GRI Index

Letter from the CSR Committee Chairperson

Index

Description

Report Contents or Explanation

Page

STRATEGY AND ANALYSIS

G4–1

Provide a statement from the most senior decision-maker of the organization (such as CEO, chair, or equivalent senior position) about the relevance of sustainability to the organization and the organization’s strategy for addressing sustainability

TSMC CSR Policy
Letter from the CSR Committee Chairperson

8
3

G4–2

Provide a description of key impacts, risks, and opportunities

Letter from the CSR Committee Chairperson

3

ORGANIZATIONAL PROFILE

G4–3

Report the name of the organization

About TSMC

6

G4–4

Report the primary brands, products, and services

About TSMC

6

G4–5

Report the location of the organization’s headquarters

About TSMC

6

G4–6

Report the number of countries where the organization operates, and names of countries where either the organization has significant operations or that are specifically relevant to the sustainability topics covered in the report

About TSMC

6

G4–7

Report the nature of ownership and legal form

About TSMC; Please refer to 2016 TSMC Annual Report (II): Financial Statements

6

G4–8

Report the markets served (including geographic breakdown, sectors served, and types of customers and beneficiaries)

About TSMC; Please refer to 2016 TSMC Annual Report

6

G4–9

Report the scale of the organization

Workforce Structure

Please refer to 2016 TSMC Annual Report

88

G4–10

Report the total number of employees by various categories

Workforce Structure
Right People with Shared Vision and Values

88
91

G4–11

Report the percentage of total employees covered by collective bargaining agreements

No employees in covered by collective bargaining agreements

G4–12

Describe the organization’s supply chain

Responsible Supply Chain

48

G4–13

Report any significant changes during the reporting period regarding the organization’s size, structure, ownership, or its supply chain

The capacity in 2016 increased 10% from 2015

G4–14

Report whether and how the precautionary approach or principle is addressed by the organization

Risk Management; or 2016 Form 20-F": Item 3. Key Information — Risk Factors

26

G4–15

List externally developed economic, environmental and social charters, principles, or other initiatives to which the organization subscribes or which it endorses

TSMC adopts the EICC Code of Conduct

TSMC supports the "responsible sourcing" practice advocated by the Electronic Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI)

99

G4–16

List memberships of associations (such as industry associations) and national or international advocacy organizations

In addition to pursuing our own business sustainability, TSMC participates in or supports a variety of trade and industry associations as well as public-policy related nonprofit entities to facilitate exchange with other companies and industries and to address key public policy issues. In 2016, the total spending for membership dues and monetary contributions is NT$36,296,334 (which is about 0.00383% of our revenue in the same year). Here is a non-exhaustive list of these associations and entities:

- Asian Corporate Governance Association
- Electronic Industry Citizenship Coalition
- Semiconductor Industry Association
- Taiwan Semiconductor Industry Association
- The Third Wednesday Club
- Chinese National Association of Industry and Commerce, Taiwan
- The Allied Association for Science Park Industries
- Taiwan Association for Trade Secrets Protection
- Cross-Strait CEO Summit
- Business Council for Sustainable Development of Taiwan
- Taiwan Carbon Capture Storage and Utilization Association
-
Academia-Industry Consortium for Southern Taiwan Science Park
- Taiwan IC Industry and Academia Research Alliance
- Taipei Forum Foundation
- Taiwan Institute for Sustainable Energy
- Epoch Foundation
- Institute for Information Industry

IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES

G4–17

List all entities included in the organization’s consolidated financial statements or equivalent documents

Materiality Analysis and Stakeholder Communication

11

G4–18

Explain the process for defining the report content and the Aspect Boundaries. Explain how the organization has implemented the Reporting Principles for Defining Report Content

Materiality Analysis and Stakeholder Communication

11

G4–19

List all the material Aspects identified in the process for defining report content

Materiality Analysis and Stakeholder Communication

11

G4–20

For each material Aspect, report the Aspect Boundary within the organization, report any specific limitation regarding the Aspect Boundary within the organization

Materiality Analysis and Stakeholder Communication

11

G4–21

For each material Aspect, report the Aspect Boundary outside the organization, report any specific limitation regarding the Aspect Boundary outside the organization

Materiality Analysis and Stakeholder Communication

11

G4–22

Report the effect of any restatements of information provided in previous reports, and the reasons for such restatements

There are no restatements of information.

G4–23

Report significant changes from previous reporting periods in the Scope and Aspect Boundaries

No significant changes

STAKEHOLDER ENGAGEMENT

G4–24

Provide a list of stakeholder groups engaged by the organization

Materiality Analysis and Stakeholder Communication

11

G4–25

Report the basis for identification and selection of stakeholders with whom to engage

Materiality Analysis and Stakeholder Communication

11

G4–26

Report the organization’s approach to stakeholder engagement, including frequency of engagement by type and by stakeholder group, and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process

Materiality Analysis and Stakeholder Communication

11

G4–27

Report key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics and concerns, including through its reporting. Report the stakeholder groups that raised each of the key topics and concerns

Materiality Analysis and Stakeholder Communication

11

REPORT PROFILE

G4–28

Reporting period (such as fiscal or calendar year) for information provided

About This Report

129

G4–29

Date of most recent previous report (if any)

About This Report

129

G4–30

Reporting cycle (such as annual, biennial)

About This Report

129

G4–31

Provide the contact point for questions regarding the report or its contents

About This Report

129

G4–32

Report the "in accordance" option the organization has chosen, the GRI Content Index for the chosen option, the reference to the External Assurance Report, if the report has been externally assured

About This Report: Report Assurance

129

G4–33

Report the organization’s policy and current practice with regard to seeking external assurance for the report

About This Report: Report Assurance

129

GOVERNANCE

G4–34

Report the governance structure of the organization, including committees of the highest governance body. Identify any committees responsible for decision-making on economic, environmental and social impacts

Governance Structure
CSR Committee

20
10

G4–35

Report the process for delegating authority for economic, environmental and social topics from the highest governance body to senior executives and other employees

Governance Structure
Board of Directors/Board Responsibilities
CSR Committee

20
20
10

G4–36

Report whether the organization has appointed an executive-level position or positions with responsibility for economic, environmental and social topics, and whether post holders report directly to the highest governance body

Governance Structure
Board of Directors/Board Responsibilities
CSR Committee

20
20
10

G4–37

Report processes for consultation between stakeholders and the highest governance body on economic, environmental and social topics. If consultation is delegated, describe to whom and any feedback processes to the highest governance body

Materiality Analysis and Stakeholder Communication

11

G4–38

Report the composition of the highest governance body and its committees

Board of Directors/Board Responsibilities

TSMC's Board of Directors consists of distinguished members with a great breadth of experience as world-class business leaders or professionals. All of them have management experience and competency in economic, environmental and social topics

20



G4–39

Report whether the Chair of the highest governance body is also an executive officer (and, if so, his or her function within the organization’s management and the reasons for this arrangement)

No, the Chair of the highest governance body is not an executive officer

G4–40

Report the nomination and selection processes for the highest governance body and its committees, and the criteria used for nominating and selecting highest governance body members

Board of Directors/Selection and Election of Directors

TSMC's Board of Directors consists of distinguished members with a great breadth of experience as world-class business leaders or professionals. All of them have management experience and competency in economic, environmental and social topics

21



G4–41

Report processes for the highest governance body to ensure conflicts of interest are avoided and managed. Report whether conflicts of interest are disclosed to stakeholders

The avoidance of conflicts of interests is governed by several corporate processes. First, any director or executive officer who, for him/herself or on behalf of another, wishes to engage in any business activity that overlaps with TSMC’s business must obtain the prior approval of our shareholders’ meeting or Board of Directors respectively in accordance with relevant laws. Second, each board member and executive officer must complete an annual declaration on related party transactions which is reviewed by our Audit Committee. Third, we are subject to strenuous reporting requirements on reporting any related party transactions under both R.O.C. and U.S. security rules

Please refer to 2016 TSMC Annual Report:
2.4.1 Information Regarding Board Members
4.1.4 Major Shareholders
4.1.8 Related Party Relationship among Our 10 Largest Shareholders
5.3.4 Raw Materials and Supply Chain Management-Suppliers Accounted for at Least 10% of Annual Consolidated Net
Procurement
5.4 Customer Trust-Customers that Accounted for at Least 10% of Annual Consolidated Net Revenue
8.1 Subsidiaries

Please refer to Consolidated Financial Statements for 2016:
Note 44: Additional Disclosures
Note 44: Additional Disclosures - Table 6 Total purchases from or sales to related parties of at least NT$100 million or 20% of
the paid-in capital)

G4–42

Report the highest governance body’s and senior executives’ roles in the development, approval, and updating of the organization’s purpose, value or mission statements, strategies, policies, and goals related to economic, environmental and social impacts

Board of Directors/Board Responsibilities
Corporate Social Responsibility Policy
CSR Matrix

Board of Directors annually reviews CSR report which includes economic, environmental and social topics, in addition, they also review the annual plan and the donations of the TSMC Education and Culture Foundation

TSMC's Board of Directors consists of distinguished members with a great breadth of experience as world-class business leaders or professionals. All of them have management experience and competency in economic, environmental and social topics

The "Corporate Social Responsibility Policy" and "CSR Matrix" set by Chairman Dr. Morris Chang clearly defines the scope of TSMC's corporate social responsibility

20
8
9

G4–43

Report the measures taken to develop and enhance the highest governance body’s collective knowledge of economic, environmental and social topics

Please refer to 2016 TSMC Annual Report:
3. Corporate Governance "Continuing Education/Training of Directors" and "Continuing Education/Training of Management"
in 2016

Through quarterly management report and annually CSR report to develop and enhance the Board of Directors’ collective knowledge of economic, environmental and social topics

G4–44

Report the processes for evaluation of the highest governance body’s performance with respect to governance of economic, environmental and social topics. Report whether such evaluation is independent or not, and its frequency. Report whether such evaluation is a self-assessment. Report actions taken in response to evaluation of the highest governance body’s performance with respect to governance of economic, environmental and social topics, including, as a minimum, changes in membership and organizational practice

Please refer to 2016 TSMC Annual Report:
3.4 Taiwan Corporate Governance Implementation as Required by Taiwan Financial Supervisory Commission

G4–45

Report the highest governance body’s role in the identification and management of economic, environmental and social impacts, risks, and opportunities. Include the highest governance body’s role in the implementation of due diligence processes. Report whether stakeholder consultation is used to support the highest governance body’s identification and management of economic, environmental and social impacts, risks, and opportunities

Board of Directors
Risk Management

Please refer to 2016 TSMC Annual Report:
3.4 Taiwan Corporate Governance Implementation as Required by Taiwan Financial Supervisory Commission
6.3 Risk Management

20
26



G4–46

Report the highest governance body’s role in reviewing the effectiveness of the organization’s risk management processes for economic, environmental and social topics

Board of Directors
Risk Management

Please refer to 2016 TSMC Annual Report:
6.3 Risk Management

20
26


G4–47

Report the frequency of the highest governance body’s review of economic, environmental and social impacts, risks, and opportunities

Board of Directors
Risk Management

Please refer to 2016 TSMC Annual Report:
3. Corporate Governance

20
26


G4–48

Report the highest committee or position that formally reviews and approves the organization’s sustainability report and ensures that all material aspects are covered

This report is reviewed and approved by the Company's functional heads and Chairperson of the Corporate Social Responsibility Committee (Chief Financial Officer)

G4–49

Report the process for communicating critical concerns to the highest governance body

CSR Committee

10

G4–50

Report the nature and total number of critical concerns that were communicated to the highest governance body and the mechanism(s) used to address and resolve them

In 2016, our CSR committee reported CSR related topics to the BOD, including EICC-related activities, green manufacturing, charity activities, and 2017 CSR focuses. We review and manage the progress of related programs periodically through our CSR committee quarterly meeting

G4–51

Report the remuneration policies for the highest governance body and senior executives. Report how performance criteria in the remuneration policy relate to the highest governance body’s and senior executives’ economic, environmental and social objectives

Please refer to 2016 TSMC Annual Report:
2.4.2 Remuneration Paid to Directors
2.5.2 Compensation Paid to President & Co-CEO and Vice Presidents
2.5.3 Employees' Profit Sharing Bonus Paid to Management Team
5.5.4 Compensation

G4–52

Report the process for determining remuneration. Report whether remuneration consultants are involved in determining remuneration and whether they are independent of management. Report any other relationships which the remuneration consultants have with the organization

Please refer to 2016 TSMC Annual Report:
3.2.2 Compensation Committee
3.2.3 Director and Committees Members' Attendance

G4–53

Report how stakeholders’ views are sought and taken into account regarding remuneration, including the results of votes on remuneration policies and proposals, if applicable

Please refer to 2016 TSMC Annual Report:
3.2.2 Compensation Committee

G4–54

Report the ratio of the annual total compensation for the organization’s highest-paid individual in each country of significant operations to the median annual total compensation for all employees (excluding the highest-paid individual) in the same country

We do not publicly disclose this confidential information

G4–55

Report the ratio of percentage increase in annual total compensation for the organization’s highest-paid individual in each country of significant operations to the median percentage increase in annual total compensation for all employees (excluding the highest-paid individual) in the same country

We do not publicly disclose this confidential information

ETHICS AND INTEGRITY

G4–56

Describe the organization’s values, principles, standards and norms of behavior such as codes of conduct and codes of ethics

Code of Conduct and Anti-corruption

22

G4–57

Report the internal and external mechanisms for seeking advice on ethical and lawful behavior, and matters related to organizational integrity, such as helplines or advice lines

Code of Conduct and Anti-corruption

Please refer to
2016 TSMC Annual Report:
3.5 Code of Ethics and Business Conduct
5.5.5 Employee Engagement - Employee Communication

22



G4–58

Report the internal and external mechanisms for reporting concerns about unethical or unlawful behavior, and matters related to organizational integrity, such as escalation through line management, whistleblowing mechanisms or hotlines

Code of Conduct and Anti-corruption

Please refer to
2016 TSMC Annual Report:
3.5 Code of Ethics and Business Conduct
5.5.5 Employee Engagement - Employee Communication

22



CATEGORY: ECONOMIC

ASPECT: ECONOMIC PERFORMANCE

G4–DMA

Generic Disclosures on Management Approach

Financial Performance

30

G4–EC1

Direct economic value generated and distributed

Financial Performance

30

G4–EC2

Financial implications and other risks and opportunities for the organization's activities due to climate change

Risk Management
Climate Change and Energy Management

26
60

G4–EC3

Coverage of the organization's defined benefit plan obligations

Inclusive Workplace - Compensation and Benefit

93

G4–EC4

Financial assistance received from government

Financial Performance

30

ASPECT: INDIRECT ECONOMIC IMPACTS

G4–EC7

Development and impact of infrastructure investments and services supported

Social Participation

114

G4–EC8

Significant indirect economic impacts, including the extent of impacts

Please refer to 2016 TSMC Annual Report:
6.3.3 Operational Risks (Risks Associated with Purchase Concentration);

Social Participation


114

ASPECT: PROCUREMENT PRACTICES

G4–EC9

Proportion of spending on local suppliers at significant locations of operation

Responsible Supply Chain

48

CATEGORY: ENVIRONMENTAL

G4–DMA

Generic Disclosures on Management Approach

Green Manufacturing

59

ASPECT: ENERGY

G4–DMA

Generic Disclosures on Management Approach

Green Manufacturing
Climate Change and Energy Management

59
60

G4–EN3

Energy consumption within the organization

Climate Change Mitigation: Energy Consumption

63

G4–EN4

Energy consumption outside of the organization

Climate Change Mitigation: Greenhouse Gas Emission Inventory - TSMC Scope 3 GHG emissions

63

G4–EN5

Energy intensity

Climate Change Mitigation: Energy Consumption

63

G4–EN6

Reduction of energy consumption

Climate Change Mitigation: Greenhouse Gas Emissions Reduction: Improving Energy Efficiency and Reducing Indirect Emission

66

G4–EN7

Reductions in energy requirements of products and services

Green Products

40

ASPECT: WATER

G4–DMA

Generic Disclosures on Management Approach

Green Manufacturing
Water Resource Management

59
70

G4–EN8

Total water withdrawal by source

Water Resource Management: Water Source Management

71

G4–EN9

Water sources significantly affected by withdrawal of water

Our operations are compliant with the Environmental Impact Assessment requirements of the Science Parks. There are no significant effects to water sources by withdrawal of water

G4–EN10

Percentage and total volume of water recycled and reused

Water Resource Management: Water Recycling

72

ASPECT: EMISSIONS

G4–DMA

Generic Disclosures on Management Approach

Green Manufacturing
Climate Change and Energy Management

59
60

G4–EN15

Direct greenhouse gas (GHG) emissions (Scope 1)

Climate Change Mitigation: Greenhouse Gas Emission Inventory

62

G4–EN16

Energy indirect greenhouse gas (GHG) emissions (Scope 2)

Climate Change Mitigation: Greenhouse Gas Emission Inventory

62

G4–EN17

Other indirect greenhouse gas (GHG) emissions (Scope 3)

Climate Change Mitigation: Greenhouse Gas Emission Inventory

62

G4–EN18

Greenhouse gas (GHG) emissions intensity

Climate Change Mitigation: Greenhouse Gas Emission Inventory

62

G4–EN19

Reduction of greenhouse gas (GHG) emissions

Climate Change Mitigation: Greenhouse Gas Emissions Reduction

65

G4–EN20

Emissions of ozone-depleting substances (ODS)

TSMC doesn't use Montreal Protocol Class I & II ODS

G4–EN21

NOX, SOX, and other significant air emissions

Air Pollution Control

Air emissions in 2016, VOC: 162.24 metric tons, NOX: 53.86 metric tons, SOX: 29.3 metric tons

84

ASPECT: EFFLUENTS AND WASTE

G4–DMA

Generic Disclosures on Management Approach

Green Manufacturing
Water Resource Management

59
70

G4–EN22

Total water discharge by quality and destination

Green Manufacturing
Water Resource Management

59
70

G4–EN23

Total weight of waste by type and disposal method

Green Manufacturing
Water Resource Management

59
70

G4–EN24

Total number and volume of significant spills

There were no significant spills in all TSMC fabs in 2016

G4–EN25

Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally

There were no imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII in 2016

G4–EN26

Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the organization's discharges of water and runoff

TSMC's treated wastewater is discharged to the Science Park wastewater treatment plant, and there is no significant environmental impact

ASPECT: PRODUCTS AND SERVICES

G4–EN27

Extent of impact mitigation of environmental impacts of products and services

Green Products

40

G4–EN28

Percentage of products sold and their packaging materials that are reclaimed by category

TSMC uses recyclable plastic and paper as packing materials for shipping products. TSMC recycles wafer product packing materials including paper box, cushion and wafer box from products shipped to customers and testing and assembly facilities for reuse after cleaning. Packing materials from raw wafers are also reused in product shipping. These measures have reduced both packing material consumption and waste generation. In 2016, we recycled about 92,607 sets of 12-inch waferbox (FOSB) from customers and assembly subcontractors, which is about 24% of our 12-wafer shipping quantity, increased 2% compared to 2015

ASPECT: COMPLIANCE

G4–DMA

Generic Disclosures on Management Approach

Governance and Business

19

G4–EN29

Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations

Please refer to G4-SO8 in this table

150

ASPECT: OVERALL

G4–EN31

Total environmental protection expenditures and investments by type

Please refer to "Environmental Accounting" in 2016 TSMC Annual Report page 124-125 for environmental cost and benefit

ASPECT: SUPPLIER ENVIRONMENTAL ASSESSMENT

G4–DMA

Generic Disclosures on Management Approach

Responsible Supply Chain

48

G4–EN32

Percentage of new suppliers that were screened using environmental criteria

All suppliers are required to sign an agreement and agree to be bound by TSMC's Supplier Code of Conduct before they can do business with TSMC

G4–EN33

Significant actual and potential negative environmental impacts in the supply chain and actions taken

Supplier Sustainability Management

50

CATEGORY: SOCIAL

SUB-CATEGORY: LABOR PRACTICES AND DECENT WORK

ASPECT: EMPLOYMENT

G4–DMA

Generic Disclosures on Management Approach

Talent Recruitment

91

G4–LA1

Total number and rates of new employee hires and employee turnover by age group, gender and region

Right People with Shared Vision and Values
Employee Turnover Rate

91
95

G4–LA2

Benefits provided to full-time employees that are not provided to temporary or part-time employees, by significant locations of operation

Compensation and Benefit

93

G4–LA3

Return to work and retention rates after parental leave, by gender

Benefits Program Exceeds Statutes

94

ASPECT: LABOR/MANAGEMENT RELATIONS

G4–DMA

Generic Disclosures on Management Approach

Internal Communication Channels for Employees

101

G4–LA4

Minimum notice periods regarding operational changes, including whether these are specified in collective agreements

TSMC does not have collective agreements.

ASPECT: OCCUPATIONAL HEALTH AND SAFETY

G4–DMA

Generic Disclosures on Management Approach

Occupational Safety and Health

102

G4–LA5

Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programs

Percentage of total workforce represented in our Safety and Health Committee
- Taiwan Fabs: 54%
- TSMC China: 4%
- WaferTech: 91%

G4–LA6

Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender

Occupational Safety and Health: Disabling Injuries Statistics

104

G4–LA7

Workers with high incidence or high risk of diseases related to their occupation

TSMC's critical health risk operations include operations involving noise, ion-radiation, lead, dimethylformamide, n-hexane, arsenic, manganese and its compounds, dust, chromic acid and its salts, nickel and its compounds, mercury and its inorganic compounds. Fab ISEPs report workers engaged in related operations for special annual health exams and categorized health management if necessary

For high risk groups, such as those at risk for work-induced cerebral and cardiovascular diseases, ergonomic hazards, and maternal health, TSMC institutes hierarchical management measures in order to minimize or eliminate the risks.

G4–LA8

Health and safety topics covered in formal agreements with trade unions

TSMC does not have health and safety topics covered in formal agreements with trade unions

ASPECT: TRAINING AND EDUCATION

G4–DMA

Generic Disclosures on Management Approach

Talent Development
Learning and Development
People Development

96
97
98

G4–LA9

Average hours of training per year per employee by gender, and by employee category

Learning and Development

97

G4–LA10

Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings

Learning and Development
People Development

The Company provides programs for upgrading employees' skills and facilitating continued employability. There is no related transition assistant programs for career endings resulting from retirement or termination of employment

97
98


G4–LA11

Percentage of employees receiving regular performance and career development reviews, by gender and by employee category

Learning and Development
People Development

The identification of this indicator is "Percentage of employees receiving regular performance and career development reviews, by gender and by employee category. TSMC's implementation rate of Performance Management and Development is 100%, therefore the Company discloses further training and development indicators to respond to the purpose of this indicator (i.e. training hours in each category - manager/indirect labor/direct labor, development effectiveness and internal job opening fulfilled by employees)

97
98





ASPECT: SUPPLIER ASSESSMENT FOR LABOR PRACTICES

G4–DMA

Generic Disclosures on Management Approach

Responsible Supply Chain

48

G4–LA14

Percentage of new suppliers that were screened using labor practices criteria

Responsible Supply Chain

All suppliers are required to sign an agreement and agree to be bound by TSMC's Supplier Code of Conduct before they can do business with TSMC

48


G4–LA15

Significant actual and potential negative impacts for labor practices in the supply chain and actions taken

Responsible Supply Chain

TSMC follows through defined risk assessment, audit, and gap closure process

48

ASPECT: SUPPLIER HUMAN RIGHTS ASSESSMENT

G4–DMA

Generic Disclosures on Management Approach

Responsible Supply Chain

48

G4–HR10

Percentage of new suppliers that were screened using human rights criteria

Responsible Supply Chain

All suppliers are required to sign an agreement and agree to be bound by TSMC's Supplier Code of Conduct before they could do business with TSMC

48


G4–HR11

Significant actual and potential negative human rights impacts in the supply chain and actions taken

Responsible Supply Chain

TSMC follows through defined risk assessment, audit, and gap closure process

48

ASPECT: ANTI-CORRUPTION

G4–DMA

Generic Disclosures on Management Approach

Code of Conduct and Anti-corruption

22

G4–SO3

Total number and percentage of operations assessed for risks related to corruption and the significant risks identified

TSMC assesses anti-corruption risk based on function rather than geographical region. Our assessment approach includes the following:

1. A task force, including the Legal, Internal Audit, and Procurement departments, is organized to engage an independent third party to perform an anonymous annual supplier survey in the third quarter each year to assess the ethical climate corporation-wide

2. Internal Audit department interviews top management in the fourth quarter each year to collect/assess potential risks, including anti-corruption risks

3. All divisions perform a Control Self Assessment (CSA) annually to assess risks and the effectiveness of controls, including awareness of and compliance with the business code of conduct

4. The TSMC external and internal websites provide links to an ombudsman system to investigate reported cases related to irregularities or corruption

Based on 2016's supplier survey, interviews with top management, CSA Reports received from each division and a review of the complaints received through the ombudsman system and the results of investigations conducted accordingly, the corruption risk is appropriately controlled and no significant corruption risk was identified

Please refer to 2016 TSMC Annual Report:
3.5 Code of Ethics and Business Conduct
3.6 Regulatory Compliance

G4–SO4

Communication and training on anti-corruption policies and procedures

Code of Conduct and Anti-corruption
2016 Regulatory Compliance Training and Promotion

Please refer to
2016 TSMC Annual Report:
3.5 Code of Ethics and Business Conduct
3.6 Regulatory Compliance

22
25



G4–SO5

Confirmed incidents of corruption and actions taken

Whistleblowing

Please refer to
2016 TSMC Annual Report:
3.5 Code of Ethics and Business Conduct

23


ASPECT: PUBLIC POLICY

G4–SO6

Total value of political contributions by country and recipient/beneficiary

TSMC is prohibited under Taiwan law from making political contributions as the majority of our investors are foreign investors, and TSMC has fully complied with this law. TSMC has consistently remained politically neutral, but encourages all of its employees to fulfill their duties as citizens

ASPECT: ANTI-COMPETITIVE BEHAVIOR

G4–SO7

Total number of legal actions for anti-competitive behavior, anti-trust, and monopoly practices and their outcomes

The Company had no legal actions pending or completed during the reporting period regarding anti-competitive behavior and violations of anti-trust and monopoly legislation

ASPECT: COMPLIANCE

G4–DMA

Generic Disclosures on Management Approach

Regulatory Compliance

23

G4–SO8

Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations

In 2016 and as of the Date of the 2016 Annual Report, the Company complied with the Taiwan Company Law, Securities Trading Act and relevant labor laws and regulations. The competent authorities levied fines totaling NT$166,000 for three violations of environmental and safety laws: (1) After the magnitude 6.4 earthquake which struck southern Taiwan on February 6, 2016, one of our employees was injured during the assessment of the damage caused. The Company has further strengthened relevant safety measures, and revised the internal rule to enhance environmental checks conducted after earthquakes; (2) Our vendors did not take effective measures to suppress dust at our construction site. The vendors have taken corrective action measures and increased relevant supervisory and execution professionals per our request. We also increased our own supervision over this site; (3) The Company did not appropriately report the non-production of a specific type of non-hazardous waste. We submitted our report immediately upon notification from the competent authority and enhanced the inspection process for future reporting

ASPECT: SUPPLIER ASSESSMENT FOR IMPACTS ON SOCIETY

G4–DMA

Generic Disclosures on Management Approach

Responsible Supply Chain

48

G4–SO9

Percentage of new suppliers that were screened using criteria for impacts on society

Responsible Supply Chain

All suppliers are required to sign an agreement and agree to be bound by TSMC's Supplier Code of Conduct before they can do business with TSMC

48


G4–SO10

Significant actual and potential negative impacts on society in the supply chain and actions taken

Responsible Supply Chain

TSMC follows through defined risk assessment, audit, and gap closure process

48

ASPECT: PRODUCT AND SERVICE LABELING

G4–PR3

Type of product and service information required by the organization's procedures for product and service information and labeling, and percentage of significant product and service categories subject to such information requirements

TSMC provides customers product composition information upon requests

G4–PR4

Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, by type of outcomes

The Company had no incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, by type of outcomes

G4–PR5

Results of surveys measuring customer satisfaction

Customer Service

45

ASPECT: COMPLIANCE

G4–DMA

Generic Disclosures on Management Approach

Regulatory Compliance

23

G4–PR9

Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services

We don't have any significant fines for non-compliance with laws and regulations concerning the provision and use of products and services in 2016