Fubon Financial Holding Co., Ltd. and Its Subsidiaries

FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES

Consolidated Interim Financial Statements

June 30, 2014 and 2013 (With Independent Accountants' Report Thereon)

FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Consolidated Balance Sheets June 30, 2014, and December 31 and June 30, 2013 (expressed in thousands of New Taiwan Dollars)

June 30, 2014 December 31, 2013 June 30, 2013 June 30, 2014 December 31, 2013 June 30, 2013 Assets Amount % Amount % Amount % Liabilities and Stockholders' Equity Amount % Amount % Amount %

Cash and cash equivalents (note 6 and 44) $ 168,447,311 3 194,224,779 4 139,581,491 3 Liabilities: Due from Central Bank and call loans to banks (note 7) 159,216,772 3 104,504,015 2 133,057,468 3 Due to Central Bank of China and other banks $ 110,658,221 2 91,718,827 2 74,685,907 2 Financial assets measured at fair value through profit or loss (note 8 and 44) 107,748,438 2 93,717,804 2 97,615,263 2 Financial liabilities measured at fair value through profit or loss (note 23) 47,980,175 1 43,000,297 1 39,319,830 1 Available-for-sale financial assets, net (note 9 and 44) 1,781,571,105 35 1,631,464,808 36 1,524,720,978 35 Hedging derivative financial liabilities (note 11) 1,853,027 - 1,872,070 - 2,080,308 - Hedging derivative financial assets (note 10) 524,606 - 517,817 - 630,617 - Securities sold under repurchase agreements (note 24) 91,898,020 2 48,188,694 1 42,248,367 1 Securities purchased under resell agreements (note 11) 70,055,362 1 72,391,296 2 74,050,430 2 Commercial paper payables, net (note 25) 5,823,522 - 4,724,342 - 5,589,492 - Receivables, net (note 12) 179,750,224 4 145,015,571 3 124,885,545 3 Payables 100,973,926 2 77,844,483 2 97,215,292 2 Current income tax assets 942,139 - 950,196 - 1,494,875 - Current income tax liabilities 5,524,865 - 5,951,820 - 5,996,852 1 Asset held for sale, net (note 13) 94,166 - - - - - Deposits (note 26) 1,767,923,312 35 1,504,452,622 33 1,461,433,294 34 Loans, net (note 14) 1,569,422,478 31 1,352,883,952 30 1,288,087,322 31 Bonds payable (note 27) 127,496,721 2 114,003,337 2 107,767,575 2 Reinsurance contract assets, net (note 15) 15,221,525 - 14,033,829 - 12,247,830 - Other borrowings (note 28) 1,100,000 - 35,000 - 1,100,000 - Held-to-maturity financial assets, net (note 16 and 44) 235,176,755 5 216,982,867 5 215,865,552 5 Provisions (note 29) 2,284,527,807 45 2,160,927,865 47 2,013,781,896 47 Investments in equity-accounted investees, net (note 17) 5,337,447 - 5,133,579 - 5,078,852 - Other financial liabilities (note 30) 185,886,426 4 182,285,637 4 168,633,918 4 Other financial assets, net (note 18) 617,993,655 12 571,464,921 13 539,311,843 12 Deferred tax liabilities (note 32) 8,702,229 - 2,474,686 - 2,325,023 - Investment property, net (note 19 and 44) 87,390,241 2 88,287,548 2 88,318,214 2 Other liabilities (note 31) 13,437,523 - 16,387,266 - 13,618,047 - Property, plant and equipment, net (note 20) 42,371,808 1 34,003,921 1 33,046,331 1 Total liabilities 4,753,785,774 93 4,253,866,946 92 4,035,795,801 94 Intangible assets, net (note 21) 30,167,080 - 13,454,750 - 13,439,702 - Equity attributable to owners of the parent (note 33 ) : Deferred tax assets (note 32) 5,546,614 - 6,728,774 - 5,738,973 - Common stock 102,336,040 2 102,336,040 2 95,351,652 2 Other assets, net (note 22) 44,379,493 1 24,786,415 - 21,670,131 1 Capital surplus 74,446,982 1 74,446,982 2 55,785,647 1 Retained earnings: Legal reserve 35,176,861 1 31,905,926 1 31,905,926 1 Special reserve 2,985,366 - 2,985,366 - 2,985,366 - Unappropriated retained earnings 84,259,699 2 75,533,098 2 60,590,069 1 Total retained earnings 122,421,926 3 110,424,390 3 95,481,361 2 Other equity 61,009,597 1 29,250,223 1 36,426,956 1 Total stockholders' equity 360,214,545 7 316,457,635 8 283,045,616 6 Non-controlling interests 7,356,900 - 222,261 - - - Total equity 367,571,445 7 316,679,896 8 283,045,616 6 Total assets $ 5,121,357,219 100 4,570,546,842 100 4,318,841,417 100 Total liabilities and stockholders' equity $ 5,121,357,219 100 4,570,546,842 100 4,318,841,417 100

See accompanying notes to consolidated financial statements. FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Consolidated Statements of Comprehensive Income For the three-month and six-month periods ended June 30, 2014 and 2013 (expressed in thousands of New Taiwan Dollars, except earnings per share)

For the three-month periods ended June 30 For the six-month periods ended June 30 2014 2013 2014 2013 Amount % Amount % Amount % Amount %

Interest income (note 36) $ 28,808,200 35 20,958,074 23 56,849,817 31 41,746,150 23 Less: Interest expense (note 36) 6,779,312 8 3,575,832 4 13,027,266 7 7,038,929 4 Net interest income 22,028,888 27 17,382,242 19 43,822,551 24 34,707,221 19 Non-interest income, net: Service fees and commission income, net (note 36) (1,578,318) (2) (1,294,233) (1) (2,533,109) (1) (2,373,176) (1) Insurance income, net (note 36) 49,924,368 60 66,009,162 71 111,011,117 61 125,377,772 70 Gains (losses) on financial assets or liabilities measured at fair value through profit or loss 10,200,484 12 (1,773,667) (2) 1,362,795 1 (11,470,608) (6) Gains on investment property 501,597 1 320,627 - 1,246,134 1 911,516 - Realized gains on available-for-sale financial assets 12,524,295 15 10,546,633 11 22,988,601 13 18,824,479 10 Realized losses on held-to-maturity financial assets (3,957) - (533) - (3,738) - (1,009) - Foreign exchange gains (losses) (12,393,616) (15) 1,856,074 2 (70,955) - 13,564,811 8 Reversal gains of impairment on assets 111,244 - 151,023 - 87,978 - 193,832 - Share of income of associates and joint ventures under equity method (note 17) 263,210 - 127,963 - 417,083 - 208,981 - Other non-interest gains (losses) 1,402,804 2 (18,131) - 2,034,962 1 (543,150) - Net Revenue 82,980,999 100 93,307,160 100 180,363,419 100 179,400,669 100 Provision losses (reversal gains) for bad debt expenses and guarantee reserve (411,330) - (115,391) - (398,515) - 74,263 - Net change in provision for insurance liability reserve (note 36) (54,570,337) 66 (72,191,583) 77 (123,682,456) 68 (136,040,047) 76 Operating expenses : Employee benefits expenses (note 36) (6,334,712) 8 (5,820,380) 6 (12,663,142) 7 (11,618,330) 6 Depreciation and amortization expenses (note 36) (676,649) 1 (462,721) - (1,351,887) 1 (983,284) 1 Other general and administrative expenses (note 36) (4,671,415) 6 (4,340,369) 5 (9,114,693) 5 (8,159,143) 5 Total operating expenses (11,682,776) 15 (10,623,470) 11 (23,129,722) 13 (20,760,757) 12 Net income before income tax from continuing operations 16,316,556 19 10,376,716 12 33,152,726 19 22,674,128 12 Income tax expenses (note 32) (2,766,257) (3) (2,624,490) (3) (5,667,608) (3) (4,775,486) (3) Net income $ 13,550,299 16 7,752,226 9 27,485,118 16 17,898,642 9 Other comprehensive income (losses): Exchange differences arising on translation of foreign operations $ (1,423,674) (2) 261,107 - (1,187,438) (1) 925,323 1 Unrealized gains (losses) on available-for-sale financial assets 17,877,989 22 (26,913,998) (29) 38,702,313 21 (40,037,747) (22) Losses on effective portions of cash flow hedges (22,580) - (45,386) - (10,127) - (78,073) - Share of other comprehensive (losses) income of associates and joint ventures under equity method 99,316 - 10,086 - 65,942 - 88,414 - Income tax related to components of other comprehensive income (2,621,059) (3) 6,041,505 6 (5,954,002) (3) 7,134,566 4 Other comprehensive income (losses) for the period, net of income tax $ 13,909,992 17 (20,646,686) (23) 31,616,688 17 (31,967,517) (17) Total comprehensive income (losses) for the period $ 27,460,291 33 (12,894,460) (14) 59,101,806 33 (14,068,875) (8)

Consolidated net income attributable to: Owners of parent $ 13,482,320 16 7,752,226 9 27,347,943 16 17,898,642 9 Non-controlling interests 67,979 - - - 137,175 - - - $ 13,550,299 16 7,752,226 9 27,485,118 16 17,898,642 9 Other comprehensive income attributable to: Owners of parent $ 27,491,636 33 (12,894,460) (14) 59,107,317 33 (14,068,875) (8) Non-controlling interests (31,345) - - - (5,511) - - - $ 27,460,291 33 (12,894,460) (14) 59,101,806 33 (14,068,875) (8)

Earnings per share (NTD) (note 36) $ 1.32 0.81 2.67 1.88

See accompanying notes to consolidated financial statements. FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Consolidated Statements of Changes in Equity For the six-month periods ended June 30, 2014 and 2013 (expressed in thousands of New Taiwan Dollars)

Equity attributable to owners of parent Other equity Exchange Unrealized Gains differences gains(losses) (losses) on Stock Retained earnings arising on on available- effective Total equity Unappropriated translation of for-sale portions of attributable Non- Common Capital Legal Special retained foreign financial cash flow Treasury to owners of controlling stock surplus reserve reserve earnings Total operations assets hedges Total stock parent interests Total equity

Balance at January 1, 2013 $ 95,269,157 55,704,785 29,007,646 2,985,366 55,124,871 87,117,883 (1,913,399) 70,028,171 279,701 68,394,473 (57,144) 306,429,154 - 306,429,154 Net income for the period - - - - 17,898,642 17,898,642 - - - - - 17,898,642 - 17,898,642 Other comprehensive income (losses) for the period (note 33) ------989,310 (32,892,026) (64,801) (31,967,517) - (31,967,517) - (31,967,517) Total comprehensive income (losses) for the period - - - - 17,898,642 17,898,642 989,310 (32,892,026) (64,801) (31,967,517) - (14,068,875) - (14,068,875) Appropriation of retained earnings : Legal reserve - - 2,898,280 - (2,898,280) ------Cash dividends - - - - (9,535,164) (9,535,164) - - - - - (9,535,164) - (9,535,164) Treasury stock transferred to employees - 3,317 ------57,144 60,461 - 60,461 Issuance of new shares of stock from exercise of employee warrants 82,495 77,545 ------160,040 - 160,040 Balance at June 30, 2013 $ 95,351,652 55,785,647 31,905,926 2,985,366 60,590,069 95,481,361 (924,089) 37,136,145 214,900 36,426,956 - 283,045,616 - 283,045,616

Balance at January 1, 2014 $ 102,336,040 74,446,982 31,905,926 2,985,366 75,533,098 110,424,390 (976,679) 30,076,828 150,074 29,250,223 - 316,457,635 222,261 316,679,896 Net income for the period - - - - 27,347,943 27,347,943 - - - - - 27,347,943 137,175 27,485,118 Other comprehensive income (losses) for the period (note 33) ------(1,138,759) 32,906,539 (8,406) 31,759,374 - 31,759,374 (142,686) 31,616,688 Total comprehensive income (losses) for the period - - - - 27,347,943 27,347,943 (1,138,759) 32,906,539 (8,406) 31,759,374 - 59,107,317 (5,511) 59,101,806 Appropriation of retained earnings : Legal reserve - - 3,270,935 - (3,270,935) ------Cash dividends - - - - (15,350,407) (15,350,407) - - - - - (15,350,407) - (15,350,407) Changes in non-controlling interests ------7,140,150 7,140,150 Balance at June 30, 2014 $ 102,336,040 74,446,982 35,176,861 2,985,366 84,259,699 122,421,926 (2,115,438) 62,983,367 141,668 61,009,597 - 360,214,545 7,356,900 367,571,445

See accompanying notes to consolidated financial statements. FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Consolidated Statements of Cash Flows For the six-month periods ended June 30, 2014 and 2013 (expressed in thousands of New Taiwan Dollars)

For the six-month periods ended June 30 2014 2013 Cash flows from operating activities: Income before income tax for the period $ 33,152,726 22,674,128 Adjustments： Income and expense items with no effect on cash flows Depreciation 1,251,835 1,065,056 Amortization 564,246 340,047 Allowance (reversal of allowance) on bad debts 364,154 (44,577) Interest expense 13,027,266 7,038,929 Interest income (56,849,817) (41,746,150) Dividend income (7,033,415) (5,760,635) Net change in insurance liability reserve 123,252,775 136,250,866 Net change in guarantee reserve 34,361 (29,686) Net change in other provisions 429,681 (210,819) Share of income of associates and joint ventures under equity method (417,083) (208,981) (Gain) losses on disposal and write-off of property, plant and equipment (801) 12,844 Property, plant and equipment transferred to expense 2,253 1,333 Gains on disposal of investment property - (151,396) Gains on disposal of investments (24,683,010) (7,939,311) Reversal gains of impairment on financial asset (68,198) (188,828) Reversal gains of impairment on non-financial assets (19,780) (5,004) Unrealized losses (gains) from foreign exchange 596,722 (12,874,683) Others (13,126) (3,631) Subtotal of income and expense items with no effect on cash flows 50,438,063 75,545,374 Change in operating assets and liabilities : Net change in operating assets : Increase in due from Central Bank and call loans to banks (14,896,729) (36,649,674) Decrease (increase) in financial assets measured at fair value through profit or loss (9,836,164) 3,962,301 Increase in available-for-sale financial assets (88,415,173) (100,693,221) Decrease (increase) in hedging derivative financial assets (31,587) 162,876 Increase in securities purchased under resell agreements (20,949,196) (100,149) Decrease (increase) in receivables and current income tax assets (31,694,841) 1,376,548 Increase in loans (66,767,557) (59,268,726) Decrease (increase) in reinsurance contract assets (1,154,532) 958,031 Decrease in held-to-maturity financial assets 4,199,341 20,150,313 Increase in other financial assets (45,733,385) (19,700,668) Increase in other assets (19,656,727) (6,102,101) Subtotal of net change in operating assets (294,936,550) (195,904,470) Net change in operating liabilities : Increase (decrease) in due to central bank and other banks 14,383,915 (1,719,233) Increase in financial liabilities measured at fair value through profit or loss 10,885,648 2,369,359 Increase (decrease) in hedging derivative financial liabilities (406,816) 380,232 Increase in securities sold under repurchased agreements 43,709,326 9,903,877 Increase in payables and current income tax liabilities 295,669 9,138,453 Increase in deposits 46,698,980 72,559,899 Increase in provisions 233,786 1,848,719 Increase (decrease) in other financial liabilities 3,174,305 (9,593,838) Decrease in other liabilities (2,976,106) (3,885,847) Subtotal of net change in operating liabilities 115,998,707 81,001,621 Subtotal of net change in operating assets and liabilities (178,937,843) (114,902,849) Subtotal of all adjustments (128,499,780) (39,357,475) Cash used in operating activities (95,347,054) (16,683,347) Cash received from interest income 49,432,618 31,909,212 Cash received from dividends 6,526,849 5,628,769 Cash paid for interest (13,295,859) (7,540,753) Cash paid for income taxes (1,734,241) (2,534,776) Net cash provided by (used in) operating activities (54,417,687) 10,779,105

For the six-month periods ended June 30 2014 2013

Cash flows from investing activities : Acquisition of equity-accounted investees $ - (80,638) Net cash flow from acquisition of subsidiaries (6,966,023) - Acquisition of property, plant and equipment (792,489) (483,550) Proceeds from disposal of property, plant and equipment 5,185 7,888 Acquisition of intangible assets (95,621) (173,786) Proceeds from disposal of foreclosed collateral 11,182 1,240 Acquisition of collateral assumed - (1,491,208) Acquisition of investment property (227,366) (7,052,840) Proceeds from disposal of investment property - 152,488 Net cash used in investing activities (8,065,132) (9,120,406) Cash flows from financing activities: Increase in due to central bank and other banks 419,959 - Increase in commercial paper payables 1,099,179 5,589,492 Issuance of bank notes payable 13,493,384 1,480,128 Increase in other borrowings 1,065,000 1,100,000 Proceeds from employees’ exercise of warrants - 160,040 Proceeds from disposal of treasury stock - 60,461 Change in non-controlling interests 996,799 - Net cash provided by financing activities 17,074,321 8,390,121 Effect of exchange rate on cash and cash equivalents (650,226) (482,488) Net increase (decrease) in cash and cash equivalents (46,058,724) 9,566,332 Cash and cash equivalents at the beginning of period 295,425,386 241,344,687 Cash and cash equivalents at the end of period $ 249,366,662 250,911,019 Components of cash and cash equivalents: Cash and cash equivalents recognized in balance sheet $ 168,447,311 139,581,491 Due from Central Bank and call loans to banks in compliance with IAS 7 definition of “Cash and cash equivalents” 32,213,532 37,379,247 Securities purchased under resell agreements in compliance with IAS 7 definition of “Cash and cash equivalents” 48,705,819 73,950,281 Cash and cash equivalents at the end of period $ 249,366,662 250,911,019

See accompanying notes to consolidated financial statements. FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements June 30, 2014 and 2013 (expressed in thousands of New Taiwan Dollars, unless otherwise specified)

(1) Organization and Business Scope 1) Fubon Financial Holding Co., Ltd. Fubon Financial Holding Co., Ltd. (the Company) was established in December 2001 pursuant to the Financial Holding Company Act in Taiwan. In connection with the formation of the Company, substantially all of the assets and liabilities and related operations of Fubon Insurance Co., Ltd. (Fubon Insurance) were transferred to a new wholly owned subsidiary named Fubon Insurance. The name of the “former” Fubon Insurance Co., Ltd. was changed to Fubon Financial Holding Co., Ltd. Furthermore, shares of Fubon Securities Co., Ltd. (Fubon Securities), Fubon Commercial Bank Co., Ltd. (Fubon Bank), and Fubon Life Assurance Co., Ltd. (Fubon Life Assurance) were exchanged for shares in the Company on December 19, 2001. On August 28, 2002, shares of Fubon Asset Management Co., Ltd. (Fubon Asset Management) were exchanged for shares in the Company. Starting from March 11, 2011, due to the Company’s corporate restructuring, Fubon Asset Management became a wholly owned subsidiary of Fubon Securities. On December 23, 2002, shares of Taipei Bank Co., Ltd. (Taipei Bank) were exchanged for shares in the Company. In September 2003, shares of Fubon Marketing Co., Ltd. (Fubon Marketing) were acquired in cash by the Company. In October 2003, shares of Fubon Holding Venture Capital Co., Ltd. (Fubon Holding Venture Capital) were acquired in cash by the Company. In March 2004, 75% of the shares of Common Stock of International Bank of Asia, Limited, renamed Fubon Bank Hong Kong, Limited (Fubon Bank (Hong Kong)), were purchased in cash by the Company. On June 13, 2011, 25% of the remaining outstanding shares of Common Stock of Fubon Bank (Hong Kong) were purchased in cash by the Company. On August 16, 2012, Fubon Bank (Hong Kong) redeemed the preferred shares of stock of $4,004,057 held by the Company. On the same date, the Company subscribed in cash of $4,004,057 for the ordinary shares of stock of Fubon Bank (Hong Kong). In August 2004, shares of Fubon Asset Management Service Co., Ltd. (Fubon AMC) and Fubon Investment Management Consulting Co., Ltd. (Fubon IMC) were purchased in cash by the Company. On November 7, 2011, the procedures for the liquidation of Fubon IMC were completed. In March 2008, shares of Taiwan Sport Lottery Co., Ltd. (Taiwan Sport Lottery) were purchased in cash by the Company. In September 2008, the Company owned 51% of the shares of Taiwan Sport Lottery. On July 20, 2011, Taiwan Sports Lottery became wholly owned subsidiary of the Company.

(Continued) 2 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

On February 11, 2009, all of the equity shares of ING Life Insurance Co., Ltd. (ING Life Insurance) were exchanged for shares in the Company. On June 1, 2009, ING Life Insurance merged with Fubon Life Assurance Co., Ltd., which was renamed Fubon Life Insurance Co., Ltd. In January 7, 2014, 80% of the shares of First Sino Bank, Limited, which was renamed as Fubon Bank (China) Co., Ltd. from April, 2014, were purchased in cash by the Company and Taipei Fubon Bank. Fubon Bank (China) became 80% owned subsidiary of the Company. The Company is principally engaged in the financial businesses including banking, financial bills, credit cards, trust, insurance, securities, futures, ventures, investments in foreign financial institutions approved by the government authorities, and investments relevant to other financial services approved by the government authorities. 2) Business of consolidated subsidiaries: 1. Fubon Insurance was incorporated on December 19, 2001, and assumed all rights and liabilities of the former Fubon Insurance Co., Ltd., which was incorporated in 1961. It is primarily engaged in the business of property and casualty insurance. 2. Fubon Securities was incorporated on July 11, 1988, as a company with an integrated securities firm license. Fubon Securities’ operations include brokerage, margin lending, securities financing and refinancing, securities trading, securities transfer services, securities underwriting, and futures. 3. Taipei Bank started as a financial institution of the Taipei City Government (TCG) in 1969. On July 1, 1984, it was reorganized into a limited liability corporation and it was renamed as City Bank of Taipei Co., Ltd. On January 1, 1993, the bank’s name was subsequently changed to Taipei Bank Co., Ltd. On August 1, 1991, Fubon Bank was authorized to operate as a commercial bank and commenced its commercial operations on April 20, 1992. On January 1, 2005, Taipei Bank merged with Fubon Bank to improve operational efficiency and reduce costs. Taipei Bank was the surviving entity from this merger. However, the name Taipei Bank was changed to Taipei Fubon Bank on the same day. Taipei Fubon Bank is engaged mainly in (a) Municipal treasuries of Taipei City Government; (b) Management of municipal treasury bills of Taipei City Government; (c) All commercial banking operations authorized under the Banking Law; (d) Trust and securities operations; (e) Handling of public benefit lottery operations; (f) Concurrent operation of futures dealing; and (g) Other authorized operations.

(Continued) 3 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

In addition to the aforementioned activities, Taipei Fubon Bank continues to handle certain functions for the Taipei City Government (TCG), primarily acceptance of payments for taxes, fines, and other fees, as well as the payments of principal and interest on bonds issued by the TCG. 4. Fubon Bank (Hong Kong) was founded in 1982. It is engaged in the following operations: (a) Retail and consumer banking; (b) Commercial banking; (c) Investment banking; (d) Investment and financial management services; and (e) Properties management and other services. 5. Fubon Life Insurance was incorporated on June 3, 1993, under the laws of the Republic of China (ROC). It is engaged in the business of life insurance underwriting. The original parent company of ING Life Insurance (Taiwan) Co., Ltd. – ING Group signed a cooperative agreement with the Company on October 20, 2008 to sell 100% of ING Life Insurance (Taiwan) shares to the Company. In order to acquire ING Life Insurance (Taiwan), the Company issued new shares and subordinated corporate bonds aggregating to US$600,000 thousand to ING Group, and regarded February 11, 2009 as the acquisition date. Fubon Life Insurance merged with ING Life Insurance (Taiwan) effective June 1, 2009, with ING Life Insurance (Taiwan) was the surviving entity and then changed its name to Fubon Life Insurance Co., Ltd. Fubon Life Insurance is primarily engaged in life insurance, accident insurance, health insurance, and any business related to life insurance. 6. Fubon Bank (China), in accordance with the “Regulations Governing Foreign Financial Institutions in the People’s Republic of China”, is invested by Shanghai Pudong Development Bank and Lotus Worldwide Ltd. and established as a Joint Venture Bank in Shanghai Pudong District, the People’s Republic of China (the PRC) on March 20, 1997. Fubon Bank (China) mainly engages in a full scope of foreign currency services and CNY service to customers except citizens in the territory of China. Fubon Bank (China) has established head office business department and 13 branches (or sub-branches) in the PRC. (2) Approval Date and Procedures of the Financial Statements The consolidated interim financial statements were approved by the board of directors and authorized for issue on August 21, 2014.

(Continued) 4 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(3) Application of New and Revised Standards, Amendments and Interpretations 1) The impact on the 2013 International Financial Reporting Standards (IFRSs) endorsed by the Financial Supervisory Commission but not yet effective in Taiwan. In accordance with Rule No. 1030010325 issued by the Financial Supervisory Commission (“FSC”) on April 3, 2014, listed companies on stock exchange market, over-the-counter market, and emerging stock market should adopt the 2013 IFRSs (excluding IFRS 9 Financial Instruments) endorsed by the FSC starting from 2015. The new standards, amendments, and interpretations are as follows: New Standards, Amendments and Interpretations Effective Date Announced by IASB

Amendment to IFRS 1 “Limited Exemption from July 1, 2010 Comparative IFRS 7 Disclosures for First-Time Adopters” Amendment to IFRS 1 “Severe Hyperinflation and Removal July 1, 2011 of Fixed Dates for First-Time Adopters” Amendment to IFRS 1 “Government Loans” January 1, 2013 Amendment to IFRS 7 “Disclosures-Transfer of Financial July 1, 2011 Assets” Amendment to IFRS 7 “Disclosures-Offsetting Financial January 1, 2013 Assets and Financial Liabilities” IFRS 10 “Consolidated Financial Statements” January 1, 2013 (Become effective for investment entity from January 1,2014) IFRS 11 “Joint Arrangements” January 1, 2013 IFRS 12 “Disclosure of Interests in Other Entities” January 1, 2013 IFRS 13 “Fair Value Measurement” January 1, 2013 Amendment to IAS 1 “Presentation of Other Comprehensive July 1, 2012 Income” Amendment to IAS 12 “Deferred tax: Recovery of January 1, 2012 Underlying Assets” IAS 19 Amendment to “Employee Benefits” January 1, 2013 IAS 27 Amendment to “Separate Financial Statements” January 1, 2013 Amendment to IAS 32 “Offsetting Financial Assets and January 1, 2014 Financial Liabilities” IFRIC 20 “Stripping Costs in Production Phase of a Surface January 1, 2013 Mine”

(Continued) 5 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Except for the following items, the adoption of the 2013 IFRSs by the Company and its subsidiaries would have no significant impact on the consolidated financial statements: 1. IAS 19 “Employee Benefits” The amendments to IAS 19 require the Company and its subsidiaries to calculate a “net interest” amount by applying the discount rate to the net defined benefit liability or asset to replace the interest cost and expected return on planned assets used in current IAS 19. In addition, the amendments eliminate the accounting treatment of either corridor approach or the immediate recognition of actuarial gains and losses to profit or loss when it incurs. Instead, they require to recognize all actuarial gains and losses immediately through other comprehensive income. The past service cost, on the other hand, will be expensed immediately when it incurs and no longer be amortized over the average period before vested on a straight-line basis. The Company and its subsidiaries shall recognize termination benefits at the earlier of the time when the Company and its subsidiaries can no longer withdraw an offer of the termination benefit or when the related restructuring costs are recognized, not only at the time when the relevant termination has a clear commitment and has recognized the termination benefits as liabilities or expenses. In addition, the amendments also require a broader disclosure in the defined benefit plans. The Company and its subsidiaries are continuingly assessing the impact on the financial position and financial performance as a result of the adoption of the above standards and interpretations, and will disclose the relevant impact when the assessment is complete. 2. IFRS 10 “Consolidated Financial Statements” IAS 27 “Consolidated and Separate Financial Statements” was superseded by IFRS 10 to establish principles for the presentation and preparation of consolidated financial statements. In addition, IASB renamed IAS 27 as “Separate Financial Statements”, repealed SIC 12 “Consolidation- Special Purpose Entities”, and redefined the principle of control. The Company and its subsidiaries can have control over the investees when it meets the three control elements at the same time. 3. IAS 1 “Presentation of Financial Statements” The amendments to IAS 1 change the presentation of other comprehensive income. They require the grouping of items of other comprehensive income into (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when specific conditions are met. In addition, all items under other comprehensive income shall be presented in pre-tax amount. The related tax effects shall be disclosed separately based on the aforesaid grouping method. The Company and its subsidiaries will change the presentation of the consolidated statements of comprehensive income in conformity with the amendments. The items that will not be reclassified subsequently to profit or loss are expected to include the actuarial gains or losses from defined benefit plans, the share of actuarial gains or losses from defined benefit plans of associates and joint venture, as well as the related income tax on such items. Items that will be reclassified subsequently to profit or loss are expected to include the exchange differences arising on translation of foreign operations, the changes in fair value of available-for- sale financial assets, the cash flow hedges, the share of other comprehensive income of associates and joint venture, as well as the related income tax on items of other comprehensive income (except for the share of actuarial gains or losses from defined benefit plans.)

(Continued) 6 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

4. IFRS 12 “Disclosure of Interests in Other Entities” IFRS 12 integrates all related standards regarding the disclosures about an entity's interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. The Company and its subsidiaries will increase the disclosures of consolidated and non-consolidated according to this standard. 5. IFRS 13 “Fair Value Measurement” IFRS 13 defines the fair value, establishes a framework for measuring fair value, and requires the disclosures of the fair value measurements. Furthermore, the disclosure requirements in IFRS 13 are more extensive than those required in the current standards. For example, the current quantitative and qualitative disclosures based on the three-level fair value hierarchy that only required for financial instruments will be extended by IFRS 13 to cover all assets and liabilities within its scope. 6. Revision to IAS 28 “Investments in Associates and Joint Ventures” Revised IAS 28 when a portion of an investment in associates meets the criteria to be classified as held for sale, that portion is classified as held for sale. Any remaining portion that has not been classified as held for sale is accounted for using the equity method. Under current IAS 28, when a portion of an investment in associates meets the criteria to be classified as held for sale, the entire investment is classified as held for sale and ceases to apply the equity method. As of the date the interim consolidated financial statements were being authorized for issue, the Company and its subsidiaries are continuously assessing the possible impact on the financial position and financial performance as a result of the adoption of the above 2013 IFRSs, and will disclose the relevant impact when the assessment is complete. 2) The impact on new IFRSs announced by the IASB but not yet endorsed by the FSC Listed as below are the accounting standards and interpretations newly issued and reused by IASB but not yet included in the 2013 IFRSs as accepted by the FSC. New Standards, Amendments and Interpretations Effective Date Announced by IASB

Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014 IFRS 9 “Financial Instruments” January 1, 2018 IFRS 14 “Regulatory Deferral Accounts” January 1, 2016 IFRS 15 “Revenue from Contracts with Customers” January 1, 2017 Amendment to IFRS 11 “Accounting for Acquisitions of January 1, 2016 interests in Joint Operations” Amendment to IAS 16 and IAS 38 “Clarification of Acceptable January 1, 2016 Methods of Depreciation and Amortization” Amendment to IAS 16 and IAS 41 “Bearer Plants” January 1, 2016 Amendment to IAS 19 “Defined Benefit Plans: Employee July 1, 2014 Contributions”

(Continued) 7 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

New Standards, Amendments and Interpretations Effective Date Announced by IASB

Amendment to IAS 36 “Impairment of Assets: Recoverable January 1, 2014 Amount Disclosures for Non-Financial Assets” Amendment to IAS 39 “Novation of Derivatives and January 1, 2014 Continuation of Hedge Accounting” IFRIC 21 “Levies” January 1, 2014

Except for the following items, the initial adoption of the above new, amended and revised standards and interpretations would have no significant impact on the accounting policies of the Company and its subsidiaries. 1. IFRS 9 “Financial Instruments” (a) Recognition and measurement of financial assets 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 Company and its subsidiaries’ 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： a) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are to be measured at amortized cost and 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; b) 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 to be measured at fair value through other comprehensive income (FVTOCI) and 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 the above, all other financial assets are measured at fair value through profit or loss. However, the Company and its subsidiaries 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.

(Continued) 8 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

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 Company and its subsidiaries take 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. (b) Recognition and measurement of financial liabilities As for financial liabilities, the main changes in the classification and measurement relate to the subsequent measurement of financial liabilities designated as at fair value through profit or loss. The amount of change in the fair value of such financial liability, attributable to changes in the credit risk of that liability, is presented in other comprehensive income and the remaining amount of change in the fair value of that liability is presented in profit or loss, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss. If the above accounting treatment would create or enlarge an accounting mismatch in profit or loss, the Company and its subsidiaries shall present all gains or losses on that liability in profit or loss. (c) Hedge accounting The main change in IFRS 9 is the increase of the eligibility of hedge accounting. It allows reporters to reflect risk management activities in the financial statements more closely as it provides more opportunities to apply hedge accounting. A fundamental difference to IAS 39 is that IFRS 9 (a) increases the scope of hedged items eligible for hedge accounting. For example, the risk components of non-financial items may be designated as hedging accounting; (b) revises a new way to account for the gain or loss recognition arising from hedging derivative financial instruments, which results in a less volatility in profit or loss; and (c) is necessary for there to be an economic relationship between the hedged item and the hedging instrument instead of performing the retrospective hedge effectiveness testing.

(Continued) 9 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

2. Amendments to IAS 36 “Recoverable Amount Disclosures for Non-Financial Assets” In issuing IFRS 13 “Fair Value Measurement”, the IASB made some consequential amendments to the disclosure requirements in IAS 36 “Impairment of Assets”, introducing a requirement to disclose in every reporting period the recoverable amount of an asset or each cash-generating unit. The amendment clarifies that the disclosure of such recoverable amount is required during the period when an impairment loss has been recognized or reversed. Furthermore, the Company and its subsidiaries are required to disclose the discount rate used in current and previous measurements of the recoverable amount based on the fair value less costs of disposal measured using a present value technique. Except for the aforementioned impact, the Company and its subsidiaries are continuously assessing the possible impact on the financial position and financial performance as a result of the adoption of the above standards and interpretations, and will disclose the relevant impact when the assessment is complete. (4) Summary of Significant Accounting Policies The consolidated interim financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language consolidated interim financial statements, the Chinese version shall prevail. The significant accounting policies applied in the preparation of these consolidated interim financial statements are set out as below. The significant accounting policies have been applied consistently to all periods presented in these consolidated interim financial statements. 1) Statement of compliance The consolidated interim financial statements have been prepared in accordance with “Regulations Governing the Preparation of Financial Reports by Financial Holding Companies” and IAS 34 Interim Financial Reporting (“IAS 34”) endorsed by the FSC and do not include all of the information required for full annual consolidated financial statements prepared in accordance with the IFRSs, IAS and interpretations endorsed by the FSC. 2) Basis of preparation The consolidated interim financial statements comprised of the consolidated balance sheets, the consolidated statements of comprehensive income, changes in equity and cash flows and notes to consolidated interim financial statements. The consolidated interim financial statements have been prepared on historical cost basis except for financial assets and liabilities measured at fair value through profit or loss, which are measured at fair value (including derivative financial instruments). The individual entity of the Company and its subsidiaries based on its primary economic environment operating currency as its functional currency. The consolidated interim financial statements functional currency is NTD unless otherwise specified. All financial information presented in NTD has been rounded to the nearest thousand, unless otherwise noted.

(Continued) 10 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

3) Principles of consolidation In accordance with the “Regulations Governing the Preparation of Financial Reports by Financial Holding Companies” and TIFRS, similar underlying assets, liabilities, equity, income and expenses of the consolidated entities are summed up and eliminated, if necessary, in the preparation of the consolidated interim financial statements. The Company prepares its consolidated interim financial statements at the same reporting date. The financial statements of subsidiaries are included in the consolidated interim financial statements from the date that control commenced until the date that control ceased. Intra-company balances and transactions, and any unrealized income arising from intra-company transactions, are eliminated in preparing the consolidated interim financial statements. Unless there is evidence that transferred assets are impaired, the intra-company unrealized losses are eliminated. Subsidiaries’ financial statements are adjusted to align the accounting policies with those of the Company. The following entities have been included in the consolidated financial statements:

Percentage of Ownership (%) Name of Investor Subsidiary Main Activities June 30, 2014 December 31, June 30, 2013 2013

The Company Fubon Insurance Property and 100.00 % 100.00 % 100.00 % casualty insurance The Company Taipei Fubon Bank Banking 100.00 % 100.00 % 100.00 % The Company Fubon Life Insurance Life insurance 100.00 % 100.00 % 100.00 % The Company Fubon Securities Securities business 100.00 % 100.00 % 100.00 % The Company Fubon Marketing Marketing 100.00 % 100.00 % 100.00 % management The Company and Fubon Financial Holding Venture Capital 100.00 % 100.00 % 100.00 % Fubon Securities Venture Capital The Company Fubon Bank (Hong Banking 100.00 % 100.00 % 100.00 % Kong) The Company Fubon AMC Creditor’s rights 100.00 % 100.00 % 100.00 % management The Company Taiwan Sport Lottery IT Software service 100.00 % 100.00 % 100.00 % The Company and Fubon Bank (China) Banking 80.00 % - % - % Taipei Fubon Bank Taipei Fubon Bank Taipei Fubon Bank Life Life insurance agent 100.00 % 100.00 % 100.00 % Insurance Agent Co., Ltd. Fubon Securities Fubon Asset Investment trust 100.00 % 100.00 % 100.00 % Management Fubon Securities Fubon Futures Futures 100.00 % 100.00 % 100.00 % Fubon Securities Fubon Investment Investment Service 100.00 % 100.00 % 100.00 % Service Fubon Securities Fubon Securities BVI Securities business 100.00 % 100.00 % 100.00 % Fubon Securities BVI Fubon Securities (Hong Securities business 100.00 % 100.00 % 100.00 % Kong) Fubon Insurance Fubon Insurance Insurance business 100.00 % 100.00 % 100.00 % (Vietnam) (Continued) 11 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Percentage of Ownership (%) Name of Investor Subsidiary Main Activities June 30, 2014 December 31, June 30, 2013 2013

Fubon Insurance Fubon Insurance Broker Broker 48.97 % 48.97 % - % (Thailand) (Note 1) Fubon Insurance Fubon Insurance Broker Broker 99.99 % 99.99 % 99.99 % (Philippine) Fubon Insurance and Fubon Property & Insurance business 80.00 % 80.00 % 100.00 % Fubon Life Casualty Insurance Insurance (Xiamen) (Note 2) Fubon Life Insurance Fubon Life Insurance Insurance business 100.00 % 100.00 % 100.00 % (Vietnam) Fubon Marketing Fu Sheng Life Insurance Life insurance and 100.00 % 100.00 % 100.00 % Agent and Fu Sheng property and General Insurance casualty insurance Agent agent Fubon Bank (HK) Fubon Nominees (Hong Financial sector 100.00 % 100.00 % 100.00 % Kong) Limited (Note 3) business Fubon Bank (HK) Fubon Financing (HK) Financial sector - % - % 100.00 % (Note 3) business Fubon Bank (HK) Fubon Credit (HK) (Note Financial sector 100.00 % 100.00 % 100.00 % 3) business Fubon Bank (HK) FB Securities (HK) (Note Securities brokerage 100.00 % 100.00 % 100.00 % 3) Fubon Bank (HK) FB Investment Capital management 100.00 % 100.00 % 100.00 % Management (HK) (Note 3) Fubon Bank (HK) FB Insurance Consultants Insurance agent 100.00 % 100.00 % 100.00 % (HK) (Note 3)

Note 1: Fubon Insurance and Friedmann Pacific Investment Holdings Limited jointly invested to set up Fubon Insurance Broker (Thailand) Co. Ltd. On November 5, 2013, the date of capital increase of Fubon Insurance Broker (Thailand) Co. Ltd., Fubon Insurance subscribed the shares and was in de facto control. Therefore, Fubon Insurance Broker (Thailand) Co. Ltd is deemed as a subsidiary of Fubon Insurance. Note 2: Fubon Insurance and Fubon Life Insurance invested CNY$400 million to set up Fubon Property & Casualty Insurance Co., Ltd. Fubon Property & Casualty Insurance Co., Ltd. increased its capital stock of CNY$100 million, which was acquired entirely by Xiamen Port Holding Group on August 16, 2013. Therefore, the jointly held equity ratio of Fubon Insurance and Fubon Life Insurance decreased to 80%. Note 3: These entities are the major subsidiaries of Fubon Bank (HK). 4) Foreign currency 1. Foreign currency transaction Transactions in foreign currencies are translated to the respective functional currencies of the individual entities of the Company and its subsidiaries at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Translation gains and losses are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was originally determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the original transaction.

(Continued) 12 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Foreign currency differences arising from settlement or retranslation of monetary assets and liabilities are recognized in profit or loss, except for the following differences, which are recognized in other comprehensive income: (a) Available-for-sale equity investment; (b) A financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or (c) Qualifying cash flow hedges to the extent the hedge is effective. 2. Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the Company’s functional currency in New Taiwan dollars at exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Company’s functional currency at average rate. Foreign currency differences are recognized in other comprehensive income, and presented in the foreign currency translation adjustments in equity. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the foreign currency translation adjustment related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant cumulative amount of foreign currency translation adjustments is reattributed proportionately to non-controlling interest. When the Company disposes of only part of investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant foreign currency cumulative amount of translation adjustments is reclassified proportionately to profit or loss. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered as part of a net investment in foreign operation and are recognized in other comprehensive income, and presented in the foreign currency translation adjustments in equity. 5) Cash and cash equivalents Cash and cash equivalents comprise cash on hand, demand deposits, unrestricted time deposits which may be terminated anytime without impairing the principal and highly liquid investments that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value. Due from Central Bank and call loans to banks and securities purchased under resell agreements which meet the definition as defined in International Accounting Standards 7 (“IAS 7”) and form an integral part of the Company and its subsidiaries’ cash management are included as components of cash and cash equivalents for the purpose of the consolidated statement of cash flows.

(Continued) 13 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

6) Investment in associates Associates are those entities in which the Company has the power to exercise significant influence, but not control, over their financial and operating policies. Investments in associates, except for held-for-sale assets, are accounted for using the equity method and are recognized initially at cost. The carrying amount of investment in associates, which includes goodwill arising from business acquisition, is stated at cost less any accumulated impairment losses. The consolidated financial statements include the Company’s share of the profit or loss and other comprehensive income of equity-accounted investees, after adjustments to align the accounting policies with those of the Company, from the date that significant influence commences until the date that significant influence ceases. When the Company’s share of losses exceeds its investment in equity-accounted investees, the carrying amount of the investment, including any long-term interests that from part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Company has an obligation or has made payments on behalf of the investee. When an associate is disposed of such that significant influence is lost, the residual investment is measured at fair value at the date of disposal. The difference between the residual value measured at fair value plus considerations received for the disposal of shares of an associate and the carrying amount at the time of losing significant influence is recognized in profit or loss. The associate-related amount initially recognized in other comprehensive income is then reclassified to profit or loss. 7) Repurchase and resell transactions Securities under agreement to repurchase or to resell are accounted for securities sold under agreements to purchase or securities purchased under agreements to resell. Related interest expenses and interest revenues are accrued over the period between the date of sale and repurchase or the date of purchase and resale. 8) Financial assets and financial liabilities Financial assets and liabilities, including derivative instruments, are recognized in the consolidated balance sheet and measured according to its classification under TIFRS. In accordance with International Accounting Standards 39 Financial instruments (“IAS 39”) as endorsed by FSC, financial assets are classified into the following categories: financial assets measured at fair value through profit or loss, available-for-sale financial assets, hedging derivative financial assets, financial assets carried at cost, debt investments in non-active market, held-to- maturity financial assets, other financial assets, and loans and receivables. Financial liabilities are classified into the following categories: financial liabilities measured at fair value through profit or loss, hedging derivative financial liabilities, and financial liabilities measured at amortized cost. The trading of financial assets is recognized by trade-date accounting. 1. Financial assets (a) Financial assets measured at fair value through profit or loss A financial asset is classified in this category if acquired principally for the purpose of selling or repurchasing in the short term, placing in an investment portfolio for short-term profit- taking, or holding as derivative instrument. Financial assets measured at fair value through profit or loss include held-for-trading or are designated as such at the time of initial recognition. (Continued) 14 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Financial assets, other than ones classified as held-for-trading, are designated as at fair value through profit or loss at initial recognition under one of the following situations: a) Designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; b) Performance of the financial asset is evaluated on a fair value basis; or c) Hybrid instrument contains one or more embedded derivatives. Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss includes any dividend or interest earned on financial asset. Financial assets measured at fair value through profit or loss and designated as such at the time of initial recognition are classified as “financial assets measured at fair value through profit or loss” in the consolidated balance sheet. Changes in fair value are recognized in profit of loss as “gain or loss on financial assets and liabilities measured at fair value through profit or loss”. (b) Held-to-maturity financial assets Financial assets which the Company and its subsidiaries have the positive intent and ability to hold debt securities to maturity are classified as held-to-maturity financial assets. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortized cost using the effective interest method, less any impairment losses. A sale or reclassification of a more than insignificant amount of held-to-maturity investments would result in the reclassification of all held-to-maturity investments as available-for-sale, and would prevent the Company and its subsidiaries from classifying financial assets as held- to-maturity for the current and the following two financial years. (c) Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are designated available-for-sale or are not classified as loans and receivables, held-to-maturity investment, or financial assets measured at fair value through profit or loss. Available-for-sale financial assets are recognized initially at fair value, plus, any directly attributable transaction cost. Subsequent to initial recognition, fair value changes due to gain or loss on foreign exchange, interest income calculated using the effective interest method and dividend income on available-for-sale investment, are recognized in profit or loss. Other fair value changes were recognized in other comprehensive income until the investment was disposed of or impaired, whereupon the cumulative gains and losses previously recognized in other comprehensive income were reclassified to profit or loss as a reclassification adjustment. Dividend income is recognized in profit or loss when the Company and its subsidiaries became entitled to the dividend.

(Continued) 15 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are recognized in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in profit or loss or other comprehensive income on financial assets. (d) Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables comprise initial originated and non-initial originated. Initial originated assets indicate that the Company and its subsidiaries directly provide money, merchandise or service to debtors. Non-initial originated assets are other than initial originated loans and receivables. Loans and receivables are initially recognized at fair value plus incremental direct transaction costs, services fees, and discount or premium, and subsequently measured at their amortized cost using the effective interest method. When the discounted effect is insignificant, loans and receivables can be measured at original cost. The non-accrual loans arising from transferred loans are recognized as “loans”, and other non-accrual loans are recognized as “other financial assets”. (e) Other financial assets a) Non-active market debt investments Non-active market debt investments are debt investments with fixed or determinable payments that are not quoted in an active market. At initial recognition, the costs of the financial assets are valued at their fair value plus the acquisition costs. Disposal gain or loss is recognized in profit or loss upon derecognition. Non-active market debt investments are measured at amortized cost using the effective interest rate method. b) Financial assets carried at cost At initial recognition, the costs of the equity investments in a non-active market are valued at fair value plus the acquisition costs. These assets can be measured at fair value under one of the following conditions: a. The variability in the range of reasonable fair value measurements is not significant for that asset. b. The probabilities of the various estimates within the range can be reasonably assessed and used when measuring fair value. If a financial asset does not meet both of these conditions, then it is carried at cost.

(Continued) 16 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

c) Investment-linked insurance policy Fubon Life Insurance is engaged in selling investment-linked insurance policies. The payment of premiums, net of administrative expenses, is recorded in a separate account and is used only in the way agreed to by the insured. The assets in these separate accounts are valued at market price on value date and it adopts related rules and ROC Financial Accounting Standards in determining the net asset value. d) Futures trading margins Futures trading margins include trading margins deposited by customers and the gain or loss generated from unsettled futures contracts based on daily market values. e) Structured deposits The structured deposit engaged by Fubon Life Insurance has rights to collect cash or other financial instruments from counterparties through the contract. Structured deposits are recorded at cost as stated in the contracts, and the interest rates are linked to market rates and other financial benchmarks. Interest income thereon is recognized after holding the structured deposits to maturity. Impairment of principals would occur when investors of structured deposits redeem structured deposits before maturity date. 2. Financial liabilities (a) Financial liabilities measured at fair value through profit or loss Financial liabilities measured at fair value through profit or loss include held-for-trading or are designated as such at the time of initial recognition. The Company and its subsidiaries enter into interest rate swaps as hedges. For those which are designated as financial liabilities measured at fair value through profit or loss at the time of initial recognition, the designation cannot be revoked. Financial liabilities measured at fair value through profit or loss and those designated as such at the time of initial recognition are recognized as “financial liabilities measured at fair value through profit or loss” in the consolidated balance sheet. The changes in fair value are recognized as “gain or loss on financial assets and liabilities measured at fair value through profit or loss” in the consolidated statement of comprehensive income. (b) Financial liabilities carried at amortized cost Financial liabilities carried at amortized cost include the following: financial liabilities which are not classified as financial liabilities measured at fair value through profit or loss, hedging derivative financial liabilities, financial bonds payable, financial guarantee contracts, loan commitments below market rate, and financial liabilities arising from transfer of financial assets that does not qualify for derecognition to the extent of transferor’s continuing involvement.

(Continued) 17 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(c) Futures traders’ equity Future traders’ equity represents the net balance of each future trader’s deposit and royalty after considering the effect of settlement based on daily closing price. Offsetting is not permitted unless there are similar accounts under the same customer. Future traders’ equity is recorded under current liabilities and any debit balance thereon is recorded as futures trading margins receivable. 3. Derecognition A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire, or when all the risks and rewards of ownership of the financial assets are substantially transferred. If the Company and its subsidiaries enter into securities lending transactions or pledge of bonds or stocks as security for repo transaction, the financial assets are not derecognized as substantially all risks and rewards of ownership are still retained by the Company and its subsidiaries. This accounting treatment is also adopted when the Company and its subsidiaries enter into securitization transaction in which the Company and its subsidiaries keep portion of the risk and rewards of ownership. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. The Company and its subsidiaries derecognize a financial liability when its contractual obligations are discharged or cancelled or expired. 4. Reclassification Under IAS 39 as endorsed by the FSC, the following principles are adopted concerning the non- derivative financial assets: (a) No reclassification is made out of the fair value measured through profit or loss category while it is held or issued. (b) No reclassification is made of any financial instrument out of the fair value measured through profit or loss category if it was designated as at fair value measured through profit or loss at initial recognition.

(c) If a financial asset is no longer held for the purpose of selling or repurchasing it in the near term, it is reclassified out of the fair value measured through profit or loss category, but only in rare circumstances. (d) No reclassification is made of any financial instrument into the fair value measured through profit or loss category subsequent to initial recognition.

(Continued) 18 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(e) If, as a result of a change in intention or ability, it is no longer appropriate to classify an investment as held-to-maturity, it is reclassified as available-for-sale and remeasured at fair value, and the difference between its carrying amount and fair value is recorded in other comprehensive income. (f) No reclassification is made of any financial assets as held-to-maturity if during the current financial year or during the two preceding financial years, more than an insignificant amount of held-to-maturity investments were sold or reclassified before maturity. Any remaining held-to-maturity investments are reclassified as available-for-sale. 5. Offsetting Financial assets and financial liabilities are offset and the net amount presented in the consolidated balance sheet if, and only if, the Company and its subsidiaries have legally enforceable right to set off the recognized amounts and it intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. 9) Derivative financial instruments and hedge accounting Derivative financial instruments are measured at fair value at initial recognition and in the subsequent period, and attributable transaction costs are recognized in profit or loss as incurred. Fair value is determined using valuation techniques that consider using quoted prices in an active market, recent market price, discounted cash flow models and option pricing models. If the result of its valuation at fair value is positive, a derivative instrument is classified as a financial asset, otherwise, it is classified as a financial liability. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risk of the host contract and the embedded derivatives are not closely related and the host contract is not measured at fair value through profit or loss. When a derivative instrument is designated as a hedging instrument, the timing of its recognition to profit or loss is determined based on the nature of hedging relationship. The Company and its subsidiaries designate certain derivatives as hedging instruments in qualifying hedging relationships: 1. Fair value of a recognized asset or liability or an unrecognized firm commitment (fair value hedges)

2. Highly probable forecast transaction for cash flow hedges On initial designation of the hedge, the Company and its subsidiaries formally document the relationship between the hedging instruments and hedged items, including the risk management objective and strategy in undertaking the hedge, together with the method that will be used to assess the effectiveness of the hedging relationship as follows: (a) Fair value hedges Changes in the fair value of a hedging instruments designated and qualified as fair value hedges are recognized in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

(Continued) 19 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. Hedged financial instruments using an effective interest rate, the fair value adjustment attributable to the hedged risk, is amortized to profit or loss when hedge accounting is discontinued over the period to maturity. The amortization is based on a recalculated effective interest rate at the date amortization begins which could enable the fair value adjustment being fully amortized up to the maturity of the instrument. (b) Cash flow hedges When a derivative is designated as a cash flow hedge, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income. Any ineffective portion of changes in the fair value of the derivative is recognized as “gain or loss on financial assets and liabilities measured at fair value through profit or loss” in the consolidated statement of comprehensive income. If financial assets or liabilities are to be recognized due to the forecast transactions, the amount recognized in other comprehensive income is reclassified to profit or loss as a reclassification adjustment in the same period as assets obtained or liabilities borne resulting from the hedged cash flows affect profit or loss, and in the same line item in the consolidated statement of comprehensive income. If the hedging derivative expires or is sold, terminated, or exercised, or the hedge no longer meets the criteria for cash flow hedge accounting, or the hedge designation is revoked, then hedge accounting is discontinued prospectively. In a discontinued hedge of a forecast transaction, the cumulative amount recognized in other comprehensive income from the period when the hedge was effective is reclassified from equity to profit or loss as a reclassification adjustment when the forecast transaction occurs and affects profit or loss. If the forecast transaction is no longer expected to occur, then the balance in other comprehensive income is reclassified as “gain or loss on financial assets and liabilities measured at fair value through profit or loss” in the consolidated statement of comprehensive income. (c) Non-qualifying hedging derivatives When a derivative is not designated in a qualifying hedge relationship, all changes in its fair value are recognized immediately in profit or loss as “gain or loss on financial assets and liabilities measured at fair value through profit or loss”. 10) Pecuniary and securities financing and refinancing Pecuniary finance represents loans extended to securities investors and is accounted for as receivable from pecuniary finance. Such loans are secured by the securities purchased by investors. These securities are not reflected in the financial statements of the Company and its subsidiaries. These securities are returned to investors when investors terminate pecuniary financing.

(Continued) 20 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Securities finance is affected by lending securities custody that are received from pecuniary finance or borrowed from securities finance companies, to investors. Such securities finance is not reflected in the financial statements of the Company and its subsidiaries. The investors’ deposits for borrowing securities are held by the Company and its subsidiaries as collateral and are recorded under securities finance margin deposits received. In addition, investors are required to deposit the proceeds from sales of borrowed securities. Such deposits are accounted for as payables to securities financing. Pecuniary refinancing represents loans from securities finance companies when the Company and its subsidiaries lack sufficient funds to perform pecuniary financing. These loans are recorded as refinance borrowings. Securities refinancing represents borrowing securities from securities finance companies when the Company and its subsidiaries do not have sufficient securities to perform securities financing. For securities refinancing, the Company and its subsidiaries pay margin deposits to securities finance companies. These margin deposits are recorded as refinance margin deposits. The Company and its subsidiaries also provide securities investors’ proceeds from selling borrowed securities to securities finance companies as collateral and records them under receivables from securities refinance. 11) Securities lending The Company and its subsidiaries lend securities through the Taiwan Stock Exchange Company. Revenue from securities lending is determined based on the formula for calculating the pricing and bidding of securities lending. Under this formula, the daily closing price of target security is used to multiply the amount of guarantee and transaction rate, so that the outcome is the amount of revenue from securities lending. This revenue is received by the securities firms when the securities are returned. 12) Non-current assets held for sale Non-current assets or disposal groups comprising assets and liabilities that are expected to be recovered primarily through sale or distribution rather than through continuing use are reclassified as held for sale. This kind of non-current assets or disposal groups must qualify to be sold under the current situation, and likely to be sold within one year. After being classified as held for sale, the measurement bases of the assets or disposal groups are the sum of their carrying amounts and fair value, less, the cost of sale. Furthermore, this kind of assets would stop depreciating. 13) Investment property Investment property (including construction-in-progress) is the property held either to earn rental income or for capital appreciation or for both. Part of property could be owner-occupied, while the remaining is held either to earn rental income or for capital appreciation. Part of property that can be individually sold is accounted for under different accounting treatment. Owner-occupied property is subject to International Accounting Standard 16 Property, plant and equipment (“IAS 16”) endorsed by the FSC, and property held either to earn rental income or for capital appreciation or for both is subject to International Accounting Standard 40 Investment property (“IAS 40”) endorsed by the FSC. If part of property cannot be individually sold, and owner-occupied property is insignificant, it is accounted for as investment property.

(Continued) 21 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Investment property is measured at cost on initial recognition. Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of raw materials and direct labor, and any other costs directly attributable to bring the investment property to a working condition for their intended use. Investment property is measured at cost less accumulated depreciation and accumulated impairment loses for subsequent accounting. Investment property that is under construction is measured at cost less accumulated impairment losses. The depreciation method, useful life and residual value of investment property are determined in accordance with the guidance under IAS 16 as endorsed by the FSC. Subsequent expenditure is capitalized only when the inflow of the economic benefits in the future associated with the expenditure is probable and relevant cost can be measured reliably. On-going repair and maintenance are expensed as incurred. The impairment of investment property is assessed on the difference between fair value and book value, along with the other considerations. The fair value is based on the evaluation results of the independent appraiser. When the use of investment property has changed, it is reclassified to property, plant and equipment at carrying amount. The investment property is written off when it is disposed of or no longer used and there is no future economic benefits arising from the disposition thereof. Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognized in profit or loss. 14) Property, plant and equipment Property, plant and equipment is measured at historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the asset. Each part of an item of property, plant and equipment is depreciated separately, unless the useful life and the depreciation method of the significant part of an item of property, plant and equipment having the same useful life and depreciation method of another significant part of the same item. Impairment loss is recognized if there is objective evidence of impairment. Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Company and its subsidiaries. The carrying amount of those parts that are replaced is derecognized. On-going repairs and maintenance cost is expensed as incurred. Depreciation of property, plant and equipment is calculated on a straight-line basis over the estimated useful lives of the respective assets. Depreciation methods, useful lives, and residual values are reviewed by the Company and its subsidiaries at each reporting date. If expectations differ from the previous estimates, the change is accounted for as a change in an accounting estimate. Gain or loss from the disposal of fixed assets is determined on the difference between carrying amount and proceeds and is recorded in profit or loss.

(Continued) 22 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

15) Assets impairment 1. Financial assets impairment (a) Financial assets carried at amortized cost At each reporting date, a financial asset or a group of financial assets is assessed whether there is objective evidence of impairment. A financial asset or a group of financial assets is impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset, and that the loss event has an impact on the future cash flows of the asset that can be estimated reliably. Objective evidence that a financial asset or a group of financial assets is impaired includes: 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 the issuer’s 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 are yet to be identified with the individual financial assets in the group, including: a. Adverse changes in the payment status of borrowers in the group; or b. Changes in national or local economic conditions that correlate with defaults on the assets in the group Evidence of impairment for financial assets is considered at both a specific asset and collective level. All individually significant financial assets are assessed for specific impairment. All individually significant financial assets found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Financial assets that are not individually significant are collectively assessed for impairment by grouping together financial assets with similar risk characteristics. The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs to obtain and sell the collateral, regardless of whether or not foreclosure is probable.

(Continued) 23 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

In addition, under the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Nonaccrual Loans” (the “Regulations”) issued by the authority, the domestic bank subsidiary assesses the recoverability of credit assets on the basis of a customer’s financial position, delinquency in interest or principal payments, and the Bank’s internal valuation of collaterals. Under the regulations, the domestic bank subsidiary categorizes the credit assets into Normal, Special Mention, Substandard, Doubtful, and Loss, and then make minimum provisions at 1% of the normal credits (other than those loans to ROC government), 2% of special mention, 10% of substandard, 50% of doubtful, and 100% of loss. Under the “Risk-Based Loan Categorization” issued by the China Banking Regulatory Commission (the “CBRC”), the foreign bank subsidiary, Fubon Bank (China), divided credit assets into Normal, Special Mentioned, Substandard, Doubtful and Loss. Under the “Administrative Measures for the Loan Loss Reserves of Commercial Banks” issued by the CBRC, the basic standard of provision loan and coverage ratios are 2.5% and 150%, respectively; the higher of the two standards shall be used for regulatory standard for the loan loss reserves of commercial bank. Fubon Bank (China) uses the individual and combined assessment of impairment, and the abovementioned standard as its minimum provision standard. Credits deemed uncollectible may be written off if the write-off is approved by the board of directors. Recoveries of amounts previously written off are credited to the allowance account. Commencing from January 1, 2011 except for estimating the allowance for bad debts arising from the impairment loss above, the allowance for doubtful accounts, which is regulated under the “Guidelines for Handling Assessment of Assets, Loans Overdue, Receivable on Demand and Bad Debts by Insurance Enterprises”, is provided at the rate of 0.5% of the outstanding balance of Category One (normal credit assets) credit asset’s claim minus the amount of life insurance loans and premium loans. Allowance for bad debts is provided in full within 3 years commencing from January 1, 2011. The allowance for the other loans and receivables is provided according to the historical accounts recovery experiences, clients’ credits, aging report of non-performing loans, and relevant policies and according to the category of each of the non-performing loans as shown below. a) 2% of principal amount of non-performing loans under notice. b) 10% of principal amount of non-performing loans with possible recovery. c) 50% of principal amount of non-performing loans whose recovery is difficult. d) 100% of principal amount of non-performing loans with no chance of recovery. The amount of the allowance for doubtful accounts is decided based on the aforementioned two methods, whichever results in higher allowance for doubtful accounts. (b) Available-for-sale financial assets When the decrease in the fair value of an available-for-sale financial asset is recognized in other comprehensive income and an available-for-sale financial asset is considered to be impaired, the losses accumulated in the fair value reserve in equity are reclassified to profit or loss, even if the available-for-sale financial asset is not derecognized yet.

(Continued) 24 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

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. (c) Financial assets carried at cost When there is objective evidence that financial assets carried at cost are impaired, the loss amount is recognized in profit or loss and the impairment loss is non-reversible. 2. Impairment of non-financial assets In accordance with International Accounting Standards 36 Asset impairment (“IAS 36”) endorsed by the FSC, at each reporting date or as circumstance changes, the Company and its subsidiaries assess non-financial assets for any indication of impairment in which the recoverable amount of an asset is less than its carrying amount. If the recoverable amount of an asset is less than its carrying amount, the difference between the recoverable amount and carrying amount is recognized as impairment loss. Assets are grouped together into the smallest group of identifiable assets (cash-generating unit) that generates cash inflows. Impairment test is also applied to an individual asset when its fair value less selling cost or its value-in-use can be reliably measured. Impairment loss on non-financial assets (other than goodwill) recognized in prior periods is assessed at each reporting date for any indications that the loss has decreased. Impairment loss recognized in prior periods for assets other than goodwill is reversed if there is indication that such impairment loss no longer exists or has decreased. The carrying value after the reversal should not exceed the recoverable amount or the depreciated or amortized balance of the assets assuming no impairment loss was recognized in prior periods. The recoverable amount of goodwill, an intangible asset with an indefinite useful life, and an intangible asset that are not yet available for use is regularly assessed. If the recoverable amount of any of these assets is lower than its carrying amount, impairment loss is recognized. An impairment loss in respect of goodwill is not reversed in subsequent years. 16) Reinsurance The Company and its subsidiaries arrange the reinsurance business based on the business need and the related insurance laws to limit the losses caused by certain events. For reinsurance ceded business, the Company and its subsidiaries cannot refuse to fulfill their obligations to insure even if the reinsurer refuses to fulfill its obligation. Reinsurance assets, claims recoverable from reinsurers, reinsurance receivable and funds held by ceding companies are periodically assessed for impairment. If the reinsurance asset is impaired, its carrying amount is reduced accordingly and impairment loss thereon is recognized in profit or loss. A reinsurance asset is impaired if, and only if there is objective evidence that the Company and its subsidiaries may not receive all amounts due them under the terms of the contract as a result of an event that occurred after initial recognition of the reinsurance asset; and the impact of that event to the amounts that the Company and its subsidiaries will receive from the reinsurer can be measured reliably.

(Continued) 25 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

The Company and its subsidiaries evaluate the effects of reinsurance with another insurer to whom insurance risks are ceded. If reinsurance contracts only cede significant insurance risks (excluding the underwriter risk and time risk), the reinsurance contract is accounted for using deposit accounting. Under this deposit accounting, the insurance premium minus the Company and its subsidiaries’ retained reinsurance premium (or fee) is recognized as a deposit asset or liability. Changes in amount of the deposit component are charged to profit or loss. Interests arising from the deposit component for the contracts which does not transfer any risk or transfer the timing risk only are recognized as interest income or expense and calculated based on the effective interest rates which are determined by the estimates of future cash flows. 17) Goodwill and intangible assets An intangible asset is measured initially at cost. If an intangible asset is acquired in a business combination, the cost of that intangible asset is its fair value at the acquisition date. Intangible asset with a finite useful life is amortized on a straight-line basis over its useful life. An intangible asset with an indefinite useful life is not amortized. Most identifiable intangible assets have finite useful life, and whose expected future economic benefits are assessed for impairment or any change at each reporting date. Subsequent to initial recognition, the Company and its subsidiaries opted to account for an intangible asset by using the cost model. An intangible asset with an indefinite useful life is evaluated for impairment annually or whenever there are indications for impairment. Except goodwill and intangible assets with an indefinite useful life, the Company and its subsidiaries use straight-line basis over the estimated useful life of intangible assets, amortization is recognized in profit or loss. For the estimated useful life, please refer to Note 21. 18) Leases 1. Lessor Lease income from operating lease is recognized in profit or loss on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging an operating lease is added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the lease income. Incentives granted to the lessee to enter into the operating lease are spread over the lease term on a straight-line basis so that the lease income received is reduced accordingly. 2. Lessee Leases whose terms require the Company and its subsidiaries to assume substantially all of the risks and rewards of ownership of a leased asset are classified as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the leased asset is accounted for in accordance with the accounting policy applicable to property, plant and equipment. Other leases are operating leases and are not recognized in the Company’s consolidated balance sheet.

(Continued) 26 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Payments made under operating lease (excluding insurance and maintenance expenses) are recognized as an expense on a straight-line basis over the term of the lease. Lease incentives received are recognized and amortized on a straight-line basis to decrease lease expenses over the term of the lease. 19) Insurance liability The reserve for both the insurance contracts and financial instruments with or without discretionary participation feature of the Company and its subsidiaries is provided in accordance with the “Regulations Governing the Provision of Various Reserves”, “Regulations for Managing the Various Reserve of Compulsory Automobile Liability Insurance”, “Enforcement Rules for the Risk Spreading Mechanism of Residential Earthquake Insurance”, and “Regulations for the Reserve of Nuclear Insurance”. The methodologies used to determine the reserve are certified by the appointed actuary who is authorized by the FSC. Except for the reserve for short-term group insurance which is calculated on the actual premiums or the premiums conforming to the rule prescribed in Tai Tsai Bao No 852367814 letter, whichever is higher, the bases for determining other reserves or provision for liabilities are as follows: 1. Unearned premium reserve For Fubon Insurance, unearned premium reserve is determined based on the exposure of the unexpired period for the unexpired policies and the policies that have not been terminated. For Fubon Life Insurance, unearned premium reserves for effective insurance contracts with a term below one year and injury insurance contracts with a term over one year are calculated based on the gross premiums of the insurance contracts which yet to mature on the reporting date. 2. Claim reserve Claim reserve, including case reserve and IBNR, is provided using actuarial approaches, based on the historical experiences for each line of business. This reserve is provided based on the incurred but not reported claims and reported but unpaid claims. For reported but unpaid claims, claim reserves are provided based on the case by case actual claim for each line of business. 3. Liability reserve The provision for future policy benefits is calculated in accordance with both the modified method of article 12 of the Enforcement Rules of Insurance Law and the calculation prescribed by the competent authority. Starting from 2003, for effective insurance contracts which adopt the dividend calculation formula prescribed under the Tai Tsai Bao No. 800484251 letter, the policy reserve is provided based on the currently reduced amount of dividend caused by the offset between interest margin and mortality margin for long term effective insurance contracts. Starting from 2012, in accordance with the Gin Guan Bao Tsai No. 10102500530 letter and Article 11 of Value-added and Non-value-added Business Tax Act, a liability reserve based on 3% of sales is provided for purposes of writing off overdue loans or providing allowance for bad debts when the percentage of overdue loans is lower than 1%.

(Continued) 27 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

4. Special earnings reserve – special reserve Special reserve provided for retention business with a term of one year is divided into two categories, which are special catastrophe reserve and special risk-volatility reserve. The new provision of this special reserve, net of income tax, is accounted for under special reserve in equity, in accordance with the International Accounting Standards No.12 (IAS 12). On January 1, 2013, the special reserve provided prior to December 31, 2012 under liabilities, is transferred, net of income tax, to special reserve in equity, in accordance with the International Accounting Standards No.12 (IAS 12), unless it is designated by authorities for other use. In accordance with the Guidance for Enhancing Property Insurances On Disasters (commercial earthquake insurance and typhoon and flood insurance), other catastrophe special reserves and equalization special reserve (except for compulsory motor TPL insurance, nuclear insurance, governmental earthquake insurance, commercial earthquake insurance, typhoon and flood insurance) recognized under liabilities account before December 31, 2012, are transferred to cover the insufficiencies of catastrophe special reserve and equalization special reserve of commercial earthquake insurance and typhoon and flood insurance until those insufficiencies are fully covered; the excess balance, if any, is recognized, net of income tax, as special reserve in equity in accordance with IAS12. (a) Special reserve – special catastrophe reserve A special catastrophe reserve covering all types of insurance is provided at a rate prescribed by the competent authority. For the actual catastrophe claim exceeding NT$30,000,000, the excess amount is offset against special catastrophe reserve. For special catastrophe reserve that remains outstanding for over 15 years, it is written off based on the evaluation of an actuary and after being reported to the competent authority for inspection. The balance for write down or reclaim, net of income tax, is offset against the special reserve for catastrophe of equity in accordance with IAS 12. (b) Special reserve – special risk-volatility reserve If the net amount of actual claim minus the related special catastrophe reserve is lower than the amount of expected claim, a special risk-volatility reserve is provided at a rate of 15% of the difference between the net amount of actual claim and the amount of expected claim. If the net amount of actual claim minus the related special catastrophe reserve is higher than the expected claim amount, the difference is debited to special risk-volatility reserve. However, the amount and type of insurance are reported to the competent authority for inspection. If the total accumulated amount of the special risk-volatility reserve is over 30% of the matured retention premium of the year for Fubon Life Insurance, and the total accumulated amount of the special risk-volatility reserve is over 60% of the matured retention premium of the year for Fubon Life Insurance, the excess is treated under reclaim rule. The balance for write down or reclaim, net of income tax, is offset against the special reserve for risk-volatility of equity in accordance with IAS 12.

(Continued) 28 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(c) Premium deficiency reserve Future losses and expenses for the unexpired policies and the policies that have not been terminated are evaluated. If the expected future losses and expenses exceed the sum of the recognized unearned premium reserve and the expected future premium income, a premium deficiency reserve is recognized for such excess. For life insurance, health insurance, and annuities contracts issued commencing from January 1, 2001, whose contract period is longer than one year, a special premium deficiency reserve is provided based on the unpaid premiums deficiency if the written premiums are less than those used for providing policy reserves. (d) Liability adequacy reserve In accordance with International Financial Reporting Standards No. 4, at the reporting date, the adequacy of recognized insurance liabilities is assessed, using current estimates of future cash flows of insurance contracts. If that assessment shows that the carrying amount of its insurance liabilities is inadequate, the entire deficiency is recognized in profit or loss. (e) Reserve for insurance policies with feature of financial instruments In accordance with the “Regulations Governing the Provision of Various Reserves”, provision for financial instruments without discretionary participation feature is accounted for using deposit accounting. 20) Foreign exchange fluctuation reserve Fubon Life Insurance, commencing from March 1, 2012 part of the special catastrophe reserve and special risk-volatility reserve covering all types of insurance is transferred to serve as the initial balance of foreign exchange fluctuation reserve. Subsequent provision or write off of this reserve is made in conformity with the “Guidelines of Foreign Exchange Fluctuation Reserve for Life Insurance Business”. Commencing from 2012, a special reserve in stockholders’ equity is also provided within 3 years, for similar amount transferred from special catastrophe reserve and special risk-volatility reserve. The amount provided for such special reserve in stockholders’ equity in the first-year shall not be less than one-third and the accumulated amount of such special reserve for the first 2 years shall not be less than two-third both of the transferred amount, net of tax. Additional provision for special reserve in stockholders’ equity is made for the cost saved from hedging, after providing for foreign exchange fluctuation reserve. If the earnings of the year is not sufficient to allow provision of this reserve, then it is provided in subsequent years when there are sufficient earnings. The related special reserve is used for capital increase or for covering accumulated deficit at least once in 3 years. 21) Insurance contracts An insurance contract is a “contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder”. The Company and its subsidiaries define significant insurance risk as the event which might lead to additional significant payment.

(Continued) 29 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

An insurance contract with financial instruments features means the contract is able to transfer significant financial risk. Financial risk refers to a risk from possible changes in one or more specified interest rate, financial instrument price, commodity price, foreign exchange rate, price index, tariff index, credit rating, credit index or other variable in the future. If the previously stated variables are non-financial variables, then no financial variables are involved in the contract. Once a contract has qualified as an insurance contract, it remains an insurance contract until all rights and obligations are extinguished or expired, even if insurance risk becomes insignificant or non- existent. However, some contracts do not transfer any insurance risk to the Company and its subsidiary at inception, although they do transfer insurance risk at a later time. In those cases, the contract is not considered an insurance contract until the risk transfer happens. 22) Employee benefits 1. Defined contribution plans Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. Pursuant to the ROC Labor Pension Act, the Company and domestic subsidiaries make contribution to the Bureau of Labor Insurance. This contribution is recognized as pension expenses on accrual basis. Foreign subsidiaries make contributions based on the regulation of local government and these contributions are recognized as pension expenses on accrual basis. 2. Defined benefit plans A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company and its subsidiaries’ net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service costs and the fair value of any plan assets are deducted. 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 prior financial year, adjusted for significant market fluctuations since that time and for significant curtailments, settlements, or other significant one- off events. 3. Employment benefit - preferential interest on employees’ deposits The Bank and its subsidiary offered preferential interest rate to its current employees and retired employees for their deposits within a prescribed amount. The preferential interest rate in excess of market interest rate is treated as employee benefits. Under Article 28 of the Regulations Governing the Preparation of Financial Reports by Public Banks, if the Bank’s preferential deposit interest rate for an employee as stated in the employment contract exceeds the market interest rate, the excess will be subject to IAS 19 “Employee Benefits” upon the employees’ retirement. The actuarial valuation assumptions and parameters are based on those announced by the authority, if any.

(Continued) 30 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

4. Termination benefits Termination benefits are recognized as an expense when the Company and its subsidiaries are committed demonstrably, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. 5. Short-term employee benefit Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. 23) Revenue recognition 1. Banking subsidiaries (a) Interest income and expense Except for financial assets and liabilities reported at fair value through profit or loss, all interests of bearing financial assets and interest-bearing financial liabilities are accrued using the effective interest rate method and are accounted for as interest revenue and interest expense in profit or loss . Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest revenue is recognized using the interest rate to discount the future cash flows for the purpose of assessing impairment. (b) Recognition of commission fee revenue and commission fee expense Commission fee revenue and expense are recognized when loans or other services are provided. Service fees on significant projects are recognized on project completion, for instance, service fees received when the Bank is the arranger of syndicated loans. Commission revenue and fees relating to loan services are amortized through service periods or included in the effective interest rate for loans and receivables. 2. Insurance subsidiaries (a) Property insurance subsidiaries Premium income from direct insurance business is recognized based on the written policies and endorsement. Assumed reinsurance premiums for reinsurance assumed business is recognized when the reinsurance statement is received by the insured. For those statements which have not been received by the insured, assumed reinsurance premium is estimated in a reasonable and systematic way. The related acquisition costs (such as: commissions, brokerages, fees, reinsurance commissions and etc.) are recognized in the same period without being deferred. Unearned premium reserve is determined based on the exposure of the unexpired period for the unexpired policies and the policies that have not been terminated. Unearned premium reserves for the compulsory auto liability, the residential earthquake insurance, and the nuclear insurance are determined in accordance with the regulations and rules.

(Continued) 31 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

The approaches to determine unearned premiums reserves selected based on the characteristics of the line of business and decided by the actuary (the approaches are not allowed to change without the permission of the Authority). Unearned premium reserve is certified by the appointed actuary. Tax liabilities related to premium income are recognized on accrual basis, in accordance with Value-added and Non-value-added Business Tax Act, the Stamp Tax Act, and other relevant laws and regulations. . (b) Life insurance subsidiaries For insurance contracts and financial instruments with discretionary participation, the first and the subsequent period premium is recognized as revenue when the insurance underwriting process is complete and the date for premium payment is due. The policy acquisition costs such as commission expenses are recognized as current expenses when the insurance contract becomes effective. Premiums on insurance contracts, which do not belong to investment-linked insurance and which are classified as financial products without discretionary participation feature, are recognized as “provision for insurance contracts with financial product features”. The insurance acquisition costs are offset against “provision for insurance contracts with financial product features” when the insurance contracts become effective. Premiums on insurance contracts, which belong to investment-linked insurance and which are classified as financial products without discretionary participation feature, are recognized as “Liabilities on Insurance Product-Separate Account”, net of related expenses such as the front-end load and investment administration service charge. The insurance acquisition costs relating to investment administration service, including commission expenses and additional charges for the issuance of new contracts, are recognized as “deferred acquisition costs”. Accounting for service charge on investment-linked insurance contracts classified as financial products without discretionary participation feature. The service charges normally collected from the policyholder of insurance contracts, which do not belong to investment-linked insurance and which are classified as financial products non-discretionary participation feature, include contract administration charge, investment administration charge, rescinding charge and others. These charges are recognized as revenue upon collection. When the Company and its subsidiaries receive certain service charge which makes them obligated to provide future service (ex: front-end load charge), this service charge is initially treated as a deferred revenue and is recognized as revenue when the service is provided, are recognized as “deferred service fee revenue”. 3. Securities subsidiaries The securities subsidiaries’ major revenue and cost recognition principles are as follows: (a) Brokerage commission, profit or loss on disposal of trading securities, and relevant brokerage securities transaction charges are recognized at the trading date. (b) Interest income or expense from margin loans, securities financing and refinancing, and bonds purchased under agreements to resell and sold under agreements to repurchase are recognized on accrual basis.

(Continued) 32 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(c) Recognition of service revenue depends on the degree of service delivered. (d) Management fees are received from providing management services to securities investment trust funds and investors’ discretionary managed accounts. Management fees are calculated daily on the net assets of each securities investment trust fund account and investor’s discretionary managed account multiplied by the contract rates. Management fees are paid monthly by each securities investment trust fund and investor’s discretionary managed account. 24) Income tax 1. Current income tax The Company and its subsidiaries estimated and disclosed interim income tax under IAS 34 “Interim Financial Reporting” Appendix B12. Income tax expense for the interim reporting period is best estimated by multiplying pretax income for the period with the effective annual tax rate as forecasted by the management. This is recognized fully as tax expense for the current period. Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases shall be measured based on the tax rates that have been enacted or substantively enacted at the time of the asset or liability is recovered or settled and recognized directly in equity or other comprehensive income as tax expense. The 10% surtax on undistributed earnings, computed according to the ROC Income Tax Act, is charged to current income tax expense in the year when stockholders decided not to distribute the earnings. The adjustment of prior year’s income tax payable is included in the current income tax. 2. Deferred income tax Deferred taxes are measured based on the enacted or substantively enacted tax rate on the reporting date applicable during the year of expected asset realization or debt settlement. Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Temporary differences arise primarily from the evaluation of financial instruments (including derivative financial instrument), pension, and the reserve and reversal of retired employees benefit. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carry forward and unused tax credits for purchases of machinery, equipment and technology, research and development expenditures, and personnel training expenditures to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

(Continued) 33 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Temporary differences arising from investment in subsidiaries, associates, and joint ventures are recognized as deferred income tax assets or liabilities, except when the Company has ability and intention to control the timing of reversal of the temporary differences and it is highly possible that temporary differences are not reversible in the foreseeable future. Deferred income tax assets and liabilities are not offset if they relate to income taxes levied by different tax authorities. The Company and domestic subsidiaries file a combined corporate income tax return. However, the measurement of income tax is treated by following the above-mentioned principles. The excess or deficit payment of income tax due to a combined corporate income tax filing is charged to current and deferred income tax. 25) Business combination For those business acquisitions after January 1, 2012 (inclusive), goodwill is measured as the excess of the consideration transferred (which generally is measured at fair value at the acquisition date) and amount of any non-controlling interest in the acquiree over net fair value at acquisition-date of the identifiable assets acquired and the liabilities assumed (generally at fair value). If the residual is a negative balance, a re-assesses is made whether all of the assets acquired and liabilities assumed are correctly identified, and a gain on a bargain purchase is recognized in profit or loss. Any non-controlling equity interest in the acquiree is measured either at fair value or at the non- controlling interest’s proportionate share of the acquiree’s identifiable net assets on a transaction by transaction basis. In a business combination achieved in stages, the previously held equity interest in the acquiree at its acquisition-date, fair value is remeasured and the resulting gain or loss, if any, is recognized in profit or loss. In prior reporting periods, the Company and its subsidiaries may have recognized changes in the value of its equity interest in the acquiree in other comprehensive income. If so, the amount that was recognized in other comprehensive income shall be recognized on the same basis as would be required if the Company and its subsidiaries had disposed directly of the previously held equity interest. If the disposal of the equity interest required a reclassification to profit or loss, such an amount shall be reclassified to profit or loss. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the provisional amounts for the items are reported in the financial statements or which the accounting is incomplete. During the measurement period, the provisional amounts recognized at the acquisition date are retrospectively adjusted, or additional assets or liabilities are recognized to reflect new information obtained about facts and circumstances that existed at the acquisition date. The measurement period shall not exceed one year from the acquisition date. All the transaction costs incurred for the business combination are recognized immediately as expenses when incurred, except for the issuance of debt or equity instruments.

(Continued) 34 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

26) Earnings per share Earnings per share are calculated by dividing net income after tax by the weighted average number of shares outstanding in each year. The employees’ bonuses are regarded as potential common stock. If the potential common stock has dilutive effect, both basic earnings per share and diluted earnings per share are presented, otherwise, only basic earnings per share is disclosed. The consolidated net income and number of common stocks outstanding are adjusted for the effects of all potentially dilutive common stock assuming that all potentially dilutive common stock are outstanding for the entire period. The effect of any increase in outstanding shares due to the issuance of common stock from capitalization of retained earnings or capital surplus approved in the shareholders’ meeting is retroactively adjusted. 27) Treasury stock Repurchased shares are recognized as treasury stock based on its repurchase price. If treasury shares of stock are cancelled, Capital Reserve – Share Premiums and Share Capital are debited proportionately. The amount of consideration received is recorded under an equity account when the shares are subsequently reissued or sold. As treasury stock transactions are viewed as a change in paid-in capital, the price difference in treasury stock transactions is charged to equity rather than to profit or loss. 28) Operating segments An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity). The segment’s operating results are reviewed regularly by the entity’s chief operating decision maker to make decisions pertaining to the allocation of the resources to the segment and to assess its performance for which discrete financial information is available. (5) Major Sources of Accounting Assumptions, Judgments, and Estimation Uncertainty The preparation of the interim consolidated interim financial statements in conformity with IAS 34 “Interim Financial Reporting” requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed by management on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised. If the revision only affects in the period of the revision and future periods, the revision affects are recognized in both current and future periods. 1) Critical judgments in applying accounting policies Except for estimation and underlying assumptions, information on critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is as follows: 1. Classification of financial assets The classification of financial assets requires management judgment, which will affect the Company and its subsidiaries’ financial condition and operating results.

(Continued) 35 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

2. Held-to-maturity financial assets Management has reviewed the Company and its subsidiaries’ held-to-maturity financial assets in light of their capital maintenance and liquidity requirements and has confirmed the Company and its subsidiaries’ positive intention and ability to hold those assets to maturity. 2) Major source of estimation uncertainty Assumptions and estimation uncertainties that may cause adjustments to the carrying amounts of assets and liabilities carrying amount in the following year are as follows: 1. Fair value and impairment of financial instruments (a) Fair value The fair value of non-active market or non-quoted financial instruments is determined using valuation techniques. In this case, the fair value is based on observable data of similar financial instruments or valuation model. If there are no observable market parameters, the fair value of financial instruments is evaluated based on appropriate assumptions. When the fair value are determined by the valuation model, the model shall be calibrated to ensure that all output data and the results reflect the actual market price. The models use only observable data as possible. (b) Impairment a) Available-for-sale financial assets Management makes critical judgments on assessing impairment of available-for-sale financial asset. Factors considered in assessment include the following: a. Whether or not financial instruments’ fair value decline significantly. b. If fair value decreases materially due to any event of defaults which result in significant decline in future cash flow. c. Securities expected life may affect calculation of amended expected cash flow. d. The reasonableness of evaluating whether expected future cash flows exceed market values through the duration of securities’ existence. e. The length and the extent of decline in fair value of financial assets measured at amortized cost. f. The financial conditions and prospects of the issuers or other observable conditions that indicate the investment is impaired.

(Continued) 36 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

b) Estimated impairment loss of loans and receivables The Company and its subsidiaries review loan portfolios and receivables to assess impairment periodically. In determining whether an impairment loss should be recognized, the Company and its subsidiaries make judgments as to whether there is any observable data indicating that an impairment loss occurs. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers in the portfolio (e.g. payment delinquency or default), national or economic condition that correlates with defaults on the assets in the portfolio. For the purpose of assessing impairment, the management determines the future cash flows in the portfolio using estimates based on historical loss experience for financial assets grouped on the basis of similar credit risk characteristics. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to decrease any difference between estimated loss and actual loss. Impairment assessment of financial assets is effected by inherent risk, which reflects different future expectation from the current market, inconsistency from original estimate and assumption due to changes in market conditions, and uncertain prospective macroeconomic and financial environment that management may decide to sell related assets. 2. Impairment of goodwill Determining whether goodwill is impaired requires an estimation of the value in use of the cash- generating units to which goodwill has been allocated. The calculation of the value in use requires management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. When the actual future cash flows are less than expected, a material impairment loss may arise. 3. Classification of insurance contract and the test of transferring significant insurance risk The Company and its subsidiaries should assess the insurance risk and other risks of the policies they have issued and determine whether components of the risks can be separated and calculated accordingly. The assessment of the risks will affect the classification of insurance contracts. In addition, the Company and its subsidiaries also need to make significant judgment about whether the extent of the insurance risks that they assume for the policies they issued are transferrable, whether the transfer of risks has commercial substance, and whether the transfer of insurance risk is significant. Subsequently, a test of whether insurance risk assumed is significant is then executed. The result of the judgment will affect the classification of insurance contracts. The identification of insurance contract components and classification of insurance contracts will affect the revenue recognition, liability measurement and presentation of the financial statements of the Company and its subsidiaries.

(Continued) 37 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

4. Insurance liability and provisions for investment-linked insurance contracts The Company and its subsidiaries measure insurance liabilities in accordance with “Regulations Governing the Provision of Various Reserves”. Provision of life insurance liability reserve applies "lock-in" assumption, under which fixed interest rates at the time the policies are issued, instead current interest market rate are used for providing this reserve. Reserve for unearned premium is calculated according to the risks of respective insurance, and is determined by the actuary based on the characteristic of respective insurance. Claim reserve is estimated by Loss Development Triangle Method. The final claim cost is calculated using primary assumptions including claim development factor and expected claim rate. The claim development factor and the expected claim rate are calculated based on the historical claim experience and adjusted by the Company and its subsidiaries policy factors such as charge rate and claim management. The estimation of liability adequacy test follows the “Code of Conduct of Actuarial Practice for the Statements of Financial Accounting Standards No 4” pronounced by the Actuarial Institute of the Republic of China. The estimated present value of the future cash flow of insurance contract when Company and its subsidiaries assess liability adequacy reserve is based on the reasonable estimated future insurance payment, premium revenue and relevant expenses. The professional judgment applied to the abovementioned liability evaluation process will affect the amount recognized for net changes in insurance liability, net changes in investment-linked insurance contract, insurance liability and provision for investment-linked insurance contract. 5. Reinsurance reserve assets Reinsurance reserve assets include unearned premium reserve, provision for reinsurance ceded, liability reserve ceded, premium deficiency reserve ceded and liability adequacy reserve ceded. The Company and its subsidiaries calculate the abovementioned reinsurance assets using estimate and judgments in accordance with the rules of “Regulations Governing the Provision of Various Reserves” and “Notice for the Recognition of Liability Reserve on the Balance Sheet for Ceded Insurance over 1 year For Life Insurance Business”. 6. Retirement benefit The present value of the retirement benefit obligations is determined by the actuarial result using a number of assumptions. Any changes in these assumptions will affect the carrying amount of retirement benefit obligations. The assumptions used in determining the net cost (income) for pensions include the discount rate. The Company and its subsidiaries determined the appropriate discount rate at the end of each year, which is used to determine the present value of estimated future cash outflows expected to be required to settle the retirement benefit obligation. In determining the appropriate discount rate, the Company and its subsidiaries should consider the interest rates of high-quality corporate bonds or government bonds, the currency of those bonds should be the same as the currency of the benefits paid and the maturity of those bonds should be matched with the maturity of pension liability. Other key assumptions for retirement benefit obligations are based on current market conditions.

(Continued) 38 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

7. Income taxes and deferred tax assets and liabilities The Company and its domestic subsidiaries pay income taxes in the ROC. The tax computed by the Company and its domestic subsidiaries may differ from those of the authorities. The Company and its domestic subsidiaries recognize related income tax and deferred income tax by assessing possible additional income tax pursuant to the transactions and calculations for the tax. If the final tax determined by the authorities differs from the initial recognized amount, the difference will affect the income tax and deferred income tax accounts. The assessment of the recoverable of deferred tax assets base on future profitability estimation. If the estimated assumption of profitability has changed, the Company and its subsidiaries may adjust the recognized amount of deferred tax assets. (6) Cash and Cash Equivalents June 30, 2014 December 31, June 30, 2013 2013

Cash on hand and petty cash $ 6,899,119 7,434,374 6,820,570 Bank deposits 81,795,333 103,771,117 98,577,174 Cash equivalents 4,618,702 9,099,008 359,507 Notes and checks for clearing 1,609,214 3,329,745 4,711,517 Due from banks 74,398,646 71,274,903 29,604,828 Less: Guarantee deposits (873,703) (684,368) (492,105) Total $ 168,447,311 194,224,779 139,581,491

For consolidated statement of cash flow, cash and cash equivalents include accounts listed below: June 30, 2014 December 31, June 30, 2013 2013

Cash and cash equivalents in consolidated $ 168,447,311 194,224,779 139,581,491 balance sheets Due from the Central Bank of China and other 32,213,532 29,209,658 37,379,247 banks that meet the definition of cash and cash equivalents in IAS 7 Securities purchased under resell agreements that 48,705,819 71,990,949 73,950,281 meet the definition of cash and cash equivalents in IAS 7 Cash and cash equivalents in consolidated $ 249,366,662 295,425,386 250,911,019 statement of cash flow

Refer to note 39 for the disclosure of sensitivity analysis and interest rate risk of the financial assets and liabilities of the Company and its subsidiaries. The guarantee deposits are time deposits provided as pledged assets. Refer to note 44 for details.

(Continued) 39 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(7) Due from Central Bank and Call Loans to Banks June 30, 2014 December 31, June 30, 2013 2013

Call loans to banks $ 59,814,464 55,157,639 69,068,611 Deposit reserve 86,989,238 45,186,613 62,982,792 Due from Central Bank 12,413,070 4,159,763 1,012,390 Less: Allowance for doubtful accounts - - (6,325) Total $ 159,216,772 104,504,015 133,057,468

Under a directive issued by the Central Bank of China, New Taiwan dollar (NTD)-denominated deposit reserves are determined by applying a prescribed percentage to the average monthly balances of customers’ NTD-denominated deposits. As of June 30, 2014, and December 31 and June 30, 2013, deposit reserves for checking account amounted to $21,338,962 thousand, $14,382,807 thousand and $32,392,513 thousand, respectively; required deposit reserves amounted to $29,707,809 thousand, $30,117,991 thousand and $29,459,007 thousand, respectively. The deposit reserves for checking account are not interest bearing and may be withdrawn anytime. The required deposit reserves are subject to withdrawal restrictions. In addition, foreign-currency deposit reserves are determined by applying a prescribed percentage to the balances of foreign-currency deposits. These reserves may be withdrawn anytime but bear no interests. Fubon Bank (China) uses the ending balance of deposits at the end of the month or the end of ten days as the base to pay into the provisions, which is regulated by People's Bank of China. Allowance for credit loss is provided by the general provision of Vietnam branches in accordance with Vietnam’s local regulations. (8) Financial Assets Measured at Fair Value through Profit or Loss June 30, 2014 December 31, June 30, 2013 2013

Financial assets held for trading: Government bonds $ 9,402,019 10,204,062 13,362,770 Commercial paper 11,606,789 12,400,611 21,077,568 Treasury bonds 8,434,004 8,087,359 8,302,369 Convertible bonds 2,595,163 1,233,179 857,871 Stocks and beneficiary certificates 7,428,340 6,206,383 4,149,198 Beneficiary securities 884,469 1,025,243 1,103,201 Corporate and financial bonds 16,070,406 11,498,170 13,312,060 Other - 2,214 500 Subtotal 56,421,190 50,657,221 62,165,537

(Continued) 40 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 December 31, June 30, 2013 2013

Derivative financial instruments: Interest rate contracts $ 4,561,491 6,231,699 5,878,985 Foreign exchange rate contracts 14,298,452 18,653,236 12,352,682 Options contracts 19,795,084 2,204,570 5,236,258 Others 2,199,349 2,613,529 2,571,077 Subtotal 40,854,376 29,703,034 26,039,002 Financial assets designated at fair value measured through profit or loss: Credit structured bonds 2,290,421 2,300,103 2,598,686 Convertible bonds 7,675,096 10,545,239 6,812,038 Others 507,355 512,207 - Subtotal 10,472,872 13,357,549 9,410,724 Total $ 107,748,438 93,717,804 97,615,263

For the details of pledged financial assets designated as financial assets measured at fair value through profit or loss, please refer to note 44. Taipei Fubon Bank entered into held for trading derivatives transactions primarily to meet clients’ needs, balance the bank’s position, and to meet the needs of making payments in different currencies. The aforementioned financial assets were designated as financial assets measured at fair value through profit or loss because such financial instruments are hybrid instruments and such designation eliminates or significantly reduces inconsistency of a measurement or recognition. (9) Available-for-sale Financial Assets, Net June 30, 2014 December 31, June 30, 2013 2013

Negotiable certificates of deposits $ 9,437,913 7,544,992 9,494,771 Government bonds 492,846,290 516,683,050 506,043,081 Corporate and financial bonds 625,352,217 530,865,782 444,545,410 Stocks 384,404,007 323,465,843 298,805,737 Beneficiary certificates and beneficiary 256,355,403 234,686,158 239,451,647 securities Commercial paper 14,449,520 19,521,434 25,317,449 Treasury bonds 8,106,514 8,598,272 9,539,876 Others 128,642 - 53,124 Subtotal 1,791,080,506 1,641,365,531 1,533,251,095 Less: Guarantee deposits 7,663,057 7,786,869 6,437,249 Accumulated impairment 1,846,344 2,113,854 2,092,868 Net amount $ 1,781,571,105 1,631,464,808 1,524,720,978

(Continued) 41 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

For the periods from April 1 to June 30, 2014 and 2013, and the six-month periods ended June 30, 2014 and 2013, the Company and its subsidiaries performed impairment evaluation and recognized impairment losses (reversal gains) on available-for-sale financial assets amounting to $(74,464), $121, $(52,844) and $837, respectively. (10) Hedging Derivative Financial Instruments June 30, 2014 December 31, June 30, 2013 2013

Hedging derivative financial assets Fair value hedge-interest rate swap contracts $ 524,606 517,817 630,617 Hedging derivative financial liabilities Fair value hedge-interest rate swap contracts $ 1,853,027 1,872,070 2,080,308

1) Fubon Life Insurance 1. Cash flow hedge The assets and liabilities of Fubon Life Insurance and its subsidiary bear floating interest rate. This exposes Fubon Life Insurance and its subsidiary to the risk that the future outflow of those assets and liabilities will fluctuate due to the change in market's interest rate. As Fubon Life Insurance and its subsidiary assessed that the potential risks could be significant in the future, interest rate swaps were contracted for hedging purposes. As of June 30, 2014, and December 31 and June 30, 2013 details of hedged items designated as cash flow hedges and their respective hedging derivative financial instruments were as follows:

June 30, 2014 Expected period of Designated Fair value of Expected recognition hedging Nominal hedging period of in profit or Hedged item instrument amount instrument cash flows loss

Floating bonds and floating Interest rate swap $ 16,400,000 170,685 2014.07.16~ 2014.07.16~ collateral loans contracts 2024.05.26 2024.05.26

December 31, 2013 Expected period of Designated Fair value of Expected recognition hedging Nominal hedging period of in profit or Hedged item instrument amount instrument cash flows loss

Floating bonds and floating Interest rate swap $ 9,400,000 180,813 2014.01.24~ 2014.01.24~ collateral loans contracts 2020.03.28 2020.03.28

(Continued) 42 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Expected period of Designated Fair value of Expected recognition hedging Nominal hedging period of in profit or Hedged item instrument amount instrument cash flows loss

Floating bonds and floating Interest rate swap $ 5,900,000 258,916 2013.07.15~ 2013.07.24~ collateral loans contracts 2020.03.28 2020.03.28

2. As of June 30, 2014, and December 31 and June 30, 2013 the gain or loss arising from the cash flow hedging recognized as an adjustment of stockholders’ equity was as follows: June 30, 2014 December 31, June 30, 2013 Item 2013

Equity adjusted amount $ (10,127) (156,177) (78,073) Non-financial liabilities (recognized $ (1,721) (26,550) (13,272) as deferred income tax liabilities) transferred from stockholders' equity

2) Taipei Fubon Bank Fair value hedge Taipei Fubon Bank and its subsidiary are exposed to the risk of fair value fluctuation due to the change of interest rate on the corporate bonds and bank debentures included in available-for-sale financial assets and bank debentures issued. Since the risk is considered to be material, the Bank and its subsidiary enter into interest rate swap contracts to hedge against this risk. June 30, 2014 Designated hedging Nominal Hedged item instruments amount Fair value

Financial bonds payable Interest rate swap contracts $ 24,150,000 132,836 Available-for-sale financial Interest rate swap contracts 12,219,181 (272,026) assets－financial bond Availed-for-sale financial Interest rate swap contracts 4,041,544 (325,771) assets－corporate bond

December 31, 2013 Designated hedging Nominal Hedged item instruments amount Fair value

Financial bonds payable Interest rate swap contracts $ 24,150,000 121,143 Available-for-sale financial Interest rate swap contracts 13,118,279 (337,059) assets－financial bond Availed-for-sale financial Interest rate swap contracts 3,986,431 (350,696) assets－corporate bond (Continued) 43 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Designated hedging Nominal Hedged item instruments amount Fair value

Financial bonds payable Interest rate swap contracts $ 28,850,000 302,773 Available-for-sale financial Interest rate swap contracts 12,887,858 (452,177) assets－financial bond Availed-for-sale financial Interest rate swap contracts 3,162,619 (348,804) assets－corporate bond

3) Fubon Bank (Hong Kong) – fair value hedge Bonds payable and available-for-sale financial assets bearing fixed interest rate may be exposed to the risk of fluctuation in fair value because of the changes in interest rates. Therefore, Fubon Bank (Hong Kong) entered into interest rate swap contracts to hedge such interest rate risks. June 30, 2014 Designated hedging Nominal Hedged item instruments amount Fair value

Available-for-sale financial Interest rate swap contracts $ 25,632,481 (1,034,145) assets

December 31, 2013 Designated hedging Nominal Hedged item instruments amount Fair value

Available-for-sale financial Interest rate swap contracts $ 25,768,824 (968,454) assets

June 30, 2013 Designated hedging Nominal Hedged item instruments amount Fair value

Available-for-sale financial Interest rate swap contracts $ 25,660,230 (1,210,399) assets

(11) Securities Purchased Under Resell Agreements June 30, 2014 December 31, June 30, 2013 2013

Margin lending (borrowed) amount $ 70,055,362 72,391,296 74,050,430 Contractual period to resell (repurchase) 2014.07.01~ 2014.01.02~ 2013.07.01~ 2014.11.09 2014.03.27 2013.09.18 Interest rate (%) 0.5%~6.12% 0.54%~0.69% 0.00%~0.78%

(Continued) 44 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(12) Receivables, Net June 30, 2014 December 31, June 30, 2013 2013

Credit card receivable $ 25,520,513 24,445,550 24,234,639 Accounts receivable – forfeiting 53,440,611 32,411,109 8,006,723 Accounts receivable, notes receivable and 7,446,538 5,142,323 5,672,592 acceptance Accounts receivable – factoring 16,715,367 19,987,476 14,875,209 Interest receivable 24,901,348 24,292,119 22,073,260 Revenues receivable 2,006,210 1,385,999 1,407,386 Premiums receivable 5,572,368 4,284,454 5,605,848 Margin loans receivable 16,909,063 14,580,568 13,753,731 Accounts receivable for settlement 20,543,499 13,557,838 22,218,706 Others 7,958,002 6,021,381 7,845,246 Subtotal 181,013,519 146,108,817 125,693,340 Less: Allowance for doubtful accounts 1,263,295 1,093,246 807,795 Total $ 179,750,224 145,015,571 124,885,545 (13) Assets Held for Sale, Net On May 13, 2014, the board of directors of Fubon Bank (Hong Kong) approved the selling plan for two owned properties. Fubon Bank (Hong Kong) has initiated the selling event. Those properties may be sold in November, 2014 and are classified as assets held for sale according to the intention. As of June 30, 2014, amounts of assets held for sale amounted to $94,166. (14) Loans, Net June 30, 2014 December 31, June 30, 2013 2013

Discounts and overdrafts $ 61,721,410 2,617,422 2,776,845 Short-term advances 7,970,869 7,556,202 6,988,089 Accounts receivable – financing 9,387,589 10,156,329 5,431,746 Short-term loans 335,253,255 278,693,643 266,570,655 Short-term secured loans 96,067,732 48,475,283 41,678,259 Medium-term loans 212,757,480 212,419,305 197,937,967 Medium-term secured loans 146,429,255 108,872,076 103,567,216 Long-term loans 85,931,834 85,110,764 81,129,896 Long-term secured loans 557,980,394 543,303,373 534,242,510 Insurance policy loans 41,611,210 41,732,842 40,629,777 Import and export bill negotiation 30,052,608 26,926,131 16,243,331 Nonperforming loans 2,901,293 1,153,160 1,205,358 Subtotal 1,588,064,929 1,367,016,530 1,298,401,649 Less: Allowance for doubtful accounts 17,731,842 13,690,283 9,927,320 Amortization on discount (premium) 910,609 442,295 387,007 Total $ 1,569,422,478 1,352,883,952 1,288,087,322 (Continued) 45 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Evaluation tables of allowance for doubtful accounts of loans and receivables are as follows:

Loans Total loans Item June 30, 2014 December 31, 2013 June 30, 2013 There is objective evidence of Individual assessment of 20,404,770 20,395,221 21,900,923 impairment. impairment Combined assessment of 2,351,639 2,535,124 2,693,886 impairment There is no objective evidence Combined assessment of 1,565,308,520 1,344,086,185 1,273,806,840 of impairment. impairment

Loans Allowance for doubtful accounts Item June 30, 2014 December 31, 2013 June 30, 2013 There is objective evidence of Individual assessment of 4,441,246 3,804,285 3,704,041 impairment. impairment Combined assessment of 122,420 139,225 144,720 impairment There is no objective evidence Combined assessment of 13,168,176 9,746,773 6,078,559 of impairment. impairment

Receivables Total receivables Item June 30, 2014 December 31, 2013 June 30, 2013 There is objective evidence of Individual assessment of 1,458,326 1,479,358 1,706,734 impairment. impairment Combined assessment of 2,091,856 2,119,323 2,135,821 impairment There is no objective evidence Combined assessment of 178,813,150 144,072,502 123,493,517 of impairment. impairment

Receivables Allowance for doubtful accounts Item June 30, 2014 December 31, 2013 June 30, 2013 There is objective evidence of Individual assessment of 331,311 337,349 404,501 impairment. impairment Combined assessment of 320,377 318,123 363,131 impairment There is no objective evidence Combined assessment of 890,685 724,970 317,490 of impairment. impairment

Note 1:Receivable could be presented separately by various natures. Gross receivables represent amount initially recognized but do not deduct allowance for doubtful accounts or deduct (or add) discount (or premium) adjustment. Note 2:Abovementioned gross receivables and allowance for doubtful accounts include non-accrual loans, buy nonperforming loans and buy remittance.

(Continued) 46 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

The movement of the allowance for doubtful accounts of loans and receivables for the six-month periods ended June 30, 2014 and 2013 were as follows: For the six-month period ended June 30, 2014 Other financial Receivables Loans assets Total

Beginning balance $ 1,093,246 13,690,283 287,196 15,070,725 Acquired through business combinations 1,569 3,850,437 - 3,852,006 Allowance for (reversal of ) doubtful accounts 179,076 221,628 (98,901) 301,803 Write-off (8,571) (258,418) (152,486) (419,475) Recovery from written-off 1,004 528,858 243,272 773,134 Effects of exchange rate changes and others (3,029) (300,946) (3) (303,978) Ending balance $ 1,263,295 17,731,842 279,078 19,274,215

For the six-month period ended June 30, 2013 Other financial Receivables Loans assets Total

Beginning balance $ 923,946 9,322,962 243,922 10,490,830 Allowance for (reversal of ) doubtful accounts (201,898) 236,178 (118,633) (84,353) Write-off (9,189) (146,939) (117,752) (273,880) Recovery from written-off 90,373 475,596 269,790 835,759 Effects of exchange rate changes and others 4,563 39,523 - 44,086 Ending balance $ 807,795 9,927,320 277,327 11,012,442

(15) Reinsurance Contract Assets, Net June 30, 2014 December 31, June 30, 2013 2013

Reinsurance recoverable $ 2,211,675 2,518,233 837,645 Due from other reinsurance 2,752,976 2,886,436 2,529,029 Subtotal 4,964,651 5,404,669 3,366,674 Reinsurance assets: Reserve for unearned premiums-ceded 5,268,745 4,562,780 5,052,314 Reserve for claim-out 4,831,823 3,882,637 3,721,382 Premium deficiency reserve-out 156,306 183,743 107,460 Subtotal 10,256,874 8,629,160 8,881,156 Total $ 15,221,525 14,033,829 12,247,830

(Continued) 47 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(16) Held-to-maturity Financial Assets, Net June 30, 2014 December 31, June 30, 2013 2013

Corporate bonds $ 7,021,304 10,560,463 11,189,741 Government bonds 21,023,816 3,703,673 3,239,850 Bank debentures 37,288,375 22,573,175 22,745,624 Negotiable certificates of deposits 167,443,238 173,855,093 172,609,049 Beneficiary securities 1,012,382 1,183,566 1,481,055 Commercial paper 1,289,771 5,106,897 4,600,233 Other 97,869 - - Total $ 235,176,755 216,982,867 215,865,552

(17) Investment in Equity-Accounted Investees, Net

June 30, 2014 December 31, 2013 June 30, 2013 Ownership Ownership Ownership interest (%) Amount interest (%) Amount interest (%) Amount

Fubon Brokers (Thailand) Co., Ltd. - $ - - - 25.00 2,687 Fubon Construction Management Co., 30.00 123,942 30.00 135,557 30.00 138,175 Ltd. Xiamen Bank 17.29 5,073,242 19.99 4,828,963 19.99 4,738,661 Founder Fubon Fund Management Co., 33.30 107,828 33.30 133,399 33.30 165,379 Ltd. One Production Film Co., Ltd. 21.05 32,435 21.05 35,660 21.05 33,950 Total $ 5,337,447 5,133,579 5,078,852

For the periods from April 1 to June 30, 2014 and 2013, and the six-month periods ended June 30, 2014 and 2013, summarized profit or loss of associates were as follows: For the three-month For the six-month periods ended June 30 periods ended June 30 2014 2013 2014 2013

Profit or loss of associates $ 263,210 127,963 417,083 208,981

(Continued) 48 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Summarized financial information without adjustment to the Company and its subsidiaries’ proportionate share of associates was as follows: June 30, 2014 December 31, June 30, 2013 2013

Total assets: Fubon Broker (Thailand) Co., Ltd. $ - - 22,427 Fubon Construction Management Co., Ltd. 446,417 465,624 488,452 Xiamen Bank 563,367,494 524,166,173 327,691,964 Founder Fubon Fund Management Co., Ltd. 599,549 513,007 546,239 One Production Film Co., Ltd. 186,167 268,321 175,281 Subtotal 564,599,627 525,413,125 328,924,363 Total liabilities: Fubon Broker (Thailand) Co., Ltd. - - 11,681 Fubon Construction Management Co., Ltd. 33,276 13,765 27,870 Xiamen Bank 534,990,305 500,035,435 304,957,371 Founder Fubon Fund Management Co., Ltd. 275,740 112,410 47,564 One Production Film Co., Ltd. 35,577 102,411 17,499 Subtotal 535,334,898 500,264,021 305,061,985 Net assets $ 29,264,729 25,149,104 23,862,378

For the three-month For the six-month periods ended June 30 periods ended June 30 2014 2013 2014 2013

Revenue: Fubon Broker (Thailand) Co., Ltd. $ - 2,821 - 4,938 Fubon Construction Management Co., Ltd. 19,347 19,966 43,227 37,938 Xiamen Bank 2,836,818 1,809,361 5,110,473 3,475,441 Founder Fubon Fund Management Co., Ltd. 112,438 18,511 164,574 27,784 One Production Film Co., Ltd. 9,361 11,186 13,368 12,266 Total $ 2,977,964 1,861,845 5,331,642 3,558,367

(Continued) 49 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

For the three-month For the six-month periods ended June 30 periods ended June 30 2014 2013 2014 2013

Net income (loss) for the period: Fubon Broker (Thailand) Co., Ltd. $ - 938 - 1,148 Fubon Construction Management Co., Ltd. 11,722 13,002 20,041 18,714 Xiamen Bank 1,093,304 752,262 1,900,599 1,248,801 Founder Fubon Fund Management Co., Ltd. (38,912) (62,874) (66,726) (119,852) One Production Film Co., Ltd. (11,808) (18,650) (15,320) (22,699) Total $ 1,054,306 684,678 1,838,594 1,126,112

As of June 30, 2013, Fubon Insurance possessed 24.96% of the total shares outstanding of Fubon Insurance Broker (Thailand) Co., Ltd., and the holding reached 48.97% through capital increase on November 5, 2013. Furthermore, natural person shareholders are the employee of the Company and, in accordance with the regulations of section 2, article 369 of Company Act and IAS 27, Fubon Insurance Broker (Thailand) Co., Ltd. is a subsidiary of the Company and is included in the consolidated financial statements from November 5, 2013 On April 16, 2012, Fubon Financial Holding Venture Capital set up Kbro Media Co., Ltd. through Kbro Co., Ltd. Its share capital is $20,000. Fubon Financial Holing Venture Capital invested $9,800, in exchange for 49% of ownership. On August 10, 2012, Kbro Media Co., Ltd. increased its capital by cash of $220,000. Fubon Financial Holding Venture Capital subscribed $40,000. Fubon Financial Holding Venture Capital did not acquire new shares in proportion to its original ownership percentage when Kbro Media Co., Ltd. issued new shares for cash for the three-month period ended March 31, 2013. As Fubon Financial Holding Venture Capital lost significant influence over Kbro Media Co., Ltd., these long-term investments was recognized as financial assets measured at cost. Fubon Financial Holding Venture capital invested in One Production Film Co., Ltd. and increased its capital by cash on August 14, 2012. This investee’s total capital is $190,000. Fubon Financial Holding Venture Capital invested $40,000 for 21.05% ownership. A second-tier subsidiary, Fubon Asset Management, set up a fund management company Founder Fubon Fund Management Co., Ltd., with Founder Securities Co. in Mainland China. Financial Supervisory Commission and Investment Commission of MOEA approved this investment on January 5, 2011 and January 7, 2011, respectively, and the Securities Supervisory Commission in Mainland China also approved this investment on June 30, 2011. On July 27, 2011, Fubon Asset Management remitted $298,244 to Founder Fubon Fund Management Co., Ltd. In August, 2011, Founder Fubon Fund Management returned $726 due to foreign exchange rate fluctuated. As of June 30, 2014, Fubon Asset Management invested approximately $297,518 in Founder Fubon Fund Management. Fubon Insurance, based on the decision of the board of directors, applied to Insurance Bureau of FSC for a permit to invest in stock shares in China and signed a joint contract with Fubon Life Insurance Co., Ltd. and Zijin Investment Group to set up a life insurance company in China. The joint venture company is named Fubon Zijin Life Insurance Company. Until the date of the report, it is already approved by Financial Supervisory Commission based on Letter Gin Guan Bao Li Zi No. 10002542061, dated January 14, 2011. Nevertheless, the Company has not remitted the investment amount and the relevant investment establishment has not been set up yet.

(Continued) 50 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Insurance, under the consent of board of directors in the meeting on April 30, 2014, to execute capital increase by cash in the subsidiary Fubon Property and Casualty Insurance Co. Ltd. The capital increase amounted to CNY$100 million and is not yet approved by the competent authority. Therefore, the capital increase is not completed yet. Fubon Insurance, under the consent of board of directors in the meeting on June 30, 2014, to execute capital increase by cash in the subsidiary Fubon Insurance (Vietnam). The capital increase amounted to VND $200,000 million and is not yet approved by the competent authority. Therefore, the capital increase is not completed yet. Fubon Life Insurance, under the consent of board of directors in the meeting on May 6, 2014, to execute capital increase by cash in the subsidiary Fubon Property and Casualty Insurance Co. Ltd. The capital increase amounted between CNY$80 million and CNY$100 million and is not yet approved by the competent authority. Therefore, the capital increase is not completed yet. The original ownership of Xiamen Bank held by Fubon Bank (Hong Kong) was 19.99%. On June 5, 2014, Xiamen Bank allotted additional share capital to its new investors. Thus, the ownership of Xiamen Bank held by Fubon Bank (Hong Kong) decreased to 17.29%. In July, Xiamen Bank issued new ordinary shares. In order to retain the original ownership of 19.99%, Fubon Bank (Hong Kong) has conducted the legal procedures to acquire the additional shares of Xiamen Bank. (18) Other Financial Assets, Net June 30, 2014 December 31, June 30, 2013 2013

Financial assets carried at cost, net $ 3,597,081 8,051,543 3,446,492 Debt securities investment in non-active 413,489,223 364,936,028 347,763,952 market, net Assets on insurance product－separated 140,100,965 141,757,981 138,734,735 account Continuing involvement in transferred assets 119,583 - - Linked deposits 45,612,089 37,655,198 40,600,638 Margin deposits paid for borrowed securities 42,251 145,774 67,929 Collateral for borrowed securities 46,761 155,838 56,345 Overdue receivables 59,172 61,587 55,189 Customer margin deposit 5,953,261 5,426,274 5,641,629 Buy remittance 8,247 10,654 7,663 Buy nonperforming loan 1,282,394 1,490,125 1,579,880 Time deposits of non-cash equivalents 7,939,034 12,042,366 1,620,828 Others 22,672 18,749 13,890 Less: Allowance for doubtful accounts (279,078) (287,196) (277,327) Total $ 617,993,655 571,464,921 539,311,843

(Continued) 51 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

1) Financial assets carried at cost June 30, 2014 December 31, June 30, 2013 2013

Investment in unlisted stocks $ 3,927,500 8,392,590 3,766,481 Less: Accumulated impairment (330,419) (341,047) (319,989) Total $ 3,597,081 8,051,543 3,446,492

The unlisted stocks held by the Company and its subsidiaries are measured by the cost method because they are not quoted in an active market and the fair value is not reliably measurable. Due to objective evidence of impairment, the Company and its subsidiaries provided impairment losses on financial assets carried at cost amounting to $0, $15,742, $4,434 and $17,983 for the periods from April 1 to June 30, 2014 and 2013, and the six-month periods ended June 30, 2014 and 2013, respectively. 2) Separated account－insurance product June 30, 2014 December 31, June 30, 2013 2013

Assets on insurance product－separated account: Receivables $ 1,855,966 987,511 1,348,564 Securities 130,258,344 133,105,422 129,450,504 Bank deposits 7,986,655 7,665,048 7,935,667 Total $ 140,100,965 141,757,981 138,734,735

June 30, 2014 December 31, June 30, 2013 2013

Liabilities on insurance product －separated account: Reserve－insurance contract $ 85,782,763 83,822,306 80,973,428 Reserve－investment contract 54,317,349 57,935,111 57,761,096 Payables 853 564 211 Total $ 140,100,965 141,757,981 138,734,735

(Continued) 52 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

For the three-month For the six-month periods ended June 30 periods ended June 30 2014 2013 2014 2013

Investment-type insurance policy revenues: Insurance revenues $ 3,007,737 3,242,244 6,075,800 6,581,223 Interest revenues 81,338 157,489 136,399 213,645 Gain on investment 510,729 348,426 689,933 841,154 Unrealized gain (loss) on financial 2,386,176 (4,607,802) 3,119,497 (2,437,753) assets Loss on foreign exchange (50,445) (135,690) (72,169) (313,088) Total $ 5,935,535 (995,333) 9,949,460 4,885,181 Investment-type insurance policy expense: Net insurance separate account value $ 1,660,793 (5,742,398) 1,959,858 (4,069,753) reserve Insurance claim payments 3,585,863 4,062,927 6,604,809 7,585,421 Administrative expense 688,879 684,138 1,384,793 1,369,513 Total $ 5,935,535 (995,333) 9,949,460 4,885,181

As for the six-month periods ended June 30, 2014 and 2013, Fubon Life Insurance earned sales commission in investment oriented insurance products from counterparty and recognized service fee thereon of $211,363 and $225,642, respectively. 3) Debt securities investment in non-active market June 30, 2014 December 31, June 30, 2013 2013

Government bonds $ 192,650 56,548 - Corporate bonds 4,319,810 4,106,343 2,914,380 Financial bonds 20,646,902 16,771,118 16,762,445 Zero-coupon bonds 322,590,419 274,239,835 257,726,384 Real estate mortgage bonds 42,820,745 44,328,725 44,903,962 Structured bonds 2,991,500 1,497,500 - Preferred stock 1,000,000 1,000,000 1,000,000 Securitization of beneficiary certificates 2,625,633 9,343,622 10,979,036 Negotiable certificates of deposit 16,381,491 16,186,192 16,103,923 Subtotal 413,569,150 367,529,883 350,390,130 Accumulated impairment (79,927) (2,593,855) (2,626,178) Total $ 413,489,223 364,936,028 347,763,952

(Continued) 53 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

For the periods from April 1 to June 30, 2014 and 2013, and the six-month periods ended June 30, 2014 and 2013 based on the results of impairment evaluation, impairment loss previously recognized was reversed so that gain was recognized from the reversal of impairment loss on debt securities investments with non-active market amounting to $9,904, $162,753, $19,790 and $207,679, respectively. 4) Continuing involvement in transferred assets Fubon Bank (China) had sold its nonperforming loans to the buyer, and issued a letter of guarantee to the buyer as a collateral for enhancing commitment. Under this transaction, Fubon Bank (China) neither transferred nor retained substantially all the risks and rewards of ownership in the financial assets. Therefore, Fubon Bank (China) continued to recognize the transferred asset to the extent of its continuing involvement and recognized associated liabilities it could be required to repay. The aforementioned information are listed below: June 30, 2014 December 31, 2013 June 30, 2013 Financial Financial Financial Assets Not Associated Assets Not Associated Assets Not Associated Meeting the Financial Meeting the Financial Meeting the Financial Criteria for Liabilities Criteria for Liabilities Criteria for Liabilities Derecognition (Note) Derecognition (Note) Derecognition (Note)

Continuing $ 119,583 - - - - - involvement in transferred assets Continuing - 119,583 - - - - involvement liabilities Total $ 119,583 119,583 - - - -

Note: The amount of relevant financial liabilities recognized as other financial liabilities. (19) Investment Property

Investment Prepayment for Land and property under investment improvements Buildings construction property Total

Cost or deemed cost: Balance as of January 1, 2014 $ 64,491,460 26,521,992 1,026,063 22,861 92,062,376 Additions - 10,480 208,492 8,394 227,366 Reclassification (583,004) (103,591) - (24,799) (711,394) Balance as of June 30, 2014 $ 63,908,456 26,428,881 1,234,555 6,456 91,578,348 Balance as of January 1, 2013 $ 59,851,703 20,723,222 2,423,201 1,082,217 84,080,343 Additions 4,243,498 1,760,164 1,026,574 18,980 7,049,216 Disposals - (1,675) - - (1,675) Reclassification 857,482 887,384 (44,334) (1,067,458) 633,074 Balance as of June 30, 2013 $ 64,952,683 23,369,095 3,405,441 33,739 91,760,958

(Continued) 54 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Investment Prepayment for Land and property under investment improvements Buildings construction property Total

Depreciation and impairment loss: Balance as of January 1, 2014 $ 58,810 3,714,221 - 1,797 3,774,828 Depreciation - 417,359 - - 417,359 Impairment loss - (12,448) - - (12,448) Reclassification 11,002 (2,634) - - 8,368 Balance as of June 30, 2014 $ 69,812 4,116,498 - 1,797 4,188,107 Balance as of January 1, 2013 $ 39,907 3,018,302 - 1,772 3,059,981 Depreciation - 336,566 - 25 336,591 Impairment loss 18,915 (11,354) - - 7,561 Disposals - (583) - - (583) Reclassification - 39,194 - - 39,194 Balance as of June 30, 2013 $ 58,822 3,382,125 - 1,797 3,442,744 Book value: Balance as of January 1, 2014 $ 64,432,650 22,807,771 1,026,063 21,064 88,287,548 Balance as of June 30, 2014 $ 63,838,644 22,312,383 1,234,555 4,659 87,390,241 Balance as of January 1, 2013 $ 59,811,796 17,704,920 2,423,201 1,080,445 81,020,362 Balance as of June 30, 2013 $ 64,893,861 19,986,970 3,405,441 31,942 88,318,214 Fair value: Balance as of January 1, 2014 $ 119,134,680 Balance as of June 30, 2014 $ 118,773,696 Balance as of January 1, 2013 $ 105,483,587 Balance as of June 30, 2013 $ 113,686,648

The fair value of investment property as of June 30, 2014, and December 31 and June 30, 2013 is based on valuations performed by independent valuers. Evaluation methods include comparative method, income approach and cost method. Evaluators consider the location, market supply and demand and characteristic of property and use the weighed average method to evaluate the value of properties. The comparative method use the comparative underlying price as it's basis, and calculate underlying price by comparison, analysis and adjustment. Income approach includes Direct Capitalization method and discounted cash flow analysis method. Cost method uses acquisition or reconstruction costs less accumulated depreciation and other deduction to calculate the underlying price. Rental revenue incurred for investment property for the six-month periods ended June 30, 2014 and 2013, amounted to $1,964,705 and $1,304,326, respectively. Direct operation expenses amounted to $754,652 and $576,132 for the six-month periods ended June 30, 2014 and 2013, respectively, in which, $45,655 and $41,791, respectively, are direct operation expenses belonging to investment property that does not generate rental income. Certain property were pledged as collateral, please refer to note 44 for details.

(Continued) 55 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(20) Property, Plant and Equipment, Net Changes in the cost, depreciation, and impairment loss of the property, plant and equipment of the Company and its subsidiaries for the six-month periods ended 2014 and 2013, are as follows:

Prepayment for purchases of equipment, Machinery and and computer Transportation construction in Land Buildings equipment equipment Other equipment progress Total

Cost or deemed cost:

Balance as of January 1, 2014 $ 14,960,329 16,957,421 5,794,764 342,053 9,410,877 525,432 47,990,876 Acquired through business combinations - 7,928,382 269,527 35,363 234,819 - 8,468,091 Additions 4,259 11,056 167,862 30,840 341,044 248,627 803,688 Estimated decommissioning cost - - - - 391 - 391 Transfer out (9,051) (14,970) - - - (135) (24,156) Transfer in 18,798 26,663 314 - 44 - 45,819 Disposals - - (388,575) (33,823) (265,386) - (687,784) Reclassification 536,073 4,044 228,164 600 (180,215) (22,495) 566,171 Effect of change in exchange rates - (197,963) (6,863) (1,982) (9,399) (2) (216,209) Balance as of June 30, 2014 $ 15,510,408 24,714,633 6,065,193 373,051 9,532,175 751,427 56,946,887 Balance as of January 1, 2013 $ 15,035,499 20,371,456 4,202,874 329,277 5,954,542 510,095 46,403,743 Additions - 4,725 78,320 15,595 141,085 223,988 463,713 Transfer out - (46,242) - - (318,663) - (364,905) Transfer in 8,565 9,507 - - 380,140 - 398,212 Disposals - (6,232) (166,412) (22,235) (75,426) - (270,305) Reclassification (226,288) (453,440) 52,747 2,290 64,291 (212,984) (773,384) Effect of change in exchange rates 8 138,397 2,833 1,954 68,308 - 211,500 Balance as of June 30, 2013 $ 14,817,784 20,018,171 4,170,362 326,881 6,214,277 521,099 46,068,574 Depreciation and impairment loss:

Balance as of January 1, 2014 $ 1,030,732 3,731,988 4,146,389 224,957 4,852,889 - 13,986,955 Acquired through business combinations - 233,196 156,097 20,081 156,413 - 565,787 Depreciations - 209,479 207,226 22,327 326,982 - 766,014 Disposals - - (333,507) (32,884) (263,011) - (629,402) Transfer in - 6,170 - - - - 6,170 Reclassification (11,002) 54,489 25,049 15 (77,062) - (8,511) Effect of change in exchange rates - (101,425) (4,230) (753) (5,526) - (111,934) Balance as of June 30, 2014 $ 1,019,730 4,133,897 4,197,024 233,743 4,990,685 - 14,575,079 Balance as of January 1, 2013 $ 1,030,732 3,978,495 3,099,062 213,832 4,266,530 - 12,588,651 Depreciations - 110,708 156,604 18,443 323,566 - 609,321 Disposals - - (162,179) (20,699) (66,709) - (249,587) Transfer in - 1,974 - - 12,748 - 14,722 Reclassification - (10,173) 600 106 1,533 - (7,934) Effect of change in exchange rates - 25,039 (111) 532 41,610 - 67,070 Balance as of June 30, 2013 $ 1,030,732 4,106,043 3,093,976 212,214 4,579,278 - 13,022,243

Carrying amounts:

Balance as of January 1, 2014 $ 13,929,597 13,225,433 1,648,375 117,096 4,557,988 525,432 34,003,921 Balance as of June 30, 2014 $ 14,490,678 20,580,736 1,868,169 139,308 4,541,490 751,427 42,371,808 Balance as of January 1, 2013 $ 14,004,767 16,392,961 1,103,812 115,445 1,688,012 510,095 33,815,092 Balance as of June 30, 2013 $ 13,787,052 15,912,128 1,076,386 114,667 1,634,999 521,099 33,046,331

Certain property were pledged as collateral, please refer to note 44 for details.

(Continued) 56 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(21) Intangible Assets, Net June 30, 2014 December 31, June 30, 2013 2013

Banking license and operating rights $ 6,077,361 715,844 729,948 Core deposits 8,488,386 476,416 523,442 Goodwill 14,614,966 11,346,173 11,434,983 Computer software 873,662 916,107 751,085 Customer relationships 112,705 210 244 $ 30,167,080 13,454,750 13,439,702

The movement of intangible assets of the Company and its subsidiaries for the six-month periods ended 2014 and 2013 is as follows: Other intangible Goodwill assets Total

Balance as of January 1, 2014 $ 11,346,173 2,108,577 13,454,750 Acquired through business combinations 3,352,882 14,116,802 17,469,684 Additions - 92,940 92,940 Disposals (1,986) - (1,986) Amortization - (483,590) (483,590) Reclassification - 61,745 61,745 Effect of change in exchange rates (82,103) (344,360) (426,463) Balance as of June 30, 2014 $ 14,614,966 15,552,114 30,167,080 Balance as of January 1, 2013 $ 11,434,919 2,027,063 13,461,982 Additions - 173,650 173,650 Disposal - (350) (350) Amortization - (270,148) (270,148) Reclassification - 71,515 71,515 Effect of change in exchange rates 64 2,989 3,053 Balance as of June 30, 2013 $ 11,434,983 2,004,719 13,439,702

The above banking license and operating rights, core deposits, customer relationships and goodwill arised from the Company and its subsidiaries’ acquisition of the Hanoi branch and Ho Chi Minh City subbranch of Chinfon Bank, which were monitored by the Financial Restructuring Fund, and from the acquisition of ING Life Insurance (Taiwan) and Fubon Bank (China).

(Continued) 57 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

The above intangible assets, except for banking license with an indefinite useful life which is not amortized, are amortized on a straight-line basis and recognized as profit or loss based on the following estimated useful life: Core deposits 6 to 23 years Operating rights 10 to 97 years Computer software 3 to 8 years Customer relationships 7 to 14 years

For the purpose of goodwill impairment testing, branches of Taipei Fubon Bank in Vietnam were deemed as a cash generating unit, and the recoverable amounts of these branches were determined on the basis of their net fair value. The key assumptions used in the net fair value calculation included the branches’ profitability, business cycle and prosperity, the overall state of the Vietnam’s economy, and the estimated salvage value of the Vietnam branches. For the year ended December 31, 2013, the Company and its subsidiaries recognized impairment loss of $88,000 and no goodwill impairment was resulted from the assessment as of June 30, 2014 and 2013. (22) Other Assets June 30, 2014 December 31, June 30, 2013 2013

Refundable deposits $ 25,545,498 12,541,034 12,072,819 Foreclosed collaterals and residuals taken over 2,378,643 2,389,979 2,391,844 Operation guarantee deposits and settlement 334,993 344,916 352,303 fund Deferred assets 460,232 563,550 684,572 Prepayments 14,140,320 7,279,148 5,204,623 Others 1,519,807 1,667,788 963,970 Total $ 44,379,493 24,786,415 21,670,131

For the periods from April 1 to June 30, 2014 and 2013, and the six-month periods ended June 30, 2014 and 2013, the Company and its subsidiaries recognized impairment loss (reversal gains) on other assets measured at net fair value amounting to $(5,586), $12,718, $1,512 and $1,055, respectively.

(Continued) 58 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(23) Financial Liabilities Measured at Fair Value through Profit or Loss June 30, 2014 December 31, June 30, 2013 2013

Financial liabilities held for trading: Stock warrant liabilities $ 662,819 325,597 249,209 Exchange fund bills and bonds 8,405,931 7,140,731 7,808,411 Stock borrowing payable 396,549 462,128 268,543 9,465,299 7,928,456 8,326,163 Derivative financial instruments: Interest rate contracts 4,423,350 6,256,131 5,939,574 Foreign exchange contracts 9,903,144 22,534,167 15,192,016 Options contracts 21,062,736 3,768,905 6,203,565 Other 1,608,249 2,377,389 2,200,921 36,997,479 34,936,592 29,536,076 Financial liabilities designated at fair value through profit or loss: Financial bonds 1,440,419 - 1,369,284 Structured products 76,978 135,249 88,307 1,517,397 135,249 1,457,591 Total $ 47,980,175 43,000,297 39,319,830

(24) Securities Sold under Repurchase Agreements June 30, 2014 December 31, June 30, 2013 2013

Pecuniary financing $ 91,898,020 48,188,694 42,248,367 Contractual period to repurchase 2014.07.01~ 2014.01.02~ 2013.07.01~ 2014.12.19 2014.12.05 2013.12.20 Interest rate range 0.35%~6.25% 0.14%~9.88% 0.54%~6.25%

(25) Commercial Paper Payable, Net June 30, 2014 December 31, June 30, 2013 2013

Par value $ 5,825,000 4,725,000 5,590,000 Less: Discount on commercial paper payable (1,478) (658) (508) Total $ 5,823,522 4,724,342 5,589,492 Interest rate range 0.61%~0.86% 0.83%~1.14% 0.73%~2.60%

(Continued) 59 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(26) Deposits June 30, 2014 December 31, June 30, 2013 2013

Checking accounts $ 46,274,609 48,266,957 43,734,290 Public treasury deposits 19,392,316 21,692,181 18,979,321 Demand deposits 284,650,227 240,946,478 229,321,906 Time deposits 689,776,413 522,573,626 501,546,381 Negotiable certificates of deposit 33,639,600 2,552,626 16,337,300 Savings accounts 692,974,154 667,563,315 650,605,562 Remittances 1,215,993 857,439 908,534 $ 1,767,923,312 1,504,452,622 1,461,433,294

(27) Bonds Payable 1) The bonds payable as of June 30, 2014, and December 31 and June 30, 2013 were as follows: June 30, 2014 December 31, June 30, 2013 2013

Unsecured corporate bonds $ 38,000,000 38,000,000 29,000,000 Financial bonds 89,496,721 76,003,337 78,767,575 Total $ 127,496,721 114,003,337 107,767,575

2) Unsecured corporate bonds

Issue period Maturity Issue Interest June 30, December June 30, Name Issue date date amount rate 2014 31, 2013 2013 Note

First 98 unsecured Domestic 2010.01.27 2017.01.27 $ 6,000,000 2.60 $ 6,000,000 6,000,000 6,000,000 Fixed interest, interest payable corporate bonds annually; pay in full upon seven years Second 98 unsecured domestic 2010.01.28 2015.01.28 3,200,000 1.70 3,200,000 3,200,000 3,200,000 Fixed interest, interest payable corporate bonds-bond A annually; pay in full upon five years Second 98 unsecured domestic 2010.01.28 2017.01.28 1,000,000 1.90 1,000,000 1,000,000 1,000,000 Fixed interest, interest payable corporate bonds-bond B annually; pay in full upon seven years Second 98 unsecured domestic 2010.01.28 2017.01.28 800,000 2.60 800,000 800,000 800,000 Fixed interest, interest payable corporate bonds-bond C annually; pay in full upon seven years First 99 unsecured Domestic 2010.08.23 2015.08.23 5,000,000 1.56 5,000,000 5,000,000 5,000,000 Fixed interest, interest payable corporate bonds annually; pay in full upon five years First 100 unsecured Domestic 2011.11.15 2016.11.15 6,000,000 1.40 6,000,000 6,000,000 6,000,000 Fixed interest, interest payable corporate bonds annually; pay in full upon five years First 101 unsecured Domestic 2012.08.15 2017.08.15 2,000,000 1.35 2,000,000 2,000,000 2,000,000 Fixed interest, interest payable corporate Bonds-bond A annually; pay in full upon five years

(Continued) 60 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

First 101 unsecured Domestic 2012.08.15 2019.08.15 5,000,000 1.45 5,000,000 5,000,000 5,000,000 Fixed interest, interest payable corporate Bonds-bond B annually; pay in full upon seven years First 102 unsecured Domestic 2013.08.28 2018.08.28 5,450,000 1.45 5,450,000 5,450,000 - Fixed interest, interest payable corporate Bonds-bond A annually; pay in full upon seven years First 102 unsecured Domestic 2013.08.28 2020.08.28 900,000 1.58 900,000 900,000 - Fixed interest, interest payable corporate Bonds-bond B annually; pay in full upon seven years Second 102 unsecured domestic 2013.12.18 2018.12.18 100,000 1.42 100,000 100,000 - Fixed interest, interest payable corporate Bonds-bond A annually; pay in full upon five years Second 102 unsecured domestic 2013.12.18 2020.12.18 2,550,000 1.60 2,550,000 2,550,000 - Fixed interest, interest payable corporate Bonds-bond B annually; pay in full upon seven years $ 38,000,000 38,000,000 29,000,000

3) Financial Bonds Payable June 30, 2014 Maturity Interest rate Amount

Taipei Fubon Bank From January 2015 to Inverse floating rate, $ 71,032,836 May 2024 floating rate or fixed rate Fubon Bank (Hong Kong) From July 2014 to Floating rate or fixed rate 18,463,885 November 2020 $ 89,496,721

December 31, 2013 Maturity Interest rate Amount

Taipei Fubon Bank From January 2014 to Inverse floating rate, $ 65,271,143 August 2023 floating rate or fixed rate Fubon Bank (Hong Kong) From February 2014 to Floating rate or fixed rate 10,732,194 November 2020 $ 76,003,337

June 30, 2013 Maturity Interest rate Amount

Taipei Fubon Bank From July 2013 to May Inverse floating rate, $ 66,202,773 2022 floating rate or fixed rate Fubon Bank (Hong Kong) From July 2013 to Floating rate or fixed rate 12,564,802 November 2020 $ 78,767,575

(Continued) 61 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(28) Other Borrowings June 30, 2014 December 31, June 30, 2013 2013

Credit and guarantee loan $ 1,100,000 35,000 1,100,000 Interest rate range 0.95% 1.138%~1.230% 1.10%~1.80%

For pledged collateral information, please refer to note 44. (29) Provisions 1) Provisions June 30, 2014 December 31, June 30, 2013 2013

Reserve for unearned premiums (Note) $ 26,513,749 24,567,982 24,814,634 Special reserve (Note) 11,971,267 12,739,767 14,954,629 Claims reserve (Note) 17,033,442 14,705,290 13,299,299 Assurance reserve (Note) 2,085,073,078 1,964,533,169 1,815,091,312 Guarantee reserve 500,567 466,956 277,822 Reserve for premium deficiency (Note) 12,218,874 10,348,193 7,927,470 Reserve for decommissioning obligations 132,519 133,620 130,802 Reserve for employee benefit obligations 9,650,085 9,376,330 9,241,832 Liabilities adequacy reserve (Note) 24,150 439 58,829 Reserve for insurance contracts with 89,146,174 92,003,504 95,730,061 financial product feature (Note) Others 30,997,733 31,227,356 31,401,248 Foreign exchange valuation reserve(Note) 1,266,169 825,259 853,958 Total $ 2,284,527,807 2,160,927,865 2,013,781,896

Note:For further information, please refer to note 37 for insurance contracts. 2) Employee benefits 1. Defined benefit plans There was no significant volatility of the market or any significant reimbursement, settlement or other one-time event in the prior fiscal year, the Company and its subsidiaries used December 31, 2013 and 2012 pension cost measured and disclosed interim pension cost. The Company and its subsidiaries’ expenses recognized in profit or loss for the periods from April 1 to June 30, 2014 and 2013, and the six-month periods ended June 30, 2014 and 2013, were $182,912, $136,059, $400,849 and $375,371, respectively.

(Continued) 62 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

2. Defined contribution plans The Company and its subsidiaries’ expenses recognized in profit or loss for the periods from April 1 to June 30, 2014 and 2013, and the six-month periods ended June 30, 2014 and 2013, were $276,590, $287,237, $511,915 and $501,702, respectively. (30) Other Financial Liabilities June 30, 2014 December 31, June 30, 2013 2013

Principle of structured products collected $ 39,652,920 34,933,700 23,943,804 Liabilities on insurance product－separated 140,100,965 141,757,981 138,734,735 account Future traders' equity 5,953,261 5,426,274 5,641,629 Appropriated loan funds 55,000 166,750 313,750 Others 124,280 932 - Total $ 185,886,426 182,285,637 168,633,918

Investment-type insurance policy liabilities For related revenue and expenses of insurance separate account instrument liabilities for the six-month periods ended June 30, 2014 and 2013 please refer to note 18, other financial assets. (31) Other Liabilities June 30, 2014 December 31, June 30, 2013 2013

Advance receipts $ 2,812,035 2,479,042 2,478,420 Temporary receipts 3,796,944 5,372,542 3,914,834 Guarantee deposits received 2,560,953 2,044,439 1,456,689 Temporary premiums 791,673 2,832,463 754,843 Deferred handling charge revenue 1,209,008 1,198,118 1,243,004 Deposit-in for borrowed securities 846,459 1,311,855 2,925,363 Other 1,420,451 1,148,807 844,894 $ 13,437,523 16,387,266 13,618,047

(Continued) 63 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(32) Income Tax The components of income tax expenses for the periods from April 1 to June 30, 2014 and 2013, and the six-month periods ended June 30, 2014 and 2013 were as follows: For the three-month For the six-month periods ended June 30 periods ended June 30 2014 2013 2014 2013

Current tax expense Current period $ 2,815,901 2,614,757 3,053,494 3,800,690 Adjustment for prior periods 40,341 (716,484) 40,341 (716,484) Others 330,673 231,728 460,504 559,075 3,186,915 2,130,001 3,554,339 3,643,281 Deferred tax expense Temporary differences (420,658) 494,489 2,113,269 1,132,205 Total income tax expenses $ 2,766,257 2,624,490 5,667,608 4,775,486

Income tax (expenses) benefits recognized directly in other comprehensive income for the periods from April 1 to June 30, 2014 and 2013, and the six-month periods ended June 30, 2014 and 2013 were as follows: For the three-month For the six-month periods ended June 30 periods ended June 30 2014 2013 2014 2013

Foreign currency translation differences for $ 10,847 (4,967) 5,982 (14,649) foreign operations Unrealized (gain) loss on available-for-sale (2,635,744) 6,038,757 (5,961,705) 7,135,943 financial assets Cash flow hedges 3,838 7,715 1,721 13,272 $ (2,621,059) 6,041,505 (5,954,002) 7,134,566

1) In accordance with the Financial Holding Company Act, Article 49, the domestic companies, which are held directly by the Company for over 90% of their equity shares, appointed the Company as the taxpayer to file a combined corporate income tax return commencing from 2002. For the years 2003, 2005, 2006, 2007 and 2008, income tax receivable amounted to $112,307, $361,237, $379,179, $28,830 and $72,435, respectively. 2) Under a combined corporate income tax filing, the income tax and 10% surtax on unappropriated earnings paid to the tax authorities amounted to $3,673,828 (actual) and $2,579,519 (actual) for 2013 and 2012, respectively.

(Continued) 64 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

3) The tax authorities have assessed the combined income tax returns for the Company and its major subsidiaries from years 2002 to 2008. The status of the local tax office’s assessment of the income tax returns of the Company and its subsidiaries was as follows: Taxpayer Assessment issue Status

The Company Certain operating expense and Still discussing with the tax interest expense were not authorities and regulators allowed as deductible Fubon Insurance Amortization of bond premium The appeal is still in process for the and discount year 2004; review by the tax authorities of the Company’s application for reassessments of income tax returns of 2005, 2006, 2007 and 2008 is still in process. Fubon Life Insurance Amortization of bond premium The appeal is still in process for the and discount year 2004; review by the tax authorities of the Company’s application for reassessments of income tax returns of 2005, 2006, 2007 and 2008 is still in process. Fubon Securities The tax issue on stock warrant The appeal is still in process for the year 2004; review by the tax authorities of the Company’s application for reassessments of income tax returns of 2005, 2006, 2007 and 2008 is still in process. Taipei Fubon Bank Amortization of bond premium The appeal is still in process for the and discount year 2004; review by the tax authorities of the Company’s application for reassessments of income tax returns of 2005, 2006, 2007 and 2008 is still in process.

The Company is the taxpayer of the combined corporate income tax return. The Company has applied for administrative procedures for assessment of incom tax returns of 2004, 2005, 2006, 2007 and 2008.

(Continued) 65 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

4) As of June 30, 2014, and December 31 and June 30, 2013, the details of the Company’s receivables from and payables to subsidiaries resulting from combined corporate income tax return filings were as follows: June 30, 2014 Estimate for the six-month period ended Filed in June 30, 2014 previous years Total

Linked tax receivables from subsidiaries: Fubon Insurance $ 122,009 234,388 356,397 Fubon Life Insurance - 601,392 601,392 Fubon Securities 68,993 1,187,986 1,256,979 Taipei Fubon Bank 957,791 - 957,791 Fubon AMC 39,761 - 39,761 Fubon Financial Holding Venture 71,656 - 71,656 Capital Fubon Marketing 989 - 989 Total $ 1,261,199 2,023,766 3,284,965

Linked tax payables to subsidiaries: Fubon Life Insurance $ 659,098 2,704,758 3,363,856 Fubon Securities - 32,434 32,434 Taipei Fubon Bank - 385,911 385,911 Fubon Asset Management - 115,404 115,404 Taiwan Sport Lottery 198 625 823 Total $ 659,296 3,239,132 3,898,428

December 31, 2013 Estimate in Filed in 2013 previous years Total

Linked tax receivables from subsidiaries: Fubon Insurance $ 422,022 247,133 669,155 Fubon Life Insurance - 68,584 68,584 Fubon Securities 73,501 1,450,045 1,523,546 Taipei Fubon Bank 1,243,045 - 1,243,045 Fubon AMC 26,934 - 26,934 Fubon Financial Holding Venture 37,708 - 37,708 Capital Fubon Marketing 7,937 - 7,937 Total $ 1,811,147 1,765,762 3,576,909

(Continued) 66 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Estimate in Filed in 2013 previous years Total

Linked tax payables to subsidiaries: Fubon Life Insurance $ 941,553 1,767,408 2,708,961 Fubon Securities - 32,434 32,434 Taipei Fubon Bank - 385,911 385,911 Fubon Asset Management - 115,404 115,404 Taiwan Sport Lottery 1,203 625 1,828 Total $ 942,756 2,301,782 3,244,538

June 30, 2013 Estimate for the six-month period ended Filed in June 30, 2013 previous years Total

Linked tax receivables from subsidiaries: Fubon Insurance $ 308,529 247,133 555,662 Fubon Life Insurance - 592,925 592,925 Fubon Securities 37,955 1,496,289 1,534,244 Taipei Fubon Bank 882,468 - 882,468 Fubon AMC 32,054 - 32,054 Fubon Financial Holding Venture 14,778 - 14,778 Capital Fubon Marketing 3,463 - 3,463 Total $ 1,279,247 2,336,347 3,615,594

Linked tax payables to subsidiaries: Fubon Insurance $ - 96,074 96,074 Fubon Life Insurance 378,208 1,885,208 2,263,416 Fubon Bank - 136,996 136,996 Fubon Securities - 183,859 183,859 Taipei Fubon Bank - 372,229 372,229 Fubon Asset Management - 115,404 115,404 Taiwan Sport Lottery 325 625 950 Total $ 378,533 2,790,395 3,168,928

(Continued) 67 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

5) Information related to the imputation credit account (“ICA”) of the Company was summarized below: June 30, 2014 December 31, June 30, 2013 2013

Unappropriated earnings: Earned prior to 1997 $ 46,459 46,459 46,459 Earned in 1998 and thereafter 84,213,240 75,486,639 60,543,610 Total $ 84,259,699 75,533,098 60,590,069 ICA balance $ 9,609,554 8,462,444 9,488,265

For the year ended December 31, 2013 2012 (estimated) (actual)

Creditable ratio for earnings distribution to ROC resident 16.75 % 17.07 % stockholders

The information related to the imputation credit account ("ICA") mentioned above is in according with Nation Taxation Tai Tsai No.10204562810 on October 17, 2013. (33) Capital and Other Equity 1) Common Stock The authorized and paid-in capital of the Company were as follows: June 30, 2014 December 31, June 30, 2013 2013

Capital stock authorized $ 150,000,000 150,000,000 150,000,000 Paid-in capital $ 102,336,040 102,336,040 95,351,652

For the six-month periods ended June 30, 2013, the Company issued 8,250 thousand shares for employee warrants exercise. On July 9, 2013, the Company issued 698,439 thousand shares of common stock for cash to sponsor the issuance of Global Depositary Receipts (GDR), totaled 69.84 million units. The issuance price of GDR is USD$12.17 per unit, equivalent to NTD$36.51 per share. The total GDR amount is USD$805 million.

(Continued) 68 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

2) Treasury stock The related information on this treasury stock was as follows: For the six-month period ended June 30, 2013 Beginning Ending balance of Shares Shares balance of Reason for buyback shares increase decrease shares

Treasury stock 1,486 - 1,486 -

The meeting of the Board of Directors held on August 27, 2010, resolved to repurchase treasury shares of 5,000 thousand shares for transfer to employees. According to the Securities and Exchange Act, transfer of treasury shares to employees should be executed within three years from the date of buyback. Treasury shares not transferred within three years are deemed not issued by the Company, and the capital registration is amended accordingly. The Company transferred its treasury stock to employees at the average prices of treasury stock acquisitions in March 2013, adjusted by for the percentage of the increase in issued shares of the Company. The total vesting shares were 1,486 thousand shares and the vesting price was $51,237 after deducting transfer tax. The Company and its subsidiaries recognized the amount of $12,438 as employee expenses incurred. 3) Capital surplus 1. Details of capital surplus According to the ROC Company Act, prior to its new amendment on January 4, 2012, capital surplus can only be used to offset accumulated deficit or to increase share capital using the realized capital surplus. Capital surplus cannot be used for distribution of cash dividends. According to the newly amended ROC Company Act, the aforementioned realized capital surplus includes the income derived from the issuance of new shares at a premium and the income from endowments received by the Company. The capital surplus capitalized in any one year may not exceed a certain percentage of the Company’s capital increase in accordance with the Regulations Governing the Offering and Issuance of Securities by Securities Issuers. The Company may only increase its capital once a year from the capital surplus arising from issuance of shares of stock in excess of par value. The additional capital increment from capital surplus may not be increased during the same fiscal year as additional share capital from cash premium on capital stock.

(Continued) 69 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

The components of capital surplus as of June 30, 2014, and December 31 and June 30, 2013 were as follows: June 30, 2014 December 31, June 30, 2013 2013

Additional paid-in capital from new $ 33,690,397 33,690,397 15,258,148 share issuance for cash Additional paid-in capital from share 38,651,532 38,651,532 38,651,532 exchange Additional paid-in capital from 236,611 236,611 7,525 equity-accounted investees Land revaluation surplus 1,104 1,104 1,104 Sale of treasury stock 178,098 178,098 178,098 Transfer of treasury stock to 23,753 23,753 23,753 employee Cash dividend from the Company's 27,664 27,664 27,664 stock held by its subsidiary Additional paid-in capital for 1,637,823 1,637,823 1,637,823 employee warrants exercise Total $ 74,446,982 74,446,982 55,785,647

2. The details of additional paid in capital from share exchange were as follows: Participants of Date of share share exchange June 30, 2014 December 31, June 30, 2013 exchange and description 2013

December 19, Fubon Securities, $ 42,040,134 42,040,134 42,040,134 2001 Fubon Bank, and Fubon Life Assurance August 28, 2002 Fubon Asset (124,882) (124,882) (124,882) Management December 23, Taipei Bank 3,384,059 3,384,059 3,384,059 2002 February 11, ING Life 4,825,587 4,825,587 4,825,587 2009 Insurance Subtotal 50,124,898 50,124,898 50,124,898

(Continued) 70 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Participants of Date of share share exchange June 30, 2014 December 31, June 30, 2013 exchange and description 2013

Cash dividend (3,912,569) (3,912,569) (3,912,569) Subsidiaries' (46,600) (46,600) (46,600) employee bonus and remuneration to directors and supervisors December 19, Common stock (2,982,647) (2,982,647) (2,982,647) 2004 held by Fubon Securities and Fubon Insurance to be cancelled April 29, 2005 Retirement of (313,789) (313,789) (313,789) treasury stock December 23, Retirement of (2,287,988) (2,287,988) (2,287,988) 2005 treasury stock June 2006 Cash dividend (1,929,773) (1,929,773) (1,929,773) (11,473,366) (11,473,366) (11,473,366) $ 38,651,532 38,651,532 38,651,532

According to the Ruling Letter No.10200017220 of the Banking Bureau, Financial Supervisory Commission, ROC., dated March 7, 2013, the undistributed earnings of financial institutions which are converted into financial holding companies, could be either distributed as cash dividends or accounted for as capital surplus of the financial holding companies, on the converting year, pursuant to Article 47, Paragraph 4 of Financial Holding Company Act. The amount of capital surplus used to increase capital is not subject to restriction under Securities 1 of Article 72 of Regulations Governing the Offering and Issuance of Securities by Securities Issuers. As of June 30, 2014, the balance of such capital surplus was $4,343. 4) Legal reserve According to the ROC Company Act, prior to its amendment on January 4, 2012, 10% of after-tax annual earnings is retained as legal reserve until such retention equals the amount of total capital. Legal reserve can only be used to offset deficits, and cannot be distributed as cash dividends. Up to one-half of legal reserve can be converted to share capital when it reaches an amount equal to one-half of issued share capital. According to the newly amended ROC Company Act, where the Company incurs no loss, it may, pursuant to a resolution to be adopted by a shareholders' meeting, distribute legal reserve by issuing new shares or by cash. However, only the portion of legal reserve which exceeds 25 percent of the paid-in capital may be distributed.

(Continued) 71 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

5) Special reserve According to the regulation stipulated by the Securities and Futures Bureau, in addition to legal reserve, the Company is also required to provide a special reserve equal to the net amount of the current year stockholders’ equity contra accounts, from the current year’s earnings after tax or prior years’ unappropriated earnings. If a stockholders’ equity contra account is reversed, the reversed portion of special reserve could be distributed as dividends. 6) Distribution of earnings According to the Company’s articles of incorporation, 10% of its annual net income after offsetting prior years’ losses and tax payment is appropriated as legal reserve. 0.01% to 0.05% of the remaining unappropriated earnings is distributed as employees’ bonus. The remaining balance of current year’s earnings and prior year’s unappropriated earnings are distributed as bonuses to shareholders upon the approval of shareholders’ meeting. For the six-month period ended June 30, 2014, the estimated and accrued employees’ bonuses and directors’ and supervisors’ remuneration of the Company was not recognized as it was insignificant. Management is expecting that the difference between the amounts of 2014 employees’ bonuses and directors’ and supervisors’ remuneration to be approved in the shareholders’ meeting and recognized in the financial statements, if any, will be treated as a change in accounting estimate and will be charged to profit or loss in 2015. The actual earnings distribution results and the amounts recorded in the financial statements for years 2013 and 2012 were as follows: 2013 Actual results Amounts resolved by recorded in the shareholders' financial meeting statements Difference

Employees' bonuses－cash $ 6,000 6,000 - Directors' and supervisors' remuneration 43,500 43,500 - Total $ 49,500 49,500 -

2012 Actual results Amounts resolved by recorded in the shareholders' financial meeting statements Difference

Employees' bonuses－cash $ 5,000 5,000 - Directors' and supervisors' remuneration 36,000 36,000 - Total $ 41,000 41,000 -

(Continued) 72 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

In 2013 and 2012, the Company paid a cash dividend of $1.5 and about $1.0 per share from its 2014 and 2013 retained earnings, respectively. The distribution of earnings approved in the shareholders’ meeting is the same as the resolution of the board meeting in 2014 and 2013. The relevant information could be accessed from the website of the Market Observation Post System. 7) Dividend policy The Company adopted a stable and balanced dividend policy that is intended to provide profitability to the shareholders. This policy also considers the capital accumulation and impact on operation. Pursuant to the Company's dividend distribution plan, an amount shall be reserved for the necessary funds and the remainder may be distributed in cash. In accordance with the resolution of the stockholders’ meeting, the Company provided cash dividend shall not be less than 10% of the total dividend. Subject to practical need, the above principles of distribution of dividend may be adjusted by resolution at a shareholders' meeting. The dividend policy shown above is a general rule. The Company would make the best dividend distribution plan in consideration of the Company’s operations for current year and the capital budget plan for the following year. 8) Other equity Exchange Gains Unrealized differences (losses) on gains (losses) arising on effective on available- translation portion of for-sale of foreign cash flow financial operations hedges assets Total

Balance as of January 1, 2014 $ (976,679) 150,074 30,076,828 29,250,223 Foreign currency translation difference, net of tax: The Company and subsidiaries (990,110) - - (990,110) Investments in associates (148,649) - - (148,649) Effective portion of cash flow hedge, net of tax: The Company and subsidiaries - (8,406) - (8,406) Unrealized gains of available-for- sale financial assets, net of tax: The Company and subsidiaries - - 32,691,432 32,691,432 Investments in associates - - 215,107 215,107 Balance as of June 30, 2014 $ (2,115,438) 141,668 62,983,367 61,009,597

(Continued) 73 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Exchange Gains Unrealized differences (losses) on gains (losses) arising on effective on available- translation portion of for-sale of foreign cash flow financial operations hedges assets Total

Balance as of January 1, 2013 $ (1,913,399) 279,701 70,028,171 68,394,473 Foreign currency translation difference, net of tax: The Company and subsidiaries 912,169 - - 912,169 Investments in associates 77,141 - - 77,141 Effective portion of cash flow hedge, net of tax: The Company and subsidiaries - (64,801) - (64,801) Unrealized losses on available-for- sale financial assets, net of tax: The Company and subsidiaries - - (32,901,804) (32,901,804) Investments in associates - - 9,778 9,778 Balance as of June 30, 2013 $ (924,089) 214,900 37,136,145 36,426,956

9) Non-controlling interests For the six-month periods ended June 30, 2014 2013

Beginning balance $ 222,261 - Non-controlling interests while acquired Fubon Bank (China) 6,143,351 - Attributable to non-controlling interests Net income 137,175 - Exchange differences arising on translation of foreign (191,859) - operations Unrealized gains (losses) on available-for-sale financial 65,564 - assets Income tax related to unrealized gains (losses) on (16,391) - available-for-sale financial instruments Effect of cash capital increase after acquisition of Fubon 1,001,200 - Bank (China) Others (4,401) - Ending balance $ 7,356,900 -

(Continued) 74 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(34) Share-based Payment An employee warrant plan was approved in June 2007 by the Financial Supervisory Commission. Under this plan, the Company granted a total of 150,000 units of call warrants. Each unit bears the right to purchase one thousand shares of the Company’s common stock. This warrant is granted to the employees working for the parent company or for more than 50% owned subsidiaries (direct or indirect). The duration of the warrants is five-year, and the exercise price of the warrant is the closing price at issue date. Warrant holders are only able to exercise the rights after two years after vesting. The annual vesting percentages are as follows: Accumulated Percentage of percentage of warrants warrants Vesting period of employee warrants vested vested

Over 2 years but less than 3 years 50 % 50 % Over 3 years but less than 4 years 25 % 75 % Over 4 years up to 5 years 25 % 100 %

The related information of employee warrants for the six-month period ended June 30, 2013, was as follows: For the six-month period ended June 30, 2013 Weighted- average Employee warrant plan in 2007 Units exercise price Duration

Outstanding balance on January 1: First grant - 23.50 Expired on 2012.07.30 Second grant 8,250 19.40 Expired on 2012.12.06 Granted - Forfeited - Matured: First grant - Second grant - Registered (8,250) Vested balance on June 30 -

(Continued) 75 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(35) Earnings Per Share The details of earnings per share were as follows: For the three-month For the six-month periods ended June 30 periods ended June 30 2014 2013 2014 2013

Net income of ordinary equity holders $ 13,482,320 7,752,226 27,347,943 17,898,642 Weighted average number of ordinary shares 10,233,604 9,535,165 10,233,604 9,535,165 outstanding (thousands) Dilutive potential ordinary shares - - - - $ 10,233,604 9,535,165 10,233,604 9,535,165 Basic EPS (Dollars) $ 1.32 0.81 2.67 1.88 Diluted EPS (Dollars) $ 1.32 0.81 2.67 1.88

(36) Income and Expenses The details of revenue for the periods from April 1 to June 30, 2014 and 2013, and the six-month periods ended June 30, 2014 and 2013 were as follows: 1) Net interest income For the three-month For the six-month periods ended June 30 periods ended June 30 2014 2013 2014 2013

Interest income: Loans $ 9,401,613 6,774,282 18,664,184 13,400,305 Investment securities 15,784,498 12,136,652 31,097,237 24,703,895 Other 3,622,089 2,047,140 7,088,396 3,641,950 Subtotal 28,808,200 20,958,074 56,849,817 41,746,150 Interest expense: Deposits 5,303,028 2,617,715 10,335,142 5,183,901 Debt securities issued 122,305 167,514 548,310 585,566 Due to the Central Bank and other 302,604 179,309 574,964 315,313 banks Other 1,051,375 611,294 1,568,850 954,149 Subtotal 6,779,312 3,575,832 13,027,266 7,038,929 Net interest income $ 22,028,888 17,382,242 43,822,551 34,707,221

(Continued) 76 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

2) Service fees and commission income, net For the three-month For the six-month periods ended June 30 periods ended June 30 2014 2013 2014 2013

Service fee and commission income: Brokerage service fees $ 909,880 704,550 1,737,159 1,345,484 Trust and custody services 1,025,961 879,884 1,961,278 1,759,589 Credit card and cash card related fees 463,401 516,475 922,992 972,519 Commission income 883,933 1,038,318 1,986,559 2,128,976 Other 1,239,781 1,388,304 2,545,263 2,795,450 Subtotal 4,522,956 4,527,531 9,153,251 9,002,018 Service charge and commission expense: Insurance commission expense 5,531,570 5,301,938 10,570,880 10,355,635 Interbank service charge 54,597 50,022 109,543 101,331 Brokerage service charge 67,963 51,984 129,155 101,200 Other 447,144 417,820 876,782 817,028 Subtotal 6,101,274 5,821,764 11,686,360 11,375,194 Net income from fees and commissions $ (1,578,318) (1,294,233) (2,533,109) (2,373,176)

3) Insurance income, net For the three-month For the six-month periods ended June 30 periods ended June 30 2014 2013 2014 2013

Premiums income $ 95,177,559 97,568,383 204,412,050 182,640,352 Income on insurance product-separate 5,935,535 (995,333) 9,949,460 4,885,181 account Insurance business income 101,113,094 96,573,050 214,361,510 187,525,533 Direct business expenses 9,154 7,045 13,300 11,729 Insurance claims payment 45,152,341 31,457,195 93,190,116 57,073,267 Disbursement on insurance product- 5,935,535 (995,333) 9,949,460 4,885,181 separate account Disbursement toward industry stability 91,696 94,981 197,517 177,584 Insurance business expense 51,188,726 30,563,888 103,350,393 62,147,761 Net income from insurance business $ 49,924,368 66,009,162 111,011,117 125,377,772

(Continued) 77 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

4) Net change in provision for insurance reserve For the three-month For the six-month periods ended June 30 periods ended June 30 2014 2013 2014 2013

Net change of insurance reserve $ (53,865,916) (71,706,566) (120,120,665) (134,259,944) Net change of claim reserve (264,546) (199,577) (1,385,865) (400,953) Net change of special reserve 38,324 196,919 768,500 119,853 Net change of reserve for premium (957,548) (634,096) (1,905,049) (1,080,524) deficiency Net change of reserve for insurance (391,555) (408,771) (786,455) (817,557) contracts with financial product feature Net change of liabilities adequacy 4,461 (27,606) (23,711) (26,421) reserve Other 866,443 588,114 (229,211) 425,499 Net change in provision for insurance $ (54,570,337) (72,191,583) (123,682,456) (136,040,047) reserve

5) Employee benefit expenses For the three-month For the six-month periods ended June 30 periods ended June 30 2014 2013 2014 2013

Salaries and wages $ (4,857,242) (4,273,529) (9,523,841) (8,436,472) Labor insurance, national health (545,645) (488,779) (1,191,875) (1,086,803) insurance, and group insurance for life Pension (406,473) (378,828) (771,570) (723,227) Other employee benefit expense (525,352) (679,244) (1,175,856) (1,371,828) $ (6,334,712) (5,820,380) (12,663,142) (11,618,330)

(Continued) 78 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

6) Depreciation and amortization expenses For the three-month For the six-month periods ended June 30 periods ended June 30 2014 2013 2014 2013

Depreciation expenses $ (396,577) (318,758) (787,640) (682,217) Amortization expenses (280,072) (143,963) (564,247) (301,067) $ (676,649) (462,721) (1,351,887) (983,284) Investment property depreciation $ (231,255) (186,394) (464,194) (357,273) expenses (included in net revenue on invesment property)

7) Other operating expenses For the three-month For the six-month periods ended June 30 periods ended June 30 2014 2013 2014 2013

Taxation and government fee $ (782,321) (520,796) (1,473,428) (1,009,683) Rental (795,801) (767,578) (1,565,080) (1,507,142) Professional services (310,293) (253,429) (639,758) (581,608) Business activities (679,775) (280,585) (1,446,539) (797,462) Selling expense (241,234) (237,273) (569,549) (478,910) Postage $ (240,533) (228,456) (441,724) (426,876) Other (1,621,458) (2,052,252) (2,978,615) (3,357,462) $ (4,671,415) (4,340,369) (9,114,693) (8,159,143)

(Continued) 79 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(37) Insurance Contracts 1) Fubon Insurance 1. Various reserves (a) Details of liability reserve a) Detail of reserve for unearned premiums and reserve for unearned premiums out June 30, 2014 Reserve for unearned Reserve for unearned Premiums- premiums ceded Reinsurance Reinsurance Direct -assumed -ceded Retained Item business business business business

Fire insurance $ 1,986,298 14,523 490,670 1,510,151 Marine cargo insurance 356,897 1,845 167,640 191,102 Marine hull fishing vessel 259,949 (3,004) 206,561 50,384 Voluntary moto insurance 5,431,398 138,208 376,762 5,192,844 Compulsory moto TPL 1,782,760 236,952 707,828 1,311,884 insurance Liability insurance 1,269,082 4,294 339,245 934,131 Engineering and nuclear 1,358,420 53,241 813,066 598,595 insurance Surety and credit insurance 160,215 567 115,808 44,974 Other property insurance 57,762 82 35,089 22,755 Accident insurance 2,127,284 10,706 36,277 2,101,713 Typhoon, flood and 1,840,032 38,109 1,250,621 627,520 earthquake insurance Personal and commercial 314,060 (2) 27,213 286,845 multiple peril insurance Health insurance 135,413 - 4 135,409 Overseas reinsurance - 208,926 (715) 209,641 assumed Overseas subsidiaries 1,567,706 84,720 307,114 1,345,312 Total $ 18,647,276 789,167 4,873,183 14,563,260

(Continued) 80 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 Reserve for unearned Reserve for unearned premiums- premiums ceded Reinsurance Reinsurance Direct -assumed -ceded Retained Item business business business business

Fire insurance $ 1,858,145 14,714 361,662 1,511,197 Marine cargo insurance 316,425 3,066 144,125 175,366 Marine hull fishing vessel 247,485 (7,397) 186,123 53,965 Voluntary moto insurance 5,129,796 123,368 312,546 4,940,618 Compulsory moto TPL 1,817,584 234,758 722,069 1,330,273 insurance Liability insurance 1,190,808 7,306 275,846 922,268 Engineering and nuclear 1,305,090 71,402 775,519 600,973 insurance Security and credit insurance 121,446 341 90,946 30,841 Other property insurance 52,527 50 32,756 19,821 Accident insurance 2,014,537 6,864 24,961 1,996,440 Typhoon, flood and 1,351,470 30,469 978,226 403,713 earthquake insurance Personal and commercial 266,013 (24) 11,601 254,388 multiple peril insurance Health insurance 121,908 - 2 121,906 Overseas reinsurance - 136,825 (1,735) 138,560 assumed Overseas subsidiaries 1,157,280 81,586 261,161 977,705 Total $ 16,950,514 703,328 4,175,808 13,478,034

(Continued) 81 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Reserve for unearned Reserve for unearned premiums- premiums ceded Reinsurance Reinsurance Direct -assumed -ceded Retained Item business business business business

Fire insurance $ 2,296,337 19,185 571,751 1,743,771 Marine cargo insurance 325,783 2,411 164,500 163,694 Marine hull fishing vessel 284,366 13,663 250,899 47,130 Voluntary moto insurance 5,000,840 90,434 305,902 4,785,372 Compulsory moto TPL 1,784,224 229,731 695,719 1,318,236 insurance Liability insurance 1,137,454 6,604 253,415 890,643 Engineering and nuclear 1,379,314 31,324 841,165 569,473 insurance Security and credit insurance 125,983 547 86,988 39,542 Other property insurance 57,613 288 38,895 19,006 Accident insurance 2,040,174 5,776 30,826 2,015,124 Typhoon, flood and 1,861,653 28,096 1,145,684 744,065 earthquake insurance Personal and commercial 257,480 (38) 17,595 239,847 multiple peril insurance Health insurance 107,693 - 19 107,674 Overseas reinsurance - 164,694 (154) 164,848 assumed Overseas subsidiaries 896,860 93,915 222,337 768,438 Less: Accumulated - - (51) 51 impairment Total $ 17,555,774 686,630 4,625,490 13,616,914

The net amount of evaluated accumulated impairment loss of abovementioned reserve for unearned premiums-ceded were nil, nil and $51 as of June 30, 2014, and December 31 and June 30, 2013, respectively.

(Continued) 82 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

b) The movements in reserve for unearned premiums and reserve for unearned premiums- ceded were as follows: June 30, 2014 Reserve for Reserve for unearned unearned Item premiums premiums-ceded

Balance on January 1, 2014 $ 17,653,842 4,175,808 Provision 19,399,605 4,806,412 Recovered (17,653,842) (4,175,808) Other 63,677 63,677 Other－effect of change in exchange rates (26,839) 3,094 Balance on June 30, 2014 $ 19,436,443 4,873,183

December 31, 2013 Reserve for Reserve for unearned unearned Item premiums premiums-ceded

Balance on January 1, 2013 $ 16,562,557 4,092,426 Provision 17,634,369 4,187,762 Recovered (16,562,557) (4,092,426) Impairment loss - 1,385 Other－effect of change in exchange rates 19,473 (13,339) Balance on December 31, 2013 $ 17,653,842 4,175,808

June 30, 2013 Reserve for Reserve for unearned unearned Item premiums premiums-ceded

Balance on January 1, 2013 $ 16,562,557 4,092,426 Provision 18,226,942 4,635,093 Recovered (16,562,557) (4,092,426) Impairment loss - 1,334 Other－effect of change in exchange rates 15,462 (10,937) Balance on June 30, 2013 $ 18,242,404 4,625,490

Note: the foreign exchange difference from additional insurance liabilities, other liabilities acquired from other insurance companies, and liabilities transferred to other companies is disclosed in accordance with the International Accounting Standard No. 21, “The Effects of changes in Foreign Exchange Rates.”

(Continued) 83 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Insurance provides the reserve for unearned premiums according to the Regulations Governing the Setting Aside of Various Reserves by Insurance Enterprises amended by Financial Supervisory Commission, Executive Yuan, Jin Guan Bao Tsai No.09802513192 on December 28, 2009. Under the Regulations, the unearned premium of effective insurance contracts which have not matured yet or insurance contracts which are not yet effective is calculated in accordance with the unexpired risk for every type of insurance, and the reserve for unearned premium is also provided accordingly. The method of providing the reserve mentioned above, which is noted in the insurance product application filed with the Authority, is decided by actuaries in according to type of insurance. This method cannot be changed, unless approved by the Authority. Based on local regulations, reserve for unearned premiums is provided for compulsory automobile liability insurance, nuclear insurance and resident earthquake insurance as follows: a. The unearned premiums reserve for compulsory private passenger automobile liability is provided based on the Regulations for Deposit and Management of the Reserve of Compulsory Automobile Liability Insurance. b. The unearned premiums reserve for nuclear insurance is provided based on The Regulations for the Reserve of Nuclear Insurance. c. The unearned premiums reserve for resident earthquake insurance is provided according to the Enforcement Rules for the Risk Spreading Mechanism for Resident Earthquake Insurance. (b) Special reserve a) Special reserve is classified as Catastrophe Reserve and Equalization Reserve. The incremental catastrophe special reserve, after deducting income tax determined in accordance with IAS 12, is recognized as special reserve under equity. According to IAS 12, any write-off or recovery of catastrophe special reserve is charged to special reserve recognized under liabilities. After January 1, 2013, the special reserve under liabilities after deducting income tax in accordance with IAS 12, is deducted from the special reserve recognized under equity. In accordance with the Directions for Property Insurances Enhancing in Disasters’ (Commercial earthquake insurance and typhoon and flood insurance) provision, property insurance should, among other catastrophe special reserves and the equalization special reserve except for compulsory moto TPL insurance, nuclear insurance, governmental earthquake insurance, commercial earthquake insurance, typhoon and flood insurance, put up catastrophe special reserve of commercial earthquake insurance and typhoon and flood insurance and equalization special reserve recognized under liabilities before December 31, 2012 to full level in priority, and recognize other catastrophe special reserves and equalization special reserves, deducting income tax, as special reserves under shareholders’ equity according to IAS 12.

(Continued) 84 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

a. Special catastrophe reserve A special catastrophe reserve is provided for all types of insurance based on a rate prescribed by the competent authority. For the actual catastrophe claim exceeding $30 million, and in the total property insurance industry, the insurance category of the whole compensation exceeding to $2,000 million, the excess amount is offset against special catastrophe reserve. For special catastrophe reserve that remains outstanding for over 15 years, it is written off based on the evaluation of an actuary and after being reported to the competent authority for inspection. b. Variation special reserve If the actual insurance claim and claims adjustment expenses for a particular type of insurance are less than the expected amount determined by FSC, an additional special reserve equal to 15% of the amount of the different is provided. In accordance with the letter Jin Guan Bao Tsai No.10002509161 issued by Financial Supervisory Commission, Executive Yuan, R.O.C on June 16, 2011, if the net balance of the actual claims for earthquake, typhoon and flood damages from commercial and personal accident insurance after deducting the special catastrophe reserve is less than the expected claims determined by FSC, an additional special reserve equal to 75% of the amount of the difference is provided. Expected claims are calculated at no less than 60% of expected loss. The excess amount of actual claims over the expected claims, after deducting the special catastrophe reserve, is offset against variation special reserve. If the variation special reserve of the insurance mentioned above is insufficient, the deficiency is offset against the variation special reserve of other kind of insurance. The type and amount of deduction should be reported to FSC. The total amount of special claim reserve for a particular type of insurance at the end of year may not exceed its net earned premiums for each year. If the special claim reserve exceeds 60% of the net earned premiums of the year, the excess amount of special reserve must be released from its reserves and treated as income of Fubon Insurance. b) The special assets of segment requirements Fubon Insurance provides independent accounting and disclosures for Compulsory Automobile Liability Insurance activities (the Insurance) according to the Regulations of Compulsory Automobile Liability Insurance. Under Section 5 of the Regulations for Deposits and Management of the Reserve for Compulsory Automobile Liability Insurance, the special reserve for Compulsory Automobile Liability Insurance should be deposited with financial institutions in the form of time deposits. In lieu of these time deposits, however, Fubon Insurance can purchase other domestic negotiable securities mentioned below, but subject to approval by the Authority.

(Continued) 85 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

a. Government bonds and treasury bonds excluding exchangeable bonds. b. Financial bonds, negotiable certificates of deposits, bank’s acceptance bill, and financial institution guaranteed commercial paper. Yet financial bonds are restricted to normal financial bonds. The amount of the statutory deposits listed above shall not be less than 30% of the matured retention insurance premium, and the Authority can increase such statutory deposits beyond the prescribed minimum percentage depending on the operating circumstances of Fubon Insurance. According to the “Regulations for Deposit and Management of the Reserve for Compulsory Automobile Liability Insurance” article 6, except for the special reserve provided as prescribed in the preceding article, funds held by an insurer for this insurance shall be deposited in a financial institution in the form of demand deposits and time deposits, provided that with the approval of the competent authority, an insurer may purchase any of the following domestic securities: a. Treasury bills. b. Negotiable certificates of deposits, bank’s acceptance bill, and financial institution guaranteed commercial paper. c. Repurchase agreement bonds. The amount of the demand deposits listed above shall not be less than the capital withheld for the Insurance after deducting 60% of the special reserve and 40% of the recent audited or reviewed matured retention insurance premium. The Authority can increase such demand deposits beyond the prescribed minimum percentage depending on the operating circumstances of Fubon Insurance. If the amount of the unearned premium and claims reserve does not exceed 40% of the recent audited or reviewed matured retention insurance premium, all of the insurance capital of the insurance is deposited with financial institution as demand deposits. Under Section 9 of the Regulations for Deposits and Management of the Reserve of Compulsory Automobile Liability Insurance, the related reserves are transferred to the successor in the event that the property insurance company decides to discontinue its operations or suspend its insurance activity. If the property insurance company is officially forced to discontinue operating and liquidate, or ordered to dismiss, and there is no successor to handle over, the related reserves are transferred to the Legal Foundation of Traffic Accidents Special Compensation Fund. c) The special reserve for compulsory private use, commercial use, and motorcycle liability insurance are based on the Regulations for Deposits and Management of the Reserve for Compulsory Automobile Liability Insurance.

(Continued) 86 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

d) Movements in special reserve – Compulsory automobile liability insurance Particular June 30, 2014

Balance on January 1, 2014 $ 2,640,113 Provision - Recovered (872,802) Balance on June 30, 2014 $ 1,767,311

December 31, Particular 2013

Balance on January 1, 2013 $ 2,970,467 Provision 27,702 Recovered (358,056) Balance on December 31, 2013 $ 2,640,113

Particular June 30, 2013

Balance on January 1, 2013 $ 2,970,467 Provision - Recovered (213,486) Balance on June 30, 2013 $ 2,756,981

e) Movements in special reserve – Non compulsory automobile liability insurance

June 30, 2014 Liability Reserve Special Reserve Dangerous Dangerous Particular Catastrophe Change Total Catastrophe Change Total

Balance on January 1, 2014 $ 960,680 5,878,372 6,839,052 907,971 1,717,092 2,625,063 Recovered (16,564) - (16,564) - - - Balance on June 30, 2014 $ 944,116 5,878,372 6,822,488 907,971 1,717,092 2,625,063

December 31, 2013 Liability Reserve Special Reserve Dangerous Dangerous Particular Catastrophe Change Total Catastrophe Change Total

Balance on January 1, 2013 $ 993,807 5,878,372 6,872,179 604,188 1,087,720 1,691,908 Provision - - - 297,783 686,827 984,610 Recovered (35,975) - (35,975) - (57,455) (57,455) Other-Effect of change 2,848 - 2,848 - - - in exchange rates Balance on December 31, $ 960,680 5,878,372 6,839,052 901,971 1,717,092 2,619,063 2013

(Continued) 87 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Liability Reserve Special Reserve Dangerous Dangerous Particular Catastrophe Change Total Catastrophe Change Total

Balance on January 1, $ 2,761,894 4,113,105 6,874,999 604,188 1,087,720 1,691,908 2013 Recovered (19,423) - (19,423) - - - Other－effect of change - 39 39 - - - in exchange rates Balance on June 30, 2013 $ 2,742,471 4,113,144 6,855,615 604,188 1,087,720 1,691,908

Note 1: The calculated exchange difference from additional insurance liabilities, other liabilities acquired from other insurance companies, and liabilities transferred to other companies is disclosed to conform to the calculated exchange difference under the IAS 21, “The Effects of Changes in Foreign Exchange Rates” Note 2: The special reserve above covers all the insurances except for the special reserve for compulsory automobile liability insurance, which was recognized before January 1, 2011.

f) The special reserve for nuclear insurance was provided to conform to The Regulations for the Reserve of Nuclear Insurance. g) The special reserve for resident earthquake insurance was provided to conform to the Regulations for danger diversified mechanism for Resident earthquake insurance. (c) Claims reserve a) The debt for policy holder of claims reported and paid, reported and unpaid, and unreported.

June 30, 2014 Indemnity Payments Notes payable Payable Claims reserve Reported but Particular reported and paid unpaid Unreported Item

Fire insurance $ - 79 1,519,342 53,245 1,572,587 Marine cargo insurance - 950 433,355 148,659 582,014 Marine hull fishing vessel - - 336,683 133,915 470,598 Voluntary moto insurance - 64,560 2,027,764 855,745 2,883,509 Compulsory moto TPL insurance - 25,828 607,015 2,007,285 2,614,300 Liability insurance - 3,811 1,430,933 300,817 1,731,750 Engineering and nuclear insurance - 81 919,587 121,063 1,040,650 Surety and credit insurance - - 359,289 87,828 447,117 Other property insurance - - 89,648 3,523 93,171 Accident insurance - 9,166 190,779 565,505 756,284 Typhoon, flood and earthquake - 3,927 219,115 373,184 592,299 insurance Personal and commercial multiple - 21 49,903 83,594 133,497 peril insurance Health insurance - 153 2,804 59,576 62,380 Overseas reinsurance assumed - - 458,229 40,945 499,174 Overseas subsidiaries - 10,192 1,556,298 238,536 1,794,834 Total $ - 118,768 10,200,744 5,073,420 15,274,164

(Continued) 88 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 Indemnity Payments Notes payable Payable Claims reserve Reported but Particular reported and paid unpaid Unreported Item

Fire insurance $ - 155 1,436,146 52,832 1,488,978 Marine cargo insurance - 3,745 354,888 184,085 538,973 Marine hull fishing vessel - (122) 472,674 152,570 625,244 Voluntary moto insurance - 16,648 1,919,786 688,474 2,608,260 Compulsory moto TPL insurance - 18,487 1,102,240 29,417 1,131,657 Liability insurance - 555 1,312,631 296,107 1,608,738 Engineering and Nuclear insurance - 32 827,947 132,600 960,547 Surety and credit insurance - 163 365,809 95,671 461,480 Other property insurance - 552 140,977 3,772 144,749 Accident insurance - 5,221 221,505 560,002 781,507 Typhoon, flood and earthquake - 653 305,950 361,542 667,492 insurance Personal and commercial multiple - (7) 36,804 49,714 86,518 peril insurance Health insurance - 254 6,224 34,482 40,706 Overseas reinsurance assumed - - 511,337 42,472 553,809 Overseas subsidiaries - 8,301 961,826 179,694 1,141,520 Total $ - 54,637 9,976,744 2,863,434 12,840,178

June 30, 2013 Indemnity Payments Notes payable Payable Claims reserve Reported but Particular reported and paid unpaid Unreported Item

Fire insurance $ - 2,936 1,162,996 52,585 1,215,581 Marine cargo insurance - 400 440,242 183,654 623,896 Marine hull fishing vessel - - 524,331 158,277 682,608 Voluntary moto insurance - 51,242 1,664,072 715,351 2,379,423 Compulsory moto TPL insurance - 29,177 1,084,424 28,590 1,113,014 Liability insurance - 11,947 1,231,251 291,553 1,522,804 Engineering and nuclear insurance - 3,119 879,821 132,899 1,012,720 Surety and credit insurance - 131 366,612 71,981 438,593 Other property insurance - 580 123,980 3,939 127,919 Accident insurance - 9,297 203,634 530,660 734,294 Typhoon, flood and earthquake - 239 27,416 46,531 73,947 insurance Personal and commercial multiple - 144 349,772 362,611 712,383 peril insurance Health insurance - 462 5,649 33,014 38,663 Overseas reinsurance assumed - - 382,831 46,781 429,612 Overseas subsidiaries - 4,812 588,469 123,609 712,078 Total $ - 114,486 9,035,500 2,782,035 11,817,535

(Continued) 89 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

b) Reinsurance assets – the insurance-ceded business for the policy holders with reported but unpaid or unreported claims June 30, 2014 Reported but Particular unpaid Unreported Total

Fire insurance $ 310,365 24,400 334,765 Marine cargo insurance 235,966 77,310 313,276 Marine hull fishing vessel 251,900 108,106 360,006 Voluntary moto insurance 92,642 33,565 126,207 Compulsory moto TPL 189,846 719,612 909,458 insurance Liability insurance 300,799 64,122 364,921 Engineering and nuclear 436,110 61,489 497,599 insurance Surety and credit 257,491 78,165 335,656 insurance Other property insurance 21,217 2,173 23,390 Accident insurance 3,275 7,739 11,014 Typhoon, flood and 36,692 230,736 267,428 earthquake insurance Personal and commercial 650 3,096 3,746 multiple peril insurance Health insurance - 5 5 Overseas reinsurance 207 1 208 assumed Overseas subsidiaries 1,102,818 45,677 1,148,495 Less: Accumulated (14,754) (6,517) (21,271) impairment Total $ 3,225,224 1,449,679 4,674,903

(Continued) 90 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 Reported but Particular unpaid Unreported Total

Fire insurance $ 314,172 24,628 338,800 Marine cargo insurance 176,174 95,714 271,888 Marine hull fishing vessel 362,931 128,280 491,211 Voluntary moto insurance 96,593 29,995 126,588 Compulsory moto TPL 365,287 10,353 375,640 insurance Liability insurance 243,942 47,527 291,469 Engineering and Nuclear 327,656 77,168 404,824 insurance Surety and credit 254,147 83,928 338,075 insurance Other property insurance 74,493 2,410 76,903 Accident insurance 15,716 13,934 29,650 Typhoon, flood and 50,743 218,849 269,592 earthquake insurance Personal and commercial 352 2,636 2,988 multiple peril insurance Health insurance - 10 10 Overseas reinsurance 333 - 333 assumed Overseas subsidiaries 707,905 38,029 745,934 Less: accumulated (11,989) (1,624) (13,613) impairment Total $ 2,978,455 771,837 3,750,292

(Continued) 91 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Reported but Particular unpaid Unreported Total

Fire insurance $ 321,521 25,001 346,522 Marine cargo insurance 251,703 96,220 347,923 Marine hull fishing vessel 399,993 133,399 533,392 Voluntary moto insurance 90,256 36,428 126,684 Compulsory moto TPL 361,222 9,803 371,025 insurance Liability insurance 234,602 49,226 283,828 Engineering and nuclear 388,936 74,286 463,222 insurance Surety and credit 260,756 59,662 320,418 insurance Other property insurance 72,051 2,481 74,532 Accident insurance 14,666 18,492 33,158 Typhoon, flood and 38,866 252,457 291,323 earthquake insurance Personal and commercial 409 2,458 2,867 multiple peril insurance Health insurance - 15 15 Overseas reinsurance 3,267 - 3,267 assumed Overseas subsidiaries 397,668 32,660 430,328 Less: Accumulated (11,265) (350) (11,615) impairment Total $ 2,824,651 792,238 3,616,889

Reserves above were expressed in net amount and its estimated accumulated impairment losses amounted to $21,271, $13,613 and $11,615 as of June 30, 2014, and December 31 and June 30, 2013, respectively.

(Continued) 92 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

c) Movements in claim reserve and claim-ceded reserve June 30, 2014 Claim-ceded Particular Claim reserve reserve

Balance on January 1, 2014 $ 12,840,178 3,750,292 Provision 15,294,544 4,688,872 Recovered (12,840,178) (3,750,292) Impairment loss - (7,658) Other 13,411 13,411 Other－effect of change in exchange rates (33,791) (19,722) Balance on June 30 $ 15,274,164 4,674,903

December 31, 2013 Claim-ceded Particular Claim reserve reserve

Balance on January 1, 2013 $ 12,239,412 4,355,691 Provision 12,827,796 3,740,156 Recovered (12,239,412) (4,355,691) Reversal of impairment loss - 8,174 Other－effect of change in exchange rates 12,382 1,962 Balance on December 31, 2013 $ 12,840,178 3,750,292

June 30, 2013 Claim-ceded Particular Claim reserve reserve

Balance on January 1, 2013 $ 12,239,412 4,355,691 Provision 11,809,419 3,606,449 Recovered (12,239,412) (4,355,691) Reversal of impairment loss - 10,172 Other－effect of change in exchange rates 8,116 268 Balance on June 30, 2013 $ 11,817,535 3,616,889

Note: The foreign exchange difference from additional insurance liabilities, other liabilities acquired from other insurance companies, and liabilities transferred to other companies is disclosed to conform to IAS 21, “The Effects of Changes in Foreign Exchange Rates”

(Continued) 93 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

d) Non insurance assets acquired from exercising the rights of retrieve salvage and subrogation For the three-month For the six-month periods ended June 30 periods ended June 30 2014 2013 2014 2013

Fire insurance $ 1,376 21 3,632 21 Marine cargo insurance 3,676 6,625 10,337 16,697 Marine hull fishing vessel 93,787 2,648 93,787 2,736 Voluntary moto insurance 47,888 38,754 84,394 77,085 Compulsory moto TPL 33,361 39,267 82,749 82,125 insurance Liability insurance 5,012 4,565 9,609 4,920 Engineering and nuclear 12 2,616 24 2,616 insurance Surety and credit insurance 5,136 8,155 8,596 10,382 Other property insurance 30 89 40 99 Accident insurance 242 26 282 31 Personal and commercial 16 46 17 50 multiple peril insurance Typhoon, flood and earthquake - - - 52 insurance Health insurance - - - - Overseas reinsurance - - - - assumed Total $ 190,536 102,812 293,467 196,814

Claims reserve is provided to conform the Regulations Governing the Setting Aside of Various Reserves by Insurance Enterprises amended by Financial Supervisory Commission, Executive Yuan, Jin Guan Bao Tsai No.09802513192 on December 28, 2009. The calculation of claims reserve by non life insurance companies is divided into reported but unpaid claims and IBNR based on the past claim experience and payments, using the actuary methodology. The claims reserve for reported but not paid claims is estimated based on actual situation by each case. The preceding claim reserve shall be returned at closing account of next year, and then provide it according to actual closing account data in that very year. The methodology for providing claims reserve or change in the said methodology is decided by actuaries and reported to the authority.

(Continued) 94 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(d) Other liability reserve a) The formula for calculating liability reserve is reported to the authority and the current interest rate is used for discounting purposes to calculate the present value of the liability reserve. b) Movements in liability reserve and liability-ceded reserve： June 30, 2014 Liability Liability-ceded Particular reserve reserve

Balance on January 1, 2014 $ 400,229 - Provision 2,404 - Recovered (26,070) - Balance on June 30, 2014 $ 376,563 -

December 31, 2013 Liability-ceded Particular Liability reserve reserve

Balance on January 1, 2013 $ 453,341 - Provision 4,273 - Recovered (57,385) - Balance on December 31, 2013 $ 400,229 -

June 30, 2013 Liability Liability-ceded Particular reserve reserve

Balance on January 1, 2013 $ 453,341 - Provision 2,911 - Recovered (33,922) - Balance on June 30, 2013 $ 422,330 -

(Continued) 95 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(e) Premium deficiency reserve a) Premium deficiency reserve June 30, 2014 Premium deficiency Premium deficiency reserve- reserve ceded Reinsurance Direct -assumed Direct Retained Particular business business business business

Fire insurance $ - - - - Marine cargo insurance - - - - Marine hull fishing 68,437 - 61,323 7,114 vessel Voluntary moto 32,739 456 24,792 8,403 insurance Compulsory moto TPL - - - - insurance Liability insurance - - - - Engineering and nuclear - - - - insurance Surety and credit - - - - insurance Other property insurance - - - - Accident insurance - - - - Typhoon, flood and - - - - earthquake insurance Personal and commercial - - - - multiple peril insurance Health insurance - - - - Overseas reinsurance - 380 - 380 assumed Overseas subsidiaries 66,806 6,161 70,191 2,776 Total $ 167,982 6,997 156,306 18,673

(Continued) 96 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 Premium deficiency Premium deficiency reserve- reserve ceded Reinsurance Direct -assumed Direct Retained Particular business business business business

Fire insurance $ - - - - Marine cargo insurance - - - - Marine hull fishing 82,010 2,129 75,812 8,327 vessel Voluntary moto 6,096 165 - 6,261 insurance Compulsory moto TPL - - - - insurance Liability insurance - - - - Engineering and Nuclear - - - - insurance Surety and credit - - - - insurance Other property insurance - - - - Accident insurance - - - - Typhoon, flood and - - - - earthquake insurance Personal and commercial - - - - multiple peril insurance Health insurance - - - - Overseas reinsurance - 250 - 250 assumed Overseas subsidiaries 105,563 16,128 107,931 13,760 Total $ 193,669 18,672 183,743 28,598

(Continued) 97 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Premium deficiency Premium deficiency reserve- reserve ceded Reinsurance Direct -assumed Direct Retained Particular business business business business

Fire insurance $ - - - - Marine cargo insurance - - - - Marine hull fishing 51,283 2,682 36,468 17,497 vessel Voluntary moto 116,336 1,643 - 117,979 insurance Compulsory moto TPL - - - - insurance Liability insurance - - - - Engineering and nuclear - - - - insurance Surety and credit 5,294 23 1,298 4,019 insurance Other property insurance - - - - Accident insurance - - - - Typhoon, flood and - - - - earthquake insurance Personal and commercial - - - - multiple peril insurance Health insurance - - - - Overseas reinsurance - 1,170 - 1,170 assumed Overseas subsidiaries 65,502 26,730 69,694 22,538 Total $ 238,415 32,248 107,460 163,203

(Continued) 98 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

b) Loss recognized due to premium deficiency reserve deposit premium deficiency reserve net change and premium deficiency-ceded reserve net change.

2014 Net deposit The net The net of pre- change of change of mium Direct underwrite Reinsurance ceded-in premium Reinsurance ceded-out premium deficiency Particular Deposit Get back Deposit Get back deficiency Deposit Get back deficiency reserve

Fire insurance $ ------Marine cargo insurance ------Marine hull fishing vessel 68,437 82,010 - 2,129 (15,702) 61,323 75,812 (14,489) (1,213) Voluntary moto insurance 32,739 6,096 456 165 26,934 24,792 - 24,792 2,142 Compulsory moto TPL ------insurance Liability insurance ------Engineering and nuclear ------insurance Surety and credit insurance ------Accident insurance ------Personal and commercial ------multiple peril insurance Typhoon, flood and ------earthquake insurance Health insurance ------Overseas reinsurance assumed - - 380 250 130 - - - 130 Overseas subsidiaries 67,116 104,482 6,230 15,858 (46,994) 70,561 105,574 (35,013) (11,981) Other－effect of change in (310) 644 (69) 707 (1,730) (500) 2,357 (2,857) 1,127 exchange rates Total $ 167,982 193,232 6,997 19,109 (37,362) 156,176 183,743 (27,567) (9,795)

2013 Net deposit The net The net of pre- change of change of mium Direct underwrite Reinsurance ceded-in premium Reinsurance ceded-out premium deficiency Particular Deposit Get back Deposit Get back deficiency Deposit Get back deficiency reserve

Fire insurance $ ------Marine cargo insurance ------Marine hull fishing vessel 51,283 41,186 2,682 2,058 10,721 36,468 25,690 10,778 (57) Voluntary moto insurance 116,336 76,813 1,643 1,059 40,107 - - - 40,107 Compulsory moto TPL ------insurance Liability insurance ------Engineering and nuclear ------insurance Surety and credit insurance 5,294 4,569 23 23 725 1,298 1,291 7 718 Accident insurance ------Personal and commercial ------multiple peril insurance Typhoon, flood and ------earthquake insurance Health insurance ------Overseas reinsurance assumed - - 1,170 1,592 (422) - - - (422) Overseas subsidiaries 62,365 6,264 26,265 162 82,204 67,272 50 67,222 14,982 Other－effect of change in 1,336 - 465 - 1,801 1,211 - 1,211 590 exchange rates Total $ 236,614 128,832 32,248 4,894 135,136 106,249 27,031 79,218 55,918

(Continued) 99 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

c) Movements in net premium deficiency reserve net premium deficiency-ceded reserve net change June 30, 2014 Premium Premium deficiency deficiency-ceded Particular reserve reserve

Balance on January 1, 2014 $ 212,341 183,743 Provision 174,979 156,176 Recovered (212,341) (183,743) Other－effect of change in exchange rates - 130 Balance on June 30, 2014 $ 174,979 156,306

December 31, 2013 Premium Premium deficiency deficiency-ceded Particular reserve reserve

Balance on January 1, 2013 $ 133,726 27,031 Provision 211,904 183,743 Recovered (133,726) (27,031) Other－effect of change in exchange rates 437 - Balance on December 31, 2013 $ 212,341 183,743

June 30, 2013 Premium Premium deficiency deficiency-ceded Particular reserve reserve

Balance on January 1, 2013 $ 133,726 27,031 Provision 268,862 106,249 Recovered (133,726) (27,031) Other－effect of change in exchange rates 1,801 1,211 Balance on June 30, 2013 $ 270,663 107,460

(Continued) 100 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Premium deficiency reserve is provided to conform to the Regulations Governing the Setting Aside of Various Reserves by Insurance Enterprises amended by Financial Supervisory Commission, Executive Yuan, Jin Guan Bao Tsai No.09802513192 on December 28, 2009. Non life insurance companies are required to estimate future claim payments and related expenses by evaluating the insurance contracts which have not matured and the risks covered by those contracts. If the expenditures are lower than the premium, non life insurance companies are required to provide the premium deficiency reserve. The methodology for providing premium deficiency reserve or change in the said methodology is decided by actuaries and reported to the Authority. On June 25, 2008, Fubon Insurance reported its methodology for providing premium deficiency reserve and obtained approval thereof from Financial Supervisory Commission, Executive Yuan, through its letter Jin Guan Bao Yi No.09702115350. (f) Liabilities adequacy reserve a) Liabilities adequacy reserve June 30, 2014 Liabilities Liabilities adequacy adequacy-ceded Particular reserve reserve

Fire insurance $ - - Marine cargo insurance - - Marine hull fishing vessel - - Voluntary moto insurance 521 - Compulsory moto TPL insurance - - Liability insurance - - Engineering and nuclear insurance - - Surety and credit insurance - - Other property insurance - - Accident insurance - - Typhoon, flood and earthquake insurance 7,769 - Personal and commercial multiple insurance - - Health insurance - - Overseas reinsurance assumed 15,860 - Overseas subsidiaries - - Total $ 24,150 -

(Continued) 101 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 Liabilities Liabilities adequacy adequacy-ceded Particular reserve reserve

Fire insurance $ - - Marine cargo insurance - - Marine hull fishing vessel - - Voluntary moto insurance 428 - Compulsory moto TPL insurance - - Liability insurance - - Engineering and nuclear energy insurance - - Surety and credit insurance - - Other property insurance - - Accident insurance - - Typhoon, flood and earthquake insurance - - Personal and commercial multiple insurance - - Health insurance - - Overseas reinsurance assumed 11 - Overseas subsidiaries - - Total $ 439 - June 30, 2013 Liabilities Liabilities adequacy adequacy-ceded Particular reserve reserve

Fire insurance $ - - Marine cargo insurance - - Marine hull fishing vessel 2,710 - Voluntary moto insurance 21,595 - Compulsory moto TPL insurance - - Liability insurance - - Engineering and nuclear insurance - - Surety and credit insurance 3,024 - Other property insurance - - Accident insurance - - Typhoon, flood and earthquake insurance 25,389 - Personal and commercial multiple insurance 3,902 - Health insurance - - Overseas reinsurance assumed 14 - Overseas subsidiaries 2,195 - Total $ 58,829 - (Continued) 102 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

b) Net change in the liability adequacy reserve

For the six-month period ended June 30, 2014 Net The net ceding Loss of change of liability liability Insurance contract liability Holding reinsurance adequacy adequacy Particular Deposit Get back adequacy Deposit Get back reserve test

Fire insurance $ ------Marine cargo insurance ------Marine hull fishing vessel ------Voluntary moto insurance 521 428 93 - - - 93 Compulsory moto TPL insurance ------Liability insurance ------Engineering and nuclear insurance ------Surety and credit insurance ------Other property insurance ------Accident insurance ------Typhoon, flood and earthquake insurance 7,769 - 7,769 - - - 7,769 Personal and commercial multiple ------insurance Health insurance ------Overseas reinsurance 15,860 11 15,849 - - - 15,849 Overseas subsidiaries ------Other－effect of change in exchange rates ------Total $ 24,150 439 23,711 - - - 23,711

For the six-month period ended June 30, 2013 Net The net ceding Loss of change of liability liability Insurance contract liability Holding reinsurance adequacy adequacy Particular Deposit Get back adequacy Deposit Get back reserve test

Fire insurance $ ------Marine cargo insurance ------Marine hull fishing vessel 2,710 4,679 (1,969) - - - (1,969) Voluntary moto insurance 21,595 6,598 14,997 - - - 14,997 Compulsory moto TPL insurance ------Liability insurance ------Engineering and nuclear insurance ------Surety and credit insurance 3,024 2,110 914 - - - 914 Other property insurance ------Accident insurance ------Typhoon, flood and earthquake insurance 25,389 14,749 10,640 - - - 10,640 Personal and commercial multiple 3,902 4,083 (181) - - - (181) insurance Health insurance ------Overseas reinsurance 14 34 (20) - - - (20) Overseas subsidiaries 2,187 151 2,036 - - - 2,036 Other-effect of change in exchange rates 4 - 4 - - - 4 Total $ 58,825 32,404 26,421 - - - 26,421

(Continued) 103 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

c) Movements in net premium deficiency reserve and net premium deficiency-ceded reserve June 30, 2014 Liabilities Liabilities adequacy adequacy-ceded Particular reserve reserve

Balance on January 1, 2014 $ 439 - Provision 24,150 - Recovered (439) - Balance on June 30, 2014 $ 24,150 -

December 31, 2013 Liabilities Liabilities adequacy adequacy-ceded Particular reserve reserve

Balance on January 1, 2013 $ 32,404 - Provision 439 - Recovered (32,409) - Other－effect of change in exchange rates 5 - Balance on December 31, 2013 $ 439 -

June 30, 2013 Liabilities Liabilities adequacy adequacy-ceded Particular reserve reserve

Balance on January 1, 2013 $ 32,404 - Provision 58,825 - Recovered (32,404) - Other－effect of change in exchange rates 4 - Balance on June 30, 2013 $ 58,829 -

(Continued) 104 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

2. Nature and extent of the insurance contract risk (a) Objectives, policies, procedures and methods for the insurance contract risk management a) Objectives and policies of the risk management Risk management policy is established to conform to “The Code of Conduct of Risk Management Practice for Insurance Companies”, “The Implementation of Internal Control and Audit System for Insurance Companies” and “Risk Management Policy of Fubon Financial Co., Ltd”, which is regarded as the top guiding principle. This policy is intended to define the overall organization structure, provide risk management guidance and fit the relevant principals into the daily process for every unit to form a culture of risk management and to ensure that the Company shall maximize shareholder's value under stable operation. b) Structure, organization and responsibility Risk Management Committee and Independent Risk Management Department are subordinate to the Board. Their related responsibilities are as follows: a. Board of Directors (i) Assume ultimate responsibilities for the risk of Fubon Insurance and therefore should be aware of all potential risks relating to the insurance division operations, and ensure that overall risk management functions are operating properly. (ii) Approval risk management policy, establish risk management culture and allocates resources. (iii) Evaluate the overall effect of the risks, and the capital required by governmental authorities and related regulations on the capital allocation. b. Risk Management Committee (i) Set risk management policies and strategies, risk appetite, structure and organization functions, establish managing standard for quality or quantity, change risk type, risk tolerances and allocation limit, and the methods to overcome risks. (ii) Report directly to the board of directors. This committee is headed by a CEO who is responsible for appointing the members, including the deputy convener, executive secretary, each risk division heads and others. Establish 5 risk management divisions by risk characteristics, which are mainly as follows: (1) Insurance risk, (2) Credit Risk, (3) Market Risk (including liquidity risk), (4) Operational Risk, (5) Risk Models (including ALM risk). Each division is leaded by a senior executive to ensure that each division operates according to its functions.

(Continued) 105 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(iii) Risk Management Committee operates once a month, and the chief convener serves as the host to monitor the effectiveness of risk management, If the chief convener is not able to attend the meeting, the vice convener can act for the chief convener. (iv) Executive directors execute the decision of risk management, evaluate and monitor the capability to overcome risks, current acceptance risk and the strategy to address the risks. (v) Regular meeting with the Board of Directors to report the current progress of risk management decisions on time and offer advises for any improvements. c. Chief Risk Officer Fubon Securities and its subsidiaries set up a position “Chief Risk Officer” (CRO) to deal with all daily of risk management. It is including risk management strategy planning; supervising Fubon Securities and its subsidiaries to create and follow the risk management system; monitoring the appropriateness of risk exposure and the effectiveness of risk management. And to supervise Fubon Securities and its subsidiaries' Risk Management Department. d. Risk Management Department (i) Responsible for all daily risk management activities including monitoring, measuring, and revaluing the risks. (ii) Assist the execution/implementation of risk management policies approved by the Board of directors. (iii) Based on the risk appetite setting up the risk tolerance level and the limitations. (iv) Summarize the relative information provided by each unit, and help each unit follow the policies and the limits. (v) Regular propose risk management related reports. (vi) Regularly monitor the risk limits and the utilization of risk limits of respective business unit. (vii)Assist in carrying out the stress test out. (viii)If necessary, proceed the back testing. (ix) Other risk management related duties. e. Business Units (i) Recognize the potential risks and measure it. Report risk management information and risk exposure to the risk management department regularly. (ii) Regularly examine each kind of business risk and limitations to ensure that the risk limitation is under control.

(Continued) 106 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(iii) Monitor risk exposure and report any situation when the exposure exceeds the limitation and take the necessary procedures. (iv) Make sure all business units are properly enforced under internal control and follow the rules and standards. (v) Each business unit should setup an operation risk manager to ensure that risk management is conducted independently and effectively. c) Scope of risk reporting Fubon Insurance measured insurance risk in consideration of factors including: Commodity pricing, check and ratify insurance, claims processing, catastrophe, reinsurance and reserves. This is in accordance to a standard for monitoring key risk indicator. Considering the ability of risk appetite and tolerance, we set up the limitation by single reserved and single accident to control it. In the meantime, we set up the risk tolerance for all major risks (including Insurance risk, market risk, credit risk and operation risk) by each scenarios to avoid the overall risk exposures exceed the tolerance of Fubon Insurance. All business units report their situations to the committee every month or quarterly. The Risk Management department collects all risk management reports and risk monitoring indicators semi annually and reports the overall situation to the Risk Management Committee and the board of directors. The report explains the risk exposure, how the policies worked and other related issues. d) The procedures and methods of the insurance risk management Insurance risk refers to the risk resulting from unexpected changes from benefit payments, related charges after collecting insurance premiums and undertaking the risk transferred from the insurant. Fubon Insurance sets up the code of conduct for insurance risk management to serve as a guideline of insurance risk management. It also establishes relevant risk management methods for the scope of insurance risk management in terms of the risk elements such as underwriting, reinsurance, catastrophe, claim, product design and pricing and provision. Insurance risk management procedures such as risk reorganization, risk measurement, risk monitoring and risk responding to ensure the timeliness, reliability and security of risk management information, except for different tiers disclosure per regulation, we also updates and archives relevant documents properly via the responsibility of each tiers. Fubon Insurance sets up another risk tolerance, risk limit and critical risk indicators to facilitate management and reports to the Risk Management Committee based on the frequency for each management indicators. If any risk tolerance, risk limit or critical risk management indicators over the limits, the proper authority shall provide the explanation of the excess risk and the improvement reviewed by the insurance risk team. The explanation will be submitted to the Insurance Risk Committee for approval. After approval, the risk management department shall track the improvement process based on the conditions of the approval.

(Continued) 107 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(b) Insurance risk information a) The sensitivity test of insurance risk Test Hypothesis For the three-month period ended June 30, 2014 Change of income Change of stockholder's before tax equity Change of expected Before After Before Compulsory rate of loss reinsurance reinsurance reinsurance insurance

+1% $ (1,000) (1,252) (746) (999) 1% 1,018 1,254 765 1,001

For the three-month period ended June 30, 2013 Change of income Change of stockholder's before tax equity Change of expected Before After Before Compulsory rate of loss reinsurance reinsurance reinsurance insurance

+1% $ (2,457) (1,398) (2,787) (1,727) 1% 2,386 1,427 2,716 1,756

For the six-month period ended June 30, 2014 Change of income Change of stockholder's before tax equity Change of expected Before After Before Compulsory rate of loss reinsurance reinsurance reinsurance insurance

+1% $ (19,624) (11,309) (16,288) (9,387) 1% 19,668 11,309 16,325 9,387

For the six-month period ended June 30, 2013 Change of income Change of stockholder's before tax equity Change of expected Before After Before Compulsory rate of loss reinsurance reinsurance reinsurance insurance

+1% $ (15,101) (7,366) (16,813) (9,078) 1% 15,003 7,408 16,715 9,119

(Continued) 108 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

b) Explanation of the risk concentration a. Underwriting and inward reinsurance premiums The insurance contracts which Fubon Insurance underwrites are categorized into different types of insurances and are not concentrated in a single type of insurance. The top 5 types of insurance are: voluntary motor insurance, compulsory motor TPL insurance, accident insurance, engineering insurance and liability insurance. The proportion of voluntary motor insurance represents 30.4% and 30.1% of all insurances for the six-month periods ended June 30, 2014 and and 2013, respectively. Although its proportion is higher than the others, its loss experience is stable and the variance is small. There is no risk concentration in other types of insurance. The proportion of underwriting and inward reinsurance premiums is as follows: June 30, 2014 June 30, 2013 Insurance type Amount % Amount %

Fire insurance $ 1,212,819 7.0 % 1,313,999 8.2 % Marine cargo 629,496 3.7 % 640,491 4.0 % insurance Marine hull fishing 277,208 1.6 % 341,046 2.1 % vessel Voluntary moto 5,235,019 30.4 % 4,839,170 30.1 % insurance Compulsory moto 1,963,602 11.4 % 1,949,233 12.1 % TPL insurance Liability insurance 1,078,590 6.3 % 1,042,006 6.4 % Engineering and 523,045 3.0 % 604,143 3.8 % nuclear insurance Surety and credit 169,079 1.0 % 128,346 0.8 % insurance Other property 65,874 0.4 % 70,538 0.4 % insurance Accident insurance 1,871,983 10.9 % 1,731,205 10.8 % Typhoon, flood and 1,932,071 11.2 % 1,912,024 11.9 % earthquake insurance Personal and 303,418 1.8 % 255,201 1.5 % commercial multiple peril insurance Health insurance 154,194 0.9 % 121,089 0.8 % Foreign business 223,106 1.3 % 188,066 1.2 % Overseas 1,573,149 9.1 % 949,083 5.9 % subsidiaries Total $ 17,212,653 100.0 % 16,085,640 100.0 %

(Continued) 109 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

b. The proportion of retained business premium The top 5 types of insurances with the highest proportion is voluntary motor insurance, compulsory motor TPL insurance, accident insurance, liability insurance and fire insurance. The voluntary insurance which has the highest proportion accounted for 37.5% and 38.1% for the six-month periods ended June 30, 2014 and 2013, respectively. Fubon Insurance considers that the loss experienced for voluntary motor insurance as stable and retained all the reinsurance. For other insurances, Fubon Insurance evaluated the possibility of accumulation of significant losses and arranged appropriate reinsurance contracts to spread risks so that management is expecting no risk concentration. In addition, the insurance which is likely to result in significant accumulated loss is catastrophe insurance (For example, earthquake, typhoon and flood) and the insurances are likely to result in accumulation are property insurance (fire insurance and engineering insurance), marine insurance and personal accident insurance. To avoid the operating risk resulting from the underwriting risk concentration, Fubon Insurance has bought catastrophe reinsurance contracts in advance for abovementioned insurances to diversify the risk. June 30, 2014 June 30, 2013 Insurance type Amount % Amount %

Fire insurance $ 647,027 5.0 % 671,158 5.7 % Marine cargo insurance 286,522 2.2 % 286,829 2.4 % Marine hull fishing 48,057 0.4 % 50,522 0.4 % vessel Voluntary moto 4,848,410 37.5 % 4,497,165 38.1 % insurance Compulsory moto TPL 1,445,155 11.2 % 1,424,194 12.1 % insurance Liability insurance 860,142 6.7 % 834,881 7.1 % Engineering and nuclear 248,875 1.9 % 233,679 2.0 % insurance Surety and credit 46,825 0.4 % 39,750 0.3 % insurance Other property insurance 26,001 0.2 % 24,201 0.2 % Accident insurance 1,849,289 14.3 % 1,711,071 14.5 % Typhoon, flood and 640,554 5.0 % 716,864 6.1 % earthquake insurance Personal and commercial 279,030 2.2 % 241,958 2.1 % multiple peril insurance Health insurance 154,189 1.2 % 121,089 1.0 % Foreign business 223,106 1.7 % 188,397 1.6 % Overseas 1,309,386 10.1 % 756,076 6.4 % subsidiaries Total $ 12,912,568 100.0 % 11,797,834 100.0 %

(Continued) 110 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

c) Claim development trend: a. Sum of accumulated and reported claims

June 30, 2014 Evaluation date Occurrence December 31, December 31, December 31, December 31, March 31, Accumulated Reported but Reported and Claim year 2010 2011 2012 2013 2014 claim paid unpaid unpaid Provision

≦2009 797,062 2010 1,253,610 13,354,798 13,279,816 12,793,925 12,764,883 12,466,290 298,593 2011 11,952,120 13,146,221 1,312,245 13,239,023 12,681,039 557,984 2012 12,992,155 14,762,214 14,674,892 13,428,909 1,245,983 2013 13,742,107 14,177,078 11,524,296 2,652,782 2014 7,842,222 3,193,882 4,648,340 Total 10,200,744 5,073,420 15,274,164

December 31, 2013 Evaluation date Occurrence December 31, December 31, December 31, December 31, December 31, Accumulated Reported but Reported Claim year 2009 2010 2011 2012 2013 claim paid unpaid and unpaid Provision

≦2008 780,358 2009 12,020,187 12,258,804 12,563,600 12,369,757 12,214,777 12,053,664 161,113 2010 12,153,808 13,355,113 13,279,998 12,794,103 12,423,507 370,596 2011 11,956,273 13,149,327 13,314,711 12,523,691 791,020 2012 13,000,230 14,770,930 12,727,073 2,043,857 2013 13,769,708 7,939,908 5,829,800 Total 9,976,744 2,863,434 12,840,178

June 30, 2013 Evaluation date Occurrence December 31, December 31, December 31, December 31, March 31, Accumulated Reported but Reported and Claim year 2009 2010 2011 2012 2013 claim paid unpaid unpaid Provision

≦2007 852,841 2008 12,020,240 12,258,817 12,563,614 12,366,220 12,243,819 12,000,843 246,526 2009 12,153,877 13,355,224 13,280,062 12,777,408 12,339,755 437,653 2010 11,956,794 13,149,494 13,270,094 12,237,693 1,032,401 2011 12,999,425 14,274,332 11,073,096 3,201,236 2012 5,815,240 2,550,397 3,264,843 Total 9,035,500 2,782,035 11,817,535

b. Sum of accumulated and reported claims

≦2009 471,199 2010 8,508,804 9,299,790 9,412,457 9,193,735 9,176,572 8,978,799 197,773 2011 8,755,569 9,757,291 10,050,247 9,992,341 9,594,203 398,138 2012 9,900,489 11,348,747 11,330,939 10,414,240 916,699 2013 10,821,829 11,065,830 9,384,978 1,680,852 2014 5,861,038 2,564,934 3,296,104 Total 6,960,765 3,617,224 10,577,989

(Continued) 111 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

≦2008 443,784 2009 7,848,702 7,767,452 7,976,736 8,015,497 7,975,407 7,896,569 81,115 2010 8,508,913 9,299,900 9,412,558 9,183,008 8,945,019 248,817 2011 8,757,032 9,758,860 10,019,563 9,468,008 583,877 2012 9,905,366 11,322,161 10,010,921 1,381,233 2013 10,837,674 6,611,154 4,247,475 Total 6,986,301 2,089,972 9,076,273

≦2007 472,469 2008 7,848,721 7,767,459 7,976,743 8,013,592 7,968,779 7,850,902 120,163 2009 8,508,951 9,299,939 9,412,594 9,148,709 8,870,031 289,624 2010 8,756,857 9,758,694 9,941,595 9,527,348 717,060 2011 9,904,294 10,915,187 8,848,439 2,148,380 2012 4,644,370 2,176,016 2,451,890 Total 6,199,586 1,989,447 8,189,033

(c) Objectives, policies, procedures and methods of insurance contract risk management. a) Credit risk The credit risk of insurance contracts comes mainly from reinsurance business (The reinsurers’ default or bad financial condition which leads to the inability to pay the reinsurance claims). Reinsurance contracts are arranged in accordance with “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms”. The reinsurers with whom Fubon Insurance reinsures are mostly reinsurers with better credit rating and qualify as authorized reinsurers. Relevant risk control procedures are also established to regularly keep track and monitor changes in the credit rating of reinsurers. In compliance with Article No.5 of “Regulations Governing the Provision of Unauthorized Reinsurance Reserves for Insurance Company”, transactions with unauthorized reinsurers are disclosed in the notes of financial statements which include the following: a. Summary of unauthorized reinsurance contracts and types of reinsurance. b. Reinsurance premium expense of unauthorized reinsurance contracts. c. General description of the amount of unauthorized reserve and its components.

(Continued) 112 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

d. As of June 30, 2014, the major unqualified reinsurance counter part is listed below: (i) KNAPTON INSURANCE LIMITED C/O ENSTAR LIMITED：The facultative reinsurance of engineering insurance. (ii) NORFOLK REINSURANCE COMPANY LTD.：The facultative reinsurance of commercial fire insurance. (iii) MISR INSURANCE COMPANY, CAIRO：The facultative reinsurance of marine insurance. (iv) ALLIANZ C.P. GENERAL INSURANCE COMPANY LIMITED：The facultative reinsurance of new types of insurance. (v) RIVERSTONE FRANCE S.A.：The facultative reinsurance of engineering insurance. (vi) HEALTH LAMBERT GROUP RUN-OFF DIVISION：The facultative reinsurance of new types of insurance. (vii)GENERAL REINSURANCE：The facultative reinsurance of commercial fire insurance. (viii)BEST RE(L) LIMITED. (ix) PAOFOONG INSURANCE COMPANY (HONG KONG) LIMITED：The facultative reinsurance of personal fire insurance. e. As of December 31, 2013, the major unqualified reinsurance counter part is listed below: (i) KNAPTON INSURANCE LIMITED C/O ENSTAR LIMITED：The facultative reinsurance of engineering insurance. (ii) NORFOLK REINSURANCE COMPANY LTD.：The facultative reinsurance of commercial fire insurance. (iii) MISR INSURANCE COMPANY, CAIRO：The facultative reinsurance of marine insurance. (iv) ALLANZ C.P. GENERAL INSURANCE COMPANY LIMITED: The facultative reinsurance of new type of insurance. (v) RIVERSTONE FRANCE S.A.：The facultative reinsurance of engineering insurance. (vi) HEALTH LAMBERT GROUP RUN-OFF DIVISION：The facultative reinsurance of new types of insurance. (vii)COLOGNE REINSURANCE：The facultative reinsurance of commercial fire insurance. (viii)BEST RE(L) LIMITED.

(Continued) 113 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

f. As of June 30, 2013, the major unqualified reinsurance counter part is listed below: (i) ALLANZ C.P. GENERAL INSURANCE COMPANY LIMITED: The facultative reinsurance of commercial insurance. (ii) ALLANZ C.P. GENERAL INSURANCE COMPANY LIMITED：The facultative reinsurance of new type of insurance. (iii) MISR INSURANCE COMPANY, CAIRO：The facultative reinsurance of marine fire insurance. (iv) PAOFOONG INSURANCE COMPANY (HONG KONG) LIMITED：The facultative reinsurance of personal fire insurance. (v) RIVERSTONE FRANCE S.A.：The facultative reinsurance of engineering insurance. (vi) KNAPTON INSURANCE LIMITED C/O ENSTAR LIMITED：The facultative reinsurance of engineering insurance. (vii)GENERAL REINSURANCE：The facultative reinsurance of commercial fire insurance. g. As of June 30, 2014, and December 31 and June 30, 2013, the reinsurance expenses, which were deal with reinsurance companies with below the standard rating, amounted to $257,444, $671,023 and $379,862, respectively. h. As of June 30, 2014, and December 31 and June 30, 2013, the net change in reinsurance reserve for reinsurance transactions with reinsurance companies with below the standard rating amounted to $475,657, $492,145 and $272,379, respectively. The components of this account includes: (a) net change in unearned premium reserve of $387,416, $335,512 and $115,581, respectively. (b) net change in claims recoverable from reinsurers of paid claims overdue in nine month amounted to $38,490, $20,551 and $17,533, respectively. (c) net change in claims recoverable from reinsurers which were reported but unpaid amounted to $49,752, $136,082 and $139,264, respectively. b) Liquidity risk Insurance contracts which Fubon Insurance undertakes are mostly policies that expire within 1 year. The liquidity risk from insurance contracts depends on whether Fubon Insurance’s assets are able to cover significant claims in time when material claims occur which means that the liquidity risk of insurance contracts is mainly capital liquidity risk. Therefore, Fubon Insurance adopts the current asset ratio to evaluate the liquidity risk from insurance contracts.

(Continued) 114 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

c) Market risk The market risk from insurance contracts arises from the reserves provided for these insurance contracts, such as fluctuation of market interest rate. According to Regulations Governing the Setting Aside of Various Reserves by Insurance Enterprise, the provision which Fubon Insurance provided such as the reserves for unearned premium, reserves for claims, special reserves, premium deficiency reserves liability adequacy reserves and liability reserves are not affected by the change of market interest rate because they are not calculated using the market interest rate, except for liability reserves. Liability reserve is provided for long term fire insurance. Although the sale of this type of insurance product is discontinued, the liability reserve has been provided for the effective insurance policies. The calculation of this probable future repayments and the discount rate that is determined on the average years for those contracts which have unexpired and the previous years’ market rate trends. As there are only very few fire insurance contracts that are still effective, and the fluctuation in market interest rate is expected to have no significant effect on the overall reserve and the income of the subsidiary, Fubon Insurance. 3. Fubon Life Insurance (a) Liability reserve a) The components of liability reserves were as follows: June 30, 2014 Financial instruments with Insurance discretionary contracts participation Total

Life insurance $ 1,751,254,346 - 1,751,254,346 Injury insurance 787,956 - 787,956 Health insurance 171,062,417 - 171,062,417 Annuity insurance 1,351,741 160,225,656 161,577,397 Investment-linked insurance 14,399 - 14,399 Total $ 1,924,470,859 160,225,656 2,084,696,515

(Continued) 115 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 Financial instruments with Insurance discretionary contracts participation Total

Life insurance $ 1,634,387,659 - 1,634,387,659 Injury insurance 800,208 - 800,208 Health insurance 161,803,366 - 161,803,366 Annuity insurance 1,402,071 165,728,562 167,130,633 Investment-linked insurance 11,074 - 11,074 Total $ 1,798,404,378 165,728,562 1,964,132,940

June 30, 2013 Financial instruments with Insurance discretionary contracts participation Total

Life insurance $ 1,513,791,132 - 1,513,791,132 Injury insurance 814,272 - 814,272 Health insurance 151,827,213 - 151,827,213 Annuity insurance 1,420,632 146,792,805 148,213,437 Investment-linked insurance 22,928 - 22,928 Total $ 1,667,876,177 146,792,805 1,814,668,982

The movements in the liability reserves were as follows: For the six-month period ended June 30, 2014 Financial instruments with Insurance discretionary contracts participation Total

January 1, 2014 $ 1,798,404,378 165,728,562 1,964,132,940 Current provisions 183,207,955 9,813,129 193,021,084 Current reclaims (57,586,788) (15,316,035) (72,902,823) Gain or loss on foreign 445,314 - 445,314 exchange June 30, 2014 $ 1,924,470,859 160,225,656 2,084,696,515

(Continued) 116 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

For the six-month period ended June 30, 2013 Financial instruments with Insurance discretionary contracts participation Total

January 1, 2013 $ 1,529,886,228 146,410,273 1,676,296,501 Current provisions 156,108,601 21,005,231 177,113,832 Current reclaims (22,234,099) (20,622,699) (42,856,798) Gain or loss on foreign 4,115,447 - 4,115,447 exchange June 30, 2013 $ 1,667,876,177 146,792,805 1,814,668,982

b) The unearned premium reserves for these insurance products were as follows: June 30, 2014 Financial instruments with Insurance discretionary contracts participation Total

Individual life insurance $ 2,666 - 2,666 Individual injury insurance 2,243,943 - 2,243,943 Individual health insurance 2,931,613 - 2,931,613 Group insurance 1,805,399 - 1,805,399 Investment-linked insurance 93,684 - 93,684 Total ceded reserve 7,077,305 - 7,077,305 Deduction of provision for reinsurance ceded: Individual life insurance 275,496 - 275,496 Individual injury insurance 26,673 - 26,673 Individual health insurance 2,668 - 2,668 Group insurance 79,090 - 79,090 Investment-linked 11,636 - 11,636 insurance Total ceded reserve 395,563 - 395,563 Net reserve $ 6,681,742 - 6,681,742

(Continued) 117 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 Financial instruments with Insurance discretionary contracts participation Total

Individual life insurance $ 1,385 - 1,385 Individual injury insurance 2,130,671 - 2,130,671 Individual health insurance 2,786,477 - 2,786,477 Group insurance 1,899,881 - 1,899,881 Investment-linked insurance 95,725 - 95,725 Total ceded reserve 6,914,139 - 6,914,139 Deduction of provision for reinsurance ceded: Individual life insurance 294,714 - 294,714 Individual injury insurance 28,951 - 28,951 Individual health insurance 1,429 - 1,429 Group insurance 50,787 - 50,787 Investment-linked 11,091 - 11,091 insurance Total ceded reserve 386,972 - 386,972 Net reserve $ 6,527,167 - 6,527,167

June 30, 2013 Financial instruments with Insurance discretionary contracts participation Total

Individual life insurance $ 678 - 678 Individual injury insurance 2,046,662 - 2,046,662 Individual health insurance 2,583,065 - 2,583,065 Group insurance 1,859,635 - 1,859,635 Investment-linked insurance 82,190 - 82,190 Total ceded reserve 6,572,230 - 6,572,230 Deduction of provision for reinsurance ceded: Individual life insurance 336,597 - 336,597 Individual injury insurance 30,988 - 30,988 Individual health insurance 434 - 434 Group insurance 46,459 - 46,459 Investment-linked 12,346 - 12,346 insurance Total ceded reserve 426,824 - 426,824 Net reserve $ 6,145,406 - 6,145,406

(Continued) 118 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

The movements in unearned premium reserve were as follows: For the six-month period ended June 30, 2014 Financial instruments with Insurance discretionary contracts participation Total

January 1, 2014 $ 6,914,139 - 6,914,139 Current provisions 7,077,305 - 7,077,305 Current reclaims (6,914,138) - (6,914,138) Gain or loss on foreign (1) - (1) exchange June 30, 2014 7,077,305 - 7,077,305 Less: Provision for ceded reinsurance January 1, 2014, net 386,972 - 386,972 Current provisions 395,563 - 395,563 Current reclaims (386,972) - (386,972) exchange June 30, 2014, net 395,563 - 395,563 $ 6,681,742 - 6,681,742

For the six-month period ended June 30, 2013 Financial instruments with Insurance discretionary contracts participation Total

January 1, 2013 $ 6,253,623 - 6,253,623 Current provision 6,572,228 - 6,572,228 Current reclaims (6,253,623) - (6,253,623) Gain or loss on foreign 2 - 2 exchange June 30, 2013 6,572,230 - 6,572,230 Less: provision for ceded reinsurance January 1, 2013, net 465,347 - 465,347 Current provisions 426,809 - 426,809 Current reclaims (465,347) - (465,347) Gain or loss on foreign 15 - 15 exchange June 30, 2013, net 426,824 - 426,824 $ 6,145,406 - 6,145,406

(Continued) 119 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

c) The components of claim reserves were as follows: June 30, 2014 Financial instruments with Insurance discretionary contracts participation Total

Individual life insurance －Reported but unpaid $ 459,795 28,570 488,365 －Incurred but not reported 3,271 - 3,271 Individual injury insurance －Reported but unpaid 127,387 - 127,387 －Incurred but not reported 175,548 - 175,548 Individual health insurance －Reported but unpaid 165,142 - 165,142 －Incurred but not reported 331,337 - 331,337 Group insurance －Reported but unpaid 55,311 - 55,311 －Incurred but not reported 228,266 - 228,266 Investment-linked insurance －Reported but unpaid 144,983 - 144,983 －Incurred but not reported 39,669 - 39,669 Total ceded reserve 1,730,709 28,570 1,759,279 Deduction of provision for reinsurance ceded: Individual life insurance 37,583 - 37,583 Individual injury insurance 56,819 - 56,819 Individual health insurance 210 - 210 Group insurance 5,842 - 5,842 Investment-linked 56,466 - 56,466 insurance Total ceded reserve 156,920 - 156,920 Net reserve $ 1,573,789 28,570 1,602,359

(Continued) 120 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 Financial instruments with Insurance discretionary contracts participation Total

Individual life insurance －Reported but unpaid $ 403,130 9,196 412,326 －Incurred but not reported 3,676 - 3,676 Individual injury insurance －Report but unpaid 183,613 - 183,613 －Incurred but not reported 199,994 - 199,994 Individual health insurance －Reported but unpaid 265,002 - 265,002 －Incurred but not reported 325,787 - 325,787 Group insurance －Reported but unpaid 81,053 - 81,053 －Incurred but not reported 247,092 - 247,092 Investment-linked insurance －Reported but unpaid 100,005 - 100,005 －Incurred but not reported 46,565 - 46,565 Total ceded reserve 1,855,917 9,196 1,865,113 Deduction of provision for reinsurance ceded: Individual life insurance 30,655 - 30,655 Individual injury insurance 60,468 - 60,468 Individual health insurance 211 - 211 Group insurance 1,617 - 1,617 Investment-linked 39,783 - 39,783 insurance Total ceded reserve 132,734 - 132,734 Net reserve $ 1,723,183 9,196 1,732,379

(Continued) 121 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Financial instruments with Insurance discretionary contracts participation Total

Individual life insurance －Reported but unpaid $ 320,095 1,858 321,953 －Incurred but not reported 3,451 - 3,451 Individual injury insurance －Report but unpaid 146,765 - 146,765 －Incurred but not reported 174,937 - 174,937 Individual health insurance －Reported but unpaid 160,348 - 160,348 －Incurred but not reported 269,846 - 269,846 Group insurance －Reported but unpaid 82,255 - 82,255 －Incurred but not reported 218,369 - 218,369 Investment-linked insurance －Reported but unpaid 56,435 - 56,435 －Incurred but not reported 47,404 - 47,404 Total ceded reserve 1,479,905 1,858 1,481,763 Deduction of provision for reinsurance ceded: Individual life insurance 28,547 - 28,547 Individual injury insurance 59,780 - 59,780 Individual health insurance 280 - 280 Group insurance 6,226 - 6,226 Investment-linked 9,660 - 9,660 insurance Total ceded reserve 104,493 - 104,493 Net reserve $ 1,375,412 1,858 1,377,270

(Continued) 122 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

The movements in claim reserves were as follows: For the six-month period ended June 30, 2014 Financial instruments with Insurance discretionary contracts participation Total

January 1, 2014 $ 1,855,917 9,196 1,865,113 Current provisions 1,730,809 28,570 1,759,379 Current reclaims (1,855,918) (9,196) (1,865,114) Gain or loss on foreign (99) - (99) exchange June 30, 2014 1,730,709 28,570 1,759,279 Less: Provision for cede reinsurance: January 1, 2014, net 132,734 - 132,734 Current provisions 156,920 - 156,920 Current reclaims (132,734) - (132,734) June 30, 2014, net 156,920 - 156,920 $ 1,573,789 28,570 1,602,359

For the six-month period ended June 30, 2013 Financial instruments with Insurance discretionary contracts participation Total

January 1, 2013 $ 1,404,271 1,367 1,405,638 Current provisions 1,479,866 1,858 1,481,724 Current reclaims (1,404,271) (1,367) (1,405,638) Gain or loss on foreign 39 - 39 exchange June 30, 2013 1,479,905 1,858 1,481,763 Less: Provision for ceded reinsurance: January 1, 2013, net 111,403 - 111,403 Current provisions 104,493 - 104,493 Current reclaims (111,403) - (111,403) June 30, 2013, net 104,493 - 104,493 $ 1,375,412 1,858 1,377,270

(Continued) 123 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

d) The components of special reserves for these insurance products were as follows: June 30, 2014 Financial instruments with Insurance discretionary contracts participation Others Total

Legal reserve: Dividend provision for $ 1,184,676 - - 1,184,676 participation policies Provision for risk of 1,544,524 - - 1,544,524 dividend Others (note) 652,267 - - 652,267 Total $ 3,381,467 - - 3,381,467

December 31, 2013 Financial instruments with Insurance discretionary contracts participation Others Total

Legal reserve: Dividend provision for $ 1,505,791 - - 1,505,791 participation policies Provision for risk of 1,102,544 - - 1,102,544 dividend Others (note) 652,267 - - 652,267 Total $ 3,260,602 - - 3,260,602

(Continued) 124 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Financial instruments with Insurance discretionary contracts participation Others Total

Legal reserve: Dividend provision for $ (244,316) - - (244,316) participation policies Provision for risk of 2,325,014 - - 2,325,014 dividend Others (note) 3,261,335 - - 3,261,335 Total $ 5,342,033 - - 5,342,033

Note: In accordance with the regulation of “Principles of Preparing Financial Reports for Insurance Companies”, Fubon Life Insurance and its subsidiaries estimated the real estate with fair value and there was increment. Fubon Life Insurance and its subsidiaries used it to cover the disadvantageous effect of other accounts due to the transition to IFRSs. The remaining of the increment which amounted to $3,261,335 were recognized as the special reserve under the account of insurance liability on the transition date. In accordance with the Gin Guan Bao Tsai No.10102515281 letter dated on November 30, 2012 issued by the Financial Supervisory Commission (FSC), Fubon Life Insurance and its subsidiaries applied to the FSC for recovering the special reserve for incremental gain on real estate. The FSC approved the application on October 24, 2013 based on the Gin Guan Bao Tsai No.10102515281 letter. As of December 31, 2013, the gain on the recovery of the special reserve amounted to $2,609,068, and was recognized as special reserve under the stockholders' equity. The movements in special reserves were as follows: For the six-month period ended June 30, 2014 Financial instruments with Insurance discretionary contracts participation Others Total

January 1, 2014 $ 3,260,602 - - 3,260,602 Dividend provision for (321,115) - - (321,115) Net risk provisions for 441,980 - - 441,980 bonus participation polices June 30, 2014 $ 3,381,467 - - 3,381,467

(Continued) 125 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

For the six-month period ended June 30, 2013 Financial instruments with Insurance discretionary contracts participation Others Total

January 1, 2013 $ 5,228,976 - - 5,228,976 Dividend provision for (291,228) - - (291,228) Net risk provisions for 404,285 - - 404,285 bonus participation policies June 30, 2013 $ 5,342,033 - - 5,342,033

e) The components of premium deficiency reserves were as follows: June 30, 2014 Financial instruments with Insurance discretionary contracts participation Total

Individual life insurance $ 11,499,954 - 11,499,954 Individual health insurance 534,599 - 534,599 Group insurance 9,342 - 9,342 Total $ 12,043,895 - 12,043,895

December 31, 2013 Financial instruments with Insurance discretionary contracts participation Total

Individual life insurance $ 9,531,943 - 9,531,943 Individual health insurance 560,215 - 560,215 Group insurance 43,693 - 43,693 Total $ 10,135,851 - 10,135,851

(Continued) 126 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Financial instruments with Insurance discretionary contracts participation Total

Individual life insurance $ 7,051,585 - 7,051,585 Individual health insurance 564,436 - 564,436 Group insurance 40,787 - 40,787 Total $ 7,656,808 - 7,656,808

The movements in premium deficiency reserve were as follows: For the six-month period ended June 30, 2014 Financial instruments with Insurance discretionary contracts participation Total

Balance on January 1, 2014 $ 10,135,851 - 10,135,851 Current provision, net 1,914,844 - 1,914,844 Loss on foreign exchange (6,800) - (6,800) Balance on June 30, 2014 $ 12,043,895 - 12,043,895

For the six-month period ended June 30, 2013 Financial instruments with Insurance discretionary contracts participation Total

Balance on January 1, 2013 $ 6,541,639 - 6,541,639 Current provision, net 1,024,605 - 1,024,605 Loss on foreign exchange 90,564 - 90,564 Balance on June 30, 2013 $ 7,656,808 - 7,656,808

(Continued) 127 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

f) Liability adequacy reserve Based on the actuary’s liability adequacy test report, the results of reserve testing were as follows: Financial instruments June 30, 2014 December 31, June 30, 2013 with discretionary 2013 participation

Liability reserve $ 2,084,667,300 1,964,110,720 1,814,652,832 Unearned premium reserve 7,077,224 6,914,069 6,572,158 Premium deficiency 12,043,895 10,135,851 7,656,808 reserve Special reserve 3,381,467 2,608,335 2,080,698 Claim reserve 1,759,271 1,865,106 1,481,755 Carrying amount of the $ 2,108,929,157 1,985,634,081 1,832,444,251 related insurance liabilities Current estimate of future $ 1,662,316,850 1,488,064,706 1,419,890,402 cash flows under its insurance liabilities Total liability adequacy $ - - - reserve The liability adequacy test method adopted by Fubon Life Insurance and its subsidiaries as of June 30, 2014, and December 31 and June 30, 2013, are as the following: Test method Gross Premium Valuation (GPV) Group All insurance contracts Significant The discount rate assumption for future years was set up based on the assumption assets allocation and the weighted average return on investments of Fubon Life Insurance

The above-mentioned liability adequacy test did not include the provisions of Fubon Life Insurance’s subsidiaries. The omission of such provisions is primarily due to the fact that they only account for 0.0014% of the total provisions which will not affect the result of the liability adequacy test. The amount is classified as gain from special reserve of real estate. Due to considering the amount $652,267 is unrecoverable; from the six-month period ended 2014, this amount is put in evaluation test.

(Continued) 128 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

g) Special reserve (Detail of special catastrophe and special risk-volatility reserve): June 30, 2014 Financial instruments with Insurance discretionary contracts participation Others Total

Special catastrophe reserve $ 1,757,275 - - 1,757,275 Special risk-volatility 8,472,118 - - 8,472,118 reserve Total $ 10,229,393 - - 10,229,393

December 31, 2013 Financial instruments with Insurance discretionary contracts participation Others Total

Special catastrophe reserve $ 1,199,166 - - 1,199,166 Special risk-volatility 8,070,930 - - 8,070,930 reserve Total $ 9,270,096 - - 9,270,096

June 30, 2013 Financial instruments with Insurance discretionary contracts participation Others Total

Special catastrophe reserve $ 968,335 - - 968,335 Special risk-volatility 7,917,616 - - 7,917,616 reserve Total $ 8,885,951 - - 8,885,951

(Continued) 129 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

h) Other reserves a. Reserve provision for financial instruments without discretionary participation features Financial instruments without discretionary participation features and the movements in the related reserve were as follows: June 30, 2014 December 31, June 30, 2013 2013

Life insurance $ 89,146,174 92,003,504 95,730,061

2014 2013

Balance on January 1 $ 92,003,504 98,544,225 Current premiums collected 212 948 Current claims and benefits (3,643,987) (3,632,698) Current net provision for legal reserve 786,455 817,557 Current commission and agency fees (10) 29 Balance on June 30 $ 89,146,174 95,730,061

b. Foreign exchange fluctuation reserve (i) Hedging strategy and risk exposure The hedging strategy is primarily perfect hedge, together with currency proxy hedge and natural hedge. To ensure the effectiveness and appropriateness of hedging, the rationality of the hedging cost is considered and the hedging strategy and hedging proportion are vigorously adjusted. The frequency and level of foreign exchange hedge considers the foreign exchange fluctuation risk. (ii) The movements in foreign exchange fluctuation reserve were as follows: 2014 2013

Balance on January 1 $ 825,259 1,062,830 Current provision： Compulsory provision 593,338 443,274 Additional provision 945,614 228,167 Subtotal 1,538,952 671,441 Recovered (1,098,042) (880,313) Balance on June 30 $ 1,266,169 853,958

(Continued) 130 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(iii) Effect of foreign exchange fluctuation reserve Unapplied Applied Effected Item amount amount amount

Balance on June 30, 2014 Foreign exchange $ - 1,266,169 (1,266,169) fluctuation reserve Owner's equity 191,022,863 191,646,270 (623,407)

Unapplied Applied Effected Item amount amount amount

Balance on December 31, 2013 Foreign exchange $ - 825,259 (825,259) fluctuation reserve Owner's equity 146,799,440 147,788,802 (989,362)

Unapplied Applied Effected Item amount amount amount

Balance on June 30, 2013 Foreign exchange $ - 853,958 (853,958) fluctuation reserve Owner's equity 141,317,441 142,282,983 (965,542)

For the six-month periods ended June 30 2014 2013 Unapplied Applied Effected Unapplied Applied Effected Item amount amount amount amount amount amount

Net income $13,337,942 12,971,987 365,955 8,972,677 9,146,041 (173,346) Earnings per 3.66 3.56 0.10 2.46 2.51 0.05 share

(Continued) 131 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

c. Deferred acquisition cost The additional transaction costs incurred on investment administrative work were deferred in connection with the sales of investment-linked insurance policies, classified as financial instrument without discretionary participation features. The movements in these deferred acquisition costs, were as follows: For the six-month period ended June 30 2014 2013

Balance on January 1 $ 455,797 683,021 Addition 41,275 45,978 Amortization (124,717) (167,771) Balance on June 30 $ 372,355 561,228

d. Deferred handling fees The handling fees incurred on investment administrative work were likewise deferred in connection with the sales of investment-linked insurance policies, classified as financial instrument without discretionary participation features. The movements in these deferred handling fees were as follows: For the six-month period ended June 30 2014 2013

Balance on January 1 $ 699,591 796,262 Addition 120,300 141,069 Amortization (128,185) (173,324) Balance on June 30 $ 691,706 764,007

(Continued) 132 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

e. Retained earned premiums For the three-month period ended June 30, 2014 Financial instruments with Insurance discretionary contracts participation Total

Direct written premiums $ 89,548,910 1,933,828 91,482,738 Reinsurance premium 1,573 - 1,573 Premium income 89,550,483 1,933,828 91,484,311 Less: reinsurance 2,080,926 - 2,080,926 premium ceded Net change in 129,227 - 129,227 unearned premium reserve Subtotal 2,210,153 - 2,210,153 Retained earned $ 87,340,330 1,933,828 89,274,158 premium

For the three-month period ended June 30, 2013 Financial instruments with Insurance discretionary contracts participation Total

Direct written premium $ 82,838,510 11,738,169 94,576,679 Reinsurance premium 1,631 - 1,631 Premium income 82,840,141 11,738,169 94,578,310 Less: reinsurance 2,268,507 - 2,268,507 premium ceded Net change in 95,985 - 95,985 unearned premium reserves Subtotal 2,364,492 - 2,364,492 Retained earned $ 80,475,649 11,738,169 92,213,818 premiums

(Continued) 133 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

For the six-month period ended June 30, 2014 Financial instruments with Insurance discretionary contracts participation Total

Direct written premium $ 188,703,900 8,392,502 197,096,402 Reinsurance premium 2,870 - 2,870 Premium income 188,706,770 8,392,502 197,099,272 Less: Reinsurance 4,201,798 - 4,201,798 premium ceded unearned premium 154,576 - 154,576 reserves Subtotal 4,356,374 - 4,356,374 Retained earned $ 184,350,396 8,392,502 192,742,898 premiums

For the six-month period ended June 30, 2013 Financial instruments with Insurance discretionary contracts participation Total

Direct written premium $ 157,013,341 19,868,706 176,882,047 Reinsurance premium 3,420 - 3,420 Premium income 157,016,761 19,868,706 176,885,467 Less: Reinsurance 4,442,410 - 4,442,410 premium ceded unearned premium 357,143 - 357,143 reserves Subtotal 4,799,553 - 4,799,553 Retained earned $ 152,217,208 19,868,706 172,085,914 premiums

(Continued) 134 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

f. Retained claims payment For the three-month period ended June 30, 2014 Financial instruments with Insurance discretionary contracts participation Total

Claims payment incurred $ 35,171,730 8,396,145 43,567,875 Reinsurance claims 674 - 674 payment incurred Insurance claims 35,172,404 8,396,145 43,568,549 payment Less: Claims payment 1,472,127 - 1,472,127 recovered from reinsures Retained claims payment $ 33,700,277 8,396,145 42,096,422

For the three-month period ended June 30, 2013 Financial instruments with Insurance discretionary contracts participation Total

Claims payment incurred $ 18,272,115 11,750,406 30,022,521 Reinsurance claims 573 - 573 payment incurred Insurance claims 18,272,688 11,750,406 30,023,094 payment Less: Claims payment 1,368,835 - 1,368,835 recovered from reinsurers Retained claims payment $ 16,903,853 11,750,406 28,654,259

(Continued) 135 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

For the six-month period ended June 30, 2014 Financial instruments with Insurance discretionary contracts participation Total

Claims payment incurred $ 74,592,706 15,479,404 90,072,110 Reinsurance claims 1,349 - 1,349 payment incurred Insurance claims 74,594,055 15,479,404 90,073,459 payment Less: Claims payment 2,849,088 - 2,849,088 recovered from reinsurers Retained claims payment $ 71,744,967 15,479,404 87,224,371

For the six-month period ended June 30, 2013 Financial instruments with Insurance discretionary contracts participation Total

Claims payment incurred $ 33,330,094 20,842,949 54,173,043 Reinsurance claims 1,117 - 1,117 payment incurred Insurance claims 33,331,211 20,842,949 54,174,160 payment Less: Claims payment 2,650,398 - 2,650,398 recovered from reinsurers Retained claims payment $ 30,680,813 20,842,949 51,523,762

(Continued) 136 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(b) Nature and extent of insurance contract risk a) Objectives, polices procedures and methods for the insurance contract risk management. a. The organization of risk management (i) Assets and Liabilities Management Committee: The chairman of Fubon Life Insurance and its subsidiary serves as the chairman of the committee. As part of its oversight responsibility, the committee considers the balance between assets and liabilities, set up strategic target of assets and liabilities and supervise the execution process. (ii) Operational Risk Management Committee: It is convened by the president to supervise and manage the operational risk of Fubon Life Insurance and its subsidiary in order to ensure that management adopts appropriate risk management procedures within its authority. Furthermore, in order to assist all business units to carry out risk control and to coordinate other risk control affairs, Fubon Life Insurance’s board of directors designates a chief risk officer to handle a risk management department which is independent of all business units. This risk management department executes or assists to execute risk control in accordance with the risk management policy, organization rules governing the risk management committee and organization rules governing the risk related committee. Fubon Life Insurance and its subsidiary have established diverse risk management policy, stop-loss limit order, internal tiers authorization system and criteria for assessment to facilitate effective risk management. b. Risk management strategy A Risk Management Policy was announced with the consent of the board of directors. This policy regulates the strategy and target as well as the mechanism of risk management. The risk management strategy is in line with the regulation on overall operation target, management strategy and risk management. It aims to establish appropriate risk management system and management procedures purposely to identify, evaluate, measure, supervise, respond to and report potential risk. b) Insurance risk management a. Underwriting risk management Underwriting risk refers to the unexpected risk arising from soliciting new insurance policies, and relevant expenditure disbursement. In order to control underwriting risk, Fubon Life Insurance and its subsidiary have classified it into the following types to facilitate the control process, which consists of evaluating information and resources to determine how an individual will be classified. (i) Risk of policyholder concealment (ii) Risk of insurance content (iii) Occupational and financial risk

(Continued) 137 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(iv) Risk of health conditions (v) Risk of the lack of experience of the underwriter (vi) Risk of retention (vii)Risk of operation quality. Aside from establishing “Underwriting Systems and Procedures” based on the “Regulations Governing new insurance Policy Soliciting, Underwriting and Claim Settlement of Insurance Enterprises”, a code of conduct for underwriting operation is also established to serve as a guide for underwriting risk control. Considering the experience and professional skills of the underwriters, different levels of authorization are established and the underwriting amount for each underwriter personnel is regulated to control the appropriateness of underwriting assessment and to supervise the correctness and timeliness of underwriting operation. b. Claim risk management Claim risk refers to the risk arising from adopting inappropriate or negligent procedures on claims settlement procedure. In order to control claim risk, claim risk is categorized into four management interfaces, such as reason of occurrence, frequency of occurrence of risk, classification of risk and effect of the risk. The property of the claim risk is assessed through the multiple-dimension table and risk tolerance level to control the claim risk. Aside from establishing the “Claim Settlement System and Procedures” based on the “Regulations Governing new insurance policy Soliciting, Underwriting and Claim Settlement of Insurance Enterprises” to enhance professional training and morality of claims personnel as well as the control procedures to lessen operational negligence, Fubon Life Insurance also monitors the correctness, timeliness, policy holder complaint ratio and actual loss ratio through the tiers authorization management of the claims personnel. c. Product design and pricing risk management Product design and pricing risk refers to the risk arising from the impropriety, inconsistency or unexpected change of the data related to the product content, clauses and rates. To insure risk control at the point of the pre and after sales of insurance products, internal code of conduct and control procedure were established based on “Regulation governing the procedure before the sales of insurance product” issued by authorities for the insurance product design, inspection, sales preparation to control the risk related to each phases and procedure of product development. In terms of product design, feasibility analysis of new product is conducted and a conference is held to confirm before relevant issue submission. A pre-market meeting is also convened before product launch to ensure that the related activities are completed. In terms of product pricing, aside from certain quantitative risk control mechanism such as risk control procedure, profit test and sensitivity analysis, an assets allocation plan is also set up. Fubon Life Insurance takes into consideration of the characteristics of asset and liabilities for asset allocation and conforms to sales review meeting regularly after sales.

(Continued) 138 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

d. Reserve risk management Reserve-related risk refers to the risk arising from underestimating the liabilities from insufficient written premium provision to cover future obligation. In order to control the reserve-risk, the reserve-risk is categorized into the legality of reserve provision and completeness of operating procedures. To ensure the legality of reserves provision, the Regulatory self-Inspection Compliance manual has been established and audit procedures are executed regularly to ensure that all sorts of reserves conform to what is required by law. Also「Standard Operating Procedures」 manual is established. The provisions of this manual maybe updated regularly as the law changes. The operating procedures manual covers ranges from system administration, data access and report generation. Furthermore, several controls are established within the framework to ensure the accuracy of the calculation. e. Catastrophe risk and reinsurance risk To avoid risk concentration and catastrophe compensation, the following controls are established. (i) Catastrophe risk Based on Fubon Insurance’s experience, the retention and reinsurance limits are set up and are regularly reviewed. These limits are also applicable to insurance for calamities like earthquakes, typhoons, and air-crash by using scenario analysis and take into account the inter-insurance accumulated losses derived from Risk Accumulation. (ii) Reinsurance risk An annual reinsurance risk management plan is established in conformity with the “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms” as part of Fubon Life Insurance’s annual reinsurance policy. This plan includes retention risk management, ceded insurance risk management, assumed insurance risk management, intra-group in conjunction with reinsurance risk management. The credit rating of the reinsurers is also monitored monthly. The credit rating is evaluated based on article 8 of “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms”. Under these regulations, reinsurers or insurance organizations with a credit rating above a certain level from an international credit rating agency (BBB or higher from Standard & Poor’s Corporation) are eligible as reinsurers to whom an insurance enterprise may cede it business. Fubon Life Insurance currently adopts Standard and Poor’s A- or above as its guideline.

(Continued) 139 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

f. Assets and liabilities combination risk (i) To enhance the overall assets and liabilities allocation, maintain adequate liquidity, and improve capital performance for the purpose of maximizing the risk management reward, management monitor compliance of Fubon Life Insurance and its subsidiaries with the relevant government regulations. In addition, through the establishment of Assets and Liabilities Management Committee, management keep track of the issues related to the cash flow allocation of assets and liabilities, and to establish assets and liabilities management related regulation which enable Fubon Life Insurance and its subsidiaries to sustain adequate capital to cover the potential risk from business operation. (ii) The Assets and Liabilities Management Committee holds meetings monthly and the responsible department in Fubon Life Insurance and its subsidiaries performs the cash flow test using the spot interest rate and estimates the earnings at the end of each year to test Fubon Life Insurance and its subsidiaries’ liquidity. In addition, the Risk-Based Capital ratio is examined and simulated via important elements to execute sensitivity analysis which serves as the reference for capital adequacy decision. Furthermore, the change between Venture Capital and equity fund is analyzed to identify the reason for such changes and capital liquidity risk analysis is performed by using the accumulated net cash flow in a year and the accumulated net cash flow in 5 years as the benchmark for risk management. g. Risk management report (i) A Risk Management Committee is set up under the supervision of the Board of Directors. Except for the independent directors acting as the conveners, all other independent directors are members of the committee, which holds a meeting quarterly. According to its organization rules, the major duties of the committee are to: i) Set up and modify policy and structure of risk management ii) Set up and modify the quantitative and qualitative criteria for risk measurement. iii) Adjust risk types as environment change iv) Set up risk limit allocation and the way of undertaking risk v) Submit risk management report to the board of directors regularly and authorize to competent departments. (ii) The committee also reviews the overall risk management. Aside from supervising the implementation of risk management policies to ensure that Fubon Life Insurance meets the strategic target, the committee reviews the effectiveness and feasibility of risk management mechanism. It also submits reports to the board of directors to ensure that the risk management is enforced effectively.

(Continued) 140 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

c) Information of insurance risk a. Sensitivity of insurance risk – Insurance contracts and financial instruments with discretionary feature: For the six-month period ended June 30, 2014 Change of Change of Change income before stockholder's assumption tax equity

Mortality/Morbidity Increase 10 % (1,000,872) (830,724) Rate of return Decrease 0.1 % (1,153,905) (957,741) Expense (fixed expense) Increase 5 % (162,250) (134,668) Decrement and elapsing Increase 10 % 72,227 59,948 rate

For the six-month period ended June 30, 2013 Change of Change of Change income before stockholder's assumption tax equity

Mortality/Morbidity Increase 10 % (929,943) (771,853) Rate of return Decrease 0.1 % (1,007,885) (836,545) Expense (fixed expense) Increase 5 % (151,400) (125,662) Decrement and elapsing Increase 10 % 58,434 48,500 rate

The sensitivity analysis requires evaluating the impact to the profit before tax/stockholders’ equity under the circumstance in which only one element changes and the others remain constant. Fubon Life Insurance uses a pre-tax rate of 17% and other factors, including mortality, morbidity, rate of return, expense rate and lapse rate, in evaluating the impact on stockholders’ equity. The sensitivity analysis does not include the information of the Vietnam subsidiary. Such exclusion is due to the fact that the retention of earned premiums accounted for only 0.0056% of the consolidated retention of earned premiums and is not expected to affect the result of the sensitivity analysis. b. Insurance risk concentration Fubon Life Insurance sells insurances, which includes life insurance, annuity insurance, accident insurance and health insurance. As all of these insurance contracts are issued from Taiwan, the insurance risk is concentrated in Taiwan.

(Continued) 141 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

c. Claim development trend (i) Development trend of claims payment incurred

June 30, 2014 Occurrence Development year Claim year 1 2 3 4 5 6 7 provision 2008 3,020,586 3,528,026 3,560,745 3,564,356 3,571,232 3,574,204 3,575,588 - 2009 3,002,570 3,389,116 3,429,856 3,438,866 3,442,739 3,445,075 - - 2010 3,426,842 3,989,417 4,044,102 4,059,304 4,059,260 - - 411 2011 3,500,731 4,151,270 4,214,277 4,222,839 - - - 1,688 2012 3,534,236 4,263,656 4,310,787 - - - - 32,587 2013 3,970,050 4,574,595 - - - - - 427,983 2014 1,667,433 ------299,217 Provision for unreported and unpaid claims 761,886 Plus: reported and unpaid claims 981,187 Provision for claims 1,743,073

December 31, 2013 Occurrence Development year Claim year 1 2 3 4 5 6 7 provision 2007 2,636,095 2,998,778 3,044,513 3,048,815 3,053,987 3,057,538 3,059,525 - 2008 3,020,586 3,528,026 3,560,745 3,564,356 3,571,232 3,574,204 - - 2009 3,002,570 3,389,116 3,429,856 3,438,866 3,442,739 - - - 2010 3,426,842 3,989,417 4,044,102 4,059,304 - - - 827 2011 3,500,731 4,151,270 4,214,277 - - - - 2,232 2012 3,534,236 4,263,656 - - - - - 62,874 2013 3,970,050 ------741,124 Provision for unreported and unpaid claims 807,057 Plus: reported and unpaid claims 1,041,999 Provision for claims 1,849,056

June 30, 2013 Occurrence Development year Claim year 1 2 3 4 5 6 7 provision 2007 2,636,095 2,998,778 3,044,513 3,048,815 3,053,987 3,057,538 3,059,531 1,440 2008 3,020,586 3,528,026 3,560,745 3,564,356 3,571,232 3,571,524 - 3,761 2009 3,002,570 3,389,116 3,429,856 3,438,866 3,444,651 - - 4,765 2010 3,426,842 3,989,417 4,044,102 4,056,173 - - - 9,500 2011 3,500,731 4,151,270 4,190,278 - - - - 37,165 2012 3,534,236 4,170,061 - - - - - 372,083 2013 1,597,869 ------269,221 Provision for unreported and unpaid claims 697,935 Plus: reported and unpaid claims 767,756 Provision for claims 1,465,691

Note 1: Amount shown above excludes investment contracts

Note 2: As of June 30, 2014, and December 31 and June 30, 2013, except for the IBNR Reserve of Investment-linked products, from claims payment incurred are not estimated based on claim development trend amounts to $16,206, $16,058 and $16,072, respectively.

(Continued) 142 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(ii) Development trend of retained business loss

June 30, 2014 Occurrence Development year Claim year 1 2 3 4 5 6 7 provision 2008 2,546,849 2,972,473 3,001,734 3,006,979 3,013,816 3,016,784 3,018,169 - 2009 2,692,917 3,000,037 3,038,956 3,047,944 3,052,342 3,054,678 - - 2010 3,262,624 3,703,188 3,757,543 3,772,737 3,772,694 - - 283 2011 3,437,890 3,981,026 4,044,397 4,052,959 - - - 1,043 2012 3,526,249 4,184,487 4,231,597 - - - - 31,988 2013 3,942,698 4,488,048 - - - - - 420,151 2014 1,664,239 ------298,200 Provision for unreported and unpaid claims 751,665 Plus: reported and unpaid claims 836,134 Provision for claims 1,587,799

December 31, 2013 Occurrence Development year Claim year 1 2 3 4 5 6 7 provision 2007 1,937,347 2,185,713 2,228,739 2,232,620 2,237,640 2,241,185 2,243,172 - 2008 2,546,849 2,972,473 3,001,734 3,006,979 3,013,816 3,016,784 - - 2009 2,692,917 3,000,037 3,038,956 3,047,944 3,052,342 - - - 2010 3,262,624 3,703,188 3,757,543 3,772,737 - - - 568 2011 3,437,890 3,981,026 4,044,397 - - - - 1,369 2012 3,526,249 4,184,487 - - - - - 61,791 2013 3,942,698 ------735,018 Provision for unreported and unpaid claims 798,746 Plus: reported and unpaid claims 919,255 Provision for claims 1,718,001

June 30, 2013 Occurrence Development year Claim year 1 2 3 4 5 6 7 provision 2007 1,937,347 2,185,713 2,228,739 2,232,620 2,237,640 2,241,185 2,242,779 692 2008 2,546,849 2,972,473 3,001,734 3,006,979 3,013,816 3,014,106 - 2,843 2009 2,692,917 3,000,037 3,038,956 3,047,944 3,054,253 - - 3,877 2010 3,262,624 3,703,188 3,757,543 3,769,593 - - - 8,523 2011 3,437,890 3,981,026 4,020,372 - - - - 35,146 2012 3,526,249 4,153,789 - - - - - 369,775 2013 1,594,229 ------268,510 Provision for unreported and unpaid claims 689,366 Plus: reported and unpaid claims 673,974 Provision for claims 1,363,340

Note 1: Amount shown above excludes investment contracts

Note 2: As of June 30, 2014, and December 31 and June 30, 2013, except for the IBNR Reserve of investment-linked products and the IBNR Reserve of Fubon Life Insurance (Vietnam) Co., Ltd. which are not estimated based on claim development trend, the IBNR Reserve from retained business amounted to $14,561, $14,378 and $13,929.

(Continued) 143 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Claims reserves are provided based on the expected claims payment and relevant handling fee of RBNA and IBNR claims. Such provisions involve vast uncertainty, estimates and judgments which are highly complicated. Any change of estimate or judgment is regarded as a change in accounting estimate and the amount of change is recognized as a current gain or loss. For some claims, notifications to Fubon Insurance may be delayed. In addition, estimating the potential IBNR claims involves vast past loss experience and subjective judgment, therefore, it is difficult to confirm whether the estimated claims reserve on the balance sheet date will equal to the final claim compensation amount. The estimate of claims reserve is based on the information currently available. However, the final result may deviate from the original estimate due to the subsequent development. The table above demonstrates the development trend of claims (excluding those claims that need confirmation within one year). The vertical shaft represents the year in which the claim event occurred, and the horizontal shaft represents the development years. Each slash represents the accumulated compensation amount at the end of each year. The compensation amount refers to the claims whether they are finalized or not. It explains how Fubon Life Insurance and its subsidiary estimate the compensation amount of each year as time passed. The scenario and trend which affect the provision of claims reserve may not be the same as they will be in the future. Therefore, the estimated future compensation amount cannot be determined by the claim development trend. d) The credit risk, liquidity risk and market risk of insurance contracts a. Credit risk The credit risk from Insurance Contract arises mainly from the inability of reinsurers to fulfill the obligation of reinsurance contracts which result in financial losses. Fubon Life Insurance monitors the credit rating of reinsurers monthly to ensure that they meet the minimum regulatory requirements. It also selects reinsurers prudently to reduce the potential loss. Furthermore, the assets related to reinsurance only account for an extremely little part of Fubon Life Insurance’s assets and therefore there is no significant credit risk. b. Liquidity risk The liquidity risk of insurance contract arises mainly from the inability of Fubon Life Insurance to obtain sufficient funds or turn assets into cash in order to fulfill payment of financial obligations as they are due. Aside from regularly reviewing the maturity analysis of Insurance Contracts, Fubon Life Insurance also reviews short- term and mid-term liquidity risk benchmark through the Assets and Liabilities Management Committee to lower the relevant risk by using Asset Liability Matching (ALM). The Committee also sets the response strategy in advance for potential payments in order to ensure timeliness of liquidity risk management and to avoid inadequate liquidity.

(Continued) 144 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

The maturity analysis of Insurance Contracts of Fubon Life Insurance and its subsidiary is shown below: June 30, 2014 (in million) Unable to Maturity classify date < 1 year 1~3 years 3~5 years > 5 years (note) Total Provision 48,133 211,079 314,659 1,332,593 290,988 2,197,452 Proportion 2.2 % 9.6 % 14.3 % 60.6 % 13.3 % 100.0 %

December 31, 2013 (in million) Unable to Maturity classify date > 1 year 1~3 years 3~5 years > 5 years (note) Total Provision 39,328 187,272 247,016 1,298,715 305,329 2,077,660 Proportion 1.9 % 9.0 % 11.9 % 62.5 % 14.7 % 100.0 %

June 30, 2013 (in million) Unable to Maturity classify date > 1 year 1~3 years 3~5 years > 5 years (note) Total Provision 50,787 96,995 300,027 1,186,974 293,408 1,928,191 Proportion 2.6 % 5.0 % 15.6 % 61.6 % 15.2 % 100.0 %

Note: The “Unable to classify” includes interest-linked product, authorized additional provision and provision for bad debt allowance. The amounts above exclude provision for separate account, foreign exchange fluctuation reserve and appraisal increment of real estate. c. Market risk Market risk refers to the risk caused by the adverse changes in market prices in terms of interest rates, foreign exchange rates, stock prices, and commodity prices. Fubon Life Insurance and its subsidiary measure market risk from insurance contract according to discount rate assumption prescribed by the authorities. This assumption may not be consistent with changes in market interest rates. Unless the liability adequacy test disclosed the need to provide more reserve, management is not expecting that the change in market risk factors would have a significant effect on income and equity of Fubon Life Insurance and its subsidiary.

(Continued) 145 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(38) Financial instruments 1) Fair value of financial instruments

June 30, 2014 December 31, 2013 June 30, 2013 Carrying Carrying Carrying amount Fair value amount Fair value amount Fair value

Financial assets: Non-derivative financial instruments: Cash and cash equivalents $ 168,447,311 168,447,311 194,224,779 194,224,779 139,581,491 139,581,491 Due from Central Bank and call loans to banks 159,216,772 159,216,772 104,504,015 104,504,015 133,057,468 133,057,468 Financial assets measured at fair value through 66,894,062 66,894,062 64,014,770 64,014,770 71,576,261 71,576,261 profit or loss Available-for-sale financial assets 1,781,571,105 1,781,571,105 1,631,464,808 1,631,464,808 1,524,720,978 1,524,720,978 Securities purchased under resell agreements 70,055,362 70,055,362 72,391,296 72,391,296 74,050,430 74,050,430 Receivables 179,750,224 179,750,224 145,015,571 145,015,571 124,885,545 124,885,545 Loans 1,569,422,478 1,569,422,478 1,352,883,952 1,352,883,952 1,288,087,322 1,288,087,322 Reinsurance contract assets-reinsurance 4,964,651 4,964,651 5,404,669 5,404,669 3,366,674 3,366,674 recoverable and due from other reinsurance Held-to-maturity investments 235,176,755 235,938,443 216,982,867 217,413,123 215,865,552 216,305,443 Other financial assets, net 617,993,655 617,177,844 571,464,921 546,624,053 539,311,843 522,669,878 Derivative financial instruments: Financial assets measured at fair value through 40,854,376 40,854,376 29,703,034 29,703,034 26,039,002 26,039,002 profit or loss Hedging derivative financial assets 524,606 524,606 517,817 517,817 630,617 630,617 Financial liabilities: Non-derivative financial instruments: Due to Central Bank and other banks 110,658,221 110,658,221 91,718,827 91,718,827 74,685,907 74,685,907 Financial liabilities measured at fair value 10,982,696 10,982,696 8,063,705 8,063,705 9,783,754 9,783,754 through profit or loss Securities sold under repurchase agreements 91,898,020 91,898,020 48,188,694 48,188,694 42,248,367 42,248,367 Commercial paper payable 5,823,522 5,823,522 4,724,342 4,724,342 5,589,492 5,589,492 Payables 100,973,926 100,973,926 77,844,483 77,844,483 97,215,292 97,215,292 Deposits 1,767,923,312 1,767,923,312 1,504,452,622 1,504,452,622 1,461,433,294 1,461,433,294 Bonds payable 127,496,721 128,151,531 114,003,337 114,711,687 107,767,575 108,850,871 Other borrowings 1,100,000 1,100,000 35,000 35,000 1,100,000 1,100,000 Other financial liabilities 185,886,426 185,886,426 182,285,637 182,285,637 168,633,918 168,633,918 Derivative financial instruments: Financial liabilities measured at fair value 36,997,479 36,997,479 34,936,592 34,936,592 29,536,076 29,536,076 through profit or loss Hedging derivative financial liabilities 1,853,027 1,853,027 1,872,070 1,872,070 2,080,308 2,080,308

(Continued) 146 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

2) Methods and assumptions used by the Company and its subsidiaries for fair value evaluation were as follows: 1. Fair value of short term financial instruments is estimated by their carrying amount on the balance sheet date. As these instruments have short term maturities, the book value is adopted as a reasonable basis in estimating the fair value. This method is applied to cash and cash equivalents, due from Central Bank and call loans to banks, securities purchased under resell agreements, notes receivables and other receivables, other financial assets (excluding financial assets carried at cost and debt investments in non active market), securities margin trading related accounts, due to Central Bank and other banks, commercial paper payable, securities sold under repurchase agreements, payables, remittance, other borrowings, and other financial liabilities. 2. The fair value of financial instruments at fair value through profit or loss and available for sale, held to maturity, and hedging derivative financial assets is based on quoted market prices in an active market. If a quoted market price is unavailable, then the fair value is determined based on certain valuation techniques. 3. The fair value of loans, inward remittances, factoring, due from credit card payments, acceptances receivable and collections is based on the balance of adjustment unamortized discount or premium and impairment assessment amount. 4. The fair value of held-to-maturity investments and debt investments in non-active market is estimated by using the quoted prices from financial institution or evaluation model. 5. According to the regulations of “Criteria Governing the Preparation of Financial Reports by Public Banks”, financial assets carried at cost of other financial assets are investment in unlisted stocks. 6. Deposits and principal of structured instrument are both classified as interest bearing financial liabilities; therefore, their book value approximates their fair value. 7. Refundable deposits and guarantee deposits have no specific maturity dates, therefore estimated its fair value by using booked value on balance sheet. 8. The fair value of derivative financial instruments is based on the assumptions that Fubon Life Insurance terminates the contract at reporting date in accordance with the contracts. The fair value is the amount expected to be received or paid. It generally comprises unrealized gain or loss of current outstanding contracts. Fubon Life Insurance and its subsidiaries’ derivative financial instruments are estimated by using the quoted prices from financial institution or evaluation model.

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3) Fair value hierarchy 1. Fair value hierarchy

June 30, 2014 Financial instrument measured at fair value Total Level 1 Level 2 Level 3

Non-derivative financial instrument Assets: Financial assets measured at fair value through profit or loss Financial assets held for trading Stock investment $ 6,743,171 6,743,171 - - Bond investment 36,501,591 9,675,547 26,729,644 96,400 Others 13,176,428 1,569,639 11,606,789 - Financial assets designated at fair value 10,472,872 6,836,341 869,697 2,766,834 through profit or loss at time of initial recognition Available for sale financial assets Stock investment 383,917,106 382,794,109 - 1,122,997 Bond investment 1,123,952,183 875,235,780 198,983,942 49,732,461 Others 273,701,816 241,702,296 19,236,308 12,763,212 Liabilities: Financial liabilities measured at fair value through profit or loss: Financial liabilities held for trading 9,465,299 9,465,299 - - Financial liabilities designated at fair 1,517,397 - 1,467,687 49,710 value through profit or loss at time of initial recognition Derivative financial instrument Assets: Financial assets measured at fair value 40,854,376 329,705 30,360,610 10,164,061 through profit or loss Hedging derivative financial assets 524,606 - 524,606 - Liabilities: Financial liabilities measured at fair value 36,997,479 - 27,173,491 9,823,988 through profit or loss Hedging derivative financial liabilities 1,853,027 - 1,853,027 -

(Continued) 148 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 Financial instrument measured at fair value Total Level 1 Level 2 Level 3

Non-derivative financial instrument Assets: Financial assets measured at fair value through profit or loss Financial assets held for trading Stock investment $ 4,388,337 4,388,337 - - Bond investment 31,022,773 10,385,693 20,637,080 - Others 15,246,111 2,845,489 12,400,610 12 Financial assets designated at fair value 13,357,549 10,534,885 227,126 2,595,538 through profit or loss at time of initial recognition Available for sale financial assets Stock investment 323,275,152 322,118,950 - 1,156,202 Bond investment 1,051,092,722 818,215,499 185,507,914 47,369,309 Others 257,096,934 220,967,736 25,287,927 10,841,271 Liabilities: Financial liabilities measured at fair value through profit or loss: Financial liabilities held for trading 7,928,456 6,441,951 1,486,505 - Financial liabilities designated at fair 135,249 - 17,262 117,987 value through profit or loss at time of initial recognition Derivative financial instrument Assets: Financial assets measured at fair value 29,703,034 162,806 25,154,057 4,386,171 through profit or loss Hedging derivative financial assets 517,817 - 517,817 - Liabilities: Financial liabilities measured at fair value 34,936,592 - 31,182,832 3,753,760 through profit or loss Hedging derivative financial liabilities 1,872,070 - 1,872,070 -

(Continued) 149 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Financial instrument measured at fair value Total Level 1 Level 2 Level 3

Non-derivative financial instrument Assets: Financial assets measured at fair value through profit or loss Financial assets held for trading Stock investment $ 3,239,791 3,239,791 - - Bond investment 35,339,029 11,505,117 23,833,912 - Others 23,586,717 2,012,608 21,574,109 - Financial assets designated at fair value 9,410,724 6,812,038 - 2,598,686 through profit or loss at time of initial recognition Available for sale financial assets Stock investment 298,035,480 296,907,777 - 1,127,703 Bond investment 956,354,289 754,381,198 158,232,643 43,740,448 Others 270,331,209 228,088,845 33,478,669 8,763,695 Liabilities: Financial liabilities measured at fair value through profit or loss: Financial liabilities held for trading 8,326,163 8,326,163 - - Financial liabilities designated at fair 1,457,591 - 1,369,284 88,307 value through profit or loss at time of initial recognition Derivative financial instrument Assets: Financial assets measured at fair value 26,039,002 258,679 19,439,966 6,340,357 through profit or loss Hedging derivative financial assets 630,617 - 627,204 3,413 Liabilities: Financial liabilities measured at fair value 29,536,076 - 23,829,276 5,706,800 through profit or loss Hedging derivative financial liabilities 2,080,308 - 2,079,278 1,030

Note1: Level 1 means fair value of financial instrument which are quoted market prices of same financial instruments in active market. The definition of active market refers the market that satisfies all of the following conditions: (1) The products traded in the market are homogeneous. (2) Willing parties are available anytime in the market. (3) Price information is available for the public. Note2: Level 2 means fair value of the financial instruments which are observable price other than quotes prices in active market, including the observable input parameters that are obtained directly (i.e., prices) or indirectly (i.e., derived from prices) from an active market. For instance, (1) The quoted prices of similar financial instruments in active market. The fair value of financial instruments owned by Fubon Life Insurance and its subsidiaries is inferred from the recent trading price of similar financial instruments. The similar financial instrument is judged according to the characteristic and trading conditions. Fair value of financial instruments should be priced using observable trading prices adjusted over time, trading conditions and the impact of related parties and its observable trading prices and associated nature of the product.

(Continued) 150 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(2) Quoted prices of similar financial instruments in non active markets. (3) Fair value price using valuation models. The input parameters of the valuation models (i.e., interest rates, yield curve, volatility…etc), is based on available data in the market, such as input parameters, which is an estimated figure derived from public data. The price of financial instruments is estimated by using the parameters which could reflect the expectation from market participants. (4) The majority of the input parameters are derived from observable market data or its relevance can be validated by observable market data. Note3: Level 3 means input parameters are not based on observable market data (unobservable inputs such as: option pricing model using historical volatility index, as historical volatility does not represent the expected future volatility from market participants). 2. Reconciliation for fair value measurements in Level 3 of the fair value hierarchy (a) The following tables show reconciliation of financial assets measured at fair value in Level 3 of the fair value hierarchy:

June 30, 2014 Gains (Loss) on Valuation Increase Decrease Balance at Other Balance at January 1, Profit and Comprehen- Transferred Transferred June 30 Name 2014 Loss sive Income Buy or issue to Level 3 Sales from level 3 2014

Financial assets measured at fair value through profit or loss: Financial assets held for $ 4,386,183 6,741,927 - 496,804 - 1,364,453 - 10,260,461 trading Financial assets 2,595,538 (8,497) - 910,731 474,528 603,070 602,396 2,766,834 designated at fair value through profit or loss at time of initial recognition Available-for sale financial 59,366,782 1,482,692 2,394,377 5,722,256 5,782,394 1,426,030 9,703,801 63,618,670 liabilities Total $ 66,348,503 8,216,122 2,394,377 7,129,791 6,256,922 3,393,553 10,306,197 76,645,965

June 30, 2013 Gains (Loss) on Valuation Increase Decrease Balance at Other Balance at January 1, Profit and Comprehen- Transferred Transferred June 30 Name 2013 Loss sive Income Buy or issue to Level 3 Sales from level 3 2013

Financial assets measured at fair value through profit or loss: Financial assets held for $ 2,043,686 599,000 - 5,233,875 - 1,507,365 28,839 6,340,357 trading Financial assets 2,228,230 66,516 - 303,940 - - - 2,598,686 designated at fair value through profit or loss at time of initial recognition Available-for sale financial 59,439,124 (3,134,977) (1,375,127) 4,784,986 888,308 4,852,926 2,117,542 53,631,846 liabilities Hedging derivative 31,888 (28,475) - - - - - 3,413 financial assets Total $ 63,742,928 (2,497,936) (1,375,127) 10,322,801 888,308 6,360,291 2,146,381 62,574,302

(Continued) 151 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(b) The following tables show reconciliation of financial liabilities measured at fair value in Level 3 of the fair value hierarchy

June 30, 2014 Evaluation of gains and losses included in profit or loss Increase Decrease Balance at or the Balance at January 1, amount of Buy or Transferred Transferred June 30 Name 2014 equity issue to level 3 Sales from level 3 2014

Financial liabilities measured at fair value through profit or loss: Financial liabilities held for trading $ 3,753,760 5,769,301 1,410,071 - 1,109,144 - 9,823,988 Financial liabilities designated at 117,987 (753) 475,934 - 543,458 - 49,710 fair value through profit or loss at time of initial recognition Total $ 3,871,747 5,768,548 1,886,005 - 1,652,602 - 9,873,698

June 30, 2013 Evaluation of gains and losses included in profit Increase Decrease or loss or Balance at the Balance at January 1, amount of Buy or Transferred Transferred June 30 Name 2013 equity issue to level 3 Sales from level 3 2013

Financial liabilities measured at fair value through profit or loss: Financial liabilities held for trading $ 1,675,127 631,663 4,711,385 - 1,282,536 28,839 5,706,800 Financial liabilities designated at 141,170 82 643,664 - 696,609 - 88,307 fair value through profit or loss at time of initial recognition Hedging derivative financial liabilities - 1,030 - - - - 1,030 Total $ 1,816,297 632,775 5,355,049 - 1,979,145 28,839 5,796,137

Note: Transfers to Level 3 were due to lack of observable valuation inputs for certain derivative financial instruments. Transfers out of Level 3 were due to valuation inputs for certain derivative products becoming observable. 3. Transfer between Level 1 and Level 2 The Company and its subsidiaries transferred part of the foreign-currency bonds from Level 2 to Level 1 to improve the valuation quality of the hierarchy and enhance quoting standards. Furthermore, the valuation standards changed due to the liquidity changes in NTD bond markets; thus, part of the NTD bonds were transferred from Level 1 to Level 2.

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4. Sensitivity analysis of Level 3 fair value if reasonably possible alternative assumptions used Although the Company and its subsidiaries believe that their estimates of fair value are appropriate, the use of different methodology or assumptions could lead to different measurements of fair value. For fair value measurements in Level 3 of the fair value hierarchy, a 10% change in either direction of the quotes from counterparties would have the following effects: (a) Taipei Fubon Bank June 30, 2014 Effect on Other Effect on Profit and Loss Comprehensive Income Name Favorable Unfavorable Favorable Unfavorable

Assets Financial assets at fair value through profit or loss Held for trading financial 1,009,294 (1,009,294) - - assets Financial assets 276,683 (276,683) - - designated as at fair value through profit or loss Available-for -sale financial - - 32,654 (32,654) assets Liabilities Financial liabilities at fair value through profit or loss Held for trading financial 982,380 (982,380) - - liabilities

(Continued) 153 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Effect on Other Effect on Profit and Loss Comprehensive Income Name Favorable Unfavorable Favorable Unfavorable

Assets Financial assets at fair value through profit or loss Held for trading financial 619,719 (619,719) - - assets Financial assets 259,869 (259,869) - - designated as at fair value through profit or loss Available-for -sale financial - - 97,859 97,859 assets Hedging derivative 341 (341) - - financial assets Liabilities Financial liabilities at fair value through profit or loss Held for trading financial 569,665 569,665 - - liabilities Hedging derivative financial 103 (103) - - liabilities

(b) Fubon Life Insurance June 30, 2014 Effect on Other Effect on Profit and Loss Comprehensive Income Name Favorable Unfavorable Favorable Unfavorable

Assets Financial assets at fair value through profit or loss Held for trading financial 16,734 (16,734) - - assets Available-for sale financial - - 6,223,423 (6,223,423) assets

(Continued) 154 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Effect on Other Effect on Profit and Loss Comprehensive Income Name Favorable Unfavorable Favorable Unfavorable

Assets Financial assets at fair value through profit or loss Held for trading financial 17,871 (17,871) - - assets Available-for-sale financial - - 5,794,167 (5,794,167) assets

(c) Fubon Securities June 30, 2014 Effect on Other Effect on Profit and Loss Comprehensive Income Name Favorable Unfavorable Favorable Unfavorable

Assets Available-for -sale financial - - 5,252 (5,252) assets Liabilities Financial liabilities at fair value through profit or loss Financial liabilities 4,971 (4,971) - - designated as fair value through profit or loss

(Continued) 155 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 Effect on Other Effect on Profit and Loss Comprehensive Income Name Favorable Unfavorable Favorable Unfavorable

Assets Financial assets at fair value through profit or loss Financial assets 1 (1) - - designated as at fair value through profit or loss Available-for -sale financial - - 5,252 (5,252) assets Liabilities Financial liabilities at fair value through profit or loss Financial liabilities 11,799 (11,799) - - designated as at fair value through profit or loss

June 30, 2013 Effect on Other Effect on Profit and Loss Comprehensive Income Name Favorable Unfavorable Favorable Unfavorable

Assets Available-for -sale financial - - 5,252 (5,252) assets Liabilities Financial liabilities at fair value through profit or loss Financial liabilities 8,831 (8,831) - - designated as at fair value through profit or loss

(Continued) 156 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(d) Fubon (HK) Bank June 30, 2014 Effect on Other Effect on Profit and Loss Comprehensive Income Name Favorable Unfavorable Favorable Unfavorable

Assets Available-for -sale financial - (8,176) 25,227 (17,051) assets Hedging derivative 5 (5) - - financial assets Liabilities Hedging derivative (5) 5 - - financial liabilities

December 31, 2013 Effect on Other Effect on Profit and Loss Comprehensive Income Name Favorable Unfavorable Favorable Unfavorable

Assets Available-for -sale financial - (8,733) 26,137 (17,404) assets Hedging derivative 7 (7) - - financial assets Liabilities Hedging derivative (7) 7 - - financial liabilities

June 30, 2013 Effect on Other Effect on Profit and Loss Comprehensive Income Name Favorable Unfavorable Favorable Unfavorable

Assets Available-for -sale financial - 7,509 25,941 (18,432) assets Hedging derivative 261 (261) - - financial assets Liabilities Hedging derivative (261) 261 - - financial liabilities

(Continued) 157 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(39) Financial risk management 1) Risk management structure The Company is dedicated to building a strong risk management culture and environment, pursuing sustainable business development and optimizing the trade-off between return and risk. The Board of Directors has overall responsibility for overseeing the establishment of effective risk management systems and control mechanism, approving risk management policies and reviewing major risk management reports. The Risk Management Committee, under the supervision of the Company’s chairman, is responsible for supervising the risk exposure of the Company and subsidiaries, and reviewing and approving key risk limits, such as for credit risk, market risk, operational risk, insurance risk, liquidity risk, asset and liability risk, and capital adequacy. As part of its risk management architecture, Fubon Financial has adopted three lines of defense considered internationally as risk management best practices, ensuring the effectiveness of the risk management mechanism. 1. First line of defense – Business, operational and managing units are responsible for ensuring compliance with risk management policies and procedures in performing their respective duties. 2. Second line of defense – Independent risk management units are responsible for risk management systems and policy planning, independent risk control, and reporting. 3. Third line of defense – Independent audit units are responsible for auditing the compliance of and implementation of policies, procedures and management mechanisms, thereby ensuring the fulfillment of internal control systems and risk management policies. 2) Risk management policies In order to effectively identify, evaluate, supervise, monitor, and report credit risk, market risk, operational risk, liquidity risk, asset and liability risk, insurance risk, and country risk, the Company has built a sound risk management policies and procedures for subsidiaries to comply with, including risk management policies, credit risk management policies, market risk management policies, operational risk management policies, capital adequacy management policies, asset and liability risk management policies, liquidity risk management policies, insurance risk management policies, and country risk management principles. Based on the attributable risk, the Company establishes risk limit and loss limit, monitors authorization privileges, regularly evaluates risk dimensions, and sets up risk control points, risk guidelines and mechanism. In accordance with “Regulations Governing the Capital Adequacy and Capital Category of Banks”, the Company and its subsidiaries consider related risk into capital evaluation and establish internal control of capital adequacy ratio standards.

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3) Credit Risk Major subsidiaries are listed separately as follows: 1. Taipei Fubon Bank (The Bank) and its subsidiary (a) Sources and definition of credit risk Taipei Fubon Bank (The Bank) Credit risk refers to the risk of losses caused by borrowers, debtors, or counterparties’ failure to fulfill their contractual obligations due to deteriorating financial position or other factors. It arises principally from business like discount, loan, credit card, due from or call loan to banks, debt investment and derivatives etc., but also from off-balance sheet products such as guarantee, acceptance, letter of credit and commitment. Fubon Bank (China) Credit risk is the primary risk faced by Fubon Bank (China), and it mainly comes from commercial lending (including mortgage, discount, negotiation, bank’s acceptance bill, issuing letter of credit, SBLC or bank guarantee etc.), financial derivative contracts, and bond investment. (b) Strategy/objectives/policies and procedures Taipei Fubon Bank (The Bank) The Bank has established solid credit risk policies and procedures. A robust credit risk strategy taking into account of economic environment, industry sector and financial sector as well as corporate business plan is in place. Comprehensive credit risk management systems and tools have been deployed effectively to measure, evaluate, monitor and report credit risk including default risk, counter-party risk and concentration risk. Fubon Bank (China) Under the risk management guidance of board meeting, the credit risk management strategy of Fubon Bank (China) becomes an effective tool to accomplish the risk control based on our comprehensive credit risk management system, with the consideration of the international economic development and regional industry feature and the implementation of risk management policy, for instance, credit management regulation, approval policy, post-loan regulation, etc. The risk management goal of Fubon Bank (China) is to manage the expected loss effectively, to protect the credit assets, to realize the optimal ratio of risk and revenue, relaying the implementation of credit risk management tools. (c) Credit risk management framework Taipei Fubon Bank (The Bank) a) To strengthen risk management function, under the supervision of the Board of Directors, the Bank has established the Credit Risk Management Committee which is composed of senior management and chaired by the President to monitor the bank’s credit risk and country risk control, risk acceptance and management strategy in respect of credit business, securities investment and transaction and derivatives.

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b) To enhance the independency of credit risk management, the Bank has established Risk Management Division, under which, there is Credit Risk Management Departments, responsible for measuring the Bank’s risk exposures, monitoring risk limits, reporting, coordinating to develop the mechanism for managing credit risk and validating risk models. c) In business lines, the Bank has business units undertake the role ensuring to comply with control requirements while performing daily business operation. d) Furthermore, the Bank has established Institutional Credit Review Committee, and Retail Credit Review Committee respectively to review credit above a certain limit to strengthen control on large amount credit cases. e) Audit department, which is under the supervision of the Board of Directors, conducts the third defense line examining the effectiveness of internal control functions independently. Fubon Bank (China) The credit risk management system of Fubon Bank (China) is established based on our comprehensive risk management system. Departments under the Risk management division which are related to credit risk management are risk policy and SME risk management, early warning and operational risk, credit approval and loan documentation. (d) Credit risk measurement, control and reporting Taipei Fubon Bank (The Bank) a) The Bank has established credit risk measurements and control procedures including underwriting, risk rating, limit control, account maintenance, pre-settlement limit control and collection management systems, which enable the Bank to manage limit controls on country risk, single legal entity and group exposure risk and industry concentration risk effectively. Other than aforementioned control procedure, the Bank has established vigorous review and early warning mechanism to ensure the Bank to undertake proper courses of actions on credit risk management. b) The Bank regularly performs the credit risk stress testing based on the guideline issued by Financial Supervisory Commission, and continues to develop scenario analysis and stress test approaches to provide senior management with an assessment of risk tolerance, as well as to provide the reference of credit portfolio management. c) The Bank has completed several Basel II credit risk management projects including risk date warehousing system, internal risk rating system and risk-weighted assets calculation system. The development and revise of score card and rating models are validated independently by Risk Management Division to monitor the model performance and stability.

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Fubon Bank (China) a) The credit risk control process includes credit policy development, credit approval, early warning and collection. Credit risk supervision includes regular follow up of high-risk cases, exposure limit control of country risk, customer credit grading management, real- estate loan monitoring and monthly monitoring which includes industry concentration and the concentration of single client /group client and its affiliated parties. b) Fubon Bank (China) will finish the regular credit portfolio stress test for industry, product, region and customers based on the real situation of the credit portfolio feature. The stress test results will be reported to the board meeting base on the changes of different risk triggers as a reference during the risk management and decision-making. c) The credit management system of Fubon Bank (China) contains the moduels of credit approval, loan ledger management, collateral information maintainance, customer grading management and Five - category assets classification for bank loans. The system can support the credit risk management effectively. (e) Credit risk mitigation Taipei Fubon Bank (The Bank) The Bank has established sophisticated limits in controlling concentration risks on credit, investment and counter-parties exposures. Risk rating is assessed for each borrower based on stringent evaluation of obligor risk and facility risk. Furthermore, the Bank has set centralized approval process with documented guidelines and dual authorizations. Appropriate collaterals are required based on borrowers’ financials and debt service capabilities to mitigate credit risk. Fubon Bank (China) Fubon Bank (China) set up the credit and approval authority limitation based on customer risk grading and loan classification, guarantee and sub-guarantee criteria, investment portfolio management by . At the meantime, Fubon Bank (China) strengthens the risk identification according to the customer’s risk grading and the CB customer selection criteria classification. The credit quality control can be contributed to the strict and highly concentrated due diligent and approval procedure and counter sign of credit officers from both sales department and risk department. Fubon Bank (China) will require suitable collateral in order to enhance the risk mitigation due to the loan risk. In addition, continuous monitoring and management will be executed per our post-loan management and early warning mechanism.

(Continued) 161 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(f) The regulatory capital requirement Taipei Fubon Bank (The Bank) The Bank presently adopts the standardized approach for credit risk capital charge. Fubon Bank (China) Fubon Bank (China) makes capital provision based on credit risk weighting method. (g) Maximum exposure to credit risk The maximum exposure to credit risks is represented by the carrying amount of each financial asset in the balance sheet without taking into consideration any collateral held or other credit enhancements. The maximum credit exposures of the off-balance sheet financial instruments (before taking account of any collateral held or other credit enhancements) are summarized as follows: Taipei Fubon Bank (The Bank) Maximum exposure amount June 30, 2014 December 31, June 30, 2013 Off-balance sheet item 2013

Irrevocable loan commitments $ 322,961,788 330,912,939 299,671,019 Standby letters of credit 11,017,284 10,095,464 9,874,484 Financial guarantees 49,352,009 46,561,501 55,364,864 Unused credit card facility 218,320,846 213,219,858 209,003,776 Total $ 601,651,927 600,789,762 573,914,143

Fubon Bank (China) Units:In Thousands of CNY Maximum exposure amount Off-balance sheet item June 30, 2014

Standby letters of credit $ 115,697 Financial guarantees 1,637,759 Total $ 1,753,456

(Continued) 162 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(h) Concentrations of credit risk exposure Concentrations of credit risk arise when a number of counterparties or exposure have comparable economic characteristics, or such counterparties are engaged in similar activities, or operate in the same geographical areas or industry sectors, so that their collective ability to meet contractual obligations is uniformly affected by changes in economic or other conditions. Credit risk concentrations can arise in a Bank’s assets, liabilities, or off-balance sheet items, through the execution or processing of transactions (either product or service), or through a combination of exposures across these broad categories. It includes credit, loan and deposits, call loan to banks, investment, receivables and derivatives. The Bank maintains a diversified portfolio, limits its exposure to any one geographic region, country or individual creditor and monitors the exposure on a continuous basis. The Bank’s most significant concentrations of credit risk are summarized as follows: Taipei Fubon Bank (The Bank) a) By industry

June 30, 2014 December 31, 2013 June 30, 2013 Amount ％ Amount ％ Amount ％

Private enterprise $ 458,595,973 38.07 443,620,068 38.05 397,582,694 35.04 Public enterprise 89,801,232 7.46 76,713,090 6.58 85,281,234 7.52 Government 152,218,061 12.64 158,983,921 13.64 190,794,321 16.81 organization Non-profit 313,374 0.03 455,704 0.04 925,478 0.08 organization Private organization 455,001,314 37.77 450,071,691 38.61 425,364,720 37.48 Financial institution 48,593,301 4.03 35,960,224 3.08 34,815,735 3.07 Total $ 1,204,523,255 100.00 1,165,804,698 100.00 1,134,764,182 100.00

b) By geographical area The Bank and is subsidiaries’ operations are mainly in Taiwan. c) By collateral

June 30, 2014 December 31, 2013 June 30, 2013 Amount ％ Amount ％ Amount ％

Unsecured $ 534,218,602 44.35 506,662,777 43.46 501,886,995 44.23 Secured Financial 32,624,379 2.71 28,169,752 2.42 26,885,708 2.37 instruments Accounts 270,453 0.02 102,809 0.01 165,272 0.01 receivable Properties 497,787,397 41.33 492,595,817 42.25 460,695,528 40.60 Guarantees 87,721,450 7.28 82,315,758 7.06 90,805,531 8.00 Others 51,900,974 4.31 55,957,785 4.80 54,325,148 4.79 Total $ 1,204,523,255 100.00 1,165,804,698 100.00 1,134,764,182 100.00

(Continued) 163 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Bank (China) a) By industry Units:In Thousands of CNY June 30, 2014 Amount ％

Wholesale and retailing $ 7,013,122 20.98 Real estate 4,993,622 14.94 Manufacturing 4,925,655 14.74 Architecture 1,740,847 5.21 Leasing and business service 1,278,854 3.83 Private loans 612,615 1.83 Transportation 441,559 1.32 Accommodation and catering 374,257 1.12 Electricity, gas and water 369,500 1.11 Communications 107,868 0.32 Entertainments 84,509 0.25 Agriculture 78,626 0.24 Water conservancy and environment 59,308 0.18 Hygiene and social welfare 38,293 0.11 Scientific research and technology 4,088 0.01 services Others 11,300,217 33.81 Total (Note) $ 33,422,940 100.00 Note：Loans are included only. b) By geographical area Units:In Thousands of CNY June 30, 2014 Amount ％

East China $ 26,451,308 79.14 North China 1,797,430 5.38 South China 2,090,932 6.26 Other regions 2,470,655 7.39 Private loans 612,615 1.83 Total (Note) $ 33,422,940 100.00 Note：Loans are included only.

(Continued) 164 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

c) By collateral Units:In Thousands of CNY June 30, 2014 Amount ％

Credit $ 16,878,618 50.50 Guarantees 932,070 2.79 Secured 15,612,252 46.71 Mortgaged 12,420,965 37.16 Pledged 3,191,287 9.55 Total (Note) $ 33,422,940 100.00 Note：Loans are included only. (i) Credit quality and impairment assessment Some financial assets like cash and cash equivalents, due from Central Bank and call loan to banks, financial asset at fair value through profit or loss, repos and debt securities, refundable deposits, guaranty bond and clearing and settlement fund are regarded as very low credit risk owing to the good credit rating of counterparties. Besides the aforementioned financial assets, the credit quality of discounts, loans, receivables and investments are divided into three classifications. The credit quality classifications defined below each encompass a range of more granular, internal credit rating grades assigned to wholesale and retail lending business, as well as the external ratings attributed by external agencies to investment. Quality classification definitions: Taipei Fubon Bank (The Bank) and Taipei Fubon Bank Life Insurance Agent a) Good:Exposures demonstrate a good capacity to meet financial commitments, with low default risk and/or low levels of expected loss. b) Moderate:Exposures require closer monitoring and demonstrate an average to fair capacity to meet financial commitments, with moderate default risk. c) Substandard:Exposures require varying degrees of special attention and default risk is of greater concern. Fubon Bank (China) a) Standard (Pass): Borrower can fulfill the loan contract. There is no convincing reason to doubt the repayment capacity of borrowers. b) Special-mention: There are some negative factors which may impact borrower’s repayment, even though the borrower has the capacity to maintain the regular repayment up till now.

(Continued) 165 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Credit analysis for receivables and discounts and loans： Taipei Fubon Bank (The Bank) and Taipei Fubon Bank Life Insurance Agent

Non-overdue-nor non-impaired amount Loss recognized (D) With no Overdue but With objective objective not yet impaired Impaired Total evidence of evidence of Net total June 30, 2014 Good Moderate Substandard Subtotal (A) (B) Amount (C) (A)+(B)+(C) impairment impairment (A)+(B)+(C)-(D) Receivables 80,724,012 24,513,972 535,486 105,773,470 191,040 1,299,900 107,264,410 137,000 835,233 106,292,177 Credit card business 18,265,894 5,148,532 453,177 23,867,603 175,802 1,089,550 25,132,955 125,235 111,084 24,896,636 Account receivable- 48,411,038 4,859,916 - 53,270,954 - 169,657 53,440,611 - 534,405 52,906,206 factoring Account receivable- 4,970,720 11,243,175 1,453 16,215,348 - 2,819 16,218,167 2,820 162,139 16,053,208 forfeiting Acceptances 131,703 2,339,539 3,374 2,474,616 - - 2,474,616 - 24,746 2,449,870 Others 8,944,657 922,810 77,482 9,944,949 15,238 37,874 9,998,061 8,945 2,859 9,986,257 Bill purchased 29 8,218 - 8,247 - - 8,247 - 82 8,165 Nonperforming loans - - - - - 55,680 55,680 52,391 - 3,289 transferred from other than loans Discounts and loans 602,961,182 499,462,923 29,114,180 1,131,538,285 1,186,281 19,972,063 1,152,696,629 3,657,142 9,851,608 1,139,187,879 Consumer finance 351,168,674 29,490,629 23,437,348 404,096,651 1,025,477 1,988,431 407,110,559 59,351 4,092,667 402,958,541 Corporate banking 251,792,508 469,972,294 5,676,832 727,441,634 160,804 17,983,632 745,586,070 3,597,791 5,758,941 736,229,338

Note: Total loan is the original amount without the adjustments of premium or discounts $658,542. Beside receivable transactions with Fubon Bank (China) are eliminated.

Non-overdue-nor non-impaired amount Loss recognized (D) With no Overdue but With objective objective not yet impaired Impaired Total evidence of evidence of Net total December 31, 2013 Good Moderate Substandard Subtotal (A) (B) Amount (C) (A)+(B)+(C) impairment impairment (A)+(B)+(C)-(D) Receivables 63,348,981 23,229,382 985,341 87,563,704 186,345 1,263,602 89,013,651 185,862 680,869 88,146,920 Credit card business 17,226,908 5,089,476 446,586 22,762,970 168,916 1,202,325 24,134,211 169,373 126,632 23,838,206 Account receivable- 27,584,960 4,826,149 - 32,411,109 - - 32,411,109 - 324,111 32,086,998 factoring Account receivable- 9,053,504 10,250,789 470,337 19,774,630 - 2,807 19,777,437 2,807 201,209 19,573,421 forfeiting Acceptances 415,320 2,397,534 11,676 2,824,530 - 11,676 2,836,206 238 28,241 2,807,727 Others 9,068,289 665,434 56,742 9,790,465 17,429 46,794 9,854,688 13,444 676 9,840,568 Bill purchased 136 10,518 - 10,654 - - 10,654 - 107 10,547 Nonperforming loans - - - - - 58,820 58,820 54,917 - 3,903 transferred from other than loans Discounts and loans 606,629,596 459,044,730 25,570,198 1,091,244,524 2,637,120 22,525,347 1,116,406,991 3,836,101 9,381,487 1,103,189,403 Consumer finance 355,274,274 26,602,385 20,500,272 402,376,931 1,736,547 2,184,619 406,298,097 70,239 4,085,541 402,142,317 Corporate banking 251,355,322 432,442,345 5,069,926 688,867,593 900,573 20,340,728 710,108,894 3,765,862 5,295,946 701,047,086

Note: Total loan is the original amount without the adjustments of premium or discounts $442,295.

Non-overdue-nor non-impaired amount Loss recognized (D) With no Overdue but With objective objective not yet impaired Impaired Total evidence of evidence of Net total June 30, 2013 Good Moderate Substandard Subtotal (A) (B) Amount (C) (A)+(B)+(C) impairment impairment (A)+(B)+(C)-(D) Receivables 39,499,879 18,208,524 968,200 58,676,603 174,102 1,588,718 60,439,423 328,483 271,632 59,839,308 Credit card business 16,670,750 5,244,540 478,129 22,393,419 153,985 1,307,081 23,854,485 229,837 142,894 23,481,754 Account receivable- 6,079,201 1,786,551 - 7,865,752 - 140,971 8,006,723 - 40,034 7,966,689 factoring Account receivable- 6,319,498 8,010,213 421,141 14,750,852 - 2,827 14,753,679 2,827 73,751 14,677,101 forfeiting Acceptances 394,231 2,479,769 - 2,874,000 - - 2,874,000 - 14,370 2,859,630 Others 10,036,199 687,451 68,930 10,792,580 20,117 137,839 10,950,536 95,819 583 10,854,134 Bill purchased 210 7,453 - 7,663 - - 7,663 - 38 7,625 Nonperforming loans - - - - - 52,482 52,482 48,930 - 3,552 transferred from other than loans Discounts and loans 607,428,380 412,532,176 30,648,494 1,050,609,050 1,758,566 24,157,702 1,076,525,318 3,730,439 5,764,335 1,067,030,544 Consumer finance 330,708,319 28,101,779 25,545,983 384,356,081 1,514,324 2,314,079 388,184,484 69,421 2,691,917 385,423,146 Corporate banking 276,720,061 384,430,397 5,102,511 666,252,969 244,242 21,843,623 688,340,834 3,661,018 3,072,418 681,607,398

Note: Total loan is the original amount without the adjustments of premium or discounts $387,007.

(Continued) 166 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Bank (China)

Units:In Thousands of CNY Non-overdue- nor non-impaired amount Loss recognized(D) Overdue With no but not yet With objective objective Net total impaired Impaired Total evidence of evidence of (A)+(B)+(C)- June 30, 2014 Good Moderate Subtotal(A) (B) Amount(C) (A)+(B)+(C) impairment impairment (D)

Receivables 690,477 - 690,477 - - 690,477 - 35 690,442 Account receivable- 454,578 - 454,578 - - 454,578 - - 454,578 factoring Others 235,899 - 235,899 - - 235,899 - 35 235,864 Discounts and loans 32,008,796 608,069 32,616,865 312,129 493,946 33,422,940 169,499 595,226 32,658,215 Consumer finance 606,554 6,061 612,615 - - 612,615 - 10,935 601,680 Corporate banking 31,402,242 602,008 32,004,250 312,129 493,946 32,810,325 169,499 584,291 32,056,535

Note: Total loan is the original amount without the adjustments of premium or discounts CNY $52,293.

a) Credit analysis for neither past due nor impaired discounts and loans according to internal rating standards are as follows: Taipei Fubon Bank (The Bank)

Non-overdue nor non-impaired amount June 30, 2014 Good Moderate Substandard Total Consumer finance Mortgage 323,040,780 22,957,819 12,880,894 358,879,493 Cash card - - 1,092 1,092 Micro credit - 5,912,556 10,554,794 16,467,350 Others 28,127,894 620,254 568 28,748,716 Corporate banking Secured 43,543,002 172,542,675 2,254,992 218,340,669 Unsecured 208,249,506 297,429,619 3,421,840 509,100,965 Total 602,961,182 499,462,923 29,114,180 1,131,538,285

Non-overdue nor non-impaired amount December 31, 2013 Good Moderate Substandard Total Consumer finance Mortgage 327,310,495 19,576,655 8,473,147 355,360,297 Cash card - - 1,165 1,165 Micro credit - 6,508,287 12,025,338 18,533,625 Others 27,963,779 517,443 622 28,481,844 Corporate banking Secured 44,203,288 159,196,959 2,198,378 205,598,625 Unsecured 207,152,034 273,245,386 2,871,548 483,268,968 Total 606,629,596 459,044,730 25,570,198 1,091,244,524

(Continued) 167 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Non-overdue nor non-impaired amount June 30, 2013 Good Moderate Substandard Total Consumer finance Mortgage 303,510,708 21,092,724 13,806,317 338,409,749 Cash card - - 1,635 1,635 Micro credit - 6,587,813 11,737,357 18,325,170 Others 27,197,611 421,242 674 27,619,527 Corporate banking Secured 60,884,710 147,955,018 1,533,423 210,373,151 Unsecured 215,835,351 236,475,379 3,569,088 455,879,818 Total 607,428,380 412,532,176 30,648,494 1,050,609,050

Fubon Bank (China) Units:In Thousands of CNY Non-overdue nor non-impaired amount June 30, 2014 Good Moderate Total Consumer finance Mortgage 334,389 6,061 340,450 Others 272,165 - 272,165 Corporate banking Secured 14,220,731 602,008 14,822,739 Unsecured 17,181,511 - 17,181,511 Total 32,008,796 608,069 32,616,865

b) Credit analysis for marketable securities Taipei Fubon Bank (The Bank)

Non-overdue nor non-impaired amount Overdue but Impaired loss Net total non-impaired Impaired Total recognized (A)+(B)+(C)- June 30, 2014 Good Moderate Substandard Subtotal (A) amount (B) amount (C) (A)+(B)+(C) (D) (D) Available-for-sale financial assets Investment in bonds 26,221,881 10,174,110 - 36,395,991 - - 36,395,991 - 36,395,991 Others 15,139,422 3,556,886 - 18,696,308 - - 18,696,308 - 18,696,308 Held-to-maturity financial assets Investment bonds 24,508,221 6,990,649 - 31,498,870 - - 31,498,870 - 31,498,870 Others 169,147,011 - 97,869 169,244,880 - - 169,244,880 - 169,244,880

Note 1: Available-for-sale financial assets did not include equity investments and beneficiary securities, and related information: Original cost of $7,067,058, valuation amounting to $2,710,243 and cumulative impairment amounting to $335,594.

Note 2: Other financial assets did not include equity investment of financial assets carried at cost, original cost was $589,936 and accumulated impairment amounted to $39,621.

(Continued) 168 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Non-overdue nor non-impaired amount Overdue but Impaired loss Net total December 31, 2013 non-impaired Impaired Total recognized (A)+(B)+(C)- Good Moderate Substandard Subtotal (A) amount (B) amount (C) (A)+(B)+(C) (D) (D) Available-for-sale financial assets Investment in bonds 25,673,799 9,369,231 - 35,043,030 - - 35,043,030 - 35,043,030 Others 12,107,117 12,149,815 - 24,256,932 - - 24,256,932 - 24,256,932 Held-to-maturity financial assets Investment in bonds 21,442,431 8,773,264 - 30,215,695 - - 30,215,695 - 30,215,695 Others 179,101,607 444,925 - 179,546,532 - - 179,546,532 - 179,546,532 Other financial assets Investment in bonds - 272,219 - 272,219 - - 272,219 - 272,219

Note 1: Available-for-sale financial assets did not include equity investments and beneficiary securities, and related information: Original cost of $7,198,851, valuation amounting to $3,065,270 and cumulative impairment amounting to $335,594.

Note 2: Other financial assets did not include equity investment of financial assets carried at cost, original cost was $4,050,408 and accumulated impairment amounted to $39,621. Non-overdue nor non-impaired amount Overdue but Impaired loss Net total June 30, 2013 non-impaired Impaired Total recognized (A)+(B)+(C)- Good Moderate Substandard Subtotal (A) amount (B) amount (C) (A)+(B)+(C) (D) (D) Available-for-sale financial assets Investment in bonds 24,533,761 7,104,172 - 31,637,933 - - 31,637,933 - 31,637,933 Others 16,364,862 15,573,807 - 31,938,669 - - 31,938,669 - 31,938,669 Held-to-maturity financial assets Investment in bonds 21,349,091 8,932,117 - 30,281,208 - - 30,281,208 - 30,281,208 Others 176,859,931 1,228,032 - 178,087,963 - - 178,087,963 - 178,087,963 Other financial assets Investment in bonds - 273,761 - 273,761 - - 273,761 - 273,761

Note 1: Available-for-sale financial assets did not include equity investments and beneficiary securities, and related information: Original cost of $7,198,851, valuation amounting to $4,503,224 and cumulative impairment amounting to $335,594.

Note 2: Other financial assets did not include equity investment of financial assets carried at cost, original cost was $674,460 and accumulated impairment amounted to $38,199. Fubon Bank (China)

Units:In Thousands of CNY Non-overdue not non-impaired amount Overdue but Impaired June 30, 2014 non- loss Net total impaired Impaired Total recognized (A)+(B)+ Good Moderate Subtotal(A) amount(B) amount(C) (A)+(B)+(C) (D) (C)-(D) Available-for-sale financial assets Investments in bonds 2,205,668 - 2,205,668 - - 2,205,668 - 2,205,668 Held- to-maturity financial assets Investments in bonds 5,645,857 - 5,645,857 - - 5,645,857 - 5,645,857

c) Aging analysis for overdue but not yet impaired financial assets Delays in processing payments by borrowers and other administrative reasons could result in financial assets overdue but not yet impaired. According to the Bank and its subsidiary’s internal risk management policies, financial assets overdue within 90 days are not considered impairment loss, unless other evidences provided.

(Continued) 169 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Aging analysis for overdue but not yet impaired financial assets was as follows: Taipei Fubon Bank (The Bank) June 30, 2014 Overdue Overdue Overdue one to over three less than three to six one month months months Total

Accounts receivable: Credit card $ 121,410 54,392 - 175,802 Others 11,528 3,710 - 15,238 Discounts and loans: Consumer finance 910,197 115,280 - 1,025,477 Corporate banking 160,804 - - 160,804

December 31, 2013 Overdue Overdue Overdue less than one to three over three one month months to six Total months

Accounts receivable: Credit card $ 112,925 55,991 - 168,916 Others 13,405 4,024 - 17,429 Discounts and loans: Consumer finance 1,618,318 118,229 - 1,736,547 Corporate banking 900,573 - - 900,573

June 30, 2013 Overdue Overdue Overdue one to over three less than three to six one month months months Total

Accounts receivable: Credit card $ 108,217 45,768 - 153,985 Others 15,273 4,844 - 20,117 Discounts and loans: Consumer finance 1,402,536 111,788 - 1,514,324 Corporate banking 244,242 - - 244,242

(Continued) 170 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Bank (China) Units:In Thousands of CNY June 30, 2014 Overdue Overdue Overdue over three less than one to three to six one months months months Total

Discounts and loans Corporate banking $ 259,403 46,000 6,726 312,129

d) Analysis of impairment for financial assets Part of the Bank and its subsidiary’s investments included in available-for-sale financial assets or financial assets carried at cost and investments in bonds included in debt instruments with no active market were considered impaired because there were some objective evidences of impairment loss provided by investee companies. The Bank and its subsidiary have assessed whether loans and receivables have objective evidence of impairment. The assessment on June 30, 2014, and December 31 and June 30, 2013, are as follows: Discounts and loans

June 30, 2014 December 31, 2013 June 30, 2013 Discounts and Allowance for Discounts and Allowance for Discounts and Allowance for Type of impairment assessment loans credit losses loans credit losses loans credit losses With objective evidence of Individually assessed 20,364,602 4,414,827 20,340,728 3,765,862 21,843,623 3,661,018 impairment for impairment Collectively assessed 1,988,431 59,351 2,184,619 70,239 2,314,079 69,421 for impairment With no objective evidence Collectively assessed 1,291,452,194 12,720,778 1,093,881,644 9,381,487 1,052,367,616 5,764,335 of impairment for impairment

Receivables

June 30, 2014 December 31, 2013 June 30, 2013 Discounts and Allowance for Discounts and Allowance for Discounts and Allowance for Type of impairment assessment loans credit losses loans credit losses loans credit losses With objective evidence of Individually assessed 198,060 5,932 46,091 9,822 257,595 90,701 impairment for impairment Collectively assessed 1,157,520 183,459 1,276,331 230,957 1,383,605 286,712 for impairment With no objective evidence Collectively assessed 109,301,064 835,483 87,760,703 680,976 58,858,368 271,670 of impairment for impairment

Note 1: The receivables are those originated by the Bank and its subsidiary, and not net of the allowance for credit losses and adjustments for discount (premium). Note 2: The above receivables and allowances include nonperforming loans reclassified from other than loans and bills purchased.

(Continued) 171 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(j) Collateral and other credit enhancements held Taipei Fubon Bank (The Bank) On the basis of the result of the credit evaluation, the Bank may require collaterals before drawdowns are made on the credit facilities. Appropriate collaterals are required based on borrowers’ financials and debt service capabilities to mitigate credit risk. All guarantees and appraisal procedures follow the relative regulations of the authorities and internal rules of the Bank. The internal rules of the Bank include the acceptable types of collaterals, appraisal methods, appraisal process, and post-approval collateral management, which require closely monitoring on the value of collaterals in order to ensure repayment security. The main collateral types are summarized as follows: a) Real estate b) Other property c) Securities/stock d) Certificate of deposits/deposit e) Guaranteed by credit guarantee fund or government Fubon Bank (China) The main types of collateral of Fubon Bank (China) are deposit, certificate of deposit, notes, and mortgages which most liky are real estate mortgage Most of the real-estate collateral types of Fubon Bank (China) are office building, residential building, shop and mall. All the real-estate collateral must locate at our “acceptable region”. In principle, acceptable region must meet two requirements: 1. Provinces that branches are located; 2. prosperous regions and developed communities at cities which can be easily managed. 2. Fubon Life Insurance and its subsidiaries Credit risk refers to the risk resulted from the deterioration of the credit status of the investment, the descending of credit rating, the credit risk event which can be attributed to the default of contracts, and the default of the trading instrument issuers or counterparties for fulfilling their obligation. Fubon Life Insurance and its subsidiaries may suffer losses from these events.

(Continued) 172 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

The credit risk of Fubon Life Insurance and its subsidiaries is mainly from the financial instrument transactions resulted from operating activities. The primary transactions are security investments and loans. Fubon Life Insurance and its subsidiaries mitigates the possibility of massive loss resulted from over-concentration of portfolios by regularly monitoring the concentration statistic. Details are as follows: (a) Credit risk exposure－industry

June 30, 2014 December 31, 2013 June 30, 2013 Financial assets Amount ％ Amount ％ Amount ％

Industrial enterprise $ 24,028,664 1.54 20,407,934 1.41 12,766,392 0.96 Public business 58,313,994 3.73 51,198,243 3.55 47,574,274 3.58 Diversification 287,438 0.02 400,970 0.03 183,592 0.01 Mortgage backed securities 42,820,745 2.74 44,328,725 3.07 44,903,962 3.38 Financial sector 582,738,319 37.24 512,350,327 35.50 493,933,310 37.21 Consumer staples 48,968,332 3.13 44,730,527 3.10 28,387,295 2.14 Government 477,064,697 30.48 495,629,972 34.34 484,799,962 36.52 Technology 14,226,264 0.91 13,247,221 0.92 8,555,867 0.64 Raw material 48,650,175 3.11 32,050,860 2.22 26,370,423 1.99 Consumer discretionary 25,240,040 1.61 20,991,634 1.45 12,374,143 0.93 Energy 73,466,507 4.69 53,046,161 3.68 37,825,924 2.85 Assets backed securities 2,454,654 0.16 7,086,693 0.49 7,583,704 0.57 Telecommunication 55,646,165 3.56 44,486,526 3.08 29,959,054 2.26 Other 111,061,765 7.08 103,195,954 7.16 92,230,188 6.96 Total $ 1,564,967,759 100.00 1,443,151,747 100.00 1,327,448,090 100.00

(b) Credit risk exposure-geographic area

June 30, 2014 December 31, 2013 June 30, 2013 Financial assets Amount ％ Amount ％ Amount ％

Taiwan $ 711,728,155 45.47 678,676,880 47.03 671,842,146 50.61 Asia except Taiwan 158,741,340 10.14 131,465,123 9.11 127,455,963 9.60 North America 384,328,731 24.56 363,661,640 25.20 278,754,334 21.00 Middle and South America 24,821,068 1.59 19,921,251 1.38 19,824,415 1.49 Europe 275,393,833 17.60 241,016,335 16.70 221,933,697 16.72 Africa/Middle East 9,954,632 0.64 8,410,518 0.58 7,637,535 0.58 Total $ 1,564,967,759 100.00 1,443,151,747 100.00 1,327,448,090 100.00

In terms of credit quality, Fubon Life Insurance and its subsidiaries traces the credit rating data of various credit rating institutions regularly for normal assets which are not overdue and not impaired and categories the quality into three levels, which are low risk, medium risk and high risk based on the credit rating. The definition of each level is as follows: Low risk: The issuers or the counterparties are rated as robust or above to fulfill their obligation of the contracts. Even under various negative news or disadvantageous economic conditions, the companies are capable of dealing with the situations.

(Continued) 173 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Medium risk: The issuers or the counterparties have lower capability of fulfilling their obligation. Negative news or disadvantageous economic conditions may weaken their financial statuses and result in the doubt of asset impairment or the loss of Fubon Life Insurance and its subsidiaries. High risk: The possibility that the issuers or counterparties fulfill their obligation is remote and mainly relies on the business environment. Negative news or disadvantageous economic conditions will lower their ability and willingness to fulfill their obligation. The impaired amount refers to the amount provided for all financial assets based on the regulations of accounting standards. Under the principle of prudence, the amount is able to reflect the current value of the impairment and includes overdue but not impaired financial assets and the accumulated impairment loss.

June 30, 2014 No credit Overdue but Accumulated Low risk Medium risk High risk rating not impaired Impaired impairment

Total $ 1,152,374,661 410,006,184 812,255 1,000,000 - 3,141,494 1,568,589

December 31, 2013 No credit Overdue but Accumulated Low risk Medium risk High risk rating not impaired Impaired impairment

Total $ 1,105,926,101 334,207,512 1,075,783 1,000,000 - 5,884,398 3,927,677

June 30, 2013 No credit Overdue but Accumulated Low risk Medium risk High risk rating not impaired Impaired impairment

Total $ 1,046,721,391 276,097,258 1,130,308 1,000,000 - 7,507,073 3,937,837

Note1: Normal assets include debt assets but not funds and stocks. Impaired and accumulated impairment include debt assets and security assets. Impaired refer to the book value of the impaired assets plus accumulated impairment. Note2: Based on the credit ratings of the issuers or the guarantee agencies to tier Note3: Adopt S&P, Moody’s, Fitch and Taiwan Ratings, whichever is lower. Note4: No credit rating refers to the preferred stock of Taiwan High Speed Rail Corporation and is classified as debt instrument without active market. The credit risk of the subsidiary in Vietnam comes from the financial instrument transaction of operating activities. All of the investment exposures are saved in the local banks in Vietnam as time deposits. There are no securities or loans and there is no exposure outside of the domain of Vietnam. The subsidiary in Vietnam mitigates the risk of concentration in single financial institution by regular statistical controlling and monitoring. As of June 30, 2014, and December 31 and June 30, 2013, the time deposits of the subsidiary in Vietnam amounted to $779,727, $816,663 and $888,309. As of June 30, 2014, and December 31 and June 30, 2013 the subsidiary in Vietnam holds government bonds amounted to $192,650 and $56,548. (c) Fubon Insurance Credit risk is the risk Fubon Insurance would suffered from the loss due to the downgrade of borrower’s credit rating or borrower failing to make payments, the counterparty’s failure or refusing to meet its obligation. The risk includes but not limited to the following risks: the credit risk of the issuer, the counterparty and the underlying assets.

(Continued) 174 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Credit risk mainly comes from the trading of financial instruments generated from operating activity of Fubon Insurance. Fubon Insurance decreases the probability of a larger loss resulting from any single credit risk event due to the over concentration of the portfolios through regular analysis and monitor as follows: a) Management process of credit risk a. Risk identification Fubon Insurance’s management process of credit risk could identify the existing and potential risk, analyze the source of the major risk of the operation and the product, and plan proper control system. b. Risk measurement When measuring credit risk, Fubon Insurance considers the factors including the content of contracts, the condition of the market, securities or guarantees, the variation of the future probable risk of the counterparty and evaluating the risk in asset portfolios with credit risk except for individual risk. Also, by collecting related information of credit rating, Fubon Insurance analyzes and quantitatively measures the credit risk in accordance with the level of business and practical settlement methods and calculates the credit risk capital based on the rules stipulated by the authority. For financial instruments in non-active markets, held-to-maturity financial assets and other credit position, depending on the practical settlement methods, Fubon Insurance measures the credit risk by referring to the expected loss formula (ECL=EAD×PD×LGD). c. Risk monitoring Based on the process of risk monitoring established, Fubon Insurance reviews and monitors the credit limit usage and over-limit circumstances regularly with proper disposition. Through proper and frequent monitoring and hierarchical control system, the responsible person could submit the report by related rules when finding mistakes and unusual events. When the relevant unit gets aware of significant credit risk event, it should notify risk management department of Fubon Insurance by email and deal with the problem according to the Company’s guidelines related to the reporting of significant credit risk event to control the timeliness of the dealing process. d. Risk responding When an event of credit risk occurs, the head of any related unit involved or who has authority to deal with the event would respond to the event immediately, and report to risk management department by following the authorization table of Fubon Insurance. Subsequently, the reason of the event would be investigated, the remediation plan would be developed and the progress of actions would be followed.

(Continued) 175 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

b) Credit risk management mechanism Credit risk management mechanism includes: a. Credit risk management before transaction: Before Fubon Insurance is engaged in investment and transaction business, a completed evaluation and analysis will be performed on subject of investments and transactions, issuer, credit and financial position information of counterparty and guarantee agency and it also will confirm the legality of the transaction. Meanwhile, Fubon Insurance will confirm if transaction counterparty, issuer and guarantee agency exceeded credit limits. In case of involving in the decision-making process of complex structured instrument, Fubon Insurance should follow the authorization level related to credit risk management, and have proper notification process and operating activities. b. Management of credit limit by hierarchy: Considering the complexity and characteristics of the investment assets, Fubon Insurance sets credit hierarchical management system and manages them by different hierarchy, including the following: (i) By counterparty, issuer and guarantee agency, set credit limit and manage by different hierarchy. (ii) By country, set credit limit and manage hierarchically. Besides, it will re-examine credit limit when inside or outside economic circumstances have changed severely. c. Credit risk management after transaction: (i) Examine credit status periodically: Periodically review the overall credit market conditions to understand trends in the credit markets and get an early warning to credit risk. Also periodically examine credit status of counterparty, issuer and guarantee agency to fully reveal their risk situation. (ii) Control credit risk limit by each position: Measure credit exposure amount monthly, compare with authorized credit risk limit and monitor the risk. Classification of the measuring credit exposure amount of Fubon Insurance includes: counterparty, issuer, guarantee agency, country and commodity. According to different business characteristics, Fubon Insurance takes individual or portfolio management approach to review the changes in credit status in connection with the transaction balance or position periodically.

(Continued) 176 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

c) Concentration of credit risk To control credit concentration risk, Fubon Insurance confirms that a loss resulting from any single credit risk event won’t exceed credit risk limit through regular statistic and monitor concentration as follows:

June 30, 2014 Central and North South By area Taiwan Rest of Asia America America Europe Total

Exposure amount $ 31,240,609 2,941,150 7,923,062 177,741 5,150,453 47,433,015 Ratio of the total 65.86 % 6.20 % 16.70 % 0.38 % 10.86 % 100.00 %

December 31, 2013 Central North and South By area Taiwan Rest of Asia America America Europe Total

Exposure amount $ 33,722,234 1,639,167 7,188,447 160,634 5,393,550 48,104,032 Ratio of the total 70.10 % 3.41 % 14.94 % 0.34 % 11.21 % 100.00 %

June 30, 2013 Central and North South By area Taiwan Rest of Asia America America Europe Total

Exposure amount $ 31,340,169 1,617,481 7,447,415 164,047 3,959,591 44,528,703 Ratio of the total 70.38 % 3.63 % 16.72 % 0.37 % 8.90 % 100.00 %

d) Details of maximum credit risk exposure of Fubon Insurance financial assets (without considering collateral or other credit enhancements instruments), the net amount of book values less the offset amount recognized in accordance with IAS 32 and the impairment loss recognized in accordance with IAS 39 are as follows:

June 30, 2014 December 31, 2013 June 30, 2013 Maximum Maximum Maximum Book value exposure Book value exposure Book value exposure

Non-derivative financial instruments Financial assets Cash and cash equivalents $ 8,787,585 8,787,585 9,848,109 9,848,109 9,103,991 9,103,991 Receivables 6,955,510 6,955,510 5,182,969 5,182,969 6,694,989 6,694,989 Financial assets measured at fair 74,373 74,373 - - - - value through profit or loss Available-for-sale financial assets 33,806,051 33,806,051 34,389,222 34,389,222 32,876,841 32,876,841 Financial assets carried at cost 210,091 210,091 222,332 222,332 243,130 243,130 Non-active market bonds 2,564,964 2,564,964 2,889,788 2,889,788 2,979,159 2,979,159 investment Reinsurance contract 575,115 575,115 727,229 727,229 674,821 674,821 asset－reinsurance recoverable Reinsurance contract asset－due 1,946,561 1,946,561 1,306,234 1,306,234 2,178,440 2,178,440 from other reinsurance Other assets 1,388,586 1,388,586 1,438,161 1,438,161 1,232,631 1,232,631

(Continued) 177 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 December 31, 2013 June 30, 2013 Maximum Maximum Maximum Book value exposure Book value exposure Book value exposure

Financial liability Accounts payable $ 7,215,410 7,215,410 5,586,066 5,586,066 7,637,363 7,639,363 Tax liability 231,958 231,958 526,771 526,771 285,451 285,451 Other financial liability 195,700 195,700 105,000 105,000 - - Other liability 513,101 513,101 783,302 783,302 574,037 574,037 Derivative financial instruments Financial assets Financial assets measured at fair 66,766 66,766 1,847 1,847 7,361 7,361 value through profit or loss Financial liability Financial liability measured at fair 1,858 1,858 128,168 128,168 122,299 122,299 value through profit or loss e) Fubon Insurance’s financial assets quality and impairment condition For credit quality for neither past due nor impaired normal assets, Fubon Insurance periodically follow credit rating information issued by credit rating agency, and based on the rating, classified as low risk, moderate risk and high risk as following table: June 30, 2014 Neither past due nor impaired Financial assets High Moderate Low Total

Financial assets $ 56,429 10,337 - 66,766 measured at fair value through profit or loss Available-for-sale 9,537,496 2,851,992 - 12,389,488 financial assets Non-active market 2,564,964 - - 2,564,964 bond investment Total $ 12,158,889 2,862,329 - 15,021,218

(Continued) 178 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 Neither past due nor impaired Financial assets High Moderate Low Total

Financial assets $ 1,676 171 - 1,847 measured at fair value through profit or loss Available-for-sale 10,839,100 2,922,097 - 13,761,197 financial assets Non-active market 2,789,788 100,000 - 2,889,788 bond investment Total $ 13,630,564 3,022,268 - 16,652,832

June 30, 2013 Neither past due nor impaired Financial assets High Moderate Low Total

Financial assets $ 7,361 - - 7,361 measured at fair value through profit or loss Available-for-sale 10,534,657 1,609,447 - 12,144,104 financial assets Non-active market 2,579,159 400,000 - 2,979,159 bond investment Total $ 13,121,177 2,009,447 - 15,130,624

The definition of each level is as follow: a. Low risk (A- and above): Issuer or counterparty is having ability more than soundness to fulfill contractual commitments, even under variety of negative news or unfavorable economic conditions, they are having good financial condition which is good enough to cope with it. b. Moderate risk (BBB+ to B+): Issuer or counterparty’s ability to fulfill contractual commitments is poor, variety of negative news or unfavorable economic conditions may weaken its financial condition. Triggering concerns of assets impairment or causing loss of Fubon Insurance further. c. High risk (B and below): The possibility of issuer or counterparty to fulfill contractual commitments is poor and depends on operating environment, variety of negative news or unfavorable economic conditions will reduce its ability and willingness to fulfill obligations.

(Continued) 179 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

f) Aging analysis of Fubon Insurance overdue but not impaired financial assets: None g) Impaired financial assets and allowance of losses of Fubon Insurance Impaired items represent Fubon Insurance has been estimated impaired amount to variety financial assets in accordance to accounting principle. Under the principle of conservative estimate, the amount is able to reflect current value appropriately. Information of credit quality is as follow: December 31, 2013 Impaired allowance of Amount losses Net amount

Bond investment of non- $ 300,000 (300,000) - active market

June 30, 2013 Impaired allowance of Amount losses Net amount

Bond investment of non- $ 300,000 (300,000) - active market

(d) Fubon Securities and its subsidiaries Fubon Securities and its subsidiaries have exposure to credit risk, including issuer credit risk, counterparty credit risk and credit risk of underlying assets. Issuer credit risk is the risk of financial loss to Fubon Securities and its subsidiaries if an issuer by whom issuing investment debt securities to Fubon Securities and its subsidiaries or a bank in which Fubon Securities and its subsidiaries made deposits fails to meet its contractual obligation on a delivery, or goes into bankruptcy or liquidation. Counterparty credit risk is the risk of financial loss to Fubon Securities and its subsidiaries if a derivative counterparty fails to meet its contractual obligation on a delivery due to price movement in the underlying securities from Fubon Securities and its subsidiaries’ derivatives. Credit risk of underlying assets is the risk of financial loss to Fubon Securities and its subsidiaries if an underlying asset of an instrument by Fubon Securities and its subsidiaries its credit quality is weakened, risk premium is increased, credit ratings is downgraded, or fails to meet its contractual obligation. Fubon Securities and its subsidiaries faced credit risk arising from financial assets including bank deposits, debt securities, Over the Counter (OTC) derivatives transactions, repurchase agreement / reverse sell agreement, collateral of securities lending, margin account of futures, other refundable deposits and receivables.

(Continued) 180 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

a) Analysis of concentrations of credit risk

June 30, 2014 Credit risk exposure amount－by region Financial assets Taiwan Hong Kong Asia Europe America Total

Cash and cash equivalents $ 5,423,139 105,289 1,992 966 50,184 5,581,570 Customer margin account 5,960,666 - - - - 5,960,666 Held-for-trading financial 3,209,294 - - - 20,282 3,229,576 assets Debt securities 2,574,881 - - - 20,282 2,595,163 Derivative－OTC 34,025 - - - - 34,025 Derivative－Futures 115,688 - - - - 115,688 trading margin Other debt securities 484,700 - - - - 484,700 Margin lending－refundable 42,251 - - - - 42,251 Other refundable 1,691,017 3,807 - - - 1,694,824 Other current assets 255,930 69,853 - - 310 326,093 Available-for-sale financial 265,275 - 162,428 - - 427,703 assets Debt securities 49,991 - - - - 49,991 Other debt securities 112,674 - - - - 112,674 Open fund and money 102,610 162,428 265,038 market instruments Total $ 16,847,572 178,949 164,420 966 70,776 17,262,683 Proportion of the total 97.60 % 1.03 % 0.95 % 0.01 % 0.41 % 100.00 %

December 31, 2013 Credit risk exposure amount－by region Financial assets Taiwan HK Asia Europe America Total

Cash and cash equivalents $ 5,913,408 189,829 5,829 804 - 6,109,870 Customer margin account 5,433,673 - - - - 5,433,673 Held-for-trading financial 1,842,923 - - - - 1,842,923 assets Debt securities 1,233,179 - - - - 1,233,179 Derivative－Futures 53,178 - - - - 53,178 trading margin Other debt securities 556,566 - - - - 556,566 Margin lending－refundable 145,774 - - - - 145,774 Other refundable 1,667,777 3,811 - - - 1,671,588 Other current assets 745,540 18,016 - - - 763,556 Available-for-sale financial 261,545 - 163,353 - - 424,898 assets Other debt securities 159,279 - - - - 159,279 Open fund and money 102,266 - 163,353 - - 265,619 market instruments Total $ 16,010,640 211,656 169,182 804 - 16,392,282 Proportion of the total 97.67 % 1.29 % 1.03 % 0.01 % - % 100.00 %

(Continued) 181 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Credit risk exposure amount－by region Financial assets Taiwan Hong Kong Asia Europe America Total

Cash and cash equivalents $ 6,481,111 177,774 4,121 1,516 22,174 6,686,696 Customer margin account 5,649,023 - - - - 5,649,023 Held-for-trading financial 1,465,608 - - - - 1,465,608 assets Debt securities 824,976 - - - - 824,976 Derivative－Futures 8,590 - - - - 8,590 trading margin Other debt securities 608,450 - - - - 608,450 Open fund and money 23,592 - - - - 23,592 market instruments Margin lending－refundable 67,929 - - - - 67,929 Other refundable 1,873,865 - - - - 1,873,865 Other current assets 712,779 - - - - 712,779 Available-for-sale financial 394,118 - 140,000 - - 534,118 assets Other debt securities 295,737 - - - - 295,737 Open fund and money 98,381 - 140,000 - - 238,381 market instruments Total $ 16,644,433 177,774 144,121 1,516 22,174 16,990,018 Proportion of the total 97.96 % 1.05 % 0.85 % 0.01 % 0.13 % 100.00 %

June 30, 2014 Credit risk exposure amount－by industry Central and local Food and Financial Retail and Building and Biotechnology Shipping Electronic Chemical Other services government travel Financial assets service wholesale material industry industry industry industry Total agencies industry

Cash and cash $ 5,493,549 ------88,021 5,581,570 equivalents

Customer margin 5,960,666 ------5,960,666 account

Held-for-trading 895,692 - 38,584 128,087 101,216 141,069 83,976 1,507,980 167,028 165,944 3,229,576 financial assets

Debt securities 261,279 - 38,584 128,087 101,216 141,069 83,976 1,507,980 167,028 165,944 2,595,163

Derivative－OTC 34,025 ------34,025

Derivative－Futures 115,688 ------115,688 trading margin

Other debt securities 484,700 ------484,700

Margin lending－ 42,251 ------42,251 refundable

Other refundable 1,691,017 ------3,807 1,694,824

Other current assets 321,985 ------4,108 326,093

Available-for-sale 377,712 49,991 ------427,703 financial assets

Debt securities - 49,991 ------49,991

Other debt 112,674 ------112,674 securities

Open fund and 265,038 ------265,038 money market instruments

Total $ 14,782,872 49,991 38,584 128,087 101,216 141,069 83,976 1,507,980 167,028 261,880 17,262,683

Proportion of the total 85.63 % 0.29 % 0.22 % 0.74 % 0.59 % 0.82 % 0.49 % 8.73 % 0.97 % 1.52 % 100.00 %

(Continued) 182 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 Credit risk exposure amount－by industry Central and local Food and Financial Retail and Building and Biotechnology Shipping Electronic Chemical Other services government travel Financial assets service wholesale material industry industry industry industry Total agencies industry

Cash and cash $ 6,109,870 ------6,109,870 equivalents

Customer margin 5,433,673 ------5,433,673 account

Held-for-trading 735,276 - 35,001 101,431 93,912 228,164 81,402 418,275 5,150 144,312 1,842,923 financial assets

Debt securities 125,532 - 35,001 101,431 93,912 228,164 81,402 418,275 5,150 144,312 1,233,179

Derivative－Futures 53,178 ------53,178 trading margin

Other debt securities 556,566 ------556,566

Margin lending－ 145,774 ------145,774 refundable

Other refundable 1,671,588 ------1,671,588

Other current assets 763,556 ------763,556

Available-for-sale 424,898 ------424,898 financial assets

Other debt 159,279 ------159,279 securities

Open fund and 265,619 ------265,619 money market instruments

Total $ 15,284,635 - 35,001 101,431 93,912 228,164 81,402 418,275 5,150 144,312 16,392,282

Proportion of the total 93.25 % - % 0.21 % 0.62 % 0.57 % 1.39 % 0.50 % 2.55 % 0.03 % 0.88 % 100.00 %

June 30, 2013 Credit risk exposure amount－by industry Central and local Food and Financial Retail and Building and Biotechnology Shipping Electronic Chemical Other services government travel Financial assets service wholesale material industry industry industry industry Total agencies industry

Cash and cash $ 6,686,696 ------6,686,696 equivalents

Customer margin 5,649,023 ------5,649,023 account

Held-for-trading 783,620 - 30,707 73,959 84,747 - 19,789 357,046 18,144 97,596 1,465,608 financial assets

Debt securities 142,988 - 30,707 73,959 84,747 - 19,789 357,046 18,144 97,596 824,976

Derivative－Futures 8,590 ------8,590 trading margin

Other debt securities 608,450 ------608,450

Open fund and 23,592 ------23,592 money market instruments

Margin lending－ 67,929 ------67,929 refundable

Other refundable 1,873,865 ------1,873,865

Other current assets 712,779 ------712,779

Available-for-sale 534,118 ------534,118 financial assets

Open fund and 238,381 ------238,381 money market

Other debt 295,737 ------295,737 securities Total $ 16,308,030 - 30,707 73,959 84,747 - 19,789 357,046 18,144 97,596 16,990,018

Proportion of the total 95.98 % - % 0.18 % 0.44 % 0.50 % - % 0.12 % 2.10 % 0.11 % 0.57 % 100.00 %

Fubon Securities and its subsidiaries’ exposure to credit risk in Taiwan was due to the following reasons: (1) the deposited cash in financial institutions and held debt securities issued or guaranteed by banks, and (2) all the counterparties of derivative transactions, investments in debt securities, and security lending were financial institutions.

(Continued) 183 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

b) Credit risk of financial assets a. Cash and cash equivalents Cash and cash equivalents included time deposits, demand deposits, checking accounts and short-term bills, with trading counterparties being mainly domestic financial institutions. b. Financial assets measured at fair value-current (i) Debt securities Fubon Securities and its subsidiaries held positions in debt securities, including bonds, convertible bonds and bond funds, which were issued by domestic companies. The details of debt securities are as follows: i) Convertible bonds Convertible bonds held by Fubon Securities and its subsidiaries were primarily issued by domestic companies. To control exposure to credit risk from convertible bonds, Fubon Securities and its subsidiaries transferred credit risk to external investors by asset swaps. ii) Bond funds The underlying assets of bond funds held by Fubon Securities and its subsidiaries were mainly fixed income securities. (ii) Derivatives-Over the Counter (OTC) When Fubon Securities and its subsidiaries engaged in OTC derivatives, it would sign an ISDA agreement with each counterparty. This provides the contractual framework within which dealing activity across a full range of over- the-counter (OTC) products is conducted, and contractually binds both parties to apply close-out netting across all outstanding transactions covered by an agreement if either party defaults or another pre-agreed termination event occurs. The parties execute a Credit Support Annex (CSA) in conjunction with the ISDA Master Agreement. Under a CSA, collateral is passed between the parties to mitigate the counterparty risk inherent in outstanding positions. OTC derivatives held by Fubon Securities and its subsidiaries included interest rate swap, convertible bond asset swaps and equity options. The counterparties were all from the financial industry and were mainly based in Taiwan. (iii) Derivatives-futures trading margin For trading on the centralized exchange market, Fubon Securities and its subsidiaries deposits futures trading margin into an account designated by Fubon Securities and its subsidiaries as a guarantee of future funding to fulfill a contractual obligation. Fubon Futures and Polaris MF Global Futures are Fubon Securities and its subsidiaries' futures commission merchants. Fubon Securities and its subsidiaries held 100% of the shares of Fubon futures. Thus little potential loss due to credit risk was likely to occur.

(Continued) 184 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(iv) Other debt securities Other debt securities were mainly asset-capitalized beneficiary securities Fubon R1, Fubon R2 and Gallop No.1 REIT. Because of the good quality of entrusted assets and the above-average quality of renters in the asset pool, Fubon Securities and its subsidiaries had low credit risk. i) Margin deposits for borrowed securities This includes relevant disclosures of collateral for borrowed securities and margin deposits for borrowed securities. When borrowing the underlying securities from the holder, Fubon Securities and its subsidiaries should deposit the margin in the designated bank account. Because it holds the underlying securities as collateral, Fubon Securities and its subsidiaries will be able to effectively decrease credit exposure to the holder. ii) Other guarantee deposits Other guarantee deposits mainly include operating deposits, clearing and settlement funds and refundable deposits. Operating deposits are mainly deposited in credit-worthy banks. Clearing and settlement funds are deposited in the TWSE. They are used as compensation when a market securities trading party does not fulfill delivery obligations. The credit risk of institutions where funds are deposited is minimal. Refundable deposits arise when Fubon Securities and its subsidiaries' deposit cash or other assets as guarantees. Because deposits are placed in various financial institutions and each deposit amount is not high, the credit risk is dispersed and the credit exposure of the overall refundable deposit is minimal. iii) Other current assets Other current assets of Fubon Securities and its subsidiaries were cash provided for pledge or restricted use to domestic financial institutions with good credit. iv) Futures trading margins The purpose of the account is to deposit the guarantee fund to the customers during any transaction between Fubon Futures and its customers. The account is created as a low credit risk account by big financial institutions. c) Quality classification definitions Low Risk: exposures demonstrate a good capacity to meet financial commitments, with low default risk and/or low levels of expected loss. Moderate Risk: exposures require closer monitoring and demonstrate an average to fair capacity to meet financial commitments, with moderate default risk. High Risk: exposures require varying degrees of special attention and default risk is of greater concern.

(Continued) 185 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Impaired: Fubon Securities and its subsidiaries or the target did not perform its obligation according to the contracts and the potential estimated loss has reached the standard of impairment.

June 30, 2014 Financial assets credit quality and classification

Moderate Overdue but Impairment Financial assets Low risk risk High risk not impaired Impaired reserve Total

Cash and cash equivalents $ 5,580,093 1,477 - - - - 5,581,570 Customer margin account 5,960,666 - - - - - 5,960,666 Held-for-trading financial assets 1,394,792 1,786,968 47,816 - - - 3,229,576 Debt securities 1,199,115 1,348,232 47,816 - - - 2,595,163 Derivative－OTC - 34,025 - - - - 34,025 Derivative－Futures trading margin 115,688 - - - - - 115,688 Other debt securities 79,989 404,711 - - - - 484,700 Margin lending－refundable 42,251 - - - - - 42,251 Other refundable 1,691,808 3,016 - - - - 1,694,824 Other current assets 324,702 1,391 - - - - 326,093 Available-for-sale financial assets 251,089 55,153 121,461 - - - 427,703 Debt securities 49,991 - - - - - 49,991 Other debt securities 112,674 - - - - - 112,674 Open fund and money market 88,424 55,153 121,461 - - - 265,038 instruments

Subtotal 15,245,401 1,848,005 169,277 - - - 17,262,683 Proportion of the total 88.31 % 10.71 % 0.98 % - % - % - % 100.00 % Receivables 17,701,633 8,698,773 1,073,032 - - - 27,473,438 Account receivable 10,564,375 - - - - - 10,564,375 Receivables from pecuniary finance 7,137,258 8,698,773 1,073,032 - - - 16,909,063 Total $ 32,947,034 10,546,778 1,242,309 - - - 44,736,121 Proportion of the total 73.64 % 23.58 % 2.78 % - % - % - % 100.00 %

December 31, 2013 Financial assets credit quality and classification

Moderate Overdue but Impairment Financial assets Low risk risk High risk not impaired Impaired reserve Total

Cash and cash equivalents $ 6,104,734 5,136 - - - - 6,109,870 Customer margin account 5,433,673 - - - - - 5,433,673 Held-for-trading financial assets 476,842 1,345,196 20,885 - - - 1,842,923 Debt securities 337,666 874,628 20,885 - - - 1,233,179 Derivative－Futures trading margin 53,178 - - - - - 53,178 Other debt securities 85,998 470,568 - - - - 556,566 Margin lending－refundable 145,774 - - - - - 145,774 Other refundable 1,671,588 - - - - - 1,671,588 Other current assets 763,556 - - - - - 763,556 Available-for-sale financial assets 424,898 - - - - - 424,898 Other debt securities 159,279 - - - - - 159,279 Open fund and money market 265,619 - - - - - 265,619 instruments

Subtotal 15,021,065 1,350,332 20,885 - - - 16,392,282 Proportion of the total 91.64 % 8.24 % 0.12 % - % - % - % 100.00 % Receivables 15,603,815 7,727,652 1,616,432 - - - 24,947,899 Account receivable 10,367,331 - - - - - 10,367,331 Receivables from pecuniary finance 5,236,484 7,727,652 1,616,432 - - - 14,580,568 Total $ 30,624,880 9,077,984 1,637,317 - - - 41,340,181 Proportion of the total 74.08 % 21.96 % 3.96 % - % - % - % 100.00 % (Continued) 186 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Financial assets credit quality and classification

Moderate Overdue but Impairment Financial assets Low risk risk High risk not impaired Impaired reserve Total

Cash and cash equivalents $ 6,663,314 23,382 - - - - 6,686,696 Customer margin account 5,649,023 - - - - - 5,649,023 Held-for-trading financial assets 262,395 1,133,773 69,440 - - - 1,465,608 Debt securities 133,109 622,427 69,440 - - - 824,976 Derivative－Futures trading margin 8,590 - - - - - 8,590 Other debt securities 97,104 511,346 - - - - 608,450 Open fund and money market 23,592 - - - - - 23,592 instruments Margin lending－refundable 67,929 - - - - - 67,929 Other refundable 1,873,865 - - - - - 1,873,865 Other current assets 712,779 - - - - - 712,779 Available-for-sale financial assets 383,804 150,314 - - - - 534,118 Other debt securities 295,737 - - - - - 295,737 Open fund and money market 88,067 150,314 - - - - 238,381 instruments

Subtotal 15,613,109 1,307,469 69,440 - - - 16,990,018 Proportion of the total 91.89 % 7.70 % 0.41 % - % - % - % 100.00 % Receivables 14,943,110 5,435,844 1,140,039 - - - 21,518,993 Account receivable 7,765,262 - - - - - 7,765,262 Receivables from pecuniary finance 7,177,848 5,435,844 1,140,039 - - - 13,753,731 Total $ 30,556,219 6,743,313 1,209,479 - - - 38,509,011 Proportion of the total 79.35 % 17.51 % 3.14 % - % - % - % 100.00 %

From above tables, Fubon Securities and its subsidiaries have no financial assets overdue but not impaired. 4.18% of normal assets were classified under high risk category. Those assets mainly were margin loans receivable. The details of assets classified as high risk were as follows: a. Cash and cash equivalents：To fulfill daily settlement payments and remittance operations, it was required to deposit a certain amount to the main delivery lines for the brokerage business and other operations. The management of Fubon Securities and its subsidiaries would periodically review financial condition, operation and credit risk of delivery lines. b. Debt securities：To control exposure to credit risk from convertible bonds, Fubon Securities and its subsidiaries transferred credit risk to external investors by asset swaps. c. Receivables from pecuniary finance：The risk of financial loss arose from price movement in the underlying securities. To lower credit risk, Fubon Securities and its subsidiaries has closely monitored market volatility of underlying assets and set strict control over counterparties’ credit risk.

(Continued) 187 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Impairment loss Aging analysis of other receivables and overdue receivables were as follows:

June 30, 2014 December 31, 2013 June 30, 2013 Total Impairment Total Impairment Total Impairment amount amount amount amount amount amount

Overdue 0 to 180 days $ 1,007 933 156 144 - - Overdue 181 days to one 156 144 - - - - year Overdue more than one 2,505 779 2,611 794 2,707 807 year Total $ 3,668 1,856 2,767 938 2,707 807 Allowance for doubtful accounts of other receivables and overdue receivables were as follow: For the three-months For the six-months ended June 30 ended June 30 2014 2013 2014 2013

Beginning balance on $ 1,925 2,042 938 2,322 January 1, Recognized impairment loss (69) (1,235) 918 (1,515) Ending balance on June 30 $ 1,856 807 1,856 807 Some investors failed to settle stock purchases made by pecuniary finance. Therefore, Fubon Securities and its subsidiaries disposed of the securities so purchased by the investors and deducted the proceeds of such sales from receivables due to pecuniary finance. In addition, some collateral securities purchased by investors through unsettled pecuniary finance contracts were unable to be disposed of. Fubon Securities has persistently tried to settle the aforementioned claims, and recorded the uncollected receivables from such unsettled pecuniary finance contracts and the past-maturity corporate bonds as overdue receivables. As of June 30, 2014, and December 31 and June 30, 2013, Fubon Securities and its subsidiaries’ margin loans receivable recovery period were principally less than a year or an operating cycle (not more than half a year). Thus it was assumed that book value was approximated to its fair value, without discounting by appropriate interest rate. In addition, as of June 30, 2014, and December 31 and June 30, 2013, according to Regulations Governing Margin and Stock Loans by Securities Firms, Fubon Securities and its subsidiaries charged self-financing payment to their customers, and made all securities purchasing by margin financing as collaterals. Fubon Securities set margin ratio around 120% to managed margin loans receivable. If stock price fluctuates too large to maintain margin ratio of 120%, Fubon Securities will inform those under- standard customers to repay partial amount of financing, replenish deposit margin or increase the amount of collaterals to make up the balance. As of June 30, 2014, and December 31 and June 30, 2013, Fubon Securities and its subsidiaries had no impairment loss on margin loans receivable, as taken historical experience and the recoverable amount of collaterals into account.

(Continued) 188 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(e) Fubon Bank (Hong Kong) and its subsidiaries The following disclosure related to Fubon Bank Hong Kong is all expressed in thousands of HKD, unless otherwise stated. a) Sources and definition of credit risk Credit risk is the risk of suffering financial loss in the event that any of Fubon Bank (Hong Kong) and its subsidiaries’ borrowers or market counterparties fail to fulfill their obligation to Fubon Bank (Hong Kong) and its subsidiaries. It arises mainly from loans and advances, debt securities held, and counterparty credit risk arising from derivative contracts entered into with customer. It can also arise from trading and treasury activities. b) Strategy/objectives/policies and procedures Fubon Bank (Hong Kong) and its subsidiaries manage credit risk through a framework of controls to ensure credit risk taking activities are based on sound principles and in line with the overall business objectives of Fubon Bank (Hong Kong) and its subsidiaries. It has established a set of credit policies and procedures, which define the credit risk taking criteria, the credit approval authorities delegated from the Board of Directors, the credit monitoring processes, the credit rating system, and the loan impairment policy. c) Credit risk management framework The Board of Directors has delegated credit approval authorities to the following in descending order of authority: the Executive Credit Committee, the Credit Committee and the Wholesale Credit Committee. The Executive Credit Committee serves as the Credit Committee of the Board of Directors to review and approve credits that require the approval from the Board of Directors. In addition, it approves Fubon Bank (Hong Kong) and its subsidiaries’ credit policies and overall credit risk profile, taking into consideration relevant law and regulations. The Credit Committee is a management level committee that provides management oversight of Fubon Bank (Hong Kong) and its subsidiaries’ credit risk management. It ensures that Fubon Bank (Hong Kong) and its subsidiaries have in place an effective credit risk management framework and that its credit risks are within the credit policies and credit risk profile as specified by the Board of Directors or its delegated committees. The Credit Committee reviews and endorses all credit policies and the overall credit risk profile for the Executive Credit Committee’s approval, and reviews and approves credit related guidelines. It also conducts on-going review of the market environment and makes necessary policy recommendations to the Executive Credit Committee to ensure that the credit risk profile of Fubon Bank (Hong Kong) and its subsidiaries is within the established risk appetite of Fubon Bank (Hong Kong) and its subsidiaries. The Credit Committee also reviews and approves credits that are within the authority as delegated by the Board of Directors. The Wholesale Credit Committee reviews and approves wholesale credits that are within its authority as delegated by the Board of Directors.

(Continued) 189 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

d) Risk report and evaluation system Specific policies and measures to address different kinds of credit related activities are set out below: a. Corporate lending Credit risk from corporate lending is managed by conducting thorough credit evaluation, credit mitigation through collateral and guarantee, internal credit rating system and post-approval monitoring system. Subject to the size of the credit and the internal credit rating of the borrower, different levels of credit approval are required. Credit decision takes into account facility structure, tenor, the repayment ability of the obligor and credit mitigation through collateral and guarantee. Fubon Bank (Hong Kong) and its subsidiaries have established limits for exposures to individual industries and for borrowers and groups of borrowers, regardless of whether the credit exposure is in the form of loans or non-funded exposures. Fubon Bank (Hong Kong) and its subsidiaries also undertake ongoing credit review and monitoring at several levels. The relevant policies and procedures also take into account the rules under the Hong Kong Banking Ordinance, regulatory requirements of the HKMA and best market practices. The credit risk management procedures are designed to promote early detection of counterparty, industry or product exposures that require special monitoring. Overall portfolio risk is monitored by the Control and Risk Management Division on an ongoing basis. Regular management reports are submitted to the Credit Committee regularly for review. The loan portfolio reports cover information on large exposures, country exposures, industry exposures, loan quality and loan impairment level. b. Consumer credit risk Consumer credit risk is product driven, arising from consumer finance products such as credit cards, unsecured personal loans and mortgage loans. Because of the homogeneous nature of these products, credit risk management procedures are primarily based on statistical analyses of risks with respect to different products and types of customers. Fubon Bank (Hong Kong) and its subsidiaries determine product terms and desired customer profiles on a regular basis by developing, validating and fine-tuning of internal scorecards and stress testing models. The relevant credit risk management procedures also include on-going product portfolio analysis and review, clear rules for loan classification and impairment, and regular reporting to Credit Committee.

(Continued) 190 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

c. Counterparty credit risk Unlike the on-balance sheet instruments, where the credit risk is generally represented by the principal value or the notional amount, credit risk for derivatives is the positive replacement cost together with an estimate for the potential future exposure from changes in market value. These credit exposures are managed as part of the overall credit limits to the counterparties. Fubon Bank (Hong Kong) and its subsidiaries use the current exposure method for the purpose of providing capital for such counterparty exposures. Wrong way risk occurs when the credit exposure to a counterparty is strongly correlated with collateral held and any market risk factors impacting the transaction. Credit exposures and potential losses may increase as a result of adverse change in market conditions. Fubon Bank (Hong Kong) and its subsidiaries have various policies and procedures to control wrong-way risk, and undertaking of wrong way risk transaction would require prior approval. d. Credit-related commitments The risks involved in credit-related commitments and contingencies are essentially the same as the credit risk involved in extending loan facilities to customers. These transactions are, therefore, subject to the same credit application, portfolio management and collateral requirements as for loan transactions. e. Concentration of credit risk Concentration of credit risk exists when changes in geographic, economic or industry factors similarly affect groups of borrowers or market counterparties whose aggregate credit exposure is material in relation to Fubon Bank (Hong Kong) and its subsidiaries’ total exposures. Fubon Bank (Hong Kong) and its subsidiaries’ financial risk exposure are diversified by obligor group, industry and product, but are concentrated in Hong Kong. e) Mitigation or hedging of risk Fubon Bank (Hong Kong) and its subsidiaries’ credit evaluation focuses primarily on the borrower’s repayment ability from its cash flow and financial condition. In addition, Fubon Bank (Hong Kong) and its subsidiaries employ various credit risk mitigation techniques such as appropriate facility structuring, posting of collateral and/or third party support as well as transfer of risk to other third parties, which form an integral part of the credit risk management process. The most commonly used credit risk mitigation measures are provided below:

(Continued) 191 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Collateral Fubon Bank (Hong Kong) and its subsidiaries hold collateral against loans and advances to customers mainly in the form of cash deposits, marketable securities, mortgage interest over property and guarantees. Fubon Bank (Hong Kong) and its subsidiaries have in place policies and procedures that govern the assessment, acceptance and the periodic valuation of the collateral. Collateral taken to secure corporate and retail loans is revalued periodically ranging from daily to semi-annually depending on the type of collateral. For treasury operations, collateral taken is marked to market on a periodic basis that is mutually agreed with the counterparty. Master netting agreements Collateral generally is not held over loans and advances extended to banks, except when securities are held as part of reverse repurchase and securities borrowing activity. However, where applicable, Fubon Bank (Hong Kong) and its subsidiaries manage its credit exposure to banks by entering into master netting arrangements whenever it is appropriate and feasible to do so. The netting arrangement results in the settlement of counterparty exposure on a net basis in the event a default occurs. Fubon Bank (Hong Kong) and its subsidiaries’ preferred agreement for documenting derivatives activity is the ISDA Master Agreement which covers the contractual framework within which dealing activity across a full range of over-the-counter products is conducted and contractually binds both parties to apply close-out netting across all outstanding transactions covered by an agreement if either party defaults or following other pre-agreed termination events. It is also common for Fubon Bank (Hong Kong) and its subsidiaries to execute a Credit Support Annex in conjunction with the ISDA Master Agreement with the counterparty under which collateral is passed between the parties to mitigate the market contingent counterparty risk inherent in outstanding positions. f) The maximum exposure to credit risk The balance sheet is not considering the maximum exposure to credit risk of the guarantees and other credit instruments being the same as their book value. The maximum exposure to credit risk of financial instruments off balance sheet is as follows (not considering the guarantees or other credit instruments): Maximum exposure to credit risk June 30, 2014 December 31, June 30, 2013 Off-balance sheet 2013

Has developed and irrevocable $ 1,642,760 2,184,919 1,116,493 loan commitment Irrevocable credit commitment 1,059,224 340,975 313,093 of credit cards The amount of established 62,899 31,040 36,304 but unused letters of credit 18,238,065 15,464,535 12,027,871 Total $ 21,002,948 18,021,469 13,493,761

(Continued) 192 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

g) The significant concentrations of the credit risk Concentration of credit risk exists when changes in geographic, economic or industry factors similarly affect groups of borrowers or market counterparties whose aggregate credit exposure is material in relation to Fubon Bank (Hong Kong) and its subsidiaries’ total exposures. Fubon Bank (Hong Kong) and its subsidiaries’ financial risk exposure are diversified by obligor group, industry and product, but are concentrated in Hong Kong. Information of loans and nonperforming loans in different industries, areas and guarantees with significant concentration of credit risk is as follow: a. By area & industry

June 30, 2014 December 31, 2013 June 30, 2013 Industry Amount ％ Amount ％ Amount ％

Gross advances for use in Hong Kong industrial, commercial and financial Property development $ 1,596,170 3.78 1,539,903 4.04 1,272,121 3.81 Property investment 9,928,446 23.50 10,085,688 26.45 9,873,152 29.58 Financial concerns 744,774 1.76 649,367 1.70 634,883 1.90 Stockbrokers 986,347 2.34 113,333 0.30 128,333 0.38 Wholesale and retail trade 289,824 0.69 338,389 0.89 347,290 1.04 Manufacturing 942,551 2.23 576,996 1.51 2,413,212 7.23 Transport and transport equipment 477,374 1.13 482,426 1.26 473,894 1.42 Information technology - - 635 - 194,681 0.58 Electricity and gas - - - - 234,000 0.70 Others 2,367,042 5.60 1,236,762 3.24 1,784,332 5.35 Individuals Loan for the purchase of flats under the Home 7,456 0.02 7,879 0.02 8,999 0.03 Ownership Scheme, Private Sector Participation Scheme and Tenants Purchase Scheme or their respective successor schemes Loan for the purchase of other residential properties 8,577,238 20.31 8,391,612 22.00 8,224,941 24.64 Credit card advances 881,789 2.09 827,979 2.17 757,786 2.27 Others 1,889,165 4.47 1,547,203 4.06 1,420,852 4.26 28,688,176 67.92 25,798,172 67.64 27,768,476 83.19 Trade finance 7,766,228 18.39 6,428,810 16.86 4,085,099 12.24 Gross advances for use outside Hong Kong 5,781,847 13.69 5,913,309 15.50 1,525,456 4.57 Gross advances to customers $ 42,236,251 100.00 38,140,291 100.00 33,379,031 100.00 b. By collateral

June 30, 2014 December 31, 2013 June 30, 2013 Collateral Amount ％ Amount ％ Amount ％

Unsecured $ 20,381,865 48.26 18,032,371 47.28 13,946,694 41.78 Credit secured Financial collateral 612,868 1.45 674,767 1.77 490,493 1.47 Real estate 20,497,594 48.53 19,288,534 50.57 18,828,739 56.41 Other collateral 743,924 1.76 144,619 0.38 113,105 0.34 Total $ 42,236,251 100.00 38,140,291 100.00 33,379,031 100.00

(Continued) 193 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

h) The analysis of credit quality and impairment of financial instruments a. The credit quality of loans and receivables

The amount of the part not overdue and not impaired The loss amount recognized (D) There is objective Items not The amount of The amount of evidence of subject to the part overdue the part Total impairment on Items with no Net amount June 30, 2014 Grade 1 Grade 2 grading system Subtotal (A) (B) impaired (C) (A)+(B)+(C) individual asset grading system (A)+(B)+(C)-(D) Receivables

Credit card - - 100,401 100,401 - - 100,401 - - 100,401

Others - - 1,305,452 1,305,452 - - 1,305,452 - - 1,305,452

Loans 37,503,326 24,722 4,380,625 41,908,673 317,172 10,406 42,236,251 (6,844) (40,930) 42,188,477

Commitment and - - 21,002,948 21,002,948 - - 21,002,948 - - 21,002,948 guarantee

The amount of the part not overdue and not impaired The loss amount recognized (D) There is objective Items not The amount of The amount of evidence of subject to the part overdue the part Total impairment on Items with no Net amount December 31, 2013 Grade 1 Grade 2 grading system Subtotal (A) (B) impaired (C) (A)+(B)+(C) individual asset grading system (A)+(B)+(C)-(D) Receivables

Credit cards - - 80,599 80,599 - - 80,599 - - 80,599

Others - - 466,012 466,012 - - 466,012 - - 466,012

Loans 33,990,793 14,939 3,395,428 37,401,160 725,024 14,107 38,140,291 (9,947) (40,930) 38,089,414

Commitment and - - 18,021,469 18,021,469 - - 18,021,469 - - 18,021,469 guarantee

The amount of the part not overdue and not impaired The loss amount recognized (D) There is objective Items not The amount of The amount of evidence of subject to the part overdue the part Total impairment on Items with no Net amount June 30, 2013 Grade 1 Grade 2 grading system Subtotal (A) (B) impaired (C) (A)+(B)+(C) individual asset grading system (A)+(B)+(C)-(D) Receivables

Credit cards - - 97,905 97,905 - - 97,905 - - 97,905

Others - - 1,250,160 1,250,160 - - 1,250,160 - - 1,250,160

Loans 30,924,219 - 2,183,194 33,107,413 256,855 14,763 33,379,031 (11,080) (40,930) 33,327,021

Commitment and - - 13,493,761 13,493,761 - - 13,493,761 - - 13,493,761 guarantee

b. The analysis of credit quality of discounts and loans not overdue and not impaired by customer: The amount of the part not overdue and not impaired Not subjective to internal June 30, 2014 grading Grade 1 Grade 2 system Total Customer loans: Mortgage 8,351,498 14,173 - 8,365,671 Credit card 864,178 9,626 - 873,804 Micro credit 1,881,329 923 - 1,882,252 Corporate loan: Secured 12,263,330 - - 12,263,330 Unsecured 14,142,991 - 4,380,625 18,523,616 Total 37,503,326 24,722 4,380,625 41,908,673

(Continued) 194 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

The amount of the part not overdue and not impaired Not subjective to internal December 31, 2013 grading Grade 1 Grade 2 system Total Customer loans: Mortgage 8,217,932 3,887 - 8,221,819 Credit card 809,279 9,701 - 818,980 Micro credit 1,536,115 - - 1,536,115 Corporate loan: Secured 10,449,066 1,351 - 10,450,417 Unsecured 12,978,400 - 3,395,428 16,373,828 Total 33,990,792 14,939 3,395,428 37,401,159

The amount of the part not overdue and not impaired Not subjective to internal June 30, 2013 grading Grade 1 Grade 2 system Total Customer loans: Mortgage 8,109,490 - - 8,109,490 Credit card 752,835 - - 752,835 Micro credit 1,374,491 - - 1,374,491 Corporate loan: Secured 10,413,387 - - 10,413,387 Unsecured 10,274,016 - 2,183,194 12,457,210 Total 30,924,219 - 2,183,194 33,107,413

c. The credit quality of securities and bonds

The amount of the part not overdue and not impaired The amount

of the part overdue but The amount The Net amount Lower than not impaired of the part Total impairment (A)+(B)+(C)- June 30, 2014 AAA AA- to AA+ A- to A+ A- Unrated Subtotal (A) (B) impaired (C) (A)+(B)+(C) amount (D) (D) Available for sale

Bonds investment 1,124,631 8,379,613 8,089,496 1,596,877 364,894 19,555,511 - 44,770 19,600,281 44,770 19,555,511

Equity investment - - - - 168,523 168,523 - 142,566 311,089 60,802 250,287 Held-to-maturity

Bonds investment - 658,822 982,522 228,629 - 1,869,973 - - 1,869,973 - 1,869,973 Other financial

Bonds investment - 2,184,919 54,627 681,359 511,452 3,432,357 - - 3,432,357 - 3,432,357

(Continued) 195 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

The amount of the part not overdue and not impaired The amount

of the part overdue but The amount The Net amount Lower than not impaired of the part Total impairment (A)+(B)+(C)- December 31, 2013 AAA AA- to AA+ A- to A+ A- Unrated Subtotal (A) (B) impaired (C) (A)+(B)+(C) amount (D) (D) Available for sale

Bonds investment 1,067,645 7,143,672 7,006,818 1,526,191 343,287 17,087,613 - 44,787 17,132,400 44,787 17,087,613

Equity investment - - - - 170,855 170,855 - 141,548 312,403 54,214 258,189 Held-to-maturity

Bonds investment - 659,069 982,545 227,662 - 1,869,276 - - 1,869,276 - 1,869,276 Other financial

Bonds investment 27,983 2,093,652 - 682,727 - 2,804,362 - - 2,804,362 - 2,804,362

The amount of the part not overdue and not impaired The amount

of the part overdue but The amount The Net amount Lower than not impaired of the part Total impairment (A)+(B)+(C)- June 30, 2013 AAA AA- to AA+ A- to A+ A- Unrated Subtotal (A) (B) impaired (C) (A)+(B)+(C) amount (D) (D) Available for sale

Bonds investment 1,082,598 7,085,324 7,368,715 1,359,979 305,222 17,201,838 - 44,804 17,246,642 44,804 17,201,838

Equity investment - - - - 175,093 175,093 - 123,907 299,000 48,819 250,181 Held-to-maturity

Bonds investment - 659,324 982,575 288,715 - 1,930,614 - - 1,930,614 - 1,930,614 Other financial

Bonds investment 45,280 2,088,867 91,874 550,341 - 2,776,362 - - 2,776,362 - 2,776,362

i) The aging analysis of past due but not individually impaired financial instruments June 30, 2014 Overdue in Overdue in Overdue in Items 1 month 1-3 month 3-6 month Total

Receivables Discount and loans －Others $ 297,871 8,669 10,632 317,172

December 31, 2013 Overdue in 1 Overdue in 1-3 Items month month Total

Receivables Discount and loans －Others $ 712,496 12,528 725,024

(Continued) 196 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Overdue in 1 Overdue in 1-3 Items month month Total

Receivables Discount and loans －Others $ 246,935 9,920 256,855

4) Liquidity risk Major subsidiaries are listed separately as follows: 1. Taipei Fubon Bank (The Bank) and its subsidiary (a) Source and definition of liquidity risk Liquidity risk means banks can not provide sufficient funding for asset size growth and obligation of matured liabilities, using late-payment to counterparties or emergency funding raise to cover funding gaps. (b) Management strategy and principles Taipei Fubon Bank (The Bank) a) The Bank’s strategy is to lower liquidity risk by acquiring stable, low interest-rate, sufficient funding to cover asset size growth and obligation of matured liabilities, and escape funding gaps from overrun in funding usage and demand. b) The principle is to harmony with the Bank’s deposit, loan and financial transaction growth. The Bank adjust funding strategy depending on market fund change and the central bank’s policies to increase fund utilization and lower liquidity risk; not only pay attention to period adjustment of long-term and short-term securities to match the timing of large amount loan drawdown and repayment, but also analyze stability and percentages of various type of deposits to manage funding liquidity. Funding liquidity management indicators, analyses, and explanations are reported in the Asset/Liability and Risk Management Committee for discussion and reported to Board of Directors (Managing Directors) for reference.

(Continued) 197 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Bank (China) The liquidity risk management strategy of Fubon Bank (China) aims not only at meeting compliance and regulatory requirements but also finding sound balance between business performance and adequate liquidity position. By adjusting its short-term and long-term assets allocation and dispersing sources of funds base on market conditions, the bank manages its liquidity risk exposure at an acceptable level to ensure its sustainable business operations and sound reputation. The principle for the bank’s liquidity risk management consists of full participation of staff, dynamic prevention, scientific quantification and prudent management to ensure Fubon Bank (China) has sufficient funding for its capital growth and obligations under all circumstances. (c) Qualitative explanation Taipei Fubon Bank (The Bank) The Bank’s management policy is to match maturities and interest rates of assets and liabilities, and control un-matched gap. Because of uncertainties of terms and conditions or types, the maturities and interest rates of assets and liabilities usually do not match perfectly, resulting in potential gain or loss. To maintain proper liquidity, the Bank uses appropriate ways to group assets and liabilities to evaluate liquidity and monitors the ratios of short-term negative funding gap to total asset in main currencies. Fubon Bank (China) Fubon Bank (China) maintains a robust risk appetite in its liquidity management. Daily liquidity management is centralized given the size and complexity of its current business scope with an organizational structure suitable for its liquidity exposure. The Board of Directors takes the ultimate responsibility of the bank’s liquidity risk, authorizing the Risk & Related Party Transaction Committee to conduct its liquidity-risk-related supervision duties. The senior management is in charge of implementations of liquidity management, authoring the Asset & Liability Management Committee (ALCO) to implement daily management duties. Liquidity risk assessment reports are submitted via ALCO to the Risk & Related Party Transaction Committee and Board of Directors on a quarterly basis.

(Continued) 198 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(d) Quantitative explanation The analysis of cash inflow and outflow in assets and liabilities held for liquidity risk was by the remaining periods which were from reporting date to contractual maturity dates. The maturity analysis of financial assets and liabilities, derivatives assets and liabilities, and off balance sheet items in main currencies was as follows (Except for non-deliverable derivatives, all were non-discounted contractual cash flow): Taipei Fubon Bank (The Bank) a) The maturity analysis of financial assets and liabilities - NTD

June 30, 2014 0-30 days 31-90 days 91-180 days 181-365 days Over 1 year Total

Assets Cash, call loans and $ 33,475,200 3,218,334 3,433,110 5,769,152 22,552,032 68,447,828 deposits due from/to other banks Investment in 166,114,543 15,958,539 10,846,483 25,021,795 37,515,805 255,457,165 marketable securities(Note 2) Securities purchased 8,823,462 - - - - 8,823,462 under agreements to resell Loans (included 87,617,101 81,073,934 90,368,044 100,385,122 555,098,088 914,542,289 overdue loans) Deliverable derivative 118,826,306 128,101,940 108,691,450 102,972,445 33,726,552 492,318,693 assets Non deliverable 4,913,095 - - 74,558 122,940 5,110,593 derivative assets Other capital inflow 12,809,886 4,464,331 3,941,329 7,733,387 43,759,267 72,708,200 on maturity Total assets $ 432,579,593 232,817,078 217,280,416 241,956,459 692,774,684 1,817,408,230 Liabilities Due to the Central $ 10,928,815 83,068 - 2,154,089 90,000 13,255,972 Bank of China and other banks Deposits and 147,863,538 108,957,098 116,264,473 195,376,052 437,612,923 1,006,074,084 remittances Securities sold under 4,398,623 152,651 50,620 - - 4,601,894 agreements to repurchase Payables 447,693 237,090 369,506 475,452 529,071 2,058,812 Bank debentures - - 35,000 18,074,558 52,978,278 71,087,836 Other deliverable 128,669,783 143,464,070 135,595,436 86,972,817 41,049,569 535,751,675 derivative liabilities Other non deliverable 5,267,629 - - - 64,663 5,332,292 derivative liabilities Other capital outflow 13,283,864 1,046,930 392,315 4,466,723 15,885,808 35,075,640 on maturity Total liabilities $ 310,859,945 253,940,907 252,707,350 307,519,691 548,210,312 1,673,238,205

(Continued) 199 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 181-365 0-30 days 31-90 days 91-180 days days Over 1 year Total

Assets Cash, call loans and $ 28,662,099 4,027,229 3,399,384 5,675,476 15,950,413 57,714,601 deposits due from/to other banks Investment in 174,236,148 21,552,743 17,715,004 25,030,341 31,945,082 270,479,318 marketable securities(Note 2) Securities purchased 15,779,517 4,400,380 - - - 20,179,897 under agreements to resell Loans (included 114,589,673 73,304,003 64,935,068 97,827,021 544,010,835 894,666,600 overdue loans) Deliverable 133,381,808 128,423,765 67,852,205 69,555,079 43,206,376 442,419,233 derivative assets Non-deliverable 4,849,682 - - - 236,195 5,085,877 derivative assets Other capital inflow 12,604,868 3,746,871 6,253,065 7,349,212 36,129,348 66,083,364 on maturity Total assets $ 484,103,795 235,454,991 160,154,726 205,437,129 671,478,249 1,756,628,890 Liabilities Due to the Central $ 15,485,564 1,261,750 1,734,252 83,587 90,000 18,655,153 Bank of China and other banks Deposits and 140,637,888 134,291,900 113,383,939 189,301,314 426,948,324 1,004,563,365 remittances Securities sold under 1,921,197 51,041 50,525 - - 2,022,763 agreements to repurchase Payables 419,700 425,848 380,498 385,825 732,048 2,343,919 Bank debentures - 4,250,000 - 35,000 61,152,894 65,437,894 Other-deliverable 136,063,951 155,408,234 83,879,428 56,305,168 53,181,249 484,838,030 derivative liabilities Other-non- 5,235,203 - - - 115,051 5,350,254 deliverable derivative liabilities Other capital 14,450,842 1,583,909 5,640,992 1,158,288 13,706,747 36,540,778 outflow on maturity Total liabilities $ 314,214,345 297,272,682 205,069,634 247,269,182 555,926,313 1,619,752,156

(Continued) 200 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 0-30 days 31-90 days 91-180 days 181-365 days Over 1 year Total

Assets Cash, call loans $ 48,741,426 3,616,968 3,582,496 5,477,806 11,912,493 73,331,189 and deposits due from/to other banks Investment in 187,163,469 24,315,310 9,651,114 34,267,680 29,054,915 284,452,488 marketable securities(Note 2) Securities 14,305,298 3,098,106 - - - 17,403,404 purchased under agreements to resell Loans (included 91,626,005 63,718,569 72,068,162 109,228,058 556,980,844 893,621,638 overdue loans) Deliverable 61,726,269 132,778,160 62,295,700 65,657,123 26,814,866 349,272,118 derivative assets Non-deliverable 5,784,254 3,414 - - 322,356 6,110,024 derivative assets Other capital inflow 22,298,409 3,040,604 3,695,778 8,851,574 24,164,160 62,050,525 on maturity Total assets $ 431,645,130 230,571,131 151,293,250 223,482,241 649,249,634 1,686,241,386 Liabilities Due to the Central $ 17,039,741 471,278 474,675 2,995,002 90,000 21,070,696 Bank of China and other banks Deposits and 167,950,538 124,381,414 123,264,121 188,476,679 409,533,026 1,013,605,778 remittances Securities sold 2,062,862 2,403,963 79,024 - - 4,545,849 under agreements to repurchase Payables 526,076 352,071 421,258 501,422 504,851 2,305,678 Bank debentures - 5,047,384 - 4,518,750 56,950,389 66,516,523 Other-deliverable 79,052,001 143,086,293 76,753,019 78,276,222 27,833,611 405,001,146 derivative liabilities Other-non- 5,975,989 1,030 - - 21,967 5,998,986 deliverable derivative liabilities Other capital 19,741,326 749,398 261,942 6,079,607 14,248,714 41,080,987 outflow on maturity Total liabilities $ 292,348,533 276,492,831 201,254,039 280,847,682 509,182,558 1,560,125,643

Note1: The above amounts are book value held by the head office of the Bank in New Taiwan Dollars.

Note2: Investment in marketable securities includes financial assets at fair value through profit or loss, available-for-sale financial assets, and held-to-maturity financial assets.

(Continued) 201 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

b) The maturity analysis of financial assets and liabilities - USD

Units: In Thousands of USD June 30, 2014 0-30 days 31-90 days 91-180 days 181-365 days Over 1 year Total

Assets Cash, call loans $ 416,796 - 202,698 171,305 - 790,799 and deposits due from/to other banks Investment in 59,705 8,018 40,934 115,390 925,168 1,149,215 marketable securities(Note 2) Loans (included 1,580,590 709,209 539,278 407,276 1,326,250 4,562,603 overdue loans) Deliverable 7,627,508 6,240,694 5,433,597 3,858,228 1,433,644 24,593,671 derivative assets Non-deliverable 184,538 - - - 1,567 186,105 derivative assets Other capital inflow 1,496,309 267,662 198,911 430,198 262,766 2,655,846 on maturity Total assets $ 11,365,446 7,225,583 6,415,418 4,982,397 3,949,395 33,938,239 Liabilities Due to Central $ 827,679 487,000 - - - 1,314,679 Bank of China and other banks Deposits and 2,035,205 574,507 670,554 900,089 1,990,096 6,170,451 remittances Securities sold - 7,634 18,997 65,339 596,393 688,363 under agreements to repurchase Payables 4,187 3,639 1,687 354 430 10,297 Other-deliverable 7,220,582 6,074,141 4,641,087 5,190,018 1,358,652 24,484,480 derivative liabilities Other-non- 204,299 18 73 845 19,054 224,289 deliverable derivative liabilities Other capital 1,042,523 152,297 45,860 34,818 487,835 1,763,333 outflow on maturity Total liabilities $ 11,334,475 7,299,236 5,378,258 6,191,463 4,452,460 34,655,892

(Continued) 202 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 0-30 days 31-90 days 91-180 days 181-365 days Over 1 year Total

Assets Cash, call loans $ 1,572,910 249,537 60,000 152,698 - 2,035,145 and deposits due from/to other banks Investment in 41,119 25,052 94,610 66,531 1,066,814 1,294,126 marketable securities(Note 2) Loans (included 1,415,478 824,089 596,939 518,861 1,238,284 4,593,651 overdue loans) Deliverable 6,748,303 6,335,605 3,217,576 2,328,396 1,823,041 20,452,921 derivative assets Non-deliverable 134,038 - - - 1,656 135,694 derivative assets Other capital inflow 908,016 233,310 118,756 180,183 126,957 1,567,222 on maturity Total assets $ 10,819,864 7,667,593 4,087,881 3,246,669 4,256,752 30,078,759 Liabilities Due to Central $ 613,510 442,000 - - - 1,055,510 Bank of China and other banks Deposits and 1,982,934 792,640 553,764 844,541 2,379,697 6,553,576 remittances Securities sold 29,121 4,613 43,216 27,084 508,698 612,732 under agreements to repurchase Payables 4,211 2,515 1,559 370 372 9,027 Other-deliverable 7,326,422 5,736,196 2,764,539 2,703,702 1,500,632 20,031,491 derivative liabilities Other-non- 153,367 19 232 267 22,361 176,246 deliverable derivative liabilities Other capital 1,041,204 121,909 76,115 22,163 255,311 1,516,702 outflow on maturity Total liabilities $ 11,150,769 7,099,892 3,439,425 3,598,127 4,667,071 29,955,284

(Continued) 203 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 0-30 days 31-90 days 91-180 days 181-365 days Over 1 year Total

Assets Cash, call loans $ 864,363 200,974 80,000 - - 1,145,337 and deposits due from/to other banks Investment in 19,996 5,022 22,112 151,464 994,544 1,193,138 marketable securities(Note 2) Loans (included 1,256,610 712,206 498,109 468,573 969,736 3,905,234 overdue loans) Deliverable 3,814,916 5,457,536 2,895,521 2,874,287 990,642 16,032,902 derivative assets Non-deliverable 161,522 - - - 945 162,467 derivative assets Other capital inflow 803,748 254,935 120,605 77,818 149,300 1,406,406 on maturity Total assets $ 6,921,155 6,630,673 3,616,347 3,572,142 3,105,167 23,845,484 Liabilities Due to the Central $ 348,510 350,000 - - - 698,510 Bank of China and other banks Deposits and 1,633,738 612,616 654,752 652,016 2,161,388 5,714,510 remittances Securities sold - - 9,487 78,894 484,399 572,780 under agreements to repurchase Payables 3,692 2,601 1,471 100 169 8,033 Other-deliverable 3,651,701 5,783,310 2,398,975 2,502,007 991,624 15,327,617 derivative liabilities Other-non- 168,917 - 35 1,350 23,823 194,125 deliverable derivative liabilities Other capital 801,174 140,671 91,339 123,672 185,997 1,342,853 inflow on maturity Total liabilities $ 6,607,732 6,889,198 3,156,059 3,358,039 3,847,400 23,858,428

Note 1: The above amounts are book value held by the headquarters, onshore branches and offshore banking unit of the Bank in U.S. dollars.

Note 2: Investment in marketable securities includes financial assets at fair value through profit or loss, available-for-sale financial assets, and held-to-maturity financial assets.

(Continued) 204 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Bank (China) c) The maturity analysis of financial assets and liabilities - CNY

Units: In Thousands of USD June 30, 2014 0-30 days 31-90 days 91-365 days Over 1 year Undetermined Total

Assets Cash, call loans $ 3,289,116 412,873 896,492 - 7,084,135 11,682,616 and deposits due from/to other banks Investment in 19,625 214,827 974,298 8,294,830 283,015 9,786,595 marketable securities(Note ) Securities 293,394 2,326,021 1,831,200 - - 4,450,615 purchased under agreements to resell Loans (included 8,108,375 10,890,391 7,967,047 6,458,521 - 33,424,334 overdue loans) Deliverable 3,281,188 3,221,615 8,403,510 94,043 - 15,000,356 derivative assets Non deliverable 518 2,215 6,205 518 - 9,456 derivative assets Other capital 117,282 204,626 133,348 24,800 4,811 484,867 inflow on maturity Total assets $ 15,109,498 17,272,568 20,212,100 14,872,712 7,371,961 74,838,839 Liabilities Due to the $ 694,142 793,712 856,993 - - 2,344,847 Central Bank of China and other banks Financing to the - - 158,425 60,537 - 218,962 Central Bank of China and other banks Deposits and 16,638,553 10,473,079 15,193,005 2,123,958 - 44,428,595 remittances Securities sold 4,846,667 497,461 1,221,710 - - 6,565,838 under agreements to repurchase Payables 187,701 204,626 133,348 - - 525,675 Deliverable 3,292,077 3,231,076 8,392,694 92,956 - 15,008,803 derivatives liabilities Non-deliverable 577 2,470 6,587 518 - 10,152 derivatives Other capital 27 31 134 25,428 45,028 70,648 outflow liabilities Total liabilities $ 25,659,744 15,202,455 25,962,896 2,303,397 45,028 69,173,520

Note: Investment in marketable securities includes financial assets at fair value through profit or loss, available-for-sale financial assets, and held-to-maturity financial assets.

(Continued) 205 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Taipei Fubon Bank (The Bank) d) The maturity analysis of derivatives assets and liabilities - NTD

June 30, 2014 0-30 days 31-90 days 91-180 days 181-365 days Over 1 year Total

Assets Deliverable derivative assets Forward contracts $ 347,909 223,884 528,543 436,266 3,081 1,539,683 Currency exchange 111,280,417 112,138,475 79,722,979 69,105,835 957,943 373,205,649 Cross-currency 7,197,980 15,739,581 28,439,928 33,430,344 32,765,528 117,573,361 swap Subtotal $ 118,826,306 128,101,940 108,691,450 102,972,445 33,726,552 492,318,693 Non-deliverable derivative assets Foreign exchange $ 963,356 - - - - 963,356 derivative instrument Interest rate derivative - - - 74,558 122,940 197,498 instrument-hedging Interest rate derivative 3,144,139 - - - - 3,144,139 instrument-non- hedging Equity derivative 796,880 - - - - 796,880 instrument Product derivative 8,720 - - - - 8,720 instruments Subtotal $ 4,913,095 - - 74,558 122,940 5,110,593 Liabilities Deliverable derivative liabilities Forward contracts $ 1,302,916 2,302,902 284,874 - - 3,890,692 Currency exchange 126,659,400 139,365,836 133,545,712 72,691,628 1,764,521 474,027,097 Cross-currency 707,467 1,795,332 1,764,850 14,281,189 39,285,048 57,833,886 swap Subtotal $ 128,669,783 143,464,070 135,595,436 86,972,817 41,049,569 535,751,675 Non-deliverable derivative liabilities Foreign exchange $ 867,634 - - - - 867,634 derivative instrument Interest rate derivative - - - - 64,663 64,663 instrument-hedging Interest rate derivative 3,594,395 - - - - 3,594,395 instrument-non- hedging Equity derivative 796,880 - - - - 796,880 instrument Product derivative 8,720 - - - - 8,720 instruments Subtotal $ 5,267,629 - - - 64,663 5,332,292

(Continued) 206 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 181-365 0-30 days 31-90 days 91-180 days days Over 1 year Total

Assets Deliverable derivative assets Forward contracts $ 2,051,852 223,429 200,923 38,133 27,757 2,542,094 Currency exchange 122,435,501 100,897,901 60,932,549 42,468,508 3,633,420 330,367,879 Cross-currency 8,894,455 27,302,435 6,718,733 27,048,438 39,545,199 109,509,260 swap Subtotal $ 133,381,808 128,423,765 67,852,205 69,555,079 43,206,376 442,419,233 Non-deliverable derivative assets Foreign exchange $ 186,476 - - - - 186,476 Interest rate derivative - - - - 236,195 236,195 instrument-hedging Interest rate derivative 3,812,920 - - - - 3,812,920 instrument-non- hedging Equity derivative 834,945 - - - - 834,945 instrument Product derivative 15,341 - - - - 15,341 instruments Subtotal $ 4,849,682 - - - 236,195 5,085,877 Liabilities Deliverable derivative liabilities Forward contracts $ 2,113,319 638,257 238,515 410,921 - 3,401,012 Currency exchange 131,995,198 129,237,436 75,620,640 52,099,364 11,235,090 400,187,728 Cross-currency 1,955,434 25,532,541 8,020,273 3,794,883 41,946,159 81,249,290 swap Subtotal $ 136,063,951 155,408,234 83,879,428 56,305,168 53,181,249 484,838,030 Non-deliverable derivative liabilities Foreign exchange $ 133,363 - - - - 133,363 Interest rate derivative - - - - 115,051 115,051 instrument-hedging Interest rate derivative 4,251,554 - - - - 4,251,554 instrument-non- hedging Equity derivative 834,945 - - - - 834,945 instrument Product derivative 15,341 - - - - 15,341 instruments Subtotal $ 5,235,203 - - - 115,051 5,350,254

(Continued) 207 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 0-30 days 31-90 days 91-180 days 181-365 days Over 1 year Total

Assets Deliverable derivative assets Forward contracts $ 1,360,973 716,154 530,371 292,895 65,890 2,966,283 Currency exchange 58,222,696 125,552,311 57,090,529 30,466,897 2,950,966 274,283,399 Cross-currency 2,142,600 6,509,694 4,674,800 34,897,331 23,798,011 72,022,436 swap Subtotal $ 61,726,269 132,778,159 62,295,700 65,657,123 26,814,867 349,272,118 Non-deliverable derivative assets Foreign exchange $ 259,862 - - - - 259,862 Interest rate derivative - 3,414 - - 322,356 325,770 instrument-hedging Interest rate derivative 5,075,821 - - - - 5,075,821 instrument-non- hedging Equity derivative 431,203 - - - - 431,203 instrument Product derivative 17,368 - - - - 17,368 instruments Subtotal $ 5,784,254 3,414 - - 322,356 6,110,024 Liabilities Deliverable derivative liabilities Forward contracts $ 4,918,223 2,429,812 131,465 205,380 - 7,684,880 Currency exchange 73,715,008 135,877,884 74,873,304 43,560,278 15,196,329 343,222,803 Cross-currency 418,770 4,778,597 1,748,250 34,510,564 12,637,282 54,093,463 swap Subtotal $ 79,052,001 143,086,293 76,753,019 78,276,222 27,833,611 405,001,146 Non-deliverable derivative liabilities Foreign exchange $ 180,495 - - - - 180,495 Interest rate derivative - 1,030 - - 21,967 22,997 instrument-hedging Interest rate derivative 5,369,752 - - - - 5,369,752 instrument-non- hedging Equity derivative 408,374 - - - - 408,374 instrument Product derivative 17,368 - - - - 17,368 instruments Subtotal $ 5,975,989 1,030 - - 21,967 5,998,986

Note: The above amounts are book value held by the headquarters and onshore branches of the Bank in New Taiwan Dollars.

(Continued) 208 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

e) The maturity analysis of derivatives assets and liabilities - USD

Units: In Thousands of USD June 30, 2014 0-30 days 31-90 days 91-180 days 181-365 days Over 1 year Total

Assets Deliverable derivative assets Forward contracts $ 480,324 436,696 177,764 252,294 2,300 1,349,378 Currency exchange 7,083,684 5,723,998 5,185,833 3,318,934 112,864 21,425,313 Cross-currency 63,500 80,000 70,000 287,000 1,318,480 1,818,980 swap Subtotal $ 7,627,508 6,240,694 5,433,597 3,858,228 1,433,644 24,593,671 Non-deliverable derivative assets Foreign exchange $ 162,359 - - - - 162,359 derivative instrument Interest rate derivative - - - - 1,567 1,567 instrument-hedging Interest rate derivative 21,452 - - - - 21,452 instrument-non- hedging Equity derivative 555 - - - - 555 instrument Product derivative 172 - - - - 172 instruments Subtotal $ 184,538 - - - 1,567 186,105 Liabilities Deliverable derivative liabilities Forward contracts $ 452,914 613,286 276,440 303,109 51,390 1,697,139 Currency exchange 6,527,827 4,936,905 3,406,744 3,765,266 205,346 18,842,088 Cross-currency 239,841 523,950 957,903 1,121,643 1,101,916 3,945,253 swap Subtotal $ 7,220,582 6,074,141 4,641,087 5,190,018 1,358,652 24,484,480 Non-deliverable derivative liabilities Foreign exchange $ 165,457 - - - - 165,457 derivative instrument Interest rate derivative - 18 73 845 19,054 19,990 instrument-hedging Interest rate derivative 38,115 - - - - 38,115 instrument-non- hedging Equity derivative 555 - - - - 555 instrument Product derivative 172 - - - - 172 instruments Subtotal $ 204,299 18 73 845 19,054 224,289

(Continued) 209 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 181-365 0-30 days 31-90 days 91-180 days days Over 1 year Total

Assets Deliverable derivative assets Forward contracts $ 447,525 216,944 162,923 261,182 3,000 1,091,574 Currency exchange 6,233,978 5,255,247 2,780,843 1,869,346 409,741 16,549,155 Cross-currency 66,800 863,414 273,810 197,868 1,410,300 2,812,192 swap Subtotal $ 6,748,303 6,335,605 3,217,576 2,328,396 1,823,041 20,452,921 Non-deliverable derivative assets Foreign exchange $ 91,320 - - - - 91,320 derivative instrument Interest rate derivative - - - - 1,656 1,656 instrument Interest rate derivative 41,764 - - - - 41,764 instrument-non- hedging Equity derivative 723 - - - - 723 instrument Product derivative 231 - - - - 231 instruments Subtotal $ 134,038 - - - 1,656 135,694 Liabilities Deliverable derivative liabilities Forward contracts $ 1,072,413 635,130 260,562 168,493 - 2,136,598 Currency exchange 5,957,209 4,182,824 2,278,071 1,621,448 168,988 14,208,540 Cross-currency 296,800 918,242 225,906 913,761 1,331,644 3,686,353 swap Subtotal $ 7,326,422 5,736,196 2,764,539 2,703,702 1,500,632 20,031,491 Non-deliverable derivative liabilities Foreign exchange $ 93,691 - - - - 93,691 derivative instrument Interest rate derivative 76 19 232 267 22,361 22,955 instrument-hedging Interest rate 58,647 - - - - 58,647 derivative- instrument-non- hedging Equity derivative 723 - - - - 723 instrument Product derivative 230 - - - - 230 instrument Subtotal $ 153,367 19 232 267 22,361 176,246

(Continued) 210 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 0-30 days 31-90 days 91-180 days 181-365 days Over 1 year Total

Assets Deliverable derivative assets Forward contracts $ 400,704 360,312 64,699 153,189 4,850 983,754 Currency exchange 3,400,212 4,937,237 2,770,822 1,555,874 563,792 13,227,937 Cross-currency 14,000 159,987 60,000 1,165,224 422,000 1,821,211 swap Subtotal $ 3,814,916 5,457,536 2,895,521 2,874,287 990,642 16,032,902 Non-deliverable derivative assets Foreign exchange $ 133,377 - - - - 133,377 derivative instrument Interest rate derivative - - - - 945 945 instrument Interest rate derivative 23,428 - - - - 23,428 instrument-non- hedging Equity derivative 840 - - - - 840 instrument Product derivative 3,877 - - - - 3,877 instruments Subtotal $ 161,522 - - - 945 162,467 Liabilities Deliverable derivative liabilities Forward contracts $ 578,711 493,492 215,483 197,913 17,603 1,503,202 Currency exchange 3,000,785 5,070,188 2,020,894 1,132,746 175,713 11,400,326 Cross-currency 72,205 219,630 162,598 1,171,348 798,308 2,424,089 swap Subtotal $ 3,651,701 5,783,310 2,398,975 2,502,007 991,624 15,327,617 Non-deliverable derivative liabilities Foreign exchange $ 128,584 - - - - 128,584 derivative instrument Interest rate derivative - - 35 1,350 23,823 25,208 instrument-hedging Interest rate 35,673 - - - - 35,673 derivative- instrument-non- hedging Equity derivative 828 - - - - 828 instrument Product derivative 3,832 - - - - 3,832 instrument Subtotal $ 168,917 - 35 1,350 23,823 194,125

Note:The above amounts are book value held by the headquarters, onshore branches and offshore banking unit of the Bank in US dollars.

(Continued) 211 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Bank (China) f) The maturity analysis of derivatives assets and liabilities - CNY

Units:In Thousands of CNY June 30, 2014 0~30 days 31~90 days 91~365 days Over 1 year Total

Asset Deliverable derivatives assets Forward contracts $ 895,703 577,025 4,930,751 19,242 6,422,721 Currency exchange 2,340,395 2,641,436 3,323,447 - 8,305,278 Options 45,090 3,154 149,312 74,801 272,357 Subtotal 3,281,188 3,221,615 8,403,510 94,043 15,000,356 Non-deliverable derivatives assets Interest rate derivatives 518 2,215 6,205 518 9,456 instruments-non- hedging Liabilities Deliverable derivatives liabilities Forward contracts $ 895,525 576,226 4,923,920 19,213 6,414,884 Currency exchange 2,350,000 2,652,202 3,321,302 - 8,323,504 Options 46,552 2,648 147,472 73,743 270,415 Subtotal 3,292,077 3,231,076 8,392,694 92,956 15,008,803 Non-deliverable derivatives assets Interest rate derivatives 577 2,470 6,587 518 10,152 instruments- non- hedging g) The maturity analysis of off-balance sheet items The maturity analysis of off-balance sheet items shows the remaining balance from the balance sheet date to the maturity date. For the sent financial guarantee contracts, the maximum amounts are possibly asked for settlement in the earliest period. The amounts in the table below were on cash flow basis; therefore, some disclosed amounts will not match with the consolidated balance sheet. Taipei Fubon Bank (The Bank)

June 30, 2014 0-30 days 31-90 days 91-180 days 181-365 days Over 1 year Total Standby and irrevocable loan 322,961,788 - - - - 322,961,788 commitment Unused letters of credit 11,017,284 - - - - 11,017,284 Other guarantee amounts 12,424,316 4,217,788 372,597 4,521,661 27,815,647 49,352,009 Total 346,403,388 4,217,788 372,597 4,521,661 27,815,647 383,331,081

(Continued) 212 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 0-30 days 31-90 days 91-180 days 181-365 days Over 1 year Total Standby and irrevocable loan 330,912,939 - - - - 330,912,939 commitment Unused letters of credit 10,095,464 - - - - 10,095,464 Other guarantee amounts 8,171,212 126,479 1,316,915 4,240,575 32,706,320 46,561,501 Total 349,179,615 126,479 1,316,915 4,240,575 32,706,320 387,569,904

June 30, 2013 0-30 days 31-90 days 91-180 days 181-365 days Over 1 year Total Standby and irrevocable loan 299,671,019 - - - - 299,671,019 commitment Unused letters of credit 9,874,484 - - - - 9,874,484 Other guarantee amounts 7,925,372 100,000 2,228,505 4,834,331 40,276,656 55,364,864 Total 317,470,875 100,000 2,228,505 4,834,331 40,276,656 364,910,367

Fubon Bank (China)

Units:In Thousands of CNY June 30, 2014 0-30 days 31-90 days 91-180 days 181-365 days Over 1 year Total Unused letters of credit 12,431 54,324 39,952 8,990 - 115,697 Other guarantee amounts - 40,822 433,914 841,618 321,405 1,637,759 Total 12,431 95,146 473,866 850,608 321,405 1,753,456

2. Fubon Life Insurance and its subsidiaries The liquidity risk of financial instruments is divided into capital liquidity risk and market liquidity risk. Capital liquidity risk refers to the risk that Fubon Life Insurance does not possess sufficient cash and is not able to raise funds in time and finally failed to fulfill the obligation (debt repayment); Market liquidity risk refers to the risk that Fubon Life Insurance is not able to settle or offset current position with reasonable market price due to the shallow market depth or market disorder or the oversized possession of the investment position and finally Fubon Life Insurance may suffer from losses. In terms of capital liquidity risk, Fubon Life Insurance and its subsidiaries manages it in 2 aspects, short term and mid-to-long term. Except for the capital liquidity ratio set up for the index of measurement and control of short-term liquidity, relevant departments have established prompt capital report mechanism and apply proper currency market instruments or foreign exchange derivative instruments for daily capital movement; Mid-to-long term capital liquidity management is reviewed by the Assets and Liabilities Management Committee. The Company applies cash flow analysis model to monitor the coordination of assets and liabilities in order to lower related risks. Regarding the market liquidity risk, the risk management department of Fubon Life Insurance and its subsidiaries established monitoring mechanism in terms of daily transaction concentration, investment position limit and current assets deployment in order to avoid market liquidity risk. In addition, Fubon Life Insurance and its subsidiaries established complete crisis management and responding mechanism to cope with significant capital demand of unusual or emergent situations.

(Continued) 213 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Life Insurance and its subsidiaries possess sufficient operating funds, including cash can cash equivalent and securities with excellent liquidity such as government bond, to cover the investments and debt repayments. Therefore, the liquidity risk of Fubon Life Insurance and its subsidiaries is extremely low. In addition, the derivative financial instruments Fubon Life Insurance and its subsidiaries engages in, such as delivery forward contracts, currency swap contracts, cross currency swap contracts, are all of highly liquid currencies. The possibility that they are not able to be sold at reasonable prices in the market is minimum, and therefore the market liquidity risk is low. Furthermore, the delivery forward contracts, currency swap contracts and cross currency swap contracts which matured are mostly extended and the capital to pay for the settlements is sufficient. Thus, the capital liquidity risk is low. The maturity structure of non-derivative financial liabilities of Fubon Life Insurance and its subsidiaries is listed below:

June 30, 2014 < 1 year 1~3 years 3~5 years > 5 years Total

Payables $30,607,501 - - - 30,607,501 Short-term debts 102,499 - - - 102,499 Total $30,710,000 - - - 30,710,000

December 31, 2013 < 1 year 1~3 years 3~5 years > 5 years Total

Payables $21,926,625 - - - 21,926,625

June 30, 2013 < 1 year 1~3 years 3~5 years > 5 years Total

Payables $32,256,320 - - - 32,256,320

The maturity structure of derivative financial liabilities of Fubon Life Insurance and its subsidiaries is listed below:

June 30, 2014 < 1 year 1~3 years 3~5 years > 5 years Total

Financial liabilities $ 241,560 56,521 - - 298,081 measured at fair value through profit or loss Hedging derivative - - 1,385 51,070 52,455 financial liabilities Total $ 241,560 56,521 1,385 51,070 350,536

(Continued) 214 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 < 1 year 1~3 years 3~5 years > 5 years Total

Financial liabilities $ 5,769,107 55,802 - - 5,824,909 measured at fair value through profit or loss Hedging derivative - - 2,775 48,445 51,220 financial liabilities Total $ 5,769,107 55,802 2,775 48,445 5,876,129

June 30, 2013 < 1 year 1~3 years 3~5 years > 5 years Total

Financial liabilities at $ 4,260,465 - 57,853 - 4,318,318 fair value through profit or loss Hedging derivative - - 1,465 15,988 17,453 financial liabilities Total $ 4,260,465 - 59,318 15,988 4,335,771

Note: The statistics of the table is based on the maturity date specified in the contracts (year=Act/365) and the amount is the book value. The subsidiary in Vietnam possesses a bit position of government bonds. The operating capital is enough for investment, debt repayment and fulfilling contract obligation, so the capital liquidation risk is extremely low. Currently, the subsidiary in Vietnam’s operating capital contains cash and cash equivalent of $803,053 and the position of government bonds $192,650. 3. Fubon Insurance Liquidity risk is divided into two types: “market liquidity risk” and” funding liquidity risk.” Fubon Insurance and its subsidiaries monitored liquidity risk in compliance with its risk management rules. Funding liquidity risk is the risk that the entity cannot provide sufficient funding to meet the needs for the growth of asset level and the settlement of the obligation of matured liabilities, which caused late-payment to counterparties or called for an emergency fund raising requirement to cover the funding gaps. Market liquidity risk is the loss incurred as a market participant unable to easily exit a position on a prevailing market price or to liquidate a position immediately while not hitting the best price due to insufficiency of market depth or market transparency, or market failure. (a) Management process of liquidity risk a) Risk identification To achieve liquidity risk management goal, Fubon Insurance identified potential liquidity risk factors encountered during operation process. Those risk factors were such as funding liquidity risk factors, market liquidity risk factors and characteristics of products being traded.

(Continued) 215 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

b) Risk measurement Fubon Insurance measured the possibility of occurrence and the degree of negative impact of risk events and risk factors by qualitative or quantitative method, and compared these influences with risk limits set by the management which was used as a basis for the setting of the priority in risk control and the response measures subsequently. c) Risk monitoring Fubon Insurance established liquidity risk monitoring procedure to review and monitor utilization of various risk limits monthly. An action would be taken if the risk limits is breached. Fubon Insurance has established proper monitor frequency and hierarchical reporting mechanism to deal with whenever there is any abnormal situation occurred or deficiency identified. A specific reporting procedure would be followed to ensure the timely response to significant liquidity risk. d) Risk responding As liquidity risk occurs, the head of any related unit being impacted or relevant unit with the authority to deal with the event would respond to the event immediately, and report to risk management and related departments in accordance with the established authorization. Afterwards, every related unit would work with risk management department to investigate the underlying reason for the event, and develop a remediation plan, and risk management department would monitor the progress of the follow up actions. (b) Liquidity risk management mechanism a) Management strategy of funding liquidity risk in operation and investment were as follows: ensure balance of capital inflow and outflow, examine and predict capital demand at present and in the future in accordance with strategies of operational management and investment activities, establish critical indicators of funding liquidity risk, and make appropriate adjustment with business strategy and market condition. Fubon Insurance manages the liquidity risk efficiently in two aspects, short-term and medium-long term. Besides setting the percentage of liquid assets in total assets and the net everyday cash flow as standards of measurement and control, Fubon Insurance has already established the immediate cash-using information system, using proper market monetary instruments or foreign exchange instruments to allocate daily cash. Medium- long term liquidity management decreases related risk through annual reviewing on the assessment report of using assets and liabilities and applying the model of cash flow analysis to monitor the using of assets and liabilities. b) For the liquidity risk management in the market, consider the transaction volume mainly, the strategy of sales development and the target of budget, according to the market size, dimension and market liquidity of every product, to set the key indicators of the liquidity risk in the market. For lower liquidity products, avoiding the occurrence liquidity risk, Fubon Insurance controls the transaction amount and the transaction conditions in every transaction.

(Continued) 216 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

c) Fubon Insurance established complete risk management system to deal with the mass demand of cash in abnormal or urgent condition. Monitoring daily net cash flow, Fubon Insurance established immediate cash flow estimation system and preserved proper amount of equivalent cash for future response. Financial department and accounting office provide risk management department with the condition of cash liquidity monthly, while risk management department also regularly reviews the limitation of market liquidity risk and it should inform the risk management committee with the indicators of the market liquidity risk and the management of the limitation. If the management indicator approaches the limitation, it should enhance the intention of the capital variation. Possessing sufficient operating capital, government bonds and other securities to satisfy the capital demand in investment, pay liabilities matured and execute contracts’ obligation, Fubon Insurance confronts low liquidity in compliance with rules. d) The maturity analyses are as follows:

June 30, 2014 No Less than 5 to 10 10 to 20 More than maturity one year 1 to 3 year 3 to 5 year year year 20 year date Total

The maturity analysis of financial assets Available-for-sale $ 727,064 349,850 3,521,945 4,244,225 662,541 2,883,863 - 12,389,488 financial assets Non-active 100,000 - 288,270 - 239,154 1,937,540 - 2,564,964 market bond investment $ 827,064 349,850 3,810,215 4,244,225 901,695 4,821,403 - 14,954,452

The maturity analysis of financial liabilities Other financial $ (195,700) ------(195,700) liabilities

December 31, 2013 No Less than 5 to 10 10 to 20 More than maturity one year 1 to 3 year 3 to 5 year year year 20 year date Total

The maturity analysis of financial assets Available-for-sale $ 1,299,784 1,108,361 2,944,704 5,111,384 625,888 2,671,076 - 13,761,197 financial assets Non-active 300,000 400,000 289,908 - 285,073 1,914,807 - 3,189,788 market bond investment $ 1,599,784 1,508,361 3,234,612 5,111,384 910,961 4,585,883 - 16,950,985

The maturity analysis of financial liabilities Other financial $ (105,000) ------(105,000) liabilities

(Continued) 217 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 No Less than 5 to 10 10 to 20 More than maturity one year 1 to 3 year 3 to 5 year year year 20 year date Total

The maturity analysis of financial assets Available-for-sale $ 852,129 1,909,736 2,509,119 3,930,365 206,161 2,736,594 - 12,144,104 financial assets Non-active 300,000 400,000 90,417 200,000 389,581 1,899,161 - 3,279,159 market bond investment $ 1,152,129 2,309,736 2,599,536 4,130,365 595,742 4,635,755 - 15,423,263

(c) The maturity analyses of derivative assets and liabilities All of the forward rate contracts and swap contracts are not held for trading, but mainly for avoiding the foreign exchange rate risk generated from the foreign investment capital. Being high liquidity monetary, whose probability of being unable to sale in the market is extremely small, the liquidity risk of the currency held is low. Matured forward rate contracts and swap contracts almost will be continued and there is enough capital for settlement. Therefore, the liquidity risk of the capital is low. The maturity analysis of derivative financial instruments is as follows:

June 30, 2014 No Less than 1 5 to 10 maturity year 1 to 3 year 3 to 5 year year date Total

Maturity analysis of $ 66,766 - - - - 66,766 financial assets Maturity analysis of $ 1,858 - - - - 1,858 financial liabilities

December 31, 2013 No Less than 1 5 to 10 maturity year 1 to 3 year 3 to 5 year year date Total

Maturity analysis of $ 1,847 - - - - 1,847 financial assets Maturity analysis of $ 128,168 - - - - 128,168 financial liabilities

June 30, 2013 No Less than 1 5 to 10 maturity year 1 to 3 year 3 to 5 year year date Total

Maturity analysis of $ 7,361 - - - - 7,361 financial assets Maturity analysis of $ 122,299 - - - - 122,299 financial liabilities

(Continued) 218 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

4. Fubon Securities and its subsidiaries Liquidity Risk Presentation and Disclosure Liquidity risk is the risk that Fubon Securities and its subsidiaries cannot provide sufficient funding for asset size growth and obligation of matured liabilities, using late-payment to counterparties or emergency funding raise to cover funding gaps. (a) Liquidity risk measurement analysis

June 30, 2014 Cash flow gap 91-180 181-365 Over 1 Financial assets 0-30 days 31-90 days days days year Total

Cash and cash equivalents $ 2,494,371 689,259 1,553,419 832,021 12,500 5,581,570 Customer margin account 5,960,666 - - - - 5,960,666 Held for trading financial assets 9,255,852 - - - 484,700 9,740,552 Open-end funds and money 252,505 - - - - 252,505 market instruments Operating securities 8,853,634 - - - - 8,853,634 Derivative-OTC 34,025 - - - - 34,025 Derivative-Futures trading 115,688 - - - - 115,688 margin Others debt securities - - - - 484,700 484,700 Available-for-sale financial assets- - - - 5,915,648 112,674 6,028,322 current Available-for-sale financial assets- - - - 49,991 - 49,991 non-current Receivables from pecuniary finance 13,865,432 2,029,088 676,362 338,181 - 16,909,063 Stock collateral price 46,761 - - - - 46,761 Margin lending-refundable 42,251 - - - - 42,251 Receivables 10,620,641 97,203 12,445 5,712 - 10,736,001 Total $ 42,285,974 2,815,550 2,242,226 7,141,553 609,874 55,095,177 Proportion of the total 76.75 % 5.11 % 4.07 % 12.96 % 1.11 % 100.00 %

(Continued) 219 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 Cash flow gap 91-180 181-365 Over 1 Financial liabilities 0-30 days 31-90 days days days year Total

Short term loans $ 1,100,000 - - - - 1,100,000 Commercial papers payable 5,250,000 - - - - 5,250,000 Held for trading financial liabilities 1,479,312 - - - - 1,479,312 Call (put) warrants 662,820 - - - - 662,820 Derivative-OTC 469,961 - - - - 469,961 Borrowed stock payable and 346,531 - - - - 346,531 buyback borrowed stock payable Initial recognition, held-designated 76,978 - - - - 76,978 financial liability at fair value through profit or loss Short margin 1,161,448 169,968 56,656 28,328 - 1,416,400 Short sales proceeds payable 1,304,245 190,865 63,622 31,811 - 1,590,543 Securities lending refundable 846,459 - - - - 846,459 deposits Futures customers' equity 5,960,666 - - - - 5,960,666 Accounts payable 10,181,685 27 9 5 - 10,181,726 Amounts collected for other parties 570,063 165 - - - 570,228 Total $ 27,930,856 361,025 120,287 60,144 - 28,472,312 Proportion of the total 98.10 % 1.27 % 0.42 % 0.21 % - % 100.00 % Cash inflow 42,285,974 2,815,550 2,242,226 7,141,553 609,874 55,095,177 Cash outflow 27,930,856 361,025 120,287 60,144 - 28,472,312 Net cash inflow 14,355,118 2,454,525 2,121,939 7,081,409 609,874 26,622,865

December 31, 2013 Cash flow gap 91-180 181-365 Over 1 Financial assets 0-30 days 31-90 days days days year Total

Cash and cash equivalents $ 2,133,942 257,321 532,653 3,170,954 15,000 6,109,870 Customer margin account 5,433,673 - - - - 5,433,673 Held for trading financial assets 6,413,185 - - - 556,566 6,969,751 Open-end funds and money 1,295,045 - - - - 1,295,045 market instruments Operating securities 5,064,962 - - - - 5,064,962 Derivative-Futures trading 53,178 - - - - 53,178 margin Other debt securities - - - - 556,566 556,566 Available-for-sale financial assets - - - 5,879,764 159,279 6,039,043 Receivables from pecuniary finance 12,101,872 1,603,863 583,222 291,611 - 14,580,568 Stock collateral price 155,838 - - - - 155,838 Margin lending-refundable 145,774 - - - - 145,774 Receivables 10,381,226 33,124 11,535 5,547 - 10,431,432 Total $ 36,765,510 1,894,308 1,127,410 9,347,876 730,845 49,865,949 Proportion of the total 73.72 % 3.80 % 2.26 % 18.75 % 1.47 % 100.00 %

(Continued) 220 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 Cash flow gap 91-180 181-365 Over 1 Financial liabilities 0-30 days 31-90 days days years year Total

Held for trading financial liabilities $ 1,230,285 - - - - 1,230,285 Call (put) warrant 325,596 - - - - 325,596 Derivative-－OTC 542,540 - - - - 542,540 Borrowed stock payable and 362,149 - - - - 362,149 buyback borrowed stock payable Initial recognition, held-designated 135,249 - - - - 135,249 financial liability at fair value through profit or loss Short margin 1,978,932 262,268 95,370 47,685 - 2,384,255 Short sales proceeds payable 2,390,425 316,803 115,201 57,601 - 2,880,030 Securities lending refundable 1,311,855 - - - - 1,311,855 deposits Futures customers' equity 5,433,673 - - - - 5,433,673 Amounts payable 10,078,068 84 31 15 - 10,078,198 Amounts collected for the parties 702,815 - - - - 702,815 Total $ 23,261,302 579,155 210,602 105,301 - 24,156,360 Proportion of the total 96.29 % 2.40 % 0.87 % 0.44 % - % 100.00 % Cash inflow 36,765,510 1,894,308 1,127,410 9,347,876 730,845 49,865,949 Cash outflow 23,261,302 579,155 210,602 105,301 - 24,156,360 Net cash inflow 13,504,208 1,315,153 916,808 9,242,575 730,845 25,709,589

June 30, 2013 Cash flow gap 91-180 181-365 Over 1 Financial assets 0-30 days 31-90 days days days year Total

Cash and cash equivalents $ 2,423,265 1,084,921 1,891,325 1,246,790 40,395 6,686,696 Customer margin account 5,649,023 - - - - 5,649,023 Held for trading financial assets 3,700,622 - - - 608,450 4,309,072 Open-end funds and money 235,715 - - - - 235,715 market instruments Operating securities 3,456,317 - - - - 3,456,317 Derivative-Futures trading 8,590 - - - - 8,590 margin Other debt securities - - - - 608,450 608,450 Available-for-sale financial assets - - - 6,734,215 295,735 7,029,950 Receivables from pecuniary finance 11,278,059 1,650,448 550,149 275,075 - 13,753,731 Stock collateral price 56,345 - - - - 56,345 Margin lending-refundable 67,929 - - - - 67,929 Receivables 7,951,357 36,636 11,750 5,761 - 8,005,504 Total $ 31,126,600 2,772,005 2,453,224 8,261,841 944,580 45,558,250 Proportion of the total 68.34 % 6.08 % 5.38 % 18.13 % 2.07 % 100.00 %

(Continued) 221 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Cash flow gap 91-180 181-365 Over 1 Financial liabilities 0-30 days 31-90 days days years year Total

Commercial papers payable $ 700,000 - - - - 700,000 Held for trading financial liabilities 922,604 - - - - 922,604 Call (put) warrant 249,209 - - - - 249,209 Derivative-－OTC 404,852 - - - - 404,852 Borrowed stock payable and 268,543 - - - - 268,543 buyback borrowed stock payable Initial recognition, held-designated 88,307 - - - - 88,307 financial liability at fair value through profit or loss Short margin 955,482 139,827 46,609 23,304 - 1,165,222 Short sales proceeds payable 1,102,398 161,327 53,776 26,888 - 1,344,389 Securities lending refundable 2,925,363 - - - - 2,925,363 deposits Futures customers' equity 5,649,023 - - - - 5,649,023 Amounts payable 7,360,271 19 7 3 - 7,360,300 Amounts collected for the parties 145,935 - - - - 145,935 Total $ 19,849,383 301,173 100,392 50,195 - 20,301,143 Proportion of the total 97.78 % 1.48 % 0.49 % 0.25 % - % 100.00 % Cash inflow 31,126,600 2,772,005 2,453,224 8,261,841 944,580 45,558,250 Cash outflow 19,849,383 301,173 100,392 50,195 - 20,301,143 Net cash inflow 11,277,217 2,470,832 2,352,832 8,211,646 944,580 25,257,107

(b) Liquidity risk stress test In order to allocate capital effectively, Fubon Securities and its subsidiaries utilize liquidity risk management mechanisms to evaluate and monitor short-term cash flow requirements for various types of business, and consider local short-term, cross-border, or cross-market demand for capital. The Financial settlement Department provides capital requirement evaluating information to the Risk Management Department, and the Risk Management Department provides a flow-of- funds simulation analysis stress test evaluating report to the Financial Settlement Department every six months to evaluate Fubon Securities and its subsidiaries related action taken while facing periods of high market volatility. If a stressful situation occur, the department report the result to the management and performs the following procedures to prevent the occurrence of a stressful event when necessary. In order to increase liquidity reserve, Fubon Securities and its subsidiaries sell the low-risk assets from the Trading Department dealing positions. Fubon Securities and its subsidiaries dispose of high-liquidity stocks, government bonds, and other securities in order to respond to adverse shocks affecting the market. Fubon Securities and its subsidiaries also use secured loan credit lines and long-term financing credit lines form banks and bills corporations to implement Fubon Securities and its subsidiaries capital allocation emergency response plan.

(Continued) 222 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

5. Fubon Bank (Hong Kong) and its subsidiaries The following disclosures related to Fubon Bank (Hong Kong) are all expressed in thousands of HKD, unless otherwise stated. (a) Management strategy and principles The purpose of liquidity management is to ensure sufficient cash flows to meet all financial commitment and to capitalize on opportunities for business expansion. This includes Fubon Bank (Hong Kong) and its subsidiaries’ ability to meet deposit withdrawals either on demand or at contractual maturity, to repay borrowings as they mature, to comply with the statutory liquidity ratio, and to make new loans and investments as opportunities arise. Fubon Bank (Hong Kong) and its subsidiaries maintain a stable and diversified funding base of core retail and corporate customer deposits as well as portfolios of highly liquid assets. It is the responsibility of Fubon Bank (Hong Kong) and its subsidiaries’ management to ensure compliance with local regulatory requirements and limits set by Risk Committee of the Board of Directors. Liquidity is managed on a daily basis by Fubon Bank (Hong Kong)’s Funding Desk department. The Funding Desk department is responsible for ensuring that Fubon Bank (Hong Kong) and its subsidiaries have adequate liquidity for all operations, ensuring that the funding mix is appropriate so as to avoid maturity mismatches and to minimize price and reinvestment rate risk in the case of a maturity gap, and monitoring relevant markets for the adequacy of funding and liquidity. Compliance with liquidity and funding requirements is monitored by the Asset and Liability Committee (“ALCO”) and is reported to the Risk Committee of the Board on a regular basis. This process includes: a) Maintaining balances within relevant regulatory requirements; b) Projecting cash flows under various stress scenarios and considering the level of liquid assets necessary in relation thereto; c) Monitoring balance sheet liquidity and loan to deposit ratios against internal requirements; d) Maintaining a diverse range of funding sources with adequate back-up facilities; e) Managing the concentration and profile of debt maturities; f) Managing lending commitment to customers within predetermined limits; g) Managing debt financing plans; h) Monitoring of depositor concentration in order to avoid undue reliance on large individual depositors and ensuring a satisfactory overall funding mix; and i) Maintaining funding contingency plans, which identify early indicators of stress conditions and describe actions to be taken in the event of difficulties arising from systematic or other crises, while minimizing adverse long-term implications for the business.

(Continued) 223 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(b) Qualitative explanation a) The management of funding and liquidity risk As part of its liquidity risk management, Fubon Bank (Hong Kong) and its subsidiaries focus on a number of components, including maintaining sufficient liquid assets, maintaining diversified sources of liquidity, reserving necessary funding capacity and contingent planning. Fubon Bank (Hong Kong) and its subsidiaries manage liquidity risk by holding sufficient liquid assets (e.g. cash and short term funds and securities) of appropriate quality to ensure that short term funding requirements are covered within prudential limits. Fubon Bank (Hong Kong) and its subsidiaries also adopt a funding strategy that is to achieve diversification of funding by controlling the concentration of top depositors, wholesale funding and reliance of foreign exchange swap markets. Moreover, adequate standby facilities are maintained to provide strategic liquidity to meet unexpected and material cash outflows in the ordinary course of business. In addition to observing the statutory liquidity ratio, Fubon Bank (Hong Kong) and its subsidiaries have established different liquidity risk metrics, including but not limited to the liquidity ratio, loan-to-deposit ratio, cumulative cash flow gap, concentration of funding sources and medium-term funding ratio to measure and analyze its liquidity risks. Financial Control Division is responsible for measurement and monitoring of these liquidity metrics and reporting to the ALCO regularly. b) Core deposits Fubon Bank (Hong Kong) and its subsidiaries monitor the stability of customer deposits by means of the core deposit ratio, which is the ratio of core deposits to total customer deposits. Fubon Bank (Hong Kong) and its subsidiaries categorize customer deposits into core deposits after taking into consideration of nature of deposits, relationship history with customers and stability of customer’s total balance. An alert trigger level is set on the core deposits ratio which is monitored by the ALCO. c) Loan to deposit ratio Fubon Bank (Hong Kong) and its subsidiaries emphasize the importance of customer deposits as a source of funds to finance lending to customers, and mitigate against reliance on short-term interbank funding. A limit on the loan to deposit ratio is established and approved by the Risk Committee of the Board of Directors and monitored by the ALCO.

(Continued) 224 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

d) Cash flow projection and stress testing Fubon Bank (Hong Kong) and its subsidiaries conduct cash flow analysis and cash flow projection arising from on-and off-balance sheet items over a set of time horizons on a regular basis to identify funding needs in specific time buckets. Fubon Bank (Hong Kong) and its subsidiaries also regularly perform stress tests on its liquidity position. In the stress test, both on-and off-balance sheet items with a cash flow impact are considered, with applicable hypothetical and historical assumptions. Three stressed scenarios, namely an institution-specific crisis scenario, a general market crisis scenario, and a combined scenario are adopted with minimum survival period defined pursuant to HKMA’s latest Supervisory Policy Manual “Sound Systems and controls for Liquidity Risk Management”. e) Contingent liquidity risk Fubon Bank (Hong Kong) and its subsidiaries provide customers with committed and standby facilities. These facilities increase the funding requirements of Fubon Bank (Hong Kong) and its subsidiaries when customers drawdown. The liquidity risk associated with the potential drawdown on non-cancellable committed facilities is factored into our stressed scenarios and a management alert trigger is set for these facilities. f) Contingency funding plan Fubon Bank (Hong Kong) and its subsidiaries have formulated a Contingency Funding Plan (“CFP”) that describes Fubon Bank (Hong Kong) and its subsidiaries’ strategy in dealing with any liquidity problem and the procedures for making up cash flow deficits in emergency situations. The CFP is designed to be pro-active and pre-emptive. Fubon Bank (Hong Kong) and its subsidiaries utilize early warning indicators, which cover both qualitative and quantitative measures, monitoring both internal and external factors. Should there be any early signs of significant impact on Fubon Bank (Hong Kong) and its subsidiaries’ liquidity position, the management would be informed for their consideration. Once the CFP is triggered, a Crisis Management Team, which is led by the senior management, is formed to handle the crisis. Strategy and procedures in obtaining contingency funding, as well as roles and responsibilities of parties concerned are clearly stated. The CFP is subject to regular testing to ensure its effectiveness and operational feasibility, particularly in respect of the availability of the contingency sources of funding listed in it. Moreover, the CFP is subject to review and update on a regular basis to ensure it remains robust over time. Any changes to the CFP would be approved by the Board of Directors. Liquidity ratio under the Hong Kong Banking Ordinance, Fubon Bank (Hong Kong) and its subsidiaries maintained an average liquidity ratio of 48.06% for the year ended December 31, 2013, which was well above the statutory minimum ratio of 25%. This ratio is computed in accordance with the Forth Schedule of the Hong Kong Banking Ordinance and is computed on a consolidated basis which comprises the Bank and its subsidiaries designated by the HKMA.

(Continued) 225 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 91~180 181~365 Over 1 0~30 days 31~90 days days days year Total

Non-derivative $ 410,082 1,368,000 400,685 1,356 539,051 2,719,174 financial liabilities held at fair value through profit or loss Bonds and securities 4,434,517 2,414,911 229,156 - - 7,078,584 purchased under resell agreement Others 34,178,554 12,241,124 10,194,534 4,236,717 2,397,079 63,248,008

December 31, 2013 91~180 181~365 Over 1 0~30 days 31~90 days days days year Total

Non-derivative $ 50,081 1,100,000 340,664 1,350 540,211 2,032,306 financial liabilities held at fair value through profit or loss Bonds and securities 3,470,852 1,524,972 - 229,242 - 5,225,066 purchased under resell agreement Others 34,068,149 10,368,533 6,377,172 3,178,570 2,842,470 56,834,894

June 30, 2013 91~180 181~365 Over 1 0~30 days 31~90 days days days year Total

Non-derivative $ 2,011,079 - 657 1,300 540,868 2,553,904 financial liabilities held at fair value through profit or loss Bonds and securities 3,098,649 454,812 - - - 3,553,461 purchased under resell agreement Others 32,043,488 11,230,248 6,809,986 2,041,999 2,427,796 54,553,517

(Continued) 226 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(d) The maturity analysis of derivative financial liabilities a) Net settlement derivative instruments

June 30, 2014 91~180 181~365 Over 1 0~30 days 31~90 days days days year Total

Derivative financial liabilities held at fair value through profit or loss －Foreign $ 15,639,376 8,513,691 7,008,648 15,155,599 6,364,559 52,681,873 exchange derivative contracts －Interest rate 918,125 731,586 211,715 816,695 5,087,634 7,765,755 derivatives contracts Derivative designated as hedges －Interest rate - 93,010 - 286,024 6,361,332 6,740,366 derivatives contracts Total $ 16,557,501 9,338,287 7,220,363 16,258,318 17,813,525 67,187,994

December 31, 2013 91~180 181~365 Over 1 0~30 days 31~90 days days days year Total

Derivative financial liabilities held at fair value through profit or loss －Foreign $ 15,915,695 5,291,567 7,214,876 9,357,310 7,493,134 45,272,582 exchange derivative contracts －Interest rate 233,293 251,675 - 1,854,469 5,080,948 7,420,385 derivatives contracts Derivatives designated as hedges －Interest rate 77,538 - 240,366 93,045 6,260,073 6,671,022 derivatives contracts Total $ 16,226,526 5,543,242 7,455,242 11,304,824 18,834,155 59,363,989

(Continued) 227 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 91~180 181~365 Over 1 0~30 days 31~90 days days days year Total

Derivative financial liabilities held at fair value through profit or loss －Foreign $ 10,065,813 6,025,793 10,186,911 9,277,113 6,892,844 42,448,474 exchange derivative contracts －Interest rate 260,664 123,015 555,813 485,156 722,947 2,147,595 derivatives contracts Derivatives designated as hedges －Interest rate - - - 318,027 6,290,495 6,608,522 derivatives contracts Total $ 10,326,477 6,148,808 10,742,724 10,080,296 13,906,286 51,204,591

b) The maturity analysis of off-balance sheet liabilities

June 30, 2014 91~180 181~365 Over 1 0~30 days 31~90 days days days year Total

Has developed $ - - 354,175 153,150 1,135,435 1,642,760 and irrevocable loan commitment The amount of 243,363 566,066 249,795 - - 1,059,224 established but unused letters or credit Other 1,586 1,393 21,024 12,040 26,856 62,899 guarantees Total $ 244,949 567,459 624,994 165,190 1,162,291 2,764,883

(Continued) 228 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 91~180 181~365 Over 1 0~30 days 31~90 days days days year Total

Has developed $ - 15,508 326,756 594,266 1,248,389 2,184,919 and irrevocable loan commitment The amount of 68,368 126,193 146,414 - - 340,975 established but unused letters of credit Other 340 3,702 5,119 19,483 2,396 31,040 guarantees Total $ 68,708 145,403 478,289 613,749 1,250,785 2,556,934

June 30, 2013 91~180 181~365 Over 1 0~30 days 31~90 days days days year Total

Has developed $ - 200,527 38,800 56,138 821,028 1,116,493 and irrevocable loan commitment The amount of 79,374 205,345 28,374 - - 313,093 established but unused letters or credit Other 4,591 2,123 18,174 7,019 4,397 36,304 guarantees Total $ 83,965 407,995 85,348 63,157 825,425 1,465,890

5) Market risk Major subsidiaries are listed separately as follows: 1. Taipei Fubon Bank (The Bank) and its subsidiaries (a) The definition and classification of market risk Market risk refers to unfavorable changes in the market (such as changes in interest rates, exchange rates, stock prices and commodity prices), which may cause a potential loss on or off the balance sheet. Based on the Bank’s policies on risk measurement and management, financial instruments are recorded in either the trading book or the banking book, and the Bank performs risk measurement and management accordingly.

(Continued) 229 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Trading book positions follow the definitions below: a) Positions held for earning profits from changes in bid-ask spread or changes in price and interest rate; b) Positions held for the brokerage business or proprietary trading; c) Positions held for full or partial offsetting risk from other positions; and d) Positions held for trading within approved market risk limits. Trading book positions should not be under any restrictive trading contract and should be completely hedged against risks. Positions that do not qualify for recording in the trading book are recorded in the banking book. (b) Guidelines and procedures Taipei Fubon Bank (The Bank) The Bank has comprehensive policies on market risk management and has a systematic mechanism for deal execution, clearing and settlement. The trading book instruments, which are exposed to risk factors, are as follows: Interest rate-related instruments, exchange rate- related instruments, securities and commodities. The risk management systems apply the Bank’s management policies and market risk limits to identify, measure, monitor and control market risks. Fubon Bank (China) Pursuant to the guidance of relevant laws and regulations, a series of policies and procedures regarding market risk and valuation of financial instruments are stipulated to regulate internal control of market risks as well as trading strategies and limits. IT systems are also established to identify, quantify, monitor and control market risks, ensuring bank’s market risk exposures is managed robustly and effectively. (c) Organization and framework Taipei Fubon Bank (The Bank) Under the supervision of the Board of Directors, the Bank has established the Market Risk Management Committee, which is composed of senior management and chaired by the President to monitor the Bank’s market risk control, risk acceptance and management strategies for the trading business, securities investments and transactions, and derivatives. The Market Risk Management Department under the Risk Management Division is responsible for formulating policies on and procedures for market risk management, enforcing market risk limits, reporting market risk events timely and validating valuation models independently. The independent audit department under the Board of Directors is an added support for the market risk management framework.

(Continued) 230 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Bank (China) The Board of Directors, acting as the highest supervisor of market risk management, approves the bank’s market risk strategies and trading limits. The Risk & Related Party Transaction Committee under the board is responsible for supervising the implementation of market risk policies. Market risk assessment reports are submitted by Market Risk Departmetn to senior management, the Risk & Related Party Transaction Committee and Board of Directors on a quarterly basis. The Market Risk Department under Risk Management Division, independent of front trading desk and back settlement desk, is responsible for implementing market risk policies authorized by the Board and the senior management. Internal Audit Department is responsible for reviewing and evaluating the effectiveness and independence of the risk management system. Compliance Department, on the other hand, is accountable for monitoring compliance risk and reports to the Board and senior management. (d) The procedure of market risk control, reporting and verification The Market Risk Management Department is responsible for monitoring compliance with the daily market risk limit (including the analysis of risk sensitivity factors such as Delta, Vega, DV01, and VaR) and loss control. The Bank has established a market risk management system and related market risk management procedures to be able to observe the VaR limit. In addition, the Bank does backtesting to check the effectiveness of the VaR calculation module and updates the on-line risk control management and trading system. The valuation and VaR models are evaluated independently by the Market Risk Management Department to ensure their stability and effectiveness. (e) Market risk measurement of trading book Taipei Fubon Bank (The Bank) The Bank’s measurement of trading book market risk includes methods for determining degrees (known as the “Greeks”) of sensitivity to risk and measures (such as VaR and stress testing) of the risk of loss on specific portfolios of financial assets. These measures provide consistent and comparable measurement of various types of risks across different trading desks. a) VaR (Value at Risk) VaR is a tool that measures “the worst expected loss over a given time horizon under normal market conditions at a given level of confidence.” The Bank adopts various risk models to evaluate the worst loss on current net positions within one day, with a 99% confidence level. Some of the methods for VaR calculation are the (a) historical simulation, which is used to calculate common VaR and stressed VaR; and (b) Monte Carlo simulation, which also involves the GED (generalized error distribution) model, which strengthens the predictability of this model. This model has the advantage of backward-looking (i.e., based on experience) and forward-looking (i.e., based on a cognitive map of action-outcome linkages) assessment risk measurement and is able to cover most market risk scenarios.

(Continued) 231 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

To ensure the accuracy of VaR measures, the Bank does statistical hypothesis testing and back testing periodically. In addition to carrying out Bernoulli trials, the Bank does two statistical tests suggested by the Basel Committee on Banking Supervision after the 2007-2008 financial crisis: (a) the unconditional coverage test, which is used to check if a VaR calculation reasonably reflects actual conditions; and (b) the conditional coverage test, which is used to examine whether a VaR model can help the Bank forecast portfolio returns on the basis of certain information. Both tests help the Bank determine if its risk models are effective tools for forecasting and responding to different risk scenarios. VaR information of trading book is shown below: For the six-month period ended June 30, 2014 End of Common VaR Highest Lowest Average period

Interest rate group $ 33,448 21,847 25,952 21,847 Exchange rate group 17,165 3,622 8,485 10,143 Volatility group 31,909 3,023 11,758 3,691 Diversification effect - - (13,762) (11,978) Common VaR of trading $ 32,433 23,703 book

For the six-month period ended June 30, 2013 End of Common VaR Highest Lowest Average period

Equity group $ 7,895 5,233 7,176 5,233 Interest rate group 75,329 26,266 44,218 32,367 Exchange rate group 6,252 3,281 4,922 3,281 Volatility group 9,748 4,458 6,985 7,644 Diversification effect - - (23,705) (16,982) Common VaR of trading $ 39,596 31,543 book

The above VaRs are calculated on the basis of changes in risk factors. If one product includes several risk factors, it will be classified under different risk factors. For example, forward contracts are exposed to interest rate risk and exchange rate risk; foreign exchange option is exposed to exchange rate risk and volatility risk. (Note: The highest and lowest VaRs may occur on different dates; the related diversification effects were not disclosed in the above table because it has no significant meaning.)

(Continued) 232 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

b) Stress testing As described earlier, VaR is the worst loss likely to occur over a holding period with a given confidence level during normal fluctuation. However, VaR cannot be used to predict the losses when an extreme event or the systematic risk appears in the market. Therefore, stress testing is introduced to capture the above risk by measuring the potential impact on trading book portfolio during the abnormal market period, compensating the insufficiency of common VaR. Some techniques can be used when executing stress testing, such as sensitivity analysis, scenario analysis and maximum loss analysis. The Bank applies stress testing regularly to multiple scenarios chosen from the approved scenario list. Fubon Bank (China) In terms of trading book market risk management, Fubon Bank (China) has set out appropriate market risk measurements and relevant risk limits based on its trading products, features and complexity of its risk exposures, including position limits on notional amount, net exposure of foreign currency, stop-loss limits of various products, and sensitivity limits such as duration, convexity and DV01 for interest rate products, Delta, Gamma, Vega for options. The Market Risk Department also performs stress tests on derivative trading of trading book on a quarterly basis to evaluat Fubon Bank (China)’s ability to sustain loss of market value of its trading book when main market risk factors such as interest rates and exchange rates move adversly. (f) Banking Book Market Risk Taipei Fubon Bank (The Bank) a) Interest rate risk Interest rate risk refers to the possible loss on investment portfolio value due to interest rate changes. The interest rate-sensitive assets/liabilities include banking book debt securities. The characteristics of banking book debt securities differ from those of trading book securities, which are for short-term trading. The valuation basis of banking book debt securities includes fair value and accrued interest. Banking book interest rate risk refers to possible loss due to unfavorable changes in interest rates for the banking book portfolio. One of the methods used to determine exposure to interest rate risks is earnings analysis, which focuses on the effects interest rate changes on the earnings of the banking book portfolio, especially earnings in the short term. Had the interest rate increased/decreased 100bps (basis points) as of June 30, 2014, and December 31 and June 30, 2013 and all other factors been held constant, the earnings would have decreased/increased by $2,015 million, $2,209 million and $2,113 million, respectively.

(Continued) 233 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

b) Exchange rate risk Banking book exchange rate risk refers to the risk of loss due to unfavorable changes in exchange rates for the Bank’s foreign currency operating funds to be used for the launch of a foreign exchange business, the establishment of overseas branches or overseas subsidiaries branch’s investment accounted for by the equity method. These exchange rate differences are reflected under either the statement of comprehensive income or “exchange differences on translating foreign operations in equity. The Bank has a foreign exchange business, overseas branches, overseas subsidiaries branch’s investment accounted for by the equity method.. The percentage of the foreign currency operating funds used for the foreign exchange business operations is low when compared with the Bank’s entire foreign currency position. For the operating funds of overseas branches, the Bank considers the ratio of exchange differences on translating foreign operations to equity of owner of the Bank immaterial. c) Equity risk The Bank’s equity instruments as shown in the banking book have two groups. The first consists of investments in accordance with Article 74 of the Banking Act. The second group refers to investments in promising companies with a higher cash dividend payout ratio. For the second group, even though changes in equity prices may influence the stockholder’s equity, the Bank holds these investments for a long term and has strict regulations on buying or selling these investments. The sensitivity analysis for equity positions of banking book is listed below: June 30, 2014 Effect on profit Effect on and loss equity

Stock prices increased by 10% $ 33,231 944,171 Stock prices decreased by 10% (33,231) (944,171)

December 31, 2013 Effect on profit Effect on and loss equity

Stock prices increased by 10% $ 38,944 992,853 Stock prices decreased by 10% (38,944) (992,853)

June 30, 2013 Effect on profit Effect on and loss equity

Stock prices increased by 10% $ 42,093 1,139,893 Stock prices decreased by 10% (42,093) (1,139,893)

(Continued) 234 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Bank (China) a) Interest rate risk The benchmark interest rate (CNY rate) of interest-bearing assets and liabilities is regulated by the Central Bank. Therefore, its risk of interest rate is mainly from the risk of interest repricing. The measure of monitoring account interest rate risk is to compute the repricing gap of risk-sensitive assets/liabilities and to develop risk standards as the monitoring benchmark. Its measure is to set the interest rate, which increases or decreases 50 basis points to evaluate risk. Units:In Thousands of CNY June 30, 2014 Effect on Effect on profit or loss equity

Interest rate increased by 50% $ 7,822 (24,878) Interest rate decreased by 50% (7,822) 25,457

b) Exchange rate risk So far, Fubon Bank (China) uses CNY to perform the loan/deposit and inter-bank borrowing and foreign currency is composed of USD. In order to effectively control the exchange rate risk, Fubon Bank (China) establishes the foreign exchange gap controlling conditions and simultaneously conducts the foreign currency sensitivity analysis on assets/liabilities, based on its risk-taking ability and operating strategy. Under the hypothesis of the condition when CNY appreciates or depreciates 5% compared to all foreign currency spot rate and forward rate, we estimate the influence on the standard money. The outcome is listed as follows: Units:In Thousands of CNY June 30, 2014 Effect on Effect on profit or loss equity

Foreign exchange rate for USD and HKD $ (196,982) (177,284) against CNY increased by 5％ Foreign exchange rate for USD and HKD 196,982 177,284 against CNY decreased by 5％

(Continued) 235 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(g) Foreign currency rate risk information The table below shows the Bank and its subsidiary's foreign currency risk information for financial assets and liabilities denominated in foreign currency at carrying value as of June 30, 2014, and December 31 and June 30, 2013. Taipei Fubon Bank (The Bank)

June 30, 2014 December 31, 2013 June 30, 2013 Original Rate NTD Original Rate NTD Original Rate NTD

Financial assets Monetary items

USD $ 10,989,259 29.9152 328,745,886 11,999,142 29.9506 359,381,490 11,204,461 30.1202 337,480,611 CNY 23,356,759 4.8203 112,586,585 17,171,320 4.9435 84,886,421 8,333,200 4.9116 40,929,347 JPY 24,556,039 0.2951 7,246,487 59,108,975 0.2849 16,840,147 45,663,905 0.3044 13,900,093 HKD 6,599,810 3.8601 25,475,927 5,919,884 3.8628 22,867,329 3,405,979 3.8829 13,225,078 AUD 332,668 28.1351 9,359,635 413,294 26.7294 11,047,107 469,323 27.8499 13,070,590 Non-monetary items Financial liability Monetary items

USD 12,265,556 29.9152 366,926,552 12,198,629 29.9506 365,356,259 12,212,964 30.1202 367,856,928 CNY 19,721,177 4.8203 95,061,988 13,563,841 4.9435 67,052,847 8,383,537 4.9116 41,176,579 AUD 1,022,912 28.1351 28,779,720 1,159,487 26.7294 30,992,390 1,187,875 27.8499 33,082,200 EUR 265,762 40.8468 10,855,527 597,539 41.2616 24,655,423 401,199 39.3025 15,768,114 HKD 3,543,339 3.8601 13,677,644 3,347,049 3.8628 12,928,982 2,004,263 3.8829 7,782,353

Fubon Bank (China) June 30, 2014 Original Rate CNY

Financial assets Monetary items USD $ 866,743 6.1528 5,332,894 HKD 119,837 0.7938 95,121 Non-monetary items USD 65 6.1528 403 Financial liabilities Monetary items USD 1,723,867 6.1528 10,606,609 HKD 42,461 0.7938 33,703

(Continued) 236 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

2. Fubon Life Insurance and its subsidiaries Market risk refers to the risk that the value of assets decreases due to disadvantageous movement of the market price and this may result in a revenue reduction to Fubon Life Insurance. The risk factors of the market price fluctuation include interest rates, foreign exchange rates, stock prices, and commodity prices. Guided by Assets and Liabilities Management Committee, Fubon Life Insurance takes financial environment, all the economic indicators, liability risk properties and ALM into account, to choose appropriate investment target through risk control mechanism. Under the consent of regulatory framework and market environment, choosing and acquisition of long-term assets is monitored by the Assets and Liabilities Management Committee. This is to allow assets and liabilities to coordinate better in terms of payment terms and profits, to pursue long term business and protect the rights of policyholders. This will also reduce the influence on insurance contract caused by market risk and eventually lower the potential loss to Fubon Life Insurance Fubon Life Insurance widely applies various risk management instruments to measure market risk. The primary methods adopted would be Value at Risk (VaR) and Sensitivity Analysis. By using these 2 instruments, Fubon Life Insurance is able to measure, monitor and manage market risk completely and effectively. (a) Value at Risk Value at Risk is to apply statistical techniques to measure the maximum potential loss of the investment portfolio resulted from market risk factor variation in a given period of time and under certain confidence interval. Fubon Life Insurance and its subsidiaries applied 99% as the confidence interval to predict the VaR in the next 10 days. The VaR model applied to manage risk shall be examined retrospectively and continuously to ensure that Fubon Life Insurance and its subsidiaries are able to measure the maximum potential risk of the portfolios reasonably, completely and accurately. (b) Sensitivity analysis Except for using VaR to manage market risk, Fubon Life Insurance and its subsidiaries adopt sensitivity analysis to serve as a basis for corporate risk analysis, risk alert and operation management. Sensitivity analysis is to measure the amount changed in the portfolio value resulted from the variation of single risk factor. This will facilitate Fubon Life Insurance and its subsidiaries to understand how each variation of risk factors may influence the portfolios in certain extreme scenarios.

(Continued) 237 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Sensitivity analysis

June 30, 2014 Change in Change in Risk factor Variation profit or loss equity Equity risk (price) Price incline by 10% - 33,098,025 Price decline by 10% - (33,098,025) Interest rate risk (yield Yield curve (USD) incline by 100BPS 336 (56,739,552) curve) Yield curve (NTD) incline by 100BPS (203,896) (43,900,172) Yield curve (other) incline by 100BPS - (4,173,777) Yield curve (USD) decline by 100BPS (204) 67,629,190 Yield curve (NTD) decline by 100BPS 222,798 49,320,701 Yield curve (other) decline by 100BPS - 4,454,583 Exchange rate risk NT$ to tall currency incline by 3% (3,122,571) (5,103,279) (currency exchange rate) NT$ to tall currency decline by 3% 3,122,571 5,103,279

December 31, 2013 Change in Change in Risk factor Variation profit or loss equity Equity risk (price) Price incline by 10% - 27,498,568 Price decline by 10% - (27,498,568) Interest rate risk (yield Yield curve (USD) incline by 100BPS 483 (49,834,187) curve) Yield curve (NTD) incline by 100BPS (108,379) (39,058,811) Yield curve (other) incline by 100BPS - (4,468,886) Yield curve (USD) decline by 100BPS (299) 59,471,505 Yield curve (NTD) decline by 100BPS 118,931 43,293,638 Yield curve (other) decline by 100BPS - 4,868,614 Exchange rate risk NT$ to tall currency incline by 3% (1,808,421) (4,184,108) (currency exchange rate) NT$ to tall currency decline by 3% 1,808,421 4,184,108

(Continued) 238 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Change in Change in Risk factor Variation profit or loss equity Equity risk (price) Price incline by 10% - 24,019,909 Price decline by 10% - (24,019,909) Interest rate risk (yield Yield curve (USD) incline by 100BPS 466 (37,794,822) curve) Yield curve (NTD) incline by 100BPS (390,395) (35,946,256) Yield curve (other) incline by 100BPS - (4,951,229) Yield curve (USD) decline by 100BPS (249) 44,209,549 Yield curve (NTD) decline by 100BPS 415,508 39,051,755 Yield curve (other) decline by 100BPS - 5,410,080 Exchange rate risk NT$ to tall currency incline by 3% (1,863,630) (3,783,429) (currency exchange rate) NT$ to tall currency decline by 3% 1,863,630 3,783,429

Note: Equity risk and Interest rate risk of the sensitivity analysis mainly include financial assets measured at fair value through profit or loss and available-for-sale financial assets. For the scenario of Equity risk include Stock and Fund (excluding Money Funds and Bond Funds), for the scenario of Interest rate risk include Bonds and Bond Funds. Exchange rate variation of the sensitivity analysis exclude foreign insurance policy assets. The subsidiary in Vietnam is still in the preliminary phase of operation. Most investments are conducted with equity funds and funds from loans are minimal. Considering the unique financial environment and risk characteristics of Vietnam, the operating funds are all saved in local financial institutions as time deposits. Therefore, the market risk, Fubon Life Insurance and its subsidiaries face is minimum. In the future, Fubon Life Insurance and its subsidiaries are going to choose appropriate investment targets based on the investment environment in Vietnam and the coordination between assets and liabilities. In addition, Fubon Life Insurance will pursue long-term and robust operation and protect the right of the insured as well as to mitigate the possible loss resulted from market risk. 3. Fubon Insurance and its subsidiaries Market risk is the risk of losses in the value of assets in a given period resulting from unfavorable changes in the asset’s market prices. Fubon Insurance and its subsidiaries management has set a monitor system on the concentration of daily transactions, established a sound crisis response mechanism to deal with working capital demand due to emergency or abnormal event.

(Continued) 239 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(a) Management process of market risk a) Risk identification To achieve market risk management goal, Fubon Insurance identified potential market risk factors encountered during operation process. Positions held by Fubon Insurance in different financial instruments were classified into four categories, mainly interest, foreign exchange rate, equity security and commodity, according to accounting standards. Each category further divided by different purposes into trading position and non-trading position, and market risk management focused on trading position. b) Risk measurement a. Establish a risk quantification model, adopting basic statistical measurement, sensitivity analysis and scenario analysis etc., for different risk factors to measure market risk. b. Analyze outcome from the risk model for better market risk planning, supervision and control. c. Measure possible losses from the holding position daily under normal market fluctuation and perform stress testing monthly. d. Evaluate accuracy of the risk model by retroactive testing or other methodologies. c) Risk monitoring Fubon Insurance and its subsidiaries established market risk monitoring procedure to review and monitor utilization of various risk limits monthly. An action would be taken if the risk limit is breached. Fubon Insurance and its subsidiaries have established proper monitoring frequency and hierarchical reporting mechanism to ensure proper reporting whenever there is any abnormal situation occurred or any deficiency identified. A specific reporting procedure would be followed to ensure the control of timing in dealing with significant market risk. d) Risk responding As market risk occurs, the head of any related unit being impacted or in-charge unit with relevant authority would respond to the event immediately, and report to risk management and related departments based on the established authorization. Afterwards, every related unit would work with risk management department to investigate the underlying reason for the risk event, develop a remediation plan, and risk management department would monitor the progress of the follow up actions. (b) Concentration of market risk The main counterparty and buyer of financial instruments of Fubon Insurance and its subsidiaries were financial industry. There were rules about limitation of the government bonds, fixed income bonds, bonds, convertible bonds, funds, stocks, derivative financial instruments, structured notes and bonds securitization to control the risk.

(Continued) 240 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(c) Market risk management mechanism a) Risk tolerance management Risk tolerance refers to the maximum amount of risk an entity is willing to withstand. Market risk tolerance is submitted to and approved by the risk management committee annually. b) Risk limit management Establishment of risk limits is to put risk tolerance management into practice. Risk limits for different financial products were made by trading position, investment position and hedging position separately. When setting risk limits, various factors were taken into account, such as risk tolerance, business history, expected budget target, market liquidity of a specific product, historical utilization of risk limits, traders’ trading experiences, trading system and supports by the operation department. The amended risk limits will be reviewed by the risk management committee. After approved by proper authorities according to company’s authorization table, the amended risk limits will be reported to risk management unit and then, submitted to the risk management committee of the Company for discussion and approval. Risk limits of Fubon Insurance and its subsidiaries include risk value limit and position limit under system support. (d) Valuation management Commodity was evaluated based on the market value if it is available. If the market value is not readily available, the product value will be calculated using the latest market price, quotation from the counterparty or valuation model. (e) Risk value model Risk value is a statistical estimate of probable worst outcome during normal fluctuation. Fubon Insurance and its subsidiaries used value at risk (VaR) model to measure the potential maximum loss in value of an investment portfolio at risk over a period of ten-day for a 99% confidence interval with respect to different market factors. Fubon Insurance and its subsidiaries applied retroactive testing which provides estimates of the accuracy of VaR model to check whether a VaR methodology is being used appropriately, completely and accurately in measuring the potential maximum loss in value of an investment portfolio. The retroactive testing procedure consists of calculating the number or percentage of times that the actual portfolio returns fall outside the VaR estimate. A VaR was computed over a period of one year with reconciled profit and loss on a daily basis. Fubon Insurance and its subsidiaries will periodically monitor the outcome of the aforementioned model and test the accuracy of parameters and assumptions being used.

(Continued) 241 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 Common VaR Average High Low

Fixed income group $ 324,613 380,536 228,738 Equity group 621,114 743,084 552,784 Fund group 48,470 70,961 36,400 Asset securitization group 58,413 69,464 53,307 Total position 654,189 712,652 621,358

December 31, 2013 Common VaR Average High Low

Fixed income group $ 382,550 563,067 184,720 Equity group 705,339 1,082,743 492,433 Fund group 75,376 121,121 39,232 Asset securitization group 79,989 144,550 45,053 Total position 747,771 1,143,809 463,522

June 30, 2013 Common VaR Average High Low

Fixed income group $ 284,912 471,451 184,720 Equity group 630,073 1,082,707 492,433 Fund group 58,398 121,121 39,232 Asset securitization group 7,255 89,372 55,933 Total position 598,715 1,142,990 463,522

Note 1: VaR was adopted for the six-month period ended June 30, 2014, for the year ended December 31, 2013, for the six-month period ended June 30, 2013. Note 2: VaR was computed over a period of ten days. Note 3: Computation of VaR included MBS for June 1, 2014. 4. Fubon Securities and its subsidiaries Market risk is defined as an unfavorable change in market prices (such as interest rates, exchange rates, stock prices and commodity prices) which may cause a potential loss on or off the balance sheet. According to Fubon Securities and its subsidiaries’ internal administrative policies, the positions in the trading book are for the purpose of market risk measurement and management.

(Continued) 242 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Trading book positions fit the following definitions: (a) Positions held for earning profits from changes in bid-ask spread or changes in price and interest rate. (b) Positions held for brokerage business or dealing trading. (c) Positions held for offsetting risk from other positions (either entirely or partly). (d) Positions held for trading within approved market risk limits. Notice that the trading book positions should be either free from any contract terms and constraints on trading or completely hedged to remove the risks. a) Guidelines and Procedures Fubon Securities and its subsidiaries have enacted comprehensive policies of market risk management and have established mechanism for deal execution, clearing and settlement. Based on the risk factors they are exposed to trading book positions are categorized in the following four groups: interest rates instruments, exchange rates instruments, securities and commodities. Fubon Securities and its subsidiaries have established management policies and market risk limits that implement the risk management systems to identify, measure, monitor and control the market risk. b) Organization and Framework Under the supervision of the board of directors, Risk Management Committee is composed of the senior managers from each department, while the chairman of the board oversees this committee. To improve market risk management, the Committee supervises the suitability of market risk exposures and the effectiveness of market risk management. The Risk Management Department, is responsible for formulating policies and procedures on market risk management, for executing market risk limits control, for reporting mark risk events immediately, and for verifying valuation models independently. In addition, the independent Audit Department, which is under the board of directors plays the role of the third line of defense in the market risk management framework. c) Procedure for Market Risk Control, Reporting and Verification The Risk Management Department is responsible for monitoring the daily risk limit (including the analysis of risk sensitivity factors such as Delta, Vega, DV01, and VaR etc), notional quota, and profit and loss (P&L). Based on the authorized daily limit, this department controls the quota used and the monthly / yearly P&L. However, a position exceeding the approved limit is treated as an exceptional case to be monitored. Fubon Securities and its subsidiaries have established related mechanism and procedures for VaR limit management while also applying back-testing to check the VaR model calculation and the effectiveness of the valuation methodology. Fubon Securities and its subsidiaries also keep upgrading and improving its trading system with a market risk control function. Moreover, the valuation models and VaR models are verified independently by the Risk Management Department to ensure their effectiveness and stability.

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d) Market Risk Measurement of Trading Book Fubon Securities and its subsidiaries’ market risk measurement of the trading book includes individual risk measures (such as Greeks) and integrated risk measures (such as VaR and Stress-testing). The integrated measures provide consistent and comparable measurement across different trading desks or risk types. Value at Risk (VaR) VaR is defined as ‘the worst expected loss over a target horizon with a given level of confidence and normal market environment’. Fubon Securities and its subsidiaries adopt Historical Simulation risk models to evaluate the one-day worst loss on current net positions, with a 99% confidence level. Historical Simulation is used to calculate Common VaR and Stressed VaR, which reflects the impact on position held by Fubon Securities and its subsidiaries in the historical scenario. To conform to Basel Committee on Banking Supervision’s suggestion after the financial crisis in 2008, a new Stressed VaR used a 12-month period of market turmoil to assess potential losses above the 99% confidence level used in the VaR model. The outcome of Historical Simulation was easier to explain and understand, and the method could also avoid mistaken risk factor hypotheses being used. To ensure the quality of VaR measures, Fubon Securities and its subsidiaries execute statistical hypothesis testing and back-testing periodically. In addition to Bernoulli trials, Fubon Securities and its subsidiaries has also adopted statistical tests suggested by the Basel Committee after the financial crisis. VaR and Stressed VaR information of trading book were as follows: For the three-month period ended June 30, 2014 Common VaR Highest Low Average

Interest rate $ 101 53 82 Foreign exchange rate - - - Equity 84,938 60,414 75,999 Fluctuate 5,473 4,202 4,633 Degree of decentralization $ 89,287 61,850 79,265 (99% HS VaR)

For the three-month period ended June 30, 2013 Common VaR Highest Lowest Average

Interest rate $ 24 9 18 Foreign exchange rate - - - Equity 40,415 29,005 35,624 Fluctuate 3,852 1,772 2,825 Degree of decentralization $ 42,821 30,486 37,729 (99% HS VaR)

(Continued) 244 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

For the six-month period ended June 30, 2014 Common VaR Highest Lowest Average

Interest rate $ 101 24 66 Foreign exchange rate - - - Equity 84,938 36,693 59,451 Fluctuate 5,473 2,520 4,115 Degree of decentralization $ 89,287 41,268 61,738 (99% HS VaR)

For the six-month period ended June 30, 2013 Common VaR Highest Lowest Average

Interest rate $ 24 9 14 Foreign exchange rate - - - Equity 40,415 33,188 30 Fluctuate 3,852 1,393 2,308 Degree of decentralization $ 37,254 28,755 31,741 (99% HS VaR)

(The High and low VaR in the table may appear on different dates, so its dispersion effect isn't significant, so that not disclosed in the table) Stress Testing As described earlier, VaR is the worst loss likely to occur over a holding period with a given confidence level during normal fluctuation. However, VaR cannot be used to predict the loss when an extreme event or the systematic risk appears in the market. Therefore, stress testing is introduced to capture the above risk by measuring the potential impact on the trading book portfolio during the abnormal market period, compensating the insufficiency of common VaR. Some techniques can be used when executing stress testing, such as sensitivity analysis, scenario analysis, and maximum loss analysis. Fubon Securities and its subsidiaries selected and implemented stress testing periodically within the scope of market risk set by the Fubon Financial risk control system. The result from the stress testing would be reported to the Risk Management Committee as a reference for management setting each managerial objective and quota.

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5. Fubon Bank (Hong Kong) and its subsidiaries The following disclosures related to Fubon Bank (Hong Kong) are all expressed in thousands of HKD, unless otherwise stated. (a) The definition and classification of market risk Market risk arises on all market risk sensitive financial instruments, including securities, foreign exchange contracts, equity and other derivative instruments, as well as from balance sheet or structural positions. Fubon Bank (Hong Kong) transacts in the money market, foreign exchange market, equity market and capital market giving rise to market risk exposures. Positions are taken as a result of the execution of customers’ orders, market making activities, and offsetting transactions in order to hedge Fubon Bank (Hong Kong)’s open position. Fubon Bank (Hong Kong) does not engage in significant proprietary trading. (b) Guidelines and procedures The objective of market risk management is to avoid excessive exposure of earnings and equity to loss and to reduce Fubon Bank (Hong Kong) and its subsidiaries’ exposure to the volatility inherent in financial instruments. Fubon Bank (Hong Kong) and its subsidiaries has also established clear market risk policies, including limits, reporting lines and control procedures, which are reviewed regularly and approved by the Board of Directors. Market risk is managed within various limits approved by the Board of Directors. These limits are determined for each financial instrument and include limits on product volume, gross and net positions, position concentrations, mark to market limits, stop loss limits and risk position limits. The sale of derivatives to customers as risk management products and the subsequent use of derivatives to manage the resulting position is an integral part of Fubon Bank (Hong Kong) and its subsidiaries’ business activities. These instruments are also used to manage Fubon Bank (Hong Kong) and its subsidiaries’ own exposures to market risk as part of its asset and liability management process. The principal derivative instruments used by Fubon Bank (Hong Kong) and its subsidiaries are interest and foreign exchange rate related contracts, which are primarily over-the-counter derivatives. Fubon Bank (Hong Kong) and its subsidiaries also purchases exchange traded derivatives. Most of Fubon Bank (Hong Kong) and its subsidiaries’ derivatives positions have been entered into to meet customer demand and to hedge these and other positions. One of the tools used by Fubon Bank (Hong Kong) and its subsidiaries to monitor and limit market risk exposure is Value-at-risk (VaR). VaR is a technique that estimates the potential losses that could occur on risk positions as a result of movements in market rates and prices over a specified time horizon and to a given level of confidence. The calculation uses the variance-covariance model as the means to estimate the statistical confidence level.

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The VaR technique is only effective for potential loss events which are not correlated. Fubon Bank (Hong Kong) and its subsidiaries therefore augment its VaR limits with other positions and sensitivity limit structures. Additionally, Fubon Bank (Hong Kong) and its subsidiaries apply a wide range of sensitivity analysis, both on individual portfolios and on Fubon Bank (Hong Kong) and its subsidiaries’ consolidated positions to assess the potential impact on Fubon Bank (Hong Kong) and its subsidiaries’ earnings as a result of extreme movements in market prices. (c) Organization and framework The Board of Directors reviews and approves policies for the management of market risks including dealing authorities and limits. The Board of Directors has delegated the responsibility for ongoing general market risk management to the Asset and Liability Committee. This committee articulates the interest rate view of Fubon Bank (Hong Kong) and decides on future business strategy with respect to interest rates. It also reviews and sets funding policy and ensures adherence to risk management objectives. (d) Evaluation technique of market risk: Value at risk (VaR) The following table shows the relevant market risk VaR: June 30, 2014 VaR Average High Low

Foreign exchange risk $ 506 595 404 Interest rate risk 199 1,157 28 Total risk 608 1,293 418

December 31, 2013 VaR Average High Low

Foreign exchange risk $ 121 689 8 Interest rate risk 1,045 3,524 101 Total risk 1,093 3,521 97

June 30, 2013 VaR Average High Low

Foreign exchange risk $ 25 155 8 Interest rate risk 1,497 3,418 1,043 Total risk 1,501 3,444 1,039

(Continued) 247 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(e) Sensitivity information of interest rate risk, foreign exchange risk and equity risk (In HK million) June 30, 2014 Influenced amount Main risk Variance Equity profit or loss Foreign exchange risk 10% increase in HKD - (16.4) Foreign exchange risk 10% decrease in HKD - 16.4 Interest rate risk +100 basis points shift in yield 43.5 54.0 curves Interest rate risk -100basis points shift in yield (43.5) (54.0) curve Equity risk 10% increase in equity prices - - Equity risk 10% decrease in equity prices - -

December 31, 2013 Influenced amount Main risk Variance Equity profit or loss Foreign exchange risk 10% increase in HKD - (0.5) Foreign exchange risk 10% decrease in HKD - 0.5 Interest rate risk +100 basis points shift in yield 67.5 4.0 curves Interest rate risk -100basis points shift in yield (67.5) (4.0) curve Equity risk 10% increase in equity prices - - Equity risk 10% decrease in equity prices - -

(Continued) 248 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Influenced amount Main risk Variance Equity profit or loss Foreign exchange risk 10% increase in HKD - - Foreign exchange risk 10% decrease in HKD - - Interest rate risk +100 basis points shift in yield 37.0 10.0 curves Interest rate risk -100 basis points shift in yield (37.0) (10.0) curves Equity risk 10% increase in equity prices - - 10% decrease in equity prices Equity risk - -

(40) Capital Management 1) General information Objectives for managing capital are as follows: 1. The Company’s basic objective of capital management shall be in compliance with the capital requirements of FSC and achieve the minimum statutory capital adequacy ratio. The qualified capital calculation is in accordance with regulation by competent authorities. 2. Maintain an optimal capital structure to respond to possible operational or economic risks, to sustain future development of the business, and to make appropriate and effective capital allocation. 2) Procedure for capital management The Company maintained capital adequacy ratio to meet the requirements of the competent authority and report the ratio to the authority every quarter. The Company complies with the rules in compliance with “Regulations Governing the Consolidated Capital Adequacy of Financial Holding Companies”. The Company shall comply with the related capital adequacy norms, and overseas subsidiaries shall comply with local regulations. The Capital is managed by the authority of the Company according to the Company Capital Adequacy Monitoring Standard.

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(41) Significant impact of related foreign currency information

June 30, 2014 December 31, 2013 June 30, 2013 Foreign Exchange NTD Foreign Exchange NTD Foreign Exchange NTD currency (in rate (in currency (in rate (in currency (in rate (in thousands) dollars) thousands) dollars) thousands) dollars)

Financial assets: Monetary items USD 38,472,310 29.901/ 1,150,919,565 36,326,741 29.950/ 1,087,543,563 31,417,433 30.1202/ 945,543,811 29.9152 29.9506 30.120/ 29.990/ 29.828 HKD 6,749,138 3.8601 26,052,349 5,943,232 3.8628 22,957,517 3,421,081 3.8829 13,283,715 AUD 1,954,846 28.1351/ 54,951,197 1,971,273 26.7294/ 52,666,116 1,996,919 27.8499/ 55,509,044 28.105 26.721 27.813/ 27.756 EUR 1,442 40.8468 58,883 283,351 41.2616 11,691,506 99,755 39.3025/ 3,925,972 39.358/ 39.131 JPY 24,681,288 0.2951 7,283,448 59,179,041 0.2849 16,860,109 45,721,100 0.3044 13,917,503 SGD 914 23.9590 23,657 835 23.6829 19,767 949 238533 22,646 GBP 636 50.9358 32,389 660 49.4985 32,645 612 458878 28,068 SFR 241 33.6121 8,094 182 33.6580 6,131 182 31.8215 15,796 CAD 99 28.0052 2,786 120 28.1477 3,365 112 28.7352 3,214 VND 349,713,571 0.0014 489,599 - - - 211,453,375 0.0014 296,035 CNY 23,829,040 4.8203 114,863,121 17,213,003 4.9435 85,092,479 8,798,255 4.9116 43,213,507 DKK 245 5.4770 1,342 ------PHP 18,709 0.6853 12,821 - - - 20,417 0.6965 14,220 THB 13,557 0.9220 12,500 ------Non-Monetary items USD 7,899,178 29.9152/ 236,261,300 6,116,665 29.950/ 183,151,456 5,912,675 30.1202/ 177,770,650 29.915 29.9506 30.12/ 29.99 JPY 189,440 0.2951 55,904 195,841 0.2849 55,795 183,679 0.3044 55,912 AUD 2,187 40.8468 89,333 ------EUR - - - 2,881 41.2616 118,866 4,985 39.3025 195,924 HKD 5,583,875 3.8601 21,552,083 3,697,889 3.8630 14,283,355 2,849,833 3.8830 11,065,173 CNY 181,359 4.8203 874,207 ------Derivatives USD 2,232 29.9152/ 192,933 62 29.950/ 86,660 244 30.1202 217,484 29.915 29.9506 Long-term investments in equity CNY 1,074,844 4.8203 5,181,070 1,003,816 4.9435 4,962,362 998,461 4.9116 4,904,040 Financial liabilities: Monetary items USD 14,070,026 29.9152 420,907,633 12,275,605 29.9506 367,661,736 12,254,030 30.1202 369,093,844 HKD 3,596,408 3.8601 13,882,496 3,350,044 3.8628 12,940,551 309 3.8829 1,200 EUR 265,773 40.8468 10,855,976 597,550 41.2616 24,655,877 401,203 39.3025 15,768,271 AUD 1,022,912 281351 18,779,720 1,159,487 26.7294 30,992,390 1,187,875 27.8499 33,082,200 CNY 19,721,177 4.8203 95,061,988 13,563,841 4.9435 67,052,847 8,383,537 4.9116 41,176,579 GBP 18 50.9358 917 45 49.4985 2,227 7 45.8878 321 JPY 34,179 0.2951 10,086 71,424,492 0.2849 20,348,838 52,127,969 0.3044 15,867,754 SGD 16 23.9590 383 29 23.6829 687 18 23.8533 429 Derivatives USD 62 29.9150 1,858 216 29.6170 6,385 4,060 30.1202 122,288

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(42) The following disclosures are only applicable to Taipei Fubon Bank, in accordance with relevant regulations 1) Asset quality of overdue loans and overdue receivables

Units:In Thousands of NTD, % June 30, 2014 Non- performing Loan loss Coverage ratio loan (NPL) NPL Ratio reserves (LLP) (Note 3) Item (Note 1) Total loans (Note 2) Finance loan Secured 495,339 231,224,859 0.21 4,474,416 903.30 Unsecured 347,432 514,361,211 0.07 4,882,316 1,405.26 Mortgage (Note 4) 66,693 360,685,276 0.02 3,653,781 5,478.51 Cash card 95 14,171 0.67 282 296.84 Consumer Micro credit (Note 5) 52,347 17,394,842 0.30 196,716 375.79 loan Others Secured - 165,533 - 1,668 - (Note 6) Unsecured 61,175 28,850,737 0.21 299,571 489.70 Total 1,023,081 1,152,696,629 0.09 13,508,750 1,320.40 Overdue Account Delinquency Allowance for receivable receivable ratio credit losses Coverage ratio Credit card 51,955 25,524,259 0.20 % 294,076 566.02 % Account receivable factoring with no recourse - 16,218,167 - 164,959 - (Note 7) Excluded NPL as a result of debt consultation and 339,257 loans agreement (Note 8) Excluded overdue receivables as a result of debt 415,038 consultation and loans agreements (Note 8) Excluded NPL as a result of debt solvency and 291,198 restart plan (Note 9) Excluded overdue receivables as a result of debt 594,702 solvency and restart plan (Note 9)

(Continued) 251 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Non- performing Loan loss Coverage ratio loan (NPL) NPL Ratio reserves (LLP) (Note 3) Item (Note 1) Total loans (Note 2) Finance loan Secured 588,591 226,576,767 0.26 3,564,015 605.52 Unsecured 377,000 461,764,067 0.08 3,169,421 840.70 Mortgage (Note 4) 123,047 340,916,570 0.04 2,418,490 1,965.50 Cash card 244 21,036 1.16 426 174.59 Consumer Micro credit (Note 5) 54,506 19,328,294 0.28 143,451 263.18 loan Others Secured 44 132,447 0.03 706 1,604.55 (Note 6) Unsecured 58,129 27,786,137 0.21 198,265 341.08 Total 1,201,561 1,076,525,318 0.11 9,494,774 790.20 Overdue Account Delinquency Allowance for receivable receivable ratio credit losses Coverage ratio Credit card 50,561 24,033,487 0.21 % 429,119 848.72 % Account receivable factoring with no recourse - 14,753,679 - 76,578 - (Note 7) Excluded NPL as a result of debt consultation and 491,472 loans agreement (Note 8) Excluded overdue receivables as a result of debt 567,015 consultation and loans agreements (Note 8) Excluded NPL as a result of debt solvency and 234,605 restart plan (Note 9) Excluded overdue receivables as a result of debt 625,869 solvency and restart plan (Note 9)

Note 1: For loan business: Overdue loans represent the amounts of reported overdue loans pursuant to the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non performing/Non accrual Loans” issued by the MoF. For credit card business: Overdue receivables are regulated by the Banking Bureau letter dated July 6, 2005 (Ref. No. 0944000378). Note 2: For loan business: NPL Ratio = NPL/Total Loans. For credit card business: Delinquency Ratio = Overdue receivable/Account receivable. Note 3: For loan business: Coverage Ratio = LLR/NPL For credit card business: Coverage Ratio = Allowance for credit losses/Overdue receivables. Note 4: Household mortgage means the purpose of financing is to purchase, build, or fix up the dwelling, and the dwelling owned by the borrower, spouse, or children fully secures the loan. Note 5: Micro credit is regulated by the Banking Bureau letter dated December 19, 2005 (Ref. No. 09440010950). Note 6: Others in consumer loan refer to secured or non secured loans excluding mortgage, cash card, micro credit, and credit card. Note 7: Account receivable – factoring with no recourse: As required by the Banking Bureau letter dated July 19, 2005 (Ref. No. 094000494), provision for bad debt is recognized once no compensation is received from the factoring or insurance company. Note 8: The amounts of excluded NPL and excluded overdue receivables through financial debt negotiation and loan agreement were disclosed based on the interpretation issued by the Banking Bureau dated April 25, 2006 (Ref. 19510001270). Note 9: The amounts of excluded NPL and excluded overdue receivables through debt solvency and restart plan were disclosed based on the interpretation issued by the Banking Bureau dated September 15, 2008 (Ref. 09700318940).

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2) Concentration of credit extensions Units:In Thousands of NTD, % June 30, 2014 Rank Credit extensions % of net asset (Note 1) Group name (Note 2) balance (Note 3) value (Note 4) 1 A group (LCD and its component manufacturing 11,885,938 8.33 industry) 2 B group (LCD and its component manufacturing 8,122,602 5.69 industry) 3 C group (iron and steel smelting industry) 8,089,592 5.67 4 D group (computer and its peripheral devices and 7,052,065 4.94 software wholesale industry) 5 E group (wire and cable manufacturing industry) 6,806,544 4.77 6 F group (paper manufacturing industry) 6,377,448 4.47 7 G enterprise (petrochemical raw material 6,201,911 4.35 manufacturing industry) 8 H enterprise (real estate industry) 5,976,990 4.19 9 I group (ocean freight industry) 5,970,022 4.18 10 J enterprise (real estate industry) 5,609,000 3.93

June 30, 2013 Rank Credit extensions % of net asset (Note 1) Group name (Note 2) balance (Note 3) value (Note 4) 1 A group (LCD and its component manufacturing 12,658,295 10.36 industry) 3 B group (LCD and its component manufacturing 10,468,891 8.56 industry) 2 C group (iron and steel smelting industry) 10,435,949 8.54 4 D enterprise (unclassified other electronic 6,695,699 5.48 component industry) 5 E enterprise (real estate industry) 6,646,163 5.44 6 F group (computer and its peripheral devices and 6,325,927 5.17 software wholesale industry) 7 G enterprise (petrochemical raw material 6,178,861 5.05 manufacturing industry) 8 H group (other peripheral devices manufacturing 5,979,836 4.89 industry) 9 I group (wire and cable manufacturing industry) 5,838,337 4.78 10 J group (electronic component manufacturing 5,561,687 4.55 industry)

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Note 1: The list shows ranking by total amounts of credit, endorsement or other transactions (excluding those of government-owned or state-run enterprises). If the borrower is a member of a group enterprise, the total amount of credit, endorsement or other transactions of the entire group enterprise must be listed and disclosed by code and line of industry. The industry of the group enterprise should be presented as the industry of the member firm with the highest risk exposure. The lines of industry should be described in accordance with the Standard Industrial Classification System of the Republic of China published by the Directorate-General of Budget, Accounting and Statistics under the Executive Yuan. Note 2: Groups enterprise refers to a group of corporate entities as defined by Article 6 of the Supplementary Provisions to the Taiwan Stock Exchange Corporation Criteria for Review of Securities Listings. Note 3: The total amount of credits, endorsements or other transactions is the sum of various loans (including import and export negotiations, discounted, overdrafts, unsecured and secured short-term loans, margin loans receivable, unsecured and secured medium-term loans, unsecured and secured long-term loans and overdue loans), exchange bills negotiated, accounts receivable factored without recourse, acceptances and guarantees. 3) Interest rate sensitivity information Interest Rate Sensitivity (NTD) (In Thousands of NTD, %) June 30, 2014 Items 1-90 days 91-180 days 181-365 days Over 1 year Total Interest rate-sensitive assets $ 1,065,903,971 64,503,896 37,102,553 46,865,601 1,214,376,021 Interest rate-sensitive 396,982,384 548,780,943 76,622,185 72,080,032 1,094,465,544 liabilities Interest rate sensitivity gap 668,921,587 (484,277,047) (39,519,632) (25,214,431) 119,910,477 Net worth 130,431,807 Ratio of interest rate-sensitive assets to 110.96 liabilities Ratio of the interest rate sensitivity gap to net 91.93 worth

Note 1:The above amounts include only New Taiwan Dollar amounts held by the Bank, and exclude contingent assets and contingent liabilities.

Note 2:Interest-rate sensitive assets and liabilities mean the revenues or costs of interest-earnings assets and interest-bearing liabilities affected by interest-rate changes.

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

Note 4:Ratio of interest-rate sensitive assets to liabilities = Interest-rate sensitive assets/Interest-rate sensitive liabilities (New Taiwan dollars).

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June 30, 2013 Items 1-90 days 91-180 days 181-365 days Over 1 year Total Interest rate-sensitive assets $ 1,049,959,229 57,398,455 59,359,348 52,431,059 1,219,148,091 Interest rate-sensitive 417,783,123 533,511,855 76,776,686 75,095,095 1,103,166,759 liabilities Interest rate sensitivity gap 632,176,106 (476,113,400) (17,417,338) (22,664,036) 115,981,332 Net worth 115,743,732 Ratio of interest rate-sensitive assets to 110.51 liabilities Ratio of the interest rate sensitivity gap to net 100.21 worth

Note 1: The above amounts included only New Taiwan dollar amounts held by the onshore branches of the Bank (i.e., excluding foreign currency). In compliance with Central Bank’s supervision policies, the above data is prepared for off-site monitoring by 15th of next month. Note 2: Interest-rate sensitive assets and liabilities mean the revenues or costs of interest-earnings assets and interest-bearing liabilities affected by interest-rate changes. Note 3: Interest rate sensitivity gap = Interest rate-sensitive assets - Interest rate-sensitive liabilities. Note 4: Ratio of interest-rate sensitive assets to liabilities = Interest-rate sensitive assets/Interest-rate sensitive liabilities (New Taiwan dollars).

Interest Rate Sensitivity (USD) (In Thousands of USD, %) June 30, 2014 Items 1-90 days 91-180 days 181-365 days Over 1 year Total Interest rate-sensitive assets $ 7,143,793 961,481 723,450 725,761 9,554,485 Interest rate-sensitive 9,456,843 960,804 1,047,864 359,403 11,824,914 liabilities Interest rate sensitivity gap (2,313,050) 677 (324,414) 366,358 (2,270,429) Net worth 267,937 Ratio of interest rate-sensitive assets to 80.80 liabilities Ratio of the interest rate sensitivity gap to net (847.37) worth

Note 1: The above amounts include only USD amounts held by the Bank, and exclude contingent assets and contingent liabilities.

Note 2: Interest-rate sensitive assets and liabilities mean the revenues or costs of interest-earnings assets and interest-bearing liabilities affected by interest-rate changes.

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

Note 4: Ratio of interest-rate sensitive assets to liabilities = Interest-rate sensitive assets/Interest-rate sensitive liabilities (New Taiwan dollars).

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June 30, 2013 Items 1-90 days 91-180 days 181-365 days Over 1 year Total Interest rate-sensitive assets $ 6,258,392 733,516 576,235 478,828 8,046,971 Interest rate-sensitive 7,812,927 613,108 600,160 141,467 9,167,662 liabilities Interest rate sensitivity gap (1,554,535) 120,408 (23,925) 337,361 (1,120,691) New worth 172,808 Ratio of interest rate-sensitive assets to 87.78 liabilities Ratio of the interest rate sensitivity gap to net (648.52) worth

Note 1: The above amounts include only USD amounts held by the onshore branches, OBU and offshore branches of the Bank, and exclude contingent assets and contingent liabilities. In compliance with Central Bank’s supervision policies, the above data is prepared for off-site monitoring by 15th of next month. Note 2: Interest-rate sensitive assets and liabilities mean the revenues or costs of interest-earnings assets and interest-bearing liabilities affected by interest-rate changes. Note 3: Interest-rate sensitive gap = Interest-rate sensitive assets - Interest-rate sensitive liabilities. Note 4: Ratio of interest-rate sensitive assets to liabilities = Interest-rate sensitive assets/Interest-rate sensitive liabilities (U.S. dollars). 4) Profitability Unit: % Item 2014 2013 Return on total assets Before income tax 0.65 0.60 After income tax 0.55 0.52 Return on net worth Before income tax 8.52 8.60 After income tax 7.28 7.51 Profit margin 49.28 49.92

Note 1: Return on total assets = Income before (after) income tax/Average total assets. Note 2: Return on net worth = Income before (after) income tax/Average net worth. Note 3: Profit margin = Income after income tax/Total operating revenues. Note 4: Income before (after) income tax represents income for the six-month periods ended June 30, 2014 and 2013.

(Continued) 256 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

5) Maturity analysis Maturity Analysis of Assets and Liabilities (NTD)

(In Thousands of NTD) June 30, 2014 The amount for the remaining period to maturity Total 1-30 days 31-90 days 91-180 days 181-365 days Over 1 year Main capital inflow $ 1,817,351,730 432,526,152 232,817,078 217,280,414 241,956,454 692,771,632 on maturity Main capital outflow 2,317,246,184 346,411,145 325,042,910 359,361,300 520,826,825 765,604,004 on maturity Gap (499,894,454) 86,115,007 (92,225,832) (142,080,886) (278,870,371) (72,832,372)

Note: The above amounts include only NTD amounts held by the Bank. June 30, 2013 The amount for the remaining period to maturity Total 1-30 days 31-90 days 91-180 days 181-365 days Over 1 year Main capital inflow $ 1,686,183,630 431,591,316 230,571,131 151,293,248 223,482,241 649,245,694 on maturity Main capital outflow 1,947,206,255 310,771,273 313,339,335 256,523,795 391,386,146 675,185,706 on maturity Gap (261,022,625) 120,820,043 (82,768,204) (105,230,547) (167,903,905) (25,940,012)

Note: The above amounts include only NTD amounts held by the Bank. Maturity Analysis of Assets and Liabilities (USD) (In Thousands of USD) June 30, 2014 The amount for the remaining period to maturity Total 1-30 days 31-90 days 91-180 days 181-365 days Over 1 year Main capital inflow $ 55,675,846 18,734,876 12,635,461 9,220,925 9,855,828 5,228,756 on maturity Main capital outflow 65,142,801 19,469,801 13,652,688 9,962,933 15,642,198 6,415,181 on maturity Gap (9,466,955) (734,925) (1,017,227) (742,008) (5,786,370) (1,186,425)

Note 1: The above amounts include only USD amounts held by the Bank.

Note 2: If the overseas assets are at least 10% of the total assets, there should be additional disclosures. June 30, 2013 The amount for the remaining period to maturity Total 1-30 days 31-90 days 91-180 days 181-365 days Over 1 year Main capital inflow $ 39,972,667 12,704,836 10,260,161 6,353,308 6,572,540 4,081,822 on maturity Main capital outflow 42,146,471 13,423,121 10,950,923 6,224,993 6,821,789 4,725,645 on maturity Gap (2,173,804) (718,285) (690,762) 128,315 (249,249) (643,823)

Note 1: The above amounts include only USD amounts held by the Bank.

Note 2: If the overseas assets are at least 10% of the total assets, there should be additional disclosures.

(Continued) 257 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(43) Related-party Transactions 1) Names and relationships of related parties Relationship with the Company and Name of related party its subsidiaries

Fubon Property Management Co., Ltd. Related parties in substance (Fubon Property Management) Taiwan Stock Exchange Corporation Related parties in substance (Taiwan Stock Exchange) Fubon Land Development Co., Ltd. Related parties in substance (Fubon Land Development) Fubon Multimedia Technology Co., Ltd. Related parties in substance (Fubon Multimedia Technology) Fubon Art Foundation Related parties in substance Fubon Cultural & Education Foundation Related parties in substance Fubon Charity foundation Related parties in substance Taipei Fubon Commercial Bank Charity Foundation Related parties in substance Funds Managed by Fubon Asset Management Related parties in substance Taiwan Fixed Network Co., Ltd. (Taiwan Fixed Network) Related parties in substance HannStar Display Corporation (HannStar Display) Related parties in substance Taiwan High Speed Rail Corporation Related parties in substance (Taiwan High Speed Rail) Taiwan Mobile Co., Ltd. (Taiwan Mobile) Related parties in substance Taipei New Horizon Related parties in substance Taiwan Depository & Clearing Corporation Related parties in substance (Taiwan Depository & Clearing) Taiwan's GreTai Securities Market Related parties in substance (GreTai Securities Market) Kbro Co., Ltd. (Kbro) Related parties in substance Taishin International Bank Related parties in substance (not related parties in substance from April, 2014) Capital Securities Co., Ltd. (Capital Securities) Related parties in substance Shanghai Ruidong Hospital Related parties in substance Shanghai Pudong Development Bank Related parties in substance Formosa Petrochemical Corporation Related parties in substance (Formosa Petrochemical) Founder Fubon Assets Management Related parties in substance Chung Hsing Land Development Co., Ltd. A major stockholder of the Company (Chung Hsing Land Development)

(Continued) 258 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Relationship with the Company and Name of related party its subsidiaries

Taipei City Government A major stockholder of the Company Ming-Dong Corporation (Ming-Dong) A major stockholder of the Company Fuji Investment Co., Ltd. (Fuji Investment) A major stockholder of the Company Ruji Investment Co., Ltd. (Ruji Investment) A major stockholder of the Company Others Directors, supervisors, managers and their relatives up to the second degree, affiliates and the related parties in substance

2) Significant transactions with related parties 1. Insurance revenue:

Insurance revenue Insurance receivable For the three-month For the periods ended six-month period June 30 ended June 30 June 30, December June 30, 2014 2013 2014 2013 2014 31, 2013 2013

Kbro $ - 13,612 - 13,612 - - 10,434 Taiwan Mobile 138 5,953 25,621 29,148 25,382 735 361 Taiwan High Speed Rail - - - - - 166,932 - Others 14,902 14,699 40,510 37,937 40,194 4,112 21,249 Related parties in substance 515,114 497,151 535,839 546,991 - - - (individual) $ 530,154 531,415 601,970 627,688 65,576 171,779 32,044

Premium rates were calculated in accordance with the relevant provisions of the Insurance Act, and were not materially different from the general trading terms. 2. Rental revenue and guarantee deposits:

For the three-month For the six-month period periods ended June 30 ended June 30 2014 2013 2014 2013

Rental revenue: Fubon Multimedia Technology $ 25,969 29,683 51,941 59,350 Others 8,375 5,119 16,218 9,317 $ 34,344 34,802 68,159 68,667

(Continued) 259 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 December 31, June 30, 2013 2013

Guarantee deposits: Fubon Multimedia Technology $ 27,219 27,219 83,042

All the above leases were operating leases. The leasing term was not materially different from that with unrelated parties. 3. Rental expense and refundable deposits:

For the three-month For the six-month period periods ended June 30 ended June 30 2014 2013 2014 2013

Rental expense: Chung Hsing Land Development $ 57,797 57,958 115,567 115,896

Ming-Dong 6,418 6,224 13,020 12,449 Taipei City Government 10,624 6,443 17,097 12,885 Others 16,061 15,101 32,226 29,587 $ 90,900 85,726 177,910 170,817

June 30, 2014 December 31, June 30, 2013 2013

Refundable deposits: Chung Hsing Land Development $ 36,035 36,035 28,277 Others 20,305 17,306 12,006 $ 56,340 53,341 40,283

June 30, 2014 December 31, June 30, 2013 2013

Other deposits: Taiwan High Speed Rail $ 108,000 100,800 108,000 Taipei City Government (Note) 380,000 - - $ 488,000 100,800 108,000

Note: Bid Bond All the above leases were operating leases. The leasing term was not materially different from that with unrelated parties.

(Continued) 260 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

4. Bank deposits June 30, 2014 December 31, June 30, 2013 2013

Taishin International Bank $ - 9,805,921 -

5. Deposits June 30, 2014 December 31, 2013 June 30, 2013 Interest Interest Interest rate rate rate Amount range Amount range Amount range

Others $ 42,855,454 0~8 50,998,693 0~6.395 45,950,552 0~6.395

6. Loans June 30, 2014 December 31, 2013 June 30, 2013 Interest Interest Interest rate rate rate Amount range Amount range Amount range

Others $ 53,594,741 1.38~19.98 49,471,182 0~19.98 65,878,593 0~19.98

Units:In Thousands of NTD June 30, 2014 Differences in transaction terms between related and Amount or name of Highest Ending Type of non related Category related party balance balance Normal Overdue collateral parties Employee consumer loans 53 24,044 23,660  - None None House mortgages 337 2,716,347 2,649,240  - Real estate None Others Department of Urban 1,201,559 1,118,075  - Public treasury None Development, Taipei guarantees City Government Taipei City 7,951,330 1,351,330  - Public treasury None Government guarantees Department of Rapid 51,000,000 35,500,000  - Public treasury None Transit systems, TCG guarantees Taipei Municipal 3,321 2,398  - Public treasury None Secured Small Loans guarantees and Service listed stocks Fubon Land 1,690,000 1,590,000  - Construction None Development land Department of 10,000,000 10,000,000  - Credit None Property, Taipei City Government Taipei New Horizon 750,000 750,000  - Credit None Shanghai Ruidong 160,483 160,483  - Deposits None Hospital pledged Shanghai Pudong 449,555 449,555  - None None Development Bank Total 75,946,639 53,594,741

(Continued) 261 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Differences in transaction terms between related and Amount or name of Highest Ending Type of non related Category related party balance balance Normal Overdue collateral parties Employee consumer loans 58 22,526 21,952  - Credit None House mortgages 336 2,469,308 2,410,767  - Land and None buildings Others Department of Urban 1,400,790 1,300,724  - Public treasury None Development, Taipei guarantees City Government Taipei City 13,564,823 13,564,823  - Public treasury None Government guarantees Department of Rapid 52,486,507 39,386,507  - Public treasury None Transit systems, TCG guarantees Taipei Municipal 4,355 3,820  - Public treasury None Secured Small Loans guarantees Service Fubon Land 1,690,000 1,690,000  - Construction None Development land and listed stocks Department of 7,500,000 7,500,000  - Credit Property Development, Taipei City Government Total 79,138,309 65,878,593

7. Guarantees June 30, 2014 Highest balance for Ending Provision Type of Related party the period balance (Note) Rates (%) collateral Taipei City 1,220 1,197 - 1% Public treasury Government guarantees Taipei New Horizon 32,500 32,500 - 0.85% Credit

June 30, 2013 Highest balance for Ending Provision Type of Related party the period balance (Note) Rates (%) collateral Taipei City 1,205 1,205 - 1% Public treasury Government guarantees

Note: Guarantee provisions are reversed based on all claims.

(Continued) 262 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

8. Details of financing activities between Fubon Life Insurance and related parties: (a) Secured loans

For the six-month period ended June 30, 2014 Difference in transaction terms between related and Numbers or name Highest Ending Compliance Type of unrelated Category of related party balance balance situation collateral parties Residential mortgage loans 36 related parties in $ 350,297 306,233 Normal loansReal estate None substance

For the six-month period ended June 30, 2013 Difference in transaction terms between related and Numbers or name Highest Ending Compliance Type of unrelated Category of related party balance balance situation collateral parties Residential mortgage loans 28 related parties in $ 228,426 226,996 Normal loansReal estate None substance

(b) The interest rate of loans provided by Fubon Life Issuance to other related parties are determined by bank loan rate plus additional basis points; the transaction terms are identical to those of other market participants. Moreover, the values of collateral assets which obtained are greater than the lending amount; therefore, creditor’s right can be assured.

For the six-month period ended June 30, 2014 Difference in transaction terms between related and Numbers or name Highest Ending Compliance Type of nonrelated Category of related party balance balance situation collateral parties Life insurance loans 98 related parties in $ 37,998 28,783 Normal loansPolicy value None substance

For the six-month period ended June 30, 2013 Difference in transaction terms between related and Numbers or name Highest Ending Compliance Type of nonrelated Category of related party balance balance situation collateral parties Life insurance loans 101 related parties in $ 38,122 31,289 Normal loansPolicy value None substance

(d) The interest rate of life insurance loans by Fubon Life Insurance to other related parties are determined by rate of insurance policy plus additional or average loan rate of domestic banks, whichever is higher. The transaction terms are identical to those of other market participants. Moreover, the loans were included Policy value Reserve and over the level; therefore, creditor’s right can be assured.

(Continued) 263 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

9. Derivative financial instruments (notional amount) Name of related Financial June 30, 2014 December 31, June 30, 2013 party instrument 2013

Department of cultural Foreign currency $ - 24,132 24,132 Affairs Taipei City forward contract government Shanghai Pudong Foreign currency 1,917,043 - - Development Bank exchange contract Shanghai Pudong Foreign currency 4,577,308 - - Development Bank forward contract Capital Securities Interest rate swap 13,340,000 - - contracts Taishin International Exchange rate - 19,497,450 - Bank swap contracts HannStar Display Foreign currency 5,794,860 - - forward contract HannStar Display Foreign currency 388,898 - - exchange contract $ 26,018,109 19,521,582 24,132

10. Other income Service fees charged by Taipei Fubon Bank For the three-month For the six-month periods periods ended June 30 ended June 30 Name of related party 2014 2013 2014 2013

Others $ 94,086 60,132 186,844 108,986

Service fees charged by Fubon Securities For the three-month For the six-month periods periods ended June 30 ended June 30 Name of related party 2014 2013 2014 2013

Others $ 13,460 12,939 27,274 25,968

Management fees charged by Fubon Asset Management For the three-month For the six-month periods periods ended June 30 ended June 30 Name of related party 2014 2013 2014 2013

Fubon Investment Trust Funds $ 114,355 116,555 226,361 235,255

(Continued) 264 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Interest revenue For the three-month For the six-month periods periods ended June 30 ended June 30 Name of related party 2014 2013 2014 2013

Taishin International Bank $ 92 - 20,095 -

As of June 30, 2014, and December 31 and June 30, 2013, interest receivables amounted to nil, $19,219 and nil, respectively. Dividend revenue charged by Fubon Securities For the three-month For the six-month periods periods ended June 30 ended June 30 Name of related party 2014 2013 2014 2013

Others $ 10,656 10,917 10,656 10,917

11. Other expenses:

For the three-month For the six-month periods ended June 30 periods ended June 30 Name of related party Category 2014 2013 2014 2013

Taiwan Fixed Phone expense and $ 48,007 47,935 79,757 93,306 Network service fee Fubon Property Management fees 52,322 23,009 81,673 49,042 Management Taiwan Stock Brokerage commissions, 56,021 43,131 104,677 82,654 Exchange computer information fee and issuing call warrant fee Gretai Securities Brokerage commissions, 26,754 14,351 48,899 27,013 Market computer information fee and issuing call warrant fee Taiwan Depository & Depository & Clearing 21,432 14,679 38,962 28,151 Clearing fee Others Service fee and others 23,909 33,460 45,528 70,141

Total $ 228,445 176,565 399,496 350,307

(Continued) 265 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

12. Bond transaction (a) Bonds sold under repurchase agreement June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Related parties in substance $ 581,571 1,179,606 403,557 Fuji Investment - 81,000 17,700 Ruji Investment - - 20,000 Total $ 581,571 1,260,606 441,257

(b) Bonds purchased under resell agreement June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Capital Securities. $ 300,339 - -

Taishin International Bank $ - 50,105 -

(d) Bonds and bills buy in and sell out transactions Bills buy in transactions For the six-month periods ended June 30 Name of related party 2014 2013

Capital Securities $ 5,897,403 - Formosa Petrochemical 11,494,202 - $ 17,391,605 -

Bonds buy in transactions For the six-month periods ended June 30 Name of related party 2014 2013

Capital Securities $ 260,771 -

(Continued) 266 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Bonds sell out transactions For the six-month periods ended June 30 Name of related party 2014 2013

Capital Securities $ 449,186 -

13. Donations to related parties were as follows: For the three-month For the six-month periods periods ended June 30 ended June 30 2014 2013 2014 2013

Taipei Fubon Commercial Bank $ 7,967 - 19,830 10,000 Charity Foundation Fubon Art Foundation 1,451 10,255 32,000 31,999 Fubon Cultural & Education 36,540 12,203 36,740 38,278 Foundation Fubon Charity Foundation 4,634 25,549 25,279 48,735 $ 50,592 48,007 113,849 129,012

14. Other receivable from related party June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Fund redemptions receivable $ - 18,642 195,731 Others 39,423 39,377 37,516 $ 39,423 58,019 233,247

15. Prepayment from related party June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Taipei City Government $ 6,605,052 - -

16. Payable to customers of related party June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Funds managed by Fubon Asset $ 750,263 517,504 532,849 Management

(Continued) 267 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

17. Funds purchased by the Company’s related party and managed by Fubon Asset Management Co., Ltd. were as follows: June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Fubon Chi-Hsiang Money Market $ 1,764,891 1,760,266 1,686,834 Fund Fubon Fund 591,300 459,202 640,923 Fubon Precision - 20,415 - Fubon Taiwan Technology ETF 167,293 145,255 139,632 Fubon Taiwan Eight Industries ETF 129,760 121,400 107,808 Fubon Taiwan Finance ETF 127,126 126,829 108,592 Fubon MSCI Taiwan ETF 147,609 133,168 98,130 Fubon Global Investment-Grade Bond 198,289 - - Fund Fubon emerging Asia Growth Equity 28,350 28,140 28,830 Fund Fubon China Growth Fund 10,082 10,763 9,031 Fubon Elite Fund - 24,486 21,936 Fubon SSE180 ETF 730,858 306,683 303,234 Fubon Strategic High Income 102,882 294,257 188,439 Fubon China High Yield Bd CNY 99,050 102,785 100,000 Fubon China Investment Grade Bd 49,865 40,555 49,736 CNY B Total $ 4,147,355 3,574,204 3,483,125

As of June 30, 2014, and December 31 and June 30, 2013, the Company has acquired Fubon REIT I Fund and Fubon REIT II as follows: June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Fubon REIT I Fund $ 1,689,024 1,980,603 3,159,887 Fubon REIT II Fund 925,310 1,037,835 2,053,476 Total $ 2,614,334 3,018,438 5,213,363

(Continued) 268 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

18. Sale of nonperforming loans On June 30, 2014, Fubon Bank (China) sold the nonperforming loans (secured corporate loans), amounting $905,383 thousands with book value amounting $666,730 thousands, at the price of $724,732 thousands to Beijing Founder Fubon Asset Management, and recognized a gain of disposal of $58,002 thousands. 19. Transaction of property Taiwan Sport Lottery leased the internet systematic equipment with Taiwan Fixed Network amounted to $76,319 based on market value, which had second advisor addendum on May 1, 2010 and expired in May, 2013. The interest expenses under capital lease were $0 and $55 for the six-month periods ended June 30, 2014 and 2013, respectively. 20. Other In accordance with the Development Incentives Regulations of Xinyi Planning District, Taipei City, the Subsidiary Fubon Life Insurance Co., Ltd. aided in building 8 upper level bridges connecting the A10 buildings to Taipei City Government in June, 2013 and signed an administrative contract with the Government that Fubon Life Insurance Co., Ltd. is responsible for those bridges’ maintenance until November, 2058. 3) Compensation to executive officers Executive officers’ compensation comprised: For the three-month For the six-month periods periods ended June 30 ended June 30 2014 2013 2014 2013

Short-term employee benefits $ 297,488 236,167 601,623 496,929 Post-employment benefits 7,807 9,472 15,425 16,185 Other long-term employee benefits 1,359 1,260 2,559 2,459 Share-based payment - 1,181 - 7,676 $ 306,654 248,080 619,607 523,249

For share-based payment information please refer to note 34.

(Continued) 269 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

4) Information on related party transactions amounting to more than $100,000 If a transaction occurs between two subsidiaries, only one subsidiary needs to disclose its related party information, and the inter-company transaction is eliminated in the consolidated financial statements. 1. Fubon Insurance and subsidiaries (a) Name and relationship of related party Name of related party Relationship with the Company

Taipei Fubon Bank Co., Ltd. Company controlled by Fubon Financial (Taipei Fubon Bank) Holdings Fubon Life Insurance Co., Ltd. Company controlled by Fubon Financial (Fubon Life Insurance) Holdings Funds managed by Fubon Asset Management Related parties in substance Taiwan High Speed Rail Corporation Related parties in substance (Taiwan High Speed Rail) Taishin International Bank Related parties in substance (not related parties in substance from April, 2014)

(b) Significant transactions with related parties were as follows: a) Funds purchased by Fubon Insurance and managed by Fubon Asset Management Co., Ltd. were as follows: June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Fubon Fund $ 257,410 228,448 201,234

b) Bank deposit with related party June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Taipei Fubon Bank $ 1,551,566 1,459,720 995,835 Taishin International Bank - 600,000 - Total $ 1,551,566 2,059,720 995,835

(Continued) 270 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

c) Project marketing services expense to related party For the three-month For the six-month periods periods ended June 30 ended June 30 Name of related party 2014 2013 2014 2013

Fubon Life Insurance $ 63,036 56,892 125,537 105,654

d) Premiums receivable from related party December 31, Name of related party June 30, 2014 2013 June 30, 2013

Taiwan High Speed Rail $ - 166,932 -

2. Fubon Life Insurance and its subsidiaries (a) Name and relationship of related party Name of related party Relationship with the Company

Fubon Asset Management Co., Ltd. Company controlled by Fubon Financial (Fubon Asset Management) Holdings Fubon Insurance Co., Ltd. (Fubon Insurance) Company controlled by Fubon Financial Holdings Taipei Fubon Bank Co., Ltd. Company controlled by Fubon Financial (Taipei Fubon Bank) Holdings Funds managed by Fubon Asset Management Related parties in substance Taipei City Government Related parties in substance Taishin International Bank Related parties in substance (not related parties in substance from April, 2014) Others Directors, supervisors, managers and their relatives up to the second degree; affiliates and the related parties in subsidiary

(b) Significant transactions with related parties a) Commission expenses For the three-month For the six-month periods periods ended June 30 ended June 30 Name of related party 2014 2013 2014 2013

Taipei Fubon Bank $ 988,466 610,853 1,873,041 1,319,889

All commission expenses include unamortized deferred commission.

(Continued) 271 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Taipei Fubon Bank $ 17,801 19,177 28,289

b) Deposits accepted by Taipei Fubon Bank June 30, 2014 December 31, June 30, 2013 Nature of deposits 2013

Taipei Fubon Bank: Demand deposits $ 1,784,773 3,141,998 7,967,969 Time deposits 1,100,930 8,800,930 6,400,930 Structured deposits 2,973,026 3,001,969 3,031,004 Taishin International Bank: Demand deposits - 102,872 - Time deposits - 6,000,000 - Structured deposits - 2,000,000 - $ 5,858,729 23,047,769 17,399,903

All deposits exclude assets on insurance products-separate account. The structured deposits were recorded as other financial assets. c) Account receivables with related party were as follows: June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Taipei Fubon Bank $ 237,121 220,680 198,948

d) Interest revenues with related party were as follows: For the three-month For the six-month periods periods ended June 30 ended June 30 Name of related party 2014 2013 2014 2013

Taipei Fubon Bank $ 44,905 49,379 103,872 98,564

(Continued) 272 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

e) Loans to related parties were as follows: a. Secured loans

For the six-month period ended June 30, 2014 Differences in transaction terms between Numbers or related and name of related Highest Ending Compliance Type of non related Category party Balance Balance situation Collateral parties

Residential mortgage loans 36 related parties in$ 350,297 306,233 Normal loan Real Estate None substance For the six-month period ended June 30, 2013 Differences in transaction terms between Numbers or related and name of related Highest Ending Compliance Type of non related Category party Balance Balance situation Collateral parties

Residential mortgage loans 28 related parties in $ 228,426 226,996 Normal loan Real Estate None substance

b. The interest rate of loans provided by Fubon Life Issuance to other related parties are determined by bank loan rate plus additional basis points; the transaction terms are identical to those of other market participants. Moreover, the values of collateral assets which obtained are greater than the lending amount; therefore, creditor’s right can be assured. f) Funds were as follows: June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Fubon Fund $ 255,142 226,435 199,461 Fubon Chi-Hsiang Money 1,504,516 1,500,574 1,500,740 Market Fund Fubon Taiwan Technology 165,120 144,150 137,999 ETF Fubon MSCI Taiwan ETF 111,946 101,374 96,060 Fubon Taiwan Eight 127,542 119,865 105,892 Industries ETF Fubon Taiwan Finance ETF 124,795 125,317 107,415 Fubon SSE180 ETF 674,880 306,000 284,400 Fubon Strategic High Income 101,300 97,607 94,225 Fund-A $ 3,065,241 2,621,322 2,526,192

(Continued) 273 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

g) Account balance under the Discretionary Investment Service was as follows: June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Fubon Asset Management $ - - 39,887,807

In December, 2013 the discretionary relation between Fubon Life Insurance and Fubon Asset Management has ended. h) Bond transactions with related party were as follows: Purchase of bonds For the six-month periods ended June 30 Name of related party 2014 2013

Taipei Fubon Bank $ 3,605,838 1,612,453

i) Fubon Asset Management promised to compensate Fubon Life Insurance for the financial bonds and corporate bonds bought from Fubon Asset Management for $16,116,457 with yield of 90 days CP+20bp, which is paid quarterly and expired in April, 2014. The interest of compensation amounted to $173 and $587 for the periods from April 1 to June 30, 2014 and 2013, and $693 and $1,183 for the six-month periods ended June 30, 2014 and 2013, respectively. j) Other receivable (payable) with related party June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Fubon Insurance $ 125,984 59,902 90,466

k) Fubon Life Insurance has acquired Fubon REIT I and Fubon REIT II as of available-for- sale financial assets: June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Fubon REIT I Fund $ 809,215 948,343 1,025,005 Fubon REIT II Fund 852,376 955,187 1,064,559 Total $ 1,661,591 1,903,530 2,089,564

(Continued) 274 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

l) Premium Revenue: For the three-month For the six-month periods periods ended June 30 ended June 30 Name of related party 2014 2013 2014 2013

Related parties in $ 28,747 80,080 107,678 110,080 substance Others 206,896 239,460 458,195 464,127 Total $ 235,643 319,540 565,873 574,207

m) Refundable deposits and rental expense: Refundable deposits: June 30, December June 30, Name of related party 2014 31, 2013 2013 Note

Taipei City Government $ 380,000 - - Bid Bond

Rental expense: For the three-month For the six-month periods ended June 30 periods ended June 30 Name of related party 2014 2013 2014 2013 Note

Taipei City $ 4,151 - 4,151 - Superficies Government rental

All the above leases were operating leases. The leasing term was not materially different from that with unrelated parties. n) Miscellaneous disbursements: For the three-month For the six-month Name of periods ended June 30 periods ended June 30 related party Properties 2014 2013 2014 2013

Taipei Fubon Credit card fees, $ 108,429 75,492 197,629 151,721 Bank etc.

o) Prepayment: June 30, December June 30, Name of related party Properties 2014 31, 2013 2013

Taipei City Government Superficies, $ 6,605,052 - - Land rent

(Continued) 275 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

p) Fubon Life Insurance and Taishin International Bank’s net derivatives:

June 30, 2014 Gain (loss) Balance sheet Nominal on Name Period amount valuation Accounts Balance

Exchange rate June 2013~ $ 15,723,750 (169,424) Financial liabilities at fair (169,424) swap contracts June 2014 value through profit or loss

3. Fubon Securities (a) Name and relationship with related party Name of related party Relationship with the Company

Taipei Fubon Bank Co., Ltd. Company controlled by Fubon Financial (Taipei Fubon Bank) Holdings Fubon Bank (HK) Company controlled by Fubon Financial Holdings Taiwan Mobile Co., Ltd. (Taiwan Mobile) Related parties in substance Funds managed by Fubon Asset Management Related parties in substance Taishin International Bank Related parties in substance (not related parties in substance from April, 2014)

(b) Significant transactions with related parties a) Bank deposits, short－term borrowings, and other current assets As of June 30, 2014, and December 31 and June 30, 2013, cash deposits in Taipei Fubon Bank and Fubon Bank (HK) were as follows： June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Demand deposits (including $ 399,369 314,942 609,412 securities brokerage account) Time deposits $ 1,923,921 2,416,775 1,905,929 Restricted time deposits $ 1,617,824 2,040,000 2,370,117 Checking accounts $ 360,623 24,862 9,094 Pledged deposits $ 233,891 233,891 739,891 Foreign currency deposits $ 297,923 246,374 153,060 Foreign currency time $ 658,134 1,198,024 2,560,217 deposit

(Continued) 276 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2014 and 2013, interest rate intervals on the above deposits in Taipei Fubon Bank and Fubon Bank (HK) were both 0.550%~1.365%. Interest revenues were $8,896, $18,007, $23,284 and $41,318 for the periods from April 1 to June 30, 2014 and 2013, and the six-month periods ended June 30, 2014 and 2013, respectively. As of December 31, 2013, Fubon Securities and its subsidiaries had placed demand and time deposit in Taishin International Bank amounting to $5,493 and $1,050,000, respectively. Interest revenues amounted to $2,228 for the period from April 1 to June 30, 2014. Interest rate intervals on the above deposits were 0.170%~0.940% for the six- month period ended June 30, 2014. As of June 30, 2014, and December 31 and June 30, 2013, the Company had provided time deposits in Taipei Fubon Bank as operating deposits, refundable deposits and warrant deposits amounting to $1,279,700, $1,251,700 and $1,320,000, respectively. Balances of short term borrowing from Taipei Fubon Bank as of June 30, 2014, and December 31 and June 30, 2013, were all nil. As of June 30, 2014, and December 31 and June 30, 2013, unused credit facilities from Taipei Fubon Bank amounted to $6,000,000. Time deposits pledged to Taipei Fubon Bank for short term borrowings were $105,000, $105,000 and $500,000 as of June 30, 2014, and December 31 and June 30, 2013, respectively. The book value of land and buildings pledged to Taipei Fubon Bank for short term borrowings were $1,377,653, $1,381,965 and $11,386,277 as of June 30, 2014, and December 31 and June 30, 2013, respectively. Fubon Securities also provided stock investments amounting to $1,663,200, $1,733,400 and $2,133,000 to Taipei Fubon Bank as collateral for short term borrowings as of June 30, 2014, and December 31 and June 30, 2013, respectively. b) Available for sale financial assets – current The balance of related parties’ shares held by Fubon Securities and its subsidiaries and the gain or loss on disposal were as follows: June 30, 2014 Gain (loss) on Name of related party Cost valuation

Taiwan Mobile $ 1,412,500 666,500

December 31, 2013 Gain (loss) on Name of related party Cost valuation

Taiwan Mobile $ 1,412,500 754,250

June 30, 2013 Gain (loss) on Name of related party Cost valuation

Taiwan Mobile $ 1,412,500 1,253,750

(Continued) 277 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

For the three-month period ended June 30, 2014 Dividend Gain (loss) on Name of related party revenue disposal

Taiwan Mobile $ 126,000 -

For the six-month period ended June 30, 2013 Dividend Gain (loss) on Name of related party revenue disposal

Taiwan Mobile $ 126,000 -

For the six-month periods ended June 30, 2014 and 2013, the balance of related parties’ common stock shares held by Fubon Securities and its subsidiaries has no related dividend revenues and gains or loss on disposal. c) Futures traders' equity As of June 30, 2014, and December 31 and June 30, 2013, related parties' engaged in futures trading and deposited in Fubon Futures traders' equity were as follow: June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Fubon SSE 180 ETF $ 111,752 157,626 137,324 Fubon labor pension fund 194,210 194,046 194,527 99-2 Fubon new labor fund 101-1 136,219 50,452 130,941 Fubon new labor fund 97-2 100,150 50,452 130,941 $ 542,331 452,576 593,733

d) Funds purchased by Fubon Securities were as follow: June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Fubon Chi-Hsiang Money $ 187,128 186,636 180,144 Market Fund Fubon Chian High Yield 99,050 102,785 100,000 Bond Fund CNY $ 286,178 289,421 280,144

(Continued) 278 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

e) Funds issued by Fubon Asset Management and purchased by related parties: June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Fubon Chi-Hsiang Money $ 1,764,891 1,760,265 1,686,834 Market Fund Fubon Fund 591,300 459,202 640,923 Fubon SSE 180 ETF 730,858 306,683 303,234 (managed by Fubon Asset Management) Fubon Strategic High Income 102,882 294,257 188,439 Funds Others (no related company 963,775 759,689 678,635 or person accounts for more than 5%) $ 4,153,706 3,580,096 3,498,065

f) Management income: For the three-month For the six-month periods periods ended June 30 ended June 30 Name of related party 2014 2013 2014 2013

Others $ 66,954 72,483 135,570 141,840

g) Rental revenue

Rental revenue Rental receivable For the three-month For the six-month periods ended June 30 periods ended June 30 June 30, December June 30, 2014 2013 2014 2013 2014 31, 2013 2013

Taipei Fubon Bank $ 73,350 65,715 141,252 128,762 48,484 68,096 44,118

(Continued) 279 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

4. Taipei Fubon Bank and its subsidiaries (a) Name and relationship with related party Name of related party Relationship with the Company

Fubon Insurance Co., Ltd. (Fubon Insurance) Company controlled by Fubon Financial Holdings Fubon Life Insurance Co., Ltd. Company controlled by Fubon Financial (Fubon Life Insurance) Holdings Fubon Securities Co., Ltd. (Fubon Securities) Company controlled by Fubon Financial Holdings Taiwan Sport Lottery Co., Ltd. Company controlled by Fubon Financial (Taiwan Sport Lottery) Holdings Fubon Bank (HK) Company controlled by Fubon Financial Holdings Taipei City Government A major shareholder of the Company Funds managed by Fubon Asset Management Related parties in substance Fubon Land Development Co., Ltd. Related parties in substance (Fubon Land Development) Founder Fubon Asset Management Related parties in substance Taiwan New Horizon Related parties in substance Capital Securities Co., Ltd. Related parties in substance (Capital Securities) Formosa Petrochemical Corporation Related parties in substance (Formosa Petrochemical) Shanghai Rudong Hospital Related parties in substance Shanghai Pudong Development Bank A major shareholder of Fubon Bank (China) Others Directors, supervisors, managers and their relatives up to the second degree; affiliated and the related parties in substance (b) Significant transactions with related parties a) Deposits and loans For the six-month period ended June 30, 2014 Interest rate / Interest service fee rate revenue Item Ending balance (%) (expense)

Loans $ 53,594,741 1.38~19.98 464,981 Due from banks $ 4,439,795 0.01~5.4 36,460 Deposits $ 55,305,460 0~8.00 (192,554)

(Continued) 280 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Units:In Thousands of NTD June 30, 2014 Differences in transaction terms between Amount or name of Highest Ending Type of related and non Category related party balance balance Normal Overdue collateral related parties Employee consumer loans 53 24,044 23,660  - None None House mortgages 337 2,716,347 2,649,240  - Real estate None Others Department of Urban 1,201,559 1,118,075  - Public treasury None Development, Taipei guarantees City Government Taipei City 7,951,330 1,351,330  - Public treasury None Government guarantees Department of Rapid 51,000,000 35,500,000  - Public treasury None Transit systems, TCG guarantees Taipei Municipal 3,321 2,398  - Public treasury None Secured Small Loans guarantees Service Fubon Land 1,690,000 1,590,000  - Construction None Development land and listed stochs Department of 10,000,000 10,000,000  - Credit None Property, Taipei City Government Taipei New Horizon 750,000 750,000  - Credit None Shanghai Rudong 160,483 160,483  - Deposits None pledged Hospital

Shanghai Pudong 449,555 449,555  - None None Development Bank

Total 75,946,639 53,594,741

For the six-month period ended June 30, 2014 Interest rate / service fee rate Interest Ending balance Ending balance (%) revenue

Guarantees and acceptances $ 33,702 0.85~1 157

June 30, 2014 Highest balance for Ending Provision Rates Type of Related party the period balance (note) (%) collateral Taipei City 1,220 1,197 - 1% Public treasury Government guarantees Taipei New Horizon 32,500 32,500 - 0.85% Credit

Note:Guarantees provisions are reserved based on all claims.

(Continued) 281 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

For the six-month period ended June 30, 2013 Interest rate / Interest service fee rate revenue Item Ending balance (%) (expense)

Loans $ 65,878,593 0~19.98 428,972 Due from banks $ 701,595 3.98 11,254 Deposits $ 69,626,125 0~6.395 (236,290)

June 30, 2013 Differences in transaction terms between Amount or name of Highest Ending Type of related and non Category related party balance balance Normal Overdue collateral related parties Employee consumer loans 58 22,526 21,952  - None None House mortgages 336 2,469,308 2,410,767  - Land and None buildings Others Department of Urban 1,400,790 1,300,724  - Public treasury None Development, Taipei guarantees City Government Taipei City 13,564,823 13,564,823  - Public treasury None Government guarantees Department of Rapid 52,486,507 39,386,507  - Public treasury None Transit systems, TCG guarantees Taipei Municipal 4,355 3,820  - Public treasury None Secured Small Loans guarantees Service Fubon Land 1,690,000 1,690,000  - Construction None Development Co., Ltd. land and listed stocks Department of 7,500,000 7,500,000  - Credit None Property, Taipei City Government Total 79,138,309 65,878,593

For the six-month period ended June 30, 2013 Interest rate / service fee rate Interest Ending balance Ending balance (%) revenue

Guarantees and acceptances $ 1,205 1 6

June 30, 2013 Highest balance for Ending Provision Rates Type of Related party the period balance (note) (%) collateral Taipei City 1,205 1,205 - 1% Public treasury Government guarantees

Note:Guarantees provisions are reserved based on all claims.

(Continued) 282 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

b) Bond transactions were as follows: For the six-month period ended June 30 Name of related party Subject Transaction types 2014 2013

Fubon Life Insurance Bonds Bonds purchased $ 1,807,104 2,606,996 Capital Securities Bonds Bonds purchased 260,771 - Capital Securities Bonds Bonds sold 449,186 - Capital Securities Bills Bonds purchased 5,897,403 - Formosa Petrochemical Bills Bonds purchased 11,494,202 -

June 30, December June 30, Name of related party Subject Transaction types 2014 31, 2013 2013

Capital Securities Bonds Bonds sold under $ 300,339 - - resell agreement Taiwan Sports Lottery Bonds Bonds sold under - - 2,290,000 repurchase agreement Directors, supervisors, Bonds Bonds sold under 581,571 1,179,606 403,557 managers and their repurchase agreement relatives up to the second degree; affiliated and the related parties in substance

c) Fund and stock transactions June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Fubon Fund $ - - 238,624 Fubon REIT I Fund 821,940 963,256 1,041,124 $ 821,940 963,256 1,279,748

(Continued) 283 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

d) Insurance Insurance contracts with Fubon Insurance were as follows: For the six-month period ended June 30, 2014 Insurance Insured items Insured years Insured amount expense

Cash 2014.4.20~2015.4.20 $ 200,000 370 Safety deposit box 2014.4.20~2015.4.20 150,000 1,396 liability insurance Electrical equipment 2013.11.1~2014.11.1 2,470,694 4,927 insurance Fire insurance 2014.3.1~2015.3.1 5,269,190 9,075 Liability insurance 2014.4.20~2015.4.20 468,000 628 Banking insurance 2014.4.20~2015.4.20 122,500 8,700

For the six-month period ended June 30, 2013 Insurance Insured items Insured years Insured amount expense

Cash 2013.4.20~2014.4.20 $ 200,000 390 Safety deposit box 2013.4.20~2014.4.20 150,000 1,398 liability insurance Electrical equipment 2012.11.1~2013.11.1 2,337,732 4,745 insurance Fire insurance 2013.3.1~2014.3.1 5,980,242 9,908 Liability insurance 2013.4.20~2014.4.20 468,000 645 Banking insurance 2013.4.20~2014.4.20 122,500 8,850

Note: Insured amount depend on job type of each employee were $1,000, $3,000 and $5,000, respectively. e) Derivative financial instruments June 30, 2014 June 30, 2013 Name of related party Instruments

Fubon Bank (HK) Interest rate swap $ 192,157 209,030 contract Fubon Life Insurance Interest rate swap (593,713) (681,090) Co., Ltd. contract $ (401,556) (472,060)

(Continued) 284 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

f) Other June 30, 2014 December 31, June 30, 2013 2013

Receivable –Taiwan Sport $ 922,647 2,570,942 3,518,210 Lottery Receivable –Fubon Life 406,481 465,095 269,306 Insurance Payable –Others 69,975 103,654 71,862 Refundable deposits – other 161,601 161,553 158,766 Structure of the principal 2,750,000 2,750,000 2,750,000 amount of good received– Fubon Life Insurance $ 4,310,704 6,051,244 6,768,144

For the three-month For the six-month periods periods ended June 30 ended June 30 Name of related party 2014 2013 2014 2013

Service fee – Fubon Life $ 1,085,107 739,791 2,178,395 1,530,317 Insurance Co., Ltd. Service fee – other 121,443 106,094 240,314 192,799 Other income – Taiwan 7,379 563,299 14,625 1,247,026 Sport Lottery $ 1,213,929 1,409,184 2,433,334 2,970,142

g) Transaction of NPL On June 30, 2014, Fubon Bank (China) sold the nonperforming loans (secured corporate loans), amounting $905,383 thousands with book value amounting $666,730 thousands, at the price of $724,732 thousands to Beijing Founder Fubon Asset Management, and recognized a gain of disposal of $58,002 thousands. Transactions between the Bank and related parties were at arm’s length commercial terms, except for the preferential interest rates offered to employees for savings and loans of up to certain amounts. Under the Banking Law, except for consumer and government loans, credits extended by the Bank to any related party should be fully secured, and the credit terms for related parties should be similar to those for unrelated parties.

(Continued) 285 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

5. Fubon Bank (Hong Kong) (a) Name and relationship with related party Name of related party Relationship with the Company

Taipei Fubon Bank Co., Ltd. Company controlled by Fubon Financial (Taipei Fubon Bank) Holdings

(b) Significant transactions with related parties Deposits June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Taipei Fubon Bank HKD 32,073 HKD 132,709 HKD -

Bank Deposits June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Taipei Fubon Bank HKD 74,000 HKD 33,068 HKD 103,340

6. Fubon Financial Holding Venture Capital (a) Name and relationship with related party Name of related party Relationship with the Company

Taipei Fubon Bank Co., Ltd. (Taipei Fubon Bank) Company controlled by Fubon Financial Holdings Funds managed by Fubon Asset Management Related parties in substance

(b) Significant transactions with related parties a) Bank deposits As of June 30, 2014, and December 31 and June 30, 2013, cash deposits in related parties were as follows： Taipei Fubon Bank Co., June 30, 2014 December 31, June 30, 2013 Ltd. 2013

Demand deposits $ 160,635 17,937 2,603 Time deposits 504,835 504,835 503,732 $ 665,470 522,772 506,335

(Continued) 286 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2014 and 2013, the interest revenue were $2,000 and $3,195, respectively, and interest receivable were $2,833 and $420, respectively. b) Funds purchased by Fubon Financial Holding Venture Capital and managed by Fubon Asset Management Co., Ltd. were as follows: June 30, 2014 December 31, June 30, 2013 Fund name 2013

Fubon Strategic High Income $ 101,837 100,193 - Fund 7. Fubon Marketing and its subsidiaries (a) Name and relationship with related party Name of related party Relationship with the Company

(b) Significant transactions with related parties a) Deposit June 30, 2014 December 31, June 30, 2013 2013

Taipei Fubon Bank $ 159,365 340,074 105,167

For the six-month periods ended June 30, 2014 and 2013, the interest revenues were $514 and $587, respectively. b) Operating revenue For the six-month periods ended June 30 Name of related party 2014 2013

Fubon Insurance $ 216,190 218,121 Fubon Life Insurance 233,976 298,752 Total $ 450,166 516,873

(Continued) 287 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

The details of account receivables generated from aforementioned transactions were as follows: June 30, 2014 December 31, June 30, 2013 Name of related party 2013

Fubon Insurance $ 90,127 39,700 112,170 Fubon Life Insurance 29,923 49,150 93,083 Total $ 120,050 88,850 205,253

8. Taiwan Sport Lottery (a) Name and relationship with related party Name of related party Relationship with the Company

Taipei Fubon Bank Co., Ltd. (Taipei Fubon Bank) Company controlled by Fubon Financial Holdings

(b) Significant transactions with related parties a) Deposit June 30, 2014, and December 31 and June 30, 2013, cash deposits in Taipei Fubon Back Co., Ltd. was as follows: Taipei Fubon Bank Co., Ltd. June 30, 2014 December 31, June 30, 2013 2013

Time deposits $ - 790,000 830,000 Bonds and bills purchased - - 2,290,000 under repurchase agreements $ - 790,000 3,120,000

For the six-month periods ended June 30, 2014 and 2013, the interest revenues were $1,785 and $6,216, respectively. b) Not achieving the guaranteed annual turnover For the six-month periods ended June 30 Name of related party 2014 2013

Taipei Fubon Bank $ - 1,223,000

(Continued) 288 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

c) Operating revenue Service revenue from related party was as follows: For the six-month periods ended June 30 Name of related party 2014 2013

Taipei Fubon Bank $ - 221,767

d) Other income For the six-month periods ended June 30 Name of related party 2014 2013

Taipei Fubon Bank $ 843,120 274

(44) Pledged Assets June 30, 2014 December 31, June 30, 2013 Pledged assets Purpose of pledge 2013

Time deposits (accounted for Guarantee deposits for $ 17,942 17,880 17,897 refundable deposits) Insurance business Time deposits (accounted for Bank loans 683,722 694,449 713,169 pledged assets) Time deposits (accounted for Deposits for leases and 300,930 100,930 930 due from Central Bank and others call loans to banks) Time deposits (accounted for USD clearing transaction 5,500,000 - - due from Central Bank and warranty call loans to banks) Negotiable Certificate of Collaterals for day term 23,559,830 20,065,891 20,066,264 Deposit (accounted for held to overdraft as liquidity maturity financial assets) reserve, collaterals for call loans of foreign currency and USD clearing transaction warranty Pledged time deposits Note 1 2,169,135 692,090 - (accounted for other financial assets) Government bonds(accounted Guarantee deposits for 7,170,146 7,253,546 5,897,156 for refundable deposits) Insurance business Government bonds (accounted Note 1 1,941,591 1,261,342 1,287,652 for held to maturity financial assets non current) Government bonds (accounted Placement with courts of 112,365 - - for non-active market bonds justice for various over investment) due loan collection cases

(Continued) 289 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 December 31, June 30, 2013 Pledged assets Purpose of pledge 2013

Government bonds (accounted Note 1 $ 322,793 323,450 322,949 for financial assets measured at fair value through profit or loss) Government bonds (accounted Note 1 1,754,653 906,563 941,190 for available-for-sale financial assets) Property, plant and equipment Bank loans 316,009 306,312 307,075 – land and buildings Investment property – land and Bank loans 341,480 319,919 325,453 buildings Idle assets – land and building Bank loans 39,316 47,379 47,968 Total $ 44,229,912 31,989,751 29,927,703

Note 1: Those pledged assets had been placed with (a) courts for meeting requirements for judiciary provisional seizure of debtors' property, (b) the National Credit Card Center for the Bank's potential obligations on credit card activities, (c) the Central Bank for the Bank's potential obligations on its trust activities, and (d) foreign governments for the Bank's potential obligations on its overseas operations. For the six-month periods ended June 30, 2014 and 2013, operating deposits and refundable deposits in Taipei Fubon Bank Co., Ltd. amounted to $105,000 and $605,000, respectively, were eliminated when the Company compiled its consolidated financial report. (45) Commitments and contingencies 1) Details of the Company’s leasing contract commitments to the maturity were as follows:

June 30, 2014 Less than one Between one More than five year and five years years Total Lease commitments Operating lease payments (Lessee) 1,179,677 1,376,912 120,095 2,676,684 Operating lease income (Lessor) 3,624,309 13,905,589 9,911 17,539,809 Finance lease payments (Lessee) 1,578 4,044 - 5,622 Finance lease income (Lessor) 28,249 36,274 41,137 105,660 Present value of finance lease payments 732 1,033 - 1,765 (Lessee) Present value of finance lease income 25,905 31,361 37,541 94,807 (Lessor) Capital expenditure commitments 1,180,045 383,979 - 1,564,024 Total 6,040,495 15,739,192 208,684 21,988,371

(Continued) 290 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

December 31, 2013 Less than one Between one More than five year and five years years Total Lease commitments Operating lease payments (Lessee) 1,137,542 1,049,710 121,919 2,309,171 Operating lease income (Lessor) 3,571,149 14,696,807 11,023 18,278,979 Finance lease payments (Lessee) 1,496 1,313 - 2,809 Finance lease income (Lessor) 39,452 44,688 51,599 135,739 Present value of finance lease payments 1,469 1,312 - 2,781 (Lessee) Present value of finance lease income 36,088 38,564 46,667 121,319 (Lessor) Capital expenditure commitments 1,103,295 300,296 - 1,403,591 Total 5,890,491 16,132,690 231,208 22,254,389

June 30, 2013 Less than one Between one More than five year and five years years Total Lease commitments Operating lease payments (Lessee) 1,097,350 1,074,524 28,848 2,200,722 Operating lease income (Lessor) 3,319,005 14,093,927 1,722 17,414,654 Finance lease payments (Lessee) 2,494 1,645 - 4,139 Finance lease income (Lessor) 53,710 50,463 55,651 159,824 Present value of finance lease payments 2,422 1,620 - 4,042 (Lessee) Present value of finance lease income 49,851 43,771 50,147 143,769 (Lessor) Capital expenditure commitments 929,360 296,773 - 1,226,133 Total 5,454,192 15,562,723 136,368 21,153,283

2) Fubon Insurance 1. As of June 30, 2014, Fubon Insurance had several insurance disputes and was requested to pay indemnities amounting to approximately $688,404, of which approximately $428,275 was reinsured. The difference not covered by reinsurance related to these claims had been accrued. These cases were still pending with the district court and had not been resolved as of June 30, 2014.

(Continued) 291 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

2. Tainan city government claims that the former employee of Fubon Insurance made them losing $223,500 by using insurance contract without “sample” sign. Fubon Insurance also has joint and several liabilities for damage compensation. The Tainan District Court had been rejecting the Tainan city government’s accusation. But the Tainan city government appealed to a higher court, and Fubon Insurance lost the lawsuit in March, 2009. Fubon Insurance appealed to the Supreme Court. The Supreme Court remanded the case to the Taiwan High court Tainan branch on September 17, 2009. Taiwan High Court Tainan branch ruled that the appeal of Tainan city government has been overruled on November 29, 2011 and Tainan city government has filed an appeal. Taiwan Supreme Court remanded the case and it is under the trial of Taiwan High Court Tainan branch. On March 29, 2012, The Supreme Court ruled that the remand order for this case to Taiwan High Court Tainan Branch Court. Taiwan High Court Tainan branch ruled that the appeal of Tainan city government has been overruled on June 18, 2013, but Tainan city government appealed to the higher court again. Taiwan Supreme Court ruled that the appeal of Tainan city government has been overruled on May 22, 2014. The case is confirmed and the company has no responsibility to compensate Tainan City Government. 3) Fubon Life Insurance 1. As of June 30, 2014, Fubon Life Insurance had 29 insurance lawsuits for which it was required to indemnification for losses totaling approximately $177,278 which had been accrued under claim reserve. 2. Significant unrecognized contract commitment The unrecognized contract commitment of Life Insurance is as follows: June 30, 2014 December 31, June 30, 2013 2013

Acquisition of superficies (Note) $ 17,288,000 - 2,086,400

Note: Fubon Life Insurance acquired the superficies of No.6 Xinyi Rd., Xinyi District in June, 2014 by bid. The total contract value amounted to $17,288,000 by referencing to the appraisal report of Repro International Inc. and Colliers internationals. As of reporting date, the contract has not yet been signed. 4) Fubon Securities 1. There were several disputes that former brokers had with clients due to securities brokerage transactions. Also, there were several disputes which brokers of the Futures IB group of Fubon Securities had with clients due to futures transactions. The clients filed lawsuits against Fubon Securities and the Futures IB group of Fubon Securities for damages. Based on the adjudication, as of June 30, 2013, Fubon Securities recognized indemnification loss of $55,249. On September 10, and November 18, 2013, the Supreme Court ordered the Futures IB group of Fubon Securities to pay for indemnification loss of $54,935.

(Continued) 292 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

The balances of indemnificatory loss payable, resulted from the litigation with customers for stocks for stock business were as following: June 30, 2014 December 31, June 30, 2013 2013

Indemnificatory loss payable $ 14,129 2,602 55,249

For the six-month periods ended June 30, 2014 and 2013, Fubon Securities recognized indemnification loss of $16,418 and $0. As of June 30, 2014, the remaining claims for indemnification loss of $12,000 were still under judicial examination. 2. Customers of Fubon Futures, Mr. Liu and nine other persons, requested Fubon Futures to absorb all losses on their futures investment amounting to $237,644. In 2010, the requested amount was changed to $238,629 because of two customers, Miss Chen and Miss Lin. Fubon Futures reached a settlement with Mr. Wang and paid $390 to Mr. Wang in 2009. Pursuant to the first trial judgment made by the Taipei District Court in 2010, Fubon Futures had to pay Mr. Lee $9,400, but Fubon Futures appealed to a higher court. In April, 2011, Fubon Securities reached an agreement with Mr. Lee and paid $6,207 as compensation for his loss. In July, 2011, the result of the judicial judgments was to reject to the appeal of Miss Lin, and Miss Lin appealed to the Supreme Court. In November, 2011, the Supreme Court decided to reject this appeal, and Miss Lin was ordered to pay about $800 to the court. Fubon Futures won the lawsuit in February, 2012, the final decision of the High Court was that Fubon Futures need not pay Miss Lin $21,000. Based on the lawyer’s opinion, for the year ended December 31, 2013, Fubon Futures' absorbing of losses requested by the remaining customers would amount to $20,794 which had be recognized as non-operating expenses. However, the outcome will be determined by the Supreme Court. Fubon Futures made a provision of $46,394 for its loss on June 30, 2014, accounted as other payables. 5) Taipei Fubon Bank 1. Except for disclosed in other notes of consolidated financial statements, as of June 30, 2014, and December 31 and June 30, 2013, Taipei Fubon Bank and its subsidiary had commitments as follows: June 30, 2014 December 31, June 30, 2013 2013

Collections for customers $ 48,168,440 62,330,124 38,106,808 Agency loans payable 76,031,908 33,116,682 34,982,788 Travelers’ checks consigned-in 741,118 813,173 752,282 Marketable securities under custody 209,241,782 213,536,978 248,384,043 Trust assets 296,858,974 294,693,857 299,937,897 Management for book-entry 266,033,700 308,825,400 351,904,700 government bonds

(Continued) 293 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

2. Taipei Fubon Bank sold its Fubon Neihu building to Taiwan Land Bank Co., Ltd., the trust company of Fubon No. 2 REITs, and then leased back the building. The disposal gain of $295,819 was recognized over the three-year lease term. However, at the end of the lease term in April 2009, Taipei Fubon Bank renewed the lease, thereby extending the lease term to another 10 years. Consequently, the unrealized profit on the sale and leaseback transaction was recognized over 124 months commencing from January 1, 2009. 3. For the period from May 2, 2008 to December 31, 2013, the Bank was designated as the institution to run the sports lottery program and was required to cover any shortfall of the guaranteed 80% of earnings to be turned over to the Sports Administration. However, as a result of some unexpected factors such as the delay in setting up the operating channels, the shortfall amounts calculated by the Bank were lower than those calculated by the Sports Administration. Although the Bank disagreed with the higher calculations by the authorities, the Bank paid these amounts within the deadline. Nevertheless, to protect its interest, the Bank had filed administrative appeals; related information is shown below.

Unit：$ 100 million Differences to Yearly lottery be submitted Differences earrings to be by the request submitted by submitted based of the Taipei Fubon on annul regulatory Bank upon the Differences yet Year turnover agency request to be submitted Remarks

2008 6.80 3.90 3.90 - Taipei Fubon Bank filed for administrative appeal and Taipei High Administrative Court (THAC) adjudicated the case in favor of Taipei Fubon Bank. After the Sports Affairs Council Executive Yuan (reorganize to Sport Administration, Ministry of Education) appealed against THAC’s decision, The Supreme Administrative Court abandoned the original decision and remanded it to THAC. Later, THAC dismissed the appeal during remanding. Taipei Fubon Bank is going to appeal to the Supreme Administrative Court. 2009 18.48 3.98 3.98 - Taipei Fubon Bank filed for administrative appeal and THAC adjudicated the case in favor of Taipei Fubon Bank. After the Sports Affairs Council Executive Yuan (reorganize to Sport Administration, Ministry of Education) appealed against THAC’s decision, the Supreme Administrative Court abandoned the original decision and remanded it to THAC. Later, THAC dismissed the appeal during remanding. Taipei Fubon Bank is going to appeal to the Supreme Administrative Court.

(Continued) 294 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Differences to Yearly lottery be submitted Differences earrings to be by the request submitted by submitted based of the Taipei Fubon on annul regulatory Bank upon the Differences yet Year turnover agency request to be submitted Remarks

2010 19.75 15.87 15.87 - Taipei Fubon Bank filed for administrative appeal. THAC dismissed the appeal. After Taipei Fubon Bank appealed against the decision, the Supreme Administrative Court dismissed Taipei Fubon Bank’s appeal. The Supreme Administrative Court ruled that the supplementary payments need not be adjusted. 2011 16.60 23.53 23.53 - Taipei Fubon Bank filed for administrative appeal. Taipei High Administrative Court made a favorable ruling of Taipei Fubon Bank’s administrative proceedings. After an appeal by the Sports Administration of the Ministry of Education, the Supreme Administrative Court abandoned the THAC’s ruling and dismissed the first instance lawsuit. However, the Supreme Administrative Court later dismissed another appeal filed by Taipei Fubon Bank. A final verdict was made that Taipei Fubon Bank need not to adjust its repayment amount. 2012 19.65 26.85 26.85 - Taipei Fubon Bank filed for administrative appeal. The case was still in pendings under THAC as of June 30, 2014. 2013 27.97 21.76 21.76 - The appeal was still processing as of June 30, 2014.

The sports lottery operation of Taipei Fubon Bank has created the lottery earnings over $10 billion to the government. The said earnings will be utilized for notational sports development programs, subsidies to the National Pension Insurance, National Health Insurance Reserve Fund Operation and good-cause spending. All in all, it has indicated that Taipei Fubon Bank fully supports Taiwan’s sports industry and financial stability with a determination as an enterprise to wholeheartedly undertake its corporate social responsibility. 4. Acting as an agent, Taipei Fubon Bank had sold to customers financial products linked to securities issued by Lehman Brothers Company (LEH) and other companies. However, LEH filed for bankruptcy in September 2008. The customers then filed a claim against Taipei Fubon Bank. Taipei Fubon Bank had estimated a settlement loss of $420,000 and accrued it accordingly in 2008 and 2009. As of June 30, 2014, Taipei Fubon Bank had paid compensation of $333,458.

(Continued) 295 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

6) Taiwan Sport Lottery 1. Taiwan Sport Lottery is established to operate a sport lottery business entrusted by Taipei Fubon Bank. According to the contract, Taiwan Sport Lottery should achieve a sales revenue which is determined based on a guaranteed annual turnover that is equal to 80% of the annual turnover excluding the retail store channels during the contract term period. 2. Due to causes that can not be held against Taipei Fubon Bank, such as no approval for retail stores or late approval for the sale channel, the guaranteed lottery earnings, calculated by the regulatory agency and Taipei Fubon Bank itself, differs. Despite of these differences and based on the request letter from the regulatory agency, Taipei Fubon Bank has submitted all the differences within the deadline and has been in the process of administrative litigation. The litigation and the amounts submitted related to Taiwan Sports Lottery are as follows:

Unit: $100 million Differences to Yearly lottery be submitted earrings to be by the request submitted of the Submitted by Submitted by Differences based on annul regulatory Taipei Fubon Taiwan Sport yet to be Year turnover agency Bank Lottery submitted Remarks

2008 6.80 3.90 3.90 - - Taipei Fubon Bank filed for administrative appeal and Taipei High Administrative Court (THAC) adjudicated the case in favor of Taipei Fubon Bank. After the Sports Affairs Council Executive Yuan (reorganize to Sport Administration, Ministry of Education) appealed against THAC’s decision, The Supreme Administrative Court abandoned the original decision and remanded it to THAC. Later, THAC dismissed the appeal during remanding. Taipei Fubon Bank is going to appeal to the Supreme Administrative Court. 2009 18.48 3.98 1.54 2.44 - Taipei Fubon Bank filed for administrative appeal and THAC adjudicated the case in favor of Taipei Fubon Bank. After the Sports Affairs Council Executive Yuan (reorganize to Sport Administration, Ministry of Education) appealed against THAC’s decision, the Supreme Administrative Court abandoned the original decision and remanded it to THAC. Later, THAC dismissed the appeal during remanding. Taipei Fubon Bank is going to appeal to the Supreme Administrative Court.

(Continued) 296 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Differences to Yearly lottery be submitted earrings to be by the request submitted of the Submitted by Submitted by Differences based on annul regulatory Taipei Fubon Taiwan Sport yet to be Year turnover agency Bank Lottery submitted Remarks

2010 19.75 15.87 3.39 12.48 - Taipei Fubon Bank filed for administrative appeal. THAC dismissed the appeal. After the Bank appealed against the decision, the Supreme Administrative Court dismissed Taipei Fubon Bank’s appeal. The Supreme Administrative Court ruled that the supplementary payments need not be adjusted. 2011 16.60 23.53 3.77 19.76 - Taipei Fubon Bank filed for administrative appeal. Taipei High Administrative Court made a favorable ruling of Taipei Fubon Bank’s administrative proceedings. After an appeal by the Sports Administration of the Ministry of Education, the Supreme Administrative Court abandoned the THAC’s ruling and dismissed the first instance lawsuit. However, the Supreme Administrative Court later dismissed another appeal filed by Taipei Fubon Bank. A final verdict was made that Taipei Fubon Bank need not to adjust its repayment amount. 2012 19.65 26.85 3.96 22.89 - Taipei Fubon Bank filed for administrative appeal. The case was still in pendings under THAC as of June 30, 2014. 2013 27.94 21.76 4.53 17.23 - The appeal was still processing as of June 30, 2014. 3. Up to date, except for the $920 million in the year 2013 still not paid, due to still in process of increasing capital. The annual payment that Taiwan Sport Lottery has to be submitted to Taipei Fubon Bank had been made based on the contract. All the litigation cases of guaranteed earnings difference are still in legal proceedings except those for 2010 and 2011, which has been determined by the Highest Administrative Court. There will be no payable for Taiwan Sports Lottery due to the results of litigation. On the contrary, the receivables might increase due to the favorable verdict in the future. 4. Up to date, the lottery earning operation paid to government amounting to $10 billion. The said earnings will be utilized for national sports development programs, subsidies to the National Pension Insurance, National Health Insurance Reserve Fund Operation and good-cause spending. All in all, it has indicated that Taiwan Sport Lottery fully supports Taiwan’s sports industry and financial stability with a determination as an enterprise to wholeheartedly undertake its corporation social responsibilities. (46) Significant loss of damage: None.

(Continued) 297 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(47) Significant subsequent events 1) In order to increase working capital, the board of directors resolved the issuance of the first 2014 unsecured corporate bonds on April 22, 2014. The contract has been completed in July 2014. 2) According to Gin Shen (2) Zhi No.10300180760 letter, Fubon Insurance is allowed to invest CNY 50 million in Fubon Property & Casualty Insurance Co., Ltd. on August 7, 2014. Fubon Insurance is going to remit the proceeds on August 19, 2014. Please refer to Note 17. 3) Fubon Life Insurance acquired the superficies of No.472 Xingming Rd., Beitou District and 5 other superficies in July, 2014 by bid. The total contract value amounted to $1,401,000 based on the appraisal report of DTZ and Repro International Inc. As of reporting date, the contract is yet to be signed. 4) Fubon Life Insurance acquired the superficies of No.354 Zhongzheng District in August 2014 by bid. The total contract value amounted to $688,000 based on the appraisal report of DTZ and Repro International Inc. As of the reporting date, the contract has not yet been signed. 5) On August 12, 2014, according to Jin Shen Er No.10300182240, Fubon life Insurance was approved to invest an amount of CNY$50 million in Fubon Property and Casualty Insurance Co., Ltd. Fubon Insurance remitted and reported the investment on August 19, 2014. Related information could be referred to in note 17. (48) Others 1) Reclassification On January 1, 2012, Taipei Fubon Bank reclassified its financial assets. The fair values at the reclassification date were as follows: Before After Reclassification Reclassification

Available-for-sale financial assets $ 12,052,604 - Held-to-maturity financial assets - 12,052,604 $ 12,052,604 12,052,604

The effective interest rates for the available-for-sale financial assets that have been reclassified to held-to-maturity financial assets ranged from 0.52% to 9.95%. The estimated recoverable cash flows amounted to $13,966,953. The carrying amounts and fair values of the reclassified financial assets (excluding those that had been derecognized) as of June 30, 2014, and December 31 and June 30, 2013, were as follows: June 30, 2014 December 31, June 30, 2013 2013

Held-to-maturity financial assets Carrying amounts $ 4,126,265 4,910,374 6,232,264 Fair value 4,234,587 5,045,856 6,505,087

(Continued) 298 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

The gains or losses recorded for the reclassified financial assets (excluding those that had been derecognized before June 30, 2014 and 2013) for the six-month periods ended June 30, 2014 and 2013 and the pro forma adjustments recognized in other equity assuming no reclassifications had been made were as follows: For the six-month periods ended June 30 2014 2013

Held-to-maturity financial assets Gains recognized $ 68,329 118,253 Pro forma adjustments recognized in other equity 263,763 333,555

2) Business combinations 1. Subsidiaries acquired Proportion of Voting Equity Interests Principal Date of Acquired Consideration Activity Acquisition (%) Transferred

Fubon Bank (China) Banking industry January 7, 2014 80% $ 27,926,284

The Company and its subsidiaries acquired 13.89% of the shares of Fubon Bank (China) on December 31, 2013, and subsequently acquired an additional 66.11% of shareholdings on January 7, 2014. Its continuing interest was increased from 13.89 % to 80%. The purpose of the acquirement of Fubon Bank (China) is to gain majority control over the Mainland China’s Bank which both possesses the growth potential and profitability. In this way, it will not only assist the Company and its subsidiaries' business development over Mainland China, Taiwan and Hong Kong, but also improve the Company and its subsidiaries' profitability. 2. Considerations transferred Acquisition-related costs were excluded from the consideration transferred and recognized as an expense in the current year.

(Continued) 299 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

3. Assets acquired and liabilities assumed at the date of acquisition Fubon Bank (China)

Assets Cash and cash equivalents $ 13,720,123 Due from the Central Bank of China and other banks 37,702,764 Financial assets at fair value through profit or loss 262,663 Securities purchased under resell agreements 1,010,990 Receivables, net 3,593,858 Discounts and loans, net 149,788,605 Available-for-sale financial assets, net 6,215,285 Held-to-maturity financial assets, net 22,398,276 Property, plant and equipment, net 7,902,304 Intangible assets 14,116,802 Deferred tax assets 762,635 Other assets, net 74,750 Liabilities Due to the Central Bank of China and other banks (3,532,267) Call loans (603,254) Financial liabilities at fair value through profit or loss (231,464) Payables (5,177,881) Current income tax liabilities (38,812) Deposits and remittances (216,771,710) Other liabilities (476,914) $ 30,716,753

The fair value of discount and loans acquired in these transactions amounted to $149,788,605, and the gross contractual amount amounted to $153,639,042. The best estimate of the contractual cash flows not expected to be collected as at the acquisition date was $3,850,437. 4. Non-controlling interests The non-controlling interest (20% ownership interest in Fubon Bank (China)) recognized at the acquisition date was measured by reference to the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets.

(Continued) 300 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

5. Goodwill arising on acquisition Fubon Bank (China)

Consideration transferred $ 27,926,284 Plus: Non-controlling interests 6,143,351 Less: Fair value of identifiable net assets acquired (30,716,753) Goodwill arising on acquisition $ 3,352,882

Goodwill arose in the acquisition of Fubon Bank (China) because of a control premium. In addition, the consideration paid for the combination effectively included the amounts in relation to the benefit of expected synergies, revenue growth, future market development and value of banking license. 6. Cash outflow arising from acquisition of subsidiary Fubon Bank (China)

Total consideration cash paid $ 27,926,284 Acquisition of 13.89% of shareholdings cash paid on (4,802,594) December 31, 2013 Less: Fubon Bank (China)’s cash and cash equivalent (16,157,667) acquired $ 6,966,023

7. Business performance affected by business combination For the period from January 8 to June 30, 2014

Net income $ 2,503,622 Net profit $ 1,082,691 Had these business combinations been in effect at the beginning of the annual reporting period, the Company total net revenues would have been $180,440,743, and the net profit would have been $27,583,542 for the six-months period ended June 30, 2014. This pro-forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Bank and its subsidiaries that actually would have been achieved, nor is it intended to be a projection of future results.

(Continued) 301 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

3) Financial Improvement Plan of Taiwan Sport Lottery The effective dates for the capital decrease and increase were set on June 20 and June 11, 2013, respectively. The legal process of capital reduction to offset deficit amounting to $3,450,000 and a cash injection of $1,700,000 were completed on June 2013. As of June 30, 2014, Taiwan Sports Lottery has an accumulated deficit of $2,593,789. Its current liabilities have exceeded its current assets by $892,730, and total liabilities have exceeded total assets by $893,789. On July 30, 2014, the Board of director of Taiwan Sports Lottery has decided to increase its cash capital by $1,000,000 and decrease the capital to remedy the deficit of $1,700,000 and improve the company’s financial position. Taiwan Sport Lottery was established to operate a sport lottery business entrusted by Taipei Fubon Bank. Ministry of Finance assigned Fubon Taipei Bank to handle the issuance of sport lottery operations. In accordance with the provisions, the right of sport lottery operations was expired on December 31, 2013. Taiwan Sports Lottery (hold by CTBC Bank) is the new issuer after January 1, 2014. As of the financial statements date, Taiwan Sports Lottery’s board of directors doesn’t discuss the issue of liquidation. 4) Business or trading behaviors within Subsidiaries: 1. Business or trading behaviors: Please see note 43 for related-party transactions. 2. Integrate business activities: The subsidiaries that operated cross-selling under the Company included Taipei Fubon Bank Co. Ltd., Fubon Insurance Co. Ltd., Fubon Life Insurance Co. Ltd., Fubon Securities Co. Ltd., Fubon Asset Management Co. Ltd., Fubon Futures Co. Ltd., Fubon Marketing Co. Ltd., Taipei Fubon Bank Life Insurance Agent Co. Ltd., Fu Sheng General Insurance Agent Co. Ltd. and Fu Sheng Life Insurance Agent Co. Ltd. The cooperation among the subsidiaries, from launching and promoting products, integrating and managing channels, to training and inspiring cross-selling personnel, makes their relationship much closer. Especially, Fubon Life Insurance and Taipei Fubon Bank cooperate in a positive way, and make good use of their channel advantage to boost the Company’s sales in the integrate business activities. 3. Cross utilization of information: In accordance with Financial Holding Company Act, Marketing Collaboration Agreement with Financial Holdings Company and its subsidiaries, and the self discipline standard for financial holding company and its subsidiaries, the Company and its subsidiaries which joined the cross- selling business signed the “Agreement of Privacy Exchange” to keep the customers' data confidential or to limit the use of the data. In addition, they also announced the "Jointly Privacy Statement" and disclosed the statement in each subsidiary's website and the Company's website, as well as facilitate customers to online searching and browsing. To assure the equity of customers, customers could notify the Company and its subsidiaries to stop using their personal information among subsidiaries for cross-marketing. This standard is accessible in the web site of each subsidiary as well.

(Continued) 302 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

4. Locations and business utilities: The subsidiaries that the Company applied to government for “operation place” included banking, securities and futures subsidiaries. Up to now, Taipei Fubon Bank has 121 branches, which operate securities and insurance business; 6 other branches set up insurance counters; Fubon Securities has 57 branches, which operate banking and insurance business; Fubon Futures operate banking, insurance and securities business. Thus, customers can directly handle their relevant business in banking, securities and futures operation places. In addition, in order to improve the scope and timeliness of service, Fubon Life Insurance and Fubon Insurance through “walking around” type of service provide, insurance, banking and securities service for customers. 5. Allocation on revenues, costs, expenses, profits and losses: Allocation of Revenue, Cost and Expense is calculated based on the proportion of actual sales among subsidiaries. The estimated amount for the six-month period ended June 30, 2014 and was as follows: Amount Name (in thousands)

Fubon Insurance $ 380,708 Taipei Fubon Bank 31,861 Fubon Life Insurance 2,131,816 Fubon Securities 3,002

5) Capital adequacy ratios Unit: Million NTD, % June 30, 2014 Ownership Item interest Eligible capital Legal capital The Company 100.00 % 363,589 416,238 Taipei Fubon Bank 100.00 % 160,261 100,992 Fubon Bank (HK) 100.00 % 31,266 15,265 Fubon Bank (China) 29.00 % 6,428 3,334 Fubon Securities 100.00 % 23,790 7,804 Fubon Insurance and Fubon Life Insurance 100.00 % 179,216 127,535 Fubon Financial Holding Venture Capital 91.67 % 4,546 2,312 Taiwan Sport Lottery Corporation 100.00 % (894) 14 Others 100.00 % 3,265 2,006 Less: deductible item (439,185) (415,431) Subtotal 332,282 260,069 Consolidated capital adequacy ratio 127.77

(Continued) 303 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Unit: Million NTD, % June 30, 2013 Ownership Item interest Eligible capital Legal capital The Company 100.00 % 287,790 327,035 Taipei Fubon Bank 100.00 % 144,552 88,311 Fubon Bank (HK) 100.00 % 22,886 12,430 Fubon Securities 100.00 % 22,242 7,093 Fubon Insurance and Fubon Life Insurance 100.00 % 145,984 107,204 Fubon Financial Holding Venture Capital 91.67 % 4,531 2,278 Taiwan Sport Lottery 100.00 % (309) 1,627 Others 100.00 % 3,235 2,184 Less: deductible item (347,735) (326,713) Subtotal 283,176 221,449 Consolidated capital adequacy ratio (Note) 127.87

Note: The capital adequacy ratio of June 30, 2013 is adjusted in concert with subsidiary. 6) Eligible capital Unit: Thousand NTD Amount Item June 30, 2014 June 30, 2013 Common stock 102,336,040 95,351,652 Other preferred stocks and subordinated debts 3,400,000 - Capital surplus 74,446,982 55,785,647 Legal reserve 35,176,861 31,905,926 Special reserve 2,985,366 2,985,366 Accumulated profit and loss 84,259,699 60,590,069 Other subordinated bonds - 4,760,000 Equity adjustment 61,009,597 36,426,956 Less: Goodwill and other intangible assets 12,710 4,590 Less: Deferred assets 13,031 10,841 Consolidated eligible capital 363,588,804 287,790,185

(Continued) 304 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

7) The aggregate amount of credit extended, guarantees given, or other transactions conducted by all subsidiaries of the financial holding company to, for, or with the same person, same related person or same affiliate: Unit: Million NTD, % June 30, 2014 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company’s net Name transactions worth The same individual Central Government 582,459 158.45 Mainland district government and finance institute 102,646 27.92 Taiwan Power Company 92,567 25.18 Chunghwa Telecom Co., Ltd. 54,070 14.71 Department of Rapid Transit Systems, Taipei City 35,500 9.66 Government CPC Corporation, Taiwan 35,295 9.60 WELLS FARGO & CO. 32,840 8.93 New Taipei City Government 31,772 8.64 National Treasury Administration, Ministry of Finance 29,916 8.14 Taiwan Semiconductor Manufacturing Co., Ltd. 27,553 7.50 CITIGROUP INC. 24,968 6.79 CHINA DEVELOPMENT BANK 20,790 5.66 DEUTSCHE BANK AG 20,437 5.56 First Commercial Bank 20,302 5.52 Taiwan Mobile Co., Ltd. 20,164 5.49 RUSSIAN FEDERATION 19,973 5.43 WESTPAC BANKING CORP. 19,125 5.20 JP MORGAN CHASE & CO. 18,913 5.14 BARCLAYS BANK PLC 18,085 4.92 Vanguard Long-Term Invest Grade Fund 17,773 4.83 GINNIE MAE 17,115 4.66 UBS AG 16,839 4.58 FREDDIE MAC 16,733 4.55 BNP PARIBAS 16,587 4.51 GLODMAN SACHS GROUP INC. 15,998 4.35 NATIONAL AUSTRALIA BANK 15,718 4.28 Taishin International Bank 15,101 4.11 (Continued) 305 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company’s net Name transactions worth Taichung City Government 15,000 4.08 REPULBIC OF INDONESIA 14,925 4.06 AUSTRALIA & NEW ZEALAND BANKING GROUP 14,841 4.04 Taiwan Cooperative Bank 14,426 3.92 Far EasTone Telecommunications Co., Ltd. 14,416 3.92 Financial Bureau Kaohsiung City Government 14,000 3.81 HONG KONG GOVERNMENT 13,929 3.79 RABOBANK NEDERLAND 13,851 3.77 COMMONWEALTH BANK OF AUSTRALIA 13,699 3.73 AllianceBernstein-Global HY Portfolio 12,884 3.50 China Development Industrial Bank 12,808 3.48 China Steel Corporation 12,495 3.40 BANK OF AMERICA CORP. 12,328 3.35 China Merchants Bank Co., Ltd. 12,312 3.35 China Trust Commercial Bank 12,162 3.31 Formosa Chemicals & Fiber Corporation 12,002 3.26 Taiwan Railways Administration, MOTC 12,000 3.26 ICBC 11,586 3.15 AGRICULTURAL BANK OF CHINA 11,278 3.07 Natixis 11,223 3.05 AXA IM-US Short Duration High Yield 11,170 3.04 Mega Financial Holding Company 11,163 3.04 FANNIE MAE 10,616 2.89 ABN AMRO BANK NV 10,543 2.87 Lloyds Bank PLC 10,505 2.86 SOCIETE GENERALE 10,499 2.86 BANK OF CHINA LTD. 10,448 2.84 ROYAL BANK OF CANADA 10,035 2.73 Financial Bureau Taipei City Government 10,000 2.72 AU Optronics Corp. 9,909 2.70 NOMURA BANK INTERNATIONAL PLC 9,835 2.68 Vanguard High-Yield Corporate Fund 9,746 2.65

(Continued) 306 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company’s net Name transactions worth Industrial Zone Development and Administration Fund 9,686 2.63 Abbey National Treasury Services PLC/Lo 9,646 2.62 DBS Bank LTD 9,596 2.61 ING BANK NV 9,576 2.61 BANK OF COMMUNICATIONS 9,555 2.60 BBVA GLOBAL MARKETS BV 9,302 2.53 Harbin Bank Co Ltd 9,250 2.52 HSBC BANK PLC 9,147 2.49 PIMCO Income Fund 8,988 2.45 ROYAL BANK OF SCOTLAND GROUP PLC 8,716 2.37 Neuberger Berman High Yield Bond Fund 8,715 2.37 Tainan City Government 8,465 2.30 VERIZON COMMUNICATIONS 8,440 2.30 AT&T Inc. 7,985 2.17 CHANG HWA BANK 7,919 2.15 HSBC BANK USA 7,864 2.14 Gazprom OAO Via Gaz Capital SA 7,804 2.12 MIZUHO FINANCIAL GROUP 7,803 2.12 InnoLux Corporation 7,802 2.12 Goldman Saches Global High Yield 7,482 2.04 AllianceBernstein-American Income 7,427 2.02 BANK OF AMERICA NA 7,395 2.01 iShares iBox High Yield CB 7,269 1.98 AMERICAN INTERNATIONAL GROUP INC. 7,138 1.94 CREDIT SUISSA AG 7,134 1.94 RSEA Engineering Corp. 6,700 1.82 HUA NAN Commercial Bank Co., Ltd. 6,654 1.81 CHINA CONSTRUCTION BANK 6,515 1.77 DZ BANK AG 6,500 1.77 Franklin Invest-Templeton EM Bond 6,450 1.75 PIMCO High Yield Fund 6,447 1.75 NOTA DO TESOURO NACIONAL 6,408 1.74

(Continued) 307 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company’s net Name transactions worth Bank of Montreal 6,254 1.70 APACHE CORP 6,036 1.64 STANDARD CHARTERED BANK. 6,004 1.63 Asia Cement Corporation 6,000 1.63 SPDR Barclays Capital HY Bond ETF 5,994 1.63 Taipei Financial Center Corporation 5,977 1.63 CREDIT AGRICOLE CORPORATE AND INVESTMENT 5,957 1.62 BANK Taiwan Cement Corporation 5,936 1.61 Cathay United Bank 5,914 1.61 Nan Ya Plastics Corporation 5,870 1.60 AXA World Funds-US High Yield Bonds 5,780 1.57 Yuanta Securities Investment Trust Co., Ltd. 5,763 1.57 Lite-On Technology Corporation 5,761 1.57 Fidelity Funds-US High Yield Fund 5,754 1.57 Land Bank of Taiwan 5,657 1.54 COCA-COLA CO 5,568 1.51 China Bills Finance Corporation 5,565 1.51 iShares S&P US Preferred Stock Index 5,561 1.51 Export-Import Bank of China 5,396 1.47 Yuanta Securities Investment Trust Co., Ltd. 5,339 1.45 International Bills Finance Corporation 5,330 1.45 YUE XIU ENT ERPRISES (HOLDINGS) LTD 5,308 1.44 Dragon Steel Corporation 5,285 1.44 Xiamen Bank 5,240 1.43 Taipei City Government 5,212 1.42 Taoyuan County Government 5,200 1.41 PIMCO Long-Term Credit Fund 5,194 1.41 Yuanta Commercial Bank 5,140 1.40 BP PLC 5,091 1.38 Quanta Computer Inc. 5,070 1.38 China Citic Bank 4,993 1.36

(Continued) 308 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company’s net Name transactions worth Svensk Exportkredit AB 4,888 1.33 AMERICA MOVIL SAB DE CV 4,860 1.32 Yang Ming Marine Transport Corp. 4,822 1.31 Vale Overseas Limited 4,811 1.31 China Minsheng Banking Corp Ltd 4,794 1.30 Formosa Petrochemical Corp. 4,785 1.30 Changhua Country Government 4,667 1.27 ANZ Bank (Taiwan) Limited 4,663 1.27 NRW.BANK 4,594 1.25 JP MORGAN CHASE BANK 4,570 1.24 FORMOSA PLASTIC CORPORATION 4,528 1.23 Kaohsiung City Government 4,511 1.23 Group Holding Bhd 4,501 1.22 VST COMPUTERS (H.K.) LIMITED 4,469 1.22 JPMorgan-Global High Yield Bond Fund 4,423 1.20 Cathay Financial Holdings 4,373 1.19 The Capital Group 4,308 1.17 General Motors Co 4,300 1.17 Taiwan Finance Corporation 4,254 1.16 AMGEN INC. 4,238 1.15 Shanghai Pudong Development Bank 4,232 1.15 Compal Electronics, Inc. 4,210 1.15 Comcast Corp 4,156 1.13 Kaohsiung Mass Rapid Transit 4,100 1.12 Pimco Global High Yield Bonds Fund 4,077 1.11 Mega International Security Investment Trust Co. Ltd 4,068 1.11 Electricite de France 3,974 1.08 Shanghai Commercial and Savings Bank 3,950 1.07 HIWIN Technologies Corp. 3,921 1.70 KGI Security 3,859 1.05 Eastspring Investment Trust Co., Ltd. 3,853 1.05 VOLDAFONE GROUP PLC 3,835 1.04

(Continued) 309 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company’s net Name transactions worth Sinpec Group Oversea Development 2013 3,802 1.03 CHINA RESOURCES POWER HLDGS CO 3,791 1.03 BlackRock US Doller High Yeild Bond Fund 3,786 1.03 BONOS TESORERIA PESOS 3,742 1.02 MICROSOFT CORP 3,742 1.02 International Business Machines Corp 3,721 1.01 Far Eastern New Century Corporation 3,714 1.01 Taiwan Glass Industrial Corporation 3,654 0.99 Bank Of Taiwan 3,635 0.99 Franklin Security Investment Trust Co.,Ltd. 3,619 0.98 Agricultural Bank of Taiwan Corporation 3,619 0.98 China Airlines 3,613 0.98 MACQURARUE BANK LIMITED. 3,600 0.98 CIE FINANCEMENT FONCIER 3,574 0.97 Orange SA 3,563 0.97 REPUBLIC OF SOUTH AFRICA 3,457 0.94 Pictet-Global Emerging Debt 3,403 0.93 CITIC PACIFIC LIMITED 3,389 0.92 Standard Chartered Bank (Taiwan) Limited 3,350 0.91 Franklin Invest-High Yield Fund 3,346 0.91 CVS Caremark Corp 3,327 0.91 Cheng Shin Rubber IND. Co. Ltd. 3,312 0.90 Jihsun Securities Co., Ltd. 3,309 0.90 Mega Bills 3,306 0.90 Skysea International Capital Management 3,297 0.90 Simplo Technology Co.,Ltd. 3,292 0.90 Masterlink Securities Corporation 3,216 0.87 CHINA RESOURCES LAND 3,178 0.86 First Securities Investment Trust Co., Ltd. 3,095 0.84 Israel Government International Bond 3,057 0.83 Cathay No. 1 REIT Fund 3,046 0.83 Wistron Corporation 3,046 0.83

(Continued) 310 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company’s net Name transactions worth Bank Sinopac Co., Ltd. 3,036 0.83 Pou Chen Group 3,036 0.83 Landeskreditbank Baden?Wuerttemberg Foe 3,034 0.83 PineBridge Investment 3,026 0.82 Petrobras International Finance Co 3,020 0.82 The same person and related parties Mr. Huang and related parties 4,193 1.14 Mr. Tsai and related parties 3,454 0.94 Mr. Liu and related parties 3,171 0.86 Mr. Song and related parties 3,167 0.86 The same affiliated Central Government 622,061 169.22 Taiwan Power Company 92,567 25.18 Chunghwa Telecom Co., Ltd. 54,305 14.77 Taipei City Government 51,832 14.10 AXA SA 37,348 10.16 CPC Group 36,394 9.90 WELLS FARGO & CO. 32,963 8.97 J.P. MORGAN CHASE BANK 31,859 8.67 New Taipei City Government 31,772 8.64 Far Eastern New Century Corporation Group 28,946 7.87 Taiwan Semiconductor Manufacturing Group 28,173 7.66 Vanguard Group Inc. 27,519 7.49 Allianz SE 27,179 7.39 Taishin Financial Holding Group 26,954 7.33 Kaohsiung City Government 26,611 7.24 Mega Financial Holding 26,450 7.20 First Financial Holdings 25,601 6.96 CITIGROUP INC. 25,485 6.93 GOLDMAN SACHS GROUP INC 24,095 6.55 HSBC HOLDINGS PLC 23,848 6.49 China Steel Corporation 22,102 6.01 (Continued) 311 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company’s net Name transactions worth CHINA DEVELOPMENT BANK 21,792 5.93 UBS AG 21,364 5.81 Taiwan Mobile Co., Ltd. 20,947 5.70 DEUTSCHE BANK AG 20,437 5.56 BANK OF AMERICA CORPORATION 20,245 5.51 RUSSIAN FEDERATION 19,973 5.43 AUSTRALIA & NEW ZEALAND BANKING GROUP 19,504 5.31 Yuanta Financial Holdings 19,238 5.23 Cathay Financial Holding Co., Ltd. 19,206 5.22 WESTPAC BANKING CORP. 19,125 5.20 BlackRock 18,269 4.97 BARCLAYS BANK PLC 18,190 4.95 Industrial and Commercial Bank of China 17,836 4.85 China Development Financial Holding Co., Ltd. 17,730 4.82 GINNIE MAE 17,115 4.66 NATIONAL AUSTRALIA BANK 17,102 4.65 FREDDIE MAC 16,733 4.55 BNP PARIBAS 16,587 4.51 CTBC Financial Holding Co., Ltd 15,242 4.15 HONG KONG SPECIAL ADMIN REGION 15,145 4.12 GOVERNMENT BPCE Group 15,064 4.10 Taichung City Government 15,000 4.08 REPUBLIC OF INDONESIA 14,925 4.06 Formosa Chemicals & Fiber Corporation 14,679 3.99 Taiwan Cooperative Holdings Co., Ltd. 14,507 3.95 RABOBANK NEDERLAND 13,851 3.77 Land Bank of Taiwan 13,813 3.76 COMMONWEALTH BOANK OF AUSTRALIA 13,699 3.73 Qisda Corporation 13,618 3.70 Sinopec 13,529 3.68 Yuen Foong Yu Co., Ltd. 13,435 3.65

(Continued) 312 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company’s net Name transactions worth CHINA MERCHANTS BANK CO., LTD 13,329 3.63 Uni-President Enterprises Corp. 13,126 3.57 BANK OF CHINA LTD. 12,977 3.53 STANDARD CHARTERED BANK 12,293 3.34 Taiwan Railways Administration, MOTC 12,000 3.26 Franklin Resources Inc 11,308 3.08 Agricultural Bank of China Ltd 11,278 3.07 HUN NAN Financial Holdings 11,140 3.03 LLOYDS TSB BANK PLC LONDON 11,066 3.01 ING Group N.V. 10,922 2.97 FANNIE MAE 10,616 2.89 CITIC GROUP 10,594 2.88 ABN AMRO Group 10,543 2.87 SOCIETE GENERALE 10,499 2.86 Taiwan Cement Corporation 10,389 2.83 BANCO SANTANDER 10,049 2.73 ROYAL BANK OF CANADA 10,035 2.73 Nomura Holdings Inc. 9,992 2.72 BANK OF COMMUNICATIONS 9,848 2.68 BANCO BILBAO VIZCAYA ARGENTARIA SA 9,737 2.65 DBS BANK LTD. 9,596 2.61 Innolux Display Corp. 9,560 2.60 Nan Ya Plastics Corporation 9,541 2.60 UK Financial Investments Ltd 9,531 2.59 CHINA RESOURCES POWER HOLDINGS CO 9,492 2.58 Synnex Technology International Corporation 9,288 2.53 Harbin Bank Co Ltd 9,250 2.52 CNOOC LTD. 8,830 2.40 Neuberger Berman Investment Funds PLC 8,715 2.37 AT & T Inc. 8,502 2.31 Tainan City Government 8,465 2.30 Lite-On Technology Corporation 8,452 2.30 (Continued) 313 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company’s net Name transactions worth VERIZON COMMUNICATIONS 8,440 2.30 MIZUHO FINANCIAL GROUP 8,102 2.20 Foxconn Technology Corporation 7,864 2.14 CHINA CONSTRUCTION BANK 7,862 2.14 Gazprom OAO Via Gaz Capital SA 7,804 2.12 ASUSTek Computer Inc. 7,684 2.09 Formosa Plastic Corporation 7,651 2.08 United Microelectronics 7,633 2.08 Evergreen Marine Corp. (Taiwan) Ltd. 7,585 2.06 CREDIT SUISSE 7,540 2.05 AMERICAN INTERNATIONAL GROUP INC. 7,458 2.03 Quata Computer Inc. 7,023 1.91 Walsin Lihwa Corp. 6,824 1.86 Waterland Financial Holding Co., Ltd. 6,760 1.84 Compel Electronics, Inc 6,723 1.83 RSEA ENGINEERING CORPORATION 6,700 1.82 DZ Bank AG Deutsche Zentral-Ge 6,500 1.77 Credit Agricole Group 6,420 1.75 NOTA DO TESOURO NACIONAL 6,408 1.74 Formosa Petrochemical Co. 6,388 1.74 PHOENIX PROPERTY INVESTORS (H.K.) LIMITED 6,374 1.73 Industrial Bank of Taiwan 6,277 1.71 Bank of Montreal 6,254 1.70 Yang Ming Marine Transport Corp. 6,102 1.66 Wistron Corporation 6,062 1.65 APACHE CORP 6,036 1.64 State Street Corp. 5,994 1.63 Taipei Financial Center Corporation 5,977 1.63 Vale SA 5,925 1.61 Fidelity Worldwide Investment 5,848 1.59 Coca-Cola Co/The 5,821 1.58 Taiwan Glass Industrial Corporation 5,784 1.57

(Continued) 314 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company’s net Name transactions worth Cheung Kong Holdings 5,700 1.55 Prudential PLC 5,646 1.54 Hontai Group 5,631 1.53 Advanced Semiconductor Engineering Inc. 5,466 1.49 EXPORT IMPORT BANK CHINA 5,396 1.47 YUE XIU ENTERPRISES (HOLDINGS) LTD 5,308 1.44 Taoyuan Country Government 5,200 1.41 China Airlines Corporation 5,103 1.39 BP PLC 5,101 1.39 BlackstoneGroup 5,085 1.38 Berkshire Hathaway Inc. 5,029 1.37 KERRY LOGISTICS 4,980 1.35 Svensk Exportkredit AB 4,888 1.33 AMERICA MOVIL SAB DE CV 4,860 1.32 CIMB Group 4,804 1.31 CHINA MINSHENG BANKING CORPORATION LTD 4,794 1.30 MACQUAIE GROUP LTD 4,771 1.30 MTRC GROUP 4,725 1.29 JihSun Financial Holding Co., Ltd. 4,703 1.28 Changhua Country Government 4,667 1.27 NRW.BANK 4,594 1.25 Ta Chong Bank 4,517 1.23 Pou Chen Group 4,496 1.22 VST HILDINGS LTD 4,484 1.22 WPG Holdings 4,335 1.18 Capital Securities Corporation 4,308 1.17 General Motors Co 4,300 1.17 Taiwan Finance Corporation 4,254 1.16 Cheng Shin Rubber Ind. Co., Ltd 4,247 1.16 AMGEN INC. 4,238 1.15 SHANGHAI PUDONG DEVELOPMENT BANK 4,232 1.15 Comcast Corp 4,156 1.13

(Continued) 315 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company’s net Name transactions worth Chang Chun Group 4,136 1.13 CTCI CORPORATION 4,129 1.12 Loews Corp 4,109 1.12 Electricite De France 3,974 1.08 HIWIN Technologies Corp. 3,971 1.08 Shanghai Commercial and Savings Bank, Ltd 3,950 1.07 TPK HOLDING CO., LTD. 3,941 1.07 Continental Holdings Corporation 3,862 1.05 VODAFONE GROUP PLC 3,835 1.04 Taiwan Financial Holdings Co., Ltd 3,807 1.04 YAGEO Corporation 3,768 1.03 MORGAN STANLEY 3,748 1.02 BONOS TESORERIA PESOS 3,742 1.02 MICROSOFT CORP 3,742 1.02 International Business Machines Corp 3,721 1.01 Far Easten International Bank 3,677 1.00 Agricultural Bank of Taiwan Corporation 3,619 0.98 SIMPLO TECHNOLOGY CO.,LTD. 3,591 0.98 Yulon Motors 3,578 0.97 Orange SA 3,563 0.97 FRANKLIN TEMPLETON 3,469 0.94 Schroders PLC 3,459 0.94 REPUBLIC OF SOUTH AFRICA 3,457 0.94 Sino-American Silicon Production Inc 3,430 0.93 Pictet & Cie 3,403 0.93 CVS Caremark Corp 3,327 0.91 China State Grid Corp. 3,323 0.90 China National Petroleum Corp. 3,278 0.89 Beijing Enterprises Holding Ltd 3,255 0.89 Sunpower development & construction Co., Ltd. 3,247 0.88 Masterlink Securities Corporation 3,216 0.87 PEPSICO INC 3,160 0.86

(Continued) 316 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2014 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company’s net Name transactions worth Airtac International Group 3,075 0.84 E.SUN Financial Holding Co., Ltd 3,066 0.83 ALLIED GROUP 3,060 0.83 Israel Government International Bond 3,057 0.83 HENDERSON LAND LTD. 3,051 0.83 Landeskreditbank Baden-Wuerttemberg Foe 3,034 0.83 Pacific Century Regional Developments Limited 3,026 0.82 Petroleo Brasileiro SA 3,020 0.82

June 30, 2013 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company's net Name transactions worth The same individual Central Bank 615,339 218.18 Taiwan Power Company 91,563 32.46 Chunghwa Telecom Co., Ltd. 57,538 20.40 Department of Rapid Transit System, TCG 39,387 13.97 WELLS FARGO & CO. 32,505 11.52 National Treasury Administration 32,440 11.50 CPC Corporation, Taiwan 31,444 11.15 Taipei City Government 30,454 10.80 CITIGROUP INC. 30,283 10.74 Taiwan Mobile Co., Ltd. 26,113 9.26 Taiwan Semiconductor Manufacturing Co., Ltd. 23,480 8.33 CHINA DEVELOPMENT BANK 20,354 7.22 BNP PARIBAS 19,596 6.95 WESPAC BANK CORP. 18,302 6.49 Taichung City Government 17,800 6.31 BANK OF AMERICA CORP. 17,667 6.26 GINNIE MAE 17,648 6.26

(Continued) 317 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company's net Name transactions worth FUSSIAN FEDERATION 17,483 6.20 Taipei City Government 17,469 6.19 Far EasTone Telecommunications Co., Ltd. 17,297 6.13 JP MORGAN CHASE & CO. 17,187 6.09 DEUTSCHE BANK AG 17,149 6.08 FREDDIE MAC 16,780 5.95 AUSTRALIA & NEW ZEALAND BANKING GROUP 16,057 5.69 NATIONAL AUSTRALIA BANK 15,274 5.42 BARCLAYS BANK PLC 15,201 5.39 Standard chartered Bank (Taiwan) Limited 14,580 5.17 FORMOSA PETROCHEMICAL Co., Ltd. 14,170 5.02 US TREASURY N/B 13,626 4.83 HONG KONG GOVERNMENT 13,320 4.72 Vanguard Long-Term Invest Grade Fund 13,181 4.67 RABOBANK NEDERLAND 13,161 4.67 Formosa Chemicals & Fiber Corporation 13,016 4.62 COMMONWEALTH BANK OF AUSTRALIA 12,934 4.59 Taiwan Cooperative Bank 12,822 4.55 FANNIE MAE 12,771 4.53 HSBC BANK PLC 12,693 4.50 AXA IM-US Short Duratin High Yield 12,660 4.49 REPUBLIC OF INDONESIA 12,539 4.45 Yuanta Bank Co., Ltd. 11,877 4.21 Financial Bureau Kaohsiung City Government 11,402 4.04 UBS AG 11,392 4.04 International Bills Finance Corporation Limited 11,209 3.97 First Bank Co., Ltd. 11,105 3.94 China Steel Corporation 10,423 3.70 Yuanta Securities Investment Trust Co., Ltd. 10,090 3.58 SOCIETE GENERALE 10,058 3.57 Innolux Display Corp. 10,003 3.55 Taiwan Railways Administration 10,000 3.55

(Continued) 318 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company's net Name transactions worth PIMCO High Yeild Fund 9,940 3.52 ROYAL BANK OF SCOTLAND GROUP PLC 9,713 3.44 AllianceBernstein-American Income 9,703 3.44 Industrial Zone Development and Administration Fund 9,686 3.43 NOMURA BANK INTERNATIONAL PLC 9,675 3.43 Mega Financial Holding Company 9,554 3.39 Au Optronics Corp. 9,537 3.38 ABN AMRO BANK NV 9,500 3.37 China Bills Financial Holding Co., Ltd. 9,486 3.36 China Trust Commercial Bank 9,451 3.35 International Bills Finance Corporation Limited 9,357 3.32 Nan Ya Plastics Corporation 9,347 3.31 ING BANK NV 8,920 3.16 BBVA GLOBAL MARKETS BV 8,802 3.12 China Development Industrial Bank 8,192 2.90 iShares iBoxx High Yield CB 8,094 2.87 Dragon Steel Corporation 8,088 2.87 Neuberger Berman High Yield Bond Fund 8,048 2.85 CREDIT AGRICOLE CORPORATE AND INVESTMENT 7,924 2.81 BANK ROYAL BANK OF CANADA 7,872 2.79 Financial Bureau Taipei City Government 7,777 2.76 Abbey National Treasury Services PLC/Lo 7,777 2.76 Franklin Invest-Templeton EM Bond 7,692 2.73 AMERICAN INTERNATIONAL GROUP INC. 7,657 2.71 CREDIT SUISSA AG 7,610 2.70 RSEA Engineering Corp. 7,194 2.55 Agricultural Bank of Taiwan Corporation 7,123 2.53 STANDARD CHARTERED BANK 6,819 2.42 NORDDEUTSCHE LANDESBANK 6,798 2.41 Taipei Financial Center Corporation 6,646 2.36 FORMOSA PLASTIC CORPORATION 6,570 2.33 Taiwan Railways Administration 6,500 2.30 (Continued) 319 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company's net Name transactions worth Vanguard High-Yield Corporate Fund 6,441 2.28 NOTA DO TESOURO NACIONAL 6,384 2.26 Eastspring Investment Trust Co., Ltd. 6,317 2.24 Natixis 6,287 2.23 Taishin International Bank 6,278 2.23 Kaohsiung City Government 6,264 2.22 DZ BANK AG 6,238 2.21 SPDR Barclays Capital HY Bond ETF 6,131 2.17 GLODMAN SACHS GROUP INC. 6,123 2.17 Asia Cement Corporation 6,103 2.16 HSBC BANK USA 6,094 2.16 Lite-On Technology Corporation 5,975 2.12 Cathay United Bank 5,908 2.09 LLOYDS TSB BANK PLC LONDON 5,826 2.07 DBS BANK LTD 5,799 2.06 Land Bank of Taiwan 5,702 2.02 CHANG HWA BANK 5,616 1.99 Cathy Financial Holding Co., Ltd. 5,610 1.99 Fidelity Funds-US Hight Yield Fund 5,510 1.95 iShare S&P US Preferred Stock Index 5,497 1.95 Changhua Country Government 5,000 1.77 PIMCO Long-Term Credit Fund 4,916 1.74 MediaTek Inc. 4,809 1.70 MIZUHO FINANCIAL GROUP 4,755 1.69 Foxconn Technology Corporation 4,717 1.67 HUA NAN Commercial Bank Co., Ltd. 4,706 1.67 Capital Securities Corporation 4,626 1.64 MORGAN STANLEY 4,569 1.62 Taishin Securities Investment Trust Co., Ltd. 4,565 1.62 Jihsun Securities Co., Ltd. 4,516 1.60 BANK OF CHINA LTD. 4,513 1.60 AXA World Funds-US High Yield Bonds 4,413 1.56

(Continued) 320 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company's net Name transactions worth Taiwan Business Bank 4,347 1.54 First Securities Investment Trust Co., Ltd. 4,231 1.50 China Airlines Corporation 4,098 1.45 VERIZON COMMUNICATIONS 4,034 1.43 Taiwan Cement Corporation 4,031 1.43 BONOS TESORERIC PESOS 4,009 1.42 Tainan City Government 3,965 1.41 Pimco Giobal High Yield Bonds Fund 3,916 1.39 Far Eastern New Century Corporation 3,913 1.39 BANK OF CHINA (HK) LTD. 3,855 1.37 Advanced Semiconductor Engineering Inc. 3,793 1.34 Cathay No. 1 REIT Fund 3,787 1.34 PIMCO Income Fund 3,655 1.30 Fubon REIT I Fund 3,581 1.27 REPBULIC OF SOUTH AFRICA 3,513 1.25 CIE FINANCEMENT FONCIER 3,393 1.20 AT&T Inc. 3,373 1.20 Compel Electronics, Inc. 3,347 1.19 Pictet-Global Emerging Debt 3,337 1.18 Changhua Country Government 3,333 1.18 EVA Airways Corporation 3,318 1.18 Bank Sinopac Co., Ltd. 3,239 1.15 Vale Overseas Limited 3,232 1.15 Yuanta Securities Investment Trust Co., Ltd. 3,226 1.14 Miaoli Country Government 3,219 1.14 Taiwan Glass Industrial Corporation 3,215 1.14 MEGA Financial Holding Co., Ltd. 3,205 1.14 Pou Chen Group 3,199 1.13 Skysea International Capital Management 3,165 1.12 AMGEN INC. 3,113 1.10 Masterlink Securities Corporation 3,112 1.10 KGI Securities Co., Ltd. 3,112 1.10

(Continued) 321 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company's net Name transactions worth Wistron Corporation 3,112 1.10 Bank of Montreal 3,071 1.09 AMERICA MOVIL SAB DE CV 3,046 1.08 Urban Development Bureau Kaohsiung City Government 3,000 1.06 The same person and related parties Mr. Ju and related parties 16,007 5.68 Mr. Song and related parties 4,383 1.55 Mr. Liu and related parties 3,879 1.38 The same affiliated Central Government 675,215 239.41 Taiwan Power Company 91,563 32.46 Taipei City Government 65,940 23.38 Chunghwa Telecom Co., Ltd. 58,015 20.57 WELLS FARGO & CO. 34,429 12.21 Far Eastern New Century Corporation Group 32,595 11.56 CPC Group 32,422 11.50 Mega Financial Holding 31,153 11.05 New Taipei City Government 30,454 10.80 CITIGROUP INC. 30,301 10.74 Allianz SE 29,720 10.54 AXA SA 29,194 10.35 Taiwan Mobile Co., Ltd. 26,705 9.47 Yuanta Financial Holding Co., Ltd. 25,779 9.14 HSBC HOLDINGS PLC 25,128 8.91 Taiwan Semiconductor Manufacturing Group 24,116 8.55 China Steel Corporation 23,419 8.30 J.P. MORGAN CHASE BANK 22,872 8.11 STANDARD CHARTERED BANK 22,221 7.88 CHINA DEVELOPMENT BANK 21,229 7.53 Land Bank of Taiwan 20,909 7.41 Cathay Financial Holding Co., Ltd. 20,885 7.41 Kaohsiung City Government 20,666 7.33

(Continued) 322 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company's net Name transactions worth BANK OF AMERICA CORPORATION 20,631 7.32 Vanguard Group Inc. 19,622 6.96 BNP PARIBAS 19,596 6.95 WESTPAC BANKING CORP. 18,302 6.49 Taishin Financial Holding Group 18,026 6.39 Taichung City Government 17,800 6.31 GINNIE MAE 17,648 6.26 First Financial Holding Group 17,580 6.23 RUSSIAN FEDERATION 17,483 6.20 DEUTSCHE BANK AG 17,149 6.08 FREDDIE MAC 16,782 5.95 NATIONAL AUSTRALIA BANK 16,528 5.86 AUSTRALIA & NEW ZEALAND BANKING GROUP 16,057 5.69 Formosa Petrochemical Co. 15,866 5.63 BlackRock 15,832 5.61 BARCLAYS BANK PLC 15,305 5.43 UBS AG 15,201 5.39 Formosa Chemicals & Fiber Corporation 14,375 5.10 China Development Financial Holding Co., Ltd. 14,176 5.03 Qisda Corporation 13,985 4.96 US TREASURY N/B 13,626 4.83 HONG KONG GOVERNMENT 13,320 4.72 RABOBANK NEDERLAND 13,161 4.67 Yuen Foong Yu Paper Manufacturing Co., Ltd. 13,147 4.66 Taiwan Cooperative Holdings Co., Ltd. 13,108 4.65 Nan Ya Plastics Corporation 13,016 4.61 COMMONWEALTH BANK OF AUSTRALIA 12,934 4.59 FANNEIE MAE 12,771 4.53 REPUBLIC OF INDONESIA 12,539 4.45 China Trust Financial Holding Co., Ltd. 12,328 4.37 Innolux Display Corp. 11,944 4.23 ING Group N.V. 10,522 3.73

(Continued) 323 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company's net Name transactions worth Uni-President Enterprises Corp. 10,507 3.73 Waterland Financial Holding Co., Ltd. 10,268 3.64 Foxconn Technology Corporation 10,215 3.62 Industrial Bank of Taiwan 10,152 3.60 SOCIETE GENERALE 10,058 3.57 Groupe BPCE 9,926 3.52 Nomura Holdings Inc. 9,895 3.51 THE ROYAL BANK OF SCOTLAND 9,713 3.44 HUN NAN Group 9,564 3.39 ABN AMRO Group 9,500 3.37 BANCO BILBAO VIZCAYA ARGENTARIA SA 9,219 3.27 Taiwan Cement Corporation 9,082 3.22 Credit Agricole Group 8,811 3.12 Franklin Resources Inc. 8,560 3.04 BANK OF CHINA LTD. 8,369 2.97 Lite-On Technology Corporation 8,278 2.94 BANCO SANTANDER 8,157 2.89 Neuberger Berman Investment Funds PLC 8,048 2.85 Prudential PLC 8,009 2.84 American International Group Inc. 7,952 2.82 Synnex Technology International Corporation 7,876 2.79 Royal Bank of Canada 7,272 2.79 Credit Suisse 7,669 2.72 Goldaman Sachs Group Inc 7,654 2.71 Formosa Plastic Corporation 7,301 2.59 RSEA Engineering Corp. 7,194 2.55 Agricultural Bank of Taiwan Corporation 7,123 2.53 Norddeutsche Landesbank 6,798 2.41 Advanced Semiconductor Engineering Inc. 6,796 2.41 Taipei Financial Center Corporation 6,646 2.36 JihSun Financial Holding Co., Ltd. 6,585 2.33 Industrial and commercial Bank of China 6,560 2.33

(Continued) 324 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company's net Name transactions worth NOTA DO TESOURO NACIONAL 6,384 2.26 Wistron Corporation 6,334 2.25 Evergreen Marine Corp. (Taiwan) Ltd. 6,282 2.23 State Street Corp. 6,270 2.22 DZ Bank AG Deutsche Xentral-Ge 6,238 2.21 ASUSTek Computer Inc. 6,121 2.17 Lloysd Tsb Bank Plc London 6,074 2.15 Walsin Lihwa Corp. 5,935 2.10 China Airlines Corporation 5,882 2.09 DBS Bank Ltd. 5,801 2.06 Compel Electronics, Inc 5,777 2.05 MediaTek Inc. 5,712 2.03 Fidelity Worldwide Investment 5,671 2.01 Pou Chen Group 5,540 1.96 Feng Tay (HK) Group 5,435 1.93 China Resources Power Holdings Co 5,412 1.92 Taiwan Glass Industrial Corporation 5,127 1.82 Ping Tang Country Government 5,000 1.77 United Microelectronics 4,850 1.72 Mizuho Financial Group 4,755 1.69 The Wharf (Holding) Limited 4,727 1.68 Capital Securities Corporation 4,626 1.64 Morgan Stanley 4,569 4.62 Quata Computer Inc. 4,448 1.58 Taiwan Business Bank 4,347 1.54 Yang Ming Marine Transport Corp. 4,313 1.53 CICI Corporation 4,172 1.48 Shin Kong Financial Holding Co., Ltd. 4,102 1.45 TPK Holding Co., Ltd. 4,097 1.45 Cnooc Ltd. 4,062 1.44 Verizon Communications 4,034 1.43 Bonos Tesoreria Peson 4,009 1.42

(Continued) 325 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

June 30, 2013 Aggregate amount of Aggregate ratio credits, of the financial guarantees or holding any other company's net Name transactions worth Tainan City Government 3,965 1.41 Continental Holding Corporation 3,943 1.40 AT & T Inc. 3,861 1.37 Schroders PLC 3,719 1.32 Far Eastern International Bank 3,634 1.29 Chang Chun Group 3,544 1.26 Republic of South Africa 3,513 1.25 Vale SA 3,484 1.24 LCY Chemical Corp. 3,455 1.22 Tatung Co., Ltd. 3,422 1.21 Union Bank of Taiwan Co., Ltd. 3,418 1.21 Berkshire Hathaway Inc. 3,403 1.21 Taiwan Broadband Communications 3,353 1.19 Pictet & Cie 3,337 1.18 Changhua Country Government 3,333 1.18 CITIC Securities Co., Ltd. 3,278 1.16 Henderson Land Ltd. 3,274 1.16 Hotai Corporation 3,256 1.15 China National Petroleum Corp. 3,160 1.12 Amgen Inc. 3,113 1.10 Masterlink Securities Corporation 3,112 1.10 Acer Inc. 3,111 1.10 Bank of Montreal 3,071 1.09 Hontai Group 3,055 1.08 America Movil SAB DE CV 3,046 1.08

(Continued) 326 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

8) Financial information classified by business type: For the six-month period ended June 30, 2014

(In Thousands of NTD) Item Banking Insurance Securities Others Consolidation Interest income (expense) 12,475,452 30,971,840 514,345 (139,086) 43,822,551 Non-interest income 12,140,575 120,145,927 3,035,961 1,218,405 136,540,868 Net revenue 24,616,027 151,117,767 3,550,306 1,079,319 180,363,419 Bad debt expense (reversal gain) (200,694) (196,902) (919) - (398,515) and provision for insurance reserve Net change in provision for - (123,894,155) - 211,699 (123,682,456) insurance liability Operating expense (10,644,928) (10,005,706) (2,404,857) (74,231) (23,129,722) Income from continuing 13,770,405 17,021,004 1,144,530 1,216,787 33,152,726 operations before income tax Income tax expense (1,967,199) (2,614,090) (51,315) (1,035,004) (5,667,608) Cumulative effect of changes in - - - - - accounting principle Net income 11,803,206 14,406,914 1,093,215 181,783 27,485,118

For the six-month period ended June 30, 2013

(In Thousands of NTD) Item Banking Insurance Securities Others Consolidation Interest income (expense) 8,926,846 25,429,037 468,949 (117,611) 34,707,221 Non-interest income 10,792,284 132,601,613 2,197,228 (897,677) 144,693,448 Net revenue 19,719,130 158,030,650 2,666,177 (1,015,288) 179,400,669 Bad debt expense (reversal gain) 161,727 (74,175) - (13,289) 74,263 and provision for insurance reserve Net change in provision for - (136,256,675) - 216,628 (136,040,047) insurance liability Operating expense (9,006,633) (9,240,357) (2,241,752) (272,015) (20,760,757) Income from continuing 10,874,224 12,459,443 424,425 (1,083,964) 22,674,128 operations before income tax Income tax expense (1,375,877) (1,836,849) (48,139) (1,514,621) (4,775,486) Cumulative effect of changes in - - - - - accounting principle Net income (loss) 9,498,347 10,622,594 376,286 (2,598,585) 17,898,642

(Continued) 327 9) Financial statements of Fubon Financial Holding Co., Ltd. FUBON FINANCIAL HOLDING CO., LTD. Balance Sheet June 30, 2014, December 31, and June 30, 2013 (expressed in thousands of New Taiwan Dollars)

June 30, 2014 December 31, 2013 June 30, 2013 June 30, 2014 December 31, 2013 June 30, 2013 Assets Amount % Amount % Amount % Liabilities and Stockholders' Equity Amount % Amount % Amount %

Liabilities: Cash and cash equivalents $ 3,338,849 1 15,240,602 4 1,523,188 - Commercial paper payables, net - - 4,000,000 1 4,000,000 1 Securities purchased under resell agreements - - 1,819,637 1 3,073,466 1 Payables 15,907,198 4 641,069 - 10,001,845 3 Receivables, net 226 - 283 - 668 - Current income tax liabilities 8,305,129 2 7,627,551 2 8,329,815 2 Current income tax assets 4,238,953 1 4,534,273 1 5,065,175 2 Bonds payable 38,000,000 9 38,000,000 10 29,000,000 9 Investments in equity-accounted investees, net 415,460,654 98 344,432,779 94 326,713,319 97 Other borrowings - - - - 1,000,000 - Other financial assets, net 11,597 - 1,358,242 - 11,597 - Deferred tax liabilities 979,988 - 781,254 - 635,867 - Property, plant and equipment, net 42,372 - 41,544 - 51,489 - Other liabilities 434,947 - 187,535 - 699,138 - Intangible assets, net 12,710 - 14,794 - 4,590 - Total liabilities 63,627,262 15 51,237,409 13 53,666,665 15 Deferred tax assets 1,562 - 1,214 - 1,431 - Equity : Other assets, net 734,884 - 251,676 - 267,358 - Common stock 102,336,040 24 102,336,040 28 95,351,652 28 Capital surplus 74,446,982 18 74,446,982 20 55,785,647 17 Retained earnings: Legal reserve 35,176,861 8 31,905,926 9 31,905,926 9 Special reserve 2,985,366 1 2,985,366 1 2,985,366 1 Unappropriated retained earnings 84,259,699 20 75,533,098 21 60,590,069 19 Total retained earnings 122,421,926 29 110,424,390 31 95,481,361 29 Other equity 61,009,597 14 29,250,223 8 36,426,956 11 Total equity 360,214,545 85 316,457,635 87 283,045,616 85 Total assets $ 423,841,807 100 367,695,044 100 336,712,281 100 Total liabilities and stockholders' equity $ 423,841,807 100 367,695,044 100 336,712,281 100 328 FUBON FINANCIAL HOLDING CO., LTD. Statement of Comprehensive Income For the three-month and six-month periods ended June 30, 2014 and 2013 (expressed in thousands of New Taiwan Dollars,except earnings per share)

For the three-month periods ended June 30 For the six-month periods ended June 30 2014 2013 2014 2013 Amount % Amount % Amount % Amount %

Revenue : Share of income of associates and joint ventures under equity method $ 14,646,695 100 9,485,140 100 $ 28,805,549 100 19,875,919 100 Other revenues (15,439) - (132) - 26,487 - 22,292 - Total Revenue 14,631,256 100 9,485,008 100 28,832,036 100 19,898,211 100 Expense : Operating expenses 127,023 1 135,446 1 254,026 1 272,241 1 Other expenses and losses 161,300 1 139,026 1 321,748 1 275,821 1 Total expenses 288,323 2 274,472 2 575,774 2 548,062 2 Net income before income tax 14,342,933 98 9,210,536 98 28,256,262 98 19,350,149 98 Income tax expense (860,613) (6) (1,458,310) (15) (908,319) (3) (1,451,507) (7) Net income $ 13,482,320 92 7,752,226 83 27,347,943 95 17,898,642 91 Other comprehensive income (losses): Share of other comprehensive income of associates and joint ventures under equity method 14,009,316 96 (20,646,686) (218) 31,759,374 110 (31,967,517) (161) Income tax related to components of other comprehensive income ------Other comprehensive income (losses) for the period, net of income tax $ 14,009,316 96 (20,646,686) (218) 31,759,374 110 (31,967,517) (161) Total comprehensive income (losses) for the period $ 27,491,636 188 (12,894,460) (135) 59,107,317 205 (14,068,875) (70) Earnings per share (in New Taiwan Dollars) $ 1.32 0.81 2.67 1.88 329

FUBON FINANCIAL HOLDING CO., LTD. Statement of Changes in Equity For the six-month periods ended June 30, 2014 and 2013 (expressed in thousands of New Taiwan Dollars)

Other equity Exchange Unrealized Effective differences gains(losses) on portion of Stock Retained earnings arising on available- unrealized gains Unappropriated translation of for-sale (losses) Common Capital Legal Special retained foreign financial on cash flow stock Surplus reserve reserve earnings Total operations instrument hedges Total Treasury stock Total equity

Balance at January 1, 2013 $ 95,269,157 55,704,785 29,007,646 2,985,366 55,124,871 87,117,883 (1,913,399) 70,028,171 279,701 68,394,473 (57,144) 306,429,154 Net income for the period - - - - 17,898,642 17,898,642 - - - - - 17,898,642 Other comprehensive income (losses) for the period ------989,310 (32,892,026) (64,801) (31,967,517) - (31,967,517) Total comprehensive income (losses) for the period - - - - 17,898,642 17,898,642 989,310 (32,892,026) (64,801) (31,967,517) - (14,068,875) Legal reserve - - 2,898,280 - (2,898,280) ------Cash dividends - - - - (9,535,164) (9,535,164) - - - - - (9,535,164) Treasury stock transferred to employees - 3,317 ------57,144 60,461 Issuance of new shares of stock from exercise of employee warrants 82,495 77,545 ------160,040 Balance at June 30, 2013 $ 95,351,652 55,785,647 31,905,926 2,985,366 60,590,069 95,481,361 (924,089) 37,136,145 214,900 36,426,956 - 283,045,616

Balance at January 1, 2014 $ 102,336,040 74,446,982 31,905,926 2,985,366 75,533,098 110,424,390 (976,679) 30,076,828 150,074 29,250,223 - 316,457,635 Net income for the period - - - - 27,347,943 27,347,943 - - - - - 27,347,943 Other comprehensive income (losses) for the period ------(1,138,759) 32,906,539 (8,406) 31,759,374 - 31,759,374 Total comprehensive income (losses) for the period - - - - 27,347,943 27,347,943 (1,138,759) 32,906,539 (8,406) 31,759,374 - 59,107,317 Legal reserve - - 3,270,935 - (3,270,935) ------Cash dividends - - - - (15,350,407) (15,350,407) - - - - - (15,350,407) Balance at June 30, 2014 $ 102,336,040 74,446,982 35,176,861 2,985,366 84,259,699 122,421,926 (2,115,438) 62,983,367 141,668 61,009,597 - 360,214,545 330 FUBON FINANCIAL HOLDING CO., LTD. Statement of Cash Flows For the six-month periods ended June 30, 2014 and 2013 (expressed in thousands of New Taiwan Dollars)

For the six-month periods ended June 30 2014 2013

Cash flows from operating activities: Income before income tax for the period $ 28,256,262 19,350,149 Adjustments： Income of non-cash activities Depreciation 5,687 3,696 Amortization 4,030 2,691 Interest expense 321,544 273,536 Interest income (9,246) (6,803) Share of income of associates and joint ventures under equity method (28,805,549) (19,875,919) Subtotal of income of non-cash activities (28,483,534) (19,602,799) Change in operating assets and liabilities : Change in operating assets : Decrease in receivables and current income tax assets 295,455 217,415 Increase in other assets (484,497) (15,308) Subtotal of change in operating assets (189,042) 202,107 Change in operating liabilities : Increase in payables and current income tax liabilities 292,058 2,149,176 Increase in other liabilities 446,147 43,483 Subtotal of change in operating liabilities 738,205 2,192,659 Subtotal of change in operating assets and liabilities 549,163 2,394,766 Subtotal of all adjustments (27,934,371) (17,208,033) Cash provided by operating activities 321,891 2,142,116 Cash received from interest income 9,168 8,378 Cash received from dividends 9,473,129 3,458,420 Cash paid for interest (250,976) (267,861) Cash paid for income taxes (677,646) (1,387,159) Net cash provided by operating activities 8,875,566 3,953,894 Cash flows from investing activities : Acquisition of equity-accounted investees (18,589,436) (8,665,400) Acquisition of property, plant and equipment (6,515) (17,703) Acquisition of intangible assets (1,005) (3,101) Net cash used in investing activities (18,596,956) (8,686,204) Cash flows from financing activities: Increase in short-term borrowings - 1,000,000 Increase in commercial papers payable - 4,000,000 Decrease in commercial papers payable (4,000,000) - Proceeds from employees’ exercise of warrants - 160,040 Disposal of treasury stock - 60,461 Net cash provided by (used in) financing activities (4,000,000) 5,220,501 Net increase (decrease) in cash and cash equivalents (13,721,390) 488,191 Cash and cash equivalents at the beginning of period 17,060,239 4,108,463 Cash and cash equivalents at the end of period $ 3,338,849 4,596,654 Components of cash and cash equivalents: Cash and cash equivalents recognized in balance sheet $ 3,338,849 1,523,188 Securities purchased under resell agreements in compliance with IAS 7 definition of “Cash and cash equivalents” - 3,073,466 Cash and cash equivalents at the end of period $ 3,338,849 4,596,654 331 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

10) Subsidiaries' balance sheets and statements of comprehensive income 1. Balance sheets Taipei Fubon Bank June 30, 2014 June 30, 2013

Cash and cash equivalents $ 48,547,018 27,687,721 Due from Central Bank and call loans to banks 106,008,736 124,541,595 Financial assets measured at fair value through profit or loss 77,585,695 80,561,332 Available-for-sale financial assets, net 64,534,008 74,943,083 Hedging derivative financial assets 244,384 354,248 Securities purchased under resell agreements 8,823,462 17,403,404 Receivable, net 106,300,877 59,838,544 Current income tax assets 407,302 509,226 Loans, net 1,138,529,337 1,066,643,537 Held-to-maturity financial assets, net 200,743,750 208,369,171 Investments in equity-accounted investees, net 20,517,477 194,375 Other financial assets, net 8,500,803 2,542,027 Property, plant and equipment, net 11,484,892 11,260,409 Investment property, net 1,657,094 1,726,891 Intangible assets, net 1,587,434 1,616,510 Deferred tax assets 345,147 357,307 Other assets, net 16,661,007 5,210,055 Total assets $ 1,812,478,423 1,683,759,435 Due to Central Bank and other banks $ 81,899,534 68,866,146 Financial liabilities measured at fair value through profit or loss 35,282,844 24,155,620 Hedging derivative financial liabilities 709,345 852,456 Securities sold under repurchase agreements 32,790,170 30,761,136 Payable 25,893,356 31,986,074 Current income tax liabilities 1,480,363 1,373,705 Deposits 1,370,600,398 1,305,278,103 Bonds payable 71,032,836 66,202,773 Other financial liabilities 42,457,920 27,007,554 Provisions 1,933,509 1,517,648 Deferred tax liabilities 509,732 407,142 Other liabilities 5,194,466 3,108,749 Total liabilities 1,669,784,473 1,561,517,106 Common stock 89,176,722 76,449,789 Capital surplus 14,800,927 10,655,831 Retained earnings 36,318,579 30,777,110 Other equity 2,397,722 4,359,599 Total equity 142,693,950 122,242,329 Total liabilities and equity $ 1,812,478,423 1,683,759,435

(Continued) 332 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Insurance June 30, 2014 June 30, 2013

Cash and cash equivalents $ 6,528,872 6,806,123 Receivable 6,709,395 6,500,576 Financial assets measured at fair value through profit or 66,766 7,361 loss Available-for-sale financial assets 33,806,051 32,876,841 Financial assets carried at cost 210,091 243,130 Non-active market debt investments 2,564,964 2,979,159 Investments in equity-accounted investee 605,272 917,045 Investment property 5,289,919 5,357,310 Reinsurance assets 10,447,721 10,213,457 Property, plant and equipment 2,279,822 2,290,371 Intangible assets 64,928 86,733 Deferred tax assets 496,877 569,804 Other assets 807,810 784,888 Total assets $ 69,878,488 69,632,798 Payable $ 6,723,165 6,717,683 Current income tax liabilities 231,958 285,451 Financial liabilities measured at fair value through profit 1,858 122,299 or loss Other financial liabilities 195,700 - Insurance liabilities 40,355,871 38,627,079 Provisions 1,070,339 999,124 Deferred tax liabilities 292,955 259,289 Other liabilities 513,430 574,894 Total liabilities 49,385,276 47,585,819 Common stock 3,178,396 3,178,396 Capital surplus 5,934,408 8,318,907 Retained earnings 7,872,271 6,517,499 Other equity 3,508,137 4,032,177 Total equity 20,493,212 22,046,979 Total liabilities and equity $ 69,878,488 69,632,798

(Continued) 333 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Life Insurance June 30, 2014 June 30, 2013

Cash and cash equivalents $ 118,101,989 154,596,740 Receivable 30,574,732 34,441,479 Current income tax liabilities 3,327,103 2,258,174 Financial assets measured at fair value through profit or loss 6,814,174 1,415,624 Available-for-sale financial assets 1,587,789,146 1,340,279,695 Hedging derivative financial assets 223,140 276,369 Financial assets carried at cost 1,061,284 1,041,849 Non-active market debt investments 408,608,853 342,374,112 Investment in equity-accounted investees 1,289,413 1,451,986 Other financial assets 48,382,077 43,364,527 Investment property 85,898,321 85,805,144 Loans 111,061,766 92,230,188 Reinsurance assets 2,995,457 1,044,732 Property, plant and equipment 7,801,887 7,155,642 Intangible assets 297,428 256,097 Deferred tax assets 4,027,056 4,577,025 Other assets 21,776,970 11,409,282 Separate account-insurance instrument assets 140,100,965 138,734,735 Total assets $ 2,580,131,761 2,262,713,400 Payable $ 30,595,480 32,240,936 Current income tax liabilities 1,068,691 659,160 Financial liabilities measured at fair value through profit or loss 298,081 4,318,318 52,455 17,453 Insurance liabilities 2,108,929,157 1,835,705,586 Reserve for insurance contracts with financial product futures 89,146,174 95,730,061 Foreign exchange valuation reserve 1,266,169 853,958 Provisions 6,648,972 6,407,352 Deferred tax liabilities 6,588,043 836,812 Other liabilities 3,791,304 4,926,047 Separate account-insurance instrument liabilities 140,100,965 138,734,735 Total liabilities 2,388,485,491 2,120,430,418 Common stock 43,982,150 36,481,480 Capital surplus 27,641,058 27,527,473 Retained earnings 49,215,949 35,338,039 Other equity 70,807,113 42,935,990 Total equity 191,646,270 142,282,982 Total liabilities and equity $ 2,580,131,761 2,262,713,400

(Continued) 334 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Securities June 30, 2014 June 30, 2013

Current assets $ 46,158,085 37,575,228 Available-for-sale financial assets 102,514 75,818 Financial assets carried at cost 474,685 518,204 Investments in equity-accounted investees 4,888,214 5,000,310 Property, plant and equipment 1,719,773 1,803,915 Investment property 727,467 719,325 Intangible assets 47,847 82,549 Deferred tax assets 39,099 50,779 Other non-current assets 1,441,503 1,464,859 Total assets $ 55,599,187 47,290,987 Current liabilities $ 24,364,513 16,765,098 Provisions 480,630 533,593 Deferred tax liabilities 7,684 19,983 Other non-current liabilities 8,177 7,855 Total liabilities 24,861,004 17,326,529 Common stock 16,643,550 16,643,550 Capital surplus 7,335 7,335 Retained earnings 13,354,026 11,657,736 Other equity 733,272 1,655,837 Total equity 30,738,183 29,964,458 Total liabilities and stockholders' equity $ 55,599,187 47,290,987

Unit: CNY thousands Fubon Bank (China) (Note) June 30, 2014

Cash and cash equivalents $ 2,512,913 Due from Central Bank and call loans to banks 9,103,635 Financial assets measured at fair value through profit or loss 347,097 Available-for-sale financial assets, net 2,205,668 Securities purchased under resell agreements 4,429,090 Other financial assets 24,800 Receivable, net 690,442 Loans, net 32,605,922 Held-to-maturity financial assets, net 5,724,272 Property, plant and equipment, net 1,195,812 Intangible assets, net 7,324 Deferred tax assets 112,098 Other assets, net 12,157 Total assets $ 58,971,230 (Continued) 335 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Bank (China) (Note) June 30, 2014

Due to Central Bank and other banks $ 2,344,846 Financing due to Central Bank and other banks 212,272 Financial liabilities measured at fair value though profit or loss 97,639 Payables 964,587 Current income tax liabilities 19,418 Deposits 44,383,567 Securities sold under repurchase agreements 6,540,654 Other financial liabilities 25,607 Deferred tax liabilities 2,508 Other liabilities 45,040 Total liabilities 54,636,138 Common stock 2,100,000 Capital surplus 93,176 Retained earnings 2,147,615 Other equity (5,699) Total equity 4,335,092 Total liabilities and equity $ 58,971,230

Note: Acquisition date was January 7, 2014. Unit: HKD thousands Fubon Hong Kong Bank June 30, 2014 June 30, 2013

Cash and cash equivalents $ 6,204,485 3,584,016 Due from Central Bank and call loans to banks 2,415,944 2,193,173 Financial assets measured at fair value through profit or loss 2,882,434 2,677,991 Available-for-sale financial assets, net 19,805,798 17,452,019 Investments in equity-accounted investees, net 1,314,277 1,220,392 Held-to-maturity financial assets, net 1,869,973 1,930,614 Hedging derivative financial assets 14,788 - Other financial assets, net 549,923 550,341 Receivable, net 1,648,747 1,547,780 Loans, net 42,188,477 33,327,021 Current income tax asset 1,080 12,705 Hold for sale asset 24,395 - Property, plant and equipment, net 1,036,846 1,028,025 Hedging derivativem income tax financial assets - 24,690 Other assets, net 140,183 132,748 Total assets $ 80,097,350 65,681,515

(Continued) 336 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Hong Kong Bank June 30, 2014 June 30, 2013

Due to Central Bank and other banks $ 4,675,247 1,498,818 Financial liabilities measured at fair value though profit or loss 2,699,790 2,501,399 Payables 741,577 1,372,517 Current income tax liabilities 32,325 30,468 Deposits 51,178,349 46,884,149 Hedging derivative financial liabilities 332,475 365,559 Bonds and bills sold under repurchase agreements 7,067,625 3,548,181 Bonds payable 4,783,266 3,243,232 Liability reserve 50,752 65,439 Hedging derivative income tax liabilities 65,211 26,033 Other liabilities 527,395 383,650 Total liabilities 72,154,012 59,919,445 Common stock 2,871,489 1,383,783 Capital surplus 1,958,959 2,417,448 Retained earnings 2,838,601 1,892,756 Other equity 274,289 66,727 Non-controlling interests - 1,356 Total equity 7,943,338 5,762,070 Total liabilities and equity $ 80,097,350 65,681,515

2. Statements of comprehensive income Taipei Fubon Bank For the six-month periods ended June 30 2014 2013

Interest income $ 15,654,778 13,261,160 Less: interest expense (7,022,709) (5,754,245) Net interest income 8,632,069 7,506,915 Non-interest income, net 10,919,344 9,682,355 Net revenue 19,551,413 17,189,270 Bad debt expense and reserve for guarantees (42,057) 157,431 Operating expense (7,773,177) (7,516,575) Income before income tax 11,736,179 9,830,126 Income tax expense (1,532,649) (1,247,238) Net income for the period 10,203,530 8,582,888 Other comprehensive income (loss) (728,943) 261,118 Total comprehensive income for the period 9,474,587 8,844,006 Earnings per share 1.15 1.05

(Continued) 337 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Insurance For the six-month periods ended June 30 2014 2013

Operating income $ 12,279,979 11,412,404 Operating cost (7,775,842) (7,105,380) Operating expense (2,635,873) (2,550,144) Operating revenue 1,868,264 1,756,880 Non-operating income and expense (55,378) (30,326) Income before income tax 1,812,886 1,726,554 Income tax expense (321,390) (250,000) Net income for the period 1,491,496 1,476,554 Other comprehensive income (loss) 78,181 439,181 Total comprehensive income for the period 1,569,677 1,915,735 Earnings per share (Unit: NTD) 4.69 4.65

Fubon Life Insurance For the six-month periods ended June 30 2014 2013

Operating income $ 252,719,146 219,877,909 Operating cost (231,559,080) (203,606,168) Operating expense (6,157,229) (5,688,476) Operating revenue 15,002,837 10,583,265 Non-operating income and expense 264,538 148,897 Income before income tax 15,267,375 10,732,162 Income tax expense (2,295,388) (1,586,121) Net income for the period 12,971,987 9,146,041 Other comprehensive income (loss) 32,709,555 (33,771,611) Total comprehensive income (loss) for the period 45,681,542 (24,625,570) Earnings per share (Unit: NTD) 3.56 2.51

(Continued) 338 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Fubon Securities For the six-month periods ended June 30 2014 2013

Revenue $ 3,120,264 2,193,003 Expense (2,229,975) (2,024,621) Operating revenue 890,289 168,382 Non-operating income and expense 238,134 239,903 Income before income tax 1,128,423 408,285 Income tax expense (35,208) (32,000) Net income for the period 1,093,215 376,285 Other comprehensive income (loss) (33,308) 596,225 Total comprehensive income for the period 1,059,907 972,510 Earnings per share (Unit: NTD) 0.66 0.23

Unit: CNY thousands Fubon Bank (China) (Note) For the six-month period ended June 30 2014

Interest income $ 1,317,253 Less: interest expense (868,166) Net interest income 449,087 Non-interest income, net 62,180 Net revenue 511,267 Bad debt expense and reserve for guarantees (26,627) Operating expenses (204,927) Income before income tax 279,713 Income tax expense (58,615) Net income for the period 221,098 Other comprehensive income (loss) 49,706 Total comprehensive income for the period 270,804

Note: Acquisition date was January 7, 2014.

(Continued) 339 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Unit: Thousands of HKD Fubon Hong Kong Bank For the six-month periods ended June 30 2014 2013

Interest income $ 796,575 663,618 Less: interest (401,425) (294,202) Net interest income 395,150 369,416 Non-interest income, net 361,160 288,117 Net revenue 756,310 657,533 Bad debt expense and reserve for guarantees (7,245) 1,118 Operating expenses (422,917) (387,249) Income before income tax 326,148 271,402 Income tax expense (37,653) (33,225) Net income for the period 288,495 238,177 Other comprehensive income (loss) 134,853 (88,977) Total comprehensive income for the period 423,348 149,200

11) Profitability of the Company June 30, 2014

Unit: % Taipei Fubon Fubon (HK) Fubon Bank Fubon Life Fubon Fubon Item Consolidation The Company Bank Bank (China) Insurance Insurance Securities Return on total assets Before income tax 1.37 % 14.28 % 1.31 % 0.87 % 1.03 % 1.22 % 5.22 % 4.21 % After income tax 1.13 % 13.82 % 1.14 % 0.77 % 0.82 % 1.04 % 4.29 % 4.08 % Return on common equity Before income tax 19.38 % 16.70 % 17.01 % 9.34 % 15.12 % 17.99 % 16.73 % 7.42 % After income tax 16.07 % 16.17 % 14.79 % 8.26 % 11.96 % 15.29 % 13.76 % 7.19 % Profit margin 15.24 % 95.92 % 52.19 % 38.15 % 43.25 % 5.13 % 12.15 % 35.04 %

June 30, 2013

Unit: % Taipei Fubon Fubon (HK) Fubon Life Item Consolidation The Company Bank Bank Insurance Fubon Insurance Fubon Securities Return on total assets Before income tax 1.08 % 11.37 % 1.20 % 0.86 % 0.97 % 4.97 % 1.68 % After income tax 0.85 % 10.52 % 1.04 % 0.76 % 0.83 % 4.25 % 1.55 % Return on common equity Before income tax 15.39 % 13.13 % 17.19 % 9.55 % 13.88 % 15.78 % 2.74 % After income tax 12.15 % 12.15 % 15.01 % 8.38 % 11.83 % 13.49 % 2.52 % Profit margin 9.98 % 91.22 % 49.93 % 36.22 % 4.16 % 12.94 % 17.16 %

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

Note 2: Return on common equity = Income before (after) income tax/Average net worth of common equity.

Note 3: Profit margin = Income after income tax/Total operating revenues.

Note 4: Income before (after) income tax is the income in the six-month periods ended June 30, 2014 and 2013.

Note 5: The return on assets and net return on assets are presented on the annual bases, the numbers are annual rate.

(Continued) 340 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

(49) Disclosure Required 1) Related Information of Significant Transactions 1.Loans to others: None. 2.Endorsement and guarantees for others: None. 3.Marketable securities held as of June 30, 2014： (In Thousands of NTD / Thousands shares) Held company securities type and June 30, 2014 Held company name securities name with the Shareholding Shareholding name type and name securities issuer Account No. of shares ratio ratio Market price Remark Fubon Futures Co., Fubon R1 - Available-for- 2,670 38,047 - 38,047 Beneficiary Ltd. sale financial securities assets 〃 Fubon R2 - 〃 3,011 35,199 - 35,199 〃〃 Cathay R1 - 〃 310 5,555 - 5,555 〃〃 Shin Kong R1 - 〃 2,570 33,873 - 33,873 〃 Fubon Marketing UPAMC Quality - Financial assets 258 6,405 - 6,405 Beneficiary Growth measured at fair certificates value through profit or loss 〃 Allianz G1b1 Inv - 〃 785 11,311 - 11,311 〃 All Seasons Ret of Bd 〃 Eastspring Inv Fund managed under 〃 200 9,944 - 9,944 〃 Umbrella Fund a subsidiary G1b1 Bd FoF company's manager of the Company 〃 Fubon R1 - 〃 1,391 19,822 - 19,822 Beneficiary securities 〃 Fubon R2 - 〃 1,380 16,132 - 16,132 〃〃 Cathay R1 - 〃 1,000 17,920 - 17,920 〃〃 Cathay R2 - 〃 950 13,585 - 13,585 〃 Fubon Investment Beneficiary Fund managed under 〃 4,173 64,186 - 64,186 Beneficiary service certificate – Fubon a subsidiary certificates Chi Hsiang Fund company's manager of the Company Fubon Asset Beneficiary Fund managed under 〃 7,994 122,942 - 122,942 Beneficiary Management certificate – Fubon Fubon Asset certificates Chi Hsiang Fund Management 〃 Beneficiary 〃〃 54 2,173 - 2,173 〃 certificate – Mega Diamond Money Market 〃 Beneficiary 〃〃 75 2,331 - 2,331 〃 certificate – Fubon Taiwan Financial ETF 〃 Beneficiary 〃〃 59 2,218 - 2,218 〃 certificate – Fubon Taiwan Eight Industries ETF 〃 Beneficiary 〃〃 55 2,181 - 2,181 〃 certificate – Fubon MSCI Taiwan ETF 〃 Beneficiary 〃〃 3,069 55,978 - 55,978 〃 certificate – Fubon SSE180 ETF 〃 Beneficiary 〃〃 13 496 - 496 〃 certificate – Taiwan FTSE TWSE Taiwan 50 EFT 〃 Beneficiary - Available-for- 2,352 22,411 - 22,411 〃 certificate – sale financial Eastspring Inv Asia assets Pacific REITs B

(Continued) 341 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Held company securities type and June 30, 2014 Held company name securities name with the Shareholding Shareholding name type and name securities issuer Account No. of shares ratio ratio Market price Remark Fubon Asset Beneficiary - Available-for- 20 48,503 - 48,503 Beneficiary Management certificate –Loomis sale financial certificates Sayles Glob Credit assets Fd 〃 Beneficiary - 〃 25 12,693 - 12,693 〃 certificate –GAM Sart European Equity－A 〃 Beneficiary - 〃 62 43,364 - 43,364 〃 certificate –GAM Sart US All Cap Equity－A 〃 Beneficiary - 〃 161 54,108 - 54,108 〃 certificate –Loomis Sayles high income fund R/D USD 〃 Beneficiary Fund managed under 〃 2,062 10,082 - 10,082 〃 certificate –Fubon Fubon Asset china Growth Management 〃 Beneficiary - 〃 850 33,482 - 33,482 〃 certificate –Fubon MSCI Taiwan ETF 〃 Beneficiary 〃〃 98 1,045 - 1,045 〃 certificate –Fubon Strategic High Income C 〃 Beneficiary 〃〃 7,638 78,748 - 78,748 〃 certificate –Fubon Fund 〃 Beneficiary 〃〃 488 5,855 - 5,855 〃 certificate –Fubon Taiwan CSR B 〃 Beneficiary - 〃 2,041 99,050 - 99,050 〃 certificate –Fubon China High Yield Bd CNY－B 〃 Beneficiary - 〃 816 39,921 - 39,921 〃 certificate –Fubon China Investment Grade Bd CNY－B Fubon AMC Union Bank - 〃 600 6,605 0.03 6,605 Listed stock Fubon Financial Chunghwa - 〃 3,000 140,700 3.87 140,700 〃 Holding Venture chemical Synthesis Capital Co., Ltd. & Biotech Co., Ltd. Bionime - 〃 1,075 75,356 2.45 75,356 〃 Corporation 〃 Media Asia Group - 〃 66,125 137,835 4.94 137,835 Hong Kong Holdings Ltd. listed stock 〃 KD Holding - 〃 2,544 456,622 4.01 456,622 Listed stock in Corporation GTSM Fubon Financial H&Q AP Greater - Available-for- - 31,572 4.00 31,572 Private fund Holding Venture China Growth sale financial Capital Co., Ltd. Fund assets 〃 Media Asia Group - 〃 - 128,642 4.48 128,642 Convertible Holding Limited Bond 〃 An Shin Food - 〃 97 6,699 0.30 6,699 Listed stock in Service Co., Ltd. GTSM

(Continued) 342 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Held company securities type and June 30, 2014 Held company name securities name with the Shareholding Shareholding name type and name securities issuer Account No. of shares ratio ratio Market price Remark Fubon Financial Eversol Company - Available-for- 1,150 4,566 0.41 4,566 Emerging Holding Venture sale financial stock Capital Co., Ltd. assets 〃 EVA Technologies - 〃 3,350 18,761 6.48 18,761 〃 Co., Ltd. 〃 SynCore - 〃 2,328 262,971 4.52 262,971 〃 Biotechnology Co. 〃 FSITC Global High - 〃 8,982 101,033 - 101,033 Bond Fund Yield Bond 〃 Fubon Strategic Fund managed under 〃 9,545 101,837 - 101,837 〃 High Income a subsidiary company's manager of the Company 〃 Fuh Hwa Strategic - 〃 7,930 102,776 - 102,776 〃 High Income Fd of Fds 〃 Cathay Multi- - 〃 10,471 100,942 - 100,942 〃 Strategy High Yield Bond 〃 Franklin Templeton - 〃 9,458 100,515 - 100,515 〃 Sino Am Global High Yield Bond Fund 〃 TIPCO - Financial assets 1 147,202 4.55 147,202 Unlisted stock International measured at Limited cost 〃 Refael - 〃 800 3,080 3.98 3,080 〃 Microelectronics, Inc. 〃 Jeoutai Technology - 〃 1,998 42,000 8.06 42,000 〃 Co., Ltd. 〃 Century Related party in 〃 2,568 31,204 1.00 31,204 〃 Development substance Corporation 〃 Yuan-tai Foreign - 〃 240 4,800 2.00 4,800 〃 Exchange Brokey Co., LTd. 〃 Phalanx Biotech - 〃 182 913 0.49 913 〃 Group 〃 ConforMIS, Inc. - 〃 450 61,325 1.03 61,325 〃〃 StemCyte Inc. Related party in 〃 9,426 270,427 11.04 270,427 substance 〃 Tai Yai 〃〃 4,500 45,000 3.00 45,000 〃 Petrochemical Corp. 〃 Kbro Media Co., 〃〃 13,050 129,797 14.50 129,797 〃 Ltd. 〃 Diamond 〃〃 20,000 200,000 5.00 200,000 〃 Bioventure 〃 Taiwan SyneuRx - 〃 414 4,476 3.21 4,476 〃 Corp. 〃 Lonestar Heart Inc. - 〃 294 60,640 4.01 60,640 〃〃 D.D powers - 〃 1,500 15,000 5.00 15,000 〃 Corporation. 〃 JHL Biotech Inc. - 〃 2,632 150,130 3.03 150,130 〃〃 Sunny Pharma - 〃 11,765 119,988 11.20 119,988 〃 Holdings, Limited

(Continued) 343 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Held company securities type and June 30, 2014 Held company name securities name with the Shareholding Shareholding name type and name securities issuer Account No. of shares ratio ratio Market price Remark Fubon Financial Beneficiary - Financial assets 45,697 560,767 - 560,767 Beneficiary Holding Venture certificate –Mega measured at fair certificates Capital Co., Ltd. Diamond Money value through Market profit or loss 〃 Beneficiary - 〃 12,211 181,318 - 181,318 〃 certificate –Yuanta Wan Tai Money Market 〃 Fubon Chi-Hsiang Fund managed under 〃 4,763 73,247 - 73,247 〃 Money Market a subsidiary Fund company's manager of the Company 4.Cumulative purchase or sales of the same investee’s capital stock up to $300,000 or 10% of paid- in capital:

(In Thousands of NTD / Thousands shares) Marketable January 1 2014 Purchase Sales June 30 2014 Purchase or securities Deposit sales type and Counter- Relation- No. of No. of shares No. of Sales Book gain or No. of company name Account party ship shares Amounts Accounts shares price value loss shares Accounts Fubon Fubon Bank Equity Lotus Subsidiary - 1,346,646 - 10,368,017 - - - - - 11,714,663 Financial (China) Investments Worldwide of the (Note 1) (Note 2) Holding under the Ltd. Company equity method (Note 1) Fubon Taipei Fubon Equity Cash capital 〃 8,206,571 132,992,392 154,000 9,441,952 - - - - 8,360,571 142,434,344 Financial Bank Investments increase- (Note 2) Holding under the subsidiary equity method Fubon Fubon Bank Equity Cash capital " 1,371,489 26,787,641 269,784 7,354,179 - - - - 1,641,273 34,141,820 Financial (HK) Investments increase- (Note 2) Holding under the subsidiary equity method Taipei Fubon Fubon Bank Equity Lotus - - 3,455,948 - 16,822,600 - - - - - 20,338,548 Bank (China) Investments Worldwide (Note 1) (Note 3) under the Ltd. equity method (Note 1)

Note 1: Beginning balance was financial assets measured at cost.

Note 2: Including cash capital increase from Fubon Bank (China), Taipei Fubon Bank and Fubon Bank (HK) amounts were $10,326,140, $2,484,020 and $5,779,275 the other were investment profit or loss on equity method, unrealized financial assets profit or loss and cumulative translation adjustments.

Note 3: Including acquisition cost and cash capital increase to Fubon Bank (China), amount to $16,802,350, recognised as profit or loss on equity method/share of other comprehensive income. 5.Acquisition of real estate up to $300,000 or 10% of paid-in capital: None. 6.Obtain of real estate up to $300,000 or 10% of paid-in capital: None. 7.Disposal of real estate up to $300,000 or 10% of paid-in capital: None. 8.Discount of commission fees for transaction with related parties up to $5,000: None.

(Continued) 344 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

9.Receivables from related parties up to $300,000 or 10% of paid-in capital: (In Thousand of NTD) Subsequently Company of Balance of Post-due receivables – related received amount of Allowance for accounted for receivables from Turnover parties receivables from doubtful receivable Counter-party Relation-ship related party rate Amount Resolution related party accounts The Company Taipei Fubon Bank Subsidiary of 957,791 - - - - the Company (Note 1) 〃 Fubon Securities 〃 1,256,979 - - - - (Note 1) 〃 Fubon Insurance 〃 356,397 - - - - (Note 1) 〃 Fubon Life 〃 601,392 - - - - Insurance (Note 1) Taipei Fubon Fubon Financial Parent 385,912 - - - - Bank Holding Company (Note 2) Taipei Fubon Taiwan Sport Subsidiary of 922,647 - - - - Bank Lottery the Company Taipei Fubon Fubon Life Subsidiary of 406,481 - - - - Bank Insurance the Company Fubon Life Fubon Financial Parent 3,362,653 - - - - Insurance Holding Company (Note 2)

Note 1: The tax receivable by tax link mainly of subsidiary of company estimated payment that Company should be pay. Note 2: The tax receivables to the subsidiaries, which derived from tax receivable of the Company as a result of combined income tax declaration starting from 2002. 10.Transactions of financial derivatives: for future information please refer to notes 8, 10, 23 and 38. 11.Transaction information of NPL disposition: (1)Summary of transaction information of NPL disposition： (Unit: In Thousand of NTD) Relationship with Trading Transaction Trading NPL Book Selling Disposal Contractual Partner Date Partner information Value Price Gain/Loss Conditions Fubon Bank Founder Credit case 666,730 724,732 58,002 - Directly or (China) Fubon Fund with no indirectly June 30, 2014Management collateral controlled by (Business the same Client) corporation or organization with Fubon Bank (China)

(2)The information of a transaction of NPL disposition up to $1,000,000 should be disclosed : None. 12.Types of securitization instruments and other relevant information approved to issue pursuant to financial assets securitization rules or real estate securitization rules: None.

(Continued) 345 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

13.Business relationships and significant inter-company transactions: (Unit: In Thousand of NTD) No. Relationship Transaction details Rates of operation (Note 1) Company Counter-party (Note 2) Accounts Amounts Transaction terms income/total assets (Note 3) 1 Fubon Financial Taipei Fubon Bank 1 Cash and cash 3,000,000 Same as non related- 0.06 % Holding equivalents party transactions 1 Fubon Financial Fubon Life Insurance and 1 Corporate income 2,703,555 Same as non related- 0.05 % Holding its subsidiaries tax payable party transactions 2 Fubon Insurance and its Fu Sheng General 3 Service fees income, 169,824 Same as non related- 0.09 % subsidiaries Insurance Agent net party transactions 2 Taipei Fubon Bank Fubon Life Insurance and 3 Other general and 125,537 Same as non related- 0.07 % its subsidiaries administrative party transactions expenses 3 Taipei Fubon Bank Fubon Financial Holding 2 Deposits 3,000,000 Same as non related- 0.06 % party transactions 3 Taipei Fubon Bank Fubon Life Insurance and 3 Other financial 2,750,000 Same as non related- 0.05 % its subsidiaries libilities party transactions 3 Taipei Fubon Bank Fubon Securities and its 3 Deposits 2,556,943 Same as non related- 0.05 % subsidiaries party transactions 3 Taipei Fubon Bank Fubon Life Insurance and 3 Service fees income, 1,864,345 Same as non related- 1.03 % its subsidiaries net party transactions 3 Taipei Fubon Bank Taiwan Sport Lottery 3 Other non-interest 1,686,240 Same as non related- 0.93 % income, net party transactions 3 Taipei Fubon Bank Taiwan Sport Lottery 3 Other non-interest 857,516 Same as non related- 0.47 % income, net party transactions 3 Taipei Fubon Bank Fubon Life Insurance and 3 Service fees income, 147,529 Same as non related- 0.08 % its subsidiaries net party transactions 3 Taipei Fubon Bank Fubon Securities and its 3 Service fees income, 140,270 Same as non related- 0.08 % subsidiaries net party transactions 4 Fubon Life Insurance Taipei Fubon Bank 3 Other financial assets 2,750,000 Same as non related- 0.05 % and its subsidiaries party transactions 4 Fubon Life Insurance Fubon Financial Holding 2 Corporate income 2,703,555 Same as non related- 0.05 % and its subsidiaries tax receivable party transactions 4 Fubon Life Insurance Taipei Fubon Bank 3 Service fees income, 1,873,373 Same as non related- 1.04 % and its subsidiaries net party transactions 4 Fubon Life Insurance Fu Sheng Life Insurance 3 Service fees income, 231,328 Same as non related- 0.13 % and its subsidiaries Agent net party transactions 4 Fubon Life Insurance Taipei Fubon Bank 3 Other operating 170,870 Same as non related- 0.09 % and its subsidiaries expenses party transactions 4 Fubon Life Insurance Fubon Insurance and its 3 Other non-interest 125,537 Same as non related- 0.07 % and its subsidiaries subsidiaries income, net party transactions 5 Fubon Securities and its Taipei Fubon Bank 3 Other non-interest 147,817 Same as non related- 0.08 % subsidiaries income, net party transactions 6 Taiwan Sport Lottery Taipei Fubon Bank 3 Other non-interest 843,120 Same as non related- 0.47 % income, net party transactions 7 Fubon Marketing and its Fubon Life Insurance and 3 Service fees income, 233,976 Same as non related- 0.13 % subsidiaries its subsidiaries net party transactions 7 Fubon Marketing and its Fubon Insurance and its 3 Service fees income, 169,824 Same as non related- 0.09 % subsidiaries subsidiaries net party transactions

Note 1: Serial number is determined as follows: 1. 0 represents parent company. 2. Subsidiaries are numbered in a sequence of Arabic numerals from 1 based on the companies’ category. Note 2: The relation category among traders is determined as follows: 1. Parent to subsidiary. 2. Subsidiary to parent. 3. Subsidiary to subsidiary. Note 3: Above listed are the significant transactions that comprised over 0.05% of the consolidated revenue or total assets.

(Continued) 346 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

14.Other significant transactions that may have substantial influence upon the decision made by financial statement user: None. 2) Related information of investees companies： As of June 30, 2014 were as follow:

(Unit: In Thousand of NTD) Aggregate shareholding of the company and its Name of Name of Main Investment subsidiaries investor investee business Shareholding Carrying gain (loss) No. of No. of Total company Company Address scope ratio value recognized shares proforma Number of Shareholding Remarks shares shares ratio Fubon Fubon Insurance Taipei Property 100.00 % 20,493,212 1,491,496 317,840 - 317,840 100.00 % - Financial Co., Ltd. insurance Holding Fubon Life Taipei Life 100.00 % 169,035,209 13,151,127 3,648,148 - 3,648,148 100.00 % - Insurance Co., insurance Ltd. Fubon Securities Taipei Securities 100.00 % 30,747,347 1,090,954 1,664,355 - 1,664,355 100.00 % - Co., Ltd. Taipei Fubon Taipei Banking 100.00 % 142,434,344 10,186,875 8,360,571 - 8,360,571 100.00 % - Bank Co., Ltd. Fubon Taipei Marketing 100.00 % 329,454 92,793 14,500 - 14,500 100.00 % - Marketing Co., and Ltd. management consult Fubon Financial Taipei Venture 91.67 % 4,523,905 482,766 250,580 - 273,360 100.00 % - Holding Venture Capital Capital Co., Ltd. Fubon Bank Hong Kong Banking 100.00 % 34,141,820 1,070,999 1,641,273 - 1,641,273 100.00 % - (Hong Kong) Fubon Asset Taipei Creditor's 100.00 % 2,934,488 156,366 250,000 - 250,000 100.00 % - management right Service Co., Ltd. purchasing Taiwan Sport Taipei Information 100.00 % (893,789) 801,243 170,000 - 170,000 100.00 % - Lottery Co., Ltd. Software Service Fubon Bank Mainland Banking 29.00 % 11,714,663 280,928 - - - 80.00 % - (China) Co., Ltd.China Fubon Fubon Brokers Thailand Insurance 48.97 % 7,008 (245) 29,384 - 29,384 48.97 % - Insurance (Thailand) Co., brokers Ltd. Fubon Insurance Vietnam Insurance 100.00 % 276,261 (195,913) - - - 100.00 % - (Vietnam) Co., Business Ltd. Fubon Property Mainland Insurance 40.00 % 307,980 (112,626) - - - 40.00 % - and Casualty China Business Insurance Co., Ltd. Fubon Insurance Philippines Insurance 99.99 % 14,023 (110) 199,994 - 199,994 99.99 % - Brokers broke (Philippines) Co., Ltd. Fubon Life Fubon Life Vietnam Life 100.00 % 981,433 (14,361) - - - 100.00 % - Insurance Insurance Insurance (Vietnam) Co., business Ltd. Fubon Property Mainland Property 40.00 % 307,980 (112,626) - - - 40.00 % - and Casualty China insurance Insurance Co., Ltd. Fubon Fubon Futures Taipei Futures 100.00 % 1,323,084 21,432 100,000 - 100,000 100.00 % - Securities Co., Ltd. Fubon Securities British Securities 100.00 % 170,259 (43,428) 6,550 - 6,550 100.00 % - (BVI) Ltd. Virgin Islands

(Continued) 347 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Aggregate shareholding of the company and its Name of Name of Main Investment subsidiaries investor investee business Shareholding Carrying gain (loss) No. of No. of Total company Company Address scope ratio value recognized shares proforma Number of Shareholding Remarks shares shares ratio Fubon Securities Taipei Investment 100.00 % 307,832 4,964 30,000 - 30,000 100.00 % - Investment Consulting Service Co., Ltd. Fubon Financial Taipei Venture 8.33 % 435,153 43,886 22,780 - 273,360 100.00 % - Holding Venture Capital Fubon Asset Taipei Asset 100.00 % 2,651,886 17,920 192,345 - 192,345 100.00 % - Management management Co., Ltd. Taipei Fubon Taipei Construction 30.00 % 123,942 6,012 6,964 - 6,964 30.00 % Note 2 Fubon Bank Construction management, Management real estate Co., Ltd. valuation Taipei Fubon Taipei Life 100.00 % 54,987 3,350 2,000 - 2,000 100.00 % Note 2 Bank Life Insurance Insurance Agent agent Co., Ltd. Fubon Bank Mainland Banking 51.00 % 20,338,548 494,047 - - - 80.00 % Note 2 (China) Co., Ltd China Fubon Fu-Sheng Life Taipei Life 100.00 % 52,731 28,145 300 - 300 100.00 % - Marketing Insurance Agent Insurance Co., Ltd. agent Fu-Sheng Taipei Insurance 100.00 % 91,743 67,612 300 - 300 100.00 % - General agent Insurance Agent Co., Ltd. Fubon One Production Taipei Entertainment 21.05 % 32,435 (3,225) 4,000 - 4,000 21.05 % Note 2 Financial Film Co., Ltd. Holding Venture Capital Co., Ltd. Fubon Bank Fubon Financial Hong Kong Deposit 100.00 % HKD HKD 65,000 - 65,000 100.00 % - (Hong (H.K.) Ltd. service 65,000 2,466 Kong) (Note 1) Fubon Bank Hong Kong Securities 100.00 % HKD HKD 8,000 - 8,000 100.00 % - Securities (H.K.) 8,000 13,920 Ltd. Fubon Bank Hong Kong Fund 100.00 % HKD HKD 80 - 80 100.00 % - Investment management 8,000 (98) Management Ltd. Fubon Nominees Hong Kong Nominees 100.00 % HKD HKD 0.200 - 0.200 100.00 % - (Hong Kong) service 0.2 - Limited Fubon Insurance Hong Kong Insurance 100.00 % HKD HKD 100 - 100 100.00 % - Broker Limited broker 100 (158)

Note 1: The details of consolidated entities of Fubon Bank (Hong Kong) are its main subsidiary. Note 2: The investment gain (loss) recognized in accordance with the audited auditing financial statements . 3) Disclosure of investment in Mainland China:： 1. The Company and Fubon Taipei Bank investment in Mainland China information:

(Continued) 348 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Accumulated Investment amounts investment in Mainland authorized by China as of June 30, investment commission, Upper limited on Company 2014 MOEA investment Fubon Financial 11,672,786 11,672,786 216,128,727 Holding Co., Ltd (CNY2,358,493) (CNY2,358,493) (Note 1) Taipei Fubon Bank 20,258,298 20,258,298 85,616,370 (CNY4,093,113) (CNY4,093,113)

Note 1: The authorized investment amount was approved by Investment commission, MOEA. Note 2: The foreign currency except profit or loss is converted into New Taiwan Dollars using CNY average exchange rate, for the six-month period ended June 30, 2014. 2. Fubon Insurance and Fubon Life Insurance invested CNY$400 million, each company funded CNY$200 million, to set up Fubon Property and Casualty Insurance Co., Ltd. in Mainland China for insurance business. The investment project had been approved by the Financial Supervisory Commission, Executive Yuan, Jin Guan Bao San No.09602175710 on December 24, 2007. The investment project had been approved by the China Insurance Regulatory Commission, Bao Jin Guo Jian No. 1352 on December 24, 2009. The investment project has been adopted by the Investment Commission, Ministry of Economics Affairs on January 27, 2010, and approved by the Jing Shen Er No.09800482270 on February 3, 2010. The approved investment amount is CNY$250 million. On September 17 2010, the China Insurance Regulatory Commission approved to issue an insurance corporation permit based on Letter No. 1133. On September 10, 2012, Fubon Insurance and Fubon Life Insurance signed a joint investment contract with Xiamen Port Holding Group in order to develop regional markets, raise working capital, enhance solvency and attract strategic investor. Under this joint venture contract, Fubon Property & Casualty Insurance Co., Ltd. will increase its capital stock of up to CNY$100 million, which will be acquired entirely by Xiamen Port Holding Group. This capital increase was approved by China Insurance Regulatory Commission on August 16, 2013. The record date for the capital increase was set on August 16, 2013. As of June 30, 2014, the authorized capital of Fubon Property and Casualty Insurance Co., Ltd. was CNY$500 million including CNY$400 million from combined company. Fubon Insurance, under the consent of board of directors in the meeting on April 30, 2014, decided to execute capital increase by cash in the subsidiary Fubon Property & Casualty Insurance Co., Ltd. The capital increase amounted to CNY $80 million. According to Gin Shen (2) Zhi No.10300180760 letter, Fubon Insurance is allowed to invest CNY $50 million in Fubon Property & Casualty Insurance Co., Ltd. In addition to the abovementioned approved amount CNY $50 million. Fubon Insurance is going to remit the proceeds on August 19, 2014.

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On May 6, 2014, the board of directors of Fubon Life Insurance resolved to participate in cash capital injection with an amount between CNY$80 million and CNY$100 million in Fubon Property and Casualty Insurance Co. Ltd. On August 12, 2014, in accordance with the letter Jin Shen Er No.10300182240, Fubon Life Insurance was approved to invest an amount of CNY$50 million. With the remaining investment amount of CNY$50 million, approved by the Investment Commission, MOEA in 2010, the total investment in Fubon Property and Casualty Insurance Co. Ltd. amounted to CNY$100 million, which is expected to be remitted on August 19, 2014. Fubon Insurance and Fubon Life Insurance entered into a letter of intent with Nanjing Zijin Investment Co., Ltd., establishing a company named Fubon Zijin Life Insurance Co., Ltd. This investment was approved by Financial Supervisory Commission on January 14, 2011. As of report date, this investee company was not yet incorporated.

(In Thousands of NTD / CNY) Accumulated Investment flows Accumulated Accumulated outflow of Total Amount Investment outflow of inward of Paid-in from Taiwan as investment from Percentage Equity in Carrying remittance of Investee Main Capital Method of of January 1, Taiwan as of Net income of the Earnings value as of earnings as of Company Business (thousand) Investment 2014 Outflow Inflow June 30, 2014 from investee Ownership (gains) June 30, 2014 June 30, 2014 Fubon Property CNY 500,000 Direct investment 1,870,458 - - 1,870,458 (281,565) 80.00 % (225,252) 615,960 - Property Insurance for China and Company Casualty Insurance Co., Ltd. Accumulated Investment amounts investment in Mainland authorized by China as of June 30, investment commission, Upper limited on Company 2014 MOEA investment Fubon Insurance Co., 936,358 1,162,867 12,295,927 Ltd. (USD29,295) (USD36,765) Fubon Life Insurance 934,100 1,162,867 114,987,762 Co., Ltd.

Note: The limit of Fubon Insurance Co., Ltd. and Fubon Life Insurance Co., Ltd. investment were $8,197,285, and $76,658,508 according to the Regulations Governing Foreign Investments by Insurance Companies. 3. Fubon Asset Management invest CNY$200,000 thousand, and Fubon Asset Management investment CNY$66,600 thousand to set up a fund management company with Founder Securities Co.

(Continued) 350 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

Accumulated investment in Investment amounts Mainland China as of authorized by investment Upper limited on June 30, 2014 commission, MOEA investment (Note 2) 297,518 298,244 1,539,505 (CNY66,600) (CNY66,600)

Note 1: Cash direct investment by Fubon Asset Management. Note 2: The net value was calculated by Fubon Asset Management on June 30, 2014.

4. Fubon Bank (Hong Kong) investment in Mainland China information:

(In Thousands of NTD / CNY) Accumulated Investment flows Accumulated Accumulated outflow of Total Amount Investment outflow of inward of Paid-in from Taiwan as investment from Percentage Equity in Carrying remittance of Investee Main Capital Method of of January 1, Taiwan as of Net income of the Earnings value as of earnings as of Company Business (thousand) Investment 2014 Outflow Inflow June 30, 2014 from investee Ownership (gains) June 30, 2014 June 30, 2014 Xiamen Banking CNY1,586,927 Investment of N/A, Investment N/A, N/A, N/A, Investment 1,900,599 17.29 % 436,576 5,073,242 - Commercial Fubon Bank of Fubon Bank Investment Investment of Fubon Bank (indirect) Bank (Hong Kong) (Hong Kong) of Fubon of Fubon (Hong Kong) (100% of the Bank (Hong Bank (Hong shares held by Kong) Kong) the Company) Accumulated investment in Investment amounts Mainland China as of authorized by investment Upper limited on June 30, 2014 commission, MOEA investment N/A, Investment of Fubon N/A, Investment of Fubon N/A, Investment of Fubon Bank (Hong Kong) Bank (Hong Kong) Bank (Hong Kong)

5. Commitments and contingencies: see note 45. 6. Significant disaster loss: see note 46. 7. Significant subsequent event: see note 47. (50) Segment and Geographic Information 1) Operating segment information The reportable segments of the Company are as follows: 1. Bank business: Engaged in banking business. 2. Insurance business: Providing a variety of life and property insurance services. 3. Life insurance business: Providing a variety of life and property insurance services. 4. Securities business: Engaged in securities business. 5. Others: Engaged in financial holding venture capital and asset management business, etc. The Company reports segments information by business type to offer different business and services. All of these business types are administered separately and have different finance and marketing strategies.

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The Company does not allocate tax expenses to reporting segments. The accounting policies of the operating segments are the same as those described in Note 2. The income of the operating segments is based on income before tax, which also serves as the basis for the performance measurement. The sales and transfer between the departments are regarded as third party sales and transfer, and are measured at current market value. 2) Business information Operating Segments information was as follows:

For the three-month period ended June 30, 2014 Insurance Insurance Securities Adjustment Bank business business business Business Others and elimination Total

Revenues Revenue by external customers $ 11,578,620 2,849,248 66,719,106 1,666,363 167,662 - 82,980,999 Revenue between segments 162,681 5,942 (1,032,584) 121,801 15,756,835 (15,014,675) - Total revenues $ 11,741,301 2,855,190 65,686,522 1,788,164 15,924,497 (15,014,675) 82,980,999 Segment income (note) $ 6,131,429 746,399 7,877,197 547,132 15,569,491 (14,555,092) 16,316,556

For the three-month period ended June 30, 2013 Insurance Insurance Securities Adjustment Bank business business business Business Others and elimination Total

Revenues Revenue by external customers $ 9,629,200 2,284,957 80,215,798 1,210,353 (33,148) - 93,307,160 Revenue between segments 1,036,452 29,007 (756,919) 103,744 9,247,251 (9,659,535) - Total revenues $ 10,665,652 2,313,964 79,458,879 1,314,097 9,214,103 (9,659,535) 93,307,160 Segment income (note) $ 6,074,312 624,211 3,963,363 165,343 8,799,906 (9,250,419) 10,376,716

For the six-month period ended June 30, 2014 Insurance Insurance Securities Adjustment Bank business business business Business Others and elimination Total

Revenues Revenue by external customers $ 23,577,887 5,556,129 147,406,872 3,302,481 520,050 - 180,363,419 Revenue between segments 1,038,140 (5,164) (1,952,697) 247,824 30,149,092 (29,477,195) - Total revenues $ 24,616,027 5,550,965 145,454,175 3,550,305 30,669,142 (29,477,195) 180,363,419 Segment income (note) $ 13,770,404 1,640,946 15,267,431 1,144,530 29,960,003 (28,630,588) 33,152,726 Segment assets $ 2,400,928,019 74,359,902 2,580,276,766 61,907,051 432,995,061 (429,109,580) 5,121,357,219

For the six-month period ended June 30, 2013 Insurance Insurance Securities Adjustment Bank business business business Business Others and elimination Total

Revenues Revenue by external customers $ 17,376,350 4,693,798 154,708,952 2,443,349 178,220 - 179,400,669 Revenue between segments 2,342,781 27,293 (1,559,944) 222,828 19,424,188 (20,457,146) - Total revenues $ 19,719,131 4,721,091 153,149,008 2,666,177 19,602,408 (20,457,146) 179,400,669 Segment income (note) $ 10,874,224 1,566,076 10,732,816 424,424 18,774,291 (19,697,703) 22,674,128 Segment assets $ 1,938,742,640 72,785,421 2,262,762,427 53,174,342 349,413,806 (358,037,219) 4,318,841,417

Note: Income tax expense information is not included in segments information.

(Continued) 352 FUBON FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Interim Financial Statements

3) Geographic information There are no revenues from external customers and identifiable assets attributed to an individual foreign country that reach 10% of the consolidated revenue and consolidated assets for the six-month periods ended June 30, 2014 and 2013. 4) Major customer information There is no revenue from transactions with single external customer amounted to 10% or more of the Company's revenues.