CTBC FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES

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Stock Code: 2891

CTBC FINANCIAL HOLDING CO., LTD. ANDSUBSIDIARIES

Consolidated Financial Statements

With Independent Auditors’ ReportFor the Six Months Ended June 30, 2021 and 2020

Address: 27F and 29F, No.168, Jingmao 2nd Rd., Nangang Dist., Taipei City 115,Taiwan, R.O.C.

Telephone: 886-2-3327-7777

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

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Table of contents

Contents Page

1. Cover Page 1

2. Table of Contents 2

3. Independent Auditors’ Report 3

4. Consolidated Balance Sheets 4

5. Consolidated Statements of Comprehensive Income 5

6. Consolidated Statements of Changes in Equity 6

7. Consolidated Statements of Cash Flows 7

8. Notes to the Consolidated Financial Statements

(1) Company history 8

(2) Approval date and procedures of the consolidated financial statements 8

(3) New standards, amendments and interpretations adopted 9～12

(4) Summary of significant accounting policies 13～37

(5) Significant accounting assumptions and judgments, and major sourcesof estimation uncertainty

38

(6) Explanation of significant accounts 38～202

(7) Related-party transactions 203～216

(8) Pledged assets 217～218

(9) Commitments and contingencies 218～227

(10) Losses Due to Major Disasters 227

(11) Subsequent Events 227

(12) Other 228～290

(13) Other disclosures

(a) Information on significant transactions 291～294

(b) Information on investees 295～297

(c) Information on investment in mainland China 297～298

(d) Major shareholders 298

(14) Segment information 299

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Independent Auditors’ Report

To the Board of Directors of CTBC Financial Holding Co., Ltd.:

Opinion

We have audited the consolidated financial statements of CTBC Financial Holding Co., Ltd.(“the Company”)and its subsidiaries, which comprise the consolidated balance sheets as of June 30, 2021, December 31 and June30, 2020, and the consolidated statement of comprehensive income for the three and six months ended June 30,2021 and 2020, changes in stockholders’ equity and cash flows for the six months ended June 30, 2021 and2020, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, theconsolidated financial position of the Company and its subsidiaries as of June 30, 2021, December 31 and June30, 2020, along with consolidated financial performance for the three and six months ended June 30, 2021 and2020, and its consolidated cash flows for the six months ended June 30, 2021 and 2020 in accordance with theRegulations Governing the Preparation of Financial Reports by Financial Holding Companies, the RegulationsGoverning the Preparation of Financial Reports by Public Banks, the Regulations Governing the Preparation ofFinancial Reports by Securities Firms, the Regulations Governing the Preparation of Financial Reports byFutures Commission Merchants, the Regulations Governing the Preparation of Financial Reports by InsuranceCompanies, and International Accounting Standards (IAS) 34, “ Interim Financial Reporting” , endorsed andissued into effect by the Financial Supervisory Commission of the Republic of China (“FSC”).

Basis for Opinion

We conducted our audit of the consolidated financial statements in accordance with the Regulations GoverningAuditing and Certification of Financial Statements by Certified Public Accountants, Jin Kuan YinNo.10802731571 issued by the Financial Supervisory Commission, and the auditing standards generallyaccepted in the Republic of China. Our responsibilities under those standards are further described in theAuditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We areindependent of the Company and its subsidiaries in accordance with the Certified Public Accountants Code ofProfessional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities inaccordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis of our opinion.

Emphasis of Matter

The judicial cases as stated in Note 9(c). Part of judicial cases are still under investigation by the judiciary, andthe results remain uncertain. Our opinion is not modified in respect of this matter.

deychang

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Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit ofthe consolidated interim financial statements for the six months ended June 30, 2021. These matters wereaddressed in the context of our audit of the consolidated financial statements as a whole, and in forming ouropinion thereon, and we do not provide a separate opinion on these matters.

1. Assessment of the fair value of financial instruments

Please refer to Note 4 (f) for the related accounting policies of the assessment of the fair value of financialinstruments, Note 5 for the accounting assumptions and estimation uncertainty, and Note 6 (au) for the otherdetails.

Description of key audit matter:

Parts of the financial instruments owned by the Company and its subsidiaries as of June 30, 2021 werevalued via evaluation model due to the lack of public transaction prices, and parts of the referred input valuescould not be obtained from the public market. Thus, it demands significant professional judgments from themanagement by using different valuation techniques and assumptions for input values. Therefore, theassessment of fair value of financial instruments is one of the key audit matters.

How the matter was addressed in our audit:

Our principal audit procedures included: testing the management’s control procedures over the classification,measurement and disclosure of fair value of financial instruments, including evaluating how the managementdetermines the classification of financial instruments and chooses the appropriate evaluation method and theprime parameter hypothesis, and confirming that the presentation and disclosure of financial instruments arein accordance with the International Financial Reporting Standards (IFRSs). For financial instruments withactive market prices, we used sampling test to assess the appropriateness of public quoted prices. As tofinancial instruments using evaluation model to measure their fair value, we used sampling test to confirmthe appropriateness of the evaluation method and the prime input values used by the management.

2. Impairment of loans and receivables

Please refer to Note 4 (f) for the related accounting policies of impairment of loans and receivables, Note 5for the accounting assumptions and estimation uncertainty, and Note 6 (h), (i), (j) and (au) for the otherdetails.


The management assessed the expected credit loss (ECL) of loans and receivables by identifying whether thecredit risk of credit assets has significantly increased since initial recognition, then dividing ECL into 12-month ECL and lifetime ECL, and dividing them into collective assessment and individual assessment tomeasure them by using different impairment methods. For collective assessment, the impairment iscalculated by establishing an impairment model and using the past loss experience, current market conditionsand forward-looking estimation on assets with similar credit risk characteristic to form basic estimation. Forindividual assessment, the measurement is based on expected future recoverable cash flows. Theaforementioned measurement methods involved significant professional judgments and estimation by themanagement; therefore, the impairment of loans and receivables is one of the key audit matters.


Our principal audit procedures included: understanding the methodology and related control procedures onhow the management assesses and measures the impairment amount of loans and receivables. For collectiveassessment, we assessed the impairment model adopted by the management and reviewed theappropriateness of the calculation of the impairment parameters (including probability of default, loss givendefault, exposure at default and recovery rate) via sampling. For individual assessment, we used samplingtest to assess the appropriateness of the estimation of future recoverable amounts and the value of collateral.Meanwhile, we assessed whether the allowance for loans and receivables meets the regulation requirements.

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3. Provision of insurance liability

Please refer to Note 4 (s) for the related accounting policies of insurance liability, Note 5 for the accountingassumptions and estimation uncertainty, and Note 6 (z) and (ae) for the other details of the provision ofinsurance liability.


The estimation of the Company and its subsidiaries’ insurance liability is subject to future uncertainties. Theassumption of life insurance reserve adopts a fixed cost basis, that is to say, the provision is calculated by areserve rate upon the issuance of insurance policy. Provision of unearned premiums is calculated by actuariesaccording to each product’ s characteristic and its undue risk. The main assumptions of claim reserve areclaim development factors and expected claims rates. To evaluate the adequacy of insurance liabilities,estimating the discounted future cash flows should take into consideration the future insurance payments,insurance income and related expenses. The aforementioned evaluation involved the professional judgmentsof the management which will affect the recognition amount of insurance liabilities. Therefore, evaluatingthe provision of insurance liabilities is one of the key audit matters.


Our principal audit procedures included: reviewing the analysis of movements in insurance liabilities,adopting the audit of insurance liabilities performed by our actuarial specialists, and inspecting whether thecalculation and applied parameters are in accordance with the related ordinances, administrativeinterpretations and code of conduct announced by the Actuarial Institute of the Republic of China. Also, theassessment on the reasonableness of actuarial assumptions should be in conformity with the empirical dataand product specification in order to build the model of evaluation of insurance liability, as well as theestimation on the reasonableness of the actuarial result adopted by the management should be based on ourunderstanding of industry and market to make sure that the final provision of insurance liability has beenproperly recorded.

Responsibilities of Management and Those Charged with Governance for the Consolidated FinancialStatements

Management is responsible for the preparation and fair presentation of the consolidated financial statements inaccordance with the Regulations Governing the Preparation of Financial Reports by Financial HoldingCompanies, the Regulations Governing the Preparation of Financial Reports by Public Banks, the RegulationsGoverning the Preparation of Financial Reports by Securities Firms, the Regulations Governing the Preparationof Financial Reports by Futures Commission Merchants, the Regulations Governing the Preparation of FinancialReports by Insurance Companies, and International Accounting Standards (IAS) 34 "Interim FinancialReporting", endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China(“ FSC” ) and for such internal control as management determines is necessary to enable the preparation ofconsolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company and itssubsidiaries ability to continue as a going concern, disclosing, as applicable, matters related to going concernand using the going concern basis of accounting unless management either intends to liquidate the Company andits subsidiaries or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including audit committee) are responsible for overseeing the Company and itssubsidiaries financial reporting process.

deychang

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Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as awhole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report thatincludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an auditconducted in accordance with the auditing standards generally accepted in the Republic of China will alwaysdetect a material misstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence the economicdecisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with auditing standards generally accepted in the Republic of China, weexercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether dueto fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidencethat is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theCompany and its subsidiaries internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates andrelated disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, basedon the audit evidence obtained, whether a material uncertainty exists related to events or conditions that maycast significant doubt on the Company and its subsidiaries’ ability to continue as a going concern. If weconclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to therelated disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modifyour opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.However, future events or conditions may cause the Company and its subsidiaries to cease to continue as agoing concern.

5. Evaluate the overall presentation, structure and content of the consolidated financial statements, includingthe disclosures, and whether the consolidated financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or businessactivities within the Company and its subsidiaries to express an opinion on the consolidated financialstatements. We are responsible for the direction, supervision, performance of the Group audit and developingthe Group audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope andtiming of the audit and significant audit findings, including any significant deficiencies in internal control thatwe identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethicalrequirements regarding independence, and to communicate with them all relationships and other matters thatmay reasonably be thought to bear on our independence, and where applicable, related safeguards.

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From the matters communicated with those charged with governance, we determine those matters that were ofmost significance in the audit of the consolidated financial statements of the current period and are therefore thekey audit matters. We describe these matters in our auditors’ report unless law or regulation precludes publicdisclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonably be expected tooutweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Wu, Lin and Tzang,Kuo-Yang.

KPMG

Taipei, Taiwan (Republic of China)August 20, 2021

Notes to Readers

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

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

deychang

新建印章

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese)CTBC FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES

Consolidated Balance SheetsJune 30, 2021, December 31 and June 30, 2020(Expressed in Thousands of New Taiwan Dollars)

June 30, 2021 December 31, 2020 June 30, 2020　ASSETS Amount % Amount % Amount %

11000 　Cash and cash equivalents (Note 4 and 6(a)) $ 158,613,452 2 142,085,440 2 140,363,591 211500 　Due from the central bank and call loans to banks

(Note 6(b), 7 and 8)331,853,201 5 357,920,481 5 254,033,172 4

12000 　Financial assets measured at fair value through profitor loss (Note 4, 6(c) and (u), and 7 )

486,292,893 7 529,747,338 8 552,133,674 9

12150 　Financial assets measured at fair value through othercomprehensive income (Note 4, 6(d) and (u), and8)

578,763,630 9 644,711,761 10 585,550,675 9

12200 　Investments in debt instruments measured atamortized cost (Note 4, 6(e) and (u), and 8)

1,873,156,999 28 1,826,984,725 28 1,797,048,196 28

12300 　Financial assets-hedging (Note 4 and 6(f)) 60,870 - 16,394 - 171,721 -12500 　Securities purchased under resell agreements (Note 4

and 6(g))6,732,210 - 3,953,395 - 10,418,546 -

13000 　Receivables-net (Note 4, 6(h), (j) and (au), 7 and 8) 167,211,567 3 179,275,408 3 179,885,256 313200 　Current income tax assets (Note 4) 1,663,568 - 1,511,113 - 1,235,670 -13500 　Loans-net (Note 4, 6(i), (j) and (au), 7 and 8) 2,653,198,575 40 2,528,287,216 38 2,504,387,399 3913700 　Reinsurance contract assets-net (Note 4 and 6(k)) 3,161,894 - 3,062,366 - 2,540,788 -15000 　Investment under equity method-net (Note 4 and

6(l))30,865,687 - 31,438,820 1 29,912,551 1

15500 　Other financial assets-net (Note 4, 6(j), (m) and (ao),and 8)

159,590,914 3 127,858,688 2 94,518,429 2

18000 　Investment property-net (Note 4 and 6(n)) 89,906,003 1 86,925,071 1 84,961,584 118500 　Premises and equipment-net (Note 4 and 6(o)) 49,613,194 1 49,310,211 1 50,003,009 118600 　Right-of-use assets-net (Note 4 and 6(p)) 17,170,001 - 16,209,281 - 16,068,998 -19000 　Intangible assets-net (Note 4 and 6(q)) 24,477,589 - 24,603,501 - 24,457,394 -19300 　Deferred income tax assets (Note 4) 17,913,154 - 18,373,870 - 16,935,263 -19500 　Other assets-net (Note 4, 6(r) and 8) 44,948,166 1 44,392,100 1 37,312,735 1

TOTAL ASSETS $ 6,695,193,567 100 6,616,667,179 100 6,381,938,651 100

June 30, 2021 December 31, 2020 June 30, 2020　LIABILITIES AND EQUITY Amount % Amount % Amount %Liabilities:

21000 　Deposits from the central bank and banks (Note 6(s)and 7)

$ 48,055,219 1 55,993,946 1 58,001,422 1

21500 　Due to the central bank and banks (Note 6(t) and 8) 13,244,779 - 16,214,708 - 16,095,558 -22000 　Financial liabilities measured at fair value through

profit or loss (Note 4 and 6(c))56,035,528 1 79,847,010 1 124,527,154 2

22300 　Financial liabilities-hedging (Note 4 and 6(f)) 116,600 - 211,672 - 28,272 -22500 　Securities sold under repurchase agreements (Note 4

and 6(u))90,868,088 1 94,461,164 2 120,072,751 2

22600 　Commercial papers issued-net (Note 6(v)) 15,847,322 - 17,005,163 - 47,404,940 123000 　Payables (Note 6(w) and 7) 105,636,535 2 95,998,453 2 119,662,417 223200 　Current income tax liabilities (Note 4) 8,190,899 - 8,415,865 - 6,254,386 -23500 　Deposits and remittances (Note 6(x) and 7) 3,791,571,754 57 3,728,667,552 56 3,454,999,653 5424000 　Bonds payable (Note 6(c) and (y)) 132,882,346 2 125,380,870 2 107,179,394 224600 　Provisions (Note 4, 6(j), (z), (ad) and (ae)) 1,756,564,764 26 1,760,399,327 27 1,752,389,095 2725500 　Other financial liabilities (Note 4, 6(aa) and (ao)) 196,638,252 3 176,691,031 3 159,628,000 326000 　Lease liabilities (Note 4, 6(ab) and 7) 16,227,726 - 15,442,031 - 14,895,873 -29300 　Deferred tax liabilities (Note 4) 5,868,900 - 11,555,649 - 9,172,775 -29500 　Other liabilities (Note 6(ac)) 28,543,855 1 25,071,998 - 30,063,337 -

　　Total liabilities 6,266,292,567 94 6,211,356,439 94 6,020,375,027 94Stockholders’ equity - parent company:

31100 　Capital stock:31101 　　Common stock (Note 6(ag)) 194,969,896 3 194,969,896 3 194,969,896 331103 　　Preferred stock (Note 6(ag)) 4,999,900 - 4,999,900 - 4,999,900 -31500 　Capital surplus (Note 6(ag)) 58,732,202 1 58,754,923 1 58,754,923 132000 　Retained earnings:32001 　　Legal reserve 32,003,213 - 32,003,213 - 32,003,213 132003 　　Special reserve 16,188,405 - 16,188,405 - 16,188,405 -32011 　　Undistributed earnings (Note 6(ah)) 130,916,913 2 97,217,071 2 73,783,605 132500 　Other equity interest (Note 6(ag)) (8,985,357) - 1,097,162 - (19,216,718) -39500 Non-controlling interests 75,828 - 80,170 - 80,400 -

　　Total equity 428,901,000 6 405,310,740 6 361,563,624 6TOTAL LIABILITIES AND EQUITY $ 6,695,193,567 100 6,616,667,179 100 6,381,938,651 100

See accompanying notes to financial statements.

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Consolidated Statements of Comprehensive IncomeFor the three and six months ended June 30, 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Share)

For the three months ended June 30 For the six months ended June 302021 2020 2021 2020

Amount % Amount % Amount % Amount %41000 Interest income (Note 6(ak) and 7) $ 30,338,284 80 32,560,779 68 60,816,830 71 67,084,181 6151000 Less: Interest expenses (Note 6(ak) and 7) (3,558,090) (9) (5,221,444) (11) (7,203,070) (8) (12,154,792) (11)

Net income of interest (Note 6(ak)) 26,780,194 71 27,339,335 57 53,613,760 63 54,929,389 50　Net non-interest income (loss)

49800 Service fee and commissions income (Note 6(al) and 7) 6,140,636 16 4,695,565 10 13,657,008 16 11,819,277 1149810 Net insurance (losses) income (Note 6(am)) (3,940,092) (11) 7,352,270 15 (7,111,694) (8) 29,066,617 2649820 Gains on financial assets measured at fair value through profit or loss (Note 6(an)) 18,483,139 49 28,220,356 59 19,550,338 23 2,715,361 249825 Gains on investment properties 275,518 1 129,181 - 448,411 - 250,236 -49835 Realized gains on financial assets measured at fair value through other comprehensive

income3,438,946 9 3,744,987 8 9,240,961 11 8,644,290 8

49850 Gains on derecognition of financial assets measured at amortized cost (Note 6(e)) 3,446,034 9 1,420,710 3 7,390,867 9 1,441,218 149870 Foreign exchange losses (14,339,442) (38) (11,705,333) (24) (13,174,101) (15) (9,778,761) (9)49880 Reversal of (provision for) impairment loss on assets 46,143 - (39,123) - 113,311 - (117,008) -49890 Proportionate share of gains from associates or joint ventures under equity method (Note

6(l))202,116 - 840,844 2 405,870 - 720,716 1

49898 (Losses) gains on reclassification under the overlay approach (Note 6(c)) (3,148,315) (8) (16,290,247) (34) 1,161,884 1 11,057,051 1049900 Net other non-interest income 1,016,713 3 2,564,120 5 1,986,440 2 1,633,637 258099 Public-welfare lottery payment (421,309) (1) (530,621) (1) (1,682,839) (2) (1,788,224) (2)

　　Net revenue 37,980,281 100 47,742,044 100 85,600,216 100 110,593,799 10058100 Provisions for bad debt expenses, commitment and guarantee liability provision (Note

6(j))(1,374,647) (4) (3,557,173) (7) (2,305,943) (3) (5,489,098) (5)

58300 Net change in provisions for insurance liabilities (Note 6(ap)) (4,702,884) (12) (15,749,438) (33) (10,421,511) (12) (47,425,189) (43)Operating expenses:

58501 Employee benefits expenses (Note 6(aq)) (10,060,188) (26) (10,183,937) (21) (21,655,578) (25) (18,264,067) (17)58503 Depreciation and amortization expenses (Note 6(ar)) (1,769,378) (5) (1,792,251) (4) (3,564,954) (4) (3,593,403) (3)58599 Other general and administrative expenses (Note 6(at)) (5,158,611) (14) (5,304,076) (11) (10,183,265) (12) (10,428,604) (9)

　　Total operating expenses (16,988,177) (45) (17,280,264) (36) (35,403,797) (41) (32,286,074) (29)Profit from continuing operations before tax 14,914,573 39 11,155,169 24 37,468,965 44 25,393,438 23

61003 Less: Income tax expenses(Note 6(af)) 1,173,899 3 4,137,234 9 4,018,869 5 6,214,416 6

Profit 13,740,674 36 7,017,935 15 33,450,096 39 19,179,022 1769500 Other comprehensive income (losses) : 69560 Components of other comprehensive income (losses) that will not be reclassified to profit

or loss69561 Gains on remeasurement of defined benefit plans 19,052 - 5,304 - 19,546 - 5,929 -69565 Change in fair value of financial liability attributable to change in credit risk of liability (157,547) - (2,990,751) (6) (64,468) - (387,865) -69567 Unrealized gains (losses) from investments in equity instruments measured at fair value

through other comprehensive income2,607,076 7 11,599,389 24 11,745,673 14 (8,145,431) (7)

69563 Share of other comprehensive income (losses) of associates and joint ventures accountedfor using equity method, components of other comprehensive income that will not bereclassified to profit or loss

57,540 - (917,140) (2) 19,940 - (932,278) (1)

69569 Less: Income tax related to items that will not be reclassified to profit or loss 65,021 - (111,490) - 528,264 1 (1,212,725) (1)Components of other comprehensive income (losses) that will not be reclassified to

profit or loss2,461,100 7 7,808,292 16 11,192,427 13 (8,246,920) (7)

69570 Components of other comprehensive income (losses) that will be reclassified to profit orloss

69571 Exchange differences on translation of foreign financial statements (2,731,727) (7) (396,208) (1) (5,923,573) (7) (2,528,424) (2)69583 Unrealized gains (losses) from debt instruments measured at fair value through other

comprehensive income4,572,559 12 12,228,903 26 (16,160,970) (19) 757,968 1

69575 Share of other comprehensive income (losses) of associates and joint ventures accountedfor using equity method, components of other comprehensive income that will bereclassified to profit or loss

247,980 1 339,451 1 (309,085) - 201,670 -

69590 Other comprehensive losses on reclassification under the overlay approach 3,148,315 8 16,290,247 34 (1,161,884) (1) (11,057,051) (10)69579 Less: Income tax related to items that are or may be reclassified to profit or loss 1,025,371 3 3,223,336 7 (2,569,101) (3) (2,435,930) (2)

Components of other comprehensive income (losses) that will be reclassified to profitor loss

4,211,756 11 25,239,057 53 (20,986,411) (24) (10,189,907) (9)

69500 Other comprehensive income (losses) 6,672,856 18 33,047,349 69 (9,793,984) (11) (18,436,827) (16)Total comprehensive income $ 20,413,530 54 40,065,284 84 23,656,112 28 742,195 1Net income attributable to: Parent company $ 13,740,532 36 7,017,158 15 33,449,249 39 19,177,109 17 Non-controlling interest 142 - 777 - 847 - 1,913 -

$ 13,740,674 36 7,017,935 15 33,450,096 39 19,179,022 17Comprehensive income attributable to:

Parent company $ 20,414,517 54 40,056,357 84 23,660,454 28 745,356 1Non-controlling interest (987) - 8,927 - (4,342) - (3,161) -

$ 20,413,530 54 40,065,284 84 23,656,112 28 742,195 1Earnings per share (unit: NT Dollars) (Note 6(aj)) $ 0.70 0.31 1.72 0.93


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Consolidated Statements of Changes in EquityFor the six months ended June 30, 2021 and 2020(Expressed in Thousands of New Taiwan Dollars)

Stockholder’s Equity - parent companyCapital Stock Retained earnings Other equity interest

Commonstock Preferred stock Capital surplus Legal reserve Special reserve

Undistributedearnings

Exchangedifferences of

overseassubsidiaries'

financial reportstranslation

Unrealized gains(losses) on financialassets measured at

fair valuethrough othercomprehensive

income

Change indesignated as

financial liabilitiesmeasured at fair

value through profitor loss attributable

to credit risk

Othercomprehensive

income (losses) onreclassification

under the overlayapproach

Stockholders’ equity- parent Company

Non-controllinginterests Total equity

Balance at January 1, 2020 $ 194,969,896 4,999,900 58,688,782 27,793,018 50,412,813 46,503,092 (7,642,509) 4,050,190 1,086,384 277,123 381,138,689 81,151 381,219,840Net income - - - - - 19,177,109 - - - - 19,177,109 1,913 19,179,022Other comprehensive income (losses) - - - - - 5,274 (2,234,424) (6,599,529) (527,569) (9,075,505) (18,431,753) (5,074) (18,436,827)Total comprehensive income (losses) - - - - - 19,182,383 (2,234,424) (6,599,529) (527,569) (9,075,505) 745,356 (3,161) 742,195Appropriation and distribution of retained earnings:　Legal reserve appropriated - - - 4,210,195 - (4,210,195) - - - - - - -　Cash dividends of common stock - - - - - (19,496,990) - - - - (19,496,990) - (19,496,990)　Cash dividends of preferred stock - - - - - (989,325) - - - - (989,325) - (989,325)　Reversal of special reserve - - - - (34,224,408) 34,224,408 - - - - - - -Changes in equity of associates and joint ventures accounted for using equity method - - 66,141 - - - - - - - 66,141 - 66,141Changes in ownership interests in subsidiaries - - - - - (2,410) - - - - (2,410) 2,410 -Disposal of equity instruments designated at fair value through other comprehensive income - - - - - (1,449,121) - 1,449,121 - - - - -Changes in special reserve - - - - - 21,763 - - - - 21,763 - 21,763Balance at June 30, 2020 $ 194,969,896 4,999,900 58,754,923 32,003,213 16,188,405 73,783,605 (9,876,933) (1,100,218) 558,815 (8,798,382) 361,483,224 80,400 361,563,624

Balance at January 1,2021 $ 194,969,896 4,999,900 58,754,923 32,003,213 16,188,405 97,217,071 (10,680,748) 10,770,530 (72,291) 1,079,671 405,230,570 80,170 405,310,740Net Income - - - - - 33,449,249 - - - - 33,449,249 847 33,450,096Other comprehensive income (losses) - - - - - 14,855 (5,002,954) (2,667,276) (51,574) (2,081,846) (9,788,795) (5,189) (9,793,984)Total comprehensive income (losses) - - - - - 33,464,104 (5,002,954) (2,667,276) (51,574) (2,081,846) 23,660,454 (4,342) 23,656,112Changes in equity of associates and joint ventures accounted for using equity method - - (22,721) - - - - - - - (22,721) - (22,721)Reorganization - - - - - - (33,517) - - - (33,517) - (33,517)Disposal of equity instruments designated at fair value through other comprehensive income - - - - - 245,352 - (245,352) - - - - -Changes in special reserve - - - - - (9,614) - - - - (9,614) - (9,614)Balance at June 30, 2021 $ 194,969,896 4,999,900 58,732,202 32,003,213 16,188,405 130,916,913 (15,717,219) 7,857,902 (123,865) (1,002,175) 428,825,172 75,828 428,901,000


7


Consolidated Statements of Cash FlowsFor the six months ended June 30, 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars)

For the six months ended June 302021 2020

Cash Flows from Operating Activities:Net Income Before Tax $ 37,468,965 25,393,438Adjustments:

Income and expenses items with no effect on cash flow:Depreciation expense 3,057,869 3,078,080Amortization expense 857,708 801,892Impairment losses on expected credit loss/ Provisions for bad debt expenses, commitments and

guarantee reserve2,305,943 5,489,098

Net losses on financial assets or liabilities measured at fair value through profit 17,299,396 8,597,210Interest expense 7,203,070 12,154,792Interest income (60,816,830) (67,084,181)Dividend income (1,650,178) (1,910,789)Net change in insurance liabilities 10,421,511 47,425,189Net change in other provisions (1,556,698) (1,224,759)Proportionate share of gains from associates or joint ventures under the equity method (405,612) (720,716)Gains on reclassification by applying overlay approach (1,161,884) (11,057,051)Losses on disposal and retirement of premises and equipment 17,462 11,805Gains on disposal of investment properties (232,278) -Losses (gains) on disposal and retirement of intangible assets 1,424 (608)Gains on disposal of investments accounted for using equity method (258) -(Reversal of) provision for impairment losses on financial assets (112,166) 118,724Reversal of impairment losses on non-financial assets (1,145) (1,716)(Gains) losses on disposal of foreclosed properties (811) 1,951Unrealized foreign exchange gains on insurance liabilities (12,506,841) (8,450,682)Other adjustments 689,400 231,377

Subtotal of income and expense items with no effect on cash flows (36,590,918) (12,540,384)Changes in Operating Assets and Liabilities:

Net Changes in Operating Assets:Increase in due from the central bank and call loans to banks (22,251,869) (20,406,994)Decrease (increase) in financial assets measured at fair value through profit or loss 26,010,651 (59,163,186)Decrease (increase) in financial assets measured at fair value through other comprehensive income 61,552,156 (16,826,114)Increase in investments in debt instruments measured at amortized cost (46,080,257) (75,836,849)(Increase) decrease in hedging financial assets (44,476) 159,043Decrease in receivables 12,458,851 13,401,037Increase in loans (127,281,381) (38,493,308)Increase in reinsurance contract assets (35,081) (171,148)Increase in other financial assets (2,913,648) (808,996)(Increase) decrease in other assets (2,054,739) 3,543,228

Net Changes in Operating Assets (100,639,793) (194,603,287)Net Changes in Operating Liabilities:

(Decrease) increase in deposits from the central bank and other banks (7,938,727) 4,801,124(Decrease) increase in financial liabilities measured at fair value through profit or loss (20,163,245) 12,743,250Decrease in hedging financial liabilities (95,072) (9,165)Increase in payables 12,016,415 3,170,211Increase in deposits and remittances 62,904,202 94,929,029Decrease in employee benefits reserve (107,750) (72,691)Decrease in other financial liabilities (7,531,380) (18,913,646)Increase in other liabilities 3,471,857 5,705,177Net Changes in Operating Liabilities 42,556,300 102,353,289

Net Changes in Operating Assets and Liabilities (58,083,493) (92,249,998)Sum of Adjustments (94,674,411) (104,790,382)


7-1


Consolidated Statements Of Cash FlowsFor the six months ended June 30, 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars)


Cash Used in by Operating Activities $ (57,205,446) (79,396,944)Interest received 61,075,467 67,369,071Dividends received 1,428,865 1,743,464Interest paid (7,971,526) (12,275,534)Income taxes paid (7,774,319) (2,913,101)

Net Cash Flows Used in by Operating Activities (10,446,959) (25,473,044)Cash Flows from Investing Activities:

Purchase of financial assets under equity method (863,926) (2,205,354)Proceeds from disposal of investments accounted for using equity method 508 -Purchase of premises and equipment (642,327) (694,968)Disposal of premises and equipment 976 11,654Purchase of intangible assets (762,821) (791,618)Disposal of intangible assets - 4,481Proceed from disposal of foreclosed collateral 21,344 4,513Purchase of investment properties (5,754,615) (3,642,023)Proceeds from disposal of investment properties 1,428,875 50,591

Net Cash Flows Used in Investing Activities (6,571,986) (7,262,724)Cash Flows from Financing Activities:

Decrease in due to the central bank and banks (2,969,929) (4,800,602)(Decrease) increase in commercial papers payable (1,158,400) 2,969,000Proceeds from issuing bonds 6,500,000 10,000,000Issuance of financial debentures 1,000,000 -Repayments of financial debentures (7,293,660) (6,445,000)(Decrease) increase in securities sold under repurchase agreement (3,593,076) 14,806,659Increase in financial liabilities designated at fair value through profit or loss 3,906,700 -Payment of lease liabilities (1,832,411) (1,710,060)Interest paid (1,595,488) (1,276,055)

Net Cash Flows (Used in) Provided by Financing Activities (7,036,264) 13,543,942Effect of Exchange Rate Changes on Cash and Cash Equivalents (4,957,113) (949,537)Decrease in Cash and Cash Equivalents (29,012,322) (20,141,363)Cash and Cash Equivalents at the Beginning of the Period 449,691,651 342,323,069Cash and Cash Equivalents at the End of the Period $ 420,679,329 322,181,706Composition of Cash and Cash Equivalents:

Cash and cash equivalents recognized in balance sheet $ 158,613,452 140,363,591Due from the central bank and call loans to bank which meet IAS 7 definition of cash and cash equivalents 255,333,667 171,399,569Securities purchased under resell agreements which meet IAS 7 definition of cash and cash equivalents 6,732,210 10,418,546

Cash and Cash Equivalents at the End of the Period $ 420,679,329 322,181,706


8


Notes to the Consolidated Financial StatementsFor the six months ended June 30, 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(1) Company history

CTBC FINANCIAL HOLDING CO., LTD. (the “Company”) was established on May 17, 2002, through astock conversion (conversion ratio: one to one) with CTBC Bank Co., Ltd. On the same date, followingthe approval from the Securities & Futures Bureau (the “ SFB” ) under the Financial SupervisoryCommission (the “FSC”), Executive Yuan, the shares of the Company started to be traded publicly, whileshares of CTBC Bank Co., Ltd. were delisted.

The Company conducts business in the following areas:

(a) The Company has been approved to invest in the following businesses:

(i) Banking;

(ii) Bills financing;

(iii) Credit cards;

(iv) Trusts;

(v) Insurance;

(vi) Securities;

(vii) Futures;

(viii) Venture capital;

(ix) Investments in overseas financial institutions as approved by the FSC;

(x) Other related financing as approved by the FSC; and

(xi) Other financial related business investments in accordance with the law.

(b) Management of invested businesses stipulated in item (a).

(c) Investments in businesses other than the ones stipulated in item (a) as approved by the FSC.

(d) Other related businesses as approved by the FSC.

(2) Approval date and procedures of the consolidated financial statements:

The consolidated financial reports were approved by the Board of Directors on August 20, 2021.

(Continued)

9

CTBC FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIESNotes to the Consolidated Financial Statements

(3) New standards, amendments and interpretations adopted:

(a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the FinancialSupervisory Commission, R.O.C. (“FSC”) which have already been adopted

The details of impact on the Company and its subsidiaries' adoption of the new amendmentsbeginning January 1, 2021 are as follows:

(i) Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 “ Interest Rate BenchmarkReform－Phase 2” (the Phase 2 amendments)

The Company and its subsidiaries applied the Phase 2 amendments retrospectively. However,in accordance with the exceptions permitted in the Phase 2 amendments, the Company and itssubsidiaries have elected not to restate the prior period to reflect the application of theseamendments, including not providing additional disclosures for 2020. There is no impact onbeginning equity balances as a result of retrospective application.

The Phase 2 amendments provide practical relief from certain requirements in the standards.These reliefs relate to modifications of financial instruments or lease contracts or hedgingrelationships when a benchmark interest rate in a contract is replaced with a new alternativebenchmark rate.

When the basis for determining the contractual cash flows of a financial instrument is changedas a direct consequence of interest rate benchmark reform and is made on an economicallyequivalent basis, the Phase 2 amendments provide a practical expedient to update the effectiveinterest rate of a financial asset or financial liability before applying the existing requirementsin the standards.

Please refer to Note 6(au)(iii) for information with regard to financial risk information.

(ii) Amendments to IFRS 16 “Covid-19-Related Rent Concessions beyond June 30, 2021”

A one-year extension to the practical expedient is available to lessees when accounting forCOVID-19-related rent concessions reduce the lease payments originally due on or before June30, 2022. The Company and its subsidiaries have elected to apply the amendments on January1, 2021, with early adoption. In response to the rent concessions which occurred as a directconsequence of the Covid-19 pandemic, the Company and its subsidiaries elect to use thepractical expedient without assessing the lease modifications. In accordance with the practicalexpedient, the effect of the change in the lease liability is reflected in profit or loss in theperiod in which the event or condition that triggers the rent concession occurs.

(iii) Other amendments

● Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9”

The Company and its subsidiaries assess that the adoption of the above-mentioned standardwould not have any material impact on its consolidated financial statements.

(Continued)

10


(b) The impact of IFRS issued by the FSC but not yet effective

The Company and its subsidiaries assess that the adoption of the following new amendments,effective for annual period beginning on January 1, 2022, would not have a significant impact on itsconsolidated financial statements:

● Amendments to IAS 16 “Property, Plant and Equipment－Proceeds before Intended Use”

● Amendments to IAS 37 “Onerous Contracts－Cost of Fulfilling a Contract”

● Annual Improvements to IFRS Standards 2018–2020

● Amendments to IFRS 3 “Reference to the Conceptual Framework”

(c) The impact of IFRS issued by IASB but not yet endorsed by the FSC

The following new and amended standards, which may be relevant to the Company and itssubsidiaries, have been issued by the International Accounting Standards Board (IASB), but have yetto be endorsed by the FSC:

Standards orInterpretations Content of amendment

Effective date perIASB

Amendments to IFRS 10 andIAS 28 “Sale or Contributionof Assets Between an Investorand Its Associate or JointVenture”

A full gain or loss is recognized inaccounting when sale or contribution ofassets between an investor and its associateor joint venture occurred, if it’ s consideredas the loss of control of a subsidiary thatconstitutes a business. A deferred unrealizedgain or loss computed by shareholding ratiois recognized when the transaction thatinvolves assets does not constitute abusiness.

Effective date to bedetermined by IASB

(Continued)

11




IFRS 17 “InsuranceContracts”

The new standard of accounting forinsurance contracts contain recognition,measurement, presentation and disclosure ofinsurance contracts issued, and the mainamendments are as follows: ● Recognition: the beginning of the

coverage period of the group of contracts,the date when the first payment from apolicyholder in the group becomes dueand when the group becomes onerousshall recognize a group of insurancecontracts it issues from the earliest.

● Measurement: on initial recognition, anentity shall measure a group of insurancecontracts at the total of the fulfilmentcash flows and the contractual servicemargin. For subsequent measurement, theentity shall estimate the cash flows,discount rates and the adjustment fornon-financial risk.

● Presentation and disclosure: thepresentation of insurance revenue isbased on the provision of service patternand investment components excludedfrom insurance revenue and service fee.

January 1, 2023

Amendments to IFRS 17“Insurance Contracts”

The fundamental principles introduced whenthe Board first issued IFRS 17 in May 2017remain unaffected. The amendments aredesigned to:● reduce costs by simplifying some

requirements in the Standard；● make financial performance easier to

explain; and● ease transition by deferring the effective

date of the Standard to 2023 and byproviding additional relief to reduce theeffort required when applying IFRS 17for the first time.

January 1, 2023

(Continued)

12




Amendments to IAS 1“Disclosure of AccountingPolicies”

The key amendments to IAS 1 include:● requiring companies to disclose their

material accounting policies rather thantheir significant accounting policies;

● clarifying that accounting policies relatedto immaterial transactions, other events orconditions are themselves immaterial andas such need not be disclosed; and

● clarifying that not all accounting policiesthat relate to material transactions, otherevents or conditions are themselvesmaterial to a company’ s financialstatements.

January 1, 2023

Amendments to IAS 8“Definition of AccountingEstimates”

The amendments introduce a new definitionfor accounting estimates: clarifying that theyare monetary amounts in the financialstatements that are subject to measurementuncertainty. The amendments also clarify therelationship between accounting policies andaccounting estimates by specifying that acompany develops an accounting estimate toachieve the objective set out by anaccounting policy.

January 1, 2023

Amendments to IAS 12“Deferred Tax related toAssets and Liabilities arisingfrom a Single Transaction”

The amendments narrowed the scope of therecognition exemption so that it no longerapplies to transactions that, on initialrecognition, give rise to equal taxable anddeductible temporary differences.

January 1, 2023

The Company and its subsidiaries are evaluating the impact of its initial adoption of theabovementioned standards or interpretations on its consolidated financial position and consolidatedfinancial performance. The results thereof will be disclosed when the Company completes itsevaluation.

The Company and its subsidiaries do not expect the following other new and amended standards,which have yet to be endorsed by the FSC, to have a significant impact on its consolidated financialstatements:

● Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”

(Continued)

13


(4) Summary of significant accounting policies:

This report was originally prepared in Chinese language. When conflicts or ambiguities arise ininterpretations between the two versions, the Chinese version shall prevail.

(a) Assertion of compliance

The consolidated financial reports were prepared in accordance with the Regulations Governing thePreparation of Financial Reports by Financial Holding Companies, Regulations Governing thePreparation of Financial Reports by Public Banks, the Regulations Governing the Preparation ofFinancial Reports by Securities Firms, the Regulations Governing the Preparation of FinancialReports by Futures Commission Merchants, the Regulations Governing the Preparation of FinancialReports by Insurance Companies, International Auditing Standards No.34 “ Interim FinancialReporting” as accepted by the FSC. The consolidated financial reports do not need to meet thepartial requirement of disclosing mandatory information in the annual consolidated financial reportsas required by IFRSs, IAS, interpretations and pronouncements as accepted by the FSC ( “IFRSs asaccepted by the FSC”).

(b) Basis of preparation

The consolidated financial reports have been prepared on a historical cost basis except for thefollowing material items in the statement of financial position:

(i) Financial instruments measured at fair value through profit or loss (including derivativefinancial instruments);

(ii) Financial instruments measured at fair value through other comprehensive income;

(iii) Hedging financial instruments measured at fair value;

(iv) Cash-settled share-based payment agreements liability measured at fair value;

(v) Defined benefit assets, which are recognized as the net amount of pension plan assets plusunrecognized prior service cost and unrecognized actuarial losses, minus unrecognizedactuarial gains and present value of defined benefits obligation; and

(vi) Reinsurance assets, insurance liabilities and reserve for financial insurance contracts, whichare recognized in compliance with the Regulations Governing the Provision of Reserves byInsurance Companies.

(c) Basis of consolidation

(i) Basis of compilation for consolidated financial reports

The consolidated financial reports encompass the Company itself and controlled entities. Allsignificant intra-group transactions are eliminated.

(ii) The control of an entity by the Company and subsidiaries may be indicated if the followingcriteria are met simultaneously.

1) The Company and subsidiaries have powers to obtain the majority of the benefits of theentity’s activities through voting rights or other rights;

(Continued)

14


2) By having a right to the majority of the entity’s benefits, the Company and subsidiariesare exposed to the entity’s business risks;

3) The Company and subsidiaries are capable of using leverage over the entity to influencethe benefits of the entity.

(iii) Subsidiaries and special purpose entities are included in the consolidated financial reports:

Name of ShareholdingInvestor

Company Name of Subsidiary Primary BusinessJune 30,

2021December31, 2020

June 30,2020 Description

The Company CTBC Bank Co., Ltd. (“CTBC Bank”) Commercial banking andfinancing business

%100.00 %100.00 %100.00

The Company CTBC Securities Co., Ltd. (“CTBC Securities”) Securities and futuresbusiness

%100.00 %100.00 %100.00

The Company CTBC Venture Capital Co., Ltd. (“CTBC VentureCapital”)

Venture capital business %100.00 %100.00 %100.00

The Company CTBC Asset Management Co., Ltd. (“CTBC AssetManagement”)

Asset managementbusiness

%100.00 %100.00 %100.00

The Company Taiwan Lottery Co., Ltd. (“Taiwan Lottery”) Issuing, selling,promoting, drawing,redeeming, andmanaging kinds oflottery products

%100.00 %100.00 %100.00

The Company Taiwan Life Insurance Co., Ltd. (“Taiwan Life”) Life insurance business %100.00 %100.00 %100.00

The Company CTBC Investments Co., Ltd. (“CTBC Investments”) Investment andtrust business

%100.00 %100.00 %100.00

CTBC Bank CTBC Bank (Philippines) Corp. Commercial banking andfinancing business

%99.72 %99.72 %99.72 (Note 1)

CTBC Bank PT. Bank CTBC Indonesia Commercial banking andfinancing business

%99.00 %99.00 %99.00

CTBC Bank CTBC Bank Corp. (Canada) Commercial banking andfinancing business

%100.00 %100.00 %100.00

CTBC Bank The Tokyo Star Bank, Ltd. Commercial banking andfinancing business

%100.00 %100.00 %100.00

CTBC Bank CTBC Capital Corp. Investment business %100.00 %100.00 %100.00

The Tokyo StarBank, Ltd.

Tokyo Star Business Finance, Ltd. Financing and assurancebusiness

%100.00 %100.00 %100.00


TSB Servicer, Ltd. Debt managementbusiness

%- %100.00 %100.00 (Note 3)

CTBC CapitalCorp.

CTBC Bank Corp. (USA) Commercial banking andfinancing business

%100.00 %100.00 %100.00

CTBC VentureCapital

CTBC Capital International Co., Limited Holding company %- %- %100.00 (Note 2)

CTBC VentureCapital

CTBC International Co., Limited Holding company %100.00 %100.00 %100.00 (Note 6)

CTBCInternationalCo., Limited

CTBC Financial Leasing Co., Ltd. (“CTBC Leasing(China)”)

Financial leasing %100.00 %100.00 %100.00

CTBCSecurities Co.,Ltd

CTBC (Mauritius) Holding Co., Ltd. Investment business %100.00 %100.00 %100.00 (Note 4)


CTBC Investment Service Co., Ltd. Securities investmentconsultant business

%100.00 %100.00 %100.00

(Continued)

15


Name of ShareholdingInvestor

Company Name of Subsidiary Primary BusinessJune 30,




CTBC Securities Venture Capital Co., Ltd. Venture capital business %100.00 %100.00 %100.00


CTBC Asia Limited Securities business %100.00 %100.00 %100.00 (Note 5)

Taiwan Life CTBC Capital Co., Ltd. (used name: TLG CapitalCo., Ltd.)

Installment, leasing andaccount receivablefactoring business

%100.00 %100.00 %100.00

Taiwan Life CTBC Insurance Co., Ltd. (used name: TLGInsurance Co., Ltd.)

Property insurancebusiness

%100.00 %100.00 %100.00

(iv) Below are investees excluded in the consolidated financial reports while the Company has defacto control or over 50% holdings:

ShareholdingName of Investor

CompanyName of

Subsidiary Primary BusinessJune 30,



TheCompany

CTBC Security Co., Ltd. Protection, fire and lifesafety services

%100.00 %100.00 %100.00 The total assets andoperating revenue ofthis investee companyare insignificant.

Taiwan LifeInsuranceCo., Ltd.

HoFa Land DevelopmentCo., Ltd.

Premises developmentand transaction

%90.00 %90.00 %90.00 Has no de facto controlover the entity.

Taiwan LifeInsuranceCo., Ltd.

Wu Tzu Development Co.,Ltd.

Athletics andrecreational sportsstadium

%99.00 %99.00 %99.00 Has no de facto controlover the entity.

Note 1: The subsidiary, CTBC Bank increased its capital contribution to CTBC Bank(Philippines) Corp. in March 2020, increasing its percentage of ownership to99.72%.

Note 2: The company had been liquidated on December 4, 2020.

Note 3: The company had been liquidated on March 16, 2021.

Note 4: The company is still in the process of liquidation.

Note 5: The subsidiary CTBC Securities Co., Ltd. acquired equity stakes of CTBC AsiaLimited from CTBC (Mauritius) Holding Co., Ltd. in February 2021. Because it is areorganization within the Group, it is deemed to have held the equity from thebeginning.

Note 6: The subsidiary CTBC Venture Capital acquired equity stakes of CTBC InternationalCo., Limited that CTBC Asset Management has held on March 31, 2021. Because itis a reorganization within the Group, it is deemed to have held the equity from thebeginning.

(Continued)

16


(d) Foreign currency

(i) A foreign currency transaction that is denominated or requires settlement in a foreign currency,shall be recorded on initial recognition in the functional currency by applying to the foreigncurrency spot exchange rate between the functional currency and the foreign currency on thedate of the transaction.

(ii) On each balance sheet date, foreign currency monetary items shall be translated using theclosing rate. Non-monetary items that are measured in terms of historical cost in a foreigncurrency shall be translated using the exchange rate on the date of the transaction; and non-monetary items that are measured at fair value in a foreign currency shall be translated usingthe exchange rates on the date when the fair value was determined.

(iii) Foreign currency differences arising on the settlement of a foreign currency transaction arerecognized in current profit or loss. Foreign currency differences arising on the retranslation ofmonetary items, except for differences arising on the retranslation of monetary itemsdesignated as the hedging instruments in a hedge of the net investments in foreign operation orin a qualifying cash flow hedge are recognized directly in other comprehensive income, othersare recognized in profit or loss when it incurred.

(iv) When a gain or loss on a non-monetary item is recognized in other comprehensive income, anyexchange difference of that gain or loss shall be recognized in other comprehensive income.Otherwise, when a gain or loss on a non-monetary item is recognized in profit or loss, anyexchange difference of that gain or loss shall be recognized in profit or loss.

(v) Functional currency and presentation currency

The functional currency of the Company and subsidiaries is the currency of the primaryeconomic environment in which they operate. The consolidated financial reports are presentedin New Taiwan dollars, the functional currency of the Company.

(e) Cash and cash equivalents

The statements of cash flows are compiled based upon cash and cash equivalents. Cash comprisescash on hand, savings accounts, checking accounts, and unrestricted time deposits or negotiablecertificates of deposit which may be terminated anytime without impairing the principal. Cashequivalents consist of short-term and highly liquid investments that are readily convertible to knownamounts of cash and will mature within a short period so that interest rate fluctuations have littleeffect on their values. Cash equivalents include short-term bills with maturities within three monthsfrom the investment date.

Cash and cash equivalents comprise time deposits that are used by the Company and subsidiaries inthe management of its short-term cash commitments and are not for investment or other purposes.Additionally, the aforementioned deposits are readily convertible to fixed amount of cash and aresubject to an insignificant risk of changes in their fair value.

(Continued)

17


(f) Financial instruments

Financial assets held by the Company and subsidiaries are recorded on the trading date, the fairvalue is recorded at the time of initial recognition. Except for financial instruments classified as fairvalue through profit or loss (FVTPL), other financial instruments are initially recognized atacquiring or issuing cost plus transaction costs. However, if the handling fee arising from the saleand purchase does not reach the principle of materiality, it will be charged to current expenses. Upondisposition, the cost of sale of equity securities is determined by the moving-average method, and thecost of sale of debt securities is determined by the first-in, first-out (FIFO) method.

(i) Financial assets

Financial assets are classified into the following categories: fair value through profit or loss(FVTPL), fair value through other comprehensive income (FVOCI) and measured at amortizedcost.

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

Financial assets measured at fair value through profit or loss, if one of the followingconditions is met:

a) Financial assets held for trading.

i) Its main purpose is to sell or repurchase in the near future.

ii) When it was originally recognized, it was part of the identifiable financialcommodity investment of a group of merged management with evidenceshows the mode of operation in which this combination is actually a short-term profit in the near term.

b) Financial assets that are not measured at amortized cost or fair value through othercomprehensive income.

c) In addition to being designated as a hedged item by hedge accounting, financialassets designated as at fair value through profit or loss at initial recognition.

d) Derivative financial instrument.

At each balance sheet date, the fair value is remeasured, and the resulting gain or lossfrom such remeasurement is recognized in current profit or loss.

2) Financial assets measured at fair value through other comprehensive income

a) Financial assets measured at fair value through other comprehensive income, ifboth of the following conditions are met and financial assets were not designated asfinancial assets measured at fair value through profit or loss:

i) The financial assets are held within a business model whose objective isachieved by both collecting contractual cash flows and selling financialassets.

(Continued)

18


ii) The contractual terms of the financial asset give rise on specified dates tocash flows that are solely payments of principal and interest on the principalamount outstanding.

1. Principal is the fair value of the financial asset at initial recognition.Interest consists of consideration for the time value of money, for thecredit risk associated with the principal amount outstanding during aparticular period of time and for other basic lending risks and costs, aswell as a profit.

2. However, in some cases, the time value of money element may bemodified (i.e., imperfect). In such cases, the Company and subsidiariesmust assess the modification to determine whether the contractual cashflows represent solely payments of principal and interest on theprincipal amount outstanding.

The fair value of debt instruments measured at fair value through othercomprehensive income shall be remeasured at each balance sheet date. Theresulting gain or loss from such remeasurement is recognized directly in othercomprehensive income. Interest on a debt instrument shall be recorded underthe accrual basis, with the relevant premium/discount amortized by using theeffective-interest-rate method. Credit losses on the financial instrument shallbe recognized as well. If, in a subsequent period, the impairment lossdecreases, and the decrease can be related objectively to an event occurringafter the impairment was recognized, the previously recognized impairmentloss is reversed through profit or loss. The balance of impaired adjustmentamount in other comprehensive income after the reversal shall not benegative. A gain or loss on financial assets is recognized directly in othercomprehensive income, except for foreign exchange gains or losses arisingfrom monetary financial assets, until the financial assets are derecognized, atwhich time the cumulative gain or loss previously recognized in othercomprehensive income is charged to profit or loss.

b) At initial recognition, an irrevocable election is made to present changes in the fairvalue of an equity instrument that is not held for trading in other comprehensiveincome. When the equity instrument is derecognized, the amounts presented inother comprehensive income shall not be subsequently transferred to profit or loss.However, the cumulative gain or loss may be transferred within equity or intoretained earnings directly. Dividends are recognized in profit or loss unless thedividend represents the recovery of part of the investment costs clearly.

3) Financial assets at amortized cost

Financial assets measured at amortized cost include cash and cash equivalents, debtinstruments measured at amortized cost, securities under repurchase/resell agreements,loans and receivables, deposits pledged and other financial assets that are not measuredat fair value, etc.

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Financial assets measured at amortized cost are initially recognized at whose fair valueplus transaction costs. After initial recognition, the amortized cost minus impairment lossis determined by using the effective-interest-rate method. The interest income andimpairment loss are recognized in profit or loss. Until the financial assets arederecognized, at which time the cumulative gain or loss is charged to profit or loss.

a) Debt instruments at amortized cost

The debt instrument investments held by the Company and subsidiaries shall bemeasured at amortized cost if both of the following conditions are met:

i) The financial assets are held within a business model whose objective isachieved by collecting contractual cash flows; and

ii) The contractual terms of the financial asset give rise on specified dates tocash flows that are solely payments of principal and interest on the principalamount outstanding.

The Company and subsidiaries, whose business model is to hold assets in order tocollect contractual cash flows, may sell financial assets when there is an increase inthe assets’ credit risk. Sales made for other reasons may be consistent with abusiness model whose objective is to hold financial assets in order to collectcontractual cash flows if those sales are infrequent (even if significant in value) orinsignificant in value both individually and in aggregate (even if frequent). For debtinstruments measured at amortized cost, the effective-interest-rate method shall beused to calculate amortized cost and interest revenue. Credit-impaired loss shall berecognized for assets measured at amortized cost. If, in a subsequent period, theimpairment loss decreases, and the decrease can be related objectively to an eventoccurring after the impairment was recognized, the previously recognizedimpairment loss is reversed through profit or loss. The carrying amount after thereversal shall not exceed the recoverable amount.

b) Securities under repurchase/resell agreements

Securities sold/purchased with a commitment to repurchase/resell at apredetermined price are treated as financing transactions. The difference betweenthe cost and the repurchase/resell price is treated as interest expenses/revenue andrecognized over the term of the agreement. On the selling/purchasing date, theseagreements are recognized as securities sold under repurchase agreements orsecurities purchased under resell agreements.

c) Loans and receivables

At initial recognition, loans and receivables include incremental direct transactioncosts. The subsequent measurement recognizes interest revenues through theeffective-interest-rate method on accrual basis, under which the loans andreceivables are carried at amortized cost less impairment losses. Loans arereclassified as a non-accrual account if either of the following conditions is met,and interest collected while accruing of interest has been suspended is included inearnings only to the extent of cash actually received.

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- Collection of payment of principal or interest accrued is considered highlyunlikely; or

- Payment of principal or interest accrued is over 3 or 6 months past due; or

- Payment of principal, interest accrued and other suspense account of credit card isover 90 days past due.

Loans and receivables are assessed on each reporting day and the credit risk ofloans and receivables have been significantly increased since the initial recognition.Comparing the risk of breach of contract on the reporting date and the original dateof recognition, and considering the credit risk from the original recognition , thesignificant increase of reasonable and verifiable information as a basis for theestimation of default risk and expected loss rate. In accordance with the expectedcredit losses and with reference to the “Regulations Governing the Procedures forBanking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans” and relevant regulations issued by the FSC. The provision will bedetermined based on the higher of the amount calculated in accordance withregulatory requirements.

Nonaccrual accounts deemed uncollectible are written off upon approval of theBoard of Directors. The recovery of written-off loans and accounts receivable isaccounted for under the reversal of the allowance for credit losses.

Off-balance-sheet loan commitments and financial guarantee contracts should beevaluated for the possibility of bad debts and the provisions of guarantee orfinancial commitments should be recognized.

4) Financial asset impairment

The Company and subsidiaries should consider the past events, the current situation andthe forecast of future economic conditions, to identify whether the credit risk of financialinstruments have been significantly increased since the initial recognition; After thecredit risk has increased significantly, the impairment loss should be measured as theexpected credit loss during the existence; if there is no significant increase in credit riskafter recognition, the impairment loss should be measured against the 12-month expectedcredit loss. For the judgment and forward-looking adjustment method after therecognition of whether the credit risk has increased significantly, please refer to Note6(au).

5) Derecognition of financial assets

The Company and subsidiaries shall derecognize a financial asset when the contractualrights to the cash flows from the financial asset expire or when the Company andsubsidiaries transfer substantially all the risks and rewards of ownership of the financialassets.

Securities lending agreement or repurchase transactions, where bonds or stocks are takenas collateral, shall not be derecognized, because the Company and subsidiaries haveretained substantially all the risks and rewards of ownership. The transaction of asset-backed securitization is applying to such situation when the Company and subsidiariesstill retained partial risks.

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6) Reclassification of financial assets

The Company and subsidiaries reclassify all affected financial assets in accordance withregulations only when changing the business model of managing financial assets.

7) Overlay approach

The Company’s subsidiary Taiwan Life Insurance Co., Ltd. and subsidiaries may electdesignated financial assets for the overlay approach. A financial asset is eligible fordesignation for the overlay approach if, and only if it is measured at fair value throughprofit or loss applying IFRS 9 but would not have been measured at fair value throughprofit or loss in its entirety applying IAS 39, and it is held in respect of an activity that isconnected with IFRS 17. The Company’s subsidiary Taiwan Life Insurance Co., Ltd. andits subsidiaries have to designate explicitly eligible financial assets for the overlayapproach when and only when they elect to apply the overlay approach. The financialassets should only be designated only when it first applies IFRS 9. Subsequently, theymay designate an eligible financial asset for the overlay approach when, and only whenthat asset is initially recognized or when that asset newly meets the criterion havingpreviously not met.

(ii) Financial liabilities

The financial liability held by the Company and subsidiaries includes a financial liabilitymeasured at fair value through profit or loss (including the instruments designated as at fairvalue through profit or loss), amortized cost of a financial liability and hedge derivatives.

1) Financial liabilities measured at fair value through profit or loss

Financial liability measured at fair value through profit or loss, if one of the followingconditions is met:

a) A financial liability is held for trading if it is acquired or incurred principally forthe purpose of selling or repurchasing it in the near term; on initial recognition it ispart of a portfolio of identified financial instruments that are managed together andfor which there is evidence of a recent actual pattern of short-term profit-taking. Aderivative, except for a derivative that is a financial guarantee contract or adesignated and effective hedging instrument, is classified as instrument held fortrading as well. Financial liabilities held for trading include obligations to deliverfinancial assets borrowed by a short seller.

b) Financial liability designated as measured at fair value through profit or loss at thetime of initial recognition, except that designated as a hedged item in accordancewith the hedge accounting.

Financial liabilities falling under this category are measured at fair value in the balancesheet at the balance sheet date. Moreover, the changes in fair value are recognized ascurrent profit or loss. While for financial liabilities designated at fair value through profitor loss, its fair value changed in the liability’s credit risk should be recognized underother comprehensive income, except for avoiding accounting mismatch or in thecircumstances of loan commitments and financial guarantee contract to provide a loanthat should be accounted as current profit or loss.

(Continued)

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Under certain circumstances, the Company and subsidiaries may not recognize profit orloss of a financial asset or financial liability at initial recognition, if a fair value is notderived from a quoted market price in an active market and is based on the evaluationmethod with data retrieved from unobservable market. In the above scenario, therecognition of the difference between fair value at initial recognition and transactionprice is deferred. After initial recognition, the entity shall recognize the aforesaiddeferred difference as a gain or loss only to the extent that it arises from a change in afactor that market participants would take into account when pricing the asset or liability.

2) Amortized cost of a financial liability

Financial liabilities are classified at amortized cost of a financial liability, except forfinancial liabilities measured at fair value through profit or loss, hedged derivativesfinancial liability, financial bonds payable, financial guarantee contracts, commitments toprovide a loan at a below-market interest rate and financial liabilities that arise when atransfer of a financial asset does not qualify for derecognition or when the continuinginvolvement approach applies.

3) Derecognition of a financial liability

The Company and subsidiaries shall remove a financial liability from its statement offinancial position when, and only when, it is extinguished.

4) Offsetting financial assets and financial liabilities

Financial assets and financial liabilities will be offset and recognized in the net amounton the balance sheet only when the Company and subsidiaries have statutory rights tooffset and intend to net settle or realize assets and to pay off liabilities at the same time.

5) The Company and subsidiaries shall not reclassify any financial liability.

(iii) Derivatives and Hedging Accounting

Derivatives instruments are initially recognized at fair value on contract date and aresubsequently measured at fair value. Fair value includes quoted price in an active market,occurring market transaction prices or model valuation techniques. All derivatives instrumentsare recognized as assets with positive fair value and as liability with negative fair value.

The Company and subsidiaries should accounts for an embedded derivative separately from thehost contract when the host contract is not itself carried at fair value through profit or loss, theterms of the embedded derivative would meet the definition that the economic characteristicsand risks of the embedded derivative are not closely related to the economic characteristics andrisks of the host contract, and the entire hybrid contract is not designated as at fair valuethrough profit or loss. In addition, the embedded derivative is recognized as financial liabilityas measured at fair value through profit or loss.

(Continued)

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When a fair value hedge, cash flow hedge, and hedge of a net investment in a foreign operationare in conformity with all the conditions for the application of hedge accounting, the affectedprofit or loss is recognized by offsetting the changes in the fair value of hedging instrumentsand hedged items. The related accounting treatments are as follows:

1) Fair value hedge

Changes in the fair value of derivatives that are designated and qualified as fair valuehedging instruments against the exposure to changes in fair value of a recognized asset orliability or an unrecognized firm commitment are recognized through profit or loss in thecurrent period.

2) Cash flow hedge

Where a derivative financial instrument is designated as a hedge of the variability in cashflow of a recognized asset or liability or a highly probable forecast transaction, theeffective portion of any gain or loss on remeasurement of the derivative financialinstrument to fair value is recognized directly under other comprehensive income. Whenthe hedged transaction actually affects the profit or loss, the gain or loss previouslyrecognized under other comprehensive income shall be recognized through current profitor loss. Any gain or loss from the change in fair value relating to an ineffective portion ofthe hedge transaction is recognized immediately through profit or loss in the currentperiod.

3) Hedge of a net investment in a foreign operation

The effective portion of any gain or loss on a hedging instrument relating to a hedgeagainst foreign currency fluctuation in a foreign operation is recognized directly in othercomprehensive income until the disposal of the foreign operation, at which time thecumulative gain or loss recognized directly under other comprehensive income isrecognized in profit or loss in the current period.

(iv) Financial guarantee contracts

The Company and subsidiaries recognize financial guarantee liabilities initially at their fairvalue at the date of providing guarantee. The Company and subsidiaries receive commissionincome with non-arm’s length transaction at contract date; this is, the income could representthe fair value of financial guarantee contract. The advanced service fee is recognized asdeferred item and amortized by straight-line method over the life of the financial guarantee.

Financial guarantee contracts shall be subsequently measured by the Company and subsidiariesat the higher of:

1) The amount determined in accordance with “ Provisions”; and

2) The amount initially recognized less, when appropriate, cumulative amortizationrecognized from deferred revenues.

(Continued)

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(g) Investment properties

Investment property could be recognized by the Company’s insurance subsidiary only to earn rentalsor for capital appreciation or both.

Some properties comprise a portion that is held to earn rentals or for capital appreciation and anotherportion that is held for use by the Company’s insurance subsidiary. If these portions could be soldseparately, the Company’ s insurance subsidiary accounts for the portions separately. The portionthat is held for use is treated following “Property and Equipment”, and another portion that is held toearn rentals or for capital appreciation or both is regarded as investment property. If the portionscould not be sold separately, and if an insignificant portion is held for use, then the whole property isregarded as investment property.

Investment property shall be recognized as an asset when, and only when it is probable that thefuture economic benefits that are associated with the investment property will flow to theCompany’s insurance subsidiary, and the cost of the investment property can be measured reliably.Subsequent expenditure is capitalized as cost only when it is probable that the future economicbenefits that are associated with the investment property will flow to the Company’ s insurancesubsidiary, and the cost of the investment property can be measured reliably. Regular repair costs arerecognized as expenses in the period they are incurred.

If the recognition criteria are met, the Company’ s insurance subsidiary recognizes the cost ofreplacement in the carrying amount of the replaced investment property at the time the cost isincurred. The carrying amount of the part that is replaced is derecognized.

After initial recognition, real estate property is subsequently measured by using cost model, andamortized by the depreciable amount. Its depreciation method, useful life and residual value can bereferred to the regulation of properties and equipment.

When the use of a property changes such that it is reclassified as property and equipment, the bookvalue at the date of reclassification become its cost for subsequent accounting.

(h) Non-financial asset impairment

At each balance sheet date, the recoverable amount of an asset is estimated and compared with thecarrying amount whenever there is an indication that the non-financial asset may be impaired. Animpairment loss is recognized when the recoverable amount, higher of fair market value or value inuse, is less than the carrying amount. For assets other than goodwill, reversal of impairment loss isrecognized 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 oramortized balance of the assets assuming no impairment loss was recognized in prior periods.

(i) Assets held for sale

For an asset or disposal group to be classified as held for sale, it needs to be disposed of through salerather than through continuing use to recover its carrying amount. Assets or disposal groups thatmeet the criteria to be classified as such must be subject only to terms that are usual and customaryand be available for immediate sale, which is highly probable, within one year of such classification.After being classified as held for sale, it is measured at the lower of carrying amount and fair valueless costs to sell.

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Amortization or depreciation on investment property, intangible assets, premises and equipmentceases once they are classified as held for sale.

(j) Investments in associates

Investments in associates in which the Company is able to exercise significant influence andsubsidiaries the Company has control over are accounted for under the equity method and initiallyrecognized at cost. Goodwill, with a deduction of accumulated impairment loss, relating to anassociate is included in the carrying amount of the investment. The equity method discontinues fromthe date when it ceases to have significant influence, and the book value is taken as the new cost ofthe investment.

The Company has significant influence if holding, directly or indirectly, 20% or more of the votingright of the investee. However, an exception will apply if the Company can specify that it has nosignificant influence over an investee.

After the date of acquisition, the Company and subsidiaries’ share of the profit or loss of theassociates is recognized in profit or loss. Distributions received from an associate reduce thecarrying amount of the investment. Adjustments to the carrying amount of the investment may alsobe necessary for changes in the Company or its subsidiaries’ proportionate interest in the associatesarising from changes in the associates’ other comprehensive income. If the Company or itssubsidiaries’ share of losses of an associate equals or exceeds their interest in the associate(including non-guarantee long-term receivables), the Company or its subsidiaries discontinuesrecognizing its share of further losses. Additional losses and liabilities are recognized, only to theextent that the Company or its subsidiaries has incurred legal or constructive obligations or madepayments on behalf of the associate.

Changes in ownership interest in a subsidiary that do not result in a loss of control are accounted foras equity transactions. In such circumstances, the carrying amounts of the parent’ s ownershipinterest and non-controlling interests shall be adjusted to reflect the changes in their relative interestsin the subsidiary. Any difference between the amount by which the non-controlling interests areadjusted and the fair value of the consideration paid or received shall be recognized directly inequity.

(k) Interest in joint ventures

The joint agreements include joint operations and joint ventures, and have the followingcharacteristics:

(i) The parties are bound by a contractual arrangement;

(ii) The contractual arrangement gives two or more of those parties joint control of thearrangement.

The Company or its subsidiaries distinguish between joint operations and joint ventures byconsidering the structure and legal form of the arrangement, the contractual terms agreed to by theparties to the arrangement and, when relevant, other facts and circumstances. In joint operations, theCompany or its subsidiaries accounts for its share of the joint assets, liabilities, revenues andexpenses in accordance with the contractual arrangement. In joint ventures, the Company or itssubsidiaries account for its investment using the equity method.

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(l) Cash surrender value of life insurance

The Company’s sub-subsidiary CTBC Bank Corp. (USA) purchased single premium life insuranceunder which the executive officers and directors are the insured, while CTBC Bank Corp. (USA) isthe owner and beneficiary thereof. The cash surrender value indicates the amount that would bereceived if the life insurance is terminated prior to the maturity date, and is accounted for underother assets.

(m) Reinsurance assets

In cases of reinsurance contracts that transfer significant insurance risk, unless the Company’ sinsurance subsidiary can independently measure the deposit component, the insurance componentand deposit component should be unbundled. That is, the consideration received or paid, afterdeducting the amount belonging to the insurance component, is recognized as a financial liability orasset, rather than as revenue or expense. That financial liability or asset is recognized or measured atfair value, which is based on the discount value of future cash flows.

The Company’s insurance subsidiary periodically assesses the impairment of the reinsurance reserveassets, claims recoverable from reinsurers, and amount due from reinsurers and ceding companies. Ifa cedant’s reinsurance asset is impaired, the cedant shall reduce its carrying amount accordingly andrecognize the impairment loss in profit or loss. A reinsurance asset is impaired if, and only if, thereis objective evidence, as a result of an event that occurred after initial recognition of the reinsuranceasset, that the cedant may not receive all amounts due to it under the terms of the contract, and thatevent has a reliably measurable impact on the amounts that the cedant will receive from thereinsurer.

(n) Premises and equipment

The Company and subsidiaries’ premises and equipment are recognized after deducting anyaccumulated depreciation and accumulated impairment losses from historical cost. The historicalcost includes any costs directly attributable to acquiring the assets.

Subsequent expenditure of premises and equipment shall be recognized as an asset or be included inthe carrying amount of assets, when, and only when it is probable that the future economic benefitsthat are associated with premises and equipment will flow to the Company and subsidiaries, and thecost of premises and equipment can be measured reliably. The carrying amount of those parts thatare replaced is derecognized. A major improvement or repair expense that can extend the benefitsover afterward period is regarded as capital expenditure; while frequent maintenance or repairs arecharged to current expenses.

If the Company and subsidiaries have obligations to dismantle, remove and restore the property andequipment, the obligation for which the Company and subsidiaries incurs either when the item isacquired or as a consequence of having used the item during a particular period shall be recognizedas the cost of the premises and equipment as well as liability.

(Continued)

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Depreciation is computed using the straight-line method; the useful lives are calculated based on thenormal economic lives. Each part of an item of premises and equipment with a cost that is significantin relation to the total cost of the item shall be depreciated separately. The residual value and theuseful life of an asset shall be reviewed or adequately adjusted at least at each fiscal year-end. Usefullives of major premises and equipment are as follows:

Buildings and premises 2 ~ 56 years

Transportation equipment 1 ~ 12 years

Miscellaneous equipment 2 ~ 20 years

The gain or loss arising from the disposition of an item of premises and equipment shall berecognized in current profit or loss and determined as the difference between the disposal proceedsand the carrying amount of an item.

A property is reclassified to investment property at its carrying amount when the use of the propertychanges from owner-occupied to investment property.

(o) Intangible assets

(i) Computer software system

Computer software system expenses, which are recorded on the basis of the actual cost ofacquisition, are amortized using a straight-line method over a period of 3 to 15 years. Itsamortization method, useful life and residual value are determined with reference to theregulation of properties and equipment. The Company and subsidiaries use the cost model toconduct subsequent measurements.

(ii) Goodwill

The Company and subsidiaries account a business combination by applying the acquisitionmethod. The consideration transferred in a business combination shall be measured at fairvalue, which shall be calculated as the sum of the acquisition-date fair values of the assetstransferred by the acquirer, the liabilities assumed by the acquirer and the equity interestsissued by the acquirer. In addition, other expense directly contributed to the acquisition isincluded. The acquirer shall measure the identifiable assets acquired from businesscombination and the liabilities or contingent liabilities assumed at their acquisition-date fairvalues without considering non-controlling interest. The acquirer shall recognize goodwill asof the acquisition date measured as the excess of the consideration transferred over the fairvalue of net identifiable assets held according to holding proportion. Adversely, the differencemay result in directly recognizing a gain on a purchase.

Goodwill relating to cash-generating units is tested for impairment periodically each year. Animpairment loss is recognized when the recoverable amount is less than the carrying amount.Impairment losses cannot be reversed once an impairment loss has been recognized.

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(iii) The acquisition value of insurance policies

The Company’ s insurance subsidiary should broadly accept the acquisition value of aninsurance policy. In accordance to IFRS 4, the acquisition value of general assumptioninsurance policies is the difference between the liability, which is determined by the insurerbased on the evaluation of accounting policies for the issued insurance policies, and the fairvalue of both the acquired contractual rights and commitment to insurance obligations. Whenamortizing, the amortizable amount would be the value of acquired insurance policies at thedate when general assumption incurs. Over the effective period of the insurance contracts, anamortization expense should be accounted based on the profit or loss of the acquired insurancepolicies. And the amortization expense should be recognized at current profit or loss.

(p) Lease

(i) Identifying a lease

At inception of a contract, the Company and subsidiaries assess whether a contract is, orcontains, a lease. A contract is, or contains, a lease, if the contract conveys the right to controlthe use of an identified asset for a period of time.

(ii) As a lessor

The leases are classified as finance leases, if the Company and subsidiaries transfersubstantially the entire risks and rewards incidental to the ownership of the assets. Otherwise,the leases are classified as operating leases.

1) Operating lease: Lease payments or receivables under an operating lease shall berecognized in current profit or loss using a straight-line method over the lease term.

2) Finance lease: As lessors, the Company and subsidiaries shall derecognize assets heldunder a finance lease at contract date and recognize them as lease payment receivable atan amount equal to the present value of lease payments. The difference between grossamount and present value of lease payment receivables is recognized as unrealizedinterest income and transferred to interest income of current period on an accrual basis.Lease revenue is calculated based on the interest rate implicit in the lease on theremaining balance of lease payment receivables and recognized in current profit or lossover the lease term.

(iii) As a lessee

The Company and subsidiaries recognize a right-of-use asset and a lease liability at the leasecommencement date. The initial amount of the right-of-use asset comprises the initial amountof the lease liability, adjusted for any lease payments made at or before the commencementdate, plus any initial direct costs incurred, and an estimate of costs to restore the underlyingasset, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from thecommencement date to the earlier of the end of the useful life of the underlying asset or theend of the lease term. Refer to “Premises and Equipment” for the review of useful life and theimpairment assessment policy.

(Continued)

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The lease liability is initially measured at the present value of the lease payments that are notpaid at the commencement date, discounted using the interest rate implicit in the lease, or theCompany and subsidiaries’ incremental borrowing rate. Lease payments included in themeasurement of the lease liability comprise the following:

1) Fixed payments, including payments that may, in form, contain variability but that, insubstance, are unavoidable.

2) Variable lease payments that depend on an index or a rate, initially measured using theindex or rate as at the commencement date;

3) Amounts expected to be payable under a residual value guarantee; and

4) Amounts expected for the exercise price under a purchase option, lease payments underan extension option, and penalties for early termination, if the Company and subsidiariesare reasonably certain to exercise or early terminate.

The lease liability is measured by the effective interest method to recognize the interestexpense, and remeasured to reflect the changes as follows:

1) The lease term changes;

2) The future lease payments change to reflect a change in an index or rate; or

3) If there is a change in the Company and subsidiaries estimate of the amount expected tobe payable under a residual value guarantee, or if the Company and subsidiaries changestheir assessment of whether it will exercise a purchase, extension or termination option.

When the lease liability is remeasured to reflect above changes, a corresponding adjustment ismade to the carrying amount of the right-of-use asset, or is recorded in profit or loss if thecarrying amount of the right-of-use asset has been reduced to zero.

The Company and subsidiaries do not recognize right-of-use assets and lease liabilities forshort-term leases that have a lease term of 1 year or less and leases of low-value assets. TheCompany and subsidiaries recognize the lease payments associated with these leases as anexpense on a straight-line basis over the lease term.

(q) Segregated account insurance product assets

When the Company’s insurance subsidiary sells a segregated account insurance product, premiumspaid by policyholders are deposited in a specifically designated account book, after deductingvariable expenses incurred by the insurer per the agreement, in ways that are agreed or required bypolicyholders. The account book asset values are calculated according to the market valuation of thevaluation date, while net asset value is calculated in accordance with regulations and IFRSs.

The assets and liabilities in the account book, whether or not they result from an insurance contractor an insurance contract that has the nature of a financial product, are recognized under “segregatedaccount insurance assets” and “segregated account insurance liabilities”, respectively.

(Continued)

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The revenue and expense in the account book refer to the accumulation of variable revenues andexpenses that meet the definition of an insurance contract under IFRS No. 4, and they are recognizedunder “ segregated account insurance revenue” and “ segregated account insurance expense” ,respectively. That is, for a segregated account insurance product that is classified as an insurancecontract, the premiums received are recognized as premium income, after deducting preliminaryexpenses and other expenses such as account management services fees, while the differencebetween the original cost and the disposal/ subsequent valuation is recognized as profit and loss.

For a segregated account insurance product that is classified as an investment contract, the receivedor paid consideration should be treated as financial assets and liabilities, rather than as an income orexpense. And the difference between the original cost and the disposal/ subsequent valuation of thefinancial asset is not recognized as profit and loss, but rather recognized under the account“segregated account insurance value reserve.”

(r) Foreclosed properties

Foreclosed properties received are stated at acquired cost, and the difference between it and thenominal value of the original claim is reflected as a credit loss. On the Balance sheet date, if theforeclosed properties received are still unsold, they shall be evaluated at the lower of carryingamount and net fair market value. If there is sufficient evidence indicating that the net fair marketvalue is lower than the carrying amount of foreclosed properties, the difference after reassessment isaccounted for under impairment loss on assets. Gain or loss on disposal of foreclosed properties isrecognized in current profit or loss as well.

(s) Provisions

The Company and subsidiaries recognize liability reserve only if all of the following conditions aremet:

(i) An entity has a present obligation, legal or constructive, as a result of a past event;

(ii) It is probable that an outflow of resources embodying economic benefits will be required tosettle the obligation; and

(iii) A reliable estimate can be made of the amount of the obligation.

The Company and subsidiaries shall not recognize liability reserve for future operating losses.

Where there are a number of similar obligations the probability that an outflow will be required insettlement is determined by considering the class of obligations as a whole. Although the likelihoodof outflow for any one item may be small, it may well be probable that some outflow of resourceswill be needed to settle the class of obligations as a whole. If that is the case, a provision isrecognized.

The amount of a provision is measured subsequently as the present value of the expendituresexpected to be required to settle the obligation. The discount rate is a pre-tax rate that reflectscurrent market assessments of the time value of money and the risks specific to the liability. Anydeficiency is recognized in current profit and loss.

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In line with each corresponding authority’s regulations, the Company’s insurance subsidiaries makereserves for unearned premiums, claims, liabilities, contingencies, underinsurance, liabilityadequacy, and insurance contracts with embedded derivatives. Except for catastrophe andequalization reserves provided by the Company’ s life insurance subsidiaries; whereas specialcatastrophe reserve, special risk-volatility reserve and partial provision over pool elevation on non-compulsory Automobile and Motorcycle Liability Insurance regulated by the authorities of R.O.C.are recognized under equity. Other provisions are recognized as expenses in the period they arise.

In accordance with Article 32 of the Regulations, if there is a revaluation increment when appraisingthe investment property at fair value, the increment shall be recognized as a special reserve underliability after offsetting the adverse effects of other accounting items resulting from the first-timeadoption of IFRSs. In addition, in accordance with Jin-Guan-Pao-Chai No. 10102515281 datedNovember 30, 2012, life insurance businesses shall determine the amount of policy reserve thatneeds to be strengthened in accordance with the fair value standards for effective contract stipulatedin Jin-Guan-Pao-Chai No.10102515285 dated November 27, 2012, and transfer the aforementionedspecial reserve to the “policy reserves – insurance contract liability fair value” on January 1, 2013. Ifthere is a remaining surplus subsequent to the transfer, the Company may reverse 80% of the surplusin the first year or reverse it on a straight-line basis over the following consecutive five years andrecognize the reversal as special earnings reserve. However, the annual reversal and the provision forthe special earnings reserve are limited to $10 billion.

The liability adequacy test of the Company’s insurance subsidiary is based on product type group (orthe overall company contracts) and is to compare on each Balance sheet date the net book value ofthe insurance liability (after deduction of the deferred acquisition costs and relevant intangibleassets) to the estimate of the present value of the future cash flow of the insurance contracts. If thenet book value is lower than the estimate, then the difference shall be recognized as current loss. Thetest also follows “ Code of Conduct of Actuarial Practice for IFRS 4 Contract Classification andLiability Adequacy Test” pronounced by the Actuarial Institute of the Republic of China.

(t) Foreign exchange rate fluctuation reserves

On March 1, 2012, the Company’ s insurance subsidiary transferred to be the opening balance offoreign exchange rate fluctuation reserves part of catastrophic special reserves and risk variationspecial reserves; the provision and charge off of foreign exchange rate fluctuation reserves followthe Guidelines on Foreign Exchange Rate Fluctuation Reserves in Life Insurance Companies. Theopening balance of foreign exchange rate fluctuation reserves will then be set aside as specialreserve within 3 years of 2012. The amount set aside in the first year shall not be less than one thirdof the opening balance after tax, and the amount set aside in the first 2 years shall not be less thantwo thirds of the opening balance after tax. Also, the amount saved on the cost of hedging shall betransferred to special reserve each year. If the earning of a particular year is not enough for thetransfer, it shall be done in later years when there are enough earnings. The special reservementioned herein will then be used to increase capital or make up for losses. According to article 9of the Guidelines on Life Insurance Foreign Exchange Rate Fluctuation Reserves, a life insurancecompany should after the shareholders’ meeting provide for special reserve equal to 10% of aftertax profit.

(Continued)

32


(u) Treasury stock

The Company has repurchased the issued stocks and recognized them as treasury stock at the cost ofbuyback. The difference should be recognized as Capital surplus-treasury stock transaction if theprice of treasury stock disposal is greater than the book value. On the other hand, if the price oftreasury stock disposal is less than the book value, the difference should be offset against the capitalsurplus that is incurred due to the transaction of equivalent treasury stock. If the balance isinsufficient to absorb the loss, retained earnings should be debited. The book value of treasury stockis computed based on the weighted average method and should be calculated separately dependingon the repurchase reason.

When treasury stock is cancelled, Capital surplus-paid in capital and Capital stock should be debitedbased on the shareholding ratio. The difference should be offset against the capital surplus thatincurs due to the transaction of equivalent treasury stock, if the book value is greater than theaggregate amount of par value and capital premium. If the balance is insufficient to absorb thedifference, retained earnings should be debited. On the contrary, if the book value is less than theaggregate amount of par value and capital premium, capital surplus resulted from the transaction ofequivalent treasury stock should be credited.

(v) Revenue recognition

(i) The income of the Company and subsidiaries is recognized on the accrual basis.

(ii) Please refer to Note 4(f)(i)3. Loans and receivables for more information on the accountingpolicies of interest income from receivables and loans.

(iii) Life insurance business

1) Insurance income and contract acquisition cost

In terms of the insurance contracts and the financial instruments with a discretionaryparticipation feature, the first and the subsequent period premiums are recognized asrevenue when the insurance process is completed and the total payment is received. Thecontract acquisition costs such as commission expenses are recognized as currentexpenses when the insurance contracts become effective.

Financial instruments that are not regarded as insurance products with segregatedaccounts and are classified as not having discretionary participation features arerecognized as “reserves for insurance contract with the nature of financial products.” Theacquisition costs are used to write off “reserves for insurance contract with the nature offinancial products” when the insurance contracts become effective.

Financial instruments that are regarded as insurance products with segregated accountsand are classified as not having discretionary participation features are all recognized asliabilities on insurance product—segregated account after deducting the expenses, suchas the front-end load and investment administrative service charge.

(Continued)

33


2) The recognized service income for the life insurance subsidiary’ s insurance productswith a segregated account is classified as financial products without a discretionaryparticipation feature.

The service fees on insurance products of segregated accounts classified as financialproducts without a discretionary participation feature include contract management fees,investment management fees, surrender charges, and others. The service fees arerecognized as income when received. When the service fees (e.g., preliminary cost) areattached with the obligation to provide future services, though, their recognition isdeferred under “deferred service fee and commission income”, and they are amortizedusing the straight line method at a constant proportion over the period during which theservice is provided. The amortized amount is recognized under “ service fee andcommission income”.

The paid acquisition costs of the investment management service for an insurance policyinclude commission expense and other incremental costs directly related to issuing a newcontract. Those costs’ recognition is deferred under “deferred cost of acquirement”, andthey are amortized using the straight line method at a constant proportion over the periodduring which the service is provided. The amortized amount is recognized under “othernon-interest net profit and loss”.

(iv) Property insurance

Premium income includes various insurance income generated from insurance contractsderived from insurance and reinsurance business. Premium income includes the entireinsurance premium generated from direct underwritten and revised premiums issued within theaccounting period, including premium received and temporarily held by solicitors andinsurance agents. Started from January 1, 2015, for automobile insurance business, theinsurance subsidiary should collect automobile insurance fees and sign and issue insurancepolicy or certification before the insurance agreement become effective. Income should berecognized once the underwriting process is done. Reinsurance premium income is recognizedbased on the billing schedule, and unbilled reinsurance premium income should be assessedand recognized based on a reasonable and systematic method at each balance sheet date.Corresponding expenses, including commissions, agency charges, and service fee charges, arerecognized as incurred.

(w) Employee benefit

(i) Short-term employee benefit: The Company and subsidiaries expect to settle all short-termnon-discounted benefits in 12 months after the end of annual financial reporting date in whichthe services are rendered by employees, and recognize them as current expenses.

(ii) Post-employment benefit: The Company and subsidiaries’ pension plan comprises definedcontribution plan and defined benefit plan.

(Continued)

34


1) A defined contribution plan is a post-employment benefit plan under which a companypays fixed contributions into a separate entity and will have no legal or constructiveobligation to pay further amounts. Obligations for contributions to defined contributionpension plans are recognized as an employee benefit expense in profit or loss in theperiods during which services are rendered by employees. Prepaid contributions arerecognized as assets to the extent that a cash refund or a reduction in future payments isavailable. Contributions to a defined contribution plan that is due more than 12 monthsafter the end of the period in which the employees render the service are discounted totheir present value.

2) A defined benefit plan is a post-employment benefit plan under which benefit is paid toan employee on the basis of their ages, service periods and compensated salaries at thedate of retirement. The Company and subsidiaries recognize actuarial gains and losseswhich are incurred by the change of actual experience or actuarial assumption in othercomprehensive income, and recognize pension asset or liability in balance sheet in whichasset or liability is the amount of actuarial present value of defined benefit obligationdeducting fair value of plan assets. The calculation of defined benefit obligation isperformed annually by an actuary using the projected unit credit method. The actuarialpresent value of defined benefit obligation is calculated by discounting future cash flowat the yield rate on AA credit rated bonds or government bonds that have maturity datesapproximating the terms of the obligation and that are denominated in the same currencyin which the benefits are expected to be paid. In accordance with the article 30 of theRegulations Governing the Preparation of Financial Reports by Financial HoldingCompanies, when the interest incurred from retiree deposits with favorable rates exceedthe interest generated from market rate, it should be considered as the actuarial amountaccording to defined benefit plan regulated on IAS 19 “ Employee Benefits” since theemployee’ s retirement date. Otherwise, the parameter of actuarial assumption ofcompetent authority should be followed (if have). The interim amount of defined benefitplan is determined based on the pension cost rate, which is the actuarial rate at the end oflast fiscal year, and the amount, which is from the beginning of the year to the end ofcurrent period. In addition, an adjustment would be made if significant marketfluctuation, significant decrease, pay-off or other significant one-time event occurs afterthe end of period.

3) The defined contribution plan of overseas unit is in accordance with respectiveauthorities’ regulation.

(iii) Termination benefit: Termination benefits are incurred when the Company and subsidiariesterminate employment prior to qualifying for retirement, or the employees accepted voluntaryredundancy to get termination benefits in return. Termination benefits are recognized asliabilities when the Company and subsidiaries are committed demonstrably, without realisticpossibility of withdrawal, to a formal detailed plan to provide termination benefits or make anoffer of termination benefits to encourage voluntary redundancy. If termination benefits arepayable more than 12 months after the reporting period, then they are discounted to theirpresent value.

(Continued)

35


(x) Share-based payment transactions

The accounting treatments of share-based payment are as follows.

(i) Equity-settled share-based payments are measured at fair value at the date of grant. The fairvalue determined at the grant date of the equity-settled share-based payments is expensed overthe vesting period, and the corresponding increase in owners’ equity is recognized. The vestingperiod is estimated based on the ultimate vesting conditions that must be satisfied. The vestingconditions include service conditions and performance conditions, including marketconditions. In valuing equity-settled payments, no account is taken of any vesting conditionsother than market conditions.

(ii) For cash-settled share-based payment transactions, a liability equal to the portion of the goodsor services received is recognized at its current fair value determined at each balance sheet dateand at the date of settlement, with any changes in the fair value recognized in profit or loss ofthe period.

(iii) Fair value of the share options at the grant date is measured with the use of an option pricingmodel based on management’s best estimate of the exercise price, expected term, underlyingshare price, expected volatility, expected dividend yield, risk-free interest rate, and any otherinputs to the model.

(y) Compensations of employees and directors

The Company and subsidiaries employees’ and directors’ (including independent directors)compensations are recognized as personnel expense. Any difference lies between the actualallocation amount and previously recognized in the financial report is considered as change inaccounting estimates which is then recognized as profit or loss in next year.

(z) Income taxes

Income tax expenses include both current taxes and deferred taxes. Except for expenses related tobusiness combinations or items recognized directly in equity or other comprehensive income, allcurrent and deferred taxes shall be recognized in profit or loss. Current taxes include tax payablesand tax deduction receivables on taxable gains (losses) for the year calculated using the statutory taxrate on the reporting date or the actual legislative tax rate, as well as tax adjustments related to prioryears. Income tax expense of the interim reporting period is measured by interim reporting periodnet income before tax multiplied by best estimate effective annual tax rate. And the best estimateeffective annual tax rate is determined by the management. Deferred taxes arise due to temporarydifferences between the carrying amounts of assets and liabilities for financial reporting purposesand their respective tax bases. Deferred tax assets and liabilities shall be measured at the tax ratesthat are expected to apply to the period when the asset is realized or the liability is settled, based ontax rates that have been enacted or substantively enacted by the end of the reporting period. Deferredtax assets and liabilities may be offset against each other if the following criteria are met by theCompany and subsidiaries:

(i) The entity has the legal right to settle tax assets and liabilities on a net basis; and

(Continued)

36


(ii) The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the sametaxation authority on either:

1) Levied by the same taxing authority; or

2) Levied by different taxing authorities, but where each such authority intends to settle taxassets and liabilities where such amounts are significant on a net basis every year of theperiod of expected asset realization or debt liquidation, or where the timing of assetrealization and debt liquidation is matched.

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

When the Company files a consolidated corporate income tax return with its domestic subsidiariespursuant to the regulations on consolidated taxation, it shall determine the income tax liability ofeach individual member of the Company. During the period of consolidation, the members of theCompany calculate and adjust deferred tax assets (liabilities) and current income tax payable (taxrefund receivable) accordingly based on a reasonable, consistent and systematic method, and suchadjustments are reflected in income tax recognition as other receivables (payables), which areeliminated in preparing the consolidated financial reports.

(aa) Contingent liability

A contingent liability is defined as a possible obligation that arises from past events and whoseexistence will be confirmed only by the occurrence or non-occurrence of one or more uncertainfuture events not wholly within the control of the Company and subsidiaries; or a present obligationthat arises from past events but is not recognized because it is not probable that an outflow ofresources embodying economic benefits will be required to settle the obligation or the amount of theobligation cannot be measured with sufficient reliability. The Company and subsidiaries shall notrecognize a contingent liability; instead, contingent liability shall be appropriately disclosed.

(ab) Insurance contract

An insurance contract is a “ contract under which the insurance subsidiary accepts significantinsurance risk from another party (the policyholder) by agreeing to compensate the policyholder if aspecified uncertain future event (the insured event) adversely affects the policyholder” . Insurancerisk refers to the risk transferred from the policyholder to the insurer that is not financial risk.Financial risk refers to the risk resulting from possible changes in one or more of the following inthe future: specified interest rate, financial instrument price, commodity price, foreign exchange rate,price index, tariff index, credit rating, credit index or other variables. Non-financial variables aresubject to contributing factors from the counterparty in a contract.

(Continued)

37


The insurance subsidiary defines significant insurance risk as an event which might lead toadditional significant payment. But cases that lack commercial essences are excluded. When aninsurance policy was originally judged to meet the definition of an insurance contract, it remains aninsurance contract until its rights and obligations end or mature. Contracts that do not transfersignificant insurance risk are classified as insurance contracts with the nature of a financial product.When the significant risk of an insurance contract with the nature of a financial product istransferred to the Company’ s insurance subsidiary, the Company’ s insurance subsidiary willreclassify it as an insurance contract.

Insurance contracts and insurance contracts with financial instrument features can be furtherclassified as insurance with or without a discretionary participation feature. Except for guaranteedbenefits, a discretionary participation feature is a contractual right to receive additional payments.The right also has the features below:

(i) It is likely to be a significant portion of the total contractual benefits;

(ii) In accordance with the contract, the additional payments and timing of distribution are at thediscretion of the issuer; and

(iii) In accordance with the contract, the additional payments are contractually based on:

1) The performance of a specified pool of contracts or a specified type of contract;

2) Return on investment of a specific asset portfolio held by the insurance subsidiary, or

3) The profit or loss of the insurance subsidiary, fund or other entity.

An embedded derivative is accounted for separately from the host contract when its economiccharacteristics and risks are not closely related to the host contract, and the derivative is measured atfair value through profit or loss. If the embedded derivative conforms to the definition of aninsurance contract or the entire contract is measured at fair value through profit or loss, theCompany’s insurance subsidiary does not need to recognize it separately.

(ac) Operating segments

An operating segment is a component of the Company and subsidiaries that engages in businessactivities from which it may earn revenues and incur expenses (including revenues and expensesrelating to transactions with other components of the Company and subsidiaries). The segment’ soperating results are reviewed regularly by the Company’s chief operating decision maker to makedecisions about resources to be allocated to the segment and assess its performance for whichdiscrete financial information is available.

The prime responsibility of the Company is the management of its subsidiaries, whose operationalperformance and resource allocation are executed under board approval of the parent company. Thecomponents periodically report actual financial results to the Company’s Management Board, andthereby leading to its role as the chief operating decision maker.

(Continued)

38


(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

When preparing for the consolidated financial statements in accordance with the Regulations Governingthe Preparation of Financial Reports by Financial Holding Companies, the Regulations Governing thePreparation of Financial Reports by Public Banks, the Regulations Governing the Preparation of FinancialReports by Securities Firms, the Regulations Governing the Preparation of Financial Reports by FuturesCommission Merchants, the Regulations Governing the Preparation of Financial Reports by InsuranceCompanies, and following IAS 34 “ Interim Financial Reporting” as accepted by Financial SupervisoryCommission, the management needs to make judgments, estimates, and assumptions that affect theadoption of accounting policies, reported amounts of assets, liabilities, revenues, and expenses. Actualresults could differ from the estimates.

During preparation of the consolidated financial reports, the major source of the judgments and estimatesof uncertainty which the management decides on accepting policies is consistent with Note 5 in 2020annual consolidated financial statement.

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

June 30, 2021December 31,

2020 June 30, 2020Cash on hand $ 30,627,772 29,398,807 30,484,714Petty cash and revolving fund 23,623 23,894 24,691Checks for clearance 1,427,218 2,039,159 1,510,361Cash in transit 1,880,969 3,513,291 2,340,862Due from other banks 124,378,204 106,736,450 105,698,269Cash equivalents 275,666 373,839 304,694Total $ 158,613,452 142,085,440 140,363,591

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


2020 June 30, 2020Required reserve—Account A $ 119,632,738 106,708,570 61,998,505Required reserve—Account B 71,412,938 64,989,171 61,556,351Required reserve—Foreign Currency 557,400 840,986 29,660Due from Central Bank 114,212,847 133,389,143 74,297,514Banks overdrafts 23,935 - -Call loans to banks 26,013,343 51,992,611 56,151,142Total $ 331,853,201 357,920,481 254,033,172

(Continued)

39


The reserves for deposits are calculated at prescribed rates, using the average monthly balances ofvarious deposit accounts, and are appropriated and deposited in the reserve account of the CentralBank of the Republic of China (Taiwan). Deposits in “Required reserve－Account A” are interestfree and can be withdrawn at any time; deposits in “ Required reserve－Account B” are interestbearing and cannot be withdrawn except for the monthly adjustment to the required reservepermitted by relevant regulations.

Please refer to Note 8 for information with regard to the restrictions on the due from Central Bankand call loans to banks shown above.

(c) Financial instruments measured at fair value through profit or loss


2020 June 30, 2020Mandatorily measured at fair value through

profit or lossCommercial papers $ 90,221,080 119,561,419 131,588,172Negotiable certificates of deposits - 1,000,000 -Other securities and bonds 29,976,585 12,566,908 22,875,108Government bonds 3,040,696 4,738,963 2,662,185Corporate bonds 4,184,938 4,988,425 6,598,956Convertible bonds 2,719,782 3,372,220 2,019,624Financial debentures 57,047,238 57,447,345 54,849,750Asset-backed securities 15,326,130 17,456,969 16,154,777Stocks 66,338,600 64,030,164 71,637,243Beneficiary certificates 160,309,800 166,180,081 148,970,986Linked deposits 8,000,000 7,000,000 9,000,000Derivative financial assets 50,915,440 72,761,917 99,041,132Valuation adjustment of financial assets (1,787,396) (1,357,073) (13,264,259)

Total $ 486,292,893 529,747,338 552,133,674

Please refer to Note 6(u) for information with regard to parts of the financial assets at fair valuethrough profit or loss are sold with conditions.

From January 1, 2018, the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. and itssubsidiaries adopted IFRS 9 and elected to apply the overlay approach under the IFRS 4 “InsuranceContracts” to recognize the profit and loss for the designated financial assets. As of June 30, 2021,December 31 and June 30, 2020, among the financial assets relating to the investing activities underinsurance contracts, the amounts of financial assets at fair value through profit or loss designated toapply the overlay approach were $310,840,537, $305,165,013 and $293,954,001.

(Continued)

40


For the three and six months ended June 30, 2021 and 2020, the reclassification amounts of theCompany’ s subsidiary Taiwan Life Insurance Co., Ltd. and its subsidiaries between profit or lossand other comprehensive income for the aforementioned designated financial assets under theoverlay approach were as follows:


The amounts reported in profit(loss) for the designatedfinancial assets as applyingIFRS 9

$ 7,792,687 18,823,340 12,978,559 (3,203,420)

Less: The amounts that wouldhave been reported in profitfor the designated financialassets as applying IAS 39

4,644,372 2,533,093 14,140,443 7,853,631

Gains (losses) of thereclassification to othercomprehensive income underthe overlay approach

$ 3,148,315 16,290,247 (1,161,884) (11,057,051)

Due to the adjustment of the overlay approach, the gains (losses) on financial assets measured at fairvalue through profit or loss of the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. and itssubsidiaries has decreased from gains $17,360,239 to gains $14,211,924, increased from gains$17,307,313 to gains $18,469,197 and decreased from gains $26,058,680 to gains $9,768,433,increased from gains $131,055 to gains $11,188,106, respectively, for the three and six monthsended June 30, 2021 and 2020.

The Company’ s subsidiary Taiwan Life Insurance Co., Ltd. and its subsidiaries did not designatefinancial products that are previously unqualified for the overlay approach but then qualified duringfor the six months ended June 30, 2021 and 2020, or cancel the designated application.

Financial liabilities measured at fair value through profit or loss of the Company and subsidiarieswere as follows:


2020 June 30, 2020Derivative financial liabilities $ 44,720,945 65,218,734 86,346,238Financial liabilities designated at fair value

through profit or loss10,827,037 14,475,274 38,172,784

Borrowed listed and OTC securities 487,546 153,002 8,132Total $ 56,035,528 79,847,010 124,527,154

(Continued)

41


The aforementioned financial liabilities designated at fair value through profit or losses were issuedby the Company’s subsidiary CTBC Bank Co., Ltd., with the related terms and conditions disclosedin Note 6(y). The amounts of fair value and its changes which are attributable to changes in marketconditions that give rise to credit risk were as follows:


2020 June 30, 2020Financial debentures at fair value $ 10,827,037 14,475,274 38,172,784Cumulative changes in fair value that are

attributable to changes in the credit risk154,832 90,364 (698,519)

The difference between book value and theamount payable upon maturity as specifiedin the contract

(654,487) (734,418) (741,864)

The Company’ s subsidiary CTBC Bank Co., Ltd. assesses changes in fair value that are notattributable to changes in market conditions that give rise to swing of market risk to evaluatechanges in fair value due to shift of credit risk. For the six months ended June 30, 2021 and 2020,there is no transfer of cumulative gain or loss within equity.

The fair value of the callable financial liabilities issued by the Company’s subsidiary CTBC BankCo., Ltd., evaluated based on the internal evaluation method, with evaluation variables retrievedfrom parameters unobservable in the market. In consideration of the discrepancy between evaluatedprice and transaction price, CTBC Bank Co., Ltd. has recognized reserve for day one profits. Thechanges in reserve for day one profits were as follows:


Beginning balance $ 59,193 910,293Current increase 134,918 -Current decrease (20,309) (368,163)Foreign exchange losses (1,256) (6,467)Ending balance $ 172,546 535,663

(Continued)

42


(d) Financial assets measured at fair value through other comprehensive income


2020 June 30, 2020Debt instruments measured at fair value

through other comprehensive incomeNegotiable certificates of deposits $ 3,243,169 4,030,282 3,080,158Treasury bills 1,112,669 2,425,241 1,193,626Government bonds 78,076,677 104,122,698 100,341,011Corporate bonds 122,294,158 137,984,210 121,030,164Commercial papers 13,996,221 - 10,039,146Financial debentures 165,620,218 195,712,973 182,926,376Asset-backed securities 63,121,237 64,108,042 44,238,173Other securities and bonds 11,241,080 12,230,343 5,563,861Valuation adjustment of financial assets (2,763,328) 13,055,729 10,032,031

Subtotal 455,942,101 533,669,518 478,444,546Equity instruments measured at fair value

through other comprehensive incomeStocks 105,874,000 105,263,000 109,504,181Beneficiary certificates 1,341,606 1,695,515 1,185,786Asset-backed securities 1,866,092 1,866,091 1,866,092Valuation adjustment of financial assets 13,739,831 2,217,637 (5,449,930)

Subtotal 122,821,529 111,042,243 107,106,129Total $ 578,763,630 644,711,761 585,550,675

For the three and six months ended June 30, 2021 and 2020, the dividends of the Company andsubsidiaries recognized dividend income were as follows:


Amounts derecognized during thereporting period

$ 3,355 6,116 8,237 32,583

Amounts held by the end of thereporting period

895,147 959,249 1,310,605 1,395,046

Total $ 898,502 965,365 1,318,842 1,427,629

For the three and six months ended June 30, 2021 and 2020, the Company and subsidiaries disposedequity instruments designated at fair value through other comprehensive income due to theconsideration of investment strategy, risk management, sale for profit-making purpose and thecapital reduction conducted by the investees.

(Continued)

43


During the three and six months ended June 30, 2021 and 2020, the gains or losses on disposal of theCompany and subsidiaries related to equity instruments measured at fair value through othercomprehensive income were as follows. The gains or losses on disposal will be transferred fromother equity interest to retained earnings.

The fair value at thedate of derecognition Gain on disposal (before tax)

For the six monthsended June 30, 2021

For the three monthsended June 30, 2021


Stocks $ 2,362,282 97,820 216,712

The fair value at thedate of derecognition Loss on disposal (before tax)


For the three monthsended June 30, 2020


Stocks $ 4,055,246 (827,154) (1,673,923)

The changes in allowance for credit losses attributed to the financial assets above were as follows:

For the six months ended June 30, 2021

12-monthECL

LifetimeECL

(Collectivelyassessed)

LifetimeECL

(Individuallyassessed)

LifetimeECL(Not

purchasedor

originatedcredit-

impairedfinancialassets)

LifetimeECL

(Purchasedor originated

credit-impairedfinancialassets)

The provisionof impairmentin accordancewith IFRS 9

(Total)Beginning balance $ 130,018 - - - - 130,018Changes in financial instruments that have been identified

at the beginning of the period:　－The financial assets that have been derecognized (32,001) - - - - (32,001)New financial assets originated or purchased 19,349 - - - - 19,349Foreign exchange and other movement (8,747) - - - - (8,747)

Ending balance $ 108,619 - - - - 108,619


12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not

purchasedor

originatedcredit-


LifetimeECL




(Total)Beginning balance $ 123,581 - - - - 123,581Changes in financial instruments that have been identified

at the beginning of the period:　－The financial assets that have been derecognized (27,263) - - - - (27,263)New financial assets originated or purchased 52,427 - 28,660 - - 81,087Foreign exchange and other movement (6,863) - - - - (6,863)Ending balance $ 141,882 - 28,660 - - 170,542

Please refer to Notes 6(u) and 8 for information with regard to the resell conditions for, orrestrictions on, financial assets at fair value through other comprehensive income shown above.

(Continued)

44


(e) Investment in debt instruments at amortized cost


2020 June 30, 2020Negotiable certificates of deposits $ 494,999,844 448,349,183 421,547,112Treasury bills 16,172,650 17,037,050 9,321,060Government bonds 370,831,210 355,976,110 355,546,194Corporate bonds 502,377,271 501,128,463 457,884,139Financial debentures 406,959,732 430,156,617 469,321,413Asset-backed securities 62,392,275 62,714,475 72,627,438Others 20,118,160 12,411,574 11,668,218Less: Loss allowance (694,143) (788,747) (867,378)Total $1,873,156,999 1,826,984,725 1,797,048,196

The Company and its subsidiaries derecognized investments in debt instruments measured atamortized cost for purpose of fund management, the mandatorily redemption of bond issuers, salesfor credit risk management and infrequent sales or nonsignificant value both individually and inaggregate for the three and six months ended June 30, 2021 and 2020, the information of disposalgains was as follows:

Accumulated gains of disposalFor the three months ended June 30 For the six months ended June 30

2021 2020 2021 2020Government bonds $ 688,665 96 871,757 193Corporate bonds 1,895,833 1,083,250 4,290,301 1,103,921Financial debentures 861,536 337,364 2,228,809 337,104Total $ 3,446,034 1,420,710 7,390,867 1,441,218

(Continued)

45


The changes in allowance for credit losses attributed to the above assets were as follows:


12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not

purchasedor

originatedcredit-


LifetimeECL



Theprovision of

impairment inaccordancewith IFRS 9

(Total)Beginning balance $ 368,352 2,929 410,574 6,892 - 788,747

Changes in financial instruments that have beenidentified at the beginning of the period:

－The financial assets that have beenderecognized (25,733) - (38,536) - - (64,269)

New financial assets originated or purchased 24,820 - - - - 24,820

Foreign exchange and other movement (29,749) (397) (25,360) 351 - (55,155)

Ending balance $ 337,690 2,532 346,678 7,243 - 694,143


12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not

purchasedor

originatedcredit-


LifetimeECL



Theprovision of

impairment inaccordancewith IFRS 9

(Total)Beginning balance $ 342,485 - 454,156 - - 796,641

Changes in financial instruments that have beenidentified at the beginning of the period:

－Transfer to Lifetime ECL (credit risk has beensignificantly increased) (175) - 175 - - -

－Transfer to 12-month ECL 4,528 - (4,528) - - -

－The financial assets that have beenderecognized (11,589) - - - - (11,589)

New financial assets originated or purchased 43,237 - - - - 43,237

Foreign exchange and other movement (1,041) - 40,130 - - 39,089

Ending balance $ 377,445 - 489,933 - - 867,378

Please refer to Notes 6(u) and 8 for information with regard to the repurchase conditions for, orrestrictions on, Investments in debt instruments measured at amortized cost shown above.

(Continued)

46


(f) Financial instruments－hedging

Hedging derivative financial assets of the Company’ s subsidiary CTBC Bank Co., Ltd. were asfollows:


2020 June 30, 2020Fair value hedge: Non-delivery forwards $ - 16,394 12,952Hedge of a net investment in a foreign

operation:　Currency swaps 60,870 - 158,769Total $ 60,870 16,394 171,721

Hedging derivative financial liabilities of the Company’s subsidiary CTBC Bank Co., Ltd. were asfollows:


2020 June 30, 2020Fair value hedge:　Non-delivery forwards $ 21,238 - 389Hedge of a net investment in a foreign

operation:　Currency swaps 95,362 211,672 27,883Total $ 116,600 211,672 28,272

(i) For the six months ended June 30, 2021 and 2020, the hedging derivative financial instrumentsof the Company’s subsidiary CTBC Bank Co., Ltd. have no ineffective portion of hedging.

(ii) Fair value hedge

The Company’s subsidiary CTBC Bank Co., Ltd. further entered into non-delivery forwards;these contracts are principally to hedge against the foreign exchange fluctuation of capital ofthe international banking department.

Designated hedging instrumentsFinancial instruments Fair value

Hedged itemsdesignated as hedging

instrumentsJune 30,


June 30,2020

Capital of internationalbanking department in USD

Non-delivery forwards $ (21,238) 16,394 12,563

(Continued)

47


The information of the Company’s subsidiary CTBC Bank Co., Ltd. designated as the hedgeditems on June 30, 2021, December 31 and June 30, 2020 was as follows:

The carrying amount of thehedged items

The cumulative amount ofadjustment

included in the carryingamount of the hedged

item at fair value hedge

The separate lineitems of the

hedgeditems included in

The changein the fair

value of theineffectiveportion ofhedging

Provision ofcash flow

Assets Liabilities Assets Liabilities the balance sheet items hedgeJune 30, 2021Fair value hedge:

Foreign exchangerisk

$ 951,010 - 24,440 - Cash and cashequivalents

- -

December 31, 2020Fair value hedge:


$ 1,007,190 - (9,410) - Cash and cashequivalents

- -

June 30, 2020Fair value hedge:


$ 1,059,130 - (21,030) - Cash and cashequivalents

- -

(iii) Hedge of a net investment in a foreign operation

In order to minimize the risk from overseas equity-method investments, the Company’ ssubsidiary CTBC Bank Co., Ltd. entered into currency swaps to hedge against foreignexchange fluctuation.

Designated hedging instrumentsFinancial

instruments Fair value

Hedged itemsdesignated as

hedging instrumentsJune 30,


June 30,2020

CTBC Bank Co., Ltd.-Ho Chi MinhCity Branch

Currency swaps $ (8,029) (317) 7,221

CTBC Capital Corp. 〞 (40,976) (38,745) 32,476CTBC Bank Corp. (Canada) 〞 4,035 (2,422) 4,820The Tokyo Star Bank, Ltd. 〞 10,478 (170,188) 86,369

(Continued)

48


(iv) The amounts applicable to the hedge accounting that affects the statement of comprehensiveincome statement for the six months ended June 30, 2021 and 2020 were as follows:

Provision of hedge reclassified to profit or loss

Recognized inother

comprehensiveincome

Recognized inprofit or loss ofthe ineffective

portion ofhedging

The separate lineitems of the hedged

items included in thestatements of

comprehensiveincome

The hedgeditems no longer

expected tooccur andtransfer

The hedgeditems have

affected profitor loss andtransferred

The separateline items

affected byreclassification

June 30, 2021

Hedge of net investment


－Hedge of a netinvestment in a foreignoperations

$ 1,181,810 - - - - -

June 30, 2020



－Hedge of a netinvestment in a foreignoperations

$ 187,151 - - - - -

(v) The amounts, timing and uncertainty of the aforementioned hedging instruments affecting theCompany’s subsidiary CTBC Bank Co., Ltd.’s future cash flow were as follows:

Maturity dateUp to 1month 1-3 months

3 months to1 year 1-5 years

Over 5years

June 30, 2021

Fair value hedge

Non-delivery forwards

Notional Amount USD 15,000 USD 20,000 - - -

Range of FX(TWD/USD) 27.122~27.310 27.115


Exchange transaction

Notional Amount USD 291,500 - - - -

Range of FX(TWD/USD) 27.644~27.760

Notional Amount CAD 10,000 - - - -

Range of FX(TWD/CAD) 22.888

Notional Amount JPY 52,970,726 - - - -

Range of FX(TWD/JPY) 0.2520~0.2525

(Continued)

49


Maturity dateUp to 1month 1-3 months

3 months to1 year 1-5 years

Over 5years

June 30, 2020

Fair value hedge

Non-delivery forwards

Notional Amount USD 15,000 USD 20,000 - - -

Range of FX(TWD/USD) 29.942~29.998 30.472


Exchange transaction

Notional Amount USD 291,500 - - - -

Range of FX(TWD/USD) 29.749~29.879

Notional Amount CAD 10,000 - - - -

Range of FX(TWD/CAD) 21.185

Notional Amount JPY 52,970,726 - - - -

Range of FX(TWD/JPY) 0.2758~0.2780

(g) Securities purchased under resell agreements


2020 June 30, 2020Securities purchased under resell agreements $ 6,732,210 3,953,395 10,418,546

Face value of securities $ 6,592,522 3,868,600 10,047,120

(Continued)

50


(h) Receivables－net


2020 June 30, 2020Notes receivable $ 184,305 229,235 201,963Accounts receivable 72,580,275 88,171,524 72,801,784Accounts receivable factoring 20,775,315 22,255,471 23,675,162Interest receivable 22,409,538 22,678,933 22,772,360Acceptances receivable 10,655,194 13,692,006 11,200,164Accrued income 933,949 444,096 1,126,217Securities margin loan receivable 5,755,550 3,957,906 2,616,724Financial leasing receivable 11,637,361 10,870,913 9,209,959Interbank clearing receivable 3,145,652 2,583,849 2,689,972Premium receivable 4,877,407 4,038,537 10,804,240Separate account of investment products

receivable223,609 1,658,136 1,406,698

Installment accounts receivable 6,233,890 5,730,490 5,147,336Financial trading receivable 5,963,919 2,577,264 13,266,063Other receivables 4,178,465 2,872,668 5,381,414Subtotal 169,554,429 181,761,028 182,300,056Less: Allowance for credit losses (2,342,862) (2,485,620) (2,414,800)Total $ 167,211,567 179,275,408 179,885,256

The accounts receivable shown above included the receivables from credit card holders who wereinvolved in debt repayment negotiation with the Company’s subsidiary CTBC Bank Co., Ltd.

Please refer to Note 8 for information with regard to the restrictions on other receivables shownabove.

Please refer to Note 6(j) for changes in allowance for credit losses of receivables listed above.

Please refer to Note 6(au) for credit risk and the market risk information about parts of theaforementioned receivables.

Receivables of the Company and subsidiaries should be included in impairment assessment,excluding that of credit card receivables, which are accounted for under liability reserve. Totalreceivables do not encompass investments in security-related and other receivables whoseimpairment assessments are consistent with corresponding assets.

(Continued)

51


(i) Loans－net


2020 June 30, 2020Corporate loans $ 713,109,375 601,440,442 583,871,533Micro business loans 17,426,578 16,849,743 15,020,706Mortgage loans 800,838,071 767,048,129 720,594,360Automobile loans 4,410,091 5,243,795 6,218,440Consumer loans 192,966,506 175,301,158 163,008,483Life insurance loans 20,168,711 19,947,382 20,131,386Automatic premium loans 3,843,035 3,765,273 3,699,659 Subtotal of NTD loans 1,752,762,367 1,589,595,922 1,512,544,567Foreign currency loans 924,514,265 962,737,119 1,018,240,842Non-accrual loans 10,341,673 11,285,923 10,705,752Subtotal 2,687,618,305 2,563,618,964 2,541,491,161Less: Allowance for credit losses (33,325,643) (34,226,903) (36,056,259)Less: Adjustment of discount and premium (1,094,087) (1,104,845) (1,047,503)Total $2,653,198,575 2,528,287,216 2,504,387,399

The loans shown above included the loans to cash card holders and fiduciary loans to clients whowere involved in debt repayment negotiation with the Company’s subsidiary CTBC Bank Co., Ltd.

Please refer to Note 6(au) for the industry information.

Non-performing loans of the Company’s subsidiary CTBC Bank Co., Ltd. and its subsidiaries wereas follows:


2020 June 30, 2020Non-performing loans $ 10,434,435 12,427,569 9,608,328

The Company’s subsidiary CTBC Bank Co., Ltd. and subsidiaries have suspended interests on non-accrual loans. The amounts of suspended interests were as follows:


Suspended interest on non-accrual loans

$ 23,923 36,494 73,841 64,848

For the six months ended June 30, 2021 and 2020, there were no loans written off without recourse.

Please refer to Note 8 for information with regard to the restrictions on loans shown above.

Please refer to Note 6(j) for changes in allowance for credit losses of loans listed above.

Please refer to Note 6(au) for credit risk and market risk information of loans listed above.

(Continued)

52


(j) Allowance for credit losses

The changes in allowance for credit losses, attributed to receivables, loans, other financial assets,and financing guarantee, etc., were as follows:

(i) ReceivablesFor the six months ended June 30, 2021

12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not

purchased ororiginated


LifetimeECL




(Total)

Additionalprovision of

impairment inaccordance with

regulationsfor each industry

(Note) TotalBeginning balance $ 829,644 102,253 5,462 1,109,951 1 2,047,311 438,309 2,485,620Changes in financial instruments that

have been identified at thebeginning of the period:－Transfer to lifetime ECL (14,013) 13,383 1,265 (635) - - - -－Transfer to the credit-impaired

financial assets (28,666) (72,120) (182) 100,968 - - - -－Transfer to 12-month ECL 67,139 (19,496) (1) (47,642) - - - -－The financial assets that have

been derecognized (47,424) (5,215) (1,281) (5,782) - (59,702) - (59,702)New financial assets originated or

purchased 173,362 10,148 - 16,793 1 200,304 - 200,304Additional provision of impairment in

accordance with regulations foreach industry (Note) - - - - - - (111,511) (111,511)

Write-offs - - - (433,299) - (433,299) - (433,299)Recoveries of amounts previously

written off - - - 387,475 - 387,475 - 387,475Foreign exchange and other movement (165,569) 95,042 (1,355) (54,143) - (126,025) - (126,025)Ending balance $ 814,473 123,995 3,908 1,073,686 2 2,016,064 326,798 2,342,862


12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not



LifetimeECL




(Total)




(Note) TotalBeginning balance $ 858,746 87,685 13,630 1,461,553 5 2,421,619 329,745 2,751,364Changes in financial instruments that

have been identified at thebeginning of the period:－Transfer to lifetime ECL (10,788) 8,361 3,404 (977) - - - -－Transfer to the credit-impaired

financial assets (22,266) (57,635) (917) 80,818 - - - -－Transfer to 12-month ECL 86,481 (19,866) (58) (66,557) - - - -－The financial assets that have

been derecognized (45,407) (2,451) (9,919) (54,215) (1) (111,993) - (111,993)New financial assets originated or

purchased 130,635 6,310 2,720 17,501 - 157,166 - 157,166Additional provision of impairment in

accordance with regulations foreach industry (Note) - - - - - - 69,779 69,779

Write-offs - - - (578,193) - (578,193) (238) (578,431)Recoveries of amounts previously

written off - - - 401,967 - 401,967 - 401,967Foreign exchange and other movement (210,171) 53,296 810 (118,986) (1) (275,052) - (275,052)Ending balance $ 787,230 75,700 9,670 1,142,911 3 2,015,514 399,286 2,414,800

(Continued)

53


Note: Additional provisions of impairment were in accordance with “Regulations Governingthe Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans” and “ Regulations Governing the Procedures forInsurance Enterprises to Evaluate Assets and Deal with Non-performing/Non-accrualLoans”.

(ii) LoansFor the six months ended June 30, 2021

12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not



LifetimeECL




(Total)




(Note) TotalBeginning balance $ 5,487,619 994,715 296,391 8,468,634 37,899 15,285,258 18,941,645 34,226,903Changes in financial instruments that have

been identified at the beginning of theperiod:－Transfer to lifetime ECL (93,513) 208,025 7,302 (120,250) (1,564) - - -－Transfer to the credit-impaired

financial assets (85,554) (382,444) (34,881) 502,875 4 - - -－Transfer to 12-month ECL 361,496 (99,249) (65,730) (196,517) - - - -－The financial assets that have been

derecognized (823,680) (129,390) (7,131) (1,402,324) (5,571) (2,368,096) - (2,368,096)New financial assets originated or

purchased 1,356,808 136,423 36,727 661,211 2,435 2,193,604 - 2,193,604Additional provision of impairment in

accordance with regulations for eachindustry (Note) - - - - - - 1,204,551 1,204,551

Write-offs (1,141) (5,731) - (3,404,137) (11,303) (3,422,312) - (3,422,312)Recoveries of amounts previously written

off 620 - - 627,877 - 628,497 - 628,497Foreign exchange and other movement (787,531) 213,225 (23,218) 1,464,266 (4,246) 862,496 - 862,496Ending balance $ 5,415,124 935,574 209,460 6,601,635 17,654 13,179,447 20,146,196 33,325,643


12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not



LifetimeECL




(Total)




(Note) TotalBeginning balance $ 5,036,020 533,670 330,610 8,895,618 145,535 14,941,453 17,858,073 32,799,526Changes in financial instruments that

have been identified at thebeginning of the period:－Transfer to lifetime ECL (84,307) 110,315 8,247 (33,566) (689) - - -－Transfer to the credit-impaired

financial assets (83,147) (190,144) (8,407) 281,698 - - - -－Transfer to 12-month ECL 226,557 (133,633) (17,246) (75,678) - - - -－The financial assets that have

been derecognized (842,768) (121,928) (196,142) (336,643) (4,147) (1,501,628) - (1,501,628)New financial assets originated or

purchased 1,315,047 134,822 96,253 3,190,127 4,655 4,740,904 - 4,740,904Additional provision of impairment in


Write-offs (754) (5,045) - (2,707,711) (99,707) (2,813,217) - (2,813,217)Recoveries of amounts previously

written off 544 - - 646,233 - 646,777 - 646,777Foreign exchange and other movement 39,259 284,870 40,435 947,704 (3,412) 1,308,856 - 1,308,856Ending balance $ 5,606,451 612,927 253,750 10,807,782 42,235 17,323,145 18,733,114 36,056,259

(Continued)

54



(iii) Short-term advances, non-accrual loans and othersFor the six months ended June 30, 2021

12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not



LifetimeECL




(Total)




(Note) TotalBeginning balance $ 8,558 4,840 - 167,064 - 180,462 12,184 192,646Changes in financial instruments that

have been identified at thebeginning of the period:－Transfer to lifetime ECL - 119 - (119) - - - -－Transfer to the credit-impaired

financial assets - (25) - 25 - - - -－Transfer to 12-month ECL 595 (4) - (591) - - - -－The financial assets that have

been derecognized (3,773) (40) - (12,469) - (16,282) - (16,282)New financial assets originated or

purchased 2,574 4 - 107,847 - 110,425 - 110,425Additional provision of impairment in


Write-offs - - - (56,107) - (56,107) - (56,107)Foreign exchange and other movement (709) (4,775) - 80,875 - 75,391 - 75,391Ending balance $ 7,245 119 - 286,525 - 293,889 15,880 309,769


12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not



LifetimeECL




(Total)




(Note) TotalBeginning balance $ 12,743 3,863 - 269,237 - 285,843 39,060 324,903Changes in financial instruments that

have been identified at thebeginning of the period:－Transfer to lifetime ECL - 82 - (82) - - - -－Transfer to the credit-impaired

financial assets - (19) - 19 - - - -－Transfer to 12-month ECL 1,378 (3) - (1,375) - - - -－The financial assets that have

been derecognized (4,739) (29) - (9,026) - (13,794) - (13,794)New financial assets originated or

purchased 3,712 2 - 7,147 - 10,861 - 10,861Additional provision of impairment in

accordance with regulations foreach industry (Note) - - - - - - (3,516) (3,516)

Write-offs - (52) - (57,613) - (57,665) - (57,665)Recoveries of amounts previously

written off - - - 75 - 75 - 75Foreign exchange and other movement (4,303) 10 - 40,482 - 36,189 - 36,189Ending balance $ 8,791 3,854 - 248,864 - 261,509 35,544 297,053


(Continued)

55


(iv) Financing commitment and guarantee reserveFor the six months ended June 30, 2021

12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not



LifetimeECL




(Total)



“RegulationsGoverning theProcedures for

BankingInstitutions to

Evaluate Assetsand Deal with

Non-performing/Non-accrual

Loans” TotalBeginning balance $ 318,247 7,196 272 143,247 94 469,056 756,280 1,225,336Changes in financial instruments that have

been identified at the beginning of theperiod:－Transfer to lifetime ECL (1,132) 1,138 3 (9) - - - -－Transfer to the credit-impaired

financial assets (1,305) (690) - 1,995 - - - -－Transfer to 12-month ECL 1,964 (1,066) - (898) - - - -－The financial assets that have been

derecognized (40,051) (791) (177) (587) - (41,606) - (41,606)New financial assets originated or

purchased 55,826 426 145 127 129 56,653 - 56,653Additional provision of impairment in

accordance with “RegulationsGoverning the Procedures for BankingInstitutions to Evaluate Assets andDeal with Non-performing/ Non-accrual Loans” - - - - - - (157,874) (157,874)

Write-offs - - - (68) - (68) - (68)Recoveries of amounts previously written

off - - - 329 - 329 - 329Foreign exchange and other movement (16,104) 772 (12) 898 (58) (14,504) - (14,504)Ending balance $ 317,445 6,985 231 145,034 165 469,860 598,406 1,068,266


12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not



LifetimeECL




(Total)



“RegulationsGoverning theProcedures for

BankingInstitutions to

Evaluate Assetsand Deal with

Non-performing/Non-accrual

Loans” TotalBeginning balance $ 314,737 3,576 - 180,951 117 499,381 670,109 1,169,490Changes in financial instruments that have

been identified at the beginning of theperiod:－Transfer to lifetime ECL (885) 911 - (26) - - - -－Transfer to the credit-impaired

financial assets (1,046) (224) - 1,270 - - - -－Transfer to 12-month ECL 25,087 (924) - (24,163) - - - -－The financial assets that have been

derecognized (46,944) (777) - (13,551) - (61,272) - (61,272)New financial assets originated or

purchased 52,516 123 237 4,599 170 57,645 - 57,645Additional provision of impairment in

accordance with “RegulationsGoverning the Procedures for BankingInstitutions to Evaluate Assets andDeal with Non-performing/ Non-accrual Loans” - - - - - - (1,258) (1,258)

Write-offs - - - (185) - (185) - (185)Recoveries of amounts previously written

off - - - 247 - 247 - 247Foreign exchange and other movement (13,391) 2,594 - (1,334) (64) (12,195) - (12,195)Ending balance $ 330,074 5,279 237 147,808 223 483,621 668,851 1,152,472

(Continued)

56


(k) Reinsurance assets－net


2020 June 30, 2020Claims recoverable from reinsurers $ 800,554 767,989 676,924Due from reinsurers and ceding companies 324,623 322,006 327,515Less: Allowance for credit losses (17,988) (17,887) (17,912)　Subtotal 1,107,189 1,072,108 986,527Reinsurance reserve assets:　Ceded unearned premium reserve 1,233,746 1,180,804 1,111,643　Ceded claim reserve 820,959 809,426 442,618　Ceded premium deficiency reserve - 28 -　　Subtotal 2,054,705 1,990,258 1,554,261Total $ 3,161,894 3,062,366 2,540,788

As of June 30, 2021, December 31 and June 30, 2020, non-performing loans of due from reinsuresand ceding companies were $20,652, $18,275 and $22,541, respectively, and the bad debtsallowance were $17,988, $17,887 and $17,912, respectively. Please refer to Note 6(j) forinformation with regard to the changes in allowance for losses.

(Continued)

57


(l) Investment under equity method－net

June 30, 2021% Book value

Investment in associates:Grand Bills Finance Corporation

(original investment at 1,010,880 thousand)21.15 $ 2,195,395

AZ-Star Co., Ltd.(original investment at JPY 12,000 thousand)

40.00 25,339

AZ-Star no. 3 Investment Limited Partnership(original investment at JPY 1,812,452 thousand)

23.56 406,623

LH Financial Group Public Company Limited(original investment at THB 16,598,915 thousand)

35.86 15,127,507

CTBC Security Co., Ltd.(original investment at 58,839 thousand)

100.00 58,338

HoFa Land Development Co., Ltd.(original investment at 3,407,393 thousand)

90.00 3,741,044

Wu Tzu Development Co., Ltd.(original investment at 2,596,144 thousand)

99.00 2,393,829

Top Taiwan IX Venture Capital Co., Ltd.(original investment at 200,000 thousand)

25.00 393,293

Star Shining Energy Co., Ltd.(original investment at 1,500,000 thousand)

30.00 1,555,188

Giga Green Energy Co., Ltd.(original investment at 327,000 thousand)

30.00 348,479

Taiwan Wind Investment Co., Ltd.(original investment at 1,836,255 thousand)

42.86 1,609,300

Solarbright Energy Co., Ltd.(original investment at 105,000 thousand)

35.00 105,925

Star Power Energy Co., Ltd.(original investment at 225,000 thousand)

30.00 224,051

Li-Wei Energy Co., Ltd. (original investment at 425,000 thousand)

28.33 426,076

Xinhe Energy Development Co., Ltd.(original investment at 421,250 thousand)

25.00 420,604

Investment in joint ventures:Xiamen Jinmeixin Consumer Finance Co., Ltd.

(original investment at RMB170,000 thousand)34.00 893,881

King Dragon Life Investment Co., Ltd.(original investment at 1,856,036 thousand)

50.00 940,815

Total $ 30,865,687

(Continued)

58


December 31, 2020% Book value




40.00 17,117

AZ Star no. 1 Investment Limited Partnership(original investment at JPY 2,333,068 thousand)

43.98 264

AZ-Star no. 3 Investment Limited Partnership(original investment at JPY 580,866 thousand)

23.56 116,904


36.07 16,362,979


100.00 61,697


90.00 3,744,132


99.00 2,416,827


25.00 291,317

Star Shining Energy Co., Ltd.(original investment at 1,500,000 thousand)

30.00 1,535,629


30.00 343,681

Taiwan Wind Investment Co., Ltd.(original investment at 1,836,255 thousand)

42.86 1,822,576

Solarbright Energy Co., Ltd.(original investment at 35,000 thousand)

35.00 34,800

Star Power Energy Co., Ltd.(original investment at 175,000 thousand)

35.00 166,773

Li-Wei Energy Co., Ltd.(original investment at 425,000 thousand)

28.33 419,535


(original investment at RMB 170,000 thousand)34.00 871,195


50.00 952,079

Total $ 31,438,820

(Continued)

59


June 30, 2020% Book value




40.00 26,170

AZ-Star no. 1 Investment Limited Partnership(original investment at JPY 2,333,068 thousand)

43.98 97,749

AZ-Star no. 3 Investment Limited Partnership(original investment at JPY 546,697 thousand)

23.56 117,442


36.07 16,526,780


100.00 56,896


90.00 3,750,097


99.00 2,432,509


25.00 231,963

Star Shining Energy Co., Ltd. (original investment at 900,000 thousand)

30.00 921,517


30.00 345,182

Taiwan Wind Investment Co., Ltd. (original investment at 1,723,962 thousand)

42.86 1,719,835


(original investment at RMB170,000 thousand)34.00 786,469


50.00 797,297

Total $ 29,912,551

For the three and six months ended June 30, 2021 and 2020, the amounts of profit and loss fromassociates and joint ventures recognized under equity-method investments were as follows:


Investment in associates $ 213,481 874,318 348,620 734,022Investment in joint ventures (11,365) (33,474) 57,250 (13,306)Total $ 202,116 840,844 405,870 720,716

(Continued)

60


(i) Investment in associates

1) Information of significant associates:

The relevant information about the associates which are material to the Company andsubsidiaries was as follows:

Nature of

Main operatinglocation/

Registered Percentage of ownership

Name of AssociatesRelationship with

the CompanyCountry of the

CompanyJune 30,

2021December 31,

2020June 30,

2020LH Financial Group

Public CompanyLimited

Investment underequity method

Thailand %35.86 %36.07 %36.07

LH Financial Group Public Company Limited successively increased its treasury stocksfrom January to March 2020, and sold part of treasury stocks from March to June 2021.

The fair values of associates listed on the Stock Exchange (over the counter) which werematerial to the Company and subsidiaries were as follows:


2020 June 30, 2020LH Financial Group Public

Company Limited$ 7,425,125 7,407,266 7,327,998

Summarized financial information of LH Financial Group Public Company Limited wasas follows:


2020 June 30, 2020Total assets $ 231,062,440 237,348,505 241,248,814Total liabilities (197,515,931) (200,571,829) (204,017,982)Net assets $ 33,546,509 36,776,676 37,230,832


Net revenue $ 1,633,312 4,811,280 3,344,012 3,752,864Net income from

continuingoperations

423,511 2,493,502 948,132 1,270,020

Othercomprehensiveincome (losses)

274,514 (2,394,940) (387,731) (2,512,230)

Comprehensiveincome (losses)

$ 698,025 98,562 560,401 (1,242,210)

(Continued)

61



2020 June 30, 2020Proportionate share of net assets of

associates$ 12,028,771 13,264,243 13,428,044

Add: Premium on the investmentunder equity method

3,098,736 3,098,736 3,098,736

Book value of associates $ 15,127,507 16,362,979 16,526,780

2) Information of insignificant associates:

The following is the collected prorated financial information of the associates that areindividually insignificant to the Company and subsidiaries. The financial information isderived from the consolidated financial report:


Net income fromcontinuingoperations

$ 59,580 3,615 3,941 279,581


58,022 188,340 (81,066) 55,566

Comprehensiveincome (losses)

$ 117,602 191,955 (77,125) 335,147

3) Information of other associates:

As of June 30, 2021, December 31 and June 30, 2020, the Company’s subsidiary TaiwanLife Insurance Co., Ltd. acquired 90% equity stake of HoFa Land Development Co., Ltd.HoFa Land Development Co., Ltd. is set up for participating in the program of“ Kaohsiung City HoFa industrial park development, sell (sell by tender) andmanagement”. However, the final approval of practical operations, such as developmentplans, expenditures and the bid price of the land, were made by Kaohsiung CityGovernment. The number of directors and supervisors appointed by the Company’ ssubsidiary Taiwan Life Insurance Co., Ltd. shall not exceed half of the total number ofdirectors and supervisors of the invested enterprises. As a result, the Company’ ssubsidiary Taiwan Life Insurance Co., Ltd. has no de facto control but with significantinfluence, hence, HoFa Land Development Co., Ltd. is excluded in the consolidatedentities.

(Continued)

62


As of June 30, 2021, December 31 and June 30, 2020, the Company’s subsidiary TaiwanLife Insurance Co., Ltd. acquired 99% equity stake of Wu Tzu Development Co., Ltd.Wu Tzu Development Co., Ltd. was set up for the purpose of participating in “ theDevelopment and Operating Program of Taichung Intercontinental Baseball Stadium” ,and was authorized by Taichung City Government to operate the TaichungIntercontinental Baseball Stadium, build multiple functional sport center, parking lots,and other items proposed by Wu Tzu Development Co., Ltd.. The aforesaid items shouldbe reviewed and approved by Taichung City Government before operating. The numberof directors and supervisors appointed by the Company’ s subsidiary Taiwan LifeInsurance Co., Ltd. shall not exceed half of the total number of directors and supervisorsof the invested enterprises. As a result, the Company’s subsidiary Taiwan Life InsuranceCo., Ltd. has no de facto control but with significant influence, hence, Wu TzuDevelopment Co., Ltd. is excluded in the consolidated entities.

As of June 30, 2021, December 31 and June 30, 2020, the Company’s subsidiary TaiwanLife Insurance Co., Ltd. acquired 42.86% equity stake of Taiwan Wind Investment Co.,Ltd. The number of directors and supervisors appointed by the Company’ s subsidiaryTaiwan Life Insurance Co., Ltd. shall not exceed half of the total number of directors andsupervisors of the invested enterprises. As a result, the Company’ s subsidiary TaiwanLife Insurance Co., Ltd. has no de facto control but with significant influence, hence,Taiwan Wind Investment Co., Ltd. is excluded in the consolidated entities.

As of June 31, 2021 and December 31, 2020, the Company’ s subsidiary Taiwan LifeInsurance Co., Ltd. acquired 35% equity stake of Solarbright Energy Co., Ltd. Thenumber of directors and supervisors appointed by the Company’s subsidiary Taiwan LifeInsurance Co., Ltd. shall not exceed half of the total number of directors and supervisorsof the invested enterprise. As a result, the Company’s subsidiary Taiwan Life InsuranceCo., Ltd. has no de facto control but with significant influence, hence, SolarbrightEnergy Co., Ltd. is excluded in the consolidated entities.

(ii) Investment in joint venture

Xiamen Jinmeixin Consumer Finance Co., Ltd. was jointly invested by the Company'ssubsidiary CTBC Bank Co., Ltd., GOME Holdings Group Co., Ltd. and Xiamen Jin YuanFinancial Holding Co., Ltd. The investment was a joint venture accounted for using the equitymethod. Please refer to Note 13(c) for information with regard to related information oninvestee companies in Mainland China.

The joint agreement between the Company’s subsidiary Taiwan Life Insurance Co., Ltd. andKing Dragon Life Insurance Co., Ltd. is a joint venture, hence accounted for under equitymethod. Please refer to Note 13(c) for information with regard to related information oninvestee companies in Mainland China.

(Continued)

63


The aforementioned financial information for investments in individually insignificant jointventure accounted for using equity method are shown below. The amount of these financialinformation included in the consolidated financial statement:


Net (losses) income fromcontinuing operations

$ (11,365) (33,474) 57,250 (13,306)

Other comprehensiveincome (losses)

123,356 103,316 (45,829) 69,814

Comprehensive income $ 111,991 69,842 11,421 56,508

The financial information for investments in joint venture accounted for using equity method ofTaiwan Life Insurance Co., Ltd. is individually insignificant. The financial information has reflectedthe adjustments of the difference of the accounting policy when the consolidated Company adoptedequity method. Moreover, due to the carrying amount of liabilities generating from the contractswithin the scope of IFRS 4 are considered significant compared to the total liabilities, the Companyis temporarily exempt from applying IFRS 9.

The fair value as of the end of financial reporting date and changes of the fair value during theperiod of King Dragon Life Insurance Co., Ltd.’s financial assets were as follows:

The Fair Value onJune 30, 2021

Changes in FairValue for the six

months endedJune 30, 2021

Financial assets with the characteristic of solelypayments of principal and interest, but excluding anyfinancial assets meeting the definition of holding fortrading purpose under IFRS 9 or those weremanaging and evaluating on the basis of fair value

$ 1,381,979 (122)

Financial assets without the characteristic of paymentsof principal and interest, or meeting the definition ofholding for trading purpose under IFRS 9 or thosewere managing and evaluating on the basis of fairvalue

8,157,183 71,351

(Continued)

64


The Fair Value onJune 30, 2020

Changes in FairValue for the six

months endedJune 30, 2020


$ 1,574,300 (20,447)


5,184,788 227,857

The carrying amounts of the financial assets under IAS 39 above were as follows:

June 30, 2021

Investmentgrade

Sub-investment

gradeHigh risk

gradeFinancial assets with the characteristic of solely

payments of principal and interest, butexcluding any financial assets meeting thedefinition of holding for trading purposeunder IFRS 9 or those were managing andevaluating on the basis of fair value

$ 1,011,138 - 711,975

Financial assets without the characteristic ofpayments of principal and interest, ormeeting the definition of holding for tradingpurpose under IFRS 9 or those weremanaging and evaluating on the basis of fairvalue

1,453,779 - 6,703,404

(Continued)

65


June 30, 2020

Investmentgrade

Sub-investment

gradeHigh risk

gradeFinancial assets with the characteristic of solely

payments of principal and interest, butexcluding any financial assets meeting thedefinition of holding for trading purposeunder IFRS 9 or those were managing andevaluating on the basis of fair value

$ 1,118,614 - 692,390

Financial assets without the characteristic ofpayments of principal and interest, ormeeting the definition of holding for tradingpurpose under IFRS 9 or those weremanaging and evaluating on the basis of fairvalue

385,491 - 4,799,297

Note: If the financial assets are measured at amortized cost, the carrying amount is measured beforeadjusting for any loss allowance.

The fair value of the financial assets above which do not belong to low credit risk, and the carryingamount under IAS 39 as of the end of reporting date were as follows:

June 30, 2021The Carrying

Amount under IAS39 (Note) Fair Value


$ 711,975 351,152


6,703,404 6,703,404

(Continued)

66


June 30, 2020The Carrying

Amount under IAS39 (Note) Fair Value


$ 692,390 456,409


4,799,297 4,799,297

Note: If the financial assets are measured at amortized cost, the carrying amount is measured beforeadjusting for any credit loss allowance.

(m) Other financial assets－net


2020 June 30, 2020Short-term advances $ 578,497 742,171 662,163Less: Allowance for credit losses－short-term

advances(65,121) (74,528) (73,353)

Deposits pledged 3,306,377 712,510 454,337Non-accrual loans transferred from non-loan

financial assets270,574 116,495 218,976

Less: Allowance for credit losses—non-accrual loans transferred from non-loanfinancial assets

(214,155) (77,137) (181,820)

Separate insurance products 154,596,484 125,640,620 92,725,208Customer margin deposit 631,944 386,865 609,671Others 486,314 411,692 103,247Total $ 159,590,914 127,858,688 94,518,429

(Continued)

67


Please refer to Note 6(j) for information with regard to the changes of allowance for short-termadvances and allowance for credit losses— non-accrual loans transferred from non-loan financialassets shown above.

Please refer to Note 6(ao) for the information on separate insurance products.

Please refer to Note 8 for information with regard to the restrictions on the other financial assetsshown above.

(n) Investment property－net

June 30, 2021

Asset CostAccumulateddepreciation

Accumulatedimpairment Book value

Proprietary AssetsLand $ 49,782,012 - 163,267 49,618,745Buildings 22,002,784 2,914,496 60,478 19,027,810Construction in progress 6,769,832 - - 6,769,832Prepayment for land 138,153 - - 138,153Subtotal 78,692,781 2,914,496 223,745 75,554,540Right-of-Use AssetsSuperficies 15,255,941 904,478 - 14,351,463Total $ 93,948,722 3,818,974 223,745 89,906,003

Fair value $ 97,121,493

December 31, 2020




Fair value $ 93,540,617

(Continued)

68


June 30, 2020




Fair value $ 90,857,115

Changes in the cost were as follows:

January 1, 2021 Current increase Current decrease Others June 30, 2021Proprietary Assets

Land $ 48,126,025 3,876,287 2,220,300 - 49,782,012

Buildings 21,567,072 1,144,428 708,716 - 22,002,784

Construction in progress 5,412,320 1,368,569 11,057 - 6,769,832

Prepayment for land 135,230 39,173 36,250 - 138,153

Subtotal 75,240,647 6,428,457 2,976,323 - 78,692,781

Right-of-Use Assets

Superficies 15,255,941 - - - 15,255,941

Total $ 90,496,588 6,428,457 2,976,323 - 93,948,722


Land $ 47,064,215 597,524 32,052 - 47,629,687

Buildings 17,600,150 181,733 19,072 - 17,762,811

Construction in progress 4,471,976 3,018,548 36,260 - 7,454,264

Prepayment for land 96,557 46,448 44,000 - 99,005

Subtotal 69,232,898 3,844,253 131,384 - 72,945,767

Right-of-Use Assets

Superficies 15,218,219 37,722 - - 15,255,941

Total $ 84,451,117 3,881,975 131,384 - 88,201,708

(Continued)

69


Changes in accumulated depreciation were as follows:


Buildings $ 2,623,446 413,186 122,136 - 2,914,496

Right-of-Use Asset

Superficies 723,399 181,079 - - 904,478

Total $ 3,346,845 594,265 122,136 - 3,818,974


Buildings $ 2,088,128 268,577 4,885 - 2,351,820

Right-of-Use Asset

Superficies 361,240 181,079 - - 542,319

Total $ 2,449,368 449,656 4,885 - 2,894,139

Changes in accumulated impairment were as follows:


Land $ 163,267 - - - 163,267

Buildings 61,405 160 1,087 - 60,478

Total $ 224,672 160 1,087 - 223,745


Land $ 245,972 - - - 245,972

Buildings 100,013 - - - 100,013

Total $ 345,985 - - - 345,985

On August 12, 2015, the Company’ s subsidiary, Taiwan Life Insurance Co., Ltd., acquired thesuperficies right of lot 15 of Jingmao Section, Nangang, Taipei, from Taipei Fertilizer Co., Ltd. for45 years, with the total royalty of $15 billion, wherein the Company’s subsidiary can decide (fromthe sixth month of the ninth year to the tenth year) whether to extend the superficies right period foranother 40 years, at an amount of $15 billion, with 15 years to pay off. On December 10, 2015, adecision had been made regarding the extension of superficies right mentioned above, which wasaccounted for as right of use assets under investment property. Please refer to Note 8 for informationon performance guarantee deposits.

Please refer to Note 13(a)(v)(vi) for information on the related significant transactions of investmentproperty.

(Continued)

70


The fair value of investment property is based on a valuation by an external independent appraiserwho holds a recognized and relevant professional qualification and has recent experience in thelocation and category of the investment property being valued, and internal evaluation method. Thevalue of investment properties is estimated through application of market value method.

The rental income and direct operating expenses arising from investment properties under operatingleases of the Company and subsidiaries were as follows:


Rental income from investmentproperty

$ 436,538 409,545 860,151 795,086

Direct operating expense arisingfrom investment property thatgenerated rental incomeduring the period

$ 235,651 199,041 474,199 380,608

Direct operating expense arisingfrom investment property thatdid not generate rental incomeduring the period

$ 5,742 5,571 14,010 8,373

The Company and subsidiaries have no pledged investment properties.

The Company’ s subsidiary Taiwan Life Insurance Co., Ltd. and its subsidiaries and CTBC AssetManagement Co., Ltd. lease their investment property and rental assets under operating leases;please refer to Note 6(r) for information on rental assets. A maturity analysis of lease payments,showing the undiscounted lease payments to be received after the reporting date is as follows:


2020 June 30, 2020Less than 1 year $ 1,674,563 1,548,989 1,595,6831 year to 2 years 1,740,640 1,504,709 1,495,3832 year to 3 years 1,519,388 1,560,744 1,681,1933 year to 4 years 1,400,956 1,276,147 1,368,0674 year to 5 years 1,330,011 1,205,665 1,252,376More than 5 years 9,904,111 9,651,760 12,513,877Total undiscounted lease payments $ 17,569,669 16,748,014 19,906,579

(Continued)

71


(o) Premises and equipment－net

June 30, 2021 CostAccumulateddepreciation

Accumulatedimpairment Net

Land $ 19,351,750 - 41,383 19,310,367Buildings 34,937,511 9,189,099 103,540 25,644,872Transportation equipment 98,671 65,179 6 33,486Miscellaneous equipment 10,608,630 6,265,979 15,573 4,327,078Construction in progress 269,354 - - 269,354Prepayment for equipment 28,037 - - 28,037Total $ 65,293,953 15,520,257 160,502 49,613,194

December 31, 2020 CostAccumulateddepreciation


Land $ 18,275,002 - 41,383 18,233,619Buildings 34,976,252 8,801,981 136,743 26,037,528Transportation equipment 100,126 65,638 6 34,482Miscellaneous equipment 10,909,339 6,250,820 22,227 4,636,292Construction in progress 359,444 - - 359,444Prepayment for equipment 8,846 - - 8,846Total $ 64,629,009 15,118,439 200,359 49,310,211

June 30, 2020 CostAccumulateddepreciation


Land $ 18,341,286 - 41,383 18,299,903Buildings 34,781,220 8,276,365 23,610 26,481,245Transportation equipment 97,679 66,480 - 31,199Miscellaneous equipment 10,969,290 6,039,189 - 4,930,101Construction in progress 231,048 - - 231,048Prepayment for equipment 29,513 - - 29,513Total $ 64,450,036 14,382,034 64,993 50,003,009

(Continued)

72



January 1, 2021 Current increase Current decrease Others (exchange

difference) June 30, 2021Land $ 18,275,002 1,329,242 245,404 (7,090) 19,351,750

Buildings 34,976,252 531,530 366,906 (203,365) 34,937,511

Transportation equipment 100,126 6,668 5,498 (2,625) 98,671

Miscellaneous equipment 10,909,339 434,656 597,487 (137,878) 10,608,630

Construction in progress 359,444 145,242 228,554 (6,778) 269,354

Prepayment for equipment 8,846 44,700 25,341 (168) 28,037

Total $ 64,629,009 2,492,038 1,469,190 (357,904) 65,293,953


difference) June 30, 2020Land $ 18,344,452 - 1,002 (2,164) 18,341,286

Buildings 34,526,450 364,109 39,489 (69,850) 34,781,220

Transportation equipment 98,136 6,446 6,672 (231) 97,679


Construction in progress 293,737 171,339 233,448 (580) 231,048

Prepayment for equipment 48,009 57,884 76,312 (68) 29,513

Total $ 64,050,464 1,126,329 616,603 (110,154) 64,450,036



difference) June 30, 2021Buildings $ 8,801,981 684,739 192,229 (105,392) 9,189,099



Total $ 15,118,439 1,386,150 781,789 (202,543) 15,520,257


difference) June 30, 2020Buildings $ 7,621,544 703,484 25,557 (23,106) 8,276,365



Total $ 13,287,085 1,419,243 273,183 (51,111) 14,382,034



difference) June 30, 2021Land $ 41,383 - - - 41,383

Buildings 136,743 - 24,125 (9,078) 103,540

Transportation equipment 6 - - - 6

Miscellaneous equipment 22,227 - 4,877 (1,777) 15,573

Total $ 200,359 - 29,002 (10,855) 160,502

(Continued)

73



difference) June 30, 2020Land $ 41,383 - - - 41,383Buildings 23,610 - - - 23,610Total $ 64,993 - - - 64,993

Please refer to Note 13(a)(v)(vi) on the related significant transactions of premises and equipmentshown above.

(p) Right-of-use assets

June 30, 2021

CostAccumulateddepreciation


Superficies $ 9,690,150 645,756 - 9,044,394Buildings 12,302,245 4,491,076 81,808 7,729,361Transportation equipment 205,373 98,041 - 107,332Miscellaneous equipment 1,055,185 766,271 - 288,914Total $ 23,252,953 6,001,144 81,808 17,170,001

December 31, 2020



Superficies $ 9,685,207 515,376 - 9,169,831Buildings 10,656,976 3,957,799 109,545 6,589,632Transportation equipment 191,001 82,123 - 108,878Miscellaneous equipment 1,084,633 743,693 - 340,940Total $ 21,617,817 5,298,991 109,545 16,209,281

June 30, 2020



Superficies $ 9,685,207 384,903 - 9,300,304Buildings 9,494,455 3,248,046 - 6,246,409Transportation equipment 177,256 69,871 - 107,385Miscellaneous equipment 1,081,390 666,490 - 414,900Total $ 20,438,308 4,369,310 - 16,068,998



difference) June 30, 2021Superficies $ 9,685,207 4,943 - - 9,690,150Buildings 10,656,976 2,651,824 602,367 (404,188) 12,302,245Transportation equipment 191,001 38,292 22,457 (1,463) 205,373Miscellaneous equipment 1,084,633 46,666 1,984 (74,130) 1,055,185Total $ 21,617,817 2,741,725 626,808 (479,781) 23,252,953

(Continued)

74



difference) June 30, 2020Superficies $ 9,454,385 230,822 - - 9,685,207

Buildings 8,428,794 1,454,261 323,172 (65,428) 9,494,455


Miscellaneous equipment 1,086,788 260 302 (5,356) 1,081,390

Total $ 19,141,174 1,719,965 350,409 (72,422) 20,438,308



difference) June 30, 2021Superficies $ 515,376 130,380 - - 645,756

Buildings 3,957,799 1,171,498 462,348 (175,873) 4,491,076


Miscellaneous equipment 743,693 77,775 1,984 (53,213) 766,271

Total $ 5,298,991 1,416,304 484,365 (229,786) 6,001,144


difference) June 30, 2020Superficies $ 254,429 130,474 - - 384,903

Buildings 2,210,111 1,363,451 292,591 (32,925) 3,248,046


Miscellaneous equipment 592,558 77,750 301 (3,517) 666,490

Total $ 3,116,074 1,605,234 314,549 (37,449) 4,369,310



difference) June 30, 2021Buildings $ 109,545 - 18,779 (8,958) 81,808

In May 2006, CTBC Bank acquired the superficies right of lots 43, 43-1, 45 and 45-1 of JingmaoSection, Nangang, Taipei, from Taiwan Fertilizer Co., Ltd. for 50 years through a public tender. Theacquisition cost amounted to $3,364,140 (including business taxes and other related expenses of thesuperficies). The rental is determined annually at the rate of 8% of the government assessed currentpresent value. Please refer to Note 8 for information on performance guarantee deposits.

(q) Intangible assets－net


2020 June 30, 2020Goodwill $ 18,015,340 18,015,340 18,015,340Computer software 5,806,430 5,920,814 5,766,488The acquisition value of insurance policies 594,298 605,132 612,658Others 61,521 62,215 62,908Total $ 24,477,589 24,603,501 24,457,394

(Continued)

75


Goodwill of the Company and subsidiaries was acquired from business combination.

The acquisition value of insurance policies is the difference between the fair value of both theacquired contractual rights and commitment to insurance obligations, and the liability, which isdetermined by the insurer based on the evaluation of accounting policies for the issued insurancepolicies under general assumption.

Changes in intangible assets were as follows:


difference) June 30, 2021Goodwill $ 18,015,340 - - - 18,015,340

Computer software 5,920,814 1,060,663 976,525 (198,522) 5,806,430

The acquisition value ofinsurance policies

605,132 - 10,834 - 594,298

Others 62,215 - 694 - 61,521

Total $ 24,603,501 1,060,663 988,053 (198,522) 24,477,589


difference) June 30, 2020Goodwill $ 18,015,340 - - - 18,015,340

Computer software 5,726,704 1,070,113 1,009,434 (20,895) 5,766,488

The acquisition value ofinsurance policies

619,419 - 6,761 - 612,658

Others 63,602 - 694 - 62,908

Total $ 24,425,065 1,070,113 1,016,889 (20,895) 24,457,394

(r) Other assets－net


2020 June 30, 2020Prepayments $ 13,377,621 14,155,744 13,031,929Deferred charges 746,329 570,358 450,425Foreclosed properties received－net 142,523 159,782 165,460Temporary payments 150,003 111,345 114,531Refundable deposits－net 14,368,667 19,278,443 15,113,017Cash surrender value of life insurance 1,748,002 1,764,302 1,811,091Clients’ position-debit 12,247,952 5,302,451 3,905,933Rental assets 253,995 410,666 626,290Others 1,913,074 2,639,009 2,094,059Total $ 44,948,166 44,392,100 37,312,735

(Continued)

76


In order to fulfill social responsibility of the Company’s subsidiary CTBC Bank Co., Ltd., improvethe image of the Company’s subsidiary CTBC Bank Co., Ltd. and receive a long term benefit fromadvertisements, the Company’s subsidiary CTBC Bank Co., Ltd. sponsored a professional baseballteam by signing a sponsorship and cooperative advertisement contract with Hua Yi Entertaining Co.Ltd. on December 5, 2013, amounting to $400,000 and accounted under prepaid expenses. Theduration of the name of the baseball team will last for 10 years, starting from the date the Company’ssubsidiary CTBC Bank Co., Ltd. appointed the team name. As of June 30, 2021, the account balancewas $100,000.

Please refer to Note 8 for information on restrictions on other assets shown above.

(s) Deposits from Central Bank and other banks


2020 June 30, 2020Deposits from Central Bank $ 486,571 196,782 179,974Deposits from other banks 13,827,684 27,330,281 23,136,459Deposits from post offices 164,794 236,313 349,933Overdraft on banks 378,100 1,235,540 1,149,809Call loans from banks 33,198,070 26,995,030 33,185,247Total $ 48,055,219 55,993,946 58,001,422

(t) Due to Central Bank and other banks


2020 June 30, 2020Financing from Central Bank $ 2,810,931 3,069,094 6,244,757Financing from other banks 3,189,297 5,774,834 4,250,648Long-term borrowings 7,244,551 7,370,780 5,600,153Total $ 13,244,779 16,214,708 16,095,558

Financing from Central Bank:

(i) As of June 30, 2021, December 31 and June 30, 2020, the Company’s subsidiary CTBC BankCo., Ltd. applied for marginal loans from the Central Bank amounting to $2,615,790,$2,868,770 and $441,700 for providing loans to small and medium enterprises affected byCovid-19 pandemic.

(ii) CTBC Bank Corp. (USA) obtained financing in total USD 46,649 from the Federal ReserveBoard for providing small business loans under the Paycheck Protection Program LendingFacility (PPPLF) on June 30, 2020 .

(Continued)

77


(iii) The Tokyo Star Bank, Ltd.


2020 June 30, 2020Borrowings (JPY thousand) $ 774,060 724,500 16,053,260Interest rate 0.17%~0.20% 0.31%~0.57% 0.30%~1.63%Maturity date March 4, 2022 March 5, 2021 March 5, 2021Interest Payment Interest is

payableat the maturity

date

Interest ispayable

at the maturitydate

Interest ispayable

at the maturitydate

Financing from other banks:

(i) CTBC Bank Corp. (USA)


2020 June 30, 2020Inter bank borrowings (USD thousand) $ - 55,000 60,000Interest rate - 0.00%~0.96% 0.00%~0.96%Maturity date - April 30, 2025 April 30, 2025

(ii) PT. Bank CTBC Indonesia


2020 June 30, 2020Inter bank borrowings (IDR thousand) $ 99,974,725 - 142,550,000Interest rate 4.75% - 0.06%~4.60%Maturity date August 16, 2021 - February 28,

2022

(iii) CTBC Bank (Philippines) Corp.


2020 June 30, 2020Inter bank borrowings (PESO thousand) $ - 988,536 919,634Interest rate - 1.11%~4.96% 7.38%Maturity date - April 29, 2022 April 29, 2022

(iv) CTBC Securities Co., Ltd.


2020 June 30, 2020Inter bank borrowings (NTD) $ - - 3,827Interest rate - - 1.70%Maturity date - - July 24, 2020

(Continued)

78


(v) CTBC Capital Co., Ltd.


2020 June 30, 2020Inter bank borrowings (NTD) $ 1,600,000 2,860,000 1,285,000Interest rate 0.90%~1.10% 0.95%~1.20% 0.78%~1.20%Maturity date March 26, 2022 October 26,

2021June 29, 2021

(vi) CTBC Venture Capital Co., Ltd.


2020 June 30, 2020Inter bank borrowings (NTD) $ 1,400,000 760,000 200,000Interest rate 0.82%~0.85% 0.82%~0.87% 0.90%Maturity date July 16, 2021 February 5,

2021August 25,

2020

(vii) CTBC Asset Management Co., Ltd.


2020 June 30, 2020Inter bank borrowings (NTD) $ - 1,013,000 100,000Interest rate - 1.00%~1.10% 1.00%Maturity date - January 14,

2021July 1, 2020

Long-term borrowings:

(i) CTBC Leasing (China)


2020 June 30, 2020Borrowings (RMB thousand) $ 885,445 745,677 688,591Borrowings (USD thousand) 123,133 108,133 91,267Interest rate LIBOR+1.5%~

5.70%LIBOR+1.5%~

5.70%LIBOR+1.5%~

5.70%Maturity date August 18, 2023 August 18, 2023 January 20,

2023Interest Payment Interest is

payablemonthly,

quarterly and atthe maturity

date.

Interest ispayablemonthly,


date.

Interest ispayablemonthly,


date.

Please refer to Note 8 for information on assets pledged to the bank as collateral of the borrowingaforesaid.

(Continued)

79


(u) Securities sold under repurchase agreements

June 30, 2021

Assets Par valueSelling price

(Note)Designated

repurchase amountDesignated

repurchase dateFinancial assets measured at

fair value through profit orloss

$ 3,403,745 3,380,183 3,381,195 Prior to November 3,2021

Financial assets measured atfair value through othercomprehensive income

41,558,173 40,305,223 40,311,708 Prior to November 3,2021

Debt instruments at amortizedcost

49,546,160 47,182,682 47,187,990 Prior to September 7,2021

Total $ 94,508,078 90,868,088 90,880,893

December 31, 2020


(Note)Designated




$ 12,759,607 12,747,831 12,750,369 Prior to June 18,2021


22,907,535 22,330,998 22,340,572 Prior to June 18,2021


64,166,970 59,382,335 59,395,267 Prior to March 12,2021

Total $ 99,834,112 94,461,164 94,486,208

June 30, 2020


(Note)Designated




$ 7,221,073 7,206,327 7,216,837 Prior to February 16,2023


66,455,838 64,068,891 64,102,436 Prior to September17, 2020


45,006,960 48,797,533 48,807,493 Prior to July 24, 2020

Total $ 118,683,871 120,072,751 120,126,766

(Continued)

80


(v) Commercial paper payable－net

The information of commercial paper payable issued by the Company and subsidiaries was asbelow:


2020 June 30, 2020Commercial paper payable $ 15,851,500 17,009,900 47,426,500Less: Discount on commercial paper payable (4,178) (4,737) (21,560)Total $ 15,847,322 17,005,163 47,404,940

Rate range 0.20%~0.99% 0.20%~1.08% 0.27%~1.04%Duration February 22,

2021~February7, 2024

September 1,2020~

June 9, 2021

February 12,2020~

December 11,2020

The commercial paper payable aforementioned is guaranteed by financial institution and acceptanceinstitution.

(w) Payables


2020 June 30, 2020Accounts payable $ 8,508,821 7,334,190 6,786,611Accounts payable factoring 4,559,493 7,693,081 4,726,824Accrued expenses 18,324,286 21,529,423 16,197,427Interest payable 5,229,791 7,260,625 11,211,820Acceptances payable 10,319,962 13,357,577 11,148,415Collection payable 17,994,316 5,420,231 8,693,369Dividends and bonuses payable 29,648 29,694 20,516,394Miscellaneous lottery accounts payable 12,880,152 7,746,966 11,726,924Commission payable 1,811,582 2,560,206 1,864,522Claims payable 3,600,860 3,508,556 4,150,608Due to reinsurers and ceding companies 1,283,887 1,543,559 1,319,777Separate account of investment products

payables 1,539,840 1,885,039 994,434

Premium payable 3,816,194 3,918,314 6,394,220Financial trading payable 8,559,586 2,453,693 4,468,420Other payables 7,178,117 9,757,299 9,462,652Total $ 105,636,535 95,998,453 119,662,417

(Continued)

81


(x) Deposits and remittances


2020 June 30, 2020NTD deposits Checking accounts $ 11,778,555 13,317,733 10,525,519 Demand deposits Demand deposits 307,007,255 292,599,253 264,939,350 Demand savings deposits 1,066,400,934 961,836,654 885,784,028 Public treasury deposits 8,934,648 11,504,170 13,829,571 Subtotal of demand deposits 1,382,342,837 1,265,940,077 1,164,552,949 Time deposits Time deposits 319,753,420 289,028,461 267,213,955 Time savings deposits 473,030,426 471,296,393 472,359,396 Negotiable certificates of deposit 1,192,700 1,110,300 1,356,600 Public treasury deposits 27,717,171 28,367,171 12,457,171 Others 17,343,500 16,953,500 20,151,500 Subtotal of time deposits 839,037,217 806,755,825 773,538,622Subtotal of NTD deposits 2,233,158,609 2,086,013,635 1,948,617,090Foreign currency deposits 1,557,054,080 1,640,906,124 1,505,081,724Stored value cards 162 167 167Remittances under custody 18,467 56,339 30,191Remittances outstanding 1,340,436 1,691,287 1,270,481Total $3,791,571,754 3,728,667,552 3,454,999,653

(Continued)

82


(y) Bonds Payable

Bonds June 30, 2021December 31,

2020 June 30, 20202008-1 $ 2,000,000 2,000,000 2,000,0002011-1 4,000,000 4,000,000 4,000,0002012-1 2,400,000 2,400,000 2,400,0002014-1 20,000,000 20,000,000 20,000,0002014-2 15,000,000 15,000,000 15,000,0002015-1(financial debentures) (Note 3) - 7,326,556 7,622,6202015-1(ordinary corporate bonds) 5,500,000 5,500,000 11,800,0002015-2 12,000,000 12,000,000 12,000,0002015-3 5,000,000 5,000,000 5,000,0002016-1 (Note3) - - 23,134,8002017-1 (subordinated corporate debentures) 15,000,000 15,000,000 15,000,0002018-1 (financial debentures) (Note 3) 6,270,750 6,414,300 6,673,5002018-1 (subordinated corporate debentures) 10,000,000 10,000,000 10,000,0002020-1 (subordinated corporate debentures) 10,000,000 10,000,000 10,000,0002020-1 (financial debentures) 1,000,000 1,000,000 -2020-2 23,500,000 23,500,000 -2020-3 6,500,000 - -2021-1 (Note 3) 3,901,800 - -2021-2 1,000,000 - -Unamortized discount (17,654) (19,130) (20,606)Less: Financial liability designated at fair

value through profit or loss (Note 3)(10,172,550) (13,740,856) (37,430,920)

Total $ 132,882,346 125,380,870 107,179,394

(Continued)

83


Terms of transactions Bond issuedBonds Issue date Maturity date Interest rate Type

2008-1 04/10/2008 04/10/2023 3.49% Unsecured subordinatedfinancial debentures

2011-1 09/27/2011 09/27/2021 B=1.95%. From the 4th year after the issue date, theinterest rate will be the prime rate plus 0.55% (Note1)

Unsecured subordinatedfinancial debentures

2012-1 02/20/2012 02/20/2022 B=1.80%. Unsecured subordinatedcorporate bonds

2014-1 06/18/2014 N/A A=3.70%, B=4.00%. Perpetual non accumulatedsubordinated financialdebentures

2014-2 06/26/2014 06/26/2029 A=2.00%, B=The prime rate plus 0.45%. (Note 2) Unsecured subordinatedfinancial debentures

2015-1(financial debentures) 01/27/2015 01/27/2045 0% (Note 3) Unsecured financialdebentures

2015-1(unsecured ordinary corporatebonds)

08/03/2015 08/03/2022 B=1.35%, C=1.65% Unsecured ordinarycorporate bonds

2015-2 06/10/2015 N/A 3.60% Perpetual non accumulatedsubordinated financialdebentures

2015-3 06/18/2015 06/18/2025 A=1.83%, B=2.00%, C=2.05% Unsecured subordinatedfinancial debentures

2016-1 11/29/2016 11/29/2044 0% (Note 3) Unsecured financialdebentures

2017-1(subordinated corporate bonds)

06/21/2017 N/A 3.45%, if redemption right is not exercised 10 years afterthe issue date, the interest rate will increase by 1.00%

Unsecured subordinatedcorporate bonds

2018-1 (financial debentures) 03/29/2018 03/29/2048 0% (Note 3) Unsecured financialdebentures

2018-1 (subordinated corporate bonds)

01/16/2019 01/16/2031 A=1.30%, B=1.55% Unsecured subordinatedcorporate bonds

2020-1(subordinated corporate bonds)

06/24/2020 06/24/2030 A=0.90%, B=1.05% Unsecured subordinatedcorporate bonds

2020-1 (financial debentures) 11/06/2020 11/06/2025 0.43% Unsecured financialdebentures

2020-2 09/17/2020 09/17/2030 A=0.60%, B=0.65%, C=0.68%, D=0.69% Unsecured ordinarycorporate bonds

2020-3 01/21/2021 01/21/2028 A=0.40%, B=0.44% Unsecured ordinarycorporate bonds

2021-1 04/27/2021 04/27/2051 0% (Note 3) Unsecured financialdebentures

2021-2 05/18/2021 05/18/2026 0.43% Unsecured financialdebentures

Note 1: The original prime rate is based on page code 6165 of Reuters, the fixed interest rate of 90-day CP/BA at 11:00 am on the interest reset date. With the consensus reached amongcreditors through forward rate agreement, the prime rate will be changed to the 3-monthTaipei Interbank Offered Rate (TAIBOR) from January 1, 2015.

Note 2: The prime rate is based on page code 6165 of Reuters, the fixed interest rate of 90-dayCP/BA at 11:00 am on the interest reset date. If no quotation is available on page code6165 of Reuters, no page is displayed, or no prime rate is retrievable from Reuters, theBank would change the resource of the rate. The Bank would set the prime rate asSecondary Market Fixing Rate of 90-day TAIBIR 02 from the “TAIBIR Section” in thewebpage of Taiwan Depository and Clearing Corporation.

Note 3: Financial debentures of 2015-1, 2016-1, 2018-1 and 2021-1 are recognized as financialliabilities designated at fair value through profit or loss. For more information, please referto Note 6(c).

(Continued)

84


(z) Provisions


2020 June 30, 2020Settlement compensation provision $ 87,903 88,230 88,326Employee benefits provision 3,770,422 3,897,718 3,791,137Guarantee provision 870,135 995,566 954,564Insurance provision 1,744,312,767 1,746,219,622 1,739,533,227Reserve for insurance policies with financialinstrument features

1,591 1,644 1,974

FX rate fluctuation provision 1,665,919 3,251,865 2,126,115Financing commitment provision 198,131 229,770 197,908Other provision 539,910 505,882 354,588Fair value adjustment 5,117,986 5,209,030 5,341,256Total $1,756,564,764 1,760,399,327 1,752,389,095

Please refer to Note 6(ae) for more information on Insurance provision, reserve for insurancepolicies with financial instrument features and FX rate fluctuation provision.

(aa) Other financial liabilities


2020 June 30, 2020Futures trader’s equity $ 630,311 386,263 608,601Structured commodity principal 41,411,441 49,342,504 58,353,644Guarantee deposits received-securities lending

transaction- 1,277,114 7,940,261

Separate insurance products 154,596,484 125,640,620 92,725,208Others 16 44,530 286Total $ 196,638,252 176,691,031 159,628,000

Please refer to Note 6(ao) for information on separate insurance products.

(Continued)

85


(ab) Lease liabilities

Summary June 30, 2021December 31,

2020 June 30, 2020Superficies Lease for operation units $ 7,859,422 8,104,874 7,966,512Buildings Lease for operation units 7,964,590 6,867,410 6,385,924Transportation

equipmentLease for official vehicles 112,952 113,149 111,587

Miscellaneousequipment

Leased office equipment 290,762 356,598 431,850

Total $ 16,227,726 15,442,031 14,895,873

Few real estate include lease extension options to extend the lease while some of them are notreasonably assured that options will be exercised, so the measurement of lease liabilities do notreflect the terms.

Maturity analysis of lease liabilities (undiscounted) was as follows:


2020 June 30, 2020Less than one year $ 2,960,121 2,875,252 2,931,552Between one and five years 6,916,917 5,965,977 5,930,021More than five years 12,939,008 13,490,494 13,104,296Total $ 22,816,046 22,331,723 21,965,869

The total cash outflow of leases was $2,280,711 and $2,145,462, for the six months ended June 30,2021 and 2020, respectively.

(ac) Other liabilities


2020 June 30, 2020Amount received in advance $ 1,297,936 1,558,196 1,587,223Custody payable 1,304,379 688,954 1,005,854Deferred income 1,985,317 1,907,481 1,556,665Guarantee deposits 8,691,956 12,904,851 18,274,962Temporary receipt 2,982,864 2,107,245 3,536,303Credits recognized when accepting orders to

trade11,986,547 5,686,963 3,924,691

Others 294,856 218,308 177,639Total $ 28,543,855 25,071,998 30,063,337

(Continued)

86


(ad) Employee benefits

(i) Defined contribution plan

The Company and subsidiaries’ defined contribution plan follows the Labor Pension Act of theR.O.C. and makes monthly cash contributions to the employees’individual pension accounts atthe Bureau of Labor Insurance at the rate of 6% of the employees’ monthly salary. Under thisplan, the Company and subsidiaries have no legal or constructive obligation to make otherpayments after the Company and subsidiaries make the fixed amount of contribution to theBureau of Labor Insurance.

For the three and six months ended June 30, 2021 and 2020, the pension expenses underdefined contribution plan of the Company and subsidiaries amounted to $264,468, $255,290,$509,465 and $485,376, respectively, and were contributed to the Bureau of Labor Insuranceor labor agencies designated by local authorities in the case of overseas units.

(ii) Employee benefits provision

Employee benefits provision reserves recognized by the Company and subsidiaries in theconsolidated balance sheet were as follows:


2020 June 30, 2020Defined benefits plan $ 2,753,314 2,854,557 2,849,583Retiree deposits with favorable rates and

other post-employment benefits517,602 518,447 469,124

Total $ 3,270,916 3,373,004 3,318,707

After the end of last fiscal year, no significant market fluctuations, significant decrease, pay offor other significant one-time event occurred. Therefore, the pension costs for the interimperiods are assessed and disclosed at the actuarial costs that were determined on December 31,2020 and 2019 by the Company and subsidiaries.

1) Defined benefits plan

The Company and subsidiaries’ defined benefits plan contributes to designateddepository account with Bank of Taiwan. Payments of pension benefits to employeeswho are covered by the Labor Standards Act are calculated based on the employee’ saverage monthly salary for the last 6 months prior to approved retirement and base point(b.p.) entitlement based on years of service.

For the three and six months ended June 30, 2021 and 2020, expenses recognized by theCompany and subsidiaries in profit and loss amounted to $23,217, $28,140, $46,095 and$56,126, respectively.

(Continued)

87


2) Retiree deposits with favorable rates and other post-employment benefits

The Company’s subsidiary CTBC Bank Co., Ltd.’s obligation to grant retirees, includingcurrent employees retiring in the future, fixed-amount deposits with favorable rates isbased on the Bank’s Regulations for Subsidizing the Retiree Benefits.

For the three and six months ended June 30, 2021 and 2020, expenses recognized by theCompany’ s subsidiary CTBC Bank Co., Ltd. in profit and loss amounted to $5,187,$5,033, $10,374 and $10,065, respectively.

3) Defined benefits plan of overseas branches and subsidiaries

Defined benefits plan of the Company’ s subsidiary CTBC Bank Co., Ltd.’ s overseasbranches and subsidiaries recognized in consolidated balance sheets was as follows:


2020 June 30, 2020Defined benefits plan $ 499,506 524,714 472,430

For the three and six months ended June 30, 2021 and 2020, expenses recognized byoverseas branches and subsidiaries in profit and loss amounted to $48,124, $41,752,$98,044 and $91,328, respectively.

(ae) Insurance liabilities, income, and expense

(i) Insurance liabilities

The details of the reserve for insurance contracts and financial instruments with discretionaryparticipation feature and its adjustment and the balances of the related accounts of theCompany’ s subsidiary Taiwan Life Insurance Co., Ltd. and sub-subsidiary CTBC Insurancewere as follows:


2020 June 30, 2020Reserve for unearned premiums $ 5,124,111 4,850,520 4,545,164Claim reserve 3,217,864 2,677,575 2,088,883Insurance reserve 1,732,582,659 1,735,297,584 1,729,170,984Special reserve 1,728,586 1,346,530 968,888Premium deficiency reserve 1,659,547 2,047,413 2,759,308

Total $1,744,312,767 1,746,219,622 1,739,533,227

(Continued)

88


Life Insurance Business:

1) The details of reserve for unearned premium were as follows:

June 30, 2021

Insurancecontracts

Financialinstruments with

discretionaryparticipation

feature TotalIndividual life $ 613,943 - 613,943Individual injury 743,543 - 743,543Individual health 2,336,107 - 2,336,107Group insurance 314,922 - 314,922Investment linked insurance 26,271 - 26,271Total 4,034,786 - 4,034,786Less: Reserve for unearned premiumsIndividual life 219,725 - 219,725Individual injury 8,988 - 8,988Individual health 674,116 - 674,116Investment linked insurance 3,664 - 3,664Total 906,493 - 906,493Net value $ 3,128,293 - 3,128,293

December 31, 2020

Insurancecontracts



feature TotalIndividual life $ 556,911 - 556,911Individual injury 755,895 - 755,895Individual health 2,225,912 - 2,225,912Group insurance 272,024 - 272,024Investment linked insurance 26,262 - 26,262Total 3,837,004 - 3,837,004Less: Reserve for unearned premiumsIndividual life 241,129 - 241,129Individual injury 9,771 - 9,771Individual health 651,151 - 651,151Investment linked insurance 3,618 - 3,618Total 905,669 - 905,669Net value $ 2,931,335 - 2,931,335

(Continued)

89


June 30, 2020

Insurancecontracts



feature TotalIndividual life $ 481,258 - 481,258Individual injury 672,724 - 672,724Individual health 1,919,189 - 1,919,189Annuity insurance 1 - 1Group insurance 340,199 - 340,199Investment linked insurance 26,326 - 26,326Total 3,439,697 - 3,439,697Less: Reserve for unearned premiumsIndividual life 194,310 - 194,310Individual injury 8,792 - 8,792Individual health 572,035 - 572,035Investment linked insurance 3,961 - 3,961Total 779,098 - 779,098Net value $ 2,660,599 - 2,660,599

The changes and adjustments of the aforesaid reserve for unearned premiums were asfollows:


Insurancecontracts



feature TotalBeginning balance $ 3,837,004 - 3,837,004Current provision 2,116,308 - 2,116,308Reversal of provision (1,918,502) - (1,918,502)Foreign exchange gains (24) - (24)Ending balance 4,034,786 - 4,034,786Less: Reserve for unearned premiumsBeginning balance—net 905,669 - 905,669Current increase 1,785 - 1,785Foreign exchange gains (961) - (961)Ending balance—net 906,493 - 906,493Ending balance $ 3,128,293 - 3,128,293

(Continued)

90



Insurancecontracts



feature TotalBeginning balance $ 3,429,856 1 3,429,857Current provision 1,724,790 - 1,724,790Reversal of provision (1,714,927) (1) (1,714,928)Foreign exchange gains (22) - (22)Ending balance 3,439,697 - 3,439,697Less: Reserve for unearned premiumsBeginning balance—net 564,383 - 564,383Current decrease 215,175 - 215,175Foreign exchange gains (460) - (460)Ending balance—net 779,098 - 779,098Ending balance $ 2,660,599 - 2,660,599

(Continued)

91


2) The details of claim reserve were as follows:

June 30, 2021

Insurancecontracts



feature TotalIndividual life

-reported but not paid $ 342,668 2,087 344,755-not reported and not paid 5,093 - 5,093

Individual injury-reported but not paid 24,378 - 24,378-not reported and not paid 414,092 - 414,092

Individual health-reported but not paid 835,753 - 835,753-not reported and not paid 694,966 - 694,966

Annuity insurance-reported but not paid - 6,285 6,285-not reported and not paid - - -

Group insurance-reported but not paid 52,354 - 52,354-not reported and not paid 148,825 - 148,825

Investment linked insurance-reported but not paid 10,367 - 10,367-not reported and not paid - - -

Total 2,528,496 8,372 2,536,868Less: Reserve for claim reserveIndividual life 268,598 - 268,598Individual injury 1,752 - 1,752Individual health 367,859 - 367,859Group insurance - - -Investment linked insurance - - -Total 638,209 - 638,209Net value $ 1,890,287 8,372 1,898,659

(Continued)

92


December 31, 2020

Insurancecontracts




-reported but not paid $ 286,909 2,942 289,851-not reported and not paid 3,157 - 3,157



Annuity insurance-reported but not paid - 7,796 7,796-not reported and not paid - - -



Total 1,950,576 10,738 1,961,314Less: Reserve for claim reserveIndividual life 79,396 - 79,396Individual injury - - -Individual health 530,716 - 530,716Group insurance - - -Investment linked insurance - - -Total 610,112 - 610,112Net value $ 1,340,464 10,738 1,351,202

(Continued)

93


June 30, 2020

Insurancecontracts




-reported but not paid $ 190,616 - 190,616-not reported and not paid 3,533 - 3,533



Annuity insurance-reported but not paid 2,409 4,338 6,747-not reported and not paid - - -



Total 1,280,384 4,338 1,284,722Less: Reserve for claim reserveIndividual life 39,694 - 39,694Individual injury - - -Individual health 175,828 - 175,828Group insurance - - -Investment linked insurance - - -Total 215,522 - 215,522Net value $ 1,064,862 4,338 1,069,200

(Continued)

94


The changes and adjustments of the aforesaid claim reserve were as follows:


Insurancecontracts



feature TotalBeginning balance $ 1,950,576 10,738 1,961,314Current provision 1,554,445 4,305 1,558,750Reversal of provision (975,598) (6,660) (982,258)Foreign exchange gains (927) (11) (938)Ending balance 2,528,496 8,372 2,536,868Less: Reserve for claim reserveBeginning balance－net 610,112 - 610,112Current increase 28,100 - 28,100Foreign exchange gains (3) - (3)Ending balance—net 638,209 - 638,209Ending balance $ 1,890,287 8,372 1,898,659


Insurancecontracts



feature TotalBeginning balance $ 1,332,410 3,946 1,336,356Current provision 614,652 2,367 617,019Reversal of provision (666,274) (1,977) (668,251)Foreign exchange (gains) losses (404) 2 (402)Ending balance 1,280,384 4,338 1,284,722Less: Reserve for claim reserveBeginning balance－net 168,227 - 168,227Current increase 47,297 - 47,297Foreign exchange gains (2) - (2)Ending balance—net 215,522 - 215,522Ending balance $ 1,064,862 4,338 1,069,200

(Continued)

95


3) Details of insurance reserves were as follows:

June 30, 2021

Insurancecontracts



feature TotalIndividual life $ 1,588,290,933 2,192,012 1,590,482,945Individual health 112,153,048 - 112,153,048Annuity insurance 4,891,693 23,362,942 28,254,635Group insurance 409,599 611,970 1,021,569Investment linked insurance 346,436 - 346,436Incremental reserve 35,834 - 35,834Transfer from operating loss reserve 43,665 - 43,665Recovery of special catastrophe

reserve7,252 - 7,252

Other 237,275 - 237,275Total $ 1,706,415,735 26,166,924 1,732,582,659

December 31, 2020

Insurancecontracts



feature TotalIndividual life $ 1,595,422,813 2,265,087 1,597,687,900Individual health 106,834,545 - 106,834,545Annuity insurance 4,962,157 24,197,590 29,159,747Group insurance 387,446 575,862 963,308Investment linked insurance 340,413 - 340,413Incremental reserve 35,833 - 35,833Transfer from operating loss reserve 43,665 - 43,665Recovery of special catastrophe

reserve7,252 - 7,252

Other 224,921 - 224,921Total $ 1,708,259,045 27,038,539 1,735,297,584

(Continued)

96


June 30, 2020

Insurancecontracts



feature TotalIndividual life $ 1,594,216,937 2,399,321 1,596,616,258Individual health 100,924,366 - 100,924,366Annuity insurance 5,036,490 24,976,631 30,013,121Group insurance 353,979 569,573 923,552Investment linked insurance 396,750 - 396,750Incremental reserve 35,833 - 35,833Transfer from operating loss reserve 43,665 - 43,665Recovery of special catastrophe

reserve7,252 - 7,252

Other 210,187 - 210,187Total $ 1,701,225,459 27,945,525 1,729,170,984

As the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. measured the insurancereserves on a discounted basis, the recognized amounts of cumulative interest over-timeeffects were as below:


Cumulative interestover-time effectsof insurancereserves

$ 13,721,877 14,646,341 27,542,645 29,516,139

The changes and adjustments of the aforesaid insurance reserves were as follows:


Insurancecontracts



feature TotalBeginning balance $ 1,708,259,045 27,038,539 1,735,297,584Current provision 78,365,151 233,242 78,598,393Reversal of provision (67,843,193) (1,019,250) (68,862,443)Foreign exchange gains (12,377,622) (85,607) (12,463,229)Others 12,354 - 12,354Ending balance $ 1,706,415,735 26,166,924 1,732,582,659

(Continued)

97



Insurancecontracts



feature TotalBeginning balance $ 1,659,686,451 28,674,800 1,688,361,251Current provision 110,800,784 500,867 111,301,651Reversal of provision (60,950,111) (1,167,826) (62,117,937)Foreign exchange gains (8,356,449) (62,316) (8,418,765)Others 44,784 - 44,784Ending balance $ 1,701,225,459 27,945,525 1,729,170,984

4) Special reserve liabilities:

June 30, 2021

Insurancecontracts



feature TotalReserve for policyholder dividend $ 1,393,274 - 1,393,274Reserve for bonus risk 178,626 - 178,626Revaluation appreciation on real estate 57,891 - 57,891Total $ 1,629,791 - 1,629,791

December 31, 2020

Insurancecontracts



feature TotalReserve for policyholder dividend $ 959,119 - 959,119Reserve for bonus risk 232,183 - 232,183Revaluation appreciation on real estate 57,891 - 57,891Total $ 1,249,193 - 1,249,193

June 30, 2020

Insurancecontracts



feature TotalReserve for policyholder dividend $ 547,644 - 547,644Reserve for bonus risk 248,095 - 248,095Revaluation appreciation on real estate 57,891 - 57,891Total $ 853,630 - 853,630

(Continued)

98


The changes and adjustments of the aforesaid special reserve were as follows:

For the six months ended June 30, 2021Reserve forpolicyholder

dividendReserve

for bonus risk

Revaluationappreciation on

real estate TotalBeginning balance $ 959,119 232,183 57,891 1,249,193Current provision 992,324 - - 992,324Current provision-losses from

disposal of equityinstruments measured at fairvalue through othercomprehensive income forpolicyholder

1,716 - - 1,716

Reversal of provision (541,150) (53,557) - (594,707)Reversal of provision-losses

from disposal of equityinstruments measured at fairvalue through othercomprehensive income

7,898 - - 7,898

Foreign exchange gains (26,633) - - (26,633)Ending balance $ 1,393,274 178,626 57,891 1,629,791

For the six months ended June 30, 2020Reserve forpolicyholder

dividendReserve

for bonus risk

Revaluationappreciation on

real estate TotalBeginning balance $ 438,024 248,071 57,891 743,986Current provision 459,242 24 - 459,266Current provision-gains from

disposal of equityinstruments measured at fairvalue through othercomprehensive income forpolicyholder

(21,066) - - (21,066)

Reversal of provision (313,710) - - (313,710)Reversal of provision-gains

from disposal of equityinstruments measured at fairvalue through othercomprehensive income

(697) - - (697)

Foreign exchange gains (14,149) - - (14,149)Ending balance $ 547,644 248,095 57,891 853,630

(Continued)

99


5) The details of premium deficiency reserve were as follows:

June 30, 2021

Insurancecontracts



feature TotalIndividual life $ 1,594,456 - 1,594,456Individual health 64,718 - 64,718Annuity insurance 55 - 55Total $ 1,659,229 - 1,659,229

December 31, 2020

Insurancecontracts




June 30, 2020

Insurancecontracts




The changes and adjustments of the aforesaid premium deficiency reserve were asfollows:


Insurancecontracts



feature TotalBeginning balance $ 2,046,605 - 2,046,605Current provision 177,464 - 177,464Reversal of provision (548,823) - (548,823)Foreign exchange gains (16,017) - (16,017)Ending balance $ 1,659,229 - 1,659,229

(Continued)

100



Insurancecontracts



feature TotalBeginning balance $ 4,156,518 - 4,156,518Current provision 173,816 - 173,816Reversal of provision (1,554,772) - (1,554,772)Foreign exchange gains (17,302) - (17,302)Ending balance $ 2,758,260 - 2,758,260

6) The details of liability adequacy reserve of the Company's subsidiary Taiwan LifeInsurance Co., Ltd. were as follows:

Insurance contracts and financialinstruments with discretionary

participation feature June 30, 2021December 31,

2020 June 30, 2020Unearned premium reserve $ 4,034,786 3,837,004 3,439,697Claim reserve 2,536,868 1,961,314 1,284,722Insurance reserve 1,732,582,659 1,735,297,584 1,729,170,984Premium deficiency reserve 1,659,229 2,046,605 2,758,260　　Total 1,740,813,542 1,743,142,507 1,736,653,663Less: Intangible asset (594,298) (605,132) (612,658)Book value of related insurance

liabilities$1,740,219,244 1,742,537,375 1,736,041,005

Current estimate of future cashflows under insurance liabilities

$1,435,696,668 1,420,056,290 1,382,498,868

Liability adequacy reserve balance $ - - -

The liability adequacy test method of the Company’s subsidiary Taiwan Life InsuranceCo., Ltd. was as follows:

June 30, 2021

Test Method Gross Premium Valuation (GPV)Group All insurance contractsSignificantAssumptions

(1) Insurance contract information: As of June 30, 2021, theinsurance contracts and financial instruments with adiscretionary participation feature were tested.

(2) Discount rate: For the asset allocation in the latest quarterlyreport as of valuation date, the rate of investment return underthe best-case scenario in the latest certified actuarial reportprovided to the regulator for the year 2020 is adopted. Theassumed rate beyond 30 years remains unchanged.

(Continued)

101


December 31, 2020Test Method Gross Premium Valuation (GPV)Group All insurance contractsSignificantAssumptions

(1) Insurance contract information: As of December 31, 2020, theinsurance contracts and financial instruments with adiscretionary participation feature were tested.


June 30, 2020Test Method Gross Premium Valuation (GPV)Group All insurance contractsSignificantAssumptions

(1) Insurance contract information: As of June 30, 2020, theinsurance contracts and financial instruments with adiscretionary participation feature were tested.


7) Reserve for insurance policies with financial instrument features

The financial instruments, belonging to the Company’s subsidiary Taiwan Life InsuranceCo., Ltd. are segregated account insurance product and are classified as financialinstruments without discretionary participation feature. As of June 30, 2021, December31 and June 30, 2020 the details of reserves for insurance contract of the nature offinancial products and their adjustments were as follows:


2020 June 30, 2020Annuities $ 1,591 1,644 1,974


Beginning balance $ 1,644 4,196Net provision for statutory reserve for the period 351 851Insurance claims payment for the period (404) (3,031)Exchange number - (42)Ending balance $ 1,591 1,974

(Continued)

102


8) Foreign exchange rate fluctuation reserves

a) Hedging strategy and risk exposure:

When adjusting the foreign exchange rate hedge ratio, the Company’s subsidiaryTaiwan Life Insurance Co., Ltd. takes into consideration the dynamics of theinternational financial market and its own ability to take risks, so that thefluctuation in foreign exchange profit and loss can be reduced, and choosetraditional hedge instrument as its major hedge tools, and properly allocationdepending on the corresponded hedge cost ratio of each maturity. As of June 30,2021, December 31 and June 30, 2020, major risk exposure on foreign exchangeare all from US dollar assets, amounted to USD17,962,000, USD16,063,000 andUSD15,896,000 thousand, respectively, without hedge positions, and risk exposureof it are amounted to USD9,389,319, USD10,388,365 and USD9,499,020 thousand,respectively.

b) As of June 30, 2021, December 31 and June 30, 2020, foreign exchange ratefluctuation reserves of the Company’s subsidiary Taiwan Life Insurance Co., Ltd.amounted to $1,665,919, $3,251,865 and $2,126,115, respectively.

The Company’ s subsidiary Taiwan Life Insurance Co., Ltd., applied for anincrement of foreign exchange rate fluctuation reserves amounting to $1,000,000on April 28, 2021, with the approval by the Insurance Bureau of the FSC. Allrelated procedures had been completed before the end of April 2021.

The Company’ s subsidiary Taiwan Life Insurance Co., Ltd., applied for anincrement of foreign exchange rate fluctuation reserves amounting to $1,000,000on August 18 and December 17, 2020, respectively, with the approval by theInsurance Bureau of the FSC. All related procedures had been completed before theend of 2020.

Changes in foreign exchange rate fluctuation reserves:


Beginning balance $ 3,251,865 3,331,629Current provision　Mandatory provision 921,947 968,537　Extra provision 1,000,000 642,270　　Subtotal 1,921,947 1,610,807Current recovery (3,507,893) (2,816,321)Ending balance $ 1,665,919 2,126,115

(Continued)

103


c) The effects of foreign exchange rate fluctuation reserves on the Company’ ssubsidiary Taiwan Life Insurance Co., Ltd. were as follows:

Items Not applicable Applicable EffectJune 30, 2021　Foreign exchange rate fluctuation reserves

$ - 1,665,919 (1,665,919)

　Stockholders’ equity 152,432,146 151,974,126 458,020December 31, 2020　Foreign exchange rate fluctuation reserves

- 3,251,865 (3,251,865)

Stockholders’ equity 140,354,589 138,627,812 1,726,777June 30, 2020　Foreign exchange rate fluctuation reserves

- 2,126,115 (2,126,115)

　Stockholders’ equity 112,371,253 111,545,076 826,177

For the three months ended June 30, 2021 For the six months ended June 30, 2021Not

applicable Applicable EffectNot

applicable Applicable EffectProfit after tax $ 5,633,612 6,278,399 (644,787) 15,305,708 16,574,465 (1,268,757)

Earnings per share 1.01 1.12 (0.11) 2.74 2.97 (0.23)

For the three months ended June 30, 2020 For the six months ended June 30, 2020

ItemsNot

applicable Applicable EffectNot

applicable Applicable EffectProfit after tax $ 2,055,137 3,911,997 (1,856,860) 7,179,956 8,144,367 (964,411)

Earnings per share 0.37 0.70 (0.33) 1.29 1.46 (0.17)

(Continued)

104


9) Special reserves on the Company’s subsidiary Taiwan Life Insurance Co., Ltd. were asfollows:


2020 June 30, 2020Recovery of special reserve for

catastrophe$ 3,212,651 3,065,249 3,065,249

Special reserves for significantincidents and catastrophe

2,151,149 2,151,149 1,930,777

Foreign exchange rate fluctuationreserves

5,961,389 4,431,333 4,431,333

Recovery of revaluationappreciation reserves on realestate

231,566 231,566 231,566

Provision on profit testing ofinsurance products

1,246 9,514 9,514

Provision on derecognition ofunmatured debt

5,826,248 1,903,334 1,903,334

Employees training and transferprogram

106,156 108,301 108,301

Disability assistance insurance 43,502 - -

$ 17,533,907 11,900,446 11,680,074

According to Tai-Tsai-Bao-Zi No. 0910074195, the Company’s subsidiary Taiwan LifeInsurance Co., Ltd. shall follow the “ Regulations Governing Insurance Enterprises forSetting Aside Various Reserves” since 2002 to set aside a special reserve by the net oftax amounts of recovery of special reserve for catastrophe after the approval ofshareholder meeting next year.

The Company’ s subsidiary Taiwan Life Insurance Co., Ltd. has recognized specialreserves for significant incidents and catastrophe in accordance with the “ RegulationsGoverning Insurance Enterprises for Setting Aside Various Reserves” . The provisionshould be made at after-tax amount at the end of each year, and should be placed inspecial reserve under “Equity.” Special reserve under “Equity” can be offset or recoveredby the aforementioned offset or recoverable amount at the after-tax amount.

In addition, in accordance with the mechanism of the reserve for fluctuation of foreignexchange, under legal proceedings, the Company’ s subsidiary Taiwan Life InsuranceCo., Ltd. should contribute a special reserve by 10% of its after-tax income earnings.

According to FSC Jin-Guan-Bao-Shou-Zi No. 10302125060, the Company’ s subsidiaryTaiwan Life Insurance Co., Ltd. has recognized special reserve amounting to $1,246 inaccordance with the results of the insurance product profit testing on June 30, 2021.

(Continued)

105


According to FSC Jin-Guan-Bao-Tsai-Zi No. 10804501381, 20% of the derecognitionprofits or losses of unmatured debt instruments after 2019 should be recognized inspecial reserve. As of June 30, 2021, the Company’s subsidiary, Taiwan Life InsuranceCo., Ltd. has recognized the special reserve amounting to $5,826,248.

According to FSC Jin-Guan-Bao-Tsai-Zi No. 10502066461, in order to respond the trendof the development of FinTech, the Company’ s subsidiary Taiwan Life Insurance Co.,Ltd. should recognize special reserve amounting to $106,156 to assist insuranceemployees to transform and protect their rights on June 30, 2021. However, inaccordance with Jin-Guan-Bao-Tsai-Zi No. 10804932431 issued by the FSC on July 30,2019, the special reserve is no longer needed to be appropriated since 2019, but theaforementioned special reserve can be reversed within an amount equal to theaforementioned expenditures stemming from employees’ training to protect employeesrights.

According to FSC Jin-Guan-Bao-Tsai-Zi No. 11004908861, the Company's subsidiaryTaiwan Life Insurance Co., Ltd. recognizes special reserve from all current net incomeafter tax from disability assistance insurance. As of June 30, 2021, the Company'ssubsidiary, Taiwan life Insurance Co., Ltd. has recognized the special reserve amountingto $43,502.

Property insurance business:

a) Unearned premium reserve and ceded unearned premium reserve

i) As of June 30, 2021, December 31 and June 30, 2020, the reserves forunearned premiums of the Company’ s sub-subsidiary CTBC insurance Co.,Ltd. were as follows:

June 30, 2021

Unearned premium reserveCeded unearnedpremium reserve

Direct businessReinsurance

assumed businessReinsurance cede

businessRetainedbusiness

Fire insurance $ 276,979 38,460 174,575 140,864Marine insurance 12,785 460 10,981 2,264Miscellaneous casualty

insurance107,045 18,620 79,930 45,735

Personal accident andhealth insurance

93,768 1,602 19,953 75,417

Voluntary auto insurance 397,392 - 996 396,396Compulsory auto TPL

insurance68,028 74,186 40,818 101,396

Total $ 955,997 133,328 327,253 762,072

(Continued)

106


December 31, 2020






insurance72,895 17,565 54,675 35,785


93,028 1,595 18,238 76,385

Voluntary auto insurance 400,362 - 1,299 399,063Compulsory auto TPL

insurance71,094 78,070 42,658 106,506

Total $ 894,230 119,286 275,135 738,381

June 30, 2020






insurance98,012 16,925 78,886 36,051


96,773 1,334 22,673 75,434

Voluntary auto insurance 422,820 1 1,174 421,647Compulsory auto TPL

insurance83,369 80,111 50,023 113,457

Total $ 981,097 124,370 332,545 772,922

ii) The movements in reserve for unearned premiums and reserve for cededunearned premiums were as follows:

For the six months ended June 30, 2021 For the six months ended June 30, 2020

Unearnedpremium reserve

Unearnedpremium

reserve cedeUnearned

premium reserve

Unearnedpremium

reserve cedeBeginning balance $ 1,013,516 275,135 1,134,602 297,481Current provision 1,089,325 327,253 1,105,995 332,545Current recovery (1,013,516) (275,135) (1,135,130) (297,481)Ending balance $ 1,089,325 327,253 1,105,467 332,545

(Continued)

107


b) Claim reserve and ceded claim reserve

i) Liabilities for claims categorized by reported to be paid, reported but unpaid,and not reported

June 30, 2021Notes payable

(claims)Claimspayable Claim reserve

Reported to be paidReported but

unpaid Not reported TotalFire insurance $ - - 43,079 3,551 46,630Marine insurance - - 22,499 2,243 24,742Miscellaneous casualty

insurance128 - 65,236 29,875 95,111


441 - 7,104 35,899 43,003

Voluntary auto insurance 54 - 195,700 66,350 262,050Compulsory auto TPL

insurance374 - 44,398 165,062 209,460

Total $ 997 - 378,016 302,980 680,996

December 31, 2020Notes payable




insurance138 - 59,986 30,804 90,790


395 - 7,333 38,651 45,984


insurance372 - 49,564 181,917 231,481

Total $ 990 - 388,236 328,025 716,261

June 30, 2020Notes payable




insurance193 - 73,516 34,213 107,729


341 - 9,842 40,507 50,349


insurance54 - 55,261 191,233 246,494

Total $ 735 - 450,303 353,858 804,161

(Continued)

108


ii) Reinsurance assets－the insurance ceded business for the policy holders withreported but unpaid or not reported claims

June 30, 2021Reported but

unpaid Not reported TotalFire insurance $ 18,784 20 18,804Marine insurance 16,481 748 17,229Miscellaneous casualty insurance 34,843 8,967 43,810Personal accident and health

insurance2,717 8,188 10,905

Voluntary auto insurance 20 23,955 23,975Compulsory auto TPL insurance 12,070 55,963 68,033Less: Accumulated impairment (6) - (6)Total $ 84,909 97,841 182,750

December 31, 2020Reported but


insurance2,499 10,373 12,872

Voluntary auto insurance 972 26,366 27,338Compulsory auto TPL insurance 14,809 62,611 77,420Less: Accumulated impairment (7) - (7)Total $ 89,869 109,445 199,314

June 30, 2020Reported but


insurance4,586 11,693 16,279

Voluntary auto insurance 1,680 34,400 36,080Compulsory auto TPL insurance 18,308 67,275 85,583Less: Accumulated impairment (7) - (7)Total $ 101,783 125,313 227,096

(Continued)

109


iii) The movements in claim reserve and ceded claim reserve were as follows:

For the six months ended June 30, 2021 For the six months ended June 30, 2020

Claim reserveCeded claim

reserve Claim reserveCeded claim

reserveBeginning balance $ 716,261 199,314 859,449 247,112Current provision 680,996 182,756 804,161 227,103Current recovery (716,261) (199,321) (859,449) (247,201)Reversal of impairment

loss - 1 - 82

Ending balance $ 680,996 182,750 804,161 227,096

c) Special reserve

i) The special reserves of the Company’s sub-subsidiary CTBC insurance Co.,Ltd. were as follows:


2020 June 30, 2020Special reserve of compulsory auto

liability insurance$ 1,871 413 16,707

Special reserve of non-compulsoryauto liability insurance

96,924 96,924 98,551

$ 98,795 97,337 115,258

ii) The movements in special reserve were as follows:

1. Special reserve－compulsory auto liability insurance


Beginning balance $ 413 32,047Current provision 1,458 -Current recovery - (15,340)Ending balance $ 1,871 16,707

2. Special reserve－non-compulsory auto liability insurance

For the six months ended June 30, 2021Liability Special reserve

CatastropheDangerous

change Total CatastropheDangerous

change TotalEnding balance

(beginning balance)$ 35,797 61,127 96,924 118,667 355,531 474,198

For the six months ended June 30, 2020Liability Special reserve

CatastropheDangerous

change Total CatastropheDangerous

change TotalEnding balance

(beginning balance)$ 37,424 61,127 98,551 103,309 316,064 419,373

(Continued)

110


The amount of special reserve liabilities the Company’s sub-subsidiaryCTBC Insurance Co., Ltd. recognized as of December 31, 2012 was inaccordance with Jin Kuan Bao CAI Zi No. 10102515061 “ Notice toReserve Enforcement of Insurance Companies for Natural DisasterInsurance (Commercial Earthquake Insurance and Typhoon and FloodInsurance)” ,” Disclosure of the special reserve for resident earthquakeinsurance” , and “ Disclosure of the special reserve for nuclearinsurance”. Since the aforesaid amount was not achieved to the level asrequested by the regulator, the special reserve should be accounted forunder liabilities and the special catastrophe reserve and risk volatilityreserve should be reclassified into natural disaster insurance categorysince January 1, 2013.

The effects on income, liabilities, equity and earnings per share of theCompany’ s sub-subsidiary CTBC Insurance Co., Ltd. under thecircumstance of not adopting the aforesaid regulations were as follows:

June 30, 2021Amount

without theadoption of reserve

Amountwith the adoption

of reserve EffectSpecial reserve $ 1,871 98,795 (96,924)

Stockholders’ equity 2,008,069 1,930,530 77,539

December 31, 2020Amount



of reserve EffectSpecial reserve $ 413 97,337 (96,924)


June 30, 2020Amount



of reserve EffectSpecial reserve $ 16,707 115,258 (98,551)


For the three months ended June 30, 2021 For the six months ended June 30, 2020Amount

without theadoption of

reserve

Amount with the

adoption ofreserve Effect

Amountwithout theadoption of

reserve

Amount with the


Net income $ 13,945 13,945 - 57,217 57,217 -

Earnings per share (after tax) 0.07 0.07 - 0.29 0.29 -

For the three months ended June 30, 2020 For the six months ended June 30, 2020Amount

without theadoption of

reserve

Amount with the


Amountwithout theadoption of

reserve

Amount with the


Net income $ 8,402 8,402 - 25,534 25,534 -

Earnings per share (after tax) 0.04 0.04 - 0.13 0.13 -

(Continued)

111


d) Premium deficiency reserve and ceded premium deficiency reserve:

i) Details of premium deficiency reserve and ceded premium deficiency reserveof the Company’s sub-subsidiary CTBC Insurance Co., Ltd. were as follows:

June 30, 2021 December 31, 2020 June 30, 2020

Premiumdeficiency

reserve

Cededpremiumdeficiency

reserve

Premiumdeficiency

reserve


reserve

Premiumdeficiency

reserve


reserveMarine insurance $ 5 - 33 28 - -

Miscellaneous casualtyinsurance

313 - 775 - 1,048 -

Total $ 318 - 808 28 1,048 -

ii) The movements of premium deficiency reserve were as follows:


Premiumdeficiency

reserve

Ceded premiumdeficiency

reserve

Premiumdeficiency

reserve

Ceded premiumdeficiency

reserveBeginning balance $ 808 28 1,089 -Current provision 318 - 1,048 -Current recovery (808) (28) (1,089) -Ending balance $ 318 - 1,048 -

(ii) Insurance revenue and expense

1) Retained earned premium:

Life insurance business:

For the three months ended June 30, 2021

Insurancecontracts



feature TotalDirect written premium $ 30,852,290 21,065 30,873,355Reinsurance premium - - -Insurance income 30,852,290 21,065 30,873,355Reinsurance expense 338,531 - 338,531Net changes in unearned

premium reserve172,144 - 172,144

510,675 - 510,675Retained earned premium $ 30,341,615 21,065 30,362,680

(Continued)

112



Insurancecontracts




premium reserve(274,326) (1) (274,327)

326,211 (1) 326,210Retained earned premium $ 37,660,329 16,396 37,676,725


Insurancecontracts




premium reserve196,021 - 196,021

906,387 - 906,387Retained earned premium $ 62,043,049 42,341 62,085,390


Insurancecontracts



feature TotalDirect written premium $ 90,467,227 35,616 90,502,843Reinsurance premium - - -Insurance income 90,467,227 35,616 90,502,843Reinsurance expense 959,671 - 959,671Net change in unearned

premium reserves(205,312) (1) (205,313)

754,359 (1) 754,358Retained earned premium $ 89,712,868 35,617 89,748,485

(Continued)

113




Item

Claims(Contain claim

expense)(1)

Reinsuranceclaim

(2)

Claimrecovered

(3)

Retain claimspayment

(4)=(1)+(2)-(3)

The net changeof unearned

claims reserve (5)

Earned retainclaims

payment (6)=(4)-(5)

Non-compulsory insurance $ 405,729 35,255 122,171 318,813 8,120 310,693Compulsory insurance 40,650 29,590 17,397 52,843 (2,023) 54,866Total $ 446,379 64,845 139,568 371,656 6,097 365,559


Item


expense)(1)

Reinsuranceclaim

(2)

Claimrecovered

(3)


(4)=(1)+(2)-(3)


claims reserve (5)

Earned retainclaims

payment (6)=(4)-(5)

Non-compulsory insurance $ 386,945 30,544 126,388 291,101 (26,290) 317,391Compulsory insurance 41,790 32,350 17,419 56,721 (4,895) 61,616Total $ 428,735 62,894 143,807 347,822 (31,185) 379,007


Item


expense)(1)

Reinsuranceclaim

(2)

Claimrecovered

(3)


(4)=(1)+(2)-(3)


claims reserve (5)

Earned retainclaims

payment (6)=(4)-(5)

Non-compulsory insurance $ 807,804 66,607 298,940 575,471 28,801 546,670Compulsory insurance 78,641 58,571 33,199 104,013 (5,110) 109,123Total $ 886,445 125,178 332,139 679,484 23,691 655,793


Item


expense)(1)

Reinsuranceclaim

(2)

Claimrecovered

(3)


(4)=(1)+(2)-(3)


claims reserve (5)

Earned retainclaims

payment (6)=(4)-(5)

Non-compulsory insurance $ 796,980 46,189 296,741 546,428 (55,650) 602,078Compulsory insurance 85,100 65,010 35,379 114,731 (8,549) 123,280Total $ 882,080 111,199 332,120 661,159 (64,199) 725,358

(Continued)

114


2) Retained claims payment:

Life insurance business:


Insurancecontracts



feature TotalClaims payment $ 34,339,266 489,221 34,828,487Reinsurance claims payment - - -Insurance claims payment 34,339,266 489,221 34,828,487Less: Recovery of reinsurance

claims payment 235,348 - 235,348

Retained claims payment $ 34,103,918 489,221 34,593,139


Insurancecontracts



feature TotalClaims payment $ 29,642,410 638,235 30,280,645Reinsurance claims payment - - -Insurance claims payment 29,642,410 638,235 30,280,645Less: Recovery of reinsurance


Retained claims payment $ 29,447,827 638,235 30,086,062


Insurancecontracts



feature TotalClaims payment $ 69,067,878 1,008,840 70,076,718Reinsurance claims payment - - -Insurance claims payment 69,067,878 1,008,840 70,076,718Less: Recovery of reinsurance


Retained claims payment $ 68,554,937 1,008,840 69,563,777

(Continued)

115



Insurancecontracts



feature TotalClaims payment $ 59,825,669 1,154,438 60,980,107Reinsurance claims payment 12 - 12Insurance claims payment 59,825,681 1,154,438 60,980,119Less: Recovery of reinsurance


Retained claims payment $ 59,339,861 1,154,438 60,494,299



Item


expense)(1)

Reinsuranceclaim

(2)

Claimrecovered

(3)


(4)=(1)+(2)-(3)Non-compulsory insurance $ 170,827 2,856 34,475 139,208Compulsory insurance 36,991 33,809 19,902 50,898Total $ 207,818 36,665 54,377 190,106


Item


expense)(1)

Reinsuranceclaim

(2)

Claimrecovered

(3)




Item


expense)(1)

Reinsuranceclaim

(2)

Claimrecovered

(3)




Item


expense)(1)

Reinsuranceclaim

(2)

Claimrecovered

(3)



(Continued)

116


(af) Income tax

(i) Income tax expenses

For the three and six months ended June 30, 2021 and 2020, the Company and subsidiaries’income tax expenses (benefits) and related accounts were as follows:


Current income taxexpenses

$ 4,090,124 4,965,658 7,396,898 6,042,626

Deferred income tax(benefits) expenses

(2,916,225) (828,424) (3,378,029) 171,790

Income tax expenses $ 1,173,899 4,137,234 4,018,869 6,214,416

For the three and six months ended June 30, 2021 and 2020, the Company and subsidiaries’income tax expenses (benefits) recognized under other comprehensive income were as follows:


Items that will not bereclassified subsequentlyto profit or loss:Remeasurement gains

related to definedbenefit plans

$ 4,221 1,167 4,317 1,285

Proportionate share ofother comprehensiveincome (losses) fromassociates or jointventures under theequity method

1,682 (56,895) (7,264) (56,895)

Unrealized gains (losses)from equityinstruments measuredat fair value throughother comprehensiveincome

90,628 542,388 544,105 (1,296,819)

Change in fair value offinancial liabilityattributable to changein credit risk ofliability

(31,510) (598,150) (12,894) 139,704

Total $ 65,021 (111,490) 528,264 (1,212,725)

(Continued)

117



Items that are or may bereclassified subsequentlyto profit or loss:Exchange differences of

overseas subsidiaries’financial reportstranslation

$ (346,091) 123,403 (916,660) (288,528)

Unrealized gains (losses)from debt instrumentsmeasured at fair valuethrough othercomprehensive income

804,866 2,246,733 (2,534,127) (172,056)

Other comprehensiveincome (losses) onreclassification underthe overlay approach

555,430 851,894 919,962 (1,981,546)

Proportionate share ofother comprehensiveincome (losses) fromits subsidiaries,associates or jointventures under theequity method

11,166 1,306 (38,276) 6,200

Total $ 1,025,371 3,223,336 (2,569,101) (2,435,930)

(ii) Uncertainty over income tax treatments

For all the Company and subsidiaries’ income tax returns which have already been returnedbut have not been assessed, the Company and subsidiaries evaluate some related factors, suchas relevant interpretations letter and previous experience, and consider it has already estimatedenough income tax liabilities.

(iii) The Company and subsidiaries’ income tax returns assessed and administrative remedies filedwere as follows:

Latest year ofassessment

The Company Until 2015CTBC Bank Co., Ltd. Until 2015CTBC Securities Co., Ltd. Until 2015CTBC Venture Capital Co., Ltd. Until 2015CTBC Asset Management Co., Ltd. Until 2015CTBC Security Co., Ltd. Until 2015Taiwan Lottery Co., Ltd. Until 2015Taiwan Life Insurance Co., Ltd. Until 2015CTBC Investments Co., Ltd. Until 2015

(Continued)

118


Year ofRecheck Description of Recheck

The Company 2014 Other incomeCTBC Bank Co., Ltd. 2014 Undistributed earningsCTBC Venture Capital Co.,

Ltd.2015 Foreign tax credits

CTBC Asset ManagementCo., Ltd.

2014 Allocation of expenses for exempt income

CTBC Securities Co., Ltd. 2014 Undistributed earnings〃 2015 Allocation of expenses for exempt income

Year ofLitigation Description of Litigation

The Company 2010 Losses carry forward

(ag) Capital stock, capital surplus, treasury stock, and other equity interest

(i) Capital stock

As of June 30, 2021, the Company’ s authorized capital was $230,000,000 representing23,000,000 thousand shares with par value at NT$10 per share. The paid-in capital includescommon stock amounted to $194,969,896, preferred stock B amounted to $3,333,300 and ,preferred stock C amounted to $1,666,600 with 19,496,990 thousand shares, 333,330 thousandshares and 166,660 thousand shares issued, respectively.

The Company’s rights and obligations of issuing preferred stock were as follows:

1) Series B Preferred Stock

a) Dividends: The dividend yield is set at 3.75% per annum (equal to the sum of 7-year IRS 1.0825%+2.6675%) on the issue price. The IRS rate will be reset every 7years and the pricing date for reset is two business days prior to the IRS reset date.The IRS rate is the arithmetic mean of 7-year IRS rates appearing on Reuters pages“ PYTWDFIX” and “ COSMOS3” at 11:00 a.m. (Taipei time) on the relevantpricing date for reset. If such rate cannot be obtained, the Company will determinethe rate based on reasonable market price with good faith. The dividends will bedistributed annually in arrears.

b) Earnings distribution: The fiscal year-end earnings of the Company shall be appliedto the following uses in order: payments of taxes, adjustments per financial andaccounting principle, making-up of deficit, legal reserve, special reserve by law orreversal, and the remaining shall be paid to holders of preferred shares B as thecurrent year’s dividends.

(Continued)

119


c) Dividend distribution: The Company has discretion over the dividend distributionof preferred shares B. The Company may decide not to distribute dividends ofpreferred shares B in the following circumstances: (a) there are no earnings in afiscal year, (b) the earnings are insufficient to distribute dividends of preferredshares B, (c) the distribution of dividends of preferred shares B will cause thecapital adequacy ratio to be lower than the regulatory requirements, and (d) otherconsiderations. The cancellation of dividend payment should not constitute anevent of default.

d) The preferred shares B are noncumulative, and the preferred shareholders do nothave the right to claim any of the unpaid or omitted dividends in the future.

e) Other than the receipt of dividends at the rate as a) mentioned above, holders ofSeries B Preferred Stock are not entitled to common shares’ cash or stock dividendsderived from earnings or capital reserve.

f) Holders of preferred shares B have prior claim on the Company’ s assets overcommon shareholders if it is liquidated. The repayment shall be capped atrespective issue amount of preferred shares B upon liquidation.

g) Voting right and election right: Preferred shareholders do not have voting rights orsuffrage. However, they have voting rights with respect to agendas related to therights and obligations of preferred shares B in shareholders’ meetings.

h) Conversion rights: Cannot be converted to common shares and Holders do not havethe right to request the Company to redeem preferred shares.

i) Due date: The preferred shares B is perpetual but may be redeemed in whole or inpart at issue price anytime after seven years of issuance at the option of theCompany. Unredeemed preferred shares shall continue to have the rights andobligations of issuance terms prescribed in this Article.

2) Series C Preferred Stock

a) Dividends: The dividend yield is set at 3.20% per annum (equal to the sum of 7-year IRS 0.99%+2.21%) on the issue price. The IRS rate will be reset every 7years, the reference date for pricing is one business day prior to the pricing dateand the reference date for reset is two business days prior to the interest rate resetdate. The IRS rate is the arithmetic mean of 7-year IRS rates appearing on Reuterspages “TAIFXIRS” and “COSMOS3” at 11:00 a.m. (Taipei time) on the relevantreference date. If such rate cannot be obtained, the Company will determine the ratebased on reasonable market price with good faith. The dividends will be distributedannually in arrears.

b) Earnings distribution: The fiscal year-end earnings of the Company shall be appliedto the following uses in order: payments of taxes, making-up of deficit, legalreserve, special reserve by law or reversal, and the remainders shall first be appliedto distribute the dividend of Preferred Shares.

(Continued)

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c) Dividend distribution: The Company has discretion over the dividend distributionof preferred shares C. The Company may decide not to distribute dividends ofpreferred shares C in the following circumstances: (a) there are no earnings in afiscal year, (b) the earnings are insufficient to distribute dividends of preferredshares, (c) the distribution of dividends of preferred shares will cause the capitaladequacy ratio to be lower than the regulatory requirements, and (d) otherconsiderations. The preferred shareholders can not object to the decision.

d) The preferred shares C are non-cumulative, and the preferred shareholders do nothave the right to claim any of the unpaid or omitted dividends in the future.

e) Other than the receipt of dividends at the rate as a) mentioned above, holders ofSeries C Preferred Stock are not entitled to common shares’ cash or stock dividendsderived from earnings or capital reserve.

f) Holders of preferred shares C have prior claim on the Company’ s assets overcommon shareholders if it is liquidated. The claims of all series of preferredshareholders are equal. The repayment shall be capped at respective issue amountof preferred shares C upon liquidation.

g) Voting right and election right: Holders of preferred shares C do not have votingright and election right in the Common Shareholders’ Meeting, but may be electedas directors, and have voting right in the Preferred Shareholders’ Meeting and theShareholders’ Meeting concerning the rights and obligations of shareholders ofPreferred Shares C.

h) Conversion Rights: Preferred shares C cannot be converted to common shares andholders do not have the right to request the Company to redeem preferred shares.

i) Due date: The preferred shares C is perpetual but may be redeemed in whole or inpart at issue price anytime after seven years of issuance at the option of theCompany. Unredeemed preferred shares shall continue to have the rights andobligations of issuance terms prescribed in this Article. If the Company decides todistribute the dividend in the current year, the distribution of the payable dividendsin the date of redemption shall be calculated based on the actual number of days thePreferred Shares remained outstanding in that year.

(Continued)

121


(ii) Capital surplus

The components and sources of capital surplus were as follows:


2020 June 30, 2020Additional paid-in capital－common

stock$ 32,242,575 32,242,575 32,242,575

Additional paid-in capital－preferredstock

24,963,768 24,963,768 24,963,768

Share based payment transactions 1,501,496 1,501,496 1,501,496Others 24,363 47,084 47,084Total $ 58,732,202 58,754,923 58,754,923

In compliance with the Company Act, capital surplus can only be used to offset a deficit whensurplus reserve is not sufficient to offset losses or be distributed by issuing new shares or bycash pursuant to a resolution to be adopted by a shareholders’ meeting as required in Article241, Paragraph 1 of the Company Act. Furthermore, according to Article 72 1, Paragraph 1 ofthe Regulations Governing the offering and Issuance of Securities by Securities Issuers, theamount of capital surplus to be used to increase capital shall not exceed 10% of total paid incapital. The capital surplus arising from a capital increase can be capitalized only in thefollowing fiscal year after being registered by the Company with the competent authority forapproval.

The share-based payment transactions are treasury stock and cash capital increase transferredto employees. The Company is reserving 10 percent of new shares for subscription byemployees of the Company and subsidiaries follows Article 267, Paragraph 1 of the CompanyAct.

(Continued)

122


(iii) Other equity interest

Changes in the Company’s other equity interests were as follows:


overseassubsidiaries’


Unrealized gains(losses) on

financial assetsmeasured at fair

value throughother

comprehensiveincome

Changes infinancialliabilities

designated atfair value

through profitor loss

attributable tocredit risk


onreclassification

under theoverlay

approach Total

Balance at January 1, 2021 $ (10,680,748) 10,770,530 (72,291) 1,079,671 1,097,162

Exchange differences of overseas subsidiaries’financial reports translation

(6,184,764) - - - (6,184,764)

Gains on designated as hedging instruments in ahedge of the net investments in overseassubsidiaries

1,181,810 - - - 1,181,810

Proportionate share of other comprehensive lossesfrom associates under the equity method

- (250,705) - - (250,705)

Unrealized gains from financial assets measured atfair value through other comprehensiveincome

- 5,505,548 - - 5,505,548

Accumulated losses on disposals of debt instrumentsmeasured at fair value through othercomprehensive income reclassified to profit orloss

- (7,922,119) - - (7,922,119)

Disposals of equity instruments measured at fairvalue through other comprehensive income

- (245,352) - - (245,352)

Valuation adjustment of other comprehensiveincome on reclassification under the overlayapproach

- - - (2,081,846) (2,081,846)

Change in designated as financial liabilitiesmeasured at fair value through profit or lossattributable to credit risk

- - (51,574) - (51,574)

Reorganization (33,517) - - - (33,517)

June 30, 2021 $ (15,717,219) 7,857,902 (123,865) (1,002,175) (8,985,357)

Balance at January 1, 2020 $ (7,642,509) 4,050,190 1,086,384 277,123 (2,228,812)

Exchange differences of overseas subsidiaries’financial reports translation

(2,421,575) - - - (2,421,575)

Gains on designated as hedging instruments in ahedge of the net investments in overseassubsidiaries

187,151 - - - 187,151

Proportionate share of other comprehensive lossesfrom associates under the equity method

- (737,478) - - (737,478)

Unrealized gains from financial assets measured atfair value through other comprehensiveincome

- 1,354,609 - - 1,354,609

Accumulated losses on disposals of debt instrumentsmeasured at fair value through othercomprehensive income reclassified to profit orloss

- (7,216,660) - - (7,216,660)

Disposals of equity instruments measured at fairvalue through other comprehensive income

- 1,449,121 - - 1,449,121

Valuation adjustment of other comprehensiveincome on reclassification under the overlayapproach

- - - (9,075,505) (9,075,505)

Change in designated as financial liabilitiesmeasured at fair value through profit or lossattributable to credit risk

- - (527,569) - (527,569)

June 30, 2020 $ (9,876,933) (1,100,218) 558,815 (8,798,382) (19,216,718)

(Continued)

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(ah) Earnings distribution and dividend policy

Annual earnings, if any, are used to pay taxes, make adjustments in accordance with financialaccounting standards, offset deficits, appropriate legal reserve, and provision for or reversal ofspecial reserve. Then, preferred stock dividends are distributed prior to the distribution of theremaining earnings. The remaining earnings, if any, will be the undistributed earnings of the year,plus the beginning undistributed earnings, it will be the accumulated distributable earnings, andBoard of Directors will draft the proposal for earnings distribution and have it passed by theresolution of shareholders’ meeting before distribution or modification.

The Company, aiming to a continued growth and increase profitability as well as to be in line withthe provisions of laws, adopts a residual dividend policy.

According to operational planning of the Company, shareholders dividend and bonus will bedistributed according to the following manners:

(i) In principle, the distribution of annual shareholders dividend and bonus shall not be lower than20% of the distributable earnings of the current year; the distributable earnings of the currentyear referred to in this subparagraph is the aforementioned undistributed earnings of the yearstated in Article 29-1, paragraph 1 of the corporate charter after deducting the balance ofadjustments per accounting principle and reversals of special reserves by law in the currentyear, excluding distributable but not yet distributed Preferred Shares dividends for the currentyear;

(ii) Shareholders dividend and bonus may be distributed in cash and/or by stock, provided the cashdividend shall not be less than 10% of the total dividends;

For the above-mentioned dividend distribution policy, Board of Directors may propose to aShareholders’ Meeting for resolution to an appropriate adjustment of the ratio in cash dividenddistribution according to the business operation of the Company, funds demand in reinvestments andacquisition, and major amendment of laws, provided it shall not be less than 1% of the totaldividends. The Company may retain the earnings if the cash dividend is less than NT$0.1(dollars)per share.

A resolution on 2020 earnings distribution of the Company was approved by the general shareholdermeeting on July 23, 2021, and the distribution of cash dividend for common stock and preferredstock were $20,471,839 and $1,069,980, respectively.

A resolution on 2019 earnings distribution of the Company was approved by the general shareholdermeeting on June 19, 2020 and the distribution of cash dividend for common stock and preferredstock were $19,496,990 and $989,325.

Relevant information about employee bonuses approved by the Board of Directors on behalf ofshareholders’ meeting was available on Market Observation Post System or other sites.

(Continued)

124


(ai) Share-based payment

For the six months ended June 30, 2021 and 2020, the Company and subsidiaries had set out themeasurement principles and specific requirements for the share-based payment transactions whichwere as follows:

Management stock appreciation rights plan for the years2017 2018 2019 2020

Grant date 2018.02.08 2019.01.31 2020.01.21 2021.02.05

Grant number 241,881 308,951 358,402 299,788

Exercise period 2020.12.31 2021.12.31 2022.12.31 2023.12.31

Exercise price (in dollars) 21.39 20.24 22.44 19.35

The Company and subsidiaries implement the above plan via cash settlements, yet absentee andresigned employees’ stock appreciation rights will be deemed abandoned and forfeited.

Disclosures for the Company and subsidiaries’ employee stock appreciation rights plan (SARs) wereas follows:

For the six months ended June 30, 2021Management stock appreciation rights plan for the years

2018 2019 2020

Number

Weightedaverageexercise

price Number


price Number


priceOutstanding at the beginning

of the period328,919 18.38 368,810 21.37 299,788 19.35

Granted during the period - 18.38 - 21.37 - 19.35Forfeited during the period - 18.38 - 21.37 - 19.35Exercised during the period 917 18.38 - 21.37 807 19.35Expired during the period - 18.38 - 21.37 - 19.35Outstanding at the end of the

period328,002 18.38 368,810 21.37 298,981 19.35

Exercisable at the end of theperiod

- 18.38 - 21.37 - 19.35

(Continued)

125


For the six months ended June 30, 2020Management stock appreciation rights plan for the years

2017 2018 2019

Number


price Number


price Number


priceOutstanding at the beginning

of the period258,228 19.37 321,172 19.30 358,402 22.44

Granted during the period 2,927 19.37 551 19.30 246 22.44Forfeited during the period 2,878 19.37 801 19.30 666 22.44Exercised during the period 2,087 19.37 2,135 19.30 390 22.44Expired during the period - 19.37 - 19.30 - 22.44Outstanding at the end of the

period256,190 19.37 318,787 19.30 357,592 22.44

Exercisable at the end of theperiod

- 19.37 - 19.30 - 22.44

For the six months ended June 30, 2021, the weighted-average stock prices executed under SARs for2018 and 2020 were $22.94 and $22.94 (in dollars), respectively.

As of June 30, 2021, the weighted-average remaining durations of outstanding shares under SARsfor 2018, 2019 and 2020 were 0.50,1.50 and 2.50 years, respectively.

(aj) EPS


Net income attributable to theparent company

$ 13,740,532 7,017,158 33,449,249 19,177,109

Dividends on preferred stock - (989,325) - (989,325)Net income attributable to

common stockholders$ 13,740,532 6,027,833 33,449,249 18,187,784

Weighted average outstandingshares of common stock (inthousands)

19,496,990 19,496,990 19,496,990 19,496,990

Basic EPS (in dollars) $ 0.70 0.31 1.72 0.93

Since the Company deals with share-based payment transactions via cash settlement, no impact isexpected to be on its weighted-average outstanding shares, nor does the diluted EPS need to becalculated.

(Continued)

126


The EPS is calculated after the distribution of preferred stock dividends on the basis of the earningsdistribution proposal approved by the shareholders’ meeting on July 23, 2021 as follows:

For the threemonths endedJune 30, 2021

For the sixmonths endedJune 30, 2021

Net income attributable to the parent company $ 13,740,532 33,449,249Dividends on preferred stock (1,069,980) (1,069,980)Consolidated net income attributable to common stockholders $ 12,670,552 32,379,269Weighted average outstanding shares of common stock (in thousands) 19,496,990 19,496,990Basic EPS (in dollars) $ 0.65 1.66

(ak) Net interest income


Interest incomeLoan interest $ 13,544,699 14,245,231 26,840,537 29,902,746Revolving credit interest 713,327 722,279 1,432,977 1,495,946Securities interest 14,952,567 16,136,137 30,319,004 32,512,589Due from Central Bank 83,791 77,285 166,137 211,779Due from banks and call

loans to banks181,595 565,257 344,898 1,250,561

Insurance policies loans 314,685 322,262 625,338 642,552Others 547,620 492,328 1,087,939 1,068,008Subtotal 30,338,284 32,560,779 60,816,830 67,084,181

Interest expenseDeposit 2,505,067 4,015,462 5,090,402 9,395,986Due to other banks 84,208 112,952 181,459 353,157Borrowings and other

financing708,050 797,514 1,409,176 1,756,859

Lease liabilities 103,275 99,746 207,178 199,199Others 157,490 195,770 314,855 449,591Subtotal 3,558,090 5,221,444 7,203,070 12,154,792

Total net interest income $ 26,780,194 27,339,335 53,613,760 54,929,389

The above table does not include income from financial assets or liabilities measured at fair value.

(Continued)

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(al) Service fee and commission income


Commission incomeCredit card business $ 1,204,313 1,226,825 2,542,131 2,581,473Wealth management business 1,779,645 1,552,522 4,141,960 3,488,508Corporate business 1,109,752 973,896 2,188,296 2,472,017Banking business 1,372,800 1,301,737 2,826,972 2,724,283Insurance business 1,767,183 1,085,585 3,091,445 2,714,414Securities business 593,019 257,280 1,017,367 463,880Lottery business 710,134 939,115 3,256,857 3,154,177Others 277,353 219,085 536,531 413,088

Total commission income 8,814,199 7,556,045 19,601,559 18,011,840Service fee

Credit card business 123,338 109,824 242,346 261,000Wealth management business 65,615 60,198 136,461 123,098Corporate business 58,176 64,592 116,733 123,958Banking business 548,541 552,014 1,124,713 1,159,451Insurance business 1,761,069 1,975,346 3,951,720 4,218,634Securities business 53,642 24,878 91,037 49,306Lottery business 51,309 62,513 245,948 240,658Others 11,873 11,115 35,593 16,458

Total service fee 2,673,563 2,860,480 5,944,551 6,192,563Service fee and commission

income$ 6,140,636 4,695,565 13,657,008 11,819,277

(Continued)

128


(am) Net insurance income


Insurance incomeInsurance income $ 31,319,734 38,431,670 63,878,222 91,384,923Reinsurance premium income 64,845 62,894 125,178 111,199Recovery of reinsurance

claims payment289,725 255,161 603,342 608,031

Separate account insuranceproduct income

12,363,253 7,680,813 32,979,329 3,776,770

Total insurance income 44,037,557 46,430,538 97,586,071 95,880,923Insurance expense

Reinsurance expense 478,099 744,344 1,042,505 1,291,791Underwriting expense 3,687 3,419 7,792 5,850Claims payment 16,783,417 15,167,623 32,298,027 28,689,313Reinsurance claims payment 36,665 40,160 74,640 88,146Life insurance bonus payment 338,010 242,150 361,403 277,751Surrender value 17,914,878 15,126,619 37,812,333 32,510,647Guaranty fund expense 59,640 73,140 121,736 174,038Separate account insurance

product expense12,363,253 7,680,813 32,979,329 3,776,770

Total insurance expense 47,977,649 39,078,268 104,697,765 66,814,306Total net insurance income $ (3,940,092) 7,352,270 (7,111,694) 29,066,617

(Continued)

129


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


Disposal gains (losses)Commercial paper $ 36 53 58 292Treasury bills 57 397 124 549Government bonds 37,301 (33,334) (62,176) 9,416Corporate bonds 8,803 21,213 18,713 57,659Financial debentures 74,237 32,516 136,708 248,671Convertible bonds 3,297 12,963 4,169 12,583Stocks 3,635,373 1,766,324 9,823,153 2,722,402Beneficiary certificates 1,689,863 1,678,248 4,804,316 4,631,470Derivative financial

instruments14,725,559 1,079,412 20,387,643 2,154,676

Margin purchase and shortsale of securities

(7,613) (184) (13,763) (184)

Other securities and bonds 69,537 4,963 72,205 6,357Subtotal 20,236,450 4,562,571 35,171,150 9,843,891Valuation gains (losses)

Commercial paper 2,960 2,508 17,146 (7,444)Government bonds 11,715 80,744 (47,158) 24,266Corporate bonds 7,307 115,299 (6,561) (81,930)Financial debentures (196,236) 512,354 34,298 (2,153,658)Convertible bonds (289,375) 61,657 (283,170) (57,415)Asset-backed securities 17,634 641,406 45,768 (318,446)Stocks (998,957) 11,098,298 828,485 (6,822,054)Beneficiary certificates 4,796,231 5,083,205 (374,442) (4,195,113)Other securities and bonds (98,369) 344,941 (362,161) 115,852Derivative financial

instruments(6,038,109) 4,783,744 (17,151,601) 4,898,732

Subtotal (2,785,199) 22,724,156 (17,299,396) (8,597,210)Dividend income 288,044 422,687 331,336 483,160Interest income 844,486 950,498 1,550,407 1,925,470Interest expense (100,642) (439,556) (203,159) (939,950)Total $ 18,483,139 28,220,356 19,550,338 2,715,361

(Continued)

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(ao) Investment-linked assets, liabilities, incomes and expenses

Related account balances of the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. were asfollows:


2020 June 30, 2020Insurance product assets of segregated

account:　Cash in bank $ 4,057,041 3,092,486 1,855,658　Securities 149,733,103 121,766,320 90,283,839　Receivables 806,340 781,814 585,668　Others - - 43Total $ 154,596,484 125,640,620 92,725,208Insurance product liabilities of segregated

account:　Insurance product reserve－insurance

contract of segregated account$ 133,369,534 103,835,717 70,560,157

　Insurance product reserve－investmentcontract of segregated account

19,763,620 20,221,428 20,194,487

　Payables 1,463,330 1,583,475 1,970,564Total $ 154,596,484 125,640,620 92,725,208


Insurance product revenues ofsegregated account:

　Premium income $ 13,607,540 3,151,086 35,747,470 9,103,838　(Losses) gains on financial

assets or liabilitiesmeasured at fair valuethrough profit or loss

(187,764) 3,025,180 (1,962,837) (3,171,157)

　Foreign exchange (losses)gains

(1,152,290) 1,459,058 (990,909) (2,266,410)

　Interest income 95,767 45,489 185,605 110,499Total $ 12,363,253 7,680,813 32,979,329 3,776,770Insurance product expenses of

segregated account:　Net changes in segregated

account reserve－insurancecontract

$ 10,699,245 6,926,778 29,763,918 1,674,332

　Surrender value 1,339,775 466,089 2,563,639 1,482,467　Insurance claims payment 57,982 20,199 110,925 48,400　Management fee expense 266,251 267,747 540,847 571,571Total $ 12,363,253 7,680,813 32,979,329 3,776,770

(Continued)

131


For the three and six months ended June 30, 2021 and 2020, sales bonuses or discount ofinvestment-oriented insurance products from counterparties amounted to $36,305, $96,314, $90,746and $224,543, respectively.

(ap) Net changes in insurance liability reserve


Provision for liability reserve $ 4,770,818 16,915,763 9,735,950 49,183,714Provision for (reversal of) claim

reserve321,176 (93,382) 529,692 (133,719)

Reversal of premium deficiencyreserve

(148,662) (425,318) (371,821) (1,380,997)

(Reversal of) provision forspecial claim reserve

(360,662) (282,105) 399,075 130,216

Provision for (reversal of)unearned premium reserve

178,241 (305,512) 219,712 (269,512)

Provision for (reversal of)insurance policies withfinancial instrument features

81 (1,212) (53) (2,180)

Fair value adjustment (58,108) (58,796) (91,044) (102,333)Total $ 4,702,884 15,749,438 10,421,511 47,425,189

(aq) Employee benefits expenses


Salary expenses $ 8,333,420 8,253,720 17,661,903 16,236,042Insurance expenses 581,355 527,072 1,224,595 1,192,468Cash-settled share-based

payment534,378 805,670 1,568,809 (326,638)

Retirement expensesDefined contribution plan 264,468 255,290 509,465 485,376Defined benefits plan 76,528 74,925 154,513 157,519

Other personnel expenses 270,039 267,260 536,293 519,300Total $ 10,060,188 10,183,937 21,655,578 18,264,067

As of June 30, 2021 and 2020, numbers of the Company and subsidiaries’ employees were 20,709and 20,588, respectively.

The Company and subsidiaries recognized the changes in the fair value of share-based payments inprofit or loss over the vesting period. For the six months ended June 30, 2020, the share-basedpayments were reversed due to the changes in fair value.

(Continued)

132


(ar) Depreciation and amortization expenses


Housing $ 307,969 300,295 612,263 601,195General equipment 121,134 129,742 246,953 260,525Transportation equipment 2,726 2,528 5,586 5,221Information equipment 219,945 222,715 447,454 450,011

Subtotal of depreciationexpenses from premisesand equipment

651,774 655,280 1,312,256 1,316,952

Superficies 65,190 65,237 130,380 130,474Buildings 569,353 610,711 1,155,405 1,234,204Transportation equipment 15,797 15,854 31,431 32,021Miscellaneous equipment 39,536 39,015 77,774 77,860

Subtotal of depreciationexpenses from right-of-useassets

689,876 730,817 1,394,990 1,474,559

Amortization of informationsoftware

426,233 404,854 854,755 799,510

Other deferred expenses 1,495 1,300 2,953 2,382Subtotal of amortization

expenses427,728 406,154 857,708 801,892

Total $ 1,769,378 1,792,251 3,564,954 3,593,403

(as) Compensations of employees and the remunerations to directors

In accordance with the Company’ s article of incorporation, annual earnings, if any, should beappropriated 0.05% and 0.7% (not higher than) as compensations of employees and remunerations toBoard of Directors. However, if there is any cumulative loss, the Company should offset cumulativelosses in priority. Compensations of employees and the remunerations to directors which arerecognized as current period operating expenses based on the Company’ s net income before taxexcluding the amount of the compensations of employees and remunerations to directors, accordingto accounting period multiplied by the estimate of remuneration distribution set by the Company’sarticle of incorporation.

The estimated compensations of employees were $16,844 and $10,940 and the remunerations todirectors were $235,811 and $153,165 for the six months ended June 30, 2021 and 2020,respectively.

The actual compensations of employees of 2020 and 2019 amounted to $22,713 and $21,956, with $0and $(368) differences from the amount recognized in the annual financial report. The actualcompensations of the directors’ of 2020 and 2019 amounted to $299,806 and $296,403, with$(18,171) and $(16,134) different from the amount recognized in the annual financial report. Thedifference is regarded as a change of accounting estimates and will be adjusted in profit or loss in thefiscal year of 2021 and 2020. Relevant information is available on Market Observation Post System.

(Continued)

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(at) Other general and administrative expenses


Site usage and generalequipment expenses

$ 366,688 483,083 712,213 915,509

Information equipment expenses 747,921 733,363 1,512,303 1,413,043General administration expenses 1,387,300 1,486,316 2,765,930 2,921,893Marketing and promotion

expenses715,558 711,404 1,302,714 1,430,102

Other expenses 995,839 1,017,624 1,982,087 1,985,948Business tax 945,305 872,286 1,908,018 1,762,109Total $ 5,158,611 5,304,076 10,183,265 10,428,604

The total amount of rent expenses of short-term lease contracts and low-value assets of the Companyand subsidiaries for the three and six months ended June 30, 2021 and 2020 were $122,471,$117,027, $241,121 and $236,203.

(au) The disclosure of financial instruments

(i) Methods and assumptions used by the Company and subsidiaries for fair value evaluation offinancial instruments were as follows:

1) Fair value of short-term financial instruments is estimated by their book value on theBalance sheet date. Since these instruments have short maturities, the book value isadopted as a reasonable basis in estimating the fair value. The method is applied to cashand cash equivalents, due from Central Bank and call loans to banks, securitiespurchased under resell agreements, receivables, reinsurance assets, other financial assets,deposits from Central Bank and other banks, due to Central Bank and other banks,securities sold under repurchase agreements, commercial paper payables, payables,remittances, and other financial liabilities.

2) If there is a quoted price in an active market for the financial asset, including financialinstruments measured at fair value through profit or loss, financial assets measured at fairvalue through other comprehensive income, financial assets measured at amortized cost,hedging financial instruments, the quoted price is regarded as its fair value. If there is noquoted price in an active market for the financial asset, its fair value is estimated on thebasis of the result of a valuation technique that refers to quoted prices provided byfinancial institutions. The discounted cash flow technique is used to estimate the fairvalue of a debt instrument where an active market does not exist. The estimates,hypotheses and discount rates for valuation refer to quoted prices, from financialinstitutions, of financial instruments having substantially the same terms andcharacteristics, including the credit quality of debtors, the remaining term over which thecontractual interest rate is fixed, the remaining term to repayment of the principal, andthe currency in which the payments are to be made. Fair value for an equity investment isdetermined based on either the price calculated using a valuation technique or its bookvalue.

(Continued)

134


3) Loans and deposits are both classified as interest bearing financial assets; therefore, thebook value of financial assets is equivalent to their fair value. The net book value of thenon-accrual loan, after deducting provision for credit loss, is adopted as the fair value.

4) Fair value of long-term liabilities is estimated by the present value of expected futurecash flows. The discount rate is based on rates of similar loans available elsewhere; thatis, loans with similar maturity date and terms (close to the maturity date).

5) Derivatives usually adopt mark to model prices. The Discounted Cash Flow model isadopted for non-option derivatives, and the Black Scholes Model is adopted for optionderivatives.

6) The exchange price is used for financial instruments traded on an exchange. Over-the-counter (OTC) positions use independent price/ parameter quotes by reliable brokers ordata vendors, such as Reuters, Bloomberg, etc. In general, the closing price, settlementprice, mid-price at a fixed cut-off time, and the average price of several independentbrokers could be used as market data for valuation purposes.

7) The Company and subsidiaries would calculate credit valuation adjustment (CVA) byassessing probability of default (PD) and loss given default (LGD) of the counterpartybefore multiplying exposure at default (EAD) of the counterparty. On the contrary, debitvaluation adjustment (DVA) is computed by applying probability of default of theCompany and subsidiaries and considering loss given default of the Company andsubsidiaries before being multiplied by exposure at default of the Company andsubsidiaries.

The Company and subsidiaries adopt IFRS9 or take any observable data into account toevaluate the probability of impairment and loss rate of allowance for doubtful accountsas the estimates of PD and LGD. In addition, mark to market assessment of a derivativeinstrument from Over the Counter (OTC) is applied as EAD. For those accounts haveshowed significant increase in credit risk, would be the CVA assessment individually bytaking into account of the changes of exposures, conditions of collaterals and therecovery probabilities.

8) Except the following listed items, the book value is considered to be a reasonable basisof estimated fair value if the Company and subsidiaries do not measure a financialinstrument at fair value.

June 30, 2021Financial Assets Book value Fair value

Investment in debt instruments at amortized cost $1,873,156,999 1,975,866,812

December 31, 2020Financial Assets Book value Fair value


June 30, 2020Financial Assets Book value Fair value


(Continued)

135


(ii) Fair value hierarchy information on financial instruments and the statements of changes in fairvalue of Level 3

1) The definition of fair value hierarchy

a) Level 1

Fair value measurement for a financial instrument classified in Level 1 isdetermined as the quoted price for an identical financial instrument in an activemarket. The definition of active market has all of the following conditions: (1) theproducts traded in the market are homogeneous, (2) willing parties are availableanytime in the market, and (3) price information is available for the public.

b) Level 2

Fair value measurement for a financial instrument classified in Level 2 isdetermined 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., asprices) or indirectly (i.e., derived from prices). The examples of observable priceare as follows:

i) The quoted price for an identical financial instrument in an active marketmeans the fair value from the market transaction prices for an identicalfinancial instrument. An identical financial instrument should be determinedby its characteristics and terms of transaction. The fair value of a financialinstrument has to be adjusted according to the observable market price of theidentical financial instrument. The reasons for adjustments include time lagof the occurring market transaction prices for an identical financialinstrument (the quoted prices do not represent fair value at the measurementdate), the difference in transaction terms for financial instruments, transactionprices involving related parties, and the correlation between the observabletransaction prices of identical financial instruments and the market prices ofheld financial instruments.

ii) The quoted market price of the same or identical financial instruments in aninactive market.

iii) 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 fluctuationrate) are based on obtainable data from the market (an observable inputmeans an input can be derived from market data and can reflect theexpectation of market participants when the inputs were used in evaluatingthe prices of financial instruments).

(iv) A majority of inputs are derived from observable market data, or the inputcorrelation can be tested based on observable market data.

(Continued)

136


c) Level 3

Input for a fair value measurement for a financial instrument classified in Level 3 isnot based on obtainable data from the market (an unobservable input, such asvolatility for a share option derived from the share’s historical prices, as it does notgenerally represent current market expectations about future volatility).

2) Fair value hierarchy information on financial instruments

June 30, 2021Asset and Liability Items Total Level 1 Level 2 Level 3

Instruments measured at fair value

Instruments measured at fair value on a recurringbasis

Non-derivative financial instruments assets andliabilities

Assets:

Financial assets measured at fair value through profitor loss

Mandatorily measured at fair value through profitor loss

Investment in equity instruments $ 66,522,436 62,681,892 2,047,280 1,793,264

Investment in debt instruments 198,793,051 6,794,486 186,699,486 5,299,079

Others 170,061,966 116,461,406 - 53,600,560

Financial assets measured at fair value through othercomprehensive income

Investment in equity instruments 122,821,529 111,579,133 866,261 10,376,135

Investment in debt instruments 455,942,101 209,304,924 246,417,832 219,345

Liabilities:

Financial liabilities measured at fair value throughprofit or loss

Financial liabilities held for trading 487,546 487,546 - -

Designated as financial liabilities measured at fairvalue through profit or loss

10,827,037 - - 10,827,037

Derivative financial instruments assets andliabilities

Assets:

Financial assets measured at fair value throughprofit or loss

$ 50,915,440 3,002,208 46,384,794 1,528,438

Financial assets－hedging 60,870 - 60,870 -

Liabilities:


44,720,945 1,584,747 41,563,711 1,572,487

Financial liabilities－hedging 116,600 - 116,600 -

Instruments not measured at fair value

Investment in debt instruments at amortized cost 1,975,866,812 1,375,877,786 586,140,102 13,848,924

Investment property 97,121,493 - - 97,121,493

(Continued)

137


December 31, 2020Asset and Liability Items Total Level 1 Level 2 Level 3




Assets:



Investment in equity instruments $ 63,950,081 61,087,219 1,083,348 1,779,514


Others 177,767,169 134,974,414 - 42,792,755




Liabilities:


Financial liabilities held for trading 153,002 153,002 - -


14,475,274 - - 14,475,274


Assets:


$ 72,761,917 2,243,343 68,971,815 1,546,759


Liabilities:


65,218,734 476,858 63,143,907 1,597,969





(Continued)

138


June 30, 2020Asset and Liability Items Total Level 1 Level 2 Level 3




Assets:



Investment in equity instruments $ 66,446,017 63,811,783 822,613 1,811,621


Others 153,867,958 118,892,756 - 34,975,202




Liabilities:



8,132 8,132 - -


38,172,784 - - 38,172,784


Assets:


$ 99,041,132 194,306 97,429,779 1,417,047


Liabilities:


86,346,238 376,223 84,485,112 1,484,903





(Continued)

139


3) Transferred between level 1 and level 2

For the six months ended June 30, 2021From Level 1 to Level 2 From Level 2 to Level 1

Amount Reason Amount ReasonFinancial assets measured

at fair value throughprofit or loss

$ - - 238,930 the high frequency ofthe transaction andthe availability ofobservable ofinput parameters

Financial assets measuredat fair value throughother comprehensiveincome

1,305,596 the lack of activequote markers fordebt securities

4,316,174 the high frequency ofthe transaction andthe availability ofobservable ofinput parameters

For the six months ended June 30, 2020From Level 1 to Level 2 From Level 2 to Level 1

Amount Reason Amount ReasonFinancial assets measured

at fair value throughprofit or loss

$ - - 109,336 the high frequency ofthe transaction andthe availability ofobservable ofinput parameters


7,902,272 the lack of activequote markers fordebt securities

2,328,095 the high frequency ofthe transaction andthe availability ofobservable ofinput parameters

4) Statements of changes in financial assets which were classified to Level 3 based on fairvalue measurement

For the six months ended June 30, 2021Current increase Current decrease

ItemsBeginning

balance

The amountrecognized incurrent net

income

The amountrecognized in

othercomprehensive

incomePurchase or

issue

Transfer in toLevel 3 and outof other levels

Transfer in toLevel 3 of financial

assets and out ofLevel 3 of financial

liabilitiesSale, disposal,or settlement

Transfer in toother levels andout of Level 3

Transfer in toLevel 3 of financialliabilities and out

of Level 3 offinancial assets Ending balance

Financial assets measuredat fair value throughprofit or loss

Mandatorily measured atfair value throughprofit or loss

$ 50,936,821 89,432 4,142,316 9,770,681 6,000 90,933 2,453,413 178,800 182,629 62,221,341


10,406,101 - 221,525 1,574 - - 33,720 - - 10,595,480

Total $ 61,342,922 89,432 4,363,841 9,772,255 6,000 90,933 2,487,133 178,800 182,629 72,816,821

(Continued)

140



ItemsBeginning

balance


income


othercomprehensive

incomePurchase or

issue




liabilitiesSale, disposal,or settlement



of Level 3 offinancial assets Ending balance

Financial assets measuredat fair value throughprofit or loss

Mandatorily measured atfair value throughprofit or loss

$ 37,487,132 (52,223) (1,636,165) 8,487,871 - 45,683 1,045,096 143,900 69,321 43,073,981


9,163,734 - (369,792) 866,458 795,600 - 105,275 - - 10,350,725

Total $ 46,650,866 (52,223) (2,005,957) 9,354,329 795,600 45,683 1,150,371 143,900 69,321 53,424,706

The policy for when to recognize the transfers in or out of Level 3 is according to theactual date of the event or change in circumstances.

Unrealized gains (losses) associated with assets as of June 30, 2021 and 2020 which wererecognized in current net income shown in the above table were $220,832 of profit and$62,880 of loss, respectively.

5) Statements of changes in financial liabilities which were classified to Level 3 based onfair value measurement


ItemsBeginning

balance


income


othercomprehensive

incomePurchase or

issue



of Level 3 offinancial assets

Sale, disposal,or settlement




liabilities Ending balanceFinancial liabilities at fair

value through profit orloss

Financial liabilities heldfor trading

$ 1,597,969 (84,532) - 4,601 - 182,629 37,247 - 90,933 1,572,487

Designated as financialliabilities measured atfair value throughprofit or loss

14,475,274 (451,915) 64,468 3,901,800 - - 7,162,590 - - 10,827,037

Total $ 16,073,243 (536,447) 64,468 3,906,401 - 182,629 7,199,837 - 90,933 12,399,524


ItemsBeginning

balance


income


othercomprehensive

incomePurchase or

issue



of Level 3 offinancial assets

Sale, disposal,or settlement




liabilities Ending balanceFinancial liabilities at fair

value through profit orlossFinancial liabilities held

for trading$ 172,257 60,760 - 1,315,766 - 69,321 87,518 - 45,683 1,484,903

Designated as financialliabilities measured atfair value throughprofit or loss

41,068,313 2,055,406 387,865 - - - 5,338,800 - - 38,172,784

Total $ 41,240,570 2,116,166 387,865 1,315,766 - 69,321 5,426,318 - 45,683 39,657,687

The policy for when to recognize the transfers in or out of Level 3 is according to theactual date of the event or change in circumstances.

(Continued)

141


Unrealized gains (losses) associated with liabilities as of June 30, 2021 and 2020 whichwere recognized current net income shown in the above table were $90,708 of loss and$2,797,663 of loss, respectively.

6) Sensitivity analysis of Level 3 fair value if reasonably possible alternative assumptionsused

Valuation techniques used by the Company’ s subsidiary CTBC Bank Co., Ltd. and itssubsidiaries for fair value measurements of financial instruments are appropriate.However, the use of different valuation models or inputs could lead to different outcomesof fair value measurements. The following statement analyses Level 3 sensitivities forthose unobservable inputs in valuation models that have a material impact on thevaluation of Level 3 financial instrument. The Company’s subsidiary CTBC Bank Co.,Ltd. and its subsidiaries major Level 3 financial instruments include:

a) Back-to-back derivative transactions: the movements of fair value betweenfinancial assets and liabilities can be fully offset for back-to-back trades, so there isno material impact on the income statement.

b) Financial Debentures issued by the Company’s subsidiary CTBC Bank Co., Ltd.:the sensitivity analysis based on the assumption of one basis point change in theCompany’s subsidiary CTBC Bank Co., Ltd. credit spread which would have thefollowing effects on the statement of other comprehensive income.

Impacts on other comprehensiveincome as credit spread changes

Favorablechanges

Unfavorablechanges

June 30, 2021LiabilitiesFinancial liabilities measured at fair value through

profit or loss　Designated as financial liabilities measured at fair

value through profit or loss$ 9,792 (9,569)

December 31, 2020LiabilitiesFinancial liabilities measured at fair value through



June 30, 2020LiabilitiesFinancial liabilities measured at fair value through



(Continued)

142


7) Quantitative information about the significant unobservable inputs used in the fair valuemeasurement (Level 3)

Quantitative information about the significant unobservable inputs was as follows:

June 30, 2021

Fair valueValuationtechniques

Keyunobservable

inputs Range of inputs

The relationbetween inputsand fair value

Recurring fair value measurementsNon-derivative financial instruments assetsand liabilities

　　Assets:Financial assets measured at fair value

through profit or lossMandatorily measured at fair value

through profit or loss$ 60,692,903 Net asset valuation

method/ internalevaluationmodel/ marketmodel

Net asset value/interest rate/value multiple

Not applicable/0%~100%/

not applicable

The higher netasset value, thehigher fair value/the higherinterest rate, thelower fair value/the higher valuemultiple, the higher fairvalue

Financial assets measured at fair valuethrough other comprehensive incomeInvestment in equity instruments 10,376,134 Net asset valuation

method/ discounted cashflow model/market model

Net asset value/dividenddistribution rate/price-to-earningratio, price bookratio, price-to-sales ratio


not applicable

The higher netasset value/ thedividenddistributionrate/price-to-earning ratio,price book ratio,price-to-salesratio, the higherfair value

Investment in debt instruments 219,345 Discounted cashflow model

Interest rate 0.60%~0.64% The higher interestrate, the lowerfair value

　　Liabilities:Designated as financial liabilities measured

at fair value through profit or loss10,827,037 Interest rate option

pricing modelCredit risk

parameter0.09%~2.01% The higher credit

risk parameter,the lower fairvalue



through profit or loss$ 1,528,438 Interest rate option

pricing modelInterest rate

correlationcoefficient

36%~74% The highercorrelationcoefficient, thelower fair value

　　Liabilities:Financial liabilities measured at fair value

through profit or loss1,572,487 Interest rate option



36%~74% The highercorrelationcoefficient, thehigher fair value

(Continued)

143


December 31, 2020


Keyunobservable



Recurring fair value measurements

Non-derivative financial instruments assetsand liabilities

　　Assets:

Financial assets measured at fair valuethrough profit or loss

Mandatorily measured at fair valuethrough profit or loss

$ 49,390,062 Net asset valuationmethod/ internalevaluationmodel/marketmodel



not applicable

The higher netasset value, thehigher fair value/the higherinterest rate, thelower fair value/the higher valuemultiple, the higher fairvalue

Financial assets measured at fair valuethrough other comprehensive income

Investment in equity instruments 10,136,690 Net asset valuationmethod/ discounted cashdividend model/ market model



not applicable

The higher netasset value/ thedividenddistributionrate/price-to-earningratio, price bookratio, price-to-sales ratio, thehigher fair value



　　Liabilities:

Designated as financial liabilities measuredat fair value through profit or loss

14,475,274 Interest rate optionpricing model

Credit riskparameter

0.09%~2.85% The higher creditrisk parameter,the lower fairvalue


　　Assets:

Financial assets measured at fair valuethrough profit or loss

$ 1,546,759 Interest rate optionpricing model

Interest ratecorrelationcoefficient


　　Liabilities:

Financial liabilities measured at fair valuethrough profit or loss

1,597,969 Interest rate optionpricing model

Interest ratecorrelationcoefficient


(Continued)

144


June 30, 2020


Keyunobservable



Recurring fair value measurementsNon-derivative financial instruments assetsand liabilities


through profit or lossMandatorily measured at fair value

through profit or loss$ 41,656,934 Net asset valuation

method/ internalevaluationmodel/ marketmodel



not applicable

The higher netasset value, thehigher fair value/the higherinterest rate, thelower fair value/the higher valuemultiple, thehigher fair value

Financial assets measured at fair valuethrough other comprehensive incomeInvestment in equity instruments 10,057,926 Net asset valuation

method/ discounted cashflow model/market model



not applicable

The higher netasset/ thedividenddistributionrate/price-to-earningratio, price bookratio, price-to-sales ratio, thehigher fair value



　　Liabilities:Designated as financial liabilities measured

at fair value through profit or loss38,172,784 Interest rate option

pricing modelCredit risk

parameter0.11%~2.85% The higher credit

risk parameter,the lower fairvalue



through profit or loss$ 1,417,047 Interest rate option




　　Liabilities:Financial liabilities measured at fair value

through profit or loss1,484,903 Interest rate option




8) The valuation process used for fair value measurements categorized within Level 3

Market risk management unit of the Company and subsidiaries is in charge ofindependently testifying the fair value through applying independent data sources so thatthe information can be close to the current market status, making sure that the datasources are independent, reliable, consistent with other information and representable asan exercisable price. Additionally, periodically calibrating the pricing model, conductingretrospective testing, renewing inputs and information required for pricing model, andmaking any other necessary fair value adjustment are used to verify the reasonableness ofvaluation.

(Continued)

145


(iii) Financial risk information

The risk management objectives of the Company and subsidiaries are to minimize the potentialfinancial losses through appropriate strategies, policies and procedures. The overall riskmanagement frameworks, which are transparent, systematic, professional and well-established,are rooted in their corporate governance to improve both business performance andshareholder’s equity.

The organization structure of risk management includes Board of Directors, General Auditor,Risk Management Committee, Executive Committee, Credit Committee and Risk ManagementDepartment. The Company’ s subsidiaries also have their own risk management units. Thescope of their authorities is illustrated as follows:

Board of Directors, who is in charge of risk strategy approval, risk policies, risk managementframeworks, and creating a culture of risk management, serves as the primary guidance for allrisks and undertakes ultimate responsibility of overall risk management.

General Auditor is responsible for planning and carrying out all kind of audit business and isdirectly accountable to the Board. The internal auditing unit under the General Auditor mustregularly review and assess the integrity and the actual implementation on various kinds of riskmanagement mechanism, and provide timely suggestion for improvement so that the riskmanagement mechanism can be effectively implemented.

By communications, reporting, and advising the Board, Risk Management Committee assiststhe Board in risk governance. Risk Management committee also builds appropriate riskauthorization and monitors and ensures risk authorization system operate properly. We expectthe senior managers to support the Company’s risk culture, through decision-making processesand leader’ s supportive behavior, which could eventually influence all employees andorganization.

Executive Committee is accountable for overall risk control and holds executive meetings. Inthose meetings, risk management policies and risk limits are reviewed.

Credit Committee is in charge of supervising, approving and reviewing significant credit riskincidents of the Company and subsidiaries.

Risk Management Department is in charge of establishing and implementing appropriate riskmechanisms, and providing integrated risk report of the Company.

1) Credit Risk Management

a) Description of credit risk

Credit risk is the risk of financial loss if a client, guarantor, debtor or counterpartyfails to meet its contractual obligations due to financial problems or other factors.Credit risk arises from both on-balance-sheet items and off-balance-sheet items,including but not limited to lending risk, issuer’ s credit risk, counterparty creditrisk and credit risk of the underlying assets/ investments.

On/off-balance-sheet items of the Company and subsidiaries primarily includeloans, securities investment approved by regulators, and derivatives financialtransaction, etc.

(Continued)

146


b) Management procedures of credit risk

i) Risk Identification:

By prudent credit review process, the Company and subsidiaries assesssources and degrees of default risks from lenders, issuers, counterparties, andissues. By considering both internal operations and external environment, theCompany and subsidiaries lay out risk factors to serve as the foundation forrisk measurement.

ii) Risk Measurement:

In order to appropriately evaluate and monitor obligor’ s credit risk, theinternal rating system or external rating is applied in accordance with theirrespective characteristics/ complexity of business, which improves themanagement and analysis of the credit approval, facility management andperformance evaluation. Please refer to (1) C, measurement of credit risk fordetailed explanation.

iii) Risk Monitoring:

The Company and subsidiaries develop proper and necessary guidelines inaccordance with their respective characteristics of credit portfolio, such as:

1. Before undertaking the business, comprehensive credit process aredeveloped, such as credit extension and annual review procedure, loanreview mechanism, guideline for early-warning and watch-list accounts,guideline for collateral appraisement and management, procedure fornon-performing loan management, guideline for limit management ofon/off-balance-sheet credit assets and so on.

2. After undertaking business, management information systems are usedto monitor the credit risk portfolio, changes of risk exposures, riskconcentration situation and large risk exposure, situation of limit usageand overrun, to ensure the risk is under control.

3. To ensure the effectiveness and appropriateness of credit riskmonitoring mechanism of subsidiaries, the Company has establishedcredit risk assurance review mechanism to assess, scrutinize orphysically observe the completeness/independence of the subsidiaries’credit risk organization structure, the effectiveness/improving status ofthe subsidiaries’ credit risk management, the portfolio risk of credit riskassets and management process of credit risk. These conducts wouldhelp the Company identify the current status of the subsidiaries’ creditrisk management, potential risk and the necessary monitoringmechanism that needs to be carried out. Consequently, a growth of thesubsidiaries’ long-term operation can be supported.

(Continued)

147


iv) Risk Reporting:

Risk management units of the Company and subsidiaries periodically preparecredit risk portfolio/management reports which are regularly submitted tosenior managements or the board. The reports disclose credit risk profilesfrom various dimensions, such as credit exposure, portfolio mix (by product,industry sector, counterparty, rating, etc.) portfolio concentration, creditquality, credit line with major loss, stress testing and so on.

c) Measurement of credit risk

i) Internal Rating System:

The Company’ s subsidiary CTBC Bank Co., Ltd. develops internal ratingsystems based on its own internal historical data. The major risk componentsincluding Probability of Default (PD), Loss Given Default (LGD), andExposure at Default (EAD), which are used to measure the expected loss(EL) and unexpected loss (UL), assist the Company in their stable growth oflong-term operation.

1. Probability of default (PD)

Regarding the institutional banking business, various scorecard modelsare developed for Jumbo Enterprise, Middle Enterprise, SmallEnterprise, Real Estate Developer, and Personal, etc. based on obligor’scharacteristics, including exposure types, industrial characteristics,revenue scales, and the correspondent with banks. A master scale is alsodeveloped to segment the obligor’ s default risk; each segment of themaster scale is associated with a predefined one-year forward-lookingprobability of default. As for retail banking business, the risksegmentation with predefined one-year forward-looking probability ofdefault is also established, which is developed according to obligor’ srisk characteristics, credit score, and delinquency status, etc.

2. Loss given default (LGD)

Regarding the institutional banking business, the parameters of LGD,such as Collateral Recovery Rate, is calculated based on the productcharacteristics, collateral types, and guarantee forms, etc. Theparameters are used to estimate the LGD for each facility. As for retailbanking business, the risk segmentation with predefined loss givendefault is established, and the LGD parameter is developed according tothe product characteristics, such as loan-to-value, exposure, collateraltype, etc. and

(Continued)

148


3. Exposure at default (EAD)

Exposure at default is calculated by current outstanding plus potentialextra outstanding at default. The credit conversion factor for potentialextra outstanding at default is calculated by taking the facilitycommitment, usage ratio, loan outstanding and headroom intoconsideration. For off-balance exposure, non-cash conversion factor isused to estimate the portion of off-balance-sheet exposure convertedinto on-balance-sheet if default.

ii) Stress Test:

Depending on subsidiaries' credit risk materiality and business scale, stresstesting of credit risk portfolios was implemented. Stress testing helps toaware the plausible change of subsidiaries risk component resulting fromstress event, assess the amount of capital needed to absorb losses or planremedial actions to mitigate the impact of exceptional loss when suchincident occurs.

d) Mitigation of credit risk

i) Collateral Management:

In assessing the credit extension, the business prospect, and future cash flowof an obligor are the main factors for determining the repayment capability.However, for the creditor’s sake, the obligor or a third party could be asked todeliver pledge of real estate, chattel, or securities as collateral which could bedisposed for recovering the creditor’s right if the obligor defaults. In order tomaintain the good standing value of collateral, the Company’ s subsidiarieswith loan business have established guidelines regarding collateralmanagement, which were as follows. By taking the volatility of market valueand the characteristic of collateral into account, the Company’s subsidiarieswith loan business set the type of collateral that can be pledged and considerthe historical recovery situation to draw up the highest loan to value. Toverify the fairness of the value of the collateral, the value is identified notonly through valuation reports issued by professional appraisers but alsomarket price and the actual registered price. With the periodic revaluation,the adequacy of the guarantee capability of an object which is highlyfluctuation can be timely monitored.

ii) External guarantee:

In order to enhance the credit for weak small and medium business borrowersand the risk mitigation for the unsecured exposure of small and mediumbusiness borrower, external guarantee provided by R.O.C. SMEG fundapproved by government is one of the eligible guarantees.

(Continued)

149


iii) Pre-settlement risk mitigation:

The Company and subsidiaries might take mitigation actions such as call foradditional collateral (or margin), signing a netting agreement or signing anearly determination agreement so as to reduce the credit loss.

e) Maximum exposure to credit risk

Without taking collateral or other credit enhancement mitigation effect intoaccount, the maximum exposure to credit risk of on-consolidated-balance-sheetfinancial assets is equal to their carrying values.

Please refer to Note 6 (au)(iii)(2) F. for off-balance-sheet financial instruments’maximum exposure to credit risks maturity analysis.

f) Concentrations of credit risk

Significant concentrations of credit risk occur when there are significant exposuresto an individual counterparty of a transaction or a number of related counterpartiesengage in similar activities and have similar economic characteristics that wouldcause their ability to meet contractual obligations to be affected by changes ineconomic or other conditions. The Company and subsidiaries have a strategy tomanage the concentration of credit risk in terms of a single client or counterparty toa transaction or clients located in nearby regions or specific industries. Thefollowing table illustrates the diversification of financial assets among industrysectors, geographical regions.

i) By IndustryJune 30, 2021

Individual Clients Service Public Sector High Tech Real Estate ManufacturingFinancialInstitution Others Total

On balance sheet

Receivables—Credit card $ 66,491,395 - - - - - - - 66,491,395

Receivables—Factoring - 4,031,214 - 13,793,563 9,241 1,549,594 1,391,703 - 20,775,315

Loans

-Consumer loans 998,214,668 - - - - - - - 998,214,668

-Corporate loans 95,971,664 89,336,566 251,477,657 62,998,480 96,245,256 110,470,647 6,253,972 355,133 713,109,375

-Micro-business loans 3,760,804 7,091,338 - 2,049,993 1,792,004 2,565,136 167,303 - 17,426,578

-Life insurance loans 20,168,711 - - - - - - - 20,168,711

-Premium advance loans 3,843,035 - - - - - - - 3,843,035

-Foreign currency loans 226,095,603 218,163,518 19,542,468 46,356,681 143,987,550 167,219,583 97,843,696 5,305,166 924,514,265

-Non-accrual loans 3,949,391 3,071,375 64 393,916 199,686 2,685,199 12,185 29,857 10,341,673

-Adjustment of discountand premium

(390,828) (284,973) - (28,439) (152,348) (144,738) (38,395) (54,366) (1,094,087)

Other financial assets 154,091 117,144 - - 2,854 1,894 5,709 25,954 307,646

Total $ 1,418,258,534 321,526,182 271,020,189 125,564,194 242,084,243 284,347,315 105,636,173 5,661,744 2,774,098,574

Off balance sheet

Guarantee and commitment $ 639,231,661 161,353,237 102,914,508 255,970,880 83,888,757 312,287,279 78,058,745 2,068,003 1,635,773,070

(Continued)

150


June 30, 2021

Public Sector CorporateFinancialInstitution

IndividualClients Total

Financial assets measured at fair valuethrough other comprehensive income－Investment in debt instruments

$ 109,510,185 153,938,657 179,274,865 13,218,394 455,942,101

Financial assets for hedging - - 60,870 - 60,870

Reinsurance assets－Claims recoverable fromreinsurers

- - 800,554 - 800,554

Reinsurance assets－Due from reinsurers andceding companies

- - 324,623 - 324,623

Investment in debt instrument at amortizedcost

900,920,656 480,366,257 492,564,229 - 1,873,851,142

Total $ 1,010,430,841 634,304,914 673,025,141 13,218,394 2,330,979,290

December 31, 2020


On balance sheet



Loans

-Consumer loans 947,593,082 - - - - - - - 947,593,082

-Corporate loans 92,111,080 77,372,758 154,282,794 62,954,342 104,194,821 103,965,787 6,502,428 56,432 601,440,442

-Micro-business loans 3,703,224 7,015,408 - 1,955,582 1,627,217 2,356,700 182,854 8,758 16,849,743



-Foreign currency loans 254,665,363 239,915,877 19,201,430 44,917,445 138,199,020 158,244,272 102,353,633 5,240,079 962,737,119

-Non-accrual loans 4,323,130 3,359,456 65 135,148 195,787 3,002,584 211,470 58,283 11,285,923


(361,908) (315,360) - (31,489) (143,479) (160,104) (53,109) (39,396) (1,104,845)

Other financial assets 105,187 45,412 - - 202 639 - 11,479 162,919

Total $ 1,409,083,386 331,265,179 173,484,289 124,982,373 244,083,067 269,454,728 110,475,425 5,335,635 2,668,164,082

Off balance sheet


December 31, 2020




$ 132,022,179 163,877,242 222,088,156 15,681,941 533,669,518



- - 767,989 - 767,989


- - 322,006 - 322,006


841,289,908 454,114,380 532,369,184 - 1,827,773,472

Total $ 973,312,087 617,991,622 755,563,729 15,681,941 2,362,549,379

(Continued)

151


June 30, 2020


On balance sheet



Loans

-Consumer loans 889,821,283 - - - - - - - 889,821,283

-Corporate loans 85,085,152 74,178,736 142,142,410 62,658,892 105,708,187 107,512,060 6,560,147 25,949 583,871,533

-Micro-business loans 3,479,568 6,001,184 - 1,892,269 1,268,316 2,167,114 208,312 3,943 15,020,706



-Foreign currency loans 262,126,305 246,808,746 17,587,345 50,000,119 143,339,699 181,407,657 110,645,107 6,325,864 1,018,240,842

-Non-accrual loans 4,349,331 2,046,687 - 649,473 142,913 2,886,010 385,870 245,468 10,705,752


(301,287) (343,651) (1) (28,627) (135,249) (143,362) (56,599) (38,727) (1,047,503)

Other financial assets 183,782 32,433 - - - 6,590 - 48,017 270,822

Total $ 1,334,743,777 330,974,036 159,729,754 132,342,466 250,329,202 295,265,042 120,563,449 6,610,514 2,630,558,240

Off balance sheet


June 30, 2020




$ 117,660,727 141,762,665 202,564,438 16,456,716 478,444,546

Financial assets for hedging 119,656 - 52,065 - 171,721


- - 676,924 - 676,924


- - 327,515 - 327,515


814,385,624 412,969,774 570,560,176 - 1,797,915,574

Total $ 932,166,007 554,732,439 774,181,118 16,456,716 2,277,536,280

(Continued)

152


ii) By Area

June 30, 2021

Taiwan North AmericaAsia (excluding

Taiwan) Others TotalOn balance sheet

Financial assets measured at fairvalue through othercomprehensive income－Investment in debt instruments

$ 86,682,942 119,350,524 191,162,127 58,746,508 455,942,101

Financial assets for hedging 60,870 - - - 60,870

Receivables－Credit card 66,491,395 - - - 66,491,395

Receivables－Factoring 5,933,294 2,331,673 11,963,501 546,847 20,775,315

Loans

Consumer finance

－Mortgage loans 800,838,071 - - - 800,838,071

－Automobile loans 4,410,091 - - - 4,410,091

－Consumer loans 192,966,506 - - - 192,966,506

Corporate finance

－Corporate loans 711,720,201 339,233 1,037,941 12,000 713,109,375

－Micro-business loans 17,418,505 - 8,073 - 17,426,578

Life insurance loans 20,168,711 - - - 20,168,711

Premium advance loans 3,843,035 - - - 3,843,035

Foreign currency loans 34,088,018 123,478,163 705,188,021 61,760,063 924,514,265

Non-accrual loans 1,477,907 421,118 7,657,193 785,455 10,341,673

Adjustment of discount andpremium

(587,576) (31,659) (428,366) (46,486) (1,094,087)

Reinsurance assets－Claimsrecoverable from reinsurers

108,856 322,764 334,476 34,458 800,554

Reinsurance assets－Due fromreinsurers and cedingcompanies

148,829 88,103 81,418 6,273 324,623

Investments in debt instruments atamortized cost

730,196,788 459,246,998 348,349,695 336,057,661 1,873,851,142

Other financial assets 165,653 - 141,993 - 307,646

Total $ 2,676,132,096 705,546,917 1,265,496,072 457,902,779 5,105,077,864

Off balance sheet

Guarantee and commitment $ 1,309,740,975 18,323,197 290,226,936 17,481,962 1,635,773,070

(Continued)

153


December 31, 2020




$ 100,296,303 128,471,887 240,325,495 64,575,833 533,669,518



Receivables－Factoring 8,097,656 1,052,238 12,134,002 971,575 22,255,471

Loans

Consumer finance

－Mortgage loans 767,048,129 - - - 767,048,129


－Consumer loans 175,301,158 - - - 175,301,158

Corporate finance

－Corporate loans 600,312,270 - 1,056,172 72,000 601,440,442

－Micro business loans 16,841,454 - 8,289 - 16,849,743



Foreign currency loans 31,399,040 122,270,317 747,968,752 61,099,010 962,737,119

Non-accrual loans 1,269,583 424,983 8,867,384 723,973 11,285,923


(567,267) (21,988) (467,234) (48,356) (1,104,845)


111,032 366,067 269,284 21,606 767,989


108,852 121,673 87,680 3,801 322,006


685,718,430 452,236,373 340,757,858 349,060,811 1,827,773,472


Total $ 2,498,239,926 704,921,550 1,351,071,732 476,480,253 5,030,713,461

Off balance sheet


(Continued)

154


June 30, 2020




$ 112,990,642 79,374,355 220,640,290 65,439,259 478,444,546

Financial assets for hedging 145,815 - 13,676 12,230 171,721


Receivables－Factoring 6,975,421 576,874 15,364,038 758,829 23,675,162

Loans

Consumer finance

－Mortgage loans 720,594,360 - - - 720,594,360


－Consumer loans 163,008,483 - - - 163,008,483

Corporate finance

－Corporate loans 583,401,080 - 399,453 71,000 583,871,533

－Micro-business loans 15,012,202 - 8,504 - 15,020,706



Foreign currency loans 32,194,449 129,124,575 794,310,981 62,610,837 1,018,240,842

Non-accrual loans 1,577,836 221,248 8,906,668 - 10,705,752


(534,807) 13,587 (468,061) (58,222) (1,047,503)


112,623 318,299 238,150 7,852 676,924


128,527 110,286 77,707 10,995 327,515


648,655,476 456,305,679 329,608,474 363,345,945 1,797,915,574


Total $ 2,380,691,406 666,044,903 1,369,159,486 492,198,725 4,908,094,520

Off balance sheet


(Continued)

155


g) Credit quality and overdue loss analysis of financial assets of the Companyand subsidiaries

The measurement of credit risk of the Company and subsidiaries is based on threestage classification of credit risk status of financial assets and the estimation ofthree major credit risk components including Probability of Default, Loss GivenDefault and Exposure At Default, which are used to measure the 12-month andlifetime expected credit losses.

For Probability of Default, to evaluate the expected credit losses, the Companyand subsidiaries consider the internal history default experience and external creditrating default rate information of financial assets or issuers or counterparty, the risksegmentation is developed according to obligor’s risk characteristics, industry andcountry. For Loss Given Default, the risk segmentation depends on whether theasset is partially secured, fully secured, product characteristics or other else.Current exposure method or expected exposure approach is adopted for theestimation of exposure at default. The on-balance sheet exposure at default ismeasured by gross carrying amount or amortized cost; the off-balance sheetexposure at default is estimated by carrying amount multiplied by credit conversionfactor.

The Company and subsidiaries evaluate credit risk whether financial instrumentsincreased significantly that should be included in credit loss provisions. TheCompany and subsidiaries consider to disclose the information which can provethe significant increases in credit risk. The criteria for identifying the significantincreases in credit risk are set as below:

i) Obligor’ s risk rating or collateral value at the reporting date deterioratessignificantly compared to that at the initial recognition date.

ii) Past due information.

iii) Significant increases in credit risk on other financial instruments of the sameborrower.

iv) Credit quality status placed in early warning list due to the mechanism ofearly warning at reporting date.

(Continued)

156


The Company and subsidiaries’ definition of default on financial assets generallyincludes the items as below:

i) Significant financial difficulty of the issuer or the borrower;

ii) Potential breach of contract due to adverse changes in the repayment status ofborrower;

iii) Decease, dissolution, or it becoming probable that the borrower will enterbankruptcy or other financial reorganization;

iv) The disappearance of an active market for that financial asset because offinancial difficulties; or

v) Significant adverse news in the market, e.g. the fair value of the debtinstrument has been less than its amortized cost, causing the impairment ofthe financial asset.

The estimation of the expected credit loss includes forward-looking informationand primarily references to historically macroeconomic data and relevantmacroeconomic factors (e.g. economic growth rate, consumer price index, interestrate or unemployment rate, etc.) to develop internal forward-looking risk signals.The risk signals incorporate internal and external loss experiences and apply theforward-looking adjustments to credit risk position. Besides, the Company andsubsidiaries consider macroeconomic forecast derived from industry, publicagencies, and academic institutions to reflect the estimation of impairmentallowance.

There is no significant change on the methodology or assumptions for assessmentof expected credit losses during the six months ended June 30, 2021.

(Continued)

157


Credit quality and impairment analysis of financial assets

Some financial assets held by the Company and subsidiaries, such as cash and cash equivalent, due from Central Bank, call loans to banks, financial assets measured at fair valuethrough profit or loss, securities purchased under resell agreements, refundable deposits, operational guarantee deposits, and settlement fund, are excluded from this analysis sincethe most of the counterparties are normally with good credit quality and can be considered as low credit risk. Some products consider their characteristics and experiences with nohistorical impairments and are therefore considered as low-risk products, such as deposit quality loan or depository and demolition industry. Below tables provide the credit qualityanalysis for the rest of financial assets.

i) Credit quality analysis of financial assets

June 30, 2021Stage 1 Stage 2 Stage 3

ItemInvestment

gradeSub-investment

grade High risk grade Subtotal (A)Investment

gradeSub-investment

grade High risk grade Subtotal (B)

Individuallyassessed

impaired (C)

Collectivelyassessed

impaired (D)Impairment

allowances (E)Total (A)+(B)+(C)+(D)-(E)

On balance sheetFinancial assets at fair value through other

comprehensive incomes－Investment indebt instruments

$ 415,517,872 40,424,229 - 455,942,101 - - - - - - 108,619 455,833,482

Financial assets for hedging 60,870 - - 60,870 - - - - - - - 60,870Receivables－Credit cards 52,404,961 8,437,772 2,884,745 63,727,478 1,683 8,520 268,847 279,050 - 2,484,867 952,455 65,538,940Receivables－Factoring 6,560,740 8,877,731 4,730,308 20,168,779 - 465 - 465 606,071 - 532,769 20,242,546Loans

Consumer finance－Mortgage loans 788,213,349 7,887,575 1,745,673 797,846,597 129,695 10,921 161,981 302,597 - 2,688,877 247,281 800,590,790－Automobile loans 4,409,605 - - 4,409,605 43 - - 43 - 443 3,249 4,406,842－Consumer loans 136,878,981 35,698,095 11,289,786 183,866,862 41,957 68,884 1,168,282 1,279,123 - 7,820,521 3,202,871 189,763,635

Corporate finance－Corporate loans 409,909,253 255,691,582 44,762,659 710,363,494 - 411,510 856,195 1,267,705 1,478,176 - 568,941 712,540,434－Micro-business loans 814,913 12,066,923 3,291,941 16,173,777 - 154,104 849,632 1,003,736 248,219 846 90,988 17,335,590

Life insurance loans 20,168,711 - - 20,168,711 - - - - - - - 20,168,711Premium advance loans 3,843,035 - - 3,843,035 - - - - - - - 3,843,035Foreign currency loans 354,389,337 394,275,123 152,226,995 900,891,455 31,401 995,232 12,026,182 13,052,815 9,623,442 946,553 4,617,837 919,896,428Non-accrual loans 4,233 - - 4,233 - 79,203 491,410 570,613 4,635,689 5,131,138 4,448,734 5,892,939Adjustment of discount and premium (580,895) (405,004) (78,505) (1,064,404) 121 (3) (20,987) (20,869) (5,056) (3,758) (454) (1,093,633)


775,943 - - 775,943 18,069 6,494 48 24,611 - - - 800,554


268,833 - - 268,833 25,740 9,334 64 35,138 20,652 - 17,988 306,635

Investments in debt instruments at amortizedcost

1,808,127,177 52,323,348 8,742,194 1,869,192,719 86,761 3,064,358 1,256,442 4,407,561 250,862 - 694,143 1,873,156,999

Other financial assets 39,716 - - 39,716 - - - - 117,174 150,756 192,066 115,580Total $ 4,001,806,634 815,277,374 229,595,796 5,046,679,804 335,470 4,809,022 17,058,096 22,202,588 16,975,229 19,220,243 15,677,487 5,089,400,377

Off balance sheetGuarantee and commitment $ 1,159,507,444 390,287,978 84,263,944 1,634,059,366 7,708 26,647 1,169,166 1,203,521 273 509,910 469,860 1,635,303,210

(Continued)

158


December 31, 2020Stage 1 Stage 2 Stage 3

ItemInvestment

gradeSub-investment


gradeSub-investment



impaired (C)




On balance sheet

Financial assets at fair value through othercomprehensive incomes－Investment indebt instruments

$ 494,619,782 32,496,782 6,552,954 533,669,518 - - - - - - 130,018 533,539,500

Financial assets for hedging 16,394 - - 16,394 - - - - - - - 16,394

Receivables－Credit cards 68,200,941 8,933,174 2,993,532 80,127,647 3,038 8,222 230,896 242,156 - 2,861,770 1,027,193 82,204,380

Receivables－Factoring 9,559,896 11,152,454 922,700 21,635,050 - 476 - 476 619,945 - 529,853 21,725,618

Loans

Consumer finance

－Mortgage loans 753,818,743 7,695,588 2,057,816 763,572,147 96,427 - 77,743 174,170 - 3,301,812 286,749 766,761,380

－Automobile loans 5,242,931 - - 5,242,931 - - - - - 864 5,207 5,238,588

－Consumer loans 121,559,064 34,716,900 10,225,666 166,501,630 27,212 57,399 798,458 883,069 - 7,916,459 3,107,788 172,193,370

Corporate finance

－Corporate loans 302,842,935 254,460,096 41,522,325 598,825,356 - 405,068 1,077,410 1,482,478 1,132,608 - 615,226 600,825,216

－Micro business loans 827,683 12,018,020 3,213,619 16,059,322 - 184,308 516,612 700,920 87,176 2,325 79,196 16,770,547

Life insurance loans 19,947,382 - - 19,947,382 - - - - - - - 19,947,382

Premium advance loans 3,765,273 - - 3,765,273 - - - - - - - 3,765,273

Foreign currency loans 379,429,841 389,405,371 165,737,020 934,572,232 37,882 1,480,672 12,043,753 13,562,307 13,725,547 877,033 6,195,431 956,541,688

Non-accrual loans 10,685 - - 10,685 - 233,067 1,190,448 1,423,515 4,544,139 5,307,584 4,996,346 6,289,577

Adjustment of discount and premium (570,706) (392,193) (102,226) (1,065,125) 262 - (30,756) (30,494) (6,802) (2,424) (685) (1,104,160)


732,094 - - 732,094 21,818 13,978 99 35,895 - - - 767,989


264,744 - - 264,744 23,123 15,848 16 38,987 18,275 - 17,887 304,119


1,759,726,807 37,682,392 24,979,191 1,822,388,390 88,891 3,631,791 1,389,415 5,110,097 274,985 - 788,747 1,826,984,725

Other financial assets 47,656 - - 47,656 - - - - 13,641 101,622 59,601 103,318

Total $ 3,920,042,145 788,168,584 258,102,597 4,966,313,326 298,653 6,030,829 17,294,094 23,623,576 20,409,514 20,367,045 17,838,557 5,012,874,904

Off balance sheet

Guarantee and commitment $ 1,126,912,817 392,356,629 94,856,198 1,614,125,644 2,452 28,563 1,499,728 1,530,743 11,381 684,429 469,056 1,615,883,141

(Continued)

159


June 30, 2020Stage 1 Stage 2 Stage 3

ItemInvestment

gradeSub-investment


gradeSub-investment



impaired (C)




On balance sheetFinancial assets at fair value through other

comprehensive incomes－Investment indebt instruments

$ 427,854,335 44,442,182 5,899,149 478,195,666 - 248,880 - 248,880 - - 170,542 478,274,004

Financial assets for hedging 171,721 - - 171,721 - - - - - - - 171,721Receivables－Credit cards 51,561,477 8,456,791 3,092,597 63,110,865 1,674 3,111 182,260 187,045 - 2,870,688 982,440 65,186,158Receivables－Factoring 9,274,886 11,454,614 2,295,487 23,024,987 - 5,178 - 5,178 644,997 - 553,515 23,121,647Loans

Consumer finance－Mortgage loans 707,554,473 7,376,660 1,898,677 716,829,810 90,412 7,810 104,868 203,090 - 3,561,460 300,555 720,293,805－Automobile loans 6,216,932 - - 6,216,932 - - - - - 1,508 4,490 6,213,950－Consumer loans 113,296,359 31,526,784 9,976,064 154,799,207 25,580 33,875 482,865 542,320 - 7,666,956 2,878,184 160,130,299

Corporate finance－Corporate loans 291,541,534 248,464,149 40,730,861 580,736,544 - 445,550 1,351,221 1,796,771 1,338,218 - 632,806 583,238,727－Micro-business loans 868,771 10,920,827 2,405,090 14,194,688 - 151,496 544,175 695,671 124,973 5,374 73,991 14,946,715

Life insurance loans 20,131,386 - - 20,131,386 - - - - - - - 20,131,386Premium advance loans 3,699,659 - - 3,699,659 - - - - - - - 3,699,659Foreign currency loans 409,253,000 419,365,113 162,416,318 991,034,431 53,230 747,764 9,258,836 10,059,830 16,254,288 892,293 8,409,733 1,009,831,109Non-accrual loans 61,586 - - 61,586 - 1,326,241 196,487 1,522,728 4,930,698 4,190,740 5,023,842 5,681,910Adjustment of discount and premium (504,197) (404,484) (117,888) (1,026,569) 625 (55) (14,885) (14,315) (4,981) (1,638) (456) (1,047,047)


641,587 - - 641,587 31,244 3,754 339 35,337 - - - 676,924


273,734 - - 273,734 30,180 320 740 31,240 22,541 - 17,912 309,603


1,701,164,126 65,168,441 25,778,785 1,792,111,352 92,630 5,711,592 - 5,804,222 - - 867,378 1,797,048,196

Other financial assets 53,469 - - 53,469 - - - - 40,558 176,795 141,615 129,207Total $ 3,743,114,838 846,771,077 254,375,140 4,844,261,055 325,575 8,685,516 12,106,906 21,117,997 23,351,292 19,364,176 20,056,547 4,888,037,973

Off balance sheetGuarantee and commitment $ 1,015,938,756 407,688,330 83,118,986 1,506,746,072 1,834 10,760 1,131,374 1,143,968 10,475 556,795 483,621 1,507,973,689

Note 1: The balances of impairment allowance, as shown above, are in compliance with the IFRSs accepted by FSC.

Note 2: Stage 1 is the loss allowance measured at 12-month expected credit loss of financial instrument.

Stage 2 is the loss allowance measured at lifetime ECL measurement and the credit risk of a financial asset at the reporting date has increased significantly.

Stage 3 is the loss allowance measured at lifetime ECL measurement and the credit losses has impaired of a financial asset at the reporting date.

(Continued)

160


h) Foreclosed properties

Foreclosed properties of the Company and subsidiaries are classified under otherassets. Please refer to Note 6(r).

i) Disclosures required by the Regulations Governing the Preparation of FinancialReports by Financial Holding Companies

i) Asset quality of CTBC Bank Co., Ltd. and subsidiaries’ overdue loans andoverdue receivables

Unit: In Thousands of New Taiwan Dollars, %

Month / Year June 30, 2021

Categories / ItemsNon-performing

loans Total loansNon-performing

loans ratioAllowance forcredit losses Coverage ratio

Corporatefinance

Secured

Unsecured (Note 10)

1,576,128

4,587,664

482,849,466

928,335,415

%0.33

%0.49

16,123,910 %261.59

Residential mortgages 1,903,050 886,304,989 %0.21 8,973,650 %471.54

Cash cards 20,648 1,291,265 %1.60 46,883 %227.06

Consumer Micro credit Original 2,031,248 189,015,199 %1.07 5,957,703 %293.30

finance loans Purchase - 45 %- - %-

Others Secured 110,441 138,231,505 %0.08 1,823,006 %577.45

Unsecured 205,256 6,141,236 %3.34

Total loan business 10,434,435 2,632,169,120 %0.40 32,925,152 %315.54

Overduereceivables

Balance ofreceivables

Delinquencyratio

Allowance forcredit losses Coverage ratio

Credit cards business 134,397 66,630,235 %0.20 1,040,699 %774.35

Without recourse factoring - 20,775,315 %- 711,125 %-

Month / Year June 30, 2020

Categories / ItemsNon-performing

loans Total loansNon-performing

loans ratioAllowance forcredit losses Coverage ratio

Corporatefinance

Secured

Unsecured (Note 10)

1,126,319

4,236,045

470,387,409

870,594,379

%0.24

%0.49

19,688,751 %367.17

Residential mortgages 2,168,369 857,432,757 %0.25 8,641,592 %398.53

Cash cards 26,558 1,622,766 %1.64 61,285 %230.76

Consumer Micro credit Original 1,629,151 160,695,470 %1.01 5,404,333 %331.73

finance loans Purchase - 75 %- 1 %-

Others Secured 158,952 121,196,750 %0.13 1,836,403 %435.28

Unsecured 262,934 6,408,871 %4.10

Total loan business 9,608,328 2,488,338,477 %0.39 35,632,365 %370.85

Overduereceivables

Balance ofreceivables

Delinquencyratio

Allowance forcredit losses Coverage ratio

Credit cards business 92,988 66,265,094 %0.14 1,042,369 %1,120.97

Without recourse factoring - 23,675,162 %- 781,503 %-

(Continued)

161


Note 1: Non-performing loans represent the amount of overdue loans as reported in accordancewith the “Regulations on the Procedures for Banking Institutions to Evaluate Assets andDeal with Past Due/Non-performing Loans”. The credit card overdue loans represent theamount of overdue loans as reported in accordance with Jin Kuan Yin (4) Zi No.0944000378, dated July 6, 2005.

Note 2: Non-performing loan ratio = Non-performing loans ÷ total loans; Credit card delinquencyratio = Overdue receivables ÷ balance of receivables.

Note 3: Coverage ratio for loans = Allowance for credit losses ÷ non-performing loans; Coverageratio for credit card business = 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 ofobtaining funds to purchase property and to construct or repair a house.

Note 5: Microcredit loans are defined by Jin Kuan Yin (4) Zi No. 09440010950, dated December19, 2005, and do not include credit cards or cash cards.

Note 6: Others in consumer finance are secured and unsecured consumer loans other thanresidential mortgage loans, cash card loans, and microcredit loans, and do not includecredit cards.

Note 7: In accordance with Jin Kuan Yin (5) Zi No. 094000494, dated July 19, 2005, the amountsof without recourse factoring will be classified as overdue receivables within threemonths from the date that suppliers or insurance companies resolve not to compensate theloss.

Note 8: The balances of impairment allowance, as shown above, are calculated in accordancewith the IFRSs accepted by the FSC and “ Regulations Governing the Procedures forBanking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrualLoans,” and other related regulations. Additionally, the amounts exclude non-accrualloans arising from guarantees. Related allowance for credit losses is recognized underprovisions.

Note 9: Supplemental disclosures:

The information below shows supplemental disclosures of the Company’ s subsidiaryCTBC Bank Co., Ltd.’ s loans and receivables that may be exempted from reporting asnon-performing loans and overdue receivables, respectively.

(Continued)

162


Unit: In Thousands of New Taiwan Dollars

June 30, 2021 June 30, 2020Loans that may be

exempted fromreporting as a non-

performing loan

Receivables thatmay be exemptedfrom reporting as

overdue receivables

Loans that may beexempted from

reporting as a non-performing loan

Receivables thatmay be exemptedfrom reporting as

overdue receivablesPursuant to a contract under a debtnegotiation plan (Note 1)

22,444 157,512 31,005 154,197

Pursuant to a contract under a debtliquidation plan and a debt reliefplan (Note 2)

672,818 61,801 685,132 67,091

Total 695,262 219,313 716,137 221,288

Note 1: In accordance with Jin Kuan Yin (1) Zi No. 09510001270, dated April 25, 2006,a bank is required to make supplemental disclosures of credit information whichwas approved under the “Debt Coordination Mechanism of Unsecured ConsumerDebts by the Bankers Association of the R.O.C.”

Note 2: In accordance with Jin Kuan Yin (1) Zi No. 09700318940, dated September 15,2008, and with Jin Kuan Yin No. 10500134790, dated September 20, 2016, abank is required to make supplemental disclosures of credit information oncedebtors apply for pre-negotiation, pre-meditation, relief and liquidation under the“Consumer Debt Clearance Act.”

Note 10:Those loans that are not 100% backed by collateral are classified as unsecured.

ii) The Company’ s subsidiary CTBC Bank Co., Ltd.’ s concentration of creditextensions


June 30, 2021

Ranking Enterprise group by industry sector Credit amount

Credit amount/stockholders’

equity (%)1 A group. Cement manufacturing 13,762,479 %4.53

2 B group. Panel and components manufacturing 12,674,912 %4.17

3 C group. Cable telecommunications 9,848,879 %3.24

4 D group. Panel and components manufacturing 8,822,279 %2.90

5 E group. Iron and steel smelting 8,576,752 %2.82

6 F group. Electricity supply 7,037,820 %2.32

7 G group. Other unclassified financial service 6,926,770 %2.28

8 H group. Other unclassified financial service 6,636,705 %2.18

9 I group. Other telecommunications 5,777,827 %1.90

10 J group. Printed circuit boards manufacturing 5,744,499 %1.89

(Continued)

163



June 30, 2020

Ranking Enterprise group by industry sector Credit amount

Credit amount/stockholders’

equity (%)1 A group. Cement manufacturing 14,708,135 %4.95

2 K group. Panel and components manufacturing 14,398,272 %4.84

3 B group. Panel and components manufacturing 9,939,101 %3.34

4 D group. Iron and steel smelting 9,848,962 %3.31

5 C group. Cable telecommunications 9,705,930 %3.26

6 E group. Wires and cables manufacturing 6,308,647 %2.12

7 L group. Other unclassified financial service 6,300,585 %2.12

8 M group. Metal Die manufacturing 6,000,000 %2.02

9 N group. Other telecommunications 5,992,443 %2.02

10 I group. Other unclassified financial service 5,931,850 %1.99

Note 1: The top 10 enterprise groups other than government or state-ownedenterprises are ranked according to their total outstanding creditamount. If the borrowers belong to an enterprise group, theaggregate credit balance of the enterprise should be calculated anddisclosed as a code number for each such borrower together with anindication of the borrowers’ line of business. In addition, if theborrowers are enterprise groups, the enterprise group’ s industrysector with the maximum exposure to credit risk in its main industrysector should be disclosed, along with the “class” of the industry, incompliance with the Standard Industrial Classification System of theR.O.C. posted by the Directorate General of Budget, Accounting andStatistics, Executive Yuan, R.O.C.

Note 2: Enterprise group is as defined in Article 6 of the “ SupplementaryProvisions to the Taiwan Stock Exchange Corporation Rules forReview of Securities Listings.”

Note 3: The total outstanding credit amount is the sum of the balances of allloan types (including import and export bill negotiations, loans,overdrafts, short/medium/long term secured and unsecured loans,margin loans receivable, and non-accrual loans), bills purchased,without recourse factoring, acceptances receivable, and guaranteesreceivable.

(Continued)

164


2) Liquidity Risk Management Mechanism

a) Description and origin of liquidity risk

Liquidity risk refers to the risk of inability to obtain funds at a reasonable costwithin a reasonable timeframe to meet the financial obligations and to cause theimpact on the Company’s earnings or stockholder’s equity value.

Liquidity risk may stem from external and internal factors, one of the external keyfactors could be undermined payment capability caused by financial marketvolatility, and one of the internal factors could be funding shortage caused bymismatch between the timing of capital inflow and outflow.

b) Management procedures of liquidity risk

Based on the Company’ s Financial Risk Management Policy, the Company andsubsidiaries set robust management procedures and risk measurement to identify,measure, monitor, and report the liquidity risk. To avoid liquidity crisis events, theCompany and subsidiaries continuously monitor liquidity status by applyingvarious assessment tools, coordinating responsible units to handle potentialliquidity risk issues and implementing necessary disposals. Moreover, the risk limitis set and monitored, in order to ensure the actual risk profile comply with the risktolerance requirements.

c) Measurement of liquidity risk

The measurement of liquidity risk includes:

i) Maturity gap analysis: The measure discloses cash flow gap by time bucket.

ii) Ratio of fund source to fund usage: The indicators are loan-to-deposit ratio,and current ratio, etc.

iii) Stress test: The test assesses the liquidity impact from extreme scenarios.

iv) Financial market liquidity: The information about changes of market liquidityis used for cross-check the appropriateness of its own liquidity position.

The Company and subsidiaries should adopt appropriate measurements to helpimplement management procedures in accordance with their respectivecharacteristics and complexity of assets and liabilities.

(Continued)

165


d) Maturity analysis of non-derivative liabilities

Table below shows the analysis of cash outflows of non-derivative liabilities of theCompany and subsidiaries based on time remaining until the contractual maturitydate. The amount disclosed is based on contractual cash flows and may be differentfrom that included in the consolidated balance sheets.

June 30, 20210-30 days 31-90 days 91-180 days 181 days-1 year Over 1 year Total

Deposits from Central Bank andother banks

$ 36,380,812 9,767,083 504,200 1,403,124 - 48,055,219

Due to Central Bank and otherbanks

1,942,055 1,714,760 4,642,680 1,763,089 3,182,195 13,244,779

Non-derivative financial liabilitiesmeasured at fair value throughprofit and loss

281,676 - 205,870 - 10,827,037 11,314,583

Securities sold under repurchaseagreements

66,326,227 24,541,861 - - - 90,868,088

Commercial papers payable 10,221,500 3,755,000 525,000 650,000 700,000 15,851,500

Payables 57,380,597 9,734,671 8,417,221 14,404,402 38,403,262 128,340,153

Current income tax liabilities 3,923 10,942 7,075 5,765,886 2,403,073 8,190,899

Deposits and remittances 2,467,428,132 372,659,969 327,194,434 459,488,701 164,800,518 3,791,571,754

Bonds payable - 4,000,000 - 5,100,000 123,800,000 132,900,000

Other financial liabilities 7,534,375 7,152,328 8,834,455 11,653,167 6,867,427 42,041,752

December 31, 20200-30 days 31-90 days 91-180 days 181 days-1 year Over 1 year Total


$ 35,774,383 16,165,098 2,001,373 2,053,092 - 55,993,946


2,360,456 5,830,332 1,279,063 3,606,153 3,138,704 16,214,708


7,352,987 - 153,002 - 7,122,287 14,628,276


85,358,817 9,102,347 - - - 94,461,164

Commercial papers payable 12,649,900 2,525,000 1,185,000 650,000 - 17,009,900

Payables 34,405,599 14,365,994 11,776,541 16,050,193 46,035,393 122,633,720

Current income tax liabilities 3,215 2,267,394 5,867,884 140,538 136,834 8,415,865


Bonds payable - - - 4,000,000 121,400,000 125,400,000


(Continued)

166


June 30, 20200~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year Total


$ 40,544,582 14,782,376 1,376,500 1,297,964 - 58,001,422


1,252,151 6,105,554 483,693 2,999,920 5,254,240 16,095,558


- - 23,142,932 - 15,037,984 38,180,916


119,954,851 - - 90,390 27,510 120,072,751

Commercial papers payable 22,127,333 23,861,667 1,012,500 425,000 - 47,426,500

Payables 31,211,552 32,618,830 13,498,495 12,807,441 64,539,808 154,676,126

Current income tax liabilities 1,130 2,503,927 3,391 3,610,882 135,056 6,254,386


Bonds payable - 6,300,000 - - 100,900,000 107,200,000


Note: For demand deposits included in “Deposit and remittances”, the amount willbe disclosed in the earliest period since such deposits can be withdrawn atany time.

e) Maturity analysis of derivative liabilities

i) Net settled derivatives

Net settled derivatives engaged by the Company and subsidiaries include butnot limited to:

1. Foreign exchange derivatives: Non-delivery forwards and net settled FXoptions;

2. Interest rate derivatives: Forward rate agreements, interest rate swaps,and interest rate futures;

3. Other derivatives: Equity options and commodity futures.

For derivatives held by trading purpose, the amount will be disclosed in theearliest period with fair value to reflect the nature of short-term tradingbehavior; for hedging derivatives, the amount disclosed is based oncontractual cash flow and may be different from that included in theconsolidated balance sheets. The maturity analysis of net settled derivativesliabilities is as follows:


Derivative financial liabilities measuredat fair value through profit or loss

－Foreign exchange derivatives $ 2,740,220 66,032 10,331 16,248 - 2,832,831

－Interest rate derivatives 8,307,455 - - - - 8,307,455

－Other derivatives 386,987 10,119 230,546 45,557 107,080 780,289

Derivative financial liabilities for hedging

－Foreign exchange derivatives 418,029 557,372 - - - 975,401

Total $ 11,852,691 633,523 240,877 61,805 107,080 12,895,976

(Continued)

167


December 31, 20200~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year Total


－Foreign exchange derivatives $ 2,364,689 10,820 21,993 38,582 - 2,436,084


－Other derivatives 215,695 10,119 230,546 45,557 107,080 608,997


－Foreign exchange derivatives 427,567 570,089 - - - 997,656

Total $ 13,657,443 591,028 252,539 84,139 107,080 14,692,229



－Foreign exchange derivatives $ 2,824,640 2,283 1,734 - - 2,828,657


－Other derivatives 217,903 - 297,314 12,858 53,703 581,778


－Foreign exchange derivatives - - 1,038,127 - - 1,038,127

Total $ 56,645,151 2,283 1,337,175 12,858 53,703 58,051,170

ii) Gross settled derivatives

Gross settled derivatives engaged by the Company and subsidiaries include:

Foreign exchange derivatives: forwards, currency swaps, cross currencyswaps, and gross settled foreign currency options. For forwards, currencyswaps, and cross currency swaps, the amount disclosed is based oncontractual cash flow and may be different from that included in theconsolidated balance sheet; for gross settled foreign currency options, theamount will be disclosed in the earliest period with fair value, as currencyoptions are for trading purpose and can be disposed at any time. The maturityanalysis of gross settled derivatives was as follows:


Derivative financial instrumentsmeasured at fair value through profitor loss－Foreign exchange derivatives－Cash outflow $ 1,227,787,901 719,502,113 378,982,449 651,207,394 71,101,848 3,048,581,705－Cash inflow 1,229,729,538 721,255,940 380,693,416 651,923,426 72,266,893 3,055,869,213

Derivative financial liabilities for hedging－Foreign exchange derivatives－Cash outflow 27,275,454 - - - - 27,275,454－Cash inflow 27,241,922 - - - - 27,241,922

Cash outflow subtotal 1,255,063,355 719,502,113 378,982,449 651,207,394 71,101,848 3,075,857,159

Cash inflow subtotal 1,256,971,460 721,255,940 380,693,416 651,923,426 72,266,893 3,083,111,135

Net cash flow $ 1,908,105 1,753,827 1,710,967 716,032 1,165,045 7,253,976

(Continued)

168




Derivative financial liabilities for hedging－Foreign exchange derivatives－Cash outflow 33,150,039 - - - - 33,150,039－Cash inflow 32,938,751 - - - - 32,938,751



Net cash flow $ (2,164,610) 1,320,880 1,928,359 2,296,102 826,321 4,207,052



Derivative financial liabilities for hedging－Foreign exchange derivatives

─ Cash outflow 33,822,354 - - - - 33,822,354─ Cash inflow 33,953,613 - - - - 33,953,613



Net cash flow $ (5,396,422) (1,902,469) (2,512,693) (8,854,581) (264,579) (18,930,744)

f) Maturity analysis of off-balance-sheet items

Table below shows the maturity analysis of off-balance-sheet items for theCompany and subsidiaries. The amount of the guarantee and committed credit lineswill be allocated to the earliest period when such obligation can be exercised at anytime by clients. The amount disclosed is based on contractual cash flow and may bedifferent from that included in the consolidated balance sheets.


Financial guarantee contracts $ 68,339,599 - - - - 68,339,599Unused amount of irrevocable loan

commitments100,506,917 - - - 11,507,643 112,014,560

Unused amount of irrevocable letter ofcredit

21,436,186 - - - - 21,436,186

Unused amount of irrevocable creditcard commitments

579,946,280 - - - - 579,946,280

Total $ 770,228,982 - - - 11,507,643 781,736,625


Financial guarantee contracts $ 81,386,781 - - - - 81,386,781

Unused amount of irrevocable loancommitments

88,997,671 - - - 12,825,012 101,822,683


20,759,866 - - - - 20,759,866


556,172,464 - - - - 556,172,464

Total $ 747,316,782 - - - 12,825,012 760,141,794

(Continued)

169



Financial guarantee contracts $ 72,122,661 - - - - 72,122,661Unused amount of irrevocable loan

commitments94,630,986 - - - 12,720,248 107,351,234


18,391,216 - - - - 18,391,216


554,748,251 - - - - 554,748,251

Total $ 739,893,114 - - - 12,720,248 752,613,362

Note: The total refers to the maximum credit risk exposure.

g) Disclosures required by the Regulations Governing the Preparation of FinancialReports by Financial Holding Companies

i) Maturity analysis of the Company’s subsidiary CTBC Bank Co., Ltd.’s assetsand liabilities in New Taiwan Dollars

June 30, 2021

Unit: In Millions of New Taiwan Dollars

Amount remaining to maturity dateTotal 0~10 days 11~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year

Major cash inflow at maturity $ 3,090,654 475,032 288,663 220,458 215,401 353,915 1,537,185

Major cash outflow at maturity 3,545,589 129,258 252,907 475,821 415,377 751,511 1,520,715

Gap (454,935) 345,774 35,756 (255,363) (199,976) (397,596) 16,470

June 30, 2020

Unit: In Millions of New Taiwan Dollars

Amount remaining to maturity dateTotal 0~10 days 11~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year

Major cash inflow at maturity $ 2,727,970 429,722 230,004 205,551 201,370 225,441 1,435,882

Major cash outflow at maturity 3,118,260 162,225 235,553 408,389 375,407 624,360 1,312,326

Gap (390,290) 267,497 (5,549) (202,838) (174,037) (398,919) 123,556

Note: Listed amount of the Company’s subsidiary CTBC Bank Co., Ltd. isdenominated in New Taiwan Dollars.

ii) Maturity analysis of the Company’s subsidiary CTBC Bank Co., Ltd.’s assetsand liabilities in U.S. Dollars

June 30, 2021

Unit: In Thousands of U.S. Dollars

Amount remaining to maturity dateTotal 0~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year

Major cash inflow at maturity $ 81,091,458 31,804,447 15,123,554 7,825,559 11,977,715 14,360,183

Major cash outflow at maturity 113,376,832 31,656,979 17,973,522 12,964,561 18,670,602 32,111,168

Gap (32,285,374) 147,468 (2,849,968) (5,139,002) (6,692,887) (17,750,985)

(Continued)

170


June 30, 2020





Gap (29,611,843) 273,978 (244,914) (6,720,010) (7,368,661) (15,552,236)

Note: Listed amount of the Company’s subsidiary CTBC Bank Co., Ltd. isdenominated in U.S. Dollars.

iii) Maturity analysis of the Company’ s subsidiary CTBC Bank Co., Ltd.’ soverseas branches’ assets and liabilities in U.S. Dollars

June 30, 2021





Gap (7,398,152) 2,166,420 (1,912,811) (1,799,803) (2,236,776) (3,615,182)

June 30, 2020





Gap (8,742,070) 311,927 592,554 (3,194,024) (3,653,849) (2,798,678)

3) Market Risk Management Mechanism

a) Description and origin of market risk

Market risk is the risk that the earnings, capital or its ability to meet businessobjectives adversely affects the Company and subsidiaries by having volatileinterest rate (including credit spread), foreign exchange rate, securities price andcommodity price. The market correlation and liquidity of these types of instrumentsare also covered.

The Company and subsidiaries’ market risk exposures come from trading and non-trading portfolios. The trading portfolio includes positions arising from tradingactivities, which aim at benefiting from short-term price movements, such asproprietary trading and market making. The non-trading portfolios are held forobtaining capital gain in the long term.

(Continued)

171


b) Management procedures of market risk

Based on the Company’ s Financial Risk Management Policy, the Company andsubsidiaries set robust management procedures, facilitate market riskcommunication within the Company and subsidiaries and provide propermanagement.

An effective market risk management process begins at risk identification. Theappropriate and consistent market risk measurement methodologies are defined inaccordance with the business characteristics and risk source. The measurementresults are applied to daily management and serve as the foundation of market riskplanning, monitoring, and control.

To ensure that the actual risk profile can comply with the risk appetiterequirements, the risk limit mechanism is established and further transmitted tooperational level and translated into various management indicators, which caneffectively help observe the risk profile changes, analyze the impacts, and form themanagement decisions promptly.

c) Measurement of market risk

i) Value at Risk (VaR)

Value at Risk measures the maximum potential loss under a particularconfidence interval and a given holding period.

ii) Stress Testing

Stress testing is used to calculate a range of trading exposures which resultfrom extreme market events or scenarios. Stress testing measures the impactof exceptional changes in market rate/price, volatility or correlation in the fairvalue of trading portfolios.

iii) Factor Sensitivity

Factor sensitivity is a measurement for monitoring the cross-productexposures within each risk type, including but not limited to foreignexchange, interest rate and equity price.

1. Interest Rate Risk

Interest rate risk, mostly arising from bonds and interest ratederivatives, is measured in different yield curves and currencies. PVBP,the change in fair value as the yield curves parallel shifts up by 0.01%(1bp), is used to measure interest rate risk exposures.

PVBP for the trading portfolio is illustrated as follows, and for PVBPfor the non-trading one, please refer to (d) sensitivity analysis.

(Continued)

172



Yield curve parallel shift up by 1 b.p. CurrencyJune 30,


June 30,2020

RMB $ (303) (549) (261)

EUR (197) 441 813

HKD (485) (170) 181

INR (1,013) (936) (757)

NTD 1,383 (186) (99)

USD 3,429 4,885 (827)VND 81 14 -

Others 49 341 (768)

2. Foreign Exchange Risk

Foreign exchange risk, mostly arising from spots, FX derivatives andother positions denominated in foreign currency, is measured indifferent currencies or currency pairs. FX delta, the change in netpresent value as the foreign exchange rate moves up by one unit, 1%, isused to measure foreign exchange risk exposures.

FX delta for the trading portfolio is illustrated as follows, and for FXdelta for the non-trading one, please refer to (d) sensitivity analysis.


Underlying currency appreciate by 1% CurrencyJune 30,


June 30,2020

GBP $ 634 644 2,403EUR 454 (29) 191HKD (608) (2,469) (1,863)IDR 2,694 2,068 154JPY (92) 187 525PHP (5,259) (449) (241)USD 2,958 (5,715) 4,680VND 216 1,921 (2,798)

Others 271 (1,072) (1,263)

(Continued)

173


3. Equity Price Risk

Equity price risk, mostly arising from stocks and related derivatives, ismeasured in equity delta, the change in fair value as the underlyingstock price or index price moves up by 1%.

Equity delta for the trading portfolio is illustrated as follows, and forequity delta for the non-trading one, please refer to (d) sensitivityanalysis.


Equity factor sensitivityCountry/

CommodityJune 30,


June 30,2020

Sensitivity of equity price riskStock price upward movement by 1% Taiwan $ 24,426 22,236 21,197

China 26,940 37 13,500US 477 18,932 817

Japan - - (9)Others 31 60 40

Sensitivity of commodity riskCommodity price upward movement by

1%Gold - 1 521

Sensitivity of credit risk premiumCredit spread upward shift by 0.01% (671) (861) (1,457)

d) Sensitivity analysis

Sensitivity analysis of risk factors of the Company and subsidiaries’ non-tradingpurpose investment portfolio is summarized as follows:

June 30, 2021

Risk Items Movement Amount

Profit and Loss Equity

Interest Rate Risk Interest Rate Curve shifts up by 1 bp $ 126,178 (404,671)

Interest Rate Curve shifts down by 1 bp (126,178) 404,671

Foreign Exchange Rate Risk Foreign Currency appreciates by 1% against NTD

1,619,562 985,420

Foreign Currency depreciates by 1% against NTD

(1,619,562) (985,420)

Equity Price Risk Equity price appreciates by 1% 125,695 3,325,427

Equity price depreciates by 1% (125,695) (3,325,427)

(Continued)

174


December 31, 2020






1,933,877 1,017,509

Foreign Currency depreciates by 1%against NTD

(1,933,877) (1,017,509)



June 30, 2020






1,753,008 1,060,055

Foreign Currency depreciates by 1%against NTD

(1,753,008) (1,060,055)



Note: For fair value hedges or hedges of a net investment in a foreign operation,changes in profit and loss would offset each other in hedge duration, leadingto little influence on the Company and subsidiaries’ overall profit and loss,and hence, were not incorporated in the above aggregate positions.

(Continued)

175


e) Foreign exchange rate gap information

According to IFRS 7 “ Financial Instruments: Disclosure” 34(a), an entity shalldisclose summarized quantitative data about its exposure to that risk at the end ofthe reporting period. Significant foreign exchange rate risk exposure was asfollows:

June 30, 2021Foreign currency Spot rate NTD amount

Financial assetsMonetary items

USD $ 72,433,087 27.8700 2,018,710,155JPY 2,329,979,124 0.2521 587,387,737RMB 48,678,352 4.3110/4.3150 209,872,223AUD 4,786,023 20.9499 100,266,712HKD 11,004,771 3.5892 39,498,321

Non-monetary itemsUSD 3,168,135 27.8700 88,295,948RMB 2,114,764 4.3110/4.3150 9,125,091EUR 168,982 33.1569 5,602,916HKD 1,345,552 3.5892 4,829,455JPY 13,001,102 0.2521 3,277,578

Investments underequity methodTHB 17,391,937 0.8698 15,127,507RMB 425,383 4.3110/4.3150 1,834,696JPY 1,713,452 0.2521 431,962

Financial liabilities

Monetary itemsUSD $ 40,560,163 27.8700 1,130,411,734JPY 2,232,918,715 0.2521 562,918,808RMB 35,915,862 4.3110/4.3150 154,833,281AUD 1,558,141 20.9499 32,642,898IDR 14,121,488,225 0.0019 26,830,828

(Continued)

176


December 31, 2020Foreign currency Spot rate NTD amount



Non-monetary itemsUSD 2,805,290 28.5080 79,973,236RMB 2,083,404 4.3817/4.3634 9,091,104JPY 19,092,434 0.2765 5,279,057EUR 145,813 35.0506 5,110,830HKD 1,216,054 3.6775 4,472,038

Investments underequity methodTHB 17,195,228 0.9516 16,362,979RMB 417,023 4.3817/4.3634 1,823,274JPY 485,659 0.2765 134,285


Monetary itemsUSD $ 41,619,803 28.5080 1,186,497,320JPY 2,337,764,847 0.2765 646,391,980RMB 34,073,259 4.3817/4.3634 149,298,800IDR 13,815,472,503 0.0020 27,630,945PHP 37,532,307 0.5937 22,282,931

(Continued)

177


June 30, 2020Foreign currency Spot rate NTD amount



Non-monetary itemsUSD 2,379,418 29.6600 70,573,502RMB 2,300,650 4.1954/4.1963 9,654,199JPY 21,175,440 0.2753 5,829,599HKD 1,462,935 3.8269 5,598,504EUR 139,127 33.2845 4,630,788

Investments underequity methodTHB 17,201,062 0.9608 16,526,780RMB 377,420 4.1954/4.1963 1,583,766JPY 876,720 0.2753 241,361


Monetary itemsUSD $ 40,349,343 29.6600 1,196,761,534JPY 2,171,217,858 0.2753 597,736,276RMB 32,795,874 4.1954/4.1963 137,621,324AUD 1,840,009 20.3408 37,427,256IDR 14,093,793,928 0.0021 29,596,967

Note: Foreign currency amount of overseas subsidiaries is disclosed by theirfunctional currency.

(Continued)

178


4) Asset and Liability Management Mechanism

a) Description and origin of ALM mismatch risk

ALM mismatch risk refers to the risk that the earnings or capital that is adverselyaffected by different sensitivity of assets and liabilities to interest rate change, suchas mismatches of reset timing and amount of asset and liability, varying magnitudeof changes in short-term and long-term interest rates, and various interest rateindexes to which asset and liability are linked, or embedded options.

b) Management procedures of ALM mismatch risk

Based on the Company’ s Financial Risk Management Policy, the Company andsubsidiaries set robust management procedures and clearly define authorities andresponsibilities, so that the Company and subsidiaries keep their finances andoperations sound.

The appropriate and consistent measurement methodologies are adopted inaccordance with the business characteristics and risk source. The measurementresults are embedded to management procedures and become the reference whenmonitoring and reporting risk status.

The Company and subsidiaries can adjust the structures of assets and liabilities bymeans of derivatives. Prior to executing an external hedge, the hedge plans withspecified hedged position, profit and loss analysis and detailed scheme are preparedand authorized. After executing hedge deals, the hedge effectiveness is periodicallyreviewed.

c) Measurement of ALM mismatch risk

The measurement of ALM mismatch risk includes:

i) Re-pricing Gap Report: This report measures the re-pricing gap between assetand liability by time buckets in order to understand interest rate mismatch.

ii) Interest rate sensitivity: This measures the impact of 1 basis point change ininterest rate on net interest income (NII) and economic value of equity(EVE).

iii) Duration: This calculates the weighted-average term to maturity of rate-sensitive assets and liabilities.

iv) Stress Test: This evaluates the impact of a significant change in interest rateon economic value of equity.

The Company and subsidiaries should adopt appropriate measurements and applyproper management procedures by taking their respective characteristics/complexity of assets and liabilities into account.

(Continued)

179


d) Disclosure items required by the “ Regulations Governing The Preparation ofFinancial Reports by Financial Holding Company”

i) The Company’ s subsidiary CTBC Bank Co., Ltd.’ s sensitivity analysis ofinterest rate for assets and liabilities (New Taiwan Dollars)

June 30, 2021


Items 1~90 days(inclusive)

91~180 days(inclusive)

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

Interest rate sensitiveassets

$ 2,047,075,922 140,900,594 181,813,721 159,570,626 2,529,360,863

Interest rate sensitiveliabilities

590,576,506 1,490,242,985 161,828,185 68,250,744 2,310,898,420

Interest rate sensitivitygap

1,456,499,416 (1,349,342,391) 19,985,536 91,319,882 218,462,443

Net worth 303,760,732Ratio of interest rate sensitive assets to liabilities (%) 109.45Ratio of interest rate sensitivity gap to net worth (%) 71.92

December 31, 2020

Unit: In Thousands of New Taiwan Dollars，%





$ 1,925,734,151 202,652,638 57,026,384 181,074,708 2,366,487,881


596,283,538 1,363,816,242 145,572,675 65,277,558 2,170,950,013


1,329,450,613 (1,161,163,604) (88,546,291) 115,797,150 195,537,868


June 30, 2020






$ 1,828,240,800 136,193,192 122,375,805 178,364,730 2,265,174,527


607,657,570 1,254,446,589 129,822,634 65,317,283 2,057,244,076


1,220,583,230 (1,118,253,397) (7,446,829) 113,047,447 207,930,451


(Continued)

180


Note 1: Listed amount of the Company’s subsidiary CTBC Bank Co.,Ltd. is denominated in NTD, excluding contingent assets andliabilities.

Note 2: Interest-rate-sensitive assets and liabilities are the interest-earning assets or interest-bearing liabilities whose revenue orcosts are affected by interest rate change.

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).

ii) The Company’s subsidiary CTBC Bank Co., Ltd’s sensitivity analysis of theinterest rate for assets and liabilities (U.S. Dollars)

June 30, 2021

Unit: In Thousands of U.S. Dollars, %





$ 12,995,560 667,746 480,287 8,933,345 23,076,938


8,707,596 18,364,294 1,498,335 376,095 28,946,320


4,287,964 (17,696,548) (1,018,048) 8,557,250 (5,869,382)

Net worth 10,899,201Ratio of interest rate sensitive assets to liabilities (%) 79.72Ratio of interest rate sensitivity gap to net worth (%) (53.85)

December 31, 2020






$ 13,135,202 624,932 203,716 7,991,356 21,955,206


7,871,899 17,941,452 2,612,849 492,431 28,918,631


5,263,303 (17,316,520) (2,409,133) 7,498,925 (6,963,425)

Net worth 10,954,814Ratio of interest rate sensitive assets to liabilities (%) 75.92Ratio of interest rate sensitivity gap to net worth (%) (63.56)

(Continued)

181


June 30, 2020






$ 12,502,310 1,254,554 89,824 6,575,128 20,421,816


8,286,569 16,410,942 1,445,302 499,918 26,642,731


4,215,741 (15,156,388) (1,355,478) 6,075,210 (6,220,915)

Net worth 10,025,166

Ratio of interest rate sensitive assets to liabilities (%) 76.65

Ratio of interest rate sensitivity gap to net worth (%) (62.05)

Note 1: Listed amount of the Company’s subsidiary CTBC Bank Co.,Ltd. is denominated in U.S. dollars, excluding contingentassets and liabilities.

Note 2: Interest-rate-sensitive assets and liabilities are the interest-earning assets or interest-bearing liabilities whose revenue orcosts are 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).

5) Interest rate benchmark reform

London Interbank Offered Rate (LIBOR) will cease to publish. A fundamental reform ofmajor interest rate benchmarks is being undertaken globally, including the replacementof London Interbank Offered Rate (LIBOR) with alternative nearly risk-free rate. Theexposure of interest rate benchmark of the Company and subsidiaries’ financialinstruments will be a part of the market overall transformation. According to thecessation date of LIBOR announced by the Financial Conduct Authority (FCA) in March2021, LIBOR is expected to retire by the end of 2021. The Company and subsidiarieswill complete the contract modification or add appropriate fallback provisions before thecessation date of LIBOR.

(Continued)

182


The main affected subsidiaries’ responsive planning are explained as following:

The subsidiary CTBC Bank Co., Ltd.

The subsidiary CTBC Bank Co., Ltd. has formally established a cross-functional projectteam since March 2020, to initiate the project of LIBOR transition; the scope of theproject contains overseas branches and subsidiaries. In addition to coordinate the projectimplementation of domestic and overseas branches, the Bank’ s project team will alsoprovide the planning content of headquarters for reference by the overseas subsidiaries’project team to ensure the corporate-wide consistency of project implementation.

The project team is responsible for setting timeline, monitoring the progress, andmitigating potential risks in the implementation of the project. It also closely tracks theregulatory key milestones and recommendations by local authorities on LIBOR reforms,and regularly reports to the LIBOR transition project steering committee.

In response to the interest rate benchmark reform of LIBOR, the subsidiary CTBC Bankand its subsidiaries are currently modifying or preparing to modify contract terms,adjusting related systems and operating procedures, restarting bilateral negotiations withclients on transactions related to interest rate benchmark of LIBOR, updating contractterms, signing supplementary agreements or negotiating other arrangements, andestablishing control mechanisms to keep track of the progress of transition.

The subsidiary Taiwan Life Insurance Co., Ltd.

It is expected that the main risk faced by the change in interest rate benchmark isoperational risk. Check whether there are fallback provisions in the product treaty. Afterrenegotiating the treaty with the counterparty, updating the contract terms and revisingthe operational control related to the transformation, it is planned to complete themodification of contract terms or implement appropriate contingency provisions beforethe end of the year 2021 to respond interest rate benchmark reform, and performoperations for follow-up evaluation, interest assessment and related accountingprocesses. Financial risk is mainly limited to interest rate risk. A treaty whose contractterms will still be affected by changes in the interest rate benchmark is regarded as acontract that has not yet been converted to another alternative benchmark rate, even if thetreaty contains a contingency provisions for the cessation of the existing interest ratebenchmark.

Re-examine the total amount of contracts that has not yet been converted to anotherbenchmark rate and the amount of contracts that have appropriate contingency provisionsin order to monitor the progress of the conversion to the new benchmark rate andregularly report to the Board of Directors until the preparation work is completed or therelevant parts have been fully disposed.

(Continued)

183


As of June 30, 2021, the financial instruments that should be transited but have not yetbeen transited of the Company and subsidiaries are as follows:

Unit: In Thousands of US Dollars/Thousands of JPY Dollars/Thousands of EUR Dollars/Thousands of GBP Dollars/Thousands of SGD Dollars

Position USD LIBOR JPY LIBOR EUR LIBOR GBP LIBOR SORDerivatives (Notional amount) USD 8,627,248 JPY 127,928,177 - - SGD 3,615,738

Non-derivative financial

instruments assets (Par value)

USD 5,780,890 JPY 277,447,594 EUR 55,219 GBP 72,443 SGD 316,693

(iv) Transferred financial assets that are not fully derecognized

The transactions, relating to transferred financial assets not qualifying for full derecognition,of the Company and subsidiaries conduct during daily operation mostly involve securitieslending in accordance to repurchase agreements. Since the right to receive contractual cashflow has been transferred to others and the Company and subsidiaries’ obligation to repurchasethe transferred assets for a fixed price at a future date is recognized under liability, the saidtransferred assets are not fully derecognized.

June 30, 2021

Types of financial assets

Carryingamount of

transferredfinancial assets

Carryingamount ofassociatedfinancialliabilities

Fair value oftransferred

financial assets

Fair value ofassociatedfinancialliabilities Net fair value

Financial assets measured at fair valuethrough profit or lossRepurchase agreements $ 3,635,652 3,380,183 3,635,652 3,380,183 255,469

Financial assets measured at fair valuethrough other comprehensive incomeRepurchase agreements 41,305,189 40,305,223 41,305,189 40,305,223 999,966

Financial assets at amortized costRepurchase agreements 50,356,506 47,182,682 51,519,683 47,182,682 4,337,001

December 31, 2020


Carryingamount of




financial assets


Financial assets measured at fair valuethrough profit or lossRepurchase agreements $ 12,600,281 12,747,831 12,600,281 12,747,831 (147,550)

Financial assets measured at fair valuethrough other comprehensive incomeRepurchase agreements 22,139,962 22,330,998 22,139,962 22,330,998 (191,036)Securities lending agreements 1,329,831 1,277,114 1,329,831 1,277,114 52,717

Financial assets at amortized costRepurchase agreements 64,913,193 59,382,335 68,727,584 59,382,335 9,345,249

(Continued)

184


June 30, 2020


Carryingamount of




financial assets


Financial assets measured at fair valuethrough profit or lossRepurchase agreements $ 6,843,735 7,206,327 6,843,735 7,206,327 (362,592)

Financial assets measured at fair valuethrough other comprehensive incomeRepurchase agreements 68,224,889 64,068,891 68,224,889 64,068,891 4,155,998Securities lending agreements 8,052,524 7,940,261 8,052,524 7,940,261 112,263

Financial assets at amortized costRepurchase agreements 45,529,838 48,797,533 49,144,228 48,797,533 346,695

(v) Offsetting financial assets and financial liabilities

The Company and subsidiaries have an exercisable master netting arrangement or similaragreement in place with counterparties. When both parties reach a consensus regarding netsettlement, the aforesaid exercisable master netting arrangement or similar agreement can benet settled by offsetting financial assets and financial liabilities. If not, the transaction can besettled at total amount. In the event of default involving one of the parties, the other party canhave the transaction net settled.

The following tables present the aforementioned offsetting financial assets and financialliabilities.

June 30, 2021Financial assets that are offset, have an exercisable master netting arrangement or similar agreement

Gross amountGross amount

of financialNet amount offinancial assets

Amount not off set in the balancesheet (d)

of recognizedfinancial assets

(a)

liabilities offsetin the balance

sheet (b)

presented inthe balance

sheet (c)=(a)-(b)

Financialinstruments

(Note)Cash collateral

receivedNet amount(e)=(c)-(d)

Derivative financial assets $ 50,976,310 - 50,976,310 27,150,701 4,420,865 19,404,744

June 30, 2021Financial liabilities that are offset, have an exercisable master netting arrangement or similar agreement


of financial

Net amount offinancialliabilities


of recognizedfinancial

liabilities (a)

assets offset inthe balance

sheet (b)


sheet (c)=(a)-(b)



pledgedNet amount(e)=(c)-(d)

Derivative financial liabilities $ 44,837,545 - 44,837,545 26,954,510 5,529,176 12,353,859

December 31, 2020Financial assets that are offset, have an exercisable master netting arrangement or similar agreement





(a)


sheet (b)


sheet (c)=(a)-(b)





(Continued)

185


December 31, 2020Financial liabilities that are offset, have an exercisable master netting arrangement or similar agreement


of financial




liabilities (a)


sheet (b)


sheet (c)=(a)-(b)




Derivative financial liabilities $ 65,430,406 - 65,430,406 43,809,814 7,140,711 14,479,881Securities lending agreements 1,277,114 - 1,277,114 1,277,114 - -Total $ 66,707,520 - 66,707,520 45,086,928 7,140,711 14,479,881

June 30, 2020Financial assets that are offset, have an exercisable master netting arrangement or similar agreement





(a)


sheet (b)


sheet (c)=(a)-(b)





June 30, 2020Financial liabilities that are offset, have an exercisable master netting arrangement or similar agreement


of financial




liabilities (a)


sheet (b)


sheet (c)=(a)-(b)




Derivative financial liabilities $ 86,374,510 - 86,374,510 44,401,844 15,506,139 26,466,527

Securities lending agreements 7,940,261 - 7,940,261 7,940,261 - -

Total $ 94,314,771 - 94,314,771 52,342,105 15,506,139 26,466,527

Note: Master netting arrangements and non-cash financial collaterals are included.

(vi) Capital management

1) Capital management goal and procedure

The goal of the Company’s capital management is to meet the regulatory requirement fordifferent businesses on capital adequacy of the Company and subsidiaries and theorganization’ s target of maximizing returns for shareholders by following capitalmanagement procedures and raising return on capital.

The Company’ s group capital planning accounts for short-term and long-term capitalrequirements. The Company makes yearly capital planning based on operation planning,current and forecast future capital requirement, and promised returns for shareholders.The Company also makes back-up plan to meet capital requirement not included in theplanning. The Company also regularly conducts stress tests and scenario simulationanalyses to calculate different capital ratios, fully taking into account of externalconditions and other factors, including potential risks, changes in financial markets, andother events impacting risk taking capabilities, to make sure that the Company canmaintain adequate capital in case of detrimental events and huge market changes.

(Continued)

186


Planning for yearly earnings distribution follows the principles and ratios mandated byarticles of incorporation and dividend policy, and are put into effect after being approvedby the Board of Directors and shareholders’ meeting. The Company’ s group capitaladequacy, potential investment needs, and dividend amount of previous years are takeninto account. The needs to maintain proper financial ratios and satisfy capitalrequirement of the parent company are also preconditions of the distribution.

2) Definition and regulation

The regulator of the Company is FSC of the Republic of China. FSC issued “RegulationsGoverning the Consolidated Capital Adequacy of Financial Holding Companies” andmonitors and manages the Company’ s group capital status on a consolidated basis.Subsidiaries in different businesses should also follow capital adequacy rules announcedby regulators of their businesses.

The Company’ s group capital adequacy ratio should not be lower than 100%. TheCompany capital adequacy ratio refers to the Company’s net eligible capital divided bythe Company’ s statutory capital requirement. The Company’ s net eligible capital andgroup’s statutory capital requirement refer to the combined total of the eligible capital ofa financial holding company and those of its subsidiaries calculated based on thefinancial holding company’ s shareholding in the subsidiary less the amounts of legaldeductions.

3) Eligible capital

The Company’s eligible capital refers to the sum of the common stocks, preferred stocks,subordinated debts, capital collected in advance, capital surplus, retained earnings, andother equity less the sum of goodwill, other intangible assets, deferred assets, andtreasury stocks. Statutory capital requirement refers to total assets less cash (includingcash equivalents), tax receivable (including tax refund receivable), prepaid taxes, thebook value of the use of short-term funds set forth in Paragraph 1, Article 39 of FinancialHolding Company Act, goodwill, other intangible assets, and deferred assets.

To maintain the quality of financial holding companies’ capital, the regulator also hasrules in place regarding the terms and upper limit of hybrid capital instrument, preferredstocks, and subordinated debts that can be included in eligible capital.

(Continued)

187


4) Capital adequacy ratio of CTBC Group


June 30, 2021Items

CompanyPercentage of

OwnershipGroup’s Net

Eligible CapitalGroup’s Statutory

Capital RequirementCTBC Financial Holding Co., Ltd. %100.00 $ 448,003,121 474,015,708

CTBC Bank Co., Ltd. %100.00 263,985,800 190,051,762

CTBC Securities Co., Ltd. %100.00 7,951,735 3,864,569

Taiwan Life Insurance Co., Ltd. %100.00 151,682,805 82,851,868

CTBC Venture Capital Co., Ltd. %100.00 5,293,625 3,830,845

CTBC Security Co., Ltd. %100.00 58,338 48,627

CTBC Asset Management Co., Ltd. %100.00 5,705,375 3,677,346

Taiwan Lottery Co., Ltd. %100.00 1,089,604 720,643

CTBC Investments Co., Ltd. %100.00 626,541 418,632

Deduction (492,279,007) (473,081,617)

Subtotal 392,117,937 286,398,383

Capital adequacy ratio of CTBC Group %136.91

Unit：In Thousands of New Taiwan Dollars; %

December 31, 2020Items





CTBC Bank Co., Ltd. %100.00 268,440,034 188,810,475






Taiwan Lottery Co., Ltd. %100.00 1,372,870 941,298


Deduction (485,171,355) (466,203,628)

Subtotal 351,467,555 281,105,659


(Continued)

188



June 30, 2020Items





CTBC Bank Co., Ltd. %100.00 255,819,151 201,821,924






Taiwan Lottery Co., Ltd. %100.00 971,671 643,622


Deduction (441,473,602) (421,858,122)

Subtotal 322,178,157 286,907,925


5) CTBC Financial Holding Co., Ltd.’s eligible capital


Items June 30, 2021December 31,

2020 June 30, 2020Common stock 194,969,896 194,969,896 194,969,896Capital surplus 58,732,202 58,754,923 58,754,923Legal reserve 32,003,213 32,003,213 32,003,213Special reserve 16,188,405 16,188,405 16,188,405Accumulated profit or loss 130,916,913 97,217,071 73,783,605Equity adjustments (8,985,357) 1,097,162 (19,216,718)Preferred stock meet under Netadditional Tier 1 Capital of the Bank

4,999,900 4,999,900 4,999,900

Subordinated debentures 19,200,000 20,480,000 20,480,000Less: Goodwill and other intangibleassets

(4,485) (4,544) (1,711)

Less: Deferred assets (17,566) (17,671) (15,199)Total eligible capital 448,003,121 425,688,355 381,946,314

(Continued)

189


(av) Structured entities that are not included in consolidated financial reports

(i) The table below presents the types of structured entities that the Company and subsidiaries donot include in consolidated financial reports but in which they hold an interest.

The types of structured entities Nature and purposeInterests held by the Company and

subsidiariesAsset-backed Securities Securitizing financial or non-financial assets

and issuing them to raise funds.Investing or lending in securities issued by

these entities.Private funds Raising funds to create investment

opportunities in a variety of assets. Investing in funds and equity of limited

partnership issued by these entities.Special purpose entities Setting up for participating in the program

of “Kaohsiung City HoFa industrial parkdevelopment, sell (bid) andmanagement”, and for conducting theproject of “Taichung IntercontinentalBaseball Stadium extension, renovationand operation”.

Investing in stocks issued by these entities.

(ii) The scales of structured entities not included in consolidated financial reports were as follows.


2020 June 30, 2020Asset-backed securities $ 219,191,825,716 184,881,749,032 181,549,864,066Private funds 12,908,699,928 11,501,642,918 11,039,660,826Special purpose entities 7,813,862 7,940,731 8,345,444

(iii) The carrying amounts of interests held by the Company and subsidiaries in these structuredentities were as follows.


2020 June 30, 2020Assets held by the Company and

subsidiariesFinancial assets measured at fair value

through profit or loss$ 57,023,028 46,522,807 39,042,973

Financial assets measured at fair valuethrough other comprehensive income

62,293,266 63,943,022 43,544,078

Financial assets at amortized cost 62,691,517 63,167,938 73,172,493Investments under equity method 6,541,496 6,278,127 6,397,797Total assets held by the Company and

subsidiaries $ 188,549,307 179,911,894 162,157,341

The maximum amount of risk exposures the Company and subsidiaries endure to a lossincurred from special purpose entities that are not included in consolidated financial reports isthe carrying amount of interests held by the Company and subsidiaries.

(iv) As of June 30, 2021, December 31 and June 30, 2020, the Company and subsidiaries have notprovided any financial support to their special purpose entities that are not included inconsolidated financial reports.

(Continued)

190


(aw) Nature and scope of insurance contract risk

(i) Life insurance business

1) Evaluation and management of the scope of insurance risks from a corporate-wide pointof view

To properly manage the risks in different stages such as product design, pricing,issuance, policy approval, and payment for damage, the subsidiary CTBC Life InsuranceCo., Ltd. has management mechanism as follows:

a) Management of risks associated with product design and pricing

Management of risks associated with product design and pricing results frominappropriateness, inconsistency, or unexpected changes relating to product design,insurance covenants, and pricing sources. The subsidiary Taiwan Life InsuranceCo., Ltd. devises an “insurance product design standard process” before selling aproduct to make sure of the risk control before and after selling a product, to ensurecompliance with regulations, and to strengthen internal control. The subsidiaryTaiwan Life Insurance Co., Ltd. also adopts profit tests and sensitivity analyses tomeasure the risks for different product types and natures, and, at the same time,takes responsibility for auditing an insurance product. After selling a product, therelevant department will propose an inspection after selling report in the biannualinsurance product management conference.

b) Management of risks associated with insurance approval

Management of risks associated with insurance approval refers to unexpectedlosses resulting from product promotion and approval, and related expenses. Inorder to control those risks, the subsidiary Taiwan Life Insurance Co., Ltd. puts inplace standard approval procedures, guidelines, and manuals.

c) Management of risks associated with reinsurance

Management of risks associated with reinsurance results from the failure to arrangeappropriate reinsurance or the incapacity of the reinsurer to fulfill its obligationwhich makes it impossible for the premium, payment for damage, and otherexpenses to be recovered. The subsidiary Taiwan Life Insurance Co., Ltd. has putin place a management plan for reinsurance risks which covers the management ofretained risks, reinsured risks, and risks from selling reinsurance to other insurancecompanies. The subsidiary Taiwan Life Insurance Co., Ltd. will then evaluate itsretention risk limits based on classification of risks and its ability to cover thoserisks. Also, it devises a set of procedures and criteria on the choice of reinsurers,and, after purchasing the reinsurance, monitors the credit ratings of reinsurers toavoid a default on the part of reinsurers.

(Continued)

191


d) Management of risks associated with catastrophe

Management of risks associated with catastrophe is associated with risk events thatare a magnitude significant enough to cause multiple losses for hazard units of asingle or several sorts of insurance, and thus can affect the credit ratings andsolvency of an insurance company. The subsidiary Taiwan Life Insurance Co., Ltd.measures and manages the catastrophe risks by means of catastrophic loss recordsto estimate possible amount of losses in cases of recurrence.

e) Management of risks associated with payment for damage

Management of risks associated with payment for damage results from the failureto properly process damage claims by the insured. The subsidiary Taiwan LifeInsurance Co., Ltd. puts in place a standard procedure to reduce the risks.

f) Management of risks associated with reserves

Management of risks associated with reserves results from sales’ underestimate ofliabilities, which renders the reserve provision insufficient for future obligationrisks. The subsidiary Taiwan Life Insurance Co., Ltd. puts in place a standardprocedure for reserve provision and conducts regular sufficiency analysis to reducethe risks.

2) Limits on and transfer of risk exposures, and prevention of inappropriate riskconcentration

The Company’s subsidiary Taiwan Life Insurance Co., Ltd. puts in place a managementplan for reinsurance risks which covers the management of retained risks, reinsured risks,risks from selling reinsurance to other insurance companies, and reinsurance risks withinthe Company and subsidiaries. The Company’ s subsidiary Taiwan Life Insurance Co.,Ltd. will then evaluate its retention risk limits based on classification of risks and itsability to cover those risks. Also, it devises a set of procedures and criteria on the choiceof reinsurers, and, after purchasing the reinsurance, periodically monitors the creditratings of reinsurers to avoid a default on the part of reinsurers and maintain the safety ofthe operation.

3) Asset and liability management

a) The Company’ s subsidiary Taiwan Life Insurance Co., Ltd. has its ownasset/liability management committee, which is responsible for reviewing andapproving the overall investment and liability management decisions.

b) In compliance with asset and liability matching regulations, the match of asset andliability is routinely reviewed with its risk limit monitored to ensure alignment withthe Company’ s subsidiary Taiwan Life Insurance Co., Ltd.’ s objectives. If risklevels exceed the tolerance or in special circumstances, prompt mitigation plans areescalated to senior levels, followed by communications with the people in charge topropose improvement plans.

(Continued)

192


4) Administration and control policies on additional debts or equity commitments requiredto undertake when acquiring or providing assets under certain circumstances.

To comply with regulations and strengthen capital base, the Company’ s subsidiaryTaiwan Life Insurance Co., Ltd. routinely assesses its capital adequacy. If it falls belowminimum capital requirements, instant alerts with required timeframe and projectedamount will be reported to senior levels, followed by a capital strengthening proposal tofulfill regulatory requirements.

5) Information on insurance risk

a) Sensitivity of insurance risk-insurance contracts and financial instruments with adiscretionary feature

For the six months ended June 30, 2021Change

in assumptionChange in income

before taxChange in

stockholders’ equityMortality/Morbidity Increase %5 Decrease 209,633 Decrease 167,706Rate of return Decrease %0.1 Decrease 957,415 Decrease 765,932Expense (fixed expense) Increase %5 Decrease 506,167 Decrease 404,934Decrement and lapse rate Increase %5 Increase 42,645 Increase 34,116

For the six months ended June 30, 2020Change

in assumptionChange in income

before taxChange in

stockholders’ equityMortality/Morbidity Increase %5 Decrease 176,856 Decrease 141,485Rate of return Decrease %0.1 Decrease 916,936 Decrease 733,549Expense (fixed expense) Increase %5 Decrease 451,341 Decrease 361,073Decrement and lapse rate Increase %5 Increase 35,438 Increase 28,350

i) The above profit or loss changes are the influence of assumptions on theCompany’s subsidiary Taiwan Life Insurance Co., Ltd.’s pre-tax income forthe six months ended June 30, 2021 and 2020. The influence on stockholders’equity assumes that income tax is calculated at 20% of pre-tax income.

ii) The sensitivity test does not take how market changes affect operations intoaccount.

iii) The underlying assumption is that the changes in each factor are notcorrelated.

(Continued)

193


b) Concentration of insurance risks

The Company’ s subsidiary Taiwan Life Insurance Co., Ltd. only operates inTaiwan and thus incurs geographical risk concentration. The subsidiary TaiwanLife Insurance Co., Ltd. reduces risk concentration via reinsurance contracts. Toreduce the degree of risk concentration, the subsidiary Taiwan Life Insurance Co.,Ltd. regularly reviews its profit and loss on claims, monitors risks, and evaluatesthe need to make adjustments to catastrophe insurance and the amount of self-retention of reinsurance.

According to the “Regulations Governing Insurance Enterprises for Setting AsideVarious Reserves” starting from January 1, 2011, the Company’ s subsidiaryTaiwan Life Insurance Co., Ltd. should set aside a special reserve after deductingincome tax under stockholders’ equity each year for significant incidents andcatastrophe. The special reserve for significant incidents is the provision for hugeindemnity caused by future significant accidents. The special reserve forcatastrophe is the provision for abnormal changes in loss ratios for each line ofinsurance and claims. After deducting income tax pursuant to IAS 12, the specialreserves recognized under liabilities before December 31, 2012 shall be recognizedunder stockholders’ equity, starting from January 1, 2013, unless otherwisespecified by the competent authority for monitoring purposes.

c) Claim development trend

i) Claims development from direct business

As of June 30, 2021, December 31 and June 30, 2020, the accumulatedcompensation amounts which were reconciled to the balance sheet over thepast years were as follows:

June 30, 2021Development year

Accidentyear 1 2 3 4 5 6 7 8

Claimsreserve

From July 1, 2013 toJune 30, 2014

1,669,391 1,777,263 1,798,352 1,802,624 1,831,136 1,837,152 1,869,060 1,872,537 -


1,779,631 1,921,007 1,940,690 1,944,894 1,951,150 1,956,004 1,959,525 1,963,302 3,777


1,854,790 1,995,330 2,011,959 2,020,696 2,029,796 2,034,356 2,051,792 2,055,914 21,558


2,050,040 2,231,024 2,290,368 2,317,997 2,321,243 2,327,362 2,348,627 2,353,496 32,253


2,104,540 2,618,996 2,677,203 2,698,550 2,714,160 2,720,655 2,744,157 2,749,859 51,309


2,634,895 3,363,151 3,432,640 3,453,276 3,471,809 3,480,318 3,506,937 3,514,302 81,662


3,398,570 4,216,550 4,286,922 4,312,494 4,336,654 4,347,505 4,382,238 4,391,823 175,273


4,284,512 4,991,001 5,067,820 5,097,018 5,123,192 5,134,756 5,169,331 5,181,187 896,675

Not reported and not paid claim reserve 1,262,507Add: Reported but not paid claims 1,273,892

Provision for not paid claims per other statutory requirement 469Claims reserve 2,536,868

(Continued)

194


December 31, 2020Development year


Claimsreserve

2013 1,654,614 1,745,643 1,766,078 1,768,485 1,770,801 1,781,532 1,782,678 1,784,115 -

2014 1,734,136 1,848,736 1,899,471 1,899,345 1,909,745 1,915,888 1,925,154 1,926,738 1,584

2015 1,863,300 2,007,352 2,019,715 2,024,455 2,029,935 2,035,519 2,041,378 2,043,206 7,687

2016 1,888,033 2,058,040 2,074,841 2,092,978 2,121,249 2,129,525 2,136,038 2,138,023 16,774

2017 2,210,427 2,402,323 2,464,964 2,481,326 2,496,308 2,505,555 2,513,227 2,515,643 34,317

2018 2,320,786 2,928,805 2,999,066 3,013,302 3,030,106 3,040,302 3,049,104 3,052,050 52,984

2019 3,152,097 3,900,562 3,962,722 3,981,301 4,003,491 4,017,509 4,029,312 4,033,391 132,829

2020 3,811,854 4,332,829 4,399,093 4,419,195 4,443,578 4,458,120 4,471,436 4,476,283 671,429

Not reported and not paid claim reserve 917,604

Add: Reported but not paid claims 1,043,284

Provision for not paid claims per other statutory requirement 426

Claims reserve 1,961,314



Claimsreserve


1,603,272 1,698,546 1,744,370 1,747,324 1,747,462 1,749,847 1,750,955 1,753,384 -

From July 1, 2013 to June 30, 2014

1,667,215 1,775,087 1,796,176 1,800,448 1,828,960 1,832,839 1,866,884 1,868,358 1,474


1,779,907 1,921,283 1,939,966 1,944,170 1,950,426 1,955,280 1,956,557 1,958,140 2,860


1,847,661 1,982,148 1,998,776 2,007,013 2,018,248 2,024,409 2,025,776 2,027,484 9,236


2,039,410 2,214,227 2,273,459 2,325,078 2,333,190 2,340,977 2,342,607 2,344,653 19,575


2,097,393 2,610,558 2,937,097 2,950,186 2,960,007 2,968,675 2,970,681 2,973,222 36,125


2,625,104 3,346,585 3,395,641 3,409,324 3,419,972 3,429,687 3,432,041 3,435,046 88,461


3,328,040 3,674,400 3,726,581 3,741,413 3,753,406 3,764,127 3,766,867 3,770,399 449,359

Not reported and not paid claim reserve 607,090

Add: Reported but not paid claims 677,292

Provision for not paid claims per other statutory requirement 340

Claims reserve 1,284,722

The above tables demonstrate the development trend of claims. The verticalaxis represents the year in which the claim event occurred, and the horizontalaxis represents the development years. Each horizontal axis figure representsthe accumulated compensation amount at the end of each year. Thecompensation amount refers to the claims whether they are finalized or not.The tables explain how Taiwan Life Insurance Co., Ltd. estimates thecompensation amount for each year over time. The scenarios and trendswhich affect the provision of claims reserve may change in the future;therefore, the estimated future compensation amount is not able to bedetermined by the claim development trend.

(Continued)

195


ii) Claims development from retained business

The Company’s subsidiary Taiwan Life Insurance Co., Ltd. for the operatingbenchmark is balanced and conservative, and no longer gets on thereinsurance cede business, since July 2016. For the relevant developmenttrend information for non-reported insurance claims reserve loss please lookat the disclosure in claims development from direct business.

The Company’s subsidiary Taiwan Life Insurance Co., Ltd. provides a claimreserve based on the expected claims payment and relevant handling fee forRBNA and IBNR claims. Such provision involves vast uncertainty, estimatesand judgments; hence, it is highly complicated. Any change in estimate orjudgment is regarded as a change in accounting estimate; and the amount ofchange is recognized as current gains or losses. Some claimants may delaynotifying Taiwan Life Insurance Co., Ltd. In addition, when estimating thepotential IBNR claims, past loss experience and subjective judgment areinvolved; therefore, it is not certain that the estimated claims reserve on theBalance sheet date will be equal to the final compensation amount. Theestimate of claims reserve is based on the information currently available;however, the final result may deviate from the original estimate due tosubsequent developments.


1) Objectives, policies, procedures, and methods for managing risks arising from insurancecontracts

In order to achieve the risk management objective to ensure solvency, enhance long-termcompetitiveness, and increase the value of equity, the sub-subsidiary CTBC InsuranceCo., Ltd. has established the “Risk Management Policy” as the prime guiding principle toproperly identify, measure, response, and control risks. Insurance risk is one of the majorrisks, and it originates from the risk transferred by the insured after the sub-subsidiaryCTBC Insurance Co., Ltd. receives premiums and thereby results in contractualobligations of insurance claim payments for damage caused by unforeseeable events. Thesub-subsidiary CTBC Insurance Co., Ltd. established effective management mechanismfor each insurance risk as follows:

a) Risk from product design and pricing

These risks arise from improper product design, inconsistency between contractterms and the information used in pricing, or unexpected changes. The sub-subsidiary CTBC Insurance Co., Ltd. has established the loss allocation model foreach homogeneous insurance risk to quantitatively measure the expected valueinsurance risk loss and possible losses under different confidence levels. In themeanwhile, the sub-subsidiary CTBC Insurance Co., Ltd. evaluates risks underqualitative basis and describes the possibility and the degree of influence. Thepossible controlling procedures according to each commodity characteristics are asfollows:

(Continued)

196


i) Risk-transfer strategies: Take approaches to transfer all or part of risksdepending on certain circumstances.

ii) Actuarial assumptions: The adopted actuarial assumptions for setting upexpense rates could add up proper safety coefficients in conformity withregulations depending on certain circumstances.

iii) After-sales experience tracking: Periodically analyzing each actuarialassumption after sales, applying profit testing or sensitivity analysis to testand adjust commodity and rate-setting.

b) Risk from insurance underwriting:

These risks arise from unexpected loss risk of business solicitation, insuranceunderwriting, and other operating processes. The sub-subsidiary CTBC InsuranceCo., Ltd. established proper management mechanism for risk from insuranceunderwriting as follows:

i) Establish internal underwriting systems and procedures for businesssolicitation, underwriting policy.

ii) Provide an insurance underwriting handbook to effectively maintain qualityand reduce potential risk from insurance underwriting.

iii) Set indicators for insurance underwriting risk management and reportperiodically to management.

c) Risk from reinsurance:

These risks result from the failure to arrange appropriate reinsurance or theincapacity of the reinsurer to fulfill its obligation which makes it impossible for thepremium, payment for damage, and other expenses to be recovered. The sub-subsidiary CTBC Insurance Co., Ltd. established reinsurance risk managementmechanism in conformity with relative regulations, and after purchasing thereinsurance, monitors the credit ratings of reinsurers to avoid a default on the partof reinsurers.

d) Risk from catastrophes:

The sub-subsidiary CTBC Insurance Co., Ltd. identifies catastrophes that mightcause material loss based on the characteristics of the products, regularly reviewsthe relation between the effect of cumulative risks and limits of risks for eachinsurance product under different assumed catastrophes, and evaluates whether itscapital is sufficient to cover the capital requirement of catastrophe risk.

(Continued)

197


e) Risk of claim:

These risks result from the failure to properly process damage claims by theinsured. The sub-subsidiary CTBC Insurance Co., Ltd. has built a proper internalclaim-handling process including the qualifications, responsibilities, quota ofauthorizes and scopes of authority of claim adjuster.

f) Reserve-related risk:

These risks result from sales’ underestimate of liabilities, which renders the reserveprovision insufficient for future obligation risks. The sub-subsidiary CTBCInsurance Co., Ltd. puts in place a standard procedure for reserve provision andrisk controlling mechanism in accordance with different reserve-related riskincidences and the possible controlling procedures are as follows:

i) Risk-transfer strategies: Take approaches to transfer all or part of risksdepending on certain circumstances.

ii) Plans for increase in reserve: Increase reserve when it is overrun orinsufficient to cover the risk.

2) Information on insurance risk

a) Sensitivity of insurance risk:

For the six months ended June 30, 2021Effects to net income as the expectedloss rate increases (decreases) 5%

ItemInsurancePremium

Expectedloss rate

Beforereinsurance

Afterreinsurance

Fire insurance $ 300,565 %60.7 12,815 5,480

Marine insurance 18,269 %64.0 772 167

Miscellaneous casualty insurance 145,203 %69.4 5,985 2,682

Personal accident and healthinsurance

88,599 %68.4 4,470 3,520

Voluntary auto insurance 373,623 %68.8 18,830 18,773

Compulsory auto TPL insurance 137,212 Not applicable Not applicable Not applicable

For the six months ended June 30, 2020Effects to net income as the expectedloss rate increases (decreases) 5%

ItemInsurancePremium

Expectedloss rate

Beforereinsurance

Afterreinsurance

Fire insurance $ 255,507 %62.8 11,107 3,939Marine insurance 28,387 %64.1 563 165Miscellaneous casualty insurance 135,592 %68.7 5,733 2,380Personal accident and health

insurance91,757 %68.1 5,324 3,650

Voluntary auto insurance 381,663 %69.5 22,988 22,936Compulsory auto TPL insurance 150,110 Not applicable Not applicable Not applicable

(Continued)

198


b) Description of insurance risk concentration

The sub-subsidiary CTBC Insurance Co., Ltd. establishes risk limits based on eachrisk unit and each insured event and transfers the over-limit risk by reinsurance toreduce the effect of insurance risk concentration.

i) Business concentration

For the three months ended June 30, 2021Premium income Retained earned premiums

Item Amount % Amount %Fire insurance $ 159,967 %31.31 80,803 %21.76Marine insurance 14,321 %2.80 2,280 %0.61Miscellaneous casualty insurance 40,085 %7.85 21,232 %5.72Personal accident and health insurance 46,195 %9.04 34,082 %9.18Voluntary auto insurance 180,097 %35.25 180,097 %48.50Compulsory auto TPL insurance 70,240 %13.75 52,843 %14.23Total $ 510,905 %100.00 371,337 %100.00

For the three months ended June 30, 2020Premium income Retained earned premiums

Item Amount % Amount %Fire insurance $ 146,177 %29.70 56,461 %16.20Marine insurance 15,525 %3.15 3,192 %0.92Miscellaneous casualty insurance 30,850 %6.27 15,834 %4.55Personal accident and health insurance 43,716 %8.88 34,818 %9.99Voluntary auto insurance 181,834 %36.94 181,409 %52.06Compulsory auto TPL insurance 74,140 %15.06 56,721 %16.28Total $ 492,242 %100.00 348,435 %100.00

For the six months ended June 30, 2021Premium income Retained earned premiums

Item Amount % Amount %Fire insurance $ 300,565 %28.27 129,269 %17.68Marine insurance 18,269 %1.72 3,480 %0.48Miscellaneous casualty insurance 145,203 %13.65 53,883 %7.37Personal accident and health insurance 88,599 %8.33 67,895 %9.28Voluntary auto insurance 373,623 %35.13 372,792 %50.97Compulsory auto TPL insurance 137,212 %12.90 104,013 %14.22Total $ 1,063,471 %100.00 731,332 %100.00

For the six months ended June 30, 2020Premium income Retained earned premiums

Item Amount % Amount %Fire insurance $ 255,507 %24.50 91,197 %12.83Marine insurance 28,387 %2.72 5,730 %0.81Miscellaneous casualty insurance 135,592 %13.00 45,139 %6.35Personal accident and health insurance 91,757 %8.80 73,286 %10.31Voluntary auto insurance 381,663 %36.59 380,813 %53.56Compulsory auto TPL insurance 150,110 %14.39 114,731 %16.14Total $ 1,043,016 %100.00 710,896 %100.00

(Continued)

199


ii) Loss concentration

Self–claim as ofJune 30, 2021

Self–claim as ofDecember 31, 2020

Self–claim as ofJune 30, 2020

Item Amount % Amount % Amount %Fire insurance $ 27,826 %5.58 15,000 %2.90 13,410 %2.32

Marine insurance 7,513 %1.51 4,967 %0.96 4,029 %0.70

Miscellaneous casualty insurance 51,301 %10.30 40,830 %7.90 46,410 %8.04

Personal accident and health insurance 32,104 %6.44 33,119 %6.41 34,077 %5.91

Voluntary auto insurance 238,075 %47.78 268,970 %52.03 318,228 %55.15

Compulsory auto TPL insurance 141,427 %28.39 154,061 %29.80 160,911 %27.88

Total $ 498,246 %100.00 516,947 %100.00 577,065 %100.00

iii) Trends in claim development

1. Claim development from direct business and arrange reinsurancebusiness

The sub-subsidiary CTBC Insurance Co., Ltd.’ s claim developmentfrom direct business and arrange reinsurance business, the cumulativeclaims over the past years were as follows:


Accidentyear 2012 2013 2014 2015 2016 2017 2018 2019 2020

For the sixmonths

ended June30, 2021

Cumulativeclaims paid

Reportedbut unpaid Unpaid

Claimreserve

≦2012 16,308,499 5,087,627 5,129,008 5,140,169 5,138,215 5,145,401 5,136,058 5,140,058 5,137,537 5,138,522 5,133,995 4,527

2013 815,688 994,571 1,043,050 1,050,437 1,054,039 1,048,848 1,051,923 1,052,787 1,053,108 1,047,125 5,983

2014 1,031,688 1,226,439 1,265,429 1,279,183 1,275,842 1,276,851 1,277,002 1,276,756 1,263,733 13,023

2015 1,081,950 1,198,254 1,205,616 1,202,002 1,211,814 1,212,436 1,214,129 1,211,977 2,152

2016 1,103,788 1,271,401 1,290,246 1,304,900 1,312,708 1,316,482 1,312,716 3,766

2017 993,289 1,197,458 1,274,745 1,292,331 1,289,310 1,274,074 15,236

2018 1,075,384 1,270,933 1,307,263 1,312,246 1,298,183 14,063

2019 1,006,073 1,215,164 1,264,028 1,217,394 46,634

2020 804,008 935,166 812,718 122,448

For the sixmonthsended

June 30,2021

270,951 120,767 150,184

Total 378,016 302,980 680,996

(Continued)

200



Accidentyear 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020



Claimreserve

≦2011 11,457,980 3,964,866 3,999,114 3,989,607 3,999,138 3,998,050 4,006,038 4,000,434 4,001,465 3,999,362 3,997,226 2,136

2012 885,653 1,088,513 1,139,401 1,141,031 1,140,165 1,139,363 1,135,624 1,138,593 1,138,175 1,136,879 1,296

2013 815,688 994,571 1,043,050 1,050,437 1,054,039 1,048,848 1,051,923 1,052,787 1,047,023 5,764

2014 1,031,688 1,226,439 1,265,429 1,279,183 1,275,842 1,276,851 1,277,002 1,263,445 13,557

2015 1,081,950 1,198,254 1,205,616 1,202,002 1,211,814 1,212,436 1,211,068 1,368

2016 1,103,788 1,271,401 1,290,246 1,304,900 1,312,708 1,307,956 4,752

2017 993,289 1,197,458 1,274,745 1,292,331 1,267,889 24,442

2018 1,075,384 1,270,933 1,307,263 1,295,197 12,066

2019 1,006,073 1,215,164 1,159,095 56,069

2020 804,008 537,222 266,786

Total 388,236 328,025 716,261


Accidentyear 2011 2012 2013 2014 2015 2016 2017 2018 2019

For the sixmonths

ended June30, 2020



Claimreserve

≦2011 11,457,980 3,964,866 3,999,114 3,989,607 3,999,138 3,998,050 4,006,038 4,000,434 4,001,465 4,001,086 3,998,900 2,186

2012 885,653 1,088,513 1,139,401 1,141,031 1,140,165 1,139,363 1,135,624 1,138,593 1,138,369 1,137,043 1,326

2013 815,688 994,571 1,043,050 1,050,437 1,054,039 1,048,848 1,051,923 1,051,674 1,045,916 5,758

2014 1,031,688 1,226,439 1,265,429 1,279,183 1,275,842 1,276,851 1,276,940 1,262,372 14,568

2015 1,081,950 1,198,254 1,205,616 1,202,002 1,211,814 1,212,411 1,209,646 2,765

2016 1,103,788 1,271,401 1,290,246 1,304,900 1,313,312 1,306,429 6,883

2017 993,289 1,197,458 1,274,745 1,290,258 1,256,966 33,292

2018 1,075,384 1,270,933 1,301,696 1,270,893 30,803

2019 1,006,073 1,143,055 1,011,665 131,390


June 30,2020

360,663 139,331 221,332

Total 450,303 353,858 804,161

(Continued)

201


2. Claims development from retained business

The sub-subsidiary CTBC Insurance Co., Ltd.'s claims developmentfrom retained business, the cumulative claims over the past years wereas follows:


Accidentyear 2012 2013 2014 2015 2016 2017 2018 2019 2020

For the sixmonths

ended June30, 2021



Claimreserve

≦2012 9,871,393 2,792,218 2,826,139 2,828,717 2,827,798 2,830,661 2,823,933 2,826,732 2,824,302 2,825,405 2,822,373 3,032

2013 309,566 389,766 413,261 415,501 420,720 417,022 418,421 420,871 419,453 417,479 1,974

2014 339,270 405,799 428,001 443,771 440,224 443,032 441,481 443,966 439,679 4,287

2015 427,366 486,185 493,026 489,687 498,014 498,221 499,827 498,253 1,574

2016 664,691 755,956 785,122 797,747 805,915 808,922 806,869 2,053

2017 823,289 950,364 997,162 1,015,586 1,012,099 1,009,049 3,050

2018 868,689 990,605 1,011,240 1,014,976 1,005,910 9,066

2019 845,392 975,781 1,003,095 970,025 33,070

2020 670,657 761,841 667,490 94,351


June 30,2021

248,496 107,852 140,644

Total 293,101 205,139 498,240

Cumulative impairment loss 6 - 6

$ 293,107 205,139 498,246


Accidentyear 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020



Claimreserve

≦2011 7,194,699 2,354,538 2,361,957 2,362,717 2,367,103 2,366,996 2,368,244 2,365,004 2,366,002 2,363,751 2,362,441 1,310

2012 322,156 430,261 463,422 461,614 460,802 462,417 458,929 460,730 460,551 460,019 532

2013 309,566 389,766 413,261 415,501 420,720 417,022 418,421 420,871 417,448 3,423

2014 339,270 405,799 428,001 443,771 440,224 443,032 441,481 439,470 2,011

2015 427,366 486,185 493,026 489,687 498,014 498,221 497,538 683

2016 664,691 755,956 785,122 797,747 805,915 803,352 2,563

2017 823,289 950,364 997,162 1,015,586 1,004,670 10,916

2018 868,689 990,605 1,011,240 1,004,843 6,397

2019 845,392 975,781 930,366 45,415

2020 670,657 445,547 225,110

Total 298,360 218,580 516,940


$ 298,367 218,580 516,947

(Continued)

202



Accidentyear 2011 2012 2013 2014 2015 2016 2017 2018 2019

For the sixmonths

ended June30, 2020



Claimreserve

≦2011 7,194,699 2,354,538 2,361,957 2,362,717 2,367,103 2,366,996 2,368,244 2,365,004 2,366,002 2,365,149 2,363,792 1,357

2012 322,156 430,261 463,422 461,614 460,802 462,417 458,929 460,730 460,576 460,028 548

2013 309,566 389,766 413,261 415,501 420,720 417,022 418,421 418,168 416,311 1,857

2014 339,270 405,799 428,001 443,771 440,224 443,032 443,007 438,681 4,326

2015 427,366 486,185 493,026 489,687 498,014 499,003 497,466 1,537

2016 664,691 755,956 785,122 797,747 806,301 802,575 3,726

2017 823,289 950,364 997,162 1,011,655 995,551 16,104

2018 868,689 990,605 1,011,151 989,282 21,869

2019 845,392 938,653 825,289 113,364


June 30,2020

303,635 119,810 183,825

Total 348,513 228,545 577,058


$ 348,520 228,545 577,065

The sub-subsidiary CTBC Insurance Co., Ltd. recognizes the claimreserve based on expected future claims, including both reported andunreported claims. Because the recognition of this kind of reserveinvolves many uncertainties, estimations, and judgments, it containshigh complexity. Any changes in estimations and judgments areregarded as changes in accounting estimates, and the effect of thechanges will be recognized in the net income of the current period.Some claims might have a delay in reporting to the sub-subsidiaryCTBC Insurance Co., Ltd. In addition, estimating the expected possibleclaims of unreported claims might involve previous claim experiencesand subjective judgments. Therefore, the claims reserve recognized atthe balance sheet date may not be the same as the final claim payments.Claim reserves recognized are estimated based on the currentlyavailable information. However, the final result may depart from theinitial estimation due to the subsequent development of claims.

(Continued)

203


(7) Related-party transactions:

(a) Names of related parties and relationship with the Company

Name of related party Relationship with the CompanyCTBC Security Co., Ltd. An investee company carried under the equity

method.King Dragon Life Insurance Co., Ltd. 〃

HoFa Land Development Co., Ltd. 〃

Wu Tzu Development Co., Ltd. 〃

Star Shining Energy Co., Ltd. 〃

Top Taiwan IX Venture Capital Co., Ltd. 〃

Giga Green Energy Co., Ltd. 〃

Taiwan Wind Investment Co., Ltd. 〃

Solarbright Energy Co., Ltd. 〃

Star Power Energy Co., Ltd. 〃

Grand Bills Finance Corporation 〃

LH Financial Group Public Company Limited 〃

Xiamen Jinmeixin Consumer Finance Co., Ltd. 〃

Li-Wei Energy Co., Ltd. 〃

Xinhe Energy Development Co., Ltd. 〃

CTBC Investments Trust Funds A securities investment trust fund managed by theCompany’s subsidiary CTBC Investments Co.,Ltd.

Taiwan Institute of Economic Research The Company’s subsidiary contributed over 1/3 ofits total funds.

CTBC Charity Foundation 〃

CTBC Culture Foundation 〃

CTBC Anti-Drug Education Foundation 〃

CTBC Business School 〃

CTBC International Academy Foundation 〃

Taipei Kai-Nan High School The Chairman of the Company is its bodycorporate representative.

Pei sheng Culture Foundation The Director of the Company’s subsidiary is itsbody corporate representative.

Chung Yuan Investment Co., Ltd. The Institutional Director of the Company.Yi Chuan Investment Co., Ltd. 〃

Wei Fu Investment Co., Ltd. 〃

Ho-Wei Investment Co., Ltd. The Chairman of the Company is its Director.Weihong Investment Co., Ltd. 〃

(Continued)

204


Name of related party Relationship with the CompanyChuan Wei Investment Co., Ltd. Within the second-degree relative of the Chairman

of the Company is its Chairman.Taiwan Relo Club, Ltd. The Chairman of the Company’s subsidiary is its

Chairman.Sungbo Co., Ltd. The Director of the Company’s subsidiary is its

Chairman.Yan Yuan Investment Co., Ltd. The Director of the Company’s subsidiary is its

President.Nan Ya Plastics Corporation The Chairman of the Company’s subsidiary is its

Director.Formosa Sumco Technology Corporation 〃

Taipei Financial Center Corporation 〃

Financial Information Service Co., Ltd. 〃

Brothers Recreational Co., Ltd. 〃

Sundia Meditech Group (Note) The Company’s Chairman is the second-degreerelative of the Director of the Company’ssubsidiary.

Chailease Finance Co., Ltd. Related party in substance.Taiwan Sports Lottery Co., Ltd. 〃

Chung Kwan Investment Co., Ltd. 〃

Kuan Ho Construction and Development Cor 〃

CTC Group Inc. 〃

Chung-Chie Property Management Co., Ltd. 〃

Chinatrust Real Estate Co., Ltd. 〃

APEX Credit Solution Inc. (Note) 〃

Kae Lee Investment Ltd. 〃

Yi Hua Investment Co., Ltd. 〃

Sung Young Investment Co., Ltd. 〃

Chailease Auto Rental Co., Ltd. 〃

Fina Finance & Trading Co., Ltd. 〃

Shin Wen investment Co., Ltd. 〃

Ronghua Investment Co., Ltd. 〃

Chung Cheng Investments and DevelopmentCo., Ltd.

〃

My Leasing (Mauritius) Corp. 〃

Other related parties Major executives of the Company and subsidiariesand their close relatives.

Note: The party is not related parties in the financial statement in 2021.

(Continued)

205


(b) Significant transactions between related parties and the Company

(i) Lease

1) The Company’s subsidiary, CTBC Bank Co., Ltd. is as a lessor

For the three and six months ended June 30, 2021 and 2020, the rental revenues that theCompany’s subsidiary CTBC Bank Co., Ltd. received from related parties for the rentalof buildings, parking spaces, and safe deposit boxes amounted to $12,364, $11,754,$24,129 and $23,474, respectively.

As of June 30, 2021, December 31 and June 30, 2020, deposits of the Company’ ssubsidiary CTBC Bank Co., Ltd. for renting safe boxes to related parties amounted to$101, $125 and $122, respectively. The rents received in advance from related partiesamounted to $7,703, $4,554 and $4,346, respectively. The guarantee deposit for the useof space and machinery received from related parties amounted to $11,822, $12,104 and$11,618, respectively.

2) The Company’s subsidiary, CTBC Bank Co., Ltd. is as a lessee

Lease liabilities

Name of related party Summary June 30, 2021December 31,

2020 June 30, 2020Chailease Finance Co.,

Ltd.Leasing of official

vehicles$ - - 1,567

Chailease Auto RentalCo., Ltd.

Leasing of officialvehicles

13,824 8,827 7,332

$ 13,824 8,827 8,899

Lease paymentFor the three months ended

June 30For the six months ended June

30Name of related party Summary 2021 2020 2021 2020Chailease Finance Co.,

Ltd.Leasing of official

vehicles$ - - - 92

Chailease Auto RentalCo., Ltd

Leasing of officialvehicles

1,378 1,029 2,352 1,721

$ 1,378 1,029 2,352 1,813

The lease term and the collection of the rental are conducted with the contracts. Leasepayment amount includes payment amount which does not recognize lease liabilities dueto the application of IFRS 16 exemptions.

(Continued)

206


(ii) Donations

For the three months ended June 30 For the six months ended June 30Related party 2021 2020 2021 2020

CTBC Culture Foundation $ 44,000 31,000 44,000 31,000CTBC Charity Foundation 57,000 50,000 57,000 50,000CTBC Anti-Drug

Educational Foundation- 26,900 35,000 39,850

CTBC InternationalAcademy Foundation

- 10,000 - 10,000

CTBC Business School 25,447 6,068 100,447 107,068Total $ 126,447 123,968 236,447 237,918

(iii) Loans

June 30, 2021Settlement status

CategoriesNumber/name of

related partiesMaximum

balanceEndingbalance

Normalloans

Overdueloans Collateral

Loanconditions

Consumer loan—employee 10 $ 4,634 1,342 1,342 - None NoneHome loan mortgage 257 1,569,706 1,449,423 1,449,423 - Real estate/ others 〃

Others Nan Ya Plastics Corporation 2,534,043 1,434,043 1,434,043 - None 〃

〃 Chung Kwan InvestmentCo., Ltd.

350,000 350,000 350,000 - Real estate 〃

〃 CTC Group Inc. 334,866 334,866 334,866 - Real estate 〃

〃 Kuan Ho Construction andDevelopment Cor

245,000 245,000 245,000 - Real estate 〃

〃 Others 158,670 110,871 110,871 - Real estate/ smalland mediumenterprise creditguarantee fund

〃

December 31, 2020Settlement status




Normalloans


Loanconditions

Consumer loan—employee 11 $ 5,195 2,650 2,650 - None None

Home loan mortgage 319 2,077,294 1,860,010 1,860,010 - Real estate/ others 〃

Others Nan Ya Plastics Corporation 2,787,830 2,401,828 2,401,828 - Real estate/ machine room

〃



350,000 350,000 350,000 - Real estate 〃


245,000 245,000 245,000 - Real estate 〃


〃

(Continued)

207






Normalloans


Loanconditions

Consumer loan—employee 8 $ 3,313 1,375 1,375 - None None

Home loan mortgage 289 1,760,859 1,638,960 1,638,960 - Real estate/ others 〃

Others Nan Ya Plastics Corporation 1,774,497 1,687,830 1,687,830 - Real estate/machine room

〃



350,000 350,000 350,000 - Real estate 〃


245,000 245,000 245,000 - Real estate 〃


〃

(Continued)

208


(iv) Deposits

June 30, 2021

Related partyMaximum


Range ofinterest rates

Interestexpenses

(For the threemonths ended

June 30)

Interestexpenses

(For the sixmonths ended

June 30)Yan Yuan Investment Co., Ltd. $ 2,486,557 1,892,786 0~0.01% 40 64Chuan Wei Investment Co.,

Ltd.1,591,337 1,549,327 0~0.03% 50 71

HoFa Land Development Co.,Ltd.

1,507,647 1,470,353 0~0.18% 516 1,031

CTBC Charity Foundation 1,371,596 1,275,881 0~0.82% 1,141 2,268Taiwan Sports Lottery Co.,

Ltd. 1,884,132 1,252,894 0~0.01% 32 62

Financial Information ServiceCo., Ltd.

1,010,504 1,010,504 0.01~0.82% 1,976 3,931

Wu Tzu Development Co., Ltd. 663,228 605,416 0~0.77% 157 314Taipei Kai-Nan High School 624,864 557,834 0~1.04% 241 480Taiwan Wind Investment Co.,

Ltd.535,573 521,363 0~0.03% 38 78

Taiwan Institute of EconomicResearch

606,716 463,935 0~1.04% 407 762

Chung Cheng Investments andDevelopment Co., Ltd.

327,126 325,924 0~0.01% 8 16

Chinatrust Real Estate Co.,Ltd.

331,923 321,191 0~0.82% 303 607

Chung Yuan Investment Co.,Ltd.

331,785 301,984 0.01% 7 13

Weihong Investment Co., Ltd. 236,472 234,472 0.01% 3 6Wei Fu Investment Co., Ltd. 387,022 184,129 0~0.03% 2 2Yi Hua Investment Co., Ltd. 169,201 160,645 0~0.01% 2 4Sung Young Investment Co.,

Ltd.230,646 156,713 0~0.01% 4 9

Brothers Recreational Co., Ltd. 233,098 151,909 0-0.03% 5 8Top Taiwan IX Venture

Capital Co., Ltd.218,461 146,897 0~0.01% 3 4

CTBC Business School 200,817 135,605 0~0.83% 32 64Shin Wen Investment Co., Ltd. 326,963 125,578 0~0.01% 2 5Ho-Wei Investment Co., Ltd. 125,330 121,118 0~0.01% 3 6Pei Sheng Culture Foundation 143,182 119,133 0~0.03% 8 16Kae Lee Investment Co., Ltd. 118,179 117,446 0~0.01% 3 6Ronghua Investment Co., Ltd. 317,864 108,843 0~0.01% 3 7Others 23,046,167 7,846,939 6,004 11,957Total $ 39,026,390 21,158,819 10,990 21,791

(Continued)

209


December 31, 2020




Interestexpenses

(For the yearended

December 31)HoFa Land Development Co., Ltd. $ 1,512,571 1,494,093 0~0.44% 2,808

Taiwan Sports Lottery Co., Ltd. 1,491,327 1,489,899 0~0.01% 88

CTBC Charity Foundation 1,217,253 1,185,251 0~1.07% 4,888

Financial Information Service Co., Ltd. 1,012,285 1,006,551 0.01~1.07% 8,517

Yan Yuan Investment Co., Ltd. 2,580,308 916,984 0~0.06% 310

Chuan Wei Investment Co., Ltd. 1,005,260 868,589 0~0.01% 87

Wu Tzu Development Co., Ltd. 659,834 652,220 0~1.00% 768

My Leasing (Mauritius) Corp. 2,934,737 638,937 0.03~0.20% 86

Taiwan Institute of Economic Research 605,702 600,210 0~1.09% 2,017

Taipei Kai-Nan High School 575,633 554,361 0~1.04% 1,371

Taiwan Wind Investment Co., Ltd. 3,463,691 533,788 0~0.15% 217

Shin Wen Investment Co., Ltd. 634,510 329,963 0~0.01% 22

Ronghua Investment Co., Ltd. 318,791 317,864 0~0.01% 14

Chinatrust Real Estate Co., Ltd. 297,820 295,032 0~2.15% 1,518

Chung Cheng Investments and Development Co.,Ltd.

289,499 287,681 0~0.01% 27

Chung Yuan Investment Co., Ltd. 330,885 241,597 0.01% 23

Sung Young Investment Co., Ltd. 669,879 230,560 0~0.01% 57

Sundia Meditech Group 1,933,349 200,688 0~0.03% 37

Weihong Investment Co., Ltd. 174,236 174,236 0.01% 9

Yi Hua Investment Co., Ltd. 510,167 169,201 0~0.01% 15

Brothers Recreational Co., Ltd. 210,479 166,796 0~0.01% 13

Pei Sheng Culture Foundation 183,294 143,202 0~0.05% 50

Ho-Wei Investment Co., Ltd. 130,784 125,330 0~0.01% 12

Kae Lee Investment Co., Ltd. 119,884 118,179 0~0.01% 12

CTBC Business School 178,105 111,872 0~1.09% 133

Others 24,711,768 7,700,997 31,602

Total $ 47,752,051 20,554,081 54,701

(Continued)

210


June 30, 2020




Interestexpenses


June 30)

Interestexpenses


June 30)HoFa Land Development Co.,

Ltd. $ 1,512,571 1,512,571 0~0.44% 530 1,731

CTBC Charity Foundation 1,168,493 1,057,919 0~1.07% 1,137 2,589Financial Information Service

Co., Ltd.1,012,285 1,002,577 0.01~1.07% 1,976 4,521

Chuan Wei Investment Co.,Ltd.

1,005,260 819,113 0~0.01% 20 42

Taiwan Wind Investment Co.,Ltd.

3,463,691 718,914 0~0.15% 59 135

Wu Tzu Development Co.,Ltd.

659,834 642,252 0~1.00% 201 397

Sung Young Investment Co.,Ltd.

669,879 632,578 0~0.01% 16 33

Taiwan Sports Lottery Co.,Ltd.

1,375,145 464,731 0~0.01% 18 40


529,897 464,403 0~1.09% 509 991

Taipei Kai-Nan High School 402,012 344,448 0~1.04% 499 1,012Chinatrust Real Estate Co.,

Ltd.270,329 264,267 0~2.15% 405 899

Chung Cheng Investmentsand Development Co., Ltd.

258,499 258,153 0~0.01% 7 13


252,419 249,004 0.01% 5 9

Brothers Recreational Co.,Ltd.

208,506 207,411 0~0.01% 3 5

Ronghua Investment Co., Ltd. 185,579 175,791 0~0.01% 3 7Weihong Investment Co., Ltd. 155,797 154,248 0.01% 2 5Pei Sheng Culture Foundation 183,294 152,654 0~0.05% 11 30CTBC Business School 178,105 135,509 0~1.09% 32 70Yi Hua Investment Co., Ltd. 510,167 123,582 0~0.01% 2 11Kae Lee Investment Co., Ltd. 119,884 119,006 0~0.01% 3 6Shin Wen Investment Co.,

Ltd.634,510 118,807 0~0.01% 1 14

Yi Chuan Investment Co.,Ltd.

165,872 107,827 0~0.01% 3 5

Ho-Wei Investment Co., Ltd. 122,744 100,850 0~0.01% 3 6Others 18,029,736 8,626,173 8,953 18,351Total $ 33,074,508 18,452,788 14,398 30,922

(Continued)

211


(v) Call Loans to Banks


Related party Ending balanceRange of

interest rates

Interest revenues(for the threemonths ended

June 30)

Interest revenues(for the six

months endedJune 30)

Grand Bills Finance Corporation $ - 0.18~0.21% 107 204


Related party Ending balanceRange of

interest rates

Interest revenues(for the threemonths ended

June 30)

Interest revenues(for the six

months endedJune 30)

Grand Bills Finance Corporation $ - 0.26~0.53% 300 703

(vi) Securities transactions

For the six months ended June 30, 2021Related party Securities purchased Securities sold

Nan Ya Plastics Corporation $ 400,000 -

(vii) Derivative financial commodity trading

June 30, 2021Derivative Balance sheet

Related partyfinancial

instrumentsContract

periodNotionalprincipal

Unrealized(losses) gains Account

EndingBalance

CTBCInvestmentsTrust Funds

Foreign exchangeswap

07.08.2020~

08.16.2021

USD 136,590 $ (381,586) (Note 2) (381,586)

〃 Cross currencyswap

06.30.2021~

07.02.2021

NTD 280,000 184 (Note 1) 184

December 31, 2020Derivative Balance sheet


instrumentsContract


Unrealizedlosses Account

EndingBalance

CTBC　Investments　Trust Funds


12.02.2019~08.16.2021

USD 136,590 $ (315,705) (Note 2) (315,705)



instrumentsContract


Unrealized(losses) gains Account

EndingBalance

CTBCInvestmentsTrust Funds


12.02.2019~08.14.2020

USD 141,590 $ (21,943) (Note 2) (21,943)


02.03.2020~07.02.2020

USD 60,000 10,165 (Note 1) 10,165

Note 1: Financial assets measured at fair value through profit or loss.

Note 2: Financial liabilities measured at fair value through profit or loss.

(Continued)

212


(viii) Funds

Related party Content June 30, 2021December 31,

2020 June 30, 2020CTBC Securities Co.,

Ltd.CTBC Investments

Trust Funds$ 129,417 143,586 143,034

CTBC Investments Co.,Ltd.

〃 72,970 41,001 31,185

Taiwan Life InsuranceCo., Ltd.

〃 16,331,168 17,207,105 11,529,581

Total $ 16,533,555 17,391,692 11,703,800

(ix) Stocks issued by the related parties that are being held by the Company and subsidiaries:

Related party June 30, 2021December 31,

2020 June 30, 2020Nan Ya Plastics Corporation $ 1,396,096 1,211,875 1,088,833Taipei Financial Center Corporation 1,591,200 1,591,200 1,591,200Formosa Sumco Technology Corporation 9,450 183,262 177,758Total $ 2,996,746 2,986,337 2,857,791

(x) Others

1) Income generated between the Company’s subsidiary CTBC Bank Co., Ltd. and relatedparties.

For the three months ended June 30Trading Company Related party Summary 2021 2020

CTBC Bank Co., Ltd. Taipei Financial CenterCorporation

Commission income $ 22,817 16,505

〞 Grand Bills FinanceCorporation

Commission income, theremunerations to directors andsupervisors, and transportationallowance

3,358 2,609

〞 Sungbo Co., Ltd. Commission income 1,547 1,183

〞 Brothers Recreational Co.,Ltd.

Commission income and otherincome from the malls

687 265

〞 CTBC Charity Foundation Commission income and incomefrom accommodation

260 43

〞 Individuals Commission income 1,031 746


CTBC Investment TrustFunds

Management fees and sales feesincome

246,533 216,454

$ 276,233 237,805

(Continued)

213


For the six months ended June 30Trading Company Related party Summary 2021 2020

CTBC Bank Co., Ltd. Taipei Financial CenterCorporation

Commission income $ 45,095 32,700

〞 Grand Bills FinanceCorporation

Commission income, theremunerations to directors andsupervisors, and transportationallowance

3,690 2,967

〞 Sungbo Co., Ltd. Commission income 2,557 2,417

〞 Brothers Recreational Co.,Ltd.

Commission income and otherincome from the malls

1,050 465


856 763

〞 Individuals Commission income 2,224 1,483


CTBC Investment TrustFunds


488,796 405,743

$ 544,268 446,538

Foregoing transactions, accounts receivable balances were as follows:

Trading Company Related Party Summary June 30, 2021 June 30, 2020CTBC Bank Co., Ltd. Brothers Recreational Co.,

Ltd.Commission income and other

income from the malls$ 49 -


- 1

CTBC Investments Co., Ltd. CTBC Investment TrustFunds


83,114 74,026

$ 83,163 74,027

(Continued)

214


2) Expenses generated between the Company’s subsidiary CTBC Bank Co., Ltd. and relatedparties.

For the three months ended June 30Trading Company Related party Summary 2021 2020

CTBC Bank Co., Ltd. Brothers Recreational Co.,Ltd.

Sponsorship, marketing feedbackfund, and business promotionfees

$ 133,820 141,185

〞 CTBC Security Co., Ltd. Security fees 23,727 10,584

〞 Taipei Financial CenterCorporation

Sponsorship, joint-brand creditcard payments, ATM utilitybill, consultant fees,and redeemed rewards points

40,063 30,451

〞 Taiwan Relo Club, Ltd. Gift expenses, marketing fees,and redeemed rewards points

3,515 6,337

〞 Taiwan Institute ofEconomic Research

Expenses for domestic economicsresearch and businessconsulting commissionedresearch

3,000 3,000

〞 Chinatrust Real Estate Co.,Ltd.

Agency service fees 1,033 919

〞 Chung-Chie PropertyManagement Co., Ltd.

Outsourcing fees and repairexpenses

434 650

〞 Chailease Auto Rental Co.,Ltd.

Travel expenses and freight andofficial cars rental expenses

512 64

〞 Sungbo Co., Ltd. Gift expenses, management fees,and expenses from groupcatering

36 572

〞 Fina Finance & Trading Co.,Ltd.

Business service fees 35 339

〞 APEX Credit Solutions Inc. Collection assistance fees - 2,910

CTBC Venture Capital Co.,Ltd

CTBC Security Co., Ltd. Security fees 700 926

$ 206,875 197,937

(Continued)

215


For the six months ended June 30Trading Company Related party Summary 2021 2020

CTBC Bank Co., Ltd. Brothers Recreational Co.,Ltd.


$ 133,908 276,265

〞 CTBC Security Co., Ltd. Security fees 46,870 43,804


Sponsorship, joint-brand creditcard payment, ATM utility bill,consultant fees, and redeemedrewards points

43,171 31,923


11,259 15,893



6,000 6,000


Agency service fees 2,119 919

〞 Chung-Chie PropertyManagement Co., Ltd.

Outsourcing fees and repairexpenses

879 1,228

〞 Chailease Auto Rental Co.,Ltd.

Travel expenses and freight andofficial cars rental expenses

512 134

〞 Sungbo Co., Ltd. Gift expenses, management fees,and expenses from groupcatering

511 737



〞 APEX Credit Solutions Inc. Collection assistance fees - 5,693

CTBC Venture Capital Co.,Ltd.

CTBC Security Co., Ltd. Security fees 1,379 1,385

$ 246,718 384,847

Foregoing transactions, accounts payable balances were as follows:

Trading Company Related party Summary June 30, 2021 June 30, 2020CTBC Bank Co., Ltd. CTBC Security Co., Ltd. Security fees $ 7,934 7,724


Sponsorship, joint-brand creditcard payments, ATM utilitybill, consultant fees, andredeemed rewards points

850 -


926 2,860



3,000 6,000


Agency service fees 1,029 -



$ 13,750 16,745

(Continued)

216


3) Others

Trading Company Related party Summary June 30, 2021December 31,

2020 June 30, 2020CTBC Bank Co., Ltd. Fina Finance & Trading

Co., Ltd.Released undue loans (Note) $ 1,848 6,493 16,316

〞 Other Affiliates Advances for utilitiesexpenses, postage,allocation of the golfcompetition, and otherexpenses

1,964 6,211 33

$ 3,812 12,704 16,349

Note: The Company’ s subsidiary CTBC Bank Co., Ltd. signed strategic allianceagreements with Fina Finance & Trading Co., Ltd. agreeing loans will be releaseddirectly to Fina’s clients, and Fina pledged to buyback and settle all debts once anydelay arises.

No significant discrepancy in transaction terms found between related partytransaction and non-related party transaction.

(c) Key management personnel compensation in total


Salary and other short-termemployee benefits

$ 580,258 616,690 1,267,335 1,250,663

Post-employment benefits 7,203 8,405 14,495 15,790Share-based payment 258,429 393,191 724,161 (116,036)Termination benefits - 39 - 77Total $ 845,890 1,018,325 2,005,991 1,150,494

The Company and subsidiaries recognized the changes in the fair value of share-based payments inprofit or loss over the vesting period. For the six months ended June 30, 2020, the share-basedpayments expenses were reversed due to the changes in fair value.

(Continued)

217


(8) Pledged assets:

Pledged assets of the Company and subsidiaries were as follows:


Assets June 30, 2021December 31,

2020 June 30, 2020 Purpose of collateralCTBC Financial Holding Co., Ltd.

Time deposits $ 11,615 11,609 6,609 Bid for company card guaranteeSubsidiary—CTBC Bank Co., Ltd.

and its subsidiariesRequired reserve - Account B 6,000,000 6,000,000 6,000,000 Project fund accommodations

securedBonds 2,471,332 4,413,590 11,649,607 Guarantee amount of overdrafts,

pledged assets, line of credit ofbanks, repurchase agreementpledge, trust funds reserve, bondsettlement reserves, deposit forlitigation, other guarantee deposits,and other legal reserve, etc.

Negotiable certificates of deposit 30,241,000 30,241,000 30,251,000 Guarantee fulfillment of superficies,daytime overdrafts of Central Bank,deposits for bills, dealer deposits forcalling loans in foreign currency,call loan liquidation account in U.S.dollars, and call loan liquidationaccount in JPY.

Time deposits 3,258,181 670,410 370,401 Compliance guarantee deposits forfutures dealer, CPC Corporation,Taiwan guarantee fulfillment, publicwelfare walkway guaranteefulfillment, joint-brand credit cardguarantee, and daytime overdraftsof time deposits in RMB

Receivables 700 1,300 1,300 Guarantee of deposit for litigationLoans 36,999,840 32,998,774 29,913,488 Line of credit of banks

Subsidiary—CTBC Securities Co.,Ltd. and its subsidiariesRestricted time deposits 756,000 756,000 779,944 Guarantee for all the debts

Subsidiary—CTBC Investments Co.,Ltd.Restricted time deposits 115,000 115,000 95,000 Operation guarantee deposits and others

Subsidiary—Taiwan Life InsuranceCo., Ltd. and its subsidiaries Demand deposits 3,836 - 2,000 Short-term borrowingsTime deposits 405,763 408,584 473,537 Compliance guarantee depositsNegotiable certificates of deposits 400 400 400 Guarantee provisional attachment

claimed by courtAccounts Receivable 102,105 151,242 160,103 Short-term borrowingsGovernment bonds 10,999,730 10,997,259 9,355,373 Compliance guarantee deposits and

other guarantee depositsSubsidiary—CTBC Venture Capital

Co., Ltd. and its subsidiariesTime deposits 44,360 41,914 51,205 Compliance guarantee deposits

Subsidiary—CTBC AssetManagement Co., Ltd.Time deposits 3,445 3,445 3,445 Compliance guarantee deposits

(Continued)

218


As of June 30, 2021, December 31 and June 30, 2020, the deposits for public welfare lottery issuance ofthe Company’s subsidiary CTBC Bank Co., Ltd.’s irrevocable standby letter of credit were all $1,050,000.

(9) Commitments and contingencies:

(a) Major commitments and contingencies


2020 June 30, 2020CTBC Financial Holding Co., Ltd.

Promissory notes of short-term borrowingand other financing

$ 123,800,000 124,800,000 125,500,000

Subsidiary—CTBC Bank Co., Ltd. and itssubsidiariesContingent liabilities from guarantee and

letter of credit business89,775,785 102,146,647 90,513,877

Promissory note to Central Bank for bank’sclearance

198,968 198,968 198,968

Client notes in custody 89,865,532 85,066,494 85,326,114Marketable securities and debts in custody 3,383,024,782 3,242,510,510 3,184,664,417Consigned travelers’ checks in custody - - 211,594Designated purpose trust accounts 1,451,284,149 1,325,313,127 1,302,834,128Other items in custody 397,918 368,161 330,438

$5,138,347,134 4,880,403,907 4,789,579,536

As of June 30, 2021, December 31 and June 30, 2020, the credit amounts of the cancellable loancommitments of the Company’ s subsidiary CTBC Bank Co., Ltd. and its subsidiaries were$1,457,946,714, $1,439,047,127 and $1,345,358,016, respectively.

The Company’ s subsidiary CTBC Bank Co., Ltd. renewed the services contract of informationresources with International Business Machines, authorizing a five years and four months contractterm commencing from September 1, 2017, and ending on December 31, 2022, in the amount of$2,670,000, which comprised a host computer lease fee, an authorization fee, and an annual softwaremaintenance fee.

The Company’ s subsidiary CTBC Bank Co., Ltd. was designated by the Ministry of Finance (the“MOF”) as the issuing institution for the fourth term of public welfare lottery. The period is fromJanuary 1, 2014 to December 31, 2023. The Company’ s subsidiary CTBC Bank Co., Ltd. wasauthorized to arrange and issue traditional lottery, scratch and win lottery, and computerized lotterytickets. For the fourth term of public welfare lottery, the Company’ s subsidiary CTBC Bank Co.,Ltd. receives a commission for issuing lottery tickets, representing 4.35% of the total lottery salesamount. The commission will be settled monthly. The Company’ s subsidiary CTBC Bank Co.,Ltd.’ s profit will be what remains after a fixed payment of $2,700,000 to the MOF per year.Furthermore, in order to ensure that the lottery prize payout rate is not greater than 60% of thelottery issuing amount, not only did the Company’ s subsidiary CTBC Bank Co., Ltd. created atransitional monitoring account-provision for the lottery prize, but also has already adoptedappropriate risk control strategies.

(Continued)

219


On May 31, 2013, the Company’s subsidiary CTBC Bank Co., Ltd. signed a renewed contract forlottery software, hardware purchase and establishment and maintenances services amounting to$2,322,756 (within which $1,633,851 was for maintenance service). The maintenance service startedfrom May 31, 2013 to the redemption date of the last lottery ticket issued in December 2023. Theservice will be finished as all the settlement, consignment and aftermath of the work have been done.

The Company’ s subsidiary CTBC Bank Co., Ltd. entrusted the Company’ s subsidiary TaiwanLottery Co., Ltd. to operate the public welfare lottery’ s ticket issuing, sales, promotion, drawing,payment of prize, and management, with a contract period from November 11, 2013, and ending onJune 30, 2024. The Company’ s subsidiary CTBC Bank Co., Ltd. will disburse 4.35% of the totallottery sales amount as commission to the Company’ s subsidiary Taiwan Lottery Co., Ltd. TheCompany’ s subsidiary CTBC Bank Co., Ltd. agreed that Taiwan Lottery Co., Ltd. can receive areward, amounting to the commission revenue after the deduction of value-added tax (VAT), rebatesand direct costs incurred for the lottery business, and the addition of marginal benefits, if the balanceis positive. Otherwise, the Company’ s subsidiary Taiwan Lottery Co., Ltd. should pay for thediscrepancy, if the balance is negative. An amendment regarding not adding marginal benefitstoward the said entrusted benefits has been made on May 20, 2015, with an effective date tracedback to January 1, 2015.

On November 6, 2015, the Company’ s subsidiary CTBC Bank Co., Ltd. signed with ZileDevelopment Co., Ltd. (BVI) and Shuohe Development Co., Ltd. a contract of joint construction fora building on the land, zone 18 at Xinyi section 4, Xinyi District, Taipei City. The Bank will retain5% of the rights of the land for joint construction, get 5% of the whole construction area of the newbuilding and the corresponding land, and burden 5% of the costs of construction based on purchasecontract and joint construction contract. The Bank expects to invest $530 million of the total costs ofthe construction. As of June 30, 2021, the Bank has paid $219,921.

As of June 30, 2021, due to the procurement contract and the storage contract for lottery tickets, theCompany’s subsidiary Taiwan Lottery Co., Ltd. had requested contractors to create and deposit theguarantee notes, which are accounted for under guarantee notes payable amounting to $23,000.

As of June 30, 2021, the Taxation Administration Ministry of Finance entrusted the Company’ ssubsidiary Taiwan Lottery Co., Ltd. to conduct the procurement of five-year-period depositinsurance and an allowance for computerized lottery agents to switch to another career. Theinsurance company that won the tender transferred and deposited unregistered central governmentbonds amounting to $5,000 in the Company’s subsidiary Taiwan Lottery Co., Ltd.

To help CTBC Financial Leasing Co., Ltd., the Company’ s sub-subsidiary obtaining financingfacility, a Letter of Comfort was issued to financial institutions to request a credit limit ofRMB$310,215 thousand as of June 30, 2021, in order to declare that the operation of the company isactively supported by the Company.

To help CTBC Financial Leasing Co., Ltd., the Company’ s sub-subsidiary obtaining financingfacility, a Letter of Comfort to financial institution was issued by CTBC Asset Management Co.,Ltd. to request a credit limit of USD82,000 thousand and RMB$300,000 thousand as of June 30,2021.

(Continued)

220


As of June 30, 2021, the outstanding balance of the signed contract and property acquisition of theCompany’ s subsidiary Taiwan Life Insurance Co., Ltd. and its subsidiaries amounted to$14,992,324, and the outstanding balance of superficies were recognized under lease liabilities,please refer to Note 6(ab).

As of June 30, 2021, the outstanding balance of the new insurance information core system contractof the Company’s subsidiary Taiwan Life Insurance Co., Ltd. amounted to $772,922.

As of June 30, 2021, the outstanding balance of the committed investment facility of signed privatefund contract of the Company and subsidiaries amounted to JPY$2,573,241 thousand,USD1,276,557 thousand, EUR$310,263 thousand, DKK$36,821 thousand, GBP$2,840 thousand and$432,000, respectively.

(b) The below information is shown based on the disclosure requirements of Enforcement Rules of theTrust Enterprise Act, Article 17.

Balance Sheet of Trust Accounts

June 30, 2021 and 2020

Trust Assets June 30, 2021 June 30, 2020 Trust Liabilities June 30, 2021 June 30, 2020Cash in bank $ 52,668,742 43,658,417 Payables 635,560 641,001Receivables 498,674 603,218 Securities in custody

payables748,679,949 682,265,681

Bonds 31,522,773 31,650,053 Other liabilities 26,248 65,839Stocks 223,628,304 181,521,932 Trust capital 579,998,173 552,432,812Mutual funds 306,241,462 285,440,594 Miscellaneous reserves

and accumulatedearnings

121,056,380 67,428,795

Structured products 35,312,681 22,744,253 Other investments 3,966,868 4,020,007 Real estates－net 47,848,213 50,901,290Securities in custody 748,679,949 682,265,681Other assets 28,644 28,683Total trust assets $1,450,396,310 1,302,834,128 Total trust liabilities 1,450,396,310 1,302,834,128

Note: As of June 30, 2021 and 2020, the Company’s subsidiary CTBC Bank’s Offshore BankingUnit invested in foreign securities under specific purpose trust accounts amounting to$5,768,569 and $4,267,442, respectively.

(Continued)

221


Properties Catalog of Trust Accounts

June 30, 2021 and 2020

Investments June 30, 2021 June 30, 2020Cash in bank $ 52,668,742 43,658,417Receivables 498,674 603,218Bonds 31,522,773 31,650,053Stocks 223,628,304 181,521,932Mutual funds 306,241,462 285,440,594Structured products 35,312,681 22,744,253Other investments 3,966,868 4,020,007Real estates－net　Lands 47,790,264 50,840,780　Buildings 57,949 60,510　Subtotal 47,848,213 50,901,290Securities in custody 748,679,949 682,265,681Other assets　Superficies 28,478 28,478　Prepaid other payments 166 205　Subtotal 28,644 28,683Total $ 1,450,396,310 1,302,834,128

Income Statement of Trust Accounts

For the six months ended June 30, 2021 and 2020


Trust revenues $ 3,333,246 1,454,833Trust expenses (229,743) (2,223,391)Earnings before tax 3,103,503 (768,558)Less: Income tax expenses 4,431 4,057Net profits (losses) $ 3,099,072 (772,615)

(Continued)

222


(c) Other significant legal matters

(i) Structured notes

From September to December in 2005, the Hong Kong branch CTBC Bank (“HK Branch”), asubsidiary of CTBC Financial Holding Co., Ltd. (“ this Company” or “ CTBC Holding” )purchased structured notes (“ Overseas Structured Notes” ) in a total par value of US$390million from Barclays Bank PLC with the approval of CTBC Bank’s Board of Directors. Whenthis Company intended to invest in Mega Financial Holding Company in 2006, the OverseasStructured Notes must be sold in order that CTBC Bank should not violate the 5%shareholding ceiling in another single company set on a commercial bank in the Banking Actof the Republic of China. The HK Branch thus sold the Overseas Structured Notes at themarket price to Red Fire, a special purpose vehicle acquired by the then president of CTBCBank’ s corporate banking department (i.e., Mr. xxx Chen). In the sale of the OverseasStructured Notes, CTBC Bank earned a profit of US$8.448 million. Through the redemption ofthe Overseas Structured Notes from Barclays Bank PLC, Red Fire had a profit of US$30.47million, among which an amount about US$9.50 million was, for certain unknown reasons,remitted into an account controlled by Mr. Chen, and the balance about US$20.90 million hadbeen remitted to this Company’s overseas subsidiary, CT Opportunity Investment Company.Pursuant to the request of Financial Supervisory Committee (“FSC”), this Company’s directorsadvanced US$30.47 million to CTBC Bank in September 2006 so as to allow a smoothdevelopment of business operations. Given that the amount so advanced is far more than theamount about US$9.50 million (which was not remitted to this Company’ s overseassubsidiary), CTBC Bank had thus suffered no losses.

Per a letter dated April 28, 2011 from two directors of this Company (i.e., Chung ChengInvestment and Kuan Ho Construction & Development), they realized that CTBC Banksuffered no losses in its sale of Overseas Structured Notes, based on the Analysis Report on theSale of Structured Notes to Red Fire by CTBC Bank’s Hong Kong Branch (“Analysis Report”)attached to this Company’s letter dated March 30, 2011 (with a reference number of ChungHsin Chin 1002243570005), and they further indicated that as stated in the Analysis Report,without the ground that CTBC Bank suffered losses pursuant to which an agreement datedFebruary 9, 2009 was signed between this Company and these two directors, CTBC Bank wasthus urged to negotiate with them for a reasonable solution. CTBC Bank sent a letter datedAugust 16, 2011 to Chung Cheng Investment and Kuan Ho Construction & Developmentasking them to waive their right of claim arising from the advancement of US$30.47 millionmade in September of 2006. These two directors responded and agreed to waive on August 18,2011, but they requested that CTBC Bank should apply the US$20.90 million proceeds toloans for emergency assistances and charities, and CTBC Bank should transfer US$9.57million to this Company so as to make up the losses recognized by this Company which arosefrom the investment made by this Company’s overseas subsidiary, CT Opportunity InvestmentCompany. In this regard, CTBC Bank and these two directors would have to further negotiate,as CTBC Bank has yet made the aforesaid applications about the US$20.90 million, but thesetwo directors still insisted so. Furthermore, Red Fire was deemed as this Company’s specialpurpose vehicle as Red Fire’s profits would ultimately belong to this Company based on theinvestigation conducted by this Company and the opinion of the legal counsel appointed bythis Company. As manifested in the fund flow, none of the ex-chairman of CTBC Bank, Mr.Koo and the other three employees involved in the litigation had acquired any gains personally.

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After this case was appealed for the third instance, the Supreme Court, in August of 2014,revoked the judgment made by the High Court and a re-trial by the High Court was ordered(“first retrial”). In the judgment made by the first retrial on September 12, 2018, a defendantwas judged not guilty and the others were guilty. All of the defendants judged guilty and theTaiwan High Prosecutors Office had appealed against the judgment. On November 14, 2019,the Supreme Court revoked the guilty judgment made by the first retrial on the defendants (i.e.,Koo, Chang and Lin) and a second re-trial by the High Court was ordered (“second retrial”),and the non-guilty judgment on the defendants rendered by the first retrial has affirmed. In thejudgment made by the second retrial on April 28, 2021, the defendants were judged not guilty(i.e., Koo, Chang and Lin). Prosecutors have filed an appeal against the judgment made by thesecond retrial. Given this, this case is not yet completely final and conclusive. According to theopinion of the legal counsel retained by this Company, “The profits of US$20.90 million fromthe redemption of the structured notes by Red Fire have been remitted to CT OpportunityInvestment Company, an overseas subsidiary of CTBC Holding. In addition, two directors ofCTBC Holding have advanced US$30,474,717 to CTBC Bank. Given that the total of theaforesaid two amounts is far more than the profits realized by Red Fire from the redemption ofthe structured notes, CTBC Holding has thus suffered no losses. Furthermore, as far as thelegal liability is concerned, since this case is a criminal one, even if certain defendants werejudged guilty, such judgment would not apply to CTBC Holding as a corporate entity. Besides,the guilty judgment has yet been final. Hence, the judgment has no material adverse impactupon the financial conditions or business operations of CTBC Holding, and would not affectthe fact that CTBC Holding suffers no losses or damages.” It is thus assessed by this Companythat this case has no material impact upon the operation and shareholders’ interests of CTBCBank and this Company.

The Taiwan High Prosecutors Office filed a petition to the High Court on July 6, 2016 againstthis Company trying to recover NT$261,696,000 illegal income arising from the stock pricemanipulation conducted by this Company. The High Court for the 1st retrial notified thisCompany to attend the court hearings as a third interested party. This Company is of theopinion that this case has no such act of stock price manipulation and there is no illegalincome. A legal counsel has been retained to claim so in the High Court for the 1st retrial. Inits judgment made by the High Court for the 1st retrial on September 12, 2018, this Company’sproperty should neither be confiscated nor pursued on the ground (among others) that this casehas no such act of stock price manipulation and there is thus no illegal income. Regarding thejudgment of no confiscation of this Company’s property made by the High Court for the 1stretrial on September 12, 2018, the Supreme Court revoked it and ordered a second retrial onthe ground that even the prosecutor did not appeal to the Supreme Court against the “ noconfiscation” judgment, the appeal nonetheless applies to this issue. In order to avoid a conflictof judgments respectively made by the 1st retrial court and the 2nd retrial court as far as the“ confiscation” issue is concerned, the Supreme Court thus revoked the “ no confiscation”judgment and ordered a 2nd retrial. In the judgment made by second retrial on April 28, 2021,CTBC Holding’s property should neither be confiscated nor levied. Prosecutors have filed anappeal against the judgment made by the second retrial. Hence, the “no confiscation” judgmentis not yet final.

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(ii) NPLs and Transaction of Chengcing Lake Building

As to the indictment brought by the prosecutor of the Taipei District Prosecutors Office onAugust 26, 2019 about the transaction of real property and non-performing loans betweenCTBC Bank and its related parties (i.e., Tectonics Laboratories Co., Ltd. and other companies)in 2005 and 2006, the legal counsel appointed by this Company opined that “Keshin Company,Lilin Company and Tectonics Laboratories Co., Ltd. were all special purpose vehiclesindirectly owned by CTBC Asset Management Co., Ltd., therefore the profits arising from thetransactions between the aforesaid three companies and CTBC Bank or CTBC First AssetManagement Co., Ltd., a subsidiary of CTBC Asset Management Co., Ltd. should ultimatelybelong to CTBC Holding. Because the non-performing loans of Fengshan Credit Union weresold by CTBC Bank within the appraise value range, there thus were no losses or damages.Given that the other three transactions of non-performing loans had been canceled and thepayments thereof had been returned to CTBC Bank, no losses or damages would have beenmade to CTBC Holding or CTBC Bank. According to the data provided by CTBC Holding, theprofits derived from the sale of Chenghu Building had been remitted to CT OpportunityInvestment, a subsidiary of CTBC Asset Management Co., Ltd. and had ultimately beenreturned to CTBC Holding. Given this, the transaction of Chenghu Building had caused nolosses or damages to CTBC Holding and CTBC Bank.” Based upon the aforesaid legalopinion, it is thus assessed by CTBC Holding that this case has no material impact on theoperations and shareholders’ interests of CTBC Holding or CTBC Bank.

(iii) US$300 million Overseas Investments

According to the press release of the Supreme Prosecutors Office on October 5, 2016, Mr. Koo(the ex-chairman of CTBC Bank) was involved in certain controversial overseas investmentsof US$300 million made in 2004 to 2007. The Taipei District Court rendered a judgment onAugust 23, 2019 judging that Mr. Koo and a current employee (Mr. Chang) were not guilty.The prosecutor has appealed against the judgment, and this case has been being tried by theHigh Court. The legal counsel retained by CTBC Holding opined: “ Pursuant to the 2016consolidated financial statement of CTBC Holding, the overseas investments made by CTOpportunity Investment Company (“ CTO” , a subsidiary of CTBC Asset Management Co.,Ltd.) at the end of 2015 were in total US$339,310,000; while by the end of 2016,US$304,988,000 were recovered and such recovered amount is more than the appropriatedUS$300 million as so accused in the aforesaid press release. Furthermore, when CTO wasliquidated, the amounts remitted for investment had all been recovered. Thus, CTBC Holdingand CTBC Asset Management Co., Ltd. had suffered no losses or damages, and there was nomaterial adverse impact to the financial conditions of these two companies.” The legal counselfurther opined: “According to two press releases about criminal judgment made by the TaipeiDistrict Court on August 23, 2019, an ex-employee of CTBC Holding was judged guilty ofembezzlement, but such judgment would not apply to CTBC Holding and CTBC AssetManagement Co., Ltd. In addition, even though Mr. Cheng was judged having embezzled theinvestment proceeds of CTO, CTBC Holding has recovered all investment funds together witha profit of US$41,154,896.72. Given this, CTBC Holding ultimately suffered no losses ordamages. Therefore, there would be no changes to our previous analysis and the aforesaidjudgment had no material adverse impact to the financial conditions and business operations ofCTBC Holding and CTBC Asset Management Co., Ltd.” Based upon the aforesaid legalopinion, it is thus assessed by CTBC Holding that this case has no material impact on theoperations and shareholders’ interests of CTBC Holding and CTBC Asset Management Co.,Ltd.

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(iv) CTBC Life Insurance & Gobo Group

In its press release made by the Supreme Prosecutors Office on October 5, 2016, CTBC LifeInsurance (before it was merged with Taiwan Life Insurance) was involved in a transaction inwhich it purchased a real property from Gobo Group at a price above the market price andsuffered losses and damages therefrom. The Taipei District Court, on August 23, 2019,rendered a judgment judging that Mr. Koo, (the ex-chairman of CTBC Bank) and a currentemployee (Mr. Chang) were not guilty. The prosecutor has appealed against such judgmentand the case is being tried by the High Court. The legal counsel retained by CTBC Holdingopined: “According to the data provided by CTBC Life Insurance (having been merged byTaiwan Life Insurance), CTBC Life Insurance purchased the real property from Gobo Group atthe price less than (1) the appraisal price given by two independent appraisal companies and(2) the ceiling set by the Board of Directors of CTBC Life Insurance. Given that (1) thepurchase price does not exceed the appraisal price and it is lack of concrete evidence to theeffect that the appraisal report is doubtful, (2) the transaction was made in due process, and (3)the purchase price is not unreasonable, the transaction in question had no impact of damagingthe interest of CTBC Life Insurance and CTBC Holding.” The legal counsel further opined:“According to two press releases made by the Taipei District Court on August 23, 2019, thecourt had judged that (1) the loan extended by CTBC Life Insurance to Gobo against a realproperty collateral (located at the 2nd floor of Asia Plaza Building) is an arms-lengthtransaction, (2) CTBC Life Insurance’ s bidding (to purchase the real property) was givensubject to a condition that Gobo should guarantee a two-year lease at the rental of NT$6,125per ping of up to a total of NT$2,000,268 per ping and in such event, the bidding was given inline with general practice, and (3) CTBC Life Insurance suffered no losses or damages. Sincethe court’s conclusion shares the same view as analyzed in our opinion, it can be proven thatCTBC Life Insurance suffered no losses in the loan transaction and the real propertytransaction.” Pursuant to the aforesaid legal opinion, it is thus assessed by CTBC Holding thatthis case has no material impact on the operations and shareholders’ interests of CTBC LifeInsurance and CTBC Holding.

(v) Neihu Land and Building

Regarding the transaction in which CTBC Bank purchased three lots of land in Neihu, Taipeiand the buildings thereon (consisting of administration building and computer facilities) andfrom which Mr. xxx Chang and others earned improper price differences, the Taipei DistrictProsecutors Office brought an indictment on January 12, 2017 and an additional indictmentagainst another employee on January 4, 2018. All defendants indicted on January 12, 2017were judged guilty and they have appealed. As to the additional indictment made on January 4,2018, the employee in question was judged not guilty by the Taipei District Court on June 4,2019, but this part has yet been final. In respect of the guilty judgment, the legal counselretained by CTBC Holding opined in writing: “CTBC Bank made the aforesaid purchase of theadministration building and computer facilities with the approval of its Board of Directors andit had in advance hired professional institutions to give an appraisal price for reference. Even ifthe court doubted that the appraisal institutions failed to appraise the real property objectively,it did not object the appraisal conclusion. Given that (1) the purchase prices were less than theappraisal prices and (2) the purchase prices did not exceed the ceilings set by the Board ofDirectors of CTBC Bank, it could be proven that the purchase prices were comparable with thethen reasonable prices and the employees-in-charge had followed the resolution of the Boardof Directors without breaking the law. It may therefore be concluded that CTBC Bank sufferedno losses or damages from the said transaction. Furthermore, as far as the legal liability is

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concerned, since this case is a criminal one, even if defendants were judged guilty, suchjudgment would not apply to CTBC Bank as a corporate entity. In addition, this has yet beenfinal. Hence, the guilty judgment has no material adverse impact upon the present financialconditions or business operations of CTBC Bank or CTBC Holding.” Regarding the issueraised in the guilty judgment that Yongyue Development Co., Ltd. is a related party to CTBCBank and the transaction in question should be disclosed in the financial statement of CTBCBank and CTBC Holding, the Board of Directors of CTBC Holding requested the department-in-charge together with a legal counsel to analyze and report. The analysis report manifests:“In our opinion, Mr. Chang in substance is not a person-in-charge and he has no controllingpower over CTBC Bank’ s policies or operations. The process and price of the purchasetransactions in question had been made in accordance with the law. Besides, Mr. Chang didneither attend the board meeting in which the transaction in question was reviewed norparticipate in the formation of decision about purchasing the real property in question.” Thelegal counsel further opined: “ According to the Regulations Governing the Acquisition andDisposal of Assets by Public Companies, Article 45 of the Financial Holding Company Act,CTBC Bank’ s Regulations Governing Transactions (other than credit extensions) by Quasi-Related Parties of CTBC Bank as amended on July 31, 2013, Regulations Governing thePreparation of Financial Statements by Issuers of Securities, Regulations Governing thePreparation of Financial Statements by Banks, and IAS 24, Mr. Chang is not, in form or insubstance, a related party or quasi-related party of CTBC Bank.”

“Ms. Woo, a shareholder of Yongyue Development Co., Ltd (also the ultimate beneficiary) andthe spouse of Mr. Chang’s younger brother, has taken no position of decision making power asstipulated in the aforesaid regulations and has no such identity as stated in Para. 9 of IAS (PartA). Thus, Ms. Woo is not a related party or quasi-related party of CTBC Bank.” As stated inthe aforesaid analysis report and legal opinion, Mr. Chang is not a person-in-charge insubstance of CTBC Bank and is neither a related party nor a quasi-related party of CTBC Bankin form or in substance. Even if Mr. Chang is deemed as a person-in-charge in substance ofCTBC Bank, Ms. Woo, as a second-degree relative (in marriage) of Mr. Chang, should not bedeemed as a related party or a quasi-related party of CTBC Bank, in accordance with Para. 9 ofIAS (Part A).

The legal counsel concluded “Regardless the guilty judgment has yet been final, the evidencesas referred to in the judgment are not strong enough to support the point that Mr. Changmanaged Yongyue in substance. Besides, the profits earned by Yongyue are irrelevant to Mr.Chang. As such, the transaction between CTBC Bank and Yongyue is not a related-partytransaction as far as CTBC Bank or CTBC Holding is concerned and thus, there is no need todisclose such deal in the financial statement.”

“From the evidences as stated in the guilty judgment, (1) it cannot conclude that Mr. Chang isthe person managing Yongyue in substance, as mentioned above, and (2) neither Mr. Changnor Ms. Woo is a related party or quasi-related party of CTBC Bank. We may say thatYongyue is not a related party or quasi-related party of CTBC Bank, the transaction inquestion between Yongyue and CTBC Bank is not a related-party transaction and accordingly,there should be no need for CTBC Holding to disclose such transaction in its quarterly orannual financial statement as a related-party transaction. It may conclude that there is no suchillegal misstatements in the financial statement.” Based upon the aforesaid legal opinion, giventhat (1) the purchase prices were comparable with the then reasonable prices and theemployees-in-charge had followed the resolution of the Board of Directors without breakingthe law. It may therefore be concluded that CTBC Bank suffered no losses or damages from

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the said transaction. In addition, neither Mr. Chang nor Yongyue is a related party or quasi-related party of CTBC Bank. There should be no need for this Company to disclose suchtransaction in its quarterly or annual financial statement as a related-party transaction. It mayconclude that there is no such illegal misstatements in the financial statement. It is thusassessed by CTBC Holding that this case has no material impact on the operations andshareholders’ interests of CTBC Bank and CTBC Holding.

(vi) Tainan Real property

As stated in a press release on September 12, 2019, the Taipei District Prosecutors Officemade an indictment relating to a sale by CTBC Bank of a real property located in Tainan in2012. The legal counsel retained by CTBC Holding opined that since (1) CTBC Bank hadhired a professional appraisal company to appraise before the transaction, (2) the sale pricewas higher than (a)the appraisal price and (b)the book value shown in June 2012, (3) thetransaction in question was duly made in accordance with CTBC Bank’s approval process, thetransaction in question was made in due process following CTBC Bank’ s internal rules andrelevant laws and regulations and CTBC Bank had suffered no losses or damages. It is thusassessed by CTBC Holding that this case has no material impact on the operations andshareholders’ interests of CTBC Bank and CTBC Holding.

(vii) Ex-Xinyi Headquarter Building

Regarding the transaction in which CTBC Bank sold 95% of its holding in the land atSongshou building (i.e., Ex-Xinyi headquarter building) in Taipei on November 6, 2015. Thelegal counsel retained by CTBC Holding opined that CTBC Bank sold the land by way ofpublic tender, Cushman & Walkfield was appointed to carry out the public tender, and Baker& McKenzie was also retained to monitor the whole process. CTBC Bank had hired twoprofessional appraisal companies to conduct appraisals in advance and the floor price for thepublic tender was set at the average of two appraisal prices. The transaction in question hadbeen approved by CTBC Bank’s audit committee and Board of Directors. The sale price washigher than the floor price set for the public tender. A public announcement about its boardapproval and the sale had been made by CTBC bank. The transaction in question had beenmade duly in accordance with relevant laws and regulations and CTBC Bank’s internal rules,and CTBC Bank suffered no losses or damages. All CTBC Holding and CTBC Bank’s relevantemployees were rendered the ruling “not to prosecute” on October 8, 2020.

(10) Losses Due to Major Disasters: None

(11) Subsequent Events: None

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(12) Other:

(a) Business segment financial information

For the three months ended June 30, 2021Unit: In Thousands of New Taiwan Dollars

Business SegmentItems Banking Securities Insurance Others ConsolidationNet interest income $ 14,393,174 89,745 12,257,947 39,328 26,780,194Non-interest income 7,982,791 803,894 1,458,211 955,191 11,200,087Net revenue 22,375,965 893,639 13,716,158 994,519 37,980,281(Provisions for) reversal of bad

debt expenses and guaranteereserve

(1,395,872) (85) 33,142 (11,832) (1,374,647)

Net changes in insurance liabilityreserve

- - (4,702,884) - (4,702,884)

Operating expenses (14,100,908) (494,294) (1,437,549) (955,426) (16,988,177)Net income before tax 6,879,185 399,260 7,608,867 27,261 14,914,573Less: Income tax expenses

(benefits)1,373,286 54,512 (183,126) (70,773) 1,173,899

Net income 5,505,899 344,748 7,791,993 98,034 13,740,674

For the three months ended June 30, 2020Unit: In Thousands of New Taiwan Dollars

Business SegmentItems Banking Securities Insurance Others ConsolidationNet interest income (losses) $ 14,065,845 50,318 13,238,435 (15,263) 27,339,335Non-interest income 8,877,265 748,821 10,066,173 710,450 20,402,709Net revenue 22,943,110 799,139 23,304,608 695,187 47,742,044(Provisions for) reversal of bad

debt expenses and guaranteereserve

(3,553,383) (196) 19,069 (22,663) (3,557,173)


- - (15,749,438) - (15,749,438)

Operating expenses (14,553,439) (296,884) (1,532,778) (897,163) (17,280,264)Net income (losses) before tax 4,836,288 502,059 6,041,461 (224,639) 11,155,169Less: Income tax expenses 801,153 25,777 845,601 2,464,703 4,137,234Net income (losses) 4,035,135 476,282 5,195,860 (2,689,342) 7,017,935

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For the six months ended June 30, 2021Unit: In Thousands of New Taiwan Dollars

Business SegmentItems Banking Securities Insurance Others ConsolidationNet interest income $ 28,518,432 166,717 24,855,685 72,926 53,613,760

Non-interest income 18,234,961 1,595,202 10,130,361 2,025,932 31,986,456

Net revenue 46,753,393 1,761,919 34,986,046 2,098,858 85,600,216

(Provisions for) reversal of baddebt expenses, commitments,and guarantee reserve

(2,321,049) (1,440) 17,331 (785) (2,305,943)


- - (10,421,511) - (10,421,511)

Operating expenses (29,207,392) (951,103) (3,126,216) (2,119,086) (35,403,797)

Net income (losses) before tax 15,224,952 809,376 21,455,650 (21,013) 37,468,965

Less: Income tax expenses(benefits)

2,831,582 102,074 1,235,864 (150,651) 4,018,869

Net income 12,393,370 707,302 20,219,786 129,638 33,450,096

For the six months ended June 30, 2020Unit: In Thousands of New Taiwan Dollars

Business SegmentItems Banking Securities Insurance Others ConsolidationNet interest income (losses) $ 28,524,831 96,934 26,338,333 (30,709) 54,929,389

Non-interest income 18,798,064 657,221 35,592,944 616,181 55,664,410

Net revenue 47,322,895 754,155 61,931,277 585,472 110,593,799

(Provisions for) reversal of baddebt expenses, commitments,and guarantee reserve

(5,533,982) (17) 14,589 30,312 (5,489,098)


- - (47,425,189) - (47,425,189)

Operating expenses (27,300,096) (522,135) (2,895,552) (1,568,291) (32,286,074)

Net income (losses) before tax 14,488,817 232,003 11,625,125 (952,507) 25,393,438

Less: Income tax expenses 2,562,184 22,066 1,015,783 2,614,383 6,214,416

Net income (losses) 11,926,633 209,937 10,609,342 (3,566,890) 19,179,022

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(b) Public notices pursuant to Financial Holding Company Law, Article 46

The aggregate amount of credit extended, guarantees given, or any other transactions conducted byall subsidiaries of the financial holding company to, for, or with the same person, same relatedperson, or same affiliate, disclosure of which is required under Article 46 of the Financial HoldingCompany ACT:

June 30, 2021

Unit: In Thousands of New Taiwan Dollars; %

Names or titles

Aggregate amountof credits,

guarantees or anyother transactions

Aggregatepercentage of thefinancial holding

company’s net worthA. The same person

CENTRAL BANK OF REPUBLIC OF CHINA(TAIWAN) $ 494,211,589 %115.25

TAIWAN GOVERNMENT 218,203,671 %50.88PERSONAL CLIENT OF THE TOKYO STAR

BANK, LTD. 200,484,000 %46.75GOVERNMENT AGENCIES CLIENT OF THE

TOKYO STAR BANK, LTD. 122,064,000 %28.46SERVICE INDUSTRY CLIENT OF THE

TOKYO STAR BANK, LTD. 98,113,000 %22.88TAIWAN POWER COMPANY 57,676,646 %13.45NATIONAL TREASURY ADMINISTRAION,

MINISTRY OF FINANCE 52,000,000 %12.13US GOVERNMENT 51,894,469 %12.10FANNIE MAE 51,165,734 %11.93REAL ESTATE INDUSTRY CLIENT OF THE

TOKYO STAR BANK, LTD. 49,721,000 %11.59REAL ESTATE INDUSTRY CLIENT OF THE

CTBC CAPITAL CORP. 48,517,000 %11.31 FINANCIAL INSTITUTION CLIENT OF THE

TOKYO STAR BANK, LTD. 44,877,000 %10.47BANK OF AMERICA 39,471,650 %9.20JP MORGAN CHASE & CO. 39,103,721 %9.12VERIZON COMMUNICATIONS INC. 33,666,558 %7.85PERSONAL CLIENT OF THE CTBC

CAPITAL CORP. 32,445,000 %7.57

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Names or titles




company’s net worthGOVERNMENT NATIONAL MORTGAGE

ASSOCIATION $ 30,716,252 %7.16CENTRAL TAIWAN SCIENCE PARK

BUREAU 30,000,000 %7.00TAIWAN RAILWAYS ADMINISTRATION 29,821,005 %6.95BNP PARIBAS SA 26,442,404 %6.17MORGAN STANLEY 26,358,170 %6.15SAUDI ARABIAN GOVERNMENT 23,935,125 %5.58CITIGROUP INC. 23,590,221 %5.50FINANCE BUREAU OF KAOHSIUNG CITY

GOVERNMENT 21,500,000 %5.01AT&T INC. 20,761,412 %4.84WELLS FARGO & CO. 20,705,351 %4.83COMISION FED DE ELECTRIC 20,028,324 %4.67MEXICAN GOVERNMENT 17,037,669 %3.97COMCAST CORP. 16,990,454 %3.96ELECTRICITE DE FRANCE S.A. 16,572,613 %3.86RABOBANK NEDERLA 16,416,470 %3.83MANUFACTURING INDUSTRY CLIENT OF

THE PT. BANK CTBC INDONESIA 16,355,000 %3.81CATHAY SECURITIES INVESTMENT

TRUST CO., LTD. 16,253,010 %3.79CAPITAL INVESTMENT TRUST CORP. 15,685,612 %3.66CREDIT AGRICOLE SA 15,499,469 %3.61QNB FINANCE LTD 15,491,981 %3.61ADCB FINANCE CAYMAN LTD. 15,058,553 %3.51QATAR GOVERNMENT 14,863,188 %3.47HSBC HOLDINGS PLC. 14,735,056 %3.44INDONESIAN GOVERNMENT 14,566,489 %3.40PEOPLES REPUBLIC OF CHINA

GOVERNMENT 14,474,285 %3.38CHINA DEVELOPMENT BANK 14,393,860 %3.36SOUTHERN TAIWAN SCIENCE PARK

BUREAU 14,000,000 %3.26

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Names or titles




company’s net worthYUANTA FUNDS CO., LTD. $ 13,865,962 %3.23TAIPEI FUBON COMMERCIAL BANK CO.,

LTD. 13,683,437 %3.19REPUBLIC OF SINGAPORE 13,308,003 %3.10GOLDMAN SACHS GROUP INC. 13,276,831 %3.10COLOMBIA GOVERNMENT 12,974,790 %3.03MANUFACTURING INDUSTRY CLIENT OF

THE TOKYO STAR BANK, LTD. 12,682,000 %2.96BANK OF CHINA LIMITED 12,482,563 %2.91FIRST ABU DHABI BANK PJSC 11,936,334 %2.78CITIC LTD. 11,936,101 %2.78COMMONWEALTH BANK OF AUSTRALIA 11,712,283 %2.73NATIONAL AUSTRALIA BANK LIMITED 11,633,808 %2.71OTHER INDUSTRY CLIENT OF THE

TOKYO STAR BANK, LTD. 11,431,000 %2.67TAIWAN SEMICONDUCTOR

MANUFACTURING COMPANY LIMITED 11,204,273 %2.61BARCLAYS BANK PLC. 11,155,623 %2.60UBS AG 11,052,603 %2.58CHUNGHWA TELECOM CO., LTD. 11,041,068 %2.57BRAZIL GOVERNMENT 10,863,311 %2.53TAIWAN CEMENT LTD. 10,743,588 %2.51CORP NACIONAL DEL COBRE 10,446,207 %2.44THE EXPORT-IMPORT BANK OF CHINA 10,378,571 %2.42STATE OF CALIFORNIA 10,139,139 %2.36SOCIETE GENERALE SA 10,031,381 %2.34SUMITOMO MITSUI BANKING

CORPORATION 9,918,821 %2.31TENCENT HOLDINGS LTD. 9,882,146 %2.30RUSSIAN GOVERNMENT 9,699,108 %2.26AGRICULTURAL DEVELOPMENT BANK

OF CHINA 9,616,588 %2.24JAPAN BANK INTERNATIONAL

COOPERATION 9,381,397 %2.19

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Names or titles




company’s net worthEXPORT-IMPORT BANK OF KOREA $ 9,262,008 %2.16TAIWAN MOBILE CO., LTD. 9,042,634 %2.11MEGA FINANCIAL HOLDING CO., LTD. 9,041,039 %2.11BARCLAYS PLC. 9,017,148 %2.10FREEWAY BUREAU, MOTC 9,000,000 %2.10SERVICE INDUSTRY CLIENT OF THE

CTBC CAPITAL CORP. 8,980,000 %2.09ANHEUSER-BUSCH INBEV SA/NV 8,948,192 %2.09FUBON SECURITIES EQUITY

INVESTMENT CO., LTD. 8,784,235 %2.05APPLE INC. 8,708,325 %2.03FORMOSA PLASTIC CORPORATION 8,653,797 %2.02FUBON SECURITIES CO., LTD. 8,628,796 %2.01ANZ BANKING GROUP LTD. 8,515,666 %1.99TAIWAN BUSINESS BANK CO., LTD. 8,354,873 %1.95NEW TAIPEI CITY GOVERNMENT 8,272,189 %1.93AU OPTRONICS CORP. 8,248,109 %1.92CNOOC PETROLEUM NORTH AMERICA

ULC 8,070,403 %1.88AMGEN INC. 8,054,521 %1.88YUANTA SECURITIES CO., LTD. 7,944,573 %1.85ASIAN DEVELOPMENT BANK 7,860,232 %1.83FINANCE BUREAU OF TAIPEI CITY

GOVERNMENT 7,800,000 %1.82WESTPAC BANKING CORP. 7,748,548 %1.81ARES CAPITAL CORP. 7,639,171 %1.78GOVERNMENT AGENCIES CLIENT OF THE

PT. BANK CTBC INDONESIA 7,625,000 %1.78HSBC BANK MIDDLE EAST LTD. 7,295,058 %1.70TAICHUNG CITY GOVERNMENT 7,200,000 %1.68DEUTSCHE BANK AG 7,146,610 %1.67SANTANDER INTERNATIONAL PRODUCT

PLC. 7,135,150 %1.66

(Continued)

234


Names or titles




company’s net worthPETRONAS CAPITAL LTD. $ 7,125,754 %1.66CATCHER TECHNOLOGY CO., LTD. 7,100,789 %1.66BANK OF TOKYO-MITSUBISHI UFJ 7,058,990 %1.65IL GOVERNMENT 6,993,215 %1.63TAISHIN FINANCIAL HOLDING CO., LTD. 6,979,959 %1.63BANK SINOPAC CO., LTD. 6,888,434 %1.61FUHUA TRUST CO., LTD. 6,814,370 %1.59PETROLEOS MEXICANOS 6,804,711 %1.59CHANG HWA COMMERCIAL BANK, LTD. 6,737,600 %1.57CENTRAL AMERICAN BANK FOR

ECONOMIC INTEGRATION 6,698,764 %1.56UNITED OVERSEAS BANK LTD. 6,554,066 %1.53BANK OF MONTREAL 6,537,395 %1.52HUA NAN COMMERCIAL BANK, LTD. 6,488,350 %1.51QUANTA COMPUTER CO., LTD. 6,478,832 %1.51ROYAL BANK OF CANADA 6,466,549 %1.51AIG INC. 6,439,559 %1.50TAIWAN COOPERATIVE BANK CO., LTD. 6,349,837 %1.48PERUSAHAAN LISTRIK NEGARA PT 6,306,750 %1.47NAN SHAN LIFE INSURANCE CO., LTD. 6,239,369 %1.45THOMA BRAVO, LLC. 6,214,076 %1.45GOVERNMENT AGENCIES CLIENT OF

THE CTBC BANK (PHILIPPINES) CORP. 6,120,000 %1.43BP CAPITAL MARKETS AMERICA INC. 6,119,552 %1.43SERVICE INDUSTRY CLIENT OF THE

CTBC BANK (PHILIPPINES) CORP. 6,114,000 %1.43KGI SECURITIES INVESTMENT TRUST

CO., LTD. 6,098,620 %1.42CREDIT SUISSE GROUP FUNDING 6,064,656 %1.41INTERNATIONAL BANK FOR

RECONSTRUCTIONAND DEVELOPMENT (THE WORLDBANK) 6,054,261 %1.41

BPCE SA 5,972,364 %1.39

(Continued)

235


Names or titles




company’s net worthENEL FINANCE INTERNATION NV $ 5,957,308 %1.39CREDIT SUISSE GROUP AG 5,953,550 %1.39ALIBABA GROUP HOLDING LTD. 5,942,843 %1.39EMIRATES NBD PJSC 5,895,304 %1.37BANK OF NOVA SCOTIA, TORONTO 5,892,545 %1.37SOUTHERN POWER COMPANY 5,860,973 %1.37MANULIFE FINANCIAL CORP. 5,845,019 %1.36NATIXIS 5,743,856 %1.34HSBC BANK PLC. 5,662,915 %1.32SAUDI ARABIAN OIL COMPANY 5,621,640 %1.31STANDARD CHARTERED PLC. 5,574,661 %1.30THE SHANGHAI COMMERCIAL &

SAVINGS BANK, LTD. 5,538,613 %1.29GRUPO TELEVISA SA-SPON ADR 5,537,372 %1.29FORMOSA CHEMICALS & FIBRE

CORPORATION 5,464,145 %1.27HONGKONG GOVERNMENT 5,412,627 %1.26HSINCHU COUNTY GOVERNMENT 5,400,000 %1.26FOXWELL ENERGY CO., LTD. 5,400,000 %1.26DP WORLD LTD. 5,338,957 %1.25SHELL INTERNATIONAL FIN. 5,334,626 %1.24FAR EAS TONE TELECOMMUICATIONS

CO., LTD. 5,325,529 %1.24IBM CORP. 5,258,912 %1.23SOUTHERN COPPER CORP. 5,187,705 %1.21WALT DISNEY COMPANY 5,186,834 %1.21CHINA PETROCHEMICAL DEVELOPMENT

CORPORATION 5,152,009 %1.20ANHEUSER-BUSCH INBEV WORLDWIDE

INC. 5,124,409 %1.19INDUSTRIAL AND COMMERCIAL BANK

OF CHINA 5,120,956 %1.19SHIN KONG INTERNATIONAL SECURITIES

CO., LTD. 5,090,672 %1.19

(Continued)

236


Names or titles




company’s net worthING GROEP NV $ 5,067,336 %1.18AIA GROUP LTD. (HK) 5,050,422 %1.18TAINAN CITY GOVERNMENT 5,000,000 %1.17LLOYDS BANK PLC. 4,991,912 %1.16FINANCIAL INSTITUTION CLIENT OF THE

CTBC BANK (PHILIPPINES) CORP. 4,977,000 %1.16TAQA ABU DHABI NATL ENER 4,966,801 %1.16CHINA CINDA FINANCE 4,960,503 %1.16ANTHEM INC. 4,953,990 %1.16INNOLUX CORPORATION 4,827,504 %1.13CORNING INC. 4,823,595 %1.12TAIWAN STAR TELECOM CORPORATION

LIMITED 4,816,552 %1.12REPUBLIC OF PANAMA 4,815,483 %1.12SHIN KONG BANK CO., LTD. 4,803,411 %1.12INDUSTRIAL BANK CO., LTD. 4,757,369 %1.11BRISTOL-MYERS SQUIBB COMPANY 4,691,712 %1.09HUARONG FINANCE 2017 CO., LTD. 4,669,804 %1.09KOREA DEVELOPMENT BANK, THE,

SEOUL 4,657,129 %1.09AMERICA MOVIL SAB DE CV 4,625,066 %1.08SINOPEC GROUP 2018 OVERSEAS

DEVELOPMENT LTD. 4,595,846 %1.07SINOCHEM OVERSEAS CAPITA 4,566,410 %1.06DBS GROUP HOLDINGS LIMITED 4,558,291 %1.06FORMOSA HA TINH (CAYMAN) LIMITED 4,521,280 %1.05MDC-GMTN BV 4,518,017 %1.05MAWDER INTERNATIONAL

INVESTMENTS CO., LTD. 4,500,000 %1.05SERVICE INDUSTRY CLIENT OF THE PT.

BANK CTBC INDONESIA 4,500,000 %1.05FIRST FINANCIAL HOLDING CO., LTD. 4,442,153 %1.04LAND BANK OF TAIWAN CO., LTD. 4,396,204 %1.03

(Continued)

237


Names or titles




company’s net worthUNIMICRON TECHNOLOGY CORP. $ 4,382,499 %1.02SINOPAC SECURITIES CORPORATION 4,367,795 %1.02HUMANA INC. 4,337,812 %1.01CIGNA CORPORATION 4,324,668 %1.01NB ALTERNATIVES ADVISERS LLC. 4,308,110 %1.00HSINCHU CITY GOVERNMENT 4,283,340 %1.00CPC CORPORATION, TAIWAN 4,280,327 %1.00BAYER US FINANCE II LLC. 4,273,699 %1.00MALAYAN BANKING BERHAD 4,263,047 %0.99HUAKU DEVELOPMENT CO., LTD. 4,227,047 %0.99GOLDMAN SACHS FINANCE CORP

INTERNATIONAL LTD. 4,222,375 %0.98REPUBLIC OF KOREA GOVERNMENT 4,220,038 %0.98CITIGROUP GLOBAL MARKETS 4,212,875 %0.98ABBVIE INC. 4,201,923 %0.98CHANGFANG WIND POWER CO., LTD. 4,180,923 %0.97THE BANK OF YOKOHAMA, LTD. 4,180,448 %0.97BANK OF COMMUNICATIONS CO., LTD. 4,152,237 %0.97RELIANCE INDUSTRIES LTD. 4,112,180 %0.96PHILLIPS 66 4,087,639 %0.95LLOYDS BANKING GROUP PLC. 4,041,276 %0.94CHINA NATIONAL PETROLEUM

CORPORATION 4,032,011 %0.94CHANGHUA COUNTY GOVERNMENT 4,000,000 %0.93E.SUN COMMERCIAL BANK, LTD. 3,970,072 %0.93WOORI BANK GROUP 3,922,708 %0.91DA-FU MEDIA CORP. 3,900,134 %0.91GOLDMAN SACHS FINANCE CORP

INTERNATIONAL LTD. 3,871,644 %0.90FINANCIAL INSTITUTION CLIENT OF THE

PT. BANK CTBC INDONESIA 3,863,000 %0.90AGRICULTURAL BANK OF CHINA

LIMITED 3,822,565 %0.89

(Continued)

238


Names or titles




company’s net worthMORGAN STANLEY AND CO.

INTERNATIONAL PLC. (FOREIGN $ 3,810,802 %0.89MORGAN STANLEY FINANCE LLC. 3,759,660 %0.88HOFA LAND DEVELOPMENT CO., LTD. 3,741,044 %0.87CHINA STATE GRID CORPORATION OF

CHINA 3,692,195 %0.86HALLIBURTON CO. 3,691,203 %0.86HON HAI PRECISION INDUSTRY CO., LTD. 3,682,467 %0.86PINGTUNG COUNTY GOVERNMENT 3,660,000 %0.85NOMURA INTERNATIONAL FUNDING PTE

LTD. 3,632,798 %0.85SINOPAC SECURITIES INVESTMENT

TRUST CO., LTD. 3,623,917 %0.85FIRST COMMERCIAL BANK CO., LTD. 3,601,856 %0.84UNITED MICROELECTRONICS CORP. 3,591,277 %0.84VODAFONE GROUP PLC. 3,586,761 %0.84CATHAY UNITED BANK, LTD. 3,576,370 %0.83CONS EDISION CO. OF NY 3,564,202 %0.83HONGKONG ELECTRIC FINANCE LTD. 3,542,681 %0.83NEW RESIDENTIAL INVESTMENT CORP. 3,538,665 %0.83PERSONAL CLIENT OF THE CTBC BANK

CORP. (CANADA) 3,516,000 %0.82SG ISSUER SA 3,506,200 %0.82ABN AMRO BANK NV 3,468,484 %0.81ROGERS COMMINICATIONS INC. 3,463,378 %0.81EUROPEAN INVESTMENT BANK 3,453,778 %0.81PERSONAL CLIENT OF THE CTBC BANK

(PHILIPPINES) CORP. 3,440,000 %0.80YAGEO CORPORATION 3,415,689 %0.80KEB HANA BANK 3,407,367 %0.79CHINA NETWORK SYSTEMS CO., LTD. 3,359,135 %0.78FREDDIE MAC 3,346,709 %0.78BANK RAKYAT INDONESIA 3,344,400 %0.78

(Continued)

239


Names or titles




company’s net worthMANUFACTURING INDUSTRY CLIENT OF

THE CTBC BANK (PHILIPPINES) CORP. $ 3,333,000 %0.78STATE OF CALIFORNIA 3,318,720 %0.77ENBRIDGE INC. 3,303,262 %0.77PRUDENTIAL PLC. 3,303,127 %0.77INFRAESTRUCTURA ENERGETICA NOVA

SAB DE CV 3,286,455 %0.77REAL ESTATE INDUSTRY CLIENT OF THE

CTBC BANK (PHILIPPINES) CORP. 3,261,000 %0.76MOROCCO GOVERNMENT 3,231,834 %0.75SHIN KONG LIFE INSURANCE CO., LTD. 3,227,662 %0.75MACQUARIE BANK LIMITED 3,216,052 %0.75NORDEA BANK AB 3,207,623 %0.75ASIA CEMENT (CHINA) HOLDINGSCORP 3,201,090 %0.75FINANCIAL INSTITUTION CLIENT OF THE

CTBC CAPITAL CORP. 3,172,000 %0.74DELL GLOBAL B.V. (SINGAPORE

BRANCH) 3,169,545 %0.74ANHEUSER-BUSCH COS LLC / ANH 3,167,523 %0.74AXIATA SPV5 LABUAN LTD. 3,151,132 %0.73CHINA OVERSEAS FINANCE CAYMAN 3,128,568 %0.73SEMBCORP FINANCIAL SERVICES PTE

LTD. 3,108,037 %0.72CATHAY FINANCIAL HOLDING CO., LTD. 3,104,436 %0.72REAL ESTATE CLIENT OF THE CTBC

BANK CORP. (CANADA) 3,085,000 %0.72FAR EASTERN NEW CENTURY

CORPORATION 3,072,779 %0.72COASTAL EMERALD LTD. 3,071,652 %0.72FAR EAST HORIZON LIMITED 3,065,544 %0.71ECOPETROL SA 3,060,301 %0.71WARBURG PINCUS LLC. 3,059,836 %0.71CIMB BANK BERHAD 3,037,812 %0.71CVS HEALTH CORP. 3,007,235 %0.70

(Continued)

240


Names or titles




company’s net worthMr./Ms. Jhong $ 3,000,000 %0.70

B. The same related personMr./Ms. Wang 11,482,884 %2.68Mr./Ms. Jhuang 6,742,614 %1.57Mr./Ms. Wu 4,272,435 %1.00Mr./Ms. Jhuang 4,266,144 %0.99Mr./Ms. Lu 3,761,887 %0.88Mr./Ms. Lee 3,758,582 %0.88Mr./Ms. Wang 3,727,347 %0.87Mr./Ms. Chan 3,646,243 %0.85Mr./Ms. Chan 3,646,243 %0.85Mr./Ms. Chan 3,646,243 %0.85Mr./Ms. Lee 3,209,184 %0.75Mr./Ms. Lee 3,209,184 %0.75Mr./Ms. Yang 3,209,184 %0.75Mr./Ms. Wei 3,080,664 %0.72

C. The same affiliateAMERICA GROUP 87,695,562 %20.45JP MORGAN CHASE & CO. GROUP 41,859,787 %9.76MERRILL LYNCH GROUP 40,030,570 %9.33SHIN KONG GROUP 35,869,572 %8.36FUBON GROUP 35,352,371 %8.24MORGANSTANLEY GROUP 35,175,914 %8.20HSBC GROUP 34,310,721 %8.00CITIGROUP INC. GROUP 31,520,550 %7.35THE FAR EASTERN GROUP 25,971,999 %6.06LINYUAN GROUP 24,293,829 %5.67YUANTA FINANCIAL HOLDING GROUP 23,828,535 %5.56GOLDMAN SACHS GROUP INC. GROUP 22,830,412 %5.32KAOHSIUNG CITY GOVERNMENT GROUP 21,600,073 %5.04CITIC GROUP 21,059,190 %4.91WELLS FARGO & CO. GROUP 20,982,732 %4.89

(Continued)

241


Names or titles




company’s net worthBARCLAYS BANK PLC. GROUP $ 20,172,771 %4.70COMCAST CORPORATION GROUP 18,028,511 %4.20ANHEUSER-BUSCH INBEV SA/NV GROUP 17,910,535 %4.18HON HAI FOXCONN GROUP 17,903,531 %4.18CREDIT AGRICOLE CORPORATE AND

INVES GROUP 16,339,212 %3.81CHINA DEVELOPMENT BANK GROUP 16,060,878 %3.75THE CAPITAL SECURITIES GROUP 15,708,172 %3.66SINOPAC FINANCIAL HOLDING GROUP 15,167,050 %3.54FCFC GROUP 15,166,143 %3.54TSMC GROUP 14,098,288 %3.29TAIWAN TELECOM GROUP 14,084,823 %3.28NATIONAL BANK OF ABU DHABI GROUP 14,010,002 %3.27TAIWAN CEMENT GROUP 13,637,676 %3.18SOCIETE GENERALE GROUP 13,537,581 %3.16SINOPEC GROUP 13,103,266 %3.06BANK OF CHINA GROUP 13,102,217 %3.06UMC GROUP 12,974,347 %3.03CREDIT SUISSE A.G. GROUP 12,724,770 %2.97CHINA CINDA HK HOLDINGS CO., LTD.

GROUP 12,063,963 %2.81HOTAI MOTOR SUBSIDIARIES GROUP 11,786,270 %2.75BPCE GROUP 11,716,220 %2.73MEGA HOLDING GROUP 11,656,868 %2.72AIG GROUP 11,490,895 %2.68SOUTHERN CO., GROUP 11,287,730 %2.63UBS AG GROUP 11,166,650 %2.60CHUNGHWA TELECOM GROUP 11,043,268 %2.58FORMOSA PLASTIC GROUP 10,988,344 %2.56AUO GROUP 10,420,288 %2.43CNOOC GROUP 10,380,596 %2.42HONTAI GROUP 9,900,018 %2.31

(Continued)

242


Names or titles




company’s net worthANZ BANKING GROUP $ 9,679,916 %2.26TAIWAN COOPERATIVE FINANCIAL

HOLDING GROUP 9,648,269 %2.25FIRST FINANCIAL HOLDING GROUP 9,460,905 %2.21BANCOSANTANDER GROUP 9,150,269 %2.13CHINA DEVELOPMENT BANK GROUP 9,057,969 %2.11LLOYDS BANKING GROUP PLC. GROUP 9,033,188 %2.11TING HSIN INTERNATIONAL GROUP 8,874,439 %2.07TEMASEK HOLDINGS GROUP 8,661,290 %2.02INDUSTRIAL & COMMERCIAL BANK OF

CHINA GROUP 8,447,229 %1.97HUA NAN GROUP 8,196,835 %1.91ALIBABA GROUP 8,184,588 %1.91SAUDI ARABIAN OIL COMPANY GROUP 7,806,934 %1.82PERUSAHAAN LISTRIK NEGARA GROUP 7,671,865 %1.79DBS GROUP 7,596,944 %1.77RUENTEX GROUP 7,540,194 %1.76STANDARD CHARTERED GROUP 7,409,175 %1.73MITSUBISHI UFJ FG GROUP 7,352,535 %1.71UNITED OVERSEAS BANK GROUP 7,093,480 %1.65CHENG UEI GROUP 7,052,924 %1.64GAW CAPITAL GROUP 6,926,773 %1.62CHINA STEEL GROUP 6,739,147 %1.57QUANTA COMPUTER GROUP 6,658,914 %1.55ING BANK GROUP 6,619,744 %1.54BANK OF MONTREAL GROUP 6,572,370 %1.53BP PLC. GROUP 6,557,897 %1.53ENEL SPA GROUP 6,311,059 %1.47PRUDENTIAL PLC. GROUP 6,304,034 %1.47CHINA NATIONAL PETROLEUM GROUP 6,192,402 %1.44VILC GROUP 6,125,692 %1.43ASE GROUP 5,926,302 %1.38

(Continued)

243


Names or titles




company’s net worthMANULIFE FIN GROUP $ 5,878,721 %1.37WALSIN LIHWA GROUP 5,792,988 %1.35MAW DER PROPERTY DEVELPOMENT

GROUP 5,690,000 %1.33THE SHANGHAI COMMERCIAL &

SAVINGS GROUP 5,624,833 %1.31ROYAL DUTCH SH-A GROUP 5,609,283 %1.31CORE PACIFIC GROUP 5,291,852 %1.23PHOENIX PROPERTY INVESTORS GROUP 5,071,267 %1.18YULON GROUP 5,051,301 %1.18CHINA HUARONG ASSET MANAGEME

GROUP 5,044,193 %1.18HFF GROUP 4,766,034 %1.11SPORTS CITY INTERNATIONAL GROUP 4,762,158 %1.11IPIC GROUP 4,761,461 %1.11YAGEO GROUP 4,747,548 %1.11SAN MIGUEL GROUP 4,730,057 %1.10BEIJING ENTERPRISES HOLDINGS GROUP 4,699,527 %1.10CPC GROUP 4,680,582 %1.09SINOCHEM GROUP 4,622,053 %1.08ENBRIDGE INC. GROUP 4,585,642 %1.07KINGSTON GROUP 4,396,877 %1.03FARGLORY GROUP 4,245,218 %0.99CHINA OVERSEAS LAND & INVESTMENT

LTD. GROUP 4,239,830 %0.99CIP GROUP 4,202,233 %0.98ASUS GROUP 4,193,305 %0.98STRONGMAN CYCLES GROUP 4,162,689 %0.97NOMURA HOLDINGS INC. GROUP 4,091,087 %0.95E.SUN FINANCIAL HOLDINGS CO., LTD.

GROUP 3,973,054 %0.93GVL GROUP 3,966,044 %0.92MIZUHO BANK LTD. GROUP 3,834,083 %0.89

(Continued)

244


Names or titles




company’s net worthCHINA STATE GRID CORP. GROUP $ 3,833,163 %0.89SANDI GROUP 3,700,000 %0.86BANK RAKYAT INDONESIA GROUP 3,514,128 %0.82SOUNDRISE CONSTRUCTION GROUP 3,431,589 %0.80UNI-PRESIDENT GROUP 3,377,483 %0.79REALTEK GROUP 3,353,487 %0.78FCL GROUP 3,234,416 %0.75CONSTRUCTION BANK GROUP 3,203,819 %0.75IBT LEASING GROUP 3,131,057 %0.73CHYAU FWU PROPERTIES GROUP 3,046,360 %0.71AXA SA GROUP 3,000,445 %0.70

(Continued)

245


Note:

1. If the aggregate amount of credit extended, guarantees given, or any other transactions conductedby all subsidiaries of the financial holding company to, for, or with the same person, same relatedperson or same affiliate is greater than the lower of 5% of net worth of the financial holdingcompany or NT$3 billion, the related transaction information needs to be filed according to thetable refer above.

2. Credit includes loans, discounts, overdrafts, acceptances, guarantees and other lines of businessoperations designated by the Central Competent Authority.

3. Guarantees here are indicative of endorsements and guarantees of bills finance corporations.

4. Other transactions with the same person, same related person, or same affiliate (thereinafterreferred to as “the affiliates”) here are indicative of the transactions listed below:

(1) Investment in or purchase of securities issued by any of the affiliates mentioned in thepreceding paragraph;

(2) Purchase of real estate or other assets from any of the affiliates mentioned in the precedingparagraph;

(3) Sale of securities, real estate or other assets to any of the affiliates mentioned in thepreceding paragraph;

(4) Entering into agreements regarding payment of money or provision of services with any ofthe affiliates mentioned in the preceding paragraph;

(5) Arrangements involving any of the affiliates mentioned in the preceding paragraph acting asan agent or broker of a financial holding company or its subsidiaries or providing otherservices which charge commission or fees;

(6) Engaging in transactions with third parties having a relationship with any of the affiliatesmentioned in the preceding paragraph or engaging in transactions with third parties in whichthe affiliates mentioned in the preceding paragraph are involved; and

(7) The amount of the transactions with the affiliates mentioned in the preceding paragraph shallnot include negotiable certificates of deposit issued by a bank subsidiary.

(Continued)

246


CTBC Financial Holding Co., Ltd.BALANCE SHEETS

June 30, 2021, December 31 and June 30, 2020(Expressed in Thousands of New Taiwan Dollars)

(c) Financial statements of the Parent company

June 30, 2021 December 31, 2020 June 30, 2020　Assets Amount ％ Amount ％ Amount ％

11000 　Cash and cash equivalents $ 265,685 - 103,047 - 18,977,662 4

12150 　Financial assets measured at fair value through other

comprehensive income

14,791,221 3 795,600 - 10,833,519 2

12500 　Securities purchased under resell agreements 498,490 - - - 3,270,611 1

13000 　Receivables-net 768 - 5,511 - 206 -

13200 　Current income tax assets 281,790 - 9,318 - 8,182 -

15000 　Investments under equity method-net 473,081,617 97 466,203,628 100 421,858,122 93

15500 　Other financial assets-net 11,615 - 11,609 - 6,609 -

18500 　Premises and equipment-net 58,052 - 60,202 - 61,826 -

18600 　Right-of-use assets-net 31,202 - 46,705 - 66,509 -

19000 　Intangible assets-net 4,485 - 4,544 - 1,711 -

19300 　Deferred income tax assets 17,566 - 17,671 - 15,199 -

19500 　Other assets-net 36,855 - 27,608 - 28,541 -

Total assets $ 489,079,346 100 467,285,443 100 455,128,697 100

June 30, 2021 December 31, 2020 June 30, 2020　Liabilities and Equity Amount % Amount % Amount %Liabilities:

22600 　Commercial papers payable-net $ 999,823 - 7,099,144 2 35,434,455 8

23000 　Payables 1,245,370 - 1,223,856 - 21,401,092 5

23200 　Current income tax liabilities 6,436 - 2,215,608 - 2,486,689 1

24000 　Bonds payable 57,900,000 12 51,400,000 11 34,200,000 7

24600 　Provisions 77,353 - 76,170 - 63,074 -

26000 　Lease liabilities 25,187 - 40,095 - 60,109 -

29500 　Other liabilities 5 - - - 54 -

　　Total Liabilities 60,254,174 12 62,054,873 13 93,645,473 21

Stockholders’ Equity - Parent Company：

　Capital stock:

31101 　Common stock 194,969,896 40 194,969,896 42 194,969,896 43

31103 　Preferred stock 4,999,900 1 4,999,900 1 4,999,900 1

31500 　Capital surplus 58,732,202 12 58,754,923 13 58,754,923 13

　Retained earnings:

32001 　Legal reserve 32,003,213 7 32,003,213 7 32,003,213 7

32003 　Special reserve 16,188,405 3 16,188,405 3 16,188,405 3

32011 　Undistributed earnings 130,916,913 27 97,217,071 21 73,783,605 16

32500 　Other equity interest (8,985,357) (2) 1,097,162 - (19,216,718) (4)

　　Total Equity 428,825,172 88 405,230,570 87 361,483,224 79

Total Liabilities and Equity $ 489,079,346 100 467,285,443 100 455,128,697 100

(Continued)

247


CTBC FINANCIAL HOLDING CO., LTD.

STATEMENTS OF COMPREHENSIVE INCOME

For the three and six months ended June 30, 2021 and 2020

(Expressed In Thousands of New Taiwan Dollars)


Amount ％ Amount ％ Amount % Amount %Income:

　Proportionate share of gains

from associates or joint

ventures under equity

method

$ 14,183,637 100 10,058,637 100 34,433,759 100 22,566,961 100

　Other income 24,746 - 16,350 - 40,904 - 46,076 -

Expenses and Losses:

　Operating expenses (445,113) (3) (452,872) (4) (1,009,567) (3) (656,231) (3)

　Other expenses and losses (141,648) (1) (136,955) (2) (280,013) (1) (277,342) (1)

Net Income before Tax 13,621,622 96 9,485,160 94 33,185,083 96 21,679,464 96

Less: Income tax (benefit)

expense

(118,910) (1) 2,468,002 24 (264,166) (1) 2,502,355 11

Net Income 13,740,532 97 7,017,158 70 33,449,249 97 19,177,109 85

Other comprehensive income

(losses) (net amount after

tax)

6,673,985 47 33,039,199 328 (9,788,795) (28) (18,431,753) (82)

Total Comprehensive Income $ 20,414,517 144 40,056,357 398 23,660,454 69 745,356 3

Basic EPS (in NT dollars) $ 0.70 0.31 1.72 0.93

(Continued)

248

CTBC FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIESNotes to Consolidated Financial Statements

CTBC FINANCIAL HOLDING CO., LTD.Statements of Changes in Stockholder’s Equity

For the six months ended June 30, 2021 and 2020(Expressed in Thousands of New Taiwan Dollars)

Share capital Retained earnings Total other equity interest

Commonstock Preferred stock

Capitalsurplus

Legalreserve

Specialreserve

Undistributedearnings


overseassubsidiaries’


Unrealized gains(losses) on financialassets measured atfair value through

other comprehensiveincome

Changes indesignated as

financial liabilitiesmeasured at fair

value throughprofit or loss

attributable tocredit risk

Other comprehensiveincome (losses) on

reclassification underthe overlay approach Total equity

Balance at January 1, 2020 $ 194,969,896 4,999,900 58,688,782 27,793,018 50,412,813 46,503,092 (7,642,509) 4,050,190 1,086,384 277,123 381,138,689Net income - - - - - 19,177,109 - - - - 19,177,109Other comprehensive income (losses) - - - - - 5,274 (2,234,424) (6,599,529) (527,569) (9,075,505) (18,431,753)Total comprehensive income (losses) - - - - - 19,182,383 (2,234,424) (6,599,529) (527,569) (9,075,505) 745,356Appropriation and distribution of retained earnings:　Legal reserve appropriated - - - 4,210,195 - (4,210,195) - - - - -　Cash dividends of common stock - - - - - (19,496,990) - - - - (19,496,990)　Cash dividends of preferred stock - - - - - (989,325) - - - - (989,325)　Reversal of special reserve - - - - (34,224,408) 34,224,408 - - - - -Changes in equity of associates and joint ventures accounted for using equity method - - 66,141 - - (2,410) - - - - 63,731Disposal of equity instruments designated at fair value through other comprehensive income - - - - - (1,449,121) - 1,449,121 - - -Changes in special reserve - - - - - 21,763 - - - - 21,763Balance at June 30, 2020 $ 194,969,896 4,999,900 58,754,923 32,003,213 16,188,405 73,783,605 (9,876,933) (1,100,218) 558,815 (8,798,382) 361,483,224

Balance at January 1,2021 $ 194,969,896 4,999,900 58,754,923 32,003,213 16,188,405 97,217,071 (10,680,748) 10,770,530 (72,291) 1,079,671 405,230,570Net income - - - - - 33,449,249 - - - - 33,449,249Other comprehensive income (losses) - - - - - 14,855 (5,002,954) (2,667,276) (51,574) (2,081,846) (9,788,795)Total comprehensive income (losses) - - - - - 33,464,104 (5,002,954) (2,667,276) (51,574) (2,081,846) 23,660,454Changes in equity of associates and joint ventures accounted for using equity method - - (22,721) - - - - - - - (22,721)Disposal of equity instruments designated at fair value through other comprehensive income - - - - - 245,352 - (245,352) - - -Reorganization - - - - - - (33,517) - - - (33,517)Changes in special reserve - - - - - (9,614) - - - - (9,614)Balance at June 30, 2021 $ 194,969,896 4,999,900 58,732,202 32,003,213 16,188,405 130,916,913 (15,717,219) 7,857,902 (123,865) (1,002,175) 428,825,172

(Continued)

249


CTBC FINANCIAL HOLDING CO., LTD.Statements of Cash Flows

For the six months ended June 30, 2021 and 2020(Expressed in Thousands of New Taiwan Dollars)


Cash Flows from Operating Activities:　Net Income before Tax $ 33,185,083 21,679,464　Adjustments: Income and expenses items with no effect on cash flow: 　Adjustments to reconcile profit (loss)　　　Depreciation expense 22,382 23,261　　　Amortization expense 451 819　　　Interest expenses 279,607 277,145　　　Interest income (755) (226)　　　Proportionate share of gains from associates or joint ventures under equity method (34,433,759) (22,566,961)　　　Gains on disposal and retirement of premises and equipment (1) (284)　　　Gains on disposal of intangible assets - (628)　　　Others (5) (65)　　　　Subtotal of income and expense items with no effect on cash flows (34,132,080) (22,266,939)　　Changes in Operating Assets and Liabilities: 　　　　Net Changes in Operating Assets: 　　　　Increase in financial assets at fair value through other comprehensive income (13,996,221) (10,039,146)　　　　Decrease (increase) in receivables 5,463 (6)　　　　Increase in other financial assets (6) (9)　　　　Increase in other assets (9,247) (6,766)　　　　　Net Changes in Operating Assets (14,000,011) (10,045,927)　　　Net Changes in Operating Liabilities: 　　　　Increase (decrease) in payables 35,026 (631,917)　　　　Increase in employee benefits liabilities 1,183 602　　　　Increase (decrease) in other liabilities 5 (1,781,613)　　　　Net Changes in Operating Liabilities 36,214 (2,412,928)　　　　　Net Changes in Operating Assets and Liabilities (13,963,797) (12,458,855)　　　Total Adjustments (48,095,877) (34,725,794)　　Interest received 35 35　　Dividends received 17,701,724 22,260,831　　Interest paid (264) (342)　　Income tax paid (2,217,373) (657,693)　　　Net Cash Provided by Operating Activities 573,328 8,556,501Cash Flows from Investing Activities: 　Purchase of premises and equipment (586) (502)　Disposal of premises and equipment 183 9,769　Purchase of intangible assets (392) -　Disposal of intangible assets - 4,481　　Net Cash (Used in) Provided by Investing Activities (795) 13,748Cash Flows from Financing Activities: 　(Decrease) increase in commercial paper payable (6,100,000) 3,700,000　Issuance of corporate bonds 6,500,000 10,000,000　Repayments of lease liabilities principal (19,228) (27,337)　Interest paid (292,177) (271,152)　　Net Cash Provided by Financing Activities 88,595 13,401,511Net Increase in Cash and Cash Equivalents 661,128 21,971,760Cash and Cash Equivalents, at the Beginning of the Period 103,047 276,513Cash and Cash Equivalents, at the End of the Period $ 764,175 22,248,273Composition of Cash and Cash Equivalents：　Cash and cash equivalents recognized in balance sheet $ 265,685 18,977,662　Securities purchased under resell agreements which meet IAS 7 definition of cash and cash equivalents 498,490 3,270,611　Cash and Cash Equivalents at the end the period $ 764,175 22,248,273

(Continued)

250


(d) The condensed balance sheets and condensed comprehensive income statements of financial holdingcompany’s subsidiaries

(i) CTBC Bank Co., Ltd.

1) Condensed Balance Sheets


June 30, 2021 June 30, 2020Cash and cash equivalents $ 48,697,868 47,696,226Due from Central Bank and call loans to banks 203,652,252 174,290,993Financial assets measured at fair value through profit or

loss126,299,850 222,449,392


235,150,935 235,100,636

Investments in debt instruments at amortized cost 858,193,366 743,973,813Financial assets－hedging－net 60,870 171,721Securities purchased under resell agreements 3,475,689 2,441,332Receivables－net 120,194,559 137,365,545Current income tax assets 869,634 815,180Loans－net 2,087,233,380 1,871,382,433Investments under equity method－net 89,944,522 95,205,128Other financial assets－net 3,820,259 1,022,736Premises and equipment－net 40,395,262 42,013,483Right-of-use assets－net 13,730,227 13,473,449Investment property－net 5,309,655 5,019,142Intangible assets－net 13,375,827 13,125,883Deferred income tax assets 6,393,583 5,055,259Other assets－net 18,127,229 13,010,017Total assets 3,874,924,967 3,623,612,368Deposits from Central Bank and other banks 40,267,196 57,918,963Due to Central Bank and other banks 2,615,790 441,700Financial liabilities measured at fair value through profit

or loss44,693,518 115,170,763

Financial liabilities－hedging－net 116,600 28,272Securities sold under repurchase agreements 77,284,910 106,326,535Payables 81,362,626 76,820,487Current income tax liabilities 5,564,861 1,956,212Deposits and remittances 3,219,234,790 2,864,259,841Financial debentures 59,999,997 58,000,000Other financial liabilities 11,308,629 7,889,555Provisions 4,135,707 4,314,834Lease liabilities 11,592,631 11,138,935Deferred income tax liabilities 2,072,919 4,387,338Other liabilities 10,914,061 17,612,508Total liabilities 3,571,164,235 3,326,265,943Common stock 147,962,186 144,098,754Reserve for capital increase - 3,863,432Capital surplus 29,835,856 29,859,205Retained earnings 139,038,942 127,115,703Other equity interest (13,076,252) (7,590,669)Total equity 303,760,732 297,346,425Total liabilities and equity 3,874,924,967 3,623,612,368

(Continued)

251


2) Condensed Comprehensive Income Statement


For the six months ended June 302021 % 2020 %

Interest revenues $ 27,066,047 62 30,459,480 73Less: Interest expenses (5,615,442) (13) (9,729,647) (23)Net interest income 21,450,605 49 20,729,833 50Non-interest income－net 22,033,975 51 20,908,862 50Net revenue 43,484,580 100 41,638,695 100Provisions for bad debt expenses,

commitments and guarantee reserve(2,120,458) (5) (4,287,951) (10)

Operating expenses (24,205,232) (56) (21,513,918) (52)Net income before tax from continuing

operations17,158,890 39 15,836,826 38

Less: Income tax expenses 2,275,426 5 2,365,776 6Net income 14,883,464 34 13,471,050 32Other comprehensive losses (6,608,479) (15) (3,821,707) (9)Total comprehensive income 8,274,985 19 9,649,343 23EPS—net income (after tax) (in NT dollars) 1.01 0.91

(Continued)

252


(ii) CTBC Securities Co., Ltd.



June 30, 2021 June 30, 2020Current assets $ 43,453,397 30,073,867Financial assets measured at fair value through other

comprehensive income－non-current34,884 33,542

Investments under equity method－net 660,306 517,979Premises and equipment－net 105,808 105,230Right-of-use assets 54,128 82,144Investment property－net 47,286 47,687Intangible assets－net 81,822 64,950Deferred income tax assets 101,362 107,798Other non-current assets 470,508 437,626Total assets 45,009,501 31,470,823Current liabilities 35,269,050 23,314,642Provisions 89,158 46,460Lease liabilities 54,899 82,728Deferred income tax liabilities 23,986 9,669Total liabilities 35,437,093 23,453,499Common stock 6,441,039 6,027,140Stock dividends to be distributed 466,254 413,899Capital surplus 796,261 796,261Retained earnings 1,636,504 727,998Other equity interest 232,350 52,026Total equity 9,572,408 8,017,324Total liabilities and equity 45,009,501 31,470,823

(Continued)

253





Revenues $ 1,863,752 100 851,490 100Service fee expenses (87,436) (4) (46,270) (6)Employee benefits expenses (628,764) (34) (304,776) (36)Proportionate share of income from

associates or joint ventures under equitymethod

1,980 - (1,665) -

Operating expenses (361,725) (19) (262,229) (31)Net income before tax from continuing

operations787,807 43 236,550 27

Less: Income tax expenses 101,256 6 20,846 2Net income 686,551 37 215,704 25Other comprehensive income (losses) 48,522 3 (121,250) (14)Total comprehensive income 735,073 40 94,454 11EPS—net income (after tax) (in NT dollars) 1.07 0.33

(Continued)

254


(iii) CTBC Venture Capital Co., Ltd.



June 30, 2021

AfterAdjustmentsJune 30, 2020

(Note)Current assets $ 441,664 232,478Financial assets measured at fair value through profit or

loss5,663,210 4,675,876

Investments under equity method－net 1,499,723 1,376,707Premises and equipment－net 3,716 4,106Right-of-use assets 5,130 12,451Intangible assets 39 134Deferred income tax assets 46,663 59,087Other non-current assets 1,561 1,547Total assets 7,661,706 6,362,386Current liabilities 2,362,846 1,085,500Lease liabilities 5,235 12,556Total liabilities 2,368,081 1,098,056Common stock 3,666,846 3,519,581Stock dividends to be distributed 71,359 147,265Capital surplus 213,002 1,085Retained earnings 1,467,908 244,036Other equity interest (125,490) (1,462)Prior interest under common control - 1,353,825Total equity 5,293,625 5,264,330Total liabilities and equity 7,661,706 6,362,386

(Continued)

255




For the six months ended June 30

2021 %

AfterAdjustments

(Note)2020 %

Operating revenues $ 1,663,628 100 224,230 100Operating costs (268,971) (16) (69,651) (31)Operating expenses (57,612) (3) (46,349) (21)Operating income 1,337,045 81 108,230 48Non-operating income and expense 35,510 2 96,757 43Net income before tax from continuing

operations1,372,555 83 204,987 91

Less: Income tax expenses (benefits) 20,935 1 (23,524) (10)Net income 1,351,620 82 228,511 101Other comprehensive losses (9,165) (1) (32,537) (15)Total comprehensive income 1,342,455 81 195,974 86EPS－net income (after tax) (in NT dollars) 3.62 0.61

Note: CTBC Venture Capital Co., Ltd. acquired shares of CTBC International Co., Limited, theCompany's sub-subsidiary, by cash from CTBC Asset Management Co., Ltd. on March 31,2021. The transaction could be qualified as a reorganization through business combinationunder common control, and shall be assumed that the business combination had taken placewhen preparing comparative consolidated financial statement, and prior years' consolidatedfinancial statements shall be restated. Please refer to Note 12(o) for the transactions.

(Continued)

256


(iv) CTBC Asset Management Co., Ltd.



June 30, 2021 June 30, 2020Current assets $ 976,451 142,725Financial assets measured at fair value through profit or

loss2,348,794 264,162

Investments under equity method－net - 1,353,825Premises and equipment－net 741 869Right-of-use assets 3,127 7,576Investment properties－net 4,126,522 5,595,358Intangible assets 142 120Deferred income tax assets 14,205 85,059Other non-current assets 4,582 4,815Total assets 7,474,564 7,454,509Current liabilities 1,725,656 2,099,470Lease liabilities 3,183 6,878Other non-current liabilities 40,350 41,872Total liabilities 1,769,189 2,148,220Common stock 5,358,820 5,358,820Capital surplus - 451Retained earnings 346,555 77,755Other equity interest - (130,737)Total equity 5,705,375 5,306,289Total liabilities and equity 7,474,564 7,454,509

(Continued)

257





Operating revenues $ 201,535 100 69,823 100Operating costs (24,631) (12) (24,494) (35)Operating expenses (45,558) (23) (32,662) (47)Operating income 131,346 65 12,667 18Non-operating income and expenses 62,112 31 71,885 103Net income before tax from continuing

operations193,458 96 84,552 121

Less: Income tax benefits (82,354) 41 (807) (1)Net income 275,812 137 85,359 122Other comprehensive losses - - (31,980) (46)Total comprehensive income 275,812 137 53,379 76EPS—net income (after tax) (in NT dollars) 0.51 0.16

(v) CTBC Security Co., Ltd.



June 30, 2021 June 30, 2020Current assets $ 92,544 90,798Premises and equipment－net 1,485 1,608Right-of-use assets 2,169 5,720Other non-current assets 834 834Financial assets measured at fair value through other

comprehensive income103 103

Deferred income tax assets 120 551Total assets 97,255 99,614Current liabilities 33,063 28,856Lease liabilities 1,350 5,720Other non-current liabilities 4,504 8,142Total liabilities 38,917 42,718Common stock 47,695 47,695Capital surplus 743 743Retained earnings 9,900 8,458Total equity 58,338 56,896Total liabilities and equity 97,255 99,614

(Continued)

258





Operating revenues $ 125,723 100 120,291 100Operating costs (111,421) (89) (107,317) (89)Operating expenses (10,426) (8) (9,865) (8)Operating income 3,876 3 3,109 3Non-operating income and expenses 189 - 213 -Net income before tax from continuing

operations4,065 3 3,322 3

Less: Income tax expense 510 - 431 1Net income 3,555 3 2,891 2Total comprehensive income 3,555 3 2,891 2EPS－net income (after tax) (in NT dollars) 0.75 0.61

(vi) Taiwan Lottery Co., Ltd.



June 30, 2021 June 30, 2020Current assets $ 1,312,341 1,127,318Premises and equipment－net 66,285 72,960Intangible assets－net 21,571 21,243Right-of-use assets 18,190 40,975Deferred income tax assets 8,446 7,831Other non-current assets 14,453 16,916Total assets 1,441,286 1,287,243Current liabilities 333,157 273,666Lease liabilities 18,326 41,097Other non-current liabilities 199 809Total liabilities 351,682 315,572Common stock 500,000 500,000Capital surplus 9,895 9,895Retained earnings 579,709 461,776Total equity 1,089,604 971,671Total liabilities and equity 1,441,286 1,287,243

(Continued)

259





Operating revenues $ 1,133,619 100 943,742 100Operating expenses (562,107) (50) (531,261) (56)Operating income 571,512 50 412,481 44Non-operating income and expenses (4,139) - 9,965 1Net income before tax from continuing

operations567,373 50 422,446 45

Less: Income tax expense 112,664 10 85,671 9Net income 454,709 40 336,775 36Total comprehensive income 454,709 40 336,775 36EPS－net income (after tax) (in NT dollars) 9.09 6.74

(vii) Taiwan Life Insurance Co., Ltd.



June 30, 2021 June 30, 2020Cash and cash equivalents $ 138,898,813 96,406,788Receivables 19,085,667 22,376,655Current income tax assets 334,206 348,665Financial assets measured at fair value through profit or

loss329,375,149 303,248,439


267,061,905 261,291,351

Financial assets at amortized cost 992,359,044 1,032,239,773Investments under equity method－net 15,183,461 13,000,139Other financial assets－net 1,526,671 119,494Investment properties 83,321,128 77,836,166Loans 54,976,809 52,653,229Reinsurance assets 2,589,478 1,909,941Premises and equipment 6,191,719 4,656,370

(Continued)

260


June 30, 2021 June 30, 2020Right-of-use assets $ 108,137 293,833Intangible assets 7,616,938 7,255,959Deferred income tax assets 8,779,252 9,033,208Other assets 12,409,631 10,974,158Separated account insurance product assets 154,596,484 92,725,208Total assets 2,094,414,492 1,986,369,376Payables 17,595,693 14,508,761Current income tax liabilities 2,484,161 1,508,462Financial liabilities measured at fair value through profit or

loss2,171,855 305,302

Bonds payables 14,982,349 14,979,394Other financial liabilities 303,504 2,382,588Lease liabilities 1,210,670 1,406,817Insurance liabilities 1,742,443,333 1,737,507,293Reserve for insurance policies with financial instrument

features1,591 1,974

Foreign exchange rate fluctuation reserves 1,665,919 2,126,115Provisions 125,387 140,222Deferred income tax liabilities 3,771,648 4,775,768Other liabilities 1,087,772 2,456,396Separated account insurance product liabilities 154,596,484 92,725,208Total liabilities 1,942,440,366 1,874,824,300Common stock 55,880,707 45,124,335Stock dividend to be distributed 6,386,612 10,756,372Capital surplus 33,946,777 33,946,149Retained earnings 44,775,819 26,263,294Other equity interest 10,984,211 (4,545,074)Total equity 151,974,126 111,545,076Total liabilities and equity 2,094,414,492 1,986,369,376

(Continued)

261





Operating revenues $ 141,238,769 100 130,862,099 100Operating costs (120,728,021) (85) (119,119,308) (92)Operating expenses (2,834,879) (2) (2,630,493) (3)Operating income 17,675,869 13 9,112,298 5Non-operating revenues and expenses 121,943 - 34,425 -Net income before tax from continuing

operations17,797,812 13 9,146,723 5

Less: Income tax expenses 1,223,347 1 1,002,356 1Net Income 16,574,465 12 8,144,367 4Other comprehensive losses (3,219,165) (2) (14,412,953) (10)Total comprehensive income (losses) 13,355,300 10 (6,268,586) (6)EPS—net income (after tax) (in NT dollars) 2.97 1.46

(viii) CTBC Investments Co., Ltd.



June 30, 2021 June 30, 2020Current assets $ 590,334 530,592Financial assets measured at fair value through profit or

loss72,970 31,185

Premises and equipment－net 27,757 24,928Right-of-use assets 9,508 29,965Intangible assets 16,502 15,750Deferred income tax assets 606 115Other non-current assets 119,625 99,611Total assets 837,302 732,146Current liabilities 205,321 131,022Lease liabilities 5,094 30,029Deferred income tax liabilities 346 -Total liabilities 210,761 161,051Common stock 306,000 306,000Capital surplus 155,967 155,967Retained earnings 164,574 109,128Total equity 626,541 571,095Total liabilities and equity 837,302 732,146

(Continued)

262





Operating revenues $ 513,989 100 415,528 100Operating expenses (370,085) (72) (313,533) (75)Operating income 143,904 28 101,995 25Non-operating revenues and expenses 4,077 1 30 -Net income before tax from continuing

operations147,981 29 102,025 25

Less: Income tax expenses 27,905 5 18,952 5Net income 120,076 24 83,073 20Total comprehensive income 120,076 24 83,073 20EPS—net income (after tax) (in NT dollars) 3.92 2.71

(e) Profitability of the Company

Unit: %

Items June 30, 2021 June 30, 2020Return on assets ratio (annual) Before income tax 13.88 9.67

After income tax 13.99 8.56Return on equity ratio (annual) Before income tax 15.92 11.68

After income tax 16.04 10.33Net income ratio 97.82 85.86

Note 1: Return on assets ratio = Net income before/after income tax ÷ average total assets.

Note 2: Return on equity ratio = Net income before/after income tax ÷ average total equity.

Note 3: Return on common equity ratio = (Net income before/after income tax－preferred stockdividend) ÷ average total common equity. As of June 30, 2021, the Company’s return oncommon equity ratio (annual) before and after income tax were 17.15% and 17.28%,respectively. As of June 30, 2020, the Company’ s return on common equity ratio(annual) before and after income tax were 12.41% and 10.95%, respectively.

Note 4: Net income ratio = Net income after income tax ÷ Net revenue.

Note 5: Net income before / after tax represented accumulated income of the current year.

Note 6: Return on assets ratio, return on equity ratio and return on common equity ratio areannualized ratios.

(Continued)

263


(f) Profitability of the Company and subsidiaries

Unit: %






Note 3: Return on common equity ratio = (Net income before/after income tax－preferred stockdividend) ÷ average total common equity. As of June 30, 2021, the Company’s return oncommon equity ratio (annual) before and after income tax was 19.36% and 17.28%,respectively. As of June 30, 2020, the Company’ s return on common equity ratio(annual) before and after income tax was 14.59% and 10.95%, respectively.


Note 5: Net income before / after tax represented accumulated income of the current year.

Note 6: Return on assets ratio, return on equity ratio and return on common equity ratio areannualized ratios.

(g) Profitability of the Company’s subsidiaries

(i) Profitability of CTBC Bank Co., Ltd. and subsidiaries

Unit: %







Note 4: Net income before/after tax represented accumulated income of the current year.

Note 5: Both return on assets ratio and return on equity ratio are annualized ratios.

Note 6: The profitability ratios above are calculated by the amount audited (reviewed) of theCompany’s subsidiaries.

(Continued)

264


(ii) Profitability of CTBC Securities Co., Ltd. and subsidiaries

Unit: %






Note 3: Net income ratio = Net income after income tax ÷ revenue.



Note 6: The profitability ratios above are calculated by the amount audited (reviewed) of the　Company’s subsidiaries.

(iii) Profitability of Taiwan Life Insurance Co., Ltd. and subsidiaries

Unit: %




Note 1: Return on assets ratio = (Net income before/after income tax + interest expenses) ÷average total assets.


Note 3: Net income ratio = Net income after income tax ÷ operating revenue.



Note 6: The profitability ratios above are calculated by the amount audited (reviewed) of theCompany’s subsidiaries.

(Continued)

265


(h) Related information of its subsidiaries’ investments in Mainland China: Please refer to Note 13(c).

(i) Significant commitments and contingencies of its subsidiaries: Please refer to Note 9.

(j) Significant catastrophic losses of its subsidiaries: None.

(k) Significant subsequent events of its subsidiaries: None.

(l) Related party transactions of the Company’s subsidiaries of $100 million or more are summarized asfollow:

(i) CTBC Bank Co., Ltd.

1) Names of related parties and their relationship

Name of related party Relationship with the BankCTBC Financial Holding Co., Ltd. Parent company of the Bank.CTBC Bank (Philippines) Corp. Investee company carried under equity method by

the Bank.PT Bank CTBC Indonesia 〃

CTBC Bank Corp. (Canada) 〃

CTBC Capital Corp. 〃

The Tokyo Star Bank, Ltd. 〃

LH Financial Group Public Company Limited 〃

Grand Bills Finance Corporation 〃

Xiamen Jinmeixin Consumer Finance Co., Ltd. 〃

CTBC Bank Corp. (USA) Investee company carried under equity method byCTBC Capital Corp.

Taiwan Institute of Economic Research The Bank contributed over 1/3 of its total funds.CTBC Charity Foundation 〃

CTBC Culture Foundation 〃

CTBC Business School The company which is controlled by the samecompany as the Bank contributed over 1/3 of itstotal funds.

CTBC Anti-Drug Education Foundation 〃

Finance Information Service Co., Ltd. The Chairman of the Bank is its Director.CTBC Securities Co., Ltd. Controlled by the same company as the Bank.CTBC Asia Limited 〃

CTBC Securities Venture Capital Co., Ltd. 〃

CTBC Venture Capital Co., Ltd. 〃

CTBC Asset Management Co., Ltd. 〃

CTBC Security Co., Ltd. 〃

Taiwan Lottery Co., Ltd. 〃

(Continued)

266


Name of related party Relationship with the BankCTBC Investments Co., Ltd. Controlled by the same company as the Bank.Taiwan Life Insurance Co., Ltd. 〃

CTBC Capital Co., Ltd. (used name: TLGCapital Co., Ltd.)

〃

CTBC Insurance Co., Ltd. (used name: TLGInsurance Co., Ltd.)

〃

Wu Tzu Development Co., Ltd. Investee company carried under equity method ofthe Company which is controlled by the samecompany as the Bank.

HoFa Land Development Co., Ltd. 〃



CTBC Investments Trust Funds Securities investment trust funds managed by the company which is controlled by the samecompany as the Bank.

Chung Yuan Investment Co., Ltd. The Director of the Bank's parent company.Yi Chuan Investment Co., Ltd. 〃

Wei Fu Investment Co., Ltd. 〃

Ho-Wei Investment Co., Ltd. The Chairman of the Bank's parent company is itsDirector.

Weihong Investment Co., Ltd. 〃

Chuan Wei Investment Co., Ltd. The company’s Chairman is the second-degreerelative of the Chairman of the Bank’s parentcompany.

Taipei Kai-Nan High School The Chairman of the Bank’s parent company is itsbody corporate representative.

Pei Sheng Culture Foundation The Director of the company which is controlledby the same company as the Bank is its bodycorporate respresentative.

Taipei Financial Center Corporation The Chairman of the company which is controlledby the same company as the Bank is its Director.

Nan Ya Plastics Corporation 〃

Brothers Recreational Co., Ltd. 〃

Sundia Meditech Group (Note) The second-degree relative of the Director of theBank's subsidiary is its Chairman.

Taiwan Relo Club, Limited The Chairman of the company which is controlledby the same company as the Bank is itsChairman.

Sungbo Co., Ltd. The Director of the company which is controlledby the same company as the Bank is itsChairman.

(Continued)

267


Name of related party Relationship with the BankYan Yuan Investment Co., Ltd. The company’s General Manager is the Director of

the company which is controlled by the samecompany as the Bank.

Chailease Finance Co., Ltd. Related party in substance.Shin Wen Investment Co., Ltd. 〃

Fina Finance & Trading Co., Ltd. 〃

Sung Young Investment Co., Ltd. 〃


Kuan Ho Construction and Development Cor 〃

Taiwan Sports Lottery Co., Ltd. 〃

CTC Group Inc. 〃

APEX Credit Solution Inc. (Note) 〃

Yi Hua Investment Co., Ltd. 〃

Chinatrust Real Estate Co., Ltd. 〃

Kae Lee Investment Ltd. 〃

Ronghua Investment Co., Ltd. 〃

Chung-Chie Property Management Co.,Ltd.

〃

Chailease Auto Rental Co., Ltd. 〃

Chung Cheng Investments and Development Co., Ltd.

〃

My Leasing (Mauritius) Corp. 〃

Other related parties Major executives of the Company and subsidiaries,and their close relatives.

Note: The party is not related parties in the financial statement in 2021.

2) Significant transactions between related parties and the Bank

a) As a lessee

Lease liabilities

Name of related party Summary June 30, 2021December 31,

2020 June 30, 2020Taiwan Life Insurance

Co., Ltd.Lease office $ 96,318 105,002 84,153

(Continued)

268


Lease payment amountFor the three months

ended June 30For the six months

ended June 30Name of related

party Summary 2021 2020 2021 2020Taiwan Life

Insurance Co.,Ltd.

Leased office $ 5,721 2,869 8,684 5,927

b) Donations

For the six months ended June 30Related party 2021 2020

CTBC Business School $ 77,390 107,068

c) Loans





Normalloans Overdue loans Collateral

Loanconditions

Home loan mortgage 257 $ 1,569,706 1,449,423 1,449,423 - Real estate/others

None

Others Nan Ya PlasticsCorporation

2,534,043 1,434,043 1,434,043 - None 〃

〃 CTBC Bank(Philippines)Corp.

1,114,800 1,114,800 1,114,800 - None 〃

〃 Chung KwanInvestment Co., Ltd.

350,000 350,000 350,000 - Real estate 〃


〃 Kuan HoConstruction andDevelopment Cor

245,000 245,000 245,000 - Real estate 〃

December 31, 2020Settlement status





Loanconditions


None

Others Nan Ya PlasticsCorporation

2,787,830 2,401,828 2,401,828 - Real estate/machine room

〃

〃 CTBC Bank(Philippines)Corp.

2,138,100 1,140,320 1,140,320 - None 〃


350,000 350,000 350,000 - Real estate 〃



245,000 245,000 245,000 - Real estate 〃

(Continued)

269







Loanconditions


None

Others CTBC Bank(Philippines)Corp.

2,224,500 2,224,500 2,224,500 - None 〃

〃 Nan Ya PlasticsCorporation

1,774,497 1,687,830 1,687,830 - Real estate/machine room

〃

〃 PT Bank CTBCIndonesia

830,480 830,480 830,480 - None 〃



350,000 350,000 350,000 - Real estate 〃


245,000 245,000 245,000 - Real estate 〃

(Continued)

270


d) Deposits

June 30, 2021


balance Ending balanceRange of

interest rates

Interestexpenses


June 30)

Interestexpenses


June 30)Taiwan Life Insurance Co., Ltd. $ 67,671,458 47,192,279 0~0.30% 2,111 3,641CTBC Securities Co., Ltd. 5,727,391 3,030,998 0~0.82% 1,404 2,881Yan Yuan Investment Co., Ltd. 2,486,557 1,892,786 0~0.01% 40 64Chuan Wei Investment Co., Ltd. 1,591,337 1,549,327 0~0.03% 50 71HoFa Land Development Co.,

Ltd. 1,507,647 1,470,353 0~0.18% 516 1,031

CTBC Charity Foundation 1,371,596 1,275,881 0~0.82% 1,141 2,268Taiwan Sports Lottery Co., Ltd. 1,884,132 1,252,894 0~0.01% 32 62Financial Information Service

Co., Ltd.1,010,504 1,010,504 0.01~0.82% 1,976 3,931

Wu Tzu Development Co., Ltd. 663,228 605,416 0~0.77% 157 314Taiwan Lottery Co., Ltd. 1,612,541 584,863 0~0.07% 167 327CTBC Investments Co., Ltd. 839,005 562,810 0~0.26% 226 450Taipei Kai-Nan High School 624,864 557,834 0~1.04% 241 480Taiwan Wind Investment Co.,

Ltd.535,573 521,363 0~0.03% 38 78


606,716 463,935 0~1.04% 407 762

CTBC Venture Capital Co., Ltd. 1,665,177 364,467 0~0.03% 9 29Chung Cheng Investments and

Development Co., Ltd.327,126 325,924 0~0.01% 8 16

Chinatrust Real Estate Co., Ltd. 331,923 321,191 0~0.82% 303 607Chung Yuan Investment Co.,

Ltd.331,785 301,984 0.01% 7 13

CTBC Insurance Co., Ltd. 299,838 279,938 0~0.08% 4 7CTBC Financial Holding Co.,

Ltd.16,990,919 277,134 0~0.09% 40 52

Weihong Investment Co., Ltd. 236,472 234,472 0.01% 3 6Wei Fu Investment Co., Ltd. 387,022 184,129 0~0.03% 2 2Yi Hua Investment Co., Ltd. 169,201 160,645 0~0.01% 2 4Sung Young Investment Co., Ltd. 230,646 156,713 0~0.01% 4 9Brothers Recreational Co., Ltd. 233,098 151,909 0~0.03% 5 8Top Taiwan IX Venture Capital

Co., Ltd.218,461 146,897 0~0.01% 3 4

CTBC Business School 200,817 135,605 0~0.83% 32 64Shin Wen Investment Co., Ltd. 326,963 125,578 0~0.01% 2 5Ho-Wei Investment Co., Ltd. 125,330 121,118 0~0.01% 3 6CTBC Asia Limited 454,376 120,090 0~0.13% 1 3Pei Sheng Culture Foundation 143,182 119,133 0~0.03% 8 16Kae Lee Investment Co., Ltd. 118,179 117,446 0~0.01% 3 6Ronghua Investment Co., Ltd. 317,864 108,843 0~0.01% 3 7Total $ 111,240,928 65,724,459 8,948 17,224

(Continued)

271


December 31, 2020



interest rates

Interestexpenses

(For the yearended

December 31)Taiwan Life Insurance Co., Ltd. $ 54,038,870 21,448,561 0~0.50% 10,388CTBC Securities Co., Ltd. 7,017,813 2,579,228 0~1.60% 9,603HoFa Land Development Co., Ltd. 1,512,571 1,494,093 0~0.44% 2,808Taiwan Sports Lottery Co., Ltd. 1,491,327 1,489,899 0~0.01% 88CTBC Venture Capital Co., Ltd. 1,564,015 1,483,156 0~0.15% 50CTBC Charity Foundation 1,217,253 1,185,251 0~1.07% 4,888Financial Information Service Co., Ltd. 1,012,285 1,006,551 0.01~1.07% 8,517Yan Yuan Investment Co., Ltd. 2,580,308 916,984 0~0.06% 310Chuan Wei Investment Co., Ltd. 1,005,260 868,589 0~0.01% 87Taiwan Lottery Co., Ltd. 1,296,671 767,882 0~0.12% 459CTBC Investments Co., Ltd. 722,412 653,510 0~0.49% 1,577Wu Tzu Development Co., Ltd. 659,834 652,220 0~1.00% 768My Leasing (Maurutius) Corp. 2,934,737 638,937 0.03~0.20% 86Taiwan Institute of Economic Research 605,702 600,210 0~1.09% 2,017Taipei Kai-Nan High School 575,633 554,361 0~1.04% 1,371Taiwan Wind Investment Co., Ltd. 3,463,691 533,788 0~0.15% 217Shin Wen Investment Co., Ltd. 634,510 329,963 0~0.01% 22Ronghua Investment Co., Ltd. 318,791 317,864 0~0.01% 14Chinatrust Real Estate Co., Ltd. 297,820 295,032 0~2.15% 1,518Chung Cheng Investments and Development Co.,

Ltd.289,499 287,681 0~0.01% 27

Chung Yuan Investment Co., Ltd. 330,885 241,597 0.01% 23Sung Young Investment Co., Ltd. 669,879 230,560 0~0.01% 57CTBC Asia Limited 436,122 201,703 0~3.20% 691Sundia Meditech Group 1,933,349 200,688 0~0.03% 37Weihong Investment Co., Ltd. 174,236 174,236 0.01% 9Yi Hua Investment Co., Ltd. 510,167 169,201 0~0.01% 15Brothers Recreational Co., Ltd. 210,479 166,796 0~0.01% 13Pei Sheng Culture Foundation 183,294 143,202 0~0.05% 50Ho-Wei Investment Co., Ltd. 130,784 125,330 0~0.01% 12Kae Lee Investment Co., Ltd. 119,884 118,179 0~0.01% 12CTBC Financial Holding Co., Ltd. 25,352,847 114,489 0~0.15% 162CTBC Business School 178,105 111,872 0~1.09% 133Total $ 113,469,033 40,101,613 46,029

(Continued)

272


June 30, 2020



interest rates

Interestexpenses


June 30)

Interestexpenses


June 30)CTBC Financial Holding Co.,

Ltd.$ 18,984,104 18,984,104 0~0.15% 36 51

Taiwan Life Insurance Co., Ltd. 47,481,808 14,530,040 0~0.50% 1,189 7,698CTBC Securities Co., Ltd. 6,486,470 2,500,632 0~1.60% 2,521 5,544HoFa Land Development Co.,

Ltd.1,512,571 1,512,571 0~0.44% 530 1,731

CTBC Charity Foundation 1,168,493 1,057,919 0~1.07% 1,137 2,589Financial Information Service

Co., Ltd. 1,012,285 1,002,577 0.01~1.07% 1,976 4,521

Chuan Wei Investment Co.,Limited

1,005,260 819,113 0~0.01% 20 42

Taiwan Wind Investment Co.,Ltd.

3,463,691 718,914 0~0.15% 59 135

Wu Tzu Development Co., Ltd. 659,834 642,252 0~1.00% 201 397Sung Young Investment Co., Ltd. 669,879 632,578 0~0.01% 16 33Taiwan Lottery Co., Ltd. 1,296,671 599,269 0~0.12% 113 299CTBC Investments Co., Ltd. 619,731 492,955 0~0.49% 400 810Taiwan Sports Lottery Co., Ltd. 1,375,145 464,731 0~0.01% 18 40Taiwan Institute of Economic

Research529,897 464,403 0~1.09% 509 991

Taipei Kai-Nan High School 402,012 344,448 0~1.04% 499 1,012Chinatrust Real Estate Co., Ltd. 270,329 264,267 0~2.15% 405 899Chung Cheng Investments and

Development Co., Ltd.258,499 258,153 0~0.01% 7 13


252,419 249,004 0.01% 5 9

CTBC Venture Capital Co., Ltd. 355,727 210,381 0~1.05% 2 13Brothers Recreational Co., Ltd. 208,506 207,411 0~0.01% 3 5Ronghua Investment Co., Ltd. 185,579 175,791 0~0.01% 3 7Weihong Investment Co., Ltd. 155,797 154,248 0.01% 2 5Pei Sheng Culture Foundation 183,294 152,654 0~0.05% 11 30CTBC Business School 178,105 135,509 0~1.09% 32 70Yi Hua Investment Co., Ltd. 510,167 123,582 0~0.01% 2 11Kae Lee Investment Co., Ltd. 119,884 119,006 0~0.01% 3 6Shin Wen Investment Co., Ltd. 634,510 118,807 0~0.01% 1 14Yi Chuan Investment Co., Ltd. 165,872 107,827 0~0.01% 3 5Ho-Wei Investment Co., Ltd. 122,744 100,850 0~0.01% 3 6Total $ 90,269,283 47,143,996 9,706 26,986

(Continued)

273


e) Call loans to banks


Related partyEndingbalance


Interestrevenues

The Tokyo Star Bank, Ltd. $ 2,966,000 1.25~2.49% 63,493

f) Call loans from banks


Related partyEndingbalance


Interestrevenues

The Tokyo Star Bank, Ltd. $ 1,376,500 0.06~0.08% 428

g) Due from other banks


2020 June 30, 2020CTBC Bank Corp. (Canada) $ 16,369 40,061 162,985

h) Derivative financial instruments



instrumentsContract


Unrealizedprofit Account

EndingBalance

CTBC InvestmentsTrust Funds

Money marketswap

07.08.2020~08.16.2021

USD 136,590 $ (381,586) (Note2) (381,586)


06.30.2021~07.02.2021

NTD 280,000 184 (Note1) 184

Taiwan LifeInsurance Co.,Ltd.

Cross currencyswap

06.29.2021~07.01.2021

JPY 1,500,000 4 (Note1) 4

December 31, 2020Derivative Balance sheet


instrumentsContract



EndingBalance


Money marketswap

12.02.2019~08.16.2021

USD 136,590 (315,705) (Note2) (315,705)



instrumentsContract



EndingBalance


Money marketswap

12.02.2019~08.14.2020

USD 141,590 $ (21,943) (Note2) (21,943)


02.03.2020~07.02.2020

USD 60,000 10,165 (Note1) 10,165

Note 1: Financial assets measured at fair value through profit or loss.

Note 2: Financial liabilities measured at fair value through profit or loss.

(Continued)

274


i) Securities transactions


Related partyBills and bonds

purchasedBills and bonds

soldCTBC Financial Holding Co., Ltd. $ 6,200,000 -Nan Ya Plastics Corporation 400,000 -

$ 6,600,000 -


Related partyBills and bonds

purchasedBills and bonds

soldCTBC Financial Holding Co., Ltd. $ 6,000,000 -

j) Stocks issued by the related parties that are being held by the Company andsubsidiaries


2020 June 30, 2020Taipei Financial Center

Corporation$ 795,600 795,600 795,600

k) Others

i) Commission and other income

For the three months ended June 30Related party Summary 2021 2020

Taiwan Life Insurance Co.,Ltd.

Commission for joint sales,income from group catering,commission income, andallocation of information

$ 1,376,295 1,194,063

For the six months ended June 30Related party Summary 2021 2020

Taiwan Life Insurance Co.,Ltd.

Commission for joint sales,income from group catering,commission income, andallocation of information

$ 3,560,985 2,335,811

The balances of accounts receivable for foregoing transactions were asfollows:

Related party SummaryJune 30,

2021June 30,

2020Taiwan Life Insurance Co.,

Ltd.Commission for joint sales, income from

group catering, commission income, andallocation of information

$ 351,451 415,071

(Continued)

275


ii) Handling fees and other general administration expenses

For the three months ended June 30Related party Summary 2021 2020

Taiwan Lottery Co., Ltd. Lottery service fees $ 155,335 268,135Brothers Recreational Co.,

Ltd.Sponsorship, marketing feedback

fund, and business promotionfees

133,820 141,185

$ 289,155 409,320

For the six months ended June 30Related party Summary 2021 2020

Taiwan Lottery Co., Ltd. Lottery service fees $ 1,200,580 1,002,544

Brothers Recreational Co.,Ltd.


133,908 276,265

$ 1,334,488 1,278,809

The balances of accounts payable for foregoing transactions were as follows:

Related party Summary June 30, 2021 June 30, 2020Taiwan Lottery Co., Ltd Lottery service fees $ 657,428 467,551

No significant discrepancy in transaction terms found between related partytransaction and non-related party transaction.

(Continued)

276


(ii) CTBC Securities Co., Ltd.

1) Names of related parties and relationship

Name of related party Relationship with the CompanyCTBC Financial Holding Co., Ltd. Parent company of the Company.CTBC Bank Co., Ltd. Controlled by the same parent company as the

Company.CTBC Venture Capital Co., Ltd. 〃




CTBC Investments Co., Ltd. 〃

Taiwan Life Insurance Co., Ltd. 〃

CTBC Insurance Co., Ltd. (used name:TLG Insurance Co., Ltd.)

〃

CTBC Capital Co., Ltd. (used name:TLG Capital Co., Ltd.)

〃

CTBC Investments Trust Funds A securities investment trust fund managed by thecompany which is controlled by the same companyas the Company.

CTBC (Mauritius) Holding Co., Ltd. An investee company carried under equity method.CTBC Investment Service Co., Ltd. 〃

CTBC Securities Venture Capital Co.,Ltd.

〃

CTBC Asia Limited 〃


2) Significant transactions with related parties

Please refer to Note 12(l)(i) for transactions with CTBC Bank Co., Ltd.

Please refer to Note 7(b)(viii) for transactions with CTBC Investments Co., Ltd.

(Continued)

277


(iii) CTBC Venture Capital Co., Ltd.

1) Names of the related parties and relationship

Name of related party Relationship with the CompanyCTBC Financial Holding Co., Ltd. Parent company of the Company.CTBC Bank Co., Ltd. Controlled by the same company as the Company.CTBC Securities Co., Ltd. 〃







〃


〃

CTBC Capital International Co.,Limited (Note)

An investee company carried under equity method.

CTBC International Co., Ltd. 〃

CTBC Financial Leasing Co., Ltd. An investee company carried under equity method byCTBC International Co., Limited.


Note: The party’s liquidation was completed in December 2020.


The Company acquired 100% shares of CTBC International Co., Limited for $1,375,231from CTBC Asset Management Co., Ltd. on March 31, 2021, indirectly acquired 100%shares of CTBC Financial Leasing Co., Ltd. in Mainland China, and was accountedunder investments under the equity method.


(Continued)

278


(iv) CTBC Asset Management Co., Ltd.









〃




Please refer to Note 12(l)(iii) for the transactions with CTBC Venture Capital Co., Ltd.

(Continued)

279


(v) CTBC Security Co., Ltd.


Name of related party Relationship with the CompanyCTBC Financial Holding Co., Ltd. Parent company of the Company.CTBC Bank Co., Ltd. Controlled by the same company as the Company.CTBC Securuties Co., Ltd. 〃






Brothers Entertaining Co., Ltd. The Chairman of the company which is controlled bythe same company as the Company is its Director.

CTBC Charity Foundation The company which is controlled by the samecompany as the Company contributed over 1/3 ofits total funds.

Chuan Wei Investment Co., Ltd. The second-degree relative of the Chairman of theparent company is its chairman.

Chung Yuan Investment Co., Ltd. The Institutional Director of the parent company.Yi Chuan Investment Co., Ltd. 〃

Changchi Investment Ltd. 〃

Yi Kao Investment Co., Ltd. Related party in substance.Bo Yu Investment Co., Ltd. 〃


Kuan Ho Construction and DevelopmentCor

〃

Chung-Chie Property Management Co.,Ltd.

〃




(Continued)

280


(vi) Taiwan Lottery Co., Ltd.









〃

CTBC Business School The Company contributed over 1/3 of its total funds.CTBC Anti-Drug Educational

Foundation〃




(Continued)

281


(vii) Taiwan Life Insurance Co., Ltd.








CTBC Investments Trust Funds A securities investment trust fund managed by thecompany which is controlled by the same companyas the Company.


A subsidiary company of the Company.


〃

HoFa Land Development Co., Ltd. An investee company carried under equity method bythe Company.

Wu Tzu Development Co., Ltd. 〃

Star Shining Energy Co., Ltd. 〃


King Dragon Life Insurance Co., Ltd. 〃

Giga Green Energy Co., Ltd. 〃


Solarbright Energy Co., Ltd. 〃

Star Power Energy Co., Ltd. 〃

Li-Wei Energy Co., Ltd. 〃

Xinhe Energy Development Co., Ltd. 〃

Nan Ya Plastics Corporation The Chairman of the company which is controlled bythe same company as the Company is its Director.

Formosa Sumco Technology Corporation 〃

Chailease Insurance Brokers Co., Ltd. Related party in substance. Other related parties Major executives of the Company and subsidiaries

and their close relatives.

(Continued)

282



a) The following table presents the handling fee by the Company and its relatedparties:

For the three months ended June 30 For the six months ended June 30Related party 2021 2020 2021 2020

CTBC InvestmentsCo., Ltd.

$ 104,126 16,218 134,936 36,014

b) The following table presents the ending balance of the discretionary accountinvested by the related parties:


2020 June 30, 2020CTBC Investments Co., Ltd. $ 7,934,617 46,235,976 42,053,581

c) The following table presents information regarding stocks issued by the relatedparty that are being held by the Company:


2020 June 30, 2020Nan Ya Plastics Corporation $ 1,387,776 1,199,292 1,077,528Formosa Sumco Technology

Corporation- 164,362 166,798

Total $ 1,387,776 1,363,654 1,244,326


Please refer to Note 7(b)(viii) for transactions with CTBC Investments Co., Ltd.

(Continued)

283


(viii) CTBC Investments Co., Ltd.









〃

CTBC Investments Trust Funds A securities investment trust fund managed by theCompany.




Please refer to Note 12(l)(vii) for transactions with Taiwan Life Insurance Co., Ltd.

Please refer to Note 7(b)(viii) for funds investment transactions with CTBC InvestmentsCo., Ltd.

(Continued)

284


(m) Significant contracts: Please refer to Note 9(a).

(n) The income and expenses arising from the joint marketing operation and information interoperabilityamongst the Financial Holding Company’s subsidiaries were allocated as follows:

The Company’s subsidiary CTBC Bank Co., Ltd. (“CTBC Bank”) and Taiwan Life Insurance Co.,Ltd. (“Taiwan Life”) have gained from the joint business promotion. The bonus for joint marketingwith CTBC Bank and Taiwan Life shared based on annual commission rate agreed between allparties for each insurance product.

(o) CTBC Venture Capital Co., Ltd. acquired shares of the Company’ s sub-subsidiary CTBCInternational Co., Limited, which was owned by CTBC Asset Management Co., Ltd.:

The Company’ s subsidiary CTBC Venture Capital Co., Ltd. acquired 100% shares of CTBCInternational Co., Limited, the Company’ s sub-subsidiary, for $1,375,231 from the Company’ ssubsidiary CTBC Asset Management Co., Ltd. on March 31, 2021, indirectly acquired 100% sharesof CTBC Financial Leasing Co., Ltd. in Mainland China. The transaction could be qualified as areorganization. Since there is no clear requirement in business combination under common control inIFRS 3 “Business Combination”, it is taken into consideration to adopt IFRS Q&A “InterpretationFor IFRS 3 On Business Combinations under common control” issued by Accounting Research andDevelopment Foundation on October 26, 2018.

(p) The movement of compulsory auto and motorcycle insurance reserves (retained business) for theCompany’s sub-subsidiary CTBC insurance Co., Ltd.:


Compulsory auto insuranceBeginningbalance

Currentprovision

Currentrecovery

Endingbalance

Unearned premium reserve $ 51,514 48,838 51,514 48,838Claim reserve 102,588 93,659 102,588 93,659Special reserve (214,931) 6,179 - (208,752)Total $ (60,829) 148,676 154,102 (66,255)


Compulsory auto insuranceBeginning

balanceCurrent

provisionCurrentrecovery

Endingbalance

Unearned premium reserve $ 60,931 55,360 60,931 55,360Claim reserve 118,890 111,985 118,890 111,985Special reserve (211,450) 522 - (210,928)Total $ (31,629) 167,867 179,821 (43,583)

(Continued)

285



Compulsory motor insuranceBeginningbalance

Currentprovision

Currentrecovery

Endingbalance

Unearned premium reserve $ 54,992 52,558 54,992 52,558Claim reserve 51,473 47,768 51,473 47,768Special reserve 215,344 629 5,350 210,623Total $ 321,809 100,955 111,815 310,949


Compulsory motor insuranceBeginning

balanceCurrent

provisionCurrentrecovery

Endingbalance

Unearned premium reserve $ 61,075 58,097 61,075 58,097Claim reserve 50,064 48,926 50,064 48,926Special reserve 243,497 - 15,862 227,635Total $ 354,636 107,023 127,001 334,658

(Continued)

286


(q) The information of segmentation of specific assets of the Company’ s sub-subsidiary CTBCInsurance Co., Ltd.:

(i) The Company’s sub-subsidiary CTBC Insurance Co., Ltd. is engaged in compulsory auto TPLinsurance (hereinafter referred to as “ this insurance” ), in accordance with “ CompulsoryAutomobile Liability Insurance Law” , The Company’ s sub-subsidiary CTBC Insurance Co.,Ltd. build an independent account to record the operation and financial activities of theinsurance. As of June 30, 2021, December 31 and June 30, 2020, assets and liabilities of theCompany’ s sub-subsidiary CTBC Insurance Co., Ltd. operated on this insurance were asbelow:


2020 June 30, 2020Assets

Cash and cash equivalents $ 231,147 239,875 274,431Notes receivable 615 536 806Premiums receivable 3,169 2,036 1,875Claims recoverable from reinsurers 3,334 8,116 6,413Due from reinsurers and ceding

companies10,986 16,269 13,161

Other receivables 1,199 - -Ceded unearned premiums reserve 40,818 42,658 50,023Ceded claim reserve 68,033 77,420 85,583Temporary payments and suspense

accounts145 63 269

Total Assets $ 359,446 386,973 432,561Liabilities

Notes payable $ 374 372 54Due to reinsurers and ceding

companies5,527 5,537 5,808

Unearned premium reserve 142,214 149,164 163,480Claim reserve 209,460 231,481 246,494Special reserve 1,871 413 16,707Temporary receipts and suspense

accounts- - 13

Other liabilities - 6 5Total liabilities $ 359,446 386,973 432,561

(Continued)

287


According to the Article 5 of the Regulations for Deposit and Management of the Reserve ofCompulsory Automobile Liability Insurance Article, special reserves provided shall deposit infinancial institutions as time deposits, once insurer has reported and gotten the approval of thecompetent authority, it may purchase domestic securities. As of June 30, 2021, December 31and June 30, 2020, the amounts of time deposits the Company’ s sub-subsidiary CTBCInsurance Co., Ltd. placed in financial institutions described in preceding paragraph were$1,871, $413 and $16,707, respectively. Additionally, according to article 6 of “Regulationsfor Deposit and Management of the Reserve of Compulsory Automobile Liability Insurance”,except for the aforesaid special reserve provided, funds (including reserves, payables, andsuspense accounts to carry forward) shall be deposited in financial institutions in the form ofdemand deposits and time deposits, but as funds provided that with the approval of thecompetent authority, an insurer may purchase domestic securities. The Company’ s sub-subsidiary CTBC Insurance Co., Ltd. placed deposits in financial institutions to support theexpenditures of the insurance, as of June 30, 2021, December 31 and June 30, 2020, theamounts of demand deposits were $53,647, $62,375 and $43,425, respectively, note depositswere $0, $0 and $6, respectively, and time deposits were $175,629, $177,087 and $214,293,respectively.

(ii) The information of the Company’s sub-subsidiary CTBC Insurance Co., Ltd. for the insurancerevenue and cost:


Operating revenue

Premium (containingreinsurancepremium)

$ 58,585 61,382 113,901 123,973

Less: Reinsuranceexpense

(17,397) (17,419) (33,199) (35,379)

Net change inunearnedpremiumsreserve

2,023 4,895 5,110 8,549

　Retained earned 　　　　 premium

43,211 48,858 85,812 97,143

　Interest income 1 60 2 143

$ 43,212 48,918 85,814 97,286

(Continued)

288



Operating costsInsurance claim

payment (containreinsuranceindemnity)

$ 70,800 83,166 140,743 175,366

Less: Claimsrecoverable fromreinsurers

(19,902) (25,632) (42,554) (54,697)

Retained claimpayment

50,898 57,534 98,189 120,669

Net change in claimreserve

(8,324) (7,514) (12,634) (8,043)

Net change in specialclaim reserve

1,837 (1,102) 1,458 (15,340)

$ 44,411 48,918 87,013 97,286

(iii) According to the Article 11 of the Regulations for the Management of the Various Reserve forCompulsory Automobile Liability Insurance, when an insurer suspends or terminates itsoperations, reserves of the insurance shall transfer into the reserves provided by the otherinsurer that assume the business. If in a situation that there is no any insurer to assume theinsurance business and the balance of the special reserve is positive, it shall transfer the assetscorresponding to the special reserve to the Motor Vehicle Accident Compensation Fund.

When an insurer has been duly ordered to suspend business and undergo rehabilitation,ordered to dissolve, or its permission to operate the insurance business has been revoked, andno other insurer is to assume this insurance business, and there is no outstanding liability underthe insurance and the balance of the special reserve is positive, the assets corresponding to thespecial reserve shall be transferred to the Motor Vehicle Accident Compensation Fund.

(Continued)

289


(r) Unauthorized Reinsurance Reserve

The Company’s sub-subsidiary CTBC Insurance Co., Ltd.’s arrangements of reinsurances are basedon the “ Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and OtherRisk Spreading Mechanisms” , stipulated to evaluate ceded reinsurers’ qualification with creditratings and periodically track the changes of their credit ratings. The unauthorized reinsurers’transactions, in accordance with the “ Reservation of Unauthorized Reinsurance Reserve (e)” , aredisclosed as follows:

(i) The summary and the sorts of unauthorized reinsurances:

June 30, 2021

Ceded Reinsurers SummaryBest RE(L) Limited contracts of injury insurances, contracts of

marine insurances, and engineeringfacultative reinsurances

Trust International Insurance and ReinsuranceCo., B.S.C(C)Trust Re, Labuan

contracts of marine insurances, contracts ofcasualty insurances, and contracts ofengineering facultative reinsurances

Asia Capital Reinsurance Group Pte Ltd.Singapore

contracts of casualty insurances, contracts ofmarine insurances, contracts ofengineering facultative reinsurances, andaviation facultative reinsurances

December 31, 2020

Ceded Reinsurers SummaryBest RE(L) Limited contracts of marine insurances and

engineering facultative reinsurancesTrust International Insurance and Reinsurance

Co., B.S.C(C)Trust Re, Labuancontracts of marine insurances, contracts of

casualty insurances, and contracts ofengineering facultative reinsurances


contracts of casualty insurances, contracts ofmarine insurances, contracts ofengineering facultative reinsurances, andaviation facultative reinsurances

June 30, 2020

Ceded Reinsurers SummaryBest RE(L) Limited contracts of injury insurancesTrust International Insurance and Reinsurance

Co., B.S.C(C)Trust Re, Labuancontracts of marine insurances, contracts of

casualty insurances, and engineeringfacultative reinsurances


contracts of casualty insurances, contracts ofmarine insurances, contracts of aviationfacultative reinsurances, and engineeringfacultative reinsurances

(Continued)

290


(ii) The reinsurance expense and reinsurance commission income of the Company’s sub-subsidiaryCTBC Insurance Co., Ltd. were as follows:


Reinsurance expense $ 156 (308) 189 835Reinsurance commissionincome

(256) (11) (227) 90

(iii) As of June 30, 2021, December 31 and June 30, 2020, the unauthorized reinsurance reserves ofthe Company’s sub-subsidiary CTBC Insurance Co., Ltd. were as follows:


2020 June 30, 2020Ceded unearned premium reserve $ 95 184 417Reported but unpaid ceded claim

reserve1,096 103 710

Overdue in nine months and paidclaims recovered from reinsurers

93 833 339

Total unauthorized reinsurancereserve

$ 1,284 1,120 1,466

(Continued)

291


(13) Other disclosures:

(a) Information on significant transactions:

For the six months ended June 30, 2021, according to the Regulations Governing the Preparation of Financial Reports byFinancial Holding Companies, the related information on significant transactions by the Company and subsidiaries that should befurther disclosed as follows:

(i) Loans to other businesses or individuals: None

(ii) Endorsements and guarantees for others:


Counter-party of guarantee and endorsement Limitation on Highest Balance of Amount of

Ratio ofaccumulatedamounts of

guarantees and Parent

companySubsidiary

endorsements/ Endorsements/guarantees to

No. Name ofguarantor Name

Reason(Note 2)

amount ofguarantees and endorsementsfor a specific

enterprise

balance forguarantees andendorsements

during the period

guaranteesand

endorsementsas of

reporting date

Actual usageamount

during theperiod

propertypledged forguarantees

andendorsements

endorsements tonet worth of the

latestfinancial

statements

Maximum amount for

guarantees andendorsements

endorsements/ guarantees to

third parties onbehalf of

subsidiary

guaranteesto third parties

on behalf ofparent

company

third partieson behalf ofcompanies in

MainlandChina

1 CTBCSecuritiesCo., Ltd.

CTBC AsiaLimited

5 460,942 100,000 100,000 - - %1.10 3,687,538 Y N N

Note 1: 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.

Note 2: The reasons recognized between the securities-industry subsidiaries and endorsees or guarantees are as follow:

(1) Overseas subsidiary of securities firm is required to perform underwriting business.

(2) Overseas subsidiary issues call (put) warrants overseas.

(3) Overseas subsidiary acting as the offshore structured product issuing institution or guarantor sells the products inside the ROC in accordance with theRegulations Governing Offshore Structured Products, and its domestic parent company acts as the general agent.

(4) Overseas subsidiary is required for the issuance of corporate bonds.

(5) Overseas subsidiary is financed from local financial institutions for the business needs.

(6) Endorsements and guarantees between the overseas subsidiaries of securities firms.

(7) Others (please indicate the reasons).

(iii) Marketable securities held as of June 30, 2021 (the associates of invested subsidiaries and joint controlled organizations areexcluded): Not applicable to bank, securities, and insurance subsidiaries; others:

Unit: In Thousands of New Taiwan Dollars/Thousands of SharesMarketable Relationship Ending balance

Name of companyholding securities

securities typeand name

with the securitiesissuer Account Number of shares Carrying amount Shareholding ratio

Fair value(Note 1) Note

CTBC Venture CapitalCo., Ltd.

Eir Genic, Inc. - Financial assets measuredat fair value through profitor loss

4,482 661,156 %1.84 661,156

〃 Yuen Foong Yu ConsumerProducts Co., Ltd.

- 〃 12,000 906,360 %4.90 906,360

〃 Others (Note 2) - 〃 - 4,095,694 %- 4,095,694CTBC AssetManagement Co., Ltd.

Privately Offered Fund –CVICredit Value Fund B III

- 〃 - 179,344 %- 179,344

〃 Beneficiary Certificate – Taishin 1699 Money MarketFund

- 〃 8,928 121,982 %- 121,982

〃 Beneficiary Certificate–Taishin Ta-Chong MoneyMarket Fund

- 〃 47,451 680,279 %- 680,279

〃 Beneficiary Certificate–FSITC Money Market

- 〃 2,400 432,055 %- 432,055

〃 Beneficiary Certificate–FSITC Taiwan MoneyMarket

- 〃 60,509 935,134 %- 935,134


Beneficiary Certificate –CTBC Hwa-win MoneyMarket Fund

Securitiesinvestment trustfund managed byCTBC InvestmentsCo., Ltd.

〃 1,806 20,084 %0.04 20,084

〃 Beneficiary Certificate –CTBC Vietnam Equity Fund- NTD

〃〃 1,415 21,002 %0.33 21,002

〃 Beneficiary Certificate –CTBC Hang Seng ChinaHigh Dividend Yield ETFFund

〃〃 1,343 21,065 %0.16 21,065

〃 Others (Note 2) 〃〃 - 10,819 %- 10,819CTBC Capital Co., Ltd. Union Bank of Taiwan

(2838A)- 〃 4,000 213,200 %2.00 213,200

(Continued)

292


Marketable Relationship Ending balance Name of companyholding securities

securities typeand name

with the securitiesissuer Account Number of shares Carrying amount Shareholding ratio

Fair value(Note 1) Note

CTBC Capital Co., Ltd. Formosa Plastic Corporation - Financial assets measuredat fair value through othercomprehensive income

760 78,280 %0.01 78,280

〃 Mega Finance Holding Co.,Ltd.

- 〃 3,088 101,441 %0.02 101,441

〃 Quanta Computer Co., Ltd. - 〃 1,315 115,063 %0.03 115,063〃 Taishin Holdings Preferred

Stock (2887E)- 〃 1,511 80,687 %0.19 80,687

〃 Taiwan Cement Co., Ltd. - 〃 1,676 85,483 %0.03 85,483〃 Asia Cement Corporation - 〃 1,500 76,050 %0.04 76,050〃 Others (Note 2) - 〃 - 132,007 %- 132,007

Note 1: Listed/OTC companies are measured at fair value. The net worth for a non-listed/ OTC company is calculated based on the proportion of total stockholders’equity on hand. The net value of listed/ OTC companies’ preferred shares is based on the liquidation price plus dividends in arrears.

Note 2: Those account balances held by companies are less than 5% of ending balance.

(iv) Accumulative purchases or sales of the same securities/ investee’ s capital stock up to $300,000 or over 10% of paid-incapital:

Unit: In Thousands of New Taiwan Dollars/Thousands SharesMarketable Beginning Acquisition Disposition Ending

Acquiring/selling

company

securitiestype and

name Account Counterparty RelationshipNumber of

shares AmountNumber of

shares AmountNumber of

shares Sell price Book valueGain/loss

on disposalNumber of

shares AmountThe TokyoStar Bank,Ltd.

Privateequity funds

Investmentunder equitymethod-net

AZ-Star no.3InvestmentLimitedPartnership

Investmentunder equitymethod

3 116,904 - 330,311 - - - - 3 406,623(Note)

CTBCVentureCapital Co.,Ltd.

Securities Investmentunder equitymethod-net

CTBC AssetManagementCo., Ltd.

Investment inassociates

- - 70,000 1,375,231 - - - - 70,000 1,499,723(Note)


Securities Investmentunder equitymethod-net

CTBCVentureCapital Co.,Ltd.

Investment inassociates

70,000 1,423,011 - - 70,000 1,375,231 1,470,823 - - -

Note: The ending balance includes recognition of investment income or loss.

(v) Acquisition of real estate up to $300,000 or 10% of paid-in capital:


Previous transfer of related partyPrice

determination

Company ofacquisition Property

Triggeringdate

Transactionprice

Status ofpayment Counter-party Relationship Owner

Relationshipwith theissuer

Date oftransfer Amount

andsupportingreferencematerials

Purpose ofacquisition

Othercommitment


Land: Lot No. 32-2at Jintai Section,Zhongshan District,Taipei City;Building: 8F., 8F-1.,8F-2., 8F-3., 8F-5.,8F-6., 8F-7., 8F-8.,8F-9., 8F-10., 9F.,9F-1., 9F-2., 9F-3.,9F-5., 9F-6., 9F-7.,9F-8., 9F-9., 9F-10., 10F., 10F-1.,10F-2., 10F-3.,10F-4., 10F-5.,10F-6., 10F-7.,10F-8., 10F-9., and10F-10., and 72parking spaces, No.267 at Lequn 2ndRd., ZhongshanDistrict, Taipei City

Thesubsidiarysigned thecontract inDecember2020, andgained theownership inJanuary 2021.

3,688,880 The totalamount of thecontract pricehas beenpaid.

HighwealthConstructionCo., Ltd.,Run LongConstructionCo., Ltd., andChyi YuhConstructionCo., Ltd.

Non-relatedparties

Notapplicable

Notapplicable

Notapplicable

- Appraisalreport of realestateappraisers

Real estateinvestment inaccordancewith theInsurance Law

None


Land: Lot No. 57 atShuibiantouSection, TaoyuanDistrict, TaoyuanCity; Building: Thewhole building atNo. 36, Jingguo 2ndRoad., TaoyuanDistrict, TaoyuanCity

Thesubsidiarysigned thecontract inDecember2020, andgained theownership inJanuary 2021.

819,889 The totalamount of thecontract pricehas beenpaid.

Two peopleand GuahaoCo., Ltd.

Non-relatedparties

Notapplicable

Notapplicable

Notapplicable

- Appraisalreport of realestateappraisers

Real estateinvestment inaccordancewith theInsurance Law

None

(Continued)

293


(vi) Disposal of real estate up to $300,000 or 10% of paid-in capital:

Units: In Thousands of New Taiwan DollarsName of company

Type of property

Transaction date

Acquisition date

Carryingamount

Transaction price Status of receipt

Gain ondisposal (note) Counter-party

Nature of relationship

Purpose of disposal Price reference Other terms


The wholebuilding at No.142, AnkangRoad, NeihuDistrict, TaipeiCity

The Subsidiary’sBoard of Directorsapproved inDecember 2020, andtransferred theownership in March2021.

May 7, 2018 324,295 395,000 The total amountof the contractprice has beenreceived.

62,696 DediprogTechnologyCo., Ltd.

Non-relatedparties

Main operatingactivities

Appraisalreport

None

Note: Gain from disposal for real estate is deducting related expenses.

(vii) Discount on commission fees for transaction with related parties up to $5,000: None.

(viii) Receivables from related parties up to $300,000 or over 10% of paid-in capital:


Account receivable Balance due from Turnover Overdue from related partySubsequentcollections provision for

creditor Counterparty Relationship related party rate Amount Disposal from related party bad debtsCTBC Bank Co., Ltd. Taiwan Life

Insurance Co., Ltd.Controlled by thesame company asCTBC Bank Co., Ltd.

351,451 %- - - The total amount hasbeen received.

-

(ix) Financial derivative transactions: Not applicable to bank subsidiaries; others: Please refer to Note 6(au).

(x) Information on NPL disposal transaction:

1) Summary table of NPL disposal:

Unit: In Thousands of JPY/In Thousands of US Dollars

Trade date Counterparty Debt component Book value Sale priceLosses

on disposal Additional term RelationshipFebruary 05, 2021 Mynavi Bridge

Corporation Ltd.Secured loan JPY 114,748 JPY 89,822 JPY (24,926)None Non-related party

March 05, 2021 Claylish. Ltd. Secured loan JPY 46,444 JPY 37,600 JPY (8,844)None Non-related partyMarch 30, 2021 Olympos Servicing inc. Non-Secured loan JPY 2,838 JPY - JPY (2,838)None Non-related partyJune 3, 2021 Goldman Sachs Lending

Partners LLCNon-Secured loan USD - USD 2,131 USD 2,131 None Non-related party

June 29, 2021 H S Servicer Co., Ltd. Non-Secured loan JPY 457,793 JPY 207,202 JPY (250,591)None Non-related party

2) Disposal of a single batch of NPL up to $1,000,000 and information on each transaction: None.

(xi) Types of securitization instruments approved to be issued pursuant to financial assets securitization rules or real estatesecuritization rules and other relevant information: None.

(xii) Business relationships and material transaction between the parent company and subsidiaries:

Unit: In Thousands of New Taiwan DollarsTransaction status for the six months ended June 30, 2021

No.(Note) Party Counterparty Relationship Account Amount Terms

Percentage ofconsolidated net

revenue or consolidatedtotal assets

0 CTBC FinancialHolding Co., Ltd.

CTBC Bank Co., Ltd. Parent companyto subsidiary

Cash and cashequivalents/Deposits andremittances

265,519 The terms of loans betweenrelated and non-relatedparties are identical.

-%

1 CTBC Bank Co.,Ltd.

CTBC Securities Co.,Ltd.

Subsidiary tosubsidiary

Deposits andremittances/Other assets


-%




Deposits andremittances/Other financialassets


0.01%




Deposits andremittances/Cash and cashequivalents


0.01%






0.01%

(Continued)

294


Transaction status for the six months ended June 30, 2021

No.(Note) Party Counterparty Relationship Account Amount Terms

Percentage ofconsolidated net

revenue or consolidatedtotal assets


Taiwan Lottery Co., Ltd. Subsidiary tosubsidiary



0.01%



Payables/Receivables


0.01%



Other general andadministrativeexpenses/ Serviceincome

1,133,619 The terms of loans betweenrelated and non-relatedparties are identical.

1.32%


CTBC Venture CapitalCo., Ltd.




0.01%






0.62%




Receivables/Payables


0.01%




Service fee andcommissionincome/ Servicefee andcommissionexpenses


4.13%


CTBC Bank (Philippines)Corp.

Subsidiary to sub-subsidiary

Loans/ Due toCentral Bank andother banks


0.02%


CTBC Insurance Co., Ltd. Subsidiary to sub-subsidiary



-%

2 CTBC SecuritiesCo., Ltd.

CTBC (Mauritius)Holding Co., Ltd.

Subsidiary to sub-subsidiary

Other payables/Other receivables


-%

3 CTBC CapitalCorp.

CTBC Bank Corp. (USA) Sub-subsidiary tosub-subsidiary

Cash and cashequivalents/Deposits andremittances


0.01%

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.

(xiii) Other significant transactions that may have substantial influence upon the decisions made by financial report users: None.

(Continued)

295


(b) Information on investees:

The following is the information on investees for the six months ended June 30, 2021 (excluding information on investees in Mainland China):

Unit: In Thousands of New Taiwan Dollars/Thousands SharesAggregate shareholding of the Company and subsidiaries

Name of Main Investment Number of Totalinvesteecompany Address

businessscope

Shareholdingratio

Carryingamount

gain(loss)recognized

Number ofshares

pro formashares

Number ofshares

Shareholdingratio Note

CTBC BankCo., Ltd.

No. 166, 168, 170,186, and 188 Jingmao2nd Road, Taipei City

Commercial bankingand financingbusiness

100.00% 302,197,433 14,875,927 14,796,218 - 14,796,218 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBC SecuritiesCo., Ltd.

3F., No. 168, Jingmao2nd Road, Taipei City

Securities and futuresbusiness

100.00% 9,590,923 686,551 690,729 - 690,729 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBC VentureCapital Co., Ltd.

21F., No. 168,Jingmao 2nd Road,Taipei City

Venture capitalinvestment

100.00% 5,293,625 1,351,620 373,820 - 373,820 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.



Asset managementbusiness


CTBC SecurityCo., Ltd.


Protection, fire andlife safety services

100.00% 58,338 3,555 4,770 - 4,770 100.00%

Taiwan LotteryCo., Ltd.


Issuance and sale,promotion, drawingand redeeming andmanagement of kindsof lottery products


CTBCInvestments Co.,Ltd.


Investment and trustbusiness

100.00% 806,597 120,076 30,600 - 30,600 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.



Life insurancebusiness

100.00% 148,339,722 16,665,509 6,226,732 - 6,226,732 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBC Bank(Philippines)Corp.

16th to 19th Floors,Fort Legend Towers31st Street corner 3rdAvenue BonifacioGlobal City, TaguigCity, 1634 Philippines



PT Bank CTBCIndonesia

Tamara Center,15th~17th F1, JIJenderal SudirmanKev. 24 Jakarta12920 Indonesia


99.00% 5,789,171 62,481 1 - 1 99.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBC BankCorp. (Canada)

Suite #350-2608Granville Street,Vancouver, B.C.,V6H 3V3, Canada



CTBC CapitalCorp.

801 S. FigueroaStreet, Suite 2300,Los Angeles, CA90017, USA

Investment business 100.00% 16,842,245 662,298 6 - 6 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

Grand BillsFinanceCorporation

11F., No. 560, Sec. 4,Jhongsiao E. Rd.,Taipei City

Proprietary trading ofshort-term bills andsecurities

21.15% 2,195,395 98,105 114,399 - 114,399 21.15%

CTBC BankCorp. (USA)

801 S. FigueroaStreet, Suite 2300,Los Angeles, CA90017, USA


100.00% 16,190,272 673,893 Common shares-3

Preferred shares-100

- Common shares-3

Preferred shares-100

100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

(Continued)

296


Aggregate shareholding of the Company and subsidiariesName of Main Investment Number of Totalinvesteecompany Address

businessscope

Shareholdingratio

Carryingamount


Number ofshares

pro formashares

Number ofshares



2-3-5, Akasaka,Minato-Ku, Tokyo,107-8480, Japan


100.00% 40,914,367 457,091 700 - 700 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

Tokyo StarBusinessFinance, Ltd.

2-7-1, Nishi Shinjuku,Shinjuku, Tokyo

Financing andassurance business


TSB Servicer,Ltd.

1-7-5, Sekido,Tamashi, Tokyo

Debts managementbusiness

-% - (14,181) - - - -% The company hadbeen liquidated inMarch 16, 2021.The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBC(Mauritius)Holding Co.,Ltd.

3rd Floor, RafflesTower, 19 CybercityEbene, Republic ofMauritius.

Investment business 100.00% 163,762 (3,870) 17,363 - 17,363 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements. (Note 1,Note 2)

CTBC SecuritiesInvestmentService Co., Ltd.


Security investmentconsultant business

100.00% 51,708 769 5,000 - 5,000 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBC SecuritiesVenture CapitalCo., Ltd.


Venture capitalinvestment business

100.00% 323,110 15,809 30,000 - 30,000 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBC AsiaLimited

Suite 2809, 28F., TwoInternational FinanceCentre, 8 FinanceStreet, Central,Hong Kong

Securities business 100.00% 142,355 (14,554) 134,526 - 134,526 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBCInternationalCo., Limited

Romm 511, 5F,Tower 1 SilvercordCentre No.30 CantonRoad, Tsim Sha Tsui,Hong Kong

Holding company 100.00% 1,499,723 100,984 70,000 - 70,000 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBC FinancialLeasing Co.,Ltd.

12F., No. 1386Wenguang Building,Hongqiao Road,Changning District,Shanghai

Financial leasing 100.00% 1,475,570 101,115 - - - 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBC InsuranceCo., Ltd. (usedname: TLGInsurance Co.,Ltd.)

18F-1, No. 17,Xuchang St.,Zhongzheng Dist.,Taipei City

Property insurancebusiness


CTBC CapitalCo., Ltd. (usedname: TLGCapital Co.,Ltd.)

17F., No. 17,Xuchang St.,Zhongzheng Dist.,Taipei City

Installment, leasing,and accountreceivable factoringbusiness


King DragonLife InsuranceCompany

27F., Xiamen LixinSquare Lake RoadNo. 90 in FujianProvince

Insurance business 50.00% 940,815 19,754 - - - 50.00%

Top Taiwan IXVenture CapitalCo., Ltd.

8F., No. 99, Sec.1,Xinsheng S. Rd., Daan Dist., Taipei City

Venture CapitalInvestment

25.00% 393,293 107,656 20,000 - 20,000 25.00%

AZ-Star Co.,Ltd.

5-2-7, Gobancho,Chiyodaku, Tokyo

Fund managementbusiness

40.00% 25,339 10,114 - - - 40.00%

AZ-Star FirstInvestmentLimitedPartnership


Equity investmentbusiness

-% - 258 - - - -% The company hadbeen liquidated onMarch 24, 2021

(Continued)

297


Aggregate shareholding of the Company and subsidiariesName of Main Investment Number of Totalinvesteecompany Address

businessscope

Shareholdingratio

Carryingamount


Number ofshares

pro formashares

Number ofshares


AZ-Star ThirdInvestmentLimitedPartnership


Equity investmentbusiness

23.56% 406,623 (10,858) 3 - 3 23.56%

LH FinancialGroup PublicCompanyLimited

1Q. House LuminiBuilding, 5th Floor,South Sathon Road,Thungmahamek,Sathon, Bangkok10120

Investment business 35.86% 15,127,507 341,124 7,544,961 - 7,544,961 35.86%

XiamenJinmeixinConsumerFinance Co.,Ltd.

Xiamen InternationalFinancial Central 6thFloor, No. 82,Hongzhan Load,SimingDist.,XiamenCity,China(P.R.C)

Consumer financialbusiness

34.00% 893,881 37,496 - - - 34.00%

HoFa LandDevelopmentCo., Ltd.

4F-2, No. 80, Szu Wei3rd, Kaohsiung City

Premises developmentand transaction

90.00% 3,741,044 (3,088) 340,488 - 340,488 90.00%

Wu TzuDevelopmentCo., Ltd.

3F., No. 2-7, LuchuanW. St., WestDist.,Taichung City

Athletics andrecreational sportsstadium

99.00% 2,393,829 (22,998) 241,560 - 241,560 99.00%

Star ShiningEnergy Co., Ltd.

4F., No. 20-1,Guangfu N. Rd.,Hukou Township,Hsinchu County

Energy ServicesCompany

30.00% 1,555,188 19,559 150,000 - 150,000 30.00%

Giga GreenEnergy Co., Ltd.

1F., No. 3, Gongye1st Rd., HukouTownship, HsinchuCounty


30.00% 348,479 4,798 32,700 - 32,700 30.00%

Taiwan WindInvestment Co.,Ltd.

26F., No. 68, Sec. 5,Zhongxiao E. Rd.,Xinyi Dist., TaipeiCity

General investmentindustry

42.86% 1,609,300 (213,276) 183,626 - 183,626 42.86%

SolarbrightEnergy Co., Ltd.

9F., No. 295, Sec. 2,Tiding Blvd., NeihuDist., Taipei City


35.00% 105,925 1,125 10,500 - 10,500 35.00%

Star PowerEnergy Co., Ltd.

28F-2., 28F-3., No.213, Chaofu Rd.,Xitun Dist., TaichungCity


30.00% 224,051 6,650 22,500 - 22,500 30.00%

Li-Wei EnergyCo., Ltd.

3F-1., No. 2, Sec. 2,Dunhua S. Rd., DaanDist., Taipei City

Offshore wind powerIndustry

28.33% 426,076 6,542 42,500 - 42,500 28.33%

Xinhe EnergyDevelopmentCo., Ltd.

No. 560-3, ZhongxingRd., ChangzhiTownship, PingtungCounty


25.00% 420,604 (646) 42,125 - 42,125 25.00%

Note 1: The carrying amount includes accumulated impairment loss amounted to $20,629.

Note 2: The company is in liquidation.

(c) Information on investment in mainland China:

(i) Related information on investee companies in Mainland China:Unit: In Thousands of New Taiwan Dollars/In Thousands of US Dollars/In Thousands of Chinese Yuan

Accumulated Investment flows Accumulated

Name of investeecompany in Mainland

China Main businessesTotal amount

of paid-in capital

Method ofinvestment(Note 1)

outflow ofinvestment from

Taiwan as of January 1, 2021 Outflow Inflow

outflow ofinvestment from

Taiwan as of June 30, 2021

Investment gains(losses) by an

investee

Percentage ofownership for direct or

indirect investment

Investmentgains (losses)

(Note 2)Book value as of

June 30, 2021

Accumulatedinward remittanceof earnings as ofJune 30, 2021

CTBC Bank Co., Ltd.,Shanghai Branch

Commercialbanking

6,194,068USD 206,045

( 3 ) 6,194,068USD 206,045

- - 6,194,068USD 206,045

5,345RMB 1,227

A branch in Shanghai;not an investee

5,345 7,358,674 None

CTBC Bank Co., Ltd.,Guangzhou Branch

Commercialbanking

4,114,056USD 130,531

( 3 ) 4,114,056USD 130,531

- - 4,114,056USD 130,531

187,585RMB 43,054

A branch inGuangzhou; not aninvestee

187,585 5,000,282 None

CTBC Bank Co., Ltd.,Xiamen Branch

Commercialbanking

4,081,960RMB 800,000

( 3 ) 4,081,960RMB 800,000

- - 4,081,960RMB 800,000

78,640RMB 18,226

A branch in Xiamen;not an investee

78,640 4,081,430 None

CTBC Bank Co., Ltd.Shenzhen Branch

Commercialbanking

1,351,890RMB 100,000USD 29,395

( 3 ) 1,351,890RMB 100,000USD 29,395

- - 1,351,890RMB 100,000USD 29,395

23,657RMB 5,441

A branch inShenzhen; not aninvestee

23,657 1,241,483 None

Xiamen JinmeixinConsumer Finance Co.,Ltd.

Financing business 795,471RMB 170,000

( 1 ) 795,471RMB 170,000

- - 795,471RMB 170,000

175,554RMB 40,335

34.00% 37,496 893,881 None

CTBC FinancialLeasing Co., Ltd.

Financial leasing 2,071,728USD 69,110

( 2 ) 2,071,728USD 69,110

- - 2,071,728USD 69,110

101,115RMB 23,173

100.00% 101,115 1,475,570 None

King Dragon LifeInsurance Co., Ltd.(Note3)

Life insurancebusiness

3,948,990RMB 800,000

( 1 ) 1,856,036USD 26,724RMB 220,000

- - 1,856,036USD 26,724RMB 220,000

57,722RMB 13,302

50.00% 19,754 940,815 None

(Continued)

298


Note 1: Three methods of investment are as below:

1. Invest in Mainland China companies directly.

2. Re-invest in Mainland China companies through another investee in a third area (The investee in the third areais CTBC International Co., Limited).

3. Other method: set up new overseas branches.

Note 2: For the column of “Investment gains (losses)”:

1. If the company is still in the preparation process, and does not have any investment gain or loss, please specify.

2. The bases for recognition of investment income or loss.

a. The auditor’ s reviewed financial reports that are issued by an international accounting firm which isconnected to an accounting firm in Taiwan: CTBC Financial Leasing Co., Ltd. and King Dragon LifeInsurance Co., Ltd.

b. The audited financial reports that are issued by the Taiwanese parent company’s designated accounting firm:None.

c. Others: Individual gains (losses) from overseas branches of CTBC Bank Co., Ltd.

3. Please specify if information regarding current gains or losses of an investee is not accessible.

Note 3: The Board of Directors of the Company’s subsidiary Taiwan Life Insurance Co., Ltd. had approved to participatein the capital increase of King Dragon Life Insurance Co., Ltd. for RMB 350,000 thousand in proportion to thepercentage to ownership on March 18, 2021. The approval of the transaction is to be determined by MOEA.

(ii) Upper limit on investment in Mainland China:

Unit: In Thousands of New Taiwan Dollars/In Thousands of US Dollars/In Thousands of Chinese Yuan

Name of investor company

Accumulated outflow of investmentfrom Taiwan to Mainland China as of

June 30, 2021

Investment amounts authorizedby Investment Commission,

MOEA

Upper limit on investmentauthorized by Investment

Commission, MOEACTBC Bank Co., Ltd. 16,537,445

(USD 365,971 )(RMB 1,070,000 )

15,145,194(RMB 3,370,000 )

182,301,936

CTBC Venture Capital Co., Ltd. 2,071,728(USD 69,110 )

1,375,231(USD 47,217 ) (Note)

3,176,175

Taiwan Life Insurance Co., Ltd. 1,856,036(USD 26,724 )(RMB 220,000 )

1,856,036(USD 26,724 )(RMB 220,000 )

91,184,476

Note: The amounts are the investment of CTBC International Co., Limited, which was invested by the Company’ ssubsidiary CTBC Asset Management Co., Ltd. Due to the reorganization in the Group, the Company’s subsidiaryCTBC Venture Capital Co., Ltd. acquired the investee for $1,375,231 (USD 47,217 thousand) from CTBC AssetManagement Co., Ltd. on March 31, 2021. The transaction was approved by Investment Commission, MOEA.

(iii) Significant transactions with investee companies in Mainland China: None.

(d) Major shareholders: No shareholders have over 5% shareholding.

(Continued)

299


(14) Segment information:

The Company and subsidiaries provide their chief operating decision maker with necessary informationaccording to the characteristics of the business, to facilitate the assessment of performance and allocationof operational resources. The disclosures of assets, profits and losses are the same as the summary ofsignificant accounting policies described in Note 4.

According to IFRS 8 “Operating Segments”, reportable segments are as follows:

The major operating activities of Institutional Banking are commercial banking and capital marketactivities which provide clients with flexible and tailor-made financing services and the design, supply,and propriety trading of various financial products.

The major operating activity of Retail Banking is providing target clients with relevant financial services,including wealth management, credit cards, secured loans, and unsecured individual loans, etc.

The major operating activity of Life Insurance is providing various sorts of life insurance services.

The major operating activities of other segments are investing and general administration. The aboveoperating segments did not meet the criteria for reportable segments when applying quantitativethresholds.

(a) Segment information: For the three months ended June 30, 2021 Institutional banking Retail banking Life insurance Others Total

Net interest income $ 8,117,135 6,344,935 12,260,103 58,021 26,780,194Net non-interest income 2,199,896 6,654,220 58,313 2,287,658 11,200,087

Net revenue 10,317,031 12,999,155 12,318,416 2,345,679 37,980,281

Net Income (Losses) before Tax $ 4,014,685 4,920,208 6,095,273 (115,593) 14,914,573

For the three months ended June 30, 2020 Institutional banking Retail banking Life insurance Others TotalNet interest income $ 8,120,644 5,840,555 13,239,765 138,371 27,339,335Net non-interest income 3,628,345 5,723,724 8,888,159 2,162,481 20,402,709

Net revenue 11,748,989 11,564,279 22,127,924 2,300,852 47,742,044


For the six months ended June 30, 2021 Institutional banking Retail banking Life insurance Others TotalNet interest income $ 16,238,311 12,417,299 24,859,371 98,779 53,613,760Net non-interest income 5,716,185 14,255,489 6,674,983 5,339,799 31,986,456

Net revenue 21,954,496 26,672,788 31,534,354 5,438,578 85,600,216


Total assets $ 3,207,026,323 1,254,658,587 2,105,363,915 128,144,742 6,695,193,567

For the six months ended June 30, 2020 Institutional banking Retail banking Life insurance Others TotalNet interest income $ 16,282,692 12,037,895 26,346,161 262,641 54,929,389Net non-interest income 7,397,631 12,357,610 33,331,429 2,577,740 55,664,410

Net revenue 23,680,323 24,395,505 59,677,590 2,840,381 110,593,799

Net Income before Tax $ 5,417,240 9,624,370 9,160,150 1,191,678 25,393,438

Total assets $ 3,111,119,490 1,138,296,375 1,996,774,557 135,748,229 6,381,938,651

(b) Geographic segment information: Not applicable to the interim financial statements.

(c) Information on major customers: Not applicable to the interim financial statements.

Documents

CTBC FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES