Taishin Financial Holding Co., Ltd. and Subsidiaries
Consolidated Financial Statements for the Six Months Ended June 30, 2014 and 2013 and Independent Auditors’ Report
WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 INDEPENDENT AUDITORS’ REPORT
The Board of Directors and Shareholders Taishin Financial Holding Co., Ltd.
We have audited the accompanying consolidated balance sheets of Taishin Financial Holding Co., Ltd. (“Taishin Financial Holding”) and its subsidiaries (collectively referred to as the “Group”) as of June 30, 2014, December 31, 2013 and June 30, 2013 and the related consolidated statements of comprehensive income for the three months ended June 30, 2014 and 2013, six months ended June 30, 2014 and 2013, and changes in equity and cash flows for the six months ended June 30, 2014 and 2013. These consolidated financial statements are the responsibility of Taishin Financial Holding and subsidiaries’ management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants, Rules Governing the Audit of Financial Statements of Financial Institutions by Certified Public Accountants, and auditing standards generally accepted in the Republic of China (“ROC”). Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statements presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the accompanying consolidated financial statements referred to above present fairly, in all material respects, the financial position of Taishin Financial Holding and its subsidiaries as of June 30, 2014, December 31, 2013 and June 30, 2013, the results of their operations for the three months ended June 30, 2014 and 2013, six months ended June 30, 2014 and 2013, and their cash flows for the six months ended June 30, 2014 and 2013, in conformity with the Regulations Governing the Preparation of Financial Statements by Financial Holding Companies, Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms, Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Accounting Standards 34 “Interim Financial Reporting” endorsed by the Financial Supervisory Commission of the ROC.
- 1 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 We have also audited the accompanying schedules of significant accounts, provided for supplementary analysis, by applying the same procedures described above. In our opinion, such schedules are consistent, in all material respects with the financial statements referred to above.
August 22, 2014
Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the ROC and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the ROC.
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 ROC. 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.
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CONSOLIDATED BALANCE SHEETS (In Thousands of New Taiwan Dollars)
June 30, 2014 December 31, 2013 June 30, 2013 ASSETS Amount % Amount % Amount %
Cash and cash equivalents (Notes 5 and 7) $ 53,505,258 2 $ 61,516,953 2 $ 56,582,504 2
Due from the central bank and call loans to other banks (Note 8) 134,625,141 4 124,152,449 4 141,565,296 5
Financial assets at fair value through profit or loss (Notes 5 and 9) 106,452,360 4 102,817,889 4 90,680,427 3
Available-for-sale financial assets, net (Notes 5, 10 and 33) 281,299,974 9 251,947,289 9 228,224,328 8
Derivative financial assets for hedging (Notes 5 and 11) 40,385 - 62,494 - 82,629 -
Securities purchased under resell agreements (Note 5) 354,313 - 9,470,428 - 6,936,868 -
Receivables, net (Notes 5, 12 and 13) 118,490,290 4 107,590,190 4 98,137,437 4
Current tax assets (Note 5) 1,258,290 - 1,759,870 - 1,623,794 -
Loans, net (Notes 5, 6 and 13) 1,959,204,680 64 1,845,715,026 64 1,822,578,268 66
Held-to-maturity financial assets, net (Notes 5 and 14) 184,543,904 6 228,942,921 8 188,438,984 7
Investments accounted for using the equity method, net (Notes 5 and 15) 73,126 - 221,229 - 243,235 -
OTHER FINANCIAL ASSETS, NET Financial assets carried at cost, net (Note 16) 7,358,548 1 7,334,016 - 8,108,074 - Debt investments without active market (Note 17) 3,643,951 - 4,111,523 - 4,106,472 - Other miscellaneous financial assets, net (Notes 13 and 18) 93,916,395 3 36,062,303 2 15,454,246 1
Other financial assets, net 104,918,894 4 47,507,842 2 27,668,792 1
Investment property, net (Notes 5 and 19) 11,767,838 - 11,808,520 - 11,606,932 1
Property and equipment, net (Notes 5 and 20) 41,653,161 1 41,530,667 2 41,661,573 2
Intangible assets, net (Notes 5 and 21) 22,004,736 1 21,563,628 1 21,644,880 1
Deferred tax assets (Notes 5 and 6) 7,209,506 - 7,809,571 - 8,485,925 -
Other assets, net (Note 22) 18,927,477 1 6,569,720 - 8,924,019 -
TOTAL $ 3,046,329,333 100 $ 2,870,986,686 100 $ 2,755,085,891 100
LIABILITIES AND EQUITY
Due to the Central Bank and banks (Note 23) $ 207,698,778 7 $ 176,662,165 6 $ 155,606,337 6
Due to banks - credit 447,675 - - - - -
Financial liabilities at fair value through profit or loss (Notes 5 and 9) 25,939,845 1 16,237,369 1 16,917,216 1
Derivative financial liabilities for hedging (Notes 5 and 11) 2,292 - - - - -
Securities sold under repurchase agreements (Note 5) 63,850,250 2 37,932,722 1 33,873,788 1
Commercial papers issued, net (Note 24) 460,647 - - - - -
Payables (Note 25) 57,451,099 2 46,370,940 2 56,573,168 2
Current tax liabilities (Note 5) 4,534,809 - 4,248,028 - 3,813,721 -
Deposits and remittances (Note 26) 2,294,497,695 75 2,250,576,346 79 2,170,854,589 79
Bonds payable (Note 27) 108,179,189 4 90,322,818 3 90,308,743 3
Other borrowings (Note 28) 4,556,117 - 2,287,315 - 646,950 -
Reserve for liabilities (Notes 5 and 29) 4,513,774 - 4,422,703 - 4,314,536 -
Other financial liabilities (Note 30) 52,675,015 2 32,803,503 1 23,152,621 1
Deferred tax liabilities (Note 5) 6,638,806 - 6,711,208 - 6,455,021 -
Other liabilities (Note 31) 5,017,710 - 4,422,327 - 3,892,856 -
Total liabilities 2,836,463,701 93 2,672,997,444 93 2,566,409,546 93
EQUITY ATTRIBUTABLE TO OWNERS OF PARENT (Note 33) Capital stock Common stock 80,356,314 3 75,116,532 3 68,915,233 3 Preferred stock 7,251,368 - 7,251,368 - 7,251,368 - Stock dividends to be distributed 7,987,008 - - - 6,139,767 - Advance receipts for capital stock 33,770 - 180,170 - - - Capital surplus 10,615,976 - 9,478,327 - 9,443,781 - Retained earnings Legal reserve 5,315,307 - 3,939,770 - 3,939,770 - Special reserve 465,368 - 465,368 - 465,368 - Unappropriated earnings 9,035,319 1 13,755,369 1 8,236,802 1 Other equity Exchange differences on translation of foreign financial statements (2,303 ) - 68,688 - 53,917 - Unrealized gains (losses) on available-for-sale financial assets 930,215 - 875,995 - 264,471 -
Equity attributable to owners of parent 121,988,342 4 111,131,587 4 104,710,477 4
NON-CONTROLLING INTERESTS 87,877,290 3 86,857,655 3 83,965,868 3
Total equity 209,865,632 7 197,989,242 7 188,676,345 7
TOTAL $ 3,046,329,333 100 $ 2,870,986,686 100 $ 2,755,085,891 100
The accompanying notes are an integral part of the consolidated financial statements
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)
For the Three Months Ended June 30 For the Six Months Ended June 30 2014 2013 2014 2013 Amount % Amount % Amount % Amount %
INTEREST INCOME (Notes 5 and 34) $ 14,438,994 100 $ 12,497,020 82 $ 28,280,179 92 $ 24,635,207 85
INTEREST EXPENSES (Note 34) (5,823,592 ) (40 ) (4,701,264 ) (31 ) (11,328,166 ) (37 ) (9,350,056 ) (32 )
NET INTEREST INCOME (Note 34) 8,615,402 60 7,795,756 51 16,952,013 55 15,285,151 53
NET INCOME OTHER THAN NET INTEREST INCOME (Note 5) Net service fee and commissions income (Note 35) 3,840,238 27 3,461,876 23 7,588,562 25 6,770,449 23 Gain on financial assets and liabilities at fair value through profit or loss (Note 36) 1,433,080 10 2,719,150 18 3,764,501 12 6,619,769 23 Realized gain on available-for-sale financial assets (Note 37) 26,898 - 1,812,457 12 99,174 - 2,801,652 10 Foreign exchange gain (loss) 26,975 - (1,079,715 ) (7 ) 833,599 3 (3,204,401 ) (11 ) Impairment loss on assets (Note 16) (6,053 ) - (67,614 ) - (6,053 ) - (147,764 ) (1 ) Share of profit (loss) of associates and joint ventures accounted for using equity method (Note 15) 6,609 - 7,214 - 12,580 - 14,690 - Net other non-interest income Gain on disposal of non-performing loans - - - - 719,705 2 - - Other miscellaneous net income 461,760 3 493,236 3 875,257 3 733,712 3
Net income other than net interest income 5,789,507 40 7,346,604 49 13,887,325 45 13,588,107 47
NET REVENUE AND GAINS 14,404,909 100 15,142,360 100 30,839,338 100 28,873,258 100
REVERSED ALLOWANCE FOR BAD DEBTS EXPENSES AND GUARANTEE LIABILITY PROVISIONS (Notes 5 and 13) 1,228,837 8 173,286 1 1,231,341 4 848,273 3
OPERATING EXPENSES Employee benefits expenses (Note 38) (5,299,353 ) (37 ) (4,803,062 ) (32 ) (10,568,034 ) (34 ) (9,541,825 ) (33 ) Depreciation and amortization expenses (Note 39) (396,477 ) (3 ) (370,472 ) (2 ) (790,724 ) (3 ) (743,318 ) (3 ) Other general and administrative expenses (2,695,708 ) (18 ) (2,510,852 ) (17 ) (5,030,752 ) (16 ) (4,709,796 ) (16 )
Total operating expenses (8,391,538 ) (58 ) (7,684,386 ) (51 ) (16,389,510 ) (53 ) (14,994,939 ) (52 )
INCOME BEFORE INCOME TAX 7,242,208 50 7,631,260 50 15,681,169 51 14,726,592 51
INCOME TAX EXPENSE (Notes 5 and 40) (852,139 ) (6 ) (1,737,311 ) (11 ) (2,069,513 ) (7 ) (2,834,430 ) (10 )
NET INCOME 6,390,069 44 5,893,949 39 13,611,656 44 11,892,162 41 (Continued)
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)
For the Three Months Ended June 30 For the Six Months Ended June 30 2014 2013 2014 2013 Amount % Amount % Amount % Amount %
OTHER COMPREHENSIVE INCOME Exchange differences on translation of foreign financial statements $ (296,966 ) (2 ) $ 80,111 - $ (219,296 ) (1 ) $ 312,961 1 Unrealized gains (losses) on available-for-sale financial assets 150,497 1 (2,109,348 ) (14 ) 233,406 1 (2,935,767 ) (10 ) Income tax relating to the components of other comprehensive income (loss) (2,672 ) - 258,061 2 1,064 - 309,290 1
Other comprehensive income (loss), net of tax (149,141 ) (1 ) (1,771,176 ) (12 ) 15,174 - (2,313,516 ) (8 )
TOTAL COMPREHENSIVE INCOME $ 6,240,928 43 $ 4,122,773 27 $ 13,626,830 44 $ 9,578,646 33
NET INCOME ATTRIBUTABLE TO: Owners of parent $ 4,211,567 29 $ 4,081,807 27 $ 9,035,319 29 $ 8,263,496 29 Non-controlling interests 2,178,502 15 1,812,142 12 4,576,337 15 3,628,666 12
$ 6,390,069 44 $ 5,893,949 39 $ 13,611,656 44 $ 11,892,162 41
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of parent $ 4,161,906 29 $ 2,482,828 16 $ 9,018,548 29 $ 6,181,277 21 Non-controlling interests 2,079,022 14 1,639,945 11 4,608,282 15 3,397,369 12
$ 6,240,928 43 $ 4,122,773 27 $ 13,626,830 44 $ 9,578,646 33
EARNINGS PER SHARE (Note 41) Basic $0.50 $0.51 $1.11 $1.04 Diluted $0.48 $0.50 $1.06 $1.00
The accompanying notes are an integral part of the consolidated financial statements. (Concluded)
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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars)
Equity Attributable to Owners of the Parent Other Equity Exchange Differences on Unrealized Gains Capital Stock Capital Surplus Translation of (Losses) on Advanced Additional Retained Earnings Foreign Available- Stock Dividends Receipts for Paid-in Capital Treasury Stock Stock-based Unappropriated Financial for-sale Non-controlling Common Stock Preferred Stock to Be Distributed Capital Stock in Excess of Par Transactions Compensation Legal Reserve Special Reserve Earnings Statements Financial Assets Interests Total
BALANCE, JANUARY 1, 2013 $ 68,914,473 $ 7,251,368 $ - $ - $ 7,005,072 $ 2,075,475 $ 329,210 $ 2,942,721 $ 244,474 $ 10,164,169 $ (58,334 ) $ 2,458,941 $ 81,127,472 $ 182,455,041
Special reserve under Rule No. 1010012865 is issued by FSC ------220,376 (220,376 ) - - - -
Special reserve under Rule No. 1010045494 is issued by FSC ------518 - - - - 518
Appropriation of 2013 earnings Legal reserve ------997,049 - (997,049 ) - - - - Cash dividends on common stock ------(1,534,942 ) - - - (1,534,942 ) Cash dividends on preferred stock ------(1,298,729 ) - - - (1,298,729 ) Stock dividends - - 6,139,767 ------(6,139,767 ) - - - -
Net income for the six months ended June 30, 2013 ------8,263,496 - - 3,628,666 11,892,162
Other comprehensive income for the six months ended June 30, 2013, net of tax ------112,251 (2,194,470 ) (231,297 ) (2,313,516 )
Total comprehensive income for the six months ended June 30, 2013 ------8,263,496 112,251 (2,194,470 ) 3,397,369 9,578,646
Share-based payments 760 - - - 536 - 33,488 - - - - - 32 34,816
Subsidiary cash dividends ------(559,005 ) (559,005 )
BALANCE, JUNE 30, 2013 $ 68,915,233 $ 7,251,368 $ 6,139,767 $ - $ 7,005,608 $ 2,075,475 $ 362,698 $ 3,939,770 $ 465,368 $ 8,236,802 $ 53,917 $ 264,471 $ 83,965,868 $ 188,676,345
BALANCE, JANUARY 1, 2014 $ 75,116,532 $ 7,251,368 $ - $ 180,170 $ 7,077,571 $ 2,075,475 $ 325,281 $ 3,939,770 $ 465,368 $ 13,755,369 $ 68,688 $ 875,995 $ 86,857,655 $ 197,989,242
Appropriation of 2014 earnings Legal reserve ------1,375,537 - (1,375,537 ) - - - - Cash dividends on common stock ------(3,423,308 ) - - - (3,423,308 ) Cash dividends on preferred stock ------(969,516 ) - - - (969,516 ) Stock dividends - - 7,987,008 ------(7,987,008 ) - - - -
Net income for the six months ended June 30, 2014 ------9,035,319 - - 4,576,337 13,611,656
Other comprehensive income for the six months ended June 30, 2014, net of tax ------(70,991 ) 54,220 31,945 15,174
Total comprehensive income for the six months ended June 30, 2014 ------9,035,319 (70,991 ) 54,220 4,608,282 13,626,830
Issue of common shares for cash 5,000,000 - - - 988,154 ------5,988,154
Share-based payments 239,782 - - (146,400 ) 146,738 - 2,757 - - - - - 163 243,040
Subsidiary cash dividends ------(3,588,810 ) (3,588,810 )
BALANCE, JUNE 30, 2014 $ 80,356,314 $ 7,251,368 $ 7,987,008 $ 33,770 $ 8,212,463 $ 2,075,475 $ 328,038 $ 5,315,307 $ 465,368 $ 9,035,319 $ (2,303 ) $ 930,215 $ 87,877,290 $ 209,865,632
The accompanying notes are an integral part of the consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars)
For the Six Months Ended June 30 2014 2013
CASH FLOWS FROM OPERATING ACTIVITIES Net income before income tax $ 15,681,169 $ 14,726,592 Adjustments: Non-cash (revenues and gains) or expenses and losses Depreciation expenses 600,707 590,638 Amortization expenses 190,017 152,680 Reversed allowance for bad debts expenses and guarantee liability provisions (1,231,341) (848,273) Net gain on financial assets and liabilities at fair value through profit or loss (4,107,835) (6,738,735) Interest expenses 11,328,166 9,350,056 Interest income (28,280,179) (24,635,207) Dividends income (91,338) (201,972) Share-based payments 172,747 45,716 Share of profit of associates and joint ventures accounted for using equity method (12,580) (14,690) Gain on disposal of investments (89,789) (2,792,818) Impairment loss on financial assets 9,425 147,764 Reversal of impairment loss on non-financial assets (3,372) - Unrealized foreign exchange losses 343,334 118,966 Other adjustments (58,505) 165,687 Total adjustments (21,230,543) (24,660,188) Changes in operating assets and liabilities Decrease (increase) in due from the Central Bank 3,099,027 (3,605,560) Decrease in financial assets at fair value through profit or loss 16,247,541 17,493,890 (Increase) decrease in available-for-sale financial assets (28,752,347) 45,631,927 Decrease in securities purchased under resell agreements 747,606 - (Increase) decrease in receivables (9,521,933) 8,200,526 Increase in loans (112,393,572) (34,765,595) Decrease (increase) in held-to-maturity financial assets 44,389,908 (15,835,254) Increase in other financial assets (57,146,211) (12,840,453) Increase in other assets (12,343,043) (1,933,106) Increase (decrease) in due to the Central Bank and banks 1,544,256 (1,867,025) Decrease in financial liabilities at fair value through profit or loss (6,721,069) (9,690,638) Increase (decrease) in securities sold under repurchase agreements 25,917,528 (22,660,406) Increase (decrease) in payables 2,634,972 (974,797) Increase in deposits and remittances 43,921,349 31,208,415 Decrease in reserve for liabilities (48,808) (262,669) Increase in other financial liabilities 19,871,512 8,117,277 Increase in other liabilities 416,075 303,283 Cash used in operations (73,686,583) (3,413,781) Interest received 27,240,437 24,621,996 Dividend received 107,773 224,757 (Continued)
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CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars)
For the Six Months Ended June 30 2014 2013
Interest paid $ (10,937,359) $ (9,662,996) Income tax refund 505,339 271,789 Income taxes paid (1,252,185) (529,491)
Net cash flows (used in) generated from operating activities (58,022,578) 11,512,274
CASH FLOWS FROM INVESTING ACTIVITIES Capital reduction of financial assets carried at cost 2,333 24,397 Acquisition of property and equipment (673,378) (376,427) Proceeds from disposal of property and equipment 1,394 1,753 Acquisition of intangible assets (616,116) (60,401) Net cash inflows from business combination 145,448 - Acquisition of investment property - (470)
Net cash used in investing activities (1,140,319) (411,148)
CASH FLOWS FROM FINANCING ACTIVITIES Increase in due to the Central Bank and call loans from banks 29,940,032 4,578,437 Increase in commercial papers payable 410,687 - Decrease in commercial papers payable - (7,000) Proceeds from issuance of bank debentures 18,000,000 4,879,000 Repayments of bank debentures - (11,700,000) Increase in other borrowings 2,118,802 66,954 Proceeds from issue of common shares 5,988,154 - Exercise of employee share options 116,033 889
Net cash flows generated from (used in) financing activities 56,573,708 (2,181,720)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (219,296) 312,961
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,808,485) 9,232,367
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 101,748,195 107,625,114
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 98,939,710 $ 116,857,481 (Continued)
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CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars)
For the Six Months Ended June 30 2014 2013
RECONCILIATION OF CASH AND CASH EQUIVALENTS Cash and cash equivalents in consolidated balance sheet $ 53,505,258 $ 56,582,504 Call loans to banks qualifying as cash and cash equivalents under the definition of IAS 7 permitted by the Financial Supervisory Commission 45,080,139 53,338,109 Securities purchased under resell agreements qualifying as cash and cash equivalents under the definition of IAS 7 permitted by the Financial Supervisory Commission 354,313 6,936,868 Cash and cash equivalents at end of period $ 98,939,710 $ 116,857,481
The accompanying notes are an integral part of the consolidated financial statements. (Concluded)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
1. GENERAL INFORMATION
Taishin Financial Holding Co., Ltd. (“Taishin Financial Holding” or the “Company”) was established by Taishin International Bank Co., Ltd. (“Taishin Bank”) and Dah An Commercial Bank Co., Ltd. (“Dah An Bank”) pursuant to the ROC Financial Holding Company Act and related regulations through a share swap on February 18, 2002. Taishin Financial Holding’s main business activities are investing and managing its invested financial institutions.
Taishin Bank and Dah An Bank established Taishin Financial Holding through a share swap. In forming the holding company, Taishin Bank merged with Dah An Bank, with Taishin Bank as the survivor company. In addition, Taishin Securities Co., Ltd. (“Taishin Securities A”) and Taishin Bills Finance Co., Ltd. (“Taishin Bills Finance”) became wholly-owned subsidiaries of Taishin Financial Holding through a share swap effective on December 31, 2002.
In order to integrate corporate resources, Taishin Financial Holding sold all of the equity of Taishin Securities A as of December 19, 2009 and Taishin Bank merged with Taishin Bills Finance, and the base date of merger was January 22, 2011. Taishin Bank acquired total assets, liabilities and operations of Taishin Bills Finance.
In the fourth quarter of 2005, Taishin Financial Holding acquired 1,400,000 thousand shares of preferred stock - B issued by Chang Hwa Commercial Bank, Ltd. (“Chang Hwa Bank”) through private placements. The 22.55% ownership interest with voting rights allows Taishin Financial Holding to take over half of the seats in the Board of Directors of Chang Hwa Bank. Accordingly, Taishin Financial Holding had controlling power over Chang Hwa Bank. On October 3, 2008, this preferred stock - B had been converted into 1,400,000 thousand shares of common stock. The ownership interest with voting rights in Chang Hwa Bank held by Taishin Financial Holding and subsidiaries was 22.81% as of June 30, 2014.
Taishin Financial Holding acquired 100% equity interest of Donshin Securities Co., Ltd. (“Donshin Securities”) by cash investments on April 6, 2010. Donshin Securities became a subsidiary of Taishin Financial Holding and changed the company name to Taishin Securities Co., Ltd. (“Taishin Securities B”).
Taishin Financial Holding acquired 100% equity interest of Taishin Securities Investment Trust Co., Ltd. (“Taishin Securities Investment Trust”) and 92% equity interest of Taishin Securities Investment Advisory Co., Ltd. (“Taishin Securities Investment Advisory”) by cash investments on July 26, 2010. Taishin Securities Investment Trust and Taishin Securities Investment Advisory became subsidiaries of Taishin Financial Holding.
Taishin Financial Holding acquired 100% equity interest of Franklin Insurance Brokers Co., Ltd. (“Franklin Insurance Brokers”) by cash investments on April 27, 2011. Franklin Insurance Brokers became a subsidiary of Taishin Financial Holding and changed the company name to Taishin Holdings Insurance Brokers Co., Ltd. (“Taishin Holdings Insurance Brokers”). Taishin Financial Holding invested in Taishin Holdings Insurance Brokers $29,500 thousand on April 29, 2011.
- 10 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Taishin Bank started its business operations on March 23, 1992. Taishin Bank provides customers with (a) general commercial banking services - commercial lending, foreign exchange transactions, installment and term loans, wire transfers, marketable security investments, receivable factoring, offshore banking business, etc. as well as (b) various financial instruments - letters of credit, bankers’ acceptances, checking and savings accounts, credit cards, derivative instruments, etc.
Taishin Real-Estate Management Co., Ltd. (“Taishin Real-Estate”) was established in August 1995 and its operations include audits and consultations of construction plans, contract witness, and assessments and trades of real estate, etc.
Taishin Insurance Agency Co., Ltd. (“Taishin Insurance Agency”) was established in September 1996 and provides life insurance agent service. Taishin Insurance Agency owned 100% equity interest of Taishin Insurance Brokers Co., Ltd. (“Taishin Insurance Brokers”).
Taishin D.A. Finance was established in October 1997. Its operations include the lease, wholesale and retail sale of machinery, precision machinery, motor vehicle, aircraft, and vessel and its components.
Chang Hwa Bank was established on March 1, 1947 and got licensed by the Ministry of Economic Affairs in July 1950. It mainly engages in the following businesses: (a) all commercial banking operations allowed by the Banking Act; (b) trust operations; (c) international banking operations; (d) overseas branch operations authorized by the respective foreign governments; and (e) other operations as authorized by the central authority.
CHB Life Insurance Agency Co., Ltd. (“CHB Life Insurance Agency”) was established on October 3, 2001 to provide life insurance agent service.
CHB Insurance Brokerage Co., Ltd. (“CHB Insurance Brokerage”) was established on April 7, 2003 to provide property insurance broker service.
Taishin Securities B originally named Donshin Securities was incorporated on January 15, 1990 and its operations include services dealing with futures, securities underwriting, brokerage, margin lending and security transfer services.
Taishin Asset Management Co., Ltd. (“Taishin AMC”) was established on August 14, 2002 in accordance with the Company Law and other related laws. Taishin AMC’s operations include acquisition, evaluation, auction, and management of delinquent loans.
Taishin Marketing Consultant Co., Ltd. (“Taishin Marketing”) was established on November 20, 1998. Its operations include investment and enterprise consulting, agent services, acquisition of accounts receivable, real estates and leasing. Taishin Financial Holding had approved to dissolve its subsidiary Taishin Marketing in the board meeting on March 21, 2013 and Taishin Marketing had been liquidated in September 2013.
Taishin Venture Capital Co., Ltd. (“Taishin Venture Capital”) was approved to establish on December 25, 2002. Its operations include engagement in investment start-up.
Taishin Financial Leasing (China) Co., Ltd. (“Taishin Financial Leasing (China)”) was approved to establish on July 12, 2011 to provide financial leasing service.
Taishin Financial Leasing (Tianjin) Co., Ltd. (“Taishin Financial Leasing (Tianjin)”) was approved to establish on March 1, 2012 to provide financial leasing service.
Taishin Securities Investment Advisory was established in March 1989 and its operations include accepting a mandate from a customer and providing analytical opinions or recommendations on securities investment, acting as an agent for investment consultancy of offshore funds, issuing publications or holding lectures about securities investment and other relevant business permitted by the competent authority.
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Taishin Securities Investment Trust, approved by the Securities and Future Bureau, was established on May 31, 2004. Its operations include offering securities investment trust funds and issuing beneficial interest certificates and investing in or trading securities, securities-related products, or other items approved by the competent authority. In addition, Taishin Securities Investment Trust was approved to operate full fiduciary discretionary investment business.
Taishin Holdings Insurance Brokers was originally named Franklin Insurance Brokers; its operations include property insurance broker service and life insurance broker service.
The consolidated financial statements are presented in the Company’s functional currency, New Taiwan dollars.
2. STATEMENT OF COMPLIANCE
The consolidated financial statements were prepared in accordance with the Regulations Governing the Preparation of Financial Statements by Financial Holding Companies, Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms, Regulations Governing the Preparation of Financial Reports by Securities Issuers, International Accounting Standards 34 “Interim Financial Reporting” as endorsed by the Financial Supervisory Commission (“FSC”). Disclosure information included in interim financial report is less than the disclosure information in a full set of annual financial reports required by International Financial Reporting Standards, International Accounting Standards, and Interpretations permitted by the FSC (“FSC-recognized IFRSs”).
3. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements were approved by the Board of Directors and authorized for issue on August 21, 2014.
4. APPLICATION OF NEW AND REVISED STANDARDS, AMENDMENTS AND INTERPRETATIONS
a. The 2013 version of FSC-recognized IFRSs in issue but not yet effective
Rule No. 1030010325 issued by the FSC on April 3, 2014, stipulated that the company and entities controlled by the Company (the “Group”) should apply the 2013 version of IFRSs (IFRS 9 “Financial Instruments” not included) endorsed by the FSC starting January 1, 2015.
The New IFRSs Included in the Effective Date 2013 IFRSs Version Not Yet Endorsed by the FSC Announced by IASB (Note)
Improvements to IFRSs (2009) - amendment to IAS 39 January 1, 2009 and January 1, 2010, as appropriate Amendment to IAS 39 “Embedded Derivatives” Effective for annual periods ended on or after June 30, 2009 Improvements to IFRSs (2010) July 1, 2010 and January 1, 2011, as appropriate Annual Improvements to IFRSs 2009-2011 Cycle January 1, 2013 (Continued)
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The New IFRSs Included in the Effective Date 2013 IFRSs Version Not Yet Endorsed by the FSC Announced by IASB (Note)
Amendment to IFRS 1 “Limited Exemption from Co mparative IFRS 7 July 1, 2010 Disclosures for First-time Adopters” Amendment to IFRS 1 “Severe Hyperinflation and Removal of Fixed July 1, 2011 Dates for First-time Adopters” Amendment to IFRS 1 “Government Loans” January 1, 2013 Amendment to IFRS 7 “Disclosure - Offsetting Financial Assets and January 1, 2013 Financial Liabilities” Amendment to IFRS 7 “Disclosure - Transfer of Financial Assets” July 1, 2011 IFRS 10 “Consolidated Financial Statements” January 1, 2013 IFRS 11 “Joint Arrangements” January 1, 2013 IFRS 12 “Disclosure of Interests in Other Entities” January 1, 2013 Amendments to IFRS 10, IFRS 11 and IFRS 12 “Consolidated January 1, 2013 Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance” Amendments to IFRS 10 and IFRS 12 and IAS 27 “Investment January 1, 2014 Entities” IFRS 13 “Fair Value Measurement” January 1, 2013 Amendment to IAS 1 “Presentation of Other Comprehensive Income” July 1, 2012 Amendment to IAS 12 “Deferred Tax: Recovery of Underlying January 1, 2012 Assets” IAS 19 (Revised 2011) “Employee Benefits” January 1, 2013 IAS 27 (Revised 2011) “Separate Financial Statements” January 1, 2013 IAS 28 (Revised 2011) “Investments in Associates and Joint January 1, 2013 Ventures” Amendment to IAS 32 “Offsetting Financial Assets and Financial January 1, 2014 Liabilities” IFRIC 20 “Stripping Costs in Production Phase of a Surface Mine” January 1, 2013 (Concluded)
Note: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after the respective effective dates.
Based on the Group’s assessment, the future initial application of the above 2013 IFRSs version is not expected to have any material impact on the Group’s accounting policies. b. New IFRSs in issue but not yet endorsed by FSC
The Group has not applied the following New IFRSs issued by the IASB but not yet endorsed by the FSC. As of the date the consolidated financial statements were authorized for issue, the FSC has not announced their effective dates.
Effective Date The New IFRSs Not Included in the 2013 IFRSs Version Announced by IASB (Note 1)
Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014 IFRS 9 “Financial Instruments” January 1, 2018 Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of January 1, 2018 IFRS 9 and Transition Disclosures” Amendments to IFRS 11 “Accounting for Acquisitions of Interests in January 1, 2016 Joint Operations” (Continued)
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Effective Date The New IFRSs Not Included in the 2013 IFRSs Version Announced by IASB (Note 1)
IFRS 14 “Regulatory Deferral Accounts” January 1, 2016 IFRS 15 “Revenue from Contracts with Customers” January 1, 2017 Amendments to IAS 16 and IAS 38 “Clarification of Acceptable January 1, 2016 Methods of Depreciation and Amortization” Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants” January 1, 2016 Amendment to IAS 19 “Defined Benefit Plans: Employee July 1, 2014 Contributions” Amendment to IAS 36 “Impairment of Assets: Recoverable Amount January 1, 2014 Disclosures for Non-financial Assets” Amendment to IAS 39 “Novation of Derivatives and Continuation of January 1, 2014 Hedge Accounting” IFRIC 21 “Levies” January 1, 2014 (Concluded)
Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after the respective effective dates.
Note 2: The amendment to IFRS 2 applies to share-based payment transactions for which the grant date is on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations for which the acquisition date is on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.
Except for the following, the impending initial application of the above the “New IFRSs”, whenever applied, would not have any material impact on the Group’s accounting policies:
IFRS 9 “Financial Instruments”
With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below.
For the Group’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:
1) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method;
2) For debt instruments, if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses.
Except for above, all other financial assets are measured at fair value through profit or loss. However, the Group may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required.
- 14 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 IFRS 9 requires that impairment loss on financial assets is recognized by using the “Expected Credit Losses Model”. The credit loss allowance is required for financial assets measured at amortized cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction.
For purchased or originated credit-impaired financial assets, the Group takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss.
As of the date the consolidated financial statements were authorized for issue, the Group is continuingly assessing the possible impact that the application of the above New IFRSs will have on the Group's financial position and operating result, and will disclose the relevant impact when the assessment is complete.
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Except for the following, the same accounting policies have been followed in these consolidated financial statements as were applied in the preparation of the consolidated financial statements for the year ended December 31, 2013.
Basis of Preparation
The consolidated financial statements have been consolidated on the same basis as the consolidated financial statements as of December 31, 2013. Please refer to the Note 5 to the consolidated financial statements as of December 31, 2013 for details.
a. Subsidiaries included in the consolidated financial statements as of June 30, 2014, December 31, 2013 and June 30, 2013 were as follows:
Ownership Interest (%) December 31, Investor Subsidiary June 30, 2014 2013 June 30, 2013 Note
Taishin Financial Holding Taishin Bank 100.00 100.00 100.00 Taishin Financial Holding Taishin Securities B 100.00 100.00 100.00 Taishin Financial Holding Taishin AMC 100.00 100.00 100.00 Taishin Financial Holding Taishin Marketing - - 100.00 1) Taishin Financial Holding Taishin Venture Capital 100.00 100.00 100.00 Taishin Financial Holding Chang Hwa Bank 22.55 22.55 22.55 Taishin Financial Holding Taishin Securities Investment Advisory 92.00 92.00 92.00 Taishin Financial Holding Taishin Securities Investment Trust 100.00 100.00 100.00 Taishin Financial Holding Taishin Holdings Insurance Brokers 100.00 100.00 100.00 Taishin Bank Chang Hwa Bank 0.27 0.27 0.27 Taishin Bank Taishin Real-Estate 60.00 60.00 60.00 Taishin Bank Taishin Insurance Agency 87.40 87.40 87.40 Taishin Bank Taishin D.A. Finance 100.00 100.00 100.00 2) Taishin AMC Taishin Real-Estate 40.00 40.00 40.00 Taishin Insurance Agency Taishin Insurance Brokers 100.00 100.00 100.00 Chang Hwa Bank CHB Life Insurance Agency 100.00 100.00 100.00 Chang Hwa Bank CHB Insurance Brokerage 100.00 100.00 100.00 Taishin Venture Capital Taishin Financial Leasing (China) 86.96 100.00 100.00 Taishin Venture Capital Taishin Financial Leasing (Tianjin) 100.00 100.00 100.00 Taishin D.A. Finance Taishin Financial Leasing (China) 13.04 - -
- 15 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 b. Subsidiaries not included in the consolidated financial statements as of June 30, 2014, December 31, 2013 and June 30, 2013 were as follows:
Ownership Interest (%) December 31, Investor Subsidiary June 30, 2014 2013 June 30, 2013 Note
Taishin Bank Taishin D.A. Finance 100.00 100.00 100.00 2)
Note:
1) Taishin Financial Holding had approved to dissolve its subsidiary Taishin Marketing in the board meeting on March 21, 2013 and Taishin Marketing had been liquidated in September 2013.
2) Taishin D.A. Finance was an equity-method investee of Taishin Bank as of December 31, 2013, and June 30, 2013. Its capital was less than 0.24% and 0.27% of the consolidated capital, and its total assets were less than 0.01% of the consolidated total assets; thus, it was not included in the consolidated financial statements.
Impairment of Financial Assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the holder of the asset about the following loss events: a. Significant financial difficulty of the issuer or obligor; b. A breach of contract, such as a default or delinquency in interest or principal payments; c. The lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; d. It becoming probable that the borrower will enter bankruptcy or other financial reorganization; e. The disappearance of an active market for that financial asset because of financial difficulties; or f. Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group, including:
1) Adverse changes in the payment status of borrowers in the group; or
2) National or local economic conditions that correlate with defaults on the assets in the group.
For certain categories of financial assets, such as loans and receivables, assets are assessed for impairment on a collective basis even if they were assessed as not impaired individually.
If there is objective evidence that an impairment loss on financial assets carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate.
- 16 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 The assessment procedures above classified loans in accordance with the Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans. Normal credit assets are classified as “Category One” and set aside loss provision at 1% of the outstanding balance (excluding assets that represent claims against an ROC government agency). Loans other than “Category One” are classified into “special mentioned (Category Two)”, “substandard (Category Three)”, “doubtful (Category Four)”, and “losses (Category Five)” based on the status of credit, the length of time overdue, and the status of the loan collaterals. Loss provisions should be made at 2%, 10%, 50%, and 100% for each loan category, respectively.
For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
The carrying amount of accounts receivable is reduced through the use of an allowance account. When accounts receivable are considered uncollectible, they are written off against the allowance account. Recoveries of amounts previously written off are credited to the allowance account. Changes in the carrying amount of the allowance account are recognized as bad debt in profit or loss.
For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.
When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.
In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income and accumulated under the heading of investments revaluation reserve. In respect of available-for-sale debt securities, impairment loss are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.
For financial assets carried at cost, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.
Retirement Benefit Costs
Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant curtailments, settlements, or other significant one-time events.
Income Taxes
Income tax expense is the sum of the tax currently payable and deferred tax. Interim period income taxes are assessed on an annual basis and calculated by applying to an interim period's pre-tax income the tax rate that would be applicable to expected total annual earnings.
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Equity-settled share-based payment
The fair value determined at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of employee share options that will eventually vest, with a corresponding increase in capital surplus - employee share options. The fair value determined at the grant date of the employee share options is recognized as an expense in full at the grant date when the share options granted vest immediately.
The grant date of employee share options, which are reserved when the Company issues new shares, is the date when the number of employee subscription is confirmed. The Company recognized an expense and capital surplus at the fair value of the share options determined at the grant date.
Cash-settled share-based payment
For cash-settled share-based payments, a liability is recognized for the goods or services acquired, measured initially at the fair value of the liability incurred. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognized in profit or loss.
6. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The same critical accounting judgments and key sources of estimation uncertainty of consolidated financial statements have been followed in these consolidated financial statements as were applied in the preparation of the consolidated financial statements for the year ended December 31, 2013. Please refer to the Note 6 to the consolidated financial statements as of December 31, 2013 for the details of critical accounting judgments and key sources of estimation uncertainty.
7. CASH AND CASH EQUIVALENTS
December 31, June 30, 2014 2013 June 30, 2013
Cash on hand $ 17,432,384 $ 17,762,028 $ 16,270,280 Checks for clearing 8,107,646 8,172,651 21,378,742 Due from banks 26,264,082 32,956,554 16,064,985 Others 1,701,146 2,625,720 2,868,497
$ 53,505,258 $ 61,516,953 $ 56,582,504
Due from banks include time deposits that have a maturity of three months or less from the date of acquisition, are readily convertible to a known amount of cash, and are subject to an insignificant risk of change in value; these were held for the purpose of meeting short-term cash commitments.
- 18 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Please refer to the consolidated statement of cash flows for the reconciliation information as of June 30, 2014 and 2013. Cash and cash equivalents as of December 31, 2013 as shown in the consolidated statement of cash flows are reconciled with the related items in the balance sheet as follows:
December 31, 2013
Cash and cash equivalents in consolidated balance sheet $ 61,516,953 Call loans to banks qualifying as cash and cash equivalents under the definition of FSC-recognized IAS 7 31,508,420 Securities purchased under resell agreements qualifying as cash and cash equivalents under the definition of FSC-recognized IAS 7 8,722,822
$ 101,748,195
8. DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS
December 31, June 30, 2014 2013 June 30, 2013
Deposit reserve in the Central Bank Reserve for checking account $ 22,809,739 $ 29,271,924 $ 26,066,823 Reserve for demand account 57,231,167 56,286,658 55,994,200 Reserve for foreign deposit 293,408 362,630 230,974 80,334,314 85,921,212 82,291,997 Call loans to other banks 45,080,139 31,508,420 53,338,109 Certificate of deposits issued by Central Bank 5,700,000 5,700,000 5,700,000 Others 3,510 ,688 1,022,817 235,190
$ 134 ,625 ,141 $ 124, 152,449 $ 141,565,296
9. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
December 31, June 30, 2014 2013 June 30, 2013
Financial assets designated as at FVTPL Interest -rate combination instruments $ 3,495,590 $ 3,676,994 $ 1,766,919 Financial assets held for trading Derivative instrument Futures 85,683 60,848 81,873 Forward exchange contracts 788,640 2,197,620 1,750,307 Currency swaps 2,753,290 4,670,432 3,5 95,448 Cross -currency swaps 863,537 906,828 920,728 Foreign -exchange options 16,514,747 2,892,427 3,897 ,786 Equity -linked options 13,091 20,251 13,671 Interest rate swaps 5,190,627 4,927,699 4,343,195 Eq uity -linked swaps 146,754 582,731 1,156,250 Credit default swaps 2,027 3,436 3,296 Commodity price swaps 106,307 31,769 44,684 Commodity f orward contracts 369 - - (Continued)
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December 3 1, June 30, 2014 2013 June 30, 2013
Non -derivative financial assets Investment in bills $ 51,898,223 $ 54,263,030 $ 50,265,669 Domestic and overseas stocks and beneficial certificates 1,519,892 999,899 687,838 Government bonds 17,313,309 19,381,159 14,070,409 Corporate bonds, bank debentures and other bonds 3,935,568 6,578,965 7,063,337 Trading securities Dealing 1,232,246 1,063,866 679,690 Underwriting 592,460 559,935 339,327
Financial assets at FVTPL $ 106,452,360 $ 102,817,889 $ 90,680,427
Financial liabilities held for trading Derivative instrument Futures $ 1,530 $ - $ 1,687 Forward exchange contracts 561,528 2,156,783 1,424,089 Currency swaps 2,455,991 4,499,493 5,211,047 Cross -currency swaps 236,895 787,058 844,093 Foreign -exchange options 16 ,491 ,363 2,618,768 3,746 ,535 Interest rate options 14 13 2 Eq uity -linked options 158,324 259,379 157,008 Interest rate swaps 5,280,573 4,996,459 4,230,800 Equity -linked swaps 146,754 582,708 1,156,139 Credit default swaps 2,027 3,436 3,296 Commodity price swaps 106,307 31,769 44,684 Commodity f orward contracts 369 - - Non -derivative financial liabilities Securit y borrowing s 498,170 301,503 97,836
Financial liabilities at FVTPL $ 25,939,845 $ 16,237,369 $ 16,917,216 (Concluded) a. Taishin Bank used various derivative instruments in the six months ended June 30, 2014 and 2013 to fulfill customers’ needs, as well as to manage Taishin Bank’s asset and liability positions and risk.
Chang Hwa Bank engaged in various derivative instruments in the six months ended June 30, 2014 and 2013 to eliminate the risk arising from exchange rate and interest rate fluctuations in the market. The purpose of Chang Hwa Bank’s hedging strategy is to eliminate the market price risk and cash flow risk. b. The par values of those financial assets at FVTPL provided for transactions with repurchase agreements were as follows:
December 31, June 30, 2014 2013 June 30, 2013
Par values $ 24,093,200 $ 12,404,900 $ 12,566,000 c. Please refer to Note 48 for information relating to financial assets at FVTPL pledged as collaterals.
- 20 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 d. The nominal principal amounts of outstanding derivative contracts were as follows:
December 31, June 30, 2014 2013 June 30, 2013
Futures $ 166,384 $ 18,429 $ 248,302 Forward exchange contracts 167,816,725 214,252,756 253,022,761 Currency swaps 855,109,705 688,324,443 704,888,811 Cross -currency swaps 78,410,066 89,181,370 80 ,344,506 Foreign -exchange options 2,550,559,404 1,539,199,910 1,228,741,530 Interest rate options 550,000 230,000 418,000 Equity -linked options 2,737,445 4,216,800 6,556,440 Commodity options 24,770 49,597 627,460 Interest rate swaps 1,159,432,477 1,139,528,961 1,022,702,334 Equity -linked swaps 12,272,234 7,555,562 10,113,790 Credit default swaps 1,125,600 1,126,917 1,133,313 Commodity price swaps 720,618 1, 268,048 992,692 Fixed rate commercial paper s 9,300,000 8,500,000 7,930,000 Commodity forward contracts 21,599 86,627 -
10. AVAILABLE-FOR-SALE FINANCIAL ASSETS
December 31, June 30, 2014 2013 June 30, 2013
Investment in bills $ 150,033,345 $ 149,915,156 $ 127,610,852 Domestic and overseas stocks 5,667,562 5,780,458 4,654,438 Beneficial certificates 958,285 438,335 203,183 Government bonds 74,809,908 50,750,944 48,919,889 Corporate bonds 24,265,010 21,183,073 20,593,363 Bank debentures 23,736,044 21,628,401 23,708,355 Beneficial securities and asset-based securities 1,829,820 2,102,208 2,534,248 Bonds issued by international organization - 148,714 -
$ 281,299,974 $ 251,947,289 $ 228,224,328
a. Please refer to Note 46 (financial instrument) for the determination of fair values of available-for-sale financial assets.
b. The par values of bond investments in available-for-sale financial assets provided for transactions with repurchase agreements were as follows:
December 31, June 30, 2014 2013 June 30, 2013
Par values $ 39 ,212 ,340 $ 22,863,024 $ 20,272,412
c. In six months ended June 30 2013, the Group disposed 609,144 shares of Visa and 13,517 shares of Master Card stocks, which were originally under available for sale financial assets. The proceeds from the disposal were $3,270,928 thousand. The total gain on disposal was $2,483,550 thousand and was reclassified from other comprehensive income to net income.
d. Please refer to Note 48 for information relating to available-for-sale financial assets pledged as collaterals.
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11. DERIVATIVE FINANCIAL ASSETS FOR HEDGING
December 31, June 30, 2014 2013 June 30, 2013
Assets
Fair value hedging - interest rate swap $ 40,385 $ 62,494 $ 82,629
Liabilities
Fair value hedging - interest rate swap $ 2,292 $ - $ -
Chang Hwa Bank used interest rate swaps to minimize its exposure to fair value changes of its fixed-rate borrowings by swapping a portion of the fixed-rate borrowings from fixed rates to floating rates. The interest swaps and the corresponding borrowings had the same terms and management believed the interest rate swaps were highly effective hedge instruments. The nominal amounts of outstanding interest rate swap contracts of Chang Hwa Bank were $7,200,000 thousand, $2,000,000 thousand and $2,000,000 thousand as of June 30, 2014, December 31, 2013 and June 30, 2013, respectively.
The fixed-to-floating interest swaps were designated and effective fair value hedge instruments. During the six months ended June 30, 2014 and 2013, the swaps were 100% effective in hedging the fair value exposure to interest rate movements and as a result the carrying amount of the fixed-rate borrowings was adjusted by $25,189 thousand, $59,818 thousand and $79,743 thousand as of June 30, 2014, December 31, 2013 and June 30, 2013, respectively; these amounts were included in profit or loss at the same time that the fair value of the interest rate swap was included in profit or loss.
The information on hedging transactions is as follows:
a. Hedging type: Fair value hedging.
b. Hedging objective: To minimize risks of Chang Hwa Bank from the variation of fair value due to fluctuation of interest rate, by converting fixed-rate note to floating-rate note.
c. Hedging method: By signing interest swap contract.
d. Hedging effect: 7 hedging trades were made in 2014. The actual offset result is considered highly effective since the variation of the fair value of the hedged instrument and of the hedging instrument is within 80%-125%, which has met the hedging accounting criterion suggested in IFRSs. The realized gain of $21,592 thousand and $11,133 thousand for the three months ended June 30, 2014 and 2013, respectively, $32,661 thousand and $21,915 thousand for the six months ended June 30, 2014 and 2013, respectively, accounted as net other non-interest income and losses.
12. RECEIVABLES
December 31, June 30, 2014 2013 June 30, 2013
Notes and accounts receivable $ 68,527,468 $ 60,550,318 $ 50,928,063 Credit card receivable 36,897,284 34,615,829 34,480,516 Acceptance receivable 6,458,006 7,169,741 6,869,743 Interest receivable 5,705,790 4,505,209 4,444,690 (Continued)
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December 31, June 30, 2014 2013 June 30, 2013
Revenue receivable $ 407,982 $ 304, 832 $ 840,906 Securities margin loans receivable 992,122 859,532 767,333 Other receivables 1,603,310 1,404,604 1,113,590 Adjustment for discount (652,153 ) (397,534) (119,736) 119,939,809 109,012,531 99,325,105 Less: Allowance for receivables (1,449,519 ) (1,422,341) (1,187,668)
$ 118,490,290 $ 107,590,190 $ 98,137,437
Please refer to Note 13 for the movements of allowance for receivables.
13. LOANS
a. The details of loans were as follows:
December 31, June 30, 2014 2013 June 30, 2013
Negotiated $ 4,002,431 $ 5,243,309 $ 3,961,071 Overdrafts 2,589,867 3,515,566 3,008,401 Discounts 5,741,411 6,310,230 3,896,616 Sh ort -term loans 521,640,070 456,046,554 473,795,483 Medium -term loans 606,243,982 573,077,655 550,766,374 Long -term loans 839,106,931 819,393,820 804,210,406 Delinquent loans 3,980,373 5,252,713 5,774,715 Adjustment for discount (553,188 ) (544,312 ) (525,339 ) 1,982,751,877 1,868,295,535 1,844,887,727 Less: Allowance for loan losses (23,547,197 ) (22,580,509 ) (22,309,459 )
$ 1,959,204,680 $ 1,845,715 ,026 $ 1,822,578,268
b. Movements of allowance for loan losses were as follows:
For the Six Months Ended June 30, 2014 Other Miscellaneous Financial Receivables Loans Assets Total
Balance, January 1, 2014 $ 1,422,341 $ 22,580 ,509 $ 543,208 $ 24,546,058 Reverse of loan losses 34,675 (1,097,500 ) (308,395 ) (1 ,371 ,220 ) Loans written off (12,206 ) (278,216 ) (144,684 ) (435 ,106 ) Recovery of loans written off 4,499 2,340 ,059 277,886 2,622 ,444 Reclassified to guarantees for reserve - (10,000) - (10,000) Exchange differences and others 210 12,345 - 12,555
Balance, June 30, 2014 $ 1,449,519 $ 23,547,197 $ 368,015 $ 25 ,364,731
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For the Six Months Ended June 30, 2013 Other Miscellaneous Financial Receivables Loans Assets Total
Balance, January 1, 2013 $ 1,328,936 $ 21,350,050 $ 404,728 $ 23,083,714 Reverse of loan losses (142,047 ) (513,731 ) (194,316 ) (850,094 ) Loans written off (8,787 ) (1,318,281 ) (142,337 ) (1,469,405 ) Recovery of loans written off 7,051 2,752,074 313,817 3,072,942 Exchange differences and others 2,515 39,347 - 41,862
Balance, June 30, 2013 $ 1,187,668 $ 22,309,459 $ 381,892 $ 23,879,019 c. Details of reversed allowance for loan losses and liability guarantee provisions the six months ended June 30, 2014 and 2013 were as follows:
For the Three Months Ended For the Six Months Ended June 30 June 30 2014 2013 2014 2013 Reversed allowance for losses of receivables, loans and other miscellaneous financial assets $ (1,226,505) $ (154,018) $ (1,371,220) $ (850,094) Provision for (reverse of) loss on guarantees (2,332) (19,268) 139,879 1,821
$ (1,228 ,837 ) $ (173,286 ) $ (1,231,341 ) $ (848,273 ) d. Details of assessed impairment of receivables (including other miscellaneous financial assets) and loans were as follows:
Receivables (including other miscellaneous financial assets)
Total Receivable Item December 31, June 30, 2014 June 30, 2013 2013 Individual assessment of $ 969,418 $ 776,898 $ 773,842 Objective evidence of impairment impairment Combined assessment of 3,014,289 3,249,980 2,698,599 impairment Nonobjective evidence Combined assessment of 117,161,965 106,024,250 96,666,928 of impairment impairment Total $ 121 ,145 ,672 $ 110,051,128 $ 100,139,369
Total Allowance Item December 31, June 30, 2014 June 30, 2013 2013 Individual assessment of $ 844,020 $ 683,977 $ 631,120 Objective evidence of impairment impairment Combined assessment of 466,246 553,734 372,394 impairment Nonobjective evidence Combined assessment of 507,268 727,838 566,046 of impairment impairment Total $ 1,817,534 $ 1,965,549 $ 1,569,560
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Note: The amount of receivable did not include the amount of allowance for receivables and adjustment for discount (premium).
Loans
Total Loans Item December 31, June 30, 2014 June 30, 2013 2013 Individual assessment of $ 22,170,554 $ 26,269,476 $ 29,529,425 Objective evidence of impairment impairment Combined assessment of 12,484,360 13,039,249 9,371,055 impairment Nonobjective evidence Combined assessment of 1,948,650,151 1,829,531,122 1,806,512,586 of impairment impairment Total $ 1,983 ,305 ,065 $ 1,868,839,847 $ 1,845,413,066
Total Allowance Item December 31, June 30, 2014 June 30, 2013 2013 Individual assessment of $ 8,057,696 $ 8,272,075 $ 8,441,767 Objective evidence of impairment impairment Combined assessment of 2,389,699 2,530,574 2,230,614 impairment Nonobjective evidence Combined assessment of 13,099,802 11,777,860 11,637,078 of impairment impairment Total $ 23,547,197 $ 22,580,509 $ 22,309,459
Note: The amount of loans did not include the amount of allowance for loan losses and adjustment for discount (premium).
14. HELD-TO-MATURITY FINANCIAL ASSETS
December 31, June 30, 2014 2013 June 30, 2013
Investment in bills $ 170,246,206 $ 215,841,649 $ 174,142,287 Government bonds 1,015 - - Corporate bonds 10,736 ,945 7,210,933 7,263,547 Bank debentures 3,559,738 5,890,339 7,033,150
$ 184,543,904 $ 228,942,921 $ 188,438,984
a. The par values of bond investments in held-to-maturity financial assets provided for transactions with repurchase agreements were as follows:
December 31, June 30, 2014 2013 June 30, 2013
Par values $ - $ 1,647,250 $ 1,957,800
b. Please refer to Note 48 for information relating to held-to-maturity financial assets pledged as collaterals.
- 25 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 15. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
a. The Group’s associates and joint ventures accounted for using the equity method were listed below:
June 30, 2014 December 31, 2013 June 30, 2013 Ownership Ownership Ownership Interest and Interest and Interest and Carrying Value Voting Rights Carrying Value Voting Rights Carrying Value Voting Rights Unlisted shares Taishin D.A. Finance $ - - $ 142,860 100.00 $ 169,386 100.00 An Hsin Real-Estate Management Co., Ltd. (“An Hsin Real-Estate”) 73,126 30.00 78,369 30.00 65,066 30.00 Youn Shin Artistic Co., Ltd. (“Youn Shin Artistic”) - - - - 8,783 25.00
$ 73,126 $ 221,229 $ 243,235
The summarized financial information in respect of the Group’s associates was set out below:
December 31, June 30, 2014 2013 June 30, 2013
Total assets $ 310,022 $ 753,658 $ 536,490 Total liabilities $ 66,316 $ 311,453 $ 76,960
For the Three Months Ended For the Six Months Ended June 30 June 30 2014 2013 2014 2013
Revenue $ 81,003 $ 79,639 $ 152,661 $ 146,253 Net income $ 22,555 $ 23,000 $ 41,758 $ 43,039
b. The amounts of investment income (loss) recognized under equity method were as follows:
For the Three Months Ended For the Six Months Ended June 30 June 30 2014 2013 2014 2013 Investment Investment Investment In vestment Income Income Income Income (Loss) Recognized Recognized Recognized Recognized
Taishin D.A. Finance $ - $ 158 $ - $ 2,000 An Hsin Real -Estate 6,609 6,993 12,580 12,763 Youn Shin Artistic - 63 - (73 )
$ 6,609 $ 7,214 $ 12, 580 $ 14,690
For the six months ended June 30, 2014 and 2013, the equity-method investees’ financial statements, which had been used to determine the carrying amount of the Group’s investments share of profit and other comprehensive income of associates, had been audited, except Youn Shin Artistic.
c. The Group’s equity-method investments were not pledged as collaterals as of June 30, 2014, December 31, 2013 and June 30, 2013.
d. The Group lost their holding percentage and did not have significant influence on Youn Shin Artistic due to giving up the preemptive right of Youn Shin Artistic in December 2013. Therefore, the Group reclassified investments accounted for using equity method to financial assets carried at cost.
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16. FINANCIAL ASSETS CARRIED AT COST
December 31, June 30, 2014 2013 June 30, 2013
Domestic and overseas unlisted stocks $ 7,358,548 $ 7,334,016 $ 8,108,074
Classified according to financial asset measurement category Available -for -sale finan cial assets $ 7,358,548 $ 7,334,016 $ 8,108,074
Management believed that the fair value of the above unlisted equity investments held by the Group cannot be reliably measured due to the very wide range of reasonable fair value estimates; therefore, they were measured at cost less impairment at the end of reporting period.
The Group’s domestic and overseas unlisted stocks were financial assets carried at cost, including investments in stocks of Kaohsiung Rapid Transit Corporation, Han-Shin Venture Capital Inc., Han-Hun Venture Capital Inc., PayEasy Digital, Chung-Yang Special Return Venture Capital Co., Solar PV Corporation and Choi Hong Technology Co., Ltd. The investment value has been impaired and possibility of restoration was very small; thus, the Group had recognized impairment loss of $9,425 thousand and $147,764 thousand for the six months ended June 30, 2014 and 2013, and recognized impairment loss of $9,425 thousand and $67,614 thousand for the three months ended June 30, 2014 and 2013.
The Group’s financial assets carried at cost were not pledged as collaterals as of June 30, 2014, December 31, 2013 and June 30, 2013.
17. DEBT INVESTMENTS WITHOUT ACTIVE MARKET
December 31, June 30, 2014 2013 June 30, 2013
Domestic unli sted preferred stocks $ 1,600,000 $ 1,600,000 $ 1,600,000 Beneficial securities and asset -based securities 149,805 224,114 265,720 Corporate bonds and bank debentures 1,894,146 2,287,409 2,240,752
$ 3,643,951 $ 4,111,523 $ 4,106,472
18. OTHER MISCELLANEOUS FINANCIAL ASSETS
December 31, June 30, 2014 2013 June 30, 2013
Inward remittance $ 11,192 $ 22,055 $ 12,883 Purchase credit receivables 78,710 130,506 185,327 De linquent loans reclassified from other items (excluding loans) 463,808 495,009 503,079 Less: Allowance for bad debt (368,015 ) (543,208 ) (381,892 ) Time deposit with original maturity more than 3 months 93,537,863 35,748,015 14,937,842 Gold account 192,837 209,926 197,007
$ 93,916,395 $ 36,062,303 $ 15,454,246
- 27 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Please refer to Note 13 for the movements of allowance for other miscellaneous financial assets. Please refer to Note 48 for the information relating to time deposit with original maturity more than 3 months pledged as collaterals.
19. INVESTMENT PROPERTY
December 31, June 30, 2014 2013 June 30, 2013
Investment property Land $ 11,291,495 $ 11,323,94 4 $ 11,166,462 Buildings Cost 777,504 777,405 712,279 Accumulated depreciation (301,161 ) (292,829 ) (271,809 ) 476,343 484,576 440,470
$ 11,767,838 $ 11,808,520 $ 11,606,932
Land Buildings Total
Cost
Balance, January 1, 2014 $ 11,323,944 $ 777,405 $ 12,101,349 Reclassification (32,449 ) 99 (32,350 )
Balance, June 30, 2014 $ 11,291,495 $ 777,504 $ 12,068,999
Balance, January 1, 2013 $ 11,166,462 $ 706,074 $ 11,872,536 Additions - 470 470 Reclassification - 5,735 5,735
Balance, June 30, 2013 $ 11,166,462 $ 712,279 $ 11,878,741
Accumulated depreciation
Balance, January 1, 2014 $ - $ 292,829 $ 292,829 Depreciation - 8,233 8,233 Reclassification - 99 99
Balance, June 30, 2014 $ - $ 301,161 $ 301,161
Balance, January 1, 2013 $ - $ 258,147 $ 258,147 Depreciation - 8,026 8,026 Reclassification - 5,636 5,636
Balance, June 30, 2013 $ - $ 271,809 $ 271,809
The investment properties held by the Group were depreciated on the following estimated useful lives using the straight-line method.
Buildings Main buildings 12-60 years Equipment 3-10 years
- 28 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 The rental incomes and direct operating expenses generated by the investment properties for the three months and six months ended June 30, 2014 and 2013 were as follows:
For the Three Months Ended For the Six Months Ended June 30 June 30 2014 2013 2014 2013
Rental incomes $ 52,010 $ 47,059 $ 101,042 $ 94,573 Direct operating expenses 20,8 44 21,168 40,557 39,387
The fair values of the Group’s investment properties as of June 30, 2014, December 31, 2013 and June 30, 2013, were $16,758,093 thousand, $16,653,357 thousand and $16,462,550 thousand, respectively. The fair values had been arrived at on the basis of valuation procedures carried out at those dates by the management of the Group which used the valuation model that market participants usually use in determining fair value. The valuation amounts were arrived at by reference to market evidence of transaction prices for similar properties.
20. PROPERTY AND EQUIPMENT
December 31, June 30, 2014 2013 June 30, 2013
Land $ 28,328,849 $ 28,296,400 $ 28,415,580 Buildings 10,712,872 10,887,245 10,982,327 Machinery equipment 1,636,580 1,410,033 1,404,362 Transportation equipment 151,805 153,436 140,427 Miscellaneous equipment 235,868 228,045 217,326 Leasehold improvement 404,992 376,775 310,705 Leased assets 108,990 118,371 127,610 Prepayments for buildings, equipment and property under construction 73,205 60,362 63,236
$ 41,653,161 $ 41,530,667 $ 41,661,573
Prepayment for Buildings, Equipment and Machinery Transportation Miscellaneous Leasehold Property under Land Buildings Equipment Equipment Equipment Improvement Leased Assets Construction Total Cost
Balance, January 1, 2014 $ 28,296,400 $ 16, 604,699 $ 6,639,065 $ 640,062 $ 1,548,916 $ 1,237,817 $ 168,860 $ 60,362 $ 55,196,181 Additions - 23,487 419,518 17,250 27,357 60,580 - 125,186 673,378 Disposals - (30,714 ) (202,880 ) (20,711 ) (12,516 ) (22,748 ) - - (289,569 ) Reclassification 32,449 2,690 70,685 - 688 27,520 - (112,430 ) 21,602 Combined individual effects - - - 2,195 14,120 9,882 - - 26,197 Effect of foreign currency exchange differences - - (35 ) 234 440 (477 ) - 87 249
Balance, June 30, 2014 $ 28,328,849 $ 16,600,162 $ 6,926,353 $ 639,030 $ 1,579, 005 $ 1,312,574 $ 168,860 $ 73,205 $ 55,628,038
Balance, January 1, 2013 $ 28,415,580 $ 16,496,450 $ 6,400,093 $ 609,525 $ 1,539,843 $ 1,089,171 $ 168,275 $ 24,024 $ 54,742,961 Additions - 33,131 180,882 29,933 27,093 26,858 445 78,085 376,427 Disposals - (5,565 ) (149,392 ) (10,932 ) (20,577 ) (11,666 ) - - (198,132 ) Reclassification - 3,917 - 752 - 22,865 - (38,921 ) (11,387 ) Effect of foreign currency exchange differences - - 1,142 59 399 3,266 - 48 4,914
Balance, June 30, 2013 $ 28,415,580 $ 16,527,933 $ 6,432,725 $ 629,337 $ 1,546,758 $ 1,130,494 $ 168,720 $ 63,236 $ 54,914,783
Accumulated depreciation
Balance, January 1, 2014 $ - $ 5,717,454 $ 5,229,032 $ 486,626 $ 1,320,87 1 $ 861,042 $ 50,489 $ - $ 13,665,514 Depreciation - 200,429 260,737 20,840 33,388 67,699 9,381 - 592,474 Disposals - (30,493 ) (200,610 ) (20,614 ) (12,249 ) (21,305 ) - - (285,271 ) Reclassification - (100 ) ------(100 ) Combined individual effects - - - 183 810 417 - - 1,410 Effect of foreign currency exchange differences - - 614 190 317 (271 ) - - 850
Balance, June 30, 2014 $ - $ 5,887,290 $ 5,289,773 $ 487,225 $ 1,343,137 $ 907,582 $ 59,870 $ - $ 13,974,877
Balance, January 1, 2013 $ - $ 5,359,664 $ 4,912,255 $ 479,360 $ 1,318,112 $ 769,496 $ 31,749 $ - $ 12,870,636 Depreciation - 197,143 265,262 18,968 31,547 60,331 9,361 - 582,612 Disposals - (5,565 ) (149,14 7 ) (9,475 ) (20,506 ) (11,697 ) - - (196,390 ) Reclassification - (5,636 ) ------(5,636 ) Effect of foreign currency exchange differences - - (7 ) 57 279 1,659 - - 1,988
Balance, June 30, 2013 $ - $ 5,545,606 $ 5,028,363 $ 488,910 $ 1,329,432 $ 819,789 $ 41,110 $ - $ 13,253,210
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The above items of property and equipment were depreciated on a straight-line basis at the following estimated useful lives.
Buildings Main buildings 20 -60 years Air conditioning 5-10 years Machinery equipment 3-16 years Transportation equipment 2-10 years Miscellaneous equipment 3-10 years Leasehold imp rovements 1.5 -5 years Leased assets 9 years
21. INTANGIBLE ASSETS
December 31, June 30, 2014 2013 June 30, 2013
Goodwill $ 21,012,047 $ 21,012,047 $ 21,012,047 Intangible assets - customer value 99,380 167,726 236,072 Intangible assets - computer software 882,977 366,635 369,615 Intangible assets - concession 10,332 17,220 24,109 Intangible assets - others - - 3,037
$ 22,004,736 $ 21,563,628 $ 21,644,880
Computer Software
Balance, January 1, 2014 $ 366,635 Additions 616,116 Amortization (113,635 ) Reclassification 10,747 Combined individual effects 3,383 Effect of foreign currency exchange differences (269 )
Balance, June 30, 2014 $ 882,977
Balance, January 1, 2013 $ 378,662 Additions 60,401 Amortization (73,152) Reclassification 3,226 Effect of foreign currency exchange differences 478
Balance, June 30, 2013 $ 369,615
Please refer to Note 21 to the consolidated financial statements as of December 31, 2013 for the other related information on intangible assets.
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December 31, June 30, 2014 2013 June 30, 2013
Prepayments $ 1,236,858 $ 2,745,906 $ 2,791,236 Refundable deposits 16,661,885 3,008,659 5,315,894 Operating guarantee deposits and settlement funds 168,125 162,614 162,574 Collaterals, net 470,522 472,590 482,859 Less: Accumulated im pairment (44,960 ) (48,173 ) (57,483 ) Others 435,047 228,124 228,939
$ 18,927,477 $ 6,569,720 $ 8,924,019
Please refer to Note 22 to the consolidated financial statements as of December 31, 2013 for the other related information on other assets.
23. DUE TO CENTRAL BANK AND BANKS
December 31, June 30, 2014 2013 June 30, 2013
Due to Central Bank $ 41,129 $ 24,598 $ 24,347 Due to other banks 12,051,980 9,952,204 10,403,130 Deposits transferred from the Postal Bureau 33,979,937 34,551,988 35,433,101 Call loans from other banks 159,889,657 128,082,410 108,746,766 Bank overdraft 1,736,075 4,050,965 998,993
$ 207,698,778 $ 17 6,662,165 $ 155,606,337
24. COMMERCIAL PAPER ISSUED
December 31, June 30, 2014 2013 June 30, 2013
Guarantee or acceptance institution China Bills Finance $ 50 ,000 $ - $ - Ta Ching Bills Finance 111 ,000 - - International Bills Finance 50 ,000 - - Grand Bills Finance 50 ,000 - - Taiwan Bills Finance 50 ,000 - - Mega Bills Finance 50 ,000 - - Taichung Commercial Bank 100 ,000 - - Less: Discounts on c ommercial paper issued (353 ) - -
$ 460,647 $ - $ -
As of June 30, 2014, the interest rates for commercial paper issued were 0.73%-1.638%.
- 31 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 25. PAYABLES
December 31, June 30, 2014 2013 June 30, 2013
Notes an d accounts payable $ 16,663,639 $ 13,478,296 $ 12,337,402 Accrued expenses 4,976,440 6,060,544 3,985,942 Interest payable 4,037,118 3,640,598 3,809,255 Acceptance payable 6,549,783 7,252,081 7,220,218 Check for clearance payable 12,635,424 12,004,800 21,780,086 Other tax payable 472,894 289,526 489,980 Collection payable 612,862 759,281 861,112 Dividends and bonuses payable 8,215,961 258,965 3,612,023 Other payables 3,286,978 2,626,849 2,477,150
$ 57,451,099 $ 46,370,940 $ 56,573,168
26. DEPOSITS AND REMITTANCES
December 31, June 30, 2014 2013 June 30, 2013
Checking deposits $ 38,688,641 $ 40,586,728 $ 39,226,384 Demand deposits 474,252,241 458,643,172 457,974,798 Time deposits 552,030,617 551,986,863 517,917,044 Negotiable certificates of deposit 8,518,427 6,390,900 8,022,100 Savings deposits 1,219,742,270 1,191,904,484 1,146,795,966 Remittances 1,265,499 1,064,199 918,297
$ 2,294,497,695 $ 2,250,576,346 $ 2,170,854,589
27. BONDS PAYABLE
December 31, June 30, 2014 2013 June 30, 2013
Unsecured subordinated corporate bonds - par $ 22,000,000 $ 22,000,000 $ 22,000,000 Bank debentures 86,179,189 68,322,818 68,308,743
$ 108,179,189 $ 90,322,818 $ 90,308,743
Subordinated Corporate Bonds Issued by Taishin Financial Holding
To raise working capital and enhance financial structure, Taishin Financial Holding issued unsecured subordinated corporate bonds under SFB approval. Bond issue terms were as follows:
December 31, June 30, 2014 2013 June 30, 2013
Unsecu red Subordinated Corporate Bonds - 2010 (I) $ 5,300,000 $ 5,300,000 $ 5,300,000 Unsecured Subordinated Corporate Bonds - 2010 (II) 2,700,000 2,700,000 2,700,000 (Continued)
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December 31, June 30, 2014 2013 June 30, 2013
Unsecured Subordinated Corporate Bonds - 2011 (I) $ 5,200,000 $ 5,200,000 $ 5,200,000 Unsecured Subordinated Corporate Bonds - 2011 (II) 1,800,000 1,800,000 1,800,000 Unsecured Subordinated Corporate Bonds - 2012 (I) 7,000,000 7,000,000 7,000,000
$ 22,000,000 $ 22,000,000 $ 22,000,000 (Concluded)
Bank Debentures Issued by Taishin Bank
Taishin Bank has issued bank debentures to enhance its capital ratio and raise medium to long-term operating funds. Details of the bank debentures were as follows: December 31, June 30, 2014 2013 June 30, 2013
Subordinated Bank Debentures - 2005 (II) $ 3,300,000 $ 3,300,000 $ 3,300,000 Subordinated Bank Debentures - 2010.04.12 10,000,000 10,000,000 10,000,000 Subordinated Bank Debentures - 2012 (I) 5,600,000 5,600,000 5,600,000 Subordinated Bank Debentures - 2012 (II) 6,100,000 6,100,000 6,100,000 Subordinated Bank Debentures - 2014 (I) 3,000,000 - - Subordinated Bank Debentures - 2014 (II) 2,000,000 - - Subordinated Bank Debentures - 2014 (III) 3,000,000 - -
$ 33,000,000 $ 25,000,000 $ 25,000,000 a. Taishin Bank made first issue of $3,000 million in unsecured, no-maturity, non-cumulative bank debentures in 2014 as follows:
Bank The Method of Redemption and Issue Date Maturity Date Term Issue Amount Interest Rate Face Value Debentures Interest Payment Interest is accrued according to nominal interest rate and actual days, and calculated at a simple No maturity. rate and paid annually on July No maturity. (Issuer has 1 from the issue date. 2014, first issue 2014.04.16 (Issuer has $3,000 million 4.10% fixed interest rate $50 million redemption Additional interest is not redemption right.) right.) accrued if principal and interest are withdrawn after the interest date. The debentures have no maturity.
1) Dividend distribution
Taishin Bank may not distribute the dividend or pay the interest if it had no earnings during the previous fiscal year and did not distribute common stock dividends. Where the balance of accumulated undistributed earnings after deducting the unamortized loss on the disposal of non-performing loans exceeds the interest payment and such payment does not alter the originally agreed conditions for interest payment, distribution is allowed. The dividends not distributed should not be accumulated or deferred.
Taishin Bank shall defer the payment of principal and interest if the ratio of regulatory capital to risk-weighted assets does not meet the minimum requirements in Regulations Governing the Capital Adequacy and Capital Category of Banks Paragraph 1 of Article 5; the deferred payment of principal or interest shall not be imposed further with interest.
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2) Redemption policy
After five years of issuance, if the ratio of regulatory capital to risk-weighted assets after redemption will meet the minimum rate and the redemption has an approval from the competent authority, the debts may be redeemed earlier by Taishin Bank. b. Taishin Bank made second issue of $2,000 million in unsecured, no-maturity, non-cumulative bank debentures in 2014 as follows:
Bank The Method of Redemption and Issue Date Maturity Date Term Issue Amount Interest Rate Face Value Debentures Interest Payment Interest is accrued according to nominal interest rate and actual days, and calculated at a simple No maturity. No maturity. rate and paid annually on July 2014, second (Issuer has (Issuer has 1 from the issue date. 2014.05.09 $2,000 million 4.10% fixed interest rate $50 million issue redemption redemption Additional interest is not right.) right.) accrued if principal and interest are withdrawn after the interest date. The debentures have no maturity.
1) Dividend distribution:
Taishin Bank may not distribute the dividend or pay the interest if it had no earnings during the previous fiscal year and did not distribute common stock dividends. Where the balance of accumulated undistributed earnings after deducting the unamortized loss on the disposal of non-performing loans exceeds the interest payment and such payment does not alter the originally agreed conditions for interest payment, distribution is allowed. The dividends not distributed should not be accumulated or deferred.
Taishin Bank shall defer the payment of principal and interest if the ratio of regulatory capital to risk-weighted assets does not meet the minimum requirements in Regulations Governing the Capital Adequacy and Capital Category of Banks Paragraph 1 of Article 5; the deferred payment of principal or interest shall not be imposed further with interest.
2) Redemption policy
After five years of issuance, if the ratio of regulatory capital to risk-weighted assets after redemption will meet the minimum rate and the redemption has an approval from the competent authority, the debts may be redeemed earlier by Taishin Bank. c. Taishin Bank made third issue of $3,000 million in unsecured bank debentures in 2014 as follows:
Bank The Method of Redemption and Issue Date Maturity Date Term Issue Amount Interest Rate Face Value Debentures Interest Payment Interest is accrued according to nominal interest rate and actual days, and calculated at a simple rate and paid annually from the 2014, third issue 2014.05.16 2024.05.16 10 years $3,000 million 1.95% fixed interest rate $50 million issue date. Additional interest is not accrued if principal and interest are withdrawn after the interest date. Principal will be repaid on maturity date.
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On September 26, 2007, May 19, 2008, December 15, 2008, September 15, 2009, June 29, 2010, March 11, 2011, April 18, 2011 and April 16, 2014, Chang Hwa Bank issued subordinated bank debentures and senior bank debentures on May 29, 2013, to enhance its capital adequacy ratio and raise medium to long-term operating funds. The details of subordinated bank debentures were as follows:
December 31, June 30, 2014 2013 June 30, 2013
Fair value hedged
Subordinated Bank Debentures - 2008 (I) $ 2,000,000 $ 2,000,000 $ 2,000,000 Subordinated Bank Debentures - 20 14 (I) - A 2,200,000 - - Subordinated Bank Debentures - 20 14 (I) - B 3,000,000 - - Valuation adjustment 25,1 89 59,818 79,743 7,225,189 2,059,818 2,079,743 Non -hedged
Subordinated Bank Debentures - 2007 (I) 5,000,000 5,000,000 5,000,000 Subordinated Bank Debentures - 2008 (I) 3,000,000 3,000,000 3,000 ,000 Subordinated Bank Debentures - 2008 (II) 8,350,000 8,350,000 8,350,000 Subordinated Bank Debentures - 2009 (I) 5,000,000 5,000,000 5,000,000 Subordinated Bank Debentures - 2010 (I) 5,000,000 5,000,000 5,000,000 Subordinated Bank Debentures - 2011 (I) 3,300,000 3,300,000 3,300,000 Subordinated Bank Debentures - 2011 (II) 6,700,000 6,700,000 6,700,000 Subordinated Bank Debentures - 2013 (I) 4,804,000 4,913,000 4,879,000 Subord inated Bank Debentures - 20 14 (I) - B 2,300,000 - - Subordinated Bank Debentures - 20 14 (I) - C 2,500,000 - - 45,954,000 41,263,000 41,229,000
$ 53,179,189 $ 43,322,818 $ 43,308,743 a. Subordinated Bank Debentures - 2014 (I) - A
1) Issue amount: $2,200,000 thousand.
2) Issue date: April 16, 2014.
3) Issue price: 100% of the principal amount of the bonds.
4) Maturity: 7 years from the issue date.
5) Coupon rate: 1.45% per annum.
6) Interest payment: Interest payable annually from the issue date.
7) Other: To avoid loss on fair value changes of its fixed-rate borrowings, Chang Hwa Bank engaged in interest rate swaps derivative as hedging instruments under derivative financial instruments for hedging. b. Subordinated Bank Debentures - 2014 (I) - B
1) Issue amount: $5,300,000 thousand.
2) Issue date: April 16, 2014.
- 35 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59
3) Issue price: 100% of the principal amount of the bonds.
4) Maturity: 10 years from the issue date.
5) Coupon rate: 1.63 % per annum.
6) Interest payment: Interest payable annually from the issue date.
7) Other: To avoid loss on fair value changes of its fixed-rate borrowings, Chang Hwa Bank engaged in interest rate swaps derivative as hedging instruments under derivative financial instruments for hedging.
c. Subordinated Bank Debentures - 2014 (I) - C
1) Issue amount: $2,500,000 thousand.
2) Issue date: April 16, 2014.
3) Issue price: 100% of the principal amount of the bonds.
4) Maturity: 10 years from the issue date.
5) Coupon rate: The 90-day commercial paper fixed rate in the secondary market plus 0.45%, provided by Reuters Limited.
6) Interest payment: Interest payable annually from the issue date.
Please refer to Note 27 to the consolidated financial statements as of December 31, 2013 for the other related information on unsecured subordinated corporate bonds and bank debentures.
28. OTHER BORROWINGS
December 31, June 30, 2014 2013 June 30, 2013
Short-term unsecured borrowings $ 3,995 ,140 $ 2,156,539 $ 573,652 Long-term borrowings Nanjing Bank, medium-term working capital loan with a credit line of CNY200,000 thousand; repayable in semi-annual installments 87,142 130,776 73,298 Ta Chong Bank, medium-term working capital loan with a credit line of USD10,000 thousand 236,918 - - Yuanta Bank, medium-term working capital loan with a credit line of USD8,000 thousand 236,917 - -
$ 4,556,117 $ 2,287,315 $ 646,950
As of June 30, 2014, December 31, 2013 and June 30, 2013, the interest rates on short-term unsecured borrowings ranged from 0.97% to 6.60%, from 1.99% to 2.76% and 1.90% to 2.60%, respectively.
- 36 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 As of June 30, 2014, December 31, 2013 and June 30, 2013, the interest rate of long-term borrowings ranged from 2.28% to 6.77%, 6.46% and 6.46%, respectively.
29. RESERVE FOR LIABILITIES
December 31, June 30, 2014 2013 June 30, 2013
Reserve for employee benefits $ 3,633,844 $ 3,663,483 $ 3,5 31,270 Reserve for guarantee liabilities 600,998 451,131 458,504 Other reserves 278,932 308,089 324,762
$ 4,513,774 $ 4,422,703 $ 4,314,536
Reserve for Guarantee Liabilities Other Reserves Total
Balance, January 1, 2014 $ 451,131 $ 308,089 $ 759,220 Provision 139,879 143 140,022 Reclassified from allowance for loan losses 10,000 - 10,000 Payment - (29,300 ) (29,300 ) Exchange differences (12 ) - (12 )
Balance, June 30, 2014 $ 600,998 $ 278,932 $ 879,930
Balance, January 1, 2013 $ 456,450 $ 350,488 $ 806,938 Provision 1,821 79 1,900 Payment - (25,805) (25,805) Exchange differences 233 - 233
Balance, June 30, 2013 $ 458,504 $ 324,762 $ 783,266
Please refer to Note 29 to the consolidated financial statements as of December 31, 2013 for the other related information on reserve for liabilities.
30. OTHER FINANCIAL LIABILITIES
December 31, June 30, 2014 2013 June 30, 2013
Principal of structured products $ 51,144,193 $ 31,484,193 $ 22,672,321 Appropriations for loan fund 1,285,169 1,023,936 184,481 Lease payable 63,920 81,017 97,717 Gold account 181,733 214,357 198,102
$ 52,675,015 $ 32,803,503 $ 23,152,621
- 37 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 31. OTHER LIABILITIES
December 31, June 30, 2014 2013 June 30, 2013
Unearned revenue $ 979,938 $ 888,536 $ 829,356 Unearned interest 473,785 297,102 212,179 Guarantee deposits 2,031,838 1,706,699 1,400,037 Deferred income 1,086,231 1,107,335 1,076,612 Temporary credits 335,178 286,028 282,517 Others 110,740 136,627 92,155
$ 5,017,710 $ 4,422,327 $ 3,892,856
32. POST-EMPLOYMENT BENEFIT PLANS
The Group’s retirement benefit plans include defined contribution, defined benefit and Chang Hwa Bank’s high-yield savings accounts for employee plans. For defined benefit plans, employee benefit expenses were calculated using the actuarially determined pension cost discount rate as of December 31, 2013 and December 31, 2012, and recognized in their respective periods. Please refer to Note 32 to the consolidated financial statements as of December 31, 2013 for information on the Group’s defined benefit and Chang Hwa Bank’s high-yield savings accounts for employee plans. Please refer to Note 38 for information on employee benefit expenses.
33. EQUITY
Please refer to Note 33 to the consolidated financial statements as of December 31, 2013 for the other related information on the Group’s equity, except for details listed below.
December 31, June 30, 2014 2013 June 30, 2013
Numbers of shares authorized (in thousands) 12,000,000 12,000,000 12,000,000 Shares authorized $ 120,000,000 $ 120,000,000 $ 120,000,000 Numbers of shares issued and fully paid (in thousands) Common stock 8,035,631 7,511,653 6,891,523 Preferred stock 725,137 725,137 725,137 Shares issued $ 87,607,682 $ 82,367,900 $ 76,166,601 Stock dividends to be distributed $ 7,987,008 $ - $ 6,139,767
For the six months ended June 30, 2014, the movements of share capital resulted from the issuance of 500,000 thousand ordinary shares and 23,978 thousand shares upon exercise of employee stock options.
On December 31, 2013, Taishin Financial Holding’s board of directors resolved to issue 500,000 thousand ordinary shares, with a par value of NT$10 each, for consideration of NT$12 per share, which increased the share capital issued and fully paid to $87,367,900 thousand. On January 17, 2014, the above transaction was approved by the FSC, and the subscription base date was set by board of directors at April 14, 2014.
Advance receipts for common stock
As of June 30, 2013, advance receipts for capital stock amounted to $33,770 thousand, representing the proceeds of the conversion of employee stock options into 3,073 thousand common shares; the registration of this conversion and share issuance had not been completed.
- 38 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59
In the shareholders’ meeting on June 6, 2014, Taishin Financial Holding’s shareholders had resolved the transfer of $7,987,008 thousand of earnings to common stock. As of June 30, 2014, the amount was accounted as stock dividends to be distributed because the registration of the capitalization has not been completed.
Capital surplus
The issue of common shares for cash was approved by the Board of Directors on December 31, 2013, and 10 percent of the shares issued were reserved for the Group’s employees’ subscription in accordance with the Company Law. The Company recognized a capital surplus of $105,873 thousand based on the share fair value at the grant date.
Retained earnings and dividend policy
Taishin Financial Holding’s Articles of Incorporation provide that annual net income, after payment of taxes and offset of any accumulated deficit should be appropriated in the following order: a. Legal reserve and, if needed, special reserve; b. Dividends to holders of preferred stock; c. 0.01% of the remainder as bonuses to employees and 1% of the remainder as remuneration to directors and supervisors; d. The remainder, together with the unappropriated retained earnings of previous years, as dividends.
Taishin Financial Holding’s Board of Directors should prepare a proposal on above item (d) for approval in the stockholders’ regular annual meeting. However, under the requirements of the MOF, if the group’s capital adequacy ratio is less than 100%, distributions of dividends may also be restricted.
For the six months ended June 30, 2014 and 2013, the bonus to employees was $765 thousand and $740 thousand, respectively, and the remuneration to directors and supervisors was $76,471 thousand and $73,982 thousand, respectively. The bonus to employees and remuneration to directors, and supervisors were calculated based on the rates described above (percentage of net income net of the bonus to employees, directors, and supervisors) and based on the Articles of Incorporation. If the actual amounts subsequently resolved by the shareholders differ from the proposed amounts, the differences are recorded in the year of shareholders’ resolution as a change in accounting estimate. If bonus shares are resolved to be distributed to employees, the number of shares is determined by dividing the amount of bonus by the closing price (after considering the effect of cash and stock dividends) of the shares of the day preceding the shareholders’ meeting.
Appropriation of earnings to legal reserve shall be made until the legal reserve equals the corporation’s paid-in capital. Legal reserve may be used to offset deficit. If the corporation has no deficit and the legal reserve has exceeded 25% of the corporation’s paid-in capital, the excess may be transferred to capital or distributed in cash.
Except for non-ROC resident shareholders, all shareholders receiving dividends are allowed a tax credit equal to their proportionate share of the income tax paid by Taishin Financial Holding.
- 39 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 The appropriations of earnings for 2013 and 2012 had been approved in the shareholders’ meetings on June 6, 2014 and June 21, 2013. Where the actual number of common shares outstanding has changed because of exercise of employee share options, the actual appropriation is as follows:
Dividend Per Share Appropriation of Earnings (NT$) For For For For Year 2013 Year 2012 Year 2013 Year 2012
Legal reserve $ 1,375,537 $ 997,049 $ - $ - Preferred stock - C cash dividends - 388,729 - - Preferred stock - D cash dividends 969,516 910,000 - - Common stock cash dividends 3,423 ,308 1,534,942 0. 42575 0.22273 Common stock dividends 7,987 ,008 6,139,767 0.99334 0.89092
The bonus to employees and remuneration to directors and supervisors for 2013 and 2012 had been proposed and approved in the shareholders’ meeting on June 6, 2014 and June 21, 2013, respectively. Related information was as follows:
For Year 2013 For Year 2012
Bonus to employees $ 1,147 $ 767 Remuneration to directors and supervisors 114,698 76,747
The appropriations of earnings for 2012 were proposed according to Taishin Financial Holding’s financial statements for the year ended December 31, 2012, which were prepared in accordance with the Regulations Governing the Preparation of Financial Statements by Financial Holding Companies and ROC GAAP, and by reference to the balance sheet for the year ended December 31, 2012, which was prepared in accordance with the Regulations Governing the Preparation of Financial Statements by Financial Holding Companies (revised) and IFRSs.
There were no differences between the approved amounts of the bonus to employees and the remuneration to directors and supervisors and the accrual amounts reflected in the financial statements for the year ended December 31, 2012 and 2012.
Information about the earnings appropriation, the bonus to employees, directors and supervisors proposed by Taishin Financial Holding’s Board of Directors and shareholders’ meeting is available at the Market Observation Post System website of the Taiwan Stock Exchange.
Other Equity Items a. Exchange differences on translation of foreign financial statements
For the Six Months Ended June 30 2014 2013
Beginning balance $ 68,688 $ (58,334) Exchange differences arising on translating the net assets of foreign operations (71,219) 117,869 Income tax relating to exchange differences arising on translating the net assets of foreign operations 228 (5,618)
Ending balance $ (2,303 ) $ 53,917
- 40 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 b. Unrealized gains (losses) on available-for-sale financial assets
For the Six Months Ended June 30 2014 2013
Beginning balance $ 875,995 $ 2,458,941 Unrealized gains (losses) on available-for-sale financial assets 141,197 66,162 Income tax relating to unrealized gains (losses) on available-for-sale financial assets (216) 334,715 Cumulative gains (losses) reclassified to profit or loss on sale of available-for-sale financial assets (86,761) (2,595,347)
Ending balance $ 930,215 $ 264,471
Non-controlling interests
For the Six Months Ended June 30 2014 2013
Beginning balance $ 86,857,655 $ 81,127,472 Attributable to non-controlling interests Net income 4,576,337 3,628,666 Exchange differences on translation of foreign financial statements (148,077) 195,092 Income tax relating to exchange differences arising on translating the foreign operations 773 (19,011) Unrealized gains (losses) on available-for-sale financial assets 178,970 (406,582) Income tax relating to unrealized gains (losses) on available-for-sale financial assets 279 (796) Non-controlling interest relating to outstanding vested share options held by the employees of subsidiaries 163 32 Cash dividends (3,588,810 ) (559,005)
Ending balance $ 87,877,290 $ 83,965,868
34. NET INTEREST INCOME
For the Three Months Ended For the Six Months Ended June 30 June 30 2014 2013 2014 2013
Interest income Loans $ 11,097,831 $ 10,381,492 $ 21,838,498 $ 20,519,739 Due from and call loans to banks 1,277,537 323,854 2,362,946 547,215 Investment in marketable securities 1,218,352 1,161,318 2,388,448 2,308,946 Revolving interest of credit card 313,688 342,090 640,688 693,959 Others 531,586 288,266 1,049,599 565,348 14,438,994 12,497,020 28,280,179 24,635,207 (Continued)
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For the Three Months Ended For the Six Months Ended June 30 June 30 2014 2013 2014 2013
Interest expense Deposits $ (4,275,579) $ (3,673,900) $ (8,410,614) $ (7,341,030) Due to the Central Bank and call loans from banks (574,320) (283,594) (1,104,495) (577,474) Issuance of bonds and securities (583,081) (481,820) (1,081,422) (951,709) Structured products (253,834) (162,389) (478,063) (271,115) Others (136,778) (99,561) (253,572) (208,728) (5,823,592) (4,701,264) (11,328,166) (9,350,056)
Net interest income $ 8,615,402 $ 7,795,756 $ 16,952,013 $ 15,285,151 (Concluded)
35. NET SERVICE FEE AND COMMISSIONS INCOME
For the Three Months Ended For the Six Months Ended June 30 June 30 2014 2013 2014 2013
Service fee and commissions income Fees from import and export $ 94,638 $ 110,663 $ 182,730 $ 212,687 Remittance fees 147,472 134,294 294,973 267,169 Interbank fees 200,620 175,459 388,950 358,041 Loan and guarantees fees 237,748 288,646 559,073 516,529 Fees from certification, underwriting and brokerage 104,808 68,166 182,407 155,688 Fees from trustee business 632,659 693,982 1,328,306 1,425,045 Agency fees 2,106,736 1,667,632 4,100,009 3,247,480 Fees from credit card and cash card 774,520 708,342 1,512,838 1,414,345 Fees from trustee affiliated business 101,177 108,441 196,817 214,017 Others 264,760 243,391 513,596 461,055 4,665,138 4,199,016 9,259,699 8,272,056 Service fee and commissions expense Interbank fees (63,664) (62,664) (126,965) (150,465) Fees from trustee business (36,419) (44,842) (77,033) (92,899) Marketing fees (106,385) (85,952) (215,582) (179,133) Agency fees (118,169) (84,328) (274,273) (199,966) Fees from credit card (304,796) (259,461) (585,779) (505,730) Others (195,467) (199,893) (391,505) (373,414) (824,900) (737,140) (1,671,137) (1,501,607)
Net service fee and commissions income $ 3,840,238 $ 3,461,876 $ 7,588,562 $ 6,770,449
- 42 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 36. GAIN ON FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
For the Three Months Ended For the Six Months Ended June 30 June 30 2014 2013 2014 2013
Disposal gains (losses) on financial assets and liabilities at FVTPL Stocks and beneficiary certificates $ 128,451 $ 28,835 $ 318,022 $ 65,320 Bills 2,413 5,285 7,052 8,251 Bo nds 2,949 (27,254 ) 183,502 (97,060 ) Derivative financial instruments 815,997 1,099,475 2,921,010 2,661,341 949,810 1,106,341 3,429,586 2,637,852 Valuation gains (losses) on financial assets and liabilities at FVTPL Stocks and beneficiary certificates (16,300) (18,642) (10,738) (7,932) Bills 2,760 (452 ) 502 (3,371 ) Bonds (35,192 ) (87,126 ) (47,646 ) (50,247 ) Derivative financial instrumen ts 388,589 1,565,991 86,762 3,734,917 339,857 1,459,771 28,880 3,673,367 Net interest income 142,753 152,850 305,375 308,362 Dividend revenue 660 188 660 188
$ 1,433,080 $ 2,719,150 $ 3,764,501 $ 6,619,769
37. REALIZED GAIN ON AVAILABLE-FOR-SALE FINANCIAL ASSETS
For the Three Months Ended For the Six Months Ended June 30 June 30 2014 2013 2014 2013
Disposal gains Stock and beneficiary certificates $ (13,575) $ 1,757,036 $ 9,273 $ 2,694,893 Bills (2,933) (2,060) (4,341) (5,286) Bonds 35,919 70,675 86,755 124,914 Others - (21,713) - (21,713) 19,411 1,803,938 91,687 2,792,808 Stock dividends and bonuses 7,487 8,519 7,487 8,844
$ 26,898 $ 1,812,457 $ 99,174 $ 2,801,652
- 43 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 38. EMPLOYEE BENEFIT EXPENSES
For the Three Months Ended For the Six Month s Ended June 30 June 30 2014 2013 2014 2013
Short -term benefits $ 4,743,858 $ 4,409,286 $ 9,490,182 $ 8,676,846 Post -employment benefits (Note 32) Defined contribution plans 116,728 107,541 232,017 216,242 Defined benefit plans 192,022 112,842 280,999 222,314 High -yield savings account for employees 116,538 114,100 229,388 224,343 Other post -employment benefits 1,496 1,362 3,056 2,705 Share -based payment Equity -settled share -based payment 10,801 16,145 127,006 33,926 Cash -settled share -based payment 35,451 7,900 45,741 11,790 Other employee benefits expenses 82,459 33,886 159,645 153,659
$ 5,299,353 $ 4,803,062 $ 10,568,034 $ 9,541,825
39. DEPRECIATION AND AMORTIZATION EXPENSES
For the Three Months Ended For the Six Months Ended June 30 June 30 2014 2013 2014 2013
Property and equipment $ 291,012 $ 292,762 $ 592,474 $ 582,612 Investment property 4,087 4,036 8,233 8,026 Intangible assets and other deferred assets 101,378 73,674 190,017 152,680
$ 396,477 $ 370,472 $ 790,724 $ 743,318
40. INCOME TAX
In 2003, Taishin Financial Holding adopted the linked tax system for tax filing with subsidiaries Taishin Bank, Taishin Securities A, Taishin Bills Finance, Taishin AMC and Taishin Marketing. Taishin Venture Capital was included in this tax system in 2004. Taishin Securities A, Taishin Bills Finance and Taishin Marketing were excluded from the linked tax system in 2009, in 2011 and in 2013, respectively. Taishin Securities B, Taishin Securities Investment Trust and Taishin Securities Investment Advisory were included in this tax system in 2011. Taishin Holdings Insurance Brokers was included in this tax system in 2012.
- 44 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Income Tax Recognized in Profit or Loss
The major components of tax expense were as follows:
For the Three Mont hs Ended For the Six Months Ended June 30 June 30 2014 2013 2014 2013
Current tax In respect of the current period $ 812,107 $ 503,900 $ 1,605,065 $ 1,088,021 Additional income tax on unappropriated earnings - 1,662 - 2,842 Adjustments for prior years (207,884 ) 440,035 (213,524 ) 440,035 Offshore income tax expense 52,774 23,320 82,934 50,723 Deferred tax In respect of the current period 195,142 768,394 595,038 1,252,809
Income tax expense recognized in profit or loss $ 852,139 $ 1,737,311 $ 2,069,513 $ 2,834,430
Income Tax Recognized in Other Comprehensive Income
For the Three Months Ended For the Six Months Ended June 30 June 30 2014 2013 2014 2013 Deferred tax
Recognized in other comprehensive income Exchange differences on translation of foreign financial statements $ (1,037) $ 10,263 $ (1,001) $ 24,629 Unrealized gains (losses) on available-for-sale financial assets 3,709 (268,324) (63) (333,919)
$ 2,672 $ (258,061) $ (1,064) $ (309,290)
Taishin Financial Holding’s Information about Integrated Income Tax
December 31, June 30, 2014 2013 June 30, 2013
Balance of ICA $ 1,350,617 $ 61,421 $ 610,039 Unappropriated earnings generated after January 1, 1998 $ 9,035,319 $ 13,755,369 $ 8,236,802
As stipulated in the Ministry of Finance Letter No. (91) Tai-Tsai-Tax 0910454466, the denominator to be used in the imputed tax credit ratio should include the capital surplus which is originally the un-appropriated earnings generated after January 1, 1998 before the share swap in establishing a financial holding company. As of June 30, 2014, the capital surplus of Taishin Financial Holding mentioned above amounted to $757,662 thousand.
Taishin Financial Holding’s creditable ratio for distribution of earnings of 2013 and 2012 was 20.18% (estimate) and 5.49% (actual), respectively.
- 45 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Under the Income Tax Law, for distribution of earnings generated after January 1, 1998, the imputation credit allocated to ROC resident shareholders of Taishin Financial Holding was calculated based on the creditable ratio as of the date of dividend distribution.
The actual imputation credit allocated to shareholders of Taishin Financial Holding was based on the balance of the ICA as of the date of dividend distribution. Therefore, the expected creditable ratio for the 2013 earnings may differ from the actual creditable ratio to be used in allocating imputation credits to the shareholders.
According to legal interpretation No. 10204562810 announced by the Taxation Administration of the Ministry of Finance, when calculating imputation credits in the year of first-time adoption of IFRSs, the cumulative distributable earnings should include the net increase or decrease in retained earnings arising from first-time adoption of IFRSs.
Assessments of the Group’s Income Tax
Please refer to Note 40 to the consolidated financial statements as of December 31, 2013 for related information on the assessments of the Group’s income tax. a. Taishin Financial Holding’s income tax returns through 2008 had been assessed by the tax authorities. The litigations for 2004 and 2005 have been reviewed and determined by National Taxation Bureau of Taipei, Ministry of Finance. b. Taishin Bank’s income tax returns through 2008 had been assessed by the tax authorities. The income tax returns of Taishin Insurance Agency, Taishin Real-Estate, Taishin D.A. Finance, and Taishin Insurance Brokers through 2010, 2012, 2012, and 2012 had been assessed by the tax authorities.
In regard to the amortization of $758,518 thousand, $758,518 thousand, $758,518 thousand and $126,420 thousand of goodwill from the merger of Dah An Bank reported in the 2004, 2005, 2006 and 2007 income tax returns of Taishin Bank, the tax authorities had disapproved the amortization as deductible because the goodwill resulted from the negotiations of the dealing parties rather than from a purchase in active market. Taishin Bank had filed appeals and litigations to the tax authorities and the administrative courts. In June, 2014, National Taxation Bureau of Taipei, Ministry of Finance has agreed part of the recognition of the amortization of the goodwill. Taishin Bank had adjusted the estimated income tax expense for the six months ended June 30, 2014.
In regard to the amortization of $18,109 thousand, $71,577 thousand, $71,405 thousand, $71,405 thousand and $71,405 thousand on goodwill from the acquisition of the 10th Credit Cooperative of Hsin-Chu in the 2004, 2005, 2006, 2007 and 2008 income tax returns of Taishin Bank, the tax authorities had disapproved the related expense due to the reason that the goodwill was not assessed by applying professional valuation procedures and the identifiable assets and liabilities were not analyzed by fair value. Taishin Bank is filing appeals to the tax authorities. In June, 2014, National Taxation Bureau of Taipei, Ministry of Finance has agreed part of the recognition of the amortization of the goodwill. Taishin Bank had adjusted the estimated income tax expense for the six months ended June 30, 2014. c. Taishin AMC’s income tax returns through 2008 had been assessed by the tax authorities. d. Taishin Marketing’s income tax returns through 2008 had been assessed by the tax authorities. e. Taishin Venture Capital’s income tax returns through 2008 had been assessed by the tax authorities.
- 46 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 41. EARNINGS PER SHARE
Unit: NT$ Per Share
For the Three Months Ended For the Six Months Ended June 30 June 30 2014 2013 2014 2013
Basic earnings per share $ 0.50 $ 0.51 $ 1.11 $ 1.04 Pro forma basic earnings per share adjusted retrospectively to reflect the effects of changes in the number of shares which resulted from bonus issue on August 25, 2014 occurred after these consolidated financial statements were approved $ 0.46 $ 0.47 $ 1.01 $ 0.95 Diluted earnings per share $ 0.48 $ 0.50 $ 1.06 $ 1.00 Pro forma diluted earnings per share adjusted retrospectively to reflect the effects of changes in the number of shares which resulted from bonus issue on August 25, 2014 occurred after these consolidated financial statements were approved $ 0.44 $ 0.45 $ 0.97 $ 0.92
The earnings and weighted average number of common shares outstanding in the computation of earnings per share were as follows:
Net Income for the Periods
For t he Three Months Ended For the Six Months Ended June 30 June 30 2014 2013 2014 2013
Net income for the periods attributable to owner of the parent $ 4,211,567 $ 4,081,807 $ 9,035,319 $ 8,263,496 Less: Dividends on preferre d stocks (226,877) (226,877) (451,260) (451,260) Earnings used in computation of basic earnings per share 3,984,690 3,854,930 8,584,059 7,812,236 Effect of dilutive potential ordinary share: Convertible prefer red stocks 226,877 226,877 451,260 451,260
Earnings used in computation of diluted earnings per share $ 4,211,567 $ 4,081,807 $ 9,035,319 $ 8,263,496
- 47 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Weighted Average Number of Common Shares Outstanding (In Thousand Shares)
For the Three Months Ended For the Six Months Ended June 30 June 30 2014 2013 2014 2013
Weighted average number of ordinary shares in computation of basic earnings per share 7,964,687 7,505,492 7,748,469 7,505,465 Weighted average number of ordinary shares in computation of pro forma basic earnings per share 8,755,848 8,251,039 8,518,152 8,251,009 Effect of dilutive potential ordinary shares: Convertible preferred stocks 725,137 725,137 725,137 725,137 Employee stock option 29,688 - 28,944 - Employees bonus 114 109 126 112
Weighted average number of ordinary shares outstanding in computation of dilutive earnings per share 8,719,626 8,230,738 8,502,676 8,230,714 Weighted average number of ordinary shares outstanding in computation of pro forma diluted earnings per share 9,510,787 8,976,285 9,272,359 8,976,258
If the Group could settle the bonus to employees by cash or shares, the Group presumed that the entire amount of the bonus would 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, if the shares had a dilutive effect. Such dilutive effect of the potential shares was included in the computation of diluted earnings per share until the shareholders resolved the number of shares to be distributed to employees at their meeting in the following year.
42. SHARE-BASED PAYMENT ARRANGEMENTS
a. Equity-settled share-based payments of employee share option plan
No share options were granted during the six months ended June 30, 2014 and 2013. Please refer to Note 42 to the consolidated financial statements as of December 31, 2013 for the information on employee share option plan.
- 48 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 The quantity and weighted-average exercise price of the share options were as follows:
For the Six Months Ended June 30 2014 2013 Weighted Weighted Average Average Exercise Price Exercise Price Unit (Dollars) Unit (Dollars)
Plan of 2010 (II)
Outstanding, beginning balance 1,507 $ 10.70 1,507 $ 11.80 Exercise (50 ) 10.70 - - Forfeited - - -
Outstanding, ending balance 1,457 1,507
Exercisable, ending balance 267 -
For the Six Months Ended June 30 2014 2013 Weighted Weighted Average Average Exercise Price Exercise Price Unit (Dollars) Unit (Dollars)
Plan of 2010 (I)
Outstanding, beginning balance 48,306 $ 10.60 61,710 $ 11.70 Exercise (4,438 ) 10.60 (76 ) 11.70 Forfeited (649 ) 10.60 (1,700 ) 11.70
Outstanding, ending balance 43,219 59,934
Exercisable, ending balance 14,373 15,169
For the Six Months Ended June 30 2014 2013 Weighted Weighted Average Average Exercise Price Exercise Price Unit (Dollars) Unit (Dollars)
Plan of 2007
Outstanding, beginning balance 96,260 $ 11.30 109,118 $ 12.50 Exercise (6,058 ) 11.30 - - Forfeited (120 ) 11.30 (1,060 ) 12.50
Outstanding, ending balance 90,082 108,058
Exercisable, ending balance 90,082 108,058
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For the Six Months Ended June 30 2014 2013 Weighted Weighted Average Average Exercise Price Exercise Price Unit (Dollars) Unit (Dollars)
Plan of 2005
Outstanding, beginning balance 40,450 $ 15.30 40,450 $ 17.20 Forfeited - - - -
Outstanding, ending balance 40,450 40,450
Exercisable, ending balance 40,450 40,450
The weighted-average of stock prices at the dates of exercise of share options exercised during the year ended June 30, 2014 was $14.36.
The exercise price and expected weighted-average outstanding period of the share option warrants for the years ended June 30, 2014 were as follows:
For the Six Months Ended June 30 2014 2013 Expected Expected Weighted Weighted Average Average Exercise Price Outstanding Exercise Price Outstanding (Dollars) Period (Years) (Dollars) Period (Years)
Plan of 2010 (II) $ 10.70 7.17 $ 11.80 8.17 Plan of 2010 (I) 10.60 6.29 11.70 7.29 Plan of 2007 11.30 2.71 12.50 3.71 Plan of 2005 15.30 1.09 17.20 2.09
The valuation models of the share options for the year ended June 30, 2014 were as follows:
Valuation Black-scholes Options Plan of 2010 Model Valuation Model (II) Plan of 2010 (I) Plan of 2007
Assumption Dividend yield - - 7.00% Expected price volatility 37.71%-39.71% 38.02%-38.73% 33.26% Risk-free interest rate 1.22%-1.52% 1.06%-1.23% 2.15% Expected outstanding periods 10 years 10 years 10 years
Please refer to Note 33 for information relating to share-based payments of employee subscription reserved when the Company issues new shares. b. Cash-settled share-based payment of Taishin appreciation rights plan
The Group issued to employees share appreciation rights (the SARs) that require the Group to pay the intrinsic value of the SAR to the qualified people at the date of exercise. The fair value of the SARs was determined using the Black-Scholes pricing model based on the following assumptions.
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Plan of 2013 Plan of 2012
Balance sheet date share price $15.30 $15.30 Exercise price $14.30 $9.90 Outstanding period 2 years, 3 years 2 years, 3 years Expected volatility 31.15%, 31.15% 31.15%, 31.15% Risk-free interest rate 0.97%, 0.97% 0.97%, 0.97%
The movements in the appreciation rights plan were as follows:
Plan of 2012 For the Six Months Ended For the Six Months Ended June 30, 2014 June 30, 2013 Weighted Weighted Average Average Exercise Price Exercise Price Appreciation Rights Plan Unit (Dollars) Unit (Dollars)
Outstanding, beginning 23,743 $ - - $ - Granted - - 24,323 10.97 Forfeited (350 ) 9.90 (460 ) -
Outstanding, ending 23,393 23,863
Exercisable, ending - -
Weighted-average fair value of appropriation rights (NT$) $ 5.62 $ 3.04
Plan of 2013 For the Six Months Ended For the Six Months Ended June 30, 2014 June 30, 2013 Weighted Weighted Average Average Exercise Price Exercise Price Appreciation Rights Plan Unit (Dollars) Unit (Dollars)
Outstanding, beginning - $ - - $ - Granted 26,695 14.50 - - Forfeited (160 ) 14.30 - -
Outstanding, ending 26,535 -
Exercisable, ending - -
Weighted-average fair value of appropriation rights (NT$) $ 2.77 $ -
43. OPERATING LEASE ARRANGEMENTS
a. The Group as lessee
Operating leases relate to leases of operating place which were tenanted by Taishin Bank, Chang Hwa Bank with lease terms between 1 and 10 years.
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As of June 30, 2014, December 31, 2013 and June 30, 2013, refundable deposits paid under operating leases amounted to $265,002 thousand, $263,959 thousand and $290,520 thousand, respectively.
The future minimum lease payments of non-cancellable operating lease commitments were as follows:
December 31, June 30, 2014 2013 June 30, 2013
Not later than 1 year $ 711,510 $ 976,806 $ 644,089 Later than 1 year and not later than 5 years 1,972 ,230 1,895,610 1,981,306 Later than 5 years 373,647 349,138 199,803
$ 3,057 ,387 $ 3,221,554 $ 2,825,198
b. The Group as lessor
Operating leases relate to the investment property owned by the Group with lease terms from 0.5 to 10 years.
As of June 30, 2014, December 31, 2013 and June 30, 2013, deposits received under operating leases amounted to $53,310 thousand, $51,733 thousand and $50,170 thousand, respectively.
The future minimum lease payments of non-cancellable operating leases were as follows:
December 31, June 30, 2014 2013 June 30, 2013
Not later than 1 year $ 146,359 $ 229,830 $ 137,248 Later than 1 year and not later than 5 years 571,168 483,164 555,765 Later than 5 years 86,551 74,197 73,443
$ 804,078 $ 787,191 $ 766,456
44. CAPITAL RISK MANAGEMENT
a. Summary
To efficiently control the capital adequacy of the Group and its subsidiaries on the premise of balancing the Group’s business development and risk control, Taishin Financial Holding had codified its “principles of capital adequacy management” and compiles related information reported to the Asset and Liability Management Committee periodically.
The Group’s goals in capital management are as follows:
1) To ensure the Group and its subsidiaries conform to related capital adequacy regulations and minimum basic criteria set by each industry administration.
2) To ensure every subsidiary is able to meet the capital needs of operating plan and the capital requirement, as well as to reach the optimization of capital allocation within the Group.
3) To implement capital management, Taishin Financial Holding and its significant subsidiaries should assess capital adequacy periodically and make proper arrangement of capital structure and application of capital instruments and adjustments of asset portfolio.
- 52 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 b. Capital management procedures
In order to meet the Group’s capital adequacy goals, Taishin Financial Holding established the Asset and Liability Committee to review capital performance of Taishin Financial Holding and its significant subsidiaries’ every month. If there is concern that the Group’s capital adequacy may be below the legal standard, the Committee would immediately find measures to increase the Group’s net qualified capital or to reduce the Group’s legal capital requirement so as to improve the Group’s performance and meet capital adequacy ratio.
The Group’s capital adequacy is calculated based on the accounting reports and related data of capital adequacy provided by Taishin Financial Holding and its subsidiaries. Taishin Financial Holding and each of its subsidiaries should respectively report to local administrations using the calculation formula and forms according to the regulations before deadline. c. Capital adequacy of the Group
June 30, 2014 Item Group’s Ownership Group Eligible Statutory Capital Company Interest (%) Capital Requirement Taishin Financial Holding $ 137,866,706 $ 132,176,589 Taishin Bank 100.00% 100,566,443 73,087,508 Chang Hwa Bank 22.55% 30,320,384 21,551,476 Taishin Securities B 100.00% 2,288,060 1,034,363 Taishin Venture Capital 100.00% 1,936,906 969,364 Taishin AMC 100.00% 1,918,174 1,104,889 Taishin Securities Investment Trust 100.00% 826,269 444,018 Taishin Securities Investment Advisory 92.00% 327,349 171,639 Taishin Holdings Insurance Brokers 100.00% 627,081 562,224 Exclusive items amounts subtracted (143,864,841) (130,907,918) Total 132,812,531 100,194,152 Group’s capital adequacy ratio (Note) 132.56%
June 30, 2013 Item Group’s Ownership Group Eligible Statutory Capi tal Company Interest (%) Capital Requirement Taishin Financial Holding $ 124,988,550 $ 121,157,948 Taishin Bank 100.00% 88,418,465 60,523,821 Chang Hwa Bank 22.55% 28,326,406 19,888,542 Taishin Securities B 100.00% 2,008,453 468,098 Taishin Venture Capital 100.00% 2,094,660 1,048,552 Taishin AMC 100.00% 1,676,620 942,406 Taishin Marketing 100.00% 3,752 1,958 Taishin Securities Investment Trust 100.00% 811,926 436,147 Taishin Securities Investment Advisory 92.00% 320,951 167,156 Taishin Holdings Insurance Brokers 100.00% 513,132 428,961 Exclusive items amounts subtracted (133,370,179) (120,779,364) Total 115,792,736 84,284,225 Group’s capital adequacy ratio (Note) 137.38%
- 53 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 d. Financial Holding Company Eligible Capital
Item June 30, 2014 Common stock $ 80,356,314 Non-cumulative perpetual preferred stocks and non-cumulative subordinated debts without maturity dates which comply with eligible Tier 1 capital 13,397,329 Other preferred stock and subordinated corporate bonds 16,000,000 Advance receipts for capital stock 8,020,778 Capital surplus 4,470,015 Legal reserve 5,315,307 Special reserve 465,368 Retained earnings 9,035,319 Equity adjustment 927,912 Subtracted: Goodwill - Deferred assets 121,636 Treasury stock - Total 137,866,706
Item June 30, 2013 Common stock $ 68,915,233 Non-cumulative perpetual preferred stocks and non-cumulative subordinated debts without maturity dates which comply with eligible Tier 1 capital 13,397,329 Other preferred stock and subordinated corporate bonds 20,400,000 Advance receipts for capital stock 6,139,767 Capital surplus 3,297,820 Legal reserve 3,939,770 Special reserve 465,368 Retained earnings 8,236,802 Equity adjustment 318,388 Subtracted: Goodwill - Deferred assets 121,927 Treasury stock - Total 124,988,550
Note a: The above list was prepared according to “Regulations Governing the Consolidated Capital Adequacy of Financial Holding Company.”
Note b: Group’s capital adequacy ratio = Group’s eligible capital ÷ Group’s statutory capital requirement.
45. DISCLOSURES ACCORDING TO ARTICLE 46 OF FINANCIAL HOLDING ACT
According to Article 46 of Financial Holding Company Act, all subsidiaries of financial holding company should disclose the balance of credit, endorsements and other transactions to the same person, the same related person or the same related enterprise.
- 54 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Details for the balance of credit, endorsements and other transactions to the same person as of June 30, 2014 were as follows:
(In Thousands of New Taiwan Dollars; %)
Credit, As Proportion Endorsement of Financial and Other Holding’s Net Transaction Party Transaction Equity a. To the same person or the same enterprise Central Bank $ 373,631,764 178.03% Taiwan Power Co., Ltd. 52,199,011 24.87% Taiwan High Speed Rail Co., Ltd. 34,463,695 16.42% CPC Corporation, Taiwan 17,864,477 8.51% US GOVT 14,691,968 7.00% Innolux Corporation 11,521,141 5.49% AU Optronics Corp. 10,482,873 5.00% Formosa Petrochemical Corp. 10,318,865 4.92% National Treasury Administration, Ministry of Finance 10,000,000 4.76% Quanta Computer Corp 6,348,188 3.02% Ruentex Development Co., Ltd. 6,322,116 3.01% Formosa Chemicals & Fiber Corp. 5,994,553 2.86% EVA Airways Corp. 5,983,241 2.85% Manpower Development Corp. 5,516,460 2.63% China Airlines Co. 5,319,797 2.53% Lin Yuan Investment Co., Ltd. 4,800,720 2.29% Chailease Finance Co., Ltd. 4,573,308 2.18% Pujen Archiland Co., Ltd. 4,281,349 2.04% Catcher Technology Co., Ltd. 4,258,712 2.03% U-Ming Marine Transport Corp. 4,200,000 2.00% Evergreen Marine Corp. 4,000,117 1.91% Farglory Construction Corp. 3,933,935 1.87% China Steel Corp. 3,902,308 1.86% Ho Run Enterprise Co., Ltd. 3,877,138 1.85% Mai Liao Power Corp. 3,811,493 1.82% Wistron Corp. 3,699,777 1.76% TSMC 3,694,781 1.76% United Microelectronics Corp. 3,566,702 1.70% Continental Development Corp. 3,536,036 1.68% Taiwan Railways Administration, MOTC 3,500,000 1.67% Tatung Co., Ltd. 3,468,460 1.65% Pacific Electric Wire & Cable Co., Ltd. 3,230,258 1.54% Yangming Marine Corp. 3,208,800 1.53% Cathay Construction Co., Ltd. 3,200,000 1.52% KGI Securities Co., Ltd. 3,149,854 1.50% Mega Securities Co., Ltd. 3,149,254 1.50% Acer Incorporated 3,111,893 1.48% Formosa Plastics Corp. 3,098,898 1.48% Greencompass Marine S.A. 3,067,174 1.46% Inotera 3,057,955 1.46% Hsin-Han Development Co., Ltd. 3,022,500 1.44% Cheng Shin Rubber Industry Co., Ltd. 3,001,718 1.43% Total 668,061,289 (Continued)
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Credit, As Proportion Endorsement of Financial and Other Holding’s Net Transaction Party Transaction Equity b. To the same person and spouse, the relative within the second degree and the person or the spouse’s enterprise Individual A $ 5,476,500 2.61% Individual B 4,315,751 2.06% Individual C 3,742,795 1.78% Individual D 3,592,953 1.71% Individual E 3,409,160 1.62% Individual F 3,242,922 1.55% Individual G 3,199,562 1.52% Total 26,979,643 c. To the same related party enterprise Taiwan Power Company Limited Group 52,199,011 24.87% Taiwan High Speed Rail Group 34,463,695 16.42% CPC Corporation, Taiwan Group 17,864,477 8.51% AU Optronics Group 17,822,096 8.49% Evergreen Group 16,037,221 7.64% The Far Eastern Group 15,747,754 7.50% Lin Yuan Group 15,513,686 7.39% Ruentex Group 15,184,904 7.24% Formosa Plastics Group 12,877,988 6.14% CITIC Group 12,190,112 5.81% Innolux Group 12,055,149 5.74% China Steel Group 11,319,266 5.39% Hon5 Hai Group 10,962,559 5.22% Uni-President Group 10,820,341 5.16% Yuen Foong Yu Group 10,480,658 4.99% Formosa Petrochemical Corporation 10,318,865 4.92% National Treasury Group 10,000,000 4.76% Formosa Chemicals & Fibre Group 9,806,046 4.67% Quanta Computer Group 9,528,781 4.54% E United Group 9,044,461 4.31% Chailease Finance Group 8,121,348 3.87% MiTAC- SYNNEX Group 7,083,126 3.38% Tatung Group 6,931,065 3.30% Nan Ya Group 6,476,707 3.09% WPG Holdings Group 6,344,532 3.02% Fubon Group 6,215,628 2.96% Wistron Group 6,091,577 2.90% Continental Engineering Group 5,839,732 2.78% Wei Chuan Ting Hsin Group 5,767,387 2.75% Walsin China Technology Group 5,747,085 2.74% Development Financial Holding Group 5,709,159 2.72% Walsin Group 5,654,802 2.69% Ho tai Group 5,470,917 2.61% Gold Compal Group 5,366,955 2.56% Yangming Marine Group 5,349,883 2.55% China Airline Group 5,319,797 2.53% Qin Mei Group 5,246,151 2.50% (Continued)
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Credit, As Proportion Endorsement of Financial and Other Holding’s Net Transaction Party Transaction Equity Ho Shin Groups $ 5,163,864 2.46% Chi Mei Industrial Group 5,130,575 2.44% Far Glory Group 4,954,116 2.36% Catcher Technology Group 4,543,550 2.16% Wei Jing Group 4,512,760 2.15% Yuanta Group 4,492,238 2.14% Hsin-Han Development Group 4,347,500 2.07% UMC Group 4,328,262 2.06% TGI Group 4,246,089 2.02% Taiwan polymerization Chemical Group 4,203,825 2.00% Yulon Group 4,117,844 1.96% TSMC Group 3,697,155 1.76% Ministry of Transportation Taiwan Railway Administration Group 3,500,000 1.67% Mega Financial Holding Group 3,384,254 1.61% Acer Group 3,320,715 1.58% Pacific Electric Wire and Cable Group 3,230,258 1.54% Jindong Trading Group 3,109,227 1.48% Cheng Shin Rubber Group 3,001,718 1.43% Total 490,256,871 (Concluded)
46. FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments
Except for those described below, the fair value information on financial instruments and financial instruments categories have been followed in the same manner without significant change in these consolidated financial statements as were applied in the preparation of the consolidated financial statements for the year ended December 31, 2013. Please refer to Note 47 to the consolidated financial statements as of December 31, 2013 for details.
June 30, 2014 June 30, 2013 Carrying Amount Fair Value Carrying Amount Fair Value
Financial assets
Cash and cash equivalents $ 53,505,258 $ 53,505,258 $ 56,582,504 $ 56,582,504 Due from the Central Bank and call loans to banks 134,625,141 134,625,141 141,565,296 141,565,296 Financial assets at FVTPL 106,452,360 106,452,360 90,680,42 7 90,680,427 Available-for-sale financial assets 281,299,974 281,299,974 228,224,328 228,224,328 Derivative financial assets for hedging 40,385 40,385 82,629 82,629 Securities purchased under resell agreements 354,313 354,313 6,936,868 6,936,868 Receivables 118,490,290 118,490,290 98,137,437 98,137,437 Loans 1,959,204,680 1,959,204,680 1,822,578,268 1,822,578,268 Held-to-maturity financial assets 184,543,904 18 4,596,477 188,438,984 188,531,313 Financial assets carried at cost 7,358,548 7,358,548 8,108,074 8,108,074 Debt investments without active market 3,643,951 3,675,595 4,106,472 4,132,525 Other miscellaneous financial assets 93,916,395 93,916,395 15,454,246 15,454,246 (Continued)
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June 30, 2014 June 30, 2013 Carrying Amount Fair Value Carrying Amount Fair Value
Financial liabilities
Due to the Central Bank and banks $ 207,698,778 $ 207,698,778 $ 155,606,337 $ 155,606,337 Due to banks - credit 447,675 447,675 - - Financial liabilities at FVTPL 25,939,845 25,939,845 16,917,216 16,917,216 Derivative financial liabilities for hedging 2,292 2,292 - - Securities sold under repurchase agreements 63,850,250 63,850,250 33,873,788 33,873,788 Commercial paper issued 460,647 460,647 Payables 57,451,099 57,451,099 56,573, 168 56,573,168 Deposits and remittances 2,294,497,695 2,294,497,695 2,170,854,589 2,170,854,589 Bonds payable 108,179,189 109,337,467 90,308,743 91,799,347 Other borrowings 4,556,117 4,556,117 646,950 646,950 Other financial liabilities 52,675,015 52,675,015 23,152,621 23,152,621
(Concluded) a. Financial instruments measured at fair value
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
(In Thousands of New Taiwan Dollars)
Fair Value Measurement of June 30, 2014 Financial Instruments Total Level 1 Level 2 Level 3 Non-derivative financial instruments
Assets Financial assets at FVTPL Stocks and beneficial certificates $ 2,317,249 $ 1,597,534 $ 719,715 $ - Bond investments 22,276,226 6,857,428 15,418,798 - Others 51,898,223 - 51,898,223 - Financial assets designated as at FVTPL 3,495,590 - 122,590 3,373,000 Available-for-sale financial assets Stocks and beneficial certificates 6,625,847 6,625,847 - - Bond investments 122,810,962 44,701,924 78,109,038 - Others 151,863,165 - 151,276,557 586,608 Liabilities Financial liabilities at FVTPL 498,170 498,710 - -
Derivative financial instruments
Assets Financial assets at FVTPL 26,465,072 85,683 7,197,827 19,181,562 Derivative financial assets for hedging 40,385 - 40,385 - Liabilities Financial liabilities at FVTPL 25,441,675 1,530 6,424,608 19,015,537 Derivative financial liabilities for hedging 2,292 - 2,292 -
- 58 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 (In Thousands of New Taiwan Dollars)
Fair Value Measurement of June 30, 2013 Financial Instruments Total Level 1 Level 2 Level 3 Non-derivative financial instruments
Assets Financial assets at FVTPL Stocks and beneficial certificates $ 1,040,896 $ 796,030 $ 244,866 $ - Bond investments 21,799,70 5 20,576,57 8 1,223,127 - Others 50,265,6 69 - 50,265,6 69 - Financial assets designated as at FVTPL 1,766,919 - 118,496 1,648,423 Available-for-sale financial assets Stocks and beneficial certificates 4,857,621 4,857,621 - - Bond investments 93,221,607 35,159,251 58,062,356 - Others 130,145,100 - 129,187, 576 957,524 Liabilities Financial liabilities at FVTPL 97,836 97,836 - -
Derivative financial instruments
Assets Financial assets at FVTPL 15,807,238 81,873 10,201,403 5,523,962 Derivative financial assets for hedging 82,629 - 82,629 - Liabilities Financial liabilities at FVTPL 16,819,380 1,687 11,591,013 5,226,680
Note 1: Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Active markets must have the following attributes: (A) assets or liabilities traded in the market are identical, (B) easiness of finding buyers and sellers in the principal (or most advantageous) market for the asset or liability that are both able and willing to transact, (C) pricing information are readily available to the public.
Note 2: Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (e.g. price) or indirectly (e.g. value derived from price), in the active markets.
1) Quoted prices of similar financial instruments in active market are the company’s fair value of financial instruments if based on recent quoted price for similar financial instruments. Similar financial instruments should be decided in accordance with characteristics and transaction conditions of these instruments. Fair value of financial instruments will vary depending on factors specific to the similar asset or liability. The factors include: Prices are not current, price quotations vary substantially, transaction price between related parties, relevance of quoted price of similar instruments and the quoted price of financial instruments.
2) Quoted prices for identical or similar assets or liabilities in markets that are not active.
3) Valuation models are used to measure fair value, and the inputs (e.g. interest rate, yield curve, and volatilities) are based on accessible data from the markets (the observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data).
4) Inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).
- 59 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Note 3: Level 3 inputs are inputs that are not available in the market. Unobservable inputs are inputs such as historical volatilities used in option pricing model since historical volatilities are not representative of the expectation of volatilities of market participants. b. Reconciliation of Level 3 fair value measurements of financial assets (In Thousands of New Taiwan Dollars)
For the Six Months Ended June 30, 2014 Valuation Gains (Losses) Increase Decrease Beginning In Other Ending Item Balance In Net Income Comprehen- Buy or Issue Transfer in Sell, Disposal Transfer out Balance sive Income Financial assets at FVTPL $ 8,680,866 $ 7,681,373 $ - $ 7,531,609 $ - $ (1,339,286 ) $ - $ 22,554,562 Available-for-sale financial assets 732,768 (1,129 ) 278 - - (145,309 ) - 586,608 Total $ 9,413,634 $ 7,680,244 $ 278 $ 7,531,609 $ - $ (1,484,595 ) $ - $ 23,141,170
(In Thousands of New Taiwan Dollars)
For the Six Months Ended June 30, 2013 Valuation Gains (Losses) Increase Decrease Beginning In Other Ending Item Balance In Net Income Comprehen- Buy or Issue Transfer in Sell, Disposal Transfer out Balance sive Income Financial assets at FVTPL $ 2,772,644 $ 793,775 $ - $ 4,206,321 $ - $ (600,355 ) $ - $ 7,172,385 Available-for-sale financial assets 2,056,021 61,662 (1,598 ) 18,551 - (1,177,112 ) - 957,524 Total $ 4,828,665 $ 855,437 $ (1,598 ) $ 4,224,872 $ - $ (1,777,467 ) $ - $ 8,129,909
Valuation gains (losses) above recognized in current profits or losses in the amounts of $(584,916) thousand and $377,906 thousand were attributed to gains (losses) on assets owned during the six months ended June 30, 2014 and 2013, respectively.
Valuation gains (losses) above recognized in other comprehensive income in the amounts of $278 thousand and $(8,407) thousand were attributed to gains (losses) on assets owned during the six months ended June 30, 2014 and 2013, respectively.
Reconciliation of Level 3 financial liabilities:
For the Six Months Ended June 30, 2014 Beginning Valuation Increase Decrease Ending Item Balance Gains (Losses) Buy or Issue Transfer in Sell, Disposal Transfer out Balance Financial liabilities at FVTPL $ 4,906,193 $ 7,723,969 $ 7,513,340 $ - $ (1,127,965 ) $ - $ 19,015,537
For the Six Months Ended June 30, 2013 Beginning Valuation Increase Decrease Ending Item Balance Gains (Losses) Buy or Issue Transfer in Sell, Disposal Transfer out Balance Financial liabilities at FVTPL $ 1,016,527 $ 882,628 $ 3,929,342 $ - $ (601,817 ) $ - $ 5,226,680
Valuation gains (losses) above recognized in current profits or losses in the amounts of $(543,725) thousand and $451,156 thousand were attributed to gains (losses) on liabilities owned during the six months ended June 30, 2014 and 2013, respectively.
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Chang Hwa Bank reclassified parts of financial assets based on the fair value traced back to July 1, 2008, according to the amended Statement of Financial Accounting Standards No. 34 “Financial Instruments: Recognition and Measurement”. The fair values on the reclassification date were as follows:
Before After Reclassification Reclassification
Available-for-sale financial assets $ 14,246,193 $ - Debt investments without active market - 14,246,193
$ 14,246,193 $ 14,246,193
During the third quarter of 2008, the international economic condition changed a lot and resulted in global financial crisis which caused the value of financial assets to collapse, Chang Hwa Bank decided not to sell parts of the available-for-sale financial assets in a short period of time, and reclassified them to debt investments without active market.
The reclassified financial assets have matured on January 30, 2014.
The carrying amount and fair value after reclassification as of June 30, 2013 were as follows:
June 30, 2013 Carrying Amount Fair Value
Debt investment without active market $ 233,627 $ 239 ,978
The investment income and pro forma adjustment to shareholders’ equity if the reclassification had not been taken were as follows:
For the Three Months Ended For the Six Months Ended June 30, 2013 June 30, 2013 Pro Forma Pro Forma Adjustment to Adjustment to Investment Shareholders’ Investment Shareholders’ Income (Loss) Equity Income (Loss) Equity
Available-for-sale financial assets $ 10 $ 5,604 $ 467 $ 2,261
Financial Risk Management Objectives and Policies a. Summary
The Group’s goal in risk management is to balance the risks and returns by giving consideration to business operation, overall risk taken, and external legal restrictions. The major risks the Group sustains includes in- and off-balance-sheet credit risks, market risks (including interest rate, exchange rate, equity security prices and commodity price risks) and liquidity risks.
Taishin Financial Holding has rules for risk management policies and risk control procedures, which had been approved by the Board of Directors or Risk Management Committee, in order to effectively identify, measure, supervise and control credit risks, market risks and liquidity risks.
- 61 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 b. Organizational structure of risk management function
The Board of Directors is the highest level in the risk management function in the company and takes the full responsibility for risk management issues. Risk Management Committee is formed under the Board of Directors to examine policies and standards and establish risk management system. The chairman of Risk Management Committee takes charge of risk management and reports to the Board of Directors periodically.
Risk management department is independent of business department and identifies, assesses, and controls various risks according to risk management standards. In addition, internal auditing department is responsible for the independent review of risk management and control environment. c. Market risk
1) The source and definition of market risk
Market risk is the uncertainty of changes in fair value of in- and off-balance-sheet financial instruments due to changes in market risk factors. Market risk factors include interest rates, exchange rates, equity security prices and commodity prices.
The major market risks of the Group are equity securities price risks, interest rate risks, and exchange rate risks. The main position of equity securities risk includes domestic public, OTC, and emerging market stocks, domestic stock index options and stock index futures. The main position of interest rate risk includes bonds and interest derivative instruments, such as interest rate swap. The main position of exchange rate risk includes the Group’s investments denominated in foreign currencies, such as foreign currency spots and foreign currency options.
2) Market risk management policy
Taishin Financial Holding’s risk management policy was approved by the Board of Directors and is the highest guidance and principle of risk management.
Risk management policy clearly defines the risk management procedures for risk identifying, risk measuring, risk controlling and risk reporting, which are executed by risk management department independent of trading and other departments. The risk management department develops management principles for different businesses and for various aspects of market risk management based on the risk management policy. It establishes market risk management system and regulates market risks, risk limits and stress tests of various financial assets.
3) Market risk management procedures
a) Identifying risks and measuring possible effects
The Group’s risk management department identifies the exposures of positions or new financial instruments to market risks and measures the gains and losses on positions held due to changes in market risk factors based on standards; the risk management department calculates price sensitivity and gains and losses on positions are recorded in trading books daily; and calculates the maximum potential losses recorded in each trading book monthly. The Group wants to avoid tremendous losses that will harm the Group’s operations due to overwhelming changes in market risk factors.
- 62 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 b) Controlling of risk and reporting of issues
The Group controls market risk by managing risk limits. The risk management department sets various trading limits, such as position limits, stop-loss limits, and maximum potential loss. The trading limits are implemented only after they are reported to and approved by the Board of Directors.
The risk management department calculates exposures and estimated gains and losses on positions daily to make sure that the positions held and losses do not exceed the limits approved by the Board of Directors and prepares reports to the high-level management and the Board of Directors periodically for their sufficient understanding of the implementation of the market risk management work and, if necessary, issuance of additional guidance.
The risk management department reports important market risk issues, such as discovery of possible loss on positions in each trading book or identification of weakness in the market risk management system, to the Risk Management Committee in order to improve the effectiveness of the market risk management.
4) Trading book market risk management
Based on the related risk management standards, the Group classifies financial instruments into trading books and banking books according to the purpose of holding the instruments and manages them with different methods. Trading book position consists of trading purpose financial instruments or commodities held to hedge positions in trading books. A position is for trading purpose if it is intended to be sold within a short period; profit can be earned from actual or expected short-term price fluctuations which are the reasons for dealing, matched principal brokering or market making position.
Principles of trading book market risk management are as follows:
a) Management strategy
The goal of trading book market risk management is to pursue maximum return on capital, meaning maximizing the capital usage efficiency to improve shareholders’ interest.
In order to control market risks, the risk management department sets risk limits for various investment portfolio based on trading strategies, category of trading products and annual profit goals in order to control exposure to risks on positions and losses.
b) Management principles
The Group stipulated “Principles of Market Risk Limit Management”, “Regulations Governing Market Risk Management”, “Procedures for Operating Derivative Assets Transactions” and operating principles for various financial instruments to manage trading book limits.
c) Valuation gains and losses
If objective prices of financial instruments in various trading books exist in open market, such as trading prices, gains and losses on positions are valued in accordance with the market prices by the risk management department. If fair value data is inaccessible, the risk management department will cautiously adopt verified mathematical models to value gains and losses and review the assumptions and parameters of the valuation models periodically.
- 63 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 d) Risk measuring methods
The methods applied by the risk management department in measuring market risks are as follows:
i. Measure the price sensitivity of various risk factors (i.e. Greeks), such as the effect on the valuations of foreign currency position of a 1% change in exchange rate or the effect on option position valuation due to changes in Greeks.
ii. Please refer to item 9 for the risk assumptions and calculation methods.
iii. Measure potential losses resulting from extreme market volatility in order to assess capital adequacy and essential position adjustments.
5) Trading book interest rate risk management
a) Definition of interest rate risk
Interest rate risk is fair value changes in interest rate risk position held by the Group due to interest rate changes. The risks are mainly in debt securities and interest rate derivatives.
b) Measuring methods
The risk management department applies sensitivity analysis or Value at Risk to measure interest rate risk and calculates stress loss of risk position held. In sensitivity analysis, the interest rate factor sensitivity is measured by DV01, which is the change in the value of interest rate risk positions when the yield curve moves upward by one basis point (1bp). Please refer to item 9 for the risk assumptions and calculation methods.
c) Management procedures
The risk management department defines the interest rate related products that can be undertaken among trading book investment portfolio and set the total limit of DV01, the limit of DV01 in each time band and the stop-loss limits in order to control exposure risks on position losses. If the losses reach the stop-loss limit, then the trading department should decrease risk exposure positions so as to control losses.
6) Exchange rate risk management
a) Definition of exchange rate risk
Exchange rate risk is the gain or loss resulting from exchange or translation of two different foreign currencies at different times. The Group’s exchange rate risk mainly comes from spot and forward exchange positions and forward exchange options.
b) Measuring methods
The risk management department applies sensitivity analysis or Value at Risk to measure exchange rate risk and calculates stress loss of risk position held. In sensitivity analysis, Delta is applied to measure the exchange rate risk of the first order change and Gamma is applied to measure the exchange rate risk of the second order change. In addition, Vega is used to measure the first order risk of implied volatility rate. Please refer to item 9 for the risk assumptions and calculation methods.
- 64 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 c) Management procedures
The risk management department sets the position limit and stop-loss limit of trading book investment combinations in order to control exchange rate risk. If the losses reach the stop-loss limit, the trading department should decrease risk exposure positions so as to control losses.
7) Equity security price risk management
a) Definition of equity security price risk
Equity security price risk is the valuation effect on the position held by the Group when the equity security price changes. The Group’s equity security price risk mainly comes from public and OTC stocks, index futures and options.
b) Measuring methods
The risk management department applies sensitivity analysis or Value at Risk to measure equity security price risk and calculates stress loss of risk position held. In sensitivity analysis, Delta is applied to measure the independent equity security price risk of the first order change, or market value is applied to indicate the exposure risks on positions of stocks. Please refer to item 9 for the risk assumptions and calculation methods.
c) Management procedures
The risk management department sets the position limit and stop-loss limit of trading book investment portfolio in order to control equity security price risk. If the losses reach the stop-loss limit, then the trading department should decrease risk exposure position so as to control losses.
8) Banking book interest rate risk management
Taishin Bank
Banking book interest rate risk involves bonds and bills and their hedge position, which are held to manage the Bank’s liquidity risk and the interest rate risk of deposits and loans undertaken by business departments. The interest rate risk is transferred to banking book management department for centralized management through internal fund transfer pricing (FTP) system. Banking book interest rate risk is the effect on net interest income of risk exposure positions held due to changes in interest rate. There is no secondary market for loan transactions and the purpose of holding banking book investment position is to establish deposit reserve. This is different from short-term holding for pursuing profit in trading book. Banking book interest rate risks are regulated separately by the risk management department.
a) Management strategy
The goal of banking book interest rate risk management is to control interest rate risk position and pursue stability and growth of banking book net interest income under the circumstances that liquidity is appropriate.
b) Management principles
Taishin Bank stipulated “The Principles of Banking Book Interest Rate Risk Management” as the important control regulations for banking book interest rate risk management.
- 65 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 c) Measuring methods
The banking book interest rate risk is the risk of quantitative or repricing term differences due to the differences in amounts and maturity or repricing dates of banking book assets, liabilities and off-balance-sheet items. Taishin Bank measures the effect on net interest income when the yield curve moves upward by 1bp.
d) Management procedures
Taishin Bank defines the instruments of banking book interest rate management and sets the limit of interest rate risk in order to avoid severe recession of net interest income when the interest rate changes unfavorably. The banking book management unit sets limits and keeps the interest rate risk within the limits.
Chang Hwa Bank
a) Definition of banking book interest rate risk
The banking book interest rate risk means the unfavorable change of interest rate of non-trading-book interest rate position which changes the present value of revenues costs or assets, liabilities and therefore causes decrease of earnings or impairment of economic value.
b) Management policy on banking book interest rate risk
According to Chang Hwa Bank’s interest rate risk management policy, Chang Hwa Bank has set various measurement indicators and limits on banking book interest rate risk. To pursue profits and steady growth of shareholder value without exposure to extreme loss risks, Chang Hwa Bank applies appropriate management strategy including on- and off-balance-sheet adjustments and maintains appropriate amounts of assets and liabilities.
c) Banking book interest rate risk report/scope of measuring system
Chang Hwa bank mainly applies standard method for interest rate risk sensitivity gap analysis to measure banking book interest rate risks. The responsible department periodically measures banking book interest rate risks and reports to related departments and to the Asset and Liability Management Committee in order to adopt appropriate strategies for adjusting banking book interest rate risk combinations. Assessment information of banking book interest rate risk would be presented to the Board of Directors periodically to let the high-level management control such risks.
9) Methods for measuring market risk
Taishin Bank
a) Stress test
A stress test is applied to measure loss under extremely unfavorable market circumstances in order to assess financial institutions’ tolerance to extreme market volatility. The risk management unit is required to execute the stress test at least once a month to calculate trading book stress loss. The risk management unit observes historical information of market price and sets the biggest possible volatility range for various market risk factors as the stress circumstance, which should be approved by the Risk Management Committee. Since there are so many market risk factors that affect trading book position, there might be plenty of permutation and combination of stress circumstances when the unit calculates stress loss. For instance, change in a market risk factor might result in the biggest loss of one investment portfolio but create profits for another investment portfolio. Based on the conservative
- 66 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 principles, the risk management unit will take into account correlation between various risk factors to calculate the biggest loss as the stress loss.
The risk management unit should confirm that overall trading book loss does not exceed the stress loss limit and report to the high-level management as references for adjusting positions or resource distribution. b) Value at risk, “VaR”
Taishin Bank uses variety of methods to control market risk; the VaR is one of them. Taishin Bank is using risk model to assess the value of trading portfolios and potential loss amount of holding positions. VaR is Taishin Bank’s important internal risk control system, and the Board of Directors reviews and establishes trading portfolio’s limits annually. Actual exposures of Taishin Bank are monitored daily by risk management.
VaR is used to estimate adverse market potential loss of existing positions. The VaR model uses historical simulation method, a one-year historical observation period, the estimate of 99% confidence interval, the maximum possible amount of loss holding positions for one day, and the probability that actual losses may exceed the estimate.
For the Six Months Ended June 30, 2014 Ending Average Highest Lowest Balance
Exchange VaR $ 13,304 $ 22,117 $ 8,986 $ 15,629 Interest rate VaR 22,861 37,345 17,993 22,276 Equity securities VaR 26,058 33,225 14,571 28,219 Value at risk 32,827 47,057 22,600 29,569
For the Six Months Ended June 30, 2013 Ending Average Highest Lowest Balance
Exchange VaR $ 8,395 $ 16,178 $ 2,936 $ 8,420 Interest rate VaR 18,438 27,316 12,266 18,558 Equity securities VaR 21,379 32,803 11,692 13,748 Value at risk 34,951 50,871 24,454 24,454 c) Information of exchange rate risk concentration
For information regarding Taishin Bank’s non-functional currency financial assets and liabilities on the balance sheet date, please refer to Note 54.
Chang Hwa Bank a) Value at Risk, “VaR”
Chang Hwa Bank uses VaR model and stress testing to evaluate the risk of trading portfolio the market risk and the maximum expected loss of positions held through assumptions of changing market situation. VaR is the statistical estimation of potential losses of existing positions arising from unfavorable market changes. VaR refers to the maximum potential loss that Chang Hwa Bank might be exposed to within the confidence interval (99%), which means there is a certain probability (1%) that the actual loss would exceed VaR. The significant loss caused by excessive market volatility could not be avoided by using VaR.
- 67 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Chang Hwa Bank used the variance-covariance method to determine VaR in 2013. Interest rate risk measurement method is based on the cash flows of the investment portfolio and the value of basis point. The term structure is divided into 13 time bands, which the investment portfolio cash flow is grouped into. After selecting confidence (99%), the VaR of interest rate risk of certain portfolio is determined by its historical volatility and correlations; the VaR of equity securities is determined by the associated stock market index linked with Single Index Model. Under the approach, the β value is calculated by independent variable (the previous daily returns data of the market index) and dependent variable (the previous daily returns data of certain stock). After the β value and confidence (99%) are determined, the historical volatility is applied to decide portfolio VaR. Exchange rate VaR is measured on the history of currency volatility and correlations. After selecting confidence (99%), the exchange rate VaR of each currency held by Chang Hwa Bank is calculated.
On January 27, Chang Hwa Bank changed its method for VaR determination from the variance-covariance method to the historical simulation method (HSM). Under the HSM, the market risk of financial instrument transactions is evaluated using value changes of future cash flows, which are estimated on the basis of actual historical data. For VaR determination, the HSM reviews the past occurrence of each risk factor pertaining to, and profits (losses) on, an investment portfolio to simulate the profit and loss on a target asset, assuming that the events in the past will be the same as those in the future. Because the HSM uses historical data and takes several characteristics such as the tail of the empirical distribution of returns on the investment portfolio, correlation of factors such as asset returns or price changes and time intervals, etc. into consideration, it can be used to evaluate VaR regardless of whether the profit and loss distribution of an investment portfolio is normal or linear. One advantage of the HSM is that it allows the direct estimation of the VaR from the hypothetical data without the need to make assumptions about the entire distribution of these data. Furthermore, the HSM approach is simple and direct; thus, more and more financial institutions have adopted this method. However, the HSM has a limitation in determining VaR, i.e., the HSM relies on the pattern of historical returns, which may not be reflected in actual circumstances. In addition, it may be difficult to collect sufficient quantities of relevant, synchronized data for all risk factors, thus weakening the HSM results as a basis for VaR determination. To compensate for the weakness arising from the insufficiency of market information and historical data, Chang Hwa Bank has set up a break-even point at which unforeseen or uncontrollable negative circumstances can be identified, managed and resolved to minimize loss.
VaR is an important internal risk control in Chang Hwa Bank. The VaR limits of investment portfolio are approved annually by the Risk Management Committee and reported to the Board of Directors. In addition, the daily actual VaR is monitored by Chang Hwa Bank’s risk management department.
For the six months ended June 30, 2014 and 2013, Chang Hwa Bank’s VaR factors determined by historical simulation method were as follows:
For the Six Months Ended June 30, 2014 Ending Average Highest Lowest Balance
Exchange VaR $ 274,204 $ 328,929 $ 212,405 $ 212,405 Interest rate VaR 46,256 56,45 0 29,599 29,599 Equity securities VaR 963 1,536 895 1,222
Value at risk $ 321,423 $ 386,915 $ 242,899 $ 243,226
- 68 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59
For the Six Months Ended June 30, 2013 Ending Average Highest Lowest Balance
Exchange VaR $ 347,864 $ 459,248 $ 295,155 $ 382,652 Interest rate VaR 29,427 42,154 16,274 28,513 Equity securities VaR 660 845 602 845
Value at risk $ 377,951 $ 502,247 $ 312,031 $ 412,010
c) Information of exchange rate risk concentration
With regard to Chang Hwa Bank’s information of non-functional currency financial assets and liabilities on the balance sheet date, please refer to Note 54
Taishin Securities B
VaR is the potential highest loss for a period within certain confidence interval. For six months ended June 30, 2013, Taishin Securities B’s VaR factors were as follows:
June 30, 2014 Ending Highest Average Lowest Balance
Value at risk (VaR) $ 32,521 $ 18,507 $ 13,587 $ 26,067 d. Credit risk
1) Source and definition
Credit risk means the possible loss due to failure of debtors or counterparties to fulfill their contractual obligations or their ability of fulfill contractual obligations is impaired. Credit risk arises from the operation, on- and off-balance-sheet items, including credit loans, derivatives transactions and securities investment, etc. Because the business becomes more complex, the credit risk is often generated with other risks that affect one another. For example, exchange rate risk also exists in foreign currency debt investment. Secured loans will be affected by the price volatility on the collaterals and market liquidity risk of the collaterals.
Credit risk can be divided into the following categories based on the object and nature of business:
a) Credit risk
Credit risk is the risk that a borrower is unable to pay its debts or fulfill its debt commitments in credit loans operation.
b) Issuer (guarantor) risk of the underlying issue
It is the credit risk that stock issuers go into liquidation or are unable to pay back money when debts, bills and other securities mature.
c) Counterparty risk
It is the credit risk that the counterparty undertaking OTC derivatives or RP/RS transactions are unable to fulfill settlement obligations.
- 69 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Counterparty risk is also divided into settlement risk and pre-settlement risk.
i. Settlement risk
It is the loss resulting from the counterparty failing to deliver goods or other money on the settlement date when the Group had fulfilled settlement obligations.
ii. Pre-settlement risk
It is the loss resulting from the counterparty failing to fulfill settlement or pay the obligations and from changes in market prices before the settlement date.
d) Other credit risks
Country risk, custodian risk and brokers risk, etc.
2) Credit risk management policies
Taishin Bank
To ensure its credit risk under control within the tolerable range, Taishin Bank has stipulated in the guidelines for risk management that for all the products provided and businesses conducted, including all on- and off-balance-sheet transactions in the banking and trading books, Taishin Bank should make detailed analyses to identify existing and potential credit risks. Before launching new products or businesses, Taishin Bank ensures compliance with all applicable rules and regulations and identifies relevant credit risks. For sophisticated credit extensions, such as accounts receivable factoring and credit derivative instruments, Taishin Bank also establishes risk management system described in the related rules and guidelines.
Unless the assessment of asset qualities and provision for potential losses of the overseas business department is regulated by the local authorities, it is in accordance with Taishin Bank’s risk management policies and guidelines.
The measurement and management procedures of credit risks in Taishin Bank’s main businesses are as follows:
a) Credit granting business (including loans and guarantees)
Classification of credit assets and level of credit quality are summarized as follows:
i. Classification of credit assets
Taishin Bank’s credit assets are classified into five categories. Except for normal credit assets classified as “Category One”, the remaining unsound credit assets are evaluated based on the status of the loan collaterals and the length of time overdue. Assets that require special mention are classified as “Category Two”, assets that are substandard are classified as “Category Three”, assets that are doubtful are classified as “Category Four”, and assets with existing loss are classified as “Category Five”. In order to manage the problematic credit loans, the reorganization of loan loss provisions, allowance for bad debts or guarantee liability provisions, measures are adopted for overdue loans and procedures and for collecting default loans. In the management of credit assets, Taishin Bank is also guided by the “Regulations Governing the Procedures for Corporation Credit Business to Evaluate Assets and Deal with Non-performing Assets”, “Measures for Corporation Credit Business to Be Taken When Credit Extensions Become Past Due and Regulations Governing Collection Procedures”, “Regulations Governing the Procedures for Consumer Business to
- 70 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Evaluate Assets and Deal with Non-performing Assets”, “Regulations Governing the Procedures for Overdue Loan, Non-accrual Loans and Doubtful Loans”.
ii. Credit risk rating
For risk management purposes, Taishin Bank rates credit qualities (by using internal rating models for credit risk or credit score tables) in accordance with the nature and scale of a business.
The credit risk rating system is internal rating based on the definition of Basel II of internal rating method (IRB). It covers operation procedures, methodology, control mechanism, information system and data collection, which is used to assist risk assessment, rating approval and loss assessment.
The corporate finance department’s internal rating adopts two aspects. One is obligor risk rating (ORR) and the other is Facility Risk Rating (FRR). ORR is used to assess the possibility of the debtor performing financial commitments, which is a quantitative value based on the probability of default (PD) within one year. FRR is used to assess the effect of rating structures and collateral conditions on credit rating, which is a quantitative value based on loss given default (LGD). At the same time, experts also engage in judging and adjusting the rating overrides of statistic models to make up the shortage of the model.
The consumer finance department’s internal rating system adopts product characteristic and debtor condition (such as new case or behavior grading) as the basis of segmentation. It is to ensure that the same pools of debtors and risk exposure are homogeneous. At the same time, review of loans based on experts’ override is complemented to make up the shortage of the model. b) Due from and call loans to banks
Taishin Bank evaluates the credit status of counterparties before deals are closed. Taishin Bank grants different limits to the counterparties based on their respective credit ratings as suggested by external qualified credit rating institutes. c) Security Investment and Financial Derivatives Transaction
Regarding the credit risk of security investments and financial derivatives, Taishin Bank manages the risk by internal credit rating of issuers, issued underlying, counterparties, and by external credit rating of debt instruments and counterparties or status of regions/countries.
The other banks with which Taishin Bank conducts derivative transactions are mostly considered investment grade. The credits extended to counterparties that are not rated as investment grade are assessed case by case. The credits extended to counterparties are monitored in accordance with the related contract terms and conditions, and the credit limits for derivatives established in normal credit granting processes. Meanwhile, Taishin Bank has set the total position limit on trading and banking book securities and each issuer’s limit based on credit ratings.
Chang Hwa Bank a) To meet the needs of risk management, Chang Hwa Bank continues to enhance corporate finance credit application management system and various risk management techniques and efficiency.
- 71 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 b) Chang Hwa Bank continues to develop methods of credit risk quantification models to elevate credit risk management techniques, which enable Chang Hwa Bank’s capital requirement and expected loss to become more risk sensitive. c) Chang Hwa Bank continues to develop and implement credit risk stress testing in compliance with the requirements of the competent authority supervising risk management and improve the effectiveness of Chang Hwa Bank’s risk management. d) Chang Hwa Bank is building a complete after-loan monitoring mechanism to efficiently identify and manage potential problematic loans, establish appropriate monitoring procedures, track the frequency and the specific responsive measures in order to achieve active management in the process of credit risk identification, measurement, monitoring and reporting. e) Chang Hwa Bank is building a knowledge base to facilitate learning and assessment. To meet the business demand, it holds risk management seminars and trainings to shape the Bank’s risk management culture.
Chang Hwa Bank’s credit risk management procedures and measuring methods for major business are described as follows: a) Credit business (including loan commitments and guarantees)
Levels are as follows:
i. Classification of credit assets
Chang Hwa Bank’s credit assets are grouped into five categories. Except for normal credit assets, the remaining unsound credit assets are evaluated based on the status of the loan collaterals and the length of time overdue, and grouped into “special-mentioned”, “substandard”, and “losses”.
In order to manage problematic credit loans, Chang Hwa Bank has set up “Operating Points of Assets Assessment”, “Assessment Operating Details of Handling Debts to Normal Borrowers”, “Principle of Overdue Loans, Delinquent Loans and Doubtful Debts Handling Authority”, “Regulations Governing Overdue Loans, Delinquent Loans and Doubtful Collection” and other regulations managing credit loans and collection of loans.
ii. Credit quality level
For risk management purposes, Chang Hwa Bank has set up internal rating models for credit risks in accordance with the nature and scale of a business.
With the use of statistical method and judgment by experts, Chang Hwa Bank has developed a credit rating model for clients. After taking into account client-related information, Chang Hwa Bank developed a corporate credit rating model, in which rating results are divided into 21 levels. Chang Hwa Bank reviews the model periodically to examine if the outcome matches reality and adjusts each parameter to optimize the result.
Chang Hwa Bank evaluates the credit rating of borrowers at least once a year. In addition, to ensure the estimates used are reasonable and to make sure the outcome calculated matches reality, Chang Hwa Bank annually conducts validity test and back-testing of the models using data on customers’ actual defaults.
Chang Hwa Bank classifies the credit qualities of corporate loans as strong, medium, weak and non-rating.
- 72 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Clients of consumer finance are temporarily classified as non-rating. Once the customized grading models have accumulated considerable information and the results match actual situations, the credit exposure is classified based on the grading results.
b) Call loans to banks
Chang Hwa Bank evaluates the credit status of counterparties before deals are closed. Chang Hwa Bank grants different limits to the counterparties based on their respective credit ratings as suggested by domestic and foreign credit rating institutes. Chang Hwa Bank assesses the credit limits to counterparties based on their levels and financial status and efficiently manages counterparties’ credit risks through regular reviews, monitoring and reports.
c) Debt instrument and derivatives financial instruments
Chang Hwa Bank identifies and manages the credit risks from debt instruments through the use of external credit ratings of the debt instruments along with the evaluation of credit qualities of bonds, regional conditions and counterparty risks.
The other banks with which Chang Hwa Bank conducts derivative transactions are mostly considered investment grade. Chang Hwa Bank monitors the credit limits (including lending limits) by counterparties. The credits extended to counterparties who are general customers are monitored in accordance with the related contract terms and conditions and the credit limits for derivatives established in normal credit granting processes.
Chang Hwa Bank classifies the credit qualities of debt instruments as strong, medium, weak and non-rating.
3) Credit risk hedging or mitigation policies
Taishin Bank
a) Collaterals
Taishin Bank has a series of measures for credit granting to reduce credit risks. One of the procedures is asking for collaterals from the borrowers. To secure the loans, Taishin Bank manages and assesses the collaterals following the procedures that suggest the scope of collateralization and valuation of collaterals and the process of disposition. In credit contracts, Taishin Bank stipulates the security mechanism for loans and the conditions and terms for collaterals and offsetting to state clearly that Taishin Bank reserves the right to reduce granted limit, to reduce repayment period, to demand immediate settlement or to offset the debts of the borrowers with their deposits in Taishin Bank in order to reduce the credit risks.
The requirements for collaterals for other non-credit businesses depend on the nature of the financial instruments. Asset-backed securities and similar financial instruments are required to provide a pool of underlying financial assets as collaterals.
b) Credit risk concentration limits and control
To avoid the concentration of credit risks, Taishin Bank has included credit limits for the same person (entity) and for the same related-party corporation (group) based on the credit risk arising from loans, securities investment and derivatives transactions.
Meanwhile, for trading and banking book investments, Taishin Bank has set a ratio, which is the credit limit of a single issuer in relation to the total security position. Taishin Bank has also included credit limits for a single counterparty and a single group.
- 73 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 In addition, to manage the concentration risk on the financial assets, Taishin Bank has set credit limits by industry, conglomerate, country and transactions collateralized by stocks, and integrated within one system to supervise concentration of credit risk in these categories. Taishin Bank monitors concentration of each asset and controls various types of credit risk concentration in a single transaction counterparty, group, related-party corporation, industries, nations.
c) Net settlement
Taishin Bank settles most of its transactions at gross amounts. For further reduction of credit risks, settlement netting is used for some counterparties or some circumstances where the transactions with counterparties are terminated due to defaults.
Chang Hwa Bank
a) Collaterals
Chang Hwa Bank has a series of measures for credit granting to reduce credit risks. One of the procedures is asking for collaterals from the borrowers. To secure the loans, Chang Hwa Bank manages and assesses the collaterals following the procedures that suggest the scope of collateralization and valuation of collaterals and the process of disposition. In credit contracts, Chang Hwa Bank stipulates the security mechanism for loans and the conditions and terms for collaterals offsetting to state clearly that Chang Hwa Bank reserves the right to reduce granted limit, to reduce repayment period, to demand immediate settlement or to offset the debts of the borrowers with their deposits in Chang Hwa Bank in order to reduce the credit risks.
b) Credit line for credit risks and control over concentration of credit risks
To avoid the concentration of credit risks, Chang Hwa Bank has included credit limits for a single counterparty and for a single group in its credit-related guidelines. Chang Hwa Bank has also included credit limits for an individual (entity) and for related enterprises (group) in the guidelines for investment and regulations for risk control on equity investments. To manage the concentration risk on the assets, Chang Hwa Bank has set credit limits by industry, conglomerate, transactions collateralized by stocks, and other categories and integrated within one system to supervise concentration of credit risk in these categories.
4) Maximum exposure to credit risk
The maximum credit risk exposures of various financial instruments held by the Group are the same as per book amounts. Please refer to the notes to the consolidated financial statements.
As of June 30, 2014 and 2013, the maximum exposure to credit risk (before deducting the guarantees or other credit enhancement instruments and the maximum amount of exposure) were as follows:
Taishin Bank
June 30 Financial Instrument Type 2014 2013
Guarantees $ 12,186,056 $ 12,997,683 Letters of credit 4,065,697 3,604,110 Unused loan commitments (excluding credit card) 499,144,007 522,490,133 Unused loan commitments (credit card only) 12,914,850 13,051,475
- 74 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Chang Hwa Bank
June 30 Financial Instrument Type 2014 2013
Loan commitments (excluding credit card) $ 130,734,578 $ 145,847,900 Unused loan commitments (credit card only) 216,457 155,665 Unused issued letters of credit 26,733,265 22,435,777 Guarantees in guarantee business 28,942,645 27,989,671
5) Situation of credit risk concentration
Prominent concentration of credit risks occurs when transaction parties for financial instruments prominently concentrate on one party, or on a few that are in similar business lines or exhibit similar economic characteristics. The characteristics of concentration of credit risks include the nature of business activities engaged by debtors. The Group has not engaged in transactions that involved a prominent concentration to one client or one transaction party, but has engaged in transaction parties of similar industry type or from similar region.
The Group’s information on prominent concentration of credit risk was as follows:
Taishin Bank
June 30, 2014 June 30, 2013 Carrying Percentage of Carrying Percentage of Industry Type Amount Item (%) Amount Item (%)
Manufacturing $ 126 ,843 ,902 16 $ 125,713,043 19 Wholesale and retailing 59 ,741 ,901 8 41,127,800 6 Finance and insurance 72 ,979 ,274 9 62,264,829 9 Real estate and leasing 33 ,867 ,348 4 23,291,431 3 Service 8,055 ,043 1 7,691,482 1 Individuals 436 ,347 ,784 57 390,571,259 58 Others 31 ,451 ,436 5 27,424,199 4
$ 769 ,286 ,688 $ 678,084,043
Chang Hwa Bank
June 30, 2014 June 30, 2013 Carrying Percentage of Carrying Percentage of Industry Type Amount Item (%) Amount Item (%)
Finance and insurance $ 68,446,252 6 $ 52,718,093 5 Manufacturing 317,136,207 26 307,403,314 26 Wholesale and retailing 112,478,966 9 104,107,586 9 Real estate and leasing 74,809,330 6 67,956,926 6 Service 21,516,665 2 20,883,207 2 Individuals 420,083,214 35 402,900,118 34 Others 199,870,877 16 211,653,203 18
$ 1,214,341,511 $ 1,167,622,447
- 75 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Taishin Bank
June 30, 2014 June 30, 2013 Carrying Percentage of Carrying Percentage of Geographic Location Amount Item (%) Amount Item (%)
Asia $ 720 ,281 ,362 94 $ 637,2 34,837 94 Europe 931 ,438 - 1,336,643 - America 575 ,614 - 1,752,283 - Others 47 ,498 ,274 6 37,760,280 6
$ 769 ,286 ,688 $ 678,084,043
Chang Hwa Bank
June 30, 2014 June 30, 2013 Carrying Percentage of Carrying Percentage of Geographic Location Amount Item (%) Amount Item (%)
Asia $ 1,158,023,966 95 $ 1,121,243,327 96 America 36,344,164 3 30,252,324 3 Europe 18,715,706 2 14,861,729 1 Others 1,257,675 - 1,265,067 -
$ 1,214,341,511 $ 1,167,622,447
6) Financial assets credit quality and non-performing impairment analysis
Part of financial assets held by the Group, such as cash and cash equivalents, due from the Central Bank and call loans to banks, financial assets at fair value through profit or loss, securities purchased under resell agreement, deposit refunds, operating deposits, and settlement deposits are exposed to low credit risks because the counterparties have rather high credit ratings.
- 76 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Except for those mentioned above, the credit quality of Taishin Banks and Chang Hwa Bank’s remaining financial assets were analyzed as follows:
Taishin Bank a) Credit quality analysis of loans and receivables (including delinquent loans reclassified from other items)
(In Thousands of New Taiwan Dollars)
June 30, 2014 Provision for Impairment Losses Neither Past Due Nor Impaired Past Due But (D) Net Item Total Not Impaired Impaired (C) Objective Nonobjective (A)+(B)+(C)- (A)+(B)+(C) Excellent Good Acceptable Non-ratings Subtotal (A) (B) Evidence of Evidence of (D) Impairment Impairment In-balance-sheet items
Receivables (including delinquent loans reclassified from other items) $ 68,099,686 $ 10,438,196 $ 284,386 $ 8,732,377 $ 87,554,645 $ 71,279 $ 3,608,907 $ 91,234,831 $ 1,000,769 $ 248,124 $ 89,985,938 Loans 585,838,093 154,909,565 8,525,010 - 749,272,668 2,319,832 17,694,188 769,286,688 5,888,138 4,132,686 759,265,864
(In Thousands of New Taiwan Dollars)
June 30, 2013 Provision for Impairment Losses Neither Past Due Nor Impaired Past Due But (D) Net Item Total Not Impaired Impaired (C) Objective Nonobjective (A)+(B)+(C)- (A)+(B)+(C) Excellent Good Acceptable Non-ratings Subtotal (A) (B) Evidence of Evidence of (D) Impairment Impairment In-balance-sheet items
Receivables (including delinquent loans reclassified from other items) $ 57,469,267 $ 8,953,384 $ 2,120,935 $ 4,395,647 $ 72,939,233 $ 63,067 $ 3,044,790 $ 76,047,090 $ 727,617 $ 202,769 $ 75,116,704 Loans 519,992,201 129,211,701 13,030,376 - 662,234,278 394,255 15,455,510 678,084,043 4,612,436 3,852,453 669,619,154
- 77 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 b) Credit quality analysis of loans neither past due nor impaired based on credit ratings of clients
(In Thousands of New Taiwan Dollars)
June 30, 2014 Item Neither Past Due Nor Impaired Excellent Good Acceptable Non-ratings Total Consumer finance $ 400,617,311 $ - $ 7,573,472 $ - $ 408,190,783 Corporation finance 185,220,782 154,909,565 951,538 - 341,081,885 Total $ 585,838,093 $ 154,909,565 $ 8,525,010 $ - $ 749,272,668
(In Thousands of New Taiwan Dollars)
June 30, 2013 Item Neither Past Due Nor Impaired Excellent Good Acceptable Non-ratings Total Consumer finance $ 358,654,406 $ - $ 11,941,926 $ - $ 370,596,332 Corporation finance 161,337,795 129,211,701 1,088,450 - 291,637,946 Total $ 519,992,201 $129,211,701 $ 13,030,376 $ - $ 662,234,278
- 78 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 c) Credit quality analysis of non-credit financial assets
(In Thousands of New Taiwan Dollars)
June 30, 2014 Provision for Impairment Losses Neither Past Due Nor Impaired Past Due But (D) Net Item Total Not Impaired Impaired (C) Objective Nonobjective (A)+(B)+(C)- (A)+(B)+(C) Excellent Good Acceptable Non-ratings Subtotal (A) (B) Evidence of Evidence of (D) Impairment Impairment Call loans to banks $ 2,884,091 $ - $ - $ - $ 2,884,091 $ - $ - $ 2,884,091 $ - $ - $ 2,884,091 Securities purchased under resell agreements 348,309 - - - 348,309 - - 348,309 - - 348,309 Available-for-sale financial assets Stocks ------150,000 150,000 135,000 - 15,000 Bills 150,033,345 - - - 150,033,345 - - 150,033,345 - - 150,033,345 Bonds and beneficial securities 81,656,482 337,410 - - 81,993,892 - - 81,993,892 - - 81,993,892 Held-to-maturity financial assets Bonds 1,047,180 - - 1,015 1,048,195 - - 1,048,195 - - 1,048,195 Financial assets carried at cost Stocks ------181,399 181,399 89,222 - 92,177
(In Thousands of New Taiwan Dollars)
June 30, 2013 Provision for Impairment Losses Neither Past Due Nor Impaired Past Due But (D) Item Total Not Impaired Impaired (C) Objective Nonobjective Net (A)+(B)+(C) Excellent Good Acceptable Non-ratings Subtotal (A) (B) Evidence of Evidence of (A)+(B)+(C)- Impairment Impairment (D) Call loans to banks $ 1,536,120 $ - $ - $ - $ 1,536,120 $ - $ - $ 1,536,120 $ - $ - $ 1,536,120 Securities purchased under resell agreements ------Available-for-sale financial assets Stocks ------150,000 150,000 135,000 - 15,000 Bills 127,610,852 - - - 127,610,852 - - 127,610,852 - - 127,610,852 Bonds and beneficial securities 56,625,642 440,733 - - 57,066,375 - - 57,066,375 - - 57,066,375 Held-to-maturity financial assets Bonds 1,973,603 - - - 1,973,603 - - 1,973,603 - - 1,973,603 Financial assets carried at cost Stocks ------198,859 198,859 82,047 - 116,812
- 79 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 d) Aging analysis of financial assets that are past due but not impaired
(In Thousands of New Taiwan Dollars)
June 30, 2014 June 30, 2013 Past Due Up Past Due Two Past Due Up Past Due Two Item to Two to Three Total to Two to Three Total Months Months Months Months Receivables (including delinquent loans reclassified from other items) $ 47,839 $ 23,440 $ 71,279 $ 38,928 $ 24,139 $ 63,067 Consumer finance 27,225 14,441 41,666 38,859 23,645 62,504 Corporation finance 8,768 6,541 15,309 69 494 563 Others 11,846 2,458 14,304 - - - Loans 1,283,910 1,035,922 2,319,832 213,817 180,438 394,255 Consumer finance 131,944 43,114 175,058 208,774 63,380 272,154 Corporation finance 1,151,966 992,808 2,144,774 5,043 117,058 122,101 e) Impairment analysis of loans and receivables
Receivables (including delinquent loans reclassified from other items)
Gross Receivables Item December 31, June 30, 2014 June 30, 2013 2013 Individual assessment of Objective $ 636,549 $ 502,276 $ 407,094 impairment evidence of Combined assessment of impairment 2,972,358 3,197,766 2,637,696 impairment Non objective Combined assessment of evidence of 87,625,924 80,767,922 73,002,300 impairment impairment Total $ 91,234,831 $ 84,467,964 $ 76,047,090
Allowance Item December 31, June 30, 2014 June 30, 2013 2013 Individual assessment of Objective $ 551,758 $ 481,408 $ 383,822 impairment evidence of Combined assessment of impairment 449,011 531,366 343,795 impairment Non objective Combined assessment of evidence of 248,124 312,429 202,769 impairment impairment Total $ 1,248,893 $ 1,325,203 $ 930,386
- 80 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Loans
Gross Loans Item December 31, June 30, 2014 June 30, 2013 2013 Individual assessment of Objective $ 7,650,938 $ 8,282,971 $ 9,358,441 impairment evidence of Comb ined assessment of impairment 10,043,250 10,396,595 6,097,070 impairment Non objective Combined assessment of evidence of 751,592,500 694,084,146 662,628,532 impairment impairment Total $ 769,286,688 $ 712,763,712 $ 678,084,043
Allowance Item December 31, June 30, 2014 June 30, 2013 2013 Individual assessment of Objective $ 4,161,195 $ 3,644,166 $ 3,343,617 impairment evidence of Combined assessment of impairment 1,726,943 1,807,484 1,268,819 impairment Non objective Combined assessment of evidence of 4,132,686 3,618,390 3,852,453 impairment impairment Total $ 10,020,824 $ 9,070,040 $ 8,464,889
- 81 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Chang Hwa Bank a) Credit quality analysis of loans and receivables (In Thousands of New Taiwan Dollars)
June 30, 2014 Neither Past Due Nor Impaired Provision for Impairment Losses (D) Net Item Past Due But Not Total Objective Nonobjective Impaired (C) (A)+(B)+(C)- High Medium Weak Non-ratings Subtotal (A) Impaired (B) (A)+(B)+(C) Evidence of Evidence of (D) Impairment Impairment In-balance-sheet items
Receivables $ 9,967,370 $ 4,509,643 $ 234,557 $ 8,171,794 $ 22,883,364 $ 6,401 $ 285,336 $ 23,175,101 $ 220,033 $ 84,202 $ 22,870,866 Credit cards - - - 2,230,610 2,230,610 - 17,343 2,247,953 8,799 6,778 2,232,376 Other 9,967,370 4,509,643 234,557 5,941,184 20,652,754 6,401 267,993 20,927,148 211,234 77,424 20,638,490 Loans 339,186,417 626,579,388 165,566,711 64,311,451 1,195,643,967 1,736,818 16,960,726 1,214,341,511 4,559,257 8,967,116 1,200,815,138
(In Thousands of New Taiwan Dollars)
June 30, 2013 Neither Past Due Nor Impaired Provision for Impairment Losses (D) Net Item Past Due But Not Total Objective Nonobjective Impaired (C) (A)+(B)+(C)- High Medium Weak Non-ratings Subtotal (A) Impaired (B) (A)+(B)+(C) Evidence of Evidence of (D) Impairment Impairment In-balance-sheet items
Receivables $ 9,372,105 $ 4,106,004 $ 79,672 $ 6,890,194 $ 20,447,975 $ 9,316 $ 315,393 $ 20,772,684 $ 232,260 $ 143,301 $ 20,397,123 Credit cards - - - 1,233,392 1,233,392 - 15,574 1,248,966 7,313 4,005 1,237,648 Other 9,372,105 4,106,004 79,672 5,656,802 19,214,583 9,316 299,819 19,523,718 224,947 139,296 19,159,475 Loans 246,671,448 416,726,818 30,691,891 447,454,687 1,141,544,844 2,632,634 23,444,969 1,167,622,447 6,059,945 7,784,625 1,153,777,877
- 82 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 b) Credit quality analysis of loans neither past due nor impaired based on credit ratings of clients
(In Thousands of New Taiwan Dollars)
June 30, 2014 Item Neither Past Due Nor Impaired High Medium Weak Non-ratings Total Consumer finance $ 68,576,879 $ 171,888,800 $ 143,400,338 $ 33,338,802 $ 417,204,819 Corporation finance 270,609,538 454,690,588 22,166,373 30,972,649 778,439,148 Total $ 339,186,417 $ 626,579,388 $ 165,566,711 $ 64,311,451 $ 1,195,643,967
(In Thousands of New Taiwan Dollars)
June 30, 2013 Item Neither Past Due Nor Impaired High Medium Weak Non-ratings Total Consumer finance $ 70,465,473 $ 169,809,329 $ 128,081,093 $ 30,913,307 $ 399,269,202 Corporation finance 246,671,448 416,726,818 30,691,891 48,185,485 742,275,642 Total $ 317,136,921 $ 586,536,147 $ 158,772,984 $ 79,098,792 $ 1,141,544,844
- 83 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 c) Credit quality analysis of non-credit financial assets
(In Thousands of New Taiwan Dollars)
June 30, 2014 Neither Past Due Nor Impaired Provision for Impairment Losses (D) Item Past Due But Not Total Objective Nonobjective Net Impaired (C) High Medium Weak Non-ratings Subtotal (A) Impaired (B) (A)+(B)+(C) Evidence of Evidence of (A)+(B)+(C)-(D) Impairment Impairment Available-for-sale financial assets $ 44,646,384 $ - $ - $ - $ 44,646,384 $ - $ 150,000 $ 44,796,384 $ 120,000 $ - $ 44,676,384 Bonds 42,646,889 - - - 42,646,889 - - 42,646,889 - - 42,646,889 Stocks 1,999,495 - - - 1,999,495 - 150,000 2,149,495 120,000 - 2,029,495 Held-to-maturity financial assets 183,495,709 - - - 183,495,709 - - 183,495,709 - - 183,495,709 Bonds 13,249,503 - - - 13,249,503 - - 13,249,503 - - 13,249,503 Bills 170,246,206 - - - 170,246,206 - - 170,246,206 - - 170,246,206 Other financial assets 2,538,045 - - 805,906 3,343,951 - 137,879 3,481,830 137,879 - 3,343,951 (Note) Bonds 2,538,045 - - 805,906 3,343,951 - 137,879 3,481,830 137,879 - 3,343,951 (Note)
Note: Cost on the reclassification date.
(In Thousands of New Taiwan Dollars)
June 30, 2013 Neither Past Due Nor Impaired Provision for Impairment Losses (D) Item Past Due But Not Total Objective Nonobjective Net Impaired (C) High Medium Weak Non-ratings Subtotal (A) Impaired (B) (A)+(B)+(C) Evidence of Evidence of (A)+(B)+(C)-(D) Impairment Impairment Available-for-sale financial assets $ 40,241,965 $ - $ - $ 95,539 $ 40,337,504 $ - $ 150,000 $ 40,487,504 $ 120,000 $ - $ 40,367,504 Bonds 38,593,941 - - 95,539 38,689,480 - - 38,689,480 - - 38,689,480 Stocks 1,648,024 - - - 1,648,024 - 150,000 1,798,024 120,000 - 1,678,024 Held-to-maturity financial assets 186,465,381 - - - 186,465,381 - - 186,465,381 - - 186,465,381 Bonds 12,323,094 - - - 12,323,094 - - 12,323,094 - - 12,323,094 Bills 174,142,287 - - - 174,142,287 - - 174,142,287 - - 174,142,287 Other financial assets 1,299,347 - - 1,207,125 2,506,472 - 138,504 2,644,976 138,504 - 2,506,472 (Note) Bonds 1,299,347 - - 1,207,125 2,506,472 - 138,504 2,644,976 138,504 - 2,506,472 (Note)
Note: Cost on the reclassification date.
- 84 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 d) Aging analysis of financial assets that are past due but not impaired
(In Thousands of New Taiwan Dollars)
June 30, 2014 Item Past Due Up to Past Due Over Total One Month One Month Loans Consumer finance $ 1,233,453 $ 405,286 $ 1,638,739 Corporation finance 50,511 47,568 98,079
(In Thousands of New Taiwan Dollars)
June 30, 2013 Item Past Due Up to Past Due Over Total One Month One Month Loans Consumer finance $ 1,773,954 $ 511,385 2,285,339 Corporation finance 295,661 51,634 347,295 e) Impairment analysis of loans and receivables
Receivables
Gross Receivable Item December 31, June 30, 2014 June 30, 2013 2013 Individual assessment $ 243,405 $ 274,622 $ 254,490 Objective evidence of impairment of impairment Combined assessment 41,931 52,214 60,903 of impairment Nonobjective Combined assessment evidence of 22,889,765 20,250,401 20,457,291 of impairment impairment Total $ 23,175,101 $ 20,577,237 $ 20,772,684
Allowance Item December 31, June 30, 2014 June 30, 2013 2013 Individual assessment $ 202,798 $ 202,569 $ 203,661 Objective evidence of impairment of impairment Combined assessment 17,235 22,368 28,599 of impairment Non objective Combined assessment evidence of 84,202 150,073 143,301 of impairment impairment Total $ 304,235 $ 375,010 $ 375,561
Note: The amount of gross receivables excluded the amount of allowance for receivables and adjustments for discount (premium).
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Gross Loans Item June 30, 2014 December 31, 2013 June 30, 2013 Individual assessment of $ 14,519,616 $ 17,986,505 $ 20,170,984 Objective evidence of impairment impairment Combined assessment of 2,441,110 2,642,654 3,273,985 impairment Non objective evidence Combined assessment of 1,197,380,785 1,135,748,475 1,144,177,478 of impairment impairment Total $ 1,214,341,511 $ 1,156,377,634 $ 1,167,622,447
Allowance Item December 31, June 30, 2014 June 30, 2013 2013 Individual assessment $ 3,896,501 $ 4,627,909 $ 5,098,150 Objective evidence of impairment of impairment Combined assessment 662,756 723,090 961,795 of impairment Non objective Combined assessment evidence of 8,967,116 8,159,470 7,784,625 of impairment impairment Total $ 13,526,373 $ 13,510,469 $ 13,844,570
Note: The amount of gross loans excluded the amount of allowance for loans and adjustment for discount (premium). e. Liquidity risk
1) The source and definition of liquidity risk
Liquidity risk is the potential loss that the Group may suffer due to inability to liquidate assets or raise enough funds in reasonable time to perform obligations when due and to meet the demands of assets growth. Sources of liquidity risk are as follows:
a) Inability to fulfill funding gap due to asymmetric time and amount in cash inflows and outflows.
b) Liabilities paid off in advance before maturity, inability to maintain liabilities at maturity or inability to acquire funds from the market.
c) Inability to liquidate current assets at reasonable price or raising funds to fulfill funding gap with price higher than the reasonable one.
Except for the liquidity risks arising from normal operation, the Group’s liquidity might be affected by events such as credit ratings being downgraded, credibility seriously damaged, financial system’s system risk, causing customers to lack confidence and canceling deposits before maturity, call loans from banks being suspended, RS or RP transactions being deterred and liquidity of financial assets decreasing.
2) Liquidity risk management policy
Taishin Bank
The objective of liquidity risk management is to ensure that Taishin Bank can acquire funds at reasonable price to pay off debts, perform obligations and contingent liabilities and satisfy demands required by business growth either in normal operation or under sudden, serious and unusual circumstances. Taishin Bank has established policies on assets and liabilities management that
- 86 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 stipulate related liquidity risk management rules and principles, stipulate clear distinction between accountability and responsibility of Asset and Liability Committee and management departments and regulate the limits of liquidity risk, risk measuring, risk monitoring and the scope and procedures of reporting to ensure that overall liquidity risk is within the limits of liquidity risk approved by the Board of Directors.
Basic principles of liquidity risk management policy are as follows: a) Principle of risk diversification: Taishin Bank should avoid excessively concentrating funds on the same maturity, instruments, currencies, regions, funding sources or counterparties. b) Principle of stability: Taishin Bank should follow stable strategies and pay attention to market and internal funding liquidity. For example, Taishin Bank should absorb the core deposits at appropriate time in order to prevent market volatility from affecting funding sources and thus lower dependence on unstable fund sources. c) Principle of maintaining appropriate asset liquidity: Market liquidity will indirectly affect funding liquidity. Therefore, Taishin Bank should make sure total assets can pay off total liabilities and maintain certain proportion of assets with high liquidity or collaterals in order to finance funds and pay off current liabilities in critical and urgent time. d) Principle of matching asset and liability maturity: Taishin Bank should pay attention to the spread of maturity and liquidity of liquid assets and current assets should be sufficient to pay off current liabilities.
For urgent or sudden liquidity events, Taishin Bank has stipulated urgent fund dispatching handling plan as the highest principle for urgent events in order to integrate the Bank’s resources quickly to resolve emergencies efficiently.
Chang Hwa Bank
According to Chang Hwa Bank’s liquidity risk management policy, Chang Hwa Bank clearly sets various indicators and limits for liquidity risk. The responsible department should implement operation procedures for funding liquidity, monitor and prepare maturity analysis periodically to assess liquidity risk. In addition, the responsible department should also report to related departments and Asset and Liability Committee to enable them to make appropriate adjustments to meet the needs of liquidity. Related information about liquidity risk assessment should be reported to the Board of Directors to let high-level management understand Chang Hwa Bank’s funding liquidity.
As of June 30, 2014 and 2013, the ratio of liquidity reserve is 16.62% and 18.29%, respectively. Since the capital and working funds are deemed sufficient to meet the cash flow needs for performance of all contracted obligations, liquidity risk is not considered to be significant.
Taishin Securities B
Taishin Securities B’s funding liquidity risk management incorporates funding sources, funding application and gap management. Key control points are as follows: a) Funding sources: Other than ensuring stability and risk diversification of funding sources, Taishin Securities B maintains sufficient credit limits in order to cope with volatility risk from unexpected funding supply. b) Funding application: When assessing investment income, Taishin Securities B ensures its liquidity and safety in order to cope with liquidity risk from unexpected funding needs.
- 87 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 c) Gap management: Taishin Securities B implements funding gap management of various term structures in order to efficiently control unexpected fund dispatching
Market liquidity risk includes on- and off-balance-sheet transactions. To make sure that market liquidity of positions with low liquidity is within tolerable range, Taishin Securities B stipulated in its risk management rules that it should carefully analyze and efficiently identify existing and potential market liquidity risk in order to operate in coordination with Taishin Securities B’s business development and Taishin Financial Holding’s overall risk appetite. Before promoting new products and business, Taishin Securities B should also scrutinize related operation rules and confirm related market liquidity risk.
The market liquidity management procedures and measuring methods of Taishin Securities B’s major business are as follows:
a) When closeout of a position with low amount of market transactions and low liquidity occurs, impairment is generated due to increase of bid-ask premium and extension of covered time. Therefore, liquidity reserve is drawn based on product categories in internal assessment to avoid biased assessment.
b) The proportion limit is calculated as the sum of position, which is the amount of quoted and OTC stocks over one-day average volume, of the investment portfolio. The ratio is set to implement control.
c) The volume of holding a single stock and the volume of accounting for investment portfolio is limited to a certain amount in order to implement control.
d) The proportion of the volume of a single convertible bond issued to the volume of outstanding portfolio is limited to a certain amount in order to implement control.
3) Financial assets held to manage liquidity risk and maturity analysis
Financial assets held to manage liquidity risk:
The Group holds cash and cash equivalents, due from the Central Bank and banks and available-for-sale and held-to-maturity financial assets held for the purpose of managing liquidity risk, in order to perform contracted obligations when due and meet the needs of urgent fund dispatching.
- 88 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59
Maturity analysis:
Taishin Bank a) Maturity analysis of non-derivative financial liabilities
Taishin Bank’s non-derivative financial liabilities presented based on the residual maturities from the balance sheet date to the contract maturity date were as follows:
(In Thousands of New Taiwan Dollars)
June 30, 2014 Financial Instruments Item 1-30 Days 31-90 Days 91-180 Days 181 Days-1 Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years Over 5 Years Total Due to the Central Bank and other banks $ 37,547,560 $ 6,429,133 $ 12,063,543 $ 8,858,725 $ - $ 17,000 $ - $ - $ - $ 64,915,961 Financial liabilities at fair value through profit or loss 498,170 ------498,170 Securities sold under repurchase agreements 61,862,056 4,101,407 755,775 ------66,719,238 Payables 19,850,844 369,622 485,177 1,178,101 94,969 - - - - 21,978,713 Deposits and remittances 112,441,703 226,301,946 134,214,008 193,120,141 241,520,481 3,014,477 2,274 17,940 - 910,632,970 Bank debentures - - - - - 13,300,000 - - 19,700,000 33,000,000 Other financial liabilities 4,161,394 2,936,564 313,713 6,996,390 1,301,429 152,123 1,447,586 1,899,422 32,654,999 51,863,620 $ 236,361,727 $ 240,138,672 $ 147,832,216 $ 210,153,357 $ 242,916,879 $ 16,483,600 $ 1,449,860 $ 1,917,362 $ 52,354,999 $ 1,149,608,672
(In Thousands of New Taiwan Dollars)
June 30, 2013 Financial Instruments Item 1-30 Days 31-90 Days 91-180 Days 181 Days-1 Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years Over 5 Years Total Due to the Central Bank and other banks $ 4,543,861 $ 6,582,290 $ 10,088,767 $ 12,379,401 $ - $ - $ - $ - $ - $ 33,594,319 Financial liabilities at fair value through profit or loss 97,836 ------97,836 Securities sold under repurchase agreements 25,214,798 2,606,552 96,983 ------27,918,333 Payables 16,344,070 192,655 242,555 608,739 66,369 - - - - 17,454,388 Deposits and remittances 118,686,694 204,493,641 137,394,626 171,802,205 207,269,694 2,009,228 138 - - 841,656,226 Bank debentures ------13,300,000 - 11,700,000 25,000,000 Other financial liabilities 3,331,520 1,914,924 481,811 3,142,024 2,710,293 332,232 135,914 450,635 9,553,861 22,053,214 $ 168,218,779 $ 215,790,062 $ 148,304,742 $ 187,932,369 $ 210,046,356 $ 2,341,460 $ 13,436,052 $ 450,635 $ 21,253,861 $ 967,774,316
The maturity analysis of time deposits in “deposits and remittances” is allocated to each time band based on Taishin Bank’s historical experience. If all the time deposits were required to be paid off in recent period, the funds outflows in less than one-month time band would have been $394,051,266 thousand and $353,529,715 thousand as of June 30, 2014 and 2013, respectively.
- 89 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 b) Maturity analysis of derivative financial liabilities
Taishin Bank disclosed amounts of derivative financial liabilities at fair value through profit or loss using fair values recognized in the earliest time band as follows:
(In Thousands of New Taiwan Dollars)
June 30, 2014 Financial Instruments Item 181 Days - 1-30 Days 31-90 Days 91-180 Days 1-2 Years 2-3 Years 3-4 Years 4-5 Years Over 5 Years Total 1 Year Derivative financial liabilities at fair value through profit or loss $ 23,886,639 $ - $ - $ - $ - $ - $ - $ - $ - $ 23,886,639
(In Thousands of New Taiwan Dollars)
June 30, 2013 Financial Instruments Item 181 Days - 1-30 Days 31-90 Days 91-180 Days 1-2 Years 2-3 Years 3-4 Years 4-5 Years Over 5 Years Total 1 Year Derivative financial liabilities at fair value through profit or loss $ 13,808,405 $ - $ - $ - $ - $ - $ - $ - $ - $ 13,808,405
- 90 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 c) Maturity analysis of off-balance-sheet items
Below are the amounts of Taishin Bank’s off-balance-sheet items presented based on the residual maturities from the balance sheet date to the maturity date of irrevocable loan commitments, guarantees or letters of credit. As of June 30, 2014 and 2013, assuming that all amounts, including the amounts in the longest time band, were due in the less than one-month time band, the amounts would have been $12,186,056 thousand and $12,997,683 thousand, respectively, for guarantees; $4,065,697 thousand and $3,604,110 thousand, respectively, for letters of credit; $499,144,007 thousand and $522,490,133 thousand, respectively, for loans commitments (excluding credit card); and $12,914,850 thousand and $13,051,475 thousand, respectively, for credit cards commitments.
(In Thousands of New Taiwan Dollars)
June 30, 2014 Item 181 Days - 1-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Guarantees $ 2,491,233 $ 2,958,178 $ 2,082,293 $ 1,408,812 $ 3,245,540 $ 12,186,056 Letters of credit 1,618,426 2,238,707 200,128 8,436 - 4,065,697 Loans commitments (excluding credit cards) 7,373,562 124,329,347 107,958,586 256,512,997 2,969,515 499,144,007 Credit cards commitments 628 323,979 665,543 1,272,688 10,652,012 12,914,850
(In Thousands of New Taiwan Dollars)
June 30, 2013 Item 181 Days - 1-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Guarantees $ 5,302,099 $ 1,904,892 $ 1,080,545 $ 1,402,565 $ 3,307,582 $ 12,997,683 Letters of credit 1,435,040 1,867,621 214,069 44,141 43,239 3,604,110 Loans commitments (excluding credit cards) 8,598,026 142,323,612 91,662,427 276,625,341 3,280,727 522,490,133 Credit cards commitments 250 61,427 90,769 592,746 12,306,283 13,051,475
Chang Hwa Bank a) Maturity analysis of non-derivative financial assets and liabilities
Chang Hwa Bank adopted appropriate grouping methods, which are based on the nature of non-derivative financial assets and liabilities, to do maturity analysis in order to assess liquidity. The maturity analysis is presented as follows:
(In Thousands of New Taiwan Dollars)
June 30, 2014 Item 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Total Major maturity funds inflows Cash and cash equivalents $ 17,431,685 $ - $ - $ - $ - $ 17,431,685 Due from the Central Bank and call loans to other banks 21,250,599 3,930,521 4,371,879 13,547,016 15,950,139 59,050,154 Financial assets at fair value through profit or loss 24,199,521 - - - - 24,199,521 Receivables 17,523,057 519,372 185,441 800,144 234,214 19,262,228 Loans 91,500,594 94,280,960 98,328,151 89,250,958 607,991,285 981,351,948 Available-for-sale financial assets - 423,436 - 145,890 33,475,955 34,045,281 Held-to-maturity financial assets 120,900,000 5,800,000 1,699,756 - 13,079,219 141,478,975 Debts instrument without active market - - - - 2,100,000 2,100,000 Financial assets carried at cost - - - - 4,171,778 4,171,778 Other maturity funds inflow items - - - - 11,981,957 11,981,957 292,805,456 104,954,289 104,585,227 103,744,008 688,984,547 1,295,073,527 Major maturity funds outflows Due to the Central Bank and banks 387,891 1,778,471 695,169 1,465,574 - 4,327,105 Funds borrowed from the Central Bank and banks 1,710,000 15,000 - - - 1,725,000 Securities sold under repurchase agreements 2,171,639 2,070,974 10,030 - - 4,252,643 Payables 26,683,441 5,747,699 835,645 1,148,777 626,649 35,042,211 Deposits and remittances 134,321,138 121,720,592 135,907,243 243,937,764 495,837,062 1,131,723,799 Bank debentures - 5,000,000 - 5,000,000 38,350,000 48,350,000 Other maturity funds outflows items 22,291 28,227 14,220 123,131 4,962,197 5,150,066 165,296,400 136,360,963 137,462,307 251,675,246 539,775,908 1,230,570,824
Gap $ 127,509,056 $ (31,406,674 ) $ (32,877,080 ) $ (147,931,238 ) $ 149,208,639 $ 64,502,703
Note: The amounts listed above were the position in N.T. dollars of Chang Hwa Bank.
- 91 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 (In Thousands of New Taiwan Dollars)
June 30, 2013 Item 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Total Major maturity funds inflows Cash and cash equivalents $ 29,047,918 $ - $ - $ - $ - $ 29,047,918 Due from the Central Bank and call loans to other banks 35,793,473 4,064,860 4,603,353 13,289,445 15,506,735 73,257,866 Financial assets at fair value through profit or loss 46,008,104 - - - - 46,008,104 Receivables 12,803,652 498,506 160,602 667,461 229,967 14,360,188 Loans 107,798,726 104,939,865 69,719,419 84,303,196 605,291,432 972,052,638 Available-for-sale financial assets - - 201,902 101,149 28,189,448 28,492,499 Held-to-maturity financial assets 127,698,429 8,300,000 1,051,039 501,485 8,350,201 145,901,154 Debts instrument without active market - - - - 2,100,000 2,100,000 Financial assets carried at cost - - - - 4,698,434 4,698,434 Other maturity funds inflows items - - - - 11,462,527 11,462,527 359,150,302 117,803,231 75,736,315 98,862,736 675,828,744 1,327,381,328 Major maturity funds outflows Due to the Central Bank and banks 428,954 2,087,918 1,054,960 2,042,147 - 5,613,979 Funds borrowed from the Central Bank and banks 18,760,000 20,000 - - - 18,780,000 Securities sold under repurchase agreements 3,706,642 2,050,568 198,245 - - 5,955,455 Payables 29,798,524 1,974,048 790,841 1,050,142 779,532 34,393,087 Deposits and remittances 140,400,757 125,813,488 143,185,138 236,066,147 482,329,731 1,127,795,261 Bank debentures - - - - 38,350,000 38,350,000 Other maturity funds outflows items 13,716 34,568 2,887 70,440 4,172,820 4,294,431 193,108,593 131,980,590 145,232,071 239,228,876 525,632,083 1,235,182,213
Gap $ 166,041,709 $ (14,177,359 ) $ (69,495,756 ) $ (140,366,140 ) $ 150,196,661 $ 92,199,115
Note: The amounts listed above were the position in N.T. dollars of Chang Hwa Bank.
(In Thousands of United States Dollars)
June 30, 2014 Item 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Total Major maturity funds inflows Cash and cash equivalents $ 207,661 $ - $ - $ - $ 16,000 $ 223,661 Due from the Central Bank and call loans to other banks 975,388 241,076 112,698 743 3,742 1,333,647 Financial assets at fair value through profit or loss 116,598 - - - - 116,598 Receivables 407,487 100,852 210,214 14,730 490 733,773 Loans 817,803 1,034,862 779,791 389,497 3,251,096 6,273,049 Available-for-sale financial assets - 2,000 - - 55,947 57,947 Held-to-maturity financial assets 2,000 - - - 2,999 4,999 Debts instrument without active market - - - - 5,019 5,019 Other maturity funds inflows items 38,502 188,000 57,000 - 316 283,818 2,565,439 1,566,790 1,159,703 404,970 3,335,609 9,032,511 Major maturity funds outflows Due to the Central Bank and banks 484,088 45,436 30,454 720 16,070 576,768 Funds borrowed from the Central Bank and banks 1,993,332 1,052,000 32,000 15,000 - 3,092,332 Payables 664,459 19,533 2,966 1,506 5,890 694,354 Deposits and remittances 1,256,310 1,192,139 662,561 803,134 2,042,634 5,956,778 Other maturity funds outflows items 36,354 633 327 106 1,062 38,482 4,434,543 2,309,741 728,308 820,466 2,065,656 10,358,714
Gap $ (1,869,104 ) $ (742,951 ) $ 431,395 $ (415,496 ) $ 1,269,953 $ (1,326,203 )
Note: The amounts listed above were the position in U.S. dollars of Chang Hwa Bank.
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June 30, 2013 Item 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Total Major maturity funds inflows Cash and cash equivalents $ 214,407 $ 22,000 $ - $ - $ - $ 236,407 Due from the Central Bank and call loans to other banks 575,628 309,769 79,499 5,531 2,673 973,100 Financial assets at fair value through profit or loss 3,420 - - - 54,985 58,405 Receivables 427,007 201,944 82,806 1,524 2,558 715,839 Loans 788,992 1,147,921 571,966 233,186 2,579,356 5,321,421 Available-for-sale financial assets 18,731 - 29,813 62,775 39,151 150,470 Held-to-maturity financial assets 2,000 - 5,004 36,001 5,997 49,002 Debts instrument without active market - - - - 8,863 8,863 Other maturity funds inflows items 16,500 - 60,000 20,000 267 96,767 2,046,685 1,681,634 829,088 359,017 2,693,850 7,610,274 Major maturity funds outflows Due to the Central Bank and banks 387,933 125,149 175 303 16,273 529,833 Funds borrowed from the Central Bank and banks 1,524,190 509,500 13,500 - - 2,047,190 Payables 476,075 16,209 2,780 617 5,388 501,069 Deposits and remittances 1,177,533 822,177 628,466 736,984 2,052,038 5,417,198 Other maturity funds outflows items 23,906 2,250 869 298 2,679 30,002 3,589,637 1,475,285 645,790 738,202 2,076,378 8,525,292
Gap $ (1,542,952 ) $ 206,349 $ 183,298 $ (379,185 ) $ 617,472 $ (915,018 )
Note: The amounts listed above were the position in U.S. dollars of Chang Hwa Bank. b) Maturity analysis of derivative financial assets and liabilities
The derivative instruments held by Chang Hwa Bank, except for interest rate swaps with leveraging effects, have very little probabilities of failing to be sold with reasonable prices in the market, and thus have very low liquidity risks.
(New Taiwan Dollars and Foreign Currencies Combined in Thousands of New Taiwan Dollars)
June 30, 2014 Item 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Total Foreign currency derivative instruments Outflows $ 75,179,204 $ 172,386,546 $ 30,557,014 $ 47,292,414 $ 3,432 $ 325,418,610 Inflows 75,229,108 172,466,069 30,692,458 47,322,120 3,374 325,713,129 Interest rate derivative instruments Outflows 1,523,509 4,404,547 8,187,670 35,241,209 13,696,170 63,053,105 Inflows 1,484,945 4,476,750 8,349,400 35,552,246 13,718,736 63,582,077 Total outflows $ 76,702,713 $ 176,791,093 $ 38,744,684 $ 82,533,623 $ 13,699,602 $ 388,471,715 Total inflows $ 76,714,053 $ 176,942,819 $ 39,041,858 $ 82,874,366 $ 13,722,110 $ 389,295,206
(New Taiwan Dollars and Foreign Currencies Combined in Thousands of New Taiwan Dollars)
June 30, 2013 Item 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Total Foreign currency derivative instruments Outflows $ 76,590,353 $ 101,224,880 $ 41,338,259 $ 11,410,647 $ 35,508 $ 230,599,647 Inflows 76,748,091 101,373,715 41,243,996 11,370,968 35,182 230,771,952 Interest rate derivative instruments Outflows 2,107,884 299,860 6,472,304 20,223,590 30,187,951 59,291,589 Inflows 2,098,600 299,800 6,294,924 20,083,141 30,546,731 59,323,196 Total outflows $ 78,698,237 $ 101,524,740 $ 47,810,563 $ 31,634,237 $ 30,223,459 $ 289,891,236 Total inflows $ 78,846,691 $ 101,673,515 $ 47,538,920 $ 31,454,109 $ 30,581,913 $ 290,095,148
- 93 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 c) Maturity analysis of off-balance-sheet items
Chang Hwa Bank’s off-balance-sheet items - irrevocable loans, guarantees, letters of credit - presented based on the residual time from the balance sheet date to the maturity date were as follows:
(In Thousands of New Taiwan Dollars)
June 30, 2014 Item 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Total Loan commitments (excluding credit card) $ 101,324,623 $ 1,292,895 $ 2,684,771 $ 6,962,790 $ 18,469,499 $ 130,734,578 Unused loan commitments (credit card only) 48 1,989 730 2,842 210,848 216,457 Unused issued letters of credit 26,656,075 56,100 12,255 8,835 - 26,733,265 Guarantees in guarantee business 27,438 ,587 50,018 762,455 154,595 536,990 28,942,645 $ 155,419,333 $ 1,401,002 $ 3,460,211 $ 7,129,062 $ 19,217,337 $ 186,626,945
(In Thousands of New Taiwan Dollars)
June 30, 2013 Item 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Total Loan commitments (excluding credit card) $ 106,861,011 $ 1,150,888 $ 2,032,859 $ 10,736,424 $ 25,066,718 $ 145,847,900 Unused loan commitments (credit card only) 256 4,188 4,540 8,385 138,296 155,665 Unused issued letters of credit 22,310,962 72,234 49,450 3,131 - 22,435,777 Guarantees in guarantee business 26,883,708 3,233 241,176 59,078 802,476 27,989,671 $ 156,055,937 $ 1,230,543 $ 2,328,025 $ 10,807 ,018 $ 26,007,490 $ 196,429,013
47. RELATED-PARTY TRANSACTIONS
a. Names and relationships of related parties were as follows:
Name Relationship
Taishin Bank Wholly owned by Taishin Financial Holding Taishin AMC Same as above Taishin Marketing Wholly owned by Taishin Financial Holding (it had been liquidated by the end of September 2013) Taishin Venture Capital Wholly owned by Taishin Financial Holding Taishin Securities B Same as above Taishin Securities Investment Trust Same as above Taishin Holdings Insurance Brokers Same as above Taishin Securities Investment Advisory Owned by Taishin Financial Holding Chang Hwa Bank Same as above Taishin D. A. Finance Owned by Taishin bank Taishin Insurance Agency Same as above Taishin Real-Estate Same as above An Hsin Real-Estate Equity-method investee by Taishin bank Youn Shin Artistic Its corporate director is Taishin Venture Capital Shin Kong Life Insurance Co., Ltd. (“Shin Kong Its director is the person in charge of Taishin Life Insurance”) Financial Holding’s corporate director Shinkong Synthetic Fibers Co., Ltd. (“Shinkong Same as above Synthetic Fibers”) Taishin Insurance Broker Wholly owned by Taishin Insurance Agency CHB Life Insurance Agency Wholly owned by Chang Hwa Bank CHB Insurance Brokerage Same as above Dah Chung Bills Finance Corp. (“Dah Chung Its corporate director is Taishin Bank Bills”) Taiwan Shin Kong Commercial Bank Co., Ltd. Related party in substance (“Shin Kong Bank”) (Continued)
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Name Relationship
MasterLink Securities Corp. (“MasterLink Its supervisor is Chang Hwa Bank Securities”) Taishin Financial Leases (China) Owned by Taishin Venture Capital Taishin Financial Leases (Tianjin) Wholly owned by Taishin Venture Capital CyberSoft Digital Service Corp. (“CyberSoft Related party in substance Digital Service”) Shin Kong Mitsukoshi Department Store Co., Its director is Taishin Financial Holding’s chairman Ltd. (“Shin Kong Mitsukoshi”) Central Reinsurance Corporation (“Central Re”) Its director is Chang Hwa Bank’s corporate director The Pacific Securities Co., Ltd. (“Pacific Its independent director is Chang Hwa Bank’s Securities) director (consolidated with another company and dissolved in December 2012) Vanguard International Semiconductor Corp. Its director is Chang Hwa Bank’s corporate (“Vanguard International Semiconductor) supervisor Scino Pharm Taiwan, Ltd. (“Scino Pharm Same as above Taiwan”) Taiwan High Speed Rail Corp. (“Taiwan High Same as above Speed Rail”) Taiwan Semiconductor Manufacturing Company Same as above Limited (“TSMC”) GreTai Securities Market Its supervisor is Taishin Financial Holding’s director (become non-related party after the fourth quarter of 2013) Kai Fa International Investment Co., Ltd. (“Kai Its corporate director is Chang Hwa Bank Fa International Investment”) Shin Kong Insurance Co., Ltd. (“Shin Kong Its director is Taishin Financial Holding’s Insurance”) chairman’s spouse Diamond Biotech Investment Corp. (“Diamond Its director is Taishin Financial Holding’s senior Biotech Investment”) vice general manager China Airlines Co., Ltd. (“China Airlines”) Its director is Chang Hwa Bank’s corporate supervisor Nan Ya Plastics Corp. (“Nan Ya Plastics”) Its director is Taishin Financial Holding’s independent director Darfon Corp. (“Darfon”) Its independent director is Taishin Financial Holding’s independent director Mega International Commercial Bank (“Mega Its director is Chang Hwa Bank’s vice general Bank”) manager’s spouse Taiwan Business Bank Co., Ltd. (“Taiwan Its director is Chang Hwa Bank’s corporate director Business Bank”) Industrial Bank of Taiwan (“Industrial Bank”) Its director is Taishin Financial Holding’s director’s spouse (become non-related party after the third quarter of 2013) Tang Eng Iron Works Co., Ltd. (“Tang Eng”) Its independent director is Taishin Securities B’s chairman Kaohsiung Rapid Transit Corp. (“KRTC”) Its director is Chang Hwa Bank’s corporate supervisor Land Bank of Taiwan (“Land Bank”) Its director is Chang Hwa Bank’s corporate director Taiwan Finance Corp. (“TFC”) Its director is Chang Hwa Bank’s vice general manager’s spouse Chunghwa Telecom Co., Ltd. (“Chunghwa Its supervisor is Chang Hwa Bank’s corporate Telecom”) supervisor (Continued)
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Name Relationship
Sercomm Corp. (“Sercomm”) Its supervisor is Taishin Financial Holding’s director Ri Chang Electronics Co., Ltd. (“Ri Chang Its director is Taishin Bank’s senior manager Electronics”) Straits Exchange Foundation (“SEF”) Its director is Taishin Financial Holding’s independent director (became non-related party after the fourth quarter of 2013) Wan Hai Lines Ltd. (“Wan Hai Lines”) Its director is Chang Hwa Bank’s director Han-Shin Venture Capital Inc. (“Han-Shin Its corporate director is the Taishin Financial Venture Capital”) Holding (became liquidated at the fourth quarter of 2013) Aero Win Technology Corp. (“Aero Win Its supervisor is Taishin Securities B’s independent Technology”) director Formosa Sumco Technology Corp. (“Formosa Its independent director is Taishin Financial Sumco Technology”) Holding’s independent director The Export-Import Bank of the ROC (“The Its director is Chang Hwa Bank’s corporate director Export-Import Bank”) Formosa International Hotels Corporation Its supervisor is the chairman of Taishin Financial (“GFRT”) Holding’s corporate director Ubright Optronics Corporation (“UBright”) Related party in substance AimCore Technology Co., Ltd. (“AimCore Its independent director is Taishin Holdings Technology”) Insurance Broker’s manager SCI Pharmtech, Inc. (“SCI”) Its independent director is Taishin Securities B’s independent director (became non-related party after the fourth quarter of 2013) Financial Information Service Co., Ltd. (“FISC”) Its director is Chang Hwa Bank’s corporate director Agricultural Credit Guarantee Fund (“ACGF”) Its general manager is Taishin Securities B’s independent director Trade-Van Information Services Co. Its director is the person in charge of Chang Hwa (“Trade-Van”) Bank’s corporate director Individual A The chairman of Taishin Financial Holding’s corporate director Others Other related parties based on the FSC-recognized IAS 24 “Disclosures of Related Parties” (Concluded) b. Material transactions with related parties were as follows:
1) Loans, deposits and guaranteed loans
Loans to related parties of Taishin Bank and subsidiaries were as follows:
Loans Percentage of Ending Balance Loans (%)
June 30, 2014 $ 2,353,616 0.31 December 31, 2013 4,061,831 0.57 June 30, 2013 5,022,002 0.74
For the three months ended June 30, 2014 and 2013, interest revenues were $12,473 thousand and $22,074 thousand, respectively.
- 96 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 For the six months ended June 30, 2014 and 2013, interest revenues were $30,206 thousand and $44,150 thousand, respectively and interest rates ranged from 0.0001% to 18.25% and from 0.0001% to 20.00%, respectively.
For the Six Months Ended June 30, 2014 The Different Non- Terms with Ending Highest performing Non-related Balance Amount Normal Loans Loans Collateral Parties
Consumer loans
105 accounts $ 245,717 $ 279,233 $ 245,717 $ - Land, building, None chattels
Self-used residence mortgage loans
100 accounts 588,784 667,680 588,784 - Land, building None
Other loans
China Airlines 1,000,000 1,000,000 1,000,000 - - None Shinkong Synthetic 250,000 250,000 250,000 - Securities None Fibers Others 269,115 748,925 263,761 5,354 Land, building, None chattels, securities
$ 2,353,616 $ 2,348,262
December 31, 2013 The Different Non- Terms with Ending performing Non-related Balance Normal Loans Loans Collateral Parties
Consumer loans
114 accounts $ 237,965 $ 237,965 $ - Land, building, None chattels
Self-used residence mortgage loans
99 accounts 614,847 614,847 - Land, building None
Other loans
Nan Ya Plastics 2,001,499 2,001,499 - Land, building, None chattels, securities China Airlines 1,000,000 1,000,000 - - None Others 207,520 202,166 5,354 Land, building, None chattels, securities
$ 4,061,831 $ 4,056,477
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For the Six Months Ended June 30, 2013 The Different Non- Terms with Ending Highest performing Non-related Balance Amount Normal Loans Loans Collateral Parties
Consumer loans
91 accounts $ 187,555 $ 265,822 $ 187,555 $ - Land, building, None chattels
Self-used residence mortgage loans
96 accounts 633,582 683,100 633,582 - Land, building None
Other loans
Nan Ya Plastics 2,902,998 2,904,497 2,902,998 - Land, building, None chattels, securities China Airlines 1,000,000 1,000,000 1,000,000 - - None SCI Pharmtech 130,000 130,000 130,000 - - None Others 167,867 476,354 162,513 5,354 Land, building, None chattels, securities
$ 5,022,002 $ 5,016,648
All transactions with related parties are made under arm’s length terms, which are consistent with normal policies.
Deposits Percentage of Ending Balance Deposits (%)
June 30, 2014 $ 16,497,228 1.84 December 31, 2013 16,356,029 1.93 June 30, 2013 27,742,234 3.55
For the three months ended June 30, 2014 and 2013, interest expenses were $34,005 thousand and $53,546 thousand, respectively.
For the six months ended June 30, 2014 and 2013, interest expenses were $63,811 thousand and $104,880 thousand, respectively and interest rates ranged both from 0.00% to 4.00%.
For the Six Months Ended June 30, 2014 Interest Interest Expense for the Expense for the Interest Rate Three Months Six Months Ending Balance (Per Annum %) Ended June 30 Ended June 30
An Hsin Real-Estate $ 4,841,689 0.17 -0.94 $ (10,238 ) $ (18,580 ) Taiwan High Speed Rail 1,957,926 0.01-1.50 (4,367) (8,323) Central Re 1,098,946 0.17 -0.85 (2,279 ) (4,542 ) Shin Kong Mitsukoshi 1,002,737 0.00 -0.17 (417 ) (908 ) Vanguard International Semiconductor 846,334 0.17-1.22 (2,660) (4,961) Diamond Biotech Investment 728,276 0.04-1.22 (2,137) (4,324) (Continued)
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For the Six Months Ended June 30, 2014 Interest Interest Expense for the Expense for the Interest Rate Three Months Six Months Ending Balance (Per Annum %) Ended June 30 Ended June 30
Shin Kong Insurance $ 680,839 0.00 -1.50 $ (1,181 ) $ (2,497 ) Dah Chung Bills 436,722 0.00 -0.82 (823 ) (1,634 ) GFRT 301,176 0.00 -0.75 (489 ) (997 ) China Airlines 300,539 0.17 (494 ) (494 ) Scino Pharm Taiwan 281,484 0.00 -0.94 (743 ) (1,615 ) FISC 264,750 0.17 -1.36 (280 ) (280 ) Wan Hai Lines 209,405 1.00 -1.50 (1,292 ) (2,371 ) ACGF 200,00 0 0.27 -1.38 (1,377 ) (1,377 ) Shin Kong Synthetic Fibers 190,965 0.00-0.35 (16) (28) Shin Kong Life Insurance 144,856 0.05-0.60 (40) (73) Ri Chang Electronics 142,147 0.00 -1.86 (337 ) (991 ) Kai Fa International Investment 101,753 0.04-0.82 (621) (1,417) Trade Van 100,059 0.04 -0.75 (72 ) (72 ) Others 2,666,625 (4,142 ) (8,327 )
$ 16,497,228 $ (34,005 ) $ (63,811 ) (Concluded)
December 31, 2013 Ending Balance
An Hsin Real-Estate $ 3,574,866 Taiwan High Speed Rail 1,955,070 Shin Kong Mitsukoshi 1,563,149 Central Re 1,098,946 Vanguard International Semiconductor 1,017,849 Diamond Biotech Investment 914,433 Shin Kong Insurance 829,320 Scino Pharm Taiwan 714,383 Dah Chung Bills 425,567 Kai Fa International Investment 408,652 Wan Hai Lines 329,850 GFRT 300,212 Shin Kong Synthetic Fibers 234,669 Ri Chang Electronics 170,988 Taishin D.A. Finance 142,440 Ubright 106,321 Others 2,569,314
$ 16,356,029
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For the Six Months Ended June 30, 2013 Interest Interest Expense for the Expense for the Interest Rate Three Months Six Months Ending Balance (Per Annum %) Ended June 30 Ended June 30
TSMC $ 10,172,421 0.17-0.84 $ (17,530) $ (32,357) An Hsin Real-Estate 2,677,627 0.17-1.36 (6,602) (11,904) Taiwan High Speed Rail 1,961,505 0.01-1.05 (4,303) (8,749) Shin Kong Insurance 1,406,330 0.00-1.36 (1,846) (3,726) Diamond Biotech Investment 1,402,420 0.17-1.22 (3,765) (8,626) GreTai Securities Market 1,392,431 0.12-1.38 (3,766) (7,526) Scino Pharm Taiwan 1,125,036 0.00-0.94 (2,274) (4,650) Central Re 1,093,465 0.05-1.00 (2,570) (5,143) Vanguard International Semiconductor 910,793 0.17-1.22 (2,712) (5,520) Pacific Securities 635,936 0.00-1.35 (2) (35) Dah Chung Bills 415,934 0.00-0.90 (900) (1,790) Kai Fa International Investment 406,232 0.12-0.96 (891) (1,808) Wan Hai Lines 335,220 0.01-1.00 (429) (808) Shin Kong Mitsukoshi 255,537 0.00-0.17 (212) (489) SEF 222,010 0.12-1.38 (756) (1,457) Ri Chang Electronics 176,076 0.17-1.00 (257) (266) Han-Shin Venture Capital 175,014 0.00-0.95 (37) (37) Taishin D.A. Finance 170,184 0.17-0.80 (278) (565) Shin Kong Synthetic Fibers 168,818 0.00-0.35 (20) (30) Others 2,639,245 (4,396) (9,394)
$ 27,742,234 $ (53,546) $ (104,880)
All transactions with related parties are made under arm’s length terms, which are consistent with normal policies.
Guaranteed loans December 31, 201 3 Reserve for Guarantee Ending Balance Liabilities Collateral
Scino Pharm Taiwan $ 6,889 $ - - Darfon 600 - Certificate of deposit
For the Six Months Ended June 30, 2013 Reserve for Ending Highest Interest Rate Guarantee Balance Amount (Per Annum %) Liabilities Collateral
Scino Pharm Taiwan $ 4,678 $ 11,513 - $ - - Darfon 600 600 0.70 - Certificate of deposit
- 100 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59
All transactions with related parties are made under arm’s length terms, which are consistent with normal policies.
Loans to related parties of Chang Hwa Bank and subsidiaries were as follows:
Loans
Percentage of Ending Balance Loans (%)
June 30, 2014 $ 40,554,069 3.38 December 31, 2013 38,417,445 3.36 June 30, 2013 39,670,103 3.44
For the three months ended June 30, 2014 and 2013, interest income amounted to $171,718 thousand and $169,868 thousand, respectively.
For the six months ended June 30, 2014 and 2013, interest income amounted to $340,419 thousand and $344,067 thousand, respectively and interest rates ranged both from 0.00% to 3.88%.
For the Six Months Ended June 30, 2014 The Different Non- Terms with Ending Highest performing Non-related Balance Amount Normal Loans Loans Collateral Parties
Consumer loans
28 accounts $ 9,311 $ 9,964 $ 9,311 $ - Credit None
Self-used residence mortgage loans
209 accounts 1,030,303 1,060,796 1,030,303 - Real estate None
Other loans
Taiwan High Speed 33,966,348 34,087,459 33,966,348 - Equipment None Rail China Airlines 2,480,000 2,627,500 2,480,000 - Credit, aircraft None Nan Ya Plastics 1,085,585 1,085,585 1,085,585 - Credit, plant None KRTC 590,000 595,000 590,000 - Credit None Tang Eng 366,024 366,255 366,024 - Credit Aero Win 240,721 254,423 240,721 - Credit, plant, None Technology equipment Cybersoft Digital 184,000 194,000 184,000 - Real estate None service AimCore 150,000 150,000 150,000 - Plant Technology 10 corporate 441,485 476,635 441,485 - Credit, equipment, None accounts (Note) real estate 14 individual 10,292 10,982 10,292 - Deposit None accounts (Note)
$ 40,554,069 $ 40,554,069
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December 31, 2013 The Different Non- Terms with Ending performing Non-related Balance Normal Loans Loans Collateral Parties Consumer loans
27 accounts $ 8,910 $ 8,910 $ - Credit None
Self-used residence mortgage loans
222 accounts 1,117,505 1,117,505 - Real estate None
Other loans
Taiwan High Speed Rail 33,688,317 33,688,317 - Equipment None China Airlines 1,622,500 1,622,500 - Credit, aircraft None KRTC 715,000 715,000 - Credit None Nan Ya Plastics 317,192 317,192 - Credit, Plant, None equipment Aero Win Technology 252,492 252,492 - Credit, plant, None equipment CyberSoft Digital Service 194,000 194,000 - Real estate None 11 corporate accounts (Note) 492,798 492,798 - Credit, equipment, None real estate 15 individual accounts (Note) 8,731 8,731 - Deposit None
$ 38,417,445 $ 38,417,445
For the Six Months Ended June 30, 2013 The Different Non- Terms with Ending Highest performing Non-related Balance Amount Normal Loans Loans Collateral Parties Consumer loans
21 accounts $ 6,072 $ 7,088 $ 6,072 $ - Credit None
Self-used residence mortgage loans
222 accounts 1,139,657 1,179,787 1,139,657 - Real estate None
Other loans
Taiwan High Speed 33,741,400 33,860,422 33,741,400 - Equipment None Rail China Airlines 2,770,000 3,232,500 2,770,000 - Credit, aircraft None KRTC 610,000 610,000 610,000 - Credit None Nan Ya Plastics 378,799 378,799 378,799 - Credit, equipment, None real estate Tang Eng 300,000 300,000 300,000 - Credit Wan Hai Lines 193,333 241,667 193,333 - Shipping None Aero Win 136,826 145,551 136,826 - Credit, equipment, None Technology real estate Formosa Sumco 100,849 115,256 100,849 - Equipment, real Technology estate 8 corporate 283,480 294,491 283,480 - Credit, equipment, None accounts (Note) real estate 13 individual 9,6 87 11,101 9,687 - Deposit None accounts (Note)
$ 39,670,103 $ 39,670,103
Note: Others: Corporate accounts less than $100 million were summarized and disclosed in aggregate.
Others: Individual accounts less than 1% of the total ending balance were summarized and disclosed in aggregate.
Chang Hwa Bank’s mortgage loans with balance below $8,000 thousand and consumer loans with balance below $800 thousand to natural persons such as managers all had
- 102 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 interest rates of 1.54% as of June 30, 2014, December 31, 2013 and June 30, 2013, respectively. Regular interest rates are used for ordinary loan borrowers.
Deposits Percentage of Ending Balance Deposits (%)
June 30, 2014 $ 5,632,905 0.40 December 31, 2013 3,752,791 0.27 June 30, 2013 6,398,266 0.48
For the three months ended June 30, 2014 and 2013, the interest expenses were $17,178 thousand and $17,000 thousand, respectively.
For the six months ended June 30, 2013 and 2012, interest expenses were $33,526 thousand and $39,773 thousand, respectively and the interest rates ranged from 0.00%-13%.
For the Six Months Ended June 30, 2014 Interest Interest Expense for the Expense for the Interest Rate Three Months Six Months Ending Balance (Per Annum %) Ended June 30 Ended June 30
Wan Hai Lines $ 876,473 0.05 -3.2 $ (2,264 ) $ (3,902 ) TSMC 473,153 0.00 -0.17 (14 ) (23 ) AimCore Technology 186,013 0.05 -0.35 (59 ) (59 ) Nan Ya Plastics 182,265 0.00 -3.05 (189 ) (773 ) Individual A 101,082 0.05 -1.39 (205 ) (417 ) Others 3,813,919 (14,447 ) (28,352 )
$ 5,632,905 $ (17,178 ) $ (33,526 )
December 31, 2013 Ending Balance
Wan Hai Lines $ 154,128 Individual A 108,443 Others 3,490,220
$ 3,752,791
For the Six Months Ended June 30, 2013 Interest Interest Expense for the Expense for the Interest Rate Three Months Six Months Ending Balance (Per Annum %) Ended June 30 Ended June 30
TSMC $ 2,447,841 0.00 -0.94 $ (4,243 ) $ (14,504 ) China Airlines 150,088 0.00 -0.45 (28 ) (47 ) Wan Hai Lines 129,642 0.05 -0.63 (84 ) (91 ) Individual A 128,971 0.32 -1.37 (175 ) (351 ) Others 3, 541,724 (12,470 ) (24,78 0)
$ 6, 398,266 $ (17,000 ) $ (39,77 3)
- 103 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Chang Hwa Bank provides interest rate at 13% per annum to managers of the above affiliates for their savings deposits with a balance below $480 thousand. For any excess amount, the interest is calculated at the rate given to regular savings deposits. The rest is the same as regular depositors.
Guaranteed loans
For the Six Months Ended June 30, 2014 Reserve for Ending Highest Guarantee Interest Rate Balance Amount Liabilities (Per Annum %) Collateral
Taiwan High Speed Rail $ 186,500 $ 448,541 $ - 0.775 -0.80 Equipment KRTC 40,000 40,000 - 0.75 -
December 31, 2013 Reserve for Guarantee Ending Balance Liabilities Collateral
Taiwan High Speed Rail $ 448,541 $ - Equipment
For the Six Months Ended June 30, 2013 Reserve for Ending Highest Guarantee Interest Rate Balance Amount Liabilities (Per Annum %) Collateral
Taiwan High Speed Rail $ 448,541 $ 779,854 $ - 0.775-0.80 Equipment
All transactions with related parties are made under arm’s length terms, which are consistent with normal policies.
2) Call loans to banks and call loans from banks
Taishin Bank and subsidiaries
Call loans from banks December 31 2013 Ending Balance
Mega Bank $ 3,144,750 Land Bank 737,901 Taiwan Business Bank 599,000
For the Six Months Ended June 30, 2013 Interest Interest Expense for the Expense for the Interest Rate Three Months Six Months Ending Balance (Per Annum %) Ended June 30 Ended June 30
Taiwan Business Bank $ 240,960 0.27 -2.50 $ (426) $ (822) Mega Bank 98,159 0.10 -7.00 (434) (434)
- 104 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Chang Hwa Bank and subsidiaries
Call loans to banks
(In Thousands of Original Currencies)
For the Six Months Ended June 30, 2014 Interest Interest Revenue for Revenue for Interest Rate the Three the Six Months Ending (Per Annum Months Ended Ended Name Department Currency Balance %) June 30 June 30
Land Bank DBU TWD $ 5,000 0.388-0.87 $ 463 $ 954 Singapore Branch USD 30,000 0.30-1.35 40 64 Hong Kong Branch USD 20,000 0.29-1.55 36 67 Taiwan Business Bank Singapore Branch USD 18,000 0.85-1.58 64 102 OBU EUR 2,000 0.10-0.25 - - Mega Bank OBU USD 28,000 0.16-0.48 8 14 Singapore Branch USD 80,000 0.65 20 20 London Branch USD 70,000 0.24-0.98 38 89 Hong Kong Branch USD 45,000 0.15-1.00 32 80 Hong Kong Branch CNY 90,000 0.90-3.30 442 558 The Export-Import London Branch USD 10,000 0.84-1.10 14 39 Bank (In Thousands of Original Currencies)
December 31, 2013 Name Department Currency Ending Balance
Land Bank DBU TWD $ 5,000 Singapore Branch USD 30,000 Taiwan Business Bank Singapore Branch USD 20,000 London Branch USD 10,000 Hong Kong Branch USD 10,000 Mega Bank Singapore Branch AUD 22,200 London Branch USD 10,000 Hong Kong Branch USD 40,000 The Export-Import Bank London Branch USD 10,000
(In Thousands of Original Currencies)
For the Six Months Ended June 30, 2013 Interest Interest Revenue for Revenue for Interest Rate the Three the Six Months Ending (Per Annum Months Ended Ended Name Department Currency Balance %) June 30 June 30
Dah Chung Bills DBU TWD $ 500,000 0.40-0.46 $ 591 $ 591 Land Bank DBU TWD 2,010,000 0.388-0.89 803 1,347 Singapore Branch USD 10,000 0.30-0.80 4 4 New York Branch USD 10,000 0.28-0.70 18 19 Los Angeles Branch USD 15,000 0.77-0.98 20 21 London Branch USD 20,000 0.36-0.74 22 28 Hong Kong Branch USD 20,000 0.20-0.66 17 36 Taiwan Business Bank Singapore Branch USD 15,000 0.80 11 11 London Branch USD 15,000 0.50-0.68 17 28 TFC DBU TWD 500,000 0.41-0.47 527 912 Mega Bank DBU TWD 2,000,000 0.388-0.40 1,016 1,016 OBU USD 31,000 0.21-0.43 26 26 London Branch USD 5,000 0.28-0.46 31 34 Hong Kong Branch USD 60,000 0.15-0.60 38 52 Industrial Bank Singapore Branch USD 15,000 0.74 4 4 London Branch USD 10,000 0.46-1.61 5 18 Hong Kong Branch USD 5,000 0.42-0.82 13 13
- 105 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Call loans from banks
(In Thousands of Original Currencies)
For the Six Months Ended June 30, 2014 Interest Interest Revenue for Revenue for Interest Rate the Three the Six Months Ending (Per Annum Months Ended Ended Name Department Currency Balance %) June 30 June 30
Land Bank DBU TWD $ 5,000 0.388-0.88 $ 1,104 $ 1,496 Hong Kong Branch USD 20,000 1.60 72 72 Taiwan Business Bank London Branch EUR 28,000 0.65-1.45 83 129 Mega Bank OBU USD 40,000 1.20-1.45 - 308 Singapore Branch USD 51,000 0.40-1.48 197 415 Kunshan Branch USD 71,000 0.30-3.45 524 594 New York Branch USD 70,000 0.76-1.43 110 140 Los Angeles Branch USD 10,000 0.26-0.93 3 6 London Branch USD 35,000 0.80-1.52 129 149 Hong Kong Branch USD 64,000 0.85-1.74 287 475
(In Thousands of Original Currencies)
December 31, 2013 Name Department Currency Ending Balance
Land Bank DBU TWD $ 5,000 Taiwan Business Bank London Branch EUR 19,000 Mega Bank Singapore Branch USD 40,000 New York Branch USD 20,000 Los Angeles Branch USD 10,000 London Branch USD 16,000 Hong Kong Branch USD 64,000
(In Thousands of Original Currencies)
For the Six Months Ended June 30, 2013 Interest Interest Expense for the Expense for the Interest Rate Three Months Six Months Ending (Per Annum Ended Ended Name Department Currency Balance %) June 30 June 30
Land Bank DBU TWD $ 5,005,000 0.388-0.88 $ 558 $ 1,597 Singapore Branch USD 10,000 0.78 20 22 New York Branch USD 10,000 0.22-0.55 12 14 Los Angeles Branch USD 15,000 0.25-0.70 20 22 Taiwan Business Bank Singapore Branch USD 15,000 0.43-0.52 11 15 London Branch EUR 35,000 0.15-0.48 30 40 Mega Bank OBU USD 7,000 0.45-0.70 25 52 Singapore Branch USD 55,000 0.34-0.73 14 40 New York Branch USD 40,000 0.28-0.77 17 43 London Branch USD 78,000 0.30-0.80 115 183 London Branch EUR 19,000 0.27-0.45 12 16 Industrial Bank Los Angeles Branch USD 7,000 0.15-0.26 - -
All transactions with related parties are made under arm’s length terms, which are consistent with normal policies.
- 106 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 3) Due from banks and due to banks
Taishin Bank and subsidiaries
Due from banks For the Six Months Ended June 30, 2014 Interest Interest Revenue for the Revenue for the Interest Rate Three Months Six Months Item Ending Balance (Per Annum %) Ended June 30 Ended June 30
Mega Bank Due from banks $ 32,814 0.00-0.15 $ 21 $ 74
December 31, 2013 Item Ending Balance
Mega Bank Due from banks $ 35,259
For the Six Months Ended June 30, 2013 Interest Interest Revenue for the Revenue for the Interest Rate Three Months Six Months Item Ending Balance (Per Annum %) Ended June 30 Ended June 30
Mega Bank Due from banks $ 41,222 0.00-0.15 $ 27 $ 88
All transactions with related parties are made under arm’s length terms, which are consistent with normal policies.
Chang Hwa Bank and subsidiaries
Due from banks
(In Thousands of Original Currencies)
December 31, June 30, 2014 2013 June 30, 2013 Ending Ending Ending Name Department Currency Balance Balance Balance
Land Bank DBU TWD $ 922 $ 58 $ 22 Taiwan Business Bank DBU TWD 125 70 48 Mega Bank DBU TWD 21,613 21,724 43,230 DBU USD 479 369 244 DBU AUD 273 688 160 DBU CAD 25 140 198 DBU JPY 13,350 16,110 4,976 New York Branch USD 5 1 6 Los Angeles Branch USD 21 21 21
Due to banks (In Thousands of Original Currencies)
December 31, June 30, 2014 2013 June 30, 2013 Ending Ending Ending Name Department Currency Balance Balance Balance
The Export-Import Bank DBU TWD $ 3,542 $ 641 $ 498 Land Bank DBU TWD 277 277 277 Taiwan Business Bank DBU TWD - 124 124 Mega Bank DBU TWD 6 6 6
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(In Thousands of Original Currencies)
December 31, June 30, 2014 2013 June 30, 2013 Ending Ending Ending Name Department Currency Balance Balance Balance
Mega Bank DBU USD $ - $ 572 $ 2,262
All transactions with related parties are made under arm’s length terms, which are consistent with normal policies.
4) Trading securities
For the Six Months Ended June 30, 2014 Purchase Repurchase Agreements Resell Agreements Price Sales Price Interest Interest (Accumulated (Accumulated Ending Rate (Per Ending Rate (Per Amount) Amount) Balance Annum %) Balance Annum %)
Dah Chung Bills $ 2,517,733 $ 1,098,959 $ - - $ 248,792 0.40-0.56 MasterLink Securities 4,513,675 2,437,733 300,000 0.55-0.59 - - TFC 3,980,830 - - - - - Mega Bank 100 ,101 49 ,825 - - - - Nan Ya Plastics - - 49 ,982 0.63 -0.63 - - Taiwan Business Bank - - 299,919 0.58-0.68 - - Shin Kong Life Insurance - - 300,654 0.60-0.62 - - Chunghwa Telecom - - 2,447,109 0.59-0.62 - - Shin Kong Bank - 49,985 - - - - Taiwan High Speed Rail - - 997,000 0.60-0.65 - -
$ 11,112,339 $ 3,636,502 $ 4,394,664 $ 248,792
December 31, 2013 Repurchase Agreements Ending Balance
MasterLink Securities $ 952,218 China Airlines 299,552 Taiwan High Speed Rail 920,000 Shin Kong Insurance 49,956 Taiwan Business Bank 1,397,692
$ 3,619,418
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For the Six Months Ended June 30, 2013 Purchase Repurchase Agreements Resell Agreements Price Sales Price Interest Rate Interest Rate (Accumulated (Accumulated Ending (Per Annum Ending (Per Annum Amount) Amount) Balance %) Balance %)
Dah Chung Bills $ 804,183 $ 1,010,492 $ - - $ - - Shin Kong Life
Insurance - - 99,775 0.70-0.76 - - MasterLink
Securities 3,135,509 2,969,493 180,901 0.13-0.73 - - TFC 3,457,652 - - - - - Taiwan Business
Bank 500,000 149,024 499,702 0.70-0.76 - - Chunghwa Telecom - - 2,393,309 0.69-0.74 - - Land Bank 203,715 207,925 - - - - Industrial Bank 3,128,983 2,684,143 - - - - Taiwan High Speed
Rail - - 963,000 0.70-0.74 - -
$ 11,230,042 $ 7,021,077 $ 4,136,687 $ -
All transactions with related parties are made under arm’s length terms, which are consistent with normal policies.
5) Derivatives
For the Six Months Ended June 30, 2014 Valuation Gain Valuation Gain Nominal (Loss) for the (Loss) for the Derivative Principal Three Months Six Months Related Parties Contracts Period Amount Ended June 30 Ended June 30 Account Balance
Mega Bank Currency swaps and 2007/11/05-2017/05/09 $ 4,090,650 $ 2,748 $ (1,558 ) Financial $ (10,089 ) interest rate swaps liabilities at FVTPL Taiwan Business Bank Currency swaps and 2007/08/15-2015/09/17 3,494,900 3,083 (4,434 ) Financial assets 13,342 interest rate swaps at FVTPL L Dah Chung Bills Interest rate swaps 2010/11/09-2018/11/30 1,800,000 256 98 Financial (1,858 ) liabilities at FVTPL China Airlines Interest rate swaps 2012/05/23-2015/06/22 1,000,000 102 (119 ) Financial assets 49 at FVTPL
Vanguard International Currency swaps 2014/04/30-2014/07/18 269,235 (1,083 ) (262 ) Financial assets 1,040 Semiconductor at FVTPL Taiwan High Speed Foreign exchange 2014/06/26-2014/07/04 17,221 23 23 Financial assets 23 Rail contracts at FVTPL
December 31, 2013 Nominal Derivative Principal Related Parties Contracts Period Amount Account Balance
Taiwan Business Bank Currency swaps and interest rate swaps 2007.08.15-2015.09.17 $ 1,999,500 Financial assets at $ 26,627 FVTPL Dah Chung Bills Interest rate swaps 2010.11.09-2018.11.30 1,800,000 Financial liabilities at (1,956 ) FVTPL Mega Bank Currency swaps and interest rate swaps 2007.11.05-2017.05.09 1,399,000 Financial assets at 15,906 FVTPL China Airlines Interest rate swaps 2012.05.23-2015.06.22 1,000,000 Financial assets at 168 FVTPL Vanguard International Currency swaps 2013.11.04-2014.02.24 703,825 Financial assets at 5,456 Semiconductor FVTPL Scino Pharm Taiwan Foreign exchange contracts 2013.12.05-2014.03.07 82,662 Financial assets at 212 FVTPL
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For the Six Months Ended June 30, 2013 Valuation Gain Valuation Gain Nominal (Loss) for the (Loss) for the Derivative Principal Three Months Six Months Related Parties Contracts Period Amount Ended June 30 Ended June 30 Account Balance
Taiwan Business Bank Currency swaps and 2007.08.15-2015.09.17 $ 2,603,600 $ (13,093 ) $ (12,511 ) Financial assets $ 27,088 interest rate swaps at FVTPL Dah Chung Bills Interest rate swaps 2010.11.09-2018.03.08 1,500,000 (1,819 ) (781 ) Financial (1,771 ) liabilities at FVTPL Mega Bank Currency swaps and 2007.11.05-2017.05.09 1,101,200 (969 ) (5,974 ) Financial assets 11,432 interest rate swaps at FVTPL China Airlines Interest rate swaps 2012.05.23-2015.06.22 1,000,000 (3,026 ) (523 ) Financial (589 ) liabilities at FVTPL Industrial Bank Currency swaps 2013.06.11-2013.12.31 903,600 391 539 Financial assets 3,079 at FVTPL Vanguard International Currency swaps 2013.04.29-2013.09.18 572,280 425 390 Financial assets 7,027 Semiconductor at FVTPL Darfon Cross-currency swaps 2013.06.18-2013.07.11 120,480 61 26 Financial assets 986 at FVTPL Scino Pharm Taiwan Foreign exchange 2013.05.08-2013.08.09 91,565 1,248 918 Financial assets 918 contracts at FVTPL Sercomm Foreign exchange 2013.05.22-2013.08.26 39,308 826 826 Financial assets 826 contracts at FVTPL Shin Kong Life Currency swaps 2013.05.31-2013.12.31 US$ 25,000 1,406 1,406 Financial assets 1,406 Insurance thousand at FVTPL
All transactions with related parties are made under arm’s length terms, which are consistent with normal policies.
6) Other material transactions
For the Three Months Ended June 30 2014 2013 Item Amount Item Amount
Shin Kong Mitsukoshi Fee income $ 68,654 Fee income $ 67,669 Shin Kong Mitsukoshi Operating expense 79,866 Operating expense 86,228 Cyber Soft Digital Service Operating expense 134,853 Operating expense 101,509 Shin Kong Life Insurance Commission 82,552 Commission 1,022 income income
For the Six Months Ended June 30 2014 2013 Item Amount Item Amount
Shin Kong Mitsukoshi Fee income $ 133,545 Fee income $ 130,919 Shin Kong Mitsukoshi Operating expense 149,879 Operating expense 143,206 Cyber Soft Digital Service Operating expense 314,588 Operating expense 279,252 Shin Kong Life Insurance Commission 114,164 Commission 2,339 income income Diamond Biotech Investment Acquisition of - Acquisition of 450,000 financial assets financial assets carried at cost carried at cost
All transactions with related parties are made under arm’s length terms, which are consistent with normal policies.
- 110 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 c. Compensation of key management personnel:
The remuneration of directors and other members of key management personnel for the three months ended June 30, 2014 and 2013, and six months ended June 30, 2014 and 2013 included the following:
For the Three Months Ended For the Six Months Ended June 30 June 30 2014 2013 2014 2013
Short-term benefits $ 32,546 $ 30,364 $ 64,380 $ 60,155 Post-employment benefits 386 484 770 968 Share-based payments 7,368 3,090 12,101 6,360
$ 40,300 $ 33,938 $ 77,251 $ 67,483 d. Related-party transactions of subsidiaries with amounts more than $100,000 thousand.
1) Taishin Bank
Material transactions with related parties were as follows:
a) Loans, deposits and guaranteed loans
Loans
For the Six Months Ended June 30, 2014 The Different Non- Terms with Ending Highest Normal performing Non-related Related Parties Balance Amount Loans Loans Collateral Parties
Other loans
China Airline $ 1,000,000 $ 1,000,000 $ 1,000,000 $ - - None Shin Kong Synthetic 250,000 250,000 250,000 - Securities None Fibers
For the Six Months Ended June 30, 2013 The Different Non- Terms with Ending Highest Normal performing Non-related Related Parties Balance Amount Loans Loans Collateral Parties
Other loans
Nan Ya Plastics $ 2,902,998 $ 2,904,497 $ 2,902,998 $ - Land, None building, chattels, securities China Airline 1,000,000 1,000,000 1,000,000 - - None SCI Pharmtech 130,000 130,000 130,000 - - None
Deposits For the Six Months Ended June 30, 2014 Interest Rate Interest Ending Balance (Per Annum %) Expense
Taishin Financial Holding $ 11,462,407 0.17-1.36 $ (1,450 ) An Hsin Real-Estate 4,841,689 0.17-0.94 (18,580 ) Taiwan High Speed Rail 1,957,926 0.01-1.50 (8,323 ) Central Re 1,098,946 0.17-0.85 (4,542 ) (Continued)
- 111 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 For the Six Months Ended June 30, 2014 Interest Rate Interest Ending Balance (Per Annum %) Expense
Shin Kong Mitsukoshi $ 1,002,73 7 0.00-0.17 $ (908 ) Taishin Insurance Agency 926,620 0.00-0.17 (755 ) Vanguard International Semiconductor 846,334 0.17-1.22 (4,961) Diamond Biotech Investment 728,276 0.04-1.22 (4, 324 ) Shin Kong Insurance 680,839 0.00-1.50 (2,497 ) Taishin Holding Insurance Brokers 641,728 0.17 (944 ) Dah Chung Bills 436,722 0.00-0.82 (1,634 ) Taishin Securities Investment Advisory 311,099 0.05-0.36 (1,325) GFRT 301,176 0.00-0.75 (997 ) China Airline 300,539 0.17 (494 ) Scino Pharm Taiwan 281,484 0.00-0.94 (1,615 ) FISC 264,750 0.17-1.36 (280 ) Wan Hai Lines 209,405 1.00-1.50 (2,371 ) ACGF 200,000 0.27-1.38 (1,377 ) Shin Kong Synthetic Fibers 190,965 0.00-0.35 (28 ) Taishin Securities B 187,169 0.17-1.36 (746 ) Shin Kong Life Insurance 144,856 0.05-0.60 (73 ) Ri Chang Electronics 142,147 0.00-1.86 (991 ) Kai Fa International Investment 101,753 0.04-0.82 (1,417 ) Trade-Van 100,059 0.04-0.75 (72 ) (Concluded)
For the Six Months Ended June 30, 2013 Interest Rate Interest Ending Balance (Per Annum %) Expense
TSMC $ 10,172,421 0.17-0.84 $ (32,357) Taishin Financial Holding 3,690,259 0.12-1.36 (547) An Hsin Real-Estate 2,677,627 0.17-1.36 (11,904) Taiwan High Speed Rail 1,961,505 0.01-1.05 (8,749) Shin Kong Insurance 1,406,330 0.00-1.36 (3,726) Diamond Biotech Investment 1,402,420 0.17-1.22 (8,626) GreTai Securities Market 1,392,431 0.12-1.38 (7,526) Scino Pharm Taiwan 1,125,036 0.00-0.94 (4,650) Central Re 1,093,465 0.05-1.00 (5,143) Taishin Insurance Agency 968,722 0.00-0.17 (823) Vanguard International Semiconductor 910,793 0.17-1.22 (5,520) Pacific Securities 635,936 0.00-1.35 (35) Taishin Holding Insurance Brokers 556,731 0.17 (820) Dah Chung Bills 415,934 0.00-0.90 (1,790) Kai Fa International Investment 406,232 0.12-0.96 (1,808) Wan Hai Lines 335,220 0.01-1.00 (808) Taishin Securities Investment Advisory 300,696 0.05-1.36 (1,362) Taishin Securities B 290,739 0.13-1.36 (1,244) Shin Kong Mitsukoshi 255,537 0.00-0.17 (489) SEF 222,010 0.12-1.38 (1,457) (Continued)
- 112 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59
For the Six Months Ended June 30, 2013 Interest Rate Interest Ending Balance (Per Annum %) Expense
Ri Chang Electronics $ 176,076 0.17-1.00 $ (266) Han-Shin Venture Capital 175,014 0.00-0.95 (37) Taishin D.A. Finance 170,184 0.17-0.80 (565) Shin Kong Synthetic Fibers 168,818 0.00-0.35 (30) Taishin AMC 127,829 0.00-0.88 (652) (Concluded)
All transactions with related parties are made under arm’s length terms, which are consistent with normal policies. b) Call loans to banks and call loans from banks
June 30, 2013 Interest Ending Interest Rate Revenue Item Balance (Per Annum %) (Expense)
Taiwan Business Bank Call loans to $ 240,960 0.27-2.50 $ 822 banks
All transactions with related parties are made under arm’s length terms, which are consistent with normal policies. c) Trading securities
For the Six Months Ended June 30, 2014 Repurchase Agreements Resell Agreements Purchase Price Sales Price Interest Interest (Accumulated (Accumulated Ending Rate (Per Ending Rate (Per Amount) Amount) Balance Annum %) Balance Annum %)
Chang Hwa Bank $ 353,579 $ 500,244 $ - - $ - - Dah Chung Bills 2,517,733 1,098,959 - - 248,792 0.40-0.56 Taishin Financial Holding - - 7,121,631 0.54-0.58 - - MasterLink Securities 4,513,675 2,437,733 300,000 0.55-0.59 - - TFC 3,980,830 - - - - - Mega Bank 100,101 49,825 - - - - Taiwan Business Bank - - 299,91 9 0.58-0.68 - -
Shin Kong Life - - 300,654 - Insurance 0.60-0.62 - Chunghwa Telecom - - 2,447,109 0.59-0.62 - - Taiwan High Speed Rail - - 997,000 0.60-0.65 - -
For the Six Months Ended June 30, 2013 Repurchase Agreements Resell Agreements Purchase Price Sales Price Interest Interest (Accumulated (Accumulated Ending Rate (Per Ending Rate (Per Amount) Amount) Balance Annum %) Balance Annum %)
Chang Hwa Bank $ 497,747 $ 761,460 $ - - $ - - Dah Chung Bills 804,183 1,010,492 - - - - MasterLink Securities 3,135,509 2,969,493 180,901 0.13-0.73 - - TFC 3,457,652 - - - - - Taiwan Business Bank 500,000 149,024 499,702 0.70-0.76 - - Chunghwa Telecom - - 2,393,309 0.69-0.74 - - Land Bank 203,715 207,925 - - - - Industrial Bank 3,128,983 2,684,143 - - - - Taiwan High Speed Rail - - 963,000 0.70-0.74 - -
- 113 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 All transactions with related parties are made under arm’s length terms, which are consistent with normal policies. d) Derivatives
For the Six Months Ended June 30, 2014 Nominal Derivative Principal Valuation Related Parties Contracts Period Amount Gain (Loss) Account Balance
Mega Bank Currency swaps and 2007.11.05- $ 4,090,650 $ (1,558 ) Financial liabilities $ (10,089 ) interest rate swaps 2017.05.09 at FVTPL Taiwan Business Bank Currency swaps and 2007.08.15- 3,494,900 (4,434 ) Financial assets at 13,342 interest rate swaps 2015.09.17 FVTPL Dah Chung Bills Interest rate swaps 2010.11.09- 1,800,000 98 Financial liabilities (1,858 ) 2018.11.30 at FVTPL China Airlines Interest rate swaps 2012.05.23- 1,000,000 (119 ) Financial assets at 49 2015.06.22 FVTPL Vanguard International Currency swaps 2014.04.30- 269,235 (262 ) Financial assets at 1,040 Semiconductor 2014.07.18 FVTPL
For the Six Months Ended June 30, 2013 Nominal Derivative Principal Valuation Related Parties Contracts Period Amount Gain (Loss) Account Balance
Taiwan Business Bank Currency swaps and 2007.08.15- $ 2,603,600 $ (12,511 ) Financial assets at $ 27,088 interest rate swaps 2015.09.17 FVTPL Dah Chung Bills Interest rate swaps 2010.11.09- 1,500,000 (781 ) Financial liabilities (1,771 ) 2018.03.08 at FVTPL Mega Bank Currency swaps and 2007.11.05- 1,101,200 (5,974 ) Financial assets at 11,432 interest rate swaps 2017.05.09 FVTPL China Airlines Interest rate swaps 2012.05.23- 1,000,000 (523 ) Financial liabilities (589 ) 2015.06.22 at FVTPL Industrial Bank Currency swaps 2013.06.11- 903,600 539 Financial assets at 3,079 2013.12.31 FVTPL Vanguard International Currency swaps 2013.04.29- 572,280 390 Financial assets at 7,027 Semiconductor 2013.09.18 FVTPL Darfon Cross-currency 2013.06.18- 120,480 26 Financial assets at 986 swaps 2013.07.11 FVTPL
All transactions with related parties are made under arm’s length terms, which are consistent with normal policies. e) Other material transactions
For the Six Months Ended June 30 2014 2013 Item Amount Item Amount
Taishin Holding Insurance Fee income $ 1,615,281 Fee income $ 1,149,670 Brokers Taishin Holding Insurance Receivables, net 357,017 Receivables, net 239,733 Brokers Shin Kong Mitsukoshi Fee income 133,545 Fee income 130,919 Shin Kong Mitsukoshi Operating expenses 149,492 Operating expenses 142,457 CyberSoft Digital Service Operating expenses 309,935 Operating expenses 275,082
All transactions with related parties are made under arm’s length terms, which are consistent with normal policies.
- 114 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 f) Compensation of key management personnel:
The remuneration of directors and other members of key management personnel for the six months ended June 30, 2014 and 2013 included the following:
For the Six Months Ended June 30 201 4 201 3
Short -term benefits $ 72,379 $ 70,194 Post -employment benefits 1,918 2,587 Share -based payments 19,581 11,074
$ 103,878 $ 83,855
2) Chang Hwa Bank
Material transactions with related parties were as follows:
a) Loan
Loans to related parties of Chang Hwa Bank were as follows:
June 30, 2014 The Different Non- Terms with Highest performing Non-related Related Parties Ending Balance Amount Normal Loans Loans Collateral Parties
Other loans
Taiwan High Speed $ 33,966,348 $ 34,087,459 $ 33,966,348 $ - Equipment None Rail China Airlines 2,480,000 2,627,500 2,480,000 - Credit, aircraft None Nan Ya Plastics 1,085,585 1,085,585 1,085,585 - Credit, plant None KRTC 590,000 595,000 590,000 - Credit None Tang Eng 366,024 366,255 366,024 - Credit None Aero Win 240,721 254,423 240,721 - Credit, plant, real estate None Technology Cyber Soft Digital 184,000 194,000 184,000 - Real estate None Service AimCore 150,000 150,000 150,000 - Plant None Technology
June 30, 2013 The Different Non- Terms with Highest performing Non-related Related Parties Ending Balance Amount Normal Loans Loans Collateral Parties
Other loans
Taiwan High Speed $ 33,741,400 $ 33,860,422 $ 33,741,400 $ - Equipment None Rail China Airlines 2,770,000 3,232,500 2,770,000 - Credit, aircraft None KRTC 610,000 610,000 610,000 - Credit None Nan Ya Plastics 378,799 378,799 378,799 - Credit, equipment, real None estate Tang Eng 300,000 300,000 300,000 - Credit None Wan Hai Lines 193,333 241,667 193,333 - Shipping None Aero Win 136,826 145,551 136,826 - Credit, equipment, real None Technology estate Formosa Sumco 100,849 115,256 100,849 - Equipment, real estate None Technology
All transactions with related parties are made under arm’s length terms, which are consistent with normal policies.
- 115 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 b) Guarantees
For the Six Months Ended June 30, 2014 Reserve for Interest Rate Ending Highest Guarantee (Per Annum Related Party Balance Amount Liabilities %) Collateral
Taiwan High Speed Rail $ 186,500 $ 448,541 - 0.775-0.80 Equipment
For the Six Months Ended June 30, 2013 Reserve for Interest Rate Ending Highest Guarantee (Per Annum Related Party Balance Amount Liabilities %) Collateral
Taiwan High Speed Rail $ 448,541 $ 779,854 - 0.775-0.80 Equipment
All transactions with related parties are made under arm’s length terms, which are consistent with normal policies. c) Deposits
For the Six Months Ended June 30, 2014 Interest Rate Interest Ending Balance (Per Annum %) Expense
CHB Life Insurance Agency $ 887,193 0.00 -0.41 $ (1,076 ) Wan Hai Lines 876,473 0.05 -3.2 (3,902 ) TSMC 473,153 0.00 -0.17 (23 ) AimCore Technology 186,013 0.05 -0.35 (59 ) Nan Ya Plastics 182,265 0.00 -3.05 (773 ) CHB Insurance Brokerage 104,249 0. 17 -0.41 (125 ) Individual A 101,082 0.05 -1.39 (417 )
For the Six Months Ended June 30, 2013 Interest Rate Interest Ending Balance (Per Annum %) Expense
TSMC $ 2,447,841 0.00-0.94 $ (4,247) CHB Life Insurance Agency 753,119 0.00-0.41 (1,076) China Airlines 150,088 0.00-0.45 (47) Wan Hai Lines 129,642 0.05-0.63 (91) Individual A 128,971 0.32-1.37 (351)
Chang Hwa Bank provides interest rate at 13% per annum to the Board of Directors, supervisors, and managers of the above affiliates for their savings deposits with a balance below $480 thousand. For any excess amount, the interest is calculated at the rate given to regular savings deposits. The rest is the same as regular depositors. d) Derivatives
For the Six Months Ended June 30, 2013 Nominal Derivative Principal Valuation Related Party Contracts Period Amount Gain (Loss) Account Balance
Shin Kong Life FX swaps 2013.05.31-2013.12.31 US$ 25,000 $ 1,406 Financial assets at $ 1,406 Insurance thousand FVTPL
- 116 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 e) Call loans to banks and call loans from banks
Call loans to banks
(In Thousands of Original Currencies)
For the Six Months Ended June 30, 2014 Interest Rate Ending (Per Annum Interest Name Department Currency Balance %) Revenue
Land Bank Singapore Branch USD $ 30,000 0.30-1.35 $ 64 Hong Kong Branch USD 20,000 0.29-1.55 67 Taiwan Business Bank Singapore Branch USD 18,000 0.85-1.58 102 Mega Bank OBU USD 28,000 0.16-0.48 14 Singapore Branch USD 80,000 0.65 20 London Branch USD 70,000 0.24-0.98 89 Hong Kong Branch USD 45,000 0.15-1.00 80 Hong Kong Branch CNY 90,000 0.90-3.30 558 The Export-Inport Bank London Branch USD 10,000 0.84-1.10 39
(In Thousands of Original Currencies)
For the Six Months Ended June 30, 2013 Interest Rate Ending (Per Annum Interest Name Department Currency Balance %) Revenue
Dah Chung Bills DBU TWD $ 500,000 0.40-0.46 $ 591 Land Bank DBU TWD 2,010,000 0.388-0.89 1,347 Singapore Branch USD 10,000 0.30-0.80 4 New York Branch USD 10,000 0.28-0.70 19 Los Angeles Branch USD 15,000 0.77-0.98 21 London Branch USD 20,000 0.36-0.74 28 Hong Kong Branch USD 20,000 0.20-0.66 36 Taiwan Business Bank Singapore Branch USD 15,000 0.80 11 London Branch USD 15,000 0.50-0.68 28 TFC DBU TWD 500,000 0.41-0.47 912 Mega Bank DBU TWD 2,000,000 0.388-0.40 1,016 OBU USD 31,000 0.21-0.43 26 London Branch USD 5,000 0.28-0.46 34 Hong Kong Branch USD 60,000 0.15-0.60 52 Industrial Bank Singapore Branch USD 15,000 0.74 4 London Branch USD 10,000 0.46-0.61 18 Hong Kong Branch USD 5,000 0.42-0.82 13
Call loans from banks
(In Thousands of Original Currencies)
For the Six Months Ended June 30, 2014 Interest Rate Ending (Per Annum Interest Name Department Currency Balance %) Expense
Land Bank Hong Kong Branch USD $ 20,000 1.60 $ 72 Taiwan Business Bank London Branch EUR 28,000 0.65-1.45 129 Mega Bank OBU USD 40,000 1.20-1.45 308 Singapore Branch USD 51,000 0.40-1.48 415 Kunshan Branch USD 71,000 0.30-3.45 594 New York Branch USD 70,000 0.76-1.43 140 Los Angeles Branch USD 10,000 0.26-0.93 6 London Branch USD 35,000 0.80-1.52 149 Hong Kong Branch USD 64,000 0.85-1.74 475
- 117 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 (In Thousands of Original Currencies)
For the Six Months Ended June 30, 2013 Interest Rate Ending (Per Annum Interest Name Department Currency Balance %) Expense
Land Bank DBU TWD $ 5,005,000 0.388-0.88 $ 1,597 Singapore Branch USD 10,000 0.78 22 New York Branch USD 10,000 0.22-0.55 14 Los Angeles Branch USD 15,000 0.25-0.70 22 Taiwan Business Bank Singapore Branch USD 15,000 0.43-0.52 15 London Branch EUR 35,000 0.15-0.48 40 Mega Bank OBU USD 7,000 0.45-0.70 52 Singapore Branch USD 55,000 0.34-0.73 40 New York Branch USD 40,000 0.28-0.77 43 London Branch USD 78,000 0.30-0.80 183 London Branch EUR 19,000 0.27-0.45 16 Industrial Bank Los Angeles Branch USD 7,000 0.15-0.26 -
f) Others
Chang Hwa Bank provided CHB Life Insurance Agency with personnel resources and distribution channels, and recognized service revenue of $606,700 thousand and $502,000 thousand for the six months ended June 30, 2014 and 2013.
3) Taishin Securities B
Liability contracts with related parties:
June 30 2014 2013 % to % to Item Name Amount Total Amount Total
Operating guarantee deposits Taishin Bank $ 175,000 92 $ 175,000 92 Restricted assets Taishin Bank - - 100,000 100
4) Taishin AMC
Names and relationships of related parties were as follows:
a) Liability contracts with related parties
June 30 2014 2013 % to % to Item Related Party Amount Total Amount Total
Bank deposits Taishin Bank $ 32,010 5 $ 127,829 31
- 118 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Other material transactions
June 30 2014 2013 % to % to Item Related Party Amount Total Amount Total
Acquisition of Diamond Biotech $ - - $ 100,000 57 financial assets Investment carried at cost
Credit receivable
In July 2006, Taishin AMC bought non-performing loans that resulted from cash card, credit card and small consumer loans from Taishin Bank for $546,697 thousand with book value of $9,494,153 thousand. According to the contract, December 31, 2006 was determined as the basic measurement date of this transaction, and the receivables of $546,697 thousand will be paid off in two installments by September 15, 2006. In September 2006, Taishin AMC bought non-performing loans that resulted from cash card, credit card and small consumer loans from Taishin Bank for $158,000 thousand with book value of $5,490,584 thousand. According to the contract, August 31, 2006 was determined as the basic measurement date of this transaction, and the receivables of $158,000 thousand will be paid off in two installments by October 31, 2006. Also defined in the contract, 5 years from measurement date, Taishin AMC authorized Taishin Bank the rights to collect payments from debtors and will pay the 30% of loans collected as service fee and 40% of remaining 70% of loan collected paid as commission. The service contracts mentioned were terminated on June 30, 2011 and August 31, 2011, respectively. From July 1, 2011 and September 1, 2011, Taishin AMC authorized Taishin Bank the rights to collect payments from debtors and will pay 32.5% of loans collected as service fee.
Loans with transferred ownership
For the Six Months Ended June 30, 2014 Beginning Ending Balance Purchased Collected Balance
Loans with transferred ownership $ 16,249,111 $ $ (361,715) $ 15,887,396
For the Six Months Ended June 30, 2013 Beginning Ending Balance Purchased Collected Balance
Loans with transferred ownership $ 16,643,138 $ - $ (126,356) $ 16,516,782
5) Taishin Venture Capital
Liability contracts with related parties:
June 30 2014 2013 % to % to Item Related Party Amount Total Amount Total
Acquisition of financial Diamond Biotech $ - - $ 350,000 46 assets carried at cost Investment
- 119 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59
6) Taishin Securities Investment Trust
There were no related party transactions with amounts more than $100,000 thousand for the six months ended June 30, 2014.
7) Taishin Securities Investment Advisory
Liability contracts with related parties:
June 30 2014 2013 % to % to Item Related Party Amount Total Amount Total
Other financial assets Taishin Bank $ 252,790 100 $ 243,590 100
8) Taishin Holdings Insurance Brokers
Liability contracts with related parties
June 30 2014 2013 % to % to Item Related Party Amount Total Amount Total
Bank deposits Taishin Bank $ 641,728 100 $ 556,731 100 Accounts payable Taishin Bank 357,017 100 239,733 100 Service fee Taishin Bank 1,615,281 100 1,149,670 100 Commission income Shin Kong Life 114,164 5 2,339 - Insurance
48. PLEDGED ASSETS
December 31, Pledged Assets Description June 30, 2014 2013 June 30, 2013
Refundable deposits Cash and certificates of $ 16,661,885 $ 3,008,659 $ 5,315,894 time deposits Operating deposits and Cash and cash paid to 168,125 162,614 162,574 settlement funds stock exchange Financial assets at Convertible corporate 324,610 238,370 195,801 FVTPL bonds Available-for-sale Certificates of time 15,531,028 8,62 0,427 8,537,365 financial assets deposits and bonds Held-to-maturity Certificates of time 41,149,208 37,238,183 37,239,764 financial assets deposits and bonds Deposit with original Time deposit 2,402,000 2,456,500 2,439,500 maturity more than 3 months
- 120 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 49. CONTINGENT LIABILITIES AND COMMITMENTS
In addition to those mentioned in Note 9 and Note 46, Taishin Financial Holding and subsidiaries have the following contingent liabilities and commitments as of June 30, 2014 and 2013: June 30 2014 2013
Repayment note and time deposit held for custody $ 1,817,387 $ 6,980,082 Liabilities on joint loans 1,119,894 934,310 Trust liabilities 476,007,935 470,645,004 Unpaid equipment purchase contracts 1,004,357 1,176,711
The Department of National Defense of Iran as the recipient requested Chang Hwa Bank to release US$15,000 thousand. On August 1, 2002, the Supreme Court decided in favor of Chang Hwa Bank. The Department of National Defense of Iran filed another legal suit against Chang Hwa Bank in the Taipei District Court. On September 10, 2004 and July 13, 2010, the Taipei District Court and the Taiwan High Court decided in favor of Chang Hwa Bank. However, the Department of National Defense of Iran filed another legal suit against Chang Hwa Bank in the Taiwan High Court on August 10, 2010. On November 4, 2010, the Supreme Court ordered the Taiwan High Court to review the ruling. On December 27, 2011, the Taiwan High Court decided in favor of Chang Hwa Bank. The Department of National Defense of Iran filed another legal suit against Chang Hwa Bank in the Supreme Court on January 19, 2012. On July 31, 2012, the Supreme Court had judged “the original verdict should be abandoned” and the ruling was sent back to the Taiwan High Court for a second review. On September 24, 2013 the Taiwan High Court decided in favor of Chang Hwa Bank. The department of National Defense of Iran filed another legal suit against Chang Hwa Bank in the Taiwan Supreme Court on October 16, 2013. The mentioned case is currently on trial in Taiwan Supreme Court.
Damagers amounted to $46,401 thousand between Chang Hwa Bank and TDK Corporation currently in trial in Taiwan Taipei District Court. The verdict is still pending.
Taishin Financial Holding has appointed Lee and Li Attorney-at-Law to help Taishin Bank’s customers to assert their legal rights to Lehman Brother about the loss on investment in Lehman Brother’s securities. The related fees for the legal services will be paid by Taishin Bank. However, this case is a worldwide affair. Thus, Taishin Bank cannot reasonably estimate related litigation fee.
50. FINANCIAL INFORMATION BY BUSINESS
The financial information by business for the six months ended June 30, 2014 and 2013 was as follows:
Bank Business For the Six Months Ended June 30, 2014 Securities Other Bank Business Total Item Business Business Net interest income (expense) $ 16,983,108 $ 18,364 $ (49,459) $ 16,952,013 Net income other than net interest income 10,586,968 413,725 2,886,632 13,887,325 Net revenue and gains 27,570,076 432,089 2,837,173 30,839,338 Reversed allowance for bad debts expenses and guarantee liability provisions 1,234,318 - (2,977) 1,231,341 Total operating expenses (15,469,752) (221,212) (698,546) (16,389,510) Income (loss) before income tax of 13,334,642 continued operations 210,877 2,135,650 15,681,169 Income tax expense (1,943,430) (33,576) (92,507) (2,069,513) Income (loss) after income tax of continued operations 11,391,212 177,301 2,043,143 13,611,656
- 121 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59
Bank Business For the Six Months Ended June 30, 2013 Securities Other Bank Business Total Item Business Business Net interest income (expense) $ 15,439,237 $ 14,403 $ (168,489) $ 15,285,151 Net income other than net interest income 11,470,238 154,225 1,963,644 13,588,107 Net revenue and gains 26,909,475 168,628 1,795,155 28,873,258 Reversed allowance for bad debts expenses and guarantee liability provisions 826,048 (180) 22,405 848,273 Total operating expenses (14,161,918) (184,798) (648,223) (14,994,939) Income (loss) before income tax of continued operations 13,573,605 (16,350) 1,169,337 14,726,592 Income tax expense (2,194,021) (219) (640,190) (2,834,430) Income (loss) after income tax of continued operations 11,379,584 (16,569) 529,147 11,892,162
- 122 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 51. FINANCIAL STATEMENTS OF TAISHIN FINANCIAL HOLDING
TAISHIN FINANCIAL HOLDING CO., LTD. BALANCE SHEETS (In Thousands of New Taiwan Dollars)
June 30 June 30 ASSETS 2014 2013 LIABILITIES AND EQUITY 2014 2013
Cash and cash equivalents $ 11,462,407 $ 3,690,259 LIABILITIES Payables $ 5,147,713 $ 3,539,474 Securities purchased under resell agreements 7,121,631 6,643,357 Current tax liabilities 3,373,794 2,975,429 Bonds payable 22,000,000 22,000,000 Receivables 2,214,712 988,375 Reserve for liabilities - 15,352
Current tax assets 463,358 803,305 Total liabilities 30,521,507 28,530,255
Investments accounted for using equity method 130,905,718 120,777,164 EQUITY Capital stock OTHER FINANCIAL ASSETS Common stock 80,356,314 68,915,233 Financial assets carried at cost 2,200 2,200 Preferred stock 7,251,368 7,251,368 Stock dividends to be distributed 7,987,008 6,139,767 Property and equipment, net 7,990 7,563 Advance receipts for capital stock 33,770 - Capital surplus 10,615,976 9,443,781 Deferred tax assets 121,636 121,927 Retained earnings 5,315,307 3,939,770 Legal reserve 465,368 465,368 Other assets 210,197 206,582 Special reserve 9,035,319 8,236,802 Unappropriated earnings Other equity (2,303) 53,917 Exchange differences on translation of foreign financial statements 930,215 264,471 Unrealized gains (losses) on available -for -sale financial assets 121,988,342 104,710,477 Total equity
TOTAL $ 152,509,849 $ 133,240,732 TOTAL $ 152,509,849 $ 133,240,732
- 123 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 TAISHIN FINANCIAL HOLDING CO., LTD.
STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)
For the Six Months Ended June 30 2014 2013
INCOME Share of profit of subsidiaries associates and joint ventures accounted for using equity method $ 9,377,126 $ 9,353,132 Interest income 27,808 12,870
Total income 9,404,934 9,366,002
EXPENSES AND LOSSES Share of loss of subsidiaries associated and joint ventures accounted for using equity method (33,565) (86,840) Operating expenses (206,544) (248,499) Interest expenses (233,554) (233,695)
Total expenses and losses (473,663) (569,034)
INCOME BEFORE INCOME TAX 8,931,271 8,796,968
INCOME TAX (EXPENSE) BENEFIT 104,048 (533,472)
NET INCOME 9,035,319 8,263,496
OTHER COMPREHENSIVE INCOME (NET OF TAX) (16,771) (2,082,219)
TOTAL COMPREHENSIVE INCOME $ 9,018,548 $ 6,181,277
EARNINGS PER SHARE Basic $1.11 $1.04 Diluted $1.06 $1.00
- 124 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 TAISHIN FINANCIAL HOLDING CO., LTD.
STATEMENTS OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (In Thousands of New Taiwan Dollars)
Capital Stock Capital Surplus Other Equity Stock Dividends Advance Additional Retained Earnings Foreign Available- to Be Receipts for Paid-in Capital Treasury Stock Stock-based Unappropriated Financial for-sale Common Stock Preferred Stock Distributed Capital Stock in Excess of Par Transactions Compensation Legal Reserve Special Reserve Earnings Statements Financial Assets Total
BALANCE, JANUARY 1, 2013 $ 68,914,473 $ 7,251,368 $ - $ - $ 7,005,072 $ 2,075,475 $ 329,210 $ 2,942,721 $ 244,474 $ 10,164,169 $ (58,334 ) $ 2,458,941 $ 101,327,569
Special reserve under Rule No. 1010012865 is issued by FSC ------220,376 (220,376 ) - - -
Special reserve under Rule No. 1010045494 is issued by FSC ------518 - - - 518
Appropriation of 2013 Legal reserve ------997,049 - (997,049 ) - - - Cash dividends on common stock ------(1,534,942 ) - - (1,534,942 ) Cash dividends on preferred stock ------(1,298,729 ) - - (1,298,729 ) Stock dividend - - 6,139,767 ------(6,139,767 ) - - -
Net income for the six months ended June 30, 2013 ------8,263,496 - - 8,263,496
Other comprehensive income for the six months ended June 30, 2013, net of tax ------112,251 (2,194,470 ) (2,082,219 )
Total comprehensive income for the six months ended June 30, 2013 ------8,263,496 112,251 (2,194,470 ) 6,181,277
Share-based payments 760 - - - 536 - 33,488 - - - - - 34,784
BALANCE, JUNE 30, 2013 $ 68,915,233 $ 7,251,368 $ 6,139,767 $ - $ 7,005,608 $ 2,075,475 $ 362,698 $ 3,939,770 $ 465,368 $ 8,236,802 $ 53,917 $ 264,471 $ 104,710,477
BALANCE, JANUARY 1, 2014 $ 75,116,532 $ 7,251,368 $ - $ 180,170 $ 7,077,571 $ 2,075,475 $ 325,281 $ 3,939,770 $ 465,368 $ 13,755,369 $ 68,688 $ 875,995 $ 111,131,587
Appropriation of 2014 Legal reserve ------1,375,537 - (1,375,537 ) - - - Cash dividends on common stock ------(3,423,308 ) - - (3,423,308 ) Cash dividends on preferred stock ------(969,516 ) - - (969,516 ) Stock dividend - - - 7,987,008 - - - - - (7,987,008 ) - - -
Net income for the six months ended June 30, 2014 ------9,035,319 - - 9,035,319
Other comprehensive income for the six months ended June 30, 2014, net of tax ------(70,991 ) 54,220 (16,771 )
Total comprehensive income for the six months ended June 30, 2014 ------9,035,319 (70,991 ) 54,220 9,018,548
Issue of common shares for cash 5,000,000 - - - 988,154 ------5,988,154
Share-based payments 239,782 - - (146,400 ) 146,738 - 2,757 - - - - - 242,877
BALANCE, JUNE 30, 2014 $ 80,356,314 $ 7,251,368 $ - $ 8,020,778 $ 8,212,463 $ 2,075,475 $ 328,038 $ 5,315,307 $ 465,368 $ 9,035,319 $ (2,303 ) $ 930,215 $ 121,988,342
- 125 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 TAISHIN FINANCIAL HOLDING CO., LTD.
STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars)
For the Six Months Ended June 30 2014 2013
CASH FLOWS FROM OPERATING ACTIVITIES Net income before income tax $ 8,931,271 $ 8,796,968 Depreciation expenses 1,267 917 Interest expense 233,554 233,695 Interest revenue (27,808) (12,870) Share-based payments 4,703 4,739 Share of profit of subsidiaries associates and joint accounted for using equity method (9,343,561) (9,266,292) Net changes in operating assets and liabilities Net changes in operating assets Decrease in receivables 992,869 344,049 Increase in other assets (666) (626) Net changes in operating liabilities (Decrease) increase in payables (49,038) 24,756 Increase in reserve for employee benefits - 504 Decrease in other liabilities (278) - Interest received 26,787 13,146 Dividend received 8,294,893 6,857,957 Interest paid (195,079) (195,231) Income taxes refund 339,947 271,789 Income taxes paid (827,923) (135,924) Net cash flows generated from operating activities 8,380,938 6,937,577
CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of investments accounted for using equity method (3,520,000) - Acquisition of property and equipment - (2,684) Net cash used in investing activities (3,520,000) (2,684)
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of common shares 5,988,154 - Exercise of employee share options 116,033 889 Net cash flows generated from financing activities 6,104,187 889
NET INCREASE IN CASH AND CASH EQUIVALENTS 10,965,125 6,935,782
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,618,913 3,397,834
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,584,038 $ 10,333,616
CASH AND CASH EQUIVALENTS IN BALANCE SHEET $ 11,462,407 $ 3,690,259
SECURITIES PURCHASED UNDER RESELL AGREEMENTS QUALIFYING FOR CASH AND CASH EQUIVALENTS UNDER THE DEFINITION OF IAS 7 PERMITTED BY THE FINANCIAL SUPERVISORY COMMISSION 7,121,631 6,643,357
$ 18,584,038 $ 10,333,616
- 126 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 52. PROFITABILITY OF TAISHIN FINANCIAL HOLDING (STAND-ALONE AND CONSOLIDATED)
Stand-alone
For the Six Months Ended June 30 Item 2014 2013 Pretax 6.17% 6.79% Return on total assets After tax 6.24% 6.38% Pretax 8.32% 9.47% Return on net equity - common stock After tax 8.43% 8.86% Profit margin 96.07% 88.23%
Income before (after) tax Note a: Return on total assets = Average assets
Income before (after) tax Note b: Return on net equity = Average net equity - common stock - common stock
Income after tax Note c: Profit margin = Total income
Note d: Profitability presented above is cumulative from January 1 to June 30 of 2014 and 2013.
Consolidated
For the Six Months Ended June 30 Item 2014 2013 Pretax 0.53% 0.54% Return on total assets After tax 0.46% 0.43% Pretax 9.59% 11.26% Return on net equity - common stock After tax 8.43% 8.86% Profit margin 44.14% 41.19%
Income before (after) tax Note a: Return on total assets = Average assets
Income before (after) tax (of the parent company’s Note b: Return on net equity = shareholders) - common stock Average net equity - common stock
Income after tax Note c: Profit margin = Net revenue and gains
Note d: Profitability presented above is cumulative from January 1 to June 30 of 2014 and 2013.
- 127 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 53. CONDENSED BALANCE SHEETS AND STATEMENTS OF COMPREHENSIVE INCOME AND IMPORTANT FINANCIAL NOTES OF SUBSIDIARIES
Taishin Bank
a. Balance sheet
June 30 2014 2013
Assets Cash and cash equivalents $ 10,478,495 $ 14,408,163 Due from the Central Bank and call loans to banks 30,673,513 35,063,610 Financial assets at FVTPL 73,556,340 38,129,222 Securities purchased under resell agreements 348,309 - Receivables, net 88,997,069 74,840,067 Current tax assets 174,730 162,142 Loans, net 758,717,545 669,093,815 Available-for-sale financial assets, net 236,600,174 187,833,120 Held-to-maturity financial assets, net 1,047,180 1,973,603 Investments accounted for using equity method, net 1,427,906 1,651,332 Other financial assets, net 11,725,766 2,130,369 Property and equipment, net 17,486,800 17,435,064 Intangible assets, net 1,546,104 1,624,702 Deferred tax assets 4,440,955 4,503,897 Other assets, net 17,507,440 5,743,646
$ 1,254,728,326 $ 1,054,592,752
Liabilities Due to the Central Bank and banks $ 64,915,961 $ 33,594,319 Financial liabilities at FVTPL 24,384,809 13,906,241 Securities sold under repurchase agreements 66,719,238 27,918,333 Payables 21,570,382 17,216,266 Current tax liabilities 1,807,551 1,292,105 Deposits and remittances 911,691,255 842,704,761 Bonds payable 33,000,000 25,000,000 Reserve for liabilities 686,803 711,925 Other financial liabilities 51,082,952 22,053,214 Deferred tax liabilities 53,552 249,439 Other liabilities 1,871,913 1,491,376 1,177,784,416 986,137,979 Equity Capital stock 52,025,627 49,157,526 Capital surplus 5,400,649 3,339,246 Retained earnings 18,530,857 15,607,471 Other equities 986,777 350,530 76,943,910 68,454,773
$ 1,254,728,326 $ 1,054,592,752
- 128 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 b. Statements of comprehensive income
For the Six Months Ended June 30 2014 2013
Interest income $ 12,456,583 $ 11,177,355 Interest expense (4,794,213) (4,159,542) Net interest income 7,662,370 7,017,813 Net income other than net interest income 7,609,317 8,777,594 Net revenue and gains 15,271,687 15,795,407 Reversed allowance for bad debts expenses and guarantee liability provisions 455,217 403,957 Operating expenses (7,865,270) (7,117,735) Income before income tax 7,861,634 9,081,629 Income tax expense (792,294) (1,247,451) Net income 7,069,340 7,834,178 Other comprehensive income (5,651) (2,073,190) Total comprehensive income $ 7,063,689 $ 5,760,988
Basic earnings per share (dollar) $1.40 $1.61 Diluted earnings per share (dollar) $1.40 $1.55 c. Key financial and business highlights
1) Profitability
Item June 30, 2014 June 30, 2013 Pretax 0.66% 0.85% Return on total assets After tax 0.59% 0.73% Pretax 10.46% 13.24% Return on net equity After tax 9.40% 11.42% Profit margin 46.29% 49.60%
Income before (after) tax Note a: Return on total assets = Average assets
Income before (after) tax Note b: Return on net equity = Average net equity
Income after tax Note c: Profit margin = Net revenue and gains
Note d: Profitability presented above is cumulative from January 1 to June 30 of 2014 and 2013.
- 129 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 2) Asset quality
Nonperforming loans and receivables
June 30, 2014 June 30, 2013 Item Non- Non- Non- Non- performing performing Allowance For Coverage Ratio performing performing Allowance For Coverage Ratio Loans Loans Business Type Loans Loans Ratio Loan Losses (Note c) Loans Loans Ratio Loan Losses (Note c) (Note a) (Note b) (Note a) (Note b) Corporate Secured $ 605,067 $ 182,468,134 0.33% $ 3,746,392 619.17% $ 751,484 $ 158,462,759 0.47% $ 3,264,466 434.40% finance Unsecured 67,492 170,930,892 0.04 % 1,499,053 2,221.08% 171,341 144,417,623 0. 12 % 1,084,817 633.13% Mortgage loans (Note d) 141,393 222,937,332 0.06% 2,448,496 1,731.70% 188,270 216,740,024 0.0 9% 1,928,223 1024.18% Cash cards 35,609 4,165,074 0.85% 182,886 513.59% 41,369 5,355,574 0.77% 293,710 709.98% Consumer Credit loans (Note e) 97,738 37,302,820 0.26% 632,128 646.76% 134,282 30,272,952 0.44% 685,415 510.43% finance Secured 120,030 149,254,115 0.08% 1,339,709 1,116.15% 109,082 121,425,861 0.09% 1,045,712 958.65% Others (Note f) Unsecured 15,424 2,228,321 0.69% 167,291 1,084.61% 22,935 1,409,250 1.63% 162,546 708.72% Subtotal 1,082,753 769,286,688 0.14% 10,015,955 925.05% 1,418,763 678,084,043 0.21% 8,464,889 596.64% Credit card 77,223 34,999,432 0.22 % 492,247 637.44% 84,977 33,763,179 0. 25 % 399,805 470.4 9% Acc ounts receivable factoring with no - 44,815,651 - 86,723 - - 34,989,989 - 172,418 - recourse (Note g)
Note a: Nonperforming loans are in accordance with the Regulations of the Procedures for Banking Institutions to Evaluate Assets and Deal with Past Due/Non-performing Loans and Bad Debts issued by MOF. Non-performing loans of credit cards are defined in the Letter issued by the Banking Bureau on July 6, 2005 (Ref. No. Jin-Guan-Yin (4) 0944000378).
Note b: Nonperforming loans ratio = Nonperforming loans ÷ Loans Nonperforming loans of credit card ratio = Nonperforming loans of credit cards ÷ Accounts receivable
Note c: Coverage ratio of allowances for loan losses = Allowances for loan losses ÷ Nonperforming loans Coverage ratio of allowance for loan losses of credit card = Allowance for loan losses of credit card ÷ Nonperforming loans of credit cards
Note d: Mortgage loans are for applicants to build or repair the buildings owned by the applicants, their spouses or their minor children. These applicants provide their buildings as collaterals and assign the right on mortgage to financial institutions.
Note e: Credit loans are defined in the Letter issued by the Banking Bureau on December 19, 2005 (Ref. No. Jin-Guan-Yin (4) 09440010950), excluding credit loans of credit cards and cash cards.
Note f: The others of consumer financial business are defined as secured or unsecured consumer financial business excluding mortgage loans, cash cards, credit loans and credit cards.
Note g: In accordance with the Letter issued by the Banking Bureau on July 19, 2005 (Ref. No. Jin-Guan-Yin (5) 094000494), accounts receivable without recourse are classified as non-performing loans if not compensated by the factor or insurance company within year.
- 130 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Exempted from report as nonperforming loans and receivables
Item June 30, 2014 June 30, 2013 Exempted from Exempted from Exempted from Exempted from Report as Report as Report as Report as Non-performing Non-performing Non-performing Non-performing Business Type Loans Receivables Loans Receivables Amounts negotiated in accordance with the agreement (Note a) $ 2,494,071 $ 759,427 $ 3,284,179 $ 1,018,746 Loans executed in accordance with debt clearing and renewal regulations (Note b) 1,781,608 1,345,903 1,839,984 1,371,618 Total 4,275,679 2,105,330 5,124,163 2,390,364
Note a: Disclosed in accordance with the Letter issued by the Banking Bureau on April 25, 2006 (Ref. No. Jin-Guan-Yin (1) 09510001270).
Note b: Disclosed in accordance with the letter issued by the Banking Bureau on September 15, 2008 (Ref. No. Jin-Guan-Yin (1) 09700318940).
3) Concentration of credit risk
Year June 30, 2014 June 30, 2013 Rank As Proportion As Proportion Transaction Party (Note b) Loans (Note c) Transaction Party (Note b) Loans (Note c) (Note a) of Net Equity of Net Equity 1 A Group (liquid crystal panel and $ 12,949,355 16.83% A Group (liquid crystal panel and $ 13,756,808 20.10% components manufacturing components manufacturing industry) industry) 2 B Group (other financial 10,992,663 14.29% B Group (other financial 8,942,908 13.06% intermediary not elsewhere intermediary not elsewhere classified industry) classified industry) 3 C Group (other financial 9,362,109 12.17% C Group (other financial 7,967,555 11.64% intermediary not elsewhere intermediary not elsewhere classified industry) classified industry) 4 D Group (other financial 6,271,134 8.15% I Group (liquid crystal panel and 6,063,208 8.86% intermediary not elsewhere components manufacturing classified industry) industry) 5 E Group (other financial 6,182,260 8.03% E Group (other financial 5,874,320 8.58% intermediary not elsewhere intermediary not elsewhere classified industry) classified industry) 6 F Group (monitor and terminals 4,707,542 6.12% K Group (computer peripheral 5,424,187 7.92% manufacturing industry) equipment manufacturing industry) 7 G Group (bare printed circuit 4,627,762 6.01% D Group (other financial 5,287,430 7.72% boards manufacturing) intermediary not elsewhere classified industry) 8 H Group (computers 4,616,802 6.00% L Group (man-made fibers 5,170,388 7.55% manufacturing) manufacturing industry) 9 I Group (liquid crystal panel and 4,545,749 5.91% F Group (monitor and terminals 5,073,103 7.41% components manufacturing manufacturing industry) industry) 10 J Group (computers 4,263,261 5.54% G Group (semi-conductor 4,714,597 6.89% manufacturing) packaging and testing industry)
Note a: Sorted by the balance of loans on June 30, 2014 and 2013, excluding government or state-owned business. If borrowers belong to the same business group, the aggregated credit amount of the business group is disclosed, and code and industry additionally disclosed. If the borrower is a business group, the industry with the largest risk exposures in the business group is disclosed. The industry disclosure should follow the guidelines of Directorate-General of Budget, Accounting and Statistics.
Note b: Transaction party is in accordance with Article 6 of the Supplementary Provisions of the Taiwan Stock Exchange Corporation Criteria for Review of Securities Listings.
Note c: Loans include import and export bill negotiations, bills discounted, overdraft, short-term loan, short-term secured loan, receivable financing, medium-term loan, medium-term secured loan, long-term loan, long-term secured loan, delinquent loans, inward remittances, factoring without recourse, acceptance, and guarantee.
- 131 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 4) Interest rate sensitivity
(In Thousands of New Taiwan Dollars)
June 30, 2014 Item More Than 1-90 Days 91-180 Days 181 Days-1 Year Total 1 Year Interest-sensitive assets $ 832,471,004 $ 46,268,426 $ 73,732,908 $ 148,345,623 $ 1,100,817,961 Interest-sensitive liabilities 478,120,737 137,112,486 171,238,655 276,788,013 1,063,259,891 Interest sensitivity gap 354,350,267 (90,844,060 ) (97,505,747 ) (128,442,390 ) 37,558,070 Net equity 77,000,619 Ratio of interest-sensitive assets to liabilities 103.53% Ratio of interest sensitivity gap to net equity 48.78%
(In Thousands of New Taiwan Dollars)
June 30, 2013 Item More Than 1-90 Days 91-180 Days 181 Days-1 Year Total 1 Year Interest-sensitive assets $ 746,137,973 $ 23,183,958 $ 61,441,439 $ 129,969,058 $ 960,732,428 Interest-sensitive liabilities 421,930,471 142,147,559 143,841,293 233,269,357 941,188,680 Interest sensitivity gap 324,207,502 (118,963,601 ) (82,399,854 ) (103,300,299 ) 19,543,748 Net equity 68,446,208 Ratio of interest-sensitive assets to liabilities 102.08% Ratio of interest sensitivity gap to net equity 28.55%
Note a: The amounts listed above include amounts in N.T. dollars only (i.e., excluding foreign currency) for both head office and domestic branches.
Note b: Interest-sensitive assets and liabilities are interest-bearing assets and interest-bearing liabilities with income or cost affected by interest rate fluctuations.
Note c: Interest sensitivity gap = Interest-sensitive assets - Interest-sensitive liabilities
Note d: Ratio of interest-sensitive assets to interest-sensitive Interest-sensitive assets = liabilities (N.T. dollars only) Interest-sensitive liabilities
(In Thousands of U.S. Dollars)
June 30, 2014 Item More Than 1-90 Days 91-180 Days 181 Days-1 Year Total 1 Year Interest-sensitive assets $ 9,016,373 $ 1,602,477 $ 2,003,850 $ 2,689,733 $ 15,312,433 Interest-sensitive liabilities 8,406,990 4,238,542 1,920,820 638,351 15,204,703 Interest sensitivity gap 609,383 (2,636,065 ) 83,030 2,051,382 107,730 Net equity 60,611 Ratio of interest-sensitive assets to liabilities 100.71% Ratio of interest sensitivity gap to net equity 177.74%
(In Thousands of U.S. Dollars)
June 30, 2013 Item More Than 1-90 Days 91-180 Days 181 Days-1 Year Total 1 Year Interest-sensitive assets $ 6,654,541 $ 1,292,412 $ 947,142 $ 1,368,597 $ 10,262,692 Interest-sensitive liabilities 6,265,318 3,238,422 903,998 386,625 10,794,363 Interest sensitivity gap 389,223 (1,946,010 ) 43,144 981,972 (531,671 ) Net equity 32,509 Ratio of interest-sensitive assets to liabilities 95.07% Ratio of interest sensitivity gap to net equity (1,635.46% )
Note a: The amounts listed above include amounts in U.S. dollars only for domestic branches, OBU, and overseas branches, excluding contingent assets and contingent liabilities.
Note b: Interest-sensitive assets and liabilities are interest-bearing assets and interest-bearing liabilities with income or cost affected by interest rate fluctuations.
Note c: Interest sensitivity gap = Interest-sensitive assets - Interest-sensitive liabilities
- 132 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59
Note d: Ratio of interest-sensitive assets to interest-sensitive Interest-sensitive assets = liabilities (U.S. dollars only) Interest-sensitive liabilities
5) Maturity analysis of assets and liabilities
(In Thousands of New Taiwan Dollars)
June 30, 2014 Period Remaining until Due Date and Amount Due Total More Than 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year 1 Year Major maturity cash inflow $ 1,172,608,874 $ 359,131,563 $ 141,688,643 $ 67,330,378 $ 115,749,443 $ 488,708,847 Major maturity cash outflow 1,518,839,052 232,229,900 197,876,328 179,073,731 253,605,094 656,053,999 Gap (346,230,178 ) 126,901,663 (56,187,685 ) (111,743,353 ) (137,855,651 ) (167,345,152 )
(In Thousands of New Taiwan Dollars)
June 30, 2013 Period Remaining until Due Date and Amount Due Total More Than 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year 1 Year Major maturity cash inflow $ 1,028,922,593 $ 297,129,850 $ 158,339,581 $ 41,243,047 $ 97,086,715 $ 435,123,400 Major maturity cash outflow 1,113,539,898 167,854,461 214,518,858 201,062,794 199,972,928 330,130,857 Gap (84,617,305 ) 129,275,389 (56,179,277 ) (159,819,747 ) (102,886,213 ) 104,992,543
Note: The amounts listed above include amounts in N.T. dollars only (i.e., excluding foreign currency) for both head office and domestic branches.
(In Thousands of U.S. Dollars)
June 30, 2014 Period Remaining until Due Date and Amount Due Total More Than 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year 1 Year Major maturity cash inflow $ 21,007,754 $ 8,221,354 $ 4,213,201 $ 2,146,535 $ 2,468,774 $ 3,957,890 Major maturity cash outflow 20,873,641 6,886,452 4,236,165 4,676,054 2,448,572 2,626,398 Gap 134,113 1,334,902 (22,964 ) (2,529,519 ) 20,202 1,331,492
(In Thousands of U.S. Dollars)
June 30, 2013 Period Remaining until Due Date and Amount Due Total More Than 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year 1 Year Major maturity cash inflow $ 16,917,714 $ 6,150,401 $ 4,511,727 $ 1,808,154 $ 1,933,357 $ 2,514,075 Major maturity cash outflow 16,824,065 5,083,139 4,121,746 3,623,643 1,933,758 2,061,779 Gap 93,649 1,067,262 389,981 (1,815,489 ) (401 ) 452,296
Note: The amounts listed above include amounts in U.S. dollars for head office, domestic branches, and OBU.
- 133 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 6) Capital adequacy
Period June 30, 2014 Item Common equity Tier I $ 70,392,046 Other Tier I capital 6,215,781 Self-owned capital Tier II capital 23,958,616 Self-owned capital 100,566,443 Standardized approach 835,535,009 Credit risk IRB - Securitization 366,284 Basic indicator approach - Risk-weighted assets Operation risk Standardized approach/optional standard 42,494,713 Advanced internal-rating based approach - Standardized approach 35,197,838 Market price risk Internal model approach - Total 913,593,844 Capital adequacy ratio 11.01% Common equity Tier I to risk-weighted assets ratio 7.70% Tier I capital to risk-weighted assets ratio 8.39% Leverage ratio 4.27%
Note 1: The ratios are calculated in accordance with the Letters issued by the MOF on both January 9, 2014 (Ref. No. Jin-Guan-Yin 10200362920 and 10200362921).
Note 2: Formula:
a. Self-owned capital = Common equity Tier I + Other Tier I capital + Tier II capital
b. Risk-weighted assets = Credit risk-weighted assets + (Operation risk capital + Market price risk capital) x 12.5
c. Capital adequacy = Self-owned capital/Risk-weighted assets
d. Common equity Tier I capital to risk-weighted assets ratio = Common equity Tier I capital/Risk-weighted assets
e. Tier I capital to risk-weighted assets ratio = (Common equity Tier I + Other Tier I capital)/Risk-weighted assets
f. Leverage ratio = Tier I capital/Adjusted average assets
- 134 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59
Period December 31, June 30, 2013 Item 2013 Common equity Tier I $ 67,391,696 $ 62,990,038 Self-owned Other Tier I 1,173,025 1,202,598 capital Tier II capital 21,730,618 24,225,829 Self-owned capital 90,295,339 88,418,465 Standardized approach 753,873,729 688,278,927 Credit risk IRB - - Securitization 420,834 507,358 Basic indicator approach - - Standardized approach/optional 42,494,713 39,101,650 Risk-weighted Operation risk standard assets Advanced internal-rating based - - approach Market price Standardized approach 28,685,638 28,659,825 risk Internal model approach - - Total 825,474,914 756,547,760 Capital adequacy ratio 10.94% 11.69% Common stock equity to total assets ratio 8.16% 8.33% Tier I capital to risk-weighted assets ratio 8.31% 8.48% Leverage ratio 4.08% 4.20%
Note 1: The ratios are calculated in accordance with the Letters issued by the MOF on both November 26, 2012 (Ref. No. Jin-Guan-Yin 10110007010 and 10110007011).
Note 2: Formula:
a. Self-owned capital = Common equity Tier I + Other Tier I capital + Tier II capital
b. Risk-weighted assets = Credit risk-weighted assets + (Operation risk capital + Market price risk capital) x 12.5
c. Capital adequacy = Self-owned capital/Risk-weighted assets
d. Common equity Tier I capital to risk-weighted assets ratio = Common equity Tier I capital/Risk-weighted assets
e. Tier I capital to risk-weighted assets ratio = (Common equity Tier I + Other Tier I capital)/Risk-weighted assets
f. Leverage ratio = Tier I capital/Adjusted average assets
7) Securities department balance sheet: Table 4.
Securities department statements of income: Table 5.
- 135 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Chang Hwa Bank a. Balance sheet
June 30 2014 2013
Assets Cash and cash equivalents $ 41,302,572 $ 41,370,828 Due from the Central Bank and call loans to banks 102,420,988 106,501,686 Financial assets at FVTPL, net 30,651,201 51,170,561 Derivative financial assets for hedging, net 40,385 82,629 Receivables, net 23,419,970 20,749,984 Current tax assets 618,403 657,175 Loans, net 1,200,815,138 1,153,777,877 Available-for-sale financial assets, net 44,676,384 40,367,504 Held-to-maturity financial assets, net 183,495,709 186,465,381 Investments accounted for using equity method, net 346,694 392,949 Other financial assets, net 91,151,168 23,332,752 Property and equipment, net 23,921,814 24,052,239 Investment property, net 10,940,114 10,822,260 Intangible assets, net 523,133 78,119 Deferred tax assets 2,503,990 3,727,256 Other assets 1,884,678 2,355,585
$ 1,758,712,341 $ 1,665,904,785
Liabilities Due to the Central Bank and banks $ 142,784,426 $ 122,014,083 Due to Bank- credit 447,675 - Financial liabilities at FVTPL 1,555,036 3,010,974 Derivative financial liabilities for hedging 2,292 - Securities sold under repurchase agreements 4,252,643 5,955,455 Payables 30,441,477 35,046,037 Current tax liabilities 198,242 187,874 Deposits and remittances 1,397,531,066 1,335,042,768 Bonds payable 53,179,189 43,308,743 Other financial liabilities 1,592,064 1,099,408 Reserve for liabilities 3,799,961 3,557,524 Deferred tax liabilities 6,585,233 6,205,424 Other liabilities 2,579,085 1,885,960 1,644,948,389 1,557,314,250 Equity Capital stock 79,040,404 77,490,592 Retained earnings 35,048,822 31,354,282 Other equities (325,274) (254,339) 113,763,952 108,590,535
$ 1,758,712,341 $ 1,665,904,785
- 136 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 b. Statement of comprehensive income
For the Six Months Ended June 30 2014 2013
Interest income $ 15,545,690 $ 13,367,888 Interest expense (6,281,079) (4,964,619) Net interest income 9,264,611 8,403,269 Net income under than net interest income 4,064,319 3,471,882 Net revenue and gains 13,328,930 11,875,151 Bad debt expenses and guarantee liability provisions 790,332 421,797 Operating expenses (7,048,319) (6,677,673) Income before income tax 7,070,943 5,619,275 Income tax expense (1,102,720) (894,822) Net income 5,968,223 4,724,453 Other comprehensive income 41,834 (305,317)
Total comprehensive income $ 6,010,057 $ 4,419,136
Basic earnings per share (dollar) $0.76 $0.60 Diluted earnings per share (dollar) $0.75 $0.59 c. Key financial and business highlights
1) Profitability
Item June 30, 2014 June 30, 2013 Pretax 0.41% 0.34% Return on total assets After tax 0.35% 0.29% Pretax 6.25% 5.26% Return on net equity After tax 5.28% 4.43% Profit margin 47.33% 39.78%
Income before (after) tax Note a: Return on total assets = Average assets
Income before (after) tax Note b: Return on net equity = Average net equity
Income after tax Note c: Profit margin = Net revenue and gains
Note d: Profitability presented above is cumulative from January 1 to June 30 of 2014 and 2013.
- 137 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 2) Asset quality
June 30, 2014 June 30, 2013 Item Non-performing Non-performing Non-performing Non-performing Allowance For Coverage Ratio Allowance For Coverage Ratio Loans Loans Loans Ratio Loans Loans Loans Ratio Business Type Loan Losses (Note c) Loan Losses (Note c) (Note a) (Note b) (Note a) (Note b) Corporate Secured $ 1,450,597 $ 342,929,523 0.42% $ 7,085,360 488.44% $ 3,057,596 $ 331,746,219 0.92% $ 8,366,500 273.63% finance Unsecured 219,890 451,327,684 0.05% 2,890,580 1,314.56% 285,736 432,680,555 0.07% 3,018,137 1,056.27% Mortgage loans (Note d) 621,136 289,243,663 0.21% 2,199,693 354.14% 918,159 289,774,953 0.32% 1,680,712 183.05% Cash cards (Note h) ------Consumer Credit loans (Note e) 4,110 1,544,232 0.27% 23,851 580.32% 8,347 1,653,008 0.50% 27,555 330.12% finance Secured 370,252 127,665,159 0.29% 1,284,230 346.85% 406,557 109,923,944 0.37% 718,394 176.70% Others (Note f) Unsecured 12,034 1,631,250 0.74% 42,659 354.49% 17,370 1,843,768 0.94% 33,272 191.55% Total 2,678,019 1,214,341,511 0.22% 13,526,373 505.09% 4,693,765 1,167,622,447 0.40% 13,844,570 294.96%
June 30, 2014 June 30, 2013 Item Non-performing Non-performing Non-performing Non-performing Allowance For Coverage Ratio Allowance For Coverage Ratio Loans Loans Loans Ratio Loans Loans Loans Ratio Business Type Loan Losses (Note c) Loan Losses (Note c) (Note a) (Note b) (Note a) (Note b) Credit card $ 3,336 $ 2,157,932 0.15% $ 16,962 508.45% $ 1,637 $ 1,179,640 0.14% $ 12,485 762.68% Accounts receivable factoring with no recourse (Note g) - 10,024,490 - 28,662 - - 8,935,855 - 79,531 -
June 30, 2014 June 30, 2013 Item Non-performing Non-performing Non-performing Non-performing Receivables Receivables Loans Exempted Loans Exempted Exempted from Exempted from Business Type from Reporting from Reporting Reporting Reporting Negotiated loans transacted in accordance with the agreement and exempted from reporting as non-performing loans (Note i) $ 159 $ 4,632 $ 605 $ 5,831 Negotiated accounts receivable transacted in accordance with the agreement and exempted from reporting as non-performing receivables (Note j) 8,708 7,557 8,975 7,294 Total 8,867 12,189 9,580 13,125
- 138 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Note a: Nonperforming loans are in accordance with the Regulations of the Procedures for Banking Institutions to Evaluate Assets and Deal with Past Due/Non-performing Loans and Bad Debts issued by the MOF. Non-performing loans of credit cards are defined in the Letter issued by the Banking Bureau on July 6, 2005. (Ref. No. Jin-Guan-Yin (4) 0944000378).
Note b: Nonperforming loans ratio = Nonperforming loans ÷ Loans Nonperforming loans of credit card ratio = Nonperforming loans of credit cards ÷ Accounts receivable
Note c: Coverage ratio of allowances for loan losses = Allowances for loan losses ÷ Nonperforming loans
Coverage ratio of allowance for loan losses of credit card = Allowance for loan losses of credit card ÷ Nonperforming loans of credit cards
Note d: Mortgage loans are for applicants to build or repair the buildings owned by the applicants, their spouses or their minor children. These applicants provide their buildings as collaterals and assign the right on mortgage to financial institutions.
Note e: Credit loans are defined in the Letter issued by the Banking Bureau on December 19, 2005 (Ref. No. Jin-Guan-Yin (4) 09440010950), excluding credit loans of credit cards and cash cards.
Note f: The others of consumer financial business are defined as secured or unsecured consumer financial business excluding mortgage loans, cash cards, credit loans and credit cards.
Note g: In accordance with the Letter issued by the Banking Bureau on July 19, 2005 (Ref. No. Jin-Guan-Yin (5) 094000494), accounts receivable without recourse are classified as non-performing loans if not compensated by the factor or insurance company within year.
Note h: Chang Hwa Bank does not engage in cash card business.
Note i: Negotiated loans and accounts receivable performed in accordance with the agreement and exempted from reporting as non-performing loans are disclosed in accordance with the Letter issued by the Banking Bureau on April 25, 2006 (Ref. No. Jin-Guan-Yin (1) 09510001270).
Note j: Loans and receivable transacted in accordance with debt clearance and renewal regulation and exempted from reporting as non-performing loans or receivables are disclosed in accordance with the Letter issued by the Banking Bureau on September 15, 2008 (Ref. No. Jin-Guan-Yin (1) 09700318940).
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3) Concentration of credit risk
Year June 30, 2014 June 30, 2013 Rank As Proportion As Proportion Transaction Party (Note b) Loans (Note c) Transaction Party (Note b) Loans (Note c) (Note a) of Net Equity of Net Equity 1 A Co. (railway transportation 34,463,694 30.29% A Co. (railway transportation 34,689,720 34.24% industry) industry) 2 B Group (manufacture of other 33,330,553 29.30% B Group (manufacture of other 29,281,657 28.90% chemical products) chemical products) 3 C Group (air transportation 17,675,215 15.54% C Group (air transportation 17,751,765 17.52% industry) industry) 4 D Group (liquid crystal panel and 8,207,897 7.21% D Group (liquid crystal panel and 12,910,181 12.74% components manufacturing components manufacturing industry) industry) 5 F Group (building construction 8,030,895 7.06% F Group (building construction 9,565,973 9.44% industry) industry) 6 G Group (ocean freight industry) 7,884,310 6.93% L Group (iron and steel smelting 8,589,927 8.48% industry) 7 H Group (iron and steel smelting 7,243,997 6.37% J Group (liquid crystal panel and 7,817,010 7.72% industry) components manufacturing industry) 8 I Group (other retail sale in 6,452,251 5.67% H Group (iron and steel smelting 7,296,299 7.20% general merchandise stores) industry) 9 J Group (liquid crystal panel and 6,381,528 5.61% G Group (ocean freight industry) 6,674,708 6.59% components manufacturing industry) 10 K Group (other financial 6,134,920 5.39% M Group (computers 6,310,850 6.23% intermediary not elsewhere manufacturing) classified industry)
Note a: Sorted by the balance of loans on June 30, 2014 and 2013, excluding government or state-owned business.
Note b: Transaction party is in accordance with Article 6 of the Supplementary Provisions of the Taiwan Stock Exchange Corporation Criteria for Review of Securities Listings.
Note c: Loans include import and export bill negotiations, bills discounted, overdraft, short-term loan, short-term secured loan, receivable financing, medium-term loan, medium-term secured loan, long-term loan, long-term secured loan, delinquent loans, inward remittances, factoring without recourse, acceptance, and guarantee.
Note d: Ratio of loans to net equity = Loans ÷ Net equity (the head office’s net equity of domestic banks or the local branches’ net equity of foreign banks)
4) Interest rate sensitivity
(In Thousands of New Taiwan Dollars)
June 30, 2014 Item 181 Days- More Than 1-90 Days 91-180 Days Total 1 Year 1 Year Interest-sensitive assets $ 1,133,597,906 $ 37,521,269 $ 6,929,165 $ 85,342,741 $ 1,263,391,081 Interest-sensitive liabilities 340,876,160 693,727,324 86,976,005 35,071,177 1,156,650,666 Interest sensitivity gap 792,721,746 (656,206,055 ) (80,046,840 ) 50,271,564 106,740,415 Net equity 98,724,480 Ratio of interest-sensitive assets to liabilities 109.23% Ratio of interest sensitivity gap to net equity 108.12%
(In Thousands of New Taiwan Dollars)
June 30, 2013 Item 181 Days- More Than 1-90 Days 91-180 Days Total 1 Year 1 Year Interest-sensitive assets $ 1,171,699,680 $ 27,045,814 $ 1,054,906 $ 87,674,464 $ 1,287,474,864 Interest-sensitive liabilities 368,536,311 679,660,448 77,835,341 34,594,966 1,160,627,066 Interest sensitivity gap 803,163,369 (652,614,634 ) (76,780,435 ) 53,079,498 126,847,798 Net equity 101,771,852 Ratio of interest-sensitive assets to liabilities 110.93% Ratio of interest sensitivity gap to net equity 124.64%
- 140 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Note a: The amounts listed above include amounts in N.T. dollars only (i.e., excluding foreign currency) for both head office and domestic branches.
Note b: Interest-sensitive assets and liabilities are interest-bearing assets and interest-bearing liabilities with income or cost affected by interest rate fluctuations.
Note c: Interest sensitivity gap = Interest-sensitive assets - Interest-sensitive liabilities
Note d: Ratio of interest-sensitive assets to interest-sensitive Interest-sensitive assets = liabilities (N.T. dollars only) Interest-sensitive liabilities
(In Thousands of U.S. Dollars)
June 30, 2014 Item 181 Days- More Than 1-90 Days 91-180 Days Total 1 Year 1 Year Interest-sensitive assets $ 9,890,782 $ 1,365,215 $ 341,096 $ 155,479 $ 11,752,572 Interest-sensitive liabilities 11,591,628 576,552 673,170 20 12,841,370 Interest sensitivity gap (1,700,846 ) 788,663 (332,074 ) 155,459 (1,088,798 ) Net equity 195,831 Ratio of interest-sensitive assets to liabilities 91.52% Ratio of interest sensitivity gap to net equity (555.99% )
(In Thousands of U.S. Dollars)
June 30, 2013 Item 181 Days- More Than 1-90 Days 91-180 Days Total 1 Year 1 Year Interest-sensitive assets $ 7,284,500 $ 992,410 $ 72,657 $ 48,594 $ 8,398,161 Interest-sensitive liabilities 8,573,063 392,182 354,231 - 9,319,476 Interest sensitivity gap (1,288,563 ) 600,228 (281,574 ) 48,594 (921,315 ) Net equity 61,786 Ratio of interest-sensitive assets to liabilities 90.11% Ratio of interest sensitivity gap to net equity (1,491.14% )
Note a: The amounts listed above include amounts in U.S. dollars only for domestic branches, OBU, and overseas branches, excluding contingent assets and contingent liabilities.
Note b: Interest-sensitive assets and liabilities are interest-bearing assets and interest-bearing liabilities with income or cost affected by interest rate fluctuations.
Note c: Interest sensitivity gap = Interest-sensitive assets - Interest-sensitive liabilities
Note d: Ratio of interest-sensitive assets to interest-sensitive Interest-sensitive assets = liabilities (U.S. dollars only) Interest-sensitive liabilities
5) Maturity analysis of assets and liabilities
(In Thousands of New Taiwan Dollars)
June 30, 2014 Period Remaining until Due Date and Amount Due Total 181 Days- More Than 0-30 Days 31-90 Days 91-180 Days 1 Year 1 Year Major maturity cash inflow $ 1,490,946,801 $ 301,903,454 $ 225,476,981 $ 116,232,737 $ 129,750,443 $ 717,583,186 Major maturity cash outflow 2,127,331,564 221,597,633 327,483,148 258,621,905 462,176,236 857,452,642 Gap (636,384,763 ) 80,305,821 (102,006,167 ) (142,389,168 ) (332,425,793 ) (139,869,456 )
(In Thousands of New Taiwan Dollars)
June 30, 2013 Period Remaining until Due Date and Amount Due Total 181 Days- More Than 0-30 Days 31-90 Days 91-180 Days 1 Year 1 Year Major maturity cash inflow $ 1,470,400,026 $ 379,563,167 $ 165,302,415 $ 101,169,376 $ 114,602,062 $ 709,763,006 Major maturity cash outflow 1,586,144,441 236,040,459 214,009,846 180,956,783 280,740,519 674,396,834 Gap (115,744,415 ) 143,522,708 (48,707,431 ) (79,787,407 ) (166,138,457 ) 35,366,172
- 141 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59
Note: The above data included only accounts denominated in New Taiwan dollars of Chang Hwa Bank and its branches.
(In Thousands of U.S. Dollars)
June 30, 2014 Period Remaining until Due Date and Amount Due Total 181 Days- More Than 1-30 Days 31-90 Days 91-180 Days 1 Year 1 Year Major maturity cash inflow $ 18,025,519 $ 6,587,387 $ 3,508,014 $ 2,213,646 $ 1,956,393 $ 3,760,079 Major maturity cash outflow 23,006,133 7,831,462 4,502,303 2,140,164 4,263,764 4,268,440 Gap (4,980,614 ) (1,244,075 ) (994,289 ) 73,482 (2,307,371 ) (508,361 )
(In Thousands of U.S. Dollars)
June 30, 2013 Period Remaining until Due Date and Amount Due Total 181 Days- More Than 1-30 Days 31-90 Days 91-180 Days 1 Year 1 Year Major maturity cash inflow $ 13,938,213 $ 4,680,342 $ 3,360,895 $ 1,550,007 $ 864,975 $ 3,481,994 Major maturity cash outflow 15,603,148 5,997,857 2,489,072 1,660,645 1,675,185 3,780,389 Gap (1,664,935 ) (1,317,515 ) 871,823 (110,638 ) (810,210 ) (298,395 )
Note: The above data included only accounts denominated in U.S. dollars of the head office, domestic branches and OBU.
6) Transferring ownerships of loans
June 30, 2014 Composition Transferring of NPLs Book Value Transferring Gain on Attachment Agreement with Date (Note a) (Note b) Price Disposal Clause Added Terms
JPMorgan Chase Bank 2014.01.29 Vessel secured $ 60,575 $ 128,349 $ 67,774 None None N.A. loans JPMorgan Chase Bank 2014.01.29 Vessel secured 49,558 107,866 58,308 None None N.A. loans JPMorgan Chase Bank 2014.01.29 Vessel secured 49,475 106,238 56,763 None None N.A. loans JPMorgan Chase Bank 2014.01.29 Vessel secured 67,342 146,899 79,557 None None N.A. loans JPMorgan Chase Bank 2014.01.29 Vessel secured 67,301 146,608 79,307 None None N.A. loans Deutsche Bank AG 2014.02.24 Vessel secured 73,029 211,903 138,874 None None London Branch loans Deutsche Bank AG 2014.02.24 Vessel secured 47,703 137,011 89,308 None None London Branch loans Macquarie Bank Limited 2014.03.17 Vessel secured 82,847 232,661 149,814 None None loans
Note a: Please specify the type of NPLs (ex: Credit card, cash card, home loan mortgage, accounts receivable).
Note b: Book value = Original loan balance - Allowance
- 142 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 7) Capital adequacy
Period December 31, June 30, 2014 June 30, 2013 Item 2013 Common equity Tier I capital $ 97,580,818 $ 96,516,072 $ 92,530,100 Self-owned Other Tier I capital 3,015,008 3,453,503 3,386,373 capital Tier II capital 33,885,378 25,991,559 29,720,761 Self-owned capital 134,481,204 125,961,134 125,637,234 Standardized approach 1,137,081,174 1,073,505,460 1,049,217,635 Credit risk IRB - - - Real estate securitization 29,961 59,772 68,194 Basic indicator approach - - - Standardized Risk- Operation approach/optional 39,393,925 39,393,925 37,383,713 weighted risk standard assets Advanced internal-rating - - - based approach Market Standardized approach 18,346,400 20,542,888 15,985,950 price Internal model approach - - - risk Total 1,194,851,460 1,133,502,045 1,102,655,492 Capital adequacy ratio 11.26% 11.11% 11.39% Common equity Tier I capital to risk weighted 8.17% 8.51% 8.39% assets ratio Tier I capital to risk weighted assets ratio 8.42% 8.82% 8.70% Gearing ratio 3.74% 3.66% 3.53%
Note 1: The ratios are calculated in accordance with the Regulations Governing the Capita l Adequacy and Capital category of Banks.
Note 2: Annual financial report should include the capital adequacy ratio in current and previous period. Besides semiannual report should disclose the ratio the end of last year.
Note 3: Formula:
a. Self-owned capital = Common equity Tier I capital + Other Tier I capital + Tier II capital
b. Risk-weighted assets = Credit risk-weighted assets + (Operation risk Capital + Market price risk Capital) × 12.5
c. Capital Adequacy = Self-owned capital ÷ Risk-weighted assets
d. Common equity Tier I capital to risk weighted assets ratio = Common equity Tier I capital ÷ Risk-weighted assets
e. Tier I capital to risk weighted assets ratio = (Common equity Tier I capital + Other Tier I capital) ÷ Risk-weighted assets
f. Gearing ratio = Tier I capital ÷ Average-assets adjusted
8) Securities department balance sheet: Table 6.
Securities department statements of income: Table 7.
- 143 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Taishin Securities B a. Balance sheet
June 30 2014 2013
Assets Current assets $ 3,271,072 $ 2,555,924 Financial asset measured at cost - noncurrent 6,470 6,470 Property and equipment 27,582 35,280 Intangible assets 29,015 26,878 Deferred tax assets 3,570 4,494 Other noncurrent assets 234,388 237,974
$ 3,572,097 $ 2,867,020
Liabilities Current liabilities $ 984,604 $ 562,789 Other noncurrent liabilities 18,765 22,151 1,003,369 584,940 Equity Capital stock 2,280,000 2,280,000 Capital surplus 78,404 73,009 Retained earnings 210,324 (70,929) 2,568,728 2,282,080
$ 3,572,097 $ 2,867,020 b. Statement of comprehensive income
For the Six Months Ended June 30 2014 2013
Revenue $ 434,807 $ 167,781 Expense (225,802) (202,596) Non-operating income 2,626 4,270 Non-operating expense (5) (10) Loss before income tax 211,626 (30,555) Income tax (expense) benefit (33,576) (219) Net income (loss) 178,050 (30,774)
Total comprehensive income $ 178,050 $ (30,774)
Basic earnings (losses) per share (dollar) $0.78 $(0.13)
- 144 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 c. Key financial and business highlights
1) Profitability
For the Six Months Ended June 30 Item 2014 2013 Pretax 6.30% (1.11%) Return on total assets After tax 5.30% (1.12%) Pretax 8.41% (1.33%) Return on net equity After tax 7.08% (1.34%) Profit margin 40.70% (17.89%)
Income before (after) tax Note a: Return on total assets = Average assets
Income before (after) tax Note b: Return on net equity = Average net equity
Income after tax Note c: Profit margin = Operating income + Nonoperating income
Note d: Profitability presented above is cumulative from January 1 to June 30 of 2014 and 2013. d. Capital adequacy
June 30 Item 2014 2013
Eligible capital Tier I capital $ 2,568,728 $ 2,282,080 Tier I capital - minus assets 154,842 150,253 Tier II capital - minus assets in excess of Tier II capital 125,826 123,374 Tier I capital, net 2,288,060 2,008,453 Tier II capital - - Tier II capital - minus assets - - Tier II capital, net - - Tier III capital - -
Total net of eligible capital $ 2,288,060 $ 2,008,453
Equivalent amount of operating risk Equivalent amount of credit risk $ 46,723 $ 34,003 Equivalent amount of operation risk 71,817 52,074 Equivalent amount of market risk 571,035 225,988
$ 689,575 $ 312,065
Capital adequacy ratio 332.00% 644.00%
Capital adequacy ratio = Net of eligible capital ÷ Equivalent amount of operating risk
Net of eligible capital = Tier I capital + Tier II capital + Tier III capital - Minus assets
Equivalent amount of operating risk = Equivalent amount of market risk + Equivalent amount of credit risk + Equivalent amount of operation risk
- 145 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 1) Net of eligible capital
a) Tier I capital
June 30 2014 2013 Percentage Percentage Amount of Item (%) Amount of Item (%)
Common stock $ 2,280,000 89 $ 2,280,000 100 Capital surplus 78,404 3 73,009 3 Retained earnings 32,274 1 (40,154) (2) Income for the six months ended June 30 178,050 7 (30,775) (1)
$ 2,568,728 100 $ 2,282,080 100
b) Tier II: None
c) Tier III: None
d) Minus assets
June 30 2014 2013 Percentage Percentage Amount of Item (%) Amount of Item (%)
Intangible assets $ 29,015 10 $ 26,878 10 Prepayments 4,106 2 5,268 2 Domestic unlisted stocks 3,470 1 3,470 1 Investment in a finance-related enterprise 8,112 3 - - Operating guarantee deposits 190,000 68 190,000 69 Settlements funds 31,922 11 27,451 10 Refundable deposits 8,645 3 12,517 5 Deferred expenses 1,828 1 3,549 1 Deferred tax assets 3,570 1 4,494 2
$ 280,668 100 $ 273,627 100
2) Equivalent amount of operating risk
a) Equivalent amount of market risk
June 30 2014 2013 Percentage Percentage Amount of Item (%) Amount of Item (%)
Interest rate risks $ 48,893 9 $ 61,129 27 Equity security risks 512,982 90 164,859 73 Exchange rate risks 1,158 - - - Special concentration - Tier I 8,002 1 - -
$ 571,035 100 $ 225,988 100
- 146 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59
b) Equivalent amount of credit risk
June 30 2014 2013 Percentage Percentage Amount of Item (%) Amount of Item (%)
Client’s position and credit transactions $ 44,515 95 $ 31,120 92 Repurchase agreements transactions 1 - 61 - In-balance-sheet transactions 2,207 5 2,822 8
$ 46,723 100 $ 34,003 100
c) Equivalent amount of operation risk
June 30 2014 2013 Percentage Percentage Amount of Item (%) Amount of Item (%)
Operation risk $ 71,817 100 $ 52,074 100
Taishin AMC a. Balance sheet
June 30 2014 2013
Assets Current assets $ 929,820 $ 681,005 Investments accounted for using equity method 125,358 124,357 Property and equipment 182,409 184,706 Investment property 737,455 641,039 Deferred tax assets 44,175 63,145 Other noncurrent assets 190,561 190,560
$ 2,209,778 $ 1,884,812
Liabilities Current liabilities $ 287,202 $ 203,944 Other noncurrent liabilities 4,402 4,248 291,604 208,192 Equity Capital stock 1,445,000 1,445,000 Capital reserve 3,730 2,828 Retained earnings 469,444 228,792 1,918,174 1,676,620
$ 2,209,778 $ 1,884,812
- 147 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 b. Statements of comprehensive income
For the Six Months Ended June 30 2014 2013
Operating revenue $ 391,116 $ 156,054 Operating cost and expenses (91,781) (87,380) Operating income 299,335 68,674 Non-operating income 63,996 18,132 Non-operating expense (548) (24,344) Income before income tax 362,783 62,462 Income tax expense (98,662) (13,728) Net income 264,121 48,734
Total comprehensive income $ 264,121 $ 48,734
Basic earnings per share (dollar) $1.83 $0.34 c. Profitability
For the Six Months Ended June 30 Item 2014 2013 Pretax 16.75% 3.21% Return on total assets After tax 12.19% 2.50% Pretax 19.08% 3.61% Return on net equity After tax 13.89% 2.82% Profit margin 58.03% 27.98%
Income before (after) tax Note a: Return on total assets = Average assets
Income before (after) tax Note b: Return on net equity = Average net equity
Income after tax Note c: Profit margin = Operating income + Nonoperating income
Note d: Profitability presented above is cumulative from January 1 to June 30 of 2014 and 2013.
- 148 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Taishin Venture Capital a. Balance sheet
June 30 2014 2013
Assets Current assets $ 113,407 $ 104,781 Financial asset measured at cost 722,534 766,519 Available-for-sale financial assets 11,330 11,619 Investments accounted for using equity method 1,090,941 1,213,639 Property and equipment 79 106 Other noncurrent assets 439 439
$ 1,938,730 $ 2,097,103
Liabilities Current liabilities $ 1,824 $ 1,347 Current tax liabilities - 1,096 1,824 2,443 Equity Capital stock 2,219,035 2,219,035 Capital surplus 6,512 541 Retained earnings (303,113) (150,117) Other equity 14,472 25,201 1,936,906 2,094,660
$ 1,938,730 $ 2,097,103 b. Statements of comprehensive income
For the Six Months Ended June 30 2014 2013
Revenue $ 11,720 $ 46,170 Expenses (45,285) (94,226) Loss before income tax (33,565) (48,056) Income tax expense - (1,112) Net loss (33,565) (49,168) Other comprehensive income (20,553) 58,530
Total comprehensive income $ (54,118) $ 9,362
Basic loss per share (dollar) $ (0.15) $ (0.22)
- 149 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 c. Profitability
For the Six Months Ended June 30 Item 2014 2013 Pretax (1.71%) (2.30%) Return on total assets After tax (1.71%) (2.35%) Pretax (1.71%) (2.30%) Return on net equity After tax (1.71%) (2.35%) Profit margin (286.39%) (106.49%)
Income before (after) tax Note a: Return on total assets = Average assets
Income before (after) tax Note b: Return on net equity = Average net equity
Income after tax Note c: Profit margin = Operating income + Nonoperating income
Note d: Profitability presented above is cumulative from January 1 to June 30 of 2014 and 2013.
Taishin Securities Investment Trust a. Balance sheet
June 30 2014 2013
Assets Current assets $ 346,072 $ 339,872 Property and equipment 5,160 6,881 Intangible assets 438,910 445,061 Deferred tax assets 145 213 Other noncurrent assets 97,881 80,267
$ 888,168 $ 872,294
Liabilities Current liabilities $ 43,418 $ 41,887 Other noncurrent liabilities 18,481 18,481 61,899 60,368 Equity Capital stock 754,545 754,545 Capital surplus 47,856 46,809 Retained earnings 23,868 10,572 826,269 811,926
$ 888,168 $ 872,294
- 150 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 b. Statement of comprehensive income
For the Six Months Ended June 30 2014 2013
Operating revenue $ 133,547 $ 147,456 Operating expenses (122,177) (137,669) Operating income 11,370 9,787 Non-operating income 11,080 2,231 Non-operating expense (253) (1,684) Income before income tax 22,197 10,334 Income tax expenses (2,547) (2,666) Net income 19,650 7,668
Total comprehensive income $ 19,650 $ 7,668
Basic earnings per share (dollar) $ 0.26 $ 0.10 c. Profitability
For the Six Months Ended June 30 Item 2014 2013 Pretax 2.47% 1.19% Return on total assets After tax 2.18% 0.88% Pretax 2.68% 1.27% Return on net equity After tax 2.37% 0.94% Profit margin 13.59% 5.12%
Income before (after) tax Note a: Return on total assets = Average assets
Income before (after) tax Note b: Return on net equity = Average net equity
Income after tax Note c: Profit margin = Operating income + Nonoperating income
Note d: Profitability presented above is cumulative from January 1 to June 30 2014 and 2013.
- 151 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 Taishin Securities Investment Advisory a. Balance sheet
June 30 2014 2013
Assets Current assets $ 314,722 $ 303,958 Property and equipment 1,973 1,498 Deferred tax assets 4,734 6,239 Other noncurrent assets 51,832 51,833
$ 373,261 $ 363,528
Liabilities Current liabilities $ 14,196 $ 11,708 Deferred tax liabilities 20 - Other noncurrent liabilities 3,225 2,954 17,441 14,662 Equity Capital stock 300,000 300,000 Capital surplus 55,050 54,449 Retained earnings 770 (5,583)
355,820 348,866
$ 373,261 $ 363,528 b. Statement of comprehensive income
For the Six Months Ended June 30 2014 2013
Operating revenue $ 46,986 $ 48,934 Operating expenses (44,460) (42,521) Operating income 2,526 6,413 Non-operating income 1,722 2,239 Non-operating expense (482) (123) Income before income tax 3,766 8,529 Income tax expense (774) (1,457) Net income 2,992 7,072
Total comprehensive income $ 2,992 $ 7,072
Basic earnings per share (dollar) $ 0.10 $ 0.24
- 152 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 c. Profitability
For the Six Months Ended June 30 Item 2014 2013 Pretax 1.01% 2.37% Return on total assets After tax 0.80% 1.96% Pretax 1.06% 2.47% Return on net equity After tax 0.85% 2.05% Profit margin 6.14% 13.82%
Income before (after) tax Note a: Return on total assets = Average assets
Income before (after) tax Note b: Return on net equity = Average net equity
Income after tax Note c: Profit margin = Operating income + Nonoperating income
Note d: Profitability presented above is cumulative from January 1 to June 30 of 2014 and 2013.
Taishin Holdings Insurance Brokers a. Balance sheet
June 30 2014 2013 Assets Current assets $ 1,112,633 $ 842,730 Property and equipment 2,590 4,271 Intangible assets 3,663 5,425 Deferred tax assets 853 787 Other noncurrent assets 4,709 4,709
$ 1,124,448 $ 857,922
Liabilities Current liabilities $ 492,346 $ 340,160 Other noncurrent liabilities 5,021 4,630 497,367 344,790 Equity Capital stock 30,000 30,000 Capital surplus 358 - Retained earnings 596,723 483,132 627,081 513,132
$ 1,124,448 $ 857,922
- 153 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 b. Statements of comprehensive income
For the Six Months Ended June 30 2014 2013
Operating revenue $ 2,372,919 $ 1,743,104 Operating cost (1,653,898) (1,182,681) Operating expenses (112,064) (90,446) Operating income 606,957 469,977 Non-operating income 955 946 Income before income tax 607,912 470,923 Income tax expenses (103,418) (80,060) Net income 504,494 390,863
Total comprehensive income $ 504,494 $ 390,863
Basic earnings per share (dollar) $ 168.16 $ 130.29 c. Profitability
For the Six Months Ended June 30 Item 2014 2013 Pretax 53.34% 49.79% Return on total assets After tax 44.26% 41.32% Pretax 79.66% 73.74% Return on net equity After tax 66.11% 61.21% Profit margin 21.25% 22.41%
Income before (after) tax Note a: Return on total assets = Average assets
Income before (after) tax Note b: Return on net equity = Average net equity
Income after tax Note c: Profit margin = Operating income + Nonoperating income
Note d: Profitability presented above is cumulative from January 1 to June 30 of 2014 and 2013.
- 154 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 54. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND LIABILITIES
Significant financial assets and liabilities denominated in foreign currencies were as follows:
Taishin Bank
(In Thousands of Foreign Currencies/New Taiwan Dollars)
June 30 2014 2013 Foreign Exchange New Taiwan Foreign Exchange New Taiwan Currencies Rate Dollars Currencies Rate Dollars
Financial assets
Monetary items AUD $ 81,343 28.13 $ 2,287,985 $ 76,596 27.90 $ 2,136,691 CNY 4,953,742 4.82 23,877,734 1,017,728 4.91 4,994,942 EUR 61,723 40.84 2,520,957 48,252 39.31 1,896,680 HKD 1,783,935 3.86 6,885,321 1,552,459 3.88 6,028,462 JPY 13,068,364 0.30 3,856,187 16,333,307 0.30 4,979,094 USD 5,424,958 29.92 162,287,624 4,418,857 30.12 133,095,983 Non-monetary items AUD 360,726 28.13 10,146,362 298,485 27.90 8,326,423 CNY 5,269,578 4.82 25,400,107 5,655,238 4.91 27,755,540 EUR 61,640 40.84 2,517,560 151,726 39.31 5,964,071 HKD 497,356 3.86 1,919,609 68,846 3.88 267,341 JPY 54,291,377 0.30 16,020,191 42,164,567 0.30 12,853,573 THB 1,151,919 0.92 1,061,932 - 0.97 - USD 1,661,630 29.91 49,707,651 5,586,549 30.12 168,266,866 ZAR 6,729,209 2.82 18,985,778 5,674,313 3.03 17,164,843
Financial liabilities
Monetary items AUD 301,844 28.13 8,490,140 356,151 27.90 9,935,061 CNY 5,555,523 4.82 26,778,404 2,106,305 4.91 10,337,607 EUR 109,893 40.84 4,488,367 121,597 39.31 4,779,749 HKD 1,189,694 3.86 4,591,773 1,036,612 3.88 4,025,342 JPY 9,345,854 0.30 2,757,756 8,804,216 0.30 2,683,904 USD 6,892,979 29.92 206,203,473 4,802,165 30.12 144,641,214 ZAR 6,060,209 2.82 17,098,262 5,112,708 3.03 15,465,982 Non-monetary items AUD 133,642 28.13 3,759,021 13,075 27.90 364,732 CNY 4,560,103 4.82 21,980,341 4,546,804 4.91 22,315,420 EUR 26,053 40.84 1,064,089 87,055 39.31 3,421,951 HKD 1,138,019 3.86 4,392,328 527,365 3.88 2,047,847 JPY 58,909,545 0.30 17,382,911 50,160,656 0.30 15,291,125 THB 1,161,392 0.92 1,070,664 3,035 0.97 2,952 USD 645,293 29.91 19,303,934 5,299,244 30.12 159,613,222 ZAR 707,722 2.82 1,996,767 572,332 3.03 1,731,310
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(In Thousands of Foreign Currencies/New Taiwan Dollars)
June 30, 2014 Foreign Exchange New Taiwan Currencies Rate Dollars
Financial assets
Monetary items USD $ 6,459,618 29.84 $ 192,787,299 GBP 75,431 50.85 3,835,666 AUD 713,358 28.11 20,056,060 HKD 2,890,802 3.85 11,129,588 CAD 35,029 27.98 980,111 JPY 53,419,372 0.29 15,742,689 EUR 289,521 40.73 11,792,190 NZD 3,516 26.15 91,943 CNY 24,965,519 4.80 119,934,353
Financial liabilities
Monetary items USD 7,381,732 29.84 220,307,792 GBP 84,321 50.85 4,287,723 AUD 712,335 28.11 20,027,299 HKD 2,297,748 3.85 8,846,330 SGD 46,694 23.89 1,115,520 CAD 59,715 27.98 1,670,826 ZAR 1,498,763 2.82 4,226,512 JPY 54,517,684 0.29 16,066,361 EUR 357,334 40.73 14,554,214 NZD 31,288 26.15 818,181 CNY 16,114,530 4.80 77,414,202
(In Thousands of Foreign Currencies/New Taiwan Dollars)
June 30, 2013 Foreign Exchange New Taiwan Currencies Rate Dollars
Financial assets
Monetary items USD $ 4,597,721 29.98 $ 137,839,676 GBP 34,120 45.75 1,560,990 AUD 527,277 27.69 14,602,937 HKD 855,040 3.86 3,303,875 CAD 131,174 28.58 3,748,953 JPY 52,580,943 0.30 15,979,349 EUR 308,637 39.12 12,073,879 NZD 97,052 23.32 2,263,253 CNY 4,824,465 4.87 23,538,565 (Continued)
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June 30, 2013 Foreign Exchange New Taiwan Currencies Rate Dollars
Financial liabilities
Monetary items USD $ 5,517,107 29.98 $ 165,402,868 GBP 44,928 45.75 2,055,456 AUD 545,378 27.69 15,104,244 HKD 670,970 3.86 2,592,628 CAD 162,729 28.58 4,650,795 ZAR 1,681,893 3.02 5,079,317 JPY 47,502,990 0.30 14,436,159 EUR 363,839 39.12 14,233,382 NZD 227,221 23.32 5,298,794 CNY 2,629,692 4.87 12,830,267 (Concluded)
55. DISCLOSURES UNDER STATUTORY REQUIREMENTS
a. Material transactions are summarized as follows:
No. Item Explanation 1 Marketable securities acquired or disposed of at costs or prices of at least Table 1 NT$300 million or 10% of the paid-in capital 2 Acquisition or disposal of individual real estate at costs of at least NT$300 None million or 10% of the paid-in capital 3 Discounts of service charges for related parties amounting to at least $5 None million 4 Receivables from related parties amounting to at least NT$300 million or 10% Table 9 of the paid-in capital 5 Sales of NPL from subsidiaries Note 53 6 Authorities securitized instruments and related assets which are in accordance None with the Statute for Financial Assets Securitization and the Statute for Real Estate Securitization 7 Other transactions that may have significant impact on the decision made by None the financial statement users
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No. Item Explanation 1 Names, locations, and related information of investees Table 2 2 Financings provided Note 3 Endorsements/guarantees provided Note 4 Marketable securities held Table 3 (Note) 5 Marketable securities acquired or disposed of at costs or prices of at least Note NT$300 million or 10% of the paid-in capital 6 Acquisition or disposal of individual real estate at costs of at least NT$300 None million or 10% of the paid-in capital 7 Discounts of service charges for related parties amounting to at least $5 None million 8 Receivables from related parties amounting to at least NT$300 million or 10% None of the paid-in capital 9 Sales of NPL from subsidiaries None 10 Securitized instruments and related assets which are in accordance with the None Statute for Financial Assets Securitization and the Statute for Real Estate Security 11 Other transactions that may have significant impact on the decision made by None the financial statement users 12 Derivative transactions of investees Notes 9 and 46
Note: None, or not required to disclose No. 2 to 5 if the investee is a bank, insurance or security company.
c. Information of investment in Mainland China, significant commitments and contingencies, significant losses and subsequent events is summarized as follows:
No. Item Explanation 1 Information of investment in Mainland China Table 8 2 Significant commitments and contingencies Note 49 3 Significant losses None 4 Subsequent events None
d. According to the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, a company should disclose business relationships and material transactions in consolidation. Please refer to Table 9.
56. SEGMENT INFORMATION
a. General information
The report of Taishin Financial Holding and subsidiaries is the same as the report for internal use of policy makers. Main policy makers distribute the resources to the operation department and evaluate its efficiency. Taishin Financial Holding’s main policy makers are the Board of Directors.
Interdepartmental transactions are normal transactions. Taishin Financial Holding consolidates all its subsidiaries, and writes off interdepartmental transaction gains and losses. The subsidiaries evaluate their own operation efficiency.
The Board of Directors, the main policy maker, reviews company operation result, distributes resources, and evaluates operation efficiency.
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For the Six Months Ended June 30, 2014 Taishin Bank Chang Hwa Bank Adjustments and (Consolidated) (Consolidated) Others Total Eliminations Total
Net interest income (expense) $ 7,688,754 $ 9,265,803 $ (2,544 ) $ 16,952,013 $ - $ 16,952,013 Net income other than net interest income 8,130,256 4,155,439 1,690,094 13,975,789 (88,464 ) 13,887,325 Net revenue and gains 15,819,010 13,421,242 1,687,550 30,927,802 (88,464 ) 30,839,338 Reversed allowance for bad debts expenses and guarantee liability provisions 443,986 790,332 (2,977 ) 1,231,341 - 1,231,341 Operating expenses (8,426,316 ) (7,093,380 ) (935,147 ) (16,454,843 ) 65,333 (16,389,510 ) Income before income tax 7,836,680 7,118,194 749,426 15,704,300 (23,131 ) 15,681,169 Income tax expense (793,459 ) (1,149,971 ) (126,083 ) (2,069,513 ) - (2,069,513 )
Net income (loss) $ 7,043,221 $ 5,968,223 $ 623,343 $ 13,634,787 $ (23,131 ) $ 13,611,656
Total assets $ 1,255,374,265 $ 1,757,826,621 $ 166,888,509 $ 3,180,089,395 $ (133,760,062 ) $ 3,046,329,333 Total liabilities $ 1,178,215,703 $ 1,644,062,669 $ 36,588,795 $ 2,858,867,167 $ (22,403,466 ) $ 2,836,463,701
For the Six Months Ended June 30, 2013 Taishin Bank Chang Hwa Bank Adjustments and (Consolidated) (Consolidated) Others Total Eliminations Total
Net interest income (expense) $ 7,018,841 $ 8,404,510 $ (138,200 ) $ 15,285,151 $ - $ 15,285,151 Net income other than net interest income 9,137,942 3,549,188 969,556 13,656,686 (68,579 ) 13,588,107 Net revenue and gains 16,156,783 11,953,698 831,356 28,941,837 (68,579 ) 28,873,258 Reversed allowance for bad debts expenses and guarantee liability provisions 404,251 421,797 22,225 848,273 - 848,273 Operating expenses (7,482,310 ) (6,715,508 ) (841,585 ) (15,039,403 ) 44,464 (14,994,939 ) Income before income tax 9,078,724 5,659,987 11,996 14,750,707 (24,115 ) 14,726,592 Income tax expense (1,258,487 ) (935,534 ) (640,409 ) (2,834,430 ) - (2,834,430 )
Net income (loss) $ 7,820,237 $ 4,724,453 $ (628,413 ) $ 11,916,277 $ (24,115 ) $ 11,892,162
Total assets $ 1,054,312,727 $ 1,665,176,394 $ 142,903,493 $ 2,862,392,614 $ (107,306,723 ) $ 2,755,085,891 Total liabilities $ 985,618,789 $ 1,556,585,859 $ 30,461,982 $ 2,572,666,630 $ (6,257,084 ) $ 2,566,409,546 b. Financial information by region
The operating income of Taishin Financial Holding and subsidiaries’ overseas departments is not over 10% of consolidated operating income. In addition, their assets are not over 10% of consolidated total assets either. Thus, no financial information by region is required. c. Information of foreign sales
The revenue from foreign sales made by the domestic departments of Taishin Financial Holding and subsidiaries to individuals is not over 10% of consolidated total operating income. d. Information of important customers
Taishin Financial Holding and subsidiaries do not have important customers contributing revenue more than 10% of consolidated operating income.
- 159 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 TABLE 1
TAISHIN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES
INFORMATION ON INVESTEES’ ACCUMULATED PURCHASES AND SALES OF SPECIFIC MARKETABLE SECURITIES OVER NT$300 MILLION OR 10% OF OUTSTANDING CAPITAL FOR THE SIX MONTHS ENDED JUNE 30, 2014 (In Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Issuer’s Beginning of the Period Purchases Sales Others End of the Period Type and Name Account Transaction Relationship Buyer or Seller of Marketable Shares Shares Shares Selling Carrying Disposal Shares Shares Recorded Party to the Buyer or Amount Amount Amount Amount Security (Units) (Units) (Units) Price Value Gain (Loss) (Units) (Units) Seller
Taishin Financial Stock Holding Taishin Bank Investments Taishin Bank Parent and 4,915,752,571 $ 73,396,067 160,000,000 $ 3,520,000 - $ - $ - $ - - $ (10,274) 5,075,752,571 $ 76,905,793 accounted for subsidiary using the equity method
Note: Others means investment income $7,069,340 thousand, cash dividends $(7,185,903) thousand, recognition of employee stock options $117,660 thousand and others $(11,371) thousand.
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TAISHIN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES
INFORMATION ON INVESTEES’ NAMES, LOCATIONS, ETC. FOR THE SIX MONTHS ENDED JUNE 30, 2014 (In Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Ownership Recognized Sum of Ownership Unified Interest (%) Investment Book Investment Income Total Investees’ Names Investees’ Location Principal Business Activities Imputed Shares Note Business No. at Ending Value (Loss) of Current Current Shares Ownership (Note) Total Shares Balance Period Interest (%)
Financial business Taishin Bank 86519539 B1, 1F, No. 44, Jungshan N. Commercial bank business, 100.00 $ 76,905,793 $ 7,069,340 5,075,752,571 5,075,752,571 100.00 Investments Rd., Sec. 2, Taipei, Taiwan trust, and bills discounting accounted for using equity method Chang Hwa Bank 51811609 No. 38, Tsu Yu Rd., Sec. 2, Commercial bank business, 22.55 45,752,488 1,345,607 1,775,909,286 1,775,909,286 22.92 〃 Taichung, Taiwan trust, and offshore banking unit Taishin Securities B 23534956 2F, No. 44, Jungshan N. Rd., Multiple securities and future 100.00 2,611,658 171,161 228,000,000 228,000,000 100.00 〃 Sec. 2, Taipei, Taiwan transaction assistant Taishin AMC 80341022 2F-3, No. 9, Dehuei St., Acquisition of delinquent 100.00 1,918,174 264,121 144,500,000 144,500,000 100.00 〃 Zhongshan district, Taipei, loans, evaluation, auction, Taiwan and management Taishin Securities Investment 27326178 13F, No. 96, Jianguo N. Rd., Investment trust 100.00 826,269 19,650 75,454,545 75,454,545 100.00 〃 Trust Sec. 1, Zhong Shan District, Taipei, Taiwan Taishin Securities Investment 23285289 16F, No. 118, Ren-Ai Rd., Investment trust, advisory, 92.00 327,349 2,753 27,599,513 27,599,513 92.00 〃 Advisory Sec. 4, Taipei, Taiwan and publication Taishin Holdings Insurance 29030974 11F, No. 44, Jungshan N. Rd., Property insurance manager, 100.00 627,081 504,494 3,000,000 3,000,000 100.00 〃 Brokers Sec. 2, Taipei, Taiwan life insurance manager
Nonfinancial business Taishin Venture Capital 80031342 18F, No. 118, Ren-Ai Rd., Investment start-up 100.00 1,936,906 (33,565) 221,903,495 221,903,495 100.00 〃 Sec. 4, Taipei, Taiwan
Nonfinancial business Metro Consulting Service Ltd. 27974096 6F-2, No. 3-1, Yuancyu St. Consultancy, information 4.40 2,200 - 520,000 520,000 10.40 Financial assets Nangang Dist., Taipei, service and human resource carried at cost Taiwan dispatch
Note: Imputed shares are considered if equity securities such as convertible bond, warrant, etc., or derivative contract such as stock options, are converted to shares.
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TAISHIN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES HELD JUNE 30, 2014 (In Thousands of New Taiwan Dollars; in Thousands of U.S. Dollars)
JUNE 30, 2014 Relationship with the Holding Company Marketable Securities Type and Name Financial Statement Account Shares/Units/ Percentage of Note Holding Company Carrying Amount Market Value Nominal Ownership (%)
Taishin Real Estate Stock Metro Consulting Service Ltd. Taishin Real Estate is the Financial assets carried at cost 300,000.00 $ 3,000 6.00 $ - director of the Metro Consulting Service
Beneficiary certificates Taishin 1699 Money Market Fund Fund issued by Taishin Financial assets at FVTPL - 606,543.08 8,036 - 8,036 Securities Investment Trust current
Taishin Insurance Agency Stock Taishin Insurance Broker Parent and subsidiary Investment accounted for using 6,000,000.00 74,912 100.00 - equity method Chi-Long Technology Co., Ltd. None Financial assets carried at cost 950,000.00 4,275 4.13 -
Taishin D. A. Finance Stock Yuan Tai Forex Brokerage Co., Ltd. Taishin D. A. Finance is the Financial assets carried at cost - 600,000.00 6,000 5.00 - director of Yuan Tai Forex noncurrent Brokerage Bon-Li International Technology Co., Ltd. None 〃 125,000.00 - 1.50 - Go out of business
Bonds Government Bonds 99-5 Held to maturity financial - 1,015 - 1,015 assets - noncurrent
Taishin Venture Capital Stock Darfon Electronics Corp. Its independent director is Available-for-sale financial 242,550.00 5,300 0.08 5,300 Taishin Financial Holding’s assets - noncurrent independent director BAFO Technologies Corp. None 〃 174,044.00 6,031 2.26 6,031 Kwan-Hwa Venture Capital Corp. Its corporate director is Taishin Financial assets carried at cost 3,200,000.00 27,840 5.56 - Venture Capital Chi-Ting Venture Capital Investment Co., None 〃 3,000,000.00 30,000 1.30 - Ltd. Hwei-Yang Venture Capital Investment 〃 〃 840,000.00 8,400 1.54 - Co., Ltd. CC Media Co., Ltd. 〃 〃 400,000.00 164 0.48 - Century Development Corp. Its corporate supervisor is 〃 7,782,543.00 85,176 3.03 - Taishin Venture Capital
(Continued)
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JUNE 30, 2014 Relationship with the Holding Company Marketable Securities Type and Name Financial Statement Account Shares/Units/ Percentage of Note Holding Company Carrying Amount Market Value Nominal Ownership (%)
Cyberheart Inc. None Financial assets carried at cost 12,500.00 $ 79 0.05 $ - Cyberheart Inc. A-1 〃 〃 285,958.00 1,659 Preferred stock - Solar PV Corp. None 〃 1,665,000.00 8,503 1.09 - OME Technology Co., Ltd. 〃 〃 1,457,152.00 25,767 2.30 - Innostar Technology Corporation 〃 〃 1,077,000.00 34,464 2.20 - Youn Shin Arti stic Co., Ltd. Its corporate director is Taishin 〃 1,000,000.00 8,650 12.69 - Venture Capital Winking Entertainment Ltd. B-2 None 〃 709,178.00 29,626 Preferred stock - PayEasy Digital Integration Co., Ltd. 〃 〃 2,172,500.00 3,693 5.00 - Diamond Biotech Investment Corp. Its director is Taishin Financial 〃 35,000,000.00 350,000 8.75 - Holding’s senior vice general manager Yuan Shan Biotech Corp. None 〃 500,000.00 30,328 0.56 - Bio Key Inc. 〃 〃 200,000.00 6,029 Preferred stock - VM Discovery Inc. 〃 〃 95,238.00 6,029 Preferred stock - RevMAB Biosciences Inc. 〃 〃 400,000.00 6,029 Preferred stock - JHL Biotech Inc 〃 〃 1,052,632.00 60,097 Preferred stock - Microbio Co., Ltd. 〃 Financial assets at FVTPL - 1,709,150.00 56,060 0.40 56,060 current
Beneficiary certificates Capital Global Biotech None Financial assets at FVTPL - 1,000,000.00 10,830 - 10,830 current Capital China New Opportunities 〃 〃 1,100,000.00 10,692 - 10,692 PineBridger Emerging Market Asia Pac 〃 〃 500,000.00 5,108 - 5,108 Strategy Bond FSITC Global Multi-Asset Income Balance 〃 〃 500,000.00 4,985 - 4,985 FSITC Taiwan Money Market 〃 〃 667,851.00 10,000 - 10,000 Taishin C Si Leading Cons and Service Issued by Taishin Securities 〃 100,000.00 997 - 997 Index Investment Trust Taishin RMB Money Market 〃 〃 20,695.00 998 - 998 Hun Nan China A Share Equity Fund None 〃 100,000.00 1,000 - 1,000 KGI Asia Pacific High Dividend 〃 〃 100,000.00 999 - 999
Taishin AMC Stock Linkou Golf Country Club None Financial assets carried at cost 3.00 1,800 0.30 - Dah Chung Bills 〃 〃 2,200,000.00 28,886 0.51 - PayEasy Digital 〃 〃 2,172,500.00 3,693 5.00 - Diamond Biotech Investment Corp. 〃 〃 10,000,000.00 100,000 2.50 - Taishin Real Estate Equity-method investee Investment accounted for using 8,000,000.00 125,358 40.00 - equity method
Beneficiary certificates Taishin Latin America Fund Issued by Taishin Securities Financial assets at FVTPL - 1,000,000.00 7,660 - 7,660 Investment Trust current Taishin Emerging Europe Fund 〃 〃 1,000,000.00 7,560 - 7,560 Taishin Ta-Chong Money Market Fund 〃 〃 4,587,745.20 50,040 - 50,040 (Concluded)
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TAISHIN INTERNATIONAL BANK CO., LTD. SECURITIES DEPARTMENT
BALANCE SHEETS (In Thousands of New Taiwan Dollars)
June 30, 2014 December 31, 2013 June 30, 2013 ASSETS Amount % Amount % Amount %
CURRENT ASSETS Financial assets at fair value through profit or loss - current $ 17,024,130 26 $ 5,281,841 12 $ 2,701,013 7 Other current assets 1,814,657 3 587,471 1 1,089,182 3
Total current assets 18,838,787 29 5,869,312 13 3,790,195 10
NONCURRENT ASSETS Financial assets at fair value through profit or loss - noncurrent 6,260 - 7,105 - 16,722 - Available-for-sale financial assets - noncurrent 46,810,815 71 38,821,957 87 33,819,305 90 Refundable deposits 22,362 - 22,317 - 22,317 -
Total noncurrent assets 46,839,437 71 38,851,379 87 33,858,344 90
TOTAL $ 65,678,224 100 $ 44,720,691 100 $ 37,648,539 100
LIABILITIES AND EQUITY
CURRENT LIABILITIES Financial liabilities at fair value through profit or loss - current $ 498,123 1 $ 301,492 1 $ 97,836 - Securities sold under repurchase agreements 39,589,205 60 18,977,462 42 13,461,205 36 Other current liabilities 1,728,471 2 336,274 1 1,429,025 4
Total current liabilities 41,815,799 63 19,615,228 44 14,988,066 40
NONCURRENT LIABILITIES Transactions between home office and branches 22,783,213 35 24,000,710 54 21,694,858 57
Total liabilities 64,599,012 98 43,615,938 98 36,682,924 97
EQUITY Appropriated working capital 800,000 1 800,000 2 800,000 2 Retained earnings Special reserve 189,340 - 189,340 - 189,340 1 Unappropriated earnings 209,947 1 225,317 1 69,361 - Unrealized gains (losses) on available-for-sale financial asset (120,075) - (109,904) (1) (93,086) -
Total equity 1,079,212 2 1,104,753 2 965,615 3
TOTAL $ 65,678,224 100 $ 44,720,691 100 $ 37,648,539 100
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TAISHIN INTERNATIONAL BANK CO., LTD. SECURITIES DEPARTMENT
STATEMENTS OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (In Thousands of New Taiwan Dollars)
2014 2013 Amount % Amount %
REVENUES AND GAINS Gain (loss) on sale of securities held for operations - dealing $ 72,045 21 $ (29,495) (17) Interest income 288,060 83 216,903 122 Gain (loss) on valuation of securities held for operations - dealing (24,818) (7) 3,647 2 Gain (loss) on financial derivatives 9,327 3 (12,945) (7)
Total revenues and gains 344,614 100 178,110 100
EXPENSES AND LOSSES Interest expense (108,567) (32) (100,903) (57) Employee benefit expense (11,569) (3) (2,809) (1) Other operating expenses (14,531) (4) (5,036) (3)
Total expenses and losses (134,667) (39) (108,748) (61)
INCOME BEFORE INCOME TAX 209,947 61 69,362 39
INCOME TAX EXPENSE (27,662) (8) (16,186) (9)
NET INCOME $ 182,285 53 $ 53,176 30
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CHANG HWA COMMERCIAL BANK, LTD. SECURITIES DEPARTMENT
BALANCE SHEETS (In Thousands of New Taiwan Dollars)
June 30, 2014 December 31, 2013 June 30, 2013 ASSETS Amount % Amount % Amount %
CURRENT ASSETS Financial assets at fair value through profit or loss - current $ 799,612 6 $ 14,245,942 6 $ 11,714,951 43 Available-for-sale financial assets - current 11,832,846 86 11,944,310 86 13,578,311 50 Margin loan receivables 323,133 2 301,498 2 293,424 1 Receivables, net 744,206 6 739,025 6 1,748,806 6 Current tax assets 21,268 - 22,262 - 8,332 -
Total current assets 13,721,065 100 27,253,037 100 27,343,824 100
NONCURRENT ASSETS Equipment, net 8,737 - 2,062 - 2,357 - Other noncurrent assets 32,881 - 31,796 - 31,797 -
Total noncurrent assets 41,618 - 33,858 - 34,154 -
TOTAL $ 13,762,683 100 $ 27,286,895 100 $ 27,377,978 100
LIABILITIES AND EQUITY
CURRENT LIABILITIES Bonds sold under repurchase agreements $ 2,508,514 18 $ 2,589,524 18 $ 2,588,757 9 Deposits received from securities borrowers 620 - 1,388 - 328 - Deposit payable for securities financing 676 - 1,502 - 363 - Payables 648,649 5 631,930 5 1,571,192 6
Total current liabilities 3,158,459 23 3,224,344 23 4,160,640 15
NONCURRENT LIABILITIES Other noncurrent liabilities 8,674,031 63 22,269,220 63 21,437,195 79
Total liabilities 11,832,490 86 25,493,564 86 25,597,835 94
EQUITY Appropriated working capital 2,000,000 14 2,000,000 14 2,000,000 7 Retained earnings Unappropriated earnings (23,337) - 52,825 - (104,932) - Unrealized gains (losses) on available-for-sale financial assets (46,470) - (259,494) - (114,925) (1)
Total equity 1,930,193 14 1,793,331 14 1,780,143 6
TOTAL $ 13,762,683 100 $ 27,286,895 100 $ 27,377,978 100
- 166 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 TABLE 7
CHANG HWA COMMERCIAL BANK, LTD. SECURITIES DEPARTMENT
STATEMENTS OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (In Thousands of New Taiwan Dollars)
2014 2013 Amount % Amount %
REVENUES AND GAINS Brokerage revenue $ 33,816 19 $ 23,133 16 Revenue from underwriting business 74 - 41 - Interest income 106,662 59 119,221 84 Unrealized gain on valuation of securities held for operations 40,300 22 - - Futures commission revenue 130 - 111 - Nonoperating income 198 - 102 -
Total revenues and gains 181,180 100 142,608 100
EXPENSES AND LOSSES Brokerage handling fee (1,892) (1) (1,283) (1) Dealing handling fee (30) - (30) - Loss on sale of securities held for operations (58,218) (32) (117,903) (83) Interest expense (6,587) (4) (7,235) (5) Unrealized loss on valuation of securities held for operations - - (16,215) (12) Employee benefits expense (18,710) (10) (18,746) (13) Depreciation (1,192) (1) (361) - Other operating expense (7,492) (4) (6,812) (5) Nonoperating expenses (61,378) (34) (72,977) (51)
Total expenses and losses (155,499) (86) (241,562) (170)
INCOME BEFORE INCOME TAX 25,681 14 (98,954) (70)
INCOME TAX EXPENSE (7,406) (4) (5,978) (4)
NET INCOME $ 18,275 10 $ (104,932) (74)
- 167 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 TABLE 8
TAISHIN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES
INVESTMENTS IN MAINLAND CHINA FOR THE SIX MONTHS ENDED JUNE 30, 2014 (In Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Accumulated Investment Flows Accumulated Total Amount Outflow of (US$ in Thousand) Outflow of Accumulated of Paid-in Investment Investment Equity in the Main Businesses Carrying Value Inward Capital of Method of from Taiwan as from Taiwan as Investee’s Net Percentage of Earnings Investor Investee and Products of as of Remittance of Investee Investment of January 1, of Income Ownership (Losses) Investee Outflow Inflow June 30, 2014 Earnings as of (US$ in 2014 June 30, 2014 (Note 2) June 30, 2014 Thousand) (US$ in (US$ in Thousand) Thousand)
Chang Hwa Bank Chang Hwa Commercial Banking $ 4,618,293 Note 1. c. $ 4,618,293 $ - $ - $ 4,618,293 $ - - $ - $ - $ - Bank, Ltd. Kunshan (US$ 155,174) (US$ 155,174) (US$ 155,174) Branch
Taishin Venture Taishin Financial Leasing Financial leasing 681,339 Note 1. a. 591,240 - - 591,240 (31,858) 86.96 (27,702) 522,632 - Capital (China) (US$ 23,000) (US$ 20,000) (US$ 20,000) Note 2. b. (1) Taishin Financial Leasing Financial leasing 600,828 Note 1. a. 600,828 - - 600,828 (8,270) 100 (8,270) 568,310 - (Tianjin) (US$ 20,000) (US$ 20,000) (US$ 20,000) Note 2. b. (1)
Taishin D. A. Finance Taishin Financial Leasing Financial leasing 681,339 - 90,099 - 90,099 (31,858) 13.04 (4,155) 78,394 - (China) (US$ 23,000) (US$ 3,000) (US$ 3,000) Note 2. b. (1)
Accumulated Investment in Mainland China Investment Amounts Authorized by Upper Limit on Investment Investor as of June 30, 2014 Investment Commission, MOEA (US$ in Thousand) (US$ in Thousand) (US$ in Thousand)
Chang Hwa Bank $ 4,618,293 $ 4,766,850 $ 17,064,593 (US$ 155,174) (US$ 159,001)
Taishin Venture Capital 1,192,068 1,192,068 12,198,834 (US$ 40,000) (US$ 40,000)
Taishin D. A. Finance 90,099 90,099 11,541,586 (US$ 3,000) (US$ 3,000)
Note 1: The three methods of investment are as follows:
a. Direct investment in Mainland China. b. Investment in Mainland China through reinvestment in existing enterprise in a third area. c. Others.
Note 2: Equity in the profits (losses):
a. If the entity is still in preparation stage and there is no equity in profits (losses), the condition should be noted.
b. The basis of recognizing equity in profits (losses) is categorized in the following three types and each entity should be noted according to its condition.
1) Financial statement audited (reviewed) by international accounting firms that cooperate with accounting firms in ROC. 2) Financial statements audited (reviewed) by Taiwan parent company’s CPA. 3) Others.
- 168 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 TABLE 9
TAISHIN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES
BUSINESS RELATIONSHIPS AND MATERIAL TRANSACTIONS IN CONSOLIDATION FOR THE SIX MONTHS ENDED JUNE 30, 2014 (In Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Transactions % of Consolidated Number Relationship Main Party Counterparty Operating Revenues or (Note a) (Note b) Account Amount Terms Consolidated Total Assets (Note c)
1 Taishin Bank Taishin Securities B 3 Deposits and remittances $ 187,169 Under arm’s length terms 0.01
1 Taishin Bank Taishin Securities Investment Advisory 3 Deposits and remittances 311,099 Under arm’s length terms 0.01
0 Taishin Financial Holding Taishin Bank 1 Accounts receivable, net 976,273 Under arm’s length terms 0.03
0 Taishin Financial Holding Taishin Bank 1 Securities purchased under resell agreements 7,121,631 Under arm’s length terms 0.23
0 Taishin Financial Holding Taishin Holding Insurance Brokers 1 Accounts receivable, net 103,326 Under arm’s length terms 0.00
1 Taishin Bank Taishin Holding Insurance Brokers 3 Accounts receivable, net 357,017 Under arm’s length terms 0.01
1 Taishin Bank Taishin Holding Insurance Brokers 3 Deposits and remittances 641,728 Under arm’s length terms 0.02
1 Taishin Bank Taishin Holding Insurance Brokers 3 Fee income 1,615,281 Under arm’s length terms 0.05
0 Taishin Financial Holding Taishin Bank 1 Cash and cash equivalents 11,462,407 Under arm’s length terms 0.38
Note a: Business between the parent and subsidiaries is numbered as follows:
1. Parent: 0 2. Subsidiaries are numbered from 1 in order
Note b: Relationship between the main party and the counterparty is numbered as follows:
1. Parent to subsidiary 2. Subsidiary to parent 3. One subsidiary to another subsidiary
Note c: Percentage of consolidated operating revenues or consolidated total assets: If the account is a balance sheet account, it was calculated by dividing the ending balance into consolidated total assets; if the account is an income statement account, it was calculated by dividing the interim cumulative balance into consolidated operating revenues.
- 169 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 TAISHIN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES
STATEMENTS OF MAJOR ACCOUNTING ITEMS FOR THE SIX MONTHS ENDED JUNE 30, 2014
Items Index
Statements of Asset, Liability and Equity Financial assets at fair value through profit or loss Statement 1 Securities purchased under resell agreements Statement 2 Available-for-sale financial assets Statement 3 Held-to-maturity financial assets Statement 4 Changes in investments accounted for using equity method Statement 5 Other financial assets Statement 6 Changes in investment property Note 19 Changes in accumulated depreciation of investment property Note 19 Changes in property and equipment Note 20 Changes in accumulated depreciation of property and equipment Note 20 Securities sold under repurchase agreements Statement 7 Statements of Profit and Loss Detailed statement of gain (loss) on financial assets and liabilities at fair Note 36 value through profit or loss Detailed statement of foreign exchange gain (loss) Statement 8 Detailed statement of net other non-interest income (loss) Statement 9 Detailed statement of operating expenses Statement 10
- 170 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 STATEMENT 1
TAISHIN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS JUNE 30, 2014 (In Thousands of New Taiwan Dollars)
Financial Instrument Item Summary Face Value/Unit Cost Fair Value
Financial assets designated as at Interest-rate combination instruments $ - $ 3,500,641 $ 3,495,590 fair value through profit or loss Derivative financial instrument Currency swaps - - 2,753,290 Interest rate swaps - - 5,190,627 Currency options - - 16,514,747 Forward exchange contracts - - 788,640 Cross-currency swaps - - 863,537 Equity-linked swaps - - 146,754 Futures - - 85,683 Commodity price swaps - - 106,307 Equity-linked options - - 13,091 Credit default swaps - - 2,027 Commodity forward contract - - 369 - - 26,465,072 Investment in bills Commercial paper 46,679,800 46,619,783 46,611,425 Negotiable certificate of deposits - 5,284,400 5,288,264 5,286,798 banks 51,964,200 51,908,047 51,898,223 Domestic listed stocks 16,891 682,812 705,123 Domestic OTC stocks 2,796 135,440 166,094 Mutual funds 30,862 619,054 648,675 Government bonds Treasury Bond 100-6 3,400,000 3,500,748 3,491,204 Treasury Bond 103-1 2,900,000 2,898,739 2,902,706 Treasury Bond 103-2 2,150,000 2,154,243 2,146,476 Treasury Bond 102-7 1,900,000 1,896,958 1,902,504 Treasury Bond 103-4 1,850,000 1,843,987 1,836,174 Treasury Bond 101-1 1,750,000 1,761,284 1,760,237 Treasury Bond 102-11 1,600,000 1,613,103 1,610,030 Treasury Bond 103-6 500,000 495,581 496,452 Treasury Bond 102-10 400,000 405,897 405,112 Treasury Bond 100-1 350,000 352,535 352,637 Others (Note) 404,775 410,681 409,777 17,204,775 17,333,756 17,313,309 Convertible bonds Acer II 794,000 793,759 797,970 AGV Products III 423,600 423,879 438,426 TPKHOL 0 10/01/17 388,895 388,895 395,066 AUOPT 0 10/13/15 299,150 299,150 329,032 Others (Note) 1,524,300 1,622,990 1,749,669 3,429,945 3,528,673 3,710,163 Corporate bonds 223,233 223,233 225,405 Trading securities - dealing Domestic listed stocks 443 28,521 27,776 Trading securities - dealing Domestic OTC stocks 381 43,756 49,655 Trading securities - dealing Convertible bonds 4,052 427,511 435,100 Trading securities - dealing Domestic emerging stock 12,455 624,703 583,115 Trading securities - dealing Others 1,000 136,000 136,600 Trading securities - underwriting Domestic OTC stocks 15 210 211 Trading securities - underwriting Convertible bonds 5,291 529,134 592,249
$ 72,896,339 $ 79,721,491 $ 106,452,360
Note: “Others” means the aggregated disclosure of items under $300,000.
- 171 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 STATEMENT 2
TAISHIN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES
SECURITIES PURCHASED UNDER RESELL AGREEMENTS JUNE 30, 2014 (In Thousands of New Taiwan Dollars)
Item Face Value Amount
Government bonds Treasury Bond 103-4 $ 350,000 $ 348,309 Bills purchased under resell agreements 6,000 6,004
$ 356,000 $ 354,313
- 172 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 STATEMENT 3
TAISHIN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES
AVAILABLE-FOR-SALE FINANCIAL ASSETS JUNE 30, 2014 (In Thousands of New Taiwan Dollars)
Accumulated Item Summary Face Value Amount Impairment Adjustment Fair Value Note
Investment in bills Negotiable certificates of deposit - Central Bank $ 141,330,000 $ 141,330,000 $ - $ (85,752) $ 141,244,248 Commercial bills - guaranteed by other banks 7,230,200 7,223,179 - (946) 7,222,233 SDBC Float 12/15 448,725 448,555 - 3,376 451,931 BCHINA Float 16 337,531 337,152 - (332) 336,820 Others (Note) 754,041 779,277 - (1,164) 778,113 150,100,497 150,118,163 - (84,818 ) 150,033,345 Domestic listed stocks Taiwan Cement Corp. 59,600 2,074,491 - 619,429 2,693,920 MasterLink Securities Corp. 60,047 665,710 - (14,120) 651,590 Asia Pacific Telecom Corp. 30,000 165,000 - 373,500 538,500 Others (Note) 73,479 1,927,530 (16,168) (154,009) 1,757,353 Domestic OTC stocks 223,126 4,832,731 (16,168) 824,800 5,641,363 Mutual funds 1,731 23,028 - 3,171 26,199 22,997 912,875 - 45,410 958,285 Government bonds Treasury Bond 101-9 10,900,000 10,859,400 - (287,104) 10,572,296 Treasury Bond 103-2 7,450,000 7,466,575 - (26,277) 7,440,298 Treasury Bond 102-11 7,000,000 7,058,117 - (14,235) 7,043,882 Treasury Bond 101-6 6,350,000 6,546,695 - 31,296 6,577,991 Treasury Bond 101-1 5,970,000 5,993,156 - 5,217 5,998,373 Treasury Bond 100-6 4,100,000 4,188,282 - 20,961 4,209,243 Treasury Bond 102-1 3,400,000 3,375,180 - (146,846) 3,228,334 T 1 1/4 09/30/15 2,910,876 2,910,876 - 340 2,911,216 T 2 04/30/16 2,474,617 2,458,732 - 5,050 2,463,782 Treasury Bond 103-6 2,350,000 2,344,250 - (11,029) 2,333,221 Treasury Bond 102-2 2,100,000 2,096,577 - (5,271) 2,091,306 T 0 1/4 02/29/16 1,639,599 1,642,442 - 1,405 1,643,847 T 0 5/8 02/15/17 1,342,245 1,343,777 - (1,073) 1,342,704 T 1 1/2 12/31/18 1,183,064 1,187,861 - 9,300 1,197,161 T 0 3/4 03/15/17 1,188,184 1,191,172 - 5,241 1,196,413 T 1 1/2 02/28/19 1,042,721 1,044,043 - 1,101 1,045,144 Treasury Bond 88-2 750,000 891,805 - 1,846 893,651 Treasury Bond 97-6 750,000 785,021 - (4,375) 780,646 Treasury Bond 103-4 750,000 747,453 - (2,937) 744,516 Treasury Bond 90-6 650,000 687,902 - 2,947 690,849 Treasury Bond 89-1 500,000 632,325 - (5,754) 626,571 T 0 7/8 04/30/17 592,093 596,699 - 2,559 599,258 Treasury Bond 90-7 502,000 530,466 - 2,755 533,221 Treasury Bond 90-3 500,000 529,303 - 3,743 533,046 98 Kaohsiung City Government Bond II 500,000 497,875 - 1,250 499,125 99 Kaohsiung City Government Bond II 500,000 492,734 - 3,069 495,803 Treasury Bond 98-3 450,000 456,839 - (3,368) 453,471 (Continued)
- 173 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59
Accumulated Item Summary Face Value Amount Impairment Adjustment Fair Value Note
Treasury Bond 93-8 $ 450,000 $ 451,332 $ - $ 681 $ 452,013 T 0.75 01/15/17 448,725 448,058 - 1,298 449,356 Treasury Bond 96-3 400,000 408,525 - 2,453 410,978 Treasury Bond 95-6 400,000 408,214 - 1,580 409,794 HKGB 1.61 12/10/18 391,245 390,809 - 2,131 392,940 CGB 1.4 08/18/16 375,658 380,349 - (2,681) 377,668 T 3 1/8 04/30/17 319,237 317,122 - 1,310 318,432 HKGB 0.79 09/16 309,410 310,293 - 669 310,962 93 Taipei City Development Bond II 300,000 300,207 - 102 300,309 Others (Note) 3,169,856 3,219,436 - 22,652 3,242,088 74,409,530 75,189,902 - (379,994) 74,809,908 Corporate bonds 02 FCFC 2A 900,000 898,485 - (1,905) 896,580 01 FPCC 2A 850,000 850,415 - 1,917 852,332 00 Hon Hai 1 800,000 801,662 - 3,735 805,397 02 Taipower 1C 800,000 799,331 - (12,954) 786,377 00 TSMC 1A 750,000 751,446 - 5,297 756,743 02 UMC 1A 750,000 750,017 - 718 750,735 P03 Uni -President 1 750,000 748,318 - (1,268 ) 747,050 01 TSMC 1A 700,000 701,526 - 2,646 704,172 99 Taipower 3B 500,000 508,783 - (1,308) 507,475 01 UMC 1B 500,000 503,303 - 786 504,089 00 Taipower 5A 500,000 500,979 - 2,295 503,274 00 Evaair2F 500,000 503,364 - (210) 503,154 01 CPC1B 500,000 501,822 - (994) 500,828 02 Taipower 1A 500,000 499,622 - 952 500,574 00 Taipower 2B 450,000 454,195 - 838 455,033 00 Hon Hai 2A 450,000 451,521 - 2,107 453,628 HKMTGC 3.5 08/14 448,725 449,255 - 453 449,708 95 Taipower 1B 400,000 405,721 - 1,913 407,634 00 CPC1B 400,000 405,411 - (157) 405,254 99 CPC1B 400,000 399,296 - 2,675 401,971 00 Yuan Ding 1 400,000 400,154 - 1,421 401,575 01 FPC 1A 400,000 400,184 - (315) 399,869 00 FPCC 1 350,000 350,838 - 743 351,581 SUNHUN 3.5 11/16 329,065 340,750 - 2,539 343,289 Brave Rise Investments Ltd 337,410 337,410 - - 337,410 00 Hon Hai 3 300,000 299,699 - 3,211 302,910 01 UMC 1A 300,000 300,794 - 862 301,656 02 Fubon 1A 300,000 300,000 - 958 300,958 Others (Note) 9,521,991 9,602,544 - 31,210 9,633,754 24,087,191 24,216,845 - 48,165 24,265,010 Bank debentures EIB 8.5 11/04/14 1,620,752 1,633,882 - (2,157) 1,631,725 SVENSKA HANDELSBANKEN AB 843,450 843,450 - 1,088 844,538 RABOBANK NEDERLAND 801,277 801,295 - 7,304 808,599 GOLDMAN SACHS GROUP INC 800,905 793,813 - 6,827 800,640 BPCE SA 562,300 562,300 - 978 563,278 ING BANK NV SYDNEY BRANCH 534,185 534,185 - 5,807 539,992 WESTPAC BANKING COPR 506,070 506,070 - 6,794 512,864 BARCLAYS BANK PLC/AUST 506,070 506,070 - 4,374 510,444 (Continued)
- 174 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59
Accumulated Item Summary Face Value Amount Impairment Adjustment Fair Value Note
EXPORT IMPORT BK OF KOREA $ 477,955 $ 477,955 $ - $ 1,018 $ 478,973 MORGAN STANLEY 474,888 468,624 - 6,580 475,204 BNP PARIBAS AUSTRALIA 449,840 449,840 - 5,147 454,987 KDB Float 12/15 450,041 450,266 - 1,197 451,463 INTNED Float 16 393,786 397,229 - 3,704 400,933 COMMONWEALTH BANK AUST 379,553 379,644 - 4,891 384,535 BANK OF QUEENSLAND LTD 368,306 368,306 - 1,537 369,843 KOFCOR Float 17 365,659 365,645 - 1,646 367,291 SOCIETE GENERALE 356,755 356,755 - 992 357,747 MS 5.45 01/09/17 299,150 329,050 - (1,472) 327,578 Woori Bank 283,967 309,666 - 2,693 312,359 ICBCAS Float 16 306,591 306,762 - (64) 306,698 RAIFFEISEN BANK INTL 298,450 298,450 - 4,665 303,115 Others (Note) 12,399,711 12,471,106 - 62,132 12,533,238 23,479,661 23,610,363 - 125,681 23,736,044 Beneficial securities and asset-based Government National Mortgage Association 1,059,222 1,090,416 - (238) 1,090,178 securities Others (Note) 2,746,570 737,720 - 1,922 739,642 3,805,792 1,828,136 - 1,684 1,829,820
$ 276,130,525 $ 280,732,043 $ (16,168 ) $ 584,099 $ 281,299,974
Note: “Others” means the aggregated disclosure of items under $300,000.
(Concluded)
- 175 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 STATEMENT 4
TAISHIN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES
HELD-TO-MATURITY FINANCIAL ASSETS JUNE 30, 2014 (In Thousands of New Taiwan Dollars)
Unamortized Item Summary Face Value Interest Rate (%) Premium (Discount) Book Value Note
Investment in bills Negotiable certificates of deposit - Central Bank $ 169,900,000 0.568-1.05 $ - $ 169,900,000 Others (Note) 346,370 (164) 346,206 170,246,370 (164) 170,246,206 Corporate bonds P03 Dragon 1A 720,000 1.40 (619) 719,381 00 TSMC 1B 700,000 1.63 9,464 709,464 98 CPC 1A 700,000 1.20 (244 ) 699,756 02 UMC 1A 600,000 1.35 (442) 599,558 P03 ACC 1 600,000 1.36 (1,274) 598,726 01 TSMC 2B 500,000 1.40 1,218 501,218 00 Nanya 2 500,000 1.35 900 500,900 01 FENC 3 500,000 1.30 273 500,273 00 FPCC 1 500,000 1.40 (328) 499,672 02 Far Eastone 3B 500,000 1.27 (645) 499,355 01 FCFC 2A 500,000 1.23 (725) 499,275 02 Uni-President. 1 500,000 1.22 (897) 499,103 00 TSMC 1A 400,000 1.40 (183) 399,817 01 UMC 1A 400,000 1.43 (231) 399,769 01 FPCC 2A 300,000 1.35 903 300,903 00 Evaair 2B 300,000 1.44 807 300,807 01 FCFC 1A 300,000 1.29 753 300,753 00 FPC 2 300,000 1.35 628 300,628 Others (Note) 1,907,811 (224) 1,907,587 10,727,811 9,134 10,736,945 Bank debentures 00 HSBC 1D 500,000 1.37 - 500,000 01 HSBC 1A 500,000 1.25 - 500,000 01 The Export-Import Bank of R.O.C. 2 500,000 1.25 - 500,000 02 HSBC 1A 500,000 1.23 - 500,000 WF C 3.75 10/01/14 448,725 6.00 (32 ) 448,693 Others (Note) 1,109,560 1,485 1,111,045 3,558,285 1,453 3,559,738 Government bonds 1,000 1.38 15 1,015
$ 184,533,466 $ 10,438 $ 184,543,904
Note: “Others” means the aggregated disclosure of items under $300,000.
- 176 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 STATEMENT 5
TAISHIN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES
CHANGES IN INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD FOR THE SIX MONTHS ENDED JUNE 30, 2014 (In Thousands of New Taiwan Dollars, Except Unit Price)
Ending Balance Beginning Balance Increase Decrease Ownership Market Price or Equity Name Shares Amounts Shares Amounts Shares Amounts Shares Interest (%) Amounts Unit Price Total
Unlisted shares Taishin D.A. Finance (Note) 20,000,000 $ 142,860 - $ - (20,000,000) $ (142,860) - $ - $ - An-Hsin Real-Estate 3,900,000 78,369 - 12,580 - (17,823) 3,900,000 30 73,126 18.75 73,126
$ 221,229 $ 12,580 $ (160,683) $ 73,126 $ 73,126
Note: Decrease of Taishin D.A. Finance means that it has been included in the consolidated financial statements as of June 30, 2014
- 177 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 STATEMENT 6
TAISHIN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES
OTHER FINANCIAL ASSETS, NET JUNE 30, 2014 (In Thousands of New Taiwan Dollars)
Items Amount
Financial assets carried at cost Taiwan Power Co., Ltd. $ 2,279,704 Taiwan Asset Management Corp. 1,612,471 Dah Chung Bills 942,527 Kai Fa International Investment 500,000 Diamond Biotech Investment 450,000 Taiwan Sugar Corporation 434,213 Others (Note) 1,139,633 7,358,548 Debt investments without active market Class A Convertible Preferred Stock of Taiwan High Speed Rail Corp. 1,600,000 98 Cathay Holdings 1 800,000 Brave Rise Investments Ltd. 480,400 Others (Note) 763,551 3,643,951 Other miscellaneous financial assets Time deposit with original maturity more than 3 months 93,537,863 Others 378,532 93,916,395
$ 104,918,894
Note: “Others” means the aggregated disclosure of items under $300,000.
- 178 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 STATEMENT 7
TAISHIN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS JUNE 30, 2014 (In Thousands of New Taiwan Dollars)
Item Face Value Amount
Commercial paper Issued by - Yageo Corporation $ 3,316,400 $ 3,314,410 Issued by - Changhwa Telcom Co., Ltd. 2,450,000 2,447,109 Issued by - Bank SinoPac 1,900,000 1,897,998 Issued by - China Development Industrial Bank 1,450,000 1,447,647 Issued by - Taipei Fubon Bank 1,200,000 1,198,637 Issued by - Hotai Motor Co., Ltd. 1,000,000 998,883 Issued by - Fubon Life Insurance 860,000 860,213 Issued by - Cathay Financial Holdings 810,000 808,511 Issued by - Chang Gung Hospital 673,000 672,346 Issued by - CPC Corporation, Taiwan 550,000 547,359 Issued by - Yuanta Venture Capital 504,000 503,651 Issued by - Yuanta Futures 458,000 457,147 Issued by - HSBC Pension 98 450,000 448,961 Issued by - JP Morgan (Taiwan) Asia 400,000 399,677 Issued by - Far Estone Telecommunications 400,000 399,262 Issued by - Shin Kong Life Insurance 300,000 300,654 Others (Note) 7,371,800 7,364,977 24,093,200 24,067,442 Government bonds Treasury Bond 101-6 5,276,300 5,426,045 Treasury Bond 100-6 3,520,700 3,734,860 Treasury Bond 102-11 3,691,000 3,722,575 Treasury Bond 101-1 1,308,200 1,446,663 Treasury Bond 103-2 1,138,000 1,168,724 Treasury Bond 102-2 525,000 552,484 Treasury Bond 88-2 541,700 543,800 98 Kaohsiung City Government Bond II 488,200 498,549 99 Kaohsiung City Government Bond II 458,000 480,787 Treasury Bond 101-9 323,400 358,732 Others (Note) 1,275,500 1,367,927 18,546,000 19,301,146 Bank debentures Intned Float 16 393,786 381,229 Kofcor Float 17 365,659 348,904 Bchina Float 16 337,531 319,583 Others (Note) 3,864,808 3,716,447 4,961,784 4,766,163 Corporate bonds 02 FCFC 2A 870,000 870,000 00 Hon Hai 1 762,000 763,202 00 TSMC 1A 750,000 750,010 02 UMC 1 A 710,000 710,207 01 FPCC 2A 700,000 700,030 01 TSMC 1A 700,000 700,000 00 Taipower 5A 500,000 500,816 99 Taipower 3B 500,000 500,029 00 Hon Hai 2A 450,000 450,013 99 CPC1B 400,000 400,638 95 Taipower 1B 400,000 400,000 01 FPC 1A 396,000 396,021 01 CPC 1B 300,000 300,119 01 FCFC 2A 300,000 300,000 01 UMC 1A 300,000 300,000 02 Fubon 1A 300,000 300,000 Others (Note) 7,366,556 7,374,414 15,704,556 15,715,499
$ 63,305,540 $ 63,850,250
Note: “Others” means the aggregated disclosure of items under $300,000.
- 179 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 STATEMENT 8
TAISHIN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES
DETAILED STATEMENT OF FOREIGN EXCHANGE GAIN (LOSS) FOR THE SIX MONTHS ENDED JUNE 30, 2014 (In Thousands of New Taiwan Dollars)
Items Amount
Spot $ (4,385,332) Forward 5,244,092 Margin (37,538) Self-owned capital (8,127) Others 20,504
$ 833,599
- 180 - WorldReginfo - 26dcea23-7eb0-4783-a984-a76627a00c59 STATEMENT 9
TAISHIN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES
DETAILED STATEMENT OF NET OTHER NON-INTEREST INCOME (LOSS) FOR THE SIX MONTHS ENDED JUNE 30, 2014 (In Thousands of New Taiwan Dollars)
Items Amount
Revenue excluding interest Gain on disposal of non-performing loans $ 719,705 Leasing revenue 152,967 Loans management revenue 376,064 Gain on financial assets carried at cost 84,247 Gain on hedge derivatives 32,661 Other 305,294 1,670,938 Expense excluding interest Loans manage cost (22,612) Lease payments (24,241) Other (29,123) (75,976)
$ 1,594,962
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TAISHIN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES
DETAILED STATEMENT OF OPERATING EXPENSES FOR THE SIX MONTHS ENDED JUNE 30, 2014 (In Thousands of New Taiwan Dollars)
Items Amount
Employee benefits expenses $ 10,568,034 Depreciation 600,707 Amortization 190,017 Leases 744,244 Stationeries 62,109 Postage and remittance fee 345,902 Advertisement fee 358,103 Insurance 369,167 Tax and levies 1,055,178 Allowance for entertainment 87,266 Donation 362,563 Labor service fee 505,262 Freight 20,829 Others 1,120,129
$ 16,389,510
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