Net 30 days from invoice date	-	-	387,902	-
	VIS	Associate	Sales	1,467,380	-	Net 30 days from the end of the month of when invoice is issued	-	-	945,224	-
	SSMC	Associate	Sales	299,174	-	Net 30 days from the end of the month of when invoice is issued	-	-	97,263	-
	TSMC Nanjing	Subsidiary	Purchases	73,652,776	27	Net 30 days from the end of the month of when invoice is issued	-	-	(2,934,085)	3
	TSMC Arizona	Subsidiary	Purchases	67,096,542	25	Net 30 days from the end of the month of when invoice is issued	-	-	(9,127,301)	10
	TSMC China	Subsidiary	Purchases	26,581,060	10	Net 30 days from the end of the month of when invoice is issued	-	-	(2,261,531)	2
	TSMC Washington	Indirect subsidiary	Purchases	7,233,381	3	Net 30 days from the end of the month of when invoice is issued	-	-	(578,662)	1
	SSMC	Associate	Purchases	4,113,439	2	Net 30 days from the end of the month of when invoice is issued	-	-	(374,089)	-
	VIS	Associate	Purchases	878,168	-	Net 30 days from the end of the month of when invoice is issued	-	-	(91,947)	-
TSMC North America	GUC	Associate of TSMC	Sales	25,079,357	1	Net 30 days from invoice date	-	-	1,263,109	1
				(US$ 805,964)					(US$ 40,170)
VisEra Tech	Xintec	Associate of TSMC	Sales	366,246	4	Net 60 days from the end of the month of when invoice is issued	-	-	46,003	4

Note: The tenor is determined by the payment terms granted to its clients by TSMC North America.

- 72 -

TABLE 4

Taiwan Semiconductor Manufacturing Company Limited and Investees

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

DECEMBER 31, 2025

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

Company Name	Related Party	Nature of Relationships	Ending Balance (Foreign Currencies in Thousands)	Turnover Days (Note 1)	Overdue		Amounts Received in Subsequent Period	Allowance for Bad Debts
					Amount	Action Taken
TSMC	TSMC North America	Subsidiary	$ 210,872,604	26	$ -	-	$ -	$ -
	JASM	Subsidiary	397,110	Note 2	-	-	-	-
	VIS	Associate	1,213,033	Note 2	-	-	-	-
	GUC	Associate	387,902	25	-	-	-	-
TSMC North America	TSMC	Parent company	149,819	Note 2	-	-	-	-
			(US$ 4,765)
	GUC	Associate of TSMC	1,263,109	10	-	-	-	-
			(US$ 40,170)
TSMC Europe	TSMC	Parent company	112,840	Note 2	-	-	-	-
			(EUR 3,049)
TSMC China	TSMC	Parent company	2,261,531	27	-	-	-	-
			(RMB 502,702)
	TSMC Nanjing	The same parent company	15,388,856	Note 2	-	-	-	-
			(RMB 3,420,734)
TSMC Nanjing	TSMC	Parent company	2,934,085	18	-	-	-	-
			(RMB 652,200)
TSMC Arizona	TSMC	Parent company	9,127,301	26	-	-	-	-
			(US$ 290,272)
TSMC Technology	TSMC	The ultimate parent of the Company	1,248,835	Note 2	-	-	-	-
			(US$ 39,716)
TSMC Development	TSMC Washington	Subsidiary	1,886,640	Note 2	-	-	-	-
			(US$ 60,000)
TSMC Washington	TSMC	The ultimate parent of the Company	578,662	27	-	-	-	-
			(US$ 18,403)

Note 1: The calculation of turnover days excludes other receivables from related parties.

Note 2: The ending balance is primarily consisted of royalty receivables and other receivables, which is not applicable for the calculation of turnover days.

- 73 -

TABLE 5

Taiwan Semiconductor Manufacturing Company Limited and Investees

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE (EXCLUDING INFORMATION ON INVESTMENT IN MAINLAND CHINA)

FOR THE YEAR ENDED DECEMBER 31, 2025

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

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount		Balance as of December 31, 2025			Net Income (Losses) of the Investee (Foreign Currencies in Thousands)	Share of Profits/Losses of Investee (Note 1) (Foreign Currencies in Thousands)	Note
				December 31, 2025 (Foreign Currencies in Thousands)	December 31, 2024 (Foreign Currencies in Thousands)	Shares (In Thousands)	Percentage of Ownership	Carrying Value (Foreign Currencies in Thousands)
TSMC	TSMC Global	Tortola, British Virgin Islands	Investment activities	$ 1,178,213,709	$ 616,839,509	37	100	$ 1,351,374,238	$ 51,520,610	$ 51,520,610	Subsidiary
	TSMC Arizona	Phoenix, Arizona, U.S.A.	Manufacturing, sales and testing of integrated circuits and other semiconductor devices	672,616,510	565,786,810	21,250	100	644,037,295	16,141,125	14,599,365	Subsidiary
	TSMC Partners	Tortola, British Virgin Islands	Investing in companies involved in the semiconductor design and manufacturing, and other investment activities	31,456,130	31,456,130	988,268	100	75,809,127	2,172,398	2,172,398	Subsidiary
	JASM	Kumamoto, Japan	Manufacturing, sales and testing of integrated circuits and other semiconductor devices	68,384,148	68,384,148	3,011	73	48,148,122	(9,767,064)	(7,095,772)	Subsidiary
	ESMC	Dresden, Germany	Manufacturing, sales and testing of integrated circuits and other semiconductor devices	38,221,667	18,112,326	805	70	39,474,813	(688,621)	(482,035)	Subsidiary
	VIS	Hsinchu, Taiwan	Manufacturing, sales, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing and design service of masks	13,919,430	13,919,430	506,709	28	18,166,267	7,907,503	2,172,713	Associate
	SSMC	Singapore	Manufacturing and sales of integrated circuits and other semiconductor devices	5,120,028	5,120,028	314	39	12,419,167	3,752,313	1,455,522	Associate
	VisEra Tech	Hsinchu, Taiwan	Research, design, development, manufacturing, sales, packaging and test of color filter	4,224,082	4,224,082	213,619	67	11,921,700	1,273,995	803,176	Subsidiary
	TSMC North America	San Jose, California, U.S.A.	Sales and marketing of integrated circuits and other semiconductor devices	333,718	333,718	11,000	100	8,770,383	1,194,222	1,194,222	Subsidiary
	Xintec	Taoyuan, Taiwan	Wafer level chip size packaging and wafer level post passivation interconnection service	1,988,317	1,988,317	111,282	41	4,495,255	1,353,534	555,073	Associate
	Emerging Fund	Cayman Islands	Investing in technology start-up companies	3,014,372	2,688,915	-	99.9	4,138,575	158,117	157,959	Subsidiary
	GUC	Hsinchu, Taiwan	Researching, developing, manufacturing, testing and marketing of integrated circuits	386,568	386,568	46,688	35	2,952,582	3,769,566	1,313,286	Associate
	TSMC 3DIC	Yokohama, Japan	Engineering support activities	1,144,356	1,144,356	49	100	1,502,144	216,635	216,635	Subsidiary
	TSMC Europe	Amsterdam, the Netherlands	Customer service and supporting activities	15,749	15,749	-	100	767,420	77,134	77,134	Subsidiary
	TSMC JDC	Yokohama, Japan	Engineering support activities	410,680	410,680	15	100	433,326	31,851	31,851	Subsidiary
	TSMC Japan	Yokohama, Japan	Customer service and supporting activities	83,760	83,760	6	100	129,152	5,123	5,123	Subsidiary
	TSMC Korea	Seoul, Korea	Customer service and supporting activities	13,656	13,656	80	100	44,447	1,670	1,670	Subsidiary
	VTAF III  (Note 3)	Cayman Islands	Investing in technology start-up companies	-	561,975	-	-	-	445	436	Subsidiary
TSMC Partners	TSMC Development	Delaware, U.S.A.	Investing in companies involved in semiconductor manufacturing	18,455,704	18,455,704	-	100	38,469,935	114,205	Note 2	Subsidiary
				(US$ 586,939)	(US$ 586,939)			(US$ 1,223,443)	(US$ 3,617)
	TSMC Technology	Delaware, U.S.A.	Engineering support activities	449,084	449,084	-	100	1,911,742	408,763	Note 2	Subsidiary
				(US$ 14,282)	(US$ 14,282)			(US$ 60,798)	(US$ 13,211)
	TSMC Canada	Ontario, Canada	Engineering support activities	72,321	72,321	2,300	100	472,275	44,729	Note 2	Subsidiary
				(US$ 2,300)	(US$ 2,300)			(US$ 15,020)	(US$ 1,439)
VTAF III	Growth Fund (Note 3)	Cayman Islands	Investing in technology start-up companies	-	38,862	-	-	-	445	Note 2	Subsidiary
					(US$ 1,236)				(US$ 14)
TSMC Development	TSMC Washington	Washington, U.S.A.	Manufacturing, sales and testing of integrated circuits and other semiconductor devices	-	-	293,637	100	4,571,303	(401,529)	Note 2	Subsidiary
								(US$ 145,379)	(US$ (12,888))

Note 1: The share of profits/losses of investee includes the effect of unrealized gross profit on intercompany transactions.

Note 2: The share of profits/losses of the investee company is not reflected herein as such amount is already included in the share of profits/losses of the investor company.

Note 3: VTAF III and the Growth Fund have completed the liquidation procedures respectively in the first quarter and the second quarter of 2025.

- 74 -

TABLE 6

Taiwan Semiconductor Manufacturing Company Limited and Investees

INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR THE YEAR ENDED DECEMBER 31, 2025

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

Investee Company	Main Businesses and Products	Total Amount of Paid-in Capital (RMB in Thousands)	Method of Investment	Accumulated Outflow of Investment from Taiwan as of January 1, 2025 (US$ in Thousands)	Investment Flows		Accumulated Outflow of Investment from Taiwan as of December 31, 2025 (US$ in Thousands)	Net Income (Losses) of the Investee Company	Percentage of Ownership	Share of Profits/Losses	Carrying Amount as of Balance as of December 31, 2025	Accumulated Inward Remittance of Earnings as of December 31, 2025
					Outflow (US$ in Thousands)	Inflow
TSMC China	Manufacturing, sales, testing and computer-aided design of integrated circuits and other semiconductor devices	$ 18,939,667	(Note 1)	$ 18,939,667	$ -	$ -	$ 18,939,667	$ 11,571,415	100%	$ 11,638,257	$ 122,572,394	$ -
		(RMB 4,502,080)		(US$ 596,000)			(US$ 596,000)			(Note 2)
TSMC Nanjing	Manufacturing, sales, testing and computer-aided design of integrated circuits and other semiconductor devices	30,521,412	(Note 1)	30,521,412	-	-	30,521,412	27,605,732	100%	27,453,918	145,609,673	-
		(RMB 6,650,119)		(US$ 1,000,000)			(US$ 1,000,000)			(Note 2)

Accumulated Investment in Mainland China as of December 31, 2025                                (US$ in Thousands)	Investment Amounts Authorized by Investment Commission, MOEA (US$ in Thousands)	Upper Limit on Investment
$    49,461,079	$  119,412,667	$  3,276,477,170
(US$ 1,596,000)	(US$ 3,596,000)	(Note 3)

Note 1:     TSMC directly invested US$596,000 thousand in TSMC China and US$1,000,000 thousands in TSMC Nanjing.

Note 2:     Amount was recognized based on the audited financial statements.

Note 3:     The upper limit on investment in mainland China is determined by sixty percent (60%) of the Company's consolidated net worth.

- 75 -

THE CONTENTS OF STATEMENTS OF MAJOR

ACCOUNTING ITEMS

ITEM		STATEMENT INDEX
MAJOR ACCOUNTING ITEMS IN ASSETS, LIABILITIES AND EQUITY
STATEMENT OF CASH AND CASH EQUIVALENTS		1
STATEMENT OF NOTES AND ACCOUNTS RECEIVABLE, NET		2
STATEMENT OF RECEIVABLES FROM RELATED PARTIES		3
STATEMENT OF INVENTORIES		4
STATEMENT OF CHANGES IN INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD		5
STATEMENT OF CHANGES IN PROPERTY, PLANT AND EQUIPMENT		Note 13
STATEMENT OF CHANGES IN ACCUMULATED DEPRECIATION AND ACCUMULATED IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT		Note 13
STATEMENT OF CHANGES IN RIGHT-OF-USE ASSETS		6
STATEMENT OF CHANGES IN INTANGIBLE ASSETS		Note 15
STATEMENT OF DEFERRED INCOME TAX ASSETS / LIABILITIES		Note 23
STATEMENT OF ACCOUNTS PAYABLES		7
STATEMENT OF PAYABLES TO RELATED PARTIES		8
STATEMENT OF PAYABLES TO CONTRACTORS AND EQUIPMENT SUPPLIERS		9
STATEMENT OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES		10
STATEMENT OF BONDS PAYABLE		11
STATEMENT OF LEASE LIABILITIES		12
MAJOR ACCOUNTING ITEMS IN PROFIT OR LOSS
STATEMENT OF NET REVENUE		13
STATEMENT OF COST OF REVENUE		14
STATEMENT OF OPERATING EXPENSES		15
STATEMENT OF FINANCE COSTS		Note 21
STATEMENT OF LABOR, DEPRECIATION AND AMORTIZATION BY FUNCTION		16

- 76 -

STATEMENT 1

Taiwan Semiconductor Manufacturing Company Limited

STATEMENT OF CASH AND CASH EQUIVALENTS

DECEMBER 31, 2025

(In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

Item		Description		Amount
Cash
Petty cash				$ 670
Cash in banks
Checking accounts and demand deposits				1,877,647
Foreign currency deposits		Including US$2,848,100 thousand @31.444, JPY55,265,702 thousand @0.2013 and EUR91,795 thousand @37.003		104,077,322
Time deposits		From 2025.07.15 to 2026.06.29, interest rates at 0.63%-4.35%, including NT$675,147,639 thousand, US$7,470,000 thousand @31.444, JPY70,017,775 thousand @0.2013 and EUR968,000 thousand @37.003		959,947,801
Cash equivalents
Repurchase agreements		Expired by 2026.01.16, interest rates at 4.18%		1,131,984
Money market funds				8
Total				$ 1,067,035,432

- 77 -

STATEMENT 2

Taiwan Semiconductor Manufacturing Company Limited

STATEMENT OF NOTES AND ACCOUNTS RECEIVABLE, NET

DECEMBER 31, 2025

(In Thousands of New Taiwan Dollars)

Client Name		Amount
Client A		$ 21,355,904
Client B		5,577,827
Client C		4,706,863
Client D		2,597,710
Client E		2,382,943
Others (Note)		10,558,944
		47,180,191
Less: Allowance for doubtful accounts		(477,512)
Total		$ 46,702,679

Note: The amount of individual client included in others does not exceed 5% of the account balance.

- 78 -

STATEMENT 3

Taiwan Semiconductor Manufacturing Company Limited

STATEMENT OF RECEIVABLES FROM RELATED PARTIES

DECEMBER 31, 2025

(In Thousands of New Taiwan Dollars)

Client Name		Amount
TSMC North America		$ 206,855,118
Others (Note)		1,927,920
Total		$ 208,783,038

Note: The amount of individual client included in others does not exceed 5% of the account balance.

- 79 -

STATEMENT 4

Taiwan Semiconductor Manufacturing Company Limited

STATEMENT OF INVENTORIES 

DECEMBER 31, 2025

(In Thousands of New Taiwan Dollars)

		Amount
Item		Cost		Net Realizable Value
Finished goods		$ 26,782,971		$ 105,960,493
Work in process		170,000,320		926,545,143
Raw materials		43,318,957		43,318,957
Supplies and spare parts		12,218,121		12,218,121
Total		$ 252,320,369		$ 1,088,042,714

- 80 -

STATEMENT 5

Taiwan Semiconductor Manufacturing Company Limited

STATEMENT OF CHANGES IN INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

FOR THE YEAR ENDED DECEMBER 31, 2025

(In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

														Increase
														(Decrease)
														in Using the								Market Value or
		Balance, January 1, 2025				Additions in Investment				Decrease in Investment				Equity Method		Balance, December 31, 2025						Net Assets Value
		Shares				Shares				Shares				Amount		Shares						Unit Price
Investees		(In Thousands)		Amount		(In Thousands)		Amount		(In Thousands)		Amount		(Note 2)		(In Thousands)		%		Amount		(NT$)		Amount		Collateral
Stocks
TSMC Global		19		$ 772,437,954		18		$ 561,374,200		-		$ -		$ 17,562,084		37		100		$ 1,351,374,238		$ -		$ 1,351,374,238		Nil
TSMC Arizona		17,850		544,359,678		3,400		106,829,700		-		-		(7,152,083)		21,250		100		644,037,295		-		645,663,984		Nil
TSMC Partners		988,268		76,694,630		-		-		-		-		(885,503)		988,268		100		75,809,127		-		75,934,789		Nil
JASM		3,011		57,173,512		-		-		-		-		(9,025,390)		3,011		73		48,148,122		-		48,448,598		Nil
ESMC		735		17,510,070		70		20,109,341		-		-		1,855,402		805		70		39,474,813		-		39,474,813		Nil
VIS		506,709		18,300,373		-		-		-		-		(134,106)		506,709		28		18,166,267		92  (note 1)		46,667,929		Nil
SSMC		314		11,387,185		-		-		-		-		1,031,982		314		39		12,419,167		-		12,205,571		Nil
VisEra Tech		213,619		12,204,760		-		-		-		-		(283,060)		213,619		67		11,921,700		285  (note 1)		60,881,415		Nil
TSMC North America		11,000		7,856,923		-		-		-		-		913,460		11,000		100		8,770,383		-		8,770,383		Nil
Xintec		111,282		4,220,609		-		-		-		-		274,646		111,282		41		4,495,255		139  (note 1)		15,468,188		Nil
GUC		46,688		3,512,938		-		-		-		-		(560,356)		46,688		35		2,952,582		2125  (note 1)		99,211,700		Nil
TSMC 3DIC		49		1,343,370		-		-		-		-		158,774		49		100		1,502,144		-		1,502,144		Nil
TSMC Europe		-		631,939		-		-		-		-		135,481		-		100		767,420		-		767,420		Nil
TSMC JDC		15		418,383		-		-		-		-		14,943		15		100		433,326		-		433,326		Nil
TSMC Japan		6		129,226		-		-		-		-		(74)		6		100		129,152		-		129,152		Nil
TSMC Korea		80		43,764		-		-		-		-		683		80		100		44,447		-		44,447		Nil
Subtotal				1,528,225,314				688,313,241				-		3,906,883						2,220,445,438				2,406,978,097
Capital
TSMC Nanjing		-		116,846,280		-		-		-		-		28,763,393		-		100		145,609,673		-		145,943,725		Nil
TSMC China		-		110,272,686		-		-		-		-		12,299,708		-		100		122,572,394		-		122,744,745		Nil
Emerging Fund		-		3,214,022		-		633,246		-		(307,789)		599,096		-		99.9		4,138,575		-		4,147,607		Nil
VTAF II (Note3)		-		6,246		-		-		-		(128,619)		122,373		-		-		-		-		-		Nil
VTAF III (Note3)		-		23,334		-		-		-		(39,804)		16,470		-		-		-		-		-		Nil
Subtotal				230,362,568				633,246				(476,212)		41,801,040						272,320,642				272,836,077
Total				$ 1,758,587,882				$ 688,946,487				$ (476,212)		$ 45,707,923						$ 2,492,766,080				$ 2,679,814,174

Note 1: The unit price is calculated by closing price of the Taipei Exchange or the TWSE as of December 31, 2025.

Note 2:     Mainly including share of profit or loss of subsidiaries and associates, share of other comprehensive income or loss of subsidiaries and associates, cash dividends received from subsidiaries and associates, etc.

Note 3:     VTAF II and VTAF III have completed the liquidation procedures respectively in the first quarter of 2025.

- 81 -

STATEMENT 6

Taiwan Semiconductor Manufacturing Company Limited

STATEMENT OF CHANGES IN RIGHT-OF-USE ASSETS

FOR THE YEAR ENDED DECEMBER 31, 2025

(In Thousands of New Taiwan Dollars)

						Office
Item		Land		Buildings		Equipment		Total
Cost
Balance at January 1, 2025		$ 47,535,869		$ 2,686,676		$ 50,962		$ 50,273,507
Additions		6,793,814		1,813,438		17,381		8,624,633
Deductions		(1,058,946)		(18,754)		(15,164)		(1,092,864)
Balance at December 31, 2025		$ 53,270,737		$ 4,481,360		$ 53,179		$ 57,805,276
Accumulated depreciation
Balance at January 1, 2025		$ 10,919,881		$ 1,423,766		$ 30,713		$ 12,374,360
Additions		2,972,023		703,268		16,015		3,691,306
Deductions		(113,298)		(3,589)		(14,220)		(131,107)
Balance at December 31, 2025		$ 13,778,606		$ 2,123,445		$ 32,508		$ 15,934,559
Carrying amounts at December 31, 2025		$ 39,492,131		$ 2,357,915		$ 20,671		$ 41,870,717

- 82 -

STATEMENT 7

Taiwan Semiconductor Manufacturing Company Limited

STATEMENT OF ACCOUNTS PAYABLES

DECEMBER 31, 2025

(In Thousands of New Taiwan Dollars)

Vendor Name		Amount
Vendor A		$ 5,506,480
Others (Note)		68,691,672
Total		$ 74,198,152

Note: The amount of individual vendor included in others does not exceed 5% of the account balance.

- 83 -

STATEMENT 8

Taiwan Semiconductor Manufacturing Company Limited

STATEMENT OF PAYABLES TO RELATED PARTIES

DECEMBER 31, 2025

(In Thousands of New Taiwan Dollars)

Vendor Name		Amount
TSMC Arizona		$ 9,127,301
TSMC Nanjing		2,934,085
TSMC China		2,261,532
Xintec		1,298,672
TSMC Technology		1,248,835
Others (Note)		1,654,538
Total		$ 18,524,963

Note: The amount of individual vendor in others does not exceed 5% of the account balance.

- 84 -

STATEMENT 9

Taiwan Semiconductor Manufacturing Company Limited

STATEMENT OF PAYABLES TO CONTRACTORS AND EQUIPMENT SUPPLIERS

DECEMBER 31, 2025

(In Thousands of New Taiwan Dollars)

Vendor Name		Amount
Vendor A		$ 29,799,065
Vendor B		27,321,659
Vendor C		10,885,531
Vendor D		8,959,351
Others (Note)		91,683,234
Total		$ 168,648,840

Note: The amount of individual vendor included in others does not exceed 5% of the account balance.

- 85 -

STATEMENT 10

Taiwan Semiconductor Manufacturing Company Limited

STATEMENT OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

DECEMBER 31, 2025

(In Thousands of New Taiwan Dollars)

Item		Amount
Temporary receipts from customers		$ 145,207,051
Refund liability		75,708,756
Contract liabilities		34,734,928
Others (Note)		85,104,566
Total		$ 340,755,301

Note: The amount of each item in others does not exceed 5% of the account balance.

(Continued)

- 86 -

STATEMENT 11

Taiwan Semiconductor Manufacturing Company Limited

STATEMENT OF BONDS PAYABLE

DECEMBER 31, 2025

(In Thousands of New Taiwan Dollars)

										Amount
						Interest		Coupon				Repayment		Balance,		Premiums
Bonds Name		Trustee		Issuance Date		Payment Date		Rate (%)		Total Amount		Paid		End of Year		(Discounts)		Carrying Value		Unamortized Repayment		Collateral
Domestic unsecured bonds-109-1
-A		Taipei Fubon Commercial Bank Co., Ltd.		2020.03.23		On 03.23 annually		0.58		$ 3,000,000		$ 3,000,000		$ -		$ -		$ -		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2020.03.23		On 03.23 annually		0.62		10,500,000		-		10,500,000		(1,929)		10,498,071		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2020.03.23		On 03.23 annually		0.64		10,500,000		-		10,500,000		(4,651)		10,495,349		Bullet repayment		Nil
Domestic unsecured bonds-109-2
-A		Taipei Fubon Commercial Bank Co., Ltd.		2020.04.15		On 04.15 annually		0.52		5,900,000		5,900,000		-		-		-		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2020.04.15		On 04.15 annually		0.58		10,400,000		-		10,400,000		(1,961)		10,398,039		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2020.04.15		On 04.15 annually		0.60		5,300,000		-		5,300,000		(2,359)		5,297,641		Bullet repayment		Nil
Domestic unsecured bonds-109-3
-A		Taipei Fubon Commercial Bank Co., Ltd.		2020.05.29		On 05.29 annually		0.55		4,500,000		4,500,000		-		-		-		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2020.05.29		On 05.29 annually		0.60		7,500,000		-		7,500,000		(1,571)		7,498,429		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2020.05.29		On 05.29 annually		0.64		2,400,000		-		2,400,000		(1,124)		2,398,876		Bullet repayment		Nil
Domestic unsecured bonds-109-4
-A		Taipei Fubon Commercial Bank Co., Ltd.		2020.07.14		On 07.14 annually		0.58		5,700,000		5,700,000		-		-		-		Two equal installments in last two years		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2020.07.14		On 07.14 annually		0.65		6,300,000		-		6,300,000		(1,042)		6,298,958		Two equal installments in last two years		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2020.07.14		On 07.14 annually		0.67		1,900,000		-		1,900,000		(858)		1,899,142		Two equal installments in last two years		Nil
Domestic unsecured bonds-109-5
-A		Taipei Fubon Commercial Bank Co., Ltd.		2020.09.03		On 09.03 annually		0.50		4,800,000		4,800,000		-		-		-		Two equal installments in last two years		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2020.09.03		On 09.03 annually		0.58		8,000,000		-		8,000,000		(1,487)		7,998,513		Two equal installments in last two years		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2020.09.03		On 09.03 annually		0.60		2,800,000		-		2,800,000		(1,298)		2,798,702		Two equal installments in last two years		Nil
Domestic unsecured bonds-109-6
-A		Taipei Fubon Commercial Bank Co., Ltd.		2020.12.02		On 12.02 annually		0.40		1,600,000		1,600,000		-		-		-		Two equal installments in last two years		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2020.12.02		On 12.02 annually		0.44		5,600,000		-		5,600,000		(1,382)		5,598,618		Two equal installments in last two years		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2020.12.02		On 12.02 annually		0.48		4,800,000		-		4,800,000		(2,548)		4,797,452		Two equal installments in last two years		Nil
Domestic unsecured bonds-109-7
-A		Taipei Fubon Commercial Bank Co., Ltd.		2020.12.29		On 12.29 annually		0.36		1,900,000		1,900,000		-		-		-		Two equal installments in last two years		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2020.12.29		On 12.29 annually		0.41		10,200,000		-		10,200,000		(2,408)		10,197,592		Two equal installments in last two years		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2020.12.29		On 12.29 annually		0.45		6,400,000		-		6,400,000		(3,173)		6,396,827		Two equal installments in last two years		Nil
Domestic US$ unsecured bonds-109-1		Mega International Commercial Bank Co., Ltd.		2020.09.22		On 09.22 annually		2.70		31,444,000		-		31,444,000		(30,002)		31,413,998		Bullet repayment (callable on the 5th anniversary of the issue date and every anniversary thereafter)		Nil
Domestic unsecured bonds-110-1
-A		Taipei Fubon Commercial Bank Co., Ltd.		2021.03.30		On 03.30 annually		0.50		4,800,000		-		4,800,000		(236)		4,799,764		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2021.03.30		On 03.30 annually		0.55		11,400,000		-		11,400,000		(3,806)		11,396,194		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2021.03.30		On 03.30 annually		0.60		4,900,000		-		4,900,000		(2,686)		4,897,314		Bullet repayment		Nil
Domestic unsecured bonds-110-2
-A		Taipei Fubon Commercial Bank Co., Ltd.		2021.05.03		On 05.03 annually		0.50		5,200,000		-		5,200,000		(347)		5,199,653		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2021.05.03		On 05.03 annually		0.58		8,400,000		-		8,400,000		(2,915)		8,397,085		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2021.05.03		On 05.03 annually		0.65		5,600,000		-		5,600,000		(3,123)		5,596,877		Bullet repayment		Nil
Domestic unsecured bonds-110-3
-A		Taipei Fubon Commercial Bank Co., Ltd.		2021.06.25		On 06.25 annually		0.52		6,900,000		-		6,900,000		(684)		6,899,316		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2021.06.25		On 06.25 annually		0.58		7,900,000		-		7,900,000		(2,925)		7,897,075		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2021.06.25		On 06.25 annually		0.65		4,900,000		-		4,900,000		(2,792)		4,897,208		Bullet repayment		Nil
Domestic unsecured bonds-110-4
-A		Taipei Fubon Commercial Bank Co., Ltd.		2021.08.19		On 08.19 annually		0.485		4,000,000		4,000,000		-		-		-		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2021.08.19		On 08.19 annually		0.50		8,000,000		-		8,000,000		(1,016)		7,998,984		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2021.08.19		On 08.19 annually		0.55		5,400,000		-		5,400,000		(2,077)		5,397,923		Bullet repayment		Nil
-D		Taipei Fubon Commercial Bank Co., Ltd.		2021.08.19		On 08.19 annually		0.62		4,200,000		-		4,200,000		(2,443)		4,197,557		Bullet repayment		Nil
Domestic US$ unsecured bonds-110-5		Mega International Commercial Bank Co., Ltd.		2021.09.23		On 09.23 annually		3.10		31,444,000		-		31,444,000		(29,387)		31,414,613		Bullet repayment (callable on the 5th anniversary of the issue date and every anniversary thereafter)		Nil
Domestic unsecured bonds-110-6
-A		Taipei Fubon Commercial Bank Co., Ltd.		2021.10.05		On 10.05 annually		0.535		3,200,000		-		3,200,000		(219)		3,199,781		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2021.10.05		On 10.05 annually		0.54		6,900,000		-		6,900,000		(1,177)		6,898,823		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2021.10.05		On 10.05 annually		0.60		4,600,000		-		4,600,000		(1,958)		4,598,042		Bullet repayment		Nil
-D		Taipei Fubon Commercial Bank Co., Ltd.		2021.10.05		On 10.05 annually		0.62		1,600,000		-		1,600,000		(980)		1,599,020		Bullet repayment		Nil
Domestic unsecured bonds-110-7
-A		Taipei Fubon Commercial Bank Co., Ltd.		2021.12.09		On 12.09 annually		0.65		7,700,000		-		7,700,000		(1,596)		7,698,404		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2021.12.09		On 12.09 annually		0.675		3,500,000		-		3,500,000		(975)		3,499,025		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2021.12.09		On 12.09 annually		0.72		5,500,000		-		5,500,000		(2,509)		5,497,491		Bullet repayment		Nil

(Concluded)

- 87 -

										Amount
						Interest		Coupon				Repayment		Balance,		Premiums
Bonds Name		Trustee		Issuance Date		Payment Date		Rate (%)		Total Amount		Paid		End of Year		(Discounts)		Carrying Value		Unamortized Repayment		Collateral
Domestic unsecured bonds-111-1
-A		Taipei Fubon Commercial Bank Co., Ltd.		2022.01.12		On 01.12 annually		0.63		$ 2,100,000		$ -		$ 2,100,000		$ (534)		$ 2,099,466		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2022.01.12		On 01.12 annually		0.72		3,300,000		-		3,300,000		(1,775)		3,298,225		Bullet repayment		Nil
Domestic unsecured bonds-111-2
-A		Taipei Fubon Commercial Bank Co., Ltd.		2022.03.29		On 03.29 annually		0.84		3,000,000		-		3,000,000		(550)		2,999,450		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2022.03.29		On 03.29 annually		0.85		9,600,000		-		9,600,000		(2,631)		9,597,369		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2022.03.29		On 03.29 annually		0.90		1,600,000		-		1,600,000		(817)		1,599,183		Bullet repayment		Nil
Domestic unsecured bonds-111-3		Taipei Fubon Commercial Bank Co., Ltd.		2022.05.20		On 05.20 annually		1.50		6,100,000		-		6,100,000		(1,898)		6,098,102		Bullet repayment		Nil
Domestic unsecured bonds-111-4
-A		Taipei Fubon Commercial Bank Co., Ltd.		2022.07.27		On 07.27 annually		1.60		1,200,000		-		1,200,000		(175)		1,199,825		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2022.07.27		On 07.27 annually		1.70		10,100,000		-		10,100,000		(3,342)		10,096,658		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2022.07.27		On 07.27 annually		1.75		1,200,000		-		1,200,000		(653)		1,199,347		Bullet repayment		Nil
-D		Taipei Fubon Commercial Bank Co., Ltd.		2022.07.27		On 07.27 annually		1.95		1,400,000		-		1,400,000		(987)		1,399,013		Bullet repayment		Nil
Domestic unsecured bonds-111-5
-A		Taipei Fubon Commercial Bank Co., Ltd.		2022.08.25		On 08.25 annually		1.65		2,000,000		-		2,000,000		(677)		1,999,323		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2022.08.25		On 08.25 annually		1.65		8,900,000		-		8,900,000		(3,331)		8,896,669		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2022.08.25		On 08.25 annually		1.65		2,200,000		-		2,200,000		(1,297)		2,198,703		Bullet repayment		Nil
-D		Taipei Fubon Commercial Bank Co., Ltd.		2022.08.25		On 08.25 annually		1.82		2,500,000		-		2,500,000		(1,873)		2,498,127		Bullet repayment		Nil
Domestic unsecured bonds-111-6
-A		Taipei Fubon Commercial Bank Co., Ltd.		2022.10.20		On 10.20 annually		1.75		5,700,000		-		5,700,000		(2,466)		5,697,534		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2022.10.20		On 10.20 annually		1.80		1,000,000		-		1,000,000		(655)		999,345		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2022.10.20		On 10.20 annually		2.00		3,500,000		-		3,500,000		(2,865)		3,497,135		Bullet repayment		Nil
Domestic unsecured bonds-112-1
-A		Taipei Fubon Commercial Bank Co., Ltd.		2023.03.28		On 03.28 annually		1.54		12,200,000		-		12,200,000		(6,399)		12,193,601		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2023.03.28		On 03.28 annually		1.60		2,300,000		-		2,300,000		(1,576)		2,298,424		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2023.03.28		On 03.28 annually		1.78		4,800,000		-		4,800,000		(3,929)		4,796,071		Bullet repayment		Nil
Domestic unsecured bonds-112-2
-A		Taipei Fubon Commercial Bank Co., Ltd.		2023.05.03		On 05.03 annually		1.60		13,100,000		-		13,100,000		(7,018)		13,092,982		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2023.05.03		On 05.03 annually		1.65		2,300,000		-		2,300,000		(1,576)		2,298,424		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2023.05.03		On 05.03 annually		1.82		5,300,000		-		5,300,000		(4,303)		5,295,697		Bullet repayment		Nil
Domestic unsecured bonds-112-3
-A		Taipei Fubon Commercial Bank Co., Ltd.		2023.06.01		On 06.01 annually		1.60		11,400,000		-		11,400,000		(6,270)		11,393,730		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2023.06.01		On 06.01 annually		1.65		2,600,000		-		2,600,000		(1,807)		2,598,193		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2023.06.01		On 06.01 annually		1.80		6,000,000		-		6,000,000		(4,901)		5,995,099		Bullet repayment		Nil
Domestic unsecured bonds-112-4
-A		Taipei Fubon Commercial Bank Co., Ltd.		2023.08.16		On 08.16 annually		1.60		7,300,000		-		7,300,000		(4,313)		7,295,687		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2023.08.16		On 08.16 annually		1.65		700,000		-		700,000		(510)		699,490		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2023.08.16		On 08.16 annually		1.76		7,900,000		-		7,900,000		(6,600)		7,893,400		Bullet repayment		Nil
Domestic unsecured bonds-112-5
-A		Taipei Fubon Commercial Bank Co., Ltd.		2023.10.16		On 10.16 annually		1.62		4,300,000		-		4,300,000		(2,713)		4,297,287		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2023.10.16		On 10.16 annually		1.76		5,500,000		-		5,500,000		(4,733)		5,495,267		Bullet repayment		Nil
Domestic unsecured bonds-113-1
-A		Taipei Fubon Commercial Bank Co., Ltd.		2024.03.15		On 03.15 annually		1.64		12,000,000		-		12,000,000		(8,284)		11,991,716		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2024.03.15		On 03.15 annually		1.76		10,800,000		-		10,800,000		(9,534)		10,790,466		Bullet repayment		Nil
Domestic unsecured bonds-113-2
-A		Taipei Fubon Commercial Bank Co., Ltd.		2024.05.17		On 05.17 annually		1.98		4,900,000		-		4,900,000		(3,576)		4,896,424		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2024.05.17		On 05.17 annually		2.10		6,600,000		-		6,600,000		(5,968)		6,594,032		Bullet repayment		Nil
Domestic unsecured bonds-114-1
-A		Taipei Fubon Commercial Bank Co., Ltd.		2025.03.28		On 03.28 annually		1.90		12,000,000		-		12,000,000		(10,891)		11,989,109		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2025.03.28		On 03.28 annually		2.05		7,200,000		-		7,200,000		(7,129)		7,192,871		Bullet repayment		Nil
Domestic unsecured bonds-114-2
-A		Taipei Fubon Commercial Bank Co., Ltd.		2025.06.02		On 06.02 annually		1.92		12,500,000		-		12,500,000		(11,551)		12,488,449		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2025.06.02		On 06.02 annually		2.05		1,600,000		-		1,600,000		(1,581)		1,598,419		Bullet repayment		Nil
Domestic unsecured bonds-114-3
-A		Taipei Fubon Commercial Bank Co., Ltd.		2025.07.09		On 07.09 annually		1.92		8,300,000		-		8,300,000		(7,844)		8,292,156		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2025.07.09		On 07.09 annually		2.05		4,000,000		-		4,000,000		(3,985)		3,996,015		Bullet repayment		Nil
Domestic unsecured bonds-114-4
-A		Taipei Fubon Commercial Bank Co., Ltd.		2025.09.18		On 09.18 annually		1.66		13,800,000		-		13,800,000		(13,372)		13,786,628		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2025.09.18		On 09.18 annually		1.73		4,000,000		-		4,000,000		(3,997)		3,996,003		Bullet repayment		Nil
Domestic unsecured bonds-114-5
-A		Taipei Fubon Commercial Bank Co., Ltd.		2025.11.20		On 11.20 annually		1.50		14,000,000		-		14,000,000		(14,320)		13,985,680		Bullet repayment		Nil
-B		Taipei Fubon Commercial Bank Co., Ltd.		2025.11.20		On 11.20 annually		1.53		3,000,000		-		3,000,000		(3,094)		2,996,906		Bullet repayment		Nil
-C		Taipei Fubon Commercial Bank Co., Ltd.		2025.11.20		On 11.20 annually		1.58		6,500,000		-		6,500,000		(6,728)		6,493,272		Bullet repayment		Nil
TOTAL										$ 569,788,000		$ 31,400,000		$ 538,388,000		$ (316,672)		538,071,328
Less: Current portion																		(61,940,126)
																		$ 476,131,202

- 88 -

STATEMENT 12

Taiwan Semiconductor Manufacturing Company Limited

STATEMENT OF LEASE LIABILITIES

DECEMBER 31, 2025

(In Thousands of New Taiwan Dollars)

						Discount		Balance,
Item		Description		Lease Term		Rate (%)		End of Year
Land		Mainly for the use of plants and offices		1 to 22 years		0.39~2.30		$ 31,051,868
Buildings		Mainly for the use of offices		1 to 12 years		0.40~2.04		2,457,301
Office equipment		For operation use		1 to 3 years		0.28~1.80		21,668
								33,530,837
Less: Current portion								(3,241,718)
Noncurrent portion								$ 30,289,119

- 89 -

STATEMENT 13

Taiwan Semiconductor Manufacturing Company Limited

STATEMENT OF NET REVENUE

FOR THE YEAR ENDED DECEMBER 31, 2025

(In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

Item		Shipments (Piece)(Note)		Amount
Wafer		14,833,949		$ 3,255,146,998
Other				529,241,762
Net revenue				$ 3,784,388,760

Note: 12-inch equivalent wafers.

- 90 -

STATEMENT 14

Taiwan Semiconductor Manufacturing Company Limited

STATEMENT OF COST OF REVENUE

FOR THE YEAR ENDED DECEMBER 31, 2025

(In Thousands of New Taiwan Dollars)

Item		Amount
Raw materials used
Balance, beginning of year		$ 44,017,395
Raw material purchased		90,912,827
Raw materials, end of year		(43,318,957)
Transferred to manufacturing or operating expenses		(23,891,976)
Others		(254,061)
Subtotal		67,465,228
Direct labor		32,733,556
Manufacturing expenses		1,335,140,462
Manufacturing cost		1,435,339,246
Work in process, beginning of year		178,296,363
Work in process purchased		65,949,003
Work in process, end of year		(170,000,320)
Transferred to manufacturing or operating expenses		(65,395,343)
Cost of finished goods		1,444,188,949
Finished goods, beginning of year		33,980,459
Finished goods purchased		113,982,630
Finished goods, end of year		(26,782,971)
Transferred to manufacturing or operating expenses		(32,866,260)
Scrapped		(477,609)
Subtotal		1,532,025,198
Others		32,287,869
Total		$ 1,564,313,067

- 91 -

STATEMENT 15

Taiwan Semiconductor Manufacturing Company Limited

STATEMENT OF OPERATING EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 2025

(In Thousands of New Taiwan Dollars)

Item		Research and Development Expenses		General and Administrative Expenses		Selling Expenses
Payroll and related expense		$ 98,093,854		$ 29,384,438		$ 5,926,506
Consumables		60,081,024		2,291,590		62
Depreciation expense		36,512,090		2,421,062		24,200
Repair and maintenance expense		13,431,843		4,785,914		5,231
Consulting expense		14,852		3,902,532		14,520
Management fees of the Science Park Administration		-		7,009,413		-
Commission		-		200,931		1,454,472
Others (Note)		28,887,048		18,033,234		446,580
Total		$ 237,020,711		$ 68,029,114		$ 7,871,571

Note: The amount of each item in others does not exceed 5% of the account balance.

- 92 -

STATEMENT 16

Taiwan Semiconductor Manufacturing Company Limited

STATEMENT OF LABOR, DEPRECIATION AND AMORTIZATION BY FUNCTION

FOR THE YEAR ENDED DECEMBER 31, 2025 AND 2024

(In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

		Year Ended December 31, 2025								Year Ended December 31, 2024
		Classified as Cost of Revenue		Classified as Operating Expenses		Classified as Other Operating Income and Expenses		Total		Classified as Cost of Revenue		Classified as Operating Expenses		Classified as Other Operating Income and Expenses		Total
Labor cost
Salary and bonus		$ 190,604,680		$ 124,173,907		$ -		$ 314,778,587		$ 138,658,016		$ 94,485,677		$ -		$ 233,143,693
Labor and health insurance		8,224,477		4,819,258		-		13,043,735		6,527,978		3,993,315		-		10,521,293
Pension		3,577,098		1,854,132		-		5,431,230		3,116,700		1,696,152		-		4,812,852
Board compensation		-		157,366		-		157,366		-		507,110		-		507,110
Others		4,697,091		2,400,135		-		7,097,226		3,853,797		2,075,869		-		5,929,666
		$ 207,103,346		$ 133,404,798		$ -		$ 340,508,144		$ 152,156,491		$ 102,758,123		$ -		$ 254,914,614
Depreciation		$ 574,475,240		$ 38,957,352		$ 4		$ 613,432,596		$ 590,881,553		$ 34,858,056		$ 7,814		$ 625,747,423
Amortization		$ 4,989,782		$ 2,994,470		$ -		$ 7,984,252		$ 6,320,646		$ 2,808,823		$ -		$ 9,129,469

Note 1: For the year of 2025 and 2024, the Company had average 76,916 and 70,037 employees, respectively, which included 9 non-employee directors for both years.

Note 2: Average labor cost for the years ended December 31, 2025 and 2024 were NT$4,425 thousand and NT$3,633 thousand, respectively.

Note 3: Average salary and bonus for the years ended December 31, 2025 and 2024 were NT$4,093 thousand and NT$3,329 thousand, respectively. The average salary and bonus increased by 22.95% year over year.

Note 4: The Company did not have supervisors for the years ended December 31, 2025 and 2024. Therefore, there was no compensation to the supervisor.

Note 5: The Company’s compensation policies: The Company’s employees are entitled to a comprehensive compensation and benefits program above the industry average. The compensation program includes a monthly salary, business

performance bonuses based on quarterly business results, a profit sharing bonus based on annual profits, and a subsidy based on Employee Stock Purchase Plan. The Company determines the amount of the business performance bonus

and profit sharing based on operating results and industry practice in the R.O.C.. The amount and distribution of the bonus and profit sharing are recommended by the Compensation and People Development Committee to the Board of

Directors for approval. Individual rewards are based on each employee’s job responsibility, contribution and performance.

Note 6: The total compensation paid to the executive officers is decided based on their job responsibility, contribution, company performance and projected future risks the Company will face. It is reviewed by the Compensation and People

Development Committee then submitted to the Board of Directors for approval.

Note 7: According to the Company’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 Company and the standards of the industry within the R.O.C. and overseas. The Articles of Incorporation also provide that the compensation to directors shall be no more than 0.3% of annual profits and directors who

also serve as executive officers of the Company are not entitled to receive compensation to directors. The distribution of compensation to directors shall be made in accordance with the Company’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

the other directors, as all independent directors also serve as members of the Audit and Risk Committee and the Compensation and People Development Committee and thus participate in the discussions as well as resolutions of related

committee meetings in accordance with the charter of each committee; and (3) the compensation for overseas independent directors may be higher than domestic independent directors.

FAQ

How did TSM (Taiwan Semiconductor) perform financially in 2025?

TSMC delivered significantly higher earnings in 2025. Net revenue reached NT$3,809,054,272 thousand, and income from operations was NT$1,936,091,677 thousand. Net income attributable to shareholders climbed to NT$1,717,882,627 thousand, with basic earnings per share rising to NT$66.26.

What were TSM’s 2025 profit margins under Taiwan-IFRS?

TSMC’s profitability improved notably in 2025. Gross profit was NT$2,281,293,979 thousand, representing a 60% gross margin versus 56% in 2024. Income from operations accounted for 51% of revenue, up from 46%, highlighting stronger operating efficiency at higher sales levels.

How strong was TSM’s cash flow and cash position at the end of 2025?

TSMC generated solid cash in 2025. Net cash from operating activities totaled NT$2,274,975,625 thousand. After intensive investing and financing cash flows, cash and cash equivalents increased to NT$2,767,856,402 thousand at December 31, 2025, from NT$2,127,627,043 thousand a year earlier.

How much did TSM spend on capital expenditures in 2025?

TSMC continued large-scale investment in its manufacturing base. In 2025 it acquired property, plant and equipment totaling NT$1,272,410,529 thousand, compared with NT$956,006,536 thousand in 2024. These outlays support capacity expansion and technology advancement across its global fab network.

What was TSM’s equity and leverage profile at year-end 2025?

TSMC’s balance sheet remained strong at December 31, 2025. Total equity reached NT$5,460,795,283 thousand, up from NT$4,323,575,865 thousand in 2024. Total liabilities were NT$2,472,228,595 thousand, representing 31% of total assets, indicating a conservative use of debt financing.

What dividends did TSMC distribute to shareholders in 2025?

TSMC continued returning cash to shareholders. In 2025, cash dividends recognized in equity appropriations totaled NT$531,618,438 thousand. Cash dividends paid, as reflected in financing cash flows, were NT$466,779,199 thousand, following NT$363,055,226 thousand of cash dividends paid in 2024.

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