Taiwan Cooperative Bank, Ltd. and Subsidiaries

Consolidated Financial Statements for the

Years Ended December 31, 2014 and 2013 and

Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORT

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The Board of Directors and the Stockholders

Taiwan Cooperative Bank, Ltd.

We have audited the accompanying consolidated balance sheets of Taiwan Cooperative Bank, Ltd. and its subsidiaries (collectively, the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements of Financial Institutions by Certified Public Accountants, the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants, and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Taiwan Cooperative Bank, Ltd. and its subsidiaries as of December 31, 2014 and 2013, and their consolidated financial performance and their consolidated cash flows for the years then ended, in conformity with the Regulations Governing the Preparation of Financial Reports by Public Banks, the Regulations Governing the Preparation of Financial Reports by Security Firms, International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretation of IFRS (IFRIC) and Interpretations of IAS (SIC) endorsed by the Financial Supervisory Commission of the Republic of China.


We have also audited the parent company only financial statements of Taiwan Cooperative Bank, Ltd. as of and for the years ended December 31, 2014 and 2013 and have issued an unqualified opinion in our report dated March 23, 2015.

March 23, 2015

Notice to Readers

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

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

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TAIWAN COOPERATIVE BANK, LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2014 AND 2013

(In Thousands of New Taiwan Dollars)

2014 / 2013
ASSETS / Amount / % / Amount / %
CASH AND CASH EQUIVALENTS (Notes 4, 6 and 35) / $ 44,118,605 / 2 / $ 38,414,812 / 1
DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS (Notes 4, 7, 35 and 36) / 682,506,761 / 23 / 705,109,511 / 24
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4, 8 and 35) / 43,669,323 / 2 / 41,638,773 / 2
SECURITIES PURCHASED UNDER RESELL AGREEMENTS (Notes 4, 9 and 35) / 1,851,763 / - / - / -
RECEIVABLES, NET (Notes 4, 10, 35, 36 and 42) / 13,113,295 / 1 / 14,163,506 / 1
CURRENT TAX ASSETS (Notes 4, 32 and 35) / 1,570,953 / - / 1,311,307 / -
DISCOUNTS AND LOANS, NET (Notes 4, 11, 35 and 36) / 1,860,345,887 / 64 / 1,905,323,210 / 65
AVAILABLE-FOR-SALE FINANCIAL ASSETS (Notes 4, 12 and 36) / 69,774,501 / 2 / 52,973,404 / 2
HELD-TO-MATURITY FINANCIAL ASSETS (Notes 4, 13 and 36) / 20,049,579 / 1 / 10,466,449 / -
INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD (Notes 4 and 14) / 115,905 / - / 106,127 / -
OTHER FINANCIAL ASSETS, NET (Notes 4, 15 and 36) / 123,253,666 / 4 / 105,758,143 / 4
PROPERTIES AND EQUIPMENT, NET (Notes 4 and 16) / 39,651,685 / 1 / 38,694,337 / 1
INVESTMENT PROPERTIES, NET (Notes 4 and 17) / 2,083,696 / - / 2,090,943 / -
INTANGIBLE ASSETS (Notes 4 and 18) / 3,695,854 / - / 3,728,060 / -
DEFERRED TAX ASSETS (Notes 4 and 32) / 1,074,891 / - / 1,094,684 / -
OTHER ASSETS, NET (Notes 4, 19 and 37) / 3,771,130 / - / 625,365 / -
TOTAL / $ 2,910,647,494 / 100 / $ 2,921,498,631 / 100
LIABILITIES AND EQUITY
DUE TO THE CENTRAL BANK AND OTHER BANKS (Notes 20 and 35) / $ 177,020,696 / 6 / $ 240,391,110 / 8
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4, 8 and 35) / 6,082,468 / - / 2,178,102 / -
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS (Notes 4, 8, 12, 13, 21 and 35) / 23,179,705 / 1 / 32,366,468 / 1
PAYABLES (Notes 22 and 35) / 41,744,226 / 2 / 36,100,395 / 1
CURRENT TAX LIABILITIES (Notes 4, 32 and 35) / 94,645 / - / 288,778 / -
DEPOSITS AND REMITTANCES (Notes 23 and 35) / 2,397,276,471 / 83 / 2,340,266,504 / 80
BANK DEBENTURES (Note 24) / 92,110,000 / 3 / 97,880,000 / 4
OTHER FINANCIAL LIABILITIES (Notes 25, 35 and 37) / 9,061,067 / - / 19,197,898 / 1
PROVISIONS (Notes 4, 26 and 27) / 8,829,110 / - / 8,546,352 / -
DEFERRED TAX LIABILITIES (Notes 4, 16 and 32) / 3,568,502 / - / 3,415,603 / -
OTHER LIABILITIES (Note 4) / 1,170,711 / - / 1,103,148 / -
Total liabilities / 2,760,137,601 / 95 / 2,781,734,358 / 95
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY
Capital stock
Common stock / 71,362,760 / 3 / 68,432,520 / 3
Capital surplus
Additional paid-in capital from share issuance in excess of par value / 38,627,359 / 1 / 35,257,584 / 1
From treasury stock transactions / 103,157 / - / 103,157 / -
Total capital surplus / 38,730,516 / 1 / 35,360,741 / 1
Retained earnings
Legal reserve / 22,548,376 / 1 / 20,141,758 / 1
Special reserve / 1,217,583 / - / 1,309,025 / -
Unappropriated earnings / 16,966,428 / - / 14,788,307 / -
Total retained earnings / 40,732,387 / 1 / 36,239,090 / 1
Other equity / (512,882 ) / - / (468,463 ) / -
Total equity attributable to owners of the Company / 150,312,781 / 5 / 139,563,888 / 5
NON-CONTROLLING INTEREST / 197,112 / - / 200,385 / -
Total equity / 150,509,893 / 5 / 139,764,273 / 5
TOTAL / $ 2,910,647,494 / 100 / $ 2,921,498,631 / 100

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

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TAIWAN COOPERATIVE BANK, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

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

Percentage Increase
2014 / 2013 / (Decrease)
Amount / % / Amount / % / %
INTEREST REVENUE (Notes 4, 28
and 35) / $ 50,720,752 / 128 / $ 47,055,185 / 142 / 8
INTEREST EXPENSE (Notes 4, 28
and 35) / (22,952,550 ) / (58 ) / (21,540,589 ) / (65 ) / 7
NET INTEREST / 27,768,202 / 70 / 25,514,596 / 77 / 9
NET REVENUES AND GAINS OTHER THAN INTEREST
Service fee income, net (Notes 4, 29,
35 and 42) / 5,558,893 / 14 / 4,716,942 / 14 / 18
Gains (losses) on financial assets and liabilities at fair value through profit or loss (Notes 4, 30 and 35) / 2,663,086 / 7 / (332,276 ) / (1 ) / 901
Realized gains on available-for-sale financial assets (Note 4) / 550,004 / 1 / 328,581 / 1 / 67
Foreign exchange gains (losses), net (Note 4) / (93,905 ) / - / 1,961,371 / 6 / (105 )
Reversal of impairment losses (impairment losses) on assets
(Notes 4, 13, 15 and 19) / (21,236 ) / - / 48,834 / - / (143 )
Share of gains of associates and joint ventures accounted for using the equity method (Notes 4 and 14) / 15,018 / - / 11,402 / - / 32
Gains on financial assets carried at cost, net (Note 4) / 252,294 / - / 260,061 / 1 / (3 )
Gains on disposal of collaterals assumed, net / - / - / 53,605 / - / (100 )
Gains on disposal of properties and equipment, net (Notes 4 and 35) / 3,106,619 / 8 / 240,939 / 1 / 1,189
Other noninterest gains (losses), net (Notes 35 and 42) / (35,950 ) / - / 461,948 / 1 / (108 )
Subtotal / 11,994,823 / 30 / 7,751,407 / 23 / 55
TOTAL NET REVENUES / 39,763,025 / 100 / 33,266,003 / 100 / 20

(Continued)


TAIWAN COOPERATIVE BANK, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

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

Percentage Increase
2014 / 2013 / (Decrease)
Amount / % / Amount / % / %
BAD-DEBT EXPENSES AND PROVISION FOR LOSSES ON GUARANTEES (Notes 4 and 11) / $ (6,248,353 ) / (16 ) / $ (3,237,123 ) / (10 ) / 93
OPERATING EXPENSES (Notes 4, 16, 17, 18, 27, 31 and 35)
Employee benefits / (14,657,194 ) / (37 ) / (14,354,190 ) / (43 ) / 2
Depreciation and amortization / (1,214,726 ) / (3 ) / (1,195,362 ) / (4 ) / 2
General and administrative / (5,965,347 ) / (15 ) / (5,063,989 ) / (15 ) / 18
Total operating expenses / (21,837,267 ) / (55 ) / (20,613,541 ) / (62 ) / 6
INCOME BEFORE INCOME TAX / 11,677,405 / 29 / 9,415,339 / 28 / 24
INCOME TAX EXPENSE (Notes 4 and 32) / (1,540,207 ) / (4 ) / (1,378,709 ) / (4 ) / 12
NET INCOME / 10,137,198 / 25 / 8,036,630 / 24 / 26
OTHER COMPREHENSIVE INCOME (LOSSES) (Notes 4, 14, 27 and 32)
Exchange differences on the translation of financial statements of foreign operations / 217,839 / 1 / 218,958 / 1 / (1 )
Unrealized losses on available-for-sale financial assets / (243,609 ) / (1 ) / (1,022,452 ) / (3 ) / (76 )
Actuarial gains (losses) arising from defined benefit plans / (34,190 ) / - / 328,295 / 1 / (110 )
Share of the comprehensive losses of associates and joint ventures accounted for using the equity method / (591 ) / - / - / - / -
Income tax attributable to other comprehensive income / (31,042 ) / - / (41,705 ) / - / (26 )
Other comprehensive income (losses) , net of income tax / (91,593 ) / - / (516,904 ) / (1 ) / (82 )
TOTAL COMPREHENSIVE INCOME / $ 10,045,605 / 25 / $ 7,519,726 / 23 / 34

(Continued)


TAIWAN COOPERATIVE BANK, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

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

Percentage Increase
2014 / 2013 / (Decrease)
Amount / % / Amount / % / %
NET INCOME ATTRIBUTABLE TO:
Owner of the Company / $ 10,127,487 / 25 / $ 8,022,060 / 24 / 26
Non-controlling interest / 9,711 / - / 14,570 / - / (33 )
$ 10,137,198 / 25 / $ 8,036,630 / 24 / 26
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owner of the Company / $ 10,048,878 / 25 / $ 7,492,507 / 23 / 34
Non-controlling interest / (3,273 ) / - / 27,219 / - / (112 )
$ 10,045,605 / 25 / $ 7,519,726 / 23 / 34
EARNINGS PER SHARE (NEW TAIWAN DOLLARS; Note 33)
Basic / $1.45 / $1.17

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

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TAIWAN COOPERATIVE BANK, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

(In Thousands of New Taiwan Dollars)

Equity Attributable to Owners of the Company
Other Equity
Exchange
Differences on the
Translation of / Unrealized
Financial / Gains (Losses) on
Capital Stock (Note 34) / Retained Earnings (Notes 4 and 34) / Statements of / Available-for-sale / Non-controlling
Shares / Capital Surplus / Unappropriated / Foreign Operations / Financial Assets / Interest
(In Thousands) / Common Stock / (Notes 4 and 34) / Legal Reserve / Special Reserve / Earnings / (Note 4) / (Note 4) / (Notes 4 and 34) / Total Equity
BALANCE, JANUARY 1, 2013 / 6,643,934 / $ 66,439,340 / $ 31,563,789 / $ 17,881,897 / $ 180,199 / $ 13,812,999 / $ (127,103 ) / $ 572,642 / $ 173,166 / $ 130,496,929
Appropriation of special reserve, January 1, 2013 / - / - / - / - / 1,132,019 / (1,132,019 ) / - / - / - / -
Reversal of special reserve / - / - / - / - / (3,193 ) / 3,193 / - / - / - / -
Appropriation of the 2012 earnings
Legal reserve / - / - / - / 2,259,861 / - / (2,259,861 ) / - / - / - / -
Cash dividends / - / - / - / - / - / (1,993,180 ) / - / - / - / (1,993,180 )
Stock dividends / 199,318 / 1,993,180 / - / - / - / (1,993,180 ) / - / - / - / -
Cash dividends received from holding shares of Taiwan Cooperative Financial Holding Company, Ltd. as a result of a share swap / - / - / 45,487 / - / - / - / - / - / - / 45,487
Disposal of shares of Taiwan Cooperative Financial Holding Company, Ltd. as a result a share swap / - / - / 3,751,465 / - / - / - / - / (56,154 ) / - / 3,695,311
Total comprehensive income
Net income for the year ended December 31, 2013 / - / - / - / - / - / 8,022,060 / - / - / 14,570 / 8,036,630
Other comprehensive losses for the year ended December 31, 2013 / - / - / - / - / - / 328,295 / 171,133 / (1,028,981 ) / 12,649 / (516,904 )
Total comprehensive income for the year ended December 31, 2013 / - / - / - / - / - / 8,350,355 / 171,133 / (1,028,981 ) / 27,219 / 7,519,726
BALANCE, DECEMBER 31, 2013 / 6,843,252 / 68,432,520 / 35,360,741 / 20,141,758 / 1,309,025 / 14,788,307 / 44,030 / (512,493 ) / 200,385 / 139,764,273
Reversal of special reverse / - / - / - / - / (91,442 ) / 91,442 / - / - / - / -
Appropriation of the 2013 earnings
Legal reserve / - / - / - / 2,406,618 / - / (2,406,618 ) / - / - / - / -
Cash dividends / - / - / - / - / - / (5,600,000 ) / - / - / - / (5,600,000 )
Capital increase in June 2014 / 200,000 / 2,000,000 / 2,300,000 / - / - / - / - / - / - / 4,300,000
Capital increase in December 2014 / 93,024 / 930,240 / 1,069,775 / - / - / - / - / - / - / 2,000,015
Total comprehensive income
Net income for the year ended December 31, 2014 / - / - / - / - / - / 10,127,487 / - / - / 9,711 / 10,137,198
Other comprehensive losses for the year ended December 31, 2014 / - / - / - / - / - / (34,190 ) / 191,583 / (236,002 ) / (12,984 ) / (91,593 )
Total comprehensive income for the year ended December 31, 2014 / - / - / - / - / - / 10,093,297 / 191,583 / (236,002 ) / (3,273 ) / 10,045,605
BALANCE, DECEMBER 31, 2014 / 7,136,276 / $ 71,362,760 / $ 38,730,516 / $ 22,548,376 / $ 1,217,583 / $ 16,966,428 / $ 235,613 / $ (748,495 ) / $ 197,112 / $ 150,509,893

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