Taiwan Semiconductor Manufacturing : TSMC Board of Directors approved the amendments to the 2022 employee restricted stock awards

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Provided by: Taiwan Semiconductor Manufacturing Co., Ltd.
SEQ_NO	1	Date of announcement	2022/04/12	Time of announcement	17:08:23
Subject	TSMC Board of Directors approved the amendments to the 2022 employee restricted stock awards
Date of events	2022/04/12	To which item it meets	paragraph 11
Statement	1.Date of the board of directors resolution:2022/04/12 2.Expected issue price:Grants will be made free of charge. 3.Expected total amount (shares) of issuance: The number of shares to be issued will not exceed 3,065 thousand common shares, with a par value of NT$10 per share. The actual number of shares to be issued will be resolved by the Board of Directors after the issuance of employee restricted stock awards ("RSAs") is approved at the shareholders' meeting and by the competent authority. 4.Vesting conditions: -The RSAs granted to an employee can only be vested if (1) the employee remains employed by the Company or the Company's subsidiaries on the last date of each vesting period; (2) during the vesting period, the employee may not breach any agreement with the Company or the Company's subsidiaries or violate the Company's or the Company's subsidiaries' work rules; and (3) certain employee performance metrics and the Company's business performance metrics are met, as detailed in the Employee Restricted Stock Awards Rules. -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, as detailed in the following points. -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 (see below) 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 Committee's 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: Above the Index by X percentage points: ratio of shares to be vested will be 50% + X * 2.5%, with the maximum of 100%. Equal to the Index: ratio of shares to be vested will be 50%. Below the Index by X percentage points: ratio of shares to be vested will be 50% - X * 2.5%, with the minimum of 0%. -For eligible employees who are not executive officers of the Company and the Company's subsidiaries: The number of RSAs to be vested in each year will be calculated in accordance with the below criteria based on the Company's audited consolidated financial statements for the year prior to the vesting year. The number of shares so calculated should be rounded down to the nearest integral. Revenue Growth (one-third weight): Threshold 10%, Target 15%; Gross Margin (one-third weight): Threshold 50%, Target 53%; Return on Equity (one-third weight): Threshold 20%, Target 25%; Ratio of shares to be vested: below Threshold: 0%, equal to Threshold: 50%, equal to or above Target: 100%, between Threshold and Target: as calculated by interpolation method 5.Measures to be taken when employees fail to meet the vesting conditions or in the event of inheritance: Where an employee fails to meet the vesting conditions, the Company will reclaim the granted RSAs and cancel the same at no extra cost to the Company; for exceptional events, including but not limited to inheritance, the Company will take measures as set forth in the Employee Restricted Stock Awards Rules. 6.Other issuance criteria: As set forth in the Employee Restricted Stock Awards Rules. 7.Qualification criteria for employees: (1) Only the Company's full-time executive officers or the Company's and the Company's subsidiaries' selected critical talents who are employed as of the date of the granting of the RSAs and who meet certain performance requirements are eligible for this incentive plan. Eligible employees must also be those who (i) have a significant influence on the Company's or the Company's subsidiaries' operational decisions or (ii) are the Company's or the Company's subsidiaries' selected critical talents for its future core technologies and strategy development. (2) The number of shares granted to eligible employees will be determined by Chairman and CEO and approved by the Compensation Committee and the Board of Directors by reference to the Company's business performance and the employee's job grade, performance, and other factors as deemed appropriate. 8.The necessary reason of the current issuance of RSA: To attract and retain corporate executives and critical talents and to link their compensation with shareholders' interests and ESG achievements. 9.Calculated expense amount: Based on the measurement specified in vesting conditions, the total expenses are preliminarily estimated at approximately NT$1,230 million which are estimated at approximately NT$728 million, NT$358 million, NT$127 million and NT$17 million from 2023 to 2026 respectively, assuming that the RSAs will be issued at the beginning of March 2023. 10.Dilution of the Company's earnings per share (EPS): Based on the Company's outstanding shares, the potential impact from above mentioned expenses to the Company's EPS is preliminarily estimated at approximately NT$0.0201, NT$0.0099, NT$0.0035, and NT$0.0005 from 2023 to 2026 respectively. The potential dilution of the Company's EPS is minimal; therefore, there is no material impact on shareholders' interest. 11.Other matters affecting shareholder's equity: The Company plans to offset dilution from the increase of outstanding shares by conducting a share buyback program, which will be proposed to the Board of Directors for approval separately. 12.Restrictions before employees meet the vesting conditions once the RSA are received or subscribed for: During each vesting period, no employees 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. Other related matters are as set forth in the Employee Restricted Stock Awards Rules. 13.Other important terms and conditions (including stock trust custody, etc.): Granted RSAs will be deposited in a stock trust custody account. 14.Any other matters that need to be specified: (1) Please refer to the announcement disclosed on 2022/02/15 for the 2022 employee restricted stock awards before the amendments. (2)If any revision or adjustment has to be made due to any instruction of the competent authority or amendment to the laws and regulations, it is proposed that the Annual Shareholders' Meeting authorize the Board of Directors or the person authorized by the Board of Directors to handle all relevant matters regarding the granting of the RSAs.