Annual Report 2015 Taiwan Cooperative Financial Holding Co.,Ltd

Stock Code: 5880 TAIWAN COOPERATIVE FINANCIAL HOLDING CO.,LTD. AWNCOEAIEFNNILHLIGC.LD ANNUAL REPORT 2015 TAIWAN COOPERATIVE FINANCIAL HOLDING CO.,LTD.

ANNUAL REPORT 2015

Proactive．Agile．Innovative

TAIWAN COOPERATIVE FINANCIAL HOLDING CO.,LTD.

77, Guan Qian Road, Taipei, Taiwan R.O.C. Tel: +886-2-2311-8811 Fax: +886-2-2311-3699

This annual report is available at our website: http://www.tcfhc.com.tw Printed on April 26, 2016 Spokesperson Taiwan Cooperative Securities Investment Trust Co., Ltd. Kuang-Hua Hu, Executive Vice President Address: 13F., No.85, Sec. 2, Nanjing E. Rd., Zhongshan Dist., Taipei City Tel: +886-2-2311-8811 104, Taiwan, R.O.C. Email: [email protected] Tel: +886-2-2181-5999 Website: http://www.tcb-am.com.tw Deputy Spokesperson Taiwan Cooperative Venture Capital Co., Ltd. Mei-Tsu Chen, Executive Vice President Address: 13F., No.325, Sec. 4, Zhongxiao E. Rd., Da’an Dist., Taipei City Tel: +886-2-2311-8811 106, Taiwan, R.O.C. Email: [email protected] Tel: +886-2-8772-6718 Headquarters BNP Paribas Cardif TCB Life Insurance Co., Ltd. Address: 10F., No.325, Sec. 4, Zhongxiao E. Rd., Da’an Dist., Taipei City Taiwan Cooperative Financial Holding Co., Ltd. 106, Taiwan, R.O.C. Address: No.77, Guan Qian Road, Zhongzheng Dist., Tel: +886-2-2772-6772 Taipei City 100,Taiwan, R.O.C. Website: http://www.tcb-life.com.tw Tel: +886-2-2311-8811 Website: http://www.tcfhc.com.tw Stock Transfer Agent Subsidiaries Yuanta Securities Co., Ltd. Address: B1, No.210, Sec. 3, Chengde Rd., Datong Dist., Taipei City 103, Taiwan Cooperative Bank, Ltd. Taiwan, R.O.C. Address: No.77, Guan Qian Road, Zhongzheng Dist., Tel: +886-2-2586-5859 Taipei City 100,Taiwan, R.O.C. Website: http://www.yuanta.com.tw Tel: +886-2-2311-8811 Website: http://www.tcb-bank.com.tw Auditors Taiwan Cooperative Bills Finance Corporation Ltd. Deloitte & Touche Address: 14F., No.85,87, Sec. 2, Nanjing E. Rd., Address: 12F., No.156, Sec. 3, Minsheng E. Rd., Songshan Dist., Taipei Zhongshan Dist., Taipei City 104, Taiwan, R.O.C. City 105, Taiwan, R.O.C. Tel: +886-2-2522-1656 Tel: +886-2-2545-9988 Website: http://www.tcb-bills.com.tw Website: http://www.deloitte.com.tw Taiwan Cooperative Securities Co., Ltd. Address: 2, 6F., No.325, Sec. 4, Zhongxiao E. Rd., Credit Rating Agency Da'an Dist., Taipei City 106, Taiwan, R.O.C. Taiwan Ratings Corp. Tel: +886-2-2731-9987 Address: 49th Floor Taipei 101 Tower No. 7, Xinyi Road, Section 5, Taipei Website: http://www.tcfhc-sec.com.tw 110,Taiwan, R.O.C. Co-operative Assets Management Co., Ltd. Tel: +886-2-8722-5800 Address: 7F., No.325, Sec. 4, Zhongxiao E. Rd., Da'an Dist., Taipei City 106, Taiwan, R.O.C. Standard & Poor’s Ratings Services Address: Unit 1, Level 69, International Commerce Centre, 1 Austin Road Tel: +886-2-8772-0868 West, Kowloon, Hong Kong Website: http://www.coamc.com.tw Tel: +852-2533-3500

Notice to readers This English version annual report is a summary translation of the Chinese version and is not an ofﬁcial document of the shareholders' meeting. If there is any discrepancy between the English version and Chinese version, the Chinese version shall prevail. CONTENTS

02 1. Letter to Shareholders

10 2. About TCFHC

12 3. Corporate Governance Report

20 4. Capital Overview

28 5. Business Operation Overview

37 6. Financial Information

154 7. Financial Status and Risk Management 2 Letter to Shareholders

1. Letter to Shareholders

03 1.1 Business Performance in 2015

07 1.2 Business Plan for 2016

09 1.3 Latest Credit Ratings and Evaluation Dates 2015 ANNUAL REPORT

1. Letter to Shareholders

1.1 Business Performance in 2015

The global economy underperformed in 2015. Several macroeconomic developments in the second half of the year weighed on its performance, including the unexpected depreciation of the RMB, a delay in the raising of interest rates in the U.S., competitive depreciation among Asian currencies, a slowdown in economic growth in China and other emerging markets, plummeting oil and other commodity prices, and an increase in geopolitical risks. However, helped by relatively stable economic growth in the U.S., 1. Letter to the global economy is expected to recover and grow moderately in 2016. According to the IMF’s World Economic Outlook released in January 2016, global economic growth, currently estimated at 3.1%, is Shareholders projected at 3.4% in 2016. That said, there are still many global uncertainties, including the impact of China’s slowing economy and the global effects of the localization of supply chains; the potential impact of rising interest rates in the U.S. and quantitative easing policies in Japan and Europe on the foreign exchange, bond, and stock markets; the future trend in oil and commodity prices; and the impact of geopolitical risks on global trade, consumption, and corporate confidence, which may affect the pace of economic recovery.

In 2015, foreign demand for Taiwan’s exports was negatively affected by the slowing down of the global economy, while domestic demand remained weak. According to statistics of the Directorate-General of Budget, Accounting, and Statistics of Executive Yuan, R.O.C. in February 2016, the economy grew at just 0.75% in 2015, marking a significant drop of 3.17 percentage points from 3.92% in 2014. Against a backdrop of a weak global economic recovery, major foreign and domestic institutions have projected Taiwan’s economic growth rate to decrease between 1.47% and 2.7% in 2016, and maintain a cautious outlook going forward.

Chairman Tsan-Chang Liao 3 4 Letter to Shareholders

As at the end of 2015, TCFHC had seven subsidiaries, namely Taiwan Cooperative Bank, Ltd., Taiwan Cooperative Securities Co., Ltd., Taiwan Cooperative Bills Finance Corporation Ltd., Co-operative Assets Management Co., Ltd., Taiwan Cooperative Securities Investment Trust Co., Ltd., BNP Paribas Cardif TCB Life Insurance Co., Ltd., and Taiwan Cooperative Venture Capital Co., Ltd., which was founded in 2015.

With the trust and support of our shareholders over the past year, TCFHC was able to continue to grow and reach higher profitability despite the economic strains in the era of the ‘New Mediocre’ and heated competition in the financial markets. In 2015, our consolidated net income grew significantly by 30% to reach TWD13.462 billion, 3.048 billion more than the TWD10.414 billion in 2014. Post-tax earnings per share came in at TWD1.22, and the return on equity and return on assets were 7.72% and 0.43%, respectively, setting new records for TCFHC.

The Group pursues growth and excellence based on a foundation of making continuous improvements. Our business performance in 2015 are summarized below:

Consolidated Budget and Review for TCFHC in 2015: Unit: NT$ million, Except EPS in NT$ Item Actual Amount Budget Amount Achieving Rate (%) Net interest 32,075 33,929 94.54 Net revenues and gains other than interest 6,248 8,241 75.82 Total net revenues 38,323 42,170 90.88 Bad-debt expense and provision for losses on guarantees ( 2,225 ) ( 2,517 ) 111.60 Net change in reserves for insurance liabilities 4,344 2,092 207.65 Operating expenses ( 24,830 ) ( 25,826 ) 103.86 Income before income taxes 15,612 15,919 98.07 Income tax expense ( 2,150 ) ( 2,465 ) 112.78 Net income 13,462 13,454 100.06 Other comprehensive income, net of income tax 1,345 ( 290 ) 663.79 Total comprehensive income 14,807 13,164 112.48 Earnings per share 1.22 1.24 98.39

Non-Consolidated Budget Review for TCFHC in 2015: Unit: NT$ million, Except EPS in NT$ Item Actual Amount Budget Amount Achieving Rate (%) Revenues and gains 13,337 13,695 97.39 Expenses and losses ( 291 ) ( 350 ) 116.86 Income before income tax 13,046 13,345 97.76 Income tax expense 33 ( 85 ) 238.82 Net income 13,079 13,260 98.63 Other comprehensive income 1,236 ( 131 ) 1,143.51 Total comprehensive income 14,315 13,129 109.03 Earnings per share 1.22 1.24 98.39 2015 ANNUAL REPORT

Earning Reporting for TCFHC and its Subsidiaries in 2015: Unit: NT$ million, Except EPS in NT$

Net income before Net income after Earnings per Net profit Return on Return on tax from continuing tax from continuing share ratio (%) assets (%) equity (%) operations operations TCFHC and its subsidiaries 15,612 13,462 1.22 35.13 0.43 7.72 TCFHC (unconsolidated) 13,046 13,079 1.22 98.75 7.12 7.65 Taiwan Cooperative Bank (unconsolidated) 14,082 12,129 1.52 30.99 0.41 7.28 Taiwan Cooperative Securities 195 170 0.44 24.51 1.52 4.15 Taiwan Cooperative Bills Finance 480 479 1.35 100.74 1.21 10.21 Co-operative Assets Management (unconsolidated) 395 328 1.25 43.93 6.04 10.82 BNP Paribas Cardif TCB Life Insurance 847 753 1.25 52.73 0.59 11.22 Taiwan Cooperative Securities Investment Trust ( 21 ) ( 21 ) ( 0.69 ) ( 13.58 ) ( 5.59 ) ( 6.06 ) Taiwan Cooperative Venture Capital ( 2 ) ( 2 ) ( 0.02 ) ( 151.06 ) ( 0.21 ) ( 0.21 ) Note: 1. Net income before/after taxes from continuing operations get round off to the nearest dollar 2. Return on assets = profit after income tax÷Average assets 3. Return on equity = profit after income tax÷Average stockholders’ equity 4. Net profit ratio = profit after income tax÷Total net revenue

In 2015, we also achieved the following accomplishments: Profitability a. The bank subsidiary was the main source of revenue for the Group. Business performance was enhanced by the merging of 11 branches, lowering of capital costs, adjusting loan structures to increase interest rate spreads, increasing undertakings in SME financing and overseas loans, and actively developing wealth management operations. The bank and its subsidiaries generated TWD12.14 billion in net profit for the Group, growing by 20% with an increase of TWD2.002 billion from TWD10.138 billion in the previous year. b. Stable business growth was seen in the life insurance, bills finance, asset management, and securities subsidiaries, as they posted annual net income of TWD753 million, TWD479 million, TWD328 million, and TWD170 million, respectively; these results all represented significant growth from the previous year. The net income of the life insurance and securities subsidiaries were 2 and 12 times their corresponding figures in the previous year, respectively. The net incomes of the bills and asset management subsidiaries expanded by 50% and 10%, respectively, from the previous year. Although the securities investment trust subsidiary had a loss of TWD21 million, the loss had narrowed by TWD45 million from the previous year, reflecting improving business performance. The loss at venture capital subsidiary was TWD 2 million. This subsidiary was established on October 1 and became fully operational on November 11, 2015. The performance of the subsidiary is expected to improve gradually in 2016.

Capital Allocation a. For the medium-term and long-term development of the Group and to improve the financial structures of subsidiaries and increase working capital to expand overseas operations, TCFHC completed a public offering of securities about TWD21.87 billion and allocated the proceeds to the bank and securities subsidiaries. 5 6 Letter to Shareholders

b. To increase risk tolerance and expand business capacity, the bank subsidiary conducted two cash capital increases in 2015, raising a combined total TWD26.146 billion. The capital adequacy ratio, tier-1 capital ratio, and common equity ratio in 2015 were 12.64%, 9.32%, and 9.32%, respectively, achieving the annual goals. To improve the capital structure and as required for business development, the securities subsidiary conducted a cash capital increase in 2015 and raised just over TWD2 billion, increasing its net worth to TWD5.2 billion and fulfilling the requirement to establish an offshore securities unit.

Capital-output Ratio a. As the government lifted restrictions, the Group expanded into new operations. The capital-output ratio for bills finance, life insurance, securities, and securities investment trust subsidiaries in 2015 were 369.53%, 246%, 138.89%, and 85.22%, respectively, having grown by 20.97%, 44.54%, 32.97%, and 66.25% from the previous year, separately. b. We continued to adjust the core business structure of the Group to increase interest rate spreads, enhance wealth management operations, and increase revenues from fee income. The capital-output ratio of the bank subsidiary in 2015 was 175.03%, representing growth of 6.61% from 2014.

Integrated Marketing a. To strengthen the collaborative opportunities between the bank and the securities subsidiaries, 240 securities counters had been set up in the bank subsidiaries by the end of 2015. As a result, brokerage orders accounted for 62.59% of the annual total trading volume of the securities subsidiary. The securities subsidiary also served as the lead underwriter in eight secondary public offerings and was the secondary underwriter in 13 such offerings referred to it by the bank subsidiary. b. TCFHC regularly holds Group-wide integrated marketing meetings to review the performances of co-marketing products among various subsidiaries. Insurance premiums and fund sales incomes that were referred by other subsidiaries to the life insurance and securities investment trust subsidiaries accounted for 92.1% and 76.01% of their revenues, respectively. In addition to promoting synergies of integrated marketing, we are also actively developing external channels.

Global Footprint a. As planned, we have continued to expand into global financial markets and increased the contribution from overseas revenues. By the end of 2015, the overseas units of the bank subsidiary (including OBU and other offshore units) had post-lodgment pre-tax earnings of TWD3.842 billion, accounting for 27.10% of overall earnings. b. Overseas units in Europe, the U.S., Australia, and Asia were set up. In 2015, the Fuzhou Branch in China, the Tuek Thla and Pur Senchey Sub-branches under the Phnom Penh Branch in Cambodia, and the Yangon Representative Office in Myanmar became operational. The New York Branch in the U.S. went into business on January 6, 2016. There are currently a total of 16 overseas units. With the planned Siem Reap Sub-branch under the Phnom Penh Branch in Cambodia and the Changsha Branch in China, that number will increase to 18 in 2016. 2015 ANNUAL REPORT

E-finance a. In response to the demands for digital, online, and mobile financing, the bank subsidiary pioneered an online mortgages application. b. The bank subsidiary's efforts in developing an electronic cash flow platform and mobile payment services won the excellence and innovation awards at the ACH Services Development Competition hosted by the Taiwan Clearing House. Furthermore, it garnered the Best Electronic Cash Flow Service Development Award and the Outstanding Mobile Payment Service Innovation Award from Financial Information Service Co., Ltd.

Corporate Governance a. TCFHC ranked in the top 20% of all listed companies in the first Corporate Governance Evaluation. b. To effectively manage the Group’s remuneration system and enhance corporate governance and shareholder interests, we held nine remuneration committee meetings in 2015 to review amendments to the concurrent service pay standards of appointed investment business directors and supervisors, distributed remuneration to TCFHC's directors and supervisors, formulated new management performance assessment standards for subsidiaries, regularly reviewed the remuneration system for managers and above, and formulated regulations regarding remuneration, bonuses, and employee salaries in TCFHC and its subsidiaries.

Social Responsibilities a. We have long contributed to the country's programs for training athletic talents and helped create many world-class athletes. The bank subsidiary has won the Sports Activist Award from the Sports Administration of the Ministry of Education for seven consecutive years. The life insurance subsidiary has also won (for the 11th consecutive time) the award for outstanding insurance company in the "Program to Increase Insurance Coverage for the People". b. Exerting a positive influence and setting an example of corporate contributions to society, TCFHC has organized and sponsored a series of "Winter Warmth" charity, cultural, and athletic events as donations to social welfare organizations that care for people in remote regions, aboriginal communities, and other minority groups. 1.2 Business Plan for 2016 1.2.1 Operating Principles Seek business opportunities with Big Data and increase business performance. Optimize capital allocation and enhance operational effectiveness. Integrate cross-functional operational synergies and continue to lift capital-output ratio in subsidiaries. Expand overseas footprint and demonstrate business prowess. Modify the structure of human resources organization and promote professional management. Strengthen information integration and establish digital financial service. Implement effective internal controls and reinforce risk management. Refine corporate governance and corporate social responsibilities. 7 8 Letter to Shareholders

1.2.2 2016 Business Objectives Unit: NT$ million Name of Subsidiary Item Budget 2016

Deposits(excluding inter-bank deposit) 2,507,550

Taiwan Cooperative Bank Loans (excluding non-accrual loan) 2,012,200

Foreign exchange (US$ million) 110,000

Securities brokerage 460,000

Taiwan Cooperative Securities Securities ﬁnancing transactions 4,200

Lead and secondary underwriting cases Lead: 12, secondary: 25

Underwriting of bills 207,400

Dealing in bills and bonds 35,000 Taiwan Cooperative Bills Finance Guarantee 20,500

RP 25,550

Co-operative Assets Management Debt collection amount 1,037

BNP Paribas Cardif TCB Life Insurance Annual total premiums 44,717

Taiwan Cooperative Securities Investment Trust (note 1) Total fund size (including discretionary investment) 40,412

Taiwan Cooperative Venture Capital (note 2) Long-term equity investment 350

Note: 1: BNP Paribas TCB Asset Management has been renamed as Taiwan Cooperative Securities Investment Trust Co., Ltd. on April, 22, 2014. 2: The venture capital subsidiary was established on October 1, 2015 and became operational on November 11, 2015. 1.2.3 Major Business Policies Raise business performance standards with the help of Big Data analysis using the government’s Open Data Platform and the databases of the Group’s subsidiaries. Using Big Data analysis, gain insights into the characteristics and demographics of our clientele and design products and services that precisely cater to their needs in order to increase business volume growth at our subsidiaries. Enhance asset allocation, capital management, and financial operations at the subsidiaries in order to improve the effectiveness of the Group’s overall capital allocation. Actively plan the utilization of idle and under-used real estate in the Group to effectively increase return on capital. Utilize the diverse channels of the bank subsidiary to enhance the integrated marketing of products and services of our securities investment trust, life insurance, and venture capital subsidiaries, and increase their business volumes. Develop the Group’s integrated information analysis systems to screen for and gain insights on clients with high potential, thus increasing the effectiveness of cross- marketing and synergies within the Group. Focus on the China and Southeast Asian markets, as well as the major international financial centers, thereby boost the bank subsidiary’s plan to establish more overseas units, increase operational 2015 ANNUAL REPORT

capabilities accordingly, and raise the contribution of overseas profits. Increase the amount of the life insurance subsidiary’s overseas investments and diversify the use of capital to raise the ratio of foreign income. Continue to recruit top talents and overseas Chinese students in Taiwan from all disciplines in cultivating talents for cross-over operations and overseas markets, thereby strengthening the human resources structure of the Group. Improve on-the-job training for employees in the Group to help them obtain certifications for their professional skills and to enhance their core competence and multidisciplinary abilities. Enhance information integration within the Group, establish secure identification verification systems, and accelerate the digitization of our operations to improve overall competitiveness. Establish flexible, efficient, secure, and reliable information systems as digital services across countries, industries, and physical/virtual channels. Supervise the implementation and auditing of the compliance systems of our subsidiaries, and actively track their effectiveness to strengthen the internal control systems of the Group. Improve the risk control systems in all subsidiaries of the Group and further strengthen the detection mechanisms for major risks in the bank, securities, and life insurance subsidiaries; implement risk- oriented internal audit systems. Sufficiently disclose the Group’s CSR guidelines and financial information to increase information transparency, realize corporate governance, and build an outstanding corporate brand. With our corporate spirit of social care, organize and sponsor a variety of charity and cultural events to give back to society. 1.2.4 Future Development Strategies In 2016,we will focus on seeking business opportunities with Big Data, establishing digital financial service, capital-output ratio in subsidiaries, expanding its overseas footprint, and creating more cross- functional operational synergies. While implementing effective internal controls, reinforcing risk management, and refining corporate governance, we will expand the scale of operations, enhance business performance, and increase competitiveness in order to maximize value for shareholders.

1.3 Latest Credit Ratings and Evaluation Dates

Credit Rating Company Rating Agency Outlook Effective Date Long-term Short-term

Standard & Poor’s BBB- A-3 Stable 2016.03.07 Taiwan Cooperative Financial Holdings Taiwan Ratings twA+ twA-1 Stable 2016.03.07

Standard & Poor’s A- A-2 Stable 2016.02.22 Taiwan Cooperative Bank Taiwan Ratings twAA twA-1+ Stable 2016.02.22

Taiwan Cooperative Bills Finance Fitch AA(twn) F1+(twn) Stable 2016.03.22

Taiwan Cooperative Securities Fitch AA(twn) F1+(twn) Stable 2016.03.22 9 10 Bank Proﬁle

2. About TCFHC 2015 ANNUAL REPORT

2. About TCFHC

Date of Incorporation: December 1, 2011. Overview:

TCFHC’S investments include six wholly-owned subsidiaries, namely Taiwan Cooperative Bank, Ltd., Taiwan Cooperative Securities Co., Ltd., Taiwan Cooperative Bills Finance Corporation Ltd., Co- operative Assets Management Co., Ltd., Taiwan Cooperative Securities Investment Trust Co., Ltd., Taiwan Cooperative Venture Capital, Co., Ltd., and BNP Paribas Cardif TCB Life Insurance Co., Ltd. (the company is a joint venture between TCFHC with 51% of its shareholdings and BNP Paribas Cardif with the remaining 49%). The Group offers financial services in banking, securities, bills, asset management, life insurance, investment trust, and venture investment.

One of our subsidiaries, Taiwan Cooperative Securities Investment Trust Co., Ltd. (its former name is BNP Paribas TCB Asset Management Co., Ltd.), was a joint venture which we held 51% shares of the stock and BNP Paribas Investment Partners had 49% stakes. However, given strategic and operational considerations, we acquired the remaining 49% of shares from BNP Paribas Investment Partner and renamed the company to Taiwan Cooperative Securities Investment Trust Co., Ltd. on April 22, 2014. Furthermore, in order to provide comprehensive financial services and utilize group synergies and increase competitiveness, Taiwan Cooperative Venture Capital Co., Ltd. was founded on October 1, 2015 and became operational on November 11.

TCFHC did not engage in any merger or restructuring activities during the period from January 1, 2015 to April 26, 2016.

President Shyh-Laang Lin 11 12 Corporate Governance Report

3. Corporate Governance Report

14 3.1 Organization

16 3.2 Board Structure and Composition

18 3.3 Status of Corporate Governance Practices and Deviations from “Corporate Governance Best-Practice Principles for Financial Holding Companies” 2015 ANNUAL REPORT

From left to right, E.V.P.& Chief Audit Executive: Chwan-Jau Lii; Executive Vice President: Mei-Tsu Chen Chairman: Tsan-Chang Liao; President: Shyh-Laang Lin Executive Vice President: Kuang-Hua Hu; E. V. P. & Chief Compliance Officer: Pi-Chu Wu 13 14 Corporate Governance Report

3. Corporate Governance Report

3.1 Organization 3.1.1 Organizational Chart

General Meeting of Shareholders

Audit Committee

Remuneration Committee Board of Directors

Risk Management Committee Chairman of Business the Board Management Committee

E.V.P .& General Auditor Investment Committee President

Auditing Secretariat Department, Department, Board of Board of Directors Directors

Executive Vice President Executive Vice President Chief Compliance Officer

Business Information Risk Human Compliance Treasury Administration Accounting Development Technology Management Resource &Legal Department Department Department Department Department Department Department Department 2015 ANNUAL REPORT

3.1.2 Major Departments Department Functions Auditing Department, Auditing administration; handling of inspections by financial inspection agencies; auditing the Group’s subsidiaries; effectiveness Board of Directors evaluation of the internal auditing operations of subsidiaries; and follow-up review of auditing deficiencies. Secretariat Department, Managing shareholders meetings, Board of Directors meetings, and secretarial affairs. Board of Directors Organizational development; operational policies; strategic alliances; capital planning; investment and M&A planning; corporate Business Development governance; detecting and reporting suspicious transactions to prevent money laundering; implementing anti-terror plan; integrated Department product planning and marketing; other matters concerning the development of subsidiaries of the financial holding company; and supervision and assistance on matters within the scope of subsidiaries’ operations. Increasing and utilization of capital and financial planning for the holding company; capital utilization and asset allocation Treasury Department planning and management for the subsidiaries; management and evaluation of investment performance of subsidiaries; other financial matters for the holding company; and supervision and assistance on matters within the scope of subsidiaries’ operations. Responsible for the assessment of risk management systems and capital adequacy, contingency plans, and other matters related to Risk Management risk management for the holding company and subsidiaries; internal controls; and supervision and assistance on matters within the Department scope of subsidiaries’ operations. Legal compliance; handling of litigation and non-litigation cases; review of contracts and regulations; other legal matters Compliance and Legal concerning the financial holding company and its subsidiaries; and supervision and assistance on matters within the scope of Affairs Department subsidiaries’ operations. Information policy planning by the financial holding company and its subsidiaries; integration, establishment, and security Information Technology management of the holding company and subsidiary information systems, and other information-related matters for the financial Department holding company and its subsidiaries; and supervision and assistance on matters within the scope of subsidiaries’ operations. Human resources management and policy formulation, planning of training; other matters related to human resources management Human Resources of the financial holding company and its subsidiaries; and supervision and assistance on matters within the scope of subsidiaries’ Department operations. Financial holding company and subsidiary investor relations; disclosure of information, public relations, corporate image, and Administration general affairs; procurement; stock affairs; other matters related to administrative management; and supervision and assistance on Department matters within the scope of subsidiaries’ operations. Responsible for compiling budgets, closing reports and final reports, planning and management of accounting policies, planning and management of tax affairs for the holding company and subsidiaries; bookkeeping for the holding company, handling Accounting Department accounting and statistics, other accounting affairs; and supervision and assistance on matters within the scope of subsidiaries’ operations. 3.1.3 Group Structure Chart

As of Dec.31, 2015 Taiwan Cooperative Financial Holding Co., Ltd.

90.02％ owned 100％ owned United Taiwan Bank Taiwan Cooperative Bank, Ltd.

100％ owned Cooperative Insurance 100％ owned Brokers Co., Ltd. Taiwan Cooperative Bills Finance Corporation Ltd.

100％ owned Taiwan Cooperative Securities Co., Ltd.

100％ owned ％ Co-operative Assets 100 owned Cooperative International Management Co., Ltd. Leasing Corp., Ltd.

100％ owned Taiwan Cooperative Securities Note 1: Given strategic and operational considerations, TCFHC reached a deal with Investment Trust Co., Ltd. BNP Paribas Investment Partners to buy back the shares it did not own in the BNP Paribas TCB Asset Management Corporation joint venture on January 16, ％ 2014. It has been renamed to Taiwan Cooperative Securities Investment Trust 100 owned Taiwan Cooperative Venture Capital Co., Ltd. Co., Ltd., Ltd. after the completion of the deal on April 22,2014. Note 2: To enhance capital allocation and increase the benefits of capital use, the board of directors of Co-operative Asset Management Co., Ltd.(CAM) decided to ％ 51 owned BNP Paribas Cardif TCB Life merge CAM and its subsidiary, Cooperative I Asset Management Co., Ltd. The Insurance Co., Ltd. effective date of the merger was December 1, 2014. In this merger, CAM was the survivor entity. 15 16 Corporate Governance Report

3.2 Board Structure and Composition 3.2.1 Board of Directors, Independent Board Directors and Executives Officers As of April 26, 2016 Board of Directors

Title Name Title Name

Chairman Tsan-Chang Liao Ming-Shenq Hwang

President & Director Shyh-Laang Lin Independent Board Directors Yao-Kuei Lee

James T.H. Shih Chin-Ming Chung

Shen-Gang Mai

Ching-Tien Hsiao

Jong-Wei Chang

Chung-Fern Wu Directors Shian-Juh Chen

Cheng-Hua Fu

Mu-Chin Cheng

Ruei-Yuan Tsai

Jung-Hua Lin

As of April 26, 2016 Executive Officers

Title Name

President Shyh-Laang Lin

Executive Vice President Kuang-Hua Hu

Executive Vice President Mei-Tsu Chen

E.V.P. & Chief Audit Executive Chwan-Jau Lii

E.V.P. & Chief Compliance Ofﬁcer Pi-Chu Wu

S.V.P. & Department Head, Auditing Department Chen-Hsing Tsai

S.V.P. & Chief Corporate Secretary Jeng-Rong Tsai

S.V.P. & Department Head, Business Development Department Chung-Yueh Yuan

S.V.P. & Department Head, Human Resource Department Huie-Lin Chen

S.V.P. & Department Head, Accounting Department Chen-Tsai Chou

S.V.P. & Department Head, Administration Department Peter J.W. Ken

S.V.P. & Department Head, Compliance & Legal Affairs Department Chao-Yu Hsu

S.V.P. & Department Head, Information Technology Department Chien-Hsing Chang

S.V.P. & Department Head, Risk Management Department Shiaw-Yen Lun

V.P. & Deputy General Manager, Accounting Department Mei-Chun Wei

V.P. & Deputy General Manager, Treasury Department Gucci Ku 2015 ANNUAL REPORT

3.2.2 Professional qualifications and independence analysis of Directors

Criteria Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience Independence Criteria(Note) An Instructor or A Judge, Public Number of Higher Position in Prosecutor, Attorney, Have Work Other Public a Department of Certified Public Experience in Companies Commerce, Law, Accountant, or Other the Areas of in Which the Finance, Accounting, Professional or Technical Commerce, Individual is or Other Academic Specialist Who has Law, Finance, Concurrently Department Related Passed a National or Accounting, 1 2 3 4 5 6 7 8 9 10 Serving as an to the Business Needs Examination and been or Otherwise Independent of the Company in Awarded a Certificate in Necessary for Director a Public or Private a Profession Necessary the Business of Name Junior College, College for the Business of the the Company or University Company Chairman p p p p p p p p p p 0 Tsan-Chang Liao Director p p p p p p p p 0 Shyh-Laang Lin Director p p p p p p p p p p 0 James T.H. Shih Director p p p p p p p 0 Shen-Gang Mai Director p p p p p p p 0 Ching-Tien Hsiao Director p p p p p p p 0 Jong-Wei Chang Director p p p p p p p p p p 3 Chung-Fern Wu Director p p p p p p p p p 0 Shian-Juh Chen Director p p p p p p p p p 0 Cheng-Hua Fu Independent Board Director p p p p p p p p p p p 1 Ming-Shenq Hwang Independent Board Director p p p p p p p p p p p p 1 Yao-Kuei Lee Independent Board Director p p p p p p p p p p p 0 Chin-Ming Chung Director p p p p p p p p p 0 Mu-Chin Cheng Director p p p p p p p p p p 0 Ruei-Yuan Tsai Director p p p p p p p p p p 0 Jung-Hua Lin Note: Please tick the corresponding boxes if directors have been any of the following during the two years prior to being elected or during the term of office. 1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of the Company or any of its affiliates. The same does not apply, however, in cases where the person is an independent board director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares. 3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. 4. Not a spouse, relative within the second degree of kinship, or lineal relative within the fifth degree of kinship, of any of the persons in the preceding three subparagraphs. 5. Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of outstanding shares of the Company or that holds shares ranking in the top five in holdings. 6. Not a director, supervisor, officer, or shareholder holding 5% or more of the share, of a specified company or institution that has a financial or business relationship with the Company. 7. Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof. 8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company. 9. Not been a person of any conditions defined inArticle 30 of the Company Law. 10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law. 17 18 Corporate Governance Report

3.3 Status of Corporate Governance Practices and Deviations from “Corporate Governance Best-Practice Principles for Financial Holding Companies”

Implementation Status Deviations from "the Corporate Governance Best-Practice Principles Evaluation Item Yes No Brief Explanation for Financial Holding Companies" and reasons thereof 1. Shareholding Structure & Shareholders’ Rights (1) Dose the ﬁnancial holding p (1) TCFHC has a designated department to handle investor suggestions and (1) None. company have internal disputes. The contact information for the department is provided on our procedures for handling company website. Please refer to the “Shareholder Q&A” under the shareholder’s suggestions, “Investor Relations” option. concerns, disputes, and TCFHC has entrusted the Yuanta Securities as an agent to handle stocks litigation, and follow such affairs on behalf of the Group, and the agent follows the guidelines for procedures? handling of stock affairs which are formulated according to internal control-related regulations.

(2) Does the ﬁnancial holding p (2) TCFHC has well-understood the holding situation of its major (2) None. company possess the list of shareholders from the stock transfer book, which the detail of a transfer its major shareholders as is immediately recorded after receiving the approval of the transfer from well as the ultimate owners the competent authority, and from the shareholders’ reporting of equity of those shares? changes in accordance with the Article 25 of the Securities Exchange Act and the Article 16 of the Financial Holding Company Act.

(3) Has the financial holding p (3) TCFHC has set up an independent risk management unit to perform (3) None. company established the risk control functions for the Group as well as a risk management and implemented risk committee to monitor the risks and related procedures of the company management and firewall and its subsidiaries. mechanisms between TCFHC has in place a policy — the Criteria for Loans and Transactions affiliated enterprises. with Stakeholders by the Taiwan Cooperative Financial Holding Co., Ltd. and Its Subsidiaries — that sets out clear rules for loans and other transactions with stakeholders by the company and its subsidiaries. 2. Composition and Duties of the Board of Directors (1) Does the financial holding p (1) Aside from the Remuneration Committee and the Audit Committee, (1) None. company voluntarily TCFHC has not established other functional committees that met the establishes functional requirement under Section III of Article 35 of the Corporate Governance committees in addition Best Practice Principles for Financial Holding Companies. to the Remuneration Committee and Audit Committee.

(2) Does the financial holding p (2) TCFHC appoints accountants and assesses the independence of its (2) None. company regularly assesses certified public accountants annually. Our assessment has revealed that the independence of its the appointed accountant is prohibited from performing services for the certified public accountant? company, as prescribed by Article 47 of the Certified Public Accountant Act. The appointed accountant has also submitted a statement of independence as per Bulletin No. 10 of the Norm of Professional Ethics for Certified Public Accountants regarding “integrity, objectivity, and independence,” and is not a stakeholder as defined by the Financial Holding Company Act, thus fulfilling the requirements of appointment as the company’s accountant. 3. Has the financial holding p Our company website has a stakeholder relations section and the means to None. company established receive suggestions for the relevant departments to manage communications. communication channels with stakeholders? 2015 ANNUAL REPORT

Implementation Status Deviations from "the Corporate Governance Best-Practice Principles Evaluation Item Yes No Brief Explanation for Financial Holding Companies" and reasons thereof 4. Information Disclosure (1) Does the financial holding p (1) TCFHC has a website which is maintained in both Chinese and English (1) None. company discloses online languages. The site is updated periodically with crucial information information on its financial regarding financial matters, corporate governance, and other affairs; the situation and corporate information is also posted to the Market Observation Post System in a governance? timely manner.

(2) Does the ﬁnancial holding p (2) TCFHC handles all important internal information based on its (2) None. company uses other Operational Procedures for Handling Material Inside Information. channels to disclose Moreover, the President of TCFHC designates one Vice-President to information (e.g., setting act as spokesperson on behalf of the company and is authorized by the up an English-language President or the General Manager. In addition, TCFHC has established website, assigning staff Guidelines for News Announcements to regulate press-related affairs to collect and disclose the and promote the company’s major corporate policies and events through company’s information, the media. appointing a spokesperson, To date, TCFHC has not held an investor conference. and webcasting investor conferences).

5. Dose the financial holding p Employee rights and benefits: In order to establish a fair evaluation, None. company has additional disciplinary system and protect employees’ rights and benefits and team information to facilitate better discipline, TCFHC has administered the following regulations: the Regular understanding of its governance Employee Evaluation and Monitoring Guide, Employee Evaluation Guide, practices (including and not and Employee Disciplinary Guide. In addition, TCFHC has established a limited to employees’ rights Performance Management Steering Committee which includes employee and benefits, employee welfare, representatives to ensure the protection of employee rights and benefits. investor relations, stakeholders’ Investor relations: TCFHC has in place an “Investor Relations” section on its interests and rights, directors’ website to provide updates of its current financial situation and stock-related and supervisors’ training information. Moreover, TCFHC has designated investment management staff records, execution of risk to handle investor inquiries. management and risk Training of directors: On a voluntary basis, the directors of the company assessment, implementation register for corporate governance courses, the progress of which is regularly of customer service policies, disclosed as prescribed by law. purchasing of liability insurance Liability insurance for directors and supervisors: To mitigate the risk of loss for directors and supervisors, for TCFHC, its directors and officers, the company has been insured with and donations made to political Liability Insurance for Directors, Supervisors, and Officers. parties, stakeholders and charity TCFHC has not made any donations to any political party or stakeholder. For groups, etc.). donations to charity groups, please refer to Chapter 5.3 on Corporate Social Responsibility and Ethics. TCFHC has established the Risk Management Policy and Guidelines to serve as principles for risk management of the holding company and its subsidiaries. In addition, all subsidiaries have risk management sub-policies and guidelines in order to identify, measure, oversee and control risks.

6. Dose the ﬁnancial holding p TCFHC ranked top 20% among the publically listed companies in “The 2nd None. company compiles its Corporate Corporate Governance Evaluation” conducted by the Taiwan Stock Exchange Governance Self-assessment in 2015. Report or is assessed by a professional institution regarding corporate governance. If so, please disclose the Board of Dirctor’s view, the evaluation results, major deﬁciencies and improvement. 19 20 Capital Overview

4. Capital Overview

21 4.1 Capital and Shares

23 4.2 Dividend Policy and Implementation Status

25 4.3 Implementation of the Capital Utilization Plan 2015 ANNUAL REPORT

4. Capital Overview

4.1 Capital and Shares 4.1.1 Source of Capital As of April 26, 2016

Authorized Capital Pad-in Capital Par Month/ Value Year (NTD) Shares Amount Shares Amount 4. Capital Overview (In Thousands of Shares) (In Thousands of NTD) (In Thousands of Shares) (In Thousands of NTD) 12/2011 10 12,000,000 120,000,000 6,596,825 65,968,254

08/2012 10 12,000,000 120,000,000 6,926,666 69,266,667

09/2012 10 12,000,000 120,000,000 8,126,666 81,266,667

08/2013 10 12,000,000 120,000,000 8,614,266 86,142,667

08/2014 10 12,000,000 120,000,000 9,044,980 90,449,800

03/2015 10 12,000,000 120,000,000 10,544,980 105,449,800

08/2015 10 12,000,000 120,000,000 11,072,229 110,722,290

4.1.2 Type of Stock As of April 26, 2016

Authorized Capital Share Type Remark Issued Shares Un-issued Shares Total Shares

Common Stock 11,072,229,042 927,770,958 12,000,000,000 (Note)

Note: All issued shares are listed on the Taiwan Stock Exchange.

4.1.3 Status of Shareholders As of April 26, 2016

Government Financial Other Juridical Domestic Natural Foreign Institutions & Item Total Agencies Institutions Person Persons Natural Persons

Number of Shareholders 1 13 940 181,811 596 183,361

Shareholding (shares) 2,885,892,938 244,912,378 2,841,083,815 3,240,380,202 1,859,959,709 11,072,229,042

Percentage (%) 26.06 2.21 25.66 29.27 16.80 100

21 22 Capital Overview

4.1.4 Shareholding Distribution Status

A. Common Shares (The par value for each share is NT$10) As of April 26, 2016 Class of Shareholding Number of Shareholders Shareholding (Shares) Percentage (%) (Unit: Share)

1~999 46,067 11,866,346 0.11

1,000~5,000 64,727 160,004,370 1.45

5,001~10,000 23,489 167,940,194 1.52

10,001~15,000 12,239 148,828,678 1.34

15,001~20,000 6,556 114,590,408 1.03

20,001~30,000 8,351 204,695,756 1.85

30,001~50,000 7,609 292,143,544 2.64

50,001~100,000 6,934 482,587,082 4.36

100,001~200,000 3,863 533,940,192 4.82

200,001~400,000 2,029 561,371,414 5.07

400,001~600,000 530 254,531,148 2.30

600,001~800,000 203 138,558,630 1.25

800,001~1,000,000 100 89,126,257 0.80

1,000,001 or over 664 7,912,045,023 71.46

Total 183,361 11,072,229,042 100

B. Preferred Shares: None 4.1.5 List of Major Shareholders As of April 26, 2016 Shareholding Shareholder’s Name Shares Percentage (%)

Ministry of Finance, R.O.C. 2,885,892,938 26.06

Chunghwa Post Co., Ltd. 408,438,840 3.69

Taiwan Tobacco and Liquor Corp 354,841,000 3.20

National Farmers’ Association, R.O.C. 171,520,767 1.55

Vanguard Emerging Markets Stock Index Fund, A Series of Vanguard International Equity Index Funds 131,796,757 1.19

Dimensional Emerging Markets Value Fund 104,289,725 0.94

China Life Insurance Company, Ltd 99,750,126 0.90

Norges Bank 89,578,478 0.81

ISHARES MSCI Emerging Markets Minimum Volatility ETF 86,158,375 0.78

JPMorgan Chase Bank N.A. Taipei Branch in custody for Vanguard Total International Stock Index Fund a 83,616,973 0.76 series of Vanguard Star Funds 2015 ANNUAL REPORT

4.1.6 Market Price, Net Worth, Earnings, and Dividends per Share Unit: NT$

Items 2015 2014 01/01/2016~03/31/2016 Market Price per Share Highest Market Price 16.80 18.15 14.50 Lowest Market Price 12.55 15.80 12.70 Average Market Price 15.25 16.50 13.82 Net Worth per Share Before Distribution 16.85 17.18 17.25 After Distribution -- 15.68 -- Earnings Per Share Weighted Average Shares (thousand shares) 10,718,393 9,044,980 11,072,229 Diluted Earnings per Share 1.22 1.13 0.28 Adjusted Diluted Earnings per Share 1.14 1.08 -- Dividends per Share Cash Dividends 0.3 0.5 -- Stock Dividends ● Dividends From Retained Earnings 0.7 0.4 -- ● Dividends from Capital Surplus -- 0.1 -- Accumulated Undistributed Dividends ------Return on Investment Price/Earnings Ratio (Note 1) 12.50 14.60 49.36 Price/ Dividend Ratio (Note 2) 50.83 33 -- Cash Dividend Yield Rate (%) (Note 3) 1.97 3.03 --

Note 1: Price/Earnings Ratio=Average Market Price/Earning per Share Note 2: Price/Dividend Ratio=Average Market Price/Cash Dividends per Share Note 3: Cash Dividend Yield Rate=Cash Dividends per Share/Average Market Price 4.2 Dividend Policy and Implementation Status

A. Dividend Policy As for expanding the business scale and enhancing the profitability, and under the related law, TCFHC adopts surplus dividend policy. When TCFHC appropriates its earnings, legal reserve should be appropriated from the annual net income less any accumulated deficit. A special reserve may then be appropriated depending on regulations and operating needs. Any remainder should be appropriated as dividends, determined annually by the board of directors. Unless otherwise restricted by related regulations, TCFHC’s policy indicates that cash dividends must be 10% or above of the total dividends distributed. If the cash dividend per share is less than NT$0.1, the cash dividend will not be distributed unless the distribution is resolved in the stockholders’ meetings. 23 24 Capital Overview

B. Proposed Distribution of Dividends for the Shareholders of the Company at the next Shareholders’ Meeting A profit distribution proposal will be made to pay a cash dividend of NT$0.3 per share, totaling NT$3,321,668,713. The dividend payout ratio will set at 7%, which will equivalent to pay 70 shares per 1,000 share to the shareholders of the company. Such stock dividends appropriated from earnings and capital reserve will total NT$7,750,560,330.

C. Impact of Stock Grants on Operational Performance and Earnings Per Share at the Shareholders’ Meeting Both “Regulations Governing the Publication of Financial Forecasts of Public Companies” and “Taiwan Stock Exchange Corporation Standards for Determining Whether a TWSE Listed Company Shall Publish Complete Financial Forecasts” governs the publication of financial forecasts of public companies. We therefore cannot give our forecasted operating income, profit-and-loss, and earnings per share for the year 2016 in the report.

D. Remuneration of Employees, Directors, and Supervisors

Remuneration of Employees, Directors, and Supervisors as Prescribed in the Articles of Incorporation In any given year when the company is profitable, and based on the level of profitability, 0.0001 to 0.0008 of its profit is appropriated as remuneration for employees. The recipients of the remuneration include qualified employees from subordinate companies. Directors’ remuneration may not exceed 1%, depending on the level of profitability. When there are accumulated losses, the profit shall be retained to first offset such losses. The aforementioned level of profitability refers to pre-tax income before deductions made for the remuneration of employees and directors. The distribution of remuneration to employees and directors are made in lump sums. Subject to approval from the majority of directors present at a board meeting with two-thirds of the members present, the remuneration for employees is distributed in the form of stock or cash. Such a board resolution is to be presented at a shareholders meeting.

Estimation Basis for the Remuneration Amount to Employees, Directors, and Supervisors; the Calculation Basis for the Number of Shares Distributed as Remuneration for Employees; and the Accounting Procedure in the Event of a Discrepancy between the Actual Distribution and the Estimated Amount. The remuneration of employees and directors are calculated as 0.0147% and 0.55%, respectively, of pre-tax income before deduction of such remunerations. In the event of a significant change to the distributable amount as resolved by the Board of Directors post the financial year-end, any variation 2015 ANNUAL REPORT

must be reflected in the originally submitted annual expenses. If further changes are made by resolution at the shareholders meeting, they are to be processed according to accounting procedures and recorded in the year of the shareholders meeting resolution.

Distribution of Remuneration Approved by the Board of Directors a. Any discrepancies, reasons thereof, and responses thereto with regards to the actual amount of remuneration distributed in cash or stock to employees, directors and supervisors and the recognized amounts according to the annual estimate must be disclosed. In 2015, TCFHC proposed to distribute NT$1,897,213 as employees’ remuneration and NT$70,984,147 as directors’ remuneration. TCFHC did not distribute remuneration to employees in the form of stock in 2015. The proposed amounts for distribution matched the recognized amounts in the annual estimate. b. The ratio of employee remuneration distributed in stock in the combined amount of post-tax net income and employee remuneration listed in the non-consolidated financial statement of the period: TCFHC did not distribute employee remuneration in stock in 2015.

Actual Distribution versus Recognized Remuneration of Employees, Directors, and Supervisors (Including the Number of Shares, Share Price, and Amounts Distributed); Any Discrepancies, Reasons, and Responses are to be Stated The amount of employee bonuses and remuneration for directors and supervisors approved at the general shareholders meeting in 2015 were the same as those proposed. In 2014, the actual amounts distributed for employee bonuses and the remuneration of directors and supervisors were NT$1,842,544 and NT$64,488,996, respectively. While the former showed no variation from its recognized amount in the 2014 financial statement, the latter differed by just NT$27 from the recognized amount of NT$64,489,023. The discrepancies were attributable to minor calculation adjustments.

4.3 Implementation of the Capital Utilization Plan 4.3.1 Contents of the Plan

Capital Utilization Plan In order to meet the requirements for future developments and operations of the Group, TCFHC invested in the bank and securities subsidiaries to increase the capital adequacy ratio of the bank subsidiary and the net worth of the securities subsidiary.

Approval Date and Document Number The capital increase was approved by the Financial Supervisory Commission (Permission No. 1030052987) on January 12, 2015. 25 26 Capital Overview

Sources of Capital a. For the capital increase by cash, 1.5 billion common shares were issued, each with a NT$10 face value. The issue price per share was NT$14.58. The total amount of capital raised was NT$21.87 billion. b. A further NT$630 million was raised with the company's own capital and through other means.

Plan Objectives and Progress of Capital Utilization Unit: NT$ thousand Projected progress of capital utilization Estimated date of Total capital Objective 2015 completion required First quarter Second Quarter Third Quarter Investment in Taiwan Cooperative Bank Q1 2015 21,350,000 21,350,000 - - Investment in Taiwan Cooperative Securities Q3 2015 1,150,000 - - 1,150,000 Total 22,500,000 21,350,000 - 1,150,000 Increasing the capital adequacy of Taiwan Cooperative Bank, Ltd. : Investing in this subsidiary should enhance its operating capital and increase its capital adequacy ratio to 13.16% and tier-1 capital ratio to 9.13% (as at September 2015). Expected results Increasing the net worth of Taiwan Cooperative Securities Co., Ltd.: Investing in this subsidiary should improve its operating capital and meet the needs for future development. After the capital increase, its net worth is expected to rise to NT$4,150,935,000, fulfilling the requirement to establish an overseas securities unit (NT$4 billion net worth or higher), and enhancing its competitiveness and proﬁtability.

4.3.2 Implementation According to plan, TCFHC invested NT$21.35 billion in the bank subsidiary during the first quarter of 2015 and shifted the NT$1.15 billion investment in the securities subsidiary to the second quarter. The status of the plan’s execution and its effectiveness are as follows:

Plan Execution

Unit: NT$ thousand Item Execution Q1 2015 Q2 2015 Planned 21,350,000 - Amount Actual 21,350,000 - Investment in Taiwan Cooperative Bank Planned 100 - Progress (%) Actual 100 - Planned - 0 Amount Actual - 1,150,000 Investment in Taiwan Cooperative Securities Planned - 0 Progress (%) Actual - 100 Note: The actual capital utilization in the plan was ahead of schedule mainly because capital raising was completed earlier than projected.

Effectiveness Analysis

Item Projected result Actual result Increase capital adequacy ratio and tier-1 capital Capital adequacy ratio expected to rise to 13.16%; By the end of Q1 2015, capital adequacy ratio ratio of Taiwan Cooperative Bank tier-1 capital ratio increase to 9.13%. increased to 13.69% while tier-1 capital ratio rose to 9.33%. Increase the net worth of Taiwan Cooperative Increase to NT$4,150,935,000 By the end of Q2 2015, net worth rose to Securities NT$5,056,643,000. 2015 ANNUAL REPORT

Comparison of key financial ratios of TCFHC, the bank subsidiary, and the securities subsidiary before and after the capital increase: a. TCFHC

2015 2014

Return on equity (%) 7.72 6.70

Return on total assets (%) 0.43 0.34

Double leverage ratio (%) 107.44 105.42

Group capital adequacy ratio (%) 137.55 132.88

Net Income (NT$ thousand) 13,461,711 10,414,068

Earnings per share (NT$) 1.22 1.08

b. Bank subsidiary

2015 2014

Return on equity (%) 7.28 6.99

Return on total assets (%) 0.41 0.35

Net Income (NT$ thousand) 12,129,481 10,128,559

Earnings per share ( NT$) 1.52 1.46

Capital adequacy ratio 12.64 12.74

Tier-1 capital ratio 9.32 8.19

c. Securities subsidiary

2015 2014

Return on equity (%) 4.15 0.48

Return on total assets (%) 1.52 0.17

Net income (NT$ thousand) 170,434 14,308

Earnings per share (NT$) 0.44 0.05

27 28 Business Operation Overview

5. Business Operation Overview

29 5.1 Business Overview

31 5.2 Cross-Functional Integration and Co- Marketing Benefits

32 5.3 Corporate Social Responsibility and Ethics

36 5.4 Employee Code of Ethical Conduct 2015 ANNUAL REPORT

5. Business Operations Overview 5.1 Business Overview Taiwan Cooperative Financial Holding Co., Ltd. A. Main areas of business operations According to Taiwan’s Financial Holding Company Act, the business of a financial holding company shall be limited to investment in, and management of, its invested enterprises.

B. Revenue distribution 5. Business Operation Unit: NT$ thousand Year 2015 2014 Overview Item Amount % Amount % Share of gains of subsidiaries, associates and joint ventures accounted for using 13,333,107 99.97 10,528,276 99.97 equity method

Other revenues and gains 3,540 0.03 2,993 0.03

Total revenues and gains 13,336,647 100.00 10,531,269 100.00

The overview of the business subsidiaries are shown in the table below: A. Taiwan Cooperative Bank, Ltd. Unit: NT$ thousand

Year 2015 2014 2015/2014

Item Amount % Amount % Change amount Change %

Net interest income 29,906,237 76.41 27,652,947 69.90 2,253,290 8.15

Net fee income 5,929,969 15.15 5,259,824 13.30 670,145 12.74

Gain on ﬁnancial assets and liabilities at fair value 455,847 1.16 2,663,086 6.73 ( 2,207,239 ) ( 82.88 ) through proﬁt or loss

Realized gain on available-for-sale ﬁnancial assets 633,063 1.62 550,004 1.39 83,059 15.10

Foreign exchange gain 1,243,147 3.18 ( 95,262 ) ( 0.24 ) 1,338,409 1,404.98

Asset impairment reversals ( 5,730 ) ( 0.01 ) ( 21,236 ) ( 0.05 ) 15,506 73.02

Share of gains of subsidiaries, associates and joint 294,718 0.75 224,293 0.57 70,425 31.40 ventures accounted for using equity method

Gain on ﬁnancial assets carried at cost 240,159 0.61 252,294 0.64 ( 12,135 ) ( 4.81 )

Interests of property transactions 154,779 0.40 3,106,619 7.85 ( 2,951,840 ) ( 95.02 )

Other non-interest income-net 285,691 0.73 ( 34,569 ) ( 0.09 ) 320,260 926.44

Total 39,137,880 100.00 39,558,000 100.00 ( 420,120 ) ( 1.06 )

Note: This table provides non-consolidated financial information. 29 30 Business Operation Overview

B. Taiwan Cooperative Securities Co., Ltd. Unit: NT$ thousand Year 2015 2014

Item Amount % Amount %

Brokerage fee income 244,421 35 253,675 51

Underwriting income 76,330 11 26,596 5

Gain on sale of operating securities-underwriting 34,149 5 24,445 5

Gain on sale of operating securities-dealing 114,320 17 2,817 1

Interest income 207,653 30 180,026 37

Dividend income 16,060 2 4,425 1

Net income-securities held for operations -11,680 -2 5,255 1

Future commission income 5,775 1 4,317 1

Net income on derivatives -1,497 0 -10,011 -2

Other operating income 6,966 1 867 0

Total 692,497 100 492,412 100

C. Taiwan Cooperative Bills Financial Corporation Ltd. Unit: NT$ thousand

Year 2015 2014 Ratio in total income Ratio in total income Amount Amount Item (%) (%)

Bills revenue 361,036 55.34 300,647 58.58

Bond proceeds 258,244 39.59 154,120 30.03

Other non interest income 33,091 5.07 58,472 11.39

Total 652,371 100.00 513,239 100.00

D. Co-operative Assets Management Co., Ltd. Unit: NT$ thousand Year 2015 (consolidated) 2014 (consolidated)

Item Amount % Amount %

Interest Revenues from Buying Credit 676,760 74.29 685,198 82.54

Rental Income 152,479 16.74 77,444 9.33

Rental Revenues 60,046 6.59 45,433 5.47

Gain on disposal of assets-not-for-operations 15,423 1.69 10,244 1.23

Interest income 2,803 0.31 9,391 1.13

Income on exchange - - 2,343 0.28

Other operating income 3,492 0.38 74 0.02

Total 911,003 100.00 830,127 100.00 2015 ANNUAL REPORT

E. Taiwan Cooperative Securities Investment Trust Co., Ltd. Unit: NT$ thousand

Item 2015 2014

Year Amount % Amount %

Equity 20,936 14 32,569 29 Mutual fund management fees Fixed income 121,960 79 76,075 68

Discretionary management fees 10,695 7 3,276 3

Operational fees 0 0 0 0

Total 153,591 100 111,920 100

F. Taiwan Cooperative Venture Capital Co., Ltd. Taiwan Cooperative Venture Capital was established on October 1, 2015 and became operational on November 11, 2015. The company had not yet received long-term equity investment cases as at the end of 2015.

G. BNP Paribas Cardif TCB Life Insurance Co., Ltd. Unit: NT$ million

Year 2015 2014

Item Amount % Amount %

UL Unit Link Products 28,429 90.2 31,898 93.2

Traditional Products 653 2.1 720 2.1

CI Credit Insurance Products 1,997 6.3 1,244 3.6

IP Individual Protection Products 443 1.4 366 1.1

Total 31,522 100.0 34,228 100.0

5.2 Cross-Functional Integration and Co-Marketing Benefits To integrate the resources of all our subsidiaries and create operating synergies, we held regular integrated business meetings with our subsidiaries to review co-marketing performance. Our life insurance company adopts the co-marketing strategy. In 2015, approximately 92.1% of its total premium income was earned through tie-up with our other subsidiaries. Our securities investment trust company sells funds through tie-up with our other subsidiaries. In 2015, the sales of funds through co-marketing accounted for 76.01% of its total fund sales. Our securities company started to offer and sell a wide range of securities business since June 2012. By the end of 2015, we set up 240 counters providing securities-transaction services to our banking customers. In addition, the number of shares or contracts traded through these counters represented 62.59% of our total securities trading volume. 31 32 Business Operation Overview

5.3 Corporate Social Responsibility and Ethics TCFHC operates on robust business principles and is committed to compliance, corporate social responsibility, corporate governance, and a mutually beneficial corporate culture to maximize value for our shareholders.

Customer Rights and Benefits To protect customer rights and benefits, TCFHC urges and supervises our subsidiaries in formulating customer protection terms based on Article 65 of the Corporate Governance Best Practice Principles. In addition, to protect customer information, We has implemented the Confidentiality Measures for Customer Information and published it on our website.

Employee Care, Rights, Safety, and Health a. TCFHC's human resources management systems comply with labor laws and the relevant regulations. Our employee retirement policies comply with the Labor Standards Act, the Labor Pension Act, and the company's Regulations for Employee Retirement, Pension, and Severance. The company also appropriates amounts prescribed by the Labor Pension Act to individual labor pension accounts at the Bureau of Labor Insurance. b. TCFHC values employee welfare. Our employee remuneration standards are formulated based on industry norms. The company has also been selected by TWSE as a constituent stock in the Taiwan High Compensation 100 Index. The Index is the world's first corporate social responsibility index for encouraging corporations to focus on employee remuneration. c. The Group has regulations in place to ensure that employees' legal rights are protected. We have also set up a suggestion box on the company's website as a labor-management communication channel for employees to voice any grievances. The bank subsidiary holds annual labor-management meetings as a communication platform to discuss suggestions from the labor side and operational changes from the management. All employees are notified of major resolutions made at such meetings via email. d. The company approves annual budgets for the training of its employees, and encourages them to use internal, external, and personal training resources. When required for operations, employees are assigned to professional seminars. The company also conducts internal job rotations for employees to comprehensively enhance their professional abilities. e. We adopt the Policies for Preventive Measures and Complaints, Disposition, and Punishment for Sexual Harassment in the Workplace in order to prevent sexual harassment and protect victims’ rights. We strictly forbid any act of sexual harassment in the workplace. Violators are punished based on the severity of their actions. In addition to providing information on sexual harassment prevention, we have established anonymous complaint channels to handle such issues to provide a workplace free of sexual harassment and to resolve employee grievances. 2015 ANNUAL REPORT

f. To ensure workplace safety and the health of our employees, we have implemented the Safety and Health Work Rules and the Occupational Safety and Health Management Plan, based on which we perform regular maintenance and repairs of our facilities, conduct safety and health training, safety drills, and inspection. g. To provide employees with a comfortable, healthy, and safe workplace, we regularly conduct inspections of building structures, carbon dioxide concentrations, and fire protection. All buildings are furnished with fire-resistant/fireproof, flameproof, and non-toxic materials. Security personnel are stationed at all buildings, with surveillance and access control systems to ensure safe entry and exit. Printers are installed in separate rooms with air purification equipment to prevent employees from exposure to potentially toxic environments. Breastfeeding rooms are also set up for female employees to comfortably feed their babies or collect milk. h. TCFHC assigns employees fire protection, disaster prevention, safety, first-aid, occupational hazards, and occupational safety and health training programs. Assistance is provided to the company's occupational safety personnel to obtain the relevant certifications. We also contract researchers and professionals in health, CPR, and AED first-aid lectures to enhance employees' knowledge of safety matters. i. We regularly conduct employee health examinations, offer paid health examination leave, and subsidize health examinations. A medical room has been set up in the headquarters building, staffed with doctors and professional nurses to offer health consultation and basic medical services to enhance employee health.

Environmental Protection a. TCFHC complies with energy conservation and emissions-reduction policies, and strives to promote environmental protection. Our administrative division is responsible for managing our corporate environment with the aim to save electricity and water usage through measures such as controlling the temperature air-conditioners, installing new energy-efficient lighting technologies, and installing water conservation devices in water supply systems. In addition to displaying posters to promote environmental awareness, we also propagate energy-saving and water-conservation information to our employees. In the workplace, we also commit to resources recycling and re-using. b. We have implemented electronic document management systems and meeting systems to deploy paperless documentation and meeting processes. Hard-copy documents are printed double-sided with as much re-used paper as possible to minimize paper wastage, and we require our contractor for printing supplies to assist in recycling used toner cartridges. c. With regard to procurement, we prioritize equipment that is certified with the Energy Label. For facility furnishing, we prioritize products that have been certified for green buildings or with the

33 34 Business Operation Overview

Green Label. We purchase equipment with high-energy efficiency, and we require our contractor for printing supplies to assist in recycling used toner and ink cartridges. d. In our Notices for Tenders and the terms of the contract, we specify terms of corporate social responsibility and require suppliers to comply with national environmental laws and regulations regarding environmental protection, safety, and health to prevent any form of pollution or human rights violation during production or services, jointly contributing to corporate social responsibility. e. In addition to internal environmentally friendly and energy-saving measures, we actively promote paperless financial transactions to provide clients with more convenient electronic financial services and minimize printing on paper. Since August 2015, Taiwan Cooperative Bank, Ltd. has combined trust asset reports, statements, and electronic transfer records into a consolidated statement. By the end of 2015, 70,858 clients chose to switch to receiving statements via email, and 126,361 electronic consolidated statements were sent. We have also been encouraging the bank's credit card holders to switch to electronic bills, with a penetration rate of 16.39%. In addition to online policy search and modification services, the life insurance subsidiary has also provided a 24-hour online digital services insurance application platform, which has been operational since June 2015.

Fulfilling corporate social responsibility is a part of TCFHC’s business principles. The following are engagements by the company and its subsidiaries in charity events, social contributions and services, and community participation in 2015: a. TCFHC, its bank subsidiary, and National Taxation Bureau of the North Area co-organized the "2015 Ministry of Finance Uniform Invoice Cup Running Event in New Taipei City" at Fishermen's Wharf, Tamsui. The event collected 335,858 uniform invoices, which were all distributed as a donation to the Chun-Hui Center for Persons with Intellectual Disabilities of the Chung Hua Foundation for Persons with Intellectual Disability, the New Taipei City Autism Service Association, the Taipei Happy Mount Social Welfare and Charity Foundation, and the Institute for the Blind of Taiwan. The employees of TCFHC donated more than 141,500 uniform invoices, reflecting the care and energy of the Group as it embodied the goals of the event to "turn invoices into love, support charity with action, and run for a healthy life." b. In the spirit of love and care for society, TCFHC and the bank subsidiary continue to hold winter charity events to uncover more underprivileged children and groups that need assistance. In 2015, TCFHC made donations in 16 counties and cities in Taiwan, totaling 27 homes, schools, and charity organizations. c. In the aftermath of the Formosa Fun Coast explosion tragedy in June 2015, we contributed to the medical and rehabilitation expenses of the victims. As part of fulfilling our corporate social responsibility, TCFHC and its subsidiaries jointly donated TWD10 million with hopes to inspire compassion and contributions to the victims. 2015 ANNUAL REPORT

d. In the spirit of giving back to society, the bank subsidiary sponsored the New Year’s party for new immigrants held by Taipei's Pearl S. Buck Foundation, the aboriginal community service project by Taichung's Stella Matutina Girls' High School, Yilan's Tzih Huai Social Welfare Foundation, the Taiwan U-life Association, and the Eden Social Welfare Foundation. e. In response to the Financial Supervisory Commission promoting financial corporations to contribute to social welfare, the bank subsidiary participated in the 2015 "Finance with Love" food and supplies donation drive to help alleviate the plight of minority families in remote impoverished regions. f. To support small-and-medium sized start-up companies, promote local cultures, and as part of fulfilling our corporate social responsibility, the bank subsidiary sponsored the Startup Incubation Program for Central Taiwan and the Startup Incubation Program for Yunlin and Chiayi organized by the Taiwan Love and Care Association to help minority women and ambitious youth start their own businesses. g. In light of the damages caused by Typhoon Soudelor and Typhoon Dujuan, the bank subsidiary in collaboration with the government offered policy-based loans for natural disaster recovery as well as other loans to help with the resumption of normal life for the affected farmers, fishermen, agricultural businesses, and other individuals and businesses. h. To fulfill our corporate social responsibility and assist minority children, the bank subsidiary issued a credit card — the Care Card — in collaboration with the Child Welfare League Foundation. The bank donates a portion of the card holder’s payables to the foundation, which has made a difference in their social work supporting to minority children. For children with cardiac diseases, the bank issues the Heart Child Card in collaboration with the Cardiac Children’s Foundation of Taiwan, donating a portion of the card holder’s payables to the foundation to help the children. i. In response to the Financial Supervisory Commission promoting financial corporations contributing to social welfare, TCFHC became a co-organizer of the College Student Finance Career Charity Class with Taiwan Depository & Clearing Corporation. This initiative offers college students with financial disadvantages professional training courses in finance in order to enhance their career competitiveness and help them overcome financial difficulties. j. To support students from minority families to complete their education and offer them training courses in finance, the bank subsidiary sponsored the Taiwan Financial Services Roundtable in the Financial Industry Training Charity Fund, which encourages students in their academic pursuits and promotes financial knowledge. k. The bank subsidiary participated in the Financial Industry Social Care Fair hosted by the Taiwan Financial Services Roundtable in Nantou and Taitung. By engaging with the public, we offer financial knowledge through fun activities while inspiring care for minority groups.

35 36 Business Operation Overview

l. To promote academic financial development in Taiwan, TCFHC participated in the Chung-Hua Financial Summit hosted by the Chung-Hua Institution for Economic Research, the 13th Chinese Industry Leader Global Views Summit organized by Global Views – Commonwealth Publishing Group, and the 2015HackNTU competition hosted by National Taiwan University. The bank subsidiary also participated in several international forums in 2015, including the Public-Private Partnership Conference organized by Economic Daily News, the Digital Accounting Innovation Charity Contest: Digital Finance, Electronic Invoice, and XBRL Promotion event of the Accounting Research and Development Foundation, the 2015 Symposium of the Institute of Internal Auditors (IIA)-Taiwan Chapter, the 2015 Finance Forum by Mr. & Ms. Yuan-Dong Sheu's Memorial Culture & Education Foundation. To support cross-strait financial operations, the bank subsidiary also attended the 2015 Conference on Cross-Strait Banking and Finance hosted by the Banking Education Association of Taiwan and the 20th Cross-strait Banking Symposium put together by the Taipei Foundation of Finance. m. To encourage college and graduates to engage in financial research, the bank subsidiary implemented the Regulations for Research Grants. In 2015, 11 outstanding students were awarded this grant; to date, a total of 728 students have been awarded, contributing to economic and financial research in Taiwan. n. To promote physical activities among the public, the bank subsidiary used the resources of our baseball team, badminton team and table tennis team to organize winter and summer vacation sports camps. At the camps, the TCB Baseball Team donated baseball equipment to the local elementary school baseball teams. The TCB Cup invitational badminton and slow-pitch softball matches and the Maxxis-TCFHC Cup were also held. We also sponsored the Badminton Taipei Open, the Chinese Taipei Junior and Cadet Open, and the Chinese Taipei Volleyball Association, contributing to the development of sporting events. Thanks to the efforts by the bank subsidiary to promote athletic activities, in 2015, the Sports Administration of the Ministry of Education presented the company with the Sports Activist Awards in the sponsorship, long-term sponsorship, and promotion categories. The company has won the Sports Activist Awards for seven consecutive years. 5.4 Employee Code of Ethical Conduct TCFHC adopts the Standards of Ethical Conduct for Employees in order to set out the basic standard of conduct expected of all directors and staff, and the Group’s policy on acceptance of. These Standards can be found on the“Corporate Governance”option of our website (http://www.tcfhc.com.tw). 2015 ANNUAL REPORT

6. Financial Information

37 38 Financial Information

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders

Taiwan Cooperative Financial Holding Co., Ltd.

We have audited the accompanying consolidated balance sheets of Taiwan Cooperative Financial Holding Co., Ltd. and its subsidiaries (collectively, the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements of Financial Institutions by Certified Public Accountants, Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to in the first paragraph present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2015 and 2014 and its consolidated financial performance and its consolidated cash flows for the years then ended, in conformity with the Regulations Governing the Preparation of Financial Reports by Financial Holding Companies, Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms, and Regulations Governing the Preparation of 2015 ANNUAL REPORT

Financial Reports by Insurance Enterprises, as well as International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretation of IFRS (IFRIC) and Interpretations of IAS (SIC) endorsed by the Financial Supervisory Commission of the Republic of China.

March 28, 2016

Notice to Readers

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

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

39 40 Financial Information

TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2015 AND 2014 (In Thousands of New Taiwan Dollars) 2015 2014 (Audited after Retrospected) ASSETS Amount % Amount % CASH AND CASH EQUIVALENTS (Notes 4, 6 and 38) $ 43,753,654 1 $ 45,149,610 2 DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS (Notes 4, 7, 38 and 39) 706,456,442 22 685,306,762 22 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4, 8 and 38) 37,138,694 1 62,603,553 2 AVAILABLE-FOR-SALE FINANCIAL ASSETS, NET (Notes 4, 9 and 39) 152,087,557 5 126,818,812 4 SECURITIES PURCHASED UNDER RESELL AGREEMENTS (Notes 4 and 10) 1,346,831 - 2,322,745 - RECEIVABLES, NET (Notes 4, 11, 38 and 39) 23,484,726 1 24,735,185 1 CURRENT TAX ASSETS (Notes 4 and 35) 1,217,277 - 1,676,447 - DISCOUNTS AND LOANS, NET (Notes 4, 12, 38 and 39) 1,981,115,609 61 1,860,748,281 60 REINSURANCE ASSETS, NET (Note 4) 27,088 - 18,056 - HELD-TO-MATURITY FINANCIAL ASSETS (Notes 4, 13 and 39) 45,199,348 2 22,066,804 1 INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD (Notes 4 and 14) 122,023 - 115,905 - OTHER FINANCIAL ASSETS, NET (Notes 4, 15, 29 and 39) 191,284,181 6 196,758,103 7 INVESTMENT PROPERTIES, NET (Notes 4 and 16) 3,570,167 - 2,714,707 - PROPERTIES AND EQUIPMENT, NET (Notes 4 and 17) 39,485,980 1 40,312,130 1 INTANGIBLE ASSETS (Notes 4 and 18) 3,683,142 - 3,765,773 - DEFERRED TAX ASSETS (Notes 4 and 35) 1,328,980 - 1,142,191 - OTHER ASSETS, NET (Notes 4, 19 and 28) 3,793,581 - 5,910,142 - TOTAL $ 3,235,095,280 100 $ 3,082,165,206 100 LIABILITIES AND EQUITY DUE TO THE CENTRAL BANK AND OTHER BANKS (Notes 20 and 38) $ 204,595,814 6 $ 182,820,696 6 FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4, 8, 25 and 38) 15,513,219 - 6,730,193 - SECURITIES SOLD UNDER REPURCHASE AGREEMENTS (Notes 4, 8, 9, 10, 13, 21 and 38) 51,141,231 2 46,390,229 2 COMMERCIAL PAPER ISSUED, NET (Note 22) 15,557,051 1 12,177,863 - PAYABLES (Notes 4, 23 and 38) 38,665,035 1 45,499,471 2 CURRENT TAX LIABILITIES (Notes 4 and 35) 1,349,570 - 104,927 - DEPOSITS AND REMITTANCES (Notes 24 and 38) 2,502,775,090 77 2,396,440,749 78 BONDS PAYABLE (Note 25) 69,610,000 2 92,110,000 3 OTHER BORROWINGS (Notes 22 and 26) 851,606 - 922,008 - PROVISIONS (Notes 4, 27 and 28) 54,947,799 2 59,454,738 2 OTHER FINANCIAL LIABILITIES (Notes 4 and 29) 84,646,193 3 75,942,974 2 DEFERRED TAX LIABILITIES (Notes 4, 17 and 35) 3,529,676 - 3,598,327 - OTHER LIABILITIES (Note 30) 1,591,110 - 1,386,405 - Total liabilities 3,044,773,394 94 2,923,578,580 95 EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY Capital stock Common stock 110,722,290 3 90,449,800 3 Capital surplus 57,964,343 2 51,818,091 2 Retained earnings Legal reserve 2,356,575 - 1,332,940 - Special reserve 996,026 - 996,026 - Unappropriated earnings 12,866,132 1 10,918,919 - Total retained earnings 16,218,733 1 13,247,885 - Other equity 1,689,065 - (164,453 ) - Total equity attributable to owners of the Company 186,594,431 6 155,351,323 5 NON-CONTROLLING INTERESTS 3,727,455 - 3,235,303 - Total equity 190,321,886 6 158,586,626 5 TOTAL $ 3,235,095,280 100 $ 3,082,165,206 100

The accompanying notes are an integral part of the consolidated financial statements. 2015 ANNUAL REPORT

TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) Percentage 2014 2015 Increase (Audited after Retrospected) (Decrease) Amount % Amount % % INTEREST REVENUE (Notes 4, 31 and 38) $ 53,415,061 140 $ 52,927,408 149 1 INTEREST EXPENSE (Notes 4, 31 and 38) ( 21,340,692 ) ( 56 ) ( 23,156,579 ) ( 65 ) ( 8 ) NET INTEREST 32,074,369 84 29,770,829 84 8 NET REVENUES AND GAINS OTHER THAN INTEREST Service fee and commission income, net (Notes 4, 32 and 38) 6,285,788 16 5,436,442 15 16 Premium loss, net (Notes 4 and 29) ( 3,650,516 ) ( 10 ) ( 6,096,977 ) ( 17 ) ( 40 ) Gains on financial assets and liabilities at fair value throughprofit or loss (Notes 4, 33 and 38) 182,950 - 1,621,802 4 ( 89 ) Realized gains on available-for-sale financial assets (Note 4) 1,153,146 3 944,787 3 22 Foreign exchange gains, net (Note 4) 1,836,226 5 955,021 3 92 Impairment losses on assets (Notes 4, 9, 13, 15 and 19) ( 5,730 ) - ( 21,236 ) - ( 73 ) Share of gains of associates and joint ventures accounted for using the equity method (Notes 4 and 14) 13,432 - 15,018 - ( 11 ) Gains on financial assets carried at cost, net (Note 4) 240,995 1 252,973 1 ( 5 ) Gains on disposal of properties and equipment, net (Note 4) - - 2,680,984 7 ( 100 ) Other noninterest gains (losses), net (Note 38) 192,034 1 ( 73,170 ) - 362 Total net revenues and gains other than interest 6,248,325 16 5,715,644 16 9 TOTAL NET REVENUES 38,322,694 100 35,486,473 100 8 BAD-DEBT EXPENSES AND PROVISION FOR LOSSES ON GUARANTEES (Notes 4 and 12) ( 2,224,992 ) ( 6 ) ( 6,426,454 ) ( 18 ) ( 65 ) NET CHANGE IN RESERVES FOR INSURANCE LIABILITIES (Notes 4 and 27) 4,343,586 12 6,319,674 18 ( 31 ) OPERATING EXPENSES (Notes 4, 16, 17, 18, 28 and 34) Employee benefits ( 16,152,203 ) ( 42 ) ( 15,429,103 ) ( 43 ) 5 Depreciation and amortization ( 1,306,831 ) ( 4 ) ( 1,310,640 ) ( 4 ) - General and administrative ( 7,370,634 ) ( 19 ) ( 6,574,542 ) ( 19 ) 12 Total operating expenses ( 24,829,668 ) ( 65 ) ( 23,314,285 ) ( 66 ) 6 INCOME BEFORE INCOME TAX 15,611,620 41 12,065,408 34 29 INCOME TAX EXPENSE (Notes 4 and 35) ( 2,149,909 ) ( 6 ) ( 1,651,340 ) ( 5 ) 30 NET INCOME 13,461,711 35 10,414,068 29 29 OTHER COMPREHENSIVE INCOME Items that will not be reclassified subsequently to profit or loss (Notes 4 and 28) Remeasurement of defined benefit plans ( 617,722 ) ( 1 ) ( 34,287 ) - 1,702 Change in the fair value attributable to changes in the credit risk of financial liabilities designated as at fair value through profit or loss 2,168 - - - - Items that will not be reclassified subsequently to profit or loss, net of income tax ( 615,554 ) ( 1 ) ( 34,287 ) - 1,695 Items that may be reclassified subsequently to profit or loss (Notes 4, 14 and 35) Exchange differences on the translation of financial statements of foreign operations 29,731 - 252,775 1 ( 88 ) Unrealized gains on available-for- sale financial assets 1,921,311 5 36,359 - 5,184 Share of other comprehensive losses of associates and joint ventures accounted for using the equity method ( 111 ) - ( 591 ) - ( 81 ) Income tax attributable to other comprehensive income 9,912 - 14,302 - ( 31 ) Items that may be reclassified subsequently to profit or loss, tne of income tax 1,960,843 5 302,845 1 547 Other comprehensive income, net of income tax 1,345,289 4 268,558 1 401 TOTAL COMPREHENSIVE INCOME $ 14,807,000 39 $ 10,682,626 30 39 NET INCOME ATTRIBUTABLE TO: Owners of the Company $ 13,079,052 34 $ 10,237,424 29 28 Non-controlling interests 382,659 1 176,644 - 117 $ 13,461,711 35 $ 10,414,068 29 29 TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Company $ 14,314,848 38 $ 10,372,542 29 38 Non-controlling interests 492,152 1 310,084 1 59 $ 14,807,000 39 $ 10,682,626 30 39 EARNINGS PER SHARE (NEW TAIWAN dollars; Note 36) Basic $ 1.22 $ 1.08 Diluted $ 1.22 $ 1.08 The accompanying notes are an integral part of the consolidated financial statements. 41 42

TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 Financial Information (In Thousands of New Taiwan Dollars)

Equity Attributable to Owners of the Company

Other Equity

Changes in the Fair Value Attributable to Changes in the Credit Exchange DifferencesUnrealized Gains Risk of Financial Capital Stock (Note 37) Retained Earnings (Notes 4 and 37) on the Translation of (Losses) on Liabilities Designated Financial StatementsAvailable-for-sale as at Fair Value Non-controlling Shares Capital Surplus Unappropriatedof Foreign OperationsFinancial Assetsthrough Profit or Loss Interests (In Thousands) Common Stock (Notes 4 and 37) Legal Reserve Special ReserveEarnings (Note 4) (Note 4) (Note 4) (Notes 4, 37 and 49)Total Equity

BALANCE, JANUARY 1, 2014 8,614,266 $ 86,142,667 $ 56,125,224 $ 782,391 $ 1,083,833 $ 5,505,489 $ 44,213 $ ( 378,071 ) $ - $ 3,060,307 $ 152,366,053

Effect of retrospective application - - - - - ( 3,216 ) - - - - ( 3,216 )

BALANCE, JANUARY 1, 2014 AS RETROSPECTED 8,614,266 86,142,667 56,125,224 782,391 1,083,833 5,502,273 44,213 ( 378,071 ) - 3,060,307 152,362,837

Reversal of special reserve - - - - ( 87,807 ) 87,807 - - - - -

Appropriation of the 2013 earnings

Legal reserve - - - 550,549 - ( 550,549 ) - - - - -

Cash dividends - - - - - ( 4,307,133 ) - - - - ( 4,307,133 )

Capital surplus transferred to stock dividends 430,714 4,307,133 ( 4,307,133 ) ------

Difference between the carrying amount and acquisition cost of Taiwan Cooperative Securities Investment Trust Co., Ltd. - - - - - ( 16,616 ) - - - ( 135,088 ) ( 151,704 )

Total comprehensive income

Net income for the year ended December 31, 2014 - - - - - 10,237,424 - - - 176,644 10,414,068

Other comprehensive income for the year ended December 31, 2014 - - - - - ( 34,287 ) 220,579 ( 51,174 ) - 133,440 268,558

Total comprehensive income for the year ended December 31, 2014 - - - - - 10,203,137 220,579 ( 51,174 ) - 310,084 10,682,626

BALANCE, DECEMBER 31, 2014 AS RETROSPECTED 9,044,980 90,449,800 51,818,091 1,332,940 996,026 10,918,919 264,792 ( 429,245 ) - 3,235,303 158,586,626

Appropriation of the 2014 earnings

Legal reserve - - - 1,023,635 - ( 1,023,635 ) - - - - -

Cash dividends - - - - - ( 5,272,490 ) - - - - ( 5,272,490 )

Stock dividends 421,799 4,217,992 - - - ( 4,217,992 ) - - - - -

Capital surplus transferred to stock dividends 105,450 1,054,498 ( 1,054,498 ) ------

Capital increase in March 2015 1,500,000 15,000,000 6,870,000 ------21,870,000

Share-based payment for the employees' subscription for new shares - - 330,750 ------330,750

Total comprehensive income

Net income for the year ended December 31, 2015 - - - - - 13,079,052 - - - 382,659 13,461,711

Other comprehensive income for the year ended December 31, 2015 - - - - - ( 617,722 ) 35,623 1,815,727 2,168 109,493 1,345,289

Total comprehensive income for the year ended December 31, 2015 - - - - - 12,461,330 35,623 1,815,727 2,168 492,152 14,807,000

BALANCE, DECEMBER 31, 2015 11,072,229 $ 110,722,290 $ 57,964,343 $ 2,356,575 $ 996,026 $ 12,866,132 $ 300,415 $ 1,386,482 $ 2,168 $ 3,727,455 $ 190,321,886

The accompanying notes are an integral part of the consolidated financial statements. 2015 ANNUAL REPORT

TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 (In Thousands of New Taiwan Dollars) 2014 2015 (Audited after Retrospected) CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax $ 15,611,620 $ 12,065,408 Adjustments for: Depreciation expenses 1,035,803 1,034,870 Amortization expenses 271,028 275,770 Bad-debt expenses 2,481,579 6,194,477 Gains on financial assets and liabilities at fair value through profit or loss ( 182,950 ) ( 1,621,802 ) Interest expense 21,340,692 23,156,579 Interest revenue ( 53,415,061 ) ( 52,927,408 ) Dividend income ( 533,262 ) ( 504,774 ) Net changes in reserves for insurance liabilities ( 4,936,524 ) ( 6,828,543 ) Provision (reversal of provision) for losses on guarantees ( 256,587 ) 231,977 Salary expense on share-based payments 330,750 - Share of gains of associates and joint ventures accounted for using equity method ( 13,432 ) ( 15,018 ) Losses (gains) on disposal of properties and equipment 4,090 ( 2,673,545 ) Gains on disposal of investment properties ( 15,423 ) ( 10,243 ) Gains on disposal of investments ( 904,776 ) ( 755,635 ) Impairment losses on financial assets 7,857 21,380 Reversal of impairment losses on non-financial assets ( 2,127 ) ( 144 ) Unrealized gains on foreign exchange ( 453,249 ) ( 929,621 ) Net changes in operating assets and liabilities Decrease (increase) in due from the Central Bank and call loans to other banks 70,094,536 ( 56,287,178 ) Decrease in financial assets at fair value through profit or loss 39,984,832 12,461,204 Increase in available-for-sale financial assets ( 22,674,340 ) ( 9,985,105 ) Decrease in receivables 712,288 1,086,575 Decrease (increase) in discounts and loans ( 122,168,566 ) 38,912,561 Increase in reinsurance assets ( 792 ) ( 12,868 ) Increase in held-to-maturity financial assets ( 23,398,183 ) ( 11,200,751 ) Decrease (increase) in other financial assets 15,785,698 ( 18,477,386 ) Decrease (increase) in other assets 2,560,799 ( 3,315,683 ) Increase (decrease) in due to the Central Bank and other banks 21,775,118 ( 62,720,414 ) Decrease in financial liabilities at fair value through profit or loss ( 18,825,741 ) ( 13,262,075 ) Increase (decrease) in securities sold under repurchase agreements 4,751,002 ( 4,051,011 ) Increase (decrease) in payables ( 6,076,103 ) 6,101,855 Increase in deposits and remittances 106,334,341 57,927,860 Increase (decrease) in provision for employee benefits 60,538 ( 51,163 ) Decrease in other financial liabilities ( 1,956,423 ) (9,862,926 ) Increase (decrease) in other liabilities 142,546 ( 24,802 ) Cash generated by (used in) operations 47,471,578 ( 96,047,579 ) Interest received 53,996,151 52,494,017 Dividends received 562,741 516,151 Interest paid ( 21,953,438 ) ( 23,305,164 ) (Continued) 43 44 Financial Information

(Continued)

2014 2015 (Audited after Retrospected) Income tax paid ( 681,061 ) ( 1,583,633 ) Net cash generated by (used in) operating activities 79,395,971 ( 67,926,208 ) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of properties and equipment ( 1,087,331 ) ( 3,334,729 ) Proceeds of the disposal of properties and equipment - 3,346,763 Increase in refundable deposits ( 1,036,553 ) ( 294,539 ) Decrease in refundable deposits 743,078 150,442 Acquisition of intangible assets ( 188,224 ) ( 188,907 ) Proceeds of the disposal of collaterals assumed 2,127 144 Acquisition of collaterals assumed ( 100,694 ) ( 27,623 ) Acquisition of investment properties - ( 2,286 ) Proceeds of the disposal of investment properties 28,208 35,665 Increase in other assets ( 14,516 ) ( 14,838 ) Decrease in other assets 7,193 - Net cash used in investing activities ( 1,646,712 ) ( 329,908 ) CASH FLOWS FROM FINANCING ACTIVITIES Increase in commercial paper issued 114,630,000 107,324,000 Decrease in commercial paper issued ( 111,251,000 ) ( 102,264,000 ) Proceeds of the issuance of bank debentures 12,516,000 10,000,000 Repayments of bank debentures ( 22,500,000 ) ( 15,770,000 ) Increase in other borrowings 6,676,897 6,969,597 Decrease in other borrowings ( 6,775,849 ) ( 6,195,975 ) Increase in guarantee deposits received 636,133 17,875 Decrease in guarantee deposits received ( 11,412 ) ( 281,902 ) Increase in other liabilities 49,540 1,956 Dividends paid ( 5,272,490 ) ( 4,307,133 ) Capital increase 21,870,000 - Changes in non-controlling interests - ( 151,704 ) Net cash generated by (used in) financing activities 10,567,819 ( 4,657,286 ) EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS $ 851,189 $ ( 177,058 ) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 89,168,267 ( 73,090,460 ) CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR 341,517,226 414,607,686 CASH AND CASH EQUIVALENTS, END OF THE YEAR $ 430,685,493 $ 341,517,226

Cash and cash equivalent reconciliations:

December 31 2014 2015 (Audited after Retrospected) Cash and cash equivalents in consolidated balance sheets $ 43,753,654 $ 45,149,610 Due from the Central Bank and call loans to other banks in accordance with the definition of cash and cash equivalents under IAS 7 “Statement of Cash Flows” 385,289,088 294,044,871 Securities purchased under resell agreements in accordance with the definition of cash and cash equivalents under IAS 7 “Statement of Cash Flows” 1,346,831 2,322,745 Other items in accordance with the definition of cash and cash quivalentse under IAS 7 “Statement of Cash Flows” 295,920 - Cash and cash equivalents, end of the year $ 430,685,493 $ 341,517,226

The accompanying notes are an integral part of the consolidated financial statements. (Concluded) 2015 ANNUAL REPORT

On December 2, 2011, TCB spun off its Security TAIWAN COOPERATIVE Department for the establishment of Taiwan FINANCIAL HOLDING Cooperative Securities Co., Ltd. (TCS). TCS issued new common shares to TCFHC and CO., LTD. AND SUBSI- became its 100% subsidiary. TCS primarily DIARIES (a) brokers securities; (b) deals securities; (c) underwrites securities; (d) provides pecuniary and NOTES TO CONSOLIDATED securities financing facilities for the trading of FINANCIAL STATEMENTS listed securities; (e) trading of futures introducing FOR THE YEARS ENDED DECEMBER broker business; (f) does other business as approved by the authorities. 31, 2015 AND 2014 (In Thousands of New Taiwan Dollars, Unless Stated TCBF, established on May 13, 1998, has a head office in Taipei and a branch in Kaohsiung. Otherwise) TCBF engages in (a) brokering and dealing short- term bills; (b) underwriting commercial paper; 1. ORGANIZATION AND OPERATIONS (c) acting as registrar of commercial paper; Taiwan Cooperative Financial Holding Co., Ltd. (d) providing guarantees on or endorsements (TCFHC) was established by Taiwan Cooperative of commercial paper and bank acceptance; (e) Bank, Ltd. (TCB), Taiwan Cooperative Bills brokering call loans between financial institutions; Finance Corporation Ltd. (TCBF) and Co- (f) providing consulting services on corporate operative Assets Management Co., Ltd. (CAM) financial matters; (g) brokering and dealing through a share swap on December 1, 2011 under government bonds; (h) underwriting, brokering the Financial Holding Companies Act and related and dealing bank debentures; (i) dealing corporate regulations in the Republic of China (ROC). The bonds; (j) investment related equity instruments; TCFHC's shares have been listed on the Taiwan (k) other operations approved by the authorities. Stock Exchange (TSE) since December 1, 2011. CAM was established on October 18, 2005; its After the share swap, TCB, TCBF and CAM main businesses are the purchase, appraisal, auc- became wholly owned subsidiaries of TCFHC. tion and management of financial institutions' TCFHC invests in and manages financial creditors' rights as well as the purchase of ac- institutions. counts receivable and management of overdue receivables. To enhance capital allocation and TCB engages in (a) all commercial banking increase the benefits of capital use, the board of operations allowed under the Banking Law; (b) directors of CAM decided to merge CAM and international banking operations; (c) overseas its subsidiary, Cooperative I Asset Management branch operations as authorized by the respective Co., Ltd. The effective date of the merger was foreign governments; and (d) other operations December 1, 2014. In this merger, CAM was the as authorized by the central authority-in- survivor entity. charge. TCB has its Head Office in Taipei. It had a Business, International Banking, Finance, Cooperative Insurance Brokers Co., Ltd. (CIB) Credit Card and Trust Departments as well as was established on November 25, 2005; it 270 domestic branches, an offshore banking unit engages in life and property insurance brokering. (OBU), 9 overseas branches and 2 representative TCB set up the United Taiwan Bank S.A. (UTB) office as of December 31, 2015. in Belgium through raising funds with Bank The operations of TCB's Trust Department of Taiwan, Land Bank of Taiwan and Taiwan are (1) planning, managing and operating Business Bank. UTB started its operation on the trust business and (2) custodianship of December 23, 1992; it is TCB's subsidiary and its nondiscretionary trust funds in domestic and main business is in general deposits and loans. overseas securities and mutual funds. These For organizational restructuring purpose, TCB's operations are regulated under the Banking Law board of directors resolved to reduce TCB's and Trust Law of the ROC. capital of $1,524,390 thousand and transferred TCB merged with the Farmers Bank of China TCB's long-term equity investments in BNP (FBC) on May 1, 2006, with TCB as the survivor Paribas Cardif TCB Life Insurance Co., Ltd. entity. (BPCTLI) and Taiwan Cooperative Securities 45 46 Financial Information

Investment Trust Co., Ltd. (TCSIT) to TCFHC Related Rules issued by the Financial Super- on December 1, 2011. The effective date of visory Commission (FSC), stipulated that the the capital reduction was set on April 3, 2012. Company should apply the 2013 version of IFRS, After this capital reduction, BPCTLI and TCSIT IAS, IFRIC and SIC (collectively, the “IFRSs”) both became 51% subsidiaries of TCFHC. On endorsed by the FSC and the related amendments April 21, 2014, TCFHC acquired 49% of long- to the Regulations Governing the Preparation of term equity investments in TCSIT for $151,704 Financial Reports by Financial Holding Compa- thousand. After this acquisition, TCSIT became a nies, Regulations Governing the Preparations of 100% subsidiary of TCFHC. Financial Reports by Publics Bank, Regulation Governing the Preparation of Financial Reports The business of BPCTLI was approved in by Securities Firms and Regulations Governing March 2010. BPCTLI provides insurance: Life, the Preparation of Financial Reports by Insurance personal injury, health, annuity and investment- Enterprises starting January 1, 2015. linked products. Except for the following, whenever applied, the The business of TCSIT was approved in April initial application of the above 2013 IFRSs ver- 2011. TCSIT engages in the (a) securities sion and the related amendments to the Regula- investment trust business; (b) discretionary tions Governing the Preparation of Financial investment business and (c) other businesses as Reports by Financial Holding Companies, Regu- approved by the authorities. lations Governing the Preparation of Financial Taiwan Cooperative Venture Capital Co., Ltd. Reports by Publics Bank, Regulations Governing (TCVC) was established on October 1, 2015. the Preparation of Financial Reports by Securities TCVC engages in (a) venture capital investments; Firms and Regulations Governing the Preparation (b) consulting; and (c) investment consulting. of Financial Reports by Insurance Enterprises would not have any material impact on the Com- As of December 31, 2015 and 2014, TCFHC and pany's accounting policies: its subsidiaries (the “Company”) had 9,014 and 9,144 employees, respectively. 1) IFRS 12 “Disclosure of Interests in Other Entities” The operating units of the Company maintain their accounts in their respective functional IFRS 12 is a new disclosure standard and is currencies. The consolidated financial statements applicable to entities that have interests in are presented in New Taiwan dollars. subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In 2. APPROVAL OF CONSOLIDATED general, the disclosure requirements in IFRS FINANCIAL STATEMENTS 12 are more extensive than in the current The consolidated financial statement were standards. approved by TCFHC's board of directors on 2) IFRS 13 “Fair Value Measurement” March 28, 2016. IFRS 13 establishes a single source of 3. APPLICATION OF NEW, AMENDED guidance for fair value measurements. It AND REVISED STANDARDS AND defines fair value, establishes a framework INTERPRETATIONS for measuring fair value, and requires disclosures about fair value measurements. a. Initial application of the amendments to The disclosure requirements in IFRS 13 are the Regulations Governing the Preparation more extensive than those required in the of Financial Reports by Financial Holding current standards. For example, quantitative Companies, Regulations Governing the and qualitative disclosures based on the Preparation of Financial Reports by Public three-level fair value hierarchy currently Banks, Regulations Governing the Preparation required for financial instruments only will of Financial Reports by Securities Firms, be extended by IFRS 13 to cover all assets Regulations Governing the Preparation of and liabilities within its scope. Financial Reports by Insurance Enterprises and the 2013 version of the International Financial The fair value measurements under IFRS 13 Reporting Standards (IFRS), International will be applied prospectively from January Accounting Standards (IAS), Interpretations of 1, 2015. Refer to Note 41 for related IFRS (IFRIC), and Interpretations of IAS (SIC) disclosures. 2015 ANNUAL REPORT

3) Amendments to IAS 1 “Presentation of 4) Revision to IAS 19 “Employee Benefits” Items of Other Comprehensive Income” Revised IAS 19 requires the recognition of The amendments to IAS 1 requires items changes in defined benefit obligations and of other comprehensive income to be in the fair value of plan assets when they grouped into those items that (1) will not be occur, and hence eliminates the “corridor reclassified subsequently to profit or loss; approach” permitted under current IAS and (2) may be reclassified subsequently to 19 and accelerate the recognition of past profit or loss. Income taxes on related items service costs. The revision requires all of other comprehensive income are grouped remeasurements of the defined benefit plans on the same basis. Under current IAS 1, to be recognized immediately through there were no such requirements. other comprehensive income in order for the net pension asset or liability to reflect The Company retrospectively apply the the full value of the plan deficit or surplus. above amendments starting in 2015. Furthermore, the interest cost and expected Items that will not be reclassified to return on plan assets used in current profit or loss are remeasurements of the IAS 19 are replaced with a “net interest” defined benefit plans and share of the amount, which is calculated by applying remeasurements arising from defined the discount rate to the net defined benefit benefit plans of associates accounted for liability or asset. In addition, the revised using equity method. Items expected to be IAS 19 introduces certain changes in the reclassified to profit or loss are the exchange presentation of the defined benefit cost, and differences on translating foreign operations, also includes more extensive disclosures. unrealized gains (losses) on available-for- sale financial assets and share of the other On initial application of the revised IAS 19, comprehensive income (except the share of the changes in cumulative employee benefit the remeasurements of the defined benefit costs as of December 31, 2013 resulting from plans) of associates accounted for using the retrospective application are adjusted to equity method. However, the application provision for employee benefits and retained of the above amendments will not result in earnings; in addition, in preparing the any impact on the net profit for the year, consolidated financial statements for the year other comprehensive income for the year ended December 31, 2015, the Company (net of income tax), and total comprehensive would elect not to present 2014 comparative income for the year. information about the sensitivity of the defined benefit obligation.

The impact on the prior year is set out below:

Adjustments Arising As Originally Stated from Initial Application Retrospected Impact on assets, liabilities and equity December 31, 2014 Total effect on provision for employee benefits $ 7,988,477 $ 2,144 $ 7,990,621 Total effect on retained earnings $ 13,250,029 $ ( 2,144 ) $ 13,247,885 Total effect on equity $ 158,588,770 $ ( 2,144 ) $ 158,586,626 January 1, 2014 Total effect on provision for employee benefits $ 8,004,378 $ 3,216 $ 8,007,594 Total effect on retained earnings $ 7,371,713 $ ( 3,216 ) $ 7,368,497 Total effect on equity $ 152,366,053 $ ( 3,216 ) $ 152,362,837 Impact on total comprehensive income and earnings per share For the year ended on December 31, 2014 Total effect on operating expense $ 23,315,357 $ ( 1,072 ) $ 23,314,285 Total effect on net income for the year $ 10,412,996 $ 1,072 $ 10,414,068 Total effect on total comprehensive income for the year $ 10,681,554 $ 1,072 $ 10,682,626 Basic earnings per share (New Taiwan dollars) $ 1.08 $ - $ 1.08 47 48 Financial Information

b. New IFRSs in issue but not yet endorsed by the 2017. Thus, outside of this scope are IFRSs that FSC are not yet effective as of January 1, 2017, such as IFRS 9 “Financial Instruments” and IFRS The Company has not applied the following 15 “Revenue from Contracts with Customers” IFRS, IAS, IFRIC and SIC (collectively, and those with undetermined effective dates. the “IFRSs”) issued by the International In addition, the FSC announced that the Group Accounting Standards Board (IASB) but not should apply IFRS 15 starting January 1, yet endorsed by the FSC. 2018. As of the date the consolidated financial On March 10, 2016, the FSC announced that statements were authorized for issue, the FSC IFRSs that will be endorsed and will take effect had not yet announced the effective dates of from January 1, 2017 are all IFRSs that had other new, amended and revised standards and been issued by the IASB before January 1, 2016 interpretations. and have effective dates on or before January 1,

New IFRSs Effective Date Announced by IASB (Note 1)

Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 (Note 2)

Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014

Annual Improvements to IFRSs 2012-2014 Cycle January 1, 2016 (Note 3)

IFRS 9 “Financial Instruments” January 1, 2018

Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of IFRS 9 and Transition Disclosures” January 1, 2018

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

Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment Entities: Applying the Consolidation January 1, 2016 Exception”

Amendment to IFRS 11 “Accounting for Acquisitions of Interests in Joint Operations” January 1, 2016

IFRS 14 “Regulatory Deferral Accounts” January 1, 2016

IFRS 15 “Revenue from Contracts with Customers” January 1, 2018

IFRS 16 “Leases” January 1, 2019

Amendment to IAS 1 “Disclosure Initiative” January 1, 2016

Amendment to IAS 7 “Disclosure Initiative” January 1, 2017

Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses” January 1, 2017

Amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and January 1, 2016 Amortization”

Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants” January 1, 2016

Amendment to IAS 19 “Defined Benefit Plans: Employee Contributions” July 1, 2014

Amendment to IAS 27 “Equity Method in Separate Financial Statements” January 1, 2016

Amendment to IAS 36 “Impairment of Assets: Recoverable Amount Disclosures for Non-financial Assets” January 1, 2014

Amendment to IAS 39 “Novation of Derivatives and Continuation of Hedge Accounting” January 1, 2014

IFRIC 21 “Levies” January 1, 2014

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates. Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014. Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016. 2015 ANNUAL REPORT

The initial application of the above New IFRSs, changes in the fair value of an equity whenever applied, would not have any material investment (that is not held for trading) in impact on the Company’s accounting policies, other comprehensive income, with only except for the following: dividend income generally recognized in profit or loss. No subsequent impairment 1) IFRS 9 “Financial Instruments” assessment is required, and the cumulative Recognition and measurement of financial gain or loss previously recognized in other assets comprehensive income cannot be reclassified from equity to profit or loss. With regards to financial assets, all recognized financial assets that are within The impairment of financial assets the scope of IAS 39 “Financial Instruments: IFRS 9 requires that impairment loss on Recognition and Measurement” are financial assets is recognized by using subsequently measured at amortized cost or the “Expected Credit Losses Model”. fair value. The credit loss allowance is required for For the Company’s debt instruments that financial assets measured at amortized have contractual cash flows that are solely cost, financial assets mandatorily measured payments of principal and interest on at FVTOCI, lease receivables, contract the principal amount outstanding, their assets arising from IFRS 15 “Revenue classification and measurement are as from Contracts with Customers”, certain follows: written loan commitments and financial guarantee contracts. A loss allowance for a) For debt instruments, if they are the 12-month expected credit losses is held within a business model whose required for a financial asset if its credit objective is to collect the contractual risk has not increased significantly since cash flows, the financial assets are initial recognition. A loss allowance for measured at amortized cost and are full lifetime expected credit losses is assessed for impairment continuously required for a financial asset if its credit with impairment loss recognized in risk has increased significantly since initial profit or loss, if any. Interest revenue is recognition and is not low. However, a loss recognized in profit or loss by using the allowance for full lifetime expected credit effective interest method; losses is required for trade receivables that b) For debt instruments, if they are held do not constitute a financing transaction. within a business model whose objective For purchased or originated credit-impaired is achieved by both the collecting of financial assets, the Company takes into contractual cash flows and the selling account the expected credit losses on initial of financial assets, the financial assets recognition in calculating the credit-adjusted are measured at fair value through other effective interest rate. Subsequently, any comprehensive income (FVTOCI) and changes in expected losses are recognized as are assessed for impairment. Interest a loss allowance with a corresponding gain revenue is recognized in profit or loss by or loss recognized in profit or loss. using the effective interest method, and other gain or loss shall be recognized in 2) Amendment to IAS 36 “Recoverable other comprehensive income, except for Amount Disclosures for Non-financial impairment gains or losses and foreign Assets” exchange gains and losses. When the In issuing IFRS 13 “Fair Value Measurement”, debt instruments are derecognized or the IASB made consequential amendment reclassified, the cumulative gain or to the disclosure requirements in IAS 36 loss previously recognized in other “Impairment of Assets”, introducing a comprehensive income is reclassified requirement to disclose in every reporting from equity to profit or loss. period the recoverable amount of an Except for above, all other financial assets asset or each cash-generating unit. The are measured at fair value through profit or amendment clarifies that such disclosure of loss. However, the Company may make an recoverable amounts is required only when irrevocable election to present subsequent an impairment loss has been recognized or 49 50 Financial Information

reversed during the period. Furthermore, the using effective interest method. In the Company is required to disclose the discount consolidated statements of cash flows, cash rate used in measurements of the recoverable payments for the principal portion of the amount based on fair value less costs of lease liability are classified under financing disposal measured using a present value activities; cash payments for the interest technique. portion are classified under operating activities. 3) IFRS 15 “Revenue from Contracts with Customers” The application of IFRS 16 is not expected to have a material impact on the accounting IFRS 15 establishes principles for recognizing principles of the Company as a lessor. revenue that apply to all contracts with customers, and will supersedes IAS 18 When IFRS 16 becomes effective, “Revenue”, IAS 11 “Construction Contracts” the Company may elect to apply this and a number of revenue-related interpretations. Standard either (a) retrospectively to each prior reporting period presented, or (b) When applying IFRS 15, the Company shall retrospectively, with the cumulative effect recognize revenue by applying the following of the initial application of this Standard steps: recognized at the date of initial application. ● Identify the contract with the customer; Except for the above impact, as of the date ● Identify the performance obligations in the the consolidated financial statements were contract; authorized for issue, the Company was continuing to assess the possible impact ● Determine the transaction price; that the application of other standards and ● Allocate the transaction price to the interpretations will have on the Company’s performance obligations in the contracts; financial position and financial performance, and and will disclose this impact when the assessment is completed. ● Recognize revenue when the entity satisfies a performance obligation. 4. SUMMARY OF SIGNIFICANT When IFRS 15 is effective, the Company ACCOUNTING POLICIES may elect to apply this Standard either Statement of Compliance retrospectively to each prior reporting period presented or retrospectively with the The consolidated financial statements have been cumulative effect of initially applying this prepared in accordance with the Regulations Standard recognized at the date of initial Governing the Preparation of Financial Reports application. by Financial Holding Companies, Regulations Governing the Preparation of Financial Reports 4) IFRS 16 “Leases” by Public Banks, Regulations Governing the IFRS 16 sets out the accounting treatment for Preparation of Financial Reports by Securities leases and has superseded IAS 17 “Leases” Firms, Regulations Governing the Preparation of and a number of related interpretations. Financial Reports by Insurance Enterprises and IFRSs as endorsed by the FSC. Under IFRS 16, if the Company is a lessee, it should recognize in the balance sheets Basis of Preparation right-of-use assets and lease liabilities for all leases on the consolidated balance The consolidated financial statements have been sheets except for low-value and short-term prepared on the historical cost basis except for leases. The Company may elect to apply financial instruments that are measured at fair the operating lease accounting method value. under IAS 17 to the low-value and short- The fair value measurements are grouped into term leases. In the consolidated statements Levels 1 to 3 based on the degree to which the of comprehensive income, the Company fair value measurement inputs are observable should present the depreciation expense and the significance of the inputs to the fair value charged on the right-of-use asset separately measurement in its entirety, which are described from the interest expense accrued on the as follows: lease liability; interest is computed by 2015 ANNUAL REPORT

a. Level 1 inputs are quoted prices (unadjusted) in monetary assets and liabilities are restated at active markets for identical assets or liabilities; the prevailing exchange rates, and the resulting differences are recorded as credits or charges to b. Level 2 inputs are inputs other than quoted current income. prices included within Level 1 that are observable for the asset or liability, either TCB records foreign-currency transactions in directly (i.e. as prices) or indirectly (i.e. derived the respective currencies in which these are from prices); and denominated. Every month-end, foreign currency income and expenses are translated into New c. Level 3 inputs are unobservable inputs for the Taiwan dollars at the prevailing exchange rates. asset or liability. At month-end, monetary assets and liabilities Basis of Consolidation denominated in foreign currencies are reported using the prevailing exchange rates, and exchange TCFHC’s consolidated financial statements differences are recognized in profit or loss. incorporate the financial statements of Taiwan Nonmonetary assets and liabilities measured Cooperative Financial Holding Co., Ltd. at fair value are translated using the prevailing (TCFHC), and the entities controlled by TCFHC, exchange rates at month-end. Translation including Taiwan Cooperative Bank, Ltd. differences on nonmonetary assets and liabilities (TCB) and its subsidiaries, Co-operative Assets measured at fair value are recognized in profit Management Co., Ltd. (CAM) and its subsidiary, or loss, except for translation difference arising Taiwan Cooperative Bills Finance Co., Ltd. from nonmonetary items of which the change in (TCBF), Taiwan Cooperative Securities Co., Ltd. fair values is recognized in other comprehensive (TCS), BNP Paribas Cardif TCB Life Insurance income, in which case, the translation Co., Ltd. (BPCTLI), Taiwan Cooperative differences are also recognized directly in other Securities Investment Trust Co., Ltd. (TCSIT) comprehensive income. Nonmonetary assets and and Taiwan Cooperative Venture Capital Co., Ltd. liabilities that are classified as carried at cost are (TCVC). recognized at the exchange rate on the transaction The accounting policies of TCFHC and its date. subsidiaries are consistent. In preparing the consolidated financial All significant intercompany transactions and statements, foreign operations’ financial balances have been eliminated for consolidation statements are translated at the following rates: purposes. The accompanying consolidated Assets and liabilities - the prevailing exchange financial statements also include accounts of rates on the balance sheet date; and income and TCB’s Head Office, OBU, and all branches. All expenses - at the average exchange rate for the interoffice account balances and transactions have year. Translation difference net of income tax been eliminated. is recorded as “other comprehensive income” and accumulated in equity, and is attributed to Total comprehensive income of subsidiaries is the owner of the Company and non-controlling attributed to the owners of the Company and to interests. the non-controlling interests even if this results in the non-controlling interests having a deficit Classification of Current and Non-current balance. Assets and Liabilities For more information on the consolidated entities, The operating cycle in the financial holding please see Table 1 (attached). company, banking industries and insurance industries cannot be reasonably identified; thus Foreign-currency Transactions the accounts included in the financial statements Foreign-currency transactions of TCFHC, TCBF, of TCFHC, TCB, UTB, TCBF and BPCTLI are TCS, TCSIT, CAM, BPCTLI and TCVC are not classified as current or non-current. Other recorded in New Taiwan dollars at the rates of subsidiaries’ assets and liabilities are classified as exchange in effect when the transactions occur. follows: Losses or gains resulting from the application of Current assets are assets held for trading purposes, prevailing exchange rates when foreign-currency assets expected to be converted to cash, sold or assets and liabilities are settled, are credited or consumed within twelve months from the balance charged to income in the period of settlement. sheet date and cash and equivalents, excluding The period-end balances of foreign-currency assets held for an exchange or held to settle a 51 52 Financial Information

liability at more than twelve months after the initial recognition. Transaction costs directly balance sheet date and assets that are otherwise attributable to the acquisition of financial assets restricted. Properties and equipment, investment or financial liabilities at fair value through profit properties, intangible assets and other assets that or loss are recognized immediately in profit or are not classified as current are non-current assets. loss. Current liabilities are obligations incurred for Financial assets trading purposes and obligations settled within twelve months from the balance sheet date, or All regular way purchases or sales of financial when it does not have an unconditional right to assets are recognized and derecognized on a trade defer settlement of the liability for at least 12 date basis. months after the balance sheet date. Liabilities a. Measurement category that are not classified as current are non-current liabilities. Terms of a liability that could, at the Financial assets are classified into the following option of the counter-party, result in its settlement categories: Financial assets at fair value by the issue of equity instruments do not affect its through profit or loss (FVTPL), available-for- classification. sale (AFS) financial assets, held-to-maturity financial assets and loans and receivables. The The consolidated financial statements, however, classification depends on the nature and purpose do not show the classification of current or non- of the financial assets and is determined at the current assets/liabilities because the banking time of initial recognition. industry accounts for the major parts of the consolidated accounts. Thus, accounts in the 1) Financial assets at FVTPL consolidated financial statements are instead Financial assets are classified as at FVTPL categorized by nature and sequenced by their when the financial asset is either held for liquidity. trading or designated as at FVTPL. Cash and Cash Equivalents A financial asset is classified as designated In the consolidated balance sheet, cash and as at FVTPL upon initial recognition if: cash equivalents comprise cash on hand and ● Such designation eliminates or demand deposits, together with short-term, highly significantly reduces a measurement or liquid investments that are readily convertible recognition inconsistency that would to a known amount of cash and are subject to otherwise arise; an insignificant risk of changes in value. In the consolidated statement of cash flows, cash ● The financial asset forms part of a group and cash equivalents comprise cash and cash of financial assets or financial liabilities equivalents defined in the consolidated balance or both, which is managed and its sheet, due from the Central Bank and call loans performance is evaluated on a fair value to other banks, securities purchased under resell basis, in accordance with the Company’s agreements, and call loans to securities firms documented risk management or that correspond to the definition of cash and cash investment strategy, and information about equivalents in IAS 7 - “Cash Flow Statements,” the grouping is provided internally on that as endorsed by the FSC. basis; or ● The contract contains one or more Financial Instruments embedded derivatives so that the entire Financial assets and financial liabilities are hybrid (combined) contract can be recognized when the Company becomes a party designated as at fair value through profit to the contractual provisions of the instruments. or loss. Financial assets and financial liabilities are Financial assets at FVTPL are stated at fair initially measured at fair value. Transaction costs value, with any gains or losses arising on that are directly attributable to the acquisition or remeasurement recognized in profit or loss. issue of financial assets and financial liabilities The net gain or loss recognized in profit or (other than financial assets and financial liabilities loss incorporates any dividend or interest at fair value through profit or loss) are added to earned on the financial asset. Fair value is or deducted from the fair value of the financial determined in the manner described in Note assets or financial liabilities, as appropriate, on 41. 2015 ANNUAL REPORT

2) Available-for-sale (AFS) financial assets After initial recognition, held-to-maturity financial assets are measured at amortized AFS financial assets are non-derivatives cost using the effective interest method less that are either designated as AFS or are any impairment. not classified as (a) loans and receivables, (b) held-to-maturity financial assets or (c) 4) Loans and receivables financial assets at fair value through profit or Loans and receivables are non-derivative loss. AFS financial assets are stated at fair financial assets with fixed or determinable value at each balance sheet date. Fair value payments that are not quoted in an active is determined in the manner described in market. Loans and receivables (including Note 41. cash and cash equivalents, due from the Changes in the carrying amount of AFS Central Bank and call loans to other banks, monetary financial assets relating to changes receivables, debt instruments with no active in foreign currency rates, interest income markets) are measured at amortized cost calculated using the effective interest method using the effective interest method less any and dividends on AFS equity investments are impairment. recognized in profit or loss. Other changes b. Impairment of financial assets in the carrying amount of AFS financial assets are recognized in other comprehensive Except for financial assets at fair value through income and will be reclassified to profit or profit or loss, financial assets are assessed loss when the investment is disposed or is for indicators of impairment at the end of determined to be impaired. each reporting period. Financial assets are considered impaired when there is objective Cash dividends on AFS equity instruments evidence that, as a result of one or more events are recognized in profit or loss when the that occurred after the initial recognition of Company’s right to receive the dividends is financial assets, the estimated future cash flows established. Stock dividends are recorded as of the asset have been affected. Objective an increase in the number of shares held and evidence of impairment could include: do not affect investment income. The cost per share is recalculated on the basis of the ● Significant financial difficulty of the asset new number of investee’s shares held. issuer and debtor; AFS financial assets that do not have a ● The financial assets becoming overdue; and quoted market price in an active market ● Probability that the debtor will enter and have a fair value that cannot be reliably into bankruptcy or undergo financial measured and derivatives that are linked reorganization. to and must be settled by delivery of such unquoted equity investments are measured Amortized cost of the presentation of at cost less any identified impairment losses financial assets (loans and receivables) that at the balance sheet date and are recognized are individually assessed had no objective in a separate line item as financial assets evidence of impairment are further assessed carried at cost. These financial assets are collectively for impairment. Objective measured at fair values if the fair values can evidence of impairment of a portfolio of be reliably measured subsequently. The receivables could include the Company’s difference between carrying amount and past difficulty in collecting payments and an fair value is recognized in profit or loss or increase in the number of delayed payments, as other comprehensive income. When an AFS well as observable changes in national or local financial asset is considered impaired, the economic conditions that correlate with defaults losses are recognized to profit or loss. on financial assets. 3) Held-to-maturity financial assets For financial assets carried at amortized cost, the amount of the impairment loss recognized Held-to-maturity financial assets are non- is the difference between the asset’s carrying derivative financial assets with fixed or amount and the present value of estimated determinable payments and fixed maturity future cash flows with consideration to the dates that the Company has the positive collaterals and guarantees, discounted at the intent and ability to hold to maturity. financial asset’s original effective interest rate. 53 54 Financial Information

For financial assets measured at amortized TCB made 100%, 50%, 10%, 2% and 1% cost, if the impairment loss decreases and the provisions for credits deemed uncollectible, decrease can be related objectively to an event with collectability highly doubtful, substandard, occurring after the impairment was recognized, special mention and sound credit assets the previously recognized impairment loss is (excluding assets that represent claims against reversed through profit or loss to the extent that an ROC government agency), respectively, the carrying amount of the investment at the as minimum provisions. For the sound credit date the impairment is reversed does not exceed assets, minimum provisions were required be what the amortized cost would have been had contributed before December 31, 2014. In the impairment not been recognized. addition, TCB was required to make provisions of at least 1.5% each for the sound credit assets For AFS equity instruments, a significant on loans granted to Mainland China clients or prolonged decline in the fair value of the (including short-term trading financing) and for security below its cost is considered to be mortgage loans granted for housing acquisition, objective evidence of impairment. renovation and construction before December When an AFS financial asset is considered 31, 2015 and 2016, respectively. impaired, cumulative gains or losses previously Under “The Regulations Governing the recognized in other comprehensive income are Procedures for Bills Finance Companies to reclassified to profit or loss. Evaluate Assets, Set Aside Loss Reserves, and For AFS equity instruments, impairment losses Handle Nonperforming Credits, Nonaccrual previously recognized in profit or loss cannot Loans, and Bad Debts” issued by the FSC, be reversed through profit or loss. Any increase TCBF makes the following minimum in fair value subsequent to an impairment loss provisions for losses on credits for these is recognized in other comprehensive income. categories: Uncollectible - 100%; with For AFS debt instruments, impairment losses doubtful collectability - 50%; substandard - are subsequently reversed through profit or loss 10%; “special mention” - 2%; and collectible if an increase in the fair value of the investment (excluding assets that represent claims against can be objectively related to an event occurring an ROC government agency) - 1%. after the recognition of the impairment loss. Under the Article 5 of the “Regulations For financial assets that are carried at cost, the Governing the Procedures for Insurance impairment loss is measured as the difference Institutions to Evaluate Assets and Deal with between the asset’s carrying amount and the Nonperforming/Nonaccrual Loans” issued by present value of the estimated future cash flows the Insurance Bureau, BPCTLI should make discounted at the current market rate of return sufficient provisions for credit assets. for a similar financial asset. This impairment Credits deemed uncollectible may be written loss cannot be reversed in subsequent periods. off if the write-off is approved by the board of Impairment loss on financial asset is recognized directors. by reducing its carrying amount through the use c. Derecognition of financial assets of an allowance account. When financial assets are considered uncollectible, they are written The Company derecognizes a financial asset off against the allowance account. Recoveries only when the contractual rights to the cash of amounts previously written off are credited flows from the asset expire, or when it transfers to the allowance account. Changes in the the financial asset and substantially all the carrying amount of the allowance account are risks and rewards of ownership of the asset recognized in profit and loss. to another party. If the Company retains substantially all the risks and rewards of Under FSC guidelines, TCB should classify ownership of a transferred financial asset, the credit assets as sound credit assets or unsound Company continues to recognize the financial credit assets, with the unsound assets further asset and also recognizes a collateralized categorized as special mention, substandard, borrowing for the proceeds received. with collectability highly doubtful and uncollectible, on the basis of the customers’ On derecognition of a financial asset in financial position, valuation of collaterals and its entirety, the difference between the the length of time the principal repayments or asset’s carrying amounts and the sum of interest payments have become overdue. the consideration received, receivable and 2015 ANNUAL REPORT

the cumulative gain or loss that had been Financial liabilities at FVTPL are stated at recognized in other comprehensive income and fair value, with any gains or losses arising accumulated in equity is recognized in profit or on remeasurement recognized in profit or loss. loss. The net gain or loss recognized in profit or loss incorporates any interest paid Equity instruments on the financial liability. For a financial The Company classifies the debt and equity liability designated as at fair value through instruments issued either as financial liabilities or profit or loss, the amount of changes in as equity in accordance with the substance of the fair value attributable to changes in the contractual agreements and the definitions of a credit risk of the liability is presented in financial liability or an equity instrument. other comprehensive income, and it will not be subsequently reclassified to profit An equity instrument is any contract that or loss. The gain or loss accumulated evidences a residual interest in the assets of in other comprehensive income will be an entity after deducting all its liabilities. transferred to retained earnings when the Equity instruments issued by the Company are financial liabilities are derecognized. If recognized at the proceeds received, net of direct this accounting treatment related to credit issue costs. risk would create or enlarge an accounting Repurchase of the TCFHC’s own equity mismatch, all changes in fair value of the instruments is recognized and deducted directly liability are presented in profit or loss. Fair in equity. No gain or loss is recognized in profit value is determined in the manner described or loss on the purchase, sale, issue or cancellation in Note 41. of the TCFHC’s own equity instruments. 2) Financial guarantee contracts Financial liabilities Financial guarantee contracts issued by the a. Subsequent measurement Company are not designated as at FVTPL and are subsequently measured at the higher Except for the cases stated below, all financial of (a) the amount of the obligation under the liabilities are measured at amortized cost using the effective interest method: contract, as determined in accordance with IAS 37 “Provisions, Contingent Liabilities 1) Financial liabilities at FVTPL and Contingent Assets”; or (b) the amount initially recognized less, where appropriate, Financial liabilities are classified as at cumulative amortization recognized in FVTPL when the financial liability is either held for trading or designated as at FVTPL. accordance with revenue recognition policies. A financial liability is classified as designated as at FVTPL upon initial recognition if: b. Derecognition of financial liabilities ● Such designation eliminates or The Company derecognizes financial liabilities significantly reduces a measurement or only when the Company’s obligations are recognition inconsistency that would discharged, cancelled, or expired. The otherwise arise; or difference between the carrying amount of the financial liability derecognized and ● The financial liability forms part of a the consideration paid (includes transfer of group of financial assets or financial non-cash assets and liabilities assumed) is liabilities or both, which is managed recognized in profit or loss. and its performance is evaluated on a fair value basis, in accordance with the Derivatives Company’s documented risk management Derivatives are initially recognized at fair value or investment strategy, and information at the date the derivative contracts are entered about the grouping is provided internally into and are subsequently remeasured to their fair on that basis; or value at the balance sheet date. The resulting gain ● The contract contains one or more or loss is recognized in profit or loss immediately. embedded derivatives so that the entire If the fair value of a derivative is a positive combined contract (asset or liability) can number, the derivative is carried as an financial be designated as at fair value through asset and if the fair value is a negative number, profit or loss. the derivative is carried as a financial liability. 55 56 Financial Information

Derivatives embedded in non-derivative host Securities Purchased/Sold Under Resell/ contracts are treated as separate derivatives when Repurchase Agreements they meet the definition of a derivative, their risks Securities purchased under resell agreements and characteristics are not closely related to those and securities sold under repurchase agreements of the host contracts and the contracts are not are generally treated as collateralized financing measured at FVTPL. transactions. Interest earned on resell agreements Overdue Loans or interest incurred on repurchase agreements is recognized as interest revenue or interest expense Loans and other credits (including accrued over the life of each agreement. interest) that are overdue for at least six months are classified as overdue loans in accordance with Security Lending the guideline issued by the FSC. For self-hedging purposes on convertible bond Overdue loans (except other credits) are classified investments, TCS carries out security lending as discounts and loans, and the remaining are transactions. As a security borrower, TCS classified as other financial assets. recognizes the margins which paid to other securities companies as refundable deposits Purchase on Margin and Short Sale - securities borrowing. When TCS sells the Taiwan Cooperative Securities Co., Ltd. (TCS) borrowed securities, the selling price of the recognizes margin loans as loans to customers for borrowed securities is recognized as payable - purchases on margin while providing financing security borrowing (part of financial liabilities to investors who buy stocks. Margin loans made at fair value through profit or loss), and the by TCS are generally collateralized by securities difference between the selling price and the fair in the client’s account. These collateralized value of securities is recognized in the profit or securities are not entered in TCS’s books but are loss in the year of the transaction. When TCS recorded using memorandum entries. After the buys back the securities, it classifies the securities security investors settle the margin loans, these as operating securities (part of financial assets at pledged securities are returned to investors. fair value through profit or loss) and recognizes the total amount of margins and selling price in TCS requires a deposit from security investors profit or loss after deducting the service charge on for short sale services while providing short sale the borrowed securities. services to investors. This deposit is recorded under deposits on short-sale transactions. The Investment in Associates and Joint Ventures amount collected from selling of short sale An associate is an entity over which the Company securities (net of securities transaction tax, has significant influence and that is neither a brokerage fee and handling fee) is kept by TCS subsidiary nor an interest in a joint venture. as collateral and recorded as payables for short- Joint venture is a joint arrangement whereby the sale transactions. The securities lent to clients Company and other parties that have joint control as short sale are recorded using memorandum of the arrangement have rights to the net assets of entries. The deposits on short-sale transactions the arrangement. and payables for short sale are returned to security investors after investors settle the short- Under the equity method, investment in an sale transactions. associate or a joint venture is initially recognized at cost and adjusted thereafter to recognize the The margin deposited by securities firms to Company’s share of the profit or loss and other securities finance companies are recorded as comprehensive income of the associate or joint loan from refinanced margin. The refinancing venture. The Company also recognizes the securities delivered to TCS are recorded through changes in the Company’s share of equity of memorandum entries as refinancing stock loans. associates or joint ventures. A portion of the proceeds from the short-sale of securities borrowed from securities finance When the Company subscribes for additional companies is retained by the securities finance new shares of the associate or joint ventures at a companies as collateral and is recorded as percentage different from its existing ownership refinancing deposits receivable. percentage, the resulting carrying amount of the investment differs from the amount of the 2015 ANNUAL REPORT

Company’s proportionate interest in the associate ceases to be an associate and a joint venture. Any or joint ventures. The Company records such a retained investment is measured at fair value at difference as an adjustment to investments with that date and the fair value is regarded as its fair the corresponding amount charged or credited value on initial recognition as a financial asset. to capital surplus. If the Company’s ownership The difference between the previous carrying interest is reduced due to the additional amount of the associate and the joint venture subscription of the new shares of the associate attributable to the retained interest and its fair or joint ventures, the proportionate amount of value is included in the determination of the gain the gains or losses previously recognized in or loss on disposal of the associate and the joint other comprehensive income in relation to that ventures. The Company accounts for all amounts associate or joint ventures is reclassified to profit previously recognized in other comprehensive or loss on the same basis as would be required if income in relation to that associate and the joint the investee had directly disposed of the related venture on the same basis as would be required assets or liabilities. When the adjustment should if that associate had directly disposed of the be debited to capital surplus, but the capital related assets or liabilities. If an investment in surplus recognized from investments accounted an associate becomes an investment in a joint for by equity method is insufficient, the shortage venture or an investment in a joint venture is debited to retained earnings. becomes an investment in an associate, the When the Company’s share of losses of an Company continues to apply the equity method associate or a joint venture equals or exceeds its and does not remeasure the retained interest. interest in that associate or joint ventures, which When the Company transacts with its associate includes any carrying amount of the investment or joint ventures, profits and losses resulting accounted for by equity method and long-term from the transactions with the associate or interests that, in substance, form part of the joint ventures are recognized in the Company’s Company’s net investment in the associate or joint consolidated financial statements only to the ventures, the Company discontinues recognizing extent of interests in the associate or joint its share of further losses. Additional losses and ventures that are not related to the Company. liabilities are recognized only to the extent that the Company has incurred legal obligations, or Investment Properties constructive obligations, or made payments on behalf of that associate or joint venture. Investment properties are properties held to earn rentals and/or for capital appreciation. Any excess of the cost of acquisition over the Investment properties also include land held for a Company’s share of the net fair value of the currently undetermined future use. identifiable assets and liabilities of an associate or a joint venture recognized at the date of Investment properties are measured initially at acquisition is recognized as goodwill, which cost, including transaction costs. Subsequent is included within the carrying amount of the to initial recognition, investment properties are investment and is not amortized. Any excess of measured at cost less accumulated depreciation the Company’s share of the net fair value of the and accumulated impairment loss. Depreciation identifiable assets and liabilities over the cost is recognized using the straight-line method. of acquisition, after reassessment, is recognized Any gain or loss arising on derecognition of the immediately in profit or loss. property is calculated as the difference between The entire carrying amount of the investment the net disposal proceeds and the carrying amount (including goodwill) is tested for impairment as a of the asset and is included in profit or loss in the single asset by comparing its recoverable amount year in which the property is derecognized. with its carrying amount. Any impairment loss recognized forms part of the carrying Reinsurance Contracts amount of the investment. Any reversal of that In order to limit the potential losses that may impairment loss is recognized to the extent arise from certain risk exposure events, the that the recoverable amount of the investment Company cedes insurance contracts with the subsequently increases. reinsurer according to its business consideration The Company discontinues the use of the equity and the relevant insurance regulations. To the method from the date on which its investment extent that the assuming reinsurers are unable 57 58 Financial Information

to meet their obligations, the Company remains Land for self-use is not depreciated. Depreciation liable to its policyholders for the portion is recognized using the straight-line method. reinsured. Consequently, allowances are made Each significant part is depreciated separately. for receivables on reinsurance contracts which are The estimated useful lives, residual values deemed uncollectible. and depreciation method are reviewed at the end of each reporting period, with the effect Reinsurance expense, reinsurance commission of any changes in estimate accounted for on a income and reinsurance payables are processed prospective basis. and recognized on the basis of reinsurance contracts over the duration of these contracts. Any gain or loss recognized on the disposal or Reinsurance contracts include reinsurance ceded retirement of an item of property and equipment reserves, claims recoverable from reinsurers and is the difference between the sales proceeds and reinsurance receivables. The assets, liabilities, the carrying amount of the asset and is included income and expense for reinsurance contracts in profit or loss in the period in which the asset is cannot be offset against the original insurance derecognized. contracts’ related balances. Leasing If the Company’s reinsurance assets, claims recovered from reinsurers and net due from Leases are classified as finance leases whenever reinsurers and ceding companies are impaired, the terms of the lease transfer substantially all the which are subject to periodic impairment tests, risks and rewards of ownership to the lessee. All the Company shall reduce its carrying amount other leases are classified as operating leases. accordingly and recognize that impairment loss The Company as a lessor in profit or loss as long as (a) there is objective evidence, as a result of an event that occurred Amounts due from lessees under finance leases after initial recognition of the reinsurance asset, are recognized as receivables at the amount of that the Company may not receive all amounts the Company’s net investment in the leases. due to it under the terms of the contract; and (b) Unearned interest revenue is allocated to that event has a reliably measurable impact on the accounting periods so as to reflect a constant amounts that the Company will receive from the periodic rate of return on the Company’s net reinsurer. investment outstanding in respect of the leases. Ceded reinsurance refers to the transfer of Rental income from operating leases is insurance risk, along with the respective recognized in revenues over the lease periods premiums, to one or more reinsurers who will on a straight-line basis. Contingent rents arising share in the risks. When the reinsurance contracts under operating leases are recognized as income do not transfer significant insurance risk, the in the year in which they are incurred. Company records the agreement using the deposit Lease incentives offered in the operating lease method of accounting. are recognized as an asset. The aggregate cost of If a reinsurance contract involves the transfer of incentives is recognized as a reduction of rental significant insurance risk and if the Company can income on a straight-line basis over the lease evaluate the deposit components individually, the term. insurance component and the deposit component The Company as a lessee are separately recognized. That is, the difference between the contract amount the Company Lease payments under an operating lease are receives or pays and the amount of the insurance expensed on a straight-line basis over the lease component is recognized as a financial liability or period. Under operating lease, contingent rentals asset chargeable other than revenues or expenses. are recognized as expenses at current year. The financial liability or asset is recognized and Lease incentives received for operating leases measured at fair value, which is based on the are recognized under liabilities. The aggregate discounted value of future cash flows. benefit of incentives is recognized as a reduction Properties and Equipment of rental expense on a straight-line basis. Properties and equipment are initially recognized When TCB sales and leasebacks a property, the at cost and subsequently measured at costs less excess of sales proceeds over the carrying amount accumulated depreciation and accumulated resulted from the sale of the property is deferred impairment losses. and amortized over the lease term regardless of 2015 ANNUAL REPORT

operating lease or finance lease. For indefinite combination is measured at its fair value on the lease term, the excess is amortized over 10 years. acquisition date, and is recognized separately from goodwill. Subsequent to initial recognition, Goodwill they are measured on the same basis as intangible Goodwill (part of intangible assets) from business assets that are acquired separately. combination is recorded at acquisition cost and Derecognition subsequently measured at cost less accumulated impairment. Gains or losses arising from derecognition of an intangible asset, measured as the difference For the purposes of impairment testing, goodwill between the net disposal proceeds and the is allocated to each of the Company’s cash- carrying amount of the asset, are recognized in generating units or groups of cash-generating profit or loss when the assets is derecognized. units (referred to as cash-generating units (CGU)) that is expected to benefit from the synergies of Impairment of Tangible and Intangible the combination. Assets Other Than Goodwill In testing assets for impairment, the Company At the balance sheet date, the Company reviews compares the carrying amounts of operating the carrying amounts of its tangible and intangible segments (CGUs with allocated goodwill) to assets (except goodwill) for any indication their recoverable amounts on a yearly basis (or of impairment loss. If any such indication when impairment indicators exist). CGUs with exists, the recoverable amount of the asset is allocated goodwill arise from the current year estimated in order to determine the extent of the should be tested for impairment before the end of impairment loss. Corporate assets are allocated the year. When the recoverable amount of CGUs to the individual cash-generating units or a is below the carrying amount, an impairment loss reasonable and consistent basis of allocation. The should be recognized to reduce first the carrying recoverable amount is the higher of fair value less amount of goodwill of the CGU and then the selling costs or value in use. carrying amounts of other assets of the CGU proportionately. Any impairment loss should be If the recoverable amount of an asset or cash- directly recognized as loss in the current year, generating unit is estimated to be less than its and subsequent reversal of impairment loss is not carrying amount, the carrying amount is reduced allowed. to its recoverable amount. If asset impairment On disposal of the relevant cash-generating unit, loss reverses, the increase in the carrying amount the amount attributable to goodwill is included in resulting from reversal is credited to earnings. the determination of the profit or loss on disposal. However, loss reversal should not be more than the carrying amount (net of depreciation or Intangible Assets Other Than Goodwill amortization) had the impairment loss not been recognized. Separate acquisition Intangible assets with finite useful lives that Investment-linked Products are acquired separately are initially measured The Company sells investment-linked products. at cost and subsequently measured at cost less Based on agreements, the insurance premiums accumulated amortization and accumulated paid by policyholders are offset against various impairment losses. Amortization is recognized on expenses incurred by the Company and are a straight-line basis. At year-end, the Company invested in separate accounts at allocation ratios examines its estimates of the useful lives, residual agreed on with or set by the policyholders. The values and amortization method of the assets, value of the separate-account assets is accounted and any changes in estimates are accounted for for at the market value on the date of the start of prospectively. Unless the Company expects to the transaction, and their net worth is computed dispose of an intangible asset before the end of in accordance with the related regulations and its useful life, the residual value of an intangible asset with limited useful life is estimated to be accounting principles generally accepted in the zero. ROC. Acquisition as part of a business combination The assets, liabilities, revenues and expenses of separate accounts represent the rights and Intangible asset acquired through business obligations of the policyholders and are recorded, 59 60 Financial Information

pursuant to the accounting principles governing by Insurance Enterprises and other rulings investment-linked products, in the Company’s promulgated by regulators. Calculation is based “Assets on insurance products - separate account” on a mortality table and projected interest rate (part of other financial assets), “Liabilities on at the time of approval of the insurance product insurance products - separate account” (part of granted by the Insurance Bureau of the Republic other financial liabilities), “Income on insurance of China. products - separate account” and “Disbursements on insurance products - separate account” (part of Unearned premium reserve premium income, net). Unearned premiums of effective policies with a term of less than one year and the term of injury Foreclosed Collaterals insurance exceeding one year are computed, Foreclosed collaterals (part of other assets) are by the policy types, according to the respective recorded at the fair value on recognition and actual risk. recorded at the lower of cost or net fair value as Claim reserve of the balance sheet dates. Net fair value falling below book value indicates impairment, and Reserve for claim payments is for claims which impairment loss should be recognized. If the net are reported but not yet paid and incurred but not fair value recovers, the recovery of impairment yet reported (IBNR). Reserve for claim payments loss is recognized in gains. For foreclosed which is reported but not yet paid is provided collaterals that should have been disposed of according to a case by case basis based on an in the statutory term, unless the disposal period actual data. Reserve for claim payments which is is prolonged, additional provision for losses incurred but not yet reported is provided based on should be made and impairment loss should be the following rules: recognized, as required under a FSC directive. a. Life insurance and health insurance with a term Provisions of less than one year Provisions are the best estimate of the Life insurance and health insurance with a consideration required to settle the present term of less than one year is provided based on obligation at the balance sheet date, taking historical information and actuarial principles into account the risks and uncertainties on the for each type of insurance. obligation. A provision is measured using b. Injury insurance the cash flows estimated to settle the present obligation. Injury insurance is provided based on historical information and actuarial principles for each When some or all of the economic benefits type of insurance. required to settle a provision are expected to be recovered from a third party, a receivable is Deficiency reserve recognized as an asset if it is virtually certain that reimbursement will be received and the amount For life, health and annuity insurance contracts, of the receivable can be measured reliably. whereas insurance term is over one year and insurance premium is lower than the required The reserves of insurance contracts are recognized reserve liability, a further reserve for deficient in accordance with Regulations Governing the premiums will be required in addition to the Reserves by Insurance Enterprises and attested normal insurance reserve. by actuary with accreditation from Financial Supervisory Commission. According to the No. In addition, for effective insurance contracts with 852367814 announced by the Insurance Bureau, a term less than one year, if the estimated claims except the Company insurance with a term of less and expenses are in excess of the relevant reserve than one year, the insurance liabilities should be for unearned premium and the expected premium calculated based on the higher of its revenue or to be received, the excess amount shall be revenue calculated according to the regulation. provided as an addition to the deficiency reserve The provision basis are summarized as follows: account. Life policy reserve Reserve for liability adequacy Reserve of life policy is calculated according According to IFRS 4 “Insurance Contracts” to the Regulations Governing the Reserves additional reserve for liability adequacy shall be 2015 ANNUAL REPORT

made pursuant to the results of the Company's less than two thirds of the initial amount of net annual insurance liability adequacy tests. income. In this reclassification, the recovered amount should be calculated in accordance The Company's liability adequacy test is based with Regulations Governing the Reserves by on the whole insurance contracts, and is in Insurance Enterprises. accordance with Actuarial Standards of Practice of IFRS 4 - “Classification of Contracts and b. Provisions: Except for provisions calculated Liability Adequacy Test” issued by the Actuarial at the total amounts of foreign investments Institute of the Republic of China. The adequacy multiplied by the ratio of exposures and the of insurance liabilities must be tested at each ratio of 0.042 percent, if there is the profit balance sheet date. The liability adequacy test is on non-hedging foreign exchange assets, based on the difference between the net carrying the Company should provide a reserve at 50 amount of insurance liabilities minus deferred percent of the profit. acquisition costs and related intangible assets c. Write-off amounts: The loss on foreign and current estimates of future cash flows from exchange of the assets without hedge should insurance policies. If the net carrying amount is be written off against the reserve at 50 percent insufficient, the deficiency will be recognized in of the loss. The balance of the reserve at the profit or loss. end of a month cannot be less than 20 percent Insurance contract with financial instrument of the amount of the end of the previous year’s features cumulative balances. The cumulative balance in 2012 refers to the initial amount of the The service fees the Company charges from reserve. investment contracts, which do not belong to investment-linked products and are with no d. The maximum cumulative reserve is 9.5 percent discretionary participation feature, are recognized of the current year’s total foreign investment. as reserve for insurance contracts with financial e. If the Company has savings on hedging cost, instrument feature. The related acquisition cost it should appropriate from the current year’s will be charged against reserve for insurance net profit an amount the same as that of these contracts with financial instrument feature when savings. However, if the net profit is not the relevant insurance contracts become effective. enough for this appropriation, the appropriation The Company provided the insurance contract should be made in the year a profit is made. with financial features in accordance with the This reserve should be used for capital increase Regulations Governing the Reserves by Insurance or for offsetting the deficit at least once in three Enterprises. years. Reserve for foreign exchange valuation f. Ten percent of net profit should be provided For the life insurance enterprises manage its as special reserve. However, exemption from exposure to foreign exchange risks, reduce the this requirement may be obtained under the cost and strengthen liquidation, in accordance authorities’ approval. with Regulations Governing the Reserves by Insurance Enterprises and the Company based on Recognition of Revenue its foreign investment asset to provide the foreign The Company recognizes revenue in accordance exchange valuation. with IAS 18 “Revenue”, except revenue from Under the Guidelines on Life Insurance Reserve insurance contracts. for Foreign Exchange Valuation and related Interest revenue on loans is recorded on an amendments, the reserve to be provided and the accrual basis. Under the guidance of the FSC, no terms for write-offs against the reserve are as interest revenue is recognized on loans that are follow: classified as overdue loans. The interest revenue a. Special reserve is reclassified to reserve for on these loans is recognized upon collection of foreign exchange valuation for three years the loans and credits. from the reclassification date. For the first Service fees are recognized when a major part year, the amount cannot be less than one third of the earnings process is completed and cash is of the initial amount of net income. For the collected. first two years, the cumulative amounts cannot 61 62 Financial Information

Dividend income from investments is recognized contracts and the service cost corresponding to when the stockholder’s right to receive payment the received service fee. has been established (provided that it is probable that the economic benefits will flow to the Government Grants Company and the amount of income can be Government grants are not recognized until there measured reliably). is reasonable assurance that the Company will Service that results in award credits for customers, comply with the conditions attaching to them and under the Company’s award scheme, is accounted that the grants will be received. for as multiple element revenue transactions Government grants are recognized in profit or and the fair value of the consideration received loss on a systematic basis over the periods in or receivable is allocated between the service which the Company recognizes as expenses the rendered and the award credits granted. The related costs for which the grants are intended consideration allocated to the award credits is to compensate. Specifically, government grants measured by reference to their fair value. Such whose primary condition is that the Company consideration is not recognized as revenue at the should purchase, construct or otherwise acquire time of the initial sale transaction but is deferred non-current assets are recognized as deferred and recognized as revenue when the award credits revenue and transferred to profit or loss on a are redeemed and the Company’s obligations systematic and rational basis over the useful lives have been fulfilled. of the related assets. Premium Income and Policy Acquisition Government grants that are receivable as Cost compensation for expenses or losses already incurred or for the purpose of giving immediate The initial premiums for the Company’s financial support to the Company with no future insurance contracts and investment contracts related costs are recognized in profit or loss in the with a discretionary participation feature are period in which they become receivable. recognized as revenue once the collection is made and the insurance approval procedures Employee Benefits are completed. The subsequent premiums are recognized as revenue upon cash collection. The Short-term employee benefits related expenses, e.g., commission expenses, are Short-term and non-discounted employee benefits recognized as expenses once the contract takes are recognized as expenses in the current year as effect. services are rendered. The service fees the Company charges on Retirement benefits investment contracts that are not considered investment-linked products and have no Payments to defined contribution retirement discretionary participation feature are recognized benefit plans are recognized as an expense when as reserve for insurance contracts with financial employees have rendered service entitling them instrument feature. The related acquisition cost to the contributions. will be charged against the reserve for insurance Defined benefit costs (including service cost, contracts with financial instrument feature when net interest and remeasurement) under the the relevant insurance contracts take effect. defined benefit retirement benefit plans are The service fees that the Company charges for determined using the projected unit credit the investment-linked product of insurance method. Service cost and net interest on the net contracts and from which front-load fees or defined benefit liability (asset) are recognized related investment management fees have been as employee benefits expense in the period they occur. Remeasurement, comprising actuarial deducted, are recognized as investment-linked gains and losses and the return on plan assets product liabilities. The policy-related expenses (excluding interest), is recognized in other incurred by the investment management service, comprehensive income in the period in which including commission and increased expenses they occur. Remeasurement recognized in other associated with the new contracts, are deferred. comprehensive income is reflected immediately These costs are depreciated using the straight- in retained earnings and will not be reclassified to line method throughout the duration of service profit or loss. provision. The Company recognizes the deferred service fee revenue and deferred acquisition cost Net defined benefit liability (asset) represents the in accordance with the design of the insurance actual deficit (surplus) in the Company’s defined 2015 ANNUAL REPORT

benefit plan. Any surplus resulting from this Deferred tax calculation is limited to the present value of any Deferred tax is recognized on temporary refunds from the plans or reductions in future differences between the carrying amounts of contributions to the plans. assets and liabilities in the consolidated financial Preferential interest deposits for employees statements and the corresponding tax bases used in the computation of taxable profit. Taiwan Cooperative Bank, Ltd. (TCB) provides preferential interest deposits to current and Deferred tax liabilities are generally recognized retired employees, and these deposits, including for all taxable temporary differences. Deferred payments of the preferential interest deposits, are tax assets are generally recognized for all within certain amounts. The preferential rates deductible temporary differences and unused loss for employees’ deposits in excess of market rate carryforwards to the extent that it is probable should be treated as employee benefits. that taxable profits will be available against which these deductible temporary differences Under the Guidelines Governing the Preparation can be used. If the temporary difference arises of Financial Reports by Public Banks, TCB from the initial recognition (other than in a should follow the requirement of IAS 19 business combination) of assets and liabilities in “Employee Benefits” endorsed by FSC to a transaction that affects neither the taxable profit determine the excess interest on the preferential nor the accounting profit, the resulting deferred interest deposits of retired employees by tax asset or liability is not recognized. In applying an actuarial valuation method when addition, a deferred tax liability is not recognized the employees retire. The actuarial assumptions on taxable temporary difference arising from the should be in accordance with the requirements set initial recognition of goodwill. by the authorities. Deferred tax liabilities are recognized for Termination benefits taxable temporary differences associated with A liability for a termination benefit is recognized investments in subsidiaries and associates, and at the earlier of when the Company can no longer interests in joint ventures, except where the withdraw the offer of the termination benefit Company is able to control the reversal of the and when the Company recognizes any related temporary difference and it is probable that the restructuring costs. temporary difference will not reverse in the foreseeable future. Deferred tax assets arising Share-based Payment from deductible temporary differences associated The Company’s employees subscribed for the with such investments and interests are only reserved shares of Taiwan Cooperative Financial recognized to the extent that it is probable that Holding Company, Ltd., (TCFHC) in accordance there will be sufficient taxable profits against with the Financial Holding Company Act, and the which to use the benefits of the temporary Company recognized the fair value of the stock differences and these differences are expected to options under salary expenses and under capital reverse in the foreseeable future. surplus for share-based payment on the grant The carrying amount of deferred tax assets is date, i.e., the date when the Company and its reviewed each balance sheet date and reduced employees made an agreement for the employees to the extent that it is no longer probable that to subscribe for TCFHC’s shares. sufficient taxable profits will be available to allow all or part of the asset to be recovered. A Taxation previously unrecognized deferred tax asset is also Income tax expense represents the sum of the tax reviewed each balance sheet date and recognized currently payable and deferred tax. to the to the extent that it has become probable that future taxable profit will allow the deferred Current tax tax asset to be recovered. According to the Income Tax Law, an additional Deferred tax liabilities and assets are measured tax at 10% of unappropriated earnings is provided at the tax rates that are expected to apply in the for as income tax in the year the shareholders period in which the liability is settled or the asset approve to retain the earnings. realized, based on tax rates (and tax laws) that Adjustments of prior years’ tax liabilities are have been enacted or substantively enacted by the added to or deducted from the current year’s tax end of the reporting period. The measurement provision. of deferred tax liabilities and assets reflects the 63 64 Financial Information

tax consequences based on the manner in which period comparative information in the financial the Company expects, at the end of the reporting statements is restated as if a business combination period, to recover or settle the carrying amount of involving entities under common control had its assets and liabilities. already occurred in that period.

Current and deferred tax for the year Classification of Insurance Contracts Current and deferred taxes are recognized in An insurance contract is one under which one profit or loss, except when they relate to items party (the insurer) accepts significant insurance that are recognized in other comprehensive risk from another party (the policyholder) by income or directly in equity, in which case, the agreeing to compensate the policyholder if a current and deferred tax are also recognized in specified uncertain future event (the insured other comprehensive income or directly in equity, event) adversely affects the policyholder. The respectively. Where current tax or deferred taxes Company identifies insurance risk as significant arises from the initial accounting for a business only if the insured event would cause the combination, the tax effect is included in the Company to pay material additional benefits. accounting for the business combination. The insurance contract with the nature of TCFHC and its subsidiaries elected to file financial instruments is the contract that makes a consolidated tax returns. The difference between contract issuer exposed to financial risk but not consolidated income tax payable and the sum significant insurance risk. Financial risk is the of income tax payables of the entities included risk that one or multiple interest rates, the price of in consolidated tax return is considered as a tax financial instruments, commodity price, exchange consolidation adjustment which is shown on rate, price index, insurance premium index, credit TCFHC’s income tax expense or benefit. Any ratings, credit index or other variables (if the distribution of cash payments and receipts among variable is nonfinancial it has to be non-specific the consolidated group members is recorded as to both parties) will change in the future. current tax assets or current tax liabilities. The policy that initially met the definition of Business Combination insurance contract remains an insurance contract Acquisitions of businesses are accounted for until all of the rights and obligations expire, even using the acquisition method. Acquisition-related though the insurance risk has been significantly costs are generally recognized as expense as reduced through the duration of the insurance incurred. contract. However, if the significant insurance risk of the insurance contract with the nature Goodwill is measured as the excess of the sum of of financial instruments is transferred to the the consideration transferred, the amount of any Company, the contract should be reclassified to non-controlling interests in the acquiree, and the insurance contract. fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the Insurance contracts may also be classified as with acquisition-date amounts of the identifiable assets or without the discretionary participation feature acquired and the liabilities assumed. (DPF). DPF is a contractual right to receive the following additional benefits: Non-controlling interests that are present ownership interests and entitle their holders to a a. An amount that is equal to a significant portion proportionate share of the entity’s net assets in of the total contractual benefits; the event of liquidation may be initially measured b. Whose amount or timing is contractually at the either at fair value or at the non-controlling discretion of the issuer; and interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net assets. c. That is contractually based on: The choice of measurement basis is made on a 1) The performance of a specified pool of transaction-by-transaction basis. Other types contracts or a specified type of contract; of non-controlling interests are measured at fair value. 2) Realized and/or unrealized investment returns on a specified pool of assets held by Business combination involving entities the issuer; or under common control is not accounted for by acquisition method but accounted for at 3) The profit or loss of the Company, fund or the carrying amounts of the entities. Prior other entity that issues the contract. 2015 ANNUAL REPORT

Derivatives embedded in non-derivative host on loans and receivables. The management contracts are treated as separate derivatives uses past loss experience on assets that have when they meet the definition of a derivative, similar credit risk characteristics to estimate recognized at fair value and the resulting gain the expected future cash flows. The Company or loss is recognized in profit or loss. If the reviews the methods and assumptions of cash derivatives embedded in non-derivative host flow estimation regularly to eliminate the contracts are qualify as insurance policies, or difference between expected and actual loss. the contracts are recognized at fair value and the b. Fair values of financial instruments resulting gain or loss is recognized in profit or loss, the derivatives embedded in non-derivative Fair values of financial instruments in an host contracts do not have to separate from inactive market or with no quoted market prices insurance policies. are determined by valuation techniques. Under these circumstances, fair values are derived 5. CRITICAL ACCOUNTING from observable market data of other similar JUDGMENTS AND KEY SOURCES financial assets. When there are no observable OF ESTIMATION UNCERTAINTY inputs in the market, the fair values of In the application of the Company's accounting financial instruments are estimated by making policies, which are described in Note 4, the appropriate assumptions. The Company applies Company's management is required to make appropriate valuation models to determine the judgments, estimates and assumptions about the fair values of financial instruments subjective carrying amounts of assets and liabilities that to valuation techniques. All models are fine- are not readily apparent from other sources. The tuned to ensure the valuation results fairly estimates and associated assumptions are based reflect actual market information and prices. on historical experience and other factors that are The Company’s management believes that the considered relevant. Actual results may differ chosen valuation techniques and assumptions from these estimates. used are appropriate in determining the fair value of financial instruments. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to For the fair value determination of financial accounting estimates are recognized in the period instruments, refer to Note 41 to the consolidated in which the estimate is revised if the revision financial statements. affects only that period, or in the period of the c. Income tax revision and future periods if the revision affects both current and future periods. The Company is required to make substantive estimates when calculating income tax. The Unless stated in other notes, the following are the final tax assessment is based on considerable critical judgments, assumptions and estimation transactions and calculations. When the uncertainty that the Company's management has final tax amount differs from the amount on made in the process of applying the Company's original recognition, the difference affects accounting policies and that have the most the recognition of both current and deferred significant effect on the amounts recognized in income tax. The realizability of the deferred the consolidated financial statements: tax asset mainly depends on whether sufficient a. Impairment losses on loans future profits or taxable temporary differences will be available. In cases where the actual The Company monthly assesses loans future profits generated are less than expected, collectively. When determining whether a material reversal of deferred tax assets may an impairment loss should be recognized, arise, which would be recognized in profit or the Company mainly seeks for observable loss for the period in which such a reversal evidence that indicates impairment. Objective takes place. evidence of impairment of a portfolio of loans and receivables could include the Company’s d. Employment benefits past difficulty in collecting payments and an The calculation of the present value of post- increase in the number of delayed payments, as employment benefits and preferential rates for well as observable changes in national or local retired employees’ deposits is based on the economic conditions that correlate with defaults actuarial result under several assumptions. Any 65 66 Financial Information

change in these assumptions may affect the any observable evidence that the Company has carrying amount of post-employment benefits payment obligations to compensate the losses and preferential interest deposits plan for retired of guarantee holders. The Company regularly employees. reviews the economic situation in terms of One of the estimates used for determining the defaults on debt repayments to reduce the net pension costs (revenues) is discount rate. difference between the estimated and the actual The Company determines appropriate discount amounts of loss. rates at the end of each year and estimates the h. Insurance liability and liability adequacy test present values of future cash outflows resulting from fulfilling the post-employment obligation An independent actuary estimated the insurance by the discount rates. To better determine the liability and tested liability adequacy using discount rates, the Company takes into account certain actuarial principles and assumptions, the interest rates of high-quality corporate which included the characteristics of each bonds or government bonds, with currencies type of insurance, historical information, the same as those of post-employment benefit loss development factors, expected loss ratio payments, and with durations that match those and estimation of future cash flows. The of the corresponding pension liabilities. management may adjust the differences between actual results and estimates, if it is Other significant assumptions for post- necessary. employment obligation are subject to current market condition. Significant assumptions for 6. CASH AND CASH EQUIVALENTS the obligation of preferential interest deposits for retired employee are determined by the December 31 authorities. 2015 2014 Cash on hand $ 21,451,458 $ 22,606,627 e. Impairment of goodwill Notes and checks in clearing 9,279,476 14,207,885 Determining whether goodwill is impaired Due from banks 13,022,720 8,335,098 requires an estimation of the value in use of the $ 43,753,654 $ 45,149,610 cash-generating units to which goodwill has been allocated. The value in use calculation Reconciliations of cash and cash equivalents requires management to estimate the future between the consolidated statements of cash cash flows expected to arise from the cash- flows and the consolidated balance sheets as of generating unit and a suitable discount rate in December 31, 2015 and 2014 are shown in the order to calculate present value. Where the consolidated statements of cash flows. actual future cash flows are less than expected, a material impairment loss may arise. 7. DUE FROM THE CENTRAL BANK f. Impairment assessment on available-for-sale AND CALL LOANS TO OTHER equity investment BANKS Objective evidences of the impairment of an December 31 available-for-sale equity investment include 2015 2014 the fair value of that investment falling Reserves for deposits - account A $ 39,790,008 $ 34,584,333 significantly or constantly below the cost. Reserves for deposits - account B 64,299,766 61,768,836 Subjective judgments are required when Reserves for deposits - community assessing the impairment. The Company’s financial institutions 52,801,642 50,837,686 management considers past market fluctuation, Reserves for deposits - foreign-currency historical prices of the investment and other deposits 318,069 292,232 factors that affect the performance of the Deposits in the Central Bank 39,200,000 39,200,000 industries to which the investees belong to Time deposits in the Central Bank 4,500,000 4,600,000 make the subjective judgments. Negotiable certificates of deposit in the Central Bank 443,715,000 461,665,000 g. The valuation of provisions on financial Due from the Central Bank - others 8,815,848 7,694,909 guarantee contracts Due from the Central Bank - central Except for the minimum standards under certain government agencies’ deposits 3,156,360 1,713,740 laws, the Company’s main basis for deciding Call loans to banks 49,859,749 22,950,026 the amounts of provisions is whether there is $ 706,456,442 $ 685,306,762 2015 ANNUAL REPORT

The deposit reserves are determined monthly at As of December 31, 2015 and 2014, some prescribed rates based on the average balances securities amounting to $23,189,614 thousand of various types of deposit accounts held by the and $21,794,732 thousand, respectively, had been Company. The deposit reserves are subject to sold under repurchase agreements. withdrawal restrictions, but deposit reserve - account A and foreign-currency deposit reserves Taiwan Cooperative Bank, Ltd. (TCB) enters into may be withdrawn anytime. derivative transactions mainly to accommodate customers' needs and to manage its exposure to Under the guideline issued by the Central adverse changes in exchange rates and interest Bank of the Republic of China (CBC), Taiwan rates. TCB's strategy for hedging against risk Cooperative Bank Ltd. should deposit 60 percent is to avoid most of the market price risk or cash of the deposits of central government agencies flow risk. in the CBC, and the deposits are subject to withdrawal restrictions. As of December 31, 2015 and 2014, the contract (notional) amounts of derivative transactions of 8. FINANCIAL ASSETS AND TCB were as follows: LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS December 31 December 31 2015 2014 2015 2014 Currency swap contracts $ 435,783,946 $ 446,375,166 Held-for-trading financial assets Forward contracts 27,179,346 35,806,344 Commercial paper $ 29,281,435 $ 50,999,037 Interest rate swap contracts 15,152,000 3,135,010 Corporate bonds 1,515,920 556,500 Currency option contracts - sell 11,907,017 13,884,274 Negotiable certificates of deposit 799,623 400,046 Currency option contracts - buy 11,907,017 13,811,464 Government bonds 506,660 250,519 Cross-currency swap contracts 6,639,328 24,975,395 Convertible bonds 416,618 344,280 Listed and emerging market stocks 262,273 216,786 Foreign-currency margin contracts 5,198,399 1,323,912 Beneficial certificates 52,106 16,134 Currency swap contracts 3,590,561 7,495,044 As of December 31, 2015, the open position Cross-currency swap contracts 225,100 760,174 of futures transactions of Taiwan Cooperative Forward contracts 209,482 795,203 Securities Co., Ltd. were as follows: Foreign-currency margin contracts 122,685 6,521 December 31, 2015 Currency option contracts - buy 66,725 237,293 Futures exchange margins 42,602 19,589 Open Position Contract Amounts or Interest rate swap contracts 5,888 220 Premium Commercial paper contracts with reference Number of Paid rate 921 2,400 Items Products Buy/Sell Contracts (Charged) Fair Values Asset swap options - 19 Futures TAIEX Sell 24 $ 39,655 $ 39,720 37,098,599 62,099,765 contracts Futures 201601 Financial assets designated as at fair value through profit or loss US T-NOTE Sell 15 61,880 61,993 201603 Convertible bond asset swap contracts 40,095 86,061 Corporate bonds - 326,993 As of December 31, 2014, the contract (notional) Bank debentures - 90,734 amounts of asset swap options of Taiwan 40,095 503,788 Financial assets at fair value through profit Cooperative Securities Co., Ltd. were as follows: or loss $ 37,138,694 $ 62,603,553 December 31, 2014 Held-for-trading financial liabilities Currency swap contracts $ 1,748,423 $ 3,973,236 Asset swap options $ 1,000 Cross-currency swap contracts 617,155 1,272,029 Forward contracts 330,601 1,209,990 Taiwan Cooperative Securities Co., Ltd. engages Currency option contracts - sell 66,958 237,751 in currency swap contracts to manage the Interest rate swap contracts 38,488 16,788 exposures due to exchange rate fluctuations. The Foreign-currency margin contracts 8,531 20,399 objective of financial risk management of Taiwan 2,810,156 6,730,193 Cooperative Securities Co., Ltd. is to manage Financial liabilities designated as at fair substantial risks due to changes in fair value or value through profit or loss cash flow. Bank debentures (Note 25) 12,703,063 - Financial liabilities at fair value through profit or loss $ 15,513,219 $ 6,730,193 67 68 Financial Information

As of December 31, 2014, some securities As of December 31 2015, the contract (notional) amounting to $600,129 thousand had been sold amounts of currency swap options of Taiwan under repurchase agreements. Cooperative Securities Co., Ltd. were as follows:

December 31, 2015 11. RECEIVABLES, NET Currency swap contracts $ 261,440 December 31 BNP Paribas Cardif TCB Life Insurance Co., 2015 2014 Ltd. (BPCTLI) engages in cross-currency swap Accrued interest $ 6,598,400 $ 6,402,684 contracts and currency swap contracts to manage Margin loans receivable 3,405,659 4,273,697 the exposures due to exchange rate fluctuations. The objective of financial risk management of Acceptances 3,305,845 2,803,356 BPCTLI is to manage substantial risks due to Credit cards 2,652,085 2,545,072 changes in fair value or cash flow. Acquired loans 2,636,903 3,135,123

As of December 31, 2015 and 2014, the contract Lease payment receivable 1,551,057 1,161,245 (notional) amounts of derivative transactions of BPCTLI were as follows: Settlement consideration 898,997 1,409,807 Settlement receivable 867,216 945,122 December 31 Receivables on merchant accounts in the 2015 2014 credit card business 557,158 710,985 Cross-currency swap contracts $ 3,452,400 $ 7,284,100 Credits receivable 475,799 484,557 Currency swap contracts 8,554,600 3,108,895 Receivable - separated account 372,903 484,895

9. AVAILABLE-FOR-SALE FINANCIAL Accounts receivable 345,098 255,133 ASSETS, NET Receivable on securities 328,600 286,861

December 31 Refundable deposits receivable in 2015 2014 leasehold agreements 272,993 272,993

Government bonds $ 91,849,779 $ 85,631,949 Accounts receivable factored without Corporate bonds 33,386,562 20,732,451 recourse 216,084 384,088 Bank debentures 17,042,247 10,130,042 Others 446,144 341,138 Beneficial certificates 5,272,281 6,040,635 Stocks 4,536,688 4,283,735 24,930,941 25,896,756 $ 152,087,557 $ 126,818,812 Less: Allowance for possible losses 1,319,773 1,054,454

The Company evaluated its available-for-sale Less: Unrealized interest revenue 126,442 107,117 financial assets and recognized impairment loss $ 23,484,726 $ 24,735,185 of $3,178 thousand because of the fall in credit ratings of the bond issuers in 2015. Credits receivable due to the merger with the Farmers Bank of China on May 1, 2006 As of December 31, 2015 and 2014, available- were recognized at the fair value of credits for-sale financial assets amounting to $25,513,538 written off by the Farmers Bank of China in thousand and $20,119,793 thousand, respectively, the past. The fair values were evaluated by had been sold under repurchase agreements. PricewaterhouseCoopers Financial Advisory 10. SECURITIES PURCHASED UNDER Service Co., Ltd. RESELL AGREEMENTS The allowances for possible losses on receivables Securities acquired for $1,346,831 thousand and (except spot exchange receivable - foreign $2,322,745 thousand under resell agreements as currencies, which amounted to $77 thousand of December 31, 2015 and 2014, respectively, and $10,115 thousand, respectively) assessed for will subsequently be sold for $1,347,169 impairment as of December 31, 2015 and 2014 thousand and $2,323,873 thousand, respectively. were as follows: 2015 ANNUAL REPORT

December 31, 2015 December 31, 2014 Items Allowance for Possible Allowance for Possible Receivables Receivables Losses Losses Assessment of individual $ 1,753,808 $ 737,281 $ 1,975,962 $ 565,035 With objective evidence of impairment impairment Assessment of collective 163,022 62,206 140,083 59,059 impairment With no objective evidence of Assessment of collective 23,014,034 520,286 23,770,596 430,360 impairment impairment Total 24,930,864 1,319,773 25,886,641 1,054,454

The changes in allowance for possible losses are December 31 summarized below: 2015 2014 Accounts receivable financing 608,195 733,675 For the Year Ended December 31 Secured 161,485,690 146,582,665 2015 2014 Medium-term loans Balance, January 1 $ 1,054,454 $ 1,293,269 Unsecured 301,683,991 317,700,013 Provision for possible losses 200,203 347,394 Secured 307,329,399 287,136,072 Write-offs ( 33,789 ) ( 609,401 ) Long-term loans Recovery of written-off receivables 99,135 21,622 Unsecured 34,629,232 38,195,391 Effects of exchange rate changes and other changes ( 230 ) 1,570 Secured 944,885,625 885,415,448 Balance, December 31 $ 1,319,773 $ 1,054,454 Overdue loans 6,371,809 7,048,376 Life insurance loan 332,794 399,056 12. DISCOUNTS AND LOANS, NET Temporary insurance paid 7,062 3,338 2,003,054,008 1,883,529,331 December 31 Less: Allowance for possible losses 21,461,997 22,270,721 2015 2014 Less: Adjustment of discount 476,402 510,329 Bills discounted $ 2,004,757 $ 2,432,955 $ 1,981,115,609 $ 1,860,748,281 Overdraft Unsecured 161,789 210,204 As of December 31, 2015 and 2014, accrual of Secured 111,712 370,963 interest on the above overdue loans had stopped. Import and export negotiations 542,432 743,226 Thus, the unrecognized interest revenue was Short-term loans $139,404 thousand and $207,845 thousand in 2015 and 2014, respectively, based on the average Unsecured 242,899,521 196,557,949 loan interest rate for the year.

The allowances for possible losses on discounts and loans assessed for impairment as of December 31, 2015 and 2014 were as follows: December 31, 2015 December 31, 2014 Items Allowance for Possible Allowance for Possible Discounts and Loans Discounts and Loans Losses Losses Assessment of individual $ 14,581,806 $ 4,597,960 $ 23,544,651 $ 7,120,928 With objective evidence of impairment impairment Assessment of collective 11,167,720 2,418,484 11,152,065 2,527,760 impairment With no objective evidence of Assessment of collective 1,977,304,482 14,445,553 1,848,832,615 12,622,033 impairment impairment Total 2,003,054,008 21,461,997 1,883,529,331 22,270,721

69 70 Financial Information

The changes in allowance for possible losses are bonds because of the fall in credit ratings of the summarized below: bond issuers in 2015 and 2014, respectively. For the Year Ended December 31 As of December 31, 2015 and 2014, held-to- 2015 2014 maturity financial assets amounting to $1,883,182 Balance, January 1 $ 22,270,721 $ 20,776,250 thousand and $1,898,938 thousand, respectively, Provision for possible losses 1,990,276 5,867,907 Write-offs ( 3,793,034 ) ( 5,426,523 ) had been sold under repurchase agreements. Recovery of written-off credits 882,611 846,435 Effects of exchange rate changes and other 14. INVESTMENTS ACCOUNTED FOR changes 111,423 206,652 USING EQUITY METHOD Balance, December 31 $ 21,461,997 $ 22,270,721 December 31 2015 2014 The bad-debt expenses and provision for losses Percentage Percentage of of on guarantees in 2015 and 2014 were as follows: Amount Ownership Amount Ownership For the Year Ended December 31 Investment in associate 2015 2014 United Real Estate Provision for possible losses on discounts Management Co., Ltd. $ 122,023 30.00 $ 115,905 30.00 and loans $ 1,990,276 $ 5,867,907 Provision for possible losses on receivables 200,203 347,394 Aggregate information of associates that are not Provision (reversal of provision) for individually material: possible losses on overdue receivables 291,100 ( 20,824 ) Provision (reversal of provision) for For the Year Ended December 31 possible losses on guarantees ( 256,587 ) 231,977 2015 2014 $ 2,224,992 $ 6,426,454 The TCB’s share of: Net income $ 13,432 $ 15,018 The Financial Supervisory Commission (FSC) Other comprehensive income ( 111 ) ( 591 ) required 1% minimum provisions for category Total comprehensive income for the year $ 13,321 $ 14,427 one sound credit assets. TCB made the required provision in 2014. As of December 31, 2015 The investments accounted for by equity and 2014, TCB was in compliance with the FSC- method and the share of profit or loss and other required provision for credit assets. comprehensive income of the investments for the years ended December 31, 2015 and 2014 The reversal in 2015 of provisions for possible were based on the associate's financial statements losses on guarantees (a) included TCB's audited by the auditors for the same years. reclassification of guaranteed receivables to overdue loans due to the default of clients and 15. OTHER FINANCIAL ASSETS, NET an increase in provision for possible losses on December 31 overdue loans; and (b) pertained to TCBF's 2015 2014 agreements with clients to extend their payment Overdue receivables $ 405,199 $ 270,473 periods. The provision and reversal of provision Less: Allowance for possible losses 329,294 258,846 were in compliance with regulations. Overdue receivables, net 75,905 11,627 Debt instruments with no active market, 13. HELD-TO-MATURITY FINANCIAL net 94,584,846 91,003,303 ASSETS Due from banks 15,317,401 35,437,885 Financial assets carried at cost 4,101,660 3,432,060 December 31 Call loans to securities firms 295,920 - 2015 2014 Separate-account assets (Note 29) 76,908,449 66,873,228 Government bonds $ 19,746,164 $ 7,001,616 $ 191,284,181 $ 196,758,103 Corporate bonds 18,756,957 6,818,453 Bank debentures 6,390,443 5,800,188 Debt instruments with no active market are Certificates of deposit 305,784 446,547 Preferred stocks - 2,000,000 summarized as follows: $ 45,199,348 $ 22,066,804 December 31 2015 2014 The Company evaluated its held-to-maturity Corporate bonds $ 76,365,142 $ 74,463,443 financial assets and recognized an impairment Bank debentures 17,890,904 16,223,160 loss of $4,679 thousand and a reversal of Government bonds - overseas 328,800 316,700 $ 94,584,846 $ 91,003,303 impairment loss of $2,455 thousand on some 2015 ANNUAL REPORT

Financial assets carried at cost are summarized as Land Buildings Total follows: Accumulated depreciation and impairment December 31 2015 2014 Balance, January 1, 2015 $ - $ 253,024 $ 253,024 Percentage Percentage Disposals - ( 1,168 ) ( 1,168 ) of of Depreciation expenses - 24,048 24,048 Amount Ownership Amount Ownership Transferred from properties Taiwan Asset Management and equipment - 73,677 73,677 Co., Ltd. $ 2,370,934 17.03 $ 2,370,934 17.03 Balance, December 31, 2015 $ - $ 349,581 $ 349,581 Taipei Financial Center Corp. 669,600 1.63 - - Balance, January 1, 2014 $ - $ 231,457 $ 231,457 Taiwan Power Company 631,153 0.24 631,153 0.24 Disposals - ( 547 ) ( 547 ) Financial Information Depreciation expenses - 22,114 22,114 Service Co., Ltd. 135,405 2.89 135,405 2.89 Balance, December 31, 2014 $ - $ 253,024 $ 253,024 Taiwan Financial Asset Service Co., Ltd. 101,125 5.88 101,125 5.88 Others 193,443 193,443 Investment properties (except for land) were $ 4,101,660 $ 3,432,060 depreciated on the straight-line method over service lives estimated as follows: Management believed that the above equity Main buildings 17 to 50 years investments held by the Company, whose fair Equipment installed in buildings 5 years value cannot be reliably measured due to the range of reasonable fair value estimates was so As of December 31, 2015, the fair value of significant; therefore they were measured at cost investment properties was $8,765,688 thousand. less impairment at the end of reporting period. The fair value was determined through Some investees had operating losses; thus the calculations using the market value method Company recognized an impairment loss of and estimates based on market quotes. As of $23,835 thousand on financial assets carried at December 31, 2014, the fair value of investment cost for the year ended December 31, 2014. properties was $6,909,934 thousand. The fair value was based on the valuation made through Due from banks (part of other financial assets, a discounted cash-flow analysis, the cost of land net) held by the Company were demand deposits development analysis and estimation with market and time deposits could not be withdrawn and quotes. time deposits had maturity periods of more than three months and could not be used before The revenues generated from the investment maturity. properties are summarized as follows: For the Year Ended December 31 16. INVESTMENT PROPERTIES, NET 2015 2014 December 31 Rental income from investment properties $ 169,110 $ 136,388 2015 2014 Direct operating expenses for investment Land $ 2,679,194 $ 2,091,412 properties that generate rental income ( 55,165 ) ( 50,782 ) Buildings 890,973 623,295 $ 113,945 $ 85,606 $ 3,570,167 $ 2,714,707 17. PROPERTIES AND EQUIPMENT, NET Land Buildings Total December 31 Cost 2015 2014 Balance, January 1, 2015 $ 2,091,412 $ 876,319 $ 2,967,731 Carrying amount Disposals ( 6,066 ) ( 7,887 ) ( 13,953 ) Land $ 24,823,697 $ 25,145,633 Transferred from properties Buildings 8,349,213 8,789,570 and equipment 593,848 372,122 965,970 Machinery and equipment 1,027,241 1,267,088 Balance, December 31, 2015 $ 2,679,194 $ 1,240,554 $ 3,919,748 Transportation equipment 115,670 138,585 Balance, January 1, 2014 $ 2,111,996 $ 870,170 $ 2,982,166 Other equipment 185,048 212,483 Additions - 11,534 11,534 Leasehold improvements 181,756 182,419 Disposals ( 20,584 ) ( 5,385 ) ( 25,969 ) Prepayments for equipment, land and Balance, December 31, 2014 $ 2,091,412 $ 876,319 $ 2,967,731 buildings and construction in progress 4,803,355 4,576,352 $ 39,485,980 $ 40,312,130

71 72 Financial Information

Machinery and Transportation Other Leasehold Land Buildings Equipment Equipment Equipment Improvements Prepayments Total Cost Balance, January 1, 2015 $ 25,160,810 $ 14,784,145 $ 5,587,271 $ 665,216 $ 1,319,596 $ 870,490 $ 4,576,352 $ 52,963,880 Additions 51,551 85,496 64,077 19,278 42,070 79,912 744,947 1,087,331 Disposals - - ( 523,067 ) ( 43,738 ) ( 56,458 ) ( 53,656 ) - ( 676,919 ) Reclassification 12,508 49,192 136,909 - - 5,447 ( 204,056 ) - Transferred to investment properties ( 386,098 ) ( 266,156 ) - - - - ( 313,716 ) ( 965,970 ) Transferred to intangible assets ------( 172 ) ( 172 ) Effects of exchange rate changes 103 219 2,821 40 165 ( 630 ) - 2,718 Balance, December 31, 2015 $ 24,838,874 $ 14,652,896 $ 5,268,011 $ 640,796 $ 1,305,373 $ 901,563 $ 4,803,355 $ 52,410,868 Balance, January 1, 2014 $ 25,956,333 $ 14,643,001 $ 5,859,325 $ 653,760 $ 1,348,913 $ 902,859 $ 2,116,283 $ 51,480,474 Additions 38,030 66,748 176,450 17,579 52,050 42,765 2,941,107 3,334,729 Disposals ( 833,713 ) ( 83,907 ) ( 667,341 ) ( 61,563 ) ( 84,584 ) ( 81,332 ) - ( 1,812,440 ) Reclassification - 157,961 214,046 54,921 2,320 5,717 ( 434,965 ) - Transferred to intangible assets ------( 46,069 ) ( 46,069 ) Transferred to other assets ------( 4 ) ( 4 ) Effects of exchange rate changes 160 342 4,791 519 897 481 - 7,190 Balance, December 31, 2014 $ 25,160,810 $ 14,784,145 $ 5,587,271 $ 665,216 $ 1,319,596 $ 870,490 $ 4,576,352 $ 52,963,880

Machinery and Transportation Other Leasehold Land Buildings Equipment Equipment Equipment Improvements Total Accumulated depreciation and impairment Balance, January 1, 2015 $ 15,177 $ 5,994,575 $ 4,320,183 $ 526,631 $ 1,107,113 $ 688,071 $ 12,651,750 Disposals - - ( 520,061 ) ( 43,515 ) ( 55,895 ) ( 53,358 ) ( 672,829 ) Depreciation expenses - 382,658 438,939 40,945 66,158 83,055 1,011,755 Transferred to investment properties - ( 73,677 ) - - - - ( 73,677 ) Effects of exchange rate changes - 127 1,709 1,065 2,949 2,039 7,889 Balance, December 31, 2015 $ 15,177 $ 6,303,683 $ 4,240,770 $ 525,126 $ 1,120,325 $ 719,807 $ 12,924,888 Balance, January 1, 2014 $ 15,177 $ 5,662,962 $ 4,530,255 $ 542,728 $ 1,124,018 $ 695,639 $ 12,570,779 Disposals - ( 48,919 ) ( 661,584 ) ( 61,277 ) ( 83,931 ) ( 80,072 ) ( 935,783 ) Depreciation expenses - 380,353 448,990 44,866 66,322 72,225 1,012,756 Effects of exchange rate changes - 179 2,522 314 704 279 3,998 Balance, December 31, 2014 $ 15,177 $ 5,994,575 $ 4,320,183 $ 526,631 $ 1,107,113 $ 688,071 $ 12,651,750

Taiwan Cooperative Bank, Ltd. (TCB) revalued As of December 31, 2015 and 2014, the its properties five times in 1979, 1998, 2007, 2011 Company's prepayments for equipment, land and and 2012. As December 31, 2015, the reserve for buildings and construction in progress pertained land revaluation increment tax (part of deferred to the construction of the head office. The tax liabilities) was $2,596,230 thousand. license for the construction of the head office was obtained in January 2015, the building acceptance Properties and equipment were depreciation check was still in progress as of the date of the on the straight-line method over service lives accompanying independent auditors' report, and estimated as follows: the property will be classified under buildings Buildings after completion and acceptance. Main buildings 37 to 50 years Equipment installed in buildings 10 to 15 years In testing assets for impairment, TCB defined Machinery and equipment 3 to 10 years each operating unit or operating segment as a Transportation equipment 4 to 10 years cash-generating unit (CGU). The recoverable Other equipment 3 to 20 years amount of a CGU was determined at its value in Leasehold Improvements 2 to 10 years use. The discount rates for the CGUs' value in use were 8.78% and 9.66% as of December 31, 2015 and 2014, respectively. 2015 ANNUAL REPORT

18. INTANGIBLE ASSETS 20. DUE TO THE CENTRAL BANK AND December 31 OTHER BANKS 2015 2014 December 31 Goodwill $ 3,170,005 $ 3,170,005 2015 2014 Computer software 513,137 595,768 Due to banks $ 116,665,130 $ 103,149,357 $ 3,683,142 $ 3,765,773 Call loans from banks 72,030,073 57,097,833 Deposits from Chunghwa Post Co., Ltd. 14,531,307 21,122,619 Computer Bank overdraft 857,336 1,107,203 Goodwill Software Total Due to the Central Bank 511,968 343,684 Balance, January 1, 2015 $ 3,170,005 $ 595,768 $ 3,765,773 $ 204,595,814 $ 182,820,696 Separate acquisition - 188,224 188,224 Amortization expenses - ( 270,940 ) ( 270,940 ) 21. SECURITIES SOLD UNDER Transferred from properties and equipment - 172 172 REPURCHASE AGREEMENTS Effect of exchange rate changes - ( 87 ) ( 87 ) Securities sold for $51,141,231 thousand Balance, December 31, 2015 $ 3,170,005 $ 513,137 $ 3,683,142 and $46,390,229 thousand under repurchase agreements as of December 31, 2015 and 2014, Balance, January 1, 2014 $ 3,170,005 $ 631,723 $ 3,801,728 respectively, would subsequently be purchased Separate acquisition - 188,907 188,907 for $51,162,708 thousand and $46,415,235 Amortization expenses - ( 271,681 ) ( 271,681 ) thousand, respectively. Transferred from properties and equipment - 46,069 46,069 22. COMMERCIAL PAPER ISSUED, NET Effect of exchange rate changes - 750 750 The face values of commercial paper issued were Balance, December 31, 2014 $ 3,170,005 $ 595,768 $ 3,765,773 $15,564,000 thousand and $12,185,000 thousand The computer software with limited useful lives and the annual discount rates were from 0.658% is amortized on a straight-line basis by the useful to 1.068% and from 0.858% to 1.158% as of lives in 3 to 10 years. December 31, 2015 and 2014, respectively, and the commercial paper will mature by March 4, Goodwill resulting from merger of Taiwan 2016 and February 2, 2015, respectively. The Cooperative Bank, Ltd. with the Farmers Bank foregoing commercial paper was accepted and of China was allocated to operating units or guaranteed by financial institutions. As of operating segment (cash-generating units with December 31, 2015, the Company had not used allocated goodwill). There was no impairment the amount of $31,981,296 thousand, the sum of loss on goodwill as of December 31, 2015 and the amount of the commercial paper issued and 2014. the credit. 19. OTHER ASSETS, NET 23. PAYABLES December 31 December 31 2015 2014 2015 2014 Refundable deposits $ 1,797,748 $ 1,466,714 Checks for clearing $ 9,279,476 $ 14,207,885 Prepaid expenses 658,317 3,356,423 Collections payable 6,009,108 6,837,352 Operating deposits and settlement funds 632,766 619,354 Collections of notes and checks for various Collaterals assumed, net 262,051 161,357 financial institutions in other cities 5,201,546 5,701,648 Others 442,699 306,294 Accrued expenses 4,507,153 4,499,837 $ 3,793,581 $ 5,910,142 Accrued interest 3,375,115 3,583,339 Acceptances 3,321,956 2,816,912 On the basis of the guidelines of the Financial Payables on notes and checks collected for Supervisory Commission and the Company's others 1,693,053 1,606,723 evaluation of the possibilities of recovery, the Settlement consideration 999,988 1,141,101 Company recognized $2,127 thousand and Settlement payable 739,927 1,213,851 $144 thousand in reversal of impairment losses Tax payable 547,210 524,158 on collaterals assumed in 2015 and 2014, Payable on securities 273,798 59,880 respectively. Dividends payable 242,035 226,896 Payables for short-sale transactions 215,834 237,814 Of the prepaid expenses as of December 31, Deposits on short-sale transactions 213,499 212,092 2015 and 2014, an amount of $323,205 thousand Factored accounts payable 114,474 87,215 and $2,950,882 thousand referred to TCB's Insurance claims and benefits payable 79,345 158,796 investment in its overseas branches. Others 1,851,518 2,383,972 $ 38,665,035 $ 45,499,471 73 74 Financial Information

24. DEPOSITS AND REMITTANCES December 31 2015 2014 Deposits Checking $ 40,477,016 $ 41,122,893 Demand 484,984,597 422,353,497 Savings - demand 744,683,401 701,731,007 Time 472,293,325 458,929,525 Negotiable certificates of deposit 3,543,000 2,059,800 Savings - time 683,100,935 703,248,764 Treasury 73,374,578 66,581,720 Remittances 318,238 413,543 $ 2,502,775,090 $ 2,396,440,749

25. BONDS PAYABLE Details of bank debentures issued by Taiwan Cooperative Bank, Ltd. (TCB) are as follows: December 31 2015 2014 First cumulative subordinated bonds in 2007: Reuters’ fixing rate for 90 days’ New Taiwan dollar commercial paper plus 0.7% in first five years; Reuters’ fixing rate for 90 days’ New Taiwan dollar commercial paper plus 1.7% if TCB fails to redeem the bank debenture after five years from the issuance date; no maturity $ - $ 13,000,000 First subordinated bonds in 2008, Type A: Reuters’ fixing rate for 90 days’ New Taiwan dollar commercial paper plus 0.43%; maturity - May 28, 2015 - 1,000,000 First subordinated bonds in 2008, Type B: Fixed rate of 3.0%; maturity - May 28, 2015 - 4,500,000 Second subordinated bonds in 2009: Fixed rate of 2.10%; maturity - March 28, 2015 - 4,000,000 First subordinated bonds in 2010: TCB’s floating interest rate for 1-year time deposit plus 0.25%; maturity - June 21, 2017 8,000,000 8,000,000 Second subordinated bonds in 2010, Type A: Reuters’ fixing rate for 90 day’s New Taiwan dollar commercial paper plus 0.15%; maturity - October 25, 2017 3,000,000 3,000,000 Second subordinated bonds in 2010, Type B: Fixed rate of 1.45%; maturity - October 25, 2017 1,000,000 1,000,000 First subordinated bonds in 2011, Type A: Reuters’ fixing rate for 90 day’s New Taiwan dollar commercial paper plus 0.15%; maturity - May 25, 2018 7,300,000 7,300,000 First subordinated bonds in 2011, Type B: Fixed rate of 1.65%; maturity - May 25, 2018 2,700,000 2,700,000 Second subordinated bonds in 2011, Type A: Reuters’ fixing rate for 90 day’s New Taiwan dollar commercial paper plus 0.25%; maturity - July 28, 2018 1,200,000 1,200,000 Second subordinated bonds in 2011, Type B: Fixed rate of 1.70%; maturity - July 28, 2018 3,410,000 3,410,000 First subordinated bonds in 2012: Fixed rate of 1.65%; maturity - June 28, 2022 11,650,000 11,650,000 Second subordinated bonds in 2012, Type A: Fixed rate of 1.43%; maturity - December 25, 2019 1,000,000 1,000,000 Second subordinated bonds in 2012, Type B: Fixed rate of 1.55%; maturity - December 25, 2022 7,350,000 7,350,000 First subordinated bonds in 2013, Type A: Reuters’ fixing rate for 90 day’s New Taiwan dollar commercial paper plus 0.43%; maturity - March 28, 2020 4,000,000 4,000,000 First subordinated bonds in 2013, Type B: Fixed rate of 1.48%; maturity - March 28, 2020 3,500,000 3,500,000 Second subordinated bonds in 2013, Type A: Fixed rate of 1.72%; maturity - December 25, 2020 900,000 900,000 Second subordinated bonds in 2013, Type B: Reuters’ fixing rate for 90 day’s New Taiwan dollar commercial paper plus 0.45%; maturity - December 25, 2023 4,600,000 4,600,000 First subordinated bonds in 2014, Type A: Fixed rate of 1.70%; maturity - May 26, 2021 1,500,000 1,500,000 First subordinated bonds in 2014, Type B: Fixed rate of 1.85%; maturity - May 26, 2024 2,700,000 2,700,000 First subordinated bonds in 2014, Type C: Reuters’ fixing rate for 90 day’s New Taiwan dollar commercial paper plus 0.43%; maturity - May 26, 2024 5,800,000 5,800,000 $ 69,610,000 $ 92,110,000

The above Reuters' fixing rate for 90 days' New Taiwan dollar commercial paper refers to the Taipei Interbank Offered Rate (TAIBOR) for three months announced by the Bankers Association of the Republic of China after January 1, 2015. FSC approved the TCB's redemption of the First cumulative subordinated bonds - Type C issued in 2008, which amounted to $4,500,000 thousand on April 8, 2014. The TCB redeemed the bonds on May 28, 2014. FSC approved the TCB's redemption of the Second cumulative subordinated bonds - Type B issued in 2007, which amounted to $5,810,000 thousand on July 29, 2014. The TCB redeemed the bonds on September 29, 2014. 2015 ANNUAL REPORT

FSC approved the TCB's redemption of the First a. Details of reserve for life insurance liabilities cumulative subordinated bonds issued in 2007, were as follows: which amounted to $13,000,000 thousand on December 31, 2015 February 17, 2015. The TCB decided to redeem Financial Instruments the bonds on April 28, 2015. with Discretionary To expand its long-term USD capital, the TCB Insurance Participation applied for the issuance of unsecured bank Contract Features Total debentures amounting to US$1,000,000 thousand. Life insurance $ 7,304,700 $12,202,679 $ 19,507,379 The application was approved by the Financial Health insurance 169,512 - 169,512 Annuity insurance - 13,035,184 13,035,184 Supervisory Commission (FSC) on January 22, Investment insurance 31,779 - 31,779 2015. The TCB issue unsecured bank debentures 7,505,991 25,237,863 32,743,854 with an aggregate face value of US$400,000 Less: Ceded life insurance thousand, consisting of type A bonds worth liability reserve - - - US$300,000 thousand with 0% interest rate $ 7,505,991 $25,237,863 $ 32,743,854 and type B bonds worth US$100,000 thousand with 0% interest rate; the TCB may exercise its December 31, 2014 Financial redemption rights at an agreed price after two Instruments years and three years, respectively, from the issue with Discretionary dates. If the TCB do not exercise its redemption Insurance Participation rights during issue period, all unsecured bank Contract Features Total debentures will be refunded on settlement date, Life insurance $ 5,485,915 $15,280,743 $ 20,766,658 March 30, 2045. To manage exposure to adverse Health insurance 87,358 - 87,358 changes in interest rates, the TCB enters into Annuity insurance - 16,488,762 16,488,762 Investment insurance 12,024 - 12,024 interest rate swap contracts measured at fair 5,585,297 31,769,505 37,354,802 value through profit or loss and to eliminate a Less: Ceded life insurance measurement or recognition inconsistency, the liability reserve - - - unsecured bank debentures are reclassified as $ 5,585,297 $ 31,769,505 $ 37,354,802 designated as at FVTPL upon initial recognition. They were as follows: The changes in the reserve for life insurance December 31, 2015 liabilities are summarized below: Unsecured bank debentures bonds issued in 2015, For the Year Ended December 31, 2015 Type A $ 9,515,762 Financial Unsecured bank debentures bonds issued in 2015, Instruments with Type B 3,187,301 Discretionary $ 12,703,063 Insurance Participation Contract Features Total Balance, January 1 $ 5,585,297 $ 31,769,505 $ 37,354,802 26. OTHER BORROWINGS Provision 2,099,475 481,608 2,581,083 Recovery ( 178,781 ) ( 7,013,250 ) ( 7,192,031 ) December 31 Ending balance 7,505,991 25,237,863 32,743,854 2015 2014 Less: Ceded life insurance Amount Rate (%) Amount Rate (%) liability reserve - - - Short-term borrowings Balance, December 31 $ 7,505,991 $ 25,237,863 $ 32,743,854 (Note 22) $ 851,606 0.878-2.3855 $ 922,008 1.100-2.555 For the Year Ended December 31, 2014 27. PROVISIONS Financial Instruments December 31 with 2015 2014 Discretionary Insurance Participation Reserve for life insurance liabilities $ 32,743,854 $ 37,354,802 Contract Features Total Reserve for insurance contracts with Balance, January 1 $ 4,224,304 $ 39,690,511 $ 43,914,815 financial instrument features 11,735,236 12,136,190 Provision 1,506,913 710,836 2,217,749 Provision for employee benefits 8,668,086 7,990,621 Recovery ( 145,920 ) ( 8,631,842 ) ( 8,777,762 ) Provision for losses on guarantees 1,439,421 1,695,541 Ending balance 5,585,297 31,769,505 37,354,802 Others 361,202 277,584 Less: Ceded life insurance $ 54,947,799 $ 59,454,738 liability reserve - - - Balance, December 31 $ 5,585,297 $ 31,769,505 $ 37,354,802 75 76 Financial Information

b. Details of liability adequacy reserves are as 2) Reconciliation of the reserve of foreign follows: exchange variation Insurance Contract and Financial For the Year Ended December 31 Instruments with Discretionary Participation Features 2015 2014 December 31 Balance, January 1 $ 115,688 $ 111,515 2015 2014 Provisions Life insurance liability reserve $ 32,743,854 $ 37,354,802 Compulsory provisions 6,828 3,054 Unearned premium reserve 93,548 39,340 Additional provisions 135,915 56,295 Premium deficiency reserve 64,980 85,921 258,431 170,864 Claims reserve 31,463 36,635 Recovery ( 87,220 ) ( 55,176 ) Book value of insurance reserve $ 32,933,845 $ 37,516,698 Balance, December 31 $ 171,211 $ 115,688 Present value of discounted cash flows $ 30,205,201 $ 34,718,711 Balance of liability adequacy reserve $ - $ - 3) Impact of the reserve of foreign exchange variation As of December 31, 2015 and 2014, the For the year ended December 31, 2015 Company’s reserves for insurance contracts Amount satisfied the liability adequacy tests. Amount With Items Without Effect Reserve The liability adequacy test method, scope and Reserve assumptions were as follows: Net income $ 13,517,234 $ 13,461,711 $ ( 55,523 ) Earnings per share (NT$) 1.22 1.22 - December 31, 2015 and 2014 Reserve of foreign Test method Total premium measurement method - 171,211 171,211 exchange variation Tested group All insurance contracts as a whole Equity 190,493,097 190,321,886 ( 171,211 ) Assumptions The discount rate assumption for every year was based on the best estimate scenario as well as the rate of return on investment with current information For the year ended December 31, 2014 Amount Amount With Items Without Effect c. Reserve for insurance contracts with financial Reserve Reserve instrument features were as follows: Net income $ 10,418,241 $ 10,414,068 $ ( 4,173 ) December 31 Earnings per share (NT$) 1.08 1.08 - 2015 2014 Reserve of foreign Life insurance $ 11,735,236 $ 12,136,190 - 115,688 115,688 exchange variation Equity 158,702,314 158,586,626 ( 115,688 ) For the Year Ended December 31 2015 2014 e. Net changes in reserves for insurance liabilities Balance, January 1 $ 12,136,190 $ 12,446,412 are summarized below: Premiums received for the year - 72,706 For the Year Ended December 31 Insurance claim payments for the year ( 592,938 ) ( 581,575 ) 2015 2014 Reserve for insurance contract with Reserve for life insurance liabilities, net $ ( 4,610,948 ) $ ( 6,560,013 ) financial instrument features 191,984 198,647 Reserve for insurance contract with financial Balance, December 31 $ 11,735,236 $ 12,136,190 instrument features, net 191,984 198,647 Others, net 75,378 41,692 d. Explanations for the reserve of foreign exchange variation are as follows: $ ( 4,343,586 ) $ ( 6,319,674 )

1) Hedging strategy and foreign exchange f. Provisions for employee benefits are exposure summarized below: To ensure the effectiveness and December 31 appropriateness of hedge for overseas 2015 2014 investment, BNP Paribas Cardif TCB Life Net defined benefit liabilities $ 4,658,134 $ 4,106,199 Insurance Co., Ltd. (BPCTLI) uses cross- Present value of retired employees’ currency swap and currency swap to hedge preferential interest deposit obligation 4,009,952 3,884,422 exchange rate risks. BPCTLI maintains the $ 8,668,086 $ 7,990,621 hedging ratio at over 95%. 2015 ANNUAL REPORT

g. The changes in provision for losses on The amounts included in the consolidation guarantees are summarized below: balance sheets in respect of the Company’s For the Year Ended December 31 defined benefit plans were as follows: 2015 2014 December 31 Balance, January 1 $ 1,695,541 $ 1,463,216 2015 2014 Provision (reversal of provision) for Present value of defined benefit obligation $ 11,813,451 $ 11,131,975 losses on guarantees ( 256,587 ) 231,977 Fair value of plan assets ( 7,161,392 ) ( 7,032,582 ) Effects of exchange rate changes and Deficit 4,652,059 4,099,393 other changes 467 348 Net defined benefit asset (part of other assets) 6,075 6,806 Balance, December 31 $ 1,439,421 $ 1,695,541 Net defined benefit liability (part of provisions) $ 4,658,134 $ 4,106,199 28. EMPLOYEE BENEFITS PLAN The changes in net defined benefit liability a. Defined contribution plan (asset) were as follows: The pension plan under the Labor Pension Present Value of the Net Defined Act (the “Act”) is a defined contribution plan. Defined Benefit Fair Value of the Benefit Liability Based on the Act, the Company’s monthly Obligation Plan Assets (Asset) contributions to individual pension accounts of Balance at January 1, 2014 $ 10,313,513 $ ( 6,291,901 ) $ 4,021,612 employees covered by the defined contribution Service cost plan is at 6% of monthly salaries and wages. Current service cost 938,814 - 938,814 The funds are deposited in individual labor Net interest expense (income) 183,410 ( 117,961 ) 65,449 pension accounts at the Bureau of Labor Recognized in profit or loss 1,122,224 ( 117,961 ) 1,004,263 Insurance. Remeasurement The Company recognized expense of $147,677 Return on plan assets thousand and $135,963 thousand in the (excluding amounts included in net interest) - ( 29,531 ) ( 29,531 ) consolidated statement of comprehensive Actuarial loss - changes income in 2015 and 2014, respectively, in in financial assumptions 61,143 - 61,143 accordance with the defined contribution plan. Actuarial loss - experience adjustments 2,675 - 2,675 b. Defined benefit plan Recognized in other The defined benefit plan adopted by the comprehensive income 63,818 ( 29,531 ) 34,287 Contributions from the Company in accordance with the Labor employer - ( 960,769 ) ( 960,769 ) Standards Law is operated by the government. Benefits paid ( 367,580 ) 367,580 - Pension benefits are calculated on the basis Balance at December 31, of the length of service and average monthly 2014 11,131,975 ( 7,032,582 ) 4,099,393 salaries of the six months before retirement. Service cost The Company contributes amounts equal to Current service cost 851,231 - 851,231 15% of total monthly salaries and wages to Net interest expense a pension fund administered by the pension (income) 186,681 ( 121,004 ) 65,677 Recognized in profit or loss 1,037,912 ( 121,004 ) 916,908 fund monitoring committee. The pension fund Remeasurement is managed by the Bureau of Labor Funds, Return on plan assets Ministry of Labor (“the Bureau”); the Company (excluding amounts has no right to influence the investment included in net interest) - ( 61,011 ) ( 61,011 ) policy and strategy. Pension contributions are Actuarial loss - changes deposited in the Company of Taiwan in the in financial assumptions 499,961 - 499,961 committee’s name. Before the end of each Actuarial loss - experience adjustments 178,772 - 178,772 year, the Company assesses the balance in the Recognized in other pension fund. If the amount of the balance comprehensive income 678,733 ( 61,011 ) 617,722 in the pension fund is inadequate to pay Contributions from the retirement benefits for employees who conform employer - ( 981,964 ) ( 981,964 ) to retirement requirements in the next year, the Benefits paid ( 1,035,169 ) 1,035,169 - Company is required to fund the difference in Balance at December 31, one appropriation that should be made before 2015 $ 11,813,451 $ ( 7,161,392 ) $ 4,652,059 the end of March of the next year. 77 78 Financial Information

Through the defined benefit plans under the The sensitivity analysis presented above might Labor Standards Law, the Company is exposed not have been representative of the actual to the following risks: change in the present value of the defined benefit obligation as it was unlikely that the 1) Investment risk: The plan assets are changes in assumptions would have occurred invested in domestic/and foreign/equity independently of each other because some of and debt securities, bank deposits, etc. The the assumptions might have correlated. investment is conducted at the discretion of the Bureau or under the mandated As of December 31, 2015 and 2014, the management. However, in accordance with expected contributions to the plan for the next relevant regulations, the return generated by year were $2,871,100 thousand and $605,000 plan assets should not be below the interest thousand, respectively. As of December 31, rate for a 2-year time deposit with local 2015 and 2014, the average duration of defined banks. benefit obligation were 11 to 12.4 years and 11 to 13.07 years, respectively. 2) Interest risk: A decrease in the government bond interest rate will increase the present c. Employees’ preferential deposit plan value of the defined benefit obligation; The TCB’s payment obligations on fixed- however, this will be partially offset by an amount preferential interest deposits for increase in the return on the plan’s debt retired employees and current employees after investments. retirement are in compliance with the TCB’s 3) Salary risk: The present value of the defined internal rules. Under the Guidelines Governing benefit obligation is calculated by reference the Preparation of Financial Reports by Public to the future salaries of plan participants. As Banks, the TCB should determine the excess such, an increase in the salary of the plan interest from the preferential interest deposits participants will increase the present value of employees by applying an actuarial valuation of the defined benefit obligation. method when the employees retire. The actuarial valuations of the present value The amounts included in the balance sheet of the defined benefit obligation were carried arising from the TCB’s obligation in the out by qualified actuaries. The significant employees’ preferential interest deposits plan assumptions used for the purposes of the were as follows: actuarial valuations were as follows: December 31 December 31 2015 2014 2015 2014 Present value of retired employees’ preferential interest deposits obligation Discount rate(s) 1.35-1.45% 1.75-1.90% (part of provisions) $ 4,009,952 $2 3,884,42 Expected rate(s) of salary increase 2.00% 2.00% Expected rate(s) of return on plan asset 1.35-1.45% 1.75-1.90% The changes in present value of retired employees’ preferential interest deposits Had there been a possible reasonable change obligation were as follows: in each of the significant actuarial assumptions For the Year Ended December 31 and all other assumptions remained constant, 2015 2014 the present value of the defined benefit obligation would have increased (decreased) as Present value of retired employees’ preferential interest deposits obligation, follows: January 1 $ 3,884,422 $ 3,979,147 December 31, 2015 Interest expense 152,379 151,452 Discount rate(s) Actuarial losses 760,838 523,661 0.25% increase $ ( 316,200 ) Benefits paid ( 787,687 ) ( 769,838 ) 0.25% decrease $329,320 Expected rate(s) of salary increase Present value of retired employees’ preferential interest deposits obligation, 0.25% increase $ 313,868 December 31 $ 4,009,952 $ 3,884,422 0.25% decrease $ ( 303,139 ) 2015 ANNUAL REPORT

Amounts recognized in profit or loss in 29. OTHER FINANCIAL LIABILITIES employee preferential deposit plans for retired December 31 employees in the consolidated statement of 2015 2014 comprehensive income were as follows: Structured products - host contracts $ 5,422,591 $ 7,266,986 For the Year Ended December 31 Guarantee deposits received 1,553,783 929,362 2015 2014 Appropriation for loans 761,370 873,398 Interest expense $ 152,379 $ 151,452 Separate-account liabilities 76,908,449 66,873,228 Actuarial losses 760,838 523,661 $ 84,646,193 $ 75,942,974 Excessive interest of retired employees’ preferential interest deposits $ 913,217 $ 675,113 The status of the Company's investment-linked products - separate account as of December 31, Under Rule No. 10110000850 issued by the 2015 and 2014, are summarized as follows: Financial Supervisory Commission, effective December 31 March 15, 2012, the actuarial assumptions 2015 2014 for calculating the expense for the retired Fund assets for investment-linked products employees’ preferential interest deposit benefit (part of other financial assets) are as follows: Cash $ 477,400 $ 205,742 December 31 Beneficial certificates 75,932,515 65,633,404 2015 2014 Other receivables 498,534 1,034,082 Discount rate 4.00% 4.00% $ 76,908,449 $ 66,873,228 Return on deposit 2.00% 2.00% Fund liabilities for investment-linked Account balance diminishing rate per year 1.00% 1.00% products (part of other financial liabilities) Rate of probability of change in the Reserve for investment-linked products $ 76,535,546 $ 66,388,333 preferential deposit system 50.00% 50.00% Other payables 372,903 484,895 Had there been a possible reasonable change $ 76,908,449 $ 66,873,228 in each of the significant actuarial assumptions and all other assumptions remained constant, For the Year Ended December 31 the present value of the retired employees’ 2015 2014 preferential interest deposit benefit obligation Income on investment-linked products would have increased (decreased) as follows: Premium income $ 24,812,996 $ 27,899,909 Gain on foreign exchange - 701,046 December 31, 2015 Others 237,187 176,386 Discount rate(s) 1% increase $ ( 293,925 ) $ 25,050,183 $ 28,777,341 1% decrease $ 339,856 Expense for investment-linked products Return on deposit Net investment-linked product provision 1% increase $ ( 748,637 ) of insurance reserves $ 9,747,390 $ 17,025,511 1% decrease $ 748,637 Unrealized loss on financial instruments 5,964,001 3,061,993 Account balance diminishing rate per year Insurance claims and surrender 5,631,922 8,139,005 1% increase $ ( 310,616 ) Loss on disposal and investment 2,051,144 333,189 1% decrease $ 354,540 Loss on foreign exchange 1,249,820 - Rate of probability of change in the preferential Insurance fees 268,859 116,443 deposit system Service charge and maintenance fees 137,047 101,200 20% increase $ ( 1,603,981 ) $ 25,050,183 $ 28,777,341 20% decrease $ 1,603,981 Income from and expense for investment-linked The sensitivity analysis presented above might products were recognized under premium income, not have been representative of the actual net. change in the present value of the retired employees’ preferential interest deposit benefit 30. OTHER LIABILITIES obligation because it was unlikely that the December 31 change in assumptions would have occurred 2015 2014 Advance receipts $ 1,473,390 $ 1,333,820 independently of each other because some of Others 117,720 52,585 the assumptions correlated. $ 1,591,110 $ 1,386,405

79 80 Financial Information

31. NET INTEREST 32. SERVICE FEE AND COMMISSION

For the Year Ended December 31 INCOME, NET For the Year Ended December 31 2015 2014 2015 2014 Interest revenue Service fee and commission revenues From trust business $ 1,355,148 $ 1,324,429 From discounts and loans $ 40,592,700 $ 40,133,011 From insurance service 1,215,478 810,013 From due from banks and call loans to From loans 701,715 743,842 other banks 6,267,199 6,913,507 From credit cards 555,590 525,778 From investments 4,751,972 3,993,335 From guarantee 535,767 467,534 Others 1,803,190 1,887,555 From investment-linked products 433,599 290,089 From remittance 366,280 321,565 53,415,061 52,927,408 From cross-bank transactions 244,214 227,117 Interest expense From brokerage service 243,302 251,765 From deposits ( 18,737,090 ) ( 19,243,659 ) From trust affiliated business 158,372 128,840 From management fees 153,593 111,920 From subordinated bank debentures ( 1,197,324 ) ( 1,767,858 ) From management fees of investment- From funds borrowing from the Central linked products 140,504 105,594 Bank and other banks ( 596,930 ) ( 1,227,639 ) From underwriting 135,637 76,630

From due to the Central Bank and other From import/export service 120,170 140,026 banks ( 423,188 ) ( 415,662 ) Others 846,098 740,001 7,205,467 6,265,143 From securities sold under repurchase agreements ( 241,938 ) ( 242,840 ) Service charge and commission expenses From cross-bank transactions ( 255,417 ) ( 241,290 ) From structure products ( 92,149 ) ( 225,607 ) From credit cards ( 176,804 ) ( 134,467 ) Others ( 52,073 ) ( 33,314 ) From insurance business ( 150,443 ) ( 116,474 ) ( 21,340,692 ) ( 23,156,579 ) From credit cards acquiring ( 130,617 ) ( 111,726 ) From selling insurance policy ( 17,773 ) ( 29,172 ) $ 32,074,369 $ 29,770,829 Others ( 188,625 ) ( 195,572 ) ( 919,679 ) ( 828,701 ) $ 6,285,788 $ 5,436,442

33. GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

For the Year Ended December 31, 2015 Interest Revenue Gain (Loss) on Gain (Loss) on (Expense) Disposal Valuation Dividend Income Total Held-for-trading financial assets $ 490,125 $ 18,534,012 $ (3,934,851 ) $ 27,263 $ 15,116,549 Financial assets designated as at fair value through profit or loss 9,290 ( 7,529 ) 10,874 - 12,635 Held-for-trading financial liabilities - ( 17,628,362 ) 2,640,124 - ( 14,988,238 ) Financial liabilities designated as at fair value through profit or loss ( 404,765 ) - 446,769 - 42,004 $ 94,650 $ 898,121 $ ( 837,084 ) $ 27,263 $ 182,950

For the Year Ended December 31, 2014 Gain (Loss) on Gain (Loss) on Interest Revenue Disposal Valuation Dividend Income Total Held-for-trading financial assets $ 433,559 $ 8,760,976 $ 10,698,314 $ 7,704 $ 19,900,553 Financial assets designated as at fair value through profit or loss 19,383 - ( 15,750 ) - 3,633 Held-for-trading financial liabilities - ( 9,609,238 ) ( 8,673,146 ) - ( 18,282,384 ) $ 452,942 $ ( 848,262 ) $ 2,009,418 $ 7,704 $ 1,621,802 2015 ANNUAL REPORT

34. EMPLOYEE BENEFITS, should be made only from the annual net income DEPRECIATION AND less any accumulated deficit. For the year AMORTIZATION EXPENSES ended December 31, 2015, the compensation to employees was $711,078 thousand, based on the For the Year Ended December 31 amended Company Act and the amended Articles. 2015 2014 Employee benefits Material differences between such estimated Salaries $ 8,525,217 $ 8,108,208 amounts and the amounts proposed by the board Incentives 2,857,197 3,073,481 of directors on or before the annual consolidated Excessive interest from preferential financial statements are authorized for issue interest deposits 1,343,384 1,116,634 are adjusted in the year the compensation and Post-employment benefits, remuneration were recognized. If there is a termination benefits and change in the proposed amounts after the annual compensation 1,404,343 1,166,183 consolidated financial statements are authorized Overtime 401,967 399,605 for issue, the differences are recorded as a change Others 1,620,095 1,564,992 in accounting estimate. Depreciation expenses 1,035,803 1,034,870 Amortization expenses 271,028 275,770 The appropriations of bonus and compensation to employees for 2014 and 2013 have been proposed Under the TCFHC's Articles of Incorporation by the board of directors on June 12, 2015 and amended on June 20, 2014, the bonus to June 20, 2014, respectively, were as follows: employees and remuneration to directors and For the Year Ended December 31 supervisors were estimated on the basis of 2014 2013 past experience. The employee bonus and Bonus to employees - cash $ 1,843 $ 1,521 remuneration to directors and supervisors for Remuneration to directors and supervisors - the year ended December 31, 2014 were $1,843 cash 64,489 49,549 thousand and $64,489 thousand, respectively. Under the Company Act as amended in May There was no difference between the amounts of 2015, the Company's Articles of Incorporation the bonus to employees proposed by the board should stipulate a fixed amount or ratio of annual of directors and the amounts recognized in the profit to be distributed as employee remuneration. consolidated financial statements for the years On December 28, 2015, the board of directors ended December 31, 2014 and 2013, respectively. of TCFHC decided to amend its Articles of Incorporation. Under the amended Articles, Information on the bonus to employees and TCFHC will make distributions at fixed ratios of remuneration to directors and supervisors 0.01% to 0.08% and up to 1% of its annual profit proposed by the TCFHC's board of directors and (pretax income which exclude compensation stockholder's meeting is available on the Market to employees and remuneration to directors) Observation Post System website of the Taiwan for the employees' compensation and directors' Stock Exchange (http://emops.tse.com.tw). remuneration, respectively. However, the actual 35. INCOME TAX appropriation of the bonus and remuneration should be made only from the annual net income a. Income tax recognized in profit or loss less any accumulated deficit. For the year ended Main components of income tax expense were December 31, 2015, the employees' compensation as follows: and remuneration to directors were estimated For the Year Ended December 31 at $1,897 thousand and $70,984 thousand, 2015 2014 respectively. Current tax Under the TCB's Articles of Incorporation Current year $ 2,393,449 $ 784,417 amended on February 25, 2015, the bonus to Additional 10% income tax on employees for the year ended December 31 2014 unappropriated earnings - 108,966 was estimated at $529,182 thousand on the basis Prior year’s adjustments 2,267 418,345 of past experience. When the Company Act was 2,395,716 1,311,728 amended in May 2015, TCB's board of directors Deferred tax amended its Articles of Incorporation on March Current year ( 245,807 ) 514,191 28, 2016. Under the amended Articles, TCB will Prior year’s adjustments - ( 174,579 ) distribute employees' compensation at a fixed ( 245,807 ) 339,612 ratio 1% to 8% of its annual profit (pretax income Income tax expense recognized in profit or which exclude compensation to employees). loss $ 2,149,909 $ 1,651,340 However, the actual appropriation of the bonus 81 82 Financial Information

A reconciliation of accounting profit and b. Income tax recognized in other comprehensive current income tax expenses were as follows: income For the Year Ended December 31 For the Year Ended December 31 2015 2014 2015 2014 Income before income tax $ 15,611,620 $ 12,065,408 Deferred tax Income tax expense at the 17% statutory Recognized in other comprehensive rate $ 2,653,975 $ 2,051,119 income - items that may be reclassified subsequently to profit or loss Nondeductible expenses in determining Exchange differences on the translation taxable income 103,845 20,975 of financial statements of foreign Tax-exempt income ( 599,388 ) ( 1,019,913 ) operations $ 7,297 $ 45,179 Additional income tax under the Unrealized gains on available-for-sale Alternative Minimum Tax Act 43,883 155,929 financial assets ( 17,209 ) ( 59,481 ) Additional 10% income tax on Total income tax recognized in other unappropriated earnings - 108,966 comprehensive income $ ( 9,912 ) $ ( 14,302 ) Unrecognized deductible temporary differences ( 217,063 ) ( 40,425 ) c. Current tax assets and liabilities Effect of different tax rate of overseas December 31 branches operating in other jurisdictions 162,390 130,923 2015 2014 Adjustments for prior year’s tax 2,267 243,766 Current tax assets Income tax expense recognized in profit or Tax refund receivable $ 1,108,886 $ 1,633,332 loss $ 2,149,909 $ 1,651,340 Others 108,391 43,115 $ 1,217,277 $ 1,676,447 Current tax liabilities Tax payable $ 1,289,153 $ 65,047 Others 60,417 39,880 $ 1,349,570 $ 104,927 d. Deferred tax assets and liabilities The changes in deferred tax assets and liabilities are as follows: For the year ended December 31, 2015 Recognized in Recognized in Other Opening Balance Profit or Loss Comprehensive Income Closing Balance Deferred tax assets Temporary differences Available-for-sale financial assets $ 1,454 $ - $ 4,066 $ 5,520 Investments accounted for using equity method 31,034 ( 16,840 ) - 14,194 Properties and equipment 10,541 ( 547 ) - 9,994 Payable for annual leave 70,471 ( 1,682 ) - 68,789 Defined benefit obligation 295,341 78,914 - 374,255 Employee’s preferential interest deposit obligation 660,352 21,340 - 681,692 Other liabilities 6,113 242 - 6,355 Allowance for possible losses 61,610 15,546 - 77,156 Collaterals assumed 316 - - 316 Other assets 879 ( 879 ) - - Financial instruments at fair value through profit or loss - 597 - 597 Pension liabilities - 1,002 - 1,002 Employee benefit 4,080 ( 1,020 ) - 3,060 Unrealized interest expense - 68,810 - 68,810 Revenue from disposal of acquired loans - 17,240 - 17,240 $ 1,142,191 $ 182,723 $ 4,066 $ 1,328,980 Deferred tax liabilities Temporary differences Financial instruments at fair value through profit or loss $ 543,486 $ ( 127,705 ) $ - $ 415,781 Available-for-sale financial assets 25,744 - ( 13,143 ) 12,601 Intangible assets 364,322 - - 364,322 The reserve for land revaluation increment tax 2,596,230 - - 2,596,230 Exchange differences on foreign operations 66,097 - 7,297 73,394 Investments accounted for using equity method 2,051 2,846 - 4,897 Collaterals assumed 397 - - 397 Lease incentive - 4,570 - 4,570 Properties and equipment - 218 - 218 Unrealized foreign exchange gains - 51,761 - 51,761 Others - 5,505 - 5,505 $ 3,598,327 ( $ 62,805 ) $ ( 5,846 ) $ 3,529,676 2015 ANNUAL REPORT

For the year ended December 31, 2014 Recognized in Profit or Recognized in Other Opening Balance Loss Comprehensive Income Closing Balance Deferred tax assets Temporary differences Available-for-sale financial assets $ 1,229 $ - $ 225 $ 1,454 Investments accounted for using equity method 45,931 ( 14,897 ) - 31,034 Properties and equipment 11,089 ( 548 ) - 10,541 Payable for annual leave 64,473 5,998 - 70,471 Defined benefit obligation 295,341 - - 295,341 Employee’s preferential interest deposit obligation 676,455 ( 16,103 ) - 660,352 Other liabilities 547 5,566 - 6,113 Allowance for possible losses 33,863 27,747 - 61,610 Collaterals assumed 316 - - 316 Employee benefit - 4,080 - 4,080 Other assets 335 544 - 879 $ 1,129,579 $ 12,387 $ 225 $ 1,142,191 Deferred tax liabilities Temporary differences Financial instruments at fair value through profit or loss $ 32,111 $ 511,375 $ - $ 543,486 Available-for-sale financial assets 85,000 - ( 59,256 ) 25,744 Intangible assets 538,901 ( 174,579 ) - 364,322 The reserve for land revaluation increment tax 2,811,394 ( 215,164 ) - 2,596,230 Exchange differences on foreign operations 20,918 - 45,179 66,097 Investments accounted for using equity method 367 1,684 - 2,051 Collaterals assumed 397 - - 397 $ 3,489,088 $ 123,316 $ ( 14,077 ) $ 3,598,327

e. Unused loss carryforwards and deductible temporary differences for which no deferred tax assets have been recognized in the consolidated balance sheets December 31 2015 2014 Loss carryforwards $ 2,818,315 $ 3,333,752 Deductible temporary differences $ 1,514,030 $ 2,416,334

f. Imputed tax credits are summarized as follows: TCFHC TCB CAM CIB TCBF TCS BPCTLI TCSIT Balances of stockholders’ imputed tax credit December 31, 2015 $ 1,422,676 $ 140,889 $ 987 $ 12,798 $ 16,506 $ 5,274 $ 63,225 $ - December 31, 2014 1,987,241 645,738 6,359 10,407 32,106 3,601 58,320 - Estimated creditable tax ratio for distributing the 2015 earnings 10.29% 0.71% 0.26% 20.48% 2.07% 3.30% 20.48% - Actual creditable tax ratio for distributing the 2014 earnings 12.22% 0.22% 1.99% 20.48% 5.12% - - -

The actual stockholders' imputation credits Cooperative Financial Holding Co., Ltd. should be based on the balance of the (TCFHC), Taiwan Cooperative Securities Co., imputation credit account as of the dividend Ltd. (TCS), Co-operative Assets Management distribution date. As a result, the estimated Co., Ltd. (CAM), Cooperative Insurance creditable ratio for the 2015 earnings may differ Brokers Co., Ltd. (CIB), BNP Paribas Cardif from the actual creditable ratio. TCB Life Insurance Co., Ltd. (BPCTLI), Taiwan Cooperative Securities Investment g. Under the Income Tax Law, the unappropriated Trust Co., Ltd. (TCSIT), Taiwan Cooperative retained earnings of $19,985 thousand Bills Finance Co., Ltd. (TCBF), and Taiwan generated by Taiwan Cooperative Bank, Ltd. Cooperative Venture Capital Co., Ltd. (TCVC) (TCB) until December 31, 1997 were included had no retained earnings generated until in the unappropriated retained earnings as December 31, 1997. of December 31, 2015 and 2014. Taiwan 83 84 Financial Information

h. The years for which TCFHC and other subsidiaries' income tax returns had been examined by tax authorities were as follows: TCFHC TCB CIB CAM TCBF TCS BPCTLI TCSIT 2011 2011 2013 2011 2011 2011 2012 2013

TCB initiated administrative litigations due to date. The dilutive effects of the potential shares the taxable income authorized by tax authorities needs to be included in the calculation of diluted was different from TCB's income tax returns EPS until the stockholders resolve the number from 2006 to 2011. Please refer to Note 40 for of shares to be distributed to employees in the more information. following year.

36. EARNINGS PER SHARE 37. EQUITY Shares Earnings a. Capital stock Net Income (Denominator Per Share (Numerator) in Thousands) (Dollars) Common stocks For the year ended December 31, 2015 December 31 Basic earnings per share (EPS) $ 13,079,052 10,718,393 $ 1.22 2015 2014 Effect of dilutive common Numbers of shares authorized (in stock: thousands) 12,000,000 12,000,000 Employees' compensation Authorized capital $ 120,000,000 $ 120,000,000 or bonus to employees - 189 Number of shares issued and fully paid (in Diluted EPS $ 13,079,052 10,718,582 $ 1.22 thousands) 11,072,229 9,044,980 For the year ended December Common stocks issued $ 110,722,290 $ 90,449,800 31, 2014 Basic earnings per share (EPS) $ 10,237,424 9,497,229 $1.08 Fully paid common stocks, which have a par Effect of dilutive common value of $10, carry one vote per share and carry stock: a right to dividends. Bonus to employees - 157 Diluted EPS $ 10,237,424 9,497,386 $ 1.08 On June 20, 2014, the stockholders of Taiwan Cooperative Financial Holding Co., Ltd. The weighted average number of shares (TCFHC) resolved to have a capital increase outstanding for EPS calculation has been through the issue of 430,714 thousand shares, retroactively adjusted to reflect the effects of the amounting to $4,307,133 thousand, from stock dividends distributed in the year following capital surplus. The issuance was approved by the Financial Supervisory Commission (FSC) earning appropriation. and Ministry of Economic Affairs (MOEA). For the Year Ended December 31, 2014 Before Adjusted After Adjusted On December 22, 2014, the board of directors Retrospectively Retrospectively of TCFHC resolved to increase its capital Basic EPS (NT$) $ 1.13 $ 1.08 by issuing 1,500,000 thousand shares with a Diluted EPS (NT$) $ 1.13 $ 1.08 par value of NT$10.00. This issuance was approved by FSC and MOEA. TCFHC issued The Company can elect to distribute bonus to the shares at NT$14.58 per share. employees or employees' compensation by stock or by cash. If the bonus or compensation is in On June 12, 2015, the board of directors of the form of cash or shares, the Company should TCFHC resolved to issue 527,249 thousand presume that the entire amount of the bonus or shares, which included the 2014 earnings amounting to $4,217,992 thousand and the compensation will be settled in shares, and the capital surplus amounting to $1,054,498 resulting potential shares should be included thousand. This issuance was approved by FSC in the weighted average number of shares and MOEA. outstanding to be used in calculating diluted earnings per share (EPS) if the shares have a b. Capital surplus dilutive effect. The number of shares is estimated Under related regulations, capital surplus may by dividing the entire amount of the bonus by the only be used to offset a deficit. But capital closing price of the shares on the balance sheet surplus from the issuance of shares in excess of 2015 ANNUAL REPORT

par value (including additional paid-in capital c. Special reserve from the issuance of common shares and On the first-time adoption of IFRSs, TCFHC capital surplus from mergers and treasury stock transactions) and donations may be distributed should appropriate to a special reserve of an as cash dividends or transferred to common amount that was the same as these of unrealized stock on the basis of the percentage of shares revaluation increment and cumulative held by the stockholders. Any capital surplus translation differences (gains) transferred to transferred to common stock should be within a retained earnings as a result of the Company's certain percentage prescribed by law. use of exemptions under IFRS 1. However, at the date of transitions to IFRSs, if the Under the Financial Holding Company Law increase in retained earnings that resulted and related directives issued by the Securities from all IFRSs adjustments is not enough and Futures Bureau (SFB), the distribution for this appropriation, only the increase in of the ex-conversion unappropriated earnings retained earnings that resulted from all IFRSs that are generated by financial institutions (the subsidiaries) and become part of capital surplus adjustments will be appropriated to special of the financial holding company through a reserve. The special reserve appropriated as share swap is exempted from the appropriation above may be reversed in proportion to the restriction of the Securities and Exchange Law. usage, disposal or reclassification of the related These unappropriated earnings should be net assets and thereafter distributed. The special of the appropriation of legal reserve or special reserve appropriated on the first-time adoption reserve. of IFRSs may be used to offset deficits in subsequent years. No appropriation of On December 22, 2014, the Company's board earnings shall be made until any shortage of the of directors resolved to issue shares, 15% of aforementioned special reserve is appropriated which are reserved for Company's employees, in subsequent years if the Company has and the Company recognized $330,750 earnings and the original need to appropriate a thousand, the fair value of the stock options under salary expenses and capital surplus for special reserve is not eliminated. share-based payment on the grant date in 2015. The increase in retained earnings that resulted The capital surplus as of December 31, 2015 from all IFRSs adjustments was not enough came from the issuance of shares in excess for this appropriation; therefore, TCFHC of par value and treasury stock transactions. appropriated to the special reserve an amount Capital surplus sources and uses were as of $1,086,876 thousand on January 1, 2013, the follows: increase in retained earnings that resulted from Sources all IFRSs adjustments on transitions to IFRSs. From subsidiaries Information regarding the above special reserve Capital surplus (mainly additional paid-in capital from appropriated or reversed on elimination of the share issuance in excess of par value) $ 27,783,766 Legal reserve 15,799,245 original need to appropriate a special reserve Special reserve 195,968 was as follows: Unappropriated earnings 10,410,804 For the Year Ended December 31 54,189,783 2015 2014 Additional paid-in capital from TCFHC’s share issuance in Balance on January 1 $ 996,026 $ 1,083,833 excess of par value 3,861,434 Reversed on elimination of the original Cash dividends from TCFHC received by subsidiary 148,857 need to appropriate a special reserve: Additional paid-in capital from TCFHC’s share issuance in Disposal of properties and equipment - ( 87,807 ) excess of par value 12,642,000 Balance on December 31 $ 996,026 $ 996,026 Share-based payment for the subscription for TCFHC’s new shares by the employees of TCFHC and its subsidiaries 618,750 d. Appropriation of earnings 71,460,824 Uses As for expanding the business scale and Issuance of TCFHC’s stock and cash dividends in 2012 ( 6,360,660 ) enhancing the profitability, and under the Issuance of TCFHC’s stock dividends in 2013 ( 1,625,333 ) related law, TCFHC adopts surplus dividend Subsidiary disposal of the shares of TCFHC regarded as policy. reissue of treasury stock ( 148,857 ) Issuance of TCFHC's stock dividends in 2014 ( 4,307,133 ) When TCFHC appropriates its earnings, legal Issuance of TCFHC's stock dividends in 2015 ( 1,054,498 ) reserve should be appropriated from the annual $ 57,964,343 net income less any accumulated deficit. A 85 86 Financial Information

special reserve may then be appropriated The appropriations from the earnings of 2014 depending on regulations and operating needs. and 2013 were approved in the stockholders' Any remainder should be appropriated as meeting on June 12, 2015 and June 20, 2014, follows: respectively. The appropriations and dividends per share were as follows: 1) 0.02% to 0.16% as bonus to employees; Appropriation of Earnings Dividends Per Share (NT$) 2) 1% or less as remuneration to directors 2014 2013 2014 2013 (including supervisors before the articles of incorporation been revised on June 20, Legal reserve $ 1,023,635 $ 550,549 2014); Cash dividends 5,272,490 4,307,133 $ 0.5 $ 0.50 3) Dividends, determined annually by the board Stock dividends 4,217,992 - 0.4 - of directors. The appropriations of earnings for 2015 had Unless otherwise restricted by related been proposed by TCFHC's board of directors regulations, TCFHC's policy indicates that on March 28, 2016. The appropriations and cash dividends must be 10% or above of the dividends per share were as follows: total dividends and bonus distributed. If the Appropriation Dividends Per cash dividend per share is less than NT$0.1, of Earnings Share (NT$) the cash dividend will not be distributed unless Legal reserve $ 1,286,613 the distribution is resolved in the stockholders' Cash dividends 3,321,669 $ 0.3 meetings. Stock dividends 7,750,560 0.7 Under the Company Law, legal reserve should be appropriated until the reserve equals Information on the appropriation of earnings TCFHC's paid-in capital. This reserve should is available on the Market Observation Post only be used to offset a deficit. When the System website of the Taiwan Stock Exchange reserve exceeds 25% of TCFHC's paid-in (http://emops.tse.com.tw). capital, the excess may be used to issue new Under the Income Tax Law, except for non- shares or distribute cash dividends. ROC resident stockholders, all stockholders are Under related regulations, a special reserve is allowed tax credits for the income tax paid by appropriated from the balance of the retained the Company. Effective from January 1, 2015, earnings at an amount from the net income and ROC resident stockholders are only allowed unappropriated earnings that is equal to the half of original tax credits for the income tax debit balance of accounts in the stockholders' paid by the Company according to the revised equity section (such as exchange differences Income Tax Law. in translation of financial statements of foreign e. Non-controlling interests operations and unrealized gains or losses on available-for-sale financial assets). The special For the Year Ended December 31 reserve should be appropriated from the prior 2015 2014 years' unappropriated earnings to the extent Balance on January 1 $ 3,235,303 $ 3,060,307 of the debit balance accumulated from prior Attributable to non-controlling interests years and such special reserve should not be appropriated. Net income 382,659 176,644 Exchange differences in translation If there is difference between appropriation of of financial statements of foreign special reserve and net amount of deduction in operations ( 13,189 ) ( 12,984 ) other stockholder's equity, the Company should Unrealized gains on available for sale appropriate on additional amount of special financial assets 122,682 146,424 reserve in the first-time adoption of IFRSs. Difference between the carrying amounts Afterwards, if there is any reversal in of the and acquisition cost of Taiwan Cooperative deduction in other stockholder's equity, the Securities Investment Trust Co., Ltd. (Note Company is allowed to appropriating retained 49) - ( 135,088 ) earnings from the reversal amount. Balance on December 31 $ 3,727,455 $ 3,235,303 2015 ANNUAL REPORT

38. RELATED-PARTY TRANSACTIONS 3) Due to banks Taiwan Cooperative Financial Holding Co., Ltd. For the Year Ended December 31 is the ultimate parent of the Company, and the 2015 2014 Ministry of Finance is the major government Ending Interest Ending Interest stockholder. Based on IAS 24 “Related Party Balance Expense Balance Expense Disclosures” the Company's transactions with Main management $ 167,114 $ 2,620 $ 599,742 $ 9,155 government-related parties are exempt from Others 24,747,119 304,369 24,001,686 332,769 disclosure requirements. All transactions, $ 24,914,233 $ 306,989 $ 24,601,428 $ 341,924 account balances, earnings, expenses and gains (losses) on transactions between the Company 4) Call loans from banks and subsidiaries have all been excluded from Highest Ending Interest Interest Rate consolidation and are not disclosed in this note. Balance Balance Expense (%) In addition to those mentioned in other notes, For the year ended the related-party transactions are summarized as December 31, 2015 follows: Main management $ 18,779,577 $ 1,532,092 $ 10,103 0.100-3.000 a. Related parties Others 3,000,000 - 32 0.388 Related Party Relationship with the Company $ 21,779,577 $ 1,532,092 $ 10,135 United Real Estate Management Co., Associated enterprise For the year ended Ltd. December 31, 2014 TCB Fund of Emerging Markets Bond Fund managed by Taiwan Cooperative Main management $ 4,909,587 $ 792,487 $ 6,447 0.180-1.600 Fund (former name: BNP Paribas TCB Securities Investment Trust Co., Ltd. Elite Fund of Emerging Markets Bond 5) Loans Fund) Highest Ending Interest Interest Rate TCB Global High Yield Bond Fund Fund managed by Taiwan Cooperative Balance Balance Revenue (%) (former name: BNP Paribas TCB Elite Securities Investment Trust Co., Ltd. For the year ended Global High Yield Bond Fund) December 31, 2015 Giga Solution Tech. Co., Ltd. (“Giga”) Giga’s independent director is also the Main management $ 192,304 $ 126,978 $ 2,030 1.470-2.708 parent company's independent director. Others 99,024 78,959 1,457 1.500-2.700 Others Main management of the parent company and other related parties. $ 291,328 $ 205,937 $ 3,487 For the year ended b. Significant transactions between the Company December 31, 2014 and related parties: Main management $ 208,026 $ 130,808 $ 2,041 1.525-2.708 1) Due from banks (part of cash and cash Others 116,282 76,119 1,476 1.417-2.810 equivalents) $ 324,308 $ 206,927 $ 3,517 December 31 2015 2014 Under the Banking Law, except for customer loans and government loans, credits Main management $ 47,965 $ 3,343 extended by TCB to any related party should 2) Call loans to banks be 100% secured, and the terms of credits extended to related parties should be similar Highest Ending Interest Interest Rate Balance Balance Revenue (%) to those for third parties. For the year ended 6) Securities sold under repurchase agreements December 31, 2015 Ending Interest Interest Rate Main management $ 7,880,060 $ - $ 783 0.010-0.400 Balance Expense (%) For the year ended Others 9,000,000 1,000,000 21,276 0.280-0.600 December 31, 2015 $ 16,880,060 $ 1,000,000 $ 22,059 Main management $ - $ 2,652 0.370-0.630 For the year ended Others 569,223 2,291 0.370-0.600 December 31, 2014 $ 569,223 $ 4,943 Main management $ 10,356,090 $ - $ 2,729 0.170-1.250 For the year ended December 31, 2014 Others 7,000,000 2,600,000 10,785 0.390-0.600 Others $ 349,497 $ 2,128 0.590-0.610 $ 17,356,090 $ 2,600,000 $ 13,514 87 88 Financial Information

7) Deposits Ending Interest Interest Rate For the Year Ended December 31 Balance Expense (%) 2015 2014 For the year ended 13) Service charge (part of service fee December 31, 2015 and commission income, net) Associates $ 189,203 $ 866 0-1.130 Main management $ 155,959 $ 63,677 Main management 534,878 10,910 0-13.000 Others 11,471 7,219 Others 10,923,024 34,821 0-13.000 $ 167,430 $ 70,896 $ 11,647,105 $ 46,597 14) Rental income (part of other For the year ended noninterest gain, net) December 31, 2014 Others $ 12,708 $ 12,708 Associates $ 181,242 $ 806 0-1.130 15) Other income (part of other Main management 530,003 11,647 0-13.000 noninterest gain, net) Others 14,518,535 41,028 0-13.000 Associates $ 24 $ 104 $ 15,229,780 $ 53,481 Others 2,950 3,027 $ 2,974 $ 3,131 December 31 16) Donation (part of other noninterest 2015 2014 gain, net) 8) Accrued income (part of Main management $ 2,000 $ 2,000 receivables) Main management $ - $ 1 Terms of other transactions with related parties Others 14,279 12,235 were similar to those for third parties, except for the more favorable interest rate for managers' $ 14,279 $ 12,236 savings within a prescribed limit. 9) Accrued interest (part of receivables) 17) Purchases and sales of securities Others $ 85 $ 57 For the Year Ended December 31, 2015 10) Accrued interest (part of payables) Sales Under Purchases Repurchase Under Resell Main management $ 2,113 $ 52 Related Party Purchases Sales Agreements Agreements Main management $ - $ 449,850 $ 12,886,480 $ - December 31 Others - - 20,416,647 - 2015 2014 $ - $ 449,850 $ 33,303,127 $ - 11) Accrued expense (part of payables)

Main management $ 18,339 $ 5,784 For the Year Ended December 31, 2014 Others 891 334 Sales Under Purchases Repurchase Under Resell $ 19,230 $ 6,118 Related Party Purchases Sales Agreements Agreements Main management $ 50,019 $ 189,447 $ 99,947 $ - For the Year Ended December 31 Others - - 22,461,287 - 2015 2014 $ 50,019 $ 189,447 $ 22,561,234 $ - 12) Service fee income (part of service fee and commission income, net) Associates $ 65 $ - Main management 350 281 Others 153,538 112,433 $ 153,953 $ 112,714 2015 ANNUAL REPORT

18) Derivatives For the Year Ended December 31, 2015 Amounts on the Consolidated Balance Sheet Type of Contract Nominal Valuation Related Party Derivatives Period Amounts Gain (Loss) Account Amounts

Other - TCB Fund of Emerging Currency swap 2015.11.27- US$ 2,000 $ 742 Financial assets at fair value through profit or loss $ 742 Markets Bond Fund 2016.01.27 Other - TCB Global High Yield Currency swap 2015.12.16- US$ 7,300 - Financial assets at fair value through profit or loss - Bond Fund 2016.01.19 Currency swap 2015.12.16- US$ 2,200 - Financial assets at fair value through profit or loss - 2016.01.19 Currency swap 2015.12.16- US$ 730 - Financial assets at fair value through profit or loss - 2016.01.19 Currency swap 2015.12.16- US$ 3,000 - Financial assets at fair value through profit or loss - 2016.01.19 Currency swap 2015.12.16- US$ 520 ( 271 ) Financial liabilities at fair value through profit or ( 271 ) 2016.01.19 loss Other - Giga Solution Tech. Co., Forward 2015.10.22- US$ 500 240 Financial assets at fair value through profit or loss 240 Ltd. 2016.01.26 Forward 2015.10.30- US$ 500 169 Financial assets at fair value through profit or loss 169 2016.02.03 Forward 2015.11.09- US$ 500 118 Financial assets at fair value through profit or loss 118 2016.02.16 Forward 2015.11.16- US$ 200 15 Financial assets at fair value through profit or loss 15 2016.02.18 Forward 2015.11.27- US$ 500 147 Financial assets at fair value through profit or loss 147 2016.02.01 Forward 2015.12.02- US$ 300 55 Financial assets at fair value through profit or loss 55 2016.03.07 Forward 2015.12.31- US$ 500 22 Financial assets at fair value through profit or loss 22 2016.03.04

For the Year Ended December 31, 2014 Amounts on the Consolidated Balance Sheet Type of Contract Nominal Valuation Related Party Derivatives Period Amounts Gain (Loss) Account Amounts Other - TCB Fund of Emerging Currency swap 2014.11.20- US$ 4,000 $ 3,977 Financial assets at fair value through profit $ 3,977 Markets Bond Fund 2015.01.20 or loss

The realized profit or loss resulted from the currency swap and cross-currency swap transactions with related parties was as follows: For the Year Ended December 31 2015 2014 Financial assets and liabilities at fair value through profit or loss

Others $ 41,353 $ 4,587

19) Loans December 31, 2015

Highest Balance in the Loan Classification Year Ended Differences in Terms of Transaction Account December 31, 2015 Ending Normal Nonperforming Compared with Those for Type Volume or Name (Note) Balance Loans Loans Collaterals Unrelated Parties Consumer loans 48 $ 151,434 $ 95,322 $ 95,322 $ - Land and None buildings Self-used housing mortgage 28 139,894 110,615 110,615 - Land and None loans buildings 89 90 Financial Information

December 31, 2014

Highest Balance in the Loan Classification Year Ended Differences in Terms of Transaction Account December 31, 2014 Ending Nonperforming Compared with Those for Type Volume or Name (Note) Balance Normal Loans Loans Collaterals Unrelated Parties Consumer loans 43 $ 118,407 $ 85,481 $ 85,481 $ - Land and None buildings Self-used housing mortgage 40 205,901 121,446 121,446 - Land and None loans buildings Note: The highest balance is the largest sum in the year of all daily accounts for each type.

20) Funds invested by TCS which were managed by TCSIT and related profit or loss were as follows: a) Investments in funds (part of financial assets at fair value through profit or loss) December 31, 2014 Others $ 4,908

b) Gains or losses on investments on funds (part of gains or losses on financial assets and liabilities at fair value through profit or loss) For the Year Ended December 31 2015 2014 Others Revenues from fund $ 247 $ 42 Gains (losses) on valuation of fund - ( 92 ) Gains (losses) on disposal of fund ( 450 ) - $ ( 203 ) $ ( 50 )

c. Subsidiaries' related-party transactions and balances that each amounted to more than $100,000 thousand as of and for the years ended December 31, 2015 and 2014 1) Taiwan Cooperative Bank, Ltd. a) Due from banks December 31 2015 2014 Subsidiaries $ 582,372 $ 33,801 Main management 1 965 $ 582,373 $ 34,766

b) Call loans to banks Highest Balance Ending Balance Interest Revenue Interest Rate (%) For the year ended December 31, 2015 Subsidiaries $ 101,116,861 $ 6,435,789 $ 40,407 0.020-3.320 Sister companies 4,400,000 3,500,000 14,560 0.350-0.650 Main management 7,880,660 - 783 0.010-0.400 Others 9,000,000 1,000,000 21,276 0.280-0.600 $ 122,397,521 $ 10,935,789 $ 77,026 For the year ended December 31, 2014 Subsidiaries $ 8,306,725 $ 8,306,725 $ 81,559 0.230-3.750 Sister companies 5,000,000 1,800,000 14,042 0.390-0.650 Main management 10,356,090 - 2,729 0.130-1.250 Others 7,000,000 2,600,000 10,785 0.390-0.600 $ 30,662,815 $ 12,706,725 $ 109,115 2015 ANNUAL REPORT

c) Due to banks For the Year Ended December 31 2015 2014 Ending Balance Interest Expense Ending Balance Interest Expense Subsidiaries $ 2,753 $ 1 $ 6,163 $ 31 Main management 165,233 2,620 597,339 9,155 Others 24,747,119 304,369 24,001,686 332,769 $ 24,915,105 $ 306,990 $ 24,605,188 $ 341,955

d) Call loans from banks Highest Balance Ending Balance Interest Expense Interest Rate (%) For the year ended December 31, 2015 Main management $ 17,905,250 $ 657,764 $ 7,845 0.100-3.000 Others 3,000,000 - 32 0.388 $ 20,905,250 $ 657,764 $ 7,877 For the year ended December 31, 2014 Main management $ 4,592,150 $ 475,050 $ 6,433 0.180-1.600

e) Loans Highest Balance Ending Balance Interest Revenue Interest Rate (%) For the year ended December 31, 2015 Sister companies $ 12,697 $ - $ 6 2.475-2.545 Main management 192,304 126,978 2,030 1.470-2.708 Others 99,024 78,959 1,457 1.500-2.700 $ 304,025 $ 205,937 $ 3,493 For the year ended December 31, 2014 Sister companies $ 85,137 $ - $ 6 2.545 Main management 208,026 130,808 2,041 1.525-2.708 Others 116,282 76,119 1,476 1.417-2.810 $ 409,445 $ 206,927 $ 3,523

Under the Banking Law, except for g) Deposits customer loans and government loans, Ending Interest Interest Rate credits extended by TCB to any related Balance Expense (%) party should be 100% secured, and the For the year ended December 31, 2015 terms of credits extended to related Parent company $ 34,739 $ 1,139 0-0.170 parties should be similar to those to third Subsidiaries 242,200 568 0.170-1.395 parties. Sister companies 4,405,864 6,261 0-1.360 f) Securities purchased under resell Associates 189,203 866 0-1.130 agreements Main management 534,878 10,910 0-13.000 Others 10,923,024 34,821 0-13.000 Ending Interest Interest $ 16,329,908 $ 54,565 Balance Revenue Rate (%) For the year ended For the year ended December 31, 2014 December 31, 2015 Parent company $ 23,659 $ 152 0-0.170 Sister companies $ 199,597 $ 4,280 0.440-0.810 Subsidiaries 187,298 548 0.170-1.395 For the year ended Sister companies 1,199,420 8,376 0-1.360 December 31, 2014 Associates 181,242 806 0-1.130 Sister companies $ 898,819 $ 3,906 0.600-0.700 Main management 530,003 11,647 0-13.000 Others 14,518,535 41,028 0-13.000 $ 16,640,157 $ 62,557 91 92 Financial Information

h) Accrued income (part of receivables) k) Service fee (part of service fee income, December 31 net) 2015 2014 For the Year Ended December 31 Subsidiaries $ 198,226 $ 121,494 2015 2014 Sister companies 2,205 3,056 Subsidiaries $ 2,193,549 $ 1,578,556 Sister companies 58,759 59,278 Associates - 1 Associates 65 - Others 300 90 Main management 350 281 $ 200,731 $ 124,641 Others 626 360 $ 2,253,349 $ 1,638,475 i) Tax receivable - consolidated tax return (part of current tax assets) l) Purchases and sales of securities December 31 For the Year Ended December 31, 2015 2015 2014 Sales Under Purchases Repurchase Under Resell Parent company $ 744,306 $ 743,899 Related Party Purchases Sales Agreements Agreements Parent company $ - $ - $ 1,093,873 $ - j) Tax payable - consolidated tax return Sister companies - - - 17,117,728 (part of current tax liabilities) $ - $ - $ 1,093,873 $ 17,117,728 December 31 For the Year Ended December 31, 2014 2015 2014 Sales Under Purchases Parent company $ 1,251,673 $ - Repurchase Under Resell Related Party Purchases Sales Agreements Agreements Sister companies $ 2,153,222 $ - $ - $ 14,340,829

m) Derivatives For the Year Ended December 31, 2015 Related Party Nominal Valuation Gain Amounts on the Balance Sheet Type of Derivatives Contract Period Amounts (Loss) Account Amounts Financial assets at fair value Sister company - BPCTLI Currency swap 2015.12.22-2016.03.22 US$ 4,935 $ 146 $ 146 through profit or loss Financial assets at fair value Currency swap 2015.12.22-2016.03.22 US$ 10,033 296 296 through profit or loss Financial assets at fair value Currency swap 2015.12.22-2016.03.22 US$ 13,000 383 383 through profit or loss Financial assets at fair value Currency swap 2015.05.06-2016.05.06 US$ 3,187 6,744 6,744 through profit or loss Financial assets at fair value Currency swap 2015.11.09-2016.01.11 US$ 6,981 3,672 3,672 through profit or loss Financial assets at fair value Currency swap 2015.10.13-2016.01.13 US$ 9,989 3,201 3,201 through profit or loss Financial assets at fair value Currency swap 2015.12.31-2016.01.29 US$ 11,219 842 842 through profit or loss Financial assets at fair value Currency swap 2015.11.09-2016.01.11 US$ 3,499 1,841 1,841 through profit or loss Financial assets at fair value Currency swap 2015.12.31-2016.01.29 US$ 10,897 817 817 through profit or loss Financial assets at fair value Currency swap 2015.11.09-2016.01.11 US$ 1,699 894 894 through profit or loss Financial assets at fair value Currency swap 2015.10.15-2016.01.15 US$ 11,386 4,890 4,890 through profit or loss Financial assets at fair value Currency swap 2015.12.31-2016.01.29 US$ 6,722 504 504 through profit or loss Financial assets at fair value Currency swap 2015.12.31-2016.01.29 US$ 3,000 225 225 through profit or loss Financial assets at fair value Currency swap 2015.12.31-2016.01.29 US$ 5,000 375 375 through profit or loss Financial assets at fair value Currency swap 2015.04.07-2016.04.07 US$ 10,259 16,125 16,125 through profit or loss Financial assets at fair value Currency swap 2015.04.15-2016.04.15 US$ 3,129 5,194 5,194 through profit or loss 2015 ANNUAL REPORT

For the Year Ended December 31, 2015 Related Party Nominal Valuation Gain Amounts on the Balance Sheet Type of Derivatives Contract Period Amounts (Loss) Account Amounts Financial assets at fair value Currency swap 2015.04.15-2016.04.15 US$ 3,129 5,194 5,194 through profit or loss Financial assets at fair value Currency swap 2015.04.15-2016.04.15 US$ 4,850 8,051 8,051 through profit or loss Financial assets at fair value Currency swap 2015.05.08-2016.05.09 US$ 20,579 43,673 43,673 through profit or loss Financial assets at fair value Currency swap 2015.05.13-2016.05.13 US$ 10,443 22,640 22,640 through profit or loss Financial assets at fair value Currency swap 2015.10.13-2016.01.13 US$ 1,920 615 615 through profit or loss Financial assets at fair value Currency swap 2015.09.15-2016.03.15 US$ 10,488 5,124 5,124 through profit or loss Other - TCB Fund of Financial assets at fair value Emerging Markets Bond Currency swap 2015.11.27-2016.01.27 US$ 2,000 742 742 through profit or loss Fund Other - TCB Global High Financial assets at fair value Currency swap 2015.12.16-2016.01.19 US$ 7,300 - - Yield Bond Fund through profit or loss Financial assets at fair value Currency swap 2015.12.16-2016.01.19 US$ 2,200 - - through profit or loss Financial assets at fair value Currency swap 2015.12.16-2016.01.19 US$ 730 - - through profit or loss Financial assets at fair value Currency swap 2015.12.16-2016.01.19 US$ 3,000 - - through profit or loss Financial liabilities at fair Currency swap 2015.12.16-2016.01.19 US$ 520 ( 271 ) ( 271 ) value through profit or loss Other - Giga Solution Financial assets at fair value Forward 2015.10.22-2016.01.26 US$ 500 240 240 Tech. Co., Ltd. through profit or loss Financial assets at fair value Forward 2015.10.30-2016.02.03 US$ 500 169 169 through profit or loss Financial assets at fair value Forward 2015.11.09-2016.02.16 US$ 500 118 118 through profit or loss Financial assets at fair value Forward 2015.11.16-2016.02.18 US$ 200 15 15 through profit or loss Financial assets at fair value Forward 2015.11.27-2016.02.01 US$ 500 147 147 through profit or loss Financial assets at fair value Forward 2015.12.02-2016.03.07 US$ 300 55 55 through profit or loss Financial assets at fair value Forward 2015.12.31-2016.03.04 US$ 500 22 22 through profit or loss

For the Year Ended December 31, 2014 Related Party Nominal Valuation Gain Amounts on the Balance Sheet Type of Derivatives Contract Period Amounts (Loss) Account Amounts Sister company - BNP Financial assets at fair value Paribas Cardif TCB Life Cross-currency swap 2010.11.17-2015.09.08 US$ 5,000 $ 10,184 $ 9,133 through profit or loss Insurance Co., Ltd. Financial assets at fair value Cross-currency swap 2010.11.24-2015.01.20 US$ 5,000 9,033 8,414 through profit or loss Financial assets at fair value Cross-currency swap 2010.12.10-2015.09.28 US$ 5,000 8,999 10,445 through profit or loss Financial assets at fair value Currency swap 2014.12.22-2015.06.22 US$ 10,036 2,799 2,799 through profit or loss Financial assets at fair value Currency swap 2014.12.22-2015.09.22 US$ 4,935 1,390 1,390 through profit or loss Financial assets at fair value Currency swap 2014.12.22-2015.06.22 US$ 10,029 2,797 2,797 through profit or loss Financial assets at fair value Currency swap 2014.12.22-2015.12.22 US$ 10,033 2,916 2,916 through profit or loss Financial assets at fair value Currency swap 2014.12.22-2015.12.22 US$ 13,000 3,779 3,779 through profit or loss Financial assets at fair value Currency swap 2014.11.06-2015.02.06- US$ 3,187 3,802 3,802 through profit or loss Financial assets at fair value Currency swap 2014.12.08-2015.04.08 US$ 6,981 3,584 3,584 through profit or loss 93 94 Financial Information

For the Year Ended December 31, 2014 Related Party Nominal Valuation Gain Amounts on the Balance Sheet Type of Derivatives Contract Period Amounts (Loss) Account Amounts Financial assets at fair value Currency swap 2014.12.10-2015.09.10 US$ 9,989 4,561 4,561 through profit or loss Financial assets at fair value Currency swap 2014.11.28-2015.05.29 US$ 11,219 8,435 8,435 through profit or loss Financial assets at fair value Currency swap 2014.12.08-2015.09.08 US$ 3,499 1,818 1,818 through profit or loss Financial liabilities at fair Currency swap 2014.12.26-2015.01.26 US$ 10,897 ( 2,454 ) ( 2,454 ) value through profit or loss Financial assets at fair value Currency swap 2014.10.02-2015.01.05 US$ 1,699 2,020 2,020 through profit or loss Financial assets at fair value Currency swap 2014.12.11-2015.04.13 US$ 5,147 2,051 2,051 through profit or loss Financial assets at fair value Currency swap 2014.12.15-2015.09.15 US$ 11,386 4,919 4,919 through profit or loss Financial liabilities at fair Currency swap 2014.12.29-2015.01.29 US$ 6,722 ( 1,223 ) ( 1,223 ) value through profit or loss Financial liabilities at fair Currency swap 2014.12.31-2015.01.30 US$ 5,000 ( 466 ) ( 466 ) value through profit or loss Financial liabilities at fair Currency swap 2014.12.31-2015.01.30 US$ 10,000 ( 933 ) ( 933 ) value through profit or loss Financial liabilities at fair Currency swap 2014.12.31-2015.03.31 US$ 3,000 ( 283 ) ( 283 ) value through profit or loss Financial liabilities at fair Currency swap 2014.12.31-2015.03.31 US$ 5,000 ( 471 ) ( 471 ) value through profit or loss Financial liabilities at fair Currency swap 2014.12.31-2015.04.30 US$ 5,000 ( 460 ) ( 460 ) value through profit or loss Other -TCB Fund of Financial assets at fair value Emerging Markets Currency swap 2014.11.20-2015.01.20 US$ 4,000 3,977 3,977 through profit or loss Bond Fund

The realized gain or loss resulted from the net) for the years ended December 31, currency swap and cross-currency swap 2015 and 2014, respectively. transactions of TCB with related parties was 2) Taiwan Cooperative Securities Co., Ltd. as follows: For the Year Ended December 31 a) Collections for underwriting stock value 2015 2014 (part of other current assets) Financial assets and liabilities at fair value December 31 through profit or loss 2015 2014 Sister companies $ 181,029 $ 210,875 Sister companies $ 277,079 $ 180,500 Others 41,353 4,587 $ 222,382 $ 215,462 b) To settle security transactions, TCS applied to TCB in April 2014 for a n) On December 30, 2013, TCB's board of guarantee of $500,000 thousand for directors approved a property sale and short-term loan and overdraft. As leaseback transaction with CAM. The of December 31, 2015, TCS had no selling price was $962,000 thousand and borrowing and overdraft. the net gain on this disposal was $580,423 thousand after the deduction of a land The overdraft for the years ended revaluation increment tax of $17,792 December 31, 2015 and 2014 were as thousand. The gain on disposal should follows: be deferred and amortized over the For the Year Ended December 31, 2015 Highest Ending Interest Interest Rate lease period. TCB recognized $154,779 Balance Balance Expense (%) thousand and $425,644 thousand as Sister companies $ 12,697 $ - $ 6 2.475-2.545 realized gain (part of gains/losses on disposal of properties and equipment, 2015 ANNUAL REPORT

For the Year Ended December 31, 2014 Accumulated Ending Interest Rate Interest Highest Ending Interest Interest Rate Amount Balance (%) Expense Balance Balance Expense (%) Sister companies 27,551,703 1,388,372 0.550-0.700 6,423 Sister companies $ 85,137 $ - $ 6 2.545 d) Non-guarantee commercial paper issued c) Non-guarantee commercial paper (part of financial assets at fair value underwrited by TCBF for TSC and though profit or loss) related profit or loss were as follows: For the Year Ended December 31, 2015 For the Year Ended December 31, 2015 Ending Premiums Balance Fact Amount (%) Service Fee Highest Interest Interest Rate Balance Service Fee Expense (%) Parent company $ 500,000 $ - 0.640-0.650 $ 249 Sister companies - - 0.800-1.000 279 Sister companies $ - $ 279 $ 157 0.800-1.000 $ 500,000 $ - $ 528

For the Year Ended December 31, 2014 For the Year Ended December 31, 2014 Highest Interest Interest Rate Balance Service Fee Expense (%) Ending Premiums Balance Fact Amount (%) Service Fee Sister companies $ 550,000 $ 684 $ 152 0.580-1.040 Parent company $ - $ - 0.700-0.880 $ 232 Sister companies 550,000 250,000 0.580-1.040 684 3) Taiwan Cooperative Bills Finance $ 550,000 $ 250,000 $ 916 Corporation Ltd. a) Cash in bank 4) BNP Paribas Cardif TCB Life Insurance Co., Highest Ending Interest Rate Interest Ltd. Balance Balance (%) Revenue a) Cash in bank (part of cash and cash December 31, 2015 equivalents, refundable deposits and Sister companies $ 972,407 $ 55,478 0.020-1.345 $ 22 separate account assets) December 31, 2014 December 31 Sister companies 405,121 26,221 0.060-1.345 29 2015 2014 b) Call loans from banks Amount % Amount % Sister companies $ 2,007,078 55 $ 917,445 31 Highest Ending Interest Rate Interest Balance Balance (%) Expense Others 47,895 1 2,376 - December 31, 2015 $ 2,054,973 56 $ 919,821 31 Sister companies $ 4,400,000 $ 3,500,000 0.350-0.650 $ 14,560 December 31, 2014 b) Securities purchase under resell Sister companies 5,000,000 1,800,000 0.390-0.650 14,042 agreement (part of cash and cash equivalents) c) Securities sold under repurchase agreement For the Year Ended December 31, 2015 Securities Purchase Under Purchased Accumulated Ending Interest Rate Interest Resell Agreement Amount Balance (%) Expense Securities (Note) Amount Rate (%) December 31, 2015 Sister companies $ 99,942 $ 14,261,690 0.370-0.590 Parent company $ 99,962 $ - 0.540 $ 6

Sister companies 31,379,418 299,539 0.370-0.810 6,110 For the Year Ended December 31, 2014 Main management 12,886,480 - 0.370-0.630 2,652 Securities Purchase Under Purchased Resell Agreement Others 20,416,647 569,223 0.370-0.600 2,291 Securities December 31, 2014 (Note) Amount Rate (%) Parent company 299,898 - 0.600 20 Sister companies $ 489,553 $ 13,210,874 0.550-0.620 Note: The amount includes securities sold under resell agreements.

c) Derivatives For the year ended December 31, 2015 Amounts on the Balance Sheet Nominal Valuation Gain Related Party Type of Derivatives Contract Period Amounts (Loss) Account Amounts Financial liabilities at fair Sister companies Currency swap 2015.04.01-2016.05.13 US$ 166,344 $ ( 131,446 ) $ ( 131,446 ) value through profit or loss 95 96 Financial Information

For the year ended December 31, 2014 Type of Contract Nominal Valuation Amounts on the Balance Sheet Related Party Derivatives Period Amounts Gain (Loss) Account Amounts Financial liabilities at fair Sister companies Cross-currency swap 2010.11.15-2015.09.08 US$ 10,000 $ ( 19,182 ) $ ( 17,511 ) value through profit or loss Financial liabilities at fair Cross-currency swap 2010.12.08-2015.09.28 US$ 5,000 ( 8,976 ) ( 10,423 ) value through profit or loss Financial assets at fair value Sister companies Currency swap 2014.12.24-2015.04.30 US$ 47,318 6,477 6,477 through profit or loss Financial liabilities at fair Currency swap 2014.11.04-2015.12.22 US$ 99,441 ( 42,851 ) ( 42,851) value through profit or loss

In 2015 and 2014, the realized losses on d. Salaries, bonuses and remunerations to main cross-currency swaps and currency swaps management with sister companies were $149,099 thousand and $218,185 thousand, For the Year Ended December 31 respectively. 2015 2014 Salaries and other short-term employment d) Payables benefits $ 138,014 $ 127,137 December 31 Post-employment benefits 6,391 6,787 2015 2014 Interest arising from the employees’ Sister companies $ 102,204 $ 81,031 preferential rate in excess of normal rates 3,022 3,050 Others 17,533 4,617 $ 147,427 $ 136,974 $ 119,737 $ 85,648 39. PLEDGED ASSETS e) Operating expenses a. In addition to those mentioned in other notes, For the Year Ended December 31 the face values of the pledged bonds and 2015 2014 certificates of deposit are summarized as Insurance contract expenses follows: Sister companies $ 1,144,498 $ 897,977 December 31 Others 150,366 42,666 2015 2014 $ 1,294,864 $ 940,643 Collaterals for call loans of foreign currency $ 40,000,000 $ 40,000,000 Collaterals for day-term overdraft 31,110,000 31,110,000 The above amounts were recorded as Collaterals for overdraft of domestic U.S. 11,000,000 11,000,000 operating cost - commission expenses dollar settlement and were deducted from the reserve Collaterals for overdraft of domestic RMB 3,994,400 7,648,500 for insurance contracts with financial settlement instrument features. Guarantee deposits for the insurance 900,000 900,000 operation 5) Co-operative Assets Management Co., Ltd. Guarantee deposits for provisional collateral 730,600 826,500 On December 30, 2013, the board of directors seizure for loan defaults and others of Co-operative Assets Management Co., Collaterals for overdraft of domestic JPY 500,000 - Ltd. (CAM) approved a property purchase settlement and lease transaction with TCB. The price Overseas branches’ capital adequate reserve 305,784 446,547 of CAM's purchase was $962,000 thousand. Guarantee deposits for securities operation 345,000 380,000 Guarantee deposits for the bills finance 6) Taiwan Cooperative Securities Investment 227,400 227,400 business Trust Co., Ltd. Guarantee deposits for the trust business 180,000 160,000 For the Year Ended December 31 compensation reserve 2015 2014 Collaterals for overseas branch U.S. dollar 36,168 28,503 Management fee income settlement Others $ 152,458 $ 111,653 Collaterals for handling the government - 90,200,000 treasury affairs Others 94,400 29,400 $ 89,423,752 $ 182,956,850 2015 ANNUAL REPORT

To comply with the Central Bank of the The lease payments recognized as expenses Republic of China's (CBC) clearing system are as follows: for real-time gross settlement (RTGS), TCB For the Year Ended December 31 provided certificates of deposit as collateral 2015 2014 for day-term overdraft (part of due from the Minimum lease payments $ 648,987 $ 642,520 Central Bank and call loans to other banks). Contingent rentals 1,199 1,095 The pledged amount may be adjusted anytime, and the unused overdraft amount at the end $ 650,186 $ 643,615 of a day can also be treated as TCB's liquidity reserve. 2) Lease agreements on investment properties owned by TCB and rent to others are b. To expand their capital sourcing and enhance operating lease. Rentals are calculated on the their liquidity position, TCB's Seattle Branch basis of the leased areas and are receivable and Los Angeles Branch obtained access monthly, quarterly or semiannually. The privileges at the Discount Window of the lessees have no preemptive rights to buy Federal Reserve Bank of San Francisco. For properties at the end of the lease agreements. this access, the two branches pledged the As of December 31, 2015, refundable following assets: deposits on these leases totaled $38,313 (In Thousands of U.S. Dollars) thousand. Minimum future annual rentals Outstanding Balance Collateral are as follows: Date Loan Bond Total Value December 31 December 31, 2015 $ 316,666 $ 22,000 $ 338,666 $ 227,840 2015 2014 December 31, 2014 $ 278,096 $ 62,000 $ 340,096 $ 247,340 Within one year $ 117,718 $ 91,978 One to five years 313,913 108,637 40. SIGNIFICANT CONTINGENT $ 431,631 $ 200,615 LIABILITIES AND UNRECOGNIZED COMMITMENTS 3) As of December 31, 2015, TCB's outstanding In addition to those mentioned in other notes, the major construction and procurement significant commitments and contingencies as of contracts amounted to $5,687,178 thousand, December 31, 2015 were as follows: of which $1,013,309 thousand was still unpaid. a. Taiwan Cooperative Financial Holding Co., Ltd. 4) According to the joint venture contract signed with BNP Paribas Assurance As of December 31, 2015, TCFHC's (BNPPA), TCB signed the tri-party outstanding major construction and agreement with BNP Paribas Cardif TCB procurement contracts amounted to $48,287 Life Insurance Co., Ltd. (BPCTI) and thousand, of which $37,612 thousand was still Cooperative Insurance Broker Co., Ltd. unpaid. (CIB) on April 13, 2010, which identified b. Taiwan Cooperative Bank, Ltd. BPCTI as the sole supplier of life insurance products for TCB and CIB, also applying 1) Lease agreements on premises occupied by TCB's marketing channels to sell life TCB's branches are operating lease. Rentals insurance products exclusively. are calculated on the basis of the leased areas and are payable monthly, quarterly or 5) For TCB's income tax returns (ITRs) from semiannually. As of December 31, 2015, 2006 to 2011, the Taipei National Tax refundable deposits on these leases totaled Administration (TNTA) claimed that the $163,796 thousand. Minimum future annual appraisal of goodwill was not reasonable rentals are as follows: and that there were no unrecognized losses December 31 on the sale of nonperforming loans in TCB's records on the date of the merger with 2015 2014 the Farmers Bank of China (FBC). Thus, Within one year $ 592,570 $ 626,257 TNTA denied the expenses for the goodwill One to five years 1,016,771 1,109,710 amortization of $3,170,005 thousand and Over five years 36,656 14,027 the deferred loss amortization of $3,105,522 $ 1,645,997 $ 1,749,994 97 98 Financial Information

thousand on the sale of nonperforming loans. contract, CIB should pay Tamsui Credit- TCB disagreed with the TNTA's decision Cooperative Association at 90% of the and initiated administrative litigations. On commission revenue after paying tax that December 30, 2014, TNTA allowed the CIB receives from insurance companies. As partial amortization of goodwill expenses of December 31, 2015, the unpaid amount to and of the losses on sales of nonperforming Tamsui Credit-Cooperative Association was loans in the tax returns of 2006 to 2011 after $891 thousand. negotiating with TCB. TCB recognized 4) CIB and Hsinchu Credit-Cooperative related income tax expenses of $228,990 Association signed a contract. Under this thousand in 2014. On February 25 and April contract, CIB should pay Hsinchu Credit- 9, 2015, TNTA reassessed TCB's 2006 to Cooperative Association at 90% of the 2010 ITRs application. Because the Bank commission revenue after paying tax that did not file an administrative appeal, the final CIB receives from insurance companies. As court decision has been determined. Thus, of December 31, 2015, the unpaid amount to ITRs have been returned (part of tax refund Hsinchu Credit-Cooperative Association was receivable of current tax assets). Besides the $1 thousand. administrative litigation of the Bank's 2011 ITRs application is still in process. 5) CIB and Taichung Credit-Cooperative Association signed a contract. Under this c. United Taiwan Bank S.A. contract, CIB should pay Taichung Credit- United Taiwan Bank S.A. has operating lease Cooperative Association at 90% of the agreements with unrelated parties on its office commission revenue after paying tax that premises. The rentals payable in the next five CIB receives from insurance companies. As years are as follows: of December 31, 2015, the unpaid amount

December 31 to Taichung Credit-Cooperative Association was $183 thousand. 2015 2014 e. Taiwan Cooperative Bills Finance Cooperation Within one year $ 3,914 $ 3,656 Ltd. One to five years 16,865 16,159 As of December 31, 2015, the commitments or $ 20,779 $ 19,815 contingencies were as follows:

December 31, 2015 d. Cooperative Insurance Brokers Co., Ltd. Guarantees of commercial paper $ 19,112,600 1) The Cooperative Insurance Brokers Co., Ltd. (CIB) entered into insurance agent contracts Purchase of reference-rate commercial paper $ 3,800,000 with various insurance companies. The contract's effective period is one year after f. Taiwan Cooperative Securities Co., Ltd. the contract signed, if either party of contract As of December 31, 2015, TCS's agreements makes no notice to terminate the contract on the acquisition equipment and procurement after contract expired, then the contract contracts amounted to $43,613 thousand, of automatically extend for one year. The which $30,359 thousand was still unpaid. commission charge with every insurance company is according with the contents of In May 2012, TCS laid off a certain Mr. Chen contract. in accordance with the Labor Standards Act, but Mr. Chen, claiming the layoff was illegal, 2) CIB and Land Bank signed a contract. applied to the Taipei District Court (the “Court”) Under this contract, CIB should pay Land on April 10, 2014 for clarification of this Bank at 90% of the commission revenue employment issue. As of December 31, 2014, after paying tax that CIB receives from this case was still investigation under the Court. insurance companies. As of December 31, The Taipei Department of Labor (TDOL) 2015, the unpaid amount to Land Bank was investigated this case in March 2014 and TDOL $805 thousand. later concluded that there was no evidence that 3) CIB and Tamsui Credit-Cooperative TCS had violated the Labor Standards Act. Association signed a contract. Under this TCS estimated that it would have no loss on this litigation. 2015 ANNUAL REPORT

g. Co-operative Assets Management Co., Ltd. b. The valuation techniques and assumptions the Company uses for determining fair values are CAM leases its own investment properties with as follows: lease term from 1 to 20 years. Lessee won't have the right of bargaining purchase at the end The fair values of financial instruments of lease period. traded on active markets are based on quoted market prices. However, in many instances As of December 31, 2015, refundable deposits where there are no quoted market prices for on these leases to totaled $10,979 thousand. the Company's various financial instruments, Minimum future annual rentals are as follows: fair values are based on estimates using December 31 other financial data and appropriate valuation 2015 2014 methodologies. Fair values of forward Within one year $ 54,014 $ 33,223 contracts, currency swap contracts, foreign- One to five years 164,405 178,219 currency margin contracts, cross-currency Over five years 640,251 681,826 swap contracts and interest rate swap contracts $ 858,670 $ 893,268 are calculated using the discounted cash flow method, unless the fair values are provided by counter-parties. Fair values of option contracts 41. FINANCIAL INSTRUMENTS are based on estimates using the Black Scholes a. Fair values of financial instruments that are not pricing model. measured at fair value The Company estimates the fair value of each Except for the financial assets and liabilities forward contract on the basis of the swap points shown in the following table, management quoted by Reuters on each settlement date. Fair considers that either the carrying amounts values of interest rate swap contracts and cross- of financial assets and financial liabilities currency swap contracts are calculated using recognized in the financial statements the Bloomberg information system, unless the approximate their fair values or the fair fair values are provided by counterparties. The values of the financial instruments cannot be calculation of the fair value of each option reasonably measured. contract is based on the mid-price (the average December 31 of bid and ask prices) quoted by Reuters. 2015 2014 For debt instruments with no active market, Carrying Estimated Carrying Estimated if there are theoretical prices from GreTai Amount Fair Value Amount Fair Value Securities Market (GTSM, an over-the-counter Financial assets securities exchange) on the balance sheet date, Held-to-maturity they are used as the basis for evaluating the financial assets $ 45,199,348 $ 46,084,422 $ 22,066,804 $ 22,106,227 fair value of debt instruments with no active Debt instruments market. Otherwise, the latest trade prices and with no active quoted prices by major markets are used. The market 94,584,846 95,581,253 91,003,303 91,066,731 fair values of bank debentures are recorded as Financial liabilities follows: (a) debentures with no maturity dates Bonds payable 69,610,000 70,258,774 92,110,000 92,416,474 - at book values; (b) debentures with floating interest rates - at theoretical prices quoted Fair value hierarchy as at December 31, 2015 by the GTSM; and (c) debentures with fixed Total Level 1 Level 2 Level 3 interest rates - at estimates reached using the Financial assets discounted cash flow method. The discount Held-to-maturity rates used were between 0.7361% and 1.0960%, financial assets $ 46,084,422 $ - $ 46,084,422 $ - between 0.8567% and 1.5995% as of December Debt instruments 31, 2015 and 2014, respectively, and were with no active comparable with interest rates for loans with market 95,581,253 406,048 95,175,205 - similar terms and characteristics. Financial liabilities Bonds payable 70,258,774 - 70,258,774 - 99 100 Financial Information

c. The fair value hierarchy of the Company's financial instruments as of December 31, 2015 and 2014 were as follows: Financial Instruments December 31, 2015 Measured at Fair Value Total Level 1 Level 2 Level 3 Non-derivative financial instruments Assets Financial assets at FVTPL Held-for-trading financial assets Stocks $ 262,273 $ 260,881 $ 1,392 $ - Debt instruments 2,439,198 2,439,198 - - Others 30,133,164 52,106 30,081,058 - Financial assets designated as at FVTPL 40,095 - 40,095 - Available-for-sale financial assets Stocks 4,536,688 3,985,033 551,655 - Debt instruments 142,278,588 46,341,353 95,937,235 - Others 5,272,281 5,272,281 - - Liabilities Financial liabilities at FVTPL ( 12,703,063 ) - ( 12,703,063 ) - Derivative financial instruments Assets Financial assets at FVTPL 4,263,964 42,602 4,221,362 $ - Liabilities Financial liabilities at FVTPL ( 2,810,156 ) - ( 2,810,156 ) -

Financial Instruments December 31, 2014 Measured at Fair Value Total Level 1 Level 2 Level 3 Non-derivative financial instruments Assets Financial assets at FVTPL Held-for-trading financial assets Stocks $ 216,786 $ 216,786 $ - $ - Debt instruments 1,151,299 1,149,662 1,637 - Others 51,415,217 16,134 51,399,083 - Financial assets designated as at FVTPL 503,788 417,727 86,061 - Available-for-sale financial assets Stocks 4,283,735 4,283,735 - - Debt instruments 116,494,442 42,398,907 74,095,535 - Others 6,040,635 6,040,635 - - Derivative financial instruments Assets Financial assets at FVTPL 9,316,463 19,608 9,296,855 - Liabilities Financial liabilities at FVTPL ( 6,730,193 ) - ( 6,730,193 ) -

d. Information on financial assets designated as Change in Fair Values Resulting from at fair value through profit or loss that should Credit Risk Variations be originally measured at amortized cost is as Change in amount in the year follows: 2015 $ 6,311 2014 $ ( 5,322 ) December 31 2015 2014 Accumulated amount of change Carrying amounts of debt instruments As of December 31, 2015 $ - designated as at fair value through profit or As of December 31, 2014 $ ( 6,311 ) loss $ - $ 90,734 2015 ANNUAL REPORT

The change in fair value of debt instruments f. Information on financial risk management is as designated as at fair value through profit or follows: loss resulting from credit risk variation is the Taiwan Cooperative Financial Holding Co., difference between the total change in fair Ltd. value and the change in fair value due to market risk variations on these debt instruments. The 1) Risk management change in fair value resulting from market risk TCFHC and its subsidiaries' risk variations is calculated using the benchmark management goals are to develop a sound yield rate plus a fixed credit spread. The fair risk management mechanism under the value of debt instruments is the present value of principles of customer service, business future cash flows discounted by the benchmark continuity management, risk appetite, yield rate quoted in the market as of the balance and compliance with related laws and sheet date plus the credit spread estimated using regulations and expected-return standards the interest rates for the debt issuers' financial and to enhance stockholder's equity. Major assets with similar maturities. risks faced by TCFHC and its subsidiaries As of the balance sheet date, the debt include on-balance-sheet and off-balance- instruments designated as at fair value through sheet credit risks, market risks (including profit or loss have no concentration of credit interest rate, exchange rate, equity security risk. Their carrying amounts are the amount of and financial product risks), and liquidity the maximum exposure to credit risks of these risks. debt instruments. To effectively identify, measure, manage, e. Information of financial liabilities designated as and monitor various types of risks and to at fair value through profit or loss is as follows: achieve profit objectives under a reasonable December 31, 2015 risk, both TCFHC and its subsidiaries Difference between carrying amount have developed risk management policies, and contractual amount at maturity regulations and procedures, which have been Fair value $ 12,703,063 approved by the board of directors. Amount payable at maturity 13,152,000 The board of directors is the highest $ ( 448,937 ) decision-making unit of TCFHC's risk management system and takes the ultimate Change in Fair Values Resulting overall, responsibility for risk management. from Credit Risk Variations The risk management committee is in Change in amount in the year charge of setting risk management policies 2015 $ 2,168 and indicators, monitoring TCFHC and Accumulated amount of change its subsidiaries' various risk situations and As of December 31, 2015 $ 2,168 operating procedures, and coordinating and supervising the execution of risk The change in fair value attributable to change management. The risk management division in credit risk was calculated as the difference is in charge of TCFHC's risk management between total change in fair value of bank policy planning, capital adequacy calculating debentures and the change in fair value due and assessing, emergency contingency to change in market risk factors alone. The plan making, and periodically monitoring change in fair value due to market risk factors and reporting TCFHC and its subsidiaries' was calculated using benchmark interest yield risk control and management execution as curves as at the end of the reporting period required by regulations. holding. The fair value of bank debentures Each subsidiary' board of directors is were estimated by discounting future cash the highest decision-making unit of each flows using quoted benchmark interest yield subsidiaries' risk management system and curves as at the end of the reporting period and takes the ultimate overall responsibility for by obtaining lender quotes for borrowing of risk management. Each subsidiary has also similar maturity to estimate credit risk margin. established a risk management committee or independent risk management unit, which is in charge of the execution of risk management procedures. 101 102 Financial Information

2) Credit risk liabilities when they become due. Examples of liquidity risk-related situations are the Credit risk refers to borrowers, issuers early withdrawal of deposits, transaction or counterparties' deterioration or other terms becoming more stringent, increase in factors (dispute between a borrower and its borrowers' defaults, a financial instrument counterparty, for instance), which leads to becoming illiquid, and the early cancellation borrowers, issuers or counterparties' breach of a floating rate insurance product policy. of contracts, resulting in default losses. These situations may deplete TCFHC and Credit risk comes from both on-balance- its subsidiaries' capital resources, requiring sheet and off-balance-sheet transactions. them to seek loans, and do fund-raising and TCFHC and its subsidiaries' on-balance- investment activities. In extreme situations, sheet credit-risk exposure come from loans, lack of liquidity may cause the potential due from and call loans to other banks, risk of the inability to enter into lending security investments and derivatives. The transactions. For the reduction of liquidity off-balance-sheet credit risk exposure comes strains on the bank funding market, there is a from guarantees, letters of acceptance, letters bank liquidity risk channel. of credit and loan contracts. TCFHC and its subsidiaries separately TCFHC and its subsidiaries must closely execute their respective liquidity analyze every on-balance-sheet and off- management procedures, and this execution balance-sheet transaction to recognize is monitored by an independent risk existing and potential credit risk. On the management division, which periodically basis of the Company's operating conditions prepares related reports for submission and the principle of sound risk distribution, to TCFHC and its subsidiaries' risk every risk factor should be managed, risk management committees and the board of situations should be analyzed and assessed, directors. limits on concentration of credit risk should be set, and a risk monitoring and warning Taiwan Cooperative Bank Ltd. and subsidiaries mechanism should be established. 1) Risk management 3) Market risk The objective of risk management is Market risk refers to unfavorable market to develop a sound risk management price fluctuations, which affect the on- mechanism, and on the basis of the risk balance-sheet and off-balance-sheet tolerance level and the expected return level, positions. Market price refers to interest pursue the maximum value of stockholders' rate, foreign-exchange rate, equity security investments. The main risks faced by TCB price and financial product prices. TCFHC include the business credit risk in- and and its subsidiaries' risk market management off- balance-sheet, market risks (including procedures include risk identification, interest, exchange, equity security, and measurement, assessment, monitoring and commodity risks) and liquidity risk. reporting. TCB has risk management policies and risk TCFHC and its subsidiaries' risk monitoring procedures, which have been management staff analyze and assess market reviewed and approved by the Board and risk position data, monitor market risks are used to effectively identify, measure, position and gains or losses, and periodically monitor and control credit, market, and and make reports to the risk management operating and liquidity risks. committee and board of directors for The Board, the highest decision-making unit managements' decision making. Each for the risk management, takes charge of subsidiary has various authorized investment approving the risk management policy and amounts and stop loss regulations based system and building the risk management on the overall risk management target and culture. It also takes ultimate responsibility product attributes and periodically prepare for overall risk management. management reports on the control and management of each market risk. Under the risk management decision approved by the Board, the risk management 4) Liquidity risk committee takes charge of and reviews all Liquidity risk refers to the possible financial TCB's risk management implementation, losses that may arise because of the inability capital adequacy assessment, and to liquidate assets or to pay financial risk exposure management. It also 2015 ANNUAL REPORT

communicates and the inter-departmental a) Loans business (including loan risk management issues and coordinates commitment and guarantees) issue handling and continually monitors the Credit assets are classified into five execution of risk management procedures. categories. In addition to normal credit The risk management department is assets that are classified as sound assets, responsible for planning and designing the the unsound assets are classified, on the risk management system, deliberating capital basis of the valuation of collaterals and allocation, setting up the instruments for the length of time the payments become risk measurement and capital provision, and overdue, as special mention, substandard, monitoring risk control. This department with collectability high doubtful and also regularly prepares reports for uncollectible. TCB and its subsidiaries submission to senior management, the risk also set up policies for the management management committee and the Board. of doubtful credits and the collection of Under the business management regulation overdue debts to deal with collection and risk policy, the business supervising unit problems. manages and oversees each business unit TCB and its subsidiaries' apply to toward proper risk management and carries its credit business the so-called “5Ps out risk review and control. In addition, the of credit analysis” as the basis for Audit Department independently audits at lending approval and evaluation of its least once a year all risk-related businesses counterparties. These 5Ps are: People and timely provides suggestions for (know customers' background and their improvement. credit status well); purpose (what will 2) Credit risk the fund be used for); payment (the borrower's ability to repay an obligation Credit risk refers to a borrower, a when it falls due); protection (TCB and financial instrument issuer or a transaction its subsidiaries' recourse on repayment counterparty undergoing financial difficulty defaults); and perspective (how the credit or other adverse situations (such as a dispute is seen in light of rewards and risks). between the borrower and its business After a loan is granted, the transaction is partner), which could result in loss due to reviewed and monitored to ensure TCB breach of contract. Credit risk can come and its subsidiaries' creditor's rights. from in- and off-balance-sheet items., On- balance sheet items are mainly lending, due To quantify credit risk, TCB and its from bank and call loans to other banks, subsidiaries apply statistical methods security investment and derivatives. Off- using with customers' qualitative data balance sheet items are mainly guarantees, and lending history to develop a rating acceptance, letters of credit and loan module for corporate finance and commitments. consumer finance. This module is used to create an internal credit rating system The risk management policy, which is for risk evaluation, in which 9 is the base founded on the basic principles of safety, grade of the credit quality of corporate liquidity, profitability, welfare and growth, is customers, and 8 or 10 on the business implemented by the credit risk management segment consumer customers. division toward the cultivation of a risk management culture. All on- and off- The 5P credit analysis and the module balance sheet transactions are should be rating specifically apply to corporate detailed analyzed in detail to identify existing customers. Micro credits and residential and potential credit risk. Based on TCB's mortgages are assessed by using the business characteristics and the principle of credit rating model, and consumer loans risk diversification, risk status is analyzed are assessed individually for default and evaluated, centralized limits are set, and risks. a risk monitoring and alert mechanism has b) Due from and call loans to other banks been developed and operated. For a more effective credit risk evaluation, an internal TCB and its subsidiaries evaluate the rating system has been created to enhance credit status of counterparties before the ability to quantify risk. closing deals. TCB and its subsidiaries grant different limits to the counterparties TCB's main business items that are measured on the basis of their respective credit and managed for credit risks are as follows: 103 104 Financial Information

ratings as suggested by domestic and limits, the related department or division will foreign credit rating agencies. apply appropriate procedures to ensure that the credit limits are followed. c) Investments in debt instruments and derivatives TCB and its subsidiaries settle most of its transactions at gross amounts. For further TCB and its subsidiaries identify reduction of credit risks, settlement netting and manage credit risks from debt is used for some counterparties or in some instruments through the use of external circumstances where the transactions are credit ratings of the debt instruments terminated because of a counterparty's along with the evaluation of credit default. qualities of bonds, regional conditions and counterparty risks. The maximum exposures to credit risks of assets on the consolidated balance sheets TCB and its subsidiaries conduct without consideration of guarantees or other derivative transactions with other banks credit enforcement instruments approximate and sets the credit limits (including the assets' carrying amounts. The maximum lending limits) at their credit rating exposures of off-balance sheet items to credit and the ranking given by the Banker risks without consideration of guarantees or magazine. The credits extended to other credit enforcement instruments are as general customers are monitored in follows: accordance with the related contract terms and conditions and the credit December 31 limits for derivatives established through 2015 2014 normal credit granting processes. Irrevocable loan commitments issued $ 101,337,530 $ 87,234,668 Irrevocable credit card commitments 37,667,998 36,224,758 TCB and its subsidiaries have a series of Letters of credit issued yet unused 17,365,650 21,907,342 measures for credit granting to reduce credit Other guarantees 75,846,447 72,135,567 risks. One of the procedures is asking for collaterals from the borrowers. To secure TCB and its subsidiaries' management a debt, TCB and its subsidiaries manage believes its ability to minimize credit risk and assesses the collaterals following the exposures on off-balance sheet items is procedures that determine the scope of mainly due to its rigorous evaluation of collateralization and valuation of collaterals and the process of disposition. In credit credit extended and the periodic reviews of contracts, TCB and its subsidiaries stipulate these credits. the security mechanism for debts; the Concentration of credit risk exists when conditions and terms for collaterals; and counterparties to financial transactions are the terms and conditions of offsetting to individuals or groups engaged in similar state clearly that TCB and its subsidiaries activities or activities in the same region, reserve the right to reduce the granted quota, which would cause their ability to meet to reduce the repayment period, to demand immediate settlement or to offset the debts contractual obligations to be similarly of the borrowers by their deposits in TCB affected by changes in economic or other and its subsidiaries in order to reduce the conditions. The profile by group or industry, credit risks. regions and collaterals of obligations that were 10% or more of total outstanding loans To avoid the concentration of credit is as follows: risks, TCB and its subsidiaries set up December 31 centralized credit limits for business Credit Risk segments, countries, collaterals, groups, Profile by Group 2015 2014 and construction financing. Monthly, or or Industry Amount % Amount % more frequently, as needed, TCB and its Natural person $ 811,865,538 39 $ 766,147,304 39 subsidiaries review credit limits, monitor the Manufacturing 322,834,983 16 317,386,644 16 actual risk-exposure condition and whether the usage rate of limits meets relevant Some financial assets held by TCB and regulations and reports the review results its subsidiaries, such as cash and cash to superior management, risk management equivalents, due from the Central Bank and committee and the Board periodically. If call loans to other banks, financial assets at there is a possibility of breach of the credit fair value through profit or loss, securities 2015 ANNUAL REPORT

purchased under resell agreements and refundable deposits, are exposed to low credit risks because the counterparties have high credit ratings. In addition to the above assets, credit quality analysis of other financial assets are as follows: a) Credit quality analysis of discounts, loans and receivables

Provision for Impairment Losses (D) Neither Past Due Past Due But Not Impaired Total Net December 31, 2015 Nor Impaired Impaired With Objective With No Objective (C) (A)+(B)+(C) (A)+(B)+(C)-(D) (A) (B) Evidence of Evidence of Impairment Impairment

Receivables

Credit cards $ 2,549,807 $ 27,980 $ 74,336 $ 2,652,123 $ 34,983 $ 18,435 $ 2,598,705

Others 10,828,753 26,551 519,669 11,374,973 323,002 220,344 10,831,627

Discounts and loans 1,968,578,879 8,385,747 25,749,526 2,002,714,152 7,016,444 14,445,553 1,981,252,155

Provision for Impairment Losses (D) Neither Past Due Past Due But Not Impaired Total Net December 31, 2014 Nor Impaired Impaired With Objective With No Objective (C) (A)+(B)+(C) (A)+(B)+(C)-(D) (A) (B) Evidence of Evidence of Impairment Impairment

Receivables

Credit cards $ 2,431,203 $ 24,752 $ 89,248 $ 2,545,203 $ 45,339 $ 14,181 $ 2,485,683

Others 10,611,364 24,558 453,368 11,089,290 278,219 183,459 10,627,612

Discounts and loans 1,841,768,677 6,661,544 34,696,716 1,883,126,937 9,648,688 12,622,033 1,860,856,216

b) Credit quality analysis of discounts and loans not past due and not impaired

Items December 31, 2015 December 31, 2014

Loans

Secured $ 1,393,174,736 $ 1,293,517,863

Unsecured 575,404,143 548,250,814

Total 1,968,578,879 1,841,768,677

c) Credit quality analysis of securities

Provision for Neither Past Due Past Due But Not Total Net December 31, 2015 Impaired (C) Impairment Losses Nor Impaired (A) Impaired (B) (A)+(B)+(C) (A)+(B)+ (C)-(D) (D)

Available-for-sale financial assets

Debt instruments $ 91,593,863 $ - $ - $ 91,593,863 $ 3,288 $ 91,590,575

Equities 3,975,015 - - 3,975,015 - 3,975,015

Others 319,261 - - 319,261 - 319,261

Held-to-maturity financial assets

Debt instruments 42,106,395 - - 42,106,395 14,802 42,091,593

Others 305,784 - - 305,784 - 305,784

Other financial assets

Debt instruments 84,539,585 - - 84,539,585 - 84,539,585

Equities 4,092,383 - - 4,092,383 - 4,092,383

Others 14,030,137 - - 14,030,137 - 14,030,137 105 106 Financial Information

Provision for Im- Neither Past Due Past Due But Not Total Net December 31, 2014 Impaired (C) pairment Losses Nor Impaired (A) Impaired (B) (A)+(B)+(C) (A)+(B)+ (C)-(D) (D)

Available-for-sale financial assets

Debt instruments $ 66,113,701 $ - $ - $ 66,113,701 $ - $ 66,113,701

Equities 3,507,963 - - 3,507,963 - 3,507,963

Others 152,837 - - 152,837 - 152,837

Held-to-maturity financial assets

Debt instruments 17,613,230 - - 17,613,230 10,198 17,603,032

Others 2,446,547 - - 2,446,547 - 2,446,547

Other financial assets

Debt instruments 84,853,538 - - 84,853,538 3,167 84,850,371

Equities 3,397,849 - 48,769 3,446,618 23,835 3,422,783

Others 34,968,885 - - 34,968,885 - 34,968,885

The processing delays by the borrowers and other December 31, 2014 administrative reasons may cause financial assets Past Due by Item Past Due Up Over 1 Month Total to become past due but not impaired. As defined to 1 Month - 3 Months in the internal rules governing TCB and its subsidiaries' risk management, financial asset that Receivables are past due within 90 days are not deemed as Credit cards $ 19,109 $ 5,643 $ 24,752 impaired, unless there are evidences that indicate Others 13,763 10,795 24,558 impairment. Loans The vintage analysis of financial assets that are Secured 4,819,281 1,332,310 6,151,591 past due but not impaired is as follows: Unsecured 401,927 108,026 509,953 December 31, 2015 Available-for-sale financial assets Past Due by Item Past Due Up Over 1 Month Total Debt instruments - - - to 1 Month - 3 Months Others - - - Receivables Held-to-maturity financial Credit cards $ 22,337 $ 5,643 $ 27,980 assets Others 16,298 10,253 26,551 Debt instruments - - - Loans Others - - - Secured 5,879,070 1,356,697 7,235,767 Other financial assets Unsecured 902,419 247,561 1,149,980 Debt instruments - - - Available-for-sale financial Others - - - assets Debt instruments - - - 3) Market risks Others - - - Market risk refers to the risk of losses in Held-to-maturity financial positions arising from adverse movements assets of market prices. It refers to interest rates, Debt instruments - - - exchange rates, equity security prices, Others - - - commodity prices, etc. Other financial assets The main market risks that TCB and its Debt instruments - - - subsidiaries face are equity security, interest Others - - - rates, and exchange rate risks. The market risk position of equity security mainly 2015 ANNUAL REPORT

includes domestic listed and OTC stocks, TCB and its subsidiaries' business units domestic stock index options and stock and risk management unit have established market index futures; the position of interest market risk factors for identifying risk rate mainly includes short-term bills, bonds exposure positions and use these factors and interest rate derivative instruments; to measure market risks. The market risk and the instruments exposed to exchange factors refer to the components of financial rate risk mainly include spot contracts instruments' position, such as profit and and forward contracts and derivatives loss and sensitivity to risk, which might be denominated in foreign currency. affected by interest rates, exchange rates and equity security market prices. Under the market risk management policies approved by the board of directors, the TCB and its subsidiaries' risk management new Basel Capital Accord and regulations unit reports to management periodically implemented by relevant authorities and the execution status of measures on market in consideration of the Bank's own market risk management, investment positions, and risk management system and its overall risk profit and loss control so that management management goals and product features, can fully understand the status of market TCB and its subsidiaries have set all types risk management. TCB and its subsidiaries' of investment authorization limits and stop- also have cleared reporting procedures loss rules, regularly reviews the customers' and rules for all types of transaction limits credit status and compiles management and the stop-loss order. If any transaction information reports to control all types of amount reaches the limit, the stop-loss order market risks effectively. is executed immediately; if the stop-loss order is not executed, the transaction unit TCB and its subsidiaries' market risk is required to explain the reasons for non- management procedures include risk execution and prepare a response plan for identification, evaluation, measurement, management's approval. monitoring, and reporting. Every units' risk management personnel analyze data TCB applies market risk sensitivity as a risk on market risk position and evaluate control instrument. Market risk sensitivity measurement methods, including the position refers to the change in the value of a statistical basic measurement method, position due to a change in a certain market sensitivity analysis, and situational risk factor. Market risk factors include analysis. Monitoring content includes interest rates, exchange rates, and equity trading processes, collective and individual, security prices. TCB's position sensitivity of all transaction units and all financial exposure trading book contains all types instruments, such as change of position, of positions exposed to market risk and the change of profit and loss, trading pattern, range of change to which sensitivity analysis and if trading objects are transacted within applied under various pressure scenarios for the authorized scope and limits. all types of risk factors.

Assuming all other factors are held constant, the effects of risks within defined change scenarios are shown below: Main Risk Change Scenario December 31, 2015 December 31, 2014 Interest rate curve increased 100 basis points $ ( 25,435 ) $ ( 94,508 ) Interest rate risk Interest rate curve fell 100 basis points 25,524 96,870 USD/NT$, EUR/NT$ increased 3% ( 86,027 ) ( 82,661 ) USD/NT$, EUR/NT$ fell 3% 86,027 82,194 Exchange rate risk Others (RMB, AUD etc.)/NT$ increased 5% ( 18,673 ) 35,485 Others (RMB, AUD etc.)/NT$ fell 5% 18,673 ( 36,846 ) Equity security price increased by 15% 12,369 13,441 Equity security price risk Equity security price fell by 15% ( 12,369 ) ( 13,441 ) 107 108 Financial Information

Average amount and average interest rate of interest-earning assets and interest-bearing liabilities are as follows: Average balance is calculated by the daily average balances of interest-earning assets and interest-bearing liabilities. a) Taiwan Cooperative Bank, Ltd. For the Year Ended December 31 2015 2014 Average Average Average Average Balance Rate (%) Balance Rate (%) Interest-earning assets Due from banks and other financial assets - due from banks $ 32,145,426 2.35 $ 39,147,531 3.68 Due from the Central Bank 602,415,776 0.75 599,027,661 0.77 Call loans to banks 82,635,880 1.17 72,043,662 1.21 Held-for-trading financial assets 31,818,557 0.76 35,488,190 0.74 Financial assets designated as at fair value through profit or loss 140,102 5.99 280,079 6.28 Securities purchased under resell agreements 1,894,914 0.46 1,150,187 0.62 Discounts and loans 1,908,703,823 2.12 1,920,309,106 2.08 Available-for-sale financial assets 79,494,683 1.80 57,435,929 1.64 Held-to-maturity financial assets 31,668,410 1.81 16,489,401 1.82 Debt instruments with no active market 81,837,519 1.79 85,412,305 1.73 Interest-bearing liabilities Due to the Central Bank and other banks 223,584,339 0.40 248,756,371 0.63 Financial liabilities designated as at fair value through profit or loss 9,686,723 4.18 - - Securities sold under repurchase agreements 21,520,863 0.45 25,506,195 0.49 Demand deposits 441,434,653 0.14 398,559,146 0.14 Savings - demand deposits 718,931,183 0.39 681,221,574 0.40 Time deposits 459,583,913 1.18 469,369,599 1.21 Time savings deposits 695,132,173 1.33 715,754,182 1.35 Treasury deposits 73,684,825 0.85 77,410,304 0.81 Negotiable certificates of deposits 1,739,192 0.39 2,063,198 0.39 Structured products 6,623,598 1.39 11,506,151 1.96 Bank debentures 76,956,575 1.56 98,957,589 1.79

b) United Taiwan Bank S.A. For the Year Ended December 31 2015 2014 Average Average Average Average Balance Rate (%) Balance Rate (%) Interest-earning assets Due from banks $ 478,676 - $ 142,752 0.03 Due from the Central Bank 156,856 0.03 136,074 0.08 Call loans to banks 28,446 0.01 5,888 0.66 Discounts and loans 7,478,201 2.22 6,927,579 2.22 Debt instruments with no active market 2,104,437 1.33 2,215,294 2.23 Interest-bearing liabilities Due to the Central Bank and other banks 8,008,106 0.60 6,914,510 1.28 Demand deposits 74,404 - 69,486 - Time deposits 88,023 0.57 101,905 0.51 2015 ANNUAL REPORT

The exchange rate risk of TCB and its December 31, 2014 subsidiaries is as follows: Foreign New Taiwan (In Thousands) Currencies Exchange Rate Dollars December 31, 2015 Financial assets Foreign New Taiwan Currencies Exchange Rate Dollars Monetary items

Financial assets USD $ 8,662,353 31.6700 $ 274,336,710

Monetary items RMB 9,162,316 5.0990 46,718,650

USD $ 9,438,349 32.8800 $ 310,332,926 AUD 479,193 26.0250 12,471,003

RMB 9,443,309 4.9930 47,150,444 JPY 45,043,385 0.2656 11,963,523

EUR 431,528 35.9200 15,500,469 EUR 239,531 38.5400 9,231,482 AUD 627,564 23.9750 15,045,854 HKD 2,143,327 4.0820 8,749,061 JPY 48,863,783 0.2730 13,339,813 ZAR 454,326 2.7400 1,244,852 HKD 1,465,852 4.2420 6,218,146 NZD 23,968 24.8500 595,594 ZAR 972,188 2.1200 2,061,039 GBP 10,415 49.3400 513,878 GBP 28,763 48.7500 1,402,194 CAD 7,878 27.3200 215,235 CAD 27,447 23.7200 651,032 CHF 4,550 32.0450 145,797 NZD 19,499 22.5000 438,733 SGD 2,058 24.0000 49,383 CHF 3,627 33.2350 120,544 SEK 6,309 4.1000 25,868 SGD 2,417 23.2500 56,207 THB 9,566 0.9683 9,262 SEK 4,358 3.9100 17,040

THB 10,234 0.9168 9,383 KHR 538,571 0.0078 4,203

KHR 751,603 0.0081 6,068 PHP 2,030 0.7074 1,436

PHP 2,581 0.7007 1,809 MYR 7 9.0680 64

MYR 7 7.6510 54 Financial liabilities

Financial liabilities Monetary items

Monetary items USD 8,840,908 31.6700 279,991,557

USD 10,105,448 32.8800 332,267,122 RMB 7,539,054 5.0990 38,441,637

RMB 9,190,733 4.9930 45,889,329 AUD 505,968 26.0250 13,167,816 AUD 678,335 23.9750 16,263,088 JPY 30,812,811 0.2656 8,183,883 JPY 32,415,488 0.2730 8,849,428 ZAR 2,400,419 2.7400 6,577,147 GBP 157,243 48.7500 7,665,610 EUR 167,324 38.5400 6,448,640 EUR 186,511 35.9200 6,699,476 HKD 768,642 4.0820 3,137,597 ZAR 2,568,244 2.1200 5,444,677 SEK 569,636 4.1000 2,335,507 HKD 593,004 4.2420 2,515,523 CAD 72,509 27.3200 1,980,933 NZD 85,355 22.5000 1,920,493 GBP 33,545 49.3400 1,655,112 CAD 69,632 23.7200 1,651,680 NZD 49,455 24.8500 1,228,962 CHF 5,251 33.2350 174,523 SGD 6,124 23.2500 142,383 SGD 5,415 24.0000 129,971 SEK 14,172 3.9100 55,413 CHF 3,464 32.0450 111,001 THB 11,050 0.9168 10,131 THB 8,812 0.9683 8,532 PHP 133 0.7007 93 PHP 1,111 0.7074 786

KHR 2,885 0.0081 23 KHR 2,883 0.0078 22

MYR - 7.6510 3 MYR - 9.0680 3 109 110 Financial Information

4) Liquidity risk The risk management department regularly generates risk reports, which include the Liquidity risk is inherent in all bank liquidity reserve ratios and the maturity operations and might be affected by specific analysis of instruments and transactions or general industry and environmental denominated in major foreign currencies, events. These events include credit-related and submits them to the Asset and Liability events, mergers or acquisitions, systemic Management Committee and the Board as changes and natural disasters. TCB and reference for decision making. its subsidiaries define liquidity risk as the inability to realize assets or to obtain TCB stipulates liquidity risk limits, which financing for meeting obligations when they are regularly monitored and reviewed by the fall due, resulting in loss. risk management department. If a liquidity risk limit is exceeded or other exception The liquidity risk management strategy situations occur, the business supervising is based on the overall risk management unit immediately develops appropriate objectives and involves liquidity risk, contingency measures and submits them identification, measurement, monitoring to the Asset and Liability Management and control to maintain TCB's appropriate Committee for approval and implementation. liquidity and ensure adequate funding for meeting liability obligations or for capital TCB contingency measures for business growth. emergency or sudden liquidity crisis are aimed at quick crisis resolution and The liquidity risk management procedures resumption of normal operations. cover all types of businesses and business activities and should financing products. TCB's liquidity reserve ratios were 23.48% in December 2015 and 20.44% in December For adequate liquidity for all types of 2014. deposits, TCB follows the relevant regulations issued by the Central Bank to The Company disclosed the analysis of estimate the liquidity reserves and calculates cash outflows on non-derivative financial and controls daily the liquidity reserve liabilities by their residual maturities as of ratios. the balance sheet dates. The amounts of cash outflows are based on contractual cash For TCB's operating liquidity, the fund flows, so some amounts may not correspond disbursement unit performs daily cash flow to those shown in the consolidated balance management and monitoring of the payments sheets. schedule on the basis of detailed reports by different departments and relevant rules.

December 31, 2015 0-30 Days 31-90 Days 91-180 Days 181 Days -1 Year Over 1 Year Total Due to the Central Bank and other banks $ 129,943,568 $ 61,620,412 $ 499,880 $ 8,181,954 $ - $ 200,245,814 Financial liabilities at fair value through profit or loss - - - - 13,152,000 13,152,000 Securities sold under repurchase agreements 11,324,769 4,138,888 1,961,817 27,006 - 17,452,480 Payables 26,641,525 1,250,741 3,724,904 1,642,602 1,574,763 34,834,535 Deposits and remittances 238,906,777 349,548,292 356,297,049 608,264,851 951,494,918 2,504,511,887 Bank debentures - - - - 69,610,000 69,610,000 Other items of cash outflow on maturity 6,944,010 51,121 28,891 76,156 609,190 7,709,368

December 31, 2014 0-30 Days 31-90 Days 91-180 Days 181 Days - 1 Year Over 1 Year Total Due to the Central Bank and other banks $ 101,945,027 $ 49,770,769 $ 15,298,404 $ 10,006,496 $ - $ 177,020,696 Securities sold under repurchase agreements 17,825,644 3,208,667 2,143,891 1,503 - 23,179,705 Payables 32,602,250 1,451,036 4,148,507 2,360,923 676,658 41,239,374 Deposits and remittances 239,241,979 343,567,766 333,392,499 605,650,196 875,424,031 2,397,276,471 Bank debentures - 4,000,000 18,500,000 - 69,610,000 92,110,000 Other items of cash outflow on maturity 7,549,966 690,785 34,799 81,459 704,058 9,061,067 2015 ANNUAL REPORT

In the above table, the maturity analysis TCB and its subsidiaries assess the maturity of deposits and remittances by residual- dates of contracts to understand the maturity period was based on TCB and basic elements of all derivative financial its subsidiaries' historical experience. instruments shown in the balance sheets. Assuming that all demand deposits as of The amounts used in the maturity analyses December 31, 2015 and 2014 must be of derivative financial liabilities are based repaid soon, the capital expenditure will on contractual cash flows, so some of these be increased by $1,265,775,142 thousand amounts may not correspond to the amounts and $1,159,478,601 thousand, respectively, shown in the consolidated balance sheets. within 30 days these balance sheet dates. The maturity analysis of derivative financial liabilities is as follows:

a) Derivative financial liabilities to be settled at net amounts December 31, 2015 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Total Derivative financial liabilities at fair value through profit or loss Currency $ 1,452 $ 3,668 $ 2,279 $ 1,360 $ - $ 8,759 Interest ( 2,141 ) ( 435 ) ( 2,810 ) ( 4,510 ) ( 11,384 ) ( 21,280 )

December 31, 2014 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Total Derivative financial liabilities at fair value through profit or loss Currency $ 30,182 $ 17,701 $ 49,514 $ 110,225 $ 4,700 $ 212,322 Interest ( 2,593 ) ( 543 ) ( 4,292 ) ( 3,424 ) 43,697 32,845

b) Derivative financial liabilities to be settled at gross amounts December 31, 2015 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Total Derivative financial liabilities at fair value through profit or loss Currency derivatives Cash outflow $ 121,940,698 $ 61,218,639 $ 8,332,811 $ 6,721,102 $ 139,693 $ 198,352,943 Cash inflow 122,438,787 61,450,896 8,404,151 6,782,455 139,717 199,216,006 Interest derivatives Cash outflow 136,070 1,887,838 1,394,754 140,160 851,454 4,410,276 Cash inflow 136,452 1,754,559 1,321,384 136,070 1,026,649 4,375,114 Total cash outflow 122,076,768 63,106,477 9,727,565 6,861,262 991,147 202,763,219 Total cash inflow 122,575,239 63,205,455 9,725,535 6,918,525 1,166,366 203,591,120 Net cash flow 498,471 98,978 ( 2,030 ) 57,263 175,219 827,901

December 31, 2014 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Total Derivative financial liabilities at fair value through profit or loss Currency derivatives Cash outflow $ 99,402,667 $ 68,577,981 $ 55,598,467 $ 23,656,876 $ 1,696,359 $ 248,932,350 Cash inflow 145,125,350 50,949,366 26,825,975 17,301,318 2,349,112 242,551,121 Interest derivatives Cash outflow 332,525 1,183,200 106,693 20,866,476 3,109,322 25,598,216 Cash inflow 332,628 1,184,847 106,906 20,875,704 3,109,339 25,609,424 Total cash outflow 99,735,192 69,761,181 55,705,160 44,523,352 4,805,681 274,530,566 Total cash inflow 145,457,978 52,134,213 26,932,881 38,177,022 5,458,451 268,160,545 Net cash flow 45,722,786 ( 17,626,968 ) ( 28,772,279 ) ( 6,346,330 ) 652,770 ( 6,370,021 ) 111 112 Financial Information

TCB and its subsidiaries conducted maturity analysis of off-balance sheet items based on the residual maturities as of the balance sheet dates. For the financial guarantee contracts issued, the maximum amounts of the guarantees are included in the earliest periods that the guarantee obligation might have been required to be fulfilled. The amounts used in the maturity analysis of off-balance sheet items are based on contractual cash flows, so some of these amounts may not correspond to those shown in the balance sheets.

December 31, 2015 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Total

Irrevocable loan commitments issued $ 1,175,415 $ 6,237,551 $ 7,763,379 $ 11,348,130 $ 74,813,055 $ 101,337,530

Irrevocable credit card commitments 13,900 128,504 755,729 1,347,700 35,422,165 37,667,998

Letters of credit issued yet unused 4,430,340 8,766,697 2,230,412 483,024 1,455,177 17,365,650

Other guarantees 3,023,999 6,402,251 6,562,665 9,228,210 50,629,322 75,846,447

December 31, 2014 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Total

Irrevocable loan commitments issued $ 1,380,298 $ 4,522,267 $ 10,127,928 $ 6,081,353 $ 65,122,822 $ 87,234,668

Irrevocable credit card commitments 46,720 373,476 400,932 1,994,668 33,408,962 36,224,758

Letters of credit issued yet unused 4,688,231 10,902,026 3,070,995 1,851,105 1,394,985 21,907,342

Other guarantees 5,501,045 7,439,428 5,155,563 6,263,807 47,775,724 72,135,567

BNP Paribas Cardif TCB Life Insurance Co., commodity prices, which may cause a Ltd. (BPCTLI) gain or loss on or off the balance sheet. Financial risk arises when future cash flows b) Market risk strategy and procedures generated from financial assets are insufficient BPCTLI has established management to pay insurance and investment contracts. policies and market risk limits to monitor BPCTLI has already set up a risk management the market risk and tolerable losses. mechanism and control system that can effectively identify, measure, respond to, and BPCTLI monitors the limit management monitor the level of risk BPCTLI is exposed to, of financial instruments and the including market risk, credit risk, liquidity risk, implementation of sensitivity analysis, etc. stress testing and risk calculation. For management's decision making, the risk BPCTLI uses derivatives, such as cross- management department periodically currency swaps and foreign exchange swaps, to reports to the board of directors and the manage its exposures on foreign investments. Risk Management Committee. The management of BPCTLI effectively monitors and controls several risks. Control In line with hedging against interest rate strategies implemented by BPCTLI are as risk, the investment selection includes follows: an assessment of the financial instrument issuers' credit and financial condition, 1) Market risk the investing countries' risk condition a) Market risk source and market risk and interest rate movements. If a foreign factors currency risk pertains to overseas investments, BPCTLI uses cross- Market risk results from the fluctuation currency swaps and foreign exchange in the fair values of financial instruments swaps for each overseas investment and or future cash due to the market price periodically measures the efficiency of changes. The risk factors causing these swaps. BPCTLI has investment market price changes include interest limits and stop-loss order to control rates, exchange rates, stock prices and equity risk. 2015 ANNUAL REPORT

c) Market risk management framework iii) Foreign currency risk To quantify the possible loss resulting Foreign currency risk arises from the price fluctuations of BPCTLI when a financial asset or liability assets, BPCTLI control market risk is denominated in a currency through calculating value-at-risk (VaR) different from the BPCTLI's base regularly, combining with back testing, currency. This risk mainly refers to sensitivity analysis method and stress nonmonetary financial assets and testing. liabilities. d) Market risk measurement BPCTLI's overseas financial instruments were primarily exposed i. VaR (value at risk) to the U.S. dollar. Assuming all VaR measures “the worst expected other factors had been held constant, loss over a target horizon with a given no hedging had been involved, and level of confidence and normal market had the U.S. dollar decreased 1% for environment.” BPCTLI's worst expected the years ended December 31, 2015 losses for two weeks with a 99% and 2014, the income before income confidence level were $503,473 thousand tax would have decreased $189,257 and $468,933 thousand as of December thousand and $162,183 thousand, 31, 2015 and 2014, respectively. respectively. ii. Sensitivity analysis The table below shows the carrying value of financial assets and liabilities i) Interest rate risk denominated in foreign currency as Interest rate risk refers to the of December 31, 2015 and 2014. impact of interest rate changes December 31, 2015 on an investment portfolio value or investment gain or loss. The Foreign Exchange New Taiwan Currencies Rate Dollars investment instruments exposed to interest rate risk are mainly bonds Financial assets and derivative financial assets. Savings accounts

Assuming all other indicators had USD $ 11,160 32.89 $ 367,068 been held constant and had the AUD 1,704 23.99 40,877 interest rate increased by 1% as of December 31, 2015 and 2014 the fair EUR 96 35.90 3,463 values of financial assets would have Receivables decreased by $20,491 thousand and $21,494 thousand, respectively. USD 6,046 32.89 198,842 RMB 2,832 4.99 14,132 ii) Equity risk Available-for-sale Equity risk is the risk that the market financial assets value of a stock investment will fall USD 288,921 32.89 9,502,601 because of negative stock market movements. RMB 29,716 4.99 148,283 Assuming all other indicators had Debt investments with no been held constant and based on active market the asset condition of BPCTLI on USD 256,847 32.89 8,447,713 December 31, 2015 and 2014, had RMB 239,998 4.99 1,197,591 the TAIEX fallen 1%, the fair value of the equity assets would have Refundable deposits decreased by $21,220 thousand and USD 12,450 32.89 409,480 $27,853 thousand, respectively. 113 114 Financial Information

December 31, 2014 perform contractual obligations. The

Foreign New Taiwan credit exposure primarily refers to Currencies Exchange Rate Dollars investments in debt and derivative instruments. Financial assets

Savings accounts b) Credit risk strategy and procedures

USD $ 6,505 31.61 $ 205,600 BPCTLI controls credit risk as follows:

AUD 857 25.94 22,222 i. Investment credit limit and the control of concentration of credit risk EUR 111 38.44 4,260

Receivables The investment department complies with insurance laws and applicable USD 5,279 31.61 166,845 regulations, follows company credit RMB 1,624 5.08 8,257 limits and investment management policies for every type of investment Available-for-sale financial assets product, and reviews the appropriateness of investment transactions to lower USD 349,446 31.61 11,044,231 the concentration of risks. After the RMB - 5.08 - completion of each transaction, the

Debt investments with no risk management department regularly active market monitors the credit risk and reports the exposure to various credit limits in each USD 148,247 31.61 4,685,355 committee meeting. RMB 209,998 5.08 1,067,629 ii. Stress testing Refundable deposits Using the scenario from the Insurance USD 3,680 31.61 116,306 Bureau, BPCTLI periodically tests the impact on financial asset income and loss iii. Stress testing of the concentration of credit risk and If an extreme event or systematic risk credit default ratio. occurs, stress testing is done to measure iii. Credit risk reduction policy the potential impact of a negative development on trading book portfolio If a bond is downgraded below the during an abnormal market period. authorized minimum rating, the investment department will assess the BPCTLI does stress testing by analyzing impact caused and decide whether or not market risk stress testing and different to dispose of the assets. When a decision stress testing scenarios from Bloomberg. is reached not to dispose of the assets, the Assuming the Lehman crisis in 2008 investment department should provide reoccurred as of December 31, 2015 and the investment withdrawal committee 2014, the losses on financial assets would a sufficient reason for its decision. If have been $1,971,268 thousand and approval by the investment withdrawal $1,628,353 thousand, respectively. Also committee is not given within two assuming the Japan earthquake on March months of the proposed asset disposal, 11, 2011 reoccurred as of December 31, the assets are disposed of immediately by 2015 and 2014, the loss on financial assets the investment department. would have been $289,939 thousand and Some financial assets such as cash $247,517 thousand, respectively. and cash equivalents, financial assets 2) Credit risk at fair value through profit or loss and refundable deposits are regarded as a) Credit risk definition and classifications having very low credit risk because of Credit risk refers to the risks that debtors' the good credit ratings of counterparties. credit is downgraded or the counterparty The credit analysis of other financial cannot make payments or refuses to assets is as follows: 2015 ANNUAL REPORT

iv. Credit analysis for bonds c) Maturity analysis December 31, 2015 i. For the liquidity risk management of Carrying financial assets' and non-derivative Amount Fair Value % instruments' maturity analysis Domestic investment - government bonds (Note 1) $ 23,385,286 $ 23,385,286 54 To ensure that it has sufficient cash on Domestic investment - hand for liability payments and asset corporate bonds (twAAA - purchases, BPCTLI can use unrestricted twAA) 399,957 406,048 1 cash, consisting of financial institution Overseas investment - deposits, certificate deposits (including corporate bonds (Aa2 - A2) 12,834,215 12,931,069 30 conditional bonds), quasi-foreign Overseas investment - currency mutual funds, etc. corporate bonds (A3) 3,903,283 3,922,062 9 Overseas investment - ii. Maturity analysis of derivatives corporate bonds (Baa2 - Ba1) 2,558,690 2,556,565 6 The following table shows BPCTLI's $ 43,081,431 $ 43,201,030 100 liquidity analysis of its derivative financial instruments. The table was December 31, 2014 based on the undiscounted contractual net Carrying cash inflows and outflows on derivative Amount Fair Value % instruments that settle on a net basis. Domestic investment - When the amount payable or receivable government bonds (Note 1) $ 28,949,785 $ 28,949,785 63 is not fixed, the amount disclosed has Domestic investment - been determined by reference to the corporate bonds (twAA - twAAA) 399,948 400,520 1 projected interest rates as illustrated by yield curves at the end of the reporting Overseas investment - corporate bonds (A2 - Aa3) 11,600,423 11,672,786 25 period. Overseas investment - December 31, 2015 corporate bonds (A3) 4,146,352 4,183,326 9 Within 1 Year to 3 3 Years to 5 Over Five Overseas investment - One Year Years Years Years corporate bonds (Baa1) 1,050,440 1,015,229 2 Net settled $ 46,146,948 $ 46,221,646 100 Cross-currency swap contracts $ ( 191,899 ) $ ( 225,351 ) $ - $ - Note 1: The above domestic government bonds include other assets - operating deposits. Currency swap Note 2: The sources of credit ratings are Taiwan Ratings Corp. and Moody's Investors contracts ( 554,934 ) - - - Service, Inc. $ ( 746,833 ) $ ( 225,351 ) $ - $ -

3) Liquidity risk December 31, 2014 a) Source and definition of liquidity risk Within 1 Year to 3 3 Years to 5 Over Five One Year Years Years Years Liquidity risk means BPCTLI cannot Net settled provide sufficient funding for asset size Cross-currency swap growth and for meeting obligations on contracts $ ( 310,641 ) $ ( 239,335 ) $ ( 34,733 ) $ - matured liabilities. Currency swap b) Liquidity risk management strategy and contracts ( 142,810 ) ( 62,506 ) - - principles $ ( 453,451 ) $ ( 301,841 ) $ ( 34,733 ) $ -

BPCTLI does annual and monthly cash g. Insurance contracts flow analysis based on its budgets, makes daily cash estimates, and reviews the To pursue a sustainable development, to flow of funds to ensure the accuracy and protect the interests of the policyholders and to timeliness of liquidity risk management. ensure that capital is adequate for fulfilling its BPCTLI's liquidity risk is reviewed by repayment obligations, BPCTLI has formed risk the Asset Liability Committee quarterly management policies, set up a risk management and by the Investment Committee, committee under the board of directors and monthly. a risk management department, which is 115 116 Financial Information

independent from its operation departments, in The exposure to insurance risk is influenced accordance with the Risk Management Practice by the policyholders' behavior, such as Manual for Insurance Industry and practice reducing insurance coverage in the future, guideline No. 09802512072 issued by the stopping paying insurance premium or Taiwan Financial Supervisory Commission on terminating the insurance contract. December 31, 2009. BPCTLI spreads out its insurance risk The risk management program and procedure by developing appropriate policy pricing are summarized as follows: and underwriting strategies and acquiring a sufficient number of policyholders in 1) Insurance risk management and measurement each risk range so that the variances in the Insurance risk refers to the possibility of average amounts of claim payments decrease BPCTLI's not having sufficient assets to as the number of claims increases. For meet future obligations on an insured event. added safety, BPCTLI manages its insurance The risk on an insurance contract is random risks through issuing a large number of and is thus unpredictable. mixed policies and obtaining reinsurance against natural disasters with reinsurance BPCTLI's risk exposures involve mortality, companies to avoid large claims. morbidity, withdrawal rates, interest rates and fee rates, as well as the uncertainty 2) Concentration of insurance risk and the of the returns on insurance premium development of claims investments. Based on the nature of an BPCTLI sells its products all over Taiwan insurance contract, the occurrence of a and has no concentration of credit risk in a covered event, the uncertainty of the amount particular geographic region, clientele, age, and the timing are the inherent risks. For or profession. To prevent the accumulated life, injury or health insurance, underwriting risk from going beyond what BPCTLI risks include mortality, accident or can tolerate, BPCTLI has evaluated the morbidity. The significant insurance liability insurance risk associated with each product risks are the frequency and severity of and obtained reinsurance against natural the accident covered by the insurance and disasters with reinsurance companies to the actual liability payment exceeding the avoid the risk of large claims. expected liability payment. BPCTLI is also exposed to loss from natural and man-made The following table shows the development disasters, and the frequency and severity of of claims (the cases within one year are and loss on these disasters are unpredictable. not included), and it explains how BPCTLI The risks on annuity insurance contracts evaluates claims through development pertain to the constantly improving health ages. The circumstance and development care in society, which helps extend people's of reserve claims may change in the life span. future. Thus, actual future claims cannot be determined just by using the following tables.

a) Development of direct business loss Development Ages Claim 1 2 3 4 5 6 Reserve 2010 $ 3 $ 35 $ 35 $ 35 $ 35 $ 35 $ - 2011 4,170 7,263 7,786 7,854 7,854 7,854 - 2012 12,366 20,155 21,177 21,070 21,070 21,070 - 2013 19,586 27,531 27,762 27,862 27,862 27,862 100 2014 25,862 28,357 29,357 29,468 29,468 29,468 1,111 2015 35,899 54,631 57,473 57,620 57,620 57,620 21,721 Incurred but not reported 22,932 Reported but not paid 8,531 Balance of claim reserve $ 31,463 2015 ANNUAL REPORT

b) Development of retained business Development Ages Claim 1 2 3 4 5 6 Reserve

2010 $ 3 $ 35 $ 35 $ 35 $ 35 $ 35 $ -

2011 4,170 7,263 7,786 7,854 7,854 7,854 -

2012 10,307 18,108 19,129 19,023 19,023 19,023 -

2013 19,497 26,841 27,071 27,171 27,171 27,171 100

2014 25,174 27,659 28,599 28,711 28,711 28,711 1,052

2015 31,538 44,450 46,416 46,561 46,561 46,561 15,023

Incurred but not reported 16,175

Reported but not paid 5,115

Balance of claim reserve $ 21,290

3) Sensitivity analysis of insurance risk December 31, 2014 Based on relevant insurance laws and Impact on regulations, when calculating the liability Changes in the Income Before Impact on reserve, assumptions used at the time of Assumptions Income Tax Equity purchase are locked in, but such assumptions Discount rate 0.25% $ 86,033 $ 71,407 may change as time passes. According to IFRS 4 “Insurance Contracts,” a liability Discount rate ( 0.25% ) ( 86,225 ) ( 71,567 ) adequacy test is needed to determine whether BPCTLI has sufficient insurance Mortality rate 10.00% ( 13,911 ) ( 11,546 )

liability. BPCTLI performed a sensitivity Mortality rate ( 10.00% ) 13,910 11,545 analysis with changes in the assumptions on death rate, illness rate, and withdrawal rate. Withdrawal rate 30.00% ( 825 ) ( 685 ) The results are as follows: Withdrawal rate ( 30.00% ) ( 902 ) ( 749 ) Insurance contracts and investment contracts with a discretionary participation feature Illness rate/loss rate 15.00% ( 10,496 ) ( 8,712 )

December 31, 2015 Expense rate 10.00% ( 49,696 ) ( 41,247 )

Note 1: After-tax balances were used to calculate the equity. Impact on Note 2: The result is non-linear and is limited to changes in the assumptions presented Changes in the Income Before Impact on Assumptions Income Tax Equity above. Note 3: Changes in the assumptions presented above are scenarios and the range of Discount rate 0.25% $ 73,972 $ 61,397 change may be interrelated. Note 4: The sensitivity analysis does not consider market changes that have an impact Discount rate ( 0.25% ) ( 74,137 ) ( 61,534 ) on the operation (e.g., buy/sell asset positions, changes in the allocation of assets, adjustments in the declared interest rate of the policy, etc.).

Mortality rate 10.00% ( 11,622 ) ( 9,638 ) 4) Credit risk, liquidity risk, and market risk Mortality rate ( 10.00% ) 11,622 9,638 a) Market risk Withdrawal rate 30.00% 424 352 Under the Regulations Governing the Reserves by Insurance Enterprises and Withdrawal rate ( 30.00% ) ( 2,288 ) ( 1,899 ) relevant laws and regulations, BPCTLI Illness rate/loss rate 15.00% ( 10,155 ) ( 8,429 ) calculates reserves at the assumed interest rate and risk occurrence rate Expense rate 10.00% ( 56,689 ) ( 47,052 ) set by the supervisory authorities. The expected rates are tied to the policy before sale. These rates are not affected by market rate changes since the long- 117 118 Financial Information

term trend rate set by the authorities has taken into consideration the assumed interest and the related timing, amount and direction. Based on IFRS 4, if the liability adequacy test is insufficient, BPCTLI should accrue the shortage as reserve for liability adequacy. The reserve for liability adequacy is not affected by market rate changes. BPTCLI believes that the supervisory authorities would not soon change the calculation of life policy reserve from the fixed interest rate to float interest rate and that market risks would not significantly affect profit and loss. b) Credit risk BPCTLI has reinsurance on the insurance products it sells. BPCTLI evaluates the creditworthiness of the related reinsurance companies for any impairment. c) Liquidity risk BPCTLI predicts the future cash flows of assets and liabilities through an asset-liability matching model to ensure there are enough cash flows to cover a predicted liability obligation. Under related laws and regulations, the individual face values of BPCTLI's insurance policies are all greater than their surrender value. Thus, the liquidity risks on agreement cancellations would not be significant. In addition, under the materiality principle, if a policyholder cancels its coverage, BPCTLI will not disclose the cash flow maturity analysis in its financial statements if the coverage amount is not significant. h. Transfers of financial assets Under the Company operations, most of derecognized financial assets are securities sold under repurchase agreements, and the contractual cash flows have been transferred to others. The Company has the responsibility to repurchase transferred financial assets at fixed prices, and can not use, sell and pledge transferred financial assets. However, the Company is still in the risk exposure of interest rate and credit, so the transferred financial assets can not be removed entirely. The information on derecognized financial assets and liabilities is as follows:

December 31, 2015 Carrying Carrying Amount Fair Value of Fair Value of Amount of Net Position of Fair Financial Assets of Transferred Transferred Related Financial Related Financial Value Financial Assets Financial Assets Liabilities Liabilities Financial assets at FVTPL - securities sold under repurchase agreements $ 23,189,614 $ 23,168,529 $ 23,189,614 $ 23,168,529 $ 21,085 Available-for-sale financial assets - securities sold under repurchase agreements 25,513,538 26,092,702 25,513,538 26,092,702 ( 579,164 ) Held-to-maturity financial assets - securities sold under repurchase agreements 1,883,182 1,880,000 1,913,869 1,880,000 33,869

i. Offsetting financial assets and financial liabilities The Company is eligible to present in the balance sheet on a net basis certain derivative assets and derivative liabilities pertaining to transactions with counterparties under enforceable master netting arrangements or similar agreements and there is an intention either to make settlements on a net basis or to realize the asset and settle the liability simultaneously. A master netting agreement provides for a single net settlement of all financial instruments covered by the agreement if the counterparty defaults on any contract. Parties may also settle transactions at gross amounts if a single settlement results in cash flows being equivalent to a single net amount. The tables below present the quantitative information on financial assets and financial liabilities that have been offset in the balance sheet or that are covered by enforceable master netting arrangements or similar agreements. 2015 ANNUAL REPORT

December 31, 2015 Gross Amounts of Related Amounts Not Offset in the Recognized Financial Net Amounts of Balance Sheet Gross Amounts of Liabilities Financial Assets Recognized Offset in the Balance Presented in Cash Collateral Financial Assets Financial Assets Sheet the Balance Sheet Financial Instruments Received Net Amount

Resell agreements $ 1,346,831 $ - $ 1,346,831 $ ( 1,346,844 ) $ - $ ( 13 )

Related Amounts Not Offset in the Balance Gross Amounts of Net Amounts of Sheet Gross Amounts of Recognized Financial Financial Liabilities Recognized Assets Offset Presented in Cash Collateral Financial Liabilities Financial Liabilities in the Balance Sheet the Balance Sheet Financial Instruments Pledged Net Amount

Repurchase agreements $ 51,141,231 $ - $ 51,141,231 $ ( 50,367,675 ) $ - $ 773,556

December 31, 2014

Gross Amounts of Related Amounts Not Offset in the Balance Recognized Financial Net Amounts of Sheet Gross Amounts of Liabilities Financial Assets Recognized Offset in the Balance Presented in Cash Collateral Financial Assets Financial Assets Sheet the Balance Sheet Financial Instruments Received Net Amount

Resell agreements $ 2,322,745 $ - $ 2,322,745 $ ( 2,322,745 ) $ - $ -

Repurchase agreements $ 46,390,229 $ - $ 46,390,229 $ ( 44,186,416 ) $ - $ 2,203,813

42. CAPITAL MANAGEMENT To monitor capital adequacy, the risk management department regularly reports capital adequacy ratios every month and also quarterly reviews the execution status of and actual operation data variation on the Company's capital adequacy evaluation plan. When the actual capital adequacy ratio might go lower than the target, the Company immediately reviews the causes, prepares a report and proposes a response strategy to maintain the appropriate capital adequacy levels. Under the Financial Holding Company Act and related regulations, TCFHC should maintain a consolidated capital adequacy ratio (CAR) of at least 100%. If the ratio falls below 100%, the appropriation of earnings as cash dividends or other assets will be restricted and the authorities may discipline TCFHC, depending on the situation. The Banking Law and related regulations require that the Bank maintain the minimum requirement for unconsolidated and consolidated capital adequacy ratios (CAR), including the common equity Tier 1 ratio, Tier 1 capital ratio, and total capital adequacy ratio. The Act Governing Bills Finance Business and related regulations require that the bills finance business maintain CARs at a minimum of 8%. The CARs of TCBF were 15.76% and 16.44% as of December 31, 2015 and 2014, respectively. Under the rules governing securities firms and related regulations, the CAR of a securities firm should be at least 150% to ensure its stability as well as maintain the health of the security markets. If the ratio is below 150%, the authority may impose certain restrictions on a firm's operations. The CAR of TCS was 691% and 758% as of December 31, 2015 and 2014, respectively. The Law of Insurance and related regulations require that the insurance business maintain CARs at a minimum of 200%. The CARs of BPCTLI were 887.02% and 695.92% as of December 31, 2015 and 2014, respectively. Please refer to related information in Table 2 (attached). 119 120 Financial Information

43. TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES' ASSET QUALITY, CONCENTRATION OF CREDIT EXTENSIONS, INTEREST RATE SENSITIVITY, PROFITABILITY AND MATURITY ANALYSIS OF ASSETS AND LIABILITIES a. Asset quality of Taiwan Cooperative Bank, Ltd.: Table 3 (attached). b. Concentration of credit extensions 1) Taiwan Cooperative Bank, Ltd. (TCB) (In Thousands of New Taiwan Dollars, %)

December 31, 2015 December 31, 2014 Rank Total Amount of Credit Total Amount of Credit Industry of Group Enterprise Percentage of Industry of Group Enterprise Percentage of (Note 1) Endorsement or Other Endorsement or Other (Note 2) TCB's Equity (Note 2) TCB's Equity Transactions (Note 3) Transactions (Note 3) Group A Group A 1 $ 52,676,426 28.82 $ 53,351,408 35.49 Railway transportation Railway transportation Group B Group B 2 Petroleum and coal products 23,325,210 12.76 Petroleum and coal products 23,745,035 15.80 manufacturing manufacturing Group C Group C 3 21,666,561 11.86 20,471,293 13.62 Harbor services Harbor services Group D Computers and computing Group F 4 13,234,917 7.24 12,544,042 8.35 peripheral equipment Cotton and textile manufacturing Group E Group E 5 11,241,157 6.15 11,536,425 7.68 Shipping agency Shipping agency Group I Group F Other electronic parts and 6 10,795,986 5.91 10,255,611 6.82 Cotton and textile components manufacturing not classified elsewhere Group G Group G 7 Liquid crystal panel and component 9,763,984 5.34 Liquid crystal panel and component 10,244,921 6.82 manufacturing manufacturing Group H Group K 8 8,991,608 4.92 9,720,061 6.47 Cotton and textile Cement manufacturing Group I Other electronic parts and Group L 9 8,856,290 4.85 8,767,179 5.83 components manufacturing not Harbor services classified elsewhere Group J Group M 10 6,177,585 3.38 8,109,260 5.40 Iron and steel smelting Iron and steel smelting 2015 ANNUAL REPORT

2) Taiwan Cooperative Bills Finance Corporation Ltd. (TCBF) (In Thousands of New Taiwan Dollars, %) December 31, 2015 December 31, 2014 Rank Total Amount of Credit Percentage Total Amount of Credit Percentage Industry of Group Enterprise Industry of Group Enterprise (Note 1) Endorsement or Other of TCBF’s Endorsement or Other of TCBF’s (Note 2) (Note 2) Transactions (Note 3) Equity Transactions (Note 3) Equity Group A Group C 1 Other financial intermediation not $ 960,000 19.59 $ 700,000 15.63 Shipping agency elsewhere classified Group B Group H 2 750,000 15.30 680,000 15.18 Aluminum refinery manufacturing Catering industry Group G Group C 3 700,000 14.28 Other financial intermediation not 645,000 14.40 Shipping agency elsewhere classified Group D Group F 4 670,000 13.67 600,000 13.39 Real estate development Real estate development Group E Group K 5 Wholesale of motor vehicles and 600,000 12.24 518,000 11.56 Manmade fiber manufacturing motorcycles parts and accessories Group F Group B 6 537,000 10.96 500,000 11.16 Real estate development Aluminum refinery manufacturing Group G Group E 7 Other financial intermediation not 485,000 9.90 Wholesale of motor vehicles and 500,000 11.16 elsewhere classified motorcycles parts and accessories Group L Group H 8 480,000 9.79 Renting and leasing of motor 480,000 10.72 Catering industry vehicles Group I Group M 9 480,000 9.79 430,000 9.60 Real estate development Financial leasing Group J Group I 10 469,000 9.57 415,000 9.26 Real estate development Real estate development

Note 1: The list shows rankings by total amount of credit, endorsement or other transactions but excludes government-owned or state-run enterprises. If the borrower is a member of a group enterprise, the total amount of credit, endorsement or other transactions of the entire group enterprise must be listed and disclosed by code and line of industry. The industry of the group enterprise should be presented as the industry of the member firm with the highest risk exposure. The lines of industry should be described in accordance with the Standard Industrial Classification System of the Republic of China published by the Directorate-General of Budget, Accounting and Statistics under the Executive Yuan. Note 2: Group enterprise refers to a group of corporate entities as defined by Article 6 of “Supplementary Provisions to the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings.” Note 3: Total amount of credit, endorsement or other transactions is the sum of various loans (including import and export negotiations, discounts, overdrafts, unsecured and secured short- term loans, margin loans receivable, unsecured and secured medium-term loans, unsecured and secured long-term loans and overdue loans), exchange bills negotiated, accounts receivable factored without recourse, acceptances and guarantees.

c. Interest rate sensitivity information Interest Rate Sensitivity 1) Taiwan Cooperative Bank, Ltd. December 31, 2014 (In Thousands of New Taiwan Dollars, %) Interest Rate Sensitivity 181 Days to Items 1 to 90 Days 91 to 180 Days Over One Year Total December 31, 2015 One Year (In Thousands of New Taiwan Dollars, %) Interest rate-sensitive 181 Days to assets $ 2,135,164,538 $ 73,465,284 $ 11,949,803 $ 145,431,870 $ 2,366,011,495 Items 1 to 90 Days 91 to 180 Days Over One Year Total One Year Interest rate-sensitive Interest rate-sensitive liabilities 947,553,098 1,122,120,375 119,175,955 50,439,303 2,239,288,731 assets $ 2,224,055,786 $ 87,672,073 $ 11,322,931 $ 159,928,135 $ 2,482,978,925 Interest rate Interest rate-sensitive sensitivity gap 1,187,611,440 ( 1,048,655,091) ( 107,226,152) 94,992,567 126,722,764 liabilities 909,691,528 1,199,678,568 122,411,693 52,746,552 2,284,528,341 Net worth 138,104,503 Interest rate sensitivity gap 1,314,364,258 ( 1,112,006,495 ) ( 111,088,762 ) 107,181,583 198,450,584 Ratio of interest rate-sensitive assets to liabilities 105.66 Net worth 172,638,090 Ratio of interest rate sensitivity gap to net worth 91.76 Ratio of interest rate-sensitive assets to liabilities 108.69 Note 1: The above amounts included only New Taiwan dollar amounts held by the head office and branches of the Bank (i.e., excluding foreign currency). Ratio of interest rate sensitivity gap to net worth 114.95 Note 2: Interest rate-sensitive assets and liabilities refer to interest-earning assets and interest-bearing liabilities with revenues or costs that are affected by interest rate changes. Note 3: Interest rate sensitivity gap = Interest rate-sensitive assets - Interest rate- sensitive liabilities. Note 4: Ratio of interest rate-sensitive assets to liabilities = Interest rate-sensitive assets/Interest rate-sensitive liabilities (in New Taiwan dollars). 121 122 Financial Information

Interest Rate Sensitivity Interest Rate Sensitivity December 31, 2015 December 31, 2014 (In Thousands of U.S. Dollars, %) (In Thousands of U.S. Dollars, %) 181 Days to 181 Days to Items 1 to 90 Days 91 to 180 Days Over One Year Total Items 1 to 90 Days 91 to 180 Days Over One Year Total One Year One Year

Interest rate-sensitive $ 10,149,865 $ 698,630 $ 151,491 $ 565,159 $ 11,565,145 Interest rate-sensitive 326,434 42,423 - - 368,857 assets assets $ $ $ $ $ Interest rate-sensitive Interest rate-sensitive liabilities 10,403,374 993,494 1,109,895 15,000 12,521,763 liabilities 245,248 45,815 8,817 - 299,880 Interest rate Interest rate 81,186 ( 3,392 ) ( 8,817 ) - 68,977 sensitivity gap ( 253,509 ) ( 294,864 ) ( 958,404 ) 550,159 ( 956,618 ) sensitivity gap Net worth 307,844 Net worth 62,247 Ratio of interest rate-sensitive assets to liabilities 92.36 Ratio of interest rate-sensitive assets to liabilities 123.00 Ratio of interest rate sensitivity gap to net worth ( 310.75 ) Ratio of interest rate sensitivity gap to net worth 110.81 Note 1: The above amounts included only U.S. dollar amounts held by United Taiwan Interest Rate Sensitivity Bank S.A. and excluded contingent assets and contingent liabilities. December 31, 2014 Note 2: Interest rate-sensitive assets and liabilities refer to interest-earning assets and interest-bearing liabilities with revenues or costs that are affected by interest (In Thousands of U.S. Dollars, %) rate changes. 181 Days to Items 1 to 90 Days 91 to 180 Days Over One Year Total Note 3: Interest rate sensitivity gap = Interest rate-sensitive assets - Interest rate- One Year sensitive liabilities. Note 4: Ratio of interest rate-sensitive assets to liabilities = Interest rate-sensitive Interest rate-sensitive $ 10,710,125 $ 870,911 $ 132,636 $ 394,389 $ 12,108,061 assets assets/Interest rate-sensitive liabilities (in U.S. dollars). Interest rate-sensitive liabilities 10,639,807 727,954 827,580 - 12,195,341 d. Profitability Interest rate 1) Taiwan Cooperative Financial Holding Co., sensitivity gap 70,318 142,957 ( 694,944 ) 394,389 ( 87,280 ) Ltd. and its subsidiaries Net worth 385,484 (%) Ratio of interest rate-sensitive assets to liabilities 99.28 December 31, December 31, Items Ratio of interest rate sensitivity gap to net worth ( 22.64 ) 2015 2014 Note 1: The above amounts included only U.S. dollar amounts held by the head office, Before income tax 0.49 0.39 Return on total assets domestic branches, OBU and overseas branches of the Bank and excluded After income tax 0.43 0.34 contingent assets and contingent liabilities. Note 2: Interest rate-sensitive assets and liabilities refer to interest-earning assets and Before income tax 8.95 7.76 Return on equity interest-bearing liabilities with revenues or costs that are affected by interest After income tax 7.72 6.70 rate changes. Note 3: Interest rate sensitivity gap = Interest rate-sensitive assets - Interest rate- Net income ratio 35.13 29.35 sensitive liabilities. Note 4: Ratio of interest rate-sensitive assets to liabilities = Interest rate-sensitive 2) Taiwan Cooperative Financial Holding Co., assets/Interest rate-sensitive liabilities (in U.S. dollars). Ltd. (%) 2) United Taiwan Bank S.A. December 31, December 31, Items Interest Rate Sensitivity 2015 2014 Before income tax 7.11 6.43 December 31, 2015 Return on total assets (In Thousands of U.S. Dollars, %) After income tax 7.12 6.41 181 Days to Before income tax 7.63 6.74 Items 1 to 90 Days 91 to 180 Days Over One Year Total One Year Return on equity After income tax 7.65 6.72 Interest rate-sensitive $ 267,543 $ 72,167 $ - $ - $ 339,710 assets Net income ratio 98.75 98.05 Interest rate-sensitive liabilities 186,779 77,691 9,684 - 274,154 Interest rate sensitivity gap 80,764 ( 5,524 ) ( 9,684 ) - 65,556 Net worth 59,218 Ratio of interest rate-sensitive assets to liabilities 123.91 Ratio of interest rate sensitivity gap to net worth 110.70 2015 ANNUAL REPORT

3) Taiwan Cooperative Bank, Ltd. 5) Taiwan Cooperative Securities Co., Ltd. (%) (%) December 31, December 31, December 31, December 31, Items Items 2015 2014 2015 2014 Before income tax 0.47 0.40 Before income tax 1.74 0.22 Return on total assets Return on total assets After income tax 0.41 0.35 After income tax 1.52 0.17 Before income tax 8.46 8.03 Before income tax 4.75 0.64 Return on equity Return on equity After income tax 7.28 6.99 After income tax 4.15 0.48 Net income ratio 30.99 25.60 Net income ratio 24.51 3.15

4) Taiwan Cooperative Bills Finance 6) BNP Paribas Cardif TCB Life Insurance Co., Corporation Ltd. Ltd. (%) (%) December 31, December 31, December 31, December 31, Items Items 2015 2014 2015 2014 Before income tax 1.22 0.97 Before income tax 0.66 0.32 Return on total assets Return on total assets After income tax 1.21 0.96 After income tax 0.59 0.32 Before income tax 10.23 7.33 Before income tax 12.63 6.53 Return on equity Return on equity After income tax 10.21 7.31 After income tax 11.22 6.39 Net income ratio 100.74 89.98 Net income ratio 52.73 40.34 Note 1: Return on total assets = Income before (after) income tax/Average total assets Note 2: Return on equity = Income before (after) income tax/Average equity Note 3: Net income ratio = Income after income tax/Total net revenues Note 4: Income before (after) income tax represents income for each period-end date.

e. Maturity analysis of assets and liabilities 1) Taiwan Cooperative Bank, Ltd. Maturity Analysis of Assets and Liabilities December 31, 2015 (In Thousands of New Taiwan Dollars) Remaining Period to Maturity Total 0 to 10 Days 11 to 30 Days 31 to 90 Days 91 to 180 Days 181 Days to One Year Over One Year Main capital inflow on maturity $ 2,874,376,823 $ 459,449,410 $ 337,684,146 $ 143,910,031 $ 189,898,631 $ 301,915,264 $ 1,441,519,341 Main capital outflow on maturity 3,383,426,314 201,323,422 196,212,659 423,094,927 423,237,179 685,429,837 1,454,128,290 Gap ( 509,049,491 ) 258,125,988 141,471,487 ( 279,184,896 ) ( 233,338,548 ) ( 383,514,573 ) ( 12,608,949 )

Maturity Analysis of Assets and Liabilities December 31, 2014 (In Thousands of New Taiwan Dollars) Remaining Period to Maturity Total 0 to 10 Days 11 to 30 Days 31 to 90 Days 91 to 180 Days 181 Days to One Year Over One Year Main capital inflow on maturity $ 2,772,108,302 $ 462,739,262 $ 342,538,297 $ 139,189,722 $ 165,210,515 $ 269,912,009 $ 1,392,518,497 Main capital outflow on maturity 3,307,736,387 193,886,553 186,919,821 422,515,601 428,533,810 708,230,989 1,367,649,613 Gap ( 535,628,085 ) 268,852,709 155,618,476 ( 283,325,879 ) ( 263,323,295 ) ( 438,318,980 ) 24,868,884 Note: The above amounts included only New Taiwan dollar amounts held by TCB.

123 124 Financial Information

Maturity Analysis of Assets and Liabilities December 31, 2015 (In Thousands of U.S. Dollars) Remaining Period to Maturity Total 0 to 30 Days 31 to 90 Days 91 to 180 Days 181 Days to One Year Over One Year Main capital inflow on maturity $ 19,969,621 $ 7,751,534 $ 3,450,908 $ 2,294,517 $ 1,535,694 $ 4,936,968 Main capital outflow on maturity 24,145,661 10,778,451 4,407,558 2,491,497 3,621,382 2,846,773 Gap ( 4,176,040 ) ( 3,026,917 ) ( 956,650 ) ( 196,980 ) ( 2,085,688 ) 2,090,195

Maturity Analysis of Assets and Liabilities December 31, 2014 (In Thousands of U.S. Dollars) Remaining Period to Maturity Total 0 to 30 Days 31 to 90 Days 91 to 180 Days 181 Days to One Year Over One Year Main capital inflow on maturity $ 20,360,556 $ 8,068,975 $ 3,377,144 $ 2,813,229 $ 1,150,089 $ 4,951,119 Main capital outflow on maturity 25,023,200 11,386,542 4,539,872 2,945,370 3,405,229 2,746,187 Gap ( 4,662,644 ) ( 3,317,567 ) ( 1,162,728 ) ( 132,141 ) ( 2,255,140 ) 2,204,932 Note: The above amounts included only U.S. dollar amounts held by TCB.

2) United Taiwan Bank S.A. Maturity Analysis of Assets and Liabilities December 31, 2015 (In Thousands of U.S. Dollars) Remaining Period to Maturity Total 0 to 30 Days 31 to 90 Days 91 to 180 Days 181 Days to One Year Over One Year Main capital inflow on maturity $ 339,710 $ 39,047 $ 5,020 $ 8,900 $ 44,693 $ 242,050 Main capital outflow on maturity 280,492 80,737 106,042 77,691 9,683 6,339 Gap 59,218 ( 41,690 ) ( 101,022 ) ( 68,791 ) 35,010 235,711

Maturity Analysis of Assets and Liabilities December 31, 2014 (In Thousands of U.S. Dollars) Remaining Period to Maturity Total 0 to 30 Days 31 to 90 Days 91 to 180 Days 181 Days to One Year Over One Year Main capital inflow on maturity $ 368,857 $ 69,433 $ 5,324 $ 6,998 $ 37,663 $ 249,439 Main capital outflow on maturity 306,610 100,238 145,010 45,815 8,817 6,730 Gap 62,247 ( 30,805 ) ( 139,686 ) ( 38,817 ) 28,846 242,709 Note: The above amounts included only U.S. dollar amounts held by United Taiwan Bank S.A.

f. The statement of use/source funds of Taiwan Cooperative Bills Finance Corporation Ltd. December 31, 2015 Period 1 to 30 Days 31 to 90 Days 91 to 180 Days 181 Days to One Year Over One Year Items Bills $ 10,045,674 $ 9,212,792 $ 350,693 $ - $ - Bonds - - 200,000 800,000 16,301,720 Use of funds Cash in bank 4,678,915 120,000 200 - - Convertible bond asses swap - - 20,033 - 20,062 Total 14,724,589 9,332,792 570,926 800,000 16,321,782 Borrowings 7,850,000 - - - - Securities sold under repurchase Source of funds 25,645,298 3,046,983 50,210 - - agreements Total 33,495,298 3,046,983 50,210 - - Net flows ( 18,770,709 ) 6,285,809 520,716 800,000 16,321,782 Accumulated capital net flows ( 18,770,709 ) ( 12,484,900 ) ( 11,964,184 ) ( 11,164,184 ) 5,157,598 2015 ANNUAL REPORT

December 31, 2014

Period 1 to 30 Days 31 to 90 Days 91 to 180 Days 181 Days to One Year Over One Year Items Bills $ 9,418,553 $ 3,719,875 $ 4,747,327 $ - $ - Bonds - 350,000 350,000 1,053,860 11,607,790 Use of funds Cash in bank 4,872,363 - 200 - - Convertible bond asses swap - 25,045 10,046 - 50,970 Total 14,290,916 4,094,920 5,107,573 1,053,860 11,658,760 Borrowings 7,600,000 - - - - Securities sold under repurchase Source of funds 21,864,734 1,419,761 144,000 - - agreements Total 29,464,734 1,419,761 144,000 - - Net flows ( 15,173,818 ) 2,675,159 4,963,573 1,053,860 11,658,760 Accumulated capital net flows ( 15,173,818 ) ( 12,498,659 ) ( 7,535,086 ) ( 6,481,226 ) 5,177,534

44. TAIWAN COOPERATIVE BANK, LTD.'S TRUST BUSINESS UNDER THE TRUST LAW a. Trust-related items are those shown in the following balance sheets, statements of income and trust property list These items were managed by TCB's Trust Department. However, these items were not included in the consolidated financial statements. Balance Sheets of Trust Accounts December 31, 2015 and 2014 Trust Assets 2015 2014 Trust Liabilities 2015 2014

Cash in banks $ 1,459,189 $ 2,073,843 Payables Accrued expense $ 3,238 $ 1,290 Short-term investments Others 2,403 2,605 Mutual funds 155,580,004 143,206,066 5,641 3,895 Stocks 1,628,673 1,128,249 157,208,677 144,334,315 Accounts payable on securities under custody 67,632,891 62,177,011 Securities lending 804,036 149,781 Trust capital Receivables 6,377 3,902 Cash 157,015,238 145,258,269 Real estate 35,583,450 25,788,673 Real estate Securities 2,219,984 1,211,634 Land 31,454,680 25,431,949 Others 176,070 133,798 Buildings 15,948 10,585 194,994,742 172,392,374 Construction in process 4,287,799 476,255 35,758,427 25,918,789 Reserves and retained earnings

Securities under custody 67,632,891 62,177,011 Net income 252,803 64,141 Appropriation ( 60,145 ) - Retained earnings 43,665 20,220 236,323 84,361

Total $ 262,869,597 $ 234,657,641 Total $ 262,869,597 $ 234,657,641 125 126 Financial Information

Trust Property List b. Nature of trust business operations under the December 31, 2015 and 2014 Trust Law: Note 1. Investment Items 2015 2014 45. ALLOCATION OF REVENUE, Cash in banks $ 1,459,189 $ 2,073,843 COST AND EXPENSE THAT Short-term investments RESULTED FROM THE SHARING Mutual funds 155,580,004 143,206,066 OF RESOURCES BETWEEN TAIWAN Stocks 1,628,673 1,128,249 COOPERATIVE FINANCIAL Securities lending 804,036 149,781 HOLDING COMPANY, LTD. AND Receivables SUBSIDIARIES Accrued interest 2,623 2,938 Under cooperation arrangements, Taiwan Cash dividend - 4 Cooperative Bank, Ltd. (TCB) and Taiwan Mutual funds - 500 Cooperative Securities (TCS) promoted securities brokerage business together; thus, related Others 3,754 460 revenues received by TCB were calculated as Real estate follows: (a) since January 1, 2015, revenue based Land 31,454,680 25,431,949 on 20% of the net revenue derived from security Buildings 15,948 10,585 transactions in the first and second year. (b) Construction in process 4,287,799 476,255 related revenues from utilizing some operating Securities under custody 67,632,891 62,177,011 sites and equipment by the TCS; and (c) receiving Total $ 262,869,597 $ 234,657,641 cross-selling service fees of $2,000 thousand annually. Statements of Income on Trust Accounts To promote the credit card business together, For the Years Ended December 31, 2015 and 2014 TCB and TCS signed cooperation arrangements 2015 2014 marketing expenses paid by TCB were based on Revenues the arrangements. Interest revenue $ 4,193 $ 4,554 As of December 31, 2015 and 2014, TCB's Cash dividends 42,705 18,823 accrued receivables were $2,690 thousand and Realized gain on investment - stocks 14,373 1,733 $2,871 thousand, respectively. TCB's revenues Unrealized gain on investment - from cross-selling transactions were $7,060 stocks 354,349 62,536 thousand and $6,653 thousand, in 2015 and 2014, Realized gain on investment - mutual respectively. funds 576 438 To promote the insurance business together, TCB Unrealized gain on investment - and BNP Paribas Cardif TCB Life Insurance mutual funds 1,284 2,653 Co., Ltd. signed cooperation arrangements. The Rentals 9,929 1,297 service fees earned by TCB were based on the Others - 215 agreed percentage of the premiums from the Total revenues 427,409 92,249 insurance companies' products sold by TCB. Expenses As of December 31, 2015 and 2014, TCB's Management fees 3,674 1,890 accrued receivables were $2,111 thousand and Taxes 335 373 $2,914 thousand, respectively. TCB's revenues Insurance fees - 42 from cross-selling transactions were $26,219 Service charge 318 121 thousand and $29,386 thousand in 2015 and Postage 11 13 2014, respectively. Unrealized loss on investment - stocks 163,465 22,009 Realized loss on investment - mutual funds 465 76 Unrealized loss on investment - mutual funds 5,069 3,213 Others 1,269 371 Total expenses 174,606 28,108 Income before income tax 252,803 64,141 Income tax expense - -

Net income $ 252,803 $ 64,141 2015 ANNUAL REPORT

46. TCFHC'S FINANCIAL STATEMENTS the approval of the investment in the Changsha AND CONDENSED BALANCE Branch by the Investment Commission under SHEETS AND STATEMENTS OF Mainland China's Ministry of Economic Affairs COMPREHENSIVE INCOME OF and relevant authorities was being awaited. SUBSIDIARIES To enhance financial cooperation between Table 4 (attached). China and Taiwan, the board of directors of TCB approved a memorandum on August 25, 47. BUSINESS SEGMENT FINANCIAL 2014, which was signed with Ping An Pay and INFORMATION Chinapay. Table 5 (attached). To enhance the financial cooperation between the banks in China and those in Taiwan, TCB's board 48. DISCLOSURE REQUIRED UNDER of directors approved on December 22, 2014 ARTICLE 46 OF THE FINANCIAL the signing of a memorandum of understanding HOLDING COMPANY ACT (MOU) between five Taiwan banks (Taiwan Table 6 (attached). Bank, etc.) and five Chinese banks (China Bank, etc.), and TCB signed this MOU. 49. EQUITY TRANSACTIONS WITH NON-CONTROLLING INTERESTS On February 22, 2015, TCB's board of directors approved TCB's merger with its own subsidiary, On April 21, 2014, TCFHC paid $151,704 Cooperative Insurance Brokers Co., Ltd. thousand to acquire an additional 49% of interest (CIB). The effective date of this merger is to be in Taiwan Cooperative Securities Investment determined by management. In this merger, TCB Trust Co., Ltd. (TCSIT), increasing its continuing will be the survivor entity. interest from 51% to 100%. This acquisition was accounted for as equity 52. ADDITIONAL DISCLOSURES transaction since TCFHC did not cease to have a. Related information of significant transactions control over the subsidiary. and b. investees: TCSIT 1) Financing provided: TCFHC - none; Cash consideration paid $ 151,704 investee company - none or not applicable. Difference between the carrying amounts and acquisition cost of TCSIT ( 135,088 ) 2) Endorsement/guarantee provided: TCFHC - none; investee company - none or not Differences arising from equity transaction (adjusted unappropriated earnings) $ 16,616 applicable. 3) Marketable securities held: TCFHC, 50. NON-CASH FINANCING ACTIVITIES Taiwan Cooperative Bank, Ltd., United Undistributed cash dividends approved by Taiwan Bank S.A., Taiwan Cooperative shareholders' meetings are $242,035 thousand Bills Finance Corporation Ltd., Taiwan and $226,896 thousand as of December 31, 2015 Cooperative Securities Co., Ltd. and BNP and 2014, respectively. Paribas Cardif TCB Life Insurance Co., Ltd. - not applicable; investee company - Table 7 51. OTHER SIGNIFICANT (attached) TRANSACTIONS 4) Marketable securities acquired and disposed Taiwan Cooperative Bank, Ltd.'s (TCB) of at costs or prices of at least NT$300 application to set up the Changsha Branch in million or 10% of the paid-in capital Mainland China was approved by the Financial (TCFHC, Taiwan Cooperative Bank, Ltd. Supervisory Commission on December 31, and United Taiwan Bank S.A. disclosed 2015. TCB will invest RMB600,000 thousand its investments acquired or disposed of): in the Changsha Branch, under the “Regulations Taiwan Cooperative Securities Co., Ltd. and Governing Approvals of Banks to Engage in BNP Paribas Cardif TCB Life Insurance Co., Financial Activities between the Taiwan Area Ltd. - not applicable; TCFHC and investee and the Mainland Area.” As of the date of the company - Table 8 (attached) accompanying independent auditors' report, 127 128 Financial Information

5) Acquisition of individual real estate at costs Ltd. set up Taiwan Cooperative International of at least NT$300 million or 10% of the Leasing Co., Ltd. in Mainland China. This paid-in capital: None. investment had been approved by the Financial Supervisory Commission. The information - 6) Disposal of individual real estates at costs of major operating items, capital stock, the way of at least NT$300 million or 10% of the paid- investment, investment inflows and outflows, in capital: None. the holding percentage, the investment income 7) Financial asset securitization by subsidiaries: or loss, the carrying amount at period-end, the None. remitted investment profits and the limit on the amount of investment in Mainland China - can 8) Allowance of service fees to related parties be seen in Table 12 (attached) amounting to at least NT$5 million: Table 9 (attached) d. Business relationships and significant transactions among the parent company and 9) Sale of nonperforming loans by subsidiaries: subsidiaries: Table 13 (attached) None. 10) Receivables from related parties amounting 53. OPERATING SEGMENTS to at least NT$300 million or 10% of the The information reported to the Company's chief paid-in capital: Table 10 (attached) operating decision makers for the assessment of 11) Percentage share in investees and related segment performance focuses mainly on business information: Table 11 (attached). and profit or loss. The Company's reportable segments are as follows: 12) Derivative transactions: Notes 8, 38 and 41 to the consolidated financial statements a. TCB business, including deposit and loan, capital, trust and other business; 13) Other significant transactions which may affect the decisions of users of financial b. Other noncore business. reports: Note 51 to the consolidated The accounting policies of the reportable financial statements segments are the same as the Company's c. Investment in Mainland China: accounting policies described in Note 4. Segment profit is measured at income before Based on “Regulations Governing Approvals income tax, and this measure is reported to of Banks to Engage, Ltd. in Financial Activities the chief operating decision makers for the between the Taiwan Area and the Mainland purposes of resource allocation and assessment Area,” Taiwan Cooperative Bank, Ltd. set up of segment performance. The terms of the Suzhou Branch, Tianjin Branch and Fuzhou transactions between segments are similar to Branch; Co-operative Assets Management Co., those for third parties.

The revenue, expenses and related information of the Company's reportable segments are as follows: For the Year Ended December 31, 2015 Adjustment and TCB Business Others Total Elimination Total Net interest $ 29,906,237 $ 2,167,972 $ 32,074,209 $ 160 $ 32,074,369 Net revenues and gains other than interest 9,231,643 10,964,792 20,196,435 ( 13,948,110 ) 6,248,325 Net revenues 39,137,880 13,132,764 52,270,644 (13,947,950 ) 38,322,694 Bad-debt expenses and provision for losses on guarantees ( 2,158,168 ) ( 66,824 ) ( 2,224,992) - ( 2,224,992 ) Net change in reserves for insurance liabilities - 4,343,586 4,343,586 - 4,343,586 Operating expenses ( 22,898,198 ) ( 2,116,500 ) ( 25,014,698 ) 185,030 ( 24,829,668 ) Income before income tax $ 14,081,514 $ 15,293,026 $ 29,374,540 $ ( 13,762,920 ) $ 15,611,620 2015 ANNUAL REPORT

For the Year Ended December 31, 2014 Adjustment and TCB Business Others Total Elimination Total

Net interest $ 27,652,947 $ 2,117,882 $ 29,770,829 $ - $ 29,770,829 Net revenues and gains other than interest 11,905,053 5,141,509 17,046,562 ( 11,330,918 ) 5,715,644 Net revenues 39,558,000 7,259,391 46,817,391 ( 11,330,918 ) 35,486,473 Bad-debt expenses and provision for losses on guarantees ( 6,270,689 ) ( 201,660 ) ( 6,472,349 ) 45,895 ( 6,426,454 ) Net change in reserves for insurance liabilities - 6,319,674 6,319,674 - 6,319,674 Operating expenses ( 21,643,521 ) ( 1,832,775 ) ( 23,476,296 ) 162,011 ( 23,314,285 ) Income before income tax $ 11,643,790 $ 11,544,630 $ 23,188,420 $ ( 11,123,012 ) $ 12,065,408

TABLE 1 TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES CONSOLIDATED ENTITIES DECEMBER 31, 2015 AND 2014

Subsidiaries included in the consolidated financial statements

Percentage of Ownership Investor Investee Company Location Main Business and Products Note Company December 31, December 31, 2015 2014 Taiwan Taiwan Cooperative Bank, Ltd. Taipei City Banking 100.00 100.00 Cooperative Financial Holding Co., Ltd. Co-operative Assets Management Co., Ltd. Taipei City Acquisition of delinquent 100.00 100.00 loans Taiwan Cooperative Bills Finance Co., Ltd. Taipei City Bills finance dealer 100.00 100.00 Taiwan Cooperative Securities Co., Ltd. Taipei City Securities dealer 100.00 100.00 Taiwan Cooperative Securities Investment Taipei City Securities investment trust 100.00 100.00 Trust Co., Ltd. BNP Paribas Cardif TCB Life Insurance Co., Taipei City Life Insurance 51.00 51.00 Ltd. Taiwan Cooperative Venture Capital Co., Ltd. Taipei City Venture capital 100.00 - Taiwan United Taiwan Bank S.A. Belgium Banking 90.02 90.02 Cooperative Bank, Ltd. Cooperative Insurance Brokers Co., Ltd. Taipei City Life and property insurance 100.00 100.00 agent Co-operative Taiwan Cooperative International Leasing Suzhou, Leasing 100.00 100.00 Assets Co., Ltd. China Management Co., Ltd.

Subsidiaries not included in the consolidated financial statements Percentage of Ownership Investor Investee Company Location Main Business and Products Note Company December 31, December 31, 2015 2014

None - - - - -

129 130 Financial Information

TABLE 2 TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES CAPITAL ADEQUACY RATIO DECEMBER 31, 2015 AND 2014

1. Taiwan Cooperative Financial Holding Co., Ltd.'s capital adequacy ratio Unit: In Thousands of New Taiwan Dollars, % Items December 31, 2015 December 31, 2014 Group’s Group’s Proportionate Group’s Net Proportionate Group’s Net Statutory Capital Statutory Capital Company Share Eligible Capital Share Eligible Capital Requirement Requirement Taiwan Cooperative Financial Holding Co., Ltd. $ 186,588,779 $ 200,480,193 $ 155,344,673 $ 163,792,288 Taiwan Cooperative Bank, Ltd. 100 229,564,943 145,277,688 100 213,963,528 134,361,382 Taiwan Cooperative Bills Finance Co., Ltd. 100 4,914,554 2,494,769 100 4,507,880 2,193,065 Taiwan Cooperative Securities Co., Ltd. 100 4,526,871 982,532 100 2,570,035 508,529 Co-operative Assets Management Co., Ltd. 100 3,177,251 2,671,546 100 2,888,241 2,760,839 BNP Paribas Cardif TCB Life Insurance Co., Ltd. 51 3,534,283 796,889 51 3,096,371 889,858 Taiwan Cooperative Securities Investment Trust Co., Ltd. 100 334,606 180,369 100 353,887 191,878 Taiwan Cooperative Venture Capital Co., Ltd. 100 997,861 499,772 - - - Deduction ( 223,298,296 ) ( 200,468,265 ) ( 195,466,500 ) ( 163,774,089 ) Total 210,340,852 152,915,493 187,258,115 140,923,750 Group capital adequacy ratio 137.55% 132.88%

Note 1: The above amounts are calculated under the “Regulations Governing the Consolidated Capital Adequacy of Financial Holding Companies.”

Note 2: Group capital adequacy ratio = Group's net eligible capital ÷ Group's statutory capital requirement.

2. Taiwan Cooperative Financial Holding December 31, Co., Ltd.'s eligible capital Items 2014 Unit: In Thousands of New Taiwan Dollars Common stock $ 90,449,800 December 31, Items Capital instruments, which conform to the terms of 2015 - Bank’s other Tier 1 capital Common stock $ 110,722,290 Other preferred stocks and subordinated debts - Capital instruments, which conform to the terms of - Bank’s other Tier 1 capital Capital collected in advance - Other preferred stocks and subordinated debts - Capital surplus 51,818,091 Capital collected in advance - Legal reserve 1,332,940 Capital surplus 57,964,343 Special reserve 996,026 Legal reserve 2,356,575 Cumulative earnings 10,921,063 Special reserve 996,026 Equity adjustments ( 164,453 ) Cumulative earnings 12,866,132 Less: Capital deduction 8,794 Equity adjustments 1,689,065 Total eligible capital 155,344,673 Less: Capital deduction 5,652 Note: The above amounts are calculated under the “Regulations Governing the Consolidated Capital Adequacy of Financial Holding Companies.” Total eligible capital 186,588,779 2015 ANNUAL REPORT

3. Taiwan Cooperative Bank, Ltd.'s capital adequacy ratio (Unit: In Thousands of New Taiwan Dollars, %)

Year December 31, 2015 Items Standalone Consolidated Common equity $ 169,179,043 $ 170,222,272

Eligible Other Tier 1 capital - - capital Tier 2 capital 60,385,900 61,546,641 Eligible capital 229,564,943 231,768,913 Standardized approach 1,737,278,354 1,739,194,177 Credit risk Internal ratings based approach - - Securitization 750,679 750,679 Basic indicator approach - - Risk- weighted Operational risk Standardized approach/alternative standardized approach 63,325,942 65,270,944 assets Advanced measurement approach - - Standardized approach 14,616,127 14,634,941 Market risk Internal model approach - - Risk-weighted assets 1,815,971,102 1,819,850,741 Capital adequacy ratio 12.64 12.74 Ratio of the common equity to risk-weighted assets 9.32 9.35 Ratio of Tier 1 capital to risk-weighted assets 9.32 9.35 Ratio of leverage 5.25 5.28

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

Year December 31, 2014 Items Standalone Consolidated Common equity $ 137,511,724 $ 138,532,074

Eligible Other Tier 1 capital - - capital Tier 2 capital 76,451,804 77,587,128 Eligible capital 213,963,528 216,119,202 Standardized approach 1,611,020,652 1,612,742,538 Credit risk Internal ratings based approach - - Securitization - - Basic indicator approach - - Risk- weighted Operational risk Standardized approach/alternative standardized approach 58,820,779 59,992,738 assets Advanced measurement approach - - Standardized approach 9,675,842 9,670,778 Market risk Internal model approach - - Risk-weighted assets 1,679,517,273 1,682,406,054 Capital adequacy ratio 12.74 12.85 Ratio of the common equity to risk-weighted assets 8.19 8.23 Ratio of Tier 1 capital to risk-weighted assets 8.19 8.23 Ratio of leverage 3.62 3.63 Note 1: Eligible capital and risk-weighted assets are calculated under the “Regulations Governing the Capital Adequacy Ratio of Banks” and the “Explanation of Methods for Calculating the Eligible Capital and Risk-weighted Assets of Banks.” Note 2: Formulas used were as follows: 1) Eligible capital = Common equity + Other Tier 1 capital + Tier 2 capital 2) Risk-weighted assets = Risk-weighted assets for credit risk + Capital requirements for operational risk and market risk x 12.5. 3) Capital adequacy ratio = Eligible capital ÷ Risk-weighted assets. 4) Ratio of the common equity to risk-weighted assets = Common equity ÷ Risk-weighted assets. 5) Ratio of Tier 1 capital to risk-weighted assets = (Common equity + Other Tier 1 capital) ÷ Risk-weighted assets. 6) Ratio of leverage = Tier 1 capital ÷ Exposure measurement. 131 132

TABLE 3 Financial Information TAIWAN COOPERATIVE BANK, LTD. ASSET QUALITY - NONPERFORMING LOANS AND RECEIVABLES DECEMBER 31, 2015 AND 2014 (In Thousands of New Taiwan Dollars, %) Period December 31, 2015 December 31, 2014 Nonperforming Ratio of Nonperforming Ratio of Allowance for Coverage Ratio Allowance for Coverage Ratio Items Loans Loans Nonperforming Loans Loans Nonperforming Credit Losses (Note 3) Credit Losses (Note 3) (Note 1) Loans (Note 2) (Note 1) Loans (Note 2) Corporate Secured $ 3,362,084 $ 666,713,093 0.50 $ 6,133,312 182.43 $ 4,154,033 $ 618,295,520 0.67 $ 6,288,619 151.39 banking Unsecured 1,753,741 551,608,460 0.32 7,008,984 399.66 1,388,211 526,873,204 0.26 7,269,553 523.66 Housing mortgage (Note 4) 1,031,851 508,940,536 0.20 5,857,699 567.69 1,146,239 492,647,006 0.23 6,520,035 568.82 Cash card ------Consumer Small-scale credit loans (Note 5) 47,115 12,544,692 0.38 204,713 434.50 39,567 12,290,737 0.32 210,711 532.54 banking Secured 592,128 245,391,020 0.24 1,896,174 320.23 354,000 217,296,569 0.16 1,621,616 458.08 Other (Note 6) Unsecured 18,278 9,442,950 0.19 151,983 831.51 27,174 8,804,715 0.31 146,525 539.21 Loan 6,805,197 1,994,640,751 0.34 21,252,865 312.30 7,109,224 1,876,207,751 0.38 22,057,059 310.26 Ratio of Ratio of Nonperforming Nonperforming Nonperforming Allowance for Coverage Ratio Nonperforming Allowance for Coverage Ratio Receivables Receivables Receivables Receivables Receivables Credit Losses (Note 3) Receivables Credit Losses (Note 3) (Note 1) (Note 1) (Note 2) (Note 2) Credit cards 8,207 2,660,556 0.31 74,750 910.81 17,950 2,562,450 0.70 98,857 550.74 Accounts receivable factored without recourse (Note 7) - 216,084 - 3,552 - - 384,088 - 4,432 - Amounts of executed contracts on negotiated debts 15,462 17,683 not reported as nonperforming loans (Note 8) Amounts of executed contracts on negotiated debts 17,085 23,871 not reported as nonperforming receivables (Note 8) Amounts of executed debt-restructuring projects not 22,322 27,225 reported as nonperforming loans (Note 9) Amounts of executed debt-restructuring projects not 61,678 70,215 reported as nonperforming receivables (Note 9) Note 1: Nonperforming loans are reported to the authorities and disclosed to the public, as required by the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Nonaccrual Loans.” Nonperforming credit card receivables are reported to the authorities and disclosed to the public, as required by the Banking Bureau's letter dated July 6, 2005 (Ref. No. 0944000378). Note 2: Ratio of nonperforming loans: Nonperforming loans ÷ Outstanding loan balance. Ratio of nonperforming receivables: Nonperforming receivables ÷ Outstanding receivable balance. Note 3: Coverage ratio of loans: Allowance for credit losses for loans ÷ Nonperforming loans. Coverage ratio of receivables: Allowance for credit losses for receivables ÷ Nonperforming receivables. Note 4: The mortgage loan is for house purchase or renovation and is fully secured by housing that is purchased (owned) by the borrower, the spouse or minor children of the borrowers. Note 5: Based on the Banking Bureau's letter dated December 19, 2005 (Ref. No. 09440010950), small-scale credit loans are unsecured, involve small amounts and exclude credit cards and cash cards. Note 6: Other consumers banking loans refer to secured or unsecured loans that exclude housing mortgage, cash and credit cards, and small-scale credit loans. Note 7: As required by the Banking Bureau in its letter dated July 19, 2005 (Ref. No. 0945000494), accounts receivable factored without recourse are reported as nonperforming receivables within three months after the factors or insurance companies refuse to indemnify banks for any liabilities on these accounts. Note 8: Amounts of executed contracts on negotiated debts that are not reported as nonperforming loans or receivables are disclosed to the public in accordance with the Banking Bureau's letter dated April 25, 2006 (Ref. No. 09510001270). Note 9: Amounts of executed debt-restructuring projects not reported as nonperforming loans or receivables are disclosed to the public in accordance with the Banking Bureau's letter dated September 15, 2008 (Ref. No. 09700318940). 2015 ANNUAL REPORT

TABLE 4 TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES TCFHC'S FINANCIAL STATEMENTS AND CONDENSED BALANCE SHEETS AND STATEMENTS OF COMPREHENSIVE INCOME OF SUBSIDIARIES DECEMBER 31, 2015 AND 2014

1. TCFHC's financial statements Taiwan Cooperative Financial Holding Co., Ltd. Balance Sheets December 31, 2015 and 2014 (In Thousands of New Taiwan Dollars)

2014 2014 (Audited after (Audited after Assets 2015 Retrospected) Liabilities and Equity 2015 Retrospected)

Cash and cash equivalents $ 33,317 $ 23,659 Liabilities

Receivables 175 45

Current tax assets 2,082,043 720,161 Commercial paper issued, net $ 13,773,685 $ 8,283,702

Investments accounted for using equity method 200,468,265 163,771,945 Payables 155,317 121,888

Properties and equipment, net 8,251 14,757 Current tax liabilities 2,072,032 780,841

Intangible assets 5,466 8,794 Other financial liabilities 285 1,454

Deferred tax assets 186 165 Other liabilities 5,455 3,550

Other assets 3,502 3,232 Total liabilities 16,006,774 9,191,435

Equity

Capital stock 110,722,290 90,449,800

Capital surplus 57,964,343 51,818,091

Retained earnings 16,218,733 13,247,885

Other equity 1,689,065 ( 164,453 )

Total equity 186,594,431 155,351,323

Total $ 202,601,205 $ 164,542,758 Total $ 202,601,205 $ 164,542,758

133 134 Financial Information

Taiwan Cooperative Financial Holding Co., Ltd. Statements of Comprehensive Income For the Years Ended December 31, 2015 and 2014 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2014 (Audited after Retro- 2015 spected)

Revenues and gains

Share of gains of subsidiaries, associates and joint ventures accounted for using equity method $ 13,333,107 $ 10,528,276

Other revenues and gains 3,540 2,993

Total revenues and gains 13,336,647 10,531,269

Expenses and losses

Share of losses of subsidiaries, associates and joint ventures accounted for using equity method 22,998 49,015

Operating expenses 197,806 169,515

Other expenses and losses 69,594 40,984

Total expenses and losses 290,398 259,514

Income before income tax 13,046,249 10,271,755

Income tax benefit (expense) 32,803 ( 34,331 )

Net income 13,079,052 10,237,424

Other comprehensive income 1,235,796 135,118

Total comprehensive income $ 14,314,848 $ 10,372,542

Earnings per share (New Taiwan dollars)

Basic $ 1.22 $ 1.08

Diluted $ 1.22 $ 1.08 Taiwan Cooperative Financial Holding Co., Ltd. Statements of Changes in Equity For the Years Ended December 31, 2015 and 2014 (In Thousands of New Taiwan Dollars)

Other Equity

Changes in the Fair Value Attributable to Exchange Changes in the Differences on Credit Risk of the Financial Translation ofUnrealized Liabilities Financial Gains (Losses)Designated on as at Capital Stock Retained Earnings Statements ofAvailable-for- Fair Value Shares UnappropriatedForeign sale Financial through (In Thousands)Common Stock Capital Surplus Legal ReserveEarnings Special ReserveOperations Assets Profit or LossTotal Equity

BALANCE, JANUARY 1, 2014 $ 8,614,266 $ 86,142,667 $ 56,125,224 $ 782,391 $ 1,083,833 $ 5,505,489 $ 44,213 $ ( 378,071 ) $ - $ 149,305,746

Effect of retrospective application - - - - - ( 3,216 ) - - - ( 3,216 )

BALANCE, JANUARY 1, 2014 AS RETROSPECTED 8,614,266 86,142,667 56,125,224 782,391 1,083,833 5,502,273 44,213 ( 378,071 ) - 149,302,530

Reversal of special reserve - - - - ( 87,807 ) 87,807 - - - -

Appropriation of the 2013 earnings

Legal reserve - - - 550,549 - ( 550,549 ) - - - -

Cash dividends - - - - - ( 4,307,133 ) - - - ( 4,307,133 )

Capital surplus transferred to stock dividends 430,714 4,307,133 ( 4,307,133 ) ------

Difference between the carrying amount and acquisition cost of Taiwan Cooperative Securities Investment Trust Co., Ltd. - - - - - ( 16,616 ) - - - ( 16,616 )

Total comprehensive income

Net income for the year ended December 31, 2014 - - - - - 10,237,424 - - - 10,237,424

Other comprehensive income for the year ended December 31, 2014 - - - - - ( 34,287 ) 220,579 ( 51,174 ) - 135,118

Total comprehensive income for the year ended December 31, 2014 - - - - - 10,203,137 220,579 ( 51,174 ) - 10,372,542

BALANCE, DECEMBER 31, 2014 AS RETROSPECTED 9,044,980 90,449,800 51,818,091 1,332,940 996,026 10,918,919 264,792 ( 429,245 ) - 155,351,323

Appropriation of the 2014 earnings

Legal reserve - - - 1,023,635 - ( 1,023,635 ) - - - -

Cash dividends - - - - - ( 5,272,490 ) - - - ( 5,272,490 )

Stock dividends 421,799 4,217,992 - - - ( 4,217,992 ) - - - - 2015 ANNUAL REPORT Capital surplus transferred to stock dividends 105,450 1,054,498 ( 1,054,498 ) ------

Capital increase in March 2015 1,500,000 15,000,000 6,870,000 ------21,870,000

Share-based payment for the employee's subscription for new shares - - 330,750 ------330,750

Total comprehensive income

Net income for the year ended December 31, 2015 - - - - - 13,079,052 - - - 13,079,052

Other comprehensive income for the year ended December 31, 2015 - - - - - ( 617,722 ) 35,623 1,815,727 2,168 1,235,796

Total comprehensive income for the year ended December 31, 2015 - - - - - 12,461,330 35,623 1,815,727 2,168 14,314,848

BALANCE, DECEMBER 31, 2015 11,072,229 $ 110,722,290 $ 57,964,343 $ 2,356,575 $ 996,026 $ 12,866,132 $ 300,415 $ 1,386,482 $ 2,168 $ 186,594,431 135

136 Financial Information

Taiwan Cooperative Financial Holding Co., Ltd. Statements of Cash Flows For the Years Ended December 31, 2015 and 2014 (In Thousands of New Taiwan Dollars) 2014 (Audited after Retro- 2015 spected) Cash flows from operating activities Income before income tax $ 13,046,249 $ 10,271,755 Adjustments for: Share of gains of subsidiaries, associates and joint ventures accounted for using equity method ( 13,310,109 ) ( 10,479,261 ) Depreciation and amortization expenses 9,917 9,719 Interest expense 69,594 40,984 Interest revenue ( 2,409 ) ( 991 ) Salary expenses on share-based payments 587 - Net changes in operating assets and liabilities Decrease (increase) in receivables ( 130 ) 44 Increase in other assets ( 190 ) ( 231 ) Increase in payables 33,429 29,735 Increase in other liabilities 1,905 31 Cash used in operations ( 151,157 ) ( 128,215 ) Interest received 2,409 991 Dividend received 7,325,836 5,759,628 Interest paid ( 69,611 ) ( 43,670 ) Income tax refund (paid) ( 37,909 ) 4,458 Net cash generated by operating activities 7,069,568 5,593,192 Cash flows from investing activities Acquisition of investments accounted for using equity method ( 29,146,088 ) ( 6,410,015 ) Return of shares due to capital decrease of investee company accounted for using equity method - 2,000,000 Acquisition of properties and equipment ( 83 ) ( 1,000 ) Acquisition of intangible assets - ( 312 ) Increase in refundable deposits ( 80 ) - Net cash used in investing activities ( 29,146,251 ) ( 4,411,327 ) Cash flows from financing activities Increase in commercial paper issued 99,170,000 68,850,000 Decrease in commercial paper issued ( 93,680,000 ) ( 65,570,000 ) Increase in other borrowings 1,000,000 - Decrease in other borrowings ( 1,000,000 ) - Increase in other financial liabilities 357 811 Decrease in other financial liabilities ( 1,526 ) ( 3,057 ) Dividends paid ( 5,272,490 ) ( 4,307,133 ) Capital increase 21,870,000 - Acquisition of subsidiary - ( 151,704 ) Net cash generated by (used in) financing activities 22,086,341 ( 1,181,083 ) Net increase in cash and cash equivalents 9,658 782 Cash and cash equivalents, beginning of the year 23,659 22,877 Cash and cash equivalents, end of the year $ 33,317 $ 23,659 2015 ANNUAL REPORT

2. Subsidiaries' condensed balance sheets Taiwan Cooperative Bank, Ltd. Condensed Balance Sheets December 31, 2015 and 2014 (In Thousands of New Taiwan Dollars) 2014 2014 (Audited after (Audited after Assets 2015 Retrospected) Liabilities and Equity 2015 Retrospected) Cash and cash equivalents $ 42,442,551 $ 42,029,035 Liabilities Due from the Central Bank and call Due to the Central Bank and other banks $ 198,372,977 $ 176,001,915 loans to other banks 711,892,231 690,813,486 Financial assets at fair value through Financial liabilities at fair value through profit or loss 14,936,076 43,669,323 profit or loss 14,706,922 6,082,468 Securities purchased under resell Securities sold under repurchase agreements 209,592 1,851,763 agreements 17,452,480 23,179,705 Receivables, net 13,369,207 13,074,168 Payables 35,302,680 41,690,572 Current tax assets 987,343 1,570,953 Current tax liabilities 1,326,368 79,910 Discounts and loans, net 1,972,923,223 1,853,660,859 Deposits and remittances 2,504,628,491 2,397,346,915 Available-for-sale financial assets, net 95,884,851 69,774,501 Bank debentures 69,610,000 92,110,000 Held-to-maturity financial assets 42,394,027 20,046,117 Other financial liabilities 7,710,161 9,061,589 Investments accounted for using equity Provisions 9,286,765 8,831,254 method 2,100,003 2,052,636 Other financial assets, net 101,187,401 120,615,984 Deferred tax liabilities 3,453,496 3,568,502 Properties and equipment, net 39,286,038 39,650,610 Other liabilities 1,185,632 1,170,822 Investment properties, net 2,269,500 2,083,696 Total liabilities 2,863,035,972 2,759,123,652 Intangible assets 3,625,263 3,695,654 Deferred tax assets 1,227,216 1,074,810 Equity Other assets, net 1,061,451 3,770,694 Capital stock 83,493,000 71,362,760 Capital surplus 53,054,992 38,730,516 Retained earnings 45,153,797 40,730,243 Other equity 1,058,212 ( 512,882 ) Total equity 182,760,001 150,310,637

Total $ 3,045,795,973 $ 2,909,434,289 Total $ 3,045,795,973 $ 2,909,434,289

Taiwan Cooperative Bills Finance Co., Ltd. Condensed Balance Sheets December 31, 2015 and 2014 (In Thousands of New Taiwan Dollars) Assets 2015 2014 Liabilities and Equity 2015 2014 Cash and cash equivalents $ 4,559,035 $ 4,632,484 Liabilities Financial assets at fair value through Call loans from banks $ 7,850,000 $ 7,600,000 profit or loss 19,671,159 17,946,404 Securities sold under repurchase Available-for-sale financial assets, net 14,670,128 11,193,717 agreements 28,733,678 23,428,495 Receivables, net 162,360 123,599 Payables 64,553 52,518 Held-to-maturity financial assets 2,801,971 2,017,225 Provisions 820,742 854,908 Current tax assets 85,572 36,942 Other liabilities 68,337 17,089 Other financial assets 249,477 249,477 Total liabilities 37,537,310 31,953,010 Properties and equipment, net 14,571 13,660 Intangible assets 1,624 1,579 Equity Other assets, net 222,736 217,379 Capital stock 3,547,270 3,547,270 Capital surplus 3,240 1,443 Retained earnings 1,189,310 924,115 Other equity 161,503 6,628 Total equity 4,901,323 4,479,456

Total $ 42,438,633 $ 36,432,466 Total $ 42,438,633 $ 36,432,466 137 138 Financial Information

Taiwan Cooperative Securities Co., Ltd. Condensed Balance Sheets December 31, 2015 and 2014 (In Thousands of New Taiwan Dollars) Assets 2015 2014 Liabilities and Equity 2015 2014

Current assets $ 12,594,062 $ 8,753,427 Liabilities Available-for-sale financial assets - noncurrent 43,046 - Properties and equipment, net 62,893 69,872 Current liabilities $ 7,924,771 $ 6,242,755 Intangible assets 42,414 50,999 Other liabilities 9,322 4,103 Deferred tax assets 5,588 4,080 Deferred tax liabilities 3,233 - Other non-current assets 390,230 371,650 Total liabilities 7,937,326 6,246,858

Equity

Capital stock 4,724,200 3,000,000 Capital surplus 294,440 7,855 Retained earnings 158,673 ( 11,761 ) Other equity 23,594 7,076 Total equity 5,200,907 3,003,170

Total $ 13,138,233 $ 9,250,028 Total $ 13,138,233 $ 9,250,028

Co-operative Assets Management Co., Ltd. Condensed Balance Sheets December 31, 2015 and 2014 (In Thousands of New Taiwan Dollars) Assets 2015 2014 Liabilities and Equity 2015 2014

Current assets $ 22,591 $ 40,129 Liabilities Accounts receivable - acquired loans, net 2,111,623 2,634,612 Investments accounted for using the equity method 954,873 958,195 Current liabilities $ 2,132,378 $ 2,610,438 Properties and equipment, net 1,975 2,520 Other liabilities 21,033 14,576 Investment properties, net 1,881,250 1,666,736 Deferred tax liabilities 12,429 8,423 Intangible assets 2,056 3,330 Total liabilities 2,165,840 2,633,437 Deferred tax assets 78,162 52,685 Other assets 290,561 163,471 Equity

Capital stock 2,616,000 2,400,000 Capital surplus 2,553 1,122 Retained earnings 546,176 457,940 Other equity 12,522 29,179 Total equity 3,177,251 2,888,241

Total $ 5,343,091 $ 5,521,678 Total $ 5,343,091 $ 5,521,678 2015 ANNUAL REPORT

BNP Paribas Cardif TCB Life Insurance Co., Ltd. Condensed Balance Sheets December 31, 2015 and 2014 (In Thousands of New Taiwan Dollars) Assets 2015 2014 Liabilities and Equity 2015 2014 Cash and cash equivalents $ 3,186,146 $ 2,779,947 Liabilities Receivables 1,124,544 1,141,563 Current tax assets 216,151 175,482 Payables $ 432,542 $ 481,078 Financial liabilities at fair value Investments 47,774,049 52,266,867 through profit or loss 937,076 724,987 Reinsurance assets 27,088 18,056 Insurance liabilities 32,933,845 37,516,698 Reserve for insurance contracts with Equipment, net 83,732 93,113 financial instruments features 11,735,236 12,136,190 Other assets 1,408,860 1,079,080 Reserve of foreign exchange variation 171,211 115,688 Separate-account assets 76,908,449 66,873,228 Deferred tax liabilities 60,301 21,402 Other liabilities 341,065 357,675 Separate-account liabilities 76,908,449 66,873,228 Total liabilities 123,519,725 118,226,946

Equity

Capital stock 6,000,000 6,000,000 Capital surplus 9,310 3,366 Retained earnings (accumulated deficit) 350,506 ( 402,084 ) Other equity 849,478 599,108 Total equity 7,209,294 6,200,390

Total $ 130,729,019 $ 124,427,336 Total $ 130,729,019 $ 124,427,336

Taiwan Cooperative Securities Investment Trust Co., Ltd. (Former Name: BNP Paribas TCB Asset Management Co., Ltd.) Condensed Balance Sheets December 31, 2015 and 2014 (In Thousands of New Taiwan Dollars) Assets 2015 2014 Liabilities and Equity 2015 2014 Current assets $ 328,723 $ 346,091 Liabilities Properties and equipment, net 2,576 7,227 Intangible assets 1,499 4,745 Current liabilities $ 22,141 $ 27,132 Prepayments for equipment 2,310 - Other liabilities 4,599 3,282 Other assets 26,238 26,238 Total liabilities 26,740 30,414

Equity

Capital stock 303,000 303,000 Capital surplus 72,860 71,282 Accumulated deficit ( 41,254 ) ( 20,395 ) Total equity 334,606 353,887

Total $ 361,346 $ 384,301 Total $ 361,346 $ 384,301

139 140 Financial Information

Taiwan Cooperative Venture Capital Co., Ltd. Condensed Balance Sheets December 31, 2015 (In Thousands of New Taiwan Dollars) Assets 2015 Liabilities and Equity 2015 Current assets $ 996,653 Liabilities Properties and equipment, net 2,564 Intangible assets 113 Current liabilities $ 1,513 Other assets 235 Other liabilities 191 Total liabilities 1,704

Equity

Capital stock 1,000,000 Accumulated deficit ( 2,139 ) Total equity 997,861

Total $ 999,565 Total $ 999,565

3. Subsidiaries' condensed statements of comprehensive income Taiwan Cooperative Bank, Ltd. Condensed Statements of Comprehensive Income For the Years Ended December 31, 2015 and 2014 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) 2014 (Audited after 2015 Retrospected) Interest revenues $ 50,960,726 $ 50,598,352 Less: Interest expenses ( 21,054,489 ) ( 22,945,405 ) Net interest 29,906,237 27,652,947 Net revenues and gains other than interest 9,231,643 11,905,053 Total net revenues 39,137,880 39,558,000 Bad-debt expenses and provision for losses on guarantees ( 2,158,168 ) ( 6,270,689 ) Operating expenses ( 22,898,198 ) ( 21,643,521 ) Income before income tax 14,081,514 11,643,790 Income tax expense ( 1,952,033 ) ( 1,515,231 ) Net income 12,129,481 10,128,559 Other comprehensive income (loss) 954,167 ( 78,609 ) Total comprehensive income $ 13,083,648 $ 10,049,950 Earnings per share (NT$) Basic $ 1.52 $ 1.46 2015 ANNUAL REPORT

Taiwan Cooperative Bills Finance Co., Ltd. Condensed Statements of Comprehensive Income For the Years Ended December 31, 2015 and 2014 (In Thousands of New Taiwan Dollars, Except Per Share Amounts) 2015 2014 Net interest $ 287,826 $ 212,915 Net revenues and gains other than interest 187,470 143,281 Total net revenues 475,296 356,196 Reversal of allowance for credit losses and provision 133,295 81,556 Operating expenses ( 128,622 ) ( 116,604 ) Income before income tax 479,969 321,148 Income tax expense ( 1,143 ) ( 637 ) Net income 478,826 320,511 Other comprehensive income 154,080 34,170 Total comprehensive income $ 632,906 $ 354,681 Earnings per share (NT$) Basic $ 1.35 $ 0.90 Taiwan Cooperative Securities Co., Ltd. Condensed Statements of Comprehensive Income For the Years Ended December 31, 2015 and 2014 (In Thousands of New Taiwan Dollars, Except Per Share Amounts) 2015 2014 Revenues $ 692,497 $ 492,412 Service charge ( 23,578 ) ( 20,268 ) Other operating costs ( 29,348 ) ( 27,102 ) Employee benefits ( 287,488 ) ( 260,785 ) Other operating expenses ( 213,248 ) ( 174,001 ) Other gains 55,904 9,030 Income before income tax 194,739 19,286 Income tax expense ( 24,305 ) ( 4,978 ) Net income 170,434 14,308 Other comprehensive income (loss) 16,518 ( 1,841 ) Total comprehensive income $ 186,952 $ 12,467 Earnings per share (NT$) Basic $ 0.44 $ 0.05 Co-operative Assets Management Co., Ltd. Condensed Statements of Comprehensive Income For the Years Ended December 31, 2015 and 2014 (In Thousands of New Taiwan Dollars, Except Per Share Amounts) 2015 2014 Operating revenues $ 754,685 $ 740,874 Operating expenses ( 351,720 ) ( 380,828 ) Operating benefits 402,965 360,046 Non-operating losses ( 7,480 ) ( 550 ) Income before income tax 395,485 359,496 Income tax expense ( 67,249 ) ( 59,914 ) Net income 328,236 299,582 Other comprehensive income (loss) ( 16,657 ) 28,997 Total comprehensive income $ 311,579 $ 328,579 Earnings per share (NT$) Basic $ 1.25 $ 0.64 141 142 Financial Information

BNP Paribas Cardif TCB Life Insurance Co., Ltd. Condensed Statements of Comprehensive Income For the Years Ended December 31, 2015 and 2014 (In Thousands of New Taiwan Dollars, Except Per Share Amounts) 2015 2014 Operating revenues $ 30,745,687 $ 33,311,379 Operating costs ( 29,318,301 ) ( 32,383,292 ) Operating expenses ( 580,245 ) ( 545,291 ) Income before income tax 847,141 382,796 Income tax expenses ( 94,551 ) ( 8,366 ) Net income 752,590 374,430 Other comprehensive income 250,370 298,825 Total comprehensive income $ 1,002,960 $ 673,255 Earnings per share (NT$) Basic $ 1.25 $ 0.62

Taiwan Cooperative Securities Investment Trust Co., Ltd. (Former Name: BNP Paribas TCB Asset Management Co., Ltd.) Condensed Statements of Comprehensive Income For the Years Ended December 31, 2015 and 2014 (In Thousands of New Taiwan Dollars, Except Per Share Amounts) 2015 2014 Operating revenues $ 153,593 $ 111,920 Operating expenses ( 178,834 ) ( 179,946 ) Operating loss ( 25,241 ) ( 68,026 ) Non-operating gains and losses 4,382 2,473 Loss before income tax ( 20,859 ) ( 65,553 ) Income tax expenses - - Net loss ( 20,859 ) ( 65,553 ) Other comprehensive income - - Total comprehensive loss $ ( 20,859 ) $ ( 65,553 ) Loss per share (NT$) Basic $ ( 0.69 ) $ (3.20 )

Taiwan Cooperative Venture Capital Co., Ltd. Condensed Statements of Comprehensive Income Period from October 1, 2015 to December 31, 2015 (In Thousands of New Taiwan Dollars, Except Per Share Amounts) 2015 Operating revenues $ 1,416 Operating expenses ( 3,555 ) Operating loss ( 2,139 ) Non-operating gains and losses - Loss before income tax ( 2,139 ) Income tax expenses - Net loss ( 2,139 ) Other comprehensive income - Total comprehensive loss $ ( 2,139 ) Loss per share (NT$) Basic $ ( 0.02 ) 2015 ANNUAL REPORT

TABLE 5 TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES BUSINESS SEGMENT FINANCIAL INFORMATION FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 (In Thousands of New Taiwan Dollars) Business Segment For the Year Ended December 31, 2015

Items Banking Bill Finance Insurance Others Consolidated Net interest $ 30,038,002 $ 103,059 $ 1,060,103 $ 873,205 $ 32,074,369 Net revenues and gains (losses) other than interest 6,141,907 392,297 ( 2,534,421 ) 2,248,542 6,248,325 Total net revenues (losses) 36,179,909 495,356 ( 1,474,318 ) 3,121,747 38,322,694 Bad-debt expenses and provision for losses on guarantees ( 2,148,273 ) 133,295 - ( 210,014 ) ( 2,224,992 ) Net change in reserves for insurance liabilities - - 4,343,586 - 4,343,586 Operating expenses ( 22,906,425 ) ( 120,074 ) ( 538,014 ) ( 1,265,155 ) ( 24,829,668 ) Income before income tax 11,125,211 508,577 2,331,254 1,646,578 15,611,620 Income tax expenses ( 1,952,033 ) ( 1,143 ) ( 94,551 ) ( 102,182 ) ( 2,149,909 ) Net income 9,173,178 507,434 2,236,703 1,544,396 13,461,711

Business Segment For the Year Ended December 31, 2014

Items Banking Bill Finance Insurance Others Consolidated Net interest $ 27,755,829 $ 68,470 $ 1,086,456 $ 860,074 $ 29,770,829 Net revenues and gains (losses) other than interest 9,235,048 307,574 ( 5,294,056 ) 1,467,078 5,715,644 Total net revenues (losses) 36,990,877 376,044 ( 4,207,600 ) 2,327,152 35,486,473 Bad-debt expenses and provision for losses on guarantees ( 6,248,353 ) 81,556 - ( 259,657 ) ( 6,426,454 ) Net change in reserves for insurance liabilities - - 6,319,674 - 6,319,674 Operating expenses ( 21,662,427 ) ( 108,042 ) ( 519,716 ) ( 1,024,100 ) ( 23,314,285 ) Income before income tax 9,080,097 349,558 1,592,358 1,043,395 12,065,408 Income tax expenses ( 1,515,231 ) ( 637 ) ( 8,366 ) ( 127,106 ) ( 1,651,340 ) Net income 7,564,866 348,921 1,583,992 916,289 10,414,068

143 144 Financial Information

TABLE 6 TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES DISCLOSURE REQUIRED UNDER ARTICLE 46 OF THE FINANCIAL HOLDING COMPANY ACT DECEMBER 31, 2015 AND 2014 (In Thousands of New Taiwan Dollars, %)

December 31, 2015 Total Amounts Total Amounts Percentage Percentage of Credits, of Credits, Name of TCFHC’s Name of TCFHC’s Endorsement or Endorsement or Equity Equity Other Transactions Other Transactions 1. Same person Central Bank of the Republic of China (ROC) $ 443,715,000 237.80 Ruen Chen Investment Holding Co., Ltd. $ 4,807,000 2.58 National Treasury Administration, ROC 101,602,695 54.45 Dragon Steel Corp. 4,688,644 2.51 Tai Power Co., Ltd. 85,111,282 45.61 Evergreen Marine Corp. (Taiwan) Ltd. 4,529,851 2.43 Kaohsiung Financial Bureau 55,502,774 29.75 Chiayi County Government 3,915,000 2.10 Taiwan High Speed Rail Corp. 53,209,426 28.52 Pingtung County Government 3,860,000 2.07 CPC Corporation, Taiwan 31,279,902 16.76 Formosa Chemical & Fibre Corp. 3,696,229 1.98 Taiwan Railways Administration 14,480,000 7.76 Bank of America N.A. 3,662,158 1.96 Kaohsiung rapid Transit Corp. 13,334,885 7.15 Highwealth Construction Co., Ltd. 3,624,505 1.94 Clevo Corp. 11,269,097 6.04 Formosa Plastics Corp. 3,507,772 1.88 Kaohsiung Transportation Bureau 9,950,700 5.33 Chungwha Construction Corp. 3,449,331 1.85 Taiwan Semiconductor Manufacturing Co., Ltd. 9,688,017 5.19 Yunlin County Government 3,409,484 1.83 Eva Airways Corp. 8,989,884 4.82 Pacific Sogo Department Stores Co., Ltd. 3,406,220 1.83 AUO Co., Ltd. 8,046,085 4.31 Bank of Communications Company Ltd. 3,361,794 1.80 Industrial Development Bureau, Ministry of Economic 7,489,444 4.01 Hon Hai Precision Co., Ltd. 3,270,765 1.75 Affairs, ROC Formosa Petrochemical Corp. 6,906,728 3.70 Formosa Group (Cayman) Ltd. 3,235,392 1.73 Innolux Corp. 6,600,000 3.54 US Treasury 3,203,545 1.72 China Airlines Ltd. 6,260,063 3.35 Hanshin Asset Management Corp. 3,177,800 1.70 Yilan County Government 5,821,942 3.12 Farglory Land Development Co., Ltd. 3,111,306 1.67 Aerospace Industrial Development Corp. 5,482,929 2.94 United Microelectronics Corp. 3,063,051 1.64 Yang Ming Marine Transport Corp. 5,222,220 2.80 China Man-Made Fiber Corporation 3,050,381 1.63 China Steel Corp. 4,907,796 2.63 Walsin Corp. 3,001,430 1.61 Evergreen Marine (Singapore) Pte. Ltd. 4,891,671 2.62 2. Same related parties Client A 11,444,478 6.13 Client D 4,776,834 2.56 Client B 9,690,731 5.19 Client E 3,101,764 1.66 Client C 4,879,057 2.61 3. Same affiliate Evergreen Marine Corp. (Taiwan) Ltd. 18,488,968 9.91 CSE Transport Corp. 13,423,814 7.19 Evergreen Marine (UK) Ltd. 17,579,787 9.42 Chung Hung Steel Corp. 13,383,814 7.17 Eva Airways Corp. 17,265,832 9.25 Nan Hua Cement Corp. 13,166,368 7.06 Eva Cosmonautic Flight Precision Corp. 17,265,832 9.25 China Steel Corp. 13,066,172 7.00 Clevo (Cayman Island) Holding Company 16,386,181 8.78 Buynow (Wuhan) Corp. 12,275,178 6.58 Clevo Corp. 15,892,981 8.52 Buynow (Anshan) Corp. 12,232,796 6.56 Far Eastern International Leasing Corp. 14,662,825 7.86 Buynow (Fujian) Corp. 11,872,610 6.36 Evergreen Aviation Technologies Corp. 14,096,381 7.55 Buynow (Shenyang) Corp. 11,269,097 6.04 Formosa Synthetic Rubber (Ningbo) Industrial Co., Ltd. 13,838,065 7.42 Far Eastern New Century Corp. 10,985,198 5.89 Buynow (Zhengzhou) Corp. 13,456,034 7.21 Hon Hai Precision Co., Ltd. 10,935,836 5.86 C.S. Aluminium Corp. 13,423,814 7.19 UNI Airways Corp. 10,536,863 5.65 China Steel Corporation India Private Ltd. 13,423,814 7.19 Far Eastern Construction Corp. 10,523,938 5.64 2015 ANNUAL REPORT

Total Amounts Total Amounts Percentage Percentage of Credits, of Credits, Name of TCFHC’s Name of TCFHC’s Endorsement or Endorsement or Equity Equity Other Transactions Other Transactions U-Ming Marine Transport Corp. $ 10,279,720 5.51 Wan Hai Lines (Singapore) Pte. Ltd. $ 5,458,211 2.93 Global Mobile Corp. 10,251,769 5.49 Nan Ya Plastic Co., Ltd. 5,405,329 2.90 Ruentex Industries Ltd. 10,251,769 5.49 Farglory Dome Co., Ltd. 5,383,055 2.88 Taiwan Semiconductor Manufacturing Co., Ltd. 9,953,746 5.33 China Ecotek Corp. 5,318,217 2.85 Yi Tai Fund Corp. 9,901,026 5.31 Taiwan (Guang An) Cement Holding Co., Ltd. 5,239,758 2.81 Forhouse Corp. 9,813,613 5.26 Yes Logistics Corp. 5,223,220 2.80 Dragon Steel Corp. 9,596,440 5.14 Highwealth Construction Co., Ltd. 5,178,961 2.78 AUO Co., Ltd. 9,565,651 5.13 QiYu Construction Co., Ltd. 5,178,961 2.78 EDA Hua Yue Hotel Corp. 9,067,016 4.86 China Steel Chemical Corp. 5,149,970 2.76 China Aviation Development Foundation 8,860,063 4.75 Run Long Construction Co., Ltd. 5,096,015 2.73 EDA Skylark Hotel Corp. 8,801,176 4.72 China Man-Made Fiber Corporation 5,078,586 2.72 Ren Ying Enterprise Co., Ltd. 8,784,568 4.71 Luzhou SCITUS Cement Holdings Ltd. 5,075,358 2.72 BenQ Materials Corp. 8,737,977 4.68 Pao Industrial Co., Ltd. 4,947,796 2.65 Lextar Electronics Corp. 8,547,142 4.58 Himag Magnetic Corp. 4,944,290 2.65 Taiwan Cement Co., Ltd. 8,457,380 4.53 Taiwan Mobile Corp. 4,935,197 2.64 AUO Sunpower Sdn. Bhd. 8,440,645 4.52 Chung Kung Guard Corp. 4,915,632 2.63 Yieh Phui (Hong Kong) Holdings Ltd. 8,410,078 4.51 Coreasia Co., Ltd. 4,908,132 2.63 Yang Ming Marine Transport Corp. 8,128,004 4.36 Pacific Sogo Department Stores Co., Ltd. 4,906,320 2.63 AUO (Kunshan) Co., Ltd. 8,053,319 4.32 Far Eastern Department Stores Ltd. 4,906,220 2.63 Taiwan CFI Corp. 8,046,104 4.31 Evergreen Marine (Singapore) Pte. Ltd. 4,891,671 2.62 Yuan Ding Investment Corp. 7,986,011 4.28 Fujian Fuxin special steel Co., Ltd. 4,870,536 2.61 Far EasTone Telecommunications Co., Ltd. 7,986,011 4.28 WPG Holdings Ltd. 4,785,528 2.56 Kuan-Ho Refractories Corp. 7,964,180 4.27 Formosa Plastics Corp. 4,759,286 2.55 Ruen Chen Investment Holding Co., Ltd. 7,901,047 4.23 Greencompass Marine S.A. 4,749,051 2.55 Feng Sheng Enterprise Co., Ltd. 7,872,313 4.22 Formosa Chemical & Fibre Corp. 4,630,421 2.48 Ruentex Development Co., Ltd. 7,851,790 4.21 Taiwan Prosperity Chemical Corp. 4,566,855 2.45 Yang Ming Marine Transport (Liberia) Corp. 7,426,626 3.98 Farglory Land Development Co., Ltd. 4,558,624 2.44 Asia Cement Corp. 7,251,065 3.89 Zhong Tai Hotel Co., Ltd. 4,532,207 2.43 TCC International Ltd. 7,179,678 3.85 Mandarin Oriental, Taipei 4,532,207 2.43 Yien United Steel Corp. 7,101,730 3.81 Inteplast Group Inc. 4,323,322 2.32 Far Eastern Big City Department Stores Ltd. 7,081,066 3.79 Formosa PS (Ningbo) Co., Ltd. 4,314,576 2.31 Formosa Petrochemical Corp. 6,906,728 3.70 Evergreen international Corp. 4,232,366 2.27 United Microelectronics Corp. 6,782,904 3.64 Chung Kung Building Management Corp. 4,230,887 2.27 Innolux Corp. 6,600,000 3.54 Capital Machinery Corp. 4,208,078 2.26 China Airlines Ltd. 6,265,563 3.36 Chungwha Construction Corp. 4,208,078 2.26 All Oceans Transportation Inc. 6,175,943 3.31 Nan Ya Technology Corp. 4,168,443 2.23 Yieh Hsing Enterprise Co., Ltd. 6,092,944 3.27 Pan Asia Chemical Co. 4,120,381 2.21 Taiwan Cement (Anshun) Co., Ltd. 6,028,878 3.23 Funbon Financial Holding Co., Ltd. 4,118,334 2.21 Kuang Ming Shipping Corp. 6,023,599 3.23 EDA Hospital Corp. 4,101,032 2.20 Kuang Ming (Liberia) Corp. 6,023,599 3.23 Uni-President Enterprises Corp. 4,054,624 2.17 Pou Chen Industry Corp. 5,989,600 3.21 Kuo Chang Industry Co., Ltd. 4,035,953 2.16 Kao Ming Container Terminal Corp. 5,796,504 3.11 Shih Wei Navigation Co., Ltd. 4,025,161 2.16 Inotera Memories, Inc. 5,767,009 3.09 Spinnaker Pescadores S.A. Panama 4,025,161 2.16 Li Sheng Corporation 5,752,987 3.08 Yieh Phui Enterprise Co., Ltd. 3,997,731 2.14 China Steel Structure Co., Ltd. 5,734,745 3.07 Tatung Co., Ltd. 3,984,601 2.14 United Steel Engineering & Construction Corp. 5,734,745 3.07 Chailease Finance Co., Ltd. 3,904,567 2.09 Nan Chung Petrochemical Corp. 5,600,574 3.00 Formosa Biomedical Technology Corp. 3,868,229 2.07 China Steel Machinery Corp. 5,495,008 2.94 Formosa Acrylate (Ningbo) Industrial Co., Ltd. 3,858,404 2.07 Wan Hai Lines Ltd. 5,458,211 2.93 TTET Union Corp. 3,851,127 2.06 145 146 Financial Information

Total Amounts Total Amounts Percentage Percentage of Credits, of Credits, Name of TCFHC’s Name of TCFHC’s Endorsement or Endorsement or Equity Equity Other Transactions Other Transactions Chunghwa Picture Tubes, Ltd. $ 3,846,668 2.06 Dong Lien maritime Sa Panama $ 3,378,236 1.81 Giantplus Technology Co., Ltd. 3,846,668 2.06 Fina Finance & Trading Co., Ltd. 3,377,705 1.81 Taiwan Acetic Acid Chemical Co., Ltd. 3,840,073 2.06 Oriental Petrochemical (Taiwan) Corp. 3,373,546 1.81 Formosa (Ningbo) Industrial Co., Ltd. 3,825,721 2.05 Chailease Consumer Finance Co., Ltd. 3,358,595 1.80 Chung Hang Co., Ltd. 3,784,460 2.03 Wavetek Corp. 3,334,889 1.79 Formosa Polyethylene (Ningbo) Industrial Co., Ltd. 3,770,812 2.02 Info-Tek Corp. 3,324,760 1.78 Chailease Rental Corp. 3,674,243 1.97 Walsin Corp. 3,304,515 1.77 Chailease Holding Company Ltd. 3,674,243 1.97 UniSense Technology Co., Ltd. 3,292,399 1.76 G-Tech Optoelectronics Corp. 3,674,083 1.97 Fubon Bank Eurobond (OTC-15-0007) 3,280,664 1.76 Bank of America N.A. 3,662,158 1.96 NextPower Technology Corporation 3,225,051 1.73 Radium Life Tech. Co., Ltd. 3,611,624 1.94 Hanshin Asset Management Corp. 3,177,800 1.70 Yosun Industrial Corp. 3,606,474 1.93 President Packaging Ind. Corp. 3,160,186 1.69 Chahui Power Corp. 3,604,757 1.93 Advance Material Corp. 3,143,813 1.68 Genuine Crop. 3,550,274 1.90 Walton Advanced Engineering Inc. 3,140,700 1.68 General Interface Solution Ltd. 3,468,045 1.86 Unistars Corp. 3,124,621 1.67 Fubon China Bank Corp. 3,461,504 1.86 Shin-An Transportation Corp. 3,116,206 1.67 Oriental Union Chemical (Yangzhou) Corp. 3,420,929 1.83 Topcell Solar International Co., Ltd. 3,076,051 1.65 China Petrochemical Development Corporation 3,413,748 1.83 TERA Energy Development Corp. 3,066,831 1.64 Oriental Resources Development Ltd. 3,382,438 1.81 ABN AMRO Bank N.V. 3,032,338 1.63 WPG Electronic Ltd. 3,382,422 1.81 Taiwan Finance Corp. 3,006,892 1.61

December 31, 2014 Total Amounts Total Amounts Percentage Percentage of Credits, of Credits, Name of TCFHC’s Name of TCFHC’s Endorsement or Endorsement or Equity Equity Other Transactions Other Transactions 1. Same person Central Bank of the Republic of China (ROC) $ 461,665,000 297.17 Ruen Chen Investment Holding Co., Ltd. $ 4,807,000 3.09 Tai Power Co., Ltd. 93,662,946 60.29 Foundation of China Aviation Development Foundation 4,500,000 2.90 National Treasury Administration, ROC 89,437,588 57.57 Dragon Steel Corp. 4,384,543 2.82 Taiwan High Speed Rail Corp. 55,351,408 35.63 Evergreen Marine (Singapore) Pte. Ltd. 4,358,187 2.81 CPC Corporation, Taiwan 53,394,981 34.37 Pacific Sogo Department Stores Co., Ltd. 4,332,220 2.79 Kaohsiung Financial Bureau 30,597,285 19.70 China Steel Corp. 4,304,895 2.77 Industrial Development Bureau, Ministry of Economic 12,109,720 7.79 Chiayi County Government 4,065,000 2.62 Affairs ROC Eva Airways Corp. 10,986,566 7.07 Yunlin County Government 4,025,738 2.59 Kaohsiung Transportation Bureau 10,500,241 6.76 Nan Ya Plastic Co., Ltd. 3,935,349 2.53 Kaohsiung rapid Transit Corp. 10,000,000 6.44 Highwealth Construction Co., Ltd. 3,777,956 2.43 Taiwan Semiconductor Manufacturing Co., Ltd. 8,597,517 5.53 Aerospace Industrial Development Corp. 3,595,952 2.31 AUO Co., Ltd. 8,253,474 5.31 Formosa Chemical & Fibre Corp. 3,564,277 2.29 Formosa Petrochemical Corp. 7,499,133 4.83 China Petrochemical Development Corporation 3,492,218 2.25 China Airlines Ltd. 6,941,406 4.47 Nantou County Government 3,417,000 2.20 Innolux Corp. 6,765,857 4.36 Wan Hai Lines Ltd. 3,415,408 2.20 Yilan County Government 6,079,877 3.91 China Man-Made Fiber Corporation 3,358,243 2.16 Yang Ming Marine Transport Corp. 5,560,792 3.58 2. Same related parties Client A 8,601,455 5.54 Client C 3,877,956 2.50 Client B 4,639,011 2.99 2015 ANNUAL REPORT

Total Amounts Total Amounts Percentage Percentage of Credits, of Credits, Name of TCFHC’s Name of TCFHC’s Endorsement or Endorsement or Equity Equity Other Transactions Other Transactions 3. Same affiliate Evergreen Marine (UK) Ltd. $ 18,968,581 12.21 TCC International Ltd. $ 7,268,850 4.68 Evergreen Marine Corp. (Taiwan) Ltd. 18,472,862 11.89 China Airlines Ltd. 6,946,906 4.47 Eva Airways Corp. 17,269,402 11.12 All Oceans Transportation Inc. 6,741,882 4.34 Eva Cosmonautic Flight Precision Corp. 17,269,402 11.12 Yien United Steel Corp. 6,730,918 4.33 Formosa Synthetic Rubber (Ningbo) Industrial Co., Ltd. 15,667,297 10.08 KUANG MING (LIBERIA) Corp. 6,405,251 4.12 Evergreen Aviation Technologies Corp. 15,038,655 9.68 Far Eastern Department Stores Ltd. 6,232,066 4.01 UNI Airways Corp. 13,169,522 8.48 Pacific Sogo Department Stores Co., Ltd. 6,232,066 4.01 Far Eastern New Century Corp. 12,742,958 8.20 Wan Hai Lines Ltd. 6,169,431 3.97 Chung Hung Steel Corp. 12,519,103 8.06 Wan Hai Line (Singapore) Pte Ltd. 6,169,431 3.97 C.S. Aluminium Corp. 12,519,103 8.06 Kao Ming Container Terminal Corp. 6,122,337 3.94 China Steel Corporation India Private Ltd. 12,519,103 8.06 Highwealth Construction Co., Ltd. 5,873,679 3.78 CSE Transport Corp. 12,519,103 8.06 QiYu Construction Co., Ltd. 5,873,679 3.78 Kaohsiung Rapid Transit Corp. 12,512,307 8.05 Taiwan Cement (Anshun) Co., Ltd. 5,843,700 3.76 Far Eastern Construction Corp. 11,835,297 7.62 Yieh Hsing Enterprise Co., Ltd. 5,828,788 3.75 Csei Transport (Panama) Corp. 11,463,437 7.38 Taiwan Prosperity Chemical Corp. 5,633,789 3.63 Foundation of China Aviation Development Foundation 11,441,406 7.36 Nan Ya Technology Corp. 5,593,922 3.60 China Steel Corp. 11,406,431 7.34 Pou Chen Industry Corp. 5,532,000 3.56 Hon Hai Precision Co., Ltd. 10,820,509 6.97 Pau-Jar Construction Co., Ltd. 5,444,667 3.50 AUO Co., Ltd. 10,401,354 6.70 Uni-President Enterprises Corp. 5,422,737 3.49 Global Mobile Corp. 9,913,471 6.38 Bo Yuan Construction Co., Ltd. 5,223,964 3.36 Ruentex Industries Ltd. 9,913,471 6.38 United Microelectronics Corp. 5,122,440 3.30 Ren Ying Enterprise Co., Ltd. 9,817,526 6.32 Formosa Chemical & Fibre Corp. 5,108,883 3.29 Far EasTone Telecommunications Co., Ltd. 9,534,676 6.14 Formosa Biomedical Technology Corp. 5,108,883 3.29 Taiwan Cement Co., Ltd. 9,499,622 6.11 Taiwan (Guang An) Cement Holding Co., Ltd. 5,083,620 3.27 AUO Sunpower Sdn. Bhd. 9,013,554 5.80 Run Long Construction Co., Ltd. 4,974,330 3.20 Yang Ming Marine Transport Corp. 8,979,223 5.78 China Steel Structure Co., Ltd. 4,968,828 3.20 Feng Sheng Enterprise Co., Ltd. 8,934,049 5.75 President Packaging Ind. Corp. 4,959,407 3.19 M.SETEK Co., Ltd. 8,801,274 5.67 Chahui Power Corp. 4,938,543 3.18 BenQ Materials Corp. 8,765,196 5.64 WPG Holdings Ltd. 4,936,925 3.18 Lextar Electronics Corp. 8,753,474 5.63 Luzhou SCITUS Cement Holdings Ltd. 4,925,270 3.17 Kuan-Ho Refractories Corp. 8,707,872 5.61 Ton Yi Industrial Corp. 4,822,440 3.10 Dragon Steel Corp. 8,689,438 5.59 China Ecotek Corp. 4,708,149 3.03 Asia Cement Corp. 8,648,218 5.57 Farglory Dome Co., Ltd. 4,658,328 3.00 Taiwan Semiconductor Manufacturing Co., Ltd. 8,617,490 5.55 Nan Ya Plastics (Ningbo) Corp., Ltd. 4,594,021 2.96 EDA Hua Yue Hotel Corp. 8,425,445 5.42 Unimicron Technology Corp. 4,562,888 2.94 Inotera Memories, Inc. 8,343,313 5.37 Ttet Union Corp. 4,493,937 2.89 China Steel Global Trading Corporation 8,207,413 5.28 Nan Ya Plastics (Hong Kong) Corp. Ltd. 4,416,669 2.84 EDA Skylark Hotel Corp. 8,187,695 5.27 Evergreen Marine (Singapore) Pte. Ltd. 4,358,187 2.81 Yang Ming Marine Transport (Liberia) Corp. 8,134,764 5.24 Himag Magnetic Corp. 4,326,614 2.79 Chimei Lighting Technology Corp. 8,039,031 5.17 China Steel Chemical Corp. 4,311,691 2.78 Ruen Chen Investment Holding Co., Ltd. 8,037,772 5.17 Zhong Tai Hotel Co., Ltd. 4,269,000 2.75 Nan Ya Plastic Co., Ltd. 7,762,696 5.00 Formosa Plastics Corp. 4,251,757 2.74 Ruentex Development Co., Ltd. 7,742,337 4.98 Tatung Co., Ltd. 4,247,645 2.73 Innolux Corp. 7,715,957 4.97 Nan Ya (Hong Kong) Printed Circuit Board Corp. 4,235,422 2.73 Leadtek Global Group Ltd. 7,715,957 4.97 Formosa PS (Ningbo) Co., Ltd. 4,219,581 2.72 Yieh Phui (Hong Kong) Holdings Ltd. 7,543,296 4.86 Evergreen international Corp. 4,171,897 2.69 Formosa Petrochemical Corp. 7,499,133 4.83 Chunghwa Picture Tubes, Ltd. 4,141,615 2.67 Nan Chung Petrochemical Corp. 7,294,192 4.70 Giantplus Technology Co., Ltd. 4,141,615 2.67 147 148 Financial Information

Total Amounts Total Amounts Percentage Percentage of Credits, of Credits, Name of TCFHC’s Name of TCFHC’s Endorsement or Endorsement or Equity Equity Other Transactions Other Transactions Fujian Fuxin special steel Co., Ltd. $ 4,133,317 2.66 Oriental Union Chemical (Yangzhou) Corp. $ 3,339,595 2.15 Pan Asia Chemical Co., Ltd. 4,121,818 2.65 Cayman President Holdings Ltd. 3,311,778 2.13 China Man-Made Fiber Corporation 4,121,818 2.65 Macronix International Co., Ltd. 3,276,913 2.11 Taiwan Mobile Corp. 3,928,682 2.53 Li Sheng Corporation 3,245,593 2.09 Kuo Chang Industry Co., Ltd. 3,852,340 2.48 Genuine Crop. 3,221,234 2.07 Yosun Industrial Corp. 3,845,759 2.48 Maxchip Electronics Corp. 3,213,934 2.07 Shih Wei Navigation Co., Ltd. 3,798,252 2.44 Chailease Finance Co., Ltd. 3,195,177 2.06 Spinnaker Pescadores S.A. Panama 3,798,252 2.44 ABN AMRO Bank N.V. 3,184,956 2.05 Taiwan (Guigang) Cement Holding Co., Ltd. 3,792,751 2.44 RBS. London 3,184,956 2.05 Chung Hang Co., Ltd. 3,718,648 2.39 Formosa Polyethylene (Ningbo) Industrial Co., Ltd. 3,174,934 2.04 Yosun Hong Kong Corporation Ltd. 3,692,020 2.38 Formosa (Ningbo) Industrial Co., Ltd. 3,164,483 2.04 Taiwan Acetic Acid Chemical Co., Ltd. 3,686,849 2.37 Fina Finance & Trading Co., Ltd. 3,161,852 2.04 Yosun Singapore Pte Ltd. 3,682,524 2.37 Henghao Technology Corp. 3,124,353 2.01 Radium Life Tech. Co., Ltd. 3,643,655 2.35 Dong Lien Maritime S.A. Panama 3,109,542 2.00 Smart Idea Holdings Ltd. 3,612,788 2.33 Oriental Petrochemical (Taiwan) Corp. 3,095,289 1.99 China Petrochemical Development Corporation 3,610,664 2.32 Formosa Acrylate (Ningbo) Industrial Co., Ltd. 3,093,859 1.99 Chemax International Corporation 3,610,664 2.32 WPG Electronic Ltd. 3,070,730 1.98 Farglory Land Development Co., Ltd. 3,607,605 2.32 Yieh Phui Enterprise Co., Ltd. 3,042,752 1.96 Shin-An Transportation Corp. 3,575,276 2.30 Unimicron Technology (Kunshan) Corp. 3,042,728 1.96 Formosa Biomedical Technology Corp. 3,566,277 2.30 Oriental Resources Development Ltd. 3,016,081 1.94 Formosa Plastics Corp. U.S.A. 3,550,642 2.29 Funbon Financial Holding Co., Ltd. 3,013,521 1.94 Inteplast Group Inc. 3,537,493 2.28 Chailease Rental Corp. 3,001,357 1.93 TCC International Holdings Ltd. 3,476,051 2.24

TABLE 7 TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES MARKETABLE SECURITIES HELD DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars)

Relationship December 31, 2015 Holding Company Marketable Securities Type with the Financial Statement Market Value Shares Percentage of Note Name and Issuer Holding Account Carrying Value or Net Asset (Thousands) Ownership Company Value Co-operative Assets Stock Management Co., Ltd. Cooperative Financial Subsidiary Investments accounted for - $ 954,873 100.00 $ 954,873 Note 1 International Lease Co., Ltd. using equity method Cooperative Bonds Insurance Brokers Co., Ltd. Government Bonds - 88 A3 - Held-to-maturity financial - 3,350 - 3,427 Note 2 assets Note 1: When Taiwan Cooperative Financial Holding Co., Ltd. prepared the consolidated financial statements, the related account and security transaction were eliminated. Note 2: Pledged bonds as collaterals for public guarantee at Financial Supervisory Commission. 2015 ANNUAL REPORT

TABLE 8 TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 10% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars)

Marketable Financial Beginning Balance Acquisition Disposal Ending Balance Counter- Nature of Company Name Securities Type Statement Gain (Loss) party Relationship Shares Amount Shares Amount Shares Price Carrying Value Shares Amount and Issuer Account on Disposal Taiwan Cooperative Taiwan Investments - - 7,136,276 $ 149,887,137 1,213,024 $ 40,000,512 - $ - $ 7,708,071 $ - 8,349,300 $ 182,179,578 Financial Holding Co., Cooperative accounted for (Note 1) (Note 1) (Note 5) Ltd. Bank, Ltd. using equity method Taiwan Investments - - 300,000 3,003,170 172,420 2,197,737 -- - - 472,420 5,200,907 Cooperative accounted for (Note 2) (Note 5) Securities Co., using equity Ltd. method Taiwan Cooperative Taipei Financial Cathay - - - 24,000 669,600 - - - - 24,000 669,600 Bank, Ltd. Financial assets carried United Center Corp. at cost Bank Company Limited Taiwan High Available-for- -- - - 53,300 551,655 -- - - 53,300 551,655 Speed Rail sale financial (Note 3) Corporation assets Taiwan Cooperative Taiwan Equity -- - - 100,000 1,000,000 - - 2,139 - 100,000 997,861 Financial Holding Co., Cooperative investment for (Note 4) (Note 4) (Note 5) Ltd. Venture Capital using equity Co., Ltd. method Note 1: Acquisition consists of unrealized gain of $1,516,646 thousand on available-for-sale financial assets, $52,280 thousand from exchange differences on the translation of foreign operations, $2,168 thousand from changes in the fair value attributable to changes in the credit risk of financial liabilities designated as at fair value through profit or loss, $26,146,016 thousand from capital increase, $11,974,702 thousand from the share of gains of subsidiaries accounted for using equity method and $308,700 thousand from share-based payment for the employee's subscription for new shares. Disposal consists of $7,089,000 thousand from cash dividends, $2,144 thousand from the effect of retrospective application and $616,927 thousand from the remeasurement of the defined benefit plan. Note 2: Acquisition consists of unrealized gain of $16,518 thousand on available-for-sale financial assets, $2,000,072 thousand from capital increase, $170,434 thousand from the share of gains of subsidiaries accounted for using equity method and $10,713 thousand from share-based payment for the employee's subscription for new shares. Note 3: Acquisition consists of $533,000 thousand from capital increase and unrealized gain of $18,655 thousand on available-for-sale financial assets. Note 4: Acquisition consists of $1,000,000 thousand from capital increase. Disposal consists of $2,139 thousand from the share of losses of subsidiaries accounted for using equity method. Note 5: When preparing the consolidated financial statements, the amount had been eliminated.

TABLE 9 TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES ALLOWANCE OF SERVICE FEES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$5 MILLION FOR THE YEAR ENDED DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars) Percentage of Service Total Amounts of Total Allowance of Allowance of Service Percentage of Allowance of Service Revenue Revenue From Securities Firms Counter-party Nature of Relationship Brokerage Service Brokerage Service Revenue for Related Service Revenue for Related From Related Party Related Party to Total Revenue Revenue Party Party to Total Allowance Amounts Taiwan Cooperative Taiwan Cooperative Same parent company $ 484,392 $ 239,971 $ 9,679 $ 6,963 2.00 2.90 Securities Co., Ltd. Bank, Ltd.

149 150 Financial Information

TABLE 10 TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$300 MILLION OR 10% OF THE PAID-IN CAPITAL DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars) Overdue Ending Balance Amounts Received in Allowance for Company Name Related Party Relationship Turnover Rate (Note) Amount Actions Taken Subsequent Period Impairment Loss

Taiwan Cooperative Taiwan Cooperative Bank, Ltd. Subsidiary $ 1,251,673 - $ - - $ - $ - Financial Holding Co., Ltd. Taiwan Cooperative Taiwan Cooperative Financial Parent company 744,306 - - - - - Bank, Ltd. Holding Company, Ltd. Note: The receivables related to consolidated tax return. When preparing the consolidated financial statements, the receivables have been eliminated.

TABLE 11 TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. PERCENTAGE SHARE IN INVESTEES AND RELATED INFORMATION DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars) Proportionate Share of the Company and its Affiliates in Investees (Note 1) Main Businesses Percentage of Investor Company Investee Company Location Carrying Value Investment Gain Pro Forma Total Note and Products Ownership Shares Shares (Thousands) Shares Percentage of (Note 2) (Thousands) Ownership Taiwan Taiwan Cooperative Taipei Banking 100.00 $ 182,179,578 $ 11,974,702 8,349,300 - 8,349,300 100.00 Note 3 Cooperative Bank, Ltd. Financial Holding Co., Ltd. Taiwan Cooperative Taipei Securities 100.00 5,200,907 170,434 472,420 - 472,420 100.00 Note 3 Securities Co., Ltd. dealer Taiwan Cooperative Taipei Bills finance 100.00 4,901,323 478,826 354,727 - 354,727 100.00 Note 3 Bills Finance Co., Ltd. dealer Co-operative Assets Taipei Acquisition of 100.00 3,177,251 328,236 261,600 - 261,600 100.00 Note 3 Management Co., Ltd. delinquent loans Taiwan Cooperative Taipei Securities 100.00 334,606 ( 20,859 ) 30,300 - 30,300 100.00 Note 3 Securities Investment investment trust Trust Co., Ltd. BNP Paribas Cardif Taipei Life insurance 51.00 3,676,739 380,909 306,000 - 306,000 51.00 Note 3 TCB Life Insurance Co., Ltd. Taiwan Cooperative Taipei Venture capital 100.00 997,861 ( 2,139 ) 100,000 - 100,000 100.00 Note 3 Venture Capital Co., Ltd. Note 1: Shares or proforma shares held by the Company, directors, supervisors, president, vice president and affiliates in accordance with the Company Law have been included. Note 2: a. Proforma shares are shares that are assumed to have been obtained through buying equity-based securities or entering into equity-linked derivative contracts for purposes defined in Paragraph 2 of Article 36 and Article 37 of the Financial Holding Company Act. b. Equity-based securities, such as convertible bonds and warrants, are covered by Article 11 of the “Securities and Exchange Law Enforcement Rules.” c. Derivative instruments, such as stock options, are those conforming to the definition of IFRS 39 - “Financial Instruments: Recognition and Measurement,” such as stock options. Note 3: When TCFHC prepares the consolidated financial statements, this investment has been eliminated. 2015 ANNUAL REPORT

TABLE 12 TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES INVESTMENT IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Taiwan Cooperative Bank, Ltd. Accumulated Accumulated % Investment Flows Carrying Value Accumulated Investee Outflow of Outflow of Ownership Main Businesses Total Amount of Investment Investee Net Investment Gain as of Inward Remittance Company Investment from Investment from of Direct and Products Paid-in Capital Type Income (Loss) (Loss) December 31, of Earnings as of Name Taiwan as of Taiwan as of or Indirect Outflow Inflow 2015 December 31, 2015 January 1, 2015 December 31, 2015 Investment Taiwan Deposits, $ 4,547,235 Direct $ 4,547,2351.2 $ - $ - $ 4,547,235 $ ( 93,408 ) 100 $ ( 93,408 ) $ 5,433,226 $ - Cooperative loans, import ( US$ 154,395) ( US$ 154,395) ( US$ 154,395) Bank Suzhou and export, ( Note 1) ( Note 1) ( Note 1) Branch exchange and foreign exchange business Taiwan Deposits, 2,947,314 Direct 2,947,314 - - 2,947,314 ( 51,337 ) 100 ( 51,337 ) 3,138,529 - Cooperative loans, import ( US$ 97,387) ( US$ 97,387) ( US$ 97,387) Bank Tianjin and export, ( Note 1) (Note 1) ( Note 1) Branch exchange and foreign exchange business Taiwan Deposits, 2,950,882 Direct 2,950,882 - - 2,950,882 ( 83,662 ) 100 ( 83,662 ) 3,092,672 - Cooperative loans, import ( US$ 97,549) ( US$ 97,549) ( US$ 97,549) Bank Fuzhou and export, ( Note 1) ( Note 1) ( Note 1) Branch exchange and foreign exchange business

Accumulated Investment in Mainland China as of Investment Amount Approved by the Investment Commission, MOEA Maximum Investment Allowable December 31, 2015 $ 10,445,431 $ 10,445,431 $ 109,772,941 ( US$ 349,331 ) ( US$ 349,331 ) ( Note 2 ) ( Note 1 ) ( Note 1 )

Co-operative Assets Management Co., Ltd. Accumulated Accumulated Accumulated % Investment Flows Carrying Value Inward Investee Outflow of Outflow of Ownership Main Businesses Total Amount of Investment Investee Net Investment as of Remittance of Company Investment from Investment from of Direct and Products Paid-in Capital Type Income (Loss) Gain (Loss) December 31, Earnings as of Name Taiwan as of Taiwan as of or Indirect 2015 December 31, January 1, 2015 Outflow Inflow December 31, 2015 Investment 2015 Taiwan Financial leasing $ 910,980 Direct $ 910,980 $ - $ - $ 910,980 $ 16,745 100 $ 16,745 $ 954,873 $ - Cooperative ( RMB 185,460) ( RMB 185,460) ( RMB 185,460) International ( Note 1) ( Note 1) ( Note 1) Leasing Co., Ltd.

Accumulated Investment in Mainland China as of Investment Amount Approved by the Investment Commission, MOEA Maximum Investment Allowable December 31, 2015 $ 910,980 $ 910,980 $ 1,906,351 ( RMB 185,460 ) ( RMB 185,460 ) ( Note 3 ) ( Note 1 ) ( Note 1 ) Note 1: Translation into New Taiwan dollars at the exchange rates on the date of each outflow of investment. Note 2: Based on the Investment Commission's “Regulation on the Examination of Investment or Technical Cooperation in Mainland China,” investments are limited to the higher of 60 % of TCB's net asset value or 60% of TCB's consolidated net asset value. Note 3: Based on the Investment Commission's “Regulation on the Examination of Investment or Technical Cooperation in Mainland China,” investments are limited to the higher of 60 % of AMC's net asset value or 60% of AMC's consolidated net asset value. 151 152 Financial Information

TABLE 13 TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES BUSINESS RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS AMONG THE PARENT COMPANY AND SUBSIDIARIES FOR THE YEAR ENDED DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars) Description of Transactions (Notes 3 and 5) Transaction Transaction Amount/Total No. Consolidated Transacting Company Counter-party Flow Trading (Note 1) Financial Statement Account Amounts Net Revenue (Note 2) Terms or Total Consolidated Assets (%) Taiwan Cooperative Financial Tax receivables - consolidated 0 Taiwan Cooperative Bank, Ltd. a $ 1,215,673 Note 4 0.04 Holding Co., Ltd. tax return Taiwan Cooperative Financial Tax payables - consolidated tax 1 Taiwan Cooperative Bank, Ltd. b 1,215,673 Note 4 0.04 Holding Co., Ltd. return Taiwan Cooperative Financial Tax payables - consolidated tax 0 Taiwan Cooperative Bank, Ltd. a 744,306 Note 4 0.02 Holding Co., Ltd. return Taiwan Cooperative Financial Tax receivables - consolidated 1 Taiwan Cooperative Bank, Ltd. b 744,306 Note 4 0.02 Holding Co., Ltd. tax return Cooperative Insurance Brokers 1 Taiwan Cooperative Bank, Ltd. a Deposits and remittances 242,200 Note 4 0.01 Co., Ltd. Cooperative Insurance Brokers Cash and cash equivalents, 2 Taiwan Cooperative Bank, Ltd. b 242,200 Note 4 0.01 Co., Ltd. refundable deposits Cooperative Insurance Brokers 1 Taiwan Cooperative Bank, Ltd. a Receivables 198,226 Note 4 0.01 Co., Ltd. Cooperative Insurance Brokers 2 Taiwan Cooperative Bank, Ltd. b Payables 198,226 Note 4 0.01 Co., Ltd. Cooperative Insurance Brokers Service fee and commission 1 Taiwan Cooperative Bank, Ltd. a 2,196,255 Note 4 5.73 Co., Ltd. income Cooperative Insurance Brokers Service charge and commission 2 Taiwan Cooperative Bank, Ltd. b 2,196,255 Note 4 5.73 Co., Ltd. expense 1 Taiwan Cooperative Bank, Ltd. United Taiwan Bank S.A. a Due from banks 582,372 Note 4 0.02 3 United Taiwan Bank S.A. Taiwan Cooperative Bank, Ltd. b Due to banks 582,372 Note 4 0.02 1 Taiwan Cooperative Bank, Ltd. United Taiwan Bank S.A. a Call loans to banks 6,435,789 Note 4 0.20 3 United Taiwan Bank S.A. Taiwan Cooperative Bank, Ltd. b Call loans from banks 6,435,789 Note 4 0.20 BNP Paribas Cardif TCB Life 1 Taiwan Cooperative Bank, Ltd. c Deposits and remittances 1,529,678 Note 4 0.05 Insurance Co., Ltd. BNP Paribas Cardif TCB Life Cash and cash equivalents, 4 Taiwan Cooperative Bank, Ltd. c 1,529,678 Note 4 0.05 Insurance Co., Ltd. refundable deposits BNP Paribas Cardif TCB Life Financial assets at fair value 1 Taiwan Cooperative Bank, Ltd. c 131,446 Note 4 - Insurance Co., Ltd. through profit or loss BNP Paribas Cardif TCB Life Financial assets at fair value 4 Taiwan Cooperative Bank, Ltd. c 131,446 Note 4 - Insurance Co., Ltd. through profit or loss Gains (losses) on financial BNP Paribas Cardif TCB Life 1 Taiwan Cooperative Bank, Ltd. c assets and liabilities at fair $131,446 Note 4 0.34 Insurance Co., Ltd. value through profit or loss Gains (losses) on financial BNP Paribas Cardif TCB Life 4 Taiwan Cooperative Bank, Ltd. c assets and liabilities at fair 131,446 Note 4 0.34 Insurance Co., Ltd. value through profit or loss Gains (losses) on financial BNP Paribas Cardif TCB Life 1 Taiwan Cooperative Bank, Ltd. c assets and liabilities at fair 141,022 Note 4 0.37 Insurance Co., Ltd. value through profit or loss 2015 ANNUAL REPORT

Description of Transactions (Notes 3 and 5) Transaction Transaction Amount/Total No. Consolidated Transacting Company Counter-party Flow Trading (Note 1) Financial Statement Account Amounts Net Revenue (Note 2) Terms or Total Consolidated Assets (%) Gains (losses) on financial BNP Paribas Cardif TCB Life 4 Taiwan Cooperative Bank, Ltd. c assets and liabilities at fair 141,022 Note 4 0.37 Insurance Co., Ltd. value through profit or loss Cooperative Insurance Brokers BNP Paribas Cardif TCB Life 2 c Accounts receivable 100,093 Note 4 - Co., Ltd. Insurance Co., Ltd. BNP Paribas Cardif TCB Life Cooperative Insurance Brokers 4 c Commission payables 100,093 Note 4 - Insurance Co., Ltd. Co., Ltd. Cooperative Insurance Brokers BNP Paribas Cardif TCB Life Service fee and commission 2 c 1,118,279 Note 4 2.92 Co., Ltd. Insurance Co., Ltd. income BNP Paribas Cardif TCB Life Cooperative Insurance Brokers Service charge and commission 4 c 1,118,279 Note 4 2.92 Insurance Co., Ltd. Co., Ltd. expense Taiwan Cooperative Bills Finance 1 Taiwan Cooperative Bank, Ltd. c Call loans to banks 3,500,000 Note 4 0.11 Co., Ltd. Taiwan Cooperative Bills Finance 5 Taiwan Cooperative Bank, Ltd. c Call loans from banks 3,500,000 Note 4 0.11 Co., Ltd. Taiwan Cooperative Bills Finance Securities purchased under 1 Taiwan Cooperative Bank, Ltd. c 199,597 Note 4 0.01 Co., Ltd. resell agreements Taiwan Cooperative Bills Finance Securities sold under 5 Taiwan Cooperative Bank, Ltd. c 199,597 Note 4 0.01 Co., Ltd. repurchased agreements Co-operative Assets Management 1 Taiwan Cooperative Bank, Ltd. c Properties and equipment, net 383,282 Note 4 0.01 Co., Ltd. Gains on disposal of properties Co-operative Assets Management 1 Taiwan Cooperative Bank, Ltd. c and equipment, accumulated 580,423 Note 4 1.51 Co., Ltd. earnings Co-operative Assets Management 6 Taiwan Cooperative Bank, Ltd. c Investment properties, net 963,705 Note 4 0.03 Co., Ltd. Note 1: The parent company and subsidiaries are numbered as follows: a. Parent company: 0. b. Subsidiaries are numbered sequentially from 1. Note 2: Transaction flows are as follows: a. From parent company to subsidiary. b. From subsidiary to parent company. c. Between subsidiaries. Note 3: For calculating the percentages, the asset or liability account is divided by the consolidated total assets, and the revenue or expense account is divided by the total consolidated net revenue of the same year. Note 4: The terms for the transactions between the transacting company and related parties are similar to those for unrelated parties. Note 5: Referring to transactions exceeding NT$100 million.

153 154 Financial Information

7. Financial Status and Risk Management

155 7.1 2015 Investment Policies, Main Reasons for Profit or Loss, Improvement Plans, and Investment Plans for 2016

156 7.2 Analysis of Risk Management 2015 ANNUAL REPORT

7. Financial Status and Risk Management

7.1 2015 Investment Policies, Main Reasons for Profit or Loss, Improvement Plans, and Investment Plans for 2016

2015 Investment Policies A. The Venture Capital subsidiary was newly formed to increase the competitiveness of the TCFHC Group. B. Optimizing the effectiveness of capital allocation in accordance with the developmental needs of subsidiaries: a. In June 2015, and in accordance with the need of the bank subsidiary to expand operations and strengthen its capital structure, TCFHC increased the capital of the subsidiary through cash funding financed by the issuance of 993 million shares at NT$21.5 per share, raising a total of NT$21.35 billion. In September 2015, TCFHC further increased the capital of the subsidiary by cash through the issuance of 220 million shares at NT$21.8 per share, raising a total of NT$4.796 billion. After the two rounds of capital increase, the paid-in capital of the subsidiary increased to NT$83.493 billion. b. In accordance with the need of the securities subsidiary to improve its capital structure and development of its operations, TCFHC increased the capital of the subsidiary by cash through the issuance of 172 million shares at NT$11.6 per share, raising a total of approximately NT$2 billion.

2015 Main Reasons for Profit or Loss in Investments and Improvement Plans In 2015, the main source of profit of the Group was the earnings from the recognized subsidiaries — Taiwan Cooperative Bank, Ltd., Co-operative Asset Management Co., Ltd., Taiwan Cooperative Bills Finance Corporation Ltd., Taiwan Cooperative Securities Co., Ltd., and BNP Paribas Cardif TCB Life Insurance Co., Ltd., all maintained stable profitability. Although Taiwan Cooperative Securities Investment Trust Co., Ltd. (TCSIT) experienced a loss, the loss in 2015 had reduced from previous years. The main reason for the loss at TCSIT related to its management scale. Although the business scaled up significantly in 2015, it had not reached the break-even point. In the future, the company will actively expand its portfolio by releasing new funds, re-market existing funds, and continue to develop its discretionary investment operations, among others. The company will also expand its internal and external sales channels and integrate with the co-marketing platform of the Group to increase its 155 156 Financial Status and Risk Management

operational scale and revenue.

Investment Plan for 2016: None.

7.2 Analysis of Risk Management

7.2.1 Risk Management Structure

The company's Board of Directors is ultimately responsible for the risk management of the Group. Top managers and the risk control department are responsible for the execution and supervision of risk management policies, systems, and procedures and assume the main risks. They also compile reports of risk management implementation.

To implement the integration of risk management and business strategies, and ensure consistency between risk management and business goals, the company has established the Risk Management Committee to monitor the risks and the risk management procedures at the group and subsidiary levels, and to coordinate and supervise the risk management affairs of all subsidiaries.

The Board of Directors of each subsidiary is the highest decision-making body and assumes the ultimate responsibility for the company's overall risks. Each subsidiary has its own risk management committee or an independent risk management department that implements risk controls.

7.2.2 Risk Management Policies To improve the company's operations and development, all major risks involved in all operations of the company and its subsidiaries are included in risk management. In addition to complying with the relevant laws and regulations, each company implements its own risk management policies based on the requirements of its operations in order to achieve risk-return optimization. 2015 ANNUAL REPORT

TAIWAN COOPERATIVE FINANCIAL HOLDING CO., LTD.

Chairman Tsan-Chang Liao

157 Stock Code: 5880 TAIWAN COOPERATIVE FINANCIAL HOLDING CO.,LTD. AWNCOEAIEFNNILHLIGC.LD ANNUAL REPORT 2015 TAIWAN COOPERATIVE FINANCIAL HOLDING CO.,LTD.

ANNUAL REPORT 2015

Proactive．Agile．Innovative

TAIWAN COOPERATIVE FINANCIAL HOLDING CO.,LTD.

77, Guan Qian Road, Taipei, Taiwan R.O.C. Tel: +886-2-2311-8811 Fax: +886-2-2311-3699

This annual report is available at our website: http://www.tcfhc.com.tw Printed on April 26, 2016