Ctbc Financial Holding Co., Ltd. Consolidated

1 Stock Code:2891

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

CTBC FINANCIAL HOLDING CO., LTD.

CONSOLIDATED INTERIM FINANCIAL STATEMENTS

June 30, 2017 and 2016 (With Independent Auditors’ Report Thereon)

Address：27F and 29F, No.168, Jingmao 2nd Rd., Nangang Dist., Taipei City 115, Taiwan, R.O.C. Telephone：886-2-3327-7777

The auditors’ report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language auditors’ report and consolidated financial statements, the Chinese version shall prevail. 2 Table of contents

Contents Page 1. Cover Page 1 2. Table of Contents 2 3. Independent Auditors’ Report 3 4. Consolidated Balance Sheets 4 5. Consolidated Statements of Comprehensive Income 5 6. Consolidated Statements of Changes in Stockholders’ Equity 6 7. Consolidated Statements of Cash Flows 7 8. Notes to the Consolidated Financial Statements (1) History and organization 8 (2) Approval date and procedures of the consolidated financial statements 8 (3) New standards, amendments and interpretations adopted 9～14 (4) Summary of significant accounting policies 15～39 (5) Primary Sources of Significant Accounting Judgments, Estimates and 40 Assumptions Uncertainty (6) Summary of major accounts 40～186 (7) Related-party transactions 187～198 (8) Pledged assets 199 (9) Significant contingent liabilities and unrecognized contract commitments 200～209 (10) Significant catastrophic losses 209 (11) Significant subsequent events 209 (12) Others 210～259 (13) Disclosures required (a) Related information on significant transactions 260～264 (b) Related information on reinvestment 264～266 (c) Information on investment in mainland China 266～267 (14) Segment information 268～269 KPMG 11049 5 7 68 ( 101 ) Telephone + 886 (2) 8101 6666 台北市信義路段號樓台北大樓 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, Fax 電話 + 886 (2) 8101 6667 Xinyi Road, Taipei City 11049, Taiwan (R.O.C.) Internet 傳真 kpmg.com/tw 網址

KPMG, a Taiwan partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.

4 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Consolidated Balance Sheets June 30, 2017, December 31, 2016, and June 30, 2016 (Expressed in Thousands of New Taiwan Dollars)

June 30, 2017 December 31, 2016 June 30, 2016 June 30, 2017 December 31, 2016 June 30, 2016 ASSETS Amount % Amount % Amount % LIABILITIES AND EQUITY Amount % Amount % Amount % 11000 Cash and cash equivalents(Note 4 and 6(a)) $ 132,492,566 3 128,881,516 3 102,648,061 2 Liabilities: 11500 Due from the central bank and call loans to 298,354,150 6 265,151,265 5 321,100,659 7 21000 Deposits from Central Bank and banks(Note 6(r)) $ 77,868,345 2 63,498,683 1 63,539,594 2 banks(Note 6(b) and 8) 21500 Due to Central Bank and banks(Note 6(s)) 15,051,345 - 15,752,488 - 25,889,481 1 12000 Financial assets measured at fair value through profit 174,503,886 4 195,315,251 4 189,074,856 4 22000 Financial liabilities measured at fair value through 74,531,268 1 97,582,396 2 108,284,759 2 or loss(Note 4, 6(c) and (t)) profit or loss(Note 4 and 6(c)) 12100 Available-for-sale financial assets-net(Note 4, 6(d) 748,691,754 15 808,810,459 17 716,841,390 15 22300 Derivative financial liabilities-hedging-net(Note 4 281,876 - 303,599 - 623,276 - and (t), 8 and 9(a)) and 6(e)) 12300 Derivative financial assets-hedging-net (Note 4 and 223,611 - 416,342 - 264,130 - 22500 Securities sold under repurchase agreements(Note 68,581,731 1 49,491,084 1 57,351,552 1 6(e)) 4,6(t) and7) 12500 Securities purchased under resell agreements(Note 4 25,576,088 1 25,510,984 1 6,478,585 - 22600 Commercial papers payable-net(Note 6(u) and 7) 31,600,931 1 28,248,099 1 12,947,509 - and 6(f)) 23000 Payables(Note 6(v) and 7) 105,136,110 2 78,876,776 2 107,741,398 2 13000 Receivables-net(Note 4, 6(g) and (i), 7 and 8) 154,853,490 3 130,315,259 3 173,865,721 4 23200 Current income tax liabilities(Note 4) 5,261,994 - 2,435,981 - 4,445,283 - 13200 Current income tax assets(Note 4) 1,909,130 - 2,377,851 - 1,423,635 - 23500 Deposits and remittances(Note 6(w) and 7) 2,826,426,634 56 2,748,419,254 57 2,707,157,404 57 13500 Loans-net(Note 4, 6(h) and (i), and 7) 2,151,031,367 42 2,112,661,940 44 2,179,823,960 46 24000 Bonds payable(Note 6(c), (e) and (y)) 114,693,780 2 99,355,898 2 101,964,884 2 13700 Reinsurance assets-net(Note 4 and 6(j)) 2,434,001 - 3,322,732 - 3,548,653 - 24600 Provisions(Note 4, 6(z), (ac) and (ad)) 1,252,267,684 25 1,152,859,490 24 1,034,129,489 22 14500 Held-to-maturity financial assets-net(Note 4, 6(k), (t) 349,812,943 7 216,315,007 5 201,780,520 4 and 8) 25500 Other financial liabilities(Note 4, 6(aa) and (an)) 194,351,866 4 199,621,926 4 230,248,830 5 15000 Investments under equity method-net(Note 4 and 17,785,089 - 17,885,709 - 17,267,733 - 29300 Deferred income tax liabilities(Note 4) 2,755,343 - 1,506,995 - 3,664,498 - 6(l)) 29500 Other liabilities(Note 6(ab)) 14,850,009 - 19,103,166 - 15,827,096 - 15500 Other financial assets-net(Note 4, 6(i) , (m) and (ad), 820,207,622 16 739,955,696 15 653,721,172 14 Total liabilities 4,783,658,916 94 4,557,055,835 94 4,473,815,053 94 and 8) Stockholders’ equity - parent company: 18000 Investment property-net(Note 4 and 6(n)) 56,169,317 1 47,009,937 1 30,361,715 1 31100 Capital stock: 18500 Premises and equipment-net(Note 4 and 6(o)) 52,869,221 1 60,463,447 1 64,638,495 2 31101 Common stock(Note 6(ag)) 194,969,896 4 194,969,896 4 180,547,806 4 19000 Intangible assets-net(Note 4, 6(p) and 12(o)) 23,413,677 - 23,383,294 - 23,629,944 - 31107 Stock dividend to be distributed - - - - 14,422,090 - 19300 Deferred income tax assets(Note 4 ) 13,082,287 - 10,347,900 - 11,173,941 - 31500 Capital surplus(Note 6(ag)) 33,717,244 1 36,637,717 1 36,644,757 1 19500 Other assets-net(Note 4, 6(q) and 8) 44,029,990 1 51,126,665 1 57,695,897 1 32000 Retained earnings: 32001 Legal reserve 20,467,553 - 17,674,655 - 17,674,655 - 32003 Special reserve 30,688,579 1 21,886,995 - 21,886,995 1 32005 Undistributed earnings(Note 6(ah)) 19,497,980 - 28,249,266 1 14,523,095 - 32500 Other equity interest(Note 6(ag)) (15,062,549) - (16,728,988) - (3,683,426) - 32600 Treasury stock(Note 4 and 6(ag)) (582,754) - (582,754) - (582,754) - 39500 Non-controlling interests 85,324 - 88,632 - 90,796 - Total equity 283,781,273 6 282,195,419 6 281,524,014 6 TOTAL ASSETS $ 5,067,440,189 100 4,839,251,254 100 4,755,339,067 100 TOTAL LIABILITIES AND EQUITY $ 5,067,440,189 100 4,839,251,254 100 4,755,339,067 100

See accompanying notes to financial statements. 5 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Consolidated Statements of Comprehensive Income For the six months ended June 30, 2017 and 2016 (Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Share)

For the three months ended June 30 For the six months ended June 30 2017 2016 2017 2016 Amount % Amount % Amount % Amount % 41000 Interest income(Note 6(ak)) $ 27,100,551 36 25,033,877 33 53,528,695 32 49,924,244 33 51000 Less:Interest expenses(Note 6(ak)) (4,992,198) (7) (4,602,183) (6) (9,801,363) (6) (9,773,933) (6) Net income of interest (Note 6(ak)) 22,108,353 29 20,431,694 27 43,727,332 26 40,150,311 27 Net non-interest income (loss) 49800 Service fee and commission income(Note 6(al)) 5,353,988 7 4,386,803 6 10,653,533 6 10,383,583 7 49810 Net insurance income(Note 6 (am)) 42,201,091 57 45,475,942 60 104,639,982 62 91,823,475 61 49820 (Losses) gains on financial assets measured at fair value through profit or loss(Note 6(an)) (388,908) (1) 2,787,801 4 27,744,753 16 13,182,364 9 49825 Gains on investment properties 192,372 - 113,394 - 329,209 - 120,444 - 49830 Realized gains on available-for-sale financial assets(Note 6(ag)) 2,184,674 3 2,642,947 4 3,552,398 2 4,871,243 3 49840 Realized gains on held-to-maturity financial assets 3,578 - 104 - 3,667 - 211 - 49870 Foreign exchange gains (losses) 2,342,371 3 (1,824,521) (2) (25,543,851) (15) (11,577,682) (8) 49880 Impairment loss on assets (Note 6(m)) (3,553) - (65,614) - (59,521) - (72,780) - 49890 Proportionate share of gains from associates or joint ventures under equity method(Note 78,437 - 69,386 - 173,616 - 130,235 - 6(l)) 49900 Other net non-interest income 2,149,842 3 1,870,733 2 5,954,384 4 3,484,981 2 58099 Public-welfare lottery payment (422,701) (1) (509,992) (1) (1,540,543) (1) (1,562,203) (1) Net revenue 75,799,544 100 75,378,677 100 169,634,959 100 150,934,182 100 58100 Provisions for bad debt expenses and guarantee reserve(Note 6(i)) (1,018,650) 1 (897,506) (1) (382,512) - (3,380,725) (2) 58300 Net changes in insurance liability reserve(Note 6(ap)) (48,554,294) (64) (50,660,419) (67) (116,240,313) (69) (100,557,629) (67) Operating expenses: 58501 Employee benefits expenses(Note 6(aq)) (8,989,817) (12) (7,685,283) (11) (17,787,798) (10) (15,667,237) (10) 58503 Depreciation and amortization expenses(Note 6(ar)) (930,390) (1) (886,839) (1) (1,808,087) (1) (1,767,216) (1) 58599 Other general and administrative expenses(Note 6(at)) (5,799,870) (8) (5,991,504) (8) (11,133,438) (7) (11,736,698) (8) Total operating expenses (15,720,077) (21) (14,563,626) (20) (30,729,323) (18) (29,171,151) (19) Net Income Before Tax from Continuing Operations 10,506,523 14 9,257,126 12 22,282,811 13 17,824,677 12 61003 Income tax expenses (Note 6(ae)) (1,325,812) (2) (1,517,605) (2) (2,888,221) (2) (3,518,180) (2) Net income 9,180,711 12 7,739,521 10 19,394,590 11 14,306,497 10 69500 Other comprehensive income: 69560 Items that will not be reclassified subsequently to profit or loss 69561 Remeasurement losses related to defined benefit plans (6,861) - (4,079) - (4,733) - (2,733) - 69565 Changes in designated as financial liabilities measured at fair value through profit or loss (284,711) - (11,429) - (633,329) - 1,233,063 1 attributable to credit risk 69563 Proportionate share of other comprehensive income (losses) from associates or joint ventures - - - - 1,905 - (4,248) - under the equity method- items that will not be reclassified subsequently to profit or loss 69569 Income tax related to items that will not be reclassified to profit or loss 2,370 - 1,019 - 2,013 - (1,457) - Subtotal (289,202) - (14,489) - (634,144) - 1,224,625 1 69570 Items that are or may be reclassified subsequently to profit or loss 69571 Exchange differences of overseas subsidiaries’ financial reports translation 406,528 1 1,602,057 2 (3,626,749) (3) 1,491,260 1 69572 Unrealized valuation gains on available-for-sale financial assets 3,904,287 5 1,485,606 2 6,265,390 4 2,370,405 2 69575 Proportionate share of other comprehensive income (losses) from associates or joint ventures 10,061 - (7,733) - 6,392 - 11,802 - under the equity method-items that are or may be reclassified subsequently to profit or loss 69579 Income tax related to items that are or may be reclassified to profit or loss (435,879) (1) (813,227) (1) (349,804) - (862,340) (1) Subtotal 3,884,997 5 2,266,703 3 2,295,229 1 3,011,127 2 69500 Other comprehensive income (net amount after tax) 3,595,795 5 2,252,214 3 1,661,085 1 4,235,752 3 Total comprehensive income $ 12,776,506 17 9,991,735 13 21,055,675 12 18,542,249 13 Net income attributable to: Parent company $ 9,179,695 12 7,737,559 10 19,393,303 11 14,302,860 10 Non-controlling interest 1,016 - 1,962 - 1,287 - 3,637 - $ 9,180,711 12 7,739,521 10 19,394,590 11 14,306,497 10 Comprehensive income attributable to: Parent company $ 12,775,375 17 9,989,771 13 21,058,983 12 18,538,446 13 Non-controlling interest 1,131 - 1,964 - (3,308) - 3,803 - $ 12,776,506 17 9,991,735 13 21,055,675 12 18,542,249 13 Earnings per share (unit: NT Dollars)(Note 6(AJ)) $ 0.47 0.40 1.00 0.73

See accompanying notes to financial statements. 6

(English Translation of Consolidated and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Consolidated Statements of Changes in Stockholders’ Equity For the six months ended June 30, 2017 and 2016 (Expressed in Thousands of New Taiwan Dollars)

Stockholder's Equity - parent company Other equity interest Capital Stock Retained earnings Change in designated as financial Exchange liabilities differences of measured at overseas Unrealized fair value subsidiaries’ losses (gains) through profit Stock dividend financial on available- or loss Stockholders’ Non- Common to be Undistributed reports for-sale attributable to equity - parent controlling stock distributed Capital surplus Legal reserve Special reserve earnings translation financial assets credit risk Treasury stock company interests Total equity Balance at January 1, 2016 $ 180,547,806 - 36,654,760 14,180,457 19,692,303 34,941,972 (1,614,049) (7,928,095) 1,614,741 (582,754) 277,507,141 87,105 277,594,246 Net income - - - - - 14,302,860 - - - - 14,302,860 3,637 14,306,497 Other comprehensive income (losses) - - - - - (8,391) 1,059,145 1,951,769 1,233,063 - 4,235,586 166 4,235,752 Total comprehensive income - - - - - 14,294,469 1,059,145 1,951,769 1,233,063 - 18,538,446 3,803 18,542,249 Appropriation and distribution of retained earnings: Legal reserve appropriated - - - 3,494,198 - (3,494,198) ------Special reserve appropriated - - - - 2,194,692 (2,194,692) ------Cash dividends common stock - - - - - (14,602,366) - - - - (14,602,366) - (14,602,366) Stock dividends common stock - 14,422,090 - - - (14,422,090) ------Changes in other capital surplus - - (10,003) ------(10,003) - (10,003) Changes in non-controlling interests ------(112) (112) Balance at June 30, 2016 $ 180,547,806 14,422,090 36,644,757 17,674,655 21,886,995 14,523,095 (554,904) (5,976,326) 2,847,804 (582,754) 281,433,218 90,796 281,524,014

Balance at January 1,2017 $ 194,969,896 - 36,637,717 17,674,655 21,886,995 28,249,266 (4,414,363) (11,997,483) (317,142) (582,754) 282,106,787 88,632 282,195,419 Net income - - - - - 19,393,303 - - - - 19,393,303 1,287 19,394,590 Other comprehensive income - - - - - (759) (3,337,622) 5,637,390 (633,329) - 1,665,680 (4,595) 1,661,085 Total comprehensive income (losses) - - - - - 19,392,544 (3,337,622) 5,637,390 (633,329) - 21,058,983 (3,308) 21,055,675 Appropriation and distribution of retained earnings: Legal reserve appropriated - - - 2,792,898 - (2,792,898) ------Special reserve appropriated - - - - 8,801,584 (8,801,584) ------Cash dividends common stock - - - - - (16,549,348) - - - - (16,549,348) - (16,549,348) Cash dividends from capital surplus - - (2,920,473) ------(2,920,473) - (2,920,473) Balance at June 30, 2017 $ 194,969,896 - 33,717,244 20,467,553 30,688,579 19,497,980 (7,751,985) (6,360,093) (950,471) (582,754) 283,695,949 85,324 283,781,273

See accompanying notes to financial statements. 7 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Consolidated Statements of Cash Flows For the six months ended June 30, 2017 and 2016 (Expressed in Thousands of New Taiwan Dollars)

For the six months ended June 30 2017 2016 Cash Flows from Operating Activities: Net Income Before Tax $ 22,282,811 17,824,677 Adjustments: Income and expenses items with no effect on cash flow Depreciation expenses 1,403,514 1,241,095 Amortization expenses 587,767 580,928 Provision for bad debt expenses 382,512 3,380,725 Net gains on financial assets or liabilities measured at fair value through profit or loss (6,015,040) (3,654,294) Interest expenses 9,801,363 9,773,933 Interest income (53,528,695) (49,924,244) Dividends earned (1,038,834) (777,311) Net change in insurance liabilities 116,240,313 100,557,629 Net change in other provisions (805,230) 20,106 Proportionate share of gains from associates or joint ventures under the equity method (173,616) (130,235) Losses on disposal and retirement of premises and equipment 11,254 16,227 Gains on disposal of investment under cost method (9,163) (46,579) Losses on disposal and retirement of intangible assets 853 636 Impairment losses on financial assets 57,296 68,262 Impairment losses on non-financial assets 2,225 4,518 Losses (gains) on disposal of foreclosed properties 1,106 (7,958) Unrealized foreign exchange gains on insurance liabilities (14,927,921) (5,281,577) Other adjustments (865,975) 875,488 Subtotal of income and expense items with no effect on cash flows 51,123,729 56,697,349 Changes in operating assets and liabilities: Net Changes in Operating Assets: Increase in due from the central bank and call loans to banks (4,238,540) (450,588) Decrease (increase) in financial assets at fair value through profit or loss 27,557,424 (27,033,957) Decrease (increase) in available-for-sale financial assets 65,780,725 (56,373,465) Decrease (increase) in hedging derivative financial assets 192,731 (156,604) Increase in receivables (22,427,515) (20,205,807) Increase in loans (37,982,984) (102,405,146) Decrease (increase) in reinsurance assets 398,504 (488,322) (Increase) decrease in held-to-maturity financial assets (133,501,091) 22,990,210 Increase in other financial assets (77,592,623) (76,337,277) Net Changes in Operating Assets (181,813,369) (260,460,956) Net Changes in operating liabilities: Increase in deposits from Central Bank and other banks 14,369,662 17,905,320 Decrease in financial liabilities measured at fair value through profit or loss (27,988,121) (24,404,903) (Decrease) increase in hedging derivative financial liabilities (21,723) 181,848 Increase in payable 5,304,632 22,198,449 Increase in deposits and remittances 78,007,380 7,355,245 Decrease in employee benefits reserve (86,168) (353,316) Decrease in liability reserve (559,036) (481,196) (Decrease) increase in other financial liabilities (6,974,542) 20,361,129 Net Changes in Operating Liabilities 62,052,084 42,762,576 Net Changes in Operating Assets and Liabilities (119,761,285) (217,698,380) Sum of Adjustments (68,637,556) (161,001,031)

See accompanying notes to financial statements. 7-1 (English Translation of Financial Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the six months ended June 30, 2017 and 2016 (Expressed in Thousands of New Taiwan Dollars)

For the six months ended June 30 2017 2016 Cash used in Operating Activities $ (46,354,745) (143,176,354) Interest received 52,413,777 49,454,923 Dividends received 747,594 582,772 Interest paid (8,802,875) (8,896,900) Income tax paid (2,026,669) (2,139,909) Net Cash Used in Operating Activities (4,022,918) (104,175,468) Cash Flows from Investing Activities: Purchase of financial assets carried at cost (593,534) (577,693) Disposal of financial assets carried at cost 58,087 38,694 Return of capital from financial assets carried at cost 198,170 - Purchase of financial assets under equity method (134,659) (869,635) Purchase of premises and equipment (1,641,249) (1,575,693) Disposal of premises and equipment 13,125 274,993 Purchase of intangible assets (609,679) (527,539) Disposal of foreclosed properties 4,935 12,807 Purchase of investment properties (1,433,890) (5,922,381) Disposal of investment properties 103,477 - Decrease in securities purchased under repurchase agreements - 270,000 (Increase) decrease in receivables (460,171) 14,113,799 Decrease in other assets 4,920,616 2,381,319 Net Cash Provided by Investing Activities 425,228 7,618,671 Cash Flows from Financing Activities: Decrease in due to Central Bank and other banks (701,143) (2,036,485) Increase in commercial papers payable 3,352,832 1,253,756 Issuance of financial debentures 16,000,000 - Repayments of financial debentures (570,360) (8,131,000) Increase (decrease) in securities sold under repurchase agreements 19,090,647 (907,561) Increase in financial liabilities at fair value through profit or loss, designated as upon initial 5,478,480 - recognition Repayments of preference share liabilities - (2,030,000) Increase in payables 466,821 312,462 (Decrease) increase in other liabilities (4,252,641) 5,349,268 Changes in capital surplus - (10,003) Net Cash Flows Provided by (Used in) Financing Activities 38,864,636 (6,199,563) Effect of exchange rate changes on cash and cash equivalents (2,626,447) 4,093,546 Increase (decrease) in Cash and Cash Equivalents 32,640,499 (98,662,814) Cash and Cash Equivalents at the Beginning of the Period 360,203,705 450,272,061 Cash and Cash Equivalents at the End of the Period $ 392,844,204 351,609,247 Components of cash and cash equivalents: Cash and cash equivalents recognized in balance sheet $ 132,492,566 102,648,061 Due from the Central Bank and call loans to bank which meet IAS 7 definition of cash and cash 234,775,550 242,212,601 equivalents Securities purchased under resell agreements which meet IAS 7 definition of cash and cash 25,576,088 6,748,585 equivalents Cash and cash equivalents at the end of the period $ 392,844,204 351,609,247

See accompanying notes to financial statements. 8 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements June 30, 2017 and 2016 (Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(1) History and organization

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

The Company conducts business in the following areas:

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

(i) Banking;

(ii) Bills financing;

(iii) Credit cards;

(iv) Trusts;

(v) Insurance;

(vi) Securities;

(vii) Futures;

(viii) Venture capital;

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

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

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

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

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

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

The consolidated interim financial statements were approved by the board of directors on August 30, 2017.

(Continued) 9 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(3) New standards, amendments and interpretations adopted:

(a) Impact of the International Financial Reporting Standards (“ IFRSs” ) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already taken effect.

The Company and its subsidiaries are required to conform to the IFRSs which were endorsed by the FSC on January 1, 2017 in preparing financial statements. The related new standards, amendments and interpretations are as follows:

Effective date New, Revised or Amended Standards and Interpretations per IASB Amendments to IFRS 10, IFRS 12 and IAS 28 "Investment Entities: January 1, 2016 Applying the Consolidation Exception" Amendments to IFRS 11 "Accounting for Acquisitions of Interests in Joint January 1, 2016 Operations" IFRS 14 "Regulatory Deferral Accounts" January 1, 2016 Amendment to IAS 1 "Presentation of Financial Statements-Disclosure January 1, 2016 Initiative" Amendments to IAS 16 and IAS 38 "Clarification of Acceptable Methods of January 1, 2016 Depreciation and Amortization" Amendments to IAS 16 and IAS 41 "Agriculture: Bearer Plants" January 1, 2016 Amendments to IAS 19 "Defined Benefit Plans: Employee Contributions" July 1, 2014 Amendment to IAS 27 "Equity Method in Separate Financial Statements" January 1, 2016 Amendments to IAS 36 "Recoverable Amount Disclosures for Non Financial January 1, 2014 Assets" Amendments to IAS 39 "Novation of Derivatives and Continuation of Hedge January 1, 2014 Accounting" Annual Improvements to IFRSs 2010-2012 Cycle and 2011-2013 Cycle July 1, 2014 Annual Improvements to IFRSs 2012-2014 Cycle January 1, 2016 IFRIC 21 "Levies" January 1, 2014

The Company and its subsidiaries assessed that initial application of the above IFRSs would not have any material impact on its consolidated interim financial statements.

(Continued) 10 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(b) The impact of IFRSs endorsed by FSC but not yet effective

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on January 1, 2018 in accordance with Ruling No. 1060025773 issued by the FSC on July 14, 2017:

Effective date New, Revised or Amended Standards and Interpretations per IASB Amendment to IFRS 2 "Classification and Measurement of Share based January 1, 2018 Payment Transactions" Amendments to IFRS 4 "Applying IFRS 9 Financial Instruments with IFRS 4 January 1, 2018 Insurance Contracts" IFRS 9 "Financial Instruments" January 1, 2018 IFRS 15 "Revenue from Contracts with Customers" January 1, 2018 Amendment to IAS 7 "Statement of Cash Flows -Disclosure Initiative" January 1, 2017 Amendment to IAS 12 "Income Taxes- Recognition of Deferred Tax Assets for January 1, 2017 Unrealized Losses" Amendments to IAS 40 "Transfers of Investment Property" January 1, 2018 Annual Improvements to IFRS Standards 2014–2016 Cycle: Amendments to IFRS 12 January 1, 2017 Amendments to IFRS 1 and Amendments to IAS 28 January 1, 2018 IFRIC 22 "Foreign Currency Transactions and Advance Consideration" January 1, 2018

Except for the following items, the adoption of the above IFRSs would not have any material impact on its consolidated interim financial statements. The principal changes and relevant impact of the new standard are as follows:

(i) IFRS 9 “Financial Instruments”

IFRS 9 replaces IAS 39 “Financial Instruments: Recognition and Measurement” which contains classification and measurement of financial instruments, impairment and hedge accounting. The actual impact of adopting IFRS 9 on the Company and its subsidiaries consolidated financial statements of 2018 is still uncertain as it is subject to financial instruments that the Company and its subsidiaries holds and economic dynamics, as well as the accounting elections and judgments that it will make in the future.

(Continued) 11 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

1) Classification and measurement- Financial assets

IFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flow characteristics. IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (FVOCI ) and fair value through profit or loss (FVTPL). The standard eliminates the existing IAS 39 categories of held-to-maturity, available-for-sale, debt investments without active markets and financial assets measured at cost. Under IFRS 9, derivatives embedded in contracts where the host is a financial assets in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification.

The Company and its subsidiaries’ equity investments classified as available-for-sale and financial assets measured at cost have not yet been decided to be classified as FVOCI or FVTPL at the initial application of IFRS 9. In the former case, all fair value gains and losses would be reported in other comprehensive income. No gains or losses would be reclassified to profit or loss on disposal. In the latter case, all fair value gains and losses would be recognized in profit or loss as they arise, increasing volatility in the Company and its subsidiaries’s profits and losses.

2) Impairment-Financial assets and contact assets

IFRS 9 replaces the "incurred loss" model in IAS 39 with a forward-looking" expected credit loss" (ECL) model. This will require considerable judgment as to how changes in economic factors affect ECLs, which will be determined on a probability-weighted basis.

The new impairment model will apply to financial assets measured at amortized cost or FVOCI, except for investments in equity instruments.

Under IFRS 9, loss allowances will be measured on either of the following bases:

- 12-month ECLs: These are ECLs that result from possible default events within the 12 months after the reporting date; and

- Lifetime ECLs: These are ECLs that result from all possible default events over the expected life of a financial instrument.

Lifetime ECL measurement applies if the credit risk of a financial asset at the reporting date has increased significantly since initial recognition and 12-month ECL measurement applies if it has not. An entity may determine that a financial asset’s credit risk has not increased significantly if the asset has low credit risk at the reporting date.

Currently, the Company and its subsidiaries’ allowances for credit losses are determined in accordance with relevant legal interpretations, regulations or IAS 39 which is higher. The application of IFRS 9 is still under way, thus the actual impact on the Company and its subsidiaries’ financial statements of 2018 has not known yet.

(Continued) 12 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

3) Transition

The Company and its subsidiaries plan to take advantage of the exemption allowing it not to restate comparative information for prior periods with respect to classification and measurement (including impairment) changes. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 generally will be recognized in retained earnings and other line items of stockholders' equity as at January 1, 2018.

(ii) Amendments to IFRS 4 (Applying IFRS 9 “Financial Instruments” with IFRS 4 “Insurance Contracts”)

The amendments provide the following optional approaches (overlay approach and temporary exemption) to reduce the impact of the different effective dates of IFRS 9 and the forthcoming IFRS 4:

• Provide all companies that issue insurance contracts the option to recognize in other comprehensive income, rather than profit or loss, the volatility that could arise when IFRS 9 is applied before the new insurance contracts standard is issued; and

• Provide companies whose activities are predominantly connected with insurance an optional temporary exemption from applying IFRS 9 until 2021. The entities that defer the application of IFRS 9 will continue to apply the existing financial instruments Standard-IAS 39.

The Company and its subsidiaries may choose to adopt overlay approach after initial assessment to reduce the impact on profit or loss caused by adopting IFRS 9. The Company and its subsidiaries have not yet determined the final decision.

Listed as below were the new standards and amendments issued by the IASB, but not yet endorsed by the FSC:

Effective date New, Revised or Amended Standards and Interpretations per IASB Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets Between an Effective date to Investor and Its Associate or Joint Venture" be determined by IASB IFRS 16 "Leases" January 1, 2019 IFRS 17 "Insurance Contracts" January 1, 2021 IFRIC 23 "Uncertainty over Income Tax Treatments" January 1, 2019

(Continued) 13 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Those which may be relevant to the Company and its subsidiaries are set out below:

Issuance / Release Newly issued/ Revised Dates accounting standards Content of amendment January 13, 2016 IFRS 16 "Leases" The new standard of accounting for lease is amended as follows: ‧ For a contract that is, or contains, a lease, the lessee shall recognize a right-of-use asset and a lease liability in the balance sheet. A lessee’ s expenses shall be evaluated from summation of the depreciation charge for the right-of-use asset and interest expense on the lease liability during the lease term. ‧ A lessor classifies a lease as either a finance lease or an operating lease, and therefore, accounting treatment remains similar to IAS 17 "Leases". May 18, 2016 IFRS 17 "Insurance Contracts" The new standard of accounting for insurance contracts contain recognition, measurement, presentation and disclosure of insurance contracts issued, and the main guidelines are as follows: ‧ Recognition: the beginning of the coverage period of the group of contracts, the maturity when the first payment from a policyholder in the group and when the group becomes onerous shall recognize a group of insurance contracts it issues from the earliest. ‧ Measurement: on initial recognition, an entity shall measure a group of insurance contracts at the total of the fulfilment cash flows and the contractual service margin. For subsequent measurement, the entity shall estimate the cash flows, discount rates and the adjustment for non- financial risk. ‧ Presentation and disclosure: the presentation of insurance revenue is based on the provision of service pattern and investment components excluded from insurance revenue and insurance service fees.

(Continued) 14 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Issuance / Release Newly issued/ Revised Dates accounting standards Content of amendment June 7, 2017 IFRIC 23 "Uncertainty over ‧ In assessing whether and how an Income Tax Treatments" uncertain tax treatment affects the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, an entity shall assume that a taxation authority will examine the amounts it has the right to examine and have a full knowledge on all related information when making those examinations. ‧ If an entity concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the entity shall determine the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment used or planned to be used in its income tax filings. Otherwise, an entity shall reflect the effect of uncertainty for each uncertain tax treatment by using either the most likely amount or the expected value, depending on which method the entity expects to better predict the resolution of the uncertainty.

The impact of applying new standards is on the financial position and financial performance of the Company and its subsidiaries is under evaluation. Once the evaluation is completed, the Company and its subsidiaries will disclose the effect on the financial reports.

(Continued) 15 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(4) Summary of significant accounting policies:

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

(a) Assertion of compliance

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

(b) Basis of preparation

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

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

(ii) Available-for-sale financial assets measured at fair value;

(iii) Hedging derivative financial instruments measured at fair value;

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

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

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

(i) Basis of compilation for consolidated financial reports

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

(Continued) 16 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

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

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

2) By having a right to the majority of the entity's benefits, the Company and its subsidiaries are exposed to the entity's business risks;

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

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

Name of Shareholding Investor June 30, December June 30, Company Name of Subsidiary Primary Business 2017 31, 2016 2016 Description The Company CTBC Bank Co., Ltd. Commercial banking and 100.00 % 100.00 % 100.00 % (Note 1) financing business " CTBC Securities Co., Ltd. (“CTBC Securities and futures 99.92 % 99.92 % 99.92 % Securities”) business " CTBC Venture Capital Co., Ltd. Venture capital business 100.00 % 100.00 % 100.00 % (Note 2) (“CTBC Venture Capital”) " CTBC Asset Management Co., Ltd. Asset management 100.00 % 100.00 % 100.00 % (“CTBC Asset Management”) business " Taiwan Lottery Co., Ltd. (“Taiwan Dealerships of public 100.00 % 100.00 % 100.00 % Lottery”) welfare lottery products " Taiwan Life Insurance Co., Ltd. Insurance business 100.00 % 100.00 % 100.00 % (Note 3) (“Taiwan Life”) " CTBC Investments Co., Ltd. (“CTBC Investment and 100.00 % 100.00 % 100.00 % Investments”) trust business CTBC Bank CTBC Bank (Philippines) Corp. Commercial banking and 99.60 % 99.60 % 99.60 % Co., Ltd. financing business " PT. Bank CTBC Indonesia " 99.00 % 99.00 % 99.00 % " CTBC Bank Corp. (Canada) " 100.00 % 100.00 % 100.00 % " The Tokyo Star Bank, Ltd. " 100.00 % 100.00 % 100.00 % " CTBC Capital Corp. Investment business 100.00 % 100.00 % 100.00 % The Tokyo Star Tokyo Star Business Finance, Ltd. Financing and assurance - % - % - % (Note 4) Bank, Ltd. business " TSB Servicer, Ltd. Debt management 100.00 % 100.00 % 100.00 % business " TSB Capital, Ltd.(renamed to Tokyo Financing and assurance 100.00 % 100.00 % 100.00 % (Note 4) Star Business Financial, Ltd) business " Pecuniary Trust Contract Mortgage management / - % - % - % (Note 5) Asset-backed security that is secured by mortgage /NPL Collection " Credit Linked Notes A security with an - % - % - % (Note 5) embedded credit default swap

(Continued) 17 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Name of Shareholding Investor June 30, December June 30, Company Name of Subsidiary Primary Business 2017 31, 2016 2016 Description The Tokyo Star SPE Consolidation Asset-back Consumer loan - % - % - % (Note 5) Bank, Ltd. Securities management CTBC Capital CTBC Bank Corp. (USA) Commercial banking and 100.00 % 100.00 % 100.00 % Corp. financing business CTBC Asset CTBC International Co., Limited Holding company 100.00 % 100.00 % 100.00 % Management CTBC CTBC Leasing Co., Ltd. (“CTBC Financial leasing 100.00 % 100.00 % 100.00 % International Leasing (China)”) Co., Limited CTBC Venture CTBC Capital International Co., Holding company 100.00 % 100.00 % 100.00 % Capital Limited CTBC Capital CTBC Venture Capital Investment Venture capital 100.00 % 100.00 % 100.00 % International Management (Shanghai) Co., Ltd. management and Co., Limited (“CTBC Venture Capital consulting (Shanghai)”) CTBC CTBC (Mauritius) Holding Co., Ltd. Investment business 100.00 % 100.00 % 100.00 % Securities " CTBC Securities Investment Service Securities investment 100.00 % 100.00 % 100.00 % Co., Ltd. consultant business CTBC CTBC Asia Limited Securities business 100.00 % 100.00 % 100.00 % (Mauritius) Holding Co., Ltd. Taiwan Life TLG Capital Co., Ltd. Installment, leasing and 100.00 % 100.00 % 100.00 % (Note 3) account receivable factoring business, etc. " TLG Insurance Co., Ltd. (TLG Property insurance 100.00 % 100.00 % 100.00 % (Note 3) Insurance) business

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

Shareholding Name of Investor Name of June 30, December June 30, Company Subsidiary Primary Business 2017 31, 2016 2016 Description The CTBC Security Co., Ltd. Protection, fire and life 100.00 % 100.00 % 100.00 % The total assets and Company safety services operating revenue of this investee company are insignificant. Taiwan Life Ho-fa Land Development Premises development 90.00 % 90.00 % 90.00 % Has no de facto control Insurance Co., Ltd. and transaction over the entity. Co., Ltd. " Wu Tz Development Co., Athletics and 99.00 % 99.00 % 99.00 % 〃 Ltd. recreational sports stadium

Note 1: On December 30, 2016, the Company’s subsidiary CTBC Bank Co., Ltd. as resolved by the shareholders’ meeting , decided a cash capital increase of 130,435 thousand common shares, with the price of private placement at NTD 23 per share upon approval of the board of directors. The total amount raised was $3,000,000 and $1,304,348 in capital, with December 30, 2016 as its baseline for capital increase.

(Continued) 18 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Note 2: On August 25, 2016, the Company's subsidiary CTBC Venture Capital Co., Ltd. as resolved by the shareholders’ meeting, decided a capital reduction amounted to $1,000,000 and return the capital to the Company upon approval of board of directors, with November 30, 2016 as its baseline for capital reduction.

Note 3: In order to expand the scale of insurance business, the Company’ s shareholders committee approved to acquire 100% share of Taiwan Life Insurance Co., Ltd. on September 29, 2015, and the acquisition was approved by FSC Jin-Kuan-Bao-Shou no.104000944720 on August 27, 2015. The target date of capital increase was October 15, 2015. On the same date, both the Company’ s subsidiaries’ board of directors of Taiwan Life Insurance Co., Ltd. and CTBC Life Insurance Co., Ltd. approved to combine by issuing Taiwan Life Insurance Co., Ltd’s common shares in a 1.23-for-1 exchange for the shares of CTBC Life Insurance Co., Ltd. Taiwan Life Insurance Co., Ltd is the surviving entity while CTBC Life Insurance Co., Ltd. is the dissolved entity. The application to merger was approved by FSC Jin-Kuan-Bao- Shou no.10402548850 on November 20, 2015 with the target date on January 1, 2016.

Note 4: In order to fulfill operating efficiency and enhance expanding business, TSB Capital, Ltd. merged with Tokyo Star Business Finance, Ltd. on February 1, 2016. Tokyo Star Business Finance, Ltd. was dissolved, TSB Capital, Ltd. is the surviving entity and renamed to Tokyo Star Business Finance, Ltd.

Note 5： The reason the listed entities are included in the consolidated financial reports is because the subsidiary CTBC Bank Co., Ltd. and its subsidiaries have leverage over these entities through direct or indirect investment, voting rights of these entities, and rights to either benefit from the majority of subsidiary CTBC Bank Co., Ltd. and its subsidiaries’ profits or sustain the risks. As of June 30, 2017, the subsidiary CTBC Bank Co., Ltd. and its subsidiaries have not, either under the terms of any contractual or non-contractual arrangements, provided financial or other support to its special purpose entities.

(d) Foreign currency

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

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

(Continued) 19 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(iii) Foreign currency differences arising on the settlement of a foreign currency transaction are recognized in current profit or loss. Foreign currency differences arising on the retranslation of monetary item, except for differences arising on the retranslation of monetary item designated as the hedging instrument in a hedge of the net investment in a foreign operation or in a qualifying cash flow hedge are recognized directly in other comprehensive income, others are recognized in profit or loss when it incurred.

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

(v) Functional currency and presentation currency

The functional currency of the Company and its subsidiaries is the currency of the primary economic environment in which they operates. The consolidated financial reports are presented in New Taiwan dollar, the functional currency of the Company.

(e) Cash and cash equivalents

The statements of cash flows are compiled based upon cash and cash equivalents. Cash comprises cash on hand, savings accounts, checking accounts, and unrestricted time deposits or negotiable certificates of deposit which may be terminated anytime without impairing the principal. Cash equivalents consist of short term and highly liquid investments that are readily convertible to known amounts of cash and will mature within a short period so that interest rate fluctuations have little effect on their values. Cash equivalents include short term bills with maturities within three months from the investment date.

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

(f) Financial instruments

(i) Financial asset

Financial assets held by the Company and its subsidiaries are recorded on the trading date. Except for financial instruments classified as held for trading, other financial instruments are initially recognized at acquiring or issuing cost plus transaction costs. Upon disposition, the cost of sale of equity securities is determined by the moving-average method, and the cost of sale of debt securities is determined by the first-in, first-out (FIFO) method.

(Continued) 20 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(1) Financial assets measured at fair value through profit or loss Financial assets are classified as held for trading if they have been acquired principally for the purpose of selling or repurchasing in the near term. The derivative financial instruments held by the Company and its subsidiaries, except for those designated as hedging instruments, are classified under these accounts. The Company and its subsidiaries designate financial assets, other than ones classified as held-for-trading, as at fair value through profit or loss at initial recognition under one of the following situations: (a) Designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; (b) Performance of the financial asset is evaluated on a fair value basis; (c) Hybrid instrument contains one or more embedded derivatives. Financial assets in this category are measured at fair value at Balance Sheet date. Changes in fair value are recognized in profit or loss as incurred. (2) Available-for-sale financial assets－net At each Balance Sheet date, the fair value is remeasured, and the resulting gain or loss from such remeasurement is recognized directly in other comprehensive income. Interest on a debt instrument classified as available-for-sale is accrued; the relevant premium/discount is amortized by using the effective-interest-rate method. If there is objective evidence that an available-for-sale financial asset is impaired, the carrying amount of the asset is reduced, and impairment loss is recognized. If, in a subsequent period, the amount of the impairment loss of the available-for-sale equity securities decreases, the impairment loss recognized in profit or loss shall not be reversed through profit or loss. If, in a subsequent period, the amount of the impairment loss of the available-for-sale debt securities decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss. The carrying amount after the reversal shall not exceed the recoverable amount or the depreciated or amortized balance of the assets assuming no impairment loss was recognized. A gain or loss on available-for-sale financial assets is recognized directly in other comprehensive income, except for impairment losses and foreign exchange gains or losses arising from monetary financial assets, until the financial assets are derecognized, at which time the cumulative gain or loss previously recognized in other comprehensive income is charged to profit or loss. (3) Securities under repurchase/resell agreements Securities sold/purchased with a commitment to repurchase/resell at predetermined price are treated as financing transactions. The difference between the cost and the repurchase/resell price is treated as interest expenses/revenue and recognized over the term of the agreement. On the selling/purchasing date, these agreements are recognized as securities sold under repurchase agreements or securities purchased under resell agreements.

(Continued) 21 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(4) Loans and receivables

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

(a) Collection of payment of principal or interest accrued is considered highly unlikely; or

(b) Payment of principal or interest accrued is over 3 or 6 months past due; or

As the purpose of holding those creditor’s rights has changed, these loans held for sale are accounted for under “other financial assets” and will be valued using the lower-of- cost-or-market method in the future.

With regards to loans and receivables, the objective evidence shall be identified first to reveal any impairment existing for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If no objective evidence of impairment exists for an individually assessed financial asset, it shall be included in a set of financial assets with similar credit risk characteristics and collectively assessed for impairment. Assets that are individually assessed for impairment are not required to be collectively assessed because impairment is or continues to be recognized.

Nonaccrual account deemed uncollectible are written off upon approval of the board of directors; reinsurance recovery receivables and due from reinsurers and ceding companies are reclassified as non-performing loans when they are past due over 9 months. The recovery of written-off loans and accounts receivable is accounted for under the reversal of the allowance for credit losses.

Reserves for guarantees are appropriately provided based on an estimate of probable losses inherent in the ending balances of guarantees, acceptances receivable, and commercial paper.

Another estimate will also be reached following the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- performing/Non-accrual Loans” and the “Regulations Governing the Procedures for the Insurance Industry to Evaluate Assets and Deal with Non-Performing and Non-Accrued Loans”, which are both issued by the FSC. Final provision will be based on the higher of the two estimates.

(Continued) 22 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(5) Held to maturity financial assets - net The Company and its subsidiaries has active potent and intent to hold held-to-maturity debt securities, which are placed under the account, until the maturity date. The amortized cost and interest income of held to maturity financial assets are determined by using the effective interest rate method. If there is objective evidence that a held to maturity financial asset is impaired, the carrying amount of the asset is reduced, and impairment loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss. The carrying amount after the reversal should not exceed the recoverable amount or the depreciated or amortized balance of the assets assuming no impairment loss was recognized. (6) Financial assets carried at cost Equity instruments with no quoted market price are initially recognized at whose fair value plus transaction costs. At each Balance Sheet date, fair value can be reliably measured if either of the following conditions is met: (a) the variability in the range of reasonable fair value estimates is not significant for that instrument; or (b) the probabilities of the various estimates within the range can be reasonably assessed and used in estimating fair value. If the range of reasonable fair value estimates is significant and the probabilities of the various estimates cannot be reasonably assessed, the Company and its subsidiaries are precluded from measuring the instrument at fair value; instead, the instrument shall be measured at cost. (7) Debt investments without active markets The amortized cost and interest income of debt investments without an active market are determined by using the effective-interest rate method. When there is objective evidence that an impairment loss on financial assets has been incurred, impairment loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss. The carrying amount after the reversal shall not exceed the recoverable amount or the depreciated or amortized balance of the assets assuming no impairment loss was recognized. (8) Financial assets initially classified as measured at fair value through profit or loss (other than derivative financial assets and those designated as assets measured at fair value through profit or loss) may be reclassified into other categories if those financial assets are no longer held for the purpose of selling and meet the criteria listed below; financial assets initially classified as available-for-sale that would have met the definition of loans and receivables may be reclassified out of the available-for-sale category to the loans and receivables. The accounting treatments on the date of reclassification are summarized as follows:

(Continued) 23 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(a) When financial assets initially classified as measured at fair value through profit or loss have met the definition of loans and receivables and the entity has the intention and ability to hold the financial assets for the foreseeable future or until maturity, they shall be reclassified at their value on the date of reclassification, which will become their new cost or amortized cost, as applicable. Any previous gain or loss already recognized in profit or loss shall not be reversed.

(b) When financial assets initially classified as available-for-sale have met the definition of loans and receivables and the entity has the intention and ability to hold the financial assets for the foreseeable future or until maturity, they shall be reclassified at their value on the date of reclassification, which will become their new cost or amortized cost, as applicable.

(c) For any previous gain or loss on a financial asset that has been recognized directly under owners’ equity, if the financial asset has a fixed maturity, the gain or loss shall be amortized to current profit or loss over the remaining life of the financial asset; if not, the gain or loss remains under owners’ equity.

(9) Financial asset impairment

If there is an objective evidence that an impairment loss on financial assets has been incurred, the amount of the loss is recognized and measured as the difference between the asset’ s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate; the amount of the loss shall be recognized in profit or loss in the current period. The estimation of future cash flows includes the recoverable amount of collateral and related insurance when determining the amount of the loss.

The aforesaid objective evidence includes:

(a) Significant financial difficulty of the issuer or obligor;

(b) A breach of contract, such as a default or delinquency in interest or principal payments;

(c) The lender, for economic or legal reasons relating to the borrower’ s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;

(d) It is becoming probable that the borrower will enter bankruptcy or other financial reorganization;

(e) The disappearance of an active market for that financial asset because of the issuer’ s financial difficulties;

(f) Adverse changes in the payment status of the borrower; and

(g) Changes in national or local economic conditions that correlate with defaults on the assets.

(Continued) 24 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(10) Derecognition of financial assets

The Company and its subsidiaries shall derecognize a financial asset when the contractual rights to the cash flows from the financial asset expire or all the risks and rewards of ownership of the financial assets transfer substantially.

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

(ii) Financial liabilities

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

(1) Financial liability measured at fair value through profit or loss

A financial liability is held for trading if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term; on initial recognition it 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, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument, is classified as instrument held for trading as well. Financial liabilities held for trading include obligations to deliver financial assets borrowed by a short seller. The Company and its subsidiaries designate financial liabilities, as at fair value through profit or loss at initial recognition under one of the following situations:

(a) Designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise;

(b) Performance of the financial liability is evaluated on a fair value basis;

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

(Continued) 25 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

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

(2) Amortized cost of a financial liability Financial liabilities are classified at amortized cost of a financial liability, except for Financial liabilities measured at fair value through profit or loss, hedged derivatives financial liability, financial bonds payable, financial guarantee contracts, commitments to provide a loan at a below-market interest rate and financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies. (3) Derecognition of a financial liability The Company and its subsidiaries shall remove a financial liability from its statement of financial position when, and only when, it is extinguished. (iii) Derivatives and Hedging Accounting Derivatives instruments are initially recognized at fair value on contract date and are subsequently measured at fair value. Fair value includes quoted price in an active market, occurring market transaction prices or model valuation techniques. All derivatives instruments are recognized as assets with positive fair value and as liability with negative fair value. The Company and its subsidiaries should accounts for an embedded derivative separately from the host contract when the host contract is not itself carried at fair value through profit or loss, the terms of the embedded derivative would meet the definition that the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract, and the entire hybrid contract is not designated as at fair value through profit or loss. In addition, the embedded derivative is recognized as financial asset or liability as measured at fair value through profit or loss. When a fair value hedge, cash flow hedge, and hedge of a net investment in a foreign operation are in conformity with all the conditions for the application of hedge accounting, the affected profit or loss is recognized by offsetting the changes in the fair value of hedging instruments and hedged items. The related accounting treatments are as follows: (1) Fair value hedge Changes in the fair value of derivatives that are designated and qualified as fair value hedging instruments against the exposure to changes in fair value of a recognized asset or liability or an unrecognized firm commitment are recognized through profit or loss in the current period.

(Continued) 26 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(2) Cash flow hedge Where a derivative financial instrument is designated as a hedge of the variability in cash flow of a recognized asset or liability or a highly probable forecast transaction, the effective portion of any gain or loss on remeasurement of the derivative financial instrument to fair value is recognized directly under other comprehensive income. When the hedged transaction actually affects the profit or loss, the gain or loss previously recognized under other comprehensive income shall be recognized through current profit or loss. Any gain or loss from the change in fair value relating to an ineffective portion of the hedge transaction is recognized immediately through profit or loss in the current period. (3) Hedge of a net investment in a foreign operation

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

(iv) Financial guarantee contracts

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

Financial guarantee contracts shall be subsequently measured by the Company and its subsidiaries at the higher of:

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

(2) the amount initially recognized less, when appropriate, cumulative amortization recognized from deferred revenues.

(g) Investment properties

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

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

(Continued) 27 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

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

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

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

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

(h) Non-financial asset impairment

At each balance sheet date, the recoverable amount of an asset is estimated and compared with the carrying amount whenever there is an indication that the non-financial asset may be impaired. An impairment loss is recognized when the recoverable amount, higher of fair market value or value in use, is less than the carrying amount. For assets other than goodwill, reversal of impairment loss is recognized when the recoverable amount of the asset has increased from its prior-period estimation. The carrying amount after the reversal shall not exceed the recoverable amount or the depreciated or amortized balance of the assets assuming no impairment loss was recognized in prior periods.

(i) Assets held for sale

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

Amortization or depreciation on intangible assets, premises and equipment ceases once they are classified as held for sale.

(j) Investments in associates

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

(Continued) 28 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

The Company has significant influence if holding, directly or indirectly, 20% or more of the voting right of the investee. However, an exception will apply if the Company can specify that it has no significant influence over an investee.

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

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

(k) Interest in joint ventures

The joint agreements include joint operations and joint ventures, and has the following characteristics:

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

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

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

(l) Cash surrender value of life insurance

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

(Continued) 29 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(m) Reinsurance assets

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

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

If a reinsurance contract on the ceded date or balance sheet date is deemed to be unqualified ceded reinsurance under the Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms, the Company’ s insurance subsidiary should provide a reserve for unqualified reinsurance in the supervisory statements based on the Provision of Unqualified Reinsurance Reserve and disclose it in its financial statements. Please refer to Note 12(q).

(n) Property and equipment

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

Subsequent expenditure of property and equipment shall be recognized as an asset or be included in the carrying amount of assets, when, and only when it is probable that the future economic benefits that are associated with property and equipment will flow to the Company and its subsidiaries, and the cost of property and equipment can be measured reliably. The carrying amount of those parts that are replaced is derecognized. A major improvement or repair expense that can extend the benefits over afterward period is regards as capital expenditure; while frequent maintenance or repairs are charged to current expenses.

If the Company and its subsidiaries has obligations to dismantle, remove and restore the property and equipment, the obligation for which the Company and its subsidiaries incurs either when the item is acquired or as a consequence of having used the item during a particular period shall be recognized as the cost of the property and equipment as well as liability.

(Continued) 30 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

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

Buildings and premises 2 ~ 56 years

Transportation equipment 1 ~ 12 years

Miscellaneous equipment 2 ~ 20 years

The gain or loss arising from the disposition of an item of property and equipment shall be recognized in current profit or loss and determined as the difference between the disposal proceeds and the carrying amount of an item.

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

(o) Intangible assets

(i) Computer software system

Computer software system expenses, which are recorded on the basis of the actual cost of acquisition, are amortized using a straight-line method over a period of 3 to 15 years. Its amortization method, useful life and residual value are referred to the regulation of properties and equipment. The Company and its subsidiaries use cost model to proceed subsequently measurement.

(ii) Goodwill

The Company and its subsidiaries account a business combination by applying the acquisition method. The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the sum of the acquisition-date fair values of the assets transferred by the acquirer, the liabilities assumed by the acquirer and the equity interests issued by the acquirer. In addition, other expense directly contributed to the acquisition is included. The acquirer shall measure the identifiable assets acquired from business combination and the liabilities or contingent liabilities assumed at their acquisition-date fair values without considering non-controlling interest. The acquirer shall recognize goodwill as of the acquisition date measured as the excess of the consideration transferred over the fair value of net identifiable assets held according to holding proportion. Adversely, the difference may result in directly recognizing a gain on a purchase.

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

(Continued) 31 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(iii) The acquisition value of insurance policies

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

(p) Lease

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Otherwise a lease is classified as an operating lease.

The Company and its subsidiaries recognized lease payments or receivables under an operating lease as current profit or loss using a straight-line method over the lease term.

As lessors, the Company and its subsidiaries shall derecognize assets held under a finance lease at contract date and recognize them as lease payment receivable at an amount equal to the present value of lease payments. The difference between gross amount and present value of lease payment receivables is recognized as unrealized interest income and transferred to interest income of current period on an accrual basis. Lease revenue is calculated based on the interest rate implicit in the lease or the incremental borrowing rate of interest on the remaining balance of lease payment receivables and recognized in current profit or loss over the lease term.

As lessees, the Company and its subsidiaries shall capitalize finance leases at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. Interest expense is recognized by amortizing finance leased liability when each rental is paid. Lease expense is calculated based on the interest rate implicit in the lease or the incremental borrowing rate of interest on the opening balance of finance leases liabilities of each period and recognized in current profit or loss over the lease term. The property and equipment acquired under a finance lease contract is measured at cost model.

(q) Segregated account insurance product assets

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

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

(Continued) 32 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

The revenue and expense in the account book refer to the accumulation of variable revenues and expenses that meet the definition of an insurance contract under IFRS 4, and they are recognized under “segregated account insurance revenue” and “segregated account insurance expense” , respectively. That is, for a segregated account insurance product that is classified as an insurance contract, the premiums received are recognized as premium income, after deducting preliminary expenses and other expenses such as account management services fees, while the difference between the original cost and the disposal/ subsequent valuation is recognized as profit and loss.

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

(r) Foreclosed properties

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

(s) Provisions

The Company and its subsidiaries recognize liability reserve only if all of the following conditions are met:

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

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

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

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

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

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

(Continued) 33 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

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

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

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

(t) Foreign exchange rate fluctuation reserves

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

(Continued) 34 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(u) Treasury stock

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

When treasury stock is cancelled, Capital surplus- paid in capital and Capital stock should be debited. The difference should be offset against the capital surplus that incurs due to the transaction of similar treasury stock, if the book value is greater than the aggregate amount of par value and capital premium. If the balance is insufficient to absorb the loss, retained earnings should be debited. On the contrary, if the book value is less than the aggregate amount of par value and capital premium, capital surplus resulting from the transaction of similar treasury stock should be credited.

(v) Revenue recognition

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

(ii) Please refer to Note 4(f)1. Financial Assets for more information on interest income from receivables and loans.

(iii) Life insurance business

(1) Insurance income and contract acquisition cost

In terms of the insurance contracts and the investment linked contracts with a discretionary participation feature, the first and the subsequent period premiums are recognized as revenue when the insurance process is completed and the total payment is received. The contract acquisition costs such as commission expenses are recognized as current expenses when the insurance contracts become effective.

The premiums on insurance contracts that are not investment linked insurance and classified as financial products without a discretionary participation feature are recognized as “reserves for insurance contract of the nature of financial products.” The acquisition costs are used to write off “reserves for insurance contract of the nature of financial products” when the insurance contracts become effective.

Insurance products with a non segregated account classified as financial products without a discretionary participation feature are all recognized as “liabilities on insurance product—segregated account” after deducting the expenses, such as the front end load and investment administrative service charge. The acquisition costs of investment administrative service, including the commission expenses and the additional charges related to the issue of new contracts, are recognized as “deferred cost of acquirement.”

(Continued) 35 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

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

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

The paid acquisition costs of the investment management service for an insurance policy include commission expense and other incremental costs directly related to issuing a new contract. Those costs’ recognition is deferred under “deferred cost of acquirement”, and they are amortized using the straight line method at a constant proportion over the period during which the service is provided. The amortized amount is recognized under “other non interest net profit or loss”.

(iv) Property insurance

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

(w) Employee benefit

(i) Short-term employee benefit: The Company or its subsidiaries expects to settle all short-term non-discounted benefits in twelve months after the end of annual financial reporting date in which the services are rendered by employees, and recognize as current expenses.

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

(Continued) 36 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(1) A defined contribution plan is a post-employment benefit plan under which a company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan that is due more than 12 months after the end of the period in which the employees render the service are discounted to their present value.

(2) A defined benefit plan is a post-employment benefit plan under which benefit is paid to an employee on the basis of their ages, service periods and compensated salaries at the date of retirement. The Company and its subsidiaries recognize actuarial gains and losses which are incurred by the change of actual experience and actuarial assumption in other comprehensive income, and recognize pension asset or liability in balance sheet in which asset or liability is the amount of actuarial present value of defined benefit obligation deducting fair value of plan assets. The calculation of defined benefit obligation is performed annually by an actuary using the projected unit credit method. The actuarial present value of defined benefit obligation is calculated by discounting future cash flow at the yield rate on AA credit rated bonds that have maturity dates approximating the terms of the obligation and that are denominated in the same currency in which the benefits are expected to be paid. In accordance with the article 30 of the Regulations Governing the Preparation of Financial Reports by Public Banks, when the interest incurred from retiree deposits with favorable rates exceed the interest generated from market rate, it should be considered as the actuarial amount according to defined benefit plan regulated on IAS 19 “Employee Benefits” since the employee’ s retirement date. Otherwise, the parameter of actuarial assumption of competent authority should be followed (if have). The interim amount of define benefit plan is determined based on the pension cost rate, which is the actuarial rate at the end of last fiscal year, and the amount, which is from the beginning of the year to the end of current period. In addition, an adjustment would be made if significant market fluctuation, significant decrease, pay-off or other significant one-time event occurs after the end of period.

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

(iii) Termination benefits: Termination benefits are incurred when the Company and its subsidiaries terminate employment prior to qualifying for retirement, or the employees accepted voluntary redundancy to get termination benefits in return. Termination benefits are recognized as a liability when the Company and its subsidiaries are committed demonstrably, without realistic possibility of withdrawal, to a formal detailed plan to provide termination benefits or make an offer of termination benefits to encourage voluntary redundancy. Termination benefits are payable more than 12 months after the reporting period, then they are discounted to their present value.

(Continued) 37 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(x) Share-based payment transactions

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

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

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

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

(y) Compensations of employees and directors

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

(z) Income taxes

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

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

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

(Continued) 38 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(1) Levied by the same taxing authority; or

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

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

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

The Company’s 10% surtax on undistributed earnings is recorded as current expense on the date of the resolution of the shareholders’ meeting for declaring the distribution of earnings.

(aa) Contingent liability

A contingent liability is defined as a possible obligation that arises from past events and 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 Company and its subsidiaries; or a present obligation that arises from past events but is not recognized because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability. The Company and its subsidiaries shall not recognize a contingent liability; instead, contingent liability shall be appropriately disclosed.

(ab) Insurance contract

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

(Continued) 39 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

The insurance subsidiary defines significant insurance risk as an event which might lead to additional significant payment. But cases that lack commercial essences are excluded. When an insurance policy was originally judged to meet the definition of an insurance contract, it remains an insurance contract until its rights and obligations end or mature, even if the risk has been significantly reduced in the policy period. Contracts that do not transfer significant insurance risk are classified as insurance contracts with the nature of a financial product. When the significant risk of an insurance contract with the nature of a financial product is transferred to the Company’ s insurance subsidiary, the Company’s insurance subsidiary will re classify it as an insurance contract. Insurance contracts and insurance contracts with financial instrument features can be further classified as insurance with or without a discretionary participation feature. Except for guaranteed benefits, a discretionary participation feature is a contractual right to receive. The right also has the features below:

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

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

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

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

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

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

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

(ac) Operating segments

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

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

(Continued) 40 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(5) Primary Sources of Significant Accounting Judgments, Estimates and Assumptions Uncertainty:

When preparing for the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Financial Holding Companies, the Regulations Governing the Preparation of Financial Reports by Public Banks, the Regulations Governing the Preparation of Financial Reports by Securities Firms, the Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants, the Regulations Governing the Preparation of Financial Reports by Insurance Companies, International Financial Report Standards (IFRS) and following IAS 34 “Interim Financial Reporting” as accepted by Financial Supervisory Commission, the management needs to make judgments, estimates, and assumptions that affect the adoption of accounting policies, reported amounts of assets, liabilities, revenues, and expenses. Actual results could differ from these estimates.

When the Company and its subsidiaries compile the consolidated quarterly financial statements, the major source of the judgments and estimates uncertainty which the management decides on accepting policies is consistent with Note 5 in 2016 annual consolidated financial statements.

(6) Summary of major accounts:

(a) Cash and Cash equivalents

December 31, June 30, 2017 2016 June 30, 2016 Cash on hand $ 26,015,628 26,014,992 27,173,375 Petty cash and revolving fund 23,953 24,618 25,870 Checks for clearance 1,987,605 4,723,305 2,149,390 Cash in transit 4,917,647 10,281,236 2,670,831 Due from other banks 99,389,329 87,566,922 70,532,844 Cash equivalents 158,404 270,443 95,751 Total $ 132,492,566 128,881,516 102,648,061

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

December 31, June 30, 2017 2016 June 30, 2016 Required reserve—Account A $ 62,224,711 42,506,803 19,683,003 Required reserve—Account B 45,492,113 44,443,419 42,904,963 Required reserve—Foreign Currency - 103,293 200,173 Due from Central Bank 107,724,866 119,410,754 131,677,344 Call loans to banks 82,912,460 58,686,926 126,635,176 Bank Overdrafts - 70 - Total $ 298,354,150 265,151,265 321,100,659

(Continued) 41 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

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

Parts of the above due from Central Bank and call loans to banks are restricted, and please refer to Note 8 for further details.

The financial assets held for trading and the financial assets designated as at fair value through profit or loss by the Company and its subsidiaries were as follows:

December 31, June 30, 2017 2016 June 30, 2016 Financial Assets Held for Trading Commercial paper $ 65,709,363 86,814,786 79,027,333 Negotiable certificates of deposit - 1,613,950 2,500,000 Treasury bills 148,185 87,330 - Government bonds 3,922,436 3,501,222 3,579,036 Corporate bonds 5,542,234 6,105,756 6,519,142 Financial bonds 1,091,136 - - Convertible bonds 2,895,629 3,936,353 5,152,530 Other securities and bonds 188,141 164,777 233,768 Listed and OTC securities 12,348,476 7,426,676 3,721,638 Asset backed securities 24,012,887 - - Beneficiary certificates 3,029,977 3,193,900 2,970,777 Derivative financial assets 37,913,382 65,039,124 66,293,872 Valuation adjustment of financial assets 921,676 133,081 253,016 157,723,522 178,016,955 170,251,112 Financial Assets Designated at Fair Value through Profit or Loss Government bonds $ 15,065,274 16,025,132 16,136,355 Corporate bonds 271,600 551,400 628,600 Structured deposit 100,000 100,000 250,000 Other securities and bonds 1,188,250 1,240,650 1,453,638 Valuation adjustment of financial assets 155,240 (618,886) 355,151 16,780,364 17,298,296 18,823,744 Total $ 174,503,886 195,315,251 189,074,856

(Continued) 42 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Please refer to Notes 6(t) for information with regard to the repurchase conditions for, or restrictions on, financial assets held for trading shown above.

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

December 31, June 30, 2017 2016 June 30, 2016 Derivative financial liabilities $ 41,415,688 69,400,175 69,739,493 Financial liabilities designated as at fair value 33,115,580 28,178,587 38,178,591 through profit or loss Borrowed listed and OTC securities - 3,634 366,675 Total $ 74,531,268 97,582,396 108,284,759

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

December 31, June 30, 2017 2016 June 30, 2016 Financial debentures at fair value $ 33,115,580 28,178,587 38,178,591 Cumulative changes in fair value that is 950,471 317,142 (2,847,804) attributable to changes in the credit risk The difference between book value and the 3,925,032 5,294,736 5,407,509 amount payable upon maturity as specified in the contract

The Company’ s subsidiary CTBC Bank Co., Ltd., assesses changes in fair value that is not attributable to changes in market conditions that give rise to swing of market risk to evaluate changes in fair value due to shift of credit risk. For the six months ended June 30, 2017 and 2016, there is no transfer of cumulative gain or loss within equity.

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

For the six months ended June 30, 2017 2016 January 1 $ 3,522,038 3,480,703 Current issuance of debentures 1,160,587 - Current amortization (441,793) (367,144) Foreign exchange losses (190,531) (76,217) June 30 $ 4,050,301 3,037,342

(Continued) 43 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(d) Available-for-sale financial assets－net

December 31, June 30, 2017 2016 June 30, 2016 Commercial paper $ 2,498,982 599,858 2,131,526 Negotiable certificates of deposit 307,600,017 389,021,654 252,482,546 Treasury bills 3,681,578 5,279,689 5,378,519 Government bonds 122,946,671 122,699,904 119,742,893 Corporate bonds 72,639,057 83,489,569 85,363,387 Financial debentures 76,875,490 77,205,317 86,782,981 Beneficiary certificates 56,204,151 31,807,769 45,871,064 Listed and OTC securities 79,540,013 62,043,790 67,416,457 Asset backed securities 25,958,531 39,716,255 48,736,267 Other securities and bonds 3,109,962 1,732,387 814,924 Valuation adjustment of financial assets (2,362,698) (4,785,733) 2,120,826 Total $ 748,691,754 808,810,459 716,841,390

Please refer to Note 6(t) and 8 for information with regard to the repurchase conditions for, or restrictions on available-for-sale financial assets shown above.

(e) Derivative financial instruments－hedging

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

December 31, June 30, 2017 2016 June 30, 2016 Fair value hedge: Interest rate swaps $ 44,875 48,756 93,516 Non-delivery forwards 11,111 - 46,568 Hedge of a net investment in a foreign operation: Currency swaps 167,625 367,586 124,046 Total $ 223,611 416,342 264,130

(Continued) 44 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

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

December 31, June 30, 2017 2016 June 30, 2016 Fair value hedge: Non-delivery forwards $ 988 19,779 - Hedge of a net investment in a foreign operation: Currency swaps 280,888 283,820 623,276 Total $ 281,876 303,599 623,276

(i) Fair value hedge

In order to minimize the risk from future market interest rate fluctuation, the Company’ s subsidiary CTBC Bank Co., Ltd. entered into interest rate swap transactions, where the interest rate payable on fixed interest rate debts issued has been swapped with a floating interest rate to reduce interest rate risk. The Company’s subsidiary CTBC Bank Co., Ltd. further entered into non delivery forwards; these contracts are principally to hedge against the foreign exchange fluctuation of capital of the international banking department.

Designated hedging instruments Financial instruments Fair value designated as hedging June 30, December June 30, Hedged items instruments 2017 31, 2016 2016 Financial debentures in Interest rate swaps $ 44,875 48,756 93,516 NTD Capital of international Non-delivery forwards 10,123 (19,779) 46,568 banking department in USD

For the three and six months ended June 30, 2017 and 2016, net (losses) gains on the hedging derivative financial instruments and the hedged items were as follows:

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Net (losses) gains from $ (4,217) 11,332 12,767 42,369 derivative financial instruments

Net losses from the hedged $ (32,277) (29,895) (74,086) (82,679) items

(Continued) 45 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

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

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

Designated hedging instruments Financial instruments Fair value designated as hedging June 30, December June 30, Hedged items instruments 2017 31, 2016 2016 CTBC Bank Co., Ltd. Ho Currency swaps $ (13,978) (11,591) 10,670 Chi Minh City Branch CTBC Capital Corp. 〞 (121,215) (133,127) 94,006 CTBC Bank Corp. (Canada) 〞 (11,240) 231 (13) The Tokyo Star Bank , Ltd. 〞 33,170 228,253 (603,893)

(f) Securities purchased under resell agreements

December 31, June 30, 2017 2016 June 30, 2016 Securities purchased under resell agreements $ 25,576,088 25,510,984 6,478,585 Face value of securities $ 24,786,692 24,399,077 6,089,000

(g) Receivables－net

December 31, June 30, 2017 2016 June 30, 2016 Notes receivable $ 363,384 363,781 554,968 Accounts receivable 84,838,044 64,483,960 74,843,462 Accounts receivable factoring 17,457,277 19,479,864 32,361,737 Interest receivable 17,956,766 16,878,115 15,565,448 Acceptances receivable 7,970,007 7,464,074 6,126,347 Accrued income 716,024 72,645 323,878 Securities margin loan receivable 3,234,993 2,768,228 2,406,200 Securities receivable 2,763,186 316,831 25,078,468 Financial leasing receivable 9,529,577 9,624,559 8,947,201 Interbank clearing receivable 1,812,283 1,932,012 1,811,340 Premium receivable 4,636,957 3,937,838 4,553,812 Separate account of investment products 516,676 928,489 608,672 receivable Other receivables 6,369,306 5,458,632 4,464,837 Subtotal 158,164,480 133,709,028 177,646,370 Less: Allowance for credit losses (3,310,990) (3,393,769) (3,780,649) Total $ 154,853,490 130,315,259 173,865,721

(Continued) 46 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

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

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

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

Receivables of the Company and its subsidiaries should be included in impairment assessment. Please refer to the following table for the amount of receivables and the respective allowance for credit losses, excluding that of credit card receivables, which are accounted for under liability reserve. Total receivables do not encompass investments in security-related and other receivables whose impairment assessments are consistent with corresponding assets.

December 31, June 30, 2017 2016 June 30, 2016 Receivables excluded from evaluation of $ 22,540,084 19,686,323 36,576,025 impairment

June 30, 2017 Adjustment of discount and Allowance for Items Receivables premium credit losses With objective evidence of Individual assessment $ 1,970,491 - 1,328,406 impairment Collective assessment 3,423,112 - 454,520 Without objective evidence Collective assessment 129,594,971 - 1,528,064 of impairment Total $ 134,988,574 - 3,310,990

December 31, 2016 Adjustment of discount and Allowance for Items Receivables premium credit losses With objective evidence of Individual assessment $ 2,178,125 - 1,382,413 impairment Collective assessment 3,435,692 - 445,947 Without objective evidence Collective assessment 106,095,611 - 1,565,409 of impairment Total $ 111,709,428 - 3,393,769

(Continued) 47 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 Adjustment of discount and Allowance for Items Receivables premium credit losses With objective evidence of Individual assessment $ 2,478,699 - 1,778,714 impairment Collective assessment 2,483,433 - 448,389 Without objective evidence Collective assessment 133,417,955 - 1,553,546 of impairment Total $ 138,380,087 - 3,780,649

(h) Loans－net

December 31, June 30, 2017 2016 June 30, 2016 Corporate loans $ 527,533,094 492,332,484 542,559,430 Micro business loans 12,349,974 15,559,005 19,549,590 Mortgage loans 551,675,427 518,580,476 487,517,350 Automobile loans 12,983,800 15,426,993 15,293,047 Consumer loans 106,995,609 107,769,966 106,284,691 Life insurance loans 18,692,781 18,321,814 18,682,840 Automatic premium loans 2,990,383 2,849,367 2,698,223 Subtotal of NTD loans 1,233,221,068 1,170,840,105 1,192,585,171 Foreign currency loans 937,289,778 960,074,979 1,003,427,779 Non accrual loans 9,512,245 12,569,847 14,790,818 Subtotal 2,180,023,091 2,143,484,931 2,210,803,768 Less: Allowance for credit losses (27,552,750) (29,347,750) (29,457,753) Less: Adjustment of discount and premium (1,483,717) (1,537,850) (1,608,203) Fair value adjustment resulting from 44,743 62,609 86,148 acquisition Total $2,151,031,367 2,112,661,940 2,179,823,960

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

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

(Continued) 48 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

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

December 31, June 30, 2017 2016 June 30, 2016 Non performing loans $ 10,065,275 13,114,386 15,524,969

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

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Suspended interest on non $ 2,954 6,549 35,562 51,950 performing loans

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

For the six months ended June 30, 2017 and 2016, there were no loans written off without recourse.

Loans should be included in the total amounts of assessment of impairment to determine the allowance for credit losses, which was as follows:

June 30, 2017 Adjustment of discount and Allowance for Items Loans premium credit losses With objective evidence of Individual assessment $ 13,899,087 1,223 4,387,937 impairment Collective assessment 18,920,538 3,858 3,464,246 Without objective evidence Collective assessment 2,147,203,466 (1,488,798) 19,700,567 of impairment Total $ 2,180,023,091 (1,483,717) 27,552,750

December 31, 2016 Adjustment of discount and Allowance for Items Loans premium credit losses With objective evidence of Individual assessment $ 14,794,374 39,127 5,385,722 impairment Collective assessment 19,088,103 3,092 3,857,870 Without objective evidence Collective assessment 2,109,602,454 (1,580,069) 20,104,158 of impairment Total $ 2,143,484,931 (1,537,850) 29,347,750

(Continued) 49 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 Adjustment of discount and Allowance for Items Loans premium credit losses With objective evidence of Individual assessment $ 16,214,925 32,791 5,391,660 impairment Collective assessment 19,661,433 774 3,992,437 Without objective evidence Collective assessment 2,174,927,410 (1,641,768) 20,073,656 of impairment Total $ 2,210,803,768 (1,608,203) 29,457,753

(i) Allowance for credit losses

The changes in allowance for credit losses, attributed to loans, receivables, other financial assets, and provision of guarantee reserves, were as follows:

For the six months ended June 30, 2017 Receivables Loans Inherent risk of Default risk of Inherent risk of Default risk of overall claims specific claims Total overall claims specific claims Total Other (Note) Total Beginning balance $ 1,565,409 1,828,360 3,393,769 20,104,158 9,243,592 29,347,750 505,850 33,247,369 Current provision(reversal) 43,897 132,702 176,599 (107,036) 140,409 33,373 176,419 386,391 Current write-off - (659,228) (659,228) (599) (2,111,488) (2,112,087) (45,868) (2,817,183) Recovery of bad debts - 471,937 471,937 - 667,263 667,263 727 1,139,927 Non-accrual loans - 12,517 12,517 - - - (12,517) - transferred from non- loan financial assets Exchange rate effects (81,242) (3,362) (84,604) (295,956) (87,593) (383,549) 14,990 (453,163) Ending balance $ 1,528,064 1,782,926 3,310,990 19,700,567 7,852,183 27,552,750 639,601 31,503,341

For the six months ended June 30, 2016 Receivables Loans Inherent risk of Default risk of Inherent risk of Default risk of overall claims specific claims Total overall claims specific claims Total Other (Note) Total Beginning balance $ 1,608,779 830,580 2,439,359 19,139,595 8,552,135 27,691,730 565,448 30,696,537 Current provision 8,824 1,415,174 1,423,998 774,088 1,160,340 1,934,428 83,220 3,441,646 Current write off - (505,664) (505,664) 3,729 (1,624,927) (1,621,198) (44,426) (2,171,288) Recovery of bad debts - 488,984 488,984 - 713,639 712,639 355 1,201,978 Non-accrual loans - 406 406 - - - (406) - transferred from non- loan financial assets Exchange rate effects (64,057) (2,377) (66,434) 156,244 583,910 740,154 8,043 681,763 Ending balance $ 1,553,546 2,227,103 3,780,649 20,073,656 9,385,097 29,457,753 612,234 33,850,636

Note: Included other financial assets and provision of guarantee reserves, etc.

(Continued) 50 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(j) Reinsurance assets－net

December 31, June 30, 2017 2016 June 30, 2016 Claims recoverable from reinsurers $ 488,071 619,737 682,300 Due from reinsurers and ceding companies 431,238 697,431 660,591 Less: Allowance for credit losses (17,558) (17,558) (17,529) Subtotal 901,751 1,299,610 1,325,362 Reinsurance reserve assets : Ceded unearned premium reserve 1,114,294 1,488,662 1,701,630 Ceded claim reserve 402,955 507,077 502,035 Ceded premium deficiency reserve 15,001 27,383 19,626 Subtotal 1,532,250 2,023,122 2,223,291 Total $ 2,434,001 3,322,732 3,548,653

As of June 30, 2017, December 31 and June 30, 2016, non-performing loans of due from reinsures and ceding companies were $17,565, $17,511 and $17,601, respectively, and the bad debts allowance were $17,558, $17,511 and $17,529, respectively.

(k) Held-to-maturity financial assets－net

December 31, June 30, 2017 2016 June 30, 2016 Commercial paper $ 300,358 318,556 - Negotiable certificates of deposit 139,733,188 23,073,367 30,627,392 Treasury bills 3,321,419 4,088,773 4,099,839 Government bonds 157,515,027 148,232,254 131,950,561 Corporate bonds 18,746,693 15,723,952 14,556,447 Financial debentures 29,634,032 24,447,957 20,338,541 Asset backed securities 427,517 430,148 159,252 Other securities 134,709 - 48,488 Total $ 349,812,943 216,315,007 201,780,520

Please refer to Notes 6(t) and 8 for information with regard to the repurchase conditions for, or restrictions on, held to maturity financial assets shown above.

(Continued) 51 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(l) Investment under equity method－net

June 30, 2017 % Book value Investment in associates: Grand Bills Finance Corporation 21.15 $ 1,878,536 (original investment 1,010,880 thousand) AZ-Star Co., Ltd. 40.00 3,379 (original investment at JPY 12,000 thousand) AZ Star no. 1 Investment Limited Partnership 43.98 453,760 (original investment at JPY 1,874,068 thousand) CTBC Security Co., Ltd. 100.00 54,681 (original investment at 58,839 thousand) Ho-fa Land Development Co., Ltd. 90.00 12,433,328 (original investment at 12,251,513 thousand) Wu Tz Development Co., Ltd. 99.00 2,066,534 (original investment at 2,101,144 thousand) Top Taiwan IX Venture Capital Co., Ltd. 25.00 222,416 (original investment at 200,000 thousand) Investment in joint ventures: King Dragon Life Investment Co., Ltd. 50.00 672,455 (original investment at 1,646,486 thousand) Total $ 17,785,089

December 31, 2016 % Book value Investment in associates: Grand Bills Finance Corporation 21.15 $ 1,868,636 (original investment 1,010,880 thousand) AZ-Star Co., Ltd. 40.00 4,107 (original investment at JPY 12,000 thousand) AZ Star no. 1 Investment Limited Partnership 43.98 342,285 (original investment at JPY 1,380,268 thousand) CTBC Security Co., Ltd. 100.00 52,969 (original investment at 58,839 thousand) Ho-fa Land Development Co., Ltd. 90.00 12,569,908 (original investment at 12,251,513 thousand) Wu Tz Development Co., Ltd. 99.00 2,077,291 (original investment at 2,101,144 thousand) Top Taiwan IX Venture Capital Co., Ltd. 25.00 246,753 (original investment at 200,000 thousand) Investment in joint ventures: King Dragon Life Investment Co., Ltd. 50.00 723,760 (original investment at 1,646,486 thousand) Total $ 17,885,709 (Continued) 52 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 % Book value Investment in associates: Grand Bills Finance Corporation 21.15 $ 1,877,224 Grand Bills Finance Corporation 1,010,880 thousand) AZ-Star Co., Ltd. 40.00 3,508 (original investment at JPY 12,000 thousand) AZ Star no. 1 Investment Limited Partnership 43.98 387,278 (original investment at JPY 1,329,868 thousand) CTBC Security Co., Ltd. 100.00 49,848 (original investment at 58,839 thousand) Ho-fa Land Development Co., Ltd. 90.00 12,423,032 (original investment at 12,251,513 thousand) Wu Tz Development Co., Ltd. 99.00 1,351,189 (original investment at 1,368,544 thousand) Top Taiwan IX Venture Capital Co., Ltd. 25.00 233,387 (original investment at 200,000 thousand) Mirae Asset Global Investment (Taiwan) Co., Ltd. 20.55 86,266 (original investment at 253,413 thousand) Investment in joint ventures: King Dragon Life Investment Co., Ltd. 50.00 856,001 (original investment at 1,646,486 thousand) Total $ 17,267,733

For the three and six months ended June 30, 2017 and 2016, the amount of profit or loss from associates and joint ventures recognized under equity-method investments were as follows:

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Investment in associates $ 103,868 96,929 196,680 206,960 Investment in joint ventures (25,431) (27,543) (23,064) (76,725) Total $ 78,437 69,386 173,616 130,235

(Continued) 53 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(i) Investment in associates:

As of June 30, 2017, December 31, 2016 and June 30, 2016, the Company's subsidiary Taiwan Life Insurance Co., Ltd. acquired 90% equity stake of Ho-fa Land Development Co., Ltd. without any management involvement by posting directors, supervisors, managers or other ways in accordance with Article 146-5 of the Insurance Act. Ho-fa Land Development Co., Ltd. is set up for participating in the program of “Kaohsiung City Ho-fa industrial park development, sell (bid) and management”. However, the final approval of practical operations, such as development plans, expenditures and the bid price of the land, were made by Kaohsiung City Government. As a result, the Company's subsidiary Taiwan Life Insurance Co., Ltd. has no de facto control, but with significant influence, hence, Ho-fa Land Development Co., Ltd. is excluded in the consolidated entities.

As of June 30, 2017, December 31, 2016 and June 30, 2016, the Company's subsidiary Taiwan Life Insurance Co., Ltd. acquired 99% equity stake of Wu Tzu Development Co., Ltd. Wu Tzu Development Co., Ltd. was set up for the purpose of participating in “the Development and Operating Program of Taichung Intercontinental Baseball Stadium” , and was authorized by Taichung City Government to operate the Taichung Intercontinental Baseball Stadium, build multiple functional sport center, parking lots, and other items raised by Wu Tzu Development Co., Ltd. The aforesaid items should be reviewed and approved by Taichung City Government before operating. Furthermore, without any management involvement by posting directors, supervisors, managers or other ways in accordance with Article 146-1 of the Insurance Act, as a result, the Company's subsidiary Taiwan Life Insurance Co., Ltd. has no de facto control but with significant influence, hence, Wu Tzu Development Co., Ltd. is excluded in the consolidated entities.

The following is the collected prorated financial information of the associates that are individually insignificant to the Company and its subsidiaries. The financial information is derived from the consolidated financial statement:

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Net Income from Continuing $ 102,817 94,821 194,098 204,852 Operations Other comprehensive income 11,472 (3,226) 10,872 11,076 Comprehensive Income $ 114,289 91,595 204,970 215,928

(ii) Investment in joint venture

The joint agreement between the Company’s subsidiary Taiwan Life Insurance Co., Ltd. and King Dragon Life Insurance Co., Ltd. is a joint venture, hence accounted for under equity method. As of June 30, 2017, the Company’s subsidiary Taiwan Life Insurance Co., Ltd. hold 50% voting rights over King Dragon Life Insurance Co., Ltd., and its capital amounted to CNY$700,000 thousand.

(Continued) 54 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

The following is the collected information prorated financial information of joint venture that is individually insignificant to the Company’s subsidiary Taiwan Life Insurance Co., Ltd. The financial information is derived from the consolidated financial statement:

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Net loss from continuing $ (25,431) (27,543) (23,064) (76,725) operations Other comprehensive income 12,274 (16,283) (28,242) (23,775) $ (13,157) (43,826) (51,306) (100,500)

(m) Other financial assets－net

December 31, June 30, 2017 2016 June 30, 2016 Short term advances $ 160,788 723,023 180,002 Less: allowance for credit losses－short-term (26,779) (22,330) (16,435) advances Deposits pledged 704,253 733,209 661,353 Investment in debt instruments without active 760,207,747 681,706,540 590,845,981 markets—net Investment in equity instruments measured at 9,729,122 9,554,894 9,570,212 cost—net Non-accrual loans transferred from non-loan 320,078 262,769 269,517 financial assets Less: Allowance for credit losses—non- (267,452) (217,605) (233,021) accrual loans transferred from non-loan financial assets Separate insurance products 48,946,471 46,347,154 48,938,718 Structured deposits - - 3,360,915 Customer margin deposit 256,750 308,376 82,728 Others 176,644 559,666 61,202 Total $ 820,207,622 739,955,696 653,721,172

Please refer to Note 6(i) for information with regard to the changes of allowance for short term advances and allowance for credit losses— non-accrual loans transferred from non-loan financial assets shown above.

Investment in debt instruments without active markets refers to government bonds, corporate bonds, financial bonds and foreign bonds held by the Company and its subsidiaries. Due to the lack of active quoted markets, amortized costs are used for measuring such assets.

(Continued) 55 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Investment in equity instruments measured at cost is stock investments of the Company and its subsidiaries. Since no active quoted market price is available, nor the fair value can be reliably measured, acquisition cost is, therefore, adopted as the baseline for evaluating such assets.

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

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

(n) Investment property－net

June 30, 2017 Accumulated Accumulated Asset Cost depreciation impairment Book value Land $ 41,741,166 - 231,510 41,509,656 Buildings 12,515,254 884,150 94,323 11,536,781 Construction in progress 3,069,831 - - 3,069,831 Prepayment for land 53,049 - - 53,049 Total $ 57,379,300 884,150 325,833 56,169,317 Fair value $ 60,212,178

December 31, 2016 Accumulated Accumulated Asset Cost depreciation impairment Book value Land $ 34,503,385 - 149,316 34,354,069 Buildings 11,308,769 656,233 48,725 10,603,811 Construction in progress 1,994,975 - - 1,994,975 Prepayment for land 57,082 - - 57,082 Total $ 47,864,211 656,233 198,041 47,009,937 Fair value $ 51,019,781

June 30, 2016 Accumulated Accumulated Asset Cost depreciation impairment Book value Land $ 21,278,694 - - 21,278,694 Buildings 2,637,160 89,258 - 2,547,902 Construction in progress 1,544,137 - - 1,544,137 Prepayment for land 4,990,982 - - 4,990,982 Total $ 30,450,973 89,258 - 30,361,715 Fair value $ 30,501,997

(Continued) 56 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Changes in the cost were as follows:

January 1, 2017 Current increase Current decrease Others(Note) June 30, 2017 Land $ 34,503,385 7,626,044 388,263 - 41,741,166 Buildings 11,308,769 1,471,769 265,284 - 12,515,254 Construction in progress 1,994,975 1,079,115 4,259 - 3,069,831 Prepayment for land 57,082 530,074 534,107 - 53,049 Total $ 47,864,211 10,707,002 1,191,913 - 57,379,300

January 1, 2016 Current increase Current decrease Others(Note) June 30, 2016 Land $ 20,737,905 615,714 74,462 (463) 21,278,694 Buildings 3,023,749 143,690 17,060 (513,219) 2,637,160 Construction in progress 75,644 1,475,349 6,857 1 1,544,137 Prepayment for land 694,410 4,976,699 680,127 - 4,990,982 Total $ 24,531,708 7,211,452 778,506 (513,681) 30,450,973

Changes in accumulated depreciation were as follows:

January 1, 2017 Current increase Current decrease Others June 30, 2017 Buildings $ 656,233 357,965 130,048 - 884,150

January 1, 2016 Current increase Current decrease Others(Note) June 30, 2016 Buildings $ 517,583 52,622 4,260 (476,687) 89,258

Changes in accumulated impairment were as follows:

January 1, 2017 Current increase Current decrease Others June 30, 2017 Land $ 149,316 82,194 - - 231,510 Buildings 48,725 45,603 5 - 94,323 Total $ 198,041 127,797 5 - 325,833

Note：Including merge adjustments.

January 1, 2016 Current increase Current decrease Others(Note) June 30, 2016 Land $ 463 - - (463) - Buildings 36,531 - - (36,531) - Total $ 36,994 - - (36,994) -

Note: Including merge adjustments.

The fair value of investment property is based on a valuation by an independent appraiser who holds a recognized and relevant professional qualification and has recent experience in the location and category of the investment property being valued. The value of investment properties takes into consideration the appraisal value based on market value.

(Continued) 57 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

The rental income and direct operating expenses arising from investment properties under operating leases of the Company and its subsidiaries was as follows:

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Rental income from investment $ 318,698 97,723 582,130 201,588 property Direct operating expense arising $ 134,403 42,658 260,069 81,233 from investment property that generated rental income during the period Direct operating expense arising $ 1,191 410 2,362 664 from investment property that did not generate rental income during the period

Under the approval of the board of director on May 2016, The Company’s subsidiary Taiwan Life Insurance Co., Ltd. has signed a contract with Hanshin Asset Management Co., Ltd to acquire the ownership of the land and building, which addressed at Wendong St,Qianjin Dist., Kaohsiung City. The total contract amounted to 16,850,625.

The Company and its subsidiaries have no pledged investment properties.

(o) Premises and equipment－net

Accumulated Accumulated June 30, 2017 Cost depreciation impairment Net Land $ 17,463,548 - 41,383 17,422,165 Buildings 30,589,499 5,626,313 23,584 24,939,602 Transportation equipment 99,567 62,941 - 36,626 Miscellaneous equipment 8,418,519 4,194,443 - 4,224,076 Construction in progress 901,392 - - 901,392 Prepayment for equipment 48,937 - - 48,937 Prepayment for land and buildings 4,644,933 - - 4,644,933 Leased premises 1,146,459 494,969 - 651,490 Total $ 63,312,854 10,378,666 64,967 52,869,221

Accumulated Accumulated December 31, 2016 Cost depreciation impairment Net Land $ 23,389,333 - 123,577 23,265,756 Buildings 31,572,068 5,590,551 69,182 25,912,335 Transportation equipment 105,371 62,215 - 43,156 Miscellaneous equipment 8,361,742 4,149,244 - 4,212,498 Construction in progress 565,088 - - 565,088 Prepayment for equipment 48,079 - - 48,079 Prepayment for land and buildings 5,691,414 - - 5,691,414 Leased premises 1,144,393 419,272 - 725,121 Total $ 70,877,488 10,221,282 192,759 60,463,447

(Continued) 58 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Accumulated Accumulated June 30, 2016 Cost depreciation impairment Net Land $ 27,071,921 - 205,363 26,866,558 Buildings 32,588,139 5,650,009 113,761 26,824,369 Transportation equipment 104,096 57,880 - 46,216 Miscellaneous equipment 7,933,608 3,865,286 - 4,068,322 Construction in progress 545,042 - - 545,042 Prepayment for equipment 54,238 - - 54,238 Prepayment for land and buildings 5,313,272 - - 5,313,272 Leased premises 1,284,569 364,091 - 920,478 Total $ 74,894,885 9,937,266 319,124 64,638,495

Changes in the cost were as follows:

Others (exchange January 1, 2017 Current increase Current decrease difference) June 30, 2017 Land $ 23,389,333 1,263,640 7,175,682 (13,743) 17,463,548 Buildings 31,572,068 1,023,905 1,888,273 (118,201) 30,589,499 Transportation equipment 105,371 7,425 8,009 (5,220) 99,567 Miscellaneous equipment 8,361,742 588,811 452,683 (79,351) 8,418,519 Construction in progress 565,088 611,578 274,453 (821) 901,392 Prepayment for equipment 48,079 80,289 79,431 - 48,937 Prepayment for land and 5,691,414 358,745 1,405,226 - 4,644,933 buildings Leased premises 1,144,393 43,146 29,027 (12,053) 1,146,459 Total $ 70,877,488 3,977,539 11,312,784 (229,389) 63,312,854

January 1, 2016 Current increase Current decrease Others (Note) June 30, 2016 Land $ 27,130,691 74,462 478,806 345,574 27,071,921 Buildings 32,806,190 646,101 89,217 (774,935) 32,588,139 Transportation equipment 115,385 6,612 5,921 (11,980) 104,096 Miscellaneous equipment 7,589,915 500,142 129,099 (27,350) 7,933,608 Construction in progress 265,288 554,985 275,483 252 545,042 Prepayment for equipment 38,935 60,235 44,932 - 54,238 Prepayment for land and 5,192,193 128,505 7,426 - 5,313,272 buildings Leased premises 1,166,123 12,377 15,579 121,648 1,284,569 Total $ 74,304,720 1,983,419 1,046,463 (346,791) 74,894,885

Note：Including exchange difference and merge adjustments.

(Continued) 59 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Changes in accumulated depreciation were as follows:

Others (exchange January 1, 2017 Current increase Current decrease difference) June 30, 2017 Buildings $ 5,590,551 687,103 608,063 (43,278) 5,626,313 Transportation equipment 62,215 8,755 5,558 (2,471) 62,941 Miscellaneous equipment 4,149,244 549,983 445,335 (59,449) 4,194,443 Leased premises 419,272 100,196 21,612 (2,887) 494,969 Total $ 10,221,282 1,346,037 1,080,568 (108,085) 10,378,666

January 1, 2016 Current increase Current decrease Others (Note) June 30, 2016 Buildings $ 5,607,168 568,083 30,839 (494,403) 5,650,009 Transportation equipment 63,957 9,281 4,451 (10,907) 57,880 Miscellaneous equipment 3,515,757 520,758 107,327 (63,902) 3,865,286 Leased premises 268,360 92,721 13,579 16,589 364,091 Total $ 9,455,242 1,190,843 156,196 (552,623) 9,937,266

Note：Including exchange difference and merge adjustments.

Changes in accumulated impairment were as follows:

Others (exchange January 1, 2017 Current increase Current decrease difference) June 30, 2017 Land $ 123,577 - 82,194 - 41,383 Buildings 69,182 5 45,603 - 23,584 Total $ 192,759 5 127,797 - 64,967

Others (exchange January 1, 2016 Current increase Current decrease difference) June 30, 2016 Land $ 205,363 - - - 205,363 Buildings 149,376 - - (35,615) 113,761 Total $ 354,739 - - (35,615) 319,124

(p) Intangible assets－net

December 31, June 30, 2017 2016 June 30, 2016 Goodwill $ 18,015,340 18,015,340 18,015,338 Computer software 4,703,864 4,666,623 4,924,869 The acquisition value of insurance policies 659,283 665,266 668,799 Others 35,190 36,065 20,938 Total $ 23,413,677 23,383,294 23,629,944

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

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

(Continued) 60 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Changes in intangible assets were as follows:

Others (exchange January 1, 2017 Current increase Current decrease difference) June 30, 2017 Goodwill $ 18,015,340 - - - 18,015,340 Computer software 4,666,623 773,817 690,098 (46,478) 4,703,864 The acquisition value of 665,266 - 5,983 - 659,283 insurance policies Others 36,065 - 875 - 35,190 Total $ 23,383,294 773,817 696,956 (46,478) 23,413,677

Others (exchange January 1, 2016 Current increase Current decrease difference) June 30, 2016 Goodwill $ 18,015,152 - - 186 18,015,338 Computer software 4,595,002 705,392 690,943 315,418 4,924,869 The acquisition value of 672,694 - 3,895 - 668,799 insurance policies Others 2,063 19,574 699 - 20,938 Total $ 23,284,911 724,966 695,537 315,604 23,629,944

(q) Other assets－net

December 31, June 30, 2017 2016 June 30, 2016 Prepayments $ 6,793,707 7,250,662 6,856,376 Deferred charges 18,864 18,857 19,714 Foreclosed properties received－net 149,752 158,827 161,612 Temporary payments 183,671 110,867 4,268,828 Refundable deposits－net 12,425,725 20,347,657 23,001,606 Long-term prepaid rent 17,225,586 17,426,942 17,628,300 Cash surrender value of life insurance 1,738,453 1,818,490 1,793,560 Clients’ position-debit 1,873,363 1,462,276 805,848 Rental assets 1,492,086 1,524,789 1,527,933 Others 2,128,783 1,007,298 1,632,120 Total $ 44,029,990 51,126,665 57,695,897

In order to fulfill social responsibility of the Company’s subsidiary CTBC Bank Co., Ltd., improve the image of the Company’s subsidiary CTBC Bank Co., Ltd. and receive a long term benefit from advertisements, the Company’s subsidiary CTBC Bank Co., Ltd. sponsored a professional baseball team by signing a sponsorship and cooperative advertisement contract with Hua Yi Entertaining Co. Ltd. on December 5, 2013, amounting to $400,000 and accounted under prepaid expenses. The duration of the name of the baseball team will last for 10 years, starting from the date the Company’s subsidiary CTBC Bank Co., Ltd. appointed the team name. As of June 30, 2017, the account balance was $260,000.

(Continued) 61 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

In May 2006, the Company’s subsidiary CTBC Bank Co., Ltd. acquired the superficies of lots 43, 43 1, 45 and 45 1 of Jingmao Section, Nankang, Taipei, from Taiwan Fertilizer Co., Ltd. for 50 years through a public tender. The acquisition cost amounted to $3,364,140 (including business tax and other related expenses of the superficies). The rental is determined annually at the rate of 8% of the government assessed present value and accounted under long-term prepaid rent. Please refer to Note 8 for information on performance guarantee deposits.

On August 12, 2015, the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. acquired the superficies of lot 15 of Jingmao Section, Nankang, Taipei, from Taipei Fertilizer Co., Ltd. for 45 years. The total royalty is about $15 billion (from the ninth month of the ninth year to the tenth year, the Company’s subsidiary Taiwan Life Insurance Co., Ltd. can decide whether to extend the using period for more 40 years, and the royalty of extension is $15 billion, with 15 years to pay off averagely. The creation of superficies has to be completed on December 10, 2015 and accounted under long-term prepaid rent. Please refer to Note 8 for information on guarantee deposits.

(r) Deposits from Central Bank and other banks

December 31, June 30, 2017 2016 June 30, 2016 Deposits from Central Bank $ 203,197 158,880 139,012 Deposits from other banks 24,587,362 21,781,325 14,027,900 Deposits from post offices 1,405,244 1,481,894 1,834,692 Overdraft on banks 613,588 566,231 815,967 Call loans from banks 51,058,954 39,510,353 46,722,023 Total $ 77,868,345 63,498,683 63,539,594

(s) Due to Central Bank and other banks

December 31, June 30, 2017 2016 June 30, 2016 Financing from Central Bank $ 1,651,029 3,058,868 13,590,057 Financing from other banks 6,185,641 5,465,290 6,254,410 Long-term borrowings 7,214,675 7,228,330 6,045,014 Total $ 15,051,345 15,752,488 25,889,481

(Continued) 62 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Financing from Central Bank:

(i) CTBC Bank Co., Ltd.

December 31, June 30, 2017 2016 June 30, 2016 Borrowings (USD) $ 32,258 38,710 45,161 Interest rate 1.36% 1.22% 0.88% 6M LIBOR 6M LIBOR 6M LIBOR Maturity date July 26, 2019 July 26, 2019 July 26, 2019 Interest Payment Interest is Interest is Interest is payable semi payable semi payable semi annually and annually and annually and at the maturity at the maturity at the maturity date date date

(ii) The Tokyo Star Bank, Ltd.

December 31, June 30, 2017 2016 June 30, 2016 Borrowings (JPY) $ 2,464,000 6,562,780 38,600,000 Interest rate 1.26%~1.42% 0~1.26% 0~0.10% Maturity date September 5, September 5, December 5, 2017 2017 2016 Interest Payment Interest is Interest is Interest is payable payable payable at the maturity at the maturity at the maturity date date date

Financing from other banks:

(i) CTBC Bank Corp. (USA)

December 31, June 30, 2017 2016 June 30, 2016 Inter bank borrowings (USD) $ 75,000 75,000 75,000 Interest rate 0.91%~2.96% 0.91%~2.96% 0.91%~2.96% Maturity date December 31, December 31, December 31, 2020 2020 2020

(Continued) 63 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(ii) PT. Bank CTBC Indonesia

December 31, June 30, 2017 2016 June 30, 2016 Inter bank borrowings (IDR) $ 42,194,865 233,731,588 583,785,346 Interest rate 1.60%~1.81% 1.37%~7.80% 1.22%~2.14% Maturity date November 2, November 2, November 2, 2018 2018 2018

(iii) CTBC Securities Co., Ltd.

December 31, June 30, 2017 2016 June 30, 2016 Inter bank borrowings (NTD) $ 656,585 243,853 733,561 Interest rate 0.90%~1.89% 1.18%~1.80% 0.70%~1.23% Maturity date July 6, 2017 January 6, 2017 July 11, 2016

(iv) TLG Capital Co., Ltd.

December 31, June 30, 2017 2016 June 30, 2016 Inter bank borrowings (NTD) $ 2,850,000 2,140,000 1,670,000 Interest rate 1.15%~1.31% 1.17%~1.31% 1.28%~1.38% Maturity date March 28, 2018 June 29, 2017 April 21, 2017

Long term borrowings:

(i) CTBC Leasing (China)

December 31, June 30, 2017 2016 June 30, 2016 Borrowings (CNY) $ 784,448 707,023 294,351 Borrowings (USD) 121,500 121,500 141,500 Borrowings (EUR) - 2,000 2,000 Interest rate LIBOR+1.5%~ LIBOR+1.5%~ LIBOR+1.8%~ 5.23% 5.23% 5.23% Maturity date January 17, December 23, May 3, 2019 2020 2019 Interest Payment Interest is Interest is Interest is payable payable payable monthly, monthly, monthly, quarterly and at quarterly and at quarterly and at the maturity the maturity the maturity date. date. date.

(Continued) 64 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(t) Securities sold under repurchase agreements

June 30, 2017 Selling price Designated Designated Assets Par value (Note) repurchase amount repurchase date Financial assets measured at $ 29,135,410 29,363,510 29,387,044 Prior to August 21, fair value through profit or 2017 loss Available-for-sale financial 4,221,772 4,203,479 4,205,579 Prior to August 17, assets－net 2017 Held-to-maturity financial 34,402,600 35,014,742 35,020,960 Prior to October 20, assets－net 2017 Total $ 67,759,782 68,581,731 68,613,583

December 31, 2016 Selling price Designated Designated Assets Par value (Note) repurchase amount repurchase date Financial assets measured at $ 14,615,958 14,697,259 14,703,220 Prior to February 21, fair value through profit or 2017 loss Available-for-sale financial 5,972,596 5,951,382 5,964,840 Prior to February 16, assets－net 2017 Held-to-maturity financial 28,218,100 28,842,443 28,848,984 Prior to April 20, assets－net 2017 Total $ 48,806,654 49,491,084 49,517,044

June 30, 2016 Selling price Designated Designated Assets Par value (Note) repurchase amount repurchase date Financial assets measured at $ 13,845,572 13,951,542 13,945,852 Prior to September fair value through profit or 13, 2016 loss Available-for-sale financial 10,727,590 10,753,869 10,764,924 Prior to September assets－net 13, 2016 Held-to-maturity financial 31,612,580 32,646,141 32,652,689 Prior to December assets－net 22, 2016 Total $ 56,185,742 57,351,552 57,363,465

(Continued) 65 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(u) Commercial paper payable－net

The information of commercial paper payable issued by the Company and its subsidiaries is as below:

December 31, Issuer June 30, 2017 2016 June 30, 2016 Commercial paper payable $ 31,680,000 28,270,000 12,950,000 Less：discount on commercial paper payable (79,069) (21,901) (2,491) Total $ 31,600,931 28,248,099 12,947,509 Rate range 0.40%~1.21% 0.33%~1.23% 0.33%~1.40% Duration 01.10.2017~ 07.13.2016~ 04.08.2016~ 04.18.2018 05.11.2017 09.28.2016 The commercial paper payable aforementioned is guaranteed by financial institution and acceptance institution.

(v) Payables

December 31, June 30, 2017 2016 June 30, 2016 Accounts payable $ 3,825,537 6,688,357 4,881,053 Accounts payable factoring 5,359,584 6,299,204 5,130,191 Accrued expenses 14,488,470 17,815,180 12,732,944 Interest payable 7,087,792 6,069,732 8,664,776 Acceptances payable 7,933,924 7,341,593 6,063,043 Collection payable 4,290,692 3,618,538 4,073,390 Other tax payable 2,426,581 2,374,266 2,191,341 Dividends and bonuses payable 16,642,897 108,969 14,627,000 Checks for clearance 1,870,383 4,545,509 2,042,433 Interbank clearing payable 816,697 738,472 685,629 Miscellaneous lottery accounts payable 12,303,388 9,415,471 12,057,656 Construction retainage received - 14,895 633,943 Online accounts payable 517,580 409,174 441,565 Commission payable 1,612,532 2,465,632 2,148,831 Claims payable 3,347,398 2,765,362 2,562,866 Due to reinsurers and ceding companies 900,044 1,228,645 1,185,737 Securities payable 13,217,976 342,236 24,188,843 Separate account of investment products 1,441,483 695,284 609,631 payables Premium payable 2,702,883 3,050,776 923,674 Other payables 4,350,269 2,889,481 1,896,852 Total $ 105,136,110 78,876,776 107,741,398

(Continued) 66 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(w) Deposits and remittances

December 31, June 30, 2017 2016 June 30, 2016 NTD deposits Checking accounts $ 6,741,504 8,735,287 7,402,201 Demand deposits Demand deposits 160,914,004 158,447,215 147,484,554 Demand savings deposits 653,533,790 629,748,956 599,384,176 Public treasury deposits 10,082,716 9,521,044 8,760,109 Subtotal of demand deposits 824,530,510 797,717,215 755,628,839 Time deposits Time deposits 193,058,018 144,695,638 166,360,309 Time savings deposits 432,259,995 429,363,919 425,795,574 Negotiable certificates of deposit 1,227,600 1,365,000 1,292,800 Public treasury deposits 25,850,000 10,170,506 12,254,931 Others 14,059,500 10,837,500 15,067,500 Subtotal of time deposits 666,455,113 596,432,563 620,771,114 Subtotal of NTD deposits 1,497,727,127 1,402,885,065 1,383,802,154 Foreign currency deposits 1,327,936,505 1,344,462,656 1,321,723,272 Stored value cards 167 167 167 Remittances under custody 38,338 71,608 34,027 Remittances outstanding 724,497 999,758 1,597,784 Total $2,826,426,634 2,748,419,254 2,707,157,404

(x) Preferred stock liability

The Company acquired the total outstanding shares of Taiwan Life Insurance Co., Ltd. on October 15, 2015, and issued 58,000 thousand shares of class A preferred stock at $35 dollars per share with amounted to $2,030,000. The capital-raising project was approved by the FSC. A summary of the terms and conditions is as follows:

The Company issued the class A preferred stock to exchange for the class A preferred stock issued by the Company’s subsidiary Taiwan Life Insurance Co., Ltd., the related obligations of the stock are traced back to the original issuance date started from September 10, 2010.

(i) The preferred shares are outstanding for 7 years.

(ii) The incurred dividend is 3.5%, calculated based on the price of actual issuance and payable in cash on an annual basis. In a year of dividend allocation where the Company makes no profit or makes profit which is inadequate for class A preferred stock dividend allocation or where the distribution of class A preferred stock dividend places the Company’s risk-based capital (Continued) 67 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

ratio below the minimum ratio prescribed by the competent authority, the unpaid dividend will be accumulated to the ensuing year(s) with profit, and made up preferentially. A deferred dividend does not accrue additional interest.

(iii) Beginning five years plus one day after issuance, the Company may, after approval by the competent authority, redeem at any time the outstanding preferred shares either in whole or in part based on the actual price of issuance, using capital sources.

(iv) However, in the event that the Company is financially unable to redeem the preferred shares due to objective impossibility or force majeure, the right of unrecovered preferred share still continue in accordance with the issuance condition until fully redemption.

Pursuant to IAS 32 “Financial Instrument: Presentation”, the Class A preferred share is accounted under financial liabilities, and the dividend is accounted as interest expense, the detail is as below:

For the six months ended June 30, 2016 Preferred Stock 4,659

The Company has redeemed the class A preferred stock in advance on January 25, 2016 and completed the registration modification for capital reduction on February 22, 2016.

(y) Bonds Payable

December 31, Bonds June 30, 2017 2016 June 30, 2016 2008-1 $ 2,000,000 2,000,000 2,000,000 2009-1 800,000 800,000 800,000 2009-2 150,000 150,000 150,000 2011-1 12,900,000 12,900,000 12,900,000 2012-1 12,000,000 12,000,000 12,000,000 2014-1(subordinated financial debentures) 20,000,000 20,000,000 20,000,000 2014-2(subordinated financial debentures) 15,000,000 15,000,000 15,000,000 2014-1(financial debentures) (Note 3) - - 9,362,940 2014-2(financial debentures) (Note 3) - - 23,988,498 2015-1 (Note 3) 7,822,052 8,295,703 8,297,502 2015-1(unsecured ordinary bonds) 15,000,000 15,000,000 15,000,000 2015-2 12,000,000 12,000,000 12,000,000 2015-3 5,000,000 5,000,000 5,000,000 2015-4 (Note3 ) - - 1,937,160 2016-1 (Note3 ) 23,740,080 25,177,620 - 2017-1 (Note3 ) 5,478,480 - -

(Continued) 68 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, Bonds June 30, 2017 2016 June 30, 2016 2017-1 $ 15,000,000 - - 2017-2 1,000,000 - - No.10 Callable Unsecured Bond - - 1,948,660 No.11 Callable Unsecured Bond - 578,970 660,030 No.13 Callable Unsecured Bond 1,629,600 1,654,200 1,885,800 No.14 Callable Unsecured Bond 543,200 551,400 628,600 No.15 Callable Unsecured Bond 271,600 275,700 314,300 No.16 Callable Unsecured Bond 298,760 303,270 345,730 No.17 Callable Unsecured Bond 1,113,560 1,130,370 1,288,630 Adjustment for fair value increase of hedged 46,409 51,765 97,093 transactions Unamortized discount (59,349) (39,777) (53,959) Less: financial liability designated at fair value (37,040,612) (33,473,323) (43,586,100) through profit or loss (Note 3) Total $ 114,693,780 99,355,898 101,964,884

Terms of transactions Bond issued Bonds Issue date Maturity date Interest rate Type 2008-1 04/10/2008 04/10/2023 3.49% Unsecured subordinated financial debentures 2009-1 06/08/2009 N/A 4.0%, if redemption right is not exercised 10 years after Unsecured subordinated the issue date, the interest rate will be 2.20%, not corporate bonds lower than 5.0%. 2009-2 11/25/2009 N/A 4.0%, if redemption right is not exercised 10 years after 〞 the issue date, the interest rate will be 2.20%, not lower than 5.0%. 2011-1 09/27/2011 09/27/2021 A=1.80%, B=1.95%. From the 4th year after the issue Unsecured subordinated date, the interest rate will be the prime rate plus financial debentures 0.55% (Note 1) 2012-1 02/20/2012 02/20/2022 A=1.66%, B=1.80%. Unsecured subordinated corporate bonds 2014-1 06/18/2014 N/A A=3.70%, B=4.00%. Perpetual non accumulated (subordinated financial debentures) subordinated financial debentures 2014-2 06/26/2014 06/26/2029 A=2.00%, B=The prime rate plus 0.45%. (Note 2) Unsecured subordinated (subordinated financial debentures) financial debentures 2014-1 10/09/2014 10/09/2034 4.10% (Note 3) Unsecured financial (financial debentures) debentures 2014-2 11/26/2014 11/26/2044 0% (Note 3) 〞 (financial debentures) 2015-1 01/27/2015 01/27/2045 0% (Note 3) 〞 2015-1 08/03/2015 08/03/2022 A=1.15%, B=1.35%, C=1.65% Unsecured ordinary (ordinary corporate bonds) corporate bonds 2015-2 06/10/2015 N/A 3.60% Perpetual non accumulated subordinated financial debentures 2015-3 06/18/2015 06/18/2025 A=1.83%, B=2.00%, C=2.05% Unsecured subordinated financial debentures

(Continued) 69 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Terms of transactions Bond issued Bonds Issue date Maturity date Interest rate Type 2015-4 07/20/2015 07/20/2045 0% (Note 3) Unsecured financial debentures 2016-1 11/29/2016 11/29/2044 0% (Note 3) 〞 2017-1 03/29/2017 03/29/2047 0% (Note 3) 〞 2017-1 06/21/2017 N/A 3.45%, if redemption right is not exercised 10 years after Unsecured subordinated the issue date, the interest rate will be the prime rate corporate bonds plus 1.00%. No.10 Callable Unsecured Bond 09/30/2011 09/30/2021 5.25%, an interest is payable semi annually Unsecured subordinated financial debentures No.11 Callable Unsecured Bond 06/29/2012 06/29/2022 4.00%, an interest is payable semi annually 〞 No.13 Callable Unsecured Bond 09/28/2012 09/28/2022 4.50%, an interest is payable semi annually 〞 No.14 Callable Unsecured Bond 10/26/2012 10/26/2022 3.80%, an interest is payable semi annually 〞 No.15 Callable Unsecured Bond 12/14/2012 12/14/2022 3.50%, an interest is payable semi annually 〞 No.16 Callable Unsecured Bond 03/13/2013 03/13/2023 3.28%, an interest is payable semi annually 〞 No.17 Callable Unsecured Bond 06/06/2013 06/06/2023 3.46%, an interest is payable semi annually 〞

Note 1: The original prime rate is based on page code 6165 of Reuters, the fixed interest rate of 90- day CP/BA at 11:00 am on the interest reset date. With the consensus reached among creditors through forward rate agreement, the prime rate will be changed to the 3-month Taipei Interbank Offered Rate (TAIBOR) from January 1, 2015.

Note 2: The prime rate is based on page code 6165 of Reuters, the fixed interest rate of 90-day CP/BA at 11:00 am on the interest reset date. If no quotation is available on page code 6165 of Reuters, no page is displayed, or no prime rate is retrievable from Reuters, the Bank would change the resource of the rate. The Bank would set the prime rate as Secondary Market Fixing Rate of 90-day TAIBIR 02 from the “TAIBIR Section” in the webpage of Taiwan Depository and Clearing Corporation.

Note 3: Financial debentures of 2014-1, 2014-2, 2015-1, 2015-4, 2016-1 and 2017-1 are recognized as financial liabilities designated at fair value through profit or loss. For more information, please refer to Note 6(c).

Please refer to Note 6(e) for the information on the hedging of bonds shown above.

(z) Provisions

December 31, June 30, 2017 2016 June 30, 2016 Settlement compensation provision $ 106,530 938,904 940,653 Employee benefits provision 4,638,896 4,725,064 4,673,723 Guarantee provision 288,396 251,478 242,252 Insurance provision 1,240,092,457 1,139,164,345 1,019,798,644 Provisions to insurance policy provision 2,754 2,763 4,611 FX rate fluctuation provision 803,704 1,362,740 1,887,899 Other provision 210,572 183,428 218,901 Fair value adjustment 6,124,375 6,230,768 6,362,806 Total $1,252,267,684 1,152,859,490 1,034,129,489

(Continued) 70 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Please refer to Note 6(ad) for more information on provisions to insurance policy reserves and FX rate fluctuation reserve.

(aa) Other financial liabilities

December 31, June 30, 2017 2016 June 30, 2016 Futures trader’s equity $ 256,366 308,029 250,015 Lease payable 630,766 733,837 930,462 Structured commodity principal 112,967,468 126,960,940 147,503,316 Guarantee deposits received- securities lending 31,550,628 25,268,386 32,594,834 transaction Separate insurance products 48,946,471 46,347,154 48,938,718 Others 167 3,580 31,485 Total $ 194,351,866 199,621,926 230,248,830

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

(ab) Other liabilities

December 31, June 30, 2017 2016 June 30, 2016 Amount received in advance $ 2,073,118 3,805,084 1,686,417 Custody payable 1,031,814 219,754 889,097 Deferred income 689,983 545,344 544,826 Guarantee deposits 5,910,826 4,951,952 7,733,059 Temporary receipt 3,203,896 7,899,297 3,042,615 Credits recognized when accepting orders to 1,683,511 1,198,456 1,473,896 trade Others 256,861 483,279 457,186 Total $ 14,850,009 19,103,166 15,827,096

(Continued) 71 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(ac) Employee benefits

(i) Defined contribution plan

The Company and its subsidiaries’ defined contribution plan follows the Labor Pension Act of the R.O.C. and makes monthly cash contributions to the employees’ individual pension accounts at the Bureau of Labor Insurance at the rate of 6% of the employees’ monthly salary. Under this plan, the Company and its subsidiaries have no legal or constructive obligation to make other payments after the Company and its subsidiaries make the fixed amount of contribution to the Bureau of Labor Insurance.

For the three and six months ended June 30, 2017 and 2016, the pension expenses under defined contribution plan of the Company and its subsidiaries amounted to $225,544, $221,701, $446,032 and $403,357, respectively, and were contributed to the Bureau of Labor Insurance or labor agencies designated by local authorities in the case of overseas units.

(ii) Employee benefits provision

Employee benefits provision reserve recognized by the Company and its subsidiaries in the consolidated balance sheet were as follows:

December 31, June 30, 2017 2016 June 30, 2016 Defined benefits plan $ 4,045,103 4,149,468 4,096,441 Retiree deposits with favorable rates and 237,004 241,363 233,799 other post-employment benefits Total $ 4,282,107 4,390,831 4,330,240

After the end of last fiscal year, no significant market fluctuations, significant decrease, pay off or other significant one-time event occurred. Therefore, the pension costs for the interim periods are assessed and disclosed at the actuarial costs that were determined on December 31, 2016 and 2015 by the Company and its subsidiaries.

(1) Defined benefits plan

The Company and its subsidiaries’ defined benefits plan contributes to designated depository account with Bank of Taiwan. Payments of pension benefits to employees who are covered by the Labor Standards Act are calculated based on the employee’ s average monthly salary for the last 6 months prior to approved retirement and base point (b.p.) entitlement based on years of service.

For the three and six months ended June 30, 2017 and 2016, the Company and its subsidiaries have recognized $45,723, $49,809, $90,326 and $99,244, respectively, as expenses in profit or loss.

(Continued) 72 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(2) Retiree deposits with favorable rates and other post-employment benefits

The Company’s subsidiary CTBC Bank Co., Ltd.’s obligation to grant retirees, including current employees retiring in the future, fixed-amount deposits with favorable rates is based on the Bank’s Regulations for Subsidizing the Retiree Benefits.

For the three and six months ended June 30, 2017 and 2016, expenses recognized by the Company’ s subsidiary CTBC Bank Co., Ltd. in profit and loss amounted of $1,844, $1,884, $3,688 and $3,768, respectively.

(iii) Defined benefits plan of overseas branches and subsidiaries

Defined benefits plan of overseas branches and subsidiaries recognized in consolidated balance sheets was as follows:

December 31, June 30, 2017 2016 June 30, 2016 Defined benefits plan $ 356,789 334,233 343,483

For the three and six months ended June 30, 2017 and 2016, expenses recognized by overseas branches and subsidiaries in profit and loss amounted of $35,238, $36,230, $70,280 and $72,471, respectively.

(ad) Insurance liabilities income and expense

(i) Insurance liabilities

Reserve for insurance contracts and financial instruments with discretionary participation feature:

The details of the reserve for insurance contracts and financial instruments with discretionary participation feature and its adjustment and the balances of the related accounts of the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. and sub-subsidiary TLG Insurance were as follows:

December 31, June 30, 2017 2016 June 30, 2016 Reserve for unearned premiums $ 3,627,648 4,344,243 4,306,520 Claim reserve 1,700,414 1,654,953 1,490,777 Insurance reserve 1,225,016,974 1,122,630,948 1,007,158,892 Special reserve 742,231 1,193,013 560,185 Premium deficiency reserve 9,005,190 9,341,188 6,282,270 Total $1,240,092,457 1,139,164,345 1,019,798,644

(Continued) 73 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Life Insurance Business:

(1) The details of reserve for unearned premium were as follows:

June 30, 2017 Financial instruments with discretionary Insurance participation contracts feature Total Individual life $ 319,559 - 319,559 Individual injury 519,495 - 519,495 Individual health 1,215,301 - 1,215,301 Annuity insurance - 1 1 Group insurance 242,391 - 242,391 Investment linked 23,264 - 23,264 Total 2,320,010 1 2,320,011 Less: reserve for unearned premiums Individual life 139,476 5,185 144,661 Individual injury 179,739 - 179,739 Individual health 371,008 - 371,008 Group insurance 68,225 - 68,225 Investment linked 1,498 - 1,498 Total 759,946 5,185 765,131 Net value $ 1,560,064 (5,184) 1,554,880

December 31, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Individual life $ 3,375 - 3,375 Individual injury 977,247 - 977,247 Individual health 1,523,029 - 1,523,029 Annuity insurance - 222 222 Group insurance 551,113 - 551,113 Investment linked 22,966 - 22,966 Total 3,077,730 222 3,077,952 Less: reserve for unearned premiums Individual life 134,356 - 134,356 Individual injury 336,200 - 336,200 Individual health 547,168 - 547,168 Group insurance 143,965 - 143,965 Investment linked 1,483 - 1,483 Total 1,163,172 - 1,163,172 Net value $ 1,914,558 222 1,914,780

(Continued) 74 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Individual life $ 12,606 1 12,607 Individual injury 939,590 - 939,590 Individual health 1,488,759 - 1,488,759 Group insurance 564,980 - 564,980 Investment linked 23,068 - 23,068 Total 3,029,003 1 3,029,004 Less: reserve for unearned premiums Individual life 102,001 - 102,001 Individual injury 391,976 - 391,976 Individual health 596,972 - 596,972 Group insurance 172,691 - 172,691 Investment linked (2,342) - (2,342) Total 1,261,298 - 1,261,298 Net value $ 1,767,705 1 1,767,706

The changes and adjustments of the aforesaid reserve for unearned premiums were as follows:

For the six months ended June 30, 2017 Financial instruments with discretionary Insurance participation contracts feature Total Beginning balance $ 3,077,730 222 3,077,952 Current provision 322,491 (221) 322,270 Reversal of provision (1,080,159) - (1,080,159) Foreign exchange losses (52) - (52) Ending balance 2,320,010 1 2,320,011

Less: reserve for unearned premiums Beginning balance —net 1,163,172 - 1,163,172 Current decrease (402,585) 5,185 (397,400) Foreign exchange losses (641) - (641) Ending balance—net 759,946 5,185 765,131 Ending balance $ 1,560,064 (5,184) 1,554,880

(Continued) 75 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

For the six months ended June 30, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Beginning balance $ 3,031,247 1 3,031,248 Reversal of provision (2,242) - (2,242) Foreign exchange losses (2) - (2) Ending balance 3,029,003 1 3,029,004

Less: reserve for unearned premiums Beginning balance —net 1,401,637 - 1,401,637 Current decrease (140,320) - (140,320) Foreign exchange losses (19) - (19) Ending balance—net 1,261,298 - 1,261,298 Ending balance $ 1,767,705 1 1,767,706

(2) The details of claim reserve were as follows:

June 30, 2017 Financial instruments with discretionary Insurance participation contracts feature Total Individual life -reported but not paid $ 220,523 - 220,523 -not reported and not paid 1,860 - 1,860 Individual injury -reported but not paid 52,593 - 52,593 -not reported and not paid 107,555 - 107,555 Individual health -reported but not paid 187,016 - 187,016 -not reported and not paid 90,217 - 90,217 Annuity insurance -reported but not paid 331 3,384 3,715 -not reported and not paid - - - Group insurance -reported but not paid 53,031 - 53,031 -not reported and not paid 25,321 - 25,321 Total 738,447 3,384 741,831 Less: reserve for claim reserve Individual life 20,975 - 20,975 Individual injury 29,561 - 29,561 Individual health 21,758 - 21,758 Group insurance 7,544 - 7,544 Investment insurance 240 - 240 Total 80,078 - 80,078 Net value $ 658,369 3,384 661,753 (Continued) 76 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Individual life -reported but not paid $ 100,298 - 100,298 -not reported and not paid 1,159 - 1,159 Individual injury -reported but not paid 75,977 - 75,977 -not reported and not paid 105,492 - 105,492 Individual health -reported but not paid 228,203 - 228,203 -not reported and not paid 83,555 - 83,555 Annuity insurance -reported but not paid - 2,487 2,487 -not reported and not paid - - - Group insurance -reported but not paid 50,875 - 50,875 -not reported and not paid 24,604 - 24,604 Total 670,163 2,487 672,650 Less: reserve for claim reserve Individual life 18,100 - 18,100 Individual injury 40,423 - 40,423 Individual health 22,687 - 22,687 Group insurance 10,863 - 10,863 Total 92,073 - 92,073 Net value $ 578,090 2,487 580,577

(Continued) 77 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Individual life -reported but not paid $ 96,771 428 97,199 -not reported and not paid 12,150 - 12,150 Individual injury -reported but not paid 62,427 - 62,427 -not reported and not paid 67,911 - 67,911 Individual health -reported but not paid 242,096 - 242,096 -not reported and not paid 80,326 - 80,326 Annuity insurance -reported but not paid - 1,497 1,497 -not reported and not paid - - - Group insurance -reported but not paid 48,637 - 48,637 -not reported and not paid 18,230 - 18,230 Total 628,548 1,925 630,473 Less: reserve for claim reserve Individual life 18,626 - 18,626 Individual injury 30,830 - 30,830 Individual health 27,178 - 27,178 Group insurance 9,583 - 9,583 Total 86,217 - 86,217 Net value $ 542,331 1,925 544,256

(Continued) 78 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

The changes and adjustments of the aforesaid claim reserve were as follows:

For the six months ended June 30, 2017 Financial instruments with discretionary Insurance participation contracts feature Total Beginning balance $ 670,163 2,487 672,650 Current provision 403,930 2,228 406,158 Reversal of provision (335,082) (1,243) (336,325) Foreign exchange losses (564) (88) (652) Ending balance 738,447 3,384 741,831

Less: reserve for claim reserve Beginning balance－net 92,073 - 92,073 Current decrease (11,991) - (11,991) Foreign exchange losses (4) - (4) Ending balance—net 80,078 - 80,078 Ending balance $ 658,369 3,384 661,753

For the six months ended June 30, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Beginning balance $ 611,105 102 611,207 Current provision 459,186 1,958 461,144 Reversal of provision (441,546) (103) (441,649) Foreign exchange losses (197) (32) (229) Ending balance 628,548 1,925 630,473 Less: reserve for claim reserve Beginning balance－net 118,143 - 118,143 Current decrease (31,926) - (31,926) Ending balance—net 86,217 - 86,217 Ending balance $ 542,331 1,925 544,256

(Continued) 79 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(3) Details of insurance reserves were as follows:

June 30, 2017 Financial instruments with discretionary Insurance participation contracts feature Total Individual life $ 1,116,239,786 3,170,116 1,119,409,902 Individual health 72,512,753 - 72,512,753 Annuity insurance 5,748,475 27,078,733 32,827,208 Group insurance 68,615 - 68,615 Investment insurance 111,746 - 111,746 Incremental reserve 35,833 - 35,833 Transfer from operating loss reserve 43,665 - 43,665 Recovery of special catastrophe 7,252 - 7,252 reserve Total $ 1,194,768,125 30,248,849 1,225,016,974

December 31, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Individual life $ 1,017,566,105 4,657,071 1,022,223,176 Individual health 68,687,428 - 68,687,428 Annuity insurance 5,788,472 25,732,582 31,521,054 Group insurance 63,593 - 63,593 Investment insurance 48,947 - 48,947 Incremental reserve 35,833 - 35,833 Transfer from operating loss reserve 43,665 - 43,665 Recovery of special catastrophe 7,252 - 7,252 reserve Total $ 1,092,241,295 30,389,653 1,122,630,948

(Continued) 80 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Individual life $ 906,226,699 4,503,288 910,729,987 Individual health 64,416,795 - 64,416,795 Annuity insurance 5,868,095 25,935,770 31,803,865 Group insurance 69,376 - 69,376 Investment insurance 52,119 - 52,119 Incremental reserve 35,833 - 35,833 Transfer from operating loss reserve 43,665 - 43,665 Recovery of special catastrophe 7,252 - 7,252 reserve Total $ 976,719,834 30,439,058 1,007,158,892

As the Company’s subsidiaries Taiwan Life Insurance Co., Ltd. measured the insurance reserves on a discounted basis, the recognized amounts of cumulative interest over-time effects were as below:

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Cumulative interest $ 11,435,866 9,613,467 22,451,947 18,812,939 over-time effects of insurance reserves

The changes and adjustments of the aforesaid insurance reserves were as follows:

For the six months ended June 30, 2017 Financial instruments with discretionary Insurance participation contracts feature Total Beginning balance $ 1,092,241,295 30,389,653 1,122,630,948 Current provision 136,496,539 2,156,596 138,653,135 Reversal of provision (19,545,553) (1,980,793) (21,526,346) Foreign exchange losses (14,424,156) (316,607) (14,740,763) Ending balance $ 1,194,768,125 30,248,849 1,225,016,974

(Continued) 81 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

For the six months ended June 30, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Beginning balance $ 882,260,610 31,270,779 913,531,389 Current provision 116,812,970 2,418,292 119,231,262 Reversal of provision (18,349,091) (2,036,703) (20,385,794) Foreign exchange losses (4,004,655) (1,213,310) (5,217,965) Ending balance $ 976,719,834 30,439,058 1,007,158,892

(4) Special reserve liabilities:

June 30, 2017 Financial instruments with discretionary Insurance participation contracts feature Total Reserve for policyholder dividend $ 202,182 - 202,182 Reserve for bonus risk 319,778 - 319,778 Revaluation appreciation on real estate 57,891 - 57,891 Total $ 579,851 - 579,851

December 31, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Reserve for policyholder dividend $ 319,938 - 319,938 Reserve for bonus risk 667,485 - 667,485 Revaluation appreciation on real estate 57,891 - 57,891 Total $ 1,045,314 - 1,045,314

June 30, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Reserve for policyholder dividend $ (459,543) - (459,543) Reserve for bonus risk 788,164 - 788,164 Revaluation appreciation on real estate 57,891 - 57,891 Total $ 386,512 - 386,512

(Continued) 82 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

The changes and adjustments of the aforesaid special reserve were as follows:

For the six months ended June 30, 2017 Reserve for Revaluation policyholder Reserve appreciation on dividend for bonus risk real estate Total Beginning balance $ 319,938 667,485 57,891 1,045,314 Reversal of provision (117,756) (347,707) - (465,463) Ending balance $ 202,182 319,778 57,891 579,851

For the six months ended June 30, 2016 Reserve for Revaluation policyholder Reserve appreciation on dividend for bonus risk real estate Total Beginning balance $ (950,802) 1,093,392 57,891 200,481 Current provision 491,259 - - 491,259 Reversal of provision - (305,228) - (305,228) Ending balance $ (459,543) 788,164 57,891 386,512

(5) The details of premium deficiency reserve were as follows:

June 30, 2017 Financial instruments with discretionary Insurance participation contracts feature Total Individual life $ 8,878,384 - 8,878,384 Individual health 90,194 - 90,194 Annuity insurance 71 - 71 Total $ 8,968,649 - 8,968,649

December 31, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Individual life $ 9,207,430 - 9,207,430 Individual health 87,259 - 87,259 Annuity insurance 74 - 74 Total $ 9,294,763 - 9,294,763

(Continued) 83 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Individual life $ 6,166,732 - 6,166,732 Individual health 89,612 - 89,612 Total $ 6,256,344 - 6,256,344

The changes and adjustments of the aforesaid premium deficiency reserve were as follows:

For the six months ended June 30, 2017 Financial instruments with discretionary Insurance participation contracts feature Total Beginning balance $ 9,294,763 - 9,294,763 Current provision 16,382 - 16,382 Reversal of provision (156,048) - (156,048) Foreign exchange losses (186,448) - (186,448) Ending balance $ 8,968,649 - 8,968,649

For the six months ended June 30, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Beginning balance $ 5,067,262 - 5,067,262 Current provision 2,016,587 - 2,016,587 Reversal of provision (764,124) - (764,124) Foreign exchange losses (63,381) - (63,381) Ending balance $ 6,256,344 - 6,256,344

(Continued) 84 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(6) The details of liability adequacy reserve were as follows:

Insurance contracts and financial instruments with discretionary December 31, participation feature June 30, 2017 2016 June 30, 2016 Unearned premium reserve $ 2,320,011 3,077,952 3,029,004 Claim reserve 741,831 672,650 630,473 Insurance reserve 1,225,016,974 1,122,630,948 1,007,158,892 Premium deficiency reserve 8,968,649 9,294,763 6,256,344 Total 1,237,047,465 1,135,676,313 1,017,074,713 Less: intangible asset (659,283) (665,266) (668,799) Book value of related insurance $1,236,388,182 1,135,011,047 1,016,405,914 liabilities Current estimate of future cash $ 994,763,833 954,298,131 859,391,475 flows under insurance liabilities Liability adequacy reserve balance $ - - -

As of June 30, 2017, December 31, and June 30, 2016, no liability adequacy reserve was provided after the assessment by the Company’s subsidiary Taiwan Life Insurance Co., Ltd.

The liability adequacy test method of the Company’s subsidiary Taiwan Life Insurance Co., Ltd. was as follows:

June 30, 2017 Test Method Gross Premium Valuation (GPV) Group All insurance contracts Significant (1) Insurance contract information: As of June 30, 2017, the Assumptions insurance contracts and financial instruments with a discretionary participation feature were tested. (2) Discount rate: For the asset allocation in the latest quarterly report as of valuation date, the rate of investment return under the best-case scenario in the latest certified actuarial report provided to the regulator for the year 2016 is adopted. The assumed rate beyond 30 years remains unchanged.

(Continued) 85 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016 Test Method Gross Premium Valuation (GPV) Group All insurance contracts Significant (1) Insurance contract information: As of December 31, 2016, the Assumptions insurance contracts and financial instruments with a discretionary participation feature were tested. (2) Discount rate: For the asset allocation in the latest quarterly report as of valuation date, the rate of investment return under the best-case scenario in the latest certified actuarial report provided to the regulator for the year 2015 is adopted. The assumed rate beyond 30 years remains unchanged.

June 30, 2016 Test Method Gross Premium Valuation (GPV) Group All insurance contracts Significant (1) Insurance contract information: As of June 30, 2016, the Assumptions insurance contracts and financial instruments with a discretionary participation feature were tested. (2) Discount rate: For the asset allocation in the latest quarterly report as of valuation date, the rate of investment return under the best-case scenario in the latest certified actuarial report provided to the regulator for the year 2015 is adopted. The assumed rate beyond 30 years remains unchanged.

(7) Reserve for insurance policies with financial instrument features

The financial instruments, belonging to the Company’s subsidiary Taiwan Life Insurance Co., Ltd. are segregated account insurance product and are classified as financial instruments without discretionary participation feature. As of June 30, 2017, December 31, 2016 and June 30, 2016, the details of reserves for insurance contract of the nature of financial products and their adjustments are as follows:

December 31, June 30, 2017 2016 June 30, 2016 Annuities $ 2,754 2,763 4,611

(Continued) 86 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

For the six months ended June 30, 2017 2016 Beginning balance $ 2,763 1,539 Net provision for statutory reserve for the period 1,061 5,949 Insurance claims payment for the period (1,064) (2,877) Exchange number (6) - Ending balance $ 2,754 4,611

(8) Foreign exchange rate fluctuation reserves

(a) Hedging strategy and risk exposure:

When adjusting the foreign exchange rate hedge ratio, the Company’s subsidiary Taiwan Life Insurance Co., Ltd. takes into consideration the dynamics of the international financial market and its own ability to take risks, so that the fluctuation in foreign exchange profit or loss can be reduced, and choose traditional hedge instrument as its major hedge tools, and properly allocation depending on the corresponded hedge cost ratio of each maturity. As of June 30 2017, December 31, and June 30 2016, major risk exposure on foreign exchange are all from US dollar assets, amounted to USD14,693,463 thousand, USD12,834,344 thousand, and USD10,294,345 thousand, respectively, without hedge positions, and risk exposure of it are amounted to USD1,835,296 thousand, USD2,732,737 thousand, and USD3,634,378 thousand, respectively.

(b) As of June 30 2017, December 31, and June 30 2016, foreign exchange rate fluctuation reserves of the Company’s subsidiary Taiwan Life Insurance Co., Ltd. amounted to $803,704, $1,362,740 and $1,887,899, respectively.

Changes in foreign exchange rate fluctuation reserves:

For the six months ended June 30, 2017 2016 Beginning balance $ 1,362,740 2,369,095 Current provision Mandatory provision 310,710 203,160 Extra provision - 342,943 Subtotal 310,710 546,103 Current recovery (869,746) (1,027,299) Ending balance $ 803,704 1,887,899

(Continued) 87 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(c) The effect of foreign exchange rate fluctuation reserves on the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. were as follows:

Items Not applicable Applicable Effect June 30, 2017 Foreign exchange rate $ - 803,704 (803,704) fluctuation reserves Stockholders’ equity 75,447,047 75,676,609 (229,562) December 31, 2016 Foreign exchange rate - 1,362,740 (1,362,740) fluctuation reserves Stockholders’ equity 67,252,885 67,018,447 234,438 June 30, 2016 Foreign exchange rate - 1,887,899 (1,887,899) fluctuation reserves Stockholders’ equity 69,360,791 68,690,470 670,321

For the three months ended June 30, 2017 For the six months ended June 30, 2017 Items Not applicable Applicable Effect Not applicable Applicable Effect Profit (loss) after tax $ 3,206,950 2,766,091 440,859 3,726,265 4,190,265 (464,000) Earnings per share 1.05 0.90 0.15 1.22 1.37 (0.15)

For the three months ended June 30, 2016 For the six months ended June 30, 2016 Items Not applicable Applicable Effect Not applicable Applicable Effect Profit (loss) after tax $ 854,051 1,023,872 (169,821) 1,970,723 2,370,116 (399,393) Earnings per share 0.28 0.34 (0.06) 0.65 0.78 (0.13)

(Continued) 88 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(9) Special reserve

Special reserves on the Company’s subsidiary Taiwan Life Insurance Co., Ltd. were as follows:

December 31, June 30, 2017 2016 June 30, 2016 Recovery of special reserve for $ 2,853,030 2,695,397 2,694,463 catastrophe Special reserves for significant 1,576,624 1,576,624 1,324,325 incidents and catastrophe Foreign exchange rate fluctuation 1,338,783 845,392 1,040,381 reserves Recovery of revaluation 231,566 231,566 231,566 appreciation reserves on real estate Provision on profit testing of 134,400 222,330 222,330 insurance products Provision on the gain from a - 168,460 168,460 bargain purchase Deduction of other shareholders' 2,749,377 - - equity Employees training transfer 24,670 - - program $ 8,908,450 5,739,769 5,681,525

According to Tai-Tsai-Bao-Zi No.0910074195, the Company’s subsidiary Taiwan Life Insurance Co., Ltd. shall follow the “Regulations Governing Insurance Enterprises for Setting Aside Various Reserves” since 2002 to set aside a special reserve by the net of tax amounts of recovery of special reserve for catastrophe after the approval of shareholder meeting next year.

The Company’ s subsidiary Taiwan Life Insurance Co., Ltd. has recognized special reserves for significant incidents and catastrophe in accordance with the “Regulations Governing Insurance Enterprises for Setting Aside Various Reserves” . The provision should be made at after-tax amount at the end of each year, and should be placed in special reserve under “Equity.” Special reserve under “Equity” can be offset or recovered by the aforementioned offset or recoverable amount at the after-tax amount.

In addition, in accordance with the mechanism of the reserve for fluctuation of foreign exchange, under legal proceedings, the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. should contribution a special reserve by 10% of its after-tax income earnings.

(Continued) 89 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

According to FSC Jin-Guan-Bao-Shou-Zi 10302125060, the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. has recognized additional special reserve amounting to $134,400 in accordance with the results of the insurance product profit testing on June 30, 2017.

In accordance with Jin-Guan-Bao-Tsai-Zi No. 10502066461, in order to response the trend of the development of FinTech, the Company’s subsidiary Taiwan Life Insurance Co., Ltd. should recognize 0.5% of net-of-tax earnings as special reserve amounting to $24,670 to assist insurance employees to transform and protect their rights.

In accordance with Jin-Guan-Bao-Tsai-Zi No. 10102508861, the Company’s subsidiary Taiwan Life Insurance Co., Ltd. recognizes the same amount of special reserve from current income and undistributed earnings from previous period as the deduction of other equity incurred in the current year; the Company recognizes the same amount of non- distributable special reserve from undistributed earnings from previous period as the deduction of other shareholder equity accumulated from previous period. The special reserve amounting to $2,749,377 was recognized this period.

In accordance with Jin-Guan-Bao-Tsai-Zi No. 10302153881, the Company’s subsidiary Taiwan Life Insurance Co., Ltd has recognized the special reserve amounting to $168,460 due to the reversal of the bargain purchase of CTBC Life Insurance Co., Ltd. in 2014.

Property insurance business:

(a) Unearned premium reserve and ceded unearned premium reserve

(i) The reserve for unearned premiums of the Company’ s sub-subsidiary TLG insurance Co., Ltd. was as follows:

June 30, 2017 Ceded unearned Unearned premium reserve premium reserve Reinsurance Reinsurance cede Retained Direct business assumed business business business Fire insurance $ 273,928 11,235 134,741 150,422 Marine insurance 18,960 809 17,605 2,164 Miscellaneous Casualty 95,935 6,377 69,669 32,643 Insurance Personal accident and 130,456 868 50,206 81,118 health insurance Voluntary auto insurance 554,954 16 - 554,970 Compulsory auto TPL 128,215 85,884 76,942 137,157 insurance Total $ 1,202,448 105,189 349,163 958,474

(Continued) 90 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016 Ceded unearned Unearned premium reserve premium reserve Reinsurance Reinsurance cede Retained Direct business assumed business business business Fire insurance $ 258,766 11,158 117,284 152,640 Marine insurance 10,745 731 8,815 2,661 Miscellaneous Casualty 99,847 6,959 70,244 36,562 Insurance Personal accident and 127,557 759 50,465 77,851 health insurance Voluntary auto insurance 535,647 6 1,588 534,065 Compulsory auto TPL 128,438 85,678 77,094 137,022 insurance Total $ 1,161,000 105,291 325,490 940,801

June 30, 2016 Ceded unearned Unearned premium reserve premium reserve Reinsurance Reinsurance cede Retained Direct business assumed business business business Fire insurance $ 259,189 10,357 113,592 155,954 Marine insurance 11,522 685 9,393 2,814 Miscellaneous Casualty 109,172 7,008 79,970 36,210 Insurance Personal accident and 122,295 693 54,146 68,842 health insurance Voluntary auto insurance 538,360 22 104,607 433,775 Compulsory auto TPL 132,793 85,420 78,624 139,589 insurance Total $ 1,173,331 104,185 440,332 837,184

(ii) The movements in reserve for unearned premiums and reserve for unearned premiums (cede) were as follows:

For the six months ended June 30, 2017 For the six months ended June 30, 2016 Unearned Unearned Unearned premium Unearned premium premium reserve reserve cede premium reserve reserve cede Beginning balance $ 1,266,291 325,490 1,234,627 679,181 Current provision 1,307,637 349,163 1,277,516 440,332 Current recovery (1,266,291) (325,490) (1,234,627) (679,181) Ending balance $ 1,307,637 349,163 1,277,516 440,332

(Continued) 91 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(b) Claim reserve and ceded claim reserve

(i) Liabilities for claims categorized by reported to be paid, reported but unpaid, and not reported.

June 30, 2017 Notes payable Claims (claims) payable Claim reserve Reported but Reported to be paid unpaid Not reported Total Fire insurance $ - - 56,177 8,202 64,379 Marine insurance - - 5,551 3,428 8,979 Miscellaneous Casualty 687 - 87,195 25,272 112,467 Insurance Personal accident and 553 - 23,234 52,655 75,889 health insurance Voluntary auto insurance 3,261 - 320,284 71,114 391,398 Compulsory auto TPL 351 - 69,261 236,210 305,471 insurance Total $ 4,852 - 561,702 396,881 958,583

December 31, 2016 Notes payable Claims (claims) payable Claim reserve Reported but Reported to be paid unpaid Not reported Total Fire insurance $ - - 64,717 6,824 71,541 Marine insurance 170 - 12,362 3,166 15,528 Miscellaneous Casualty 713 - 110,266 29,012 139,278 Insurance Personal accident and 616 - 27,440 50,280 77,720 health insurance Voluntary auto insurance 2,683 - 310,214 69,723 379,937 Compulsory auto TPL 410 - 64,962 233,337 298,299 insurance Total $ 4,592 - 589,961 392,342 982,303

June 30, 2016 Notes payable Claims (claims) payable Claim reserve Reported but Reported to be paid unpaid Not reported Total Fire insurance $ 1,017 - 38,425 14,760 53,185 Marine insurance - - 5,373 3,766 9,139 Miscellaneous Casualty 224 - 72,591 22,296 94,887 Insurance Personal accident and 600 - 21,244 43,815 65,059 health insurance Voluntary auto insurance 3,347 - 311,540 53,533 365,073 Compulsory auto TPL 120 - 74,088 198,873 272,961 insurance Total $ 5,308 - 523,261 337,043 860,304

(Continued) 92 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(ii) Reinsurance assets－ the insurance ceded business for the policy holders with reported but unpaid or not reported claims.

June 30, 2017 Reported but unpaid Not reported Total Fire insurance $ 26,518 1,805 28,323 Marine insurance 2,990 422 3,412 Miscellaneous Casualty 56,870 9,813 66,683 Insurance Personal accident and health 14,143 23,202 37,345 insurance Voluntary auto insurance 53,654 17,346 71,000 Compulsory auto TPL insurance 24,558 91,674 116,232 Less：Accumulated impairment (118) - (118) Total $ 178,615 144,262 322,877 December 31, 2016 Reported but unpaid Not reported Total Fire insurance $ 33,419 688 34,107 Marine insurance 8,115 1,152 9,267 Miscellaneous Casualty 72,825 9,445 82,270 Insurance Personal accident and health 16,596 25,686 42,282 insurance Voluntary auto insurance 101,079 33,895 134,974 Compulsory auto TPL insurance 21,436 91,243 112,679 Less：Accumulated impairment (575) - (575) Total $ 252,895 162,109 415,004 June 30, 2016 Reported but unpaid Not reported Total Fire insurance $ 17,261 2,549 19,810 Marine insurance 3,209 2,012 5,221 Miscellaneous Casualty 43,444 12,637 56,081 Insurance Personal accident and health 13,630 26,870 40,500 insurance Voluntary auto insurance 180,601 22,948 203,549 Compulsory auto TPL insurance 23,799 67,451 91,250 Less：Accumulated impairment (593) - (593) Total $ 281,351 134,467 415,818

(Continued) 93 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(iii) The movements in claim reserve and claim reserve (ceded) were as follows:

For the six months ended June 30, 2017 For the six months ended June 30, 2016 Ceded claim Ceded claim Claim reserve reserve Claim reserve reserve Beginning balance $ 982,303 415,004 930,044 540,428 Current provision 958,583 322,995 860,304 416,411 Current recovery (982,303) (415,579) (930,044) (541,324) Reversal provision of - 457 - 303 impairment loss

Ending balance $ 958,583 322,877 860,304 415,818

(i) Special reserve of the Company’ s sub- subsidiary TLG insurance Co., Ltd. was as follows:

December 31, June 30, 2017 2016 June 30, 2016 Special reserve of compulsory $ 58,947 44,266 61,374 auto liability insurance Special reserve of non- 103,433 103,433 112,299 compulsory auto liability insurance $ 162,380 147,699 173,673

(ii) The movements in special reserve were as follows:

1. Special reserve－compulsory auto liability insurance

For the six months ended June 30, 2017 2016 Beginning balance $ 44,266 56,703 Current provision 14,681 4,671 Ending balance $ 58,947 61,374

2. Special reserve－non-compulsory auto liability insurance

For the six months ended June 30, 2017 Liability Special reserve Dangerous Dangerous Catastrophe change Total Catastrophe change Total Beginning balance $ 42,306 61,127 103,433 58,082 207,469 265,551 Current recovery - - - - (151) (151) Ending balance $ 42,306 61,127 103,433 58,082 207,318 265,400

(Continued) 94 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

For the six months ended June 30, 2016 Liability Special reserve Dangerous Dangerous Catastrophe change Total Catastrophe change Total Beginning balance $ 43,933 76,093 120,026 45,244 172,390 217,634 Current recovery - (7,727) (7,727) - - - Ending balance $ 43,933 68,366 112,299 45,244 172,390 217,634

The amount of special reserve liabilities the Company’s sub-subsidiary TLG Insurance Co., Ltd recognized as of December 31, 2012 was in accordance with Jin Kuan Bao CAI Zi No. 10102515061 “Notice to Reserve Enforcement of Insurance Companies for Natural Disaster Insurance (Commercial Earthquake Insurance and Typhoon and Flood Insurance)”, ”Disclosure of the special reserve for resident earthquake insurance” , and “Disclosure of the special reserve for nuclear insurance”. Since the aforesaid amount was not achieved to the level as requested by the regulator, the special reserve should be accounted for under liabilities and the special catastrophe reserve and risk volatility reserve should be reclassified into natural disaster insurance category since January 1, 2013.

The effect on income, liabilities, equity and earnings per share of the Company’ s sub-subsidiary TLG Insurance Co., Ltd. under the circumstance of not adopting the aforesaid regulations were as follows:

June 30, 2017 Amount Amount without the with the adoption adoption of reserve of reserve Effect Special reserve $ 638,798 742,231 (103,433) Stockholders’ equity 75,762,458 75,676,609 85,849

December 31, 2016 Amount Amount without the with the adoption adoption of reserve of reserve Effect Special reserve $ 1,089,580 1,193,013 (103,433) Stockholders’ equity 67,104,296 67,018,447 85,849

June 30, 2016 Amount Amount without the with the adoption adoption of reserve of reserve Effect Special reserve $ 447,886 558,120 (110,234) Stockholders’ equity 68,781,964 68,690,470 91,494

(Continued) 95 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

For the three months ended June 30, 2017 For the six months ended June 30, 2017 Amount Amount Amount Amount without the with the without the with the adoption of adoption of Affect the adoption of adoption of Affect the reserve reserve number reserve reserve number Profit after tax $ 2,766,091 2,766,091 - 4,190,265 4,190,265 -

Earning per share after tax - - - 1.31 1.31 -

For the three months ended June 30, 2016 For the six months ended June 30, 2016 Amount Amount Amount Amount without the with the without the with the adoption of adoption of Affect the adoption of adoption of Affect the reserve reserve number reserve reserve number Profit (loss) after tax $ 1,021,181 1,023,871 (2,690) 2,361,989 2,370,116 (8,127)

Earnings per share after tax 0.33 0.34 (0.01) 0.77 0.78 (0.01)

(d) Premium deficiency reserve and ceded premium deficiency reserve:

(i) Details of premium deficiency reserve and premium deficiency reserve (ceded) of the company’ s sub-subsidiary TLG Insurance Co., Ltd. were as follows:

June 30, 2017 December 31, 2016 June 30, 2016 Ceded Ceded Ceded Premium premium Premium premium Premium premium deficiency deficiency deficiency deficiency deficiency deficiency reserve reserve reserve reserve reserve reserve Fire insurance $ 20,249 - 16,242 - 5,049 3,730

Miscellaneous Casualty 15,289 15,001 27,836 27,383 20,877 15,896 Insurance Marine insurance 1,003 - 2,347 - - -

$ 36,541 15,001 46,425 27,383 25,926 19,626

(ii) The movements of premium deficiency reserve were as follows:

For the six months ended June 30, 2017 For the six months ended June 30, 2016 Ceded premium Premium Ceded premium Premium deficiency deficiency deficiency deficiency reserve reserve reserve reserve Beginning balance $ 46,425 27,383 46,339 36,579 Current provision 36,541 15,001 25,926 19,626 Current recovery (46,425) (27,383) (46,339) (36,579) Ending balance $ 36,541 15,001 25,926 19,626

(Continued) 96 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(ii) Insurance revenue

(1) Retained earned premium:

Life insurance business:

For the three months ended June 30, 2017 Financial instruments with discretionary Insurance participation contracts feature Total Direct written premiums $ 53,169,154 2,134,634 55,303,788 Reinsurance premiums - - - Insurance income 53,169,154 2,134,634 55,303,788 Reinsurance expense 586,807 - 586,807 Net change in unearned (448,704) 9,434 (439,270) premium reserves 138,103 9,434 147,537 Retained earned premium $ 53,031,051 2,125,200 55,156,251

For the three months ended June 30, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Direct written premiums $ 56,493,901 360,093 56,853,994 Reinsurance premiums - - - Insurance income 56,493,901 360,093 56,853,994 Reinsurance expense 690,127 - 690,127 Net change in unearned 91,655 - 91,655 premium reserves 781,782 - 781,782 Retained earned premium $ 55,712,119 360,093 56,072,212

(Continued) 97 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

For the six months ended June 30, 2017 Financial instruments with discretionary Insurance participation contracts feature Total Direct written premiums $ 124,519,045 3,790,028 128,309,073 Reinsurance premiums - - - Insurance income 124,519,045 3,790,028 128,309,073 Reinsurance expense 1,094,054 - 1,094,054 Net change in unearned (369,734) 9,245 (360,489) premium reserves 724,320 9,245 733,565 Retained earned premium $ 123,794,725 3,780,783 127,575,508

For the six months ended June 30, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Direct written premiums $ 113,126,442 1,067,008 114,193,450 Reinsurance premiums - - - Insurance income 113,126,442 1,067,008 114,193,450 Reinsurance expense 1,302,613 - 1,302,613 Net change in unearned 138,078 - 138,078 premium reserves 1,440,691 - 1,440,691 Retained earned premium $ 111,685,751 1,067,008 112,752,759

Property insurance business:

For the three months ended June 30, 2017 Claims The net change Earned retain (Contain claim Reinsurance Claim Retain claims of unearned claims expense) claim recovered payment claims reverse payment Item (1) (2) (3) (4)=(1)+(2)-(3) (5) (6)=(4)-(5) Non-compulsory insurance $ 502,521 11,440 131,305 382,656 584 382,072 Compulsory insurance 77,222 37,738 32,600 82,360 (65) 82,425 Total $ 579,743 49,178 163,905 465,016 519 464,497

(Continued) 98 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

For the three months ended June 30, 2016 Claims The net change Earned retain (Contain claim Reinsurance Claim Retain claims of unearned claims expense) claim recovered payment claims reverse payment Item (1) (2) (3) (4)=(1)+(2)-(3) (5) (6)=(4)-(5) Non-compulsory insurance $ 474,531 11,225 124,983 360,773 122,458 238,315 Compulsory insurance 77,245 37,457 32,763 81,939 (831) 82,770 Total $ 551,776 48,682 157,746 442,712 121,627 321,085

For the six months ended June 30, 2017 Claims The net change Earned retain (Contain claim Reinsurance Claim Retain claims of unearned claims expense) claim recovered payment claims reverse payment Item (1) (2) (3) (4)=(1)+(2)-(3) (5) (6)=(4)-(5) Non-compulsory insurance $ 1,022,218 20,476 281,174 761,520 17,538 743,982 Compulsory insurance 152,886 73,000 64,347 161,539 135 161,404 Total $ 1,175,104 93,476 345,521 923,059 17,673 905,386

For the six months ended June 30, 2016 Claims The net change Earned retain (Contain claim Reinsurance Claim Retain claims of unearned claims expense) claim recovered payment claims reverse payment Item (1) (2) (3) (4)=(1)+(2)-(3) (5) (6)=(4)-(5) Non-compulsory insurance $ 933,534 21,027 251,957 702,604 278,875 423,729 Compulsory insurance 152,207 72,733 64,398 160,542 2,863 157,679 Total $ 1,085,741 93,760 316,355 863,146 281,738 581,408

(2) Retained claims payment:

Life insurance business:

For the three months ended June 30, 2017 Financial instruments with discretionary Insurance participation contracts feature Total Claims payment $ 12,143,985 834,143 12,978,128 Reinsurance claims payment 9 - 9 Insurance claims payment 12,143,994 834,143 12,978,137 Less: recovery of reinsurance 296,049 - 296,049 claims payment Retained claims payment $ 11,847,945 834,143 12,682,088

(Continued) 99 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

For the three months ended June 30, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Claims payment $ 10,254,981 893,127 11,148,108 Reinsurance claims payment 10 - 10 Insurance claims payment 10,254,991 893,127 11,148,118 Less: recovery of reinsurance 291,567 - 291,567 claims payment Retained claims payment $ 9,963,424 893,127 10,856,551

For the six months ended June 30, 2017 Financial instruments with discretionary Insurance participation contracts feature Total Claims payment $ 21,486,629 1,962,770 23,449,399 Reinsurance claims payment 34 - 34 Insurance claims payment 21,486,663 1,962,770 23,449,433 Less: recovery of reinsurance 569,302 - 569,302 claims payment Retained claims payment $ 20,917,361 1,962,770 22,880,131

For the six months ended June 30, 2016 Financial instruments with discretionary Insurance participation contracts feature Total Claims payment $ 20,084,644 2,036,702 22,121,346 Reinsurance claims payment 16 - 16 Insurance claims payment 20,084,660 2,036,702 22,121,362 Less: recovery of reinsurance 618,816 - 618,816 claims payment Retained claims payment $ 19,465,844 2,036,702 21,502,546

(Continued) 100 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Property insurance business:

For the three months ended June 30, 2017 Claims (Contain claim Reinsurance Claim Retain claims expense) claim recovered payment Item (1) (2) (3) (4)=(1)+(2)-(3) Non-compulsory insurance $ 214,083 1,413 55,225 160,271 Compulsory insurance 40,815 25,405 24,156 42,064 Total $ 254,898 26,818 79,381 202,335

For the three months ended June 30, 2016 Claims (Contain claim Reinsurance Claim Retain claims expense) claim recovered payment Item (1) (2) (3) (4)=(1)+(2)-(3) Non-compulsory insurance $ 260,329 6,277 180,751 85,855 Compulsory insurance 52,257 33,094 26,634 58,717 Total $ 312,586 39,371 207,385 144,572

For the six months ended June 30, 2017 Claims (Contain claim Reinsurance Claim Retain claims expense) claim recovered payment Item (1) (2) (3) (4)=(1)+(2)-(3) Non-compulsory insurance $ 421,430 3,681 128,632 296,479 Compulsory insurance 102,812 54,346 59,468 97,690 Total $ 524,242 58,027 188,100 394,169

For the six months ended June 30, 2016 Claims (Contain claim Reinsurance Claim Retain claims expense) claim recovered payment Item (1) (2) (3) (4)=(1)+(2)-(3) Non-compulsory insurance $ 454,091 9,584 313,343 150,332 Compulsory insurance 98,559 58,505 49,975 107,089 Total $ 552,650 68,089 363,318 257,421

(Continued) 101 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(ae) Income tax

(i) Income tax

For the three and six months ended June 30, 2017 and 2016, the Company and its subsidiaries’ income tax expenses and related accounts were as follows:

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Current income tax $ 1,925,641 1,063,343 4,852,682 2,861,522 expenses Deferred income tax (599,829) 454,262 (1,964,461) 656,658 expenses (benefits) Income tax expenses $ 1,325,812 1,517,605 2,888,221 3,518,180

For the three and six months ended June 30, 2017 and 2016, the Company and its subsidiaries’ income tax expenses (benefits) recognized under other comprehensive income were as follows:

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Items that will not be reclassified subsequently to profit or loss： Remeasurement gains $ 2,370 1,019 2,013 (1,457) (losses) related to defined benefit plans Items that are or may be reclassified subsequently to profit or loss: Exchange differences of (16,094) (311,899) 284,353 (432,096) overseas subsidiaries’ financial reports translation Unrealized valuation (419,785) (501,328) (634,157) (430,244) losses on available- for-sale financial assets Total $ (433,509) (812,208) (347,791) (863,797)

(Continued) 102 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(ii) The Company and its subsidiaries’ income tax returns assessed and administrative remedies filed were as follows:

Latest year of assessment The Company Until 2012 CTBC Bank Co., Ltd. Until 2012 CTBC Securities Co., Ltd. Until 2012 CTBC Insurance Brokers Co., Ltd. (dissolved) Until 2012 and 2015(Note) CTBC Venture Capital Co., Ltd. Until 2012 CTBC Asset Management Co., Ltd. Until 2012 CTBC Security Co., Ltd. Until 2012 Taiwan Lottery Co., Ltd. Until 2012 Chinatrust Bills Finance Corp. (dissolved) Until 2008 Taiwan Life Insurance Co., Ltd. Until 2012 CTBC Life Insurance Co., Ltd. (dissolved) Until 2012 CTBC Investments Co., Ltd. Until 2012 Note: CTBC Insurance Brokers Co., Ltd was liquidated after merged with the subsidiaries CTBC Bank Co., Ltd. in November, 2015 and the notice of assessment of the income tax for the year of 2015 has been acquired.

Year of Re-exam Description of Re-examination CTBC Bank Co., Ltd. 2010 Interest income ,amortization of goodwill and operating expenses allocation of exempt income CTBC Venture Capital Co., 2010 Operating income and operating expenses allocation of exempt Ltd. income " 2011 " CTBC Asset Management 2010 Operating income and operating expenses allocation of exempt Co., Ltd. income " 2011 " " 2012 "

Year of Appeal Description of Appeal The Company 2009 Other losses and other expenses CTBC Insurance Brokers 2009 Interest income and operating expenses allocation of exempt income Co., Ltd. (dissolved) CTBC Venture Capital Co., 2009 Interest income CTBC Asset Management 2009 Interest income and operating expenses allocation of exempt income Co., Ltd.

(Continued) 103 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Year of Litigation Description of Litigation The Company 2007 Interest income " 2008 Other losses CTBC Bank Co., Ltd. 2007 Interest income Chinatrust Bills Finance 2007 " Corp. (dissolved) CTBC Insurance Brokers 2007 " Co., Ltd. (dissolved) " 2008 " CTBC Venture Capital Co., 2007 " Ltd. " 2008 Operating income and operating expenses allocation of exempt income CTBC Asset Management 2007 Interest income Co., Ltd.

(af) Imputation credit account

December 31, June 30, 2017 2016 June 30, 2016 (i) Imputation credit account balance $ 3,990,663 1,557,817 2,217,796

(ii) Tax deduction ratio for earnings distribution to resident in the Republic of China:

For the year ended For the year ended December 31, 2015 December 31, 2014 (actual) (actual) Cash dividend 6.34 % 7.45 % Share dividend 6.61 % 7.45 %

All the ending balance of undistributed earnings incurred after 1998.

(iii) The above imputation calculation is in accordance with Tax Ruling No. 10204562810 issued by the Ministry of Finance, R.O.C. (MOF) on October 17, 2013.

(Continued) 104 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(ag) Capital stock, capital surplus, treasury stock, and other equity interest

(i) Capital stock

The general shareholder meeting, held on June 24, 2016, granted a capital increase of $14,422,090 from undistributed earnings in the form of 1,442,209 thousand shares. The capital injection aforementioned is approved by Financial Supervisory Commission on September 12, 2016, the record date of the capital injection is October 18, 2016.

As of June 30 2017, the Company authorized capital was $230,000,000, representing 23,000,000 thousand common shares with par value at NT$10 per share, and paid in capital for common stock was $194,969,896, with 19,496,990 thousand common shares issued.

(ii) Capital surplus

The components and sources of capital surplus were as follows:

December 31, June 30, 2017 2016 June 30, 2016 Additional paid-in capital－common $ 32,239,491 35,159,964 35,159,964 stock Share based payment transactions 1,499,326 1,499,326 1,499,326 Others (21,573) (21,573) (14,533) Total $ 33,717,244 36,637,717 36,644,757

In compliance with the Company Act, capital surplus can only be used to offset a deficit when surplus reserve is not sufficient to offset losses or be distributed by issuing new shares or by cash pursuant to a resolution to be adopted by a shareholders’ meeting as required in Article 241, Paragraph 1 of the Company Act. Furthermore, according to Article 72 1, Paragraph 1 of the Regulations Governing the offering and Issuance of Securities by Securities Issuers, the amount of capital surplus to be used to increase capital shall not exceed 10% of total paid in capital. The capital surplus arising from a capital increase can be capitalized only in the following fiscal year after being registered by the Company with the competent authority for approval.

The share based payment transactions are treasury stock and cash capital increase transferred to employees. The Company is reserving ten percent of new shares for subscription by employees of the Company and its subsidiaries follows Article 267, Paragraph 1 of the Company Act.

(iii) Treasury stock

As of June 30, 2017, in accordance with Financial Holding Company Act and Article 12 of Business Mergers And Acquisitions Act, the Company has buyback 27,168 thousand shares at NT$21.45 per share from the shareholders who are dissent to the stock swap for the acquisition of Taiwan Life Insurance Co., Ltd. on August 2015, and no cancellation of the total number of shares 27,168 thousand shares.

(Continued) 105 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(iv) Other equity interest

Changes in the Company’s other equity interest were as follows:

Changes in financial Exchange liabilities differences of designated at Unrealized overseas fair value (losses) gains on subsidiaries’ through profit or available-for-sale financial reports loss attributable financial assets translation to credit risk Total January 1, 2017 $ (11,997,483) (4,414,363) (317,142) (16,728,988) Available-for-sale financial assets- net －Valuation adjustment 9,183,396 - - 9,183,396 －Realized amount (3,552,398) - - (3,552,398) Foreign currency translation difference －Exchange difference - (4,080,335) - (4,080,335) －Gains on effective hedging instrument - 742,713 - 742,713 Proportionate share of other comprehensive income from associates under equity method －Recognized amount 6,392 - - 6,392 Changes in designated as financial liabilities measured at fair value through profit or loss attributable to credit risk －Recognized amount - - (633,329) (633,329) June 30, 2017 $ (6,360,093) (7,751,985) (950,471) (15,062,549)

January 1, 2016 $ (7,928,095) (1,614,049) 1,614,741 (7,927,403) Available-for-sale financial assets- net －Valuation adjustment 6,840,756 - - 6,840,756 －Realized amount (4,871,243) - - (4,871,243) Foreign currency translation difference －Exchange difference - 2,572,825 - 2,572,825 －Losses on effective hedging instrument - (1,513,680) - (1,513,680) Proportionate share of other comprehensive income from associates under equity method －Recognized amount (17,744) - - (17,744) Changes in designated as financial liabilities measured at fair value through profit or loss attributable to credit risk －Recognized amount - - 1,233,063 1,233,063 June 30, 2016 $ (5,976,326) (554,904) 2,847,804 (3,683,426)

(ah) Earnings distribution and dividend policy

The Company adopted the residual dividend policy to maintain ongoing expansion and profit growth and to conform to related regulations.

(Continued) 106 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Annual earnings, if any, are used to pay taxes, make adjustments in accordance with financial accounting standards, offset deficits, appropriate legal reserve, and provision for or reversal of special reserve. Then, preferred stock dividends are distributed prior to the distribution of the remaining earnings. After being appropriated, if any, the remaining balance and the undistributed earnings at the beginning period are the distributable amount for shareholders’ dividend and bonus. The appropriation can be 30% to 100% of the aforementioned distributable amount, depending on the resolution made by the board before the final consensus made by the stockholders. Any adjustments thereto are made in accordance with the resolution approved by the during a shareholders’ meeting.

In consideration of the Company’s operation planning, stock dividends as well as cash dividends can be distributed, but the cash dividends shall not be less than 10% of total dividends. The dividend policy shown above must consider the Company’ s operations, investments, funds required for acquisition, and significant revisions of the law. Therefore, the cash dividends may be adjusted by the board of directors upon approval of a resolution approved by a shareholders’ meeting, but the ratio shall not be less than 1% of total dividends. No cash dividend shall be distributed if it is less than NT$0.1 (dollars) per share.

A resolution on 2016 earnings distribution of the Company was approved by the general shareholder meeting on June 16, 2017 and the distribution of cash dividend and cash dividend from capital surplus was $16,549,348 and $2,920,473.

A resolution on 2015 earnings distribution of the Company was approved by the general shareholder meeting on June 24, 2016 and the distribution of cash dividend and stock dividend was $14,602,366 and $14,422,090.

Relevant information about employee bonuses approved by the board of directors on behalf of shareholders’ meeting is available on Market Observation Post System or other sites.

(ai) Share-based payment

For the three and six months ended June 30, 2017 and 2016, the Company and its subsidiaries had set out the measurement principles and specific requirements for the share based payment transactions which were as follows:

Management stock appreciation rights plan for the years 2013 2014 2015 2016 Grant date 2014.01.28 2015.02.06 2016.02.04 2017.01.25 Grant number 226,413 285,222 273,119 231,283 Exercise period 2016.12.31 2017.12.31 2018.12.31 2019.12.31 Exercise price at grant date 20.07 20.35 14.92 17.82

The Company and its subsidiaries implement the above plan via cash settlements, yet absentee and resigned employees’ stock appreciation rights will be deemed abandoned and forfeited.

(Continued) 107 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Disclosures for the Company and its subsidiaries’ employee stock appreciation rights plan (SARs) were as follows:

For the six months ended June 30, 2017 Management stock appreciation rights plan for the years 2014 2015 2016 Weighted Weighted Weighted average average average exercise exercise exercise Number price Number price Number price Outstanding at the beginning 346,900 16.10 302,173 13.21 231,283 17.82 of the period Granted during the period - 16.10 - 13.21 - 17.82 Forfeited during the period - 16.10 - 13.21 - 17.82 Exercised during the period 1,993 16.10 1,088 13.21 463 17.82 Expired during the period - 16.10 - 13.21 - 17.82 Outstanding at the end of the 344,907 16.10 301,085 13.21 230,820 17.82 period Exercisable at the end of the - 16.10 - 13.21 - 17.82 period

For the six months ended June 30, 2016 Management stock appreciation rights plan for the years 2013 2014 2015 Weighted Weighted Weighted average average average exercise exercise exercise Number price Number price Number price Outstanding at the beginning 257,942 16.97 313,574 18.19 273,119 14.92 of the period Granted during the period - 16.97 - 18.19 - 14.92 Forfeited during the period - 16.97 - 18.19 - 14.92 Exercised during the period - 16.97 - 18.19 280 14.92 Expired during the period - 16.97 - 18.19 - 14.92 Outstanding at the end of the 257,942 16.97 313,574 18.19 272,839 14.92 period Exercisable at the end of the 257,942 16.97 - 18.19 - 14.92 period

For the six months ended June 30, 2017, the weighted-average stock prices executed under SARs for 2014, 2015 and 2016 were NT$18.75, NT$18.63 and NT$18.54 (in dollars).

(Continued) 108 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

As of June 30, 2017, the weighted-average remaining durations of outstanding shares under SARs for 2014, 2015 and 2016 were 0.5, 1.5 and 2.5 years, respectively.

(aj) EPS

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Net income attributable to parent $ 9,179,695 7,737,559 19,393,303 14,302,860 company Weighted average outstanding 19,469,822 19,469,822 19,469,822 19,469,822 shares of common stock (in thousands) Basic EPS (in dollars) $ 0.47 0.40 1.00 0.73

Retroactive adjustments are applied to the Company’s basic EPS for the three and six months ended June 30, 2016.

Since the Company deals with share-based payment transactions via cash settlement, no impact is expected to be on its weighted-average outstanding shares, nor does the diluted EPS need to be calculated.

(ak) Net interest income

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Interest income Loan interest $ 13,193,463 13,174,320 26,292,598 26,484,591 Revolving credit interest 630,586 600,471 1,264,152 1,210,022 Securities interest 11,858,880 9,813,028 23,097,225 19,087,763 Due from Central Bank 88,891 94,420 187,722 227,626 Due from banks and call 574,420 552,521 1,167,027 1,203,916 loans to banks Hedging derivatives 24,348 26,182 48,429 66,737 Insurance policies loans 286,836 282,164 572,499 561,634 Others 443,127 490,771 899,043 1,081,955 Subtotal 27,100,551 25,033,877 53,528,695 49,924,244 Interest expense Deposit 3,773,789 3,592,203 7,467,665 7,685,103 Due to other banks 196,239 104,285 388,170 225,043 Borrowings and other 846,668 792,087 1,645,842 1,644,878 financing Hedging derivatives 14,624 15,834 29,086 37,682 Others 160,878 97,774 270,600 181,227 Subtotal 4,992,198 4,602,183 9,801,363 9,773,933 $ 22,108,353 20,431,694 43,727,332 40,150,311

The above table does not include income from financial assets or liabilities measured at fair value.

(Continued) 109 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(al) Service fee and commission income

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Commission income Credit card business $ 1,299,815 1,345,140 2,628,548 2,653,243 Wealth management business 1,580,746 1,040,373 2,978,603 1,822,470 Corporate business 1,452,445 1,661,612 2,857,822 3,242,867 Banking business 1,167,544 1,182,535 2,367,582 2,320,860 Insurance business 2,125,880 1,744,251 4,857,987 3,830,538 Securities business 104,967 249,258 204,081 409,045 Lottery business 829,274 778,191 3,012,575 2,992,943 Others 78,923 36,956 159,191 89,548 Total commission income 8,639,594 8,038,316 19,066,389 17,361,514 Service fee Credit card business 104,099 82,519 199,958 163,352 Wealth management business 38,571 33,430 80,020 69,974 Corporate business 60,066 74,893 120,825 140,429 Banking business 505,436 532,855 1,012,240 1,046,771 Insurance business 2,484,998 2,668,767 6,683,513 5,082,746 Securities business 17,249 163,621 33,895 186,814 Lottery business 63,931 68,568 255,260 256,298 Others 11,256 26,860 27,145 31,547 Total service fee 3,285,606 3,651,513 8,412,856 6,977,931 Service fee and commission $ 5,353,988 4,386,803 10,653,533 10,383,583 income

(Continued) 110 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(am) Net insurance income

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Insurance income Insurance income $ 55,883,531 57,361,525 129,484,177 115,279,191 Reinsurance premium income 49,178 48,682 93,476 93,760 Recovery of reinsurance 375,430 498,952 757,402 982,134 claims payment Separate account insurance 3,561,582 750,755 7,254,267 976,135 product income Total insurance income 59,869,721 58,659,914 137,589,322 117,331,220 Insurance expense Reinsurance expense 750,712 847,873 1,439,575 1,618,968 Underwriting expense 2,370 1,704 5,727 2,537 Claims payment 6,698,225 6,182,689 12,047,912 11,776,261 Reinsurance claims payment 26,827 39,381 58,061 68,105 Life insurance bonus payment 627,137 218,394 653,820 256,790 Surrender value 5,907,664 5,059,612 11,271,909 10,640,947 Guaranty fund expense 94,113 83,564 218,069 168,002 Separate account insurance 3,561,582 750,755 7,254,267 976,135 product expense Total insurance expense 17,668,630 13,183,972 32,949,340 25,507,745 Total net insurance income $ 42,201,091 45,475,942 104,639,982 91,823,475

(Continued) 111 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(an) Gains and losses on financial assets and liabilities measured at fair value through profit or loss

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Disposal gains (losses) Commercial paper $ 2,133 4,205 3,518 5,629 Treasury bills 1,156 16 1,514 19 Government bonds 42,182 77,668 (555,990) 133,226 Corporate bonds 49,518 34,068 79,024 61,818 Financial debentures 27,178 13,452 53,271 26,799 Convertible bonds 33,181 45,132 66,731 52,919 Asset-backed securities (10,922) - (10,922) - Listed and OTC securities 274,829 (81,440) 615,359 (122,983) Beneficiary certificates (6,449) (16,590) (121,978) (13,730) Derivative financial 10,634,068 3,894,319 21,516,914 9,913,755 instruments Margin purchase and short (876) (10,087) (4,302) (13,792) sale of securities Other securities and bonds 2,954 (1,691) 7,690 30,150 Subtotal 11,048,952 3,959,052 21,650,829 10,073,810 Valuation gains (losses) Commercial paper (3,471) (12,183) 14,120 (20,099) Treasury bills (454) - (309) - Government bonds 182,229 308,398 832,002 295,142 Corporate bonds (7,734) 95,141 (2,848) 72,125 Financial debentures (957,112) (200,881) (403,604) (1,701,672) Convertible bonds 21,767 126,304 70,293 162,842 Asset-backed securities (114,554) - (82,355) - Listed and OTC securities 368,263 29,087 460,201 98,487 Beneficiary certificates 136,476 (42,734) 268,654 (96,007) Other securities and bonds (3,906) (89,714) (2,546) (12,023) Derivative financial (11,190,380) (1,168,717) 4,865,770 4,850,657 instruments Margin purchase and short 357 2,328 (457) 3,171 sale of securities Fair value hedge adjustment (7,466) 1,746 (3,881) 1,671 Subtotal (11,575,985) (951,225) 6,015,040 3,654,294 Dividend income 95,945 52,203 134,698 54,105 Interest income 423,642 217,588 657,629 392,039 Interest expense (381,462) (489,817) (713,443) (991,884) Total $ (388,908) 2,787,801 27,744,753 13,182,364

(Continued) 112 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(ao) Investment-linked assets, liabilities, incomes and expenses

Related account balances of the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. were as follows:

December 31, June 30, 2017 2016 June 30, 2016 Insurance product assets of segregated account: Cash in bank $ 1,499,310 1,176,590 1,043,640 Securities 46,033,124 44,811,219 47,531,883 Receivables 1,414,037 359,345 363,195 Total $ 48,946,471 46,347,154 48,938,718 Insurance product liabilities of segregated account: Insurance product reserve－insurance $ 31,907,003 27,387,250 28,041,385 contract of segregated account Insurance product reserve－investment 16,712,288 18,214,031 20,202,603 contract of segregated account Payables 327,180 745,873 694,730 Total $ 48,946,471 46,347,154 48,938,718

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Insurance product revenues of segregated account: Premium income $ 2,724,472 600,257 6,654,346 1,207,712 Gains (losses) on financial 355,405 29,806 809,288 (128,214) assets or liabilities measured at fair value through profit or loss Foreign exchange gains and 391,555 24,893 (384,351) (347,546) losses Interest income 90,150 95,799 174,984 244,183 Total $ 3,561,582 750,755 7,254,267 976,135 Insurance product expenses of segregated account: Net changes in segregated $ 2,487,948 (293,612) 5,085,670 (1,118,477) account reserve－insurance contract Surrender value 859,078 859,043 1,777,836 1,723,229 Insurance claims payment 38,667 8,925 47,705 15,645 Management fee expense 175,889 176,399 343,056 355,738 Total $ 3,561,582 750,755 7,254,267 976,135

(Continued) 113 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

For the three and six months ended June 30, 2017 and 2016, sales bonuses or discount of investment-oriented insurance products from counterparties amounted to $47,925, $15,389, $63,612 and $30,064, respectively, and were classified under service fee and commission income.

(ap) Net changes in insurance liability reserve

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Provision for liability reserve $ 49,706,913 49,560,207 117,126,789 98,845,468 Provision for claim reserve 70,577 83,744 150,688 106,594 (Reversal of) provision for (399,151) 823,467 (137,168) 1,249,003 premium deficiency reserve (Reversal of) provision for (329,434) 96,237 (450,782) 182,975 special claim reserve (Reversal of) provision for (438,751) 213,282 (342,816) 419,816 unearned premium reserve Provision for (reversal of) 338 (2,969) (3) 3,072 reserve for insurance policies with financial instrument features Fair value adjustment (56,198) (113,549) (106,395) (249,299) Total $ 48,554,294 50,660,419 116,240,313 100,557,629

(aq) Employee benefits expenses

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Salary expenses $ 6,997,448 6,541,822 14,002,794 13,092,091 Insurance expenses 480,743 486,431 1,047,129 1,042,697 Cash-settled share-based 834,624 (46,188) 1,369,992 185,831 payment Retirement expenses Defined contribution plan 225,544 221,701 446,032 403,357 Defined benefits plan 82,805 87,923 164,294 175,483 Other personnel expenses 368,653 393,594 757,557 767,778 Total $ 8,989,817 7,685,283 17,787,798 15,667,237

As of June 30, 2017 and 2016, numbers of the Company and its subsidiaries’ employees were 19,689 and 19,743, respectively.

(Continued) 114 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(ar) Depreciation and amortization expenses

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Housing $ 313,818 278,833 579,573 564,470 General equipment 135,206 124,602 267,566 247,937 Transportation equipment 8,419 11,553 17,847 23,418 Information equipment 175,987 174,719 355,334 350,463 Subtotal of depreciation 633,430 589,707 1,220,320 1,186,288 expenses Amortization of information 295,886 296,186 585,653 578,730 software Bond issuance expenses and 1,074 946 2,114 2,198 others Subtotal of amortization 296,960 297,132 587,767 580,928 expenses Total $ 930,390 886,839 1,808,087 1,767,216

(as) Compensations of employees and the remunerations to directors

In accordance with the Company’ s article of incorporation, annual earnings, if any, should be appropriated 0.05% and 0.7% (not higher than) as compensations of employees and remunerations to board of directors. However, if there is any cumulative loss, the Company should offset cumulative losses in priority. Compensations of employees and the remunerations to directors which are recognized as current period operating expenses based on the Company’ s net income before tax excluding the amount of the compensations of employees and remunerations to directors, according to accounting period multiplied by the estimate of remuneration distribution set by the Company’s article of incorporation.

The estimated compensation of employees were $9,855 and $7,451 and the remunerations to directors were $137,969 and $104,319 for the six months ended June 30, 2017 and 2016 , respectively.

The actual compensations of employees of 2016 and 2015 amounted to $13,926 and $17,829, with $(113) and $(237) different from the amount recognized in the annual financial report. The actual compensations of the directors of 2016 and 2015 amounted to $194,959 and $249,604, with $(1,592) and $(3,315) different from the amount recognized in the annual financial report. The difference is regarded as a change of accounting estimates and will be adjusted in profit or loss in the fiscal year of 2017 and 2016. Relevant information is available on Market Observation Post System.

(Continued) 115 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(at) Other general and administrative expenses

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Site usage and general $ 1,360,864 1,383,786 2,647,674 2,700,276 equipment expenses Information equipment expenses 528,696 537,205 1,030,274 1,037,776 General administration expenses 1,452,089 1,439,225 2,823,573 2,844,950 Marketing and promotion 817,600 1,008,230 1,477,343 1,869,658 expenses Other expenses 835,554 780,675 1,545,400 1,545,940 Business tax 805,067 842,383 1,609,174 1,738,098 Total $ 5,799,870 5,991,504 11,133,438 11,736,698

(au) Financial instruments

(i) Methods and assumptions used by the Company and its subsidiaries for fair value evaluation of financial instruments were as follows:

(1) Fair value of short term financial instruments is estimated by their book value on the Balance sheet date. Since these instruments have short maturities, the book value is adopted as a reasonable basis in estimating the fair value. The method is applied to cash and cash equivalents, due from Central Bank and call loans to banks, securities purchased under resell agreements, receivables, reinsurance assets, other financial assets, deposits from Central Bank and other banks, due to Central Bank and other banks, securities sold under repurchase agreements, commercial paper payables, payables, remittances, and other financial liabilities.

(2) If there is a quoted price in an active market for the financial asset, including financial instruments measured at fair value through profit or loss, available for sale financial assets and held to maturity financial assets, and hedging derivative financial instruments, the quoted price is regarded as its fair value. If there is no quoted price in an active market for the financial asset, its fair value is estimated on the basis of the result of a valuation technique that refers to quoted prices provided by financial institutions. The discounted cash flow technique is used to estimate the fair value of a debt instrument where an active market does not exist. The estimates, hypotheses and discount rates for valuation refer to quoted prices, from financial institutions, of financial instruments having substantially the same terms and characteristics, including the credit quality of debtors, the remaining term over which the contractual interest rate is fixed, the remaining term to repayment of the principal, and the currency in which the payments are to be made. Fair value of debt investments without an active market accounted for under other financial assets is determined by the quoted estimated fair value from the counterparties, and recorded in accordance with the “Regulations Governing the Preparation of Financial Reports by Financial Holding Companies” at amortized cost. Fair value for an equity investment is determined based on either the price calculated using a valuation technique or its book value.

(Continued) 116 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(3) Loans and deposits are both classified as interest bearing financial assets; therefore, the book value of financial assets is equivalent to their fair value. The net book value of the non accrual loan, after deducting provision for credit loss, is adopted as the fair value.

(4) Fair value of long term liabilities is estimated by the present value of expected future cash flows. The discount rate is based on rates of similar loans available elsewhere; that is, loans with similar maturity date and terms (close to the maturity date).

(5) Derivatives usually adopt mark to model prices. The Discounted Cash Flow model is adopted for non option derivatives, and the Black Scholes Model is adopted for option derivatives.

(6) The exchange price is used for financial instruments traded on an exchange. Over-the- counter (OTC) positions use independent price/ parameter quotes by reliable brokers or data vendors, such as Reuters, Bloomberg, etc. In general, the closing price, settlement price, mid-price at a fixed cut-off time, and the average price of several independent brokers could be used as market data for valuation purposes.

(7) The Company and its subsidiaries would calculate credit valuation adjustment (CVA) by assessing probability of default (PD) and loss given default (LGD) of the counterparty before multiplying exposure at default (EAD) of the counterparty. On the contrary, debit valuation adjustment (DVA) is computed by applying probability of default of the Company and its subsidiaries and considering loss given default of the Company and its subsidiaries before being multiplied by exposure at default of the Company and its subsidiaries.

The Company and its subsidiaries adopt IAS39 or take any observable data into account to evaluate the probability of impairment and loss rate of allowance for doubtful accounts as the estimates of PD and LGD. In addition, mark to market assessment of a derivative instrument from Over the Counter (OTC) is applied as EAD. For those accounts have showed significant increase in credit risk, would be the CVA assessment individually by taking into account of the changes of exposures, conditions of collaterals and the recovery probabilities.

(Continued) 117 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(8) Except the following listed items, the book value is considered to be a reasonable basis of estimated fair value if the Company and its subsidiaries do not measure a financial instrument at fair value.

June 30, 2017 Financial Assets Book value Fair value Held-to-maturity financial assets－net $ 349,812,943 357,855,659 Other financial assets- Investment in debt instruments 760,207,747 765,090,168 without active markets

December 31, 2016 Financial Assets Book value Fair value Held-to-maturity financial assets－net $ 216,315,007 220,776,622 Other financial assets- Investment in debt instruments 681,706,540 674,673,008 without active markets

June 30, 2016 Financial Assets Book value Fair value Held-to-maturity financial assets－net $ 201,780,520 214,582,814 Other financial assets- Investment in debt instruments 590,845,981 606,049,540 without active markets

(ii) Fair value hierarchy information on financial instruments and the statements of changes in fair value of Level 3

(1) The definition of fair value hierarchy

(a) Level 1

Fair value measurement for a financial instrument classified in Level 1 is determined as the quoted price for an identical financial instrument in an active market. The definition of active market has all of the following conditions: (1) the products traded in the market are homogeneous, (2) willing parties are available anytime in the market, and (3) price information is available for the public.

(Continued) 118 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(b) Level 2

Fair value measurement for a financial instrument classified in Level 2 is determined as the observable price other than quoted price in an active market, including an observable input obtained in an active market, either directly (i.e., as prices) or indirectly (i.e., derived from prices). The examples of observable price are as follows:

(i) The quoted price for an identical financial instrument in an active market means the fair value from the market transaction prices for an identical financial instrument. An identical financial instrument should be determined by its characteristics and terms of transaction. The fair value of a financial instrument has to be adjusted according to the observable market price of the identical financial instrument. The reasons for adjustments include time lag of the occurring market transaction prices for an identical financial instrument (the quoted prices do not represent fair value at the measurement date), the difference in transaction terms for financial instruments, transaction prices involving related parties, and the correlation between the observable transaction prices of identical financial instruments and the market prices of held financial instruments.

(ii) The quoted market price of the same or identical financial instruments in an inactive market.

(iii) The fair value is estimated on the basis of the results of a valuation technique, and the market inputs used (i.e., interest rate, yield curve, and fluctuation rate) are based on obtainable data from the market (an observable input means an input can be derived from market data and can reflect the expectation of market participants when the inputs were used in evaluating the prices of financial instruments).

(iv) A majority of inputs are derived from observable market data, or the input correlation can be tested based on observable market data.

Input for a fair value measurement for a financial instrument classified in Level 3 is not based on obtainable data from the market (an unobservable input, such as volatility for a share option derived from the share’s historical prices, as it does not generally represent current market expectations about future volatility).

(Continued) 119 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(2) Fair value hierarchy information on financial instruments

June 30, 2017 Asset and Liability Items Total Level 1 Level 2 Level 3 Instruments measured at fair value Instruments measured at fair value on a recurring basis Non-derivative financial instruments assets and liabilities Assets: Financial assets measured at fair value through profit or loss Financial assets held for trading Investment in stocks $ 13,126,846 12,956,784 170,062 - Investment in debt instruments 103,659,758 10,814,067 92,845,691 - Others 3,023,536 3,023,536 - - Designated as financial assets measured at fair value through profit or loss Investment in debt instruments 15,458,227 15,182,270 275,918 39 Others 1,322,137 - - 1,322,137 Available-for-sale financial assets－net Investment in stocks 78,153,816 77,135,771 1,018,045 - Investment in debt instruments 613,640,965 171,102,124 436,711,127 5,827,714 Others 56,896,973 49,793,460 796,956 6,306,557 Liabilities: Designated as financial liabilities measured at 33,115,580 - - 33,115,580 fair value through profit or loss Derivative financial instruments assets and liabilities Assets: Financial assets measured at fair value through $ 37,913,382 146,591 37,348,848 417,943 profit or loss Derivative financial assets－hedging 223,611 - 223,611 - Liabilities: Financial liabilities measured at fair value 41,415,688 301,000 40,624,879 489,809 through profit or loss Derivative financial liabilities－hedging 281,876 - 281,876 - Instruments not measured at fair value Held-to-maturity financial assets 357,855,659 216,644,335 141,211,324 - Other financial assets- Investment in debt instruments 765,090,168 49,010,478 629,239,615 86,840,075 without active markets Investment property 60,212,178 - - 60,212,178

(Continued) 120 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016 Asset and Liability Items Total Level 1 Level 2 Level 3 Instruments measured at fair value Instruments measured at fair value on a recurring basis Non-derivative financial instruments assets and liabilities Assets: Financial assets measured at fair value through profit or loss Financial assets held for trading Investment in stocks $ 7,727,137 7,575,063 152,074 - Investment in debt instruments 102,331,535 11,742,382 90,588,710 443 Others 2,919,159 2,919,159 - - Designated as financial assets measured at fair value through profit or loss Investment in debt instruments 15,921,830 15,391,232 530,557 41 Others 1,376,466 - - 1,376,466 Available-for-sale financial assets－net Investment in stocks 58,525,451 57,510,876 1,014,575 - Investment in debt instruments 717,759,519 190,398,013 521,142,360 6,219,146 Others 32,525,489 25,873,718 1,166,954 5,484,817 Liabilities: Financial liabilities measured at fair value 3,634 3,634 - - through profit or loss Designated as financial liabilities measured at 28,178,587 - - 28,178,587 fair value through profit or loss Derivative financial instruments assets and liabilities Assets: Financial assets measured at fair value through $ 65,039,124 202,323 58,479,020 6,357,781 profit or loss Derivative financial assets－hedging 416,342 - 416,342 - Liabilities: Financial liabilities measured at fair value 69,400,175 205,023 62,281,611 6,913,541 through profit or loss Derivative financial liabilities－hedging 303,599 - 303,599 - Instruments not measured at fair value Held-to-maturity financial assets 220,776,622 109,275,871 111,500,751 - Other financial assets- Investment in debt instruments 674,673,008 88,868,226 506,578,050 79,226,732 without active markets Investment property 51,019,781 - - 51,019,781

(Continued) 121 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 Asset and Liability Items Total Level 1 Level 2 Level 3 Instruments measured at fair value Instruments measured at fair value on a recurring basis Non-derivative financial instruments assets and liabilities Assets: Financial assets measured at fair value through profit or loss Financial assets held for trading Investment in stocks $ 3,955,041 3,766,968 188,073 - Investment in debt instruments 97,193,896 12,777,344 84,390,499 26,053 Others 2,808,303 2,808,303 - - Designated as financial assets measured at fair value through profit or loss Investment in debt instruments 17,073,399 16,447,994 625,363 42 Others 1,750,345 - - 1,750,345 Available-for-sale financial assets－net Investment in stocks 62,132,443 61,322,324 810,119 - Investment in debt instruments 610,154,568 201,918,400 406,824,579 1,411,589 Others 44,554,379 35,177,705 6,165,634 3,211,040 Liabilities: Financial liabilities measured at fair value 366,675 366,675 - - through profit or loss Designated as financial liabilities measured at 38,178,591 - - 38,178,591 fair value through profit or loss Derivative financial instruments assets and liabilities Assets: Financial assets measured at fair value through $ 66,293,872 237,074 60,000,488 6,056,310 profit or loss Derivative financial assets－hedging 264,130 - 264,130 - Liabilities: Financial liabilities measured at fair value 69,739,493 280,518 62,930,532 6,528,443 through profit or loss Derivative financial liabilities－hedging 623,276 - 623,276 - Instruments not measured at fair value Held-to-maturity financial assets 214,582,814 110,874,325 101,490,559 2,217,930 Other financial assets- Investment in debt instruments 606,049,540 87,872,861 423,614,238 94,562,441 without active markets Investment property 30,501,997 - - 30,501,997

(3) For the six months ended June 30, 2017 and 2016, the Company and its subsidiaries have transferred available-for-sale financial assets amounted to $12,013,180 and $4,090,498 from Level 1 to Level 2, based on the lack of active quote markers for debt securities, and also transferred available-for-sale financial assets amounted to $0 and $47,751,727 from Level 2 to Level 1, based on the high frequency of the transaction and the availability of observable of input parameters.

(Continued) 122 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(4) Statements of changes in financial assets which were classified to Level 3 based on fair value measurement

For the six months ended June 30, 2017 Current increase Current decrease The amount Transfer in of Transfer in of The amount recognized in Level 3 of financial Level 3 of financial recognized in other Transfer in of assets and out of Transfer in of liabilities and out Beginning current net comprehensive Purchase or Level 3 and out Level 3 of financial Sale, disposal, other levels and of Level 3 of Items balance income Income issue of other levels liabilities or settlement out of Level 3 financial assets Ending balance Financial assets measured at fair value through profit or loss Financial assets held for $ 6,358,224 (3,563,368) - 341,442 - 39,750 2,757,995 110 - 417,943 trading Designated as financial 1,376,507 (20,381) - - - - 33,950 - - 1,322,176 assets measured at fair value through profit or loss Available-for-sale financial 11,703,963 (47,408) (232,416) 903,427 105,996 - 299,291 - - 12,134,271 assets－net

Total $ 19,438,694 (3,631,157) (232,416) 1,244,869 105,996 39,750 3,091,236 110 - 13,874,390

For the six months ended June 30, 2016 Current increase Current decrease The amount Transfer in of Transfer in of The amount recognized in Level 3 of financial Level 3 of financial recognized in other Transfer in of assets and out of Transfer in of liabilities and out Beginning current net comprehensive Purchase or Level 3 and out Level 3 of financial Sale, disposal, other levels and of Level 3 of Items balance income Income issue of other levels liabilities or settlement out of Level 3 financial assets Ending balance Financial assets measured at fair value through profit or loss Financial assets held for $ 20,184,721 (5,700,509) - 899,431 - 119,663 7,631,071 1,789,872 - 6,082,363 trading Designated as financial 1,702,359 237,316 - - - - 189,288 - - 1,750,387 assets measured at fair value through profit or loss Available-for-sale financial 3,505,366 6,490 (144,302) 894,728 1,048,395 - 58,266 629,782 - 4,622,629 assets－net Total $ 25,392,446 (5,456,703) (144,302) 1,794,159 1,048,395 119,663 7,878,625 2,419,654 - 12,455,379

The policy for when to recognize the transfers in or out of Level 3 is according to the actual date of the event or change in circumstances. This transfer out of Level 3 to Level 2 was due to a switch of valuation approach.

Unrealized gains (losses) associated with assets as of June 30, 2017 and 2016 which were recognized in current net income shown in the above table were $2,378,774 and $4,373,399, respectively.

(5) Statements of changes in financial liabilities which were classified to Level 3 based on fair value measurement

For the six months ended June 30, 2017 Current increase Current decrease The amount Transfer in of Transfer in of The amount recognized in Level 3 of financial Level 3 of financial recognized in other Transfer in of liabilities and out Transfer in of assets and out of Beginning current net comprehensive Purchase or Level 3 and out of Level 3 of Sale, disposal, other levels and Level 3 of financial Items balance income Income issue of other levels financial assets or settlement out of Level 3 liabilities Ending balance Financial liabilities measured at fair value through profit or loss Financial liabilities held $ 6,913,541 (3,954,653) - 319,702 - 39,750 2,757,419 71,112 - 489,809 for trading Designated as financial 28,178,587 (1,174,816) 633,329 5,478,480 - - - - - 33,115,580 liabilities measured at fair value through profit or loss

Total $ 35,092,128 (5,129,469) 633,329 5,798,182 - 39,750 2,757,419 71,112 - 33,605,389

(Continued) 123 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

For the six months ended June 30, 2016 Current increase Current decrease The amount Transfer in of Transfer in of The amount recognized in Level 3 of financial Level 3 of financial recognized in other Transfer in of liabilities and out Transfer in of assets and out of Beginning current net comprehensive Purchase or Level 3 and out of Level 3 of Sale, disposal, other levels and Level 3 of financial Items balance income Income issue of other levels financial assets or settlement out of Level 3 liabilities Ending balance Financial liabilities measured at fair value through profit or loss Financial liabilities held $ 22,465,076 (5,953,556) - 157,273 - 119,663 6,806,587 1,773,842 1,679,584 6,528,443 for trading Designated as financial 38,683,355 (1,737,827) 1,233,063 ------38,178,591 liabilities measured at fair value through profit or loss

Total $ 61,148,431 (7,691,383) 1,233,063 157,273 - 119,663 6,806,587 1,773,842 1,679,584 44,707,034

Unrealized gains (losses) associated with liabilities as of June 30, 2017 and 2016 which were recognized in current net income shown in the above table were $1,968,459 and $6,016,377, respectively.

(6) Sensitivity analysis of Level 3 fair value if reasonably possible alternative assumptions used

Valuation techniques used by the Company’s subsidiary CTBC Bank Co., Ltd. for fair value measurements of financial instruments are appropriate. However, the use of different valuation models or inputs could lead to different outcomes of fair value measurements. The following statement analyses Level 3 sensitivities for those unobservable inputs in valuation models that have a material impact on the valuation of Level 3 financial instrument. The Company’ s subsidiary CTBC Bank Co., Ltd. major Level 3 financial instruments include:

(a) Back-to-back derivative transactions: the movements of fair value between financial assets and liabilities can be fully offset for back-to-back trades, so there is no material impact on the income statement.

(b) Financial Debentures issued by the Company’s subsidiary CTBC Bank Co., Ltd.: the sensitivity analysis based on the assumption of one basis point change in the Company’ s subsidiary CTBC Bank Co., Ltd. credit spread would have the following effects on the statement of other comprehensive income.

Impacts on other comprehensive income as credit spread changes Favorable Unfavorable changes changes June 30, 2017 Liabilities Financial liabilities measured at fair value through profit or loss Designated as financial liabilities measured at fair $ 54,093 (53,767) value through profit or loss

(Continued) 124 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Impacts on other comprehensive income as credit spread changes Favorable Unfavorable changes changes December 31, 2016 Liabilities Financial liabilities measured at fair value through profit or loss Designated as financial liabilities measured at fair $ 51,828 (51,674) value through profit or loss June 30, 2016 Liabilities Financial liabilities measured at fair value through profit or loss Designated as financial liabilities measured at fair $ 49,097 (49,039) value through profit or loss

(7) Quantitative information about the significant unobservable inputs used in the fair value measurement (Level 3)

Quantitative information about the significant unobservable inputs was as follows:

June 30, 2017 Key The relation Valuation unobservable between inputs Fair value techniques inputs Range of inputs and fair value Recurring fair value measurements Non-derivative financial instruments assets and liabilities Assets: Financial assets measured at fair value through profit or loss Designated as financial assets measured $ 1,322,176 Discounted cash Default rate 8.72%~18.92% The higher default at fair value through profit or loss flow model rate, the lower fair value Available-for-sale financial assets－net Investment in debt instruments 5,827,714 Discounted cash Interest rate 0.76% The higher interest flow model rate, the lower fair value Others 6,306,557 Net asset valuation Net asset valuation Not applicable Not applicable method method Liabilities: Designated as financial liabilities measured 33,115,580 Interest rate option Credit spread 1.20%~1.80% The higher credit at fair value through profit or loss pricing model spread, the lower fair value Derivative financial instruments assets and liabilities Assets: Financial assets measured at fair value $ 417,943 Interest rate option Interest rate 54%~97% The higher through profit or loss pricing model correlation correlation coefficient coefficient, the lower fair value Liabilities: Financial liabilities measured at fair value 489,809 Interest rate option Interest rate 54%~97% The higher through profit or loss pricing model correlation correlation coefficient coefficient, the higher fair value

(Continued) 125 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016 Key The relation Valuation unobservable between inputs Fair value techniques inputs Range of inputs and fair value Recurring fair value measurements Non-derivative financial instruments assets and liabilities Assets: Financial assets measured at fair value through profit or loss Financial assets held for trading Investment in debt instruments $ 443 Quotes from Not applicable Not applicable Not applicable counterparties Designated as financial assets measured 1,376,507 Discounted cash Default rate 8.8%~20% The higher default at fair value through profit or loss flow model rate, the lower fair value Available-for-sale financial assets－net Investment in debt instruments 6,219,146 Discounted cash Interest rate 0.82%~1.00% The lower interest flow model rate, the higher fair value Others 5,484,817 Net asset valuation Net asset valuation Not applicable Not applicable method method Liabilities: Designated as financial liabilities measured 28,178,587 Interest rate option Credit spread 1.32%~1.88% The higher credit at fair value through profit or loss pricing model spread, the lower fair value Derivative financial instruments assets and liabilities Assets: Financial assets measured at fair value $ 6,357,781 Interest rate option Interest rate 60%~80% The higher through profit or loss pricing model correlation correlation coefficient coefficient, the lower fair value Liabilities: Financial liabilities measured at fair value 6,913,541 Interest rate option Interest rate 60%~80% The higher through profit or loss pricing model correlation correlation coefficient coefficient, the higher fair value

(Continued) 126 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 Key The relation Valuation unobservable between inputs Fair value techniques inputs Range of inputs and fair value Recurring fair value measurements Non-derivative financial instruments assets and liabilities Assets: Financial assets measured at fair value through profit or loss Financial assets held for trading Investment in debt instruments $ 26,053 Quotes from Not applicable Not applicable Not applicable counterparties Designated as financial assets measured 1,750,387 Discounted cash Default rate 8.41%~20.59% The higher default at fair value through profit or loss flow model rate, the lower fair value Available-for-sale financial assets－net Investment in debt instruments 1,411,589 Discounted cash Interest rate; 1.00%~2.00%; The higher interest flow model discount rate 0.88% rate, the lower fair value; the higher discount rate, the lower fair value Others 3,211,040 Net asset valuation Net asset valuation Not applicable The higher net method method asset valuation, the higher fair value Liabilities: Designated as financial liabilities measured 38,178,591 Interest rate option Credit spread 1.15%~1.88% The higher credit at fair value through profit or loss pricing model spread, the lower fair value Derivative financial instruments assets and liabilities Assets: Financial assets measured at fair value $ 6,056,310 Interest rate option Interest rate 68%~78% The higher through profit or loss pricing model correlation correlation coefficient coefficient, the lower fair value Liabilities: Financial liabilities measured at fair value 6,528,443 Interest rate option Interest rate 68%~78% The higher through profit or loss pricing model correlation correlation coefficient coefficient, the higher fair value

(8) The valuation process used for fair value measurements categorized within Level 3

Market risk management unit of the Company and its subsidiaries is in charge of independently testifying the fair value through applying independent data sources so that the information can be close to the current market status, making sure that the data sources are independent, reliable, consistent with other information and representable as an exercisable price. Additionally, periodically calibrating the pricing model, conducting retrospective testing, renewing inputs and information required for pricing model, and making any other necessary fair value adjustment are used to verify the reasonableness of valuation.

(Continued) 127 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(iii) For the three and six months ended June 30, 2017 and 2016, unrealized (losses) gains due to the estimated change of fair value recognized by the Company and its subsidiaries were $(12,321,669), $(1,564,880), $4,344,303 and $3,527,364, respectively.

(iv) Financial risk information The risk management objectives of the Company and its subsidiaries are to minimize the potential financial losses through appropriate strategies, policies and procedures. The overall risk management frameworks, which are transparent, systematic, professional and well- established, are rooted in their corporate governance to improve both business performance and shareholder’s equity. The organization structure of risk management includes Board of Directors, General Auditor, Risk Management Committee, Executive Committee, Credit Committee and Risk Management Department. The Company’ s subsidiaries also have their own risk management units. The scope of their authorities is illustrated as follows: Board of Directors, who is in charge of risk strategy approval, risk policies, risk management frameworks, and creating a culture of risk management, serves as the primary guidance for all risks and undertakes ultimate responsibility of overall risk management. General Auditor is responsible for planning and carrying out all kind of audit business and is directly accountable to the Board. The internal auditing unit under the General Auditor must regularly review and assess the integrity and the actual implementation on various kinds of risk management mechanism, and provide timely suggestion for improvement so that the risk management mechanism can be effectively implemented. By communicating, reporting, and advising the Board, Risk Management Committee assists the Board in risk governance. Risk Management committee also builds appropriate risk authorization and monitors and ensures risk authorization system operate properly. We expect the senior managers to support the Company’s risk culture, through decision-making processes and leader’ s supportive behavior, which could eventually influence all employees and organization. Executive Committee is accountable for overall risk control and holds three major risk review meetings—the first one on credit, market, and liquidity risks; the second one on operational risks; and the third one on investments. In those meetings, risk management policies and risk limits are reviewed, risk profiles are monitored, and risk strategies are developed. Credit Committee is in charge of supervising, approving and reviewing significant credit risk incidents of the Company and its subsidiaries. Risk Management Department is in charge of establishing and implementing appropriate risk mechanisms, and providing integrated risk report of the Company.

(Continued) 128 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(1) Credit Risk Management (a) Description of credit risk Credit risk is the risk of financial loss if a client, guarantor, debtor or counterparty fails to meet its contractual obligations due to financial problems or other factors. Credit risk arises from both on-balance-sheet items and off-balance-sheet items, including but not limited to lending risk, issuer’ s credit risk, counterparty credit risk and credit risk of the underlying assets/ investments. On/off-balance-sheet items of the Company and its subsidiaries primarily include loans, securities investment approved by regulators, and derivatives financial transaction, etc.

(b) Management procedures of credit risk

(i) Risk Identification:

By prudent credit review process, the Company and its subsidiaries assess sources and degrees of default risks from lenders, issuers, counterparties, and issues. By considering both internal operations and external environment, the Company and its subsidiaries lay out risk factors to serve as the foundation for risk measurement.

(ii) Risk Measurement:

In order to appropriately evaluate and monitor obligor’ s credit risk, the internal rating system or external rating is applied in accordance with their respective characteristics/ complexity of business, which improves the management and analysis of the credit approval, facility management and performance evaluation. Please refer to (1) C, measurement of credit risk for detailed explanation.

(iii) Risk Monitoring:

The Company and its subsidiaries develop proper and necessary guidelines in accordance with their respective characteristics of credit portfolio, such as: 1. Before undertaking the business, comprehensive credit process are developed, such as credit extension and annual review procedure, loan review mechanism, guideline for early-warning and watch- list accounts, guideline for collateral appraisement and management, procedure for non-performing loan management, guideline for limit management of on/off-balance-sheet credit assets and so on. 2. After undertaking business, management information systems are used to monitor the credit risk portfolio and risk concentration situation.

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3. To ensure the effectiveness and appropriateness of credit risk monitoring mechanism of subsidiaries, the Company has established credit risk assurance review mechanism to assess, scrutinize or physically observe the completeness/independence of the subsidiaries’ credit risk organization structure, the effectiveness/improving status of the subsidiaries’ credit risk management, the portfolio risk of credit risk assets and management process of credit risk. These conducts would help the Company identify the current status of the subsidiaries’ credit risk management, potential risk and the necessary monitoring mechanism that needs to be carried out. Consequently, a growth of the subsidiaries’ long-term operation can be supported.

(iv) Risk Reporting:

Risk management units of the Company and its subsidiaries periodically prepare credit risk portfolio/ management reports which are regularly submitted to senior managements or the board. The reports disclose credit risk profiles from various dimensions, such as credit exposure, portfolio mix (by product, industry sector, counterparty, rating, etc.) portfolio concentration, credit quality, credit line with major loss, stress testing and so on.

(i) Internal Rating System:

The Company’ s subsidiary CTBC Bank Co., Ltd. develops internal rating systems based on its own internal historical data. The major risk components including Probability of Default (PD), Loss Given Default (LGD), and Exposure at Default (EAD) are used to measure the expected loss (EL) and unexpected loss (UL). 1. Probability of default (PD)

Regarding the institutional banking business, various scorecard models are developed for Jumbo Enterprise, Middle Enterprise, Small Enterprise, Real Estate Developer, and Personal etc. based on obligor’s characteristics, including exposure types, industrial characteristics, revenue scales, and the correspondent with banks. A masterscale is also developed to segment the obligor’ s default risk; each segment of the masterscale is associated with a predefined one-year forward-looking probability of default. As for retail banking business, the risk segmentation with predefined one-year forward-looking probability of default is also established, which is developed according to obligor’ s risk characteristics, credit score, and delinquency status, etc.

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2. Loss given default (LGD)

Regarding the institutional banking business, the parameters of LGD, such as Collateral Recovery Rate, is calculated based on the product characteristics, collateral types, and guarantee forms, etc. The parameters are used to estimate the LGD for each facility. As for retail banking business, the LGD parameter is developed according to the product characteristics, such as loan-to-value, exposure, collateral type, etc. 3. Exposure at default (EAD)

Exposure at default is calculated by current outstanding plus potential extra outstanding at default. The credit conversion factor for potential extra outstanding at default is calculated by taking the facility commitment, usage ratio, loan outstanding and headroom into consideration. For off-balance exposure, Non-cash conversion factor is used to estimate the portion of off-balance-sheet exposure converted into on-balance-sheet if default.

(ii) Stress Test:

Stress testing helps to aware the plausible change of subsidiaries risk component resulting from stress event, assess the amount of capital needed to absorb losses or plan remedial actions to mitigate the impact of exceptional loss when such incident occurs.

(d) Mitigation of credit risk

(i) Collateral Management:

In assessing the credit extension, the business prospect, and future cash flow of an obligor are the main factors for determining the repayment capability. However, for the creditor’s sake, the obligor or a third party could be asked to deliver pledge of real estate, chattel, or securities as collateral which could be disposed for recovering the creditor’s right if the obligor defaults. In order to maintain the good standing value of collateral, the Company’ s subsidiaries with loan business have established guidelines regarding collateral management, which is as follows. By taking the volatility of market value and the characteristic of collateral into account, the Company’s subsidiaries with loan business set the type of collateral that can be pledged and consider the historical recovery situation to draw up the highest loan to value. To verify the fairness of the value of the collateral, the value is identified not only through valuation reports issued by professional appraisers but also market price and the actual registered price. With the periodic revaluation, the adequacy of the guarantee capability of an object which is highly fluctuation can be timely monitored.

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(ii) External guarantee:

In order to enhance the credit for weak small and medium business borrowers and the risk mitigation for the unsecured exposure of small and medium business borrower, external guarantee provided by R.O.C SMEG fund approved by government is one of the eligible guarantees.

(iii) Pre-settlement risk mitigation:

The Company and its subsidiaries might take mitigation actions such as call for additional collateral (or margin), signing a netting agreement or signing an early determination agreement so as to reduce the credit loss.

(e) Maximum exposure to credit risk

Without taking collateral or other credit enhancement mitigation effect into account, the maximum exposure to credit risk of on-consolidated-balance-sheet financial assets is equal to their carrying values.

Please refer to Note 6 (au)(iv)(2) F. for off-balance-sheet financial instruments’ maximum exposure to credit risks maturity analysis.

(f) Concentrations of credit risk

Significant concentrations of credit risk occur when there are significant exposures to an individual counterparty of a transaction or a number of related counterparties engage in similar activities and have similar economic characteristics that would cause their ability to meet contractual obligations to be affected by changes in economic or other conditions. The Company and its subsidiaries have a strategy to manage the concentration of credit risk in terms of a single client or counterparty to a transaction or clients located in nearby regions or specific industries. The following table illustrates the diversification of financial assets among industry sectors, geographical regions.

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(i) By Industry

June 30, 2017 Financial Individual Clients Service Public Sector High Tech Real Estate Manufacturing Institution Others Total Receivables—Credit card $ 79,938,671 ------79,938,671 Receivables—Factoring - 1,385,474 80,732 7,782,798 - 2,515,768 5,689,854 2,651 17,457,277 Loans -Consumer loans 671,654,836 ------671,654,836 -Corporate loans 62,835,904 72,118,561 159,803,914 63,357,720 76,619,366 77,373,643 15,423,986 - 527,533,094 -Micro-business loans 6,713,519 2,577,709 - 789,591 640,006 1,015,592 154,126 459,431 12,349,974 -Life insurance loans 18,692,781 ------18,692,781 -Premium advance loans 2,990,383 ------2,990,383 -Foreign currency loans 261,753,896 230,541,780 7,962,814 49,263,122 137,464,449 153,336,583 87,949,315 9,017,819 937,289,778 -Non-accrual loans 3,797,368 3,267,653 - 245,136 222,121 1,882,347 318 97,302 9,512,245 -Adjustment of discount (207,791) (570,083) (453) (69,768) (283,060) (92,519) (53,395) (206,648) (1,483,717) and premium Other financial assets 157,473 147,428 9,622 - 71,823 4,390 - - 390,736

Total $ 1,108,327,040 309,468,522 167,856,629 121,368,599 214,734,705 236,035,804 109,164,204 9,370,555 2,276,326,058

June 30, 2017 Financial Individual Public Sector Corporate Institution Clients Total Available for sale financial assets－ $ 435,658,796 57,665,982 111,844,911 9,183,130 614,352,819 Investment in debt instruments Derivative financial assets－hedging - - 223,611 - 223,611 Reinsurance assets－Claims recoverable from - - 488,071 - 488,071 reinsurers Reinsurance assets－Due from reinsurers and - - 431,238 - 431,238 ceding companies Held-to-maturity financial assets 284,030,312 18,768,772 47,020,236 - 349,819,320 Other financial assets－Investment in debt 66,745,811 241,625,615 451,856,933 - 760,228,359 instruments without active market

Total $ 786,434,919 318,060,369 611,865,000 9,183,130 1,725,543,418

December 31, 2016 Financial Individual Clients Service Public Sector High Tech Real Estate Manufacturing Institution Others Total Receivables—Credit card $ 59,382,625 ------59,382,625 Receivables—Factoring - 1,540,667 165,374 8,428,822 - 2,220,343 7,124,658 - 19,479,864 Loans -Consumer loans 641,777,435 ------641,777,435 -Corporate loans 61,383,396 71,864,044 123,385,948 71,631,620 73,149,264 77,582,669 13,335,543 - 492,332,484 -Micro-business loans 9,988,919 2,361,177 - 797,243 585,439 1,035,940 76,554 713,733 15,559,005 -Life insurance loans 18,321,814 ------18,321,814 -Premium advance loans 2,849,367 ------2,849,367 -Foreign currency loans 272,182,034 238,087,747 16,561,041 48,451,052 138,623,561 156,413,157 80,761,007 8,995,380 960,074,979 -Non-accrual loans 4,172,591 4,748,742 - 337,493 252,660 2,941,561 - 116,800 12,569,847 -Adjustment of discount (233,579) (455,769) (720) (86,638) (282,046) (103,601) (60,206) (315,291) (1,537,850) and premium Other financial assets 108,276 149,591 - - - 4,136 - - 262,003

Total $ 1,069,932,878 318,296,199 140,111,643 129,559,592 212,328,878 240,094,205 101,237,556 9,510,622 2,221,071,573

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December 31, 2016 Financial Individual Public Sector Corporate Institution Clients Total Available for sale financial assets－ $ 535,013,034 57,538,514 116,431,645 9,541,355 718,524,548 Investment in debt instruments Derivative financial assets－hedging - - 416,342 - 416,342 Reinsurance assets－Claims recoverable from - - 619,737 - 619,737 reinsurers Reinsurance assets－Due from reinsurers and - - 697,431 - 697,431 ceding companies Held-to-maturity financial assets 157,803,860 14,722,939 43,791,648 - 216,318,447 Other financial assets－Investment in debt 57,397,168 227,196,407 397,149,351 - 681,742,926 instruments without active market

Total $ 750,214,062 299,457,860 559,106,154 9,541,355 1,618,319,431

June 30, 2016 Financial Individual Clients Service Public Sector High Tech Real Estate Manufacturing Institution Others Total Receivables—Credit card $ 69,211,286 ------69,211,286 Receivables—Factoring - 1,741,390 1,075,510 10,394,787 - 1,812,023 16,757,197 580,830 32,361,737 Loans -Consumer loans 609,095,088 ------609,095,088 -Corporate loans 57,080,309 75,749,070 160,956,447 69,408,036 80,215,465 84,353,736 14,150,565 645,802 542,559,430 -Micro-business loans 13,868,416 2,279,641 - 731,681 540,911 1,045,981 78,962 1,003,998 19,549,590 -Life insurance loans 18,682,840 ------18,682,840 -Premium advance loans 2,698,223 ------2,698,223 -Foreign currency loans 302,684,665 234,761,763 2,671,850 50,590,924 153,062,547 171,362,860 79,635,511 8,657,659 1,003,427,779 -Non-accrual loans 4,662,930 6,321,697 - 1,352,841 484,525 1,846,192 - 122,633 14,790,818 -Adjustment of discount (241,318) (501,018) (964) (75,898) (326,617) (112,419) (75,236) (274,733) (1,608,203) and premium Other financial assets 106,040 159,124 - - - 4,162 - - 269,326

Total $ 1,077,848,479 320,511,667 164,702,843 132,402,371 233,976,831 260,312,535 110,546,999 10,736,189 2,311,037,914

June 30, 2016 Financial Individual Public Sector Corporate Institution Clients Total Available for sale financial assets－ $ 400,199,233 54,379,853 144,210,568 11,494,430 610,284,084 Investment in debt instruments Derivative financial assets－hedging 121,854 - 142,276 - 264,130 Reinsurance assets－Claims recoverable from - - 682,300 - 682,300 reinsurers Reinsurance assets－Due from reinsurers and - - 660,591 - 660,591 ceding companies Held-to-maturity financial assets 157,627,152 13,384,250 30,771,620 - 201,783,022 Other financial assets－Investment in debt 44,359,904 210,922,785 336,261,654 - 591,544,343 instruments without active market

Total $ 602,308,143 278,686,888 512,729,009 11,494,430 1,405,218,470

(Continued) 134 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

ii) By Area

June 30, 2017 Asia (excluding Taiwan North America Taiwan) Others Total Available for sale financial assets $ 388,016,442 83,201,745 110,269,596 32,865,036 614,352,819 －Investment in debt instruments Derivative financial assets－ 213,490 - 3,733 6,388 223,611 hedging Receivables－Credit card 79,938,671 - - - 79,938,671 Receivables－Factoring 4,914,809 1,418,512 8,504,683 2,619,273 17,457,277 Loans Consumer finance －Mortgage loans 551,675,427 - - - 551,675,427 －Automobile loans 12,983,800 - - - 12,983,800 －Consumer loans 106,995,609 - - - 106,995,609 Corporate finance －Corporate loans 522,057,690 3,500,000 765,073 1,210,331 527,533,094 －Micro business loans 12,349,974 - - - 12,349,974 Life insurance loans 18,692,781 - - - 18,692,781 Premium advance loans 2,990,383 - - - 2,990,383 Foreign currency loans 65,791,060 112,125,554 735,963,540 23,409,624 937,289,778 Non accrual loans 1,706,392 66,809 7,739,044 - 9,512,245 Adjustment of discount and (336,810) (56,540) (855,450) (234,917) (1,483,717) premium Reinsurance assets－Claims 122,797 72,248 63,709 229,317 488,071 recoverable from reinsurers Reinsurance assets－Due from 128,313 35,521 72,805 194,599 431,238 reinsurers and ceding companies Held-to-maturity financial assets 246,386,993 31,544,887 57,957,580 13,929,860 349,819,320 Other financial assets 46,912,319 263,763,062 185,672,933 264,270,781 760,619,095 Total $ 2,061,540,140 495,671,798 1,106,157,246 338,500,292 4,001,869,476

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December 31, 2016 Asia (excluding Taiwan North America Taiwan) Others Total Available for sale financial assets $ 475,883,343 84,486,806 105,163,117 52,991,282 718,524,548 －Investment in debt instruments Derivative financial assets－ 436,122 - (19,780) - 416,342 hedging Receivables－Credit card 59,382,625 - - - 59,382,625 Receivables－Factoring 4,662,925 1,091,966 11,204,596 2,520,377 19,479,864 Loans Consumer finance －Mortgage loans 518,580,476 - - - 518,580,476 －Automobile loans 15,426,993 - - - 15,426,993 －Consumer loans 107,769,966 - - - 107,769,966 Corporate finance －Corporate loans 486,870,480 3,800,000 1,558,405 103,599 492,332,484 －Micro business loans 15,559,005 - - - 15,559,005 Life insurance loans 18,321,814 - - - 18,321,814 Premium advance loans 2,849,367 - - - 2,849,367 Foreign currency loans 63,051,341 113,129,269 761,274,768 22,619,601 960,074,979 Non accrual loans 1,688,020 120,781 10,760,902 144 12,569,847 Adjustment of discount and (380,638) (39,613) (779,182) (338,417) (1,537,850) premium Reinsurance assets－Claims 131,702 72,768 95,525 319,742 619,737 recoverable from reinsurers Reinsurance assets－Due from 205,029 69,695 84,735 337,972 697,431 reinsurers and ceding companies Held-to-maturity financial assets 123,309,927 30,928,097 50,826,150 11,254,273 216,318,447 Other financial assets 65,346,689 222,206,625 120,048,873 274,402,742 682,004,929 Total $ 1,959,095,186 455,866,394 1,060,218,109 364,211,315 3,839,391,004

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June 30, 2016 Asia (excluding Taiwan North America Taiwan) Others Total Available for sale financial assets $ 322,143,455 96,421,928 122,578,878 69,139,823 610,284,084 －Investment in debt instruments Derivative financial assets－ 217,564 - 46,566 - 264,130 hedging Receivables－Credit card 69,211,286 - - - 69,211,286 Receivables－Factoring 6,716,594 1,586,526 22,085,783 1,972,834 32,361,737 Loans Consumer finance －Mortgage loans 487,517,350 - - - 487,517,350 －Automobile loans 15,293,047 - - - 15,293,047 －Consumer loans 106,284,691 - - - 106,284,691 Corporate finance －Corporate loans 541,112,348 - 1,447,082 - 542,559,430 －Micro business loans 19,549,590 - - - 19,549,590 Life insurance loans 18,682,840 - - - 18,682,840 Premium advance loans 2,698,223 - - - 2,698,223 Foreign currency loans 65,947,277 99,587,407 819,950,981 17,942,114 1,003,427,779 Non accrual loans 2,120,546 23,567 12,586,351 60,354 14,790,818 Adjustment of discount and (426,618) (41,373) (845,442) (294,770) (1,608,203) premium Reinsurance assets－Claims 193,331 66,374 141,706 280,889 682,300 recoverable from reinsurers Reinsurance assets－Due from 203,416 67,791 102,325 287,059 660,591 reinsurers and ceding companies Held-to-maturity financial assets 136,671,133 26,708,496 29,565,883 8,837,510 201,783,022 Other financial assets 68,710,373 181,946,938 108,772,404 232,383,955 591,813,670 Total $ 1,862,846,446 406,367,654 1,116,432,517 330,609,768 3,716,256,385

(Continued) 137 (English Translation of Financial Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD.AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(g) Credit quality and impairment analysis of financial assets

Some financial assets held by the Company and its subsidiaries, such as cash and cash equivalent, due from Central Bank, call loans to banks, financial assets measured at fair value through profit or loss, securities purchased under resell agreements, refundable deposits, operational guarantee deposits, and settlement fund, are excluded from this analysis since the most of counterparties are normally with good credit quality and can be considered as low credit risk. Below tables provide the credit quality analysis for the rest of financial assets.

(i) Credit quality analysis of financial assets

June 30, 2017 Neither past due nor impaired Past due not impaired Individually Collectively Investment Sub-investment Investment Sub-investment assessed assessed Impairment Total (A)+(B) Item grade grade High risk grade Subtotal (A) grade grade High risk grade Subtotal (B) impaired (C) impaired (D) allowances (E) +(C)+(D)-(E) Available for sale financial assets－Investment $ 550,380,360 63,825,209 1,386 614,206,955 - - - - 145,864 - 102,775 614,250,044 in debt instruments Derivative financial assets－hedging 224,823 (989) (223) 223,611 ------223,611 Receivables－Credit card 66,232,462 7,887,659 1,812,874 75,932,995 57,642 110,976 506,650 675,268 - 3,330,408 1,080,911 78,857,760 Receivables－Factoring 7,138,822 8,513,176 1,473,509 17,125,507 56,252 181,393 94,125 331,770 - - 18,490 17,438,787 Loans Consumer finance －Mortgage loans 537,876,561 4,059,256 510,076 542,445,893 2,499,964 1,108,514 657,607 4,266,085 - 4,963,449 463,784 551,211,643 －Automobile loans 12,901,366 - - 12,901,366 62,097 - - 62,097 - 20,337 121,722 12,862,078 －Consumer loans 76,746,589 16,192,908 3,332,132 96,271,629 286,964 535,743 1,554,883 2,377,590 - 8,346,390 2,656,638 104,338,971 Corporate finance －Corporate loans 265,437,687 203,613,279 55,481,501 524,532,467 - 57,812 117,757 175,569 2,825,058 - 996,442 526,536,652 －Micro business loans 5,445,282 4,787,744 1,747,607 11,980,633 1,784 15,569 80,562 97,915 59,036 212,390 25,086 12,324,888 Life insurance loans 18,692,781 - - 18,692,781 ------18,692,781 Premium advance loans 2,990,383 - - 2,990,383 ------2,990,383 Foreign currency loans 390,026,781 391,420,662 145,833,380 927,280,823 306,385 625,477 2,176,615 3,108,477 5,418,464 1,482,014 4,748,569 932,541,209 Non accrual loans ------19,758 19,758 5,596,529 3,895,958 4,660,651 4,851,594 Adjustment of discount and premium (513,991) (652,663) (325,732) (1,492,386) 339 417 2,832 3,588 1,223 3,858 (706) (1,483,011) Reinsurance assets－Claims recoverable from 474,245 13,826 - 488,071 ------488,071 reinsurers Reinsurance assets－Due from reinsurers and 399,724 13,949 - 413,673 - - - - 17,558 7 17,558 413,680 ceding companies Held-to-maturity financial assets 271,969,165 77,350,155 500,000 349,819,320 ------6,377 349,812,943 Other financial assets 732,998,347 23,655,914 3,860,665 760,514,926 - - - - 14,061 90,108 96,595 760,522,500 Total $ 2,939,421,387 800,680,085 214,227,175 3,954,328,647 3,271,427 2,635,901 5,210,789 11,118,117 14,077,793 22,344,919 14,994,892 3,986,874,584

Note: The balances of impairment allowance, as shown above, are in compliance with the IFRSs accepted by the FSC.

(Continued) 138 (English Translation of Financial Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD.AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016 Neither past due nor impaired Past due not impaired Individually Collectively Investment Sub-investment Investment Sub-investment assessed assessed Impairment Total (A)+(B) Item grade grade High risk grade Subtotal (A) grade grade High risk grade Subtotal (B) impaired (C) impaired (D) allowances (E) +(C)+(D)-(E) Available for sale financial assets－Investment $ 656,627,099 61,409,144 - 718,036,243 - - - - 488,305 - 119,544 718,405,004 in debt instruments Derivative financial assets－hedging 436,322 (19,780) (200) 416,342 ------416,342 Receivables－Credit card 45,377,382 8,123,920 1,916,365 55,417,667 40,096 102,462 487,011 629,569 - 3,335,389 1,063,698 58,318,927 Receivables－Factoring 5,893,243 10,422,185 2,376,003 18,691,431 115,208 534,348 138,877 788,433 - - 19,022 19,460,842 Loans Consumer finance －Mortgage loans 503,848,071 4,144,337 434,792 508,427,200 3,232,100 1,209,099 713,711 5,154,910 - 4,998,366 459,973 518,120,503 －Automobile loans 15,331,112 - - 15,331,112 74,850 - - 74,850 - 21,031 150,359 15,276,634 －Consumer loans 75,770,379 17,053,358 3,505,932 96,329,669 546,736 784,140 1,808,260 3,139,136 - 8,301,161 2,675,322 105,094,644 Corporate finance －Corporate loans 237,746,082 198,096,672 53,427,335 489,270,089 - 118,489 154,546 273,035 2,789,360 - 1,179,068 491,153,416 －Micro business loans 8,685,107 4,469,970 1,939,367 15,094,444 2,135 20,722 75,528 98,385 39,241 326,935 35,721 15,523,284 Life insurance loans 18,321,814 - - 18,321,814 ------18,321,814 Premium advance loans 2,849,367 - - 2,849,367 ------2,849,367 Foreign currency loans 398,306,339 397,112,915 156,238,536 951,657,790 408,055 695,718 2,476,350 3,580,123 3,805,449 1,031,617 4,947,921 955,127,058 Non accrual loans ------530 530 8,160,324 4,408,993 5,926,725 6,643,122 Adjustment of discount and premium (568,737) (646,497) (364,577) (1,579,811) 323 175 (756) (258) 39,127 3,092 (913) (1,536,937) Reinsurance assets－Claims recoverable from 609,598 10,129 10 619,737 ------619,737 reinsurers Reinsurance assets－Due from reinsurers and 667,639 12,234 47 679,920 - - - - 17,511 - 17,558 679,873 ceding companies Held-to-maturity financial assets 147,268,057 69,050,390 - 216,318,447 ------3,440 216,315,007 Other financial assets 660,968,758 16,934,061 3,997,143 681,899,962 - - - - 4,897 100,070 128,032 681,876,897 Total $ 2,778,137,632 786,173,038 223,470,753 3,787,781,423 4,419,503 3,465,153 5,854,057 13,738,713 15,344,214 22,526,654 16,725,470 3,822,665,534

Note: The balances of impairment allowance, as shown above, are in compliance with the IFRSs accepted by the FSC.

(Continued) 139 (English Translation of Financial Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD.AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 Neither past due nor impaired Past due not impaired Individually Collectively Investment Sub-investment Investment Sub-investment assessed assessed Impairment Total (A)+(B) Item grade grade High risk grade Subtotal (A) grade grade High risk grade Subtotal (B) impaired (C) impaired (D) allowances (E) +(C)+(D)-(E) Available for sale financial assets－Investment $ 551,680,435 57,022,974 1,088,252 609,791,661 - - - - 492,423 - 129,229 610,154,855 in debt instruments Derivative financial assets－hedging 264,513 - (383) 264,130 ------264,130 Receivables－Credit card 55,760,993 7,607,691 1,837,167 65,205,851 50,541 92,286 472,880 615,707 - 3,389,728 1,041,742 68,169,544 Receivables－Factoring 19,015,674 11,455,376 1,388,997 31,860,047 67,269 61,906 372,515 501,690 - - 15,211 32,346,526 Loans Consumer finance －Mortgage loans 475,113,148 3,926,672 433,162 479,472,982 1,295,741 987,980 645,644 2,929,365 - 5,115,003 497,268 487,020,082 －Automobile loans 15,225,015 - - 15,225,015 47,710 - - 47,710 - 20,322 145,113 15,147,934 －Consumer loans 75,914,407 16,895,016 3,451,294 96,260,717 78,140 433,506 1,518,867 2,030,513 - 7,993,461 2,502,935 103,781,756 Corporate finance －Corporate loans 286,436,062 201,185,589 52,051,615 539,673,266 - 95,387 180,273 275,660 2,610,504 - 1,310,056 541,249,374 －Micro business loans 12,806,699 4,283,987 1,991,419 19,082,105 3,395 30,663 10,917 44,975 23,312 399,198 27,464 19,522,126 Life insurance loans 18,682,840 - - 18,682,840 ------18,682,840 Premium advance loans 2,698,223 - - 2,698,223 ------2,698,223 Foreign currency loans 424,275,990 399,323,029 171,368,914 994,967,933 465,262 813,577 2,257,267 3,536,106 3,862,683 1,061,057 5,317,540 998,110,239 Non accrual loans ------9,718,426 5,072,392 6,300,457 8,490,361 Adjustment of discount and premium (610,706) (651,170) (380,211) (1,642,087) 299 (1,236) 1,256 319 32,791 774 (699) (1,607,504) Reinsurance assets－Claims recoverable from 673,902 8,386 12 682,300 ------682,300 reinsurers Reinsurance assets－Due from reinsurers and 628,635 14,355 - 642,990 - - - - 17,526 75 17,529 643,062 ceding companies Held-to-maturity financial assets 119,965,312 81,317,721 499,989 201,783,022 ------2,502 201,780,520 Other financial assets 558,476,199 27,433,392 4,715,935 590,625,526 - - - - 1,091,877 96,267 931,216 590,882,454 Total $ 2,617,007,341 809,823,018 238,446,162 3,665,276,521 2,008,357 2,514,069 5,459,619 9,982,045 17,849,542 23,148,277 18,237,563 3,698,018,822

Note: The balances of impairment allowance, as shown above, are in compliance with the IFRSs accepted by the FSC.

(Continued) 140 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(h) Aging analysis on past due but not impaired financial assets

Past due but not impaired loans might result from some temporary administration reasons so the customer is in the early stages of delinquency but no actual impairment has occurred yet. Unless there is other objective evidence shown the potential loss, according to internal credit risk assets impairment evaluation guideline, a less than 90-day past due loan is typically not be treated as impairment.

June 30, 2017 Up to 1 month 1-2 months 2-3 months Over 3 months Total Receivables -Credit cards $ 494,871 123,506 56,891 - 675,268 -Factoring 150,508 81,781 8,194 91,287 331,770 Loans Consumer finance -Mortgage loans 4,082,290 115,298 68,497 - 4,266,085 -Automobile loans 55,842 5,274 981 - 62,097 -Consumer loans 1,957,392 290,981 129,217 - 2,377,590 Corporate finance -Corporate loans 162,309 13,260 - - 175,569 -Micro-business loans 97,766 149 - - 97,915 Foreign currency loans 1,591,737 1,115,346 401,394 - 3,108,477 Non-accrual loans - - 19,758 - 19,758 Adjustment of discount and 643 2,862 83 - 3,588 premium Total $ 8,593,358 1,748,457 685,015 91,287 11,118,117

December 31, 2016 Up to 1 month 1-2 months 2-3 months Over 3 months Total Receivables -Credit cards $ 453,774 113,880 61,915 - 629,569 -Factoring 318,023 373,332 9 97,069 788,433 Loans Consumer finance -Mortgage loans 5,017,063 127,097 10,750 - 5,154,910 -Automobile loans 73,528 1,285 37 - 74,850 -Consumer loans 2,710,028 299,819 129,289 - 3,139,136 Corporate finance -Corporate loans 270,444 2,591 - - 273,035 -Micro-business loans 95,368 3,017 - - 98,385 Foreign currency loans 1,773,741 1,329,714 474,471 2,197 3,580,123 Non-accrual loans - - 530 - 530 Adjustment of discount and 516 (837) 63 - (258) premium Total $ 10,712,485 2,249,898 677,064 99,266 13,738,713

(Continued) 141 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 Up to 1 month 1-2 months 2-3 months Over 3 months Total Receivables -Credit cards $ 438,449 121,507 55,751 - 615,707 -Factoring 137,314 69,117 227,782 67,477 501,690 Loans Consumer finance -Mortgage loans 2,769,877 135,486 24,002 - 2,929,365 -Automobile loans 44,813 2,226 671 - 47,710 -Consumer loans 1,617,968 296,584 115,961 - 2,030,513 Corporate finance -Corporate loans 260,461 13,771 1,428 - 275,660 -Micro-business loans 37,762 5,598 199 1,416 44,975 Foreign currency loans 1,977,280 1,344,069 214,757 - 3,536,106 Adjustment of discount and (1,049) 1,339 29 - 319 premium Total $ 7,282,875 1,989,697 640,580 68,893 9,982,045

(i) Impairment analysis on impaired financial assets

June 30, 2017 Individually Collectively Individually Collectively assessed assessed assessed assessed impaired impaired impairment impairment Net impaired exposure exposure allowances allowances Exposure Available for sale financial $ 145,864 - 102,775 - 43,089 assets- Investment in debt instruments Receivables -Credit cards - 3,330,408 - 432,614 2,897,794 Loans Consumer finance -Mortgage loans - 4,963,449 - 265,272 4,698,177 -Automobile loans - 20,337 - 232 20,105 -Consumer loans - 8,346,390 - 1,164,227 7,182,163 Corporate finance -Corporate loans 2,825,058 - 440,938 - 2,384,120 -Micro-business loans 59,036 212,390 1,768 173 269,485 Foreign currency loans 5,418,464 1,482,014 1,191,899 127,023 5,581,556 Non-accrual loans 5,596,529 3,895,958 2,753,332 1,907,319 4,831,836 Adjustment of discount 1,223 3,858 - - 5,081 and premium Reinsurance assets-Due from 17,558 7 17,558 - 7 reinsurers and ceding companies Other financial assets 14,061 90,108 346 78,559 25,264 Total $ 14,077,793 22,344,919 4,508,616 3,975,419 27,938,677

(Continued) 142 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016 Individually Collectively Individually Collectively assessed assessed assessed assessed impaired impaired impairment impairment Net impaired exposure exposure allowances allowances Exposure Available for sale financial $ 488,305 - 119,544 - 368,761 assets- Investment in debt instruments Receivables -Credit cards - 3,335,389 - 424,301 2,911,088 Loans Consumer finance -Mortgage loans - 4,998,366 - 282,243 4,716,123 -Automobile loans - 21,031 - 238 20,793 -Consumer loans - 8,301,161 - 1,108,402 7,192,759 Corporate finance -Corporate loans 2,789,360 - 634,255 - 2,155,105 -Micro-business loans 39,241 326,935 15,751 184 350,241 Foreign currency loans 3,805,449 1,031,617 1,098,296 177,498 3,561,272 Non-accrual loans 8,160,324 4,408,993 3,637,420 2,289,305 6,642,592 Adjustment of discount 39,127 3,092 - - 42,219 and premium Reinsurance assets-Due from 17,511 - 17,558 - (47) reinsurers and ceding companies Other financial assets 4,897 100,070 2,409 87,230 15,328 Total $ 15,344,214 22,526,654 5,525,233 4,369,401 27,976,234

June 30, 2016 Individually Collectively Individually Collectively assessed assessed assessed assessed impaired impaired impairment impairment Net impaired exposure exposure allowances allowances Exposure Available for sale financial $ 492,423 - 129,229 - 363,194 assets- Investment in debt instruments Receivables -Credit cards - 3,389,728 - 429,068 2,960,660 Loans Consumer finance -Mortgage loans - 5,115,003 - 298,713 4,816,290 -Automobile loans - 20,322 - 259 20,063 -Consumer loans - 7,993,461 - 1,047,194 6,946,267 Corporate finance -Corporate loans 2,610,504 - 650,194 - 1,960,310 -Micro-business loans 23,312 399,198 6,353 209 415,948 Foreign currency loans 3,862,683 1,061,057 916,099 164,619 3,843,022 Non-accrual loans 9,718,426 5,072,392 3,819,014 2,481,443 8,490,361 Adjustment of discount 32,791 774 - - 33,565 and premium Reinsurance assets-Due from 17,526 75 17,529 - 72 reinsurers and ceding companies Other financial assets 1,091,877 96,267 4,427 83,922 1,099,795 Total $ 17,849,542 23,148,277 5,542,845 4,505,427 30,949,547

(Continued) 143 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(j) Foreclosed properties

Foreclosed properties of the Company and its subsidiaries are classified under other assets. Please refer to Note 6(Q).

(k) Disclosures required by the Regulations Governing the Preparation of Financial Reports by Financial Holding Companies

(a) Asset quality of CTBC Bank Co., Ltd. and its subsidiaries’ overdue loans and overdue receivables

Unit：In Thousands of New Taiwan Dollars, %

Month/ Year June 30, 2017 Non performing Non-performing Allowance for Categories/ Items loans Total loans loans ratio credit losses Coverage ratio Corporate Secured 3,200,880 438,744,471 0.73 % 14,792,595 243.94 % finance Unsecured (Note 10) 2,863,208 764,129,446 0.37 % Residential mortgages 1,804,652 739,086,128 0.24 % 6,616,217 366.62 % Cash cards 54,749 2,724,002 2.01 % 117,112 213.91 % Consumer Micro credit Original 1,660,671 106,199,537 1.56 % 4,771,292 287.31 % finance loans Purchase - 78,234 - % 2,077 - % Others Secured 304,980 66,608,272 0.46 % 745,173 154.88 % Unsecured 176,135 5,152,223 3.42 % Total loan business 10,065,275 2,122,722,313 0.47 % 27,044,466 268.69 % Overdue Balance of Delinquency Allowance for receivables receivables ratio credit losses Coverage ratio Credit cards business 77,382 80,018,871 0.10 % 1,150,203 1,486.40 % Without recourse factoring - 17,457,277 - % 574,554 - %

Month/ Year June 30, 2016 Non performing Non-performing Allowance for Categories/ Items loans Total loans loans ratio credit losses Coverage ratio Corporate Secured 7,449,028 484,086,514 1.54 % 16,117,491 149.45 % finance Unsecured (Note 10) 3,335,419 763,231,201 0.44 % Residential mortgages 1,972,474 713,002,975 0.28 % 6,586,785 333.94 % Cash cards 80,892 3,158,347 2.56 % 147,884 182.82 % Consumer Micro credit Original 2,063,753 108,451,293 1.90 % 5,035,479 244.00 % finance loans Purchase - 74,459 - % 2 - % Others Secured 370,936 62,691,622 0.59 % 880,646 141.26 % Unsecured 252,467 5,357,146 4.71 % Total loan business 15,524,969 2,140,053,557 0.73 % 28,768,287 185.30 % Overdue Balance of Delinquency Allowance for receivables receivables ratio credit losses Coverage ratio Credit cards business 86,656 69,300,750 0.13 % 1,119,401 1,291.78 % Without recourse factoring - 32,361,737 - % 657,056 - %

(Continued) 144 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Note 1: Non-performing loans represent the amount of overdue loans as reported in accordance with the “Regulations on the Procedures for Banking Institutions to Evaluate Assets and Deal with Past Due/Non performing Loans.” The credit card overdue loans represent the amount of overdue loans as reported in accordance with Jin Kuan Yin (4) Zi No. 0944000378, dated July 6, 2005.

Note 2: Non performing loans ratio = non performing loans ÷ total loans; credit card delinquency ratio = Overdue receivables ÷ balance of receivables.

Note 3: Coverage ratio for loans = allowance for credit losses ÷ non performing loans; Coverage ratio for credit card business = allowance for credit losses ÷ overdue receivables.

Note 4: For residential mortgage loans, a borrower provides his/her (or spouse’s or minor child’s) house as collateral in full and pledges it to the financial institution for the purpose of obtaining funds to purchase property and to construct or repair a house.

Note 5: Microcredit loans are defined by Jin Kuan Yin (4) Zi No. 09440010950, dated December 19, 2005, and do not include credit cards or cash cards.

Note 6: Others in consumer finance are secured and unsecured consumer loans other than residential mortgage loans, cash card loans, and microcredit loans, and do not include credit cards.

Note 7: In accordance with Jin Kuan Yin (5) Zi No. 094000494, dated July 19, 2005, the amounts of without recourse factoring will be classified as overdue receivables within three months from the date that suppliers or insurance companies resolve not to compensate the loss.

Note 8: The balances of impairment allowance, as shown above, are calculated in accordance with the IFRSs accepted by the FSC and “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans,” and other related regulations. Additionally, the amounts exclude non accrual loans arising from guarantees. Related allowance for credit losses is recognized under provisions.

Note 9: Supplemental disclosures:

The information below shows supplemental disclosures of the Company’ s subsidiary CTBC Bank Co., Ltd.’s loans and receivables that may be exempted from reporting as non performing loans and overdue receivables, respectively.

(Continued) 145 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Unit: In Thousands of New Taiwan Dollars

June 30, 2017 June 30, 2016 Loans that may be Receivables that Loans that may be Receivables that exempted from may be exempted exempted from may be exempted reporting as a non from reporting as reporting as a non from reporting as performing loan overdue receivables performing loan overdue receivables Pursuant to a contract under a debt 73,432 111,868 94,879 96,978 negotiation plan (Note 1) Pursuant to a contract under a debt 736,456 73,549 673,986 73,047 liquidation plan and a debt relief plan (Note 2) Total 809,888 185,417 768,865 170,025

Note 1: In accordance with Jin Kuan Yin (1) Zi No. 09510001270, dated April 25, 2006, a bank is required to make supplemental disclosure of credit information which was approved under the “Debt Coordination Mechanism of Unsecured Consumer Debts by the Bankers Association of the R.O.C.”

Note 2: In accordance with Jin Kuan Yin (1) Zi No. 09700318940, dated September 15, 2008, and with Jin Kuan Yin No. 10500134790, dated September 20, 2016, a bank is required to make supplemental disclosure of credit information once debtors apply for pre-negotiation, pre-meditation, relief and liquidation under the “Consumer Debt Clearance Act.”

Note 10:Those loans that are not 100% backed by collateral are classified as unsecured.

(b) The Company’ s subsidiary CTBC Bank Co., Ltd.’ s concentration of credit extensions

Unit: In Thousands of New Taiwan Dollars, %

June 30, 2017 Credit amount/ Ranking Enterprise group by industry sector Credit amount stockholders’ equity (%) 1 A group. Liquid crystal panel and components 11,156,620 4.20 % manufacturing 2 B group. Cement products manufacturing 10,183,466 3.83 % 3 C group. Iron and steel smelting 9,400,818 3.54 % 4 D group. Liquid crystal panel and components 7,653,610 2.88 % manufacturing 5 E group. Other unclassified financial service 7,509,611 2.83 % 6 F group. Cable telecommunications 7,195,432 2.71 % 7 G group. Wires and cables manufacturing 6,299,863 2.37 % 8 H group. Print circuits manufacturing 6,178,258 2.33 % 9 I group. Marine shipping 6,173,563 2.32 % 10 J group. Consulting group 6,081,473 2.29 %

(Continued) 146 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Unit: In Thousands of New Taiwan Dollars, %

June 30, 2016 Credit amount/ Ranking Enterprise group by industry sector Credit amount stockholders’ equity (%) 1 A group. Liquid crystal panel and components 11,946,089 4.83 % manufacturing 2 K group. Marine freight forwarder 11,534,323 4.67 % 3 C group. Iron and steel smelting 10,173,807 4.12 % 4 I group. Marine shipping 9,771,121 3.95 % 5 D group. Liquid crystal panel and components 9,726,994 3.93 % manufacturing 6 E group. Other unclassified financial intermediaries 8,817,186 3.57 % 7 H group. Print circuits manufacturing 7,983,961 3.23 % 8 F group. Cable and other pay program broadcast 7,968,954 3.22 % industry 9 G group. Wires and cables manufacturing 6,294,083 2.55 % 10 J group. Consulting group 6,139,942 2.48 %

Note 1: The top ten enterprise groups other than government or state owned enterprises are ranked according to their total outstanding credit amount. If the borrowers belong to an enterprise group, the aggregate credit balance of the enterprise should be calculated and disclosed as a code number for each such borrower together with an indication of the borrowers’ line of business. In addition, if the borrowers are enterprise groups, the enterprise group’ s industry sector with the maximum exposure to credit risk in its main industry sector should be disclosed, along with the “class” of the industry, in compliance with the Standard Industrial Classification System of the R.O.C. posted by the Directorate General of Budget, Accounting and Statistics, Executive Yuan, R.O.C.

Note 2: Enterprise group is as defined in Article 6 of the “Supplementary Provisions to the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings.”

Note 3: The total outstanding credit amount is the sum of the balances of all loan types (including import and export bill negotiations, loans, overdrafts, short/medium/long term secured and unsecured loans, margin loans receivable, and non accrual loans), bills purchased, without recourse factoring, acceptances receivable, and guarantees receivable.

(Continued) 147 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(2) Liquidity Risk Management Mechanism

(a) Description and origin of liquidity risk

Liquidity risk refers to the risk of inability to obtain funds at a reasonable cost within a reasonable timeframe to meet the financial obligations and to cause the impact on the Company’s earnings or stockholder’s equity value.

Liquidity risk may stem from external and internal factors, one of the external key factors could be undermined payment capability caused by financial market volatility, and one of the internal factors could be funding shortage caused by mismatch between the timing of capital inflow and outflow.

(b) Management procedures of liquidity risk

Based on the Company’s Financial Risk Management Policy, the Company and its subsidiaries set robust management procedures and risk measurement to identify, measure, monitor, and report the liquidity risk. To avoid liquidity crisis events, the Company and its subsidiaries continuously monitor liquidity status by applying various assessment tools, coordinating responsible units to handle potential liquidity risk issues and implementing necessary disposals. Moreover, the risk limit is set and monitored, in order to ensure the actual risk profile comply with the risk tolerance requirements.

The measurement of liquidity risk includes:

(i) Maturity gap analysis: The measure discloses cash flow gap by time bucket.

(ii) Ratio of fund source to fund usage: The indicators are loan-to-deposit ratio, and current ratio, etc.

(iii) Stress test: The test assesses the liquidity impact from extreme scenarios.

(iv) Financial market liquidity: The information about changes of market liquidity is used for cross-check the appropriateness of its own liquidity position.

The Company and its subsidiaries should adopt appropriate measurements to help implement management procedures in accordance with their respective characteristics/ complexity of assets and liabilities.

(Continued) 148 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(d) Maturity analysis of non-derivative liabilities

Table below shows the analysis of cash outflows of non-derivative liabilities of the Company and its subsidiaries based on time remaining until the contractual maturity date. The amount disclosed is based on contractual cash flows and may be different from that included in the consolidated balance sheets.

June 30, 2017 0~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year Total Deposits from Central Bank and $ 52,297,922 13,279,697 3,900,933 7,710,793 679,000 77,868,345 other banks Due to Central Bank and other 2,124,840 3,505,025 1,009,343 2,635,016 5,777,121 15,051,345 banks Non-derivative financial liabilities - - - - 33,115,580 33,115,580 measured at fair value through profit or loss Securities sold under repurchase 66,303,112 2,267,966 10,653 - - 68,581,731 agreements Commercial papers payable 6,940,000 5,300,000 3,740,000 15,700,000 - 31,680,000 Payables 69,034,337 27,154,911 4,557,750 6,848,133 62,354,905 169,950,036 Current income tax liabilities 553 123,415 10,974 5,120,108 6,944 5,261,994 Deposits and remittances 1,874,358,010 281,487,998 239,198,554 379,508,054 51,874,018 2,826,426,634 Bonds payable - 1,629,600 814,800 1,412,320 110,850,000 114,706,720 Other financial liabilities 35,431,453 13,417,797 7,716,392 18,680,890 70,158,863 145,405,395

December 31, 2016 0~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year Total Deposits from Central Bank and $ 38,430,108 13,232,674 6,201,690 5,634,211 - 63,498,683 other banks Due to Central Bank and other 2,858,054 1,381,038 2,217,113 2,571,592 6,724,691 15,752,488 banks Non-derivative financial liabilities - - 3,634 - 28,178,587 28,182,221 measured at fair value through profit or loss Securities sold under repurchase 43,852,456 5,627,984 10,644 - - 49,491,084 agreements Commercial papers payable 5,870,000 8,200,000 14,200,000 - - 28,270,000 Payables 47,094,745 9,975,151 8,793,249 16,333,549 57,756,137 139,952,831 Current income tax liabilities 1,376 38,283 2,373,360 22,962 - 2,435,981 Deposits and remittances 1,757,117,311 312,598,807 215,367,398 408,359,683 54,976,055 2,748,419,254 Bonds payable - - 578,970 2,481,300 96,283,640 99,343,910 Other financial liabilities 30,268,079 8,574,344 11,159,623 21,569,567 81,703,159 153,274,772

(Continued) 149 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 0~30 days 31~90 days 91~180 days 181 days~1year Over 1 year Total Deposits from Central Bank and $ 47,534,014 5,781,147 3,027,480 5,782,603 1,414,350 63,539,594 other banks Due to Central Bank and other 1,669,060 8,995,300 6,124,518 3,322,839 5,777,764 25,889,481 banks Non-derivative financial liabilities 883,299 - 349,375 - 38,569,640 39,802,314 measured at fair value through profit or loss Securities sold under repurchase 50,183,008 6,926,058 242,486 - - 57,351,552 agreements Commercial papers payable 12,510,000 440,000 - - - 12,950,000 Payables 62,377,998 23,859,961 8,585,682 14,353,705 103,734,173 212,911,519 Current income tax liabilities 4,613 118,298 1,250 4,321,122 - 4,445,283 Deposits and remittances 1,723,874,245 264,250,693 247,385,128 375,161,006 96,486,332 2,707,157,404 Bonds payable - - 1,948,660 660,030 99,313,060 101,921,750 Other financial liabilities 20,868,950 22,049,513 5,681,453 21,170,440 111,539,756 181,310,112

Note: For demand deposits included in “Deposit and remittances,” the amount will be disclosed in the earliest period since such deposits can be withdrawn at anytime.

(e) Maturity analysis of derivative liabilities

(i) Net settled derivatives

Net settled derivatives engaged by the Company and its subsidiaries include but not limited to:

(1) Foreign exchange derivatives: Non-delivery forwards and net settled FX options;

(2) Interest rate derivatives: Forward rate agreements, interest rate swaps, and interest rate futures;

(3) Other derivatives: Equity options and commodity futures.

(Continued) 150 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

For derivatives held by trading purpose, the amount will be disclosed in the earliest period with fair value to reflect the nature of short-term trading behavior; for hedging derivatives, the amount disclosed is based on contractual cash flow and may be different from that included in the consolidated balance sheets. The maturity analysis of net settled derivatives liabilities is as follows:

June 30, 2017 0~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year Total Derivative financial liabilities measured at fair value through profit or loss －Foreign exchange derivatives $ 5,490,157 - - - - 5,490,157 －Interest rate derivatives 15,806,014 - - - - 15,806,014 －Other derivatives 492,149 134 162,314 6,217 39,421 700,235 Derivative financial liabilities－hedging －Foreign exchange derivatives 1,685,248 1,825,606 - - - 3,510,854 －Interest rate derivatives 14,595 - 15,495 30,172 32,226 92,488 Total $ 23,488,163 1,825,740 177,809 36,389 71,647 25,599,748

December 31, 2016 0~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year Total Derivative financial liabilities measured at fair value through profit or loss －Foreign exchange derivatives $ 16,315,782 - - - - 16,315,782 －Interest rate derivatives 14,057,424 - - - - 14,057,424 －Other derivatives 424,802 254 87,398 1,275 41,116 554,845 Derivative financial liabilities－hedging －Foreign exchange derivatives 2,576,767 1,922,403 - - - 4,499,170 －Interest rate derivatives 14,790 - 14,807 31,809 75,720 137,126 Total $ 33,389,565 1,922,657 102,205 33,084 116,836 35,564,347

June 30, 2016 0~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year Total Derivative financial liabilities measured at fair value through profit or loss －Foreign exchange derivatives $ 14,869,966 - - - - 14,869,966 －Interest rate derivatives 22,456,944 - - - - 22,456,944 －Other derivatives 181,156 - 108,980 7,766 35,939 333,841 Derivative financial liabilities－hedging －Foreign exchange derivatives 1,473,980 1,961,313 - - - 3,435,293 －Interest rate derivatives 15,097 - 15,892 27,373 82,928 141,290 Total $ 38,997,143 1,961,313 124,872 35,139 118,867 41,237,334

(Continued) 151 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(ii) Gross settled derivatives

Gross settled derivatives engaged by the Company and its subsidiaries include:

Foreign exchange derivatives: forwards, currency swaps, cross currency swaps, and gross settled foreign currency options. For forwards, currency swaps, and cross currency swaps, the amount disclosed is based on contractual cash flow and may be different from that included in the consolidated balance sheet; for gross settled foreign currency options, the amount will be disclosed in the earliest period with fair value, as currency options are for trading purpose and can be disposed at anytime. The maturity analysis of gross settled derivatives is as follows:

June 30, 2017 0~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year Total Derivative financial Instruments measured at fair value through profit or loss －Foreign exchange derivatives －Cash outflow $ 1,635,351,620 1,196,358,963 555,086,338 364,401,857 21,290,426 3,772,489,204 －Cash inflow 1,642,243,010 1,196,286,922 555,120,839 363,859,725 21,309,712 3,778,820,208 Derivative financial liabilities－hedging －Foreign exchange derivatives －Cash outflow 36,673,010 - - - - 36,673,010 －Cash inflow 36,559,544 - - - - 36,559,544 Cash outflow subtotal 1,672,024,630 1,196,358,963 555,086,338 364,401,857 21,290,426 3,809,162,214 Cash inflow subtotal 1,678,802,554 1,196,286,922 555,120,839 363,859,725 21,309,712 3,815,379,752 Net cash flow $ 6,777,924 (72,041) 34,501 (542,132) 19,286 6,217,538

December 31, 2016 0~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year Total Derivative financial Instruments measured at fair value through profit or loss －Foreign exchange derivatives －Cash outflow $ 1,470,229,040 1,008,921,307 489,032,315 328,039,330 29,073,699 3,325,295,691 －Cash inflow 1,465,162,668 1,010,678,620 489,621,605 328,797,837 28,829,069 3,323,089,799 Derivative financial liabilities－hedging －Foreign exchange derivatives －Cash outflow 39,031,124 - - - - 39,031,124 －Cash inflow 39,118,473 - - - - 39,118,473 Cash outflow subtotal 1,509,260,164 1,008,921,307 489,032,315 328,039,330 29,073,699 3,364,326,815 Cash inflow subtotal 1,504,281,141 1,010,678,620 489,621,605 328,797,837 28,829,069 3,362,208,272 Net cash flow $ (4,979,023) 1,757,313 589,290 758,507 (244,630) (2,118,543)

(Continued) 152 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 0~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year Total Derivative financial Instruments measured at fair value through profit or loss －Foreign exchange derivatives －Cash outflow $ 1,431,922,180 1,229,519,740 698,840,058 488,773,865 62,231,389 3,911,287,232 －Cash inflow 1,431,456,071 1,229,489,958 699,319,198 488,726,127 61,929,387 3,910,920,741 Derivative financial liabilities ─ hedging －Foreign exchange derivatives ─ Cash outflow 25,189,743 13,159,341 - - - 38,349,084 ─ Cash inflow 24,972,624 12,879,076 - - - 37,851,700 Cash outflow subtotal 1,457,111,923 1,242,679,081 698,840,058 488,773,865 62,231,389 3,949,636,316 Cash inflow subtotal 1,456,428,695 1,242,369,034 699,319,198 488,726,127 61,929,387 3,948,772,441 Net cash flow $ (683,228) (310,047) 479,140 (47,738) (302,002) (863,875)

(f) Maturity analysis of off-balance-sheet items

Table below shows the maturity analysis of off-balance-sheet items for the Company and its subsidiaries. The amount of the guarantee and committed credit lines will be allocated to the earliest period when such obligation can be exercised at anytime by clients. The amount disclosed is based on contractual cash flow and may be different from that included in the consolidated balance sheets.

June 30, 2017 0~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year Total Financial guarantee contracts $ 59,227,131 - - - - 59,227,131 Unused lines of credit commitments 107,216,588 - - - 267,777 107,484,365 Unused letter of credit 17,401,670 - - - - 17,401,670 Unused credit card commitments 580,849,548 - - - - 580,849,548 Total $ 764,694,937 - - - 267,777 764,962,714

December 31, 2016 0~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year Total Financial guarantee contracts $ 72,554,100 - - - - 72,554,100 Unused lines of credit commitments 124,962,909 - - - 324,777 125,287,686 Unused letter of credit 17,825,162 - - - - 17,825,162 Unused credit card commitments 573,824,982 - - - - 573,824,982 Total $ 789,167,153 - - - 324,777 789,491,930

June 30, 2016 0~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year Total Financial guarantee contracts $ 55,508,122 - - - - 55,508,122 Unused lines of credit commitments 148,213,464 - - - - 148,213,464 Unused letter of credit 15,511,216 - - - - 15,511,216 Unused credit card commitments 553,770,456 - - - - 553,770,456 Total $ 773,003,258 - - - - 773,003,258

Note: The total refers to the maximum credit risk exposure.

(Continued) 153 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(g) Disclosures required by the Regulations Governing the Preparation of Financial Reports by Financial Holding Companies

(i) Maturity analysis of the Company’s subsidiary CTBC Bank Co., Ltd.’s assets and liabilities for New Taiwan Dollars

June 30, 2017

Unit: In Millions of New Taiwan Dollars

Amount remaining to maturity date Total 0~10 days 11~30 days 31~90 days 91~180 days 181days~1year Over 1 year Major cash inflow at maturity $ 2,513,565 375,957 255,513 225,147 232,801 355,493 1,068,654 Major cash outflow at maturity 2,720,041 181,726 251,666 445,682 394,338 554,729 891,900 Gap (206,476) 194,231 3,847 (220,535) (161,537) (199,236) 176,754

June 30, 2016

Unit: In Millions of New Taiwan Dollars

Amount remaining to maturity date Total 0~10 days 11~30 days 31~90 days 91~180 days 181days~1year Over 1 year Major cash inflow at maturity $ 2,348,146 293,951 311,967 275,511 195,622 239,945 1,031,150 Major cash outflow at maturity 2,564,001 148,204 243,692 414,347 386,855 530,824 840,079 Gap (215,855) 145,747 68,275 (138,836) (191,233) (290,879) 191,071

Note: Listed amount of the Company’s subsidiary CTBC Bank Co., Ltd. are denominated in NTD.

(ii) Maturity analysis of the Company’s subsidiary CTBC Bank Co., Ltd.’s assets and liabilities for U.S. Dollars

June 30, 2017

Unit: In Thousands of U.S. Dollars

Amount remaining to maturity date Total 0~30 days 31~90 days 91~180 days 181days~1year Over 1 year Major cash inflow at maturity $ 80,974,148 32,641,241 23,854,447 10,561,454 6,758,257 7,158,749 Major cash outflow at maturity 94,759,395 40,712,616 22,500,220 11,446,797 9,856,609 10,243,153 Gap (13,785,247) (8,071,375) 1,354,227 (885,343) (3,098,352) (3,084,404)

June 30, 2016

Unit: In Thousands of U.S. Dollars

Amount remaining to maturity date Total 0~30 days 31~90 days 91~180 days 181days~1year Over 1 year Major cash inflow at maturity $ 77,621,661 26,091,232 23,123,941 13,015,881 8,564,353 6,826,254 Major cash outflow at maturity 90,117,591 33,549,867 22,191,013 13,103,633 11,537,615 9,735,463 Gap (12,495,930) (7,458,635) 932,928 (87,752) (2,973,262) (2,909,209)

(Continued) 154 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Note: Listed amount of the Company’s subsidiary CTBC Bank Co., Ltd. are denominated in U.S Dollars.

(iii) Maturity analysis of the Company’ s subsidiary CTBC Bank Co., Ltd.’ s overseas branches’ assets and liabilities for U.S. Dollars

June 30, 2017

Unit: In Thousands of U.S. Dollars

Amount remaining to maturity date Total 0~30 days 31~90 days 91~180 days 181days~1year Over 1 year Major cash inflow at maturity $ 45,140,330 20,151,149 12,839,861 4,893,274 4,070,512 3,185,534 Major cash outflow at maturity 53,417,155 28,635,031 12,712,770 5,160,075 3,923,945 2,985,334 Gap (8,276,825) (8,483,882) 127,091 (266,801) 146,567 200,200

June 30, 2016

Unit: In Thousands of U.S. Dollars

Amount remaining to maturity date Total 0~30 days 31~90 days 91~180 days 181days~1year Over 1 year Major cash inflow at maturity $ 38,110,646 13,625,133 11,907,892 5,643,374 3,814,127 3,120,120 Major cash outflow at maturity 45,513,069 20,994,839 11,374,824 5,766,272 4,285,603 3,091,531 Gap (7,402,423) (7,369,706) 533,068 (122,898) (471,476) 28,589

(3) Market Risk Management Mechanism

(a) Description and origin of market risk

Market risk is the risk that the earnings, capital or its ability to meet business objectives adversely affects the Company and its subsidiaries by having volatile interest rate (including credit spread), foreign exchange rate, securities price and commodity price. The market correlation and liquidity of these types of instruments are also covered.

The Company and its subsidiaries’ market risk exposures come from trading and non-trading portfolios. The trading portfolio includes positions arising from trading activities, which aim at benefiting from short-term price movements, such as proprietary trading and market making. The non-trading portfolios are held for obtaining capital gain in the long term.

(b) Management procedures of market risk

Based on the Company’s Financial Risk Management Policy, the Company and its subsidiaries set robust management procedures, facilitate market risk communication within the Company and its subsidiaries and provide proper management.

(Continued) 155 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

An effective market risk management process begins at risk identification. The appropriate and consistent market risk measurement methodologies are defined in accordance with the business characteristics and risk source. The measurement results are applied to daily management and serves as the foundation of market risk planning, monitoring, and control.

To ensure that the actual risk profile can comply with the risk appetite requirements, the risk limit mechanism is established and further transmitted to operational level and translated into various management indicators, which can effectively help observe the risk profile changes, analyze the impacts, and form the management decisions promptly.

(i) Value at Risk (VaR)

Value at Risk measures the maximum potential loss under a particular confidence interval and a given holding period.

(ii) Stress Testing

Stress testing is used to calculate a range of trading exposures which result from extreme market events or scenarios. Stress testing measures the impact of exceptional changes in market rate/ price, volatility or correlation in the fair value of trading portfolios.

(iii) Factor Sensitivity

Factor sensitivity is a measurement for monitoring the cross-product exposures within each risk type, including but not limited to foreign exchange, interest rate and equity price etc. (1) Interest Rate Risk

Interest rate risk, mostly arising from bonds and interest rate derivatives, is measured in different yield curves and currencies. PVBP, the change in fair value as the yield curves parallel shifts up by 0.01% (1bp), is used to measure interest rate risk exposures.

PVBP for the trading portfolio is illustrated as follow, and for PVBP for the non-trading one, please refer to (d) sensitivity analysis.

(Continued) 156 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Unit：In Thousands of New Taiwan Dollars

June 30, December June 30, Currency 2017 31, 2016 2016 Yield curve parallel shift up by 1 b.p. CNY $ (20) (133) (490) EUR 77 (75) (77) HKD 136 (226) (175) JPY (126) (5) (166) KRW - - (17) NTD (1,415) (3,351) (4,722) USD (2,429) 3,151 436 Others (752) (501) (247)

(2) Foreign Exchange Risk

Foreign exchange risk, mostly arising from spots, FX derivatives and other positions denominated in foreign currency, is measured in different currencies or currency pairs. FX delta, the change in net present value as the foreign exchange rate moves up by one unit, 1%, is used to measure foreign exchange risk exposures.

FX delta for the trading portfolio is illustrated as follow, and for FX delta for the non-trading one, please refer to (d) sensitivity analysis.

Unit：In Thousands of New Taiwan Dollars

June 30, December June 30, Currency 2017 31, 2016 2016 Underlying currency appreciate 1% AUD $ (465) (229) 744 CNY 12,628 (24,122) (12,862) EUR 17,083 (408) (1,714) GBP 128 74 (4,402) HKD (2,595) (2,628) (18,302) JPY (709) (4,044) 5,410 KRW 217 (3,063) 625 USD (43,299) 30,406 39,539 Others 8,987 3,554 15,204

(Continued) 157 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(3) Equity Price Risk

Equity price risk, mostly arising from stocks and related derivatives, is measured in equity delta, the change in fair value as the underlying stock price or index price moves up by 1%. Equity delta for the trading portfolio is illustrated as follow, and for equity delta for the non-trading one, please refer to (d) sensitivity analysis. Unit: In Thousands of New Taiwan Dollars

Country/ June 30, December June 30, Commodity 2017 31, 2016 2016 Equity factor sensitivity Stock price upward movement by 1% Taiwan $ 43,334 18,535 16,910 US 14,612 24,041 2,013 HK 122 101 2,196 China 26,612 22,832 21,378 Others 43,780 30,738 4,763 Sensitivity of commodity risk Commodity price upward movement by 1% Crude Oil 277 (436) - Gold 19 4 2,130 Corn - - 247 Copper - 40 1 Sensitivity of credit risk premium Credit spread upward shift by 0.01% 304 120 (53)

(d) Sensitivity analysis

Sensitivity analysis of risk factors of the Company and its subsidiaries’ non-trading purpose investment portfolio is summarized as follows:

June 30, 2017

Amount Risk Items Movement

Profit or Loss Equity

Interest Rate Risk Interest Rate Curve shift up 1bp $ (2,975) (160,344)

Interest Rate Curve shift down 1bp 2,975 160,344

Foreign Exchange Rate Risk Foreign Currency appreciate 1% against NTD 769,152 484,606

Foreign Currency depreciate 1% against NTD (769,152) (484,606)

Equity Price Risk Equity price appreciate 1% - 1,175,936

Equity price depreciate 1% - (1,175,936)

(Continued) 158 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016

Risk Items Movement Amount

Profit or Loss Equity

Interest Rate Risk Interest Rate Curve shift up 1bp $ (187,472) 5,027

Interest Rate Curve shift down 1bp 184,472 (5,027)

Foreign Exchange Rate Risk Foreign Currency appreciate 1% against NTD 293,988 587,964

Foreign Currency depreciate 1% against NTD (293,988) (587,964)

Equity Price Risk Equity price appreciate 1% 870,809 -

Equity price depreciate 1% (870,809) -

June 30, 2016

Risk Items Movement Amount

Profit or Loss Equity

Interest Rate Risk Interest Rate Curve shift up 1bp $ 5,620 (198,849)

Interest Rate Curve shift down 1bp (5,620) 198,849

Foreign Exchange Rate Risk Foreign Currency appreciate 1% against NTD 899,657 307,567

Foreign Currency depreciate 1% against NTD (899,657) (307,567)

Equity Price Risk Equity price appreciate 1% - 995,115

Equity price depreciate 1% - (995,115)

Note: For fair value hedges or hedges of a net investment in a foreign operation, changes in profit or loss would offset each other in hedge duration, leading to little influence on the Company’s overall profit or loss, and hence, were not incorporated in the above aggregate positions.

(Continued) 159 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(e) Foreign exchange rate gap information

According to IFRS 7 “Financial Instruments” 34(a), an entity shall disclose summarized quantitative data about its exposure to that risk at the end of the reporting period. Significant foreign exchange rate risk exposure was as follows:

June 30, 2017 Foreign currency Spot rate NTD amount Financial assets Monetary items USD $ 47,429,179 30.4360 1,443,554,442 CNY 19,526,747 4.4878 87,634,366 JPY 2,596,981,611 0.2716 705,340,205 EUR 851,451 34.7366 29,576,528 AUD 1,367,601 23.3627 31,950,872 Non-monetary items USD 1,041,235 30.4360 31,691,057 CNY 2,157,501 4.4878 9,682,900 JPY 52,400,042 0.2716 14,688,990 EUR 55,017 34.7366 1,911,121 Financial liabilities Monetary items USD 21,453,495 30.4360 652,958,593 CNY 15,508,822 4.4878 69,600,495 JPY 2,515,582,061 0.2716 683,232,088 EUR 853,822 34.7366 29,658,882 AUD 92,356 23.3627 2,157,676

(Continued) 160 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016 Foreign currency Spot rate NTD amount Financial assets Monetary items USD $ 48,052,067 32.2790 1,551,072,699 CNY 29,964,742 4.6445 139,139,245 JPY 2,664,915,483 0.2757 734,717,200 EUR 198,891 33.9285 6,748,116 AUD 2,012,270 23.3022 46,890,300 Non-monetary items USD 626,833 32.2790 20,233,527 CNY 1,543,133 4.6445 7,160,201 JPY 35,113,764 0.2757 9,680,865 EUR 95,372 33.9285 3,235,830 AUD 793 23.3022 18,470 Financial liabilities Monetary items USD 26,562,231 32.2790 857,402,271 CNY 25,625,674 4.6445 119,018,444 JPY 2,589,101,127 0.2757 713,815,181 EUR 227,309 33.9285 7,712,253 AUD 994,675 23.3022 23,178,106

(Continued) 161 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 Foreign currency Spot rate NTD amount Financial assets Monetary items USD $ 43,033,371 32.2860 1,389,359,496 CNY 27,139,775 4.8589 131,819,885 JPY 2,630,741,202 0.3143 826,841,870 EUR 336,091 35.8859 12,060,932 AUD 1,587,764 23.9853 38,082,979 Non-monetary items USD 579,835 32.2860 18,720,553 CNY 1,559,422 4.8589 7,573,506 JPY 51,423,602 0.3143 16,162,436 EUR 99,734 35.8859 3,579,041 AUD 2,566 23.9853 61,542 Financial liabilities Monetary items USD 24,818,557 32.2860 801,291,936 CNY 22,640,273 4.8589 110,006,823 JPY 2,586,206,735 0.3143 812,844,777 EUR 347,533 35.8859 12,471,545 AUD 772,195 23.9853 18,521,335

Note: Foreign currency amount of overseas subsidiaries is disclosed by their functional currency.

(4) Asset and Liability Management Mechanism

(a) Description and origin of ALM mismatch risk

ALM mismatch risk refers to the risk that the earnings or capital that is adversely affected by different sensitivity of assets and liabilities to interest rate change, such as mismatches of reset timing and amount of asset and liability, varying magnitude of changes in short-term and long-term interest rates, and various interest rate indexes to which asset and liability are linked, or embedded options.

(Continued) 162 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(b) Management procedures of ALM mismatch risk

Based on the Company’s Financial Risk Management Policy, the Company and its subsidiaries set robust management procedures and clearly define authorities and responsibilities, so that the Company and its subsidiaries keep their finances and operations sound.

The appropriate and consistent measurement methodologies are adopted in accordance with the business characteristics and risk source. The measurement results are embedded to management procedures and become the reference when monitoring and reporting risk status.

The Company and its subsidiaries can adjust the structures of assets and liabilities by means of derivatives. Prior to executing an external hedge, the hedge plans with specified hedged position, profit or loss analysis and detailed scheme are prepared and authorized. After executing hedge deals, the hedge effectiveness are periodically reviewed.

The measurement of ALM mismatch risk includes:

(i) Re-pricing Gap Report: This report measures the re-pricing gap between asset and liability by time buckets in order to understand interest rate mismatch.

(ii) Interest rate sensitivity: This measures the impact of 1 basis point change in interest rate on net interest income (NII) and economic value of equity (EVE).

(iii) Duration: This calculates the weighted-average term to maturity of rate- sensitive assets and liabilities.

(iv) Stress Test：This evaluates the impact of a significant change in interest rate on economic value of equity.

The Company and its subsidiaries should adopt appropriate measurements and apply proper management procedures by taking their respective characteristics/ complexity of assets and liabilities into account.

(Continued) 163 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(d) Disclosure items required by the “Regulations Governing The Preparation of Financial Reports by Financial Holding Company”

(i) The Company’s subsidiary CTBC Bank’s sensitivity analysis of interest rate for assets and liabilities. (New Taiwan Dollars)

June 30, 2017

Unit：In Thousands of New Taiwan Dollars，%

1~90 days 91~180 days 181 days~1 year Items Over 1 year Total (inclusive) (inclusive) (inclusive) Interest rate sensitive $ 1,485,041,651 106,136,731 163,750,819 98,124,011 1,853,053,212 assets Interest rate sensitive 492,727,494 907,826,653 142,244,382 67,462,720 1,610,261,249 liabilities Interest rate sensitivity 992,314,157 (801,689,922) 21,506,437 30,661,291 242,791,963 gap Net worth 265,652,855 Ratio of interest rate sensitive assets to liabilities (%) 115.08 Ratio of interest rate sensitivity gap to net worth (%) 91.39

December 31, 2016

Unit：In Thousands of New Taiwan Dollars，%

1~90 days 91~180 days 181 days~1 year Items Over 1 year Total (inclusive) (inclusive) (inclusive) Interest rate sensitive $ 1,456,976,315 133,901,275 66,709,907 108,514,252 1,766,101,749 assets Interest rate sensitive 419,040,873 875,434,437 145,739,307 69,649,314 1,509,863,931 liabilities Interest rate sensitivity 1,037,935,442 (741,533,162) (79,029,400) 38,864,938 256,237,818 gap Net worth 253,014,052 Ratio of interest rate sensitive assets to liabilities (%) 116.97 Ratio of interest rate sensitivity gap to net worth (%) 101.27

(Continued) 164 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016

Unit：In Thousands of New Taiwan Dollars，%

1~90 days 91~180 days 181 days~1 year Items Over 1 year Total (inclusive) (inclusive) (inclusive) Interest rate sensitive $ 1,362,422,364 106,711,301 61,793,673 101,969,611 1,632,896,949 assets Interest rate sensitive 435,839,998 842,380,689 143,880,526 71,921,344 1,494,022,557 liabilities Interest rate sensitivity 926,582,366 (735,669,388) (82,086,853) 30,048,267 138,874,392 gap Net worth 247,223,184 Ratio of interest rate sensitive assets to liabilities (%) 109.30 Ratio of interest rate sensitivity gap to net worth (%) 56.17

Note 1: Listed amount of the Company’s subsidiary CTBC Bank Co., Ltd. are denominated in NTD, excluding contingent assets and liabilities.

Note 2: Interest rate sensitive assets and liabilities are the interest- earning asset or interest-bearing liabilities whose revenue or costs are affected by interest rate change.

Note 3: Interest-rate-sensitivity gap = Interest-rate-sensitive assets － Interest-rate-sensitive liabilities.

Note 4: Ratio of interest-rate-sensitive assets to liabilities = Interest- rate-sensitive assets ÷ Interest-rate-sensitive liabilities (denominated in NTD). (ii) The Company's subsidiary CTBC Bank Co., Ltd's sensitivity analysis of the interest rate for assets and liabilities (U.S. Dollars)

June 30, 2017

Unit：In Thousands of U.S. Dollars, %

1~90 days 91~180 days 181 days~1 year Items Over 1 year Total (inclusive) (inclusive) (inclusive) Interest rate sensitive $ 11,628,400 819,263 336,268 2,123,242 14,907,173 assets Interest rate sensitive 6,713,641 11,651,254 1,560,440 1,261,418 21,186,753 liabilities Interest rate sensitivity 4,914,759 (10,831,991) (1,224,172) 861,824 (6,279,580) gap Net worth 8,728,245 Ratio of interest rate sensitive assets to liabilities (%) 70.36 Ratio of interest rate sensitivity gap to net worth (%) (71.95)

(Continued) 165 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016

Unit：In Thousands of U.S. Dollars, %

1~90 days 91~180 days 181 days~1 year Items Over 1 year Total (inclusive) (inclusive) (inclusive) Interest rate sensitive $ 10,595,334 668,753 641,701 1,634,634 13,540,422 assets Interest rate sensitive 5,812,663 10,471,604 1,254,484 1,101,899 18,640,650 liabilities Interest rate sensitivity 4,782,671 (9,802,851) (612,783) 532,735 (5,100,228) gap Net worth 7,838,349 Ratio of interest rate sensitive assets to liabilities (%) 72.64 Ratio of interest rate sensitivity gap to net worth (%) (65.07)

June 30, 2016

Unit：In Thousands of U.S. Dollars, %

1~90 days 91~180 days 181 days~1 year Items Over 1 year Total (inclusive) (inclusive) (inclusive) Interest rate sensitive $ 12,200,276 824,604 275,376 1,901,795 15,202,051 assets Interest rate sensitive 5,459,632 10,225,558 1,378,643 69,918 17,133,751 liabilities Interest rate sensitivity 6,740,644 (9,400,954) (1,103,267) 1,831,877 (1,931,700) gap Net worth 7,657,287 Ratio of interest rate sensitive assets to liabilities (%) 88.73 Ratio of interest rate sensitivity gap to net worth (%) (25.23)

Note 1: Listed amount of the Company’s subsidiary CTBC Bank Co., Ltd. are denominated in U.S dollars, excluding contingent assets and liabilities.

Note 2: Interest rate sensitive assets and liabilities are the interest- earning asset or interest-bearing liabilities whose revenue or costs are affected by interest rate change.

Note 3: Interest-rate-sensitivity gap = Interest-rate-sensitive assets － Interest-rate-sensitive liabilities.

Note 4: Ratio of interest-rate-sensitive assets to liabilities = Interest- rate-sensitive assets ÷ Interest-rate-sensitive liabilities (denominated in U.S. dollars.)

(Continued) 166 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(v) Transferred financial assets that are not fully derecognized

The transactions, relating to transferred financial assets not qualifying for full derecognition, the Company and its subsidiaries conduct during daily operation mostly involve securities lending in accordance to repurchase agreements. Since the right to receive contractual cash flow has been transferred to others and the Company and its subsidiaries’ obligation to repurchase the transferred assets for a fixed price at a future date is recognized under liability, the said transferred assets are not fully derecognized.

June 30, 2017 Carrying Carrying amount of Fair value of amount of associated Fair value of associated transferred financial transferred financial Types of financial assets financial assets liabilities financial assets liabilities Net fair value Financial assets measured at fair value through profit or loss Repurchase agreements $ 30,198,448 29,363,510 30,198,448 29,363,510 834,938 Available-for-sale financial assets Repurchase agreements 4,338,946 4,203,479 4,338,946 4,203,479 135,467 Securities lending agreements 32,759,375 31,550,628 32,759,375 31,550,628 1,208,747 Held-to-maturity financial assets Repurchase agreements 34,488,466 35,014,742 35,504,138 35,014,742 489,396

December 31, 2016 Carrying Carrying amount of Fair value of amount of associated Fair value of associated transferred financial transferred financial Types of financial assets financial assets liabilities financial assets liabilities Net fair value Financial assets measured at fair value through profit or loss Repurchase agreements $ 14,651,456 14,697,259 14,651,456 14,697,259 (45,803) Available-for-sale financial assets Repurchase agreements 6,039,969 5,951,382 6,039,969 5,951,382 88,587 Securities lending agreements 31,213,073 25,268,386 31,213,073 25,268,386 5,944,687 Held-to-maturity financial assets Repurchase agreements 28,483,682 28,842,443 29,134,818 28,842,443 292,375

June 30, 2016 Carrying Carrying amount of Fair value of amount of associated Fair value of associated transferred financial transferred financial Types of financial assets financial assets liabilities financial assets liabilities Net fair value Financial assets measured at fair value through profit or loss Repurchase agreements $ 13,920,557 13,951,542 13,920,557 13,951,542 (30,985) Available-for-sale financial assets Repurchase agreements 11,144,205 10,753,869 11,144,205 10,753,869 390,336 Securities lending agreements 40,858,255 32,594,834 40,858,255 32,594,834 8,263,421 Held-to-maturity financial assets Repurchase agreements 29,042,258 32,646,141 30,808,636 32,646,141 (1,837,505)

(Continued) 167 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(vi) Offsetting financial assets and financial liabilities

The Company and its subsidiaries have an exercisable master netting arrangement or similar agreement in place with counterparties. When both parties reach a consensus regarding net settlement, the aforesaid exercisable master netting arrangement or similar agreement can be net settled by offsetting financial assets and financial liabilities. If not, the transaction can be settled at total amount. In the event of default involving one of the parties, the other party can have the transaction net settled.

The following tables present the aforementioned offsetting financial assets and financial liabilities.

June 30, 2017 Financial assets that are offset, have an exercisable master netting arrangement or similar agreement Gross amounts Net amount of Amounts not off set in the balance Gross amounts of financial financial assets sheet (d) of recognized liabilities offset presented in Financial financial assets in the balance the balance instruments Cash collateral Net amount (a) sheet (b) sheet (c)=(a)-(b) (Note) received (e)=(c)-(d) Derivative financial assets $ 38,136,993 - 38,136,993 26,298,369 3,258,785 8,579,839

June 30, 2017 Financial liabilities that are offset, have an exercisable master netting arrangement or similar agreement Net amount of Gross amounts financial Amounts not off set in the balance Gross amounts of financial liabilities sheet (d) of recognized assets offset in presented in Financial financial the balance the balance instruments Cash collateral Net amount liabilities (a) sheet (b) sheet (c)=(a)-(b) (Note) pledged (e)=(c)-(d) Derivative financial liabilities $ 41,697,564 - 41,697,564 26,092,498 3,678,797 11,926,269 Securities lending agreements 31,550,628 - 31,550,628 31,550,628 - - Securities sold under repurchase 68,581,731 - 68,581,731 18,988,243 - 49,593,488 agreement Total $ 141,829,923 - 141,829,923 76,631,369 3,678,797 61,519,757

December 31, 2016 Financial assets that are offset, have an exercisable master netting arrangement or similar agreement Gross amounts Net amount of Amounts not off set in the balance Gross amounts of financial financial assets sheet (d) of recognized liabilities offset presented in Financial financial assets in the balance the balance instruments Cash collateral Net amount (a) sheet (b) sheet (c)=(a) (b) (Note) received (e)=(c)-(d) Derivative financial assets $ 65,455,466 - 65,455,466 41,707,573 2,221,768 21,526,125

December 31, 2016 Financial liabilities that are offset, have an exercisable master netting arrangement or similar agreement Net amount of Gross amounts financial Amounts not off set in the balance Gross amounts of financial liabilities sheet (d) of recognized assets offset in presented in Financial financial the balance the balance instruments Cash collateral Net amount liabilities (a) sheet (b) sheet (c)=(a)-(b) (Note) pledged (e)=(c)-(d) Derivative financial liabilities $ 69,703,774 - 69,703,774 37,472,541 11,014,451 21,216,782 Securities lending agreements 25,268,386 - 25,268,386 25,268,386 - - Securities sold under repurchase 49,491,084 - 49,491,084 733,119 - 48,757,965 agreement Total $ 144,463,244 - 144,463,244 63,474,046 11,014,451 69,974,747

(Continued) 168 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 Financial assets that are offset, have an exercisable master netting arrangement or similar agreement Gross amounts Net amount of Amounts not off set in the balance Gross amounts of financial financial assets sheet (d) of recognized liabilities offset presented in Financial financial assets in the balance the balance instruments Cash collateral Net amount (a) sheet (b) sheet (c)=(a)-(b) (Note) received (e)=(c)-(d) Derivative financial assets $ 66,558,002 - 66,558,002 44,154,934 4,263,993 18,139,075

June 30, 2016 Financial liabilities that are offset, have an exercisable master netting arrangement or similar agreement Net amount of Gross amounts financial Amounts not off set in the balance Gross amounts of financial liabilities sheet (d) of recognized assets offset in presented in Financial financial the balance the balance instruments Cash collateral Net amount liabilities (a) sheet (b) sheet (c)=(a)-(b) (Note) pledged (e)=(c)-(d) Derivative financial liabilities $ 70,362,769 - 70,362,769 41,524,019 14,090,751 14,747,999 Securities lending agreements 32,594,834 - 32,594,834 32,594,834 - - Securities sold under repurchase 57,351,552 - 57,351,552 6,676,122 - 50,675,430 agreement Total $ 160,309,155 - 160,309,155 80,794,975 14,090,751 65,423,429

Note：Master netting arrangements and non-cash financial collaterals are included.

(vii) Capital management

(1) Capital management goal and procedure

The goal of the Company’s capital management is to meet the regulatory requirement for different businesses on capital adequacy of the Company and its subsidiaries and the organization’ s target of maximizing returns for shareholders by following capital management procedures and raising return on capital.

The Company’ s group capital planning accounts for short-term and long-term capital requirements. The Company makes yearly capital planning based on operation planning, current and forecast future capital requirement, and promised returns for shareholders. The Company also makes back-up plan to meet capital requirement not included in the planning. The Company also regularly conducts stress tests and scenario simulation analyses to calculate different capital ratios, fully taking into account of external conditions and other factors, including potential risks, changes in financial markets, and other events impacting risk taking capabilities, to make sure that the Company can maintain adequate capital in case of detrimental events and huge market changes.

Planning for yearly earnings distribution follows the principles and ratios mandated by articles of incorporation and dividend policy, and are put into effect after being approved by the board of directors and shareholders’ meeting. The Company’ s group capital adequacy, potential investment needs, and dividend amount of previous years are taken into account. The needs to maintain proper financial ratios and satisfy capital requirement of the parent company are also preconditions of the distribution.

(Continued) 169 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(2) Definition and regulation

The regulator of the Company is FSC of the Republic of China. FSC issued “Regulations Governing the Consolidated Capital Adequacy of Financial Holding Companies” and monitors and manages the Company’ s group capital status on a consolidated basis. Subsidiaries in different businesses should also follow capital adequacy rules announced by regulators of their businesses.

The Company’s group capital adequacy ratio should not be lower than 100%. The group capital adequacy ratio refers to the group's net eligible capital divided by the group’ s statutory capital requirement. The group’ s net eligible capital and group’ s statutory capital requirement refers to the combined total of the eligible capital of a financial holding company and those of its subsidiaries calculated based on the financial holding company’s shareholding in the subsidiary less the amounts of legal deductions.

(3) Eligible capital

The Company’s eligible capital refers to the sum of the common stocks, preferred stocks, subordinated debts, capital collected in advance, capital surplus, retained earnings, and other equity less the sum of goodwill, other intangible assets, deferred assets, and treasury stocks. Statutory capital requirement refers to total assets less cash (including cash equivalents), tax receivable (including tax refund receivable), prepaid taxes, the book value of the use of short-term funds set forth in Paragraph 1, Article 39 of Financial Holding Company Act, goodwill, other intangible assets, and deferred assets.

To maintain the quality of financial holding companies’ capital, the regulator also has rules in place regarding the terms and upper limit of hybrid capital instrument, preferred stocks, and subordinated debts that can be included in eligible capital.

4) Capital adequacy ratio of CTBC Group

Unit：In Thousands of New Taiwan Dollars，%

June 30, 2017 Items Percentage of Group’s Net Group’s Statutory Company ownership Eligible Capital Capital Requirement CTBC Financial Holding Co., Ltd. 100.00 % $ 287,534,565 355,631,868 CTBC Bank Co., Ltd. 100.00 % 252,313,334 151,889,955 CTBC Securities Co., Ltd. 99.92 % 6,373,008 2,102,633 Taiwan Life Insurance Co., Ltd. 100.00 % 76,887,177 44,618,032 CTBC Venture Capital Co., Ltd. 100.00 % 3,870,042 2,109,836 CTBC Security Co., Ltd. 100.00 % 54,681 52,592 CTBC Asset Management Co., Ltd. 100.00 % 5,431,047 2,731,758 Taiwan Lottery Co., Ltd. 100.00 % 1,092,823 675,937 CTBC Investments Co., Ltd. 100.00 % 521,473 280,839 Deduction (379,863,596) (355,064,773) Subtotal 254,214,554 205,028,677 Capital adequacy ratio of CTBC Group 123.99 %

(Continued) 170 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Unit：In Thousands of New Taiwan Dollars，%

December 31, 2016 Items Percentage of Group’s Net Group’s Statutory Company ownership Eligible Capital Capital Requirement CTBC Financial Holding Co., Ltd. 100.00 % $ 288,345,486 334,299,735 CTBC Bank Co., Ltd. 100.00 % 240,946,653 137,016,711 CTBC Securities Co., Ltd. 99.92 % 6,443,933 2,080,136 Taiwan Life Insurance Co., Ltd. 100.00 % 58,572,009 41,626,458 CTBC Venture Capital Co., Ltd. 100.00 % 4,188,634 2,151,209 CTBC Security Co., Ltd. 100.00 % 55,140 59,153 CTBC Asset Management Co., Ltd. 100.00 % 5,406,442 2,711,756 Taiwan Lottery Co., Ltd. 100.00 % 964,997 574,343 CTBC Investments Co., Ltd. 100.00 % 525,728 287,299 Deduction (351,926,255) (333,729,060) Subtotal 253,522,767 187,077,740 Capital adequacy ratio of CTBC Group 135.52 %

Unit：In Thousands of New Taiwan Dollars，%

June 30, 2016 Items Percentage of Group’s Net Group’s Statutory Company ownership Eligible Capital Capital Requirement CTBC Financial Holding Co., Ltd. 100.00 % $ 287,673,079 331,148,274 CTBC Bank Co., Ltd. 100.00 % 227,965,537 140,758,057 CTBC Securities Co., Ltd. 99.92 % 6,710,032 2,210,166 Taiwan Life Insurance Co., Ltd. 100.00 % 55,570,208 38,537,270 CTBC Venture Capital Co., Ltd. 100.00 % 4,950,377 2,486,933 CTBC Security Co., Ltd. 100.00 % 49,847 53,695 CTBC Asset Management Co., Ltd. 100.00 % 5,406,304 2,713,252 Taiwan Lottery Co., Ltd. 100.00 % 1,025,870 637,343 CTBC Investments Co., Ltd. 100.00 % 538,574 287,097 Deduction (350,242,142) (330,568,641) Subtotal 239,647,686 188,263,446 Capital adequacy ratio of CTBC Group 127.29 %

(Continued) 171 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

5) CTBC Financial Holding Co., Ltd.’s eligible capital

Items June 30, 2017 December 31, 2016 June 30, 2016

Common stock 194,969,896 194,969,896 180,547,806

Stock dividends to be distributed - - 14,422,090

Capital surplus 33,717,244 36,637,717 36,644,757

Legal reserve 20,467,553 17,674,655 17,674,655

Special reserve 30,688,579 21,886,995 21,886,995

Accumulated profit or loss 19,497,980 28,249,266 14,523,095

Equity adjustments (15,062,549) (16,728,988) (3,683,426)

Subordinated debentures 3,840,000 6,240,000 6,240,000

Less：Treasury stock (582,754) (582,754) (582,754)

Less：Deferred assets (1,384) (1,301) (139)

Total eligible capital 287,534,565 288,345,486 287,673,079

(av) Structured entities that are not included in consolidated financial reports

(i) The table below presents the types of structured entities that the Company and its subsidiaries do not include in consolidated financial reports but in which they hold an interest.

Interests held by the Company and its The types of structured entities Nature and purpose subsidiaries Asset Backed Securities Securitizing financial or non-financial assets Investing or lending in securities issued by and issuing them to raise funds. these entities. Private funds Raising funds to create investment Investing in funds issued by these entities. opportunities in a variety of assets. Special purpose entities Set up for participating in the program of Investing in stocks issued by the entity. “Kaohsiung City Ho-fa industrial park development, sell (bid) and management”, and for conducting the project of “Taichung Intercontinental Baseball Stadium extension, renovation and operation”

(ii) The scales of structured entities not included in consolidated financial reports as follows.

December 31, June 30, 2017 2016 June 30, 2016 Asset Backed Securities $ 164,056,403,458 165,883,835,740 170,702,709,073 Private funds 6,378,041,728 3,638,575,446 3,463,666,091 Special purpose entities 16,223,146 16,088,307 14,932,227

(Continued) 172 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(iii) The carrying amounts of interests held by the Company and its subsidiaries in these structured entities were as follows:

December 31, June 30, 2017 2016 June 30, 2016 Assets held by the Company and its subsidiaries Available for sale financial assets $ 34,848,775 30,192,199 31,479,257 Loans－net 1,236,225 1,646,000 1,748,737 Held-to-maturity financial assets-net 427,517 153,633 159,252 Investments under equity method—net 14,499,862 14,647,199 13,774,221 Investment in debt instruments without 25,953,663 32,916,002 30,176,860 active markets—net Other assets－net 652,210 661,249 619,344 Total assets held by the Company and its $ 77,618,252 80,216,282 77,957,671 subsidiaries

December 31, June 30, 2017 2016 June 30, 2016 Liabilities held by the Company and its subsidiaries Deposits and remittances $ 5,319 7,100 7,417

The maximum amount of risk exposure the Company and its subsidiaries endure to a loss incurred from special purpose entities that are not included in consolidated financial reports is the carrying amount of interests held by the Company and its subsidiaries.

(iv) As of June 30, 2017 and December 31, and June 30, 2016 the Company and its subsidiaries have not provided any financial support to their special purpose entities that are not included in consolidated financial reports.

(Continued) 173 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(aw) Nature and scope of insurance contract risk

(i) Life insurance business

(1) Evaluation and management of the scope of insurance risks from a corporate wide point of view

To properly manage the risks in different stages such as product design, pricing, issuance, policy approval, and payment for damage, the subsidiary CTBC Life Insurance Co., Ltd. has management mechanism as follows:

(a) Management of risks associated with product design and pricing

Management of risks associated with product design and pricing result from inappropriateness, inconsistency, or unexpected changes relating to product design, insurance covenants, and pricing sources. The subsidiary Taiwan Life Insurance Co., Ltd. devises an “insurance product design standard process” before selling a product to make sure of the risk control before and after selling a product, to ensure compliance with regulations, and to strengthen internal control. The subsidiary Taiwan Life Insurance Co., Ltd. also adopts profit tests and sensitivity analyses to measure the risks for different product types and natures, and, at the same time, takes responsibility for auditing an insurance product. After selling a product, the relevant department will propose an inspection after selling report in the biannual insurance product management conference.

(b) Management of risks associated with insurance approval

Management of risks associated with insurance approval refer to unexpected losses resulting from product promotion and approval, and related expenses. In order to control those risks, the subsidiary Taiwan Life Insurance Co., Ltd. puts in place standard approval procedures, guidelines, and manuals.

Management of risks associated with reinsurance result from the failure to arrange appropriate reinsurance or the incapacity of the reinsurer to fulfill its obligation which makes it impossible for the premium, payment for damage, and other expenses to be recovered. The subsidiary Taiwan Life Insurance Co., Ltd. has put in place a management plan for reinsurance risks which covers the management of retained risks, reinsured risks, and risks from selling reinsurance to other insurance companies. The subsidiary Taiwan Life Insurance Co., Ltd. will then evaluate its retention risk limits based on classification of risks and its ability to cover those risks. Also, it devises a set of procedures and criteria on the choice of reinsurers, and, after purchasing the reinsurance, monitors the credit ratings of reinsurers to avoid a default on the part of reinsurers.

(Continued) 174 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(d) Management of risks associated with catastrophe

Management of risks associated with catastrophe are associated with risk events that are of a magnitude significant enough to cause multiple losses for hazard units of a single or several sorts of insurance, and thus could affect the credit ratings and solvency of an insurance company. The subsidiary Taiwan Life Insurance Co., Ltd. measures and manages the catastrophe risks by means of catastrophic loss records to estimate possible amount of losses in cases of recurrence.

(e) Management of risks associated with payment for damage

Management of risks associated with payment for damage result from the failure to properly process damage claims by the insured. The subsidiary Taiwan Life Insurance Co., Ltd. puts in place a standard procedure to reduce the risks.

(f) Management of risks associated with reserves

Management of risks associated with reserves result from sales’ underestimate of liability, which renders the reserve provision insufficient for future obligation risks. The subsidiary Taiwan Life Insurance Co., Ltd. puts in place a standard procedure for reserve provision and conducts regular sufficiency analysis to reduce the risks.

(2) Limits on and transfer of risk exposures, and prevention of inappropriate risk concentration

The subsidiary Taiwan Life Insurance Co., Ltd. puts in place a management plan for reinsurance risks which covers the management of retained risks, reinsured risks, risks from selling reinsurance to other insurance companies, and reinsurance risks within the Company and its subsidiaries. The subsidiary Taiwan Life Insurance Co., Ltd. will then evaluate its retention risk limits based on classification of risks and its ability to cover those risks. Also, it devises a set of procedures and criteria on the choice of reinsurers, and, after purchasing the reinsurance, periodically monitors the credit ratings of reinsurers to avoid a default on the part of reinsurers and maintain the safety of the operation.

(3) Asset and liability management

(a) The Company’ s subsidiary Taiwan Life Insurance Co., Ltd. has its own asset/liability management committee, who is responsible for reviewing and approving the overall investment and liability management decisions.

(b) In compliance with asset and liability matching regulations, the match of asset and liability is routinely reviewed with its risk limit monitored to ensure alignment with the Company’ s subsidiary Taiwan Life Insurance Co., Ltd.’ s objectives. If risk levels exceed the tolerance or in special circumstances, prompt mitigation plans are escalated to senior levels, followed by communications with the people in charge to propose improvement plans.

(Continued) 175 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(4) Administration and control policies on additional debts or equity commitments required to undertake when acquiring or providing assets under certain circumstances.

To comply with regulations and strengthen capital base, the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. routinely assesses its capital adequacy. If it falls below minimum capital requirements, instant alerts with required timeframe and projected amount will be reported to senior levels, followed by a capital strengthening proposal to fulfill regulatory requirements.

(5) Information on insurance risk

(a) Sensitivity of insurance risk-insurance contracts and financial instruments with a discretionary feature

For the six months ended June 30, 2017 Change Change in income Change in in assumption before tax stockholders’ equity Mortality/Morbidity Increase 5 % Decrease 111,612 Decrease 92,638 Rate of return Decrease 0.1 % Decrease 623,455 Decrease 517,467 Expense (fixed expense) Increase 5 % Decrease 433,169 Decrease 359,531 Decrement and lapse rate Increase 5 % Increase 24,119 Increase 20,019

For the six months ended June 30, 2016 Change Change in income Change in in assumption before tax stockholders’ equity Mortality/Morbidity Increase 5 % Decrease 91,920 Decrease 76,294 Rate of return Decrease 0.1 % Decrease 495,753 Decrease 411,475 Expense (fixed expense) Increase 5 % Decrease 496,308 Decrease 411,936 Decrement and lapse rate Increase 5 % Increase 22,472 Increase 18,651

(i) The above profit or loss changes are the influence of assumptions on the Company’s subsidiary Taiwan Life Insurance Co., Ltd.’s pre tax income for the six months ended June 30, 2017 and 2016. The influence on stockholders’ equity assumes that income tax is calculated at 17% of pre tax income.

(ii) The sensitivity test does not take how market changes affect operations into account.

(iii) The underlying assumption is that the changes in each factor are not correlated.

(Continued) 176 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(b) Concentration of insurance risks

The subsidiary Taiwan Life Insurance Co., Ltd. only operates in Taiwan and thus incurs geographical risk concentration. The subsidiary Taiwan Life Insurance Co., Ltd. reduces risk concentration via reinsurance contracts. To reduce the degree of risk concentration, the subsidiary Taiwan Life Insurance Co., Ltd. regularly reviews its profit or loss on claims, monitors risks, and evaluates the need to make adjustments to catastrophe insurance and the amount of self-retention of reinsurance.

According to the “Regulations Governing the Reserves Provision by Insurance Companies,” starting from January 1, 2011, the subsidiary Taiwan Life Insurance Co., Ltd. should recognized as special reserve under shareholders’ equity each year’ s new provision of special reserve for major events and risk changes, after deducting income tax. The special reserve for major events is meant to make large payments for damage caused by major future events. The special reserve for risk changes is meant to pay for losses caused by abnormal changes in loss ratios and claims.

(i) Claims development from direct business

As of June 30, 2017, December 31, and June 30, 2016, the accumulated compensation amount and reconciled to the balance sheet over the past years were as follows:

June 30, 2017 Development year Accident Claims year 1 2 3 4 5 6 7 8 reserve From July 1, 2009 1,527,282 1,607,263 1,624,437 1,628,354 1,631,011 1,632,445 1,633,003 1,633,353 - to June 30, 2010

From July 1, 2010 1,627,309 1,696,700 1,702,059 1,705,724 1,708,479 1,711,978 1,713,946 1,714,337 391 to June 30, 2011

From July 1, 2011 1,594,474 1,690,800 1,702,786 1,716,212 1,723,400 1,725,438 1,726,992 1,727,393 1,955 to June 30, 2012

From July 1, 2012 1,604,384 1,700,691 1,745,482 1,748,436 1,748,575 1,750,550 1,752,096 1,752,461 3,886 to June 30, 2013

From July 1, 2013 1,663,362 1,771,233 1,792,322 1,827,705 1,830,862 1,833,001 1,834,749 1,835,183 7,478 to June 30, 2014

From July 1, 2014 1,767,027 1,904,678 1,922,558 1,929,871 1,933,142 1,935,480 1,937,303 1,937,728 15,170 to June 30, 2015

From July 1, 2015 1,822,485 1,955,490 1,984,475 1,991,579 1,994,892 1,997,391 1,999,241 1,999,642 44,152 to June 30, 2016

From July 1, 2016 1,782,484 1,891,665 1,919,232 1,926,255 1,929,565 1,932,098 1,933,962 1,934,361 151,877 to June 30, 2017

Not reported and not paid claim reserve 224,909 Add: Reported but not paid claims 516,878 Provision for not paid claims per other statutory requirement 44 Claims reserve 741,831

(Continued) 177 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016 Development year Accident Claims year 1 2 3 4 5 6 7 8 reserve 2009 1,443,759 1,545,974 1,584,951 1,585,388 1,587,518 1,587,822 1,589,258 1,589,387 - 2010 1,587,190 1,664,851 1,672,895 1,677,832 1,680,821 1,683,022 1,684,413 1,684,788 375 2011 1,604,194 1,657,465 1,670,904 1,676,972 1,675,476 1,678,073 1,679,556 1,679,938 1,865 2012 1,579,524 1,673,181 1,724,511 1,732,771 1,740,315 1,742,215 1,743,713 1,744,072 3,757 2013 1,654,457 1,745,021 1,765,456 1,777,255 1,780,284 1,782,336 1,784,015 1,784,433 7,178 2014 1,706,838 1,819,944 1,858,870 1,866,229 1,869,450 1,871,672 1,873,462 1,873,898 15,028 2015 1,821,591 1,964,424 1,994,436 2,001,627 2,004,954 2,007,400 2,009,241 2,009,649 45,225 2016 1,655,644 1,757,129 1,782,739 1,789,435 1,792,519 1,794,858 1,796,607 1,796,991 141,347 Not reported and not paid claim reserve 214,775 Add: Reported but not paid claims 457,840 Provision for not paid claims per other statutory requirement 35 Claims reserve 672,650

June 30, 2016 Development year Accident Claims year 1 2 3 4 5 6 7 8 reserve From July 1, 2008 1,517,391 1,417,571 1,453,355 1,443,025 1,442,798 1,444,495 1,445,947 1,446,547 - to June 30, 2009

From July 1, 2009 1,763,783 1,651,044 1,646,351 1,653,564 1,652,514 1,653,209 1,653,651 1,655,020 1,369 to June 30, 2010

From July 1, 2010 1,958,234 1,781,751 1,764,795 1,768,143 1,770,962 1,772,563 1,773,960 1,775,405 2,842 to June 30, 2011

From July 1, 2011 1,880,220 1,756,003 1,757,347 1,762,277 1,762,988 1,764,378 1,765,779 1,767,298 4,310 to June 30, 2012

From July 1, 2012 1,864,031 1,759,317 1,793,326 1,795,197 1,796,347 1,797,792 1,799,176 1,800,809 5,612 to June 30, 2013

From July 1, 2013 1,932,553 1,847,481 1,837,759 1,840,502 1,841,718 1,843,298 1,844,854 1,846,608 8,849 to June 30, 2014

From July 1, 2014 2,052,891 1,928,756 1,952,121 1,955,119 1,956,489 1,958,167 1,959,736 1,961,660 32,904 to June 30, 2015

From July 1, 2015 1,709,472 1,802,764 1,823,068 1,825,761 1,827,166 1,828,801 1,830,256 1,832,185 122,713 to June 30, 2016

Not reported and not paid claim reserve 178,599 Add: Reported but not paid claims 451,856 Provision for not paid claims per other statutory requirement 18 Claims reserve 630,473

(Continued) 178 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(ii) Claims development from retained business

The Company’s subsidiary Taiwan Life Insurance Co., Ltd. for the operating benchmark are balanced and conservative, and no longer get on the reinsurance cede business, since July 2016. The relevant development trend information for non-reported insurance claims reserve loss please look at the disclosure in claims development from direct business.

As of June 30, 2016, the accumulative claims of the subsidiary Taiwan Insurance Co., Ltd. over the past years were as follows:

June 30, 2016 Development year Accident Claims year 1 2 3 4 5 6 7 8 reserve From July 1, 2008 1,506,752 1,402,606 1,438,363 1,427,912 1,427,685 1,429,382 1,430,834 1,431,434 - to June 30, 2009

From July 1, 2009 1,751,450 1,636,265 1,631,454 1,638,620 1,637,570 1,638,265 1,638,706 1,640,058 1,352 to June 30, 2010

From July 1, 2010 1,937,656 1,754,484 1,737,475 1,740,234 1,743,054 1,744,655 1,746,008 1,747,425 2,770 to June 30, 2011

From July 1, 2011 1,846,408 1,724,820 1,726,117 1,731,043 1,731,754 1,733,107 1,734,466 1,735,948 4,194 to June 30, 2012

From July 1, 2012 1,827,766 1,720,619 1,724,091 1,725,961 1,727,071 1,728,468 1,729,807 1,731,385 5,424 to June 30, 2013

From July 1, 2013 1,903,019 1,813,931 1,803,455 1,806,140 1,807,321 1,808,861 1,810,384 1,812,089 8,634 to June 30, 2014

From July 1, 2014 2,015,713 1,887,110 1,910,160 1,913,089 1,914,411 1,916,040 1,917,574 1,919,436 32,326 to June 30, 2015

From July 1, 2015 1,672,087 1,763,422 1,783,442 1,786,069 1,787,428 1,789,017 1,790,440 1,792,309 120,222 to June 30, 2016

Not reported and not paid claim reserve 174,922 Add: Reported but not paid claims 369,316 Provision for not paid claims per other statutory requirement 18 Claims reserve 544,256

The Company’s subsidiary Taiwan Life Insurance Co., Ltd. provides a claim reserve based on the expected claims payment and relevant handling fee for RBNA and IBNR claims. Such provision involves vast uncertainty, estimates and judgments; hence, it is highly complicated. Any change in estimate or judgment is regarded as a change in accounting estimate; and the amount of change is recognized as current gains or losses. Some claimants may delay notifying Taiwan Life Insurance Co., Ltd. In addition, when estimating the potential IBNR claims, past loss experience and subjective judgment are involved; therefore, it is not certain that the estimated claims reserve on the Balance sheet date will be equal to the final compensation amount. The estimate of claims reserve is based on the information currently available; however, the final result may deviate from the original estimate due to subsequent developments.

(Continued) 179 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

The above table demonstrates the development trend of claims. The vertical axis represents the year in which the claim event occurred, and the horizontal axis represents the development years. Each horizontal axis figure represents the accumulated compensation amount at the end of each year. The compensation amount refers to the claims whether they are finalized or not. The table explains how Taiwan Life Insurance Co., Ltd. estimates the compensation amount for each year over time. The scenarios and trends which affect the provision of claims reserve may change in the future; therefore, the estimated future compensation amount is not able to be determined by the claim development trend.

Property insurance business:

(1) Objectives, policies, procedures, and methods for managing risks arising from insurance contracts

In order to achieve the risk management objective to ensure solvency, enhance long-term competitiveness, and increase the value of equity, the sub-subsidiary TLG Insurance Co., Ltd. has established the “Risk Management Policy” as the prime guiding principle to properly identify, measure, response, and control risks. Insurance risk is one of the major risks, it originates from the risk transferred by the insured after the sub-subsidiary TLG Insurance Co., Ltd. receives premiums and thereby results in contractual obligations of insurance claim payment for damage caused by unforeseeable events. The sub-subsidiary TLG Insurance Co., Ltd. established effective management mechanism for each insurance risk as follows:

(a) Risk from product design and pricing

These risks arise from improper product design, inconsistency between contract terms and the information used in pricing, or unexpected changes. The sub- subsidiary TLG Insurance Co., Ltd. has established the loss allocation model for each homogeneous insurance risk to quantitatively measure the expected value insurance risk loss and possible losses under different confidence levels. In the meanwhile, the sub-subsidiary TLG Insurance Co., Ltd. evaluates risks under qualitative basis and describes the possibility and the degree of influence. The possible controlling procedures according to each commodity characteristics are as follows:

i) Risk-transfer strategies: Take approaches to transfer all or part of risks depending on certain circumstances.

ii) Actuarial assumptions: The adopted actuarial assumptions for setting up expense rates could add up proper safety coefficient in conformity with regulations depending on certain circumstances.

iii) After-sales experience tracking: Periodically analyzing each actuarial assumption after sales, applying profit testing or sensitivity analysis to test and adjust commodity and rate-setting.

(Continued) 180 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

b) Risk from insurance underwriting:

These risks arise from unexpected loss risk of business solicitation, insurance underwriting, and other operating processes. The sub-subsidiary TLG Insurance Co., Ltd. established proper management mechanism for risk from insurance underwriting as follows:

i) Established internal underwriting systems and procedures for business solicitation, underwriting policy.

ii) Provided an insurance underwriting handbook to effectively maintain quality and reduce potential risk from insurance underwriting.

iii) Set indicators for insurance underwriting risk management and report periodically to management.

c) Risk from reinsurance:

These risks result from the failure to arrange appropriate reinsurance or the incapacity of the reinsurer to fulfill its obligation which makes it impossible for the premium, payment for damage, and other expenses to be recovered. The sub- subsidiary TLG Insurance Co., Ltd. established reinsurance risk management mechanism in conformity with relative regulations, and after purchasing the reinsurance, monitors the credit ratings of reinsurers to avoid a default on the part of reinsurers.

d) Risk from catastrophe:

The sub-subsidiary TLG Insurance Co., Ltd. identifies catastrophes that might cause material loss based on the characteristics of the products, regularly reviews the relation between the effect of cumulative risks and limits of risks for each insurance product under different assumed catastrophe, and evaluates whether its capital is sufficient to cover the capital requirement of catastrophe risk.

e) Risk of claim:

These risks result from the failure to properly process damage claims by the insured. The sub-subsidiary TLG Insurance Co., Ltd. has built a proper internal claim-handling process including the qualifications, responsibilities, quota of authorizes and scopes of authority of claim adjuster.

(Continued) 181 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

f) Reserve-related risk:

These risks result from sales’ underestimate of liability, which renders the reserve provision insufficient for future obligation risks. The sub-subsidiary TLG Insurance Co., Ltd. puts in place a standard procedure for reserve provision and risk controlling mechanism in accordance with different reserve-related risk incidence and the possible controlling procedures were as follows:

i) Risk-transfer strategies: Take approaches to transfer all or part of risks depending on certain circumstances.

ii) Plans for increase in reserve: Increase reserve when it is overrun or insufficient to cover the risk.

2) Information on insurance risk

a) Sensitivity of insurance risk:

For the six months ended June 30, 2017 Effects to net income as the expected loss rate increases (decreases) 5% Insurance Expected Before After Item Premium loss rate reinsurance reinsurance Fire insurance $ 213,819 60.3 % 9,929 3,556 Marine insurance 25,319 63.8 % 851 243 Miscellaneous Casualty Insurance 111,412 72.8 % 7,792 4,354 Personal accident and health 159,927 68.6 % 7,921 5,619 insurance Voluntary auto insurance 532,217 69.5 % 25,645 25,499 Compulsory auto TPL insurance 225,886 Not applicable Not applicable Not applicable

For the six months ended June 30, 2016 Effects to net income as the expected loss rate increases (decreases) 5% Insurance Expected Before After Item Premium loss rate reinsurance reinsurance Fire insurance $ 171,204 60.7 % 6,824 2,523 Marine insurance 18,177 61.9 % 621 192 Miscellaneous Casualty Insurance 126,917 72.8 % 7,940 4,536 Personal accident and health 139,923 69.4 % 7,145 3,840 insurance Voluntary auto insurance 498,341 69.5 % 25,594 12,468 Compulsory auto TPL insurance 224,939 Not applicable Not applicable Not applicable

(Continued) 182 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

b) Description of insurance risk concentration

The sub-subsidiary TLG Insurance Co., Ltd. establishes risk limits based on each risk unit and each insured event and transfers the over-limit risk by reinsurance to reduce the effect of insurance risk concentration.

i) Business concentration

For the three months ended June 30, 2017 Premium income Retained earned premiums Item Amount % Amount % Fire insurance $ 105,934 16.84 % 38,194 8.21 % Marine insurance 16,076 2.56 % 1,978 0.43 % Miscellaneous casualty insurance 49,343 7.85 % 24,118 5.19 % Personal accident and health 85,728 13.63 % 62,209 13.38 % insurance Voluntary auto insurance 256,880 40.84 % 256,157 55.08 % Compulsory auto TPL insurance 114,960 18.28 % 82,360 17.71 % Total $ 628,921 100.00 % 465,016 100.00 %

For the three months ended June 30, 2016 Premium income Retained earned premiums Item Amount % Amount % Fire insurance $ 89,746 14.95 % 32,183 7.27 % Marine insurance 11,948 1.99 % 3,142 0.71 % Miscellaneous casualty insurance 60,466 10.07 % 24,754 5.59 % Personal accident and health 75,699 12.61 % 51,291 11.59 % insurance Voluntary auto insurance 247,898 41.28 % 249,403 56.33 % Compulsory auto TPL insurance 114,701 19.10 % 81,939 18.51 % Total $ 600,458 100.00 % 442,712 100.00 %

For the six months ended June 30, 2017 Premium income Retained earned premiums Item Amount % Amount % Fire insurance $ 213,819 16.85 % 68,903 7.47 % Marine insurance 25,319 2.00 % 4,355 0.47 % Miscellaneous casualty insurance 111,412 8.78 % 43,239 4.68 % Personal accident and health 159,927 12.61 % 114,147 12.37 % insurance Voluntary auto insurance 532,217 41.95 % 530,876 57.51 % Compulsory auto TPL insurance 225,886 17.81 % 161,539 17.50 % Total $ 1,268,580 100.00 % 923,059 100.00 %

(Continued) 183 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

For the six months ended June 30, 2016 Premium income Retained earned premiums Item Amount % Amount % Fire insurance $ 171,204 14.52 % 55,878 6.47 % Marine insurance 18,177 1.54 % 5,026 0.58 % Miscellaneous casualty insurance 126,917 10.76 % 44,680 5.18 % Personal accident and health 139,923 11.86 % 92,832 10.76 % insurance Voluntary auto insurance 498,341 42.25 % 504,189 58.41 % Compulsory auto TPL insurance 224,939 19.07 % 160,541 18.60 % Total $ 1,179,501 100.00 % 863,146 100.00 %

ii) Loss concentration

Self –claim as of Self –claim as of Self –claim as of June 30, 2017 December 31, 2016 June 30, 2016 Item Amount % Amount % Amount % Fire insurance $ 36,056 5.67 % 37,434 6.60 % 33,375 7.51 % Marine insurance 5,567 0.88 % 6,261 1.10 % 3,918 0.88 % Miscellaneous casualty insurance 45,784 7.20 % 57,008 10.05 % 38,806 8.73 % Personal accident and health insurance 38,662 6.08 % 36,013 6.35 % 25,152 5.66 % Voluntary auto insurance 320,398 50.40 % 244,963 43.18 % 161,524 36.34 % Compulsory auto TPL insurance 189,239 29.77 % 185,620 32.72 % 181,711 40.88 % Total $ 635,706 100.00 % 567,299 100.00 % 444,486 100.00 %

iii) Trends in claims development 1. Claims development from direct business and arrange reinsurance business, the cumulative claims over the past years were as follows:

June 30, 2017 Development year For the six months Accident ended June Cumulative Reported Claim year 2008 2009 2010 2011 2012 2013 2014 2015 2016 30, 2017 claims paid but unpaid Unpaid reserve ≦2008 3,226,827 1,564,535 1,555,575 1,585,336 1,577,932 1,568,372 1,555,869 1,556,252 1,556,007 1,542,308 1,541,061 1,247

2009 292,020 365,568 389,096 390,409 390,764 391,097 391,668 391,605 391,604 391,578 26

2010 731,225 887,990 917,652 925,371 922,365 921,213 921,267 920,878 919,769 1,109

2011 859,809 1,078,873 1,114,607 1,120,276 1,130,005 1,129,171 1,129,672 1,123,939 5,733

2012 885,653 1,088,513 1,139,401 1,141,031 1,140,165 1,138,399 1,133,499 4,900

2013 815,688 994,571 1,043,050 1,050,437 1,050,805 1,044,129 6,676

2014 1,031,688 1,226,439 1,265,429 1,272,315 1,244,570 27,745

2015 1,081,950 1,198,254 1,220,248 1,158,980 61,268

2016 1,103,788 1,217,107 1,010,253 206,854

For the six 426,612 180,468 246,144 months ended June 30, 2017

Total 561,702 396,881 958,583

(Continued) 184 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016 Development year Accident Cumulative Reported Claim year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 claims paid but unpaid Unpaid reserve ≦2007 1,808,823 1,164,845 1,209,215 1,186,758 1,219,849 1,213,446 1,204,450 1,193,364 1,193,844 1,193,682 1,192,776 906

2008 253,158 355,320 368,817 365,487 364,486 363,922 362,505 362,408 362,325 361,946 379

2009 292,020 365,568 389,096 390,409 390,764 391,097 391,668 391,605 391,579 26

2010 731,225 887,990 917,652 925,371 922,365 921,260 921,314 919,815 1,499

2011 859,809 1,078,873 1,114,607 1,120,276 1,130,005 1,129,171 1,123,781 5,390

2012 885,653 1,088,513 1,139,401 1,141,318 1,140,452 1,133,047 7,405

2013 815,688 944,571 1,044,937 1,052,324 1,045,140 7,184

2014 1,031,688 1,236,413 1,275,403 1,241,177 34,226

2015 1,090,364 1,206,668 1,119,420 87,248

2016 1,103,606 657,908 445,698

Total 589,961 392,342 982,303

2008 253,158 335,320 368,817 365,487 364,486 363,922 362,505 362,408 362,360 361,981 379

2009 292,020 365,568 389,096 390,409 390,764 391,097 391,668 391,624 391,598 26

2010 731,225 887,990 917,652 925,371 922,365 921,213 921,205 919,700 1,505

2011 859,809 1,078,873 1,114,607 1,120,276 1,130,005 1,129,857 1,122,657 7,200

2012 885,653 1,088,513 1,139,401 1,141,031 1,141,042 1,132,491 8,551

2013 815,688 994,571 1,043,050 1,047,109 1,036,905 10,204

2014 1,031,688 1,226,439 1,241,295 1,180,927 60,368

2015 1,081,950 1,153,105 992,757 160,348

For the six 470,074 196,300 273,774 months ended June 30, 2016

Total 523,261 337,043 860,304

(Continued) 185 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

2. Claims development from retained business

The cumulative claims over the past years were as follows:

June 30, 2017 Development year For the six months Accident ended June Cumulative Reported Claim year 2008 2009 2010 2011 2012 2013 2014 2015 2016 30, 2017 claims paid but unpaid Unpaid reserve ≦2008 1,941,637 1,037,173 1,023,914 1,056,901 1,050,305 1,042,543 1,036,008 1,036,398 1,036,646 1,022,972 1,021,925 1,047

2009 229,910 271,252 291,113 291,103 290,439 290,745 291,071 291,007 291,007 290,996 11

2010 472,945 550,366 579,075 576,434 579,318 579,111 579,166 578,776 578,282 494

2011 319,488 434,055 452,541 456,646 460,523 460,177 460,568 459,068 1,500

2012 322,156 430,261 463,422 461,614 460,802 460,447 458,177 2,270

2013 309,566 389,766 413,261 415,501 417,864 415,823 2,041

2014 339,270 405,799 428,001 438,891 430,913 7,978

2015 427,366 486,185 495,171 467,955 27,216

2016 664,691 726,609 612,476 114,133

For the six 370,349 144,070 226,279 months ended June 30, 2017

Total 382,969 252,619 635,588

Cumulative impairment loss 118 - 118

$ 383,087 252,619 635,706

December 31, 2016 Development year Accident Cumulative Reported Claim year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 claims paid but unpaid Unpaid reserve ≦2007 992,294 733,494 743,948 722,391 756,439 750,073 742,399 736,895 737,313 737,624 736,718 906 2008 215,849 293,225 301,523 300,462 300,232 300,144 299,113 299,085 299,022 298,865 157 2009 229,910 271,252 291,113 291,103 290,439 290,745 291,071 291,007 290,996 11 2010 472,945 550,366 579,075 576,434 579,318 579,158 579,213 578,330 883 2011 319,488 434,055 452,541 456,646 460,523 460,192 459,029 1,163 2012 322,156 430,261 463,422 461,901 461,089 457,828 3,261 2013 309,566 389,766 415,148 417,388 417,224 164 2014 339,270 415,774 437,976 432,878 5,098 2015 435,780 494,599 456,930 37,669 2016 664,509 377,330 287,179 Total 336,491 230,233 566,724 Cumulative impairment loss 575 - 575 $ 337,066 230,233 567,299

(Continued) 186 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 Development year For the six months Accident ended June Cumulative Reported Claim year 2007 2008 2009 2010 2011 2012 2013 2014 2015 30, 2016 claims paid but unpaid Unpaid reserve ≦2007 992,294 733,494 743,948 722,391 756,439 750,073 742,399 736,895 737,313 737,637 736,731 906 2008 215,849 293,225 301,523 300,462 300,232 300,144 299,113 299,085 299,057 298,900 157 2009 229,910 271,252 291,113 291,103 290,439 290,745 291,071 291,027 291,015 12 2010 472,945 550,366 579,075 576,434 579,318 579,111 579,108 578,219 889 2011 319,488 434,055 452,541 456,646 460,523 459,928 457,905 2,023 2012 322,156 430,261 463,422 461,614 461,098 457,231 3,867 2013 309,566 389,766 413,261 416,825 413,110 3,715 2014 339,270 405,799 415,262 394,450 20,812 2015 427,366 481,452 413,988 67,464 For the six 235,727 94,255 141,472 months ended June 30, 2016 Total 241,317 202,576 443,893 Cumulative impairment loss 593 - 593 $ 241,910 202,576 444,486 The sub-subsidiary TLG Insurance Co., Ltd. recognizes the claims reserve based on expected future claims, including both reported and unreported claims. Because the recognition of this kind of reserve involves many uncertainties, estimations, and judgments, it contains high complexity. Any changes in estimations and judgments are regarded as changes in accounting estimates, and the effect of the changes will be recognized in the net income of the current period. Some claims might have a delay in reporting to the sub-subsidiary TLG Insurance Co., Ltd. In addition, estimating the expected possible claims of unreported claims might involve previous claim experience and subjective judgment. Therefore, the claims reserve recognized at the balance sheet date may not be the same as the final claim payments. Claims reserve recognized is estimated based on the currently available information. However, the final result may depart from the initial estimation due to the subsequent development of claims.

(Continued) 187 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(7) Related-party transactions:

(a) Names of related parties and relationship with the Company

Name of related party Relationship with the Company CTBC Security Co., Ltd. An investee company carried under the equity method. Grand Bills Finance Corporation 〃 King Dragon Life Insurance Co., Ltd. 〃 Hofa Land Development Co., Ltd. 〃 Wu Tzu Development Co., Ltd. 〃 Top Taiwan IX Venture Capital Co., Ltd. 〃 CTBC Investment Trust Funds A securities investment trust fund managed by the Company’s subsidiary CTBC Investments Co., Ltd. Mirae Investment Trust Funds A securities trust fund managed by the Company's subsidiary investee carried under the equity method. Taiwan Institute of Economic Research The Company’s subsidiary contributed over 1/3 of its total funds. CTBC Charity Foundation 〃 CTBC Culture Foundation 〃 CTBC Anti-Drug Educational Foundation 〃 CTBC Financial Management College The Chairman of the Company’s sub-subsidiary is its Director. KINPO Electronics, Inc. 〃 Nanya Technology Corporation 〃 Kainan High School of Commerce and The Chairman of the Company is its body Industry corporate representative. Straits Exchange Foundation The Chairman of the Company’s subsidiary is its body corporate representative. CTBC Financial Park The Director of the Company's subsidiary is its body corporate representative. TransWorld University 〃 Overseas Investment & Development Corp. The Company’s subsidiary is its Chairman. Wei Fu Investment Co., Ltd. The institutional Director of the Company. Hewei Investment Co., Ltd. The Chairman of the Company is its Director. Sunghung Investment Co., Ltd. 〃 Fenglu Development & Investment Co., Ltd. 〃

(Continued) 188 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Name of related party Relationship with the Company United Real Estate Management Co., Ltd. The Chairman of the Company is its Director. Taiwan Sports Lottery Co., Ltd. The Chairman is the second-degree relatives of the Chairman of the Company. Yan Yuan Investment Co., Ltd. The Company’s General Manager is the Director of the Company's subsidiary. Taiwan Relo Club, Ltd. The Chairman of the Company’s subsidiary is its Chairman. Showa Denko HD Trace Corp. The Chairman of the Company’s subsidiary is its Director. Taipei Financial Center Corporation 〃 Nanya Plastics Corporation 〃 Brothers Entertaining Co., Ltd. 〃 Global BioPharma, Inc. The General Manager of the Company’s subsidiary is its Director. Rich Healthy Fruits & Vegetable Corp. 〃 Noratech Pharmaceuticals, Inc. 〃 Prince Pharmaceutical Co., Ltd. 〃 Hsuan Yi Co., Ltd. The Director of the Company's sub-subsidiary is its Chairman. Quanwei Investment Co., Ltd. The Company’s Chairman is the second-degree relatives of the Director of the Company's subsidiary. Huaku Development Co., Ltd. The General Manager is the second-degree relatives of the Director of the Company’s subsidiary. Hung Chang Precision Inc. The Company's Chairman is the second-degree relatives of the Chief Investment Officer of the Company. Chailease Financial Co., Ltd. Related party in substance. Sungyong Investment Co., Ltd. 〃 Sungbo Co., Ltd. 〃 Jungguan Investment Co., Ltd. 〃 Kuan Ho Development Co., Ltd. 〃 Zhonghang Co., Ltd. 〃 Bosser Design Inc. 〃 CTC Group Inc. 〃 APEX Credit Solutions Inc. 〃 My Leasing (Mauritius) Corp. 〃 (Continued) 189 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Name of related party Relationship with the Company Changchi Investment Co., Ltd. Related party in substance. Yi Huao Investment Co., Ltd. 〃 Yi Kao Investment Co., Ltd. 〃 Other related parties The Directors of the Company and its subsidiaries (including independent directors), supervisors, managers and their families, spouses, etc.

(b) Significant transactions between related parties and the Company

(i) Lease

For the three and six months ended June 30, 2017 and 2016, the rental revenue that the Company's subsidiary CTBC Bank Co., Ltd. received from related parties for the rental of buildings, parking spaces, and safe deposit boxes amounted to $64,985, $44,896, $128,801 and $86,937, respectively, constituting 53.32%, 41.36%, 52.82% and 43.79%, respectively, of total rental income.

As of June 30, 2017, December 31, 2016 and June 30, 2016, deposits that the Company's subsidiary CTBC Bank Co., Ltd. for renting safe boxes to related parties all amounted to $6, the rents received in advance from related parties amounted to $58,222, $8,243 and $33,096, respectively. The guarantee deposit for the use of space and machinery received from related parties amounted to $66,620, $64,545 and $63,971, respectively.

(ii) Donations

For the three months ended June 30, For the six months ended June 30, Related party 2017 2016 2017 2016 CTBC Culture Foundation $ 17,000 33,000 17,000 33,000 CTBC Charity Foundation 54,000 - 54,000 - CTBC Anti-Drug 18,000 70,000 18,000 74,602 Educational Foundation CTBC Financial 5,018 21,000 85,018 21,000 Management College Total $ 94,018 124,000 174,018 128,602

(iii) Guarantee

June 30, 2017 Balance of Maximum Ending guarantee Range of Related party balance balance reserve interest rates Collateral Showa Denko HD Trace $ 1,500 1,500 - 1% Securities/ the NTD Corp. deposits in the subsidiary CTBC Bank Co., Ltd. Huaku Development 46,902 46,902 - 0.95% None Co., Ltd.

(Continued) 190 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016 Balance of Maximum Ending guarantee Range of Related party balance balance reserve interest rates Collateral Showa Denko HD Trace $ 3,000 1,500 - 1% Securities/ the NTD Corp. deposits in the subsidiary CTBC Bank Co., Ltd. Huaku Development 46,902 46,902 - 0.95% None Co., Ltd.

June 30, 2016 Balance of Maximum Ending guarantee Range of Related party balance balance reserve interest rates Collateral Showa Denko HD Trace $ 3,000 1,500 - 1% Securities/ the NTD Corp. deposits in the subsidiary CTBC Bank Co., Ltd.

(iv) Loans

June 30, 2017 Settlement status Number/name of Maximum Ending Normal Overdue Loan Categories related parties balance balance loans loans Collateral conditions Consumer loan—employee 43 $ 17,234 7,553 7,553 - None None Home loan mortgage 410 2,170,201 2,065,013 2,065,013 - Real estate/ others 〃 Others Nanya Technology 1,533,250 1,333,200 1,333,200 - Real estate/ plant/ 〃 Corporation machine room/ Machinery 〃 Huaku Development Co., 1,050,000 1,050,000 1,050,000 - Land 〃 Ltd. 〃 Nan Ya Plastics Corporation 895,517 866,628 866,628 - Real estate/ plant/ 〃 machine room 〃 CTC Group Inc. 447,882 440,488 440,488 - Real estate 〃〃 Taipei Financial Center 376,756 308,713 308,713 - Real estate/ 〃 Corporation buildings for commercial use 〃 Jungguan Investment Co., 355,000 350,000 350,000 - Land 〃 Ltd. 〃 Kuan Ho Development Co., 245,000 245,000 245,000 - Real estate 〃 Ltd. 〃 Zhonghang Co., Ltd. 224,000 200,200 200,200 - Vehicle/ cargo 〃 aircraft 〃 Wei Fu Investment Co., Ltd. 50,000 50,000 50,000 - Real estate 〃〃 Sunghung Investment Co., 44,000 44,000 44,000 - Real estate 〃 Ltd. 〃 Changchi Investments Co., 9,314 8,991 8,991 - Real estate 〃 Ltd. 〃 Others 59,868 55,991 55,991 - Real estate 〃

(Continued) 191 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016 Settlement status Number/name of Maximum Ending Normal Overdue Loan Categories related parties balance balance loans loans Collateral conditions Consumer loan—employee 50 $ 21,231 12,997 12,997 - None None Home loan mortgage 395 2,171,218 1,886,911 1,886,911 - Real estate/ others 〃 Others Nanya Technology 1,533,250 1,533,250 1,533,250 - Real estate/ plant/ 〃 Corporation machine room/ Machinery 〃 Huaku Development Co., 1,050,000 1,050,000 1,050,000 - Land 〃 Ltd. 〃 Nanya Plastics Corporation 1,928,682 743,137 743,137 - Real estate/ plant/ 〃 machine room 〃 CTC Group Inc. 490,155 475,003 475,003 - Real estate 〃〃 Taipei Financial Center 416,849 376,756 376,756 - Real estate/ 〃 Corporation buildings for commercial use 〃 Jungguan Investment Co., 355,000 355,000 355,000 - Land 〃 Ltd. 〃 Zhonghang Co., Ltd. 271,600 224,000 224,000 - Vehicle/ cargo 〃 aircraft 〃 Kuan Ho Development Co., 245,000 245,000 245,000 - Real estate 〃 Ltd. 〃 Wei Fu Investment Co., Ltd. 100,000 50,000 50,000 - Real estate 〃〃 Sunghung Investment Co., 44,000 44,000 44,000 - Real estate 〃 Ltd. 〃 Changchi Investments Co., 10,148 9,454 9,454 - Real estate 〃 Ltd. 〃 Others 78,824 67,488 67,488 - Real estate 〃

June 30, 2016 Settlement status Number/name of Maximum Ending Normal Overdue Loan Categories related parties balance balance loans loans Collateral conditions Consumer loan—employee 46 $ 18,161 7,551 7,551 - None None Home loan mortgage 362 1,871,588 1,743,040 1,743,040 - Real estate/ others 〃 Others Nanya Technology 1,333,000 1,333,000 1,333,000 - Real estate/ plant/ 〃 Corporation machine room/ Machinery 〃 Huaku Development Co., 1,050,000 1,050,000 1,050,000 - Land 〃 Ltd. 〃 Nan Ya Plastics Corporation 990,147 690,147 690,147 - Real estate/ plant/ 〃 machine room 〃 CTC Group Inc. 490,262 482,684 482,684 - Real estate 〃〃 Taipei Financial Center 416,849 383,283 383,283 - Real estate/ 〃 Corporation buildings for commercial use 〃 Jungguan Investment Co., 355,000 355,000 355,000 - Land 〃 Ltd. 〃 Zhonghang Co., Ltd. 271,600 247,800 247,800 - Vehicle/ cargo 〃 aircraft 〃 Kuan Ho Development Co., 245,000 245,000 245,000 - Real estate 〃 Ltd. 〃 Wei Fu Investment Co., Ltd. 100,000 50,000 50,000 - Real estate 〃〃 Sunghung Investment Co., 44,000 44,000 44,000 - Real estate 〃 Ltd. 〃 Changchi Investments Co., 11,569 11,146 11,146 - Real estate 〃 Ltd. 〃 Others 77,189 70,894 70,894 - Real estate 〃

(Continued) 192 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(v) Deposits

June 30, 2017 Interest expenses Interest expenses (For the three (For the six Maximum Ending Range of months ended months ended Related party balance balance interest rates June 30, 2017) June 30, 2017) Showa Denko Hd Trace Corp. $ 3,207,376 2,022,892 0~1.41% 7,689 15,940 CTBC Charity Foundation 1,111,542 984,298 0~1.07% 1,482 2,945 Yan Yuan Investment Co., Ltd. 490,688 490,688 0~0.01% - 11 Taiwan Sports Lottery Co., Ltd. 1,014,570 443,012 0~0.01% 9 24 Taiwan Institute of Economic Research 424,060 372,836 0~1.33% 523 1,029 Quanwei Investment Co., Ltd. 370,715 320,888 0~0.01% 8 8 Kainan High School of Commerce and 345,795 314,333 0~1.22% 530 1,072 Industry Overseas Investment & Development Corp. 299,142 282,671 0~1.53% 946 1,958 Yi Kao Investment Co., Ltd. 345,637 229,332 0.01~0.01% 6 7 Straits Exchange Foundation 187,030 187,030 0.15~1.22% 470 968 CTBC Financial Management College 194,016 175,127 0~1.22% 40 86 Fenglu Development & Investment Co., Ltd. 177,513 174,858 0~0.01% 5 9 TransWorld University 234,056 161,404 0~1.22% 37 102 Brothers Entertaining Co., Ltd. 133,210 133,210 0~0.08% 2 3 Others 12,039,180 7,027,778 8,746 19,817 Total $ 20,574,530 13,320,357 20,493 43,979

December 31, 2016 Interest expenses Maximum Ending Range of (For the year ended Related party balance balance interest rates December 31, 2016) Showa Denko Hd Trace Corp. $ 4,805,375 2,509,340 0~1.41% 22,793 CTBC Charity Foundation 1,156,776 943,796 0~1.21% 6,347 Wu Tzu Development Co., Ltd. 683,791 462,327 0~0.08% 83 Taiwan Institute of Economic Research 451,058 407,845 0~1.37% 2,380 Taiwan Sports Lottery Co., Ltd. 1,301,224 732,396 0~0.08% 187 Kainan High School of Commerce and Industry 374,340 335,996 0~1.37% 2,588 Overseas Investment & Development Corp. 341,495 299,509 0~1.53% 957 TransWorld University 254,034 234,035 0~1.22% 518 Straits Exchange Foundation 187,030 187,030 0.15~1.37% 2,366 Fenglu Development & Investment Co., Ltd. 178,938 177,513 0~0.08% 45 Grand Bills Finance Corporation 304,283 157,030 0~6.10% 2,299 CTBC Financial Management College 177,219 153,196 0~1.23% 295 Wei Fu Investment Co., Ltd. 263,830 139,584 0~0.05% 11 Yi Huao Investment Co., Ltd. 112,301 112,178 0~0.08% 5 Sungyong Investment Co., Ltd. 137,462 109,836 0~0.08% 33 Others 18,823,596 6,325,544 36,225 Total $ 29,552,752 13,287,155 77,132

(Continued) 193 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 Interest expenses Interest expenses (For the three (For the six Maximum Ending Range of months ended months ended Related party balance balance interest rates June 30, 2016) June 30, 2016) Showa Denko Hd Trace Corp. $ 4,805,375 3,377,019 0~1.35% 5,766 11,009 CTBC Charity Foundation 1,156,776 935,601 0~1.21% 1,580 3,354 Quanwei Investment Co., Ltd. 504,043 502,598 0~0.08% 1 10 Taiwan Institute of Economic Research 426,843 352,557 0~1.37% 616 1,259 Wu Tzu Development Co., Ltd. 589,551 346,534 0~0.08% 9 62 Kainan High School of Commerce and 301,076 272,293 0~1.37% 681 1,391 Industry Taiwan Sports Lottery Co., Ltd. 1,301,224 232,565 0~0.08% 25 167 Yi Kao Investment Co., Ltd. 218,575 218,575 0.01% 1 1 Straits Exchange Foundation 187,030 187,030 0.29~1.37% 597 1,215 Fenglu Development & Investment Co., Ltd. 176,811 176,811 0~0.08% 4 36 CTBC Financial Management College 175,203 148,542 0~1.23% 74 143 My Leasing(Mauritius) Corp. 2,325,388 146,862 0.02~0.3% 37 59 Overseas Investment & Development Corp. 341,495 131,168 0~0.83% 214 518 Sungyong Investment Co., Ltd. 137,462 111,685 0~0.08% 3 28 Jungguan Investment Co., Ltd. 112,300 107,615 0~0.08% 2 21 Hewei Investment Co., Ltd. 183,176 102,369 0~0.08% 2 24 Others 9,647,022 5,785,157 4,045 18,776 Total $ 22,589,350 13,134,981 13,657 38,073

(vi) Call Loans to Banks

For the six months ended June 30, 2017 Interest Interest revenues revenues (For the three (For the six Range of months ended months ended Related party Ending balance interest rates June 30, 2017) June 30, 2017) Grand Bills Finance Corporation $ - 0.38~0.40% - 45

(vii) Derivative financial commodity trading

June 30, 2017 Derivative Balance sheet financial Contract Notional Unrealized Ending Related party instruments period principal profit (loss) Account Balance CTBC Money market 06.15.2017~ USD 8,500 1,015 (Note1) 1,015 Investment swap 07.26.2017 Trust Funds

December 31, 2016 Derivative Balance sheet financial Contract Notional Unrealized Ending Related party instruments period principal profit (loss) Account Balance CTBC Money market 12.13.2016~ USD 5,000 2,836 (Note1) 2,836 Investment swap 01.17.2017 Trust Funds

Note 1: Financial assets measured at fair value through profit or loss.

(Continued) 194 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(viii) Securities purchased under resell agreements

For the six months ended June 30, 2017 Interest expense Interest expense (For the three (For the six Ending months ended months ended Related party balance Interest payable June 30, 2017) June 30, 2017) Straits Exchange Foundation $ 15,015 - 12 21

(ix) Funds

December 31, Related party Content June 30, 2017 2016 June 30, 2016 CTBC Securities Co., CTBC Investment Trust $ 244,748 265,342 306,305 Ltd. Funds CTBC Venture Capital 〞 - - 500,037 Co., Ltd. CTBC Investments Co., 〞 31,763 30,938 30,369 Ltd. Taiwan Life Insurance 〞 1,877,932 16,953,096 1,957,267 Co., Ltd. TLG insurance Co., Ltd. 〞 - 100,074 - Taiwan Life Insurance Mirae Investment Trust - - 79,257 Co., Ltd. Funds Total $ 2,154,443 17,349,450 2,873,235 (x) Stocks issued by the related party that are being held by the Company：

December 31, Related party June 30, 2017 2016 June 30, 2016 Nanya Plastics Corporation $ 1,236,690 309,720 80,032 Nanya Technology Corporation 164,400 - 139,870 Global BioPharma, Inc. 35,000 35,000 35,000 Rich Healthy Fruits & Vegetable Corp. 90,000 90,000 - Norated Pharmaceatical, Inc. 60,000 60,000 - Prince Pharmaceutical Co., Ltd. 40,000 - - Taipei Financial Center Corporation 742,500 742,500 742,500 $ 2,368,590 1,237,220 997,402

(xi) Others

1) Commission and other income generated between the Company’s subsidiary CTBC Bank Co., Ltd. and related parties.

For the three months ended June 30, For the six months ended June 30, Related party Summary 2017 2016 2017 2016 KINPO Electronics, Commission income $ 573 1,128 1,056 1,128 Inc. Individuals Commission for funds 1,619 604 3,090 1,119 $ 2,192 1,732 4,146 2,247

(Continued) 195 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Foregoing transactions, accounts receivable balances were as follows:

Related party Summary June 30, 2017 June 30, 2016 KINPO Electronics, Inc. Commission income $ 243 485

2) Handling fees and other general administration expenses

For the three months ended June 30, For the six months ended June 30, Related party Summary 2017 2016 2017 2016 Brothers Sponsorship, $ 96,745 6,001 186,880 116,009 Entertaining Co., marketing feedback Ltd. fund and gift expenses CTBC Security Co., Security fees 35,129 34,851 61,426 67,866 Ltd. Taiwan Relo Club, Marketing fees and 21,357 6,727 21,668 17,216 Ltd. gift expenses Chailease Finance Leasing of official 2,625 6,410 5,713 15,233 Co., Ltd. vehicles, rental business and fees service fees Taiwan Institute of Expense for domestic 3,550 3,550 7,100 7,100 Economic economics research Research and business consulting commissioned research APEX Credit Collection assistance 6,406 4,576 8,638 8,034 Solutions Inc. fees Taipei Financial Sponsorship, joint- 16,564 12,224 22,656 15,495 Center brand credit card Corporation payment and ATM utilities Bosser Design Inc. Upholstery fees, 39 4,291 185 7,211 repair expenses and interior renovation fees Sungbo Co., Ltd. Gift expenses 630 470 761 1,168 CTBC Financial Head office general 36,231 68,324 72,837 68,324 Park administration expenses United Real Estate Rental fees - 539 244 539 Management Co., Ltd. $ 219,276 147,963 388,108 324,195

(Continued) 196 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Foregoing transactions, accounts payable balances were as follows:

Related party Summary June 30, 2017 June 30, 2016 CTBC Security Co., Ltd. Security fees $ 4,140 11,834 Taiwan Institute of Economic Research Expense for domestic economics research 5,000 7,100 and business consulting commissioned research Apex Credit Solutions Co., Ltd. Collection assistance fees 2,964 2,440 CTBC Financial Park Head office general administration 37,788 22,000 expenses $ 49,892 43,374

3) Others

June 30, 2017 Income statement Balance sheet Trading Company Trading Company Summary accounts Amount accounts Amount

CTBC Bank Co., Ltd. Chailease Finance Co., Released undue - $ - Other receivables 40,497 Ltd. loans (Note) 〞 Others Affiliates Advance payment for - - 〞 1,873 utilities expenses, security fee etc. CTBC Investments Co., Funds managed by the Management fees Management 106,021 Management 17,031 Ltd. Company revenue receivables CTBC Venture Capital CTBC Security Co., Security fees Other general 1,399 Accrual expenses - Co., Ltd. Ltd. administration expenses Taiwan Life Insureance CTBC Financial Park Rental expenses Other general 3,752 - - Co., Ltd administration expenses 〞 Hung Chang Precision Rental revenue - - Other receivables 13,162 Inc. $ 111,172 72,563

(Continued) 197 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016 Income statement Balance sheet Trading Company Trading Company Summary accounts Amount accounts Amount

CTBC Bank Co., Ltd. Chailease Finance Co., Released undue - $ - Other receivables 81,569 Ltd. loans (Note) 〞 Others Affiliates Advance payment for - - 〞 6,270 utilities expenses, security fee and training fees CTBC Investments Co., Funds managed by the Management fees Management 182,605 Management 17,918 Ltd. Company revenue receivables CTBC Venture Capital CTBC Security Co., Security fees Other general 2,634 Accrual expenses 11 Co., Ltd. Ltd. administration expenses 〞 CTBC Financial Park Utilities expenses Other general 958 〞 149 and administration administration expenses expenses Taiwan Life Insurance Chailease Finance Co., Beneficiary - - Investment in debt 1,583,310 Co., Ltd. Ltd. certificate instruments without investment on active markets special purpose 〞 Bosser Design Inc. Prepayment - - Prepayment 8,443 〞 CTBC Financial Park Rental expenses Other general 23,910 - - administration expenses income 〞 Taipei Medical Premium income Net insurance 10,934 - - University income TLG insurance Co., Hofa Land Premium income Net insurance 12,400 - - Ltd. Development Co., income Ltd. $ 233,441 1,697,670

(Continued) 198 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 Income statement Balance sheet Trading Company Trading Company Summary accounts Amount accounts Amount CTBC Bank Co., Ltd. Chailease Finance Co., Released undue - $ - Other receivables 154,403 Ltd. loans (Note) 〞 Others Affiliates Advance payment for - 〞 252 utilities expenses, security fee and training fees CTBC Investments Co., Funds managed by the Management fees Management 77,239 Management 12,176 Ltd. Company revenue receivables CTBC Venture Capital CTBC Security Co., Security fees Other general 1,306 - - Co., Ltd. Ltd. administration expenses Taiwan Life Insurance Hsuan Yi Co., Ltd. Rental income Non-interest income 1,895 Guarantee deposits 1,317 Co., Ltd 〞 Chailease Finance Co., Beneficiary 〞 - Investment in debt 1,584,144 Ltd. certificate instruments investment on without active special purpose markets 〞 Booser Design Inc. Prepayments 〞 - Prepayments 6,098 〞 CTBC Financial Park Rental expenses Other general 3,527 - - administration expenses TLG insurance Co., Hofa Land Premium income Net insurance 12,400 - - Ltd. Development Co., income Ltd.

$ 96,367 1,758,390

Note: The Company’ s subsidiary CTBC Bank Co., Ltd. signed a strategic alliance agreement with Chailease Finance Co., Ltd. agreeing loans will be released directly to Chailease’ s clients, and Chailease pledged to buyback and settle all debts once any delay arises.

Please refer to Note 9(A) for more information regarding the Company’ s subsidiary CTBC Bank Co., Ltd. provided guarantee to PT Bank CTBC Indonesia, CTBC bank (Philippines) Corp., and The Tokyo Star Bank, Ltd. for loan application.

No significant discrepancy in transaction terms found between related party transaction and non-related party transaction.

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Salary and other short-term $ 456,287 445,686 979,387 892,727 employee benefits Post-employment benefits 8,069 20,535 14,953 27,313 Share-based payment 1,094 7,547 306,897 332,522 Termination benefits 38 - 38 957 Total $ 465,488 473,768 1,301,275 1,253,519

(Continued) 199 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(8) Pledged assets:

Pledged assets of the Company and its subsidiaries were as follows:

Unit: In Thousands of New Taiwan Dollars

Assets June 30, 2017 December 31, 2016 June 30, 2016 Purpose of collateral Subsidiary—CTBC Bank Co., Ltd. and its subsidiaries Bonds $ 64,531,718 40,919,869 78,741,837 Guarantee deposits for transaction settlements and call loans from banks, repurchase agreement pledge, etc. Negotiable certificates of deposit 22,191,000 19,891,000 30,891,000 Daytime overdrafts of Central Bank, foreign currency call loan guarantee pledge, etc. Time deposits 8,563,349 10,863,226 10,862,369 Foreign currency call loan guarantee pledge, call loan liquidation account in U.S. Dollars, etc. Receivables 9,900 9,900 1,500 Guarantee for all the debts and Other guarantee deposits Subsidiary—CTBC Securities Co., Ltd. and its subsidiaries Restricted time deposits 756,000 768,912 558,000 Guarantee for all the debts. Subsidiary—CTBC Investments Co., Ltd. Restricted time deposits 55,000 55,000 55,000 Operation guarantee deposits Subsidiary—Taiwan Life Insurance Co., Ltd Time deposits 232,769 232,706 237,765 Compliance guarantee deposits Accounts Receivable 878,302 945,491 676,989 Guarantee for bank loan Government bonds 7,173,253 7,186,269 7,257,574 Operation guarantee deposits and other guarantee deposits

As of June 30, 2017, December 31, 2016 and June 30, 2016, the deposits for public welfare lottery issuance of the Company’s subsidiary CTBC Bank Co., Ltd.’s irrevocable standby letter of credit were all $1,050,000.

(Continued) 200 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(9) Significant contingent liabilities and unrecognized contract commitments:

(a) Major commitments and contingencies

December 31, June 30, 2017 2016 June 30, 2016 CTBC Financial Holding Company, Ltd. Promissory notes of short term borrowing and $ 66,500,000 48,000,000 35,500,000 other financing Subsidiary—CTBC Bank Co., Ltd. and its subsidiaries Contingent liabilities from guarantee and letter of 76,628,801 71,292,721 71,019,338 credit business Promissory note to Central bank for Bank’s 969,419 1,472,619 1,472,619 clearance Client notes in custody 90,735,548 89,970,027 94,813,345 Marketable securities and debts in custody 2,388,982,638 2,311,583,523 2,262,538,965 Consigned travelers’ checks in custody 292,355 325,053 333,248 Designated purpose trust accounts 871,152,049 763,869,994 820,208,715 Other items in custody 455,132 451,386 326,019 $ 3,495,715,942 3,286,965,323 3,286,212,249

As of June 30, 2017, December 31, 2016 and June 30, 2016, the credit amount of the cancellable loan commitments of the Company’ s subsidiary CTBC Bank Co., Ltd. and its subsidiaries were $1,547,630,400, $1,695,537,471 and $1,591,193,324, respectively.

On September 1, 2012, the Company’s subsidiary CTBC Bank Co., Ltd. signed a formal renewal of the services contract for information resources supply the Bank with International Business Machines, authorizing a five year contract term commencing from September 1, 2012, and ending on August 31, 2017, for the amount of $1,805,000, which includes a fixed monthly fee of $7,844 comprising a host computer lease fee, an authorization fee, and an annual software maintenance fee.

The Company’s subsidiary CTBC Bank Co., Ltd. was designated by the Ministry of Finance (the “MOF”) as the issuing institution for the fourth term of public welfare lottery. The period is from January 1, 2014 to December 31, 2023. The Company’ s subsidiary CTBC Bank Co., Ltd. was authorized to arrange and issue traditional lottery, scratch and win lottery, and computerized lottery tickets. For the fourth term of public welfare lottery, the Company’s subsidiary CTBC Bank Co., Ltd. receives a commission for issuing lottery tickets, representing 4.35% of the total lottery sales amount. The commission will be settled monthly. The Company’s subsidiary CTBC Bank’s profit will be what remains after a fixed payment of $2,700,000 to the MOF per year. Furthermore, in order to ensure that the lottery prize pay out rate is not greater than 60% of the lottery issuing amount, not only did the Company’ s subsidiary CTBC Bank Co., Ltd. created a transitional monitoring account-provision for the lottery prize, but also has already adopted appropriate risk control strategies.

(Continued) 201 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

On May 31, 2013, the Company’s subsidiary CTBC Bank Co., Ltd. signed a renewed contract for lottery software, hardware purchase and establishment and maintenances services amounting to $2,322,756 (within which $1,633,581 was for maintenance service). The maintenance service started from May 31, 2013 to December 2023, and may take the obligation in consider to be fulfilled only after the accounts are settled, the hardwares are transferred and all post events are carried out.

The Company’ s subsidiary CTBC Bank Co., Ltd. entrusted the Company’ s subsidiary Taiwan Lottery Co., Ltd. to operate the public welfare lottery’ s ticket issuing, sales, promotion, drawing, payment of prize, and management, with a contract period from November 11, 2013, and ending on June 30, 2024. The Company’s subsidiary CTBC Bank Co., Ltd. will disburse 4.35% of the total lottery sales amount as commission to The Company’ s subsidiary Taiwan Lottery Co., Ltd. The Company’ s subsidiary CTBC Bank Co., Ltd. agreed that Taiwan Lottery Co., Ltd. can receive a reward, amounting to the commission revenue after the deduction of value-added tax (VAT), rebates and direct costs incurred for the lottery business, and the addition of marginal benefits, if the balance is positive. Otherwise, The Company’ s subsidiary Taiwan Lottery Co., Ltd. should pay for the discrepancy, if the balance is negative. An amendment regarding not adding marginal benefits toward the said entrusted benefits has been made on May 20, 2015, with an effective date traced back to January 1, 2015.

As of June 30, 2017, due to the procurement contract and the storage contract for lottery tickets, the Company’s subsidiary Taiwan Lottery Co., Ltd. had requested contractors to create and deposit the guarantee notes, which are accounted for under guarantee notes payable amounting to $23,000.

As of June 30, 2017, the Taxation Administration Ministry of Finance entrusted the Company’ s subsidiary Taiwan Lottery Co., Ltd. to conduct the procurement of five-year-period deposit insurance and an allowance for computerized lottery agents to switch to another career. The insurance company that won the tender transferred and deposited unregistered central government bonds amounting to $5 million in the Company’s subsidiary Taiwan Lottery Co., Ltd.

To help CTBC Leasing Co., Ltd., a subsidiary of the Company’ s subsidiary CTBC Asset Management Co., Ltd., obtain financing facility, a letter of comfort is issued to financial institutions to request a credit limit of CNY 261,396 thousand as of June 30, 2017, in order to declare that the operation of the company is actively supported by the Company.

To help CTBC Leasing Co., Ltd., a subsidiary of the Company’ s subsidiary CTBC Asset Management Co., Ltd., obtain financing facility, a letter of comfort to financial institution is issued to request a credit limit of US$146,500 thousand and CNY170,000 thousand as of June 30, 2017.

To help PT Bank CTBC Indonesia obtain financing facility, the Company’s subsidiary CTBC Bank Co., Ltd. has issued Letters of Comfort to financial institutions on February 24, 2015, to declare that the operation of the company is actively supported by the Company’s subsidiary CTBC Bank Co., Ltd. The credit application amount is US$20,000 thousand.

(Continued) 202 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

To help PT Bank CTBC Indonesia obtain financing facility, the Company’s subsidiary CTBC Bank Co., Ltd. has issued Letters of Comfort to financial institutions on November 18, 2015 to declare that the operation of the company is actively supported by the Bank. The credit application amount is IDR 300,000,000 thousand.

To help CTBC Bank (Philippines) Corp. obtain financing facility, the Company’s subsidiary CTBC Bank Co., Ltd. has issued Letters of Comfort to financial institutions on February 24, 2015, to declare that the operation of the company is actively supported by the Company’s subsidiary CTBC Bank Co., Ltd. The credit application amount is US$5 million.

To help the Tokyo Star Bank, Ltd. obtain financing facility, the Company’s subsidiary CTBC Bank Co., Ltd. has issued Letters of Comfort to financial institutions on June 26, 2015 to declare that the financial derivatives businesses of the company is actively supported by the Company’s subsidiary CTBC Bank Co., Ltd.

On September 4, 2012, the Company’ s subsidiary CTBC Bank Co., Ltd. signed with Continental Development Corporation a contract of purchase of buildings and land. The Company’s subsidiary CTBC Bank Co., Ltd. will obtain the rights of land, including the zone 99 & 100 at Huikuo Section, Xitun District, Taichung City, currently owned by Continental Development Corporation, along with the 1st to 8th floor parking spaces of the new building located there. The $2,181,339 contract price was negotiated based on the appraisal report prepared by DTZ Real Estate Appraisal Firm and Savills Real Estate Appraisal Firm. The contract price will be paid in installments proportionately with construction progress during the contract period, accounted for under premises and equipment －net, prepayment for land and buildings. As of June 30, 2017, the outstanding balance amounted to $212,940.

On May 21, 2014, the Company’ s subsidiary CTBC Bank Co., Ltd. signed with Yung-Yue Construction and Development Co., Ltd. and Lian Hong Construction Co., Ltd. a contract of purchase of buildings and land. The Company’ s subsidiary CTBC Bank Co., Ltd. will obtain the rights of land, zone 15-2 at An-Kang Section, Nei-Hu District, Taipei City, along with the seven floors above ground as well as three floors underground of the building located there. The $1,289,000 contract price was negotiated based on the appraisal report prepared by DTZ Real Estate Appraisal Firm and Prudential Cross-strait Real Estate Appraisal Firm. The contract price will be paid in contractual installments, accounted for under premises and equipment-net, prepayment for land and buildings. As of June 30, 2017, the outstanding balance amounted to $50,830.

On July 23, 2015, the Company’s subsidiary CTBC Bank Co., signed with Yung-Yue Construction and Development Co., Ltd. and Chong Hong Construction Co., Ltd. a contract of purchase of buildings and land. The Bank will obtain the rights of land, zone 13-1 and 13-7 at An-Kang Section, Nei-Hu District, Taipei City, along with the ten floors above ground as well as four floors underground of the new buildings located there. The contract price amounted to $5,139,800 was negotiated on the appraisal report prepared by Elite Real Estate Appraisers Firm and Grand Elite Real Estate Appraisers Firm. The contract price will be paid in contractual installments, amounted for under premises and equipment-net, prepayment for land and buildings. As of June 30, 2017, the outstanding balance amounted to $508,216.

(Continued) 203 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

In September 2012, the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. signed a pre-sale contract for building and land with Continental Development Corporation. Moreover, Taiwan Life expected to acquire the rights of lands currently owned by Continental Development Corporation, along with the ninth to twenty sixth floor and parking spaces of the newly erected building. The zoning code of the lands is No. 99 and 100, Huikuo Section, Xitun District, Taichung City.

In November 2012, the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. signed a joint development contract with Continental Development Corporation, which was entrusted with the construction of the building located in No.26, Chengzhong Section, Zhongzheng District, Taipei.

As of June 30, 2017, the amounts of the unpaid payment of the signed contract and property acquisition of the Company’s subsidiary Taiwan Life Insurance Co., Ltd. amounted to $5,635,219, respectively.

As of June 30, 2017, the unpaid amount of the committed investment facility of signed private fund contract of the Company and its subsidiaries amounted to US$485,695 thousand and JPY$3,351,781 thousand, respectively.

(b) The below information is shown based on the disclosure requirements of Enforcement Rules of the Trust Enterprise Act, Article 17.

Balance Sheet of Trust Accounts

Trust Assets June 30, 2017 June 30, 2016 Trust Liabilities June 30, 2017 June 30, 2016 Cash $ 51,137,310 35,464,108 Payables 265,012,383 328,273,064 Bonds 14,556,216 5,109,235 Other liabilities 62,359 59,915 Stocks 205,752,775 128,880,526 Trust capital 530,189,312 451,370,826 Mutual funds 264,329,526 252,492,517 Miscellaneous reserves 75,023,364 39,583,147 and accumulated earnings Structured products 19,930,339 20,230,603 Other investments 1,229,350 2,229,220 Receivables 321,016 11,042,010 Real estates－net 48,617,224 46,281,463 Securities in custody 264,398,838 317,444,824 Other assets 14,824 112,446 Total trust assets $ 870,287,418 819,286,952 Total trust liabilities 870,287,418 819,286,952

Note: As of June 30, 2017 and 2016, the Company’s subsidiary CTBC Bank’s Offshore Banking Unit invested in foreign securities under specific purpose trust accounts amounting to $1,669,618 and $1,646,781, respectively.

(Continued) 204 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Properties Catalog of Trust Accounts

Investments June 30, 2017 June 30, 2016 Cash $ 51,137,310 35,464,108 Bonds 14,556,216 5,109,235 Stocks 205,752,775 128,880,526 Mutual funds 264,329,526 252,492,517 Structured products 19,930,339 20,230,603 Other investments 1,229,350 2,229,220 Securities in custody 264,398,838 317,444,824 Real estates－net Lands 48,531,881 46,196,015 Buildings 85,343 85,448 Subtotal 48,617,224 46,281,463 Other assets Prepaid other payments 172 347 Long-term prepaid rent 14,652 14,652 Pledge of rights - 97,447 Subtotal 14,824 112,446 Total $ 869,966,402 808,244,942

Income Statement of Trust Accounts

For the six months ended June 30, 2017 2016 Trust revenues $ 1,328,248 655,786 Trust expenses (394,848) (446,622) Earnings before tax 933,400 209,164 Income tax (2,940) (5,068) Net profits $ 930,460 204,096

(Continued) 205 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Total amount of minimum future irrevocable operating lease payment were as below:

December 31, June 30, 2017 2016 June 30, 2016 Less than 1 year $ 989,652 1,175,186 1,313,988 1 year to 5 years 1,985,626 1,788,368 2,252,740 More than 5 years 803,113 950,578 917,211 Total $ 3,778,391 3,914,132 4,483,939

(d) Lessor

The Company’ s subsidiary Taiwan Life Insurance Co., Ltd. and its subsidiaries leases their investment property under operating leases; please refer to Note 6(n) and 6(q). Non-cancellable operating lease rentals receivable were as follows:

December 31, June 30, 2017 2016 June 30, 2016 Less than 1 year $ 1,518,574 1,494,615 930,311 1 year to 5 years 4,159,087 4,044,359 1,513,410 More than 5 years 11,468,399 11,935,097 1,139,436 Total $ 17,146,060 17,474,071 3,583,157

(e) Other significant litigation or legal matters

(i) Structured notes case

During September to December in 2005, Hong Kong Branch of the Company’ s subsidiary CTBC Bank Co., Ltd., with approval of the board of directors, purchased structured notes (“oversea structured notes”) from Barclays Bank PLC at par value US$390 million. In the year 2006, the Company intended to invest Mega Financial Holding Company. To comply with the requirement specified in the Banking Act of The Republic of China, which requires that a commercial bank shall not invest more than five percent (5%) shares of a company, Hong Kong Branch of the Company’ s subsidiary CTBC Bank Co., Ltd. sold the above oversea structured notes at market price to Red Fire, a special purpose vehicle acquired by the former President of the Company’s subsidiary CTBC Bank’s Institutional Banking division, Mr. Chen. A profit of US$8,448 thousand incurred due to the disposal. Subsequently, Red Fire Corporation filed an application of redemption to Barclays Bank PLC and incurred a profit amounting to US$30.47 million. The opening balance of US$9.50 million was embezzled by Mr. Chen with malicious intent, while the rest of the amount (US$20.90 million) was remitted to the Company’ s overseas sub-subsidiary. In considerations of maintaining operations, the institutional director of the Company remitted an advance payment of US$ 30.47 million to CTBC Bank in accordance to the request from FSC. No loss had incurred since the remitted amount of US$ 30.47 million was far greater than US$ 9.50 million, which was not remitted to the Company’s overseas sub-subsidiary. On April 28, 2011, the Company’s subsidiary CTBC (Continued) 206 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Bank received a letter from Chung Cheng Investment and Kuan Ho Development, the institutional directors of the Company, informed that according to the Analysis Report on the Sale of Structured Notes by CTBC Bank’s Hong Kong Branch (the "Analysis Report"), the attachment of the letter from the Company with Chung Hsin Chin No. 1002243570005, dated March 10, 2011, the Company’s subsidiary CTBC Bank did not sustain loss from the sale of the structured notes. Based on the aforesaid Analysis Report, the premise of the Company’s subsidiary CTBC Bank sustaining damages no longer stands for the prior execution of the contract dated February 9, 2009 by and among the Company, Chung Cheng Investment, and Kuan Ho Development. Therefore, the Company’s subsidiary CTBC Bank Co., Ltd. has been requested to negotiate with Chung Cheng Investment and Kuan Ho Development for reasonable resolution. On August 16, 2011, the Company’s subsidiary CTBC Bank Co., Ltd. sent a letter to Chung Cheng Investment and Kuan Ho Development requesting the institutional directors of the Company to withdraw the right of recourse regarding the advance payment of US$30.47 million to the Company’ s subsidiary CTBC Bank Co., Ltd.. The institutional directors of the Company responded on August 18, 2011, agreeing to the request and wishing that the Company’s subsidiary CTBC Bank Co., Ltd. spends US$20.90 million of the advance payment on emergency assistance and public welfare loans and pays US$9.57 million to the Company as recovery for the investment income which originally should have been recognized by the Company. The latter amount was considered to be the investment income of CT Opportunity Investment Company, a sub-subsidiary of the Company. The Company’ s subsidiary CTBC Bank Co., Ltd. has not yet fulfilled the requirement, and the institutional directors still insisted the amount of US$20.90 million should be designated as the fund of welfare loans for emergency salvage. The matter will be proceeded once both parties reach agreement. Cited from the internal investigation and the opinion letter from the attorney designated by the Company, Red Fire is believed to be the Company’s SPV, since the ultimate profit or loss attribution belonged to the Company. In addition, from the perspective of cash flow, Mr. Koo, the former Chairman of the Company’s subsidiary CTBC Bank Co., Ltd., and the three involved employees did not obtain any personal benefits through the case.

After appealing for third instance, the Supreme Court of Republic of China (the “Supreme Court”) has revoked the original verdict in August 2014 and urged Taiwan High Court to re- examine its verdict. As it mentioned previously, Red Fire is the SPV of the Company. Thus, the Company did not sustain any loss, and Mr. Koo, the former Chairman of the Bank, and the three involved employees did not obtain any personal benefits through the case. Furthermore, citing from the legal opinion issued by the Company’s outside counsel, “With regard to the legal aspects, the case above is a criminal case, and since the Company is a corporate entity, the employees’ individual criminal liability will not have any influence on the Company. Therefore, there should be no significant disadvantageous effects on the financial or business affairs of the Company. The case is now still under trial at Taiwan High Court. Although the litigation result is not yet final, the outcome should not have negative impacts on the finance and operation of the Company substantially. Regardless guilty or not, the fact that the Company has not suffered damage would not be changed as a result.”

(Continued) 207 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Taiwan High Prosecutors Office has filed a motion to Taiwan High Court on July 6, 2016 against the Company to pursue the illegal proceed of $261,696 arising from the claimed manipulation of securities price by Jeffrey Koo, Jr (the former Chairman of CTBC Bank Co, Ltd., a subsidiary of the Company), and relevant employees. Taiwan High Court has noticed the Company to participate in the judiciary proceeding as a third party. The Company declares that no manipulation of securities price has been conducted by such personnel and the Company did not obtain or withhold any illegal proceed therefrom. The Company has appointed external legal counsel to represent it during the judiciary proceeding. This case is currently under the trial of Taiwan High Court. (ii) Others As for the real estate and non-performing loans transactions among the Company’s subsidiary CTBC Bank Co., Ltd. and Tectonics Laboratories (Cayman Islands) Co., Ltd. and other related parties, some employees were accused in violations of Banking Act and Securities and Exchange Act for engaging in such transactions and not disclosing related-party transactions. The case was transferred by prosecutors to Taiwan High Court, who dismissed the case on May 31, 2013 as it was bundled with Shang Chong-Su-Zi No. 54 in 2008 and Jin Shang Chong-Su-Zi No. 75 in 2010 Criminal Judgments, indicating a separate investigation should be initiated. Currently, the prosecutors have requested the case to be heard simultaneously with the structured notes case by Taiwan High court. The case is expected to have no significant effect on the Company’s subsidiary CTBC Bank Co., Ltd’s operation and shareholders’ equity. The Company’s subsidiary CTBC Securities Co., Ltd. previously served as the underwriter for issuing the domestic convertible bonds of Chou Chin Industrial Company (Chou Chin). After terminating the underwriting agreement, the former Chairman and related person of Chou Chin were found to be illegally engaged in influencing its share price and illegal trading of its shares, which resulted in the de listing of Chou Chin’ s shares from the stock market. Consequently, the Securities and Futures Investors Protection Center sued Chou Chin’s board of directors, supervisors, certified public accountants and securities underwriter with joint liability amounting to $515,157 plus 5% interest. On April 3, 2014, the judgment of the second instance (Taiwan High Court) decided in favor of the Company’ s subsidiary CTBC Securities Co., Ltd. The Taiwan Supreme Court made the judgment of Tai Shang Zi No. 1894 on October 7, 2015. The result of the appeal of Securities and Future Investors Protection Center is that CTBC Securities Co., Ltd. wins partly, and the other parts remand to Taiwan High Court. Reason for the winning: CTBC securities Co., Ltd. had made underwriting evaluation based on the audited financial reports certificated by the CPA. Since CTBC Securities Co., Ltd. had no negligence or misconduct in underwriting, it shall not be responsible for any loss or damage. Reason for the remand: the judgment of Taiwan High Court did not respond to and provide reasons for the request of the assertion of Securities and Future Investors Protection Center according to the Securities Exchange Act Art. 20.3 before amendment which caused the judgment to be automatically held in contravention of laws and regulations. The impact of this case still remains uncertain, and the management of the Company’ s subsidiary CTBC Securities Co., Ltd. evaluated the outcome of the case would not affect its financial reports as of June 30, 2017.

(Continued) 208 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

According to the press release of Supreme Prosecutors Office on October 5, 2016, Jeffrey Koo, Jr, the former Chairman of CTBC Bank has been involved in the controversy of oversea investment case amounted USD$300 million. The case is currently under the trial of Taiwan Taipei District Court. The opinion letter of the Company’s external legal counsel states that “The Company has reviewed the content of the press release and confirmed that the aforementioned amount should be the oversea investment of CT Opportunity Investment Company (CTO), a sub-subsidiary of the Company.” If the case mentioned in the press release of Supreme Prosecutors Office is indeed refer to the overseas investment of CTO, then according to the consolidated financial statement of the Company for 2006, CTO’ s oversea investment balance amounted to USD$339.31 million in 2005, and recovered USD$304.988 million in 2006 which had surpassed the USD$300 million mentioned in the press release. Since the amount is fully recovered, there should be no impairment of interests of the Company and CTBC Asset Management Co., Ltd. Therefore, there should be no significant impact on the finances of CTBC Asset Management Co., Ltd. and the Company.”According to the opinion of the above legal counsel, the Company evaluated this case is expected to have no significant impact on CTBC Asset Management's or its operation and shareholders’ equity.

According to the press release of Supreme Prosecutors Office on October 5, 2016, the Company's subsidiary CTBC Life Insurance Co., Ltd. has involved in the controversy of Gobo Group’s property acquisition case before merging Taiwan Life Insurance Co., Ltd. This case is currently under the trial of Taiwan Taipei District Court. The opinion letter of the Company’s external legal counsel states that “according to the information provided by CTBC Life Insurance Co., Ltd., the acquisition price of the second floor of the Asia Plaza Building was lower than the appraised prices provided by two independent appraisal institutions and the maximum purchase amount approved by the Board of Directors of CTBC Life Insurance Co., Ltd. The acquisition price should be reasonable since such price did not surpass the appraised prices provided by independent appraisal institutions without clear evidence showing that the appraisal reports of the independent appraisal institutions were unconvincing. This transaction should cause no impairment to either the interest of CTBC Life Insurance Co., Ltd or which of the Company.” According to the opinion of the above legal counsel, the Company evaluated this case is expected to have no significant impact on Taiwan Life Insurance's or its operation and shareholders’ equity.

(Continued) 209 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Regarding to the prosecution made by the Taipei District Prosecutors Office against employees of the Bank on January 12, 2017 for earning unjust price gains in the transaction of the land at Zone 15-2, Ankang Section, Neihu Dist., Taipei City, and two buildings at Zone 13-1 and 13-7, Ankang Section, Neihu Dist., Taipei City, the legal counsel of CTBC Bank Co., Ltd. opines, “After reviewing the information provided by the CTBC Bank Co., Ltd., the acquisition prices of the transactions were lower than the appraised prices provided by the professional institution, and the approved prices resolved by the board of directors of CTBC Bank Co., Ltd. There is no other evidence showing that the appraisal reports in the transactions were unreliable. As the transaction complied with the regulations and the acquisition prices were not unreasonable, the transactions should not damage the rights and interest of CTBC Bank Co., Ltd. and the Company.” In addition, the board of directors of the Company instructed management team to coordinate with legal counsel to review this case. According to the report, “Mr. Chang is not a substantive responsible person of the company, and does not have decision-making power over CTBC Bank’s business. The procedure and the acquisition prices of the two transactions with regard to CTBC Bank Co., Ltd. purchasing the land at Zone 15-2, Ankang Section, Neihu Dist., Taipei City, and the land and buildings at Zone 13-1 and 13-7, Ankang Section, Neihu Dist., Taipei City are in compliance with legal procedures. Moreover, Mr. Chang did not attend the board meeting which resolved to purchase the aforementioned real estate; Mr. Chang did not involve the decision-making procedures. Furthermore, the counterparties of the transaction Yongyue Development Co., Ltd., Mr. Chang, and its ultimate beneficiary person － Ms. Wu, do not meet the definitions of the interested party or quasi- interested party, and all are incompatible with IAS definition of related party. Besides, according to the request memo and related documents, the transaction had gotten all necessary approval, and the prices acquisition met the appraised opinion made by two professional appraisal institutions. After interviewing with Mr. Yang, the director of Cushman and Wakefield, we opined that the aforementioned appraisal procedures were in compliance with regulations, and the acquisition prices did not exceed the ceiling resolved by the board of directors of CTBC Bank Co., Ltd., therefore, the transactions are not illegal.” According to the opinion of the above legal counsel, the Company evaluated this case is expected to have no significant impact on CTBC Bank Co., Ltd. or its operation and shareholders’ equity.

(10) Significant catastrophic losses: None

(11) Significant subsequent events:

To expand the overseas business, the Company’s subsidiary CTBC Bank Co., Ltd. acquired 35.6% share of LH Financial Group Public Company Limited of Thailand, amounted to THB 16.6 billion (equivalent to NTD 15 billion) on July 27, 2017.

(Continued) 210 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(12) Others:

(a) Business segment financial information For the three months ended June 30, 2017 Unit: In Thousands of New Taiwan Dollars Business Segment Items Banking Securities Insurance Others Consolidation Net interest income $ 11,579,029 29,493 10,509,522 (9,691) 22,108,353 Non interest income 10,014,913 237,915 43,176,110 262,253 53,691,191 Net revenue 21,593,942 267,408 53,685,632 252,562 75,799,544 Reversal (provisions) for bad debt (1,014,987) (58,349) 60,067 (5,381) (1,018,650) expenses and guarantee reserve Net changes in insurance liability - - (48,554,294) - (48,554,294) reserve Operating expenses (13,586,269) (197,254) (1,202,497) (734,057) (15,720,077) Net income (loss) before tax 6,992,686 11,805 3,988,908 (486,876) 10,506,523 Income tax (expense) benefit (951,317) (23,097) (289,460) (61,938) (1,325,812) Net income (loss) 6,041,369 (11,292) 3,699,448 (548,814) 9,180,711

For the three months ended June 30, 2016 Unit: In Thousands of New Taiwan Dollars Business Segment Items Banking Securities Insurance Others Consolidation Net interest income $ 11,676,118 22,017 8,716,106 17,453 20,431,694 Non interest income 10,149,241 185,467 44,487,020 125,255 54,946,983 Net revenue 21,825,359 207,484 53,203,126 142,708 75,378,677 Provisions for bad debt expenses (870,838) - (17,508) (9,160) (897,506) and guarantee reserve Net changes in insurance liability - - (50,660,419) - (50,660,419) reserve Operating expenses (12,715,057) (208,320) (1,129,462) (510,787) (14,563,626) Net income (loss) before tax 8,239,464 (836) 1,395,737 (377,239) 9,257,126 Income tax (expense) benefit (1,386,517) (4,716) (147,417) 21,045 (1,517,605) Net income (loss) 6,852,947 (5,552) 1,248,320 (356,194) 7,739,521

(Continued) 211 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

For the six months ended June 30, 2017 Unit: In Thousands of New Taiwan Dollars Business Segment Items Banking Securities Insurance Others Consolidation Net interest income $ 23,126,571 52,550 20,548,760 (549) 43,727,332 Non interest income 20,254,445 547,227 104,600,569 505,386 125,907,627 Net revenue 43,381,016 599,777 125,149,329 504,837 169,634,959 Reversal (provisions) for bad debt (384,877) (58,349) 80,686 (19,972) (382,512) expenses and guarantee reserve Net changes in insurance liability - - (116,240,313) - (116,240,313) reserve Operating expenses (26,492,355) (407,086) (2,290,992) (1,538,890) (30,729,323) Net income (loss) before tax 16,503,784 134,342 6,698,710 (1,054,025) 22,282,811 Income tax (expense) benefit (2,568,377) (48,232) (206,866) (64,746) (2,888,221) Net income (loss) 13,935,407 86,110 6,491,844 (1,118,771) 19,394,590

For the six months ended June 30, 2016 Unit: In Thousands of New Taiwan Dollars Business Segment Items Banking Securities Insurance Others Consolidation Net interest income $ 23,161,742 41,267 16,917,161 30,141 40,150,311 Non interest income 21,049,867 410,530 89,011,072 312,402 110,783,871 Net revenue 44,211,609 451,797 105,928,233 342,543 150,934,182 Provisions for bad debt expenses (3,293,345) - (43,001) (44,379) (3,380,725) and guarantee reserve Net changes in insurance liability - - (100,557,629) - (100,557,629) reserve Operating expenses (25,274,339) (407,270) (2,266,024) (1,223,518) (29,171,151) Net income (loss) before tax 15,643,925 44,527 3,061,579 (925,354) 17,824,677 Income tax (expense) benefit (3,238,025) (14,001) (261,064) (5,090) (3,518,180) Net income (loss) 12,405,900 30,526 2,800,515 (930,444) 14,306,497

(Continued) 212 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(b) Public notices pursuant to Financial Holding Company Law, Article 46

The aggregate amount of credit extended, guarantees given, or any other transactions conducted by all subsidiaries of the financial holding company to, for, or with the same person, same related person, or same affiliate, disclosure of which is required under Article 46 of the Financial Holding Company ACT:

June 30, 2017

Unit: In Thousands of New Taiwan Dollars; %

Aggregate amount Aggregate of credits, percentage of the guarantees or any financial holding Names or titles other transactions company’s net worth A. The same person CENTRAL BANK OF THE REPUBLIC OF CHINA (TAIWAN) $ 423,905,000 149.38 % TAIWAN GOVERNMENT 178,247,777 62.81 % TAIWAN POWER COMPANY 56,948,565 20.07 % US GOVERNMENT 28,888,124 10.18 % MORGAN STANLEY 28,525,185 10.05 % GOLDMAN SACHS GROUP INC. 25,781,139 9.08 % BANK OF AMERICA 24,764,438 8.73 % TAIWAN RAILWAYS ADMINISTRATION 22,650,727 7.98 % CITIGROUP INC. 22,548,927 7.95 % CENTRAL TAIWAN SCIENCE PARK BUREAU,MINISTRY OF SCIENCE AND TECHNOLOGY 22,330,000 7.87 % AT&T INC. 20,001,141 7.05 % DEUTSCHE BANK AG 17,246,679 6.08 % VERIZON COMMUNICATIONS INC. 16,629,357 5.86 % JP MORGAN CHASE & CO. 16,277,481 5.74 % RABOBANK NEDERLAND 15,044,509 5.30 % FINANCE BUREAU KAOHSIUNG CITY 15,000,000 5.29 % ELECTRICITE DE FRANCE S.A. 14,996,980 5.28 % WELLS FARGO & CO. 14,597,827 5.14 % TAICHUNG CITY GOVERNMENT 14,500,000 5.11 % POLITICAL WARFARE BUREAU, MND 14,400,000 5.07 %

(Continued) 213 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Aggregate amount Aggregate of credits, percentage of the guarantees or any financial holding Names or titles other transactions company’s net worth INDUSTRIAL AND COMMERCIAL BANK OF CHINA $ 13,614,145 4.80 % SOUTHERN TAIWAN SCIENCE PARK BUREAU,MINISTRY OF SCIENCE AND TECHNOLOGY 13,515,000 4.76 % HSBC HOLDINGS PLC. 13,382,640 4.72 % HE-FA LAND DEVELOPMENT CO., LTD. 12,433,328 4.38 % CITIC LTD. 12,355,067 4.35 % SAUDI ARABIAN GOVERNMENT 11,880,312 4.19 % COMCAST CORP. 11,551,069 4.07 % SOCIETE GENERALE SA 11,501,280 4.05 % LLOYDS BANK PLC. 11,268,004 3.97 % ADCB FINANCE CAYMAN LTD. 10,918,370 3.85 % BANK OF CHINA LIMITED 10,724,045 3.78 % BANK OF TOKYO-MITSUBISHI UFJ 10,708,280 3.77 % CREDIT SUISSE 10,548,714 3.72 % TAINAN CITY GOVERNMENT 10,331,000 3.64 % COMISION FED DE ELECTRIC 10,020,454 3.53 % ANHEUSER-BUSCH INBEV SA/NV 9,681,551 3.41 % NATIONAL BANK OF ABU DHABI 9,674,700 3.41 % INDUSTRIAL DEVELOPMENT BUREAU, MOEA 9,600,000 3.38 % BRAZIL GOVERNMENT 9,230,235 3.25 % BARCLAYS PLC. 9,107,461 3.21 % RUSSIAN GOVERNMENT 9,006,032 3.17 % FREDDIE MAC 8,894,890 3.13 % AMERICA MOVIL SAB DE CV 8,805,184 3.01 % INDONESIAN GOVERNMENT 8,531,426 3.01 % QATAR GOVERNMENT 8,524,920 3.00 % MANULIFE FINANCIAL CORP. 8,212,872 2.89 % CPC CORPORATION, TAIWAN 8,105,585 2.86 % NATIXIS 8,030,256 2.83 % (Continued) 214 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Aggregate amount Aggregate of credits, percentage of the guarantees or any financial holding Names or titles other transactions company’s net worth BNP PARIBAS SA $ 7,980,973 2.81 % AU OPTRONICS CORP. 7,680,625 2.71 % STANDARD CHARTERED PLC. 7,631,666 2.69 % YUANTA SECURITIES CO., LTD. 7,580,905 2.67 % PETROLEOS MEXICANOS 7,142,151 2.52 % CHINA DEVELOPMENT BANK 6,887,659 2.43 % NEXEN ENERGY ULC 6,830,089 2.41 % KAZAKHSTAN GOVERNMENT 6,622,676 2.33 % CMA GOVERNMENT 6,608,735 2.33 % NAN SHAN LIFE INSURANCE COMPANY, LTD. 6,510,794 2.29 % CHINA STEEL CORPORATION 6,362,610 2.24 % APPLE INC. 6,324,100 2.23 % ANZ BANKING GROUP LTD. 6,214,863 2.19 % HSBC BANK MIDDLE EAST LTD. 6,162,618 2.17 % CREDIT SUISSE GROUP FUNDING GUERNSEY LTD. 6,152,444 2.17 % TAIWAN COOPERATIVE BANK CO., LTD. 6,112,194 2.15 % THE MEXICAN GOVERNMENT 6,102,290 2.15 % THE COLOMBIA GOVERNMENT 5,871,623 2.07 % CHINA CONSTRUCTION BANK CORPORATION 5,862,181 2.07 % BPCE SA 5,840,195 2.06 % VODAFONE GROUP PLC. 5,660,298 1.99 % DRAGON STEEL CORPORATION 5,599,422 1.97 % BARCLAYS BANK PLC. 5,573,739 1.96 % HSBC BANK PLC. 5,556,895 1.96 % CREDIT AGRICOLE SA 5,415,889 1.91 % DBS BANK LTD. 5,404,452 1.90 % NATIONAL AUSTRALIA BANK LIMITED 5,310,345 1.87 % PRUDENTIAL FINANCIAL INC. 5,167,090 1.82 %

(Continued) 215 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Aggregate amount Aggregate of credits, percentage of the guarantees or any financial holding Names or titles other transactions company’s net worth DA-FU MEDIA CORP. $ 5,130,382 1.81 % HON HAI PRECISION INDUSTRY CO., LTD.. 5,075,900 1.79 % KAI-YUE CO., LTD. 5,075,838 1.79 % SILICONWARE PRECISION INDUSTRIES CO., LTD. 5,007,902 1.76 % LAND BANK OF TAIWAN 4,873,405 1.72 % ASIA CEMENT CORPORATION 4,800,457 1.69 % PHILLIPS 66 4,770,149 1.68 % TAISHIN INTERNATIONAL BANK 4,721,630 1.66 % THE CHINA GOVERNMENT 4,709,583 1.66 % CATHAY FINANCIAL HOLDINGS 4,610,525 1.62 % FANNIE MAE 4,556,034 1.61 % FORMOSA HA TINH (CAYMAN) LIMITED 4,527,355 1.60 % FIRST SECURITIES INVESTMENT TRUST 4,500,200 1.59 % GOVERNMENT NATIONAL MORTGAGE ASSOCIATION 4,476,419 1.58 % NEW TAIPEI CITY GOVERNMENT 4,446,557 1.57 % NATIONAL BANK OF CANADA 4,439,959 1.56 % CHINA STATE GRID CORPORATION OF CHINA 4,384,040 1.54 % EMIRATES NBD PJSC 4,368,027 1.54 % EXPORT-IMPORT BANK OF KOREA 4,362,436 1.54 % TAIWAN SHIN KONG COMMERCIAL BANK CO., LTD. 4,310,901 1.52 % INNOLUX CORPORATION 4,292,926 1.51 % ABN AMRO BANK NV 4,243,994 1.50 % ABBVIE INC. 4,223,528 1.49 % MONSANTO CO. 4,183,892 1.47 % NOMURA INTERNATIONAL FUNDING PTE. LTD. 4,183,814 1.47 % AGRICULTURAL BANK OF TAIWAN 4,157,586 1.47 % BIOGEN ONC. 4,133,560 1.46 %

(Continued) 216 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Aggregate amount Aggregate of credits, percentage of the guarantees or any financial holding Names or titles other transactions company’s net worth SANTANDER INTERNATIONAL PRODUCT PLC. $ 4,015,916 1.42 % UNIMICRON TECHNOLOGY CORP. 4,001,262 1.41 % CHANGHUA COUNTY GOVERNMENT 4,000,000 1.41 % COMMONWEALTH BANK OF AUSTRALIA 3,947,826 1.39 % CHINA BILLS FINANCE CORPORATION 3,946,895 1.39 % AGRICULTURAL BANK OF CHINA 3,929,873 1.38 % AXA SA 3,912,335 1.38 % ARES CAPITAL CORP. 3,884,375 1.37 % UBS AG 3,863,388 1.36 % ADVANCED SEMICONDUCTOR ENGINEERING, INC. 3,840,397 1.35 % CHUNGHWA TELECOM 3,784,997 1.33 % CHINA CINDA FINANCE 2014 LTD. 3,764,596 1.33 % PETROCHINA COMPANY LIMITED 3,738,045 1.32 % CORP NACIONAL DEL COBRE 3,717,059 1.31 % SHUO-HE DEVELOPMENT CO., LTD. 3,713,000 1.28 % HUA NAN COMMERCIAL BANK, LTD. 3,621,396 1.28 % SHELL INTERNATIONAL FINANCE 3,572,705 1.26 % AMGEN INC. 3,567,178 1.26 % TAIWAN BUSINESS BANK CO., LTD. 3,534,497 1.25 % MIAOLI COUNTY GOVERNMENT 3,512,629 1.24 % MICRON TECHNOLOGY, INC. 3,500,000 1.23 % ENEL FINANCE INTERNATION NV 3,486,751 1.23 % MINISTRY OF FINANCE 3,454,023 1.22 % JIHQUAN INVESTMENT CO., LTD. 3,450,000 1.20 % ABBEY NATIONAL TREASURY SERVISE PLC 3,418,868 1.20 % TAQA ABU DHABI NATIONAL ENERGY COMPANY 3,414,742 1.20 % CHINA NETWORK SYSTEMS CO., LTD. 3,401,498 1.20 % BANK OF NOVA SCOTIA, TORONTO 3,392,721 1.20 % (Continued) 217 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Aggregate amount Aggregate of credits, percentage of the guarantees or any financial holding Names or titles other transactions company’s net worth ROYAL BANK OF CANADA $ 3,388,401 1.19 % CONOCOPHILLIPS 3,363,844 1.19 % CHANG HWA BANK LTD. 3,343,738 1.18 % TRAFIGURA PTE LTD. 3,342,909 1.18 % AIG INC. 3,341,329 1.18 % MALAYAN BANKING BERHAD 3,283,574 1.16 % UNITED OVERSEAS BANK LTD. 3,276,359 1.15 % MOROCCO GOVERNMENT 3,251,442 1.15 % YUAN LIH CONSTRUCTIONS CO., LTD. 3,226,990 1.14 % CATHAY UNITED COMMERCIAL BANK CO., LTD. 3,130,799 1.10 % SOUTHERN POWER COMPANY 3,108,810 1.10 % SUMITOMO MITSUI FINANCIAL GROUP INC. 3,079,500 1.09 % THE BANK OF YOKOHAMA, LTD. 3,043,278 1.07 % TAIWAN FINANCE CORPORATION 3,040,449 1.07 % GOLDMAN SACHS INTERNATIONAL 3,031,167 1.07 % AIA GROUP LTD (HK) 3,016,600 1.06 % PFIZER INC. 3,010,351 1.06 % PERTAMINA PERSERO PT 3,004,120 1.06 % R. S. E. A. ENGINEERING CORPORATION 3,000,000 1.06 % HSIN-CHU COUNTY GOVERNMENT 3,000,000 1.06 % B. The same related person Mr./Ms. Wu 6,217,997 2.19 % Mr./Ms. Wang 6,189,655 2.18 % Mr./Ms. Jhuang 3,739,903 1.32 % Mr./Ms. Lin 3,475,520 1.22 % Mr./Ms. Lee 3,419,198 1.20 % Mr./Ms. Jhuang 3,022,422 1.07 % C. The same affiliate HSBC HOLDINGS GROUP 33,353,726 11.75 %

(Continued) 218 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Aggregate amount Aggregate of credits, percentage of the guarantees or any financial holding Names or titles other transactions company’s net worth MERRILL LYNCH GROUP $ 30,372,898 10.70 % MORGANSTANLEY GROUP 29,864,336 10.52 % GOLDMAN SACHS GROUP 28,890,552 10.18 % SHIN KONG GROUP 24,124,775 8.50 % CITIGroup 22,737,713 8.01 % AT&T GROUP 20,295,200 7.15 % FANNIE MAE GROUP 17,927,344 6.32 % JP MORGAN CHASE GROUP 17,726,762 6.25 % DEUTSCHE BANK AG GROUP 17,381,399 6.12 % HON HAI GROUP 17,053,173 6.01 % CREDIT SUISSE GROUP 16,704,372 5.89 % ICBC GROUP 16,673,982 5.88 % SOCIETE GENERALE GROUP 15,983,447 5.63 % RABOBANK NEDERLAND GROUP 15,765,470 5.56 % THE FAR EASTERN GROUP 15,745,004 5.55 % CHINA STEEL GROUP 15,309,200 5.39 % KAOHSIUNG CITY GOVERMENT GROUP 15,300,000 5.39 % CITIC GROUP 14,995,945 5.28 % WELLS FARGO & CO. GROUP 14,874,975 5.24 % BARCLAYS BANK PLC. GROUP 14,681,199 5.17 % BOC GROUP 13,919,186 4.90 % NATIXIS GROUP 13,843,980 4.88 % LLOYDS BANKING GROUP 13,113,204 4.62 % OMCAST CORP GROUP 12,330,252 4.34 % STANDARD CHARTERED GROUP 12,289,993 4.33 % LINYUAN GROUP 11,818,865 4.16 % ANHEUSER-BUSCH GROUP 11,606,225 4.09 % NATIONAL BANK OF ABU DHABI GROUP 11,153,116 3.93 % UMC GROUP 11,148,418 3.93 % BANCO SANTANDER GROUP 10,999,144 3.88 %

(Continued) 219 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Aggregate amount Aggregate of credits, percentage of the guarantees or any financial holding Names or titles other transactions company’s net worth YUANTA FINANCIAL HOLDINGS GROUP $ 10,853,847 3.82 % CNOOC GROUP 10,317,771 3.64 % FCFC GROUP 10,156,154 3.58 % AUO GROUP 8,844,349 3.12 % CHINA DEVELOPMENT BANK GROUP 8,605,627 3.03 % FUBON GROUP 8,603,772 3.03 % RUENTEX GROUP 8,550,304 3.01 % TAIWAN COOPERATIVE FINANCIAL HOLDINGS GROUP 8,417,314 2.97 % CPC GROUP 8,108,085 2.86 % BNP GROUP 8,022,436 2.83 % TAIWAN OPTICAL PLATFORM GROUP 7,509,626 2.65 % TAIWAN TELECOM GROUP 7,464,672 2.63 % PRUDENTIAL FINANCIAL INC. GROUP 7,461,639 2.63 % EVERGREEN GROUP 7,404,617 2.61 % WALSIN LIHWA GROUP 6,986,881 2.46 % TCC GROUP 6,646,835 2.34 % FIRST FINANCIAL HOLDING GROUP 6,554,694 2.31 % ANZ BANK 6,384,099 2.25 % NOMURA HOLDINGS INC. 6,216,150 2.19 % DBS GROUP 6,179,490 2.18 % CNS GROUP 6,081,473 2.14 % CREDIT AGRICOLE SA GROUP 6,059,460 2.14 % CHINA CONSTRUCTION BANK 6,040,701 2.13 % CNPC GROUP 5,771,531 2.03 % NEW CHARM GROUP 5,649,556 1.99 % ING BANK GROUP 5,515,538 1.94 % SINOPEC GROUP 5,506,998 1.94 % YAGEO GROUP 5,423,418 1.91 % ROYAL BANK OF CANADA GROUP 5,237,690 1.85 % SPIL GROUP 5,053,855 1.78 % (Continued) 220 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Aggregate amount Aggregate of credits, percentage of the guarantees or any financial holding Names or titles other transactions company’s net worth ASE GROUP $ 4,790,627 1.69 % IBT GROUP 4,745,735 1.67 % YUANLIH GROUP 4,644,572 1.64 % BEIJING ENTERPRISES HOLDINGS GROUP 4,572,277 1.61 % CHINA STATE GRID CORP. GROUP 4,526,545 1.60 % PHOENIX PROPERTY GROUP 4,493,519 1.58 % ABC GROUP 4,371,920 1.54 % EMIRATES BANK INTERNATIONAL PJSC GROUP 4,368,027 1.54 % UBS AG GROUP 4,359,785 1.54 % SOUTHERN POWER COMPANY GROUP 4,335,800 1.53 % YULON GROUP 4,252,013 1.50 % TING HSIN INTERNATIONAL GROUP 4,040,565 1.42 % 1MDB ENERGY LTD. GROUP 4,015,504 1.41 % AXA SA GROUP 3,980,836 1.40 % CHINA OVERSEAS LAND & INVESTMENT LTD. GROUP 3,969,130 1.40 % TEVA PHARMACEUTIVAL INDUSTRIES LTD. GROUP 3,928,212 1.38 % FEIYEN GROUP 3,817,364 1.35 % NANYA GROUP 3,747,702 1.32 % HUA NAN FINANCIAL HOLDINGS GROUP 3,631,208 1.28 % MACQUARIE BANK GROUP 3,567,781 1.26 % TBC GROUP 3,512,776 1.24 % KINPO ELECTRONICS, INC. GROUP 3,350,048 1.18 % AIG GROUP 3,348,272 1.18 % SINOPAC HOLDINGS GROUP 3,196,229 1.13 % BANK OF COMMUNICATION GROUP 3,189,132 1.12 % CATCHER GROUP 3,132,791 1.10 % EASTERN BROADCASTING CO., LTD. GROUP 3,080,720 1.09 % YI CUI HONG JING GROUP 3,052,501 1.08 % (Continued) 221 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Aggregate amount Aggregate of credits, percentage of the guarantees or any financial holding Names or titles other transactions company’s net worth FRIENDWELL GROUP $ 3,034,330 1.07 % CONTINENTAL ENGINEERING CORPORATION GROUP 3,000,138 1.06 %

Note:

1. If the aggregate amount of credit extended, guarantees given, or any other transactions conducted by all subsidiaries of the financial holding company to, for, or with the same person, same related person or same affiliate is greater than the lower of 5% of net worth of the financial holding company or NT$3 billion, the related transaction information needs to be filed according to the table refer above.

2. Credit includes loans, discounts, overdrafts, acceptances, guarantees and other lines of business operations designated by the Central Competent Authority.

3. Guarantees here are indicative of endorsements and guarantees of for bills finance corporations.

4. Other transactions with the same person, same related person, or same affiliate (thereinafter referred to as “the affiliates”) here are indicative of the transactions listed below:

(1) Investment in or purchase of securities issued by any of the affiliates mentioned in the preceding paragraph;

(2) Purchase of real estate or other assets from any of the affiliates mentioned in the preceding paragraph;

(3) Sale of securities, real estate or other assets to any of the affiliates mentioned in the preceding paragraph;

(4) Entering into agreements regarding payment of money or provision of services with any of the affiliates mentioned in the preceding paragraph;

(5) Arrangements involving any of the affiliates mentioned in the preceding paragraph acting as an agent or broker of a financial holding company or its subsidiaries or providing other services which charge commission or fees;

(6) Engaging in transactions with third parties having a relationship with any of the affiliates mentioned in the preceding paragraph or engaging in transactions with third parties in which the affiliates mentioned in the preceding paragraph are involved; and

(7) The amount of the transactions with the affiliates mentioned in the preceding paragraph shall not include negotiable certificates of deposit issued by a bank subsidiary.

(Continued) 222 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

CTBC Financial Holding Co., Ltd. BALANCE SHEETS June 30, 2017, December 31, 2016, and June 30, 2016 (Expressed in Thousands of New Taiwan Dollars) (c) Financial statements of the Parent company

June 30, 2017 December 31, 2016 June 30, 2016 June 30, 2017 December 31, 2016 June 30, 2016 Assets Amount ％ Amount ％ Amount ％ Liabilities and Equity Amount % Amount % Amount % 11000 Cash and cash equivalents $ 716,220 - 755,937 - 238,663 - Liabilities： 12100 Available-for-sale financial assets-net 2,498,922 1 599,851 - 2,131,433 1 22600 Commercial papers payable-net $ 28,322,137 7 25,778,927 8 10,498,522 3 12500 Securities purchased under resell agreements 439,385 - - - 879,788 - 23000 Payables 20,426,573 6 974,165 - 15,621,397 5 13000 Receivables-net 71,356 - 70,688 - 70,833 - 23200 Current income tax liabilities 35,529 - 35,529 - 36,003 - 13200 Current income tax assets 192,548 - 360,133 - 194,460 - 24000 Bonds payable 27,000,000 8 27,000,000 8 27,000,000 8 15000 Investments under equity method-net 355,064,773 99 333,729,060 100 330,568,641 99 24600 Provisions 139 - - - 257 - 15500 Other financial assets-net 371,250 - 371,250 - 371,250 - 25500 Other financial liabilities - - 162 - 3,360 - 18500 Premises and equipment-net 78,979 - 79,652 - 88,162 - 29500 Other liabilities - - 121,387 - - - 19300 Deferred income tax assets 1,384 - 1,301 - 139 - Total Liabilities 75,784,378 21 53,910,170 16 53,159,539 16 19500 Other assets-net 45,510 - 49,085 - 49,388 - Stockholders’ Equity - Parent Company： Capital stock： 31101 Common stock 194,969,896 54 194,969,896 58 180,547,806 54 31107 Stock dividend to be distributed - - - - 14,422,090 4 31500 Capital surplus 33,717,244 9 36,637,717 11 36,644,757 11 Retained earnings： 32001 Legal reserve 20,467,553 6 17,674,655 5 17,674,655 5 32003 Special reserve 30,688,579 9 21,886,995 7 21,886,995 7 32005 Undistributed earnings 19,497,980 5 28,249,266 8 14,523,095 4 32500 Other equity interest (15,062,549) (4) (16,728,988) (5) (3,683,426) (1) 32600 Treasury stock (582,754) - (582,754) - (582,754) - Total Equity 283,695,949 79 282,106,787 84 281,433,218 84 Total assets $ 359,480,327 100 336,016,957 100 334,592,757 100 Total Liabilities and Equity $ 359,480,327 100 336,016,957 100 334,592,757 100

(Continued) 223 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

CTBC FINANCIAL HOLDING CO., LTD. STATEMENTS OF COMPREHENSIVE INCOME For The Three and Six Months Ended June 30, 2017 and 2016 (Expressed In Thousands of New Taiwan Dollars)

For the three months ended June 30, For the six months ended June 30 2017 2016 2017 2016 Amount ％ Amount ％ Amount % Amount % Income： Proportionate share of $ 9,737,194 100 8,009,726 100 20,277,258 100 14,850,705 100 gains from associates or joint ventures under equity method Other income 803 - 6,125 - 2,490 - 13,070 - Expenses and Losses： Operating expenses (371,322) (4) (177,372) (2) (659,446) - (390,181) (3) Other expenses and losses (141,228) (1) (113,616) - (273,031) - (233,984) (2) Net Income before Tax 9,225,447 95 7,724,863 98 19,347,271 100 14,239,610 95 Income tax benefit (45,752) - 12,696 - 46,032 - 63,250 - Net Income 9,179,695 95 7,737,559 98 19,393,303 100 14,302,860 95 Other comprehensive losses 3,595,680 37 2,252,212 28 1,665,680 8 4,235,586 28 (net amount after tax) Total Comprehensive $ 12,775,375 132 9,989,771 126 21,058,983 108 18,538,446 123 Income Basic EPS (Unit NT Dollars) $ 0.47 0.40 1.00 0.73

(Continued) 224 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements (CONT'D)

CTBC FINANCIAL HOLDING CO., LTD. Statements of Changes in Stockholder's Equity For the six months ended June 30, 2017 and 2016 (Expressed in Thousands of New Taiwan Dollars)

Total other equity interest Changes in designated as Exchange financial liabilities differences of Unrealized measured at fair overseas (losses) value through Share capital Retained earnings subsidiaries’ gains on profit or loss Common Stock dividends to Capital Legal Special Undistributed financial reports available-for-sale attributable to stock be distributed surplus reserve reserve earnings translation financial assets credit loss Treasury stock Total equity Balance at January 1, 2016 $ 180,547,806 - 36,654,760 14,180,457 19,692,303 34,941,972 (1,614,049) (7,928,095) 1,614,741 (582,754) 277,507,141 Net income - - - - - 14,302,860 - - - - 14,302,860 Other comprehensive income (losses) - - - - - (8,391) 1,059,145 1,951,769 1,233,063 - 4,235,586 Total comprehensive income (losses) - - - - - 14,294,469 1,059,145 1,951,769 1,233,063 - 18,538,446 Earnings appropriation and distribution Legal reserve appropriated - - - 3,494,198 - (3,494,198) - - - - - Special reserve appropriated - - - - 2,194,692 (2,194,692) - - - - - Cash dividends- preference stock - - - - - (14,602,366) - - - - (14,602,366) Stock dividends - common stock - 14,422,090 - - - (14,422,090) - - - - - Change in other additional paid in capital - - (10,003) ------(10,003) Balance at June 30, 2016 $ 180,547,806 14,422,090 36,644,757 17,674,655 21,886,995 14,523,095 (554,904) (5,976,326) 2,847,804 (582,754) 281,433,218

Balance at January 1,2017 $ 194,969,896 - 36,637,717 17,674,655 21,886,995 28,249,266 (4,414,363) (11,997,483) (317,142) (582,754) 282,106,787 Net income - - - - - 19,393,303 - - - - 19,393,303 Other comprehensive income (losses) - - - - - (759) (3,337,622) 5,637,390 (633,329) - 1,665,680 Total comprehensive income (losses) - - - - - 19,392,544 (3,337,622) 5,637,390 (633,329) - 21,058,983 Earnings appropriation and distribution Legal reserve appropriated - - - 2,792,898 - (2,792,898) - - - - - Special reserve appropriated - - - - 8,801,584 (8,801,584) - - - - - Cash dividends - common stock - - - - - (16,549,348) - - - - (16,549,348) Cash dividends from capital surplus - - (2,920,473) ------(2,920,473) Balance at June 30, 2017 $ 194,969,896 - 33,717,244 20,467,553 30,688,579 19,497,980 (7,751,985) (6,360,093) (950,471) (582,754) 283,695,949

(Continued) 225 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements (CONT'D)

CTBC FINANCIAL HOLDING CO., LTD. Statements of Cash Flows For the six months ended June 30, 2017 and 2016 (Expressed in Thousands of New Taiwan Dollars)

For the six months ended June 30, 2017 2016 Cash Flows from Operating Activities: Net Income before Tax $ 19,347,271 14,239,610 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Adjustments to reconcile profit (loss) Depreciation expense 5,406 6,210 Interest expenses 269,560 231,713 Interest income (2,490) (3,193) Proportionate share of gains from associates or joint ventures under equity method (20,277,258) (14,850,705) Loss on determination of lease contract of leased assets 78 - Gain on disposal and retirement of premises and equipment (2) (2) Total adjustments to reconcile profit (loss) (20,004,706) (14,615,977) Net Changes in Operating Assets and Liabilities： Net Changes in Operating Assets： Increase in available-for-sale financial assets (1,899,124) (1,124,022) Decrease in receivables - 23 Decrease (increase) in other assets 3,575 (6,851) Net Changes in Operating Assets (1,895,549) (1,130,850) Net Changes in Operating Liabilities： (Decrease) increase in payables (20,651) 28,699 Increase in employee benefits liabilities 139 257 Decrease in other financial liabilities (162) (1,046) Decrease in other liabilities (121,387) (305,139) Net Changes in Operating Liabilities (142,061) (277,229) Net Changes in Operating Assets and Liabilities (2,037,610) (1,408,079) Total Adjustments (22,042,316) (16,024,056) Interest received 1,822 3,214 Dividends received 607,278 1,131,454 Interest paid (266,322) (222,537) Income tax refund 213,534 37,480 Net Cash flow from Operating Activities (2,138,733) (834,835) Cash Flows from Investing Activities： Purchase of premises and equipment (4,834) (186) Disposal of premises and equipment 25 21 Net Cash Used in Investing Activities (4,809) (165) Cash Flows from Financing Activities： Increase in commercial paper payable 2,543,210 964,634 Repayments of preference share liabilities - (2,030,000) Net Cash Provided by (Used in) from Financing Activities 2,543,210 (1,065,366) Net Increase (Decrease) in Cash and Cash Equivalents 399,668 (1,900,366) Cash and Cash Equivalents at the Beginning of the Period 755,937 3,018,817 Cash and Cash Equivalents at the End of the Period $ 1,155,605 1,118,451 Components of cash and cash equivalents： Cash and cash equivalents recognized in balance sheet $ 716,220 238,663 Securities purchased under resell agreements which meet IAS 7 definition of cash and cash 439,385 879,788 equivalents Cash and Cash Equivalents at the end of the period $ 1,155,605 1,118,451 226 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(d) The condensed balance sheets and condensed comprehensive income statements of financial holding company’s subsidiaries

(i) CTBC Bank Co., Ltd.

1) Condensed Balance Sheets

Unit: In Thousands of New Taiwan Dollars

June 30, 2017 June 30, 2016 Cash and cash equivalent $ 56,225,426 56,944,207 Due from Central Bank and call loans to banks 190,655,714 190,731,137 Financial assets measured at fair value through profit or 99,309,421 136,691,567 loss Available-for-sale financial assets－net 421,054,056 351,021,193 Derivative financial assets－hedging 223,611 264,130 Receivables－net 121,877,968 125,831,629 Current income taxes assets 582,432 635,746 Loans－net 1,538,215,177 1,486,372,031 Held-to-maturity financial assets－net 259,674,619 123,340,745 Investments under equity method－net 71,999,683 75,791,463 Other financial assets－net 1,756,128 1,760,403 Investment property－net 4,079,938 - Premises and equipment－net 44,030,626 47,078,811 Intangible assets－net 12,346,850 12,047,658 Deferred income tax assets 3,667,586 3,068,987 Other assets－net 10,887,783 24,171,862 Total assets 2,836,587,018 2,635,751,569 Deposits from Central Bank and other banks 71,231,484 52,019,434 Due to Central Bank and other banks 981,807 1,458,077 Financial liabilities measured at fair value through profit 61,588,228 93,733,114 or loss Derivative financial liabilities－hedging 281,876 623,276 Securities sold under repurchase agreements 39,737,786 41,688,212 Payables 59,068,343 54,931,255 Current income tax liabilities 2,024,944 3,509,063 Deposits and remittances 2,245,997,030 2,050,938,604 Bonds payable 67,946,406 66,997,093 Other financial liabilities 10,187,130 9,441,671 Provisions 4,486,116 5,488,496 Deferred income tax liabilities 782,219 340,915 Other liabilities 6,620,794 7,359,175 Total liabilities 2,570,934,163 2,388,528,385 Common stock 131,125,735 105,729,279 Reserve for raising capital 9,559,984 24,092,108 Capital surplus 29,788,688 28,093,036 Retained earnings 105,013,753 87,906,116 Other equity interest (9,835,305) 1,402,645 Total equity 265,652,855 247,223,184 Total liabilities and equity 2,836,587,018 2,635,751,569

(Continued) 227 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

2) Condensed Comprehensive Income Statement

Unit: In Thousands of New Taiwan Dollars

For the six months ended June 30, 2017 % 2016 % Interest income $ 23,611,721 61 22,806,169 64 Less: Interest expenses (7,807,196) (20) (7,723,339) (22) Net interest income 15,804,525 41 15,082,830 42 Non-interest income－net 22,927,440 59 20,351,075 58 Net revenue 38,731,965 100 35,433,905 100 Provisions for bad debt expenses and (1,069,009) (3) (2,444,737) (7) guarantee reserve Operating expenses (20,805,067) (53) (19,084,327) (53) Net income before tax from continuing 16,857,889 44 13,904,831 40 operations Income tax expenses (1,756,530) (5) (2,356,483) (7) Net income 15,101,359 39 11,548,348 33 Other comprehensive (losses) income (2,462,556) (6) 2,263,910 6 Total comprehensive income 12,638,803 33 13,812,258 39 EPS—net income (after tax) (in NT dollars) 1.15 0.89

(Continued) 228 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(ii) CTBC Securities Co., Ltd.

1) Condensed Balance Sheets

Unit: In Thousands of New Taiwan Dollars

June 30, 2017 June 30, 2016 Current assets $ 22,115,019 20,812,537 Financial assets carried at cost－non-current 3,600 3,600 Investments under equity method－net 216,200 40,396 Premises and equipment－net 104,517 169,588 Investment property-net 47,957 - Intangible assets- net 58,316 51,148 Deferred income tax assets 73,897 73,297 Other non-current assets 457,279 450,931 Total assets 23,076,785 21,601,497 Current liabilities 15,830,182 14,462,726 Provisions -non-current liabilities 32,990 32,995 Other non-current liabilities 225 - Total liabilities 15,863,397 14,495,721 Common stock 6,027,140 6,027,140 Capital surplus 796,191 796,191 Retained earnings 471,147 328,809 Other equity interest (81,090) (46,364) Total equity 7,213,388 7,105,776 Total liabilities and equity 23,076,785 21,601,497

(Continued) 229 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

2) Condensed Comprehensive Income Statement

Unit: In Thousands of New Taiwan Dollars

For the six months ended June 30, 2017 % 2016 % Revenues $ 650,464 100 501,854 100 Service fees expenses (26,715) (4) (29,196) (6) Employee benefits expenses (253,693) (39) (229,902) (46) Proportionate share of losses from associates (2,850) (1) 2,438 - or joint ventures under equity method Operating expenses (234,265) (36) (193,130) (38) Net income before tax from continuing 132,941 20 52,064 10 operations Income tax expense (47,711) (7) (274,667) (54) Net income (losses) 85,230 13 (222,603) (44) Other comprehensive income 15,911 3 13,316 3 Total comprehensive income (losses) 101,141 16 (209,287) (42) EPS—net income (losses) (after tax) (in NT 0.14 (0.37) dollars)

(iii) CTBC Venture Capital Co., Ltd.

1) Condensed Balance Sheets

Unit: In Thousands of New Taiwan Dollars

June 30, 2017 June 30, 2016 Current assets $ 274,714 173,735 Available-for-sale financial assets－net 2,059,101 2,860,083 Investments under equity method－net 27,661 37,503 Premises and equipment－net 5,648 6,080 Deferred income tax assets 24,634 34,386 Other non-current assets 1,827,997 1,862,392 Total assets 4,219,755 4,974,179 Current liabilities 349,702 23,413 Deferred income tax liabilities 11 389 Total liabilities 349,713 23,802 Common stock 3,000,000 4,000,000 Capital surplus 1,081 1,081 Retained earnings 366,056 264,133 Other equity interest 502,905 685,163 Total equity 3,870,042 4,950,377 Total liabilities and equity 4,219,755 4,974,179

(Continued) 230 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

2) Condensed Comprehensive Income Statement

Unit: In Thousands of New Taiwan Dollars

For the six months ended June 30, 2017 % 2016 % Operating revenues $ 370,036 100 250,390 100 Operating costs (4,700) (1) - - Operating expenses (45,921) (12) (37,812) (15) Operating income 319,415 87 212,578 85 Non-operating income and expenses (6,135) (2) 13,213 5 Net income before tax from continuing 313,280 85 225,791 90 operations Income tax (expense) benefit (6,466) (2) 13,253 5 Net income 306,814 83 239,044 95 Other comprehensive losses (318,022) (86) (98,685) (39) Total comprehensive (losses) income (11,208) (3) 140,359 56 EPS－net income (after tax) (in NT dollars) 1.02 0.60

(iv) CTBC Asset Management Co., Ltd.

1) Condensed Balance Sheets

Unit: In Thousands of New Taiwan Dollars

June 30, 2017 June 30, 2016 Current assets $ 2,801,242 2,217,939 Available-for-sale financial assets－net 519,034 1,694,554 Investments under equity method－net 1,458,564 1,478,856 Investment properties－net 631,837 - Premises and equipment－net 572 638 Intangible assets 201 - Deferred income tax assets 43,461 31,161 Other non-current assets 8,605 3,356 Total assets 5,463,516 5,426,504 Current liabilities 24,419 13,292 Deferred income tax liabilities 7,664 6,783 Other non-current liabilities 386 125 Total liabilities 32,469 20,200 Common stock 5,358,820 5,358,820 Capital surplus 448 448 Retained earnings 94,711 (14,447) Other equity interest (22,932) 61,483 Total equity 5,431,047 5,406,304 Total liabilities and equity 5,463,516 5,426,504

(Continued) 231 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

2) Condensed Comprehensive Income Statement

Unit: In Thousands of New Taiwan Dollars

For the six months ended June 30, 2017 % 2016 % Operating revenues $ 6,857 100 11,984 100 Operating expenses (20,452) (298) (12,236) (102) Operating loss (13,595) (198) (252) (2) Non-operating income and expenses 81,493 1,188 28,415 237 Net income before tax from continuing operations 67,898 990 28,163 235 Income tax expense (3,077) (45) (5,799) (48) Net income 64,821 945 22,364 187 Other comprehensive losses (40,215) (586) (47,271) (394) Total comprehensive income (losses) 24,606 359 (24,907) (207) EPS－net income (after tax) (in NT dollars) 0.12 0.04

(v) CTBC Security Co., Ltd.

1) Condensed Balance Sheets

Unit: In Thousands of New Taiwan Dollars

June 30, 2017 June 30, 2016 Current assets $ 101,174 102,403 Financial assets carried at cost 103 103 Premises and equipment－net 2,611 3,174 Intangible assets－net 18 57 Other non-current assets 658 658 Deferred income tax assets 620 1,010 Total assets 105,184 107,405 Current liabilities 31,367 27,833 Other non-current liabilities 19,136 29,725 Total liabilities 50,503 57,558 Common stock 47,695 47,695 Capital surplus 739 739 Retained earnings 6,247 1,413 Total equity 54,681 49,847 Total liabilities and equity 105,184 107,405

(Continued) 232 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

2) Condensed Comprehensive Income Statement

Unit: In Thousands of New Taiwan Dollars

For the six months ended June 30, 2017 % 2016 % Operating revenues $ 122,683 100 110,793 100 Operating costs (111,842) (91) (100,746) (91) Operating expenses (8,218) (7) (7,681) (7) Operating income 2,623 2 2,366 2 Non-operating income and expenses 251 - 288 - Net income before tax from continuing 2,874 2 2,654 2 operations Income tax expense (558) - (416) - Net income 2,316 2 2,238 2 Total comprehensive income 2,316 2 2,238 2 EPS－net income (after tax) (in NT dollars) 0.49 0.47

(vi) Taiwan Lottery Co., Ltd.

1) Condensed Balance Sheets

Unit: In Thousands of New Taiwan Dollars

June 30, 2017 June 30, 2016 Current assets $ 1,158,800 1,062,666 Premises and equipment－net 137,278 154,431 Intangible assets－net 27,788 28,007 Deferred income tax assets 5,789 5,607 Other non-current assets 22,218 23,974 Total assets 1,351,873 1,274,685 Current liabilities 256,280 244,145 Other non-current liabilities 2,770 4,670 Total liabilities 259,050 248,815 Common stock 500,000 500,000 Capital surplus 9,865 9,865 Retained earnings 582,958 516,005 Total equity 1,092,823 1,025,870 Total liabilities and equity 1,351,873 1,274,685

(Continued) 233 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

2) Condensed Comprehensive Income Statement

Unit: In Thousands of New Taiwan Dollars

For the six months ended June 30, 2017 % 2016 % Operating revenues $ 1,071,873 100 1,028,863 100 Operating expenses (565,011) (52) (558,076) (54) Operating income 506,862 48 470,787 46 Non-operating income and expenses 3,224 - 4,044 - Net income before tax from continuing 510,086 48 474,831 46 operations Income tax expense (85,141) (8) (83,826) (8) Net income 424,945 - 391,005 38 Total comprehensive income 424,945 40 391,005 38 EPS－net income (after tax) (in NT dollars) 8.50 7.82

(vii) Taiwan Life Insurance Co., Ltd.

1) Condensed Balance Sheets

Unit: In Thousands of New Taiwan Dollars

June 30, 2017 June 30, 2016 Cash and cash equivalents $ 98,865,135 49,016,046 Receivables 14,111,583 15,101,809 Current income tax assets 911,666 1,080,854 Financial assets measured at fair value through profit or 13,762,234 8,805,454 loss Available-for-sale financial assets 229,742,078 219,762,594 Financial assets carried at cost 4,712,920 4,609,038 Investments under equity method－net 18,006,738 17,489,399 Debt investments without active market 747,201,479 578,373,212 Held-to-maturity financial assets 79,913,010 69,779,031 Other financial assets－net 101,330 148,760 Investment properties 52,675,732 31,524,950 Loans 56,792,839 70,060,745 Reinsurance assets 1,610,638 2,418,736 Premises and equipment 4,521,387 12,687,058 Intangible assets 6,729,673 6,724,698 Deferred income tax assets 5,354,368 2,530,415

(Continued) 234 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2017 June 30, 2016 Other assets $ 23,377,217 23,632,995 Separated account insurance product assets 48,946,471 48,938,718 Total assets 1,407,336,498 1,162,684,512 Short term liabilities - 300,000 Payables 16,093,745 16,983,277 Current income tax liabilities 2,985,317 10,831 Financial liabilities measured at fair value through profit or 3,736,341 1,269,756 loss Bonds payable 15,920,527 950,000 Insurance liabilities 1,237,627,316 1,017,461,225 Reserve for insurance policies with financial instrument 2,754 4,611 features Foreign exchange rate fluctuation reserves 803,704 1,887,899 Provisions 169,321 266,251 Deferred income tax liabilities 1,965,449 3,031,976 Other liabilities 3,408,944 2,889,498 Separated account insurance product liabilities 48,946,471 48,938,718 Total liabilities 1,331,659,889 1,093,994,042 Common stock 30,556,324 30,556,324 Stock dividends to be distributed 1,388,667 - Capital surplus 27,279,200 27,286,241 Retained earnings 14,735,670 9,289,928 Other equity interest 1,716,748 1,557,977 Total equity 75,676,609 68,690,470 Total liabilities and equity 1,407,336,498 1,162,684,512

(Continued) 235 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

2) Condensed Comprehensive Income Statement

Unit: In Thousands of New Taiwan Dollars

For the six months ended June 30, 2017 % 2016 % Operating revenues $ 160,067,008 100 135,345,502 100 Operating costs (153,663,032) (97) (130,892,725) (97) Operating expenses (1,956,836) (1) (2,030,663) (1) Gross profit 4,447,140 2 2,422,114 2 Non-operating income and expenses (57,464) - 218,641 - Net income before tax from continuing operations 4,389,676 2 2,640,755 2 Income tax expense (199,411) - (270,639) - Net income 4,190,265 2 2,370,116 2 Other comprehensive income 4,467,897 3 2,104,295 2 Total comprehensive income 8,658,162 5 4,474,411 4 EPS—net income (after tax) (in NT dollars) 1.37 0.78

(viii) CTBC Investments Co., Ltd.

1) Condensed Balance Sheets

Unit: In Thousands of New Taiwan Dollars

June 30, 2017 June 30, 2016 Current assets $ 410,356 433,959 Available-for-sale financial assets－net 31,763 30,369 Premises and equipment－net 24,261 26,484 Intangible assets 20,841 13,245 Deferred income tax assets 17,712 17,426 Other non-current assets 57,547 57,516 Total assets 562,480 578,999 Current liabilities 41,007 40,425 Total liabilities 41,007 40,425 Common stock 425,000 425,000 Capital surplus 155,950 155,950 Accumulated deficits (61,790) (43,294) Other equities interest 2,313 918 Total equity 521,473 538,574 Total liabilities and equity 562,480 578,999

(Continued) 236 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

2) Condensed Comprehensive Income Statement

Unit: In Thousands of New Taiwan Dollars

For the six months ended June 30, 2017 % 2016 % Operating revenues $ 126,053 100 87,975 100 Operating expenses (131,307) (104) (116,618) (133) Operating losses (5,254) (4) (28,643) (33) Non-operating revenues and expenses (984) (1) 679 1 Net losses before tax from continuing (6,238) (5) (27,964) (32) operations Income tax benefit 1,158 1 5,129 6 Net losses (5,080) (4) (22,835) (26) Other comprehensive income 826 1 166 - Total comprehensive losses (4,254) (3) (22,669) (26) EPS—net losses (after tax) (in NT dollars) (0.12) (0.54)

(e) Profitability of the Company

Unit: %

Items June 30, 2017 June 30, 2016 Return on assets ratio (annual) Before income tax 11.13 8.74 After income tax 11.15 8.78 Return on equity ratio (annual) Before income tax 13.68 10.19 After income tax 13.71 10.24 Net income ratio 96.93 97.77

Note 1: Return on assets ratio = Net income before/after income tax ÷ average total assets.

Note 2: Return on equity ratio = Net income before/after income tax ÷ average total equity.

Note 3: Net income ratio = Net income after income tax ÷ Net revenue.

Note 4: Net income before/after tax represented accumulated income of the current year.

Note 5: Both Return on assets ratio and Return on equity ratio are annualized ratios.

(Continued) 237 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(f) Profitability of the Company and its subsidiaries

Unit: %

Items June 30, 2017 June 30, 2016 Return on assets ratio (annual) Before income tax 0.90 0.76 After income tax 0.78 0.61 Return on equity ratio (annual) Before income tax 15.75 12.75 After income tax 13.71 10.24 Net income ratio 11.43 9.48

Note 1: Return on assets ratio = Net income before/after income tax ÷ average total assets.

Note 2: Return on equity ratio = Net income before/after income tax ÷ average total equity.

Note 3: Net income ratio = Net income after income tax ÷ Net revenue.

Note 4: Net income before/after tax represented accumulated income of the current year.

Note 5: Both Return on assets ratio and Return on equity ratio are annualized ratios.

(g) Profitability of the Company’s subsidiaries

(i) Profitability of CTBC Bank Co., Ltd. and its subsidiaries

Unit: %

Items June 30, 2017 June 30, 2016 Return on assets ratio (annual) Before income tax 0.99 0.84 After income tax 0.85 0.65 Return on equity ratio (annual) Before income tax 13.63 12.30 After income tax 11.65 9.61 Net income ratio 33.05 25.99

Note 1: Return on assets ratio = Net income before/after income tax ÷ average total assets.

Note 2: Return on equity ratio = Net income before/after income tax ÷ average total equity.

Note 3: Net income ratio = Net income after income tax ÷ Net revenue.

Note 4: Net income before/after tax represented accumulated income of the current year.

Note 5: Both Return on assets ratio and Return on equity ratio are annualized ratios.

(Continued) 238 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(ii) Profitability of CTBC Securities Co., Ltd. and its subsidiaries

Unit: %

Items June 30, 2017 June 30, 2016 Return on assets ratio (annual) Before income tax 1.20 0.50 After income tax 0.77 0.37 Return on equity ratio (annual) Before income tax 3.73 1.42 After income tax 2.38 1.04 Net income ratio 13.53 7.90

Note 1: Return on assets ratio = Net income before/after income tax ÷ average total assets.

Note 2: Return on equity ratio = Net income before/after income tax ÷ average total equity.

Note 3: Net income ratio = Net income after income tax ÷ Net revenue.

Note 4: Net income before/after tax represented accumulated income of the current year.

Note 5: Both Return on assets ratio and Return on equity ratio are annualized ratios.

(iii) Profitability of Taiwan Life Insurance Co., Ltd. and its subsidiaries

Unit: %

Items June 30, 2017 June 30, 2016 Return on assets ratio (annual) Before income tax 0.65 0.64 After income tax 0.62 0.57 Return on equity ratio (annual) Before income tax 12.33 11.17 After income tax 11.75 10.02 Net income ratio 3.41 2.25

Note 1: Return on assets ratio = Net income before/after income tax ÷ average total assets.

Note 2: Return on equity ratio = Net income before/after income tax ÷ average total equity.

Note 3: Net income ratio = Net income after income tax ÷ Net revenue.

Note 4: Net income before/after tax represented accumulated income of the current year.

Note 5: Both Return on assets ratio and Return on equity ratio are annualized ratios.

(Continued) 239 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(h) Related information of its subsidiaries’ investments in Mainland China: Please refer to Note 13(c).

(i) Significant commitments and contingencies of its subsidiaries: Please refer to Note 9.

(j) Significant catastrophic losses of its subsidiaries: None.

(k) Significant subsequent events of its subsidiaries: Please refer to Note 11.

(l) Related party transactions of the Company’s subsidiaries of $100 million or more are summarized as follow:

(i) CTBC Bank Co., Ltd.

1) Names of related parties and their relationship

Name of related party Relationship with the Bank CTBC Financial Holding Co., Ltd. Parent company of the Bank. CTBC Bank (Philippines) Corp. Investee company under equity method. PT Bank CTBC Indonesia 〃 CTBC Bank Corp. (Canada) 〃 CTBC Capital Corp. 〃 The Tokyo Star Bank, Ltd. 〃 CTBC Bank Corp. (USA) CTBC Capital Corp. investee company under equity method. Tokyo Star Business Finance, Ltd. The Tokyo Star Bank, Ltd. investee company under equity method. TSB Servicer, Ltd. 〃 Grand Bills Finance Corporation Investee company under equity method. Taiwan Institute of Economic Research The Bank contributed over 1/3 of its total funds. CTBC Charity Foundation 〃 CTBC Culture Foundation 〃 CTBC Anti-Drug Educational Foundation The company which is controlled by the same company as the Bank contributed over 1/3 of its total funds. CTBC Financial Management College The Chairman of the Bank’s subsidiary is its Director. Kinpo Electronics, Inc. 〃 Showa Denko Hd Trace Corp. The Chairman of the Bank is its Director.

(Continued) 240 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Name of related party Relationship with the Bank Straits Exchange Foundation The Chairman of the Bank is its body corporate representative. CTBC Securities Co., Ltd. Controlled by the same company as the Bank. CTBC (Mauritius) Holding Co., Ltd. 〃 CTBC Asia Limited 〃 CTBC Securities Investment Service Co., Ltd. 〃 CTBC Venture Capital Co., Ltd. 〃 CTBC Asset Management Co., Ltd. 〃 CTBC Security Co., Ltd. 〃 Taiwan Lottery Co., Ltd. 〃 CTBC Investments Co., Ltd. 〃 Taiwan Life Insurance Co., Ltd. 〃 TLG Capital Co., Ltd. 〃 TLG Insurance Co., Ltd. 〃 CTBC Venture Capital Investment Management 〃 (Shanghai) Co., Ltd. CTBC International Co., Ltd. 〃 CTBC Leasing Co., Ltd. 〃 CTBC Capital International Co., Ltd. 〃 Wu Tzu Development Co., Ltd. Taiwan Life Insurance Co., Ltd. investee company under equity method. CTBC Investments Co., Ltd. Trust Funds Securities investment trust funds managed by company which are controlled by the same company as the Bank. Overseas Investment & Development Corp. The Bank is its Chairman. Wei Fu Investment Co., Ltd. The director of the parent company. Hewei Investment Co., Ltd. The Chairman of the parent company of the Bank is its Director. Sunghung Investment Co., Ltd. 〃 Fenglu Development & Investment Co., Ltd. 〃 United Real Estate Management Co., Ltd. 〃 Taiwan Sports Lottery Co., Ltd. The company’s Chairman is the second-degree relative of the Chairman of the Bank’s parent company.

(Continued) 241 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Name of related party Relationship with the Bank Quanwei Investment Co., Ltd. The company’s Chairman is the second-degree relative of the Director of the Company. Kainan High School of Commerce and Industry The Chairman of the parent company of the Bank is its body corporate representative. TransWorld University The Director of the company which is controlled by the same company as the Bank is its body corporate representative. Taipei Financial Center Corporation The Chairman of the company which is controlled by the same parent company as the Bank is its Director. Nan Ya Plastics Corporation 〃 Nan Ya Technology Corporation 〃 Brothers Entertaining Co., Ltd. 〃 Taiwan Relo Club, Limited The Chairman of the company which is controlled by the same parent company as the Bank is its Chairman. CTBC Financial Park The director of the company which is controlled by the same parent company as the Bank is its body corporate representative. Huaku Development Co., Ltd. The company’s General Manager is the second- degree relative of the Director. Yan Yuan Investment Co., Ltd. The General Manager of the company which is controlled by the same parent company as the Bank is its Director. Chailease Finance Co., Ltd. Related party in substance. Sungyong Investment Co., Ltd. 〃 Sungbo Co., Ltd. 〃 Jungguan Investment Co., Ltd. 〃 Kuan Ho Development Co., Ltd. 〃 Zhonghang Co., Ltd. 〃 Bosser Design Inc. 〃 CTC Group Inc. 〃 APEX Credit Solutions Inc. 〃 My Leasing (Mauritius) Corp. 〃 Changchi Investments Co., Ltd. 〃 Yi Huoa Investment Co., Ltd. 〃

(Continued) 242 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Name of related party Relationship with the Bank Yi Kao Investment Co., Ltd. Related party in substance. Other related parties The Directors of CTBC Financial Holding Co., Ltd. and subsidiaries (including independent directors), supervisors, managers and their families, spouses, etc.

2) Significant transactions between related parties and the Bank

a) Loans

June 30, 2017 Settlement status Number/name of Maximum Ending Normal Loan Categories related parties balance balance loans Overdue loans Collateral conditions Home loan mortgage 410 $ 2,170,201 2,065,013 2,065,013 - Real estate/ Note others Others Nan Ya Technology 1,533,250 1,333,200 1,333,200 - Real estate/ 〃 Corporation plant/ machine room/ machinery 〃 Huaku Development 1,050,000 1,050,000 1,050,000 - Real estate 〃 Co., Ltd. 〃 Nan Ya Plastic 895,517 866,628 866,628 - Real estate/ 〃 Corporation plant/ machine room 〃 CTC Group Inc. 447,882 440,488 440,488 - Real estate 〃

〃 Jungguan Investment 355,000 350,000 350,000 - Real estate 〃 Co.,Ltd. 〃 Taipei Financial 376,756 308,713 308,713 - Real estate/ 〃 Center Corporation buildings for commercial use 〃 Kuan Ho 245,000 245,000 245,000 - Real estate 〃 Development Co., Ltd. 〃 Zhonghang Co,.Ltd 224,000 200,200 200,200 - Vehicle/ cargo 〃 aircraft

(Continued) 243 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016 Settlement status Number/name of Maximum Ending Normal Loan Categories related parties balance balance loans Overdue loans Collateral conditions Home loan mortgage 395 $ 2,171,218 1,886,911 1,886,911 - Real estate/ Note others Others Nan Ya Technology 1,533,250 1,533,250 1,533,250 - Real estate/ 〃 Corporation plant/ machine room/ machinery 〃 Huaku Development 1,050,000 1,050,000 1,050,000 - Real estate 〃 Co., Ltd. 〃 Nan Ya Plastic 1,928,682 743,137 743,137 - Real estate/ 〃 Corporation plant/ machine room 〃 CTC Group Inc. 490,155 475,003 475,003 - Real estate 〃

〃 Taipei Financial 416,849 376,756 376,756 - Real estate/ 〃 Center Corporation buildings for commercial use 〃 Jungguan Investment 355,000 355,000 355,000 - Real estate 〃 Co.,Ltd. 〃 Kuan Ho 245,000 245,000 245,000 - Real estate 〃 Development Co., Ltd. 〃 Zhonghang Co,.Ltd 271,600 224,000 224,000 - Vehicle/ cargo 〃 aircraft

June 30, 2016 Settlement status Number/name of Maximum Ending Normal Loan Categories related parties balance balance loans Overdue loans Collateral conditions Home loan mortgage 362 $ 1,871,588 1,743,040 1,743,040 - Real estate/ Note others Others Nan Ya Technology 1,333,000 1,333,000 1,333,000 - Real estate/ 〃 Corporation plant/ machine room/ machinery 〃 Huaku Development 1,050,000 1,050,000 1,050,000 - Real estate 〃 Co., Ltd. 〃 Nan Ya Plastic 990,147 690,147 690,147 - Real estate/ 〃 Corporation plant/ machine room 〃 CTC Group Inc. 490,262 482,684 482,684 - Real estate 〃〃 Taipei Financial 416,849 383,283 383,283 - Real estate/ 〃 Center Corporation buildings for commercial use 〃 Jungguan Investment 355,000 355,000 355,000 - Real estate 〃 Co.,Ltd. 〃 Zhonghang Co,.Ltd 271,600 247,800 247,800 - Vehicle/ cargo 〃 aircraft 〃 Kuan Ho 245,000 245,000 245,000 - Real estate 〃 Development Co., Ltd.

Note: The terms of loans between related and non-related parties are identical.

(Continued) 244 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

b) Deposits

June 30, 2017 Interest expenses Interest expenses (for the three (for the six Range of months ended months ended Related party Maximum balance Ending balance interest rates June 30, 2017) June 30, 2017) Taiwan Life Insurance Co., Ltd. $ 34,712,115 17,386,271 0~0.30% 2,250 4,174 Showa Denko HD Trace Corp. 3,207,376 2,022,892 0~1.41% 7,689 15,940 CTBC Securities Co., Ltd. 4,730,370 1,926,919 0~1.07% 2,477 4,871 CTBC Charity Foundation 1,111,542 984,298 0~1.07% 1,482 2,945 CTBC Financial Holding Co., Ltd. 2,090,369 715,117 0~0.11% 10 18 Taiwan Lottery Corporation 854,835 512,737 0~0.14% 136 257 Yan Yuan Investment Co., Ltd. 490,688 490,688 0~0.01% - 11 Taiwan Sports Lottery Co., Ltd. 1,014,570 443,012 0~0.01% 9 24 CTBC Investments Co., Ltd. 420,424 394,269 0~0.41% 333 659 Taiwan Institute of Economic Research 424,060 372,836 0~1.33% 523 1,029 Quanwei Investment Co., Ltd. 370,715 320,888 0~0.01% - 8 Kainan High School of Commerce and 345,795 314,333 0~1.22% 530 1,072 Industry Overseas Investment & Development 299,142 282,671 0~1.53% 946 1,958 Corp. CTBC Venture Capital Co., Ltd. 526,591 239,173 0~0.11% 5 9 Yi Kao Investment Co., Ltd 345,637 229,332 0.01% 6 7 CTBC Asia Limited 205,305 204,918 0.25% - - Straits Exchange Foundation 187,030 187,030 0.15~1.22% 470 968 CTBC Financial Management College 194,016 175,127 0~1.22% 40 86 Fenglu Development & Investment Co., 177,513 174,858 0~0.01% 5 9 Ltd. TransWorld University 234,056 161,404 0~1.22% 37 102 Brothers Entertaining Co., Ltd. 133,210 133,210 0~0.08% 2 3 Total $ 52,075,359 27,671,983 16,950 34,150

(Continued) 245 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

December 31, 2016 Interest expenses (for the year Maximum Range of ended December Related party balance Ending balance interest rates 31, 2016) Taiwan Life Insurance Co., Ltd. $ 37,154,366 10,528,663 0~0.30% 4,907 Showa Denko HD Trace Corp. 4,805,375 2,509,340 0~1.41% 22,793 CTBC Securities Co., Ltd. 3,677,771 1,963,757 0~1.21% 10,463 CTBC Charity Foundation 1,156,776 943,796 0~1.21% 6,347 CTBC Financial Holding Co., Ltd. 14,701,563 754,834 0~0.08% 213 Taiwan Sports Lottery Co., Ltd. 1,301,224 732,396 0~0.08% 187 Taiwan Lottery Corporation 1,465,582 508,823 0~0.55% 1,328 Wu Tzu Development Co., Ltd. 683,791 462,327 0~0.08% 83 CTBC Asset Management Co., Ltd 1,055,686 435,068 0~1.20% 1,304 Taiwan Institute of Economic Research 451,058 407,845 0~1.37% 2,380 CTBC Investments Co., Ltd. 443,278 402,632 0~0.45% 1,510 Kainan High School of Commerce and Industry 374,340 335,996 0~1.37% 2,588 Overseas Investment & Development 341,495 299,509 0~1.53% 957 Corp. TransWorld University 254,034 234,035 0~1.22% 518 Straits Exchange Foundation 187,030 187,030 0.15~1.37% 2,366 Fenglu Development & Investment Co., 178,938 177,513 0~0.08% 45 Ltd. CTBC Venture Capital Co., Ltd. 1,178,285 166,765 0~0.08% 25 Grand Bills Finance Corporation 304,283 157,030 0~6.10% 2,299 CTBC Financial Management College 177,219 153,196 0~1.23% 295 Wei Fu Investment Co., Ltd. 263,830 139,584 0~0.05% 11 Yi Huao Investment Co., Ltd. 112,301 112,178 0~0.08% 5 Sungyong Investment Co., Ltd. 137,462 109,836 0~0.08% 33 Total $ 70,405,687 21,722,153 60,657

(Continued) 246 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

June 30, 2016 Interest expenses Interest expenses (for the three (for the six Range of months ended months ended Related party Maximum balance Ending balance interest rates June 30, 2016) June 30, 2016) Taiwan Life Insurance Co., Ltd. $ 36,824,669 13,407,185 0~0.30% 1,065 2,964 Showa Denko HD Trace Corp. 4,805,375 3,377,019 0~1.35% 5,766 11,009 CTBC Securities Co., Ltd. 3,378,348 1,887,579 0~1.21% 2,829 5,645 CTBC Charity Foundation 1,156,776 935,601 0~1.21% 1,580 3,354 CTBC Asset Management Co., Ltd. 1,055,686 503,627 0~1.20% 412 437 Chan Wei Investment Co., Ltd. 504,043 502,598 0~0.08% 1 10 Taiwan Lottery Corporation 1,465,582 430,180 0~0.55% 588 1,157 CTBC Investments Co., Ltd. 443,278 415,232 0~0.45% 376 768 Taiwan Institute of Economic Research 426,843 352,557 0~1.37% 616 1,259 Wu Tzu Development Co., Ltd.. 589,551 346,534 0~0.08% 9 62 Kainan High School of Commerce and 301,076 272,293 0~1.37% 681 1,391 Industry CTBC Financial Holding Co., Ltd. 3,831,321 237,561 0~0.08% 6 150 Taiwan Sports Lottery Co., Ltd. 1,301,224 232,565 0~0.08% 25 167 Yi Kao Investment Co., Ltd. 218,575 218,575 0.01% 1 1 Straits Exchange Foundation 187,030 187,030 0.22~1.37% 597 1,215 Fenglu Development & Investment Co., 176,811 176,811 0~0.08% 4 36 Ltd. CTBC Venture Capital Co., Ltd 770,526 157,615 0~0.08% 5 17 CTBC Financial Management College 175,203 148,542 0~1.23% 74 143 My Leasing (Mauritius) Corp. 2,325,388 146,862 0.02~0.3% 37 59 Overseas Investment & Development 341,495 131,168 0~0.83% 214 518 Corp. Sungyong Investment Co., Ltd. 137,462 111,685 0~0.08% 3 28 Jungguan Investment Co., Ltd. 112,300 107,615 0~0.08% 2 21 Hewei Investment Co., Ltd. 183,176 102,369 0~0.08% 2 24 Total $ 60,711,738 24,388,803 14,893 30,435

c) Call loans to banks

For the six months ended June 30, 2017 Ending Range of Interest Related party balance interest rates revenues CTBC Bank(Philippines) Corp. $ 1,006,172 1.22~2.38% 911

For the six months ended June 30, 2016 Ending Range of Interest Related party balance interest rates revenues CTBC Bank(Philippines) Corp. $ 1,614,300 0.61~3.50% 4,315 CTBC Bank(Canada) Corp. 249,100 0.80% 89 Total $ 1,863,400 4,404

(Continued) 247 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

d) Call loans from banks

For the six months ended June 30, 2017 Ending Range of Interest Related party balance interest rates revenues The Tokyo Star Bank, Ltd. $ 1,086,400 0.05~0.06% 393

For the six months ended June 30, 2016 Ending Range of Interest Related party balance interest rates revenues The Tokyo Star Bank, Ltd. $ 1,571,500 0.10% 615

e) Due from other banks

December 31, Related party June 30, 2017 2016 June 30, 2016 CTBC Bank Corp. (USA) $ 121,889 2,222,327 6,387,757

f) Derivative financial instruments

June 30, 2017 Derivative Balance sheet financial Contract Notional Unrealized Ending Related party instruments period principal profit (loss) Account Balance PT Bank CTBC Interest rate swaps 2015.01.12~ USD 3,175 (195) (Note2) (195) Indonesia 2018.03.12 CTBC Investments Foreign exchange 2017.06.15~ USD 8,500 1,015 (Note1) 1,015 Co., Ltd. Trust swap 2017.07.26 Funds

December 31, 2016 Derivative Balance sheet financial Contract Notional Unrealized Ending Related party instruments period principal profit (loss) Account Balance PT Bank CTBC Interest rate swaps 2014.03.25~ USD 6,542 (314) (Note2) (314) Indonesia 2018.03.12 CTBC Investments Foreign exchange 2016.12.13~ USD 5,000 2,836 (Note1) 2,836 Co., Ltd. Trust swap 2017.01.17 Funds

June 30, 2016 Derivative Balance sheet financial Contract Notional Unrealized Ending Related party instruments period principal profit (loss) Account Balance PT Bank CTBC Interest rate swaps 2013.10.04~ USD 11,700 395 (Note1) 395 Indonesia 2018.03.12

Note 1: Financial assets measured at fair value through profit or loss.

Note 2: Financial liabilities measured at fair value through profit or loss.

(Continued) 248 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

g) Others

i) Commission and other income

For the three months ended June 30, Related party Summary 2017 2016 Taiwan Life Insurance Co., Commission for joint sales, $ 908,544 1,384,110 Ltd. income from group catering and commission income.

For the six months ended June 30, Related party Summary 2017 2016 Taiwan Life Insurance Co., Commission income, income $ 2,233,213 2,760,344 Ltd. from group catering and commission for joint sales.

The balance of accounts receivable for foregoing transactions were as follows:

Related party Summary June 30, 2017 June 30, 2016 Taiwan Life Insurance Commission for joint sales, $ 277,744 421,265 Co.,Ltd. income from group catering and commission income.

ii) Handling fees and other general administration expenses

For the three months ended June 30, Related party Summary 2017 2016 Taiwan Lottery Co., Ltd. Lottery service fees $ 270,510 137,952 Brothers Entertaining Co.,Ltd Sponsorship, feedback fund, 96,745 6,001 and gift expense $ 367,255 143,953

For the six months ended June 30, Related party Summary 2017 2016 Taiwan Lottery Co., Ltd. Lottery service fees $ 1,112,050 1,106,987 Brothers Entertaining Co.,Ltd Sponsorship, feedback fund, 186,880 116,009 and gift expense $ 1,298,930 1,222,996

The balance of accounts payable for foregoing transactions were as follows:

June 30, June 30, Related party Summary 2017 2016 Taiwan Lottery Co., Ltd. Lottery service fees $ 595,682 552,672

(Continued) 249 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

iii) Others

June 30, December June 30, Related party Summary 2017 31, 2016 2016 Chailease Finance Co., Ltd. Released undue loans (Note) $ 40,497 81,569 154,403 Taipei Financial Center Balance of share holdings 371,250 371,250 371,250 Corporation. Total $ 411,747 452,819 525,653

Note: The Company’ s subsidiary CTBC Bank Co., Ltd. signed a strategic alliance agreement with Chailease Finance Co., Ltd. agreeing loans will be released directly to Chailease’s clients, and Chailease pledged to buyback and settle all debts once any delay arises.

Please refer to Note 9(a) for more information regarding the guaranteed loans of PT Bank CTBC Indonesia, CTBC Bank (Philippines) Corp. and The Tokyo Star Bank, Ltd.

No significant discrepancy in transaction terms found between related party transaction and non-related party transaction.

(ii) CTBC Securities Co., Ltd.

1) Names of related parties and relationship

Name of related party Relationship with the Company CTBC Financial Holding Co., Ltd. Parent company of the Company. CTBC Bank Co., Ltd. Controlled by the same parent company as the Company. CTBC Venture Capital Co., Ltd. 〃 CTBC Asset Management Co., Ltd. 〃 CTBC Security Co., Ltd. 〃 Taiwan Lottery Co., Ltd. 〃 CTBC Investments Co., Ltd. 〃 Taiwan Life Insurance Co., Ltd. 〃 TLG Insurance Co., Ltd 〃 TLG Capital Co., Ltd 〃 CTBC Investments Co., Ltd. Trust Funds A securities investment trust fund managed by company which are controlled by the same company as the Company. CTBC (Mauritius) Holding Co., Ltd. Investee company under equity method. CTBC Securities Investment Service 〃 Co., Ltd. CTBC Asia Limited CTBC (Mauritius) Holding Co., Ltd. investee company under equity method. Other related parties The representative of the Company’s Director.

(Continued) 250 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

2) Significant transactions with related parties

Please refer to Note 12(l)(i) for transactions with CTBC Bank Co., Ltd.

Please refer to Note 7(b)(ix) for transactions with CTBC Investments Co., Ltd.

(iii) CTBC Venture Capital Co., Ltd.

1) Names of the related parties and relationship

Name of related party Relationship with the Company CTBC Financial Holding Co., Ltd. Parent company of the Company. CTBC Bank Co., Ltd. Controlled by the same company as the Company. CTBC Securities Co., Ltd. 〃 CTBC Asset Management Co., Ltd. 〃 Taiwan Lottery Co., Ltd. 〃 CTBC Security Co., Ltd. 〃 CTBC Investments Co., Ltd. 〃 Taiwan Life Insurance Co., Ltd. 〃 TLG Insurance Co., Ltd. 〃 CTBC Capital International Co., Investee company under equity method. Limited CTBC Venture Capital Investment Investee company under equity method by CTBC Management (Shanghai) Co., Ltd. Capital International Co., Limited. Global BioPharma, Inc. The General Manager of the Company is its Director. Rich Healthy Fruits & Vegetable Corp. 〃 Noratech Pharmaceuticals, Inc. 〃 Prince Pharmaceutical Co., Ltd. 〃 CTBC Financial Park The Director of the company which is controlled by the same parent company as the Company is its body corporate representative. Other related parties The Directors of CTBC Financial Holding Co., Ltd. and subsidiaries (including independent directors), supervisors, managers and their families, spouses, etc.

2) Significant transactions with related parties

Please refer to Note 12(l)(i) for transactions with CTBC Bank Co., Ltd.

Please refer to Note 7(b)(ix) for transactions with CTBC Investments Co., Ltd.

(Continued) 251 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(iv) CTBC Asset Management Co., Ltd.

1) Names of the related parties and relationship

Name of related party Relationship with the Company CTBC Financial Holding Co., Ltd. Parent company of the Company. CTBC Bank Co., Ltd. Controlled by the same parent company as the Company. CTBC Securities Co., Ltd. 〃 CTBC Venture Capital Co., Ltd. 〃 CTBC Investments Co., Ltd. 〃 CTBC Security Co., Ltd. 〃 Taiwan Lottery Co., Ltd. 〃 CTBC International Co., Limited Investee company 100% owned by the Company. CTBC Leasing Co., Ltd. Investee company under equity method by CTBC International Co., Limited. CTBC Financial Park The Director of the company which is controlled by the same parent company as the Company is its body corporate representative. Other related parties The Directors of CTBC Financial Holding Co., Ltd. and subsidiaries (including independent directors), supervisors, managers and their families, spouses, etc.

2) Significant transactions with related parties

Please refer to Note 12(l)(i) for transactions with CTBC Bank Co., Ltd.

(Continued) 252 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(v) CTBC Security Co., Ltd.

1) Names of the related parties and relationship

2) Significant transactions with related parties

Please refer to Note 12(l)(i) for transactions with CTBC Bank Co., Ltd.

(Continued) 253 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(vi) Taiwan Lottery Co., Ltd.

1) Names of the related parties and relationship

2) Significant transactions with related parties

Please refer to Note 12(l)(i) for transactions with CTBC Bank Co., Ltd.

(Continued) 254 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(vii) Taiwan Life Insurance Co., Ltd.

1) Names of the related parties and relationship

Name of related party Relationship with the Company CTBC Financial Holding Co., Ltd. Parent company of the Company. CTBC Bank Co., Ltd. Controlled by the same company as the Company. CTBC Securities Co., Ltd. 〃 CTBC Venture Capital Co., Ltd. 〃 CTBC Asset Management Co., Ltd. 〃 CTBC Security Co., Ltd. 〃 Taiwan Lottery Co., Ltd. 〃 CTBC Investments Co., Ltd. 〃 CTBC Investments Co., Ltd. A securities investment trust fund managed by Trust Fund company which are controlled by the same company as the Company. TLG Insurance Co., Ltd. Subsidiary company of the Company. TLG Capital Co., Ltd. 〃 Hofa Land Development Co., Ltd. Investee company under equity method. Wu Tzu Development Co., Ltd. 〃 Top Taiwan IX Venture Capital Co., Ltd. 〃 King Dragon Life Insurance Co. Ltd. 〃 Mirae Asset Global Investment (Taiwan) 〃(Disposed in 2016) Co., Ltd. Nan Ya Plastics Corporation The Chairman of the company which is controlled by the same parent company as the Company is its Director. CTBC Financial Park The Director of the company which is controlled by the same parent company as the Company is its body corporate representative. Nan Ya Technology Corporation The Chairman of the Company’s subsidiary is its Director. Chailease Finance Co., Ltd. Related party in substance. Bosser Design Inc. 〃 Other related parties The Directors of CTBC Financial Holding Co., Ltd. and subsidiaries (including independent directors), supervisors, managers and their families, spouses, etc.

(Continued) 255 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

2) Significant transactions with related parties

a) Discretionary investment balance ：

December 31, Related party June 30, 2017 2016 June 30, 2016 CTBC Investments Co., Ltd. $ 58,978,955 21,146,336 17,966,324

b) The following table presents information regarding stocks issued by the related party that are being held by the Company：

December 31, Related party June 30, 2017 2016 June 30, 2016 Nan Ya Plastics Corporation $ 1,191,390 309,720 80,032 Nan Ya Technology Corporation 164,400 - 139,870 Total $ 1,355,790 309,720 219,902

Please refer to Note 12(l)(i) for transactions with CTBC Bank Co., Ltd.

Please refer to Note 7(b)(ix) for transactions with CTBC Investments Co., Ltd.

(viii) CTBC Investments Co., Ltd.

1) Names of the related parties and relationship

(Continued) 256 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

2) Significant transactions with related parties

Please refer to Note 12(l)(i) for transactions with CTBC Bank Co., Ltd.

Please refer to Note 7(b)(ix) for the detailed holding schedule of funds issued by itself.

(m) Significant contract: Please refer to Note 9(a).

(n) The income and expenses arising from the joint marketing operation and information interoperability amongst the Financial Holding Company’s subsidiaries were allocated as follows:

The Company’s subsidiary CTBC Bank Co., Ltd. (“CTBC Bank”) and Taiwan Life Insurance Co., Ltd.( “Taiwan Life”) have gained from the joint business promotion. The bonus for co-marketing with CTBC Bank and Taiwan Life shared based on annual commission rate agreed between all parties for each insurance product.

(o) The movement of compulsory auto and motorcycle insurance reserves (retained business) for the Company’s sub-subsidiary TLG insurance Co., Ltd.

For the six months ended June 30, 2017 Beginning Current Current Ending Compulsory auto insurance balance provision recovery balance Unearned premium reserve $ 73,748 73,282 73,748 73,282 Claim reserve 130,077 136,210 130,077 136,210 Special reserve (204,344) 10,277 - (194,067) Total $ (519) 219,769 203,825 15,425

For the six months ended June 30, 2016 Beginning Current Current Ending Compulsory auto insurance balance provision recovery balance Unearned premium reserve $ 74,384 75,696 74,384 75,696 Claim reserve 128,819 133,527 128,819 133,527 Special reserve (198,435) 550 - (197,885) Total $ 4,768 209,773 203,203 11,338

For the six months ended June 30, 2017 Beginning Current Current Ending Compulsory moto insurance balance provision recovery balance Unearned premium reserve $ 63,274 63,875 63,274 63,875 Claim reserve 55,543 53,029 55,543 53,029 Special reserve 248,610 4,404 - 253,014 Total $ 367,427 121,308 118,817 369,918

(Continued) 257 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

For the six months ended June 30, 2016 Beginning Current Current Ending Compulsory moto insurance balance provision recovery balance Unearned premium reserve $ 62,342 63,893 62,342 63,893 Claim reserve 51,543 48,184 51,543 48,184 Special reserve 255,138 4,121 - 259,259 Total $ 369,023 116,198 113,885 371,336

(p) The information of segmentation of specific assets of the Company’s sub-subsidiary TLG Insurance Co., Ltd.:

(i) The Company’s sub-subsidiary TLG Insurance Co., Ltd is engaged in compulsory auto TPL insurance (hereinafter referred to as "this insurance"), in accordance with “Compulsory Automobile Liability Insurance Law”, The Company’s sub-subsidiary TLG Insurance Co., Ltd. build an independent account to record the operation and financial activities of the insurance. As of June 30, 2017, December 31 and June 30, 2016, assets and liabilities the Company’s sub-subsidiary TLG Insurance Co., Ltd. operated on this insurance were as below:

December 31, June 30, 2017 2016 June 30, 2016 Assets Cash and cash equivalents $ 370,548 356,326 366,458 Premiums receivable 4,787 4,432 5,707 Claims recoverable from reinsurers 8,579 8,292 7,270 Due from reinsurers and ceding 13,831 12,034 13,607 companies Ceded unearned premiums reserve 76,942 77,094 78,624 Ceded claim reserve 116,232 112,679 91,250 Temporary payments and suspense 46 133 845 accounts Total Assets $ 590,965 570,990 563,761 Liability Notes payable $ 351 410 120 Due to reinsurers and ceding 11,946 13,820 11,054 companies Unearned premium reserve 214,099 214,116 218,213 Claim reserve 305,471 298,299 272,961 Special reserve 58,947 44,266 61,374 Temporary receipts and suspense 138 79 25 accounts Other liabilities 13 - 14 Total liabilities $ 590,965 570,990 563,761

(Continued) 258 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

According to the article 5 of “Regulations for Deposit and Management of the Reserve of Compulsory Automobile Liability Insurance Article”, special reserves provided shall deposit in financial institution as time deposits, once insurer has reported and gotten the approval of the competent authority, it may purchase domestic securities. As of June 30, 2017, December 31 and June 30, 2016, the amount of time deposits the Company’s sub-subsidiary TLG Insurance Co., Ltd. placed in financial institutions described in preceding paragraph was $58,947, $44,266 and $61,374, respectively. Additionally, according to article 6 of “Regulations for Deposit and Management of the Reserve of Compulsory Automobile Liability Insurance” , except for the aforesaid special reserve provided, funds (including reserves, payables, and suspend account to carry forward) shall be deposited in financial institutions in the form of demand deposits and time deposits, but as funds provided that with the approval of the competent authority, an insurer may purchase domestic securities. The Company’ s sub- subsidiary TLG Insurance Co., Ltd. placed deposits in financial institutions to support the expenditures of the insurance, as of June 30, 2017, December 31 and June 30, 2016, the amount of demand deposits were $64,095, $56,024 and $103,605, respectively, note deposits were $253, $302 and $853, respectively, and time deposits were $247,253, $255,734 and $200,626, respectively.

(ii) The information of the Company’s sub-subsidiary TLG Insurance Co., Ltd. for the insurance revenue and cost:

For the three months ended June 30, For the six months ended June 30, 2017 2016 2017 2016 Operating revenue Premium (contain $ 92,070 92,052 180,243 180,040 reinsurance premium) Less: Reinsurance (32,600) (32,762) (64,347) (64,398) expense Net change in 65 831 (135) (2,863) unearned premiums reserve Retained earned premium 59,535 60,121 115,761 112,779 Interest income 115 159 229 330 $ 59,650 60,280 115,990 113,109 Operating costs Insurance claim payment $ 66,220 85,351 157,158 157,064 (contain reinsurance indemnity) Less: Claims recoverable (24,156) (26,634) (59,468) (49,975) from reinsurers Retained claim payment 42,064 58,717 97,690 107,089 Net change in claim 1,213 (891) 3,619 1,349 reserve Net change in special 16,373 2,454 14,681 4,671 claim reserve $ 59,650 60,280 115,990 113,109

(Continued) 259 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(iii) According to the article 11 of “Regulations for the Management of the Various Reserve for Compulsory Automobile Liability Insurance” when an insurer suspends or terminates its operations, reserves of the insurance shall transfer into the reserves provided by the other insurer that assume the business. If in a situation that there is no any insurer to assume the insurance business and the balance of the special reserve is positive, it shall transfer the assets corresponding to the special reserve to the Motor Vehicle Accident Compensation Fund.

When an insurer has been duly ordered to suspend business and undergo rehabilitation, ordered to dissolve, or its permission to operate the Insurance business has been revoked, and no other insurer is to assume this Insurance business, and there is no outstanding liability under the insurance and the balance of the special reserve is positive, the assets corresponding to the special reserve shall be transferred to the Motor Vehicle Accident Compensation Fund.

(q) The Company’s sub-subsidiary TLG Insurance Co., Ltd. reinsured its business to BEST RE (L) Ltd. directly or by other reinsurers, although the main contract was expired, the responsibility of compensate was still effective. In accordance with the “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms” , since the rating of BEST RE (L) Ltd.’s was downgraded to B plus by Standard & Poor's, it has become an unauthorized reinsurance company on October 22, 2013. For the three and six months ended June 30, 2017 and 2016, the income for reinsurance corporate with BEST RE (L) Ltd. were $0, $0, $18 and $12, respectively. As of June 30, 2017, December 31 and June 30, 2016, the amount of unauthorized insurance reserve the Company’s sub-subsidiary TLG Insurance Co., Ltd. should increase to meet the supervisory report request were $118, $575 and $593, respectively. The component of the preceding amount includes unearned premium reserve amounted to $0, claims recoverable from reinsurers which were reported but unpaid amounted to $106, $566 and $567, respectively, and claims recoverable from reinsurers of paid claims overdue in nine month amounted to $12, $9 and $26, respectively.

(Continued) 260 (English Translation of Financial Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD.AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(13) Disclosures required:

(a) Related information on significant transactions:

For the six months ended June 30, 2017, according to the Regulations Governing the Preparation of Financial Reports by Financial Holding Companies, the related information on significant transactions by the Company and its subsidiaries that should be further disclosed as follow:

(i) Loans to other or individuals:

Unit: In Thousands of New Taiwan Dollars Collateral The limit The The reason amount of highest Ending Actual Interest Nature of Amount of for short- Provision individual Total limit Number Interaction Related balance in balance Loan rate the loan business term for bad debt loan of loan (Note 1) creditor Debtor account party the period (Note 2) balance fluctuation (Note 3) contact borrowing allowance Item Value (Note 4) (Note 5) 1 CTBC Buynow Entrusted No 39,121 37,838 37,838 6.50% 1 44,893 Purchase of 757 - 276,499 552,997 Leasing Co., Story loans/other equipment Ltd. Electronic income Ltd, Shanghai 1 〃 Hongtai Real 〃 No 89,786 89,786 89,786 8.46% 1 89,786 〃 1,796 - 276,499 552,997 estate Development , Ltd, Ningbo

Note 1：Serial number is determined as follows: (1) 0 represents parent company. (2) Subsidiaries are numbered in a sequence of Arabic numerals from 1 based on company category. Note 2：Those ending balances are effective credit/amount as of the end of report date. Note 3：The natures of loans are determined as follows: (1) Please fill 1 if the category belongs to business relation (2) Please fill 2 if the category belongs to short-term loan (3) The natures of the leasing business of sub-subsidiary Note 4：The limit to the individual borrower: 10% of the creditor’s net worth. Note 5：The total limit of the loan: 40% of the creditor’s net worth. (ii) Endorsements and guarantees for others:

Unit: In Thousands of New Taiwan Dollars Ratio of Counter-party of accumulated guarantee and amounts of Parent Subsidiary Endorsements/ endorsement Limitation on Highest Balance of Property guarantees and company endorsements/ guarantees to amount of balance for guarantees pledged for endorsements to endorsements/ guarantees third parties guarantees and guarantees and and Actual usage guarantees net worth of the Maximum guarantees to to third parties on behalf of Relationship endorsements endorsements endorsements amount and latest amount for third parties on on behalf of companies in Name of with the for a specific during as of during the endorsements financial guarantees and behalf of parent Mainland No. guarantor Name Company enterprise the period reporting date period Amount statements endorsements subsidiary company China 1 CTBC CTBC Asia 3 359,854 100,000 100,000 - - 1.40 % 2,878,828 Y N N Securities Limited. Co., Ltd.

Note 1：Serial number is determined as follows: (1) 0 represents parent company. (2) Subsidiaries are numbered in a sequence of Arabic numerals from 1 based on company category. Note 2：The relationship of endorsements and guarantees for others are as follow: (1) Company belongs to business relation (2) Subsidiaries directly hold common stock equity over 50% (3) Parent company and it's subsidiaries hold common stock over 50% in combination based on company category. (4) The parent company that holds over 50% of the common stock directly or indirectly through its subsidiaries. (5) Co-investment relation by stockholders endorsement the company with shareholding ratio.

(Continued) 261 (English Translation of Financial Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD.AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(iii) Marketable securities held as of June 30, 2017 (the associates of invested subsidiaries and joint controlled organizations are excluded): Not applicable to bank, securities, and insurance subsidiaries; others:

Unit: In Thousands of New Taiwan Dollars/Thousands of Shares Ending balance Marketable Relationship Name of company securities type with the securities Market price holding securities and name issuer Account Number of shares Book value Shareholding ratio (Note 1) Remark CTBC Venture Capital DelSolar Co.,Ltd.- - Available-for-sale 3,675 96,750 0.36 % 53,655 Co., Ltd. privateplacement financial assets－net 〃 DelSolar Co., Ltd. - 〃 746 17,820 0.07 % 10,886 〃 Caesar Sanitary Co., - 〃 450 11,250 0.62 % 17,573 Ltd. 〃 Voltronic Power - 〃 497 21,317 0.63 % 248,809 Technology Corporation. 〃 FocalTech - 〃 3,539 174,356 1.19 % 123,330 Semiconductor Corp. 〃 HIM International - 〃 1,629 62,324 3.81 % 201,996 Music Inc. 〃 Swissray Global - 〃 614 28,436 0.43 % 12,587 Healthcare Holding Ltd. 〃 China Consumer Fund, - 〃 - 92,297 5.00 % 85,085 L.P. 〃 Pharmadax Inc. - 〃 800 107,000 1.45 % 72,976 〃 Themag Food - 〃 497 58,737 1.62 % 125,741 Corporation 〃 Intech Biopharm Ltd. - 〃 705 31,781 1.01 % 25,669 〃 Taiwan Chelic Corp., - 〃 1,000 88,000 1.50 % 61,300 Ltd. 〃 AMPAK Technology - 〃 486 3,579 0.58 % 7,898 Inc. 〃 Nien Made Enterprise - 〃 201 19,274 0.07 % 67,710 Co.,Ltd. 〃 Long Time Tech. Co., - 〃 1,024 30,503 2.66 % 33,367 Ltd. 〃 Tanvex - 〃 1,100 140,800 0.57 % 126,445 BioPharma,Inc. 〃 Life Travel & Tourist - 〃 470 29,796 1.86 % 18,067 Service Co., Ltd. 〃 InnoPharmax - 〃 1,000 32,000 1.57 % 18,800 〃 Radiation Technology, - 〃 368 13,058 1.72 % 18,157 Inc. 〃 Quaser Machine Tools, - 〃 2,191 124,156 6.22 % 139,895 Inc. 〃 Taisun Holding Corp., - 〃 1,205 106,040 3.38 % 165,688 Ltd. 〃 EirGenix Inc. - 〃 6,255 99,594 6.07 % 218,909 〃 KHAM Inc. - 〃 700 42,000 3.68 % 38,899 〃 B'IN LIVE CO., LTD. - 〃 2,000 85,000 7.79 % 165,660 〃 Bullfight International - Other financial 2,000 140,122 8.70 % 56,181 Holdings Co., Ltd. assets －net 〃 Taiwan Star Enterprises - 〃 15,000 150,000 0.43 % 72,736 Co., Ltd. 〃 Others - 〃 - 1,536,235 - % 1,125,201 Note2 CTBC Asset Private equity fund- - Available-for-sale - 519,034 - % 519,034 Management Co., Ltd. CVI Credit Value Fund financial assets－net B III CTBC Investments Beneficiary Certificate – Securities 〃 1,806 19,752 - % 19,752 Co., Ltd. CTBC Hwa-win Money investment trust Market Fund fund managed by CTBC Investments. 〃 Beneficiary Certificate – 〃〃 313 5,179 - % 5,179 CTBC Stable Growth Fund 〃 Beneficiary Certificate – 〃〃 310 4,754 - % 4,754 CTBC Taiwan A-Plus Fund 〃 Beneficiary Certificate – 〃〃 201 2,078 - % 2,078 CTBC Global Emerging Market Strategy Bond Fund–A TLG Capital Co., Ltd. Cathay Financial - 〃 1,666 104,958 0.01 % 104,958 Holding Co., Ltd. Preferred Stock A. 〃 Taishin Financial - 〃 1,194 61,849 0.01 % 61,849 Holding Co., Ltd. Preferred Stock E 〃 Mirae Asset Asia High - Financial assets 2,737 33,516 - % 33,516 Income Bond measured at fair value through profit or loss

(Continued) 262 (English Translation of Financial Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD.AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Note 1：Listed/ OTC companies are measured at fair value. The net worth for a non-listed/ OTC company is calculated based on the proportion of total stockholders’ equity on hand. The net value of listed/ OTC companies’ preferred shares is based on the liquidation price plus dividends in arrears. Note 2：Those account balances are less than 5% of ending balance. (iv) Accumulative purchases or sales of the same investee's capital stock up to $300,000 or over 10% of paid-in capital:

Unit: In Thousands of New Taiwan Dollars/Thousands Shares Marketable Beginning Acquisition Disposition Ending Acquiring/se securities lling type and Number of Number of Number of Gain/loss Number of company name Account Counterparty Relationship shares Amount shares Amount shares Sell price Book value on disposal shares Amount CTBC Asset Mega Available- 〃〃 41,471 511,133 - - 41,471 515,173 511,133 4,040 - - Management Diamond for-sale Co., Ltd. Money financial Market Fund assets—net 〃 Beneficiary 〃〃〃 - - 91,577 1,000,000 91,577 1,000,356 1,000,000 356 - - Certificate – CTBC Hwa- win Money Market Fund

(v) Acquisition of real estate up to $300,000 or 10% of paid-in capital:

Unit: In Thousands of New Taiwan Dollars Price Previous transfer of related party determination and Relationship supporting Company of Triggering Status of with the Date of reference Purpose of Other acquisition Property date Amount payment Counter-party Relationship Owner issuer transfer Amount materials acquisition commitment CTBC Asset Lot NO.81 2017.03.16 450,000,400 450,000,400 Taiwan Non-related Not Not Not - Price Investment Management zone 4 at Taipei parties applicable applicable applicable published by real estate Co., Ltd. Chang'an District Court court Section, Zhongshan Dist., Taipei City (Chang Hung building and land)

(vi) Disposal of real estate up to $300,000 or 10% of paid-in capital:None.

(vii) Discount on commission fees for transaction with related parties up to $5,000:None.

(viii) Receivables from related parties up to $300,000 or over 10% of paid-in capital:

Unit: In Thousands of New Taiwan Dollars Account Subsequent receivable Balance due from Turnover Overdue from related party collections provision for creditor Counterparty Relationship related party rate Amount Disposal from related party bad debts Taiwan Lottery Co., CTBC Bank Co., Ltd. Controlled by the 595,682 - % - - Unrecovered - Ltd. company's subsidiary Taiwan Lottery Co., Ltd.

(ix) Financial derivative transactions：Not applicable to bank subsidiaries; others：Please refer to Note 6(au).

(Continued) 263 (English Translation of Financial Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD.AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(x) Information on NPL disposal transaction:

1) Summary table of NPL disposal:

Unit: In Thousands of New Taiwan Dollars / JPY Gains (losses) Trade date Counterparty Debt component Book value Sale price on disposal Additional term Relationship 02. 24. 2017 I.R Servicing., Ltd. Non-secured loan JPY 16,231 JPY 19,690 JPY 3,459 None Non-related party 02. 24. 2017 Aozora Servicing.,Ltd. Non-secured loan JPY 149,934 JPY 155,860 JPY 5,926 None Non-related party 02. 24. 2017 RCC Non-secured loan JPY 2,568 JPY 10 JPY (2,558)None Non-related party 02. 24. 2017 Japan Servicing.,Ltd. Non-secured loan JPY 104,864 JPY 117,842 JPY 12,978 None Non-related party 02. 20. 2017 Aurora Servicing.,Ltd. Non-secured loan JPY 283,753 JPY 271,830 JPY (11,923)None Non-related party 05. 19. 2017 I.R Servicing., Ltd. Non-secured loan JPY 29,689 JPY 26,611 JPY (3,078)None Non-related party 05. 19. 2017 Aozora Servicing.,Ltd. Non-secured loan JPY 83,780 JPY 83,780 JPY - None Non-related party 05. 19. 2017 Astry Servicing.,Ltd. Non-secured loan JPY 27,607 JPY 27,607 JPY - None Non-related party 06. 19. 2017 Aurora Servicing.,Ltd. Non-secured loan JPY 101,384 JPY 56,042 JPY (45,342)None Non-related party 06. 19. 2017 Japan Servicing.,Ltd. Non-secured loan JPY 189,264 JPY 183,309 JPY (5,955)None Non-related party 06. 30. 2017 Astry Servicing.,Ltd. Non-secured loan JPY 42,435 JPY 44,500 JPY 2,065 None Non-related party 06. 30. 2017 Astry Servicing.,Ltd. Non-secured loan JPY 21,467 JPY 21,467 JPY - None Non-related party 06. 30. 2017 Astry Servicing.,Ltd. Non-secured loan JPY 41,132 JPY 51,930 JPY 10,798 None Non-related party

2) Disposal of a single batch of NPL up to $1,000,000 and information on each transaction:None.

(xi) Types of securitization instruments approved to be issued pursuant to financial assets securitization rules or real estate securitization rules and other relevant information:None.

(xii) Business relationships and material transaction between the parent company and subsidiaries:

Unit: In Thousands of New Taiwan Dollars Transaction status for the six months ended June 30, 2017 Percentage of consolidated net No. revenue or consolidated (Note) Party Counterparty Relationship Account Amount Terms total assets 0 CTBC Financial CTBC Bank Co., Ltd. Parent company Cash and cash 715,117 The terms of loans between 0.01% Holding to subsidiary equivalents / related and non-related Co., Ltd. Deposits and parties are identical. remittances 1 CTBC Bank Co., CTBC Securities Co., Subsidiary to Deposits and 320,000 〃 0.01% Ltd. Ltd. subsidiary remittances/ Other asset 〃〃〃〃 Deposits and 756,000 〃 0.01% remittances/ Other financial asset 〃〃〃〃 Deposits and 656,203 〃 0.01% remittances/ Cash and cash equivalents 〃〃 CTBC Venture Capital 〃〃 239,173 〃 -% Co., Ltd. 〃〃 Taiwan Lottery Co., Ltd. 〃〃 512,342 〃 0.01% 〃〃〃〃 Payables / 595,682 〃 0.01% Receivables 〃〃〃〃 Other general and 1,071,873 〃 0.63% administrative expenses / Service income 〃〃〃〃 Deposits and 364,269 〃 -% remittances/ Cash and cash equivalents 〃〃 Taiwan Life Insurance 〃〃 16,210,470 〃 0.32% Co., Ltd. 〃〃〃〃 Payables / 872,083 〃 0.02% Receivables 〃〃〃〃 Handing fee and 2,176,781 〃 1.28% commission income/handing fee and commission fee

(Continued) 264 (English Translation of Financial Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD.AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Note: Serial number is determined as follows:

1. 0 represents parent company.

2. Subsidiaries are numbered in a sequence of Arabic numerals from 1 based on company category.

(xiii) Other significant transactions that may have substantial influence upon the decisions made by financial report users:None.

(b) Related information on reinvestment:

The following is the information on investees for the six months ended June 30, 2017 (excluding information on investees in Mainland China):

Unit: In Thousands of New Taiwan Dollars/Thousands Shares Aggregate shareholding of the Company and its subsidiaries Name of Main Investment Number of Total investee business Shareholding Book gain(loss) Number of pro forma Number of Shareholding company Address scope ratio Value recognized shares shares shares ratio Note CTBC Bank No.166, 168, 170, Commercial banking 100.00% 265,652,855 15,101,359 14,068,572 - 14,068,572 100.00% The investment Co., Ltd.. 186, 188 Jingmao and financing has been eliminated 2nd Road, Taipei business when preparing the consolidated financial statements. CTBC Securities 3F, No.168, Jingmao Securities and futures 99.92% 7,225,981 85,160 602,219 - 602,219 99.92% " Co., Ltd. 2nd Road, Taipei business CTBC Venture 21F, No.168, Jingmao Venture capital 100.00% 3,870,042 306,814 300,000 - 300,000 100.00% " Capital Co., Ltd. 2nd Road, Taipei investment CTBC Asset 19F, No.168, Jingmao Asset management 100.00% 5,431,048 64,822 535,882 - 535,882 100.00% " Management 2nd Road, Taipei business Co., Ltd. CTBC Security 5F, No.188, Jingmao Protection, fire and 100.00% 54,681 2,581 4,770 - 4,770 100.00% Co., Ltd. 2nd Road, Taipei life safety services Taiwan Lottery 15F, No.188, Jingmao Operate the public 100.00% 1,092,823 424,945 50,000 - 50,000 100.00% The investment Co., Ltd. 2nd Road, Taipei welfare lottery for has been eliminated the issuing, sale, when preparing promotion, drawing, the consolidated payment of prize financial and management statements. CTBC 12F, No.188, Jingmao Investment and trust 100.00% 701,529 (5,080) 42,500 - 42,500 100.00% " Investments Co., 2nd Road, Taipei business Ltd. Taiwan Life 8F, No.188, Jingmao Insurance business 100.00% 71,035,815 4,296,658 3,194,499 - 3,194,499 100.00% " Insurance Co., 2nd Road, Taipei Ltd. CTBC Bank 16th to 19th Floors, Commercial banking 99.60% 4,600,962 103,758 246,496 - 246,496 99.60% " (Philippines) Fort Legend and financing Corp. Towers 31 Street business corner 3rd Avenuest Bonifacio Global City, Taguig City, 1634 Philippines

(Continued) 265 (English Translation of Financial Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD.AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Aggregate shareholding of the Company and its subsidiaries Name of Main Investment Number of Total investee business Shareholding Book gain(loss) Number of pro forma Number of Shareholding company Address scope ratio Value recognized shares shares shares ratio Note PT Bank CTBC Tamara Center, Commercial banking 99.00% 6,127,782 64,684 1 - 1 99.00% The investment Indonesia 15th~17th F1, JI and financing has been eliminated Jenderal Sudirman business when preparing Kev. 24 Jakarta the consolidated 12920 Indonesia financial statements. CTBC Bank 1518 West Broadway, Commercial banking 100.00% 1,169,647 44,535 2,312 - 2,312 100.00% " Corp. Vancouver, and financing (Canada) B.C., Canada, business V6J1W8 CTBC Capital 801 S. Figueroa Investment business 100.00% 21,320,416 463,697 6 - 6 100.00% " Corp. Street, Suite 2300, Los Angeles, CA 90017, USA Grand Bills 11F., No. 560, Sec. 4, Proprietary trading of 21.15% 1,878,536 67,715 114,399 - 114,399 21.15% Finance Jhongsiao E. short-term bills and Corporation Rd.,Taipei securities CTBC Bank 801 S. Figueroa Commercial banking 100.00% 13,552,599 417,663 Common - Common 100.00% The investment Corp. (USA) Street, Suite 2300, and financing shares- shares- has been eliminated Los Angeles, CA business 3 3 when preparing 90017, USA Preferred Preferred the consolidated shares- shares- financial 100 100 statements. The Tokyo Star 2-3-5 Akasaka, Commercial banking 100.00% 36,902,340 1,523,823 700 - 700 100.00% " Bank, Ltd. Minato-Ku, Tokyo, and financing 107-8480, Japan business Tokyo Star 2-7-1,Nishi Shinjuku, Financing business 100.00% 3,035,086 55,040 1,936 - 1,936 100.00% " Business Shinjuku, Tokyo Finance, Ltd. TSB Servicer, 2-2-17, Akasaka, Financing business 100.00% 501,323 11,880 - - - 100.00% " Ltd. Minato, Tokyo CTBC 3rd Floor, Raffles Holding company 100.00% 214,034 (5,265) 17,363 - 17,363 100.00% "(Note 1) (Mauritius) Tower,19 Cybercity Holding Co., Ebene, Republic of Ltd. Mauritius. CTBC Securities 14F, No.188, Jingmao Security investment 100.00% 22,795 2,415 2,000 - 2,000 100.00% The investment Investment 2nd Road, consultant company has been eliminated Service Co., Ltd.Taipei when preparing the consolidated financial statements. CTBC Asia Suite 2809, 28F., Two Securities company 100.00% 211,736 (5,186) 134,526 - 134,526 100.00% " Limited International Finance Centre, 8 Finance Street, Central, HongKong CTBC Capital Romm 511, 5F, Holding company 100.00% 27,661 (3,396) 2,060 - 2,060 100.00% " International Tower 1 Silvercord Co., Limited Centre No.30 Canton Road Tsim Sha Tsui, HongKong CTBC Romm 511, 5F, Holding company 100.00% 1,458,564 49,887 70,000 - 70,000 100.00% " International Tower 1 Silvercord Co., Limited Centre No.30 Canton Road Tsim Sha Tsui, HongKong CTCB Venture Hongqiao Road, Venture capital 100.00% 27,615 (3,217) - - - 100.00% " Capital Changning District, management and Investment Shanghai Wenguang consulting Management 1386, 12th (Shanghai) Co., Floor, Room 1202, Ltd. Building CTBC Leasing Hongqiao Road, Financial leasing 100.00% 1,432,573 50,042 - - - 100.00% " Co., Ltd. Changning District, Shanghai Wenguang 1386, 12th Floor, Room 1201, Building TLG Insurance 18F.-1, No.17, Property insurance 100.00% 1,874,386 36,395 200,000 - 200,000 100.00% " Co., Ltd. Xuchang St., business Zhongzheng Dist., Taipei City 100, Taiwan TLG Capital 17F., No.17, Xuchang Installment, leasing 100.00% 804,344 40,296 66,325 - 66,325 100.00% " Co., Ltd. St., and account Zhongzheng Dist., receivable factoring Taipei City 100, business, etc Taiwan King Dragon 27 F Xiamen Lixin Insurance business 50.00% 672,455 (23,064) 350,000 - 350,000 50.00% Life Square Lake Road Insurance No. 90 in Fujian Company Province (Continued) 266 (English Translation of Financial Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD.AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Note 1：The book value includes accumulated impairment loss amounted to $20,629.

(i) Related information on investee companies in Mainland China:

Unit: In Thousands of New Taiwan Dollars/US Dollars/Chinese Yuan Accumulated Total Method Accumulated Investment flows Accumulated inward outflow of outflow of Investment gains Name of investee of investment from investment from (losses) by an Percentage of Investment remittance of company in Mainland amount investment Taiwan as of Taiwan as of investee ownership for direct or gains (losses) Book value as of earnings as of June China Main businesses of paid-in capital (Note 1) January 1, 2016 Outflow Inflow June 30, 2017 (Note 2) indirect investment (Note 2) June 30, 2017 30, 2017 CTBC Bank Co., Ltd., Commercial 6,194,068 ( 3 ) 6,194,068 - - 6,194,068 (100,379)A branch in Shanghai; (100,379) 6,432,399 - Shanghai Branch banking USD 206,045 USD 206,045 USD 206,045 CNY (23,123)not an investee CNY (23,123)CNY 1,444,403 CTBC Bank Co., Ltd., " 4,114,056 ( 3 ) 4,114,056 - - 4,114,056 33,512 A branch in 33,512 3,869,960 - Guangzhou Branch USD 130,531 USD 130,531 USD 130,531 CNY 7,427 Guangzhou; not an CNY 7,427 CNY 867,720 investee CTBC Bank Co., Ltd., " 4,081,960 ( 3 ) 4,081,960 - - 4,081,960 (11,403)A branch in Xiamen; (11,403) 3,704,785 - Xiamen Branch CNY 800,000 CNY 800,000 CNY 800,000 CNY (2,572)not an investee CNY (2,572)CNY 808,203 CTBC Leasing Co., Financial leasing 2,071,728 ( 2 ) 2,071,728 - - 2,071,728 50,042 100.00% 50,042 1,432,573 - Ltd. CNY 433,802 CNY 433,802 CNY 433,802 CNY 11,155 CNY 11,155 CNY 319,108 CTBC Venture Capital Venture capital 58,612 ( 2 ) 58,612 - - 58,612 (3,217) 100.00% (3,217) 27,615 - Investment management CNY 12,578 CNY 12,578 CNY 12,578 CNY (717) CNY (717)CNY 6,151 Management and consulting (Shanghai) Co., Ltd. King Dragon Life Life insurance 3,529,890 ( 1 ) 1,646,486 - - 1,646,486 (46,128) 50.00% (23,064) 672,455 - Insurance Co., Ltd. business CNY 700,000 CNY 350,000 CNY 350,000 CNY (10,102) CNY (5,051)CNY 149,841

Note 1: Three methods of investment are as below:

1. Invest in Mainland China companies directly.

2. Re-invest in Mainland China companies through another investee in a third area. (The investees in the third area are as follows: CTBC International Co., Limited and CTBC Capital International Co., Limited)

3. Other method: set up new overseas branches.

(Continued) 267 (English Translation of Financial Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD.AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Note 2: For the column of “Investment gains (losses)”:

1. If the company is still in the preparation process, and does not have any investment gain or loss, please specify.

2. Please specify the bases for recognition of investment income or loss.

a The audited financial reports that are issued by an international accounting firm which is connected to an accounting firm in Taiwan: CTBC Leasing Co., Ltd., CTBC Venture Capital Investment Management (Shanghai) Co., Ltd. and King Dragon Life Insurance Co., Ltd.

b The audited financial reports that are issued by the Taiwanese parent company’s designated accounting firm: None.

c Others: CTBC Bank Co., Ltd. Shanghai Branch, CTBC Bank Co., Ltd. Guangzhou Branch and CTBC Bank Co,. Ltd. Xiamen Branch.

3. Please specify if information regarding current gains or losses of an investee is not accessible.

(ii) Upper limit on investment in Mainland China:

Unit: In Thousands of New Taiwan Dollars/US Dollars/Chinese Yuan Accumulated outflow of investment Upper limit on investment from Taiwan to Mainland China as of Investment amounts authorized by authorized by Investment Name of investor company June 30, 2017 Investment Commission, MOEA Commission, MOEA CTBC Bank Co., Ltd. 14,390,084 14,337,760 159,391,713 (USD 336,576 ) (USD 471,079 ) (CNY800,000 ) CTBC Asset Management 2,071,728 2,071,728 3,258,629 Co., Ltd. (CNY433,802 ) (CNY433,802 ) CTBC Venture Capital Co., 58,612 58,612 2,322,025 Ltd. (CNY 12,578 ) (CNY 12,578 ) Taiwan Life Insurance Co. 1,646,486 1,646,486 45,405,966 Ltd. (USD 26,724 ) (USD 26,724 ) (CNY170,000 ) (CNY170,000 )

(iii) Significant transactions with investee companies in Mainland China：None

(Continued) 268 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(14) Segment information:

The Company and its subsidiaries provide their chief operating decision maker with necessary information according to the characteristics of the business, to facilitate the assessment of performance and allocation of operational resources. The disclosures of assets, profits and losses are the same as the summary of significant accounting policies described in Note 4.

According to IFRS 8 “Operating Segments”, reportable segments are as follows:

The major operating activities of Institutional Banking are commercial banking and capital market activities which provide clients with flexible and tailor-made financing services and the design, supply, and propriety trading of various financial products. The major operating activity of Retail Banking is providing target clients with relevant financial services, including wealth management, credit cards, secured loans, and unsecured individual loans, etc.

The major operating activities of Japan Business are conducted by the Company’ s sub-subsidiary the Tokyo Star Bank, Ltd.

The major operating activity of Life Insurance is providing various sorts of life insurance services.

The major operating activities of other segments are investing and general administration. For the six months ended June 30, 2017 and 2016, the above operating segments did not meet the criteria for reportable segments when applying quantitative thresholds.

(a) Segment information:

Consolidated Consolidated Adjustments For the three months institutional Consolidated Japanese and ended June 30, 2017 banking retail banking Business Insurance Others eliminations Total Net interest income $ 4,921,850 4,149,037 2,238,102 10,511,765 287,599 - 22,108,353 Non- interest income 3,518,886 6,131,573 781,474 42,333,447 1,285,673 (359,862) 53,691,191 Net revenue 8,440,736 10,280,610 3,019,576 52,845,212 1,573,272 (359,862) 75,799,544 Net Income (loss) before $ 3,727,334 4,665,008 201,754 3,055,550 (1,143,123) - 10,506,523 Tax

Consolidated Consolidated Adjustments For the three months institutional Consolidated Japanese and ended June 30, 2016 banking retail banking Business Insurance Others eliminations Total Net interest income $ 4,984,758 3,656,984 2,901,935 8,717,573 170,444 - 20,431,694 Non- interest income 3,191,926 5,644,005 774,782 44,397,356 1,004,820 (65,906) 54,946,983 Net revenue 8,176,684 9,300,989 3,676,717 53,114,929 1,175,264 (65,906) 75,378,677 Net Income (loss) before $ 3,420,139 3,953,453 784,968 1,175,122 (76,556) - 9,257,126 Tax

Consolidated Consolidated Adjustments For the six months institutional Consolidated Japanese and ended June 30, 2017 banking retail banking Business Insurance Others eliminations Total Net interest income $ 9,767,983 8,112,293 4,692,863 20,552,957 601,236 - 43,727,332 Non- interest income 7,623,100 11,929,248 1,324,984 102,473,768 3,816,764 (1,260,237) 125,907,627 Net revenue 17,391,083 20,041,541 6,017,847 123,026,725 4,418,000 (1,260,237) 169,634,959 Net Income (loss)before $ 7,804,454 9,055,717 1,795,572 4,397,131 (770,063) - 22,282,811 Tax Total assets $ 1,973,679,743 777,729,299 729,065,686 1,415,564,098 193,187,080 (21,785,717) 5,067,440,189

(Continued) 269 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CTBC FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

Consolidated Consolidated Adjustments For the six months institutional Consolidated Japanese and ended June 30, 2016 banking retail banking Business Insurance Others eliminations Total Net interest income $ 9,975,182 7,263,521 5,650,582 16,920,884 340,142 - 40,150,311 Non- interest income 6,653,489 11,141,529 1,733,238 88,864,766 2,526,707 (135,858) 110,783,871 Net revenue 16,628,671 18,405,050 7,383,820 105,785,650 2,866,849 (135,858) 150,934,182 Net Income (loss) before $ 6,306,010 7,942,192 1,008,336 2,635,013 (66,874) - 17,824,677 Tax Total assets $ 1,858,373,670 704,733,040 879,668,422 1,169,309,727 161,339,854 (18,085,646) 4,755,339,067

(b) Geographic segment information: Not applicable to the interim financial statements