Taiwan Cooperative Bank, Ltd. and Subsidiaries Consolidated Financial Statements for the Years Ended December 31, 2008 and 2007 and Independent Auditors’ Report INDEPENDENT AUDITORS’ REPORT The Board of Directors and the Stockholders Taiwan Cooperative Bank, Ltd. We have audited the accompanying consolidated balance sheets of Taiwan Cooperative Bank, Ltd. and subsidiaries (collectively, the “Company”) as of December 31, 2008 and 2007, and the related consolidated statements of income, changes in stockholders‟ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company‟s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements of Financial Institutions by Certified Public Accountants, the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based on our audits, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Taiwan Cooperative Bank, Ltd. and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for the years then ended, in conformity with the Guidelines Governing the Preparation of Financial Reports by Public Banks, Guidelines Governing the Preparation of Financial Reports by Futures Commission Merchants, and accounting principles generally accepted in the Republic of China. As stated in Note 3 to the consolidated financial statements, under an explanation issued by the Accounting Research and Development Foundation of the Republic of China, Taiwan Cooperative Bank, Ltd. and subsidiaries should recognize bonus to employees and remuneration to directors and supervisors as compensation expenses effective January 1, 2008. These bonus and remuneration were previously recorded as appropriations from earnings. - 1 - As stated in Notes 3 and 33 to the consolidated financial statements, Taiwan Cooperative Bank, Ltd. and subsidiaries reclassified their financial assets in accordance with the newly amended Statement of Financial Accounting Standards No. 34 - “Financial Instruments: Recognition and Measurement.” March 2, 2009 Notice to Readers The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China. For the convenience of readers, the auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language auditors’ report and consolidated financial statements shall prevail. - 2 - TAIWAN COOPERATIVE BANK, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2008 AND 2007 (In Thousands of New Taiwan Dollars, Except Par Value) Percentage Percentage Increase Increase 2008 2007 (Decrease) 2008 2007 (Decrease) ASSETS Amount Amount % LIABILITIES AND STOCKHOLDERS’ EQUITY Amount Amount % CASH AND CASH EQUIVALENTS (Note 4) $ 40,844,312 $ 32,749,198 25 DUE TO THE CENTRAL BANK AND OTHER BANKS (Notes 16 and 29) $ 204,503,066 $ 257,709,013 (21 ) DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER COMMERCIAL PAPER ISSUED, NET (Note 17) 1,559,382 399,574 290 BANKS (Notes 5 and 30) 375,585,172 415,729,784 (10 ) FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 2, 6 and 21) 4,525,836 2,650,154 71 (Notes 2, 3, 6 and 33) 36,440,703 44,087,992 (17 ) SECURITIES SOLD UNDER REPURCHASE AGREEMENTS (Notes 2, 6, 9, RECEIVABLES, NET (Notes 2 and 7) 32,594,209 34,038,407 (4 ) 12 and 18) 63,308,291 43,251,070 46 DISCOUNTS AND LOANS, NET (Notes 2, 8 and 29) 1,838,147,297 1,734,893,395 6 PAYABLES (Note 19) 46,130,268 39,256,283 18 AVAILABLE-FOR-SALE FINANCIAL ASSETS (Notes 2, 3, 9 and 33) 68,483,509 60,424,888 13 DEPOSITS AND REMITTANCES (Notes 20 and 29) 1,983,233,481 1,884,858,034 5 HELD-TO-MATURITY FINANCIAL ASSETS (Notes 2 and 10) 8,271,079 7,627,062 8 BANK DEBENTURES (Note 21) 77,771,000 84,321,000 (8 ) EQUITY INVESTMENTS UNDER THE EQUITY METHOD (Notes 2 and 11) 76,596 69,306 11 ACCRUED PENSION COST (Notes 2 and 24) 1,763,570 1,645,063 7 OTHER FINANCIAL ASSETS, NET (Notes 2 and 12) 62,253,128 55,010,237 13 OTHER FINANCIAL LIABILITIES (Notes 17 and 22) 11,759,532 7,059,998 67 PROPERTIES (Notes 2 and 13) OTHER LIABILITIES (Notes 2, 13, 23 and 26) 4,256,881 4,777,721 (11 ) Land (including revaluation increments) 22,486,712 22,216,108 1 Buildings 13,103,374 13,021,714 1 Total liabilities 2,398,811,307 2,325,927,910 3 Machinery and equipment 5,224,189 4,792,128 9 Transportation equipment 693,981 696,506 - STOCKHOLDERS' EQUITY OF PARENT COMPANY Other equipment 1,315,991 1,308,170 1 Capital stock Leasehold improvements 648,062 565,913 15 Common stock - NT$10.00 par value; authorized 6,000,000 43,472,309 42,600,539 2 thousand shares; issued and outstanding 5,485,500 thousand Less: Accumulated depreciation 9,461,828 8,743,832 8 shares in 2008 and 4,770,000 thousand shares in 2007 54,855,000 47,700,000 15 Less: Accumulated impairment 1,114 86,215 (99 ) Capital surplus - additional paid-in capital from share 34,009,367 33,770,492 1 issuance in excess of par value 32,207,944 32,207,944 - Construction in progress 24,476 42,545 (42 ) Retained earnings Prepayment for land and buildings - 54,664 (100 ) Legal reserve 8,993,862 6,071,750 48 Prepayment for equipment 22,018 17,660 25 Unappropriated earnings 7,592,988 12,660,965 (40 ) Total retained earnings 16,586,850 18,732,715 (11 ) Properties, net 34,055,861 33,885,361 1 Other equity Unrealized revaluation increments 4,420,439 4,419,580 - INTANGIBLE ASSETS (Notes 2, 3 and 14) 3,626,396 3,436,827 6 Cumulative translation adjustments 162,980 274,568 (41 ) Unrealized gain (loss) on financial instruments 867,133 (896,081 ) 197 OTHER ASSETS, NET (Notes 2, 15, 24 and 26) Treasury stock - 100,000 thousand shares (1,898,154 ) - - Nonoperating assets, net 4,076,970 4,188,372 (3 ) Total other equity 3,552,398 3,798,067 (6 ) Refundable deposits 1,008,849 1,108,225 (9 ) Collaterals assumed, net 857,341 985,946 (13 ) Total stockholders' equity of parent company 107,202,192 102,438,726 5 Operating deposits and settlement funds 252,343 247,524 2 Deferred income tax assets, net - 724,141 (100 ) MINORITY INTEREST 1,001,364 1,116,110 (10 ) Others 441,098 276,081 60 Total stockholders' equity 108,203,556 103,554,836 4 Other assets, net 6,636,601 7,530,289 (12 ) CONTINGENCIES AND COMMITMENTS (Notes 2 and 31) TOTAL $ 2,507,014,863 $ 2,429,482,746 3 TOTAL $ 2,507,014,863 $ 2,429,482,746 3 The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche audit report dated March 2, 2009) - 3 - TAIWAN COOPERATIVE BANK, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2008 AND 2007 (In Thousands of New Taiwan Dollars, Except Per Share Amounts) Percentage Increase 2008 2007 (Decrease) Amount Amount % INTEREST REVENUE (Notes 2, 29 and 33) $ 72,050,647 $ 66,661,164 8 INTEREST EXPENSE (Notes 2, 29 and 33) (44,765,178 ) (42,202,081 ) 6 NET INTEREST 27,285,469 24,459,083 12 NET REVENUE AND GAIN (LOSS) OTHER THAN INTEREST Service fee income, net (Notes 2, 29 and 33) 3,645,096 3,421,314 7 Loss on financial assets and liabilities at fair value through profit or loss (Notes 2 and 33) (4,589,553 ) (134,190 ) 3,320 Realized gain on available-for-sale financial assets (Notes 2 and 33) 175,732 668,196 (74 ) Realized loss on held-to-maturity financial assets (Note 2) (140,354 ) - - Income from equity investments under the equity method (Notes 2 and 11) 10,115 7,536 34 Foreign exchange gain, net (Note 2) 5,325,375 578,717 820 Impairment loss on assets (Notes 2, 12 and 15) (984,134 ) (439,680 ) 124 Gains on financial assets carried at cost (Note 2) 412,543 617,887 (33 ) Gains on disposal of properties and nonoperating assets (Note 2) 298,495 1,120,188 (73 ) Recovery of bad debts written off and overdue accounts 2,537,842 3,599,636 (29 ) Other noninterest gain, net (Note 2) 900,777 1,079,642 (17 ) Total net revenue and gain (loss) other than interest 7,591,934 10,519,246 (28 ) TOTAL NET REVENUE 34,877,403 34,978,329 - ALLOWANCE FOR BAD-DEBT EXPENSES (Notes 2 and 8) (6,572,902 ) (4,785,674 ) 37 OPERATING EXPENSES Personnel (Notes 2, 3 and 25) (12,515,542 ) (11,947,807 ) 5 Depreciation and amortization (Notes 2 and 25) (1,111,587 ) (1,107,345 ) - General and administrative (Note 2) (5,177,999 ) (5,063,643 ) 2 Total operating expenses (18,805,128 ) (18,118,795 ) 4 (Continued) - 4 - TAIWAN COOPERATIVE BANK, LTD.