Annual

Report
Annual Report 2016

2016

Notice
This English version annual report is a summary translation of
the Chinese version and is not an official document of the
shareholders’ meeting. If there is any discrepancy between the
English version and the Chinese version, the Chinese version
shall prevail.
Head Office
No.100, Chi-lin Road, Taipei 10424, Taiwan
Tel: +886-2-2563-3156
Fax: +886-2-2356-8936
Website: www.megabank.com.tw
Email: [email protected]

Spokesperson
Robert Yong-Yi Tsai, Senior Executive Vice President
Tel: +886-2-2541-3289
Email: [email protected]

Deputy Spokesperson
Yuan-Hsi Lin, Senior Executive Vice President
Tel: +886-2-2531-2239
Email: [email protected]

Service Network
Refer to Service Network Section for details of domestic and overseas business units

Credit Rating Agency

Moody's Investors Service Hong Kong Limited

24/F One Pacific Place, 88 Queensway, Admiralty, Hong Kong
Tel: +852-3758-1300

S&P Global Ratings

Unit 1, Level 69, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong
Tel: +852-2533-3500

Taiwan Ratings Corp.

49th Floor Taipei 101 Tower No.7, Xinyi road, Section 5, Taipei 11049, Taiwan
Tel: +886-2-8722-5800

Auditor of Financial Report

PricewaterhouseCoopers, Taiwan
27F, 333, Keelung Rd., Sec. 1, Xinyi Dist., Taipei 11012, Taiwan
Tel: +886-2-2729-6666
 Contents
1 Message to Shareholders
Operation Results of 2016
Summary of Business Plan for 2017
Development Strategies
Major Regulatory Changes and Influences
Credit Rating

6 Bank Profile
Historical Overview

7 Corporate Governance Report

Organization Chart
Directors, Supervisors & Major Shareholders of the Institutional Shareholders
Execution of Corporate Governance

15 Capital Overview
Capital & Shares
Other Fund-Raising Activities

17 Overview of Business Operations

Business Activities
Taiwanese Banking Industry & Market Overview
Business Plan
Human Resources Profile
Social Responsibility

21 Risk Management
Credit Risk Management System
Operational Risk Management System
Market Risk Management System
Liquidity Risk Management System

28 Financial Information
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Comprehensive Income
Major Financial Analysis

30 Report of Independent Accountants

Consolidated Financial Statements
Notes to Consolidated Financial Statements
Stand-alone Financial Statements

121 Service Network

Head Office
Domestic Branches
Overseas Branches & Representative Offices
Subsidiaries
 Message to Shareholders

As a result of stagnant global trade, weak investment, and highly uncertain economic policies in major countries, global
economic growth rate in 2016 was merely 3.1%, a new low since the financial tsunami. In Taiwan, although domestic
economy started to warm up in the second half of the year, the economic growth rate was only 1.5%, still on the low side.

The unfavorable environment affected the momentum of Mega Bank's business expansion. Average loan business volume
in 2016 was slightly lower than last year's by 1.45%. In addition, as its New York Branch failed to comply with Bank
Secrecy Act and Money Laundering Control Act of the United States, the Bank was fined US$180 million by the New
York State Department of Financial Services in August, 2016. The impact led overall net pretax profit to drop by 23.78%
to NT$23.058 billion in 2016. As of the end of the year, the Bank's non-performing loan ratio was 0.09%, coverage ratio
of allowances for bad debt was 1,614%, capital adequacy ratio was 14.32%, and common equity Tier I ratio was 12.57%.
This performance is considered sound within the industry.

Thereafter the Bank reflected upon the incident. In recent years, in the midst of boosting sales, although the Bank was
aware of the importance of strengthening management and complying with laws and regulations, it was not able to keep
up with the tendency, and did not do enough. On top of that, its New York Branch omitted identifying and reporting a
few questionable transactions involved with suspected money laundering activities when conducting remittance
transactions, and the deficiency led to the incident.

2017 is the year of transformation and action for Mega Bank. The Bank adjusts its business strategies, enhances its head
office's management, restructures its organization, increases staff training, implements an information system to improve
monitoring of suspicious transactions, engages a large number of regulatory compliance and anti-money laundering
specialists, etc., so as to improve the mechanism of internal audit, internal control and regulatory compliance, and build
a corporate culture of legal compliance. The Bank demands itself to meet the highest international standard, and to be in
compliance with the regulations of domestic and overseas supervisory authorities.

Operation Results of 2016

I. Global & Domestic Economic Dynamics

1. Economic Growth

The global economic growth in 2016 failed to meet the expectation. According to IMF, the growth rate was 3.1%, a new
low after the financial tsunami. The main reasons were stagnant global trade of goods and services, increasing policy
uncertainties and weak investment. Looking forward to 2017, there may be a higher momentum for economic recovery.
IMF predicts global economic growth rate to increase to 3.4%, the highest in the last five years. For advanced countries,
corporates are expected to increase investment in line with better economic outlook; and a confidence of upward private
consumption is supported by a higher probability of wage increase due to the best shape of labor markets since the
financial tsunami. In addition, that monetary policies in advanced countries is likely easing will improve the global
economy. Specifically, IMF predicts the fiscal stimulus proposed by the Trump administration may increase the US
economic growth for this and next year by 0.1% and 0.4% respectively, generating positive spillover effects for other
countries. Also, commodity prices are still relatively low, which is of limited help to the economies of exporting countries.
The biggest downside risk to the world economy is protectionism from the US President Trump. A trade war may break
out and impacts the global economy, if the Dollar further strengthens and results in the widening of the US trade deficit,
according to IMF.

The domestic economy picked up in 2016, with economic growth rate increased every quarter after hitting a low in Q1.
In the second half of the year, due to the recovery of the world economy, rebound of international commodity prices, and
stable growth in domestic demand, the economic growth rate of the year reached 1.50%, exceeding the 1% threshold.

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1 Annual Report 2016

 Chairman
Chao-Shun Chang

Looking forward to 2017, major international research institutions predict that the global economy and trade will be better
than last year. In Taiwan, we may continue to see stable private consumption, import-export gaining momentum, and
public and private investment increasing as a result of the government's promotion of innovative industry. The
Directorate-General of Budget, Accounting and Statistics (DGBAS) predicts that this year's economic growth will reach
1.92%. However, variables, including implementation of Trump's policies, the frequency of interest rate hikes by the US
Federal Reserve, elections in European countries, the emergence of trade protectionism, China's structural adjustment,
international raw material price fluctuation, etc., will affect Taiwan’s economic performance this year.
2. Financial Market
In terms of interest rate, due to the slow momentum of economic recovery worldwide and the unfavorable domestic
economy in the last two years, the Central Bank of the Republic of China (Taiwan) has reduced the interest rate by 12.5
basis points each quarter for four consecutive quarters from September 2015 to June 2016. Also, affected by the sluggish
domestic economy, limited funding needs by companies and interest rate cuts, resulting in an average overnight rate of
0.19%, lower than last year's average of 0.35%. In the second half of 2016, due to the gradual recovery of the domestic
economy, the Central Bank kept the interest rate unchanged till the end of the year, ending the easing cycle for the time
being. Looking forward, with a stronger recovery of the global economy, domestic economic growth may be better than
last year. Besides, with inflation at a mild level, it is expected that the Central Bank will keep its easing monetary policy
in order to support the economy.
In terms of exchange rate, due to sharp fall in the global stock market, drop in oil prices and foreign investors oversell,
the NT dollar dropped to a low of 33.838 per US dollar at one point in early 2016. However, in the second half of the
year, as the global economy warmed up, raw materials prices rebounded, the domestic economy improved and foreign
investment increased significantly, TAIEX rose above 9,400 point mark; as a result, the NT dollar also appreciated,
reaching 31.225 per US dollar at one point. However, in November, due to the impact of the US presidential election and
increase in the US interest rate, the US dollar strengthened again, causing the NT dollar to drop to around 32 per US
dollar. The average exchange rate for 2016 was NT$32.30, a depreciation of 1.15% from NT$31.93 in the previous year.
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Mega ICBC 2
 II. Change in Organization Structure

In view of the increasingly strict international financial supervision standards, and considering the Bank's 39 overseas
branches and subsidiaries in 19 different jurisdictions, in 2016 the Bank resolved to set up Overseas Branches
Administration Department to supervise so as to enhance management efficiency. At the same time, Business
Administration Department was set up as the supervisory unit for domestic branches. Also, considering the fact that anti-
money laundering is a prior regulatory compliance issue, the Bank set up Anti-Money Laundering Center to manage
matters related to anti-money laundering and counter financing terrorism.

In addition, the Bank reinstated the Overdue Loan & Control Division, which was formally under the Credit Control
Department, to the Overdue Loan & Control Department.

In line with the trend of digital finance, the Bank restructured Global Electronic Banking Center to Digital Banking
Department to speed up its business innovation.

To assist its directors in doing their duties, the bank set up a secretary group to handle matters related to agenda of Board
of Directors meetings, so as to enhance corporate governance.

The Bank has restructured Auditing Office to Auditing Department.

III. Operating Results in 2016

Units: millions in N.T. dollars, except as indicated

Year
2016 2015 Change (%)
Item
Deposits (Note 1) 2,189,718 2,080,552 5.25
Loans (Note 2) 1,739,548 1,765,178 -1.45
Corporate Financing 1,356,748 1,377,601 -1.51
Consumers Financing (Note 3) 382,800 387,577 -1.23
Foreign Exchange Business (millions in US$) 805,160 842,207 -4.40
Securities Purchased 435,646 380,305 14.55
Long-term Equity Investments 22,208 23,472 -5.39
Credit Card Loans 1,155 1,230 -6.10
Note 1: including due to China Post Co.
Note 2: the figure in 2016 with amount of non-performing loans NT$1,631 million, NPL ratio 0.09%, and coverage
ratio 1,614.16%
Note 3: excluding credit card loans

IV. Budget Implementation

2016 Pretax Income 2016 Pretax Income Budget Budget Achievement Rate
(millions in NT dollars) (millions in NT dollars) (%)
23,058 28,003 82.34

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3 Annual Report 2016

 President
Li-Yen Yang

Summary of Business Plan for 2017

I. Business Plan

 Establish comprehensive anti-money laundering mechanism and enhance laws and regulations compliance to
build a sound legal compliance culture.
 Comprehensively review overseas branches’ performance and enhance management.
 Strengthen the Bank’s corporate finance niche to maintain market dominance.
 Keep up with the development of digital finance and accelerate business innovation and transformation.
 Give full play to the professional advantage in offshore banking to improve performance.
 Steadily develop wealth management business to increase fee income.

 Establish comprehensive risk management to achieve equilibrium between expanding business in the short-term
and stabilizing profit in the long-term.

II. Business Objectives

With consideration of current economic and financial developments, the Bank has set up the following business targets
based on competitive strategies for the year of 2017: total deposits of NT$2,278,400 million, total loans of NT$1,780,500
million and foreign exchange business of US$808,100 million.

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Mega ICBC 4
 Development Strategies
 Anti-Money Laundering Center shall be dedicated to the planning and effective implementation of the Bank’s
anti-money laundering mechanism, to ensure the execution of anti-money laundering/counter-terrorism financing
tasks of entire bank meet requirements of competent authorities in various jurisdictions.
 External consultants and independent legal compliance officers shall assist Head Office and overseas branches
better understand relevant laws and regulations of the country each branch registers, so as to ensure operations
are in compliance.
 Implement self-assessment of risk in cybersecurity and increase the soundness of the Bank’s network security
mechanism and infrastructure, so as to meet international supervisory standards.
 Make use of big data and social media marketing to shape a lifestyle brand image and to approach young adults.
 Launch an internal rating model to assess overseas branches’ corporate finance and consumer finance credit risk,
to expand the scope of risk quantification.
Major Regulatory Changes and Influences
In August 2016, the Financial Supervisory Commission (FSC) has put forward the “Financial Sector Supporting the Real
Economy-Four Supports with Three Powers Project” through the function of the Entrepreneurship Fund and Angel Fund.
Also, to effectively guide capital into the main innovative industries, including green technology, Asian Silicon Valley,
bio-pharmaceuticals, national defense industry and smart machinery, the FSC has therefore promulgated the “Program to
Encourage Lending by Domestic Banks to Main Innovative Industries” to enhance mutual benefit between the financial
industry and other industries.
The FSC announced amendments to the “Directions Governing Anti-Money Laundering and Countering Terrorism
Financing of Banking Sector” on December 2, 2016. In order to improve regulatory compliance, the FSC demanded banks
to enhance the soundness of internal control and audit system, strengthen the compliance with the regulations of Anti-
Money Laundering and management of overseas branches’ risk, and arrange long-term staff training.
The FSC continued to extend the permitted scope and increased regulatory relaxation in FinTech industry. However, to
maintain the order of financial market, The FSC will adapt approval system when the specialized electronic payment
institutions deal with privileged financial business. It is expected that after the approval of “Financial Technology
Innovative Experimentation Act” in 2017, the cooperation between technology and financial industry will become tighter
then create more added valued and increase the operating efficiency of domestic financial industry.

Credit Rating
As of June, 2017
Credit Rating Publication Date
Credit Rating Institute Outlook
Long-term Short-term (Year/Month)
Moody’s A1 P-1 Stable 2016/12
S&P A A-1 Stable 2016/10
Taiwan Ratings Corp. twAA+ twA-1+ Stable 2016/10

Chao-Shun Chang Li-Yen Yang

Chairman President
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5 Annual Report 2016

Bank Profile

Historical Overview

Mega International Commercial Bank Co., Ltd. (Mega Bank) has come into being as a result of the merger of The
International Commercial Bank of China and Chiao Tung Bank, effective on August 21, 2006. Both banks have been
proud of their longtime histories of outstanding track records in our country.

In 1971, The Bank of China was privatized to become The International Commercial Bank of China Co., Ltd. (ICBC),
whose origin dates back to the Ta Ching Bank and its predecessor, the Hupu Bank (the bank under the finance arm of the
imperial court in the Ching Dynasty). The Bank of China had been entrusted with the mission to serve as an agent of the
Treasury and a note-issuing bank before the establishment of the Central Bank of China in 1928. The Bank of China was
designated as a licensed specialized bank for international trade and foreign exchange thereafter. Taking advantage of its
specialization in foreign exchange, worldwide network of outlets and correspondence banks, superb bank assets, and
excellent business performance, ICBC has become a top-notch bank in the Republic of China.

Set up five years before the founding of the Republic of China, Chiao Tung Bank Co., Ltd. (CTB) had also been delegated
to act as an agent of the government coffer and a note-issuing bank in concert with the Bank of China at the outset of the
Republic. Transforming from a licensed bank for industries in 1928, an industrial bank in 1975, and a development bank
in 1979, CTB turned from a state-controlled bank into a privately–owned one in 1999. It has engaged in loan extensions
for medium- and long-term development, innovation and guidance investment (equity investment), and venture capital
ever since. For years, CTB has made significant contributions to the improvement of industrial structure and the
promotion of the upgrading of industry by assisting in the development of strategic and vital industries in line with the
economic policy and the economic development plan of the government.

CTB and International Securities Company formed the CTB Financial Holding Company in 2002. Late on, Chung Hsing
Bills Finance Corporation and Barits International Securities Company came under the financial umbrella. On December
31, 2002, Chung Kuo Insurance Company and ICBC joined forces with the Company to form a conglomerate named
Mega Financial Holding Company.

With a view to enlarging the business scale and increasing the market share, ICBC and CTB formally merged into one
bank under the name of Mega International Commercial Bank Co., Ltd. on August 21, 2006. By the end of 2016, the
Bank has 108 branches (including Foreign Department) at home, and 22 branches, 5 sub-branches, and 5 representative
offices (including marketing office) abroad. Together with the network are wholly-owned bank subsidiaries in Thailand
and Canada, along with their branches, bringing the number of overseas outposts to 39 in total. It has manpower 5,543
and an aggregate paid-in capital of NT$85.362 billion.

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Mega ICBC 6
 Corporate Governance Report
As of June, 2017

Risk Management Committee

Compliance Action Committee

Compliance Committee

Shareholders' Asset & Liability Management Committee

Meeting Offshore Structured Notes Committee

Board of Loan Committee

Supervisors
Investment Committee
Board of Foreign Department Fund Management Committee
Directors
Problem Loan Committee
Chairman of Treasury Department Trust Assets Screening Committee
the Board Personnel Appraisal Committee
Product & Regulation Committee
Trust Department
Wealth Management Product Committee
Direct Investment Occupational Safety & Health Committee
President Department Employees’ Retirement Fund Supervisory Committee

Wealth Management
Department

Digital Banking
Department

Risk Management
Department

Credit Control
Department

Credit Products &

Marketing Department

Overdue Loan &

Control Department

Credit Analysis
Senior Executive Department
Vice Presidents
Business Centers Domestic Branches
Controller's Department

Card Center
Data Processing &
Information Department
Operation Center
Human Resources
Department Overseas Branches,
Subsidiaries and
General Affairs and Representative Offices
Occupational Safety &
Health Department
Offshore Banking
Business Administration Branch
Department

Overseas Branches
Administration Department

Legal Affairs and

Compliance Department
Chief Compliance
Officer Anti-Money Laundering
& Financial Crime
Compliance Department

Planning Department

Chief Auditor Auditing Department

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7 Annual Report 2016

Directors, Supervisors & Major Shareholders of the Institutional Shareholders
I. Board of Directors and Supervisors
As of December 31, 2016

Title Name Current Position / Occupation

Chairman of the Board Chao-Shun Chang Chairman of the Board

Mega Financial Holding Company and Mega Bank

Managing Director & Li-Yen Yang President

President Mega Financial Holding Company and Mega Bank

Managing Director Ming-Chuan Ko Senior Executive Vice President

Mega Bank
Managing Director Chien-Liang Chiu Dean
College of Business and Management, Tamkang University

Independent Managing Tien-Chang Huang Independent Director

Director Mega Securities Co., Ltd.

Independent Director Kai Ma Independent Managing Director

Taiwan Power Company

Independent Director Tai-Long Chen Secretary General

Financial Planning Association of Taiwan

Director Ching-Wen Lin Professor

Department of International Business Administration, Chinese Culture
University
Director Chun-Hsiung Cho Professor
Department of Law, Tunghai University

Director Sui-Chang Liang Principal Attorney

Liang & Associates, Attorneys-at-Law

Director Wen-Ling Hung Professor

Department of Administration Police, Central Police University
Director Jhy-Yuan Shieh Professor
Department of Economics, Soochow University

Director Yong-Yi Tsai Senior Executive Vice President

Mega Bank

Director Chih-Hsien Hsieh Assistant Vice President

Mega Bank

Resident Supervisor Sheng-Chang Liu Director

C.H. CHANG & Co. Certified Public Accountants

Supervisor Hung-Shu Fan Professor

Department of Accounting, Fu Jen Catholic University

Supervisor Chia-Chi Hsiao Director General

Department of Fiscal, Statistical and Financial Affairs, Executive Yuan

Supervisor Juan-Chi Weng Managing Partner

Trust and Assist CPAs

Supervisor Jiin-Feng Chen Associate Professor

Department of Accounting, National Chengchi University

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Mega ICBC 8
 II. Professional Qualifications and Independence Analysis of Directors and Supervisors
As of December 31, 2016
Meet One of the Following Professional Qualification
Independence Criteria (Note)
Requirements, Together with at Least Five Years Work Experience
Number of
An instructor or higher A judge, public Have work
other public
Criteria position in a prosecutor, attorney, experience in the
companies
Department of certified public areas of
in which the
Commerce, Law, accountant, or other commerce, law,
individual is
Finance, Accounting, professional or technical finance,
concurrently
or other academic specialist, who has accounting, or 1 2 3 4 5 6 7 8 9 10
serving as
department related to passed a national otherwise
an
Name the business needs of examination and been necessary for the
Independent
the bank in a public or awarded a certificate in a business needs of
Director
private Junior College, profession necessary for the bank
College, or University the business of the bank
Chao-Shun Chang        
Li-Yen Yang       
Ming-Chuan Ko        
Chien-Liang Chiu            1
Tien-Chang Huang         2
Kai Ma            1
Tai-Long Chen          
Ching-Wen Lin           
Chun-Hsiung Cho           
Sui-Chang Liang           
Wen-Ling Hung        
Jhy-Yuan Shieh           
Yong-Yi Tsai       
Chih-Hsien Hsieh       
Sheng-Chang Liu           
Hung-Shu Fan           1
Chia-Chi Hsiao       
Juan-Chi Weng            1
Jiin-Feng Chen            1

Note: Check (“”) the corresponding boxes if directors or supervisors have been any of the following during the two years prior to being elected or
during the term of office.
1. Not an employee of the Bank or any of its affiliates.
2. Not a director or supervisor of the Bank’s affiliates. The same does not apply, however, in cases where the person is an independent director of the
Bank’s parent company, or any subsidiary in which the Bank holds, directly or indirectly, more than 50% of the voting shares.
3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under
others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Bank or ranking in the top 10 in holdings.
4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding
three subparagraphs.
5. Not a director, supervisor, or employee of a Bank shareholder that directly holds 5% or more of the total number of outstanding shares of the Bank
or that holds shares ranking in the top five in holdings.
6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution that has a financial or
business relationship with the Bank.
7. Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution
that, provides commercial, legal, financial, accounting services or consultation to the Bank or to any affiliate of the Company, or a spouse thereof.
These restrictions do not apply to any member of the remuneration committee who exercises powers pursuant to Article 7 of the “Regulations
Governing the Establishment and Exercise of Powers of Remuneration Committees of Companies whose Stock is Listed on the TWSE or Traded
on the TPEx”.
8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Bank.
9. Not been a person of any conditions defined in Article 30 of the Company Law.
10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.

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9 Annual Report 2016

III. Major Shareholders of the Institutional Shareholders
As of December 31, 2016

Name of the Institutional Shareholders Top Shareholders (Percentage of Shares Ownership)

Ministry of Finance, R.O.C. (8.40%)

National Development Fund, Executive Yuan, R.O.C. (6.11%)
Chunghwa Post Co., Ltd. (3.50%)
Fubon Life Insurance Co., Ltd. (3.47%)
Cathay Life Insurance Co., Ltd. (2.98%)
Mega Financial Holding Co., Ltd.
Bank of Taiwan Co., Ltd. (2.46%)
Nan Shan Life Insurance Co., Ltd. (1.80%)
China Life Insurance Co., Ltd. (1.69%)
Pou Chen Corporation (1.41%)
Government of Singapore-GOS-EFM C (1.29%)

IV. Policies for Employees’ compensation and directors’ and supervisors’ remuneration

Employees’ compensation and directors’ and supervisors’ remuneration are recognized as expenses and liabilities,
provided that such recognition is required under legal obligation or constructive obligation and those amounts can be
reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is
accounted for as changes in estimates. If employee compensation is distributed by shares, the Bank and its subsidiaries
calculate the number of shares based on the closing price at the previous day of the Board of Directors’ resolution day.

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Mega ICBC 10
Execution of Corporate Governance
I. Attendance Record
A total of forty nine meetings of the Board of Directors were held in 2016. The attendance of directors and supervisors was as follows:
Attendance Attendance rate
Title Name By Proxy Remarks
in Person (%)
Chairman Yeou-Tsair Tsai 9 0 100.0 Relieved on Apr.1, 2016
Assumed on Aug.16, 2016
Chairman Kuang-Si Shiu 4 2 66.7 Relieved on Aug.31, 2016
Chairman Chao-Shun Chang 17 1 94.4 Assumed on Sep.2, 2016
Managing Director Hann-Ching Wu 33 0 100.0 Relieved on Sep.10, 2016
Managing Director Li-Yen Yang 16 0 100.0 Assumed on Sep.10, 2016
Managing Director Jen-Hui Hsu 24 9 72.7 Relieved on Sep.10, 2016
Managing Director Shu-Chen Wang 32 1 97.0 Relieved on Sep.10, 2016
Managing Director Ming-Chuan Ko 10 6 62.5 Assumed on Sep.10, 2016
Managing Director Chien-Liang Chiu 15 1 93.7 Assumed on Sep.10, 2016
Independent Managing Director Tien-Chang Huang 49 2 95.9 Assumed on Sep.1, 2016
Independent Director Kai Ma 14 0 87.5 Re-elected
Independent Director Tai-Long Chen 16 0 100.0 Assumed on Sep.1, 2016
Director Yuan-Chung Lee 9 0 100.0 Relieved on Sep.10, 2016
Director Ching-Long Lin 9 0 100.0 Relieved on Sep.10, 2016
Director Bie-Ling Lee 9 0 100.0 Relieved on Sep.10, 2016
Director In-Ming Lee 9 0 100.0 Relieved on Sep.10, 2016
Director Po-Cheng Chen 9 0 100.0 Relieved on Sep.10, 2016
Director Chuang-Hsin Chiu 7 1 77.8 Relieved on Sep.10, 2016
Director Mei-Chi Liang 9 0 100.0 Relieved on Sep.10, 2016
Director Chih-Hsien Hsieh 16 0 100.0 Assumed on Sep.1, 2016
Director Ching-Wen Lin 5 0 71.4 Assumed on Sep.10, 2016
Director Chun-Hsiung Cho 7 0 100.0 Assumed on Sep.10, 2016
Assumed on Sep.10, 2016
Director Shih-Yang Chen 3 0 100.0 Relieved on Oct.15, 2016
Director Sui-Chang Liang 5 2 71.4 Assumed on Sep.10, 2016
Director Wen-Ling Hung 5 0 71.4 Assumed on Sep.10, 2016
Director Jhy-Yuan Shieh 7 0 100.0 Assumed on Sep.10, 2016
Director Yong-Yi Tsai 7 0 100.0 Assumed on Sep.10, 2016
Resident Supervisor Chyan-Long Jan 33 0 100.0 Relieved on Sep.10, 2016
Resident Supervisor Sheng-Chang Liu 19 0 100.0 Assumed on Sep.10, 2016
Supervisor Yu-Hui Su 9 0 100.0 Relieved on Sep.10, 2016
Supervisor Hung-Shu Fan 9 0 90.0 Assumed on Sep.10, 2016
Supervisor Chia-Min Hong 9 0 100.0 Relieved on Sep.10, 2016
Supervisor Chia-Chi Hsiao 10 0 100.0 Assumed on Sep.10, 2016
Supervisor Tsung-Chih Hsu 9 0 100.0 Relieved on Sep.10, 2016
Supervisor Juan-Chi Weng 9 0 90.0 Assumed on Sep.10, 2016
Supervisor Jui-Ying Tsai 9 0 100.0 Relieved on Sep.10, 2016
Supervisor Jiin-Feng Chen 10 0 100.0 Assumed on Sep.10, 2016
Note: 1. The Bank’s directors and supervisors are appointed by the Mega Financial Holding Company.
2. None of the independent directors has a dissenting opinion or qualified opinion on the resolutions.
3. The attendance rate is calculated as the ratio of the number of Board of Directors meetings attended to the number held during the term in office.
4. The Board of Directors has performed its duties in compliance with the related laws and regulations.
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11 Annual Report 2016

II. Corporate Governance Implementation Status and Deviations from “Corporate Governance Best-Practice
Principles for Banks” and reasons
As of December 31, 2016
Implementation Status
Evaluation Item
Yes No Abstract Illustration
A. Ownership Structure and
Shareholders’ Equity
1. Does the Bank establish an   The Bank is a 100% owned subsidiary of Mega Financial Holding
internal operating procedure Company (“Mega FHC”). The Bank's operation and management,
to deal with shareholders’ financial business information and audit management are handled
suggestions, doubts, in accordance with the “Regulations on Supervision of Mega FHC's
disputes and litigations, and Subsidiaries”. Recommendations or questions regarding the Bank's
implement based on the operations may be conveyed through formal letters, telephones,
procedure? emails, etc. The Bank's business supervisory units will handle or
explain the case, in accordance to the internal operating procedures.
 Mega FHC is the Bank's sole shareholder. Any shareholders’
dispute or litigation shall be handled by the relevant units.
However, if due to complexity of the case or other special factors,
where it is necessary to engage a lawyer, the units, according to
Article 3 of the Bank's Directions for Handling Legal Cases, shall
request for approval from the Chief Compliance Officer before
engaging a lawyer.
2. Does the Bank possess the   Mega FHC is the Bank's sole shareholder and ultimate controller.
identities of its major
shareholders as well as the
ultimate owners of those
shares?
3. Does the Bank establish and   The responsibilities for the management and risk control
execute the risk mechanism of personnels, assets and financial matters of the Bank
management and firewall and affiliated companies are completely independent; and tight
system within its firewall mechanisms are established and executed:
conglomerate structure?  Information security: The Bank has established an online scam
prevention and security system, and set up transaction
authorization control and information access authority.
 Client confidentiality: The person in charge of processing and
using customer information has to be authorized for entering and
removing customers' personal particulars, and a post-execution
supervision mechanism is in place to ensure the appropriateness
of authorization.
 Stakeholder transactions: The Bank has established “Rules on
Handling Stakeholder Transaction”. Also, in accordance with the
relevant laws and regulations, the stakeholder transaction balance
is submitted to the parent company, Mega FHC, regularly. Mega
FHC then discloses the related information and submits it to the
competent authority.
B. Composition and
Responsibilities of the Board
of Directors
1. Does the Bank voluntarily   After joining Mega FHC, the Bank is delisted from the stock
establish other functional market and is not mandatory to set up a Remuneration Committee.
committees in addition to The design and adjustment of the Bank's remuneration is submitted
the Remuneration to Mega FHC for approval.
Committee and the Audit  Mega FHC has set up an Audit Committee. According to the
Committee? regulations issued by Financial Supervisory Commission, a
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Mega ICBC 12
 Implementation Status
Evaluation Item
Yes No Abstract Illustration
company 100% owned by a financial holding company may choose
to set up an audit committee or appoint supervisors, and the Bank
has adopted the latter. The Bank's supervisors may communicate
with the Bank's employees, head of internal audit and shareholders
at any time, and convene supervisors meetings from time to time,
with the attendance of a CPA where necessary.
 The Bank has 15 committees, and the board of directors is in charge
of the Risk Management Committee and Compliance Action
Committee.
2. Does the Bank regularly   When appointing a CPA, the Bank shall assess its independence
evaluate the independence and request it to provide “Independence Declaration on the
of CPAs? Auditing and Attestation of Financial Report by the Certified
Public Accountant”.
C. If the Bank is a listed or   The Bank is a 100% owned subsidiary of Mega FHC, and is not
OTC company, is it listed on Taiwan Stock Exchange or Taipei Exchange. However,
required to set up dedicated the Bank's General Affairs and Occupational Safety & Health
(non-dedicated) unit or Department is in charge of company registration and change
personnel in charge of registration, and matters related to shareholders meetings. The
matters related to corporate office of the board of directors is in charge of matters related to the
governance? board of directors meetings, and providing information regarding
the duties of directors and supervisors.
D. Does the Bank establish a   The Bank has diverse communication channels with interested
communication channel parties such as customers, employees, suppliers, community
with interested parties? residents, etc. These parties may contact the Bank through the 24-
hour customer hotline or public website; or may communicate with
the Bank through letter or meeting. Also, a labor union bulletin in
the Bank’s intranet allows employees to express their opinions.
 In terms of communicating with interested parties defined in The
Banking Act and Financial Holding Company Act, the Bank's Head
Office requests all units to provide the interested parties. The
interested parties profile shall be maintained in the Bank's e-Loan
System and Mega FHC's intra-information system. Should there be
any change, the person concerned shall be communicated, and the
profile updated immediately.
E. Information Disclosure
1. Does the Bank have a   The Bank's official website (https://www.megabank.com.tw) is
corporate website to maintained by dedicated personnels regularly to disclose
disclose both financial information regarding the Bank’s business, financials and
standings and the status of corporate governance.
corporate governance?
2. Does the Bank have other   The Bank's official website has an English version,
information disclosure https://www.megabank.com.tw/en/. If there’s information needed
channels (e.g. building an to be made public in accordance with the relevant laws and
English website, appointing regulations, the Bank shall, within the legal time limit, designate a
designated people to handle personnel to report and disclose immediately.
information collection and  The Bank has established “Procedures for Releasing Information
disclosure, creating a by Spokesperson and Acting Spokesperson”. The Spokesperson
spokesman system, and Deputy Spokesperson speak publicly on behalf of the Bank by
webcasting investor means of press release, website disclosure or disclosure of
conferences)? information.
 The investor conference is handled by the parent company, Mega
FHC.
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13 Annual Report 2016

 Implementation Status
Evaluation Item
Yes No Abstract Illustration
F. Is there any other important   Employees' rights: The Bank shall inform the employees in
information to facilitate a advance of any job relocation. If the change of business nature
better understanding of the results in no suitable jobs for the employee, or the employee is
Bank’s corporate governance incompetent in taking up the job, the Bank shall, according to the
practices (e.g., including but Labor Standards Act, inform the employee in advance of the
not limited to employee termination of employment contract at least 10 to 30 days. In
rights, employee wellness, addition, the Bank and the Union have established a collective
investor relations, rights of agreement. The Bank has set up the Personnel Appraisal
stakeholders, directors’ and Committee, formed by the Bank and union representatives,
responsible for the review of awards and penalties of the
supervisors’ training records,
employees. It has also established the Occupational Safety &
the implementation of risk
Health Committee, responsible for the planning and handling,
management policies and risk
review and supervision of matters related to labor safety, hygiene
evaluation measures, the and health. Employees’ Retirement Fund Supervisory Committee
implementation of customer is also set up to safeguard employees' pension.
relations policies, and
 Employee welfare: The Bank has set up the Employee Welfare
purchasing insurance for
Committee, responsible for the review and planning of employee
directors and supervisors, and welfare services and fund allocation. In addition, the Bank
donations to political parties, conducts regular employees' health checkup and seminars.
stakeholders, and charity Employees can also obtain health knowledge through e-learning to
organizations)? achieve the objective of preventive health care.
 Investor relationship: The Bank is fully answerable to its parent
company, Mega FHC, for its business performance.
 Directors to recuse themselves from cases in which they have a
material interest: As per Rules and Procedures of shareholders
meeting of the Bank, interested parties with respect to proposals
shall recuse themselves from discussions or voting to avoid the
conflict of interest.
 Advanced studies of directors and supervisors: the Bank provides
directors and supervisors with opportunities enhancing their
professional competency.
 Execution of customer policies: According to the various
regulations of the competent authority and bank union, the Bank
shall state in the contract, regulations to be complied, whereby
customers can claim the right based on the contracts.
 Purchasing liability insurance for directors and supervisors: The
Bank purchases “Directors and Key Employees Liability
Insurance” for all directors and supervisors.
 Donations: The Bank has, over the years, organized various
activities and donated to charities and non-profit organizations. The
donation process strictly complies with the various internal and
external laws and regulations.
G. If the Bank has implemented a   The Bank has not yet carried out corporate governance self-
self corporate governance assessment reports or hired an outside institution to carry out
evaluation or has authorized corporate governance assessment reports.
any other professional
organization to conduct such
an evaluation?
The above mentioned corporate governance implementation status of the Bank has no deviation from the
“Corporate Governance Best-Practice Principles for Banks”.

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Mega ICBC 14
 Capital Overview

Capital & Shares

I. Source of Capital Stock
Unit: NT$; share
Par Value Authorized Capital Paid-in Capital Remark
Year/Month
(NT$) Shares Amount (NT$) Shares Amount (NT$) Source of Capital
2002/12 10 3,726,100,000 37,261,000,000 3,726,100,000 37,261,000,000 Public offering
Issuance of new shares
2006/08 10 2,684,887,838 26,848,878,380 2,684,887,838 26,848,878,380
for merger
Transference of un-
2011/10 10 389,012,162 3,890,121,620 389,012,162 3,890,121,620
appropriated earnings
Issuance of common
2012/09 10 300,000,000 3,000,000,000 300,000,000 3,000,000,000 stock (Private
placement)
Issuance of common
2013/12 10 600,000,000 6,000,000,000 600,000,000 6,000,000,000 stock (Private
placement)
Issuance of common
2015/06 10 300,000,000 3,000,000,000 300,000,000 3,000,000,000 stock (Private
placement)
Issuance of common
2015/12 10 536,233,631 5,362,336,310 536,233,631 5,362,336,310 stock (Private
placement)

II. Type of Stock

Unit: share
Authorized Capital
Type Remark
Issued Shares Unissued Shares Total Shares
Ordinary Share 8,536,233,631 0 8,536,233,631 Public offering
Note: Shares have been stopped listed since the Bank joined Mega Financial Holding Company on December 31, 2002.

III. Structure of Shareholders

As of December 31, 2016
Other Domestic Foreign
Government Financial
Juridical Natural Institutions & Total
Agencies Institutions
Person Persons Natural Persons
Number of
1 1
Shareholders
Shareholding
8,536,233,631 8,536,233,631
(shares)
Percentage 100.00% 100.00%
Note: 100% shares are held by Mega Financial Holding Company.

IV. List of Major Shareholders

As of December 31, 2016
Shareholdings
Shareholder’s Name
Shares Percentage
Mega Financial Holding Co., Ltd. 8,536,233,631 100.00%
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15 Annual Report 2016

Other Fund-Raising Activities

I. Issuance of preferred shares, global depository receipts, and employee share subscription warrants:

None.

II. Mergers, acquisitions, and issuance of new shares due to acquisition of shares of other companies:

None.

（Blank below）

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Mega ICBC 16
 Overview of Business Operations

Business Activities
I. Business Scope: Commercial banking, including a wide range of services indicated as following:
1. Domestic Branches 2. Overseas Branches
 Deposits  Deposits
 Loans & Guarantees  Loans & Guarantees
 Documentary Credits  Documentary Credits
 Remittance & Bill Purchase  Remittance & Bill Purchase
 Offshore Banking  Foreign Exchange Trading
 Trust Business  Loans Backed by the Overseas Chinese Credit
 Foreign Exchange Trading Guarantee Fund
 Safety Boxes Services  Trading Consulting Services
 Consumer Banking  Warehousing Services
 U Card, VISA Card, MasterCard, JCB Card
 Consignment Securities
 Agency Services
 Money Market Securities
 Agency for selling gold, silver, gold/silver coins,
Gold Deposit Account
 Electronic Banking
 Investment Banking

II. Distribution of Mega Bank’s Net Operating Income

As of December 31, 2016
As percentage of
Amount
Item Net Operating Income
(thousands in NT$)
(%)
NET INTEREST INCOME 35,045,060 77.57

NON-INTEREST INCOME 10,135,583 22.43

Net Service Fee Income 7,840,059 17.35

Gains on Financial Assets and Liabilities at Fair Value 3,009,229 6.66
through Profit or Loss
Realized Gains on Available-for-Sale Financial Assets 1,596,716 3.53

Realized Loss on Held-to-Maturity Financial Assets -189 -

Foreign Exchange Gain 2,046,115 4.53

Loss on Asset Impairment -334,397 -0.74

Investment Income Recognized by the Equity Method 451,001 1.00

Net Other Non-interest Income 227,825 0.50

Gain on Financial Assets Carried at Cost 803,272 1.78

Net other miscellaneous loss -5,504,048 -12.18

NET OPERATING INCOME 45,180,643 100.00

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17 Annual Report 2016

Taiwanese Banking Industry & Market Overview
Due to the competitiveness of domestic market, the trend of globalization and the drop in transaction cost, expanding
overseas market, especially Southeast Asian emerging markets, becomes an important business strategy for domestic
banks.
Domestic banks' interest rate spread continues to shrink due to the unfavorable circumstances and reduction of interest
rate by the Central Bank of China (Taiwan), thereby eroding overall profit performance. Also, because of an increase in
provision for bad debts, housing loans and China market loan exposure, net pretax profit for domestic banks in 2016
continued to drop for a second year to NT$300.06 billion, a reduction of 6.11% from 2015. In terms of asset quality, as
of the end of December 2016, domestic banks' non-performing loan ratio increased slightly from last year-end's 0.23% to
0.27%, while coverage ratio of allowances for bad debt dropped from 555.43% to 502.93%.
As a result of inflow of foreign capital, continuous increase of foreign currency deposits, conservative corporate
investment, and a depressed real estate market, domestic banks' deposit growth rate exceeded that of loans for four
consecutive years, increasing pressure on funds application efficiency. Hence, most domestic banks adjusted their
business structure and promoted their wealth management business.
In recent years, domestic banks have been setting up overseas offices, with merging and acquisition extending, not only
in China, but also in Philippines, Indonesia, Japan, South Korea, etc. Overseas offices with poor performance were
dissolved so that capital can be invested in markets with potential, to boost overseas operations performance.
Because of competitive pressure from technology sectors, banks have been aware of the need for fast changes in the
traditional operating pattern. In the past two years, they have actively upgraded their software and hardware and increased
staff training, which will facilitate bank transformation and business volume growth in FinTech services.
In 2016, many risk control deficiencies were noted in the financial industry which prompted the Financial Supervisory
Commission to adopt a series of regulatory amendments and response measures. Banks were required to strengthen
regulatory compliance of anti-money laundering and internal control system, and actively fortify a sound management
system.

I. Positive Factors

 Since the outlook of economy in 2017 is optimistic, private consumption and investment are expected to warm
up, which will facilitate domestic banks' loan and wealth management business so as to increase their profitability.

 In line with the government's promotion of “New Southbound Policy”, domestic banks successively expanded
international business and overseas markets. The competent authority also continues to ease regulations and to
encourage domestic banks granting of loans to key innovative industries. This will help domestic banks promote
loan business, and thus increase their competitiveness and profitability.

 In September 2016, the Financial Supervisory Commission launched a FinTech development project, “Pilot
Program”, allowing banks to initiate FinTech products with conditions for a trial period before relevant
regulations amended. This will help the banks to accelerate their development of the FinTech market.

 To support domestic economic growth, the government actively promotes “Investment Expansion Programs” and
“five-plus-two” innovative industries to optimize domestic investment environment, stimulate private investment,
and strengthen state-owned investment, and thereby driving development of banking industry.

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Mega ICBC 18
 II. Negative Factors

 The real estate market continues to be sluggish and developers are more conservative in launching new projects,
which will affect domestic bank’s loan business. Also, following the TRF dispute, the related escrow is expected
to increase significantly, which is not favorable for surplus.

 With increase of online transactions, the finance industry suffers higher and more frequent loss due to information
security risk and continuous threats from cyber hackers. Information security problems and consumer rights
protection also pose big challenges to banks.

 With stricter regulatory compliance required by international financial supervisory institutions, the cost of
domestic bank’s legal compliance may raise significantly.

III. Winning Strategies

 To improve information security, the Bank shall recruit qualified personnel from IT industry and increase the
frequency and depth of internal training programs.

 To enrich fee income, the Bank shall continue strengthen its wealth management business by diversifying its
consumer banking product to fulfill customers’ needs.

 To ensure the operating results, the Bank shall strengthen the internal audit and internal control scheme, pay close
attention to uncertainties in financial markets, and catch up with most recent regulations.

IV. Mega Bank’s Niche

 Mega Bank owns expansive global presence, and international banking expertise, enhancing the bank’s
diversification and profitability.

 Mega Bank maintains the highest foreign deposit balance among domestic banks ever since.

Business Plan

 The Bank will enhance training on anti-money laundering/counter-terrorism financing and BSA/OFAC
regulations of the United States to build a culture of legal compliance within the Bank.

 Head Office will strengthen the management mechanism for the Bank’s overseas branches and subsidiaries to
increase its effectiveness and efficiency.

 To response to the Government’s policy of “Digital Nation and Innovative Economy”, the Bank will increase the
exposure to industries in “five plus two industries list”.

 The Bank will engage R&D and innovation of communication technology applications in financial services to
build up the Bank’s capability to provide digital financial services.

 The Bank will increase investment in high-quality bond to generate stable fixed income, and enlarge high-
liquidity asset to compliant with regulatory requirement for LCR.

 The Bank will diversify wealth management product line to satisfy different target groups, especially the young
adults and high-net-worth customers.

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19 Annual Report 2016

Human Resources Profile

As of December 31,
Item
2016 2015
Domestic 4,939 4,914
Number of Employees Overseas 604 564
Total 5,543 5,478
Average Age 42.65 42.91
Average Years of Services 16.69 17.01
Ph.D. 4 3
Master’s Degree 1,240 1,149
Education Bachelor’s Degree 4,039 4,045
Senior High School 236 255
Below Senior High School 24 26

Social Responsibility

Fulfilling corporate social responsibility is one of the Bank’s core values. The Bank participates in various public welfare
activities and establishes many environmental protection mechanisms such as paperless documentation system, garbage
classification and recycling, water conservation and energy efficiency measures, etc.

Furthermore, the Bank founded Mega International Commercial Bank Cultural and Educational Foundation (formerly
The International Commercial Bank of China Cultural and Educational Foundation) in 1992 to undertake cultural and
educational matters and take care of underprivileged population. The sponsored activities in 2016 include: music and art
performances; indigenous children’s art, language education and publishing of the illustrated books, etc.

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Mega ICBC 20
 Risk Management

Credit Risk Management System

Year 2016

Item Content
1. When developing the Bank’s credit and investment businesses, besides complying with the
relevant laws and regulations such as the Banking Act of the Republic of China, the business
supervisory units shall set risk management targets (capital adequacy ratio, non-performing
loans ratio, NPL coverage ratio, etc.), and the Risk Management Department compiles and
submits reports to the Bank's Risk Management Committee, Mega Financial Holding
Company Risk Management Committee and the Bank's Board of Directors for approval. The
Bank also sets its risk appetite by establishing various credit and investment regulations,
maintaining a sound credit risk management framework and standard.
2. In response to the implementation of New Basel Capital Accord, the Bank is gradually
A. Credit Risk developing models and evaluation mechanisms for estimating various credit risk component,
Strategies, such as implementation of internal rating system linked to probability of default (PD), to
Goals, Policies, predict customer's PD with quantitative analysis tools, etc., so as to strengthen the existing
and Procedures credit rating system of credit analysis procedures, and thereby enhance the management
efficiency of credit risk.
3. Before engaging in credit and investment businesses, the Bank shall ensure thorough credit
investigation and review with clear authorization limits by a hierarchical delegation
framework to enhance service efficiency and shorten operating processes. Regular review is
also conducted by establishing a reporting mechanism to report irregular or emergent
incidents within the stipulated time.
4. The Overdue Loan & Control Department is in charge of non-performing/non-accrual loans
management. Proper guidelines, rules and procedures have been set to ensure effective
monitoring and collection of NPLs.
1. The Board of Directors has the ultimate responsibility for the Bank’s credit risk management,
in charge of approval of entire Bank's credit risk policies, framework, strategies/goals and
important credit risk management regulations of the Bank. The Risk Management Committee
is delegated by the Board of Directors and is convened by Chairman of the Board with the
responsibility to review and discuss risk management policies, regulations, etc.
2. The Loan Committee and Investment Committee are in charge of reviewing credit and
investment cases, related policies and implementation status in this regard. The Problem
B. Organization of Loan Committee manages problem loans and debt collection, and reviews related policies of
Credit Risk non-performing/non-accrual loans.
Management
3. Each Head Office department in charge of credit risk shall, according to their duties,
implement credit risk management procedures such as identification, measurement,
monitoring, reporting, etc., and continue to enhance risk management mechanism.
4. The Risk Management Department shall coordinate and supervise the various units in
establishing the credit risk management mechanism, and gradually develop tools such as
internal rating system to enhance credit risk management, and submits risk management
report to the Board of Directors and Mega Financial Holding Company regularly.
1. The Bank's credit risk management objectives are set annually using a bottom-up method,
C. Scope and and are submitted to the Board of Directors for approval. The implementation progress and
Characteristics status are evaluated regularly according to economic conditions, the Bank's financial status
of the Credit and risk exposure, etc., so as to strengthen the Bank's overall risk management. Meanwhile,
Risk, Reporting in accordance with the regulations of the competent authority, related credit risk information
and Measuring is disclosed on the Bank's website.
System 2. To control the same concerned party (groups of related counterparties), industries, country
risk, etc., and prevent over-concentration of risk, the Bank has set various credit and
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21 Annual Report 2016

 Item Content
investment limits for the same concerned party (groups of related counterparties), industries,
etc., according to economic performance, industry outlook and credit risk level, and reports
to the senior management regularly on the implementation status and compliance status of
the laws and regulations, such as the Banking Act of the Republic of China, and internal
credit and investment related regulations of the Bank.
3. Conducts regular credit review to better understand customers, increases the frequency of
review for loan customers with high and abnormal credit risk, and reports the review status
to the senior management after annual analysis and review.
4. Visits the invested enterprises at least once per year, and takes note of their operation, capital
flow and execution of business plan, helps solve various problems, analyzes the operations,
and reports to the Board of Managing Directors.
5. Irregularity reporting system: if loan or investment customers encounter irregular operation,
financial difficulty or other unexpected material incident that would affect the company's
operation, the business unit shall immediately report to the senior management through the
departments in charge, and to Mega Financial Holding Company through the Risk
Management Department, so that related information can be relayed and necessary measures
carried out immediately.
6. Asset evaluation: for the various credit assets, investments, other assets and contingent
assets, business supervisory units shall base on the Bank's historical loss experience on bad
debts write-off, provision, bad debt recovery, etc., current non-performing loans ratio,
collection status and the competent authority's regulations, generally accepted accounting
principles, etc., to evaluate the possible loss and provide for bad debts or cumulative
impairment.
Through prudent credit investigation and review mechanism with fully understanding of
customers’ financial and operation status, the following countermeasures are adopted:
1. When the probability of loss occurrence of loans or transactions is high, and the severity of
expected losses is significant, e.g. a newly incorporated company with low credit rating and
with credit risk higher than profit, the Bank does not undertake such business.
D. Credit Risk 2. When the probability of loss occurrence of loans or transactions is low, but the severity of
Hedging or expected losses is high, such business can be undertaken by self-liquidating trade finance,
Mitigation account receivable finance, etc., and strengthen foreign exchange transactions, and manage
Policy, and cash flow to further reduce risk. Major credit exposures, housing loans, etc., may be
Strategies and undertaken by requesting for collateral or guarantor, or through a syndicated loan, or selling
Procedures for off part of positions in the secondary market after undertaking, or engaging in debt
Monitoring the securitization, so as to reduce or transfer risk.
Continuing 3. When the probability of loss occurrence of loans or transactions is high, but the severity of
Effectiveness expected losses is minor, the Bank shall sign agreements with the clauses such as financial
of Hedging and or non-financial covenants and prohibition on sale of assets or mortgage so as to control the
Mitigation credit risk of the borrower or counterparty.
Instruments
4. When the probability of loss occurrence of loans or transactions is low, and the severity of
expected losses is minor, the Bank shall undertake such business if upon assessment, the
profit is higher than risk borne.
5. For collaterals such as securities, real estates, etc., the Bank regularly monitor loan-to-value
ratios for each case. For guarantors’ creditworthiness, the Bank monitor through measures
such as credit review to ensure the effectiveness of risk mitigation tools.
1. The Bank currently adopts the Standardized Approach for credit risk regulatory capital
charge.
E. Method of 2. In order to quantify risk so as to effectively measure risk and enhance management, the Bank
Legal Capital has progressively developed various credit rating models, introduced aforementioned models
Allocation linked to probability of default into credit investigation process, and gradually developing a
system complied with the credit risk Internal Ratings-Based Approach under the New Basel
Capital Accord.
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Mega ICBC 22
 Operational Risk Management System
Year 2016

Item Content

1. Strategies
 Establish an effective framework and formulate internal control procedures for each
level.
 Enhance employee training in laws, regulations and business.
 Strengthen control of operating procedures.
 Implement internal and external audit and supervision measures to reduce the entire
bank's operational risk loss.
2. Procedures
 Conduct risk identification and assessment, suitability analysis and planning of
information system, before launching new products or businesses or establishing new
A. Operational overseas branches, and hold a review council, in accordance with the Bank's "Operating
Risk Guidelines for Establishing New Business, New Products and Overseas Branches".
Management
 Formulate business management regulations, operational specifications, and establish
Strategies and
them in the computer system to allow staff to inquire timely and to comply with, when
Procedures
performing their duties.
 Conduct self-assessment of operational risk to identify and measure the degree of
operational risk exposure, strengthen risk management awareness, and improve current
control mechanism.
 Conduct self-reviews to understand the implementation of various business control
mechanism, and rectify the deficiencies immediately.
 Submit and compile operational risk loss incidents based on the 8 major industry types
and 7 major loss incident types stipulated in Basel II, and conduct reviews on the factors
of occurrence of the loss and improve them.
 Establish key indicators for operational risk to monitor potential risk, and apply
appropriate management measures where necessary.

1. Board of Directors: approve operational risk management policies.

2. Auditing Department: conduct regular reviews on the effectiveness of operational risk
management mechanism to each unit.
3. Risk Management Department: formulate operational risk management policies and
B. Organization of concrete targets, design and implement operational risk assessment and management
Operational mechanism, summarize and submit reports on the operational risk loss regularly.
Risk
4. Head Office's business supervisory units: identify operational risk, formulate respective
Management
business management regulations and operational specification, as well as establish control
mechanism.
5. All units of the Bank: perform various operations according to the various control
mechanisms, conduct regular self-reviews and self-assessment of operational risk, and
submit reports on loss incidents.

C. Scope and 1. The Bank submits a report to the Board of Directors regularly on the results of self-
Characteristics assessment of operational risk, occurrence of operational risk loss incidents, implementation
of the of regulatory compliance system, and audit and self-review status.
Operational 2. The Bank's reporting on operational risk loss incidents, the implementation of law
Risk Reporting compliance system and the performance of audit system apply to each unit of the Bank.
and Self-review system is conducted by General Affairs and Occupational Safety & Health
Measurement Department, Data Processing & Information Department, all business units and subsidiary
System banks.
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23 Annual Report 2016

 Item Content
3. When deficiencies are discovered, the units shall review and improve immediately, and
make regular reports to Head Office.
4. The Bank's business units and General Affairs and Occupational Safety & Health
Department, Controller's Department, Data Processing & Information Department, Overdue
Loan & Control Department, Risk Management Department, Digital Banking Department,
Operation Center, Anti-Money Laundering Center, Regional Business Centers, etc., conduct
annual operational risk self-assessment to measure the Bank's operational risk exposure and,
based on the recommendations from the various units, validate the improvement of the
existing control mechanism for preventing the occurrence of operational risk.

D. Operational
Risk Hedging 1. The Bank transfers the possible operational risk loss from the Bank’s employees, financial
or Mitigation affairs and equipment through insuring on banker’s blanket bond insurance, fire insurance,
Policy, and earthquake insurance, third-party liability insurance, group personal accident insurance,
Strategies and etc.,. The Bank also reviews and renews annually to maintain the effectiveness of risk
Procedures for transfer.
Monitoring the 2. The contract that the Bank signs with contractors for outsourced operations shall specify the
Continuing scope of outsourced operations and the relevant regulations so as to clarify the attributions
Effectiveness of responsibilities and transfer possible operational risk. Also, regular evaluations are
of Hedging and conducted on the contractors for outsourced operations to ensure that the outsourced
Mitigation operations are in compliance with the relevant regulations of the competent authority.
Instruments
E. Method of
The Bank currently adopts the Basic Indicator Approach (BIA) for operational risk regulatory
Legal Capital
capital charge.
Allocation

Market Risk Management System

Year 2016

Item Content
1. Strategies:
 According to the risk management objectives and risk limits approved by the Board of
Directors, supervise the entire bank's market risk position and tolerable loss.
 According to the Bank's "Market Risk Management Guidelines" and other relevant
regulations, implement market risk management in order to attain operational objectives
and maintain a healthy capital adequacy ratio.
 Establish market risk information system to enable effective monitoring of limit
management, profit and loss assessment, sensitivity factor analysis, execution of stress
test, etc., of the financial products' position, and compile a risk report to be submitted to
A. Market Risk the head for review and use as reference for decision-making.
Management 2. Procedures:
Strategies and
Procedures Set different types of risk management rules for financial products based on their different
business natures and include the process for risk identification, measurement, monitoring
and reporting into the regulations. The Risk Management Department monitors the
compliance status of the transaction unit.
 Daily transactions: Prepare daily market risk position and income statement, compile and
analyze domestic and overseas transaction unit data, summarize and analyze various
financial products' position, assess profit and loss, sensitivity risk factor analysis, and
submit monthly stress test results to enable the top management to understand the entire
bank's market risk exposure; and compile regular securities investment performance
evaluation and submit to the Board of Directors to enable the board to understand the risk
control of the Bank's securities investments.
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Mega ICBC 24
 Item Content
 Exception management: Each transaction has limits and stop-loss rules. If the transaction
reaches the stop-loss limit, action shall be taken immediately. If stop-loss is not executed,
the transaction unit shall state the reason for not executing stop-loss and the contingency
plan, submit to top management for approval, and report to the (Managing) Board of
Directors based on the type of financial products.

1. The Board of Directors is the Bank's highest supervisory unit for market risk, in charge of
the approval of risk strategies and various risk limits, and of the Risk Management
Committee which supervises market risk.
2. Conduct Risk Management Committee council regularly, and the Risk Management
Department shall submit a report on the management of the Bank's various financial
products position for reference by the committee. Besides submitting report on the Bank's
management status such as market risk and liquidity risk, the business supervising unit shall
submit a special report on the current period's major extraordinary event.
3. Risk Management Department is in charge of the planning of the Bank's market risk
management and supervises the Bank's various business departments in establishing risk
B. Organization of control mechanism. It compiles and analyzes data such as position, assesses the profit and
Market Risk loss, sensitivity risk factor analysis and stress test of various financial products regularly,
Management and reports to the supervisory top management and Mega Financial Holding Company.
4. Stress test is conducted on market risk factor changes on a monthly basis. Also, the Risk
Management Department shall, according to market conditions, set the stress scenario every
half a year and submit this to the top management for approval for execution of the stress
test. The results are then submitted to the top management for review, and then to the
competent authority according to the regulations of the competent authority.
5. Risk Management Department compiles and submits information on the operation of
securities investments and derivative financial products to the (Managing) Board of
Directors regularly to enable them to understand the Bank's market risk management status.
6. Treasury Department is in charge of capital movement and investments in securities, foreign
currency and derivative financial products.

1. The content of the Bank's market risk report includes exchange rate, interest rate, as well as
the position, profit and loss assessment and sensitivity factor analysis of financial products
such as equity securities, credit default swap, etc.
2. The domestic transaction units shall submit the financial products' positions and gain or loss
to the management on a daily basis. When positions are near to stop-loss alert indicator,
close monitoring of market changes will be carried out.
3. The risk management unit conducts monthly stress test and submits reports to the Risk
Management Committee meetings regularly.
C. Scope and 4. For non-hedging transactions of derivative financial products, the risk is assessed based on
Characteristics daily market price; for hedging transactions, the risk is assessed twice per month.
of Market Risk
5. When stop-loss limits for loss assessment of securities such as shares, mutual funds, bonds,
Reporting and
etc. and derivative financial products are reached, stop-loss shall be executed immediately.
Measurement
The transaction unit shall state the reasons for not executing stop-loss and the response
measures, and submit to the top management for approval. When these products exceeded
a certain amount of loss, such incident shall be reported to the (Managing) Board of
Directors based on the type of financial product.

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25 Annual Report 2016

 Item Content
D. Market Risk 1. The Bank's hedging strategy is to make use of spot or derivative financial products as a
Hedging or hedging tool to avoid market price risk. For hedged financial products and its hedging tool,
Mitigation the Bank regularly assesses the overall hedging and whether the hedged item's position and
Policy, and profit and loss is within the tolerable range, as well as the appropriateness of the current risk
Strategies and management measures used.
Procedures for
Monitoring the 2. If the assessed risk is too high, the risk exposure will be reduced, or other approved hedging
Continuing methods adopted to transfer risk, so that the risk is reduced to a tolerable range.
Effectiveness
of Hedging and
Mitigation
Instruments

1. The Bank adopts the Standardized Approach for market risk capital charge.
E. Method of 2. In terms of risk management, SUMMIT Market Risk Information System provides limit
Legal Capital management, profit and loss assessment, sensitivity factor analysis, stress test and risk value
Allocation calculation. The Bank is gradually managing market risk through information generated
from SUMMIT. In the future, it shall decide whether to adopt Internal Models Approach for
capital charge based on business requirements and complexity of the financial products.

Liquidity Risk Management System

Year 2016

Item Content
1. Strategies:
 Monitor the Bank's overall liquidity risk limit according to the risk management
objectives approved by the Board of Directors.
 According to the regulations of the Bank's “Liquidity Risk Management Guidelines” and
“Operating Guidelines for Liquidity Risk Management”, implement liquidity risk
management to ensure the Bank's payment ability.
 Conduct stress test regularly to ensure that when the Bank's internal operation or external
financial environment suffers severe impact, under any circumstance whether at present
or in the future, the Bank's liquid funds are sufficient to meet asset increase requirements
or fulfill due obligations, so that the Bank can attain sustainable operation.
A. Liquidity Risk 2. Process:
Management
Strategies and  According to the Bank’s “Liquidity Risk Management Guidelines” and “Operating
Procedures Guidelines for Liquidity Risk Management”, Treasury Department shall control the
intraday liquidity position and risk of domestic units' TWD and foreign currencies on a
daily basis. According to the regulations of the Central Bank of the Republic of China
(Taiwan), deposit reserve shall be set aside and liquid reserves maintained, and liquidity
gap adjusted based on daily capital flow and changes in market conditions, to ensure an
appropriate liquidity. Overseas branches shall comply with the regulations of the
competent authorities from both its home country and the country it is located, and
possess appropriate liquid assets to maintain sufficient liquidity.
 Risk Management Department monitors liquidity coverage ratio, currency liquidity gap
ratio and liquidity reserve ratio of TWD and foreign currencies with liabilities more than
5% of total liabilities, inspects regulatory compliance regularly, and reports to the Fund
Management Committee, Risk Management Committee and the Board of Directors.

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Mega ICBC 26
 Item Content
 Risk Management Department sets stress scenario for specific event crisis for individual
organizations or overall market environmental crisis. When setting stress scenarios, it
takes into consideration the impact on intraday liquidity position due to liquidity risks,
collateral multiplier effect, and breach of contract by customer or counterparty due to
liquidity shortage. Stress tests shall be conducted regularly, and the results submitted to
the Fund Management Committee, Asset & Liability Management Committee and the
Board of Directors.
1. The Board of Directors is the Bank's highest supervisory unit for liquidity risk, and is in
charge of the approval of risk strategies and limits.
B. Organization of 2. Treasury Department is the executive unit for managing liquidity risk.
Liquidity Risk 3. Risk Management Department is the supervisory unit in charge of monitoring various risk
Management limits and conducting regular examination of the appropriateness of execution process by
the executing unit. It reports to the Fund Management Committee, Asset & Liability
Management Committee and the Board of Directors regularly on liquidity risk monitoring.
1. The main purpose of the Bank's liquidity risk report is to estimate the impact of various
businesses' future cash flow on the Bank's capital movement, and control the cash flow gap
or ratio under a tolerable risk limit.
2. When the liquidity indicator reaches an alert level, the Risk Management Department shall
immediately report to the Chairman of the Fund Management Committee, and report at the
meeting of the Fund Management Committee. When the level for activating contingency
C. Scope and
plan is reached, it shall immediately request the Chairman of the Fund Management
Characteristics
Committee to convene a special meeting to review the liquidity contingency plan and
of Liquidity
implement it upon approval by the President. Upon approval of the plan, the Treasury
Risk Reporting
Department shall immediately implement liquidity contingency plan and the Risk
and
Management Department shall request overseas branches to cooperate according to the plan,
Measurement
so as to fill the funding gap.
3. The Bank conducts stress test regularly and analyzes test results from the perspective of cash
flow, liquidity position, repayment ability, etc. If the test results are not up to expectation,
and if the liquidity gap is mild, adjust the fund structure as a response measure within
stipulated time. In case of high liquidity gap or difficulty in raising short-term funds in the
market, activate fund emergency contingency plan to reduce the impact of liquidity risk.
D. Liquidity Risk In response to liquidity crisis such as abnormal deposit withdrawal, huge drain of funds, other
Hedging or serious shortage of liquidity, etc., the Bank has established liquidity emergency contingency
Mitigation plan to fill the funding gap and reduce liquidity risk so as to maintain normal operation of the
Policy, and entire Bank.
Strategies and
Procedures for
Monitoring the
Continuing
Effectiveness
of Hedging and
Mitigation
Instruments

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27 Annual Report 2016

Financial Information
Condensed Consolidated Balance Sheets

Unit: Thousands in NT dollars

As of December 31,
Item
2016 2015
Cash and Cash Equivalents, and Due from the Central Bank and Call
630,438,288 651,059,726
Loans to Banks
Financial Assets at Fair Value through Profit or Loss 45,316,653 47,028,384
Available-for-Sale Financial Assets – net 205,720,937 231,507,094
Securities Purchased under Resale Agreements 4,255,968 9,435,869
Receivables – net 59,425,191 142,521,355
Current Tax Assets 122,108 589,811
Bills Discounted and Loans – net 1,715,278,766 1,773,269,054
Held-to-Maturity Financial Assets – net 279,291,168 199,528,540
Investments Accounted for under the Equity Method – net 3,033,753 2,899,633
Other Financial Assets – net 9,670,797 9,985,074
Property and Equipment – net 14,322,434 14,278,590
Investment Property – net 865,039 868,057
Deferred Tax Assets 5,088,804 4,353,210
Other Assets – net 1,621,685 1,443,326
Total Assets 2,974,451,591 3,088,767,723
Due to the Central Bank and Commercial Banks 386,017,007 419,876,839
Borrowed Funds 39,974,427 45,459,094
Financial Liabilities at Fair Value through Profit or Loss 11,394,240 21,939,295
Securities Sold under Repurchase Agreements 444,678 547,798
Payables 32,149,539 35,948,937
Current Tax Liabilities 8,134,367 8,333,393
Deposits and Remittances 2,173,615,665 2,235,241,655
Financial Bonds Payable 36,200,000 36,200,000
Other Financial Liabilities 8,583,989 8,673,223
Provisions 12,953,433 11,923,424
Deferred Tax Liabilities 2,161,652 2,153,957
Other Liabilities 5,258,347 8,977,157
Total Liabilities 2,716,887,344 2,835,274,772
Equity Attributable to Owners of The Parent Company 257,564,247 253,492,951
Capital Stock 85,362,336 85,362,336
Capital Reserve 62,219,540 62,219,540
Retained Earnings 111,444,170 105,682,059
Other Equity -1,461,799 229,016
Total Equity 257,564,247 253,492,951

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Mega ICBC 28
 Condensed Consolidated Statements of Comprehensive Income
Unit: Thousands in NT dollars

Item 2016 2015

Interest Revenue 50,877,951 53,879,273

Less: Interest Expense 15,294,311 17,833,323
Net Interest Income 35,583,640 36,045,950
Net Non-Interest Income 10,051,088 14,195,272
Net Operating Income 45,634,728 50,241,222
(Provision) reversal for loan losses and guarantee reserve 3,619,823 -543,892
Operating Expenses 18,899,537 20,464,905
Consolidated Income from Continuing Operations Before Income Tax 23,115,368 30,320,209
Income Tax Expense 4,105,407 4,611,764
Consolidated Net Income 19,009,961 25,708,445
Total Other Comprehensive Loss (after Income Tax) -2,134,315 -3,721,805
Total Comprehensive Income 16,875,646 21,986,640

Major Financial Analysis

Consolidated Standalone
Item
2016 2015 2016 2015
Total Liabilities to Total Assets (%) 91.22 91.69 91.17 91.64
Financial
Structure Property and Equipment to Total
5.56 5.63 5.54 5.61
Shareholders' Equity (%)
Solvency Liquidity Reserve Ratio (%) 27.11 22.66 27.11 22.66
Loans to Deposits Ratio (%) 80.38 80.71 80.16 80.42
Operating NPL Ratio (%) 0.11 0.09 0.09 0.08
Performance Total Assets Turnover (Number of Times) 0.02 0.02 0.01 0.02
Analysis Average Profit per Employee (Thousands
3,316 4,553 3,418 4,693
in NT dollars)
Return on Tier 1 Capital (%) 9.36 13.41 9.44 13.56
ROA (%) 0.63 0.85 0.63 0.85
ROE (%) 7.44 10.89 7.44 10.89
Profitability Net Income to Net Operating Income (%) 41.66 51.17 42.08 51.61
Analysis Earnings per Share (NT dollars) 2.23 3.27 2.23 3.27
Cash Dividends per Share (NT dollars) 1.50 1.50 1.50 1.50
Shareholders' Equity per Share Before
30.17 29.70 30.17 29.70
Appropriation (NT dollars)
Capital Adequacy Ratio (%) 14.49 13.33 14.32 13.16
Note：The 2016 earnings distribution will be resolved in the 2017 Board of Directors on the stockholders' behalf .

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29 Annual Report 2016

 REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE
To the Board of Directors and Shareholders of Mega International Commercial Bank Co., Ltd.

Opinion
We have audited the accompanying consolidated balance sheets of Mega International Commercial Bank Co., Ltd. (the
“Bank”) and its subsidiaries as at December 31, 2016 and 2015, and the related consolidated statements of comprehensive
income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of the Bank and its subsidiaries as at December 31, 2016 and 2015, and its consolidated financial
performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the
Preparation of Financial Reports by Public Banks” and the International Financial Reporting Standards, International
Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory
Commission.

Basis for opinion

We conducted our audits in accordance with the “Rules Governing the Audit of Financial Statements of Financial
Institution by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC
GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Consolidated Financial Statements section of our report. We are independent of the Bank and its subsidiaries in
accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”),
and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

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

The Bank and its subsidiaries’ key audit matters for the year ended December 31, 2016 are addressed as follows:

Impairment assessment of bills discounted and loans

Description

For the accounting policy for the impairment assessment of bills discounted and loans, please refer to Note 4(9) of
the consolidated financial statements; for critical accounting judgments, estimates, and key sources of assumption
uncertainty of impairment assessment of bills discounted and loans, please refer to Note 5(2) of the consolidated financial
statements; for the details of bills discounted and loans, please refer to Note 6(5) of the consolidated financial statements.
Gross bills discounted and loans and allowance for bad debts as at December 31, 2016, was $1,741,972,998 thousand and
$26,694,232 thousand, respectively.

資誠聯合會計師事務所 PricewaterhouseCoopers Taiwan

11012 臺北市信義區基隆路一段 333 號 27 樓∕27F, No.333, Sec.1, Keelung Rd., Xinyi Dist., Taipei 11012, Taiwan
T: +886 (2) 2729 6666, F: +886 (2) 2729 6686, www.pwc.tw

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Mega ICBC 30
 The credit services provided by the Bank and its subsidiaries, which are their main business activity, are primarily
corporate credit facilitations. Impairment losses on bills discounted and loans are losses as a result of existing objective
evidence of impairment that estimated future cash flows of loans may not be recovered. The Bank and its subsidiaries’
impairment assessment on bills discounted and loans is conducted in accordance with related regulations of IAS 39,
‘Financial Instruments: Recognition and Measurement’ and meet the related requirements of the competent authority. If
there is existing objective evidence of impairment loss for significant credit facilitations which exceed a certain amount,
then such facilitations are individually assessed. Impairment loss is primarily provisioned according to the future cash
flows and collateral value of the borrower; if there is no existing objective evidence of impairment or if there is existing
objective evidence of impairment but the credit facilitation does not exceed a certain amount, then assessment is
conducted on a collective basis and impairment losses are estimated according to impairment parameters such as the
impairment probability, recovery rate, and effective interest rate under each industry group.
The aforementioned provision of impairment loss for bills discounted and loans includes the determination of future
cash flows of individual assessment and impairment parameters for collective assessment. Because this involves
subjective judgment and numerous assumptions and estimates, the method of determining assumptions and estimates will
directly affect the related recognized amounts. Also, considering that loans account for approximately 58% of total assets,
we have thus included the individual and collective impairment assessment of the Bank and its subsidiaries’ bills
discounted and loans as one of the key audit matters in our audit.
How our audit addressed the matter
The procedures that we have conducted in response to specific aspects of the above-mentioned key audit matter are
summarized as follows:
1. Understood and assessed the related policies, internal control system, and operation procedures of assumptions and
estimates (including the impairment probability, recovery rate, future cash flows, and collateral value) used by the
Bank and its subsidiaries in provisioning impairment losses for bills discounted and loans.
2. Sampled and tested internal controls related to the provision of impairment loss, including the identification of
objective evidence for impairment loss, annual reviews, management of collateral and their value assessment, value
assessment of collateral, controls for changing impairment parameters, and approval for provisioning of impairment
loss.
3. Collective assessment
(1) Evaluated the model parameter assumptions of the Bank and its subsidiaries’ collective assessments; understood
the calculation logic of different group parameters (e.g. the impairment probability, recovery rate, and effective
interest rate), as well as the status of periodic updates.
(2) Sampled and tested the accuracy of impairment loss balances.
(3) Filtered loan portfolio amounts of corporate facilitations under loans accounts using the system logic which
incorporated the Bank’s policy to sample and test the accuracy of their respective impairment probability,
recovery rate, and effective interest rates, as well as to examine their consistency with the financial statements.
4. Individual assessment (for credit facilitations with existing objective evidence of impairment loss that exceeded a
certain amount)
(1) Assessed the completeness of the watch list for credit facilitations for which objective evidence is existed.
(2) Sampled and compared the consistency of the system’s judgment with samples which had been judged to have
objective evidence of impairment.
(3) Assessed the reasonableness of parameter assumptions (including the borrower’s time of past due, financial and
operational status, and historical experience) for estimated future cash flows and the accuracy of calculation
results for estimated future cash flows.

資誠聯合會計師事務所 PricewaterhouseCoopers Taiwan

11012 臺北市信義區基隆路一段 333 號 27 樓∕27F, No.333, Sec.1, Keelung Rd., Xinyi Dist., Taipei 11012, Taiwan
T: +886 (2) 2729 6666, F: +886 (2) 2729 6686, www.pwc.tw

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31 Annual Report 2016

Impairment assessment of equity investments carried at cost
Description
For the accounting policy for the impairment assessment of equity investment carried at cost (accounted under other
financial assets), please refer to Note 4(9) of the consolidated financial statements; for critical accounting judgments,
estimates, and key sources of assumption uncertainty of equity investments carried at cost, please refer to Note 5(3) of
the consolidated financial statements; for detail of other financial assets-equity investments carried at cost, please refer to
Note 6(9) of the consolidated financial statements. Other financial assets-equity investments carried at cost and its
accumulated impairment as at December 31, 2016, was $10,692,246 thousand and $1,040,931 thousand, respectively.
For the provision of impairment for other financial assets-equity investments carried at cost accounted for by the
Bank and its subsidiaries, in accordance with the Bank and its subsidiaries’ accounting policy, upon the end of each
reporting period, the Bank and its subsidiaries shall estimate impairment losses when it is assessed that there is objective
evidence of impairment. When individual equity investments have existing objective evidence of impairment loss,
provision of impairment loss is determined by the recoverable amount of cash flows based on the financial and operating
status.
Because the aforementioned determination on whether there is existing objective evidence of impairment for equity
investments carried at cost and the provision of impairment (including the determination of recoverable cash flows)
involve subjective judgment and numerous assumptions and estimates, the method of determining assumptions and
estimates will directly affect recognized amounts. Thus, we have included the impairment assessment of the Bank and its
subsidiaries’ equity investments carried at cost as one of the key audit matters in our audit.

How our audit addressed the matter

The procedures that we have conducted in response to specific aspects of the above-mentioned key audit matter are
summarized as follows:
1. Understood and assessed the Bank and its subsidiaries’ related policies, stop-loss and exception management controls,
and handling procedures for determining impairment evidence and the provision of impairment for equity
investments measured at cost.
2. Sampled and tested the evaluations provided by management to determine whether there are documents that support
the existence of impairment evidence.
3. Sampled and tested the appropriateness of management’s estimate future cash flows (e.g. documents related expected
recoverable cash flows of investees) and recalculated the accuracy of provisioned impairment amounts.
Other matter – Parent company only financial report
We have audited and expressed an unmodified opinion on the parent company only financial statements as at and for the
years ended December 31, 2016 and 2015, prepared by the Bank.
Responsibilities of management and those charged with governance for the consolidated financial
statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance
with the “Regulations Governing the Preparation of Financial Reports by Public Banks” and the International Financial
Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by
the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable
the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.

資誠聯合會計師事務所 PricewaterhouseCoopers Taiwan

11012 臺北市信義區基隆路一段 333 號 27 樓∕27F, No.333, Sec.1, Keelung Rd., Xinyi Dist., Taipei 11012, Taiwan
T: +886 (2) 2729 6666, F: +886 (2) 2729 6686, www.pwc.tw

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Mega ICBC 32
 In preparing the consolidated financial statements, management is responsible for assessing the Bank and its subsidiaries’
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Bank and its subsidiaries or to cease
operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Bank and its subsidiaries’ financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

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

As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank
and its subsidiaries’ internal control.
3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the Bank’s and its subsidiaries’ ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Bank and its subsidiaries to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Bank and its subsidiaries to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the Bank and its subsidiaries audit. We remain solely
responsible for our audit opinion.

資誠聯合會計師事務所 PricewaterhouseCoopers Taiwan

11012 臺北市信義區基隆路一段 333 號 27 樓∕27F, No.333, Sec.1, Keelung Rd., Xinyi Dist., Taipei 11012, Taiwan
T: +886 (2) 2729 6666, F: +886 (2) 2729 6686, www.pwc.tw

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33 Annual Report 2016

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
The consolidated financial statements as at and for the year ended December 31, 2016 expressed in US dollars were
translated from the New Taiwan dollar consolidated financial statements using the exchange rate of US$1:NT$32.206 at
December 31, 2016 solely for the convenience of the readers. This basis of translation is not in accordance with generally
accepted accounting principles in the Republic of China.

Chi, Shu-Mei Chou, Chien-Hung

For and on behalf of PricewaterhouseCoopers, Taiwan

March 24, 2017

----------------------------------------------------------------------------------------------------------------------------------------------------------------
The accompanying consolidated financial statements are not intended to present the financial position and results of operations and
cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China.
The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from
those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated
financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting
principles or auditing standards generally accepted in the Republic of China, and their applications in practice.
資誠聯合會計師事務所 PricewaterhouseCoopers Taiwan
11012 臺北市信義區基隆路一段 333 號 27 樓∕27F, No.333, Sec.1, Keelung Rd., Xinyi Dist., Taipei 11012, Taiwan
T: +886 (2) 2729 6666, F: +886 (2) 2729 6686, www.pwc.tw

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Mega ICBC 34
 MEGA INTERNATIONAL COMMERCIAL BANK CO., LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN THOUSANDS OF DOLLARS)

December 31, 2016 December 31, 2015 January 1, 2015

Assets Notes NT$ US$ NT$ NT$
Assets (Unaudited-Note 4)

Cash and cash equivalents 6(1) and 11(3) $ 90,426,546 $ 2,807,755 $ 145,026,871 $ 164,407,531
Due from the Central Bank and call loans to
banks 6(2) and 11(3) 540,011,742 16,767,427 506,032,855 469,483,866
Financial assets at fair value through profit
or loss 6(3) 45,316,653 1,407,087 47,028,384 43,697,047
Securities purchased under resale
agreements 11(3) and 13 4,255,968 132,148 9,435,869 5,850,332
Receivables, net 6(4)(5) 59,425,191 1,845,159 142,521,355 171,053,943
Current tax assets 6(36) 122,108 3,791 589,811 522,877
Bills discounted and loans, net 6(5) and 11(3) 1,715,278,766 53,259,603 1,773,269,054 1,733,994,271
Available-for-sale financial assets, net 6(6) and 12 205,720,937 6,387,659 231,507,094 187,345,276
Held-to-maturity financial assets, net 6(7) and 12 279,291,168 8,672,023 199,528,540 161,795,040
Investments accounted for under the equity
method, net 6(8) 3,033,753 94,198 2,899,633 2,835,086
Other financial assets, net 6(5)(9) 9,670,797 300,279 9,985,074 13,650,563
Property and equipment, net 6(10) 14,322,434 444,713 14,278,590 14,502,322
Investment property, net 6(11) 865,039 26,860 868,057 671,195
Deferred tax assets 6(36) 5,088,804 158,008 4,353,210 3,698,294
Other assets, net 6(12) 1,621,685 50,354 1,443,326 1,556,910
Total assets $ 2,974,451,591 $ 92,357,064 $ 3,088,767,723 $ 2,975,064,553

Liabilities and equity

Liabilities
Due to the Central Bank and commercial
banks 6(13) and 11(3) $ 386,017,007 $ 11,985,872 $ 419,876,839 $ 461,696,712
Borrowed funds 6(14) and 11(3) 39,974,427 1,241,211 45,459,094 53,906,541
Financial liabilities at fair value through
profit or loss 6(15)(18) 11,394,240 353,792 21,939,295 27,345,358
Securities sold under repurchase agreements 6(3)(6) and 13 444,678 13,807 547,798 50,189,662
Payables 6(16) 32,149,539 998,247 35,948,937 36,102,125
Current tax liabilities 6(36) and 11(3) 8,134,367 252,573 8,333,393 7,281,687
Deposits and remittances 6(17) and 11(3) 2,173,615,665 67,491,016 2,235,241,655 2,038,661,855
Financial bonds payable 6(18) 36,200,000 1,124,014 36,200,000 50,200,000
Other financial liabilities 6(20) 8,583,989 266,534 8,673,223 9,021,046
Provisions 6(19) and 11(3) 12,953,433 402,206 11,923,424 10,453,201
Deferred tax liabilities 6(36) 2,161,652 67,120 2,153,957 2,143,376
Other liabilities 6(21) 5,258,347 163,272 8,977,157 9,552,549
Total liabilities 2,716,887,344 84,359,664 2,835,274,772 2,756,554,112

Equity attributable to owners of the

parent company
Share capital
Common stock 6(22) 85,362,336 2,650,510 85,362,336 77,000,000
Capital reserve 6(22) 62,219,540 1,931,924 62,219,540 46,498,006
Retained earnings
Legal reserve 6(22) 73,987,859 2,297,332 66,275,325 58,483,335
Special reserve 6(22) 3,873,832 120,283 3,845,354 3,822,741
Undistributed earnings 6(23) 33,582,479 1,042,740 35,561,380 29,916,495
Other equity 6(6)(24) ( 1,461,799 ) ( 45,389 ) 229,016 2,789,864
Total equity 257,564,247 7,997,400 253,492,951 218,510,441
Total liabilities and equity $ 2,974,451,591 $ 92,357,064 $ 3,088,767,723 $ 2,975,064,553
The accompanying notes are an integral part of these financial statements.

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35 Annual Report 2016

 MEGA INTERNATIONAL COMMERCIAL BANK CO., LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT FOR EARNINGS PER SHARE AMOUNTS)

For the years ended December 31,

2016 2015
Notes NT$ US$ NT$
(Unaudited-Note 4)
6(6)(7)(25) and
Interest revenue 11(3) $ 50,877,951 $ 1,579,766 $ 53,879,273
Less: interest expense 6(25) and 11(3) ( 15,294,311 ) ( 474,890 ) ( 17,833,323 )
Net interest income 35,583,640 1,104,876 36,045,950
Non-interest income
Net service fee income 6(26) and 11(3) 7,907,733 245,536 8,599,921
Gains (Loss) on financial assets and liabilities at fair value
through profit or loss 6(27) 3,009,597 93,448 ( 1,155,347 )
Realized gains on available-for-sale financial assets 6(28) 1,596,716 49,578 1,190,984
Realized loss on held-to maturity financial assets 6(7) ( 189 ) ( 6 ) -
Foreign exchange gain 2,112,070 65,580 2,907,967
Loss on asset impairment 6(6)(9)(29) ( 334,397 ) ( 10,383 ) ( 487,652 )
Investment income recognized by the equity method 6(8) 227,118 7,052 185,889
Net other non-interest income 6(30) 228,162 7,085 324,511
Gain on financial assets carried at cost 6(9) 803,272 24,942 764,288
Indemnity income 6(31) - - 1,717,260
Net other miscellaneous loss (income) 6(32) ( 5,498,994 ) ( 170,744 ) 147,451
Net operating income 45,634,728 1,416,964 50,241,222
(Provision) reversal for loan losses and guarantee reserve 6(5)(19) ( 3,619,823 ) ( 112,396 ) 543,892
Operating expenses
Employee benefits expenses 6(33) and 11(3) ( 11,920,209 ) ( 370,124 ) ( 13,271,460 )
Depreciation and amortization 6(34) ( 490,379 ) ( 15,226 ) ( 487,667 )
Other general and administrative expenses 6(35) and 11(3) ( 6,488,949 ) ( 201,483 ) ( 6,705,778 )
Consolidated income from continuing operations before
income tax 23,115,368 717,735 30,320,209
Income tax expense 6(36) ( 4,105,407 ) ( 127,473 ) ( 4,611,764 )
Consolidated net income 19,009,961 590,262 25,708,445
Other comprehensive income
Non-reclassifiable to profit or loss subsequently
Remeasurement of defined benefit plan 6(19) ( 534,337 ) ( 16,591 ) ( 1,398,743 )
Income tax relating to the components of other
comprehensive income 6(36) 90,837 2,820 237,786
Potentially reclassifiable to profit or loss subsequently
Cumulative translation differences of foreign operations 6(24) ( 1,255,005 ) ( 38,968 ) ( 221,299 )
Unrealized (loss) gain on valuation of available-for-sale
financial assets 6(24) ( 373,245 ) ( 11,589 ) ( 2,361,247 )
Share of other comprehensive (loss) income of associates
and joint ventures accounted for under the equity method 6(24) ( 62,565 ) ( 1,943 ) 21,698
Total other comprehensive loss (after income tax) ( 2,134,315 ) ( 66,271 ) ( 3,721,805 )
Total comprehensive income $ 16,875,646 $ 523,991 $ 21,986,640
Consolidated net income attributable to:
Owners of the parent $ 19,009,961 $ 590,262 $ 25,708,445
Consolidated comprehensive income attributable to:
Owners of the parent $ 16,875,646 $ 523,991 $ 21,986,640
Consolidated earnings per share
Basic and diluted earnings per share (in dollars) 6(37) $ 2.23 $ 0.07 $ 3.27

The accompanying notes are an integral part of these financial statements.

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Mega ICBC 36
37
MEGA INTERNATIONAL COMMERCIAL BANK CO., LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(EXPRESSED IN THOUSANDS OF DOLLARS)
Equity attributable to owners of the parent
Retained earnings Other equity
Cumulative Unrealized Gain or
Translation Loss on Available-
Capital Capital Legal Special Unappropriated

Annual Report 2016

Differences of For-Sale Financial
Stock Reserve Reserve Reserve Earnings Foreign Operations Assets Total
For the year ended December 31, 2016 (NT Dollars)
Balance, January 1, 2016 $ 85,362,336 $ 62,219,540 $ 66,275,325 $ 3,845,354 $ 35,561,380 $ 331,363 ($ 102,347 ) $ 253,492,951
Earnings distribution for 2015
Cash dividends - - - - ( 12,804,350 ) - - ( 12,804,350 )
Legal reserve - - 7,712,534 - ( 7,712,534 ) - - -
Special reserve - - - 28,478 ( 28,478 ) - - -
Net income for the year of 2016 - - - - 19,009,961 - - 19,009,961
Other comprehensive loss for the year of 2016 - - - - ( 443,500 ) ( 1,257,596 ) ( 433,219 ) ( 2,134,315 )
Balance, December 31, 2016 $ 85,362,336 $ 62,219,540 $ 73,987,859 $ 3,873,832 33,582,479 ($ 926,233 ) ($ 535,566 ) $ 257,564,247

For the year ended December 31, 2016

(US Dollars - Unaudited-Note 4)
Balance, January 1, 2016 $ 2,650,510 $ 1,931,924 $ 2,057,857 $ 119,399 $ 1,104,185 $ 10,289 ($ 3,178 ) $ 7,870,986
Earnings distribution for 2015
Cash dividends - - - - ( 397,577 ) - - ( 397,577 )
Legal reserve - - 239,475 - ( 239,475 ) - - -
Special reserve - - - 884 ( 884 ) - - -
Net income for the year of 2016 - - - - 590,262 - - 590,262
Other comprehensive loss for the year of 2016 - - - - ( 13,771 ) ( 39,049 ) ( 13,451 ) ( 66,271 )
Balance, December 31, 2016 $ 2,650,510 $ 1,931,924 $ 2,297,332 $ 120,283 $ 1,042,740 ($ 28,760 ) ($ 16,629 ) $ 7,997,400

(Continued)

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 MEGA INTERNATIONAL COMMERCIAL BANK CO., LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(EXPRESSED IN THOUSANDS OF DOLLARS)
Equity attributable to owners of the parent
Retained earnings Other equity
Cumulative Unrealized Gain or
Translation Loss on Available-
Capital Capital Legal Special Unappropriated Differences of For-Sale Financial
Stock Reserve Reserve Reserve Earnings Foreign Operations Assets Total
For the year ended December 31, 2015 (NT Dollars)
Balance, January 1, 2015 $ 77,000,000 $ 46,498,006 $ 58,483,335 $ 3,822,741 $ 29,916,495 $ 550,023 $ 2,239,841 $ 218,510,441
Earnings distribution for 2014
Cash dividends - - - - ( 11,088,000 ) - - ( 11,088,000 )
Legal reserve - - 7,791,990 - ( 7,791,990 ) - - -
Special reserve - - - 25,253 ( 25,253 ) - - -
Reversal of special reserve - - - ( 2,640 ) 2,640 - - -
Issuance of common stock 8,362,336 15,722,164 - - - - - 24,084,500
Changes in capital surplus of associates and joint
ventures accounted for under equity method - ( 630 ) - - - - - ( 630 )
Net income for the year of 2015 - - - - 25,708,445 - - 25,708,445
Other comprehensive loss for the year of 2015 - - - - ( 1,160,957 ) ( 218,660 ) ( 2,342,188 ) ( 3,721,805 )
Balance, December 31, 2015 $ 85,362,336 $ 62,219,540 $ 66,275,325 $ 3,845,354 $ 35,561,380 $ 331,363 ($ 102,347 ) $ 253,492,951

The accompanying notes are an integral part of these financial statements.

Mega ICBC
38
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 MEGA INTERNATIONAL COMMERCIAL BANK CO., LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN THOUSANDS OF DOLLARS)
For the years ended December 31,
2016 2015
NT$ US$ NT$
CASH FLOWS FROM OPERATING ACTIVITIES (Unaudited -Note 4)
Consolidated income before income tax $ 23,115,368 $ 717,735 $ 30,320,209
Adjustments to reconcile consolidated income before tax to net cash provided by
operating activities
Income and expenses having no effect on cash flows
Provision for loan losses and guarantee reserve (reversal) 3,619,823 112,396 ( 543,892 )
Depreciation 484,684 15,049 483,745
Amortization 5,695 177 3,922
Interest income ( 50,877,951 ) ( 1,579,766 ) ( 53,879,273 )
Dividend income ( 1,102,239 ) ( 34,225 ) ( 1,133,014 )
Interest expense 15,294,311 474,890 17,833,323
Investment income recognized under the equity method ( 227,118 ) ( 7,052 ) ( 182,543 )
Proceeds from disposal of investments under the equity method - - ( 3,346 )
Gain on disposal of property and equipment ( 1,142 ) ( 36 ) ( 2,893 )
Loss on asset impairment 334,397 10,383 487,652
Loss on retirement of property and equipment 253 8 541
Changes in assets/liabilities relating to operating activities
Decrease in due from the Central Bank and call loans to banks 6,827,796 212,004 17,039,254
Decrease (increase) in financial assets at fair value through profit or loss 1,711,731 53,150 ( 3,331,337 )
Decrease (increase) in receivables 83,835,911 2,603,115 28,148,654
Decrease (increase) in bills discounted and loans 54,310,193 1,686,338 ( 39,272,959 )
Decrease (increase) in available-for-sale financial assets 25,309,572 785,865 ( 46,876,359 )
Increase in held-to-maturity financial assets ( 79,762,628 ) ( 2,476,639 ) ( 37,733,500 )
(Increase) decrease in other financial assets ( 125,878 ) ( 3,909 ) 3,654,019
(Increase) decrease in other assets ( 184,024 ) ( 5,714 ) 109,435
Decrease in due to the Central Bank and commercial banks ( 33,859,832 ) ( 1,051,352 ) ( 41,819,873 )
Decrease in financial liabilities at fair value through profit or loss ( 10,545,055 ) ( 327,425 ) ( 5,406,063 )
Decrease in securities sold under repurchase agreements ( 103,120 ) ( 3,202 ) ( 49,641,864 )
(Decrease) increase in payables ( 3,585,879 ) ( 111,342 ) 30,083
(Decrease) increase in deposits and remittances ( 61,625,990 ) ( 1,913,494 ) 196,579,800
Decrease in other financial liabilities ( 89,234 ) ( 2,771 ) ( 347,823 )
Increase in reserve for employee benefit liabilities 45,482 1,412 35,435
Decrease in other liabilities ( 3,085,629 ) ( 95,809 ) ( 185,335 )
Interest received 50,650,521 1,572,705 53,894,582
Dividend received 1,261,175 39,160 1,305,595
Interest paid ( 15,507,830 ) ( 481,520 ) ( 18,016,892 )
Income tax paid ( 4,473,792 ) ( 138,912 ) ( 4,033,541 )
Net cash provided by operating activities 1,649,571 51,219 47,515,742
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of investments under the equity method 2,747 85 21,924
Acquisition of investments accounted for under the equity method - - ( 150,000 )
Proceeds from capital reduction of investee accounted for under the equity method - - 97,877
Proceeds from capital reduction of financial assets carried at cost 193 6 -
Proceeds from disposal of property and equipment 1,799 56 2,893
Acquisitions of property and equipment ( 466,857 ) ( 14,496 ) ( 387,520 )
Net cash used in investing activities ( 462,118 ) ( 14,349 ) ( 414,826 )
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in borrowed funds ( 5,484,667 ) ( 170,299 ) ( 8,447,447 )
Decrease in financial bonds payable - - ( 14,000,000 )
Decrease in deposits received ( 633,181 ) ( 19,660 ) ( 390,057 )
Payments of cash dividends ( 12,804,350 ) ( 397,577 ) ( 11,088,000 )
Proceeds from issuance of common stock - - 24,084,500
Net cash (used in) provided by financing activities ( 18,922,198 ) ( 587,536 ) ( 9,841,004 )
EFFECT OF EXCHANGE RATE CHANGES ( 1,238,798 ) ( 38,465 ) ( 217,163 )
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 18,973,543 ) ( 589,131 ) 37,042,749
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 442,010,135 13,724,466 404,967,386
CASH AND CASH EQUIVALENTS, END OF YEAR $ 423,036,592 $ 13,135,335 $ 442,010,135
CASH AND CASH EQUIVALENTS COMPOSITION:
Cash and cash equivalents shown in consolidated balance sheet $ 90,426,546 $ 2,807,755 $ 145,026,871
Due from the Central Bank and call loans to bank meeting the definition of cash and
cash equivalents as stated in IAS No. 7 "Cash Flow Statements" 328,354,078 10,195,432 287,547,395
Securities purchased under resale agreements meeting the definition of cash and cash
equivalents as stated in IAS No. 7 "Cash Flow Statements" 4,255,968 132,148 9,435,869
CASH AND CASH EQUIVALENTS, END OF YEAR $ 423,036,592 $ 13,135,335 $ 442,010,135
The accompanying notes are an integral part of these financial statements.

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39 Annual Report 2016

 MEGA INTERNATIONAL COMMERCIAL BANK CO., LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2016 AND 2015
(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT AS OTHERWISE INDICATED)
1. HISTORY AND ORGANIZATION
(1) Mega International Commercial Bank Co., Ltd. (the “Bank”; formerly The International Commercial Bank of China Co., Ltd.) was
reorganized on December 15, 1971 in accordance with the “Law for International Commercial Bank of China” as announced by the President
of the Republic of China (R.O.C.) (which was then abolished in December, 2005) and other related regulations. As of December 31, 2002,
the Bank became an unlisted wholly owned subsidiary of Mega Financial Holding Co. Ltd., through a share swap transaction. With the view
to enlarging business scale and increasing market share, the Bank entered into a merger agreement with Chiao Tung Bank Co., Ltd. on
August 21, 2006, the effective date of the merger. The Bank was later renamed Mega International Commercial Bank Co., Ltd. Mega
Financial Holding Co., Ltd. holds 100% equity interest in the Bank and is the Bank’s ultimate parent company.
(2) The Bank engages in the following operations: (a) commercial banking operations authorized by the R.O.C. Banking Law; (b) foreign
exchange and related operations; (c) import and export financing and guarantees; (d) financial operations related to international trade; (e)
trust operations; (f) investment services on consignments by clients; (g) loan operations, including mid-term to long-term development loan
and guarantee operations; (h) venture capital activities; and (i) other related operations approved by the R.O.C. government.
(3) The Bank’s business and operations are widely managed by the head office. The Bank expands its network by opening branches at key
locations in both domestic and foreign markets. The Bank was incorporated as company limited by shares under the provisions of the
Company Law of the Republic of China (R.O.C.). As of December 31, 2016 the Bank had 107 domestic branches, 22 overseas branches, 5
overseas sub-branches,4 overseas representative offices, and 1 marketing office.
(4) The Trust Department of the Bank is primarily responsible for planning, management and operation of trust investment businesses regulated
by the R.O.C. Banking Law.
(5) As of December 31, 2016 and 2015, the Bank and its subsidiaries had 5,733 and 5,667 employees, respectively.
2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR
AUTHORIZATION
These consolidated financial statements were authorized for issuance by the Board of Directors on March 24, 2017.
3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS
(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the
Financial Supervisory Commission (“FSC”)
None.
(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Bank and its subsidiaries
New standards, interpretations and amendments endorsed by the FSC effective from 2017 are as follows:
Effective Date by
International Accounting
New Standards, Interpretations and Amendments Standards Board
Investment entities: applying the consolidation exception(amendments to IFRS 10, IFRS 12 and IAS 28) January 1, 2016
Accounting for acquisition of interests in joint operations(amendments to IFRS 11) January 1, 2016
IFRS 14,‘Regulatory deferral accounts’ January 1, 2016
Disclosure initiative (amendments to IAS 1) January 1, 2016
Clarification of acceptable methods of depreciation and amortisation (amendments to IAS 16 and IAS 38) January 1, 2016
Agriculture: bearer plants (amendments to IAS 16 and IAS 41) January 1, 2016
Defined benefit plans: employee contributions (amendments to IAS 19R) July 1, 2014
Equity method in separate financial statements (amendments to IAS 27) January 1, 2016
Recoverable amount disclosures for non-financial assets (amendments to IAS 36) January 1, 2014
Novation of derivatives and continuation of hedge accounting (amendments to IAS 39) January 1, 2014
IFRIC 21, ‘Levies’ January 1, 2014
Improvements to IFRSs 2010-2012 July 1, 2014
Improvements to IFRSs 2011-2013 July 1, 2014
Improvements to IFRSs 2012-2014 January 1, 2016
As of the date the consolidated financial statements were issued, the above standards and interpretations have no significant impact to the
Bank and its subsidiaries’ financial condition and operating result.
(3) IFRSs issued by IASB but not yet endorsed by the FSC
New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs endorsed by the FSC effective from 2017
are as follows:

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Mega ICBC 40
 Effective Date by
International Accounting
New Standards, Interpretations and Amendments Standards Board
Classification and measurement of share-based payment transactions (amendments to IFRS 2) January 1, 2018
Applying IFRS 9 ‘Financial instruments’with IFRS 4 ‘Insurance contracts’(amendments to IFRS 4) January 1, 2018
IFRS 9, ‘Financial instruments’ January 1, 2018
To be determined by
Sale or contribution of assets between an investor and its associate or joint venture (amendments to IFRS
International Accounting
10 and IAS 28)
Standards Board
IFRS 15, ‘Revenue from contracts with customers’ January 1, 2018
Clarifications to IFRS 15, ‘Revenue from contracts with customers’ (amendments to IFRS 15) January 1, 2018
IFRS 16, ‘Leases’ January 1, 2019
Disclosure initiative (amendments to IAS 7) January 1, 2017
Recognition of deferred tax assets for unrealised losses(amendments to IAS 12) January 1, 2017
Transfers of investment property (amendments to IAS 40) January 1, 2018
IFRIC 22, ‘Foreign currency transactions and advance consideration’ January 1, 2018
Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 1,‘First-time adoption of
January 1, 2018
International Financial Reporting Standards’
Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 12, ‘Disclosure of interests in
January 1, 2017
other entities’
Annual improvements to IFRSs 2014-2016 cycle- Amendments to IAS 28, ‘Investments in associates and
January 1, 2018
joint ventures’
Except for the following, the above standards and interpretations have no significant impact to the Bank and its subsidiaries’ financial
condition and operating result. The quantitative impact will be disclosed when the assessment is complete.
A. IFRS 9, ‘Financial instruments’
(a) Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial
assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through
other comprehensive income or financial asset measured at amortised cost. Equity instruments would be classified as financial asset
at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive
income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading.
(b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’ approach. An entity assesses at each balance
sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognize 12-month
expected credit losses or lifetime expected credit losses (interest revenue would be calculated on the gross carrying amount of the
asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the
impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Company shall always
measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant
financing component.

B. IFRS 15, ‘Revenue from contracts with customers’

IFRS 15, ‘Revenue from contracts with customers’ replaces IAS 11 ‘Construction Contracts’, IAS 18 ‘Revenue’ and relevant interpretations.
According to IFRS 15, revenue is recognized when a customer obtains control of promised goods or services. A customer obtains control
of goods or services when a customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the
asset.
The core principle of IFRS 15 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognizes
revenue in accordance with that core principle by applying the following steps:
Step 1: Identify contracts with customer.
Step 2: Identify separate performance obligations in the contract(s).
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price.
Step 5: Recognize revenue when the performance obligation is satisfied.
Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity to disclose sufficient information to enable
users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts
with customers.
C. IFRS 16, ‘Leases’
IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognize a 'right-of-
use asset' and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays
the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases
differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been
consistently applied to all the periods presented, unless otherwise stated.

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41 Annual Report 2016

(1) Compliance statement
The consolidated financial statements of the Bank and its subsidiaries have been prepared in accordance with the “Regulations Governing the
Preparation of Financial Reports by Public Banks”, International Financial Reporting Standards, International Accounting standards, IFRIC
Interpretations, and SIC Interpretations as endorsed by the FSC ( collectively referred herein as the “IFRSs”).
(2) Basis for preparation
Except for financial assets and financial liabilities (including derivative instruments) at fair value, defined benefit liabilities recognized based
on the net amount of pension fund assets less present value of defined benefit obligation, and available-for-sale financial assets measured at
fair value, these consolidated financial statements have been prepared under the historical cost convention.
The analysis of expense is classified based on the nature of expenses.
The management has to make certain significant accounting estimates based on their professional judgment and decide the accounting policy
according to the IFRSs as endorsed by the FSC. Any change in the assumption could result in a significant change in the financial statements.
The management of the Bank and its subsidiaries believes that the assumptions used in the consolidated statements are appropriate. For highly
complicated matters, matters requiring high level of judgments, significant judgments that could have an impact on the consolidated financial
statements and estimates and key sources of assumption uncertainty, please refer to Note 5 for further details.
(3) Basis for preparation of consolidated financial statements
A. All subsidiaries are included in the Bank and its subsidiaries’ consolidated financial statements. Subsidiaries are all entities controlled by
the Bank. The Bank controls an entity when the Bank is exposed, or has rights, to variable returns from its involvement with the entity and
has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Bank obtains
control of the subsidiaries and ceases when the Bank loses control of the subsidiaries.
Inter-company transactions, balances and unrealized gains or losses on transactions between companies within the Bank and its subsidiaries
are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by
the Bank.
Profit or loss and each component of other comprehensive income are attributed to the owners of the parent. Total comprehensive income
is also attributed to the owners of the parent.
B. Subsidiaries included in the consolidated financial statements:
Name of Major business Percentage of holding shares (%)
investor Name of subsidiaries activities December 31, 2016 December 31, 2015
The Bank Mega International Commercial Bank Commercial Banking 100.00 100.00
(Canada)
The Bank Mega International Commercial Public Commercial Banking 100.00 100.00
Co., Ltd.(Thailand)
C. Subsidiaries not included in the consolidated financial statements:
Percentage of holding shares (%)
Name of investor Name of subsidiaries Major business activities December 31, 2016 December 31, 2015
The Bank Cathay Investment & International Investment & Exploration 100.00 100.00
Development
Corporation (Bahamas)
The Bank Mega Management Venture capital and management 100.00 100.00
Consulting Co., Ltd. consulting etc
The Bank Cathay Investment & 1.Storage and warehousing of imported 100.00 100.00
Warehousing Co., S.A. commodities
2.Manage and make the investment for
the business in foreign trade business
The Bank Ramlett Finance Holdings Real estate investment industry 100.00 100.00
Inc.
The Bank Yung-Shing Industries Packaging, printing and agency of 99.56 99.56
Co. manpower service
The Bank China Products Trading Investments in products businesses, 68.27 68.27
Company storage businesses and other businesses
Yung-Shing Win Card Co., Ltd Corporate management consulting, data 100.00 100.00
Industries Co. processing business and general
advertising services
Yung-Shing ICBC Asset Management Investment consulting, corporate 100.00 100.00
Industries Co. & Consulting Co., Ltd management consulting and venture
investment management consulting
As the individual total assets or operating revenue amounts of the above subsidiaries are immaterial, the accounts of these subsidiaries are
not included in the Bank’s consolidated financial statements although the Bank holds more than 50% equity interest in these subsidiaries.
The investments of certain subsidiaries are accounted for under equity method.
D. Adjustments for subsidiaries with different balance sheet dates: None.
E. Nature and extent of the restrictions on fund remittance from subsidiaries to the parent company: None.

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 (4) Foreign currency translations
A. Functional and presentation currency
Items included in the financial statements of each of the Bank and its subsidiaries’ entities are measured using the currency of the primary
economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in
New Taiwan Dollars, which is the Bank’s functional and the Bank and its subsidiaries’ presentation currency.
B. Transactions and balances
The transactions denominated in foreign currency or to be settled in foreign currency are translated into a functional currency at the spot
exchange rate between the functional currency and the underlying foreign currency on the date of the transaction.
Foreign currency monetary items should be reported using the closing rate (market exchange rate) at the date of each balance sheet. When
multiple exchange rates are available for use, they should be reported using the rate that would be used to settle the future cash flows of
the foreign currency transactions or balances at the measurement date. Foreign currency non-monetary items measured at historical cost
should be reported using the exchange rate at the date of the transaction. Foreign currency non-monetary items measured at fair value
should be reported at the rate that existed when the fair values were determined.
Exchange differences arising when foreign currency transactions are settled or when monetary items are translated at rates different from
those at which they were translated when initially recognized or in previous financial statements are reported in profit or loss in the period.
If a gain or loss on a non-monetary item is recognized in other comprehensive income, any foreign exchange component of that gain or
loss is also recognized in other comprehensive income. Conversely, if a gain or loss on a non-monetary item is recognized in profit or loss,
any foreign exchange component of that gain or loss is also recognized in profit or loss.
C. Translation of foreign operations
The operating results and financial position of the entire Bank and its subsidiaries’ entities in the consolidated financial statements that
have a functional currency (which is not the currency of a hyperinflationary economy) different from the presentation currency are
translated into the presentation currency as follows:
(A) Assets and liabilities presented are translated at the Bank and its subsidiaries’ closing exchange rate at the date of that balance sheet;
(B) The profit and loss presented is translated by the average exchange rate in the period (except for the situation that the exchange rate
on the trade date shall be adopted when the exchange rate fluctuate rapidly); and
(C) All resulting exchange differences are recognized in other comprehensive income.

The translation differences arising from above processes are recognized as ‘Cumulative translation differences of foreign operations’ under
equity items.
(5) Cash and cash equivalents
“Cash and cash equivalents” in the consolidated balance sheet includes cash on hand, due from other banks, short-term highly liquid
investments that are readily convertible to known amount of cash and subject to an insignificant risk of changes in value. In respect of the
consolidated statements of cash flows, cash and cash equivalents include cash and cash equivalents in the consolidated balance sheet, due from
the central bank and call loans to banks meeting the definition of cash and cash equivalents as stated in IAS No.7 “Cash Flow Statements”,
and securities purchased under resale agreements meeting the definition of cash and cash equivalents as stated in IAS No. 7 “Cash Flow
Statements” as endorsed by the FSC.
(6) Bills and bonds under repurchase or resale agreements
The transactions of bills and bonds with a condition of repurchase agreement or resell agreement are accounted for under the financing method.
The interest expense and interest income are recognized as incurred at the date of sale and purchase and the agreed period of sale and purchase.
The repo trade liabilities, bond liabilities, reverse repo trade bills and bond investments are recognized at the date of sale or purchase.
(7) Financial assets or liabilities
The financial assets and liabilities of the Bank and its subsidiaries including derivatives are recognized in the consolidated balance sheet and
are properly classified in accordance with IFRSs as endorsed by the FSC.
A. Financial assets
The IFRSs as endorsed by the Financial Supervisory Commission apply to the entire Bank and its subsidiaries’ financial assets, which are
classified into four categories: loans and receivables, financial assets at fair value through profit or loss, available-for-sale financial assets
and held-to-maturity financial assets.
(A) A regular way purchase or sale
Financial assets that are purchased or sold on a regular way purchase or sale basis should be recognized and derecognized using trade
date accounting or settlement date accounting. The uniform accounting principles should be applied in the accounting for purchase
and sale of financial assets of the same type. All the Bank and its subsidiaries’ financial assets are accounted for using trade date
accounting.
(B) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
There are two types of loans and receivables: one is originated by the Bank and its subsidiaries; the other is not originated by the
Bank and its subsidiaries. Loans and receivables originated by the entity refer to the direct provision by the Bank and its subsidiaries
of money, merchandise or services to debtors, and loans and receivables not originated by the Bank and its subsidiaries are loans and
receivables other than those originated by the Bank and its subsidiaries.

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 Loans and receivables are initially recognized at fair value, which includes the price of transaction, significant costs of transaction,
significant handling fees paid or received, discount and premium, etc., and subsequently measured using the effective interest method.
However, if the effect of discount is insignificant, following the “Regulations Governing the Preparation of Financial Reports by
Public Banks”, loans and receivables can be measured at initial amount.
Interest accruing on loans and receivables is recognized as ‘interest revenue’. An impairment loss is recognized when there is an
objective evidence of impairment on loans and receivables. Allowance for impairment is a deduction to carrying amount of loans
and receivables, which is under the ‘allowance for bad debts and reserve for guarantee liabilities’ account.
(C) Financial assets at fair value through profit or loss
Financial assets are classified as financial assets at fair value through profit or loss if they are acquired principally for the purpose of
selling or repurchasing or gaining profit in the short-term, or if they are derivative instruments. These financial assets are initially
recognized at fair value.
Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:
a. Hybrid (combined) contracts; or
b. They eliminate or significantly reduce a measurement or recognition inconsistency; or
c. They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or
investment strategy.
Any changes in fair value of financial assets at fair value through profit or loss and financial assets designated as at fair value through
profit or loss on initial recognition are recognized under the ‘gain/loss on financial assets and liabilities at fair value through profit
or loss’ account in the consolidated statement of comprehensive income.
(D) Held-to-maturity financial assets
Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturity date that
the Bank and its subsidiaries have the positive intention and ability to hold to maturity other than those that meet the definition of
loans and receivables, designated as available-for-sale financial assets and those that are designated as at fair value through profit or
loss on initial recognition by the Bank and its subsidiaries.
Interest accruing on held-to-maturity financial assets is recognized as ‘interest revenue’. An impairment loss is recognized when
there is an objective evidence of impairment on financial assets. Impairment loss is a deduction to carrying amount of financial assets,
which is recognized under the ‘impairment loss on financial assets’ account.
(E) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are not classified in held-to-maturity financial assets, financial assets at
fair value through profit or loss and loans and receivables. Financial assets and liabilities that are attributed to equity and debt
investments on initial recognition are assessed at fair value. Transaction costs which are attributable to the acquisition should be
capitalized.
Available-for-sale financial assets are measured at fair value with changes in fair value recognized in other comprehensive income.
When the financial asset is no longer recognized, the cumulative unrealized gain or loss that was previously recognized in other
comprehensive income is recognized in profit or loss.
An impairment loss is recognized when there is an objective evidence of impairment. If financial assets have not been derecognized,
accumulated impairment loss related to the financial assets that was previously recognized in other comprehensive income shall be
reclassified to profit or loss. Impairment loss of an investment in an equity instrument recognized in profit or loss shall not be reversed
through profit or loss. Any subsequent increases in fair value of an investment in an equity instrument are recognized in other
comprehensive income. If the impairment loss of bond investments decreases with objective evidence indicating that an impairment
loss has been incurred after the impairment is recognized, the impairment amount is reversed and recognized in current profit and
loss.
Equity instruments with no quoted price in an active market are initially recognized at fair value plus acquisition or issuance cost.
The fair value can be reasonably estimated when the following criteria are met at the balance sheet date: (a) the variability in the
range of reasonable fair value estimate is not significant for that equity instrument; or (b) probabilities of the various estimates within
the range can be reasonably assessed and used in estimating fair value.
(F) Other financial assets
Other financial assets include investments in debt instruments without active market, overdue receivables not from lending, bill of
exchange negotiated and financial assets measured at cost.
a. Debt investments with no active market
Investments in debt instruments without active market are initially recognized at fair value on the trade date plus transaction costs
of acquisition or issuance. Disposal gain or loss is recognized when such investments are derecognized. Bond investments without
active market are measured at amortized cost using the effective interest method.

b. Equity investments carried at cost

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be
reliably measured or derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are
presented in ‘equity investments carried at cost’.

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 B. Financial liabilities
Financial liabilities held by the Bank and its subsidiaries comprise financial liabilities at fair value through profit or loss (including financial
liabilities designated as at fair value through profit or loss on initial recognition) and financial liabilities measured at amortized cost.
(A) Financial liabilities at fair value through profit or loss
This category includes financial liabilities held for trading or financial liabilities designated as at fair value through profit or loss on
initial recognition.
A financial liability shall be classified as held for trading, if it is incurred principally for the purpose of repurchasing it in the near
term; or on initial recognition, is part of a portfolio of identified financial instruments that are managed together and for which there
is evidence of a recent actual pattern of short-term profit-taking. A derivative is also classified as held for trading, except for a
derivative that is a financial guarantee contract or a designated and effective hedging instrument. Financial liability held for trading
also includes the obligations of delivery of financial assets borrowed by the seller. Above financial liability is shown as “financial
liability at fair value through profit or loss” in the consolidated balance sheet.
At initial recognition, it is not revocable if a debt instrument is designated at fair value through profit and loss. When the fair value
method is adopted, the main contract and the embedded derivative need not be recognized respectively.
Any changes in fair value of financial liabilities at fair value through profit or loss and financial liabilities designated as at fair value
through profit or loss on initial recognition are recognized under the ‘gain/loss on financial assets and liabilities at fair value through
profit or loss’ account in the consolidated statement of comprehensive income.
(B) Financial liabilities measured at amortized cost
All other financial liabilities that are not classified as financial liabilities at fair value through profit or loss are classified as financial
liabilities measured at amortized cost.
C. Determination of fair value
Fair value and level information of financial instruments are provided in Note 7.
D. Derecognition of financial instruments
The Bank and its subsidiaries derecognize a financial asset when one of the following conditions is met:
(A) The contractual rights to receive cash flows from the financial asset expire.
(B) The contractual rights to receive cash flows from the financial asset have been transferred and the Bank and its subsidiaries have
transferred substantially all risks and rewards of ownership of the financial asset.
(C) The contractual rights to receive cash flows from the financial asset have been transferred; however, it has not retained control of the
financial asset.
A financial liability is derecognized when the obligation under the liability specified in the contract is discharged or cancelled or
expires.
In case of securities lending or borrowing by the Bank and its subsidiaries or provision of bonds or stocks as security for repo trading, the
Bank and its subsidiaries does not derecognize the financial asset, because substantially all risks and rewards of ownership of the financial
asset are still retained in the Bank and its subsidiaries.
(8) Offsetting financial instruments
Financial assets and liabilities are offset and reported in the net amount in the consolidated balance sheet when (A) there is a legally enforceable
right to offset the recognized amounts and (B) there is an intention to settle on a net basis or realize the asset and settle the liability
simultaneously.
(9) Financial asset-evaluation, provision and reversal of impairment losses
A. The Bank and its subsidiaries would presume that a financial asset or a group of financial assets is impaired and recognize the impairment
losses only if there is objective evidence that a financial asset or a group of financial assets is impaired as a result of a loss event that
occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset
or group of financial assets.
B. The criteria that the Bank and its subsidiaries use to determine whether there is objective evidence of an impairment loss is as follows:
(A) Significant financial difficulty of the issuer or debtor;
(B) A breach of contract, such as a default or delinquency in interest or principal payments;
(C) The Bank and its subsidiaries, for economic or legal reasons relating to the borrower’s financial difficulty, granted the borrower a
concession that a lender would not otherwise consider;
(D) It becomes probable that the borrower will enter bankruptcy or other financial reorganization;
(E) The disappearance of an active market for that financial asset because of financial difficulties;
(F) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets
since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the
group, including adverse changes in the payment status of borrowers in the group or national or local economic conditions that
correlate with defaults on the assets in the group;

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 (G) Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal
environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered;
or
(H) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
(I) Others are implemented in accordance with the Bank and its subsidiaries’ internal policies.
C. The assessment methods of impairment on loans and receivables are based on two categories: individual and collective assessments.
Individual assessments are classified as different groups based on whether there is objective evidence of significant impairment of the asset
or whether the individual asset has to be specially supervised. If no objective evidence of impairment exists for an individually assessed
financial asset, the asset will be classified into a group of financial assets with similar credit risk characteristics for collective assessments.
D. After assessed impairment of loans and receivables, the Bank and its subsidiaries recognizes’ impairment loss measured as the difference
between the asset’s carrying amount and the present value of estimated future cash flows of credit enhancement factors discounted at the
asset’s original effective interest rate. The credit enhancement factors include financial guarantee and net of collateral. If, in a subsequent
period, the amount of the impairment loss decreased and such decrease is objectively related to an event occurred after the impairment was
recognized, the amount of impairment loss recognized previously shall be reversed by adjusting the allowance for doubtful debts. The
reversal shall not cause a carrying amount of the financial asset that exceeds the amortized cost of the period before recognition of the
impairment loss. The amount of reversal shall be recognized in profit or loss.
E. Aforementioned assessment of loans and receivables were in accordance with “Regulations Governing the Procedures for Banking
Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans”, Financial-Supervisory-Banks Letter. No. 10300329440
of the FSC related to strengthening domestic banks’ tolerance of real estate mortgage risk on December 4, 2014 and Financial-Supervisory-
Banks Letter. No.10410001840 of the FSC related to strengthening domestic banks’ controls and tolerance of risk exposure in Mainland
China on April 23, 2015.
F. Equity investments carried at cost
The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated
future cash flows discounted at current market return rate of similar financial assets, and is recognized in profit or loss. Impairment loss
recognized for this category shall not be reversed subsequently. Impairment loss is recognized by adjusting the carrying amount of the
asset directly.
(10) Derivatives
Derivatives are initially recognized at fair value at the contract date and subsequently measured by fair value. The fair value includes the public
quotation in an active market or the latest trade price (e.g., Exchange-traded options), and evaluation techniques such as cash flow discounting
model or option pricing model (e.g., Swap contract and foreign exchange contracts). All derivatives are recognized as assets when the fair
value is positive and as liabilities when the fair value is negative.
Hybrid contract refers to financial instruments of the embedded derivatives. Economic characteristics and risks of the embedded derivatives
and the economic characteristics of the main contract should be examined for the embedded derivatives. If the two are not closely correlated
and the main contract is not a financial asset or liability at fair value through profit and loss, the main contract and embedded derivatives
should be respectively recognized unless the overall hybrid contract is designated as assets or liabilities at fair value through profit and loss.
The embedded derivatives are the financial assets or liabilities at fair value through profit and loss.
(11) Investments accounted for under the equity method
A. Associates are all entities over which the Bank and its subsidiaries have significant influence but not control. In general, it is presumed
that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee.
Investments in associates are accounted for using the equity method and are initially recognized at cost.
B. The Bank and its subsidiaries’ share of its associates’ post-acquisition profits or losses is recognized in profits or loss, and its share of post-
acquisition movements in other comprehensive income is recognized in other comprehensive income. When the Bank and its subsidiaries’
share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Bank and its
subsidiaries do not recognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the
associate.
C. Unrealized gains on transactions between the Bank and its subsidiaries and its associates are eliminated to the extent of the Bank and its
subsidiaries’ interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of
the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted
by the Bank and its subsidiaries.
D. When changes in an associate’s equity that are not recognized in profit or loss or other comprehensive income of the associates and such
changes not affecting the Bank and its subsidiaries’ ownership percentage of the associate, the Bank and its subsidiaries recognized the
Bank and its subsidiaries’ share of change in equity of the associate in ‘capital reserve’ in proportion to its ownership.
E. When the Bank and its subsidiaries disposes its investment in an associate, if it loses significant influence over this associate, the amounts
previously recognized as other comprehensive income in relation to the associate are transferred to profit or loss. If it still retains significant
influence over this associate, then the amounts previously recognized as other comprehensive income in relation to the associate are
transferred to profit or loss proportionately.
(12) Property and equipment
The property and equipment of the Bank and its subsidiaries are recognized on the basis of the historical cost less accumulated depreciation.
Historical cost includes all costs directly attributable to the acquisition of the assets.

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 Such assets are subsequently measured using the cost model. Subsequent costs are included in the asset’s carrying amount or recognized as a
separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Bank and its
subsidiaries and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and
maintenance are charged to profit or loss during the financial period in which they are incurred.
Land is not affected by depreciation. Depreciation for other assets is provided on a straight-line basis over the estimated useful lives of the
assets till residual value. If each part of an item of property and equipment with a cost that is significant in relation to the total cost of the item
must be depreciated separately.
The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. If
expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future
economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8,
‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change. The estimated useful lives of property, plant
and equipment are as follows:
Item Year
Buildings and accessory equipment 1~60
Machinery and computer equipment 1~20
Transportation equipment 1~10
Other equipment 3~10
(13) Investment property
The properties held by the Bank and its subsidiaries, with an intention to obtain long-term rental profit or capital increase or both and not being
used by any other enterprises of the consolidated entities, are classified as investment property. Investment property includes the office building
and land leased out in a form of operating lease.
Part of the property may be held by the Bank and its subsidiaries and the remaining will be used to generate rental income or capital appreciation.
If the property held by the Bank and its subsidiaries can be sold individually, then the accounting treatment should be made respectively.
When the future economic benefit related to the investment property is highly likely to flow into the Bank and its subsidiaries and the costs
can be reliably measured, the investment property shall be recognized as assets. When the future economic benefit generated from subsequent
costs is highly likely to flow into the entity and the costs can be reliably measured, the subsequent expenses of the assets shall be capitalized.
All maintenance cost are recognized as incurred in the consolidated statement of comprehensive income.
An investment property is stated initially at its cost and measured subsequently using the cost model. The depreciation method, remaining
useful life and residual value should apply the same rules as applicable for property and equipment.
(14) Foreclosed properties
Foreclosed properties are stated at the lower of carrying amount or fair value less selling cost on the financial reporting date.
(15) Impairment of non-financial assets
The Bank and its subsidiaries assess at each balance sheet date the recoverable amounts of those assets where there is an indication that they
are impaired. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less cost to sell or value in use. When the circumstances or reasons for recognizing
impairment loss for an asset in prior years no longer exist or diminish, the impairment loss shall be reversed. The increased carrying amount
due to reversal should not be more than what the depreciated or amortized historical cost would have been if the impairment had not been
recognized.
(16) Provisions for liabilities, contingent liabilities and contingent assets
When all the following criteria are met, the Bank and its subsidiaries shall recognize a provision:
A. A present obligation (legal or constructive) as a result of a past event;
B. It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and
C. The amount of the obligation can be reliably estimated.
If there are several similar obligations, the outflow of economic benefit as a result of settlement is determined based on the overall obligation.
Provisions for liabilities should be recognized when the outflow of economic benefits is probable in order to settle the obligation as a whole
even if the outflow of economic benefits from any one of the obligation is remote.
Provisions are measured by the present value of expense which is required for settling the anticipated obligation. The pre-tax discount rate is
used with timely adjustment that reflects the current market assessments on the time value of money and the risks specific to the obligation.
Contingent liability is a possible obligation that arises from past event, whose existence will be confirmed only by the occurrence or non-
occurrence of one or more uncertain future events not wholly within the control of the Bank and its subsidiaries. Or it could be a present
obligation as a result of past event but the payment is not probable or the amount cannot be measured reliably. The Bank and its subsidiaries
did not recognize any contingent liabilities but made appropriate disclosure in compliance with relevant regulations.
Contingent asset is a possible asset that arises from past event, whose existence will be confirmed only by the occurrence or non-occurrence
of one or more uncertain future events not wholly within the control of the Bank and its subsidiaries. The Bank and its subsidiaries did not
recognize any contingent assets and made appropriate disclosure in compliance with relevant regulations when the economic inflow is probable.
(17) Financial guarantee contracts
A financial guarantee contract is a contract that requires the Bank and its subsidiaries to make specified payments to reimburse the holder for
a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

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 The Bank and its subsidiaries initially recognize financial guarantee contracts at fair value on the date of issuance. The Bank and its subsidiaries
charge a service fee when the contract is signed and therefore the service fee income charged is the fair value at the date that the financial
guarantee contract is signed. Service fee received in advance is recognized in deferred accounts and amortized through straight-line method
during the contract term.
Subsequently, the Bank and its subsidiaries should measure the financial guarantee contract issued at the higher of:
A. The amount determined in accordance with IAS 37; and
B. The amount initially recognized less, when appropriate, cumulative amortization recognized in accordance with IAS 18, “Revenue”.
The best estimate of the liability amount of a financial guarantee contract requires management to exercise their judgment combined with
historical loss data based on the similar transaction experiences.
The increase in liabilities due to financial guarantee contract is recognized in “provision for loan losses and guarantee reserve”.
Assessment of above guarantee reserve is in accordance with “Regulations Governing the Procedures for Banking Institutions to Evaluate
Assets and Deal with Non-performing/ Non-accrual Loans” announced by the FSC.
(18) Employee benefits
A. Short-term employee benefits
The Bank and its subsidiaries should recognize the undiscounted amount of the short-term benefits expected to be paid in the future as
expenses in the period when the employees render service.
B. Employee preferential savings
The Bank provides preferential interest rate for employees, including flat preferential savings for current employees and flat preferential
savings for retired employees and current employees. The difference gap compared to market interest rate is deemed as employee benefits.
According to Regulation Governing the Preparation of Financial Statements by Public Banks, the preferential monthly interest paid to
current employees is calculated based on accrual basis, and the difference between the preferential interest rate and the market interest rate
is recognized under “employee benefit expense”. According to Article 30 of “Regulation Governing the Preparation of Financial
Statements by Public Banks”, the excessive interest arising from the interest rate upon retirement agreed with the employees in excess of
general market interest rate should be recognized in accordance with IAS 19, “Employee Benefits”, as endorsed by the FSC. However,
various parameters should be in compliance with competent authorities if indicated otherwise.
C. Termination benefits
Termination benefits are employee benefits provided in exchange for the termination of employment as a result from either the decisions
of the Bank and its subsidiaries to terminate an employee’s employment before the normal retirement date, or an employee’s decision to
accept an offer of redundancy benefits in exchange for the termination of employment. The Bank and its subsidiaries recognizes expense
as it can no longer withdraw an offer of termination benefits or it recognizes relating restructuring costs, whichever is earlier.
Benefits that are expected to be due more than 12 months after balance sheet date shall be discounted to their present value.
D. Post-employment benefit
The pension plan of the Bank and its subsidiaries includes both Defined Benefit Plan and Defined Contribution Plan. In addition, defined
contribution plan is adopted for employees working overseas according to the local regulations.
(A) Defined Contribution Plan
The contributions are recognized as pension expenses when they are due on an accrual basis. Prepaid contributions are recognized
as an asset to the extent of a cash refund or a reduction in the future payments.
(B) Defined Benefit Plan

a. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will
receive on retirement for their services with the Bank and its subsidiaries in current period or prior periods. The liability
recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation
at the balance sheet date less the fair value of plan assets. The defined benefit net obligation is calculated annually by
independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of
high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to
maturity approximating to the terms of the related pension liability; when there is no deep market in high-quality corporate
bonds, the Bank and its subsidiaries uses interest rates of government bonds (at the balance sheet date) instead.
b. Remeasurement arising on defined benefit plans are recognized in other comprehensive income in the period in which they
arise and are recorded as retained earnings.
c. Past service costs are recognized immediately in profit or loss.
E. Employees’ compensation and directors’ and supervisors’ remuneration
Employees’ compensation and directors’ and supervisors’ remuneration are recognized as expenses and liabilities, provided that such
recognition is required under legal obligation or constructive obligation and those amounts can be reliably estimated. Any difference
between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee
compensation is distributed by shares, the Bank and its subsidiaries calculate the number of shares based on the closing price at the previous
day of the Board of Directors’ resolution day.
(19) Employee share-based payment
For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity
instruments granted at the grant date, and are recognized as compensation cost over the vesting period, with a corresponding adjustment to

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Mega ICBC 48
 equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions.
Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number
of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. And ultimately, the amount
of compensation cost recognized is based on the number of equity instruments that eventually vest.
(20) Revenue and expense
Income and expense of the Bank and its subsidiaries are recognized as incurred. Expenses consist of employee benefit expense, depreciation
and amortization expense and other business and administration expenses. Dividend revenues are recognized within ‘Revenues other than
interest, net’ in the consolidated statement of comprehensive income when the right to receive dividends is assured.
A. Other than those classified as financial assets and liabilities at fair value through profit and loss, all the interest income and interest expense
generated from interest-bearing financial assets are calculated by effective interest rate according to relevant regulations and recognized
as “interest income” and “interest expense” in the consolidated statement of comprehensive income.
B. Service fee income and expense are recognized upon the completion of services of loans or other services; service fee earned from
performing significant items shall be recognized upon the completion of the service, such as syndication loan service fee received from
sponsor, service fee income and expense of subsequent services of loans are amortized or included in the calculation of effective interest
rate of loans and receivables during the service period. When determining whether the agreed rate of interest should be adjusted to effective
interest rate for interest-earning loans and receivables, the loans and receivables may be measured by the initial amounts if the effects on
discount are insignificant according to the “Regulation Governing the Preparation of Financial Reports by Public Banks”.
(21) Income tax
The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or loss, except to the extent that it relates to
items recognized in other comprehensive income or items recognized directly in equity, in which cases the tax is recognized in other
comprehensive income or equity.
The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the
countries where the Bank and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax
returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the
amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as
income tax expense in the year the stockholders resolve to retain the earnings.
Deferred income tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred income tax is not accounted for if it arises
from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in
subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Bank and its subsidiaries and it is probable
that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have
been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized
or the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilized. At each balance sheet date, unrecognized and recognized deferred income tax assets are reassessed.
Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to
offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.
Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax
assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend
to settle on a net basis or realize the asset and settle the liability simultaneously.
(22) Share capital and dividends
Dividends on ordinary shares are recognized in the financial statements in the period in which they are approved by the shareholders. Cash
dividends are recorded as liabilities. Stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares
on the effective date of new shares issuance; they are not recognized and only disclosed as subsequent event in the notes if the dividend
declaration date is later than the consolidated balance sheet date.
(23) Operating segments
Information of operating segments of the Bank and its subsidiaries is reported in the same method as the internal management report provided
to the chief operating decision-maker (CODM). The CODM is the person or group in charge of allocating resources to operating segments and
evaluating their performance. The CODM of the Bank and its subsidiaries is the Board of Directors.
5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY
The preparation of these consolidated financial statements requires management to make critical judgements in applying the Bank and its subsidiaries’
accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual
results and are continually evaluated and adjusted based on historical experience and other factors.
Management’s critical judgements in applying the Bank and its subsidiaries’ accounting policies that have significant impact on the consolidated
financial statements are outlined below:

(1) Financial instruments (including derivative instruments) valuation

If there is no quoted market price available in an active market for financial instruments, a valuation technique will be adopted to measure the
fair value. If there are observable data of similar financial instruments in the market, then the fair value of the underlying financial instruments
is estimated by reference to the observable data; otherwise, the fair value is estimated using the appropriate pricing models which are commonly
used in the market. The assumptions used in the pricing models should refer to the observable data in the market. However, when those data

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 are not observable from the market and/or the assumptions used in the pricing models are more subjective, the fair value of the financial
instruments may be estimated based on historical data or other information. The pricing models used by the Bank and its subsidiaries are all
evaluated and tested periodically to ensure the outputs may reflect the actual data and market prices. The primary assumptions used in
determining the fair values of financial instruments are provided in Note 7(3). The management believes the pricing models and assumptions
used have appropriately determined the fair values of financial instruments.
(2) Loan impairment
The Bank and its subsidiaries’ impairment assessments are in compliance with the regulations of regulatory authorities. The Bank and its
subsidiaries evaluates cash flows and impairment amounts, through model analysis and individual case assessment, on a monthly basis based
on several factors, such as nature of client risk and security coverage. The Bank and its subsidiaries recognize impairment loss whenever there
is observable evidence showing that impairment has occurred. This evidence includes repayment status of debtor, event that would cause
delinquency in payments, and any significantly unfavorable changes in national or local economic circumstance. Future cash flows are
estimated primarily based on the length of overdue time, the status of debtors, security coverage, guarantee of external institution and historical
experiences. The incidence of impairment and subsequent collectability rate used in impairment evaluations are estimated based on the types
of products and historical data. The Bank and its subsidiaries review the assumptions and inputs used in impairment evaluations periodically
to ensure they are all reasonable.
(3) Financial assets-impairment of equity investments
The Bank and its subsidiaries follow the guidance of IAS 39 to determine whether a financial asset-equity investment is impaired. This
determination requires significant judgement. In making this judgement, the Bank and its subsidiaries evaluate, among other factors, the
duration and extent to which the fair value of an equity investment is less than its cost and the financial health of and short-term business
outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash
flow.
If the decline of the fair value of an individual equity investment below cost was considered significant or prolonged, the Bank and its
subsidiaries would suffer a loss in its financial statements, being the transfer of the accumulated fair value adjustments recognized in other
comprehensive income on the impaired available-for-sale financial assets to profit or loss or being the recognition of the impairment loss on
the impaired equity investments carried at cost in profit or loss.
(4) Post-employment benefit
The present value of post-employment benefit obligations are estimated based on several assumptions. Any changes in those assumptions will
affect the carrying amounts of post-employment benefit obligations.
The assumptions used to determine net pension cost (revenue) comprise discount rate. The Bank and its subsidiaries determine the appropriate
discount rate at the end of each year, and use the discount rate in calculating the present value of future cash outflow of post-employment
benefit obligations. The discount rate is chosen by reference to the rate of government bonds where the currency and maturity date of
government bonds are in agreement with those of post-employment benefit obligations. Any changes in these assumptions could significantly
impact the carrying amount of defined pension obligations.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents
December 31, 2016 December 31, 2015
NT$ US$ NT$
Cash on hand and petty cash $ 15,389,485 $ 477,845 $ 16,728,085
Checks for clearance 763,191 23,697 1,234,149
Due from banks 74,276,076 2,306,281 127,066,878
Subtotal 90,428,752 2,807,823 145,029,112
Less: allowance for doubtful accounts –
due from banks ( 2,206 ) ( 68 ) ( 2,241 )

Total $ 90,426,546 $ 2,807,755 $ 145,026,871

(2) Due from the Central Bank and call loans to banks
December 31, 2016
NT$ US$
Reserve for deposits-category A $ 25,765,381 $ 800,018
Reserve for deposits-category B 37,590,523 1,167,190
Reserve for deposits-general 305 9
Reserve for deposits-foreign currency 585,654 18,185
Deposits of overseas branches with foreign Central Banks 275,864,933 8,565,638
Interbank settlement fund of Fund Center (Note) 4,895,305 152,000
Call loans to banks and bank overdrafts 188,357,264 5,848,515
Import and export loans from banks 140,799 4,372
Participate in interbank financing with risk 6,811,578 211,500
Subtotal 540,011,742 16,767,427
Less: allowance for doubtful accounts – import and export
loans from banks - -
Total $ 540,011,742 $ 16,767,427

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Mega ICBC 50
 December 31, 2015 January 1, 2015
NT$ NT$
Reserve for deposits-category A $ 22,045,377 $ 21,885,736
Reserve for deposits-category B 37,720,741 36,566,092
Reserve for deposits-general 312 5,700,300
Reserve for deposits-foreign currency 729,572 431,340
Deposits of overseas branches with foreign Central Banks 255,814,519 239,979,957
Interbank settlement fund of Fund Center (Note) 3,970,161 3,497,785
Call loans to banks and bank overdrafts 176,850,399 87,926,666
Import and export loans from banks 3,121,533 71,463,911
Participate in interbank financing with risk 5,780,241 2,782,450
Subtotal 506,032,855 470,234,237
Less: allowance for doubtful accounts – import and export
loans from banks - ( 750,371 )
Total $ 506,032,855 $ 469,483,866

Note: In accordance with the Bank Law, financial holding companies are required to appropriate an interbank settlement fund and deposit it
in the Central Bank for clearing purpose in the financial industry. The interbank settlement fund deposited in a special account in the
Central Bank has been reclassified from ‘other prepayments’ to ‘due from the Central Bank and call loans to banks’. As of December
31, 2015 and January 1, 2015, the amount has been adjusted from NT$0 thousand to NT$3,970,161 thousand and NT$3,497,785
thousand, respectively.
As required by relevant laws, the reserves for deposits are calculated at required reserve ratios based on the monthly average balances of
various deposit accounts. Reserve for deposits - category B cannot be used except upon the monthly adjustment of the reserve.

(3) Financial assets at fair value through profit or loss, net

December 31, 2016 December 31, 2015
NT$ US$ NT$
Financial assets held for trading
Stocks $ 2,866,854 $ 89,016 $ 2,791,248
Derivative instruments 3,783,124 117,466 4,857,594
Corporate bonds 23,284,785 722,995 24,426,195
Financial bonds 15,381,890 477,610 14,953,347
Total $ 45,316,653 $ 1,407,087 $ 47,028,384

A. Gain (loss) on financial assets and liabilities held for trading and gain (loss) on financial liabilities designated as at fair value through
profit or loss recognized for the years ended December 31, 2016 and 2015 are provided in Note 6(27).

B. As of December 31, 2016 and 2015, the above financial assets were not pledged to other parties as collateral for business reserves and
guarantees.

C. As of December 31, 2016 and 2015, the aforementioned bonds that were recognized as financial assets at fair value through profit or loss
had not been sold under repurchase agreement.
(4) Receivables, net

December 31, 2016 December 31, 2015

NT$ US$ NT$
Factoring receivable $ 36,988,054 $ 1,148,483 $ 37,366,842
Accrued interest 5,110,512 158,682 4,883,082
Earned revenue receivable 923,320 28,669 2,491,552
Acceptances receivable 8,240,037 255,854 8,884,055
Accounts receivable factoring -D/A - - 2,321,722
Accounts receivable -Credit card 4,452,488 138,250 4,392,227
Accounts receivable -Usance L/C at sight 9,008 280 566,463
Accounts receivable -Usance L/C buyout 1,879,409 58,356 75,146,660
Call loan to central bank rceivable - - 3,617,684
Other receivables 3,251,101 100,947 4,824,613
Total 60,853,929 1,889,521 144,494,900
Less: Allowance for bad debts ( 1,428,738 ) ( 44,362 ) ( 1,973,545 )
Receivables, net $ 59,425,191 $ 1,845,159 $ 142,521,355

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51 Annual Report 2016

(5) Bills discounted and loans, net
December 31, 2016 December 31, 2015
NT$ US$ NT$
Bills and notes discounted $ 14,859 $ 461 $ 5,297
Overdrafts 1,977,856 61,413 3,275,060
Short-term loans 389,317,574 12,088,355 414,857,588
Medium-term loans 773,175,872 24,007,200 799,129,828
Long-term loans 563,521,555 17,497,409 566,026,842
Import/export bills negotiated 12,512,002 388,499 12,257,141
Loans transferred to non-accrual loans 1,453,280 45,125 1,183,527
Total 1,741,972,998 54,088,462 1,796,735,283
Less: Allowance for bad debts ( 26,694,232 ) ( 828,859 ) ( 23,466,229
Bills discounted and loans, net $ 1,715,278,766 $ 53,259,603 $ 1,773,269,054

A. As of December 31, 2016 and 2015, the amounts of reclassified non-performing loans (overdue for more than six months) were
NT$1,453,280 thousand and NT$1,183,527 thousand, respectively, to ‘overdue receivables’ account. These amounts included interest
receivable of NT$7,916 thousand and NT$8,453 thousand, respectively.
B. Movements in allowance for credit losses
Information as to the evaluations of impairment of the Bank and its subsidiaries’ loans and receivables as of December 31, 2016 and 2015
was as follows:
(A) Loans
December 31, 2016
Allowance for Allowance for
credit losses credit losses
Item Loans (NT$) Loans (US$) (NT$) (US$)
With existing objective evidence of Individual
individual impairment assessment $ 12,627,826 $ 392,096 $ 2,938,804 $ 91,250
Collective
assessment 751,171 23,324 105,651 3,281
Without existing objective evidence of Collective
individual impairment assessment 1,728,594,001 53,673,042 23,649,777 734,328

December 31, 2015

Item Loans (NT$) Allowance for credit losses (NT$)
With existing objective evidence of Individual
individual impairment assessment $ 10,360,021 $ 2,662,517
Collective
assessment 785,745 117,172
Without existing objective evidence of Collective
individual impairment assessment 1,785,589,517 20,686,540

(B) Receivables:

December 31, 2016

Allowance Allowance for
Receivables Receivables for credit losses credit losses
Item (NT$) (US$) (NT$) (US$)
With existing objective evidence of Individual
individual impairment assessment $ 931,696 $ 28,929 $ 685,852 $ 21,296
Collective
assessment 257,952 8,009 26,785 831
Without existing objective evidence of Collective
individual impairment assessment 59,664,281 1,852,583 716,101 22,235

December 31, 2015

Item Receivables (NT$) Allowance for credit losses (NT$)
With existing objective evidence of Individual
individual impairment assessment $ 115,941 $ 79,253
Collective
assessment 268,100 26,795
Without existing objective evidence of Collective
individual impairment assessment 144,110,859 1,867,497

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Mega ICBC 52
 The Bank and its subsidiaries has provided appropriate allowance for credit losses for bills discounted and loans, accounts receivables,
non-accrual loans transferred from overdue receivables and remittance purchased. Movements in allowance for credit losses for the years
ended December 31, 2016 and 2015 were shown below:
2016
NT$
Non-accrual loans
Bills transferred from Import and
discounted overdue Remittance export loans
Receivables and loans receivables purchased from bank Total
Balance, January 1 $ 1,973,545 $ 23,466,229 $ 2,879 $ 113 $ - $ 25,442,766
(Reversal) Provision ( 512,317 ) 3,680,095 - 42 - 3,167,820
Write-off-net ( 103,837 ) ( 1,749,761 ) - - - ( 1,853,598 )
Recovery of written-off credits 85,156 1,263,580 - - - 1,348,736
Effects of exchange rate changes
and others ( 13,809 ) 34,089 - - - 20,280
Balance, December 31 $ 1,428,738 $ 26,694,232 $ 2,879 $ 155 $ - $ 28,126,004

2016
US$
Non-accrual loans
Bills transferred from Import and
discounted overdue Remittance export loans
Receivables and loans receivables purchased from bank Total
Balance, January 1 $ 61,279 $ 728,629 $ 89 $ 4 $ - $ 790,001
(Reversal) Provision ( 15,908 ) 114,268 - 1 - 98,361
Write-off-net ( 3,224 ) ( 54,330 ) - - - ( 57,554 )
Recovery of written-off credits 2,644 39,234 - - - 41,878
Effects of exchange rate changes
and others ( 429 ) 1,058 - - - 629
Balance, December 31 $ 44,362 $ 828,859 $ 89 $ 5 $ - $ 873,315

2015
NT$
Non-accrual loans
Bills transferred from Import and
discounted overdue Remittance export loans
Receivables and loans receivables purchased from bank Total
Balance, January 1 $ 1,620,552 $ 21,920,032 $ 8,230 $ 74 $ 750,371 $ 24,299,259
Provision (Reversal) 368,653 ( 1,824 ) ( 192,643 ) 39 ( 750,371 ) ( 576,146 )
Write-off-net ( 42,354 ) ( 817,433 ) - - - ( 859,787 )
Recovery of written-off credits 101,074 2,347,007 187,292 - - 2,635,373
Effects of exchange rate changes
and others ( 74,380 ) 18,447 - - - ( 55,933 )
Balance, December 31 $ 1,973,545 $ 23,466,229 $ 2,879 $ 113 $ - $ 25,442,766

(6) Available-for-sale financial assets, net

December 31, 2016 December 31, 2015
NT$ US$ NT$
Stocks $ 7,662,393 $ 237,918 $ 8,823,548
Commercial papers 24,631,119 764,799 76,145,276
Bonds 169,615,230 5,266,572 134,546,263
Beneficiary securities 555,833 17,259 567,601
Beneficiary certificates - - 17,962
Certificates of deposit 3,658,813 113,607 12,414,190
Treasury securities 997,756 30,980 -
Subtotal 207,121,144 6,431,135 232,514,840
Adjustments for change in value of
investment ( 508,694 ) ( 15,795 ) ( 165,475 )
Accumulated impairment loss ( 891,513 ) ( 27,681 ) ( 842,271 )
Total $ 205,720,937 $ 6,387,659 $ 231,507,094

A. As of December 31, 2016 and 2015, the aforementioned available-for-sale financial assets amounted to NT$10,669,737 thousand and
NT$14,612,323 thousand, respectively, and were pledged to other parties as collateral for business reserves and guarantees.

B. As of December 31, 2016 and 2015, available-for-sale financial assets were sold under repurchase agreements with fair values of
NT$418,751 thousand and NT$499,076 thousand, respectively.

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53 Annual Report 2016

 C. The Bank and its subsidiaries recognized gain (loss) of NT$922,297 thousand and NT($1,474,828) thousand in other comprehensive
income for fair value change for the years ended December 31, 2016 and 2015, respectively.

D. The Bank and its subsidiaries recognized impairment loss for the long-term operating losses of the investee for the years ended December
31, 2016 and 2015. Details are provided in Note 6(29).

E. The Bank and its subsidiaries recognized interest income of NT$3,628,125 thousand and NT$3,554,187 thousand on holding debt
instruments for the years ended December 31, 2016 and 2015, respectively.

F. For the years ended December 31, 2016 and 2015, amount realised and transferred from other equity in the statements of change in equity
to current profit was NT$1,295,542 thousand and NT$886,419 thousand, respectively.

G. In consideration of increasing capital returns, the Bank and its subsidiaries have invested in structured entities issued and managed by
independent third parties-Residential Mortgage Backed Security, which are accounted for by the Bank and its subsidiaries under available-
for-sale financial assets-beneficiary securities. The above-mentioned asset securitization products have maturity dates within April, 2035
to December, 2035.

As of December 31, 2016 and 2015, the book value and the maximum credit risk exposure of structured entities is NT$60,173 thousand
and NT$110,025 thousand, respectively. The Bank and its subsidiaries recognized interest income of NT$38,406 thousand and NT$29,003
thousand on structured entities for the years ended December 31, 2016 and 2015, respectively.

(7) Held-to-maturity financial assets, net

December 31, 2016 December 31, 2015
NT$ US$ NT$
Central Bank’s certificates of deposits $ 246,125,000 $ 7,642,210 $ 171,370,000
Bank's certificates of deposits 12,937,145 401,700 -
Financial bonds 14,308,432 444,278 20,920,762
Government bonds 3,026,002 93,958 3,826,080
Corporate bonds 2,894,589 89,877 3,411,698
Total $ 279,291,168 $ 8,672,023 $ 199,528,540

A. As of December 31, 2016 and 2015, the aforementioned held-to-maturity financial assets amounted to NT$5,276,900 thousand and
NT$5,546,000 thousand, respectively, were pledged to other parties as collateral of business reserves and guarantees.

B. The Bank and its subsidiaries recognized interest income of NT$1,973,226 thousand and NT$1,845,127 thousand on holding held-to-
maturity financial assets for the years ended December 31, 2016 and 2015, respectively.

C. For held-to-maturity financial assets, as the credit rating of the issuer had been downgraded, the par value of disposed assets was USD 2
million and the loss on disposal was NT$ 189 thousand. The disposal of investment amount constituted 0.02% of total investment balance
on balance sheet date.

(8) Investments accounted for under the equity method, net

December 31, 2016

Percentage of
Shareholding
Investee Company NT$ US$ (%)
Mega Management Consulting Co., Ltd. $ 66,316 $ 2,059 100.00
Cathay Investment & Development Corporation (Bahamas) 60,195 1,869 100.00
Cathay Investment & Warehousing Co., S.A. 55,941 1,737 100.00
Ramlett Finance Holdings Inc. 6,931 215 100.00
Yung-Shing Industries Co. 690,960 21,454 99.56
China Products Trading Company 27,661 859 68.27
Mega 1 Venture Capital Co., Ltd. 27,997 869 25.00
An Feng Enterprise Co., Ltd. 11,844 368 25.00
Taiwan Finance Corporation 1,574,082 48,876 24.55
Everstrong Iron & Steel Foundry & Mfg. Corporation 43,457 1,349 22.22
China Real Estate Management Co., Ltd. 183,507 5,698 20.00
Universal Venture Capital Investment Corporation 138,127 4,289 11.84
Mega Growth Venture Capital Co., Ltd. 146,735 4,556 11.81
IP Fund Seven Limited (Note) - - -
Total $ 3,033,753 $ 94,198

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Mega ICBC 54
 December 31, 2015
Percentage of
Shareholding
Investee Company NT$ (%)
Mega Management Consulting Co., Ltd. $ 62,367 100.00
Cathay Investment & Development Corporation (Bahamas) 58,935 100.00
Cathay Investment & Warehousing Co., S.A. 59,950 100.00
Ramlett Finance Holdings Inc. 5,902 100.00
Yung-Shing Industries Co. 668,539 99.56
China Products Trading Company 27,517 68.27
Mega 1 Venture Capital Co., Ltd. 27,323 25.00
An Feng Enterprise Co., Ltd. 11,911 25.00
Taiwan Finance Corporation 1,593,538 24.55
Everstrong Iron & Steel Foundry & Mfg. Corporation 43,379 22.22
China Real Estate Management Co., Ltd. 190,196 20.00
Universal Venture Capital Investment Corporation - -
Mega Growth Venture Capital Co., Ltd. 148,712 11.81
IP Fund Seven Limited (Note) 1,364 25.00
Total $ 2,899,633

Note: The company had been incurring operating losses for a long period of time. As a result, the stockholders at their meeting resolved to
liquidate the company and scheduled the liquidation registration in year 2015. The liquidation process had been completed on August
18, 2016.

A. The carrying amount of the Bank and its subsidiaries’ interests in all individually immaterial associates and the Bank and its subsidiaries’
share of the operating results are summarized as follows:
2016 2015
NT$ US$ NT$
Profit for the period $ 227,118 $ 7,052 $ 181,009
Other comprehensive (loss) income
(after income tax) ( 62,565 ) ( 1,943 ) 21,698
Total comprehensive income $ 164,553 $ 5,109 $ 202,707

B. The shares of associates and joint ventures that the Bank and its subsidiaries own have no quoted market price available in an active
market. There is no significant restriction on fund transfer from the associates to their shareholders, i.e. distribution of cash dividends,
repayment of loans or money advanced.
C. As of December 31, 2016 and 2015, investments accounted for under the equity method were not pledged as collateral.
D. The Bank’s investment in Mega Growth Venture Capital Co., Ltd. accounted for an ownership percentage of 11.81%. However, the
combined ownership percentage of the Bank, the Bank’s subsidiaries and the Bank’s parent company was over 20%, thus the investment
is accounted for under the equity method.
E. The ownership percentage of the Bank investment in Universal Venture Capital Investment Corporation is 11.84%. However, due to the
Bank occupying 2 board seats of Universal Venture Capital Investment Corporation’s total 11 board seats, and the Bank being elected as
the chairman of the board, the Bank has influence over decision-making. Therefore, valuations are accounted for under the equity method.
(9) Other financial assets, net
December 31, 2016 December 31, 2015
NT$ US$ NT$
Remittance purchased $ 16,908 $ 525 $ 11,047
Equity investments carried at cost 10,692,246 331,995 10,890,821
Nonaccrual loans transferred from overdue receivables 5,608 174 5,626
Subtotal 10,714,762 332,694 10,907,494
Less: Allowance for bad debts – Remittance purchased ( 155 ) ( 5) ( 113 )
Less: Allowance for bad debts – Nonaccrual loans
transferred from overdue receivables ( 2,879 ) ( 89 ) ( 2,879 )
Less: Accumulated impairment - Equity investments
carried at cost ( 1,040,931 ) ( 32,321 ) ( 919,428 )
Total $ 9,670,797 $ 300,279 $ 9,985,074

A. As unlisted shares the Bank owns have no quoted market price available in an active market and cannot be measured reliably, they are
measured at cost.

B. For the years ended December 31, 2016 and 2015, the Bank and its subsidiaries recognized the impairment loss due to investees operating
at a loss over an extended period of time, please refer to Note 6(29).

C. For the years ended December 31, 2016 and 2015, gain or loss arising from disposal and dividend income received from shares of the
investee was NT$803,272 thousand and NT$764,288 thousand, respectively.

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55 Annual Report 2016

 (10) Property and equipment, net

December 31, 2016

Accumulated Accumulated Net Book
Cost Depreciation Impairment Value
(In NT Thousand Dollars)
Land and land improvements $ 9,291,941 $ - ($ 77,786 ) $ 9,214,155
Buildings and auxiliary equipment 10,137,623 ( 5,819,537 ) ( 2,158 ) 4,315,928
Computers and peripheral equipment 3,147,329 ( 2,585,763 ) - 561,566
Transportation and communication equipment 147,616 ( 121,793 ) - 25,823
Miscellaneous equipment 1,536,464 ( 1,331,502 ) - 204,962
$ 24,260,973 ($ 9,858,595 ) ( $ 79,944 ) $ 14,322,434

December 31, 2016

Accumulated Accumulated Net Book
Cost Depreciation Impairment Value
(In US Thousand Dollars)
Land and land improvements $ 288,516 $ - ($ 2,415 ) $ 286,101
Buildings and auxiliary equipment 314,774 ( 180,697 ) ( 67 ) 134,010
Computers and peripheral equipment 97,725 ( 80,288 ) - 17,437
Transportation and communication equipment 4,583 ( 3,782 ) - 801
Miscellaneous equipment 47,707 ( 41,343 ) - 6,364
$ 753,305 ( $ 306,110 ) ( $ 2,482 ) $ 444,713

December 31, 2015

Accumulated Accumulated Net Book
Cost Depreciation Impairment Value
(In NT Thousand Dollars)
Land and land improvements $ 9,282,673 $ - ($ 142,596 ) $ 9,140,077
Buildings and auxiliary equipment 10,122,738 ( 5,714,212 ) ( 14,961 ) 4,393,565
Computers and peripheral equipment 3,172,897 ( 2,681,254 ) - 491,643
Transportation and communication equipment 155,890 ( 124,408 ) - 31,482
Miscellaneous equipment 1,525,297 ( 1,303,474 ) - 221,823
$ 24,259,495 ($ 9,823,348 ) ( $ 157,557 ) $ 14,278,590

2016
Transportation
Buildings and and Computers
Land and land auxiliary communication and peripheral Miscellaneous
improvements equipment equipment equipment equipment Total
Cost (In NT Thousand Dollars)
Balance at January 1, 2016 $ 9,282,673 $ 10,122,738 $ 155,890 $ 3,172,897 $ 1,525,297 $ 24,259,495
Additions for the year 10,635 123,635 6,196 278,546 47,845 466,857
Disposals for the year - ( 67,240 ) ( 12,653 ) ( 295,920 ) ( 38,178 ) ( 413,991 )
Transfers in the current period - ( 57 ) - ( 30 ) 57 ( 30 )
Exchange adjustments ( 1,367 ) ( 41,453 ) ( 1,817 ) ( 8,164 ) 1443 ( 51,358 )
Balance at December 31, 2016 9,291,941 10,137,623 147,616 3,147,329 1,536,464 24,260,973
Accumulated depreciation
Balance at January 1, 2016 $ - ( $ 5,714,212 ) ($ 124,408 ) ( $ 2,681,254 ) ( $ 1,303,474 ) ( $ 9,823,348 )
Depreciation for the year - ( 201,572 ) ( 10,710 ) ( 205,618 ) ( 63,901 ) ( 481,801 )
Disposals for the year - 67,240 12,019 295,805 38,017 413,081
Transfers in the current period - 57 7 ( 7) ( 57 ) -
Exchange adjustments - 28,950 1,299 5,311 ( 2,087 ) 33,473
Balance at December 31, 2016 - ( 5,819,537 ) ( 121,793 ) ( 2,585,763 ) ( 1,331,502 ) ( 9,858,595 )
Accumulated impairment
Balance at January 1, 2016 ($ 142,596 ) ( $ 14,961 ) $ - $ - $ - ($ 157,557 )
Gain on reversal of impairment loss 64,810 12,803 - - - 77,613
Balance at December 31, 2016 ( 77,786 ) ( 2,158 ) - - - ( 79,944 )
Net book value of December 31, 2016 $ 9,214,155 $ 4,315,928 $ 25,823 $ 561,566 $ 204,962 $ 14,322,434

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Mega ICBC 56
 2016
Transportation
Buildings and and Computers
Land and land auxiliary communication and peripheral Miscellaneous
improvements equipment equipment equipment equipment Total
Cost (In US Thousand Dollars)
Balance at January 1, 2016 $ 288,228 $ 314,312 $ 4,840 $ 98,519 $ 47,361 $ 753,260
Additions for the year 330 3,839 192 8,649 1,485 14,495
Disposals for the year - ( 2,088 ) ( 393 ) ( 9,188 ) ( 1,186 ) ( 12,855 )
Transfers in the current period - ( 2) - ( 1) 2 ( 1)
Exchange adjustments ( 42 ) ( 1,287 ) ( 56 ) ( 254 ) 45 ( 1,594 )
Balance at December 31, 2016 288,516 314,774 4,583 97,725 47,707 753,305
Accumulated depreciation
Balance at January 1, 2016 $ - ($ 177,427 ) ( $ 3,863 ) ( $ 83,253 ) ( $ 40,473 ) ($ 305,016 )
Depreciation for the year - ( 6,259 ) ( 332 ) ( 6,385 ) ( 1,984 ) ( 14,960 )
Disposals for the year - 2,088 373 9,185 1,181 12,827
Transfers in the current period - 2 - - ( 2 ) -
Exchange adjustments - 899 40 165 ( 65 ) 1,039
Balance at December 31, 2016 - ( 180,697 ) ( 3,782 ) ( 80,288 ) ( 41,343 ) ( 306,110 )
Accumulated impairment
Balance at January 1, 2016 ($ 4,427 ) ( $ 465 ) $ - $ - $ - ($ 4,892 )
Gain on reversal of impairment loss 2,012 398 - - - 2,410
Balance at December 31, 2016 ( 2,415 ) ( 67 ) - - - ( 2,482 )
Net book value of December 31, 2016 $ 286,101 $ 134,010 $ 801 $ 17,437 $ 6,364 $ 444,713

2015
Transportation
Buildings and and Computers
Land and land auxiliary communication and peripheral Miscellaneous
improvements equipment equipment equipment equipment Total
Cost (In NT Thousand Dollars)
Balance at January 1, 2015 $ 9,476,626 $ 10,094,097 $ 158,822 $ 3,283,565 $ 1,477,467 $ 24,490,577
Additions for the year - 43,322 20,716 245,888 77,594 387,520
Disposals for the year - ( 20,179 ) ( 22,582 ) ( 355,760 ) ( 25,128 ) ( 423,649 )
Transfers in the current period ( 193,627 ) ( 11,776 ) - 606 ( 168 ) ( 204,965 )
Exchange adjustments ( 326 ) 17,274 ( 1,066 ) ( 1,402 ) ( 4,468 ) 10,012
Balance at December 31, 2015 9,282,673 10,122,738 155,890 3,172,897 1,525,297 24,259,495
Accumulated depreciation
Balance at January 1, 2015 $ - ( $ 5,524,400 ) ( $ 136,587 ) ( $ 2,835,465 ) ( $ 1,264,530 ) ( $ 9,760,982 )
Depreciation for the year - ( 200,848 ) ( 10,643 ) ( 202,801 ) ( 66,743 ) ( 481,035 )
Disposals for the year - 20,179 22,130 355,583 25,216 423,108
Transfers in the current period - 5,829 - ( 211 ) - 5,618
Exchange adjustments - ( 14,972 ) 692 1,640 2,583 ( 10,057 )
Balance at December 31, 2015 - ( 5,714,212 ) ( 124,408 ) ( 2,681,254 ) ( 1,303,474 ) ( 9,823,348 )
Accumulated impairment
Balance at January 1, 2015 ($ 195,567 ) ( $ 31,706 ) $ - $ - $ - ($ 227,273 )
Gain on reversal of impairment loss 52,971 16,745 - - - 69,716
Balance at December 31, 2015 ( 142,596 ) ( 14,961 ) - - - ( 157,557 )
Net book value of December 31, 2015 $ 9,140,077 $ 4,393,565 $ 31,482 $ 491,643 $ 221,823 $ 14,278,590

(blank below)

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57 Annual Report 2016

(11) Investment property, net
December 31, 2016
Accumulated Accumulated Net Book
Cost Depreciation Impairment Value
(In NT Thousand Dollars)
Land and land improvements $ 764,955 $ - $ - $ 764,955
Buildings and auxiliary equipment 174,134 ( 74,050 ) - 100,084
$ 939,089 ($ 74,050 ) $ - $ 865,039

December 31, 2016

Accumulated Accumulated Net Book
Cost Depreciation Impairment Value
(In US Thousand Dollars)
Land and land improvements $ 23,752 $ - $ - $ 23,752
Buildings and auxiliary equipment 5,407 ( 2,299 ) - 3,108
$ 29,159 ($ 2,299 ) $ - $ 26,860

December 31, 2015

Accumulated Accumulated Net Book
Cost Depreciation Impairment Value
(In NT Thousand Dollars)
Land and land improvements $ 764,955 $ - $ - $ 764,955
Buildings and auxiliary equipment 174,442 ( 71,340 ) - 103,102
$ 939,397 ($ 71,340 ) $ - $ 868,057

A. The fair value of the investment property held by the Bank and its subsidiaries as of December 31, 2016 and 2015 was NT$3,280,811
thousand and NT$3,124,338 thousand, respectively according to the result of valuation by an independent valuation expert using the
comparison method and land development analysis approach, which is considered to be Level 2 within the fair value hierarchy.
B. Rental income from the lease of the investment property for the years ended December 31, 2016 and 2015 was NT$17,613 thousand and
NT$15,396 thousand, respectively; direct operating expenses incident to current rental income from investment property was NT$11,969
thousand and NT$9,700 thousand, respectively.
C. For the rental revenue from the lease of the investment property among related parties, please refer to Note 11(3).
D. None of the Bank’s and its subsidiaries’ investment property as at December 31, 2016 and 2015 have been pledged or provided as
guarantees.
2016
Land and land Buildings and
improvements auxiliary equipment Total
NT$ NT$ NT$
Original cost
Balance at January 1, 2016 $ 764,955 $ 174,442 $ 939,397
Exchange adjustments - ( 308 ) ( 308 )
Balance at December 31, 2016 764,955 174,134 939,089
Accumulated depreciation
Balance at January 1, 2016 $ - ($ 71,340 ) ( $ 71,340 )
Depreciation for the year - ( 2,883 ) ( 2,883 )
Exchange adjustments - 173 173
Balance at December 31, 2016 - ( 74,050 ) ( 74,050 )
$ 764,955 $ 100,084 $ 865,039

2016
Land and land Buildings and
improvements auxiliary equipment Total
US$ US$ US$
Original cost
Balance at January 1, 2016 $ 23,752 $ 5,416 $ 29,168
Exchange adjustments - ( 9) ( 9)
Balance at December 31, 2016 23,752 5,407 29,159
Accumulated depreciation
Balance at January 1, 2016 $ - ($ 2,215 ) ( $ 2,215 )
Depreciation for the year - ( 89 ) ( 89 )
Exchange adjustments - 5 5
Balance at December 31, 2016 - ( 2,299 ) ( 2,299 )
$ 23,752 $ 3,108 $ 26,860

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Mega ICBC 58
 2015
Land and land Buildings and
improvements auxiliary equipment Total
NT$ NT$ NT$
Original cost
Balance at January 1, 2015 $ 571,328 $ 162,670 $ 733,998
Transfers in the current period 193,627 11,776 205,403
Exchange adjustments - ( 4) ( 4)
Balance at December 31, 2015 764,955 174,442 939,397
Accumulated depreciation
Balance at January 1, 2015 $ - ($ 62,803 ) ($ 62,803 )
Depreciation for the year - ( 2,710 ) ( 2,710 )
Transfers in the current period - ( 5,829 ) ( 5,829 )
Exchange adjustments - 2 2
Balance at December 31, 2015 - ( 71,340 ) ( 71,340 )
$ 764,955 $ 103,102 $ 868,057
(12) Other assets, net
December 31, 2016
NT$ US$
Temporary payments $ 750,000 $ 23,288
Refundable deposits 424,942 13,194
Prepaid expenses 121,669 3,778
Other prepayments (Note) 29,244 908
Computer software 150,984 4,688
Other deferred assets 50,585 1,571
Others 94,261 2,927
Total $ 1,621,685 $ 50,354

December 31, 2015 January 1, 2015

NT$ NT$
Temporary payments $ 595,088 $ 487,161
Refundable deposits 407,745 624,431
Prepaid expenses 129,479 104,118
Other prepayments (Note) 90,854 17,480
Computer software 162,543 199,990
Other deferred assets 57,239 22,015
Others 378 101,715
Total $ 1,443,326 $ 1,556,910

Note: Please refer to Note 6(2) for detail of the reclassification of “other prepayments” to “due from the Central Bank and call loans to banks”.
(13) Due to the Central Bank and commercial banks
December 31, 2016 December 31, 2015
NT$ US$ NT$
Call loans from the Central Bank and banks $ 216,850,548 $ 6,733,234 $ 240,309,075
Transfer deposits from China Post Co. 2,818,812 87,525 2,804,643
Overdrafts from other banks 6,597,442 204,851 6,774,116
Due to the financial institutions 44,551,667 1,383,334 40,166,749
Due to the Central Bank 115,198,538 3,576,928 129,822,256
Total $ 386,017,007 $ 11,985,872 $ 419,876,839

(14) Borrowed funds

December 31, 2016 December 31, 2015
NT$ US$ NT$
Refinancing to borrow funds from the Central Bank $ 5,909,170 $ 183,481 $ 6,528,240
Other funds borrowed from the Central Bank 4,283,398 133,000 5,031,864
Funds borrowed from other banks 29,781,859 924,730 33,898,990
Total $ 39,974,427 $ 1,241,211 $ 45,459,094

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59 Annual Report 2016

 (15) Financial liabilities at fair value through profit or loss
December 31, 2016 December 31, 2015
NT$ US$ NT$
Financial liabilities held for trading:
Derivative instruments $ 3,217,540 $ 99,905 $ 4,757,866
Financial liabilities designated as at fair value through
profit or loss:
Financial bonds 8,176,700 253,887 17,181,429
Total $ 11,394,240 $ 353,792 $ 21,939,295

A. Gain (loss) on financial assets and liabilities held for trading and gain (loss) on financial liabilities designated as at fair value through
profit or loss recognized for the years ended December 31, 2016 and 2015 are provided in Note 6(27).

B. Financial liabilities designated at fair value through profit or loss by the Bank is for the purpose of eliminating recognition inconsistency.

(16) Payables
December 31, 2016 December 31, 2015
NT$ US$ NT$
Accounts payable $ 8,531,575 $ 264,906 $ 11,021,991
Bankers’ acceptances 8,932,976 277,370 8,952,015
Dividends and bonus payable 5,679,263 176,342 5,679,263
Accrued interest 2,375,143 73,748 2,588,662
Accrued expense 3,435,119 106,661 4,796,367
Collections payable for customers 1,069,207 33,199 903,529
Other payables 2,126,256 66,021 2,007,110
Total $ 32,149,539 $ 998,247 $ 35,948,937

(17) Deposits and remittances

December 31, 2016 December 31, 2015
NT$ US$ NT$
Checking deposits $ 37,981,338 $ 1,179,325 $ 33,814,589
Demand deposits 678,871,749 21,079,046 675,995,986
Time deposits 750,665,209 23,308,241 838,334,616
Demand savings deposits 429,888,906 13,348,100 408,492,456
Time savings deposits 268,289,550 8,330,421 267,626,294
Negotiable certificates of deposit 1,544,100 47,944 1,870,100
Remittances 6,374,813 197,939 9,107,614
Total $ 2,173,615,665 $ 67,491,016 $ 2,235,241,655

(18) Financial bonds payable

December 31, 2016 December 31, 2015
NT$ US$ NT$
Subordinated Bonds $ 36,200,000 $ 1,124,014 $ 36,200,000

Financial bonds were as follows:

December 31, 2016
Interest Total issued
Name of bond Issuing period rate % amount NT$ US$ Remark
99-1 Development Interest is paid annually. The
Financial bond 2010.12.24-2017.12.24 1.53% $ 10,300,000 $ 10,300,000 $ 319,816 principal is repaid at maturity.
100-1 Development Interest is paid annually. The
Financial bond 2011.04.15-2018.04.15 1.65% 4,700,000 4,700,000 145,935 principal is repaid at maturity.
100-2 Development Interest is paid annually. The
Financial bond 2011.11.24-2018.11.24 1.62% 7,900,000 7,900,000 245,296 principal is repaid at maturity.
101-1 Development Interest is paid annually. The
Financial bond 2012.05.18-2019.05.18 1.48% 1,300,000 1,300,000 40,365 principal is repaid at maturity.
103-1 Development Interest is paid annually. The
Financial bond 2014.03.28-2021.03.28 1.70% 4,900,000 4,900,000 152,146 principal is repaid at maturity.
103-2 Development Interest is paid annually. The
Financial bond 2014.06.24-2021.06.24 1.65% 7,100,000 7,100,000 220,456 principal is repaid at maturity.
Total $ 36,200,000 $ 1,124,014

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Mega ICBC 60
 December 31, 2016
Interest Total issued
Name of bond Issuing period rate % amount US$ Remark
103-3 Financial The principal is repaid at
bond 2014.11.19-2034.11.19 0.00% US$ 90,000 $ - maturity
103-4 Financial The principal is repaid at
bond 2014.11.19-2034.11.19 0.00% US$ 30,000 30,000 maturity.
103-5 Financial The principal is repaid at
bond 2014.11.19-2034.11.19 0.00% US$ 130,000 130,000 maturity.
103-6 Financial The principal is repaid at
bond 2014.11.19-2044.11.19 0.00% US$ 175,000 - maturity.
103-7 Financial The principal is repaid at
bond 2014.11.19-2044.11.19 0.00% US$ 75,000 75,000 maturity.
Total $ 235,000

December 31, 2015

Interest Total issued
Name of bond Issuing period rate % amount NT$ Remark
99-1 Development Interest is paid annually. The
Financial bond 2010.12.24-2017.12.24 1.53% $ 10,300,000 $ 10,300,000 principal is repaid at maturity.
100-1 Development Interest is paid annually. The
Financial bond 2011.04.15-2018.04.15 1.65% 4,700,000 4,700,000 principal is repaid at maturity.
100-2 Development Interest is paid annually. The
Financial bond 2011.11.24-2018.11.24 1.62% 7,900,000 7,900,000 principal is repaid at maturity.
101-1 Development Interest is paid annually. The
Financial bond 2012.05.18-2019.05.18 1.48% 1,300,000 1,300,000 principal is repaid at maturity.
103-1 Development Interest is paid annually. The
Financial bond 2014.03.28-2021.03.28 1.70% 4,900,000 4,900,000 principal is repaid at maturity.
103-2 Development Interest is paid annually. The
Financial bond 2014.06.24-2021.06.24 1.65% 7,100,000 7,100,000 principal is repaid at maturity.
Total $ 36,200,000

December 31, 2015

Interest Total issued
Name of bond Issuing period rate % amount US$ Remark
103-3 Financial The principal is repaid at
bond 2014.11.19-2034.11.19 0.00% US$ 90,000 $ 90,000 maturity
103-4 Financial The principal is repaid at
bond 2014.11.19-2034.11.19 0.00% US$ 30,000 30,000 maturity.
103-5 Financial The principal is repaid at
bond 2014.11.19-2034.11.19 0.00% US$ 130,000 130,000 maturity.
103-6 Financial The principal is repaid at
bond 2014.11.19-2044.11.19 0.00% US$ 175,000 175,000 maturity.
103-7 Financial The principal is repaid at
bond 2014.11.19-2044.11.19 0.00% US$ 75,000 75,000 maturity.
Total $ 500,000

As of December 31, 2016 and 2015, the outstanding balances of the above mentioned financial bonds amounted to US$235 million and
US$500 million, and NT$36.2 billion and NT$36.2 billion, respectively. In addition, among the above financial bonds, the senior financial
bonds with face value of US$235 million and US$500 million were designated as financial liabilities at fair value through profit or loss and
hedged by interest rate swap contracts. As such interest rate swap contracts were valued at fair value with changes in fair value recognized as
profit or loss, the financial bonds stated above were designated as financial liabilities at fair value through profit or loss in order to eliminate
or significantly reduce recognition inconsistency.
(19) Provisions
December 31, 2016 December 31, 2015
NT$ US$ NT$
Liabilities reserve for employee benefits $ 9,262,357 $ 287,597 $ 8,682,538
Reserve for guarantee liabilities 3,691,076 114,609 3,240,886
Total $ 12,953,433 $ 402,206 $ 11,923,424

Liabilities reserve for employee benefits are as follows:

December 31, 2016 December 31, 2015
NT$ US$ NT$
Recognized in consolidated balance sheet:
-Defined benefit plans $ 5,718,311 $ 177,554 $ 5,579,717
-Employee preferential savings plans 3,544,046 110,043 3,102,821
Total $ 9,262,357 $ 287,597 $ 8,682,538

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61 Annual Report 2016

A. Defined benefit plans
(A) The Bank has a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service
years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to
continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for
each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension
benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement.
The Bank and its subsidiaries contribute monthly an amount equal to 8.766% of the employees’ monthly salaries and wages to the
retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the
Bank would assess the balance in the aforementioned labor pension reserve account by the end of December 31, every year. If the
account balance is insufficient to pay the pension calculated by the aforementioned method, to the employees expected to be qualified
for retirement next year, the Bank will make contributions to cover the deficit by next March.

(B) The amounts recognized in the balance sheet are determined as follows:

December 31, 2016 December 31, 2015

NT$ US$ NT$
Present value of funded obligations $ 15,585,176 $ 483,921 $ 15,759,783
Fair value of plan assets ( 9,866,865 ) ( 306,367 ) ( 10,180,066 )
Net defined benefit liability $ 5,718,311 $ 177,554 $ 5,579,717

(C) Movements in net defined benefit liabilities are as follows:

Present value of
defined benefit Fair value of Net defined
obligation plan assets benefit liability
(In NT Thousand Dollars)
Year ended December 31, 2016
Balance at January 1 $ 15,759,783 ($ 10,180,066 ) $ 5,579,717
Current service cost 451,430 - 451,430
Interest expense (income) 192,304 ( 125,818 ) 66,486
16,403,517 ( 10,305,884 ) 6,097,633
Remeasurements:
Return on plan assets
(excluding amounts included
in interest income or expense) - 55,644 55,644
Change in financial assumptions 396,082 - 396,082
Experience adjustments 82,611 - 82,611
478,693 55,644 534,337
Pension fund contribution - ( 913,659 ) ( 913,659 )
Paid Pension ( 1,297,034 ) 1,297,034 -
Balance at December 31 $ 15,585,176 ( $ 9,866,865 ) $ 5,718,311

Present value of
defined benefit Fair value of Net defined
obligation plan assets benefit liability
(In US Thousand Dollars)
Year ended December 31, 2016
Balance at January 1 $ 489,343 ($ 316,092 ) $ 173,251
Current service cost 14,017 - 14,017
Interest expense (income) 5,971 ( 3,907 ) 2,064
509,331 ( 319,999 ) 189,332
Remeasurements:
Return on plan assets
(excluding amounts included
in interest income or expense) - 1,728 1,728
Change in financial assumptions 12,298 - 12,298
Experience adjustments 2,565 - 2,565
14,863 1,728 16,591
Pension fund contribution - ( 28,369 ) ( 28,369 )
Paid Pension ( 40,273 ) 40,273 -
Balance at December 31 $ 483,921 ( $ 306,367 ) $ 177,554

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Mega ICBC 62
 Present value of
defined benefit Fair value of Net defined
obligation plan assets benefit liability
(In NT Thousand Dollars)
Year ended December 31, 2015
Balance at January 1 $ 14,491,116 ($ 10,075,418 ) $ 4,415,698
Current service cost 415,127 - 415,127
Interest expense (income) 247,537 ( 174,823 ) 72,714
15,153,780 ( 10,250,241 ) 4,903,539
Remeasurements:
Return on plan assets
(excluding amounts included
in interest income or expense) - ( 93,043 ) ( 93,043 )
Change in financial assumptions 1,049,529 - 1,049,529
Experience adjustments 442,257 - 442,257
1,491,786 ( 93,043 ) 1,398,743
Pension fund contribution - ( 722,565 ) ( 722,565 )
Paid Pension ( 885,783 ) 885,783 -
Balance at December 31 $ 15,759,783 ($ 10,180,066 ) $ 5,579,717

(D) The Bank of Taiwan was commissioned to manage the Fund of the Bank’s defined benefit pension plan in accordance with the Fund’s
annual investment and utilization plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor
Retirement Fund” (Article 6: The scope of utilization for the Fund includes deposit in domestic or foreign financial institutions,
investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign
real estate securitization products, etc.), and the performance of fund utilization is supervised by the Labor Funds Supervisory
Committee. With regard to the utilization of the Fund, its minimum earnings in the annual distributions on the final financial
statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates
offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being
authorized by the Regulator. The Bank has no right to participate in managing and operating that fund and hence the Bank is unable
to disclose the classification of plan asset fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan
assets as of December 31, 2016 and 2015 is given in the Annual Labor Retirement Fund Utilization Report announced by the
government.
(E) The principal actuarial assumptions used were as follows:
2016 2015
Discount rate 1.00% 1.25%
Rate of future salary increases 2.00% 2.00%

Assumptions regarding future mortality rate are set based on the 5th Chart of Life Span Estimate Used by the Taiwan Life Insurance
Enterprises.
Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as
follows:
Discount rate Rate of future salary increases
Increase 0.25% Decrease 0.25% Increase 0.25% Decrease 0.25%
(In NT Thousand Dollars)
December 31, 2016
Effect on present value of defined
benefit obligation ($ 396,082 ) $ 370,000 $ 365,391 ($ 353,712 )

Discount rate Rate of future salary increases

Increase 0.25% Decrease 0.25% Increase 0.25% Decrease 0.25%
(In US Thousand Dollars)
December 31, 2016
Effect on present value of defined
benefit obligation ($ 12,298 ) $ 11,489 $ 11,345 ($ 10,983 )

Discount rate Rate of future salary increases

Increase 0.25% Decrease 0.25% Increase 0.25% Decrease 0.25%
(In NT Thousand Dollars)
December 31, 2015
Effect on present value of defined
benefit obligation ($ 363,207 ) $ 377,445 $ 373,683 ($ 361,456 )

The sensitivity analysis above is based on other conditions that are unchanged but only one assumption is changed. In practice, more
than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability
in the balance sheet are the same.

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63 Annual Report 2016

 (F) Expected contributions to the defined benefit pension plans of the Bank for the year ending December 31, 2017 amounts to
NT$420,000 thousand.
(G) As of December 31, 2016, the weighted average duration of that retirement plan is 8.88 years.
B. Defined contribution plans
(A) Effective July 1, 2005, the Bank has established a funded defined contribution pension plan (the “New Plan”) under the Labor Pension
Act (the “Act”). Employees have the option to be covered under the New Plan. Under the New Plan, the Bank contributes monthly
an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau
of Labor Insurance. The payment of pension benefits is based on the employees’ individual pension fund accounts and the cumulative
profit in such accounts, and the employees can choose to receive such pension benefits monthly or in lump sum.

(B) The pension costs under the defined contribution pension plan for the years ended December 31, 2016 and 2015 were NT$88,147
thousand and NT$83,678 thousand, respectively. For employees working overseas, pension expenses under defined contribution
plans are recognized according to the respective local regulations. For the years ended December 31, 2016 and 2015, pension
expenses were NT$23,093 thousand and NT$21,205 thousand, respectively.

C. The Bank’s payment obligations of fixed-amount preferential savings of retired employees and current employees after retirement are in
compliance with the internal “Rules Governing Pension Preferential Savings of Staff of Mega International Commercial Banks”. The
excessive interest arising from the interest rate upon retirement agreed with the employees in excess of general market interest rate should
be accounted for in accordance with IAS 19, “Employee Benefits”.
(A) Adjustment of assets and liabilities recognized in the consolidated balance sheets, present value of defined benefit obligation, and
fair value of plan assets:
December 31, 2016 December 31, 2015
NT$ US$ NT$
Present value of defined benefit obligation $ 3,544,046 $ 110,043 $ 3,102,821
Less: Fair value of plan assets - - -
$ 3,544,046 $ 110,043 $ 3,102,821

(B) Movements in net defined benefit liabilities are as follows:

Present value of
defined benefit Fair value of Net defined
obligation plan assets benefit liability
(In NT Thousand Dollars)
Year ended December 31, 2016
Balance at January 1 $ 3,102,821 $ - $ 3,102,821
Interest expense 118,458 - 118,458
3,221,279 - 3,221,279
Remeasurements:
Change in demographic assumptions 584,751 - 584,751
Experience adjustments 365,420 - 365,420
950,171 - 950,171
Pension fund contribution - ( 627,404 ) ( 627,404 )
Paid Pension ( 627,404 ) 627,404 -
Balance at December 31 $ 3,544,046 $ - $ 3,544,046

Present value of
defined benefit Fair value of Net defined
obligation plan assets benefit liability
(In US Thousand Dollars)
Year ended December 31, 2016
Balance at January 1 $ 96,343 $ - $ 96,343
Interest expense 3,678 - 3,678
100,021 - 100,021
Remeasurements:
Change in demographic assumptions 18,157 - 18,157
Experience adjustments 11,346 - 11,346
29,503 - 29,503
Pension fund contribution - ( 19,481 ) ( 19,481 )
Paid Pension ( 19,481 ) 19,481 -
Balance at December 31 $ 110,043 $ - $ 110,043

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Mega ICBC 64
 Present value of
defined benefit Fair value of Net defined
obligation plan assets benefit liability
(In NT Thousand Dollars)
Year ended December 31, 2015
Balance at January 1 $ 2,832,960 $ - $ 2,832,960
Interest cost 108,208 - 108,208
2,941,168 - 2,941,168
Remeasurements:
Change in demographic assumptions 347,480 - 347,480
Experience adjustments 366,829 - 366,829
714,309 - 714,309
Pension fund contribution - ( 552,656 ) ( 552,656 )
Paid Pension ( 552,656 ) 552,656 -
Balance at December 31 $ 3,102,821 $ - $ 3,102,821

(C) Actuarial assumptions are as follows:

2016 2015
Discount rate for employee preferential interest savings 4.00% 4.00%
Return rate on capital deposited 2.00% 2.00%
Annual decreasing ratio for account balance 1.00% 1.00%
Probability of change in preferential savings system in the
future 50.00% 50.00%

Because the main actuarial assumption changed, the present value of employee preferential interest savings obligation is affected.
The analysis was as follows:
Discount rate Rate of deposit cost
Increase 0.25% Decrease 0.25% Increase 0.05% Decrease 0.05%
(In NT Thousand Dollars)
December 31, 2016
Effect on present value of defined benefit
obligation ($ 72,311 ) $ 75,075 ( $ 17,003 ) $ 17,003

Discount rate Rate of deposit cost

Increase 0.25% Decrease 0.25% Increase 0.05% Decrease 0.05%
(In US Thousand Dollars)
December 31, 2016
Effect on present value of defined benefit
obligation ($ 2,245 ) $ 2,331 ($ 528 ) $ 528

Discount rate Rate of deposit cost

Increase 0.25% Decrease 0.25% Increase 0.05% Decrease 0.05%
(In NT Thousand Dollars)
December 31, 2015
Effect on present value of defined benefit
obligation ($ 63,938 ) $ 66,406 ($ 15,190 ) $ 15,190

(D) The Bank recognized employee benefit expenses of NT$1,245,291 thousand and NT$980,746 thousand for the years ended
December 31, 2016 and 2015, respectively.
D. Reserve for guarantee liabilities
The Bank had provided appropriate reserve for guarantee liabilities based on the guarantee reserve assessed. The details and movements
of reserve for guarantee liabilities for the years ended December 31, 2016 and 2015 are as follows:

2016 2015
NT$ US$ NT$
Balance at January 1 $ 3,240,886 $ 100,630 $ 3,204,543
Provision 452,003 14,035 32,254
Effects of exchange rate changes and others ( 1,813 ) ( 56 ) 4,089
Balance at December 31 $ 3,691,076 $ 114,609 $ 3,240,886

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65 Annual Report 2016

(20) Other financial liabilities
December 31, 2016 December 31, 2015
NT$ US$ NT$
Appropriation for loans $ 1,529,903 $ 47,504 $ 1,548,053
Structured deposits 7,054,086 219,030 7,125,170
Total $ 8,583,989 $ 266,534 $ 8,673,223

(21) Other liabilities

December 31, 2016 December 31, 2015
NT$ US$ NT$
Deposits received $ 1,525,090 $ 47,354 $ 2,158,271
Advance receipt 1,823,612 56,623 2,956,846
Temporary credits 1,145,758 35,576 3,095,033
Other liabilities to be settled 431,815 13,408 437,355
Others 332,072 10,311 329,652
Total $ 5,258,347 $ 163,272 $ 8,977,157

(22) Equity
A. Common stock
As of December 31, 2016 and 2015, the Bank’s authorized and paid-in capital was NT$85,362,336 thousand and outstanding shares were
8,536,234 thousand, with a par value of NT$10 per share.
On November 7, 2014 and November 6, 2015, the Board of Directors on behalf of the stockholders’ meeting resolved for a private
placement capital increase of NT$3,000,000 thousand and NT$5,362,336 thousand, respectively, issuing 300,000 thousand shares and
536,234 thousand shares of common stock, respectively. All shares have been planned to be acquired by the Bank’s parent company,
Mega Financial Holding Co. Ltd. (Mega Financial Holding), for NT$28.41 per share and NT$29.02 per share, respectively. The
authorized and actual paid-in capital after the capital increase was NT$80,000,000 thousand and NT$85,362,336 thousand, respectively.
The applications for capital increases have been approved by the FSC and the effective date of the capital increases was on June 11, 2015
and December 30, 2015, respectively. The total issued capital after the capital increase was NT$80,000,000 thousand and NT$85,362,336
thousand, receptively, and issued shares were 8,000,000 thousand and 8,536,234 thousand, respectively, with a par value of NT$10 per
share.
B. Capital reserve
(A) Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common
stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their
share ownership, provided that the Bank has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires that
the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the paid-in capital each year. Capital
surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.
(B) On December 31, 2016 and 2015, the details of the Bank's capital surplus are as follows:
December 31, 2016 December 31, 2015
NT$ US$ NT$
Capital increase by cash – additional paid-in
capital $ 31,495,952 $ 977,953 $ 31,495,952
Consolidation surplus arising from share
conversion 30,109,277 934,897 30,109,277
Changes in additional paid-in capital of
investees accounted for by the equity method 375,908 11,672 375,908
Share-based payment (Note) 238,403 7,402 238,403
$ 62,219,540 $ 1,931,924 $ 62,219,540

Note: above-mentioned share-based payment includes the subsidiaries.

C. Legal reserve and Special reserve
(A) Legal reserve
Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the
legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in
proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of
25% of the Bank’s paid-in capital. As of December 31, 2016 and 2015, the Bank’s legal reserves are NT$73,987,859 thousand and
NT$66,275,325 thousand, respectively.

(B) Special reserve

In accordance with Financial-Supervisory-Securities-Corporate No. 1010012865 of the FSC dated on April 6, 2012, upon the first-
time adoption for IFRSs, equivalent amounts of special reserve with regard to the unrealized revaluation increment under the
stockholders’ equity and cumulative translation adjustment (gains) transferred to retained earnings should be set aside. For the said

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 special reserve, reversal of distributed earnings shall be based on the proportion of the original ratio of special reserve provision in
the subsequent use, disposal or reclassification for the related assets. Such amounts are reversed upon disposal or reclassified if the
assets are investment property of land. If the assets are investment property other than land, the amounts are reversed over the use
period and should be reversed by amortized balance upon disposal. As of December 31, 2016 and 2015, the special reserve of the
Bank were NT$3,873,832 thousand and NT$3,845,354 thousand, respectively.
In accordance with the regulations, the Bank shall set aside an equivalent amount of special reserve from earnings after tax of the
current year and the undistributed earnings of the prior period based on the net decreased amount of other stockholders’ equity in
the current period before distributing earnings. If there is any reversal of decrease in other stockholders’ equity, the earnings may
be distributed based on the reversal proportion.
In accordance with Financial-Supervisory-Banks Letter No. 10510001510, as a response to the development of financial technology,
and to ensure the rights of bank practitioners, the Bank shall, upon appropriating the earnings of 2016 to 2018, provision 0.5% to
1% of income after taxes as special reserve. Starting from the 2017 accounting year, public banks may reverse an amount of the
aforementioned special reserve commensurate to employee termination or arrangement expenditures resulting from the
development of financial technology.

(23) Retained earnings and dividend policies

A. The current year’s earnings, if any, shall first be used to pay all taxes and offset prior year’s operating loss, and the remaining amount
should then be set aside as legal reserve and special reserve in accordance with provisions under the applicable laws and regulations. The
remaining earnings plus prior year’s accumulated unappropriated earnings are subject to the Board of Directors’ proposal for a distribution
plan and approval by the stockholders at the Ordinary Stockholders’ Meeting.
B. The legal reserve is to be used exclusively to offset any deficit or to increase capital by issuing new shares or distribute cash dividends
according to original shareholders in proportion to the number of shares being held by each of them and is not to be used for any other
purposes. For the legal reserve to be used for issuing new shares or distributing cash dividends, only the portion of the legal reserve
exceeding 25% of paid-in capital may be capitalized or released.
C. Shareholders other than those not living in ROC have imputation tax credit for the distribution of earnings after (in) 1998 based on the
creditable tax rate on the dividend declaration day.
As of December 31, 2016 and 2015, cumulative unappropriated retained earnings recorded in the books were all earnings generated in
and after 1998.
D. The appropriations and distributions for 2015 and 2014 approved by the Bank’s Board of Directors on the stockholders’ behalf on May
13, 2016 and April 24, 2015, respectively, were as follows:
2015 2014
NT$ NT$
Legal reserve $ 7,712,534 $ 7,791,990
Special reserve 28,478 25,253
Cash dividends (NT$1.50 and NT$1.44 dollar per share) 12,804,350 11,088,000
$ 20,545,362 $ 18,905,243

Information on the appropriation of the Bank’s earnings as approved by the Board of Directors and during the shareholders’ meeting is
posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.
E. The appropriation of 2016 earnings resolved by the Board of Directors on March 24, 2017 is set forth below:
2016
NT$ US$
Legal reserve $ 5,702,988 $ 177,078
Special reserve 126,223 3,919
Cash dividends (NT$1.50 dollar per share) 12,804,350 397,577
$ 18,633,561 $ 578,574

F. For information related to employees’ compensation, please refer to Note 6(33).

(24) Other equity
Cumulative
translation
differences of foreign Available-for-sale
operations financial assets Total
NT$
January 1, 2016 $ 331,363 ($ 102,347 ) $ 229,016
Available-for-sale financial assets
Evaluation adjustment for the year - 922,297 922,297
Realized gain and loss for the year - ( 1,295,542 ) ( 1,295,542 )
Cumulative translation differences of foreign operations ( 1,255,005 ) - ( 1,255,005 )
Share of other comprehensive income of associates and joint
ventures accounted for under equity method ( 2,591 ) ( 59,974 ) ( 62,565 )
December 31, 2016 ($ 926,233 ) ( $ 535,566 ) ( $ 1,461,799 )

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67 Annual Report 2016

 Cumulative
translation
differences of foreign Available-for-sale
operations financial assets Total
US$
January 1, 2016 $ 10,289 ($ 3,178 ) $ 7,111
Available-for-sale financial assets
Evaluation adjustment for the year - 28,638 28,638
Realized gain and loss for the year - ( 40,227 ) ( 40,227 )
Cumulative translation differences of foreign operations ( 38,968 ) - ( 38,968 )
Share of other comprehensive income of associates and
joint ventures accounted for under equity method ( 81 ) ( 1,862 ) ( 1,943 )
December 31, 2016 ($ 28,760 ) ( $ 16,629 ) ( $ 45,389 )

Cumulative
translation
differences of foreign Available-for-sale
operations financial assets Total
NT$
January 1, 2015 $ 550,023 $ 2,239,841 $ 2,789,864
Available-for-sale financial assets
Evaluation adjustment for the year - ( 1,474,828 ) ( 1,474,828 )
Realized gain and loss for the year - ( 886,419 ) ( 886,419 )
Cumulative translation differences of foreign operations ( 221,299 ) - ( 221,299 )
Share of other comprehensive income of associates and joint
ventures accounted for under equity method 2,639 19,059 21,698
December 31, 2015 $ 331,363 ($ 102,347 ) $ 229,016
(25) Net interest income
For the years ended December 31
2016 2015
NT$ US$ NT$
Interest income
Discount and loan interest income $ 38,730,900 $ 1,202,599 $ 38,421,717
Deposit and loan interest income of banks 5,030,123 156,186 5,000,034
Securities investment interest income 5,601,350 173,923 5,399,314
Interest income of forfeiting purchased 869,183 26,988 3,647,452
Interest income of factoring acceptances receivable 277,965 8,631 290,015
Credit card interest income 174,441 5,416 202,500
Interest income from buyout of documents against acceptance 15,749 489 519,504
Other interest income 178,240 5,534 398,737
Subtotal 50,877,951 1,579,766 53,879,273
Interest expenses
Deposit interest expense ($ 12,077,235 ) ($ 375,000 ) ($ 13,814,915 )
The Central Bank and the bank deposit interest expense ( 2,541,727 ) ( 78,921 ) ( 2,751,365 )
Interest expense of securities sold under repurchase agreements ( 15,085 ) ( 468 ) ( 344,480 )
Bond interest expense ( 582,811 ) ( 18,096 ) ( 844,776 )
Other interest expense ( 77,453 ) ( 2,405 ) ( 77,787 )
Subtotal ( 15,294,311 ) ( 474,890 ) ( 17,833,323 )
Total $ 35,583,640 $ 1,104,876 $ 36,045,950
(26) Net service fee income
For the years ended December 31
2016 2015
NT$ US$ NT$
Service fee income
Loan service fee income $ 1,941,867 $ 60,295 $ 2,106,459
Trust service fee income 1,560,220 48,445 1,995,100
Agent service fee income 1,185,458 36,809 948,708
Remittance service fee income 975,766 30,298 1,010,671
Guarantee service fee income 913,124 28,353 925,393
Import and export service fee income 607,319 18,857 656,531
Credit card service fee income 504,421 15,662 520,350
Other fee income 1,082,687 33,617 1,299,158
Subtotal 8,770,862 272,336 9,462,370
Service fee charges
Agent service fee ($ 641,953 ) ($ 19,933 ) ($ 621,527 )
Custody fee ( 51,674 ) ( 1,604 ) ( 60,389 )
Other charges ( 169,502 ) ( 5,263 ) ( 180,533 )
Subtotal ( 863,129 ) ( 26,800 ) ( 862,449 )
Total $ 7,907,733 $ 245,536 $ 8,599,921

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Mega ICBC 68
 The Bank and its subsidiaries provide custody, trust, and investment management and consultation service to the third party, and therefore the
Bank and its subsidiaries are involved with the exercise of planning, managing and trading decision of financial instruments. In relation to the
management and exercise of trust fund and portfolio for brokerage, the Bank and its subsidiaries record and prepare the financial statements
independently for internal management purposes, which are not included in the financial statements of the Bank and its subsidiaries.

(27) Gain (loss) on financial assets and liabilities at fair value through profit or loss
For the year ended December 31
2016 2015
NT$ US$ NT$
Realized gain or loss on financial assets and financial
liabilities at fair value through profit or loss
Bond $ 33,873 $ 1,052 $ 2,568,339
Stock 105,716 3,282 ( 144,709 )
Interest rate 271,726 8,437 471,316
Exchange rate 947,662 29,425 ( 1,203,728 )
Options 141,250 4,386 ( 2,218,542 )
Futures 1,347 42 730
Asset swap contracts ( 16,269 ) ( 505 ) ( 57,521 )
Credit default swap 488,939 15,181 320,515
Cross currency swap ( 27,603 ) ( 857 ) ( 2,514 )
Others ( 16,135 ) ( 501 ) ( 7,501 )
Subtotal 1,930,506 59,942 ( 273,615 )
Unrealized gain or loss on financial assets and financial
liabilities at fair value through profit or loss
Bond ( 33,862 ) ( 1,051 ) ( 3,060,075 )
Stock 165,558 5,141 ( 332,642 )
Interest rate 92,426 2,870 ( 380,233 )
Exchange rate 229,056 7,112 ( 92,316 )
Options ( 32,634 ) ( 1,013 ) 2,509,361
Futures 108 3 ( 107 )
Asset swap contracts 13,016 404 486,947
Credit default swap 136,973 4,253 ( 258,604 )
Cross currency swap ( 9,364 ) ( 291 ) 34,497
Subtotal 561,277 17,428 ( 1,093,172 )
Dividend income on financial assets at fair value through
profit or loss 120,832 3,752 91,755
Interest income on financial assets at fair value through profit
or loss 1,051,727 32,656 831,678
Interest expense on financial liabilities at fair value through
profit or loss ( 654,745 ) ( 20,330 ) ( 711,993 )
Total $ 3,009,597 $ 93,448 ( $ 1,155,347 )

Net income on the exchange rate instrument includes realized and unrealized gains and losses on forward exchange agreement, FX options,
and exchange rate futures.
Interest-linked instruments include interest rate swap contracts, money market instruments, interest linked-options and other interest related
instruments.
(28) Realized gains on available-for-sale financial assets
For the year ended December 31
2016 2015
NT$ US$ NT$
Dividend income $ 301,174 $ 9,351 $ 304,565
Realized net gains or losses
Fund ( 812 ) ( 25 ) 7,631
Bond 298,936 9,282 58,844
Stock 997,418 30,970 819,944
Total $ 1,596,716 $ 49,578 $ 1,190,984

(29) Loss on asset impairment

For the year ended December 31
2016 2015
NT$ US$ NT$
Equity investments carried at cost $ 308,670 $ 9,584 $ 204,074
Available-for-sale-financial assets 103,340 3,209 353,294
Gain on reversal of impairment loss on property and
equipment ( 77,613 ) ( 2,410 ) ( 69,716 )
Total $ 334,397 $ 10,383 $ 487,652

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69 Annual Report 2016

 After the Bank’s assessment, the above-mentioned financial assets have provisioned impairment losses due to objective evidences indicating
impairment. For the year ended December 31, 2016, relatively significant impairments were for Residential Mortage Backed Security
(accounted for as available-for-sale), Kuang Ming Shipping Corp., NexPower Technology Corp. and Everest Display Inc. (the latter three
were accounted for as those measured at cost), which provisioned impairment amounts of NT$97,871 thousand, NT$78,540 thousand,
NT$42,300 thousand and NT$27,511, respectively.
(30) Other revenue other than interest income
For the year ended December 31
2016 2015
NT$ US$ NT$
Net income from rent $ 186,847 $ 5,802 $ 184,318
Gain on sale of non-performing loans 40,508 1,258 137,841
Gain on sales of property and equipment 1,142 36 2,893
Casualty loss ( 82 ) ( 3) -
Loss on retirement of assets ( 253 ) ( 8) ( 541 )
Total $ 228,162 $ 7,085 $ 324,511

(31) Indemnity income

For the years ended December 31
2016 2015
NT$ US$ NT$
Indemnity income $ - $ - $ 1,717,260

Taiwan High Speed Rail Corporation (“THSRC”) was in arrears with preferred stock dividends from January 5, 2007 to August 6, 2015 for
“Class A convertible bearer preferred stock” held by the Bank, totaling NT$1,717,260 thousand. In order to execute the supporting measures
of the “Taiwan High Speed Rail Corporation’s Financial Solution Plan”, pursuant to the resolution by THSRC’s special stockholders’ meetings
on September 10, 2015, unpaid preferred stock dividends will be satisfied in the form of compensation. The above-mentioned amount has
been received the compensation for unpaid preferred stock from THSRC on January 20, 2016.
(32) Net other miscellaneous loss (income)
For the years ended December 31
2016 2015
NT$ US$ NT$
Other revenue $ 298,860 $ 9,280 $ 147,451
Penalty paid to New York State Department of Financial
Services (Note) ( 5,797,854 ) ( 180,024 ) -
Total ($ 5,498,994 ) ( $ 170,744 ) $ 147,451

The Bank and Mega New York Branch entered into a Consent Order with New York State Department of Financial Services (NYDFS) on
August 19, 2016. As per the consent order, NYDFS fined the Bank and Mega New York Branch for failure to establish an adequate anti-
money laundering compliance program and non-compliance with BSA (Bank Secrecy Act)/AML (Anti-Money Laundering laws) and paid a
penalty of US$180 million (approximately NT$5,797,854 thousand). In addition, under the Consent Order issued by NYDFS, the Bank and
Mega New York Branch engaged a compliance consultant selected by NYDFS, to enhance the compliance of the AML and retain an
independent monitor to be selected by NYDFS to review the Mega New York Branch’s U.S dollar clearing transaction activity from January
1, 2012 to December 31, 2014 for determining whether any transactions were in violation of BSA/AML and OFAC (Office of Foreign Assets
Control of United States Department of Treasury) Regulations.
As of the report date of this financial report, NYDFS has yet to designate an independent monitor. Thus, there are no examination results for
the above-mentioned transaction.
(33) Employee benefits expenses
For the years ended December 31
2016 2015
NT$ US$ NT$
Payroll expense $ 8,446,411 $ 262,262 $ 9,954,640
Preferential interest deposit for retired employees 1,245,291 38,667 980,746
Pension 629,156 19,535 592,724
Staff insurance 621,132 19,286 613,571
Other staff expenses 978,219 30,374 1,129,779
Total $ 11,920,209 $ 370,124 $ 13,271,460

1. Please refer to Note 1(5) for information on number of employee, the calculating basis was in agreement with employee benefit expense
excluding preferential interest deposit for retired employees.

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Mega ICBC 70
 2. The Board of Directors of the Bank has approved the amended Articles of Incorporation of the Bank on February 5, 2016, and the amended
article was resolved in the shareholder’s meeting on March 25, 2016. According to the amended articles, a ratio of distributable profit of
the current year, after covering accumulated losses, shall be distributed as employees’ compensation. In case there are earnings at the end
of each fiscal year, the employees’ compensation of the Bank shall be 1.7% of the amount of net profit before income tax and employees’
compensation, which , in any event, shall not be less than 2.4% of the aggregate amount of the balance of earnings after taxes deduct the
amount of the legal reserve and special reserve (or plus the reversible special reserve in accordance with relevant laws and regulations)
at the end of each fiscal year, provided that the accumulated losses of the Bank in previous fiscal years have been covered.

3. For the years ended December 31, 2016 and 2015, employees’ compensation was accrued at NT$400,225 thousand and NT$523,000
thousand, respectively. The above-mentioned amounts were recognized in salary expenses.

The employees’ compensation resolved by the Board of Directors was NT$398,791 thousand, which resulted in a difference of NT$1,434
thousand as compared to the recognized amount of $400,255 in the 2016 financial statements. The difference is accounted for as a change
in estimate and has been adjusted in the profit or loss of 2017. The above-mentioned employees’ compensation will be distributed in the
form of cash.

The employees’ compensation resolved by the Board of Directors was NT$523,141 thousand, which resulted in a difference of NT$141
thousand as compared to the recognized amount of $523,000 in the 2015 financial statements. The difference is accounted for as a change
in estimate and has been adjusted in the profit or loss of 2016.

Information about employees’ compensation of the Bank as resolved by the Board of Directors and the shareholders at the shareholders’
meeting will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(34) Depreciation and amortization

For the year ended December 31
2016 2015
NT$ US$ NT$
Depreciation $ 484,684 $ 15,049 $ 483,745
Amortization 5,695 177 3,922
Total $ 490,379 $ 15,226 $ 487,667

(35) Other general and administrative expenses

For the year ended December 31
2016 2015
NT$ US$ NT$
Taxes $ 2,241,019 $ 69,584 $ 2,392,412
Rental 777,716 24,148 845,459
Computer software maintenance fees 476,756 14,803 429,580
Water and electricity 120,851 3,752 138,863
Postage 212,203 6,589 209,332
Advertising and printing cost 151,769 4,712 170,188
Business development 297,439 9,236 292,823
Professional expense 608,141 18,883 411,739
Insurance charges 447,493 13,895 399,065
Shipping expenses 196,785 6,110 195,495
Donation expenses (Note) 102,560 3,185 340,689
Others 856,217 26,586 880,133
Total $ 6,488,949 $ 201,483 $ 6,705,778

Note: In order to successfully recover its creditor’s rights under the credit case provided to Hua-Long Co., and to facilitate social stability, on
November 7, 2014, the Board of Directors on behalf of the stockholders’ meeting resolved to donate NT$220,844 thousand to the
Ministry of Labor under the name of the Bank as a fund for Hua-Long Co.’s employees’ pension or severance pay. The creditor’s right
has been recovered on May 15, 2015.
(36) Income tax
A. Income tax expense
(A) Components of income tax expenses:
For the year ended December 31
2016 2015
NT$ US$ NT$
Current income tax:
Income tax from current income $ 4,326,965 $ 134,353 $ 4,367,361
Tax on undistributed surplus earnings 403,060 12,515 707,469
Prior year income tax under (over) estimate 12,444 386 ( 56,517 )
Total current tax 4,742,469 147,254 5,018,313
Deferred income tax:
Origination and reversal of temporary differences ( 637,062 ) ( 19,781 ) ( 406,549 )
Income tax expense $ 4,105,407 $ 127,473 $ 4,611,764

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71 Annual Report 2016

 (B) The income tax relating to components of other comprehensive income is as follows:
For the year ended December 31
2016 2015
NT$ US$ NT$

Remeasuremnt on defined benefit plan $ 90,837 $ 2,820 $ 237,786

B. Reconciliation between accounting income and income tax expense:

For the year ended December 31
2016 2015
NT$ US$ NT$
Income tax calculated based on pre-tax income using statutory
tax rate enacted in the country where the branch operates $ 4,740,081 $ 147,180 $ 5,710,234
Effects of items not recognised under relevant regulations 6,652 207 4,268
Additional 10% tax payment levied on undistributed earnings 403,060 12,515 707,469
Effect of income basic tax 957,082 29,717 491,773
Income tax adjustments in respect of prior years 12,444 386 ( 56,517 )
Adjusted effects on income tax exemption and other
adjustments ( 2,013,912 ) ( 62,532 ) ( 2,245,463 )
Income tax expense $ 4,105,407 $ 127,473 $ 4,611,764

C . As of December 31, 2011, the income tax return of the Bank and its subsidiaries has been approved by National Taxation Bureau of Taipei.
However, the Bank and its subsidiaries disagreed with the results of the 2009 income tax return. As a result, the parent company, Mega
Financial Holding Co., Ltd, had appealed for a review.
D. Deferred income tax assets or liabilities arising from the temporary differences are as follows:
For the year ended December 31, 2016
NT$
Recognized in Recognized in other
Temporary differences: January 1 profit or loss comprehensive income December 31
Deferred income tax assets
Allowance for doubtful accounts in
excess of limit $ 1,782,614 $ 797,827 $ - $ 2,580,441
Reserve of guarantees in excess of limit 199,597 - - 199,597
Employee benefit liabilities reserve 1,391,165 ( 232,969 ) 90,837 1,249,033
Unrealized impairment loss 603,109 114,178 - 717,287
Others 376,725 ( 34,279 ) - 342,446
$ 4,353,210 $ 644,757 $ 90,837 $ 5,088,804

Deferred income tax liabilities

Land value increment tax ($ 1,053,300 ) $ - $ - ($ 1,053,300 )
Unrealized exchange gains ( 464,213 ) ( 2,705 ) - ( 466,918 )
Investment income accounted for under
the equity method ( 562,166 ) ( 38,218 ) - ( 600,384 )
Others ( 74,278 ) 33,228 - ( 41,050 )
($ 2,153,957 ) ( $ 7,695 ) $ - ($ 2,161,652 )

For the year ended December 31, 2016

US$
Recognized in Recognized in other
Temporary differences: January 1 profit or loss comprehensive income December 31
Deferred income tax assets
Allowance for doubtful accounts in
excess of limit $ 55,350 $ 24,773 $ - $ 80,123
Reserve of guarantees in excess of limit 6,198 - - 6,198
Employee benefit liabilities reserve 43,196 ( 7,234 ) 2,820 38,782
Unrealized impairment loss 18,727 3,545 - 22,272
Others 11,697 ( 1,064 ) - 10,633
$ 135,168 $ 20,020 $ 2,820 $ 158,008

Deferred income tax liabilities

Land value increment tax ($ 32,705 ) $ - $ - ($ 32,705 )
Unrealized exchange gains ( 14,414 ) ( 84 ) - ( 14,498 )
Investment income accounted for under
the equity method ( 17,455 ) ( 1,187 ) - ( 18,642 )
Others ( 2,307 ) 1,032 - ( 1,275 )
($ 66,881 ) ( $ 239 ) $ - ($ 67,120 )

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 For the year ended December 31, 2015
NT$
Recognized in Recognized in other
Temporary differences: January 1 profit or loss comprehensive income December 31
Deferred income tax assets
Allowance for doubtful accounts in
excess of limit $ 1,520,859 $ 261,755 $ - $ 1,782,614
Reserve of guarantees in excess of limit 167,008 32,589 - 199,597
Employee benefit liabilities reserve 1,128,981 24,398 237,786 1,391,165
Unrealized impairment loss 583,643 19,466 - 603,109
Others 297,803 78,922 - 376,725
$ 3,698,294 $ 417,130 $ 237,786 $ 4,353,210

Deferred income tax liabilities

Land value increment tax ($ 1,053,300 ) $ - $ - ($ 1,053,300 )
Unrealized exchange gains ( 455,667 ) ( 8,546 ) - ( 464,213 )
Investment income accounted for under
the equity method ( 515,914 ) ( 46,252 ) - ( 562,166 )
Others ( 118,495 ) 44,217 - ( 74,278 )
($ 2,143,376 ) ( $ 10,581 ) $ - ($ 2,153,957 )

E. As of December 31, 2016 and 2015, the balance of the imputation tax credit account was NT$117,430 thousand and NT$83,225 thousand,
respectively. The creditable tax rate was 0.77% for 2015 and is estimated to be 0.34% for 2016.
(37) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders of the parent by the weighted-average number
of ordinary shares in issue during the period.
For the years ended December 31
2016 2015
NT$ US$ NT$
Weighted-average number of shares outstanding common
stock (Unit: Thousand) 8,536,234 7,870,609
Profit attributable to ordinary shareholders of the Bank and its
subsidiaries $ 19,009,961 $ 590,262 $ 25,708,445
Basic earnings per share (in dollars) $ 2.23 $ 0.07 $ 3.27

7. FAIR VALUE INFORMATION OF FINANCIAL INSTRUMENTS

( 1 ) Overview
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. Financial instruments are recorded at fair value upon their initial recognition, where often fair value refers to the
transaction price; for subsequent measurements, other than a portion of financial instruments being measured at amortized cost, fair value is
elected for measurements. The best evidence for fair value is a public quote in an active market. If the market of a financial instrument is not
active, the Bank elects valuation techniques or references Bloomberg or the quotes of counterparties to measure the fair value of the financial
instrument. In addition, through the valuation process, information on the counterparty’s and the Bank’s credit risk is also considered.
( 2 ) Fair value information of financial instruments
Except for those listed in the table below, the carrying amounts of certain financial instruments held by the Bank and its subsidiaries (such as
cash and cash equivalents, due from the Central Bank and call loans to banks, bills and bonds purchased under resale agreement, receivables,
bills discounted and loans, held-to-maturity financial assets-Central Bank’s certificates of deposits, due to the Central Bank and other banks,
funds borrowed from the Central Bank and other banks, bills and bonds sold under repurchase agreements, accounts payable, deposits and
remittances, financial bonds payable, and other financial liabilities) are approximate to their fair values (please refer to Note 7(5)). The fair
value information of financial instruments measured at fair value is provided in Note 7(6).
NT$
Book Value Fair Value
December 31, 2016
Held-to-maturity financial assets - investments in bonds $ 20,229,023 $ 20,215,485

US$
Book Value Fair Value
December 31, 2016
Held-to-maturity financial assets - investments in bonds $ 628,113 $ 627,693

NT$
Book Value Fair Value
December 31, 2015
Held-to-maturity financial assets - investments in bonds $ 28,158,540 $ 28,111,006

The fair values of the above-mentioned held-to-maturity financial assets are classified as Level 1 and Level 2.

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( 3 ) Financial instruments measured at fair value
If the market quotation from the Taiwan Stock Exchange Corporation, brokers, underwriters, Industrial Trade Unions, pricing service agencies
or competent authorities can be frequently obtained on time, and the price represents the actual and frequent transactions at arm’s length, then
a financial instrument is deemed to have an active market. If the above condition cannot be met, the market is deemed inactive. In general,
significant price variance between the purchase price and selling price, significantly increasing price variance or extremely low trading volume
are all indicators of an inactive market.
If the quoted market price of a financial instrument is available in an active market, the quoted price is the fair value, usually the fair value is
measured using the market price, interest rate, foreign exchange central parity rate shown in Reuters quotation system, partially using the
quoted prices from Bloomberg, OTC, and the basis for valuation is maintained consistently. If there is no quoted market price for reference,
a valuation technique or quoted price offer by the counterparties will be adopted to measure the fair value. Fair value measured by a valuation
technique is usually estimated by reference to the fair values of other financial instruments with similar terms and characteristics, or by using
cash flows discounting method, or using model calculation based on the market information (such as yield rate curves from OTC, average
interest rate of TAIBOR from Reuters) available on the balance sheet date.
When assessing non-standardized financial instruments with lower complexity, derivative financial instruments such as interest rate swap
contracts, foreign exchange swap contracts, options, the Bank and its subsidiaries use valuation techniques and models which are extensively
used by the market to estimate their fair value. The parameters used in the valuation model for these kinds of financial instruments usually
use the observable information as the input.
For more complicated financial instruments, such as debt instruments with embedded derivative instruments or securitization products, the
Bank and its subsidiaries develop its own valuation models to estimate fair value by reference to the valuation techniques and methods which
are extensively used by the same trade. Parts of parameters used in these valuation models are not observable from the market; they must be
estimated by using some assumptions.
A. NTD Central Government Bond: the yield rates across different contract length and one-hundred price bulletined by Over-The-Counter
(hereinafter OTC) are used.
B. NTD corporate bonds, financial debentures, government bonds, bond-type beneficiary securities and designated financial debentures issued
by the Bank and its subsidiaries: the present value of future estimated cash flows is calculated by using the yield rate curve.
C. NTD short-term bills and NTD bill-type beneficiary securities: the present value of future estimated cash flows of NTD and USD short-
term bills is calculated by using average interest rate of TAIBOR and TAIFX3 central parity rate from Reuters, respectively.
D. Foreign securities: quoted prices from Bloomberg are adopted.
E. Listed stock: the closing price being listed in TSE is adopted.
F. Emerging stock: If the objective recently has representative trading, its trading price might be the best estimate of its fair value. If the
objective has comparable listed trades, its fair value can be estimated by using appropriate market method, such as P/E method, P/B method,
EV/EBIT method or EBITDA×EV method, taking into account the operation condition of the comparable listed companies, most recent
one month trading information and its liquidity. And if the objective has no comparable instruments or its fair value cannot be estimated
using market method, other valuation technique, such as net assets method or income approach, is used to estimate its fair value.
G. Funds: net assets value is adopted.
H. Derivative financial instruments:
(A) Foreign exchange forward contract, currency swaps, forward rate agreement, interest rate swaps and cross currency swaps: the
discounting future cash flow is adopted.
(B) Options: Black-Scholes model is mainly adopted for valuation.
(C) Some structured derivative financial instruments are valued by using Bloomberg.
(D) Some foreign-currency derivatives are valued by using the quoted prices from Bloomberg.
( 4 ) Credit risk value adjustment
A. Credit risk value adjustments can be primarily classified as either credit value adjustments or debit value adjustments. The definitions are
as follows:
(A) Credit value adjustments refer to adjustments through fair value, which reflect the possibility that a counterparty may default on
repayments and that an entity may not be able to recover, in full, the market value, for transactions in non-centralized markets (i.e.
valuation adjustments on derivative contracts traded over-the-counter).
(B) Debit value adjustments refer to adjustments through fair value, which reflect the possibility that the Bank may default on
repayments and that the Bank may not be able to pay, in full, the market value, for transactions in non-centralized markets (i.e.
valuation adjustments on derivative contracts traded over-the-counter).
B. The Bank and its subsidiaries has incorporated credit risk value adjustments in the considerations for calculating the fair value of financial
instruments in order to respectively reflect the counterparty’s credit risk and the Bank’s and its subsidiaries’ credit quality.
( 5 ) Financial instruments not measured at fair value through profit or loss
A. In relation to cash and cash equivalents, bills and bonds purchased under resale agreements, due from the Central Bank and call loans to
banks, receivables, refundable deposits, due to the Central Bank and commercial banks, funds borrowed from the Central Bank and other
banks, bills and bonds sold under repurchase agreements, payables and deposits received, the book value of the financial instruments
which have a short maturity period will be considered as their fair value. While the maturities are quite closed or the future payment or
receipt is closed to the carrying amount, the carrying amount at the consolidated balance sheet date is used to estimate the fair value.

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 B . Interest rates of the Bank and its subsidiaries’ bills discounted and loans (including non-performing loans) are generally based on the
benchmark interest rate plus or minus certain adjustment to reflect the market interest rate. Thus, their fair values are based on the book
value after adjustments of estimated recoverability. Fair values for long-term loans with fixed interest rates shall be estimated using their
discounted values of expected future cash flows. However, as such loans account for only a small portion of all loans, book value was
used to estimate the fair value.
C. When held-to-maturity financial assets have a quoted market price available in an active market, the fair value is determined using the
market price. If there is no quoted market price for reference, a valuation technique or quoted price offer by the counterparties will be
adopted to measure the fair value.
D. The fair value of deposits and remittances are represented by the book value.
E. The coupon rate of convertible bonds and bank debentures issued by the Bank and its subsidiaries is equivalent to market interest rate;
therefore, fair value estimated based on the present value of future cash flows is equivalent to book value.
F. For other financial assets, such as investments in debt instruments without active market and financial assets measured at cost, as they
have no quoted price in active market and their valuation results by using different valuation methods are significantly different, their fair
value cannot be measured reliably and is not disclosed here.
( 6 ) Level information of financial instrument at fair value
A. Three definitions of the Bank and its subsidiaries’ financial instruments at fair value
(A) Level 1
Level 1 is quoted prices (unadjusted) in active markets for identical assets or liabilities. An active market refers to a market in which
transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing
basis. The Bank and its subsidiaries’ investment in listed stock, beneficiary certificates, popular Taiwan government bonds and the
derivatives with a quoted price in an active market are deemed as Level 1.
(B) Level 2
Level 2 inputs are observable prices other than quoted prices included in Level 1, including observable direct (e.g. prices) or indirect
(e.g. those inferred prom prices) inputs in an active market. The Bank and its subsidiaries’ investments in non-popular government
bonds, corporate bonds, bank debentures, convertible bonds, derivative instruments and corporate bonds issued by the Bank and its
subsidiaries belong to this category.
(C) Level 3
Level 3 inputs are inputs for assets or liabilities that are unobservable in the market (unobservable inputs, e.g. option pricing model
using history volatility rate, because history volatility rate cannot represent the expectation value of market participants for future
volatility rate).

B. Information of fair value hierarchy of financial instruments

(In NT Thousand Dollars)
December 31, 2016
Recurring fair value measurements Total Level 1 Level 2 Level 3
Non-derivative financial assets and libilities
Assets
Financial assets at fair value through profit or loss
Investment in stock $ 2,866,854 $ 2,866,854 $ - $ -
Investment in bonds 38,666,675 805,495 37,861,180 -
Available-for-sale financial assets
Investment in stock 7,028,972 6,299,048 729,924 -
Investment in bonds 169,351,914 23,708,634 145,643,280 -
Commercial paper and certificate of deposit 29,279,878 - 29,279,878 -
Other 60,173 - 60,173 -
Liabilities
Financial liabilities at fair value through profit or loss ( 8,176,700 ) -( 8,176,700 ) -
Derivative financial assets and liabilities
Assets
Financial assets at fair value through profit or loss 3,783,124 - 3,783,124 -
Liabilities
Financial liabilities at fair value through profit or loss ( 3,217,540 ) -( 3,217,540 ) -
Total $ 239,643,350 $ 33,680,031 $ 205,963,319 $ -

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 (In US Thousand Dollars)
December 31, 2016
Recurring fair value measurements Total Level 1 Level 2 Level 3
Non-derivative financial assets and libilities
Assets
Financial assets at fair value through profit or loss
Investment in stock $ 89,016 $ 89,016 $ - $ -
Investment in bonds 1,200,605 25,011 1,175,594 -
Available-for-sale financial assets
Investment in stock 218,250 195,586 22,664 -
Investment in bonds 5,258,397 736,156 4,522,241 -
Commercial paper and certificate of deposit 909,144 - 909,144 -
Other 1,868 - 1,868 -
Liabilities
Financial liabilities at fair value through profit or loss ( 253,887 ) -( 253,887 ) -
Derivative financial assets and liabilities
Assets
Financial assets at fair value through profit or loss 117,466 - 117,466 -
Liabilities
Financial liabilities at fair value through profit or loss ( 99,905 ) -( 99,905 ) -
Total $ 239,643,350 $ 1,045,769 $ 6,395,185 $ -

(In NT Thousand Dollars)

December 31, 2015
Recurring fair value measurements Total Level 1 Level 2 Level 3
Non-derivative financial assets and libilities
Assets
Financial assets at fair value through profit or loss
Investment in stock $ 2,791,248 $ 2,791,248 $ - $ -
Investment in bonds 39,379,542 2,170,654 37,208,888 -
Available-for-sale financial assets
Investment in stock 8,109,063 6,342,833 1,766,230 -
Investment in bonds 134,751,677 28,391,032 106,360,645 -
Commercial paper and certificate of deposit 88,518,247 - 88,518,247 -
Other 128,107 18,082 110,025 -
Liabilities
Financial liabilities at fair value through profit or loss ( 17,181,429 ) -( 17,181,429 ) -
Derivative financial assets and liabilities
Assets
Financial assets at fair value through profit or loss 4,857,594 - 4,857,594 -
Liabilities
Financial liabilities at fair value through profit or loss ( 4,757,866 ) -( 4,757,866 ) -
Total $ 256,596,183 $ 39,713,849 $ 216,882,334 $ -
C. Movements of financial instruments classified into Level 3 of fair value are as follows:
(A) Movements of financial assets classified into Level 3 of fair value are as follows:
For the year ended December 31, 2016: No revelant balance.
For the year ended December 31, 2015:
(In NT Thousand Dollars)
Gain and loss on valuation Addition Reduction
Beginning
Items Other comprehensive Purchased Transferred Sold, disposed Transferred Ending balance
balance Gain and loss
income or issued to Level 3 or settled from Level 3
Financial assets at fair
value through profit
or loss $ 214,281 $ 106,135 $ -$ 14,514 $ - ($ 472 ) ($ 334,458 ) $ -

(B) Movements of financial liabilities classified into Level 3 of fair value are as follows:
For the year ended December 31, 2016: No revelant balance.
For the year ended December 31, 2015:
(In NT Thousand Dollars)
Gain and loss on valuation Addition Reduction
Beginning Ending
Items Other comprehensive Purchased Transferred Sold, disposed Transferred
balance Gain and loss balance
income or issued to Level 3 or settled from Level 3
Financial liabilities at
fair value through
profit or loss ($ 214,281) ($ 106,135) $ - ($ 14,514) $ -$ 472 $ 334,458 $ -

Due to the adoption of observable inputs rather than quoted price from counterparties, derivative financial instruments were transferred from
level 3 to level 2.

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 D. Transfer between Level 1 and Level 2
The Bank’s held 104-12 and 104-13 Category A Central Government Construction Bonds at December 31, 2016 had an amount of
NT$797,688 thousand and NT$608,634 thousand, respectively. For the current period they were not on the-run bonds, thus they were
transferred from Level 1 to Level 2.
The Bank’s held 103-13 and 103-15 Category A Central Government Construction Bonds at December 31, 2015 had an amount of
NT$105,180 thousand and NT$153,912 thousand, respectively. For the current period they were not on the-run bonds, thus they were
transferred from Level 1 to Level 2.
E. Fair value measurement to Level 3, and the sensitivity analysis of the substitutable appropriate assumption made on fair value.
The Bank and its subsidiaries did not hold any Level 3 financial instruments at December 31, 2016 and 2015.
8. MANAGEMENT OBJECTIVE AND POLICY FOR FINANCIAL RISK
( 1 ) Overview
The Bank and its subsidiaries earn profits mainly from lending, financial instruments trading and investments. The Bank and its subsidiaries
are supposed to bear and manage any risks from these business activities. These risks include credit risk, market risk, operating risk and
liquidity risk. Among those risks, credit risk, market risk and liquidity risk have greatest impact.
The Bank and its subsidiaries regard any potential factors that might negatively affect earnings and reputation as risks. To maintain steady
profits and good reputation and avoid losses from incidental events, the Bank and its subsidiaries’ risk management policies focus on
prevention and reduction of anticipated business risks and increase of capital in response to future anticipated risks. In order to meet the solid
operating requirements by the competent authorities, depositors and other stakeholders for management objectives for risks, business risks
are controlled within the tolerable scope.
( 2 ) The organization framework of risk management
The Bank and its subsidiaries established risk management policies and guidelines and whole risk tolerance of the group. Subsidiaries therefore
follow the Bank’s instructions in setting risk management organization, policies, objectives, procedures, internal control operation, risk
monitor mechanism and risk limits, and report to the parent company on risk management issues.
The Board of Directors is the highest instruction unit of the Bank and its subsidiaries’ risk management organization structure and is
responsible for establishing risk management system, including risk management policies, organization structure, risk preference, internal
control system and management of significant business cases.
Under the head office, the Risk Management Committee is established. The Risk Management Committee is responsible for review and
monitor of risk management. Under the management, several committees and other administrative units are established. They are responsible
for assessing and monitoring the related risk of loans, investments, trading of financial products.
The Bank has the Risk Management Committee established beneath its management, which is responsible for supervising the establishment
of risk management mechanism, risk limits setting, risk monitoring and reporting. Each business management unit is responsible for
identifying possible risks that may be generated within their respective jurisdictions, establishing internal control procedures and regulations,
periodically measuring risk degrees and adopting response measures for possible negative effects.
Business units follow operating procedures and report to the management units directly. Risk management unit is responsible for monitor of
overall risk positions and concentration and reporting to the management or Board of Directors.
Auditing office examines the operations of business and administration units regularly or irregularly to ensure the three risk management
defense lines operate normally.
The Bank has assigned personnel to sit on the Board of Directors of each subsidiary to monitor the governance of each subsidiary.
( 3 ) Cred it risk
A. The source and definition of credit risk
Credit risk pertains to the risk of loss that the borrowers, issuers or counterparties might default on contracts due to deterioration in their
finance or other factors.
The Bank and its subsidiaries are exposed to credit risk mainly on businesses of corporate and individual loans, guarantees, trade financing,
interbank deposits and call loans and securities investments.
Credit risk is the primary risk of the Bank and its subsidiaries’ capital charge.
B. Credit risk management policies
The objectives of the Bank and its subsidiaries’ credit risk management are to maintain stable asset allocation strategy, careful loaning
policy and excellent asset quality to secure assets and earnings.
The management mechanism of the Bank and its subsidiaries for credit risk includes:
The establishment of Risk Management, Loan and Investment committees which adopt responding measures to market environment,
changes in industry, and capital limits, and review relevant regulations and cases of significant lending and investments.
Setting careful prior review procedures for lending and criteria of handling subsequent matters, regular post-lending follow-up,
understanding of clients’ operation and capital outflows, and increase in the frequency of review on clients with higher risk.
Classifying credit ratings based on clients’ probability of default or behavior scoring with management put in practice.

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Controlling concentration of credit risk by setting credit limits for individuals, corporate groups, industries, areas, and different types of
collaterals.
Setting credit risk limits by reference to external ratings and prospects with attention to changes in market credit spread and risk
concentration of counterparties.
The establishment of credit pre-warning list and reporting system.
Assessing assets quality regularly and setting aside sufficient reserve for losses.
Setting creditor’s rights management unit and advisory committee in charge of accelerating collection of non-performing loans.
The procedures for credit risk management of the Bank and its subsidiaries and related measurement approaches are outlined below:
(A) Credit extensions
Classification of credit assets and internal risk ratings are as follows:
a. Classification of credit assets
Corporate credit risk is measured by using the borrower’s default probability model with logistic regression analysis in which
financial and non-financial factors are incorporated, which predicts the default probability of borrower within the next year.
Besides, the extent of risk is measured by using credit rating table and taking into account the characteristics and scale of
business. Lending examination and post management are dealt with based on clients’ credit rating. Individual borrowers are
grouped into different risk levels and managed by using application scoring and behavior scoring cards. Back-testing is
conducted on internal models regularly; those models are subject to adjustments when necessary. Clients’ credit ratings are
reviewed annually and subject to adjustments when there is significant change in their credit ratings.
b. Internal risk rating
The internal rating for lending is classified as excellent, satisfactory, fair and weak, and corresponds to the Standard & Poor’s
rating as follows:
Internal risk rating Excellent Satisfactory Fair Weak
Corresponding to S&P AAA~BBB- BB+~ BB- B+ B and below
(B) Interbank deposits and call loans
Before trading with other banks, the Bank and its subsidiaries must assess the credit of the counterparty; generally referencing
external rating agencies, assets and scale of equity of the counterparty, and the credit rating of the counterparty’s country of origin
in order to set different transaction limits, as well as periodically examining the ratings and changes in stock prices of the
counterparty in order to monitor the risks of counterparty.
(C) Bonds and derivative instruments
The limits of bonds purchased by the Bank and its subsidiaries are set by considering the credit rating of bond issuers or guarantors
(ex. S&P, Moody’s, Fitch, Taiwan ratings or Fitch Taiwan), which needs to meet the minimum rating set by the Board of (Managing)
Directors, and country risk at the application, changes in CDS quoted prices and market condition.
The Bank and its subsidiaries have set trading units and overall total risk limit for non-hedging derivative instruments, and use
positive trading contract evaluation and the potential exposure as the basis for calculating credit risk and add the limit to the total
credit risk limit for monitoring.
(D) Asset quality
The Bank and its subsidiaries have set the minimum requirements and examination procedures for the quality of financial assets of
each type, and controls risk concentration of assets portfolios of each type based on the risk limit of each type. The Bank and its
subsidiaries also monitor the changes in assets quality regularly during the duration of the assets and takes measures to maintain
their quality. According to the policies and regulations, reserve for losses is provided adequately for those assets to actually reflect
and safeguard the value of owners’ equity.
(E) Impairment of financial assets and provision for reserves
The Bank and its subsidiaries assess at each balance sheet date whether a financial asset is impaired. If there is objective evidence
that an event that occurred after the initial recognition of the asset has an impact on the future cash flows of the financial asset, the
impairment loss on the financial asset should be recognized.
The objective evidence of an impairment loss is as follows:
Significant financial difficulty of the issuer or debtor;
The issuer or debtor has breached the contract;
The Creditor, for economic or legal reasons relating to the borrower’s financial difficulty, granted the borrower a concession;
It becomes probable that the borrower will enter bankruptcy or other financial reorganization;
The disappearance of an active market for that financial asset because of financial difficulties; or observable data indicating that
there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of
those assets, although the decrease cannot yet be identified with the individual financial asset in the group, including:
Adverse changes are in the payment status of borrowers in the group; or adverse changes in national or local economic conditions
that correlate with defaults on the assets in the group.

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 Financial assets that are not impaired are included in the group of financial assets sharing similar credit risk characteristics for
collective assessment. Financial assets that are assessed individually with impairment recognized need not be included in the
collective assessment.
The amount of the impairment loss is the difference between the financial assets’ book value and the estimated future cash flow
discounted using the original effective interest rate. The present value of estimated future cash flows must reflect the cash flows
that might generate from collaterals less acquisition or selling cost regarding the collateral.
Financial assets through collective assessment are grouped based on similar credit risk characteristics, such as types of assets,
industry and collaterals. Such credit risk characteristics represent the ability of the debtors to pay all the amounts at maturities
according to the contract term, which is related to future cash flows of group of financial assets. The future cash flows of group of
financial assets for collective assessment are estimated based on historical impairment experience, reflecting the change in
observable data for each period, and the estimation of the future cash flows should move in the same direction. The Bank and its
subsidiaries review the assumptions and methods for estimation of the future cash flows regularly.
For loan loss provision and guarantee reserve, the Bank and its subsidiaries have established the regulations for assets assessment
and loss reserve. According to the regulations of the Financial Supervisory Commission for banks, bills companies and insurance
companies, all assets in balance sheets and off balance sheets are classified as five categories. For credit assets on balance sheets
and off balance sheets, in addition to normal credit assets which shall be classified as "Category One", the remaining unsound credit
assets that required special attention shall be evaluated based on the status of the creditor’s the length of time overdue financial
situation, and loan collaterals, and classified as "Category Two". Assets that are substandard shall be classified as "Category Three".
Assets that are doubtful shall be classified as "Category Four", and assets for which there is loss shall be classified as "Category
Five". "Category Two" to "Category Five" shall be assessed one by one for possible loss and set aside sufficient loss provision.
And loss provision shall be also set aside for "Category One" proportionately in accordance with regulations of competent
authorities.
C. Policies of hedging and mitigation of credit risk
To reduce credit risk, the Bank and it subsidiaries adopt the following policies:
(A) Obtaining collaterals and guarantors
The Bank and its subsidiaries have established policies on collateral management, mortgage loan line setting, scope of collaterals,
collateral valuation, collateral management and disposal. Besides, protection of creditor’s right, collateral terms and offsetting terms
are all addressed in the credit extension contract in case of any occurrence of credit event, of which the amount may be deductible,
loan repayment schedule may be shortened or deemed as matured, or the debtor’s deposits can be used to offset its liabilities to
mitigate credit risks.
(B) Loan limit control
To avoid extreme credit risk concentration, subsidiaries established policies for control of credit risk concentration and set up credit
extension limit for a single individual, a single group, a single industry, a single area/country, and single collateral.
(C) Master netting arrangements
The Bank’s and its subsidiaries’ transactions predominantly settle at gross amount. A portion of transactions have entered into master
netting arrangements with counterparties or upon the event of a default may cease all transactions with the counterparties and settle
by net amount in order to further reduce credit risk.
(D) Other credit enhancements
The Bank and its subsidiaries have offsetting terms within their credit contracts, which clearly define that all deposits in the Bank
and its subsidiaries from debtors may be offset against their liabilities upon a credit event, and have guarantees from third parties or
financial institutions, in order to decrease credit risk.
D. Maximum credit risk exposure
The maximum credit risk exposure of financial assets within the balance sheets is presented in book values. The maximum credit risk
exposure of guarantees and irrevocable commitments off balance sheets is calculated based on their limits. Letters of credit and the
guarantee refer to those issued but not used.
(A) The maximum credit risk exposure of financial assets of the Bank and its subsidiaries excluding collaterals or other credit
enhancement instruments is approximately equal to book value. The maximum exposure to credit risk of items off balance sheet is
listed below:
December 31, 2016 December 31, 2015
NT$ US$ NT$
Credit risk exposure of items off balance sheet:
Irrevocable commitments $ 171,787,313 $ 5,334,016 $ 166,108,998
Guarantee and letters of credit 257,027,894 7,980,745 272,848,162
Total $ 428,815,207 $ 13,314,761 $ 438,957,160

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 (B) Assets of the Bank and its subsidiaries with credit risk are analyzed as follows:
Unit: In NT Thousand Dollars
December 31, 2016
Cash and cash Bills and bonds
purchased under Derivative Other items
equivalents, due from
the Central Bank and Bills discounted resale agreement financial included in Credit
call loans to banks and loans Receivables and debt instruments instruments balance sheet commitments Total
Government
organization $ 360,860,952 $ 8,467,889 $ 374,127 $ 34,678,520 $ - $ 17,378 $ 84,705,196 $ 489,104,062
Financial institution,
investment and
insurance 269,579,542 161,889,924 7,001,905 420,550,150 2,270,646 58 15,874,010 877,166,235
Enterprise and commerce - 1,166,873,194 48,085,489 65,393,120 867,531 952,480 269,879,135 1,552,050,949
Individuals - 394,633,931 4,767,526 - 45,515 312,976 56,710,159 456,470,107
Others - 10,108,060 624,882 283,986 599,432 65,479 1,646,707 13,328,546
Total 630,440,494 1,741,972,998 60,853,929 520,905,776 3,783,124 1,348,371 428,815,207 3,388,119,899
Less: Allowance for
probable losses ( 2,206 ) ( 26,694,232 ) ( 1,428,738 ) - - ( 3,034 ) - ( 28,128,210 )
Net $ 630,438,288 $ 1,715,278,766 $ 59,425,191 $ 520,905,776 $ 3,783,124 $ 1,345,337 $ 428,815,207 $ 3,359,991,689

Trade finance to enterprises accounted for 8.08%, totaling NT$94,290,515 thousand. Housing mortgage loans to individuals accounted
for 76.34%, totaling NT$301,249,912 thousand.
Unit: In US Thousand Dollars
December 31, 2016
Cash and cash Bills and bonds
purchased under Derivative Other items
equivalents, due from
the Central Bank and Bills discounted resale agreement financial included in Credit
call loans to banks and loans Receivables and debt instruments instruments balance sheet commitments Total
Government
organization $ 11,204,774 $ 262,929 $ 11,617 $ 1,076,772 $ - $ 539 $ 2,630,106 $ 15,186,737
Financial institution,
investment and
insurance 8,370,476 5,026,701 217,410 13,058,131 70,504 2 492,890 27,236,114
Enterprise and commerce - 36,231,547 1,493,060 2,030,464 26,937 29,575 8,379,778 48,191,361
Individuals - 12,253,429 148,032 - 1,413 9,718 1,760,857 14,173,449
Others - 313,856 19,402 8,818 18,612 2,033 51,130 413,851
Total 19,575,250 54,088,462 1,889,521 16,174,185 117,466 41,867 13,314,761 105,201,512
Less: Allowance for
probable losses ( 68 ) ( 828,859 ) ( 44,362 ) - - ( 94 ) - ( 873,383 )
Net $ 19,575,182 $ 53,259,603 $ 1,845,159 $ 16,174,185 $ 117,466 $ 41,773 $ 13,314,761 $ 104,328,129

Trade finance to enterprises accounted for 8.08%, totaling US$2,927,731 thousand. Housing mortgage loans to individuals accounted for
76.34%, totaling US$9,353,844 thousand.
Unit: In NT Thousand Dollars
December 31, 2015
Cash and cash Bills and bonds
purchased under Derivative Other items
equivalents, due from
the Central Bank and Bills discounted resale agreement financial included in Credit
call loans to banks and loans Receivables and debt instruments instruments balance sheet commitments Total
Government
organization $ 338,242,916 $ 10,709,913 $ 150,430 $ 18,100,977 $ - $ 10,019 $ 81,658,932 $ 448,873,187
Financial institution,
investment and
insurance 312,819,051 173,014,187 82,460,399 391,638,844 2,480,950 93 19,663,315 982,076,839
Enterprise and commerce - 1,211,258,965 56,431,606 61,780,324 1,645,168 880,164 277,025,545 1,609,021,772
Individuals - 391,311,819 4,728,797 - 50,795 314,738 58,965,383 455,371,532
Others - 10,440,399 723,668 203,755 680,681 34,825 1,643,985 13,727,313
Total 651,061,967 1,796,735,283 144,494,900 471,723,900 4,857,594 1,239,839 438,957,160 3,509,070,643
Less: Allowance for
probable losses ( 2,241 ) ( 23,466,229 ) ( 1,973,545 ) - - ( 2,992 ) - ( 25,445,007 )
Net $ 651,059,726 $ 1,773,269,054 $ 142,521,355 $ 471,723,900 $ 4,857,594 $ 1,236,847 $ 438,957,160 $ 3,483,625,636

Trade finance to enterprises accounted for 9.62%, totaling NT$116,501,780 thousand. Housing mortgage loans to individuals accounted
for 75.83%, totaling NT$296,737,772 thousand.

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Mega ICBC 80
 (C) Relevant financial information on effect of the Bank’s and its subsidiaries’ assets exposed to credit risk, net settlement master netting
arrangements and other credit improvements is as follows:

Unit: In NT Thousand Dollars

Net settlement
master netting Other credit
December 31, 2016 Collateral arrangements improvements Total
On-Balance-Sheet Items
Financial assets at fair value through profit or loss
- debt instrument $ - $ - $ 12,237,232 12,237,232
- derivative instrument 908,272 1,140,092 - 2,048,364
Bills and bonds purchased under resale agreements 4,091,532 - - 4,091,532
Bills discounted and loans 1,107,932,816 - 54,229,707 1,162,162,523
Available-for-sale financial assets - debt instrument - - 16,630,445 16,630,445
Held-to-maturity financial assets - debt instrument - - 3,652,812 3,652,812
Off-Balance-Sheet Items
Irrevocable commitments 82,161,825 - 1,206,122 83,367,947
Guarantees and letters of credit 50,000,626 - 1,852,236 51,852,862

Unit: In US Thousand Dollars

Net settlement
master netting Other credit
December 31, 2016 Collateral arrangements improvements Total
On-Balance-Sheet Items
Financial assets at fair value through profit or loss
- debt instrument $ - $ - $ 379,967 379,967
- derivative instrument 28,202 35,400 - 63,602
Bills and bonds purchased under resale agreements 127,043 - - 127,043
Bills discounted and loans 34,401,441 - 1,683,839 36,085,280
Available-for-sale financial assets - debt instrument - - 516,377 516,377
Held-to-maturity financial assets - debt instrument - - 113,420 113,420
Off-Balance-Sheet Items
Irrevocable commitments 2,551,134 - 37,450 2,588,584
Guarantees and letters of credit 1,552,525 - 57,512 1,610,037

Unit: In NT Thousand Dollars

Net settlement
master netting Other credit
December 31, 2015 Collateral arrangements improvements Total
On-Balance-Sheet Items
Financial assets at fair value through profit or loss
- debt instrument $ - $ - $ 11,166,111 $ 11,166,111
- derivative instrument 1,441,782 616,636 - 2,058,418
Bills and bonds purchased under resale agreements 9,210,246 - - 9,210,246
Bills discounted and loans 1,108,013,324 - 51,337,539 1,159,350,863
Available-for-sale financial assets - debt instrument - - 55,850,290 55,850,290
Held-to-maturity financial assets - debt instrument - - 3,370,705 3,370,705
Off-Balance-Sheet Items
Irrevocable commitments 77,350,509 - 328,366 77,678,875
Guarantees and letters of credit 49,783,690 - 2,430,842 52,214,532

Note 1: Collaterals include property, movable property, certification of authorization, securities, certificates of deposits, letter of credit and
rights in property.
(1)Value of collaterals pledged for assets that arise from lending is the lower of collateral value/ market value and maximum exposure
amount. If the collateral value cannot be btained, value of collaterals must be assessed.
(2)Value of collaterals pledged for assets that do not arise from lending is the lower of market value and maximum exposure amount.
Note 2: Details of improvement to net settlement master netting arrangements and other credits are provided in Note 8(3) C. (C) and C. (D).
E. Credit risk concentration
Extreme credit risk concentration will enhance risk degree, such as large amount of risk exposure concentrated on one credit product,
one client, or minor clients, or a group of clients in the same industry or with similar business or in the same area or with the same risk
characteristics. When adverse economic changes occur, a financial institution may incur a significant loss.
To avoid extreme credit risk concentration, the Bank and its subsidiaries have regulated credit limit and management rules for single
client, single business group and large amount of risk exposure. The Bank and its subsidiaries have to monitor and control the credit risk
concentration within the limit. Status of credit risk concentration must be shown in the regular risk report by industry, area/country,
collateral and other forms.

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81 Annual Report 2016

(A) Loans and credit commitments of the Bank and its subsidiaries are shown below by industry:
Loans and credit commitments
December 31, 2016 December 31, 2015
Amount Percentage Amount Percentage
NT$ US$ (%) NT$ (%)
Individuals Individuals $ 451,344,091 $ 14,014,286 20.79% $ 450,277,202 20.14%
Government organization 93,173,084 2,893,035 4.29% 92,368,844 4.13%
Financial institution,
investment and insurance 177,763,933 5,519,590 8.19% 192,677,503 8.62%
Enterprise and commerce
- Manufacturing 525,117,015 16,304,944 24.19% 550,645,218 24.63%
Corporation - Electricity and gas supply 98,779,752 3,067,123 4.55% 109,820,565 4.91%
- Wholesale and retail 162,134,935 5,034,308 7.47% 176,114,363 7.88%
- Transportation and storage 170,853,727 5,305,028 7.87% 177,794,548 7.95%
- Real estate 286,623,859 8,899,704 13.21% 280,618,514 12.55%
- Others 193,243,041 6,000,218 8.90% 193,291,302 8.65%
Others 11,754,768 364,987 0.54% 12,084,384 0.54%
Total $ 2,170,788,205 $ 67,403,223 100.00% $ 2,235,692,443 100.00%
(B) Loans and credit commitments of the Bank and its subsidiaries are shown below by location:
Loans and credit commitments
December 31, 2016 December 31, 2015
Amount Percentage Amount Percentage
NT$ US$ (%) NT$ (%)
ROC $ 1,653,439,909 $ 51,339,499 76.17% $ 1,686,167,196 75.42%
Asia 296,208,761 9,197,316 13.65% 329,921,179 14.76%
North America 105,347,987 3,271,067 4.85% 113,011,992 5.05%
Others 115,791,548 3,595,341 5.33% 106,592,076 4.77%
Total $ 2,170,788,205 $ 67,403,223 100.00% $ 2,235,692,443 100.00%

(C) Loans and credit commitments of the Bank and its subsidiaries are shown below by collaterals:
Loans and credit commitments
December 31, 2016 December 31, 2015
Amount Percentage Amount Percentage
NT$ US$ (%) NT$ (%)
Unsecured $ 873,404,872 $ 27,119,321 40.33% $ 946,448,173 42.33%
Secured
- Secured by stocks 133,034,971 4,130,751 6.13% 135,224,849 6.05%
- Secured by bonds 50,562,799 1,569,981 2.33% 124,992,654 5.59%
- Secured by real estate 818,537,443 25,415,682 37.71% 786,175,539 35.16%
- Secured by chattel 109,674,057 3,405,392 5.05% 108,735,241 4.86%
- Secured by letter of guarantee 57,288,066 1,778,801 2.64% 54,096,746 2.42%
- Others 128,285,997 3,983,295 5.91% 80,019,241 3.59%
Total $ 2,170,788,205 $ 67,403,223 100.00% $ 2,235,692,443 100.00%
（Blank below）

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Mega ICBC 82
83
F. Financial assets credit quality and analysis of past due and impairment
(A) The Bank and its subsidiaries’ financial assets credit quality and analysis of past due and impairment
Unit: In NT Thousand Dollars
Neither past due nor impaired Past due but not impaired
December 31, 2016 Reserve for
Excellent Satisfactory Fair Weak No rating Subtotal Excellent Satisfactory Fair Weak No rating Subtotal Impaired losses Net amount
Maximum credit risk exposure of
financial assets in balance sheet:
Cash and cash equivalents $ 87,838,654 $ 1,874,076 $ 12,955 $ 10,259 $ 692,808 $ 90,428,752 $ - $ - $ -$ - $ - $ - $ -$ 2,206 $ 90,426,546

Annual Report 2016

Due from the Central Bank and call
loans to banks 535,423,829 2,169,137 644,120 1,311,797 462,859 540,011,742 - - - - - - - - 540,011,742
Financial assets at fair value through
profit or loss
- Debt instruments 34,151,375 4,415,420 99,880 - - 38,666,675 - - - - - - - - 38,666,675
- Derivative financial instruments 2,124,733 4,250 - - 1,654,141 3,783,124 - - - - - - - - 3,783,124
Bills and bonds purchased under
resale agreements 4,255,968 - - - - 4,255,968 - - - - - - - - 4,255,968
Receivables 12,261,511 9,157,438 17,153,080 3,349,734 17,714,301 59,636,064 4,861 330 924 512 21,590 28,217 1,189,648 1,428,738 59,425,191
Bills discounted and loans 754,413,557 347,880,410 213,107,288 110,221,176 301,460,958 1,727,083,389 747,750 150,011 360,168 204,050 48,633 1,510,612 13,378,997 26,694,232 1,715,278,766
Available-for-sale financial assets-
Debt instruments 198,432,234 199,558 - 60,173 - 198,691,965 - - - - - - - - 198,691,965
Held-to-maturity financial assets-
Debt instruments 279,246,571 25,667 - - 18,930 279,291,168 - - - - - - - - 279,291,168
Other assets 84,130 795,526 - - 463,107 1,342,763 - - - - - - 5,608 3,034 1,345,337
Total $ 1,908,232,562 $ 366,521,482 $ 231,017,323 $ 114,953,139 $ 322,467,104 $ 2,943,191,610 $ 752,611 $ 150,341 $ 361,092 $ 204,562 $ 70,223 $ 1,538,829 $ 14,574,253 $ 28,128,210 $ 2,931,176,482

Unit: In US Thousand Dollars

Neither past due nor impaired Past due but not impaired
December 31, 2016 Reserve for
Excellent Satisfactory Fair Weak No rating Subtotal Excellent Satisfactory Fair Weak No rating Subtotal Impaired losses Net amount
Maximum credit risk exposure of
financial assets in balance sheet:
Cash and cash equivalents $ 2,727,400 $ 58,190 $ 402 $ 319 $ 21,512 $ 2,807,823 $ - $ - $ - $ -$ -$ -$ - $ 68 $ 2,807,755
Due from the Central Bank and call
loans to banks 16,624,972 67,352 20,000 40,731 14,372 16,767,427 - - - - - - - - 16,767,427
Financial assets at fair value through
profit or loss
- Debt instruments 1,060,404 137,099 3,102 - - 1,200,605 - - - - - - - - 1,200,605
- Derivative financial instruments 65,973 132 - - 51,361 117,466 - - - - - - - - 117,466
Bills and bonds purchased under
resale agreements 132,148 - - - - 132,148 - - - - - - - - 132,148
Receivables 380,721 284,340 532,605 104,010 550,031 1,851,707 151 10 29 16 670 876 36,938 44,362 1,845,159
Bills discounted and loans 23,424,627 10,801,727 6,617,006 3,422,380 9,360,397 53,626,137 23,218 4,658 11,183 6,336 1,510 46,905 415,420 828,859 53,259,603
Available-for-sale financial assets-
Debt instruments 6,161,344 6,196 - 1,869 - 6,169,409 - - - - - - - - 6,169,409
Held-to-maturity financial assets-
Debt instruments 8,670,638 797 - - 588 8,672,023 - - - - - - - - 8,672,023
Other assets 2,612 24,701 - - 14,380 41,693 - - - - - - 174 94 41,773
Total $ 59,250,839 $ 11,380,534 $ 7,173,115 $ 3,569,309 $ 10,012,641 $ 91,386,438 $ 23,369 $ 4,668 $ 11,212 $ 6,352 $ 2,180 $ 47,781 $ 452,532 $ 873,383 $ 91,013,368

~83~
 Unit: In NT Thousand Dollars
Neither past due nor impaired Past due but not impaired
December 31, 2015 Reserve for
Excellent Satisfactory Fair Weak No rating Subtotal Excellent Satisfactory Fair Weak No rating Subtotal Impaired losses Net amount
Maximum credit risk exposure of
financial assets in balance sheet:
Cash and cash equivalents $ 143,550,943 $ 527,447 $ -$ 28,339 $ 922,383 $ 145,029,112 $ - $ - $ -$ - $ - $ - $ -$ 2,241 $ 145,026,871
Due from the Central Bank and call
loans to banks 498,805,172 2,520,701 1,336,751 1,863,239 1,506,992 506,032,855 - - - - - - - - 506,032,855
Financial assets at fair value through
profit or loss
- Debt instruments 36,133,325 2,628,415 553,122 - 64,680 39,379,542 - - - - - - - - 39,379,542
- Derivative financial instruments 2,381,617 4,747 - - 2,471,230 4,857,594 - - - - - - - - 4,857,594
Bills and bonds purchased under
resale agreements 9,435,869 - - - - 9,435,869 - - - - - - - - 9,435,869
Receivables 70,359,334 38,639,817 2,803,379 1,819,410 30,457,184 144,079,124 4,758 550 423 897 25,107 31,735 384,041 1,973,545 142,521,355
Bills discounted and loans 582,910,908 551,525,514 223,411,631 104,716,863 320,947,499 1,783,512,415 1,176,653 262,713 143,231 385,772 108,733 2,077,102 11,145,766 23,466,229 1,773,269,054
Available-for-sale financial assets-
Debt instruments 221,778,013 699,106 - 60,298 842,532 223,379,949 - - - - - - - - 223,379,949
Held-to-maturity financial assets-
Debt instruments 199,160,317 36,183 - - 332,040 199,528,540 - - - - - - - - 199,528,540
Other assets 44,967 682,638 - - 506,608 1,234,213 - - - - - - 5,626 2,992 1,236,847
Total $ 1,764,560,465 $ 597,264,568 $ 228,104,883 $ 108,488,149 $ 358,051,148 $ 3,056,469,213 $ 1,181,411 $ 263,263 $ 143,654 $ 386,669 $ 133,840 $ 2,108,837 $ 11,535,433 $ 25,445,007 $ 3,044,668,476

a. As of December 31, 2016 and 2015, according to the internal requirements of assets internal rating, the rate of liabilities instruments belonging to excellent level were 99.07% and 98.89%, respectively.
b. As of December 31, 2016 and 2015, the rate of due from commercial banks and call loans to bank belonging to excellent level were 99.15% and 98.57%, respectively.
c. As of December 31, 2016 and 2015, the rate of loans belonging to excellent level were 43.68% and 32.68%, respectively.
d. Bills discounted and loans of the Bank and its subsidiaries were all in accordance with requirements of credit extensions and the relevant regulations, and classified by internal rating table.
e. Bills discounted and loans of the Bank and its subsidiaries were all in accordance with requirements of credit extensions and the relevant regulations, and classified by internal rating model or table, the internal
rating is classified as excellent, satisfactory, fair and weak, the probability of default can corresponds to the Standard & Poor’s rating; Besides, those without credit ratings are risk exposures classified by credit
rating (score) table, corresponding credit default rates are yet to be confirmed, mainly as a sovereign state, banks and overseas branches customers. The Bank adopted qualified external rating as the quality
control tools for sovereign states and banks, and classified by rating table for overseas branches

Mega ICBC
84
~84~
 (B) The Bank and its subsidiaries’ aging analysis of financial assets that were past due but not impaired
Financial assets might be past due but not impaired due to borrower’s processing delay or other administrative reasons. According
to subsidiaries’ internal management rules for assets assessment, financial assets which are past due within 90 days are not regarded
as impaired unless there is objective evidence that the financial assets are impaired. There are very few conditions where financial
assets are past due over 90 days but not impaired.
Unit: In NT Thousand Dollars
December 31, 2016
Overdue for Overdue for Overdue for Overdue for
Total
less than 1 month 1~3 months 3~6 months more than 6 months
Account receivable $ 20,126 $ 8,091 $ - $ - $ 28,217
Bills discounted and loans
- Enterprise and
commerce 314,767 45,004 - - 359,771
- Individuals 1,150,070 771 - - 1,150,841
Total $ 1,484,963 $ 53,866 $ - $ - $ 1,538,829

Unit: In US Thousand Dollars

December 31, 2016
Overdue for Overdue for Overdue for Overdue for
Total
less than 1 month 1~3 months 3~6 months more than 6 months
Account receivable $ 625 $ 251 $ - $ - $ 876
Bills discounted and loans
- Enterprise and
commerce 9,773 1,398 - - 11,171
- Individuals 35,710 24 - - 35,734
Total $ 46,108 $ 1,673 $ - $ - $ 47,781

Unit: In NT Thousand Dollars

December 31, 2015
Overdue for Overdue for Overdue for Overdue for
Total
less than 1 month 1~3 months 3~6 months more than 6 months
Account receivable $ 21,245 $ 10,490 $ - $ - $ 31,735
Bills discounted and loans
- Government 655,052 - - - 655,052
- Enterprise and
commerce 251,474 92,925 - - 344,399
- Individuals 1,065,990 11,661 - - 1,077,651
Total $ 1,993,761 $ 115,076 $ - $ - $ 2,108,837

(C) The Bank and its subsidiaries’ provisions for doubtful accounts analysis of impaired loans
Unit: In NT Thousand Dollars
December 31, 2016
Loans Allowance for probable losses
Not impaired Impaired
Provisions for
doutbful
accounts/
Individual Collective Individual Collective Individual Collective Loans net impaired loans
assessment assessment assessment assessment Total assessment assessment Total amount %
ROC $ - $ 1,261,478,161 $ 10,588,311 $ 728,542 $ 1,272,795,014 $ 2,383,636 $ 17,338,574 $ 19,722,210 $ 1,253,072,804 174.27
Asia - 275,312,574 900,184 8,259 276,221,017 295,756 3,781,923 4,077,679 272,143,338 448.86
North America - 85,663,604 45,974 - 85,709,578 13,276 1,176,723 1,189,999 84,519,579 2,588.42
Others - 106,139,662 1,093,357 14,370 107,247,389 246,136 1,458,208 1,704,344 105,543,045 153.86
Total $ - $ 1,728,594,001 $ 12,627,826 $ 751,171 $ 1,741,972,998 $ 2,938,804 $ 23,755,428 $ 26,694,232 $ 1,715,278,766

Unit: In US Thousand Dollars

December 31, 2016
Loans Allowance for probable losses
Not impaired Impaired
Provisions for
doutbful
accounts/
Individual Collective Individual Collective Individual Collective Loans net impaired loans
assessment assessment assessment assessment Total assessment assessment Total amount %
ROC $ - $ 39,169,042 $ 328,768 $ 22,622 $ 39,520,432 $ 74,012 $ 538,365 $ 612,377 $ 38,908,055 174.27
Asia - 8,548,487 27,951 256 8,576,694 9,183 117,429 126,612 8,450,082 448.86
North America - 2,659,864 1,428 - 2,661,292 412 36,537 36,949 2,624,343 2,588.42
Others - 3,295,649 33,949 446 3,330,044 7,643 45,278 52,921 3,277,123 153.86
Total $ - $ 53,673,042 $ 392,096 $ 23,324 $ 54,088,462 $ 91,250 $ 737,609 $ 828,859 $ 53,259,603

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85 Annual Report 2016

 Unit: In NT Thousand Dollars
December 31, 2015
Loans Allowance for probable losses
Not impaired Impaired
Provisions for
doutbful
accounts/
Individual Collective Individual Collective Individual Collective Loans net impaired loans
assessment assessment assessment assessment Total assessment assessment Total amount %
ROC $ - $ 1,283,853,287 $ 8,735,573 $ 783,070 $ 1,293,371,930 $ 2,204,145 $ 14,928,530 $ 17,132,675 $ 1,276,239,255 179.99
Asia - 308,581,116 658,159 1,893 309,241,168 209,620 3,623,156 3,832,776 305,408,392 580.68
North America - 92,893,489 436,768 - 93,330,257 110,650 1,087,023 1,197,673 92,132,584 274.21
Others - 100,261,625 529,521 782 100,791,928 138,102 1,165,003 1,303,105 99,488,823 245.73
Total $ - $ 1,785,589,517 $ 10,360,021 $ 785,745 $ 1,796,735,283 $ 2,662,517 $ 20,803,712 $ 23,466,229 $ 1,773,269,054

G. Foreclosed properties management policy

As of December 31, 2016 and 2015, other assets in the consolidated balance sheet include foreclosed properties’ book value of the Bank
and its subsidiaries both totaling NT$0 thousand. According to the R.O.C. Banking Law, foreclosed properties of the Bank shall be sold
within four years.
H. Supplementary information in accordance with “Regulations Governing the Preparation of Financial Reports by Public Banks”

(A) Asset quality of non-performing loans and overdue accounts

Unit: In NT Thousand Dollars, %
Month/Year December 31, 2016
Amount of Non-performing Allowance Coverage
Business/Items non-performing Gross loans loan ratio for doubtful
ratio (Note 3)
loans (Note 1) (Note 2) accounts
Corporate Secured loans $ 653,250 $ 662,796,704 0.10% $ 9,911,426 1517.25%
Banking Unsecured loans 741,285 684,542,363 0.11% 11,256,953 1518.57%
Residential mortgage
360,832 301,248,288 0.12% 4,232,784 1173.06%
loans (Note 4)
Cash card services - - - - -
Small amount of credit
Consumer 453 9,683,356 0.00% 133,531 29477.04%
loans (Note 5)
banking
Secured
93,991 83,537,591 0.11% 1,157,260 1231.25%
Others loans
(Note 6) Unsecured
553 164,696 0.34% 2,278 411.93%
loans
Gross loan business $ 1,850,364 $ 1,741,972,998 0.11% $ 26,694,232 1442.65%
Amount of Balance of Allowance
Overdue Coverage
overdue accounts for doubtful
account ratio ratio
accounts receivable accounts
Credit card services $ 8,354 $ 4,431,609 0.19% $ 47,486 568.42%
Without recourse factoring (Note 7) $ - $ 36,988,054 - $ 555,759 -

Unit: In US Thousand Dollars, %

Month/Year December 31, 2016
Amount of Non-performing Allowance
Coverage
Business/Items non-performing Gross loans loan ratio for doubtful ratio (Note 3)
loans (Note 1) (Note 2) accounts
Corporate Secured loans $ 20,284 $ 20,579,914 0.10% $ 307,751 1517.25%
Banking Unsecured loans 23,017 21,255,119 0.11% 349,530 1518.57%
Residential mortgage
11,204 9,353,794 0.12% 131,428 1173.06%
loans (Note 4)
Cash card services - - - - -
Small amount of credit
Consumer 14 300,669 0.00% 4,146 29477.04%
loans (Note 5)
banking
Secured
2,918 2,593,852 0.11% 35,933 1231.25%
Others loans
(Note 6) Unsecured
17 5,114 0.34% 71 411.93%
loans
Gross loan business $ 57,454 54,088,462 0.11% $ 828,859 1442.65%
Amount of Balance of Allowance
Overdue Coverage
overdue accounts for doubtful
account ratio ratio
accounts receivable accounts
Credit card services $ 259 $ 137,602 0.19% $ 1,474 568.42%
Without recourse factoring (Note 7) $ - $ 1,148,483 - $ 17,256 -

~86~

Mega ICBC 86
 Unit: In NT Thousand Dollars, %
Month/Year December 31, 2015
Amount of Non-performing Allowance
Coverage
Business/Items non-performing Gross loans loan ratio for doubtful
ratio (Note 3)
loans (Note 1) (Note 2) accounts
Corporate Secured loans $ 473,008 $ 651,622,322 0.07% $ 8,173,030 1727.88%
Banking Unsecured loans 629,388 753,801,141 0.08% 10,615,113 1686.58%
Residential mortgage
478,119 296,699,744 0.16% 3,552,218 742.96%
loans (Note 4)
Cash card services - - - - -
Small amount of credit
Consumer 750 5,477,886 0.01% 64,880 8650.67%
loans (Note 5)
banking
Secured
18,308 88,931,480 0.02% 1,058,568 5782.00%
Others loans
(Note 6) Unsecured
735 202,710 0.36% 2,420 329.25%
loans
Gross loan business $ 1,600,308 $ 1,796,735,283 0.09% $ 23,466,229 1466.36%
Amount of Balance of Allowance
Overdue Coverage
overdue accounts for doubtful
account ratio ratio
accounts receivable accounts
Credit card services $ 8,746 $ 4,377,178 0.20% $ 49,579 566.88%
Without recourse factoring (Note 7) $ - $ 37,366,842 - $ 560,562 -

Notes:
1. The amount recognized as non-performing loans is in accordance with the “Regulation Governing the Procedures for Banking
Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans”. The amount included in overdue accounts
for credit cards is in accordance with the Financial-Supervisory-Banks (4) Letter No.0944000378 dated July 6, 2005.
2. Non-performing loan ratio = non-performing loans/gross loans. Overdue account ratio for credit cards=overdue
accounts/balance of accounts receivable.
3. Coverage ratio for loans=allowance for doubtful accounts of loans/non-performing loans. Coverage ratio for accounts
receivable of credit cards=allowance for doubtful accounts for accounts receivable of credit cards/overdue accounts.
4. For residential mortgage loans, the borrower provides his/her (or spouses or minor) house as collateral in full and mortgages it
to the financial institution for the purpose of obtaining funds to purchase or add improvements to a house.
5. Small amount of credit loans apply to the norms of the Financial-Supervisory-Banks (4) Letter No. 09440010950 dated
December 19, 2005, excluding credit card and cash card services.
6. Other consumer banking is specified as secured or unsecured consumer loans other than residential mortgage loan, cash card
services and small amount of credit loans, and excluding credit card services
7. Pursuant to the Financial-Supervisory-Banks (5) Letter No. 094000494 dated July 19, 2005, the amount of without recourse
factoring will be recognized as overdue accounts within three months after the factor or insurance company resolves not to
compensate the loss.

(B) Non-performing loans and overdue receivables exempted from reporting to the competent authority
Unit: In NT Thousand Dollars
December 31, 2016
Total amount of non-performing loans Total amount of overdue receivables
exempted from reporting to the competent exempted from reporting to the
authority competent authority
Performing amounts exempted from reporting to the
competent authority as debt negotiation (Note 1) $ - $ -
Performing amounts in accordance with debt liquidation
program and restructuring program (Note 2) 377 3,017
$ 377 $ 3,017

Unit: In US Thousand Dollars

December 31, 2016
Total amount of non-performing loans Total amount of overdue receivables
exempted from reporting to the competent exempted from reporting to the
authority competent authority
Performing amounts exempted from reporting to the
competent authority as debt negotiation (Note 1) $ - $ -
Performing amounts in accordance with debt liquidation
program and restructuring program (Note 2) 12 94
$ 12 $ 94

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87 Annual Report 2016

 Unit: In NT Thousand Dollars
December 31, 2015
Total amount of non-performing loans Total amount of overdue receivables
exempted from reporting to the competent exempted from reporting to the
authority competent authority
Performing amounts exempted from reporting to the
competent authority as debt negotiation (Note 1) $ 16 $ -
Performing amounts in accordance with debt liquidation
program and restructuring program (Note 2) 402 3,383
$ 418 $ 3,383
Note 1: The Bank disclosed the total amount of non-performing loans and overdue receivables exempted from reporting to the
competent authority as debt negotiation in accordance with Financial-Supervisory-Banks (1) Letter No. 09510001270 dated
April 25, 2006.
Note 2: The Bank disclosed the total amount of non-performing loans and overdue receivables exempted from reporting to the
competent authority as debt liquidation program and restructuring program in accordance with Financial-Supervisory-
Banks (1) Letter No. 09700318940 dated September 15, 2008 and Financial-Supervisory-Banks Letter No. 10500134790
dated September 20, 2016.
(C) The Bank and its subsidiaries contract amounts of significant credit risk concentration are as follows：
Unit: In NT Thousand Dollars, In US Thousand Dollars %
Year December 31, 2016
Total outstanding loan
Total outstanding loan
Ranking amount
Name of Enterprise Group (Note 2) amount / net worth of
(Note 1) (Note 3)
the current year (%)
NT$ US$
1 A Company - Transport via Railways 59,062,727 1,833,904 22.93%
2 B Group - Manufacture of Petroleum and Coal Products 43,746,385 1,358,330 16.98%
3 C Group - Air Transport 21,405,880 664,655 8.31%
4 D Group - Other Financial Service Activities Not Elsewhere
Classified 20,626,772 640,464 8.01%
5 E Group - Rolling and Extruding of Iron and Steel 19,074,465 592,264 7.41%
6 F Group - Other Financial Service Activities Not Elsewhere
Classified 17,930,597 556,747 6.96%
7 G Group –Other Retail Sale in Non-specialized Stores 17,355,326 538,885 6.74%
8 H Group - Investment Advisory Services 17,296,179 537,048 6.72%
9 I Group - Real Estate Development Activities 15,888,845 493,350 6.71%
10 J Group - Ocean Freight Transportation Forwarding Services 15,184,618 471,484 5.90%
Unit: In NT Thousand Dollars, %
Year December 31, 2015
Total
outstanding
Ranking Total outstanding loan amount / net
Name of Enterprise Group (Note 2) loan amount
(Note 1) worth of the current year (%)
(Note 3)
NT$
1 A Company - Transport via Railways 64,823,200 25.57%
2 B Group -Manufacture of Petroleum and Coal Products 41,111,940 16.22%
3 C Group - Ocean transportation 24,892,462 9.82%
4 D Group - Other Financial Service Activities Not Elsewhere
Classified 23,417,329 9.24%
5 E Group - Smelting and Refining of Iron and Steel 18,565,116 7.32%
6 F Group - Other Financial Service Activities Not Elsewhere
Classified 18,510,217 7.30%
7 G Group - Rolling and Extruding of Iron and Steel 16,456,579 6.49%
8 H Group - Manufacture of Liquid Crystal Panel and Components 15,298,070 6.03%
9 I Group - Other Retail Sale in Non-specialized Stores 15,267,842 6.02%
10 J Group - Real Estate Development Activities 14,143,100 5.58%
Note 1: Ranking the top ten enterprise groups other than government and government enterprise according to their total amounts of
outstanding loans. If an outstanding loan belongs to an enterprise group, the outstanding loan of the enterprise group should
be categorized and listed in total, and disclosed by “code” plus “industry type” (for example, company (or group) A – Liquid
Crystal Panel and Components Manufacturing). If it is an enterprise group, industry type of maximum exposure of the
enterprise group would be disclosed. Industry type should be filled in accordance with “Standard Industrial Classification
System” of Directorate-General of Budget, Accounting and Statistics, Executive Yuan.
Note 2: Definition of enterprise group is based on Article 6 of Supplementary Provisions to the Taiwan Stock Exchange Corporation
Rules for Review of Securities Listings.
Note 3: Total outstanding loan amount is the sum of balances of all types of loans (including import negotiation, export negotiation,
bills discounted, overdraft, short-term loan, short-term secured loan, margin loans receivable, medium-term unsecured loan,
medium-term secured loan, long-term unsecured loan, long-term secured loan and overdue loan), bills purchased, without
recourse factoring, acceptance receivable and guarantees.

~88~

Mega ICBC 88
 (4) Liquidity risk
A. Definition and sources of liquidity risk
The Bank and its subsidiaries define liquidity risk as the risk of financial loss to the Bank and its subsidiaries arising from default by
any companies of financial instruments on the payment obligations. For example, the companies are default on payment obligations,
such as withdrawals paid to depositors and loans repayment. Or, the company is unable to obtain funds within a certain period at
reasonable cost in response to increased demand for assets.
B. Procedures for liquidity risk management and measurement of liquidity risk
The Bank and its subsidiaries are mainly engaged in industry related to finance. Therefore, the management for capital liquidity is very
important to the Bank and its subsidiaries. The objectives for liquidity risk management are (a) Meet the liquidity index regulation (b)
Maintain reasonable liquidity based on business development plans, ensure capability of daily payment obligations and meet business
growth requirements with adequate highly-liquid assets and capability of raising funds from others in case of emergency.
The financial department of the Bank and its subsidiaries is responsible for daily capital liquidity management. According to the limits
authorized by the Board of (Managing) Directors, the Bank and its subsidiaries monitor the indexes of liquidity risk, execute capital
procurement trading and report the conditions of capital liquidity to the management. The Bank and its subsidiaries also reports the
liquidity risk control to the Fund Management Committee, Risk Management Committee and the Board of (Managing) Directors
regularly, and performs regular liquidity stress-testing to ensure sufficient capital to meet the funding requirements for increase in assets
and payment obligations.
The Bank and its subsidiaries daily perform intensive control over capital sources and the period for fund gaps and liquidity risk
management. Future cash flows are estimated based on the financial liability contracts due date and expected cash collection date of
financial assets. The Bank and its subsidiaries also take into account the extent of practical utilization of capital in contingent liabilities
such as use of loan limits, guarantees and commitments.
Assets used to pay obligations and loan commitments including cash and cash equivalents, due from the Central Bank and call loans to
other banks, financial assets at fair value through profit or loss, bills and bonds purchased under resale agreement, receivables, bills
discounted and loans, available-for-sale financial assets, held-to-maturity financial assets, and other financial assets are held in response
to unexpected cash outflows.
The liquidity management policies of the Bank and its subsidiaries include:
(A) Maintain the ability to perform all payment obligations immediately.
(B) Maintain solid assets/liabilities structure to ensure medium and long-term liquidity safety.
(C) Diversify capital sources and absorb stable core depositors to avoid depending on certain large-sum depositors.
(D) Avoid potential unknown loss risk which will increase capital cost and capital procurement pressure.
(E) Conduct due date management to ensure that cash inflow is greater than cash outflow in short term.
(F) Keep liquidity ratio.
(G) Keep legal ratio for high-quality, high-liquidity assets.
(H) Be aware of the liquidity, safety and diversity of financial instruments.
(I) The Bank and its subsidiaries have capital emergency plans, which are reviewed regularly.
(J) The overseas branches of the Bank and its subsidiaries must obey the regulations of R.O.C. and the local supervisory authorities.
Otherwise, they will be penalized for violation of these regulations.
C. Maturity date analysis for non-derivative financial assets and liabilities
The table below lists analysis for cash inflow and outflow of the non-derivative financial assets and liabilities held by the Bank and its
subsidiaries for liquidity risk management based on the remaining period at the financial reporting date to the contractual maturity date.

(Blank below)

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89 Annual Report 2016

 The Bank and its subsidiaries’ analysis for capital maturity gaps
UNIT：In NT Thousand Dollars
December 31, 2016
181 days 1 year Over
1-30 days 31-90 days 91-180 days -1 year -5 years 5 years Total
Primary funds inflow upon
maturity
Cash and cash equivalents $ 45,378,115 $ 35,001,901 $ 8,024,994 $ 2,123,915 $ - $ - $ 90,528,925
Due from the Central Bank
and call loans to banks 475,112,300 53,732,255 9,009,059 2,638,166 - - 540,491,780
Financial assets at fair value
through profit or loss 5,647,992 1,203,373 550,142 2,750,877 29,881,502 3,071,449 43,105,335
Bills and bonds purchased
under resale agreements 4,256,613 - - - - - 4,256,613
Receivables 56,280,422 23,534,494 5,932,201 8,506,613 344,659 325 94,598,714
Bills discounted and loans 78,899,118 119,537,352 209,351,303 195,420,919 757,684,688 488,975,036 1,849,868,416
Available-for-sale financial
assets 38,609,557 15,239,037 9,589,614 15,620,227 141,720,173 76,434,077 297,212,685
Held-to-maturity financial
assets 127,391,787 34,719,381 24,655,088 68,974,861 24,181,450 6,690 279,929,257
Other financial assets 1,409 2,818 2,818 9,863 - 5,608 22,516
Total 831,577,313 282,970,611 267,115,219 296,045,441 953,812,472 568,493,185 3,200,014,241
Primary funds outflow upon
maturity
Due to the Central Bank and
commercial bank 336,305,752 6,623,886 5,733,263 6,239,878 30,516,426 649,286 386,068,491
Borrowed funds 27,677,843 7,304,654 4,991,930 - - - 39,974,427
Financial liabilities at fair
value through profit or loss 8,237,292 1,187 - 3,313 16,875 12,500 8,271,167
Bills and bonds sold under
repurchased agreements 170,716 274,172 - - - - 444,888
Payables 54,266,812 4,018,201 1,703,901 3,467,386 305,167 5,679,352 69,440,819
Deposits and remittances 394,197,787 317,587,266 195,869,354 401,713,594 862,895,914 17,860,493 2,190,124,408
Financial bonds payable - 83,300 213,940 10,585,570 26,945,810 - 37,828,620
Other financial liabilities 6,190,044 1,875,248 6,792 2,152 291,443 226,940 8,592,619
Other liabilities 127,091 254,181 254,182 889,636 - - 1,525,090
Total 827,173,337 338,022,095 208,773,362 422,901,529 920,971,635 24,428,571 2,742,270,529
Gap $ 4,403,976 ( $ 55,051,484 ) $ 58,341,857 ($ 126,856,088 ) $ 32,840,837 $ 544,064,614 $ 457,743,712

（Blank below）

~90~

Mega ICBC 90
 UNIT：In US Thousand Dollars
December 31, 2016
181 days 1 year Over
1-30 days 31-90 days 91-180 days -1 year -5 years 5 years Total
Primary funds inflow upon maturity
Cash and cash equivalents $ 1,408,996 $ 1,086,813 $ 249,177 $ 65,948 $ - $ - $ 2,810,934
Due from the Central Bank and
call loans to banks 14,752,291 1,668,393 279,732 81,915 - - 16,782,331
Financial assets at fair value
through profit or loss 175,371 37,365 17,082 85,415 927,824 95,369 1,338,426
Bills and bonds purchased under
resale agreements 132,168 - - - - - 132,168
Receivables 1,747,513 730,749 184,196 264,131 10,702 10 2,937,301
Bills discounted and loans 2,449,827 3,711,648 6,500,382 6,067,842 23,526,197 15,182,731 57,438,627
Available-for-sale financial assets 1,198,831 473,174 297,759 485,010 4,400,427 2,373,287 9,228,488
Held-to-maturity financial assets 3,955,530 1,078,041 765,543 2,141,677 750,837 208 8,691,836
Other financial assets 44 87 87 307 - 174 699
Total 25,820,571 8,786,270 8,293,958 9,192,245 29,615,987 17,651,779 99,360,810
Primary funds outflow upon maturity
Due to the Central Bank and
commercial bank 10,442,332 205,673 178,018 193,749 947,539 20,160 11,987,471
Borrowed funds 859,400 226,811 155,000 - - - 1,241,211
Financial liabilities at fair value
through profit or loss 255,769 37 - 103 524 388 256,821
Bills and bonds sold under
repurchased agreements 5,301 8,513 - - - - 13,814
Payables 1,684,991 124,765 52,906 107,663 9,475 176,345 2,156,145
Deposits and remittances 12,239,887 9,861,121 6,081,766 12,473,253 26,793,017 554,570 68,003,614
Financial bonds payable - 2,586 6,643 328,683 836,671 - 1,174,583
Other financial liabilities 192,202 58,226 211 67 9,049 7,047 266,802
Other liabilities 3,946 7,893 7,892 27,623 - - 47,354
Total 25,683,828 10,495,625 6,482,436 13,131,141 28,596,275 758,510 85,147,815
Gap $ 136,743 ( $ 1,709,355 ) $ 1,811,522 ($ 3,938,896 ) $ 1,019,712 $ 16,893,269 $ 14,212,995

UNIT：In NT Thousand Dollars

December 31, 2015
181 days 1 year Over
1-30 days 31-90 days 91-180 days -1 year -5 years 5 years Total
Primary funds inflow upon maturity
Cash and cash equivalents $ 101,918,087 $ 23,532,902 $ 20,118,784 $ - $ - $ - $ 145,569,773
Due from the Central Bank and
call loans to banks 394,350,430 101,434,856 8,874,650 1,676,660 - - 506,336,596
Financial assets at fair value
through profit or loss 7,052,315 1,492,989 1,798,695 2,043,083 28,147,853 3,020,948 43,555,883
Bills and bonds purchased under
resale agreements 8,987,482 449,602 - - - - 9,437,084
Receivables 78,325,971 34,413,142 18,563,695 44,794,072 7,998,052 320 184,095,252
Bills discounted and loans 90,728,470 141,151,096 202,332,823 198,691,684 766,200,199 516,170,533 1,915,274,805
Available-for-sale financial assets 71,867,920 22,495,506 34,328,834 14,541,734 108,251,530 90,524,452 342,009,976
Held-to-maturity financial assets 147,266,261 6,576,911 5,640,609 10,519,875 29,780,160 17,282 199,801,098
Other financial assets 910 1,821 1,872 5,524 920 5,626 16,673
Total 900,497,846 331,548,825 291,659,962 272,272,632 940,378,714 609,739,161 3,346,097,140
Primary funds outflow upon maturity
Due to the Central Bank and
commercial bank 373,627,002 2,928,429 5,928,353 5,501,789 31,328,459 650,508 419,964,540
Borrowed funds 41,808,935 2,959,581 - 176,264 514,314 - 45,459,094
Financial liabilities at fair value 17,253,653
through profit or loss 17,231,965 1,188 - 4,312 - 16,188
Bills and bonds sold under 548,152
repurchased agreements 252,175 295,977 - - - -
Payables 62,756,957 6,797,971 1,496,353 3,271,059 872,628 5,679,346 80,874,314
Deposits and remittances 459,280,762 281,735,766 234,270,921 396,657,011 865,188,659 17,417,559 2,254,550,678
Financial bonds payable - 83,300 213,940 285,570 25,628,170 12,200,450 38,411,430
Other financial liabilities 5,895,094 2,322,303 2,888 36,038 139,304 287,104 8,682,731
Other liabilities 177,880 355,759 365,641 1,079,136 179,856 - 2,158,272
Total 961,030,770 297,480,274 242,278,096 407,011,179 923,851,390 36,251,155 2,867,902,864
Gap ($ 60,532,924 ) $ 34,068,551 $ 49,381,866 ($ 134,738,547 ) $ 16,527,324 $ 573,488,006 $ 478,194,276

~91~

91 Annual Report 2016

 D. Structure analysis for maturity of derivative financial assets and liabilities
(A) Derivatives settled on a net basis
Derivatives of the Bank and its subsidiaries settled on a net basis include:
a. Foreign exchange derivatives: currency option, non-delivery forward
b. Interest derivatives: forward rate agreement, interest rate swap, assets swap, interest rate option, bond option, interest rate
futures.
c. Credit derivatives: credit default swaps (CDS).
d. Equity derivative: stock option
e. Others: combined commodity

UNIT：In NT Thousand Dollars

December 31, 2016
181 days 1 year
1-30 days 31-90 days 91-180 days -1 year -5 years Over 5 years Total
Foreign exchange derivative instruments
Inflow $ 278,109 $ 21,204 $ 217,172 $ 193,270 $ 607 $ - $ 710,362
Outflow 275,216 16,688 204,314 178,911 - - 675,129
Interest rate derivative instruments
Inflow 104,139 157,958 230,830 783,552 3,556,882 4,957,305 9,790,666
Outflow 119,528 134,626 221,582 520,089 2,955,843 21,449,704 25,401,372
Credit derivative instruments
Inflow - 74,301 75,025 137,014 514,761 - 801,101
Outflow - - - - - - -
Total inflows $ 382,248 $ 253,463 $ 523,027 $ 1,113,836 $ 4,072,250 $ 4,957,305 $ 11,302,129
Total outflows $ 394,744 $ 151,314 $ 425,896 $ 699,000 $ 2,955,843 $ 21,449,704 $ 26,076,501

UNIT：In US Thousand Dollars

December 31, 2016
181 days 1 year
1-30 days 31-90 days 91-180 days -1 year -5 years Over 5 years Total
Foreign exchange derivative instruments
Inflow $ 8,635 $ 658 $ 6,743 $ 6,001 $ 19 $ - $ 22,056
Outflow 8,545 519 6,344 5,555 - - 20,963
Interest rate derivative instruments
Inflow 3,234 4,905 7,167 24,329 110,442 153,925 304,002
Outflow 3,711 4,180 6,880 16,149 91,779 666,016 788,715
Credit derivative instruments
Inflow - 2,307 2,330 4,254 15,983 - 24,874
Outflow - - - - - - -
Total inflows $ 11,869 $ 7,870 $ 16,240 $ 34,584 $ 126,444 $ 153,925 $ 350,932
Total outflows $ 12,256 $ 4,699 $ 13,224 $ 21,704 $ 91,779 $ 666,016 $ 809,678

UNIT：In NT Thousand Dollars

December 31, 2015
181 days 1 year
1-30 days 31-90 days 91-180 days -1 year -5 years Over 5 years Total
Foreign exchange derivative instruments
Inflow $ 419,794 $ 110,923 $ 199,432 $ 468,281 $ 469,817 $ - $ 1,668,247
Outflow 436,364 101,085 189,174 443,603 449,609 - 1,619,835
Interest rate derivative instruments
Inflow 50,280 169,925 184,707 1,103,979 5,530,082 22,163,837 29,202,810
Outflow 65,801 182,948 253,605 430,140 3,474,038 4,222,911 8,629,443
Credit derivative instruments
Inflow - 69,983 69,855 131,827 548,703 - 820,368
Outflow - - - - - - -
Total inflows $ 470,074 $ 350,831 $ 453,994 $ 1,704,087 $ 6,548,602 $ 22,163,837 $ 31,691,425
Total outflows $ 502,165 $ 284,033 $ 442,779 $ 873,743 $ 3,923,647 $ 4,222,911 $ 10,249,278

~92~

Mega ICBC 92
 (B) Derivatives settled on a gross basis
Derivatives of the Bank and its subsidiaries settled on a gross basis include:
a. Foreign exchange derivatives: forward exchange
b. Interest derivatives: cross currency swaps and currency swaps
UNIT：In NT Thousand Dollars
December 31, 2016
1-30 days 31-90 days 91-180 days 181 days-1 year 1 year-5 years Over 5 years Total
Foreign exchange derivative instruments
Inflow $ 30,197,850 $ 18,201,973 $ 7,524,575 $ 2,406,361 $ 511,876 $ - $ 58,842,635
Outflow 30,211,238 18,192,363 7,553,978 2,422,939 515,424 - 58,895,942
Interest rate derivative instruments
Inflow 284,272,580 162,606,566 73,320,046 34,026,932 32,427 - 554,258,551
Outflow 282,968,234 162,045,158 73,151,435 33,799,850 29,688 - 551,994,365
Total inflows $ 314,470,430 $ 180,808,539 $ 80,844,621 $ 36,433,293 $ 544,303 $ - $ 613,101,186
Total outflows $ 313,179,472 $ 180,237,521 $ 80,705,413 $ 36,222,789 $ 545,112 $ - $ 610,890,307

UNIT：In US Thousand Dollars

December 31, 2016
1-30 days 31-90 days 91-180 days 181 days-1 year 1 year-5 years Over 5 years Total
Foreign exchange derivative instruments
Inflow $ 937,647 $ 565,173 $ 233,639 $ 74,718 $ 15,894 $ - $ 1,827,071
Outflow 938,062 564,875 234,552 75,233 16,004 - 1,828,726
Interest rate derivative instruments
Inflow 8,826,696 5,048,953 2,276,596 1,056,540 1,007 - 17,209,792
Outflow 8,786,196 5,031,521 2,271,360 1,049,489 922 - 17,139,488
Total inflows $ 9,764,343 $ 5,614,126 $ 2,510,235 $ 1,131,258 $ 16,901 $ - $ 19,036,863
Total outflows $ 9,724,258 $ 5,596,396 $ 2,505,912 $ 1,124,722 $ 16,926 $ - $ 18,968,214

UNIT：In NT Thousand Dollars

December 31, 2015
1-30 days 31-90 days 91-180 days 181 days-1 year 1 year-5 years Over 5 years Total
Foreign exchange derivative instruments
Inflow $ 36,982,855 $ 18,200,017 $ 6,624,541 $ 6,855,960 $ 207,784 $ - $ 68,871,157
Outflow 37,113,008 18,178,305 6,694,306 6,805,919 206,636 - 68,998,174
Interest rate derivative instruments
Inflow 287,052,683 154,550,737 98,456,581 25,737,148 238,315 3,390,391 569,425,855
Outflow 285,730,849 153,920,189 97,454,281 25,566,614 237,151 3,069,753 565,978,837
Total inflows $ 324,035,538 $ 172,750,754 $ 105,081,122 $ 32,593,108 $ 446,099 $ 3,390,391 $ 638,297,012
Total outflows $ 322,843,857 $ 172,098,494 $ 104,148,587 $ 32,372,533 $ 443,787 $ 3,069,753 $ 634,977,011

E. Analysis for off-balance sheet contractual commitments

UNIT：In NT Thousand Dollars
December 31, 2016
1-30 days 31-90 days 91-180 days 181 days-1 year 1 year-5 years Over 5 years Total
Irrevocable commitments $ 559,687 $ 969,790 $ 58,619,353 $ 8,386,759 $ 25,266,226 $ 77,985,498 $ 171,787,313
Financial guarantee contracts 48,952,334 58,435,802 40,052,670 88,858,404 20,169,882 558,802 257,027,894
Total $ 49,512,021 $ 59,405,592 $ 98,672,023 $ 97,245,163 $ 45,436,108 $ 78,544,300 $ 428,815,207

UNIT：In US Thousand Dollars

December 31, 2016
1-30 days 31-90 days 91-180 days 181 days-1 year 1 year-5 years Over 5 years Total
Irrevocable commitments $ 17,378 $ 30,112 $ 1,820,138 $ 260,410 $ 784,519 $ 2,421,459 $ 5,334,016
Financial guarantee contracts 1,519,975 1,814,438 1,243,640 2,759,064 626,277 17,351 7,980,745
Total $ 1,537,353 $ 1,844,550 $ 3,063,778 $ 3,019,474 $ 1,410,796 $ 2,438,810 $ 13,314,761

UNIT：In NT Thousand Dollars

December 31, 2015
1-30 days 31-90 days 91-180 days 181 days-1 year 1 year-5 years Over 5 years Total
Irrevocable commitments $ 972,703 $ 870,438 $ 59,846,527 $ 2,695,566 $ 23,113,052 $ 78,610,712 $ 166,108,998
Financial guarantee contracts 51,556,895 54,250,919 42,740,400 98,310,823 24,631,458 1,357,667 272,848,162
Total $ 52,529,598 $ 55,121,357 $ 102,586,927 $ 101,006,389 $ 47,744,510 $ 79,968,379 $ 438,957,160

a. Off-balance sheet items include irrevocable commitments and financial guarantee contracts
b. Irrevocable commitments include irrevocable arranged financing limit and credit card line commitments
c. Financial gurantee contracts refer to gurantees and letters of credit issued

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 F. Analysis for maturity leasing contractual commitments
UNIT：In NT Thousand Dollars
December 31, 2016
Not later than
one year 1 year-5 years Over 5 years Total
Leasing contractual commitments
Non-cancellable aggregate minimum
lease payments $ 460,271 $ 775,082 $ 627,779 $ 1,863,132
Non-cancellable aggregate minimum
lease income 159,920 205,063 6,705 371,688
Net payment $ 300,351 $ 570,019 $ 621,074 $ 1,491,444

UNIT：In US Thousand Dollars

December 31, 2016
Not later than
one year 1 year-5 years Over 5 years Total
Leasing contractual commitments
Non-cancellable aggregate minimum
lease payments $ 14,291 $ 24,066 $ 19,493 $ 57,850
Non-cancellable aggregate minimum
lease income 4,966 6,367 208 11,541
Net payment $ 9,325 $ 17,699 $ 19,285 $ 46,309

UNIT：In NT Thousand Dollars

December 31, 2015
Not later than
one year 1 year-5 years Over 5 years Total
Leasing contractual commitments
Non-cancellable aggregate minimum
lease payments $ 492,649 $ 829,010 $ 679,729 $ 2,001,388
Non-cancellable aggregate minimum
lease income 160,166 243,163 12,233 415,562
Net payment $ 332,483 $ 585,847 $ 667,496 $ 1,585,826

G. Disclosure requirements in the “Regulations Governing the Preparation of Financial Reports by Public Banks”
(A) Maturity analysis of NTD financial instruments of the Bank
UNIT: In NT Thousand Dollars
December 31, 2016
181 days-
Total 0-10 days 11-30 days 31-90 days 91-180 days Over 1 year
1 year
Primary funds inflow
$ 1,755,269,500 $ 168,414,595 $ 180,071,201 $ 191,975,919 $ 198,777,659 $ 202,400,836 $ 813,629,290
upon maturity
Primary funds outflow
2,437,483,830 109,575,849 173,464,798 298,729,968 275,651,699 481,489,585 1,098,571,931
upon maturity
Gap ($ 682,214,330 ) $ 58,838,746 $ 6,606,403 ($ 106,754,049 ) ($ 76,874,040 ) ($ 279,088,749 ) ( $ 284,942,641 )
UNIT: In US Thousand Dollars
December 31, 2016
181 days-
Total 0-10 days 11-30 days 31-90 days 91-180 days Over 1 year
1 year
Primary funds inflow
$ 54,501,320 $ 5,229,293 $ 5,591,232 $ 5,960,874 $ 6,172,069 $ 6,284,569 $ 25,263,283
upon maturity
Primary funds outflow
75,684,153 3,402,343 5,386,102 9,275,599 8,559,017 14,950,307 34,110,785
upon maturity
Gap ($ 21,182,833 ) $ 1,826,950 $ 205,130 ($ 3,314,725 ) ($ 2,386,948 ) ( $ 8,665,738 ) ( $ 8,847,502 )
UNIT: In NT Thousand Dollars
December 31, 2015
181 days-
Total 0-10 days 11-30 days 31-90 days 91-180 days Over 1 year
1 year
Primary funds inflow
$ 1,713,321,538 $ 152,807,613 $ 212,108,363 $ 149,411,023 $ 123,835,595 $ 183,338,830 $ 891,820,114
upon maturity
Primary funds outflow
2,493,940,047 94,231,560 198,816,170 271,669,356 307,279,804 522,259,322 1,099,683,835
upon maturity
Gap ($ 780,618,509 ) $ 58,576,053 $ 13,292,193 ($ 122,258,333 ) ($ 183,444,209 ) ($ 338,920,492 ) ( $ 207,863,721 )

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Mega ICBC 94
 (B) Maturity analysis of USD financial instruments of the Bank
UNIT: In US Thousand Dollars
December 31, 2016
181 days-
Total 0-30 days 31-90 days 91-180 days Over 1 year
1 year
Primary funds inflow
$ 49,616,397 $ 19,875,115 $ 7,124,975 $ 3,407,806 $ 2,521,586 $ 16,686,915
upon maturity
Primary funds outflow
61,855,679 22,461,490 8,469,306 5,147,899 6,649,376 19,127,608
upon maturity
Gap ($ 12,239,282 ) ( $ 2,586,375 ) ($ 1,344,331 ) ($ 1,740,093 ) ($ 4,127,790 ) ($ 2,440,693 )

December 31, 2015

181 days-
Total 0-30 days 31-90 days 91-180 days Over 1 year
1 year
Primary funds inflow
$ 49,192,216 $ 19,824,266 $ 6,928,530 $ 4,372,053 $ 3,886,530 $ 14,180,837
upon maturity
Primary funds outflow
65,418,953 23,744,666 9,451,321 6,520,937 8,066,411 17,635,618
upon maturity
Gap ($ 16,226,737 ) ( $ 3,920,400 ) ($ 2,522,791 ) ($ 2,148,884 ) ($ 4,179,881 ) ($ 3,454,781 )
Note 1: The funds denominated in US dollars means the amount of all US dollars of the Bank.
Note 2: If overseas assets exceed 10% of total assets, supplementary information shall be disclosed.
(C) Maturity analysis of USD financial instruments of the foreign branches
UNIT：In US Thousand Dollars
December 31, 2016
181 days-
Total 0-30 days 31-90 days 91-180 days Over 1 year
1 year
Primary funds inflow
$ 19,234,224 $ 10,148,675 $ 2,547,692 $ 790,346 $ 825,862 $ 4,921,649
upon maturity
Primary funds outflow
21,533,211 10,478,428 1,219,097 844,573 818,041 8,173,072
upon maturity
Gap ($ 2,298,987 ) ( $ 329,753 ) $ 1,328,595 ($ 54,227 ) $ 7,821 ($ 3,251,423 )

December 31, 2015

181 days-
Total 0-30 days 31-90 days 91-180 days Over 1 year
1 year
Primary funds inflow
$ 18,389,498 $ 9,879,840 $ 1,940,168 $ 872,192 $ 883,489 $ 4,813,809
upon maturity
Primary funds outflow
21,068,444 12,305,964 1,083,854 942,448 1,188,771 5,547,407
upon maturity
Gap ($ 2,678,946 ) ( $ 2,426,124 ) $ 856,314 ($ 70,256 ) ($ 305,282 ) ($ 733,598 )
( 5 ) Market risk
A. Definition of market risk
Market risk refers the potential losses of the Bank’s and its subsidiaries’ on-balance-sheet and off-balance-sheet positions due to the Bank
and its subsidiaries enduring fluctuations of market prices (for example: fluctuations of market interest, exchange rates, stock prices and
price of products).
B. Objective of market risk management
The objective of the Bank’s and its subsidiaries’ market risk management is to confine risks within a tolerable scope to avoid the
fluctuations of financial product prices impacting future returns and the values of assets and liabilities.
C. Market risk management policies and procedures
The Board of (Managing) Directors decided the risk tolerant limits, position limits, and loss limits. Market risk management comprises
trading book control and banking book control. Trading book operation mainly pertains to the positions held by bills and securities firms
due to market making. Policies for financial instrument trading of bank are based on back-to-back operation principle. Banking book is
based on held-to-maturity principle and adopts hedging measures.
D. Procedures for market risk management
(A) The Bank’s objectives of market risk management are respectively proposed by The Treasury Department and Risk Management
Department, and then Risk Management Department summarizes and reports these objectives to Risk Management Committee of
Mega Financial Holdings and the Bank’s Board of Directors for assessment.
(B) Risk Management Department not only prepares statement of market risk position and profit and loss of various financial instruments
but regularly compiles securities investment performance evaluation and reports to the Board of (Managing) Directors for the
Board’s knowledge of the Bank’s risk control over securities investment. Risk Management Department summarizes and analyzes
information on a daily basis. Besides, Risk Management Department monthly summarizes and analyzes data collected from positions
of various financial instruments, profit and loss assessment, analysis on risk-sensitive factors, and stress testing for senior
management’s knowledge of the Bank’s market risk exposure profile.

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E. Market risk measurement and control principle
(A) The Bank’s market risk report contains interest rate, exchange rate, positions of equity securities, credit default swap (CDS) and
profit and loss assessment. Every transaction has limit and stop-loss provisions, which shall be submitted to approval management
in accordance with the Bank’s regulations. Stop-loss limit shall be implemented as soon as a transaction reaches the threshold. If no
stop-loss limit will be implemented, trading units shall immediately make statement about reasons to not implement stop-loss limit
and coping plan, which shall be submitted to senior management for approval and reported to the Board of (Managing) Directors
regularly.
(B) Non-hedging trading positions of derivative financial instruments are daily assessed based on the market value, whereas hedging
trading positions of futures are daily assessed and others are assessed twice a month.
(C) SUMMIT information system and DW information system for market risk provides functions in relation to risk management such
as real-time limits, profit and loss assessment, analysis on risk-sensitive factors, stress testing, etc.
F. Policies and procedures of trading-book risk management
The Bank and its subsidiaries daily monitor trading-book positions, changes in risk exposures, and various risk limits, including trading
rooms, traders and product line risk limits.
If trading-book financial instruments have market price, the valuation of those instruments is conducted at least one time daily using the
independent source and available information. If using mathematical model valuation, the assumptions and parameters used in the model
are reviewed regularly.
The method of risk measurement is sensitivity analysis.
The Bank and its subsidiaries conduct stress test on the positions of its interest rate, equity securities, foreign exchange rate products and
credit default swap (CDS) on the assumptions of the monthly change in interest rate, securities market index, foreign exchange rate and
CDS by 1%, 15%, 3% and 100 base points, respectively, and reports to the Risk Management Committee.
G. Trading-book interest rate risk management
Trading-book interest rate risk refers to the financial loss of the decline in values of interest rate products held due to unfavorable changes
in interest rates, including securities and derivatives with interest.
The Bank and its subsidiaries interest rate products are traded mainly for hedging.
The trading group screens the credits and financial positions of issuers and selects investment objectives by judging interest rate trend and
a variety of country risks and based on the authorized minimum investment criteria. The Bank and its subsidiaries set trading-book trading
limits and stop-loss limits (including trading rooms, traders, trading products, counterparties, and daily and overnight limits) based on
business strategies and market conditions, and measure monthly the extent of impact of interest rate risk on investment portfolios using
DV01 value.
H. Banking book interest rate risk management
Banking book interest rate risk mainly comes from the unmatched maturity dates of assets and liabilities or price resetting dates, and
inconsistent changes in base interest rates for assets and liabilities. The Bank and its subsidiaries’ interest rate risk mainly comes from the
unmatched periods of interest-rate sensitive assets and liabilities of the Bank and its subsidiaries.
As the Bank and its subsidiaries have interest-rate sensitive gaps, market interest rate fluctuations have good or bad impacts on the Bank
and its subsidiaries’ earnings and cash flows.
The Bank and its subsidiaries manage Banking book interest rate risk by using repricing gap analysis. The interest-rate repricing gap
analysis is to estimate the difference between the assets and liabilities with interest bearing that are to be due near or repriced within a
certain period and measure the impact of interest rate change on net interest revenue. The analysis assumes assets and liabilities structure
remain unchanged and there are parallel movements of interest rate curves, and excludes the customer behavior, basis risk, option
characteristics of early repayment of bonds. The Bank and its subsidiaries calculate the change in net interest revenue for this year and
also monitor the percentage of change in net interest revenue to the projection of net interest revenue for this year.
The Bank and its subsidiaries monthly analyze and monitor interest rate risk positions limits and various interest rate risk management
indexes. If any risk management index exceeds limit, the Bank and its subsidiaries will adopt responding measures and report the analysis
and monitoring results to the Fund Management Committee, the Risk Management Committee and the Board of Directors.
I. Foreign exchange risk management
Foreign exchange risk refers to the losses caused by the exchange of two different currencies at different times. The Bank and its
subsidiaries’ foreign exchange risk mainly comes from its derivative instruments business such as spot foreign exchange, forward foreign
exchange and foreign exchange options. The foreign exchange trading of the Bank and its subsidiaries are mainly for offsetting customers’
positions on the same day; therefore, foreign exchange risk is relatively low.
To control trading-book foreign exchange risk, subsidiaries have set trading limits and stop-loss limits for trading rooms and traders and
also set the annual maximum loss limits to control the losses within the tolerable scopes.

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Mega ICBC 96
 J. The Bank and its subsidiaries’ foreign exchange risk gaps
UNIT：In NT Thousand Dollars
December 31, 2016
USD AUD RMB EUR JPY
Assets
Cash and cash equivalents $ 49,703,544 $ 310,135 $ 10,445,992 $ 3,678,163 $ 12,041,669
Due from the Central Bank and call
loans to banks 424,434,194 756,861 13,878,642 1,700,832 22,568,162
Financial assets at fair value through
profit or loss 37,811,904 2,240,329 409 9,930 2,252
Receivables 32,920,147 5,151,369 1,303,214 1,010,405 1,840,866
Bills discounted and loans 485,835,591 40,866,161 12,683,762 20,649,860 33,179,147
Available-for-sale financial assets 52,314,756 49,517,023 15,183,326 4,441,860 -
Held-to-maturity financial assets 22,064,690 1,527,971 4,109,819 679,202 276,970
Other assets 970,838 32,161 80,773 61,968 54,255
Total assets 1,106,055,664 100,402,010 57,685,937 32,232,220 69,963,321
Liabilities
Due to the Central Bank and
commercial bank 320,340,353 3,462,822 5,652,241 2,408,881 22,514,259
Borrowed funds 39,974,427 - - - -
Financial liabilities at fair value
through profit or loss 10,363,477 13,022 428 6,402 3,223
Payables 13,873,248 242,784 787,605 580,837 1,905,729
Deposits and remittances 776,913,967 29,935,501 82,258,183 28,837,557 29,034,895
Other liabilities 5,923,470 1,225,396 1,387,315 758,040 373,582
Total liabilities 1,167,388,942 34,879,525 90,085,772 32,591,717 53,831,688
On-balance sheet foreign exchange gap ($ 61,333,278 ) $ 65,522,485 ($ 32,399,835 ) ($ 359,497 ) $ 16,131,633
Off-balance sheet commitments $ 75,718,179 $ 1,400,585 $ 2,278,564 $ 11,527,929 $ 3,337,466
NTD exchange rate 32.2060 23.3236 4.6253 33.9612 0.2769

UNIT：In NT Thousand Dollars

December 31, 2015
USD AUD RMB EUR JPY
Assets
Cash and cash equivalents $ 104,413,297 $ 407,787 $ 21,972,350 $ 2,011,151 $ 2,261,350
Due from the Central Bank and call
loans to banks 395,731,182 466,070 12,389,212 2,730,334 21,399,477
Financial assets at fair value through
profit or loss 37,810,831 2,306,919 775 1,139,603 1,009
Receivables 48,740,032 4,108,989 60,892,420 1,811,053 1,888,390
Bills discounted and loans 557,267,013 37,097,367 10,107,113 22,762,021 33,028,533
Available-for-sale financial assets 46,975,580 43,187,174 29,846,677 5,245,284 -
Held-to-maturity financial assets 17,282,670 1,594,793 3,761,025 306,452 546,288
Other assets 15,271,540 9,617,567 14,311,855 ( 3,911,396 ) 1,276,504
Total assets 1,223,492,145 98,786,666 153,281,427 32,094,502 60,401,551
Liabilities
Due to the Central Bank and
commercial bank 358,371,553 4,264,077 13,516,750 2,260,385 24,084,825
Borrowed funds 45,459,094 - - - -
Financial liabilities at fair value
through profit or loss 20,614,005 27,140 242 1,851 1,063
Payables 16,264,816 163,361 1,106,099 427,713 1,644,420
Current tax liabilities 211,316 42,631 29,845 23,170 145,049
Deposits and remittances 807,812,448 32,311,316 104,223,969 26,485,856 24,790,121
Other liabilities 8,515,625 1,123,716 2,150,030 649,687 416,604
Total liabilities 1,257,248,857 37,932,241 121,026,935 29,848,662 51,082,082
On-balance sheet foreign exchange gap ($ 33,756,712 ) $ 60,854,425 $ 32,254,492 $ 2,245,840 $ 9,319,469
Off-balance sheet commitments $ 68,973,213 $ 1,342,322 $ 2,168,428 $ 12,234,400 $ 4,027,884
NTD exchange rate 32.8880 23.9754 4.9959 35.9236 0.2730

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K. Risk management for equity securities
Due to needs of proprietary, make market and tactic, etc., the Bank held equity securities within the regulations of the law. That market
risk comprises the risk of individual equity security arising from the security’s market price changes and the general market risk arising
from overall equity securities market price changes.
The investment operating group mainly selects blue chip stocks which have high liquidity and sets the investment price according to
fundamentals and market transactions. After the investment has been approved by the investment deliberation committee, the operational
personnel purchase the stock within the maximum percentage of the approved price, as the case may be.
Daily trading records, details of investment portfolios and overview of profit or loss shall report to the management and measurement of
the extent of the impact of systematic risk on investment portfolios using β value monthly. The Bank and its subsidiaries generally set a
stop loss, stop interest, pre-warning and exception handling requirements, and limit control to held individual stock and industry
concentration.
L. Sensitivity analysis
Sensitivity analysis of the Bank and its subsidiaries’ financial instruments (including trading book and non-trading book):
December 31, 2016 UNIT：In NT Thousand Dollars

Risks Extent of Variation Effect on Profit or Loss Effect on Equity

Foreign exchange risk Exchange rate of NTD to USD, to JPY, to EUR and
to each of other currencies appreciated by 1% ($ 33,095 ) $ -
Foreign exchange risk Exchange rate of NTD to USD, to JPY, to EUR and
to each of other currencies depreciated by 1% 33,095 -
Interest rate risk Major increases in interest rates 1BPS 5,912 ( 34,424 )
Interest rate risk Major declines in interest rates 1BPS ( 5,912 ) 34,424
Equity securities risk TAIEX declined by 1% ( 28,860 ) ( 51,504 )
Equity securities risk TAIEX increased by 1% 28,860 51,504
December 31, 2016 UNIT：In US Thousand Dollars
Risks Extent of Variation Effect on Profit or Loss Effect on Equity
Foreign exchange risk Exchange rate of NTD to USD, to JPY, to EUR and
to each of other currencies appreciated by 1% ($ 1,028 ) $ -
Foreign exchange risk Exchange rate of NTD to USD, to JPY ,to EUR and
to each of other currencies depreciated by 1% 1,028 -
Interest rate risk Major increases in interest rates 1BPS 184 ( 1,069 )
Interest rate risk Major declines in interest rates 1BPS ( 184 ) 1,069
Equity securities risk TAIEX declined by 1% ( 896 ) ( 1,599 )
Equity securities risk TAIEX increased by 1% 896 1,599
December 31, 2015 UNIT：In NT Thousand Dollars
Risks Extent of Variation Effect on Profit or Loss Effect on Equity
Foreign exchange risk Exchange rate of NTD to USD, to JPY, to EUR and
to each of other currencies appreciated by 1% ($ 168,072 ) $ -
Foreign exchange risk Exchange rate of NTD to USD, to JPY, to EUR and
to each of other currencies depreciated by 1% 168,072 -
Interest rate risk Major increases in interest rates 1BPS 17,717 ( 23,172 )
Interest rate risk Major declines in interest rates 1BPS ( 17,717 ) 23,172
Equity securities risk TAIEX declined by 1% ( 28,735 ) ( 55,601 )
Equity securities risk TAIEX increased by 1% 28,735 55,601
M. Disclosure requirements in the “Regulations Governing the Preparation of Financial Reports by Public Banks”
Interest rate sensitivity analysis on assets and liabilities (NT Dollars)
December 31, 2016
UNIT：In NT Thousand Dollars, %
1-90 days 91-180 days 181 days to 1 year Over 1 year Total
Interest rate sensitive assets $ 481,743,022 $ 853,830,915 $ 61,943,233 $ 65,793,060 $ 1,463,310,230
Interest rate sensitive
liabilities 441,612,902 647,580,419 92,376,140 36,414,974 1,217,984,435
Interest rate sensitive gap $ 40,130,120 $ 206,250,496 ( $ 30,432,907 ) $ 29,378,086 $ 245,325,795
Net worth $ 248,401,446
Ratio of interest rate sensitive assets to interest rate sensitive liabilities 120.14%
Ratio of interest rate sensitivity gap to net worth 98.76%

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Mega ICBC 98
 Interest rate sensitivity analysis on assets and liabilities (NT Dollars)
December 31, 2016
UNIT：In US Thousand Dollars, %
1-90 days 91-180 days 181 days to 1 year Over 1 year Total
Interest rate sensitive assets $ 14,958,176 $ 26,511,548 $ 1,923,345 $ 2,042,882 $ 45,435,951
Interest rate sensitive
liabilities 13,712,131 20,107,447 2,868,290 1,130,689 37,818,557
Interest rate sensitive gap $ 1,246,045 $ 6,404,101 ( $ 944,945 ) $ 912,193 $ 7,617,394
Net worth $ 7,712,893
Ratio of interest rate sensitive assets to interest rate sensitive liabilities 120.14%
Ratio of interest rate sensitivity gap to net worth 98.76%

Interest rate sensitivity analysis on assets and liabilities (NT Dollars)

December 31, 2015
UNIT：In NT Thousand Dollars, %
1-90 days 91-180 days 181 days to 1 year Over 1 year Total
Interest rate sensitive assets $ 516,266,779 $ 828,046,861 $ 7,364,395 $ 44,195,492 $ 1,395,873,527
Interest rate sensitive
liabilities 474,574,216 616,401,650 88,037,742 44,684,635 1,223,698,243
Interest rate sensitive gap $ 41,692,563 $ 211,645,211 ( $ 80,673,347 ) ( $ 489,143 ) $ 172,175,284
Net worth $ 239,592,215
Ratio of interest rate sensitive assets to interest rate sensitive liabilities 114.07%
Ratio of interest rate sensitivity gap to net worth 71.86%
Notes:
1. The above amounts included only New Taiwan dollar amounts by the onshore branches of the Bank (i.e. excluding foreign
currency).
2. Interest rate sensitive assets and liabilities refer to the interest-earning assets and interest-bearing liabilities of which the income
or costs are affected by the fluctuations in interest rates.
3. Interest rate sensitivity gap = Interest rate sensitive assets - Interest rate sensitive liabilities
4. Ratio of interest rate sensitive assets to interest rate sensitive liabilities = Interest rate sensitive assets ÷ Interest rate sensitive
liabilities (referring to the current interest rate sensitive assets and liabilities denominated in New Taiwan dollars)
Interest rate sensitivity analysis on assets and liabilities (US Dollars)
December 31, 2016
UNIT：In US Thousand Dollars, %
1-90 days 91-180 days 181 days to 1 year Over 1 year Total
Interest rate sensitive assets $ 31,753,246 $ 917,397 $ 448,358 $ 347,507 $ 33,466,508
Interest rate sensitive
liabilities 32,214,405 1,506,710 1,201,384 - 34,922,499
Interest rate sensitive gap ($ 461,159 ) ( $ 589,313 ) ( $ 753,026 ) $ 347,507 ( $ 1,455,991 )
Net worth $ 389,768
Ratio of interest rate sensitive assets to interest rate sensitive liabilities 95.83%
Ratio of interest rate sensitivity gap to net worth ( 373.55% )

Interest rate sensitivity analysis on assets and liabilities (US Dollars)

December 31, 2015
UNIT：In US Thousand Dollars, %
1-90 days 91-180 days 181 days to 1 year Over 1 year Total
Interest rate sensitive assets $ 32,285,909 $ 1,802,050 $ 393,155 $ 366,323 $ 34,847,437
Interest rate sensitive
liabilities 33,693,738 1,497,285 1,141,957 535,953 36,868,933
Interest rate sensitive gap ($ 1,407,829 ) $ 304,765 ( $ 748,802 ) ( $ 169,630 ) ( $ 2,021,496 )
Net worth $ 544,916
Ratio of interest rate sensitive assets to interest rate sensitive liabilities 94.52%
Ratio of interest rate sensitivity gap to net worth ( 370.97% )
Note:
1. The above amounts included only US dollars denominated assets and liabilities of head office, domestic and foreign branches,
and the OBU branch. Contingent assets and liabilities are excluded.
2. Interest rate sensitivity gap = Interest rate sensitive assets - Interest rate sensitive liabilities.
3. Ratio of interest rate sensitive assets to interest rate sensitive liabilities = Interest rate sensitive assets ÷ Interest rate sensitive
liabilities (referring to the current interest rate sensitive assets and liabilities denominated in US dollars).

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 ( 6 ) Offsetting financial assets and financial liabilities
The Bank and its subsidiaries have engaged in financial instrument transactions that apply the offsetting requirements in Paragraph 42 of IAS
32 as endorsed by the FSC. Financial assets and financial liabilities related to these transactions are reported at net amount on the balance
sheet.
The Bank and its subsidiaries have also engaged in offsetting terms that do not conform to the IFRSs. However, they have entered into
enforceable master netting arrangements or similar agreements with counterparties. For example: global master repurchase agreements or
similar repurchase or reverse repurchase agreements. When the above-mentioned enforceable master netting arrangements or similar
agreements are elected by both parties to be settled by net amount, settlements may be made by using the net amount after the offsetting of
financial assets and financial liabilities. Conversely if no such arrangements are made, settlements are made using the gross amount. However,
upon the event of a default of a party, the counterparty may choose settle by net amount.
The following table lists information related to the above-mentioned offsetting of financial assets and financial liabilities:

December 31, 2016

Financial assets that are offset, or can be settled under agreements of net settlement master netting arrangements or similar arrangements
UNIT：In NT Thousand Dollars
Gross amounts Gross amounts of recognized Net amounts of financial Not offset in the balance sheet(d)
of recognized financial liabilities offset in assets presented in the Financial Cash collateral
Description
financial assets the balance sheet balance sheet instruments received Net amount
(a) (b) (c)=(a)-(b) (Note) (e)=(c)-(d)
Derivative instruments $ 3,783,124 $ - $ 3,783,124 $ 1,181,638 $ 866,726 $ 1,734,760

Financial liabilities that are offset, or can be settled under agreements of net settlement master netting arrangements or similar arrangements
Gross amounts Not offset in the balance sheet(d)
of recognized Gross amounts of recognized Net amounts of financial Financial Cash collateral
Description financial financial assets offset in the liabilities presented in instruments received
liabilities balance sheet the balance sheet (Note) Net amount
(a) (b) (c)=(a)-(b) (e)=(c)-(d)
Derivative instruments $ 3,217,540 $ - $ 3,217,540 $ 1,140,092 $ 9,250 $ 2,068,198
December 31, 2016
Financial assets that are offset, or can be settled under agreements of net settlement master netting arrangements or similar arrangements
UNIT：In US Thousand Dollars
Gross amounts Gross amounts of recognized Net amounts of financial Not offset in the balance sheet(d)
of recognized financial liabilities offset in assets presented in the Financial
Description Cash collateral
financial assets the balance sheet balance sheet instruments Net amount
received
(a) (b) (c)=(a)-(b) (Note) (e)=(c)-(d)
Derivative instruments $ 117,466 $ - $ 117,466 $ 36,690 $ 26,912 $ 53,864

Financial liabilities that are offset, or can be settled under agreements of net settlement master netting arrangements or similar arrangements
Gross amounts Not offset in the balance sheet(d)
of recognized Gross amounts of recognized Net amounts of financial Financial Cash collateral
Description financial financial assets offset in the liabilities presented in instruments received
liabilities balance sheet the balance sheet (Note) Net amount
(a) (b) (c)=(a)-(b) (e)=(c)-(d)
Derivative instruments $ 99,905 $ - $ 99,905 $ 35,400 $ 287 $ 64,218

December 31, 2015

Financial assets that are offset, or can be settled under agreements of net settlement master netting arrangements or similar arrangements
UNIT：In NT Thousand Dollars
Gross amounts Gross amounts of recognized Net amounts of financial Not offset in the balance sheet(d)
of recognized financial liabilities offset in assets presented in the Financial Cash collateral
Description
financial assets the balance sheet balance sheet instruments received Net amount
(a) (b) (c)=(a)-(b) (Note) (e)=(c)-(d)
Derivative instruments $ 4,857,594 $ - $ 4,857,594 $ 616,636 $ 1,441,783 $ 2,799,176

Financial liabilities that are offset, or can be settled under agreements of net settlement master netting arrangements or similar arrangements
Gross amounts Not offset in the balance sheet(d)
of recognized Gross amounts of recognized Net amounts of financial Financial Cash collateral
Description financial financial assets offset in the liabilities presented in instruments received
liabilities balance sheet the balance sheet (Note) Net amount
(a) (b) (c)=(a)-(b) (e)=(c)-(d)
Derivative instruments $ 4,757,866 $ - $ 4,757,866 $ 616,636 $ 11,634 $ 4,129,596

(Note) Including net settlement master netting arrangements and non-cash collaterals.

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Mega ICBC 100

 9. CAPITAL MANAGEMENT
( 1 ) Objective of capital management
A. The Bank and its subsidiaries’ qualifying self-owned capital should meet the regulatory requirements and meet the minimum regulated
capital adequacy ratio. This is the basic objective of capital management of the Bank and its subsidiaries. The calculation and provision
of qualifying self-owned capital and regulated capital shall follow the regulations of the competent authority.
B. In order to have adequate capital to take various risks, the Bank and its subsidiaries shall assess the required capital with consideration
of the risk portfolio it faces and the risk characteristics, and manages risk through capital allocation to realize optimum utilization of
capital allocation.
( 2 ) Capital management procedures
A. Following the “Regulations Governing the Capital Adequacy Ratio of Banks” of the Financial Supervisory Commission, the Bank
calculates capital adequacy ratio on a consolidated basis and reports this information regularly.
B. The calculation of capital adequacy ratio of subsidiaries shall follow the regulations of regulatory authorities; if without regulations,
capital adequacy ratio is computed as net of qualifying self-own capital divided by regulated capital.
( 3 ) Capital adequacy ratio
Capital adequacy shown in the following table was calculated in accordance with “Regulations Governing the Capital Adequacy Ratio of
Banks” effective on December 31, 2016 and 2015.
UNIT：In NT Thousand Dollars, %
Annual
December 31, 2016 December 31, 2015
Items
Capital of Common equity $ 249,538,884 $ 244,583,282
Other Tier 1 Capital - -
Self-owned capital
Tier 2 Capital, net 37,575,805 44,734,116
Self-owned capital, net 287,114,689 289,317,398
Standardized Approach 1,851,031,943 2,033,605,160
Credit risk Internal Ratings-Based Approach - -
Asset securitization 752,163 1,375,313
Basic Indicator Approach 93,518,150 89,086,413
Total risk-weighted assets Standardized Approach / Alternative
Operation risk
(Note 1) Standardized Approach - -
Advanced Measurement Approaches - -
Standardized Approach 35,868,088 46,141,363
Market risk
Internal Models Approach - -
Total risk-weighted assets 1,981,170,344 2,170,208,249
Capital adequacy ratio (Note 2) 14.49% 13.33%
Total risk assets based Capital of Common equity, net Ratio 12.60% 11.27%
Total risk assets based Tier 1 Capital, net Ratio 12.60% 11.27%
Leverage ratio 7.49% 7.02%
Note 1: The self-owned capital, risk-weighted assets and exposures amount in the table above should be filled in accordance with
“Regulations Governing the Capital Adequacy Ratio of Banks” and “calculation method and table of self-owned capital and risk-
weighted assets”.
Note 2: Current and prior year's capital adequacy ratio should be disclosed in the annual reports. In addition to current and prior year's capital
adequacy, capital adequacy ratio at the end of prior year should be disclosed in the semi-annual reports.
Note 3: The relevant formulas are as follows:
1. Self-owned capital = Tier 1 Capital of Common equity, net＋ Other Tier 1 Capital, net＋ Tier 2 Capital, net
2. Total risk-weighted assets = credit risk-weighted assets + (operation risk + market risk) * 12.5
3. Capital adequacy ratio = Self-owned capital / Total risk-weighted assets
4. Total risk assets based Tier 1 Capital of Common equity, net Ratio＝ Tier 1 Capital of Common equity, net / Total risk-weighted
assets
5. Total risk assets based Tier 1 Capital, net Ratio＝(Tier 1 Capital of Common equity, net + Other Tier 1 Capital, net) / Total risk-
weighted assets
6. Gearing ratio = Tier 1 capital/ exposures amount
Note 4: For 1st quarter and 3rd quarter financial reports, the table of capital adequacy ratio is not required to be disclosed.
10. OPERATING SEGMENTS INFORMATION
( 1 ) General information
The Bank and its subsidiaries use reported information to the Chief Operating Decision-Maker (CODM) to identify segments and geographic
information. The Bank and its subsidiaries mainly focus on the businesses in Asia and North America. The disclosed operating segment by the
Bank and its subsidiaries is stipulated in Article 3 of the Banking Law, and the generated income is the main source of income.
( 2 ) Information of segment profit or loss, assets and liabilities
The Bank and its subsidiaries’ management mainly focuses on the operating results of the whole bank, which is consistent with that of the
consolidated statements of comprehensive income.

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101 Annual Report 2016

 ( 3 ) Information of major customers
The Bank and its subsidiaries’ source of income is not concentrated on transactions with a single customer or single trading.
( 4 ) Information by products and services
All operating segments’ operating results of the Bank and its subsidiaries mainly come from interest income from external clients and is
measured on a consistent basis compared with the statement of comprehensive income. The segmental income also consist of internal profit
and loss appropriated by the terms agreed amongst segments other than external revenue. Please refer to the information by geography for
relevant components of income balances.
( 5 ) Financial Information By Geographic Area

For the year ended December 31, 2016

UNIT: In NT Thousand Dollars
Other
Overseas Adjustment
Domestic Asia Operating and
Department (Note) North America Department Write-off Total
Revenue from customers
outside the Bank $ 41,257,735 $ 5,447,673 ( $ 2,735,172 ) $ 1,971,192 ($ 306,700 ) $ 45,634,728
Revenue from departments
within the Bank 880,321 ( 362,773 )( 66,100 ) ( 440,463 ) ( 10,985 ) -
Total revenue $ 42,138,056 $ 5,084,900 ( $ 2,801,272 ) $ 1,530,729 ($ 317,685 ) $ 45,634,728
Profit or loss $ 23,659,414 $ 3,658,798 ( $ 4,065,506 ) $ 95,076 ($ 232,414 ) $ 23,115,368

Assets attributable to specific

departments $ 2,381,099,632 $ 234,193,015 $ 294,029,798 $ 74,456,329 ($ 9,327,183 ) $ 2,974,451,591

For the year ended December 31, 2016

UNIT: In US Thousand Dollars
Other
Overseas Adjustment
Domestic Asia Operating and
Department (Note) North America Department Write-off Total
Revenue from customers
outside the Bank $ 1,281,057 $ 169,151 ($ 84,927 ) $ 61,206 ($ 9,523 ) $ 1,416,964
Revenue from departments
within the Bank 27,334 ( 11,264 ) ( 2,052 ) ( 13,677 ) ( 341 ) -
Total revenue $ 1,308,391 $ 157,887 ($ 86,979 ) $ 47,529 ($ 9,864 ) $ 1,416,964
Profit or loss $ 734,628 $ 113,606 ($ 126,234 ) $ 2,952 ($ 7,217 ) $ 717,735

Assets attributable to specific

departments $ 73,933,417 $ 7,271,720 $ 9,129,659 $ 2,311,878 ($ 289,610 ) $ 92,357,064

For the year ended December 31, 2015

UNIT: In NT Thousand Dollars
Other
Overseas Adjustment
Domestic Asia Operating and
Department (Note) North America Department Write-off Total
Revenue from customers
outside the Bank $ 41,097,238 $ 4,962,362 $ 2,583,711 $ 1,863,005 ($ 265,094 ) $ 50,241,222
Revenue from departments
within the Bank 840,860 ( 421,904 )( 15,676 ) ( 403,634 ) 354 -
Total revenue $ 41,938,098 $ 4,540,458 $ 2,568,035 $ 1,459,371 ($ 264,740 ) $ 50,241,222
Profit or loss $ 24,842,947 $ 3,286,027 $ 1,716,326 $ 867,943 ($ 393,034 ) $ 30,320,209

Assets attributable to specific

departments $ 2,424,108,458 $ 236,372,025 $ 358,103,619 $ 75,532,084 ($ 5,348,463 ) $ 3,088,767,723

Note: amounts in Asia do not include those originating from the Republic of China.

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Mega ICBC 102

 11. RELATED PARTY TRANSACTIONS
( 1 ) Parent and ultimate controlling party
The Bank and its subsidiaries are controlled by Mega Financial Holding Co., Ltd, which owns 100% of the Bank’s shares. The ultimate
controlling party of the Bank and its subsidiaries is Mega Financial Holding Co., Ltd.
( 2 ) Names of the related parties and their relationship with the Bank
Short name
Names of related parties of related parties Relationship with the Bank
Mega Bills Finance Co., Ltd. Mega Bills Jointly controlled by Mega Financial Holdings
Mega Securities Co., Ltd. Mega Securities Jointly controlled by Mega Financial Holdings
Mega Investment Trust Co., Ltd. Mega Investment Trust Jointly controlled by Mega Financial Holdings
Chung Kuo Insurance Co., Ltd. Chung Kuo Insurance Jointly controlled by Mega Financial Holdings
Mega Asset Management Co., Ltd. Mega Asset Jointly controlled by Mega Financial Holdings
Mega CTB Venture Capital Co., Ltd. Mega Venture Jointly controlled by Mega Financial Holdings
Mega Life Insurance Agency Co., Ltd. Mega Life Insurance Agency Jointly controlled by Mega Financial Holdings
Mega International Investment Service Corp. Mega International Investment Jointly controlled by Mega Financial Holdings
Service
Mega Futures Co., Ltd. Mega Futures Jointly controlled by Mega Financial Holdings
Chunghwa Post Corporation Limited Chungwha Post Director of Mega Financial Holdings
Bank of Taiwan Corp. Bank of Taiwan Director of Mega Financial Holdings
Yung-Shing Industries Co. Yung-Shing Industries Subsidiary of the Bank
China Products Trading Company China Products Subsidiary of the Bank
Mega Management Consulting Co., Ltd. Mega Management Consulting Subsidiary of the Bank
Cathay Investment & Development Cathay Investment (Bahamas) Subsidiary of the Bank
Corporation (Bahamas)
Cathay Investment & Warehousing Co., S.A. Cathay Investment & Subsidiary of the Bank
Warehousing (Panama)
Win Card Co., Ltd. Win Card Indirect subsidiary of the Bank
ICBC Assets Management & Consulting Co., Ltd. ICBC Consulting Indirect subsidiary of the Bank
Mega 1 Venture Capital Co., Ltd. Mega 1 Venture Equity investees
United Venture Capital Corp. United Venture Equity investees (Note1)
Everstrong Iron & Steel Foundry & Mfg Corp. Everstrong Iron Steel Equity investees
IP Fund Seven Ltd. IP Fundseven Equity investees (Note2)
China Real Estate Management Co., Ltd. China Real Estate Equity investees
Taiwan Finance Co., Ltd. Taiwan Finance Equity investees
An Feng Enterprise Co., Ltd. An Fang Equity investees
Ramlett Finance Holdings Inc. Ramlett Equity investees
Mega Growth Venture Capital Co., Ltd. Mega Growth Venture Capital Equity investees
Universal Venture Capital Investment Universal Venture Capital Equity investees
Corporation
Others Certain directors, supervisors, managers and
relatives of the Bank’s chairman and general
manager

Note 1: The Company was dissolved in 2013 and completed its liquidation on October 5, 2015.
Note 2: The Company was dissolved in 2015 and completed its liquidation on August 18, 2016.
( 3 ) Major transactions and balances with related parties
A. Due from and due to banks
For the year ended December 31, 2016
Highest Total Interest
Balance as of Outstanding Interest Rate Income
December 31 Balance (%) (Expense)
(Expressed in NT Thousand Dollars)
Due from banks
Fellow subsidiary:
Mega Bills $ - $ 6,392,878 0.28%-1.40% $ 14,987
(Note)
Other related parties:
Bank of Taiwan 9,330,096 27,831,099 -0.18%-14.00% 448

Due to banks
Other related parties:
China Post $ 2,818,812 $ 2,918,323 0.01%-1.30% ($ 33,038 )
Bank of Taiwan 199,789 9,348,133 0.29%-12.00% ( 247 )

~103~

103 Annual Report 2016

 For the year ended December 31, 2016
Highest
Balance as of Outstanding Interest Rate Total Interest
December 31 Balance (%) Income (Expense)
(Expressed in US Thousand Dollars)
Due from banks
Fellow subsidiary:
Mega Bills $ - $ 198,500 0.28%-1.40% $ 465
(Note)
Other related parties:
Bank of Taiwan 289,701 864,159 -0.18%-14.00% 14

Due to banks
Other related parties:
China Post $ 87,525 $ 90,614 0.01%-1.30% ($ 1,026 )
Bank of Taiwan 6,203 290,261 0.29%-12.00% ( 8)

Note: The range of NTD interest rate is 0.28% ~ 0.50% and the range of foreign currency interest rate is 0.70% ~1.40%.
For the year ended December 31, 2015
Highest
Balance as of Outstanding Interest Rate Total Interest
December 31 Balance (%) Income (Expense)
(Expressed in NT Thousand Dollars)
Due from banks
Fellow subsidiary:
Mega Bills $ 2,765,776 $ 3,000,000 0.45%-5.35% $ 1,909
Other related parties:
Bank of Taiwan 11,296,147 19,942,773 0.01%-5.20% 715

Due to banks
Other related parties:
China Post $ 2,804,643 $ 4,223,147 1.20%-1.52% ($ 39,921 )
Bank of Taiwan 3,381,407 28,257,238 0.10%-9.00% ( 254 )
B. Loans and deposits
Total
Interest
December 31, 2016
Income % of Interest Rate
Item Counterparty NT$ US$ % of Total (Expense) Total (%)
All related
Deposits $ 6,302,446 0.29% ( $ 114,861 ) 0.75% 0.00%~13.00%
For the year ended parties $ 195,692
December 31, 2016 All related
Loans 105,809 0.01% 2,738 0.01%~3.63%
parties 3,285 0.01%
Total
Interest
December 31, 2015
Income % of Interest Rate
Item Counterparty NT$ % of Total (Expense) Total (%)
All related
Deposits $ 0.53% ( $ 75,841 ) 0.43% 0.00%~13.00%
For the year ended parties 11,904,477
December 31, 2015 All related
Loans 0.01% 3,818 0.01% 1.00%~5.00%
parties 178,191
The interest rates shown above are similar, or approximate, to those offered to third parties. But the interest rates for savings deposits of
Bank managers within the prescribed amounts are the same as for savings deposits of employees.
In compliance with the Articles 32 and 33 of Banking Law, except for consumer loans and government loans, credits extended by the
Bank to any related party are fully secured, and the terms of credits extended to related parties are similar to those for third parties.
The Bank presents its transactions or account balances with related parties, in the aggregate, except for those which the amount represents
over 10% of the account balance.

~104~

Mega ICBC 104

 C. Lease agreements
Lessor
For the year ended December 31, 2016
Rental Revenue Rental Revenue
Related Party Lease Period Lease Receipt Method (NT$) (US$)
The parent:
Mega Financial Holdings 2014.08-2019.11 Monthly $ 223 $ 7
Fellow subsidiary:
Mega Securities 2012.11-2021.02 Monthly 20,458 635
Mega Bills 2016.01-2019.11 Monthly 32,579 1,012
Chung Kuo Insurance 2015.05-2019.07 Quarterly/ 2,018 63
Semi-Annually
Mega Asset 2016-01-2018.12 Monthly 7,060 219
Mega Investment Trust 2016-01-2018.12 Monthly 12,139 377
Mega Life Insurance Agency 2014-07-2017.06 Monthly 1,119 35
The subsidiary:
Yung-Shing Industries 2014.07-2018.09 Quarterly/Annually 2,861 89
Mega Management
Consulting 2016.01-2018.12 Monthly 1,561 48
The indirect subsidiary:
Win Card 2014.06-2019.05 Quarterly 4,652 144
ICBC Consulting 2015.08-2018.07 Monthly 178 6

For the year ended December 31, 2015

Rental Revenue
Related Party Lease Period Lease Receipt Method (NT$)
The parent:
Mega Financial Holdings 2014.08-2018.07 Monthly $ 206
Fellow subsidiary:
Mega Securities 2011.02-2018.04 Monthly 17,813
Mega Bills 2013.01-2015.12 Monthly 35,267
Chung Kuo Insurance Quarterly/
2011.08-2018.04 Semi-Annually 2,119
Mega Asset 2014.01-2015.12 Monthly 5,901
Mega Investment Trust 2014.01-2015.12 Monthly 10,518
Mega Life Insurance Agency 2014.07-2017.06 Monthly 1,321
The subsidiary:
Yung-Shing Industries 2014.07-2018.09 Quarterly/Annually 2,861
Mega Management
Consulting 2014.01-2015.12 Monthly/Annually 1,339
The indirect subsidiary:
Win Card 2014.06-2019.05 Quarterly 4,637
ICBC Consulting 2014.04-2017.03 Monthly 134
Lessee
For the year ended December 31, 2016
Lease Payment Rental Expense Rental Expense
Related Party Lease Period Method (NT$) (US$)
The parent:
Mega Financial Holdings 2016.11-2018.12 Monthly $ 136 $ 4
Fellow subsidiary:
Mega Securities Note Note 29,842 927
Mega Bills 2016.01-2018.12 Monthly 79,947 2,482
Chung Kuo Insurance 2006.12-2017.07 Monthly 22,283 692
Subsidiary:
Yung-Shing Industries 2014.12-2044.11 Monthly 21,600 671
China Products 2015.06-2018.05 Monthly 1,003 31
For the year ended December 31, 2015
Lease Payment Rental Expense
Related Party Lease Period Method (NT$)
Fellow subsidiary:
Mega Securities Note Note $ 30,307
Mega Bills 2013.01-2015.12 Monthly 84,246
Chung Kuo Insurance Monthly/
2006.12-2017.07 Quarterly/Annually 22,197
Subsidiary:
Yung-Shing Industries 2014.12-2044.11 Monthly 20,571
China Products 2012.06-2018.05 Monthly 1,003
Note:The Bank sets up offices for collection / payment of securities trading for customers in all operating bases of Mega Securities. There
are neither formal contracts nor actual lease terms. The rental fees are paid according to a certain percentage of deposit balance of
each operating base.

~105~

105 Annual Report 2016

D. Bills and bonds under resale agreements
For the year ended December 31, 2016
NT$
Amount Ending balance Interest revenue
Fellow subsidiary:
Mega Bills $ 141,010,835 $ - $ 9,860
Mega Securities 116,240,184 1,400,083 8,958
$ 257,251,019 $ 1,400,083 $ 18,818

For the year ended December 31, 2016

US$
Amount Ending balance Interest revenue
Fellow subsidiary:
Mega Bills $ 4,378,403 $ - $ 306
Mega Securities 3,609,271 43,473 278
$ 7,987,674 $ 43,473 $ 584

For the year ended December 31, 2015

NT$
Amount Ending balance Interest revenue
Fellow subsidiary:
Mega Bills $ 80,179,796 $ - $ 1,556
Mega Securities 216,410,254 3,356,658 21,957
$ 296,590,050 $ 3,356,658 $ 23,513

E. Current tax liabilities

December 31, 2016 December 31, 2015
NT$ US$ NT$
Amount Amount Amount
Parent company:
Mega Financial Holdings $ 2,433,546 $ 75,562 $ 2,084,962

The above-mentioned payables to the parent company are net payables due to the Bank electing to jointly file profit-seeking enterprise
income tax returns with its parent company as of 2003.
F. Service fees revenues
For the year ended For the year ended
December 31, 2016 December 31, 2015
NT$ US$ NT$
Fellow subsidiary:
Mega Life Insurance
Agency (Note 1) $ 978,170 $ 30,372 $ 772,244
Mega Investment Trust
(Note 2) 28,520 886 32,402
Chung Kuo Insurance
(Note 1) 9,534 296 10,545
$ 1,016,224 $ 31,554 $ 815,191

Note 1: The above amount represents service fee revenues earned from acting as an agent for Mega Life Insurance Agency and Chung
Kuo Insurance.
Note 2: The above amount represents service fee of sale funds revenues earned from Mega Investment Trust.
G. Insurance expense
For the year ended For the year ended
December 31, 2016 December 31, 2015
NT$ US$ NT$
Fellow subsidiary:
Chung Kuo Insurance $ 39,329 $ 1,221 $ 55,871

H. The Bank’s processes of printing, packaging documents and labor outsourcing have been outsourced to Yung-Shing Industries Co. Under
this arrangement, the Bank paid operating expenses and labor outsourcing of NT$119,930 thousand and NT$120,475 thousand for the
years ended December 31, 2016 and 2015, respectively.
I. As of 2001, a portion of the Bank’s credit card business and car loan collection business have been commissioned to its second-tier
subsidiary, Win Card Co., Ltd, for operation. For the years ended December 31, 2016 and 2015, operating expenses payable in accordance
with agreements were NT$166,884 thousand and NT$167,405 thousand, respectively.

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Mega ICBC 106

 J. Loans
December 31, 2016
(Unit: In NT Thousand dollars)
Number of Default possibility Whether terms and conditions of the
Highest Ending
Types accounts or names Normal Overdue Collateral related party transactions are different from
balance balance those of transactions with third parties.
of related party loans accounts
Consumer loans
11 $ 11,383 $ 3,933 V None None
for employees
Home mortgage
77 564,202 509,838 V Real estate None
loans
Other loans 2 95,211 55,716 V Real estate None

December 31, 2016

(Unit: In US Thousand dollars)
Number of Default possibility Whether terms and conditions of the
Highest Ending
Types accounts or names Normal Overdue Collateral related party transactions are different from
balance balance those of transactions with third parties.
of related party loans accounts
Consumer loans
11 $ 353 $ 122 V None None
for employees
Home mortgage
77 17,519 15,831 V Real estate None
loans
Other loans 2 2,956 1,730 V Real estate None

December 31, 2015

(Unit: In NT Thousand dollars)
Number of Default possibility Whether terms and conditions of the
Highest Ending
Types accounts or names Normal Overdue Collateral related party transactions are different from
balance balance those of transactions with third parties.
of related party loans accounts
Consumer loans
18 $ 10,295 $ 9,334 V None None
for employees
Home mortgage
74 522,944 479,835 V Real estate None
loans
Other loans 3 1,938,636 56,896 V Real estate None

K. Financial guarantees for related parties:

(Unit: In NT Thousand dollars)
Names of Highest Provision for
Date Ending balance Rate Collateral
related party balance guarantee reserve
December 31, Chung Kuo The bank’s
$ 9,626 $ 9,603 $ 128 1%
2016 Insurance depsoits

(Unit: In US Thousand dollars)

Names of Highest Provision for
Date Ending balance Rate Collateral
related party balance guarantee reserve
December 31, Chung Kuo The bank’s
$ 299 $ 298 $ 4 1%
2016 Insurance depsoits

(Unit: In NT Thousand dollars)

Names of Highest Provision for
Date Ending balance Rate Collateral
related party balance guarantee reserve
December 31, Chung Kuo The bank’s
$ 9,827 $ 9,806 $ 111 1%
2015 Insurance depsoits
L. Information on remunerations to the Bank’s directors, supervisors, general managers and vice general manager:
For the year ended December 31
2016 2015
NT$ US$ NT$
Salaries and other short-term employee benefits $ 78,102 $ 2,425 $ 80,744
Post-employment benefits 1,975 61 2,565
Total $ 80,077 $ 2,486 $ 83,309

12. PLEDGED ASSETS

Please refer to Note (6) and (7) for details of the assets pledged as collateral as of December 31, 2016 and 2015.

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107 Annual Report 2016

13. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT COMMITMENTS

As of December 31, 2016 and 2015, the Bank and its subsidiaries had the following commitments and contingent liabilities not reflected in the
above mentioned financial statements:
December 31, 2016 December 31, 2015
NT$ US$ NT$
Irrevocable loan commitments $ 115,408,871 $ 3,583,459 $ 107,490,342
Securities sold under repurchase agreement 444,888 13,814 548,152
Securities purchased under resale agreement 4,256,613 132,168 9,437,084
Credit card line commitments 56,378,442 1,750,557 58,618,656
Guarantees issued 195,512,459 6,070,684 217,349,493
Contra guarantees 60,644 1,883 841
Letters of credit 61,515,435 1,910,061 55,498,669
Customers’ securities under custody 193,861,943 6,019,436 208,886,695
Properties under custody 3,323,676 103,201 3,458,696
Guarantee effects 136,273,654 4,231,313 142,259,758
Collections for customers 102,094,722 3,170,053 106,021,245
Agency loans payable 977,405 30,349 1,295,073
Travelers’ checks consigned-in 1,525,830 47,377 1,877,590
Gold coins consigned-in 433 13 449
Goods and tickets consignments-in 2,459 76 2,490
Agent for government bonds 144,109,400 4,474,613 159,934,200
Short-dated securities under custody 89,610,128 2,782,405 105,969,903
Trust liability 522,980,128 16,238,593 534,133,051
Certified notes paid 6,256,579 194,267 6,528,240
Risk tolerance amount 322,060 10,000 440,243

14. SIGNIFICANT DISASTER LOSS

None.
15. SIGNIFICANT SUBSEQUENT EVENT
None.
16. OTHERS
( 1 ) Information for financial assets transfers and liabilities extinguishing
None.
( 2 ) Significant adjustment in the organization and significant changes in the management system
For reorganization of the bank, the structure is as follows:
A. Strengthen the Board of Directors:
(a)Establish a conference which is responsible for the Board of Directors.
(b)The risk management tasks which were reviewed by “Asset & Liability and Risk Management Committee” had reorganized as “Risk
Management Committee” and held by the Chairperson.
(c)“Auditing Office, Board of Directors” was reorganized as “Auditing Department”.
B. Reorganization of headquarters
(a)Reorganize “Planning Department”: established under the President.
(b)Establish “Anti-Money Laundering Center”: monitored by Chief Compliance Officer.
(c)Establish “Overseas Branches Administration Department”: monitored by Senior Executive Vice President.
(d)Establish “Business Administration Department”: monitored by Senior Executive Vice President.
(e)Upgrade Electronic Financial Extension Center to “Digital Banking Department”.
(f)Dissolve “Financial Risk Management Center”.
(g)Resume “Overdue Loan & Control Department”.
( 3 ) Significant impact arising from changes in government laws and regulations
None.
( 4 ) Information for Company’s share held by subsidiaries
None.
( 5 ) Information for private placement securities
None.
( 6 ) Information for discontinued operations
None.

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Mega ICBC 108

 ( 7 ) Major operating assets or liabilities transferred from (or to) other financial institutions
None.
( 8 ) Profitability of the Bank and its subsidiaries
Units：%
Items December 31, 2016 December 31, 2015
Before tax 0.76 1.00
Return on total assets (%)
After tax 0.63 0.85
Before tax 9.05 12.85
Return on stockholders’ equity (%)
After tax 7.44 10.89
Net profit margin ratio (%) 41.66 51.17
Note 1: Return on total assets = Income before (after) income tax/average total assets.
Note 2: Return on stockholders’ equity = Income before (after) income tax / average stockholders’ equity.
Note 3: Net profit margin ratio = Income after income tax / total operating income.
Note 4: The term “Income before (after) income tax” represents net income from January 1 to the balance sheet date of the reporting period.
( 9 ) In accordance with Article 17 of the Trust Enterprise Law, the disclosures of the trust balance sheet, trust income statement and trust property
list are as follows:
A. Trust Balance Sheet
(In NT Thousand Dollars)
Trust Balance Sheet
December 31, 2016
Trust assets Trust liabilities
Bank deposits $ 20,182,915 Capital borrowed $ 4,500,525
Receivables 5,642 Payables 15,159
Bonds 15,807,444 Account collected in advance 34,618
Stocks 46,703,729 Tax payable 30,657
Mutual funds 126,533,444 Accounts withholding 957
Structured products 28,563,600 Customers' securities under custody 158,100,512
Properties, net 19,788 Other liabilities 1,520,923
Real estate Trust capital 353,195,595
Land 100,977,308 Accumulated profit or loss for reserves
Buildings and Structures, net 10,692,335 Net income for current period 2,130,189
Construction in Process 13,153,605 Accumulated profit 3,450,993
Customers’ securities under custody 158,100,512
Other assets 2,239,806
Total trust assets $ 522,980,128 $ 522,980,128

(In US Thousand Dollars)

Trust Balance Sheet
December 31, 2016
Trust assets Trust liabilities
Bank deposits $ 626,682 Capital borrowed $ 139,742
Receivables 175 Payables 470
Bonds 490,823 Account collected in advance 1,075
Stocks 1,450,156 Tax payable 952
Mutual funds 3,928,878 Accounts withholding 30
Structured products 886,903 Customers' securities under custody 4,909,039
Properties, net 615 Other liabilities 47,225
Real estate Trust capital 10,966,764
Land 3,135,357 Accumulated profit or loss for reserves
Buildings and Structures, net 331,998 Net income for current period 66,142
Construction in Process 408,421 Accumulated profit 107,154
Customers’ securities under custody 4,909,039
Other assets 69,546
Total trust assets $ 16,238,593 $ 16,238,593

(In NT Thousand Dollars)

Trust Balance Sheet
December 31, 2015
Trust assets Trust liabilities
Bank deposits $ 24,816,673 Capital borrowed $ 4,500,526
Receivables 2,858 Payables 15,729
Bonds 11,711,475 Account collected in advance 40,648
Stocks 45,570,358 Tax payable 30,769
Mutual funds 130,151,624 Accounts withholding 973
Structured products 27,308,854 Customers' securities under custody 171,075,599
Properties, net 15,601 Other liabilities 1,342,791
Real estate Trust capital 350,994,177
Land 101,718,220 Accumulated profit or loss for reserves
Buildings and Structures, net 9,937,494 Net income for current period 4,710,469
Construction in Process 8,175,180 Accumulated profit 1,421,370
Customers’ securities under custody 171,075,599
Other assets 3,649,115
Total trust assets $ 534,133,051 $ 534,133,051

~109~

109 Annual Report 2016

 B. Trust Income Statement
For the years ended December 31,
2016 2015
NT$ US$ NT$
Trust income:
Interest income $ 170,246 $ 5,286 $ 97,789
Rental income 1,130,859 35,113 1,159,792
Dividend income 1,147,096 35,617 1,645,804
Realized capital gain-Stock 424,325 13,176 306,383
Realized capital gain-Funds 2,659 83 2,322
Gain on disposal of property - - 2,199,415
Other income 38,401 1,192 41,934
Total trust income 2,913,586 90,467 5,453,439
Trust expenses:
Management expenses ( 86,803 ) ( 2,695 ) ( 82,926 )
Supervisory fee - - ( 450 )
Repairing expenses ( 50,438 ) ( 1,566 ) ( 50,127 )
Insurance ( 13,053 ) ( 405 ) ( 13,266 )
Depreciation expense ( 1,502 ) ( 47 ) ( 1,281 )
Bad debts expense - - ( 234 )
Land and housing tax ( 142,533 ) ( 4,426 ) ( 121,008 )
Taxes - - ( 15,543 )
Interest expense ( 78,725 ) ( 2,445 ) ( 84,177 )
Service Charge Abstract ( 137,330 ) ( 4,264 ) ( 111,652 )
Accoutant fees ( 1,452 ) ( 45 ) ( 1,696 )
Lawyer fees ( 56 ) ( 2 ) ( 558 )
Realized capital loss-Stock ( 179,934 ) ( 5,587 ) ( 162,565 )
Realized capital loss-Funds ( 1) - ( 5 )
Losses on Disposal of Property - - ( 514 )
Other expenses ( 91,573 ) ( 2,843 ) ( 96,969 )
Total trust expense ( 783,400 ) ( 24,325 ) ( 742,971 )
Net income before income tax (Net investment income) 2,130,186 66,142 4,710,468
Income tax expense - - -
Net income after income tax(note) $ 2,130,186 $ 66,142 $ 4,710,468

C. Trust Property List

Trust Property List

December 31, 2016 December 31, 2015
NT$ US$ NT$
Bank deposits $ 20,182,915 $ 626,682 $ 24,816,673
Bonds 15,807,444 490,823 11,711,475
Stock 46,703,729 1,450,156 45,570,358
Mutual funds 126,533,444 3,928,878 130,151,624
Structured products 28,563,600 886,903 27,308,854
Properties, net 19,788 615 15,601
Real estate
Land 100,977,308 3,135,357 101,718,220
Buildings and structures, net 10,692,335 331,998 9,937,494
Construction in Process 13,153,605 408,421 8,175,180
Customers’ securities under custody 158,100,512 4,909,039 171,075,599
Other assets 2,239,806 69,546 3,649,115
Total $ 522,974,486 $ 16,238,418 $ 534,130,193

Note: The amount of designated investment trust on foreign equity of OBU branch is NT$36,030,159 thousand and NT$33,890,298
thousand as of December 31, 2016 and 2015, respectively.
( 1 0 ) Information for cross-sales between the Bank and its subsidiaries and subsidiaries
A . Transactions between the Bank and its subsidiaries: Please refer to Note 11.
B . Joint promotion of businesses:
In order to create synergies within the group and provide customers financial services in all aspects, the Bank has continuously
established other financial consulting service centers (including banking services, securities trading services, and insurance services) in
its subsidiaries and simultaneously promoted service business in banking, securities and insurances areas.
C . Sharing of information or operating facilities or premises
Under the Financial Holding Company Act, Computer Process of Personal Data Protection Law, and the related regulations stipulated
by MOF, when customers’ information of a financial holding company’s subsidiary is disclosed to the other subsidiaries under the group
or exchanged between the subsidiaries for the purpose of cross selling of products, the subsidiaries receiving, utilizing, managing or
maintaining the information are restricted to use the information for the joint promotion purposes only. In addition, the Bank is required
to disclose its “Measures for Protection of Customers’ Information” in its website. Customers also reserve the right to have their
information withdrawn from the information sharing mechanism.

~110~

Mega ICBC 110

111
17. SUPPLEMENTARY DISCLOSURES
( 1 ) Related information on material transaction items of the Bank and its subsidiaries:

A . Information regarding stock of short-term equity investment for which the purchase or sale amount for the period exceeded NT$300 million or 10% of the Bank's paid-in capital:
(In NT Thousand Dollars)

January 1, 2016 Addition Disposal December 31, 2016

Number of Number of
Marketable General Relationship shares shares Number of shares Gain (Loss) Number of shares

Annual Report 2016

Investor securities ledger account Counterparty with the Bank (in thousands) Amount (in thousands) Amount (in thousands) Amount on disposal (in thousands) Amount
The Bank Taiwan Top 50 Financial assets at fair value - - 3,750 $ 239,007 12,125 $ 781,881 12,195 $ 785,788 $ 15,399 3,680 $ 250,499
Tracker Fund through profit or loss-net
The Bank FCFC Financial assets at fair value - - 160 11,467 3,792 324,869 2,742 221,364 1,194 1,210 116,166
through profit or loss-net
The Bank TSMC Financial assets at fair value - - 6,208 833,259 7,764 1,236,027 11,202 1,816,606 194,988 2,770 447,668
through profit or loss-net
The Bank Far Eas Tone Financial assets at fair value - - 750 52,381 4,111 295,979 4,861 356,887 8,527 - -
through profit or loss-net
The Bank Fubon Financial Financial assets at fair value - - 1,270 64,291 7,860 319,884 7,650 305,471 ( 7,567 ) 1,480 71,137
Holding Co., through profit or loss-net
Ltd.

B . Information on the acquisition of real estate for which the purchase amount exceeded NT$300 million or 10% of the Bank's paid-in capital: None.
C . Information on the disposal of real estate for which the sale amount exceeded NT$300 million or 10% of the Bank's paid-in capital: None.
D . Information regarding discounted processing fees on transactions with related parties for which the amount exceeded NT$5 million: None.
E . Information regarding receivables from related parties for which the amount exceeded NT$300 million or 10% of the Bank's paid-in capital: None.
F . Information regarding selling non-performing loans
(A) Summary of selling non-performing loans

The information regarding selling non-performing loans for the year ended December 31, 2016 are as follows.
(Expressed in NT Thousand dollars)
Gain or loss from Attached Relationship with the Note
Transaction date Counterparty Contents of right of claim Carrying value Sale price
disposal conditions Company
2016.06.06 SC LOWY PRIMARY Corporate banking loans $ - $ 38,733 $ 38,733 None None Note 1
INVESTMENTS LTD
2016.12.26 I R LOAN SERVICING, INC Corporate banking loans - 1,775 1,775 None None Note 2

Note 1: The book value and sales price of the loan transaction were US$0 thousand and US$1,202.5 thousand, respectively. The currency exchange rate of the Bank was 1:32.2103.
Note 2: The book value and sales price of the loan transaction were JPY0 thousand and JPY6,000 thousand, respectively. The currency exchange rate of the Bank was 1:0.2959.
(B) Sale of non-performing loans exceeding NT$1 billion (excluding sale to related parties): None.
G . Information on and categories of securitized assets which are approved by the authority pursuant to Financial Asset Securitization Act or the Real Estate Securitization Act: None.
H . Other material transaction items which were significant to the users of the financial statements: None.

~111~
 ( 2 ) Supplementary disclosure regarding investee companies:

A. Supplementary disclosure regarding investee companies as of December 31,2016:

(In NT Thousand Dollars)
Share-holdings of the Bank and related enterprises
Proforma Total
Investment information on Percentage
Percentage of income Share number of Share of ownership
Investee companies Address Main service ownership % Book value (loss) (in thousands) stock held (in thousands) (%) Note
Mega Management Consulting 7F., No.91, Hengyang Rd., Venture capital and 100.00% $ 66,316 $ 35,603 1,000 None 1,000 100.00%
Co., Ltd. Taipei City management consulting etc.
Cathay Investment & Post Office Box 3937 Nassau, International investment and 100.00% 60,195 2,550 5 None 5 100.00%
Development Corporation Bahamas exploration
(Bahamas)
Cathay Investment & Calle 16 Colon Free Zone 1. Storage and warehousing 100.00% 55,941 ( 2,800) 1 None 1 100.00%
Warehousing Co., S.A. Local NO.4 Edificio NO.49 of imported commodities
P. O. Box 4036 Colon Free 2. Manage and make the
Zone,Colon,Republic of investment for the business
Panama in foreign trade business
3. Office rental
Ramlett Finance Holdings Inc. Calle 50 y Esquina Margarita Real estate investment industry 100.00% 6,931 1,176 2 None 2 100.00%
A de Vallarino Entrada
Nuevo Campo Alegre
Edificio ICBC, Panama
Yung-Shing Industries Co. 7F., No.100, Jilin Rd., Taipei Packaging, printing and agency 99.56% 690,960 58,267 299 None 299 99.56%
City of manpower service
China Products Trading 7F., No.100, Jilin Rd., Taipei Investments in products 68.27% 27,661 422 68 None 68 68.27%
Company City businesses, storage businesses
and other businesses
Mega 1 Venture Capital Co., 7F., No.91, Hengyang Rd., Investment industry 25.00% 27,997 ( 3,037) 8,438 None 8,438 25.00%
Ltd. Taipei City
An Feng Enterprise Co., Ltd. 3F., No.139, Jhengjhou Rd., Automatic Teller Machine 25.00% 11,844 683 900 None 900 30.00%
Taipei City rental, configure and maintain
Taiwan Finance Co., Ltd. 3F., No.123, Sec. 2, Nanjing Brokerage underwriting 24.55% 1,574,082 84,860 126,714 None 126,714 24.55%
E. Rd., Taipei City attestation guarantee and
endorsement of commercial
papers, proprietary trading of
government bonds and
corporate bonds
Everstrong Iron & Steel NO.1 Shiquan Rd., Xiaogang Iron and steel making 22.22% 43,457 2,542 1,760 None 1,760 22.22%
Foundry & Mfg Corp. Dist., Kaohsiung City
China Real Estate Management 11F., No.35, Guangfu S. Rd., Real estate and property selling 20.00% 183,507 2,451 9,000 None 9,000 20.00%
Co., Ltd. Taipei City

Mega ICBC
~112~

112
113
(In NT Thousand Dollars)
Share-holdings of the Bank and related enterprises
Proforma Total
Investment information on Percentage
Percentage of income Share number of Share of ownership
Investee companies Address Main service ownership % Book value (loss) (in thousands) stock held (in thousands) (%) Note
Universal Venture Capital 7F., No.91, Hengyang Rd., Venture capital 11.84% $ 138,127 $ 44,480 14,250 None 14,250 11.84%
Investment Corporation Taipei City

Annual Report 2016

Mega Growth Venture Capital 7F., No.91, Hengyang Rd., Venture capital 11.81% 146,735 ( 1,462) 15,000 None 15,000 11.81%
Co., Ltd. Taipei City
IP Fund Seven Ltd. (Note) 7F., No.122, Dunhua N. Rd., Investment industry 0.00% - 1,383 - None - 0.00%
Songshan District, Taipei
City
Win Card Co., Ltd. 4F., No.99, Sec. 3, Chongyang Corporate management 100.00% 39,351 8,806 200 None 200 100.00% Indirect
Rd., Sanchong Dist., New consulting, data processing subsidiary
Taipei City business and general of the Bank
advertising services
ICBC Asset Management & No.100, Jilin Rd., Taipei City Investment consulting, 100.00% 24,777 4,363 2,000 None 2,000 100.00% Indirect
Consulting Co., Ltd corporate management subsidiary
consulting and venture of the Bank
investment management
consulting

Note: The company had been incurring operating losses for a long period of time. As a result, the stockholders at their meeting resolved to liquidate the company and scheduled the liquidation registration in year 2015. The
liquidation process had been completed on August 18, 2016.
B. For those investee companies that the Bank has direct or indirect control interest over, further disclosures are as follows:
(A) Information on the acquisition of real estate for which the purchase amount exceeded NT$300 million or 10% of the Bank's paid-in capital: None.
(B) Information on the disposal of the real estate for which the sale amount exceeded NT$300 million or 10% of the Bank's paid-in capital: None.
(C) Information regarding discounted processing fees on transactions with related parties for which the amount exceeded NT$5 million: None.
(D) Information regarding receivables from related parties for which the amount exceeded NT$300 million or 10% of the Bank's paid-in capital: None.
(E) Information regarding selling non-performing loans: None.
(F) Information on and categories of securitized assets which are approved by the authority pursuant to the Financial Asset Securitization Act or the Real Estate Securitization Act: None.
(G) Lending to other parties: None.
(H) Guarantees and endorsements for other parties: None.

~113~
 (I) Information regarding securities held as of December 31, 2016:

(Expressed in NT Thousand Dollars)

At year-end
Relationship Ownership
Name of Holding Type and Name of Marketable with the Share / Units Percentage Market
Company Securities Securities Issuer Account (in thousands) Book value (%) value Note
Yung-Shing Industries Co. Stocks
Yung-Shing Industries Co. SysJust Corporation None Financial assets carried at cost 671 $ 6,878 2.64% $ 6,878
Yung-Shing Industries Co. Hi-Scene World Enterprise Co., None Financial assets carried at cost
Ltd. 2,370 5,272 1.54% 5,272
Yung-Shing Industries Co. Hua-sheng Venture Capital
Investment Corp. None Financial assets carried at cost 1,069 10,688 1.67% 10,688
Yung-Shing Industries Co. Win Card Co., Ltd. Equity investees Investments accounted for by the
equity method 200 39,351 100.00% 39,351
Yung-Shing Industries Co. ICBC Assets Management & Equity investees Investments accounted for by the
Consulting Co., Ltd. equity method 2,000 24,777 100.00% 24,777
Yung-Shing Industries Co. An Feng Enterprise Co., Ltd. Equity investees Investments accounted for by the
equity method 150 2,197 5.00% 2,197
$ 89,163
Cathay Investment &
Development
Corporation (Bahamas) Funds
Cathay Investment &
Development
Corporation (Bahamas) AsiaTech Taiwan Venture Fund LP None Financial assets carried at cost - $ 7,709 - $ 7,709
Cathay Investment &
Development
Corporation (Bahamas) Tai An Technologies Corp. None Financial assets carried at cost - 1,972 - 1,972
Accumulated impairment ( 7,405)
Total $ 2,276
(J) Information regarding securities for which the purchase or sale amount for the period exceeded NT$300 million or 10% of
the Bank's paid-in capital: None.
(K) Information regarding trading in derivative financial instruments: None.
(L) Other material transaction items which were significant to the users of the financial statements: None.
(3) Investments in People’s Republic of China:

Unit：In NT Thousand Dollars

Accumulated For the year ended Accumulated Carrying

amount of December 31, 2016 amount of Net income of amount of Investment
Name of Investee
Main Paid-in Investment investment investments investee The Company's Investment investment income
Company in
Business Capital method as of as of as of Direct/ Indirect Income (Loss) as of remitted as of
Mainland China Reinvestment Withdrawal
January 1, December 31, December 31, Percentage of for the period December December 31,
2016 2016 2016 Ownership (%) (Note 2) 31, 2016 2016
Mega International Banking $ 4,796,000 Branch $ 4,796,000 $ - $ - $ 4,796,000 $ 140,272 None $ 140,272 $ - $ -
Commercial Bank businesses (Note 3) (Note 3) (Note 3)
Suzhou Branch approved
(Including Wujiang by the local
Sub-Branch and government
Kunshan Sub-
Branch)
Mega International Banking $ 5,122,458 Branch $ 5,122,458 $ - $ - $ 5,122,458 ($ 62,125) None ($ 62,125) $ - $ -
Commercial Bank businesses (Note 4) (Note 4) (Note 4)
Ningbo Branch approved
by the local
government

Accumulated investment amounts Investment amount approved by Limits on investment amounts established by
in Mainland China the investment audit committee of the Ministry The investment audit committee of the Ministry of
as of December 31, 2016 of Economic Affairs Economic Affairs (Note 1)
$ 9,918,458(Note 3)(Note 4) $ 9,918,458(Note 3)(Note 4) $ 154,538,548
Note 1: Limit calculation is as follows (The Bank's net worth is $257,564,247 thousand) $257,564,247 thousand x 60% = $154,538,548 thousand.
Note 2: Relevant operating income and expense of the subsidiary, Mega International Commercial Bank Suzhou(Including Wujiang Sub-Branch and
Kunshan Sub-Branck ) and Ningbo Branch have been included the gains and losses of the Bank.
Note 3: Based on the approved investment amount (RMB$1 billion, approximately US$160,000 thousand) pursuant to Jing-Shen-II-Zi Letter No.
10000045990 issued by the Investment Commission of the Ministry of Economic Affairs on March 31, 2011. The actual remitted amount, converted
using the exchange rate at the date of remittance, was approximately US$157,347 thousand, which converted to NTD was 4,796,000 thousand.
Note 4: Based on the approved investment amount (RMB$1 billion, approximately US$167,000 thousand) pursuant to Jing-Shen-II-Zi Letter No.
10300306930 issued by the Investment Commission of the Ministry of Economic Affairs on December 9, 2014. The actual remitted amount,
converted using the exchange rate at the date of remittance, was approximately US$162,411 thousand, which converted to NTD was 5,122,458
thousand.
Note5: Unit: NT thousand dollars (unless otherwise noted).

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Mega ICBC 114

 (4) Significant transactions between parent company and subsidiaries

Unit: In NT Thousand Dollars

Details of transactions
Percentage (%)
No. Relationship of total
Company Counterparty
(Note 1) (Note 2) Account Amount Conditions consolidated net
revenues or
assets (Note 3)
0 Mega International Mega ICBC (Canada) 1 Due from Commercial $ 86,417 No significant 0.00%
Commercial Bank Co., Ltd. Banks difference from
general customers
0 ″ ″ 1 Call Loans to Banks 28,679 ″ 0.00%
0 ″ ″ 1 Due to Other Banks 43,234 ″ 0.00%
0 ″ ″ 1 Receivables 5 ″ 0.00%
0 ″ ″ 1 Interest Revenue 83 ″ 0.00%
0 ″ ″ 1 Interest Expenses 301 ″ 0.00%
0 ″ Mega ICBC (Thailand) 1 Due from Commercial 95,490 ″ 0.00%
Banks
0 ″ ″ 1 Call Loans to Banks 804,936 ″ 0.03%
0 ″ ″ 1 Due to Other Banks 714,670 ″ 0.02%
0 ″ ″ 1 Call Loans from other 41,121 ″ 0.00%
banks
0 ″ ″ 1 Interest Revenue 2,808 ″ 0.01%
0 ″ ″ 1 Interest Expenses 1,600 ″ 0.00%
1 Mega ICBC (Canada) Mega International 2 Due from Commercial 43,234 ″ 0.00%
Commercial Bank Co., Ltd. Banks
1 ″ ″ 2 Due to Other Banks 86,417 ″ 0.00%
1 ″ ″ 2 Call Loans from other 28,679 ″ 0.00%
banks
1 ″ ″ 2 Payables 5 ″ 0.00%
1 ″ ″ 2 Interest Revenue 301 ″ 0.00%
1 ″ ″ 2 Interest Expenses 83 ″ 0.00%
1 ″ Mega ICBC (Thailand) 3 Due to Other Banks 410 ″ 0.00%
2 Mega ICBC (Thailand) Mega International 2 Due from Commercial 714,670 ″ 0.02%
Commercial Bank Co., Ltd. Banks
2 ″ ″ 2 Call Loans to Banks 41,121 ″ 0.00%
2 ″ ″ 2 Due to Other Banks 95,490 ″ 0.00%
2 ″ ″ 2 Call loans from other 804,936 ″ 0.03%
banks
2 ″ ″ 2 Interest Revenue 1,600 ″ 0.00%
2 ″ ″ 2 Interest Expenses 2,808 ″ 0.01%
2 ″ Mega ICBC (Canada) 3 Due from Commercial 410 ″ 0.00%
Banks
(Note 1) The numbers in the No. column represent as follows:
1. 0 for the parent company
2. According to the sequential order, subsidiaries are numbered from 1.
(Note 2) Relationship between transaction company and counterparty is classified into the following three categories;
1. Parent company to subsidiary.
2. Subsidiary to parent company.
3. Subsidiary to subsidiary.
(Note 3) Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end
balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to
consolidated total operating revenues for income statement accounts.

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115 Annual Report 2016

 MEGA INTERNATIONAL COMMERCIAL BANK CO., LTD.
BALANCE SHEETS
(EXPRESSED IN THOUSANDS OF DOLLARS)

December 31, 2016 December 31, 2015 January 1, 2015

Assets NT$ US$ NT$ NT$
(Unaudited)
Assets
Cash and cash equivalents $ 86,952,288 $ 2,699,879 $ 141,794,023 $ 161,954,100
Due from the Central Bank and call loans to banks 540,639,263 16,786,911 505,796,414 469,613,258
Financial assets at fair value through profit or loss 45,311,254 1,406,920 47,024,122 43,670,656
Securities purchased under resale agreements 4,255,968 132,148 9,435,869 5,850,332
Receivables, net 59,342,642 1,842,596 142,291,246 170,898,252
Current tax assets 122,108 3,791 589,811 522,877
Bills discounted and loans, net 1,699,285,739 52,763,018 1,756,514,539 1,713,988,141
Available-for-sale financial assets, net 205,720,937 6,387,659 231,507,094 187,345,276
Held-to-maturity financial assets, net 276,724,781 8,592,336 197,651,402 161,087,026
Investments accounted for under the equity method, net 8,851,388 274,837 8,794,633 9,076,206
Other financial assets, net 9,669,542 300,240 9,983,801 13,649,219
Property and equipment, net 14,278,800 443,358 14,227,890 14,466,078
Investment property, net 865,039 26,860 868,057 671,195
Deferred tax assets 5,049,996 156,803 4,311,934 3,652,081
Other assets, net 1,614,016 50,115 1,435,091 1,551,070
Total assets $ 2,958,683,761 $ 91,867,471 $ 3,072,225,926 $ 2,957,995,767

Liabilities and equity

Liabilities
Due to the Central Bank and commercial banks $ 384,930,934 $ 11,952,150 $ 417,682,508 $ 459,095,355
Borrowed funds 39,974,427 1,241,211 44,733,966 53,434,282
Financial liabilities at fair value through profit or loss 11,393,071 353,756 21,936,493 27,344,357
Securities sold under repurchase agreements 444,678 13,807 547,798 50,189,662
Payables 32,010,867 993,941 35,683,942 35,856,882
Current tax liabilities 8,106,031 251,693 8,313,012 7,249,595
Deposits and remittances 2,159,117,253 67,040,839 2,222,021,878 2,024,967,933
Financial bonds payable 36,200,000 1,124,014 36,200,000 50,200,000
Other financial liabilities 8,583,989 266,534 8,673,223 9,021,046
Provisions 12,952,174 402,166 11,922,046 10,451,785
Deferred tax liabilities 2,161,652 67,120 2,153,957 2,143,376
Other liabilities 5,244,438 162,840 8,864,152 9,531,053
Total liabilities 2,701,119,514 83,870,071 2,818,732,975 2,739,485,326

Equity
Share capital
Common stock 85,362,336 2,650,510 85,362,336 77,000,000
Capital reserve 62,219,540 1,931,924 62,219,540 46,498,006
Retained earnings
Legal reserve 73,987,859 2,297,332 66,275,325 58,483,335
Special reserve 3,873,832 120,283 3,845,354 3,822,741
Undistributed earnings 33,582,479 1,042,740 35,561,380 29,916,495
Other equity ( 1,461,799 ) ( 45,389 ) 229,016 2,789,864
Total equity 257,564,247 7,997,400 253,492,951 218,510,441
Total liabilities and equity $ 2,958,683,761 $ 91,867,471 $ 3,072,225,926 $ 2,957,995,767

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Mega ICBC 116

 MEGA INTERNATIONAL COMMERCIAL BANK CO., LTD.
STATEMENTS OF COMPREHENSIVE INCOME
(EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT FOR EARNINGS PER SHARE AMOUNTS)

For the years ended December 31,

2016 2015
NT$ US$ NT$
(Unaudited)

Interest revenue $ 50,236,766 $ 1,559,857 $ 53,192,080

Less: interest expense ( 15,191,706 ) ( 471,704 ) ( 17,705,988 )
Net interest income 35,045,060 1,088,153 35,486,092
Non-interest income
Net service fee income 7,840,059 243,435 8,532,374
Gains (loss) on financial assets and liabilities at fair value through
profit or loss 3,009,229 93,437 ( 1,148,661 )
Realized gains on available-for-sale financial assets 1,596,716 49,578 1,190,984
Realized loss on held-to maturity financial assets ( 189 ) ( 6 ) -
Foreign exchange gain 2,046,115 63,532 2,837,759
Loss on asset impairment ( 334,397 ) ( 10,383 ) ( 487,652 )
Investment income recognized by the equity method 451,001 14,004 458,238
Net other non-interest income 227,825 7,074 324,511
Gain on financial assets carried at cost 803,272 24,942 764,288
Indemnity income - - 1,717,260
Net other miscellaneous loss(income) ( 5,504,048 ) ( 170,901 ) 140,298
Net operating income 45,180,643 1,402,865 49,815,491
(Provision) reversal for loan losses and guarantee reserve ( 3,593,348 ) ( 111,574 ) 544,711
Operating expenses
Employee benefits expenses ( 11,715,001 ) ( 363,752 ) ( 13,072,291 )
Depreciation and amortization ( 477,486 ) ( 14,826 ) ( 477,292 )
Other general and administrative expenses ( 6,336,881 ) ( 196,761 ) ( 6,560,315 )
Income from continuing operations before income tax 23,057,927 715,952 30,250,304
Income tax expense ( 4,047,966 ) ( 125,690 ) ( 4,541,859 )
Net income 19,009,961 590,262 25,708,445
Other comprehensive income
Non-reclassifiable to profit or loss subsequently
Remeasurement of defined benefit plan ( 534,337 ) ( 16,591 ) ( 1,398,743 )
Income tax relating to the components of other comprehensive
income 90,837 2,820 237,786
Potentially reclassifiable to profit or loss subsequently
Cumulative translation differences of foreign operations ( 1,190,886 ) ( 36,977 ) 198,203
Unrealized loss on valuation of available-for-sale financial assets ( 373,245 ) ( 11,589 ) ( 2,361,247 )
Share of other comprehensive loss of associates and joint ventures
accounted for under the equity method ( 126,684 ) ( 3,934 ) ( 397,804 )
Total other comprehensive loss (after income tax) ( 2,134,315 ) ( 66,271 ) ( 3,721,805 )
Total comprehensive income $ 16,875,646 $ 523,991 $ 21,986,640

Earnings per share

Basic and diluted earnings per share (in dollars) $ 2.23 $ 0.07 $ 3.27

117 Annual Report 2016

-117-
 MEGA INTERNATIONAL COMMERCIAL BANK CO., LTD.
STATEMENTS OF CHANGES IN EQUITY
(EXPRESSED IN THOUSANDS OF DOLLARS)

Retained earnings Other equity

Cumulative Unrealized Gain or
Translation Loss on Available-
Capital Capital Legal Special Unappropriated Differences of For-Sale Financial
Stock Reserve Reserve Reserve Earnings Foreign Operations Assets Total
For the year ended December 31, 2016 (NT Dollars)
Balance, January 1, 2016 $ 85,362,336 $ 62,219,540 $ 66,275,325 $ 3,845,354 $ 35,561,380 $ 331,363 ($ 102,347 ) $ 253,492,951
Earnings distribution for 2015
Cash dividends - - - - ( 12,804,350 ) - - ( 12,804,350 )
Legal reserve - - 7,712,534 - ( 7,712,534 ) - - -
Special reserve - - - 28,478 ( 28,478 ) - - -
Net income for the year of 2016 - - - - 19,009,961 - - 19,009,961
Other comprehensive loss for the year of 2016 - - - - ( 443,500 ) ( 1,257,596 ) ( 433,219 ) ( 2,134,315 )
Balance, December 31, 2016 $ 85,362,336 $ 62,219,540 $ 73,987,859 $ 3,873,832 33,582,479 ($ 926,233 ) ($ 535,566 ) $ 257,564,247

For the year ended December 31, 2016

(US Dollars - Unaudited)
Balance, January 1, 2016 $ 2,650,510 $ 1,931,924 $ 2,057,857 $ 119,399 $ 1,104,185 $ 10,289 ($ 3,178 ) $ 7,870,986
Earnings distribution for 2015
Cash dividends - - - - ( 397,577 ) - - ( 397,577 )
Legal reserve - - 239,475 - ( 239,475 ) - - -
Special reserve - - - 884 ( 884 ) - - -
Net income for the year of 2016 - - - - 590,262 - - 590,262
Other comprehensive loss for the year of 2016 - - - - ( 13,771 ) ( 39,049 ) ( 13,451 ) ( 66,271 )
Balance, December 31, 2016 $ 2,650,510 $ 1,931,924 $ 2,297,332 $ 120,283 $ 1,042,740 ($ 28,760 ) ($ 16,629 ) $ 7,997,400

(Continued)

Mega ICBC
118
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119
MEGA INTERNATIONAL COMMERCIAL BANK CO., LTD.
STATEMENTS OF CHANGES IN EQUITY
(EXPRESSED IN THOUSANDS OF DOLLARS)

Retained earnings Other equity

Cumulative Unrealized Gain or
Translation Loss on Available-
Capital Capital Legal Special Unappropriated

Annual Report 2016

Differences of For-Sale Financial
Stock Reserve Reserve Reserve Earnings Foreign Operations Assets Total
For the year ended December 31, 2015 (NT Dollars)
Balance, January 1, 2015 $ 77,000,000 $ 46,498,006 $ 58,483,335 $ 3,822,741 $ 29,916,495 $ 550,023 $ 2,239,841 $ 218,510,441
Earnings distribution for 2014
Cash dividends - - - - ( 11,088,000 ) - - ( 11,088,000 )
Legal reserve - - 7,791,990 - ( 7,791,990 ) - - -
Special reserve - - - 25,253 ( 25,253 ) - - -
Reversal of special reserve - - - ( 2,640 ) 2,640 - - -
Issuance of common stock 8,362,336 15,722,164 - - - - - 24,084,500
Changes in capital surplus of associates and joint
ventures accounted for under equity method - ( 630 ) - - - - - ( 630 )
Net income for the year of 2015 - - - - 25,708,445 - - 25,708,445
Other comprehensive loss for the year of 2015 - - - - ( 1,160,957 ) ( 218,660 ) ( 2,342,188 ) ( 3,721,805 )
$
Balance, December 31, 2015 $ 85,362,336 $ 62,219,540 $ 66,275,325 $ 3,845,354 $ 35,561,380 331,363 ($ 102,347 ) $ 253,492,951

（Blank below）

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 MEGA INTERNATIONAL COMMERCIAL BANK CO., LTD.
STATEMENTS OF CASH FLOWS
(EXPRESSED IN THOUSANDS OF DOLLARS)
For the years ended December 31,
2016 2015
NT$ US$ NT$
CASH FLOWS FROM OPERATING ACTIVITIES (Unaudited)
Consolidated income before income tax $ 23,057,927 $ 715,952 $ 30,250,304
Adjustments to reconcile income before tax to net cash provided by operating
activities
Income and expenses having no effect on cash flows
Provision for loan losses and guarantee reserve (reversal) 3,593,348 111,574 ( 544,711 )
Depreciation 471,791 14,649 473,370
Amortization 5,695 177 3,922
Interest income ( 50,236,766 ) ( 1,559,857 ) ( 53,192,080 )
Dividend income ( 1,102,239 ) ( 34,225 ) ( 1,133,014 )
Interest expense 15,191,706 471,704 17,705,988
Investment income recognized under the equity method ( 451,001 ) ( 14,004 ) ( 454,892 )
Proceeds from disposal of investments under the equity method - - ( 3,346 )
Gain on disposal of property and equipment ( 723 ) ( 23 ) ( 2,861 )
Loss on asset impairment 334,397 10,383 487,652
Loss on retirement of property and equipment 253 8 510
Changes in assets/liabilities relating to operating activities
Decrease in due from the Central Bank and call loans to banks 6,827,796 212,004 17,039,254
Decrease (increase) in financial assets at fair value through profit or loss 1,712,868 53,185 ( 3,353,466 )
Decrease in receivables 83,681,216 2,598,311 28,223,330
Decrease (increase) in bills discounted and loans 53,574,085 1,663,481 ( 42,522,615 )
Decrease (increase) in available-for-sale financial assets 25,309,572 785,865 ( 46,876,359 )
Increase in held-to-maturity financial assets ( 79,073,379 ) ( 2,455,238 ) ( 36,564,376 )
(Increase) decrease in other financial assets ( 125,896 ) ( 3,909 ) 3,653,948
(Increase) decrease in other assets ( 184,590 ) ( 5,732 ) 111,831
Decrease in due to the Central Bank and commercial banks ( 32,751,574 ) ( 1,016,940 ) ( 41,412,847 )
Decrease in financial liabilities at fair value through profit or loss ( 10,543,422 ) ( 327,374 ) ( 5,407,864 )
Decrease in securities sold under repurchase agreements ( 103,120 ) ( 3,202 ) ( 49,641,864 )
(Decrease) increase in payables ( 3,465,766 ) ( 107,612 ) 5,384
(Decrease) increase in deposits and remittances ( 62,904,625 ) ( 1,953,196 ) 197,053,945
Decrease in other financial liabilities ( 89,234 ) ( 2,771 ) ( 347,823 )
Increase in reserve for employee benefit liabilities 45,482 1,412 35,435
Decrease in other liabilities ( 3,085,411 ) ( 95,802 ) ( 186,734 )
Interest received 50,017,566 1,553,051 53,205,991
Dividend received 1,498,304 46,523 1,504,562
Interest paid ( 15,399,015 ) ( 478,141 ) ( 17,884,610 )
Income tax paid ( 4,426,774 ) ( 137,452 ) ( 3,956,862 )
Net cash provided by operating activities 1,378,471 42,801 46,269,102
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of investments under the equity method 2,747 85 21,924
Acquisition of investments accounted for under the equity method - - ( 150,000 )
Proceeds from capital reduction of investee accounted for under the equity method - - 97,877
Proceeds from capital reduction of financial assets carried at cost 193 6 -
Acquisitions of property and equipment ( 460,718 ) ( 14,305 ) ( 360,085 )
Proceeds from disposal of property and equipment 1,379 43 2,861
Net cash used in investing activities ( 456,399 ) ( 14,171 ) ( 387,423 )
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in borrowed funds ( 4,759,539 ) ( 147,784 ) ( 8,700,316 )
Decrease in financial bonds payable - - ( 14,000,000 )
Decrease in deposits received ( 534,303 ) ( 16,590 ) ( 480,167 )
Payments of cash dividends ( 12,804,350 ) ( 397,577 ) ( 11,088,000 )
Proceeds from issuance of common stock - - 24,084,500
Net cash (used in) provided by financing activities ( 18,098,192 ) ( 561,951 ) ( 10,183,983 )
EFFECT OF EXCHANGE RATE CHANGES ( 1,174,871 ) ( 36,480 ) 199,803
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 18,350,991 ) ( 569,801 ) 35,897,499
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 438,540,846 13,616,744 402,643,347
CASH AND CASH EQUIVALENTS, END OF YEAR $ 420,189,855 $ 13,046,943 $ 438,540,846
CASH AND CASH EQUIVALENTS COMPOSITION:
Cash and cash equivalents shown in balance sheet $ 86,952,288 $ 2,699,879 $ 141,794,023
Due from the Central Bank and call loans to bank meeting the definition of cash and
cash equivalents as stated in IAS No. 7 "Cash Flow Statements" 328,981,599 10,214,916 287,310,954
Securities purchased under resale agreements meeting the definition of cash and cash
equivalents as stated in IAS No. 7 "Cash Flow Statements" 4,255,968 132,148 9,435,869
CASH AND CASH EQUIVALENTS, END OF YEAR $ 420,189,855 $ 13,046,943 $ 438,540,846

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 Service Network

Head Office
No.100, Chi-lin Rd., Chung-shan Dist., Taipei 10424, Taiwan
Tel: +886-2-25633156
Fax: +886-2-23568936
Email: [email protected]
As of June 2, 2017
Management Team
Chao-Shun Chang, Chairman of the Board
Li-Yen Yang, President
Robert Yong-Yi Tsai, Senior Executive Vice President
Shiow Lin, Senior Executive Vice President & General Manager
Yuan-Hsi Lin, Senior Executive Vice President
Ming-Chuan Ko, Senior Executive Vice President
Ruey-Yuan Fu, Senior Executive Vice President
Chen-Shan Lee, Senior Executive Vice President
Yu-Mei Hsiao, Senior Executive Vice President
Hui-Lin Wu, Chief Compliance Officer
Fu-Yung Chen, Chief Auditor

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121 Annual Report 2016

 Office / Department Manager & Title Fax Number
Auditing Department Fu-Yung Chen +886-2-23569801
Chief Auditor
Planning Department Yu-Chuan Lu +886-2-25633122
Senior Vice President & General Manager
Anti-Money Laundering & Financial Crime Lih-Hwang Chiou +886-2-25230081
Compliance Department Vice President & General Manager
Legal Affairs and Compliance Department Ling-Chiun Lin +886-2-25632004
Vice President & General Manager
Overseas Branches Administration Department Cheng-Chian Tsao +886-2-23569169
Senior Vice President & General Manager
Business Administration Department Wen-Guan Chen +886-2-23935116
Senior Vice President & General Manager
General Affairs and Occupational Safety & Chia-Ying Chi +886-2-23568936
Health Department Senior Vice President & General Manager
Human Resources Department Chorng-Hwa Lan +886-2-23569531
Senior Vice President & General Manager
Data Processing & Information Department Kuo-Pao Chen +886-2-23416430
Senior Vice President & General Manager
Controller’s Department Ching-Yi Li +886-2-23568601
Senior Vice President & Controller
Credit Analysis Department Ven-Chien Chen +886-2-25711352
Senior Vice President & General Manager
Overdue Loan & Control Department Chi-Ho Chen +886-2-23560580
Vice President & General Manager
Credit Products & Marketing Department Jian-Pyng Lee +886-2-25625669
Vice President & General Manager
Credit Control Department Chun-Ko Su +886-2-25310691
Senior Vice President & General Manager
Risk Management Department Ta-Sheng Chen +886-2-23568506
Senior Vice President & General Manager
Digital Banking Department Hsiu-Ho Hsu +886-2-25633267
Senior Vice President & General Manager
Wealth Management Department Josephine Chao-Jung Chen +886-2-25631601
Vice President & General Manager
Direct Investment Department Tsung-Jen Cheng +886-2-25630950
Senior Vice President & General Manager
Trust Department Li-Chu You +886-2-25235002
Senior Vice President & General Manager
Treasury Department Yau-Fuh Chou +886-2-25613395
Vice President & General Manager
Foreign Department Yung-Chen Huang +886-2-25632614
Senior Vice President & General Manager
Offshore Banking Branch Chien-Chuang Chien +886-2-25637138
Vice President & General Manage

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Mega ICBC 122

 Domestic Branches

Branch Name Manager & Title Address Phone Number Fax Number
Heng Yang Wei-Shing Fan No.91, Heng-yang Rd., Chung- +886-2-23888668 +886-2-23885000
Branch Vice President & General Manager cheng Dist., Taipei 10009,
Taiwan
Cheng Chung Dah-Jyh Wang No.42, Hsu-chang St., Chung- +886-2-23122222 +886-2-23111645
Branch Senior Vice President & General cheng Dist., Taipei 10047,
Manager Taiwan
Ministry of Show-Mei Tang Room 129, No.2, Kaitakelan +886-2-23482065 +886-2-23811858
Foreign Affairs Vice President & General Manager Blvd., Chung-cheng Dist.,
Branch Taipei 10048, Taiwan
Central Branch Tung-Lung Wu No.123, Sec.2, Jhong-siao E. +886-2-25633156 +886-2-23569750
Vice President & General Manager Rd., Chung-cheng Dist., Taipei
10058, Taiwan
South Taipei Hseigh-Fang Chuang No.9-1, Sec.2, Roosevelt Rd., +886-2-23568700 +886-2-23922533
Branch Vice President & General Manager Chung-cheng Dist., Taipei
10093, Taiwan
Ta Tao Cheng Wen-Yann Wang No.62-5, Hsi-ning N. Rd., +886-2-25523216 +886-2-25525627
Branch Vice President & General Manager Dah-tong Dist., Taipei 10343,
Taiwan
Dah Tong Yuen-Chin Chiu No.113, Nan-king W. Rd., +886-2-25567515 +886-2-25580154
Branch Vice President & General Manager Dah-tong Dist., Taipei 10355,
Taiwan
Yuan Shan Ming-Kai Chao No.133, Sec.2, Zhong-shan N. +886-2-25671488 +886-2-25817690
Branch Vice President & General Manager Rd., Zhong-shan Dist., Taipei
10448, Taiwan
Chung Shan Lian-Yuh Tsai No.15, Sec.2, Chung-shan N. +886-2-25119231 +886-2-25635554
Branch Vice President & General Manager Rd., Chung-shan Dist., Taipei
10450, Taiwan
Nanking East Tsuey-Ping Chang No.53, Sec.2, Nan-king E. Rd., +886-2-25712568 +886-2-25427152
Road Branch Vice President & General Manager Chung-shan Dist., Taipei
10457, Taiwan
North Taipei Yu-Sheng Cheng No.156-1, Sung-chiang Rd., +886-2-25683658 +886-2-25682494
Branch Vice President & General Manager Chung-shan Dist., Taipei
10459, Taiwan
Taipei Fusing Shiou-Mei Lin No.198, Sec.3, Nan-king E. +886-2-27516041 +886-2-27511704
Branch Senior Vice President & General Rd., Chung-shan Dist., Taipei
Manager 10488, Taiwan
Taipei Airport Shu-Ching Tung Taipei Sungshan Airport +886-2-27152385 +886-2-27135420
Branch Vice President & General Manager Building, No.340-9, Tun-hua
N. Rd., Sung-shan Dist.,
Taipei 10548, Taiwan
Dun Hua Branch Shao-Ping Tang No.88-1, Dun-hua N. Rd., +886-2-87716355 +886-2-87738655
Vice President & General Manager Sung-shan Dist., Taipei 10551,
Taiwan
Sung Nan Chin-Kun Kuo No.234, Sec.5, Nan-king E. +886-2-27535856 +886-2-27467271
Branch Vice President & General Manager Rd., Sung-shan Dist., Taipei
10570, Taiwan
East Taipei An-Chang Chen No.52, Sec.4, Min-sheng E. +886-2-27196128 +886-2-27196261
Branch Vice President & General Manager Rd., Sung-shan Dist., Taipei
10574, Taiwan
Ming Sheng Shoei-Bin Lin No.128, Sec.3, Ming-sheng E. +886-2-27190690 +886-2-27190688
Branch Vice President & General Manager Rd., Sung-shan Dist., Taipei
10596, Taiwan

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123 Annual Report 2016

Branch Name Manager & Title Address Phone Number Fax Number
Ta An Branch Tzu-Yuan Yang No.182, Sec.3, Hsin-yi Rd., +886-2-27037576 +886-2-27006352
Vice President & General Manager Ta-an Dist., Taipei 10658,
Taiwan
An Ho Branch Jen-Jhi Chen No.62, Sec.2, An-ho Rd., Ta-an +886-2-27042141 +886-2-27042075
Vice President & General Manager Dist., Taipei 10680, Taiwan
Tun Nan Branch Sui-Huang Lee No.62, Sec.2, Tun-hua S. Rd., +886-2-27050136 +886-2-27050682
Vice President & General Manager Ta-an Dist., Taipei 10683,
Taiwan
Chung Hsiao Ming-Huei Lee No.233, Sec.4, Chung-hsiao E. +886-2-27711877 +886-2-27711486
Branch Vice President & General Manager Rd., Ta-an Dist., Taipei 10692,
Taiwan
World Trade Yu-Mei Chiu 1F, No.333, Sec.1, Keelung +886-2-27203566 +886-2-27576144
Center Branch Vice President & General Manager Rd., Hsin-yi Dist., Taipei
11012, Taiwan
Hsin Yi Branch Shih-Tsung Hsu No.65, Sec.2, Keelung Rd., +886-2-23788188 +886-2-23772515
Vice President & General Manager Hsin-yi Dist., Taipei 11052,
Taiwan
Taipei Branch Ray-Lin Liao No.550, Sec.4, Chung-hsiao E. +886-2-27587590 +886-2-27581265
Senior Vice President & General Rd., Hsin-yi Dist., Taipei
Manager 11071, Taiwan
Lan Ya Branch Teh-Ming Wang No.126, Sec.6, Chung-shan N. +886-2-28385225 +886-2-28341483
Senior Vice President & General Rd., Shih-lin Dist., Taipei
Manager 11155, Taiwan
Tien Mou Kuo-Liang Sun No.193, Sec.7, Chung-shan N. +886-2-28714125 +886-2-28714374
Branch Vice President & General Manager Rd., Shih-lin Dist., Taipei
11156, Taiwan
Nei Hu Branch Hong-Yeh Lee No.68, Sec.4, Cheng-kung Rd., +886-2-27932050 +886-2-27932048
Vice President & General Manager Nei-hu Dist., Taipei 11489,
Taiwan
Nei Hu Science Meng-Hsia Tsai No.472, Jui-kuang Rd., Nei-hu +886-2-87983588 +886-2-87983536
Park Branch Vice President & General Manager Dist., Taipei 11492, Taiwan
East Nei Hu Tsuyung Ni No.202, Kang-chien Rd., Nei- +886-2-26275699 +886-2-26272988
Branch Vice President & General Manager hu Dist., Taipei 11494, Taiwan
Nan Gang Ruer-Jan Chang No.21-1, Sec.6, Jhong-siao E. +886-2-27827588 +886-2-27826685
Branch Vice President & General Manager Rd., Nan-gang Dist., Taipei
11575, Taiwan
Keelung Branch Fu-San Lin No.24, Nan-jung Rd., Ren-ai +886-2-24228558 +886-2-24294089
Vice President & General Manager Dist., Keelung 20045, Taiwan
Ban Qiao Ming-Feng Lee No.51, Sec.1, Wen-hua Rd., +886-2-29608989 +886-2-29608687
Branch Vice President & General Manager Banqiao Dist., New Taipei City
22050, Taiwan
South Banqiao Hsiu-Chin Hsin No.148, Sec.2, Nan-ya S. Rd., +886-2-89663303 +886-2-89661421
Branch Vice President & General Manager Banqiao Dist., New Taipei City
22060, Taiwan
Xin Dian Ying-Chiou Liaw No.173, Sec.2, Bei-xin Rd., +886-2-29182988 +886-2-29126480
Branch Senior Vice President & General Xindian Dist., New Taipei City
Manager 23143, Taiwan
Shuang He Chi-Huang Wu No.67, Sec.1, Yong-he Rd., +886-2-22314567 +886-2-22315288
Branch Vice President & General Manager Yonghe Dist., New Taipei City
23445, Taiwan

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Mega ICBC 124

 Branch Name Manager & Title Address Phone Number Fax Number
Yong He Branch Pei-Hong Wu No.201, Fuhe Rd., Yong-he +886-2-29240086 +886-2-29240074
Vice President & General Manager Dist., New Taipei City 23450,
Taiwan
Zhong He Heh-Yeau Wu No.124, Sec.2, Zhong-shan +886-2-22433567 +886-2-22433568
Branch Vice President & General Manager Rd., Zhonghe Dist., New
Taipei City 23555, Taiwan
Tu Cheng Sue-Chu Wu No.276, Sec.2, Zhong-yang +886-2-22666866 +886-2-22668368
Branch Vice President & General Manager Rd., Tucheng Dist., New
Taipei City 23669, Taiwan
South San Wei-Chen Lee No.12, Sec.4, Chong-xin Rd., +886-2-29748811 +886-2-29724901
Chong Branch Vice President & General Manager Sanchong Dist., New Taipei
City 24144, Taiwan
San Chong Tsung-Che Liang No.99, Sec.3, Chong-yang Rd., +886-2-29884455 +886-2-29837225
Branch Vice President & General Manager Sanchong Dist., New Taipei
City 24145, Taiwan
Xin Zhuang Hwa-San Lo No.421, Si-yuan Rd., +886-2-22772888 +886-2-22772881
Branch Vice President & General Manager Xinzhuang Dist., New Taipei
City 24250, Taiwan
Si Yuan Branch Shu-Hua Chung No.169, Si-yuan Rd., +886-2-29986661 +886-2-29985973
Vice President & General Manager Xinzhuang Dist., New Taipei
City 24250, Taiwan
Yi Lan Branch Yu-Lien Chiang No.338, Min-zu Rd., Yilan +886-3-9310666 +886-3-9311167
Vice President & General Manager City, Yilan County 26048,
Taiwan
Lo Tung Branch Chyi-Yee Chen No.195, Sec.2, Chun-ching +886-3-9611262 +886-3-9611260
Vice President & General Manager Rd., Lo-tung Town, Ilan
County 26549, Taiwan
Chung Li Shu-Te Hsu No.46, Fu-hsing Rd., +886-3-4228469 +886-3-4228455
Branch Vice President & General Manager Chung-li Dist.,, Tao-yuan City
32041, Taiwan
North Chung Li Lien-Kuei Kuo No.406, Huan-bei Rd., +886-3-4262366 +886-3-4262135
Branch Vice President & General Manager Chung-li Dist., Tao-yuan City
32070, Taiwan
Tao Yuan Yuang-Nan Wu No.2, Sec.2, Cheng-kung Rd., +886-3-3376611 +886-3-3351257
Branch Vice President & General Manager Tao-yuan Dist., Tao-yuan City
33047, Taiwan
Tao Hsin Ching-N Pong No.180, Fu-hsin Rd., Tao-yuan +886-3-3327126 +886-3-3339434
Branch Vice President & General Manager Dist., Tao-yuan City 33066,
Taiwan
Pa Teh Branch Ling-Hua Lin No.19, Da-jhih Rd., Pa-teh +886-3-3665211 +886-3-3764012
Vice President & General Manager Dist., Tao-yuan City 33450,
Taiwan
Tao Yuan Alice Yia-Shu Lin No.15, Hang-jan S. Rd., Da- +886-3-3982200 +886-3-3834315
International Senior Vice President & General yuan Dist., Tao-yuan City
Airport Branch Manager 33758, Taiwan
Nan Kan Su-Min Liu No.33, Zhong-zheng Rd., +886-3-3525288 +886-3-3525290
Branch Vice President & General Manager Luzhu Dist., Tao-yuan City
33861, Taiwan
Hsinchu Branch Chu-Po Chou No.417-419, Sec.2, Gongdao +886-3-5733399 +886-3-5733311
Vice President & General Manager 5th Rd., Hsinchu City 30069,
Taiwan

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125 Annual Report 2016

Branch Name Manager & Title Address Phone Number Fax Number
North Hsinchu Tzu-Chen Kung No.129, Chung-cheng Rd., +886-3-5217171 +886-3-5262642
Branch Senior Vice President & General Hsinchu City 30051, Taiwan
Manager
Hsinchu Science Yeou-An Lu No.21, Chu-tsuen 7th Rd., +886-3-5773155 +886-3-5778794
Park Chu-tsuen Senior Vice President & General Hsinchu Science Park,
Branch Manager Hsinchu City 30075, Taiwan
Hsinchu Science Yung-Cheng Yeh No.1, Hsin-an Rd., Hsinchu +886-3-5775151 +886-3-5774044
Park Hsin-an Vice President & General Manager Science Park, Hsinchu City
Branch 30076, Taiwan
Jhu Bei Branch Yu-Ling Lee No.155, Guang-ming 1st Rd., +886-3-5589968 +886-3-5589998
Vice President & General Manager Jhu-bei City, Hsinchu County
30259, Taiwan
Zhunan Science Deng-Quey Liu Rm.105, 1F No.36, Ke-yan +886-37-682288 +886-37-682416
Park Branch Vice President & General Manager Rd., Zhunan Township, Miaoli
County 35053, Taiwan
Tou Fen Branch Chien-Chih Kuo No.916, Chung-hwa Rd., Tou- +886-37-688168 +886-37-688118
Vice President & General Manager fen City, Miao-li County
35159, Taiwan
Taichung Rei-Chan Tsai No.216, Ming-chuan Rd., +886-4-22281171 +886-4-22241855
Branch Senior Vice President & General Central Dist., Taichung 40041,
Manager Taiwan
Central Chung-Yang Liao No.194, Sec.1, San-min Rd., +886-4-22234021 +886-4-22246812
Taichung Vice President & General Manager West Dist., Taichung 40343,
Branch Taiwan
South Taichung Ming-Kuang Lee No.257, Sec.1, Wu-chuan W. +886-4-23752529 +886-4-23761670
Branch Vice President & General Manager Rd., West Dist., Taichung
40347, Taiwan
East Taichung Yow-Der Wang No.330, Chin-hwa N. Rd., +886-4-22321111 +886-4-22368621
Branch Vice President & General Manager North Dist., Taichung 40457,
Taiwan
North Taichung Shu-Er Huang No.96, Sec.3, Taiwan Blvd., +886-4-23115119 +886-4-23118743
Branch Vice President & General Manager Xitun Dist., Taichung 40756,
Taiwan
Pouchen Branch De-Chung Liao No.600, Sec.4, Taiwan Blvd., +886-4-24619000 +886-4-24613300
Vice President & General Manager Xitun Dist., Taichung 40764,
Taiwan
Rung Tzung Ching-Shien Li No.1650, Sec.4, Taiwan Blvd., +886-4-23500190 +886-4-23591281
Branch Vice President & General Manager Xitun Dist., Taichung 40705,
Taiwan
Tai Ping Branch Jiunn-Horgn Shyu No.152, Zhong-xing E. Rd., +886-4-22789111 +886-4-22777546
Vice President & General Manager Taiping Dist., Taichung
41167, Taiwan
Da Li Branch Ya-Ling Chen No.600, Shuang-wen Rd., +886-4-24180929 +886-4-24180629
Vice President & General Manager Dali Dist., Taichung 41283,
Taiwan
Feng Yuan Hsueh-Chu Hsieh No.519, Zhong-zheng Rd., +886-4-25285566 +886-4-25274580
Branch Vice President & General Manager Fengyuan Dist., Taichung
42056, Taiwan
Hou Li Branch Su-Li Lai No.666, Sec.1, Jia-hou Rd., +886-4-25588855 +886-4-25580166
Vice President & General Manager Houli Dist., Taichung 42144,
Taiwan
Tan Zi Branch Chien-Ping Wu No.3, Nan 2nd Rd., T.E.P.Z., +886-4-25335111 +886-4-25335110
Vice President & General Manager Tanzi Dist., Taichung 42760,
Taiwan

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Mega ICBC 126

 Branch Name Manager & Title Address Phone Number Fax Number
Central Taiwan Ching-Ho Tu 2F., No.28, Ke-ya Rd., Daya +886-4-25658108 +886-4-25609230
Science Park Vice President & General Manager Dist., Taichung 42881, Taiwan
Branch
Sha Lu Branch Kaung-Shu Shu No.533, Zhong-shan Rd., Shalu +886-4-26656778 +886-4-26656399
Vice President & General Manager Dist., Taichung 43344, Taiwan
Da Jia Branch Teih-Tsang Liang No.1033, Sec.1, Zhong-shan +886-4-26867777 +886-4-26868333
Vice President & General Manager Rd., Dajia Dist., Taichung
43744, Taiwan
North Changhua Wen-Yeong Hsieh No.39, Kuang-fuh Rd., +886-4-7232111 +886-4-7243958
Branch Vice President & General Manager Changhua City, Changhua
County 50045, Taiwan
South Kuo-Chih Hsu No.401, Sec.1, Chung-shan Rd., +886-4-7613111 +886-4-7622656
Changhwa Vice President & General Manager Changhwa City, Changhwa
Branch County 50058, Taiwan
Lu Gang Branch Kuan-Yu Wu No.254, Zhong-shan Rd., Lu- +886-4-7788111 +886-4-7788600
Vice President & General Manager gang Town, Changhua County
50564, Taiwan
Yuan Lin Fu-Kuei Wu No.338, Sec.1, Da-tong Rd., +886-4-8332561 +886-4-8359359
Branch Vice President & General Manager Yuan-lin City, Changhua County
51056, Taiwan
Nan Tou Branch Hung-Fuh Wu No.45, Wen-chang St., Nan-tou +886-49-2232223 +886-49-2232758
Vice President & General Manager City, Nan-tou County 54048,
Taiwan
Dou Liu Branch Chui-Ping Chiang No.1, Shang-hai Rd., Dou-liu +886-5-5361779 +886-5-5337830
Vice President & General Manager City, Yun-lin County 64048,
Taiwan
Chia Yi Branch Shu-Kwei Chang No.259, Wen-hua Rd., Chia-yi +886-5-2241166 +886-5-2255025
Vice President & General Manager City 60044, Taiwan
Chia Hsin Shoh-Chi Doong No.379, Wu-fong N. Rd., Chia- +886-5-2780148 +886-5-2769252
Branch Vice President & General Manager yi City 60045, Taiwan
Tainan Branch Hsuan-Shu Chen No.14, Sec.2, Chung-yi Rd., +886-6-2292131 +886-6-2224826
Senior Vice President & General Tainan 70041, Taiwan
Manager
Tainan Fucheng Chun-Fu Chen No.90, Chung-shan Rd., Tainan +886-6-2231231 +886-6-2203771
Branch Senior Vice President & General 70043, Taiwan
Manager
East Tainan Yi-Ren Hwang No.225, Sec.1, Chang-jung Rd., +886-6-2381611 +886-6-2378008
Branch Vice President & General Manager Tainan 70143, Taiwan
Yong Kang Suen-Pann Chen No.180, Zhong-shan Rd., +886-6-2019389 +886-6-2016251
Branch Vice President & General Manager Yongkang Dist., Tainan 71090,
Taiwan
Tainan Science Ya-Li Tseng No.13, Nan-ke 3rd Rd., Xinshi +886-6-5052828 +886-6-5051791
Park Branch Vice President & General Manager Dist., Tainan 74147, Taiwan
Cheng Gong Charng-Er Kuo No.88, Chenggong 2nd Rd., +886-7-5352000 +886-7-3312866
Branch Vice President & General Manager Qianzhen Dist., Kaohsiung
80661, Taiwan.
Wu Fu Branch Guang-Huei Lu No.82, Wu-fu 2nd Rd., Hsin- +886-7-2265181 +886-7-2260919
Vice President & General Manager hsing Dist., Kaohsiung 80043,
Taiwan
Hsin Hsing Kung-Yeong Wang No.308, Chung-shan 1st Rd., +886-7-2353001 +886-7-2350962
Branch Vice President & General Manager Hsin-hsing Dist., Kaohsiung
80049, Taiwan

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 Branch Name Manager & Title Address Phone Number Fax Number
Kaohsiung Tsair-Quey Chang No.235, Chung-cheng 4th Rd., +886-7-2515111 +886-7-2212554
Branch Vice President & General Manager Qian-jin Dist., Kaohsiung 80147,
Taiwan
Kaohsiung Chien-Chung Chen No.253, Chung-cheng 4th Rd., +886-7-2510141 +886-7-2811426
Metropolitan Vice President & General Manager Qian-jin Dist., Kaohsiung 80147,
Branch Taiwan
Ling Ya Branch Her-Song Pan No.8, Sze-wei 4th Rd., Ling-ya +886-7-3355595 +886-7-3355695
Vice President & General Manager Dist., Kaohsiung 80247, Taiwan
San Tuo Branch Chong-Yin Lee No.93, San-tuo 2nd Rd., Ling-ya +886-7-7250688 +886-7-7211012
Vice President & General Manager Dist., Kaohsiung 80266, Taiwan
San Min Branch Ching-Feng Chung No.225, Chung-hua 1st Rd., Gu- +886-7-5536511 +886-7-5224202
Vice President & General Manager shan Dist., Kaohsiung 80455,
Taiwan
Kaohsiung Huey-Ru Chao Room 107, No.3, Yu-kang E. 2nd +886-7-8219630 +886-7-8117912
Fishing Port Vice President & General Manager Rd., Kaohsiung 80672, Taiwan
Branch
Kaohsiung Jia-Feng Liu No.2, Chung 4th Rd., Kaohsiung +886-7-8316131 +886-7-8314393
Export Vice President & General Manager Export Processing Zone,
Processing Zone Kaohsiung 80681, Taiwan
Branch
North Kaohsiung Kuo-Hua Yeh No.532, Chiu-ju 2nd Rd., +886-7-3157777 +886-7-3155506
Branch Vice President & General Manager Kaohsiung 80745, Taiwan
East Kaohsiung Yaw-Ching Tseng No.419, Ta-shun 2nd Rd., +886-7-3806456 +886-7-3806608
Branch Vice President & General Manager Kaohsiung 80787, Taiwan
Nan Tze Branch Chen-Hui Chen No.600-1, Chia-chang Rd., +886-7-3615131 +886-7-3633043
Vice President & General Manager Nantze Export Processing Zone,
Kaohsiung 81170, Taiwan
Chung Kang Ying-Liang Jhu No.1, Chung-kang Rd., +886-7-8021111 +886-7-8034911
Branch Vice President & General Manager Kaohsiung 81233, Taiwan
Kaohsiung Chun-Hsia Chien Kaohsiung International Airport, +886-7-8067866 +886-7-8068841
International Vice President & General Manager No.2, Chung-shan 4th Rd.,
Airport Branch Kaohsiung 81252, Taiwan
Ren Wu Branch Ching-Shiang Tsai No.2, Zhong-zheng Rd., Renwu +886-7-3711144 +886-7-3740764
Vice President & General Manager Dist., Kaohsiung 81451, Taiwan
Gang Shan Chyi-Fure Jiang No.138, Zhong-shan N. Rd., +886-7-6230300 +886-7-6230608
Branch Vice President & General Manager Gangshan Dist., Kaohsiung
82065, Taiwan
Feng Shan Shu-Kun Chang No.248, Zhong-shan W. Rd., +886-7-7473566 +886-7-7477566
Branch Vice President & General Manager Fengshan Dist., Kaohsiung
83068, Taiwan
Ping Tung Hsiao-Chin Ma No.213, Ming-tsu Rd., Ping-tung +886-8-7323586 +886-8-7321651
Branch Vice President & General Manager City, Ping-tung County 90078,
Taiwan
Hua Lien Branch Chih-Haw Liu No.26, Kung-yuan Rd., Hua-lien +886-3-8350191 +886-3-8360443
Vice President & General Manager City, Hua-lien County 97048,
Taiwan
Kin Men Branch Ping-Sen Liang No.37-5, Min-sheng Rd., Jin- +886-82-375800 +886-82-375900
Vice President & General Manager cheng Town, Kin-men County
89345, Taiwan

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 Overseas Branches & Representative Offices

Branch Name Manager & Title Address Phone Number Fax Number
New York Shiow Lin 65 Liberty Street, New York, NY +1-212-6084222 +1-212-6084943
Branch Senior Executive Vice President & 10005, U.S.A.
General Manager
Los Angeles Yi-Ming Ko 445 South Figueroa Street, Suite +1-213-4893000 +1-213-4891183
Branch Senior Vice President & General 1900, Los Angeles, CA 90071,
Manager U.S.A.
Chicago Wan-Ling Jwang 2 North La Salle Street, Suite 1803, +1-312-7829900 +1-312-7822402
Branch Vice President & General Manager Chicago, IL 60602, U.S.A.
Silicon Valley Nian-Tzy Yeh 333 West San Carlos Street, Suite +1-408-2831888 +1-408-2831678
Branch Vice President & General Manager 100, Box 8, San Jose, CA 95110,
U.S.A.
Panama Branch Fan-Tsan Kon Calle 50 Y Esquina Margarita A, de +507-2638108 +507-2638392
Vice President & General Manager Vallarino, Entrada Nuevo Campo
Alegre, Edificio MEGAICBC
No.74, P.O. Box 0832-01598,
Panama City, Republic of Panama
Colon Free Tsung-Hsien Chiu Dominador Bazan y Calle 20, +507-4471888 +507-4414889
Zone Branch Vice President & General Manager Manzana 31, P.O. Box 0302-00445,
Colon Free Zone, Republic of
Panama
Paris Branch Jing-Fong Chiou 131-133 Rue de Tolbiac, 75013 +33-1-44230868 +33-1-45821844
Vice President & General Manager Paris, France
Amsterdam Shiow-Ling Wu World Trade Center, +31-20-6621566 +31-20-6649599
Branch Vice President & General Manager Strawinskylaan 1203, 1077XX,
Amsterdam, The Netherlands
London Branch Li-Wen Kao 4th Floor, Michael House, 35 +44-20-75627350 +44-20-75627369
Vice President & General Manager Chiswell Street, London, EC1Y
4SE, United Kingdom
Sydney Branch Bi-Huei Jin Level 8, 10 Spring Street, Sydney +61-2-92301300 +61-2-92335859
Vice President & General Manager NSW 2000, Australia
Brisbane Chun-Yu Kuo Suite 1-3, 3 Zamia Street, +61-7-32195300 +61-7-32195200
Branch Vice President & General Manager Sunnybank, QLD 4109, Australia
Melbourne Yu-Song Chen Level 20, 459 Collins Street, +61-3-86108500 +61-3-96200600
Branch Vice President & General Manager Melbourne VIC 3000, Australia
Tokyo Branch Chih-Liang Chen 7F, Kishimoto Bldg. No.2-1, +81-3-32116688 +81-3-32165686
Vice President & General Manager Marunouchi 2-Chome, Chiyoda-Ku,
Tokyo 100-0005, Japan
Osaka Branch Hwa-Yueh Lin 4-11, 3-chome, Doshomachi, Chuo- +81-6-62028575 +81-6-62023127
Vice President & General Manager ku, Osaka 541-0045, Japan
Manila Branch Rong-Hwa Lin 3rd Floor, Pacific Star Bldg., +63-2-8115807 +63-2-8115774
Senior Vice President & General Makati Avenue, Makati City,
Manager Philippines
Ho Chi Minh Chien-Hung Chen Ground Floor, Landmark Building, +84-8-38225697 +84-8-38229191
City Branch Vice President & General Manager 5B Ton Duc Thang, Dist 1, Ho Chi
Minh City, Vietnam
Singapore Wen-Sheng Chiang 80 Raffles Place#23-20 UOB Plaza +65-62277667 +65-62271858
Branch Vice President & General Manager 2 Singapore 048624
Labuan Branch Ching-Tsung Wang Level 7 (E2), Main Office Tower, +60-87-581688 +60-87-581668
Vice President & General Manager Financial Park Labuan Complex,
Jalan Merdeka, 87000 F. T. Labuan,
Malaysia

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Branch Name Manager & Title Address Phone Number Fax Number
Kuala Lumpur Ching-Tsung Wang Suite 12-04, Level 12, Wisma +60-3-20266966 +60-3-20266799
Marketing Vice President & General Manager Goldhill 67, Jalan Raja Chulan,
Office 50200 Kuala Lumpur, Malaysia
Hong Kong Chao-Ho Lee Suite 2201, 22/F, Prudential Tower, +852-25259687 +852-25259014
Branch Senior Vice President & General The Gateway, Harbour City, 21
Manager Canton Road, Tsimshatsui,
Kowloon, Hong Kong
Phnom Penh Mao-Jung Chu No.139, St.274 Independent +855-23-988101 +855-23-217982
Branch Vice President & General Manager Monument, BKK I, Chamkarmorn,
Phnom Penh, Cambodia
Phnom Penh Yao-Tsung Huang No.601, Confederation De La +855-23-969656 +855-23-969661
Airport Sub- Vice President & General Manager Russie Blvd., Phum Porbrork
Branch Khangchoeung, Sangkat Karkab,
Khan Porsenchey, Phnom Penh,
Cambodia
Olympic Sub- Pei-Wuu Hsieh No.38B, Preah Monireth Blvd. +855-23-988130 +855-23-988134
Branch Vice President & General Manager (Street 217), Phum 10, Sangkat
Toul Svay Prey 2, Khan
Chamkarmorn, Phnom Penh,
Cambodia
Tuol Kouk Chin-Lung Chou No.2A-2B, Street 315, Phum 8, +855-23-988156 +855-23-988155
Sub-Branch Vice President & General Manager Sangkat Boeng Kak 1, Khan Tuol
Kouk, Phnom Penh, Cambodia
Suzhou Jing-Fu Yang RM 104,1F, Jianwu Building, +86-512-62966568 +86-512-62966698
Branch Senior Vice President & General No.188, Wangdun Rd., Suzhou
Manager Industrial Park, Jiangsu, China
Wujiang Sub- Ting-Hau Chang NO.768, Yundong Road, Wujiang +86-512-66086088 +86-512-66086006
Branch Vice President & General Manager Economic and Technological
Development Zone, Suzhou,
Jiangsu, China
Kunshan Chien-Ting Liu 1F, No.180, Qianjin Middle Road, +86-512-50376166 +86-512-50376169
Sub-Branch Vice President & General Manager Kunshan, Suzhou, Jiangsu, China
Ningbo Ying-Chin Hsu No.1880 Zhongshan East Road, +86-574-87283939 +86-574-87283737
Branch Vice President & General Manager Jiangdong District, Ningbo,
Zhejiang Province, China
Representative Chou-Wen Pan Flat 1, Abulfatih Building, Block +971-2-6815555 +971-2-6817744
Office in Vice President & Representative 319, Rd 1906 Al Hoora Area, P.O. Ext. 248
Bahrain Box 5806, Manama, State of
Bahrain
Representative Hung-Hui Chen Trade Centre, Level Ground & 1, +91-22- 61623297 +91- 22-61623800
Office in Vice President & Representative Bandra-Kurla Complex, Bandra
Mumbai East, Mumbai, 400051, India
Representative Chou-Wen Pan 3002, 30th FL, Shining Towers, +971-2-6671846 +971-2-4488263
Office in Abu Vice President & Representative Khalidiya, P.O.Box 42782,
Dhabi Abu Dhabi, U.A.E.
Representative Juei-Heng Chia Room 110, Prime Hill Business +95-1-382-710
Office in Vice President & Representative Square, No.60, Shwe Dagon Pagoda Ext. 11010
Yangon Road, Dagon Township, Yangon,
Myanmar

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Mega ICBC 130

 Subsidiaries

Mega International Commercial Bank (Canada)

Branch Name Manager & Title Address Phone Number Fax Number
Head Office Chung-Shin Loo North York Madison Centre, +1-416-9472800 +1-416-9479964
President & Chief Executive Officer 4950 Yonge Street, Suite
1002, Toronto, Ontario, M2N
6K1, Canada
Vancouver Ming-Shan Wu 1095 West Pender Street, +1-604-6895650 +1-604-6895625
Branch Vice President & General Manager Suite 1250, Vancouver,
British Columbia, V6E 2M6,
Canada

Mega International Commercial Bank Public Co., Ltd.

Branch Name Manager & Title Address Phone Number Fax Number
Head Office Jia-Hong Wu 36/12 P.S. Tower, Asoke, +66-2-2592000 +66-2-2591330
President & Chief Executive Officer Sukhumvit 21 Road,
Klongtoey-nua, Wattana,
Bangkok 10110, Thailand
Chonburi Tong-Hai Her 88/89 Moo 1, Sukhumvit +66-38-192158 +66-38-192117
Branch Vice President & General Manager Road, Huaykapi Sub-District,
Muang District, Chonburi
Province 20000, Thailand
Bangna Branch Shih-Yung Wu MD Tower, 2nd Floor, Unit +66-2-3986161 +66-2-3986157
Vice President & General Manager B, No.1, Soi Bangna-Trad 25,
Bangna Sub-District, Bangna
District Bangkok Province
10260, Thailand
Ban Pong Shain-Ren Chen 99/47-48 Sonpong Road, Ban +66-32-222882 +66-32-221666
Branch Vice President & General Manager Pong, Ratchaburi 70110,
Thailand
Rayong Branch Yang-Der Fu 500/125 Moo 3 Tambol +66-38-950276 +66-38-950284
Vice President & General Manage Tasith, Amphur Pluak Daeng,
Rayong Province 21140,
Thailand

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131 Annual Report 2016

Annual
Report
2016
, R.O.C