UBOT - Annual Report 2020 | FinancialReports.eu

Union Bank of Taiwan and Subsidiaries

Consolidated Financial Statements for the Years Ended December 31, 2020 and 2019 and Independent Auditors’ Report

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The Bank and its subsidiaries required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2020 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in International Financial Reporting Standard 10. Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies. Hence, we have not prepared a separate set of consolidated financial statements of affiliates.

Very truly yours,

UNION BANK OF TAIWAN

By:

March 10, 2021

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders Union Bank of Taiwan

Opinion

We have audited the accompanying consolidated financial statements of Union Bank of Taiwan (the “Bank”) and its subsidiaries (collectively, the “Company”), which comprise the consolidated balance sheets as of December 31, 2020 and 2019, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the 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, the consolidated financial position of the Company as of December 31, 2020 and 2019, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2020. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

The key audit matters of the Company’s consolidated financial statements for the year ended December 31, 2020 are described as follows:

Assessment of the Impairment of Discounts and Loans

As of December 31, 2020, the net amount of discounts and loans of the Company was represented approximately 56% of total consolidated assets, and was considered material to the financial statements as a whole. Refer to Note 14 to the consolidated financial statements. The Company’s management performs loan impairment assessment by making critical judgements on accounting estimates and assumptions; therefore, we determined allowance for possible losses on discounts and loans a key audit matter for the year ended December 31, 2020.

The Company’s management periodically performs loan impairment assessment through making judgements to measure the loss allowance at an amount equal to 12-month expected credit losses or the lifetime expected credit losses. Also, the allowance provision should comply with the classification of credit assets required by the regulations on making provision issued by the authorities.

For the accounting policies and relevant information on loan impairment assessment, refer to Notes 4, 5 and 14 to the consolidated financial statements.

The main audit procedures we performed in response to certain aspects of the key audit matter described above were as follows:

We obtained an understanding of the relevant internal controls in respect of the Bank’s loan impairment assessment and tested the operating effectiveness of such controls.
We tested the classification of credit assets in accordance with relevant regulations issued by management and authorities. In addition, we evaluated the reasonableness of the adjustments to the classification.
We assessed the reasonableness and consistency of the methodology applied by management in the calculation of expected credit losses; we tested the completeness of the loans and the accuracy of the calculation of expected credit losses for selected loans.

Other Matter

We have also audited the separate financial statements of Union Bank of Taiwan as of and for the years ended December 31, 2020 and 2019 on which we have issued an unmodified opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms, and IFRS, IAS, IFRIC, and SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated 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’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including the audit committee, are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

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

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement 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.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.
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We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2020 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audits resulting in this independent auditors’ report are Jui-Chan Huang and Chen-Hsiu Yang.

Deloitte & Touche Taipei, Taiwan Republic of China March 29, 2021

Notice to Readers

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

For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated financial statements shall prevail.

UNION BANK OF TAIWAN AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

ASSETS CASH AND CASH EQUIVALENTS (Notes 4 and 6) DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS (Notes 7 and 48) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4 and 8) FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (Notes 4, 5, 9 and 11) INVESTMENTS IN DEBT INSTRUMENTS AT AMORTIZED COST (Notes 4, 5, 10 and 11) SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL (Notes 4 and 12) RECEIVABLES, NET (Notes 4, 5, 13 and 15) CURRENT TAX ASSETS DISCOUNTS AND LOANS, NET (Notes 4, 5, 14, 15 and 47) INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD, NET (Notes 4 and 17) OTHER FINANCIAL ASSETS, NET (Notes 4, 18 and 48) PROPERTY AND EQUIPMENT, NET (Notes 4 and 19) RIGHT-OF-USE ASSETS (Notes 4 and 20) INVESTMENT PROPERTIES, NET (Notes 4, 21, 31 and 48) INTANGIBLE ASSETS (Notes 4 and 22) Goodwill Computer software Total intangible assets DEFERRED TAX ASSETS (Notes 4 and 45) OTHER ASSETS, NET (Notes 4, 23, 34, 47 and 49) TOTAL LIABILITIES AND EQUITY DEPOSITS FROM THE CENTRAL BANK AND OTHER BANKS (Note 24) DUE TO THE CENTRAL BANK AND OTHER BANKS (Note 25) FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4 and 8) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (Note 26) PAYABLES (Note 27) CURRENT TAX LIABILITIES DEPOSITS AND REMITTANCES (Notes 28 and 47) BANK DEBENTURES (Note 29) PREFERRED STOCK LIABILITY (Note 30) BONDS PAYABLE (Notes 21 and 31) OTHER FINANCIAL LIABILITIES (Note 32) PROVISIONS (Notes 4, 5, 33 and 34) LEASE LIABILITIES (Notes 4, 20 and 47) DEFERRED TAX LIABILITIES (Notes 4 and 45) OTHER LIABILITIES (Notes 35 and 49) Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE BANK Share capital Ordinary shares Preference shares Total share capital Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity attributable to owners of the Bank NON-CONTROLLING INTERESTS Total equity TOTAL		2020 Amount % $ 8,961,438 1 24,325,798 3 34,881,848 5 53,403,733 7 90,697,662 12 63,911,473 9 24,936,576 3 50,085 - 422,845,363 56 1,536,989 - 4,549,698 1 7,925,277 1 1,741,760 - 5,288,112 1 1,985,307 - 181,030 - 2,166,337 - 792,478 - 9,543,375 1 $ 757,558,002 100 $ 12,481,114 2 3,786,720 1 206,002 - 44,428,176 6 5,594,014 1 121,567 - 606,860,499 80 7,200,000 1 524,000 - 1,464,796 - 7,420,161 1 268,774 - 1,723,121 - 1,696,935 - 3,589,711 - 697,365,590 92 30,933,688 4 2,000,000 - 32,933,688 4 8,040,035 1 7,883,630 1 627,440 - 4,854,972 1 13,366,042 2 5,851,070 1 60,190,835 8 1,577 - 60,192,412 8 $ 757,558,002 100		2019
				Amount % $ 12,382,445 2 17,344,886 3 30,917,254 5 41,236,965 6 104,170,149 15 51,417,825 7 21,177,107 3 58,716 - 384,649,673 55 1,587,482 - 3,632,648 1 7,969,302 1 1,439,735 - 5,369,780 1 1,985,307 - 152,150 - 2,137,457 - 698,921 - 8,970,842 1 $ 695,161,187 100 $ 11,860,732 2 - - 650,981 - 65,377,436 9 4,615,289 1 369,729 - 532,899,100 77 10,200,000 1 - - 1,473,858 - 4,887,786 1 258,535 - 1,415,180 - 1,617,201 - 3,285,481 1 638,911,308 92 28,844,553 4 2,000,000 - 30,844,553 4 8,035,484 1 6,875,793 1 627,440 - 5,180,139 1 12,683,372 2 4,684,892 1 56,248,301 8 1,578 - 56,249,879 8 $ 695,161,187 100

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

UNION BANK OF TAIWAN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

NET INTEREST (Notes 4, 37 and 47) Interest revenue Interest expense Net interest NET REVENUE OTHER THAN INTEREST Commissions and fee revenue, net (Notes 4, 38 and 47) Gain on financial assets and liabilities at fair value through profit or loss (Notes 4 and 39) Realized gain on financial assets at fair value through other comprehensive income (Notes 4 and 40) Share of loss of associates (Notes 4 and 17) Foreign exchange gain (loss) (Note 4) Reversal of impairment loss (impairment loss) on assets (Notes 4 and 41) Securities brokerage fee revenue, net (Note 4) Rental revenue (Note 4) Other noninterest gain, net TOTAL NET REVENUE PROVISIONS (Notes 4, 5, 15 and 33) Provision of allowance for doubtful accounts and provision for losses on commitments and guarantees OPERATING EXPENSES Employee benefit expense (Notes 34 and 42) Depreciation and amortization (Notes 4 and 43) Others (Notes 44 and 47) Total operating expenses		2020 Amount % $ 11,923,484 83 4,282,424 30 7,641,060 53 2,820,473 19 1,771,015 12 418,748 3 (50,493) - (1,006,456) (7) 128,860 1 320,764 2 2,278,320 16 108,071 1 14,430,362 100 290,540 2 3,965,882 28 2,492,408 17 3,739,857 26 10,198,147 71		2019 Amount % $ 12,003,109 87 5,525,647 40 6,477,462 47 2,716,846 19 1,485,872 11 346,202 2 (35,980) - 369,470 3 (42,921) - 235,895 2 2,236,624 16 76,712 - 13,866,182 100 240,675 2 3,831,242 27 2,483,882 18 3,282,927 24 9,598,051 69	Percentage Increase (Decrease)
					% (1) (22) 18 4 19 21 40 (372) 400 36 2 41 4 21 4 - 14 6 (Continued)

UNION BANK OF TAIWAN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

INCOME BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 45) CONSOLIDATED NET INCOME OTHER COMPREHENSIVE INCOME Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Unrealized gain on investments in equity instruments at fair value through other comprehensive income Income tax relating to items that will not be reclassified subsequently to profit or loss (Note 45) Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of the financial statements of foreign operations Unrealized gain (loss) on investments in debt instruments at fair value through other comprehensive income Income tax relating to items that may be reclassified subsequently to profit or loss (Note 45) Other comprehensive income for the year, net of income tax TOTAL COMPREHENSIVE INCOME		2020 Amount % $ 3,941,675 27 500,170 3 3,441,505 24 7,682 - 776,641 6 (108,661) (1) (608,239) (5) 1,005,636 7 121,648 1 1,194,707 8 $ 4,636,212 32		2019 Amount % $ 4,027,456 29 655,978 4 3,371,478 25 174,293 1 2,247,353 16 (335,033) (2) (238,885) (2) 1,604,564 12 47,777 - 3,500,069 25 $ 6,871,547 50	Percentage Increase (Decrease)
					% (2) (24) 2 (96) (65) (68) 155 (37) 155 (66) (33) (Continued)

UNION BANK OF TAIWAN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

NET INCOME ATTRIBUTABLE TO: Owners of the Bank Non-controlling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Bank Non-controlling interests EARNINGS PER SHARE (NEW TAIWAN DOLLARS; Note 46) Basic Diluted		2020 Amount % $ 3,441,709 24 (204) - $ 3,441,505 24 $ 4,636,413 32 (201) - $ 4,636,212 32 $0.96 $0.96		2019 Amount % $ 3,359,457 24 12,021 - $ 3,371,478 24 $ 6,859,589 50 11,958 - $ 6,871,547 50 $0.93 $0.93	Percentage Increase (Decrease)
					% 2 (102) 2 (32) (102) (33)

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

(Concluded)

UNION BANK OF TAIWAN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

			Equity Attributable Owners of the Company	Equity Attributable Owners of the Company
Share Capital (Notes 36 and		42) Total Capital Surplus (Note 32) $ 28,900,129 $ 8,032,413 - - - - 1,883,009 - - - - - - - - - 61,415 3,071 - - 30,844,553 8,035,484 - - - - 2,019,119 - - - - - - - - - 70,016 4,551 - - $ 32,933,688 $ 8,040,035	Retained Earnings (Notes 4, 36 and 56)	Total $ 11,220,664 - - (1,883,009 ) (480,000 ) 3,359,457 139,435 (6,698 ) - 333,523 12,683,372 - (288,446 ) (2,019,119 ) (480,000 ) 3,441,709 6,144 - - 22,382 $ 13,366,042	Other Equity (Notes 4and 36) Exchange Differences on Translation of the Financial Statements of Unrealized Valuation Gains (Loss) on Financial Assets at Fair Value Through Other Foreign Operations Comprehensive Income Total $ (413,524 ) $ 2,073,347 $ 1,659,823 - - - - - - - - - - - - - - - (191,108 ) 3,551,805 3,360,697 - (2,105 ) (2,105 ) - - - - (333,523) (333,523) (604,632 ) 5,289,524 4,684,892 - - - - - - - - - - - - - - - (486,591 ) 1,675,151 1,188,560 - - - - - - - (22,382) (22,382) $ (1,091,223) $ 6,942,293 $ 5,851,070
					Exchange Differences on Translation of the Financial Statements of Unrealized Valuation Gains (Loss) on Financial Assets at Fair Value Through Other Foreign Operations Comprehensive Income $ (413,524 ) $ 2,073,347 - - - - - - - - - - (191,108 ) 3,551,805 - (2,105 ) - - - (333,523) (604,632 ) 5,289,524 - - - - - - - - - - (486,591 ) 1,675,151 - - - - - (22,382) $ (1,091,223) $ 6,942,293
Ordinary Shares $ 26,900,129 - - 1,883,009 - - - - 61,415 - 28,844,553 - - 2,019,119 - - - - 70,016 - $ 30,933,688	Preference Shares $ 2,000,000 - - - - - - - - - 2,000,000 - - - - - - - - - $ 2,000,000		Legal Reserve Special Reserve Unappropriated Earnings $ 5,988,776 $ 612,656 $ 4,619,232 887,017 - (887,017 ) - 14,784 (14,784 ) - - (1,883,009 ) - - (480,000 ) - - 3,359,457 - - 139,435 - - (6,698 ) - - - - - 333,523 6,875,793 627,440 5,180,139 1,007,837 - (1,007,837 ) - - (288,446 ) - - (2,019,119 ) - - (480,000 ) - - 3,441,709 - - 6,144 - - - - - - - - 22,382 $ 7,883,630 $ 627,440 $ 4,854,972

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

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UNION BANK OF TAIWAN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expense Amortization expense Expected credit losses/provision of allowance for doubtful accounts Gain on disposal of financial assets at fair value through profit or loss Interest expense Interest revenue Dividend income Share of loss of associates Gain on disposal of properties and equipment Gain on disposal of investments Reversal of impairment loss on financial assets Impairment loss on financial assets Reversal of impairment loss on nonfinancial assets Gain on disposal of collaterals Changes in operating assets and liabilities Due from the Central Bank and call loans to banks Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Investments in debt instruments at amortized cost Receivables Discounts and loans Other financial assets Deposits from the Central Bank and other banks Financial liabilities at fair value through profit or loss Securities sold under repurchase agreements Payables Deposits and remittances Other financial liabilities Provision for employee benefits Other liabilities Cash generated from (used in) operations Interest received Dividends received Interest paid Income tax paid Net cash generated from (used in) operating activities	2020 $ 3,941,675 2,411,311 81,097 290,540 (1,716,214) 4,282,424 (11,923,484) (458,178) 50,493 (43,194) (15,371) (122,109) - (6,751) (256) (7,457,990) (1,909,113) (10,349,999) 13,628,315 (3,915,983) (38,507,082) (942,350) 620,382 (784,246) (20,949,260) 1,388,354 73,961,399 115,251 11,878 11,171 1,692,710 12,072,954 458,178 (4,603,904) (740,537) 8,879,401	2019 $ 4,027,456 2,395,478 88,404 240,675 (1,449,848) 5,525,647 (12,003,109) (357,904) 35,980 (18,089) (24,322) - 63,106 (20,185) (43,640) 6,069,171 8,491,975 (3,984,881) (10,706,007) (3,061,438) (59,871,253) (522,300) (251,163) (906,274) 21,043,048 (2,393,463) 18,981,025 (11,714) 154,596 1,800 (28,507,229) 11,865,208 357,904 (5,465,831) (152,161) (21,902,109) (Continued)

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UNION BANK OF TAIWAN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Payments for properties and equipment Proceeds from disposal of properties and equipment Payments for investment properties Decrease in settlement fund Increase in refundable deposits Decrease in refundable deposits Payments for intangible assets Proceeds from disposal of collaterals Payments for right-of-use assets Increase in other assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in due to Central Bank and other banks Increase in commercial paper Repayment of bonds payable Proceeds from issue of bank debentures Repayments of bank debentures Proceeds from issuance of preferred stock liability Proceeds from guarantee deposits received Repayment of the principal portion of lease liabilities Increase in other liabilities Changes in non-controlling interests Dividends paid Net cash generated from financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2020 $ (227,557) 20 (13,668) 616 - 299,958 (41,419) 7,007 - (2,503,824) (2,478,867) 3,786,720 2,417,124 (3,041) - (3,000,000) 524,000 100,940 (438,309) 189,708 - (768,446) 2,808,696 (613,667) 8,595,563 64,277,348 $ 72,872,911	2019 $ (298,983) 48 (30,174) 448 (456,918) - (46,425) 63,825 (974) (2,050,024) (2,819,177) - 810,036 - 2,000,000 (1,500,000) - 23,990 (436,833) 261,228 (264,909) (480,000) 413,512 (236,029) (24,543,803) 88,821,151 $ 64,277,348 (Continued)

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UNION BANK OF TAIWAN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

Reconciliation of the cash and cash equivalents reported in the consolidated statements of cash flows with those reported in the consolidated balance sheets as of December 31, 2020 and 2019:

Cash and cash equivalents in the consolidated balance sheets Due from the Central Bank and call loans to banks that meet the definition of cash and cash equivalents in IAS 7 “Cash Flow Statements” Securities purchased under agreements to resell that meet the definition of cash and cash equivalents in IAS 7 Cash and cash equivalents in consolidated statements of cash flows		December 31	December 31
		2020 $ 8,961,438 - 63,911,473 $ 72,872,911	2019 $ 12,382,445 477,078 51,417,825 $ 64,277,348

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

(Concluded)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

UNION BANK OF TAIWAN AND SUBSIDIARIES

1. GENERAL INFORMATION

The Union Bank of Taiwan (the “Bank”) was incorporated on December 31, 1991 after obtaining approval from the Ministry of Finance (MOF) on August 1, 1991 and started operations on January 21, 1992.

The Bank is mainly engaged in activities allowed under the Banking Law, which include deposits, loans, discounts, remittances, acceptances, issuance of guarantees and letters of credit, short-term bills transactions, investments, foreign exchange transactions, savings, trust, etc.

On the Bank’s merger with Chung Shing Bank on March 19, 2005, the Bank took over all of the assets, liabilities and operating units of Chung Shing Bank.

The Bank merged with Union Bills Finance Corporation (UBF) on August 16, 2010, with the Bank as the surviving entity.

On August 26, 2015, the board of directors of the Bank resolved to merge UIB in order to integrate the resources, strengthen management and business synergy. The merger was approved by the Financial Supervisory Commission (FSC) under Rule No. 10502022990. The effective date of this merger was August 1, 2016.

To integrate resources and enhance operating effectiveness, the Bank requested to purchase Union Securities Investment Trust Corporation’s equity, which was approved by the board of directors on May 9, 2018. The investment was approved by the FSC under Rule No. 10802037180 on March 27, 2019. The Bank acquired 64.44% and 0.16% equity interest of Union Securities Investment Trust Corporation on July 5, 2019 and December 27, 2019, respectively. After the transaction was completed, the percentage of total equity interest increased from 35% to 99.60%.

In order to actively support the FSC’s needs to adapt to the nation’s overall industry development and to boost the diversification of the corporate banking business as well as improve the efficiency in the use of funds, Union Bank of Taiwan established Union Venture Capital in coordination with the nation’s financial policies, which was approved by the board of directors on September 26, 2018. The investment was approved by the FSC under Rule No. 10802042270. Union Venture Capital had been established by the Bank on November 21, 2019. The total investment amount was $800,000 thousand, and the Bank held 100% of Union Venture Capital’s shares as of December 31, 2020.

As of December 31, 2019, the Bank’s operating units included Banking, Trust, Wealth Management, Security Finance, Bills Finance, International Banking Department of the Head Office, Insurance Agency Department, an Offshore Banking Unit (OBU), three overseas representative offices in Hong Kong, Ho Chi Minh City and Hanoi, Vietnam, and 90 domestic branches (including the business department).

The operations of the Bank’s trust department are (1) trust business planning, managing and operating; and (2) custody of nondiscretionary trust funds in domestic and overseas securities and mutual funds. These foregoing operations are regulated under the Banking Law and Trust Law.

The Bank’s shares are traded on the Taiwan Stock Exchange.

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The following chart presents the relationship between the Bank and its subsidiaries (collectively referred to as the “Company”) and percentage of ownership as of December 31, 2020:

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----- Start of picture text -----

Union Bank of Taiwan
100% 99.99% 99.60% 99.99% 100%
Union Finance and Leasing Union Information Union Securities Investment Union Finance International Union Venture Capital Co.,
International Corporation Technology Corporation Trust Co., Ltd. (H.K.) Limited Ltd.
100% 100% 100% 100% 90% 100% 99.93%
Union Capital (Cayman) New Asian Ventures Union Private Equity 100% Union Energy Ting Jie Electric Corner Union Na he yi hau
Corp. Ltd. Co., Ltd. Co., Ltd Power Inc. Venture Capital, electric power Inc.
LLC
(Delaware, US)
100% 100%
Union Capital (Singapore) Holding PTE. Ltd. Uflc Capital (Singapore) Holding PTE.
100%
Ltd. 100%
Corner Union, LLC Corner Ventures DAG I-U,
30.55% (Delaware, US) LLC
69.45%
(Delaware, US)
49%
Kabushiki Kaisha UCJ1 (Japan)
51%
51%
Tokutei Mokuteki Kaisha SSG15 (Japan)
Tokutei Mokuteki Kaisha SSG12 (Japan),
49% Tokutei Mokuteki Kaisha SSG16 (Japan)
----- End of picture text -----

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The Company’s consolidated financial statements are presented in the New Taiwan dollar.

2. APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements were approved by the bank’s board of directors and authorized for issue on March 10, 2021.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Public Banks and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the FSC

Except for the following, the initial application of the IFRSs endorsed and issued into effect by the FSC did not have material impact on the Company’s accounting policies:

1) Amendments to IFRS 3 “Definition of a Business

The Company applies the amendments to IFRS 3 to transactions that occur on or after January 1, 2020. The amendments clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. To determine whether an acquired process is substantive, different criteria apply, depending on whether there are outputs at the acquisition date. In addition, the amendments introduce an optional concentration test that permits a simplified assessment of whether or not an acquired set of activities and assets is a business.

2) Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate Benchmark Reform”

Upon retrospective application of the amendments, the Company complied with the hedge accounting requirements under the assumption that the interest rate benchmark (such as the London Interbank Offered Rate or LIBOR) on which the hedged cash flows and cash flows from the hedging instrument are based will not be altered as a result of interest rate benchmark reform.

3) Amendments to IAS 1 and IAS 8 “Definition of Material”

The Company adopted the amendments starting from January 1, 2020. The threshold of materiality that could influence users has been changed to “could reasonably be expected to influence”. Accordingly, disclosures in the consolidated financial statements do not include immaterial information that may obscure material information

b. The IFRSs endorsed by the FSC for application starting from 2021

New IFRSs Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9” Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform - Phase 2” Amendment to IFRS 16 “Covid-19-Related Rent Concessions”	Effective Date Announced by IASB
	Effective immediately upon promulgation by the IASB January 1, 2021 June 1, 2020

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Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform - Phase 2”

“Interest Rate Benchmark Reform - Phase 2” primarily amends IFRS 9, IFRS 7 and IFRS 16 to provide practical relief from the impact of the interest rate benchmark reform.

Changes in the basis for determining contractual cash flows as a result of interest rate benchmark reform

The changes in the basis for determining contractual cash flows of financial assets, financial liabilities or lease liabilities are accounted for by updating the effective interest rate at the time the basis is changed, provided the changes are necessary as a direct consequence of the reform and the new basis is economically equivalent to the previous basis.

Hedging accounting

The amendments provide the following temporary exceptions to hedging relationships that are subject to the reform:

1) The changes to the hedging relationship that are needed to reflect changes required by the reform are treated as a continuation of the existing hedging relationship, and do not result in the discontinuation of hedge accounting or the designation of a new hedging relationship.
2) If an entity reasonably expects that an alternative benchmark rate will be separately identifiable within a period of 24 months, it is not prohibited from designating the rate as a non-contractually specified risk component if it is not separately identifiable at the designation date.
3) After a cash flow hedging relationship is amended, the amount accumulated in the gain/(loss) on hedging instruments of cash flow hedge is deemed to be based on the alternative benchmark rate on which the hedged future cash flows are determined.
4) An entity should allocate the hedged items of a group hedge that is subject to the reform to subgroups based on whether the hedged items have been changed to reference an alternative benchmark rate, and should designate the hedged benchmark rate separately.

Upon initial application of the aforementioned amendments, the Company will recognize the cumulative effect of retrospective on January 1, 2021. The anticipated impact on assets, liabilities and equity is set

c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

New IFRSs “Annual Improvements to IFRS Standards 2018-2020” Amendments to IFRS 3 “Reference to the Conceptual Framework” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” IFRS 17 “Insurance Contracts” Amendments to IFRS 17 Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” Amendments to IAS 1 “Disclosure of Accounting Policies”	Effective Date Announced by IASB (Note 1)
	January 1, 2022 (Note 2) January 1, 2022 (Note 3) To be determined by IASB January 1, 2023 January 1, 2023 January 1, 2023 January 1, 2023 (Note 6) (Continued)

New IFRSs
“Annual Improvements to IFRS Standards 2018-2020”

Amendments to IFRS 3 “Reference to the Conceptual Framework”

Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture”

IFRS 17 “Insurance Contracts”

Amendments to IFRS 17

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

Amendments to IAS 1 “Disclosure of Accounting Policies”

Effective Date
Announced by IASB (Note 1)

January 1, 2022 (Note 2)
January 1, 2022 (Note 3)
To be determined by IASB
January 1, 2023
January 1, 2023
January 1, 2023
January 1, 2023 (Note 6)
(Continued)

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New IFRSs Amendments to IAS 8 “Definition of Accounting Estimates” Amendments to IAS 16 “Property, Plant and Equipment - Proceeds before Intended Use” Amendments to IAS 37 “Onerous Contracts - Cost of Fulfilling a Contract”	Effective Date Announced by IASB (Note 1)
	January 1, 2023 (Note 7) January 1, 2022 (Note 4) January 1, 2022 (Note 5) (Concluded)

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual reporting periods beginning on or after their respective effective dates.
Note 2: The amendments to IFRS 9 will be applied prospectively to modifications and exchanges of financial liabilities that occur on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IAS 41 “Agriculture” will be applied prospectively to the fair value measurements on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IFRS 1 “First-time Adoptions of IFRSs” will be applied retrospectively for annual reporting periods beginning on or after January 1, 2022.
Note 3: The amendments are applicable to business combinations for which the acquisition date is on or after the beginning of the annual reporting period beginning on or after January 1, 2022.
Note 4: The amendments are applicable to property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021.
Note 5: The amendments are applicable to contracts for which the entity has not yet fulfilled all its obligations on January 1, 2022.
Note 6: The amendments will be applied prospectively for annual reporting periods beginning on or after January 1, 2023.
Note 7: The amendments are applicable to changes in accounting estimates and changes in accounting policies that occur on or after the beginning of the annual reporting period beginning on or after January 1, 2023.
1) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”

The amendments stipulate that, when the Company sells or contributes assets that constitute a business (as defined in IFRS 3) to an associate or joint venture, the gain or loss resulting from the transaction is recognized in full. Also, when the Company loses control of a subsidiary that contains a business but retains significant influence or joint control, the gain or loss resulting from the transaction is recognized in full.

Conversely, when the Company sells or contributes assets that do not constitute a business to an associate or joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the Company’s interest as an unrelated investor in the associate or joint venture, i.e., the Company’s share of the gain or loss is eliminated. Also, when the company loses control of a subsidiary that does not contain a business but retains significant influence or joint control over an associate or a joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the Company’s interest as an unrelated investor in the associate or joint venture, i.e., the Company’s share of the gain or loss is eliminated.

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2) Annual Improvements to IFRS Standards 2018-2020

Several standards, including IFRS 9 “Financial Instruments”, were amended in the annual improvements. IFRS 9 requires the comparison of the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received, with that of the cash flows under the original financial liability when there is an exchange or modification of debt instruments. The new terms and the original terms are substantially different if the difference between those discounted present values is at least 10%. The amendments to IFRS 9 clarify that the only fees that should be included in the above assessment are those fees paid or received between the borrower and the lender.

3) Amendments to IFRS 3 “'Reference to the Conceptual Framework”

The amendments replace the references to the Conceptual Framework of IFRS 3 and specify that the acquirer shall apply IFRIC 21 “Levies” to determine whether the event that gives rise to a liability for a levy has occurred at the acquisition date.

4) Amendments to IAS 16 “Property, Plant and Equipment: Proceeds before Intended Use”

The amendments prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. The cost of those items is measured in accordance with IAS 2 “Inventories”. Any proceeds from selling those items and the cost of those items are recognized in profit or loss in accordance with applicable standards.

The amendments are applicable only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021. The company will restate its comparative information when it initially applies the aforementioned amendments.

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

The amendments specify that when assessing whether a contract is onerous, the “cost of fulfilling a contract” includes both the incremental costs of fulfilling that contract (for example, direct labor and materials) and an allocation of other costs that relate directly to fulfilling contracts (for example, an allocation of depreciation for an item of property, plant and equipment used in fulfilling the contract).

The Company will recognize the cumulative effect of the initial application of the amendments in the retained earnings at the date of the initial application.

6) Amendments to IAS 1 “Disclosure of Accounting Policies”

The amendments specify that the company should refer to the definition of material to determine its material accounting policy information to be disclosed. Accounting policy information is material if it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The amendments also clarify that:

accounting policy information that relates to immaterial transactions, other events or conditions is immaterial and need not be disclosed;
the Company may consider the accounting policy information as material because of the nature of the related transactions, other events or conditions, even if the amounts are immaterial; and
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not all accounting policy information relating to material transactions, other events or conditions is itself material.

The amendments also illustrate that accounting policy information is likely to be considered as material to the financial statements if that information relates to material transactions, other events or conditions and:

a) the Company changed its accounting policy during the reporting period and this change resulted in a material change to the information in the financial statements;
b) the Company chose the accounting policy from options permitted by the standards;
c) the accounting policy was developed in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” in the absence of an IFRS that specifically applies;
d) the accounting policy relates to an area for which the Company is required to make significant judgements or assumptions in applying an accounting policy, and the Company discloses those judgements or assumptions; or
e) the accounting is complex and users of the financial statements would otherwise not understand those material transactions, other events or conditions.

7) Amendments to IAS 8 “Definition of Accounting Estimates”

The amendments define that accounting estimates are monetary amounts in financial statements that are subject to measurement uncertainty. In applying accounting policies, the Company may be required to measure items at monetary amounts that cannot be observed directly and must instead be estimated. In such a case, the Company uses measurement techniques and inputs to develop accounting estimates to achieve the objective. The effects on an accounting estimate of a change in a measurement technique or a change in an input are changes in accounting estimates unless they result from the correction of prior period errors.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Company is continuously assessing the possible impact that the application of other standards and interpretations will have on the Company’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms and IFRSs as endorsed and issued into effect by the FSC.

Basis of Preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

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Basis of Consolidation

a. Principles for preparing consolidated financial statements

Since the operating cycle cannot be reasonably identified in the banking industry and the Bank accounted for a significant percentage of the consolidated accounts, the accounts included in the consolidated financial statements were not classified as current or non-current. Nevertheless, accounts were properly categorized in accordance with the nature of each account and sequenced by their liquidity.

The consolidated financial statements incorporate the financial statements of the Bank and the entities controlled by the Bank (i.e., its subsidiaries, including special purpose entities).

Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Bank.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation.

Non-controlling interests are presented in the consolidated balance sheets within equity, separately from the equity of the owners of the Company.

Attribution of total comprehensive income to non controlling interests

Total comprehensive income of subsidiaries is attributed to the owners of the Bank and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Company’s ownership interests in existing subsidiaries

Changes in the Company’s ownership interests in subsidiaries that do not result in the Company’s losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Company’s interests and the non-controlling interests are adjusted to reflect the changes in their respective interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company.

b. The investees included in the consolidated financial statements are as follows:

Detail of subsidiaries, percentage of ownership and operating item, refer to the Note 16.

Foreign Currencies

In preparing the financial statements of each entity, transactions in currencies other than the Company’s functional currency (i.e., foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period in which they arise except for: exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investments.

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Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising from the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which cases, the exchange differences are also recognized in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Bank’s foreign operations (including subsidiaries, associates, joint ventures and branches in other countries that use currencies which are different from the currency of the Bank) are translated into the presentation currency, the New Taiwan dollar, as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; and income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income.

Investments Accounted for Using the Equity Method

The Company uses the equity method to account for its investments in associates.

a. Investments in associates

An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture. The Company uses the equity method to account for its investments in associates.

Under the equity method, investments in an associate are initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the associate. The Company also recognizes the changes in the Company’s share of the equity of associates attributable to the Company.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets and liabilities of an associate or a joint venture at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

When the Company subscribes for additional new shares of an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company’s proportionate interest in the associate. The Company records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in capital surplus from investments in associates accounted for using the equity method. If the Company’s ownership interest is reduced due to its additional subscription of the new shares of the associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for using the equity method is insufficient, the shortage is debited to retained earnings.

When the Company’s share of losses of an associate equals or exceeds its interest in that associate (which includes any carrying amount of the investment accounted for using the equity method and long-term interests that, in substance, form part of the Company’s net investment in the associate), the Company discontinues recognizing its share of further losses. Additional losses and liabilities are

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recognized only to the extent that the Company has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.

The entire carrying amount of an investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is deducted from the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Company discontinues the use of the equity method from the date on which its investment ceases to be an associate. Any retained investment is measured at fair value at that date, and the fair value is regarded as the investment’s fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Company accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the Company continues to apply the equity method and does not remeasure the retained interest.

When an entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Company’s consolidated financial statements only to the extent that interests in the associate are not related to the Company.

Financial Instruments

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

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issuance of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.

a. Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

1) Measurement categories

Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost, investments in debt instruments at FVTOCI and investments in equity instruments at FVTOCI.

a) Financial assets at FVTPL

Financial assets are classified as at FVTPL when such financial assets are mandatorily classified or designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments that are not designated as at FVTOCI and debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria.

A financial asset may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise.

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Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividends or interest earned on such a financial asset. Fair value is determined in the manner described in Note 49.

b) Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

i. The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
ii. The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents and trade receivables at amortized cost, are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of such a financial asset, except for:

i. Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial assets; and
ii. Financial assets that are not credit-impaired on purchase or origination but have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets in subsequent reporting periods.

A financial asset is credit impaired when one or more of the following events have occurred:

i) Significant financial difficulty of the issuer or the borrower;
ii) Breach of contract, such as a default;
iii) It is becoming probable that the borrower will enter bankruptcy or undergo a financial reorganization; or
iv) The disappearance of an active market for that financial asset because of financial difficulties.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

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c) Investments in debt instruments at FVTOCI

Debt instruments that meet the following conditions are subsequently measured at FVTOCI:

i. The debt instrument is held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of such financial assets; and
ii. The contractual terms of the debt instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Investments in debt instruments at FVTOCI are subsequently measured at fair value. Changes in the carrying amounts of these debt instruments relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and impairment losses or reversals are recognized in profit or loss. Other changes in the carrying amount of these debt instruments are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of.

d) Investments in equity instruments at FVTOCI

On initial recognition, the Company may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation as at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments; instead, it will be transferred to retained earnings.

Dividends on these investments in equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

2) Impairment of financial assets

The Company recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables), investments in debt instruments at FVTOCI, lease receivables, as well as contract assets.

For financial instruments and contract assets, the Company recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.

Expected credit losses reflect the weighted average of credit losses with the respective risks of default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

In determining the allowance for credit losses and the reserve for losses on guarantees, the Company assesses the balances of discounts and loans, receivables, nonperforming loans, and other financial assets as well as guarantees and acceptances for their collectability and their specific risks or general risks as of the balance sheet date.

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Under the regulations issued by the Ministry of Finance (MOF), the Company evaluates credit balances on the basis of their estimated collectability.

The MOF regulations also require the grouping of credit assets into these five classes: Normal, special mention, substandard, doubtful and losses; the minimum loan loss provision and guarantee reserve for the unsound credit assets (those other than normal) should be 2%, 10%, 50% and 100%, respectively, of the outstanding credit balance.

The MOF issued a guideline stating that from January 1, 2014, the minimum loan loss provision and guarantee should be the sum of 1% of the outstanding balance of the normal credit asset’s claim, 2% of the balance of special mention credit assets, 10% of the balance of substandard credit assets, 50% of the balance of doubtful credit assets, and the full balance of losses credit assets (excluding assets that represent claims against the central and local government in Taiwan). Also, in accordance with Rule No. 10300329440 issued by FSC, the minimum allowance for mortgage loans should be 1.5%.

Credits deemed uncollectable may be written off if the write-off is approved by the board of directors. Recoveries of amounts previously written off are credited to the allowance account.

The Company recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and does not reduce the carrying amount of such a financial asset.

3) Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and any associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.

On derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in a debt instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss which had been recognized in other comprehensive income is recognized in profit or loss. However, on derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, and the cumulative gain or loss which had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

b. Equity instruments

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments issued are recognized at the proceeds received, net of direct issue costs.

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The repurchase of the Company’s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issuance or cancellation of the Company’s own equity instruments.

c. Financial liabilities
1) Subsequent measurement

A financial liability may be designated as at FVTPL upon initial recognition when doing so results in more relevant information and if:

a) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
b) The financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and has performance evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
c) The contract contains one or more embedded derivatives so that the entire combined contract (asset or liability) can be designated as at FVTPL.

For a financial liability designated as at FVTPL, the amount of changes in fair value attributable to changes in the credit risk of the liability is presented in other comprehensive income and will not be subsequently reclassified to profit or loss. The remaining amount of changes in the fair value of that liability which incorporates any interest or dividends paid on such financial liability is presented in profit or loss. The gain or loss accumulated in other comprehensive income will be transferred to retained earnings when the financial liability is derecognized. If this accounting treatment related to credit risk would create or enlarge an accounting mismatch, all changes in the fair value of the liability are presented in profit or loss.

Fair value is determined in the manner described in Note 49.

Financial guarantee contracts

Financial guarantee contracts issued by the Company, if not designated as at FVTPL, are subsequently measured at the higher of:

a) The amount of the loss allowance reflecting expected credit losses; and
b) The amount initially recognized less, where appropriate, the cumulative amount of income recognized in accordance with the revenue recognition policies.
d. Derivative financial instruments

Derivatives are initially recognized at fair value at the date on which the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument; in which event, the timing of the recognition in profit or loss depends on the nature of the hedging relationship. When the fair value of a derivative financial instrument is positive, the derivative is recognized as a financial asset; when the fair value of a derivative financial instrument is negative, the derivative is recognized as a financial liability.

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Derivatives embedded in hybrid contracts that contain financial asset hosts that is within the scope of IFRS 9 are not separated; instead, the classification is determined in accordance with the entire hybrid contract. Derivatives embedded in non-derivative host contracts that are not financial assets that is within the scope of IFRS 9 (e.g. financial liabilities) are treated as separate derivatives when they meet the definition of a derivative; their risks and characteristics are not closely related to those of the host contracts; and the host contracts are not measured at FVTPL.

Nonperforming Loans

Under the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Nonaccrual Loans” issued by the authorities, loans and other credits (including the accrued interests) that remain unpaid on their maturity are transferred immediately to nonperforming loans if the transfer is approved by the board of directors.

Nonperforming loans transferred from loans are recognized as discounts and loans, and those transferred from other credits are recognized as other financial assets.

Repurchase and Resale Transactions

Securities purchased under resale agreements and securities sold under repurchase agreements are generally treated as collateralized financing transactions. Interest earned on reverse repurchase agreements or interest incurred on repurchase agreements is recognized as interest income or interest expense over the life of each agreement.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and accumulated impairment loss.

Freehold land is not depreciated.

Depreciation of property and equipment is recognized using the straight-line method. Each significant part is depreciated separately. If the lease term of an item of property and equipment is shorter than its useful life, such asset is depreciated over its lease term. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effects of any changes in the estimates accounted for on a prospective basis.

For a contract where an owner of land provides land for construction of buildings by a property developer in exchange for a certain percentage of the buildings, any exchange gain or loss is recognized when the exchange transaction occurs, if the buildings acquired are classified as property, plant and equipment and the exchange transaction has commercial substance.

On derecognition of an item of property and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

Investment Properties

Investment properties are properties owned specifically to generate profit through rental income and/or capital gains. Land for which the future purpose of use has not been decided is also classified under investment properties.

Investment properties are initially recognized at cost (including transaction cost) and subsequently measured at cost less accumulated depreciation and accumulated impairment losses. The Company calculates depreciation by the straight-line method.

28 -

Gain or loss recognized on derecognition of an investment property is the difference between the net disposal proceeds and the carrying amount of the asset and is included in profit or loss in the period in which the investment property is derecognized.

Goodwill

Goodwill arising from the acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss.

For the purposes of impairment testing, goodwill is allocated to each of the Company’s cash-generating units or groups of cash-generating units (referred to as “cash-generating units”) that are expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributed goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then pro rata to the other assets of the unit based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. Any impairment loss recognized on goodwill is not reversed in subsequent periods.

If goodwill has been allocated to a cash-generating unit and the entity disposes of an operation within that unit, the goodwill associated with the operation which is disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal and is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Intangible Assets

Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis. The estimated useful lives, residual values, and amortization methods are reviewed at the end of each reporting period, with the effect of any changes in the estimates accounted for on a prospective basis.

Derecognition

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

Foreclosed Collaterals

Collaterals assumed (included in other assets) are recorded at cost, which includes the assumed prices and any necessary repairs to make the collaterals saleable, and evaluated at the lower of cost or net realizable value as of the balance sheet date.

Impairment of Tangible and Intangible Assets (Excluding Goodwill)

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered any impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to

29 -

which the asset belongs. Corporate assets are allocated to cash-generating units on a reasonable and consistent basis of allocation.

The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the corresponding asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

At the inception of a contract, the Company assesses whether the contract is, or contains, a lease.

For a contract that contains a lease component and non-lease components, the Company allocates the consideration in the contract to each component on the basis of the relative stand-alone price and accounts for each component separately.

a. The Company as lessor

Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

When the Company subleases a right-of-use asset, the sublease is classified by reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. However, if the head lease is a short-term lease that the Company, as a lessee, has accounted for applying recognition exemption, the sublease is classified as an operating lease.

Under finance leases, the lease payments comprise fixed payments, in-substance fixed payments, variable lease payments which depend on an index or a rate, residual value guarantees, the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and payments of penalties for terminating a lease if the lease term reflects such termination, less any lease incentives payable. The net investment in a lease is measured at (a) the present value of the sum of the lease payments receivable by a lessor and any unguaranteed residual value accrued to the lessor plus (b) initial direct costs and is presented as a finance lease receivable. Finance lease income is allocated to the relevant accounting periods so as to reflect a constant, periodic rate of return on the Company’s net investment outstanding in respect of leases.

Lease payments (less any lease incentives payable) from operating leases are recognized as income on a straight-line basis over the terms of the relevant leases. Initial direct costs incurred in obtaining operating leases are added to the carrying amounts of the underlying assets and recognized as expenses on a straight-line basis over the lease terms.

Variable lease payments that do not depend on an index or a rate are recognized as income in the periods in which they are incurred.

When a lease includes both land and building elements, the Company assesses the classification of each element separately as a finance or an operating lease based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the lessee. The lease payments are allocated between the land and the building elements in proportion to

30 -

the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of a contract. If the allocation of the lease payments can be made reliably, each element is accounted for separately in accordance with its lease classification. When the lease payments cannot be allocated reliably between the land and building elements, the entire lease is generally classified as a finance lease unless it is clear that both elements are operating leases; in which case, the entire lease is classified as an operating lease.

b. The Company as lessee

The Company recognizes right-of-use assets and lease liabilities for all leases at the commencement date of a lease, except for short-term leases and low-value asset leases accounted for applying a recognition exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms.

Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities adjusted for lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs needed to restore the underlying assets, and less any lease incentives received. Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets are presented on a separate line in the consolidated balance sheets.

Right-of-use assets are depreciated using the straight-line method from the commencement dates to the earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms.

Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed payments, in-substance fixed payments, variable lease payments which depend on an index or a rate, residual value guarantees, the exercise price of a purchase option if the Company is reasonably certain to exercise that option, and payments of penalties for terminating a lease if the lease term reflects such termination, less any lease incentives receivable. The lease payments are discounted using the interest rate implicit in a lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses the lessee’s incremental borrowing rate.

Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term, a change in the amounts expected to be payable under a residual value guarantee, a change in the assessment of an option to purchase an underlying asset, or a change in future lease payments resulting from a change in an index or a rate used to determine those payments, the Company remeasures the lease liabilities with a corresponding adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss. Lease liabilities are presented on a separate line in the consolidated balance sheets.

Variable lease payments that do not depend on an index or a rate are recognized as expenses in the periods in which they are incurred.

Provisions

Provisions, including those arising from contractual obligation specified in service concession arrangement to maintain or restore infrastructure before it is handed over to the grantor, are measured at the best estimate of the discounted cash flows of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

31 -

Employee Benefits

a. Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

b. Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost and past service cost) and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liabilities (assets) represent the actual deficit (surplus) in the Company’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

c. Other long-term employee benefits

Other long-term employee benefits are accounted for in the same way as the accounting required for a defined benefit plan except that remeasurement is recognized in profit or loss.

d. Termination benefits

A liability for a termination benefit is recognized at the earlier of when the Company can no longer withdraw the offer of the termination benefit and when the Company recognizes any related restructuring costs.

Income Tax

Income tax expense represents the sum of the tax currently payable and deferred tax.

a. Current tax

Income tax payable (recoverable) is based on taxable profit (loss) for the year determined according to the applicable tax laws of each tax jurisdiction.

According to the Income Tax Law in the ROC, an additional tax on unappropriated earnings is provided for in the year the shareholders approve to retain earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

b. Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary difference and unused loss

32 -

carryforwards to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Company can control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are recognized only to the extent that it is probable that there will be sufficient taxable profits against which to use the benefits of the temporary differences and these differences are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the amounts expected to be paid to (recovered from) taxation authorities, using the rates or laws that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets should reflect the tax consequences of how the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

c. Current and deferred taxes for the period

For transactions recognized in profit or loss, current and deferred taxes are also recognized in profit or loss; for transactions recognized outside profit or loss, i.e., in other comprehensive income or directly in equity, the current and deferred taxes are also recognized in other comprehensive income or directly in equity. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Interest Revenue and Service Fees

Interest revenue on loans is recorded by the accrual method. No interest revenue is recognized in the accompanying financial statements on loans and other credits extended by the Company that are classified as nonperforming loans. The interest revenue on these loans/credits is recognized upon collection. Under the regulations of the Ministry of Finance, the interest revenue on credits covered by agreements that extend their repayment periods is recorded as deferred revenue and recognized as revenue upon collection.

Service fees are recognized when a major part of the earnings process is completed and cash is collected.

Dividend income from investments is recognized when the stockholder’s right to receive payment has been established and provided that it is probable that the economic benefits will flow to the Bank and that the amount of income can be measured reliably.

The points earned by customers under loyalty program are treated as multiple-element arrangements, in which consideration is allocated to the goods or services and the award credits based on fair value through the eyes of the customer. The consideration is not recognized in earnings at the original sales transactions but at the time when the points are redeemed and the Bank’s obligation is fulfilled.

33 -

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION

UNCERTAINTY

In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Estimated Impairment of Financial Assets

The provision for impairment of loan, receivables, investments in debt instruments, and financial guarantee contracts is based on assumptions about risk of default and expected loss rates. The Company uses judgment in making these assumptions and in selecting the inputs to the impairment calculation, based on the Company’s historical experience, existing market conditions as well as forward looking estimates as of the end of each reporting period. For details of the key assumptions and inputs used, see Note 50. Where the actual future cash inflows are less than expected, a material impairment loss may arise.

6. CASH AND CASH EQUIVALENTS

Cash on hand Checks for clearing Due from banks		December 31	December 31
		2020 $ 5,740,617 1,171,066 2,049,755 $ 8,961,438	2019 $ 6,865,686 1,076,011 4,440,748 $ 12,382,445

7. DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS

Deposit reserve - checking account Required deposit reserve Deposit reserve - foreign-currency deposits Call loans to banks		December 31	December 31
		2020 $ 8,585,673 15,640,347 99,778 - $ 24,325,798	2019 $ 2,968,938 13,808,552 90,318 477,078 $ 17,344,886

Under a directive issued by the Central Bank of the ROC, the Company determines monthly NTD-denominated reserve deposits at prescribed rates based on the average balances of customers’ NTD-denominated deposits, which are subject to withdrawal restrictions.

In addition, the foreign-currency reserve deposits are determined at rates prescribed for balances of foreign-currency deposits. These reserves may be withdrawn anytime and do not bear interest.

34 -

8. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets designated as at fair value through profit or loss Domestic government bonds Negotiable certificates of deposit Commercial paper Overseas corporate bonds Domestic listed stocks Overseas listed stocks Overseas unlisted preferred stocks Beneficiary certificates Futures exchange margins Asset-backed securities Derivative financial instrument Foreign exchange forward contracts Currency swap contracts Option contracts Financial liabilities held for trading Derivative instrument Option contracts Forward exchange contracts Cross-currency swap contracts Currency swap contracts		December 31	December 31
		2020 $ 298,124 999,450 31,361,157 - 50,496 83,215 44,441 1,300,172 56,665 57,897 34,251,617 60,430 514,083 55,718 630,231 $ 34,881,848 $ 55,694 17,419 - 132,889 $ 206,002	2019 $ - - 29,670,103 27,712 - 66,800 - 755,530 61,302 67,361 30,648,808 42,044 199,417 26,985 268,446 $ 30,917,254 $ 26,976 27,623 17,705 578,677 $ 650,981

The Company engaged in derivative transactions mainly to accommodate customers’ needs and manage its exposure positions. The financial risk management objective of the Company was to minimize risks due to changes in fair value or cash flows.

The contract amounts (notional amounts) of the derivative transactions for accommodating customers’ needs and managing its exposure positions as of December 31, 2020 and 2019 were as follows:

Currency swap contracts Foreign exchange forward contracts Cross-currency swap contracts Option contracts Buy Sell	December 31
	2020 2019 $ 70,857,503 $ 67,054,536 1,755,782 3,223,477 - 3,638,415 1,779,078 1,178,033 1,779,078 1,178,033

As of December 31, 2020 and 2019, financial assets at fair value through profit and loss in the amounts of $17,501,131 thousand and $13,458,214 thousand, respectively, were sold under repurchase agreements.

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9. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Investments in equity instruments at FVTOCI Domestic listed shares Overseas listed shares Unlisted shares Investments in debt instruments at FVTOCI Overseas corporate bonds Overseas bond debentures Corporate bonds Overseas government bonds Government bonds		December 31	December 31
		2020 $ 4,388,090 5,848,951 1,913,887 12,150,928 14,093,944 6,190,979 8,410,769 6,192,951 6,364,162 41,252,805 $ 53,403,733	2019 $ 1,529,323 5,312,590 1,157,095 7,999,008 9,801,611 5,394,699 6,736,723 5,772,116 5,532,808 33,237,957 $ 41,236,965

Details of the Company’s investments in foreign and domestic unlisted shares are as follows:

Taiwan Futures Exchange Line Bank Taiwan Limited Financial Information Service Co., Ltd. RFD Micro Electricity Co., Ltd. Cosmos Foreign Exchange Intl. Co., Ltd. Taiwan Asset Management Corporation Taiwan Depository & Clearing Corporation iPass Corporation Healthy Io Limited Taiwan Financial Asset Service Corporation Others		December 31	December 31
		2020 $ 474,583 411,657 309,392 107,543 95,046 77,164 65,631 60,044 53,752 48,105 210,970 $ 1,913,887	2019 $ 439,293 55,281 294,550 - - 77,077 59,862 84,205 - 48,244 98,583 $ 1,157,095

a. Investments in equity instruments at FVTOCI

These investments in equity instruments are not held for trading. Instead, they are held for long-term strategic purposes. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI.

b. Investments in debt instruments at FVTOCI

For further information regarding credit risk management and impairment assessment of financial assets at FVTOCI, refer to Note 11.

The Company had sold $9,216,124 thousand and $19,671,156 thousand of its financial assets at FVTOCI under a repurchase agreement on December 31, 2020 and 2019, respectively.

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10. INVESTMENTS IN DEBT INSTRUMENTS AT AMORTIZED COST

Negotiable certificates of deposit Debt instruments Government bonds Overseas asset-backed securities		December 31	December 31
		2020 $ 51,275,000 10,252,526 29,170,136 39,422,662 $ 90,697,662	2019 $ 42,960,000 11,173,137 50,037,012 61,210,149 $ 104,170,149

For further information regarding credit risk management and impairment assessment on financial assets at amortized cost, refer to Note 11.

The Company sold financial assets at amortized cost under repurchase agreements in the amounts of $23,249,254 thousand and $44,134,600 thousand in 2020 and 2019, respectively.

11. CREDIT RISK MANAGEMENT FOR INVESTMENTS IN DEBT INSTRUMENTS

Debt instruments that the Company invested in have been further split into two categories, financial assets at FVTOCI and financial assets at amortized cost.

Book value Loss allowance Fair value adjustment Book value Loss allowance Fair value adjustment	December 31, 2020
	Financial Assets at FVTOCI Financial Assets at Amortized Cost $ 39,606,238 $ 39,602,262 (62,099) (179,600) 1,708,666 - $ 41,252,805 $ 39,422,662 December 31, 2019	Total $ 79,208,500 (241,699) 1,708,666 $ 80,675,467
	Financial Assets at FVTOCI Financial Assets at Amortized Cost $ 32,635,267 $ 61,513,617 (81,219) (303,468) 683,909 - $ 33,237,957 $ 61,210,149	Total $ 94,148,884 (384,687) 683,909 $ 94,448,106

The Company continuously monitors the external credit rating information and price movements of the debt instruments invested in to assess whether their credit risks have significantly increased since initial recognition.

The Company takes into consideration the multi-period default probability table for each ratings of securities issued by credit rating agencies and the recovery rates of different types of bonds to assess the 12-month expected credit losses or lifetime expected credit losses.

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The carrying values of financial assets at FVTOCI and at amortized cost sorted by credit rating are as follows:

				Carrying
				Value
				(Including
				Premiums and
			Expected	Discounts) on
		ECL Recognition	Credit Loss	December 31,
Credit Ratings	Definition	Basis	Rate	2020
Low credit risk	Low credit risk at the	12-month expected	0%-4.0303%	$ 80,675,467
	reporting date	credit losses
Significant increase	Credit risk has increased	Lifetime expected	Note	-
in credit risk	significantly since	credit losses
	initial recognition
Default	Objective evidence of	Lifetime expected	100%	-
	impairment at the	credit losses
	reporting date
				Carrying
				Value
				(Including
				Premiums and
			Expected	Discounts) on
		ECL Recognition	Credit Loss	December 31,
Credit Ratings	Definition	Basis	Rate	2019
Low credit risk	Low credit risk at the	12-month expected	0%-4.2026%	$ 94,448,106
	reporting date	credit losses
Significant increase	Credit risk has increased	Lifetime expected	Note	-
in credit risk	significantly since	credit losses
	initial recognition
Default	Objective evidence of	Lifetime expected	100%	-
	impairment at the	credit losses
	reporting date

Note: Credit rating of investment in debt instruments at December 31, 2019 and 2020 was normal, it did not apply.

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The following table shows changes in balances of loss allowances of financial assets at FVTOCI and debt instruments at amortized cost, sorted by credit risk ratings resulting from the application of IFRS 9:

Balance as of January 1, 2020 Changes in credit risk ratings Low credit risk to significant increase in credit risk Significant increase in credit risk to low credit risk Significant increase in credit risk to default New debt instruments purchased Derecognition Changes in risk or model parameters Change in exchange rates Loss allowance on December 31, 2020 Balance as of January 1, 2019 (IFRS 9) Changes in credit risk ratings Low credit risk to significant increase in credit risk Significant increase in credit risk to low credit risk Significant increase in credit risk to default New debt instruments purchased Derecognition Changes in risk or model parameters Change in exchange rates Loss allowance on December 31, 2019	Credit Risk Ratings
	Low Credit Risk Significant Increase in Credit Risk (Lifetime Expected Credit Losses with No Credit Impairment) Default Evidence of Impairment (Lifetime Expected Credit Losses with Credit Impairment) $ 384,687 $ - $ - - - - - - - - - - 9,311 - - (114,854) - - (16,566) - - (20,879) - - $ 241,699 $ - $ - $ 316,146 $ 13,313 $ - - - - 13,313 (13,313) - - - - 45,738 - - (567) - - 17,935 - - (7,878) - - $ 384,687 $ - $ -

Balance as of January 1, 2020

Changes in credit risk ratings
Low credit risk to significant increase in credit
risk
Significant increase in credit risk to low credit
risk
Significant increase in credit risk to default
New debt instruments purchased
Derecognition

Changes in risk or model parameters
Change in exchange rates

Loss allowance on December 31, 2020

Balance as of January 1, 2019 (IFRS 9)

Changes in credit risk ratings
Low credit risk to significant increase in credit
risk
Significant increase in credit risk to low credit
risk
Significant increase in credit risk to default
New debt instruments purchased
Derecognition
Changes in risk or model parameters
Change in exchange rates

Loss allowance on December 31, 2019

Credit Risk Ratings

Low Credit
Risk
Significant
Increase in
Credit Risk
(Lifetime
Expected
Credit Losses
with No Credit
Impairment)
Default
Evidence of
Impairment
(Lifetime
Expected
Credit Losses
with Credit
Impairment)
$ 384,687
$ -
$ -
-
-
-
-
-
-
-
-
-
9,311
-
-
(114,854)
-
-
(16,566)
-
-

(20,879)

-

-
$ 241,699
$ -
$ -
$ 316,146
$ 13,313
$ -
-
-
-
13,313
(13,313)
-
-
-
-
45,738
-
-
(567)
-
-
17,935
-
-

(7,878)

-

-
$ 384,687
$ -
$ -

12. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL

Commercial paper Corporate bonds Government bonds Negotiable certificates of deposit		December 31	December 31
		2020 $ 21,377,310 39,645,492 38,500 2,850,171 $ 63,911,473	2019 $ 24,223,631 23,023,883 - 4,170,311 $ 51,417,825 (Continued)

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Maturity date Resale price	December 31
	2020 2019 2021.01-2021.03 2020.01-2020.02 $ 63,915,601 $ 51,433,006 (Concluded)

The securities purchased under resell agreements had not been sold under repurchase agreements.

13. RECEIVABLES, NET

Notes and accounts receivable Interbank clearing fund receivable Investment receivable Interest receivable Accounts receivable factoring without recourse Collections receivable Acceptances receivable Others Less: Allowance for doubtful accounts		December 31	December 31
		2020 $ 19,957,195 1,818,946 1,078,978 914,906 480,043 119,055 107,221 678,915 25,155,259 218,683 $ 24,936,576	2019 $ 17,512,470 1,200,345 545,843 1,050,794 443,208 231,540 112,902 286,943 21,384,045 206,938 $ 21,177,107

Refer to Note 53 for the impairment loss analysis of receivables.

The changes in gross carrying amounts of receivables for the years ended December 31, 2020 and 2019 were as follows:

Total
$ 21,384,045

-

11,872,278

(197,910)

(7,903,154)
$ 25,155,259
(Continued)

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12-month
Expected-credit
Losses
Lifetime
Expected-credit
Losses
Lifetime
Expected-credit
Losses (Credit-
impaired
Financial
Assets)
Balance at January 1, 2019
$ 17,048,513 $ 99,394 $ 1,253,721
Receivables assessed
collectively
(328,035)
20,798
307,237
Receivables purchased or
originated
9,214,594
49,909
107,104
Write-offs
-
-
(283,410)
Derecognition

(5,776,840)

(54,501)

(274,439)

Balance at December 31, 2019$ 20,158,232
$ 115,600
$ 1,110,213

Total
$ 18,401,628

-

9,371,607

(283,410)

(6,105,780)
$ 21,384,045
(Concluded)

The Company has accrued an allowance for doubtful accounts receivable, the changes in allowance for doubtful accounts receivable for the years ended December 31, 2020 and 2019 were as follows:

						Difference of
						Impairment
						Loss under
						(Regulations
						Governing the
						Procedures for
			Lifetime			Banking
			Expected-			Institutions to
			credit Losses			Evaluate
			(Credit-			Assets and
	12-month	Lifetime	impaired	Impairment		Deal with
	Expected-	Expected-	Financial	Loss under		Non-accrual
	credit Losses	credit Losses	Assets)	IFRS 9		Loans)	Total
Balance at January 1, 2020	$ 50,434	$ 18,678	$ 93,187	$ 162,299		$ 44,639	$ 206,938
Changes of financial instruments
recognized at the beginning of the
current reporting period
Transfers to
Lifetime ECL	(424 )	491	(67 )		-	-		-
Credit-impaired financial assets	(79,269 )	(34,219 )	113,488		-	-		-
12-month ECL	433	(294 )	(139 )		-	-		-
Derecognition of financial
assets in the current
reporting period	(21,940 )	(5,558 )	(14,849 )	(42,347 )		-	(42,347 )
New financial assets purchased or
originated	107,954	37,452	90,710	236,116		-	236,116
Difference of impairment loss under
regulations	-	-	-		-	11,985	11,985
Write-offs	-	-	(197,910 )	(197,910 )		-	(197,910 )
Recovery of written-off receivables	-	-	225,538	225,538		-	225,538
Change in others	(89 )	128	(221,516 )	(221,477 )		-	(221,477 )
Change in exchange rate	(160)	-	-	(160)		-	(160)
Balance at December 31, 2020	$ 56,939	$ 16,678	$ 88,442	$ 162,059		$ 56,624	$ 218,683
							(Continued)

41 -

						Difference of
						Impairment
						Loss under
						(Regulations
						Governing the
						Procedures for
			Lifetime			Banking
			Expected-			Institutions to
			credit Losses			Evaluate
			(Credit-			Assets and
	12-month	Lifetime	impaired	Impairment		Deal with
	Expected-	Expected-	Financial	Loss under		Non-accrual
	credit Losses	credit Losses	Assets)	IFRS 9		Loans)	Total
Balance at January 1, 2019	$ 23,703	$ 17,977	$ 157,800	$ 199,480		$ 70,666	$ 270,146
Changes of financial instruments
recognized at the beginning of the
current reporting period
Transfers to
Lifetime ECL	(225 )	329	(104 )		-	-		-
Credit-impaired financial assets	(79,107 )	(33,206 )	112,313		-	-		-
12-month ECL	453	(334 )	(119 )		-	-		-
Derecognition of financial
assets in the current
reporting period	(6,919 )	(5,267 )	(12,950 )	(25,136 )		-	(25,136 )
New financial assets purchased or
originated	112,680	39,003	119,258	270,941		-	270,941
Difference of impairment loss under
regulations	-	-	-		-	(26,027 )	(26,027 )
Write-offs	-	-	(283,410 )	(283,410 )		-	(283,410 )
Recovery of written-off receivables	-	-	230,839	230,839		-	230,839
Change in others	(55 )	176	(230,440 )	(230,319 )		-	(230,319 )
Change in exchange rate	(96)	-	-	(96)		-	(96)
Balance at December 31, 2019	$ 50,434	$ 18,678	$ 93,187	$ 162,299		$ 44,639	$ 206,938
							(Concluded)

14. DISCOUNTS AND LOANS, NET

Discounts and overdraft Accounts receivable - financing Loans Short-term - unsecured - secured Medium-term - unsecured - secured Long-term - unsecured - secured Import and export negotiations Overdue loans Less: Allowance for doubtful accounts		December 31	December 31
		2020 $ 29,755 30,810 50,188,146 73,500,827 33,808,522 81,554,274 9,446,186 178,410,767 275,199 379,110 427,623,596 4,778,233 $ 422,845,363	2019 $ 27,537 19,570 50,364,941 72,321,679 30,733,615 69,154,200 7,877,847 157,821,517 271,447 356,275 388,948,628 4,298,955 $ 384,649,673

As of December 31, 2020 and 2019, the balances of nonaccrual loans were $379,110 thousand and $356,275 thousand, respectively. The unrecognized interest revenues on nonperforming loans were $9,925 thousand in 2020 and $9,095 thousand in 2019.

In 2020 and 2019, the Company wrote off certain credits after completing the required legal procedures.

42 -

The Company had set up an allowance for doubtful accounts on discounts and loans. Refer to Note 53 for impairment loss analysis of discounts and loans.

The changes in gross carrying amounts on receivables for the years ended December 31, 2020 and 2019 were as follows:

12-month
Expected-credit
Losses
Lifetime
Expected-credit
Losses
Lifetime
Expected-credit
Losses (Credit-
impaired
Financial
Assets)
Balance at January 1, 2020
$ 385,403,689 $ 2,015,580 $ 1,529,359
Discount and loans assessed
collectively
(925,108)
529,855
395,253
Discount and loans purchased
or originated
237,483,263
406,605
407,431
Write-offs
-
-
(122,057)
Derecognition
(197,751,130)

(1,077,776)

(671,368)

Balance at December 31, 2020$ 424,210,714
$ 1,874,264
$ 1,538,618

Balance at January 1, 2019
$ 325,297,553 $ 1,798,887 $ 1,771,899
Discount and loans assessed
collectively
(748,108)
301,219
446,889
Discount and loans purchased
or originated
224,866,163
747,886
202,097
Write-offs
-
-
(81,255)
Derecognition
(164,011,919)

(832,413)

(810,270)

Balance at December 31, 2019$ 385,403,689
$ 2,015,580
$ 1,529,359

Total
$ 388,948,628

-
238,297,299

(122,057)
(199,500,274)
$ 427,623,596
$ 328,868,339

-
225,816,146

(81,255)
(165,654,602)
$ 388,948,628

43 -

The Company has accrued an allowance for doubtful accounts on discount and loans; the changes in allowance for doubtful accounts on discount and loans for the years ended December 31, 2020 and 2019 were as follows:

12-month Expected- credit Losses Lifetime Expected- credit Losses Lifetime Expected- credit Losses (Credit- impaired Financial Assets) Balance at January 1, 2020 $ 240,125 $ 175,604 $ 372,647 Changes of financial instruments recognized at the beginning of the current reporting period Transfers to Lifetime ECL (366 ) 2,069 (1,703 ) Credit-impaired financial assets (319 ) (13,684 ) 14,003 12-month ECL 28,352 (21,828 ) (6,524 ) Derecognition of financial assets in the current reporting period (198,594 ) (111,620 ) (124,513 ) New financial assets purchased or originated 209,391 37,334 217,433 Difference of impairment loss under regulations - - - Write-offs - - (122,057 ) Recovery of written-off receivables - - 294,757 Change in others (28,318 ) 38,631 (210,286 ) Change in exchange rate (4,685) - - Balance at December 31, 2020 $ 245,586 $ 106,506 $ 433,757 Balance at January 1, 2019 $ 170,493 $ 162,436 $ 284,614 Changes of financial instruments recognized at the beginning of the current reporting period Transfers to Lifetime ECL (245 ) 2,983 (2,738 ) Credit-impaired financial assets (223 ) (17,140 ) 17,363 12-month ECL 18,486 (13,622 ) (4,864 ) Derecognition of financial assets in the current reporting period (125,299 ) (87,556 ) (13,245 ) New financial assets purchased or originated 196,926 76,698 86,993 Difference of impairment loss under regulations - - - Write-offs - - (81,255 ) Recovery of written-off receivables - - 291,920 Change in others (18,434 ) 51,805 (206,141 ) Change in exchange rate (1,579 ) - - Balance at December 31, 2019 $ 240,125 $ 175,604 $ 372,647	Impairment Loss under IFRS 9 Difference of Impairment Loss under (Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-accrual Loans) $ 788,376 $ 3,510,579 - - - - - - (434,727 ) - 464,158 - - 481,805 (122,057 ) - 294,757 - (199,973 ) - (4,685) - $ 785,849 $ 3,992,384 $ 617,543 $ 3,235,110 - - - - - - - (226,100 ) - 360,617 - - 275,469 (81,255 ) - 291,920 - (172,770 ) - (1,579 ) - $ 788,376 $ 3,510,579	Total $ 4,298,955 - - - (434,727 ) 464,158 481,805 (122,057 ) 294,757 (199,973 ) (4,685) $ 4,778,233 $ 3,852,653 - - - - (226,100 ) 360,617 275,469 (81,255 ) 291,920 (172,770 ) (1,579 )
		$ 4,298,955

44 -

15. BAD-DEBT EXPENSES AND PROVISION FOR LOSSES ON COMMITMENTS AND GUARANTEES

Provision for doubtful accounts on receivables Provision for doubtful accounts on discounts and loans Provision for doubtful accounts on guarantees Provision for doubtful accounts on loan commitments	For the Year Ended	For the Year Ended	December 31
		2020 $ (15,723) 311,263 (5,000) - $ 290,540	2019 $ (10,541) 237,216 5,000 9,000 $ 240,675

16. SUBSIDIARIES

The investees included in the consolidated financial statements are as follows:

Investor
Investee
Main Businesses
The Bank
Union Finance and Leasing
International Corporation
(UFLIC)
Installment, leasing and accounts
receivable factoring.
Union Information Technology
Corporation (UIT)
Software and hardware product retail and
distribution, system programming
development, system development
outsourcing, website design,
e-commerce, etc.
Union Finance International
(HK) Limited
Import and export financing.
Union Securities Investment
Trust Corporation (USITC)
Securities investment trust.
Union Venture Capital Co.,
Ltd.
General Business investment
UFLIC
Union Capital (Cayman) Corp.
(Cayman)
Installment and leasing receivable
factoring.
New Asian Ventures Ltd. (New
Asian)
Investment, overseas financing, equipment
leasing, installment selling, acquisition
of accounts receivable, etc.
Union Capital (Singapore)
Holding Pte. Ltd. (Union)
Investment, overseas financing, equipment
leasing, installment selling, acquisition
of accounts receivable, etc.
Uflc Capital (Singapore)
Holding PTE. Ltd. (Uflc)
Investment, overseas financing, equipment
leasing, installment selling, acquisition
of accounts receivable, etc.
Union Capital
(Singapore)
Kabushiki Kaisha UCJ1
(Japan) (KK)
Sale, purchasing and leasing of real
estates, etc.
Holding Pte. Ltd.
Tokutei Mokuteki Kaisha
SSG15 (Japan) (SSG15)
A real estate securitized special purpose
company.
Uflc Capital
(Singapore)
Kabushiki Kaisha UCJ1
(Japan) (KK)
Sale, purchasing and leasing of real
estates, etc.
Holding PTE. Ltd. Tokutei Mokuteki Kaisha
SSG12 (Japan) (SSG12)
A real estate securitized special purpose
company.
Tokutei Mokuteki Kaisha
SSG16 (Japan) (SSG16)
A real estate securitized special purpose
company.
Kabushiki Kaisha
UCJ1 (Japan)
Tokutei Mokuteki Kaisha
SSG15 Japan) (SSG15)
A real estate securitized special purpose
company.
Tokutei Mokuteki Kaisha
SSG12 (Japan) (SSG12)
A real estate securitized special purpose
company.
Tokutei Mokuteki Kaisha
SSG16 (Japan) (SSG16)
A real estate securitized special purpose
company.

Percentage of
Ownership
December 31
2020
2019
100.00
100.00
Note 1
99.99
99.99
Note 2
99.99
99.99
Note 3
99.60
99.60
Note 4
100.00
100.00
Note 5
100.00
100.00
Note 6
100.00
100.00
Note 6
100.00
100.00
Note 6 and 8
100.00
100.00
Notes 6 and 8
100.00
100.00
Notes 7 and 8
30.55
30.55
Notes 7 and 8
49.00
49.00
Notes 7 and 8
69.45
69.45
Notes 7 and 8
49.00
49.00
Notes 7 and 8
49.00
49.00
Notes 7 and 8
51.00
51.00
Notes 7 and 8
51.00
51.00
Notes 7 and 8
(Continued)

45 -

Investor
Investee
Main Businesses
Union Venture
Capital Co., Ltd.
Corner Union Venture Capital,
LLC (Delaware, US)
General business investment
Na He Yi Hau Electric Power
Inc.
Energy development and technology
service
Ting Jie Electric Power Inc.
Energy development and technology
service
Union Energy Co., Ltd
General business investment
Corner Union
Venture Capital,
Corner Ventures DAG I-U,
LLC (Delaware)
General business investment
LLC (Delaware)
Corner Union, LLC (Delaware) General business investment
Union Securities
Investment Trust
Corporation
(USITC)
Union Private Equity Co., Ltd. General business investment

Percentage of
Ownership
December 31
2020
2019
100.00
-
Note 9
99.93
-
Note 10
90.00
-
Note 11
100.00
-
Note 12
100.00
-
Note 9
100.00
-
Note 9
100.00
-
Note 13

(Concluded)

Note 1: Union Finance and Leasing International Corporation (UFLIC) was established under the Company Law on November 11, 1996. UFLIC trades and leases real estates, motor vehicles and machinery and equipment and does accounts receivable factoring.
Note 2: Union Information Technology Corporation (UIT), which was incorporated on August 10, 1998, mainly renders software services, wholesale and retail of information software and telecommunications equipment, enterprise management consulting, etc.
Note 3: Union Finance International (HK) Limited was incorporated in Hong Kong on April 23, 1996. It mainly engages in financial services and financial investments.
Note 4: Union Securities Investment Trust Corporation (USITC) was incorporated on November 20, 1998. It obtained a securities investment trust enterprise license and started operations on February 26, 1999; it mainly establishes securities investment trust funds by issuing beneficiary certificates. To integrate resources and enhance operating effectiveness, the Bank requested to purchase 65% equity interest, which was approved by the board of directors on May 9, 2018. The investment was approved by the FSC under Rule No. 10802037180 on March 27, 2019. The Bank paid a total of $264,909 thousand for the purchase of 65% equity interest from the shareholders of USITC; the payments were made on July 5, 2019 and December 27, 2019. After the transaction was completed, the percentage of total equity interest increased from 35% to 99.60%.
Note 5. In order to actively support the FSC’s needs to adapt to the nation’s overall industry development and to boost the diversification of the corporate banking business as well as improve the efficiency in the use of funds, the Bank established Union Venture Capital in coordination with the nation’s financial policies, which was approved by the board of directors on September 26, 2018. The investment was approved by the FSC under Rule No. 10802042270 on March 28, 2019. Union Venture Capital was established by the Bank on November 21, 2019; it mainly engages in general business investment. On August 14, 2020, for future business investment, the Bank’s board approved capital increase of $200,000 thousand. The capital increase was made on September 17, 2020. The total investment amount was $800,000 thousand, and the Bank held 100% of Union Venture Capital’s shares as of December 31, 2020
46 -
Note 6: UFLIC held 100% equity interest each in Union Capital (Cayman) Corp. and New Asian Ventures Ltd., which were incorporated in the British West Indies and the British Virgin Islands, in July 1997 and October 1997, respectively; these investees mainly engage in financial investment.

Union and Uflc were established in September 2014 and March 2016 by Cayman in Singapore. The capital was both US$1. The companies mainly engage in business of investments, overseas financing, equipment leasing, installment selling, acquisition of accounts receivable, etc. The subsidiary of UFLIC, Union Capital (Cayman) Corp., wants to comply with local economic regulation. Therefore, on February 25, 2020, the board approved to restructure the investment by transferring to Uflc Capital (Singapore) Holding PTE. Ltd. and Union Capital (Singapore) Holding PTE. Ltd. the debt and equity from Union Capital (Cayman) to UFLIC on July 1, 2020 and July 23, 2020, respectively. The prices were $485,420 thousand and $161,836 thousand.

Note 7: Kabushiki Kaisha UCJ1, Tokutei Mokuteki Kaisha SSG15, SSG12 and SSG16 are established to acquire real estate for Union Capital (Singapore) Holding Pte. Ltd. and Uflc Capital (Singapore) Holding Pte. Ltd. Kabushiki Kaisha UCJ1 mainly buys, sells, and leases real estate. Tokutei Mokuteki Kaisha SSG15, SSG12 and SSG16 is a special purpose entity that securitizes real estate.
Note 8: Union Capital (Singapore) Holding Pte. Ltd., Uflc Capital (Singapore) Holding Pte. Ltd., Kabushiki Kaisha UCJ1, Tokutei Mokuteki Kaisha SSG15, SSG12 and SSG16 have fiscal year end. The Company applied equity method based on September 30, 2020 balances, adjusted for significant changes.
Note 9: In order to manage Union Venture Corporation’s investment, the board agreed to sign investment advisory contract with Corner Venture Partners, LLC. With the contract, a subsidiary, Corner Union Venture Capital, LLC, and sub-subsidiaries Corner Ventures DAG I-U, LLC and Corner Union, LLC, were established in Delaware, USA, with the approval by Delaware state government in April and July 2020. Union Venture Corporation held 100% equity in the subsidiaries and engages in general business investment.
Note 10: In order to actively support the FSC’s needs to adapt to the nation’s overall industry development, on August 14, 2020, the board approved to make investment in green energy technology industry. The investment was in Na He Yi Hau Electric Power Inc., with total investment of $900 thousand for 90% equity. In order to continue the development of green engineering, capital increase was made on November 3, 2020. Union Venture Capital has invested a total of $148,900 thousand and held 99.93% of equity on December 31, 2020.
Note 11: In order to actively support the FSC’s needs to adapt to the nation’s overall industry development, on November 24, 2020, the board approved to acquire 90% equity of Ting Jie Electric Power Inc. Union Venture Capital has invested $900 thousand and held 90% of equity on December 31, 2020. It mainly engages in energy development and technology service
Note 12. In order to manage Union Venture Corporation’s investment, it established Union Energy Co., Ltd, with total investment of $100 thousand and held 100% equity. It mainly engages in general business investment management
Note 13. Union Securities Investment Trust Corporation actively supports the FSC’s needs to adapt to the nation’s overall industry development. On January 14, 2020, the board approved to establish Union Private Equity Co., Ltd. on September 17, 2020, with the total investment of $30,000 thousand and held 100% equity. The company mainly engages in general business investment and investment management advisory.
47 -

17. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD, NET

Not individually material Line BIZ+ Taiwan Limited Union Real-Estate Management Corporation		December 31	December 31
		2020 $ 1,484,708 52,281 $ 1,536,989	2019 $ 1,534,969 52,513 $ 1,587,482

The summarized financial information in respect of the Company’s associate is set out below:

Net loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ (50,493)	2019 $ (35,980)

To promote innovative financial technology services and popularize mobile payment endorsed by the government, the board of directors of the Bank approved the investment in Line BIZ+ Taiwan Limited on July 25, 2018 and later acquired 5,451 thousand of their ordinary shares with a price of $1,579,977 thousand on September 21, 2018 resulting in a 10% shareholding and a seat on the board. The Company has significant influence over Line BIZ+ Taiwan Limited and thus uses the equity method to account for the investment.

The Bank’s share of profit and other comprehensive income recognized from investments in associates other than Line BIZ+ Taiwan Limited during the fiscal years 2020 and 2019 were based on financial statements audited by their respective auditors for the same reporting periods as those of the Bank.

Management of the Company considers the fact that numbers quoted from the non-audited financial statements of Line BIZ+ Taiwan Limited will not lead to material misstatements on the Company’s consolidated financial statements.

18. OTHER FINANCIAL ASSETS, NET

Pledged assets (Note 48) Due from banks - certificate of deposit Others		December 31	December 31
		2020 $ 1,546,710 2,979,551 23,437 $ 4,549,698	2019 $ 1,514,930 2,114,433 3,285 $ 3,632,648

The amount of due from banks - time deposits with maturities longer than three months or certificate of deposits that cannot be cancelled or used.

48 -

19. PROPERTY AND EQUIPMENT, NET

Cost Balance at January 1, 2019 Additions Disposals Reclassification Effect of foreign currency exchange differences Balance at December 31, 2019 Accumulated depreciation Balance at January 1, 2019 Depreciation Disposals Effect of foreign currency exchange differences Balance at December 31, 2019 Balance at December 31, 2019, net Cost Balance at January 1, 2020 Additions Disposals Reclassification Effect of foreign currency exchange differences Balance at December 31, 2020 Accumulated depreciation Balance at January 1, 2020 Depreciation Disposals Effect of foreign currency exchange differences Balance at December 31, 2020 Balance at December 31, 2020, net	Land $ 3,845,398 - - - - 3,845,398 - - - - - $ 3,845,398 $ 3,845,398 6,246 - 77,910 - 3,929,554 - - - - - $ 3,929,554	Buildings Machinery and Computer Equipment Transportation Equipment $ 5,175,756 $ 1,396,588 $ 309,762 18,589 62,136 11,020 - (46,003 ) (6,041 ) 985 17,744 1,676 - (13) - 5,195,330 1,430,452 316,417 1,658,056 1,074,655 261,941 128,963 117,877 15,266 - (43,913 ) (5,894 ) - (93) - 1,787,019 1,148,526 271,313 $ 3,408,311 $ 281,926 $ 45,104 $ 5,195,330 $ 1,430,452 $ 316,417 17,181 74,873 23,423 - (125,486 ) (5,451 ) 1,012 130,283 386 - (15) - 5,213,523 1,510,107 334,775 1,787,019 1,148,526 271,313 126,213 82,511 13,125 - (118,339 ) (5,236 ) - (13) - 1,913,232 1,112,685 279,202 $ 3,300,291 $ 397,422 $ 55,573	Lease Improvements $ 401,012 30,851 (1,864 ) 5,460 6 435,465 200,180 55,152 (578 ) 6 254,760 $ 180,705 $ 435,465 53,692 - 10,033 - 499,190 254,760 51,721 - - 306,481 $ 192,709	Prepayments for Equipment $ 73,811 176,387 - (42,340 ) - 207,858 - - - - - $ 207,858 $ 207,858 52,142 - (210,272 ) - 49,728 - - - - - $ 49,728	Total $ 11,202,327 298,983 (53,908 ) (16,475 ) (7) 11,430,920 3,194,832 317,258 (50,385 ) (87) 3,461,618 $ 7,969,302 $ 11,430,920 227,557 (130,937 ) 9,352 (15) 11,536,877 3,461,618 273,570 (123,575 ) (13) 3,611,600 $ 7,925,277

The above items of property and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:

Buildings Main buildings 50-55 years Equipment installed in buildings 5 years Machinery and computer equipment 3-5 years Transportation equipment 3-5 years Lease improvements 5 years

In August 2016, the Bank acquired a piece of land in Tucheng Dist. from New Taipei City through the public auction in order to construct business operation office for $423,916 thousand. The Bank completed the payment and obtained the ownership of the land in October 2016. On November 9, 2016, the board of directors of the Bank and UFLIC, the property developer, resolved respectively to enter into a cooperation contract with each other to cooperatively construct a building. Upon completion of the building, the ownership thereof will be attributed to the Company and UFLIC. Per contract, the Bank will provide its land (estimated cost amounting to $439,626 thousand) in Tucheng District, New Taipei City for constructing the building, and UFLIC will render funds and donate a piece of land originally reserved for the public facilities to the government in exchange for transfer development rights (TDR) to increase the building area. The funds and the TDR amounted to an aggregate of $447,614 thousand. The building area increased due to the exercise of the TDR belonged to UFLIC.

49 -

On July 25, 2018, the board of directors of the Bank and UFLIC resolved to rescind the cooperation contract in Tucheng District, New Taipei City. To avoid additional time and cost on transfer development right and field investigation on the project, the Bank and UFLIC have agreed upon UFLIC to continue finishing the project while the Bank will engage third parties to construct on the land owned. The Bank has paid to the government all the fees and the price of land originally reserved for the public facilities in exchange for transfer development rights (TDR) to increase the building area.

20. LEASE ARRANGEMENTS

a. Right-of-use assets

	December 31	December 31	December 31
2020 2019 $ 1,741,760 $ 1,439,735 For the Year Ended December 31
		2020 2019 $ 742,370 $ 617,766 $ 444,225 $ 442,886 December 31
	2020 2019 $ 1,723,121 $ 1,415,180 December 31
2020 2019 0.73%-1.78% 0.89%-1.72% For the Year Ended December 31
		2020 $ 195,687 $ (633,996)	2019 $ 203,796 $ (640,629)

The Company’s leases of certain assets qualify as short-term leases. The Company has elected to apply the recognition exemption and thus, did not recognize right-of-use assets and lease liabilities for these leases.

50 -

21. INVESTMENT PROPERTIES, NET

Cost Balance at January 1, 2020 Additions Reclassification Net exchange difference Balance at December 31, 2020 Accumulated depreciation and impairment Balance at January 1, 2020 Depreciation Net exchange differences Balance at December 31, 2020 Balance at December 31, 2020, net Cost Balance at January 1, 2019 Additions Net exchange difference Balance at December 31, 2019 Accumulated depreciation and impairment Balance at January 1, 2019 Depreciation Net exchange differences Balance at December 31, 2019 Balance at December 31, 2019, net	Land $ 4,551,773 - (42,418) (3,911) $ 4,505,444 $ - - - $ - $ 4,505,444 $ 4,560,976 142 (9,345) $ 4,551,773 $ - - - $ - $ 4,551,773	Buildings $ 1,055,137 13,668 - (1,664) $ 1,067,141 $ (237,130) (47,759) 416 $ (284,473) $ 782,668 $ 1,028,934 30,032 (3,829) $ 1,055,137 $ (191,002) (47,304) 1,176 $ (237,130) $ 818,007	Total $ 5,606,910 13,668 (42,418) (5,575) $ 5,572,585 $ (237,130) (47,759) 416 $ (284,473) $ 5,288,112 $ 5,589,910 30,174 (13,174) $ 5,606,910 $ (191,002) (47,304) 1,176 $ (237,130) $ 5,369,780

The Company acquired investment properties amounting to $986,055 thousand, $1,026,015 thousand and $668,984 thousand via SSG15, SSG12 and SSG16 in Japan on September 2014, February 2016 and April 2016, respectively. The amount was based on the valuation by independent appraisers that were not the Company’s related parties.

Investment properties are depreciated on a straight-line basis over their estimated useful lives as follows:

Buildings Main buildings 15-50 years Equipment installed in buildings 6-15 years

The fair values of investment properties were $6,593,979 thousand and $6,601,085 thousand as of December 31, 2020 and 2019, respectively. The fair values were based on the valuation at these dates by independent appraisers that were not the Company’s related parties and estimated by the management according to the prices of similar properties in the vicinity.

51 -

Refer to Note 31 for information relating to investment properties pledged as guarantee.

The investment properties were leased out for 3 to 20 years. The lease contracts contain market review clauses in the event that the lessees exercise their options to extend. The lessees do not have bargain purchase options to acquire the investment properties at the expiry of the lease periods.

As of December 31, 2020 and 2019, refundable deposits paid under operating leases were $75,713 thousand and $75,546 thousand (included in other assets - refundable deposits), respectively.

The maturity analysis of lease payments receivable under operating leases of investment properties as of December 31, 2020 and 2019 was as follows:

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 onwards		December 31	December 31
		2020 $ 137,471 74,405 17,521 14,855 14,174 99,766 $ 358,192	2019 $ 167,646 98,686 54,515 14,627 14,547 120,718 $ 470,739

22. GOODWILL

The Bank acquired Chung Shing Bank (Chung Shing) on March 19, 2005 and recognized goodwill amounting to $3,309,000 thousand. The goodwill amortization period was five years, and the amortization expense in 2005 was $551,500 thousand. However, the amortization of goodwill was no longer required from January 1, 2006.

The Bank merged with Union Bills Finance Corporation on August 16, 2010, with the Bank as the survivor entity, and recognized goodwill amounting to $130,498 thousand.

For the impairment test on Chung Shing, the Bank treated individual business units as cash-generating units (CGUs). Goodwill resulting from the merger was allocated to the relevant CGUs. The recoverable amount was determined by the value in use of each CGU and was calculated at the present values of the cash flow forecast for the next five years based on the going-concern assumption. Future cash flows were estimated on the basis of Chung Shing’s present operations and will be adjusted depending on the business outlook and economic trends.

As of December 31, 2020 and 2019, the balances of accumulated impairment were both $902,691 thousand.

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23. OTHER ASSETS, NET

Assets leased to others, net Refundable deposits Prepaid expenses Prepaid pension (Note 34) Others		December 31	December 31
		2020 $ 5,828,598 2,247,706 1,212,519 186,071 68,481 $ 9,543,375	2019 $ 5,548,577 2,548,280 657,448 174,565 41,972 $ 8,970,842

24. DEPOSITS FROM THE CENTRAL BANK AND OTHER BANKS

Call loans from banks Deposits from Chunghwa Post Co., Ltd. Deposits from the Central Bank and other banks Overdraft		December 31	December 31
		2020 $ 6,616,671 5,599,730 127,091 137,622 $ 12,481,114	2019 $ 6,059,809 5,599,730 145,784 55,409 $ 11,860,732

25. DUE TO THE CENTRAL BANK AND OTHER BANKS

Due to the Central Bank and other banks		December 31	December 31
		2020 $ 3,786,720	2019 $ -

26. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Commercial paper Asset-based securities Corporate bonds Government bonds Financial bonds Negotiable certificates of deposit Maturity date Repurchase price		December 31
	2020 2019 $ 16,513,416 $ 13,471,704 18,014,455 34,959,474 5,011,996 8,259,790 2,749,077 4,177,567 1,138,946 4,508,901 1,000,286 - $ 44,428,176 $ 65,377,436 2021.01-2021.04 2020.01-2020.07 $ 43,452,064 $ 65,663,465

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27. PAYABLES

Notes and checks in clearing Investments payable Accrued expenses Interest payable Collections payable Bank acceptances payable Tax payable Settled price Others		December 31	December 31
		2020 $ 1,171,066 1,349,789 979,980 574,255 394,848 107,221 103,763 69,746 843,346 $ 5,594,014	2019 $ 1,076,011 455,093 980,878 895,542 238,668 112,902 108,739 127,990 619,466 $ 4,615,289

28. DEPOSITS AND REMITTANCES

Savings deposits Demand deposits Time deposits Checking deposits Negotiable certificates of deposit Inward and outward remittances		December 31	December 31
		2020 $ 364,921,557 115,241,243 112,396,084 13,929,291 305,900 66,424 $ 606,860,499	2019 $ 327,270,693 92,564,567 106,932,371 5,847,783 234,500 49,186 $ 532,899,100

29. BANK DEBENTURES

First issue of subordinated bank debentures in 2013; fixed rate at 2.10%; maturity: December 2020 First issue of subordinated bank debentures in 2015; fixed rate at 2.08%; maturity: April 2022 First issue of subordinated bank debentures in 2016; no maturity date and non-cumulative; redeemable at face value plus interest accrued under the approval of the authorities when the issue term is over 5.1 years; fixed rate at 4.20% First issue of subordinated bank debentures in 2017; no maturity date and non-cumulative; redeemable at face value plus interest accrued under the approval of the authorities when the issue term is over 5.1 years; fixed rate at 4.20% First issue of subordinated bank debentures in 2019; fixed rate at 1.10%; maturity: September 2026 First issue of subordinated bank debentures in 2019; fixed rate at 1.23%; maturity: September 2029		December 31	December 31
		2020 $ - 2,200,000 2,500,000 500,000 500,000 1,500,000 $ 7,200,000	2019 $ 3,000,000 2,200,000 2,500,000 500,000 500,000 1,500,000 $ 10,200,000

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30. DEFERRED TAX LIABILITIES

Deferred tax liabilities

December 31, 2020 $ 524,000

On December 31, 2020, the boards of directors of Na He Yi Hau Electric Power Inc. and Ting Jie Electric Power Inc. approved to issue 12,400 shares and 4,000 shares, respectively, of preferred stock. The face value of each stock is $10 dollars. The main terms and conditions of the preferred stock are the following:

a. Maturity: Preferred stock up to 20 years
b. Interest: The annual interest rate is 6.5%, based on the price of each stock
c. Dividend payment: Whereas Na He Yi Hau Electric Power Inc. and Ting Jie Electric Power Inc. makes profit in a fiscal year, the profit shall be first utilized for paying taxes, offset losses of previous years, and from the remaining profit set aside amount as legal reserve, and set aside or reverse special reserve in accordance with the laws and regulations, and distribute dividends to the preferred shareholders. They have the sole discretion on the distribution of dividends of preferred stocks, which includes but not limited to the their discretion to resolve not to distribute dividends to the preferred shareholders if there is no surplus, or if earnings in the fiscal year are insufficient to fully pay off dividends to the shareholders of the preferred stocks, or if the distribution of dividends of preferred stocks may cause Total Capital Adequacy Ratio to be less than the authority’s minimum requirement, or if they have other essential considerations. If they resolves not to distribute dividends to the preferred shareholders, the shareholders of preferred stock shall raise no objection. The unpaid dividend will not be carried forward to years with earnings. Dividends of preferred stocks if distributed will be in cash and in one payment in a year. After the shareholders, in their meeting, approved the appropriation of the earnings of the fiscal year as proposed by the board of directors and resolved to distribute from the earnings cash dividends, the board of directors sets the record date of preferred stock for payment of dividends. Dividend is calculated based on the proportion of the number of days that the stocks are issued in a fiscal year, starting from the date of issuance to the record date (or redemption date) of dividend. The amount of dividends distributed should be listed on the dividend statements.
d. Restrictions on payment of dividends to common shares: Except for the dividends prescribed in the preceding subparagraphs, the shareholders of preferred stock are not entitled to participate in the distribution of earnings or capital reserve as cash or stock dividends of ordinary shares.
e. Redemption: After 5 years from the issue date, Na He Yi Hau Electric Power Inc. and Ting Jie Electric Power Inc. may, subject to the competent authority’s approval, redeem a portion or all of the outstanding shares of preferred stock at any time at the issue price. The rights and obligations associated with any remaining outstanding shares of preferred stock shall continue as specified in the agreement. If the stockholders’ meeting approves the distribution of dividends in the year the Na He Yi Hau Electric Power Inc. and Ting Jie Electric Power Inc. redeems the outstanding shares of preferred stock, the dividends payable shall be calculated at the ratio of the number of days outstanding from beginning of year to the redemption date to total days in a fiscal year.
f. Preferred stock repurchase: preferred stock cannot be sold by the holder of preferred stock.
g. Liquidation preference: In the event of liquidation the order of priority for the distribution of the earnings and assets due to the shareholders is first to common shareholders then to the preferred shareholders and not more than the issuance amount of outstanding shares of preferred stock.
h. Non-voting: Generally, the preferred shares do not assign voting rights to their holders. However, some preferred shares allow its holders to vote on extraordinary events.
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i. Convertibility to common stock: Preferred shares may be converted to a predetermined number of common shares. Some preferred shares specify the date at which the shares can be converted, while others require approval from the board of directors for the conversion.
j. When the Na He Yi Hau Electric Power Inc. and Ting Jie Electric Power Inc. issues new shares in cash, the shareholders of preferred stock and the common stock shall be entitled to equivalent preemptive rights on the new shares.

31. BONDS PAYABLE

Overseas corporate bonds - secured		December 31	December 31
		2020 $ 1,464,796	2019 $ 1,473,858

SSG15

To comply with the Japanese law, whenever SSG15 issues secured corporate bonds, UCSH must transfer more than half of the shares of common stock of SSG15 held by UCSH to the legal entity Ippam Shadan Hojin UCJ1 (ISH UCJ1) in order to establish bankruptcy isolation mechanism.

SSG15 issued five-year period secured corporate bonds with a face value of JPY2,200,000 thousand (NT$609,490 thousand) secured by investment property as a guarantee. The book value of the investment property was JPY3,760,970 thousand (NT$1,041,943 thousand). According to the contract, the issuance can be extended by one year, every quarter will pay the interest and installment of JPY11,000 thousand. The overseas corporate bonds - secured has the book value of JPY2,178,000 thousand (NT$602,175 thousand). The interest rates are as follows:

a. The first to fifth years: Base interest rate + 0.20%

Base rate: The Tokyo Swap Rate (TSR), six-month LIBOR-based 5-year JPY/JPY-interest swap rate displayed on page 17143 of the Telerate screen at 10:00 am (JST) on the day that is two business days before the issuance date.

b. The sixth year: Base interest rate + 1.20%

Base rate: The 3-month TIBOR (based on 365 days) displayed as the Japanese yen TIBOR as published by the JBA TIBOR Administration on page 17097 of the Telerate screen at 11:00 am JST on the day that is two business days before the interest payment date.

SSG12

SSG12 issued secured corporate bonds, KK must transfer more than half of the shares of common stock of SSG12 held by KK to the legal entity Ippam Shadan Hojin UCJ2 (ISH UCJ2) in order to establish bankruptcy isolation mechanism.

56 -

SSG12 issued five-year period secured corporate bonds with a face value of JPY1,920,000 thousand (NT$530,844 thousand) secured by investment property as a guarantee. The book value of the investment property was JPY3,769,321 thousand (NT$1,042,146 thousand). According to the contract, the issuance can be extended by one year. The interest rates are as follows:

a. The first to fifth years: Base interest rate + 0.45%

Base rate: The five-year yen-yen swap rate displayed on Reuters Screen page 17143 as the index rate as of 10 a.m. Tokyo time two business days prior to the issue date.

b. The sixth year: Base interest rate + 0.45%

Base rate: The three-month yen TIBOR published by JBA TIBOR Administration on page 17097 of the Telerate screen as of 11 a.m., Tokyo time two business days prior to the first day of each interest calculation period during the tail period.

SSG16

SSG16 issued secured corporate bonds, KK must transfer more than half of the shares of common stock of SSG16 held by KK to the legal entity Ippam Shadan Hojin UCJ2 (ISH UCJ2) in order to establish bankruptcy isolation mechanism.

SSG16 issued four-year period secured corporate bonds with a face value of JPY1,200,000 thousand (NT$331,779 thousand) secured by investment property as a guarantee. The book value of the investment property was JPY2,426,491 thousand (NT$670,879 thousand). Issuance of Corporate bonds of base rate + 0.50% (base rate: The three-month yen TIBOR published by JBA TIBOR Administration on page 17097 of the Telerate screen as of 11 a.m., Tokyo time two business days prior to the first day of each interest calculation period during the tail period).

32. OTHER FINANCIAL LIABILITIES

Commercial paper Principal amounts of structured products Funds obtained from the government - intended for specific types of loans		December 31	December 31
		2020 $ 7,304,800 115,361 - $ 7,420,161	2019 $ 4,887,675 - 111 $ 4,887,786

33. PROVISIONS

Reserve for losses on guarantees and loan commitment Provisions for employee benefits Others		December 31	December 31
		2020 $ 216,360 12,764 39,650 $ 268,774	2019 $ 221,488 8,568 28,479 $ 258,535

57 -

The Company has accrued an allowance for doubtful guarantees and loan commitments; the changes in allowance for doubtful accounts on guarantees and loan commitment for the years ended December 31, 2020 and 2019 were as follows:

Balance at January 1, 2019 Changes of financial instruments recognized at the beginning of the current reporting period Transfers to Lifetime ECL Credit-impaired financial assets 12-month ECL Derecognition of financial assets in the current reporting period New financial assets purchased or originated Difference of impairment loss under regulations Change in others Change in exchange rates Balance at December 31, 2019 Balance at January 1, 2019 Changes of financial instruments recognized at the beginning of the current reporting period Transfers to Lifetime ECL Credit-impaired financial assets 12-month ECL Derecognition of financial assets in the current reporting period New financial assets purchased or originated Difference of impairment loss under regulations Change in others Change in exchange rates Balance at December 31, 2019	2020
	12-month Expected- credit Losses Lifetime Expected- credit Losses Lifetime Expected- credit Losses (Credit- impaired Financial Assets) Impairment Loss under IFRS 9 Difference of Impairment Loss under (Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-accrual Loans) $ 51,294 $ 3,753 $ 28,150 $ 83,197 $ 138,291 (99 ) 99 - - - (182 ) (17 ) 199 - - 1,170 (1,170 ) - - - (33,417 ) (2,608 ) (28,300 ) (64,325 ) - 30,763 1,609 95 32,467 - - - - - 27,017 (159 ) - - (159 ) - (128) - - (128) - $ 49,242 $ 1,666 $ 144 $ 51,052 $ 165,308 2019	Total $ 221,488 - - - (64,325 ) 32,467 27,017 (159 ) (128) $ 216,360
	12-month Expected- credit Losses Lifetime Expected- credit Losses Lifetime Expected- credit Losses (Credit- impaired Financial Assets) Impairment Loss under IFRS 9 Difference of Impairment Loss under (Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-accrual Loans) $ 24,420 $ 3,405 $ 28,732 $ 56,557 $ 150,982 (20 ) 20 - - - (34 ) (8 ) 42 - - 736 (716 ) (20 ) - - (16,943 ) (2,660 ) (28,733 ) (48,336 ) - 43,186 3,672 28,129 74,987 - - - - - (12,691 ) - 40 - 40 - (51) - - (51) - $ 51,294 $ 3,753 $ 28,150 $ 83,197 $ 138,291	Total $ 207,539 - - - (48,336 ) 74,987 (12,691 ) 40 (51) $ 221,488

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34. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Company (except for Union Finance International (HK) Limited) adopted a pension plan under the Labor Pension Act (LPA), which is a state-managed defined contribution plan. Under the LPA, the Company makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

The total expenses recognized in profit or loss for 2020 and 2019 of $162,125 thousand and $146,629 thousand, respectively, were contributions payable to these plans by the Company at rates specified in the pension plan rules.

b. Defined benefit plans

The Company (except for Union Finance International (HK) Limited) adopted the defined benefit plan under the Labor Standards Law, pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement.

The Company contributes a fixed proportion of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Company of Taiwan and in the Company’s Business Department in the committee’s name.

The fund is deposited in the Bank of Taiwan under management of Bureau of Labor Funds, Ministry of Labor. The Company has no right to influence the investment policy and strategy. Before the end of each year, the Company assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Company is required to fund the difference in one appropriation that should be made before the end of March of the next year.

The amounts included in the balance sheets in respect of the Company’s defined benefit plans were as follows:

Present value of defined benefit obligation Fair value of plan assets Surplus (deficit) Net defined benefit assets (liabilities) Provisions - accrued retirement liabilities Other assets - prepaid retirement		December 31	December 31
		2020 $ (1,668,388) 1,841,695 173,307 $ 173,307 $ (12,764) $ 186,071	2019 $ (1,704,114) 1,870,111 165,997 $ 165,997 $ (8,568) $ 174,565

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Movements in net defined benefit (liabilities) assets were as follows:

Present Value
of the Defined
Benefit
Obligation
Fair Value of
the Plan Assets
Balance at January 1, 2020
$ (1,704,114)
$ 1,870,111

Service cost
Current service cost
(15,380)
-
Net interest (expense)

(11,965)

13,129

Recognized in profit or loss

(27,345)

13,129

Remeasurement
Return on plan assets (excluding amounts
included in net interest)
-
19,638
Actuarial gain (loss) - changes in financial
assumptions
(59,172)
-
Actuarial gain (loss) - experience
adjustments

47,216

-

Recognized in other comprehensive income

(11,956)

19,638

Contributions from the employer
-
13,844
Benefits paid

75,027

(75,027)

Balance at December 31, 2020
$ (1,668,388)
$ 1,841,695

Balance at January 1, 2019
$ (1,640,351)
$ 1,632,342

Service cost
Current service cost
(16,351)
-
Net interest (expense)

(16,530)

16,450

Recognized in profit or loss

(32,881)

16,450

Remeasurement
Return on plan assets (excluding amounts
included in net interest)
-
259,748
Actuarial gain (loss) - changes in financial
assumptions
(56,268)
-
Actuarial gain (loss) - experience
adjustments

(29,187)

-

Recognized in other comprehensive income

(85,455)

259,748

Contributions from the employer
-
16,144
Benefits paid

54,573

(54,573)

Balance at December 31, 2019
$ (1,704,114)
$ 1,870,111

Total
$ 165,997
(15,380)

1,164

(14,216)
19,638
(59,172)

47,216

7,682
13,844

-
$ 173,307
$ (8,009)
(16,351)

(80)

(16,431)
259,748
(56,268)

(29,187)

174,293
16,144

-
$ 165,997

Through the defined benefit plans under the Labor Standards Law, the Company is exposed to the following risks:

1) Investment risk: The plan assets are invested in domestic/and foreign/equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau of Labor Funds, Ministry of Labor or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.
2) Interest risk: A decrease in the interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.
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3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The principal assumptions used for the purposes of the actuarial valuations were as follows:

Discount rate Expected rates of future salary increase	December 31
	2020 2019 0.301%-0.383% 0.690%-0.714% 1.5%-2.5% 1.5%-2.5%

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 0.25% increase 0.25% decrease		December	31
		2020 $ (44,231) $ 45,941 $ 44,263 $ (42,831)	2019 $ (47,304) $ 49,206 $ 47,544 $ (45,960)

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

The expected contributions to the plan for the next year The average duration of the defined benefit obligation		December	31
		2020 $ 14,168 9-15 years	2019 $ 16,547 9-14 years

c. Retirement benefits plans of Union Finance International (HK) Limited

Union Finance International (HK) Limited has a defined contribution plan under foreign standards and regulations and is thus not covered by the Labor Pension Act and the Labor Standards Law. Its pension costs were $78 thousand in 2020 and $98 thousand in 2019.

35. OTHER LIABILITIES

Guarantee deposits received Advance receipts Others		December 31	December 31
		2020 $ 2,438,297 1,040,272 111,142 $ 3,589,711	2019 $ 2,337,357 827,904 120,220 $ 3,285,481

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36. EQUITY

a. Capital stock

Common stock

Common stock
Number of shares authorized (in thousands) Amount of shares authorized Number of shares issued and fully paid (in thousands) Amount of shares issued		December 31
		2020 4,500,000 $ 45,000,000 3,093,369 $ 30,933,688	2019 4,500,000 $ 45,000,000 2,884,455 $ 28,844,553

Fully paid ordinary shares, which have a par value of NT$10, carry one vote per share and carry a right to dividends.

Preferred stock

Due to the capital needs of the Bank for future long-term business development and operational scale expansion, the Bank’s shareholders approved and authorized the board of directors to issue ordinary shares or special shares for domestic cash capital increase (one or both, as appropriate) in accordance with the provisions of the Articles of Incorporation or the relevant laws and regulations, in order to raise the long-term funds. The total funds to be raised through issuing new shares as authorized this time shall not be more than NT$10 billion (inclusive) as the principle. The number of shares for issue shall not be more than 800,000,000 shares (inclusive) as the principle. On June 28, 2017, the Banks’s board of directors resolved to issue preferred stock - A totaling 200,000 thousand shares, with a par value of NT$10, at NT$50 per share in the total amount of NT$10,000,000 thousand on December 28, 2017. The issuance of shares has been approved by the FSC under Order No. 1060033586 issued on September 1, 2017.

On October 24, 2017, the capital from issue of preferred stock - A amounted to NT$10,000,000 thousand. The preferred stock - A was listed on Taiwan Stock Exchange on December 1, 2017.

The rights and other important conditions of issuance of the preferred stock - A are as follows:

1) Tenor: Perpetual.
2) Dividend yield: An annual dividend yield is set at 4.8% (5-year IRS 0.89125%+3.90875%) per annum of the issue price at the pricing day. The 5-year IRS will be reset on the next business day after each fifth and half anniversary day after issuance thereafter. The pricing date for reset is the second business day of financial industry in Taipei immediately preceding each reset date. The 5-year IRS rate is the arithmetic mean of 5-year IRS rates appearing on Reuters pages “PYTWDFIX” and “COSMOS3” at 11:00 a.m. (Taipei time) on the relevant pricing date for reset. If such rate cannot be obtained, the Bank will determine the rate based on reasonable market price with good faith.
3) Dividend payment: Whereas the Company makes profit in a fiscal year, the profit shall be first utilized for paying taxes, offset losses of previous years, and from the remaining profit set aside amount as legal reserve, and set aside or reverse special reserve in accordance with the laws and regulations, and distribute dividends to the preferred shareholders. The Bank has the sole discretion on the distribution of dividends of preferred stocks - A, which includes but not limited to the Bank’s discretion to resolve not to distribute dividends to the preferred shareholders if there is no surplus, or if earnings in the fiscal year are insufficient to fully pay off dividends to the shareholders of the preferred stocks, or if the distribution of dividends of preferred stocks may cause Total Capital Adequacy Ratio to be less than the authority’s minimum requirement, or if the Bank has other
62 -

essential considerations. If the Bank resolves not to distribute dividends to the preferred shareholders, the shareholders of preferred stock - A shall raise no objection. The unpaid dividend will not be carried forward to years with earnings. The stock dividends of preferred stocks - A are distributed by cash in one payment annually. After the shareholders, in their meeting, approved the appropriation of the earnings of the fiscal year as proposed by the board of directors and resolved to distribute from the earnings cash dividends, the board of directors sets the record date of preferred stock - A for payment of dividends. Dividend is calculated based on the proportion of the number of days that the stocks are issued in a fiscal year, starting from the date of issuance to the record date (or redemption date) of dividend. The amount of dividends distributed should be listed on the dividend statements.

4) Restrictions on payment of dividends to common shares: Except for the dividends prescribed in the preceding subparagraphs herein, the shareholders of preferred stock - A are not entitled to participate in the distribution of cash or stock dividends with regard to the ordinary shares derived from earnings or capital reserves.
5) Redemption: After 5.5 years from the issue date, the bank may, subject to the competent authority’s approval, redeem a portion or all of the outstanding shares of preferred stock - A at any time at the issue price. The rights and obligations associated with any remaining outstanding shares of preferred stock - A shall continue as specified herein. If the stockholders’ meeting approves the distribution of dividends in the year the Bank redeems the outstanding shares of preferred stock - A, the dividends payable shall be calculated at the ratio of the number of days outstanding from beginning of year to the redemption date to total days in a fiscal year.
6) Liquidation preference: In the event of liquidation, except when the competent authority assigned officials to take receivership over the Bank, order the Bank to suspend and wind up business, or liquidate the Bank, in accordance with the “Regulations Governing the Capital Adequacy and Capital Category of Banks”, the order of priority for the distribution of the earnings and assets of the shareholders of preferred stock - A is the same as that of a common stockholder, the shareholders of preferred stock - A shall be given priority to claim on the Bank’s remaining assets over the shareholders of common stocks, and equal to shareholders of other preferred stock issued by the Bank, but subordinate to the holders of Tier 2 capital, depositors, and other general creditors, and not more than the issuance amount of outstanding shares of preferred stock - A.
7) Voting rights or election rights: The shareholders of preferred stock - A are not entitled to any voting rights or election rights in shareholders’ meeting. However, they may vote in preferred stock - A shareholders’ meetings and in general shareholder meetings with regard to agenda items concerning rights and obligations of the shareholders of preferred stock - A.
8) Preferred stock - A shall not be converted into common stocks. The shareholders of the preferred stocks shall not require the Bank to redeem the rights of the preferred stocks - A.
9) When the bank issues new shares in cash, the shareholders of preferred stock - A and the common stock shall be entitled to equivalent preemptive rights on the new shares.
b. Capital surplus

Issuance of preference shares Treasury stock transactions Issuance of ordinary shares		December 31	December 31
		2020 $ 8,000,000 32,413 7,622 $ 8,040,035	2019 $ 8,000,000 32,413 3,071 $ 8,035,484

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The capital surplus from shares issued in excess of par (additional paid-in capital from issuance of ordinary shares and treasury stock transactions) and donations may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital limited to a certain percentage of the Company’s capital surplus and to once a year.

The capital surplus from long-term investments, employee stock options and conversion options may not be used for any purpose.

c. Legal reserve

Legal reserve should be appropriated until it equals the Company’s paid-in-capital. Legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of its paid-in capital, the excess may be transferred to capital or distributed in cash. In addition, based on the Banking Act, if the legal reserve is less than the Company’s paid-in capital, the amount that may be distributed in cash should not exceed 15% of the Company’s paid-in-capital.

d. Special reserve

Items referred to under Rule No. 1010012865, Rule No. 1030006415 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs” should be appropriated to or reversed from a special reserve by the Bank.

If a special reserve appropriated on the first-time adoption of IFRSs relates to investment properties other than land, the special reserve may be reversed continuously over the period of use. The special reserve relating to land may be reversed on the disposal or reclassification of the related assets.

The above special reserve may be used to offset a deficit; if the reserve has reached at least 50% of the paid-in capital, half of this special reserve may be capitalized.

According to Order No. 10510001510 issued by the FSC, a special reserve should be appropriated between 0.5% and 1% of net income after tax when banks appropriate earnings of 2016 through 2018. Since 2017, the Company is allowed to reverse the special reserve at the amount of the costs of employee transfer and arrangement in connection with the development of financial technology.

According to Order No. 1010012865 and No. 10510001510 issued by FSC that should appropriate special reserves.

Balance at January 1 Special reserves appropriated Balance at December 31		December 31	December 31
		2020 $ 627,440 - $ 627,440	2019 $ 612,656 14,784 $ 627,440

e. Retained earnings and dividend policy

The shareholders of the Bank held their regular meeting on May 31, 2019 and resolved the amendments to the Bank’s Articles of Incorporation (the “Articles”). The amendments explicitly stipulate that at the end of each half of the accounting year, the Bank may propose a proposal for the distribution of surplus or loss for the first half of the fiscal year, together with the business report and financial statements submitted to the audit committee for review, which are subject to the resolution of the board of directors. When allocating surpluses, in addition to estimating and retaining taxable donations, making up for losses according to law, and making statutory surplus reserves, it is also advisable to retain employee compensation.

64 -

Under the dividends policy as set forth in the amended Articles, if the Bank has made a profit at the end of the fiscal year, in addition to paying income tax in accordance with the law, losses from prior years should first be compensated, then 30% shall be provided as legal reserve. Special reserve may also be provided in accordance with the law or as required for business. The remaining amount together with the accumulated undistributed profit from the previous year shall be subject to a profit distribution proposal prepared by the board of directors and shall be submitted to the shareholders’ meeting for a resolution on the distribution of shareholders’ dividends and bonuses.

Under the dividends policy as set forth in the Articles before the amendments, if the Bank has made a profit at the end of the fiscal year, in addition to paying income tax in accordance with the law, losses from prior years should first be compensated, then 30% shall be provided as legal reserve. Special reserve may also be provided in accordance with the law or as required for business. The remaining amount together with the accumulated undistributed profit from the previous year shall be subject to a profit distribution proposal prepared by the board of directors and submitted to the shareholders’ meeting for a resolution on the distribution of shareholders’ dividends and bonuses.

When distributing the surplus of the preceding paragraph, the statutory surplus reserve and the capital reserve by way of issuing new shares, the shareholders’ meeting will be held to make a special resolution; the cash assignor is authorized to distribute the surplus by the board of directors with more than two-thirds of the directors attending and resolution of more than half of the directors, and a report of such distribution should be submitted in the shareholders’ meeting. The dividends and bonuses under the first paragraph shall be distributed in cash or stock, as determined by the board of directors based on the financial status at the time, future profitability status and capital budget planning of the Bank. In principle, if the ratio between the Bank’s own capital and risky assets after distribution will be lower than the ratio stipulated by the competent authority by 1%, issuance of stock dividend may be given priority; before the level of capital reserve reaches the amount of total capital, profit distribution in cash shall not exceed 15% of the total capital.

The appropriations from the earnings of 2019 and 2018 were approved in stockholders’ meetings on May 28, 2020 and May 31, 2019, respectively. The appropriations and dividends per share were as follows:

Legal reserve Special reserve Cash dividends on ordinary shares Stock dividends on ordinary shares Cash dividends on preference shares	Appropriation of Earnings 2019 2018 $ 1,007,837 $ 887,017 - 14,784 288,446 - 2,019,119 1,883,009 480,000 480,000	Dividends Per Share (NT$)
		2019 2018 $ 0.1 $ - 0.7 0.7 2.4 2.4

65 -

The appropriations from the 2020 earnings were proposed by the board of directors on March 10, 2021. The appropriations, including the dividends per share, were as follows:

	Appropriation	Dividends Per	Dividends Per
	of Earnings	Share	(NT$)
Legal reserve	$ 1,041,070
Stock dividends on ordinary shares	1,951,916	$	0.631
Cash dividends on preference shares	480,000		2.40

The appropriation of earnings for 2020 will be approved in stockholders’ meeting to be held on May 28, 2021.

f. Other equity items

1) Exchange differences on translating foreign operations

Balance at January 1 Exchange differences arising on translation the foreign operations Income tax on exchange differences on translation of the net assets of foreign operations Balance at December 31 Unrealized gain (loss) on financial assets at FVTOCI Balance at January 1 (IFRS 9) Generated this year Unrealized gain (loss) Debt instruments Equity instruments Adjustments to loss allowance for debt instruments Disposal of debt instruments Other comprehensive income for the year Acquisition of interest in subsidiary Accumulated gain (loss) transferred to retained earnings from disposal of equity instruments at FVTOCI Balance at year-end	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2020 2019 $ (604,632) $ (413,524) (608,239) (238,885) 121,648 47,777 $ (1,091,223) $ (604,632) For the Year Ended December 31
		2020 $ 5,289,524 1,040,127 669,515 (19,120) (15,371) 1,675,151 - (22,382) $ 6,942,293	2019 $ 2,073,347 1,611,224 1,947,241 17,662 (24,322) 3,551,805 (2,105) (333,523) $ 5,289,524

2) Unrealized gain (loss) on financial assets at FVTOCI
66 -

g. Non-controlling interests

Balance at January 1 Attributed to non-controlling interests Share of profit for the year Unrealized gains (losses) on investments in equity instruments at fair value through gains or losses Acquisition of non-controlling interests (Note 56) Balance at December 31	For the Year Ended	For the Year Ended	December 31
		2020 $ 1,578 (204) 3 200 $ 1,577	2019 $ 245,726 12,021 (63) (256,106) $ 1,578

37. NET INTEREST

Interest revenue Discounts and loans Credit card Due from the Central Bank and call loans to other banks Securities purchased under resell agreements Investments in debt instruments at amortized cost Financial assets at fair value through other comprehensive income Others Interest expense Deposits Securities sold under repurchase agreements Bank debentures Due to Chunghwa Post Co., Ltd. Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 8,044,959 834,266 152,751 221,157 1,621,720 958,260 90,371 11,923,484 3,161,086 256,508 571,777 39,340 253,713 4,282,424 $ 7,641,060	2019 $ 7,792,869 836,084 231,438 269,316 1,912,430 901,475 59,497 12,003,109 3,897,601 246,880 1,203,134 48,489 129,543 5,525,647 $ 6,477,462

38. COMMISSION AND FEE REVENUE, NET

Commission and fee revenue Credit cards and debit cards Insurance commission Trust business Loan business Interbank service fee Underwriting business	For the Year Ended December 31
	2020 2019 $ 1,596,191 $ 1,319,093 638,744 871,886 572,023 478,926 350,161 390,072 117,207 109,034 104,690 101,056 (Continued)

67 -

Guarantee business Others Commission and fee expense Credit card Verification of credit Interbank service fee Acquiring liquidation deal Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 88,911 247,963 3,715,890 658,125 39,014 28,786 15,256 154,236 895,417 $ 2,820,473	2019 $ 79,377 227,860 3,577,304 632,799 35,532 22,966 17,221 151,940 860,458 $ 2,716,846 (Concluded)

39. GAIN ON FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Realized gain or loss on financial assets at fair value through profit or loss Currency swap contracts Foreign exchange forward contracts Commercial papers Beneficiary securities and shares Option contracts Government bonds Corporate bonds Dividend revenue Interest revenue Principal guaranteed notes Cross-currency swap contracts Futures exchange margins Unrealized gain or loss on financial assets at fair value through profit or loss Derivative financial assets and liabilities Beneficiary securities and shares Commercial paper Government bonds and corporate bonds	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 512,717 37,061 14,104 17,769 1,769 8,046 81,411 54,801 245,917 11,725 16,175 (1,406) 1,000,089 805,279 (26,987) (6,922) (444) 770,926 $ 1,771,015	2019 $ 959,335 324,367 8,220 254,796 3,125 1,783 27,321 36,024 272,159 33,242 61,109 1,124 1,982,605 (585,369) 81,591 (1,257) 8,302 (496,733) $ 1,485,872

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40. REALIZED GAIN ON FINANCIAL ASSETS AT FVTOCI

Dividend revenue Net income on disposal - debt instruments	For the Year Ended	For the Year Ended	December 31
		2020 $ 403,377 15,371 $ 418,748	2019 $ 321,880 24,322 $ 346,202

41. IMPAIRMENT LOSS (REVERSAL OF LOSS)

Debt instruments at FVTOCI Financial assets at amortized cost Foreclosed collateral	For the Year Ended	For the Year Ended	December 31
		2020 $ 14,349 107,760 6,751 $ 128,860	2019 $ (19,605) (43,501) 20,185 $ (42,921)

42. SALARY AND BENEFITS OF EMPLOYEES

Salaries and wages Bonus Pension Defined contribution plans Defined benefit plans Labor insurance and national health insurance Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 2,541,877 865,683 162,203 14,216 318,376 63,527 $ 3,965,882	2019 $ 2,445,490 859,571 146,727 16,431 304,795 58,228 $ 3,831,242

The Bank accrued compensation of employees and remuneration of directors at the rates of between 1% and 5% and no higher than 0.1%, respectively, of net profit before income tax, compensation of employees, and remuneration of directors. The compensation of employees and remuneration of directors for the years ended December 31, 2020 and 2019 which have been approved by the Company’s board of directors on March 10, 2021 and March 11, 2020, respectively, were as follows:

Accrual rate

Compensation of employees Remuneration of directors	For the Year Ended December 31
	2020 2019 1.84% 1.84% 0.09% 0.09%

69 -

Amount

Compensation of employees Remuneration of directors and supervisors	For the Year Ended December 31	For the Year Ended December 31
	2020 Cash Share $ - $ 72,242 3,534 -	2019
		Cash Share $ - $ 74,567 3,647 -

If there is a change in the amounts after the annual consolidated financial statements were authorized for issue, the differences are recorded as a change in the accounting estimate.

The number of shares of the compensation of employees, which was determined by dividing the amount of the compensation of employees resolved for 2020 and 2019 by $10.85 and $10.65, respectively, which is the closing price per share on the day immediately preceding the meeting of the Company’s board of directors was 6,658 thousand shares and 7,002 thousand shares for 2020 and 2019, respectively.

There was no difference between the actual amounts of compensation of employees and remuneration of directors paid and the amounts recognized in the financial statements for 2020 and 2019.

Information on the compensation of employees and remuneration of directors resolved by the Company’s board of directors in 2020 and 2019 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

43. DEPRECIATION AND AMORTIZATION

Assets leased Property and equipment Investment properties Intangible assets Right-of-use assets	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 1,645,757 273,570 47,759 81,097 444,225 $ 2,492,408	2019 $ 1,588,030 317,258 47,304 88,404 442,886 $ 2,483,882

44. OTHER OPERATING EXPENSES

Advertisement Taxation and government fee Outsourcing service Postage/cable charge Rental Computer operating Maintenance charge Deposit insurance Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 1,034,289 668,675 339,905 267,644 196,119 185,607 181,436 149,368 716,814 $ 3,739,857	2019 $ 602,989 698,324 315,017 265,487 203,796 166,439 153,116 140,993 736,766 $ 3,282,927

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45. INCOME TAX

a. Income tax recognized in profit or loss

The main components of income tax expense were as follows:

Current tax Current year Additional income tax on unappropriated earnings Prior year’s adjustments Deferred tax Current year Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2020 $ 507,413 1,516 (7,953) 500,976 (806) $ 500,170	2019 $ 498,030 139 4,785 502,954 153,024 $ 655,978

A reconciliation of accounting profit and current income tax expense for the years ended December 31, 2020 and 2019 is as follows:

Income before tax Income tax expense at the 20% statutory rate Tax-exempt income Nondeductible expenses in determining taxable income Additional income tax under the Alternative Minimum Tax Act Unrecognized deductible temporary differences Additional income tax on unappropriated earnings Loss on disposal of investments in equity instruments at fair value through other comprehensive income Other permanent differences Effect of change in tax rate Adjustments for prior year’s tax Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 3,941,675 $ 785,117 (469,482) 19,751 57,631 6,824 1,516 - 56,171 50,595 (7,953) $ 500,170	2019 $ 4,027,456 $ 800,051 (275,218) 26,376 1,869 24,090 139 1,387 72,499 - 4,785 $ 655,978

For the subsidiaries, the income tax rate in Hong Kong is 16.5%; in Japan 30%, and in Singapore 17%.

As the appropriation of the 2020 earnings is uncertain, the income tax consequences of the 2020 unappropriated earnings cannot be reliably determined.

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b. Income tax recognized in other comprehensive income

Deferred tax Recognized in other comprehensive income: Exchange differences on the translation of financial statements of foreign operations Unrealized gain or loss on financial assets at fair value through other comprehensive income Actuarial gains and losses on defined benefit plans Total income tax expenses (benefit) recognized in other comprehensive income	For the Year Ended	For the Year Ended	December 31
		2020 $ 121,648 (107,125) (1,536) $ 12,987	2019 $ 47,777 (300,175) (34,858) $ (287,256)

c. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2020

Opening Balance
Recognized in
Profit or Loss
Recognized in
Other
Comprehensive
Income
Deferred tax assets
Temporary differences
Impairment loss of financial
instruments
$ 42,700
$ (8,700 )
$ -

Exchange difference on translation
of foreign operations
148,236
-
121,648
Employee benefit plan
175,694
2,284
892
Allowance for possible losses and
reserve for losses on guarantees
81,728
12,890
-
Investment properties
137,317
(1,928 )
-
Others

113,246

(33,529)

-

$ 698,921
$ (28,983)
$ 122,540

Deferred tax liabilities
Temporary differences
Financial assets at fair value
through other comprehensive
income
$ (996,121 )
$ -
$ (107,125 )
Amortization of goodwill
impairment loss
(397,061 )
-
-
Others

(224,019)

29,789

(2,428)

$ (1,617,201)
$ 29,789
$ (109,553)

Exchange
Differences
Closing Balance
$ -
$ 34,000

-
269,884

-
178,870
-
94,618
-
135,389

-

79,717
$ -
$ 792,478
$ -
$ (1,103,246 )
-
(397,061 )

30

(196,628)
$ 30
$ (1,696,935)

72 -

For the year ended December 31, 2019

Opening Balance
Recognized in
Profit or Loss
Recognized in
Other
Comprehensive
Income
Deferred tax assets
Temporary differences
Impairment loss of financial
instruments
$ 54,652
$ (11,952 )
$ -

Exchange difference on translation
of foreign operations
100,459
-
47,777
Employee benefit plan
176,665
3,085
(4,056 )
Allowance for possible losses and
reserve for losses on guarantees
129,643
(47,915 )
-
Investment properties
139,244
(1,927 )
-
Others

43,123

70,123

-

643,786
11,414
43,721
Loss carryforwards

147,764

(147,764)

-

$ 791,550
$ (136,350)
$ 43,721

Deferred tax liabilities
Temporary differences
Financial assets at fair value
through other comprehensive
income
$ (695,946 )
$ -
$ (300,175 )
Amortization of goodwill
impairment loss
(397,061 )
-
-
Others

(176,563)

(16,674)

(30,802)

$ (1,269,570)
$ (16,674)
$ (330,977)

Exchange
Differences
Closing Balance
$ -
$ 42,700

-
148,236

-
175,694
-
81,728
-
137,317

-

113,246

-
698,921

-

-
$ -
$ 698,921
$ -
$ (996,121 )

-
(397,061 )

20

(224,019)
$ 20
$ (1,617,201)

d. Information on loss carryforwards

The Company’s loss carryforwards as of December 31, 2020 were as follows:

Union Securities Investment Trust Corporation Union Finance International (HK) Limited Income tax assessments Union Bank of Taiwan Union Finance and Leasing International Union Information Technology Union Securities Investment Trust Corporation	Unused Amount Expiry Year $ 28,788 2023 $ 95,360 N/A Examined and Cleared Through 2017 Through 2018 Through 2018 Through 2018	Unused Amount Expiry Year $ 28,788 2023 $ 95,360 N/A Examined and Cleared Through 2017 Through 2018 Through 2018 Through 2018

		Through 2017 Through 2018 Through 2018 Through 2018

e. Income tax assessments

46. EARNINGS PER SHARE

Basic earnings per share Diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 0.96 $ 0.96	2019 $ 0.93 $ 0.93

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The earnings and weighted average number of ordinary shares outstanding used in the computation of earnings per share are as follows:

Net Profit for the Period

Net profit Less: Dividends on preference shares Earnings used in the computation of basic earnings per share Earnings used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 3,441,709 (480,000) $ 2,961,709 $ 2,961,709	2019 $ 3,359,457 (480,000) $ 2,879,457 $ 2,879,457

The weighted average number of ordinary shares outstanding (in thousands of shares) is as follows:

Weighted average number of ordinary shares used in the computation of basic earnings per share Effect of potentially dilutive ordinary shares Compensation or bonuses of employees Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended	For the Year Ended	December 31
		2020 3,092,030 8,059 3,100,089	2019 3,085,172 7,943 3,093,115

If the Company offered to settle the compensation or bonuses paid to employees in cash or shares, the Company assumed that the entire amount of the compensation or bonuses will be settled in shares, and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

The weighted average number of shares outstanding used for the earnings per share computation was adjusted retroactively for the issuance of bonus shares on July 31, 2020. The basic and diluted earnings per share were both adjusted from $1.00 to $0.93 for the year ended December 31, 2019.

74 -

47. RELATED-PARTY TRANSACTIONS

In addition to those disclosed in other footnotes, significant transactions between the Company and related parties are summarized as follows:

a. Related parties and their relationships with the Company

Related Party Relationship with the Company

Union Real-Estate Management Corporation Associates LINE BIZ+ Taiwan, Ltd. (LINE PAY) Associates Hung-Kou Construction Inc., Ltd. (Hung-Kou) Related party in substance The Liberty Times Co., Ltd. (Liberty Times) Related party in substance Long Shan Lin Corporation Related party in substance Yong-Xuan Co., Ltd. (Yong-Xuan) Related party in substance Union Enterprise Construction Co., Ltd. (UECC) Director of the Bank Yu-Pang Co., Ltd. (Yu-Pang) Director of the Bank Union Recreation Enterprise Corporation Related party in substance Union Optronics Co., Ltd. (Union Optronics) Related party in substance Hi-Life International Co., Ltd. Related party in substance Securities Investment Trust Funds Issued by Union Securities Investment Trust Union Green Energy Private Equity Limited Union Private Equity Co., Ltd. and UFLIC are Partnership general partner and limited partner, respectively Others Directors, managers, and their relatives and affiliates

b. Significant transactions with related parties:
1) Loans

December 31, 2020

Accou Volume Type Nam Consumer loans 20 Self-used housing mortgage loans 56 Others 6 December 31, 2019 Accou Volume Type Nam Consumer loans 19 Self-used housing mortgage loans 49 Others 8 2020 2019	Highest Balance in the nt or Year Ended December 31, Ending e 2020 Balance $ 16,372 $ 9,649 171,171 88,730 12,384 11,396 Highest Balance in the nt or Year Ended December 31, Ending e 2019 Balance $ 15,965 $ 9,481 166,350 102,797 16,095 11,146 December 31		Loan Classification Differences in Terms of Transaction ormal Nonper- forming with Those for Unrelated Loans Loans Collaterals Parties 9,649 $ - Land, buildings and cars None 88,730 - Real estate None 11,396 - Land and buildings None Loan Classification Differences in Terms of Transaction ormal Nonper- forming with Those for Unrelated Loans Loans Collaterals Parties 9,481 $ - Land, buildings and cars None 102,797 - Real estate None 11,146 - Land and buildings None Interest Revenue
		N $
			Rate Amount % 1.15%-3.00% $ 2,164 0.02 1.56%-2.64% 2,551 0.02

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2) Deposits

2020 2019	December 31 Amount % $ 12,060,316 1.99 5,267,414 0.99	Interest Expense
		Rate (Note) Amount % 0%-4.80% $ 31,353 0.73 0%-4.80% 48,121 0.87

3) Guarantees and letters of credit

December 31, 2020

	Highest		Balance of
	Balance in the		Guarantees
	Year Ended		and Letters
	December 31,	Ending	of Credit
Name	2020	Balance	(Note)	Rate	Collateral
Union Recreation Enterprise Corporation	$ 19,316	$ 19,316	$ -	0.50%	Time deposits
The Liberty Times Co., Ltd.	2,517	-	-	-	Time deposits
Long Shan Lin Corporation	71,040	71,040	-	0.50%	Time deposits
Hi-Life International Co., Ltd.	20,300	20,300	-	0.40%	-
December 31, 2019
	Highest		Balance of
	Balance in the		Guarantees
	Year Ended		and Letters
	December 31,	Ending	of Credit
Name	2019	Balance	(Note)	Rate	Collateral
Union Recreation Enterprise Corporation	$ 19,316	$ 19,316	$ -	0.50%	Time deposits
The Liberty Times Co., Ltd.	2,630	-	-	-	Time deposits
Long Shan Lin Corporation	71,040	71,040	-	0.50%	Time deposits
Hi-Life International Co., Ltd.	114,324	18,500	-	0.40%	-

Note: Reserve for guarantee loss is provided on the basis of the estimated unrecoverable amount.

4) Leases

Under operating lease agreements with terms of one year to five years, the Company rents office spaces from related parties for use by the Company’s Head Office, Trust, International Banking Department, Wealth Management, Information Technology Department, Consumer Banking Department, Insurance Agency Department, Credit Card Department, Northern Collaterals Appraisal Center, five branches, USITC, UFLIC and UIT. Rentals are paid quarterly or are taken from lease deposits. Rental expenses and lease deposits were as follows:

2020 Yu-Pang Hung-Kuo 13.80Yong-Xuan UECC	Lease Deposit (Part of Other Assets) Amount % $ 461,141 20.52 219,465 9.76 16,494 0.73 4,651 0.21	Lease Liabilities
		Amount % $ 58,225 3.38 407,013 23.62 192,338 11.16 56,146 3.26 (Continued)

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2019 Yu-Pang Hung-Kuo 13.80Yong-Xuan UECC	Lease Deposit (Part of Other Assets) Amount % $ 459,983 18.05 219,465 8.61 15,685 0.62 4,651 0.18	Lease Liabilities
		Amount % $ 44,117 3.12 62,672 4.43 195,363 13.80 9,946 0.7 (Concluded)

The Bank rented space to install an ATM of Hi-life International Corporation, the rent expense was $65 in 2020 thousand and $1,372 thousand in 2019. Rental payable as December 31, 2020 and 2019 were $5 thousand and $14 thousand, respectively.

5) Financial assets at fair value through profit or loss

The Company wants to applied the fund more efficiency and participate in the investment of green energy development. Therefore, Union Private Equity Co., Ltd. has established Union Green Energy Private Equity Limited Partnership on December 2020, and invested $20 thousand as a general partner and the other general partner is UFLIC. The total investment is $556,336 thousand on December 31, 2020.

As of December 31, 2020 and 2019, the UFLIC had purchased 6,968 thousand units of beneficiary certificates issued by USITC, which amounted to $127,847 thousand and $123,481 thousand, respectively, and gain on disposal of investment were both $0.

6) LINE PAY provided the use of its consumer platform to the Bank. The maintenance fees of the platform was $25,252 thousand and $4,273 thousand, respectively in 2020 and 2019.
7) LINE PAY provided the credit card bonus points and cooperative marketing activities to the Bank. The advertising fee was $695,168 thousand and $136,198 thousand, respectively in 2020 and 2019.
8) Hi-Life provided the commodity bonus exchange and marketing activities to the Bank. The advertising fees were $867 thousand and $815 thousand in 2020 and 2019, respectively.

Under the Banking Law, except for consumer and government loans, credits extended by the Bank to any related party should be fully secured, and the credit terms for related parties should be similar to those for unrelated parties.

For transactions between the Bank and related parties, the terms are similar to those transacted with third parties, except for the preferential interest rates offered to Bank employees for savings and loans within prescribed amounts.

77 -

c. Compensation of directors, supervisors and management personnel:

Short-term employment benefits Salaries Transportation expenses Other Post-employment benefits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2020 $ 47,313 1,365 17 48,695 3,554 $ 52,249	2019 $ 47,925 1,240 11 49,176 8,653 $ 57,829

Compensation of directors and management personnel is determined by the remuneration committee on the basis of individual performance and market trends.

48. PLEDGED ASSETS

a. As of December 31, 2020, the Bank deposit of $1,000,000 in Central Bank Reserve Account, for undertaking the loan facility to help small and medium sized companies hit by the COVID-19 pandemic.
b. As of December 31, 2020 and 2019, government bonds and bank debentures, which amounted to $293,305 thousand and $318,605 thousand (all amounts included in other financial assets), respectively, had been provided to the courts and the Bank of Taiwan as guarantee deposits on provisional seizures against the debtors’ properties, as reserve for credit card receivables, as guarantee deposits on bills finance operations, brokering life insurance, property and casualty insurance, and as trust reserve.
c. As of December 31, 2020 and 2019, the Bank pledged a time deposit of both $1,100,000 thousand (part of other financial assets) to Mega International Commercial Bank and Mizuho Bank to be part of the latter’s online bank-to-bank payment system.
d. The following assets of the Company had been used as collaterals to apply for loans, issue commercial papers and apply for provisional seizure of certain assets:

Other financial assets Pledge assets Investment property		December 31	December 31
		2020 $ 77,781 $ 2,765,969	2019 $ 90,463 $ 2,757,876

e. As of December 31, 2020 and 2019, notes receivable (not expired) amounting to $504,173 thousand and $643,196 thousand had been used as collaterals to apply for loans and issue commercial papers, respectively.
78 -

49. CONTINGENCIES AND COMMITMENTS

a. As of December 31, 2020 and 2019, the Company’s commitments consisted of the following:

Irrevocable standby loan commitment Unused credit card commitment Unused letters of credit Other guarantees Collections for customers Travelers’ checks consigned-in Guarantee notes payable Trust assets Marketable securities under custody	December 31
	2020 2019 $ 124,910,213 $ 115,314,710 290,942,911 280,852,350 1,012,925 893,729 15,593,398 15,348,358 24,196,089 28,655,887 - 64,613 1,377,300 1,402,600 85,935,248 75,781,532 4,985,682 5,966,407

b. The duration of leasing cars (included in other assets) is about 1 to 3 years.

Minimum future annual rentals are as follows:

Within 1 year Over 1 year to 5 years		December 31	December 31
		2020 $ 1,884,198 1,954,589 $ 3,838,787	2019 $ 1,835,100 1,934,986 $ 3,770,086

c. Computer equipment purchase contracts

As of December 31, 2020 and 2019, the Company had contracts to buy computer equipment and software for $191,419 thousand and $195,651 thousand, respectively, of which $110,133 thousand and $89,557 thousand had been paid as of December 31, 2020 and 2019, respectively.

d. Union Securities Investment Trust

The private equity funds managed by USITC, a subsidiary of the Bank, were mainly invested in the Fairfield Sentry Funds (F Funds) of the Madoff Investment Securities’ (Madoff Company) Fairfield Company (Fairfield). On January 10, 2011, the liquidator of the F Funds sued USITC, the private equity funds managed by USITC and the beneficiaries who bought USITC’s private equity funds to demand the return of the redemption proceeds of US$17,206 thousand received by USITC’s private equity funds from the F Funds. This case remained pending before the Bankruptcy Court for the Southern District of New York.

Madoff Company’s liquidation trustee claimed that F Funds’ redemption proceeds from Madoff Company constituted unjust enrichment and thus sued USITC and F Funds on March 23, 2012 to demand the return of the redemption proceeds of US$17,206 thousand received by USITC’s private equity funds from F Funds. This case remained pending before the Bankruptcy Court for the Southern District of New York.

79 -

The plaintiff has asked the US court to deliver the complaint to the Taiwan Taipei District Court through mutual legal assistance. In accordance with the provisions of Article 402, paragraph 1, paragraph 2 of the Code of Civil Procedure and the relevant practical opinions of the court, the legal documents have been legally delivered to USITC. In order to avoid the unfavorable judgment of the court, USITC appointed American lawyers to deal with the litigation. The plaintiff has asked the US court to deliver the complaint to the Taiwan Taipei District Court through mutual legal assistance. In accordance with the provisions of Article 402, paragraph 1, paragraph 2 of the Code of Civil Procedure and the relevant practical opinions of the court, the legal documents have been legally delivered to USITC. In order to avoid the unfavorable judgment of the court, USITC appointed American lawyers to deal with the litigation. The defendant in the same situation (that is, the non-US foreign investor who was allocated from the Fairfield series of funds) disputed the application of the US bankruptcy law and the jurisdiction of the US court. The US Court recognized the law does not apply to such defendants, therefore, rejected the plaintiff’s request for the reason of international comity. The plaintiff has appealed to the Federal Second Circuit Court of Appeal. On August 2019, the plaintiff has appealed to the Supreme court of US. The Supreme court of US rejected the appeal and considered as protest; therefore, the case is back to Bankruptcy Court to hear the case

The private equity funds managed by USITC and mainly invested in the F Funds of Fairfield had become a loss for USITC. Thus, on June 26, 2013, USITC joined Fairfield Greenwich, Citco and PwC in a class action litigation on this investment loss. Regarding the class action suit against Fairfield Greenwich, United States District Court of the Southern District of New York approved the settlement of the two parties on December 19, 2014. The settlement fee was distributed among the settling parties in February 2015. Regarding the class action suit against Citco, the two parties had already come to a settlement on August 12, 2015; the court also approved the settlement of Citco on November 20, 2015. The settlement fee is going to be distributed among the settling parties. Regarding the class action suit against PwC, the court gave a preliminary verdict of settlement to the two parties and opened a court session on May 6, 2016, for a hearing on the fairness of the settlement and the granting of permission; there has been no further appeals since then. The settlement fee would be distributed to the settling parties after deducting the approved amount of counselor fees and disbursement fees. The private equity funds managed by USITC received the check of settlement fee from Rust Consulting Inc. on January 3, 2017 and redeemed for cash on February 6, 2017.

50. OTHER

Since January 2020, the COVID-19 pandemic has influenced the global economy; it is causing uncertainty in the economic growth. The Company increased the level of risk advisory, pressure test, loan management and continuously tracking different financial risks data. After critical analysis, the Company concluded that the effect of the COVID-19 pandemic will not influence the Company’s ability to continue operating or cause significant asset impairment loss.

80 -

51. TRUST BUSINESS UNDER THE TRUST LAW

Balance Sheet of Trust Accounts December 31, 2020

Trust Assets Bank deposits Investments Mutual funds Debt Common stock Accounts receivable Stock in custody Real estate - land and building Total	Amount Trust Liabilities and Capital $ 8,157,969 Management fee payable Income tax payable 47,850,626 Marketable securities payable 3,971 Trust capital 330,003 Reserve and deficit 9,687 16,366,695 13,216,297 $ 85,935,248 Total	Amount $ 13 706 16,366,695 69,507,816 60,018 $ 85,935,248

Note: The foreign currency amount of mutual funds was included in OBU on December 31, 2020.

Balance Sheet of Trust Accounts December 31, 2019

Trust Assets Bank deposits Investments Mutual funds Common stock Accounts receivable Stock in custody Real estate - land and building Total	Amount Trust Liabilities and Capital $ 6,167,712 Management fee payable Income tax payable 44,205,497 Marketable securities payable 685,405 Trust capital 9,605 Reserve and deficit 12,005,099 12,708,214 $ 75,781,532 Total	Amount $ 7 697 12,005,099 63,716,585 59,144 $ 75,781,532

Note: The foreign currency amount of mutual funds was included in OBU on December 31, 2019.

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Income Statement of Trust Accounts Year Ended December 31, 2020

Trust income
Interest revenue - demand accounts

Interest revenue - time deposits
Interest revenue - debt
Cash dividends - common stock
Income from beneficiary certificates
Realized capital gain - fund
Unrealized capital gain - fund
Unrealized capital gain - common stock at stock exchange market

Total trust income

Trust expense
Management expense
Taxation
Agency fees
Unrealized capital loss - common stock at stock exchange market
Unrealized capital loss - debt
Realized capital loss - fund
Unrealized capital loss - fund
Others

Total trust expense

Gain before tax
Income tax expense

Net gain

Amount
$ 628
21,286
100
9,077
269
287
311

45,250

77,208
15,827
5,487
3,152
238
45
1,186
423

1,687

28,045
49,163

(1,593)
$ 47,570

Note: The above trust income statements were not included in the Bank’s income statements.

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Income Statement of Trust Accounts Year Ended December 31, 2019

Trust income
Interest revenue - demand accounts

Interest revenue - time deposits
Cash dividends - common stock
Income from beneficiary certificates
Realized capital gain - fund
Unrealized capital gain - fund
Unrealized capital gain - common stock at stock exchange market

Total trust income

Trust expense
Management expense
Taxation
Agency fees
Unrealized capital loss - common stock at stock exchange market
Realized capital loss - fund
Unrealized capital loss - fund
Others

Total trust expense

Loss before tax
Income tax expense

Net loss

Amount
$ 931
18,509
7,924
261
1,011
226

49,185

78,047
10,965
7,806
3,741
281
223
548

256

23,820
54,227

(1,306)
$ 52,921

Note: The above trust income statements were not included in the Bank’s income statements.

Trust Property and Equipment Accounts December 31, 2020

Investment Portfolio Bank deposits Investments Mutual funds Debt Common stock Accounts receivable Stock in custody Real estate - land and buildings	Amount $ 8,157,969 47,850,626 3,971 330,003 9,687 16,366,695 13,216,297 $ 85,935,248

Note: The foreign currency amount of mutual funds was included in OBU on December 31, 2020.

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Trust Property and Equipment Accounts December 31, 2019

Investment Portfolio Bank deposits Investments Mutual funds Common stock Accounts receivable Stock in custody Real estate - land and buildings	Amount $ 6,167,712 44,205,497 685,405 9,605 12,005,099 12,708,214 $ 75,781,532

Note: The foreign currency amount of mutual funds was included in OBU on December 31, 2019.

52. FINANCIAL INSTRUMENTS

a. Information on fair value hierarchy

The definitions of each level of the fair value hierarchy are shown below:

1) Level 1

Level 1 financial instruments are traded in an active market in which there are quoted prices for identical assets and liabilities. An active market has the following characteristics:

a) All financial instruments in the market are homogeneous.
b) There are willing buyers and sellers in the market all the time.
c) The public can access the price information easily.

The products in this level, such as listed stocks and beneficiary securities, usually have high liquidity or are traded in futures market or exchanges.

2) Level 2

The products in this level have fair values that can be inferred from either directly or indirectly observable inputs other than quoted prices in an active market. Examples of these inputs are:

a) Quoted prices from the similar products in an active market. This means the fair value can be derived from the current trading prices of similar products, and whether they are similar products should be judged on the characteristics and trading rules. The fair price valuation in this circumstance may be adjusted due to time differences, trading rule’s differences, interested parties’ prices, and the correlation of price between itself and the similar goods;
b) Quoted prices for identical or similar financial instruments in inactive markets;
c) For the marking-to-model method, the inputs to this model should be observable (such as interest rates, yield curves and volatilities). The observable inputs mean that they can be obtained from the market and can reflect the expectation of market participants;
d) Inputs that are derived from observable market data through correlation or other means.
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The fair values of products categorized in this level are usually calculated using a valuation model generally accepted by the market. Examples are forward contracts, cross-currency swap, simple interest bearing bonds, convertible bonds and commercial paper.

3) Level 3

The fair values of the products in this level are typically based on management assumptions or expectations other than the direct market data. For example, historical volatility used in valuing options is an unobservable input because it cannot represent the entire market participants’ expectation on future volatility.

The products in this level are complex derivate financial instruments or products with prices that are provided by brokers. Examples are complex foreign exchange options.

b. The fair value hierarchies of the Company’s financial instruments as of December 31, 2020 and 2019 were as follows:

(In Thousands of New Taiwan Dollars)

Measured at fair value on a recurring basis
Nonderivative financial instruments
Assets
Financial assets at fair value through profit
or loss (FVTPL)
Financial assets mandatorily classified
as at FVTPL
Stock

Debt instruments
Beneficiary certificates
Commercial paper

Asset-based securities
Negotiable certificates of deposit
Futures exchange margins
Financial assets at fair value through other
comprehensive income
Stock

Debt instruments

Derivative financial instruments
Assets
Financial assets at FVTPL
Liabilities
Financial liabilities at FVTPL

December 31, 2020

Total
Level 1
Level 2
Level 3
$ 178,152
$ 133,711
$ -
$ 44,441
298,124
-
298,124
-
1,300,172
743,818
-
556,354
31,361,157
-
31,361,157
-
57,897
-
57,897
-
999,450
-
999,450
-
56,665
56,665
-
-
12,150,928
10,237,041
-
1,913,887
41,252,805
-
41,252,805
-
630,231
-
574,513
55,718
206,002
-
150,308
55,694

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Measured at fair value on a recurring basis
Nonderivative financial instruments
Assets
Financial assets at fair value through profit
or loss (FVTPL)
Financial assets mandatorily classified
as at FVTPL
Stock

Debt instruments
Beneficiary certificates
Commercial paper

Asset-based securities
Futures exchange margins
Financial assets at fair value through other
comprehensive income
Stock
Debt instruments

Derivative financial instruments
Assets
Financial assets at FVTPL
Liabilities
Financial liabilities at FVTPL

December 31, 2019

Total
Level 1
Level 2
Level 3
$ 66,800
$ 66,800
$ -
$ -
27,712
-
27,712
-
755,530
755,530
-
-
29,670,103
-
29,670,103
-
67,361
-
67,361
-
61,302
61,302
-
-
7,999,008
6,841,913
-
1,157,095
33,237,957
-
33,237,957
-
268,446
-
241,461
26,985
650,981
-
624,005
26,976

c. The financial instruments measured at fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants with full understanding of the sale or transfer transaction. The fair values of financial instruments at fair value, financial assets at fair value through other comprehensive income, available-for-sale financial assets and hedging derivative financial instruments with quoted price in an active market are based on their market prices; financial instruments with no quoted prices in an active market are estimated by valuation methods.

1) Marking to market

This method should be used first to determine fair value. Following are the principles to follow in marking to market:

a) Ensure the consistency and integrity of market data.
b) The source of market data should be transparent and easy to access and can be referred to by independent resources.
c) Listed securities with tradable prices should be valued at closing prices.
d) Evaluating unlisted securities that lack tradable closing prices should use quoted prices from independent brokers.
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2) Marking to model

The use of marking to model is suggested if marking to market is infeasible. This valuation methodology is based upon model inputs that are used to derive the value of the trading positions. The Company uses the same estimations and assumptions as those used by market participants to determine the fair value.

The Company uses the forward rates provided by Reuters to estimate the fair values of forward contracts, foreign exchange swap contracts, interest rate swap and cross-currency swap contracts and the discounted cash flow method to calculate the fair values of each contract. For foreign exchange option transactions, the Company uses the option pricing models which are generally used by other market participants (e.g., the Black-Scholes model) to calculate the fair value of the contracts.

For debt instruments with no active market, the Company estimates fair values based on prices quoted by counterparties and adjusted in accordance with the results of the evaluation of a debtor’s credit.

3) Fair value adjustment

Credit risk assessment adjustment refers to the fair value of the over the counter (OTC) derivative financial commodity contracts, which also reflects the credit risk of both parties. It can be mainly divided into “credit evaluation adjustment” and “debit evaluation adjustment”:

a) Credit value adjustments (CVA): A transaction in a non-concentrated trading market, that is, the adjustment of the derivatives contract evaluation in the OTC transaction, which reflects the possibility of the Company may not be able to collect the full market value or the counterparty may default on the repayment on the fair value.
b) Debit value adjustments (DVA): It refers to the transactions of the non-concentrated trading market, that is, the adjustment of the derivatives contract evaluation in the OTC transaction, which reflects the possibility that the Company may not be able to collect the full market value or the counterparty may default on the repayment of the fair value.

Both CVA and DVA are concepts of estimated loss, calculated as the probability of default (PD) multiplied by the default loss rate (LGD) and multiplied by the exposure at default (EAD).

For customers with external credit ratings, the default probability is based on the default probability corresponding to the external rating; for customers without external credit ratings, the impairment rate calculated according to the Company’s loan and receivable impairment assessment and the average incidence of impairment is taken as the default probability.

The Company uses the fair value of OTC derivatives to calculate the amount of default risk (EAD).

The Company uses 60% as the default loss rate based on the recommendation of “IFRS 13 CVA and DVA Related Disclosure Guidelines” of the Stock Exchange.

The Company incorporates the credit risk assessment adjustment into the fair value calculation of financial instruments to reflect the counterparty’s credit risk and the Company’s credit quality.

4) Transfers between Level 1 and Level 2

There was no material transfer between Level 1 and Level 2 for 2020 and 2019.

87 -
5) Reconciliation of Level 3 items of financial instruments
a) Reconciliation of Level 3 items of financial assets

For the year ended December 31, 2020

						(In	Thousands of New	Taiwan Dollars)
Items	Beginning Balance	Valuation G	ains(Losses)	Amount o	f Increase	Amount o	f Decrease	Ending Balance
		In Net Income	In Other Comprehensive Income	Purchase or Change in Fair Value	Transfer to Level 3	Sale or Change in Fair Value	Transfer from Level 3
Financial assets at fair value through profit or loss Derivative financial assets Financial assets at fair value through other comprehensive income Equityinstruments	$ 26,985 1,157,095	$ 10,676 -	$ - (113,900)	$ 53,028 914,867	$ - -	$ (34,971 ) (44,175)	$ - -	$ 55,718 1,913,887

For the year ended December 31, 2019

(In Thousands of New Taiwan Dollars)

Items	Beginning Balance	Valuation G	ains (Losses)	Amount o	f Increase	Amount o	f Decrease	Ending Balance
		In Net Income	In Other Comprehensive Income	Purchase or Change in Fair Value	Transfer to Level 3	Sale or Change in Fair Value	Transfer from Level 3
Financial assets at fair value through profit or loss Derivative financial assets Financial assets at fair value through other comprehensive income Equityinstruments	$ 36,521 1,134,574	$ (13,802 ) -	$ - 24,899	$ 27,875 -	$ - -	$ (23,609 ) (2,378)	$ - -	$ 26,985 1,157,095

b) Reconciliation of Level 3 items of financial liabilities

For the year ended December 31, 2020

						(In	Thousands of New	Taiwan Dollars)
Items	Beginning Balance	Valuation G	ains (Losses)	Amount o	f Increase	Amount o	f Decrease	Ending Balance
		In Net Income	In Other Comprehensive Income	Purchase or Change in Fair Value	Transfer to Level 3	Sale or Change in Fair Value	Transfer from Level 3
Financial liabilities at fair value through profit or loss Derivative financial liabilities	$26,976	$22,568	$ -	$36,334	$ -	$ (30,184)	$ -	$55,694

For the year ended December 31, 2019

(In Thousands of New Taiwan Dollars)

Items	Beginning Balance	Valuation G	ains(Losses)	Amount o	f Increase	Amount o	f Decrease	Ending Balance
		In Net Income	In Other Comprehensive Income	Purchase or Change in Fair Value	Transfer to Level 3	Sale or Change in Fair Value	Transfer from Level 3
Financial liabilities at fair value through profit or loss Derivative financial liabilities	$36,522	$ (14,128)	$ -	$31,111	$ -	$ (26,529)	$ -	$26,976

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6) Quantitative information of significant unobservable inputs - Level 3 fair value measurement

Item	Product	2020/12/31 Fair Value	Valuation Technique	Significant Unobservable Inputs	Interval (Weighted- average)	Relation Between Input and FairValue
Derivative financial instruments Financial assets at fair value through profit or loss Non-derivative financial instruments Financial assets at fair value through other comprehensive income Derivative financial instruments Financial liabilities at fair value through profit or loss	Foreign exchange options Equity instruments Stock Stock Foreign exchange options	$ 55,718 556,354 1,509,518 404,369 55,694	Option pricing model Assets value model Assets value model Income value model Option pricing model	Ratio Allowance of minority interest Allowance of minority interest Allowance of minority interest Ratio	AUD/JPY 9.51%-10.18% AUD/USD 9.72% EUR/USD 6.87%-8.15% NZD/USD 10.16%-10.68% USD/CNH 6.10% USD/TWD 4.30%-5.95% USD/ZAR 15.80%-16.22% 5%-20% 5%-20% 10%-20% AUD/JPY 9.51%-10.18% AUD/USD 6.69% EUR/USD 6.87%-8.15% NZD/USD 10.16%-10.68% USD/CNH 6.10% USD/TWD 4.3%-5.95% USD/ZAR 15.80%-16.22%	The higher the ratio is, the higher the fair value The higher the equity dispersion is, the lower the fair value The higher the equity dispersion is, the lower the fair value The higher the equity dispersion is, the lower the fair value The higher the ratio is, the higher the fair value

89 -

Item	Product	2019/12/31 Fair Value	Valuation Technique	Significant Unobservable Inputs	Interval (Weighted- average)	Relation Between Input and FairValue
Derivative financial instruments Financial assets at fair value through profit or loss Non-derivative financial instruments Financial assets at fair value through other comprehensive income Derivative financial instruments Financial liabilities at fair value through profit or loss	Foreign exchange options Equity instruments Foreign exchange options	$ 26,985 1,157,095 26,976	Option pricing model Assets value model Option pricing model	Ratio Allowance of minority interest Ratio	AUD/JPY 8.73%-8.74% AUD/USD 6.69% EUR/USD 5.26% USD/JPY 4.87%-5.77% USD/TWD 3.45%-4.65% USD/ZAR 11.26-%-14.35% 10%-20% AUD/JPY 8.73%-8.74% AUD/USD 6.69% EUR/USD 5.26% USD/JPY 4.87%-5.77% USD/TWD 3.45%-4.65% USD/ZAR 11.26-%-14.35%	The higher the ratio is, the higher the fair value The higher the equity dispersion is, the lower the fair value The higher the ratio is, the higher the fair value

7) The assessment process of Level 3 fair value measurement

To ensure that the product assessment results can be close to the market, the risk management department of the Bank is responsible for the verification of the independent fair value. For products assessed by the model, before daily assessment, the information required for the assessment will be verified as correct and consistent with each other and the department will calibrate the model to the market quotation and update the input value required for the assessment model. In addition to regular checking of the accuracy of the assessment model, the reasonableness of the prices provided by third parties will also be checked.

8) Sensitivity analysis of Level 3 fair value if reasonably possible alternative assumptions were used

The Company’s Level 3 financial instruments are foreign exchange options. When engaging in foreign exchange option transactions, the Company makes a match for other banks and customers. Thus, the Company does not hold positions, and its source of profit and loss is from receiving and paying premiums. The sensitivity analysis has no effect on profit and loss since the Company does back-to-back transactions and the assets offset the liabilities.

90 -

The fair value measurement of financial instrument is reasonable although the use of different valuation models or parameters may lead to different results. For financial instruments classified in Level 3, if the parameter changes by 10%, the effects on profit or loss or other comprehensive income for the current periods are as follows:

December 31, 2020

Financial assets at fair value through other comprehensive income Investments in equity instruments December 31, 2019 Financial assets at fair value through other comprehensive income Investments in equity instruments	Changes in Fair Value Are Reflected in Other Comprehensive Income for the Current Period
	Favorable Changes Unfavorable Changes $ 191,389 $ (191,389) Changes in Fair Value Are Reflected in Other Comprehensive Income for the Current Period
	Favorable Changes Unfavorable Changes $ 115,710 $ (115,710)

d. Fair value of financial instruments that are not measured at fair value
1) Information of fair value

Except for the financial instruments shown in the following table, the management believes that the financial assets and financial liabilities recognized in the financial statements either have carrying amounts that approximate their fair values or have fair values that cannot be reasonably measured.

Financial assets Financial assets measured at amortized cost Financial liabilities Bank debentures	December 31	December 31
	2020 Carrying Amount Estimated Fair Value $ 90,697,662 $ 93,603,257 7,200,000 7,280,129	2019
		Carrying Amount Estimated Fair Value $ 104,170,149 $ 106,472,282 10,200,000 10,218,066

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2) Fair value hierarchy

Items		December 31, 2020	December 31, 2020
	Total	Level 1	Level 2	Level 3
Financial assets Financial assets measured at amortized cost Financial liabilities Bank debentures	$ 93,603,257 7,280,129	$ - -	$ 93,603,257 7,280,129	$ - -

Items		December 31, 2019	December 31, 2019
	Total	Level 1	Level 2	Level 3
Financial assets Financial assets measured at amortized cost Financial liabilities Bank debentures	$ 106,472,282 10,218,066	$ - -	$ 106,472,282 10,218,066	$ - -

53. FINANCIAL RISK MANAGEMENT

a. Overview

To deal with any expected or unexpected business risk, the Company has established a comprehensive risk management system to allocate resources effectively and efficiently, strengthen business competitiveness, mitigate operational risk to a tolerable or acceptable level, and maintain the capital adequacy ratio to meet the minimum requirements of the authorities and the Basel Accord framework.

b. Risk management framework

The board of directors, which occupies the highest level in the Company’s risk management framework, reviews risk management policies, the overall risk management framework and organization structure for carrying out responsibilities and exercising accountability. The Asset/Liability Management Committee inspects management reports or information provided by business units and the Risk Management Division. The Risk Management Division is an independent unit that is in charge of reviewing the risk management system designed by business units and the compliance with risk management requirements; this division also submits risk management reports to the authorities and develops a series of risk management tools to assess the risks identified. Business units establish risk control procedures, manage and monitor the implementation of those controls in operation units. Operation units perform daily risk management work and internal controls to ensure the accuracy and completeness of the risk management information generated.

92 -

c. Credit risk

1) Credit risk definitions and sources

Credit risk refers to the risk of losses caused by borrowers, debtors, or counterparties’ failure to fulfill their contractual obligations due to deteriorating financial position or other factors. It arises principally from transactions involving discounts, loans, credit cards, due from or call loans to banks, debt investments and derivatives etc., and also from off-balance sheet products such as guarantees, acceptance, letters of credit and commitments.

2) Strategy/objectives/policies and processes

a) Credit risk management strategy: The Company has established the “Credit Risk Management Standards of Union Bank of Taiwan” as the basis of planning, implementing, and managing credit risk management system.
b) Credit risk management objective: The objectives are to establish and implement an effective credit risk management mechanism to mitigate credit risk, archive operational and management goals, and balance business development and risk control.
c) Credit risk management policy: The policies are meant to ensure that credit risk falls within an acceptable range and that adequate capital is maintained to meet credit risk management objectives and create maximum risk-adjusted returns.
d) Credit risk management process: The Company carries out credit risk identification, credit risk measurement, credit risk mitigation, credit risk monitoring and control and credit risk reporting process as part of its credit risk management mechanism.

3) Credit risk management framework

a) The board of directors: The board of directors, the top risk supervisor of the Company, reviews risk management policies, operational risk limits and the design and change of credit risk management framework.
b) Asset/Liability Management Committee: This committee inspects management reports or information provided by business units and the Risk Management Division.
c) Risk Management Division: The Risk Management Division is an independent unit that is in charge of the work related to three pillars of Basel and reviews the risk management system designed by business units and the compliance with risk management requirements; the division also submits risk management reports to the authorities and develops risk management tools to assess the risk identified.
d) Business units: Business units are responsible for establishing risk management regulations and risk control procedures and managing and monitoring the implementation of those controls in operation units.
e) Operation units: Under the risk management regulations and procedures set by business units, operation units perform daily risk management work and internal controls and prepares reports on these tasks.
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4) Credit risk measurement, control and reporting
a) The range of credit risk reporting:
- i. Each business unit will regularly report the promotion of the business and the allocation of risk assets to the Assets/Liability Management Committee (ALMC).
- ii. The Company’s risk management department regularly monitors the credit limit control situations and reports to the ALMC the credit concentration and the status of each business’ achieving BIS (Bank for International Settlements) goals. The department also presents the volume of business NPL situation, credit concentration and the execution of credit risk control to the board of directors.

b) Measurement system:

The Company’s credit risk management adopts the use of the standardized approach to calculate capital charge and regularly submits related reports to the government. The risk management division and business units implement the Company’s management system and monitors the credit exposure of the business, industry, and countries as well as the concentration of credit and collateral to effectively measure and manage investment portfolio.

5) Mitigation of risks or hedging of credit risk

The Company is exposed to loss on each credit risk faced by its business. Thus, depending on the nature of the business and the cost considerations, the Company will take appropriate remeasures to control risk. The Company’s information systems provide information that can be used in managing risk control procedures, and the risk management division reports to the board every six months the business risk management status.

6) Maximum exposure to credit risk

The maximum credit exposures of assets in the consolidated balance sheets are almost equivalent to their carrying values. These off-balance sheet maximum credit exposures (excluding collaterals and other credit enhancement instruments) are shown as follows:

Off-Balance Sheet Items	The Maximum Credit Exposure	The Maximum Credit Exposure
	December 31, 2020	December 31, 2019
Irrevocable standbyloan commitment	$ 9,449,892	$ 9,548,993
Unused letters of credit	1,012,925	893,729
Otherguarantees	15,593,398	15,348,358
Unused credit card commitments	290,942,911	280,852,350
December 31, 2020 Collateral Netting Arrangements In-balance sheet items Discount and loans $ 356,521,477 $ - December 31, 2019 Collateral Netting Arrangements In-balance sheet items Discount and loans $ 317,772,279 $ -	Other Credit Enhancement $ - Other Credit Enhancement $ -	Total $ 356,521,477 Total $ 317,772,279

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7) Concentrations of credit risk exposure

Concentrations of credit risk arise when a number of counterparties or exposure have comparable economic characteristics, or such counterparties are engaged in similar activities, or operate in the same geographical areas or industry sectors, so that their collective ability to meet contractual obligations is uniformly affected by changes in economic or other conditions.

There can be credit risk concentrations in a bank’s assets, liabilities, or off-balance sheet items through the execution or processing of transactions (either product or service), or through a combination of exposures across these broad categories. These exposures can cover credits, loans and deposits, call loans to banks, investments, receivables and derivatives. To minimize its credit risk, the Company maintains a diversified portfolio; limits its exposure to any one geographic region, country or individual creditor; and closely monitors its exposures. The Company’s most significant concentrations of credit risk are summarized as follows:

a) By industry

	December 31, 2020	December 31, 2020	December 31, 2019	December 31, 2019
	Amount	%	Amount	%
Private enterprises	$117,401,556	26.37	$106,475,131	26.30
Public enterprises	107,900	0.02
Government organizations	36,370,927	8.17	34,150,025	8.43
Nonprofit organizations	584,112	0.13	797,036	0.20
Private organizations	287,106,008	64.93	262,021,341	64.72
Financial Institutions	627	-	787	-
Foreign enterprises	1,693,804	0.38	1,408,776	0.35
Total	$443,264,934	100.00	$404,853,096	100.00

b) By geographical area

The Company’s operations are mainly in Taiwan.

c) By collaterals

	December 31, 2020	December 31, 2020	December 31, 2019	December 31, 2019
	Amount	%	Amount	%
Unsecured	$79,092,381	17.82	$78,566,192	19.40
Secured
Financial instruments	10,345,503	2.33	11,439,874	2.83
Stocks	12,565,587	2.83	11,341,285	2.80
Properties	307,553,396	69.30	276,838,598	68.38
Movables	20,259,264	4.56	18,660,538	4.61
Guarantees	12,682,520	2.86	7,520,867	1.86
Others	1,306,676	0.30	485,742	0.12
Total	$443,805,327	100.00	$404,853,096	100.00

95 -
8) Analysis of impairment for financial assets

On the basis of the result of a credit evaluation, the Company may require collaterals before the credit facilities are granted. To minimize credit risk, appropriate collaterals are required on the basis of the borrowers’ financials and debt service capabilities. All guarantees and appraisal procedures follow the authorities’ relevant regulations and the Company’s internal rules. The Company’s internal rules describe the acceptable types of collaterals, appraisal methods, appraisal process, and post-approval collateral management, which require close monitoring of the value of collaterals to ensure repayment. The main collateral types are summarized as follows:

a) Real estate
b) Other property
c) Securities/stock
d) Deposits/certificates of deposits
e) Credit guarantee fund or government guarantee

The Company observes the value of collateral for financial instruments and takes into consideration the impairment loss that should be recognized for financial assets that are credit-impaired. The values of the credit-impaired financial assets and the values of collateral to mitigate potential losses are as follows:

December 31, 2020

Credit-impaired Financial Assets Receivables Credit cards Other Discounts and loans December 31, 2019 Credit-impaired Financial Assets Receivables Credit cards Other Discounts and loans	Carrying Amount $ 1,016,564 31,495 1,538,618 $ 2,586,677 Carrying Amount $ 1,080,427 29,786 1,529,359 $ 2,639,572	Allowance for Impairment Loss $ 56,259 23,854 433,757 $ 513,870 Allowance for Impairment Loss $ 66,157 27,030 372,647 $ 465,834	Exposure Amount (Amortized Cost) Fair Value of Collateral $ 960,305 $ - 7,641 11,671 1,104,861 3,555,487 $ 2,072,807 $ 3,567,158 Exposure Amount (Amortized Cost) Fair Value of Collateral $ 1,014,270 $ - 2,756 17,534 1,156,712 3,510,967 $ 2,173,738 $ 3,528,501

96 -
9) Judgment that credit risk has increased significantly since the initial recognition

On each reporting date, the Bank assesses the change in the default risk of financial assets, as well as considers reasonable and corroborative information that shows the credit risk has increased significantly since initial recognition, to determine whether the credit risk has increased significantly. The main considerations include:

Quantitative indicators

a) The borrower pays the amount for contracts overdue for at least one month (more than or equal to 30 days for the credit card business), or the amounts for other contracts that are overdue for at least one month (more than or equal to 30 days for the credit card business).
b) Debt instruments whose prices on the reporting date have fallen more than 40% from the original price since the acquisition date.
c) Debt instruments that have non-investment grades based on the debt (priority), issuer, and guarantor’s credit rating and that have fallen by more than two grades and whose prices have fallen by more than 15% on the reporting date.

Qualitative indicators

a) The borrower’s check bounced due to insufficient funds in the Bank’s checking account, or announced as a rejected account.
b) The borrower’s collateral was seized.
c) The borrower’s debt has been recognized as a non-accrual loan or transferred to bad debt by other financial institutions.
d) The borrower has been reorganized.
e) An auditors’ report on the borrower has been released where it was stated that a material uncertainty exists that may cast significant doubt on the borrower’s ability to continue as a going concern.
f) The borrower has other bad debts that indicate that the borrower’s ability to perform its debt obligations is weak or has signs of impairment, which has been assessed to affect its operations or repayment ability.
10) Definition of default and credit impaired financial assets

The Company uses the same definitions for default and credit impairment of financial assets. If one or more of the conditions below are met, the Company determines that the financial assets have defaulted and are credit impaired. The main considerations include:

a) The borrower pays the amount for contracts overdue for at least 3 months (90 days and above for the credit card business).
b) The debtor has significant financial difficulties (e.g., the debtor has ceased operations, is bankrupt, or has liquidated).
c) Economic or legal considerations, concessions to borrowers with financial difficulties (such as debt negotiations).
97 -

If the financial assets no longer meet the definition of default and credit impairment, they are judged as regaining their status of meeting performance obligations and are no longer regarded as financial assets that have defaulted and are credit impaired.

11) Reversal policy

When the Company is not reasonably expected to recover all or part of the financial assets, the indicators that all or part of the financial assets that cannot be reasonably expected to be recovered include the following:

a) Recourse activities have stopped.
b) The borrower is assessed to have insufficient assets or sources of income to pay the outstanding amount.

The financial assets that have been written off by the Company may still have ongoing recourse activities in accordance with the relevant policies.

12) Contractual cash flow modification of financial assets

The Company may modify the contractual cash flow of financial assets due to the borrower’s financial difficulties, increase in the recovery rate of the doubtful borrowers, or to maintain customer relationships. The modification of the contractual terms of the financial assets may include extending the contract period, modifying the interest payment time, and modifying the agreed interest rate or the exemption of some of the outstanding debts. The modification of contractual cash flows of financial assets may result in the delisting of existing financial assets in accordance with the Company’s financial assets delisting policy and recognition of new financial assets at fair value.

If the contractual cash flow modification of a financial asset does not result in a derecognition, the Company assesses whether the credit risk of the financial asset has increased significantly by comparing the following:

a) Risk of default on the reporting date (based on modified contract terms).
b) The risk of default at the time of original recognition (based on the original unmodified contract terms).

The Company considers the borrower’s subsequent payment in accordance with the revised terms and several relevant behavioral indicators to assess the probability of default of the revised financial assets and confirm whether the contract modification improves or restores the ability of the Company to recover the relevant contract payments. If the borrower pays the contract amount according to the revised terms and shows good payment behavior, it can be determined that the credit risk is reduced and the loss allowance will be measured by the 12-month expected credit loss.

The Company regularly reviews the changes in credit risk of the revised financial assets in accordance with relevant policies, and evaluates whether there is a significant increase in credit risk following the revised financial assets based on a specific model.

98 -

13) Measurement of expected credit losses

For the purpose of assessing expected credit losses, credit assets are classified into the following groups based on the credit risk characteristics of the borrower’s industry, credit risk rating, collateral type and remaining maturity period:

Business	Group	Definition
Corporate banking	Corporate banking	Corporate bankingbusiness
Consumer banking	Mortgages	Mortgage business
	Financial loans	Financial loan business
	Credit card	Credit card business
	Others	Other business

The Company adopts the 12-month ECL model to evaluate the loss allowance of financial instruments whose credit risk have not increased significantly since initial recognition, and adopt the lifetime ECL model to evaluate the loss allowance of financial instruments whose credit risk has increased significantly since initial recognition or of that are credit-impaired.

The Company considers both the 12-month and lifetime probability of default (“PD”) of the borrower with the loss given default (“LGD”), multiplied by the exposure at default (“EAD”), as well as the impact of time value, to calculate the 12-month ECLs and lifetime ECLs, respectively.

“PD” refers to the borrower’s probability to default and “LGD” refers to losses caused by the default. The Company calculates the “PD” and “LGD” used in the impairment assessment of the credit business according to each group’s historical information (such as credit loss experience) from internal statistical data, and after adjustment of the historical data based on current observable and forward-looking macroeconomic information.

Gross carrying amount Less: Allowance for impairment loss Less: Additional impairment loss required under regulations		Account Receivable
		December 31, 2020
	Stage 1 12-month ECL $ 23,952,958 56,939 - $ 23,896,019	Stage 3 Additional Stage 2 Lifetime ECL Lifetime ECL (Credit-impaired Financial Assets) Impairment Loss Required under Regulations $ 109,148 $ 1,093,153 $ - 16,678 88,442 - - - 56,624 $ 92,470 $ 1,004,711 $ 56,624	Total $ 25,155,259 162,059 56,624 $ 24,936,576

Gross carrying amount Less: Allowance for impairment loss Less: Additional impairment loss required under regulations		Account Receivable
		December 31, 2019
	Stage 1 12-month ECL $ 20,158,322 50,434 - $ 20,107,798	Stage 3 Additional Stage 2 Lifetime ECL Lifetime ECL (Credit-impaired Financial Assets) Impairment Loss Required under Regulations $ 115,600 $ 1,110,213 $ - 18,678 93,187 - - - 44,639 $ 96,922 $ 1,017,026 $ 44,639	Total $ 21,384,045 162,299 44,639 $ 21,177,107

99 -

	Discounts and Loans
	December 31, 2020
Stage 1 12-month ECL $ 424,210,714 245,586 - $ 423,965,128	Stage 3 Additional Stage 2 Lifetime ECL Lifetime ECL (Credit-impaired Financial Assets) Impairment Loss Required under Regulations $ 1,874,264 $ 1,538,618 $ - 106,506 433,757 - - - 3,992,384 $ 1,767,758 $ 1,104,861 $ 3,992,384 Discounts and Loans	Total $ 427,623,596 785,849 3,992,384 $ 422,845,363
	December 31, 2019
Stage 1 12-month ECL $ 385,403,689 240,125 - $ 385,163,564	Stage 3 Additional Stage 2 Lifetime ECL Lifetime ECL (Credit-impaired Financial Assets) Impairment Loss Required under Regulations $ 2,015,580 $ 1,529,359 $ - 175,604 372,647 - - - 3,510,579 $ 1,839,976 $ 1,156,712 $ 3,510,579	Total $ 388,948,628 788,376 3,510,579 $ 384,649,673

When the Company estimates the 12-month and lifetime expected credit losses for its loan commitments, it will give different credit conversion factors according to the characteristics of each product. The Company will also take into consideration the amount that is expected to be utilized within 12 months from the reporting date and the expected lifetime of each commitment in determining the default risk amount that is used to calculate the expected credit loss.

The estimation techniques or material assumptions used to assess expected credit losses have not changed significantly during the current period.

14) Consideration of forward-looking information

The Company’s credit (including credit card) segments are based on different loan properties, such as corporate banking, consumer finance, credit, car loans and credit cards, and forward-looking model estimates are carried out, based on actual default rates and overall economic variables of each segment in the past quarters. The default rate for the next year is estimated using the credit risk chain model, by estimating the relationship between the default rate and the overall economic variables. The investment function makes reference to external credit ratings in their consideration of forward-looking information.

d. Liquidity risk

1) Source and definition of liquidity risk

Liquidity risk means banks cannot provide sufficient funding for asset size growth and for meeting obligations on matured liabilities or have to make late payments to counterparties or raise emergency funding to cover funding gaps.

100 -
2) Liquidity risk management strategy and principles
a) The board of directors, the top risk supervisor of the Company, regularly reviews liquidity risk management policies. The Asset/Liability Management Committee, the top liquidity risk executive of the Company, supervises the implementation of liquidity risk monitoring and control procedures and is responsible for taking any needed remedial measures.
b) In making internal transfer pricing, performance evaluation and new product development decisions, the operation units take liquidity cost and product effectiveness and risks into consideration and align their decisions with the Company’s overall liquidity risk management policies.
c) The fund procurement department implements funding strategies in accordance with the conservatism principle to diversify the funding sources and negotiate reasonable repayment periods to ensure continuing participation in the lending market, and maintains a close relationship with fund providers to strengthen financing channels and ensure the stability and reliability of fund sources.
d) To strengthen liquidity risk management, the Company has regulations requiring the daily execution of risk management procedures and the monitoring of implementation to maintain sufficient liquidity.
e) The risk management units report the Company’s liquidity position to the Asset/Liability Management Committee monthly and report the Company’s liquidity risk management to the board of directors regularly.
3) The liquidity risk analysis of the cash inflow and outflow of assets and liabilities held for liquidity risk refers to the amounts of the obligations for the remaining maturity periods, i.e., from the reporting date to the contract maturity dates. The maturity analysis of financial assets and financial liabilities:
a) For maintaining solvency and meeting the needs of emergency assistance arrangements, the Company holds cash and high-quality, liquid interest-bearing assets. The assets held for liquidity risk management include cash and cash equivalents, due from Central Bank and call loans to other banks, financial assets at fair value through profit or loss, discounts and loans, available-for-sale financial assets, held-to-maturity financial assets, and debt instruments with no active market, etc.
b) The Company disclosed the analysis of cash outflows from nonderivative financial liabilities by the residual maturities as of the balance sheet dates. The amounts of cash outflows are based on contractual cash flows, so some amounts may not correspond to those that shown in the consolidated balance sheets.
- i. The maturity analysis of financial liabilities

Deposits from the Central Bank
and other banks

Due to the Central Bank and other
banks
Securities sold under agreements
to repurchase
Accounts payables
Deposits and remittance
Preferred stock liabilities
Bank debentures
Bonds payable
Other liabilities

December 31, 2020

Due in
One Month
Due Between
after One Month
and Three
Months
Due Between
after Three
Months and Six
Months
Due Between
after Six Months
and One Year
Due after
One Year
Total
$ 4,899,167
$ 6,532,291
$ 525,050
$ 15,000
$ 509,606
$ 12,481,114
26,000
35,650
$ 84,300
248,720
3,392,050
3,786,720
25,701,954
18,720,220
6,002
-
-
44,428,176
3,357,074
1,180,689
873,480
164,672
18,099
5,594,014
39,569,566
64,746,534
82,685,570
157,934,658
261,924,171
606,860,499
-
-
-
-
524,000
524,000
-
-
-
-
7,200,000
7,200,000
-
-
-
-
1,464,796
1,464,796
5,290,504
2,396,706
157,093
280,736
1,733,419
9,858,458

101 -

Due to the Central Bank and call
loans to other banks

Securities sold under agreements
to repurchase
Accounts payables
Deposits and remittance
Bank debentures
Bonds payable
Other liabilities

December 31, 2019

Due in
One Month
Due Between
after One Month
and Three
Months
Due Between
after Three
Months and Six
Months
Due Between
after Six Months
and One Year
Due after
One Year
Total
$ 5,977,044
$ 1,169,642
$ 3,114,935
$ 1,015,000
$ 584,111
$ 11,860,732
21,683,238
43,444,198
-
250,000
-
65,377,436
2,165,137
1,299,264
896,265
235,823
18,800
4,615,289
38,378,449
61,742,848
75,966,212
147,981,777
208,829,814
532,899,100
-
-
-
3,000,000
7,200,000
10,200,000
-
609,490
-
-
864,368
1,473,858
2,875,806
2,248,822
156,422
292,640
1,651,453
7,225,143

Further information on the maturity analysis of lease liabilities is as follows:

Lease liability Lease liability				De	cember 31, 2020
		Due in One Year Y $ 419,180	Due Between after One ear and Five Years $ 1,083,984	Due Between after Five Years and Ten Years $ 155,267 De	Due Between after Ten Years and Fifteen Years Due Between after Fifteen Years and Twenty Years Due after Twenty Years $ 62,791 $ 6,370 $ - cember 31, 2019	Total $ 1,727,592
		Due in One Year Y $ 368,325	Due Between after One ear and Five Years $ 756,042	Due Between after Five Years and Ten Years $ 204,453	Due Between after Ten Years and Fifteen Years Due Between after Fifteen Years and Twenty Years Due after Twenty Years $ 98,557 $ 16,370 $ -	Total $ 1,443,747

ii. The maturity analysis of derivatives financial liabilities - forward exchange contracts and currency swap contracts

Derivative financial liabilities to be settled at gross amounts Cash outflow Cash inflow Derivative financial liabilities to be settled at net amounts Forward exchange contracts Derivative financial liabilities to be settled at gross amounts Cash outflow Cash inflow Derivative financial liabilities to be settled at net amounts Forward exchange contracts				December 31, 2020	December 31, 2020
		0-30 Days $ 18,335,891 18,222,640 113,251 - $ 113,251	31-90 Days $ 11,082,638 11,065,864 16,774 - $ 16,774	91-180 Days 181 Days- 1 Year $ 492,466 $ 831,586 488,806 826,142 3,660 5,444 - - $ 3,660 $ 5,444 December 31, 2019		Over 1 Year $ - - - - $ -	Total $ 30,742,581 30,603,452 139,129 - $ 139,129
		0-30 Days $ 21,333,779 20,984,823 348,956 - $ 348,956	31-90 Days $ 30,830,364 30,572,337 258,027 - $ 258,027	91-180 Days $ 242,689 237,459 5,230 - $ 5,230	181 Days- 1 Year $ 64,427 64,260 167 - $ 167	Over 1 Year $ - - - - $ -	Total $ 52,471,259 51,858,879 612,380 - $ 612,380

iii. The maturity analysis of derivatives financial liabilities-option contracts

Derivative financial liabilities to be settled at net amounts		December 31, 2020	December 31, 2020
		0-30 Days 31-90 Days 91-180 Days $ 1,738 $ 5,357 $ 2,058	181 Days- 1 Year Over 1 Year $ 11,917 $ -	Total $ 21,070

102 -

Derivative financial liabilities to be settled at net amounts		December 31, 2019	December 31, 2019
		0-30 Days 31-90 Days 91-180 Days $ 1,321 $ 2,136 $ 1,617	181 Days- 1 Year Over 1 Year $ 4,365 $ -	Total $ 9,439

e. Market risk
1) Source and definition of market risk

Market risk is defined as an unfavorable change in market prices (such as interest rates, exchange rates, stock prices and commodity prices), which may cause financial instruments classified in the trading book to give rise to a potential loss on or off the balance sheet items.

2) Market risk management strategy and processes

The Company implements the “Market Risk Management Standards of Union Bank of Taiwan”, which had been approved by the board of directors, as the basis of market risk management.

The market risk management processes are risk identification, risk measurement, risk monitoring and control, risk reporting and risk mitigation.

a) Risk identification: For balance sheet and off-balance sheet items, the Company identifies and assesses market risk factors of products and the investment business and subjects them to risk management, monitoring and control procedures.
b) Risk measurement: In principle, each investment or transaction has at least one risk measurement tool - such as sensitivity analysis, value at risk and stress testing, which can be applied to variables, such as fair market value and notional amounts, to quantify market risk.
c) Risk monitoring and control: Each operation unit observes the risk limit regulation stated in its operating manual and regularly monitors risk control. The department of risk management is responsible for summarizing and reporting the Company’s overall market risk monitoring.
d) Risk reporting: The risk management reports are classified as regular report, over-limit report and exception report. Regular reports are the management statements sent to the appropriate level in accordance with certain requirements. Over-limit reports are about situations in which risk limits are exceeded. Exception reports contain operation units’ recommendations on how to meet temporary business needs.
e) Risk mitigation: An operation unit may take certain action to reduce risk, such as hedging, investment combination adjustment, position adjustment, setting a break-even point, halting new transactions, etc.
3) Market risk management framework
a) The board of directors: The board of directors, the Company’s top market risk supervisor, reviews risk management policies, operational risk limits and the design and change of the credit risk management framework.
b) Asset/Liability Management Committee: The Asset/Liability Management Committee inspects management reports or information provided by business units and the Risk Management Division.
103 -
c) Risk Management Division: The Risk Management Division is an independent unit in charge of the work related to three pillars of Basel and of the development of market risk management tools to assess and control the risk identified through setting risk limits.
d) Operation units: Operation units perform daily market risk management work and report the market risk of investment positions and related information to the authorities.
4) Market risk measurement, control and reporting
a) The market risk of the trading book financial instruments is measured in accordance with the fair market value or evaluation model and the profit and loss situation is evaluated regularly.
b) The business units and the risk management division prepares management reports periodically and report to the appropriate level.
c) The market risk management system combines the evaluation of the front and middle offices to generate information that will assist management in risk monitoring. Moreover, the system supports the capital accrual method being used by the Company through generating internal and external reports for management’s decision, making.
5) Market risk measurement of trading book

The Company assesses the market risk exposure of the trading book in conformity with an assessment model using publicly quoted market prices or other measurement methods, including interest rate sensitivity analysis (DV01 value) and stress tests. The interest rate sensitivity analysis (DV01 value) refers to changes in market interest by 1 basis point (0.01%); the abnormal stress test system deals with market volatility and involves the regular estimation of possible losses (stress loss) and of the impact of stress test scenarios on major asset portfolios and the Company’s profit and loss.

6) Banking book market risk
a) Interest rate risk

The loans and deposits and other interest rate-related items in the Company’s balance sheet, including interest rate sensitive assets and interest rate sensitive liabilities, are measured from the viewpoint of earnings because there is a risk of decrease in earnings due to adverse changes in interest rates for loans and deposits.

The earnings viewpoint mainly emphasizes the impact of interest rates on earnings, especially short-term earnings. For 2020 and 2019, assuming all market risk indicators, except interest rates, remained constant, an interest rate increase or decrease by 100bps would result in an increase or decrease in profit before tax by $734,108 thousand and $373,604 thousand, respectively.

b) Exchange rate risk

The exchange rate risk of the banking book refers to the business operation of the International Banking Department of the Company’s Head Office and the operating funds in foreign currencies required by the ROC or local regulations; if there are adverse exchange rate changes, the income statement or cumulative translation adjustments in equity would be negatively affected.

104 -

The International Banking Department (IBD) of the Company’s Head Office is a going concern, and its operating funds are foreign currencies for business needs. However, the exchange rate risk on these funds is not significant because the percentage of the operating funds to the Company’s total assets is small, as shown by the immaterial ratio of the IBD’s cumulative translation adjustment to the Companies’ net worth.

7) Foreign currency rate risk information

The information of significant foreign financial assets and liabilities is as follows:

Unit: Each Foreign Currency (In Thousands)/NT$ (In Thousands)

Financial assets
USD

JPY
GBP
AUD
HKD
CAD
CNY
SGD
ZAR
CHF
THB
NZD
EUR
Financial liabilities
USD
JPY
GBP
AUD
HKD
CAD
CNY
SGD
ZAR
CHF
NZD
EUR

December 31, 2020

Foreign
Currencies
Exchange
Rate
New Taiwan
Dollars
$ 3,761,016
28.5080
$ 107,219,033
18,801,471
0.2765
5,198,250
6,024
38.9163
234,437
147,591
21.9740
3,243,151
358,334
3.6775
1,317,758
16,364
22.3575
365,860
829,320
4.3813
3,633,524
4,355
21.5790
93,974
1,173,971
1.9510
2,290,464
1,493
32.3587
48,327
460
0.9517
438
24,718
20.5970
509,109
42,365
35.0534
1,485,056
3,242,859
28.5080
92,447,414
13,972,564
0.2765
3,863,148
6,028
38.9163
234,582
147,527
21.9740
3,241,745
323,354
3.6775
1,189,122
16,344
22.3575
365,408
829,328
4.3813
3,633,560
4,306
21.5790
92,928
1,173,864
1.9510
2,290,254
1,543
32.3587
49,916
24,681
20.5970
508,348
35,505
35.0534
1,244,575

105 -

Financial assets
USD

JPY
GBP
AUD
HKD
CAD
CNY
SGD
ZAR
CHF
THB
NZD
EUR
Financial liabilities
USD
JPY
GBP
AUD
HKD
CAD
CNY
SGD
ZAR
CHF
NZD
EUR

December 31, 2019

Foreign
Currencies
Exchange
Rate
New Taiwan
Dollars
$ 2,755,895
30.1060
$ 82,968,979
17,750,144
0.2770
4,917,518
204
39.5382
8,071
2,494
21.1013
52,625
109,072
3.8660
421,678
1,545
23.0821
35,671
770,337
4.3231
3,330,235
104
22.3654
2,325
9,934
2.1380
21,239
120
31.0595
3,742
460
1.0091
465
690
20.2674
13,988
7,982
33.7368
269,290
2,332,778
30.1060
70,230,613
15,408,879
0.2770
4,268,891
201
39.5382
7,963
2,452
21.1013
51,735
82,007
3.8660
317,043
1,624
23.0821
37,496
768,870
4.3231
3,323,895
71
22.3654
1,599
10,481
2.1380
22,409
120
31.0595
3,728
512
20.2674
10,385
9,120
33.7368
307,675

106 -
f. Transfers of financial assets.

Most of the transferred financial assets of the Company that are not derecognized in their entirety are securities sold under repurchase agreements. According to these transactions, the right on cash flow of the transferred financial assets would be transferred to other entities and the associated liabilities of the Company’s obligation to repurchase the transferred financial assets at a fixed price in the future would be recognized. As the Company is restricted to use, sell or pledge the transferred financial assets throughout the term of transaction, and is still exposed to interest rate risks and credit risks on these instruments, the transferred financial assets are not derecognized in their entirety. The details of financial assets that are not derecognized in their entirety and the associated financial liabilities are as follows:

		December 31, 2020	December 31, 2020
Category of Financial Assets	Carrying Amount of Transferred Financial Asset	Carrying Amount of Associated Financial Liability	Fair Value of Transferred Financial Asset	Fair Value of Associated Financial Liability	Fair Value of Net Position
Financial instruments at fair value through profit or loss Securities sold under repurchase agreements	$17,501,131	$17,513,701	$17,501,131	$17,513,701	$ (12,570)
Financial assets at fair value through other comprehensive income Securities sold under repurchase agreements	9,216,124	8,900,020	9,216,124	8,900,020	316,104
Financial assets at amortized cost Securities sold under repurchase agreements	23,249,254	18,014,455	25,511,315	18,014,455	7,496,860

		December 31, 2019	December 31, 2019
Category of Financial Assets	Carrying Amount of Transferred Financial Asset	Carrying Amount of Associated Financial Liability	Fair Value of Transferred Financial Asset	Fair Value of Associated Financial Liability	Fair Value of Net Position
Financial instruments at fair value through profit or loss Securities sold under repurchase agreements	$13,458,214	$13,471,704	$13,458,214	$13,471,704	$ (13,490)
Financial assets at fair value through other comprehensive income Securities sold under repurchase agreements	19,671,156	16,946,258	19,671,156	16,946,258	2,724,898
Financial assets at amortized cost Securities sold under repurchase agreements	44,134,600	34,959,474	45,837,805	34,959,474	10,878,331

107 -
g. Offsetting financial assets and financial liabilities.

The Company is eligible to present certain derivative assets and derivative liabilities on a net basis on the balance sheets since the offsetting criteria are met. Cash collateral has also been paid by part of counterparties for the net amount of the derivative assets and derivative liabilities. The cash collateral does not meet the offsetting criteria, but it can be set off against the net amount of the derivative assets and derivative liabilities in the case of default and insolvency or bankruptcy, in accordance with an associated collateral arrangement.

The tables below present the quantitative information on financial assets and financial liabilities that have been offset in the balance sheets or that are covered by enforceable master netting arrangements or similar agreements.

		December 31, 2020	December 31, 2020
Financial Assets	Gross Amount of Recognized Financial Assets (a)	Gross Amount of Recognized Financial Liabilities Offset in the Balance Sheets (b)	Net Amount of Financial Assets Presented in the Balance Sheets (c)=(a)-(b)	Related Amount Not Offset in the Balance Sheets (d)		Net Amount (e)=(c)-(d)
				Financial Instrument	Cash Collateral Pledged
Derivatives	$630,231	$ -	$630,231	$ 1,704	$ -	$628,527

		December 31, 2020
Financial Liabilities	Gross Amount of Recognized Financial Liabilities (a)	Gross Amount of Recognized Financial Assets Offset in the Balance Sheets (b)	Net Amount of Financial Liabilities Presented in the Balance Sheets (c)=(a)(b)	Related Amount Not Offset in the Balance Sheets (d)		Net Amount (e)=(c)(d)
				Financial instrument	Cash Collateral Pledged
Derivatives	$206,002	$ -	$206,002	$ 96,346	$ -	$109,656

		December 31, 2019
Financial Assets	Gross Amount of Recognized Financial Assets (a)	Gross Amount of Recognized Financial Liabilities Offset in the Balance Sheets (b)	Net Amount of Financial Assets Presented in the Balance Sheets (c)=(a)-(b)	Related Amount Not Offset in the Balance Sheets (d)		Net Amount (e)=(c)-(d)
				Financial Instrument	Cash Collateral Pledged
Derivatives	$268,446	$ -	$268,446	$ 6,490	$ -	$261,956

		December 31, 2019
Financial Liabilities	Gross Amount of Recognized Financial Liabilities (a)	Gross Amount of Recognized Financial Assets Offset in the Balance Sheets (b)	Net Amount of Financial Liabilities Presented in the Balance Sheets (c)=(a)(b)	Related Amount Not Offset in the Balance Sheets (d)		Net Amount (e)=(c)(d)
				Financial instrument	Cash Collateral Pledged
Derivatives	$650,981	$ -	$650,981	$82,775	$ -	$568,206

54. CAPITAL MANAGEMENT

a. Strategies to maintain capital adequacy

Under the regulations set by the authorities, the Company complies with the requirements set each year for the minimum consolidated capital adequacy ratios, including the common equity Tier I capital ratio; the Company’s leverage ratio is also in accordance with the requirements of the relevant authorities. These ratios are applied in accordance with the regulations announced by the authorities.

b. Capital assessment program

The capital ratios and leverage ratios are applied, analyzed, monitored and reported regularly, and are assigned to each business unit as the target capital adequacy ratios. The business units’ compliance with the ratio requirements is tracked regularly, and remedial action is taken if the capital and leverage ratio requirements are not met.

108 -

c. Capital adequacy

(Unit: In Thousands of New Taiwan Dollars, %)

Items(Note 2)	Year	Year	December 31, 2020	December 31, 2020
			Own Capital Adequacy Ratio	Consolidated Capital Adequacy Ratio
Eligible capital	Common equityTier 1 Ratio		$40,774,470	$40,287,801
	Other Tier 1 capital		12,096,138	12,984,989
	Tier 2 capital		8,100,742	11,372,099
	Eligible capital		60,971,350	64,644,889
Risk-weighted assets	Credit risk	Standard	358,829,620	370,831,564
		Internal rating-based approach	-	-
		Asset securitization	1,457,002	1,457,002
	Operational risk	Basic indicator approach	21,379,484	25,122,017
		Standard/alternative standardized approach	-	-
		Advanced measurement approach	-	-
	Market risk	Standard	30,328,618	32,384,711
		Internal model approach	-	-
	Total risk-weighted assets		411,994,724	429,795,294
Capital adequacyrate			14.80%	15.04%
Ratio of common stockholders’ equityto risk-weighted assets			9.90%	9.37%
Ratio of Tier 1 capital to risk-weighted assets			12.83%	12.39%
Leverage ratio			6.55%	6.49%

Items(Note 2)	Year	Year	December 31, 2019	December 31, 2019
			Own Capital Adequacy Ratio	Consolidated Capital Adequacy Ratio
Eligible capital	Common equityTier 1 Ratio		$ 37,440,298	$ 37,013,051
	Other Tier 1 capital		11,559,375	12,506,259
	Tier 2 capital		6,347,470	9,685,896
	Eligible capital		55,347,143	59,205,206
Risk-weighted assets	Credit risk	Standard	332,422,791	343,086,746
		Internal rating-based approach	-	-
		Asset securitization	700,692	700,692
	Operational risk	Basic indicator approach	19,966,470	23,560,822
		Standard/alternative standardized approach	-	-
		Advanced measurement approach	-	-
	Market risk	Standard	23,513,386	24,423,653
		Internal model approach	-	-
	Total risk-weighted assets		376,603,339	391,771,913
Capital adequacyrate			14.70%	15.11%
Ratio of common stockholders’ equityto risk-weighted assets			9.94%	9.45%
Ratio of Tier 1 capital to risk-weighted assets			13.01%	12.64%
Leverage ratio			6.53%	6.52%

109 -
Note 1: Eligible capital and risk-weighted assets are calculated under the “Regulations Governing the Capital Adequacy Ratio of Banks” and the “Explanation of Methods for Calculating the Eligible Capital and Risk-weighted Assets of Banks.”
Note 2: Formulas used were as follows:
1) Eligible capital = Common equity Tier 1 capital + Other Tier 1 capital + Tier 2 capital.
2) Risk-weighted assets = Risk-weighted asset for credit risk + Capital requirements for operational risk and market risk x 12.5.
3) Capital adequacy ratio = Eligible capital ÷ Risk-weighted assets.
4) Ratio of Common equity Tier 1 capital to risk-weighted assets = Common equity Tier 1 capital ÷ Risk-weighted assets.
5) Ratio of Tier 1 capital to risk-weighted assets = (Common equity Tier 1 capital + Other Tier 1 capital) ÷ Risk-weighted assets.
6) Leverage ratio = Tier 1 capital ÷ Exposure Measurement

The Banking Law and related regulations require that the Bank maintains its unconsolidated and consolidated CARs at a minimum of 10.5%, the Tier 1 Capital Ratio at a minimum of 8.5% and the Common Equity Tier 1 Ratio at a minimum of 7.0%. In addition, if the Bank’s CAR falls below the minimum requirement, the authorities may impose certain restrictions on the amount of cash dividends that the Bank can declare or, in certain conditions, totally prohibit the Bank from declaring cash dividends.

55. ASSET QUALITY, CONCENTRATION OF CREDIT EXTENSIONS, INTEREST RATE SENSITIVITY, PROFITABILITY AND MATURITY ANALYSIS OF ASSETS AND LIABILITIES

Union Bank of Taiwan

a. Credit risk
1) Asset quality

See Note 53 and Table 5.

110 -

2) Concentration of credit extensions

(In Thousands of New Taiwan Dollars, %)

	December 31, 2020
Rank (Note 1)	Company Name	Credit Extension Balance	% to Net Asset Value
1	Group G- real estate development	$2,541,500	4.22
2	CompanyH - retail of other food and beverages	2,003,000	3.33
3	CompanyB - other financial intermediation	1,459,000	2.42
4	CompanyS - automotive manufacturing	1,230,000	2.04
5	CompanyM - sportingand athletic articles manufacturing	974,000	1.62
6	Company Q- telecommunications	955,043	1.59
7	Company C- instant food manufacturing	907,194	1.51
8	Company W- real estate development	800,000	1.33
9	CompanyV - accommodation	799,600	1.33
10	CompanyK - manufacture of rubberproducts	790,000	1.31

(In Thousands of New Taiwan Dollars, %)

	December 31, 2019
Rank (Note 1)	Company Name	Credit Extension Balance	% to Net Asset Value
1	CompanyH - retail of other food and beverages	$1,863,000	3.31
2	CompanyB - other financial intermediation	1,734,111	3.08
3	Group U- real estate development	1,708,700	3.04
4	CompanyF -gas station	1,668,136	2.97
5	Company S- automotive manufacturing	1,505,300	2.68
6	CompanyE - cable television	1,126,451	2.00
7	CompanyM - sportingand athletic articles manufacturing	874,000	1.55
8	Company C- instant food manufacturing	849,892	1.51
9	CompanyO - real estate development	752,650	1.34
10	CompanyK - other financial,insurance and real estate	750,000	1.33

b. Market risk

Interest Rate Sensitivity December 31, 2020

(In Thousands of New Taiwan Dollars, %)	(In Thousands of New Taiwan Dollars, %)	(In Thousands of New Taiwan Dollars, %)	(In Thousands of New Taiwan Dollars, %)	(In Thousands of New Taiwan Dollars, %)	(In Thousands of New Taiwan Dollars, %)
Items	1 to 90 Days	91 to 180 Days	181 Days to One Year	Over One Year	Total
Interest rate-sensitive assets	$532,258,985	$10,984,353	$12,845,941	$71,950,434	$628,039,713
Interest rate-sensitive liabilities	290,976,871	222,689,736	70,806,321	25,993,196	610,466,124
Interest rate-sensitivegap	241,282,114	(211,705,383)	(57,960,380)	45,957,238	17,573,589
Net worth					56,248,988
Ratio of interest rate-sensitive assets to liabilities					102.88%
Ratio of interest rate sensitivity gapto net worth					31.24%

111 -

December 31, 2019

(In Thousands of New Taiwan Dollars, %)

Items	1 to 90 Days	91 to 180 Days	181 Days to One Year	Over One Year	Total
Interest rate-sensitive assets	$487,276,944	$ 5,795,273	$14,257,749	$54,605,447	$561,935,413
Interest rate-sensitive liabilities	276,366,269	185,995,639	64,178,888	23,014,898	549,555,694
Interest rate-sensitivegap	210,910,675	(180,200,366)	(49,921,139)	31,590,549	12,379,719
Net worth					54,385,473
Ratio of interest rate-sensitive assets to liabilities					102.25%
Ratio of interest rate sensitivity gapto net worth					22.76%

Note 1: The above amounts included only the New Taiwan dollar held by the Bank’s head office and branches (i.e., excluding foreign currency).
Note 2: Interest rate-sensitive assets and liabilities mean the revenues or costs of interest-earning assets and interest-bearing liabilities 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 (in New Taiwan dollars).

Interest Rate Sensitivity December 31, 2020

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

Items	1 to 90 Days	91 to 180 Days	181 Days to One Year	Over One Year	Total
Interest rate-sensitive assets	$2,142,337	$ 504,181	$ 164,487	$1,402,049	$4,213,054
Interest rate-sensitive liabilities	1,601,332	433,271	492,622	702,642	3,229,867
Interest rate-sensitivegap	541,005	70,910	(328,135)	699,407	983,187
Net worth					175,908
Ratio of interest rate-sensitive assets to liabilities					130.44%
Ratio of interest rate sensitivity gapto net worth					558.92%

December 31, 2019

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

Items	1 to 90 Days	91 to 180 Days	181 Days to One Year	Over One Year	Total
Interest rate-sensitive assets	$1,803,811	$ 208,307	$ 158,745	$2,353,718	$4,524,581
Interest rate-sensitive liabilities	2,186,417	384,781	504,069	432,092	3,507,359
Interest rate-sensitivegap	(382,606)	(176,474)	(345,324)	1,921,626	1,017,222
Net worth					90,557
Ratio of interest rate-sensitive assets to liabilities					129.00%
Ratio of interest rate sensitivity gapto net worth					1,123.29%

Note 1: The above amounts included only U.S. dollar amounts held by the Bank’s head office, domestic branches, OBU and overseas branches and excluded contingent assets and contingent liabilities.
Note 2: Interest rate-sensitive assets and liabilities mean the revenues or costs of interest-earning assets and interest-bearing liabilities 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 (in U.S. dollars)
112 -

c. Liquidity risk

1) Profitability

(%)

Items	Items	Year Ended December 31, 2020	Year Ended December 31, 2019
Return on total assets	Before income tax	0.54	0.60
	After income tax	0.47	0.50
Return on common equity	Before income tax	7.18	8.22
	After income tax	6.14	6.70
Net income ratio		23.85	24.31

Note 1: Return on total assets = Income before (after) income tax ÷ Average total assets

Note 2: Return on equity = Income before (after) income tax ÷ Average equity
Note 3: Net income ratio = Income after income tax ÷ Total net revenues
Note 4: Income before (after) income tax represents income for the years ended December 31, 2020 and 2019.
2) Maturity analysis of assets and liabilities

Maturity Analysis of Assets and Liabilities December 31, 2020

(In Thousands of New Taiwan Dollars)

	Total		Remaining Period to Maturity	Remaining Period to Maturity	Remaining Period to Maturity
		1-30 Days	31-90 Days	91-180 Days	181 Days- 1 Year	Over 1 Year
Main capital inflow on maturity	$691,415,883	$196,433,057	$32,469,854	$49,004,565	$ 94,019,121	$319,489,286
Main capital outflow on maturity	796,002,195	84,997,650	113,456,441	103,382,981	191,598,487	302,566,636
Gap	(104,586,312)	111,435,407	(80,986,587)	(54,378,416)	(97,579,366)	16,922,650

December 31, 2019

(In Thousands of New Taiwan Dollars)

	Total		Remaining Period to Maturity	Remaining Period to Maturity	Remaining Period to Maturity
		1-30 Days	31-90 Days	91-180 Days	181 Days- 1 Year	Over 1 Year
Main capital inflow on maturity	$618,783,183	$153,846,953	$58,053,755	$42,402,390	$86,341,158	$278,138,927
Main capital outflow on maturity	718,840,408	82,162,339	102,869,688	97,317,383	182,098,850	254,392,148
Gap	(100,057,225)	71,684,614	(44,815,933)	(54,914,993)	(95,757,692)	23,746,777

Note: The above amounts are book value held by the onshore branches and offshore banking unit of the Bank in U.S. dollars, without off-balance sheet amounts (for example, the issuance of negotiable certificate of deposits, bonds or stocks).

113 -

Maturity Analysis of Assets and Liabilities December 31, 2020

(In Thousands of U.S. Dollars)

	Total		Remaining Period to Maturity	Remaining Period to Maturity	Remaining Period to Maturity
		1-30 Days	31-90 Days	91-180 Days	181 Days- 1 Year	Over 1 Year
Main capital inflow on maturity	$4,339,872	$ 686,488	$1,448,642	$ 535,083	$ 170,022	$1,499,637
Main capital outflow on maturity	4,318,776	923,214	1,130,312	472,516	585,694	1,207,040
Gap	21,096	(236,726)	318,330	62,567	(415,672)	292,597

December 31, 2019

(In Thousands of U.S. Dollars)

	Total		Remaining Period to Maturity	Remaining Period to Maturity	Remaining Period to Maturity
		1-30 Days	31-90 Days	91-180 Days	181 Days- 1 Year	Over 1 Year
Main capital inflow on maturity	$4,660,738	$ 795,250	$1,073,236	$ 218,610	$ 159,193	$2,414,179
Main capital outflow on maturity	4,650,739	1,045,685	1,759,373	424,397	572,968	848,316
Gap	9,999	(250,165)	(686,137)	(205,787)	(413,775)	1,565,863

Note: The above amounts are book value of the assets and liabilities held by the onshore branches and offshore banking unit of the Bank in U.S. dollars, without off-balance amounts (for example, the issuance of negotiable certificate of deposits, bonds or stocks).

56. EQUITY TRANSACTIONS WITH NON-CONTROLLING INTERESTS

On July 5 and December 27, 2019 the Company acquired from non-controlling interests an additional 64.44% and 0.16% shares of USITC, respectively, which increased its continuing interest from 35% to 99.60%.

The above transaction was accounted for as equity transaction, since the Company did not cease to have control over the subsidiary.

Cash consideration paid The proportionate share of the carrying amount of the net assets of the subsidiary transferred from non-controlling interests Reattribution of other equity from non-controlling interests Unrealized loss on financial assets at fair value through other comprehensive income Differences arising from equity transaction (reduction in retained earnings)	USITC $ 264,909 (256,106) (2,105) $ 6,698

114 -

57. ADDITIONAL DISCLOSURES

Following are the additional disclosures required by the Securities and Futures Bureau for the Bank and its investees:

a. Related information of significant transactions and investees and (b) proportionate share in investees:
1) Financing provided: The Company - not applicable; investee - Table 1 (attached)
2) Endorsement/guarantee provided: None
3) Marketable securities held: The Company - not applicable; investee - Table 2 (attached)
4) Marketable securities acquired or disposed of at costs or prices of at least $300 million or 10% of the paid-in capital: Table 3 (attached)
5) Acquisition of individual real estate at costs of at least $300 million or 10% of the paid-in capital: None
6) Disposal of individual real estate at costs of at least $300 million or 10% of the paid-in capital: None
7) Allowance of service fees to related parties amounting to at least $5 million: None
8) Receivables from related parties amounting to at least $300 million or 10% of the paid-in capital: Table 4 (attached)
9) Sale of nonperforming loans: None
10) Asset securitization under the “Regulations for Financial Asset Securitization”: None
11) Other significant transactions which may affect the decisions of users of financial reports: Table 5 (attached)
12) Names, locations and other information of investees on which the Bank exercises significant influence: Table 6 (attached)
13) Derivative transactions: Note 8
b. Investment in Mainland China: None
c. Intercompany relationships and significant intercompany transactions.

The detailed information of intercompany relationships and significant intercompany transactions are referred to Table 7 (attached).

115 -

58. OPERATING SEGMENTS

The information reported to the Company’s chief operating decision makers for the assessment of segment performance focuses mainly on operation and profitability. The Company’s reportable segments are as follows:

a. Corporate banking unit: Corporate banking, foreign exchange business, debt management and public treasury business, etc.
b. Consumer banking unit: Consumer banking, financial management and loan business, credit card business and car-loan business, etc.
c. Wealth management and trust unit: Wealth management and trust business, etc.
d. Investing unit: Investing business in the financial market, etc.
e. Leasing unit: Leasing of vehicles, buildings, etc.

The analysis of the Bank’s operating revenue and results by reportable segment was as follows:

Net interest (Note) Net commissions and fees revenues Net revenues other than interest Total net revenues Provisions (reversal) Operating expenses Income before income tax Net interest (Note) Net commissions and fees revenues Net revenues other than interest Total net revenues Provisions (reversal) Operating expenses Income before income tax				For the Year	Ended December 31, 2020	Ended December 31, 2020
		Corporate Banking $ 1,498,697 170,818 197,671 1,867,186 (10,510 ) 835,478 $ 1,042,218	Consumer Banking $ 3,425,738 1,481,686 (6,867) 4,900,557 55,291 3,368,788 $ 1,476,478	Wealth Management $ (1,646 ) 879,726 1,492 879,572 - 535,695 $ 343,877 For the Year	Investing Leasing $ 1,555,350 $ (57,793 ) 138,623 (406 ) 929,380 2,361,895 2,623,353 2,303,696 (11,801 ) 23,324 179,390 2,155,740 $ 2,455,764 $ 124,632 Ended December 31, 2019		Others $ 1,466,630 150,026 239,342 1,855,998 234,236 3,123,056 $ (1,501,294)	Total $ 7,886,976 2,820,473 3,722,913 14,430,362 290,540 10,198,147 $ 3,941,675
		Corporate Banking $ 1,479,760 172,132 150,698 1,802,590 (73,346 ) 814,129 $ 1,061,807	Consumer Banking $ 3,309,566 1,209,064 (6,274) 4,512,356 64,991 2,925,636 $ 1,521,729	Wealth Management $ (553 ) 1,022,424 14,341 1,036,212 - 558,152 $ 478,060	Investing $ 823,952 132,212 1,082,208 2,038,372 (599 ) 183,552 $ 1,855,419	Leasing $ (84,581 ) (841 ) 2,329,062 2,243,640 5,092 2,094,046 $ 144,502	Others $ 1,221,478 181,855 829,679 2,233,012 244,537 3,022,536 $ (1,034,061)	Total $ 6,749,622 2,716,846 4,399,714 13,866,182 240,675 9,598.051 $ 4,027,456

Note: Include interest revenue of financial assets at fair value through profit or loss.

116 -

TABLE 1

UNION BANK OF TAIWAN AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Lender	Borrower	Financial Statement Account	Highest Balance for the Period	Ending Balance	Actual Borrowing Amount	Interest Rate (%)	Nature of Financing	Business Transaction Amount	Reason for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each Borrower	Aggregate Financing Limit
												Item	Value
1	Union Financial and Leasing International Corporation	Union Capital (Singapore) Holding PTE. Ltd. Uflc Capital (Singapore) Holding PTE. Ltd. Feng Sheng Steel CO., LTD. Minamoto Kitazawa International Co., Ltd. Megaful CO., LTD.	Receivables of affiliates Receivables of affiliates Account receivable Account receivable Account receivable	$ 1,022,980 (JPY 3,700,000 ) 1,797,127 (JPY 6,500,000 ) 18,000 35,000 66,100	$ 1,022,980 (JPY 3,700,000 ) 1,797,127 (JPY 6,500,000 ) 18,000 35,000 66,100	$ 726,378 (JPY 2,627,225 ) 1,527,228 (JPY 5,523,808 ) 13,622 23,808 64,161	1.5 1.5 7-10 3-6 3-6	Business transaction Business transaction Short-term financing Short-term financing Short-term financing	$ 1,022,980 (JPY 3,700,000 ) 1,797,127 (JPY 6,500,000 ) - - -	- - Business financing Business financing Business financing	$ - - 136 476 642	- - Real estate Real estate Real estate	$ - - 19,326 27,400 73,484	$ 2,998,292 2,998,292 2,998,292 2,998,292 2,998,292	$ 2,998,292 2,998,292 2,998,292 2,998,292 2,998,292
2	Union Capital (Singapore) Holding Pte. Ltd.	Kabushiki Kaisha UCJ1 (Japan)	Receivables of affiliates	525,314 (JPY 1,900,000 )	525,314 (JPY 1,900,000 )	405,284 (JPY 1,465,865 )	2.75	Business transaction	525,314 (JPY 1,900,000 )		-	-	-	2,998,292	2,998,292
3	Uflc Capital (Singapore) Holding PTE. Ltd.	Kabushiki Kaisha UCJ1 (Japan)	Receivables of affiliates	912,387 (JPY 3,300,000 )	912,387 (JPY 3,300,000 )	789,493 (JPY 2,855,504 )	2.75	Business transaction	912,387 (JPY 3,300,000 )		-		-	2,998,292	2,998,292

117 -

TABLE 2

UNION BANK OF TAIWAN AND SUBSIDIARIES

MARKETABLE SECURITIES HELD FOR THE YEAR ENDED DECEMBER 31, 2020

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

Holding Company	Type and Issuer/ Name of Marketable Security	Issuer’s Relationship with Holding Company	Financial Statement Account		December 31, 2020	December 31, 2020		Note
				Shares/Piece/ Units (In Thousands)	Carrying Value	Percentage of Ownership (%)	Market Value or Net Asset Value
Union Finance and Leasing International Corporation Union Information Technology Corporation Union Securities Investment Trust (USITC)	Stock Shin Kong Financial Holdings Hey-Song Corporation ERA Communications Co., Ltd. Beneficiary certificates Union Advantage Global FI Portfolio Fund Union Golden Balance Fund Union Green Energy Private Equity Limited Partnership Stock ELTA Technology Co., Ltd. Stock Fundrish Securities Co., Ltd. Beneficiary certificates Union Advantage Global FI Portfolio Fund Union Emerging Asia Bond A Union Money Market Union Golden Balance Fund Union China	- - - Securities investment trust issued by USITC Securities investment trust issued by USITC - - - Securities investment trust issued by USITC Securities investment trust issued by USITC Securities investment trust issued by USITC Securities investment trust issued by USITC Securities investment trust issued by USITC	Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss	801 4,551 425 6,114 854 3,019 566 1,068 486 1,230 83 80	$ 7,056 149,955 1,415 101,190 26,658 556,334 27,041 5,126 17,670 5,675 16,377 2,583 2,935	0.007 1.13 0.33 14.38 0.94	$ 7,056 149,955 1,415 100,828 22,653 556,334 30,300 5,126 17,670 5,675 16,377 2,583 2,935

(Continued)

118 -

Holding Company	Type and Issuer/ Name of Marketable Security	Issuer’s Relationship with Holding Company	Financial Statement Account		December 31, 2020	December 31, 2020		Note
				Shares/Piece/ Units (In Thousands)	Carrying Value	Percentage of Ownership (%)	Market Value or Net Asset Value
Union Finance International (HK) Limited Union Venture Capital Co., Ltd. Corner Ventures DAG I-U, LLC (Delaware, US)	Union Technology Fund Union APEC Balanced A Union Asian High Yield Bond A Union Global High Dividend Strategic Investment Fund (USD-A) Stock Apple Computer Inc. Obsidian Mr. Cooper Group Inc. Microsoft Corp. Nvidia Corp. Stock Greenway environmental technology CO., LTD. RFD Micro Electricity Co. Ltd. Hope vision CO., LTD. Cosmos foreign exchange Intl. Co., Ltd. Stock Dantari Pharmaceuticals, LLC Fabric Ltd. Healthy.io Limited Prismo Systems Inc.	Securities investment trust issued by USITC Securities investment trust issued by USITC Securities investment trust issued by USITC Securities investment trust issued by USITC - - - -	Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income	210 1,358 2,300 438 5 17 1 3 3 1,100 2,521 1,200 1,100 Preferred stock 260 Preferred stock 182 Preferred stock 2 Preferred stock 6 Preferred stock 31 Preferred stock 49	$ 3,920 23,340 24,667 5,095 US$ 663 US$ 11 US$ 46 US$ 667 US$ 1,567 17,761 107,543 31,954 95,046 US$ 260 US$ 992 US$ 95 US$ 291 US$ 1,559 US$ 378	2.82 15.69 2.49 9.17 - - - - - -	$ 3,920 23,340 24,667 5,095 US$ 663 US$ 11 US$ 46 US$ 667 US$ 1,567 17,761 107,543 31,954 95,046 US$ 260 US$ 992 US$ 95 US$ 291 US$ 1,559 US$ 378

(Continued)

119 -

Holding Company	Type and Issuer/ Name of Marketable Security	Issuer’s Relationship with Holding Company	Financial Statement Account		December 31, 2020	December 31, 2020		Note
				Shares/Piece/ Units (In Thousands)	Carrying Value	Percentage of Ownership (%)	Market Value or Net Asset Value
Corner Union LLC (Delaware, US) Union Private Equity Co., Ltd.	Nexar Ltd. Latigo Biotherapeutics, Inc. Oncovalent Therapeutics Inc. Twin Health, Inc. Stock Healthy.io Limited Beneficiary certificates Union Green Energy Private Equity Limited Partnership	- - -	Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss	Preferred stock 83 Preferred stock 222 Preferred stock 102 Preferred stock 186 Preferred stock 30	US$ 945 US$ 154 US$ 106 US$ 614 US$ 1,500 20	- - - - -	US$ 945 US$ 154 US$ 106 US$ 614 US$ 1,500 20

(Concluded)

120 -

TABLE 3

UNION BANK OF TAIWAN AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED OR DISPOSED OF PROPORTION SHARE INVESTMENT OF AT LEAST NT$300 MILLION OR 10% OF THE PAID-IN CAPITAL FOR THE YEARS END DECEMBER 31, 2020

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

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counterparty	Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition		Disposal	Disposal		Ending	Balance
					Number of Shares	Amount	Number of Shares	Amount	Carrying Amount	Gain (Loss) on Disposal	Number of Shares	Amount	Number of Shares	Amount
Union Bank of Taiwan Union Finance and Leasing International Corporation	Stock LINE Bank Taiwan Limited Beneficiary certificates Union Green Energy Private Equity Limited Partnership	Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss	LINE Bank Taiwan Limited Union Green Energy Private Equity Limited Partnership	- -	- -	$ - -	50,000	$ 500,000 556,334	- -	$ - -	- -	$ - -	50,000	$ 411,657 556,334

Note 1: The securities mentioned in this table refer to stocks, bonds, beneficiary certificates and securities derived from the above items.

Note 2: Investors who use the equity method in their securities accounts must fill in these two columns, the rest are not

Note 3: The accumulated buying and selling amount should be calculated separately at market price whether it reaches 300 million yuan or 10% of the paid-in capital.

121 -

TABLE 4

UNION BANK OF TAIWAN AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$300 MILLION OR 10% OF THE PAID-IN CAPITAL DECEMBER 31, 2020

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

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate		Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
Union Finance and Leasing International Corporation Union Finance and Leasing International Corporation Union Capital (Singapore) Holding Pte. Ltd. Uflc Capital (Singapore) Holding Pte. Ltd.	Union Capital (Singapore) Holding Pte. Ltd. Uflc Capital (Singapore) Holding Pte. Ltd. Kabushiki Kaisha UCJ1 (Japan) Kabushiki Kaisha UCJ1 (Japan)	Subsidiary Subsidiary Subsidiary Subsidiary	$ 726,378 (JPY 2,627,225) 1,527,228 (JPY 5,523,808) 405,284 (JPY 1,465,865) 789,493 (JPY 2,855,504)	- - - -	$ - - - -	- - - -	$ - - - -	$ - - - -

122 -

TABLE 5

UNION BANK OF TAIWAN AND SUBSIDIARIES

ASSET QUALITY - NONPERFORMING LOANS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, %)

	Period	Period		December 31, 2020	December 31, 2020	December 31, 2020			December 31, 2019	December 31, 2019	December 31, 2019
	Items		Nonperforming Loan (Note 1)	Loan	Ratio of Nonperforming Loan (Note 2)	Allowance for Possible Losses	Coverage Ratio (Note 3)	Nonperforming Loans (Note 1)	Loans	Ratio of Nonperforming Loans (Note 2)	Allowance for Credit Losses	Coverage Ratio (Note 3)
Corporate banking	Secured		$ 239,421	$112,515,889	0.21%	$ 1,751,804	507.05%	$ 264,677	$105,089,682	0.25%	$ 1,609,158	464.60%
	Unsecured		106,065	68,184,808	0.16%			81,673	65,572,028	0.12%
Consumer banking	Housingmortgage(Note 4)		150,626	191,585,318	0.08%	2,410,675	1,600.44%	113,546	169,441,368	0.07%	2,132,294	1,877.91%
	Cash card		86	15,487	0.56%	2,811	3,268.60%	613	22,454	2.73%	4,407	718.92%
	Small-scale credit loans(Note5)		90,413	35,040,265	0.26%	380,303	420.63%	96,288	29,698,095	0.32%	331,493	344.27%
	Other (Note 6)	Secured	17,774	19,393,472	0.09%	232,640	1,221.72%	16,482	18,483,090	0.09%	221,603	1,331.51%
		Unsecured	1,268	2,347,963	0.05%			161	2,376,022	0.01%
Loan			605,653	429,083,202	0.14%	4,778,233	788.94%	573,440	390,682,739	0.15%	4,298,955	749.68%
			Nonperforming Receivables (Note 1)	Receivables	Ratio of Nonperforming Receivables (Note 2)	Allowance for Credit Losses	Coverage Ratio (Note 3)	Nonperforming Receivables (Note 1)	Receivables	Ratio of Nonperforming Receivables (Note 2)	Allowance for Credit Losses	Coverage Ratio (Note 3)
Credit cards			25,247	17,280,465	0.15%	142,695	565.20%	36,959	16,237,934	0.23%	159,838	432.47%
Accounts receivable factoredwithout recourse			-	480,043	-	4,800	-	-	443,208	-	4,432	-

Note 1: Nonperforming loans are reported to the authorities and disclosed to the public, as required by the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Non-accrued Loans.” Nonperforming credit card receivables are reported to the authorities and disclosed to the public, as required by the Banking Bureau’s letter dated July 6, 2005 (Ref. No. 0944000378).
Note 2: Ratio of nonperforming loans: Nonperforming loans ÷ Outstanding loan balance.

Ratio of nonperforming credit card receivables: Nonperforming credit card receivables ÷ Outstanding credit card receivables balance.

Note 3: Coverage ratio of loans: Allowance for possible losses for loans ÷ Nonperforming loans.

Coverage ratio of credit card receivables: Allowance for possible losses for credit card receivables ÷ Nonperforming credit card receivables.

Note 4: The mortgage loan is for house purchase or renovation and is fully secured by housing that is purchased (owned) by the borrower, the spouse or the minor children of the borrowers.
Note 5: Based on the Banking Bureau’s letter dated December 19, 2005 (Ref. No. 09440010950), small-scale credit loans are unsecured, in small amounts and exclude credit cards and cash cards.
Note 6: Other consumer banking loans refer to secured or unsecured loans that exclude housing mortgage, cash cards, credit cards and small-scale credit loans.
Note 7: As required by the Banking Bureau in its letter dated July 19, 2005 (Ref. No. 094000494), accounts receivable factored without recourse are reported as nonperforming receivables within three months after the factors or insurance companies refuse to indemnify banks for any liabilities on these accounts.

(Continued)

123 -

Not reported as nonperforming loans or nonperforming receivables

Items Types	December 31, 2020	December 31, 2020	December 31, 2019	December 31, 2019
	Not Reported as Nonperforming Loan	Not Reported as Nonperforming Receivable	Not Reported as Nonperforming Loan	Not Reported as Nonperforming Receivable
Amounts of executed contracts on negotiated debts not reported as nonperforming loans and receivables(Note 1)	$ 14,432	$ 68,937	$ 21,195	$ 96,575
Amounts of discharged and executed contracts on clearance of consumer debts not reported as nonperforming loans and receivables (Note 2)	198,375	730,286	136,314	738,307
Total	212,807	799,223	157,509	834,882

Note 1: Amounts of executed contracts on negotiated debts that are not reported as nonperforming loans or receivables are reported in accordance with the Banking Bureau’s letter dated April 25, 2006 (Ref. No. 09510001270).

Note 2: Amounts of discharged and executed contracts on clearance of consumer debts that are not reported as nonperforming loans or receivables are reported in accordance with the Banking Bureau’s letter dated September 15, 2008 (Ref. No. 09700318940).

(Concluded)

124 -

TABLE 6

UNION BANK OF TAIWAN AND SUBSIDIARIES

INFORMATION ON AND PROPORTIONATE SHARE IN INVESTEES DECEMBER 31, 2020

(In Thousands of New Taiwan Dollars)

Investor Company	Investee Company	Location	Main Business and Product	Percentage of Ownership (%)	Carrying Value	Investment Gain (Loss)	Proportionate Share of the Bank and Its Subsidiaries in Investees	Proportionate Share of the Bank and Its Subsidiaries in Investees	Proportionate Share of the Bank and Its Subsidiaries in Investees	Proportionate Share of the Bank and Its Subsidiaries in Investees	Note
							Shares (Thousands)	Pro Forma Shares (Note 2)	Total
									Shares (Thousands)	Percentage of Ownership (%)
Union bank of Taiwan Union Finance and Leasing International Corporation Union Capital (Cayman) Corp.	Financial-related Union Finance and Leasing International Corporation Union Finance International (HK) Limited Union Securities Investment Trust Corporation Union Information Technology Corporation Union Venture Capital Corporation Ipass Corporation Taiwan Gin Lian Asset Management Corporation Taiwan Financial Asset Service Corporation Sunny Asset Management Co. Taipei Forex Inc. Financial Information Service Co., Ltd. Taiwan Depository & Clearing Corporation Taiwan Futures Exchange Co., Ltd. Taiwan Mobile Payment Corporation LINE BIZ+ Taiwan., Ltd. Nonfinancial-related Union Real-Estate Management Corporation Fu Hua Venture Corporation Li Yu Venture Corporation Lian An Service Corporation Taiwan Power Corporation LINE Bank Taiwan Limited Nonfinancial-related Union Capital (Cayman) Corp. New Asian Ventures Ltd. Nonfinancial-related Union Capital (Singapore) Holding Pte. Ltd. Uflc Capital (Singapore) Holding Pte. Ltd.	Taipei Hong Kong Taipei Taipei Taipei Kaohsiung Taipei Taipei Taipei Taipei Taipei Taipei Taipei Taipei Taipei Taipei Taipei Taipei Taipei Taipei Taipei Cayman BVI Singapore Singapore	Installment, leasing and accounts receivable factoring Import and export accommodation Securities investment trust Software and hardware product retail and distribution, system programming development, system development outsourcing, website design, e-commerce, etc. Venture Investment IC card Purchase, sale and management of nonperforming loans from financial institutions Property auction Purchase, sell and manage nonperforming loans from financial institution Foreign exchange brokering Information service Financial service Futures clearing International trade, data processing service Data processing, digital information supply and third party payment services Construction plan review and consulting Investment Investment Security service Electricity - related business Banking Investments, overseas financing, equipment leasing, installment selling, acquisition of account receivable Investments, overseas financing, equipment leasing, installment selling, acquisition of account receivable Investments, overseas financing, equipment leasing, installment selling, acquisition of account receivable Investments, overseas financing, equipment leasing, installment selling, acquisition of account receivable	100.00 99.99 99.60 99.99 100.00 11.40 0.57 2.94 6.44 0.81 2.47 0.25 2.04 1.00 10.00 40.00 5.00 4.76 5.00 0.0012 5.00 100.00 100.00 100.00 100.00	$ 2,998,319 129,604 414,021 13,462 770,676 60,044 77,164 48,105 4,366 7,352 309,392 65,631 474,583 3,213 1,484,708 52,281 1,558 4,076 1,517 3,651 411,657 59,507 51,998 71,359 (JPY 258,098) 87,823 (JPY 317,646)	$ 33,995 30,813 24,241 (543) (12,225) - - - - - - - - - (50,261) (232) - - - - - 58,188 799 1,682 (JPY 6,052) (4,855) (JPY 17,470)	153,000 30,000 31,014 1,000 80,000 13,000 6,000 5,000 386 160 12,875 945 7,216 600 5,471 2,000 156 558 125 395 50,000 50 - - -	- - - - - - - - - - - - - - - - - - - - - - - -	153,000 30,000 31,014 1,000 80,000 13,000 6,000 5,000 386 160 12,875 945 7,216 600 5,471 2,000 156 558 125 395 50,000 50 - - -	100.00 99.99 99.60 99.99 100.00 11.40 0.57 2.94 6.44 0.81 2.47 0.25 2.04 1.00 10.00 40.00 5.00 4.76 5.00 0.0012 5.00 100.00 100.00 100.00 100.00	Note 3 Note 4 Note 4

(Continued)

125 -

Investor Company	Investee Company	Location	Main Business and Product	Percentage of Ownership (%)	Carrying Value	Investment Gain (Loss)	Proportionate Share of the Bank and Its Subsidiaries in Investees	Proportionate Share of the Bank and Its Subsidiaries in Investees	Proportionate Share of the Bank and Its Subsidiaries in Investees	Proportionate Share of the Bank and Its Subsidiaries in Investees	Note
							Shares (Thousands)	Pro Forma Shares (Note 2)	Total
									Shares (Thousands)	Percentage of Ownership (%)
Union Capital (Singapore) Holding Pte. Ltd. Kabushiki Kaisha UCJ1 Uflc Capital (Singapore) Holding Pte. Ltd. Union Securities Investment Trust Co., Ltd. Union Venture Capital Co., Ltd. Corner Union Venture Capital, LLC.	Nonfinancial-related Kabushiki Kaisha UCJ1 Tokutei Mokuteki Kaisha SSG15 Nonfinancial-related Tokutei Mokuteki Kaisha SSG15 Tokutei Mokuteki Kaisha SSG12 Tokutei Mokuteki Kaisha SSG16 Nonfinancial-related Kabushiki Kaisha UCJ1 Tokutei Mokuteki Kaisha SSG12 Tokutei Mokuteki Kaisha SSG16 Financial-related Union Private Equity Co., Ltd. Nonfinancial-related Na He Yi Hau Electric Power Inc. Ting Jie Electric Power Inc. Union Energy Co., Ltd. Corner Union Venture Capital, LLC. Nonfinancial-related Corner Ventures DAG I-U, LLC. Corner Union, LLC.	Japan Japan Japan Japan Japan Japan Japan Japan Taiwan Taiwan Taiwan Taiwan United States of America United States of America United States of America	Buy, sell and lease real estate Real estate securitization Real estate securitization Real estate securitization Real estate securitization Buy, sell and lease real estate Real estate securitization Real estate securitization Investment services Electricity - related business Electricity - related business Investment advisory services and energy related business Investment Investment Investment	30.55 49.00 51.00 51.00 51.00 69.45 49.00 49.00 100.00 99.93 90.00 100.00 100.00 100.00 100.00	$ 134,251 (JPY 485,570) 214,705 (JPY 776,564) 223,454 (JPY 808,209) 289,552 (JPY 1,047,276) 193,439 (JPY 699,647) 305,215 (JPY 1,103,926) 278,211 (JPY 1,006,256) 185,867 (JPY 672,260) 29,492 144,447 (1,795) 99 234,511 (US$ 7,950) 185,106 (US$ 6,493) 41,952 (US$ 1,472)	$ 1,140 (JPY 4,103) 21,069 (JPY 75,814) 21,929 (JPY 78,909) 16,815 (JPY 62,976) 10,184 (JPY 36,647) 2,593 (JPY 9,329) 16,815 (JPY 60,506) 9,785 (JPY 35,210) (508) (4,453) (2,695) (1) 2,201 (US$ 74) 713 (US$ 24) 840 (US$ 28)	9 Note 6 Preferred stock 15 Preferred stock 20 Preferred stock 13 21 Note 7 Note 5 3,000 14,890 90 10 - - -	- - - - - - - -	9 Note 6 Preferred stock 15 Preferred stock 20 Preferred stock 13 21 Note 7 Note 5 3,000 14,890 90 10 - - -	30.55 49.00 51.00 51.00 51.00 69.45 49.00 49.00 100.00 99.93 90.00 100.00 100.00 100.00 100.00	Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4

Note 1: Except for LINE BIZ+ Taiwan., Ltd., the investees’ information shown above is based on audited financial reports as of December 31, 2020.
Note 2: Pro forma shares are considered if equity securities - convertible bonds, warrants, etc. - or derivative contracts such as stock options, are converted to shares.

Note 3: Union Capital (Singapore) Holding Pte. Ltd., Uflc Capital (Singapore) Holding Pte. Ltd. and Tokutei Mokuteki Kaisha SSG15, SSG12 and SSG16 - the audited statements of stockholders’ equity as of September 30, 2019. Kabushiki Kaisha UCJ1 - unaudited statements of stockholders’ equity as of September 30, 2020.

Note 4: Refers to 1 share of common stock and 13 thousand shares of preferred stock.
Note 5: Refers to 1 share of common stock and 14 thousand shares of preferred stock.
Note 6: Refers to 1 share of common stock and 19 thousand shares of preferred stock.

(Concluded)

126 -

TABLE 7

UNION BANK OF TAIWAN AND SUBSIDIARIES

BUSINESS RELATIONSHIP AND SIGNIFICANT TRANSACTIONS AMONG THE BANK AND SUBSIDIARIES FOR THE YEAR ENDED DECEMBER 31, 2020

(In Thousands of New Taiwan Dollars)

No. (Note 1)	Transacting Corporation	Counterparty	Flow of Transaction (Note 2)	Description of Transaction	Description of Transaction
				Financial Statement Account	Amount	Trading Terms	Percentage of Total Revenue or Total Assets (Note 3)
0 0 0 1 0 1 0 1 0 1 0 3 0 3 0 3 0 3 0 4 0 0 5 0 5 0 5 0 5 0 5 3 3 6 3 6 6	The Bank The Bank The Bank UFLIC and its subsidiaries The Bank UFLIC and its subsidiaries The Bank UFLIC and its subsidiaries The Bank UFLIC and its subsidiaries The Bank UIT The Bank UIT The Bank UIT The Bank UIT The Bank UVC and its subsidiaries The Bank The Bank USITC and its subsidiaries The Bank USITC The Bank USITC The Bank USITC The Bank USITC UIT UIT UFLIC UIT UFLIC UFLIC	UFLIC and its subsidiaries UFLIC and its subsidiaries UFLIC and its subsidiaries The Bank UFLIC and its subsidiaries The Bank UFLIC and its subsidiaries The Bank UFLIC and its subsidiaries The Bank UIT The Bank UIT The Bank UIT The Bank UIT The Bank UVC and its subsidiaries The Bank USITC and its subsidiaries USITC and its subsidiaries The Bank USITC The Bank USITC The Bank USITC The Bank USITC The Bank UFLIC UFLIC UIT UFLIC UIT Union Capital (Cayman) Corp.	a a a b a b a b a b a b a b a b a b a b a a b a b a b a b a b c c c c c c	Deposits and remittances - demand deposits Deposits and remittances - checking deposits Deposits and remittances - time deposits Call loans and due to other banks - call loans from banks Discounts and loans Due from banks Other operating expenses Rental revenue Interest revenue Interest expense Deposits and remittances - demand deposits Call loans and due to other banks - call loans from banks Other assets Other liabilities Net revenues other than interest Other operating expenses Accrued payables - expense Receivables - accounts receivables Deposits and remittances - demand deposits Call loans and due to other banks - call loans from banks Deposits and remittances - demand deposits Deposits and remittances - time deposits Call loans and due to other banks - call loans from banks Deposits and remittances - time deposits Other financial assets Accrued payables - expense Receivables - accounts receivables Interest expense Interest revenue Commissions and fee revenue Commissions and fee expense Net revenues other than interest proprietary and broking sales revenue Other operating expenses Net revenues other than interest Other operating expenses Receivables - receivables from related parties	$ 182,638 11,787 879,031 1,073,456 1,459,606 1,459,606 11,061 11,061 28,721 28,721 29,362 29,362 29,237 29,237 136,744 136,744 4,410 4,410 77,952 77,952 29,839 29,700 59,539 168,600 168,600 3,616 3,616 1,727 1,727 9,829 9,829 248 1,699 1,947 1,236 1,236 2,267,544	Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4	0.02 0.00 0.12 0.14 0.19 0.19 0.08 0.08 0.20 0.20 0.00 0.00 0.00 0.00 0.95 0.95 0.00 0.00 0.01 0.01 0.00 0.00 0.01 0.02 0.02 0.00 0.00 0.01 0.01 0.07 0.07 0.00 0.01 0.01 0.01 0.01 0.30

(Continued)

127 -

No. (Note 1)	Transacting Corporation	Counterparty	Flow of Transaction (Note 2)	Description of Transaction	Description of Transaction
				Financial Statement Account	Amount	Trading Terms	Percentage of Total Revenue or Total Assets (Note 3)
7 6 7 7 8 7 10 7 8 7 10 8 9 10 9 8 9 10 9	Union Capital (Cayman) Corp. UFLIC Union Capital (Cayman) Corp. Union Capital (Cayman) Corp. Union Capital (Singapore) Holding Pte. Ltd. Union Capital (Cayman) Corp. Uflc Capital (Singapore) Holding Pte. Ltd. Union Capital (Cayman) Corp. Union Capital (Singapore) Holding Pte. Ltd. Union Capital (Cayman) Corp. Uflc Capital (Singapore) Holding Pte. Ltd. Union Capital (Singapore) Holding Pte. Ltd. Kabushiki Kaisha UCJ1 Uflc Capital (Singapore) Holding Pte. Ltd. Kabushiki Kaisha UCJ1 Union Capital (Singapore) Holding Pte. Ltd. Kabushiki Kaisha UCJ1 Uflc Capital (Singapore) Holding Pte. Ltd. Kabushiki Kaisha UCJ1	UFLIC Union Capital (Cayman) Corp. UFLIC Union Capital (Singapore) Holding Pte. Ltd. Union Capital (Cayman) Corp. Uflc Capital (Singapore) Holding Pte. Ltd. Union Capital (Cayman) Corp. Union Capital (Singapore) Holding Pte. Ltd. Union Capital (Cayman) Corp. Uflc Capital (Singapore) Holding Pte. Ltd. Union Capital (Cayman) Corp. Kabushiki Kaisha UCJ1 Union Capital (Singapore) Holding Pte. Ltd. Kabushiki Kaisha UCJ1 Uflc Capital (Singapore) Holding Pte. Ltd. Kabushiki Kaisha UCJ1 Union Capital (Singapore) Holding Pte. Ltd. Kabushiki Kaisha UCJ1 Uflc Capital (Singapore) Holding Pte. Ltd.	c c c c c c c c c c c c c c c c c c c	Payables - payables to related parties Interest revenue Interest expense Receivables - receivables from related parties Payables - payables to related parties Receivables - receivables from related parties Payables - payables to related parties Interest revenue Interest expense Interest revenue Interest expense Receivables - receivables from related parties Payables - payables to related parties Receivables - receivables from related parties Payables - payables to related parties Interest revenue Interest expense Interest revenue Interest expense	$ 2,267,544 21,493 21,493 727,512 727,512 1,540,032 1,540,032 10,952 10,952 23,027 23,027 405,650 405,650 803,351 803,351 11,233 11,233 21,870 21,870	Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4	0.30 0.15 0.15 0.10 0.10 0.20 0.20 0.08 0.08 0.16 0.16 0.05 0.05 0.11 0.11 0.08 0.08 0.15 0.15

Note 1: The transacting corporation is identified in the No. column as follows:

a. 0 for parent company. b. Sequentially from 1 for subsidiaries.

Note 2: The flow of transactions is as follows:

a. From parent company to subsidiary. b. From subsidiary to parent company. c. Between subsidiaries.

Note 3: The percentage is calculated as follows:

a. Assets and liabilities: Ending balance divided by total consolidated assets.
b. Income and expenses: The amount at the end of the year divided by consolidated net income

Note 4: The terms of the transactions between the Bank and related parties were similar to those for unrelated parties.

Note 5: Referring to transactions exceeding $100,000 thousand.

(Concluded)

128 -

TABLE 8

UNION BANK OF TAIWAN AND SUBSIDIARIES

INFORMATION OF MAJOR SHAREHOLDERS FOR THE YEAR ENDED DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars)

Name of Major Shareholder	Shares	Shares	Shares
	Number of Shares			Percentage of Ownership (%)
	Ordinary Shares	Preferred Shares	Total
Tsong-Li Investment Co., Ltd. Pai-Sheng Investment Co., Ltd	246,153 156,818	- 8,167	246,153 164,985	7.47 5.00

Note 1: The information of major shareholders presented in this table is provided by the Taiwan Depository & Clearing Corporation based on the number of ordinary shares and preferred shares held by shareholders with ownership of 5% or greater, that have been issued without physical registration (including treasury shares) by the Company as of the last business day for the current quarter. The share capital in the consolidated financial statements may differ from the actual number of shares that have been issued without physical registration because of different preparation basis.
Note 2: If a shareholder delivers the shareholdings to the trust, the above information will be disclosed by the individual truster who opened the trust account. For shareholders who declare insider shareholdings with ownership greater than 10% in accordance with the Security and Exchange Act, the shareholdings include shares held by shareholders and those delivered to the trust over which shareholders have rights to determine the use of trust property. For information relating to insider shareholding declaration, please refer to Market Observation Post System.
129 -

	December 31	December 31	December 31
2020 2019 $ 1,741,760 $ 1,439,735 For the Year Ended December 31
		2020 2019 $ 742,370 $ 617,766 $ 444,225 $ 442,886 December 31
	2020 2019 $ 1,723,121 $ 1,415,180 December 31
2020 2019 0.73%-1.78% 0.89%-1.72% For the Year Ended December 31
		2020 $ 195,687 $ (633,996)	2019 $ 203,796 $ (640,629)

AI assistant

UBOT — Annual Report 2020

52203_rns_2020-11-16_d27d3a9c-9b0a-495e-b264-2433eaebdd13.pdf

Union Bank of Taiwan and Subsidiaries

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

INDEPENDENT AUDITORS’ REPORT

Opinion

Basis for Opinion

Key Audit Matters

Other Matter

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Notice to Readers

UNION BANK OF TAIWAN AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

UNION BANK OF TAIWAN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

UNION BANK OF TAIWAN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

UNION BANK OF TAIWAN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

UNION BANK OF TAIWAN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

UNION BANK OF TAIWAN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

UNION BANK OF TAIWAN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

UNION BANK OF TAIWAN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

UNION BANK OF TAIWAN AND SUBSIDIARIES

1. GENERAL INFORMATION

2. APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

Hedging accounting

7) Amendments to IAS 8 “Definition of Accounting Estimates”

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

Basis of Preparation

Basis of Consolidation

Changes in the Company’s ownership interests in existing subsidiaries

Foreign Currencies

Investments Accounted for Using the Equity Method

Financial Instruments

a. Financial assets

1) Measurement categories

a) Financial assets at FVTPL

b. Equity instruments

Financial guarantee contracts

Nonperforming Loans

Repurchase and Resale Transactions

Property and Equipment

Investment Properties

Goodwill

Intangible Assets

Intangible assets acquired separately

Derecognition

Foreclosed Collaterals

Impairment of Tangible and Intangible Assets (Excluding Goodwill)

Leasing

Provisions

Employee Benefits

a. Short-term employee benefits

b. Retirement benefits

d. Termination benefits

Income Tax

Interest Revenue and Service Fees

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION

UNCERTAINTY

Estimated Impairment of Financial Assets

6. CASH AND CASH EQUIVALENTS

7. DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS

8. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

9. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

10. INVESTMENTS IN DEBT INSTRUMENTS AT AMORTIZED COST

11. CREDIT RISK MANAGEMENT FOR INVESTMENTS IN DEBT INSTRUMENTS

12. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL

13. RECEIVABLES, NET

14. DISCOUNTS AND LOANS, NET

15. BAD-DEBT EXPENSES AND PROVISION FOR LOSSES ON COMMITMENTS AND GUARANTEES

16. SUBSIDIARIES

UBOT Annual Report 2020