Taiwan Mobile Co., Ltd. — Annual Report 2014

Taiwan Mobile Co., Ltd.

Non-consolidated Financial Statements for the Years Ended December 31, 2014 and 2013, and Independent Auditors’ Report

Independent Auditors’ Report

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

We have audited the accompanying 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. These non-consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these non-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 non-consolidated 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 non-consolidated statements presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects, the financial position of Taiwan Mobile Co., Ltd. as of December 31, 2014 and 2013, and the results of its operations and its 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.”

We have also audited the accompanying schedules of significant accounts, provided as supplementary analysis, by applying the same procedures described above. In our opinion, such schedules are consistent, in all material respects, with the non-consolidated financial statements referred to above.

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

Notes to Readers

The accompanying non-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 non-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 non-consolidated financial statements shall prevail.

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TAIWAN MOBILE CO., LTD.

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)) 1170 Accounts and notes receivable, net (Notes 4, 5 and 6(d)) 1180 Accounts receivable from related parties (Note 7) 1200 Other receivables 1210 Other receivable from related parties (Note 7) 130x Inventories (Notes 4 and 6(e)) 1410 Prepayments (Note 7) 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)) 1550 Investments accounted for using equity method (Notes 4, 5 and 6(f)) 1600 Property, plant and equipment (Notes 4, 5 and 6(h)) 1760 Investment properties, net (Notes 4 and 6(i)) 1791 Concessions (Notes 4 and 6(j)) 1805 Goodwill (Notes 4, 5 and 6(j)) 1801 Computer software, net (Notes 4 and 6(j)) 1840 Deferred tax assets (Notes 4, 5 and 6(s)) 1995 Other non-current assets (Notes 6(k) and 8) Total non-current assets TOTAL	2014.12.31 Amount % $ 1,167,487 1 204,310 - 10,606,824 8 261,589 - 371,843 - 333,917 - 1,999,682 2 303,705 - 1,810 - 15,251,167 11 2,587,050 2 7,050 - 47,285,131 34 32,294,190 23 554,966 - 31,505,997 22 7,121,871 5 489,502 - 779,560 1 2,746,422 2 125,371,739 89 $ 140,622,906 100	2013.12.31 Amount % 601,723 1 202,354 - 11,807,587 9 1,744,392 1 335,115 - 2,433,533 2 2,283,349 2 409,844 - 1,801 - 19,819,69815 - - 50,324 - 39,513,049 30 28,975,365 22 1,765,018 1 32,748,545 24 7,121,871 5 376,627 - 815,573 1 2,991,162 2 114,357,534 85 134,177,232 100 LIABILITIES AND EQUITY CURRENT LIABILITIES 2100 Short-term borrowings (Notes 4, 6(l) and 7) 2110 Short-term notes and bills payable (Notes 4 and 6(l)) 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(p)) 2310 Advance receipts (Note 6(m)) 2320 Long-term liabilities, current portion (Note 6(o)) 2399 Other current liabilities Total current liabilities NON-CURRENT LIABILITIES 2530 Bonds payable (Note 6(n)) 2540 Long-term borrowings (Note 6(o)) 2550 Non-current provisions (Notes 4 and 6(p)) 2570 Deferred tax liabilities (Notes 4, 5 and 6(s)) 2640 Accrued pension liabilities (Notes 4 and 6(r)) 2645 Guarantee deposits Total non-current liabilities Total liabilities 3110 Ordinary shares 3200 Capital surplus Retained earnings 3310 Legal reserve 3350 Unappropriated retained earnings 3400 Other equity interests 3500 Treasury shares Total equity (Note 6(t)) TOTAL	2014.12.31 2013.12.31 Amount % Amount % $ 27,880,000 20 37,170,000 28 5,593,031 4 2,396,971 2 4,353,712 3 4,025,392 3 88,659 - 94,029 - 8,885,881 6 8,884,409 7 940,108 1 470,808 - 118,947 - 109,116 - 1,673,685 1 1,973,963 1 2,000,000 2 1,000,000 1 1,716,023 1 1,112,012 1 53,250,046 38 57,236,700 43 14,794,293 11 14,792,647 11 10,000,000 7 2,000,000 2 616,959 - 564,470 - 1,313,577 1 1,744,211 1 28,286 - 28,882 - 360,393 - 376,428 - 27,113,508 1919,506,638 14 80,363,554 57 76,743,338 57 34,208,328 24 34,208,328 26 14,715,830 11 12,456,891 9 21,537,666 15 19,262,044 14 19,817,858 14 22,171,132 17 (302,986 ) - 412,682 - (29,717,344 ) (21 )(31,077,183) (23) 60,259,352 43 57,433,894 43 $ 140,622,906 100 134,177,232 100
	Amount $ 1,167,487 204,310 10,606,824 261,589 371,843 333,917 1,999,682 303,705 1,810 15,251,167 2,587,050 7,050 47,285,131 32,294,190 554,966 31,505,997 7,121,871 489,502 779,560 2,746,422 125,371,739 $ 140,622,906	Amount 601,723 202,354 11,807,587 1,744,392 335,115 2,433,533 2,283,349 409,844 1,801 19,819,698 - 50,324 39,513,049 28,975,365 1,765,018 32,748,545 7,121,871 376,627 815,573 2,991,162 114,357,534 134,177,232

TOTAL $ 140,622,906 100 134,177,232 100

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

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TAIWAN MOBILE CO., LTD. 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(v) and 7) 5000 OPERATING COSTS (Notes 4, 7 and 12) GROSS PROFIT FROM OPERATIONS 5910 Unrealized gain on sales 5920 Realized gain on sales 5950 NET GROSS PROFIT FROM OPERATIONS 6000 OPERATING EXPENSES (Notes 4, 7 and 12) 6100 Marketing 6200 Administrative 6500 NET OTHER INCOME AND EXPENSES (Note 6(w)) 6900 NET OPERATING INCOME NON-OPERATING INCOME AND EXPENSES (Notes 4, 6(x) and 7) 7010 Other income 7020 Other gains and losses, net 7050 Finance costs 7060 Share of profit of subsidiaries and associates accounted for using equity method 7000 Total non-operating income and expenses 7900 PROFIT BEFORE TAX 7950 TAX EXPENSE (Notes 4 and 6(s)) 8200 PROFIT 8300 OTHER COMPREHENSIVE INCOME (LOSS) 8325 Unrealized gains (losses) on available-for-sale financial assets 8360 Actuarial losses on defined benefit plans 8370 Share of other comprehensive income (loss) of subsidiaries and associates accounted for using equity method 8399 Income tax generated from other comprehensive income 8300 OTHER COMPREHENSIVE INCOME (AFTER TAX) 8500 COMPREHENSIVE INCOME EARNINGS PER SHARE (Note 6(u)) 9750 BASIC 9850 DILUTED	2014	% 100 65 35 - - 35 24 4 28 - 7 1 (1) (1) 13 12 19 1 18 (1) - - - (1) 17 5.56 5.55	2013	% 100 65 35 - - 35 20 4 24 - 11 - (2) (1) 13 10 21 1 20 - - - - - 20 5.79 5.78
	Amount $ 81,649,070 52,822,024 28,827,046 42,761 30,533 28,814,818 20,018,364 3,135,187 23,153,551 52,013 5,713,280 550,826 (955,375) (599,276) 11,031,482 10,027,657 15,740,937 735,509 15,005,428 (390,994 ) (14,791 ) (330,879 ) 2,515 (734,149 ) $ 14,271,279 $		Amount 78,928,492 51,265,449 27,663,043 33,405 - 27,629,638 15,989,050 3,435,206 19,424,256 52,635 8,258,017 229,807 (1,318,154) (444,094) 9,862,077 8,329,636 16,587,653 1,004,206 15,583,447 (3,043) (17,260) 89,290 2,934 71,921 15,655,368
	$

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

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TAIWAN MOBILE CO., LTD. STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

(In Thousands of New Taiwan Dollars)

Account Number A1 BALANCE, JANUARY 1, 2013 Distribution of retained earnings for the year ended December 31, 2012 (Note 1): B1 Legal reserve B5 Cash dividends B5 Legal reserve used to distribute cash dividends Total distribution of retained earnings D1 Profit for the year ended December 31, 2013 D3 Other comprehensive income for the year ended December 31, 2013 D5 Total comprehensive income for the year ended December 31, 2013 C7 Changes in equity of associates accounted for using equity method M7 Adjustments arising from changes in percentage of ownership of subsidiaries Z1 BALANCE, DECEMBER 31, 2013 Distribution of retained earnings for the year ended December 31, 2013 (Note 2): B1 Legal reserve B5 Cash dividends Total distribution of retained earnings D1 Profit for the year ended December 31, 2014 D3 Other comprehensive income for the year ended December 31, 2014 D5 Total comprehensive income for the year ended December 31, 2014 C7 Changes in equity of associates accounted for using equity method L7 Disposal of TWM’s shares by subsidiaries M5 Difference between consideration and carrying amount of subsidiaries’ shares disposed of M7 Adjustments arising from changes in percentage of ownership of subsidiaries Z1 BALANCE, DECEMBER 31, 2014	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 Unappropriated 22,606,173 (1,469,160) (14,526,578) - (15,995,738) 15,583,447 (735) 15,582,712 - (22,015) 22,171,132 (2,275,622) (15,064,599) (17,340,221) 15,005,428 (18,481) 14,986,947 - - - - 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 )	Total Equity 56,571,089 - (14,526,578 ) (269,010 ) (14,795,588 ) 15,583,447 71,921 15,655,368 25,040 (22,015 ) 57,433,894 - (15,064,599 ) (15,064,599 ) 15,005,428 (734,149 ) 14,271,279 1,665 2,880,242 85,965 650,906 60,259,352
					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

Note 1: The remuneration to directors of $39,667 thousand and the bonus to employees of $396,673 thousand have been expensed and deducted from 2012 earnings.

Note 2: The remuneration to directors of $42,075 thousand and the bonus to employees of $420,753 thousand have been expensed and deducted from 2013 earnings.

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

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TAIWAN MOBILE CO., LTD. STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

(In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES A10000 Profit before tax A20000 Adjustments A20010 Adjustments to reconcile profit (loss) A22400 Share of profit of subsidiaries and associates accounted for using equity method A20100 Depreciation expense A20200 Amortization expense A22500 Loss on disposal of property, plant and equipment, net A20900 Finance costs A20300 Provision for bad debt expense A23900 Unrealized gain on sales A24000 Realized gain on sales A21200 Interest income A21300 Dividend income 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 A31190 Other receivable from related parties A31200 Inventories A31230 Prepayments A31240 Other current assets 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 A33350 Income taxes paid AAAA Net cash flows from operating activities	2014 $ 15,740,937 (11,031,482 ) 7,600,128 1,505,417 950,715 599,276 334,960 42,761 (30,533) (18,531) (9,835) (57,124) 1,164,238 1,482,803 (46,827) 14,616 283,667 106,139 (9) 328,320 (5,370) (1,001,011) (5,416) (245,267) 549,000 (15,387) 2,609,496 18,293,309 1,510 (4,351) (1,056,066) $ 17,234,402	2013 16,587,653 (9,862,077 ) 7,008,086 994,221 1,285,754 444,094 286,698 33,405 - (38,975) (11,628) 139,578 (941,074) (1,704,873) 211,472 (542,393) (334,014) (15,923) 1,900 (733,372) 25,757 488,164 (5,845) (294,734) 419,300 860 (3,424,775) 13,302,456 - (1,134) (1,103,859) 12,197,463

(Continued)

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TAIWAN MOBILE CO., LTD. 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 (9,196,218) B07100 Increase in prepayments for equipment (280,962) B04500 Acquisition of intangible assets (108,375) B01800 Acquisition of investments accounted for using equity method (3,172,155) B00300 Acquisition of available-for-sale financial assets (2,980,000) B04300 Increase in financing provided to investees (2,920,000) B04400 Decrease in financing provided to investees 5,005,000 B03700 Increase in refundable deposits (125,248) B03800 Decrease in refundable deposits 94,717 B04600 Proceeds from disposal of intangible assets 12,660 B02800 Proceeds from disposal of property, plant and equipment 12,484 B01400 Proceeds from investees' capital reduction 43,274 B07500 Interest received 26,943 B07600 Dividend received 9,717,061 B06500 Increase in other financial assets - BBBB Net cash used in investing activities (3,870,819) CASH FLOWS FROM FINANCING ACTIVITIES C00100 Increase in short-term borrowings 109,300,000 C00200 Decrease in short-term borrowings (122,200,000) C03700 Proceeds of financing from investee 21,070,000 C03800 Repayment of financing from investee (17,460,000) C00500 Increase in short-term notes and bills payable 19,067,020 C00600 Decrease in short-term notes and bills payable (15,874,202) C01600 Proceeds from long-term borrowings 10,000,000 C01700 Repayments of long-term borrowings (1,000,000) C03000 Increase in guarantee deposits received 110,213 C03100 Decrease in guarantee deposits received (127,049) C04500 Cash dividends paid (15,064,590) C05600 Interest paid (619,211) C01200 Proceeds from issuance of bonds - C01300 Repayments of bonds - CCCC Net cash flows from (used in) financing activities (12,797,819) EEEE NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 565,764 E00100CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 601,723 E00200CASH AND CASH EQUIVALENTS AT END OF YEAR$ 1,167,487

2013 (6,776,085) (137,989) (29,148,300) (1,153,350) - (4,445,000) 4,190,000 (109,629) 88,819 20,394 33,005 - 33,085 5,240,570 (720) (32,165,200) 71,900,000 (44,400,000) 7,270,000 (7,400,000) 3,894,957 (1,498,542) 3,000,000 - 119,069 (126,859) (14,795,584) (344,979) 5,796,043 (4,000,000) 19,414,105 (553,632) 1,155,355 601,723

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

(Concluded)

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES NOTES TO NON-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 2014, 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”.

2. APPROVAL DATE AND PROCEDURES OF THE NON-CONSOLIDATED FINANCIAL STATEMENTS

The Board of Directors approved the non-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 (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:

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TAIWAN MOBILE CO., LTD.

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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 TWM’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 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, TWM anticipates that accrued pension

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TAIWAN MOBILE CO., LTD.

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

liabilities would increase by $311 thousand and retained earnings would decrease by $258 thousand on January 1, 2014; accrued pension liabilities would increase by $289 thousand and retained earnings would decrease by $240 thousand on December 31, 2014, operating expenses would increase by $562 thousand and actuarial gains on defined benefit plans, before tax would increase by $584 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. TWM 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.

(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, TWM 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

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	Effective Date Issued by IASB
	January 1, 2018 January 1, 2016 January 1, 2017 January 1, 2016 January 1, 2018 (continued)

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TAIWAN MOBILE CO., LTD.

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

New Standards, Amendments and Interpretations 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, 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 (concluded)

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

The non-consolidated financial statements have been prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers (the Guidelines).

Basis of Preparation

• a. Basis of measurement

• The non-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 is determined based on the primary economic environment in

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TAIWAN MOBILE CO., LTD.

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

which the entity operates. The non-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.

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 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 non-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

TWM 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.

TWM 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.

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TAIWAN MOBILE CO., LTD.

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

• 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 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, TWM 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 TWM becomes a party to the contractual provisions of the instruments.

• a. Financial assets

TWM adopts trade-date accounting to recognize and derecognize financial assets. Financial assets are classified into the following categories: available-for-sale financial assets and loans and receivables.

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(1) 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.

(2) 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.

(3) 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 TWM on terms that TWM 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

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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.

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

(4) Derecognition of financial assets

TWM derecognizes financial assets when the contractual rights of the cash inflow from the asset are terminated, or when TWM 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

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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, 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

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

Investment in Associates

Associates are those entities in which TWM 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 non-consolidated financial statements include TWM’s share of the profit or loss and other comprehensive income of equity-accounted investees, after adjustments to align their accounting policies with those of TWM, from the date that significant influence commences until the date that significant influence ceases.

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

If TWM 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 TWM and an associate are eliminated to the extent of TWM’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 TWM’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 TWM has an obligation or has made payments on behalf of the investee.

Subsidiaries

The subsidiaries which TWM holds for control are measured under the equity method in the financial statements. Under the equity method, the net income, other comprehensive income, and equity in the separate financial statements are equivalent to the net income, other comprehensive income, and equity attributable to the owners of the parent in the consolidated financial statements.

Changes in ownership of the subsidiaries are recognized as equity transactions.

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

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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 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 TWM 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.

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(h).

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.

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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 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.

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. Other intangible assets

Other intangible assets are measured at cost less accumulated amortization and any accumulated impairment losses.

• c. 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(j).

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

TWM 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

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

cost to sell and value in use) for the individual asset, then TWM 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.

TWM 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 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, TWM 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

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

of the discount is recognized as finance cost. The restoration cost for property, plant and equipment that were originally acquired or used by TWM 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.

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. 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. TWM 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.

TWM 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

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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 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.

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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.

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, and value-added services, net of any applicable discount, are billed at predetermined rates.

• 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) TWM has transferred the significant risks and returns of ownership to the counterparty;

• (2) TWM 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 TWM;

• (5) Costs related to the transactions, whether incurred or expected, can be reliably measured.

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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

• c. 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.

• d. 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.

When TWM 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 TWM.

• e. Dividend and interest income

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

Interest arising from financial instruments is recognized when the economic benefits will probably flow to TWM 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, TWM 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 non-consolidated financial statements in conformity with the Guidelines 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.

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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

TWM has not recognized any impairment loss for the years ended December 31, 2014 and 2013.

• 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 $7,121,871 thousand. TWM 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.

TWM 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

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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 $779,560 thousand and $815,573 thousand, respectively; and the carrying value of deferred income tax liabilities amounted to $1,313,577 thousand and $1,744,211 thousand, respectively.

• e. Useful lives of property, plant and equipment

Please refer to Note 6(h). TWM 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, TWM 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 $10,606,296 thousand and $11,804,813 thousand, respectively. They were the net amounts after subtracting the allowances for doubtful accounts amounting to $228,697 thousand and $263,918 thousand, respectively.

6. DESCRIPTION OF SIGNIFICANT ACCOUNTS

• a. Cash and cash equivalents

2014.12.31 Cash in banks $ 729,570 Time deposits 392,887 Government bonds with repurchase rights 45,000 Revolving funds 30 $ 1,167,487 Current and non-current available-for-sale financial assets 2014.12.31 Domestic listed stock $ 204,310 Domestic unlisted stock $ 2,587,050	2013.12.31
	431,763 11,960 158,000 -
	601,723
	2013.12.31
	202,354
	-

• b. Current and non-current available-for-sale financial assets

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

c. Non-current financial assets at cost

Foreign unlisted stock	2014.12.31 $ 7,050	2013.12.31 50,324

The aforementioned investments held by TWM 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, TWM 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 $ 528 10,834,993 (228,697 ) 10,606,296 $ 10,606,824	2013.12.31 2,774 12,068,731 (263,918) 11,804,813 11,807,587

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

Amount of Accounts Receivable Sold January 2014 Long Sun Asset Management Co., Ltd. $ 988,347 January 2013 Hui Cheng First Asset Management Co., Ltd. $ 1,238,163 The accounts receivable aging analysis of TWM was as follows: 2014.12.31 Neither past due nor impaired $ 10,327,243 Past due but not impaired Past due within 180 days 279,053 Past due over 180 days - $ 10,606,296	Proceeds of the Sale of Accounts Receivable
	42,499
	40,116
	2013.12.31 11,517,099 283,805 3,909 11,804,813

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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	For the Years Ended December 31	For the Years Ended December 31
	2014 $ 263,918 317,187 112,886 (465,294) $ 228,697 2014.12.31 $ 1,999,682	2013
		257,724 262,779 120,169 (376,754 )
		263,918
		2013.12.31 2,283,349

e. Inventories

For the years ended December 31, 2014 and 2013, the cost of goods sold recognized in comprehensive income amounted to $24,463,513 thousand and $23,565,134 thousand, respectively, which included the inventory write-downs amounting to $28,232 thousand and recovery amounting to $22,766 thousand, respectively. The value of the inventories was recovered by clearing the inventories in the year 2013.

• f. Investments accounted for using equity method

Subsidiaries Associates Taipei New Horizon Co., Ltd.(TNH) Alliance Digital Tech Co., Ltd. (ADT)	2014.12.31 $ 47,261,992 - 23,139 $ 47,285,131	2013.12.31
		37,917,583 1,566,952 28,514
		39,513,049

(1) Subsidiaries

Please refer to the consolidated financial statements for the years ended December 31, 2014 and 2013.

• (2) Associates

Financial information on TWM’s associates was as follows:

Total assets Total liabilities	2014.12.31 $ 187,143 $ 13,598	2013.12.31
		7,768,095
		4,478,376

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Operating revenues Profit Share of losses of associates accounted for using equity method	For the Years Ended December 31 2014 2013 $ 42,355 2,875,023 $ (64,188 ) 143,215 $ (16,876 ) (69,725)
	2014 $ 42,355 $ (64,188 ) $ (16,876 )

(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(g).

• (2) 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.

g. 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.

Assets acquired and liabilities assumed

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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

TWM’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.

• h. Property, plant and equipment

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

Cost: Balance, January 1, 2014 Additions Reclassification Disposals Balance, December 31, 2014 Balance, January 1, 2013 Additions Reclassification Disposals Balance, December 31, 2013 Accumulated depreciation and impairment: Balance, January 1, 2014 Depreciation Reclassification Disposals Balance, December 31, 2014	Land $ 4,268,702 - 944,263 - $ 5,212,965 $ 4,040,056 - 228,646 - $ 4,268,702 $ 59,376 - - - $ 59,376	Buildings 2,612,273 - 395,524 - 3,007,797 2,551,870 - 60,403 - 2,612,273 842,123 69,961 142,263 - 1,054,347	Telecommunication equipment 63,138,694 59,519 8,962,996 (6,058,462 ) 66,102,747 61,272,984 114,199 7,471,680 (5,720,169 ) 63,138,694 43,348,134 7,040,623 (51,578 ) (5,117,069 ) 45,220,110	Miscellaneous equipment 4,571,722 328,317 116,320 (73,691 ) 4,942,668 4,243,731 338,225 60,045 (70,279 ) 4,571,722 3,160,262 477,016 51,578 (59,103 ) 3,629,753	Construction in progress and equipment to be inspected 1,793,869 10,284,580 (9,079,632 ) (7,218 ) 2,991,599 2,581,974 6,755,580 (7,532,341 ) (11,344 ) 1,793,869 - - - - -	Total 76,385,260 10,672,416 1,339,471 (6,139,371 ) 82,257,776 74,690,615 7,208,004 288,433 (5,801,792 ) 76,385,260 47,409,895 7,587,600 142,263 (5,176,172 ) 49,963,586 (continued)

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Balance, January 1, 2013 Depreciation Reclassification Disposals Balance, December 31, 2013 Carrying amount: Balance, December 31, 2014 Balance, December 31, 2013	Land $ 67,280 - (7,904 ) - $ 59,376 $ 5,153,589 $ 4,209,326	Buildings 760,044 64,926 17,153 - 842,123 1,953,450 1,770,150	Telecommunication equipment 41,366,103 6,434,764 - (4,452,733 ) 43,348,134 20,882,637 19,790,560	Miscellaneous equipment 2,697,422 491,340 1,800 (30,300 ) 3,160,262 1,312,915 1,411,460	Construction in progress and equipment to be inspected - - - - - 2,991,599 1,793,869	Total 44,890,849 6,991,030 11,049 (4,483,033 ) 47,409,895 32,294,190 28,975,365 (concluded)

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

(a) Buildings
Primary buildings	50~55 years
Mechanical and electrical equipment	15 years
(b) Telecommunication equipment	2~15 years
(c) Miscellaneous equipment	2~20 years

• (2) The non-cash investing activities of TWM 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 i. Investment property Land: Cost Buildings: Cost Accumulated depreciation Carrying amount	For the Years Ended December 31 2014 2013 $ 10,672,416 7,208,004 (1,416,746 ) (317,854) (59,452) (114,065) $ 9,196,218 6,776,085 2014.12.31 2013.12.31 $ 393,709 1,337,972 $ 254,062 649,585 92,805 222,539 $ 161,257 427,046 (Continued)
	2014 $ 10,672,416 (1,416,746 ) (59,452) $ 9,196,218 2014.12.31 $ 393,709 $ 254,062 92,805 $ 161,257

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Total investment property Fair value Capitalization rate	2014.12.31 $ 554,966 $ 1,566,181 1.06%~5.07%	2013.12.31
		1,765,018
		3,300,725
		1.19%~4.92%
		(Concluded)

Properties were reclassified from property, plant and equipment to investment property since the properties were no longer used by TWM 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.

j. Intangible assets

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

Cost: Balance, January 1, 2014 Addition Disposals Reclassification Balance, December 31, 2014 Balance, January 1, 2013 Addition Disposals Reclassification Balance, December 31, 2013 Amortization: Balance, January 1, 2014 Amortization Disposals Balance, December 31, 2014 Balance, January 1, 2013 Amortization Disposals Balance, December 31, 2013 Carrying amounts: Balance, December 31, 2014 Balance, December 31, 2013	Concession license $39,291,000 - - - $39,291,000 $10,281,000 29,010,000 - - $39,291,000 $ 6,542,455 1,242,548 - $ 7,785,003 $ 5,794,746 747,709 - $ 6,542,455 $31,505,997 $32,748,545	Goodwill 7,121,871 - - - 7,121,871 7,121,871 - - - 7,121,871 - - - - - - - - 7,121,871 7,121,871	Computer software 1,579,154 108,375 (15,670 ) 280,029 1,951,888 1,315,126 138,300 (54,782 ) 180,510 1,579,154 1,202,527 246,869 (3,010) 1,462,386 990,403 246,512 (34,388) 1,202,527 489,502 376,627	Total 47,992,025 108,375 (15,670) 280,029 48,364,759 18,717,997 29,148,300 (54,782) 180,510 47,992,025 7,744,982 1,505,417 (3,010) 9,247,389 6,785,149 994,221 (34,388) 7,744,982 39,117,370 40,247,043

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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

• (1) 4G concession license

• (2) 3G concession license

• (3) Computer software

16 years and 4 months ~16 years and 7 months 13 years and 9 months 2~3 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 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) Goodwill

The goodwill resulted from the merger of TransAsian Telecommunications Inc. (TAT) in September 2008.

In conformity with IAS 36 Impairment of Assets , TWM identified mobile communication service as the smallest identifiable units which can generate cash inflows independently.

The recoverable amounts of the operating assets and intangible assets were evaluated by the critical assumptions, which were as follows:

• a. 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.

• b. 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.

• c. Assumptions on operating costs and expenses

The estimates of activation commissions and customer retention costs were 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.

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

d. 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.

Based on the key assumptions of each cash-generating unit, TWM’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.

k. Other non-current assets

Long-term accounts receivable Refundable deposits Prepayments for equipment Other financial assets	2014.12.31 $ 2,248,006 430,750 66,946 720 $ 2,746,422	2013.12.31
		2,546,264 400,218 43,960 720
		2,991,162

• l. Short-term borrowings and short-term notes and bills payable

Unsecured loans－financial institutions Unsecured loans－related parties Short-term notes and bills payable Less: Discount on short-term notes and bills payable Unsecured loans－financial institutions Unsecured loans－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% $ 17,600,000 1.29478%~1.29789% 10,280,000 $ 27,880,000 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 1.183%~1.196% 6,670,000 $ 37,170,000 0.62%~0.72% $ 2,400,000 (3,029) $ 2,396,971
	Annual interest rate 0.83%~1.15% 1.183%~1.196% 0.62%~0.72%

For financial risk information of TWM, please refer to Note 6(aa); for the information on

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

loans from related parties, please refer to Note 7.

m. Advance receipts

Advance receipts from customers Deferred customer loyalty revenu~~es~~ Others		2014.12.31 1,606,359 51,137 16,189 1,673,685	2013.12.31
	$		1,854,177 47,879 71,907
	$		1,973,963

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.

n. 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

(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:

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

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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

o. Long-term borrowings

Unsecured loans－financial institutions Less: current portion Unsecured loans－financial institutions Less: current portion	2014.12.31 Annual interest rate Amount 1.05%~1.095% $ 12,000,000 1.05% (2,000,000) $ 10,000,000 2013.12.31 Annual interest rate Amount 1.05% $ 3,000,000 (1,000,000) $ 2,000,000
	Annual interest rate 1.05%

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.

p. Provisions

Provisions
Current Non-current	2014.12.31 $ 118,947 616,959 $ 735,906	2013.12.31
		109,116 564,470
		673,586

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

The changes in provisions for the years ended December 31, 2014 and 2013, were as follows:

Beginning balance Provision Unwinding of discount Payment Reversal Ending balance	For the Years Ended December 31 2014 2013 $ 673,586 556,202 63,903 122,600 8,284 9,165 (4,051 ) (8,042) (5,816 ) (6,339) $ 735,906 673,586	For the Years Ended December 31 2014 2013 $ 673,586 556,202 63,903 122,600 8,284 9,165 (4,051 ) (8,042) (5,816 ) (6,339) $ 735,906 673,586
	2014 $ 673,586 63,903 8,284 (4,051 ) (5,816 ) $ 735,906
		673,586

• q. Operating lease

• (1) Lessee

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

Less than one year Between one and five years Over five years	2014.12.31 $ 2,870,057 4,718,876 24,633 $ 7,613,566	2013.12.31
		2,614,701 4,688,430 30,953
		7,334,084

TWM leases base transceiver stations, stores, offices, machine rooms, maintenance centers, 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, TWM anticipated it would receive total future minimum sublease payments under the non-cancellable sublease contracts in the amount of $1,346,575 thousand and $1,616,357 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 2014 2013 $ 3,176,487 2,788,581 (595,089 ) (279,119) $ 2,581,398 2,509,462
	2014 $ 3,176,487 (595,089 ) $ 2,581,398

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

(2) Lessor

TWM 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 Over five years	2014.12.31 $ 52,772 11,701 - $ 64,473	2013.12.31
		124,556 29,782 405
		154,743

r. 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		2014.12.31 498,948 (470,373 ) 28,575 (289 ) 28,286	2013.12.31 486,172 (456,979) 29,193 (311) 28,882
	$
	$

TWM 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.

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

• (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 Defined benefit obligation, December 31	For the Years Ended December 31 2014 2013 $ 486,172 471,990 (14,372 ) (9,654 ) 1,725 2,400 9,116 7,080 16,307 14,356 $ 498,948 486,172
	2014 $ 486,172 (14,372 ) 1,725 9,116 16,307 $ 498,948

• (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:

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 $ 456,979 460,895 16,910 - (14,372 ) (9,654 ) 9,340 8,642 1,516 (2,904 ) $ 470,373 456,979
	2014 $ 456,979 16,910 (14,372 ) 9,340 1,516 $ 470,373

• (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	For the Years Ended December 31 2014 2013 $ 1,725 2,400 9,116 7,080 22 22 (9,340 ) (8,642 ) $ 1,523 860
	2014 $ 1,725 9,116 22 (9,340 ) $ 1,523

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Actual return on plan assets	For the Years Ended December 31	For the Years Ended December 31
	2014 $ 10,855	2013
		5,739

• (e) The pre-tax actuarial gains (losses) recognized in other comprehensive income TWM’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 $ 37,206 19,946 14,791 17,260 $ 51,997 37,206
	2014 $ 37,206 14,791 $ 51,997

• (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% 2.00% 2.75%	2013.12.31
		1.875% 2.00% 2.75%

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.

TWM expected $20,749 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 $ (498,948 ) 470,373 $ (28,575) $ (16,307) $ 1,516	2013.12.31 (486,172 ) 456,979 (29,193) (14,356) (2,904)	2012.12.31 (471,990 ) 460,895 (11,095 ) (15,524 ) (4,422 )	2012.1.1 (446,193 ) 429,245 (16,948) - -

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(2) Defined contribution plans

TWM 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. TWM contributed a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligations.

TWM’s contribution to the pension plan amounted to $103,665 thousand and $113,417 thousand for the years ended December 31, 2014 and 2013, respectively.

s. Income tax

• (1) Income tax expense recognized in profits or losses

Current income tax expense Current period Prior years’ adjustment on current income tax Deferred income tax expense Current period Reversal of temporary difference Income tax expense	For the Years Ended December 31 2014 2013 $ 947,931 945,214 179,684 (75,077) 1,127,615 870,137 (228,406) 134,069 (163,700) - (392,106) 134,069 $ 735,509 1,004,206
	2014 $ 947,931 179,684 1,127,615 (228,406) (163,700) (392,106) $ 735,509

(2) Income tax recognized in other comprehensive income

Deferred income tax income Defined benefit plan actuarial gains and losses	For the Years Ended December 31 2014 2013 $(2,515 ) (2,934 )
	2014 $(2,515 )

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(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 Investments accounted for using equity method, net Temporary differences Deferred income taxes Prior years’ adjustment Investment tax credit Others	For the Years Ended December 31 2014 2013 $ 15,740,937 16,587,653 2,675,959 2,819,901 (1,875,352 ) (1,676,553) 216,424 (179,164) (392,106 ) 134,069 179,684 (75,077) (48,001 ) - (21,099 ) (18,970) $ 735,509 1,004,206
	2014 $ 15,740,937 2,675,959 (1,875,352 ) 216,424 (392,106 ) 179,684 (48,001 ) (21,099 ) $ 735,509

• (4) Deferred tax assets and liabilities

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 $ 731,100 (71,716) - $ 659,384	Accrued Pension Liabilities 9,746 - 2,515 12,261	Others 74,727 33,188 - 107,915	Total 815,573 (38,528) 2,515 779,560 964,327 (151,688) 2,934 815,573
	$ 857,820 (126,720) - $ 731,100	6,812 - 2,934 9,746	99,695 (24,968 ) - 74,727

Deferred Tax Liabilities:

Balance, January 1, 2014 Recognized in profit or loss Balance, December 31, 2014 Balance, January 1, 2013 Recognized in profit or loss Balance, December 31, 2013	Accounts Receivable $ 1,325,422 (320,912) $ 1,004,510	Intangible Assets
		**296,234 **
	$ 1,404,763 (79,341) $ 1,325,422	335,693 77,467
		**413,160 **

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Integrated income tax information was as follows:

Integrated income tax information was as follows:
Balance of TWM’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.

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.

t. 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 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 $ 8,775,820 5,159,704 85,965 652,219 26,705 15,417 $ 14,715,830	2013.12.31
		8,775,820 3,639,301 - 1,313 25,040 15,417
		12,456,891

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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 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

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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:

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

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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 $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 Changes in fair value of available-for-sale financial assets Changes in other comprehensive income of subsidiaries and associates accounted for using equity method Balance, December 31, 2014	Exchange Differences on Translation $ 24,948 - 6,346 $ 31,294	Unrealized Gain (Loss) on Available-for-sale Financial Assets Total 387,734 412,682 (390,994 ) (390,994 ) (331,020 ) (324,674 ) (334,280 ) (302,986 )

(continued)

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Balance, January 1, 2013 Changes in fair value of available-for-sale financial assets Changes in other comprehensive income of subsidiaries and associates accounted for using equity method Balance, December 31, 2013	Exchange Differences on Translation $ 25,483 - (535 ) $ 24,948	Unrealized Gain (Loss) on Available-for-sale Financial Assets Total 314,543 340,026 (3,043 ) (3,043 ) 76,234 75,699 387,734 412,682 (continued)

(6)Treasury shares

TCCI Investment & Development Co., Ltd. (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 TCC Investment Co., Ltd., TFN Union Investment Co., Ltd. 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.

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

u. Earnings per share

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

Basic EPS Profit attributable to ordinary shareholders Weighted-average number of ordinary shares Diluted EPS Profit attributable to ordinary shareholders (adjusted for potential effect of dilutive ordinary shares) Weighted-average number of ordinary shares Effect of potential dilutive ordinary shares Effect of employees’ bonuses Weighted-average number of ordinary shares (adjusted for potential effect of dilutive ordinary shares)		For the Year Ended December 31	For the Year Ended December 31
		2014 15,005,428 2,697,728 5.56 15,005,428 2,697,728 5,792 2,703,520 5.55	2013
	$		15,583,447
			2,690,107
	$		5.79
	$		15,583,447
			2,690,107 6,106
			2,696,213
	$		5.78

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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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

• v. Operating revenues

TWM’s operating revenues were as follows:

Telecommunication service Sales revenue Other operating revenues	For the Years Ended December 31	For the Years Ended December 31
	2014 $ 56,224,864 23,219,991 2,204,215 $ 81,649,070	2013
		55,034,285 22,089,510 1,804,697
		78,928,492

• w. Other income and expenses

TWM’s other income and expenses were as follows:

Police inquiry Others	For the Years Ended December 31	For the Years Ended December 31
	2014 $ 21,655 30,358 $52,013	2013
		30,141 22,494
		52,635

x. Non-operating income and expenses

• (1) Other income

TWM’s other income was as follows:

Rent income Interest income Dividend income Other income	For the Years Ended December 31	For the Years Ended December 31
	2014 $ 147,611 18,531 9,835 374,849 $ 550,826	2013 176,994 38,975 11,628 2,210 229,807

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(2) Other gains and losses, net

TWM’s other gains and losses were as follows:

		For the Years Ended	For the Years Ended
		December 31
		2014	2013
Loss on disposal of property, plant and equipment$		(950,715 )	(1,285,754 )
Foreign exchange gains		28,926	6,985
Others		(33,586 )	(39,385 )
	$	(955,375 )	(1,318,154 )

(3) Finance costs

TWM’s finance costs were as follows:

Interest expense Bank loans Corporate bonds Financing extension Others Less: capitalized interest Capitalization rates were as follows: Capitalization rates	For the Years Ended December 31 2014 2013 $ 307,095 93,642 197,066 274,442 105,150 69,800 3,110 30,464 612,421 468,348 (13,145 ) (24,254 ) $ 599,276 444,094 For the Years Ended December 31	For the Years Ended December 31 2014 2013 $ 307,095 93,642 197,066 274,442 105,150 69,800 3,110 30,464 612,421 468,348 (13,145 ) (24,254 ) $ 599,276 444,094 For the Years Ended December 31
	2014 1.20%~1.36%	2013
		1.24%~1.60%

Capitalization rates were as follows:

y. Capital management

TWM 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 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, TWM may adopt various financing approaches to balance its capital structure in order to meet the

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

demands for capital expenditures, working capital, settlements of liabilities, and dividend payments in the future.

• z. Financial instruments

• (1) Categories of financial instruments

Financial assets

Available-for-sale financial assets (including current and non-current portions) Financial assets carried at cost Loans and receivables: Cash and cash equivalents Receivables (including current and non-current portions) Other financial assets Refundable deposits Subtotal Total Financial liabilities Short-term borrowings Short-term notes and bills payable Payables Bonds payable Long-term borrowings (including current portion) Guarantee deposits Total	2014.12.31 $ 2,791,360 7,050 1,167,487 13,822,179 720 430,750 15,421,136 $ 18,219,546 2014.12.31 $ 27,880,000 5,593,031 13,328,252 14,794,293 12,000,000 360,393 $ 73,955,969	2013.12.31
		202,354
		50,324
		601,723 18,866,891 720 400,218
		19,869,552
		20,122,230
		2013.12.31
		37,170,000 2,396,971 13,003,830 14,792,647 3,000,000 376,428
		70,739,876

• (2) Credit risk

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

• (3) Liquidity risk

TWM’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 TWM’s financial liabilities based on contractual undiscounted payments, but not including the financial liabilities whose carrying amounts approximate contractual cash flows.

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2014.12.31 Unsecured loans Unsecured loans-related parties Short-term notes and bills payable Bonds payable 2013.12.31 Unsecured loans Unsecured loans-related parties Short-term notes and bills payable Bonds payable	Carrying amount $ 29,600,000 10,280,000 5,593,031 14,794,293 $ 60,267,324 $ 33,500,000 6,670,000 2,396,971 14,792,647 $ 57,359,618	Contractual cash flows	Within 1year	1~5years	More than 5years
		29,808,299 10,411,831 5,600,000 15,604,570	19,761,866 10,411,831 5,600,000 195,420	10,046,433 - - 15,409,150	- - - -
		61,424,700	35,969,117	25,455,583	-
		33,623,454 6,741,664 2,400,000 15,799,990	31,607,747 6,741,664 2,400,000 195,420	2,015,707 - - 11,044,270	- - - 4,560,300
		58,565,108	40,944,831	13,059,977	4,560,300

(4) Exchange rate risk

(a) Exposure to exchange rate risk

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

Financial Assets		2014.12.31	NTD 1,377,460 15,227 478,352 293		2013.12.31
	Foreign currency	Exchange rate		Foreign currency	Exchange rate	NTD
	43,439 395 15,085 8	31.71 38.57 31.71 38.57		20,230 844 456 2	29.90 41.14 29.90 41.14	604,884 34,707 13,654 85
USD EUR Financial Liabilities
USD EUR

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(b) Sensitivity analysis

TWM’s exchange rate risk comes mainly from conversion gains and losses of accounts measured in foreign currencies such as cash and cash equivalents, accounts receivable, other receivables, other financial assets, accounts payable, other payables, etc. If the NTD, when compared with the USD and EUR, 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 $45,702 thousand and by $31,300 thousand for the years ended December 31, 2014 and 2013, respectively.

(5) Interest rate analysis

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

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets	Carrying amount	Carrying amount
	2014.12.31 $ 437,887 60,267,324 $ 722,543	2013.12.31
		2,254,960 57,359,618 426,010

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, TWM’s profit would have increased by $3,613 thousand and by $2,130 thousand, respectively.

(6) Fair value of financial instruments

(a) Financial instruments not at fair value

Except for the table below, the management of TWM 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.

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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

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

TWM 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 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 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 unlisted stocks 2013.12.31 Available-for-sale financial assets Domestic listed stock	Level 1 $ 204,310 - $ 204,310 $ 202,354	Level 2 - 2,587,050 2,587,050 -	Level 3 - - - -	Total
				204,310 2,587,050
				2,791,360
				202,354

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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

• aa. Financial risk management

• (1) Overview

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

• (a) Credit risk

• (b) Liquidity risk

• (c) Market risk

This note presents information concerning TWM’s risk exposure and TWM’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 TWM’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 TWM 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.

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(3) Credit risk

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

(4) Liquidity risk

Liquidity risk is the risk that TWM fails to meet the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. TWM’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 TWM’s reputation.

TWM ensures sufficient cash for the requirements of paying estimated operating expenditures, including financial obligations. TWM 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, TWM had unused bank facilities of $39,793,000 thousand and $36,943,800 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 TWM’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.

TWM 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, TWM’s market risk is insignificant.

(a) Exchange rate risk

TWM 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, TWM purchases currency

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

at the spot rate based on the conservative principle in order to hedge exchange rate risk. Overall, exchange rate risk does not affect TWM significantly.

• (b) Interest rate risk

TWM 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 TWM significantly. Also, interest rate risk does not impact short-term bank loans significantly.

• (c) Other market price risk

TWM’s exposure to equity price risk is mainly due to holding equity financial instruments. TWM 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 $139,568 thousand and $10,118 thousand, respectively.

7. RELATED-PARTY TRANSACTIONS

The transactions with related parties were as follows, unless stated in other disclosures of the notes:

• a. Significant transactions with related parties

• (1) Operating revenue

Operating revenue
Subsidiaries Associates Other related parties	For the Years Ended December 31
	2014 $ 14,728,155 12,930 15,332 $ 14,756,417	2013
		9,942,848 10,812 15,074
		9,968,734

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

TAIWAN MOBILE CO., LTD.

TWM renders telecommunication and sales services, etc., to the entities mentioned above. The transaction terms with related parties were not significantly different from those with third parties.

(2) Purchases

Subsidiaries Associates Other related parties		For the Years Ended **December 31 **	For the Years Ended **December 31 **
		2014 7,727,001 92 22,091 **7,749,184 **	2013 7,109,659 - 25,452 7,135,111
	$
	$

The entities mentioned above provide telecommunication, 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 Accounts receivable Other receivables Other receivables Other receivables	Related Party Category Subsidiaries Associates Other related parties Subsidiaries Subsidiaries (loans to related parties) Other related parties	2014.12.31 $ 255,602 2,145 3,842 $ 261,589 $ 325,071 - 8,846 $ 333,917	2013.12.31
			1,735,253 3,251 5,888
			1,744,392
			319,445 2,085,000 29,088
			2,433,533

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

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(4) Payables to related parties

The amount of payables to related parties was as follows:

Account Accounts payable Other payables	Related Party Category Subsidiaries Subsidiaries	2014.12.31 $ 88,659 $ 552,127	2013.12.31
			94,029
			931,934

• (5) Prepayments

The amount of prepayments to related parties was as follows:

Subsidiaries	2014.12.31 $ 53,253	2013.12.31
		102,715

• (6) Property transactions

Disposal of equipment and computer software

For the Years Ended December 31 2014 2013 Amount Gain(Loss) Amount Gain(Loss) Subsidiaries $ 24,916 - 51,648 - Borrowings from related parties 2014.12.31 2013.12.31 Subsidiaries $ 10,280,000 6,670,000	For the Years Ended December 31	For the Years Ended December 31	For the Years Ended December 31
			2013
			Gain(Loss) -
			2013.12.31
			6,670,000

(7) Borrowings from related parties

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

• (8) Bank deposits

Other related parties	2014.12.31 $ 380,882	2013.12.31
		159,962

• (9) Investments

In 2014, TWM participated in TNH’s and Wealth Media Technology Co., Ltd.’s increase in capital based on its proportion of the shareholding, and the investment amount increased by $172,155 thousand and $3,000,000 thousand, respectively.

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

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

TAIWAN MOBILE CO., LTD.

(10) Others (a)Guarantee deposits Subsidiaries (b) Other current liabilities–collections and temporary receipts Subsidiaries (c)Freight Subsidiaries (d)Telecommunication service expenses Subsidiaries (e)Repair expense Subsidiaries Other related parties (f)Advertisement expenses Subsidiaries (g)Insurance expenses Other related parties (h)Donation expense Other related parties (i)Commission Subsidiaries	2014.12.31 2013.12.31 $ 16,756 - 2014.12.31 2013.12.31 $ 43,349 47,884 For the Years Ended December 31	2013.12.31	2013.12.31
		-
		2013.12.31 47,884
	2014 $ 246,891 $ 66,390 $ 487,780 25,200 $ 512,980 $ 34,057 $ 6,309 $ 17,910 $ 10,883,637		2013
			122,515
			84,585
			267,214 26,539
			293,753
			47,000
			11,341
			14,540
			5,778,404

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(j) (k)	Professional service fees Subsidiaries Other expense Subsidiaries Other related parties	For the Years Ended December 31	For the Years Ended December 31
		2014 $ 1,076,335 $ 231,176 166,176 $ 397,352	2013
			1,053,933
			110,913 148,086
			258,999

• (l) Management service charges

• (i) For the years ended December 31, 2014 and 2013, TWM provided services to related parties, which were recorded as deductions from related costs and expenses. TWM’s service charges received were as follows:

Subsidiaries	For the Years Ended December 31	For the Years Ended December 31
	2014 $ 605,919	2013
		531,450

• (ii) For the years ended December 31, 2014 and 2013, TWM’s service charges paid were as follows:

(m) (n) (o) (p)	Subsidiaries Interest income Subsidiaries Finance costs Subsidiaries Rent income Subsidiaries Rental expenses Subsidiaries	For the Years Ended December 31	For the Years Ended December 31
		2014 $ 62,616 $ 11,730 $ 105,150 $ 111,770 $ 124,661	2013
			61,650
			23,134
			69,800
			141,253
			13,651

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

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

b. Key management personnel compensation

Key management personnel compensation
Short-term employee benefits Termination benefits Post-employment benefits	For the Years Ended **December 31 **
	2014 $ 231,074 27,560 1,614 $ 260,248	2013
		238,698 43,989 1,593
		284,280

8. ASSETS PLEDGED

The assets pledged as collateral for performance bonds for construction contracts were as follows:

Other non-current financial assets－time deposits	2014.12.31 $ 720	2013.12.31
		720

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

Unrecognized commitments

Purchases of property, plant and equipment, etc. Purchases of cellular phones	2014.12.31 $ 8,355,482 $ 7,057,442	2013.12.31
		5,001,220
		3,445,158

10. SIGNIFICANT CASUALTY LOSS: NONE

11. SIGNIFICANT SUBSEQUENT EVENTS

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.

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NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

TAIWAN MOBILE CO., LTD.

12. OTHERS

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

For the Years Ended December 31

	For the Years Ended December 31
Employee benefits Salary Labor and health insurance Pension Others Depreciation Amortization	2014 2013 Classified as Operating Costs Classified as Operating Expenses Classified as Operating Costs or Reduction of Expenses Total Classified as Operating Costs Classified as Operating Expenses Classified as Operating Costs or Reduction of Expenses 1,017,655 1,333,071 549,112 2,899,838 1,020,683 1,832,656 316,140 71,619 90,769 31,231 193,619 69,345 124,061 17,937 39,274 48,086 17,828 105,188 39,189 64,512 10,576 53,133 64,944 9,297 127,374 50,787 90,889 5,446 7,158,286 429,314 - 7,587,600 6,552,378 438,652 - 1,242,787 262,630 - 1,505,417 748,585 245,636 -
	Classified as Operating Costs Classified as Operating Expenses 1,017,655 1,333,071 71,619 90,769 39,274 48,086 53,133 64,944 7,158,286 429,314 1,242,787 262,630	Total
		3,169,479 211,343 114,277 147,122 6,991,030 994,221

• (1) For the years ended December 31, 2014 and 2013, the depreciation expense in non-operating expenses was $12,528 thousand and $17,056 thousand, respectively.

• (2) For the years ended 2014 and 2013, the average number of employees of TWM was 2,303 and 2,634, 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)

• (6) Disposal of individual real estate properties at prices of at least NT$300 million or 20%

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TAIWAN MOBILE CO., LTD.

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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

• 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 9 (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

Please refer to the consolidated financial statements for the years ended December 31, 2014 and 2013.

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TAIWAN MOBILE CO., LTD. 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)	TABLE 1
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.

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.

MARKETABLE SECURITIES HELD (EXCLUDING INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES)

DECEMBER 31, 2014

TABLE 3

	TABLE 3	TABLE 3	TABLE 3	TABLE 3	TABLE 3	TABLE 3	TABLE 3	TABLE 3
	(In Thousands of New Taiwan Dollars,Unless Stated Otherwise)
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.

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.

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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.

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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

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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.

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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	$ - - - - - - - - - - - - - - - - - - - -

～ 70 ～

TAIWAN MOBILE CO., LTD.

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)	TABLE 8
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)

～ 71 ～

TAIWAN MOBILE CO., LTD.

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.

～ 72 ～

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

FOR THE YEAR ENDED DECEMBER 31, 2014

TABLE 9

(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	$ - - -
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.

～ 73 ～

SCHEDULE 1

TAIWAN MOBILE CO., LTD. CASH AND CASH EQUIVALENTS DECEMBER 31, 2014

(In Thousands of New Taiwan Dollars)

Item Cash in banks Foreign-currency deposits Checking deposits Demand deposits Time deposits Government bonds with repurchase rights Revolving funds	Summary EUR 289,116.47 (exchange rate at 38.57) US$3,959,021.71 (exchange rate at 31.71) Due on January 8, 2015, with interest rate of 0.45%	Amount
		$11,151 125,541 7,747 585,131
		729,570
		392,887
		45,000
		30
		$ 1,167,487

～ 74 ～

SCHEDULE 2

TAIWAN MOBILE CO., LTD.

ACCOUNTS AND NOTES RECEIVABLE DECEMBER 31, 2014

(In Thousands of New Taiwan Dollars)

Client Related parties Taiwan Digital Service Co., Ltd. Taiwan Fixed Network Co., Ltd. momo.com Inc. Other (Note) Third parties Other (Note) Less: allowance for doubtful accounts	Amount $ 214,280 26,560 13,097 7,652 261,589 10,835,521 (228,697) 10,606,824 $ 10,868,413

Note: Each of the clients was less than 5% of the total account balance.

～ 75 ～

SCHEDULE 3

TAIWAN MOBILE CO., LTD. OTHER RECEIVABLES DECEMBER 31, 2014

(In Thousands of New Taiwan Dollars)

Item Temporary receipts by distribution channel Other (Note)	Amount
	$ 611,517 94,243
	$ 705,760

Note: Each of the items was less than 5% of the total account balance.

～ 76 ～

SCHEDULE 4

TAIWAN MOBILE CO., LTD. CHANGES IN INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD FOR THE YEAR ENDED DECEMBER 31, 2014

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

Taiwan Cellular Co., Ltd. Wealth Media Technology Co., Ltd. Taipei New Horizons Co., Ltd. Alliance Digital Tech. Co., Ltd.

Par Value	Beginning Balance	Beginning Balance	Increase	Increase	Decrease Thousand Shares Amount (Note 1) - (7,730,497 ) - (1,976,729 ) - - - - (9,707,226 )	Adjustments on Equity Method (Note 3) 10,882,452 3,446,256 (16,180 ) (5,375 ) 14,307,153		Ending Balance	Ending Balance	Market Price or Net Asset Value
	Thousand Shares 371,196 39,065 174,650 3,000	Amount	Thousand Shares	Amount	Thousand Shares		Thousand Shares 371,196 42,065 191,866 3,000	% of Ownership	Amount
NT$ 10 10 10 10		$ 21,760,521 16,157,062 1,566,952 28,514	- 3,000 17,216 -	- 3,000,000 172,155 -	- - - -			100 100 49.9 13.33	24,912,476 20,626,589 1,722,927 23,139	85,566,899 20,626,589 1,722,924 23,139
		$ 39,513,049		3,172,155					47,285,131

Note 1: The decrease in investments resulted from receiving dividends of investees, (including capital surplus appropriation distributed).

• Note 2: None of the above long-term investments were provided as collateral.

Note 3: The Adjustments on Equity Method include the share of the profit or loss and other comprehensive income of subsidiaries and associates, adjustment of capital surplus from disposal of the Company’s share by subsidiaries, adjustment of capital surplus from changes in percentage of ownership, and unrealized gain or loss due to intercompany’s transactions.

～ 77 ～

SCHEDULE 5

TAIWAN MOBILE CO., LTD. CHANGES IN PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars)

Please refer to Note 6(h) for related information.

～ 78 ～

SCHEDULE 6

TAIWAN MOBILE CO., LTD. CHANGES IN INVESTMENT PROPERTY

FOR THE YEAR ENDED DECEMBER 31, 2014

(In Thousands of New Taiwan Dollars)

Item Cost Land Buildings Accumulated depreciation and impairment Land Buildings Investment property, net	Beginning Balance $ 1,362,022 649,585 $ 2,011,607 $ 24,050 222,539 $ 246,589 $ 1,765,018	Changes for the Period Increase Reclassification - (944,263 ) - (395,524 ) - (1,339,787 ) - - 12,528 (142,263 ) 12,528 (142,263 ) (12,528) (1,197,524 )	Ending Balance
			417,759 254,061
			671,820
			24,050 92,804
			116,854
			554,966

～ 79 ～

SCHEDULE 7

TAIWAN MOBILE CO., LTD.

CHANGES IN INTANGIBLE ASSETS

FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars)

Please refer to Note 6(j) for related information.

～ 80 ～

SCHEDULE 8

TAIWAN MOBILE CO., LTD. SHORT-TERM BORROWINGS

DECEMBER 31, 2014

(In Thousands of New Taiwan Dollars)

Loan Type	Amount $ 17,600,000 8,180,000 1,800,000 300,000 10,280,000 $ 27,880,000	Financing Period August 29, 2014 ~April 30, 2015 October 31, 2014 ~ October 30, 2015 October 31, 2014 ~ October 30, 2015 October 31, 2014 ~ October 30, 2015	Interest Rate	Credit Line	Mortgage Guarantee
Unsecured loans Unsecured loans－related parties Taiwan Fixed Network Co., Ltd. Wealth Media Technology Co., Ltd. Taiwan Cellular Co., Ltd.			0.83%~1.08% 1.29622% 1.29622% -1.29789% 1.29478% -1.29622%	69,827,500	None None None None
				9,000,000 2,300,000 300,000
				11,600,000
				81,427,500

～ 81 ～

SCHEDULE 9

TAIWAN MOBILE CO., LTD. SHORT-TERM NOTES AND BILLS PAYABLE

DECEMBER 31, 2014

(In Thousands of New Taiwan Dollars)

Item Institution Providing Guarantee or Acceptance Short-term notes and bills payable International Bills Financial Corporation China Bills Financial Corporation	Due Date March 31, 2015 March 31, 2015	Interest Rate 0.868% ~0.915% 0.888% ~0.907%	Issuing Amount $ 2,600,000 3,000,000 $ 5,600,000	Discount on Short-term Notes and Bills Payable	Net Carrying Value
				3,743 3,226 6,969	2,596,257 2,996,774
					5,593,031

～ 82 ～

SCHEDULE 10

TAIWAN MOBILE CO., LTD. ACCOUNTS PAYABLE

DECEMBER 31, 2014

(In Thousands of New Taiwan Dollars)

Suppliers Related parties Taiwan Kuro Times Co., Ltd. Others (Note) Third parties A Company B Company C Company D Company Others (Note)	Amount
	$ 86,717 1,942
	88,659
	1,203,326 1,168,658 525,743 453,701 1,002,284
	4,353,712
	$ 4,442,371

Note: Each of the suppliers was less than 5% of the total account balance.

～ 83 ～

SCHEDULE 11

TAIWAN MOBILE CO., LTD.

OTHER PAYABLES

DECEMBER 31, 2014

(In Thousands of New Taiwan Dollars)

Item Equipment and construction Commissions Salaries and pension Repair and maintenance expense Rent and utilities expense Bonus to employees and compensation to directors Professional service fees Others (Note)	Amount
	$ 2,854,982 1,259,995 1,194,956 907,300 656,046 429,903 263,366 1,319,333
	$ 8,885,881

Note: Each of the items was less than 5% of the total account balance.

～ 84 ～

SCHEDULE 12

TAIWAN MOBILE CO., LTD. BONDS PAYABLE DECEMBER 31, 2014

(In Thousands of New Taiwan Dollars)

Please refer to Note 6(n) for related information.

～ 85 ～

SCHEDULE 13

TAIWAN MOBILE CO., LTD. LONG-TERM BORROWINGS DECEMBER 31, 2014

(In Thousands of New Taiwan Dollars)

Creditor Sumitomo Mitsui Banking Corporation The Bank of Tokyo-Mitsubishi UFJ, Ltd. Mizuho Bank, Ltd. Less: current portion	Amount $ 3,000,000 2,000,000 7,000,000 (2,000,000) $ 10,000,000	Financing Period February 27,2014 ~ February 26, 2016 December 31,2013 ~ December 31, 2015 April 14, 2014 ~ April 14, 2016	Interest Rate	Mortgage or Guarantee
			1.07% 1.05% 1.08% ~1.095% 1.05%	None None None None

～ 86 ～

SCHEDULE 14

TAIWAN MOBILE CO., LTD. OPERATING REVENUES

FOR THE YEAR ENDED DECEMBER 31, 2014

(In Thousands of New Taiwan Dollars)

Item Monthly access fee and activation fee Sales revenue Interconnection revenue (Note 1) Other operating revenues (Note 2)	Amount
	$ 48,505,727 23,219,991 7,719,137 2,204,215
	$ 81,649,070

Note 1: This includes the revenues from other telecommunication operators’ use of TWM’s networks and IDD delivery revenues.

Note 2: This includes counter-party default revenues and service revenues, etc.

～ 87 ～

SCHEDULE 15

TAIWAN MOBILE CO., LTD.

OPERATING COSTS

FOR THE YEAR ENDED DECEMBER 31, 2014

(In Thousands of New Taiwan Dollars)

Item Cost of goods sold Leased-line charges Depreciation Interconnection cost (Note 1) Rent and utilities expenses Government Fees (Note 2) Salaries and pension Maintenance materials and constructions Others (Note 3)	Amount
	$ 24,463,513 7,450,263 7,158,286 5,110,740 3,555,957 1,985,511 1,056,929 958,782 1,082,043
	$ 52,822,024

Note 1: This includes airtime and interconnection charges paid to other telecommunication service providers.

Note 2: This includes the NCC’s concession fees, frequency usage fees, number selection fees, etc. Note 3: This includes expenses for maintaining telecommunication network and equipment.

～ 88 ～

SCHEDULE 16

TAIWAN MOBILE CO., LTD. OPERATING EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 2014

(In Thousands of New Taiwan Dollars)

Item Commissions and mobile phone allowance Salaries and pension Professional service fees Service charges Repair expense Depreciation Bad debts Telecommunication service fees Amortization Others (Note)	Marketing $ 16,345,265 614,654 1,023,903 428,876 518,723 196,431 505 65,986 834 823,187 $ 20,018,364	Administrative - 766,503 209,610 461,425 162,902 232,884 334,278 198,083 261,796 507,706 3,135,187	Total
			16,345,265 1,381,157 1,233,513 890,301 681,625 429,315 334,783 264,069 262,630 1,330,893
			23,153,551

Note: Each of the items was less than 5% of the total account balance.

～ 89 ～

SCHEDULE 17

TAIWAN MOBILE CO., LTD.

NET OTHER INCOME AND EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars)

Please refer to Note 6(w) for related information.

～ 90 ～

SCHEDULE 18

TAIWAN MOBILE CO., LTD. FINANCE COSTS

FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars)

Please refer to Note 6(x) for related information.

～ 91 ～