(English Translation of Financial Report Originally … · Notes to Financial Statements ......

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(English Translation of Financial Report Originally Issued in Chinese) ENTIE COMMERCIAL BANK CO., LTD.

AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS June 30, 2013 and 2012 AND

INDEPENDENT ACCOUNTANTS' REVIEW REPORT

The reader is advised that these consolidated financial statements have been prepared originally in Chinese. In the event of a conflict between these consolidated financial statements and the original Chinese version or difference in interpretation between the two versions, the Chinese language consolidated financial statements shall prevail.

ADDRESS:40F., No.7, Sec. 5, Xinyi Rd., Xinyi Dist., Taipei, Taiwan, R.O.C. TELEPHONE NUMBER:(02)8101-2277

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ENTIE COMMERCIAL BANK CO., LTD. CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

Contents Page Cover Page 1 Table of Contents 2 Independent Accountants’ Review Report 3 Consolidated Balance Sheets 4 Consolidated Statements of Comprehensive Income 5 Consolidated Statements of Changes in Stockholders’ Equity

6

Consolidated Statements of Cash Flows 7 Notes to Financial Statements 1. Overview of EnTie Commercial Bank 8 2. Approval Date and Procedures of the Consolidated Financial Reports 8 3. New Standards and Interpretations 8～9 4. Summary of Significant Accounting Policies 10～20 5. Primary Sources of Significant Accounting Judgments, Estimates and

Assumptions Uncertainty 20

6. Summary of major accounts 21～82 7. Related-party transactions 82～84 8. Pledged assets 85 9. Significant contingent liabilities and unrecognized contract commitments 86～89 10. Significant catastrophic losses 89 11. Significant subsequent events 89 12. Others 89～100 13. Disclosure required 1. Related information on significant transactions 101～102 2. Related information on investee companies 103 3.Related information on investments in Mainland China 103 14. Segment Information 103～104 15. First-time adoption of IFRSs 105～112

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(English Translation) Independent Accountants’ Review Report

EnTie Commercial Bank Co., Ltd. We have reviewed the accompanying consolidated balance sheets of EnTie Commercial Bank and its subsidiaries as of June 30, 2013 and December 31, June 30 and January 1, 2012, the related consolidated statements of comprehensive income for the three months and six months ended June 30, 2013 and 2012, and the changes in consolidated equity and cash flows for the six months ended June 30, 2013 and 2012. These consolidated financial statements are the responsibility of the Bank's management. Our responsibility is to issue a report on these consolidated financial statements based on our review. We reviewed these consolidated financial statements in accordance with Statement of Auditing Standards No. 36 “Review of Financial Statements.” A review is limited primarily to inquiries of company personnel and applying analytical procedures to financial data and thus provides less assurance than an audit. We have not performed an audit, and accordingly, we do not express an audit opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements for them to be in conformity with the Regulations Governing the Preparation of Financial Reports by Publicly Held Banks, International Financial Reporting Standards 1 “First-time Adoption of IFRSs” as accepted by the FSC and International Accounting Standard No.34 “Interim Financial Reporting”, approved by the Financial Supervisory Commission. EnTie Commercial Bank Co., Ltd. has additionally prepared individual financial statements, on which we have expressed an unqualified opinion with an added explanatory paragraph for reference. KPMG Taipei, Taiwan, R.O.C. August 29, 2013

Notice to Readers The accompanying 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 review such financial statements are those generally accepted and applied in the Republic of China.

The auditors’ report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of, the English and Chinese language accountants’ report and financial statements, the Chinese version shall prevail.

(English Translation of Financial Report Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards

ENTIE COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2013 AND DECEMBER 31, JUNE 30 AND JANUARY 1, 2012 (Expressed in Thousands of New Taiwan Dollars)

The accompanying notes are an integral part of the financial statements. - 4 -

2013.6.30 2012.12.31 2012.6.30 2012.1.1 Assets Amount ％ Amount ％ Amount ％ Amount ％

Cash(Notes 4 and 6(A)) $ 6,511,031 2 3,309,584 1 3,837,397 1 4,569,870 1 Due from Central Bank and call loans to

banks(Note 6(B)) 74,561,708 18 73,316,787 20 75,174,664 20 86,964,396 24

Financial assets at fair value through profit or loss(Notes 4, 6(C) and (N))

15,862,365 4 11,098,438 3 11,532,800 3 10,061,963 3

Available-for-sale financial assets(Notes 4, 6(D),(N) and 8)

76,321,256 19 54,300,018 15 61,174,198 16 52,789,618 14

Securities purchased under resell agreements(Notes 4 and 6(E))

2,005,492 - 3,127,990 1 1,359,811 - 199,912 -

Receivables- net(Notes 4, 6(F) and 9) 10,635,040 3 7,485,641 2 11,080,445 3 7,492,771 2 Current tax assets 184,523 - 184,523 - 210,370 - 245,752 - Assets classified as held for sale(Notes 4

and 6(G)) 19,472 - 19,472 - - - 635,791 -

Discounts and loans- net(Notes 4, 6(H) and 7)

210,333,948 52 199,926,904 56 201,648,707 54 197,819,418 54

Other financial assets- net(Notes 4 and 6(I))

584,522 - 337,524 - 336,948 - 871,287 -

Property, Plant and Equipment-net (Notes 4 and 6(J))

916,031 - 955,083 - 1,434,533 1 1,412,443 -

Intangible assets-net(Notes 4 and 6(K)) 278,243 - 262,871 - 260,176 - 244,877 - Deferred tax assets(Notes 4) 3,794,022 1 4,058,999 1 4,250,506 1 4,405,966 1 Other assets- net(Notes 6(L)) 2,199,952 1 1,303,278 1 1,409,394 1 1,142,947 1

TOTAL ASSETS $ 404,207,605 100 359,687,112 100 373,709,949 100 368,857,011 100

2013.6.30 2012.12.31 2012.6.30 2012.1.1 Liabilities Amount ％ Amount ％ Amount ％ Amount ％

Deposits from Central Bank and other banks(Note 6(M))

$ 17,630,768 4 4,870,851 2 3,239,461 1 7,104,620 2

Financial liabilities at fair value through profit or loss(Notes 4 and 6(C))

9,639,424 2 10,418,121 3 10,693,214 3 13,708,793 4

Securities sold under repurchase agreements(Notes 4 and 6(N))

8,706,759 2 689,349 - 9,187,911 3 7,579,251 2

Payables(Notes 6 (O) and (AA)) 9,775,930 2 5,861,036 2 8,740,501 2 4,705,269 1 Current tax liabilities 149,726 - 8,720 - 8,305 - 9,770 - Deposits and remittance(Notes 6 (P)

and 7) 321,457,266 81 299,261,217 83 306,770,379 82 301,167,013 82

Financial debentures(Notes 6(Q)) 10,000,000 2 11,190,000 3 11,190,000 3 11,190,000 3 Preferred stock liabilities(Notes 4 and

6(R)) 1,414,865 - 1,414,865 - 1,414,865 - 1,414,865 -

Other financial liabilities(Notes 4 and 6(S))

497,335 - 1,133,467 - 251,270 - 170,146 -

Provisions(Notes 4 and 6(T)) 482,542 - 476,338 - 415,120 - 385,514 - Deferred tax liabilities(Notes 4) 45,047 - 12,993 - 14,999 - 48,567 - Other liabilities(Notes 4 and 6(U)) 254,246 - 151,564 - 198,231 - 221,087 - Total Liabilities 380,053,908 93 335,488,521 93 352,124,256 94 347,704,895 94 Capital(Note 6(Y)) 16,796,775 4 16,796,775 5 16,796,775 5 16,796,775 5 Capital surplus(Note 6(Y)) 1,461,505 1 1,461,505 1 1,461,505 - 1,461,505 - Retained earnings: Legal reserve(Note 6(Z)) 2,507,098 1 1,284,192 - 1,284,192 - 622,936 - Special reserve(Note 6(Z)) 133,094 - 125,598 - 125,598 - 14,151 - Unappropriated earnings(Note 6(Z)) 4,133,284 1 4,608,190 1 2,018,869 1 2,313,733 1 Other equity interest(Note 4 and

6(AL)) (878,059)

-

(77,669)

-

(101,246)

-

(56,984)

-

Total equity 24,153,697 7 24,198,591 7 21,585,693 6 21,152,116 6 TOTAL LIABILITIES AND EQUITY $ 404,207,605 100 359,687,112 100 373,709,949 100 368,857,011 100


(English Translation of Financial Report Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing stan

ENTIE COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES dards

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012

(Expressed in thousands of New Taiwan Dollars)

For the three months ended June 30, 2013


For the six months ended June 30, 2013


Amount ％ Amount ％ Amount ％ Amount ％ Interest income(Note 6(AC)) $ 2,096,200 109 1,893,454 96 3,990,573 106 3,780,579 99 Less: Interest expenses (including preferred stock

interest expense, please refer to Note 6(R) and (AC))

(922,838)

(48)

(943,751)

48

(1,816,844)

(48)

(1,919,813)

(50)

Net income of interest(Note 6(AC)) 1,173,362 61 949,703 48 2,173,729 58 1,860,766 49 Non-interest income Service fee and commission income(Note 6(AD)) 547,105 29 581,025 30 1,049,645 27 1,174,740 30 Gains on financial assets or liabilities measured at

fair value through profit or loss(Note 6(AE)) 275,624 14 14,810 1 552,542 14 244,349 6

Realized gains on available-for-sale financial assets(Note 6(AF))

28,093 1 66,765 3 150,769 4 215,847 6

Foreign exchange losses (100,129) (5) (4,342) - (127,460) (3) (1,030) - Other net non-interest income(Note 6(AG) and 9) 8,588 - (3,440) - 15,693 - (3,917) - Net gain on disposal of property(Note 6(K)) 3,468 - 362,986 18 3,468 - 362,986 9 Net revenue 1,936,111 100 1,967,507 100 3,818,386 100 3,853,741 100 Reversal of bad debts (bad debt expenses) and

reserve for guarantee liabilities provision(Notes 4, 6(F),(H),(AH) and 9)

(460) - (178,961) (9) 40,578 - (269,834) (7)

Operating expenses： Employee benefits expenses(Note 6(AI)) (488,080) (25) (550,286) (28) (987,159) (26) (1,266,333) (33) Depreciation and amortization expenses(Note

6(AJ)) (38,548) (2) (37,024) (2) (77,579) (2) (72,368) (2)

Other general and administrative expenses(Note 6(AK))

(274,234)

(14)

(293,691)

(15)

(535,838)

(14)

(557,310)

(14)

Net Income Before Tax 1,134,789 59 907,545 46 2,258,388 58 1,687,896 44 Income tax expenses(Note 4 and 6(W)) (184,528) (10) (136,804) (7) (495,086) (13) (202,249) (5) Net income 950,261 49 770,741 39 1,763,302 45 1,485,647 39 Other comprehensive income: Other comprehensive income, before tax, exchange

differences on translation $ 12,707 1 17,372 1 54,378 1 (9,419) -

Other comprehensive income, before tax, available-for-sale financial assets

(607,896) (31) (120,565) (6) (845,523) (22) (36,444) (1)

Income tax related to components of other comprehensive income

(2,161)

-

(2,953)

-

(9,245)

-

1,601

-

Other comprehensive income, net of tax (597,350) (30) (106,146) (5) (800,390) (21) (44,262) (1) Total comprehensive income $ 352,911 19 664,595 34 962,912 24 1,441,385 38

Earnings per Share (dollar) Basic earnings per Share $ 0.57 0.46 1.05 0.88 Diluted earnings per Share $ 0.53 0.44 0.98 0.84


(English Translation of Financial Report Originally Issued in Chinese) REVIEWED ONLY, NOT AUDITED IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING STANDARDS

ENTIE COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES Consolidated Statements of Changes in Equity

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012 (Expressed in Thousands of New Taiwan Dollars)

Equity attributable to owners of parent Other equity interest

Share capital Retained earnings Exchange Unrealized

Common Stock

Capital Surplus

Legal reserve

Special reserve

Undistributed earnings

Subtotal

differences on translation of foreign financial statements

Net loss not recognized as pension cost

(losses)gains on available-for –sale

financial assets

Total Beginning balance－January 1, 2012 $ 16,796,775 1,461,505 622,936 14,151 2,649,897 3,286,984 - (54,667) (56,779) 21,433,818 Effect of conversion recognition and measurement - - - - (336,164) (336,164) - 54,667 (205) (281,702) Beginning balance after restatement－January 1, 2012 16,796,775 1,461,505 622,936 14,151 2,313,733 2,950,820 - - (56,984) 21,152,116 Net income after tax for the six months ended June 30, 2012 - - - - 1,485,647 1,485,647 - - - 1,485,647 Other comprehensive income for the six months ended June 30, 2012 - - - - - - (7,818) - (36,444) (44,262) Total comprehensive income for the six months ended June 30, 2012 - - - - 1,485,647 1,485,647 (7,818) - (36,444) 1,441,385 Appropriation and distribution of retained earnings： Legal reserve appropriated - - 661,256 - (661,256) - - - - - Special reserve appropriated - - - 111,447 (111,447) - - - - - Cash dividends of ordinary shares - - - - (1,007,808) (1,007,808) - - - (1,007,808) Ending balance – June 30, 2012 $ 16,796,775 1,461,505 1,284,192 125,598 2,018,869 3,428,659 (7,818) - (93,428) 21,585,693

Beginning balance－January 1, 2013 $ 16,796,775 1,461,505 1,284,192 125,598 4,608,190 6,017,980 (45,693) - (31,976) 24,198,591 Net income after tax for the six months ended June 30, 2013 - - - - 1,763,302 1,763,302 - - - 1,763,302 Other comprehensive income for the six months ended June 30, 2013 - - - - - - 45,133 - (845,523) (800,390) Total comprehensive income for the six months ended June 30, 2013 - - - - 1,763,302 1,763,302 45,133 - (845,523) 962,912 Appropriation and distribution of retained earnings： Legal reserve appropriated - - 1,222,906 - (1,222,906) - - - - - Special reserve appropriated - - - 7,496 (7,496) - - - - - Cash dividends of ordinary shares - - - - (1,007,806) (1,007,806) - - - (1,007,806) Ending balance – June 30, 2013 $ 16,796,775 1,461,505 2,507,098 133,094 4,133,284 6,773,476 (560) - (877,499) 24,153,697


(English Translation of Financial Report Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards

ENTIE COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012 (Expressed in Thousands of New Taiwan Dollars)

For the six months ended June 30,

2013 2012 Cash Flows from Operating Activities： Net income before tax $ 2,258,388 1,687,896 Adjustments: Adjustments to reconcile profit (loss) Depreciation 55,498 53,881 Amortization 22,081 18,487 (Reversal of provision) provision for bad debt expenses (49,187) 252,502 Net (gains) losses on financial assets or liabilities at fair value through profit or loss (460,122) 10,095 Interest expenses 1,816,844 1,919,813 Interest revenue (3,990,573) (3,780,579) Net changes in provisions for guarantee liabilities 8,609 17,332 (Gains) losses on disposal of property and equipment (2,825) 2,012 Losses on disposal of intangible assets 1 19 Gains on disposal of assets classified as held for sale - (362,986) Gains on disposal of investments (7,775) - Reversal of impairment gains on financial assets (13,855) (13,508) Other adjustments (22,810) 67,350 Total adjustments to reconcile profit (2,644,114) (1,815,582) Changes in Operating Assets and Liabilities： Changes in Operating Assets： (Increase) decrease in due from Central Bank and call loans to banks (1,244,921) 11,789,732 Increase in financial assets at fair value through profit or loss (3,926,240) (1,368,466) Increase in receivables (3,136,548) (3,538,012) Increase in discounts and loans (10,364,021) (4,076,471) Increase in available-for-sale financial assets (22,866,761) (8,421,024) (Increase) decrease in other financial assets (267,919) 516,013 Changes in Operating Liabilities： Increase (decrease) in deposits from Central Bank and banks 12,759,917 (3,865,159) Decrease in financial liabilities at fair value through profit or loss (1,156,263) (3,128,045) Increase in payables 3,770,990 2,896,702 Increase in deposits and remittances 22,196,049 5,603,366 (Decrease) increase in other financial liabilities (636,132) 81,124 Increase in provisions for employee benefits - 10,380 (Decrease) increase in operating reserve and provisions (2,276) 1,896 Cash outflow generated from operation (5,259,851) (3,625,650) Interest received 3,996,928 3,742,287 Interest paid (1,672,940) (1,789,090) Income taxes paid (66,293) (80,222) Net Cash Used in Operation Activities (3,002,156) (1,752,675) Cash Flows from Investing Activities： Proceeds from disposal of financial assets at cost 24,082 13,508 Proceeds from disposal of assets classified as held for sale - 998,777 Acquisition of property and equipment (21,709) (78,813) Proceeds from disposal of property and equipment 8,088 19 Acquisition of intangible assets (37,454) (32,994) Decrease (increase) in securities purchased under resell agreements 1,122,498 (1,159,899) Increase in other assets (896,674) (266,447) Net Cash Flows from (Used in) Investing Activities 198,831 (525,849) Cash Flows from Financing Activities： Repayments of bank notes payable (1,190,000) - Increase in securities sold under repurchase agreements 8,017,410 1,608,660 Increase (decrease) in other liabilities 125,492 (54,823) Cash dividend paid (1,007,806) - Net Cash Flows from Financing Activities 5,945,096 1,553,837 Effect of exchange rate changes on cash and cash equivalents 59,676 (7,786) Net Increase(decrease) in cash and cash equivalents 3,201,447 (732,473) Cash and cash equivalents at Beginning of Period 3,309,584 4,569,870 Cash and cash equivalents at End of the Period $ 6,511,031 3,837,397

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Reviewed only, not audited in accordance with generally accepted auditing stanENTIE COMMERCIAL BANK CO., LTD.

dards

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2013 and 2012

(Expressed in thousands of New Taiwan Dollars) 1. OVERVIEW OF ENTIE COMMERCIAL BANK

EnTie Commercial Bank (the “Bank”) started its operations on April 15, 1993. It engages in banking activities under the Banking Act of the Republic of China. As of June 30, 2013, the Bank had three major Groups: the Corporate Banking Group, Retail Banking Group and Financial Markets Group. Each Group has its own Chief Office. In addition, the Corporate Banking Products, Corporate Credit Management, Trust, Product Operations (International Department/OBU), Business Financial Center and 12 Corporate Banking Regional Centers are under Corporate Banking Group; the Retail Banking Products, Consumer Credit Management, Retail Banking Channels, Retail Banking Operations, Operating Department, 52 Retail Banking Branches and 7 Consumer Finance Regional Centers are under Retail Banking Group; the Treasury and Treasury Marketing are under Financial Markets Group. Each Group is responsible for planning, managing and marketing for Corporate Banking, Retail Banking and Financial Markets. Trust Department is responsible for planning, managing and operating trust investment, and executing trust business for investment in foreign marketable securities and funds under Banking Act and Trust Enterprise Act of the Republic of China. An Yin Insurance Broker Co. Ltd.(the “Subsidiary”) was approved to incorporate on July 15, 2008, engaging in life insurance broker and property insurance broker business. It has been the Bank’s wholly owned investee company since August 19, 2010. The Bank’s stock has been listed on the Taiwan Stock Exchange since September 1999.

2. APPROVAL DATE AND PROCEDURES OF THE CONSOLIDATED FINANCIAL REPORTS The consolidated financial reports were approved and announced by the board of directors on August 29, 2013.

3. NEW STANDARDS AND INTERPRETATIONS (A) Newly issued and revised accounting standards and interpretations accepted by the Financial

Supervisory Commission and not yet adopted In November 2009 International Accounting Standards Board (IASB) issued IFRS 9 – “Financial Instruments”, which came into effect on January 1, 2013. (In December 2011 IASB postponed the effective date until January 1, 2015.) The Financial Supervisory Commission (FSC) has accepted IFRS 9, but as of the report date has not yet announced when it will come into effect. Thus IFRS 9 cannot be adopted yet. IAS 39 - “Financial Instruments”, the 2009 version, should be adopted instead. The classification and measurement of consolidated financial assets are expected to be changed when IFRS 9 is adopted by the Bank and its subsidiary.

Reviewed only, not audited in accordance with generally accepted auditing standards ENTIE COMMERCIAL BANK CO., LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

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(B) Newly issued and revised accounting standards and interpretations not yet accepted by the FSC Listed as below are the accounting standards and interpretations newly issued and revised by IASB and likely relevant to the Bank and its subsidiary but not yet accepted by the FSC. Neither has the FSC announced the effective dates.

Issue date

New standards and

amendments

Description

Effective dates

per IASB May 12, 2011 June 28, 2012

‧IFRS 10 – “Consolidated Financial Statements”

‧IFRS 12 – “Disclosure of Interests in Other Entities”

‧Revisions to IAS 27 - “Separate Financial Statements”

‧Revisions to IAS 28 - “Investments in Associates and Joint Ventures”

‧On May 12, 2011, a series of new standards and revisions related to consolidation, associates, and joint ventures were issued. They provide a control model by which to judge and analyze whether an investor has control of the investee, including a special purpose entity, while the consolidation process remains unchanged.

‧On June 28, 2012, revisions were issued to elaborate on the transitional rules of those standards.

January 1, 2013

May 12, 2011

IFRS 13 – “Fair Value Measurement”

Other standards will be replaced by IFRS 13, to consolidate fair value measurement of financial and non-financial items in one standard.

January 1, 2013

June 16, 2011

Revisions to IAS 1 – “Presentation of Financial Statements”

Other comprehensive income items that can and cannot be reclassified to profit and loss should be presented separately.

July 1, 2012

June 16, 2011

Revisions to IAS 19 – “Employee Benefits”

Mainly to eliminate corridor method. Employers are no longer allowed to recognize in profit and loss all changes in defined benefits obligation and plan assets. Past service cost should no longer be amortized and should be recognized in profit and loss immediately.

January 1, 2013

The Bank and its subsidiary are still assessing the impact on the consolidated financial reports at their first-time adoption.



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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies adopted in the consolidated financial reports are summarized as below. Unless stated otherwise, they apply consistently to all presentation periods in the consolidated financial reports and opening IFRS consolidated balance sheet as of January 1, 2012, prepared for the purpose of conversion to IFRSs, IAS, and interpretations by the International Accounting Standards Board (IASB) accepted by the FSC. (A) Assertion of compliance

The consolidated financial reports were prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Publicly Held Banks and IAS 34 – “Interim Financial Reporting” as accepted by the FSC. The consolidated financial reports does not include all the necessary information that a yearly consolidated financial reports should disclosed in accordance with Regulations Governing the Preparation of Financial Reports by Publicly Held Banks and IFRS, IAS, interpretation and SIC accepted by the FSC. The consolidated financial reports are included in the period covered by the consolidated yearly financial reports prepared following Regulations Governing the Preparation of Financial Reports and IFRSs accepted by the FSC, and follow IFRS 1 – “First-time Adoption of IFRSs” as accepted by the FSC. Please refer to Note 15 for information on the impact of the conversion to IFRSs accepted by the FSC on the financial position, financial performance, and cash flow of the Bank and its subsidiary.

(B) Basis of compilation (a) Basis of measurement

Except for the significant balance sheet items listed as below, the consolidated quarterly financial reports are prepared on the basis of historical costs. (1) Financial assets measured at fair value through profit or loss (including derivative

instruments); (2) Available-for-sale financial assets measured at fair value; (3) Cash-settled share-based payment agreements liability measured at fair value; (4) Defined benefit assets, which are recognized as the net amount of pension plan

assets plus unrecognized prior service cost and unrecognized actuarial losses, minus unrecognized actuarial gains and present value of defined benefit obligation.

(b) Functional currency and presentation currency

The consolidated financial statements are presented in the Bank’s functional currency, new Taiwan dollars. All the financial information that is expressed in new Taiwan dollars is expressed in thousands of new Taiwan dollar.



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(C) Basis of consolidation (a) Basis of compilation for consolidated financial reports

The consolidated financial reports include the entity of the Bank and its subsidiary. The subsidiary’s financial reports are included in the consolidated financial reports from the day that the Bank is able to exercise control over the subsidiary until the day it no longer has control over it. The accompanying financial statements include the accounts of the Head Office, all branches, the OBU and its subsidiary. All significant inter-company transactions and balance among the consolidated entities are eliminated in the consolidation. All inter-office transactions and balances have also been eliminated in preparing the financial statements.

(b) The subsidiary included in the consolidated financial reports and their changes

Direct or Indirect Shareholding Name of Investor

Company Name of

Subsidiary Primary Business June 30,

2013 December 31, 2012 June 30,2012

January 1, 2012

EnTie Commercial Bank Co., Ltd.

An Yin Insurance Broker Co. Ltd.

Primarily engages in life insurance broker and property insurance broker business

100.00% 100.00% 100.00% 100.00%

(c) Subsidiaries not included in the consolidated financial reports: None.

(D) Foreign currency transaction and translation of foreign currency financial statements (a) A foreign currency transaction, a transaction that is denominated or requires settlement

in a foreign currency, is recognized in the foreign currency. The income generated and expenses incurred are recognized in functional currency, which is translated using the exchange rate at the date of the transaction.

(b) Monetary foreign currency financial assets and liabilities are translated using the

exchange rate at the date of the statement of financial position, and the exchange difference is recognized in the profit or loss of the current period. For non-monetary foreign currency financial assets and liabilities which are measured in fair value and whose changes in fair value are recognized in other comprehensive income, the exchange difference is recognized in other comprehensive income. For non-monetary foreign currency financial assets and liabilities which are measured in fair value and whose changes in fair value are recognized in profit or loss in the current period, the exchange difference is recognized in profit or loss in the current period. For non-monetary foreign currency financial assets and liabilities which are not measured in fair value, they are measured using the historical exchange rate at the date of transaction.



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(c) The results and financial position of an entity whose functional currency is not the currency of a hyperinflationary economy shall be translated into a different presentation currency using the following procedures: (1) Assets and liabilities presented shall be translated at the closing rate at the date of

the statement of financial position; (2) Profit or loss presented shall be translated at the monthly-weighted average

exchange rate; and (3) All resulting exchange differences shall be recognized in other comprehensive

income.

(E) Cash and cash equivalents Cash comprises cash on hand, checks for clearance, checking and demand deposits due from other banks, and money deposited in other financial institutions without designated purposes or with unrestricted access. Cash equivalents consist of short-term and highly liquid time deposits due from other banks.

(F) Financial Instruments (a) Financial assets and liabilities at fair value through profit or loss (FVTPL)

Financial assets and liabilities held for trading are acquired or incurred principally for the purpose of selling or repurchasing it in the near term. All of the derivatives instruments held by the Bank and its subsidiary are classified under this category, except for those designated as hedging instruments are classified under these accounts. At each balance sheet date, the fair value is re-measured and the resulting gain or loss from such re-measurement is recognized in current profit or loss. A regular way purchase or sale of these financial assets is recognized and derecognized using trade date accounting. For initial recognition, fair value at the time of acquisition is used, and transaction costs are recognized as expenses in the period. To eliminate or significantly reduce a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on different bases of them, a financial asset or liability is designated at FVTPL. Upon initial recognition, a financial asset or liability may be designated at FVTPL. Thus, financial debentures, which are covered by interest rate swaps (IRS) to hedge against market price risks on interest rate changes, are designated as financial liabilities measured as at FVTPL although the Bank did not use hedge accounting for these bonds. Had the financial debentures not been designated as at FVTPL, there would have been accounting measurement mismatches between the financial debentures and IRS because of differences in measurement attributes.



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(b) Available-for-sale financial assets Available-for-sale financial assets are those financial assets that are measured at fair value and whose fair value changes are recognized in other comprehensive income. A regular way purchase or sale of these financial assets is recognized and derecognized using trade date accounting. For initial recognition, fair value at the time of acquisition is used, plus any transaction costs. For recognition in the statement of financial position, fair value at the date of the statement of financial position is used, and fair value changes are recognized as adjustments to other comprehensive income. At the time of derecognition, the cumulative gain or loss previously recognized in other comprehensive income shall be reclassified from equity to profit or loss. For available-for-sale debt products, the difference between the initially recognized amount and maturity amount is amortized using interest method, while straight-line method is used if the difference is insignificant. Interest receivables are recognized on an accrual basis. If there is objective evidence of impairment, impairment loss is recognized. When the impairment amount decreases in the subsequent period, the reduced impairment amount of available-for-sale equity products is recognized as adjustments to stockholders’ equity, while the reduced impairment amount of available-for-sale debt products is reversed and recognized as profit in the period, if the reduced impairment is deemed to be in connection with events occurring after recognition of impairment. The book value after the reversal should not exceed the recoverable amount or the depreciated or amortized balance of the assets assuming no impairment loss was recognized.

(c) Financial assets carried at cost Equity instruments with no quoted market price and whose fair value cannot be reliably measured are stated at cost. If there is objective evidence that financial assets carried at cost are impaired, the carrying amount of the assets is reduced, and impairment loss is recognized. However, the impairment losses may not be reversed subsequently. The transactions of financial assets carried at cost are recorded on the trading date. The financial instruments are initially recognized at fair value plus transaction costs.

(d) Securities under repurchase/resell agreements Securities sold/purchased with a commitment to repurchase/resell at a predetermined price are treated as financing transactions. The difference between the cost and the repurchase/resell price is treated as interest expense/revenue and recognized over the term of the agreement. On the selling/purchasing date, these agreements are recognized as securities sold under repurchase agreements or securities purchased under resell agreements.

(e) Loans and receivables Loans and receivables are financial assets that have no quoted market price with fixed or determinable payment, including receivables, other receivables and debts investment without active market.



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Consumer loans to credit card holders are reflected in the amounts reported by merchants, excluding unearned interest. Interest thereon is recognized on an accrual basis using the interest method. A credit card loan, accrued interest, and other related advances that are over three months past due are reclassified as a non-accrual account without accruing interest. Interest collected while accruing of interest has suspended is included in earnings only to the extent of cash actually received. The Bank engages in factoring and management of accounts receivable. The interest and transaction fees from factoring and management of such accounts are treated as current income. An allowance for bad debts is provided by reviewing the balance of factoring of accounts receivable at period-end. As regards the factoring accounts, those sold by the account-selling companies which have not yet been paid for are accounted for under “payables.” Loans are initially recognized at fair value plus incremental direct transaction costs, and the subsequent measurement is recognized as interest revenues through effective interest method (or through straight-line method if the difference is not significant), which is carried at amortized cost less impairment losses. Non-accrual loan

s

Loans are reclassified as a non-accrual account if either of the following conditions is met: (1) The borrower's principal or interest payments have been in arrears for three months

after the end of payment period. (2) Loans and other extensions of credit meet the criteria for transferring to the

non-accrual account at an earlier time. According to the Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing and Non-Accrued Loans, the balances of outstanding loans and other credits that has reached the three month settlement period, and is deemed uncollectable, will be reclassified in the non-accrual account including the related accrued interest. Non-accrual loans reclassified from loans are accounted for under discounts and loans, and other non-accrual loans reclassified from guarantees, acceptances, factoring accounts receivable, and receivables－other credit card are accounted for under other financial assets.



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Allowan

ces for bad debts

The Bank and its subsidiary assess their “loans and receivables” on the balance sheet day to see whether there are any objective evidence of impairment for a single or a group of financial assets. Adequate allowance for bad debts is then set aside in accordance with IAS 39, the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans”, the “Measures on Strengthening the Management on Credit Risks of Domestic Banks”, and the “Regulations Governing Institutions Engaging in Credit Card Business”. With regards to loans and receivables, the objective evidence shall be identified first to reveal any impairment existing for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If no objective evidence of impairment exists for an individually assessed financial asset, it shall be included in a set of financial assets with similar credit risk characteristics and collectively assesses for impairment. Assets that are individually assessed for impairment are not required to be collectively assessed because impairment is or continues to be recognized. If there is an objective evidence that an impairment loss on financial assets has been incurred, the amount of the loss is recognized and measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate; the amount of the loss should be recognized as bad debt expenses in profit or loss in the current period. The estimation of future cash flows includes the recoverable amount of collateral and related insurance when determining the amount of the loss. The aforesaid object evidences include: (1) Significant financial difficulty of the issuer or obligor; (2) A breach of contract, such as a default or delinquency in interest or principal

payments; (3) The lender, for economic or legal reasons relating to the borrower’s financial

difficulty, granting to the borrower a concession that the lender would not otherwise consider;

(4) It becoming probable that the borrower will enter bankruptcy or other financial

reorganization; (5) The disappearance of an active market for that financial asset because of the issuer’s

financial difficulties; (6) Adverse changes in the payment status of the borrowers; and (7) Changes in national or local economic conditions that correlate with defaults on the

assets.



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The Bank and its subsidiary provides reserve for guarantee liabilities for off-balance-sheet non-loan assets in accordance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrued Loans” and “Measures on Strengthening the Management on Credit Risks of Domestic Banks” issued by FSC. Credits deemed as uncollectible are written off upon approval of the board of directors.

(f) Debts investment without active market The amortized cost and interest income of debts investment without an active market are determined by using the effective-interest-rate method (or the straight-line method if the difference is not significant.) If there is objective evidence that a debt investment without an active market is impaired, the carrying amount of the asset is reduced, and impairment loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss. The book value after the reversal should not exceed the recoverable amount or the depreciated or amortized balance of the assets assuming no impairment loss was recognized. The transactions of debts investment without active market are recorded on trading date. The financial instruments are initially recognized at fair value plus transaction costs.

(G) Assets classified as held for sale Non-current assets held for sale, or disposal group, are those that are available for immediate sale in its present condition, subject only to terms that are usual and customary for sales of such assets, and its sale in less than one year must be highly probable. The assets classified under non-current assets held for sale, or disposal group, are to be measured at the lower of carrying amount and fair value less costs to sell, and depreciation on such assets shall cease.

(H) Property, plant and equipment Property, plant and equipments are stated at cost less accumulated depreciation. Major improvements and renewals are capitalized, while repairs and maintenance are charged current expenses. When a property, plant and equipment consists of different components and the cost of a component is significant relative to the total cost of the property, plant and equipment making adopting a different depreciation rate or depreciation method more adequate, the component will be dealt separately. Depreciation is computed using the straight-line method over service lives estimated as follows: buildings and premises, 10 to 55 years; machinery and equipment, 3 to 8 years; transportation equipment and miscellaneous equipment, 3 to 10 years; and leasehold improvements, 5 years (if the lease period is less than 5 years then the depreciation should be amortized during the period). The depreciation method, useful life and residual value of an asset shall be reviewed at each financial year-end and adequately adjusted when necessary.



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Upon retirement or disposal of property and equipment, the related cost and accumulated depreciation are deducted from the respective accounts, and the related gain or loss is recognized as other noninterest income or loss.

(I) Lease A lease contract is classified as an operating lease or a finance lease. A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset to the Bank and its subsidiary. At initial recognition, the leased asset is recognized at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payments. The subsequent treatment follows the accounting policies for property, plant and equipment. Lease payments, including payments in advance, under an operating lease shall be recognized in profit or loss on a straight-line basis over the lease term.

(J) Intangible assets Goodwill shall be measured at its cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill shall be allocated to each of the cash-generating units, or groups of cash-generating units. The impairment loss of goodwill cannot be reversed. Computer software is recorded on the basis of the actual cost of acquisition and amortized using the straight-line method over 3 to 5 years.

(K) Non-financial assets impairment The Bank and its subsidiary estimate the recoverable amount (the lower of net fair value and value in use) for assets that have indication of impairment (individual assets except for goodwill or cash-generating unit) on the balance sheet day. An impairment loss is recognized if the carrying amount is higher than the recoverable amount. For assets other than goodwill, reversal of impairment loss is recognized when the recoverable amount of the asset has increased from its prior-period estimation. The carrying amount after the reversal shall not exceed the recoverable amount or the depreciated or amortized balance of the assets assuming no impairment loss was recognized in prior periods. Regardless whether there exists indication of impairment, goodwill is tested for impairment regularly every year.

(L) Provisions A provision shall be recognized when a present obligation results from a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. A provision is determined by discounting the expected future cash flow, using a pre-tax discount rate that reflects current market assessments of the time value of money and those risks specific to the liability.



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If there is a case in which the subject matter amounts to 0.3% of the equity of the Bank, or a case in which the subject matter amounts to 0.15% of the equity of the Bank while apparent and objective evidence indicates that it is probable that the Bank will lose the case, the provisions shall be evaluated by the hired lawyers or its counsels, in the fourth quarter of each year or whenever the case has major new developments, to determine whether the chance to lose the case exceeds 50%. Provisions are made for those cases with a higher-than-50% chance that the Bank will lose, and disclosures are made in the financial statement. Those cases with a lower-than-50% chance that the Bank will lose are disclosed in the financial statement.

(M) Revenue recognition

Please refer to accounting policies of loans and receivables for information regarding interest income from receivables and loans. In addition, service fees and commission income include, but not limited to, investment management fees, sales commission, syndicated loan arrangement fees and planning service fees. The income shall be recognized when the service is provided.

(N) Employee benefits (a) Short-term employee benefits

The Bank and its subsidiary charge the short-term and non-discounted benefit expectedly paid in near future to current expenses over the periods services are rendered by employees.

(b) Termination benefits Termination benefits are incurred when the Bank and its subsidiary terminate employment prior to qualifying for retirement, or the employees accepted voluntary redundancy to get termination benefits in return. Termination benefits are payable more than 12 months after the reporting period, then they are discounted to their present value.

(c) Defined contribution plan A defined contribution plan is a post-employment benefit plan under which the Bank pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. 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. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan that is due more than 12 months after the end of the period in which the employees render the service are discounted to their present value.



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(d) Defined benefits plan A defined benefit plan is a post-employment benefit plan under which benefit is paid to an employee on the basis of their ages, service periods and compensated salaries at the date of retirement. The Bank and its subsidiary recognizes actuarial gains and losses which are incurred by the change of actual experience and actuarial assumption in other comprehensive income, and recognize pension asset or liability in balance sheet in which asset or liability is the amount of actuarial present value of defined benefit obligation deducting fair value of plan assets. The calculation of defined benefit obligation is performed annually by an actuary using the projected unit credit method. The actuarial present value of defined benefit obligation is calculated by discounting future cash flow at the yield rate on AA credit rated bonds that have maturity dates approximating the terms of the obligation and that are denominated in the same currency in which the benefits are expected to be paid.

(O) Share-based payment transactions The Bank and its subsidiary engages in cash-settled share-based payment transactions, a liability equal to the portion of the services received is recognized at its current fair value determined at each balance sheet date and at the date of settlement. The Bank and its subsidiary recognize expenses and liabilities by using a straight-line basis over the vesting period. At the vesting period, any changes in the fair value would be recognized as profit or loss of the period.

(P) Income taxes Income tax expense is measured by interim reporting period net income before tax multiplied by best estimate effective tax rate expected by the management. Current income tax expense and deferred income tax expense are allocated in proportion to the expected whole year current income tax expense and deferred income tax expense. Income tax expense directly recognized in equity or other comprehensive income is measured by the temporary difference between the carrying amount of related asset and liability for the purpose of financial reporting and the tax base multiplied by applicable tax rate at the time of expected utilization or settlement.

(Q) Employee bonuses and directors ’and supervisors’ remuneration The Bank and its subsidiary’s employee bonuses, directors’ and supervisors ’remuneration is recognized as current expenses. If later the actual distribution amount pursuant to a resolution of a stockholders’ meeting is different from the estimated amount recognized in the financial statements, the difference is accounted for as changes in accounting estimates and recognized as profit or loss of the current period.



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(R) Preferred stock liability The Bank issues preferred stock liabilities which are allocated in proportion to the equity component (capital surplus—the right of preferred stock converts into common stock). After the total issue price minus the amount of liability component measured individual. When the bond/preferred stock holders execute the conversion right, the Bank should adjust the liability component to its book value in advance. The issue of common stock, which is converted by bond/preferred stock holders, is recognized by book value of the liability component plus the book value of the equity component. The preferred stock dividends issued are recognized under interest expense in the consolidated statements of comprehensive income.

(S) Operating segments An operating segment is a component of the Bank and its subsidiary that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Bank and its subsidiary). The segment’s operating results are reviewed regularly by the Bank and its subsidiary’s chief operating decision maker to make decisions pertaining to the allocation of the resources to the segment and to assess its performance for which discrete financial information is available. The chief operating decision maker of the Bank and its subsidiary is the board of directors.

5. PRIMARY SOURCES OF SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS UNCERTAINTY The bank and its subsidiary have used necessary assumptions and estimates to measure, evaluate and disclose the assets, liabilities, income, expenses and contingencies of the consolidated financial statements when preparing the consolidated financial statements in accordance with IFRS accepted by the FSC. Actual results could differ from these estimates. The assumptions and estimates by the Bank and its subsidiary are best estimates, which are made following IFRSs as accepted by the FSC. They are based on past experience and other factors, including expectations for the future, and are continuously evaluated. When the management decides on accounting policies during preparation of the consolidated financial reports, uncertainties exist for significant judgments and estimates. The source of the uncertainties is expected to be consistent during the first-time preparation of the consolidated yearly financial reports following IFRSs as accepted by the FSC. Accounting policies for Impairment loss on loans and management judgments have significant impacts on the amount recognized in the consolidated financial reports. When the Bank and its subsidiary decide whether to recognize impairment loss, they mainly decide if there are any observable evidence indicating possible impairment. The evidence may include observable information indicating unfavorable changes in debtor payment status. When analyzing expected cash flow, the estimates by the management are based on past losses experience on assets of similar credit risk characteristics. The Bank and its subsidiary periodically review methods and assumptions behind the amount and schedule of expected cash flow, to reduce the difference between expected and actual loss.



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6. SUMMARY OF MAJOR ACCOUNTS

(A) Cash

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Cash on hand $ 1,436,283 1,212,216 1,288,613 1,149,361 Checks for clearance 1,023,050 1,164,667 1,184,264 1,005,777 Due from other banks 4,051,698 932,701 1,364,520 2,414,732 Total $ 6,511,031 3,309,584 3,837,397 4,569,870 The Bank and its subsidiary do not have time deposits that are over one year.

(B) Due from Central Bank and call loans to banks

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Required reserve─Account A $ 7,391,846 3,799,481 3,963,016 4,568,037 Required reserve─Account B 7,824,659 7,508,944 7,740,980 7,728,358 Required reserve─Foreign

Currency 44,487 42,277 45,225 44,540

Deposits transferred to Central Bank

54,980,000 57,700,000 62,100,000 71,900,000

Call loans to banks 4,015,590 3,456,670 1,025,319 2,422,240 Checking and settlements

accounts 305,126

809,415

300,124

301,221

Total $ 74,561,708 73,316,787 75,174,664 86,964,396 The reserves for deposits are calculated at prescribed rates, using the average monthly balances of various deposit accounts and are appropriated and deposited in the reserve account of the Central Bank of the Republic of China (Taiwan). Deposits in “Required reserve－Account A” are interest-free and can be withdrawn at any time; deposits in “Required reserve－Account B” are interest-bearing and cannot be withdrawn except for the monthly adjustment to the required reserve permitted by relevant regulations.

(C) Financial assets at fair value through profit or loss As of June 30, 2013 and December 31, June 30 and January 1, 2012, the financial assets held for trading were as follows:

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Government bonds $ 7,563,945 5,353,453 4,388,946 2,529,557 Corporate bonds 6,587,329 4,650,068 5,961,467 5,633,914 Financial debentures - - - 700,586 Listed and OTC securities 132,223 254,837 290,943 98,959 Beneficiary certificates 129,914 130,292 108,427 - Derivative instruments 1,448,954 709,788 783,017 1,098,947 Total $ 15,862,365 11,098,438 11,532,800 10,061,963 Please refer to Note 6(N) for information with regard to repurchase conditions on financial assets held for trading shown above.



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There was no financial asset designated on initial recognition as one to be measured at fair value, with changes in fair value recognized in profit or loss. As of June 30, 2013 and December 31, June 30 and January 1, 2012, the financial liabilities measured at fair value through profit or losses were as follows:

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Financial liabilities held for trading purposes：

Borrowed government bonds $ - 49,816 150,475 - Derivative instruments 973,076 586,312 739,004 806,137 Financial liabilities designated as

at FVTPL：

Financial debentures 8,666,348 9,781,993 9,803,735 12,902,656 Total $ 9,639,424 10,418,121 10,693,214 13,708,793 For preceding financial debentures, the Bank entered into the IRS contract to hedge the market price risks on interest rate fluctuation but the Bank did not use hedge accounting for those financial debentures. Had the financial debentures not been designated as at FVTPL but as the amortized cost approach, there would have been accounting measurement mismatches between the financial debentures and IRS as a result of differences on measurement attributes. Thus, the Bank designated financial debentures as financial liabilities at FVTPL.

(D) Available-for-sale financial assets

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Commercial papers $ 14,213,836 13,050,560 9,768,412 2,767,961 Negotiable certificates of deposit 300,013 1,500,042 120,009 99,740 Treasury bills 3,974,908 - - - Government bonds 27,855,526 9,040,103 18,834,264 29,705,853 Corporate bonds 28,534,442 29,146,398 28,625,415 18,687,135 Beneficiary certificates 139,634 33,204 - - Financial debentures 900,000 - 1,200,000 - Listed and OTC securities 1,280,396 1,561,687 2,719,526 1,585,913 Valuation adjustment of financial

assets (877,499)

(31,976)

(93,428)

(56,984)

Total $ 76,321,256 54,300,018 61,174,198 52,789,618 Please refer to Notes 6(M) and 8 for information with regard to the restrictions or repurchased conditions on available-for-sale financial assets shown above.



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(E) Securities purchased under resell agreements

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Government bonds $ 149,555 302,679 1,359,811 100,078 Commercial papers 299,471 1,416,501 - 99,834 Negotiable certificates of deposit 1,556,466 1,408,810 - - Total $ 2,005,492 3,127,990 1,359,811 199,912 Par value of securities: Government bonds $ 150,000 300,000 1,350,000 100,000 Commercial papers $ 300,000 1,420,000 - 100,000 Negotiable certificates of deposit $ 1,555,700 1,406,100 - -

(F) Receivables－net

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Credit cards receivable $ 1,686,312 1,637,986 1,597,235 2,025,504 Accounts receivable 34,980 54,032 43,619 28,491 Accounts receivable－factoring 2,224,513 2,991,273 2,514,857 3,165,661 Interest receivable 336,056 342,411 343,629 305,337 Acceptances receivable 1,113,073 311,228 881,424 525,669 Accrued income 567,066 354,138 421,044 589,538 PEMG compensation receivable 1,558,484 1,537,747 1,492,372 1,464,914 Proceeds from sale of securities receivable

4,157,624 1,251,107 4,759,777 305,968

Other receivables 106,629 121,512 132,624 155,679 Subtotal 11,784,737 8,601,434 12,186,581 8,566,761 Less: Allowance for bad debts (1,149,697) (1,115,793) (1,106,136) (1,073,990) Total $ 10,635,040 7,485,641 11,080,445 7,492,771 The credit cards receivable shown above included the receivables from credit card holders who were involved in debt repayment negotiation with the Bank. Please refer to Note 9(B) for information with regard to the redemption of PEM Group’s structure notes. The changes in allowance for bad debts were as follows:

For the six months ended June 30, 2013 2012

Beginning balance $ 1,115,793 1,073,990 Current reversal (19,203) (11,361) Current charge-off - (8,707) Recovery of bad debts 53,110 52,223 Exchange rate effect (3) (9) Ending balance $ 1,149,697 1,106,136 Receivables should be included in the total amounts of assessment of impairment to be determined its allowance for bad debts, which were as follows. Acceptances receivable, proceeds from sale of securities receivable are excluded from account receivables. Please refer to Note 6 (H) for the assessment of impairment of acceptances receivable.



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Receivables Allowance for bad debts Items June 30,

2013 December 31,

2012 June 30,

2013 December 31,

2012 With the objective evidence of impairment

Individual assessment of impairment

Receivables $ 1,558,484 1,537,747 1,005,484 1,005,484

Collective assessment of impairment

Credit cards 313,651 346,643 10,291 11,337

Subtotal 1,872,135 1,884,390 1,015,775 1,016,821 Without the objective evidence of impairment


Credit cards 1,372,661 1,291,343 78,187 49,068

Receivables 3,269,244 3,863,366 55,735 49,904 Subtotal 4,641,905 5,154,709 133,922 98,972 Total $ 6,514,040 7,039,099 1,149,697 1,115,793

Receivables Allowance for bad debts Items June 30,

2012 January 1,

2012 June 30,

2012 January 1,

2012 With the

objective evidence of impairment


Receivables $ 1,492,372 1,464,914 939,820 932,319


Credit cards 385,004 429,285 9,568 13,528

Subtotal 1,877,376 1,894,199 949,388 945,847 Without the



Credit cards 1,212,231 1,596,219 70,154 36,915

Receivables 3,455,773 4,244,706 86,594 91,228 Subtotal 4,668,004 5,840,925 156,748 128,143 Total $ 6,545,380 7,735,124 1,106,136 1,073,990 Debts investment without active market, due from Central Bank and call loans to banks should be included in the total amounts of assessment of impairment to be determined its allowance for bad debts, which were as follows:

Total Allowance for bad debts Items June 30,

2013 December 31,

2012 June 30,

2013 December 31,

2012 With the



Debts investment without active market

$ 262,666 254,117 36,275 42,769

Without the objective

evidence of impairment


Due from Central Bank and call loans to banks

74,561,708 73,316,787 - -



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2012 January 1,

2012 June 30,

2012 January 1,

2012 With the



Debts investment without active market

$ 260,747 591,476 51,484 62,911

Without the objective

evidence of impairment


Due from Central Bank and call loans to banks

75,174,664 86,964,396 - -

(G) Assets classified as held for sale

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Assets classified as held for sale $ 19,472 19,472 - 635,791 The Bank in December 2012 and October 2011, respectively, approved by the Board intended to sell the warehouse in Zhonghe and the property of branch of peace. Hence the above real estate which is recognized property, plant and equipment should be recognized as assets held for sale. Please refer to Note 6(J) for information with other notes.

(H) Discounts and loans－net

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Export bills negotiated $ 65,398 415,697 507,592 171,763 Short-term loans 49,780,548 38,725,166 41,630,105 42,151,975 Medium-term loans 81,718,626 84,207,231 81,055,633 78,846,145 Long-term loans 79,826,349 78,106,354 79,967,324 77,822,670 Non-accrual loans 1,747,297 889,525 830,060 549,746 Subtotal 213,138,218 202,343,973 203,990,714 199,542,299 Less: Allowance for bad debts (2,483,845) (2,103,105) (2,040,688) (1,437,665) Less: Adjustment of discount and premium

(320,425)

(313,964)

(301,319)

(285,216)

Total $ 210,333,948 199,926,904 201,648,707 197,819,418 The loans shown above included clients taking fiduciary loans who were involved in debt repayment negotiation with the Bank. Please refer to Note 6(AL) for the industry information. As of June 30, 2013 and December 31, June 30 and January 1, 2012, non-performing loans amounted to $1,878,351, $1,030,865, $1,254,972 and $678,185, respectively. For the six months ended June 30, 2013 and 2012, suspended accrual of interest for all of non-accrual accounts amounted to $15,698 and $9,483, respectively. For the six months ended June 30, 2013 and 2012, there were no loans written off without prior recourse.



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The changes in allowance for bad debts were as follows:


Default risk of specific claims

Inherent risk of overall claims

Total

Beginning balance $ 1,429,565 673,540 2,103,105 Current (reversal) provision (63,493) 15,040 (48,453) Current charge-off (12,223) - (12,223) Recovery of bad debts 435,986 - 435,986 Exchange rate effects 5,430 - 5,430 Ending balance $ 1,795,265 688,580 2,483,845

For the six months ended

June 30, 2012

Beginning balance $ 1,048,679 388,986 1,437,665 Current (reversal) provision (63,677) 309,214 245,537 Current charge-off (12,685) - (12,685) Recovery of bad debts 368,526 - 368,526 Exchange rate effects 1,645 - 1,645 Ending balance $ 1,342,488 698,200 2,040,688 Discounts and loans should be included in the total amounts of assessment of impairment to be determined its allowance for bad debts, which were as follows:

Loans Allowance for bad debts Items June 30,

2013 December 31,

2012 June 30,

2013 December 31,



Retail Banking $ - 69,345 - -

Corporate Banking

2,661,995 2,836,508 1,141,868 924,723

Subtotal 2,661,995 2,905,853 1,141,868 924,723 Collective

assessment of impairment

Retail Banking 2,417,005 2,488,986 607,049 466,455

Corporate Banking

146,980 141,126 46,348 38,387

Subtotal 2,563,985 2,630,112 653,397 504,842 Subtotal 5,225,980 5,535,965 1,795,265 1,429,565 Without the objective evidence of impairment


Retail Banking 86,582,626 85,803,145 349,805 374,881

Corporate Banking

121,329,612 111,004,863 338,775 298,659

Subtotal 207,912,238 196,808,008 688,580 673,540 Total $ 213,138,218 202,343,973 2,483,845 2,103,105



- 27 -

Loans Allowance for bad debts Items June 30,

2012 January 1,

2012 June 30,

2012 January 1,



Retail Banking $ 69,345 - - -

Corporate Banking

3,387,663 1,697,689 846,226 788,337

Subtotal 3,457,008 1,697,689 846,226 788,337 Collective

assessment of impairment

Retail Banking 2,824,337 2,843,401 449,966 228,085

Corporate Banking

161,100 154,324 46,296 32,257

Subtotal 2,985,437 2,997,725 496,262 260,342 Subtotal 6,442,445 4,695,414 1,342,488 1,048,679 Without the objective evidence of impairment


Retail Banking 85,974,368 84,230,482 396,739 165,123

Corporate Banking

111,573,901 110,616,403 301,461 223,863

Subtotal 197,548,269 194,846,885 698,200 388,986 Total $ 203,990,714 199,542,299 2,040,688 1,437,665 Non-loan credit business should be included in the total amounts of assessment of impairment to be determined its allowance for bad debts, which were as follows:


2013 December 31,

2012 June 30,

2013 December 31,

2012 Without the



Acceptances receivable

$ 1,113,073 311,228 11,131 3,112

Guarantee and letter of credit

11,842,464 12,691,542 35,824 35,363

Total 12,955,537 13,002,770 46,955 38,475


2012 January 1,

2012 June 30,

2012 January 1,

2012 Without the



Acceptances receivable

$ 881,424 525,669 8,814 12,984

Guarantee and letter of credit

12,973,966 8,950,998 21,500

Total $ 13,855,390 9,476,667 30,314 12,984



- 28 -

(I) Other financial assets－net

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Financial assets carried at cost－net

$ 121,962 124,414 125,923 125,923

Debts investment without active market－net

226,391 211,348 209,263 528,565

Overdue receivable 7,823 2,023 7,103 6,857 Less: Allowance for bad debts－

overdue receivable (6,262)

(261)

(5,341)

(3,439)

Others 234,608 - - 213,381 Total $ 584,522 337,524 336,948 871,287 Details of financial assets carried at cost were as follows:

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Taipei Forex Inc. $ 800 800 800 800 Taiwan Futures Exchange Co., Ltd.

9,000 9,000 9,000 9,000

Financial Information Service Co., Ltd.

45,500 45,500 45,500 45,500

Lian An Service Corp., Ltd. 1,250 1,250 1,250 1,250 Cheng Yang Venture Corp., Ltd. - - - 13,508 Li Yu Venture Co., Ltd. 11,234 11,234 12,743 12,743 Chiun Wei Venture Corp., Ltd. - 15,000 15,000 15,000 IBT Venture Corp., Ltd. 3,934 5,241 5,241 5,241 Taiwan Financial Asset Service Corp., Ltd.

50,000 50,000 50,000 50,000

Taiwan Depository & Cleaning Corp., Ltd.

4,639 4,639 4,639 4,639

Sunny Asset Management Co., Ltd.

770 770 770 770

Less: Accumulated impairment (5,165) (19,020) (19,020) (32,528) Total $ 121,962 124,414 125,923 125,923 Details of debt investment without active market were as follows:

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Asset securitization beneficiary certificates

$ - - - 30,380

Foreign principal-protected notes 262,666 254,117 260,747 561,096 Less: Accumulated impairment (36,275) (42,769) (51,484) (62,911) Total $ 226,391 211,348 209,263 528,565 Financial assets carried at cost include stock investments of the Bank with no quoted market price and whose fair value cannot be reliably measured; such financial assets are carried at cost. The debts investment, comprising corporate and other bonds, without active market held by the Bank are carried at amortized cost due to lack of quoted market price.

(J) Property, plant, and equipment－net



- 29 -

June 30, 2013

Cost

Accumulated depreciation

Net

Land $ 500,512 - 500,512 Buildings 193,277 52,644 140,633 Leasehold improvements 499,329 403,703 95,626 Machinery equipment 555,711 478,030 77,681 Transportation equipment 92,660 67,450 25,210 Miscellaneous equipment 301,235 224,866 76,369 Total $ 2,142,724 1,226,693 916,031 December 31, 2012

Land $ 502,922 - 502,922 Buildings 195,399 51,103 144,296 Leasehold improvements 490,826 382,485 108,341 Machinery equipment 558,230 467,444 90,786 Transportation equipment 92,550 65,641 26,909 Miscellaneous equipment 297,485 215,656 81,829 Total $ 2,137,412 1,182,329 955,083 June 30, 2012

Land $ 805,808 - 805,808 Buildings 362,895 66,940 295,955 Leasehold improvements 447,729 354,442 93,287 Machinery equipment 557,721 450,860 106,861 Transportation equipment 86,216 64,993 21,223 Miscellaneous equipment 399,892 288,493 111,399 Total $ 2,660,261 1,225,728 1,434,533 January 1, 2012

Land $ 805,808 - 805,808 Buildings 362,895 63,521 299,374 Leasehold improvements 390,254 346,240 44,014 Machinery equipment 577,861 449,330 128,531 Transportation equipment 85,441 63,338 22,103 Miscellaneous equipment 387,965 275,352 112,613 Total $ 2,610,224 1,197,781 1,412,443 As of June 30, 2013, December 31, June 30 and January 1, 2012, some of the land and buildings stated above were reclassified as non–current assets held for sale in accordance with IFRS 5, "Non-current Assets Held for Sale and Discontinued Operations". Please refer to Note 6(G). The Bank sold self-owned land and building located at Citizens Road Kaohsiung No. 40 and 42 on June 6, 2013. The Bank recognized a gain on disposal of $3,468.



- 30 -

The Bank sold self-owned land and buildings located at No.145 and No.147, Sec. 1, Heping E. Rd., Da’an Dist., Taipei City and No.155, Sec. 1, Neihu Rd., Neihu Dist., Taipei City on April 19 and October 30, 2012, respectively. The aforementioned transactions are sale-leaseback. The Bank recognized a gain on disposal of $362,986 for the former transaction. Changes in the cost were as below:

January 1, 2013

Current increase

Current decrease

Others

June 30, 2013

Land $ 502,922 - 2,410 - 500,512 Buildings 195,399 - 2,122 - 193,277 Leasehold improvements 490,826 8,503 - - 499,329 Machinery equipment 558,230 3,624 6,143 - 555,711 Transportation

equipment 92,550 1,531 1,421 - 92,660

Miscellaneous equipment 297,485 8,051 4,301 - 301,235 Total $ 2,137,412 21,709 16,397 - 2,142,724 January 1,

2012 Current increase

Current decrease

Others

June 30, 2012

Land $ 805,808 - - - 805,808 Buildings 362,895 - - - 362,895 Leasehold improvements 390,254 57,600 125 - 447,729 Machinery equipment 577,861 2,842 22,982 - 557,721 Transportation

equipment 85,441 2,622 1,847 - 86,216

Miscellaneous equipment 387,965 16,890 4,963 - 399,892 Total $ 2,610,224 79,954 29,917 - 2,660,261 Note: (a) For the six months ended June 30, 2012, the increase in machinery equipment includes

$41 transferred from miscellaneous equipment. (b) For the six months ended June 30, 2012, the decrease in machinery equipment includes

$301 transferred to miscellaneous equipment and $6,872 to computer software. (c) For the six months ended June 30, 2012, the decrease in transportation equipment

includes $799 transferred to miscellaneous equipment. (d) For the six months ended June 30, 2012, the increase in miscellaneous equipment

includes $301 transferred from machinery equipment and $799 from transportation equipment.

(e) For the six months ended June 30, 2012, the decrease in miscellaneous equipment

includes $41 transferred to machinery equipment.



- 31 -

Changes in accumulated depreciation were as below:

January 1, 2013

Current increase

Current decrease Others

June 30, 2013

Buildings $ 51,103 1,901 360 - 52,644 Leasehold improvements 382,485 21,219 - - 403,704 Machinery equipment 467,444 15,988 5,402 - 478,030 Transportation

equipment 65,641 3,134 1,325 - 67,450

Miscellaneous equipment 215,656 13,256 4,047 - 224,865 Total $ 1,182,329 55,498 11,134 - 1,226,693

January 1,



June 30, 2012

Buildings $ 63,521 3,419 - - 66,940 Leasehold improvements 346,240 8,327 125 - 354,442 Machinery equipment 449,330 22,051 20,521 - 450,860 Transportation

equipment 63,338 2,790 1,135 - 64,993

Miscellaneous equipment 275,352 17,834 4,693 - 288,493 Total $ 1,197,781 54,421 26,474 - 1,225,728 Note: (a) For the six months ended June 30, 2012, the increase in machinery equipment includes

$38 transferred from miscellaneous equipment. (b) For the six months ended June 30, 2012, the decrease in machinery equipment includes

$6,872 transferred to miscellaneous equipment and $6,061 to computer software. (c) For the six months ended June 30, 2012, the decrease in transportation equipment

includes $236 transferred to miscellaneous equipment. (d) For the six months ended June 30, 2012, the increase in miscellaneous equipment

includes $266 transferred from machinery equipment and $236 from transportation equipment.

(e) For the six months ended June 30, 2012, the decrease in miscellaneous equipment

includes $38 transferred to machinery equipment.

(K) Intangible assets

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Goodwill $ 137,326 137,326 137,326 137,326 Computer software 140,917 125,545 122,850 107,551 Total $ 278,243 262,871 260,176 244,877 Goodwill of the Bank was acquired from assuming the outstanding assets and liabilities of the Taipei Seventh Credit Cooperative on July 27, 1998.



- 32 -

When testing assets for impairment, the Bank defined each branch as a cash-generating unit (CGU). The recoverable amount of a CGU is determined at its value in use, and the key assumptions on the economic conditions that will occur over the remaining useful life of the CGU, such as estimated future cash flows, are based on each CGU’s operations or objective data on its business cycle to estimate the future operating cash flows of the Bank. After assessing the recoverable amount of CGUs as above, the Bank does not have to state goodwill impairment loss for the six months ended June 30, 2013 and 2012. Changes in intangible assets were as follows:

January 1, 2013

Current increase

Current decrease

Others

June 30, 2013

Goodwill $ 137,326 - - - 137,326 Computer software 125,545 37,454 22,082 - 140,917 Total $ 262,871 37,454 22,082 - 278,243 Note: For the six months ended June 30, 2013, the decrease in computer software includes

retirement loss of $1.

January 1, 2012

Current increase

Current decrease

Others

June 30, 2012

Goodwill $ 137,326 - - - 137,326 Computer software 107,551 33,805 18,506 - 122,850 Total $ 244,877 33,805 18,506 - 260,176 Note: (a) For the six months ended June 30, 2012, the increase in computer software includes

$811 transferred from machinery equipment. (b) For the six months ended June 30, 2012, the decrease in computer software includes

retirement loss of $19.

(L) Other assets－net

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Prepayments $ 35,459 47,668 48,438 51,670 Refundable deposits 2,161,314 1,250,913 1,356,745 1,087,634 Temporary payments 3,179 4,697 4,211 3,643 Total $ 2,199,952 1,303,278 1,409,394 1,142,947

(M) Deposits from Central Bank and other banks

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Deposits from banks $ 145,174 145,241 310,241 1,805,620 Due to other banks 14,859,260 4,725,610 2,929,220 5,299,000 Overdrafts on banks 2,626,334 - - - Total $ 17,630,768 4,870,851 3,239,461 7,104,620



- 33 -

(N) Securities sold under repurchase agreements

(In Thousands of New Taiwan Dollars) June 30, 2013

Assets

Par value

Selling price

(Note)

Designated repurchase

amount


date Financial assets at fair

value through profit or loss

$ 400,000 398,974 398,981 Prior to July 3, 2013

Available-for-sale financial assets

9,033,000

8,307,785

8,307,606

Prior to July 15, 2013

Total $ 9,433,000 8,706,759 8,706,587

December 31, 2012

Assets

Par value

Selling price

(Note)


amount


date Available-for-sale

financial assets $ 689,000

689,349

689,637

Prior to January 22,2013

Total $ 689,000 689,349 689,637

June 30, 2012

Assets

Par value

Selling price

(Note)


amount


date Financial assets at fair

value through profit or loss

$ 897,800 901,571 901,587 Prior to July 10, 2012


8,297,530

8,286,340

8,287,551

Prior to August 21, 2012

Total $ 9,195,330 9,187,911 9,189,138

January 1, 2012

Assets

Par value

Selling price

(Note)


amount


date Available-for-sale

financial assets $ 7,576,500

7,579,251

7,582,238

Prior to March 5, 2012

Total $ 7,576,500 7,579,251 7,582,238 Note: Accounted for under securities sold under repurchase agreements.



- 34 -

(O) Payables

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Accounts payable $ 91,565 103,860 108,375 108,558 Accrued expenses 480,442 573,719 509,865 275,491

Interest payable 848,392 704,488 905,197 774,474 Acceptances payable 1,113,073 311,228 881,424 525,669 Collection payable 91,615 80,575 106,931 85,306 Other tax payable 42,702 37,733 39,057 36,018 Interest payable－preferred stock 199,393 398,787 598,180 398,787 Dividends payable－common

stock - - 1,007,807 -

Checks for clearance 1,023,050 1,164,667 1,184,264 1,005,777 Account payable factoring 1,393,090 1,931,546 570,709 686,385 Purchase of securities payable 4,314,797 137,320 2,626,822 609,719 Other payables 177,811 417,113 201,870 199,085 Total $ 9,775,930 5,861,036 8,740,501 4,705,269

(P) Deposits and remittances

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

NTD deposits Checking accounts $ 1,940,818 1,829,379 2,043,117 1,962,674 Demand deposits Demand deposits 18,195,079 18,343,002 19,902,799 22,129,673 Demand savings deposits 41,649,454 38,192,240 37,404,856 37,770,939 Subtotal of demand deposits 59,844,533 56,535,242 57,307,655 59,900,612 Time deposits Time deposits 95,413,057 91,658,385 108,121,150 107,291,355 Time savings deposits 90,611,754 86,671,137 80,635,831 77,430,833 Negotiable certificates of

deposit 36,463,300 29,286,900 28,013,900 26,833,500

Postal savings redeposits 4,297,112 4,400,163 4,410,112 4,420,061 Subtotal of time deposits 226,785,223 212,016,585 221,180,993 215,975,749 Staff demand savings deposits 767,752 737,329 735,810 772,186 Subtotal of NTD deposits 289,338,326 271,118,535 281,267,575 278,611,221 Foreign currency deposits Foreign currency demand

deposits 8,380,630 9,017,685 8,001,179 8,094,929

Foreign currency time deposits 23,711,471 19,070,810 17,463,434 14,395,481 Subtotal of foreign currency deposits

32,092,101 28,088,495 25,464,613 22,490,410

Remittances under custody 24,751 45,783 25,320 51,096 Remittances outstanding 2,088 8,404 12,871 14,286 Total $ 321,457,266 299,261,217 306,770,379 301,167,013



- 35 -

(Q) Financial debentures

Financial debentures Period Type Coupon rate

Amount June 30,

2013 December31, 2012

2005 bonds payable June 2005 to June 2015 Dominant 2.40% $ 5,000,000 5,000,000 2005 bonds payable October 2005 to October 2015 Dominant 2.40% 3,500,000 3,500,000 2006 bonds payable June 2006 to June 2013 Subordinated 3.50% - 1,100,000 2006 bonds payable June 2006 to June 2013 Subordinated (Note2) - 1,190,000 2010 bonds payable August 2010 to August 2017 Subordinated 3.25% 4,000,000 4,000,000 2010 bonds payable December 2010 to December 2017 Subordinated 3.25% 6,000,000 6,000,000 Less: The face value of

financial liabilities designated as at FVTPL (Note 3)

(8,500,000)

(9,600,000)

$ 10,000,000 11,190,000

Financial debentures Period Type Coupon rate

Amount June 30,

2012 January 1, 2012

2005 bonds payable June 2005 to June 2015 Dominant 2.40% $ 5,000,000 5,000,000 2005 bonds payable June 2005 to June 2012 Dominant 2.25% - 3,000,000 2005 bonds payable October 2005 to October 2015 Dominant 2.40% 3,500,000 3,500,000 2006 bonds payable June 2006 to June 2013 Subordinated 3.50% 1,100,000 1,100,000 2006 bonds payable June 2006 to June 2013 Subordinated (Note

2) 1,190,000 1,190,000

2010 bonds payable August 2010 to August 2017 Subordinated 3.25% 4,000,000 4,000,000 2010 bonds payable December 2010 to December 2017 Subordinated 3.25% 6,000,000 6,000,000 Less: The face value of

financial liabilities designated as at FVTPL

(Note 3)

(9,600,000)

(12,600,000)

$ 11,190,000 11,190,000 Note 1: The interests of financial debentures above are accrued annually and the redemption

will be paid at maturity. Note 2: The single coupon rate is quoted from Bank of Taiwan’s floating interest rate for 1-

year time deposit plus 0.7%. Note 3: As of June 30, 2013, December 31, June 30 and January 1, 2012, the fair values of

the financial liabilities designated as at fair value through profit or loss were $8,666,348, $9,781,993 and $9,803,735, respectively.

(R) Preferred stock liabilities

On November 7, 2007, the Bank issued NT$10 (dollars) par perpetual noncumulative registered convertible preferred stock A at a 6.75% dividend rate through private placement at a discount price for a total of $5,907,955 (NT$9.50 dollars per share). Dividends are paid in cash annually and are calculated based on the issuance amount. Other important issuance terms are as follows:



- 36 -

Annual earnings, if any, are used to pay taxes, offset cumulative losses, adjust according to financial accounting standards, and appropriated as legal and special reserve under the Bank’s Articles of Incorporation; the remainder should prioritize to distribute to preferred stocks. The holders of preferred stocks can participate in the distribution of the remaining earnings at the ratio of two shares of preferred stock A for one common share after earnings distribution to the common stockholders with a resolution approved by the board of directors. Preferred stockholders hold the same voting rights and rights to elect and be elected as those of common stockholders during a stockholders’ meeting. A preferred share can be converted into one common share after one month of the issuance date. The Bank can call back some or all of the outstanding preferred stocks on the date ten years after the issuance date; meanwhile, the dividend rate of stocks not called back will be adjusted to 7.75% for the remaining period. Upon issuance of preferred stock A, the Bank bifurcated liability component and the conversion rights embedded in the preferred stock A, which amounted to $3,382,305 and $2,525,650 (accounted for under capital surplus), respectively. On July 11, 2008, the Bank offset a deficit by reducing capital; thus liability component of preferred stocks and capital surplus decreased $1,967,440 and $1,469,135, respectively. As of June 30, 2013, the above amount of liability component of preferred stocks and capital surplus was $1,414,865 and $1,056,515, respectively. No conversion of preferred stocks into common stocks occurred. For the six months ended June 30, 2013 and 2012, the Bank estimated and recognized the interest of preferred stock liability of $199,393, which was accounted for under interest expense and interest payable－preferred stock.

(S) Other financial liabilities

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Structured commodity principal $ 497,335 975,855 - 170,146 Others - 157,612 251,270 -

Total $ 497,335 1,133,467 251,270 170,146 (T) Provisions

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Employee benefits provision $ 428,588 428,588 372,093 361,713 Guarantee reserve 46,955 38,475 30,314 12,984

Other provisions 6,999 9,275 12,713 10,817 Total $ 482,542 476,338 415,120 385,514



- 37 -

Other provisions were the settlement compensation provision for structured notes. For the three months and six months ended June 30, 2013 and 2012, the (reversal gains) and losses recognized were $(9,668), $290, $9,522 and $0. Changes in provisions were as follows:

January 1, 2013

Current increase


June 30, 2013

Employee benefits provision

$ 428,588 - - - 428,588

Guarantee reserve 38,475 8,609 - (129) 46,955 Other provisions 9,275 10,035 (12,311) - 6,999 Total $ 476,338 18,644 (12,311) (129) 482,542

January 1,



June 30, 2012

Employee benefits provision

$ 361,713 10,380 - - 372,093

Guarantee reserve 12,984 17,332 - (2) 30,314 Other provisions 10,817 2,362 (466) - 12,713 Total $ 385,514 30,074 (466) (2) 415,120

(U) Other liabilities

June 30, 2013

December 31, 2012

June 30, 2012

January 1, 2012

Unearned revenue $ 11,647 60,008 97,307 141,827 Advance interest receipts 14,692 13,013 11,112 8,016 Temporary receipts and suspense

accounts 135,446 11,223 37,416 8,265

Other advance receipts 91,923 66,780 49,962 61,011 Guarantee deposits received 538 540 2,434 1,968 Total $ 254,246 151,564 198,231 221,087

(V) Employee benefits

Given there was no significant volatility of the market or any significant reimbursement, settlement or other one-time event in the prior fiscal year, pension cost in the interim financial statements is measured and disclosed in accordance with paragraph B9 of IAS 34“Interim Financial Reporting”. For the three months and six months ended June 30, 2013 and 2012, the expenses recognized as profit or losses were:

For the three

months ended June 30, 2013




Defined benefits plan $ 3,412 14,334 7,011 18,282 Defined contribution plan 17,581 17,952 35,155 37,168 $ 20,993 32,286 42,166 55,450



- 38 -

(a) Defined benefits plan

December 31, 2012 January 1, 2012 Present value of the defined benefits obligation $ (930,895) (872,913) Less: Fair value of the defined benefits plan assets 502,307 511,200 Subtotal (428,588) (361,713) Unamortized balance of actuarial gains and losses - - Liability recognized in consolidated balance sheet $ (428,588) (361,713) The Bank’s employee benefits liabilities were as follows: June 30,

2013 December 31,

2012 June 30,

2012 January 1,

2012 Defined benefits plan $ 428,588 428,588 372,093 361,731 The Bank and its subsidiary maintain and fund a retirement plan covering all regular employees and recognize pension expense based on the actuarial report. In accordance with the retirement plan, payments of pension benefits are calculated based on the employees’ average monthly salary for the last six months prior to approved retirement and base point (b.p.) entitlement. The b.p. earned by each employee is 2 b.p. for one year of service and 1 b.p. for the 16th year and thereafter where the maximum b.p. is 45 b.p.. The b.p. for employee less than and over half year will be 0.5 b.p. and 1b.p., respectively. Under the Labor Standards Act, the Bank contributes monthly no less than 2% of gross salary to the employees’ pension fund, which is deposited into a designated depository account with Bank of Taiwan. As well, the Bank contributes pension fund at the rate of 3.5% (it was 4.7% until February 2001) of monthly payroll to employees’ pension fund administration committee and deposited in the committee’s name in the Bank’s Operating Department for interest bearing. This pension fund is not reflected in the financial statements. Main actuarial assumptions of the Bank for 2012 were as follows: For the year

ended December 31, 2012

Discount rate 1.50% Incremental rate of future compensation levels 3.00% Expected long –term rate of return on pension plan assets 1.75%



- 39 -

Historical information for adjustment based on experience: December 31, 2012 January 1, 2012 Present value of defined benefits plan $ (930,895) (872,913) Fair value of plan assets 502,307 511,200 Net liability of defined benefits obligation $ (428,588) (361,713) Adjustment based on experience to present value of

defined benefits plan $ (23,054) (840)

Adjustment based on experience to net fair value of plan assets

$ (3,636) (5,564)

(b) Defined contribution plan

In accordance with the Labor Pension Act of the R.O.C. , the bank is required to make monthly cash contributions to the employees’ individual pension accounts at the rate of not less than 6% of the employees’ monthly wages.

(W) Income tax The Bank and its subsidiary apply the estimated annual effective tax rate to the net income before tax to evaluate and disclose the income tax expense during the period. Therefore, the reconciliation between financial income and taxable income can’t be disclosed. The components of income tax expenses for the three and six months ended June 30, 2013 and 2012 were as follows:

For the three

months ended June 30, 2013




Current income tax expenses $ 19,779 32,583 23,485 36,389 Deferred income tax expenses 164,749 61,853 287,787 123,492 10% surtax on undistributed

earnings -

42,368

183,814

42,368

Income tax expense $ 184,528 136,804 495,086 202,249



- 40 -

The components of deferred income tax expenses were as follows:





Temporary difference due to allowance for bad debts in excess of tax-allowance limit

$ 4,853 (61,467) 4,828 (100,249)

Unrealized gains(losses) on financial instruments－net

18,505 (13,905) 22,810 (34,790)

Deferred loss on sale of non-performing loans

2,650 10,199 5,299 20,397

Pension (Employee benefits provision)

- (883) - (1,765)

Paid leave (1,814) (2,116) (1,814) (2,865) Loss carryforward 140,555 135,952 256,664 248,691 Investment tax credit - 1,499 - 1,499 Adjusted deferred tax assets for

prior years -

(7,426)

-

(7,426)

Total $ 164,749 61,853 287,787 123,492 For the three months and six months ended June 30, 2013 and 2012, the amount of income tax (revenues) expenses recognized under other comprehensive income was as follows:





Exchange differences on translation of foreign financial statements

$ (2,161) (2,953) (9,245) 1,601

The Bank’s income tax return as of December 31, 2010 was examined by the Tax Authority. The Bank disagreed with the assessment for the year 2010 regarding withholding taxes for accrued interest on bonds according to Income Tax Act Article 24-1 amounting to $8,049, and applied for re-examination according to Tax Collection Act. The Bank disagreed with the assessment of income tax return as of December 31, 2009 by the Tax Authority regarding the withholding taxes for accrued interest on bonds according to Income Tax Act Article 24-1 amounting to $6,267, and applied for re-examination according to Tax Collection Act.

(X) Imputation credit account As of June 30, 2013 and 2012, the balance of the stockholders’ imputation credit account amounted to $73,671 and $93,832, respectively. For the year ended December 31, 2013, the stockholders’ imputation creditable tax ratio is expected to be 4.30%. For the year ended December 31, 2012, the stockholders’ imputation creditable tax ratio was 2.03%. The expected stockholders’ imputation creditable tax ratio for 2013 is estimated according to Article 66-6 of the draft amendment of the Income Tax Act, which has passed the first trial. As of the date of review, the draft amendment has not passed the Third Reading.



- 41 -

(Y) Common stock and capital surplus As of June 30, 2013, the Bank’s authorized capital was $47,600,000 and paid-in capital for common stock was $16,796,775. The Bank’s details of capital surplus were as follows:

June 30,

2013 December 31,

2012 June 30,

2012 January 1,

2012 Conversion of financial

debentures $ 359,507 359,507 359,507 359,507

Rights of conversion of preferred stock to common stock

1,056,515 1,056,515 1,056,515 1,056,515

Treasury stock transaction 2,496 2,496 2,496 2,496 Others 42,987 42,987 42,987 42,987 Total $ 1,461,505 1,461,505 1,461,505 1,461,505 Pursuant to the amended Company Law, which was published in January 2012, realized capital surplus shall be used initially to cover a deficit (or a loss) and the balance, if any, can be transferred to capital or distributed as cash dividends. Also, realized capital surplus includes the premium income derived from the issuance of new shares and endowments received by the company. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, the amount of capital surplus to be used purposely to increase capital shall not exceed 10% of total paid-in capital.

(Z) Earnings distribution and dividend policy In compliance with the Bank’s articles of incorporation, annual earnings, if any, shall be allocated in the following order: (a) Payment of all taxes and making certain adjustments in accordance with SFAS; (b) Offset cumulative losses in prior years; (c) Provision for legal reserve in compliance with the Banking Law of the Republic of

China and provision for special reserve in compliance with related Acts, requests of competent authority and the needs of business;

(d) Distribution of preferred stock a dividends of the current year according to Article 5-1 of

the Bank’s articles of incorporation; (e) The remainder, plus undistributed earnings in prior years, distributed base on the

following percentage determined by the board of directors in consideration of the changes of operating environment, the maintenance of sound capital adequacy ratios as well as the capital needs of long-term financial plan:

(1) Bonuses to employees: 1~7%; (2) Remuneration to directors and supervisors: 1~3%;



- 42 -

(3) The remainder as bonuses to stockholders.

Stockholders’ bonuses can be distributed as stock, cash or the combination of stock and cash under the approval of the stockholders’ meeting. When the Bank’s tier 1 capital adequacy ratio is less than the legal standard, stock dividends will be distributed instead of cash dividends as stockholders’ bonuses. For the three months ended June 30, 2013, the Bank estimated bonuses to employees and remuneration to directors and supervisors of $10,611 and $2,652, respectively. For the three months ended June 30, 2012, the Bank estimated bonuses to employees and remuneration to directors and supervisors of $20,091 and $6,658, respectively. For the six months ended June 30, 2013, the Bank estimated bonuses to employees and remuneration to directors and supervisors of $21,222 and $5,304, respectively. For the six months ended June 30, 2012, the Bank estimated bonuses to employees and remuneration to directors and supervisors of $32,959 and $10,946, respectively. If the estimated allocation amount pursuant to a resolution of the Bank’s board of directors is significantly different, the difference would be recognized in the profit or loss of the current year. However, differences between the actual outcomes resolved by the stockholders’ meeting and the original estimates of fair value will be accounted for as changes in accounting estimates and recognized as next year’s profit or loss. The relevant information on employee bonuses and the remuneration to directors and supervisors can be accessed through the Market Observation Post System and other sites. The stockholders’ meeting approved earnings distribution on March 29, 2013 and decided to distribute bonuses to employees and remuneration to directors and supervisors amounting to $42,434 and $10,608, respectively. The stockholders’ meeting also decided to distribute cash dividends to common share stockholders for NT$0.6 (dollar) per share and the total amount of cash dividends distributed was $1,007,806. The stockholders’ meeting approved earnings distribution on June 22, 2012 and decided to distribute bonuses to employees and remuneration to directors and supervisors amounting to $31,494 and $10,498, respectively. The stockholders’ meeting also decided to distribute cash dividends to common share stockholders for NT$0.6 (dollar) per share and the total amount of cash dividends distributed was $1,007,807. Earnings distribution should be resolved by the stockholders’ meeting and given effect in the financial statements of the current year. According to Company Law, as amended in January 2012, where a company incurs no loss, it may pursuant to a resolution approved by the stockholders during the stockholders meeting distribute its legal reserve and its remaining capital reserve by issuing new shares or by cash. Where legal reserve is distributed by issuing new shares or by cash, only portion of legal reserve which exceeds 25 percent of the paid-in capital stock may be distributed. Furthermore, pursuant to the Banking Act of The Republic of China, before the legal reserve balance reaches the amount of total paid-in capital, cash dividends are limited to 15% of the total paid-in capital. The relevant information on earnings distribution approved by the stockholders’ meeting can be accessed through the Market Observation Post System or other sites.



- 43 -

(AA) Share-based payment contracts Since October 2007, the Bank has adopted share-based payment agreements to recruit professional managers. Under these agreements, the Bank should issue a certain number of its stock-linked certificates in installments (one certificate represents one unit corresponding to one Bank’s share) to these managers on the day they report for work. In addition, the Bank should settle these certificates in cash at a certain preset price if there is a substantial change (the event) occurred, as defined in the agreement. This preset price is a sale price, which should be approved by the Bank’s board of directors. The certificates will be vested after three years of the grant date. All certificates that have not been granted or vested will be granted or vest on the date when the event occurred. Furthermore, the Bank should determine the aggregate amount payable on all certificates no later than 30 days after the event and make the payment in proportion to the major stockholders’ share disposal. All certificates will be forfeited and cancelled if the Bank terminated the preceding professional managers’ employment for cause or if the managers end their employment, become disabled or die.

For the six months ended June 30,2013

For the six months ended June 30,2012

Numbers

Weighted average

exercise price Numbers

Weighted average

exercise price Outstanding at the beginning of

the period 15,971 $ - 16,742 -

Granted during the period - - - - Forfeited during the period 540 - 447 - Exercised during the period - - - - Expired during the period - - - - Outstanding at the end of the

period 15,431 - 16,295 -

Exercisable at the end of the period

- - - -

As of June 30, 2013, the Bank had granted 15,431 thousand certificates (would be adjusted to 6,904 thousand certificates by capital reduction ratio on the issue date according to the approval of the stockholders’ meeting on July 11, 2008) to several managers. For the three and six months ended June 30, 2013 and 2012, the Bank recognized compensation cost (reversal gain) and payables amounting to $(7,297), $(2,793), $19,691 and $4, respectively, accounted for under personnel expenses and payables, respectively.



- 44 -

The share-based contracts were priced using the Black-Scholes pricing model. The fair value of the stock price-linked certificate was NT$15.45 (dollars) per unit. The variables used in pricing were as follows: June 30, 2013 June 30, 2012 Stock price on valuation date $ 15.45 13.25 Exercise price - Expected volatility 41.28% 50.50% Expected life (years) 6 5 Risk-free interest rate 1.00% 0.95%

(AB) Earnings per share





Basic EPS Net income $ 950,261 770,741 1,763,302 1,485,647 Weighted-average shares of

common stock outstanding (in thousands)

1,679,678 1,679,678 1,679,678 1,679,678

Basic EPS (in dollars) $ 0.57 0.46 1.05 0.88 Diluted EPS Net income $ 950,261 770,741 1,763,302 1,485,647 Interest expense of convertible

preferred stock 82,749

82,749

165,497

165,497

Net income attributable to common stockholders used to calculate diluted EPS

$ 1,033,010 853,490 1,928,799 1,651,144

Weighted-average shares of common stock outstanding (in thousands)

1,679,678 1,679,678 1,679,678 1,679,678

Bonuses to employees (in thousands)

687 1,507 1,373 2,478

Shares of convertible preferred stock (in thousands)

278,233

278,233

278,233

278,233

Weighted-average shares of common stock outstanding used to calculate diluted EPS (in thousands)

1,958,598 1,959,418 1,959,284 1,960,389

Diluted EPS (in dollars) $ 0.53 0.44 0.98 0.84



- 45 -

(AC) Net interest income





Interest income Discount and loans interest $ 1,720,372 1,558,504 3,291,154 3,091,258 Revolving credit interest 18,939 20,798 38,606 41,136 Due from Central Bank

interest 136,080 174,350 277,697 355,987

Due from banks and call loans to banks interest

7,331 4,563 13,957 11,006

Securities interest 200,925 124,604 347,479 259,235 Others 12,553 10,635 21,680 21,957 Subtotal 2,096,200 1,893,454 3,990,573 3,780,579 Interest expense Deposit interest 723,811 748,477 1,425,816 1,507,419 Due to other financing 11,594 5,605 16,279 22,897 Due to bank interest 271 1,257 548 5,222 Interest on bonds issued 87,466 88,716 174,808 184,882 Interest of preferred stock

liability 99,696

99,696

199,393

199,393

Subtotal 922,838 943,751 1,816,844 1,919,813 $ 1,173,362 949,703 2,173,729 1,860,766 Interest income and expense from financial assets and liabilities measured at fair value through profit and loss are excluded.

(AD) Net service fee and commission income





Service fee income Credit card service fee income $ 34,769 31,105 68,597 49,853 Loan service fee income 204,208 259,278 377,197 558,377 Trust service fee income 156,294 155,671 309,725 289,657 Factoring purchase service fee

income 38,909 12,437 77,546 81,117

Insurance commission income 96,502 110,265 195,289 185,447 Others 42,862 46,151 71,529 69,668 Total service fee income 573,544 614,907 1,099,883 1,234,119 Service fee expense ATM service fee 5,097 5,132 9,725 10,230 Agency service fee 8,611 9,207 17,312 18,212 Business promotion service fee 2,617 1,915 5,459 5,177 Others 10,114 17,628 17,742 25,760 Total service fee 26,439 33,882 50,238 59,379 Net service fee income $ 547,105 581,025 1,049,645 1,174,740



- 46 -

(AE) Gains and losses on financial assets or liabilities at fair value through profit or loss





Disposal gain and loss Listed and OTC securities $ 35,678 (34,088) 58,693 13,572 Corporate bonds 9,701 20,456 16,823 40,229 Beneficiary certificates (13,363) (558) (7,379) 20,860 Financial debentures 8,393 2,971 9,700 9,912 Government bonds 6,494 30,458 8,389 34,579 Derivative financial

instruments 68,933 257,844 134,920 289,103

Structured products (1,435) 74 (3,391) 28 Borrowed securities (5,626) (610) (5,402) (395) Interest on bonds issued (60,458) (77,288) (120,253) (153,726) Subtotal 48,317 199,259 92,100 254,162 Valuation gain and loss Listed and OTC securities (4,972) (22,822) 4,266 (25,729) Corporate bonds 6,843 (50,801) 72,230 148,502 Beneficiary certificates (15,698) 60 (17,976) (7,995) Financial debentures - - - 158 Government bonds (9,306) (3,996) 5,245 (2,383) Derivative financial

instruments 243,738 (141,363) 380,617 (221,503)

Borrowed securities 24 (66) 95 (66) Designation as financial bonds

payable at fair value through profit or loss

6,358

34,257

15,645

98,921

Subtotal 226,987 (184,731) 460,122 (10,095) Dividends revenue 320 282 320 282 Total $ 275,624 14,810 552,542 244,349

(AF) Realized gains and losses on available-for-sale financial assets





Commercial paper $ (2,006) (545) (3,289) (1,095) Negotiable certificate of deposit (123) 94 (591) 68 Government bonds 22,306 59 13,600 45,996 Corporate bonds 1,204 38,124 20,900 116,143 Financial debentures - (8) - 3,055 Listed and OTC securities 6,712 29,041 120,149 51,680 Total $ 28,093 66,765 150,769 215,847



- 47 -

(AG) Other net non-interest income





Rental income $ 11 5 24 243 Gain on equity investment carried

at cost 357 395 7,775 395

Loss on retirement of property and equipment

(470) (1,566) (643) (2,012)

Loss on retirement of computer software

(1) (19) (1) (19)

Loss on disposal of debt investment without active market

- (3,063) - (3,063)

Gain on reversal of operating loss 9,522 - 9,522 - Others (831) 808 (984) 539 Total $ 8,588 (3,440) 15,693 (3,917)

(AH) Bad debts expenses (reversal) and reserve for guarantee liabilities provision





Allowance for bad debts (reversal) - Discount and loans

$ 1,502 169,152 (48,453) 245,537

Allowance for bad debts reversal - Receivables

(12,411) (11,495) (19,203) (11,361)

Allowance for bad debts - Guarantee reserve

3,379 12,846 8,609 17,332

Allowance for bad debts - Non-accrual loans transferred

from overdue

7,990

8,458

18,469

18,326

$ 460 178,961 (40,578) 269,834 (AI) Employee benefits expenses





Salary expenses $ 419,083 462,832 843,478 1,092,053 Insurance expenses 30,266 34,189 63,859 69,398 Retirement expenses 20,993 27,307 42,166 55,661 Other personnel expenses 17,738 25,958 37,656 49,221 Total $ 488,080 550,286 987,159 1,266,333 Note: Including consolation money $291 for the six months ended June 30, 2012.



- 48 -

(AJ) Depreciation and amortization expenses





Buildings $ 947 1,712 1,901 3,419 Leasehold improvements 10,075 4,157 21,219 8,327 Machinery equipment 7,930 11,404 15,988 22,013 Transportation equipment 1,557 1,375 3,134 2,790 Miscellaneous equipment 6,568 8,714 13,256 17,332 Subtotal of depreciation

expenses 27,077 27,362 55,498 53,881

Amortization of computer software

11,471

9,662

22,081

18,487

Total $ 38,548 37,024 77,579 72,368 (AK) Other general and administrative expenses





Site usage and general equipment expenses

$ 88,882 87,129 176,054 163,060

General administration expenses 61,833 67,886 122,933 132,716 Marketing and promotion

expenses 7,619 10,722 12,474 16,898

Other expenses 54,998 68,835 107,571 130,273 Business tax 60,902 59,119 116,806 114,363 Total $ 274,234 293,691 535,838 557,310

(AL) Financial instruments

(a) Fair value of financial instruments

June 30, 2013 December 31, 2012 Financial assets Book value Fair value Book value Fair value Non-Derivative Financial

Instruments

Cash $ 6,511,031 6,511,031 3,309,584 3,309,584 Due from Central Bank and call

loans to bank 74,561,708 74,561,708 73,316,787 73,316,787

Financial assets at fair value through profit or loss

14,413,411 14,413,411 10,388,650 10,388,650


76,321,256 76,321,256 54,300,018 54,300,018

Securities purchased under resell agreements

2,005,492 2,005,492 3,127,990 3,127,990

Receivables－net 10,635,040 10,635,040 7,485,641 7,485,641 Current taxes assets 184,523 184,523 184,523 184,523 Discounts and loans－net 210,333,948 210,333,948 199,926,904 199,926,904 Other financial assets－net 584,522 584,522 337,524 337,524



- 49 -

June 30, 2013 December 31, 2012 Financial assets Book value Fair value Book value Fair value Derivative Financial Instruments Trading purpose: Forwards $ 222,250 222,250 34,047 34,047 Non-delivery forwards 81 81 580 580

Currency swaps 48,252 48,252 29,355 29,355 Cross currency swaps 350,647 350,647 147,586 147,586 Interest rate swaps 334,589 334,589 331,110 331,110 Options 480,276 480,276 160,944 160,944 Futures 776 776 - - Credit default swaps 7,248 7,248 - - Commodity swaps 4,835 4,835 6,166 6,166

June 30, 2013 December 31, 2012 Financial liabilities Book value Fair value Book value Fair value Non-Derivative Financial

Instruments

Deposits from Central Bank and other banks

$ 17,630,768 17,630,768 4,870,851 4,870,851

Financial liabilities at fair value through profit or loss

8,666,348 8,666,348 9,831,809 9,831,809

Securities sold under repurchase agreements

8,706,759 8,706,759 689,349 689,349

Payables 9,775,930 9,775,930 5,861,036 5,861,036 Current tax liabilities 149,726 149,726 8,720 8,720 Deposits and remittances 321,457,266 321,457,266 299,261,217 299,261,217 Financial debentures 10,000,000 10,000,000 11,190,000 11,190,000 Preferred stock liabilities 1,414,865 1,414,865 1,414,865 1,414,865 Other financial liabilities 497,335 497,335 1,133,467 1,133,467 Derivative Financial Instruments Trading purpose: Forwards $ 10,669 10,669 2,489 2,489 Non-delivery forwards 21 21 - - Currency swaps 60,277 60,277 4,940 4,940 Interest rate swaps 347,024 347,024 394,936 394,936 Options 549,423 549,423 169,621 169,621 Futures 827 827 2,680 2,680 Credit default swaps - - 5,670 5,670 Commodity swaps 4,835 4,835 5,976 5,976



- 50 -

June 30, 2012 January 1, 2012 Financial assets Book value Fair value Book value Fair value Non-Derivative Financial

Instruments

Cash $ 3,837,397 3,837,397 4,569,870 4,569,870 Due from Central Bank and call

loans to bank 75,174,664 75,174,664 86,964,396 86,964,396

Financial assets at fair value through profit or loss

10,749,783 10,749,783 8,963,016 8,963,016


61,174,198 61,174,198 52,789,618 52,789,618

Securities purchased under resell agreements

1,359,811 1,359,811 199,912 199,912

Receivables－net 11,080,445 11,080,445 7,492,771 7,492,771 Current taxes assets 210,370 210,370 245,752 245,752 Discounts and loans－net 201,648,707 201,648,707 197,819,418 197,819,418 Other financial assets－net 336,948 336,948 871,287 871,287 Derivative Financial Instruments Trading purpose: Forwards $ 9,980 9,980 8,147 8,147

Currency swaps 34,035 34,035 10,293 10,293 Cross currency swaps 211,637 211,637 307,038 307,038 Interest rate swaps 415,296 415,296 607,124 607,124 Options 105,933 105,933 136,469 136,469 Futures 159 159 88 88 Total return swap (TRS)

contracts - - 28,972 28,972

Commodity swaps 5,977 5,977 816 816 June 30, 2012 January 1, 2012

Financial liabilities Book value Fair value Book value Fair value Non-Derivative Financial

Instruments

Deposits from Central Bank and other banks

$ 3,239,461 3,239,461 7,104,620 7,104,620

Financial liabilities at fair value through profit or loss

9,954,210 9,954,210 12,902,656 12,902,656


9,187,911 9,187,911 7,579,251 7,579,251

Payables 8,740,501 8,740,501 4,705,269 4,705,269 Current tax liabilities 8,305 8,305 9,770 9,770 Deposits and remittances 306,770,379 306,770,379 301,167,013 301,167,013 Financial debentures 11,190,000 11,190,000 11,190,000 11,190,000 Preferred stock liabilities 1,414,865 1,414,865 1,414,865 1,414,865 Other financial liabilities 251,270 251,270 170,146 170,146 Derivative Financial Instruments Trading purpose: Forwards $ 33,926 33,926 6,399 6,399 Currency swaps 26,117 26,117 40,170 40,170 Cross currency swaps 45 45 107 107 Interest rate swaps 429,793 429,793 480,661 480,661 Options 206,712 206,712 153,704 153,704 Futures 10,421 10,421 5,346 5,346 Credit default swaps 26,211 26,211 19,407 19,407 Total return swap (TRS)

contracts - - 99,527 99,527

Commodity swaps 5,779 5,779 816 816



- 51 -

The Bank enters into forward, cross currency swap contracts, options and interest rate financial instruments to satisfy its clients’ transaction needs, to offset the Bank’s funding gap between local currency and foreign currency, and to avoid the market price risk arising from interest rate rising. Furthermore, the Bank uses interest rate swaps (IRS) contracts to hedge the cash flow risk and the market price risk arising from its bond investments with fixed interest rate and its financial debentures as interest rate changes. The Bank uses forwards to satisfy its clients’ transaction needs. The Bank uses total return swap (TRS) contracts to earn the interest rate differences and to hedge market price risk arising from bonds investments. The Bank uses cross currency swap (CCS) contracts to hedge interest rate and exchange rate risks. The Bank uses options to satisfy its clients’ transaction needs. The Bank uses forward rate agreements (FRA) to hedge the market price risk arising from its position in the money market as interest rate changes.

(b) Methods and assumptions applied to estimate the fair value of financial instruments are

summarized as follows:

(1) Fair value of short-term financial instruments is estimated by their book value on the balance sheet date. Since these instruments have short-term maturities, the book value is adopted as a reasonable basis in estimating the fair value. The method is applied to cash, due from Central Bank and call loans to banks, securities purchased under resell agreements, receivables, current tax assets, other financial assets－others, guarantee deposits paid, deposits from Central Bank and other banks, payables, current tax liabilities, remittances, securities sold under repurchase agreements and other financial liabilities.

(2) Financial instruments designated at FVTPL, available-for-sale financial assets, and

debts investment without active market, the quoted price is regarded as its fair value. If there is no quoted price for the financial asset, its fair value is estimated on the basis of the result of a valuation technique that refers to quoted prices provided by financial institutions. Estimates and assumptions for a valuation technique used by the Bank and its subsidiary are consistent with the information adopted by market participants when they price the value of the financial instruments. The information should be available for the Bank and its subsidiary.

(3) Discounts and loans and deposits are interest-bearing assets or liabilities; therefore,

the book value of both financial assets and liabilities is equivalent to their fair value. The net book value of the non-accrual account, after deducting provision for bad debts, is adopted as the fair value.

(4) For valuation of financial debentures, the fair value is determined on the basis of the

quoted prices of the GreTai Securities Market (over-the-counter securities exchange).

(5) For valuation of derivative instruments with no quoted market prices, the fair value

is determined on the basis of the discounted cash flow method.



- 52 -

(6) The Bank estimated the fair value of each forward contract on the basis of exchange rates quoted by Reuters. Fair value of interest rate swap contracts and cross-currency swap contracts are estimated on the basis of market quotations by Reuters.

(c) Fair value hierarchy information on financial instruments and the statements of changes

in fair value of Level 3 (1) Fair value hierarchy information on financial instruments

June 30, 2013 Fair value measurement for

financial instruments

Total

Level 1 (Note 1)

Level 2 (Note 2)

Level 3 (Note 3) Non-Derivative Finan cial Instruments Assets: Financial assets at FVTPL Financial assets held for trading Investment in stocks $ 132,223 132,223 - - Investment in bonds 14,151,274 1,962,867 12,188,407 - Others 129,914 129,914 - - Available-for-sale financial assets Investment in stocks 1,046,558 1,046,558 - - Investment in bonds 56,660,477 4,182,730 52,477,747 - Others 18,614,221 119,873 18,494,348 - Liabilities: Financial liabilities at FVTPL Financial liabilities held for

trading 8,666,348 - 8,666,348 -

Derivative Finan cial Instruments Assets: Financial assets at FVTPL $ 1,448,954 776 988,793 459,385 Liabilities: Financial liabilities at FVTPL 973,076 827 512,878 459,371

December 31, 2012 Fair value measurement for


Total

Level 1 (Note 1)

Level 2 (Note 2)

Level 3 (Note 3) Non-Derivative Financial Instruments Assets: Financial assets at FVTPL Financial assets held for trading Investment in stocks $ 254,837 254,837 - - Investment in bonds 10,003,521 513,972 9,489,549 - Others 130,292 130,292 - - Available-for-sale financial assets Investment in stocks 1,459,298 1,459,298 - - Investment in bonds 38,242,374 4,656,629 33,585,745 - Others 14,598,346 33,715 14,564,631 - Liabilities: Financial liabilities at FVTPL Financial liabilities held for

trading 9,831,809 49,816 9,781,993 -

Derivative Financial Instruments Assets: Financial assets at FVTPL $ 709,788 - 616,263 93,525 Liabilities: Financial liabilities at FVTPL 586,312 2,680 484,502 99,130



- 53 -

June 30, 2012 Fair value measurement for


Total

Level 1 (Note 1)

Level 2 (Note 2)

Level 3 (Note 3) Non-Derivative Financial Instruments Assets: Financial assets at FVTPL Financial assets held for trading Investment in stocks $ 290,943 290,943 - - Investment in bonds 10,350,413 150,285 10,200,128 - Others 108,427 108,427 - - Available-for-sale financial assets Investment in stocks 2,579,825 2,579,825 - - Investment in bonds 48,691,331 548,082 48,143,249 - Others 9,903,042 - 9,903,042 - Liabilities: Financial liabilities at FVTPL Financial liabilities held for

trading 9,954,210 150,409 9,803,801 -

Derivative Financial Instruments Assets: Financial assets at FVTPL $ 783,017 159 738,789 44,069 Liabilities: Financial liabilities at FVTPL 739,004 10,421 686,564 42,019

January 1, 2012 Fair value measurement for


Total

Level 1 (Note 1)

Level 2 (Note 2)

Level 3 (Note 3) Non-Derivative Financial Instruments Assets: Financial assets at FVTPL Financial assets held for trading Investment in stocks $ 98,959 98,959 - - Investment in bonds 8,864,057 398,720 8,465,337 - Available-for-sale financial assets Investment in stocks 1,495,173 1,495,173 - - Investment in bonds 48,424,511 7,269,042 41,155,469 - Others 2,869,934 - 2,869,934 - Liabilities: Financial liabilities at FVTPL Financial liabilities held for

trading 12,902,656 - 12,902,656 -

Derivative Financial Instruments Assets: Financial assets at FVTPL $ 1,098,947 88 1,060,316 38,543 Liabilities: Financial liabilities at FVTPL 806,137 5,346 770,543 30,248 (2) Statements of changes in financial assets which were classified to Level 3 based on

fair value measurement


The amount of profit or loss

valuation

Current increase

Current decrease

Items

Beginning

balance

The amount

recognized in

current net

income

The amount

recognized in

other

comprehensive

income

Purchase or

Issue

Transfer in of

Level 3

Transfer in of

Level 3 of

financial assets

and out of Level 3

of financial

liabilities

Sale, disposal, or

settlement

Transfer out of

Level 3

Transfer in of

Level 3 of

financial

liabilities and out

of Level 3 of

financial assets Ending balance

Financial assets at FVTPL

Financial assets held for

trading

$ 93,525 343,717 - 30,256 - - (8,113) - - 459,385



- 54 -


The amount of profit or loss

valuation

Current increase

Current decrease

Items

Beginning

balance

The amount

recognized in

current net

income

The amount

recognized in

other

comprehensive

income

Purchase or

Issue

Transfer in of

Level 3

Transfer in of

Level 3 of

financial assets

and out of Level 3

of financial

liabilities

Sale, disposal, or

settlement

Transfer out of

Level 3

Transfer in of

Level 3 of

financial

liabilities and out

of Level 3 of

financial assets Ending balance

Financial assets at FVTPL

Financial assets held for

trading

$ 38,543 (11,570) - 8,333 - 5,977 (2,993) - 5,779 44,069

(3) Statements of changes in financial liabilities which were classified to Level 3 based

on fair value measurement

For the six months ended June 30, 2013 Current increase Current decrease

Items

Beginning

balance

The amount

recognized in

current net

income

Purchase or

Issue

Transfer in of

Level 3

Transfer in of

Level 3 of financial

liabilities and out

of Level 3 of

financial assets

Sale, disposal, or

settlement

Transfer out of

Level 3

Transfer in of


assets and out of


liabilities Ending balance

Financial liabilities at FVTPL

Financial liabilities held for

trading $ 99,130 326,727 103,277 - - (69,763) - - 459,371


Current increase Current decrease

Items

Beginning

balance

The amount

recognized in

current net

income

Purchase or

Issue

Transfer in of

Level 3

Transfer in of


liabilities and out

of Level 3 of

financial assets

Sale, disposal, or

settlement

Transfer out of

Level 3

Transfer in of


assets and out of


liabilities Ending balance


Financial liabilities held for

trading

$ 30,248 (25,485) 32,207 - 5,779 (6,707) - 5,977 42,019

(4) Fair value measurement for a financial instrument classifies as Level 3 and

sensitivity analysis of reasonably possible alternative assumptions for fair value

The Bank and its subsidiary have not developed an evaluation model and the fair value is based on the quoted price from the counterparty. Therefore, sensitive analysis is not applicable.

Note 1: Fair value measurement for a financial instrument classified in Level 1 is

determined as the quoted price for an identical financial instrument in an active market. The definition of active market has all of the following conditions: (1) the products traded in the market are homogeneous, (2) willing parties are available anytime in the market, and (3) price information is available for the public.



- 55 -

Note 2: Fair value measurement for a financial instrument classified in Level 2 is determined as the observable price other than quoted price in an active market including an observable input obtained in an active market, either directly (i.e., as prices) or indirectly (i.e., derived from prices). The examples of observable price are as follows: (1) The quoted price for an identical financial instrument in an active market

means the fair value from the market transaction prices for an identical financial instrument. An identical financial instrument should be determined by its characteristics and terms of transaction. The fair value of a financial instrument has to be adjusted according to the observable market price of the identical financial instrument. The reasons for adjustments include time lag of the occurring market transaction prices for an identical financial instrument (the quoted prices do not represent fair value at the measurement date), the difference in transaction terms for financial instruments, transaction prices involving related parties, and the correlation between the observable transaction prices of identical financial instruments and the market prices of held financial instruments.

(2) The quoted market price of the same or identical financial instruments in

an inactive market. (3) The fair value is estimated on the basis of the results of a valuation

technique, and the market inputs used (i.e., interest rate, yield curve, and fluctuation rate) are based on obtainable data from the market (an observable input means an input can be derived from market data and can reflect the expectation of market participants when the inputs were used in evaluating the prices of financial instruments).

(4) A majority of inputs are derived from observable market data, or the input

correlation can be tested based on observable market data. Note 3: Input for a fair value measurement for a financial instrument classified in Level

3 is not based on obtainable data from market but based on assumption to make appropriate estimates and adjustments. If it’s not possible to develop a valuation model, quoted price from the counterparty is used as fair value. Some of the derivative instruments and debts investment without active market of the Bank and its subsidiary’s investment belong to such category.

(d) For the three months and six months ended June 30, 2013 and 2012, unrealized gains

(losses) recognized by the Bank and its subsidiaries from the fair value evaluation of financial instruments by using valuation techniques amounted to $244,682, $(137,801), $471,203 and $28,633, respectively.



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(e) Financial risk management The financial management objectives of the Bank and its subsidiary is to effectively diversify, transfer and avoid risk and to create a win-win-win situation for the customers, the stockholders and the employees by catering the need of customers while taking into account the financial related business operations and bearing the overall risk and statutory limitations. The major risks that the Bank and its subsidiary might possibly face are credit risk, market risk (including interest rate, foreign exchange, equity security and commodity risk) and liquidity risk of on- and off-balance sheet items. The organization structure of risk management of the Bank and its subsidiary is a monitoring unit directed by the board of directors or a risk management committee authorized by the board of directors to regularly monitor whether the risk management mechanism operates effectively. The risk management department and other operating departments are responsible for enforcing various risk management strategies approved by the board of directors and the risk management committee to identify, evaluate and hedge the financial risk. In addition, the audit office of the board of directors is responsible for an independent audit of risk management and control environment. (1) Credit Risk

A. Description of credit risk

Credit risk is the risk of financial loss if a client or counterparty fails to meet its contractual obligations. Credit risk arises from both on-balance sheet items and off-balance sheet items. The credit exposure of the Bank and its subsidiary consists of on-balance sheet items, which include Loan and Credit Card, Due from Central Bank and Call loans to banks, Debt Investment and Derivatives Transaction; and off-balance sheet items, which mainly include Guarantees, Bank Acceptance, Letter of Credit and Loan Commitments.

B. Credit risk management policy To ensure that the credit risk is within a tolerable range, the credit risk management specifications of the Bank and its subsidiary state that the product provided and business engaged in, including all the transactions on- and off- the balance sheet should be analyzed in detail to identify the existing and potential credit risk; before introducing new products and services, related credit risks should be examined and confirmed in accordance with the relevant provisions. For more complex credit business, such as factoring and credit derivatives, risk management mechanism has also been drawn on related business management guideline. The credit quality is controlled within an acceptable level and a balance between risk and reward is pursued in accordance with the government regulations, the practical needs and risk tolerance level of the Bank and its subsidiary to improve the overall operating structure and stockholder’s equity. In addition, the asset quality assessment and loss reserve provision is in accordance with the Bank and its subsidiary’s risk management measure.



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The credit risk management procedures and measurement methods of the major business of the Bank and its subsidiary are described as below: a. Loan (including loan commitment and guarantee)

The credit assets of the bank and its subsidiary are classified into 5 categories. Normal credit assets shall be classified as “Category One”. The remaining unsound credit assets shall be evaluated based on the status of the loan collaterals and the length of time overdue. Assets that require special mention shall be classified as “Category Two”, assets that are substandard shall be classified as “Category Three”, assets that are doubtful shall be classified as “Category Four” and assets for which there is loss shall be classified as “Category Five”. To regulate problematic credit, the Bank and its subsidiary have set the “Guidelines governing the procedures to evaluate assets and deal with non-performing/non-accrual loans” as the basis for managing problematic loans and remaining debt. Authorities responsible for credit risk management and risk control department have established an appropriate internal credit rating system and scoring models to measure the borrower’s risk level (rating level). The system is run by using professional judgments and quantitative information of a statistical model to predict the probability of a borrower that cannot meet its debt commitments and its default loss rate. Authority responsible for credit risk management uses the internal scoring model to establish an appropriate rating system as an important basis for credit approval or rejection, credit limit control, risk pricing and loss reserve provision. The Bank’s credit examination authority may use qualified external rating information (including but not limited to the S&P, Moody’s, Fitch, TRC, TCRI and JCIC) as an instrument for the approval or refusal of cases and for the credit portfolio management. The Bank’s credit quality is divided into 4 levels: low risk, moderate risk, medium risk and high risk.

b. Due and call loans to banks The Bank and its subsidiary always assess the credit situation of the counterparty before entering into a transaction. The counterparty’s rating and information on financial condition from domestic and international credit rating agency are being considered and different credit risk limits are set. The usage of the counterparty’s credit limit from financial industry peer is evaluated to monitor the exposure condition.



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c. Debt instrument and investment and derivative instrument The Bank and its subsidiary manage the risk of debt instrument by using credit rating from external institutions, bond’s credit quality, regional condition and counterparty risk to identify credit risk. The counterparties of the Bank’s derivative transactions are classified as financial peers, they shall be deemed as mostly above investment grade and will be controlled according to their credit limit (including interbank credit limit); for counterparties that have no credit rating or are classified as non-investment grade, individual cases review are needed. For general customers, credit exposure is controlled in accordance with the derivative instrument risk limit that is approved when applying for the credit by following a general procedure. Except for the general customer that follow general credit procedure, the Bank and its subsidiary classify the credit quality of debt instrument and investment and derivative instrument into 3 grades, namely investment grade, non-investment grade and no credit rating.

C. Policy of Mitigation of Credit Risk a. Collateral

The Bank and its subsidiary adopt a series of policies and measures to reduce credit risk, the most commonly used among which is to require the borrower to provide collateral. For the assessment and management of the collateral and calculation of the value of the loan, the Bank and its subsidiary have set the range for collateral that can be provided for the procedures for the valuation, management and disposal of collateral to ensure claims. If the loan contract contains debt preservation, collateral terms and offset terms, the amount of credit limit may be decreased, the loan repayment period can be shortened or be regarded as reaching its full maturity, and the borrower’s deposit in the Bank can be used to offset debt to reduce credit risk when a clearly defined credit event occurs. The collateral of other non-credit granting business will depend on the nature of the financial instrument. Only asset backed security and other similar financial instruments use financial instruments from a set of asset pool as collateral.



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b. Credit extension limit and credit risk concentration control To avoid excessive risk concentration, the credit extension guideline of the Bank and its subsidiary have set limits of credit balance for a single counterparty or a single group; the investment guideline and risk control rules for equity investment have set various investment limits for the same person (corporation) or the same affiliated (holding) corporation. To control concentration risk of assets, the Bank and its subsidiary have set credit limit in accordance with the types of industry, types of holding corporations, countries and loans using stocks as collaterals to monitor concentration risks of assets; that is, the aforementioned management mechanism is used to monitor the concentration of credit risk of a single counterparty, holding corporations, affiliated corporations, industries, nationalities and the ultimate risk countries.

c. General conventions of net settlement The transactions of the Bank and its subsidiary are usually settled on a gross basis, net settlement is set with certain counterparties or in the case of default when all the transaction with the counterparty are terminated and settled on a net basis to reduce credit risk.

D. Maximum exposure to credit risk

Without taking collateral or other credit enhancement mitigation effect into account, the maximum exposure to credit risk of on-balance sheet financial assets is equal to their carrying values and the maximum exposure to credit risk of off-balance sheet financial instruments were as follows:

June 30,

2013 December 31,

2012 June 30,

2012 January 1,

2012 Unused amount of

irrevocable loan commitments

$ 2,726,928 2,689,401 3,907,867 3,426,375

Unused amount of irrevocable letter of credit

2,182,394 1,464,615 1,801,840 1,958,853

Various guarantee proceeds

9,660,070

11,226,926

11,172,126

6,992,145

$ 14,569,392 15,380,942 16,881,833 12,377,373

The Bank and its subsidiary believe that adopting stringent selection processes and conducting a regular review afterwards are the reasons why they can continuously control and minimize the credit risk exposure of their off-balance sheet items.



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E. Concentrations of credit risk Significant concentrations of credit risk exist when there are significant exposures to an individual counterparty to a transaction or a number of related counterparties engage in similar activities and have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The credit risk concentration of the Bank and its subsidiary originates from assets, liabilities or off-balance sheet items that are generated by the transaction (irrespective of the product or service), performance, execution or cross-category exposure combination, including credit extension, deposits and call loans to banks, securities investment, receivables and derivatives instruments. There is no significant concentration of credit risk within the Bank in terms of a single client or counterparty to a transaction, and the transaction amount of a single client or counterparty does not account for a significant amount of the Bank and its subsidiary’s balance of discounts and loans and non-accrual account. The following table illustrates the diversification of the loan portfolio among geographical regions, industry sectors and collateral types. By Industry June 30, 2013 December 31, 2012 Industry Amount % Amount % Private business $ 112,234,217 52.66 103,490,976 51.15

Non-Profit Organization

15,022 0.01 16,882 0.01

Individual 97,045,420 45.53 96,072,824 47.48 Others 3,843,559 1.80 2,763,291 1.36

Total $ 213,138,218 100.00 202,343,973 100.00

June 30, 2012 January 1, 2012 Industry Amount % Amount % Private business $ 104,324,058 51.14 102,420,043 51.33

Non-Profit Organization

19,071 0.01 23,874 0.01

Individual 96,528,954 47.32 94,460,653 47.34 Others 3,118,631 1.53 2,637,729 1.32

Total $ 203,990,714 100.00 199,542,299 100.00 By Area The Bank and its subsidiary primarily engage its business in Taiwan and there is no significant geographically concentrated credit risk.



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By Collateral June 30, 2013 December 31, 2012 Collateral Amount % Amount % Financial collateral $ 12,506,185 5.87 11,095,890 5.48 Accounts receivable 631,815 0.30 501,301 0.25 Real estate 123,723,809 58.05 120,501,235 59.55 Guaranty 1,291,870 0.60 173,469 0.09 Other collateral 17,611,970 8.26 15,392,351 7.61

Credit guarantee 57,372,569 26.92 54,679,727 27.02 Total $ 213,138,218 100.00 202,343,973 100.00

June 30, 2012 January 1, 2012 Collateral Amount % Amount % Financial collateral $ 10,628,908 5.21 11,888,879 5.96 Accounts receivable 659,768 0.32 362,155 0.18 Real estate 121,421,202 59.52 123,625,033 61.95 Guaranty 177,995 0.09 - -

Other collateral 13,176,776 6.46 9,598,068 4.81 Credit guarantee 57,926,065 28.40 54,068,164 27.10

Total $ 203,990,714 100.00 199,542,299 100.00 F. Credit quality analysis of financial assets

Cash and Equivalent Cash, Due from Central Bank, Call loans to banks, Financial assets measured at fair value through profit or loss, Securities purchased under resell agreements are excluded from this analysis since the counterparty is normally with good credit quality.



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The tables below provided the credit quality analysis for the other financial assets. a. Credit quality analysis of discounts and loans as well as receivables

June 30, 2013

Neither past due nor impaired Appropriated loss(D)

Items

Low risk

Moderate risk

Medium risk

High risk

Subtotal (A)

Past due not

impaired (B)

Impaired(C)

Total

(A)+(B)+(C)

With objective

evidence of

individual

impairment

Without

objective

evidence of

individual

impairment

Net amount

(A)+(B)+(C)-(D)

Receivables

Credit card business (Note 4) $ 562,049 380,479 248,498 145,950 1,336,976 35,684 319,676 1,692,336 16,373 78,187 1,597,776

PEMG claims receivable - - - - - - 1,558,484 1,558,484 1,005,484 - 553,000

Factoring accounts receivable 110,981 858,352 60,949 1,194,231 2,224,513 - - 2,224,513 - 9,117 2,215,396

Discount and loans 124,660,719 64,625,658 14,490,353 2,961,810 206,738,540 1,173,698 5,225,980 213,138,218 1,795,265 688,580 210,654,373

Acceptance, guaranty, and letter

of credit receivable

3,415,088 7,684,398 1,669,545 186,506 12,955,537 - - 12,955,537 - 46,955 12,908,582

December 31, 2012

Neither past due nor impaired Appropriated loss(D)

Items

Low risk

Moderate risk

Medium risk

High risk

Subtotal (A)

Past due not

impaired(B)

Impaired(C)

Total

(A)+(B)+(C)

With objective

evidence of

individual

impairment

Without

objective

evidence of

individual

impairment

Net amount

(A)+(B)+(C)-(D)

Receivables


PEMG claims receivable - - - - - - 1,537,747 1,537,747 1,005,484 - 532,263

Factoring accounts receivable 109,929 1,007,022 373,607 1,500,715 2,991,273 - - 2,991,273 - 10,226 2,981,047




2,947,262 5,979,844 3,700,338 375,326 13,002,770 - - 13,002,770 - 38,475 12,964,295



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June 30, 2012

Neither past due nor impaired Appropriated loss (D)

Items

Low risk

Moderate risk

Medium risk

High risk

Subtotal(A)

Past due not

impaired (B)

Impaired (C)

Total

(A)+(B)+(C)

With objective

evidence of

individual

impairment

Without

objective

evidence of

individual

impairment

Net amount

(A)+(B)+(C)-(D)

Receivables


PEMG claims receivable - - - - - - 1,492,372 1,492,372 939,820 - 552,552

Factoring accounts receivable 146,935 1,045,469 224,174 1,098,279 2,514,857 - - 2,514,857 - 6,020 2,508,837

Discount and loans 123,226,538 53,918,413 16,594,166 2,874,610 196,613,727 934,542 6,442,445 203,990,714 1,342,488 698,200 201,950,026



3,630,436 8,108,404 2,112,242 619 13,851,701 - 3,689 13,855,390 16 30,298 13,825,076

January 1, 2012

Neither past due nor impaired Appropriated loss (D)

Items

Low risk

Moderate risk

Medium risk

High risk

Subtotal(A)

Past due not

impaired (B)

Impaired (C)

Total

(A)+(B)+(C)

With objective

evidence of

individual

impairment

Without

objective

evidence of

individual

impairment

Net amount

(A)+(B)+(C)-(D)

Receivables


PEMG claims receivable - - - - - - 1,464,914 1,464,914 932,319 - 532,595

Factoring accounts receivable 346,100 1,500,150 1,319,411 - 3,165,661 - - 3,165,661 - 5,135 3,160,526




2,469,380 5,279,081 1,635,510 92,696 9,476,667 - - 9,476,667 - 12,984 9,463,683

Note1: “Neither past due nor impaired” means the principal or interest does not exceed a reasonable grace period. The reasonable grace period is 0-7 days for credit cards and 0-5 days for other credit

assets. Note 2: “Past due”, which is different from the definition of “non-performing loans” in “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with

Non-performing and Non-Accrued Loans”, means the counterparty does not make the payment when the contract is due, for example, the principal or interest exceed a reasonable grace period.

Note 3: “Impaired” is the amount of impairment position that is individually judged with objective evidence on the reporting day. Note 4: Including receivables－other credit card.



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b. Client-credit-quality-based credit quality analysis on none past due and none impaired discount and loans

Neither past due nor impaired

June 30, 2013 Low risk Moderate risk Medium risk High risk Total

Corporate banking Unsecured $ 13,896,070 24,934,097 4,964,917 724,200 44,519,284 Land and buildings loans and

other collaterals 39,701,980 28,890,082 6,929,876 1,132,989 76,654,927

Retail banking Mortgages 67,488,483 6,599,841 1,581,393 912,541 76,582,258 Credit and others 3,574,186 4,201,638 1,014,167 192,080 8,982,071

Total $ 124,660,719 64,625,658 14,490,353 2,961,810 206,738,540


December 31, 2012 Low risk Moderate risk Medium risk High risk Total



Retail banking Mortgages 64,126,455 7,024,323 1,879,228 1,074,482 74,104,488 Credit and others 4,735,559 4,314,160 1,187,038 229,858 10,466,615

Total $ 115,741,334 60,312,554 16,468,022 2,974,055 195,495,965


June 30, 2012 Low risk Moderate risk Medium risk High risk Total



Retail banking Mortgages 65,600,412 6,276,721 1,537,461 1,006,772 74,421,366 Credit and others 5,343,845 3,635,467 1,391,095 443,653 10,814,060

Total $ 123,226,538 53,918,413 16,594,166 2,874,610 196,613,727


January 1, 2012 Low risk Moderate risk Medium risk High risk Total


other collaterals 44,535,295 18,229,162 6,845,685 524,705 70,134,847

Retail banking Mortgages 69,131,612 2,666,496 213,846 152,840 72,164,794 Credit and others 9,465,473 1,164,991 273,162 59,671 10,963,297

Total $ 134,459,416 46,199,820 11,432,147 1,169,964 193,261,347



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c. Credit quality analysis of security investments

June 30, 2013


Items

Investment grade

Non-investment grade

No credit rating

Subtotal (A)

Past due not impaired(B)

Impaired(C)

Total (A)+(B)+(C)

Loss amount recognized (D)

Net amount (A)+(B)+(C)-(D)

Available-for-sale financial assets Bonds investment $ 56,660,477 - - 56,660,477 - - 56,660,477 - 56,660,477 Stocks investment 1,046,558 - - 1,046,558 - - 1,046,558 - 1,046,558 Others 18,614,221 - - 18,614,221 - - 18,614,221 - 18,614,221 Other financial assets Bonds investment - - - - - 262,666 262,666 36,275 226,391

101.12.31


Items

Investment grade


No credit rating

Subtotal (A)


Impaired(C)

Total (A)+(B)+(C)






- 66 -

June 30, 2012


Items

Investment grade


No credit rating

Subtotal (A)


Impaired(C)

Total (A)+(B)+(C)




January 1, 2012


Items

Investment grade


No credit rating

Subtotal (A)


Impaired(C)

Total (A)+(B)+(C)



Available-for-sale financial assets Bonds investment $ 48,424,511 - - 48,424,511 - - 48,424,511 - 48,424,511 Stocks investment 1,495,173 - - 1,495,173 - - 1,495,173 - 1,495,173 Others 2,869,934 - - 2,869,934 - - 2,869,934 - 2,869,934 Other financial assets Bonds investment 30,380 - - 30,380 - 561,096 591,476 62,911 528,565



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G. Ageing analysis on past due but not impaired financial assets Past due but not impaired loans might results from some temporary administration reasons so the customer is in the early stages of delinquency but no actual impairment occurs yet. According to the internal credit risk assets impairment evaluation guideline unless, there are other objective evidence that shows a potential loss, a less than 90-day past due loan is typically not treated as impairment. The aging analysis on past due but not impaired financial assets was as follow:

June 30, 2013 Overdue within 1

month Overdue between 1 and 3 months

Total

Receivables Credit card business $ 30,416 5,268 35,684 Discount and loans Corporate banking Unsecured - 7,700 7,700 Retail banking Mortgages 643,863 276,299 920,162 Credit loans and others 190,287 55,549 245,836

December 31, 2012 Overdue within 1


Total

Receivables Credit card business $ 28,090 5,218 33,308 Discount and loans Corporate banking Unsecured 80,000 - 80,000 Retail banking Mortgages 699,259 148,501 847,760 Credit loans and others 322,824 61,459 384,283

June 30, 2012 Overdue within 1


Total

Receivables Credit card business $ 26,680 4,058 30,738 Discount and loans Retail banking Mortgages 470,465 306,936 777,401 Credit loans and others 114,562 42,579 157,141



- 68 -

January 1, 2012 Overdue within 1


Total

Receivables Credit card business $ 22,083 2,748 24,831 Discount and loans Corporate banking Land and buildings loans

and other collaterals 477,810 5,338 483,148

Retail banking Mortgages 562,276 293,383 855,659 Credit loans and others 197,043 49,688 246,731

(2) Liquidity risk

A. Definition and sources of liquidity risk

Liquidity risk of the Bank and its subsidiary refers to the risk of bearing financial losses because of inability to liquidate assets or obtain financing to provide funds to meet the financial obligation, such as early termination of deposits, deteriorating of the source and condition of financing from banks influenced by specific market, abnormal recover of funds due to default from borrowers, inability to liquidate financial instruments and early exertion of right of rescission of interest sensitive product by the assured. The aforementioned situation may reduce the cash source of loan, transactions and investment. In some extreme cases, the lack of liquidity may result in a decrease in the overall position of the balance sheet, sale of assets and failure to perform loan commitments. Liquidity risk is inherent in banking operations and can be affected by various industry-specific or overall market events, including but not limited to credit events, mergers or acquisitions, systematic impact and natural disasters.

B. Management policy of liquidity risk The Bank and its subsidiary carry out its liquidity management procedures respectively and is monitored by their respective independent risk management departments. The procedures include: a. Operate funds and monitor future cash flows to ensure that all the demands

can be fulfilled. b. Maintain adequate stock of liquid assets to buffer unexpected events that

may interrupt cash flow. c. Monitor liquidity ratios of balance sheets in accordance with the internal

management purposes and external regulatory requirements. d. Administrate the maturity dates of debt instruments.



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The monitoring and reporting procedures are based on the estimation of future one-day, one-week and one-month capital flow. The estimation of future cash flow is based on the contract maturity date of financial liabilities and estimated collection date of financial assets. The risk management department also monitors the extent and pattern of contingent liabilities such as middle- and long-term borrowing commitments, credit limits of discounts and letters of guarantee. Related information is regularly provided to the risk management committee and the board of directors.

C. Maturity analysis of financial assets and liabilities The management policy of the Bank and its subsidiary is to match the contractual maturity profile with the interest rates risk exposures on assets and liabilities and manage unexpected cash outflow. Because of uncertainty, the maturities did not fully match the interest rates, resulting in gaps that may potentially give rise to gain or loss. The Bank and its subsidiary applied appropriate ways to group assets and liabilities. The maturity analysis of assets and liabilities was as follows:

June 30, 2013

Items

Within 1 month

Between 1 and 3

months

Between 3 months and 1

year

Between 1 and

7 years

Over 7 years

Total

Assets Cash $ 6,511,031 - - - - 6,511,031 Due from Central Bank and

call loans to banks 70,912,708 1,867,900 1,781,100 - - 74,561,708

Financial assets at FVTPL (Note)

103,831 257,468 1,213,675 12,708,987 1,316,267 15,600,228

Available-for-sale financial assets – net (Note)

4,531,254 5,263,037 9,355,223 41,095,995 14,909,316 75,154,825

Securities sold under resell agreements

2,005,492 - - - - 2,005,492

Receivables－gross 599,853 6,567,855 4,617,029 - - 11,784,737 Current tax assets - - - 184,523 - 184,523 Discounts and loans－gross 20,488,377 14,412,607 38,069,019 64,386,572 75,781,643 213,138,218 Other financial assets－

debts investment without active market-net

-

-

-

226,391

-

226,391

Liabilities Deposits from Central Bank

and other banks $ 16,582,468 903,300 145,000 - - 17,630,768


36,909 71,848 407,541 9,123,126 - 9,639,424


8,706,759 - - - - 8,706,759

Payables 6,276,351 134,281 3,365,293 5 - 9,775,930 Current tax liabilities - - 149,726 - - 149,726 Deposits and remittances 59,331,014 51,326,265 174,820,870 35,979,117 - 321,457,266 Financial debentures - - - 10,000,000 - 10,000,000 Preferred stock liability - - - - 1,414,865 1,414,865 Other financial liabilities－

structured commodity principle

458,095 - 39,240 - - 497,335



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December 31, 2012

Items

Within 1 month

Between 1 and 3

months


year

Between 1 and

7 years

Over 7 years

Total


call loans to banks 70,914,297 2,402,490 - - - 73,316,787


83,722 58,417 574,181 9,272,975 724,014 10,713,309


7,871,050 5,895,732 797,849 33,203,878 5,038,496 52,807,005


3,127,990 - - - - 3,127,990

Receivables－gross 1,925,763 1,936,193 4,739,478 - - 8,601,434 Current tax assets - - 184,523 - - 184,523 Discounts and loans－gross 15,593,091 12,013,390 32,872,115 67,852,947 74,012,430 202,343,973 Other financial assets－


-

-

-

211,348

-

211,348


and other banks $ 4,760,851 - 110,000 - - 4,870,851


19,444 25,201 1,182,721 9,140,939 49,816 10,418,121


689,349 - - - - 689,349

Payables 1,172,235 120,563 4,568,238 - - 5,861,036 Current tax liabilities - - 8,720 - - 8,720 Deposits and remittances 52,482,231 45,087,832 166,808,306 34,882,848 - 299,261,217 Financial debentures - - 1,190,000 10,000,000 - 11,190,000 Preferred stock liability - - - - 1,414,865 1,414,865 Other financial liabilities－


480,645 495,210 - - - 975,855



- 71 -

June 30, 2012

Items

Within 1 month

Between 1 and 3

months


year

Between 1 and

7 years

Over 7 years

Total


call loans to banks 73,275,764 1,898,900 - - - 75,174,664


108,943 127,826 719,262 8,875,842 1,301,557 11,133,430


6,411,198 1,497,250 1,994,594 37,109,338 11,581,993 58,594,373


1,359,811 - - - - 1,359,811



-

-

-

209,263

-

209,263


and other banks $ 289,361 2,710,100 240,000 - - 3,239,461


91,740 46,345 1,187,742 9,216,978 150,409 10,693,214


9,162,911 25,000 - - - 9,187,911

Payables 5,426,657 150,999 3,162,845 - - 8,740,501 Current tax liabilities - - 8,305 - - 8,305 Deposits and remittances 55,046,001 56,845,890 163,279,365 31,599,123 - 306,770,379 Financial debentures - - 1,190,000 10,000,000 - 11,190,000 Preferred stock liability - - - - 1,414,865 1,414,865



- 72 -

January 1, 2012

Items

Within 1 month

Between 1 and

3 months


year

Between 1

and 7 years

Over 7 years

Total


call loans to banks 70,364,396 15,200,000 1,400,000 - - 86,964,396


102,374 185,287 873,657 7,031,860 1,620,343 9,813,521


2,769,518 - 100,416 34,802,715 13,473,715 51,146,364


199,912 - - - - 199,912



-

293,619

30,380

204,566

-

528,565


and other banks $ 1,145,420 4,585,800 1,373,400 - - 7,104,620


99,704 47,478 3,063,771 10,490,559 7,281 13,708,793


6,867,049 712,202 - - - 7,579,251

Payables 1,996,650 120,575 2,588,044 - - 4,705,269 Current tax liabilities - - 9,770 - - 9,770 Deposits and remittances 48,019,217 42,111,262 172,733,179 38,303,355 - 301,167,013 Financial debentures - - - 11,190,000 - 11,190,000 Preferred stock liability - - - - 1,414,865 1,414,865 Other financial liabilities－


- - 170,146 - - 170,146

Note: not including listed and OTC securities and beneficiary certificates.

D. Maturity analysis of off-balance sheet items

The table below shows the maturity analysis of the off-balance sheet items based on the remaining time until the contractual maturity date. For issued financial guarantee contracts, the maximum guaranteed amount included in the guarantee may be required to be fulfilled in the earliest period. The amount disclosed is based on contractual cash flows and may be different from that included in the consolidated balance sheets.

(In Thousands of New Taiwan Dollars)

June 30, 2013 0-30 days 31-90 days 91-180 days 181 days -1 year Over 1 year Total Unused amount of


260,220 4,188 299,876 156,715 2,005,929 2,726,928

Unused amount of letter of credit

224,519 1,864,787 93,088 - - 2,182,394


299,980 833,636 476,048 1,074,926 6,975,480 9,660,070



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December 31, 2012

0-30 days 31-90 days 91-180 days 181 days -1 year Over 1 year Total Unused amount of


- - 12,625 285,187 2,391,589 2,689,401


131,072 1,226,926 106,617 - - 1,464,615


225,449 1,306,936 554,244 216,305 8,923,992 11,226,926

June 30, 2012



- 375,000 238,057 415,111 2,879,699 3,907,867


23,962 1,669,155 102,865 5,858 - 1,801,840


271,534 795,226 535,644 1,161,637 8,408,085 11,172,126

January 1, 2012



- - - 322,720 3,103,655 3,426,375


57,408 1,440,981 448,826 11,638 - 1,958,853


123,700 485,309 492,922 5,890,214 - 6,992,145

E. Maturity analysis of lease contract and capital expenditure commitment

The lease contract of the Bank and its subsidiary is operating lease. Operating lease commitment is the future minimum rental payment under operating lease conditions when the Bank and its subsidiary is a lessee or lessor. The capital expenditure commitment of the Bank and its subsidiary is the contractual commitments signed for obtaining buildings and equipment. Maturity analysis of lease contract and capital expenditure commitment of the Bank and its subsidiary was as follow:


June 30, 2013 Under 1 year 1 to 5 years Over 5 years Total Lease contract commitment Operating lease expense

(lessee) $ 294,023 619,794 35,250 949,067

Operating lease revenue(lessor)

36 - - 36

Capital expenditure commitments

4,113 - - 4,113



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December 31, 2012 Under 1 year 1 to 5 years Over 5 years Total Lease contract commitment Operating lease expense

(lessee) $ 288,071 711,135 30,750 1,029,956


18 - - 18


19,828 - - 19,828

June 30, 2012 Under 1 year 1 to 5 years Over 5 years Total Lease contract commitment Operating lease expense

(lessee) $ 296,968 830,052 60,306 1,187,326


18 - - 18


39,686 5,204 - 44,890

January 1, 2012 Under 1 year 1 to 5 years Over 5 years Total Lease contract commitment Operating lease expense

(lessee) $ 281,572 990,206 39,750 1,311,528


18 - - 18


45,994 2,750 - 48,744

(3) Market Risk

A. Sources and definition of market risk management

Market risk is the risk that the fair value and future cash flow of the on-and off-balance sheet financial instruments of the Bank and its subsidiary fluctuate. Factors that result in the fluctuation of market prices usually include interest rates, exchange rates and prices of equity securities and commodities price. When the aforementioned risk factors change, the net income and values of portfolios may fluctuate. The major market risk of the Bank and its subsidiary is the risk of equity securities, interest rates and exchange rates. The market risk positions of equity securities include domestic listed stocks, emerging stocks, domestic stock index options and stock index futures; the positions of interest risk include bonds and interest rate derivatives; exchange rate risk position is the overall position of the investment held by the Bank and its subsidiary such as derivative instruments and bonds denominated in foreign currency.



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B. Market risk management policy The market risk positions and tolerable losses of the Bank and its subsidiary are monitored in accordance with the risk management objectives and limits approved by the management committee authorized by the board. Establishing market risk management mechanism helps effectively monitor the financial instruments positions of the company using credit management, profit and loss evaluation, sensitivity analysis, and stress test execution. All of above will be reported to the risk management committee and the board as references for decision making.

C. Market risk management process a. Recognition and evaluation

In order to evaluate market risk, the business units and risk management units of the Bank and its subsidiary should regularly identify the sources of market risk and risk factors by using business analysis and product analysis methods. Appropriate market risk measuring methods are built for different risk factors including position limits management(normal principle limits, bonds position limits and stock position limits) and sensitivity limits management(PVBP, Duration, VaR and Greeks, etc).

b. Monitoring and reporting

The risk management units of the Bank and its subsidiary regularly submit the information about the execution status of market risk management objectives, the control of positions and profits and losses, sensitivity analysis and stress testing to the board to help them fully understand the situation of market risk management. Clear notification procedures are built for the Bank and its subsidiary. Every transaction has limits, and stop-loss regulations which will be executed immediately, if any, of the transaction has reached the stop-loss limit. If the stop-loss regulation is not executed, the trading units should state the reason and the coping plan for the approval of the top management to continue to hold the position.

D. Risk management of trading book and banking book positions

The trading book is the position of financial instruments and physical goods that are held for trading or for hedging. Held-for-trading position means the position that is held with the intent to make a profit from actual or expected bid-ask spread. Positions that do not belong to the aforementioned trading book are classified as banking book positions. Trading book position is evaluated according to its daily fair value. When there is no fair value in the market, the trading book position will be evaluated by models, methods approved by the Bank, or other practicable methods. Appropriateness of the valuation models should be assessed at least once a year.



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Market price data needed by the valuation models should be updated daily. The products, the nature of the business, and the existing evaluation resources should be taken into account for the evaluation of market risk in order to adopt appropriate limits for risk management. Transactions of investments and derivatives instruments that do not belong to the trading book are regarded as banking book. Investments are conducted in accordance with the investment limits set by the authority and are evaluated at least once a month to be reported to the top management.

E. Banking book interest rate risk management The function of interest rate risk management for the banking book is to enhance the bank’s ability to measure and manage the risk of shocks on the earnings and the economical value of the balance sheet due changes in interest rates. The effect on the earnings and the present value of expected cash flows discounted by market risks for assets, liabilities and off-balance sheets positions due to changes in interest rates should be taken into account. Interest rate sensitivity gap (IRSG) method is adopted to evaluated banking book interest rate risk and the results of which are reported to the asset and liability management committee and risk management committee regularly.

F. Market risk factor sensitivity analysis

The Bank uses market risk factor sensitivity as a tool to manage risks. Market risk factor sensitivity is the change of the value of positions due to the change of specific market risk factors by one unit. Interest rate factor sensitivity is the change in the present value of one basis point (PVBP) of future cash flow of interest rate commodity position as the yield curves shift up by one basis point (0.01%) on the balance sheet date. Interest rate commodity includes bonds, interest rate swaps, cross currency swaps, etc. Option risk sensitivity measures the effects on the option prices as the prices of the underlying assets change, that is, the hedging ratio required when options are undertaken. In addition, the Bank does not have a significant net foreign currency position. Therefore, exchange rate fluctuation will not cause any significant exchange rate risk to the Bank.



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Summary of sensitivity analysis were as follows: June 30, 2013 Amount Risk Items Items Cost/par value Equity Profit and loss Interest Rate

Risk Government and corporate bonds

69,194,604 (31,490) (5,015)

(PVBP) IRS 82,537,833 - (747) Risk sensitivity

of foreign exchange

option (Delta)

Foreign exchange option

- - 102

December 31, 2012 Risk Items Items Amount Cost/par value Equity Profit or loss Interest Rate


46,842,964 (19,844) (3,870)

(PVBP) IRS 93,395,103 - 2,142

June 30, 2012 Risk Items Items Amount Cost/par value Equity Profit or loss Interest Rate


56,250,756 (23,863) (4,585)

(PVBP) IRS 99,675,092 - 2,749

January 1, 2012 Amount Risk Items Items Cost/par value Equity Profit or loss Interest Rate


54,892,032 (24,949) (2,549)

(PVBP) IRS 102,429,316 - 249



- 78 -

G. Exchange rate risk concentration information

(In Thousands of Dollars) June 30, 2013 December 31, 2012

Foreign

currency Amount

Exchange Rate

Expression amount

NTD Amount

Foreign

currency Amount

Exchange Rate

Expression amount

NTD Amount

Financial assets Monetary items USD $ 3,664,439 30.1100 110,336,248 2,000,465 29.1300 58,273,555 JPY 50,861,686 0.3047 15,497,556 7,284,786 0.3374 2,457,887 EUR 50,394 39.2900 1,979,968 36,387 38.6000 1,404,524 AUD 61,504 27.8800 1,714,743 19,860 30.2600 600,976 CNY 182,035 4.9050 892,884 59,070 4.6700 275,856

Non-monetary items

USD $ 14,853 30.1100 447,233 41 29.1300 1,208 June 30, 2013 December 31, 2012

Foreign

currency Amount

Exchange Rate

Expression amount

NTD Amount

Foreign

currency Amount

Exchange Rate

Expression amount

NTD Amount

Financial liabilities Monetary items USD $ 3,682,480 30.1100 110,879,473 1,922,625 29.1300 56,006,063 JPY 48,887,933 0.3047 14,896,153 7,182,979 0.3374 2,423,537 EUR 35,090 39.2900 1,378,688 36,337 38.6000 1,402,627 AUD 41,321 27.8800 1,152,038 19,789 30.2600 598,810 CNY 183,706 4.9050 901,078 58,707 4.6700 274,160

Non-monetary items

USD $ 26,120 30.1100 786,470 571 29.1300 16,623 AUD 145 27.8800 4,043 - - - ZAR 1,000 3.0200 3,020 - - - JPY 606 0.3047 185 - - - CNY 20 4.9050 98 - - -

June 30, 2012 January 1, 2012

Foreign

currency Amount

Exchange Rate

Expression amount

NTD Amount

Foreign

currency Amount

Exchange Rate

Expression amount

NTD Amount

Financial assets Monetary items USD $ 2,359,719 29.8900 70,531,995 2,127,992 30.2800 64,435,591 JPY 5,679,820 0.3753 2,131,636 2,171,348 0.3902 847,260 EUR 60,407 37.5800 2,270,088 44,815 39.1200 1,753,162 AUD 35,739 30.4100 1,086,819 34,755 30.7500 1,068,706 CNY 21,898 4.7000 102,923 2,211 4.8100 10,633

Non-monetary items

USD $ 737 29.8900 22,034 188 30.2800 5,694



- 79 -

June 30, 2012 January 1, 2012

Foreign

currency Amount

Exchange Rate

Expression amount

NTD Amount

Foreign

currency Amount

Exchange Rate

Expression amount

NTD Amount

Financial liabilities Monetary items USD $ 2,296,656 29.8900 68,647,055 2,053,615 30.2800 62,183,470 JPY 5,687,295 0.3753 2,134,442 2,595,062 0.3902 1,012,593 EUR 63,351 37.5800 2,380,744 44,822 39.1200 1,753,419 AUD 35,511 30.4100 1,079,881 34,246 30.7500 1,053,066 CNY 69,982 4.7000 328,916 - - -

Non-monetary items

USD $ 728 29.8900 21,756 27 30.2800 803 AUD 138 30.4100 4,204 - - -

(f) Capital management

(1) Capital management objectives

The capital management objective of the Bank and its subsidiary is that their eligible capital is sufficient to meet the capital requirements and the minimum legal capital adequacy rate. The eligible capital and the authorized capital are calculated in pursuant to the regulations set by the regulators. To enable the Bank and its subsidiary to have an adequate capital to cover various risks, the required capital should be calculated based on the risk portfolios and the risk characteristics that the Bank and its subsidiary face. Optimal allocation of resources can be achieved by regularly reviewing the objectives of capital management.

(2) Capital management procedures The Bank and its subsidiary maintain adequate capital to meet the requirements of the authority and to report to the authority on a quarterly basis. The Bank and its subsidiary’s regulatory capital is divided into Tier 1 Capital and Tier 2 Capital following the “Regulations Governing the Capital Adequacy and Capital Category of Banks” Tier I capital includes common equity and additional Tier I capital. Common equity includes common shares, capital surplus (except for additional paid-in capital in excess of par-preferred shares), accumulated profit or loss and adjustment items of equity. Items that should be deducted are: intangible assets (including goodwill), unamortized loss on sales of non-performing loans, investments on financial institutions, deferred income tax assets, deferred pension costs and the deduction items of the former Tier I capital and Tier II capital (except for major investments on financial institutions). Additional Tier I capital includes non-cumulative perpetual preferred shares, non-cumulative perpetual subordinated debts.



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Tier II capital consists of cumulative perpetual preferred shares, cumulative perpetual subordinated debts, value increased through revaluation, convertible bonds, operating reserve and loan-loss provisions. To properly monitors and maintains the capital adequacy ratio, the Bank and its subsidiary calculate the capital adequacy ratio on a quarterly basis, examine the risk exposure and the changes in eligible capital and analyze the situation of achieving the objectives and the changes in factors that may influence the capital adequacy ratio such as expected profit, provision of allowance for bad debts, changes in non-performing loans, investments in securities (financial and non-financial) and risky assets. If the estimated and actual result differs materially, reviews for improvements are conducted. When it is possible that the capital adequacy ratio is significantly lower than the management objectives, top management or risk management committee should be reported, and strategies should be developed, such as adjusting the asset structures or planning to issue qualified asset instruments in order to reduce risk exposures or to increase eligible capital.

(3) Capital adequacy

Capital adequacy ratios of the Bank and its subsidiary

(In Thousands of New Taiwan Dollars,%) Period

Analysis item June 30, 2013 Eligible Common equity 21,217,459 capital Additional tier 1 capital 2,113,213 Tier 2 capital 7,796,698 Eligible capital 31,127,370 Risk-

Weighted Credit

risk Standardized approach 246,592,910

assets Internal ratings-based approach - Securitization 90,557 Operational

risk Basic indicator approach 10,325,954

Standardized approach/ Alternative standardized approach

-

Advanced measurement approach - Market

risk Standardized approach 15,756,077

Internal model approach - Total 272,765,498 Capital adequacy ratio 11.41% Common equity / Risk-weighted assets ratio 7.78% Tier 1 capital / Risk-weighted assets ratio 8.55% Leverage ratio 5.71%



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Period

Analysis item December 31, 2012 June 30, 2012 January 1, 2012 Eligible Tier 1 capital 25,094,066 22,416,993 21,865,419 capital Tier 2 capital 7,572,935 9,886,571 9,809,300 Tier 3 capital - - - Eligible capital 32,667,001 32,303,564 31,674,719 Risk- Weighted

Credit risk Standardized approach 232,419,406 225,769,331 200,537,590

assets Internal ratings-based approach

- - -

Securitization 84,539 83,705 229,654 Operational Basic indicator

approach 10,325,954 8,662,544 8,662,544

risk Standardized approach/ Alternative standardized approach

- - -

Advanced measurement approach

- - -

Market risk Standardized approach 11,260,757 12,653,173 12,220,775 Internal model

approach - - -

Total 254,090,656 247,168,753 221,650,563 Capital adequacy ratio 12.86% 13.07% 14.29% Tier 1 capital / Risk-weighted assets ratio 9.88% 9.07% 9.86% Tier 2 capital / Risk-weighted assets ratio 2.98% 4.00% 4.43% Tier 3 capital / Risk-weighted assets ratio - % - % - % Common equity / Total assets ratio 4.67% 4.50% 4.56% Leverage ratio 6.91% 6.06% 6.17% Note 1: Eligible capital and risk-weighted assets are calculated under the

“Regulations Governing the Capital Adequacy Ratio of Banks” and “Explanation of Methods for Calculating the Eligible Capital and Risk -Weighted Assets of Banks”.

Note 2: Capital adequacy ratios for two years period are required for annual

financial statements. However, second quarter financial statements are required to disclose for the current period in two years and also the year ended of last year.

Note 3: Formulas used were as follows:

1. Eligible capital = Common equity + Additional tier 1 capital + Tier 2

capital. 2. Risk-weighted assets = Risk-weighted asset for credit risk + Capital

requirements for operational risk and market risk x 12.5. 3. Capital adequacy ratio = Eligible capital ÷ Risk-weighted assets. 4. Ratio of common equity to risk-weighted assets = Common equity ÷

Risk-weighted assets.



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5. Ratio of tier 1 capital to risk-weighted assets = (Common equity + Additional tier 1 capital) ÷ Risk-weighted assets.

6. Leverage ratio = Tier 1 capital ÷ Total exposure

Note 4: Not applicable for the first and third quarter financial report.

7. RELATED-PARTY TRANSACTIONS

(A) Names of the related parties and their relationship with the Bank

Name of Related Party Relationship with the Bank LEI Cooperatief, UA The Bank’s director. LEI Cooperatief3, UA 〃 OLHE Cayman Limited Partnership 〃 Reng Hsing Co., Ltd. 〃 Hongwei Construction Co., Ltd. 〃 Pao Shen Investment Co., Ltd. The Bank’s supervisor. Waterland Financial Holdings Co., Ltd. An immediate family member of the president

of the Bank is its president. Ablerex Electronics Co., Ltd. An immediate family member of the president

of the Bank is its independent director. Paradigm Asset & Wealth Management

Corp. 〃

Hontai Life Insurance Co.,Ltd. An immediate family member of the director of the Bank is its director.

Ju Hang Construction Co., Ltd. An immediate family member of the president of the Bank is its director.

Advanced Control & Systems Inc. A Director of the Bank is its director. Others Directors of the company and its

subsidiary(including independent directors), supervisors, managers and their relatives, spouses, etc.

http://poi.zhupiter.com/k/cht-2007086/HontaiLifeInsuranceCo./�

http://poi.zhupiter.com/k/cht-2297/Ltd/�



- 83 -

(B) Significant transactions between related parties and the Bank (a) Loan

s:

For the six months ended June, 2013 Settleman status

Categories No./name of

related parties Maximum

balance Ending balance

Normal loans

Overdue loans

Collateral

Loan conditions

Consumer loan ─employee 174 $ 67,872 60,785 60,785 - None No difference Home loan mortgage 233 1,118,245 1,074,736 1,074,736 - Real estate 〃 Others ○○, HUANG 437 437 437 - Time deposits

of the Bank 〃

〃 ○○, LIN 4,500 4,500 4,500 - Time deposits of the Bank

〃

〃 ○○○, CHEN 440 433 433 - Time deposits of the Bank

〃

〃 ○○○, CHEN 571 550 550 - Time deposits 〃〃 ○○, CHANG 4,200 4,200 4,200 - Time deposits 〃〃 ○○, SONG 188 165 165 - Automobile 〃〃 Nan Ya Plastics

Corporation 4,497 2,998 2,998 - Machinery 〃

For the six months ended June, 2012 Settleman status

Categories No./name of

related parties Maximum


Normal loans

Overdue loans

Collateral

Loan conditions

Consumer loan ─employee 174 $ 72,221 64,925 64,925 - None No difference Home loan mortgage 232 1,105,452 1,053,908 1,053,908 - Real estate 〃 Others ○○○, CHEN 444 414 414 - Time deposits

of the Bank 〃

〃 ○○, GAO 157 - - - Time deposits of the Bank

〃

〃 ○○○, CHEN 503 393 393 - Time deposits 〃〃 ○○, Chang 4,600 4,200 4,200 - Time deposits 〃〃 Hung Sheng

Construction- Co.,Ltd

340,000 340,000 340,000 - Land 〃

〃 ○○, SONG 463 350 350 - Automobile 〃〃 Nan Ya Plastics

Corporation 1,077 533 533 - Land 〃

〃 Nan Ya Plastics Corporation

1,768 884 884 - Real estate 〃

〃 Nan Ya Plastics Corporation

7,495 5,996 5,996 - Machinery 〃

〃 ATT Group 300,000 270,293 270,293 - None 〃

For the three months and six months ended June 30, 2013 and 2012, the interest income arising from the above loan of the Bank amounted to $5,164, $8,854, $10,513 and $15,272 respectively.

(b) Deposit:

For the three month ended June 30, 2013

Related party Maximum


Range of interest rates

Interest expenses

Hontai Life Insurance Co.,Ltd. $ 2,387,050 2,682,001 0.05-1.32% 9,966 Others 11,853,638 4,901,931 0.05-3.985% 17,501

Total $ 14,240,688 7,583,932 27,467





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For the three month ended June 30, 2012




Interest expenses

Advanced Control & Systems Inc. $ 119,674 119,674 0.13-0.95% 318 Hontai Life Insurance Co.,Ltd. 3,935,509 2,547,252 0.05-1.32% 9,757 Others 5,906,300 2,803,432 0.05-3.99% 17,387

Total $ 9,961,483 5,470,358 27,462

For the six month ended June 30, 2013




Interest expenses

Hontai Life Insurance Co.,Ltd. $ 2,398,680 2,682,001 0.05-1.32% 9,999 Others 13,156,881 4,925,749 0.05-3.985% 20,146

Total $ 15,555,561 7,607,750 30,145

For the six month ended June 30, 2012




Interest expenses

Advanced Control & Systems Inc. $ 119,674 119,674 0.13-0.95% 546 Hontai Life Insurance Co.,Ltd. 3,935,509 2,547,252 0.05-1.32% 11,176 Others 7,109,541 2,957,495 0.05-3.985% 20,281

Total $ 11,164,723 5,624,421 32,003 The deposits interest rates for related parties above are substantially on the same terms as for comparable transactions with non-related parties.

(c) Others: The interest rates shown for related parties above are substantially on the same terms as for comparable transactions with non-related parties, except for the deposits interest rates on deposits given to managers of the Bank which were the same as the saving deposits of employees for a certain amount. Under Articles 32 and 33 of “The Banking Act of the Republic of China”, non secured credit can only be granted by the Bank, except for consumer loans and loans extended to government, meanwhile, the secured credit should accompany with eligible collateral. Furthermore, the terms of credits extended to related parties should not be more favorable than terms offered to other customers in the same category.

(C) Key management personnel compensation in total

For the three months ended June

30, 2013

For the three months ended June

30, 2012

For the six months ended June

30, 2013

For the six months ended June

30, 2012 Salary and other short-term employee

benefits $ 20,810 17,812 69,766 69,051

Post-employment benefits - 7,193 5,206 7,193 Total $ 20,810 25,005 74,972 76,244









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8. PLEDGED ASSETS Pledged assets of the Bank and its subsidiary were as follows:

(In Thousands of New Taiwan dollars)

Assets

Type of securities June 30, 2013

Par Value December 31, 2012

Par Value purpose of collateral Available-for-sale financial assets

Government bond $ 10,000 10,000 Guarantee deposits for bonds dealer

Government bond 50,000 50,000 Guarantee deposits for bills dealer

Government bond 50,000 50,000 Bond settlement reserves

Government bond 170,000 146,000 CSA Government bond 50,000 50,000 Trust funds reserves Government bond 3,700 3,700 VISA transaction

reserves Government bond 1,000,000 1,000,000 Local settlement account

guarantee (USD) Government bond 2,850,000 - Guarantee for fund

dispatching Government bond 2,000 2,000 Operational guarantee

deposit for insurance brokers

Total $ 4,185,700 1,311,700

Assets

Type of securities June 30, 2012

Par Value January 1, 2012

Par Value

purpose of collateral Available-for-dale financial assets

Government bond $ 10,000 10,000 Guarantee deposits for bonds dealer

Government bond 50,000 50,000 Guarantee deposits for bills dealer

Government bond 50,000 50,000 Bond settlement reserves

Government bond 161,000 3,181,000 CSA Government bond 50,000 60,000 Trust funds reserves Government bond 3,700 3,700 VISA transaction

reserves Government bond 1,000,000 1,000,000 Local settlement account

guarantee (USD) Government bond 2,000 1,000 Operational guarantee

deposit for insurance brokers

Total $ 1,326,700 4,355,700



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9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT COMMITMENTS

(A) Major commitments and contingencies:

June 30, 2013 December 31, 2012 June 30, 2012 Jan

uary 1, 2012

Contingent liabilities from guarantee and letter of credit business

$ 11,842,464 12,691,542 12,973,966 8,950,998

Commercial paper to Central Bank for banks’ clearance

4,183,700 1,309,700 1,324,700 4,354,700

Client notes in custody 14,100,776 15,077,463 11,704,647 11,653,015 Marketable securities in custody 639,620 710,076 746,108 828,700 Travellers’ cheques in custody

available for sale 42,596 44,112 39,948 52,837

Special purpose trust accounts 47,149,469 49,520,412 48,696,338 47,718,729

(B) Others:

(a) During the period from April, 2007 to May 2008, the Bank sold the structure notes issued by GVEC Resource Inc., amounted to US$52,925 thousand. According to the U.S. Securities and Exchange Commission’s investigation, Private Equity Management Group LLC (“PEM Group”), of which GVEC Resource Inc. is an affiliate, has been engaged in the fraudulent offering of securities. A resolution was approved by the board of directors at the end of April, 2009 that the Bank would repurchase the structure notes from investors and claim compensation from the issuing agency. This case was approved by the board of directors in the 7th board of directors meeting for the seventh term of the Bank on December 16, 2010 that the Bank will hold the policy assets through overseas “trust structure” and continue to pay the premium to keep the policy effective. On February 24, 2011, the board of directors also approved, during the 9th board of directors meeting for the seventh term of the Bank, to authorize the operation management committee to cooperate with the receivers’ plan in connection with the US PEM case and to receive the policy assets amounting to US$11.3 million. On March 2, 2011, the Bank had signed a contract for the transfer of policy assets. The net amount of original cost of receiving PEMG’s assets, including policy assets aforementioned, and follow-up premium minus the indemnity received by the Bank was accounted for under other receivable of $1,558,484. Furthermore, as of June 30, 2013, the accumulated allowance for bad debt provision of $1,005,484 was made for such receivable, based on the Bank’s assessment of recoverability in consideration of the latest assets appraisal report provided by the receiver.



- 87 -

(b) In July and October 2012, Entie Commercial Bank was formally indicted by the stockholders, including the Securities and Futures Investors Protection Center (SFIPC) and Hung Yuan Construction Co., Ltd., regarding the way the resolution has been passed and approved by the stockholders during their meeting held on June 22, 2012.In the indictment notice. Entie Commercial Bank is accused of breaching Paragraph 2, Article 197-1 of the Company Law and the resolution is recommended to be revoked. In addition, the appointment of Mr. Jesse Ding as Entie Commercial Bank’s director from June 21, 2012 is accused by Wang Hsing Industrial Co., Ltd. As of the base date, except for the case of SFIPC, in which a further appeal was lodged after the original appeal was overruled, the cases of Hung Yuan Construction Co., Ltd. and Wang Hsing Industrial Co., Ltd. were overruled by the court and the plaintiff during the preliminary proceeding or the first instance. Based on the assessment of EnTie Commercial Bank’s appointed lawyer, the aforementioned resolution and appointment of director do not breach the Company Law. However, the outcome of this case still depends on the final judgment of the court.



- 88 -

(C) Pursuant to Article 17 of the Enforcement Rules of the Trust Enterprise Act, the Bank revealed its annotated trust information as follows:

Trust Account Balance Sheet June 30, 2013 and December 31, June 30 and January 1, 2012

Trust Assets June 30, 2013 December 31, 2012 June 30, 2012 January 1, 2011 Trust Liabilities June 30, 2013 December 31, 2012 June 30, 2012 January 1, 2011 Bank deposits $ 1,419,627 1,527,963 1,493,599 1,429,412 Trust capital 47,530,269 49,888,232 49,065,827 48,087,486 Bonds 672,171 898,486 860,278 834,075 Reserves and

accumulated deficit

(380,799) (367,820) (369,489) (368,757)

Funds 26,762,876 26,557,468 26,670,862 26,480,680 Real estate 18,294,796 20,536,495 19,671,599 18,974,562 Total assets $ 47,149,470 49,520,412 48,696,338 47,718,729 Total liabilities 47,149,470 49,520,412 48,696,338 47,718,729



- 89 -

Trust Account Property Catalogue June 30, 2013 and December 31, June 30 and January 1, 2012

Investment Items June 30, 2013 December 31, 2012 June 30, 2012 January 1, 2011 Bank deposits $ 1,419,627 1,527,963 1,493,599 1,429,412 Short-term investment Bonds 672,171 898,486 860,278 834,075 Funds 26,762,876 26,557,468 26,670,862 26,480,680 Real estate－net Land 9,949,970 10,891,123 11,137,208 12,353,087 Buildings and construction

－net 89,438 576,662 577,500 586,210

Construction in process 8,255,388 9,068,710 7,956,891 6,035,265 Subtotal 18,294,796 20,536,495 19,671,599 18,974,562 Total $ 47,149,470 49,520,412 48,696,338 47,718,729

Trust Account Statement of Income

For The Six Months Ended June 30, 2013 and 2012

2012 2011 Trust income $ 797,680 472,526 Trust expenses (510,607) (588,476) Net income before tax 287,073 (115,950) Income tax expense (85) (66) Net income $ 286,988 (116,016)

10. SIGNIFICANT CATASTROPHIC LOSSES：None. 11. SIGNIFICANT SUBSEQUENT EVENTS：None. 12. Others:

(A) Average value of the Bank’s interest-bearing assets and liabilities and average interest rates

(or yield) were as follows:


Average value

Average interest rate(%)

Assets: Cash－due from banks $ 1,696,493 0.08 Due from Central Bank and call loans to banks 69,571,734 0.84 Financial assets at FVTPL 10,879,547 - Securities purchased under resell agreements 2,409,616 0.92 Credit card receivable 708,683 10.90 Discounts and loans 209,685,780 2.89 Available-for-sale financial assets 57,904,858 1.41 Debts investment without active market 262,666 -



- 90 -


Average value


Liabilities: Due to Central Bank and other banks $ 7,482,716 0.45 Financial liabilities at FVTPL 10,785,841 - Securities sold under repurchase agreements 3,887,159 0.13 Demand deposits 27,875,298 0.17 Demand savings deposits 39,977,337 0.28 Time deposits 116,914,714 1.04 Time savings deposits 88,052,152 1.27 Negotiable certificates of deposit 32,374,273 0.93 Postal savings redeposits 4,396,662 1.38 Financial debentures 10,000,000 3.45 Preferred stock liability 1,414,865 6.75


Average value


Assets: Cash－due from banks $ 957,769 0.10 Due from Central Bank and call loans to banks 85,064,403 0.86 Financial assets at FVTPL 5,975,004 - Securities purchased under resell agreements 880,962 0.68 Credit card receivable 842,562 9.76 Discounts and loans 202,222,623 2.96 Available-for-sale financial assets 41,033,148 1.86 Debts investment without active market 450,826 0.21 Liabilities: Due to Central Bank and other banks $ 4,575,358 1.23 Financial liabilities at FVTPL 12,631,493 - Securities sold under repurchase agreements 3,541,890 0.63 Demand deposits 28,241,458 0.16 Demand savings deposits 38,813,335 0.27 Time deposits 124,946,978 1.18 Time savings deposits 79,153,875 1.33 Negotiable certificates of deposit 26,598,613 1.07 Postal savings redeposits 4,419,729 1.38 Financial debentures 11,190,000 3.10 Preferred stock liability 1,414,865 6.75



- 91 -

(B) Supplementary disclosures of asset quality, concentration of credit extensions, interest rate sensitivity information, profitability, and the structure analysis of assets and liabilities time to maturity are as follows: (a) Asset quality

(In Thousands of New Taiwan Dollars, %)

Month/Year June 30, 2013 December 31, 2012

Categories/Items

Non-

performing

loans

Total

loans

Non-

performing

loans ratio

Allowance

for credit

losses

Coverage

ratio

Non-

performing

loans

Total

loans

Non-

performing

loans ratio

Allowance

for credit

losses

Coverage

ratio

Corporate

finance

Secured

Unsecured

839,063

546,082

53,824,520

70,314,067

1.56 %

0.78 %

838,913

688,078

99.98 %

126.00 %

307,622

222,330

54,019,907

59,962,590

0.57 %

0.37 %

307,659

954,110

100.01 %

429.14 %

Residential mortgages 41,140 55,250,456 0.07 % 10,255 24.93 % 132,028 54,120,267 0.24 % 33,008 25.00 %

Cash cards - - - % - - % - - - % - - %

Consumer Micro-

credit

Original 398,383 9,718,048 4.10 % 918,289 230.50 % 322,588 11,041,516 2.92 % 784,150 243.08 %

loans Purchase - - - % - - % - - - % - - %

finance Others Secured 50,522 22,423,829 0.23 % 25,161 49.80 % 44,240 21,056,194 0.21 % 22,121 50.00 %

Unsecured 3,161 1,607,298 0.20 % 3,149 99.62 % 2,057 2,143,499 0.10 % 2,057 100.00 %

Total loan business 1,878,351 213,138,218 0.88 % 2,483,845 132.24 % 1,030,865 202,343,973 0.51 % 2,103,105 204.01 %

Overdue

receivable

Balance of

receivable

Delinquency

ratio

Allowance

for credit

losses

Coverage

ratio

Overdue

receivable

Balance of

receivable

Delinquency

ratio

Allowance

for credit

losses

Coverage

ratio

Credit cards 7,900 1,692,336 0.47 % 94,560 1,196.96% 1,592 1,638,212 0.10 % 60,631 3,808.48 %

Without-recourse factoring - 2,224,513 - % 9,117 - % - 2,991,273 - % 10,226 - %

Month/Year June 30, 2012 January 1, 2012

Categories/Items

Non-

performing

loans

Total

loans

Non-

performing

loans ratio

Allowance

for credit

losses

Coverage

ratio

Non-

performing

loans

Total

loans

Non-

performing

loans ratio

Allowance

for credit

losses

Coverage

ratio

Corporate

finance

Secured

Unsecured

341,891

258,170

55,027,846

60,094,818

0.62 %

0.43 %

342,700

851,283

100.24 %

329.74 %

56,879

237,620

56,462,417

56,005,999

0.10 %

0.42 %

56,895

987,562

100.03 %

415.61 %

Residential mortgages 163,774 55,675,326 0.29 % 41,004 25.04 % 19,933 54,327,631 0.04 % 5,768 28.94 %

Cash cards - - - % - - % - - - % - - %

Consumer Micro-

credit

Original 413,233 11,430,898 3.62 % 762,792 184.59 % 307,498 10,899,991 2.82 % 356,547 115.95 %

loans Purchase - - - % - - % - - - % - - %

finance Others Secured 72,015 18,763,260 0.38 % 37,010 51.39 % 53,093 18,375,133 0.29 % 27,627 52.04 %

Unsecured 5,889 2,998,566 0.20 % 5,899 100.17 % 3,162 3,471,128 0.09 % 3,266 103.29 %

Total loans business 1,254,972 203,990,714 0.62 % 2,040,688 162.61 % 678,185 199,542,299 0.34 % 1,437,665 211.99 %

Overdue

receivable

Balance of

receivable

Delinquency

ratio

Allowance

for credit

losses

Coverage

ratio

Overdue

receivable

Balance of

receivable

Delinquency

ratio

Allowance

for credit

losses

Coverage

ratio

Credit cards 5,427 1,602,540 0.34 % 85,027 1,566.74% 6,857 2,032,361 0.34 % 53,882 785.80 %

Without-recourse factoring - 2,514,857 - % 6,020 - % - 3,165,661 - % 5,135 - %

Note 1: Non-performing loans represent the amount of overdue loans as reported in

accordance with the “Regulations on the Procedures for Banking Institutions to Evaluate Assets and Deal with Past Due/Non-performing Loans.” The credit card overdue loans represent the amount of overdue loans as reported in accordance with former Jin-Kuan-Yin-(4)-Zi No. 0944000378, dated July 6, 2005.

Note 2: Non-performing loans ratio = Non-performing loans ÷ Total loans; Credit card

delinquency ratio = Overdue receivables ÷ Balance of receivables.



- 92 -

Note 3: Coverage ratio for loans=Allowance for credit losses ÷ Non-performing loans; Converge ratio for credit card=Allowance for credit losses ÷ Overdue receivables.

Note 4: For residential mortgage loans, a borrower provides his/her (or spouse’s or

minor child’s) house as collateral in full and pledges it to the financial institution for the purpose of obtaining funds to purchase property and to construct or repair a house.

Note 5: Microcredit loans are defined by former Jin-Kuan-Yin-(4)-Zi No.09440010950,

dated December 19, 2005, and do not include credit cards or cash cards. Note 6: Others in consumer finance are secured and un secured consumer loans other

than residential mortgage loans, cash cards, and microcredit loans, and do not include credit cards.

Note 7: In accordance with former Jin-Kuan-Yin-(5)-Zi No. 094000494, dates July 19,

2005, the amount of without-recourse factoring will be classified as overdue receivables within three months from the date that suppliers or insurance companies reject to compensate the loss. The information below shows supplemental disclosures of loans and receivables that may be exempted from reporting as non-performing loans and overdue receivables, respectively.

(In Thousands of New Taiwan Dollars) June 30,2013 December 31,2012 Loans may be

exempted from reporting as a non-

performing loan

Receivables may be exempted from

reporting as overdue receivables

Loans may be exempted from

reporting as a non- performing loan



Pursuant to a contract under a debt negotiation plan(Note A)

42,690 149,894 50,929 173,957

Pursuant to a contract under a debt liquidation plan and a debt relief plan(note B)

25,090 117,772 22,294 120,117

Total 67,780 267,666 73,223 294,074

June 30,2012 January 1, 2012









Pursuant to a contract under a debt negotiation plan(Note A)

61,246 202,873 71,915 258,782

Pursuant to a contract under a debt liquidation plan and a debt relief plan(note B)

22,986 124,357 22,486 130,775

Total 84,232 327,230 94,401 389,557



- 93 -

Note A: In accordance with former Jin-Kuan-Yin-(1)-Zi No.09510001270, dated April 25,2006, a bank is required to make supplemental disclosure reporting credit information which was approved under the debt coordination mechanism of unsecured consumer debts by the Bankers Association of the R.O.C.

Note B: In accordance with former Ji-Kua-Yin-(1)-Zi No. 09700318940, dated

September 15,2008, a bank is required to make supplemental disclosure reporting credit information once debtors apply for pre-negotiation, relief and liquidation under the “Consumer Debt Clearance Act.”

(b) Concentration of credit extensions


June 30, 2013

Ranking Enterprise group Credit amount Percentage of current year’s

equity ratio (%) 1 A group. Civil Engineering 4,289,088 17.72% 2 B group. Real Estate 4,281,695 17.69% 3 C group. Real Estate 4,037,990 16.69% 4 D group. Real Estate 3,326,930 13.75% 5 E group. Construction of Buildings 2,647,566 10.94% 6 F group. Wholesale-General 2,602,514 10.75% 7 G group. Real Estate 2,571,200 10.63% 8 H Group. Data Storage Media Units Manufacturing 2,147,106 8.87% 9 I group. Smelting and Refining of Iron and Steel 1,995,640 8.25% 10 J group. Cable and Other Subscription Programming 1,992,960 8.24%

December 31,2012


equity ratio (%) 1 C group. Real Estate 4,205,583 17.38% 2 A group. Civil Engineering 4,167,088 17.22% 3 B group. Real Estate 3,928,385 16.24% 4 H Group. Data Storage Media Units Manufacturing 2,830,426 11.70% 5 J group. Cable and Other Subscription Programming 2,805,910 11.60% 6 E Group. Construction of Building 2,640,826 10.91% 7 G Group. Real Estate 2,582,170 10.67% 8 F Group. Wholesale-General 2,530,800 10.46% 9 D Group. Real Estate 2,121,292 8.77% 10 I Group. Smelting and Refining of Iron and Steel 2,000,628 8.27%



- 94 -

June 30, 2012


equity ratio (%) 1 A group. Civil Engineering 4,397,311 20.79% 2 C group. Real Estate 4,318,876 20.42% 3 B group. Real Estate 3,709,441 17.54% 4 J group. Cable and Other Subscription Programming 3,640,563 17.21% 5 E group. Management Consulting 2,861,780 13.53% 6 G group. Real Estate 2,672,684 12.64% 7 I group. Wholesale-Metal Construction Material 2,478,269 11.72% 8 F group. Wholesale-General 2,069,100 9.78% 9 D group. Real Estate 1,846,640 8.73% 10 K group. Wholesale-Cosmetics 1,839,678 8.70%

January 1,2012


equity ratio (%) 1 A group. Civil Engineering 3,448,789 16.30% 2 C group. Wholesale-Cosmetics 3,156,086 14.92% 3 B group. Real Estate Other 3,050,005 14.42% 4 E Group. Construction 2,749,655 13.00% 5 G group. Real Estate Rental and Commerce 2,690,686 12.72% 6 I Group. Wholesale-Mental construction material 2,425,091 11.47% 7 F Group. Wholesale-General 2,333,500 11.03% 8 L Group. Computer Manufacturing 1,725,024 8.16% 9 M Group. Accommodation and catering 1,582,849 7.48% 10 N Group. Trucking 1,472,181 6.96% Note 1: The top ten enterprise groups other than government or stated-owned

enterprises are ranked according to their total outstanding loan balance of enterprise group. If the borrowers belong to an enterprise group, the aggregate credit balance of the enterprise should be calculated and disclosed as a code number for each such borrower together with an indication of the borrowers’ line of business. In addition, if the borrowers are enterprise groups, the enterprise group’s industry sector with the maximum exposure to credit risk in its main industry sector should be disclosed, along with the “class” of the industry, in compliance with the Standard Industrial Classification System of the R.O.C. posted by the Directorate-General of Budget, Accounting and Statistics, Executive Yuan, R.O.C.

Note 2: Enterprise group is as defined in Article 6 of the “Supplementary Provisions to

the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings.”

Note 3: The total outstanding credit amount is the sum of the balances of all loan types

(including import and export bill negotiations, bills and notes discounted, overdrafts, short/medium/long-term secured and unsecured loans, and nonaccrual loans),without-recourse factoring, acceptances receivable, and guarantees receivable.



- 95 -

(c) Interest rate sensitivity information (1) Sensitivity analysis of interest rate for assets and liabilities (NTD)

June 30, 2013


Items 1~90 days (inclusive)

91~180 days (inclusive)

181 days~1 year (inclusive) Over 1 year Total

Interest-rate-sensitive assets

$ 261,423,984 8,269,942 695,985 63,798,380 334,188,291

Interest-rate-sensitive liabilities

105,595,197 126,124,829 55,862,000 25,818,000 313,400,026

Interest rate sensitivity gap

155,828,787 (117,854,887) (55,166,015) 37,980,380 20,788,265

Net worth 24,153,697 Ratio of interest-rate-sensitive assets to liabilities (%) 106.63 Ratio of interest rate sensitivity gap to net worth (%) 86.07

December 31, 2012






$ 253,043,762 8,111,706 471,092 51,514,119 313,140,679


87,347,934 104,288,791 75,876,000 25,380,000 292,892,725


165,695,828 (96,177,085) (75,404,908) 26,134,119 20,247,954


June 30, 2012






$ 251,929,210 8,420,611 238,064 58,106,419 318,694,304


92,574,150 129,109,046 57,006,000 25,040,000 303,729,196


159,355,060 (120,688,435) (56,767,936) 33,066,419 14,965,108




- 96 -

January 1, 2012






$ 229,617,670 11,045,961 1,888,091 79,699,802 322,251,524


105,343,000 100,283,651 75,853,000 28,401,000 309,880,651


124,274,670 (89,237,690) (73,964,909) 51,298,802 12,370,873


Note 1: The above amounts included only New Taiwan dollar amounts held by the

Bank and excluded contingent assets and contingent liabilities. . Note 2: Interest rate-sensitive assets and liabilities mean the revenues or costs of

interest-earning assets and interest-bearing liabilities will be affected by interest rate changes.

Note 3: Interest rate sensitivity gap = Interest-rate-sensitive assets －

Interest-rate-sensitive liabilities. Note 4: Ratio of interest-rate-sensitive assets to liabilities = Interest-rate-sensitive

assets÷ Interest-rate-sensitive liabilities (denominated in NTD). (2) Sensitivity analysis of interest rate for assets and liabilities (U.S. Dollars)

June 30, 2013

(In Thousands of U.S. Dollars, %)

Items





$ 730,015 131,793 61,120 356,742 1,279,670


1,238,038 150,183 123,018 12 1,511,251


(508,023) (18,390) (61,898) 356,730 (231,581)

Net worth 1,168 Ratio of interest-rate-sensitive assets to liabilities (%) 84.68 Ratio of interest rate sensitivity gap to net worth (%) (19,827.14)



- 97 -

December 31, 2012






$ 623,978 117,558 7,020 45,654 794,210


810,834 104,807 127,856 12 1,043,509


(186,856) 12,751 (120,836) 45,642 (249,299)

Net worth 36,364 Ratio of interest-rate-sensitive assets to liabilities (%) 76.11 Ratio of interest rate sensitivity gap to net worth (%) (685.57)

June 30, 2012


Items





$ 693,533 101,224 11,321 35,414 841,492


864,213 116,976 102,617 12 1,083,818


(170,680) (15,752) (91,296) 35,402 (242,326)


January 1, 2012


Items





$ 283,279 96,607 19,947 263,111 662,944


624,455 97,389 133,918 462 856,224


(341,176) (782) (113,971) 262,649 (193,280)


Note 1: The above amounts included only U.S. dollar amounts held by the Bank

and excluded contingent assets and contingent liabilities. Note 2: Interest rate-sensitive assets and liabilities mean the revenues or costs of

interest-earning assets and interest-bearing liabilities will be affected by interest rate changes.

Note 3: Interest rate sensitivity gap = Interest-rate-sensitive assets － Interest-rate-sensitive liabilities.

Note 4: Ratio of interest-rate-sensitive assets to liabilities = Interest-rate-sensitive

assets÷ Interest-rate-sensitive liabilities (denominated in U.S. dollars)



- 98 -

(d) Profitability

Unit: %

Items June 30,

2013 December 31,

2012 June 30,

2012 January 1,

2012 Return on assets ratio

Before income tax

0.59 1.26 0.45 0.73

After income tax

0.46 1.14 0.40 0.62

Return on equity ratio

Before income tax

9.34 20.16 7.90 12.26

After income tax

7.29 18.30 6.95 10.35

Net income 46.18 47.40 38.55 35.30 Note 1: Return on assets ratio = Net income (loss) before/after income tax ÷ Average

total assets. Note 2: Return on equity ratio = Net income (loss) before/after income tax ÷ Average

total equity. Note 3: Net income ratio = Net income (loss) after income tax ÷ Net revenue. Note 4: Net income (loss) before/after tax represented accumulated income (loss) of the

current year. (e) Structure analysis of assets and liabilities time to maturity

(1) Structure analysis of New Taiwan Dollars time to maturity

June 30, 2013

(In thousands of New Taiwan Dollars)

Amount remaining to due date

Total 0~10 days 11~30 days 31~90 days 91~180 days 181 days~

1 year Over 1 year Major

capital inflow at maturity

$ 402,503,279 30,322,870 87,192,658 43,912,673 23,306,902 26,572,429 191,195,747

Major capital

outflow at maturity

479,420,407 18,444,012 20,169,095 67,686,567 114,580,147 172,252,554 86,288,032

Gap (76,917,128) 11,878,858 67,023,563 (23,773,894) (91,273,245) (145,680,125) 104,907,715



- 99 -

December 31, 2012

(In thousands of New Taiwan Dollars) Amount remaining to due date

Total 0~10 days 11~30 days 31~90 days 91~180 days

181 days~ 1 year Over 1 year

Major capital

inflow at maturity

$ 358,860,201 32,796,857 67,741,787 36,968,477 22,018,265 19,511,878 179,822,937

Major capital

outflow at maturity

440,840,522 18,552,471 21,614,197 64,477,224 85,884,525 157,578,954 92,733,151

Gap (81,980,321) 14,244,386 46,127,590 (27,508,747) (63,866,260) (138,067,076) 87,089,786

June 30, 2012




Major capital

inflow at maturity

$ 371,025,568 30,659,009 71,243,832 41,698,748 20,060,263 19,079,545 188,284,171

Major capital

outflow at maturity

435,549,178 14,373,132 26,249,822 75,373,802 114,068,059 125,136,837 80,347,526

Gap (64,523,610) 16,285,877 44,994,010 (33,675,054) (94,007,796) (106,057,292) 107,936,645

January 1, 2012




Major capital

inflow at maturity

$ 365,671,843 34,135,128 54,283,154 50,351,219 18,999,838 21,097,269 186,805,235

Major capital

outflow at maturity

416,870,098 14,064,160 25,070,615 53,517,843 67,136,979 164,062,185 93,018,316

Gap (51,198,255) 20,070,968 29,212,539 (3,166,624) (48,137,141) (142,964,916) 93,786,919 Note: The above amounts included only New Taiwan dollar amounts held by the

Bank.



- 100 -

(2) Structure analysis of U.S. Dollars time to maturity

June 30, 2013

(In thousands of U.S. Dollars) Amount remaining to due date

Total 0~30 days 31~90 days 91~180 days


Major capital inflow at maturity

$ 4,072,916 922,160 898,604 486,298 1,401,452 364,402

Major capital outflow at maturity

4,066,505 2,406,311 1,316,210 204,580 133,820 5,584

Gap 6,411 (1,484,151) (417,606) 281,718 1,267,632 358,818

December 31, 2012





$ 2,219,956 731,095 604,779 349,055 277,045 257,982


2,259,280 1,044,821 667,407 328,582 131,875 86,595

Gap (39,324) (313,726) (62,628) 20,473 145,170 171,387

June 30, 2012





$ 2,468,227 765,308 645,374 552,497 345,727 159,321


2,487,619 1,291,538 857,709 195,127 109,131 34,114

Gap (19,392) (526,230) (212,335) 357,370 236,596 125,207

January 1, 2012





$ 2,040,299 548,729 246,421 172,409 783,867 288,873


1,898,432 746,573 882,559 110,778 137,057 21,465

Gap 141,867 (197,844) (636,138) 61,631 646,810 267,408 Note1: The above amounts included only US dollar amounts held by the Bank. Note2: If the oversea assets accounted for over 10% of the total assets, additional

disclosure should be provided.



- 101 -

13. DISCLOSURE REQUIRED (A) Related information on significant transactions:

(a) Loans to other businesses or individuals: None. (b) Endorsements and guarantees for others: None. (c) Marketable securities held as of June 30, 2013: None. (d) Cumulative purchase or sale of the same investee’s capital stock up to $300,000 or 10%

of paid-in capital:

(In thousands of New Taiwan Dollars) Beginning Buy Sell End of period

Buy/Sell

party

Securities

Type and

Name Account Counterparty Relationship

Number of

shares

Market

price

Number

of

shares

Selling

price Number of

shares

Selling

price Book value

Disposal

gain/loss

Number

of shares

Market

price

EnTie

Commercial

Bank Co.,

Ltd.

Union bank

of Taiwan

There is no

specific

counterparty

None 42,491,488 359,545 - - 42,491,488 461,529 359,545 101,984 - -

(e) Acquisition of real estate up to $300,000 or 10% of paid-in capital: None. (f) Disposal of real estate up to $300,000 or 10% of paid-in capital: None. (g) Discount on commission fees for transaction with related parties up to $5,000: None. (h) Receivables from related parties up to $300,000 or 10% of paid-in capital: None. (i) Financial derivative transactions: None. (j) Transaction information on NPL disposal: None. (k) Types of securitization instruments approved to be issued pursuant to financial assets

securitization rules or real estate securitization rules and other relevant information: None.



- 102 -

(l) Business relationship and material transaction between the parent company and its subsidiary:

Transaction status for the six months ended June 30, 2013

No. Party Counterparty Relationship

Account

Amount

Terms

Percentage of

consolidated net

revenues or

consolidated total assets

0 EnTie Commercial Bank

Co., Ltd.

An Yin Insurance

Brokers Co., Ltd.

1 Accounts receivables 21,930 The same terms as for

comparable transactions

with third-party

counterparties.

0.01%


Co., Ltd.

An Yin Insurance

Brokers Co., Ltd.

1 Deposits and remittances

108,543 ″ 0.03%


Co., Ltd.

An Yin Insurance

Brokers Co., Ltd.

1 Service fees 155,573 Service fees are charged

pursuant to the contract

4.08%

1 An Yin Insurance Brokers

Co., Ltd.

EnTie Commercial Bank

Co., Ltd.

2 Accounts payables 21,930 The same terms as for


with third-party

counterparties.

0.01%


Co., Ltd.


Co., Ltd.

2 Cash and cash equivalents 108,543 ″ 0.03%


Co., Ltd.


Co., Ltd.

2 Service charge 155,573 Service fees are charged


4.08%

Transaction status for the six months ended June 30, 2012

No. Party Counterparty Relationship Account Amount Terms

Percentage of

consolidated net

revenues or

consolidated total assets


Co., Ltd.

An Yin Insurance

Brokers Co., Ltd.

1 Accounts receivables 27,117 The same terms as for


with third-party

counterparties.

0.01%


Co., Ltd.

An Yin Insurance

Brokers Co., Ltd.

1 Deposits and remittances

94,764 ″ 0.03%


Co., Ltd.

An Yin Insurance

Brokers Co., Ltd.

1 Service fees 131,919 Service fees are charged


3.42%


Co., Ltd.


Co., Ltd.

2 Accounts payables 27,117 The same terms as for


with third-party

counterparties.

0.01%


Co., Ltd.


Co., Ltd.

2 Cash and cash equivalents 94,764 ″ 0.03%


Co., Ltd.


Co., Ltd.

2 Service charge 131,919 Service fees are charged


3.42%

Note: Serial number is determined as follows:

1. 0 represents parent company. 2. Subsidiaries are numbered in a sequence of Arabic numerals from 1 based on

company category. (m) Other significant transactions that may have substantial influence upon the decisions

made by users of financial statement: None.



- 103 -

(B) Related information on investee companies：


Aggregate shareholding of the Bank and its

subsidiary

Investment No. of pro Total

Names of

holding company

Names of investee

company Address

Main business

scope

Shareholding

ratio

Carrying

value

gain (loss)

recognized

No. of

shares

forma

shares

Number of

shares

Shareholdi

ng ratio Remark

EnTie Commercial

Bank Co., Ltd.

An Yin Insurance

Brokers Co., Ltd.

Taipei City Life insurance

brokerage

100.00% 101,328 28,883 300 - 300 100.00% The inter-company

transactions are

eliminated

Note : Shares or pro forma shares held by the Bank, directors, supervisors, president, vice

president and affiliates in accordance with the Company Law have been included.

(C) Related information on investments in Mainland China: None.

14. BUSINESS SEGMENT FINANCIAL INFORMATION The Bank and its subsidiary’s chief decision-maker is the board of directors, which is responsible for consolidating business plans, verifying budgets and evaluating operating achievements. To present the operating activities reasonably, the Bank has three segments which should be reported: Retail Banking, Corporate Banking and Operating Management. Retail Banking includes the business of consumer finance and wealth management; Corporate Banking includes the business of corporate and financial market; Operating Management is responsible for the business relevant to operating management. The reported segments are strategic business units to classify the same customer service attribute to the same operating segments in order to provide integrative products and service and to plan diversified marketing strategies. The income and losses of operating segments of the Bank and its subsidiary are evaluated based on net income before tax and the amounts reported are consistent with the reports provided to decision-makers as the basis to allocate resources and evaluate achievements. (A) Segment information:


Retail Banking

Corporate Banking

Operating Banking

Subtotal

Adjustment

Total

Net interest income(losses) $ 569,212 1,190,160 (630,689) 1,128,683 44,679 1,173,362 Non-interest income 258,235 537,163 13,695 809,093 (46,344) 762,749 Net revenue(losses) 827,447 1,727,323 (616,994) 1,937,776 (1,665) 1,936,111 Reversal of (provision for) bad

debt expenses (6,233) 1,283 4,421 (529) 69 (460)

Operating expenses (359,654) (233,908) (208,896) (802,458) 1,596 (800,862) Net income(losses) before tax $ 461,560 1,494,698 (821,469) 1,134,789 - 1,134,789 Total assets $ - - - - - 404,207,605



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For the three months ended

June 30, 2012

Retail Banking Corporate Banking

Operating Banking

Subtotal

Adjustment

Total

Net interest income(losses) $ 565,827 1,006,633 (676,034) 896,426 53,277 949,703 Non-interest income 229,146 416,135 428,581 1,073,862 (56,058) 1,017,804 Net revenue(losses) 794,973 1,422,768 (247,453) 1,970,288 (2,781) 1,967,507 Reversal of (provision for)

bad debt expenses (12,570) 24,574 (190,733) (178,729) (232) (178,961)

Operating expenses (401,913) (223,473) (231,744) (857,130) (23,871) (881,001) Net income(losses) before tax $ 380,490 1,223,869 (669,930) 934,429 (26,884) 907,545 Total assets $ - - - - - 373,709,949 For the six months ended

June 30, 2013


Operating Banking

Subtotal

Adjustment

Total

Net interest income(losses) $ 1,134,749 2,205,053 (1,241,128) 2,098,674 75,055 2,173,729 Non-interest income 514,481 1,057,547 150,527 1,722,555 (77,898) 1,644,657 Net revenue(losses) 1,649,230 3,262,600 (1,090,601) 3,821,229 (2,843) 3,818,386 Reversal of (provision for)

bad debt expenses 3,695 38,229 (1,482) 40,442 136 40,578

Operating expenses (737,120) (437,867) (428,296) (1,603,283) 2,707 (1,600,576) Net income(losses) before tax $ 915,805 2,862,962 (1,520,379) 2,258,388 - 2,258,388 Total assets $ - - - - - 404,207,605

For the six months ended

June 30, 2012


Operating Banking

Subtotal

Adjustment

Total

Net interest income(losses) $ 1,136,140 2,032,136 (1,412,928) 1,755,348 105,418 1,860,766 Non-interest income 435,584 1,159,137 481,933 2,076,654 (83,679) 1,992,975 Net revenue(losses) 1,571,724 3,191,273 (930,995) 3,832,002 21,739 3,853,741 Reversal of (provision for)

bad debt expenses 27,501 (25,304) (271,853) (269,656) (178) (269,834)

Operating expenses (889,560) (521,378) (453,979) (1,864,917) (31,094) (1,896,011) Net income(losses) before tax $ 709,665 2,644,591 (1,656,827) 1,697,429 (9,533) 1,687,896 Total assets $ - - - - - 373,709,949

(B) Geographic information: There is no relevant geographic information to be disclosed since

the Bank and its subsidiary operate mainly in Taiwan. (C) Information on major customers: The Bank and its subsidiary’s revenues from a customer

were less than 10% of the Bank’s revenues in the statements of income.



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15. First-time adoption of IFRSs The consolidated- financial reports of the Bank and its subsidiary as of December 31, 2012 were prepared following former generally accepted accounting principles in the Republic of China. As stated in Note 4(A), the consolidated financial reports are included in the period covered by the consolidated yearly financial reports prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Publicly Held Banks and IFRSs as accepted by the FSC., and follow IFRS 1 – “First-time Adoption of IFRSs” as accepted by the FSC. Accounting policies included in Note 4 applied to the comparative consolidated financial statements as of June 30, 2012, the consolidated balance sheet as of December 31, 2012 and the first-time IFRS consolidated balance sheet as of January 1, 2012, the conversion date for the consolidated entities. When preparing reports for the year ended December 31, 2012, the Bank and its subsidiary began with the reporting amount under former generally accepted accounting principles in the Republic of China. The conversion from former generally accepted accounting principles in the Republic of China to IFRSs as accepted by the FSC has impacts on the financial position, financial performance, and cash flows of the Bank and its subsidiary as of each time-point or for each period, and they are as below:



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(A) Consolidated assets, liabilities and equity reconciliation The reconciliation report for consolidated financial position on June 30, 2012

(In Thousands of New Taiwan Dollars) Generally accepted accounting principles in the Republic

of China (R.O.C. GAAP) IFRS conversion's impact

IFRSs accepted by the FSC

Item

Amount

Difference in recognition

and measurement

Difference in presentation

Amount

Item

Note

Cash and cash equivalents $ 3,837,397 - - 3,837,397 Cash Due from Central Bank and call loans to

bank 75,174,664 - - 75,174,664 Due from Central Bank and call loans to

bank

Financial assets measured at fair value through profit or loss

11,532,800 - - 11,532,800 Financial assets at fair value through profit or loss

Available for sale financial assets－net 61,174,198 - - 61,174,198 Available-for-sale financial assets Securities purchased under resell

agreements 1,359,811 - - 1,359,811 Securities purchased under resell

agreements

Receivables－net 11,290,815 - (210,370) 11,080,445 Receivables－net (d) - - 210,370 210,370 Current tax assets (d) Loans－net 201,648,707 - - 201,648,707 Discounts and loans－net Other financial assets－net 1,693,693 - (1,356,745) 336,948 Other financial assets－net (j) Fixed assets—net 1,434,679 (146) - 1,434,533 Property, Plant and Equipment—net Intangible assets－net 260,176 - - 260,176 Intangible assets－net Deferred income tax assets－net 4,162,782 73,444 14,280 4,250,506 Deferred tax assets－net (d) Other assets－net 52,866 (217) 1,356,745 1,409,394 Other assets－net (b)、(j)

TOTAL ASSETS $ 373,622,588 73,081 14,280 373,709,949 TOTAL ASSETS

Liabilities Deposits from Central Bank and other

banks $ 3,239,461 - - 3,239,461 Deposits from Central Bank and other

banks

Financial liabilities measured at fair value through profit or loss

10,693,214 - - 10,693,214 Financial liabilities at fair value through profit or loss


9,187,911 - - 9,187,911 Securities sold under repurchase agreements

Payables 8,712,814 48,705 (21,018) 8,740,501 Payables (a)、(c)、(d)、(e) - - 8,305 8,305 Current tax liabilities (d) Deposits and remittances 306,770,379 - - 306,770,379 Deposits and remittances Financial debentures 11,190,000 - - 11,190,000 Financial debentures Preferred stock liabilities 1,414,865 - - 1,414,865 Preferred stock liabilities Other financial liabilities 253,704 - (2,434) 251,270 Other financial liabilities (j) - - 415,120 415,120 Provisions (e)、(f) - 719 14,280 14,999 Deferred tax liabilities (d)、(g) Other liabilities 269,763 328,441 (399,973) 198,231 Other liabilities (a)、(b)、(f)、 (j)

Total Liabilities 351,732,111 377,865 14,280 352,124,256 Total Liabilities

Stockholders’ Equity - Parent

Company Stockholders’ Equity - Parent

Company

Common stock 16,796,775 - - 16,796,775 Capital Capital surplus 1,461,505 - - 1,461,505 Capital surplus Retained earnings Retained earnings Legal reserve 1,284,192 - - 1,284,192 Legal reserve Special reserve 125,598 - - 125,598 Special reserve Undistributed earnings 2,370,502 (351,633) - 2,018,869 Unappropriated earnings (b)、(c)、(d) Other adjustments to stockholders’

equity - - (101,246) (101,246) Other equity interest (g)、(h)

Cumulative translation adjustments - (7,818) 7,818 - (g) Unrealized gains and losses on

financial instruments (93,428) - 93,428 - (h)

Net loss not recognized as pension cost

(54,667)

54,667

-

-

(b)

Total Stockholders' Equity 21,890,477 (304,784) - 21,585,693 Total Equity

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$ 373,622,588 73,081 14,280 373,709,949 TOTAL LIABILITIES AND EQUITY



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(B) Consolidated comprehensive income reconciliation The reconciliation report for consolidated comprehensive income for the six months ended June 30, 2012

Unit：In Thousands of New Taiwan Dollars Generally accepted accounting principles in the

Republic of China (R.O.C. GAAP) IFRS conversion's impact


Item

Amount

Difference in recognition

and measurement

Difference in presentation

Amount

Item

Note

Interest income $ 3,833,937 - (53,358) 3,780,579 Interest income (i) Less: Interest expenses (2,073,539) - 153,726 (1,919,813) Less: Interest expenses (i)

Net interest income 1,760,398 - 100,368 1,860,766 Net income of interest Non-interest income Non-interest income Service fee and commission

income 1,174,491 249 - 1,174,740 Service fee and commission

income (a)

Gains and losses on financial assets or liabilities measured at fair value through profit or loss

344,717 - (100,368) 244,349 Gains on financial assets or liabilities measured at fair value through profit or loss

(i)

Realized gains on available-for-sale financial assets

215,847 - - 215,847 Realized gains on available-for-sale financial assets

Foreign exchange losses and gains

(10,449) 9,419 - (1,030) Foreign exchange losses (g)

Other net non-interest income (3,917) - - (3,917) Other net non-interest income Net gains on disposal of

properties 362,986

-

-

362,986

Net gains on disposal of properties

Net Revenue 3,844,073 9,668 - 3,853,741 Net Revenue Provision for bad debt expenses (269,834) - - (269,834) Bad debt expenses and reserve for

guarantee liabilities provision

Operating expenses Operating expenses Personnel expenses (1,239,104) (27,229) - (1,266,333) Employee benefits expenses (b)、(c) Depreciation and amortization

expenses (72,222) (146) - (72,368) Depreciation and amortization

expenses

Other general and administrative expenses

(557,061)

(249)

-

(557,310)


(a)

Net Income Before Tax from Continuing Operations

1,705,852 (17,956) - 1,687,896 Net Income Before Tax from Continuing Operations

Income tax(expenses) expenses (204,558) 2,309 - (202,249) Income tax expenses (d)、(g)

Net Income After Tax from Continuing Operations

1,501,294 (15,647) - 1,485,647 Net Income After Tax from Continuing Operations

Cumulative effect of changes in accounting principles

(179)

179

-

-

Consolidated net Income $ 1,501,115 (15,468) - 1,485,647 Net Income

Other comprehensive income： (9,419) Other comprehensive income,

before tax, exchange differences on translation

(36,444) Other comprehensive income, before tax, available-for-sale financial assets

1,601


(44,262)

Other comprehensive income, net of tax

1,441,385 Total comprehensive income



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The reconciliation report for consolidated comprehensive income for the three months ended June 30, 2012

Unit：In Thousands of New Taiwan Dollars

Generally accepted accounting principles in the Republic

of China (R.O.C. GAAP)

FRS conversion's impact


Item

Item

Difference in

recognition and

measurement

Difference in

presentation

Amount

Item

Note Interest income $ 1,922,409 - (28,955) 1,893,454 Interest income (i) Less: Interest expenses (1,021,039) - 77,288 (943,751) Less: Interest expenses (i)

Net interest income 901,370 - 48,333 949,703 Net income of interest Non-interest income Non-interest income Service fee and commission

income 579,744 1,281 - 581,025 Service fee and commission

income (a)

Gains and losses on financial assets or liabilities measured at fair value through profit or loss

63,143 - (48,333) 14,810 Gains on financial assets or liabilities measured at fair value through profit or loss

(i)

Realized gains on available-for-sale financial assets

66,765 - - 66,765 Realized gains on available-for-sale financial assets

Foreign exchange gains 13,030 (17,372) - (4,342) Foreign exchange losses (g) Other net non-interest income (3,440) - - (3,440) Other net non-interest income Net gains on disposal of

properties 362,986

-

-

362,986

Net gains on disposal of properties

Net Revenue 1,983,598 (16,091) - 1,967,507 Net Revenue Losses on reversal of provision for bad

debt expenses (178,961) - - (178,961) Bad debt expenses and reserve for

guarantee liabilities provision

Operating expenses Operating expenses Personnel expenses (532,652) (17,634) - (515,018) Employee benefits expenses (b)、(c) Depreciation and amortization

expenses (36,902) (122) - (36,780) Depreciation and amortization

expenses


(292,410)

(1,281)

-

(291,129)


(a)

Net Income Before Tax from

Continuing Operations 942,673 (35,128) - 907,545 Net Income Before Tax from

Continuing Operations

Income tax expenses (142,063) 5,259 - (136,804) Income tax expenses (d)、(g)

Net Income After Tax from

Continuing Operations 800,610

(29,869)

-

770,741

Net Income from Continuing

Operations

Consolidated net Income 800,610 (29,869) - 770,741 Net Income

Other comprehensive income： 17,372 Other comprehensive income,

before tax, exchange differences on translation

(120,565) Other comprehensive income, before tax, available-for-sale financial assets

(2,953)


(106,146)

Other comprehensive income, net of tax

664,595 Total comprehensive income



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(C) Material adjustment to statement of cash flows Under R.O.C. GAAP, the Bank and its subsidiary prepared the consolidated statement of cash flows using indirect method and classified the interests/ dividends received and tax/interests paid as part of operating cash flows and were not asked to show them as separate items. Following IAS 7 “Statement of Cash Flows” as accepted by the FSC, however, for the six months ended June 30, 2013 and 2012, the Bank and its subsidiary showed them as separate items under operating cash flows, and the amount was as follows: interests received amounted to $3,996,928 and $3,742,287, respectively; interests paid amounted to $1,672,940 and $1,789,090, respectively; tax paid amounted to $66,293 and $80,222, respectively. According to the Regulations Governing the Preparation of Financial Reports by Publicly Held Banks, several items originally classified under cash flows from investing activities, such as changes in available-for-sale financial assets, purchase and paydowns of held to maturity financial assets, changes in due from Central Bank, call loans to banks and loans, and under cash flows from financing activities, such as deposits from Central Bank and other banks, deposits and remittances, should be classified under cash flows from operating activities instead. Except for those stated above, the consolidated statement of cash flows prepared in accordance with IFRSs as accepted by the FSC and with R.O.C. GAAP had no significant differences.

(D) Reconciliation note (a) Customer loyalty programs

Following IFRSs, the Bank retrospectively apply IFRIC 13 “Customer Loyalty Programs” and adjust the way they recognize the revenue related to credit card points. On June 30, 2012, the effect of this adjustment on related accounts is as follows: for accrued expenses, a decrease of $5,466; for other liabilities, an increase of $5,466. Also, for the income statement for the six months and three months ended June 30, 2012, this adjustment increase commission income $249 and $1,281, respectively; increase other general and administrative expenses by $249, and $1,281, respectively.

(b) Adjustments to pension actuarial gains and losses and pension obligations Following the instructions related to employee benefits in IFRS 1, the Bank elects to apply the exemption provided therein and retrospectively apply IAS 19 to adjust (1) items related to unrecognized transitional net benefit obligation recognized under R.O.C. GAAP, (2) items related to supplementary pension liability recognition adjustments recognized under R.O.C. GAAP, and (3) part of the actuarial assumptions. On June 30, 2012, the effect of this adjustment on related accounts is as follows: for provisions, an increase of $322,975; for retained earnings, a decrease of $367,479; for other assets, a decrease of $217; for other adjustments to stockholders’ equity, an increase of $54,667. Also, for the income statement for the six months and three months ended June 30, 2012, this adjustment increases employee benefits expenses by $10,380, and $5,190, respectively.



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(c) Short-term employee benefits－paid leave According to IAS 19, employee benefits- expected obligations of paid leave should be estimated when employees provide services. On June 30, 2012, the effect of this adjustment on related accounts is as follows: for payable, an increase of $54,171; for retained earnings, a decrease of $37,322. Also, for the comprehensive income statement for the six months and three months ended June 30, 2012, this adjustment increased the employee benefits expenses by $ 16,849 and $ 12,444, respectively.

(d) Income tax

Following IFRS 1, IFRS 12, and the Regulations Governing the Preparation of Financial Reports by Publicly Held Banks, effective from year 2013, the Bank reclassifies current tax assets out of receivables, current tax liabilities out of payables, and presents deferred tax assets and deferred tax liabilities separately. On June 30, 2012, the effect of this adjustment on related accounts is as follows: for current tax assets, an increase of $210,370; for receivables, a decrease of $210,370; for current tax liabilities, an increase of $8,305; for payables, a decrease of $8,305; for deferred tax assets, an increase of $14,280; for deferred tax liabilities, an increase of $14,280. The employee benefit obligation adjustments mentioned in notes (b) and (c) above incur income tax effects. On June 30, 2012, the influence of the income tax effects on related accounts is as follows: for deferred tax assets, an increase of $73,444; for retained earnings, and an increase of $68,816. Also, for the income statement for the six months and three months ended June 30, 2012, the income tax effects reduce income tax expenses by $4,629 and $2,998, respectively.

(e) Settlement compensation payables According to IAS 37, the settlement compensation payables of the Bank have the nature of provisions, and so they are reclassified. On June 30, 2012, the effect of this adjustment on related accounts is as follows: for payables, a decrease of $12,713; for provisions, an increase of $12,713. The amount of liabilities as a whole is not affected by this reclassification.

(f) Provisions According to IAS 1 and the Regulations Governing the Preparation of Financial Reports by Publicly Held Banks, effective from year 2013, provisions should be recognized separately, so that accrued pension liability and other provisions previously recognized under other liability are reclassified to provisions. On June 30, 2012, the effect of this adjustment on related accounts is as follows: for other liabilities, a decrease of $402,407; for provisions, an increase of $402,407. The amount of liabilities as a whole is not affected by this adjustment.



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(g) Cumulative translation adjustments According to IFRS 1 “First-time Adoption of IFRSs”, the Bank adopts the optional exemption. According to IAS 21, Income statement accounts of the Company’s offshore banking unit are translated at average rate, with differences reflected as cumulative translation adjustments. On June 30, 2012, the effect of this adjustment on related accounts is as follows: for cumulative translation adjustments, a decrease of $ 9,149; for deferred tax liabilities, an increase of $719. Also, for the comprehensive income statement for the six months and three months ended June 30, 2012, the foreign exchange gains increase(decrease) $9,419 and $(17,372), respectively; the income tax effects increase (decrease) income tax expenses by $2,320 and $(2,261), respectively. According to the Regulations Governing the Preparation of Financial Reports by Publicly Held Banks, effective from year 2013, other equity interest should be listed separately in the consolidated balance sheet, and that applies to cumulative translation adjustments. On June 30, 2012, the effect of this adjustment on related accounts is as follows: for other equity interest, a decrease of $9,419; for cumulative translation adjustments, an increase of $9,419. The amount of equity as a whole is not affected by this adjustment.

(h) Unrealized gains and losses on financial products According to the Regulations Governing the Preparation of Financial Reports by Publicly Held Banks, effective from year 2013, other equity interest should be listed separately in the consolidated balance sheet, and that applies to unrealized gains and losses on financial instruments. On June 30, 2012, the effect of this adjustment on related accounts is as follows: for other equity interest, a decrease of $93,428; for unrealized gains and losses on financial instruments, an increase of $93,428. The amount of equity as a whole is not affected by this adjustment.

(i) Gains and losses on financial assets or liabilities at fair value through profit or loss Following the Regulations Governing the Preparation of Financial Reports by Publicly Held Banks, effective from year 2013, the Bank reclassify under gains and losses on financial assets or liabilities measured at fair value through profit or loss the interest income produced by such financial assets or liabilities that was originally recognized as interest income. For the comprehensive income statement for the six months and three months ended June 30, 2012, the effect of this adjustment on related is as follow: for interest income, a decrease of $53,358 and $28,955, respectively; for interest expense, a decrease of $153,726 and $77,288, respectively; for gains and losses on financial assets or liabilities at fair value through profit or loss, a decrease of $100,368 and $48,333 respectively. The amount of gross income is not affected by this reclassification.



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(j) Refundable deposits/Guarantee deposits received Following the Regulations Governing the Preparation of Financial Reports by Publicly Held Banks, effective from year 2013, the Bank and its subsidiary reclassify under other assets and liabilities the refundable deposits and guarantee deposits received which were originally included in other financial assets and liabilities. On June 30, 2012, the effect of this adjustment on related accounts is as follows: for other financial assets, a decrease of $1,356,745; for other assets, an increase of $1,356,745; for other financial liabilities, a decrease of $2,434, for other liabilities, an increase of $2,434. The amount of assets and liabilities as a whole is not affected by this reclassification.

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