Taiwan Mobile Co., Ltd. - Annual Report 2014

Taiwan Mobile Co., Ltd. and Subsidiaries Consolidated Financial Statements for the Years Ended December 31, 2014 and 2013, and Independent Auditors’ Report

ABCD

Independent Auditors’ Report

The Board of Directors and Shareholders Taiwan Mobile Co., Ltd.

We have audited the accompanying consolidated balance sheets of Taiwan Mobile Co., Ltd. and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of comprehensive income, changes in equity, and cash flows for the years ended December 31, 2014 and 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report 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 by Certified Public Accountants” and auditing standards generally accepted in the Republic of China. Those regulations and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall 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 Taiwan Mobile Co., Ltd. and subsidiaries as of December 31, 2014 and 2013, and the consolidated results of their operations and their consolidated cash flows for the years ended December 31, 2014 and 2013, in conformity with the “Guidelines Governing the Preparation of Financial Reports by Securities Issuers” and with the IFRSs, IASs, IFRIC Interpretations and SIC Interpretations endorsed by the Financial Supervisory Commission.

We have also audited the standalone balance sheets of Taiwan Mobile Co., Ltd. as of December 31, 2014 and 2013, and the related statements of comprehensive income, changes in equity, and cash flows for the years ended December 31, 2014 and 2013, on which we have issued an unqualified and modified unqualified audit report, respectively.

KPMG Taipei, Taiwan (the Republic of China) January 29, 2015

Notes to Readers

The accompanying consolidated financial statements are intended only to present the financial position, results of operations, and cash flows in accordance with the 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 financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the 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 auditors’ report and consolidated financial statements shall prevail.

～ 1 ～

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2014 AND 2013

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS 1100 Cash and cash equivalents (Notes 4, 6(a) and 7) 1125 Current available-for-sale financial assets (Notes 4, 6(b) and 7) 1130 Current held-to-maturity financial assets (Note 4) 1170 Accounts and notes receivable, net (Notes 4, 5 and 6(d)) 1180 Accounts receivable from related parties (Note 7) 1200 Other receivables (Note 7) 130x Inventories (Notes 4 and 6(e)) 1410 Prepayments (Note 7) 1460 Non-current assets held for sale (Notes 4 and 6(f)) 1476 Other current financial assets (Notes 4, 7 and 8) 1479 Other current assets Total current assets NON-CURRENT ASSETS 1523 Non-current available-for-sale financial assets (Notes 4 and 6(b)) 1543 Non-current financial assets at cost (Notes 4 and 6(c)) 1546 Non-current debt instrument investment without active market (Note 4) 1550 Investments accounted for using equity method (Notes 4, 5, 6(g) and 7) 1600 Property, plant and equipment (Notes 4, 5 and 6(i)) 1760 Investment properties, net (Notes 4 and 6(j)) 1791 Concessions (Notes 4, 6(k) and 8) 1805 Goodwill (Notes 4, 5 and 6(k)) 1821 Other intangible assets, net (Notes 4, 5 and 6(k)) 1840 Deferred tax assets (Notes 4, 5 and 6(u)) 1980 Other non-current financial assets (Notes 4, 6(n), 7 and 8) 1995 Other non-current assets (Notes 6(l) and 7) Total non-current assets TOTAL	2014.12.31 Amount % $ 7,903,777 5 2,213,757 1 6 - 14,990,240 10 34,561 - 1,000,549 1 3,210,988 2 486,343 - - - 2,967,826 2 26,657 - 32,834,704 21 3,480,153 2 192,652 - 500,000 - 897,246 1 47,066,319 31 354,208 - 39,103,292 26 15,845,930 10 6,219,622 4 882,732 1 271,574 - 5,888,820 4 120,702,548 79 $ 153,537,252 100	2013.12.31 Amount % 7,954,294 6 960,945 1 - - 14,583,899 10 49,557 - 494,348 - 3,781,354 3 521,368 - 50,275 - 1,046,057 1 51,771 - 29,493,868 21 1,226,889 1 178,325 - 500,000 - 2,289,356 2 42,985,801 31 320,394 - 32,748,545 24 15,845,930 11 6,242,796 5 924,576 1 250,717 - 5,345,182 4 108,858,511 79 138,352,379 100 LIABILITIES AND EQUITY CURRENT LIABILITIES 2100 Short-term borrowings (Notes 4, 6(m) and 7) 2110 Short-term notes and bills payable (Notes 4 and 6(m)) 2150 Notes payable 2170 Accounts payable 2180 Accounts payable to related parties (Note 7) 2219 Other payables (Note 7) 2230 Current tax liabilities (Note 4) 2250 Current provisions (Notes 4 and 6(q)) 2310 Advance receipts (Note 6(n)) 2320 Long-term liabilities, current portion (Note 6(p)) 2399 Other current liabilities Total current liabilities NON-CURRENT LIABILITIES 2530 Bonds payable (Note 6(o)) 2540 Long-term borrowings (Notes 6(p) and 7) 2550 Non-current provisions (Notes 4 and 6(q)) 2570 Deferred tax liabilities (Notes 4, 5 and 6(u)) 2640 Accrued pension liabilities (Notes 4 and 6(t)) 2645 Guarantee deposits 2670 Other non-current liabilities (Note 6(r)) Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF PARENT (Notes 4 and 6(v)) 3110 Ordinary shares 3200 Capital surplus Retained earnings 3310 Legal reserve 3350 Unappropriated retained earnings 3400 Other equity interests 3500 Treasury shares Total equity attributable to owners of parent 36xx Non-controlling interests (Notes 6(h) and 6(v)) Total equity TOTAL	2014.12.31 Amount % $ 18,900,000 12 5,593,031 4 191,951 - 7,590,325 5 79,392 - 12,310,967 8 2,114,614 1 217,083 - 2,264,612 2 2,208,218 2 1,998,735 1 53,468,928 35 14,794,293 10 13,182,326 9 1,014,349 1 2,688,568 2 122,423 - 820,504 - 933,611 - 33,556,074 22 87,025,002 57 34,208,328 22 14,715,830 10 21,537,666 14 19,817,858 13 (302,986 ) - (29,717,344 ) (20) 60,259,352 39 6,252,898 4 66,512,250 43 $ 153,537,252 100	2013.12.31 Amount % 30,605,813 22 2,396,971 2 408,904 - 6,661,431 5 73,080 - 11,657,899 9 1,512,072 1 193,886 - 2,619,906 2 1,000,000 1 1,475,676 1 58,605,638 43 14,792,647 11 2,000,000 1 880,069 1 2,599,791 2 115,463 - 818,386 - 19,744 - 21,226,100 15 79,831,738 58 34,208,328 25 12,456,891 9 19,262,044 14 22,171,132 16 412,682 - (31,077,183) (23) 57,433,894 41 1,086,747 1 58,520,641 42 138,352,379 100
	Amount $ 7,903,777 2,213,757 6 14,990,240 34,561 1,000,549 3,210,988 486,343 - 2,967,826 26,657 32,834,704 3,480,153 192,652 500,000 897,246 47,066,319 354,208 39,103,292 15,845,930 6,219,622 882,732 271,574 5,888,820 120,702,548 $ 153,537,252	Amount 7,954,294 960,945 - 14,583,899 49,557 494,348 3,781,354 521,368 50,275 1,046,057 51,771 29,493,868 1,226,889 178,325 500,000 2,289,356 42,985,801 320,394 32,748,545 15,845,930 6,242,796 924,576 250,717 5,345,182 108,858,511 138,352,379	Amount $ 18,900,000 5,593,031 191,951 7,590,325 79,392 12,310,967 2,114,614 217,083 2,264,612 2,208,218 1,998,735 53,468,928 14,794,293 13,182,326 1,014,349 2,688,568 122,423 820,504 933,611 33,556,074 87,025,002 34,208,328 14,715,830 21,537,666 19,817,858 (302,986 ) (29,717,344 ) 60,259,352 6,252,898 66,512,250 $ 153,537,252	Amount 30,605,813 2,396,971 408,904 6,661,431 73,080 11,657,899 1,512,072 193,886 2,619,906 1,000,000 1,475,676 58,605,638 14,792,647 2,000,000 880,069 2,599,791 115,463 818,386 19,744 21,226,100 79,831,738 34,208,328 12,456,891 19,262,044 22,171,132 412,682 (31,077,183) 57,433,894 1,086,747 58,520,641 138,352,379

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

～ 2 ～

TAIWAN MOBILE CO., 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)

4000 OPERATING REVENUES (Notes 4, 6(x) and 7) 5000 OPERATING COSTS (Notes 4, 7 and 12) 5900 GROSS PROFIT FROM OPERATIONS 6000 OPERATING EXPENSES (Notes 4, 7 and 12) 6100 Marketing 6200 Administrative 6500 NET OTHER INCOME AND EXPENSES (Note 6(y)) 6900 NET OPERATING INCOME NON-OPERATING INCOME AND EXPENSES (Notes 4, 6(z) and 7) 7010 Other income 7020 Other gains and losses, net 7050 Finance costs 7060 Share of profit (loss) of associates accounted for using equity method 7000 Total non-operating income and expenses 7900 PROFIT BEFORE TAX 7950 TAX EXPENSE (Notes 4 and 6(u)) 8000 PROFIT FROM CONTINUING OPERATIONS 8100 LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX (Notes 4 and 6(f)) 8200 PROFIT 8300 OTHER COMPREHENSIVE INCOME (LOSS) 8310 Exchange differences on translation 8325 Unrealized gains (losses) on available-for-sale financial assets 8360 Actuarial gains (losses) on defined benefit plans 8370 Share of other comprehensive income (loss) of associates accounted for using equity method 8399 Income tax generated from other comprehensive income 8300 OTHER COMPREHENSIVE INCOME (AFTER TAX) 8500 COMPREHENSIVE INCOME PROFIT ATTRIBUTABLE TO 8610 Owners of parent 8620 Non-controlling interests COMPREHENSIVE INCOME ATTRIBUTABLE TO 8710 Owners of parent 8720 Non-controlling interests EARNINGS PER SHARE BASIC (Note 6(w)) 9710 Basic earnings per share from continuing operations 9720 Basic loss per share from discontinued operations 9750 Total basic earnings per share DILUTED (Note 6(w)) 9810 Diluted earnings per share from continuing operations 9820 Diluted loss per share from discontinued operations 9850 Total diluted earnings per share	2014	% 100 66 34 12 4 16 - 18 - (1) - - (1) 17 3 14 - 14 - (1) - - - (1) 13 14 - 14 13 - 13 5.57 (0.01) 5.56 5.56 (0.01) 5.55	2013	% 100 64 36 12 5 17 - 19 - (1) - - (1) 18 3 15 - 15 - - - - - - 15 15 - 15 15 - 15 5.84 (0.05) 5.79 5.83 (0.05) 5.78
	Amount $ 112,623,879 75,098,238 37,525,641 12,979,675 4,945,362 17,925,037 110,111 19,710,715 541,030 (780,195) (601,834) (4,639) (845,638) 18,865,077 3,233,643 15,631,434 (78,329) 15,553,105 14,226 (763,588) (23,207) 47,120 3,945 (721,504) $ 14,831,601 $ 15,005,428 547,677 $ 15,553,105 $ 14,271,279 560,322 $ 14,831,601 $		Amount 108,407,931 69,571,020 38,836,911 12,883,401 4,944,818 17,828,219 63,143 21,071,835 156,348 (1,356,445) (397,322) (55,403) (1,652,822) 19,419,013 3,351,840 16,067,173 (249,392) 15,817,781 303 54,782 560 (1,859) (95) 53,691 15,871,472 15,583,447 234,334 15,817,781 15,655,368 216,104 15,871,472
	$
	$
	$

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

～ 3 ～

TAIWAN MOBILE CO., 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 Parent	Equity Attributable to Owners of Parent
Ordinary Shares $ 34,208,328 - - - - - - - - - - 34,208,328 - - - - - - - - - - - - $ 34,208,328	Capital Surplus 12,431,851 - - - - - - - 25,040 - - 12,456,891 - - - - - - 1,665 1,520,403 85,965 650.906 - - 14,715,830	Retained Earnings Legal Reserve Unappropriated 18,061,894 22,606,173 1,469,160 (1,469,160 ) - (14,526,578 ) (269,010) - 1,200,150 (15,995,738 ) - 15,583,447 - (735) - 15,582,712 - - - (22,015 ) - - 19,262,044 22,171,132 2,275,622 (2,275,622 ) - (15,064,599) 2,275,622 (17,340,221 ) - 15,005,428 - (18,481 ) - 14,986,947 - - - - - - - - - - - 21,537,666 19,817,858	Other Equity Interests Exchange Differences on Translation Unrealized Gain (Loss) on Available-for- Sale Financial Assets 25,483 314,543 - - - - - - - - - - (535 ) 73,191 (535) 73,191 - - - - - - 24,948 387,734 - - - - - - - - 6,346 (722,014) 6,346 (722,014) - - - - - - - - - - - - 31,294 (334,280)	Treasury Shares (31,077,183 ) - - - - - - - - - - (31,077,183 ) - - - - - - - 1,359,839 - - - - (29,717,344 )
			Exchange Differences on Translation 25,483 - - - - - (535 ) (535) - - - 24,948 - - - - 6,346 6,346 - - - - - - 31,294
		Legal Reserve 18,061,894 1,469,160 - (269,010) 1,200,150 - - - - - - 19,262,044 2,275,622 - 2,275,622 - - - - - - - - 21,537,666

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

～ 4 ～

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

(In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES A00010 Profit from continuing operations before tax A00020 Loss from discontinued operations before tax A10000 Profit before tax A20000 Adjustments A20010 Adjustments to reconcile profit (loss) A20100 Depreciation expense A20200 Amortization expense A23000 Gain on disposal of non-current assets held for sale, net A22500 Loss on disposal of property, plant and equipment, net A20300 Provision for bad debt expense A20900 Finance costs A21200 Interest income A21300 Dividend income A21900 Share-based payments of subsidiaries A23700 Impairment loss on non-financial assets (from discontinued operations) A22300 Share of loss of associates accounted for using equity method A23100 Loss (gain) on disposal of investments A23200 Gain on disposal of investments accounted for using equity method A29900 Others A20010 Total adjustments to reconcile profit (loss) A30000 Changes in operating assets and liabilities A31150 Accounts and notes receivable A31160 Accounts receivable from related parties A31180 Other receivables A31200 Inventories A31230 Prepayments A31240 Other current assets A31990 Other assets A32130 Notes payable A32150 Accounts payable A32160 Accounts payable to related parties A32180 Other payables A32200 Provisions A32210 Advance receipts A32230 Other current liabilities A32240 Accrued pension liabilities A30000 Total changes in operating assets and liabilities A33000 Net cash inflows generated from operating activities A33100 Interest received A33300 Interest paid A33500 Income taxes paid AAAA Net cash flows from operating activities	2014 $ 18,865,077 (94,363) 18,770,714 9,721,579 1,871,429 (153,706) 969,694 373,778 601,834 (94,992) (22,803) 2,840 17,794 4,639 168 - (1,076) 13,291,178 (1,782,136) 14,996 (49,560) 570,348 72,751 27,412 14,266 (216,953) 924,698 6,312 (429,711) 27,444 (301,410) 459,458 (16,247) (678,332) 31,383,560 1,510 (6,291) (3,040,263) 28,338,516	2013 19,419,013 (300,472) 19,118,541 8,767,518 1,234,149 - 1,395,538 321,110 397,373 (95,023) (24,246) - - 55,403 (4,046) (5,874) 184 12,042,086 (3,590,403) 21,482 (9,118) (1,212,808) 47,189 30,630 18,265 48,235 (469,971) 8,703 1,079,894 41,840 (489,918) 506,844 (213) (3,969,349) 27,191,278 - (1,165) (2,357,102) 24,833,011

(Continued)

～ 5 ～

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

(In Thousands of New Taiwan Dollars)

2014
CASH FLOWS FROM INVESTING ACTIVITIES
B02700 Acquisition of property, plant and equipment
(13,569,058)
B04500 Acquisition of intangible assets
(829,831)
B07100 Increase in prepayments for equipment
(304,769)
B02200 Net cash inflows from new consolidated entities
1,193,252
B02300 Net cash inflows from disposal of subsidiaries
14,533
B01800 Acquisition of investments accounted for using equity method
(320,273)
B01900 Proceeds from disposal of investments accounted for using equity
method
-
B00300 Acquisition of available-for-sale financial assets
(4,273,724)
B00400 Proceeds from disposal of available-for-sale financial assets
-
B01200
Acquisition of financial assets at cost
(60,000)
B03700 Increase in refundable deposits
(164,135)
B03800 Decrease in refundable deposits
154,372
B06500 Increase in other financial assets
(2,392,255)
B06600 Decrease in other financial assets
447,544
B02600 Proceeds from disposal of non-current assets held for sale
250,291
B02800 Proceeds from disposal of property, plant and equipment
5,856
B04600 Proceeds from disposal of intangible assets
-
B01400 Proceeds from investees' capital reduction
45,673
B06700 Increase in other non-current assets
(3,706)
B00900
Acquisition of held-to-maturity financial assets
(6)
B07500 Interest received
93,540
B07600 Dividend received
48,142
BBBB
Net cash used in investing activities
(19,664,554)
CASH FLOWS FROM FINANCING ACTIVITIES
C00100 Increase in short-term borrowings
119,246,379
C00200 Decrease in short-term borrowings
(130,955,823)
C00500 Increase in short-term notes and bills payable
19,467,020
C00600 Decrease in short-term notes and bills payable
(16,274,202)
C01200 Proceeds from issuance of bonds
-
C01300 Repayments of bonds
-
C01600 Proceeds from long-term borrowings
10,000,000
C01700 Repayments of long-term borrowings
(1,105,000)
C04500 Cash dividends paid (including paid to non-controlling interests)
(15,289,071)
C05000 Proceeds from disposal of treasury shares
2,970,389
C05500 Disposal of ownership interests in subsidiaries (without losing
control)
323,859
C03000 Increase in guarantee deposits received
169,229
C03100 Decrease in guarantee deposits received
(214,427)
C05600 Interest paid
(586,873)
C05800 Increase in non-controlling interests
3,512,800
CCCC
Net cash flows from (used in) financing activities
(8,735,720)
DDDD EFFECT OF EXCHANGES RATE CHANGES ON CASH AND
CASH EQUIVALENTS
11,241
EEEE
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
(50,517)
E00100CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
7,954,294
E00200CASH AND CASH EQUIVALENTS AT END OF YEAR
$
7,903,777

2013
(11,525,906)
(29,190,087)
(303,046)
-
-
(1,067,850)
12,855
(1,000,000)
194,277
-
(207,141)
220,613
(1,218,816)
1,471,101
-
110,239
1
3,002
-
-
95,940
34,566
(42,370,252)
73,873,936
(46,435,716)
3,894,957
(1,498,542)
5,796,043
(4,000,000)
3,000,000
-
(15,043,570)
-
-
193,527
(186,458)
(302,404)
-
19,291,773
8,622
1,763,154
6,191,140
7,954,294

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

(Concluded)

～ 5-1 ～

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. ORGANIZATION AND OPERATIONS

Taiwan Mobile Co., Ltd. (TWM) was incorporated in the Republic of China (ROC) on February 25, 1997. TWM’s shares began to trade on the ROC Over-the-Counter Securities Exchange (known as the GreTai Securities Market) on September 19, 2000. On August 26, 2002, TWM’s shares were listed on the Taiwan Stock Exchange. TWM mainly renders wireless communication services and sells mobile phones and accessories.

TWM’s received a second-generation (2G) mobile telecommunications concession operation license issued by the Directorate General of Telecommunications (DGT) of the ROC. The license allows TWM to provide services for 15 years from 1997 onwards. The license was renewed and its expiry date was extended to June 2017 by the National Communications Commission (NCC) in November 2012. In March 2005, TWM received a third-generation (3G) concession operation license issued by the DGT. The 3G license allows TWM to provide services from the issuance date of the license to December 2018.

TWM acquired the Mobile Broadband Spectrum frequency of 30 MHz x 2 (15 MHz x 2 in the 700 MHz frequency band and 15 MHz x 2 in the 1800 MHz frequency band of the 4G spectrum) in October 2013. In April 2014, TWM acquired the concession license for the Mobile Broadband Spectrum frequency of 15 MHz x 2 in the 700 MHz frequency band. To accelerate the Mobile Broadband Spectrum service in the 1800 MHz frequency band in July 2014, the NCC authorized TWM to return the mobile telephone service frequency and approved the application for the Broadband Spectrum frequency of 5 MHz x 2 in the 1800 MHz frequency band. TMW acquired the concession license for the Mobile Broadband Spectrum frequency of 5 MHz x 2 in the 1800 MHz frequency band in August 2014.

In January 2015, TWM was approved to acquire a Mobile Broadband Spectrum frequency of 5 MHz x 2 in the 700 MHz frequency band by the NCC. Please refer to note 11 “Significant subsequent events”.

The consolidated financial statements of TWM as of and for the year ended December 31, 2014, comprise TWM and its subsidiaries (the Group).

2. APPROVAL DATE AND PROCEDURES OF THE CONSOLIDATED FINANCIAL STATEMENTS

The Board of Directors approved the consolidated financial statements on January 29, 2015.

3. NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

a. 2013 International Financial Reporting Standards endorsed by the Financial Supervisory Commission, R.O.C., but not yet in effect

In accordance with Rule No. 1030010325 issued by the Financial Supervisory Commission (“FSC”) on April 3, 2014, companies listed for trading on the stock exchange or over-the-counter market or for registration as emerging stock should adopt the 2013 IFRSs

～ 6 ～

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(excluding IFRS 9 Financial Instruments ) endorsed by the FSC beginning in 2015. The new standards, amendments and interpretations which were announced by the International Accounting Standards Board (“IASB”) are as follows:

Effective Date New Standards, Amendments and Interpretations Issued by IASB Amended IFRS 1 Limited Exemption from Comparative IFRS July 1, 2010 7 Disclosures for First-time Adopters Amended IFRS 1 Severe Hyperinflation and Removal of Fixed July 1, 2011 Dates for First-time Adopters Amended IFRS 1 Government Loans January 1, 2013 Amended IFRS 7 Disclosures - Transfers of Financial Assets July 1, 2011 Amended IFRS 7 Disclosures - Offsetting Financial Assets January 1, 2013 and Financial Liabilities IFRS 10 Consolidated Financial Statements January 1, 2013 (Subsidiaries will adopt on January 1, 2014) IFRS 11 Joint Agreements January 1, 2013 IFRS 12 Disclosure of Interests in Other Entities January 1, 2013 Amended IFRS 10, IFRS 11 and IFRS 12 Consolidated January 1, 2013 Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance Amended IFRS 10, IFRS 12 and IAS 27 Investment Entities January 1, 2014 IFRS 13 Fair Value Measurement January 1, 2013 Amended IAS 1 Presentation of Items of Other July 1, 2012 Comprehensive Income Amended IAS 12 Deferred Tax: Recovery of Underlying January 1, 2012 Assets Amended IAS 19 Employee Benefits January 1, 2013 Amended IAS 27 Separate Financial Statements January 1, 2013 Amended IAS 28 Investments in Associates and Joint January 1, 2013 Ventures Amended IAS 32 Offsetting Financial Assets and Financial January 1, 2014 Liabilities IFRIC 20 Stripping Costs in the Production Phase of a January 1, 2013 Surface Mine

In the Group’s assessment, except for the following standards, the 2013 IFRSs will not have significant influence after their adoption:

(1) IAS 19 Employee Benefits

The amendments to IAS 19 require companies to calculate a “net interest” amount by applying the discount rate to the net defined benefit liability or asset to replace the interest cost and expected return on plan assets used in the previous IAS 19. In addition, the amendments eliminate the accounting treatment of either the corridor approach or the immediate recognition of actuarial gains and losses in profit or loss when they occur, and instead require companies to recognize all actuarial gains and losses immediately through other comprehensive income. The past service cost, on the

～ 7 ～

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

other hand, will be expensed immediately when it is incurred and will no longer be amortized over the average period before meeting vesting conditions on a straight-line basis. In addition, the amendments also require a broader disclosure of defined benefit plans. In compliance with the standards above, the Group anticipates that accrued pension liabilities would increase by $16,101 thousand and retained earnings would decrease by $13,364 thousand on January 1, 2014; accrued pension liabilities would increase by $14,359 thousand and retained earnings would decrease by $11,918 thousand on December 31, 2014, operating expenses would decrease by $1,095 thousand and actuarial gains on defined benefit plans, before tax, would increase by $647 thousand in other comprehensive income for the year ended December 31, 2014.

(2) IAS 1 Presentation of Financial Statements

The primary amendment of IAS 1 was requiring profit or loss and other comprehensive income to be presented together, requiring entities to group items presented in other comprehensive income based on whether they are potentially reclassifiable to profit or loss subsequently, and requiring tax associated with items presented before tax to be shown separately for each of the two groups of other comprehensive income items. The Group will follow the amendment of IAS 1 to present the comprehensive income statement.

(3) IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 combines all related standards regarding the disclosures of financial reports of subsidiaries, joint ventures, associates, and non-consolidated entities. The Group will additionally disclose the information on consolidated and non-consolidated entities.

(4) IFRS 13 Fair Value Measurement

IFRS 13 defines the meaning of fair value and sets the method of calculation and the presentation of measurement of fair value. After assessing the standard, the Group does not expect any significant influence on the financial condition and performance, and will follow IFRS 13 to additionally disclose the information on measurement of fair value.

b. New standards and interpretations of 2013 IFRSs issued by the IASB but not yet endorsed by the FSC

～ 8 ～

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

New Standards, Amendments and Interpretations IFRS 9_Financial Instruments_ IFRS 14_Regulatory Deferral Accounts_ IFRS 15_Revenue from Contracts with Customers_ Amended IAS 1_Disclosure Initiative_ Amended IFRS 9 and IFRS 7_Mandatory Effective Date and_ Offsetting Disclosures Amended IFRS 10 and IAS 28_Sale or Contribution of Assets_ between an Investor and its Associate or Joint Venture Amended IFRS 10, IFRS 12 and IAS 28_Investment Entities: _Applying the Consolidation Exception Amended IFRS 11_Accounting for Acquisitions of Interests in_ Joint Operations Amended IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortization Amended IAS16 and IAS 41 Agriculture: Bearer Plants Amended IAS 19_Defined Benefit Plans: Employee_ Contributions Amended IAS 36_Recoverable Amount Disclosure for_ Non-Financial Assets Amended IAS 39_Novation of Derivatives and Continuation of_ Hedge Accounting IFRIC 21_Levies_	Effective Date Issued by IASB
	January 1, 2018 January 1, 2016 January 1, 2017 January 1, 2016 January 1, 2018 January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 July 1, 2014 January 1, 2014 January 1, 2014 January 1, 2014

New Standards, Amendments and Interpretations
IFRS 9_Financial Instruments_
IFRS 14_Regulatory Deferral Accounts_
IFRS 15_Revenue from Contracts with Customers_
Amended IAS 1_Disclosure Initiative_
Amended IFRS 9 and IFRS 7_Mandatory Effective Date and_
Offsetting Disclosures
Amended IFRS 10 and IAS 28_Sale or Contribution of Assets_
between an Investor and its Associate or Joint Venture
Amended IFRS 10, IFRS 12 and IAS 28_Investment Entities:
_Applying the Consolidation Exception
Amended IFRS 11_Accounting for Acquisitions of Interests in_
Joint Operations
Amended IAS 16 and IAS 38 Clarification of Acceptable
Methods of Depreciation and Amortization
Amended IAS16 and IAS 41 Agriculture: Bearer Plants
Amended IAS 19_Defined Benefit Plans: Employee_
Contributions
Amended IAS 36_Recoverable Amount Disclosure for_
Non-Financial Assets
Amended IAS 39_Novation of Derivatives and Continuation of_
Hedge Accounting
IFRIC 21_Levies_

Effective Date
Issued by IASB

January 1, 2018
January 1, 2016
January 1, 2017
January 1, 2016
January 1, 2018
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2014
January 1, 2014
January 1, 2014

The Group is assessing the influence on financial condition and performance of the above standards and interpretations. The Group will disclose the related influence when the assessment is finished.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

The consolidated financial statements have been prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers (the Guidelines) and with the IFRSs, IASs, IFRIC Interpretations and SIC Interpretations endorsed by the FSC (collectively, “Taiwan-IFRSs”).

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Basis of Preparation

a. Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis except for financial instruments measured at fair value through profit or loss, which are measured at fair value.

b. Functional and presentation currency

The functional currency of each individual consolidated entity is determined based on the primary economic environment in which the entity operates. The Group’s consolidated financial statements are presented in New Taiwan Dollars, which is TWM’s functional currency. All financial information presented in New Taiwan Dollars has been rounded to the nearest thousand.

Basis of Consolidation

a. Principles of preparation of consolidated financial statements

The consolidated financial statements incorporate the financial statements of TWM and its controlled entities (the subsidiaries). Control is achieved where TWM has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The financial statements of the subsidiaries are included in the consolidated financial statements from the date of obtaining control and are excluded from the date of losing control. The comprehensive income from subsidiaries is allocated to TWM and its non-controlling interests, even if the non-controlling interests have a deficit balance.

The consolidated statements of comprehensive income include the results of a disposed of subsidiary up to the date of disposal.

Changes in the ownership of a subsidiary that do not result in loss of control are accounted for as equity transactions.

Financial statements of subsidiaries are adequately adjusted to align their accounting policies with those of the Group.

Transactions and balances, and any unrealized income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.

b. The subsidiaries included in the consolidated financial statements

The consolidated entities were as follows:

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Investor TWM WMT momo momo momo momo Asian Crown Fortune Kingdom HK Fubon Multimedia WMT GWMT WMT GFMT WMT WMT TFNM TFNM	Subsidiary Wealth Media Technology Co., Ltd. (WMT) momo.com Inc. (momo) Fu Sheng Travel Service Co., Ltd. (FST) Fuli Life Insurance Agent Co., Ltd. (FLI) Fuli Property Insurance Agent Co., Ltd. (FPI) Asian Crown International Co., Ltd. (Asian Crown) Fortune Kingdom Corporation (Fortune Kingdom) Hong Kong Fubon Multimedia Technology Co., Ltd. (HK Fubon Multimedia) Fubon Gehua (Beijing) Enterprise Ltd. (FGE) Global Wealth Media Technology Co., Ltd. (GWMT) Globalview Cable TV Co., Ltd. (GCTV) Global Forest Media Technology Co., Ltd. (GFMT) Union Cable TV Co., Ltd. (UCTV) Win TV Broadcasting Co., Ltd. (WTVB) TFN Media Co., Ltd. (TFNM) UCTV Yeong Jia Leh Cable TV Co., Ltd. (YJCTV)	Main Business and Products Investment Wholesale and retail sales Travel agent Life insurance agent Property insurance agent Investment Investment Investment Wholesaling Investment Cable TV service provider Investment Cable TV service provider TV program provider Cable broadband and value-added services provider Cable TV service provider Cable TV service provider	Percentage of Ownership 2014.12.31 2013.12.31 100.00 100.00 44.38 50.64 100.00 100.00 100.00 100.00 100.00 100.00 76.26 100.00 100.00 100.00 100.00 100.00 91.30 87.50 100.00 100.00 6.83 6.83 100.00 100.00 0.76 0.76 100.00 100.00 100.00 100.00 99.22 99.22 100.00 100.00	Note
			2014.12.31 100.00 44.38 100.00 100.00 100.00 76.26 100.00 100.00 91.30 100.00 6.83 100.00 0.76 100.00 100.00 99.22 100.00
				- Note 1 - - - Note 2 - - Note 2 - - - - - - - -

(Continued)

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Investor TFNM TFNM TFNM TFNM TKT TWM TCC TCCI TCC TFN TFN TCC TCC TWM Holding TCC	Subsidiary Mangrove Cable TV Co., Ltd. (MCTV) Phoenix Cable TV Co., Ltd. (PCTV) GCTV Taiwan Kuro Times Co., Ltd. (TKT) ezPeer Multimedia Ltd. Taiwan Cellular Co., Ltd. (TCC) TCC Investment Co., Ltd. (TCCI) TCCI Investment & Development Co., Ltd. (TID) Taiwan Fixed Network Co., Ltd. (TFN) TFN Union Investment Co., Ltd. (TUI) TFN HK Ltd. Taiwan Digital Communications Co., Ltd. (TDC) TWM Holding Co., Ltd. (TWM Holding) TWM Communications (Beijing) Co., Ltd. (TWMC) Taiwan Teleservices & Technologies Co., Ltd. (TT&T)	Main Business and Products Cable TV service provider Cable TV service provider Cable TV service provider Online music and game service Investment Investment Investment Investment Fixed-line service provider Investment Telecommunication service provider TV program production and mobile phone wholesaling Investment Mobile application development and design Call center service and telephone marketing	Percentage of Ownership 2014.12.31 2013.12.31 29.53 29.53 100.00 100.00 92.38 92.38 100.00 100.00 - - 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	Note
			2014.12.31 29.53 100.00 92.38 100.00 - 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
				The other 70.47% of shares were held under trustee accounts. - - - ezPeer Samoa was dissolved in November 2013. - TCCI, TID and TUI collectively owned 698,752 thousand shares of TWM representing 20.42% of total outstanding shares as of December 31, 2014. - - - - - - - -

(Continued)

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Investor TT&T TT&T TT&T Holdings TCC TWM	Subsidiary Taiwan Mobile Basketball Co., Ltd. (TMB) TT&T Holdings Co., Ltd. (TT&T Holdings) Xiamen Taifu Teleservices & Technologies Co., Ltd. Taiwan Digital Service Co., Ltd. (TDS) Taipei New Horizon Co., Ltd. (TNH)	Main Business and Products Basketball team management Investment System integration, management, analysis and development of CRM application and information consulting services Telecommunica- tions service agencies and retail business Real estate leasing and hotel business	Percentage of Ownership 2014.12.31 2013.12.31 - 100.00 100.00 100.00 - - 100.00 100.00 49.90 Note 3	Note
			2014.12.31 - 100.00 - 100.00 49.90
				TMB was sold in September 2014 - Xiamen Taifu Teleservices & Technologies Co., Ltd. was dissolved in November 2013. - Note 3

(Concluded)

Note 1: WMT disposed of part of its shareholding in momo as stock released for registration as emerging and listed stock in February and December 2014, respectively. Due to non-proportional investment in momo’s capital increase, the percentage of ownership in momo decreased. Despite the reduction in the shareholding in momo, WMT still has over half of the seats on the board of momo and maintains control over momo, so momo is included in the consolidated entities.
Note 2: In July 2014, an extraordinary shareholders’ meeting of FGE resolved to inject capital by cash. Due to non-proportional investment in an investee’s capital increase, momo’s percentage of ownership in Asian Crown decreased, and HK Fubon Multimedia’s percentage of ownership in FGE increased.
Note 3: TWM subscribed for the shares based on its proportion of the shareholding in TNH, which remained at 49.9%. Since February 21, 2014, TWM has had control over TNH due to a change in the board members of TNH, and therefore TNH is included in the consolidated entities as a subsidiary.
c. Subsidiaries excluded from the consolidated financial statements: None.

Foreign Currency

Foreign currency transactions are recorded at the spot exchange rate on the date of the transaction. At the end of the reporting period (the reporting date), foreign currency monetary

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amounts are reported using the closing rate.

Non-monetary items carried at fair value should be reported at the rate that existed when the fair values were determined. Non-monetary items carried at historical cost are reported using the exchange rate at the date of the transaction.

Exchange differences due to settlement of transactions or translation for monetary items are recognized in profit or loss.

Exchange differences arising on non-monetary items carried at fair value (for example, equity instruments) are recognized in profit or loss. If a gain or loss on a non-monetary item is recognized in other comprehensive income, any foreign exchange component of that gain or loss is also recognized in other comprehensive income.

For the purpose of preparing consolidated financial statements, the assets and liabilities of foreign operations are translated to New Taiwan Dollars (NTD) using the exchange rates at the reporting date. The income and expenses of foreign operations are translated at the average exchange rate for the period. Exchange differences are recognized in other comprehensive income, and accumulated in equity.

Classification of Current and Non-current Assets and Liabilities

The Group classifies an asset as current when any one of the following requirements is met. Assets that are not classified as current are non-current assets.

a. It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;
b. It holds the asset primarily for the purpose of trading;
c. It expects to realize the asset within twelve months after the reporting period; or
d. The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or

used to settle a liability for at least twelve months after the reporting period.

The Group classifies a liability as current when any one of the following requirements is met. Liabilities that are not classified as current are non-current liabilities.

a. It expects to settle the liability in its normal operating cycle;
b. It holds the liability primarily for the purpose of trading;
c. The liability is due to be settled within twelve months after the reporting period; or
d. It does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the

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counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Voluntary Change in Accounting Policy

In response to the development of the IAS regarding revenue, the Group consulted the practical experience of most of the telecommunication service providers abroad and professional investigations of accounting firms, and changed the recognition method for bundle sales from the residual value method to the relative fair value method on January 1, 2013. Instead of recognizing revenue from telecommunication service charges and sales of inventories, the total price of the contract is allocated based on the relative fair value of each component, which fairly presents transactions and attributes gain and loss to the correct accounting period.

Cash and Cash Equivalents

Cash and cash equivalents comprise cash, cash in bank, and short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes should be recognized as cash equivalents. If they do not meet the above definition, time deposits should be recognized as other current and non-current financial assets.

Financial Instruments

Financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instruments.

a. Financial assets

The Group adopts trade-date accounting to recognize and derecognize financial assets. Financial assets are classified into the following categories: financial assets at fair value through profit or loss, available-for-sale financial assets, held-to-maturity financial assets, and loans and receivables.

(1) Financial assets at fair value through profit or loss

A financial asset classified in this category is for the purpose of trading or is at fair value through profit or loss.

This type of financial asset is measured at fair value at the time of initial recognition, and transaction costs are recognized in profit or loss as incurred. Financial assets at fair

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value through profit or loss are measured at fair value, and changes therein, which take into account any dividend and interest income, are recognized in profit or loss, and are included in non-operating income and expenses.

(2) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available for sale or are not classified in any of the other categories of financial assets. Available-for-sale financial assets are recognized initially at fair value, plus any directly attributable transaction cost, and changes are measured at fair value afterwards. Impairment losses, dividend income, and changes in the carrying amount of available-for-sale financial assets from foreign exchange gains or losses and interest income using the effective interest method are recognized in profit and loss, while other changes in carrying amount are recognized in other comprehensive income and presented in unrealized gain (loss) on available-for-sale financial assets in equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss, and is included in non-operating income and expenses.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less impairment loss, and are included in financial assets measured at cost.

(3) Held-to-maturity financial assets

Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Group intends and is able to hold to maturity. Held-to-maturity financial assets are recognized initially at fair value plus directly attributable transaction costs and are measured subsequently at amortized cost using the effective interest method, less any impairment losses.

Interest income is recognized in non-operating income and expenses.

(4) Loans and receivables

Receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables other than insignificant interest on short-term receivables are measured at amortized cost using the effective interest method less any impairment losses.

Loans and receivables comprise cash and cash equivalents, trade receivables, other receivables, debt instrument investment without active market, other financial assets, and refundable deposits.

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(5) Impairment of financial assets

A financial asset is impaired if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial assets that can be estimated reliably.

Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults, or the disappearance of an active market for a security. In addition, for an available-for-sale investment in an equity security, a significant or prolonged decline in its fair value below its cost is considered objective evidence of impairment.

Impairment losses on available-for-sale financial assets are recognized by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss.

Impairment losses recognized on an available-for-sale equity security are not reversed through profit or loss. Any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized in other comprehensive income, and accumulated in other equity.

An impairment loss in respect of a financial asset measured at cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss is not reversible in subsequent periods.

For financial assets at amortized cost, an impairment loss is calculated as the difference between an asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the financial assets at the date the impairment loss is reversed does not exceed what the amortized cost would have been had the impairment loss not been recognized.

Trade receivables are assessed as to whether any impairment has occurred at every

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reporting date. A trade receivable is impaired if, and only if, there is any objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the asset that can be estimated reliably. An impairment loss is calculated as the difference between its carrying amount and the present value of the estimated future cash flows (taking into account any guarantee and collateral) discounted at the asset’s original effective interest rate.

An impairment loss in respect of a financial asset is deducted from the carrying amount except for trade receivables, for which an impairment loss is reflected in an allowance account against the receivables. When it is determined a trade receivable is uncollectible, it is written off from the allowance account. Any subsequent recovery of the receivable written off is recorded in the allowance account. Changes in the amount of the allowance account are recognized in profit or loss.

(6) Derecognition of financial assets

The Group derecognizes financial assets when the contractual rights of the cash inflow from the asset are terminated, or when the Group transfers substantially all the risks and rewards of ownership of the financial assets.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss.

b. Financial liabilities

(1) Recognition

Financial liabilities not classified as held for trading or designated as at fair value through profit or loss, which comprise loans and borrowings, short-term notes and bills payable, bonds payable, notes payable, trade payables, other payables, and guarantee deposits received, are measured at fair value plus any directly attributable transaction cost at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method.

(2) Derecognition of financial liabilities

The Group derecognizes a financial liability when its contractual obligation has been discharged or cancelled, or has expired. The difference between the carrying amount of

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a financial liability removed and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

Inventories

Inventories are measured at the lower of cost and net realizable value. Inventories are assessed item by item, except those with similar characteristics are collectively assessed. Net realizable value is the estimated selling price in the ordinary course of business less the estimated selling expenses. The weighted-average method is used in calculation of cost.

Non-current Assets Held for Sale and Discontinued Operations

The book value of non-current assets classified as held for sale is expected to be recovered primarily through sale. Being classified as held for sale, the assets should be available for immediate sale. Being available for immediate sale means the management is committed to plan a sale and the sale is highly probable within 12 months.

Assets classified as non-current assets held for sale are measured at the lower of the carrying amount and fair value less costs to sell, and should not be depreciated. Impairment losses measured both at the time of classification as held for sale and subsequently should be recognized in profit or loss. A gain from any subsequent increase in the above measurement should be recognized in profit or loss to the extent that it is not in excess of the cumulative impairment loss.

A discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale, and represents either a separate major line of business or a geographical area of operations. The operation should be classified as discontinued when the operation is ready for disposal or the criteria for discontinuing are met, whichever is earlier.

Investment in Associates

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies.

Investments in associates are accounted for using equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition less any accumulated impairment losses. Goodwill is not amortized.

The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of equity-accounted investees, after adjustments to align their

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accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

If the Group does not subscribe the newly issued shares of associates in accordance with the percentage of ownership, which causes a change in percentage of ownership and net worth of the investment, the adjustment should be reflected in capital surplus and investments accounted for using equity method. If there is insufficient capital surplus from the investments accounted for using equity method to offset the change, then such insufficiency should be accounted for under retained earnings.

Unrealized profits resulting from transactions between the Group and an associate are eliminated to the extent of the Group’s interest in the associate. Unrealized losses on transactions with associates are eliminated in the same way, except to the extent that the underlying asset is impaired.

When the Group’s share of losses exceeds its interest in an associate, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

Property, Plant and Equipment

a. Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset, the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, and any borrowing cost that is eligible for capitalization.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated with a separate depreciation rate or depreciation method.

Property, plant and equipment are derecognized when disposed of or expected to have no future economic benefits generated through usage. The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and it shall be recognized as profit and loss.

b. Reclassification to investment property

Property is reclassified to investment property at its carrying amount when the use of the

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property changes from owner-occupied to investment property.

c. Subsequent cost

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Group and the amount can be reliably measured. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

d. Depreciation

The depreciable amount of an asset is determined after deducting its residual amount, and the net amount shall be allocated with the direct method over its useful life. Each significant item of property, plant and equipment shall be evaluated and depreciated separately if it possesses a different useful life. The depreciation charge for each period shall be recognized in profit or loss.

The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the lessee adopts for depreciable assets that are owned. The asset is depreciated over the shorter of the lease term and its useful life.

Operation utensils are measured at the cost of the acquired assets when acquisition occurs. Some of the operation utensils are depreciated over the useful life, and others are recognized at expenses when breakage occurs.

Land has an unlimited useful life and therefore is not depreciated. For the estimated useful lives, for the current and comparative years, of significant items of property, plant and equipment, please refer to Note 6(i).

Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ from the previous estimates, the change is accounted for as a change in accounting estimate.

Investment Property

Investment property is the property held either to earn rental income or for capital appreciation or for both. Investment property is measured at cost on initial recognition and subsequently at fair value, with any change therein recognized in profit or loss. Cost includes expenditure that is directly attributable to the acquisition of the investment property.

When the use of a property changes such that it is reclassified as property, plant and equipment, its fair value at the date of reclassification becomes its cost for subsequent

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accounting.

Leases

Leases in which the lessee assumes substantially all of the risks and rewards of ownership are classified as finance leases. Other leases are operating leases. Receivables collected are periodically recognized as rental income during the lease contract.

Under an operating lease, rental income or lease payments are recognized as income or expense, respectively, on a straight-line basis over the lease term.

Under a finance lease, the proceeds from the lessee should be recognized on a net basis as lease receivable when the Group is the lessor. The finance income is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the receivable.

Intangible Assets

a. Goodwill

Goodwill acquired in a business combination is included in intangible assets.

Goodwill is measured at cost less accumulated impairment losses. The carrying amount of the investments in associates includes goodwill. The impairment losses on investments would not be allocated to goodwill or any other assets.

b. Service concession agreement

The operator recognizes the right to charge users for a service as an intangible asset. The operator measures the intangible asset at fair value.

c. Other intangible assets

Other intangible assets that are acquired through business combinations or are internally developed are measured at cost less accumulated amortization and any accumulated impairment losses. Intangible assets that are acquired through business combinations are measured at acquisition-date fair value, and recognized along with goodwill.

d. Amortization

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill and intangible assets with an indefinite useful life, from the date that they are available for use. For the estimated useful lives for the current and comparative periods, please refer to Note 6(k).

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The amortization method, the amortization period, and the residual value for an intangible asset with a finite useful life shall be reviewed at each fiscal year-end. Any changes shall be accounted for as changes in accounting estimates.

Impairment of Non-financial Assets

The Group measures whether impairment occurred in non-financial assets (except for inventories, deferred income tax assets, and employee benefits) on every reporting date, and estimates the recoverable amount. If it is not possible to determine the recoverable amount (fair value less cost to sell and value in use) for the individual asset, then the Group will determine the recoverable amount for the asset’s cash-generating unit.

The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or loss.

The Group should assess at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the entity shall estimate the recoverable amount of that asset. An impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If this is the case, the carrying amount of the asset shall be increased to its recoverable amount. That increase is a reversal of an impairment loss. An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

Notwithstanding whether indicators exist, recoverability of goodwill and intangible assets with indefinite useful lives or those not yet in use is required to be tested at least annually. Impairment loss is recognized if the recoverable amount is less than the carrying amount.

For the purpose of impairment testing, goodwill acquired in a business combination shall, from the acquisition date, be allocated to each of the acquirer’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination. If the carrying amount of the cash-generating units exceeds the recoverable amount of the units, the entity shall recognize the impairment loss, and the impairment loss

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

shall be allocated to reduce the carrying amount of each asset in the units. Reversal of an impairment loss for goodwill is prohibited.

Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

a. Restoration

The restoration cost for property, plant and equipment that were originally acquired or used by the Group for a period of time and had obligations for dismantling, relocating, and restoring to the previous state should be recognized as an addition to the assets and accrued as a potential liability accordingly.

b. Warranties

A provision for warranties is recognized when the underlying products or services are sold. The provision is based on sales contracts, historical warranty data, and a weighing of all possible outcomes against their associated probabilities.

c. Decommissioning

For a service concession agreement, the concession receiver has an obligation for maintenance or decommissioning before returning the construction to the grantor as stated in the concession agreement. For a build-operate-transfer contract, the costs paid for the obligation for maintenance or decommissioning should be recognized as expense and liabilities.

Treasury Shares

Repurchased shares are recognized under treasury shares (a contra-equity account) based on their repurchase price (including all directly accountable costs), net of tax. Shares that are owned by TWM’s subsidiaries are seen as identical to treasury shares.

Gains on disposal of treasury shares should be recognized under “capital reserve – treasury share transactions”; Losses on disposal of treasury shares should be offset against existing capital reserves arising from similar types of treasury shares. If there is insufficient capital reserve to offset the losses, then such losses should be accounted for under retained earnings.

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

The carrying amount of treasury shares should be calculated using the weighted-average method and grouped by the type of repurchase.

Employee Benefits

Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

A defined benefit plan uses the projected unit credit method to calculate actuarial valuation at the end of the fiscal year. The Group recognizes actuarial gains and losses from the defined benefit obligation in other comprehensive income immediately when the gains and losses occur. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognized immediately in profit or loss.

The Group recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, any change in the present value of the defined benefit obligation, and any related actuarial gains or losses and past service cost that had not previously been recognized.

The rate used to discount post-employment benefit obligations is determined by reference to market yields at the end of the reporting period on high-quality corporate bonds or government bonds. The currency and term of the bonds are consistent with those of the obligations.

Income Tax

Income tax expenses include both current taxes and deferred taxes. Except for expenses related to business combinations, expenses recognized in equity or other comprehensive income directly, and other related expenses, all current and deferred taxes shall be recognized in profit or loss.

a. Current taxes

Current taxes include tax payables and tax deduction receivables on taxable gains (losses) for the year calculated using the statutory tax rate on the reporting date or the actual legislative tax rate, as well as tax adjustments related to prior years.

An additional 10% surtax on undistributed earnings, computed according to the ROC

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Income Tax Act, is recognized in current taxes in the year of approval by a shareholders’ meeting resolution.

b. Deferred taxes

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred tax assets are generally recognized for all deductible temporary differences, net operating loss carryforwards, and unused tax credits to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Deferred taxes shall not be recognized for temporary differences from the following:

(1) Assets and liabilities that are initially recognized but not related to a business combination and have no effect on net income or taxable gains (losses) during the combination.
(2) Temporary differences arising from equity investments in subsidiaries or joint ventures where there is a high probability that such temporary differences will not reverse.
(3) Initial recognition of goodwill.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted on the reporting date. The measurement reflects the entity’s expectations on the reporting date as to the manner in which the carrying amount of its assets and liabilities will be recovered or settled.

A deferred tax asset should be recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. Such unused tax losses, unused tax credits, and deductible temporary differences shall also be re-evaluated every year on the financial reporting date, and adjusted based on the probability that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized.

Income tax expenses recognized in equity balances or other comprehensive income shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled based on the temporary differences between the carrying amount and the tax basis of related assets and liabilities on the reporting date.

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Revenue

Revenue is measured at the fair value of the consideration received or receivable, net of returns, trade discounts, and volume rebates. Revenue from bundle sales is recognized with the relative fair value method, and the total price of the contract is allocated to each component of revenue based on the relative fair values.

a. Service revenues from mobile communication services, wireless services, fixed network services, and value-added services, net of any applicable discount, are billed at predetermined rates; the fixed monthly fees on the basic cable TV services are accrued.
b. Sales of goods

Revenue from sales of goods is recognized when the conditions mentioned below are all satisfied; the amount of sales allowance is reasonably estimated based on previous experience and other relevant factors.

(1) The Group has transferred the significant risks and returns of ownership to the counterparty;
(2) The Group has not been involved in any control activities and has not maintained effective control over the goods sold;
(3) The amount can be reliably measured;
(4) Economic benefits relevant to the transactions will probably flow to the Group;
(5) Costs related to the transactions, whether incurred or expected, can be reliably measured.

Generally, revenue is recognized as goods are delivered and ownership is transferred.

c. Proceeds from game service are recognized as advance receipts upon receiving deposits from customers and are recognized as revenue over the service periods or upon the consumption of deposits.
d. Customer loyalty program

The deferred revenue allocated to the customer loyalty program is estimated at fair value and is recognized as revenue when obligations have been fulfilled.

e. Commissions

Revenue from services rendered is recognized in profit or loss in proportion to the stage of completion of the transaction at the reporting date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

When the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognized is the net amount of commission made by the Group.

f. Revenue from room service and restaurants is recognized when the service is provided.
g. Dividend and interest income

If it is highly probable that the economic benefit associated with transactions made by an investee will flow to the Group, the dividend income attributable to investments is recognized on the date that it is certain that the Group will receive the dividend payments.

Interest arising from financial instruments is recognized when the economic benefits will probably flow to the Group and the amount can be reliably measured. Recognition is on an accrual basis, and revenue is in accordance with the weighted-average outstanding principal and effective interest rate.

Business Combination

A business combination uses the acquisition method. Goodwill is measured as an aggregation of the consideration transferred, which is measured at fair value at the acquisition date, and the amount of any non-controlling interest in the acquiree, net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed at fair value. If the residual balance is negative, the Group shall re-assess whether it has correctly identified all of the assets acquired and liabilities assumed, and recognize a gain on the bargain purchase thereafter.

5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of the consolidated financial statements in conformity with Taiwan-IFRSs requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The management will continually review the estimates and basic assumptions. Changes in accounting estimates will be recognized in the period of change and the future period of their impact.

a. Impairment assessment of tangible and intangible assets (goodwill is excluded)

In the process of impairment assessment, the Group should rely on subjective judgment to determine the individual cash flows of a specific group of assets and estimate future gain and loss according to the usage of assets and business characteristics. Alteration of estimates

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

from any change in economic conditions or business strategy may lead to significant impairment loss in the future.

Except for the assets from discontinued operations, the Group has not recognized any impairment loss for the years ended December 31, 2014 and 2013. For the recognition of impairment loss on the assets from discontinued operations, please refer to Note 6(f).

b. Impairment assessment of goodwill

The use value of the cash-generating units to which goodwill is allocated should be predetermined when assessing whether the goodwill is impaired. Management estimates the future cash flows from cash-generating units and assigns an appropriate discount rate in calculating present value. Significant impairment loss may occur if actual cash flows are less than forecasted.

As of December 31, 2014 and 2013, the carrying value of goodwill amounted to $15,845,930 thousand. The Group has not recognized any impairment loss on goodwill for the years ended December 31, 2014 and 2013.

c. Impairment assessment of investments accounted for using equity method

Impairment assessment is required if, and only if, there is objective evidence of impairment of investments accounted for using equity method and the carrying value may not be recoverable. Management assesses the impairment based on the expected future cash flows from the investee, including the growth rate of revenues estimated by the management of the investee. The general situation of the market and businesses which share similar characteristics is taken into consideration to assess the rationality of relevant assumptions.

The Group has not recognized any impairment loss on investments accounted for using equity method for the years ended December 31, 2014 and 2013.

d. Income tax

The realizability of deferred income tax assets (liabilities) depends on sufficient future profits or a taxable temporary difference. Any changes in the industry environment or amendments of law can result in significant adjustment of deferred income tax. As of December 31, 2014 and 2013, the carrying value of deferred income tax assets amounted to $882,732 thousand and $924,576 thousand, respectively; and the carrying value of deferred income tax liabilities amounted to $2,688,568 thousand and $2,599,791 thousand, respectively.

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

e. Useful lives of property, plant and equipment

Please refer to Note 6(i). The Group reviews the estimated useful lives of property, plant and equipment periodically.

f. Impairment assessment of accounts receivable

If there is any objective evidence of impairment, the Group will take account of estimates of future cash flows. An impairment loss is calculated as the difference between an asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Significant impairment loss may occur if actual cash flows are less than forecasted.

As of December 31, 2014 and 2013, the carrying value of accounts receivable amounted to $14,880,147 thousand and $14,373,340 thousand, respectively. They were the net amounts after subtracting the allowances for doubtful accounts amounting to $277,815 thousand and $288,620 thousand, respectively.

6. DESCRIPTION OF SIGNIFICANT ACCOUNTS

a. Cash and cash equivalents

Cash and cash equivalents
Government bonds with repurchase rights Cash in banks Time deposits Short-term notes and bills Cash on hand Revolving funds Available-for-sale financial assets Domestic listed stock Domestic emerging stock Domestic unlisted stock Beneficiary certificates	2014.12.31 $ 3,481,084 2,214,593 1,777,771 299,786 121,546 8,997 $ 7,903,777 2014.12.31 $ 204,310 893,103 2,587,050 2,009,447 $ 5,693,910	2013.12.31
		4,070,060 2,053,132 1,748,153 - 73,530 9,419
		7,954,294
		2013.12.31
		202,354 1,226,889 - 758,591
		2,187,834

b. Available-for-sale financial assets

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Current Non-current c. Non-current financial assets at cost Domestic unlisted stock Foreign unlisted stock	2014.12.31 $ 2,213,757 $ 3,480,153 2014.12.31 $ 185,602 7,050 $ 192,652	2013.12.31
		960,945
		1,226,889
		2013.12.31
		128,001 50,324
		178,325

The aforementioned investments held by the Group are measured at cost less impairment loss at year-end given that the range of reasonable fair value estimates is significant and the probability for each estimate cannot be reasonably determined. Therefore, the Group management has determined that the fair value cannot be measured reliably.

For the years ended December 31, 2014 and 2013, there was no impairment loss.

d. Accounts and notes receivable, net

Notes receivable Accounts receivable Less: allowance for doubtful accounts Accounts receivable, net Total	2014.12.31 $ 110,093 15,157,962 (277,815 ) 14,880,147 $14,990,240	2013.12.31 210,559 14,661,960 (288,620) 14,373,340 14,583,899

The Group entered into accounts receivable factoring contracts with asset management companies. The Group sold the asset management companies the overdue accounts receivable that had been written off. Under the contracts, the Group would no longer assume the risk on the receivables. The related information was as follows:

January 2014 Long Sun Asset Management Co., Ltd. January 2013 Hui Cheng First Asset Management Co., Ltd.	Amount of Accounts Receivable Sold	Proceeds of the Sale of Accounts Receivable
	$ 991,966	42,699
	$ 1,242,340	40,249

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

The accounts receivable aging analysis of the Group was as follows:

Neither past due nor impaired Past due but not impaired Past due within 180 days Past due over 180 days	2014.12.31 $ 14,417,430 462,436 281 $ 14,880,147	2013.12.31
		13,992,823 373,592 6,925
		14,373,340

Movements of allowance for doubtful receivables for the years ended December 31, 2014 and 2013, were as follows:

Beginning balance Add: Provision Reversal Less: Write-off Ending balance Inventories Merchandise Materials for maintenance Catering inventories	For the Years Ended December 31 2014 2013 $ 288,620 267,589 345,198 284,130 112,704 120,596 (468,707 ) (383,695) $ 277,815 288,620 2014.12.31 2013.12.31 $ 3,131,412 3,708,181 78,214 73,173 1,362 - $ 3,210,988 3,781,354
	2014 $ 288,620 345,198 112,704 (468,707 ) $ 277,815 2014.12.31 $ 3,131,412 78,214 1,362 $ 3,210,988

e. Inventories

For the years ended December 31, 2014 and 2013, the cost of goods sold recognized in consolidated comprehensive income amounted to $42,614,868 thousand and $38,099,625 thousand, respectively, which included the inventory write-downs amounting to $29,019 thousand and $21,738 thousand, respectively.

f. Non-current assets held for sale and discontinued operations
(1) Non-current assets held for sale
- (a) In November 2013, TFN decided to dispose of a piece of land and sold it to Chii Lih Development Enterprise Co., Ltd. The land was recorded as assets held for sale amounting to $50,275 thousand at the end of December 2013, and the transfer of the ownership, which was finished on January 28, 2014, led to a gain of $158,568 thousand.

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(b) In March 2014, the Board of Directors of momo resolved to sell the traditional retail business to We Can Medicines Co., Ltd. At the end of March 2014, the total value of machinery and equipment, storage equipment, and telecommunication equipment held for sale was $46,310 thousand, and a total impairment loss of $17,794 thousand was recognized through measurement at the lower of carrying amount and fair value less costs to sell. The above equipment was disposed of in June 2014, and a loss of $4,862 thousand was recognized under discontinued operations.
(2) Disclosure of profit and loss, and cash flows from discontinued operations

The profit and loss, and cash flows from discontinued operations are summarized as follows:

Profit and loss from discontinued operations: Operating revenue Operating costs Gross profit Operating expenses Other income and expenses Loss from discontinued operations before tax Non-operating income and expenses Loss on disposal of property, plant, and equipment Interest income Finance costs Others Tax revenue Loss from discontinued operations after tax Gain (loss) on disposal of the assets from discontinued operations Loss recognized on measurement of fair value less costs to sell of the assets from discontinued operations before tax Loss recognized on the disposal of the assets from discontinued operations before tax Tax revenue	For the Years Ended December 31 2014 2013 $ 172,273 735,436 138,848 462,299 33,425 273,137 102,382 546,335 (1,727) (3,800) (70,684 ) (276,998) (2,148 ) (25,083) 39 553 - (51) 1,086 1,107 12,183 51,080 (59,524) (249,392) (17,794 ) - (4,862 ) - 3,851 -
	2014 $ 172,273 138,848 33,425 102,382 (1,727) (70,684 ) (2,148 ) 39 - 1,086 12,183 (59,524) (17,794 ) (4,862 ) 3,851

Profit and loss from discontinued operations:
Operating revenue
Operating costs
Gross profit
Operating expenses
Other income and expenses
Loss from discontinued operations before
tax
Non-operating income and expenses
Loss on disposal of property, plant, and
equipment
Interest income
Finance costs
Others
Tax revenue
Loss from discontinued operations after tax
Gain (loss) on disposal of the assets from
discontinued operations
Loss recognized on measurement of fair
value less costs to sell of the assets from
discontinued operations before tax
Loss recognized on the disposal of the assets
from discontinued operations before tax
Tax revenue

For the Years Ended
December 31
2014
2013
$ 172,273
735,436
138,848
462,299
33,425
273,137
102,382
546,335
(1,727)
(3,800)
(70,684 )
(276,998)
(2,148 )
(25,083)
39
553
-
(51)
1,086
1,107
12,183
51,080
(59,524)
(249,392)
(17,794 )
-
(4,862 )
-
3,851
-

2014
$ 172,273
138,848
33,425
102,382
(1,727)
(70,684 )
(2,148 )
39
-
1,086
12,183
(59,524)
(17,794 )
(4,862 )
3,851

(Continued)

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Loss recognized on measurement of fair value less costs to sell of the assets disposed of from discontinued operations after tax Loss from discontinued operations after tax Cash flows from (used in) discontinued operations: Net cash from operating activities Net cash from investing activities Net cash from financing activities Net cash inflow (outflow)	For the Years Ended December 31 2014 2013 (18,805 ) - $(78,329) (249,392 ) $ 78,566 (113,534 ) 59,740 42,821 (9,684) (8,576) $ 128,622 (79,289 )
	2014 (18,805 ) $(78,329) $ 78,566 59,740 (9,684) $ 128,622

(Concluded)

(3) Profit (loss) from discontinued operations attributable to owners of parent: Please refer to Note 6(w).

g. Investments accounted for using equity method

2014.12.31 Amount % of Ownership $ - - 455,426 17.70 267,878 32.50 150,803 35.00 23,139 13.33 $ 897,246	2013.12.31	2013.12.31
Amount $ - 455,426 267,878 150,803 23,139 $ 897,246	Amount	% of Ownership
	1,566,952 409,142 284,748 - 28,514	49.90 17.70 32.50 - 19.23
	2,289,356

The fair value of the investments accounted for using equity method measured at the closing price in the open market on the reporting date was as follows:

Investee Company 2014.12.31 TPE $ 846,339 Financial information on the Group’s associates was as follows: 2014.12.31 Total assets $ 3,827,703 Total liabilities $ 689,475	2013.12.31 1,140,278 2013.12.31 10,659,757 4,994,076

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Operating revenues Profit Other comprehensive income Share of losses of associates accounted for using equity method	For the Years Ended December 31 2014 2013 $ 2,814,459 5,438,800 $ 69,377 17,845 $ 250,030 (22,144) $ (4,639) (55,403)
	2014 $ 2,814,459 $ 69,377 $ 250,030 $ (4,639)

(1) TNH

TNH was established with the approval of the Taipei City Government and entered into “the Build-operate-transfer project of investment in Songshan Tobacco Plant culture park contract” (the “BOT contract”) with the Department of Cultural Affairs, Taipei City Government, in 2009. TNH began to operate in May 2013.

On January 22, 2014, the Board of Directors of TNH resolved to increase TNH’s capital by $345,000 thousand, divided into 34,500 thousand shares with a par value of $10 per share. TWM subscribed for the shares based on its proportion of the shareholding, which remained at 49.9%, and paid $172,155 thousand on January 27, 2014.

On February 21, 2014, TWM obtained control of TNH due to a change in the Board members of TNH, and therefore, TNH is included in the consolidated entities as a subsidiary. For the acquisition of subsidiaries, please refer to Note 6(h).

(2) TPE

In August 2012, momo, a subsidiary of TWM, acquired 20% of TPE.

As of December 2013, momo held 17.70% of TPE due to not subscribing for new shares and selling part of its shares when TPE went public. Momo still has significant influence on TPE due to two seats on the Board.

(3) Kbro Media Co., Ltd.

In August 2012, TFNM, a subsidiary of TWM, acquired 32.5% of Kbro Media Co., Ltd.

On December 26, 2012, Kbro Media Co., Ltd.’s Board of Directors resolved to increase Kbro Media Co., Ltd.’s capital by $660,000 thousand, divided into 66,000

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

thousand shares with a par value of $10 per share, with a record date of January 31, 2013. TFNM subscribed for the shares based on its proportion of the shareholding, which remains at 32.5%.

(4) TVD Shopping

In April 2014, momo acquired 35% of TVD Shopping.

(5) ADT

In November 2013, TWM acquired 19.23% of ADT.

In 2014, TWM held 13.33% of ADT due to not subscribing for new shares.

TWM holds less than 20% of ADT but still has significant influence on ADT due to a seat on the Board.

h. Subsidiaries and transactions with non-controlling interests
(1) Acquisition of subsidiaries

TWM obtained control of TNH due to the change in the members on the Board of TNH through the election on February 21, 2014. TWM’s shareholding remained at 49.9%. TNH mainly engages in real estate leasing and hotel business.

(a) Assets acquired and liabilities assumed

Current assets Cash and cash equivalents Others Non-current assets Service concession Others Current liabilities Non-current liabilities Long-term borrowings Others	TNH $ 1,193,252 79,777 7,460,415 5,656 (647,681) (3,285,841) (1,339,944) $ 3,465,634

The Group’s shareholding of TNH was 49.9% before obtaining control of TNH, at which time the book value and fair value were equivalent. Therefore, the gain and loss arising from remeasurement were not significant.

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(b) Operating influences of combination

The Group’s share of operating revenue and net loss of TNH was $238,023 thousand and $13,229 thousand, respectively, for the period from February 21 to December 31, 2014. If the business combination had occurred at the beginning of the fiscal year, the pro forma operating revenue and net loss in the Group’s consolidated comprehensive income statement would have been $274,198 thousand and $32,425 thousand, respectively, for the year ended December 31, 2014. The pro forma revenue and net loss could not be regarded as the actual operating outcome on the basis that the business combination occurred at the beginning of the year and revenue and net loss were projected into the future.

(2) Disposal of subsidiaries

In September 2014, TT&T disposed of all of its ownership in TMB to Fubon Financial Holding Venture Co., Ltd., which caused a disposal loss of $168 thousand and the loss of control of TMB. Net cash inflow from the disposal of TMB was as follows:

Cash consideration received Less: Cash and cash equivalents of TMB Net cash inflow	$ 21,360 6,827
	$ 14,533

(3) Transactions with non-controlling interests

(a) WMT disposed of part of its shareholding in momo in February and December 2014. Despite WMT’s non-proportional investment in momo’s increase in capital and the decrease in the shareholding in momo from 50.64% to 44.38%, WMT still maintains control of momo and therefore deemed it an equity transaction.

(i) Cash consideration received
Increase in non-controlling interests due to equity transaction
involving subsidiaries
Other adjustments
Capital surplus - difference between consideration and
carrying amounts of subsidiaries’ shares disposed of
(ii) Proceeds from capital injection
Increase in non-controlling interests due to equity transaction
involving subsidiaries
Other adjustments
Capital surplus - changes in equity of subsidiaries

$ 323,859
(229,995)
(7,899)
$ 85,965
$ 3,262,970
(2,688,317)
2,219
$ 576,872

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(b)Due to non-proportional investment in an investee’s increase in capital in 2014 (Tong-An Investment Co., Ltd., TPE, Kuo Chi Investment Corp., and Fubon Financial Holding Venture Co., Ltd. participated in the capital increase), momo’s ownership percentage in Asian Crown decreased from 100% to 76.26%, and due to HK Fubon Multimedia’s non-proportional investment in FGE, its ownership percentage in FGE increased from 87.5% to 91.30%. The above transactions did not result in losing control of FGE, and therefore these were equity transactions.

Proceeds from capital injection Increase in non-controlling interests due to equity transaction involving subsidiaries Capital surplus - changes in equity of subsidiaries	$ 249,830 (175,796) $ 74,034

Due to non-proportional investment in an investee’s increase in capital in 2013, momo’s ownership percentage in FGE increased from 80% to 87.5%. The change in momo’s ownership interest in FGE, which did not result in losing control of FGE, was an equity transaction, decreasing unappropriated retained earnings and increasing non-controlling interests by $22,015 thousand.

i. Property, plant and equipment

Movements of the cost, depreciation, and impairment of property, plant and equipment of the Group for the years ended December 31, 2014 and 2013, were as follows:

Cost: Balance, January 1, 2014 Additions Acquisition from combination Reclassification Disposals Effect of deconsolidation of subsidiaries Effect of exchange rate changes Balance, December 31, 2014 Balance, January 1, 2013 Additions Reclassification Disposals Effect of exchange rate changes Balance, December 31, 2013	Land $ 8,675,595 1,717,927 - (26,837) - - - $ 10,366,685 $ 6,735,900 - 1,939,695 - - $ 8,675,595	Buildings 4,961,737 2,061 - (16,098) - - - 4,947,700 4,145,550 748 815,439 - - 4,961,737	Telecommunication equipment and machinery 73,940,408 282,376 - 10,814,268 (6,180,508) - 6,588 78,863,132 70,234,280 284,480 9,386,062 (5,974,854) 10,440 73,940,408	Miscellaneous equipment 6,049,561 408,312 10,232 677,283 (167,523 ) (1,463 ) 2,891 6,979,293 5,540,378 504,004 411,398 (410,944 ) 4,725 6,049,561	Construction in progress and equipment to be inspected 3,162,832 12,465,544 - (11,635,447) (7,332) - - 3,985,597 4,060,086 11,662,533 (12,522,151) (37,636) - 3,162,832	Total 96,790,133 14,876,220 10,232 (186,831 ) (6,355,363 ) (1,463 ) 9,479 105,142,407 90,716,194 12,451,765 30,443 (6,423,434 ) 15,165 96,790,133

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Accumulated depreciation and impairment: Balance, January 1, 2014 Depreciation Acquisition from combination Reclassification Disposals Effect of deconsolidation of subsidiaries Effect of exchange rate changes Balance, December 31, 2014 Balance, January 1, 2013 Depreciation Reclassification Disposals Effect of exchange rate changes Balance, December 31, 2013 Carrying amount: Balance, December 31, 2014 Balance, December 31, 2013	Land $ 83,426 - - - - - - $ 83,426 $ 83,426 - - - - $ 83,426 $ 10,283,259 $ 8,592,169	Buildings 1,260,526 144,045 - (5,760) - - - 1,398,811 1,127,005 138,216 (4,695) - - 1,260,526 3,548,889 3,701,211	Telecommunication equipment and machinery 48,470,898 8,659,533 - (80,647) (5,222,019) - 3,221 51,830,986 45,302,209 7,795,085 - (4,628,743) 2,347 48,470,898 27,032,146 25,469,510	Miscellaneous equipment 3,989,482 914,638 835 15,095 (157,794 ) (1,257 ) 1,866 4,762,865 3,465,876 830,711 (19,452 ) (289,112 ) 1,459 3,989,482 2,216,428 2,060,079	Construction in progress and equipment to be inspected - - - - - - - - - - - - - - 3,985,597 3,162,832	Total 53,804,332 9,718,216 835 (71,312 ) (5,379,813 ) (1,257 ) 5,087 58,076,088 49,978,516 8,764,012 (24,147 ) (4,917,855 ) 3,806 53,804,332 47,066,319 42,985,801

(1) The estimated useful lives, for the current and comparative years, of significant items of property, plant and equipment are as follows:
(a) Buildings

(a) Buildings
Primary buildings	20~55 years
Mechanical and electrical equipment	15 years
(b) Telecommunication equipment and machinery	2~20 years
(c) Miscellaneous equipment	2~20 years

(2) The non-cash investing activities of the Group for the years ended December 31, 2014 and 2013, were as follows:

Acquisition of property, plant and equipment Changes in other payables Changes in provisions Cash paid for acquisition of property, plant and equipment	For the Years Ended December 31 2014 2013 $ 14,876,220 12,451,765 (1,215,3244) (783,810) (91,838) (142,049) $ 13,569, 058 11,525,906

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

j. Investment property

Land: Cost Buildings: Cost Accumulated depreciation Carrying amount Total investment property Fair value Capitalization rate	2014.12.31 $ 261,905 $ 137,465 45,162 $ 92,303 $ 354,208 $ 1,113,847 1.06%~4.20%	2013.12.31
		235,068
		121,367 36,041
		85,326
		320,394
		717,142
		1.19%~3.12%

Properties were reclassified from property, plant and equipment to investment property since the properties were no longer used by the Group and it was decided to lease them to a third party.

Fair value of a property is determined through the income approach, comparative approach, and cost approach by an independent appraisal company.

k. Intangible assets

The cost, amortization, and impairment of intangible assets of the Group for the years ended December 31, 2014 and 2013, were as follows:

Concessions Concession license Service concession Goodwill $ 39,291,000 - 15,845,930 - 419,832 - - 7,460,415 - - - - - (144,119 ) - - - - $ 39,291,000 7,736,128 15,845,930		Other intangible assets	Other intangible assets	Other intangible assets
Concession license	Computer software 2,020,208 147,170 - (3,357 ) 319,334 831 2,484,186	Customer relationship 2,849,197 - - - - - 2,849,197	Operating rights 1,382,000 - - - - - 1,382,000	Trademarks 2,517,860 6 - - - - 2,517,866
$ 39,291,000 - - - - -
$ 39,291,000

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Concessions Concession license Service concession $ 10,281,000 - 29,010,000 - - - - - - - $ 39,291,000 - $ 6,542,455 - 1,242,548 138,833 - - - - $ 7,785,003 138,833 $ 5,794,746 - 747,709 - - - - - $ 6,542,455 - $ 31,505,997 7,597,295 $ 32,748,545 -		Other intangible assets	Other intangible assets	Other intangible assets	Others 5,631 - (739 ) - 215 5,107
Concession license	Computer software 1,664,031 181,894 (51,979 ) 224,939 1,323 2,020,208 1,502,406 353,162 (3,357 ) 467 1,852,678 1,232,525 321,025 (51,651 ) 507 1,502,406 631,508 517,802	Customer relationship 2,849,197 - - - - 2,849,197 1,023,771 136,400 - - 1,160,171 860,198 163,573 - - 1,023,771 1,689,026 1,825,426	Operating rights 1,382,000 - - - - 1,382,000 - - - - - - - - - - 1,382,000 1,382,000	Trademarks 2,517,290 570 - - - 2,517,860 579 199 - - 778 400 179 - - 579 2,517,088 2,517,281
$ 10,281,000 29,010,000 - - -
$ 39,291,000
$ 6,542,455 1,242,548 - -					4,820 287 - 110 5,217 3,056 1,663 - 101 4,820 - 287
$ 7,785,003
$ 5,794,746 747,709 - -
$ 6,542,455
$ 31,505,997
$ 32,748,545

The estimated useful lives for the current and comparative periods are as follows:

(1)	4G concession license	16 years and 4 months ~16 years and 7 months
(2)	3G concession license	13 years and 9 months
(3)	Service concession	44 years and 1 months ~50 years
(4)	Computer software	2~10 years
(5)	Customer relationship	20 years
(6)	Trademarks	10 years
(7)	Others	1~3 years

(1) 4G concession license

TWM won the Mobile Broadband Spectrum frequency of 30 MHz x 2 for 4G service on October 30, 2013. The bid price was $29,010,000 thousand ($10,485,000 thousand

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

for 15 MHz x 2 in the 700 MHz frequency band and $18,525,000 thousand for 15 MHz x 2 in the 1800 MHz frequency band).

(2) Service concession

On January 15, 2009, TNH signed the BOT contract with the Department of Cultural Affairs, Taipei City Government. Under the BOT contract, TNH obtained the right to build and operate the development project on the location of old Songshan Tobacco Plant. The development concession premium of superficies is amortized on a straight-line basis during the contract period, and the construction costs are amortized on a straight-line basis from the completion date of the construction to the BOT contract expiry date.

(3) Customer relationship, trademarks, and operating rights

The Group measures the fair value of the acquired assets when acquisition occurs, and identifies the fair value and amortization periods of the intangible assets which conform to materiality and related standards. Although some of the intangible assets such as operating rights and trademarks have a legal useful life, which can be extended, the Group regards these assets as intangible assets with indefinite useful life.

(a) On April 17, 2007, TFN, TWM’s 100%-owned subsidiary, acquired more than 50% of the former Taiwan Fixed Network Co., Ltd. (the former TFN) through a public tender offer. TWM divided the former TFN and its subsidiaries into two cash-generating units: fixed network service and cable television business. Accordingly, customer relationship and operating rights are identified as major intangible assets.
(b) Taiwan United Communication Co., Ltd. (TUC) was merged into TFN on January 1, 2008. In September 2007, TUC, TWM’s 100%-owned subsidiary, acquired more than 50% of Taiwan Telecommunication Network Services Co., Ltd. (TTN) shares. TTN was merged into TFN on August 1, 2008. TWM measured the fair value of the acquired assets and viewed TTN’s ISP services as one cash-generating unit. Accordingly, customer relationship is identified as a major intangible asset.
(c) On September 1, 2010, TFNM, TWM’s 100%-owned subsidiary, acquired 55% of TKT. On August 12, 2011, TFNM acquired 45% of TKT. TWM measured the fair value of the acquired assets and viewed TKT’s wireless services as one cash-generating unit. Accordingly, trademarks and customer relationship are identified as major intangible assets.

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(d) On July 13, 2011, WMT, TWM’s 100%-owned subsidiary, acquired more than 50% of momo. TWM measured the fair value of the acquired assets and viewed momo’s retail business as one cash-generating unit. Accordingly, trademarks are identified as major intangible assets.

(4) Goodwill

The carrying amounts of goodwill allocated to the above units were as follows:

Mobile communication service Fixed network service Cable television business Retail business	2014.12.31 $ 7,238,758 357,970 3,269,636 4,979,566 $ 15,845,930	2013.12.31
		7,238,758 357,970 3,269,636 4,979,566
		15,845,930

(5) Impairment of assets

In conformity with IAS 36 Impairment of Assets , the Group identified mobile communication service, fixed network service, the cable television business, and the retail business as the smallest identifiable units which can generate cash inflows independently.

The recoverable amounts of the operating assets and intangible assets were evaluated by business type, and the critical assumptions used for this evaluation were as follows:

(a) Mobile communication service

(i) Assumptions on cash flows

The five-year cash flow projections were estimated on the basis of previous experience, actual operating results, and the financial budget.

(ii) Assumptions on operating revenues

After taking changes in the telecom industry and competitive landscape into consideration, operating revenues were estimated on the basis of the projected changes in subscriber numbers, minutes of incoming and outgoing calls, and average revenue per minute.

(iii) Assumptions on operating costs and expenses

The estimates of activation commissions and customer retention costs were

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

based on the new customers obtained and existing customers maintained. The estimates of remaining costs and expenses were based on the cost drivers of each item.

(iv) Assumptions on discount rate

For the years ended December 31, 2014 and 2013, the discount rate used to calculate the asset recoverable amounts of TWM was 5.56% and 4.68%, respectively.

(b) Fixed network service
(i) Assumptions on cash flows

The five-year cash flow projections were made on the basis of previous experience, actual operating results, and the financial budget.

(ii) Assumptions on operating revenues

After taking into consideration the changes in the telecom industry and TWM’s growth of operations, the operating revenues were estimated based on the demand for the various types of data transmission and broadband volume.

(iii) Assumptions on operating costs and expenses

The estimates of operating costs and expenses were based on the cost drivers of each cost and expense.

(iv) Assumptions on discount rate

For the years ended December 31, 2014 and 2013, the discount rates were 6.17% and 5.31%, respectively, in calculating the asset recoverable amounts of TFN.

(c) Cable television business
(i) Assumptions on cash flows

The five-year cash flow projections were estimated on the basis of previous experience, actual operating results, and the financial budget.

(ii) Assumptions on operating revenues

After taking changes in the cable television industry and competitive landscape into consideration, operating revenues were estimated on the basis of the projected changes in subscriber numbers and average revenue per

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

subscriber.

(iii) Assumptions on operating costs and expenses

The estimates of cost of commissions, customer service costs, and bill processing costs were based on the projected changes in subscriber numbers. The estimates of remaining costs and expenses were based on the actual costs and expenses as a proportion of operating revenues.

(iv) Assumptions on discount rate

The discount rates used to calculate the asset recoverable amounts for each system operator ranged from 4.38% to 4.92% and from 8.28% to 8.38% for the years ended December 31, 2014 and 2013, respectively.

(d) Retail business
(i) Assumptions on cash flows

The five-year cash flow projections were estimated on the basis of previous experience, actual operating results, and the financial budget.

(ii) Assumptions on operating revenues

After taking into consideration the changes in the retail business industry and competitiveness of the market, the operating revenues were estimated based on the classification and the average price of commodities, and the degree of the contribution of the customers.

(iii) Assumptions on operating costs and expenses

The costs and expenses were based on the actual costs and expenses as a proportion of operating revenues.

(iv) Assumptions on discount rate

For the years ended December 31, 2014 and 2013, the discount rates in calculating the asset recoverable amounts were 15.55% and 7.29%, respectively.

Based on the key assumptions of each cash-generating unit, the Group’s management believes that the carrying amounts of these operating assets and intangible assets will not exceed their recoverable amounts even if there are any reasonable changes in the critical assumptions used to estimate recoverable amounts. Thus, there was no impairment of intangible assets for the years ended December 31, 2014 and 2013.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

l. Other non-current assets Long-term accounts receivable Refundable deposits Prepayments for equipment Others	2014.12.31 $ 4,717,815 579,457 78,501 513,047 $ 5,888,820	2013.12.31
		4,198,548 561,223 59,619 525,792
		5,345,182

m.Short-term borrowings and short-term notes and bills payable

Unsecured loans－financial institutions Short-term notes and bills payable Less: Discount on short-term notes and bills payable Unsecured loans－financial institutions Secured loans－financial institutions (related parties) Short-term notes and bills payable Less: Discount on short-term notes and bills payable	2014.12.31 Annual interest rate Amount 0.83%~1.08% $ 18,900,000 0.868%~0.915% $ 5,600,000 (6,969) $ 5,593,031 2013.12.31 Annual interest rate Amount 0.83%~1.15% $ 30,500,000 6.3%~7.224% 105,813 $ 30,605,813 0.62%~0.72% $ 2,400,000 (3,029) $ 2,396,971
	Annual interest rate 0.83%~1.15% 6.3%~7.224% 0.62%~0.72%

For financial risk information of the Group, please refer to Note 6(ac); for the information on loans from related parties, please refer to Note 7; and for the information on time deposits pledged as collateral for bank loans and commitments, please refer to Note 8 and Table 2.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

n. Advance receipts

Advance receipts
Advance receipts from customers Deferred customer loyalty revenu~~es~~ Others	2014.12.31 $ 2,100,001 58,172 106,439 $ 2,264,612	2013.12.31
		2,405,345 51,116 163,445
		2,619,906

(1) In accordance with the NCC’s policy, TWM entered into a contract with First Commercial Bank Co., Ltd. which provided a performance guarantee for advance receipts from prepaid cards and electronic gift certificates amounting to $524,500 thousand and $11,609 thousand, respectively, as of December 31, 2014.
(2) In accordance with the NCC’s policy, TFN entered into a contract with First Commercial Bank Co., Ltd. which provided a performance guarantee for advance receipts from International Direct Dialing (IDD) calling cards amounting to $38 thousand as of December 31, 2014.
(3) In accordance with the NCC’s policy, cable television companies should provide a performance deposit based on a certain proportion of the advance receipts for a prepaid period. As of December 31, 2014, the cable television companies had provided $55,742 thousand as a performance deposit, classified as other non-current financial assets.
(4) In accordance with the Ministry of Economic Affairs’ policy, momo entered into a contract with First Commercial Bank Co., Ltd. which provided a performance guarantee for advance receipts from prepaid bonus amounting to $16,854 thousand as of December 31, 2014.
(5) In accordance with the NCC’s and the Ministry of Economic Affairs’ policies, TKT entered into a contract with Mega International Commercial Bank Co., Ltd. which provided a performance guarantee for advance receipts from prepaid music cards amounting to $1,447 thousand as of December 31, 2014.
o. Bonds payable

3rd domestic unsecured bonds 4th domestic unsecured bonds	2014.12.31 $ 8,996,692 5,797,601 $ 14,794,293	2013.12.31
		8,995,936 5,796,711
		14,792,647

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(1) 3rd domestic unsecured bonds

On December 20, 2012, TWM authorized Hua Nan Commercial Bank as a trustee to issue $9,000,000 thousand of seven-year 3rd domestic unsecured bonds, each having a face value of $10,000 thousand and a coupon rate of 1.34% per annum, with simple interest due annually. Repayment will be made in the sixth and seventh years with equal installments, i.e., $4,500,000 thousand. As of December 31, 2014, the amount of unamortized bond issue cost was $3,308 thousand.

Future repayments of the above-mentioned corporate bonds are as follows:

Future repayments of the above-mentioned corporate bonds	are as follows:
Year 2018 2019	Amount
	$ 4,500,000 4,500,000
	$9,000,000

(2) 4th domestic unsecured bonds

On April 25, 2013, TWM authorized Hua Nan Commercial Bank as a trustee to issue $5,800,000 thousand of five-year 4th domestic unsecured bonds, each having a face value of $10,000 thousand and a coupon rate of 1.29% per annum, with simple interest due annually. Repayment will be made in the fourth and fifth years with equal installments, i.e., $2,900,000 thousand. As of December 31, 2014, the amount of unamortized bond issue cost was $2,399 thousand.

Future repayments of the above-mentioned corporate bonds are as follows:

Year 2017 2018	Amount
	$ 2,900,000 2,900,000
	$5,800,000

p. Long-term borrowings

Unsecured loans－financial institutions Secured loans－financial institutions Less: current portion	2014.12.31	2014.12.31
	Annual interest rate 1.05%~1.095% 2.2526% 1.05%~2.2526%	Amount
		$ 12,000,000 3,390,544 (2,208,218)
		$ 13,182,326

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Unsecured loans－financial institutions Less: current portion	2013.12.31 Annual interest rate Amount 1.05% $ 3,000,000 (1,000,000) $ 2,000,000
	Annual interest rate 1.05%

(1) Unsecured loans

TWM obtained credit facilities from banks for mid-term operating capital. The facilities will last 2 years from the date of drawing, and the interest will be paid quarterly. The credit facilities are subject to covenants regarding debt ratio and interest protection multiples during the facility period.

(2) Secured loans

On January 22, 2010, TNH entered into a syndicated loan agreement with Bank of Taiwan, Taipei Fubon Bank, etc., nine banks in total, for the investment under the BOT contract. The aggregate credit and guarantee amount were up to $3,565,000 thousand for 7 years, including the grace period of 4 years. TWM would pay interest monthly. In accordance with the contract, the financial covenants regarding the current ratio, equity ratio, and interest protection multiples must be complied with during the facility period. TNH has pledged the property of the BOT contract and its superficies as collateral; please refer to Note 8.

q. Provisions

Restoration Warranties Decommissioning Current Non-current	2014.12.31 $ 1,105,662 62,524 63,246 $ 1,231,432 $ 217,083 1,014,349 $ 1,231,432	2013.12.31
		1,021,896 52,059 -
		1,073,955
		193,886 880,069
		1,073,955

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Balance, January 1, 2014 Provision Acquisition from combination Reversal Unwinding of discount Payment Balance, December 31, 2014 Balance, January 1, 2013 Provision Reversal Unwinding of discount Payment Balance, December 31, 2013	Restoration $ 1,021,896 109,076 - (22,084) 13,092 (16,318) $ 1,105,662 $ 875,805 175,766 (23,589) 14,261 (20,347) $ 1,021,896	Warranties 52,059 102,395 - (34,841 ) - (57,089 ) 62,524 - 91,050 - - (38,991 ) 52,059	Decommis- sioning - 36,819 25,494 - 933 - 63,246 - - - - - -	Total 1,073,955 248,290 25,494 (56,925) 14,025 (73,407) 1,231,432 875,805 266,816 (23,589) 14,261 (59,338) 1,073,955

r. Other non-current liabilities

Construction retainage payable Concession payable Less: Discounts on concession payable Others	2014.12.31 $ 95,465 950,325 (131,923) 19,744 $ 933,611	2013.12.31
		- - - 19,744
		19,744

Concession payable is the development concession from the BOT contract between the Department of Cultural Affairs and TNH; please refer to Note 9(b).

s. Operating lease

(1) Lessee

Non-cancellable rentals payable of operating leases are as follows:

Less than one year Between one and five years More than five years	2014.12.31 $ 2,989,343 4,823,342 102,907 $ 7,915,592	2013.12.31
		2,920,143 5,403,480 123,538
		8,447,161

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

The Group leases offices, maintenance centers, stores, base transceiver stations, machine rooms, etc., under operating leases. The leases typically run for a period of 1 to 5 years, with an option to renew the lease.

As of December 31, 2014 and 2013, the Group anticipated it would receive total future minimum sublease payments under the non-cancellable sublease contracts in the amount of $9,058 thousand and $9,930 thousand, respectively.

The payment of leases and subleases, recognized as gains or losses, was as follows:

Minimum lease payment Sublease payment	For the Years Ended December 31	For the Years Ended December 31
	2014 $ 3,437,000 (3,499) $ 3,433,501	2013
		3,316,424 (3,263)
		3,313,161

(2) Lessor

The Group leases out investment properties under operating leases. The future minimum lease payment receivables under non-cancellable leases are as follows:

Less than one year Between one and five years	2014.12.31 $ 15,232 14,866 $ 30,098	2013.12.31
		20,036 22,220
		42,256

t. Employee benefits

(1) Defined benefit plan

The present value of the defined benefit obligations and fair value of plan assets are as follows:

Present value of defined benefit obligations Fair value of plan assets Unfunded defined benefit obligation Unrecognized prior service cost Accrued pension liability	2014.12.31 $ 881,719 (744,937 ) 136,782 (14,359 ) $ 122,423	2013.12.31 851,574 (720,010) 131,564 (16,101) 115,463

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

The Group established the pension fund account for the defined benefit plan in Bank of Taiwan. The plan, under the Labor Standards Law, provides benefits based on an employee’s length of service and average monthly salary for six-month period prior to retirement.

(a) Composition of plan assets

According to the “Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund”, with regard to the utilization of the Fund, its minimum earnings in the annual distributions shall be no less than the earnings attainable from two-year time deposits with the interest rates offered by local banks.

The information related to the pension fund includes the asset allocation and yield of the fund. Please refer to the information published on the website of the Council of Labor Affairs.

(b) Movements in present value of the defined benefit obligations

The movements in present value of defined benefit obligations for the years ended December 31, 2014 and 2013, were as follows:

Defined benefit obligation, January 1 Benefits unpaid by the plan Current service costs Interest cost Actuarial losses (gains) Defined benefit obligation, December 31	For the Years Ended December 31 2014 2013 $ 851,574 851,210 (14,372 ) (10,805) 2,626 3,295 16,032 12,802 25,859 (4,928) $ 881,719 851,574
	2014 $ 851,574 (14,372 ) 2,626 16,032 25,859 $ 881,719

(c) Movements of defined benefit plan assets

The movements in the present value of the defined benefit plan assets for the years ended December 31, 2014 and 2013, were as follows:

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Fair value of plan assets, January 1 Contributions made Benefits paid by the plan Expected return on plan assets Actuarial gains (losses) Fair value of plan assets, December 31	For the Years Ended December 31 2014 2013 $ 720,010 717,130 22,195 4,655 (14,372 ) (10,805) 14,452 13,398 2,652 (4,368) $ 744,937 720,010

(d) Expenses recognized in profit or loss

The expenses recognized in profit or loss for the years ended December 31, 2014 and 2013, were as follows:

Current service costs Interest cost Past service costs Expected return on plan assets Actual return on plan assets	For the Years Ended December 31 2014 2013 $ 2,626 3,295 16,032 12,802 1,742 1,742 (14,452) (13,398) $ 5,948 4,441 $ 17,103 9,033
	2014 $ 2,626 16,032 1,742 (14,452) $ 5,948 $ 17,103

(e) The pre-tax actuarial gains (losses) recognized in other comprehensive income

The Group’s pre-tax actuarial gains and losses recognized in other comprehensive income for the years ended December 31, 2014 and 2013, were as follows:

Cumulative amount, January 1 Recognized during the period Cumulative amount, December 31	For the Years Ended December 31 2014 2013 $ (42,725 ) (43,285) (23,207) 560 $ (65,932) (42,725)
	2014 $ (42,725 ) (23,207) $ (65,932)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(f) Actuarial assumptions

The following are the principal actuarial assumptions at the measurement date:

Discount rate Expected return on plan assets Long-term average adjustment rate of salary	2014.12.31 1.875%~2.125% 1.75%~2.00% 2.50%~3.00%	2013.12.31
		1.875% 1.75%~2.00% 2.50%~3.00%

The expected rate of return of plan assets is based on the portfolio as a whole and not on the sum of the returns on individual asset categories. The return is based exclusively on historical returns, without adjustments.

The Group expected $27,041 thousand in contributions to be paid to its benefit plans within a year of the December 31, 2014, reporting date.

(g) Historical information

Present value of the defined benefit obligation Fair value of plan assets Deficit in the plan Experience adjustments arising on plan liabilities Experience adjustments arising on plan assets		2014.12.31	2013.12.31	2012.12.31
	$
	$
	$
	$	2,652

(2) Defined contribution plans

The Group contributed 6% of each employee’s monthly wages to a labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. The Group contributed a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligations.

The Group’s contribution to the pension plan amounted to $257,572 thousand and $245,044 thousand for the years ended December 31, 2014 and 2013, respectively.

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u. Income tax from continuing operations

(1) Income tax expense recognized in profits or losses

		For the Years Ended	For the Years Ended
		December 31
		2014	2013
Current income tax expense
Current period	$	2,868,296	2,685,164
Prior years’ adjustment on current income tax		230,781	38,459
		3,099,077	2,723,623
Deferred income tax expense
Current period		298,266	628,217
Reversal of temporary difference		(163,700)	-
		134,566	628,217
Income tax expense	$	3,233,643	3,351,840
Income tax recognized in other comprehensive income
		For the Years Ended
		December 31
		2014	2013
Deferred income tax expense (income)
Defined benefit plan actuarial gains and losses	$	(3,945 )	95

(2) Income tax recognized in other comprehensive income

(3) The reconciliation of profit before tax to income tax expense was as follows:

Profit before tax Income tax expense at domestic statutory tax rate Effect of different tax rates on the Group entities Temporary differences Deferred income taxes Investment tax credit Unrecognized loss carryforwards Prior years’ adjustment Others	For the Years Ended December 31 2014 2013 $ 18,865,077 19,419,013 3,207,063 3,301,232 (19,537) (19,694) (314,915 ) (672,325) 134.566 628,217 (48,001 ) - 56,442 59,336 230,781 38,459 (12,756 ) 16,615 $ 3,233,643 3,351,840
	2014 $ 18,865,077 3,207,063 (19,537) (314,915 ) 134.566 (48,001 ) 56,442 230,781 (12,756 ) $ 3,233,643

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(4) Deferred tax assets and liabilities
(a)Unrecognized deferred tax assets items

Loss carry-forwards Impairment loss on financial assets	2014.12.31 $ 1,351,696 1,208,366 $ 2,560,062	2013.12.31 799,999 1,208,366 2,008,365

As of December 31, 2014, the Group had not recognized the prior years’ loss carry-forwards as deferred tax assets. The expiry years are as follows:

Remaining Creditable Amount $ 121,341 284,415 311,895 290,718 47,142 94,017 50,934 118,808 32,426 $ 1,351,696	Expiry Year
	2016 2017 2018 2019 2020 2021 2022 2023 2024

(b) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for the years ended December 31, 2014 and 2013, were as follows:

Deferred Tax Assets :

Balance, January 1 ,2014 Recognized in profit or loss Recognized in other comprehensive income Balance, December 31, 2014 Balance, January 1 ,2013 Recognized in profit or loss Recognized in other comprehensive income Balance, December 31, 2013	Property, Plant and Equipment $ 772,621 (69,049) - $ 703,572 $ 889,773 (117,152) - $ 772,621	Accrued Pension Liabilities 44,257 391 3,623 48,271 44,181 262 (186 ) 44,257	Others 107,698 23,191 - 130,889 138,890 (31.192 ) - 107,698	Total 924,576 (45,467) 3,623 882,732 1,072,844 (148,082) (186) 924,576

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Deferred Tax Liabilities:

Accounts Receivable	Accrued Pension Liabilities	Others
$ 1,855,071 182,315 -
$ 2,037,386
$ 1,487,266 367,805 -
$ 1,855,071	20,360	4,775

Integrated income tax information was as follows:

Integrated income tax information was as follows:
Balance of the Group’s imputation credit account (ICA)	2014.12.31 $ 1,234,356	2013.12.31
		1,312,654

As of December 31, 2014, there were no unappropriated earnings generated before 1997. The estimated tax creditable ratio for 2014 and actual tax creditable ratio for 2013 were 16.09% and 14.14%, respectively, based on Decree No. 10204562810 announced on October 17, 2013, by the Ministry of Finance of the Republic of China. Under the Integrated Income Tax System, ROC resident shareholders are allowed a tax credit for the income tax paid by TWM. An imputation credit account (ICA) is maintained by TWM for such income tax, and a tax credit is allocated to each shareholder. Actual allocation of the imputation credit account is based on the balance on the date of dividend distribution. Therefore, the estimated tax creditable ratio may differ from the actual tax creditable ratio for the 2014 earnings appropriation.

The latest years for which income tax returns have been examined and cleared by the tax authorities were as follows:

TWM TCC WMT GWMT GFMT TDC TDS (established on April 2, 2013) TCCI TID	Year
	2012 2012 2012 2012 2012 2012 - 2012 2012

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TFN TT&T TUI WTVB TFNM UCTV YJCTV MCTV PCTV GCTV TKT momo FST FLI FPI TNH	Year
	2012 2013 2012 2012 2012 2011 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012

TWM’s income tax returns for the years up to 2012 have been examined by the tax authorities. TWM disagreed with the examination results of the income tax returns for 2011 and 2012 and requested reexaminations.

TFN’s income tax returns up to 2012 have been examined by the tax authorities. TFN disagreed with the examination results of the income tax return for 2010 and 2011 and requested reexaminations. The tax authorities approved TFN’s application for correction for 2011.

TFNM’s income tax returns up to 2012 have been examined by the tax authorities. TFNM disagreed with the examination results of the income tax return for 2008 and requested a reexamination.

v. Capital and other equity
(1) Ordinary shares

As of December 31, 2014, TWM had authorized 6,000,000 thousand ordinary shares, with 3,420,833 thousand shares outstanding (par value $10).

(2) Capital surplus

Additional paid-in capital from convertible corporate bonds Treasury share transactions	2014.12.31 $ 8,775,820 5,159,704	2013.12.31
		8,775,820 3,639,301

(Continued)

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Difference between consideration and carrying amount of subsidiaries’ shares disposed of Changes in equity of subsidiaries Changes in equity of associates accounted for using equity method Others	2014.12.31 85,965 652,219 26,705 15,417 $ 14,715,830	2013.12.31
		- 1,313 25,040 15,417
		12,456,891
		(Concluded)

Under the Company Act, capital surplus generated from the excess of the issue price over the par value of capital stock, including the stock issued for new capital, the conversion premium from convertible corporate bonds, the difference between consideration and carrying amount of subsidiaries’ shares acquired or disposed of, and treasury share transactions, may be applied to cover a deficit, or be transferred to capital as stock dividends, or be distributed as cash dividends when there is no deficit, and this transfer is restricted to a certain percentage of the paid-in capital. The capital surplus arising from changes in equity of subsidiaries could be applied to cover a deficit.

(3) Legal reserve

According to the Company Act, a company shall first set aside ten percent of its income after taxes as legal reserve until it equals the paid-in capital. After offsetting any deficit, the legal reserve may be transferred to capital and distributed as stock dividends or distributed as cash dividends for the amount in excess of 25% of the paid-in capital pursuant to a resolution adopted by the shareholders’ meeting.

(4) Appropriation of earnings and dividend policy

TWM’s articles of incorporation provide that, in the event that TWM, according to the financial report, earns profits in a fiscal year, such profits shall first be applied to pay the applicable taxes, recover losses, set aside legal reserve pursuant to laws and regulations, and set aside or reverse a special reserve in accordance with the law or to satisfy the business needs of TWM. Any balance left over shall be applied to the following items:

(a) Remuneration to directors, not exceeding 0.3%;
(b) Employee bonuses in the sum of 1% to 3%;
(c) The remaining balance and any unappropriated earnings of the previous fiscal

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years shall be distributed to the shareholders as dividends in accordance with resolutions of the shareholders’ meetings.

TWM adopts a dividend distribution policy whereby only surplus profits of TWM shall be distributed to shareholders. That is, after setting aside amounts for retained earnings based on TWM’s capital budget plan, the residual profits shall be distributed as cash dividends. The value of stock dividends in a particular year shall not be more than 80% of the value of dividends distributed for that year. The amount of the distributable dividends, the forms in which dividends shall be distributed, and the ratio thereof shall depend on the actual profit and cash positions of TWM and shall be approved by resolutions of the Board, who shall, upon such approval, recommend the same to the shareholders for approval by resolution at the shareholders’ meetings.

TWM distributes and reverses special reserve in accordance with Decree No. 1010012865, Decree No. 1010047490, and “The Q&A for special reserve recognition after adopting IFRS” announced by the FSC. The special reserve appropriation will be reversed as distributable retained earnings to the extent that the net debit balance of the other shareholders’ equity reverses.

The appropriation of earnings should be resolved by the shareholders’ meeting and recognized in the financial statements in the following year.

TWM’s estimated bonuses to employees and estimated remuneration to directors are accrued by a certain percentage of the net income. TWM’s estimated bonuses to employees amounted to $396,057 thousand and $420,753 thousand for the years ended December 31, 2014 and 2013, respectively, and estimated remuneration to directors amounted to $33,846 thousand and $42,075 thousand for the years ended December 31, 2014 and 2013, respectively. The significant difference between annual accruals and the amount approved by the Board of Directors shall be adjusted in the current year. If the Board of Directors’ approval differs from the amount ratified at the annual general shareholders’ meeting (AGM), the difference will be treated as a change in accounting estimate and will be adjusted in profit and losses in the year of the AGM. If employee bonuses are paid in the form of company shares, the number of employee bonus shares shall be derived by dividing the approved bonus amount by the closing price one day prior to the AGM, adjusted for cash and/or stock dividends, if any.

The 2013 and 2012 earnings appropriations resolved by the AGM on June 12, 2014, and June 21, 2013, were as follows:

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Appropriation of legal reserve Cash dividends	Appropriation	of Earnings For Fiscal Year 2012 1,469,160 14,526,578 15,995,738	Dividendper	Share(NT$)
	For Fiscal Year 2013 $ 2,275,622 15,064,599 $ 17,340,221		For Fiscal Year 2013 5.6	For Fiscal Year 2012
				5.4

The cash dividends of $5.4 per share mentioned above were distributed from unappropriated earnings. In addition, the Board of Directors resolved another cash appropriation from legal reserve amounting to $269,010 thousand, that is, $0.1 per share. Total appropriation distributed was $5.5 per share for 2012.

The AGM on June 12, 2014, and June 21, 2013, resolved to distribute bonuses to employees amounting to $420,753 thousand and $396,673 thousand, respectively, and remuneration to directors amounting to $42,075 thousand and $39,667 thousand, respectively, for the years ended December 31, 2013 and 2012. There were no differences between the above actual distributions and the amounts recognized in the financial statements for 2013 and 2012.

TWM’s appropriation of the earnings, bonus to employees, and remuneration to directors for 2014 is awaiting a proposal by the Board of Directors and approval at the AGM.

Information on the appropriation of the earnings, bonus to employees, and remuneration to directors is available on the Market Observation Post System website of the Taiwan Stock Exchange.

(5) Other equity interests

Balance, January 1, 2014 Exchange differences on translation Changes in fair value of available-for-sale financial assets Changes in other comprehensive income of associates accounted for using equity method Balance, December 31, 2014	Exchange Differences on Translation $ 24,948 6,487 - (141) $ 31,294	Unrealized Gain (Loss) on Available-for-sale Financial Assets 387,734 - (741,210) 19,196 (334,280)	Total 412,682 6,487 (741,210) 19,055 (302,986)

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Balance, January 1, 2013 Exchange differences on translation Changes in fair value of available-for-sale financial assets Changes in other comprehensive income of associates accounted for using equity method Balance, December 31, 2013	Exchange Differences on Translation $ 25,483 (708) - 173 $ 24,948	Unrealized Gain (Loss) on Available-for-sale Financial Assets 314,543 - 75,223 (2,032) 387,734	Total 340,026 (708) 75,223 (1,859) 412,682

(6) Treasury shares

TID disposed of 31,974 thousand shares of TWM for $2,970,389 thousand in October 2014. TWM recognized “capital surplus – treasury share transactions” in the amount of $1,520,403 thousand.

As of December 31, 2014 and 2013, TWM’s stock held by TCCI, TUI and TID (all are subsidiaries 100% owned by TWM) was 698,752 thousand shares and 730,726 thousand shares, respectively, and the carrying and market values were $73,019,542 thousand and $70,368,899 thousand, respectively. Since the shares held by subsidiaries are regarded as treasury shares, TWM recognized $29,717,344 thousand and $31,077,183 thousand, respectively, as treasury shares. Although these shares are treated as treasury shares in the financial statements, the shareholders are entitled to excise their rights over these shares, except for participation in capital injection by cash. In addition, based on the ROC Company Act, subsidiaries with over 50% shareholding by TWM cannot exercise the voting rights over their treasury shares.

(7) Non-controlling interests

Beginning balance Portion attributable to non-controlling interests Profit Unrealized gains (losses) on available-for-sale financial assets Exchange differences on translation Actuarial gains (losses) on defined benefit plans	For the Years Ended December 31 2014 2013 $ 1,086,747 1,072,204 547,677 234,334 5,657 (20,441) 7,769 1,011 (941 ) 1,446
	2014 $ 1,086,747 547,677 5,657 7,769 (941 )

(Continued)

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Tax expense (income) on defined benefit plans Changes in capital surplus of associates accounted for using equity method Disposal of partial ownership interests in subsidiaries Adjustments arising from changes in percentage of ownership of subsidiaries Cash dividends from subsidiaries paid to non-controlling interests Increase in non-controlling interests Ending balance		For the Years Ended December 31 2014 2013 160 (246) (258 ) 24,410 229,995 - 2,864,113 22,015 (224,481 ) (247,986) 1,736,460 - 6,252,898 1,086,747 (Concluded)
		2014 160 (258 ) 229,995 2,864,113 (224,481 ) 1,736,460 6,252,898

	$

w. Earnings per share

The calculations of the basic and diluted EPS were as follows:

Basic EPS Profit from continuing operations attributable to owners of parent Loss from discontinued operations attributable to owners of parent Profit attributable to owners of parent Diluted EPS Profit from continuing operations attributable to owners of parent Effect of potential dilutive ordinary shares: Effect of employees’ bonuses Profit from continuing operations attributable to owners of parent Loss from discontinued operations attributable to owners of parent Profit attributable to owners of parent (adjusted for potential effect of dilutive ordinary shares)	For the Year Ended December 31, 2014	For the Year Ended December 31, 2014	EPS $ 5.57 (0.01) $ 5.56 $ 5.56 (0.01) $ 5.55
	Amount after income tax $ 15,044,537 (39,109) $ 15,005,428 $ 15,044,537 - $ 15,044,537 (39,109) $ 15,005,428	Weighted-average number of ordinary shares 2,697,728 2,697,728 2,697,728 2,697,728 5,792 2,703,520 2,703,520 2,703,520

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Basic EPS Profit from continuing operations attributable to owners of parent Loss from discontinued operations attributable to owners of parent Profit attributable to owners of parent Diluted EPS Profit from continuing operations attributable to owners of parent Effect of potential dilutive ordinary shares: Effect of employees’ bonuses Profit from continuing operations attributable to owners of parent Loss from discontinued operations attributable to owners of parent Profit attributable to owners of parent (adjusted for potential effect of dilutive ordinary shares)		For the Year Ended December 31, 2013	EPS $ 5.84 (0.05) $ 5.79 $ 5.83 (0.05) $ 5.78
	Amount after income tax $ 15,709,729 (126,282) $ 15,583,447 $ 15,709,729 - $ 15,709,729 (126,282) $ 15,583,447	Weighted-average number of ordinary shares 2,690,107 2,690,107 2,690,107 2,690,107 6,106 2,696,213 2,696,213 2,696,213

If TWM may settle the bonus to employees by cash or shares, TWM should presume that the entire amount of the bonus will be settled in shares, and the potential share dilution should be included in the weighted-average number of shares outstanding used in the calculation of diluted EPS if the shares have a dilutive effect. In the calculation of diluted EPS, the number of outstanding shares is derived by dividing the entire amount of the bonus by the closing price of the shares at the reporting date. Such potential dilutive effect should be taken into consideration in the calculation of diluted EPS until the shareholders resolve the actual number of shares to be distributed to employees at the AGM of the following year.

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x. Operating revenues from continuing operations

The Group’s operating revenues were as follows:

Telecommunication service Sales revenue Cable TV and broadband Other operating revenues	For the Years Ended December 31	For the Years Ended December 31
	2014 $ 58,374,045 44,752,181 6,199,530 3,298,123 $ 112,623,879	2013
		59,591,951 40,473,850 5,993,284 2,348,846
		108,407,931

y.Other income and expenses from continuing operations

The Group’s other income and expenses were as follows:

Police inquiry Government subsidy Others	For the Years Ended December 31	For the Years Ended December 31
	2014 $ 24,217 34,900 50,994 $ 110,111	2013
		32,679 3,762 26,702
		63,143

z. Non-operating income and expenses from continuing operations
(1) Other income

The Group’s other income was as follows:

Interest income Dividend income Rent income Other income	For the Years ended December 31	For the Years ended December 31
	2014 $ 94,953 22,803 33,493 389,781 $ 541,030	2013 94,470 24,246 33,559 4,073 156,348

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(2) Other gains and losses, net

The Group’s other gains and losses were as follows:

Gain on disposal of non-current assets held for sale Loss on disposal of property, plant and equipment Foreign exchange gains Gain (loss) on disposal of investments Gain on disposal of investments accounted for using equity method Others	For the Years ended December 31 2014 2013 $ 158,568 - (967,546 ) (1,370,455) 39,657 16,393 (168 ) 4,046 - 5,874 (10,706 ) (12,303) $ (780,195 ) (1,356,445)
	2014 $ 158,568 (967,546 ) 39,657 (168 ) - (10,706 ) $ (780,195 )

(3) Finance costs

The Group’s finance costs were as follows:

Interest expense Bank loans Corporate bonds Others Less: capitalized interest Capitalization rates were as follows: Capitalization rates	For the Years ended December 31 2014 2013 $ 389,366 109,744 197,066 274,442 28,547 37,390 614,979 421,576 (13,145 ) (24,254 ) $ 601,834 397,322 For the Years ended December 31 2014 2013 1.20%~1.36% 1.24%~1.60%
	2014 1.20%~1.36%

aa. Capital management

The Group manages its capital to maintain a healthy capital base, to meet the minimal paid-in capital required by the competent authority, and to optimize the balance of

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liabilities and equity in order to maximize shareholders’ return. By periodically reviewing and measuring relative cost, risk, and rate of return to ensure profit and maintain financial ratios, the Group may adopt various financing approaches to balance its capital structure in order to meet the demands for capital expenditures, working capital, settlements of liabilities, and dividend payments in the future.

ab. Financial instruments
(1) Categories of financial instruments

Financial assets

Available-for-sale financial assets (including
current and non-current portions)
Held-to-maturity financial assets
Financial assets carried at cost
Loans and receivables:
Cash and cash equivalents
Receivables (including current and non-current
portions)
Debt instrument investment without active
market
Other financial assets (including current and
non-current portions)
Refundable deposits
Subtotal
Total

Financial liabilities

Financial liabilities
Short-term borrowings Short-term notes and bills payable Payables (including current and non-current portions) Bonds payable Long-term borrowings (including current portion) Guarantee deposits Total	2014.12.31 $ 18,900,000 5,593,031 21,086,502 14,794,293 15,390,544 820,504 $ 76,584,874	2013.12.31
		30,605,813 2,396,971 18,801,314 14,792,647 3,000,000 818,386
		70,415,131

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(2) Credit risk

The maximum credit risk exposure of the Group’s financial instruments is equal to the carrying amount.

(3) Liquidity risk

The Group’s working capital is sufficient to meet the cash flow demand; therefore, liquidity risk is not considered to be significant.

The table below summarizes the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments, but not including the financial liabilities whose carrying amounts approximate contractual cash flows.

Contractual cash flows	Within 1year	1~5years	More than 5years
31,109,636 3,395,000 5,600,000 15,604,570	21,063,203 210,000 5,600,000 195,420	10,046,433 3,185,000 - 15,409,150	- - - -
55,709,206	27,068,623	28,640,583	-
33,623,454 111,349 2,400,000 15,799,990	31,607,747 111,349 2,400,000 195,420	2,015,707 - - 11,044,270	- - - 4,560,300
51,934,793	34,314,516	13,059,977	4,560,300

(4) Exchange rate risk

(a) Exposure to exchange rate risk

The Group’s financial assets and liabilities exposed to exchange rate risk were as follows:

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Financial Assets		2014.12.31		2013.12.31
	Foreign currency	Exchange rate	Foreign currency	Exchange rate	NTD
	$ 88,102 57,656 652 4,362 416 18,835 18,240 4,683 4,213 14 -	5.095 31.71 0.2647 4.087 38.57 5.095 31.71 0.2647 4.087 38.57 49.25	27,917 33,167 110 3,394 870 37,460 4,187 5,280 6,712 10 6	4.926 29.90 0.2838 3.856 41.14 4.926 29.90 0.2838 3.856 41.14 49.33	137,521 991,719 31 13,087 35,820 184,532 125,213 1,499 25,882 431 321
RMB USD JPY HKD EUR Financial Liabilities
RMB USD JPY HKD EUR GBP

(b) Sensitivity analysis

The Group’s exchange rate risk comes mainly from conversion gains and losses of accounts measured in foreign currencies such as cash and cash equivalents, available-for-sale financial assets, accounts receivable, other receivables, other financial assets, refundable deposits, short-term borrowings, accounts payable, other payables, guarantee deposits, etc. If the NTD, when compared with the RMB, USD, JPY, HKD, EUR, and GBP, had depreciated 5% (with other factors remaining constant on the reporting date and with analyses of the two periods on the same basis), profit would have increased by $80,789 thousand and by $42,022 thousand for the years ended December 31, 2014 and 2013, respectively.

(5) Interest rate analysis

The balances of the Group’s financial instruments exposed to interest rate risk were as follows:

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Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities	Carrying amount	Carrying amount
	2014.12.31 $ 8,530,060 51,287,324 $ 2,472,715 3,390,544	2013.12.31
		6,982,121 50,689,618 2,177,000 105,813

The following sensitivity analysis is based on the exposure to interest rate risk of derivative and non-derivative instruments on the reporting date. For floating-rate assets and liabilities, the analysis assumes that the balances of outstanding assets and liabilities on the reporting date have been outstanding for the whole period and that the changes in interest rates are reasonable. If the interest rate had increased by 0.5% (with other factors remaining constant on the reporting date and with analyses of the two periods on the same basis), for the years ended December 31, 2014 and 2013, the Group’s profit would have decreased by $4,589 thousand and increased by $10,356 thousand, respectively.

(6) Fair value of financial instruments
(a) Financial instruments not at fair value

Except for the table below, the management of the Group considers that the book value of financial assets and liabilities that are not at fair value is close to the fair value, or the fair value cannot be reliably measured.

Financial liabilities Corporate bonds payable	2014.12.31	2014.12.31	2013.12.31	2013.12.31
	Carrying Amount	Fair Value	Carrying Amount	Fair Value
	$ 14,794,293	14,774,375	14,792,647	14,713,072

(b) Valuation techniques and assumptions used in fair value determination

The Group uses the following methods in determining the fair value of its financial assets and liabilities:

(i) The fair value of financial assets and liabilities traded in active markets is based on quoted market prices (including stocks and bonds of companies that

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went public).

(ii) The fair value of corporate bonds payable is measured based on a volume-weighted-average price on the OTC on the reporting date.
(c) Fair value measurements recognized in the consolidated balance sheets
Fair value levels are defined based on the extent that fair value can be observed. Definitions are as follows:
(i) Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
(ii) Level 2: 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).
- market data (unobservable inputs).

2014.12.31 Available-for-sale financial assets Domestic listed stock Domestic emerging stock Domestic unlisted stocks Beneficiary certificates 2013.12.31 Available-for-sale financial assets Domestic listed stock Domestic emerging stock Beneficiary certificates	Level 1 $ 204,310 893,103 - 2,009,447 $ 3,106,860 $ 202,354 1,226,889 758,591 $ 2,187,834	Level 2 - - 2,587,050 - 2,587,050 - - - -	Level 3 - - - - - - - - -	Total
				204,310 893,103 2,587,050 2,009,447
				5,693,910
				202,354 1,226,889 758,591
				2,187,834

There was no transfer between the fair value levels for the years ended December 31, 2014 and 2013.

ac. Financial risk management
(1) Overview

The Group is exposed to the following risks due to usage of financial instruments:

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(a) Credit risk
(b) Liquidity risk
(c) Market risk

This note presents information concerning the Group’s risk exposure and the Group’s targets, policies and procedures to measure and manage the risks.

(2) Risk management framework
(a) Decision-making mechanism:

The Board of Directors is the highest supervisory and decision-making body responsible for assessing material risks, designating actions to control these risks, and keeping track of their execution. In addition, the Operations and Management Committee conducts periodic reviews of each business group’s operating target and performance to meet the Group’s guidance and budget.

(b) Risk management policies:
(i) Promote a risk-management-based business model.
(ii) Establish a risk management mechanism that can effectively recognize, evaluate, supervise and control risk.
(iii) Create a company-wide risk management structure that can limit risk to an acceptable level.
(iv) Introduce best risk management practices and continue to seek improvements.
(c) Monitoring mechanism:

The Internal Audit Office regularly monitors and assesses the potential risks that the Group may face and uses this information as a reference for drafting its annual audit plan. The Internal Audit Office should report any discrepancy to the concerned unit chief and ensure that remediation efforts are completed.

(3) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty of a financial instrument fails to meet its contractual obligations, which arises principally from the Group’s receivables from customers and financial instruments. The Group deals with customers with good reputations and monitors customers’ credit risk and credit ratings continuously. The Group does not concentrate transactions significantly with any single customer or counterparty or in similar areas.

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(4) Liquidity risk

Liquidity risk is the risk that the Group fails to meet the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to manage liquidity is to ensure, as far as possible, that it always has sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable loss or damage to the Group’s reputation.

The Group ensures sufficient cash for the requirements of paying estimated operating expenditures, including financial obligations. The Group also monitors its bank credit facilities and ensures that the provisions of loan contracts are all complied with properly. As of December 31, 2014 and 2013, the Group had unused bank facilities of $51,516,644 thousand and $49,957,934 thousand, respectively.

(5) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within an acceptable range and to optimize the return.

The Group engages in financial instrument transactions without involving any significant risk such as exchange rate risk, fair value risk arising from interest rate changes, and market price risk; therefore, the Group’s market risk is insignificant.

(a) Exchange rate risk

The Group mainly operates in Taiwan, except for international roaming services. Most of the operating revenues and expenses are measured in NTD. A small portion of the expenses is paid in EUR and USD; thus, the Group purchases currency at the spot rate based on the conservative principle in order to hedge exchange rate risk. Overall, exchange rate risk does not affect the Group significantly.

(b) Interest rate risk

The Group issued unsecured corporate bonds and signed facility letters with banks, locking in medium- and long-term fixed interest rates. In respect of interest payables, the fluctuation of interest rates does not affect the Group significantly. Also, interest rate risk does not impact short-term bank loans significantly.

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

The Group’s exposure to equity price risk is mainly due to holding equity financial instruments. The Group supervises the equity price risk actively and manages the risk based on fair value.

Sensitivity analysis: If the equity securities price had increased by 5% (with other factors remaining constant and with the analyses of the two periods on the same basis), for the years ended December 31, 2014 and 2013, other comprehensive income would have increased by $284,696 thousand and $109,392 thousand, respectively.

7. RELATED-PARTY TRANSACTIONS

a. Parent company and ultimate controlling party

TWM is the ultimate controlling party of the Group.

b. Significant transactions with related parties
(1) Operating revenue

Associates Other related parties Less: operating revenue from discontinued operations	For the Years Ended December 31 2014 2013 $ 17,858 13,841 196,619 206,557 - (148) $ 214,477 220,250
	2014 $ 17,858 196,619 - $ 214,477

The Group renders telecommunication services to other related parties. The transaction terms with related parties were not significantly different from those with third parties.

(2) Purchases

Associates Other related parties Less: purchases from discontinued operations	For the Years Ended December 31 2014 2013 $ 453,848 583,206 253,506 223,774 (6,370) (31,078) $ 700,984 775,902
	2014 $ 453,848 253,506 (6,370) $ 700,984

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

The entities mentioned above provide logistics, copyright, insurance, and other services. The transaction terms with related parties were not significantly different from those with third parties.

(3) Receivables from related parties

The amount of receivables from related parties was as follows:

Account Accounts receivable Accounts receivable Other receivables Other receivables	Related Party Category Associates Other related parties Associates Other related parties	2014.12.31 $ 2,792 31,769 $ 34,561 $ 109,211 60,568 $ 169,779	2013.12.31
			3,720 45,837
			49,557
			53,587 29,125
			82,712

Receivables from related parties were not secured with collateral, and no provisions for bad debt expenses were accrued.

(4) Payables to related parties

The amount of payables to related parties was as follows:

Account Related Party Category Accounts payable Associates Accounts payable Other related parties Other payables Other related parties	2014.12.31 $ 45,329 34,063 $ 79,392 $ 56,419	2013.12.31
		73,080 -
		73,080
		35,144

(5) Prepayments

The amount of prepayments to related parties was as follows:

The amount of prepayments to related parties was	as follows:
Other related parties	2014.12.31 $ 15,986	2013.12.31
		15,394

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(6) Borrowings from related parties

The amount of borrowings from related parties was as follows:

Other related parties	2014.12.31 $ 727,500	2013.12.31
		105,813

The rate on borrowings from related parties was equivalent to the rate in the market.

Additionally, the Group had drawn $32,500 thousand of performance guarantee from related parties as of December 31, 2014.

(7) Bank deposits

(a) (b	Bank deposits and time deposits Other related parties )Other financial assets (including current and non-current) Other related parties	2014.12.31 $ 1,610,122 $ 1,587,469	2013.12.31
			1,563,806
			984,684

(8) Mutual funds purchased from related parties

Mutual funds purchased from related parties
Other related parties	For the Years Ended December 31
	2014 $ 393,724	2013
		200,000

(9) Acquisition of associates

In April 2014, the Group acquired 35% of TVD Shopping, and the investment amount was $148,118 thousand.

In June 2013, the Group acquired 19.23% of ADT, and the investment amount was $30,000 thousand, which was recognized as prepayments for investments.

(10) Disposal of investments

In September 2014, the Group sold all of its ownership in TMB to Fubon Financial Holding Venture Co., Ltd. The proceeds from the disposal were $21,360 thousand, and the Group recognized a loss on disposal of investments of $168 thousand.

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(11) Others
(a)Guarantee deposits
Other related parties
(b)Donation expense
Other related parties
(c)Other expense
Other related parties
Less: other expense from discontinued
operations
(d)Repair and maintenance expense
Other related parties
(e) Insurance expenses
Other related parties
(f) Other income
Associates
(g) Finance costs
Other related parties
(h)Rental expenses
Other related parties
Less: rental expenses from discontinued
operations

2014.12.31
2013.12.31
$
32,489
30,682
For the Years Ended
December 31
2014
2013
$
22,910
14,540
$ 340,306
244,692
(314 )
(9,513 )
$
339,992
235,179
$
25,824
27,087
$
20,759
24,036
$
12,337
-
$
24,167
14,077
$ 80,130
123,134
(1,557 )
(80,636 )
$
78,573
42,498

2014
$
22,910
$ 340,306
(314 )
$
339,992
$
25,824
$
20,759
$
12,337
$
24,167
$ 80,130
(1,557 )
$
78,573

Leases were conducted at market prices, and the rental was paid by the month.

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

c. Key management personnel compensation

Short-term employee benefits Termination benefits Post-employment benefits	For the Years Ended December 31	For the Years Ended December 31
	2014 $ 283,024 27,560 2,854 $ 313,438	2013
		301,456 47,564 2,749
		351,769

8. ASSETS PLEDGED

The assets pledged as collateral for bank loans, syndicated loans, and performance bonds for construction contracts were as follows:

Other current financial assets Time deposits and restricted deposits Services concession Other non-current financial assets Time deposits and restricted deposits	2014.12.31 $ 124,806 7,597,295 107,380 $ 7,829,481	2013.12.31
		66,070 - 250,717
		316,787

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED

COMMITMENTS

a. Unrecognized commitments

Purchases of property, plant and equipment etc. Purchases of cellular phones	2014.12.31 $ 8,857,528 $ 7,057,442	2013.12.31
		5,213,950
		3,462,588

b. On January 15, 2009, TNH signed a BOT contract with the Department of Cultural Affairs, Taipei City Government. The primary terms of the contract are summarized as follows:

(1) Construction and operating period:

The construction and operating period is 50 years from the day following the signing of the contract.

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(2) Development concession:

The total initial amount of concession was $1,238,095 thousand (tax excluded). According to the supplemental agreement signed in November 2014, the concession will be paid with additional business tax from the signing date of the agreement; thus, the concession will be increased by $48,750 thousand. The rest of the concession will be paid over 14 years from the year 2015. As of December 31, 2014, $263,096 thousand of the concession had been paid.

(3) Operating concession

TNH has to pay 0.5% of total sales revenue as operating concession. According to the supplemental agreement signed in November 2014, the concession will be paid with additional business tax from the date of agreement signing.

(4) Performance guarantee

As of December 31, 2014, TNH had provided a $65,000 thousand performance guarantee regarding the BOT contract.

(5) Rental of land

During the construction period, TNH should pay land value tax (1% of the announced land value) and other expenses.

During the operating period, TNH should pay 60% of 5% of the announced land value, that is, 3% of the announced land value. According to the supplemental agreement signed in November 2014, the concession will be paid with additional business tax from the date of agreement signing.

10. SIGNIFICANT CASUALTY LOSS: NONE

11. SIGNIFICANT SUBSEQUENT EVENTS

a. In January 2015, TWM was approved to acquire a Mobile Broadband Spectrum frequency of 5 MHz x 2 in the 700 MHz frequency band by the NCC. The consideration has been paid in full.
b. For business operations, on January 27, 2015, momo’s Board of Directors resolved to construct logistics centers and acquire equipment, and the amounts of the projects are

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

$1,828,250 thousand and $642,890 thousand, respectively.

12. OTHERS

Employee benefits, depreciation, and amortization are summarized as follows:

For the Years Ended December 31

Employee benefits Salary Labor and health insurance Pension Others Depreciation Amortization		2014	Total 6,031,447 502,374 255,957 279,534 9,718,216 1,871,429		2013
	Classified as Operating Costs $ 2,042,923 168,993 88,283 95,947 9,187,476 1,544,286	Classified as Operating Expenses 3,988,524 333,381 167,674 183,587 530,740 327,143		Classified as Operating Costs	Classified as Operating Expenses 4,043,104 319,449 162,671 194,135 589,127 305,538	Total
				2,023,125 161,285 86,814 91,335 8,174,885 928,611		6,066,229 480,734 249,485 285,470 8,764,012 1,234,149

For the years ended December 31, 2014 and 2013, the depreciation expense in non-operating expenses was $3,363 thousand and $3,506 thousand, respectively.

13. ADDITIONAL DISCLOSURES

a. Information on significant transactions and b. Information on investees:

The following were the additional disclosures required by the Securities and Futures Bureau for TWM and its investees:

(1) Financing extended to other parties: Table 1 (attached)
(2) Endorsements/guarantees provided to other parties: Table 2 (attached)
(3) Marketable securities held: Table 3 (attached) (excluding investments in subsidiaries and associates)
(4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: Table 4 (attached)
(5) Acquisition of individual real estate properties at costs of at least NT$300 million or 20% of the paid-in capital: Table 5 (attached)

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(6) Disposal of individual real estate properties at prices of at least NT$300 million or 20% of the paid-in capital: None
(7) Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: Table 6 (attached)
(8) Receivables from related parties of at least NT$100 million or 20% of the paid-in capital: Table 7 (attached)
(9) Names, locations and related information of investees on which TWM exercised significant influence: Table 8 (attached) (excluding information on investment in Mainland China)
(10) Trading in derivative instruments: None
(11) Business relationships and significant intercompany transactions: Table 9 (attached)
c. Information on investment in Mainland China:
(1) The names of investees in Mainland China, the main businesses and products, issued capital, method of investment, information on inflow or outflow of capital, ownership, net income or loss and recognized investment gain or loss, ending balance, amount received as earnings distributions from the investment, and limitation on investment: Table 10 (attached)
(2) Significant direct or indirect transactions with the investee companies, the 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: Please refer to “Information on significant transactions” above.

14. SEGMENT INFORMATION

The basis of segmentation in 2014 is different from the prior year. In response to internal management needs, the Group has changed the segments to telecommunication, retail, cable television, and others.

The Group divides its business into four reportable segments with different market attributes and operation modes. The four segments are described as follows.

Telecommunication: Providing mobile communication services, data mobile services, and fixed-line services.

Retail: Providing TV shopping, online shopping, and catalog shopping.

Cable Television: Providing pay TV and cable broadband services.

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Others: Business other than telecommunication, retail, and cable television.

The amount of discontinued operations is not included in the following segment information. For the information about discontinued operations, please refer to Note 6(f).

					Adjustments
For the Year Ended	Telecommu-		Cable		and
December 31, 2014	nication	Retail	Television	Others	Eliminations	Total
Operating revenues	$ 82,355,506	23,897,005	6,380,295	383,028	(391,955)	112,623,879
Operating costs	51,316,166	20,592,348	3,042,249	257,043	(109,598)	75,098,238
Operating expenses	15,332,332	1,879,684	756,281	65,313	(108,573)	17,925,037
Other gains and	71,681	2,442	35,971	-	17	110,111
losses, net
Profit	15,778,689	1,427,415	2,617,706	60,672	(173,767)	19,710,715
EBITDA (Note)	26,106,333	1,562,408	3,438,314	201,400	(13,609)	31,294,846
For the Year Ended
December 31, 2013
Operating revenues	$ 81,879,391	20,542,841	6,243,668	-	(257,969)	108,407,931
Operating costs	48,767,854	17,987,594	2,896,136	-	(80,564)	69,571,020
Operating expenses	15,470,721	1,616,826	753,453	-	(12,781)	17,828,219
Other gains and	64,759	(3,638)	2,049	-	(27 )	63,143
losses, net
Profit	17,705,575	934,783	2,596,128	-	(164,651)	21,071,835
EBITDA (Note)	26,695,857	1,039,735	3,277,918	-	(9,911)	31,003,599

Note: The Group uses EBIDTA as the measurement for segment profit and the basis of performance assessment.

a. Geographical information

The Group’s revenues are mostly from domestic business.

b. Information on major customers

The Group’s revenues from a single customer do not exceed 10% of the total net operating revenues.

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES FINANCING EXTENDED TO OTHER PARTIES FOR THE YEAR ENDED DECEMBER 31, 2014

												TABLE 1 (In Thousands of New Taiwan Dollars)	TABLE 1 (In Thousands of New Taiwan Dollars)	TABLE 1 (In Thousands of New Taiwan Dollars)	TABLE 1 (In Thousands of New Taiwan Dollars)	TABLE 1 (In Thousands of New Taiwan Dollars)
No.	Lending Company	Borrowing Company	Financial Statement Account	Related Parties	Maximum Balance for the Period (Note 1)	Ending Balance (Note 1)	Drawdown Amounts	Interest Rate	Nature of Financing	Transaction Amounts	Reasons for Short-term Financing	Allowance for Doubtful Accounts	Collateral		Lending Limit for Each Borrowing Company	Lending Company’s Lending Amount Limits
													Item	Value
0 1 2 3 4 5 6	TWM Taiwan Fixed Network Co., Ltd. Globalview Cable TV Co., Ltd. Phoenix Cable TV Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. Wealth Media Technology Co., Ltd. Taiwan Cellular Co., Ltd.	TFN Media Co., Ltd. Win TV Broadcasting Co., Ltd. TWM TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TWM Taiwan Kuro Times Co., Ltd. Win TV Broadcasting Co., Ltd. TFN Media Co., Ltd. TWM	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables	Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes	$ 4,000,000 600,000 9,000,000 260,000 545,000 495,000 2,300,000 100,000 600,000 3,000,000 300,000	$ - - 9,000,000 260,000 540,000 480,000 2,300,000 100,000 600,000 3,000,000 300,000	$ - - 8,180,000 260,000 540,000 425,000 1,800,000 - 250,000 1,500,000 300,000	1.176%~1.197% 1.196%~1.197% 1.183%~ 1.29622% 1.184%~1.29489% 1.184%~1.29489% 1.184%~1.29489% 1.184%~1.29789% 1.196%~ 1.197% 1.294%~1.29789% 1.294% 1.186%~1.29622%	Short-term financing Short-term financing Short-term financing Short-term financing Transactions Transactions Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing	$ - - - - 544,485 494,235 - - - - -	Operation requirements Operation requirements Operation requirements Repayment of financing - - Operation requirements Operation requirements Operation requirements Operation requirements Operation requirements	$ - - - - - - - - - - -	- - - - - - - - - - -	- - - - - - - - - - -	$ 24,103,741 (Note 2) 24,103,741 (Note 2) 21,622,525 (Note 2) 280,095 (Note 3) 544,485 (Note 3) 494,235 (Note 3) 8,250,635 (Note 2) 8,250,635 (Note 2) 8,250,635 (Note 2) 8,250,635 (Note 2) 34,226,760 (Note 2)	$ 24,103,741 (Note 2) 24,103,741 (Note 2) 21,622,525 (Note 2) 494,767 (Note 3) 979,019 (Note 3) 788,005 (Note 3) 8,250,635 (Note 2) 8,250,635 (Note 2) 8,250,635 (Note 2) 8,250,635 (Note 2) 34,226,760 (Note 2)

Note 1: The maximum balance for the period and the ending balance represent quotas, not actual drawdown.

Note 2: Where funds are loaned for reasons of business dealings and short-term financing needs, the amount of loaned funds shall be limited to 40% of the lending company’s net worth. For short-term financing needs, the aggregate amount of loaned funds shall not exceed 40 percent of the lending company's net worth. The individual loan funds shall be limited to the lowest amount of the following items: 1) 40 percent of the lending company's net worth; 2) the amount that the lending company invests in the borrowing entities; or 3) an amount equal to (the share portion of the borrowing entities that the lending company invests in)* (the total loaning amounts of the lending company). In the event that a lending company directly or indirectly owns 100% of the borrowing company, or the borrowing company directly or indirectly owns 100% of the lending company, the individual lending amount and the aggregate amount of loaned funds shall not exceed 40% of the lending company’s net worth.

Note 3: Where funds are loaned for reasons of business dealings and short-term financing needs, the amount of loaned funds shall be limited to the total amount of business dealings and 40% of the lending company’s net worth. A) For reasons of business dealings: the individual lending amount and the aggregate amount of loaned funds shall not exceed the amount of business dealings. B) For short-term financing needs: the individual lending amount and the aggregate amount of loaned funds shall not exceed 40% of the lending company’s net worth.

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED TO OTHER PARTIES

FOR THE YEAR ENDED DECEMBER 31, 2014

TABLE 2

(In Thousands of New Taiwan Dollars)

No.	Company Providing Endorsements/Guarantees	Receiving Party		Limit on Endorsements/ Guarantees Amount Provided to Each Entity	Maximum Balance for the Period (Note 1)	Ending Balance (Note 1)	Drawdown Amounts (Note 1)	Amount of Endorsements/ Guarantees Collateralized by Property	Ratio of Accumulated Endorsements/ Guarantees to Net Worth of the Guarantor (Note 1)	Maximum Endorsements/ Guarantees Amount Allowable	Guarantee Provided by Parent Company	Guarantee Provided by a Subsidiary	Guarantee Provided to Subsidiaries in Mainland China
		Name	Nature of Relationship
0 1	TWM momo.com Inc.	Taiwan Fixed Network Co., Ltd. Taiwan Kuro Times Co., Ltd. Fubon Gehua (Beijing) Enterprise Ltd.	(Note 2) (Note 2) (Note 2)	$ 42,000,000 (Note 3) 259,800 (Note 3) 799,626 (Note 5)	$ 21,500,000 50,000 507,360	$ 21,500,000 50,000 507,360	$ 11,575,650 (Note 4) 50,000 507,360	$ - - -	35.68% 0.08% 8.04%	$ 60,259,352 (Note 3) 60,259,352 (Note 3) 6,310,990 (Note 5)	Y Y N	N N N	N N Y

Note 1: The maximum guarantee/endorsement balance for the period, the ending balance, and the drawdown amounts represent quotas, not actual drawdown. Note 2: Direct/indirect subsidiary.
Note 3: For 100% directly/indirectly owned subsidiaries, the aggregate endorsement/guarantee amount provided shall not exceed the net worth of TWM, and the upper limit for each subsidiary shall be double the investment amount. Note 4: Including USD15,000 thousand.
Note 5: FGE is more than 50% directly and indirectly owned by momo. The aggregate endorsement/guarantee amount provided by momo shall be limited to the net worth of momo, and the individual amount shall be limited to the investment amount in FGE. ※Limit for individual amount: The limit of guarantee/endorsement provided by momo to FGE is limited to the investment amount (USD12,322,314 × 31.71+ RMB60,000,000 × 5.095 + US$3,254,043.15 × 31.71 = NTD799,626 thousand). ※The momo Board of Directors authorized the guarantee amount (USD16,000,000 × 31.71 = NTD507,360 thousand).
※Drawn-down amount: USD16,000,000 × 31.71 = NTD507,360 thousand.
※Amount of guarantee collateralized by property: 0 thousand.
Note 6: The above amounts were translated into New Taiwan dollars at the exchange rate of US$1＝NT$31.71 and RMB 1＝NT$5.095 at the end of the period.

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD (EXCLUDING INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES)

DECEMBER 31, 2014

	DECEMBER 31, 2014	DECEMBER 31, 2014	DECEMBER 31, 2014	DECEMBER 31, 2014	DECEMBER 31, 2014	DECEMBER 31, 2014	DECEMBER 31, 2014	DECEMBER 31, 2014
	TABLE 3 (In Thousands of New Taiwan Dollars,Unless Stated Otherwise)								TABLE 3
Investing Company	Marketable Securities Type and Name	Relationship with the Securities Issuer	Financial Statement Account	DECEMBER 31, 2014				Note
				Shares/Units (Thousands)	Carrying Value	Percentage of Ownership	Fair Value
TWM momo.com Inc. Taiwan Cellular Co., Ltd.	Stock Chunghwa Telecom Co., Ltd. Ambit Microsystems Corporation Bridge Mobile Pte Ltd. Yes Mobile Holdings Company Beneficiary Certificate Fubon Strategic High Income Fund B Fubon Chi-Hsiang Money Market Fund Fubon China High Yield Bond Fund-B (RMB) Fuh Hwa Emerging Market High Yield Bond Fund B PineBridge Global Multi - Strategy High Yield Bond Fund-B Eastspring Investments Global High Yield Bond Fund B Eastspring Investments Well Pool Money Market Fund JPMorgan (Taiwan) Asia High Yield Total Return Bond Fund - Monthly Distribution Share Class Allianz Global Investors Taiwan Money Market Fund Stock We Can Medicines Co., Ltd. Stock Arcoa Communication Co., Ltd. Parawin Venture Capital Corp. Transportation High Tech Inc. WEB Point Co., Ltd.	－－－－ Related party in substance Related party in substance Related party in substance －－－－－－－－－－－	Current available-for-sale financial assets Non-current available-for-sale financial assets Non-current financial assets at cost Non-current financial assets at cost Current available-for-sale financial assets Current available-for-sale financial assets Current available-for-sale financial assets Current available-for-sale financial assets Current available-for-sale financial assets Current available-for-sale financial assets Current available-for-sale financial assets Current available-for-sale financial assets Current available-for-sale financial assets Non-current financial assets at cost Non-current financial assets at cost Non-current financial assets at cost Non-current financial assets at cost Non-current financial assets at cost	2,174 298,000 800 74 18,302 12,970 3,886 10,225 23,351 19,028 29,933 18,916 32,520 2,400 6,998 2,160 1,200 803	$ 204,310 2,587,050 7,050 - 186,456 200,004 193,869 73,313 186,335 180,437 400,006 189,020 400,007 60,000 67,731 11,471 - 6,773	0.028 14.9 10 0.19 - - - - - - - - - 7.73 5.21 3 12 3.17	$ 204,310 2,587,050 - - 186,456 200,004 193,869 73,313 186,335 180,437 400,006 189,020 400,007 - - - - -	Note 1 Note 1

(Continued)

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD (EXCLUDING INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES)

DECEMBER 31, 2014

Investing Company	Marketable Securities Type and Name	Relationship with the Securities Issuer	Financial Statement Account	DECEMBER 31, 2014	DECEMBER 31, 2014	DECEMBER 31, 2014	DECEMBER 31, 2014	Note
				Shares/Units (Thousands)	Carrying Value	Percentage of Ownership	Fair Value
TFN Media Co., Ltd. TCC Investment Co., Ltd. TCCI Investment and Development Co., Ltd. Taiwan Fixed Network Co., Ltd. TFN Union Investment Co., Ltd.	Beneficiary Certificate Dragon Tiger Capital Partners Limited Stock TWM Great Taipei Broadband Co., Ltd. Preferred stock Taiwan High Speed Rail Corporation Unlisted Convertible Preferred Stock－Series A Stock TWM Stock Taiwan High Speed Rail Corporation Stock TWM	－ TWM －－ TWM － TWM	Current held-to-maturity financial assets Non-current available-for-sale financial assets Non-current financial assets at cost Non-current debt instrument investment without active market Non-current available-for-sale financial assets Non-current available-for-sale financial assets Non-current available-for-sale financial assets	0.2 200,497 10,000 50,000 87,590 225,531 410,665	$ 6 20,951,911 39,627 500,000 9,153,109 893,103 42,914,522	- 5.86 6.67 1.24 2.56 3.46 12	$ 6 20,951,911 - - 9,153,109 893,103 42,914,522

Note 1: Impairment loss was recognized in 2004. The value was reduced to zero. (Concluded) Note 2: For the information on investments in subsidiaries and associates, please refer to table 8 and table 10.

～ 86 ～

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2014

	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014
	TABLE 4 (In Thousands of New Taiwan Dollars)
Company Name	Marketable Securities Type and Issuer	Financial Statement Account	Counter-party	Nature of Relationship	Beginning Balance		Acquisition		Disposal				Ending Balance
					Shares/Units (Thousands)	Amount	Shares/Units (Thousands)	Amount	Shares/Units (Thousands)	Amount	Carrying Value	Gain (Loss) on Disposal	Shares/Units (Thousands)	Amount
TWM Wealth Media Technology Co., Ltd. TCCI Investment and. Development Co., Ltd. momo.com Inc. Asian Crown(BVI) Fortune Kingdom HK Fubon Multimedia	Stock Wealth Media Technology Co., Ltd. Ambit Microsystems Corporation Stock momo.com Inc. Stock TWM Beneficiary Certificate Eastspring Investments Well Pool Money Market Fund Allianz Global Investors Taiwan Money Market Fund Stock Fortune Kingdom Stock HK Fubon Multimedia Fubon Gehua (Beijing) Enterprise Ltd.	Investments accounted for using equity method Non-current available-for-sale financial assets Investments accounted for using equity method Non-current available-for-sale financial assets Current available-for-sale financial assets Current available-for-sale financial assets Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method	Wealth Media Technology Co., Ltd. － SinoPac Securities Co., Ltd. (Note 4) －－－ Fortune Kingdom HK Fubon Multimedia Fubon Gehua (Beijing) Enterprise Ltd.	Subsidiary － Unrelated parties －－－ Subsidiary Subsidiary Subsidiary	39,065 - 64,742 119,564 - - 22,237 22,237 -	$16,157,062 - 8,567,490 11,513,994 - - 118,883 118,883 118,218	3,000 (Note 1) 298,000 (Note 1) - - 29,933 32,520 11,396 11,396 -	$ 3,000,00 0 2,980,000 - - 400,000 400,000 344,227 344,227 344,227	- - 1,695 31,974 - - - - -	- - 323,859 2,970,389 - - - - -	- - 229,995 1,737,267 - - - - -	- - (Note 3) 1,233,122 - - - - -	42,065 298,000 63,047 87,590 29,933 32,520 33,633 33,633 -	$ 20,626,589 (Note 2) 2,587,050 (Note 2) 9,352,414 (Note 2) 9,153,109 (Note 2) 400,006 (Note 2) 400,007 (Note 2) 248,827 (Note 2) 248,827 (Note 2) 248,230 (Note 2)

Note 1: The Shares/Units purchased for the period were obtained from capital increase by cash.

Note 2: The ending balance includes unrealized gains (losses) on financial assets, exchange differences on translation of foreign financial statements, associates accounted for using equity method, and adjustments of subsidiaries. Note 3: The gain (loss) on disposal was recognized as a capital surplus.

Note 4: To comply with the regulation for trading on the emerging market and over-allotment for initial listing on the stock exchange.

～ 87 ～

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COSTS OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2014

FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014	FOR THE YEAR ENDED DECEMBER 31, 2014
TABLE 5 (In Thousands of New Taiwan Dollars) Company Name Type of Property Transaction Date Transaction Amount Payment Counter-party Nature of Relationship Prior Transaction with Related Party Price Reference Purpose of Acquisition Other Terms Owner Relationship Transfer Date Amount momo.com Inc. Land May 14, 2014 $ 1,708,270 Paid in full Natural person Unrelated parties - - - - The appraisal reports of Jin Han Real Estate Appraiser Joint Firm and G-Beam Real Estate Appraiser Firm. Operating usage None
Company Name	Type of Property	Transaction Date	Transaction Amount	Payment	Counter-party	Nature of Relationship	Prior Transaction with Related Party				Price Reference	Purpose of Acquisition	Other Terms
							Owner	Relationship	Transfer Date	Amount
momo.com Inc.	Land	May 14, 2014	$ 1,708,270	Paid in full	Natural person	Unrelated parties	-	-	-	-	The appraisal reports of Jin Han Real Estate Appraiser Joint Firm and G-Beam Real Estate Appraiser Firm.	Operating usage	None

～ 88 ～

TAIWAN MOBILE CO., LTD. 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, 2014

TABLE 6 (In Thousands of New Taiwan Dollars)

Company Name	Related Party	Nature of Relationship		Transaction Details	Transaction Details	Transaction Details	Transactions with Terms Different from Others	Transactions with Terms Different from Others	Notes/Accounts Payable or Receivable	Notes/Accounts Payable or Receivable	Note
			Purchase/ Sale	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total
TWM Taiwan Teleservices & Technologies Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Digital Service Co., Ltd. Taiwan Kuro Times Co., Ltd. TFN Media Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. Phoenix Cable TV Co., Ltd. Union Cable TV Co., Ltd. Globalview Cable TV Co., Ltd. Mangrove Cable TV Co., Ltd. momo.com Inc.	Taiwan Fixed Network Co., Ltd. Taiwan Kuro Times Co., Ltd. Taiwan Teleservices & Technologies Co., Ltd. Taiwan Digital Service Co., Ltd. momo.com Inc. TWM Taiwan Fixed Network Co., Ltd. TWM TFN Media Co., Ltd. Taiwan Teleservices & Technologies Co., Ltd. TWM TWM Phoenix Cable TV Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. Union Cable TV Co., Ltd. Globalview Cable TV Co., Ltd. Taiwan Fixed Network Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. Dai-Ka Ltd. Taiwan Pelican Express Co., Ltd. TWM	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Ultimate parent The same parent company Ultimate parent The same parent company The same parent company Ultimate parent Ultimate parent Subsidiary Subsidiary Subsidiary Subsidiary The same parent company Parent Parent Parent Parent Related party in substance Equity-method investee Ultimate parent	Sale Purchase Purchase Purchase Sale Purchase Sale Sale Sale Sale Purchase Sale Purchase Sale Purchase Sale Channel leasing fee Channel leasing fee Channel leasing fee Channel leasing fee Operating costs Royalty for copyright Royalty for copyright Royalty for copyright Royalty for copyright Royalty for copyright Purchase Purchase	$ (1,815,552) 7,418,275 355,702 1,076,444 (12,811,112) 11,761,940 (101,189) (1,076,444) (100,848) (7,418,275) 1,815,552 (142,287) 100,848 (11,762,007) 12,811,112 (355,702) (466,136) (419,902) (214,288) (182,606) 137,565 419,902 466,136 214,288 182,606 151,606 438,046 99,042	2 (Note 2) 1 (Note 2) 15 (Note 4) - 91 8 52 (Note 2) 1 (Note 4) 70 (Note 2) 44 15 13 7 6 11 56 58 50 53 49 2 1	Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms	－－－－－－－－－－－－－－－－（Note 5）（Note 5）（Note 5）（Note 5）－（Note 5）（Note 5）（Note 5）（Note 5）（Note 5）－－	－－－－－－－－－－－－－－－－（Note 5）（Note 5）（Note 5）（Note 5）－（Note 5）（Note 5）（Note 5）（Note 5）（Note 5）－－	$ 277,712 (405,095) (86,895) (94,383) 1,677,203 (1,819,888) 13,097 94,383 7,901 405,095 (277,317) 24,945 (7,901) 1,819,888 (1,677,203) 86,895 - - - - (24,318) - - - - (37,901) (41,259) (16,396)	3 (Note 3) 2 (Note 3) 14 (Note 1) - 91 8 48 44 3 (Note 3) 99 99 100 - - - - 5 - - - - 86 2 1	(Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1)

Note 1: Accounts receivable (payable) was the net amount of accounts receivable minus accounts payable, custodial receipts, and payment on behalf of others. Note 2: Including operating costs and operating expenses.

Note 3: Including accounts payable and other payables.

Note 4: Recognized as operating expenses.

Note 5: The companies authorized a related party to deal with the copyright fees for cable television. As said account item is the only one, there is no comparable transaction.

～ 89 ～

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES RECEIVABLES FROM RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2014

DECEMBER 31, 2014	DECEMBER 31, 2014	DECEMBER 31, 2014	DECEMBER 31, 2014	DECEMBER 31, 2014	DECEMBER 31, 2014	DECEMBER 31, 2014	DECEMBER 31, 2014	DECEMBER 31, 2014	DECEMBER 31, 2014
TABLE 7 (In Thousands of New Taiwan Dollars) Company Name Related Party Nature of Relationship Ending Balance Turnover Rate Overdue Amount Received in Subsequent Period Allowance for Bad Debts Amount Action Taken TWM Taiwan Fixed Network Co., Ltd. Subsidiary Accounts receivable $ 277,712 6.26 $ - － $ - $ - Other receivables 33,260 - － 30,064 - Taiwan Digital Service Co., Ltd. Subsidiary Accounts receivable 1,677,203 5.57 - － 1,677,203 - Other receivables 284,053 - － 275,249 - Taiwan Cellular Co., Ltd. TWM Parent Other receivables 300,582 - － - - Wealth Media Technology Co., Ltd. TWM Parent Other receivables 1,802,905 - － 80,054 - Win TV Broadcasting Co., Ltd. Subsidiary Other receivables 250,988 - － - - TFN Media Co., Ltd. Subsidiary Other receivables 1,507,870 - － - - Taiwan Fixed Network Co., Ltd. TWM Ultimate parent Accounts receivable 405,095 12.68 - － 373,382 - Other receivables 8,286,612 - － 2,242 - Taiwan Digital Service Co., Ltd. TWM Ultimate parent Accounts receivable 1,819,888 6.99 - － 398,647 - Other receivables 2,887 - － 111 - Phoenix Cable TV Co., Ltd. TFN Media Co., Ltd. Parent Accounts receivable 4,957 7.35 - － - - Other receivables 540,161 - － - - Globalview Cable TV Co., Ltd. TFN Media Co., Ltd. Parent Accounts receivable 2,207 6.94 - － - - Other receivables 260,001 - － - - Yeong Jia Leh Cable TV Co., Ltd. TFN Media Co., Ltd. Parent Accounts receivable 5,492 6.61 - － - - Other receivables 425,001 - － - - momo.com Inc. Taiwan Pelican Express Co., Ltd. Equity-method investee Accounts receivable 360 9.87 - － 360 - Other receivables 109,183 - － 109,183 -										TABLE 7
Company Name	Related Party	Nature of Relationship	Ending Balance		Turnover Rate	Overdue		Amount Received in Subsequent Period	Allowance for Bad Debts
						Amount	Action Taken
TWM Taiwan Cellular Co., Ltd. Wealth Media Technology Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Digital Service Co., Ltd. Phoenix Cable TV Co., Ltd. Globalview Cable TV Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. momo.com Inc.	Taiwan Fixed Network Co., Ltd. Taiwan Digital Service Co., Ltd. TWM TWM Win TV Broadcasting Co., Ltd. TFN Media Co., Ltd. TWM TWM TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. Taiwan Pelican Express Co., Ltd.	Subsidiary Subsidiary Parent Parent Subsidiary Subsidiary Ultimate parent Ultimate parent Parent Parent Parent Equity-method investee	Accounts receivable Other receivables Accounts receivable Other receivables Other receivables Other receivables Other receivables Other receivables Accounts receivable Other receivables Accounts receivable Other receivables Accounts receivable Other receivables Accounts receivable Other receivables Accounts receivable Other receivables Accounts receivable Other receivables	$ 277,712 33,260 1,677,203 284,053 300,582 1,802,905 250,988 1,507,870 405,095 8,286,612 1,819,888 2,887 4,957 540,161 2,207 260,001 5,492 425,001 360 109,183	6.26 5.57 12.68 6.99 7.35 6.94 6.61 9.87	$ - - - - - - - - - - - - - - - - - - - -	－－－－－－－－－－－－－－－－－－－－	$ - 30,064 1,677,203 275,249 - 80,054 - - 373,382 2,242 398,647 111 - - - - - - 360 109,183	$ - - - - - - - - - - - - - - - - - - - -

～ 90 ～

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NAMES, LOCATIONS AND RELATED INFORMATION OF INVESTEES ON WHICH TWM EXERCISED SIGNIFICANT INFLUENCE (EXCLUDING INFORMATION ON INVESTMENT IN MAINLAND CHINA) FOR THE YEAR ENDED DECEMBER 31, 2014

				TABLE 8 (In Thousands of New Taiwan Dollars and Other Currencies,Unless Stated Otherwise)	TABLE 8 (In Thousands of New Taiwan Dollars and Other Currencies,Unless Stated Otherwise)	TABLE 8 (In Thousands of New Taiwan Dollars and Other Currencies,Unless Stated Otherwise)	TABLE 8 (In Thousands of New Taiwan Dollars and Other Currencies,Unless Stated Otherwise)	TABLE 8 (In Thousands of New Taiwan Dollars and Other Currencies,Unless Stated Otherwise)	TABLE 8 (In Thousands of New Taiwan Dollars and Other Currencies,Unless Stated Otherwise)	TABLE 8 (In Thousands of New Taiwan Dollars and Other Currencies,Unless Stated Otherwise)	TABLE 8 (In Thousands of New Taiwan Dollars and Other Currencies,Unless Stated Otherwise)
Investor	Investee	Location	Main Businesses and Products	Investment Amount		Balance as of December 31, 2014			Net Income (Loss) of the Investee	Investment Income (Loss)	Note
				December 31, 2014	December 31, 2013	Shares (Thousands)	Percentage of Ownership	Carrying Value
TWM Wealth Media Technology Co., Ltd. Global Wealth Media Technology Co., Ltd. Global Forest Media Technology Co., Ltd. momo.com Inc. Asian Crown(BVI) Fortune Kingdom Taiwan Cellular Co., Ltd. Taiwan Teleservices & Technologies Co., Ltd.	Taiwan Cellular Co., Ltd. Taipei New Horizon Co., Ltd. Wealth Media Technology Co., Ltd. Alliance Digital Tech Co., Ltd. momo.com Inc. Win TV Broadcasting Co., Ltd. TFN Media Co., Ltd. Global Wealth Media Technology Co., Ltd. Global Forest Media Technology Co., Ltd. Globalview Cable TV Co., Ltd. Union Cable TV Co., Ltd. Fu Sheng Travel Service Co., Ltd. Fuli Life Insurance Agent Co., Ltd. Fuli Property Insurance Agent Co., Ltd. Asian Crown (BVI) Taiwan Pelican Express Co., Ltd. TVD Shopping Fortune Kingdom HK Fubon Multimedia TWM Holding Taiwan Fixed Network Co., Ltd. Taiwan Digital Communication Co., Ltd. TCC Investment Co., Ltd. Taiwan Teleservices & Technologies Co., Ltd. Taiwan Digital Service Co., Ltd. TT&T Holdings Taiwan Mobile Basketball Co.,Ltd.	Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan British Virgin Islands Taiwan Thailand Samoa Hong Kong British Virgin Islands Taiwan Taiwan Taiwan Taiwan Taiwan Samoa Taiwan	Investment Real estate leasing and hotel business Investment Technology development of mobile payment and information processing services Wholesale and retail sales TV program provider Cable broadband and value added service provider Investment Investment Cable TV service provider Cable TV service provider Travel agent Life insurance agent Property insurance agent Investment Logistics industry Wholesale and retail sales Investment Investment Investment Fixed line service provider TV program production and mobile phone wholesaling Investment Call center service and telephone marketing Telecommunications service agencies and retail business Investment Basketball team management	$ 41,872,288 1,918,655 16,802,000 30,000 8,129,394 222,417 5,210,443 92,189 16,984 91,910 16,218 6,000 3,000 3,000 789,864 337,860 150,797 (THB 155,750) 1,035,051 1,035,051 347,951 21,000,000 112,000 17,785,441 56,210 1,000,000 36,284 -	$ 44,767,288 1,746,500 13,802,000 30,000 8,347,949 222,417 5,210,443 92,189 16,984 91,910 16,218 6,000 3,000 3,000 690,824 337,860 - 690,824 690,824 347,951 21,000,000 112,000 20,680,441 56,210 1,000,000 36,284 3,511	371,196 191,866 42,065 3,000 63,047 18,177 230,921 8,945 1,500 3,825 1,300 2,500 300 300 26,500 16,893 31,150 33,633 33,633 - 2,100,000 11,200 22,103 2,484 20,000 1,300 -	100 49.9 100 13.33 44.38 100 100 100 100 6.83 0.76 100 100 100 76.26 17.70 35.00 100 100 100 100 100 100 100 100 100 -	$ 24,912,476 1,722,927 20,626,589 23,139 9,352,414 256,861 7,082,165 97,391 17,644 95,841 15,968 50,419 11,284 12,531 193,473 455,426 150,803 248,827 248,827 261,225 54,057,276 116,240 29,130,683 106,967 1,490,123 52,284 -	$ 7,383,016 (32,425) 2,703,674 (44,991) 1,170,042 37,942 2,196,291 5,326 535 80,554 104,740 21,157 2,788 3,634 (191,776) 155,092 15,180 (192,008) (192,008) 9,548 5,379,331 (126) 1,485,742 60,057 467,479 3,260 959	$ 8,351,285 (16,180) 2,703,674 (7,297) - - - - - - - - - - - - - - - - - - - - - - -	Note 1 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Notes 2 & 7 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Notes 2 & 3

(Continued)

～ 91 ～

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES NAMES, LOCATIONS AND RELATED INFORMATION OF INVESTEES ON WHICH TWM EXERCISED SIGNIFICANT INFLUENCE (EXCLUDING INFORMATION ON INVESTMENT IN MAINLAND CHINA) FOR THE YEAR ENDED DECEMBER 31, 2014

Investor	Investee	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance as of December 31, 2014	Balance as of December 31, 2014	Balance as of December 31, 2014	Net Income (Loss) of the Investee	Investment Income (Loss)	Note
				December 31, 2014	December 31, 2013	Shares (Thousands)	Percentage of Ownership	Carrying Value
TCC Investment Co., Ltd. TFN Media Co., Ltd. Taiwan Fixed Network Co., Ltd.	TCCI Investment and Development Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. Mangrove Cable TV Co., Ltd. Phoenix Cable TV Co., Ltd. Union Cable TV Co., Ltd. Globalview Cable TV Co., Ltd. Taiwan Kuro Times Co., Ltd. Kbro Media Co., Ltd. TFN Union Investment Co., Ltd. TFN HK LIMITED	Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Hong Kong	Investment Cable TV service provider Cable TV service provider Cable TV service provider Cable TV service provider Cable TV service provider Online music and game service Film distribution, arts and literature service, and entertainment Investment Telecommunications service provider	$ 3,602,782 2,061,522 510,724 3,261,073 1,986,250 1,221,002 129,900 292,500 22,314,536 3,041 (HK$744)	$ 6,498,076 2,061,522 510,724 3,261,073 1,986,250 1,221,002 129,900 292,500 22,314,536 3,041 (HK$744)	400 33,940 6,248 68,090 169,141 51,733 14 29,250 400 1,300	100 100 29.53 100 99.22 92.38 100 32.5 100 100	$ 8,010,126 2,258,904 648,198 3,411,121 2,077,057 1,269,405 246,103 267,878 37,527,081 16,878	$ 1,159,077 212,371 103,652 209,332 104,740 80,554 98,659 (36,707) (137) 3,200	- - - - - - - - - -	Note 2 Note 2 Notes 2 & 4 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2

Note 1: Downstream transactions, upstream transactions, and consolidated unrealized gain or loss with intercompany effect are included. (Concluded) Note 2: The income/loss of the investee was already included in the income/loss of the investor, and is not presented in this table.

Note 3: The investee was disposed of in September 2014. The net income or loss for the period from January 1, 2014, to the disposal date of the subsidiary was listed in the net income (loss) of the investee. Note 4: 70.47% of shares are held under trustee accounts.

＝ Note 5: The above amounts were translated into New Taiwan dollars at the exchange rate of HK$1 NT$4.087 and THB1=NT$0.9682 at the end of the period.

Note 6: For information on investment in Mainland China, please refer to table 10.

Note 7: Held 1 share on December 31, 2014.

～ 92 ～

TABLE 9

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES BUSINESS RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE YEAR ENDED DECEMBER 31, 2014

(In Thousands of New Taiwan Dollars)

Number	Company Name	Counterparty	Nature of Relationship (Note)		Transaction Details	Transaction Details
				Account	Amount	Transaction Terms	Percentage of Consolidated Total Operating Revenues or Total Assets
0	TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM	Taiwan Digital Service Co., Ltd. Taiwan Fixed Network Co., Ltd. momo.com Inc. Taiwan Kuro Times Co., Ltd. Taiwan Digital Service Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Kuro Times Co., Ltd. momo.com Inc. Taiwan Digital Service Co., Ltd. Taiwan Digital Service Co., Ltd. TFN Media Co., Ltd. Taipei New Horizon Co., Ltd. Taiwan Fixed Network Co., Ltd. Wealth Media Technology Co., Ltd. Taiwan Cellular Co., Ltd. Taiwan Kuro Times Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Teleservices & Technologies Co., Ltd. Wealth Media Technology Co., Ltd. Taiwan Digital Service Co., Ltd. Taipei New Horizon Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. Taiwan Kuro Times Co., Ltd. Phoenix Cable TV Co., Ltd. Taiwan Digital Service Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Kuro Times Co., Ltd.	1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1	Accounts and notes receivable, net Accounts and notes receivable, net Accounts and notes receivable, net Accounts and notes receivable, net Other receivables Other receivables Other receivables Other receivables Prepayments Proceeds from disposal of property, plant and equipment and intangible assets Acquisition price of property, plant and equipment Other non-current assets Short-term borrowings Short-term borrowings Short-term borrowings Accounts payable Accounts payable Other payables Other payables Other payables Other payables Other payables Other payables Other payables Other payables Advance receipts Other current liabilities Other current liabilities	$ 214,280 26,560 13,097 1,612 284,053 33,260 3,984 3,473 53,253 24,916 1,442 16,756 8,180,000 1,800,000 300,000 86,717 1,916 457,759 94,368 2,905 2,887 2,218 2,207 1,465 1,218 9,033 43,349 2,644	The terms of transaction are determined in accordance with mutual agreements or general business practices 〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞	- - - - - - - - - - - - 5% 1% - - - - - - - - - - - - - -

(Continued)

～ 93 ～

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES BUSINESS RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE YEAR ENDED DECEMBER 31, 2014

Number	Company Name	Counterparty	Nature of Relationship (Note)		Transaction Details	Transaction Details
				Account	Amount	Transaction Terms	Percentage of Consolidated Total Operating Revenues or Total Assets
1	TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM TWM Wealth Media Technology Co., Ltd. Wealth Media Technology Co., Ltd. Wealth Media Technology Co., Ltd. Wealth Media TechnologyCo.,Ltd.	Taiwan Digital Service Co., Ltd. Taiwan Fixed Network Co., Ltd. momo.com Inc. Taiwan Kuro Times Co., Ltd. Phoenix Cable TV Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. Union Cable TV Co., Ltd. Globalview Cable TV Co., Ltd. Mangrove Cable TV Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Kuro Times Co., Ltd. Taipei New Horizon Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. TFN Media Co., Ltd. Globalview Cable TV Co., Ltd. momo.com Inc. Mangrove Cable TV Co., Ltd. Taiwan Digital Service Co., Ltd. Taiwan Digital Service Co., Ltd. Taiwan Digital Service Co., Ltd. Taiwan Teleservices & Technologies Co., Ltd. Taiwan Fixed Network Co., Ltd. Taipei New Horizon Co., Ltd. Taiwan Mobile Basketball Co., Ltd. Taiwan Digital Communications Co., Ltd. TCC Investment Co., Ltd. Taiwan Fixed Network Co., Ltd. momo.com Inc. Taiwan Digital Service Co., Ltd. TFN Media Co., Ltd. Taiwan Kuro Times Co., Ltd. Taiwan Fixed Network Co., Ltd. Wealth Media Technology Co., Ltd. Taiwan Cellular Co., Ltd. TFN Media Co., Ltd. Win TV Broadcasting Co., Ltd. TFN Media Co., Ltd. Win TV BroadcastingCo.,Ltd.	1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1	Operating revenues Operating revenues Operating revenues Operating revenues Operating revenues Operating revenues Operating revenues Operating revenues Operating revenues Operating costs Operating costs Operating costs Operating costs Operating costs Operating costs Operating costs Operating costs Realized gain on sales Unrealized gain on sales Operating expenses Operating expenses Operating expenses Operating expenses Operating expenses Operating expenses Operating expenses Other income Other income Other income Other income Other income Finance costs Finance costs Finance costs Other receivables Other receivables Other income Other income	$ 12,811,112 1,815,552 101,189 5,372 2,439 2,295 1,688 1,237 1,004 7,383,669 355,702 28,996 9,103 5,016 2,640 1,617 1,217 30,533 42,761 11,761,940 1,076,335 69,771 58,792 34,057 20,481 6,732 64,584 37,364 12,928 11,174 5,998 94,529 8,791 1,830 1,507,870 250,988 10,601 1,362	The terms of transaction are determined in accordance with mutual agreements or general business practices 〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞	11% 2% - - - - - - - 7% - - - - - - - - - 10% 1% - - - - - - - - - - - - - 1% - - -

(Continued)

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES BUSINESS RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE YEAR ENDED DECEMBER 31, 2014

Number	Company Name	Counterparty	Nature of Relationship (Note)	Transaction Details	Transaction Details	Transaction Details	Transaction Details
				Account	Amount	Transaction Terms	Percentage of Consolidated Total Operating Revenues or Total Assets
2 3	momo.com Inc. momo.com Inc. momo.com Inc. momo.com Inc. momo.com Inc. momo.com Inc. momo.com Inc. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFNMedia Co.,Ltd.	Fu Sheng Travel Service Co., Ltd. Fu Sheng Travel Service Co., Ltd. TFN Media Co., Ltd. Mangrove Cable TV Co., Ltd. Taiwan Teleservices & Technologies Co., Ltd. Phoenix Cable TV Co., Ltd. Win TV Broadcasting Co., Ltd. Phoenix Cable TV Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. Union Cable TV Co., Ltd. Globalview Cable TV Co., Ltd. Mangrove Cable TV Co., Ltd. Phoenix Cable TV Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. Globalview Cable TV Co., Ltd. Win TV Broadcasting Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. Phoenix Cable TV Co., Ltd. Union Cable TV Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. Phoenix Cable TV Co., Ltd. Union Cable TV Co., Ltd. Globalview Cable TV Co., Ltd. Mangrove Cable TV Co., Ltd. Phoenix Cable TV Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. Union Cable TV Co., Ltd. Globalview Cable TV Co., Ltd. Mangrove Cable TV Co., Ltd. Win TV Broadcasting Co., Ltd. Win TV Broadcasting Co., Ltd. Phoenix Cable TV Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. UnionCableTV Co.,Ltd.	1 1 3 3 3 3 3 1 1 1 1 1 1 1 1 3 1 1 1 1 1 1 1 1 1 1 1 1 1 3 3 1 1 1	Accounts and notes receivable, net Operating revenues Operating costs Operating costs Operating costs Operating costs Operating costs Accounts and notes receivable, net Accounts and notes receivable, net Accounts and notes receivable, net Accounts and notes receivable, net Accounts and notes receivable, net Short-term borrowings Short-term borrowings Short-term borrowings Notes payable Accounts payable Accounts payable Accounts payable Other payables Other payables Other payables Other payables Other payables Operating revenues Operating revenues Operating revenues Operating revenues Operating revenues Operating revenues Operating costs Operating costs Operating costs Operating costs	$ 18,917 9,842 89,856 8,664 1,720 1,125 1,020 35,776 35,611 21,857 13,963 12,480 540,000 425,000 260,000 15,542 1,946 1,814 1,110 3,547 3,306 2,315 1,468 1,271 507,976 457,479 214,288 199,371 16,783 1,328 59,207 35,308 33,795 20,152	The terms of transaction are determined in accordance with mutual agreements or general business practices 〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES BUSINESS RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE YEAR ENDED DECEMBER 31, 2014

Number	Company Name	Counterparty	Nature of Relationship (Note)		Transaction Details	Transaction Details
				Account	Amount	Transaction Terms	Percentage of Consolidated Total Operating Revenues or Total Assets
4 5 6 7 8	TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. TFN Media Co., Ltd. Union Cable TV Co., Ltd. Phoenix Cable TV Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Fixed Network Co., Ltd. Taiwan Teleservices & Technologies Co., Ltd. Taiwan Digital Service Co., Ltd. Taiwan Digital Service Co., Ltd. Taiwan Digital Service Co., Ltd. Taiwan Digital Service Co., Ltd.	Globalview Cable TV Co., Ltd. Mangrove Cable TV Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. Phoenix Cable TV Co., Ltd. Globalview Cable TV Co., Ltd. Union Cable TV Co., Ltd. Mangrove Cable TV Co., Ltd. Phoenix Cable TV Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. Globalview Cable TV Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. TFN Media Co., Ltd. momo.com Inc. Taiwan Digital Service Co., Ltd. Taipei New Horizon Co., Ltd. Taipei New Horizon Co., Ltd. TFN HK LIMITED Taiwan Teleservices & Technologies Co., Ltd. Taiwan Digital Service Co., Ltd. TFN Media Co., Ltd. momo.com Inc. Taiwan Kuro Times Co., Ltd. Phoenix Cable TV Co., Ltd. Union Cable TV Co., Ltd. Mangrove Cable TV Co., Ltd. Globalview Cable TV Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. Union Cable TV Co., Ltd. TFN HK LIMITED Taiwan Teleservices & Technologies Co., Ltd. Taipei New Horizon Co., Ltd. Win TV Broadcasting Co., Ltd. Taiwan Kuro Times Co., Ltd. Taipei New Horizon Co., Ltd. Yeong Jia Leh Cable TV Co., Ltd. Taipei New Horizon Co., Ltd. Taipei New Horizon Co., Ltd.	1 1 1 1 1 1 1 1 1 1 3 3 3 3 3 3 3 1 3 3 3 3 3 3 3 3 3 3 3 1 3 3 3 3 3 3 3 3	Operating costs Operating costs Operating expenses Operating expenses Operating expenses Operating expenses Operating expenses Finance costs Finance costs Finance costs Operating revenues Operating revenues Accounts and notes receivable, net Accounts and notes receivable, net Other receivables Prepayments Other non-current assets Other payables Other payables Advance receipts Operating revenues Operating revenues Operating revenues Operating revenues Operating revenues Operating revenues Operating revenues Operating costs Operating costs Operating costs Operating expenses Operating expenses Other income Operating revenues Other non-current liabilities Other payables Operating costs Operating expenses	$ 14,063 6,673 2,971 1,842 1,247 1,230 1,072 6,475 4,684 2,986 1,168 1,002 24,945 2,529 2,178 9,242 8,778 17,234 7,901 1,333 142,287 21,023 5,752 4,844 4,221 2,166 1,715 1,772 1,769 88,892 100,848 29,608 5,459 4,835 5,841 1,218 4,941 24,015	The terms of transaction are determined in accordance with mutual agreements or general business practices 〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞〞	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

(Concluded)

Note: 1. Parent to subsidiary

Subsidiary to parent
Between subsidiaries

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR THE YEAR ENDED DECEMBER 31, 2014

TABLE 10

(In Thousands of New Taiwan Dollars and Other Currencies, Unless Stated Otherwise)

Investee Company Name	Main Businesses and Products	Main Businesses and Products	Total Amount of Paid-in Capital	Investment Type	Investment Type	Accumulated Outflow of Investment from Taiwan as of January 1, 2014	Investment Flows	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2014	Net (Loss) Income of Investee	% Ownership through Direct or Indirect Investment	Investment Income (Loss)	Carrying Value as of December 31, 2014	Accumulated Inward Remittance of Earnings as of December 31, 2014
							Outflow		Inflow
Xiamen Taifu Teleservices & Technologies Co., Ltd. TWM Communications (Beijing) Co. Ltd. Fubon Gehua (Beijing) Enterprise Ltd.	System integration, management, analysis and development of CRM application and information consulting services Mobile application development and design Wholesaling		$ - (Note 3) 95,130 (US$3,000) 1,171,850 (RMB230,000)	2 2 2		$ 41,223 (US$1,300) 154,491 (US$4,872) 697,370 (US$14,000, RMB49,741)	$ - - 101,900 (RMB20,000)	$	- - -	$ 41,223 (US$1,300) 154,491 (US$4,872) 799,270 (US$14,000, RMB69,741)	$ - 105 (216,774)	100% indirect ownership through TWM’s subsidiary 100% indirect ownership through TWM’s subsidiary 69.63% indirect ownership through TWM’s subsidiary	$ - 105 (179,541)	- (Note 3) 114,049 189,304	$ - - -
									Upper Limit on Investment Authorized by Investment Commission, MOEA $80,000 $51,340,140 $3,836,917
Investee Company Name		Accumulated Investment in Mainland China as of December 31, 2014			Investment Amounts Authorized by Investment Commission, MOEA				Upper Limit on Investment Authorized by Investment Commission, MOEA
Xiamen Taifu Teleservices & Technologies Co., Ltd.		41,223 (US$1,300)			41,223 (US$1,300)				$80,000
TWM Communications (Beijing) Co., Ltd.		154,491 (US$4,872)			154,491 (US$4,872)				$51,340,140
Fubon Gehua (Beijing) Enterprise Ltd.		799,270 (US$14,000, RMB69,741)			883,250 (US$15,000, RMB80,000)				$3,836,917

Note 1: The investment types are as follows:

a. Direct investment in Mainland China.

b. Indirect investment in Mainland China through a subsidiary in a third place, e.g. TT&T, TCC and momo.

c. Others.

＝＝ Note 2: The above amounts were translated into New Taiwan dollars at the exchange rate of US$1 NT$31.71 and RMB1 NT$5.095 at the end of the period. Note 3: Xiamen Taifu Teleservices & Technologies Co., Ltd. was dissolved in November 2013 and contributed capital to the parent company, TT&T Holdings. Note 4: The amount was calculated based on the audited financial statements.

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AI assistant

Taiwan Mobile Co., Ltd. — Annual Report 2014

52277_rns_2014-11-18_50361c40-40cc-446b-b3d0-09ded93f40d0.pdf

Independent Auditors’ Report

Notes to Readers

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2014 AND 2013

(In Thousands of New Taiwan Dollars)

TAIWAN MOBILE CO., 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)

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

(In Thousands of New Taiwan Dollars)

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

(In Thousands of New Taiwan Dollars)

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

(In Thousands of New Taiwan Dollars)

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. ORGANIZATION AND OPERATIONS

2. APPROVAL DATE AND PROCEDURES OF THE CONSOLIDATED FINANCIAL STATEMENTS

3. NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

(1) IAS 19 Employee Benefits

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Basis of Preparation

Basis of Consolidation

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Foreign Currency

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Classification of Current and Non-current Assets and Liabilities

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Voluntary Change in Accounting Policy

Cash and Cash Equivalents

Financial Instruments

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(5) Impairment of financial assets

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

b. Financial liabilities

(2) Derecognition of financial liabilities

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Inventories

Non-current Assets Held for Sale and Discontinued Operations

Investment in Associates

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Property, Plant and Equipment

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Investment Property

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Leases

Intangible Assets

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Impairment of Non-financial Assets

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Provisions

Treasury Shares

Taiwan Mobile Co., Ltd. Annual Report 2014