First Financial Holding Co. Ltd. - Annual Report 2015

Stock Code: 2892

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2015 ANNUAL REPORT
Date：Feb. 29, 2016
This report is also available at our website.
(http://www.firstholding.com.tw)
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First Financial Holding

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.

Financial Highlights	2
Letter to Shareholders	4
CompanyProfle	11
Corporate Governance	16
GroupStructure,Board and Remuneration
FFHC Management Team
Capital Overview	32
Subsidiaries Overview	35
First Bank
First Securities
First Securities Investment Trust
First-Aviva Life Insurance
Corporate Social Responsibilities	53
Financial Information	58
General Information	251

Financial Highlights

2015 Net Income Breakdown by Subsidiaries

in NT$ mn

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2015 Net Income % of Group1
First Bank 16,100 100.9%
First Securities 1 74 1.1%
FSITC 102 0.6%
First-Aviva [2] (90) (0.6%)
First Financial AMC (68) (0.4%)
Others [3] (256) (1.6%)
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100.9% First Bank First Securities FSITC First-Aviva First Financial AMC Others

Estimated by sum-of-the-parts method.
FFHC claims 51% of First-Aviva operating results, a net loss of NT$ 46 mn was recognized in 2015.
Including subsidiary First Venture Capital, First Consulting, First P&C Insurance Agency and Financial Holding standalone.

1.1% 0.6% (0.4%) (0.6%) (1.6%)

FFHC at a Glance

Consolidated basis, data as of December 31, 2013, 2014 and 2015

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2015 2014 2013
Income statements (in NT$ mn)
Net Revenue 40,848 34,186 36,466
Expenses (21,872) (17,703) (23,417)
Income before tax 18,976 16,483 13,049
Net income 15,962 14,078 10,877
EPS (in NT$) 1.55 1.52 1.26
Adjusted EPS (in NT$) [1] 1.55 1.43 1.18
Balance sheets (in NT$ mn)
Total assets 2,500,096 2,355,709 2,263,385
Total liabilities 2,312,109 2,201,332 2,122,179
Total shareholders’ equity 187,987 154,377 141,206
Shares issued (in mn shares) 11,461 9,259 8,654
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2 • FIRST FINANCIAL HOLDING CO., LTD.

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Net Income EPS ROAE
15,962 1.43 1.55 9.53 9.32
14,078
7.94
1.18
10,877
2013 2014 2015 2013 2014 2015 2013 2014 2015
Consolidated basis, Consolidated basis, Consolidated basis,
in NT$ mn in NT$ in %
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Net Income

Remarks: Data are stated in accordance with IFRS.

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Dividends (in NT$) 2015 2014 2013
Cash dividends [2] 0.95 0.70 0.50
Stock dividends [2] 0.45 0.65 0.70
Total dividends [2] 1.40 1.35 1.20
Ratios (%)
ROAE 9.32 9.53 7.94
ROAA 0.66 0.61 0.50
Double Leverage Ratio [3] 105.23 109.06 103.37
Group CAR 153.43 125.34 123.04
Credit Ratings
Taiwan Ratings TwAA-/twA-1+/Stable
S&P BBB/A-3/Stable
Moody’s A3/Positive
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EPS is adjusted retroactively for stock dividends.
2015’s dividend proposal is subject to final approval at 2016 annual shareholders’ meeting on June 24, 2016.
Double Leverage Ratio = Long-term equity investment/Shareholders’ equity

2015 ANNUAL REPORT • 3

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Chairman, First Financial Ching-Nain Tsai

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4 • FIRST FINANCIAL HOLDING CO., LTD.
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Letter To Shareholders

Dear Shareholders,

The global economy recovered at a slower pace than previously expected in 2015 due to sluggish world trade growth and volatility in the financial markets. Growth in the world’s major economies continued to diverge: the U.S. offered relative strength as the country’s domestic demand remained on a solid footing, supporting economic expansion and leading to the U.S. Federal Reserve’s decision to raise its benchmark federal-funds rate after seven years at near-zero. The Eurozone’s recovery continued on a slow yet steady path, underpinned by the European Central Bank’s monetary stimulus, a weak Euro and low oil prices despite the debt problems in Greece, the economic challenges of the refugee influx and terrorist tensions. Japan’s economy stagnated amid flagging demand domestically and internationally. Emerging nations pushed forward structural reforms, led by China where policymakers

set out a 10-year national policy roadmap and promoted the development of a localized supply chain. These critical economies together influenced and shaped the performance of the world economy.

In Taiwan, slowing global growth weighted broadly on trade activity, private-sector investment and consumption. In its economic outlook report published in February 2016, the Directorate General of Budget, Accounting, and Statistics estimated that the Taiwan economy grew at a marginal rate of 0.75% in 2015. On an annual basis, goods and service exports fell 0.21% in 2015 versus a growth of 5.91% in the prior year as subdued demand from the U.S. and Europe and the slowdown in China reduced the value of overseas shipments. The banking and insurance sectors nevertheless grew 3% year-overyear. Reliant on an export-driven economy, Taiwan faced challenges from the deceleration in external trade, demographic changes and

a shortage of labor. The situation highlighted the need for the island to revitalize its industries, transit to a new business model that create growth driver and strengthen existing competitive advantages – with the Industry 4.0 holding the promise of value creation and improved productivity.

Looking into 2016, global downside risks are rising as stock market swings and volatile currency rates threaten to disrupt the growth trajectory. The challenging operating environment raises pressure on Taiwan’s financial institutions to balance risk and growth and build capabilities that allow them to navigate changing markets.

2015: Expansion of Scale and Capabilities

2015 was a pivotal year for First Financial Holding as we completed an NT$23.52 billion rights issue,

2015 ANNUAL REPORT • 5

with the proceeds from the sale of 1.6 billion shares mainly used to strengthen the capital position of our banking subsidiary and support its future growth. We continued our China expansion with the launch of our third mainland branch in Xiamen in late April, an important addition to our Chinese network of two branches in Shanghai and Chengdu and a sub-branch in the Shanghai Free Trade Zone. At present, we are fully licensed to offer RMB services to Chinese residents as well as Taiwaneseowned businesses at all of our China offices. Within the ASEAN market, the openings of a new branch in Vientiane, capital city of Laos in March 2015 and two more subbranches in Chraoy Chongvar and Mean Chey under the Phnom Penh branch in Cambodia on January 27, 2016 have further extended our geographic coverage as we advance our goal of becoming a pan-regional champion.

Our efforts on channel integration yielded strong results in the past year. Revenue from collaborative sales and marketing activities reached a record high of NT$3.519 billion, representing a CAGR of 34.35% over the past four years. First Bank became the first local bank to offer WePay, a mobile payment platform of Chinese messaging app WeChat, to allow Chinese residents travelling or doing business in Taiwan to make payments at participating offline retailers. The bank also was the first

bank in Taiwan that has registered a WeChat Official Account. During the year, we refined the organization by establishing the Ethical Management Committee under the Board of Directors as operating with integrity is essential to the group’s long-term success.

Our financial performance in 2015 was reassuringly strong. Last year marked the fourth straight year that group profit increased at a double-digit rate to exceed NT$10 billion. Total assets rose 6.13% to NT$2.5 trillion at December 31, 2015 from a year earlier. Consolidated net revenue increased 19.49% to NT$40.848 billion, of which fees and commissions increased 14.46%. Net profit increased 13.38% to NT$15.962 billion, or NT$1.55 per share.

In 2015, we received the most awards of any single year in recognition of our commitment to sustainable development through environmental protection, social responsibility and economic progress. Notable honors that we earned in the year included: a Top-10 ranking in the Taiwan government’s first-ever ranking of Taiwan-listed companies on corporate governance; the highest score of A++ received in the Information Disclosure and Transparency Ranking of Taiwanlisted companies; being the only financial company having been awarded at one time the National Environmental Education Award in the Private-Sector Enterprise

category, a Gold Award of the ROC Enterprise Environmental Protection Award – the highest honor awarded by government agencies for leadership in environmental protection – and two awards in the Taipei Energy Conservation Leadership Awards in the categories of Green Building and Commerce & Industry; being named in the Top 10 shortlist for CommonWealth Magazine’s Corporate Citizenship Awards; and a number of awards from Taiwan Institute for Sustainable Energy including a Gold Award in the Taiwan Top 50 Corporate Sustainability Report Awards, Climate Leadership Award and Transparency & Integrity Award.

Local Root, Regional Reach

The highlights of 2015 for our banking, stock brokerage, asset management, insurance and other subsidiaries are discussed below:

First Bank

First Bank has taken a two-pronged approach to expansion by moving westward to China and southward to the ASEAN market. It focuses on three geographies: Greater China, Southeast Asia and developed economies including the Eurozone, North America, Japan and Australia. In recent years, distribution chain

6 • FIRST FINANCIAL HOLDING CO., LTD.

President, First Financial Grace M.L. Jeng

2015 ANNUAL REPORT • 7

financing has become a major source of competitive edge for the bank as its innovative tools which allow financing to flow seamlessly through global value chains. To achieve greater profitability, First Bank continues to adjust its loan portfolio, shift exposure to less capital-intensive lending, together with fee-based businesses in an effort to boost capital efficiency. The bank’s pre-tax profit increased 19.9% to a record high of NT$19.182 billion in 2015, reflecting higher net interest income and fee revenues. Net fee income, in particular, increased 18.44% YoY to represent 20.04% of total net revenue. Nonperforming loan ratio set a multiyear low of 0.19% and loanloss coverage ratio increased to 751.03% at the end of 2015. First Bank reported net profit of NT$16.1 billion, or NT$2 per share, for 2015.

First Securities

In 2015, Taiwan’s stock markets opened the year on a high note but fell in volatile trading as the year progressed. Despite a sharp fall in trading volume and outstanding margin loans, First Securities was able to mitigate the impact through effective cost control and position adjustments. It handled subbrokerage transactions of NT$10.92 billion during 2015, up 368.07% year-over-year. At the same time, the firm continued to advise foreignincorporated, Taiwanese-owned businesses, in particular those operating in Southeast Asia, on

listings in Taiwan. It lead-managed seven IPOs and co-managed twentythree IPOs in the year. Through its efforts to move institutional investors toward an e-trading environment and upgrade its online trading platform, the firm grew its market share of electronic trading to 0.68% from 0.63% in the prior year. First Securities posted net profit of NT$174 million, or NT$0.27 per share, for 2015.

First Securities Investment Trust

First Securities Investment Trust’s assets under management advanced to NT$97 billion in 2015 due to its strengthened investment performance and deepened penetration of existing investors. Public-offering funds grew 31% year-over-year to NT$95.3 billion of assets, ranking 8th in the local fund industry. Discretionary mandates grew 54% year-over-year to NT$950 million. As of the end of 2015, the number of external distribution partners reached 53, contributing 32% of monthly fund sales (excluding money market funds) on average. First Securities Investment Trust reported net profit of NT$102 million, or NT$1.7 per share, for 2015.

First-Aviva Life Insurance

First-Aviva is committed to providing full coverage of security to clients’ personal and financial

well-being. For years, it has helped raise public awareness of the importance of insurance, and its product lines including mortgage insurance, investment-linked insurance and traditional protection plans are available through bank branches, stock brokerage offices, telemarketing, insurance agents and other banks’ channels. In 2015, total premium income reached NT$11.82 billion. First-year premium revenues at NT$11.028 billion, exceeded NT$10 billion for a second straight year due in large part to sales through bancassurance. Premium income of investmentlinked products declined 12.95% amid heightened market volatility while those of protection products and mortgage insurance products rose 3.02% and 9.37%, respectively. First-Aviva reported net loss of NT$90 million, or -NT$0.4 per share, for 2015.

First Financial AMC, First Venture Capital, First Consulting & First P&C Insurance Agency

First Financial AMC saw stable profit growth in its core business in 2015, but its results were negatively impacted by weaker-than-expected performance of affiliate First Leasing (Chengdu). First Venture Capital recognized an impairment loss to reflect movements in the capital market. First Consulting continued to support the group’s integrated marketing efforts and offered consultation and advisory

8 • FIRST FINANCIAL HOLDING CO., LTD.

services in areas including financial planning, investment strategies and IPOs. First P&C Insurance Agency saw revenue and profit reach their highest levels since the deregulation of insurance premium rates in 2010, thanks to collaborative marketing initiatives with other group members. First Financial AMC posted net loss of NT$68 million while First Venture Capital, First Consulting and First P&C Insurance Agency reported net profit of NT$38 million, NT$10 million and NT$7 million, respectively.

2016 Strategic Goals: Driving Growth through Innovation and Making Sustained Progress

Looking ahead to 2016, we will stay alert to the challenges posed by the changing economic environment while monitoring and acting on regulatory developments. One of our priorities is to drive growth through innovation by embracing market and industry transformations domestically and internationally, exploring new business opportunities emerging from RMB internationalization, navigating the digital transition, expanding digital channels and promoting services that support cross-border value chain activities. Our goal is to achieve a balanced mix that leads to greater scale of operations, sustained growth

and an optimized profit margin. Another priority is to make sustained progress toward the goals of deepening values of client relationships, safeguarding consumer interests, reinforcing compliance and control functions and aligning corporate structure and capital efficiency with business objectives. With these two main strategic priorities, we hope to position ourselves as a company with unique franchises, regional presence and an inclusive culture that promotes employee wellbeing and embraces diversity. Next follows a discussion of the strategic priorities we set for 2016:

As we move forward in our goal of becoming a regional champion, we continue to build our presence in Asia-Pacific with mergers and acquisitions, equity investments and joint ventures as some of the strategic options we consider going forward. We also will leverage our extensive global network of branches, sub-branches and subsidiary banks to offer crossborder services that facilitate client transactions and other activities. In order to broaden our crossborder offering, we plan to expand the scope of business so that our foreign branches can conduct and speed up their transition into fullservice branches. Ultimately, these efforts should allow us to adapt to the unique needs of the foreign markets we operate in and serve clients better with a diverse range of services.

Innovation in financial products has accelerated with financial deregulation and globalization of markets. We plan to continue introducing and developing novel products that span channels and lines of business and distribute them via matrix- marketing model. In addition, to capitalize on the opportunities that arise from an aging population and changing needs of retirees, hybrid product designed on joint-force sales will be in place, to meet the financial goals of the target customer base over their lifetime cycles.

In addition to installing a financial data service system, we will strengthen cyber security measures and apply a customer-centered approach to the development of technological applications. We are also building our virtual and mobile footprint, which, along with bank branches remodeled to include new digital applications, provides clients with smart services and an exceptional experience, in an aim to boost sales. The insight gained from our analytics capabilities and interactions in social networks are helping us anticipate, meet and beat client expectations and better project customer preferences while setting us apart as a leader in digital banking.

After completing a capital injection to our banking subsidiary, we plan to provide additional rounds of funding to non-banking subsidiaries including First-Aviva Life Insurance

2015 ANNUAL REPORT • 9

and the Chinese unit of First Financial AMC to shore up their capital position and prepare them for future growth. We also will strengthen risk management capabilities to ensure that our risk profile is aligned with our capital adequacy requirements, business objectives and our mission to create shareholder value. We are in the process of adjusting the group’s earnings contributions amid business units in order to achieve steady improvement on return on equity.

To ensure adherence to ethical values, the Ethical Management Committee was built under the Board of Directors with the responsibility of setting policies of ethical conducts by regular updates to the Board. We will take groupwide efforts to help employees navigate the digital transition, participate in technology-driven innovation by equipping them with digital literacy and marketing skills for their future career. As we pursue excellence in financial performance, we also bring together the resources of group companies to take part in charitable and volunteering activities. Environmental sustainability will be another focus in the year ahead as we implement green practices to cast a positive social and environmental influence and fulfill our responsibility as a corporate citizen.

The ratings of various rating agencies in 2015 are as follows:

First Financial Holding

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ST LT Outlook
Taiwan
twA-1+ twAA- Stable
ratings
S&P A-3 BBB Stable
Moody’s -- A3 Positive
First Bank
ST LT Outlook
Taiwan
twA-1+ twAA+ Stable
ratings
S&P A-2 A- Stable
Moody’s P-1 A2 Positive
First Securities
ST LT Outlook
Taiwan
twA-1+ twAA- Stable
ratings
S&P -- -- --
-- -- --
Moody’s
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A Foundation of Enduring Values and Trustworthy Management

To date, all credit ratings reports have highlighted our strong market position, solid franchise value, a diverse customer base, adequate financial structure, prudent risk management and sound asset quality.

In the year ahead, guided by our goals of driving growth through

innovation and making sustained progress, we will adapt to the dynamics of regional economic and trade integration, support the structural transformations of local industries, connect our clients with multiple channels and build on the depth and breadth of products and services in order to deepen the value of customer relations. All of these actions, coupled with our corporate social responsibility initiatives, lay the groundwork for us to evolve business model and management approach as we enter a new era of banking. At the same time, we will strive each day to deserve the trust of our shareholders.

Ching-Nain Tsai Chairman, First Financial

10 • FIRST FINANCIAL HOLDING CO., LTD.

Company Profile

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First Financial Holding Co., Ltd. was incorporated on January 2, 2003 with First Commercial Bank as its flagship entity. It is listed on Taiwan Stock Exchange under the stock code 2892.

Founded in 1899, First Bank was one of the three government-affiliated banks with the mission to allocate credit to underserved industrial and commercial businesses, finance national infrastructure, and serve as an underlying force of Taiwan’s great economic advancement. In 1998, First Bank became the largest private-owned bank on the island after privatization. Since then it has been able to secure leadership positions in such selected areas as the corporate banking, SME business, home mortgages, mutualfund distribution, trade finance, deposit and lending. It currently owns 190 branches at home along with 34 overseas branches and representative offices including the U.S. subsidiary of First Commercial Bank (USA).

With the historical groundwork well laid by First Bank, First Financial Holding Co. further diversified its

business portfolio into securities trading, property and casualty insurance and asset management on July 31, 2003, by acquiring First Taisec Securities Co., Ltd., Mingtai Fire & Marine Insurance Co., Ltd. and National Investment Trust Co., Ltd. On July 28, 2003, it successfully raised the equivalent of NT$17.3 billion via a global depository receipt program, the first ever issued by a Taiwanese financial institution, which significantly shored up capital bases of the group and its subsidiaries. From May through September of 2004, in its second round of penetrating into new markets to deliver full product range and high quality

services, First Financial Holding Co. established First Financial Asset Management Co., Ltd., First Venture Capital Co., Ltd., First Financial Management Consulting Co., Ltd., and First P&C Insurance Agency Co., Ltd.

First Financial Holding, in an aim to capture growth in wealth management, expand product offerings, retain clients and address personal retirement planning needs, sought to form a joint venture with U.K’s largest insurer Aviva in 2007. First-Aviva Life, a 51:49 joint-venture between the two companies, was incorporated on December 11, 2007.

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2015 ANNUAL REPORT • 11

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With regard to market expansion in China, First Financial Holding maintains its bank-centric mode, bundled with its banking subsidiary, leasing services compliments, opened the Shanghai Branch on December 23, 2010. Following that, affiliated FCB Leasing Co., set up a subsidiary in Suzhou on March 30, 2011. Moreover, First group replicate this multi-channel model in building the second presence in China: Chengdu Branch, grand-opened in 2014 and affiliated Chengdu Leasing Company, established in 2012. At a pace of intensifying allocation of group’s capital, seeking better returns and diversifying financial services, In China, our Xiamen City came next to be the third spotlight to explore branch and leasing network as Xiamen Leasing Ltd. was grand-opened in April, 2014, whereas Xiamen Branch, opened on April 30, 2015.

First Financial Holding Co., Ltd. also focuses on resource deployment

in emerging markets in the Asia Pacific region and assisting its bank subsidiary to expand overseas businesses. In 2015, two subbranches under the Phnom Penh Branch were in place and Vientiane Branch at Liao started operation on March 31, 2015. In 2016, another two sub-branches opened (Mean Chey and Chraoy Chongvar) on January 27, 2016, achieving a total of 20 presences in Asia out of 34 overseas spots. Meanwhile, setting Manila Branch (Philippines) has been approved by FSC. The regional coverage over South-East Asia is almost full, showing the ambition to further tap emerging markets’ growth opportunities and enhance its operation scale.

Apart from a rights issue of NT$16,400 million capital in 2011, First Financial Holding launched another rights issue of 1.6 billion new shares in 2015 and raised capital by NT$23.52 billion. The proceeds was mainly injected into

bank subsidiary to strengthen its equity base for long term business developments.

Ethical Management Committee was set up in October, 2015 under Board in an aim to solidify corporate governance and advocate ethical management for the best practice of CSR.

Sticking to the commitment of “Customer First, Service Foremost”, First Financial Holding will proactively tap the opportunities arisen from emerging Asia with NT$2.50 trillion by assets, over five million clientele base and longlasting relationships. It has always been our goal to act as a highly competitive financial institution both in Taiwan and Pan-Asia region, then we can create sustainable longterm value for clients, shareholders and employees.

12 • FIRST FINANCIAL HOLDING CO., LTD.

Our Businesses

FFHC currently owns eight subsidiaries. Based on our channels, we are committed to providing clients with a comprehensive suite of products and services. The coverage of banking, broker, insurance, wealth management, venture capital and consulting completed groups’ financial “one-stop shopping” picture and to fully deploy cross-sale synergies among subsidiaries, we initiated with flagship subsidiary First Bank’s wide-spreading branch network, totaled 393 cross-sale counters among group, in which 190 bank branches affiliated with insurance sales, 20 bank branches with bancassurance counters, 131 bank branches equipped with securities counters and 26 securities houses equipped with bank and insurance services.

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First Bank

Net Income in NT$ mn
2015	2014
16,100	13,381

First Bank was founded in 1899 under the name of “Savings Bank of Taiwan”. Later in the period of 1912 to 1923, three local banks merged with the then First Bank to become the foundations of the present company. In 1945, the bank became government-owned after Taiwan’s restoration from Japan’s rule. It was renamed “First Commercial Bank” in 1976, commonly known as First Bank. On January 22, 1998, First Bank became the largest private-owned bank in Taiwan after privatization. Five years later, it formed the backbone of newly-established First Financial Holding on January 2, 2003 through a share swap. First Bank has secured leadership positions in selected areas as the SME business, mortgages, mutual-fund, bancassurance distribution, trade finance, deposit and lending. To further penetrate into overseas market, Shanghai Branch launched in 2010, Chengdu Branch and sub-branch at Shanghai free-trade zone launched in 2014, while Xiamen Branch has grand-opened in 2015. In Asean countries, Yangon Representative office (Myanmar) has re-started operations in April, 2013 and two subbranches under Phnom Penh Branch in Cambodia grand-opened in June of 2014. Following the establishment of Vientiane Branch at Laos on March 31, 2015, another two sub-branches (Mean Chey and Chraoy Chongvar) in Cambodia opened on January 27, 2016. First Bank now owns 190 branches at Taiwan and 34 overseas business spots.

2015 ANNUAL REPORT • 13

First Securities

Net Income in NT$ mn
2015	2014
174	74

First Securities Investment

Trust

Net Income in NT$ mn
2015	2014
102	79

First-Aviva Life Insurance

Net Income in NT$ mn
2015	2014
(90)	(15)

First Securities, formerly known as First Taisec Securities, was established on August 15, 1988 as a retail brokerage firm. Over the years, it has expanded its services to include proprietary trading, underwriting and research, investment advisory, margin trading, options and futures. On July 31, 2003, Taisec Securities merged with the stock-brokerage unit of First Bank and altogether they became the security arm of First Financial Holding operating through 26 branches and 131 counters domestically. Effective from December 31, 2008, in order to integrate external image of First as a compacted group, intensify the corporate identity of each subsidiary, and further converge employees’ consensus, First Taisec Securities was renamed as First Securities. In 2011, Shanghai representative office opened to assist China-based Taiwan Companies to list in Taiwan. Meanwhile, consulting business for futures was set up in 2012 for more diversified and customized market.

First Securities Investment Trust, formerly known as National Investment Trust, was incorporated on February 15, 1986. Currently, FSITC manages a total assets of NT$97 bn under management. FSITC has been consistently recognized for its superior investment performance with its strong research team and 25 wins of “Taiwan Fund Performance Awards”. Through a share swap on July 31, 2003, FSITC became a wholly owned subsidiary of First Financial Holding. To integrate external image of First as a compacted group, intensify the corporate identity of each subsidiary, and further converge employees’ consensus, National Investment Trust was renamed as First Securities Investment Trust effective from December 31, 2008.

On December 11, 2007, First Financial Holding and Aviva, the UK’s largest insurance services provider, jointly established First-Aviva in Taiwan, the first joint venture of a local financial holding company and a leading foreign insurance group. First Financial Holding owns 51%, while Aviva owns 49% of the company. Mainly focusing on life insurance business, First-Aviva initiated its operating activities on January 2, 2008. Through First Bank’s 190 domestic branches, FirstAviva exclusively offers our customers specially-designed retirement plans and comprehensive insurance products. Leveraging Aviva Group’s experiences in global bancassurance and First Group’s extensive local channels, First-Aviva will continue to focus on insurance service and ultimately to develop comprehensive products that satisfy different customers’ needs.

14 • FIRST FINANCIAL HOLDING CO., LTD.

First Financial AMC

Net Income in NT$ mn
2015	2014
(68)	263

First Venture Capital

First Consulting

First P&C Insurance Agency

Founded on May 31, 2004, First Financial AMC is a wholly owned subsidiary of First Financial Holding that engages in the acquisition and management of non-performing loans for financial institutions. Currently, it serves mainly as a debt collector for First Bank and gradually expands its businesses to acquire and manage nonperforming loans for other financial institutions. In addition, in order to earn stable rental revenue from property market, it continues to search for appropriate commercial real-estate for investment, transforming into a property investor. And to further explore China’s leasing business, on January 5, 2012, subsidiary company First Financial Leasing (Chengdu) Co., was established, another milestone for First Financial AMC.

Founded on June 2, 2004, First Venture Capital is a wholly owned subsidiary of First Financial Holding. It targets distressed companies to initiate restructuring processes designed to engineer successful corporate turnaround and invests in expanding or mature companies to capitalize the growth and development potentials. Up to end of 2015, First Venture Capital engaged in 63 cases with a total of NT$1,673 million in its investment portfolios.

Founded on June 10, 2004, First Financial Management Consulting is a 100%-owned subsidiary of First Financial Holding. It provides consulting and management services to venture capital funds that invest equity capital in distressed businesses and potentially undervalued companies. In 2015, it successfully consulted FVC for investing a total of NT$ 386 million and accumulated 63 companies with investment.

Founded on September 16, 2004, First P&C Insurance Agency is a wholly owned subsidiary of First Financial Holding. It acts as a broker to sell and distribute property & casualty insurance products.

2015 ANNUAL REPORT • 15

Corporate Governance

Group Structure

FFHC Subsidiaries & Affiliates

Data as of Feb. 29, 2016

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First Financial Holding Co., Ltd.
First Commercial Bank First Commercial Bank (U.S.A.)
100% owned
100% owned
FCB Leasing Co., Ltd. FCBL Capital Int’l(B.V.I.) Ltd.
100% owned 100% owned
First Insurance Agency Co., Ltd. FCB International Leasing
100% owned 100% owned
FCB Lease(Xiamen) Ltd.
100% owned
First Securities Inc. First Capital Management Inc.
100% owned
100% owned
FSC Asia Investment Limited First Worldsec Securities Limited
100% owned 100% owned
First Securities Investment Trust Co., Ltd.
100% owned
First Financial Assets Management Co., Ltd . First Financial Assets Management (B.V.I.) Ltd.
100% owned
100% owned
First Venture Capital Co., Ltd. First Financial Leasing (Chengdu) Ltd.,
100% owned
100% owned
First Financial Management Consulting Co., Ltd.
100% owned
First Property & Casualty Insurance Agency Co., Ltd.
100% owned
First-Aviva Life Insurance Co., Ltd.
51% owned
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16 • FIRST FINANCIAL HOLDING CO., LTD.

FFHC Operational Structure

Data as of Feb. 29, 2016

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General Meeting of Shareholders
Ethical Management Committee Auditing
Chief Auditor
Department
Board of Directors
Strategic Development
Committee
Chairman & Directors
Risk Management
Audit Remuneration Committee
Committee Committee
Corporate Social
Responsibility Committee
President Business Decisions
Committee
IT Development
Committee
Executive Vice President Executive Vice Presidents Marketing Integration
Chief Compliance Officer Committee
Compliance & Administration Information Strategy
Legal Dept. Management Dept. Technology Dept. Planning Dept.
Risk Business
Management Dept. Development Dept.
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Board Structure and Composition

The board of First Financial Holding is comprised of 3 independent directors and 12 directors. They serve for a three-year term and are eligible for re-election. Of the incumbent board, 7 directors represent the Taiwan government’s shareholding. To better structure of the board composition and improve the efficiency of the board, 3 current board members are female, representing 25% of participation and gender diversification. Selected by the Governmental Share Ownership Management Committee of the Ministry of Finance (MOF), these delegates are high-level officials and professors of national universities who have proven expertise in their respective fields of banking, insurance, securities, auditing and information technology, and achieve prominence in their professional activities. A regular review on their ability to adequately discharge duties and exercise independent judgment is conducted by Governmental Share Ownership Management Committee.

2015 ANNUAL REPORT • 17

Board of Directors

Data as of April 26, 2016, term until June 25, 2018

Delegate of MOF

Chairman Ching-Nain Tsai

Male, Nationality: Taiwan, R.O.C. 2010/07/01 on board, now serves as Chairman of First Commercial Bank & First Education Foundation; Chairman of Trust Association of R.O.C..

M.S., Industrial Management, National Cheng Kung University.
Chairman, Taiwan Futures Exchange;
Chairman, Taiwan Business Bank;
President, Taiwan Land Bank;
Director-General of National Treasury Administration of MOF.

Delegate of MOF

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Director & President Grace M.L. Jeng

Female, Nationality: Taiwan, R.O.C. 2014/12/25 on board, now serves as Director of FCB; Director of Taiwan Asset Management Corp and First Education Foundation.

B.A., National Taiwan University
EVP, First Commercial Bank;
Chairman, First Commercial Bank (USA);
SVP & GM, Yuan-Shan Branch, First Commercial Bank.

Delegate of MOF

Director Po-Chiao Chou

Male, Nationality: Taiwan, R.O.C. 2014/12/25 on board, now serves as President & Managing Director of First Commercial Bank; Chairman of First Commercial Bank (USA); Vice Chairman of First Education Foundation; Director of Taipei Financial Center Corporation.

B.S., Accounting, National Cheng Kung University
Advisory Committee Consultant of Council for Economic Planning and Development, Executive Yuan;
Director, Farmers Bank of China.
Current as Associate Professor, Dept. of Economics, National Taiwan University; CEO, Public Economics Research Center, NTU.

Delegate of MOF

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Director Yi-Hsin Wang

Female, Nationality: Taiwan, R.O.C. 2008/09/26 on board, now serves as Independent Director of Transcend Information Inc. & Bestcom Infotech Corp.

Ph. D., Accounting, University of Kentucky.
Dean of Library, National Taipei University;
Chairman, The Institute of Internal Auditors;
VP, National Taipei University.
Current as Professor, Dept of Accounting, National Taipei University.

Delegate of MOF

Director Hung-Chi Huang

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Male, Nationality: Taiwan, R.O.C. 2011/08/12 on board, now serves as Director of First-Aviva Life Insurance Co.,

Ph. D., Actuarial Science, Heriot-Watt University, UK
Consultant, Public Service Pension Fund Management Board;
Advisory Committee Consultant of Risk Management, Chunghwa Post;
Reviewer of Insurance products, Financial Supervisory Commission, Executive Yuan.
Dean, College of Risk Management and Insurance, National Chengchi University.
Current as Professor, Dept. of Risk Management and Insurance, National Chengchi University.
EVP, First Commercial Bank;
SVP & GM, Accounting Dept. & General Affairs Dept., First Commercial Bank;
VP & GM, Si Tainan Branch, First Commercial Bank,
Director, First-Aviva Life Insurance Co.

Delegate of MOF

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Director Hsien-Feng Lee

Male, Nationality: Taiwan, R.O.C. 2006/01/02 on board, now serves as Managing Director of FCB.

Ph. D., Economics, Bielefeld University, Germany.

Delegate of MOF

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Director Feng-Ming Hao

Male, Nationality: Taiwan, R.O.C. 2015/06/26 on board.

Ph. D., Jura Universite de Droit, d’Economie et de Sciences sociales (Paris 2), France
Deputy Minister of Council of Labor Affair;
Vice President, National Chung Cheng University;
Dean of Law College & Professor, Dept. of Law, National Chung Cheng University;
Current as Deputy Minister of Ministry of Labor.

18 • FIRST FINANCIAL HOLDING CO., LTD.

Delegate of Bank of Taiwan

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Director Hsiao-Ling Chen

Female, Nationality: Taiwan, R.O.C. 2015/10/26 on board.

M.S. Economics, National Taiwan University.
Current as Director, Government-owned Shares Management Division, National Treasury Agency, M.O.F.

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Delegate of Bank of Taiwan

Director Shing-Rong Lo

Female, Nationality: Taiwan, R.O.C. 2015/10/26 on board.

B.S. Accounting National Chunghsing University.
Current as Director, Government-owned Shares Management Division, National Treasury Agency, M.O.F.

Delegate of Golden Garden Investment Co. Director Tien-Yuan Chen

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Male, Nationality: Taiwan, R.O.C. 2003/01/02 on board, now serves as Managing Director of FCB; Chairman, Golden Garden Investment Co & Golden Gate Motor Co; Director of First Education Foundation.

B.A., Foreign Languages and Literature, Tamkang University.

Independent Directors:

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Independent Director Shyan-Yuan Lee

Male, Nationality: Taiwan, R.O.C. 2012/06/22 on board, now serves as Independent Director, Transasia Airways Corporation.

Ph.D. Finance, Columbia University at NYC.
Commissioner, Financial Supervisory Commission.
Current as Professor, Dept. of Finance, National Taiwan University

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Independent Director Hau-Min Chu

Male, Nationality: Taiwan, R.O.C. 2015/06/26 on board, now serves as Managing Independent Director, First Commercial Bank & Independent Director, Wah Lee Industrial Corporation.

Ph.D. Economics, Brown University, U.S.A.
President, Dept. of Money and Banking, National Chengchi University;
President, Hsing-Kuo University;
Director, Taiwan Futures Exchange Corporation.
Current as Professor, Dept. of Money and Banking, National Chengchi University.

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Independent Director Hui-Ya Shen

Female, Nationality: Taiwan, R.O.C. 2015/06/26 on board, now serves as Independent Director, Taiwan Fertilizer Co., Ltd.

Chairman, Taiwan Coca-Cola Co.

Director Chi-Hsun Chang

Male, Nationality: Taiwan, R.O.C. 2006/01/02 on board, now serves as Chairman and President, Magna Central Company.

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Master of Law, National Chung Hsing University.
Consultant of Public Service Pension Fund Management Board, Ministry of Civil Service, Examination Yuan.
Current as Lawyer of Chang Chun Law Office.
B.S., International Trade, Tamkang University.
Supervisor, Optimum Care International Tech. Inc.

Delegate of Global Investment Co., Ltd Director An-Fu Chen

Male, Nationality: Taiwan, R.O.C. 2009/05/22 on board, now serves as Chairman, Global Investment Co., Ltd.

B.S., Pharmacy, Taipei Medical University.

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EVP, Transamerica Occidental Life Insurance Co;
EVP, TransGlobe Life Insurance Inc.,
Director, Mintai Fire & Marine Insurance Company.

2015 ANNUAL REPORT • 19

Shares Holding of Directors

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Shareholding Current Spouse & Minor
Title Name When Elected Shareholding Shareholding
Shares % Shares % Shares %
Ching-Nain Tsai
Chairman 1,236,294,144 13.35 1,316,653,263 11.49 285,909 0.00
(Delegate of MOF)
Director & Grace M.L. Jeng
1,236,294,144 13.35 1,316,653,263 11.49 221,027 0.00
President (Delegate of MOF)
Po-Chiao Chou
Director 1,236,294,144 13.35 1,316,653,263 11.49 220,568 0.00
(Delegate of MOF)
Hsien-Feng Lee
Director 1,236,294,144 13.35 1,316,653,263 11.49 0 0.00
(Delegate of MOF)
Yi-Hsin Wang
Director 1,236,294,144 13.35 1,316,653,263 11.49 0 0.00
(Delegate of MOF)
Hung-Chi Huang
Director 1,236,294,144 13.35 1,316,653,263 11.49 0 0.00
(Delegate of MOF)
Feng-Ming Hao
Director 1,236,294,144 13.35 1,316,653,263 11.49 0 0.00
(Delegate of MOF)
Hsiao-Ling Chen
Director 715,223,724 7.72 854,406,305 7.45 0 0.00
(Delegate of Bank of Taiwan)
Shing-Rong Lo
Director 715,223,724 7.72 854,406,305 7.45 0 0.00
(Delegate of Bank of Taiwan)
Tien-Yuan Chen
Director (Delegate of Golden Garden 2,437,680 0.03 2,912,052 0.03 718,165 0.01
Investment Co.,)
Director Chi-Hsun Chang 1,177,046 0.01 1,206,098 0.01 1,206,098 0.01
An-Fu Chen
Director (Delegate of Global 4,486,351 0.05 5,359,394 0.05 11,955,579 0.10
Investment Co., Ltd)
Independent
Shyan-Yuan Lee 0 0.00 0 0.00 0 0.00
Director
Independent
Hau-Min Chu 0 0.00 0 0.00 0 0.00
Director
Independent
Hui-Ya Shen 0 0.00 0 0.00 0 0.00
Director
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20 • FIRST FINANCIAL HOLDING CO., LTD.

Professional Qualification and Independence Analysis of Directors

Data as of April 26, 2016

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Meet one of the Following Professional
Independence Criteria
Qualification requirements, Together with at
(Note)
Least five Years Work Experience
An instructor A judge, public Have work
Criteria of higher prosecutor, experience in
position in attorney, Commerce,
Number
Commerce, certified public Law, Finance
of Other
Law, Finance, accountant or Accounting
Public Co.,
Account. or or other or other
in which the
other academic professional necessary for
individual is
dept. related or technical the business of
to the business specialist who the Co. 1 2 3 4 5 6 7 8 9 10 Concurrently Serving as an
of the Co., has passed a
at public or national exam. Independent
Director
Name private junior And been
college, college awarded a
or university. certificate in
a professional
necessary for
the business of
the Co.
Ching-Nain Tsai � � �� -
Grace M.L. Jeng � �� -
Po-Chiao Chou � �� -
Hsien-Feng Lee � � � �� -
Yi-Hsin Wang � � �� 2
Hung-Chi Huang � � � �� -
Feng-Ming Hao � � �� -
Hsiao-Ling Chen � �� -
Shing-Rong Lo � �� -
Tien-Yuan Chen � � � �� -
Chi-Hsun Chang � �� -
An-Fu Chen � �� -
Shyan-Yuan Lee � � �� 1
Hau-Min Chu � � � �� 1
Hui-Ya Shen � � � �� 1
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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.

Not an employee of the Company or any of its affiliates.
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 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.

2015 ANNUAL REPORT • 21

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.
Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs.
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.
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.
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.
Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.
Not been a person of any conditions defined in Article 30 of the Company Law.
Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.

Board Meeting

The board of directors convenes every month to approve financial and other reporting, discuss the management’s performance, monitor the internal compliance and control system, and review the development of corporate strategies and performance objectives, which reflect changes in the competitive environment. All board members receive written material on the proposals in advance and meetings of the board of directors shall be convened by the chairman of the board of directors. Unless otherwise provided for in the Company Charter, resolutions of the board of directors shall be passed by one-half of the directors at a meeting attended by one-half of the directors.

Independence & Transparency

Since the year of 2009, 3 independent directors are appointed at board and these delegates are specialized in taxation, financial, and economic fields, with their academic expertise, they serve the roles of assisting the board and shareholders in carrying out the internal and external auditing and advise top management.

To further enhance the transparency of information disclosure, “Nomination System” (the board of directors reviews the qualifications of each candidate nominated by either the board itself or any shareholder holding one percent or more of the company’s outstanding shares, and then provides the final roster of candidates together with their profiles to shareholders prior to the meeting. ) was approved for the election of directors and independent directors on 2012’s AGM meeting and employed from the year of 2015’s board election. Furthermore, the electronic voting platform for AGM meeting was launched in 2013, casting group’s commitment for the best practice of corporate governance among peers.

Attendance at Board Meetings

During 2015, there were 15 board of director meetings held. The number of meetings attended by each director was as follows:

22 • FIRST FINANCIAL HOLDING CO., LTD.

Directors Meeting Attendance

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Attendance Attendance by Attendance
Name Notes
in Person (B) Proxy Rate (%)(B/A)
Ching-Nain Tsai, Chairman
15 0 100.00
Delegate of Ministry of Finance
Grace M.L. Jeng, Director
15 0 100.00
Delegate of Ministry of Finance
Po-Chiao Chou, Director
15 0 100.00
Delegate of Ministry of Finance
Hsien-Feng Lee, Director
15 0 100.00
Delegate of Ministry of Finance
Yi-Hsin Wang, Director
14 1 93.33
Delegate of Ministry of Finance
Hung-Chi Huang, Director
11 4 73.33
Delegate of Ministry of Finance
Feng-Ming Hao, Director Newly assigned on 06/26/2015,
8 0 100.00
Delegate of Ministry of Finance total 8 meetings were held. (A)
Hsiu-Chuan Ko, Director Before discharged on 10/01/2015,
12 0 100.00
Delegate of Bank of Taiwan total 12 meetings were held. (A)
Chun-Lan Yen, Director Before discharged on 10/26/2015,
5 0 100.00
Delegate of Bank of Taiwan total 5 meetings were held. (A)
Hsiao-Ling Chen, Director Newly assigned on 10/26/2015,
3 0 100.00
Delegate of Bank of Taiwan total 3 meetings were held. (A)
Shing-Rong Lo, Director Newly assigned on 10/26/2015,
3 0 100.00
Delegate of Bank of Taiwan total 3 meetings were held. (A)
Shyan-Yuan Lee,
14 1 93.33
Independent Director
Hau-Min Chu, Newly assigned on 06/26/2015,
8 0 100.00
Independent Director total 8 meeting were held. (A)
Hui-Ya Shen, Newly assigned on 06/26/2015,
8 0 100.00
Independent Director total 8 meetings were held. (A)
Tien-Yuan Chen, Director
Delegate of Golden Garden 14 1 93.33
Investment Co.
Chi-Hsun Chang, Director 15 0 100.00
An-Fu Chen, Director
Delegate of Global Investment Co., 14 1 93.33
Ltd
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2015 ANNUAL REPORT • 23

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Attendance Attendance by Attendance
Name Notes
in Person (B) Proxy Rate (%)(B/A)
Shang-Wu Yu, Director Before discharged on 6/26/2015,
6 1 85. 7 1
Delegate of Ministry of Finance total 7 meetings were held. (A)
Hsien-Heng Lee, Director Before discharged on 6/26/2015,
5 2 7 1 .43
Delegate of Bank of Taiwan total 7 meetings were held. (A)
Yophy Huang, Before discharged on 6/26/2015,
7 0 100.00
Independent Director total 7 meetings were held. (A)
Tay-Chang Wang, Before discharged on 6/26/2015,
7 0 100.00
Independent Director total 7 meetings were held. (A)
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Note: Any circumstances referred to in Article in Article 14-3 of Securities and Exchange Act and resolutions of the directors’ meetings objected to by Independent Directors or subject to qualified opinion and recorded or declared in writing, the dates of meetings, sessions, contents of motions, all independents’ opinion and the Company’s response to independent directors’ opinion should be specified: None.

Audit Committee, Remuneration Committee & Ethical Management Committee

To further strengthen corporate governance and improve proficiency at board, an Audit committee was established on June 22, 2012 to replace Supervisors System. All three incumbent independent directors with finance, accounting and tax background and expertise are members at Audit Committee. Meanwhile, Remuneration Committee has been set on August 25, 2011, running by independent directors to practice company’s compensation policies. Up to the end of 2015, 7 meetings have been held in Audit Committee and 4 meetings in Remuneration Committee. Both Committees play important roles on setting up and monitoring auditing functions, compensation policies, regulations, standards and structures. In 2015, Ethical Management Committee was organized by independent directors to build and review the ethical policy. Only one meeting was held as of end 2015.

Audit Committee Meeting Attendance

Total 7 meetings (A) were held in 2015

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Attendance Attendance Attendance Rate
Name Notes
in Person (B) by Proxy (%)(B/A)
Shyan-Yuan Lee, Convenor
7 0 100.00
Independent Director
Hau-Min Chu, Newly assigned on 06/26/2015,
3 0 100.00
Independent Director total 3 meetings were held. (A)
Hui-Ya Shen, Newly assigned on 06/26/2015,
3 0 100.00
Independent Director total 3 meetings were held. (A)
Tay-Chang Wang, Convenor Before discharged on 06/26/2015,
4 0 100.00
Independent Director total 4 meetings were held. (A)
Yophy Huang, Before discharged on 06/26/2015,
4 0 100.00
Independent Director total 4 meetings were held. (A)
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24 • FIRST FINANCIAL HOLDING CO., LTD.

Remuneration Committee Meeting Attendance

Total 4 meetings (A) were held in 2015

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Attendance Attendance Attendance Rate
Name Notes
in Person (B) by Proxy (%)(B/A)
Hau-Min Chu, Convenor Newly assigned on 06/29/2015,
1 0 100.00
Independent Director total 1 meeting was held. (A)
Shyan-Yuan Lee, Newly assigned on 06/29/2015,
4 0 100.00
Independent Director total 4 meetings were held. (A)
Hui-Ya Shen, Newly assigned on 06/29/2015,
1 0 100.00
Independent Director total 1 meeting was held. (A)
Yophy Huang, Convenor Before discharged, total 3
3 0 100.00
Independent Director meetings were held. (A)
Tay-Chang Wang, Before discharged, total 3
3 0 100.00
Independent Director meetings were held. (A)
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Elements of Compensation of Directors

Items Delivery Policy
Base • Cash • Each director of First Financial Holding receives a monthly cash Compensation • Monthly retainer of NT$20,000. The FHC’s chairman receives a cash retainer 1.25 times that paid to the president.
• Traditionally, chairman of First Financial Holding acts as chairman of subsidiary First Bank. As is the common practice, the chairman receives compensation for his/her service at First Bank, but waives receipt of the monthly cash retainer for his/her service as chairman of First Financial Holding.
• Total monthly cash paid to directors is capped at NT$ 2,400,000. • Effective from September 1, 2011, independent directors receive a monthly cash retainer of NT$60,000, an increase of NT$10,000 per month for the operation of Remuneration Committee.
Remuneration ~~•~~ Cash ~~•~~ Directors also receive annual remuneration based on the profit of • Annually and subject the current year. to Shareholder • In compliance with Article 34-1 of the Company Charter, if there is any surplus profit concluded in a fiscal year, First Financial Holding
meeting’s approval* shall, from the net profit before tax which has not deducted any compensation to employees and remuneration to directors, appropriate no more than 1% of the balance for the remuneration of directors, Provided however that, if First Financial holding has any accumulated losses, the company shall reserve and amount thereof in advance for making up the losses.
Benefits in kind ~~•~~ Severance pay ~~•~~ First Financial Holding reimburses its directors for transportation • Reimbursed as per expenses incurred in attending board meetings and health check actual fees of no more than NT$35,000 per person.
First Financial Holding provides expenses allowance for directors for their performing other services in their capacities as directors.

*Starting from 2016, directors’ remuneration is upon director meeting’s approval and report to AGM.

2015 ANNUAL REPORT • 25

Directors who are senior executives of First Financial Holding, in addition to director’s compensation, also receive base salary, etc. for management. As some directors also act as directors, supervisors, or senior executives of First Financial Holding’s subsidiaries, their compensation comprises a component awarded exclusively by the parent company, First Financial holding, and a component awarded by the consolidated group. The following tables summarize the directors’ annual remuneration at First Financial Holding alone and at First Group.

Remuneration

Directors’ Annual Remuneration at First Financial Holding and Group

Data as of Dec. 31, 2015, in NT$ and %

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Remuneration
Ratio of
(A+B+C+D) to net
Base income (%)
Delegates Severance Pay(B) Remuneration(C) Reimbursed Pay(D)
Compensation(A)
FHC FHC FHC FHC
FHC FHC Group FHC FHC FHC FHC
Group Group Group Group
Total
Directors
(including 4,783,871 13,906,409 0 0 145,197,155 145,197,155 51,000 1,360,163 0.9373 1.0025
Independent
Directors)
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(to be continued)

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Relevant remuneration received by directors who are also employees
Ratio of
(A+B+C+D+E+F+G)
Profit-sharing
Salary, Remuneration Severance Stock to net income (%) [Compensation ]
from Employee paid to
Delegates and Allowance(E) Pay(F) Compensation(G) Option(H) directors from
invested co.,
FHC FHC Group other than
FHC FHC FHC FHC group
FHC FHC FHC FHC
Group Group Group Group
Cash Stock Cash Stock
Total
Directors
(including 5,991,000 13,339,022 0 0 0 0 0 0 0 0 0.9748 1.0859 69,549
Independent
Directors)
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26 • FIRST FINANCIAL HOLDING CO., LTD.

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Name of Directors
Bracket Total of (A+B+C+D) Total of (A+B+C+D+E+F+G)
FHC FHC Group FHC FHC Group
Po-Chiao Chou, Yi- Grace M.L. Jeng, Po-Chiao Chou, Yi- Hsien-Feng Lee, Yi-
Hsin Wang, Hung -Chi Po-Chiao Chou, Hsin Wang, Hung-Chi Hsin Wang, Hung-
Huang, Feng-Ming Hsien-Feng Lee, Yi- Huang, Feng-Ming Chi Huang, Feng-
Hao, Hsiu- Chuan Hsin Wang, Hung- Hao, Hsiu- Chuan Ming Hao, Shang-
Ko, Hsien-Heng Lee, Chi Huang , Feng- Ko, , Hsien-Heng Lee, Wu Yu, Hsiu-Chuan
Shyan-Yuan Lee, Hau- Ming Hao, Shang- Shyan-Yuan Lee, Hau- Ko, Hsien-Heng Lee,
Under 2,000,000 Min Chu, Hui-Ya Shen, Wu Yu, Hsiu- Chuan Min Chu, Hui-Ya Shen, Shyan- Yuan Lee,
Yophy Huang, Tay- Ko, Hsien-Heng Lee, Yophy Huang, Tay- Hau-Min Chu, Hui-Ya
Chang Wang, Shyan-Yuan Lee, Hau- Chang Wang. Shen, Yophy Huang,
Min Chu, Hui-Ya Shen, Tay-Chang Wang,
Yophy Huang, Tay- Tien-Yuan Chen.
Chang Wang, Tien-
Yuan Chen
2,000,000 ∼ 5,000,000 — — — —
Ching-Nain Tsai,
5,000,000 ∼ 10,000,000 — Ching-Nain Tsai Grace M. L. Jeng Grace M. L. Jeng, Po-
Chiao Chou
Golden Garden Golden Garden Golden Garden Golden Garden
Investment Co., Investment Co., Investment Co., Investment Co.,
10,000,000 ∼ 15,000,000 Global Investment Global Investment Global Investment Global Investment
Co., Ltd., Chi-Hsun Co., Ltd., Chi-Hsun Co., Ltd., Chi-Hsun Co., Ltd., Chi-Hsun
Chang Chang Chang Chang
15,000,000 ∼ 30,000,000 Bank of Taiwan Bank of Taiwan Bank of Taiwan Bank of Taiwan
30,000,000 ∼ 50,000,000 — — — —
50,000,000 ∼ 100,000,000 MOF MOF MOF MOF
— — — —
Over 100,000,000
Total 16 21 17 21
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Comparison of Remuneration for Directors in the Most Recent Two Fiscal Years

in NT$ and %

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Ratio of total remuneration paid to directors to net income
Year
FHC FHC Group
2015 0.9748% 1.0859%
2014 0.9805% 1.1654%
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For 2015, First Financial Holding alone awarded to its directors a total compensation of 0.9748% of the net income of parent company (NT$16,006,088,414). The compensation awarded to First Financial Holding’s directors on the group basis is 1.0859% of the net income of the consolidated group results. Compared to prior year, the shrinking ratio indicated that earnings result improved larger than the distributed reward ratio to directors, which proved that our remuneration system was not unreasonably connected to the company’s performance, and most of the earning results were distributed to shareholders.

2015 ANNUAL REPORT • 27

FFHC Management Team

Data as of April 26, 2016

President

Grace M.L. Jeng

Female, Nationality: Taiwan, R.O.C. 2014/12/25 on board, now serves as Director of FCB; Director of Taiwan Asset Management Corp and First Education Foundation.

B.A., National Taiwan University
EVP, First Commercial Bank;
Chairman, First Commercial Bank (USA);
SVP & GM, Yuan-Shan Branch, First Commercial Bank.

EVP & Head of Strategy Planning Department

Yao-Tien Shih

Male, Nationality: Taiwan, R.O.C. 2014/11/7 on board, now serves as Director of FS.

B.A, Department of History, Tamkang University.
SVP & Head of Corporate Banking Business Admin. Division, FCB
SVP & Head of Credit Approval Division, FCB

EVP & Head of Admin. Mgt. Dept./ Spokesperson

Jennifer M. C. Liao

Female, Nationality: Taiwan, R.O.C. 2014/10/23 on board, now serves as Director of FSITC.

B.A., Banking , National Chengchi University.
SVP, Chief Secretary of FFHC & First Bank Boards;
Supervisor, First-Aviva Life Insurance Co., Ltd.

EVP & Chief Compliance Officer

Sheng-Shi Lu

Male, Nationality: Taiwan, R.O.C. 2014/10/24 on board, now serves as EVP of FCB and Supervisor of FCB Leasing Co., Ltd.

B.A., Banking & Insurance, Tamkang University.
SVP & Head of Taichung District Center, FCB;
SVP & GM, Nanking-East-Road Branch, FCB.

Chief Auditor

Chien-Hao Lin

Male, Nationality: Taiwan, R.O.C. 2014/12/11 on board, now serves as Supervisor of FS.

Bachelor of Laws, National Taiwan University.
SVP & GM, Hong Kong Branch, FCB;
SVP & Head of Business Planning & Admin. Division, FCB.

Advisor & Head of Risk Mgt. Dept.

- Huey Chin Hung

Female, Nationality: Taiwan, R.O.C. 2014/7/18 on board, now serves as EVP of FCB.

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B.A., Accounting, National Chengchi University
Senior Vice President & Division Chief, Kaohsiung Regional Center, FCB;
SVP and Head of Credit Approval Division, FCB.

VP & Head of Auditing Dept.

Chen-Tang Wang

Male, Nationality: Taiwan, R.O.C. 2015/12/31 on board, now serves as Head of Auditing Dept, FCB and Supervisor of First VC and First Consulting.

28 • FIRST FINANCIAL HOLDING CO., LTD.

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B.S., Economics, National Chung Hsing University.
VP & GM, Min-Chiuan Branch, FCB;
VP of Credit Approval Division, FCB.

Head of IT Dept.

Chin-Fu Lee

Male, Nationality: Taiwan, R.O.C. 2011/1/27 on board, now serves as SVP of IT division of FCB.

B.A., National Chung Hsing University.
SVP and Head of IT division;
Manager of IT Planning Dept. of FCB.

SVP & Head of Compliance & Legal Dept.

Hui-Lin Yu

Female, Nationality: Taiwan, R.O.C. 2014/10/24 on board, now serves as SVP and Head of Compliance & Legal Division of FCB.

Bachelor of Laws, National Taiwan University.
SVP & GM, Shih-Mao Branch, FCB;
SVP & GM, Head of Operation Planning & Admin. Division, FCB.

VP & Acting Head of Business Development Dept.

Yung-Hua Chen

Female, Nationality: Taiwan, R.O.C. 2016/03/02 on board, now serves as Director of First Venture Capital & First Consulting.

B.S., Cooperative Economics, National Chung Hsing University
VP & GM, Tien-Mu Branch, FCB;
VP & Acting Head of Business Planning & Admin. Division, FCB.

2015 ANNUAL REPORT • 29

Executives’ Annual Remuneration

The executive management of First Financial Holding includes the president, vice president and chief auditor. Because senior executives also act as president, vice president and chief auditor of subsidiaries, the total compensation to the executive officers comprises a component awarded exclusively by the parent company, First Financial Holding, and a component awarded by the consolidated group. The following tables summarize the executive’s annual remuneration at First Financial Holding alone and at First Group.

Executives’ Annual Remuneration at First Financial Holding and Group

Data as of Dec. 31, 2015, in NT$ and %

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Severance Compensation and Profit-sharing Employee
Salary(A)
Pay(B) Allowance(C) Compensation(D)
Title FHC FHC Group
FHC FHC FHC
FHC FHC FHC
Group Group Group
Cash Stock Cash Stock
President & EVP
10,825,934 14,068,207 0 0 5,681,012 8,455,961 1,049,140 0 1,423,532 0
& Chief Auditor
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(to be continued)

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Exercisable
Ratio of (A+B+C+D) to
Employee Stock
net income(%) Any compensation
Title Option from an invested Co.
FHC FHC other than group
FHC FHC
Group Group
President & EVP & Chief Auditor 0.1097 0.1496 0 0 218,751
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30 • FIRST FINANCIAL HOLDING CO., LTD.

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Name of President and Executive Officers
Bracket
FHC FHC Group
—
Under 2,000,000 Sheng-Shi Lu
Yao-Tien Shih, Jennifer M.C. Liao, Yao-Tien Shih, Jennifer M.C. Liao,
2,000,000 ∼ 5,000,000
Chien- Hao Lin Sheng-Shi Lu, Chien- Hao Lin
5,000,000 ∼ 10,000,000 Grace M. L. Jeng Grace M. L. Jeng
10,000,000 ∼ 15,000,000 — —
15,000,000 ∼ 30,000,000 — —
30,000,000 ∼ 50,000,000 — —
50,000,000 ∼ 100,000,000 — —
— —
Over 100,000,000
Total 5 5
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Comparison of Remuneration for Executives in the Most Recent Two Fiscal Years

in NT$ and %

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Ratio of Total Remuneration paid to executives to net income
Year
FHC FHC Group
2015 0.1097% 0.1496%
2014 0.1041% 0.1906%
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For 2015, First Financial Holding alone awarded its executives a total compensation of 0.1097% of the net income of parent company (NT$16,006,088,414). The compensation ratio awarded to First Financial Holding’s executives on FHC was higher than prior year mainly due to the deployment of two EVP executives at parent company, which caused a higher ratio but improving earnings result as well.

2015 ANNUAL REPORT • 31

Capital Overview

Share Capital

As of April 26, 2016, First Financial Holding’s paid-in capital totaled NT$114,611,063,810 with 11,461,106,381 shares outstanding issued at a par value of NT$10. For the year of 2015, NT$6,018,515,630 of 2015 earnings were capitalized simultaneously with the issue of 601,851,563 common shares.

FFHC Ownership Structure

First Financial Holding continues to monitor the development of its ownership structure based on the share register as of record date, monthly filing of ownership reports by corporate insiders and major shareholders as well as reports of changes in ownership of shareholders who have more than 10%, 25%, 50% and 75% of outstanding common stock. As of April 26, 2016, top 10 shareholders at First Financial Holding are listed below.

Shareholders Breakdown by Owners Type

Data as of April 26, 2016

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Shareholders Number Share-held Holding %
Government Agencies 7 1,865,682,345 16.28
Financial Institutions 16 1,582,050,112 13.80
Other Institutions 884 875,709,123 7.64
Individuals 279,807 4,653,678,165 40. 6 1
Foreign Institutions & Foreigners 697 2,483,986,636 21.67
Total 281,411 11,461,106,381 100.00
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Major Shareholders

Top 10 Shareholders at First Financial Holding Data as of April 26, 2016

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Shareholders Share-held Holding %
Ministry of Finance 1,316,653,263 11.49
Bank of Taiwan 854,406,305 7.45
Chunghwa Post Co., Ltd. 305,292,114 2.66
Hua Nan Bank 287,542,536 2.51
Civil Servants’ Retirement Fund 261,861,812 2.28
Taiwan Tobacco & Liquor Corporation 166,259,675 1.45
Labor Insurance Fund 160,825,813 1.40
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32 • FIRST FINANCIAL HOLDING CO., LTD.

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Shareholders Share-held Holding %
Government of Singapore 147,933,212 1.29
Dimensional Emerging Markets Value Fund 146,481,416 1.28
Vanguard Emerging Markets Stock Index Fund 146,411,410 1.28
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Share Price Information

First Financial Holding was incorporated on January 2, 2003 and became the holding company of First Bank through a share-for-share swap. On the same date, First Financial Holding’s common shares were listed on the Taiwan Stock Exchange under the ticker 2892, the common stocks of First Bank (ticker: 2802) were delisted from the Taiwan Stock Exchange. On August 1, 2003, First Financial Holding’s global depositary receipts were listed on the Luxemburg Stock Exchange (now the “Euro MTF market of the Luxembourg Stock Exchange”) with each GDR unit equivalent to 20 common shares. As of Feb. 29 2016, there were 865,004 GDRs outstanding, representing 17,300,080 of outstanding common shares.

Share Price Information on Taiwan Stock Exchange

*Data as of February 29, 2016 and in NT$

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2011 2012 2013 2014 2015 2016
High 27.55 19.70 19.40 20.90 19.85 15.55
Low 16.10 16.20 16.80 17.70 14.85 14.15
Average 22.75 17.62 17.98 18.66 17.37 14.90
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GDR Price Information on the Luxembourg Stock Exchange

*Data as of February 29, 2016 and in US$

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2011 2012 2013 2014 2015 2016
High 18.87 13.21 12.96 13.87 12.80 9.31
Low 10.60 10.95 11.29 11.49 9.07 8.38
Average 15.60 11.91 12.13 12.18 11.00 8.94
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Dividend

First Financial Holding’s board of directors has the right to propose an annual dividend, which becomes effective after being approved by the shareholders’ meeting. The dividend scheme takes into account the operating and investment requirements of the company, the profit performance of the current year, cost of capital, taxation, the overall financial industry development and the movement of the money market, and shareholders’ interests.

2015 ANNUAL REPORT • 33

The Company adopts a residual dividend policy to ensure continuous business expansion and profit growth and conformance with the relevant laws and regulations. The terms, timing and amount of the distributions: Any earnings concluded in a fiscal year shall be first used to pay the statutory taxes and make up for loss of previous years, and provide a legal reserve and a special reserve according to laws and regulations and business operation needs. The remainder, if any, plus the accumulated retained earnings of the last year shall be the distributable amount for shareholder dividends and bonuses, for which 30% to 100% of the amount should be distributed in accordance with the distribution proposal made by the board of directors and approved by the shareholders’ meeting.

Cash and stock dividends shall be distributed according to the Company’s operation plan, provided that the cash dividends shall be no less than 10% of the aggregate amount of shareholder dividends and bonuses distributed in a given year, with the remainder as the stock dividends. Unless otherwise resolved in the shareholders’ meeting, any cash dividend per share which is less than 0.1 dollar shall not be distributed.

If there is any surplus profit concluded in a fiscal year, the Company shall, from the net profit before tax which has not deducted any compensation to employees and remuneration to directors, set aside 0.02% to 0.15% as employee compensation and no more than 1% as director remuneration; provided however that, if the Company has any accumulated losses, the Company shall reserve an amount thereof in advance for making up the losses.

The actual distribution percentage of the aforesaid employee compensation and director remuneration, and whether the employee compensation shall be paid out by stock or in cash, shall be approved by a majority of the directors at a meeting attended by two-thirds or more of the total number of the directors and reported to the shareholders’ meeting.

For the fiscal year 2013 and 2014, First Financial Holding’s dividend payout ratio was 101.69% and 94.41%, respectively. Retroactively adjusted for cash dividend payout ratio would be 41.67% and 48.95%.

Dividend Payout History

in NT$ or %

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2011 2012 2013 2014 2015
EPS 1.01 1.18 1.18 1.43 1.55
Cash dividends 0.40 0.45 0.50 0.70 0.95
Stock dividends 0.60 0.65 0.70 0.65 0.45
Total dividends 1.00 1.10 1.20 1.35 1.40
Cash dividend payout ratio 39.60% 38.13% 41.67% 48.95% 61.29%
Dividend payout ratio 99.01% 93.22% 101.69% 94.41% 90.32%
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2015’s dividend proposal is subject to shareholders’ final approval at 2016 annual shareholders’ meeting on June 24, 2016.

34 • FIRST FINANCIAL HOLDING CO., LTD.

Subsidiaries Overview

First Bank Overview

2015 was another year of growth for global banks, but risks in the economy appeared to be high. The U.S. Fed raised its benchmark federal-funds rate in December 2015 after seven years at near-zero. The Eurozone’s recovery continued on a slow yet steady path, supported by the ECB’s monetary stimulus. Japan’s economy continued to falter. China’s efforts to shift its growth model caused a sharp deceleration in its economy. With its trade reliant on China, Taiwan saw exports fall 10.6% in 2015 to a six-year low. Domestically, consumption slowed down as people held off spending, and a short-term stimulus program launched in the yearend quarter achieved only limited success in spurring spending. Local corporations also became hesitant to invest in light of a sluggish housing market, slowing building activity and a less-than-stellar growth outlook. Taiwan’s economy grew just 0.75% for the whole year of 2015, the slowest pace since the 2008 financial crisis, reflecting weak external and internal conditions. As for interest rates, the Central Bank of R.O.C (Taiwan) cut discount rates in the third and fourth quarter of the year by 0.125 percentage point each time to 1.625%. The New Taiwan Dollar remained largely weak owing to the central bank’s rate cuts, the U.S. monetary policy tightening and weaker-than-expected global demand.

Pre-tax profit reported by domestic banks arrived at NT$319.6 billion in 2015, down 0.15% from the prior year. The industry average of return on assets and return on equity fell to 0.75% and 10.58%, respectively. The overall asset quality nevertheless improved as banks increased their loan-loss provisions, with the average non-performing loan ratio dropping by 0.02 percentage point year-on-year to 0.23% at the end of 2015. The average loan-loss coverage ratio rose to 555.43%.

During the year, First Bank withstood fierce competition to achieve double-digit growth. Net income set a record high of NT$16.1 billion, up 20.31% year-over-year. Net revenue increased 2.0% to NT$38.275 billion. The bank’s return on assets and return on equity advanced to 0.69% and 9.56%, respectively, while its net interest income and net fee income also rose. At the same time, First Bank continued its expansion efforts with a new branch in Vientiane, the capital of Laos, and another new branch in Xiamen, China launched in March and April, separately. Moreover, it opened two subbranches in Chraoy Chongvar and Mean Chey, Cambodia under the Phnom Penh Branch in January 2016. Currently, 20 of the bank’s 34 overseas branches and offices are located in Asia, including 6 in China/Hong Kong/Macau, 13 in Southeast Asia and one in Northeast Asia. Going forward, First Bank aims to further build and strengthen its geographic footprint through the localization of its overseas branches and the delivery of cross-border services.

2015 Net Revenue Breakdown

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in NT$ mn
Net interest income Net fee income Other income
27,494 7,160 3,621
71.8% 18.7% 9.5%
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2015 ANNUAL REPORT • 35

Financial Highlights First Bank

Non-consolidated basis, data as of December 31, 2014 and 2015

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2014 2015
Income statements (in NT$ mn)
Net interest income 27,138 27,494
Net fee income 6,190 7,160
Other income 4,192 3,621
Net revenue 37,520 38,275
Provision expenses (3,921) (473)
Operating expenses (17,737) (18,752)
Income before tax 15,862 19,050
Income tax expenses (2,481) (2,950)
Cumulative effect of change in accounting principles 0 0
Net income 13,381 16,100
Balance sheets (in NT$ mn)
Total assets 2,279,947 2,420,022
Total liabilities 2,126,736 2,236,538
Total shareholders’ equity 153,211 183,484
Ratios (%)
ROAE 9.40 9.56
ROAA 0.60 0.69
Tier-1 ratio 9.02 10.93
Capital adequacy ratio 11.50 13.67
Credit Ratings
Taiwan Ratings twAA+/twA-1+/Stable
Standard & Poor’s A-/A-2/Stable
Moody’s A2/P-1/Positive
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Figures may not match due to rounding.
There are currently eight subsidiaries under the First Financial Holding umbrella. In this section, only four primary subsidiaries are introduced as their combined net income for 2015 constituting the major portion of the First Group’s profits.

36 • FIRST FINANCIAL HOLDING CO., LTD.

During 2015, First Bank set out “Be First with Us, Your Integrated and Innovative Partner” as its annual theme and focused on five priorities that underlined management actions and financial planning. These five priorities were: driving cross-border connectivity and collaborations within Asia-Pacific region; integrating services to increase market penetration and customer value; innovating on products and channels to create a seamless customer experience; using capital efficiently to improve the return on capital; and contributing to environmental sustainability and promoting values that shape a happy company culture. A discussion of selected financial and other highlights is as follows:

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In 2015, First Bank remained the market leader in SME lending for a fifth straight year with outstanding SME loans of NT$608.2 billion. In Global Views Monthly’s Financial & Wealth Management Five Star Awards, which recognize wealth managers at two levels of performance (Excellence and Achievement), the bank were among the top three recipients of Award for Achievement in the categories of Best Brand Reputation, Most Recommended Wealth Manager, Best Overall Service and Best Online Platform for Investment Advisory Service. It also received a special award in recognition of its solid performance in all the major categories. These awards were a testament to the highquality services the bank provides to clients by using its in-depth knowledge of the market and client expectations. First Bank’s capital position was strengthened significantly following an NT$20 billion capital injection by its parent company, First Financial Holding, in September. The bank’s total capital ratio and tier 1 capital ratio stood at 13.67% and 10.93% at the end of 2015, far above the 2019 minimum capital requirements. The upgrade of its credit rating by international ratings agencies affirmed continued improvement in its financial fundamentals.

First Bank made strong headway in innovation in the past year, having issued the most number of NFC-enabled contactless credit and debit cards of any local peer under a partnership with Taiwan Mobile Payment Co. It continued to offer third-party payment processing and other solutions to help merchants accept payments online and build their E-commerce presence by using high-speed mobile technologies such as 4G LTE and online marketing channels including app, social media and EDM. Other new payment methods the bank launched in the year included an online platform to take payments of tuition from international students studying at local universities and a mobile platform developed jointly with Chinese chat app WeChat, which allows Chinese residents travelling in Taiwan to make payments at participating Taiwanese offline retailers.

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To respond to recent government initiative on Bank 3.0, First Bank transformed its Yung-Chun Branch into a smart banking location, equipping it with VTM (Virtual Teller Machine) and other digital banking facilities. It also put in place a platform for big data analytics that gathers and leverages customer data, provides analytical insights and enables personalized customer interactions across channels.

2015 ANNUAL REPORT • 37

First Bank Business Units & Functional Centers

Data as of March, 2016

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First Bank
President
Compliance & Legal Affairs Compliance & Legal Division
Corporate Banking Business Administration Division
Corporate Banking BU
Digital Banking Division
International Banking Division
International Business BU
Overseas Business Admin. Division
Consumer Banking Business Administration Division
Credit Card Division
Personal Banking BU Trust Division
Personal Banking Business Administration Division
Operation Planning & Admin. Division
Treasury Division
Financial Markets BU
Financial Markets Business Administration Division
Credit Approval Division
Risk Management Division
Risk Management Center
Credit Analysis Division
Special Asset Management Division
Information Technology Division
Accounting Division
Information Technology & General
General Affair Division
Administration Center
Human Resource Division
Public Relations Office
Regional Center
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During the year, the bank changed its organization to align with its digital strategy. As a result, the Electronic Banking Division was renamed the Digital Banking Division with the mission to plan, implement and manage

38 • FIRST FINANCIAL HOLDING CO., LTD.

digital banking initiatives. Moreover, the Branch Operation Supervision Department was dissolved with some of its functions, such as the oversight of operational control, compliance, internal-audit and disciplinary management, transferred to its regional centers. In the area of corporate social responsibility (CSR), the bank adhered to the Equator Principles by performing environmental and social assessment for each loan applicant based on a set of sector-specific criteria. As of December 2015, 15,660 loan applicants had signed agreements to adopt certain CSR standards; 502 suppliers had signed human rights and sustainability declarations; and 78 partners, including 71 asset management firms and seven insurance companies, had signed sustainability declarations or provided CSR reports that outline their commitment to sustainability. First Bank itself continued to support a diverse range of CSR initiatives, including charitable giving, the sponsorship of arts and sports events as well as individual athletes, and public lectures on the topics of arts and culture, health, wellness and self-growth. Its employees continued to volunteer times towards communities in Taiwan and abroad, with a total of 72 service activities organized in the year. Green finance remained crucial to its initiatives, and the bank’s head office achieved a 20.97% carbon emissions reduction from lower usage of fuel, electricity, water and gas.

First Bank Capital Adequacy

Data as of December 31, 2014 and 2015; in NT$ mn or %

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2014 2015
Tier-1 capital 131,181 166,349
Tier-2 capital 36,040 41,826
Total capital 167,220 208,175
Total risk-weighted assets 1,453,729 1,522,361
Tier-1 capital ratio 9.02 10.93
Capital adequacy ratio 11.50 13.67
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Heading into 2016, First Bank’s strategic theme will be “Going Digital with First Bank: Integration & Transformation.” It has identified collaboration across geographies, segments and products and integration of virtual channels with bank branches as two key priorities. By going digital, it hopes to reinvent its business model, uncover new business opportunities and increase the breadth and depth of banking services.

Collaborations across business units will be one of the bank’s top priorities for 2016. It plans to take an integrated approach to product development, customer segmentation, operations, risk management, channel activities, staff training, performance measurement and the tracking and improvement of sales and marketing activities, with the streamlined processes giving strategic and operational advantages to the organization. Moreover, First Bank plans to transform the way it serves clients by delivering both online and offline banking services through a compact model that combines physical and virtual channels. The transformation will be achieved by equipping branches with digital facilities; employing big-data analytics and increasing social media engagements; improving the customer experience through campaigns that enhance brand visibility and awareness; and creating a scalable, flexible technology environment to facilitate its transition to digital banking. Following a capital injection by

2015 ANNUAL REPORT • 39

its parent company, First Bank saw its capital position strengthened significantly. Creating value through prudent use of capital and by increasing exposure to select sectors with strong growth prospects will guide its lending activities going forward, with value cocreation being a key criterion for loan underwriting decisions.

In 2016, First Bank will continue its two-pronged approach to regional expansion by moving westward to China and southward to the ASEAN market. It is in the process of planning new branches and sub-branches to

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increase its presence in China, seeking approval to upgrade representative offices in Yangon, Myanmar (Burma) and Bangkok, Thailand to full branch status and exploring opportunities for mergers and acquisitions, strategic investments or joint ventures in ASEAN’s member countries. The SME business will be First Bank’s primary focus as it advances its goal of becoming a pan-Asia regional bank. Furthermore, it looks to set an example of good corporate citizenship by advocating the arts and sports, extending care to the underprivileged, and promoting a culture that emphasizes socially responsible behavior and practices among its staff. The bank has identified corporate governance, customer engagement, employee welfare, environmental sustainability and social commitment to be its five CSR initiatives for 2016. With the support from its clients, shareholders and employees, First Bank will be able to contribute to a sustainable society where businesses and the environment coexist in harmony. It also will commit itself to demonstrating exemplary corporate citizenship by giving back to the communities. These actions will position First Bank strongly in the next decade to achieve its goal of becoming a leading regional bank, a niche bank that offers unique capabilities, and, at the same time, a “happy” bank where employees can fulfill their potential and feel satisfied with their jobs.

40 • FIRST FINANCIAL HOLDING CO., LTD.

First Securities Overview

2015 was a choppy year for Taiwan’s stock markets as TAIEX, the benchmark index, saw a drop of 2,811.21 from peak to trough. The index hit the lowest point of the year at 7,203.07 on August 24, dragged down by U.S. rate-hike expectations and depreciation pressure on the yuan amid heightened market volatility and economic uncertainty. World trade declined sharply in the first half of 2015 for its worst sameperiod performance since the 2008 financial crisis, in turn dealing a blow to export-reliant Taiwan. For the whole year

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of 2015, Taiwan’s exports fell 10.6% to US$280.48 billion and the industrial production index dropped 1.66% to 105.03 from a year earlier. Two consecutive quarters of contraction in the second half of the year dragged average economic growth in 2015 down to 0.85%. The benchmark index opened 2015 at 9,292.31 and finished the year at 8,338.06 with a 10.27% loss, or 954.24, due mainly to a rise in U.S. interest rates, volatility in the yuan and other market events that unraveled in the latter half of the year.

During 2015, First Securities posted net profit of NT$174 million, or NT$0.27 per share. Its return on equity and return on assets stood at 2.65% and 0.92%, respectively.

2015 Net Revenue Breakdown

in NT$ mn

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Net brokerage commissions Net principle transaction gains Net interest income Other income
753 217 315 178
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Financial Highlights First Securities

Consolidated basis, data as of December 31, 2014 and 2015

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2014 2015
Income statements (inNT$ mn)
Net brokerage commissions 803 753
Net interest income 335 315
Net underwriting commissions 38 53
Net principle transaction gains 187 217
Other net operating income 63 125
Operating income 1,426 1,463
Operating expenses (1,367) (1,363)
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2015 ANNUAL REPORT • 41

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2014 2015
Non-operating income 54 64
Income before tax 114 164
Income tax expenses (40) 10
Cumulative effect of change in accounting principles 0 0
Net income 74 174
Balance sheets (in NT$ mn)
Total assets 19,191 18,392
Total liabilities 12,598 11,862
Total shareholders’ equity 6,593 6,529
Ratios (%)
ROAE 1.14 2.65
ROAA 0.40 0.92
Credit Ratings
Taiwan Ratings twAA-/twA-1+/Stable
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*Figures may not match due to rounding.

U.S. Strength versus Weakness in Asia

The U.S. economy grew at a 0.6% pace from January through March with consumption and investment restrained by harsh winter weather. It shook off the weather-related weakness and returned to growth in the second and third quarter with a 3.9% and 2.2% advance, respectively. Meanwhile, the unemployment rate ticked down to a historical low, nonfarm payroll employment hit a record high, and wage growth across the country stayed above 2%. Encouraged by strong economic data, the U.S. Fed raised its benchmark federal-funds rate in

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December after seven years at near-zero. U.S. stocks, however, had their worst annual performance since the 2008 crisis, with the broader S&P 500 closing out a rocky year with a 0.7% loss. The index hit an intra-year high in May before falling below its annual moving average as investors, shaken by the unexpected depreciation of the yuan, scrambled to sell shares.

42 • FIRST FINANCIAL HOLDING CO., LTD.

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Led by Germany, the Eurozone’s recovery continued on a slow yet steady path, and Italy ended a string of three consecutive years of contraction. In Asia, Japan wobbled along with its recovery pushed back as a sales tax hike weighed on private spending and business investment in addition to the effects of slumping oil prices. The Bank of Japan, in its attempt to jumpstart the economy and bring inflation closer to its stated target, ramped up its monetary easing program, sending the Yen down to 120 against the U.S. dollar from 108 earlier in the year. The monetary stimulus boosted Japanese stocks to finish the year up 9% after hitting a high of 20,952 in June. China’s surprise currency devaluation became a major source of turmoil in 2015, sending shockwaves throughout Asian markets including Taiwan. The devaluation negatively affected exports of China-dependent Asian countries, in turn hurting business investment. After their dizzying rally in 2014, China’s equity markets suffered from massive losses in the past year as fears of China’s economic slowdown prompted investors to pull their money out of emerging Asia. Stock market volatility again signaled the worsening of investor sentiment towards emerging markets, especially at a time when China and the U.S. faced a diverging growth outlook.

Solid Results despite Challenging Market Environment

Despite the challenging operating environment, First Securities continued its growth and delivered solid results in 2015 thanks to its dedicated, hardworking staff.

• Retail Brokerage

First Securities saw its market share in retail brokerage decline to 1.542% from 1.622% in 2014. Its market share in margin loans, however, rose to 2.54% from 2.41% in the prior year, reflecting the effects created by installing brokerage service points within First Bank’s branches, improved features and functions of its trading platform and renewed sales efforts. Looking ahead, the firm plans to develop a comprehensive platform for managing sales activities, offer an all-in-one service solution for retail investors, and connect and consolidate marketing resources within the group.

2015 ANNUAL REPORT • 43

• Underwriting

First Securities lead-managed two IPOs and five SPOs in 2015, an improvement from the prior year. It entered into seven IPO advisory and led management contracts during the year, bringing the number of contracts outstanding to 42. The firm continued to make headway in advising China-based, Taiwanese-owned companies on listing shares in Taiwan after it opened a representative office in Shanghai in 2011. The number of agreements signed up to December 2015 for managing the IPO process of foreign-domiciled, Taiwanese-owned companies increased to seven after it signed on a new client to advise on an IPO and another one to offer financial consultation during the year. In addition to IPO advisory services for corporations operating in Taiwan and China, First Securities plans to expand other businesses, including financial consultation, in overseas markets in 2016 so as to boost fresh revenue stream and support clients with wider geographic reach.

• Investment Products

The deleveraging process accelerated in 2015 amid falling oil prices and volatile financial markets. Investors dumped risky-assets and flocked to safe haven assets like government bonds, triggering a decline in bond yields globally. Against this backdrop, the bond team at First Securities continued to earn spreads between bond yields and repo rates through repurchase agreements and increased its position in convertible bond asset swaps. Keeping up with the latest market developments, it also increased transactions of government bonds. In 2015, the firm comanaged a total of 16 corporate bond issues, beating its own target. Looking ahead to 2016, instead of chasing the market, First Securities will wait for opportune times – such as a rebound in interest rates, if it occurs – to grow its corporate bond assets to a targeted size of NT$4 billion. Moreover, it plans to gradually add up its holdings of locally-listed, foreign currency-denominated bonds in order to diversify its portfolio and reduce risks.

In the area of derivatives, stock warrants continued to boom in 2015 given strong support and promotion from the authorities and the Taiwan Stock Exchange. First Securities made significant gains in both volume and market share with a record number of 365 warrants issued in the year, due in part to marketing campaigns launched in the second half of 2015. Profits contributed by its stock warrant business in the first half of the year were eroded by surging hedging costs in the second half as global markets plunged and financial systemic risk became evident.

First Securities saw its market position in principal-guaranteed note transactions improve to the sixth place in 2015 after a successful collaborative campaign with First Bank. The market share gains demonstrated the firm’s expertise and excellence in structured products. During the fourth quarter of the year, First Securities became a broker for Yuanta Daily Taiwan 50 Bear-1X ETF to facilitate the purchase, redemption and arbitrage trading of this ETF.

• Proprietary Trading and Research

In 2015, First Securities lifted its maximum portfolio limit and the overall position for available-for-sale securities with a focus on high dividend yield stocks. That, coupled with changes to the authorized limit for the amount of option contracts for trading purpose, helped stabilize the return on the firm’s proprietary portfolio. A market slump in the second half of 2015 nevertheless led to unrealized losses on some available-for-sale stocks in the portfolio, offsetting

44 • FIRST FINANCIAL HOLDING CO., LTD.

dividend income. In the year ahead, First Securities will reduce its available-for-sale assets and increase holdings of foreign stocks. In addition, it plans to apply for quotas for investing in shares listed on the bourses of China, Hong Kong and the U.S. in order to diversify its portfolio and alleviate risks.

First Securities actively expanded its business of sub-brokerage on foreign securities in 2015, with its move aligned with clients’ need to allocate assets into foreign markets and the government’s policy objectives to promote international financial services and ease restrictions on outbound investments. The firm’s research unit enhanced its efforts to build, preserve and manage clients’ overseas assets by obtaining a license in December to provide investment advisory services on foreign securities.

First Securities’ strategic priorities for 2016 include strengthening its core capabilities, expanding its Greater China business and exploring the benefit of integrated marketing to boost sales. It also will increase efforts on the investment advisory business and leverage the affluent or high net worth client bases owned by members of its parent group. In support of the government’s “Securities 3.0” initiative, First Securities plans to expand its E-commerce presence, improve the service it offers to investment banking clients, and add international equities to its research coverage in order to meet demand for foreign market research. Looking ahead, Taiwan is in urgent need to keep up with an everchanging capital market and undertake structural reform of its economy. It is also an imperative for Taiwan’s regulators to revitalize the markets with eased rules, restore investor confidence, and enhance the international competitiveness of the domestic capital market. First Securities aims to capture synergies and leverage resources that exist within its organization in order to become a leading full-service brokerage firm – one that not only helps individuals reach their financial goals, but also facilitates corporations’ access to capital with a comprehensive trading and funding platform.

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2015 ANNUAL REPORT • 45

First Securities Investment Trust Overview

2015 was marked by diverging growth paths between regions of the world. Due to a general risk-off sentiment and investors’ rotating into less volatile areas of the market, the majority of new fund launches in Taiwan were bond funds, balanced funds and index funds. During the year, balanced funds experienced the largest increase in assets at 37%, followed by money market funds’ 33% and index funds’ 26.6%. As investors opted for defensive investment classes, there was a growing interest in low-volatility and target return funds, which were expected to remain popular and feature prominently in local asset managers’ product strategies in the near future.

First Securities Investment Trust (FSIT) delivered strong financial results in 2015 despite a headwind of market volatility. It reported a 29.11% rise in net profit to NT$102 million, or NT$1.7 per share. Its return on equity increased significantly from the prior year to 10.35%.

Financial Highlights First Securities Investment Trust

Non-consolidated basis, data as of December 31, 2014 and 2015

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----- Start of picture text -----

2014 2015
Income statements (in NT$ mn)
Management fee 513 464
Sales service fee 1 1
Operating income 514 465
Operating expenses (433) (370)
Non-operating income 14 26
Income before tax 95 120
Income tax expenses (16) (18)
Cumulative effect of change in accounting principles 0 0
Net income 79 102
Balance sheets (in NT$ mn)
Total assets 1,152 1,104
Total liabilities 174 106
Total shareholders’ equity 978 998
Asset under management
AUM(in NT$ mn) 74,067 97,016
AUM rank 1 1 14
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*Figures may not match due to rounding.

46 • FIRST FINANCIAL HOLDING CO., LTD.

Money Market Funds Enjoy Stellar Growth

Public-offering fund assets in Taiwan reached NT$2.2037 trillion at the end of 2015, an increase of NT$228.9 billion, or 11.6%, reflecting investors’ appetite for money market funds to hedge against volatility in financial markets. Assets of domestic and international equity funds decreased by NT$28.3 billion, or 5.3%, to NT$509 billion. Assets of balanced funds rose by NT$24.8 billion, or 37.3%, to NT$91.4 billion.

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Assets of money market funds increased by NT$250.1 billion, or 32.9%, to NT$1.0092 trillion. Assets of other types of funds, including fixed-income funds, fund of funds, principle protected funds and exchange-traded funds, decreased by NT$17.7 billion, or 2.9%, to NT$594 billion. Assets managed by 46 private equity funds – down from 59 in 2014 – were flat at NT$13.2 billion compared to a year earlier. After their spectacular growth in 2014, assets managed on a discretionary basis grew at a slower pace of 10.6%, or NT$133.2 billion, to NT$1.3896 trillion. The number of fund beneficiaries saw an increase of 50,340, or 3.2%, to 1,601,024.

Domestic Mutual Fund Market

In NT$100 mn and %

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Type 2014 2015 Change
Equity funds [1] 5,373 5,090 -5.3%
Bond funds 8,258 11,007 33.3%
Others [2] 6,117 5,940 -2.9%
Total public-offering funds 19,748 22,037 11.6%
Private-placement funds 132 132 0.0%
Funds under discretionary management 12,564 13,896 10.6%
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Including balanced funds
Including fund of funds, index funds and securitization funds

At FSIC, assets under management increased by NT$22.9 billion, or 31%, to NT$97 billion in 2015, ranking 8th in the local fund industry. Public-offering funds represented NT$95.3 billion of assets. By asset class, assets of non-money market funds including equity funds, balanced funds and others decreased by NT$2.2 billion, or 8%, to NT$25.3 billion. Assets of money market funds were NT$70 billion, an increase of NT$24.8 billion, or 55%. Client assets managed on a discretionary basis were NT$950 million, an increase of NT$330 million, or 54%. Assets of private equity funds were NT$700 million, a decrease of NT$60 million, or 8%.

2015 ANNUAL REPORT • 47

First Securities Investment Trust’s Asset under Management

in NT$100 mn and %

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Type 2014 2015 Change
Equity funds [1] 275 253 -8.0%
Bond funds 452 700 54.9%
Total public-offering funds 727 953 31.1%
Private-placement funds 8 7 -12.5%
Funds under discretionary management 6 10 66.7%
Total assets under management 741 970 30.9%
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Including balanced funds

In 2015, FSIC took actions to launch new funds, relaunch existing ones, promote dollar-cost averaging programs, diversify its fund lineup, strengthen its portfolio management team and upgrade its IT infrastructure. Overall, it delivered strong performance as demonstrated by a significant increase in assets under management to NT$97 billion, or 110% of its given target. Highlights of the 2015 results include:

Domestic funds: FSIC’s five domestic equity funds ranked in the Top 37 percent of funds with an average annual return of 0.34%, versus the benchmark’s -10.41%. Three of them achieved first-quartile performance for the one-year period, including FSITC Innovation Fund (in the top seven percent), FSITC Small Capital Fund (Top 11 percent) and FSITC OTC Fund (Top 16 percent).
International funds: Four of FSIC’s international equity funds beat their benchmarks and ranked in the Top 25 percent of their respective categories.
Fixed-income funds: FSIC’s Global High-Yield Bond Fund ranked 2[nd] among its peer group in one-year performance.
Money market funds: FSIC’s Taiwan Money Market Fund ranked in the Top 14 percent of all money market funds.

In addition to above-peer investment performance, FSIC saw fund sales generated through channel partners, as of percentage of its 2015 fund sales, increase by 5.13%. The number of third-party distribution partners has been growing month over month, reaching 53 currently. That includes 33 banks, 13 brokerage firms and seven life insurance companies.

Goals and Outlook for 2016

Growth Strategy

FSIC plans to launch two new funds in 2016. One of them will be focused on industrial robot and automation companies, and the other will feature a low-volatility strategy that targets a predetermined level of return to meet retirement planning goals in response to an aging population. As for existing funds, the company will continue to promote high-yield bond funds, in particular the yuan-denominated ones, plus yuan-based money market funds to set itself apart as an expert in yuan investments. These efforts are aimed at scaling up FSIC’s business, strengthening its market position and increasing its brand awareness.

48 • FIRST FINANCIAL HOLDING CO., LTD.

Improvement in performance

FSIC will identify and develop flagship products by bringing more clarity to its sales process and product development strategy. Furthermore, it will ensure that its investment process adheres to a team-based approach so that all portfolio decisions are made collectively and objectively. This approach is the foundation for future improvement in the analysis of securities within the investable universe, stock selection, and the identification and management of risks.

Mandates for institutional investors

FSIC will seek opportunities to manage funds for government agencies and life insurance companies by attracting and retaining senior portfolio managers with proven track record of investment performance, as part of its broader efforts to improve returns and optimize risk-return profiles.

Discretionary managed funds

The expertise of third-party investment experts and foreign asset managers will be leveraged to enhance FSIC’s investment portfolio models and returns.

Multi-channel distribution

FSIC has identified the branch network of its parent group, third-party distribution partners and the online/ mobile sales channel as its main channels of distribution for 2016.

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Overseas plans

Collaborations with China Universal Asset Management will continue in the year ahead to facilitate asset allocation into China’s stock market via investment channels including the Shanghai-Hong Kong Stock Connect, QFII and RQFII.

A sales contract with First Capital Management is expected to be signed in the first quarter of 2016 with the goal of broadening the product lineup and accessing a wider portfolio of complementary products between the two companies.

Looking ahead to 2016, providing clients with insightful advice and asset allocation will remain a top priority for FSIC. As a member of First Financial Holding, FSIC will support the group’s advocacy for equality in all aspects of life, whether it is fair treatment for people with disabilities and unusual appearance, or equal access to medical and financial services. A commitment to the best interest of its clients, shareholders and employees will continue to guide FSIC as it seeks to establish itself as a leading and indispensible asset manager in Greater China.

2015 ANNUAL REPORT • 49

First-Aviva Life Insurance Overview

First-Aviva Life Insurance was incorporated in 2008 as a joint venture between First Financial Holding Company and Aviva International Holdings. The company came into existence at a time when interest rates started to decline. Entering its eighth year, First-Aviva Life insurance posted premium income in excess of NT$10 billion for a second straight year, with its increased scale and volume demonstrating the great potential Taiwan’s life insurance sector has to offer. In addition to delivering life insurance products to customers of its parent group, First-Aviva is committed to operating sustainably and responsibly, adapting to the changing needs of those it serves, and improving public perception of insurance as a means to contain risk rather than for saving money. For 2015, First-Aviva posted net loss of NT$90 million, or NT$-0.4 per share. First Financial Holding recognized its share of loss of NT$46 million based on its 51% ownership of First-Aviva.

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Financial Highlights First-Aviva Life Insurance

Non-consolidated basis, data as of December 31, 2014 and 2015

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2014 2015
Income statements (in NT$ mn)
Premium income 13,436 11,820
Other insurance income 136 233
Net investment income 1,331 (476)
Operating Cost (14,506) (11,124)
Gross Revenue 397 453
Operating Expenses (422) (542)
Non-operating income 1 1 0
Income before tax (14) (89)
Income tax expenses (1) (1)
Cumulative effect of change in accounting principles 0 0
Net income (15) (90)
Balance sheets (in NT$ mn)
Total assets 30,387 33,557
Total liabilities 29,506 32,849
Total shareholders’ equity 881 708
Ratios (%)
ROAE (1.60) (11.26)
ROAA (0.05) (0.28)
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*Figures may not match due to rounding.

50 • FIRST FINANCIAL HOLDING CO., LTD.

Providing protection against unexpected losses is a vital function of insurance. A string of natural disasters, in particular a devastating earthquake that struck southern Taiwan in early 2016, raises risk awareness of consumers and therefore increases demand for earthquake insurance. There is also a gradual shift in public attitude toward the purchase of insurance as a means to limit

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risk rather than as a tool for savings. During the past few years, Taiwanese regulators have focused their attention on increasing insurance coverage per individual and restricting the sales of savings-type plans and high-guaranteed-rate policies. In September 2014, the regulators imposed tougher rules on the widely popular interest-sensitive single premium whole life, triggering a rush by consumers to snatch up such policies. Contrary to anticipation, interest-sensitive policies didn’t see their popularity diminish in 2015 but instead drew renewed interest after the regulators eased restrictions on the payout of accrued benefits. To date, interest-sensitive whole life remains the most popular insurance product in Taiwan.

In addition to supervisory scrutiny into insurance products, the regulators have tightened its oversight of the risks to which life insurance companies are exposed as part of their efforts to guide insurers toward financial sustainability and restore their role in supporting social stability. They also have made significant progress in restructuring and consolidating the sector. The number of Taiwan’s life insurance companies is expected to decline to 25 in 2016 after Cathay Life insurance completed in August 2015 the acquisition of Global Life Insurance and Singfor Life Insurance, two financially-troubled insurers that the Taiwan government had placed into its receivership. Later, Taiwan Life Insurance was merged into CTBC Financial Holding on January 1, 2016 with the former remaining an independent brand after the initial acquisition.

During 2015, bancassurance remained a major distribution channel in the life insurance sector, generating 53% of total new business for the first nine months of the year, up from 52% in the year-ago period. Its growth was attributable to brisk sales of certain types of investment-linked policies (ILPs) – those mostly sold through banking channels with insured assets managed on a discretionary basis and featuring back-end loads. That had brought a boom to ILP- and bancassurancefocused insurers, including Cardif Assurance Vie and Allianz Taiwan Life Insurance, as shown in their premium growth. The second-largest distribution channel for the year was the agent force, accounting for 41% of new business.

At First-Aviva, First Bank’s branch network, including its internal telemarketing force, contributed 89.7%, or NT$9.896 billion, of its first-year premium income in 2015. Trailing behind was the channel of agents and brokers, which contributed 6.1%, or NT$673 million, of first-year premium income. First-Aviva’s own telemarketing operation generated new premium income of NT$89.72 million. First-year premium income generated from other distribution partners, mainly banks that are not affiliated with First Financial Holding, remained at a healthy level of NT$453 million albeit slightly down from the prior year.

On balance, ILPs continue to be a large and key part of bancassurance sales even though savings-type products delivered strong growth in 2015. Long-term care insurance is also gaining popularity due to the rapid ageing of the population, and so are variable annuities as the Taiwan government mulls action to reform its pension system. In 2015, despite market turbulence and significant catastrophe losses, First-Aviva’s total premium income reached NT$11.82 billion, in which Firstyear premium totaled NT$11.03 billion. Investment-linked products although represented a 12% decrease year-over-year, the sales of mortgage life insurance grew markedly. As for First-Aviva’s traditional protection & savings products, which have won widespread recognition among customers and bancassurance partners, new business totaled NT$ 285 million and NT$ 28 million, respectively, grew by 3.0% than prior year.

2015 ANNUAL REPORT • 51

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2015's FYP FYP (million NT) Percent (%)
Investment-linked products 10,009 90.8%
Mortgage insurance products 705 6.4%
Traditional life products 285 2.6%
Others(Savings Products) 28 0.2%
Total 11,027 100.0%
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Looking ahead to 2016, independent insurance companies may face the need to consolidate if they are to compete against rivals backed by large, established financial groups. Taiwan’s Top 10 life insurers accounted for 88% of total premium written in 2015, up from 86% in the prior year, and the level of market concentration became even more evident after Cathay Life Insurance took over Global Life Insurance and Singfor

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Life Insurance and CTBC Financial Holding brought Taiwan Life Insurance in its fold. While the regulators continue to open up the market with the latest changes happening in overseas insurance units and managed indemnity plans, there is still a shortage of relevant legal measures that support the market liberalization. Overall, a liberal approach taken by the regulators still provides plenty of new opportunities for the future. Most of the social welfare functions advocated by the incoming administration, such as long-term care and universal pension, can actually be replaced by private insurance. As demographic changes, such as the rapid ageing of population, raise awareness about the urgency of preparing for retirement, annuities that provide income during retirement are fast gaining popularity, with their target audience moving from the wealth management clientele to middle-class consumers. In the year ahead, First-Aviva will continue to roll out products that meet customers’ ever-evolving needs and address aging and longevity risks. It also plans to develop more foreign currency-denominated policies in response to growing demand for foreign currency solutions. Another key initiative for the insurer is to educate the public about the importance of having adequate long-term insurance coverage.

The franchise of First Financial Holding’s extensive distribution network, complemented by Aviva’s global market expertise, has enabled First-Aviva to execute its brand strategy and improve customer satisfaction with a clientcentric focus. Going forward, the insurer will keep First Bank’s clients and the public informed about its news, events and product updates through exposure in the media, email newsletters and other marketing efforts initiated together with First Bank. Even more importantly, First-Aviva seeks to raise its brand awareness and position itself as one of the market leaders in bancassurance – one that not only helps customers achieve financial success, but also allows them the peace of mind. This commitment is part of First-Aviva’s mission to build the most profitable bancassurance model in Taiwan.

52 • FIRST FINANCIAL HOLDING CO., LTD.

Corporate Social Responsibilities

In 2015, we were honored by ‘Taiwan Stock Exchange” the prize of Top 10 of “The 1st Listed Company Corporation Governance Evaluation” and “Securities & Futures Exchange” grade A++ of “The 12th Listed Corporations Information Disclosure Evaluation”. These awards reveal our hardwork toward information transparency and disclosure for our related parties.

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In particular, apart from the above, 2015 made FFHC a historical honor year for CSR rewards, the CommonWealth Magazine & GreatVision Magazine awarded “Corporate Citizenship Prize” and “Environmental Friendly Prize”, respectively. These honors represent our efforts on CSR practice. Our “Year of 2014 CSR Report”, which delivered our long-term efforts on society caring, environmental protection and corporate governance as well as CSR ReportEnglish version, are on our website for free download and both verified by The British Standards Institution (BSI) certification.

Looking ahead, all members in FFHC together will extend our persistent care for the clients and give back to the society through a variety of innovative services. We will continue to achieve the goal of Best CSR Corporation and maintain our ambitions to fill our mission and our commitments to make a better future for the society as a whole.

First Financial Holding pursues corporate profits with strict compliance with the laws, regulations and rules. Moreover, we extol the virtues of corporate citizenship and fulfill our social responsibility by putting clients, staffs and people first to ensure group’s sustainable growth.

CSR Committee

The CSR Committee was formed in 2011 and outlined the guidance including the “Code of Practice for Corporate Social Responsibility” and “Corporate Social Responsibility Policy” to be followed within the group. The committee also conducts and oversees the annual targets set out by all subsidiaries on their implementation relating to corporate social responsibilities and report to the Board on a yearly basis.

2015 ANNUAL REPORT • 53

Our Employees

Training and Working Environment

We continue to focus on employee training and talent development programs. We include product research, development and marketing courses into our internal training programs for subsidiaries. We also provide education programs for many key certificate examinations of financial professionals. Moreover, to strengthen our staffs’ knowledge and perception to better adapt to the business expansion,

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we deliver external training projects for their overall development. In 2015, we conducted a total of 1,177 internal cross-selling training sessions with 61,682 participants, including on-line training or webcast training courses. We also encourage further education within staffs’ leisure time, where 1,056 participants joined with a total of subsidizing cost of NT$5,078,638. Meanwhile, a total of NT$6,978,224 was charged in 2015 to support our external training initiatives, where 6,295 participants joined.

It is our responsibility to provide a safe and sound working environment for our employees. We provide regular health checks or reimburse health examination fee, hold sports, fitness programs and recreational events to ensure the physical well-being of employees. Meanwhile, to provide a secure and friendly environment for customers and staffs, subsidiary First Bank held carbon oxide tests in premises every six months. Subsidiary First Bank, First Securities and First Securities Investment Trust each has its own “Employee Welfare Committee” that supports, sponsors and organizes various events and programs for the benefit of its employees.

We trust the balance of work and family-caring should be the key factor to support our employees, by conducting various measures such as “subsidy for longer holiday break”, which totaled NT$25.58 mn in the year of 2015, as well as an optional unpaid-leave for employees when family members caring is needed. These are the benefits that we share with our employees, allowing them to look after both working and family.

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Finally, our Personnel Committee also reviews matters involving personnel policies that affect employees, including against sexual-harassment policy that communicates a zero-tolerance approach and takes every action to correct any sexual harassment behavior within the workplace.

54 • FIRST FINANCIAL HOLDING CO., LTD.

Employees—our important assets

We provide employees with the opportunities to maximize their potential, a safe workplace to work in, and a culture that values integrity and superior products and services to customers. We believe in that only quality employees can deliver foremost service to our clients. We share company’s profits with our employees and adopt a fair KPI method to assess their performances. We hope our employees to

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advance with our clients, society and the most fast-growing financial industry, so we provide them with various opportunities for getting access to updated technology and knowledge for their positions and to adopt themselves for being a better staff.

Number of Employees

*Data as of February 29, 2016

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2016 2015 2014
First Financial Holding 72 70 62
First Bank 7,402 7,428 7,286
First Securities 939 932 933
First Securities Investment Trust 152 148 137
First-Aviva Life Insurance 255 251 214
Other Subsidiaries 91 91 92
Total: First Group 8,911 8,920 8,724
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Our Customers

Privacy protection

To infuse the concept of consumer protection into corporate culture, First Financial Holding’s subsidiaries continue to conduct training, via written programs or verbal communication, to emphasize to all employees the importance of confidentiality of customer information. The group also announces “FFHC Group marketing firewall policy and discipline” to ensure that each subsidiary disclose the privacy policy on the website page. A related training program is periodically conducted through

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education activity to protect customer information. Every employee within the group has the obligation to safeguard customer information. Contracts between the group and clients must ensure compliance with the law in recognition of customers’ legitimate interest. All subsidiaries have telephone complaint service systems in place to handle any complaints and answer inquiries.

2015 ANNUAL REPORT • 55

Our ESG – Environment, Social & Corporate Governance

Environment

The group is dedicated to environmental protection and social welfare stemming from the consensus of sustainability and energy saving. We keep setting up new goals of reducing carbonemission plans on electricity, gas, water and lift waste and recycling program targets. Our First Bank headquarter and IT buildings are both classified as green-building. Our 2015 carbon emission CO2e was 1,042 tons less than prior year and we have 7 business spots certified as “ ISO50001 Energy-Management System” and 54 units awarded as“ ISO14064-1 Greenhouse Gas” certifications respectively. Our ongoing movements toward environmental protection include:

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• Energy Saving:

Reduce Electricity and Water Usage: keep on replacing lighting devices to LED lamps, water-saving faucets and flush toilets were installed widely at the premises of group’s subsidiaries and bank branches.
Global Earth Hour in 2015: group followed the activity held by “World Wide Fund for Nature”, shutting down power for 1 hour on April, 22, 2015, continue to make progress towards being the “Green Enterprise”.

• Environmental Protection:

Reduce Paper Usage: group stuck to e-Commerce guidance with paperless meetings or training courses.
Reduce Petroleum and Carbon Usage: carpooling or taking public transportation for business visits; airconditioning temperature controls; properly recycle printer cartridges and photocopiers.
Everyone’s Daily Life: “A Day without Red-Meat” was implemented at group’s cafeteria restaurant on the first business day of each month.

Social

As we share common duty to alleviate global warming, the group is devoted to fulfilling the environmental protection mission by way of corporate procurements, business operations, and campaigns that trickle down to every employee, client, and the community.

Since 2013, subsidiary First Bank has adopted “Equator Principles” on setting up “Green Underwriting Rule” for lending business, any enterprises involving labor disputes, environmental-unfriendly or harmful product issues will be rejected for loan under the principles.

56 • FIRST FINANCIAL HOLDING CO., LTD.

Each freshman employee of First Bank will be arranged to participate the community welfare activities and to visit organic tea factory to fully understand the social responsibilities that we should bear and achieve.

FFHC Group and other subsidiaries jointly serve our community in many ways, as we continue to focus on social responsibilities towards our home towns, and more importantly, we gain more as we share more.

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Corporate Governance

CSR Awards

• British Standards Institution (BSI)

The BSI has verified First Financial Holding’s 2015 CSR Report in Core Track of G4 version.

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Securities & Futures Institute (SFI)

The SFI evaluated A++ to First Financial Holding on “12th Listed and OTClisted Companies Information Disclosure”.

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• CommonWealth Magazine

Top 10 shortlist for “Corporate Citizenship Award”.

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• GreatVision Magazine

First Financial Holding was awarded by GreatVision Magazine for “12th GreatVision CSR Award” & “ Environmental-Friendly Award” in 2015.

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• Taiwan Stock Exchange Corporation

Awarded the “1st Corporate Governance Evaluation for Top 10 among Listed Companies”.

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2015 ANNUAL REPORT • 57

2015 ANNUAL REPORT

Financial Information

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2015 ANNUAL REPORT • 59

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60 • FIRST FINANCIAL HOLDING CO., LTD.

FIRST FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

ASSETS	Notes	December 31,201	December 31,201	4
		Amount $ 48,061,649 256,445,207 91,955,343 97,524,872 1,546,214 75,766,364 1,660,099 1,480,206,723 11,601 356,817,150 2,466,210 43,438,680 9,808,721 27,749,830 410,793 1,881,042 4,345,314 $ 2,500,095,812	Amount $ 62,282,631 181,176,379 55,800,157 84,980,455 1,882,206 64,860,600 1,471,426 1,497,260,653 912 307,625,308 3,148,788 51,548,266 9,437,666 28,299,057 430,110 1,688,887 3,815,182 $ 2,355,708,683	%
Cash and cash equivalents Due from the Central Bank and call loans to banks Financial assets at fair value through profit or loss Available-for-sale financial assets Securities purchased under resell agreements Receivables, net Current tax assets Loans discounted, net Reinsurance contract assets, net Held-to-maturity financial assets Investments accounted for using equity method, net Other financial assets, net Investment property, net Property and equipment, net Intangible assets, net Deferred income tax assets, net Other assets, net Total Assets	6(1)and7 6(2) and7 6(3) and7 6(4),7 and8 6(5) 6(6) and7 6(7) and7 6(8) 6(9) and8 6(10) 6(11) and8 6(12) and8 6(13) and8 6(40) 6(14)and8			3 8 2 4 - 3 - 64 - 13 - 2 - 1 - - -
				100

(Continued)

2015 ANNUAL REPORT • 61

FIRST FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

LIABILITIES AND EQUITY	Notes	December 31,201	December 31,201	4
		Amount $ 129,174,491 63,088 30,345,870 6,319,156 11,984,234 69,344,867 2,485,846 1,947,197,924 42,300,000 2,509,227 6,430,485 5,640,517 799,145 25,294 45,779,650 5,750,527 5,958,505 2,312,108,826 114,611,064 25,916,221 10,763,595 4,128,990 23,568,431 8,651,604 347,081 187,986,986 $ 2,500,095,812	Amount $ 126,095,434 80,968 23,387,572 8,723,114 10,693,042 68,733,743 1,680,981 1,823,298,294 41,900,000 7,528,630 6,919,954 5,062,443 795,376 69,658 66,239,808 5,772,703 4,350,409 2,201,332,129 92,592,548 18,200,167 9,355,102 4,128,990 22,068,989 7,598,954 431,804 154,376,554 $ 2,355,708,683	%
Deposits from the Central Bank and banks Due to the Central Bank and banks Financial liabilities at fair value through profit or loss Securities sold under repurchase agreements Commercial papers issued, net Payables Current tax liabilities Deposits Bonds payable Other borrowings Provisions Provisions for insurance Provisions for employee benefits Provisions for guarantee liabilities Other provisions Other financial liabilities Deferred tax liabilities Other liabilities Total Liabilities Equity attributable to owners of the parent Capital Common stock Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Other equity interest Non-controlling interests Total Equity TOTAL LIABILITIES AND EQUITY	6(15)and7 6(16) and7 6(17) 6(18) 6(19) 6(20) and7 6(21) 6(22) 6(23) 6(24) 6(40) 6(25) 6(26) 6(26) 6(26) 6(26) 6(27) 6(28)			5 - 1 - 1 3 - 78 2 - - - - - 3 - -
				93
				4 1 1 - 1 - -
				7
				100

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

62 • FIRST FINANCIAL HOLDING CO., LTD.

FIRST FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Expressed in thousands of New Taiwan dollars, except earnings per share amount)

Interest income Interest expense Net interest income Net income except interest Net service fee and commission income Net gain (loss) from insurance operations Gains on financial assets (liabilities) at fair value through profit or loss Gains on investment property Realized gains on available-for-sale financial assets Foreign exchange gains Impairment loss on assets Share of profit of associates accounted for using equity method Net other non-interest income Net income Bad debt expense and guarantee liability provisions Net change in provisions for insurance liabilities Operating expenses Employee benefits expense Depreciation and amortization expenses Other general and administrative expenses Income from continuing operations Income tax expense Profit	Notes	For theyears ended December 31,	For theyears ended December 31,	Change Percentage % 126 ( 1) ( 43) ( 3) 83 1 22 14 ( 19) ( 102) 4 ( 16) - ( 15) 1 30 6 ( 21) - 86 - 2180 3 ( 10) 100 19 ( 12) ( 87) 21 ( 92) ( 40) 4 ( 3) 10 ( 18) 8 48 15 ( 7) 25 41 13
		2015	2014
			Amount $ 42,879,260 ( 14,601,666) 28,277,594 7,427,518 ( 6,532,668) 1,372,734 171,830 416,584 2,171,638 ( 5,510) ( 25,805) 912,540 34,186,455 ( 4,015,000) 7,100,719 ( 13,776,282) ( 971,182) ( 6,041,665) 16,483,045 ( 2,405,399) 14,077,646

(Continued)

2015 ANNUAL REPORT • 63

FIRST FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Expressed in thousands of New Taiwan dollars, except earnings per share amount)

Other comprehensive income Items that will not be reclassified to profit or loss Remeasurement of defined benefit plan Income tax benefit relating to components of other comprehensive income Items that may be reclassified subsequently to profit or loss Exchange difference on translation of foreign financial statements Unrealized (loss) gain on valuation of available-for-sale financial assets Share of other comprehensive income of associates accounted for using equity method Income tax related to components of comprehensive income Other comprehensive income, net of tax Total comprehensive income Profit, attributable to: Profit, attributable to owners of parent Loss attributable to non-controlling interests Comprehensive income attributable to: Comprehensive income, attributable to owners of parent Comprehensive loss, attributable to non-controlling interests Earnings per share Basic and diluted earnings per share from continuing operations, net of income tax	Notes	For theyears ended December 31,	For theyears ended December 31,	Change Percentage % - ( 5977) - ( 5976) 8 ( 49) 2 ( 123) - ( 206) - ( 331) 10 ( 88) 51 ( 6) 41 14 - 502 41 13 51 ( 6) - 90 51 ( 6) 1.43
		2015	2014

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

64 • FIRST FINANCIAL HOLDING CO., LTD.

									Total		141,206,153		-	4,326,754)	-	14,077,646	3,419,509	154,376,554		154,376,554		-	6,481,478 )	-	15,962,231	412,733	23,520,000	196,054	892	187,986,986
											$			(				$		$			(							$
								Non-controlling	interest		$ 476,904		-	-	-	( 7,290)	( 37,810)	$ 431,804		$ 431,804		-	-	-	( 43,857 )	( 41,758 )	-	-	892	$ 347,081
									Total		140,729,249		-	4,326,754)	-	14,084,936	3,457,319	153,944,750		153,944,750		-	6,481,478 )	-	16,006,088	454,491	23,520,000	196,054	-	187,639,905
											$			(				$		$			(							$
FIRST FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES	CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY	(Expressed in thousands of New Taiwan dollars)	Equity attributable to owners of theparent	Retained Earnings Otherequity	Exchange	difference on Unrealized gain or	translation of loss on	Unappropriated foreign financial available-for-	Capital surplus Legal reserve Special reserve earnings statements sale financial assets		$ 18,200,167 $ 8,266,238 $ 4,128,990 $ 19,446,949 ($ 220,040) $ 4,371,853		- 1,088,864 - ( 1,088,864) - -	- - - ( 4,326,754) - -	- - - ( 6,057,456) - -	- - - 14,084,936 - -	- - - 10,178 2,725,848 721,293	$ 18,200,167 $ 9,355,102 $ 4,128,990 $ 22,068,989 $ 2,505,808 $ 5,093,146		$ 18,200,167 $ 9,355,102 $ 4,128,990 $ 22,068,989 $ 2,505,808 $ 5,093,146		- 1,408,493 - ( 1,408,493 ) - -	- - - ( 6,481,478 ) - -	- - - ( 6,018,516 ) - -	- - - 16,006,088 - -	- - - ( 598,159 ) 1,153,290 ( 100,640 )	7,520,000 - - - - -	196,054 - - - - -	- - - - - -	$ 25,916,221 $ 10,763,595 $ 4,128,990 $ 23,568,431 $ 3,659,098 $ 4,992,506
									Common stock		$ 86,535,092		-	-	6,057,456	-	-	$ 92,592,548		$ 92,592,548		-	-	6,018,516	-	-	16,000,000	-	-	$ 114,611,064
										For the year ended December 31, 2014	Balance at January 1, 2014	Appropriation of prior year's earnings (Note)	Legal reserve appropriated	Cash dividends of ordinary shares	Stock dividends of ordinary shares	Net income for the period	Other comprehensive income for the period	Balance at December 31, 2014	For the year ended December 31, 2015	Balance at January 1, 2015	Appropriation of prior year's earnings (Note)	Legal reserve appropriated	Cash dividends of ordinary shares	Stock dividends of ordinary shares	Net income for the period	Other comprehensive income for the period	Issue of shares	Share-based payments	Change in non-controlling interest	Balance at December 31, 2015

2015 ANNUAL REPORT • 65

FIRST FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

			For theyears ended December 31,	For theyears ended December 31,	For theyears ended December 31,
			2015		2014
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations before tax		$	18,975,743	$	16,483,045
Adjustments to reconcile income before tax to net cash provided by
operating activities
Income and expenses having no effect on cash flows
Depreciation of investment property			19,420		15,929
Depreciation of property and equipment			818,629		735,451
Amortization expense			234,222		219,802
Provision for bad debt expense			3,117,251		6,308,204
Interest income	(		42,585,563 )	(	42,879,260 )
Interest expense			14,133,090		14,601,666
Dividend income	(		777,836 )	(	817,712 )
Net change in insurance liability	(		519,347 )	(	7,083,924 )
Net change in provisions for foreign exchange price fluctuation			569		18,588
Share-based payments			196,054		-
Share of loss of associates accounted for using equity method			588,413		25,805
Gain on disposal of investment property	(		69,234 )	(	106,053 )
Loss on disposal of property and equipment			1,456		2,255
Impairment loss on assets			10,226		5,510
Changes in operating assets and liabilities
Changes in operating assets
Increase in due from the Central Bank	(		2,069,729 )	(	2,548,291 )
Increase in financial assets at fair value through profit or loss	(		36,155,186 )	(	9,371,761 )
(Increase) decrease in available-for-sale financial assets	(		12,718,129 )		13,036,838
(Increase) decrease in receivables	(		10,445,626 )		4,895,278
Decrease (increase) in loans discounted			14,024,546	(	72,295,570 )
(Increase) decrease in reinsurance assets	(		10,326 )		766
Increase in held-to-maturity financial assets	(		49,191,842 )	(	3,514,347 )
Decrease (increase) in other financial assets			12,001,938	(	6,606,769 )
(Increase) decrease in other assets	(		391,296 )		250,503
Changes in operating liabilities
Increase (decrease) in deposits from the Central Bank and banks			3,079,057	(	15,280,348 )
Increase in financial liabilities at fair value through profit or loss			6,958,298		8,374,493
Decrease in derivative financial liabilities for hedging			-	(	7,973 )
Increase in payables			457,253		5,441,505
Increase in deposits and remittances			123,899,630		91,408,657
Decrease in employee benefit liability	(		142,600 )	(	141,964 )
(Decrease) increase in provisions	(		44,933 )		73,216
Decrease in other financial liabilities	(		24,362,077 )	(	478,056 )
Increase in other liabilities			1,608,096		703,317
Cash flows provided by operations			20,640,167		1,468,800
Interest received			42,017,275		42,531,065
Interest paid	(		13,979,219 )	(	14,520,097 )
Dividend received			777,836		818,028
Income tax paid	(		2,473,401 )	(	2,224,157 )
Net cash flows provided by operating activities			46,982,658		28,073,639
(Continued)

66 • FIRST FINANCIAL HOLDING CO., LTD.

FIRST FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

			For theyears ended December 31,	For theyears ended December 31,	For theyears ended December 31,
			2015		2014
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in investments using the equity method		$	-	( $	1,208,814 )
Acquisition of investment property	(		23,943 )	(	368,012 )
Proceeds from disposal of investment property			273,430		396,991
Acquisition of property and equipment	(		829,779 )	(	1,146,226 )
Proceeds from disposal of property and equipment			11,228		7
Acquisition of intangible assets	(		209,556 )	(	300,993 )
Increase in other assets	(		136,981 )	(	222,238 )
Net cash flows used in investing activities	(		915,601 )	(	2,849,285 )
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in due to the Central Bank and banks	(		17,880 )		11,725
Decrease in bills and bonds sold under repurchase agreements	(		2,403,958 )	(	5,492,695 )
Increase in commercial papers payable			1,291,192		4,901,372
Increase (decrease) in financial bonds payable			400,000	(	7,800,000 )
(Decrease) increase in other borrowings	(		5,019,403 )		4,810,552
Distribution of cash dividends	(		6,481,478 )	(	4,326,754 )
Proceeds from issuance of common stock			23,520,000		-
Net cash flows provided by (used in) financing activities			11,288,473	(	7,895,800 )
Effect of exchange rate changes on cash and cash equivalents			1,291,691		2,724,735
Net increase in cash and cash equivalents			58,647,221		20,053,289
Cash and cash equivalents at beginning of period			197,384,706		177,331,417
Cash and cash equivalents at end of period		$	256,031,927	$	197,384,706
The components of cash and cash equivalents：
Cash and cash equivalents as per consolidated balance sheet		$	48,061,649	$	62,282,631
Due from the Central Bank and call loans to banks qualified as cash and
cash equivalents as defined by IAS No. 7			206,424,064		133,219,869
Securities purchased under resell agreements qualified as cash and cash
equivalent as defined by IAS No. 7			1,546,214		1,882,206
Cash and cash equivalents at end of period		$	256,031,927	$	197,384,706

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

2015 ANNUAL REPORT • 67

FIRST FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2015 and 2014

(Expressed in thousands of New Taiwan Dollars, except as otherwise indicated)

1. Organization and business

(1) First Financial Holding Co., Ltd. (the “Company” or “FFHC”) was incorporated as a company limited by shares under the provisions of the Company Law of the Republic of China (R.O.C.). FFHC commenced the preparation for its incorporation on November 27, 2001. On January 2, 2003, the Company was established through a share swap with First Commercial Bank Co., Ltd. (“FCB”) in accordance with the Financial Holding Company Act and other related regulations, whereby FCB became its wholly-owned subsidiary with the approval from the Securities and Futures Commission (“SFC”), renamed as the Securities and Futures Bureau, Financial Supervisory Commission R.O.C. (“SFB”). The Company was listed on the Taiwan Stock Exchange (“TSE”) on the same date. On July 31, 2003, the Company acquired First Securities Inc. (“FS”), Mingtai Fire & Marine Insurance Co., Ltd. (“MFMI”) and First Securities Investment Trust Co., Ltd. (FSIT), as wholly-owned subsidiaries. On May 31, June 2, June 10, September 16, 2004 and November 19, 2007, the Company established subsidiaries namely First Financial Asset Management Co., Ltd., (“FFAM”), First Venture Capital Co., Ltd., (“FVC”), First Financial Management Consulting Co., Ltd. (“FFMC”), First P&C Insurance Agency Co., Ltd. (“FPCIA”) and First-Aviva Life Insurance Co., Ltd. (“FALI”), respectively. The Company engages mainly in the investment and management of financial institutions as approved by the authorities.
(2) On September 2, 2005, the Company completed the sale of all its common stocks in Mingtai Fire & Marine Insurance Co., Ltd. to Mitsui Sumitomo Insurance Co., Ltd.
The date of authorization for issuance of the consolidated financial statements and procedures for authorization

These consolidated financial statements were authorized for issuance by the Board of Directors on March 24, 2016.

Application of new standards, amendments and interpretations
(1)Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

According to Financial-Supervisory-Securities-Auditing No. 1030010325 issued by FSC on April 3, 2014, commencing 2015, companies with shares listed on the TWSE or traded on the Taipei Exchange or Emerging Stock Market shall adopt the 2013 version of IFRS (not including IFRS 9, ‘Financial instruments’) as endorsed by the FSC and including the following standards effective January 1, 2015: “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 for the Preparation of Financial Reports by Insurance Companies” and “Regulations Governing the Preparationof Financial Reports by Futures Commision Merchants” (collectively referred herein as the “2013 version of IFRSs”) in preparing the consolidated financial statements.The impact of adopting the 2013 version of IFRS is listed below:

68 • FIRST FINANCIAL HOLDING CO., LTD.

A. IAS 19 (revised), ‘Employee benefits’

The revised standard makes amendments that net interest amount, calculated by applying the discount rate to the net defined benefit asset or liability, replaces the finance charge and expected return on plan assets. The revised standard eliminates the accounting policy choice that the actuarial gains and losses could be recognised based on corridor approach or recognised in profit or loss. The revised standard requires that the actuarial gains and losses can only be recognised immediately in other comprehensive income when incurred. Past service cost will be recognised immediately in the period incurred and will no longer be amortised using straight-line basis over the average period until the benefits become vested. An entity is required to recognise termination benefits as liability or expense at the earlier of when the entity can no longer withdraw an offer of those benefits and when it recognises any related restructuring costs, rather than when the entity is demonstrably committed to a termination. Additional disclosures are required for defined benefit plans.

Based on the Group’s evaluation, it was noted that above-mentioned affected amounts are immaterial, and additional disclosures are made in accordance with the standard.

B. IAS 1, ‘Presentation of financial statements’

The amendment requires entities to separate items presented in OCI classified by nature into two groups on the basis of whether they are potentially reclassifiable to profit or loss subsequently when specific conditions are met or non-reclassifiable to profit or loss. If the items are presented before tax, then the tax related to each of the two groups of OCI items (those that might be reclassified and those that will not be reclassified) must be shown separately. Accordingly, the Group will adjust its presentation of the statement of comprehensive income.

C. IFRS 13, ‘Fair value measurement’

The standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard sets out a framework for measuring fair value from market participants’ perspective, and requires disclosures about fair value measurements. For non-financial assets only, fair value is determined based on the highest and best use of the asset. Based on the Group’s assessment, the adoption of the standard has no significant impact on its consolidated financial statements, and the Group will disclose additional information about fair value measurements accordingly.

D. Disclosures - Transfers of financial assets (amendments to IFRS 7)

The amendment enhances qualitative and quantitative disclosures for all transferred financial assets that are not derecognised and for any continuing involvement in transferred assets, existing at the reporting date. The Group includes qualitative and quantitative disclosures for all transferred financial assets.

E. Disclosures – offsetting financial assets and liabilities (amendment to IFRS 7)

The amendment requires an entity to disclose offsetting rights and relevant arrangement information. The aforementioned disclosures should provide information to evaluate the effect of offsetting arrangements on an entity’s financial position. The new required disclosures on offsetting, which are subject to IAS 32 “Financial instruments: Presentation” requirements on all recognised financial instruments, are also applicable to financial instruments that are subject to an enforceable master netting arrangements or similar agreements. The First Group has further disclosed information on offsetting financial assets and liabilities.

2015 ANNUAL REPORT • 69

(2)Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Group

None.

(3)IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the 2013 version of IFRS as endorsed by the FSC:

version of IFRS as endorsed by the FSC:
New Standards,Interpretations and Amendments IFRS 9, ‘Financial instruments Sale or contribution of assets between an investor and its associate or joint venture (amendments to IFRS 10 and IAS 28) Investment entities: applying the consolidation exception (amendments to IFRS 10, IFRS 12 and IAS 28) Accounting for acquisition of interests in joint operations (amendments to IFRS 11) IFRS 14, ‘Regulatory deferral accounts’ IFRS 15, ‘Revenue from contracts with customers’ IFRS 16, ‘Leases’ Disclosure initiative (amendments to IAS 1) Disclosure initiative (amendments to IAS 7) Recognition of deferred tax assets for unrealised losses (amendments to IAS 12) Clarification of acceptable methods of depreciation and amortisation (amendments to IAS 16 and IAS 38) Agriculture: bearer plants (amendments to IAS 16 and IAS 41) Defined benefit plans: employee contributions (amendments to IAS 19R) Equity method in separate financial statements (amendments to IAS 27) Recoverable amount disclosures for non-financial assets (amendments to IAS 36) Novation of derivatives and continuation of hedge accounting (amendments to IAS 39) IFRIC 21, ‘Levies’ Improvements to IFRSs 2010-2012 Improvements to IFRSs 2011-2013 Improvements to IFRSs 2012-2014	Effective Date byIASB
	January 1, 2018 To be determined by International Accounting Standards Board January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2018 January 1, 2019 January 1, 2016 January 1, 2017 January 1, 2017 January 1, 2016 January 1, 2016 July 1, 2014 January 1, 2016 January 1, 2014 January 1, 2014 January 1, 2014 July 1, 2014 July 1, 2014 January 1, 2016

version of IFRS as endorsed by the FSC:

New Standards,Interpretations and Amendments
IFRS 9, ‘Financial instruments
Sale or contribution of assets between an investor and its associate
or joint venture (amendments to IFRS 10 and IAS 28)
Investment entities: applying the consolidation exception
(amendments to IFRS 10, IFRS 12 and IAS 28)
Accounting for acquisition of interests in joint operations
(amendments to IFRS 11)
IFRS 14, ‘Regulatory deferral accounts’
IFRS 15, ‘Revenue from contracts with customers’
IFRS 16, ‘Leases’
Disclosure initiative (amendments to IAS 1)
Disclosure initiative (amendments to IAS 7)
Recognition of deferred tax assets for unrealised losses
(amendments to IAS 12)
Clarification of acceptable methods of depreciation and
amortisation (amendments to IAS 16 and IAS 38)
Agriculture: bearer plants (amendments to IAS 16 and IAS 41)
Defined benefit plans: employee contributions
(amendments to IAS 19R)
Equity method in separate financial statements
(amendments to IAS 27)
Recoverable amount disclosures for non-financial assets
(amendments to IAS 36)
Novation of derivatives and continuation of hedge accounting
(amendments to IAS 39)
IFRIC 21, ‘Levies’
Improvements to IFRSs 2010-2012
Improvements to IFRSs 2011-2013
Improvements to IFRSs 2012-2014

Effective Date byIASB

January 1, 2018
To be determined by
International Accounting
Standards Board
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2018
January 1, 2019
January 1, 2016
January 1, 2017
January 1, 2017
January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2016
January 1, 2014
January 1, 2014
January 1, 2014
July 1, 2014
July 1, 2014
January 1, 2016

The above are standards or interpretations issued by the IASB but not yet endorsed by the FSC. Actual applicability shall be based on the FSC. The Group is still assessing the potential impact of the new standards, interpretations and amendments mentioned above.

70 • FIRST FINANCIAL HOLDING CO., LTD.

4. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the period presented, unless otherwise stated.

(1) Compliance statement

The consolidated financial statements of the First Group have been prepared in accordance with the “Regulations Governing the Preparation of Financial Statements by Financial Holding Companies” , “Regulations Governing the Preparation of Financial Reports by Public Banks”, “Regulations Governing the Preparation of Financial Reports by Securities Firms”, “Regulations Governing the Preparation of Financial Reports by Insurance Companies”, “Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants”, International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC International as endorsed by the FSC.(collectively referred herein as the “IFRSs”).

(2) Basis of preparation

A. Except for the financial assets or financial liabilities (including derivative instruments) at fair value through profit or loss, insurance liabilities reserve set aside according to letter or rule of insurance enterprises, reinsurance contract assets, reserve for foreign exchange price fluctuation, and foreclosed asset (which are stated at the lower of its carrying amount or fair value less costs to sell at the end of period), these consolidated financial reports have been prepared under the historical cost convention.
B. The analysis of expense is classified based on the nature of expenses.
C. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the First Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

(3) Basis of consolidation

A. Principles for preparation of consolidated financial statements
(A) The First Group prepares the consolidated financial statements by aggregating the First Group’s assets, liabilities, revenues and expenses, which have been eliminated versus owners’ equity during the consolidation. In addition, the financial statements of the First Group are made in the same reporting period. (Item included in the consolidated financial statements are not classified as current and non-current items.) Relevant items are arranged in order based on current and non-current nature.
(B) A subsidiary refers to an investee that the First Group has controlling power over. The First Group has control over an investee if the following elements are met:
- a. power over the relevant activities of the investee, i.e. the investor has voting rights or other existing rights that give it the ability to direct the relevant activities;
- b. exposure, or rights, to variable returns from its involvement with the investee;
- c. the ability to use its power over the investee to affect the amount of the investor’s returns.

2015 ANNUAL REPORT • 71

(C) Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the First Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the First Group.
B. The consolidated financial statements include the following directly and indirectly owned subsidiaries:

Investor FFHC FFHC FFHC FFHC FFHC FFHC FFHC FFHC FCB FCB FCB FS FS FTSL	Subsidiary Business activities FCB Note (1) FS Note (2) FSIT Note (3) FALI Note (4) FFAM Note (5) FVC Note (6) FFMC Note (7) FPCIA Note (8) First Commercial Bank (USA) Banking services FCBL Leasing(Note (9)) FIA Insurance agency(Note (10)) First Capital Management Co., Ltd. (“FCMI”) Securities investment consulting service First Taisec Securities (Asia) Limited (“FTSL”) Securities investment holding First Worldsec Securities Limited (‘FWSL”) Securities brokerage, investment consultancy	Percentage of holding shares (%)(Note (11))	Note
		100 100 100 51 100 100 100 100 100 100 100 100 100 100	Note (1) Note (2) Note (3) Note (4) Note (5) Note (6) Note (7) Note (8) - Note (9) Note (10) - - -

Note (1) FCB was established in 1899 and had been a listed company since February 9, 1962. It was privatized on January 22, 1998. On January 2, 2003, FCB became the subsidiary of First Financial Holding Co., Ltd. through a share swap and was de-listed from the TSE, First Financial Holding Co., Ltd. became a public company in accordance with the related regulations set forth by the SFB. As of December 31, 2015, FCB comprises various divisions, including Operation Division, Trust Division, International Business Division, Offshore Banking Unit, domestic and overseas branches, and representative offices. FCB engages mainly in the following business activities:(1)Business activities provided by the Banking Law (2)Trust business as authorized by the authorities (3)Establishing overseas branches to engage in those business activities as approved by the respective local governments (4)Other business activities approved by the authorities.

72 • FIRST FINANCIAL HOLDING CO., LTD.

Note (2) FS was established in August of 1988 and became a subsidiary of FFHC on July 31, 2003 through a share swap. FS is authorized to engage in the following business activities:
1) Brokerage and proprietary trading of marketable securities at the securities exchange markets;
2) Underwriting of marketable securities;
3) Registration and transfer agency service for securities;
4) Margin and stock loans of marketable securities trading;
5) Futures introducing broker business; and
6) Other securities-related businesses as approved by the competent authorities.

FS founded a futures dealing department to perform futures business in September 2005. With the approval from the former FSCEY on October 29, 2010, FS started futures brokerage as a side business and terminated the business of introducing futures brokers on April 21, 2011. As FCB and FS are both wholly-owned subsidiaries of the Company, the Board of Directors of FS resolved to acquire securities brokerage business of FCB at book value to leverage the synergies of the First Group, effective on December 1, 2003.

Note (3) FSIT became the wholly-owned subsidiary of the Company through a share swap on July 31, 2003. FSIT engages mainly in the management of securities investment trust funds and private funds business.
Note (4) First-Aviva Life Insurance Co., Ltd. (“FALI”) is a joint venture between the Company and Aviva International Holdings Limited with a holding ownership of 51% and 49%, respectively. FALI obtained its Insurance License issued by the FSC in December 2007. FALI commenced its business activities mainly engaged in the life insurance business effective from January 2, 2008 and officially changed its name to FALI from September 17, 2009 under the approval of competent authorities.
Note (5) First Financial Asset Management Co., Ltd., (“FFAM”) was established under approval on May 31, 2004 and its business activities mainly engaged in financial institution creditor’s right, accounts receivable purchase and real estate transaction businesses.
Note (6) First Venture Capital Co., Ltd., (“FVC”) was established under approval on June 2, 2004 and its business activities mainly engaged in providing fund for investees and consultancy services for enterprise operation management.
Note (7) First Financial Management Consulting Co., Ltd. (“FFMC”) was established under approval on June 10, 2004 and its business activities mainly engaged in venture capital business management consultancy, investment consultancy and enterprise operation management consultancy.

2015 ANNUAL REPORT • 73

Note (8) First P&C Insurance Agency Co., Ltd. (“FPCIA”) was established under approval on September 16, 2004 and its business activities mainly engaged in various insurance products agency.
Note (9) FCBL was approved to establish in May 1998. The main business includes chattel secured and repo trade, lease business and receivable factoring.
Note (10) FIA was approved to establish on December 13, 2001. The main business is the agency of various life insurance products of other insurance enterprises.
Note (11) The stock ownership ratio remained consistent as of December 31, 2015 and 2014.
C. Unconsolidated entities ：

Investor FFAM FCBL	Subsidiary First Financial Assets Management (B.V.I) Ltd. FCBL Capital International (B.V.I) Ltd.	Business activities Percentage of the Company’s direct/indirect holding ownership (%) Note 3 100 Note 4 100	Business activities Percentage of the Company’s direct/indirect holding ownership (%) Note 3 100 Note 4 100	Note
			100 100	Note 1 Note 1

Note 1: As the individual total assets or net revenues do not materially affect the consolidated financial statement presentation taken as a whole, the Company deems that such investee companies should not be included in the consolidated financial statements.
Note 2: The stock ownership ratio remained consistent as of December 31, 2015 and 2014.
Note 3: The main business engaged in financial institution creditor’s right, accounts receivable purchase and real estate transaction businesses.
Note 4: The main business includes chattel secured and repo trade, lease business and receivable factoring.
D. Adjustment on different accounting periods of the subsidiaries: None.
E. Information with respect to the subsidiaries’ significant restriction to transfer its funds to the parent company: None.
F. Specific operation risks of the foreign subsidiaries: None.
G. Restrictions on earnings distribution of subsidiaries: None.

(4) Foreign currency translation

A. Functional and presentation currency

Financial statements of the entities in the First Group are presented by the currency of the primary economic environment in which the entities operate (that is the “functional currency”). The consolidated financial statements are presented in New Taiwan Dollars,

74 • FIRST FINANCIAL HOLDING CO., LTD.

which is the Company’s functional currency.

B. Transactions and balances

Foreign currency transactions denominated in a foreign currency or required to settle in a foreign currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.

Foreign currency monetary items should be reported using the closing rate (market exchange rate) at the date of each balance sheet. When multiple exchange rates are available for use, they should be reported using the rate that would be used to settle the future cash flows of the foreign currency transactions or balances at the measurement date. Foreign currency non-monetary items measured at historical cost should be reported using the exchange rate at the date of the transaction. Foreign currency non-monetary items measured at fair value should be reported at the rate that existed when the fair values were determined.

Exchange differences arising when foreign currency transactions are settled or when monetary items are translated at rates different from those at which they were translated when initially recognized or in previous financial statements are reported in profit or loss in the period, with one exception. The exception is that exchange differences associated with the gains or losses of the parts of effective hedges of cash flow hedges or hedges of net investments in foreign operations are recognized in other comprehensive income.

If a gain or loss on a non-monetary item is recognized in other comprehensive income, any foreign exchange component of that gain or loss is also recognized in other comprehensive income. Conversely, if a gain or loss on a non-monetary item is recognized in profit or loss, any foreign exchange component of that gain or loss is also recognized in profit or loss.

C. Entities in the consolidated financial statements

If the entity has a functional currency (not in an economy with high inflation) that is different from presentation currency in the consolidated financial statements, its operating results and financial position is translated into presentation currency using the following procedures:

(A) At the balance sheet date, all assets and liabilities are translated by the closing exchange rate of the First Group;
(B) The profit or loss is translated by the average exchange rate in the period (unless the exchange rate fluctuate rapidly, the exchange rate on the trade date shall be adopted); and
(C) All gains or losses arising from translation are recognized in other comprehensive income.

The exchange difference is recognized in “exchange difference on translation of foreign financial statements” of equity item.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations and a portion of currency instruments designated as hedges of such investments, are recognized in other comprehensive income. When a foreign operating is partially disposed of or sold, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss.

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(5) Cash and cash equivalents

“Cash and cash equivalents” in the consolidated balance sheet includes cash on hand, due from other banks, short-term highly liquid time deposits and investments that are readily convertible to known amount of cash and subject to an insignificant risk of changes in value. For the consolidated statement of cash flows, cash includes cash and cash equivalents, due from Central Bank and call loans to other banks, securities purchased under resell agreements qualified as cash and cash equivalents as defined by IAS 7.

(6) Securities purchased or sold under resell or repurchase agreements

The transactions of bills and bonds with a condition of repurchase agreement or resell agreement are accounted for under the financing method. The interest expense and interest income are recognized as incurred at the date of sale and purchase and the agreed period of sale and purchase. The repo trade liabilities, bond liabilities, reverse repo trade bills and bond investments are recognized at the date of sale or purchase.

(7) Financial assets and financial liabilities

The financial assets and liabilities of the First Group including derivatives are recognized in the consolidated balance sheet and are properly classified in accordance with IFRSs as endorsed by FSC.

A. Financial assets

All financial assets held by the First Group are in compliance with IFRSs as endorsed by FSC, classified into following four categories: “loans and receivables”, “financial assets at fair value through profit and loss”, “available-for-sale financial assets”, “financial assets held to maturity” and “other financial assets”.

(A) Regular way purchase or sale

Acquisition or disposal of financial assets under general transaction practices are accounted for using trade date accounting or settlement date accounting. Treatment for acquisition and disposal of financial assets of the same category should be consistent. Financial assets held by the First Group are all accounted for using trade date accounting.

(B) Loans and receivables

The loans and receivables are the non-derivative financial assets with no quoted prices in an active market. Such financial assets with fixed or determinable receivable amounts include those originated and those not originated by the First Group. The former originated directly from money, product or service that the First Group provides to the debtors, while the latter refers to all the other loans and receivables.

Loans and receivables are measured at initial fair value as the transaction price, and are recognized on the basis of fair value plus significant transaction cost, expense or significant service fee charge, discount or premium. Subsequently, the loans and receivables shall be measured using effective interest method. However, pursuant to “Regulations Governing the Preparation of Financial Reports by Financial Holding Companies”, if there is no material effect from discounting, measurement at the initial

76 • FIRST FINANCIAL HOLDING CO., LTD.

cost is permitted.

If there is any objective evidence of impairment, impairment is recognised as impairment losses. The impairment loss is recognised in the credit side of the financial assets, which is recognised as “bad debt expense and reserve for guarantee policy”.

When the financial assets of the First Group are held to repurchase or resell or when the portfolio belongs to derivative instruments, or are held in a short-term profit seeking model, then they should be classified as financial assets at fair value through profit and loss and measured by fair value at initial recognition.

Criteria to designate financial assets as financial assets at fair value through profit or loss at initial recognition are as follows:

a. The designation can eliminate or significantly mitigate a measurement or recognition inconsistency as a result of different measuring basis of assets or liabilities; or
b. The performance of financial instruments is assessed by fair value; or
c. Hybrid instruments include embedded derivatives.

Any change in fair value of financial assets at fair value through profit and loss and financial asset designated at fair value through profit and loss at initial recognition is recognized under “ Gain or loss on financial assets and financial liabilities at fair value through profit and loss” in the consolidated statements of comprehensive income.

(D) Available-for-sale financial assets

Available-for-sale financial assets include assets designated as available-for-sale, financial assets not held to maturity, financial assets at fair value through profit and loss, non-derivative financial assets such as loans and receivables. Equity or debt investments are initially recognized at fair value plus the transaction cost of acquisition or issuance.

Available-for-sale financial assets are measured at fair value with changes in fair value recognized in other comprehensive income. When the financial asset is no longer recognized, the cumulative unrealized gain or loss that was previously recognized in other comprehensive income is recognized in profit or loss.

Impairment loss is recognized when there is objective evidence of impairment of available-for-sale financial assets. If the financial asset has not been derecognized, cumulative loss is reclassified from ‘other comprehensive income’ to ‘profit or losses’. Impairment loss of an investment in an equity instrument recognized in profit or loss shall not be reversed through profit or loss and any subsequent change in equity is recognized in other comprehensive income. If, in a subsequent period, the fair value of an investment in a debt instrument increases, and the increase can be related objectively to an event occurring after the impairment loss was recognized, then such impairment loss is reversed through profit or loss.

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Equity instruments with no quoted price in an active market are initially recognized at fair value plus acquisition or issuance cost. The fair value can be reasonably estimated when the following criteria are met at the balance sheet date: (a) the variance of the reasonable estimate on instrument’s fair value is insignificant; or (b) the possibility of the estimate in the interval can be reasonably evaluated and used to estimate fair value.

(E) Held-to-maturity financial assets

Held-to-maturity financial assets are the non-derivative financial assets with fixed or determinable payments and fixed maturities and the First Group have positive intention and ability to hold to maturity, excluding loans and receivables, assets designated as available-for-sale financial assets and financial assets designated as at fair value through profit or loss upon initial recognition which shall not be treated as held-to-maturity financial assets.

Subsequently, held-to-maturity financial assets shall be measured using effective interest method.

If there is any objective evidence of impairment, the impairment is recognized in the credit side of the financial assets’ carrying amount as “asset impairment loss”.

(F) Other financial assets

Other financial assets include bonds investment without active market, investment-linked life products, claims receivable purchased and financial assets measured at cost.

a. Bond investments with no active market

Such financial instruments are initially recognized at fair value plus acquisition or issuance cost. Gains or losses are recognized when the investments are derecognized. Bond investments with no active market shall be subsequently measured at amortized cost using the interest method.

b. Investment-linked life products

Premiums from these products are deposited to a separate and independent account, net of expenses, and invested as stipulated under the contracts. The value of this independent account’s assets is determined based on the market price at the evaluation date, and the net asset value is calculated in accordance with related regulations and in compliance with IFRSs. In accordance with the “Regulations Governing the Preparation of Financial and Business Reports by Insurance Industry”, the assets and liabilities of this separate account which are created by insurance contract or investment contract should be classified as Investment-Linked Product Assets and Investment-Linked Product Liabilities. The revenue and expense of this separate account are presented as Investment-Linked Product Income and Investment-linked Product Expense which is required to meet the definition of the sum of Investment-linked products revenue and expense.

c. Claims receivable purchased

78 • FIRST FINANCIAL HOLDING CO., LTD.

Claims receivable purchased refers to the amount of outstanding non-performing loans from financial institutions less the total purchasing prices and other necessary expenditures of acquisition-related costs. The gains of the claims are recognised in accordance with relevant regulations. At the period end, the recoverability of the claims are individually evaluated to determine the amount of allowance for doubtful accounts.

d. Financial assets measured at cost

Equity instruments with no active market initially are recognised at fair value plus the acquisition or issuance cost. At the balance sheet date, if the interval of reasonable fair value estimates could be significant and the possibility of different estimates cannot be reasonably evaluated, cost is adopted for measurement. For financial assets measured at cost, an impairment loss shall be recognised if there is an objective evidence of impairment. The impairment loss shall not be reversed.

(G) Margin loans, stock loans and refinancing

Securities business conducts margin loan business to provide funds to its customers to purchase securities. The margin loans given to customers are recorded as “margin loans receivable” (“Receivables-net”) and are collateralized by the securities that the customers purchase. The collateral securities are recorded through memorandum accounts and are returned to customers when the loans are repaid. Securities business conducts stock loan business to lend securities to its customers to sell short. The deposits received from customers are recorded as “deposits received on securities lending” (“Payables”). Proceeds from sales of securities lent to customers less any securities exchange taxes, dealer’s commissions, and financing charges are used as the collateral for securities lent and are recorded under “collateralized proceeds payable from securities lending” (“Payables”). The securities lent to customers to sell short are recorded through memorandum accounts. When the customers return the securities, the securities business gives the deposits received and the proceeds from securities sold back to customers.

The “refinancing of margin loans” refers to refinancing to borrow funds from securities finance companies when there are insufficient funds to conduct margin loan business. The refinancing of margin loans is recorded as “refinancing borrowing” (“Payables”) and is collateralized by the securities purchased by customers on margin loans.

The “refinancing of stock loans” refers to refinancing to borrow securities from securities finance companies when there are insufficient securities to conduct securities lending business. The deposits or collateral given to securities finance companies by FS are recorded as “refinancing margin deposits” (“Receivables-net”). The proceeds from securities lent to customers to sell short are given to the securities finance companies as the collateral and are recorded as “collateralized proceeds payable from securities lending” (“Payables”) and “refinancing deposits receivable” (“Receivables-net”), respectively.

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B. Financial liabilities

Financial liabilities held by the First Group include financial liabilities at fair value through profit and loss and financial liabilities measured at amortised cost.

(A) Financial liabilities at fair value through profit or loss

These includes financial liabilities at fair value through profit and loss and those designated as financial liabilities at fair value through profit and loss at initial recognition.

Such as financial liabilities incurred with a purpose of repurchasing in a short period of time, identifiable portion of financial instruments in the portfolio belonging to the consolidated management at initial recognition with evidence indicating that its latest operating model is in a short-term profit seeking, are classified as held for trading purpose. Derivative instruments are designated as held for trading excluding those designated as effective hedging instrument or financial guarantee contract. Financial liabilities held for trading also include the obligation of the financial assets borrowed from short seller. Above financial liabilities are recognised in “financial liabilities at fair value through profit and loss” in the consolidated balance sheet.

At initial recognition, it is not revocable if a debt instrument is designated at fair value through profit and loss. When the fair value method is adopted, the main contract and the embedded derivative need not be recognised respectively.

In relation to financial liabilities at fair value through profit and loss and those designated as financial liabilities at fair value through profit and loss at initial recognition, any change in fair value is recognised as “gain and loss on financial assets and liabilities at fair value through profit and loss” in the statement of comprehensive income.

(B) Financial liabilities carried at amortized cost

Financial liabilities carried at amortized cost include liabilities not classified as financial liabilities at fair value through profit and loss, financial guarantee contracts, loan commitment with a lower-than-market interest rate and the financial liabilities incurred due to continuing engagement or that the transferring of a financial asset does not meet the requirement of derecognition.

C. Derecognition of financial instruments

A financial liability is derecognised when the obligation under the liability specified in the contract is discharged or cancelled or expires.

The First Group derecognises a financial asset when one of the following conditions is met:

(A) The contractual rights to receive the cash flows from the financial asset expire.
(B) The contractual rights to receive cash flows of the financial asset have been transferred and the First Group has transferred substantially all risks and rewards of ownership of the financial asset.
(C) The contractual rights to receive cash flows of the financial asset have been transferred; however, the First Group has not retained control of the financial asset.

80 • FIRST FINANCIAL HOLDING CO., LTD.

(8) Offsetting financial instruments

Financial assets and liabilities are offset and reported in the net amount in the balance sheet only when (1) there is a legally enforceable right to offset the recognized amounts; and (2) there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.

(9) Impairment evaluation and provision of loans and receivables

If there is any objective evidence indicating that an individual or a group’s of financial assets are impaired from estimated future cash flow after initial recognition, impairment exists and is recognized as impairment losses.

Impairment of loans and receivables is evaluated based on individual or group classification; loans and receivables are evaluated based on whether objective evidence of significant impairment exists or whether they belong to significant monitored cases. When objective evidence of significant impairment does not exist, the assets shall be included in group of financial assets with similar characteristics and evaluate the impairment losses.

The criteria that the Group uses to determine whether there is objective evidence of animpairment loss is as follows:

(A) There is no principal or interest payment after the lapse of 3 full months, or with regard to which the Credit Cooperative has sought payment from primary/subordinate debtors or has disposed of collateral.
(B) If a restructured loan meets payment terms agreement, the loan may be exempted from reporting as a non-performing loan.
(C) If a loan’s negotiated terms meet regulations by the Bankers Association of the Republic of China in 2006, the loan may be exempted from reporting as a non-performing loan.
(D) Cases approved and signed in the negotiations in accordance with the Statute for Consumer Debt Clearance.
(E) Cases that are in clearance or settlement proceedings by the court’s ruling.
(F) Cases that have begun being reorganized by the court’s ruling.
(G) Cases that have been declared for bankruptcy by the court.
(H) Cases that meet the self-made evaluation items of the First Group.

In the subsequent period, if the amount of the impairment loss decreases due to an event occurring after the impairment was originally recognized (for example, the upgraded credit rating of the debtor), the previously recognized impairment loss is reversed through the allowance for bad debt to the extent that the carrying amounts do not exceed the amortized cost that would have been determined had no impairment loss been recognized in prior years. The reversal is recognized as current profit and loss.

Above-mentioned impairment evaluation and provision of loans and receivables is in conformity with the requirements in “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans” and Jin-Guan-Yin-Fa-Zi No.

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10410001840, which were issued by the FSC.

(10) Derivative instruments

Derivative instruments are initially recognized at fair value at the contract date and subsequently measured by fair value. The fair value includes the public quoted price in an active market or the latest trade price (such as options traded in Stock Exchange Corporation), and evaluation techniques such as cash flow discounting model or option pricing model (such as swap contract and foreign exchange transaction). All derivative assets are recognized as assets when the fair value is positive and as liabilities when the fair value is negative.

Hybrid contracts refer to financial instruments embedded with derivatives. Economic characteristics and risks of the embedded derivatives and the economic characteristics of the main contract should be examined. If the two are not closely related and the main contract is not a financial asset or liability at fair value through profit and loss, the main contract and embedded derivatives should be respectively recognized unless the overall hybrid contract is designated as assets or liabilities at fair value through profit and loss. The embedded derivatives are the financial assets or liabilities at fair value through profit and loss.

(11) Investments accounted for using equity method

Investment of the First Group accounted for using equity method refers to investments in associates.

A. Associates are all entities over which the First Group has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognised at cost. The First Group’s investments in associates include goodwill identified on acquisition, net of any accumulated impairment loss arising through subsequent assessments.
B. The First Group’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the First Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the First Group does not recognise further losses, unless it has incurred statutory/constructive obligations or made payments on behalf of the associate.
C. Unrealised gains on transactions between the First Group and its associates are eliminated to the extent of the First Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the First Group.

(12) Property and equipment

The property and equipment of the First Group are recognized on the basis of the historical cost less accumulated depreciation. The historical cost includes any cost directly attributable to the acquisition of the asset.

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If the future economic benefit generated from subsequent cost of the asset can be measured reliably and is very likely to flow into the First Group, the subsequent cost of property and equipment including the carrying amount may be individually recognized as asset. Additonally, the carrying amounts of a replaced item are derecognized.

Major renewals and improvements incurred to increase the future economic benefits of the assets are capitalized and depreciated. Routine maintenance and repairs are charged to expense as incurred.

Land is not affected by depreciation. Depreciation for other assets is provided on a straight-line basis over the estimated service lives of the assets until salvage value. Service life is as follows:

Land and improvements	3 ~ 30 years
Buildings	5 ~ 60 years
Transportation equipment	3 ~ 15 years
Machinery and equipment	3 ~ 4 years
Miscellaneous assets	5 ~ 17 years

Leasehold improvements are depreciated over the lease terms of the lease agreements or 2~5 years, whichever is shorter.

On balance sheet date, the First Group assesses or appropriately adjusts the salvage value and service life of the asset. When there is an activity or change in the environment suggesting that the carrying amount may not be recovered, the First Group shall evaluate impairment on the asset. If the carrying amount of the asset is higher than the recoverable amount, the carrying amount shall be written off until it is equivalent to the recoverable amount. The recoverable amount is the higher of asset at fair value less disposal expense and value in use. Any gain or loss on disposal is calculated by the difference between the carrying amount and proceed on disposal, and be recognized in the “Other non-interest income, net” in the statement of comprehensive income.

(13) Investment property

The properties held by the First Group, with an intention to obtain long-term rental profit or capital increase or both and not being used by other entities of the consolidated First Group, are classified as investment property. Investment property includes the office building and land rented in the form of an operating lease.

Part of the property may be held by the First Group and another part generates rental income or capital increase. If the property held by the First Group can be sold individually, then the accounting treatment should be made separately. IAS 16 as endorsed by FSC applies to the self-used property, and property used to generate rental income or capital increase or both is applicable for investment property set out in IAS 40 as endorsed by FSC. If each part of the property cannot be sold individually and the self-used proportion is not material, then the property is deemed as investment property in its entirety.

When the future economic benefit related to the investment property is very likely to flow into the First Group and the costs can be reliably measured, the investment property shall be recognized as assets. When the future economic benefit generated from subsequent costs is very likely to flow into the entity and the costs can be reliably measured, the subsequent expenses of the assets shall

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be capitalized. All maintenance cost are recognized as incurred in the consolidated statement of comprehensive income.

Investment property is subsequently measured by cost model. Depreciated cost is used to calculate amortization expense after initial measurement. The depreciation method, remaining useful life and residual value should apply the same rules as applicable for property and equipment. The fair value of investment property is disclosed in the financial statements at the balance sheet date, of which the valuation should be carried out by the appraisal segment of the First Group based on the internal appraisal guidelines.

(14) Foreclosed assets

Foreclosed properties are stated at the lower of its carrying amount or fair value less costs to sell at the end of period.

(15) Lease

When the First Group is the lessor, please refer to Note 4(13) for the accounting treatment of the leased assets satisfying investment property set out in IAS 40, “Investment Property”.

The lease contract of the First Group’s subsidiaries includes operating leases and finance leases.

A. Operating lease

When the First Group is the lessor or the lessee, rental payable and receivable from the operating lease is calculated through straight-line method based on the lease term, which are recognized respectively as “other non-interest income, net” and “other business and administration expense”.

B. Finance lease

When the First Group is the lessor, the asset is derecognized when the finance lease contract is signed and the present value of lease payment is recognized as lease payable. The difference between the total lease payable and present value is recognized as unrealized interest income, and transferred to interest income as incurred at period end. Rental income is calculated based on remaining lease payment receivable using the embedded interest rate or incremental borrowing interest rate and recognized as current gain and loss.

When the First Group is the lessee, the lower of fair value of lease assets or the lowest present value of the lease payment is capitalized. Rental payment is amortized through financial leasing liabilities and recognized as interest income. Interest expense is calculated based on beginning balance of lease liabilities of each lease term using the embedded interest rate or incremental borrowing interest rate and recognized as current gain and loss. Financing lease liabilities are recognized as “other financial liabilities”. Property and equipment acquired through finance lease contracts are measured by cost model.

(16) Intangible assets

The intangible assets of the First Group consists of computer software expenditures, which are recognized by cost and amortized over its economic useful life. The maximum estimated useful life is three years.

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Subsequent measurements are based on the cost model.

(17) Impairment of non-financial assets

When there is any evidence indicating a possible impairment, the First Group immediately performs impairment test in relation to the assets applicable for IAS 36, “Impairment of Assets”.

If the testing result of the cash-generating unit of an asset or an individual asset suggests that the recoverable amount is less than the carrying amount, impairment loss is recognized. Recoverable amount refers to the higher of an asset at fair value less its cost or value in use. Reassess the recoverable amount of an asset when there is an indication that the impairment loss recognized in the prior period decreases or does not exist anymore. If there is any change in the estimated recoverable amount and result in an increase, asset impairment is reversed to the extent that the carrying amounts shall not exceed the amortized cost that would have been determined had no impairment loss been recognized in prior periods.

(18) Provisions, contingent liabilities and contingent assets

A. The First Group recognizes liabilities when all of the following three conditions are met ：
(A)present obligation (legal or constructive) has arisen as a result of past event; and
(B) the outflow of economic benefits is highly probable upon settlement; and
(C) the amount is reliably measurable.

The outflow of economic benefit as a result of settlement is determined based on the overall obligation when there are several similar obligations. Contingent assets should be recognized when the outflow of economic benefits is probable in order to settle the obligation as a whole even if the outflow of economic benefits from any one of the obligation is remote.

Measurements for provisions are at discounted present value of expenditure for settlement obligation using a pre-tax discount rate with timely adjustment made that reflects the current market assessments of the time value of money and the risks specific to the liabilities.

B. Contingent liability is a possible obligation that arises from a past event, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the First Group. Or it could be a present obligation as a result of a past event but the payment is not probable or the amount cannot be measured reliably. The First Group did not recognize any contingent liabilities but made appropriate disclosure in compliance with relevant regulations.
C. Contingent asset is a possible obligation that arises from a past event, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the First Group. The First Group did not recognize any contingent assets and made appropriate disclosure in compliance with relevant regulations when the economic inflow is probable.
D. With regard to insurance contracts of FALI and financial instruments with or without participation discretion feature, the reserves are set aside according to “Regulations Governing the Setting Aside of Various Reserve for Insurance Enterprises”. Even though part of the

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insurance contracts of FALI do have a participation discretion feature and guarantee element, FALI did not separately recognize but categorize the whole contract as a liability. The following liability reserves do not adopt discounting method other than policy reserve, premium deficiency reserve and liability adequacy reserve. Details of provision basis are summarized below:

(A)Unearned premium reserve:

The policy reserve of unearned premium of any valid contract with less than one-year insured period should be set aside based on the calculation guide book of Insurance Bureau and “Regulations Governing the Setting Aside of Various Reserve for Insurance Enterprises”.

(B) Claim reserve:

Reserves are provided for “Claims Reported but Not Paid” and “Claims Incurred But Not Reported.” For “Claims Reported but Not Paid,” a reserve has been provided on a per-policy-claim-report basis for each type of insurance. Additonally, for “Claims Incurred but Not Reported,” a reserve has been provided using the following methods:

a. According to “Regulations Governing the Setting Aside of Various Reserves by Insurance Enterprises”, the claim reserve for contracts, of which the insured period is less than 1 year, is calculated and set aside based on past claim experience and expenses and through the formula assigned or approved by FSC.
b. To date, the subsidiary, FALI has operated for approximately 5 years, and the losses experience of life insurance and health insurance is still developing. 17% self-retained earned premium of life insurances and 9% self-retained earned premium of health insurances should be respectively set aside as claim reserve for the life insurances and health insurances of FALI for the period from January 1, 2010 till January 1, 2013 according to Jin-Guan-Pao-Tsai No. 09802225020. Starting from January 1, 2013, claim reserve needed to be set aside should be calculated by loss development triangle method formulated by past experience and expenses in compliance with (102) FALI Zong-Jing-Qi Letter No. 00262 as approved by FSC.
c. Injury insurance is processed according to (100) FALI Zong-Jing-Qi Letter No. 00693, and claim reserve is calculated based on “Claims reserve for injury insurance set aside by loss development triangle method” formulated by past experience and expenses.
(C) Policy reserve:

Policy reserve of life insurance is calculated on the basis of life expectancy table rectified by competent authorities upon each application approval and the estimated interest rates, and is set aside according to the method set out in revised Article 12 of “Regulation Governing the Setting Aside of Various Reserve for Insurance Enterprises” and calculation method reviewed and approved by the authorities.

(D)Premium deficiency reserve:

If the premium of a contract is less than the reserve as calculated, then the portion of the balance of premium that has not exceeded its due date should be recorded as premium

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deficiency reserve. This applies to life, health, and annuity insurance contracts issued, with coverage over one year. Additionally, for an unexpired effective policy with coverage less than one year, the Company should recognize the premium deficiency reserve based on the difference between claim reserves/expenses, and unearned premium reserve and the expected premium income in the future.

(E) Liability adequacy reserve:

Liabilities adequacy test is based on the overall contract of the whole entity in compliance with regulations announced by The Actuarial Institute of the Republic of China, of which the long-term and short-term insurance is evaluated respectively by total premium method and loss ratio. The testing is the net carrying amount of insurance liabilities less deferred acquisition cost and related intangible assets at each balance sheet date, if insufficient when comparing with the present estimate of insurance contract future cash flow, all insufficient amount is recognized as liabilities adequacy reserve. According to the liability adequacy testing result, the reserve needed to be set aside is the liability adequacy reserve.

(19) Reserve for foreign exchange fluctuation

According to the “Regulations Governing the Setting Aside of Various Reserve for Insurance Enterprises,” with respect to foreign exchange fluctuation held by First- Aviva Life Insurance, reserve for foreign exchange fluctuation, related accumulative reserve limits set aside by FirstAviva Life Insurance under liability accounts as well as provisions, methods of writing-off and others should be based on “Reserve for Foreign Exchange Fluctuation of Life Insurance Enterprises Required to Attend To” starting from March 1, 2012.

According to Article 23.2, “Regulations Governing the Setting Aside of Various Reserve for Insurance Enterprises,” life insurance enterprises should transfer catastrophe risk reserve and riskvolatility reserve of various insurances under liabilities to the initial amount of reserve for foreign exchange fluctuation starting from March 1, 2012. First- Aviva Life Insurance has yet adopted the conversion, hence there is no reserve for foreign exchange fluctuation.

(20) Financial guarantee contract

A financial guarantee contract is a contract that requires the First Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when they are due in accordance with the original or modified terms of a debt instrument.

The First Group initially recognizes financial guarantee contracts at fair value on the date of issuance granted. The First Group charges a service fee when the contract is signed and therefore the service fee income charged is the fair value at the date that the financial guarantee contract is signed. Service fee received in advance is recognized in deferred accounts and amortized through straight-line method during the contract term.

Subsequently, the First Group should measure the contract at the higher of:

A. the amount determined in accordance with IAS 37; and
B. the amount initially recognized less, when appropriate, cumulative amortization recognized in accordance with IAS 18, “Revenue”.

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The best estimate of the liability amount requires management to exercise their judgment and historical loss data based on the similar transaction experiences.

The increase in liabilities due to financial guarantee contract is recognized in “bad debt expenses and guaranty policy reserve”.

(21) Employee benefits

A. Short-term employee benefits

The First Group recognizes undiscounted short-term employee benefits due in the future as expense during the period that the service is provided.

B. Employee preferential interest rate

FCB provides preferential interest rate for employees, including flat preferential savings rate for current employees and retired employees. The difference gap compared to market interest rate is deemed as employee benefits.

According to “Regulations Governing the Preparation of Financial Statements by Public Banks”, the preferential interest paid to current employees is calculated based on accrual basis, and the difference between the preferential interest and the market interest is recognized under “employee benefit expense”. According to Article 30 of “Regulations Governing the Preparation of Financial Statements by Public Banks”, the interest rate upon retirement agreed with the employees which exceeds general market interest rate is actualized in accordance with IAS 19, Defined Benefit Plan, as endorsed by FSC. However, various parameters should be in compliance with competent authorities if indicated otherwise.

C. Termination benefit

Termination benefit is paid to the employee being terminated who is eligible for retirement or as a result of voluntary termination in exchange of termination benefit. The First Group has made commitments in the formal detailed employment termination plan which is irrevocable, and recognizes liabilities when providing termination benefit to employees who voluntarily resign. Termination benefit paid 12 months after the financial reporting date should be discounted.

D. Post-employment benefit

The First Group adopts both defined benefit plan and defined contribution plan. Overseas branches and subsidiaries adopt defined benefit plans based on regulations of the country in which the entities operate.

The First Group adopted the defined contribution plan from July 1, 2005, the date that Labor Pension Act takes effect. Employees may choose to apply the pension policy of the First Group or the policy of the Act and retain their work seniority before the Act. For employees who are eligible for the Act, the Company and its domestic subsidiaries should set aside 6% of their monthly salaries. The Company and its subsidiaries have no other legal or constructive obligation to set aside additional reserve. Additionally, the pension in each period is recognized as pension cost in the period as incurred. Prepaid pension assets can only be recognized when there is a cash refund or deductible future pension payable.

88 • FIRST FINANCIAL HOLDING CO., LTD.

Defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognized past service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.

Remeasurement of defined benefit plan includes: (1) actuarial gains and losses; (2) return on plan assets, but not including amounts already included in net interest of net defined benefit liabilities (assets); and (3) any changes in effect of asset ceiling, but not including amounts already included in net interest of defined benefit plan. The Group chooses to categorize remeasurement of defined benefit plan under retained earnings.

Actuarial gains and losses arising from actual experiences or changes in actuarial assumption are recognised immediately in other comprehensive income. Past-service cost is recognised immediately in profit in the period incurred.

E. Employees’, directors’ and supervisors’ remuneration

Employees’, directors’ and supervisors’ remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal obligation or constructive obligation and those amounts can be reliably estimated. Different from the actual any differences between the resolved amounts and the subsequently actual distributed amounts is accounting for as changes in estimates.

- (22) Employee share based payments

For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. And ultimately, the amount of compensation cost recognised is based on the number of equity instruments that eventually vest.

(23) Income and expense

Income and expense of the First Group are recognized as incurred. Expense consists of employee benefit expense, depreciation and amortization expense and other business and administration expenses. However, interest income is recognized on a cash basis upon receiving the interest when (1) reclassified as non- accrual loans; and (2) interest from restructured loans whose maturities have been extended is not recognized as interest income but recorded in the memo accounts.

2015 ANNUAL REPORT • 89

A. Other than those classified as financial assets and liabilities at fair value through profit and loss, all the interest income and interest expense generated from interest-bearing financial assets are calculated by effective interest according to relevant regulation and recognized as “interest income” and “interest expense” in the consolidated statements of comprehensive income.
B. Handling fees and expenses are recognized when cash is received, or the earning process is substantially completed; service fee earned from performing significant items shall be recognized upon the completion of the service, such as syndication loan service fee received from sponsor, handling fees and expenses of subsequent services of loans are amortized or included in the calculation of effective interest rate of loans and receivables during the service period. However, according to the “Regulation Governing the Preparation of Financial Reports by Public Banks”, the loans and receivables may be measured by the initial amounts if the effects on discount are insignificant.
C. For more details on rental income of operating lease and unrealized interest income of finance lease in relation to lease business, please refer to Note 4(15).
D. Income and expense of insurance business

The first and subsequent premium of FALI’s insurance contracts and financial instruments with discretionary participation features is recognized when completing insurance procedures and when receiving payments. Costs incurred in acquiring a policy, such as commission expenses, are recognized as expenses in the period the insurance contracts become effective.

In addition to the “Income and Expense of Insurance Business”, FALI recognizes its income according to IAS No. 18, “Revenue”. Interest is recognized based on interest rate method over time and dividends income is recognized when the stockholders’ right of receipt is confirmed.

E. Income and expenses of FS is recognized on an accrual basis. The main components are as follows:
(A)Brokerage commission, gains (losses) on sale of securities, futures commission expenses and related handling fee expenses are recognized on the transaction date.
(B) Interest income and interest expense attributable to margin loan business, stock loan business, and bills and bonds under repurchase or resale agreements are recognized on an accrual basis during the transaction periods.
(C) Underwriting commission income or expenses: Subscription handling fees are recognized when the amounts are received and underwriting commission income and related commission expenses are recognized at the completion of such underwriting contracts.
(D)Service fee income from providing registration and transfer agency service for securities are recognized monthly according to the contracts.
(E) Futures contract gains or losses: The margin of futures trading is recognized at cost and measured through mark-to-market accounting. The gains or losses from mark-to-market, reversed futures trading or settled contracts are recognized as gains or losses in the current period; dealer handling fee expenditures is recognized on the transaction date of futures trading.

90 • FIRST FINANCIAL HOLDING CO., LTD.

(24) Reinsurance

In order to set a limit to losses and lower the risk of large claim policy to the minimum, FALI engages in reinsurance according to business demands and regulations. FALI shall not refuse to fulfill its obligation to the insured when the reinsurer does not fulfill its obligation.

Reinsurance ceded and inward standard, reinsurance expense, reinsurance premium income, reinsurance commission income and expense, claims recoverable from reinsurers and covered incidents are processed and recognized based on the reinsurance contracts signed with competitors and regular customers.

In terms of the classification of reinsurance contracts, FALI assesses if objective insurance risk shall be transferred to reinsurers. For reinsurance contracts that do not transfer significant risk, the contracts shall be recognized and measured using deposit accounting.

The subsidiary, FALI estimates unrecoverable amount according to IFRS No. 4, “Insurance Contracts” and with reference to “Regulations Governing the Procedures for Insurance Enterprises to Evaluate Assets and Deal with Non-performing/Non-accrual Loans” as revised on December 29, 2010 and recognized appropriate allowance for doubtful debt, in relation to the claims recoverable from reinsurers and reinsurance receivable in the reinsurance contracts.

(25) Insurance contract classification

In an insurance contract, FALI accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a transferred uncertain future event (insured event) adversely affects the policyholder. Generally, FALI determines the existence of significant risks from the payments with or without the insured event taking place. An insurance contract also transfers financial risks of the insured.

A contract that qualifies as an insurance contract will remain an insurance contract until all rights and obligations are extinguished or expired, even if the insurance risk is lower significantly during the policy period. However, contracts originally set as non-insurance contracts based on the degree of insurance risks (e.g. insurance contracts with the nature of financial instrument) shall be reclassified as insurance contracts when significant insurance risks are transferred to FALI.

Insurance contract with the nature of financial instruments is the contract that transfers significant financial risks. Financial risks refer to the potential risks generated from one or various specified interest rates, financial instrument prices, product prices, exchange rates, price index, rate index, credit rating, credit index or other variables. If the abovementioned variables are non-financial, such variables are not held by any of the contract parties.

Insurance contract can be further classified if the contract has discretionary participation feature. Discretionary participation feature is a contractual right to receive additional benefit rather than guaranteed benefits and this kind of right will meet all the criteria shown below:

A. additional benefits likely occupy a significant percentage of total contractual benefits;

B. the amount or timing of additional benefits is contractually at the discretion of FALI; and
C. additional benefits are contractually based on:

2015 ANNUAL REPORT • 91

(A)the performance of a specified pool of contracts or a specified type of contract;
(B) realized and/or unrealized investment returns on a specified pool of assets held by the issuer;
(C) the profit or loss of the company, fund or other entity that issues the contract.

An embedded derivative needs to be accounted separately if the embedded derivative (financial options and financial guarantee) does not have a closely related economic feature and risk; the embedded derivative shall be measured at fair value and the fair value movement shall be recognized as profit or loss of the period. An embedded derivative needs not be accounted separately if the embedded derivative meets the definition of an insurance contract, or the entire contract is measured at fair value and the fair value movement shall be recognized as profit or loss of the period.

(26) Income tax

A. Current tax

Current tax asset (liability) is calculated on the basis of the tax laws enacted in the countries where the First Group operates and generates taxable income. Except for transactions or other matters that are directly recognized in other comprehensive income or equity, all the other transactions should be recognized as income or expense and recorded as gain and loss in the period. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

B. Deferred tax

Deferred income tax assets and liabilities are measured based on the tax rate of the anticipated period that the future assets realization or the liabilities settlement requires, which is based on the effective or existed tax rate at the consolidated balance sheet date. The carrying amount of assets and liabilities included in the consolidated balance sheet are calculated through liability method and recognized as deferred income tax. The temporary difference of the First Group mainly occurs due to the revaluation on the depreciation of property and equipment and certain financial instruments (including derivatives) and provision and transferring of the reserve for pension and other post-employment benefits. Deductible temporary difference within the scope that it is probable to offset taxable income is recognized as deferred income tax.

Temporary difference related to the investees, branches and affiliated entities are recognized as deferred tax liabilities. However, when the First Group is capable of controlling the time length required to reverse the temporary difference and the temporary difference is unlikely to reverse in the foreseeable future, the temporary difference is not recognized.

The land revaluation appraisal occurred due to the revaluation assessment in line with relevant regulations, deemed as taxable temporary difference, and is recognized as deferred tax liabilities.

If the future taxable income is probable to be utilized as unused loss carryforwards or deferred income tax credit which can be realized in the future, the proportion of realization is deemed as deferred income tax assets.

92 • FIRST FINANCIAL HOLDING CO., LTD.

Certain transactions of the First Group are recognized in other comprehensive income. The tax effects on these kinds of transactions are also recognized in other comprehensive income.

Current tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realize the asset and settle the liability simultaneously.

(27) Share capital

Incremental costs directly attributable to the issuance of new shares are shown as a deduction, net of tax, from equity. Common stock dividends distributed are recognized in equity in the year in which they are approved by the Group’s shareholders.If the date of dividends declared is later than the consolidated balance sheet date, common stocks are disclosed in the subsequent events.

(28) Operating segments

The First Group’s operating segment reports are consistent with the internal reports provided to the chief operating decision-maker (“CODM”). The CODM is a team that allocates resources to operating segments and evaluates their performance.

5. Critical accounting judgments, estimates and key source of assumption uncertainty

The consolidated financial statements of the First Group may be affected by the adoption of accounting policies, accounting estimates and assumptions. Therefore, adoption of the significant accounting policies in Note 4 requires the management’s judgment, estimate and assumption, which involves information of significant adjustment made on the carrying amount of assets and liabilities in the next financial statements due to lack of resources. Estimates and assumptions are made on the basis of past experience and other elements deemed to be relevant. However, the actual results may differ from the estimates. The First Group will continually monitor the estimates and assumptions and if the revision of estimate leaves an impact in the current period, the adjustment is recognized in the period. If a revision could affect both current and future periods, then the estimated revision shall be made in current and future periods.

Certain accounting policies and judgments of management could have significantly affected the recognized amounts in the consolidated financial statements. Details are as follows:

(1) Evaluation on financial instruments (including derivatives)

The First Group evaluates the financial instrument at fair value not traded in an active market or with no quoted price. The fair value may be estimated with reference to observable market price in the market if there is observable information of similar instruments. If not, fair value is calculated based on the appropriate evaluation models generally used in the market. The input used in the model should first primarily be based on the observable information in the market. However, in the event that certain information or input cannot be observed directly in the market and/or the model assumption itself is comparatively objective, then financial instrument at fair value can be retrieved from historical data or other information. Every valuation model of the First Group are

2015 ANNUAL REPORT • 93

assessed and tested on a regular basis to ensure the output can reflect actual information and the market price. Note 12(1) provides the main assumptions used in determining the financial instruments at fair value. The competent authorities recognize that the valuation models and assumptions chosen can be appropriately used to determine the fair value of financial instruments.

(2) Loan impairment loss

In addition to the compliance with the regulations from competent authorities, the First Group evaluates risk characteristics of clients and many other factors such as secured and non-secured loans to build modules and case assessments and evaluates cash flows to calculate impairment amount by month. Recognition for impairment loss is determined by observable evidence suggesting a probable impairment. The evidence could include the payment condition of the debtor, events related to overdue payment and national or local economic situation that have given rise to a significant adverse movement, etc. When evaluating the future cash flows, overdue payment of the debtor, current position of the borrower, collateral, guarantee from external institutions and historical data should all be considered. Impairment occurrence rate and impairment recovery rate used in the portfolio assessment is estimated through different product types and historical data. The First Group regularly examines the assumptions used and the reasonableness of input to ensure the appropriateness of various assumptions and inputs.

(3) Post-employment benefit

The present value of post-employment benefit obligation is based on actuarial result of various assumptions, through which any change could affect the carrying amount of post-employment benefit obligation.

Discount rate is included when determining the net pension cost (income), and the First Group decides the appropriate discount rate at the end of each year, which is used to calculate the estimated present value of future cash outflow of post-employment benefit obligation needed. The First Group should consider interest rate of government bonds of the same currency and maturity in order to determine the appropriate discount rate.

Other significant assumptions on post-employment benefit are made based on the current market situation.

(4) Income tax

The First Group needs to pay income tax in different countries and significant estimates are required when estimating the global income tax after a series of transactions and calculations to determine the ultimate tax amount. The First Group recognizes additional income tax liabilities arising from tax issues based on the subsequent development of stringent evaluation and assessment on tax issues. The difference between the ultimate tax amount and the initial recognition, if any, will affect the recognition for income tax in the period and deferred income tax account.

(5) Insurance contract liabilities

Aviva’s insurance contract liabilities are based on assumptions for the period or assumptions when the contract is effective to reflect the best estimate of the period. Liability adequacy tests are performed on all contracts to reflect the best estimate of future cash flows by the management.

94 • FIRST FINANCIAL HOLDING CO., LTD.

Major assumptions include mortality rate, morbidity rate, return on investment rate, expense rate and withdrawal rate. The assumptions are in accordance with Chapter 3 Actuarial Assumption of Reserve Adequacy of “Practice Principles of Personal Insurance Actuarial Personnel” to reflect the FALI’s risk exposure, product characteristics, target market and claim experience.

Estimate of investment return of insurance contracts is based on the estimated return of a company’s asset pool and future economic and financial development forecast. Future expenses’ assumption is based on current expenses and is adjusted with inflation from estimated expenses.

The withdrawal rate is based on FALI’s experience; therefore, the assumptions provided by Aviva PLC will be referred to.

Summary of significant accounts

(1) Cash and cash equivalents

Cash on hand Checks for clearance Short-term bills Due from other banks Total	December 31,2015	December 31,2014
	$ 13,249,455 5,700,021 220,950 28,891,223	$ 13,066,745 14,971,201 256,598 33,988,087
	$ 48,061,649	$ 62,282,631

(2) Due from the Central Bank and call loans to banks

Reserve for deposits-account A Reserve for deposits-account B Inter-Bank clearing fund Deposits of national treasury account Deposits of overseas branches with foreign Central Banks Reserve for deposits- foreign currency Call loans and overdrafts to other banks Subtotal Less:Allowance for bad debt expense - call loans to banks Total	December 31,2015	December 31,2014
	$ 26,444,070 47,030,692 5,156,552 125,877 9,047,384 387,984 168,257,744	$ 29,585,291 46,153,702 5,602,492 93,407 3,064,672 323,034 96,353,781
	256,450,303	181,176,379
	( 5,096)	-
	$ 256,445,207	$ 181,176,379

The FCB and its subsidiaries’ reserve for deposits is required by the Banking Law and is determined by applying the reserve ratios set by the Central Bank to the monthly average balance of each type of deposit. The reserve amount is deposited in the reserve deposit account at the Central Bank. According to the regulations, such reserve for deposits - account B cannot be withdrawn except for monthly adjustments of the reserve for deposits.

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2015 ANNUAL REPORT • 95

Amounts in conformity with cash and cash equivalents as defined by IAS No.7

In conformity with cash and cash equivalents as defined by IAS No.7 Not in conformity with cash and cash equivalents as defined by IAS No.7 Reserve for deposits-account B Deposits by overseas branches with foreign Central Banks (Note) Total	December 31,2015	December 31,2014
	$ 206,424,064 47,030,692 2,995,547	$ 133,219,869 46,153,702 1,802,808
	$ 256,450,303	$ 181,176,379

Note: The deposits by overseas branches are reserves required by the respective local central banks. The deposits are restricted from deployment.

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

Financial assets held for trading Short-term bills Stocks Bonds (government, financial and corporate bonds) Beneficiary securities Derivative financial instruments Valuation adjustment for financial assets held for trading Subtotal Financial assets designated as at fair value through profit or loss Bonds Preferred stock Valuation adjustment for designated financial assets at fair value through profit or loss Subtotal Total	December 31,2015	December 31,2014
	$ 36,976,191 1,692,277 17,965,215 284,386 10,937,087 65,130	$ 15,440,631 1,832,309 13,710,689 206,868 9,395,571 18,150
	67,920,286	40,604,218
	24,083,953 19,977 ( 68,873)	15,079,342 - 116,597
	24,035,057	15,195,939
	$ 91,955,343	$ 55,800,157

A. Details of gains (losses) on financial assets and liabilities at fair value through profit or loss for the years ended December 31, 2015 and 2014 are as follows:

Net gain on financial assets and liabilities held for trading Net (loss) gain on financial assets designated as at fair value through profit or loss Total	Forthe year ended December 31,2015 $ 1,604,076 ( 452,148) $ 1,151,928	Forthe year ended December 31,2014
		$ 937,400 435,334
		$ 1,372,734

B. Financial instruments designated at fair value through profit or loss of the First Group are the hybrid instruments and products to eliminate the inconsistency of accounting recognition.
C. As of December 31, 2015 and 2014, the above financial assets for trading purposes undertaken for repurchase agreements were $1,433,878 and $1,438,350, respectively.

(4) Available-for-sale financial assets

96 • FIRST FINANCIAL HOLDING CO., LTD.

		December 31,2015	December 31,2015	December 31,2014	December 31,2014
Stocks - listed		$	8,066,711	$	6,573,885
Stocks - unlisted			1,657,338		1,436,050
Short-term notes and bills			637,087		-
Bonds			80,201,521		69,932,613
Beneficiary securities			1,299,854		302,316
Other marketable securities			1,150,764		2,057,977
Valuation adjustment for available-for-sale financial
assets			5,012,384		5,164,986
Sub-total			98,025,659		85,467,827
Less: Refundable deposits	(		351,081 )(		348,138 )
Less: Accumulated impairment	(		149,706 )(		139,234 )
Total		$	97,524,872	$	84,980,455

Please refer to Note 8 for details of the above available-for-sale financial assets pledged as collateral as of December 31, 2015 and 2014.

(5) Securities purchased under resell agreements

Investments in retractable bonds	December 31,2015 $ 1,546,214	December 31,2014
		$ 1,882,206

As of December 31, 2015 and 2014, the First Group is obliged to sell the above bonds at purchase price plus a mark-up based on the resale agreement, and such resale amounts were $1,548,090 and $1,884,175, respectively.

(6) Receivables, net

Spot exchange receivable Factoring receivable Interest receivable Acceptances receivable Margin loans receivable Credit card accounts receivable Other receivables Sub-total Less: Allowance for doubtful accounts ( Net amount	December 31,2015 $ 34,606,960 11,283,744 4,823,757 5,511,671 5,303,718 6,175,456 9,091,312 76,796,618 1,030,254 ) $ 75,766,364	December 31,2014 $ 23,732,422 9,758,089 4,255,469 6,421,115 6,444,469 5,502,474 9,711,517 65,825,555 ( 964,955 ) $ 64,860,600

(7) Loans discounted, net

Bills discounted Overdrafts Short-term loans Medium-term loans Long-term loans Import-export negotiations	December 31,2015 $ 4,007,993 1,150,389 429,960,152 433,982,789 627,725,769 1,164,431	December 31,2014
		$ 5,450,725 1,105,803 456,242,287 428,183,728 620,068,663 2,523,346

2015 ANNUAL REPORT • 97

Loans transferred to non-accrual loans Insurance policy loans Sub-total Less: allowance for doubtful accounts ( Net amount	December 31,2015 2,985,757 197,851 1,501,175,131 20,968,408 ) $ 1,480,206,723	December 31,2014 3,777,651 253,745 1,517,605,948 ( 20,345,295 ) $ 1,497,260,653

A. As of December 31, 2015 and 2014, please see Note 12(2)D for the explanation on impaired financial assets of the First Group for the loans discounted.
B. The First Group assessed the appropriate amount of allowance for doubtful accounts; the details and movements of the allowance for doubtful accounts balance for loans discounted and receivables for the years ended December 31, 2015 and 2014 were as follows:

			For the year ended		For the year ended
			December 31,2015		December 31,2014
Loans discounted (including other related
receivable derived from loans)
Beginning balance		$	20,534,259	$	18,198,602
Provision			2,990,932		5,899,935
Write-off	(		2,461,607) (		3,774,530 )
Foreign exchange and other movements			43,548		210,252
Ending balance		$	21,107,132	$	20,534,259
Receivables
Beginning balance		$	943,337	$	1,258,101
Provision			122,854		168,269
Write-off	(		53,231) (		427,325 )
Foreign exchange and other movements	(		5,137) (		55,708 )
Ending balance		$	1,007,823	$	943,337

As of December 31, 2015 and 2014, the elimination of collection of bad debts was $2,599,096 and $2,293,204 and was recognised as bad debt expenses, respectively.

(8) Reinsurance contract assets – net

Claims recoverable from reinsurers Reinsurance reserve Assets Ceded unearned premium reserve Ceded claims reserve Total	December 31,2015 $ 10,452 1,067 82 $ 11,601	December 31,2014
		$ 126 415 371
		$ 912

Please see Note 6 (23) B for the changes in reinsurance reserve assets.

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

Certificates of deposits purchased Bonds Short-term bills Total	December 31,2015 $ 284,145,000 71,936,969 735,181 $ 356,817,150	December 31,2014
		$ 247,465,000 58,585,504 1,574,804
		$ 307,625,308

98 • FIRST FINANCIAL HOLDING CO., LTD.

Please refer to Note 8 for details of the above held-to-maturity financial assets pledged as collateral as of December 31, 2015 and 2014.

(10) Investments accounted for using equity method, net
A.Investments accounted for using equity method:

	December 31, 2015	December 31, 2015	December 31, 2014	December 31, 2014
	Amount	Percentage	Amount	Percentage
		of ownership (%)		of ownership (%)
East Asia Real Estate	$ 9,141 1,739,488 717,581	30% 100% 100%	$ 2,926 2,069,133 1,076,729	30% 100% 100%
Management Co., Ltd.
FCBL Capital International
(B.V.I) Ltd.
First Financial Assets
Management (B.V.I) Ltd.
	$ 2,466,210		$ 3,148,788

B. The Group’s share of the operating results in all individually immaterial associates are summarised below:

		December	31,2015	December	31,2014
Loss from countinuing operations	(	$	588,413 )(	$	25,805 )
Other comprehensive (loss) gain income	(		155,065 )		146,337
Total comprehensive (loss) gain income	(	$	743,478 )	$	120,532

C. The affiliated enterprises invested by the First Group have no quoted price. The affiliated enterprises’ capacity to transfer capital through the distribution of cash dividends, loan repayment or advances is not significantly restricted.
(11) Other financial assets – net

	December 31,2015 $ 1,119,725 9,162,155 5,196 210,443 6,238,122 24,880,376 1,053,801 - 26,744 813,900 20,043 19,363 9	December 31,2014 $ 2,577,236 20,696,846 4,500 257,123 5,498,349 21,431,518 551,493 49,248 62,240 587,059 - - -
Debt instruments with no active market
Bond investments Investment in time deposits
Bills purchased
Claims receivable purchased
Financial assets carried at cost
Separate account product assets
Securities Bank deposits Other receivables
Non-accrual loans transferred from other accounts
(excluding loans)
Customer margin accounts Guarantee deposits for security borrowing Margin deposits for security borrowing Other

2015 ANNUAL REPORT • 99

		December 31,2015	December 31,2015	December 31,2014	December 31,2014
Subtotal			43,549,877		51,715,612
Less: Allowance for doubtful accounts - overdue
receivable	(		405 )(		64,890 )
Less: Allowance for doubtful accounts - claims
receivable purchased	(		110,792 )(		102,456 )
Total		$	43,438,680	$	51,548,266

A. As the First Group’s investments in unlisted stocks lack quoted marked price and their fair values cannot be measured reliably; those financial assets are accounted for at cost.
B. For methods and assumptions used to measure fair value of debt instruments with no active market, please refer to Note 12 (1) D.
C. The Bank’s overdue notes and debts securities affected by the financial crisis of Iceland and Washington Mutual, U.S.A. are recognized as other financial assets –overdue receivables, and the balance as of December 31, 2015 and 2014 were $0 and $15,807, respectively, with balances for allowance for doubtful loans of $0 and $2,371, respectively.
D. As of December 31, 2015 and 2014, details of the First Group’s other financial assets pledged to others as collateral are provided in Note 8.

(12) Investment property– net

Please see below table for the investment property of the First Group for the years ended December 31, 2015 and 2014:

			Lands and land
			improvements		Buildings		Total
Cost
At January 1, 2015		$	8,666,023	$	954,221	$	9,620,244
Additions			-		23,943		23,943
Transfers			319,693		344,617		664,310
Disposals	(		168,396 )(		34,709 ) (		203,105 )
At December 31, 2015			8,817,320		1,288,072		10,105,392
Accumulated depreciation
At January 1, 2015			- ($		170,106 ) (		170,106 )
Depreciation			- (		19,420 ) (		19,420 )
Transfers			- (		97,898 ) (		97,898 )
Disposals			-		2,425		2,425
At December 31, 2015			- (		284,999 ) (		284,999 )
Accumulated impairment
At January 1, 2015	(		10,617 )(		1,855 ) (		12,472 )
Disposals			800		-		800
At December 31, 2015	(		9,817 )(		1,855 ) (		11,672 )
Investment property– net		$	8,807,503	$	1,001,218	$	9,808,721

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100 • FIRST FINANCIAL HOLDING CO., LTD.

			Lands and land
			improvements		Buildings		Total
Cost
At January 1, 2014		$	8,030,605	$	914,438	$	8,945,043
Additions			253,170		114,842		368,012
Transfers			580,338		10,065		590,403
Disposals	(		198,090 )(		85,124 ) (		283,214 )
At December 31, 2014			8,666,023		954,221		9,620,244
Accumulated depreciation
At January 1, 2014			- (		138,377 ) (		138,377 )
Depreciation			- (		15,929 ) (		15,929 )
Transfers			- (		20,770 ) (		20,770 )
Disposals			-		4,970		4,970
At December 31, 2014			- (		170,106 ) (		170,106 )
Accumulated impairment
At January 1, 2014	(		13,166 )(		2,950 ) (		16,116 )
Disposals			2,549		1,095		3,644
At December 31, 2014	(		10,617 )(		1,855 ) (		12,472 )
Investment property– net		$	8,655,406	$	782,260	$	9,437,666

A. As of December 31, 2015 and 2014, the investment property at fair value of the First Group was $19,751,121 and $17,914,898, respectively. All the investment properties of the First Group are assessed by the internal appraisal expert, and market approach was adopted for all assessments.
B. For the years ended December 31, 2015 and 2014, the rental income from investment property were $146,551 and $121,917, respectively, the operating expenses from investment property were $84,599 and $84,765, respectively.
C. As of December 31, 2015 and 2014, details of the First Group’s Investment property pledged to others as collateral are provided in Note 8.

(Blank)

2015 ANNUAL REPORT • 101

				Total		39,840,597	829,779	3,240		671,782)	290,221)	22,278	39,733,891		11,541,540)	818,629)		98,138	277,537	433	11,984,061)	27,749,830
	Construction in	progress and	Leasehold prepayments for	improvements equipment		1,204,408 414,939 $ $	71,191 156,616	15,234 509,993) (		- 3,956) ( (	24,263) - (	7,332 263) (	1,273,902 57,343		1,011,885) - (	66,321) - (		- -	24,263 -	3,864 -	1,050,079) - (	223,823 57,343 $ $
Changes in the property and equipment of the First Group for the years ended December 31, 2015 and 2014:			Land and Machinery and Transportation	improvements Buildings equipment equipment Other equipment	Cost	At January 1, 2015 19,488,244 $ 12,239,714 $ 3,271,996 $ 826,902 $ 2,394,394 $ $	Additions 60,236 137,329 250,010 40,786 113,611	Transfers 199,890 191,735 90,592 2,892 12,890	Transfer into investment property,	intangible assets and other assets 319,693) ( 348,133) ( - - -	Disposals 8,655) ( 5,379) ( 169,971) ( 42,589) ( 39,364) ( (	Foreign exchange 2) ( 10,585 2,481 661 1,484	At December 31, 2015 19,420,020 12,225,851 3,445,108 828,652 2,483,015	Accumulated depreciation	At January 1, 2015 - 5,416,173) ( 2,606,868) ( 684,843) ( 1,821,771) ( (	Depreciation - 303,962) ( 274,976) ( 41,490) ( 131,880) ( (	Transfer into investment property,	intangible assets and other assets - 97,898 240 - -	Disposals - 3,123 168,650 42,150 39,351	Foreign exchange - 457) ( 2,086) ( 436) ( 452) (	At December 31, 2015 - 5,619,571) ( 2,715,040) ( 684,619) ( 1,914,752) ( (	Net 19,420,020 $ 6,606,280 $ 730,068 $ 144,033 $ 568,263 $ $

102 • FIRST FINANCIAL HOLDING CO., LTD.

			Total		39,508,892	1,146,226	3,263		608,509)	234,576)	25,301	39,840,597		11,044,142)	735,451)	-		21,351	232,314	15,612)	11,541,540)	28,299,057
					$				(	(				(	(					(	(	$
Construction in	progress and	prepayments for	equipment		404,534 $	286,529	271,293) (		4,831) (	-	-	414,939		-	-	-		-	-	-	-	414,939 $
		Land and Machinery and Transportation Leasehold	improvements Buildings equipment equipment Other equipment improvements	Cost	At January 1, 2014 19,948,099 $ 11,825,254 $ 2,758,680 $ 820,949 $ 2,646,930 $ 1,104,446 $	Additions - 375,195 269,829 45,070 108,019 61,584	Transfers 123,546 77,172 351,105 4,970 312,480) ( 30,243	Transfer into investment property,	intangible assets and other assets 580,338) ( 22,760) ( - 580) ( - -	Disposals 3,063) ( 14,376) ( 111,555) ( 45,027) ( 50,942) ( 9,613) (	Foreign exchange - 771) ( 3,937 1,520 2,867 17,748	At December 31, 2014 19,488,244 12,239,714 3,271,996 826,902 2,394,394 1,204,408	Accumulated depreciation	At January 1, 2014 2,872) ( 5,172,627) ( 2,225,662) ( 686,230) ( 1,999,000) ( 957,751) (	Depreciation - 278,422) ( 240,775) ( 40,585) ( 120,071) ( 55,598) (	Transfers - - 247,901) ( 1,684) ( 249,585 -	Transfer into investment property	intangible assets and other assets - 20,770 2 579 - -	Disposals 2,872 14,106 111,042 44,545 50,136 9,613	Foreign exchange - - 3,574) ( 1,468) ( 2,421) ( 8,149) (	At December 31, 2014 - 5,416,173) ( 2,606,868) ( 684,843) ( 1,821,771) ( 1,011,885) (	Net 19,488,244 $ 6,823,541 $ 665,128 $ 142,059 $ 572,623 $ 192,523 $	A. There was no interest capitalized on property and equipment acquired for the years ended December 31, 2015 and 2014.	B. Please refer to Note 8 for details of the property and equipment pledged as collateral as of December 31, 2015 and 2014.

2015 ANNUAL REPORT • 103

(14) Other assets - net

	Leased assets Less: Accumulated depreciation ( Leased assets - net Foreclosed assets Cost Less: Accumulated impairment ( Net foreclosed assets Refundable deposits Operating guarantee deposits and settlement clearing funds Prepayments Others Total	December 31,2015 $ 2,180,022 734,249 ) 1,445,773 77,672 68,548) 9,124 658,785 1,146,133 342,971 742,528 $ 4,345,314	December 31,2014 $ 1,901,816 ( 593,024 ) 1,308,792 76,446 ( 76,446) - 688,959 1,272,298 466,443 78,690 $ 3,815,182
	Please refer to Note 8 for details of other assets pledged as collateral as of December 31, 2015 and
	2014.
(15)	Deposits from the Central Bank and banks
	Call loans from other banks Transfer deposits from Chunghwa Post Co. Overdrafts from other banks Due to other banks Due to the Central Bank Total	December 31,2015 $ 126,741,274 1,391,866 638,545 362,973 39,833 $ 129,174,491	December 31,2014 $ 119,991,671 1,878,109 646,929 3,538,403 40,322 $ 126,095,434
(16)	Financial liabilities at fair value through profit or loss
	December 31,2015 Financial liabilities held for trading Derivative instruments $ 8,004,351 Others 20,124 Evaluation adjustments of financial liabilities held for trading ( 1,725 ) Financial liabilities designated at fair value through profit or loss Bonds 21,626,400 Valuation adjustment 696,720 Total $ 30,345,870		December 31,2014 $ 5,383,425 - - 17,801,000 203,147 $ 23,387,572

A. The financial instruments of the First Group at fair value through profit or loss were designated to eliminate or significantly reduce recognition inconsistency.

B. For the years ended December 31, 2015 and 2014, the changes in fair value belonging to financial debentures designated at fair value through profit and loss by the Company were $61,541 and $35,060, respectively.

104 • FIRST FINANCIAL HOLDING CO., LTD.

C. FCB sold the financial debentures at the face value. As of December 31, 2015 and 2014, the carrying amounts exclusive of valuation adjustment and the amounts payable to the creditors are identical.

(17) Securities sold under repurchase agreements

Bonds payable under repurchase agreements

December 31, 2015 December 31, 2014 $ 6,319,156 $ 8,723,114

The First Group is obliged to repurchase the above bonds at original sale price plus a mark-up pursuant to the repurchase agreement. The repurchase agreement amounts for such bonds and bills were $6,324,275 and $8,738,481 as of December 31, 2015 and 2014, respectively.

(18) Commercial papers issued - net

Details of commercial papers issued not yet due are stated as follows:

Details of commercial	papers issued not yet due are	stated as follows:
Commercial papers issued � � � � � � � � � � Subtotal Less: discount on commercial papers issued Net commercial papers issued	Guarantor	December 31,2015 $ 6,311,000 2,400,000 681,000 652,000 535,000 331,000 325,000 230,000 200,000 172,000 150,000 11,987,000 ( 2,766 ) ( $ 11,984,234 0.462%~0.900%	December 31,2014 $ 5,300,000 1,110,000 535,000 371,000 857,000 573,000 300,000 200,000 200,000 1,051,000 200,000 10,697,000 3,958 ) $ 10,693,042 0.650%~0.950%
	Mega Bills Finance Co., Ltd. China Bills Finance Corporation Grand Bills Finance Corporation Taiwan Finance Corporation Taishin Bank Taching Bills Finance Co., Ltd. Dah Chung Bill Finance Corporation International Bills Finance Corporation Taishin Bills Finance Corporation Union Bank of Taiwan Co., Ltd. Taiwan Cooperative Bills Finance Corporation
Interest rate (%)

2015 ANNUAL REPORT • 105

(19) Payables

Accounts payable Spot exchange payable Bank acceptances Interest payable Accrued expenses Deposits received from securities borrowers Guaranteed price deposits received from securities borrowers Collections for others Other payables Total	December 31,2015 $ 14,180,499 34,605,287 5,466,524 2,398,114 5,402,116 660,355 696,939 376,573 5,558,460 $ 69,344,867	December 31,2014
		$ 22,813,587 23,734,833 6,585,298 2,244,243 5,457,050 702,057 785,620 513,114 5,897,941
		$ 68,733,743

(20) Deposits and remittances

Checking accounts Demand deposits Time deposits Negotiable certificates of deposits Savings deposits Inward remittances Others Total	December 31,2015 $ 43,281,400 541,317,546 400,379,016 8,995,500 951,054,618 2,090,589 79,255 $ 1,947,197,924	December 31,2014
		$ 38,781,304 463,722,140 381,125,480 9,856,200 927,506,490 2,198,734 107,946
		$ 1,823,298,294

(21) Bonds payable

A. Corporate bonds payable

In order to improve the Company’s financial structure, strengthen its capital adequacy ratio, and raise funds for mid-to-long-term operation, the Company’s Board of Directors resolved on April 29, 2010, to issue unsecured corporate bonds of $5 billion, and senior corporate bonds of $2 billion approved by the FSC. The holders of the subordinated corporate bonds shall take precedence over shareholders but would rank below other creditors in the event of liquidation. The detailed terms of issuance are as follows:

liquidation. The detailed	terms of issuance are as follows:
Issue date Issue amount Issue price Coupon rate Interest and repayment terms Maturity period	First issue, 2010(A�B)
	July 22, 2010
	NT$7 billion (NT$2 billion has been paid back)
	At par
	A:Fixed rate 1.6%;B: Fixed rate 2.25%
	Interest is paid annually. The principal is to be paid pursuant to face
	value at maturity.
	A:5 years;B:7 years

106 • FIRST FINANCIAL HOLDING CO., LTD.

As of December 31, 2015 and 2014, the above mentioned corporate bonds were unsecured subordinated bonds of $5 billion and $5 billion unsecured senior bonds of $0 and $2 billion, respectively.

For the years ended December 31, 2015 and 2014, the range of interest rates of the above mentioned corporate bonds were 2.25% and 1.60%~2.25%, respectively.

B. Financial bonds payable

In order to strengthen the capital adequacy ratio and raise mid-to-long-term operating capital for FCB, FCB resolved through its Board of Directors to raise the quota of authorized financial bond shares for the issuance of senior and subordinate bonds. This proposition was approved by the Ministry of Finance, R.O.C. and the FSC. The gross approved issuance amount was: $20 billion on June 24, 2005, $20 billion on August 18, 2006, $8 billion on June 25, 2010, $10 billion on February 25, 2011, $15 billion on February 24, 2012, $15 billion on February 27, 2014, $0.3 billion USD on October 16, 2014, $30 billion and $1.5 billion USD on February 26, 2015. The priority of claims for the above mentioned subordinate bonds only takes precedence over the remaining claims distributable for shareholders and is inferior to all other creditors of FCB. The detailed terms of each issuance are as follows:

First to Third issue, 2006

	First to Third issue, 2006
Issue date Issue amount Issue price Coupon rate Interest and repayment terms Maturity period Issue date Issue amount Issue price Coupon rate Interest and repayment terms Maturity period	April 24, July 27 and December 4, 2006
	NT$14 billion (NT$13 billion has been paid back)
	At par
	2.24%~2.75%
	Interest is paid annually. The principal is to be paid pursuant to face
	value at maturity.
	5 years and 6 months to 10 years

	First to Third issue, 2007
	March 9, June 25 and December 24, 2007
	NT$14 billion(NT$10.5 billion has been paid back)
	At par
	Partial interest rate is fixed (2.4%~3.16%) and partial is floating rate.
	Interest rate index is average interest rate of NTD 90-day commercial
	paper in secondary market provided by Reuters.
	Floating rate: Interest is accrued quarterly and paid annually. The
	principal is to be paid pursuant to face value at maturity.
	Fixed rate: Interest is paid annually. The principal is to be paid
	pursuant to face value at maturity.
	7~10 years

Issue date Issue amount Issue price Coupon rate Interest and repayment terms Maturity period	First to Second issue, 2010
	September 28, 2010
	NT$8 billion
	At par
	1.5%/1.92%
	Interest is paid annually. The principal is to be paid pursuant to face
	value at maturity.
	7 years

2015 ANNUAL REPORT • 107

Issue date Issue amount Issue price Coupon rate Interest and repayment terms Maturity period	First to Second issue, 2011
	March 30, June 24, 2011
	NT$6.3 billion
	At par
	Fixed rate:1.65% /1.72%
	Interest is paid annually. The principal is to be paid pursuant to face
	value at maturity.
	7 /10 years

Issue date Issue amount Issue price Coupon rate Interest and repayment terms Maturity period Issue date Issue amount Issue price Coupon rate Interest and repayment terms Maturity period Issue date Issue amount Issue price Coupon rate Interest and repayment terms Maturity period	First to Second issue, 2012
	September 25, December 27, 2012
	NT$15 billion
	At par
	Fixed rate:1.43%/1.47%/1.59%
	Interest is paid annually. The principal is to be paid pursuant to face
	value at maturity.
	7 /10 years


	First issue, 2014
	September 26, 2014
	NT$1 billion
	At par
	Fixed rate:3.5%
	Interest is paid annually. After the expiration of five years. Early
	redemption would be possible if it has approval from authority.
	No expiry date


	Second issue, 2014
	November 26, 2014
	US $300 million
	At par
	A:This is a zero-coupon bond with the implicit interest rate at 4.10%
	B: This is a zero-coupon bond with the implicit interest rate at 4.07%
	A:The bond can be redeemed after two years from the issue date.
	The principal is to be paid pursuant to face value at maturity and
	interest is paid.
	B: The bond can be redeemed after five years from the issue date.
	The principal is to be paid pursuant to face value at maturity and
	interest is paid.
	20 years

108 • FIRST FINANCIAL HOLDING CO., LTD.

	First issue, 2015
Issue date	March 25, 2015
Issue amount	NT$7 billion
Issue price	At par
Coupon rate	A: Fixed rate:1.83%
	B: Fixed rate:2.05%
Interest and repayment	A: Interest is paid annually. The principal is to be paid pursuant to
terms	face value at maturity and interest is paid.
	B: Interest is paid annually. The principal is to be paid pursuant to
	face value at maturity and interest is paid.
Maturity period	A: 7 years
	B: 10 years

	Second issue, 2015
Issue date	May 28, 2015
Issue amount	US $230 million
Issue price	At par
Coupon rate	A:This is a zero-coupon bond with the implicit interest rate at 4.06%
	B: This is a zero-coupon bond with the implicit interest rate at 4.02%
Interest and repayment	A:The bond can be redeemed after two years from the issue date.
terms	The principal is to be paid pursuant to face value at maturity and
	interest is paid.
	B: The bond can be redeemed after three years from the issue date.
	The principal is to be paid pursuant to face value at maturity and
	interest is paid.
Maturity period	20 years

For the years ended December 31, 2015 and 2014, the range of interest rates of the above mentioned corporate bonds was 1.31%~4.10% and 1.11%~4.10%, respectively.

As of December 31, 2015 and 2014, the outstanding balances of the above mentioned financial bonds amounted to $59.226 and $53.001 billion New Taiwan dollars, respectively. Among the preceding mentioned financial bonds, the senior and the subordinate financial bonds with face value of $17.426 billion and $9.501 billion, $4.5 billion and $8.6 billion New Taiwan dollars were designated as held for trading financial liabilities and hedged by interest rate swap contracts. As such interest rate swap contracts were valued at fair value with changes in fair value recognized as profit or loss, the financial bonds stated above were designated as financial liabilities at fair value through profit or loss in order to eliminate or significantly reduce recognition inconsistency.

(22) Other borrowings

Credit borrowings Interest rate (%)	December 31,2015 $ 2,509,227 1.120%~1.502%	December 31,2014
		$ 7,528,630
		0.992%~1.500%

2015 ANNUAL REPORT • 109

(23) Provisions

Insurance liability Employee benefit liabilities reserve Reserve for guarantees Other reserves Total	December 31,2015 $ 6,430,485 5,640,517 799,145 25,294 $ 12,895,441	December 31,2014
		$ 6,919,954 5,062,443 795,376 69,658
		$ 12,847,431

A. Details of FALI’s provisions for insurance as of December 31, 2015 and 2014, were as follows:

Policy reserve Unearned premium reserve Claim reserve Reserve for premium insufficiency Total	December 31,2015 $ 6,362,503 57,485 5,063 5,434 $ 6,430,485	December 31,2014
		$ 6,860,410 36,580 15,308 7,656
		$ 6,919,954

B. Details of FALI’s liability reserves for insurance contracts and financial instruments issued with a discretionary participation feature were as follows:

(A) Policy reserve:

For the years ended December 31, 2015 and 2014, the policy reserves were all generated by insurance contract, and the contractual liabilities measured on a discounted basis to reflect the interest expense over time were $87,963 and $152,513, respectively.

			Insurance Contracts	Insurance Contracts
			For theyears ended December 31
			2015		2014
Beginning balance		$	6,860,410	$	13,932,888
Provision			1,208,619		1,530,492
Recovery	(		1,704,542 ) (		8,613,381 )
Income of surrender	(		31,295 ) (		24,105 )
Foreign currency exchange gains and
losses			29,311		34,516
Ending balance		$	6,362,503	$	6,860,410

110 • FIRST FINANCIAL HOLDING CO., LTD.

(B) Unearned premium reserve and deduction of unearned premium reserve fluctuation:

			Insurance Contracts	Insurance Contracts
			For theyears ended December 31
			2015		2014
Unearned premium reserve
Beginning balance		$	36,580	$	19,901
Change in the period			57,483		36,576
Recovery	(		36,580 ) (		19,901 )
Foreign currency exchange losses			2		4
Ending balance		$	57,485	$	36,580
Deduction of unearned premium reserve
Beginning balance		$	415	$	535
Change in the period			652	(	120 )
Ending balance		$	1,067	$	415

Deduction of unearned premium reserve was listed under “reinsurance contract assets-net”.

Claim reserve Beginning balance Change in the period Recovery ( Ending balance Deduction of claim reserve Beginning balance Change in the period ( Ending balance	Insurance Contracts For theyears ended December 31 2015 2014 $ 15,308 $ 9,750 18,087 37,271 28,332 ) ( 31,713 ) $ 5,063 $ 15,308 $ 371 $ 3,263 289 ) ( 2,892 ) $ 82 $ 371
	2015 $ 15,308 18,087 28,332 ) ( $ 5,063 $ 371 289 ) ( $ 82

The reported but not yet paid insurance claims is processed by case by the claim segment, of which the committed insured amount is estimated based on the policy details. The reported but yet paid insurance claims, which is appropriately assessed, should be able to reflect the actual claim paid. Reserve for the claim unreported is calculated by the actuarial segment based on the methods for recognizing unreported claim reserve used by FALI.

Deduction of claim reserve was listed under “reinsurance contract assets- net”.

2015 ANNUAL REPORT • 111

(D) Reserves for premium insufficiency fluctuation:

					Insurance Contracts	Insurance Contracts
				For theyears ended December 31
				2015			2014
	Beginning balance		$		7,656	$		9,585
	Change in the period	(			2,424 ) (			2,175 )
	Foreign currency exchange losses				202			246
	Ending balance		$		5,434	$		7,656
C.	Reserves for foreign exchange price (shown	under “other reserves”) fluctuation:
				For theyears ended December 31
				2014			2013
	Beginning balance		$		23,028	$		4,440
	Withdrawal in current period
	Compulsory deposits				886			1,859
	Additional deposits				20,889		31,983
	Subtotal				21,775		33,842
	Recovered cash	(			21,206 ) (		15,254 )
	Ending balance		$		23,597	$	23,028
D.	Liability reserve for employee benefit of actuarial value was				as follows:
			December		31,2014	December 31,		2013
	Consolidated balance sheet:
	Defined benefit plans		$	4,859,366		$	4,288,267
	Preferential saving plan for employees				716,858		716,177
	Total		$	5,576,224		$	5,004,444

(A) Defined contribution plans:

Effective from July 1, 2005, the First Group established a funded defined contribution plan pursuant to the Labor Pension Act, which covers the employees with R.O.C. nationality and those who choose to or are required to follow the Labor Pension Act. The contributions are made monthly based on not less than 6% of the employees’ monthly salaries and are deposited in the employee’s individual pension fund account at the Bureau of Labor Insurance. The payment of pension benefits is based on the employee’s individual pension fund accounts and the cumulative profit in such accounts, and the employees can choose to receive such pension benefits monthly or in lump sum. For the years ended December 31, 2015 and 2014, the pension costs of the First Group under the defined contribution plan were $203,707 and $181,417, respectively. For employees working overseas, pension expenses under defined contribution plans are recognized according to the local regulations. For the years ended December 31, 2015 and 2014, pension expenses of current period were $17,212 and $16,382, respectively.

(B) Defined benefit plans

The First Group has a defined benefit pension plan set up in accordance with the Labor Standards Law of the R.O.C., covering all regular employees for their services prior to the implementation of the Labor Pension Act on July 1, 2005 and those employees who choose continuously to be applicable to the Labor Standards Law for the services after

112 • FIRST FINANCIAL HOLDING CO., LTD.

the implementation of the Labor Pension Act. The payment of pension benefits is based on the length of the service period and average monthly compensation in the last six months prior to retirement. Under the defined benefit plan, employees are granted two points for each year of service for the first 15 years and are granted one point for each additional year of service from the 16th year, but are subject to a maximum of 45 points. Monthly contributions made by the First Group to the pension fund that are deposited in the designated pension account at the Bank of Taiwan were based on 2%~10% of the total monthly salaries and wages. Also, the Company would assess the balance in the aforementioned labour pension reserve account by the end of December 31, every year. If the account balance is not enough to pay the pension calculated by the aforementioned method, to the labours expected to be qualified for retirement next year, the Company will make contribution for the deficit by the end of next March. For the aforementioned pension plan, the Group recognised pension costs of $401,575 and $415,003 for the years ended December 31, 2015 and 2014, respectively. The aforementioned expenses are all recognised under “employee benefit expenses within the statement of comprehensive income”.

a. The amounts recognised in the balance sheet are as follows:

Present value of defined benefit obligations Fair value of plan assets ( Net defined benefit liability Unrecognised past service cost Net liability in the balance sheet	December 31,2015 $ 11,415,352 6,556,165 ) $ 4,859,187 $ 179 $ 4,859,366	December 31,2014 $ 10,603,240 ( 6,315,144 ) $ 4,288,096 $ 171 $ 4,288,267

b. Changes in present value of funded obligations are as follows:

Year ended December 31, 2015 Balance at January 1 Current service cost Interest (expense) income Remeasurements: Return on plan assets (including amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Paid pension ( Balance at December 31	Present value of defined benefit obligations Fair value of plan assets Net defined benefit liability $ 10,603,240 ( $ 6,315,144 ) $ 4,288,096 329,632 - 329,632 184,458 ( 112,714 ) 71,744 11,117,330 ( 6,427,858 ) 4,689,472 - ( 56,452 ) ( 56,452 ) 423,931 - 423,931 353,195 - 353,195 777,126 ( 56,452 ) 720,674 - ( 550,959 ) ( 550,959 ) 479,104 ) 479,104 - $ 11,415,352 ( $ 6,556,165 ) $ 4,859,187

2015 ANNUAL REPORT • 113

Year ended December 31, 2014
Balance at January 1
Current service cost
Interest (expense) income
Remeasurements:
Return on plan asset (eccluding
amounts included in interest
income or expense)
Change in financial assumptions
Experience adjustments
(
Pension fund contribution
Paid pension
(
Balance at December 31

Present value
of defined
benefit
obligations
Fair value of
plan assets
Net defined
benefit
liability
$ 10,499,221
( $ 6,054,807 )
$ 4,444,414
341,210
-
341,210
181,478
(
108,185 )
73,293
11,021,909 (
6,162,992 )
4,858,917
- (
35,641 ) (
35,641 )
25,160
-
25,160

1,782 )
- (
1,782 )
23,378 (
35,641 ) (
12,263 )
- (
558,558 ) (
558,558 )

442,047 )
442,047 )
-
$ 10,603,240 ( $ 6,315,144 )
$ 4,288,096

c. The Bank of Taiwan was commissioned to manage the Fund of the Company’s and domestic subsidiaries’ defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitisation products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earning is less than aforementioned rates, government shall make payment for the deficit after authorised by the Regulator. The Company has no right to participate in managing and operating that fund and hence the Company is unable to disclose the classification of plan asset fair value in accordance with IAS 19 paragraph 142. As of December 31, 2015 and 2014, the Company’s and its domestic subsidiaries’ actual return on plan assets were $169,166 and $143,826, respectively.

As of December 31, 2015 and 2014, defined benefit plan recognised through “other comprehensive income remeasurement” of ($720,674) and $12,263, respectively, for net defined benefit liability.

d. The principal actuarial assumptions used were as follows:

Discount rate Future salary increases Future death rate	2015 0.80%~2.05% 1.50%~2.00% 4th~5th	2014
		1.30%~2.05% 1.50%~2.00% 4th~5th

Assumption on future death rate is based on the 4th historical life chart by the Taiwan life insurance enterprises.

114 • FIRST FINANCIAL HOLDING CO., LTD.

Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

December 31, 2015 Discount rate Future salary increases	Impact on thepresent value of the defined benefit obligation Change in actuarial assumption(%) Positive change in actuarial assumption Negative change in actuarial assumption ±0.25% ($ 302,954) $ 316,081 ±0.25% $ 314,932 ($ 303,458)
	Change in actuarial assumption(%) ±0.25% ( ±0.25%

The sensitivity analysis above is based on the condition that only one assumption is changed while all other assumptions remain unchanged. In practice, such an assumption may not occur and correlations may exist for each assumption. The analysis for the impact on the present value of the employee preferential savings plan obligation elects the projected unit credit method for measurement.

e. Expected contributions to the defined benefit pension plan of the Company for the year ended December 31, 2016 amounts to $800,731.
f. As of December 31, 2015, the weighted average duration of the retirement plan is 6.96~17.00 years.
(C) Employee preferential savings plan

The obligation for FCB to pay an allotment for preferential savings of retired and current employees after retirement is in accordance with “First Commercial Bank’s preferential savings plan for retired employees”. Under the employee preferential savings plan, the Group recognized pension cost of $364,077 and $364,548 for the years ended December 31, 2015 and 2014, respectively. Please see Note 4(21)B for details.

a. As of December 31, 2015 and 2014, net liability in the balance sheet amounted to $716,858 and $716,177, respectively.
b. Movement in net defined benefit liabilities are as follows:

Year ended December 31,2015 Balance at January 1 Interest (expense) income Remeasurements: Change in financial ssumptions Experience adjustments Pension fund contribution Paid pension ( Balance at December 31	Present value of defined benefit obligations Fair value of plan assets Net defined benefit liability $ 716,177 $ - $ 716,177 26,739 - 26,739 742,916 - 742,916 2,593 - 2,593 178,587 - 178,587 181,180 - 181,180 - ( 207,238 ) ( 207,238 ) 207,238) 207,238 - $ 716,858 $ - $ 716,858

2015 ANNUAL REPORT • 115

Year ended December 31,2014 Balance at January 1 Interest (expense) income Remeasurements: Experience adjustments Pension fund contribution Paid pension ( Balance at December 31	Present value of defined benefit obligations Fair value of plan assets Net defined benefit liability $ 704,315 $ - $ 704,315 26,310 - 26,310 730,625 - 730,625 191,724 - 191,724 191,724 - 191,724 - ( 206,172 ) ( 206,172 ) 206,172 ) 206,172 - $ 716,177 $ - $ 716,177

c. For the years ended December 31, 2015 and 2014, there are no actuarial loss, recognized in other comprehensive income.
d. The actuarial assumptions of employee preferential savings plan are as follows:

Discount rate Return on capital deposited Annual decreasing ratio of account balance Variable ratio of preferential savings program	2015 4.00% 2.00% 1.00% 50.00%	2014
		4.00% 2.00% 1.00% 50.00%

Assumption on future death rate is based on the 4[th] historical life chart by the Taiwan life insurance enterprises.

The analysis for the impact on the present value of the employee preferential savings plan obligation as a result of changes in the primary actuarial assumption is as follows:

December 31, 2015 Discount rate of employee preferential savings Return rate of capital deposited Annual diminishing rate of account balance	Impact on the present value of the employee preferential savingsplan obligation
	Change in actuarial assumption(%) Positive change in actuarial assumption Negative change in actuarial assumption ±0.25% ($ 10,769) $ 11,092 ±0.25% ($ 84,973) $ 84,974 ±0.25% ($ 10,441) $ 10,713

116 • FIRST FINANCIAL HOLDING CO., LTD.

Impact on the present value of the employee preferential savings plan obligation

Potential future variable rate of employee preferential saving	Change in actuarial assumption(%) ±10.00%	Positive change in actuarial assumption Negative change in actuarial assumption $ 143,372 ($ 143,372)

The sensitivity analysis above is based on the condition that only one assumption is changed while all other assumptions remain unchanged. In practice, such an assumption may not occur and correlations may exist for each assumption. The analysis for the impact on the present value of the employee preferential savings plan obligation adopts the projected unit credit method for measurement.

e. Expected contributions to the employee preferential savings plan of the Company for the year ended December 31, 2016 amounts to $95,979.
E. Movements in reserve for guarantees were as follows:

	Beginning balance Reversal of provision Foreign exchange and other movements Ending balance		For theyears ended December 31 2015 2014 795,376 $ 558,614 3,465 240,000 304 ( 3,238 ) 799,145 $ 795,376 December 31,2015 December 31,2014 $ 18,978,196 $ 43,534,601 25,934,177 22,032,258 867,277 672,949 $ 45,779,650 $ 66,239,808 December 31,2015 December 31,2014 $ 3,661,176 $ 2,111,005 1,303,278 1,791,262 994,051 448,142 $ 5,958,505 $ 4,350,409
			2015 795,376 3,465 304 ( 799,145
		$
		$

(24)	Other financial liabilities
			December 31,2015 $ 18,978,196 25,934,177 867,277 $ 45,779,650
	Received principal of structured notes
	Insurance product liabilities for separate accounts
	Reserve for insurance value of separate account
	Others
	Total

(25)	Other liabilities
			December 31,2015 $ 3,661,176 1,303,278 994,051 $ 5,958,505
	Deposits received
	Collections in advance
	Others
	Total

(26) Equity

A. Common stock

As of December 31, 2015, the Company’s authorized capital and paid-in capital were

2015 ANNUAL REPORT • 117

$200,000,000 and $114,611,064, respectively, consisting of 11,461,106 thousand shares of common stock outstanding with a par value of $10 (in dollars) per share.

After the consent of the Board of Directors on April 24, 2014, the stockholders at their stockholders’ meeting on June 20, 2014 adopted a resolution to capitalize unappropriated earnings amounting to $6,057,456 with the effective date set on August 9, 2014. The capital increase was approved by Explanatory Letter Jin-Guan-Jen-Fa No. 1030025141 of the FSC. After the capital was increased, the Company’s authorized capital and paid-in capital amounted to $100,000,000 and $92,592,548, respectively, consisting of 9,259,255 thousand shares of common stock outstanding with a par value of $10 (in dollars) per share.

After the consent of the Board of Directors on April 30, 2015, the stockholders at their stockholders’ meeting on June 26, 2015 adopted a resolution to capitalize unappropriated earnings amounting to $6,018,516 with the effective date set on August 8, 2015. The capital increase was approved by Explanatory Letter Jin-Guan-Jen-Fa No. 1040025777 of the FSC. After the capital was increased, the Company’s authorized capital and paid-in capital amounted to $100,000,000 and $98,611,064, respectively, consisting of 9,861,106 thousand shares of common stock outstanding with a par value of $10 (in dollars) per share.

On July 24, 2015, the Board of Directors resolved to increase its capital by $23,520,000 by issuing 1.6 billion common stock shares with a premium value of NT$14.7 (par value of NT$10) per share in order to invest in FCB’s subsidiaries and strengthen capital for its business expansions. The capital after the capital increase amounted to $114,611,064. The capital increase date was on September 18, 2015 and capital registration was completed thereto.The capital increase was approved by Explanatory Letter Jin-Guan-Jen-Fa No. 1040024881 of the FSC, and the approval of the registration for changes in capital was pursuant to Shou-Shang-Zi No. 10401208520.

B. Share-based employee compensation

The Company’s share-based employee compensation is in accordance with Article 267 of the Company Act, that is, when a company issues new shares, 15% of such new shares shall be reserved for subscription by employees of the company.

(1) As of December 31, 2015, the First Group’s share-based employee compensation is as follows:

follows:
Type of arrangement Re-Capitalized reserved for employee preemption	Grant date September 11, 2015	Quantity granted 1 (shares) 206,372,976	Vesting conditions
			Vested immediately

(2) Paid-in capital resulting from the share-based payment transaction was $196,054.
C. Capital surplus

As required by the Company Act, additional paid-in capital resulting from the amount received in excess of par value of the issuance of capital stock and donated income may not only be used to offset the accumulated losses but also to issue new shares or distribute cash dividends in proportion to the number of shares being held by original shareholders. In addition, according to the Securities and Exchange Act, the additional paid-in capital used for capital increase shall

118 • FIRST FINANCIAL HOLDING CO., LTD.

not exceed 10% of total issued capital stock. A company should not use the capital surplus to cover its capital loss, unless the surplus reserve is insufficient.

As of December 31, 2015 and 2014, the details on the Company’s capital surplus are as follows:

follows:
Share premium Share-based payments Total	December 31,2015 $ 25,720,167 196,054 $ 25,916,221	December 31,2014
		$ 18,200,167 -
		$ 18,200,167

D. Legal reserve and special reserve
a. Legal reserve

According to the Company Law of the R.O.C., legal reserve can be used only to recover accumulated deficits or to increase capital stock and shall not be used for any other purposes. However, it is permitted that the legal reserve be used to increase capital stock if the balance of the legal reserve has reached twenty five percent of the issued capital stock.

b. Special reserve

Upon the first-time adoption of IFRSs, Jin-Guan-Zheng-Fa Letter No. 1010012865 dated April 6, 2012 requires the Company to reverse special earnings reserve in the proportion of the original recognition when the Company subsequently uses, disposes or reclassifies related assets. If the above related assets belong to investment properties, reversal of land is made when being disposed or reclassified and others are reversed during the periods of being used. In addition, the “trading loss reserve” and “default loss reserve” have been abolished in “Regulations Governing Securities Firms”. The “trading loss reserve” and “default loss reserve” set aside before the end of December 2010 should be transferred to “special earnings reserve” according to Jin-Guan-Zeng-Chung Letter No. 0990073857 dated January 11, 2011. Moreover, the additional special reserve should be transferred to “special earnings reserve” by the net of tax after the annual closing. On the other hand, if the special reserve is insufficient to write-off or to recover the amount that could be written-off or recovered, the insufficiency may be recovered or written-off through the “special earnings reserve”. The special earnings reserve can only be used in offsetting an entity’s deficit or 50% of such reserve can be transferred to capital given that such reserve is equivalent to 50% of the paid-in capital or more. No other purpose is permitted.

(27) Unappropriated earnings & dividends
A. In accordance with the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be used to pay all taxes and offset prior years’ operating losses and then set aside legal reserve and special reserve in accordance with regulations and actual business needs. The remainder, if any, may be combined with prior year accumulated undistributed earnings as distributable stockholders’ dividends and bonuses, which shall be 30% to 100% of the distributable amount. The distribution resolution shall be proposed by the Board of Directors for the approval of the stockholders at their stockholders’ meeting.

Cash dividends and stock dividends are distributed according to the Company’s operational planning. However, cash dividends shall account for at least 10% of the total stock dividends and bonus distributed and the remaining will be accounted for as stock dividends. In case cash dividend per share is less than $0.1, cash dividends and stock dividends are not distributed

2015 ANNUAL REPORT • 119

unless otherwise resolved by the stockholders at their stockholders’ meeting.

B. The appropriation of 2014 and 2013 earnings were resolved by the stockholders at the stockholders’ meeting on June 26, 2015 and June 20, 2014, respectively. Relevant information is as follows:

as follows:
	2014		2013
	Earnings	Dividend per	Earnings	Dividend per
	distribution	share (NT dollar)	distribution	share (NT dollar)
Legal reserve	$ 1,408,493 6,481,478 6,018,516	$ - 0.70 0.65 $ 1.35	$ 1,088,864 $ - 4,326,754 0.50 6,057,456 0.70
Cash dividends on common stock
Stock dividends on common stock
	$ 13,908,487		$ 11,473,074	$ 1.20

C. For information on employee’s compensation (bonus) and directors’ and supervisors’ remuneration, please refer to Note 6(37).

(28) Other equity interest

Exchange difference on translation of foreign financial statements Unrealized gain or loss on available-for-sale financial assets Total Balance, January 1, 2015 $ 2,505,808 $ 5,093,146 $ 7,598,954 Available-for-sale financial assets - Valuation adjustment - 106 106 - Realised - ( 111,514 ) ( 111,514 ) Exchange difference on the financial statements of foreign entities 1,308,355 - 1,308,355 Share of the profit or loss of associates accounted for using the equity method ( 155,065 ) - ( 155,065 ) Effect from income tax - 10,768 10,768 Balance, December 31, 2015 $ 3,659,098 $ 4,992,506 $ 8,651,604 Exchange difference on translation of foreign financial statements Unrealized gain or loss on available-for-sale financial assets Total Balance, January 1, 2014 ( $ 220,040 ) $ 4,371,853 $ 4,151,813 Available-for-sale financial assets - Valuation adjustment - 670,823 670,823 - Realised - 54,746 54,746 Exchange difference on the financial statements of foreign entities 2,579,511 - 2,579,511 Share of the profit or loss of associates accounted for using the equity method 146,337 - 146,337 Effect from income tax - ( 4,276 ) 4,276 Balance, December 31, 2014 $ 2,505,808 $ 5,093,146 $ 7,598,954	Exchange difference on translation of foreign financial statements Unrealized gain or loss on available-for-sale financial assets Total Balance, January 1, 2015 $ 2,505,808 $ 5,093,146 $ 7,598,954 Available-for-sale financial assets - Valuation adjustment - 106 106 - Realised - ( 111,514 ) ( 111,514 ) Exchange difference on the financial statements of foreign entities 1,308,355 - 1,308,355 Share of the profit or loss of associates accounted for using the equity method ( 155,065 ) - ( 155,065 ) Effect from income tax - 10,768 10,768 Balance, December 31, 2015 $ 3,659,098 $ 4,992,506 $ 8,651,604 Exchange difference on translation of foreign financial statements Unrealized gain or loss on available-for-sale financial assets Total Balance, January 1, 2014 ( $ 220,040 ) $ 4,371,853 $ 4,151,813 Available-for-sale financial assets - Valuation adjustment - 670,823 670,823 - Realised - 54,746 54,746 Exchange difference on the financial statements of foreign entities 2,579,511 - 2,579,511 Share of the profit or loss of associates accounted for using the equity method 146,337 - 146,337 Effect from income tax - ( 4,276 ) 4,276 Balance, December 31, 2014 $ 2,505,808 $ 5,093,146 $ 7,598,954	Exchange difference on translation of foreign financial statements Unrealized gain or loss on available-for-sale financial assets Total Balance, January 1, 2015 $ 2,505,808 $ 5,093,146 $ 7,598,954 Available-for-sale financial assets - Valuation adjustment - 106 106 - Realised - ( 111,514 ) ( 111,514 ) Exchange difference on the financial statements of foreign entities 1,308,355 - 1,308,355 Share of the profit or loss of associates accounted for using the equity method ( 155,065 ) - ( 155,065 ) Effect from income tax - 10,768 10,768 Balance, December 31, 2015 $ 3,659,098 $ 4,992,506 $ 8,651,604 Exchange difference on translation of foreign financial statements Unrealized gain or loss on available-for-sale financial assets Total Balance, January 1, 2014 ( $ 220,040 ) $ 4,371,853 $ 4,151,813 Available-for-sale financial assets - Valuation adjustment - 670,823 670,823 - Realised - 54,746 54,746 Exchange difference on the financial statements of foreign entities 2,579,511 - 2,579,511 Share of the profit or loss of associates accounted for using the equity method 146,337 - 146,337 Effect from income tax - ( 4,276 ) 4,276 Balance, December 31, 2014 $ 2,505,808 $ 5,093,146 $ 7,598,954

Exchange difference on translation of foreign financial statements Balance, January 1, 2014 ( $ 220,040 ) Available-for-sale financial assets - Valuation adjustment - - Realised - Exchange difference on the financial statements of foreign entities 2,579,511 Share of the profit or loss of associates accounted for using the equity method 146,337 Effect from income tax - Balance, December 31, 2014 $ 2,505,808		Unrealized gain or loss on available-for-sale financial assets $ 4,371,853 670,823 54,746 - - ( 4,276 ) $ 5,093,146

120 • FIRST FINANCIAL HOLDING CO., LTD.

(29) Net interest income

Net interest income	Net interest income
2015 2014 Interest income Interest income on loans discounted $ 33,792,702 $ 33,383,642 Interest income on deposits and call loans 3,142,397 4,072,259 Interest income on securities investment 4,789,656 4,507,759 Revolving interest income on credit cards 184,064 204,107 Interest income on margin trading and short selling 318,634 345,144 Interest income on repo trade 67,740 68,128 Other interest income 290,370 298,221 Subtotal 42,585,563 42,879,260 Interest expense Interest expense for deposits ( 11,874,258 ) ( 11,824,538 ) Interest expense for deposits of Central Banks and others ( 1,064,519 ) ( 1,497,478 ) Coupon payment on financial bonds ( 710,920 ) ( 655,641 ) Coupon payment on corporate bonds ( 130,210 ) ( 144,500 ) Interest expense of bonds payable under repurchase agreements ( 50,184 ) ( 132,023 ) Interest expense on structured notes ( 150,862 ) ( 243,418 ) Other interest expense ( 152,137 ) ( 104,068 ) Subtotal ( 14,133,090 ) ( 14,601,666 ) Total $ 28,452,473 $ 28,277,594

2015 ANNUAL REPORT • 121

(30) Net service fee and commission income

			2015		2014
Service fee income
Trust business		$	1,825,027	$	1,716,082
Custodian business			490,948		468,897
Insurance agency			2,890,265		1,783,184
Foreign exchange			934,792		971,346
Credit extension			1,132,722		982,922
Credit card			818,548		715,181
Brokerage			824,026		873,861
Management fee and sales income			464,935		514,399
Other service fee income on deposits and
remittances			819,022		861,506
Subtotal			10,200,285		8,887,378
Service fee expense
Trust business	(		133,495 ) (		113,780 )
Custodian business	(		114,204 ) (		100,935 )
Insurance agency	(		467,247 ) (		331,993 )
Foreign exchange	(		29,345 ) (		24,491 )
Credit extension	(		55,264 ) (		54,343 )
Credit card	(		395,560 ) (		329,509 )
Brokerage	(		70,746 ) (		70,753 )
Other service fee expense on deposits and
remittances	(		432,905 ) (		434,056 )
Subtotal	(		1,698,766 ) (		1,459,860 )
Total		$	8,501,519	$	7,427,518

122 • FIRST FINANCIAL HOLDING CO., LTD.

(31) Net income and expenses from insurance operations

			2015		2014
Income on insurance business
Direct premium		$	1,923,812	$	2,098,592
Reinsurance premium expense	(		27,564 ) (		19,945 )
Net change in unearned premium reserve	(		20,251 ) (		16,795 )
Self-retained matured premium income			1,875,997		2,061,852
Expenditure on insurance stabilization fund			9,212,696		12,370,000
Subtotal			11,088,693		14,431,852
Expense on insurance business
Policy claims and payment	(		1,771,188 ) (		8,595,202 )
Claims recovered from reinsurers			18,842		3,314
Self-retained claims and payment	(		1,752,346 ) (		8,591,888 )
Underwriting expenses	(		312 ) (		314 )
Expense on insurance stabilization fund	(		2,385 ) (		2,318 )
Invested insurance goods income	(		9,212,696 ) (		12,370,000 )
Subtotal	(		10,967,739 ) (		20,964,520 )
Total		$	120,954 ($		6,532,668 )

2015 ANNUAL REPORT • 123

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

			2015			2014
Gain and loss from disposal of financial assets at
fair value through profit or loss
Short-term bills	($		67,937 )	($		51,749 )
Bonds	(		69,071 )			65,845
Stocks			160,410			62,785
Beneficiary certificates			13,097			4,444
Interest rate			169,557	(		146,056 )
Exchange rate			345,835			732,950
Options			89,428	(		31,660 )
Futures	(		23,629 )	(		92,318 )
Others			511	(		822 )
Subtotal	(		618,201 )			543,419
Evaluation gain and loss on financial assets at
fair value through profit or loss
Short-term bills	(		4,051 )	(		7 )
Bonds	(		181,613 )			276,972
Stocks	(		16,219 )	(		26,452 )
Beneficiary certificates	(		2,729 )	(		4,564 )
Interest rate			459,893	(		98,626 )
Exchange rate	(		66,626 )			66,639
Options			92,872	(		2,299 )
Futures			1,238			7,413
Credit risk valuation adjustment	(		30,854 )			-
Other			29,809	(		45 )
Subtotal			281,720			219,031
Interest income on financial assets at fair value
through profit or loss			967,021			868,750
Interest expense on financial liabilities at fair
value through profit or loss	(		748,560 )	(		328,667 )
Coupon payment and bonus income on financial
assets at fair value through profit or loss			33,546			70,201
Total		$	1,151,928		$	1,372,734

Net income on exchange rate instruments are realized and unrealized gain and loss on spot and forward exchange contracts, FX options and FX futures. Financial assets and liabilities denominated in foreign currencies that are not designed for hedging and are measured at fair value through profit and loss, the translation gains and losses are also included under the net income of exchange rate instruments.

Interest-linked instruments include interest rate swaps, money market instruments, interest-linked options and other interest related instruments.

When the First Group designates a financial instrument to be measured at fair value through profit and loss, any change in fair value of the derivative managed with the financial instrument is recognized in “gain and loss on financial assets and liabilities at fair value through profit and loss”.

124 • FIRST FINANCIAL HOLDING CO., LTD.

(33) Realized gains or losses on available-for-sale financial assets

	2015 2014 Dividends income $ 423,594 $ 454,380 Gain on disposal Bonds 184,687 76,447 Securities 150,856 244,995 Beneficiary certificate 5,298 9,417 Subtotal 340,841 330,859 Loss on disposal Bonds ( 15,418 ) ( 3,344 ) Securities ( 201,378 ) ( 356,214 ) Beneficiary certificate ( 6,184 ) ( 9,097 ) Subtotal ( 222,980 ) ( 368,655 ) Total $ 541,455 $ 416,584 Impairment losses of assets 2015 2014 Gain on reversal (Loss) of impairment on other financial assets $ - $ 52,209 Gain on reversal (Loss) of impairment on foreclosed collaterals and other 5,353 10,908 Impairment losses of available-for-sale financial assets ( 15,579 ) ( 68,627 ) ($ 10,226 ) ($ 5,510 ) Net other non-interest income 2015 2014 Net gain (loss) on sale of foreclosed collaterals $ 54,898 ($ 5,789 ) Income from sale of non-performing loans 224,717 295,895 Net income and losses from rent 169,041 191,047 Gain on disposal of property 35,072 2,266 Loss on retired assets ( 1,456 ) ( 2,255 ) Net gain on financial assets carried at cost 321,136 293,491 Net change in provisions for foreign exchange price fluctuation ( 569 ) ( 18,589 ) Other net income and losses 22,671 156,474 Total $ 825,510 $ 912,540 Net change in provisions for insurance liabilities 2015 2014 Net change in claim reserve ($ 9,957 ) $ 8,450 Net change in liabilities reserve ( 527,218 ) ( 7,106,994 ) Net change in insufficient premium reserve ( 2,424 ) ( 2,175 ) Total ($ 539,599 ) ($ 7,100,719 )	2015 2014 Dividends income $ 423,594 $ 454,380 Gain on disposal Bonds 184,687 76,447 Securities 150,856 244,995 Beneficiary certificate 5,298 9,417 Subtotal 340,841 330,859 Loss on disposal Bonds ( 15,418 ) ( 3,344 ) Securities ( 201,378 ) ( 356,214 ) Beneficiary certificate ( 6,184 ) ( 9,097 ) Subtotal ( 222,980 ) ( 368,655 ) Total $ 541,455 $ 416,584 Impairment losses of assets 2015 2014 Gain on reversal (Loss) of impairment on other financial assets $ - $ 52,209 Gain on reversal (Loss) of impairment on foreclosed collaterals and other 5,353 10,908 Impairment losses of available-for-sale financial assets ( 15,579 ) ( 68,627 ) ($ 10,226 ) ($ 5,510 ) Net other non-interest income 2015 2014 Net gain (loss) on sale of foreclosed collaterals $ 54,898 ($ 5,789 ) Income from sale of non-performing loans 224,717 295,895 Net income and losses from rent 169,041 191,047 Gain on disposal of property 35,072 2,266 Loss on retired assets ( 1,456 ) ( 2,255 ) Net gain on financial assets carried at cost 321,136 293,491 Net change in provisions for foreign exchange price fluctuation ( 569 ) ( 18,589 ) Other net income and losses 22,671 156,474 Total $ 825,510 $ 912,540 Net change in provisions for insurance liabilities 2015 2014 Net change in claim reserve ($ 9,957 ) $ 8,450 Net change in liabilities reserve ( 527,218 ) ( 7,106,994 ) Net change in insufficient premium reserve ( 2,424 ) ( 2,175 ) Total ($ 539,599 ) ($ 7,100,719 )

(34)	Impairment losses of assets
	Gain on reversal (Loss) of impairment on other financial assets Gain on reversal (Loss) of impairment on foreclosed collaterals and other Impairment losses of available-for-sale financial assets ( (
(35)	Net other non-interest income

(36)	Net change in provisions for insurance liabilities

2015 ANNUAL REPORT • 125

(37) Employee benefit expense

Salary expense Employee stock options Labor and health insurance enpense Pension expense Other employee benefit Total	2015 $ 12,231,811 196,054 651,507 986,571 247,413 $ 14,313,356	2014
		$ 11,980,706 - 608,257 974,633 212,686
		$ 13,776,282

A. The calculation for the employee benefit expense is based on the number of employees of 9,201 and 9,031 for the years of 2015 and 2014, respectively. (Pension expenses include preferential interest deposit for retired employees amounting to $364,077 and $364,548 for the years of 2015 and 2014, repectively.)
B. In accordance with the Company’s Articles of Incorporation, upon the Company’s distribution of earnings, employees’ bonus to be distributed shall be 0.02% to 0.16% and directors’ and supervisors’ remuneration shall not exceed 1%.

However, in accordance with the Company Act amended on May 20, 2015, a company shall distribute employee compensation, based on the profit of the current year, in a fixed amount or a fixed ratio. However, the company’s accumated losses shall be covered first. A company may, by a resolution adopted by a majority vote at a meeting of board of directors attended by two-thirds of the total number of directors, have the profit distributable as employees' compensation distributed in the form of shares or in cash; and in addition thereto such distribution shall be reported to the annual shareholders' meeting. Qualification requirements of employees, including the employees of subsidiaries of the company meeting certain specific requirements, entitled to receive aforementioned stock or cash may be specified in the Articles of Incorporation.

C. As of December 31, 2015 and 2014, the Company’s estimated employees’ compensation (bonus) and directors’ and supervisors’ remuneration were $167,636 and $133,081, respectively. The aforementioned amounts are accounted for under employee benefit expenses.

For 2015, after considering 2015’s profit of the current year (i.e. net income before tax less distributed employees’ compensation and directors’ and supervisors’ remuneration) less accumulated losses, the balance applied a rate of 0.02% to 0.15% to determine employees’ compensation and applied a rate that did not exceed 1% to determine directors’ and supervisors’ remuneration.

For 2014’s income after tax, after considering factors such as legal reserve 0.02% to 0.16% of employees’ bonus and a percentage not exceeding 1% applied to estimate directors’ and supervisors’ remuneration. Where the accrued amounts for employees’ bonus and directors’ and supervisors’ remuneration are different from the actual distributed amounts as resolved by the stockholders at their shareholders’ meeting subsequently, the differences are accounted for as changes in estimates.

D. The actual distributed amount of employees’ bonus and directors’ and supervisors’ remuneration for 2014 and 2013 resolved at the shareholders' annual meeting in 2015 and 2014 were $134,167 and $102,241, respectively. As compared to the recognised amount in the 2014 and 2013 financial statement, this was an increase of $1,086 and a decrease of $1,732, respectively. The amounts are due to estimated differences and are treated as a change in accounting estimate, where differences are recognised as profit or loss in 2015 and 2014.

126 • FIRST FINANCIAL HOLDING CO., LTD.

E. Information about employees’ compensation (bonus) and directors’ and supervisors’ remuneration of the Company as resolved by the board of directors and shareholders’ meeting will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(38) Depreciation and amortization

	Depreciation Amortization Total	2015 $ 838,049 234,222 $ 1,072,271
(39)	Business and administrative expenses
	Taxes Rental Insurance premium Post and electricity Water, electricity and gas Stationery Maintenance Others Total	2015 $ 2,344,020 1,097,491 574,360 311,367 186,653 126,665 230,472 1,637,279 $ 6,508,307
(40)	Income tax

	A. Income tax expense
	(A) Current tax Current tax expense Adjustments for over provisions of prior years’ income tax expense and others Total current tax Origination and reversal of temporary differences ( Income tax expense (B)The tax under other comprehensive income: Changes in fair value of available-for- sale financial assets Remeasurement of defined benefit obligations

		2015 $ 3,014,447 75,146 3,089,593 76,081 ) ( $ 3,013,512

2015 ANNUAL REPORT • 127

B. Details of reconciliation between income tax expense and accounting profit

Income tax from pretax income calculated at regulated tax rate Adjustments of items not recognized under relevant regulations Adjustments for over provisions of prior years’ income tax expense and others Adjusted effects on income tax exemption and other income tax Income tax expense	2015 2014 $ 3,225,876 $ 2,802,118 5,207 ( 34,153 ) 75,146 54,125 ( 292,717 ) ( 416,691 ) $ 3,013,512 $ 2,405,399

C. Amounts of deferred tax assets or liabilities as a result of temporary difference, loss carryforward and investment tax credit are as follows:

Deferred tax assets: Temporary differences The excess of allowance for doubtful accounts Impairment loss of foreclosed assets Unappropriated employee benefit liabilities reserve Others Loss carryforwards Subtotal Deferred tax liabilities: Temporary differences Increment tax on land value Unrealized gain of avaviable-for-sale assets Others Subtotal Total (		2015

128 • FIRST FINANCIAL HOLDING CO., LTD.

Deferred tax assets: Temporary differences The excess of allowance for doubtful accounts Impairment loss of foreclosed assets Unappropriated employee benefit liabilities reserve Others Loss carryforwards Subtotal Deferred tax liabilities: Temporary differences Increment tax on land value Unrealized gain of avaviable-for-sale assets Others Subtotal Total (		2014	2014

2015 ANNUAL REPORT • 129

D. Expiration dates of unused net operating loss carryfoward and amounts of unrecognised deferred tax assets are as follows:

		December 31,2015	December 31,2015
Year incurred	Amount filed/ assessed	Unused amount	Unrecognised deferred tax assets	Usable untilyear
2007 2008 2009 2010 2011 2012 2013 2014	$ 122,530 629,211 258,853 139,289 204,350 161,036 89,816 110,495	$ 122,530 $ 122,530 629,211 629,211 258,853 258,853 139,289 139,289 204,350 204,350 161,036 161,036 89,816 89,816 110,495 110,495 December 31,2014		2017 2018 2019 2020 2021 2022 2023 2024
Year incurred	Amount filed/ assessed	Unused amount	Unrecognised deferred tax assets	Usable untilyear
2007 2008 2009 2010 2011 2012 2013	$ 122,530 629,211 258,853 139,289 204,350 161,036 89,816	$ 122,530 629,211 258,853 139,289 204,350 161,036 89,816	$ 122,530 629,211 258,853 139,289 204,350 161,036 89,816	2017 2018 2019 2020 2021 2022 2023

Note: The amount is an estimation on financial statements.

E. As of December 31, 2015, information on the First Group’s income tax returns assessed by the Tax Authority were as follows:
(A) The Company’s income tax returns through 2009 have been assessed and approved by the Tax Authority. The Company has recognized the income tax expense relating to the additional income tax payable.
(B) FCB’s filed income tax returns through 2009 have been assessed and approved by the Tax Authority. However, FCB disagreed with the assessments related to “recognition of revenue from overseas branches and investment tax credit for personnel training” in 2009, and had filed for a reassessment for the income tax returns thereof in accordance with regulations. The case is currently still under assessment. As for 2008’s “allocation of Head Office’s management fees to Offshore Banking Unit”, which had been filed for reassessment, a portion was resolved to be retroactively recognised by the Ministry of Finance, R.O.C. after reassessment; for 2003’s “available loss deduction”, where the assessed amount disagreed with the actual amount, after the Ministry of Finance, R.O.C. maintained its original position for the administrative appeal on January 6, 2016, FCB decided to cease further litigation for its 2003 administrative appeal; however, because the result involves the use of loss deductions for subsequent years, thus for the year which 2003’s loss deduction was exhausted (i.e. year of 2012), FCB has filed to rectify the loss deduction amount for that year.
(C) FS’s filed income tax returns through 2009 have been assessed and approved by the Tax Authority. However, the income tax return for 2009 was assessed by the Tax Authority for

130 • FIRST FINANCIAL HOLDING CO., LTD.

an additional $19,848. In accordance with Article 35 of the Tax Collection Act, FS has filed for a reassessment on the related revenues and expenses included in the calculation of tax exemption allocations assessed by the Tax Authority.

(D) FVC’s filed income tax returns through 2009 have been assessed and approved by the Tax Authority, among which a tax refund of $5,758 for 2008 was assessed by the Tax Authority. Accordingly, FVC has recognised an estimate in 2015.
(E) The Tax Authority has assessed income tax returns of FALI and FCMI through 2012 and 2013.
(F) The Tax Authority has assessed income tax returns of FSIT, FFAM, FVC, FFMC, and FPCIA through 2009.
(G) Income tax returns of FCBL and FIA through 2013 have been respectively assessed and approved by the Tax Authority.
F. The balance of unappropriated earnings were as follows:

As of December 31, 2015 and 2014, the balance of unappropriated earnings is generated on and after January 1, 1998.

G. As of December 31, 2015 and 2014, the balance of the imputation tax credit account was $972,534 and $1,180,440, respectively. The creditable tax rate was 12.00% for 2014 and is estimated to be 4.12% for 2015.
(41) Earnings per share

Basic

Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders of the parent by the weighted average number of ordinary shares in issue during the period.

Gain and loss attributable to the common stock of the First Group (in thousand dollars) Outstanding weighted average common stock (in thousand of shares) Earnings per share (in dollars)	2015 $ 16,006,088 10,321,380 1.55	2014
		$ 14,084,936 9,861,106 1.43

Note: Effects on earnings transferred to capital increase in 2014 have been retrospectively adjusted. Also, basic earnings per share and diluted earnings per share for the years ended December 31, 2015 and 2014 are the same.

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2015 ANNUAL REPORT • 131

7. Related party transactions

(1) Details of the related parties

Details of the related parties

Names of related parties
Ministry of Finance, R.O.C.
Bank of Taiwan
Jin Yuan Investment Co.,Ltd
Global Investment Co.,Ltd
FCBL Capital International (B.V.I.) Co., Ltd
FCB International Leasing Co., Ltd
First Financial AMC Capital International
(B.V.I) Ltd.
First Financial of Leasing(Chengda)Ltd.
East-Asia Real Estate Management Co., Ltd.
(“EAREM”)
Mutual Funds managed by First Securities
Investment Trust Co., Ltd. (“MF”)
First Commercial Bank Education Foundation
(“ FCBEF”)
Waterland Financial Holdings Co., Ltd.
Taiwan Asset Management Corporation
(TAMCO)
Others

Relationship with the Company

Director of Company
Director of Company
Director of Company
Director of Company
Subsidiary of FCBL
Subsidiary of FCBL Capital International
(B.V.I.) Co., Ltd
Subsidiary of First Financial AMC (“FFAMC”)
Subsidiary of FFAM Capital International
(B.V.I.) Co., Ltd
FCB’s investee accounted for under the equity
method
Mutual funds managed by FSIT - subsidiary of
the Company.
More than one-third of total fund was donated
by FCB
FCB is one of its Directors
The Company is one of its Directors
Spouses and relatives of the First Group’s
directors, supervisors, managers, chairman
and president and substantive related parties.

(2) Major balances and transactions with related parties:

A. Call loans to banks

Call loans to banks
Other related parties Bank of Taiwan Other related parties Bank of Taiwan		December 31,2015
	Highest balance	Endingbalance Annual interest rate(%) $ 500,000 0.23~0.43 December 31,2014	Annual interest rate(%)
	$ 15,000,000
	Highest balance	Endingbalance $ -	Annual interest rate(%)
	$ 15,000,000		0.388~0.395

For the years ended December 31, 2015 and 2014, the interest income on above related parties were $1,696 and $9,129, respectively.

Terms and conditions of the related party transactions are not significantly different from those of transactions with third parties.

132 • FIRST FINANCIAL HOLDING CO., LTD.

B. Call loans from banks

Call loans from banks
Other related parties Bank of Taiwan Other related parties Bank of Taiwan		December 31,2015 Endingbalance Annual interest rate(%) $ - 0.30~0.32 December 31,2014 Ending balance Annual interest rate (%) $ - 0.388
	Highest balance
	$ 10,000,000
	Highestbalance	Ending balance $ -
	$ 3,800,000
For the years ended December 31, 2015 and 2014, the interest			income on above related
parties were $920 and $40, respectively.

Terms and conditions of the related party transactions are not significantly different from those of transactions with third parties.

C. Due from other banks

Other related parties Bank of Taiwan Other related parties Bank of Taiwan	December 31, 2015	December 31, 2015
	Ending balance	Percentage (%) 0.90
	$ 259,520
	December 31, 2014
	Ending balance	Percentage (%) 0.66
	$ 225,695

Terms and conditions of the related party transactions are not significantly different from those of transactions with third parties.

D. Deposits

Other related parties Others (Note) Other related parties Others (Note)	December 31, 2015	December 31, 2015
	Ending balance	Percentage (%) 0.08
	$ 1,512,142
	December 31, 2014
	Ending balance	Percentage (%) 0.07
	$ 1,291,115
For the years ended December 31, 2015	and 2014, the interest income on above related
parties were $27,014and $44,725, respectively.

Note: Staff savings accounts of FCB are provided to the above related parties with interest rate of 13% p.a. and limited to a balance of $480. Deposits exceeding $480 is calculated at demand savings deposit rate. Interest rates for others are the same as those offered to other customers.

2015 ANNUAL REPORT • 133

Terms Differences	Compared to Non-Related Parties	None	None	None	Terms Differences	Compared to Non-Related Parties	None	None	None
	Collateral	None	Real estate	Certificates of deposits of FCB�real estate� land		Collateral	None	Real estate	Certificates of deposits of FCB�real estate
Status of performance	Non-performing loans	-	-	-	Status of performance	Non-performing loans	-	-	-
	Performing loans	13,333	473,511	100,791		Performing loans	8,976	442,588	30,577
	Ending balance	13,333	473,511	100,791		Ending balance	8,976	442,588	30,577
	Maximum balance for current period	14,879	508,995	101,187		Maximum balance for current period	9,947	516,204	30,585
Number or name of related party (Note 1)		31	124	5	Number or name of related party (Note 1)		23	121	4
Category of related party (Note 2)		Other related parties	Other related parties	Other related parties	Category of related party (Note 2)		Other related parties	Other related parties	Other related parties
Items		Consumer loans	Residential mortgage loans	Other loans(Note)	Items		Consumer loans	Residential mortgage loans	Other loans(Note)

134 • FIRST FINANCIAL HOLDING CO., LTD.

December 31, 2015	Loss on Period-end balance	Title of derivative valuation for	instrument Nominal current Category of	Name of related party contract Contract period principal period related party Item Balance	Other related parties A mutual fund managed by FSIT Foreign exchange contracts 2015/12/9-2016/2/26 $ 1,348,080 ($ 5,664) Valuation adjustment for trading Liabilities – currency exchange rate $ 5,664	Other related parties Bank of Taiwan Foreign exchange contracts 2015/4/24-2016/4/25 986,400 61,619 Valuation adjustment for trading Assets– currency exchange rate 61,619	December 31, 2014	Gain (Loss) Period-end balance	Title of derivative on valuation	instrument Nominal for current Category of	Name of related party contract Contract period principal period related party Item Balance	Other related parties A mutual fund managed by FSIT Foreign exchange contracts 2014/10/31~2015/3/30 $ 4,310,287 $ 89,032 Valuation adjustment for trading Assets – currency exchange rate $ 89,032	Other related parties Bank of Taiwan Foreign exchange contracts 2014/12/30~2015/4/7 316,700 605 Valuation adjustment for trading Assets– currency exchange rate 605	Note 1: The evaluation gain and loss are those gain and loss of financial derivatives measured by fair value at the ending period as of the	balance sheet date in the year.	Note 2: The balances in the balance sheet are the ending balances of financial derivative assets or liabilities of financial assets or liabilities at	fair value through profit or loss.

2015 ANNUAL REPORT • 135

G. Financial assets at fair value through profit or loss

Other related parties Mutual funds managed by FSIT Other related parties Mutual funds managed by FSIT	December 31, 2015 Ending balance Percentage (%) $ 216 - December 31, 2014 Ending balance Percentage (%) $ 219 -	December 31, 2015 Ending balance Percentage (%) $ 216 - December 31, 2014 Ending balance Percentage (%) $ 219 -
	Ending balance
	$ 219

H. Available-for-sale financial assets
Other related parties Mutual funds managed by FSIT Other related parties Mutual funds managed by FSIT	December 31, 2015 Ending balance Percentage (%) $ 248,937 0.26 December 31, 2014 Ending balance Percentage (%) $ 202,364 0.24
	Ending balance
	$ 202,364

I. Management fee and marketing service fee receivable
Other related parties Mutual funds managed by FSIT Other related parties Mutual funds managed by FSIT	December 31, 2015 Ending balance Percentage (%) $ 37,198 0.05 December 31, 2014 Ending balance Percentage (%) $ 41,024 0.06
	Ending balance
	$ 41,024

Terms and conditions of the related party transactions are not significantly different from those of transactions with third parties.

J. Handling charges income and other income

ing charges income and other income
Other related parties Mutual funds managed by FSIT (Note) Others	2015	2014
	$ 458,245 3,479	$ 511,548 2,926
	$ 461,724	$ 514,474

Note: The above amounts represent income from management charges and trust handling charges.

The above amounts are collected based on the contracts signed among the related parties.

136 • FIRST FINANCIAL HOLDING CO., LTD.

K. Rent expense and other expense

Other related parties Others	2015	2014
	$ 9,349	$ 9,266

L. Information on salaries and remunerations to the Company’s directors, supervisors, president, vice-president and others:

Salaries and other short-term employee benefits Post-employment benefits Severance pay Other long-term employee benefits Share-based payments Total	2015	2014
	$ 416,319 7,067 2,663 227 2,238	$ 365,718 16,165 219 2,302 -
	$ 428,514	$ 384,404

8. Pledged assets

Pledged assets provided by the First Group as of December 31, 2015 and 2014 were as follows:

Items Available-for-sale financial assets – bonds Held-to-maturity financial assets Refundable deposits Other assets-time deposits Operating guarantee deposits Property and equipment Land Buildings Property investments	December 31, 2015 $ 2,089,264 132,520 658,785 11,500 1,011,081 92,073 46,317 348,000	Purpose of Pledge
		Guarantees deposited with the court for the provisional seizure, guarantees for trust business reserves, foreign branch’s guarantee deposited with Federal Reserve Bank and Federal Credit Bank Deposits with Federal Deposit Insurance Corporation (FDIC) and Federal Reserve Bank (FRB) Operating guarantee deposits of consignment trading business, performance bond of discretionary business, operating guarantee deposits of offshore funds business, and so on. Guarantees for line of settlement advance. Operating guarantee deposits for securities, fully consigned businesses and offshore funds, and performance guarantee deposits for insurances. Overdraft loan guarantee. There was no overdraft loan. The pledge for property investment. However, the balance of borrowing was $0.
	$ 4,389,540

2015 ANNUAL REPORT • 137

Items Available-for-sale financial assets – bonds Held-to-maturity financial assets Refundable deposits Other assets-time deposits Operating guarantee deposits Property and equipment Land Buildings Property investments	December 31, 2014 $ 1,959,883 88,978 688,959 11,500 1,133,138 92,073 46,317 572,213	Purpose of Pledge
		Guarantees deposited with the court for the provisional seizure, guarantees for trust business reserves, foreign branch’s guarantee deposited with Federal Reserve Bank and Federal Credit Bank Deposits with Federal Deposit Insurance Corporation (FDIC) and Federal Reserve Bank (FRB) Operating guarantee deposits of consignment trading business, performance bond of discretionary business, operating guarantee deposits of offshore funds business, and so on. Guarantees for line of settlement advance. Operating guarantee deposits for securities, fully consigned businesses and offshore funds, and performance guarantee deposits for insurances. Overdraft loan guarantee. There was no overdraft loan. The pledge for property investment. However, the balance of borrowing was $0.
	$ 4,593,061

Significant contingent liabilities and unrecognized contractual commitments
(1) FCB has the following commitments as of December 31, 2015 and 2014:

Unused loan commitments
Unused credit commitments for credit cards
Unused letters of credit issued
Guarantees
Collections receivable for customers
Collections payable for customers
Travelers’ checks consignment-in
Guaranteed notes payable
Trust assets
Customers’ securities under custody
Book-entry for government bonds under management
Depository for short-term marketable securities under management

December 31, 2015

$ 119,931,228
64,096,707
24,161,021
86,407,220
129,911,417
260,002,074
371,308
62,167,809
789,030,654
422,405,204
214,150,700
86,991,220

138 • FIRST FINANCIAL HOLDING CO., LTD.

December 31, 2014

$ 135,195,659
60,425,196
31,040,109
79,865,265
140,823,599
186,527,417
373,388
58,151,193
706,940,964
361,215,423
162,378,800
75,172,132

(2) Due to the collapse of the Tung Xin building caused by an earthquake on September 21, 1999, the residents filed a civil lawsuit for compensation of tort damages against Hong Cheng Building Co., Ltd., Hong Ku Construction Co., Ltd., (including their directors and supervisors) and FCB. The court of third instance dismissed the appeal on October 2, 2014. As for criminal liability, the Supreme Court has ruled that the employees of FCB not guilty. However, due to a portion of the residents transferring their claims on compensation concerning tort damages against FCB to the Department of Urban Development, Taipei City Government, on September 19, 2014, the Department of Urban Development, Taipei City Government filed a civil lawsuit against FCB.

Besides, the residents of adjacent building, Hao Men Shi Jia, which was crushed due to the collapse of the Tung Xin building, also filed a civil lawsuit for compensation of tort damages against the Bank. The proceeding of the lawsuit was stayed in 2001, and reviewed under retrial of the Taipei District Court on July 29, 2014.

(3) As of December 31, 2015, FS’s contracted but yet settled balance for purchased property, plant and equipment and intangible assets was $10,291.
Significant losses from disasters:

None.

Significant subsequent events:

None.

12. Others:

(1)Fair value and hierarchy information on financial instruments

A.Scope

Fair value is the amount for which an asset could be exchanged or a liability can be settled between knowledgeable, willing parties in an arm’s length transaction. Financial instruments are initially recognised by fair value, which is transaction price in most cases. Subsequent recognitions are measured by fair value except that certain financial instruments are recognised by amortised cost. The best evidence of fair value is the quoted market price in an active

2015 ANNUAL REPORT • 139

market. If the market in which financial instruments traded is not active, the Company then adopts valuation technique or takes reference to Bloomberg, Reuters or the fair value of financial instrument from counterparties.

B.Fair value information of financial instruments

The fair value information of financial instruments measured at fair value is provided in Note 12(1) C.

Except for those listed in the table below, the carrying amount of some of the Company’s financial instruments (e.g. cash and cash equivalents, due from Central Bank and call loans to other banks, receivables, loans discounted, refundable deposits, deposits from the Central Bank and banks, due to Central Bank and other banks, bills and bonds under repurchase agreements, payables, deposits and remittances, bonds payable, other financial liabilities and guarantee deposits) is approximate to their fair value. (Please refer to Note 12 (1)D)

		December 31, 2015	December 31, 2015	December 31, 2015
Financial assets Held-to-maturity financial assets Bond instruments without active market Non-financial assets Investment property	Book value	Fair value
		Level 1	Level 2	Level 3
	356,817,150 10,281,880 9,808,721	3,770,480 - -	353,951,748 10,249,201 19,751,121	- - -

		December 31, 2014
Financial assets Held-to-maturity financial assets Bond instruments without active market Non-financial assets Investment property	Book value	Fair value
		Level 1	Level 2	Level 3
	307,625,308 23,274,082 9,347,666	1,683,624 - -	306,192,871 23,269,299 17,914,898	- - -

C.Financial instruments measured at fair value
(A)Determination of the fair value

The quoted market price is used as the fair value when the financial instruments have an active market, such as market prices provided by the Stock Exchange Corporation, Bloomberg and Reuters are all foundation of fair value for listed equity securities and debt instruments with a quoted market price in an active market.

If the market quotation from Stock Exchange Corporation, commission merchants, underwriters or pricing service institutions can be frequently obtained on time, and the price

140 • FIRST FINANCIAL HOLDING CO., LTD.

represents the actual and frequent transactions at arm’s length, then a financial instrument is deemed to have an active market. If the above condition is not met, the market is deemed inactive. In general, significant price variance between the purchase price and selling price or significantly increasing price variance are both indicators of an inactive market.

In addition to above financial instruments with an active market, other financial instruments at fair value are assessed by evaluation technique with reference to other financial instruments at fair value with similar conditions and characteristics in actual practice, cash flow discounting method and other evaluation technique, including market information obtained by exercising the model at balance sheet date (such as yield curve used in OTC and the Taipei Interbank Offered Rate (Taibor) price curve).

When a financial instrument has no standardized evaluation and with less complexity involved, such as interest rate swap, currency swap and options. The First Group usually adopts the valuation generally accepted by market users. The inputs used in these financial instruments valuation usually are observable information in the market.

For financial instruments with higher complexity, the fair value is assessed through the valuation model developed by general valuation methods and techniques generally accepted by competitors. These kinds of valuation models are usually applicable for derivative instruments, debt instruments with no quoted market price (including debt instrument of embedded derivatives) or other debt instruments with low market liquidity. Certain inputs used in these valuation models are not observable in the market, and the First Group needs to make appropriate estimates based on the assumptions.

Valuation on derivative instrument is based on the valuation model generally accepted by market users, such as discounting method and option pricing model. FX contract usually is valuated based on current FX rate. Structured-interest derivative contract is valuated based on option pricing model.

The output of the evaluation model is always an estimate, and the valuation technique may not reflect all the relevant factors of the financial instruments held by the First Group. As a result, the estimate generated by valuation model will be slightly adjusted based on additional inputs, such as model risk, liquidity risk or credit risk of counterparties. According to the First Group’s valuation model management and other related controlling procedures, the adjustment made is adequate and necessary and the balance sheet is believed to present fairly, in all material aspects, the fair value of financial instruments. The pricing information and input are prudently evaluated in the valuation process, and shall be timely adjusted by market condition.

(B)Valuation methods by financial instruments of the First Group are shown by types and nature as follows:
a.NTD Central Government Bond: the latest transaction price announced by Electronic Bond Trading System of GTSM or SEC or the yield rates across different contract lengths bulletined by OTC are used.
b.NTD corporate bonds & financial bonds: fair value of different maturities announced by GTSM is adopted. If the fair value is not available, yield rate curve of the corresponding credit rating provided by GTSM is used to compute the theory price. Securitization

2015 ANNUAL REPORT • 141

instruments: future cash flows discounted by market interest rate or the quotations provided by the counterparties are adopted for valuation.

c.Securitization instruments: price quoted from bloomberg.
d.Convertible corporate bond: closing prices bulletined by the GTSM or the latest closing prices is adopted as valuation standard.
e.NTD short-term bills: valuation is based by TAIBOR curve rate from The Bankers Association of the Republic of China, discounted from future cash flows.
f.Foreign securities: prices quoted from Bloomberg, Reuters, or counterparties are adopted.
g.Listed stocks: the closing price listed in TSE or OTC is adopted.
h.Beneficiary certificates: closed-end funds use the closing price in an active market as the fair value and open-ended funds use the net asset value of the a fund as the fair value.
i.Financial bonds designated at fair value issued by the Subsidiary, FCB: valuation is based by TAIBOR curve rate from The Bankers Association of the Republic of China, discounted from future cash flows.
j.Derivatives:
(a)Call (put) warrant, stock index futures, and stock index futures options: prices quoted from an active market are deemed the fair value.
(b)Forward FX, currency swap, interest swap and cross currency swap: discounted future cash flows is adopted.
(c)Options: Black-Scholes model is mainly adopted for valuation.
(d)Certain derivatives use the quoted price from counterparties.
(C) Adjustments for credit risks

Adjustments for credit risks are mainly credit valuation adjustments and debit valuation adjustments. Definition is as follows:

a. Credit valuation adjustment (CVA) is a measurement to derivatives which are not transacted through the Stock Exchange Market, or the over the counter (OTC) derivatives. CVA reflects fair value of counterparty default and the possibility of not collecting the full market value.
b. Debit valuation adjustment (DVA) is a measurement to derivatives which are not transacted through the Stock Exchange Market, or the over the counter (OTC) derivatives. DVA is the fair value of a derivative reflecting the default of the company and the possibility of the company unable to pay the full market value.

CVA is calculated by applying loss given default (LGD) to exposure at default (EAD), along with the consideration of counterparty’s probability of default (PD) (under the

142 • FIRST FINANCIAL HOLDING CO., LTD.

condition of the Group does not default). On the other hand, DVA is calculated by applying the Group’s estimated loss to the risk exposure amount, along with the consideration of the Group’s PD (under the condition of the counterparty does not default).

D.Fair value of financial instruments not measured at fair value through income statement

The methods and assumption used by financial instruments not measured at fair value through income statement of the First Group are as follows:

(A)The book value of cash and cash equivalents, due from Central Bank and call loans to banks, securities purchased under resell agreements, receivables, refundable deposits, due to Central Bank and banks, fund borrowed from Central Bank and banks, securities sold under repurchase agreements, commercial papers issued, payables, other borrowings, deposits, and other financial liabilities which have a short maturity period will be considered as their fair value.
(B)Loans discounted (including overdue receivables and assumed receivables from leasing subsidiary): Considering the nature of the financial industry, the fair value is determined by the market rate (market price). The effective interest rates of loans are generally based on the benchmark interest rate plus or minus certain adjustment (equivalent to floating rate) to reflect the market interest rate. As a result, it is reasonable to assume that the carrying amount, after adjustments of estimated recoverability, approximates the fair value. Fair values for medium-term or long-term loans with fixed interest rates shall be estimated using their discounted values of expected future cash flows. However, as such loans account for only a small portion of all loans, book value was used to estimate the fair value.
(C)Held-to-maturity financial assets: When there is a quoted market price available in an active market, the fair value is determined using the market price. If there is no quoted market price for reference, a valuation technique or quoted price offered by the counterparties will be adopted to measure the fair value.
a. NTD Central Government Bond: fair value of bonds of different maturities bulletined by Over-The-Counter (hereinafter OTC).
b. NTD corporate bonds, financial bonds, government bonds and beneficiary bond certificates: future cash flow discounted by the yield curve of OTC is used to measure present valuation.
c. NTD and US short-term bills and NTD beneficiary securities: valuation is based by TAIBOR curve rate from The Bankers Association of the Republic of China, discounted from future cash flows.
(D)Deposits: Considering the nature of the financial industry, the fair value is determined by the market rate (market price) while the deposit transactions usually mature within one year. As a result, the carrying amount is a reasonable basis to estimate the fair value. Fair values of the long-term fixed rate deposits shall be estimated using discounted expected future cash flows. Additionally, as the maturities are less than three years, it is reasonable to use the carrying amount to estimate the fair value.

2015 ANNUAL REPORT • 143

(E)Bonds payable: Since the coupon rates of the financial bonds issued by the Company approximate the market rates, the fair value based on the discounted value of expected future cash flow approximates the book value.
(F)Other financial assets- investments on debt instruments without active markets: when information on deals, or quotes from market makers exists, then the most recent deal price or quote is the basis for fair value evaluation. When no market values are able to be referenced, then a valuation method is elected for estimation. The estimation and assumption from electing the valuation method is utilising the present value from discounted cash flows as the estimated fair value.
(G)Other financial assets- financial assets measured at cost: since the variation interval for the estimated fair value of quotes without an active market is material, and the probability of estimates within the variation interval are not reasonably evaluable, fair value consequently cannot be reasonably measured and is thus not disclosed.

E.Hierarchy of fair value estimation of financial instruments

(A)Definition for the hierarchy classification of financial instruments measured at fair value
a. Level 1

Inputs that are quoted prices unadjusted in active markets for identical assets or liabilities. An active market refers to a market in which transactions for an asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Group’s investment in listed stocks, beneficiary certificates, on-the-run Taiwan central government bonds and derivative instruments with quoted market prices is included in Level 1.

b. Level 2

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).The fair value of the Group’s investment in off-the-run government bonds, corporate bonds, bank debentures, convertible bonds and most derivative instruments financial bonds issued by the First Group is included in Level 2.

c. Level 3

Inputs for the asset or liability that are not based on observable market data. The fair value of the Group’s investment in the derivatives and certain overseas securities invested by the First Group is included in Level 3.

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144 • FIRST FINANCIAL HOLDING CO., LTD.

(B)Hierarchy of fair value estimation of financial instrument

Financial instruments measured at fair value	December 31,2015	December 31,2015	December 31,2015	December 31,2015
	Total	Level 1	Level 2	Level 3
Recurring fair value measurements Non-derivative financial instruments Assets Financial assets at fair value through profit or loss Financial assets held for trading Stock investments Bond investments Short-term bills Beneficiary securities Financial assets designated as at fair value through profit or loss on initial recognition Stock investments Bond investments Available-for-sale financial assets Short-term bills Stock investments Bond investments Beneficiary securities Others Liabilities Financial liabilities at fair value through profit or loss Financial liabilities held for trading Financial liabilities designated as at fair value through profit or loss on initial recognition Derivative financial instruments Assets Financial assets at fair value through profit or loss Liabilities Financial liabilities at fair value throughprofit or loss	$ 1,735,429 17,972,665 36,988,157 286,948 20,315 24,014,742 636,724 13,771,583 80,668,382 1,293,422 1,154,761 18,399 22,323,120 10,937,087 8,004,351	$ 1,730,884 2,120,192 - 286,948 20,315 - - 12,620,388 3,091,332 1,293,422 - 18,399 - 227,026 31,344	$ 4,545 15,852,473 36,988,157 - - 24,014,742 636,724 - 77,577,050 - 1,154,761 - 22,323,120 10,710,061 7,973,007	$ - - - - - - 1,151,195 - - - - - - -
Total	$ 219,826,085	$ 21,440,250	$197,234,640	$1,151,195

2015 ANNUAL REPORT • 145

Financial instruments measured at fair value	December 31,2014	December 31,2014	December 31,2014	December 31,2014
	Total	Level 1	Level 2	Level 3
Recurring fair value measurements Non-derivative financial instruments Assets Financial assets at fair value through profit or loss Financial assets held for trading Stock investments Bond investments Short-term bills Beneficiary securities Financial assets designated as at fair value through profit or loss on initial recognition Available-for-sale financial assets Stock investments Bond investments Beneficiary securities Others Liabilities Financial liabilities at fair value through profit or loss Financial liabilities designated as at fair value through profit or loss on initial recognition Derivative financial instruments Assets Financial assets at fair value through profit or loss Liabilities Financial liabilities at fair value throughprofit or loss	$ 1,854,704 13,645,497 15,458,680 249,766 15,195,939 13,178,242 69,425,767 314,749 2,061,697 18,004,147 9,395,571 5,383,425	$ 1,854,704 1,887,225 - 249,766 - 11,501,061 208,310 314,749 - - 289,962 127,157	$ - 11,758,272 15,458,680 - 15,195,939 668,385 69,217,457 - 2,061,697 18,004,147 9,105,609 5,256,268	$ - - - - - 1,008,796 - - - - - -
Total	$ 164,168,184	$ 16,432,934	$146,726,454	$ 1,008,796

146 • FIRST FINANCIAL HOLDING CO., LTD.

	Ending balance	$ 1,151,195			Ending balance	$ - 1,008,796 -	$ 1,008,796
								In relation to the above amounts recognized in gain and loss in the period, as of December 31, 2015 and 2014, the carrying amounts of (loss) gain on assets were ($15,579) and $16,162, respectively. In relation to the above amounts recognized in other comprehensive income and loss in the period, as of December 31, 2015 and 2014, the carrying amounts of (loss) gain on assets were ($151,508) and $12,520, respectively. Note: Stocks above were transferred from Level 3 as their quoted market prices are available and used as basis for fair value measurement.
Reduction	Transferred from Level 3 (Note)	$ -		Reduction	Transferred from Level 3 (Note)	($ 189,016) ( 211,548) ( 330,071)	($ 730,635)
	Sold, disposed or settled	($ 46,936)			Sold, disposed or settled	($ 1,768,610) ( 85,976) ( 378,501)	($ 2,233,087)
ition	Transferred to Level 3	$ 61,166		ition	Transferred to Level 3	$ 6,840 - -	$ 6,840
Add	Purchased or issued	$ 295,256		Add	Purchased or issued	$ 1,688,382 243,918 41,221	$ 1,973,521
loss on valuation	Amount recognized in other comprehensive income	($ 151,508)	For the year ended December 31, 2014	Gain and loss on valuation	Amount recognized in other comprehensive income	$ - 12,520 -	$ 12,520
Gain and	Amount recognized in gain and loss	($ 15,579)			Amount recognized in gain and loss	($ 5,121) 9,578 11,705	$ 16,162
	Beginning balance	$ 1,008,796			Beginning balance	$ 267,525 1,040,304 655,646	$ 1,963,475
	Items	Non-derivative financial instruments Available-for-sale financial assets			Items	Non-derivative financial instruments Financial assets at fair value through profit or loss Available-for-sale financial assets Derivative financial instruments Financial assets at fair value through profit or loss	Total

2015 ANNUAL REPORT • 147

	Ending balance	$ -
ction	Transferred from Level 3	($ 308,282)
Redu	Sold, disposed or settled	($ 400,277)
Addition	Transferred to Level 3	$ -
	Purchased or issued	$ 64,346
ss on valuation	Amount recognized in other comprehensive income	$ -
Gain and lo	Amount recognized in gain and loss	($ 11,433)
	Beginning balance	$ 655,646
	Items	Derivative financial instruments Financial liabilities at fair value through profit or loss

148 • FIRST FINANCIAL HOLDING CO., LTD.

(D)Transfers between Level 1 and Level 2

With regard to the financial instruments held by the First Group, no transfers between Level 1 and Level 2 occurred during this period.

(E)Fair value measurement to Level 3, and the sensitivity analysis of the substitutable appropriate assumption made on fair value

The fair value measurement that the First Group made for the financial instruments is deemed reasonable; however, different valuation models or inputs could result in different valuation results. Specifically, if the valuation input of financial instruments classified in Level 3 moves 0.2% (for example, the interest rate, etc.) and the valuation moves to 10%, the effects on gain and loss in the period or the effects on other comprehensive income are as follows:

December 30, 2015	Change in fair value recognized in profit and loss in theperiod	Change in fair value recognized in profit and loss in theperiod	Change in fair value recognized in other comprehensive income	Change in fair value recognized in other comprehensive income
	favorable	unfavorable	favorable	unfavorable
Assets Available-for-sale financial assets	$ -	$ -	$ 115,120	($ 115,120)

December 31, 2014	Change in fair value recognized in profit and loss in theperiod		Change in fair value recognized in other comprehensive income
	favorable	unfavorable	favorable	unfavorable
Assets Available-for-sale financial assets	$ -	$ -	$ 100,880	($ 100,880)

Favorable and unfavorable movements of the First Group refer to the fluctuation of fair value, and the fair value is calculated through the valuation technique according to the non-observable inputs to different extent.

If the fair value of a financial instrument is affected by more than one input, the above table only illustrates the effect as a result of one single input, and the correlation and variance among multiple inputs are not listed here.

2015 ANNUAL REPORT • 149

(F) Quantitative information of fair value measurement for significant unobservable inputs (Level 3)

The Group’s fair value items classified in Level 3 are mainly available-for-sale financial assets – equity security investment.

Most of the Group’s fair value items classified in Level 3 only have single significant unobservable input, except equity instrument investments without active market have multiple significant unobservable inputs. The significant unobservable inputs of equity instrument investments without active market are independent from each other, thus, they are not correlative.

Table below summarizes quantitative information of significant unobservable inputs:

	Fair value as of December 31, 2015	Valuation technique	Significant unobservable inputs	Range (weighted-average)	Relationship between inputs and fair value
Items measured at fair value on a repetitive basis Non-derivative financial assets Available-for-sale financial assets Equity investment	$ 1,151,195	Market comparable method	Price-Earnings Ratio Price-To-Book Ratio Discount for lack of marketability	Price-Earnings Ratio between 11.38-35.69 Price-To-Book Ratio between 0.98-2.78 Discount for lack of marketability by 20%	The higher Price-Earnings Ratio or Price-To-Book Ratio in the same industry and the higher Discount for lack of marketability is, the lower the fair value is.

(G) Fair value measurement process for instruments classified in Level 3

The Group’s financial instruments within Level 3 are equity investment held by venture capital subsidiaries

In accordance with the FVC’s � Operating Guidelines for Financial Investment Management ’and � First Financial Holding Fair-Value Measurement for Non-Active Equity Investment Portfolio � , FVC’s unlisted stocks are valued by Price-Earnings Ratio and Price-To-Book Ratio. By disclosing information, valuation results are close to market condition, and sources for information are independent, reliable, in agreement with other sources and represent exercisable prices. Inputs, information and other necessary fair value adjustments for the valuation model are updated periodically to ensure that the valuation results are reasonable. Relevant valuation results are reviewed and approved by the FVC’s general managers and reported to the parent company of FFHC periodically.

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150 • FIRST FINANCIAL HOLDING CO., LTD.

(2)Management objective and policy for financial risk

A. Scope

First Group’s financial risk management objective incorporates the general operating strategy and financial targets. It considers risk appetite and external regulations along with other elements, through effective risk management policies, including but not limited to risk identification, evaluation, monitoring and reporting, and takes appropriate measures to control business risks and potential financial losses within an endurable range in order to ensure a sound business development for First Group and accomplish the objective of maintaining a reasonable risk and return, to further increase shareholders’ value.

The primary risks arising from operations of First Group includes but are not limited to credit risks incident upon on-balance-sheet and off-balance-sheet transactions, market risks, operating risks and liquidity risks. In order to put into effect the risk management culture and strategy, First Group has established a risk management policy, system, process and method. First Group abides by relevant regulations and evaluates and adjusts in a timely manner. Through managing risks, prescribing limits on each risk, monitoring and reporting periodically, as well as through the internal control and internal audit mechanisms and monitoring of high level committees, the primary risks are effectively identified, evaluated, monitored, and controlled, in order to abide regulations, accomplish strategic objectives and provide reliable financial reporting information.

B. Organization structure for risk management

The Board of Directors is the ultimate responsible unit for the Group’s overall risk management.

Under the command of the Board of Directors, there is a Risk Management Committee, headed by the Chairman as the chief commissioner. Additionally, the CEO (President), EVP, Head of audit department and the Chairman and Presidents of subsidiaries are assigned as the committee members. In line with the risk management policies and guiding principles as approved by the Board of Directors, the Risk Management Committee establishes risk managing system to coordinate and supervise risk relating matters. The main risk assumption limits and monitoring indicators must be approved by the Company’s Risk Management Committee.

In order to practice risk management, the Company and each and every significant subsidiary (FCB, FS, FSIT and FALI) set up “Risk Management Committee” to schedule risk management policies and risk management programs (including limit authorization, risk assumption limit, and risk controlling procedures such as various monitoring indicators and limit exceeding warnings). The Board of Directors and senior management of each subsidiary regularly monitors various risk exposure extent and reports the implementation of risk management policies to the Company.

The Company regularly evaluates and reviews the execution of risk management of each subsidiary and reports to the Board of Directors of the Company accordingly, including risk management program and risk controlling procedures, evaluation on the assumption and trend of major risk, and monitoring and management of capital adequacy ratio.

The auditing department and Board of Directors of the Company and every significant subsidiary within the First Group will regularly check on the risk management procedures and internal control to ensure that the risk management mechanism and the controlling procedures are operating effectively.

2015 ANNUAL REPORT • 151

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152 • FIRST FINANCIAL HOLDING CO., LTD.

The Subsidiary, FCB

The Bank’s Board of Directors has the ultimate approval right in risk management. Major management risk items include overall risk management policy, risk tolerance limit, and authority wich must be approved by the Board of Directors.

Under the Board of Directors, there is a Risk Management Committee (RMC), which is headed by the Bank’s President and comprised of several committee members including Executive Vice President. Besides, Credit Review Division, Credit Analysis Division, Loan Asset Management Division, and Legal Affairs Division are required to participate in the committee. Risk Management Division is a business line under Risk Management Committee. It is responsible for handling of overall affairs for the committee. RMC is responsible for integration of review, supervision, reporting and coordinating interaction between each division for firm-wide risk management. Besides, the committee needs to resolve affairs related to risk management policies and guidelines, risk authorized limits, risk tolerance limits, risk measurement methods, risk assessment procedures, risk monitoring system, and implementation report on risk management, and then deliver orders to each business segment in accordance with their responsibilities and approval procedures. RMC also submits regular reports about the risk evaluation of the Bank to the Board of Directors and supervisors.

The Auditing department regularly reviews the execution of risk management based on relevant internal control system to ensure the effective operation for risk management and assessment control, which should be reported to the Board of Directors regularly.

The subsidiary, FS

The Board of Directors of FS is responsible for the various risk management of various operations. In order to strengthen monitoring on various risks and effectively respond to the movement in financial market, FS has set up “Risk Management Committee” under the Board of Directors to assist and enhance the supervisory, prevention and control over the risk management. In addition, for risks that cannot be quantified, the Executive Secretary of Risk Management Committee shall assist the Board to assign risks to appropriate responsive segments and co-manage accordingly, inclusive of the establishment of emergency action, etc.

In addition to the Risk Management Committee, FS also establishes risk management system consisting of Risk Management Office, Audit Office, Compliance department, Finance department and RM Persons from various lines of businesses to ensure the effectiveness of risk management.

The subsidiary, FSIT

In order to effectively identify, evaluate, monitor and control various risks, as well as control risks incurred with the engagement of various business within durable extent and achieve reasonable goal of return and risk, the subsidiary, FIST sets up Risk Management Committee, which is in compliance with the risk managing policies and guiding principles as assessed by the Board of Directors of FSIT, to establish and supervise risk managing procedures, evaluate method and management indicators, coordinate risk-relating matters and hold regular meetings, review the implementation and exposure, and report it to the Board of FSIT.

2015 ANNUAL REPORT • 153

Audit team of the subsidiary, FSIT regularly reviews and checks the execution of risk management according to the related internal control to ensure the effective operation of evaluations and controlling procedures of risk management and to report to the Board of FSIT on a regular basis.

The subsidiary, FALI

The Board of Directors of the subsidiary, FALI is the final approving authority for risk management. The Board assesses the risk managing policies to ensure that the risks incurred from various businesses are within durable capacity and the reasonable goal of risk and return can be achieved given that the capital is exercised in an efficient manner, and takes the ultimate responsibility for the overall risk management. FALI sets up Risk Management Committee under the Board to supervise, report and coordinate risk management execution, to practice the promotion of risk managing policies and to assist with finance, insurance, operation and monitoring of strategic risks of each business unit to ensure that various risks are controlled within its capacity, the actual execution of which is regularly reported the Board of Directors.

FALI, on the other hand, sets up audit unit to investigate the soundness of risk managing structure and effectiveness of internal control in an independent and natural ground, and to review risk management of other segments.

C. Risk controlling procedures that the Company implemented for various risks of subsidiaries within the First Group

In order to effectively evaluate the risks involved in various business of the subsidiaries within the First Group, (including credit risk, market risk, liquidity risk, interest risk, insurance risk and operating risk, etc.) the Company has set up “Risk Managing Rules of First Financial Holdings Company and its subsidiaries” as the principle of risk managing policies and controlling procedures of every subsidiary.

The fundamental managing principle of the Company lies in the goal that various risks incurred due to the assets or liabilities held for a purpose of profit and business demand can be effectively controlled in consistency of relevant regulations of every competent authority.

Risk controlling procedures that the Company implemented for various risks of subsidiaries within the First Group are as follows:

(A) Authorization standards, monitoring indicators and methods of each subsidiary should be specifically defined and risk exposure is regularly escalated to the Board of Directors.
(B) When the monitoring indicator is breached, the risk management unit should assemble related business units, take necessary action and escalate the situation to the Company.
(C) Each subsidiary regularly submits the meeting minutes of the Committee with the risk monitored results to the Company.
(D) The Company retains the right to assign members to Risk Management Committee of each subsidiary.

154 • FIRST FINANCIAL HOLDING CO., LTD.

D. Credit risk

(A) Source and definition of credit risk

Financial instruments held by the First Group may incur losses if counterparties are not able to fulfill their obligations at the maturity date. Credit risk may happen due to items in or off the balance sheet. For items in the balance sheet, credit risk exposure of the First Group mainly comprises of bill discounted and loans and credit card business, securities financing, leases, deposits and call loans from banks, debt instrument and derivatives, etc. Off balance sheet items include finance guarantee, bank acceptance, letter of credit, and loan commitment.

(B) Policy for credit risk management

Please refer to Note 12(2)C for risk management regulations and procedures of the subsidiaries within the First Group. In addition, each significant subsidiary of the First Group establishes credit risk controlling procedures and authorization standards, evaluation methods, controlling measures, and credit management in accordance with relevant regulations to control the credit risk in and off the balance sheet within the First Group.

Risk management program and procedures are as follows:

A. Establishing the qualification condition and credit limit of the counterparty and granting different credit limits by referring to information from domestic and foreign credit rating institutions or by establishing its own rating system before each transaction;
B. Avoiding the concentration risk, that is, through limiting the amount of financing to or investing in a single customer, single industry, single conglomerate, single stock, or related parties;
C. Monitoring credit risk by industry, counterparty (individual and group) and country through the limits;
D. Setting up loan approval and review procedure for credit extension business as well as specific review policy for complicated credit extension cases;
E. Establishing policy of loan percentage on collateral, collateral appraisal, management and disposal in relation to credit extension;
F. Reporting to the senior management with regard to the summary of credit risk information.

In addition, each foreign operating entity of the First Group sets aside the loss reserve and appraises the assets quality, unless otherwise indicated by competent authorities of the domestic countries in which the subsidiaries reside, in conformity with risk management policy of each operating entity.

The significant subsidiaries of the First Group classify debt instruments and credit assets into 5 categories by referring to internal ratings and external rating institutions. Comparisons between the internal rating and external long-term rating scales are as follows:

2015 ANNUAL REPORT • 155

No direct correlation between the internal rating of credit assets and external rating of debt investments has been shown in the following table, but merely shows two different rating scales of the same category.

Credit quality category	Internal rating of credit assets	The Debt investments	The Debt investments
		External rating (Note)	Taiwan rating
Low risk	Level 1 to level 7	Above level BB	Above level twBBB+
Medium risk	Level 8 to level 9	Level B+ to level BB- (including the debt investments of non rating)	twBBB�twBB+
Medium-high risk	Level 10	Level B	twBB�twBB-
High risk	Level 11 to level 12	Level B- to level C	twB+�twCCC+
Default	Level 13	Level D
(Note) These are ratings of Moody’s, Fitch and S&P.

Procedures and methods used in credit risk management for the core businesses of the First Group are as follows:

a. Credit business (including accounts receivable of lease business, loan commitments and guarantees of the lease subsidiaries):

Classification for credit assets and internal risk ratings are as follows:

(a) Credit asset classification

Credit assets are classified into five types. Other than normal credit assets shall be classified as Category One, the remaining unsound assets are assessed based on the collateral provided and the time period of overdue payment as follows: Category Two for assets requiring special mention. Category three for assets deemed recoverable. Category Four for assets that are doubtful. Category Five for assets that are not recoverable. In order to manage credit extension, the Bank and its subsidiaries established Operation Guidelines for Credit Extension Assets Risks, Regulations Governing the Setting Aside of Asset Losses Valuation and Non-Performing Loans, Guidelines for Claims Receivables, Standard Procedures for Collection of Overdue receivables as the principles for managing non-performing and overdue payments.

(b) Internal risk rating

In response to the characteristics and scale of business, the Bank and its subsidiaries implement a credit risk internal evaluation module or set up a credit rating table in order to management risk.

The Bank and its subsidiaries, mainly by the statistic and professional judgement of expertise and consideration of client information, developed an objective indicator for evaluating client’s credit risk. That is the “Borrower’s risk rating” of the Bank and its subsidiaries, among which 13 thresholds are set up based on the default possibility, and then divided into 5 sub-categories as follows:

I. Low risk: Level 1 to level 7 have a default rate lower than 2%. Clients in this threshold usually have ability to sustain the payment of interest and principal

156 • FIRST FINANCIAL HOLDING CO., LTD.

even under the adverse impact of economic environment, and the default rate is low.

II. Medium risk: Level 8 to level 9 have a default rate ranging around 2-5%. Clients in this threshold usually have potential issues and adverse economic environment that could damage the borrower’s willingness and capacity to make the payment of interest and principal.
III. Medium-high risk: Level 10 has a default rate ranging around 5-10 � . Clients’ ability to make the payment of interest and principal are relatively lower and easily affected by the economic fluctuation.
IV. High risk: Level 11 to level 12 have a default rate ranging from 10% and above to less than 100%. Clients’ ability the make the payment of interest and principal are extremely weak with a high possibility of default.
V. Default: Level 13 has a default rate of 100%. Definition of default includes interest or principal payments that have been overdue for more than 60 days, overdue or non-performing loans transferred, suspended interest, C Chart, debt negotiation records and others.

The Bank should perform credit rating to the corporations at least once a year and to those who sign a mid-long-term credit contract at least once a year during the contract term. Same applies to the collective credit extension. Credit rating mainly processed by investigation division and regional center that are independent from operating units and only cases with certain amount and below may be processed by operating units.

Petty loans and mortgage loans are assessed through internal credit rating module, and the rest of retail banking are assessed by experts. Methods used in rating credit for petty loans and mortgage loans are as follows:

I. Credit rating for petty loans:

The credit rating results, Possibility of Default (PD), Loss Given Default (LGD) and Expected Loss (EL) are assessed by credit evaluation module of the borrowers, from which 3 categories were divided as follows: “Passed the credit standard”, “Highly risky” and “Failed the credit rating standard”.

II. Credit rating for mortgage loans:

Possibility of default (PD), loss given default (LGD) and exposure at default (EAD) of the borrowers assessed by credit evaluation module are used to calculate the expected loss (EL). The expected loss (EL) together with cost of capital, operation cost, and service fee are integrated into information on cost aspect. In addition, information on income aspect such as interest income and service fee income are assessed based on the credit line and interest rate at the time the borrowers applied for loans to produce ‘expected profit’ (revenue minus cost) and expected loss. Based on the expected default frequency within the next year, the credit rating results are classified into four levels, which are ‘low risk’, ‘medium risk’, ‘medium-high risk’ and ‘high risk’, respectively.

2015 ANNUAL REPORT • 157

b. Deposits and call loans

The Bank regularly reviews the limit (including limit of call loan) set up for every counterparty in the financial industry. The credit approval unit, with reference to credit risk limit granted based on long-term credit rating of external rating institutions, is responsible for individual assessment and implementation.

c. Debt investment and derivatives

The risk management of the Company’s and its subsidiaries’ debt instruments is based on credit rating of external institutions, credit quality of bonds, condition by geographical location and counterparty risk to identify the credit risk.

The counterparties of the derivative instruments are mostly financial institutions being rated at BB or above, and the credit extension (including the extension of call loan) granted to each financial institution counterparty is regularly reviewed and controlled by the credit granting segment. Those counterparties without credit rating or being rated below BB should apply risk limit to the credit granting segment by case which is then managed and controlled individually. If the counterparties are general clients, controlling is implemented through risk limits and conditions of derivatives as approved by general credit extension procedures to manage credit exposure of counterparties.

d. Margin trading and short selling

Credit risks of the subsidiary, FS are on margin trading and short selling, which are divided into clients’ credit extension and credit trade on highly risky securities. The credit facility on every client is assessed based on “Guidelines for Accounts Opening for Credit Trading and Investigation on Credit Management”. In addition, the corresponding facility in accordance with the client’s asset proof is granted through segregation, the trading limit on single client and single security are stringently defined.

The controlling mechanism in relation to the credit trading on high risk securities is processed in accordance with “Controlling Practice for Credit Trading Risks”, in which the definition of high risk securities as well as the controlling and authorization are detailed.

a. Collateral

The banking subsidiary adopts a series of policies and measures to mitigate credit risks in relation to credit business, and one of the most common methods is requesting the borrower for the collateral. The Company sets up the scope of collateral that can be recovered and the appraisal, as well as the management and disposing procedures to ensure the credit right. On the other hand, the loan security, terms of collateral, conditions to offset are addressed in the credit extending contract. The reduced facility and shortened repayment period or whether or not a loan is deemed matured are all well defined to mitigate credit risk in case that the credit event does incur.

b. Credit risk limit and risk concentration control

The Bank complies with the Banking Act in relation to the provision of business credit to the same individual, the same related parties, or the same affiliated companies as well as

158 • FIRST FINANCIAL HOLDING CO., LTD.

residential architecture, corporate architecture. In order to effectively control credit risk concentration, the Bank sets up risk assumption limit by rating, industry types, groups, countries and listed securities based on risk management strategy, change in market environment, business complexity, and report to senior management regularly. Assessment and modification shall be performed to various credit risk assumption limit based on overall economic cycle, finance environment and business development strategy regularly (at least once a year) or irregularly.

c. Net settlement with gross agreement

The transactions of the Bank and its subsidiaries are usually carried out by gross settlement. Despite that, net settlement is signed in a form of agreement with some trading counterparties, and is executed when a default occurs and all transactions were to terminate in order to further mitigate credit risk.

d. Other credit enhancements

Primarily refers to guarantees by a third-person or credit providing institutions.

(D) Maximum credit risk exposure and concentration of the First Group

Maximum credit risk exposure

The maximum risk exposure of assets in the consolidated balance sheet, without consideration of the collateral or other credit strengthening instruments, is equivalent to the carrying amount. The maximum credit risk exposure relating to accounts off the balance sheet (without consideration of collaterals or the maximum exposure of other credit enhancements) are the unused loan commitments, unused credit commitments for credit cards, unused letters of credit and other guaranteed commitments. As of December 31, 2015 and 2014, please see Note 9 for details.

The management of the First Group believes that through a series of stringent evaluation procedures and follow-up reviews afterwards, credit risk exposure off the balance sheet of the First Group can be minimized and continuously controlled.

Credit risk concentration of the credit assets in the balance sheet

The credit risks are deemed significantly concentrated when the financial instrument transactions significantly concentrate on a single person, or when there are multiple trading counterparties engaging in similar business activities with similar economic characteristics making the effects on their abilities of fulfilling the contractual obligation due to economy or other forces similar.

The credit risks of the First Group concentrate on accounts in and off balance sheet that occurs through obligation fulfilling or implementation of transactions (either products or services), or through trans-type exposure portfolio, including loans, placements and call loan from the banks, securities investment, receivables and derivatives. The nature that the debtor engages in could be a sign of credit risk concentration. The credit business of FCB and its subsidiaries is one of the core businesses; however, FCB does not significantly carry out transactions with single client or single counterparty, nor does any of total trading volume to a single client or a single counterparty account for more than 5% the balance of loans discounted and overdue receivable. The credit risk concentration of the bills discounted, overdue receivables and lease business of FCB and its subsidiaries by industry, location and collateral are shown as follows:

2015 ANNUAL REPORT • 159

Loans discounted, overdue receivable and receivable from lease business of FCB and its subsidiaries by industry are shown as	follows:	December 31, 2015 December 31, 2014	Industry Amount % Amount %	Private enterprises $ 803,053,204 53.49 $ 819,954,876 54.04	Private individual 493,612,623 32.88 481,678,177 31.74	Overseas and others 195,868,546 13.06 175,400,546 11.56	Government institutions 5,503,104 0.37 35,465,831 2.34	State-owned organizations - - 3,006,132 0.20	Non-profit organizations 2,875,403 0.19 1,688,291 0.11	Financial institutions 164,400 0.01 158,350 0.01	Total $ 1,501,077,280 100.00 $ 1,517,352,203 100.00	Loans discounted, overdue receivable and receivable from lease business of the Bank and its subsidiaries by location (Note) are	shown as follows:	December 31, 2015 December 31, 2014	Geographical location Amount % Amount %	Asia $ 1,403,107,423 93.48 $ 1,432,488,536 94.41	North America 70,996,670 4.73 61,865,391 4.08	Europe 15,828,237 1.05 12,622,434 0.83	Oceania 11,144,950 0.74 10,375,842 0.68	Total $ 1,501,077,280 100.00 $ 1,517,352,203 100.00	Note: the above geographical location is made on the basis of the branch of debtor.

160 • FIRST FINANCIAL HOLDING CO., LTD.

Loans discounted, overdue receivable and receivable from lease business of the Bank and its subsidiaries by collateral are shown as	follows:	December 31, 2015 December 31, 2014	Collateral type Amount % Amount %	Unsecured loans $ 385,713,244 25.70 $ 430,905,023 28.40	Secured loans	-Financial collateral 25,970,882 1.73 24,215,254 1.60	-Receivables 18,882 - 34,687 -	-Real estate 768,972,273 51.23 748,670,286 49.34	-Guarantee 86,318,988 5.75 87,641,702 5.77	-Other collateral 45,783,152 3.05 58,226,112 3.84	Overseas and others 188,299,859 12.54 167,659,139 11.05	Total $ 1,501,077,280 100.00 $ 1,517,352,203 100.00	(Blank)

2015 ANNUAL REPORT • 161

The affected financials from collateral, net settled master netting arrangements and other credit enhancement for the Group’s assets exposed to credit risk are as follows:

	Expressed: In thousands of New Taiwan Dollars	Expressed: In thousands of New Taiwan Dollars	Expressed: In thousands of New Taiwan Dollars	Expressed: In thousands of New Taiwan Dollars
December 31, 2015	Collateral	Net settled master nettingarrangements	Other credit enhancement	Total
Items within the table
Financial assets measured at fair value throughprofit or loss
Debt instruments	$ -	$ -	$ 2,300,494	$ 2,300,494
Derivative instruments	1,864,035	3,576,146	-	5,440,181
Others	-	-	328,800	328,800
Securities sold under repurchase agreements	46,214	-	-	46,214
Receivables
Credit card business	4,743	-	-	4,743
Others	11,797,151	-	5,827,412	17,624,563
Discounts and loans	1,029,247,438	-	94,986,002	1,124,233,440
Available-for-sale financial assets
Bond investment	-	-	6,049,338	6,049,338
Others	-	-	328,800	328,800
Held-to-maturityfinancial assets
Bond investment	-	-	3,432,955	3,432,955
Other financial assets
Others	1,101	-	-	1,101
Items outside the table
Irrevocable loan commitments	5,204,899	-	293,250	5,498,149
Unused letters of credit issued	8,339,453	-	1,010,736	9,350,189
All types ofguarantees	23,881,752	-	6,713,559	30,595,311
Total	$ 1,080,386,786	$ 3,576,146	$ 121,271,346	$ 1,205,234,278

==> picture [437 x 247] intentionally omitted <==

162 • FIRST FINANCIAL HOLDING CO., LTD.

	Expressed: In thousands of New Taiwan Dollars	Expressed: In thousands of New Taiwan Dollars	Expressed: In thousands of New Taiwan Dollars	Expressed: In thousands of New Taiwan Dollars
December 31, 2014	Collateral	Net settled master nettingarrangements	Other credit enhancement	Total
Items within the table
Financial assets measured at fair value throughprofit or loss
Debt instruments	$ -	$ -	$ 1,107,942	$ 1,107,942
Derivative instruments	921,098	2,747,505	-	3,668,603
Securities sold under repurchase agreements	1,719,225	-	-	1,719,225
Receivables
Credit card business	3,563	-	-	3,563
Others	5,981,882	-	4,508,662	10,490,544
Discounts and loans	1,040,686,195	-	98,452,585	1,139,138,780
Available-for-sale financial assets
Bond investment	-	-	1,747,701	1,747,701
Held-to-maturityfinancial assets
Bond investment	-	-	6,641,513	6,641,513
Other financial assets
Others	1,446	-	-	1,446
Items outside the table
Irrevocable loan commitments	8,029,752	-	794,645	8,824,397
Unused letters of credit issued	7,675,080	-	1,779,650	9,454,730
All types ofguarantees	16,742,487	-	7,760,602	24,503,089
Total	$ 1,081,760,728	$ 2,747,505	$ 122,793,300	$ 1,207,301,533

Note1: � Collateral” refers to fixed and non-fixed asset liens, as well as non-fixed asset or equity pledges and guarantees;

Collateral for credit assets refer to the lower of appraisal value and maximum exposure.

Note 2: Details of improvement to net settlement master netting arrangements and other credits are provided in Note 12(2) D.(c).

2015 ANNUAL REPORT • 163

Net	(A)+(B)+(C)-(D)	$ 268,522,979	1,504,933,375	$ 1,773,456,354	Net	(A)+(B)+(C)-(D)		$ 80,668,383	636,724	1,039,792	1,154,761		284,145,000	71,936,969	735,181		1,119,725	9,162,155	$ 450,598,690
Recognized losses(D)	With no individual impaired evidence	$ 342,902	17,477,177	$ 17,820,079		Recognized losses(D)		$ -	-	-	-		-	-	-		-	-	$ -
	With individual impaired evidence	$ 664,921	3,629,955	$ 4,294,876
Total	(A)+(B)+(C)	$ 269,530,802	1,526,040,507	$ 1,795,571,309	Total	(A)+(B)+(C)		$ 80,668,383	636,724	1,039,792	1,154,761		284,145,000	71,936,969	735,181		1,119,725	9,162,155	$ 450,598,690
	Impaired amount (C)	$ 1,067,759	13,180,116	$ 14,247,875		Impaired amount (C)		$ -	-	-	-		-	-	-		-	-	$ -
Positions that are past due but not impaired(B)		$ 58,089	5,374,922	$ 5,433,011	Positions	that are past due but not impaired(B)		$ -	-	-	-		-	-	-		-	-	$ -
	Subtotal (A)	$ 268,404,954	1,507,485,469	$ 1,775,890,423		Subtotal (A)		$ 80,668,383	636,724	1,039,792	1,154,761		284,145,000	71,936,969	735,181		1,119,725	9,162,155	$ 450,598,690
Positions that are neitherpast due nor impaired	High risk	$ -	19,450,330	$ 19,450,330	Positions that are neitherpast due nor impaired	High risk		$ -	-	-	-		-	-	-		-	-	$ -
	Medium-high risk	$ -	28,112,872	$ 28,112,872		Medium-high risk		$ -	-	-	-		-	-	-		-	-	$ -
	Medium risk	$ -	314,717,580	$ 314,717,580		Medium risk		$ 2,070,933	636,724	800,885	325,048		-	1,511,300	-		300,000	-	$ 5,644,890
	Low risk	$ 268,404,954	1,145,204,687	$ 1,413,609,641		Low risk		$ 78,597,450	-	238,907	829,713		284,145,000	70,425,669	735,181		819,725	9,162,155	$ 444,953,800
	December 31, 2015	Receivables	Loans discounted	Total		December 31, 2015	Available-for-sale financial assets	-Bonds investment	-Short-term bills	-Beneficiary securities	-Others	Held-to-maturity financial assets	-Certificates of time deposit purchased	-Bonds investment	-Short-term bills	Other financial assets	-Bonds investment	-Investment deposits	Total

164 • FIRST FINANCIAL HOLDING CO., LTD.

Net	(A)+(B)+(C)-(D)		$ 69,425,767	202,364	2,061,697		247,465,000	58,585,504	1,574,804		2,577,236	20,696,846	$ 402,589,218

	Recognized losses(D)		$ -	-	-		-	-	-		-		$ -
Total	(A)+(B)+(C)		$ 69,425,767	202,364	2,061,697		247,465,000	58,585,504	1,574,804		2,577,236	20,696,846	$ 402,589,218
	Impaired amount (C)		$ -	-	-		-	-	-		-		$ -
Positions	that are past due but not impaired(B)		$ -	-	-		-	-	-		-		$ -
	Subtotal (A)		$ 69,425,767	202,364	2,061,697		247,465,000	58,585,504	1,574,804		2,577,236	20,696,846	$ 402,589,218
Positions that are neitherpast due nor impaired	High risk		$ -	-	-		-	-	-		-		$ -
	Medium-high risk		$ -	-	-		-	-	-		-		$ -
	Medium risk		$ 1,013,711	-	-		-	1,441,188	939,785		300,000	-	$ 3,694,684
	Low risk		$ 68,412,056	202,364	2, 061,697		247,465,000	57,144,316	635,019		2,277,236	20,696,846	$ 398,894,534
	December 31, 2014	Available-for-sale financial assets	-Bonds investment	-Beneficiary securities	-Others	Held-to-maturity financial assets	-Certificates of time deposit purchased	- Bonds investment	-Short-term bills	Other financial assets	-Bonds investment	-Investment deposits	Total

2015 ANNUAL REPORT • 165

b. In relation to loans discounted of the First Group that were neither past due nor impaired, the credit quality analysis is based on the credit quality rating by client:

	December 31, 2015	Positions that are neitherpast due nor impaired	Positions that are neitherpast due nor impaired	Positions that are neitherpast due nor impaired	Positions that are neitherpast due nor impaired	Positions that are neitherpast due nor impaired
		Low risk	Medium risk	Medium-high risk	High risk	Total
	Receivables	$ 268,404,954	$ -	$ -	$ -	$ 268,404,954
	Credit card business	4,735,621	565,118	404,842	246,601	5,952,182
	Consumer banking	411,107,250	4,491,089	733,974	133,159	416,465,472
	Corporate banking	623,674,657	241,862,414	24,611,724	16,621,080	906,769,875
	Overseas and others	105,687,159	67,798,959	2,362,332	2,449,490	178,297,940
	Total	$ 1,413,609,641	$ 314,717,580	$ 28,112,872	$ 19,450,330	$ 1,775,890,423

	December 31, 2014	Positions that are neitherpast due nor impaired
		Low risk	Medium risk	Medium-high risk	High risk	Total
	Receivables	$ 193,761,607	$ -	$ -	$ -	$ 193,761,607
	Credit card business	4,058,246	595,839	378,918	237,541	5,270,544
	Consumer banking	403,476,869	3,920,396	715,473	156,984	408,269,722
	Corporate banking	635,235,543	268,149,868	22,054,696	16,748,136	942,188,243
	Overseas and others	17,722,203	140,178,062	-	-	157,900,265
	Total	$ 1,254,254,468	$ 412,844,165	$ 23,149,087	$ 17,142,661	$ 1,707,390,381
c. Aging analysis of overdue financial assets with no impairment of the First Group:

The delayed processing of the borrower and other administrative reasons may give rise to an overdue financial asset with no impairment. According to the internal risk management policy of the First Group, financial assets overdue for less than 90 days are usually not deemed impaired unless other evidence indicates otherwise.

Aging analysis of the overdue financial assets with no impairment of the First Group:

Items	December 31,2015	December 31,2015	December 31,2015
	Overdue for less than 1 month	Overdue for 1~3 months	Total
Receivables Loans discounted Credit card business Consumer banking Corporate banking	$ - 13,609 2,652,381 1,148,698	$ 58,089 23,898 300,009 1,236,327	$ 58,089 37,507 2,952,390 2,385,025
Total	$ 3,814,688	$ 1,618,323	$ 5,433,011

Items	December 31,2014
	Overdue for less than 1 month	Overdue for 1~3 months	Total
Receivables Loans discounted Credit card business Consumer banking Corporate banking	$ - 11,228 2,013,252 3,121,234	$ 91 26,394 515,694 148,078	$ 91 37,622 2,528,946 3,269,312
Total	$ 5,145,714	$ 690,257	$ 5,835,971

166 • FIRST FINANCIAL HOLDING CO., LTD.


d. Analysis of impaired financial assets of the First Group	Items December 31, 2015 Loans discounted Impaired amount	With individual objective evidence of impairment Individual assessment Corporate loans-secured $ 5,959,781 $ 2,133,891 Residential mortgage loans 65,965 703 Overseas and others (Note) 4,142,579 628,340 Collective assessment Corporate loans-secured 1,372,635 465,902 Residential mortgage loans 1,371,837 275,153 Overseas and others (Note) 267,319 125,966	Without individual objective evidence of impairment Collective assessment Corporate loans-secured 909,208,345 10,304,873 Residential mortgage loans 395,485,914 5,344,779 Overseas and others (Note) 208,166,132 1,827,525	Total $ 1,526,040,507 $ 21,107,132		Items December 31, 2014 Loans discounted Impaired amount	With individual objective evidence of impairment Individual assessment Corporate loans-secured $ 14,449,712 $ 2,966,985 Residential mortgage loans 132,866 1,346 Overseas and others (Note) 4,344,358 647,551 Collective assessment Corporate loans-secured 1,288,016 365,185 Residential mortgage loans 1,352,564 277,204 Overseas and others (Note) 267,025 114,817	Without individual objective evidence of impairment Collective assessment Corporate loans-secured 945,387,531 9,778,226 Residential mortgage loans 390,540,832 4,837,539 Overseas and others (Note) 183,536,291 1,545,406	Total 1,541,299,195 20,534,259	Note : Other including small amount of credit loans, consumer banking, cash card and credit card and credit card services and so on.

2015 ANNUAL REPORT • 167

Items December 31, 2015 Total receivables Impaired amount With individual objective evidence of impairment Individual assessment Receivables $ 1,064,302 $ 664,457 Overseas and others 3,457 464 Without individual objective evidence of impairment Collective assessment Receivables 199,085,773 187,614 Overseas and others 69,377,270 155,288 Total $ 269,530,802 $ 1,007,823	Items December 31, 2015 Total receivables Impaired amount With individual objective evidence of impairment Individual assessment Receivables $ 1,064,302 $ 664,457 Overseas and others 3,457 464 Without individual objective evidence of impairment Collective assessment Receivables 199,085,773 187,614 Overseas and others 69,377,270 155,288 Total $ 269,530,802 $ 1,007,823	Items December 31, 2015 Total receivables Impaired amount With individual objective evidence of impairment Individual assessment Receivables $ 1,064,302 $ 664,457 Overseas and others 3,457 464 Without individual objective evidence of impairment Collective assessment Receivables 199,085,773 187,614 Overseas and others 69,377,270 155,288 Total $ 269,530,802 $ 1,007,823	Items December 31, 2015 Total receivables Impaired amount With individual objective evidence of impairment Individual assessment Receivables $ 1,064,302 $ 664,457 Overseas and others 3,457 464 Without individual objective evidence of impairment Collective assessment Receivables 199,085,773 187,614 Overseas and others 69,377,270 155,288 Total $ 269,530,802 $ 1,007,823	Items December 31, 2015 Total receivables Impaired amount With individual objective evidence of impairment Individual assessment Receivables $ 1,064,302 $ 664,457 Overseas and others 3,457 464 Without individual objective evidence of impairment Collective assessment Receivables 199,085,773 187,614 Overseas and others 69,377,270 155,288 Total $ 269,530,802 $ 1,007,823	Items December 31, 2015 Total receivables Impaired amount With individual objective evidence of impairment Individual assessment Receivables $ 1,064,302 $ 664,457 Overseas and others 3,457 464 Without individual objective evidence of impairment Collective assessment Receivables 199,085,773 187,614 Overseas and others 69,377,270 155,288 Total $ 269,530,802 $ 1,007,823	Items December 31, 2015 Total receivables Impaired amount With individual objective evidence of impairment Individual assessment Receivables $ 1,064,302 $ 664,457 Overseas and others 3,457 464 Without individual objective evidence of impairment Collective assessment Receivables 199,085,773 187,614 Overseas and others 69,377,270 155,288 Total $ 269,530,802 $ 1,007,823	Items December 31, 2014 Total receivables Impaired amount With individual objective evidence of impairment Individual assessment Receivables $ 1,206,669 $ 613,320 Overseas and others 19,140 2,810 Without individual objective evidence of impairment Collective assessment Receivables 138,484,549 163,749 Overseas and others 55,277,149 163,458 Total $ 194,987,507 $ 943,337 (F) Policy for assumed collateral management The collaterals assumed by the First Group on December 31, 2015 and 2014 are of the nature of land and property and the carrying amounts were $9,124 and $0, respectively. The assumed collateral shall be disposed once it is disposable and the proceeds of disposal shall be used to offset the remaining unpaid loan. Collaterals are classified under other assets in the consolidated balance sheet.	Items December 31, 2014 Total receivables Impaired amount With individual objective evidence of impairment Individual assessment Receivables $ 1,206,669 $ 613,320 Overseas and others 19,140 2,810 Without individual objective evidence of impairment Collective assessment Receivables 138,484,549 163,749 Overseas and others 55,277,149 163,458 Total $ 194,987,507 $ 943,337 (F) Policy for assumed collateral management The collaterals assumed by the First Group on December 31, 2015 and 2014 are of the nature of land and property and the carrying amounts were $9,124 and $0, respectively. The assumed collateral shall be disposed once it is disposable and the proceeds of disposal shall be used to offset the remaining unpaid loan. Collaterals are classified under other assets in the consolidated balance sheet.	Items December 31, 2014 Total receivables Impaired amount With individual objective evidence of impairment Individual assessment Receivables $ 1,206,669 $ 613,320 Overseas and others 19,140 2,810 Without individual objective evidence of impairment Collective assessment Receivables 138,484,549 163,749 Overseas and others 55,277,149 163,458 Total $ 194,987,507 $ 943,337 (F) Policy for assumed collateral management The collaterals assumed by the First Group on December 31, 2015 and 2014 are of the nature of land and property and the carrying amounts were $9,124 and $0, respectively. The assumed collateral shall be disposed once it is disposable and the proceeds of disposal shall be used to offset the remaining unpaid loan. Collaterals are classified under other assets in the consolidated balance sheet.	Items December 31, 2014 Total receivables Impaired amount With individual objective evidence of impairment Individual assessment Receivables $ 1,206,669 $ 613,320 Overseas and others 19,140 2,810 Without individual objective evidence of impairment Collective assessment Receivables 138,484,549 163,749 Overseas and others 55,277,149 163,458 Total $ 194,987,507 $ 943,337 (F) Policy for assumed collateral management The collaterals assumed by the First Group on December 31, 2015 and 2014 are of the nature of land and property and the carrying amounts were $9,124 and $0, respectively. The assumed collateral shall be disposed once it is disposable and the proceeds of disposal shall be used to offset the remaining unpaid loan. Collaterals are classified under other assets in the consolidated balance sheet.	Items December 31, 2014 Total receivables Impaired amount With individual objective evidence of impairment Individual assessment Receivables $ 1,206,669 $ 613,320 Overseas and others 19,140 2,810 Without individual objective evidence of impairment Collective assessment Receivables 138,484,549 163,749 Overseas and others 55,277,149 163,458 Total $ 194,987,507 $ 943,337 (F) Policy for assumed collateral management The collaterals assumed by the First Group on December 31, 2015 and 2014 are of the nature of land and property and the carrying amounts were $9,124 and $0, respectively. The assumed collateral shall be disposed once it is disposable and the proceeds of disposal shall be used to offset the remaining unpaid loan. Collaterals are classified under other assets in the consolidated balance sheet.	Items December 31, 2014 Total receivables Impaired amount With individual objective evidence of impairment Individual assessment Receivables $ 1,206,669 $ 613,320 Overseas and others 19,140 2,810 Without individual objective evidence of impairment Collective assessment Receivables 138,484,549 163,749 Overseas and others 55,277,149 163,458 Total $ 194,987,507 $ 943,337 (F) Policy for assumed collateral management The collaterals assumed by the First Group on December 31, 2015 and 2014 are of the nature of land and property and the carrying amounts were $9,124 and $0, respectively. The assumed collateral shall be disposed once it is disposable and the proceeds of disposal shall be used to offset the remaining unpaid loan. Collaterals are classified under other assets in the consolidated balance sheet.	Items December 31, 2014 Total receivables Impaired amount With individual objective evidence of impairment Individual assessment Receivables $ 1,206,669 $ 613,320 Overseas and others 19,140 2,810 Without individual objective evidence of impairment Collective assessment Receivables 138,484,549 163,749 Overseas and others 55,277,149 163,458 Total $ 194,987,507 $ 943,337 (F) Policy for assumed collateral management The collaterals assumed by the First Group on December 31, 2015 and 2014 are of the nature of land and property and the carrying amounts were $9,124 and $0, respectively. The assumed collateral shall be disposed once it is disposable and the proceeds of disposal shall be used to offset the remaining unpaid loan. Collaterals are classified under other assets in the consolidated balance sheet.
December 31, 2015	Impaired amount	$ 664,457	464	187,614	155,288	$ 1,007,823	December 31, 2014	Impaired amount	$ 613,320	2,810	163,749	163,458	$ 943,337
	Total receivables	$ 1,064,302	3,457	199,085,773	69,377,270	$ 269,530,802		Total receivables	$ 1,206,669	19,140	138,484,549	55,277,149	$ 194,987,507
Items		Receivables	Overseas and others	Receivables	Overseas and others		Items		Receivables	Overseas and others	Receivables	Overseas and others
		Individual assessment		Collective assessment					Individual assessment		Collective assessment
		With individual objective evidence of impairment		Without individual objective evidence of impairment		Total			With individual objective evidence of impairment		Without individual objective evidence of impairment		Total

168 • FIRST FINANCIAL HOLDING CO., LTD.

														Business / Items Non-performing loans (Note 1) Gross loans Non-performing loan ratio (%) (Note 2) Allowance for doubtful accounts Coverage ratio (Note 3) Corporate Banking Secured loans $ 1,840,977$ 596,935,847 0.31% $ 7,575,359 411.49% Unsecured loans 415,149 496,974,856 0.08% 5,839,080 1406.50% Consumer Banking Residential mortgage loans (Note 4) 678,218 392,081,712 0.17% 6,412,498 945.49% Cash cards 36 6,054 0.59% 289 802.78% Micro credit loans (Note 5) 9,351 4,946,692 0.19% 72,156 771.64% Others (Note 6) Secured 7,481 16,116,629 0.05% 188,684 2522.18% Unsecured - 40,374 - 997 - Gross loans business 2,951,212 1,507,102,164 0.20% 20,089,063 680.71% Non-performing loans Balance of receivables Non-performing loan ratio (%) Allowance for doubtful accounts Coverage ratio Credit card services 10,749 5,500,769 0.20% 126,444 1176.33% Without recourse factoring (Note 7) - 4,829,874 - 97,581 -	Business / Items Non-performing loans (Note 1) Gross loans Non-performing loan ratio (%) (Note 2) Allowance for doubtful accounts Coverage ratio (Note 3) Corporate Banking Secured loans $ 1,840,977$ 596,935,847 0.31% $ 7,575,359 411.49% Unsecured loans 415,149 496,974,856 0.08% 5,839,080 1406.50% Consumer Banking Residential mortgage loans (Note 4) 678,218 392,081,712 0.17% 6,412,498 945.49% Cash cards 36 6,054 0.59% 289 802.78% Micro credit loans (Note 5) 9,351 4,946,692 0.19% 72,156 771.64% Others (Note 6) Secured 7,481 16,116,629 0.05% 188,684 2522.18% Unsecured - 40,374 - 997 - Gross loans business 2,951,212 1,507,102,164 0.20% 20,089,063 680.71% Non-performing loans Balance of receivables Non-performing loan ratio (%) Allowance for doubtful accounts Coverage ratio Credit card services 10,749 5,500,769 0.20% 126,444 1176.33% Without recourse factoring (Note 7) - 4,829,874 - 97,581 -	Business / Items Non-performing loans (Note 1) Gross loans Non-performing loan ratio (%) (Note 2) Allowance for doubtful accounts Coverage ratio (Note 3) Corporate Banking Secured loans $ 1,840,977$ 596,935,847 0.31% $ 7,575,359 411.49% Unsecured loans 415,149 496,974,856 0.08% 5,839,080 1406.50% Consumer Banking Residential mortgage loans (Note 4) 678,218 392,081,712 0.17% 6,412,498 945.49% Cash cards 36 6,054 0.59% 289 802.78% Micro credit loans (Note 5) 9,351 4,946,692 0.19% 72,156 771.64% Others (Note 6) Secured 7,481 16,116,629 0.05% 188,684 2522.18% Unsecured - 40,374 - 997 - Gross loans business 2,951,212 1,507,102,164 0.20% 20,089,063 680.71% Non-performing loans Balance of receivables Non-performing loan ratio (%) Allowance for doubtful accounts Coverage ratio Credit card services 10,749 5,500,769 0.20% 126,444 1176.33% Without recourse factoring (Note 7) - 4,829,874 - 97,581 -	Business / Items Non-performing loans (Note 1) Gross loans Non-performing loan ratio (%) (Note 2) Allowance for doubtful accounts Coverage ratio (Note 3) Corporate Banking Secured loans $ 1,840,977$ 596,935,847 0.31% $ 7,575,359 411.49% Unsecured loans 415,149 496,974,856 0.08% 5,839,080 1406.50% Consumer Banking Residential mortgage loans (Note 4) 678,218 392,081,712 0.17% 6,412,498 945.49% Cash cards 36 6,054 0.59% 289 802.78% Micro credit loans (Note 5) 9,351 4,946,692 0.19% 72,156 771.64% Others (Note 6) Secured 7,481 16,116,629 0.05% 188,684 2522.18% Unsecured - 40,374 - 997 - Gross loans business 2,951,212 1,507,102,164 0.20% 20,089,063 680.71% Non-performing loans Balance of receivables Non-performing loan ratio (%) Allowance for doubtful accounts Coverage ratio Credit card services 10,749 5,500,769 0.20% 126,444 1176.33% Without recourse factoring (Note 7) - 4,829,874 - 97,581 -	Business / Items Non-performing loans (Note 1) Gross loans Non-performing loan ratio (%) (Note 2) Allowance for doubtful accounts Coverage ratio (Note 3) Corporate Banking Secured loans $ 1,840,977$ 596,935,847 0.31% $ 7,575,359 411.49% Unsecured loans 415,149 496,974,856 0.08% 5,839,080 1406.50% Consumer Banking Residential mortgage loans (Note 4) 678,218 392,081,712 0.17% 6,412,498 945.49% Cash cards 36 6,054 0.59% 289 802.78% Micro credit loans (Note 5) 9,351 4,946,692 0.19% 72,156 771.64% Others (Note 6) Secured 7,481 16,116,629 0.05% 188,684 2522.18% Unsecured - 40,374 - 997 - Gross loans business 2,951,212 1,507,102,164 0.20% 20,089,063 680.71% Non-performing loans Balance of receivables Non-performing loan ratio (%) Allowance for doubtful accounts Coverage ratio Credit card services 10,749 5,500,769 0.20% 126,444 1176.33% Without recourse factoring (Note 7) - 4,829,874 - 97,581 -	Business / Items Non-performing loans (Note 1) Gross loans Non-performing loan ratio (%) (Note 2) Allowance for doubtful accounts Coverage ratio (Note 3) Corporate Banking Secured loans $ 1,840,977$ 596,935,847 0.31% $ 7,575,359 411.49% Unsecured loans 415,149 496,974,856 0.08% 5,839,080 1406.50% Consumer Banking Residential mortgage loans (Note 4) 678,218 392,081,712 0.17% 6,412,498 945.49% Cash cards 36 6,054 0.59% 289 802.78% Micro credit loans (Note 5) 9,351 4,946,692 0.19% 72,156 771.64% Others (Note 6) Secured 7,481 16,116,629 0.05% 188,684 2522.18% Unsecured - 40,374 - 997 - Gross loans business 2,951,212 1,507,102,164 0.20% 20,089,063 680.71% Non-performing loans Balance of receivables Non-performing loan ratio (%) Allowance for doubtful accounts Coverage ratio Credit card services 10,749 5,500,769 0.20% 126,444 1176.33% Without recourse factoring (Note 7) - 4,829,874 - 97,581 -	Business / Items Non-performing loans (Note 1) Gross loans Non-performing loan ratio (%) (Note 2) Allowance for doubtful accounts Coverage ratio (Note 3) Corporate Banking Secured loans $ 1,840,977$ 596,935,847 0.31% $ 7,575,359 411.49% Unsecured loans 415,149 496,974,856 0.08% 5,839,080 1406.50% Consumer Banking Residential mortgage loans (Note 4) 678,218 392,081,712 0.17% 6,412,498 945.49% Cash cards 36 6,054 0.59% 289 802.78% Micro credit loans (Note 5) 9,351 4,946,692 0.19% 72,156 771.64% Others (Note 6) Secured 7,481 16,116,629 0.05% 188,684 2522.18% Unsecured - 40,374 - 997 - Gross loans business 2,951,212 1,507,102,164 0.20% 20,089,063 680.71% Non-performing loans Balance of receivables Non-performing loan ratio (%) Allowance for doubtful accounts Coverage ratio Credit card services 10,749 5,500,769 0.20% 126,444 1176.33% Without recourse factoring (Note 7) - 4,829,874 - 97,581 -	Business / Items Non-performing loans (Note 1) Gross loans Non-performing loan ratio (%) (Note 2) Allowance for doubtful accounts Coverage ratio (Note 3) Corporate Banking Secured loans $ 1,840,977$ 596,935,847 0.31% $ 7,575,359 411.49% Unsecured loans 415,149 496,974,856 0.08% 5,839,080 1406.50% Consumer Banking Residential mortgage loans (Note 4) 678,218 392,081,712 0.17% 6,412,498 945.49% Cash cards 36 6,054 0.59% 289 802.78% Micro credit loans (Note 5) 9,351 4,946,692 0.19% 72,156 771.64% Others (Note 6) Secured 7,481 16,116,629 0.05% 188,684 2522.18% Unsecured - 40,374 - 997 - Gross loans business 2,951,212 1,507,102,164 0.20% 20,089,063 680.71% Non-performing loans Balance of receivables Non-performing loan ratio (%) Allowance for doubtful accounts Coverage ratio Credit card services 10,749 5,500,769 0.20% 126,444 1176.33% Without recourse factoring (Note 7) - 4,829,874 - 97,581 -	Business / Items Non-performing loans (Note 1) Gross loans Non-performing loan ratio (%) (Note 2) Allowance for doubtful accounts Coverage ratio (Note 3) Corporate Banking Secured loans $ 1,840,977$ 596,935,847 0.31% $ 7,575,359 411.49% Unsecured loans 415,149 496,974,856 0.08% 5,839,080 1406.50% Consumer Banking Residential mortgage loans (Note 4) 678,218 392,081,712 0.17% 6,412,498 945.49% Cash cards 36 6,054 0.59% 289 802.78% Micro credit loans (Note 5) 9,351 4,946,692 0.19% 72,156 771.64% Others (Note 6) Secured 7,481 16,116,629 0.05% 188,684 2522.18% Unsecured - 40,374 - 997 - Gross loans business 2,951,212 1,507,102,164 0.20% 20,089,063 680.71% Non-performing loans Balance of receivables Non-performing loan ratio (%) Allowance for doubtful accounts Coverage ratio Credit card services 10,749 5,500,769 0.20% 126,444 1176.33% Without recourse factoring (Note 7) - 4,829,874 - 97,581 -	Business / Items Non-performing loans (Note 1) Gross loans Non-performing loan ratio (%) (Note 2) Allowance for doubtful accounts Coverage ratio (Note 3) Corporate Banking Secured loans $ 1,840,977$ 596,935,847 0.31% $ 7,575,359 411.49% Unsecured loans 415,149 496,974,856 0.08% 5,839,080 1406.50% Consumer Banking Residential mortgage loans (Note 4) 678,218 392,081,712 0.17% 6,412,498 945.49% Cash cards 36 6,054 0.59% 289 802.78% Micro credit loans (Note 5) 9,351 4,946,692 0.19% 72,156 771.64% Others (Note 6) Secured 7,481 16,116,629 0.05% 188,684 2522.18% Unsecured - 40,374 - 997 - Gross loans business 2,951,212 1,507,102,164 0.20% 20,089,063 680.71% Non-performing loans Balance of receivables Non-performing loan ratio (%) Allowance for doubtful accounts Coverage ratio Credit card services 10,749 5,500,769 0.20% 126,444 1176.33% Without recourse factoring (Note 7) - 4,829,874 - 97,581 -	Business / Items Non-performing loans (Note 1) Gross loans Non-performing loan ratio (%) (Note 2) Allowance for doubtful accounts Coverage ratio (Note 3) Corporate Banking Secured loans $ 1,840,977$ 596,935,847 0.31% $ 7,575,359 411.49% Unsecured loans 415,149 496,974,856 0.08% 5,839,080 1406.50% Consumer Banking Residential mortgage loans (Note 4) 678,218 392,081,712 0.17% 6,412,498 945.49% Cash cards 36 6,054 0.59% 289 802.78% Micro credit loans (Note 5) 9,351 4,946,692 0.19% 72,156 771.64% Others (Note 6) Secured 7,481 16,116,629 0.05% 188,684 2522.18% Unsecured - 40,374 - 997 - Gross loans business 2,951,212 1,507,102,164 0.20% 20,089,063 680.71% Non-performing loans Balance of receivables Non-performing loan ratio (%) Allowance for doubtful accounts Coverage ratio Credit card services 10,749 5,500,769 0.20% 126,444 1176.33% Without recourse factoring (Note 7) - 4,829,874 - 97,581 -	Business / Items Non-performing loans (Note 1) Gross loans Non-performing loan ratio (%) (Note 2) Allowance for doubtful accounts Coverage ratio (Note 3) Corporate Banking Secured loans $ 1,840,977$ 596,935,847 0.31% $ 7,575,359 411.49% Unsecured loans 415,149 496,974,856 0.08% 5,839,080 1406.50% Consumer Banking Residential mortgage loans (Note 4) 678,218 392,081,712 0.17% 6,412,498 945.49% Cash cards 36 6,054 0.59% 289 802.78% Micro credit loans (Note 5) 9,351 4,946,692 0.19% 72,156 771.64% Others (Note 6) Secured 7,481 16,116,629 0.05% 188,684 2522.18% Unsecured - 40,374 - 997 - Gross loans business 2,951,212 1,507,102,164 0.20% 20,089,063 680.71% Non-performing loans Balance of receivables Non-performing loan ratio (%) Allowance for doubtful accounts Coverage ratio Credit card services 10,749 5,500,769 0.20% 126,444 1176.33% Without recourse factoring (Note 7) - 4,829,874 - 97,581 -
December 31, 2015	Coverage ratio (Note 3)	706.52%	678.61%	892.30%	-	596.12%	9024.86%	-	751.03%	Coverage ratio	1363.11%	-	December 31, 2014	Coverage ratio (Note 3)	411.49%	1406.50%	945.49%	802.78%	771.64%	2522.18%	-	680.71%	Coverage ratio	1176.33%	-
	Allowance for doubtful accounts	$ 7,911,620	6,316,135	6,218,470	209	67,511	223,275	722	20,737,942	Allowance for doubtful accounts	138,724	134,162		Allowance for doubtful accounts	$ 7,575,359	5,839,080	6,412,498	289	72,156	188,684	997	20,089,063	Allowance for doubtful accounts	126,444	97,581
	Non-performing loan ratio (%) (Note 2)	0.18%	0.20%	0.18%	-	0.23%	0.01%	-	0.19%	Non-performing loan ratio (%)	0.16%	-		Non-performing loan ratio (%) (Note 2)	0.31%	0.08%	0.17%	0.59%	0.19%	0.05%	-	0.20%	Non-performing loan ratio (%)	0.20%	-
	Gross loans	$ 611,826,517	454,735,581	398,186,943	3,435	4,863,032	19,835,337	30,128	1,489,480,973	Balance of receivables	6,172,127	5,968,438		Gross loans	$ 596,935,847	496,974,856	392,081,712	6,054	4,946,692	16,116,629	40,374	1,507,102,164	Balance of receivables	5,500,769	4,829,874
	Non-performing loans (Note 1)	$ 1,119,803	930,743	696,904	-	11,325	2,474	-	2,761,249	Non-performing loans	10,177	-		Non-performing loans (Note 1)	$ 1,840,977	415,149	678,218	36	9,351	7,481	-	2,951,212	Non-performing loans	10,749	-
Date & year	Business / Items	Secured loans	Unsecured loans	Residential mortgage loans (Note 4)	Cash cards	Micro credit loans (Note 5)	Secured	Unsecured				Note 7)	Date & year	Business / Items	Secured loans	Unsecured loans	Residential mortgage loans (Note 4)	Cash cards	Micro credit loans (Note 5)	Secured	Unsecured	Gross loans business		Credit card services	Without recourse factoring (Note 7)
							Others (Note 6)		business		ervices	urse factoring (								Others (Note 6)
		Corporate Banking		Consumer		Banking			Gross loans		Credit card s	Without reco			Corporate Banking		Consumer		Banking

2015 ANNUAL REPORT • 169

(a) The amount recognized as non-performing loans is in compliance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal	with Non-performing/Non-accrual Loans”. The amount included in overdue accounts for credit cards is in compliance with the Banking Bureau (4) Letter No.	0944000378 dated July 6, 2005.	(b) Non-performing loan ratio=non-performing loans/gross loans. Non-performing loan ratio of credit cards �Non-performing loan ratio of credit cards /balance of	accounts receivable.	(c) Coverage ratio for loans=allowance for doubtful accounts of loans/non-performing loans. Coverage ratio for accounts receivable of credit cards�allowance for doubtful	accounts for accounts receivable of credit cards/ Non-performing loan ratio of credit cards.	(d) For residential mortgage loans, the borrower provides his/her (or spouse’s or minor child’s) house as collateral in full and mortgages it to the financial institution for the	purpose of obtaining funds to purchase or add improvements to own house.	(e) Small amount of credit loans apply to the norms of the Banking Bureau (4) Letter No. 09440010950 dated December 19, 2005, excluding credit card and cash card	services.	(f) Other consumer banking is specified as secured or unsecured consumer loans other than residential mortgage loans, cash card services and small amount of credit loans,	and excluding credit card services.	(g) Pursuant to the Jin-Guan-Yi (5) Letter No. 094000494 dated July 19, 2005 amount of without recourse factoring will be recognized as overdue accounts within three	months after the factor or insurance company resolves not to compensate the loss.

170 • FIRST FINANCIAL HOLDING CO., LTD.

						Total amount of non-performing loans exempted from reporting to the competent authority Total amount of overdue receivables exempted from reporting to the competent authority Amounts exempted from reporting to the competent authority under debt negotiation and the contract (Note (a)) $ 3,213 $ 49,655 Perform in accordance with debt liquidation program and restructuring program (Note (b)) 50,100 120,228 Total $ 53,313 $ 169,883 Explanation: (a) The Bank disclosed the total amount of non-performing loans and overdue receivables exempted from reporting to the competent authority as debt negotiation in accordance with the Jin-Guan-Yi Letter (1) No. 09510001270 of the FSC dated April 25, 2006. (b) The Bank disclosed the total amount of non-performing loans and overdue receivables exempted from reporting to the competent authority as debt liquidation program and restructuring program in accordance with the Jin-Guan-Yi Letter Jin-Guan-Yin (1) No. 09700318940 of the FSC dated September 15, 2008.	Total amount of non-performing loans exempted from reporting to the competent authority Total amount of overdue receivables exempted from reporting to the competent authority Amounts exempted from reporting to the competent authority under debt negotiation and the contract (Note (a)) $ 3,213 $ 49,655 Perform in accordance with debt liquidation program and restructuring program (Note (b)) 50,100 120,228 Total $ 53,313 $ 169,883 Explanation: (a) The Bank disclosed the total amount of non-performing loans and overdue receivables exempted from reporting to the competent authority as debt negotiation in accordance with the Jin-Guan-Yi Letter (1) No. 09510001270 of the FSC dated April 25, 2006. (b) The Bank disclosed the total amount of non-performing loans and overdue receivables exempted from reporting to the competent authority as debt liquidation program and restructuring program in accordance with the Jin-Guan-Yi Letter Jin-Guan-Yin (1) No. 09700318940 of the FSC dated September 15, 2008.	Total amount of non-performing loans exempted from reporting to the competent authority Total amount of overdue receivables exempted from reporting to the competent authority Amounts exempted from reporting to the competent authority under debt negotiation and the contract (Note (a)) $ 3,213 $ 49,655 Perform in accordance with debt liquidation program and restructuring program (Note (b)) 50,100 120,228 Total $ 53,313 $ 169,883 Explanation: (a) The Bank disclosed the total amount of non-performing loans and overdue receivables exempted from reporting to the competent authority as debt negotiation in accordance with the Jin-Guan-Yi Letter (1) No. 09510001270 of the FSC dated April 25, 2006. (b) The Bank disclosed the total amount of non-performing loans and overdue receivables exempted from reporting to the competent authority as debt liquidation program and restructuring program in accordance with the Jin-Guan-Yi Letter Jin-Guan-Yin (1) No. 09700318940 of the FSC dated September 15, 2008.	Total amount of non-performing loans exempted from reporting to the competent authority Total amount of overdue receivables exempted from reporting to the competent authority Amounts exempted from reporting to the competent authority under debt negotiation and the contract (Note (a)) $ 3,213 $ 49,655 Perform in accordance with debt liquidation program and restructuring program (Note (b)) 50,100 120,228 Total $ 53,313 $ 169,883 Explanation: (a) The Bank disclosed the total amount of non-performing loans and overdue receivables exempted from reporting to the competent authority as debt negotiation in accordance with the Jin-Guan-Yi Letter (1) No. 09510001270 of the FSC dated April 25, 2006. (b) The Bank disclosed the total amount of non-performing loans and overdue receivables exempted from reporting to the competent authority as debt liquidation program and restructuring program in accordance with the Jin-Guan-Yi Letter Jin-Guan-Yin (1) No. 09700318940 of the FSC dated September 15, 2008.
December 31, 2015	Total amount of overdue receivables exempted from reporting to the competent authority	$ 36,821	123,728	$ 160,549	December 31, 2014	Total amount of overdue receivables exempted from reporting to the competent authority	$ 49,655	120,228	$ 169,883
	Total amount of non-performing loans exempted from reporting to the competent authority	$ 2,312	44,475	$ 46,787		Total amount of non-performing loans exempted from reporting to the competent authority	$ 3,213	50,100	$ 53,313
		Amounts exempted from reporting to the competent authority under debt negotiation and the contract (Note (a))	Perform in accordance with debt liquidation program and restructuring program (Note (b))	Total			Amounts exempted from reporting to the competent authority under debt negotiation and the contract (Note (a))	Perform in accordance with debt liquidation program and restructuring program (Note (b))	Total

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c. Profile of concentration of credit risk and credit extensions of the FCB

	December 31,2015	December 31,2015	December 31,2015
Ranking (Note І)	Type of industry (Note П)	Total outstanding loan amount (Note Ш)	Total outstanding loan amount/FCB net worth of the current year (%)(Note IV)
1 2 3 4 5 6 7 8 9 10	A. Marine freight forwarder B. Group Iron and Steel Rolls over Extends and Crowding C. Group-Petroleum and Coal Products Manufacturing D. Group Liquid Crystal Panel and Components Manufacturing E. Group Retailing F. Group Investment Consultation G. Group Man-made Fiber Spinning Industry H. Group Unclassified Other Financial Intermediation I. Group Property Leasing J. GroupReal EstateDevelopment	$ 22,101,493 11,069,000 10,897,221 10,823,590 10,419,801 10,408,138 9,838,751 9,784,845 9,035,982 8,139,543	12.05% 6.03% 5.94% 5.90% 5.68% 5.67% 5.36% 5.33% 4.92% 4.44%

	December 31,2014
Ranking (Note І)	Type of industry (Note П)	Total outstanding loan amount (Note Ш)	Total outstanding loan amount/FCB net worth of the current year (%)(NoteIV)
1 2 3 4 5 6 7 8 9 10	A. Group Air Transportation B. Group Visual Display and Terminal Service Manufacturing C. Group-Petroleum and Coal Products Manufacturing D. Group Liquid Crystal Panel and Components Manufacturing E. Group Iron and Steel Rolls over Extends and Crowding F. Group Unclassified Other Financial Intermediation G. Group Man-made Fiber Spinning Industry H.Group Investment Consultation I. Group Real Estate Development J. GroupAir Transportation	$ 21,498,630 15,037,812 14,946,777 13,678,530 10,311,498 10,099,152 9,319,721 9,078,442 8,474,639 8,340,321	14.03% 9.82% 9.76% 8.93% 6.73% 6.59% 6.08% 5.93% 5.53% 5.44%
Note:

I. Ranking the top ten enterprise groups other than government and government enterprise according to their total outstanding loan amount.

II. Definition of enterprise group is based on the Article 6 of Supplementary Provisions to the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings.

172 • FIRST FINANCIAL HOLDING CO., LTD.

III. Total outstanding loan amount is the sum of balances of all types of loans (including import negotiation, export negotiation, bills discounted, overdraft, short-term unsecured loan, short-term secured loan, margin loans receivable, medium-term unsecured loan, medium-term secured loan, long-term unsecured loan, long-term secured loan and overdue loan), purchases in remittances, without recourse factoring, acceptance receivable and guarantees.

E. Liquidity risk

(A) Definition and resource of liquidity risk

The liquidity risk of the First Group refer to a financial loss when assets are not convertible or not enough financing aid can be obtained to inject fund for the financial liabilities soon to be matured. For instance, the client terminates the deposit contract in advance, or financing channel of call loan becomes difficult due to market influence, or deterioration on the credit default rate giving rise to unusual fund collection, difficulty in converting the financial instrument and interest sensitive insurer exercise the right to terminate contract in advance. Above events may mitigate the cash inflows from loan origination, transactions and investing activities from the lease subsidiaries.

Liquidity risk exists in the Bank’s operation, which may be given rise by specific event of various industries or overall market movement, such as liquidation protocol of deposit or call loan payment, source of loan or time required for asset liquidation are affected by various industries or certain overall market events, including but not limited to insufficient depth of market, market disorder, low liquidity on funds, credit event, merging or acquisition activities, systematic impact and natural disasters.

(B) Procedures and evaluation method used for liquidity risk management

Please see Note 12(2)C for the risk controlling regulations and procedures

In order to prevent liquid risk that gives rise to operating risk, crisis reaction procedures have been set up in relation to liquidity risk and fund liquidity gap shall be monitored on a regular basis.

Management procedure and evaluation method for the liquidity risk of the First Group are as follows:

a. The subsidiary, FCB

Procedure

In consideration of the operating demand, the sources of fund need to be diverse and stable. The use of fund should avoid high concentration, and the liquid assets held should take precedence of highly liquid earning assets of high quality.

In accordance with the “Management policy of assets and liabilities” and “Management principle of liquidity and interest risk”, risk management division is the investigation unit for liquidity risk indicator. Finance division is the execution unit for fund transferring. Also, attention needs to be paid on the movement of market condition and day-to-day capital liquidity to ensure appropriate liquidity and long-term profitability. Unless

2015 ANNUAL REPORT • 173

otherwise indicated by offshore branches, sufficient liquidity shall be maintained in accordance with the local competent authorities.

Risk management division sets up liquid position or indicator limit by the duration and implements after obtaining the approval from assets and liabilities management committee and Board of Directors. Each liquidity risk monitoring indicator are assessed and appraised regularly in the meeting of assets and liabilities management committee.

Risk management division is responsible for reporting the assets and liabilities management committee, risk management committee and Board of Directors to represent the liquidity risk and other monitoring result.

Evaluation method

The content of the liquidity risk report mainly used to estimate cash flow from various business line and the effects on fund transferring so that early warning area and target goal can be set up for cash gap and relevant indicator in order to control both under the tolerable risk limit.

Risk Management Division regularly makes “Analysis table for cash flow gap” and “Adjustment table for cash flow gap” to ensure that the cash flow gap is within the granted limit and reports to the management in relation to fund liquidity matters. Given that the limit has been reached or an obvious deteriorated indicator shown internally or externally, immediate escalation should be made to the assets and liabilities management committee for further response action and report to the Board of Directors. Given the liquidity risk, action shall be taken in accordance with “Contingent plan for liquidity risk”.

b. The subsidiary, FS

Procedure

In order to maintain proper liquidity and security, enhance liquidity risk management, increase return on capital utilization and integrate business operation, the management, planning and risk controlling execution of liquidity risk is carried out in accordance with “Regulations Governing the Capital Liquidity Risks”.

In addition to operating funds and long-term investment of various businesses, proper revolving fund is required for the daily operation. Additionally the remaining capital, in principle, should hold liquid and superior earning assets in avoidance of high concentration according to the “Regulations Governing the Acquisition of Funds and Utilization” of FS. The responsible unit for capital transferring adjusts liquidity gap based on the daily capital liquidity volume and market movement to ensure appropriate liquidity.

In the event of credit rating being downgraded, financial crisis, natural disaster or other irresistible event which gives rise to insufficient liquidity, strategic actions should be taken based on the guidelines for crisis management of FS.

174 • FIRST FINANCIAL HOLDING CO., LTD.

Evaluation method

To manage liquidity risks, FS is required to maintain the lowest liquidity ratio by the competent authorities and make “Structural Analysis on Maturities of Assets and Liabilities” by month. The liquidity gap is computed based on the remaining time before maturities of assets and liabilities. In general, accumulative gap of each period should be more than 0 and is submitted to the management for approval. If the gap for accounts located in 1-10 days is less than 0 in “Structural Analysis on Maturities of Assets and Liabilities”, specific adjustment on the balance structure is needed in an effort to make the gap become greater than 0.

c. The subsidiary, FALI

Procedure

Liquidity risk refers to a gap between supply and demand of funds due to inability to acquire necessary and sufficient supply of funds by reasonable cost within a reasonable time, or the risk of loss FALI may assume when it has to sell its asset at a price lower than market price in order to acquire necessary supply of funds. FALI’s working capital is sufficient for daily operations, therefore there is no liquidity risk arising from inability to raise fund for fulfilment of contractual obligations. Most of FALI’s investments in bonds and stocks have an active market. Thus FALI expects that its financial assets can be sold at a price close to the fair value in the market. In order to ensure sufficient funds for fulfilling liabilities as maturity comes due or meeting the demands for increase in assets, FALI reconciles funds by deposits of financial institutions, short-term notes and bills (including bills and bonds under repurchase or resale agreements), and monetary funds. To cope with requirements for fund liquidity, FALI estimates yearly and monthly net cash inflow (outflow) according to revenues and expenditures from annual plan, and checks cash inflow and outflow every day in accordance with the fund procurement procedures for basis of fund allocation.

Evaluation method

In relation to the nature and purposes of holding, the investment segment evaluates market liquidity of the underlying investment with consideration of the commensuration between market trading volume and the position held. As most of FALI’s non-derivative financial liabilities mature within one year, there is no significant risk.

d. The subsidiary, FSIT

Procedure

In addition to the long-term and short-term investment, the subsidiary, FSIT needs to maintain proper operating capital for daily operations. Additionally the remaining capital, in principle, should hold liquid and superior earning assets in avoidance of high concentration and is processed according to the authorization rules of FSIT.

The Finance department should adjust the liquidity gap to maintain proper liquidity according to the daily fund liquidity and market movement and make relating structural analysis by month, which is reported to the General Manager and acknowledged to

2015 ANNUAL REPORT • 175

responsible risk managing segments. In the event of credit rating being downgraded, financial crisis, natural disaster or other unavoidable event which gives rise to severe insufficient liquidity, strategic actions should be taken based on the guidelines for crisis management of FSIT.

Evaluation method

According to “Structural Analysis on Maturities of Assets and Liabilities” made every month, the capital gap is calculated based on the remaining period of time by asset or liability, which shall be acknowledged to the responsible risk managing segment after reporting to the General Manager. In general, the gap should be greater than 0. If the capital gap is less than 0 for the accounts under 0-30 days, specific adjustment on the balance structure is needed in an effort to make the gap become greater than 0.

(C) Duration analysis for the financial assets and liabilities held for liquidity risk management are as follows:
a. Financial assets held for liquidity risk management

In order to fulfill the payment obligation and potential emergent fund demand in the market, as well as manage the liquidity risk at the same time, sound earning assets held by the First Group with high liquidity include cash and cash equivalents, deposits and call loans, financial assets at fair value through profit and loss, bills discounted and call loan, term receivables, available-for-sale financial assets, and bonds investment without an active market, etc.

b. Duration analysis for the financial assets and liabilities held for liquidity risk management

The following table illustrates the cash inflow and outflow of financial assets and liabilities of the First Group held for liquidity risk management based on the remaining maturity from the balance sheet date to the contract expiration date. While the amounts disclosed in the table are not discounted by contract cash flow, certain accounts may differ from the responding accounts in the balance sheet.

176 • FIRST FINANCIAL HOLDING CO., LTD.

December 31, 2015 0 - 30 days 31 - 90 days 91 - 180 days 181 days – 1 year 1 year or above Total 1.Primary capital inflow upon maturity Non-derivative financial instruments Cash and due from other banks $ 71,282,054 $ 7,125,996 $ 6,268,574 $ 8,839,140 $ 28,575,812 $ 122,091,576 Call loans and overdrafts 129,807,470 27,846,079 8,944,062 1,565,203 - 168,162,814 Bonds (bills) sold under a resale agreement 46,214 1,500,000 - - - 1,546,214 Securities investment 311,905,686 12,520,844 13,639,502 51,729,719 157,137,429 546,933,180 Loans discounted 146,218,185 171,649,609 189,860,716 246,237,919 746,681,443 1,500,647,872 Interest receivables and income 3,763,740 565,229 287,412 580,878 55,999 5,253,258 Other capital inflow upon maturity 57,746,763 9,606,376 6,103,963 5,184,110 6,672,543 85,313,755 Derivative financial instruments Non-hedge FX contracts (swaps and forwards) 909,770 1,134,965 1,018,067 200,851 - 3,263,653 FX margin trading 216,518 36,698 15,156 - - 268,372 Non-delivery forwards 455 1,870 - - - 2,325 FX and involving stock options held 252,088 386,444 627,116 1,585,278 625,131 3,476,057 Commodity options held 181 - - 83,306 - 83,487 Product swap contract 4,298 - - - - 4,298 Cross currency swap contracts (exclusive of notional principal) 330,429 95,873 211,682 222,014 77,894 937,892 Interest rate related contracts (interest rate swaps and asset swap excluding the principal of bonds) 86,845 12,667 10,898 78,799 2,484,768 2,673,977 Futures 99,471 33,152 - - 94,403 227,026 Total 722,670,167 232,515,802 226,987,148 316,307,217 942,405,422 2,440,885,756 2.Primary capital outflow upon maturity Non-derivative financial instruments Call loans, overdrafts and due to other banks 94,831,872 25,342,105 4,694,577 637,391 3,075,448 128,581,393 Demand deposits 53,444,795 51,613,086 45,780,069 68,716,673 992,138,868 1,211,693,491 Time deposits 135,067,759 201,758,038 139,033,234 235,281,298 22,708,753 733,849,082 Interest payables 1,347,395 414,237 320,162 328,597 113,938 2,524,329 Commercial papers payables 11,007,896 976,338 - - - 11,984,234 Bonds (bills) purchased under a repurchase agreement 4,280,017 1,401,758 636,191 1,190 - 6,319,156 Financial liabilities at fair value through profit and loss – non-derivatives 18,399 - - 677,493 21,645,627 22,341,519 Bonds payable - - - - 42,300,000 42,300,000 Other capital outflow upon maturity 66,807,845 5,213,375 5,422,096 1,238,334 28,488,637 107,170,287 Derivative financial instruments Non-hedge FX contracts (swaps and forwards) 768,777 506,531 391,427 150,834 2,738 1,820,307 FX margin trading 93,990 193 - - - 94,183 Non-delivery forwards 5,935 4,000 838 - - 10,773 Issuing FX and stock options 265,130 393,008 631,501 1,585,890 625,193 3,500,722 Commodity options written 728 - - 83,537 - 84,265 Product swap contract 4,309 - - - - 4,309 Cross currency swaps (excluding the notional principal) - - 51,532 43,835 66,975 162,342 Interest rate related contracts (interest rate swaps and asset swaps excluding the principal of bonds) 98,644 14,966 13,636 123,519 1,993,936 2,244,701 Liabilities for issuance of call (put) warrants 18,806 9,403 3,134 - - 31,343 Convertible bond asset swap option - - 121 7,493 43,792 51,406 Total 368,062,297 287,647,038 196,978,518 308,876,084 1,113,203,905 2,274,767,842 3.Gap upon maturity $ 354,607,870 ($ 55,131,236) $ 30,008,630 $ 7,431,133 ($ 170,798,482) $ 166,117,914	December 31, 2015 0 - 30 days 31 - 90 days 91 - 180 days 181 days – 1 year 1 year or above Total 1.Primary capital inflow upon maturity Non-derivative financial instruments Cash and due from other banks $ 71,282,054 $ 7,125,996 $ 6,268,574 $ 8,839,140 $ 28,575,812 $ 122,091,576 Call loans and overdrafts 129,807,470 27,846,079 8,944,062 1,565,203 - 168,162,814 Bonds (bills) sold under a resale agreement 46,214 1,500,000 - - - 1,546,214 Securities investment 311,905,686 12,520,844 13,639,502 51,729,719 157,137,429 546,933,180 Loans discounted 146,218,185 171,649,609 189,860,716 246,237,919 746,681,443 1,500,647,872 Interest receivables and income 3,763,740 565,229 287,412 580,878 55,999 5,253,258 Other capital inflow upon maturity 57,746,763 9,606,376 6,103,963 5,184,110 6,672,543 85,313,755 Derivative financial instruments Non-hedge FX contracts (swaps and forwards) 909,770 1,134,965 1,018,067 200,851 - 3,263,653 FX margin trading 216,518 36,698 15,156 - - 268,372 Non-delivery forwards 455 1,870 - - - 2,325 FX and involving stock options held 252,088 386,444 627,116 1,585,278 625,131 3,476,057 Commodity options held 181 - - 83,306 - 83,487 Product swap contract 4,298 - - - - 4,298 Cross currency swap contracts (exclusive of notional principal) 330,429 95,873 211,682 222,014 77,894 937,892 Interest rate related contracts (interest rate swaps and asset swap excluding the principal of bonds) 86,845 12,667 10,898 78,799 2,484,768 2,673,977 Futures 99,471 33,152 - - 94,403 227,026 Total 722,670,167 232,515,802 226,987,148 316,307,217 942,405,422 2,440,885,756 2.Primary capital outflow upon maturity Non-derivative financial instruments Call loans, overdrafts and due to other banks 94,831,872 25,342,105 4,694,577 637,391 3,075,448 128,581,393 Demand deposits 53,444,795 51,613,086 45,780,069 68,716,673 992,138,868 1,211,693,491 Time deposits 135,067,759 201,758,038 139,033,234 235,281,298 22,708,753 733,849,082 Interest payables 1,347,395 414,237 320,162 328,597 113,938 2,524,329 Commercial papers payables 11,007,896 976,338 - - - 11,984,234 Bonds (bills) purchased under a repurchase agreement 4,280,017 1,401,758 636,191 1,190 - 6,319,156 Financial liabilities at fair value through profit and loss – non-derivatives 18,399 - - 677,493 21,645,627 22,341,519 Bonds payable - - - - 42,300,000 42,300,000 Other capital outflow upon maturity 66,807,845 5,213,375 5,422,096 1,238,334 28,488,637 107,170,287 Derivative financial instruments Non-hedge FX contracts (swaps and forwards) 768,777 506,531 391,427 150,834 2,738 1,820,307 FX margin trading 93,990 193 - - - 94,183 Non-delivery forwards 5,935 4,000 838 - - 10,773 Issuing FX and stock options 265,130 393,008 631,501 1,585,890 625,193 3,500,722 Commodity options written 728 - - 83,537 - 84,265 Product swap contract 4,309 - - - - 4,309 Cross currency swaps (excluding the notional principal) - - 51,532 43,835 66,975 162,342 Interest rate related contracts (interest rate swaps and asset swaps excluding the principal of bonds) 98,644 14,966 13,636 123,519 1,993,936 2,244,701 Liabilities for issuance of call (put) warrants 18,806 9,403 3,134 - - 31,343 Convertible bond asset swap option - - 121 7,493 43,792 51,406 Total 368,062,297 287,647,038 196,978,518 308,876,084 1,113,203,905 2,274,767,842 3.Gap upon maturity $ 354,607,870 ($ 55,131,236) $ 30,008,630 $ 7,431,133 ($ 170,798,482) $ 166,117,914	226,987,148 316,307,217 942,405,422 2,440,885,756	4,694,577 637,391 3,075,448 128,581,393 45,780,069 68,716,673 992,138,868 1,211,693,491 139,033,234 235,281,298 22,708,753 733,849,082 320,162 328,597 113,938 2,524,329 - - - 11,984,234 636,191 1,190 - 6,319,156 - - 677,493 21,645,627 22,341,519 - - - 42,300,000 42,300,000 5,422,096 1,238,334 28,488,637 107,170,287 391,427 150,834 2,738 1,820,307 - - - 94,183 838 - - 10,773 631,501 1,585,890 625,193 3,500,722 - - 83,537 - 84,265 - - - - 4,309 - 51,532 43,835 66,975 162,342 13,636 123,519 1,993,936 2,244,701 3,134 - - 31,343 - 121 7,493 43,792 51,406	196,978,518 308,876,084 1,113,203,905 2,274,767,842	) $ 30,008,630 $ 7,431,133 ($ 170,798,482) $ 166,117,914
	$ 7,125,996 27,846,079 1,500,000 12,520,844 171,649,609 565,229 9,606,376 1,134,965 36,698 1,870 386,444 95,873 12,667 33,152	232,515,802	25,342,105 51,613,086 201,758,038 414,237 976,338 1,401,758 5,213,375 506,531 193 4,000 393,008 14,966 9,403	287,647,038	$ 55,131,236

2015 ANNUAL REPORT • 177

$ 27,711,108 $ 138,382,473 - 96,188,392 - - 1,882,206 121,232,734 464,615,311 724,858,189 1,517,234,323 16,190 4,768,633 7,778,615 69,026,931 4,334 4,337,793 - - 206,619 - - 26,777 512,911 1,816,193 - - 106,808 8,085 1,119,174 1,418,797 1,492,245 - 104,232 289,962	883,645,195 2,301,493,840	3,693,382 122,810,134 922,919,459 1,106,346,572 16,177,556 717,623,827 34,543 2,387,829 - - 10,693,042 - 8,723,114 - 13,802,074 18,004,147 35,300,000 41,900,000 51,252,133 131,253,749 8,014 1,503,597 - - 29,435 - - 83,802 513,025 1,900,183 - - 106,781 34,909 76,596 1,454,705 1,503,926 - - 126,134 - - 1,023 51,802 51,948	1,045,241,602 2,165,125,839	) ($ 161,596,407) $ 136,368,001
$ 9,172,346 243,793 27,058,615 240,491,357 591,228 5,445,683 377,634 710,475 610,416 22,588	284,724,135	399,882 56,832,190 231,724,410 347,465 49,829 5,700,000 1,758,194 110,653 787,537 41,687 22,379 146	297,774,372	$ 13,050,237
	219,842,191	3,357,487 37,172,765 135,233,698 265,691 - 1,096,191 - 4,202,073 - 900,000 8,020,806 229,980 - - 12,940 275,619 40,368 - - 16,240 - - - - - -	190,823,858	) $ 29,018,333 (
$ 9,573,719 23,637,824 351,000 15,940,813 192,418,257 638,210 9,926,618 1,507,371 13,397 17,787 221,806 31,118 173,104 1,897 21,644	254,474,565	20,980,012 42,695,697 194,316,042 365,472 584,213 2,145,111 6,504,793 640,538 30,913 222,619 31,118 3,964	268,520,492	$ 14,045,927

178 • FIRST FINANCIAL HOLDING CO., LTD.

Maturity analysis for above demand deposits are amortized to each period based on historical experience of banking subsidiary. Given that all the demand deposits have to be paid in the shortest period, as of December 31, 2015 and 2014, the payment on period of 0-30 days will be increased by $1,158,248,696 and $1,059,620,111, respectively.

(D)Maturity analysis for items off the balance sheet

The loans, loan commitment and letters of credit include unused loan commitments and unused letters of credit issued. Financial guarantee contract refers that the First Group represent a guarantor and the issuer of the guaranteed letter of credit.

Terms of financial instruments contracts off the balance sheet which may require fulfillment at the earliest are all less than a year:

at the earliest are all less than a year:
Financial instruments contracts	December 31,2015	December 31,2014
Unused loan commitments (Note) Unused letters of credit issued Variousguarantees	$ 119,931,228 24,161,021 86,407,220	$ 135,195,659 31,040,109 79,865,265
Total	$ 230,499,469	$ 246,101,033

Note: Above unused loan commitments include irrevocable loan commitment except for the significant adverse movement.

(E)Maturity analysis on lease contract and capital expense commitment

Lease commitment of the First Group includes operating lease and finance lease.

Operating lease commitment is the minimum rental that the First Group should make as a lessee or lessor under the lease term not revocable.

Capital expenditure commitment of the First Group refers to the capital expenses spent on the contract commitment in order to acquire the building and equipment.

Please refer to the below table for maturity analysis of lease contract commitment and capital expenditure commitment of the First Group:

December 31,2015	Lessthan 1year	1 to5years	Morethan 5years	Total
Lease commitment Operating lease expense (Lessee) Operatingleaseincome (Lessor)	$ 241,669 ( 587,856)	$ 1,566,387 ( 1,405,009)	$ 362,618 ( 234,655)	$ 2,170,674 ( 2,227,520)
Total	( $ 346,187)	$ 161,378	$ 127,963	($ 56,846)

December 31,2014	Lessthan 1year	1 to5years	Morethan 5years	Total
Lease commitment Operating lease expense (Lessee) Operatinglease income(Lessor)	$ 196,421 ( 528,353)	$1,880,683 ( 1,459,498)	$ 335,465 ( 161,921)	$2,412,569 ( 2,149,772)
Total	( $ 331,932)	$ 421,185	$ 173,544	$ 262,797
The present value of finance lease has been recognized under finance lease liabilities. As the
amount is immaterial and the liquidity risk is low, no analysis on its maturity value will be
taken.

2015 ANNUAL REPORT • 179

(F)Disclosure required by Regulations Governing the Preparation of Financial Statements by Financial Holdings Companies
a. Structure analysis of NTD time to maturity (FCB)

	a. Structure analysis of NTD time to maturity (FCB)	a. Structure analysis of NTD time to maturity (FCB)	a. Structure analysis of NTD time to maturity (FCB)	a. Structure analysis of NTD time to maturity (FCB)	a. Structure analysis of NTD time to maturity (FCB)	a. Structure analysis of NTD time to maturity (FCB)	a. Structure analysis of NTD time to maturity (FCB)	a. Structure analysis of NTD time to maturity (FCB)
	Expressed In Thousands of New Taiwan Dollars
		December 31,2015
		Total	0~10 days	11~30days	31~90 days	91~180 days	181 days ~1year	Over 1year
Primary capital inflow upon maturity		$1,911,683,905	$ 320,835,979	$ 240,386,384	$ 177,393,100	$ 159,643,833	$ 269,516,966	$ 743,907,643
Primary capital outflow upon maturity		( 2,613,667,734)	( 120,050,290)	( 170,673,439)	( 344,317,419)	( 358,664,205)	( 477,390,305)	(1,142,572,076)
Gap		($ 701,983,829)	$ 200,785,689	$ 69,712,945	($ 166,924,319)	($ 199,020,372)	($ 207,873,339)	($ 398,664,433)

		December 31,2014
		Total	0~10 days	11~30days	31~90 days	91~180 days	181 days ~1year	Over 1year
Primary capital inflow upon maturity		$ 1,796,519,207	$ 287,320,796	$ 215,095,351	$ 163,361,758	$ 164,529,275	$ 249,004,767	$ 717,207,260
Primary capital outflow upon maturity		( 2,551,020,779)	( 115,633,139)	( 154,631,388)	( 322,559,377)	( 372,693,217)	( 512,571,377)	(1,072,932,281)
Gap		($ 754,501,572)	$ 171,687,657	$ 60,463,963	($ 159,197,619)	($ 208,163,942)	($ 263,566,610)	($ 355,725,021)

Note: The amounts listed above represent the funds denominated in New Taiwan dollars only

b. Structure analysis of USD time to maturity of the Bank (FCB)

	b. Structure analysis of USD time to maturity of the Bank (FCB)	b. Structure analysis of USD time to maturity of the Bank (FCB)	b. Structure analysis of USD time to maturity of the Bank (FCB)	b. Structure analysis of USD time to maturity of the Bank (FCB)	b. Structure analysis of USD time to maturity of the Bank (FCB)	b. Structure analysis of USD time to maturity of the Bank (FCB)	b. Structure analysis of USD time to maturity of the Bank (FCB)
	Expressed In Thousands of US Dollars
	December 31,2015
		Total	0~30 days	31~90 days	91~180 days	181 days ~ 1year	Over 1year
Primary capital inflow upon maturity		$ 26,692,829	$ 10,825,317	$ 5,483,435	$ 3,062,287	$ 1,762,661	$ 5,559,129
Primary capital outflow upon maturity		( 32,635,347)	( 10,127,007)	( 6,943,138)	( 4,157,484)	( 5,310,638)	( 6,097,080)
Gap		($ 5,942,518)	$ 698,310	($ 1,459,703)	($ 1,095,197)	($ 3,547,977)	($ 537,951)

December 31,2014
		Total	0~30 days	31~90 days	91~180 days	181 days ~ 1year	Over 1year
Primary capital inflow upon maturity		$ 19,420,139	$ 7,113,767	$ 4,617,761	$ 2,220,219	$ 1,457,970	$ 4,010,422
Primary capital outflow upon maturity		( 28,316,148)	( 7,912,874)	( 4,720,992)	( 3,453,002)	( 5,044,740)	( 7,184,540)
Gap		($ 8,896,009)	($ 799,107)	($ 103,231)	($ 1,232,783)	($ 3,586,770)	($ 3,174,118)

Note: The amounts listed above represent the items denominated in U.S. dollars.

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180 • FIRST FINANCIAL HOLDING CO., LTD.

F.Market risk

(A) Market risk definition

Market risk occurs when the market price fluctuates leading to movement in fair value of financial instrument held by the First Group in or off the balance sheet or the future cash flow. The risk factors that could give rise to market price movement usually include interest rate, exchange rate, equity securities and instrument price. Any movement in above risk factors could result in risk of fluctuation on net profit or value of investment portfolio held by the First Group.

The market risks that the First Group faces mainly are equity securities, interest rate and exchange rate risk. Market risk position of equity securities mainly include domestic listed stocks, domestic stock index options and stock index futures and call and put warrants, etc. Positions with interest rate risk mainly include: bonds and interest-derivative instruments, such as fixed and floating interest swap and bond option, etc. Positions with exchange rate risk mainly include: the consolidated positions invested by the subsidiaries, indirect subsidiaries of the First Group, such as various derivatives denominated in foreign currency, credit-linked bonds, US government bonds, and other foreign bonds, etc.

(B) Goal of market risk management

In order to effectively identify, evaluate, control and monitor the market risks of the First Group, as well as to enhance the managing mechanism of market risk, please see Note 12(2) C. for the risk management policies and controlling procedures that the Company places for subsidiaries within the First Group.

Major subsidiaries of the First Group have various market risk management policies, standards, key points and the regulations from competent authorities and the Company to comply.

a. The Bank sets up “Management policy for market risk”, “Management standards for market risk”, “Management standards for liquidity and interest rate risk” and “Management guidelines for market risk” and others in an attempt to effectively regulate market risk and ensure that the market risk is under the Bank’s bearable capacity. The Bank divided market risk management into trading book and banking book. Interest rate risk management in relation to trading book and banking book is provided in Note 12(2)F � G) and (H). ‘Trading book’ refers to A. positions held with an intention to earn profit from interest rate movement or price variance between the purchase price and selling price, B. positions held for hedging purpose, and C. interest rate related instruments positions and equity securities positions held for brokerage or proprietary trading on which regular market value assessment and capital provision against market risk shall be made. Financial instrument positions not classified as trading book are classified into the scope of ‘banking book’.
b. FS breaks down market risks by segment and sets up “Risk Management Procedure and Implementation Standards” and guidelines for other business management, through which risk control procedures are planned and implemented.
c. The subsidiary, FALI sets up “Investment Management Policy” to regulate relating controlling process and procedures for the investments on financial instruments, and regularly manages the risk exposure through the “Investment Execution Committee”.

2015 ANNUAL REPORT • 181

In order to identify, evaluate, control and monitor market risks that the First Group faces and strengthen managing mechanism for market risks, management policies and procedures have been set up to effectively manage market risk and ensure that market risk is controlled under a bearable capacity.

Policy

The Board of FCB is the highest command and supervisory unit in charge of the granting of risk management policy, major risk assumption limit and relevant authorization. The Risk Management Committee under the Board of Directors executes various risk management implementations as resolved and granted by the Board and performs risk supervision. In addition, risk management division set up independent from the business unit is responsible for establishing market risk management structure for the market risk management.

Procedure

Please see Note 12(2)C or the risk managing regulations and controlling procedures that the Company places for each subsidiary within the Group.

Each key subsidiary sets up stop-loss point, pre-warning program, market risk limit and trading authorization, annual risk limit of investment portfolio respectively as resolved and approved by the Board of Directors. Followed by the annual reviews, revision and adjustment may be made depending on the actual situation.

a. The risk management division of the Bank assesses various risk indicators regularly as required by the policies and monitors various risk indicators to be within the limits authorized by the Board of Directors. Any excess over the limits and the usage level of risk limits are summarized and reported to the Board of Directors, risk management committee, general manager, vice-general manager and other related segments.

Business unit, before the engagement in new transaction or developing new market, should identify and evaluate risk in compliance with related procedures. The evaluation module before adoption should be verified through module testing technicians in order to effectively identify various market risks. For financial instruments that cannot be assessed by market price or module evaluation, the risks should be transferred by back-to-back method to avoid that the Bank may assume uncertain market risk.

b. The subsidiary, FS controls the trading limits to the traders directly through the on-line trading system. When developing a new product or business plan, or when the method, model and assumption are significantly altered in relation to the authorization standards, approval procedures, risk management and controlling procedures, all should be discussed and reviewed by the risk managing unit and audit segment, and initialed by the General Manager.
(D) Management procedure for market risk

The First Group’s management procedure for market risk of interest rate risk, exchange risk and equity securities are as follows:

182 • FIRST FINANCIAL HOLDING CO., LTD.

a. Identification and evaluation

Risk identification: When there is any new product, market or currency of a financial instrument, market risk factors and market risk source should first be identified before the underwriting is permitted.

Risk evaluation: Establish appropriate risk indicators and prescribe risk limits for management. The significant risk indicators of the subsidiaries include, but are not limited to positions, gains and losses, and sensitivity measures (PVO1, Delta, Vega, and Gamma). The evaluation of investment portfolios are affected by interest risk, exchange rate risk and equity securities.

b. Monitoring and report

For financial instrument evaluated by the market price, the information of independent source should be assessed at least once a day. For those evaluated by modules, the assumption and input used in the evaluation module as provided by the market data of Reuters and Bloomberg, after the module experience is tested and granted, the calculation on evaluation and sensitivity may be carried on, which is used to control the risk incurred through investment portfolio.

The key subsidiaries of the First Group establish risk reporting programs and procedures. The risk management division should regularly present the daily report, monthly report and other risk management report to the Board of Directors and senior management based on the needs of segment heads, general manager, general president or the Board of Directors to report interest risk, exchange risk and equity securities exposure, including gain and loss, trading position, various risk indicators, risk limit usage, all limit excess or fault and so on, and regularly follow-up and send out warning reminder to ensure corrective action has been taken in a timely manner and in compliance with regulations.

(E) Risk evaluation method (market risk evaluation technique)

In order to effectively evaluate market risks, each key subsidiary in the First Group sets up methods and limits to measure evaluate risks and performs market price evaluations for the financial instrument position held on a daily/weekly basis, which are then reported to the Board or each responsive unit regarding the positions held, gains and losses on transactions and market risks on a weekly/monthly basis.

a. The subsidiary, FCB

In order to effectively evaluate the market risks, the Bank establishes appropriate risk indicators and measurement instruments based on each investment portfolio and business characteristics of trading book and banking book. Meanwhile, by setting up risk limits and controlling mechanism, risk limit control is regularly reported to each responsible segment and reported to the Board of Directors. Above risk indicators include: positions, gains and losses, sensitivity indexes (Delta, Gamma, Vega), stress losses and others.

Definitions of various indicators:

PV01: It is the change in related amount of interest rate instrument when the interest rate moves by 1 unit (1bp = 0.01%).

2015 ANNUAL REPORT • 183

Delta: When the price of underlying asset moves by 1 unit that leads to related movement in Delta ratio of the derivative, by which is multiplied the nominal amount to measure to Delta position.

Vega: It is the change in related amount of derivative instrument when the value of underlying asset moves by 1 unit. It is the change in related amount of the interest rate instrument when the interest rate moves by 100 basic units.

Gamma: It is the change in related amount of Delta when the underlying asset value moves by 1 unit.

Interest rate-sensitive instruments are the change in related amount of PV01 that incurred to the interest rate instrument when interest rate moves by unit.

Exchange rate-sensitive instruments are the change in related amount of Delta that incurred to the exchange rate instrument when exchange rate moves by 1% of the unit.

Stress loss: Provided that all other conditions remain constant, it is the effects from ±100bp interest rate movement, ±15% overall market movement of equity securities, ±3% exchange rate fluctuation on New Taiwan Dollars versus major currencies or ±5% exchange rate fluctuation on New Taiwan Dollars versus other currencies.

b. The subsidiaries, FS, FALI and FSIT

Basically, financial instruments are valued through Mark-to-Market. However, if there is no quoted market price available for the public, valuation models may be adopted accompanied with related model controlling rules after verification.

(F) Policy and procedure of risk management on trading book

The so-called trading book includes the financial instrument and physical instrument position held for trading or held for hedging purpose in relation to the trading position. The positions held for trading are instruments held with an attempt to sell in short-term or gain profit or arbitrage from the actual or estimated short-term price fluctuations. For example, self-operating position, discretionary account (such as agent facilitating transaction), position generated through market transaction or the position held to offset another position in the trading book, total or major investment portfolio. For positions not included in above trading book are banking book position.

The Bank establishes specific policy and procedure for the trading strategy of trading book position in order to manage potential market risk of trading position and well control the risk within the limits.

a. Strategy

In order to effectively control market risk and ensure the mobility and adaptability of the trading strategy implemented by sale units, market risk limit of the trading book is set at the level of “investment portfolio” to carry out various assessments and controls. In addition, risk limits of each portfolio are set up according to the trading strategy, types of trading instruments and annual profit objective for better management.

184 • FIRST FINANCIAL HOLDING CO., LTD.

b. Policy and procedure of risk management

In principle, management policy is carried out based on annually revised risk limits of each investment portfolio.

c. Evaluation policy and procedure

Generally, financial instruments are assessed through Mark-to-Market, however, Mark-to-Model may be adopted if there is no fair value in the market. Nonetheless, the model should be independently verified before adoption and relevant guideline model management needs to be set up and implemented accordingly. Evaluation procedure: The risk management unit confirms that the risk evaluation is consistent with the position information posted on the evaluation system at day-end and the market data adopted. In addition, the risk management unit monitors daily evaluation and risk limit and regularly report risk quota usage and limit exceeding event.

d. Evaluation method

The Bank executes stress testing on ±100bp interest rate movement, ±15% equity securities movement, ±3% exchange rate fluctuation and ±5% circumstance movement on a monthly basis and reports to the risk management committee regularly.

(G) Interest risk management for trading book

Risk management on the interest rate of trading book for FCB is as follows:

a. Interest risk definition

Interest risk occurs when there is an adverse movement of interest rate resulting in change in fair value of trading book position held.

b. Management objective

The management objective of interest risk lies in effective identification, evaluation, controlling and monitoring of interest rate to enhance managing mechanism of market risk.

c. Management policy and procedure

In principle, annual risk limits are controlled based on investment portfolio of trading book with interest rate revised annually.

d. Evaluation method

Evaluation is calculated based on the risk-sensitive index verified by system calculation. In addition, stress testing is performed based on +/-100bp annual interest rate movement and reported to the risk management committee regularly.

2015 ANNUAL REPORT • 185

(H) Risk management for banking book interest

Interest risk is the risk that a bank suffers from an adverse movement of interest rate or financial condition of the bank. Interest movement might change the bank’s net interest income and other interest-sensitive incomes which further affects the bank’s earnings. Meanwhile, interest movement could also affect positions in and off the bank’s balance sheet.

The banking book risk management of the Bank is as follows:

a. Strategy

The objective of interest rate management is to improve banks’ adaptability so that the earnings and economic value in the balance sheet can be assessed and managed through avoiding the impact from interest rate movement.

b. Policy and procedure of risk management

According to “Management policy of asset and liability” and “Management guideline for liquidity and interest risk” of the Bank, risk management division is the monitoring unit that is responsible for interest risk index, analysis and monitoring interest-sensitive position, and regular reporting the monitoring result of interest risk to the asset and liability management committee, risk management committee and Board of Directors.

If various interest risk indexes and stress testing results fall in the warning threshold, risk management division should issue warning notice to the asset and liability management committee. However, if interest risk index exceed the planned threshold, it should be reported to the asset and liability management committee for discussing the responding measures, which is followed by relevant business unit and reported to the Board of Directors.

c. Evaluation method

The interest rate risk of the Bank is mainly the repricing gap risk resulting from the difference between maturities and repricing date of banking book assets and liabilities and off balance sheet accounts. In order to stabilize long-term profit and business development at the same time, Risk Management Division sets up various monitoring indicators for interest rate of most common period and executes stress testing, and tests the effects on net interest income and net fair economic value within one year when the market interest rate moves by +/-200 bps, that is Interest Rate Shock from the perspective of earnings and economic value. Every interest rate risk indicator and stress testing result should be reported to management for review.

(I) Risk management for foreign exchange

a. Definition of foreign exchange

Foreign exchange risk occurs when the net foreign position held fluctuates with the currency exchange rate giving rise to an exchange gain or loss. The foreigner exchange risks of financial instruments held by the Group mainly include foreign investment position, spot exchange and forward contract, FX option and other derivative or non-derivative instruments.

186 • FIRST FINANCIAL HOLDING CO., LTD.

b. Objective

The objective of foreign exchange lies in effective identification, evaluation, controlling and monitoring foreign exchange risk of the Company and enhancement of management mechanism for market risk.

c. Management policy and procedure

Management policy for market risk is adjusted based on the annual risk limit revised by foreign exchange trading investment portfolio annually.

d. Evaluation method

Through risk sensitive indicators calculated by the validated system as a benchmark, the Bank regularly carries out testing and reports the results to the risk management committee given that the currency movement is provided at +/-3% and other currency movement at +/-5%.

(J) Risk management for equity securities
a. Definition of equity securities risk

The market risk of the equity securities held by the Company includes the individual risk resulting from market price movement of each equity securities and general market risk resulting from overall market price movement.

b. Risk management objective

The objective for equity risk management lies in effective identification, evaluation, risk controlling and monitoring for the equity securities of the Group and enhancement of managing mechanism for market risk.

c. Management policy

Management policy for market risk is adjusted based on the annual risk limit revised by stock trading investment portfolio annually.

d. Evaluation method

The Bank executes stress testing on +/-15% weighted average index of taiwan stock movement on a monthly basis and reports to the risk management committee regularly.

(K) Market risk assessment techniques

Vale at Risk (VaR)

The VaR model is utilised to measure the maximum potential loss, caused by changes in market risk factors, for investment portfolios under a specific time frame and confidence level. For transaction positions, FCB utilise the VaR model as an instrument to control market risk. Currently, FCB’s standard of measuring market risk is electing the historical simulation method to estimate VaR and setting the maximum potential loss under a 99% confidence interval. The VaR of FCB continually undertakes backtesting in order to assess the accuracy of the model.

2015 ANNUAL REPORT • 187

The Board of Directors of FCB annually re-sets the VaR limit and the risk management departments of FCB conduct the daily controls and management.

	Expressed in thousands of NTD	Expressed in thousands of NTD	Expressed in thousands of NTD
	December 31,2015
	Average	Maximum	Minimum
Foreign exchange VaR	106,238 133,518 65,876 59,454 103,296 30,365 101,705 163,904 54,183 267,397 400,718 150,424
Interest VaR
Equity securities VaR
Total VaR

(L) Foreign exchange risk gap

As of December 31, 2015 and 2014, the following table summarizes financial instruments of foreign denominated assets and liabilities by currency of which the foreign exchange exposure is presented by the carrying amount:

is presented by the carrying amount:
	Expressed In Thousands of New Taiwan Dollars
Financial assets Cash and cash equivalents Due from the Central Bank and call loans to other banks Financial assets at fair value through profit or loss Available-for-sale financial assets Loans discounted Receivables Held-to-maturity financial assets Other financial assets Subtotal-financial assets Financial liabilities Due to Central Bank and others Deposits and remittances Financial liabilities at fair value through profit or loss Other financial liabilities Payables Subtotal-financial liabilities	December 31, 2015		December 31, 2014
	USD	RMB	USD	RMB
	$ 14,613,735$ 9,711,509$ 8,493,732$ 26,551,081 85,895,313 26,291,868 44,145,216 12,665,068 19,288,976 502,495 12,678,633 30,124 15,267,306 9,186,892 6,376,944 1,603,476 252,559,714 15,211,482 273,834,578 10,286,092 25,063,562 7,039,226 20,077,709 6,965,686 16,285,666 11,886,061 17,735,318 7,376,993 1,168,449 9,162,223 562,118 20,747,836 $ 430,142,721 $ 88,991,756 $ 383,904,248 $ 86,226,356
			$ 383,904,248	$ 86,226,356
	$ 86,826,676$ 5,227,671$ 86,991,014$ 5,717,756 368,988,560 74,374,056 297,764,195 75,283,508 21,696,282 117 11,579,640 1,343 57,696 72,625 335,702 206,632 27,376,270 1,408,901 20,643,074 2,736,970
	$ 504,945,484 $ 81,083,370		$ 417,313,625	$ 83,946,209

Note: As of December 31, 2015 and 2014, the exchange rate of USD to NTD was 32.880 and 31.670, respectively. In addition, as of December 31, 2015 and 2014, the exchange rate of RMB to NTD were 4.993 and 5.099, respectively.

(M) Sensitivity analysis

a. Interest rate risk

If the market yield curve shifts upwards or downwards by 20 bps, it could affect the assessed fair value and interest income.

188 • FIRST FINANCIAL HOLDING CO., LTD.

The First Group assumes that yield curve is the only variable when all the other interest curves remain constant and sums up the gain and loss resulting from changes in each yield curve. According to the above estimated net interest income and assessed gain and loss on fair value, sensitivity analysis is as follows:

b. Foreign exchange risk

Given that all the other variables remain constant, every NTD to USD appreciate/depreciate by 2% NTD to RMB appreciate/depreciate by 3% or NTD to AUD and other currencies appreciate/depreciate by 4%, the sensitivity of the gain and loss on the net foreign exchange position held by the First Group is shown in the below table.

c. Equity securities risk

Given that all the other variables remain constant, if the equity price rises/falls by 4% (based on the average interest rate of Taiwan Stock Exchange Market Index in the latest three years), the fair value of listed stocks, emerging stocks in the trading book and other equity interest relating position held by the First Group are shown in the below table:

d. Sensitivity analysis is summarized as follows:

December 31,2015 (Expressed In Thousands of New Taiwan Dollars	December 31,2015 (Expressed In Thousands of New Taiwan Dollars	December 31,2015 (Expressed In Thousands of New Taiwan Dollars	December 31,2015 (Expressed In Thousands of New Taiwan Dollars
Main risk	Movements	Effects on gain andloss	Effects on equity
Foreign exchange risk	NTD to USD appreciate by 2%, RMB appreciate by 3%, or NTD to AUD and other currencies appreciate by4%.(Note 1)	200,212	( 3,901)
Foreign exchange risk	NTD to USD depreciate by 2%, RMB depreciate by 3%, or NTD to AUD and other currencies depreciate by4%.(Note2)	( 200,212)	3,901
Interest rate risk	Main interest rate curve increases by20 BPS	( 334,012)	( 555,229)
Interest raterisk	Main interest rate curve decreases by20 BPS	358,796	572,994
Equity securities risk	Weighted average index of Taiwan Stock ExchangeMarket rises by4%.	237,183	311,126
Equity securities risk	Weighted average index of Taiwan Stock ExchangeMarket falls by4%.	( 237,160)	( 311,126)

December 31,2014 (Expressed In Thousands of New Taiwan Dollars)	December 31,2014 (Expressed In Thousands of New Taiwan Dollars)	December 31,2014 (Expressed In Thousands of New Taiwan Dollars)	December 31,2014 (Expressed In Thousands of New Taiwan Dollars)
Main risk	Movements	Effects on gain andloss	Effects on equity
Foreign exchange risk	NTD to USD appreciate by 2%, RMB and JPY appreciate by 3%, or NTD to other currencies appreciate by4%.(Note 3)	71,691	( 1,042)
Foreign exchange risk	NTD to USD depreciate by 2%, RMB and JPY depreciate by 3%, or NTD to other currencies depreciate by4%.(Note4)	( 71,691)	1,042
Interest rate risk	Main interest rate curve increases by20 BPS	( 198,425)	( 475,033)
Interest raterisk	Main interest rate curve decreases by20 BPS	186,951	558,246
Equity securities risk	Weighted average index of Taiwan Stock ExchangeMarket rises by4%.	122,864	( 56,750)
Equity securities risk	Weighted average index of Taiwan Stock ExchangeMarket falls by4%.	( 122,864)	56,750

2015 ANNUAL REPORT • 189

Note 1: If NTD to USD, RMB, AUD and other currencies respectively appreciate by 2%, 3%, 4% and 4%, the effects on profit (loss) will be ($161,909), $374,940, ($706) and ($12,113), the effect on equity is USD($1,605) and ($2,296) in other currencies, respectively.

Note 2: If NTD to USD, RMB, AUD and other currencies respectively depreciate by 2%, 3%, 4% and 4%, the effects on profit (loss) will be $161,909, ($374,940), $706 and $12,113, the effect on equity is USD$1,605 and $2,296 in other currencies, respectively.

Note 3: If NTD to USD, RMB, JPY, and other currencies respectively appreciate by 2%, 3%, 3%, and 4%, the effects on profit (loss) will be ($47,027), $156,401, ($2,449) and ($35,234), respectively; the effect on equity will be all amounts denominated in USD.

Note 4: If NTD to USD, RMB, JPY, and other currencies respectively depreciate by 2%, 3%, 3% and 4%, the effects on profit (loss) will be $47,027, ($156,401), $2,449 and $35,234, respectively; the effect on equity will be all amounts denominated in USD.

(N)Disclosure made in accordance with Regulations Governing the Preparation of Financial Reports by Financial Holdings Companies

y Financial Holdings Companies	y Financial Holdings Companies	y Financial Holdings Companies	y Financial Holdings Companies	y Financial Holdings Companies	y Financial Holdings Companies
Sensitivity analysis of interest rate for assets and liabilities (NTD) December 31, 2015 (Expressed In Thousands of New Taiwan Dollars, %)
Item	1~90 days	91~180 days	181 days~1year	Over 1year	Total
Interest-rate-sensitive assets	1,470,818,003	12,343,676	54,144,062	144,062,623	1,681,368,364
Interest-rate-sensitive liabilities	368,427,537	958,424,040	98,004,434	48,589,486	1,473,445,497
Interest-rate-sensitivegap	1,102,390,466	(946,080,364)	(43,860,372)	95,473,137	207,922,867
Net					183,484,053
Ratio of interest-rate-sensitive assets to interest-rate-sensitive liabilities(%)					114.11%
Ratio of interest-rate-sensitivegapto stockholders’ equity (%)					113.32%

Sensitivity analysis of interest rate for assets and liabilities (NTD) December 31, 2014 (Expressed In Thousands of New Taiwan Dollars,%)	Sensitivity analysis of interest rate for assets and liabilities (NTD) December 31, 2014 (Expressed In Thousands of New Taiwan Dollars,%)	Sensitivity analysis of interest rate for assets and liabilities (NTD) December 31, 2014 (Expressed In Thousands of New Taiwan Dollars,%)	Sensitivity analysis of interest rate for assets and liabilities (NTD) December 31, 2014 (Expressed In Thousands of New Taiwan Dollars,%)	Sensitivity analysis of interest rate for assets and liabilities (NTD) December 31, 2014 (Expressed In Thousands of New Taiwan Dollars,%)	Sensitivity analysis of interest rate for assets and liabilities (NTD) December 31, 2014 (Expressed In Thousands of New Taiwan Dollars,%)
Item	1~90 days	91~180 days	181 days~1year	Over 1year	Total
Interest-rate-sensitive assets	1,441,411,464	23,079,918	32,964,293	113,137,831	1,610,593,506
Interest-rate-sensitive liabilities	410,169,577	908,170,178	97,512,697	37,782,186	1,453,634,638
Interest-rate-sensitivegap	1,031,241,887	(885,090,260)	(64,548,404)	75,355,645	156,958,868
Net					153,210,918
Ratio of interest-rate-sensitive assets to interest-rate-sensitive liabilities(%)					110.80%
Ratio of interest-rate-sensitivegapto stockholders’ equity (%)					102.45%
Note: The amounts listed above represent the items denominated in NTD for the Bank, excluding contingent assets
and contingent liabilities.

190 • FIRST FINANCIAL HOLDING CO., LTD.

Sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2015

Sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2015	Sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2015	Sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2015	Sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2015	Sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2015	Sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2015
(Expressed In Thousands of USD, %)
Item	1~90 days	91~180 days	181 days~1year	Over 1year	Total
Interest-rate-sensitive assets	18,838,250	2,809,207	651,904	553,077	22,852,438
Interest-rate-sensitive liabilities	12,797,911	7,419,282	1,208,751	110,494	21,536,438
Interest-rate-sensitivegap	6,040,339	(4,610,075)	(556,847)	442,583	1,316,000
Net					5,580,415
Ratio of interest-rate-sensitive assets to interest-rate-sensitive liabilities(%)					106.11%
Ratio of interest-rate-sensitivegapto stockholders’ equity (%)					23.58%

Sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2014

Sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2014	Sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2014	Sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2014	Sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2014	Sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2014	Sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2014
(Expressed In Thousands of USD, %)
Item	1~90 days	91~180 days	181 days~1year	Over 1year	Total
Interest-rate-sensitive assets	15,628,582	2,424,202	1,008,192	414,297	19,475,273
Interest-rate-sensitive liabilities	10,792,379	6,019,120	1,081,461	108,779	18,001,739
Interest-rate-sensitivegap	4,836,203	(3,594,918)	(73,269)	305,518	1,473,534
Net					4,837,730
Ratio of interest-rate-sensitive assets to interest-rate-sensitive liabilities(%)					108.19%
Ratio of interest-rate-sensitivegapto stockholders’ equity (%)					30.46%

Explanation:The amounts listed above represent the items denominated in USD for FCB, excluding contingent assets and contingent liabilities.

Note ：

A.Interest-rate-sensitive assets and liabilities are those interest earned assets and interest bearing liabilities, revenues and costs which are sensitive to changes in interest rates.
B.Ratio of interest-rate-sensitive assets to interest-rate-sensitive liabilities =Interest-rate-sensitive assets / interest-rate-sensitive liabilities.

C.Interest-rate-sensitive gap = Interest-rate-sensitive assets � interest-rate-sensitive liabilitie

F. Transfer of financial assets

Transferred financial assets that are not derecognised in their entirety.

During the Group’s activities, the transferred financial assets that do not meet derecognition conditions are mainly debt instruments with purchase agreements. The cash flow of the contract has been transferred and related liabilities of transferred financial assets that will be repurchased at a fixed price in the future have been reflected. The Group may not use, sell or pledge the transferred financial assets during the valid period of the transaction. The financial assets were not derecognised as the consolidated company is still exposed to interest rate risk and credit risk.

December 31,2015:None.

==> picture [430 x 36] intentionally omitted <==

2015 ANNUAL REPORT • 191

H. Offsetting financial assets and financial liabilities

The consolidated company has financial instruments that meet the offsetting criteria in paragraph 42 of IAS 32, the gross financial liability is set off against the gross financial asset, resulting in the presentation of a net amount presented in the balance sheet.

The Group has transactions that do not meet the offsetting criteria but follow the net settled master netting arrangements or other similar arrangements, i.e. global master repurchase agreement, global securities lending agreement or similar agreement with repurchase agreements or reverse repurchase agreement. The above transactions are settled on a net basis after offsetting financial assets with financial liabilities if both parties of the transaction choose to use net settlement; the above transactions are settled on a gross basis if both parties do not choose to use net settlement. However, if one party breaches the contract, the counterparty can choose to use net settlement.

(Blank)

192 • FIRST FINANCIAL HOLDING CO., LTD.

aster netting arrangements or similar arrangements	Net amount (e)=(c)-(d)	Net amount (e)=(c)-(d)	$ 5,269,699	ngements	Net amount (e)=(c)-(d)	Net amount (e)=(c)-(d)	$ 4,103,811
	Not set off in the balance sheet (d)	Cash collateral received	$ 1,864,035	liabilities that are offset, or can be settled under agreements of net settled master netting arrangements or similar arra	Not set off in the balance sheet (d)	Cash pledged as collateral	$ 164,400
		Financial instruments (Note)	$ 3,576,146			Financial instruments (Note)	$ 3,704,069
greements of net settled m	Net amounts of financial assets presented in the balance sheet (c)=(a)-(b)		$ 10,709,880		Net amounts of financial liabilites presented in the balance sheet (c)=(a)-(b)		$ 7,972,280
Financial assets that are offset, or can be settled under a	Gross amounts of recognised financial liabilities set off in the balance sheet (b)		$ -		Gross amounts of recognised financial assets set off in the balance sheet (b)		$ -
	Gross amounts of recognised financial assets (a)		$ 10,709,880		Gross amounts of recognised financial liabilities (a)		$ 7,972,280
	Description		Derivative financial instruments	Financial	Description		Derivative financial instruments

2015 ANNUAL REPORT • 193

aster netting arrangements or similar arrangements		Net amount (e)=(c)-(d)	$ 5,436,879	ngements	Net amount (e)=(c)-(d)	Net amount (e)=(c)-(d)	$ 2,232,662	-	$ 2,232,662
	Not set off in the balance sheet(d)	Cash collateral received	$ 921,098	liabilities that are offset, or can be settled under agreements of net settled master netting arrangements or similar arra	Not set off in the balance sheet(d)	Cash pledged as collateral	$ 276,000	-	$ 276,000
		Financial instruments (Note)	$ 2,747,505			Financial instruments (Note)	$ 2,747,505	1,889,578	$ 4,637,083
greements of net settled m	Net amounts of financial assets presented in the balance sheet (c)=(a)-(b)		$ 9,105,482		Net amounts of financial liabilities presented in the balance sheet (c)=(a)-(b)		$ 5,256,167	1,889,578	$ 7,145,745
Financial assets that are offset, or can be settled under a	Gross amounts of recognised financial liabilities set off in the balance sheet (b)		$ -		Gross amounts of recognised financial assets set off in the balance sheet (b)		$ -	-	$ -
	Gross amounts of recognised financial assets (a)		$ 9,105,482		Gross amounts of recognised financial liabilities (a)		$ 5,256,167	1,889,578	$ 7,145,745
	Description		Derivative financial instruments	Financial	Description		Derivative financial instruments	Repurchase agreement	Total

194 • FIRST FINANCIAL HOLDING CO., LTD.

I. Insurance risks

(A) Policy, procedure and method of risk management relating to insurance liabilities:

Risks relating to insurance liabilities happen when the policy sales underestimate the liability leading to a failure of fulfilling the future obligation. The subsidiary, FALI establishes appropriate risk managing mechanism in relation to various reserves for insurance business which is actually implemented accordingly. The contents include:

a. Review on the legitimacy of the setting aside of provisions for insurance
b. Setting up proper procedures for the setting aside of provisions for insurance
c. Evaluation on the risk of provisions for insurance
d. Controlling methods for risks relating to provisions for insurance
(B) Commensurate policy, procedure and method between risk management and assets and liabilities

Risk of assets and liabilities commensuration refer to risks occuring due to inconsistent movement in the value of asset and liability. According to the nature and complexity of the insurance liabilities sold, proper assets and liabilities managing mechanism are set up making FALI form, execute, monitor and adjust strategies relating to the assets and liabilities under durable capacity in order to achieve its pre-set financial goals. The content includes:

a. Commensurate risk identification of assets and liabilities
b. Commensurate risk evaluation of assets and liabilities
c. Responding commensurate risk of assets and liabilities
(C) Insurance risk concentration

All businesses of FALI occur within the territory of Taiwan, and the insurance risks from every location as assumed by FALI have no significant difference between them. Moreover, FALI sets up durable accumulative limits based on each risk unit and each risk event and transfers the risks exceeding risk limit through reinsurance.

(D) Sensitivity analysis on insurance risk

According to insurance regulations, the assumption variables used for computing policy reserve are locked-in upon pricing. However, such assumption may differ from the actual experience as time passes. In addition, according to IFRS No. 4, FALI should perform liability adequacy test to evaluate if the provisions for insurance recognized is sufficient or not. In particular, for changes in various assumptions on death rate, insurance rate, lapse rate, discount rate and rate of return on investment, the results of sensitivity testing have shown that inadequacy of FALI’s liabilities did not exist For the nine months ended September 30 2014 and 2013 given that the

2015 ANNUAL REPORT • 195

death rate moves by 10%, insurance rate rises by 10%, assumed lapse rate moves by 10% or 30%, fluctuates by 1%.

(E) Credit risk

With regard to the insurance contracts taken over by FALI, credit risks happen mainly when the reinsurer fails to carry out the obligation of reinsurance contract leading to a financial loss of FALI. Any dispute between FALI and reinsurer could give rise to further impairment on the reinsured assets. In addition, receivables from insurance agents or representatives could also involve credit risks.

In avoidance of above risks, the subsidiary, FALI chooses to trade with reinsurance companies assessed by AVIVA Group with good credit rating. The maximum exposure on reinsurance contract of FALI is the carrying amount of reinsured asset.

(F) Liquidity risk

The liquidity risk of insurance contract mainly happens when FALI fails to liquidate assets or obtain sufficient fund leading to a failure in fulfilling obligation from various insurance liabilities. In order to manage the liquidity risk of insurance contracts, FALI carries out maturity analysis on insurance contract regularly and reviews the assets and liabilities.

The following table contains an analysis on estimated timing for net cash flow of insurance contracts of FALI. The figures in the table represent estimates that the total insurance payment and expense at certain time in the future less undiscounted cash inflow, premiums for example. However, the actual payments in the future may differ from the estimated experience.

Net cash outflow (inflow) of insurance contract:

Less than 1 year 1~5 years 5~15 years More than 15 years Total contractual cash flow	December 31,2015 $ 578,035 26,449 787,821 6,051,589 $ 7,443,894	December 31,2014
		$ 1,288,957 741,573 176,574 5,525,503
		$ 7,732,607

(G) Market risk:

Main risks of insurance contracts assumed by the subsidiary, FALI include: death rate, mortality rate, insurance rate and return rate, etc. Insurance contracts under general accounts offered by FALI are mainly denominated in NTD. Therefore, market risks relating to exchange rates are insignificant. On the other hand, according to current Regulations Governing the Setting Aside of Various Reserves by Insurance Enterprises, the interest rate of insurance contract is locked-in for liabilities reserve set aside based on the assumption when the policy is issued. In addition, the best estimated investment return is the discount rate used for liability adequacy test.

(H) Regarding derivatives embedded in the main insurance contract not measured by fair value, information on market risk exposure is as follows:

196 • FIRST FINANCIAL HOLDING CO., LTD.

The following embedded derivatives issued by FALI, of which the contracts are not measured by fair value. Surrender value of such instruments varies with the announced interest rates, and the announced interest rates are the interest rates used to compute the value of insurance contract reserve in the year in which the policy effective date or the month of policy anniversary date announced by the life insurance company. FALI assumes risks when the overall return on investment or separated return rate on investment is lower than the lowest guaranteed interest rate. However, FALI regularly reviews the return on investment and investment portfolios to mitigate risk of interest-spread.

(3)Capital management

For the effective control on capital adequacy of the First Group and each of its subsidiary, as well as for ensuring the business development and risk controlling, the Company has established “Management Policies for Capital Adequacy of The First Financial Holdings Company” as approved by the Board of Directors to improve capital utilization efficiency of the First Group, through which the Risk Management Committee then sets up “Warning Indicators for Capital Adequacy ” for each subsidiary accordingly as authorized by the Board so that the capital strategies from senior management can be practiced and implemented. Related information should be reported to the Board of Directors accordingly on a regular basis.

In addition, in order to establish evaluation process for capital adequacy and maintain proper self-owned capital structure of each significant subsidiary within the First Group, also to develop business and control risk on both sides for better improvement of capital utilization, subsidiaries have established capital management policies to implement the strategies of senior management and the related information shall be disclosed or reported accordingly.

The management objectives and procedures for capital management of the significant subsidiaries within the First Group are as follows:

A.Objective of capital management

(A)To ensure that the First Group and its subsidiaries comply with regulations governing capital adequacy and minimum requirements set up by competent authorities of each industry, the consolidated capital adequacy ratio for the First Group shall not be lower than 110%, capital adequacy ratio for FCB should be not be lower than 8% as set out in “Regulations Governing Capital Adequacy of Banks”, capital adequacy ratio for FS should not be lower than 200% as set out in “Regulations Governing Securities Firms”, and capital adequacy ratio for FALI should be not be lower than 200%.
(B)In response to the capital required from each subsidiary’s operation plan, and to make them have sufficient capital for various risks derived from capital demand, capital allocation is distributed under a goal of utilization of capital arrangement.
(C)Significant subsidiaries such as FSC, FS, and FALI should evaluate its capital adequacy on a regular basis and appropriately plan on its capital structure, tool to exercise and portfolio adjustment through duty segregation to carry out capital management.

B.Capital management procedures

2015 ANNUAL REPORT • 197

The Board of Directors of the Company is the highest authority of the First Group. To maintain the capital adequacy, the Board authorizes Risk Management Committee of the Company to set up “Warning indicators of Capital Adequacy” and review the budgeted business goals for each subsidiary every year. When the capital adequacy ratio of each subsidiary is lower than the warning indicator, the Company has to take action depending on the significance.

When the capital adequacy is lower than the legal standard as required, the First Group may start to plan on resolutions, such as increasing qualifying net capital or decreasing the legal standards, including:

(A)Reduce total risk assets of subsidiaries.
(B)Adjust asset portfolios of subsidiaries.
(C)Dispose the stock investments of subsidiaries; or
(D)Increase capital of the Company or issue preferred stocks or subordinated bonds that can be included in qualifying capital.

The Company performs evaluation for the First Group’s capital adequacy and reports to the senior management in order to effectively monitor the capital adequacy of the First Group on time.

The responsible segments of significant banking, securities and life insurance subsidiaries and others should effectively identify, evaluate, monitor and control market risk, credit risk, operating risk, banking book interest risk, liquidity risk as set up by competent authorities and comply with legal and compliance risk regulations with an attempt to reflect evaluation on the minimum capital required. The subsidiary, FCB also sets up separately a team for capital planning and holds a meeting to ensure the implementation of the Board’s capital strategies on a regular basis in respect of capital managing objectives, fund gap, responding measures that could impose an effect on risk assets or qualifying self-owned capital and so on.

198 • FIRST FINANCIAL HOLDING CO., LTD.

(A) Capital adequacy

December 31,2015 (Expressed In Thousands of New Taiwan Dollars,%)	December 31,2015 (Expressed In Thousands of New Taiwan Dollars,%)	December 31,2015 (Expressed In Thousands of New Taiwan Dollars,%)	December 31,2015 (Expressed In Thousands of New Taiwan Dollars,%)
Company	Ownership of financial holdings company	Qualifying capital	Legal capital demand
FFH	100%	$ 188,639,174	$ 197,460,811
FCB	100%	208,175,327	121,788,899
FS	100%	4,536,444	1,806,332
FALI	51%	331,126	185,808
FSIT	100%	997,622	551,946
FVC	100%	1,953,577	971,256
Other subsidiaries	100%	1,572,346	1,854,161
Deductible item		( 206,231,476)	( 194,286,200)
Subtotal		199,974,140	130,333,013
Capital adequacy			153.43%


December 31,2014 (Expressed In Thousands of New Taiwan Dollars,%)
Company	Ownership of financial holdings company	Qualifying capital	Legal capital demand
FFH	100%	$ 155,944,344	$ 167,906,467
FCB	100%	167,220,303	116,298,350
FS	100%	4,644,815	2,041,455
FALI	51%	391,667	171,926
FSIT	100%	978,416	576,055
FVC	100%	2,201,219	1,109,638
Other subsidiaries	100%	1,898,538	2,132,479
Deductible item		( 175,959,585)	( 164,719,946)
Subtotal		157,319,717	125,516,424
Capital adequacy			125.34%

Note 1: group capital adequacy ratio = group net eligible capital / group statutory capital requirement

2015 ANNUAL REPORT • 199

(B) Qualifying capital of financial holdings company

(B)	Qualifying capital of financial holdings company	Qualifying capital of financial holdings company	Qualifying capital of financial holdings company
	December 31,2015 (Expressed In Thousands of New Taiwan Dollars,%)
	Item	Amount
	Common stock	$ 114,611,064
	Capital instrument met regulation of other Tier I capital for bank	-
	Otherpreferred stock and subordinated bonds	1,000,000
	Capital collected in advance	-
	Additionalpaid-in capital	25,916,221
	Legal reserve	10,763,595
	Special reserve	4,128,990
	Retained earnings	23,568,431
	Adjustment of equity	8,651,604
	Less：capital deductible item	( 731)
	Totalqualifyingcapital	$ 188,639,174

	December 31,2014 (Expressed In Thousands of New Taiwan Dollars,%)
	Item	Amount
	Common stock	$ 92,592,548
	Capital instrument met regulation of other Tier I capital for bank	-
	Otherpreferred stock and subordinated bonds	2,000,000
	Capital collected in advance	-
	Additionalpaid-in capital	18,200,167
	Legal reserve	9,355,102
	Special reserve	4,128,990
	Retained earnings	22,068,989
	Adjustment of equity	7,598,954
	Less：capital deductible item	( 406)
	Totalqualifyingcapital	$ 155,944,344

200 • FIRST FINANCIAL HOLDING CO., LTD.

(C) In accordance with Article 46 of the Financial Holding Company Act, the following table represents the Company and its subsidiaries’ provision of business credit or endorsements to, or other transactions with, the same individual or the same affiliated company.

December 31,2015	December 31,2015
Name	Total balance of transaction listed in article 46, paragraph 2 of the Financial Holding CompanyAct	Percentage (%) of net value on effective date of financial holdings company
Same Natural Persons Or Same Legal Person National Treasury Administration, Ministry Of Finance Taiwan High Speed Rail Corporation Taiwan Power Company Au Optronics Corp. Wan Bao Development Consulting Co.,Ltd Fubon Financial China Airlines Ltd. Far Eastern New Century Corporation Ever Green Marine (Taiwan) Ltd Ever Green Marine (UK) Ltd Cheng Shin Rubber Ind. Co., Ltd. Wistron Corporation Kindom Construction Corp. Eva Airways Corporation Yang Ming Marine Transport Corp. Lih Pao Construction Co.,Ltd Dragon Steel Corporation Shanghai Lanshen industru Co., Ltd. Fu Hong Co., Ltd. Cai Feng International Ltd. Mercuries & Associates, holding Ltd Taiwan Mobile Co., Ltd. Subtotal Same Party Shen Sir. and Same Party Ding Sir. and Same Party Hsu Sir. and Same Party Subtotal	$ 88,640,807 35,890,537 23,019,743 6,873,628 5,330,500 5,002,680 4,982,254 4,240,599 4,226,048 4,134,800 4,004,000 3,912,720 3,726,319 3,532,373 3,458,493 3,369,883 3,261,457 3,250,177 3,187,797 3,103,718 3,070,220 3,018,239	47.09 19.07 12.23 3.65 2.83 2.66 2.65 2.25 2.25 2.20 2.13 2.08 1.98 1.88 1.84 1.79 1.73 1.73 1.69 1.65 1.63 1.60
	$ 223,236,992	118.60
	$ 7,338,584 5,005,313 4,870,668	3.90 2.66 2.59
	$ 17,214,565	9.15

2015 ANNUAL REPORT • 201

December 31,2015	December 31,2015
Name	Total balance of transaction listed in article 46, paragraph 2 of the Financial Holding CompanyAct	Percentage (%) of net value on effective date of financial holdings company
Same Natural Persons Or Same Legal Person Evergreen Group Formosa Plastics Group Far Eastern Group E United Group Fubon Group Au Optronics Group Ruentex Group LinYuan Group Chicony Group CSC Group Lih Pao Construction Group Yfy Group Taiya International Group Taiwan Cement Group Hon Hai Group Walsin Group Wisdom Marine Group Chan&Chang Group Yulon Group China Airlines Group Hpw Group Test Rite Group Uni President Group Cheng Shin Group Long Chen Paper Group Chang Chun Group Kantons Group Hongtai Group Wistron Corporation Shihlin Paper Group Yang Ming Marine Group Kingston Group China Development Financial ATCC Group Mercuries & Associates Group Continental Engineering Group WPG Group Subtotal	$ 22,566,517 12,504,838 11,816,808 11,452,608 11,395,129 10,941,256 10,603,239 10,564,655 10,419,795 9,435,734 9,044,908 8,242,585 8,180,313 7,293,529 6,816,113 6,513,431 6,338,717 6,033,042 5,785,042 5,691,719 5,585,026 5,509,250 5,491,630 5,486,964 5,070,653 4,529,500 4,525,073 4,490,706 4,326,675 4,182,879 4,037,115 3,941,835 3,929,025 3,748,831 3,544,734 3,145,752 3,012,148	11.99 6.64 6.28 6.08 6.05 5.81 5.63 5.61 5.54 5.01 4.81 4.38 4.35 3.87 3.62 3.46 3.37 3.21 3.07 3.02 2.97 2.93 2.92 2.92 2.69 2.41 2.40 2.39 2.30 2.22 2.14 2.09 2.09 1.99 1.88 1.67 1.60
	$ 266,198,529	141.42
(Note) Net value in the above table is the amount that had not been audited As of December 31,
2015.

202 • FIRST FINANCIAL HOLDING CO., LTD.

(4) Information with respect to the transferring of financial assets and extinguishing of liabilities: None.

(5) Adjustment of key organization and significant change in regulatory system: None.

(6) Significant impact arising from changes in government laws and regulations: None.

(7) Information with respect to the subsidiary holding the capital stock of parent company: None.

(8) Information for private placement securities: None.

(9) Information for discontinued operations: None.

(10) Major operating assets or liabilities transferred from (or to) other financial institutions: None.

(11) Research developing plan and the amounts sponsored by others: None.

(12) Employee benefit information: Please see Note 6(23) d and (37).

(13) The main asset additions, expansion, construction, leasing, abandoned, idle, sale, transfer or long-term lease: None.

(14) The major contract signed, completed, canceled or lapsed: None.

’ - (15) Information of the First Group engagement in co marketing:

A. Transactions among the First Group

Please refer to Notes 13(1)H and 7.

B. Joint promotion of businesses

In order to create synergies within the group and provide customers financial services in all aspects, the Company has continuously established other financial service desks (including banking service, securities trading service, and insurance service desks) in its banks and securities subsidiaries to provide customers one-stop-shopping services.

C. Sharing of information

The Company has established “Measures for Protection of Customers’ Information for First Financial Holding Co., Ltd and its Subsidiaries” in accordance with the “Financial Holding Company Act”, “Computer-Process Personal Data Protection Law” and the related regulations stipulated by the Financial Supervisory Commission and the Company is required to publish its “Measures for Protection of Customers’ Information” at its website. Customers also reserve the right to have their information withdrawn from the information sharing mechanism.

D. Sharing of operating facilities or premises

The Company’s subsidiaries have set up 393 cross-selling service desks cooperation and promotion desks, among which FCB has established insurance service desks in its 190 branches, FALI has established cross-selling insurance service desks in 20 branches of FCB,

2015 ANNUAL REPORT • 203

and FS has set up cross-selling securities trading service desks in 131 branches of FCB. Besides, FS set up banking service desks and insurance service desks in the brokerage department of its 26 branches.

E. Apportionment of revenues, costs, expenses, gains and losses

Revenues, costs, expenses, gains and losses arising from the mutual use of business facilities and cross-sales between the Company's subsidiaries are directly attributed to subsidiaries by nature of services.

(Blank)

204 • FIRST FINANCIAL HOLDING CO., LTD.

For the year ended December 31, 2015 Banking business Securities business Investment trust business Insurance business Other business Consolidated	Net interest income 28,141,191 $ 348,806 $ 1,802 $ 144,026 $ 183,352) ($ 28,452,473 $	Net non-interest income 10,939,218 1,293,798 489,957 283,123) ( 44,090) ( 12,395,760	Net revenues 39,080,409 1,642,604 491,759 139,097) ( 227,442) ( 40,848,233	Provision for credit losses and recovery for	premiums reserve 506,456) ( - - 2,131) ( 9,568) ( 518,155) (	Net change in insurance liabilities reserve - - - 539,599 - 539,599	Operating expenses 19,365,772) ( 1,476,403) ( 371,345) ( 513,455) ( 166,959) ( 21,893,934) (	Net income (loss) from continuing operations	before income tax 19,208,181 166,201 120,414 115,084) ( 403,969) ( 18,975,743	Income tax expense 3,082,350) ( 7,366 18,157) ( 160) ( 79,789 3,013,512) (	Net income (loss) from continuing operations	after income tax 16,125,831 $ 173,567 $ 102,257 $ 115,244) ($ 324,180) ($ 15,962,231 $	For the year ended December 31, 2014 Banking business Securities business Investment trust business Insurance business Other business Consolidated	Net interest income 27,833,122 $ 373,647 $ 2,632 $ 238,014 $ 169,821) ($ 28,277,594 $	Net non-interest income 9,697,073 1,193,129 526,547 6,390,368) ( 882,480 5,908,861	Net revenues 37,530,195 1,566,776 529,179 6,152,354) ( 712,659 34,186,455	Provision for credit losses and recovery for	premiums reserve 3,933,456) ( - - 9) ( 81,535) ( 4,015,000) (	Net change in insurance liabilities reserve - - - 7,100,719 - 7,100,719	Operating expenses 18,132,009) ( 1,431,356) ( 381,072) ( 387,071) ( 457,621) ( 20,789,129) (	Net income (loss) from continuing operations	before income tax 15,464,730 135,420 148,107 561,285 173,503 16,483,045	Income tax expense 2,618,078) ( 47,900) ( 15,588) ( 470) ( 276,637 2,405,399) (	Net income (loss) from continuing operations	after income tax 12,846,652 $ 87,520 $ 132,519 $ 560,815 $ 450,140 $ 14,077,646 $	Note: Financial information by business line which shall be shown separately is determined according to each company’s classification methods for business group management	to fill in amounts offset through business combination.

2015 ANNUAL REPORT • 205

						2014	3,998,967	227,047	2,783,097	7,000,000	4,100,000	16,604	359	18,126,074		92,592,548	18,200,167		9,355,102	4,128,990	22,068,989	7,598,954	153,944,750	172,070,824
							$																	$
						2015	6,498,909	250,472	2,515,576	5,000,000	-	17,204	455	14,282,616		114,611,064	25,916,221		10,763,595	4,128,990	23,568,431	8,651,604	187,639,905	201,922,521
							$
																								$
A. First Financial Holding Co., Ltd.	(A)	First Financial Holding Co., Ltd.	Individual balance sheet	December 31	(Expressed In Thousands of New Taiwan Dollars)	Assets 2015 2014 Liabilities	Cash and cash equivalents $ 783,692 $ 1,749,883 Commercial papers payable	Securities purchased under Payables	resell agreements 1,500,000 - Current tax liabilities	Receivables - net 83 9,981 Bonds payable	Current tax assets 2,177,287 2,414,068 Other borrowings	Investments accounted for Liabilities reserve	using equity method - net 194,286,200 164,719,946 Other liabilities	Other financial assets -net 3,168,114 3,168,106 Total liabilities	Property and equipment – net 3,484 4,457 Equity	Intangible assets – net 731 406 Common stock	Deferred income tax assets-net 1,701 1,691 Capital surplus	Other assets - net 1,229 2,286 Retained earnings	Legal reserve	Special reserve	Unappropriated earnings	Other equity interest	Total equity	Total assets $ 201,922,521 $ 172,070,824 Total liabilities and equity

206 • FIRST FINANCIAL HOLDING CO., LTD.

(B)

First Financial Holding Co., Ltd. Individual Statements of Comprehensive Income For the years ended December 31

(Expressed In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Accounts			2015		2014
Revenues
Share of profit of associates accounted for using
equity method		$	16,430,612	$	13,904,398
Other revenues			213,641		289,401
Total revenues			16,644,253		14,193,799
Expenses and losses
Share of loss of associates accounted for using
equity method	(		113,711 ) (		7,588 )
Operating expenses	(		373,294 ) (		263,661 )
Other expenses and losses	(		191,868 ) (		159,124 )
Total expenses and losses	(		678,873 ) (		430,373 )
Income from continuing operations before income
tax			15,965,380		13,763,426
Income tax benefit			40,708		321,510
Income from continuing operations after income tax			16,006,088		14,084,936
Other comprehensive income			454,491		3,457,319
Total comprehensive income for the period		$	16,460,579	$	17,542,255
Earnings Per Share (in NT dollars)
Basic Consolidated Earnings Per Share and
Diluted Consolidated Earnings Per Share		$	1.55	$	1.43

==> picture [456 x 60] intentionally omitted <==

2015 ANNUAL REPORT • 207

l	9,249 - 6,754) - 4,936 57,319	44,750	4,750 - 1,478) - 6,088 4,491 0,000 96,054	39,905
First Financial Holding Co., Ltd. Individual Statement of Change in Equity For the years ended December 31 (Expressed In Thousands of New Taiwan Dollars) For the year ended December 31, 2014 Common stock Capital surplus Legal reserve Special reserve Unappropriated earnings Exchange difference on translation of foreign financial statements Unrealized gain and loss on available-for-sale financial assets Tota Balance, January 1, 2014 86,535,092 $ 18,200,167 $ 8,266,238 $ 4,128,990 $ 19,446,949 $ 220,040) ($ 4,371,853 $ 140,72 $ Appropriation of prior year's earnings - Legal reserve appropriated - - 1,088,864 - 1,088,864) ( - - Cash dividends of ordinary shares - - - - 4,326,754) ( - - 4,32 ( Stock dividends of ordinary shares 6,057,456 - - - 6,057,456) ( - - Net income for the year ended December 31, 2014 - - - - 14,084,936 - - 14,08 Other comprehensive income for the year ended December 31, 2014 - - - - 10,178 2,725,848 721,293 3,4 Balance, December 31, 2014 92,592,548 $ 18,200,167 $ 9,355,102 $ 4,128,990 $ 22,068,989 $ 2,505,808 $ 5,093,146 $ 153,9 $ For the year ended December 31, 2015 Balance, January 1, 2015 92,592,548 $ 18,200,167 $ 9,355,102 $ 4,128,990 $ 22,068,989 $ 2,505,808 $ 5,093,146 $ 153,94 $ Appropriation of prior year's earnings Legal reserve appropriated - - 1,408,493 - 1,408,493) ( - � Cash dividends of ordinary shares - - - - 6,481,478) ( - - 6,48 ( Stock dividends of ordinary shares 6,018,516 - - - 6,018,516) ( - - Net income for the year ended December 31, 2015 - - - - 16,006,088 - - 16,00 Other comprehensive income for the year ended December 31, 2015 - - - - 598,159) ( 1,153,290 100,640) ( 45 Issue of shares 16,000,000 7,520,000 - - - - - 23,52 Share-based payments - 196,054 - - - - - 1 Balance, December 31, 2015 114,611,064 $ 25,916,221 $ 10,763,595 $ 4,128,990 $ 23,568,431 $ 3,659,098 $ 4,992,506 $ 187,6 $ Retained earnings Other equity interest

208 • FIRST FINANCIAL HOLDING CO., LTD.

First Financial Holding Co., Ltd. Individual Cash Flow Statement For the years ended December 31

(Expressed In Thousands of New Taiwan Dollars)

			2015			2014
Cash Flows From Operating Activities
Net income		$	15,965,380		$	13,763,426
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and other amortization			2,548			3,120
Interest revenue	(		12,695 )	(		49,885 )
Interest expense			176,223			156,840
Dividend income	(		215,329 )	(		206,231 )
Loss on disposal of property and equipment			25			-
Share-based payments			1,432			-
Share of profit of associates accounted for using equity
menthod	(		16,316,901 )	(		13,896,810 )
Changes in assets and liabilities
Changes in assets
Increase in other financial assets	(		8 )			-
Decrease in other assets			368			694
Changes in liabilities
Increase in payables			39,491			30,265
Decrease in other liabilities			-	(		184 )
Increase in provision			540			-
Interest received			22,593			41,517
Interest paid	(		192,289 )	(		155,064 )
Dividends received			7,615,139			461,632
Income tax received			9,968			448,028
Net cash provided by operating activities			7,096,485			597,348
Cash Flows from Investing Activities
Increase in investments using the equity method	(		20,000,000 )	(		5,300,000 )
Acquisition of property and equipment	(		480 )	(		2,322 )
Acquisition of intangible assets	(		756 )			-
Net cash flows used in investing activities	(		20,001,236 )	(		5,302,322 )
Cash Flows from Financing Activities
Increase in commercial papers payable			2,499,942			3,998,967
Decrease in bonds payable	(		2,000,000 )			-
(Decrease) Increase in other borrowings	(		4,100,000 )			4,100,000
Increase in guarantee deposits			96			-
Distribution of cash dividends	(		6,481,478 )	(		4,326,754 )
Issue of shares			23,520,000			-
Net cash used in financing activities			13,438,560			3,772,213
Net increase (decrease) in cash and cash equivalents			533,809	(		932,761 )
Beginning balance of cash and cash equivalents			1,749,883			2,682,644
Ending balance of cash and cash equivalents		$	2,283,692		$	1,749,883
Components of cash and cash equivalents
Cash and cash equivalents shown in the balance sheet		$	783,692		$	1,749,883
Due from the Central Bank and call loans to banks qualified as
cash and cash equivalents as defined by IAS No. 7			1,500,000			-
Ending balance of cash and cash equivalents		$	2,283,692		$	1,749,883

2015 ANNUAL REPORT • 209

				2014		125,462,454		80,968		23,464,824		4,922,050	62,188,524	2,187,360	1,815,526,003	34,900,000	43,466,110	5,727,436	5,713,268	3,097,234	2,126,736,231			75,859,000	22,669,729	47,650,662	7,031,527	153,210,918	2,279,947,149
						$																							$
				2015		128,624,163		63,088		30,513,494		2,608,441	63,149,702	2,043,541	1,938,129,761	37,300,000	18,011,070	6,284,623	5,710,999	4,098,665	2,236,537,547			86,244,000	34,848,216	53,778,098	8,613,739	183,484,053	2,420,021,600
						$																							$
First Commercial Bank	Individual balance sheet	December 31	(Expressed In Thousands of New Taiwan Dollars)	2015 2014 Liabilities	Due to the Central Bank and other	45,249,970 $ 59,411,418 banks	Funds borrowed from Central Bank	252,652,913 176,619,889 and other banks	Financial liabilities at fair value	87,332,352 50,114,468 through profit or loss	62,870,032 50,202,758 Securities sold under repurchase	1,610,273 2,420,475 agreements	1,468,743,031 1,487,013,101 Payables	88,490,175 77,463,047 Current tax liabilities	356,678,138 307,529,119 Deposits and remittances	Financial bonds payable	7,136,455 6,921,652 Other financial liabilities	12,871,246 25,636,828 Liabilities reserve	26,834,378 27,528,019 Deferred tax liabilities	6,975,756 6,429,494 Other liabilities	338,122 381,417 Total liabilities	1,479,200 1,381,797	759,559 893,667 Equity	Common stock	Capital surplus	Retained earnings	Other equity interest	Total equity	2,420,021,600 $ 2,279,947,149 Total liabilities and equity
						$																							$
(A)				Assets		Cash and cash equivalents	Due from the Central Bank and call	loans to other banks	Financial assets at fair value through	profit or loss	Receivables – net	Current tax assets	Loans discounted, net	Available-for-sale financial assets	Held-to-maturity financial assets – net	Investments accounted for under the	equity method – net	Other financial assets – net	Property and equipment - net	Investment property - net	Intangible assets – net	Deferred income tax assets	Other assets – net						Total assets

210 • FIRST FINANCIAL HOLDING CO., LTD.

(B)

First Commercial Bank

Individual Condensed Statements of Comprehensive Income For the years ended December 31

(Expressed In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Account			2015		2014
Interest income		$	41,314,633	$	41,472,499
Interest expenses	(		13,820,411 ) (		14,334,673 )
Net interest income			27,494,222		27,137,826
Net non-interest income			10,780,772		10,381,690
Net revenues			38,274,994		37,519,516
Provision for bad debt expense and guarantee policy
reserve	(		472,808 ) (		3,920,704 )
Operating expenses	(		18,751,836 ) (		17,737,017 )
Income from continuing operations before income
tax			19,050,350		15,861,795
Income tax expense	(		2,950,259 ) (		2,480,644 )
Net income			16,100,091		13,381,151
Other comprehensive income			994,557		3,242,140
Total comprehensive income for the period		$	17,094,648	$	16,623,291
Earnings Per Share (in NT dollars)
Basic Consolidated Earnings Per Share and
Diluted Consolidated Earnings Per Share		$	2.00	$	1.75

==> picture [456 x 37] intentionally omitted <==

2015 ANNUAL REPORT • 211

						2014	12,519,939	77,631	12,597,570					6,400,000	28,814	138,479	26,132	6,593,425	19,190,995
							$												$
						2015	11,780,228	82,081	11,862,309					6,400,000	40,365	241,785	152,795)	6,529,355	18,391,664
							$												$
																	(
		First Securities	Individual Condensed Balance Sheets	December 31	(Expressed In Thousands of New Taiwan Dollars)	2015 2014 Liabilities	13,472,769 $ 16,657,190 Current liabilities	Other liabilities – noncurrent	3,084,800 590,503 Total liabilities		772,675 790,048	214,013 218,962	54,953 38,462 Equity	15,580 17,355 Common stock	776,874 878,475 Capital surplus	Retained earnings	Other equity interest	Total equity	18,391,664 $ 19,190,995 Total liabilities and equity
							$												$
C. First Securities	(A)					Assets	Current assets	Available-for-sale financial	assets	Investments accounted for	under the equity method	Property and equipment	Intangible assets	Deferred income tax assets	Other assets - noncurrent				Total assets

==> picture [37 x 661] intentionally omitted <==

212 • FIRST FINANCIAL HOLDING CO., LTD.

(B)

First Securities

Individual Condensed Statements of Comprehensive Income For the years ended December 31

(Expressed In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Accounts			2015		2014
Revenues		$	1,669,680	$	1,551,837
Service fee expense	(		74,214 ) (		75,628 )
Employee benefit expense	(		789,936 ) (		792,557 )
Share of profit of associates accounted for using
equity method	(		22,569 ) (		34,654 )
Operating expenses	(		618,720 ) (		534,329 )
Income from continuing operations before income
tax			164,241		114,669
Income tax benefit (expense)			9,326 (		40,241 )
Net income			173,567		74,428
Other comprehensive income	(		185,513 )		58,134
Total comprehensive income for the period	($		11,946 )	$	132,562
Earnings Per Share (in NT dollars)
Basic Consolidated Earnings Per Share and
Diluted Consolidated Earnings Per Share		$	0.27	$	0.12

==> picture [456 x 37] intentionally omitted <==

2015 ANNUAL REPORT • 213

						2014	164,010	9,683	173,693			600,000	4,632	363,866	9,918	978,416	1,152,109
							$										$
						2015	91,900	14,369	106,269			600,000	6,629	391,485	492)	997,622	1,103,891
							$										$
															(
D. First Securities Investment Trust Co., Ltd.	(A)	First Securities Investment Trust Co., Ltd.	Individual Condensed Balance Sheets	December 31	(Expressed In Thousands of New Taiwan Dollars)	Assets 2015 2014 Liabilities	Current assets $ 165,542 $ 244,926 Current liabilities	Available-for-sale financial Other liabilities – noncurrent	assets 238,907 202,364 Total liabilities	Property and equipment 496,655 496,988	Investment property 153,913 154,133 Equity	Deferred income tax assets 2,341 9,400 Common stock	Other assets– noncurrent 46,533 44,298 Capital surplus	Retained earnings	Other equity interest	Total equity	Total assets $ 1,103,891 $ 1,152,109 Total liabilities and equity

214 • FIRST FINANCIAL HOLDING CO., LTD.

(B)

First Securities Investment Trust Co., Ltd. Individual Condensed Statements of Comprehensive Income For the years ended December 31

(Expressed In Thousands of New Taiwan Dollars, Except Earnings Per Share)

	Accounts	2015 $ 464,935 ( 370,325 ) ( 94,610 25,804 120,414 ( 18,157 ) ( 102,257 ( 13,616 ) $ 88,641 $ 1.70	2014 $ 514,399 433,106 ) 81,293 13,761 95,054 15,588 ) 79,466 7,075 $ 86,541 $ 1.32
	Operating revenues Operating expenses Operating income Non-operating income and gain Income from continuing operations before income tax Income tax expense Net income Other comprehensive income Total comprehensive income for the period Earnings Per Share (in NT dollars) Basic Consolidated Earnings Per Share and Diluted Consolidated Earnings Per Share

2015 ANNUAL REPORT • 215

					2014	341,846		59,525	6,959,585	82,309	30,032		22,032,258	29,505,555			2,250,000	-	1,517,869)	149,101	881,232		30,386,787
						$																	$
					2015	263,939		70,272	6,478,682	72,135	30,026		25,934,177	32,849,231			2,250,000	1,820	1,607,373) (	63,881	708,328		33,557,559
						$																	$
																			(
	First-Aviva Life Insurance Co., Ltd.	Individual Condensed Balance Sheets	December 31	(Expressed In Thousands of New Taiwan Dollars)	2015 2014 Liabilities	824,202 $ 1,634,889 Payables	550,874 249,557 Financial liabilities at fair value	44,065 34,478 through profit or loss	Liabilities reserve	295,201 229,363 Other liabilities	Deferred tax liabilities	3,799,461 4,668,014 Insurance product liabilities of	separate accounts	1,463,253 884,884 Total liabilities	197,850 253,745	11,601 912 Equity	35,811 16,819 Common stock	6,080 6,939 Capital surplus	29,651 19,520 Retained earnings	365,333 355,409 Other equity interest	Total equity	25,934,177 22,032,258	33,557,559 $ 30,386,787 Total liabilities and equity
(A)					Assets	Cash and cash equivalents $	Receivables	Current tax assets	Financial assets at fair value	through profit or loss	Available-for-sale financial	assets	Bond instruments without	active market	Loans	Reinsurance reserve assets	Property and equipment	Intangible assets	Deferred income tax assets	Other assets	Insurance product assets of	separate accounts	Total assets $

216 • FIRST FINANCIAL HOLDING CO., LTD.

(B)

First-Aviva Life Insurance Co., Ltd. Individual Condensed Statements of Comprehensive Income For the years ended December 31

(Expressed In Thousands of New Taiwan Dollars, Except Earnings Per Share)

	Accounts	Accounts

2015 ANNUAL REPORT • 217

F. First Financial Assets Management Co., Ltd.

(A)

First Financial Assets Management Co., Ltd. Individual Condensed Balance Sheets

December 31

(Expressed In Thousands of New Taiwan Dollars)

Assets	2015 $ 171,155 717,581 3,534 2,679,052 797 62,130 12,038 $ 3,646,287	2014 $ 231,104 1,076,729 3,461 2,854,038 1,022 20,643 14,183 $ 4,201,180	Liabilities Current liabilities Other liabilities – noncurrent Total liabilities Equity Common stock Capital surplus Retained earnings Other equity interest Total equity Total liabilities and equity	2015 $ 2,090,173 34,564 2,124,737 1,450,000 3,203 24,566 43,781 1,521,550 $ 3,646,287	2014
Current assets Investments accounted for under the equity method Property and equipment Investment property Intangible assets Deferred income tax assets Other assets– noncurrent Total assets					$ 2,313,320 42,408
					2,355,728
					1,450,000 1,800 330,345 63,307
					1,845,452
					$ 4,201,180

(B)

First Financial Assets Management Co., Ltd. Individual Condensed Statements of Comprehensive Income For the years ended December 31

(Expressed In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Accounts 2015 Operating revenues $ 425,850 Operating expenses ( 157,122 ) ( Operating income 268,728 Non-operating income and expense ( 361,147 ) (Loss)Income from continuing operations before income tax ( 92,419 ) Income tax benefit (expense) 24,355 ( Net (loss) income ( 68,064 ) Other comprehensive income ( 19,526 ) Total comprehensive income for the period ($ 87,590 ) Earnings Per Share (in NT dollars) Basic Consolidated Earnings Per Share and Diluted Consolidated Earnings Per Share ($ 0.47 )	Accounts 2015 Operating revenues $ 425,850 Operating expenses ( 157,122 ) ( Operating income 268,728 Non-operating income and expense ( 361,147 ) (Loss)Income from continuing operations before income tax ( 92,419 ) Income tax benefit (expense) 24,355 ( Net (loss) income ( 68,064 ) Other comprehensive income ( 19,526 ) Total comprehensive income for the period ($ 87,590 ) Earnings Per Share (in NT dollars) Basic Consolidated Earnings Per Share and Diluted Consolidated Earnings Per Share ($ 0.47 )	2014 $ 482,900 246,829 ) 236,071 56,482 292,553 29,504 ) 263,049 38,510 $ 301,559 $ 1.81

218 • FIRST FINANCIAL HOLDING CO., LTD.

G. First Venture Capital Co., Ltd.

(A)

First Venture Capital Co., Ltd. Individual Condensed Balance Sheets December 31

(Expressed In Thousands of New Taiwan Dollars)

Assets	2015 $ 251,111 1,693,744 8,838 $ 1,953,693	2014 $ 375,784 1,839,872 8,838 $ 2,224,494	Liabilities Current liabilities Total liabilities Equity Common stock Retained earnings Other equity interest Total equity Total liabilities and equity	2015 $ 116 116 1,800,000 38,785 114,792 1,953,577 $ 1,953,693	2014
Current assets Available-for-sale financial assets Deferred income tax assets Total assets					$ 23,275
					23,275
					1,800,000 9,189 392,030
					2,201,219
					$ 2,224,494

(B)

First Venture Capital Co., Ltd. Individual Condensed Statements of Comprehensive Income For the years ended December 31

(Expressed In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Accounts			2015		2014
Operating revenues		$	46,201	$	124,528
Operating expenses	(		28,072 ) (		25,013 )
Non-operating income (expense)			1,529 (		268 )
Income from continuing operations before income tax			19,658		99,247
Income tax benefit (expense)			18,208 (		11,527 )
Net income			37,866		87,720
Other comprehensive income	(		277,238 )		169,038
Total comprehensive income for the period	($		239,372 )	$	256,758
Earnings Per Share (in NT dollars)
Basic Consolidated Earnings Per Share and Diluted
Consolidated Earnings Per Share		$	0.21	$	0.55

2015 ANNUAL REPORT • 219

H. First Financial Management Consulting Co., Ltd.

(A)

First Financial Management Consulting Co., Ltd. Individual Condensed Balance Sheets

December 31

(Expressed In Thousands of New Taiwan Dollars)

Assets	2015 $ 42,649 113 - 308 103 $ 43,173	2014 $ 44,383 43 1 146 58 $ 44,631	Liabilities Current liabilities Other liabilities – noncurrent Total liabilities Equity Common stock Capital surplus Retained earnings Total equity Total liabilities and equity	2015 $ 4,280 1,815 6,095 20,000 261 16,817 37,078 $ 43,173	2014
Current assets Property and equipment Intangible assets Deferred income tax assets Other assets Total assets					$ 4,215 860
					5,075
					20,000 89 19,467
					39,556
					$ 44,631

(B)

First Financial Management Consulting Co., Ltd. Individual Condensed Statements of Comprehensive Income For the years ended December 31

(Expressed In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Accounts	2015 $ 30,238 ( 18,478 ) ( 11,760 ( 102 ) 11,658 ( 2,011 ) ( 9,647 ( 662 ) $ 8,985 $ 4.82	2014 $ 28,770 15,966 ) 12,804 1,086 13,890 2,391 ) 11,499 2,116 $ 13,615 $ 5.75
Operating revenues Operating expenses Operating income Non-operating income and expense Income from continuing operations before income tax Income tax expense Net income Other comprehensive income Total comprehensive income for the period Earnings Per Share (in NT dollars) Basic Consolidated Earnings Per Share and Diluted Consolidated Earnings Per Share

==> picture [462 x 37] intentionally omitted <==

220 • FIRST FINANCIAL HOLDING CO., LTD.

I. First P&C Insurance Agency Co., Ltd.

(A)

First P&C Insurance Agency Co., Ltd. Individual Condensed Balance Sheets

December 31

(Expressed In Thousands of New Taiwan Dollars)

Assets	2015 $ 18,412 30 18 400 $ 18,860	2014 $ 18,451 48 - 650 $ 19,149	Liabilities Current liabilities Total liabilities Equity Common stock Capital surplus Retained earnings Total equity Total liabilities and equity	2015 $ 5,142 5,142 3,000 175 10,543 13,718 $ 18,860	2014
Current assets Property and equipment Intangible assets Other assets Total assets					$ 5,619
					5,619
					3,000 89 10,441
					13,530
					$ 19,149

(B)

First P&C Insurance Agency Co., Ltd. Individual Condensed Statements of Comprehensive Income For the years ended December 31

(Expressed In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Accounts
Operating revenues		$	49,379	$	47,240
Operating costs	(		35,846 ) (		31,632 )
Operating expenses	(		4,953 ) (		7,289 )
Operating income			8,580		8,319
Non-operating income			76		213
Income from continuing operations before income tax			8,656		8,532
Income tax expense	(		1,472 ) (		1,450 )
Net income			7,184		7,082
Total comprehensive income for the period		$	7,184	$	7,082
Earnings Per Share (in NT dollars)
Basic Consolidated Earnings Per Share and Diluted
Consolidated Earnings Per Share		$	23.95	$	23.61

2015 ANNUAL REPORT • 221

(18)Profitability, asset quality, management information, and liquidity and market risk sensitivity of subsidiaries:

A. Consolidated:

Consolidated:
		For theyears ended December 31,
		2015	2014
R l %	Before taxes	0.78	0.71
eturn on tota assets ()	After taxes	0.66	0.61
Return on stockholders’ equity (%)	Before taxes	11.09	11.15
	After taxes	9.32	9.53
Netprofit margin ratio(%)		39.08	41.18

Note 1:Return on total assets = Income before (after) income tax / average total assets.

Note 2:Return on stockholders’ equity = Income before (after) income tax / average stockholders’ equity.

Note 3:Net profit margin ratio = Income after income tax / net revenues.

Note 4:The term “Income before (after) income tax” means net income from January 1 to the balance sheet date of the reporting period.

B. FFHC

FFHC
		For theyears ended December 31,
		2015	2014
Return on total assets (%)	Before taxes	8.54	8.51
	After taxes	8.56	8.70
Return on stockholders’ equity (%)	Before taxes	9.35	9.34
	After taxes	9.37	9.56
Netprofit margin ratio(%)		97.96	100.41

Note 1:Return on total assets = Income before (after) income tax / average total assets.

Note 2:Return on stockholders’ equity = Income before (after) income tax / average stockholders’ equity.

Note 3:Net profit margin ratio = Income after income tax / net revenues.

Note 4:The term “Income before (after) income tax” means net income from January 1 to the balance sheet date of the reporting period.

222 • FIRST FINANCIAL HOLDING CO., LTD.

C. FCB and Its subsidiaries:

(A) Profitability

(A) Profitability
		For theyears ended December 31,
		2015	2014
Return on total assets (%)	Before taxes	0.81	0.71
	After taxes	0.69	0.60
Return on stockholders’ equity (%)	Before taxes	11.32	11.14
	After taxes	9.56	9.40
Netprofit margin ratio(%)		42.06	35.66

Note 1:Return on total assets = Income before (after) income tax / average total assets.

Note 2:Return on stockholders’ equity = Income before (after) income tax / average stockholders’ equity.
Note 3:Net profit margin ratio = Income after income tax / net revenues.
Note 4:The term “Income before (after) income tax” means net income from January 1 to the balance sheet date of the reporting period.
(B) Asset quality of FCB
a. Non-performing loans and assets quality

Please refer to Note 12(2)D(G)a.

b. Non-performing loans and overdue receivables exempted from reporting to the competent authority

Please refer to Note 12(2)D(G)b.

c. Profile of concentration of credit risk and credit extensions of FCB
Please refer to Note 12(2)D(G)c.
d. Structure analysis of time to maturity of FCB
i. Structure analysis of NTD time to maturity

Please refer to Note 12(2)E(F)a.

ii. Structure analysis of USD time to maturity of FCB

Please refer to Note 12(2)E(F)b.

e. Sensitivity analysis of interest rate for assets and liabilities of FCB

Please refer to Note 12(2)F(M).

2015 ANNUAL REPORT • 223

D. Information for FS and its subsidiaries is stated below:

Profitability

Profitability
		For theyears ended December 31,
		2015	2014
Return on total assets (%)	Before taxes	0.87	0.62
	After taxes	0.92	0.40
Return on stockholders’ equity (%)	Before taxes	2.50	1.76
	After taxes	2.65	1.14
Netprofit margin ratio(%)		11.03	5.16

Note 1:Return on total assets = Income before (after) income tax / average total assets.

Note 2:Return on stockholders’ equity = Income before (after) income tax / average stockholders’ equity.

Note 3:Net profit margin ratio = Income after income tax / net revenues.

Note 4:The term “Income before (after) income tax” means net income from January 1 to the balance sheet date of the reporting period.
E. Information for FSIT is stated below:

Profitability

Profitability
		For theyears ended December 31,
		2015	2014
Return on total assets (%)	Before taxes	(0.28)	(0.05)
	After taxes	(0.28)	(0.05)
Return on stockholders’ equity (%)	Before taxes	(11.24)	(1.55)
	After taxes	(11.26)	(1.60)
Netprofit margin ratio(%)		(21.00)	(3.67)

Note 1:Return on total assets = Income before (after) income tax / average total assets.

Note 2:Return on stockholders’ equity = Income before (after) income tax / average stockholders’ equity.

Note 3:Net profit margin ratio = Income after income tax / net revenues.

Note 4:The term “Income before (after) income tax” means net income from January 1 to the balance sheet date of the reporting period.

==> picture [462 x 106] intentionally omitted <==

224 • FIRST FINANCIAL HOLDING CO., LTD.

(20)Content and amount of investment trust business in accordance with Trust Enterprise Act

			(Expressed In Thousands of New Taiwan Dollars)	(Expressed In Thousands of New Taiwan Dollars)	(Expressed In Thousands of New Taiwan Dollars)
	Balance Sheet of Trust Accounts
Trust assets			December 31,2015	December 31,2014
Bank deposits		$	12,705,312	$	11,186,194
Bonds			67,790,171		49,252,352
Stocks			90,174,627		91,152,688
Mutual funds			203,370,218		206,060,965
Beneficiary certificate			296,512		-
Accounts receivable			160		-
Properties			17,387,383		15,533,438
Structured notes			1,000,000		-
Net assets under collective management
accounts			317,872		448,365
Net assets under individual	management
accounts			9,049		13,880
Customers’ securities under custody			395,979,350		333,293,082
Total		$	789,030,654	$	706,940,964
Trust liabilities
Payables-customers securities under custody		$	395,979,350	$	333,293,082
Payables			249		44
Trust capital			392,853,518		373,519,274
Various reserves and accumulated profit or loss			197,537		128,564
Total		$	789,030,654	$	706,940,964
As of December 31, 2015 and 2014, the Offshore Banking Unit had book balance of NTD$3,961,092
and $3,373,399 for designated money trust funds investing in foreign securities ; the Offshore
Banking Unit had book balance of NT$137,839 and			NT$35,736 for designated money trust funds
investing in local securities, repectively.

Total
$ 789,030,654
$ 706,940,964
As of December 31, 2015 and 2014, the Offshore Banking Unit had book balance of NTD$3,961,092
and $3,373,399 for designated money trust funds investing in foreign securities ; the Offshore
Banking Unit had book balance of NT$137,839 and NT$35,736 for designated money trust funds
investing in local securities, repectively.

(Expressed In Thousands of New Taiwan Dollars)
PropertyList of Trust Accounts
Investment items
December 31,2015
December 31,2014
Bank deposits
$ 12,705,312
$ 11,186,194
Bonds
67,790,171
49,252,352
Stocks
90,174,627
91,152,688
Mutual funds
203,370,218
206,060,965
Properties
17,387,383
15,533,438
Beneficiary certificate
296,512
-
Accounts receivable
160
-
Structured notes
1,000,000
-
Net assets under collective management accounts
317,872
448,365
Net assets under individual management
accounts
9,049
13,880
Customers’ securities under custody
395,979,350
333,293,082
Total
$ 789,030,654
$ 706,940,964

Investment items
Bank deposits
Bonds
Stocks
Mutual funds
Properties
Beneficiary certificate
Accounts receivable
Structured notes
Net assets under collective management accounts
Net assets under individual management
accounts
Customers’ securities under custody
Total

December 31,2015
$ 12,705,312
67,790,171
90,174,627
203,370,218
17,387,383
296,512
160
1,000,000
317,872
9,049
395,979,350
$ 789,030,654

2015 ANNUAL REPORT • 225

(Expressed In Thousands of New Taiwan Dollars)

	Income Statement of Trust Accounts For theyears ended December 31 Trust revenues 2015 2014 Interest income $ 5,081,879 $ 4,580,483 Cash dividend income 2,315 3,714 Realized gain on bonds 5,095 29,932 Realized gain on stocks 3,184 1,480 Realized gain on mutual funds 4,434,131 4,287,897 Gain on translation 2,028 839 Other income 2 - Total trust revenues 9,528,634 8,904,345 Trust expenses Management fee ( 2,730 ) ( 2,102 ) Other expenses - ( 36 ) Service fee ( 3,723 ) ( 935 ) Realized loss on bonds ( 67,512 ) ( 153,482 ) Realized loss on stocks ( 4,155 ) ( 209 ) Realized loss on mutual funds ( 4,278,173 ) ( 2,818,601 ) Loss on translation ( 1,630 ) ( 2,081 ) Total trust expenses ( 4,357,923 ) ( 2,977,446 ) Net income before tax 5,170,711 5,926,899 Income tax expense ( 411 ) ( 60 ) Net income after tax $ 5,170,300 $ 5,926,839	Income Statement of Trust Accounts For theyears ended December 31 Trust revenues 2015 2014 Interest income $ 5,081,879 $ 4,580,483 Cash dividend income 2,315 3,714 Realized gain on bonds 5,095 29,932 Realized gain on stocks 3,184 1,480 Realized gain on mutual funds 4,434,131 4,287,897 Gain on translation 2,028 839 Other income 2 - Total trust revenues 9,528,634 8,904,345 Trust expenses Management fee ( 2,730 ) ( 2,102 ) Other expenses - ( 36 ) Service fee ( 3,723 ) ( 935 ) Realized loss on bonds ( 67,512 ) ( 153,482 ) Realized loss on stocks ( 4,155 ) ( 209 ) Realized loss on mutual funds ( 4,278,173 ) ( 2,818,601 ) Loss on translation ( 1,630 ) ( 2,081 ) Total trust expenses ( 4,357,923 ) ( 2,977,446 ) Net income before tax 5,170,711 5,926,899 Income tax expense ( 411 ) ( 60 ) Net income after tax $ 5,170,300 $ 5,926,839	Income Statement of Trust Accounts For theyears ended December 31 Trust revenues 2015 2014 Interest income $ 5,081,879 $ 4,580,483 Cash dividend income 2,315 3,714 Realized gain on bonds 5,095 29,932 Realized gain on stocks 3,184 1,480 Realized gain on mutual funds 4,434,131 4,287,897 Gain on translation 2,028 839 Other income 2 - Total trust revenues 9,528,634 8,904,345 Trust expenses Management fee ( 2,730 ) ( 2,102 ) Other expenses - ( 36 ) Service fee ( 3,723 ) ( 935 ) Realized loss on bonds ( 67,512 ) ( 153,482 ) Realized loss on stocks ( 4,155 ) ( 209 ) Realized loss on mutual funds ( 4,278,173 ) ( 2,818,601 ) Loss on translation ( 1,630 ) ( 2,081 ) Total trust expenses ( 4,357,923 ) ( 2,977,446 ) Net income before tax 5,170,711 5,926,899 Income tax expense ( 411 ) ( 60 ) Net income after tax $ 5,170,300 $ 5,926,839

226 • FIRST FINANCIAL HOLDING CO., LTD.

Balance as at December 31, 2015	Amount (thousands)	$ 738,234	533,000
	Number of shares ( thousands)	26,460	53,300
Addition (Note 2)	Amount (thousands)	$ 738,234	533,000
	Number of shares ( thousands)	26,460	53,300
Balance as at January 1, 2015	Amount (thousands)	$ -	-
	Number of shares (thousands)	-	-
Relationship with the investor		Non-related party	Non-related party
Counterparty		Cathay Life Insurance Co., Ltd.	Taiwan High Speed Rail Corporation
General ledger account		Other financial assets	Available-for-sale financial assets
Type and name of marketable securities �Note 1�		Stock	Stock

2015 ANNUAL REPORT • 227

Relationship between counterparty and FCB	None	None
Additional terms	None	None
Gain (loss) on disposal	($ 6,539)	26,892
Sale price	$ 40,576	26,892
Book value(Note)	$ 47,115	-
Constituents of creditor’s right	Loans	Financial bonds
Counterparty	Eastern Finance Ltd.	SC Lowy Primary Investments Ltd.
Transaction date (Date of contract)	2015.8.11	2015.12.7

228 • FIRST FINANCIAL HOLDING CO., LTD.

Percentage (%) of total consolidated net revenues or assets (Note 3)	0.03%	0.04%	0.05%	0.00%	0.03%	0.04%	0.05%	0.03%	0.17%	0.13%	0.00%	0.09%	0.02%	0.01%	0.17%	0.00%	0.00%	0.00%	0.08%	0.03%	0.17%	0.13%
Conditions	No significant difference from general customers	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�
Amount	$ 783,692	910,975	1,212,770	33,550	783,692	910,975	1,212,770	690,551	68,788	54,006	47,483	37,642	386,733	343,528	70,365	100,000	58,335	39,729	32,068	690,551	68,788	54,006
Account	Cash and cash equivalents	Current tax liabilities	Current tax assets	Current tax assets	Deposits and remittances	Current tax assets	Current tax liabilities	Deposits and remittances	Net income except interest	Business and administrative expenses	Deposits and remittances	Net service fee and commission	Deposits and remittances	Financial liabilities at fair value through income statement	Business and administrative expenses	Loans discounted, net	Deposits and remittances	Deposits and remittances	Net service fee and commission	Cash and cash equivalents	Business and administrative expenses	Net income except interest
Relationship (Note 2)	1	1	1	1	2	2	2	3	3	3	3	3	3	3	3	3	3	3	3	3	3	3
Counterparty	FCB	FCB	FCB	FFAM	FFHC	FFHC	FFHC	FS	FS	FS	FSIT	FSIT	FALI	FALI	FFAM	FFAM	FVC	FFMC	FPCIA	FCB	FCB	FCB
Company	FFHC				FCB															FS
No. (Note 1)	0				1															2

2015 ANNUAL REPORT • 229

Percentage (%) of total consolidated net revenues or assets (Note 3)	0.00%	0.09%	0.02%	0.01%	1.66%	0.00%	0.00%	0.17%	0.00%	0.00%	0.08%	0.00%	1.66%	0.00%
Conditions	�	�	�	�	�	�	�	�	�	�	�	�	�	�
Amount	47,483	37,642	386,733	343,528	676,727	59,571	33,550	70,365	100,000	39,729	32,068	58,335	676,727	59,571
Account	Cash and cash equivalents	Business and administrative expenses	Cash and cash equivalents	Other financial assets – net	Net service fee and commission	Accounts payable	Current tax liabilities	Net service fee and commission	Other borrowings	Cash and cash equivalents	Net service fee and commission	Cash and cash equivalents	Net service fee and commission	Accounts payable
Relationship (Note 2)	3	3	3	3	3	3	2	3	3	3	3	3	3	3
Counterparty	FCB	FCB	FCB	FCB	FIA	FIA	FFHC	FCB	FCB	FCB	FCB	FCB	FALI	FALI
Company	FSIT		FALI				FFAM			FFMC	FPCIA	FVC	FIA
No. (Note 1)	3		4				5			6	7	8	9

230 • FIRST FINANCIAL HOLDING CO., LTD.

==> picture [212 x 585] intentionally omitted <==

2015 ANNUAL REPORT • 231

	Ceiling on total loans granted	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357
	Limit on loans granted to a single party	946,017	946,017	946,017	946,017	946,017	946,017	946,017	946,017	946,017	946,017	946,017	946,017	946,017
Collateral	Value	120,000	55,000	2,600	1,500	240,000	96,000	72,000	63,800	35,850	2,000	2,250	14,400	4,018
	Item	Real estate setting	Stock	Deposit	Deposit	Real estate setting	Real estate setting	Real estate setting	Real estate setting	Real estate setting	Deposit	Deposit	Real estate setting	Tickets
	Allowance for doubtful accounts	-	-	-	-	-	-	-	-	-	-	-	-	-
	Reason for short-term financing	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover
	Amount of transactions with the borrower	-	-	-	-	-	-	-	-	-	-	-	-	-
	Nature of Loan	2	2	2	2	2	2	2	2	2	2	2	2	2
	Interest Rate	3.75%	5.53%	6.80%	5.80%	4.18%	4.38%	4.58%	4.80%	4.61%	6.88%	6.04%	8.11%	7.40%
	Actual amount drawn down	55,650	38,669	4,662	10,723	279,530	58,000	18,858	32,000	18,250	5,062	15,000	11,208	4,633
	Balance at December 31, 2014	55,650	50,000	4,662	10,723	279,530	58,000	18,858	32,000	18,250	5,062	15,000	11,208	4,633
Maximum outstanding balance during the nine months ended December 31, 2014		59,850	50,000	13,652	23,698	295,985	80,000	20,000	40,000	20,000	10,000	15,000	13,921	7,353
Is a related party		N	N	N	N	N	N	N	N	N	N	N	N	N
General ledger account		Other receivables	Other receivables	Other receivables	Other receivables	Other receivables	Other receivables	Other receivables	Other receivables	Other receivables	Other receivables	Other receivables	Other receivables	Other receivables
Borrower		Punggi Construction Co., Ltd.	Ai Kuai International, Inc.	I-Mei Multimedia e-Content Production & Marketing Co., Ltd.	San Wen Co., Ltd.	HANKY Co., Ltd.	Kai Chu Aluminum Co., Ltd	Che Cheng Industrial Co., Ltd.	Fan Tai Asset Property Management Co., Ltd.	Zhao Yi real estate Co., Ltd.	Asia Forging Supply Co., Ltd.	Hlsc Logistics Co., Ltd.	Yuans of biological Science Technologies Co., Ltd. of hall	Taiwan Newleader Co., Ltd
Creditor		FCB Leasing Co., Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.
Number		1	2	3	4	5	6	7	8	9	10	11	12	13

232 • FIRST FINANCIAL HOLDING CO., LTD.

	Ceiling on total loans granted	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357	1,261,357
	Limit on loans granted to a single party	946,017	315,339	315,339	946,017	946,017	946,017	946,017	315,339	315,339	946,017	946,017	315,339
Collateral	Value	15,651	2,000	5,800	2,000	12,000	1,200	10,206	14,000	194,400	3,000	18,886	180,000
	Item	Warehouse (fish goods)	Deposit	Deposit	Deposit	Personal property secured	Deposit	Pledged shares	Real estate setting	Real estate setting	Deposit	Real estate setting	Real estate setting
	Allowance for doubtful accounts	-	-	19,807	-	-	7,457	-	-	-	-	-	-
	Reason for short-term financing	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover	Operation turnover
	Amount of transactions with the borrower	-	15,000	20,000	-	-	-	-	10,000	73,600	-	-	237,000
	Nature of Loan	2	1	1	2	2	2	2	1	1	2	2	1
	Interest Rate	8.03%	7.16%	8.75%	7.01%	7.20%	7.35%	5.69%	8.11%	5.02%	5.30%	6.58%	4.50%
	Actual amount drawn down	5,144	5,089	19,807	6,744	5,776	7,457	3,979	3,943	153,835	20,000	9,609	96,550
	Balance at December 31, 2014	17,144	5,089	19,807	6,744	5,776	7,457	3,979	3,943	153,835	20,000	9,609	111,550
Maximum outstanding balance during the nine months ended December 31, 2014		30,000	10,000	29,000	10,000	8,980	10,582	10,000	9,134	162,000	20,000	10,000	143,600
Is a related party		N	N	N	N	N	N	N	N	N	N	N	N
General ledger account		Other receivables	Other receivables	Other receivables	Other receivables	Other receivables	Other receivables	Other receivables	Other receivables	Other receivables	Other receivables	Other receivables	Other receivables
Borrower		Ton-Dar Seafood Co., Ltd.	Sen Hai Trade Co., Ltd.	Super Vision International Trading Co., Ltd.	Zhen Hao Co., Ltd.	Compass guarantee responsibility Changhua County Cooperative Farm	Xuantai Food Co., Ltd.	Chun Lin Investment Co., Ltd.	Newera Art Co., Ltd.	Coven Garden Construction Co., Ltd.	Holmes Chez International Co., Ltd.	Long Life Tien Trading Co., Ltd.	Arch-world Co., Ltd.
Creditor		FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.
Number		14	15	16	17	18	19	20	21	22	23	24	25

2015 ANNUAL REPORT • 233

	rovision of dorsements/ uarantees to the party in Mainland China �Note�	rovision of dorsements/ uarantees to the party in Mainland China �Note�	N	Y
2. With regard to short-term financing capital borrowers who did not have business transactions with FCB Leasing, the amount of loans for individual companies due to business transactions shall not exceed 30% net asset value of FCBL’s latest financial statements. For those who have the demand for short-term financing capital, the total amount of loans shall not exceed 40% net asset value of FCBL’s latest financial statements. If the borrower is FCBL’s subsidiary, the amount of loans shall not exceed 40% net asset value of FCBL’s latest financial statements. 3. The total amount of FCBL shall not exceed 40% net asset value of its latest financial statements. 4. (1) with business relationships (2) short-term financing needs without business relationships. Endorsements and guarantees provided for others: (A) The subsidiaries, FCB, FALI and FS belong to financial industry, insurance industry and securities industry, and no disclosure is required. (B) Not applicable for the subsidiaries, FSIT, FFAM, FVC, FFMC and FPCIA. (C) Indirect investees belong to financial industry and securities industry and no disclosure is required except for First Commercial Bank (USA) and FTSL.	P en g				Note : The subsidiaries of FCB, for business needs, may resolve through its Board of Directors to provided guarantees for external parties. Securities held at the end of period: (A) The subsidiaries, FCB, FALI and FS belong to financial industry, insurance industry and securities industry, and no disclosure is required.
	Provision of endorsements/ guarantees by subsidiary to parent company �Note�		N	N
	Provision of endorsements/ guarantees by parent company to subsidiary �Note�		N	N
	Maximum limit		$31,533,915	$31,533,915
	The ratio of accumulated endorsement and guarantee amount and the net value of the latest financial statements		74.03%	68.82%
	Property- backed endorsement and guarantee		None	None
	Actually used amount		596,345	1,134,360
	Ending balance of endorsement and guarantee		2,334,480	2,170,080
	Maximum balance accumulated as of the month		2,638,620	2,945,810
	Limit for endorsement and guarantee for single enterprise		9,460,174	9,460,174
	Endorsed and guaranteed company	Relationship	Subsidiary	Subsidiary
		Name of company	FCBL Capital International (B.V.I) Ltd.	FCBL
		Endorsing and guarantee company	FCB Leasing Co., Ltd.	FCB Leasing Co., Ltd.
		o.	1	2
B.		N			C.

234 • FIRST FINANCIAL HOLDING CO., LTD.

(B) The relevant information for subsidiaries FSIT, FFAM, FVC is as follows, except FFMC and FPCIA which are not applicable	for the regarding matter.	(C) Indirect investees belong to financial industry and securities industry and no disclosure is required except for First	Commercial Bank (USA) and FTSL.	Commercial Bank (USA) and FTSL.	(Expressed In Thousands of New Taiwan Dollars, Unless Otherwise Indicated)	Shares / Units Ownership Market Value	Name Of Investee And Type Of Securities Relationship Account (in thousands) Book value Percentage (%) (Note 1) Note	Name Of Investee And Type Of Securities Relationship Account (in thousands) Book value Percentage (%) (Note 1) Note	FCB Stocks A subsidiary of FFHC Equity investments accounted for under the equity method 8,624,400 $182,872,053 100.00% $182,872,053	FS � � � 640,000 6,529,355 100.00% 6,529,355	FSIT � � � 60,000 997,622 100.00% 997,622	FFAM � � � 145,000 1,521,550 100.00% 1,521,550	FVC � � � 180,000 1,953,577 100.00% 1,953,577	FFMC � � � 2,000 37,078 100.00% 37,078	FPCIA � � � 300 13,718 100.00% 13,718	FALI � � � 114,750 361,247 51.00% 361,247	Taiwan Depository & Clearing Corporation � An investee of FFHC under the cost method Financial assets carried at cost 285 6,105 0.08% 6,105	Taipei Financial Center Corp. � � � 30,000 300,000 2.04% 300,000	Taiwan Asset Management Corporation � � � 225,000 2,862,000 17.03% 2,862,000	FCBL Capital International (B.V.I) Ltd. Stocks An investee of FCBL under the equity method Equity investments accounted for under the equity method 60,050 1,739,488 100.00% 1,739,488 Note 2	FCB International Leasing Ltd. � An investee of FCBL Capital �	International (B.V.I) Ltd USD 30,000 thousand 601,023 100.00% 601,023 Note 2	under the equity method	FCB Leasing (Xiamen) Ltd. � � � USD 30,000 thousand 943,014 100.00% 943,014 Note 2	Central Construction Bonds (92 A central debt c) Bonds None Available-for- sale financial Assets 3,000 thousand $3,300 - $3,300 Note 3	FSITC Global REITs Fund Beneficiary certificates A mutual fund managed by FSIT Available-for- sale financial Assets-current 317 2,513 0.83% 2,513	FSITC China Century Fund � � � 2,527 28,754 0.62% 28,754	FSITC Taiwan Money Market Fund � � � 3,182 48,047 0.17% 48,047
							Investor		FFHC	�	�	�	�	�	�	�	�	�	�	FCBL	FCBL Capital	International	(B.V.I) Ltd	�	FIA	FSIT	�	�

2015 ANNUAL REPORT • 235

	Note
Ownership Market Value	Percentage (%) (Note 1)	0.62% $ 3,142		0.12% 48,045	0.48% 45,732	2.03% 30,617	0.84% 30,090	0.20% 1,967		2.22% 23,798	0.23% 8,135	0.77% 11,296	0.21% 4,129	4.65% 16,854	4.60% 53,037	0.98% 5,515	0.02% 493	0.98% 16,050	2.36% 5,383	6.32% 48,818	1.79% 10,019	5.03% 35,242	0.30% 4,308	1.66% 98,380	4.05% 40,925	3.63% 672	3.81% 39,188	12.63% 38,270	8.49% 14,487	4.06% 1,457	7.85% 7,768	4.97% 44,850	8.70% -	0.93% 56,269	15.09% 11,980
	Book value	3,142		48,045	45,732	30,617	30,090	1,967		23,798	8,135	11,297	4,129	16,854	53,037	5,515	493	16,050	5,383	48,818	10,019	35,242	4,308	98,380	40,925	672	39,188	38,270	14,487	1,457	7,768	44,850	-	56,269	11,980
Shares / Units	(in thousands)	395 $		273	3,352	2,025	3,000	91		3,095	510	348	800	3,098	3,084	2,744	7	892	605	1,983	1,207	1,031	207	1,000	1,103	1,200	2,850	3,448	3,300	459	800	2,500	2,250	3,281	2,000
	Account	Available-for- sale financial	Assets-current	�	�	�	�	�	Available-for- sale financial	Assets	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�
	Relationship	A mutual fund managed	by FSIT	�	�	�	�	�	None		�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�
	Name Of Investee And Type Of Securities	FSITC OTC Fund Beneficiary certificates		FSITC Money Market Fund �	FSITC Global High Yield Bond Fund �	FSITC Innovation Fund �	FSITC RMB High Yield Bond Fund �	FSITC High-Tech Fund �	SPACE SHUTTLE HI-TECH CO.,LTD Stocks		Hitron Technologies Inc. �	China Fineblanking Technology Co., Ltd. �	Cando Co., Ltd. �	Wieson Technologies Co., Ltd. �	Joyin Co., Ltd. �	Eversol Corporation �	JPP Holding Co., Ltd. �	Kuo Ching Chemical Co., Ltd. �	Tcst Tech Co., Ltd. �	Jorjin Technologies Inc. �	Maxigen Biotech Inc. �	Power Source energy Co., Ltd �	Advanced Flexible Circuits Co., Ltd �	SR SUNTOUR INC �	Caremed Supply, Inc �	Mylight Technology Co., Ltd. �	Clientron Corp �	Gloria Special Steel Profile Corporation �	Chuan Shih Industrial Co., Ltd. �	ZOWIE Technology Corporation �	Awin Diamond Technology Corporation �	Biotanico Inc. �	Universal Peptide Corp �	Taiwan Solar Energy Corporation �	Sino Applied Materials Co., Ltd �
	Investor	FSIT		�	�	�	�	�	FVC		�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�	�

236 • FIRST FINANCIAL HOLDING CO., LTD.

	Note
Ownership Market Value	Percentage (%) (Note 1)		4.64% $ 20,070	0.45% 882	2.35% 53,800	8.22% 17,471	1.09% 5,712	5.00% 600	4.95% 24,250	3.12% 25,300	4.86% 24,296	7.14% 119,970		2.66% 13,572		10.88% 18,228	0.00% 27,976	3.08% 18,888	5.25% 2,875	3.34% 31,208		2.20% 5,545	3.50% 40,040	2.82% 45,465	3.34% 30,000	4.08% 7,440		2.27% 46,662		1.97% 23,571	3.57% 29,031	3.79% 22,026	10.47% 5,355	0.39% 38,257	3.17% 35,590	7.33% 57,773	0.16% 15,774
	Book value		20,070	882	53,800	17,471	5,712	600	24,250	25,300	24,296	119,970		13,572		18,228	27,976	18,888	2,875	31,208		5,545	40,040	45,465	30,000	7,440		46,662		23,571	29,031	22,026	5,355	38,257	35,590	57,773	15,774
Shares / Units	(in thousands)		1,090 $	210	2,000	1,381	2,400	60	1,213	1,100	1,565	3,000		668		3,170	-	813	588	735		500	1,400	1,500	1,000	1,600		1,250		637	1,275	1,700	2,100	362	1,000	2,448	200
	Account	Available-for- sale financial	Assets	�	�	�	�	�	�	�	�	�		�		�	�	�	�	�		�	�	�	�	�		�		�	�	�	�	�	�	�	�
	Relationship	None		�	�	�	�	�	�	�	�	�		�		�	�	�	�	�		�	�	�	�	�		�		�	�	�	�	�	�	�	�
		Stocks		�	�	�	�	�	�	�	�	�		�		�	�	�	�	�		�	�	�	�	�		�		�	�	�	�	�	�	�	�
	Name Of Investee And Type Of Securities	3S Silicon Tech., Inc.		GreenRich Technology Co., Ltd.	TBIMotion Technology	Entropy Precision System Inc.	Utech Solar Corp	Hero Movie	Golden Way Electronics Corp., Ltd	Joy Industrial Co., Ltd	Everready Precision Ind. Corp.	Interactive Digital Technologies Inc.	Accutex Accurancy & Technology Leading		Company	Weiya Technology co., LTD	TPM Fund	FORMOSA MICROSEMI CO., LTD.	Dai Yi Wistom CO., LTD.	A Plus Biotechnology co., Ltd(Common Stock)	Advanced Material Systems Co.(Common Stock)		Antero Biotechnology Co., Ltd.	Genomics BioSci & Tech	Shanghai Kitchen Co., Ltd.	Bravo Ideas	All Cosmos Bio-Tech Holding Corporation		(Cayman)	APOGEE OPTOCOM Co.,Ltd(Common Stock)	Tai Ling Biotech Inc.	Tong Bao Co., Ltd.	Applied Green Light Inc. of Cayman	Nan Pao Resins Co., Ltd	Tair Jiuh Enterprise Co., Ltd.	FEMCO Steel Technology Co., Ltd.	United BioPharma, Inc.
	Investor	FVC		�	�	�	�	�	�	�	�	�	�			�	�	�	�	�	�		�	�	�	�	�			�	�	�	�	�	�	�	�

2015 ANNUAL REPORT • 237

	Note
Shares / Units Ownership Market Value	Investor Name Of Investee And Type Of Securities Relationship Account (in thousands) Book value Percentage (%) (Note 1)		FVC Episonica Holdings Ltd.(Preferred Stock) Stocks None Available-for- sale financial Assets 1,509 $ 31,522 14.29% $ 31,522	� Innopharmax Inc. � � � 145 8,887 0.27% 8,887	� Zhong Lin Capital Co., Ltd. � � � 12,000 180,000 12.00% 180,000	� Hyper Crystal Inc. � � � 1,500 21,750 13.06% 21,750	Amaryllo International B.V. � � � 600 19,731 0.00% 19,731	polaris group taiwan � � � 1,823 26,902 0.00% 26,903	Gloria Material Technology Corp.(Common Stock) � � Financial assets at fair value through profit or loss 1,478 26,532 0.33% 26,533	polaris group taiwan Convertible bond � � - 65,701 0.00% 65,700	FFAM First Financial Assets Management (B.V.I) Ltd. Stocks An investee of FFAM under the equity method Equity investments accounted for under the equity method USD 30,000 thousand 717,581 100.00% 717,581	FFAM (B.V.I) First Financial Leasing (Chengdu) � � � USD 30,000 thousand 717,545 100.00% 717,545	Note 1：Market value of unlisted stock is calculated based on the investee’s most recent unaudited financial statements, whereas market value of emerging stock is calculated based on reference price in an emerging stock market.	Note 2: The above-mentioned long-term investments were not provided as liens or pledges.	Note 3：For details on liens and pledges, please refer to Note 8	D. Cumulative purchases or sales of the marketable securities up to NT$300 million or over 10% of the issued capital stock:	The subsidiaries, FCB, FALI and FS belong to financial industry, insurance industry and securities industry, and no disclosure is	required. Indirect investees belong to financial industry and securities industry and no disclosure is required except for First	Commercial Bank (USA) and FTSL. Not applicable for the remaining indirect investees.	E. Information of derivative instrument transactions:	The subsidiaries, FCB, FS and FALI, insurance industry and securities industry, and no disclosure is required. Indirect investees	belong to financial industry and securities industry and no disclosure is required except for First Commercial Bank (USA) and	FTSL. Not applicable for the remaining indirect investees.	F. Information regarding reinvested business and consolidated stock holdings:

238 • FIRST FINANCIAL HOLDING CO., LTD.

Total	Number of Number of pro Number of	owned shares forma shares shares Percentage of	(in thousands) (Note 8) (in thousands) ownership (%)	8,624,400 - 8,624,400 100		640,000 - 640,000 100		60,000 - 60,000 100		145,000 - 145,000 100		180,000 - 180,000 100		2,000 - 2,000 100		300 - 300 100		114,750 - 114,750 51		5,000 - 5,000 100		300,000 - 300,000 100		7,000 - 7,000 100				1,500 - 1,500 30		60,050 - 60,050 100
Investment income	(loss) recognized by	the Company for	current period	$16,100,091		173,567		102,257		(68,064)		37,866		9,647		7,184		(45,647)		-		-		-				-		-
		Carrying value	of investment	$182,872,053		6,529,355		997,622		1,521,550		1,953,577		37,078		13,718		361,247		428,670		3,129,688		3,568,956				9,141		1,739,488
Percentage of	ownership (%) at the	end of current	period	100		100		100		100		100		100		100		51		100		100		100				30		100
	Major	operating	activities	Note 1		Note 2		Note 2		Note 5		Note 4		Note 5		Note 3		Note 3		Note 3		Note 5		Note 1				Note 6		Note 5
			Address	30, Chung-King S. Road, Sec. 1,	Taipei, Taiwan	6F, 27, An Ho Road, Sec. 1,	Taipei, Taiwan	7F, 6, Min Chuan E. Road Sec.	3, Taipei, Taiwan	7F, 94, Chung Hsiao E. Road,	Sec 2, Taipei, Taiwan	9F,30,Chung-King S. Road, Sec.	1, Taipei, Taiwan	9F,30,Chung-King S. Road, Sec.	1, Taipei, Taiwan	9F,30,Chung-King S. Road, Sec.	1, Taipei, Taiwan	13F, 456, Xin-Yi	Road,Sec.4,Taipei,Taiwan	9F, 30, Chung-King S. Road,	Sec. 1, Taipei, Taiwan	6F, 94,ChungHsiaoE.Road., Sec.	2, Taipei, Taiwan	200 East Main Street,	Alhambra, CA91801, USA			9F, 94,ChungHsiaoE.Road.,	Sec.2, Taipei, Taiwan	6F, 94,ChungHsiaoE.Road, Sec.	2, Taipei, Taiwan
	Name of	investee	company	FCB		FS		FSIT		FFAM		FVC		FFMC		FPCIA		FALI		FIA		FCBL		FIRST	COMMERCI	AL	BANK(USA)	EAREM		FCBL Capital	International
	Name of	investee	company	FFHC		�		�		�		�		�		�		�		FCB		�		�				�		FCBL

2015 ANNUAL REPORT • 239

Total	Number of Number of pro Number of	owned shares forma shares shares Percentage of	(in thousands) (Note 8) (in thousands) ownership (%)		USD 30,000 - USD 30,000 100	thousand thousand			USD 30,000 - USD 30,000 100	thousand thousand			10,000 - 10,000 100		1,000 - 1,000 100			66,000 - 66,000 100		USD 30,000 - USD 30,000 100	thousand thousand				USD 30,000 - USD 30,000 100	thousand thousand
					-				-				-		-			-		-					-
Investment income	(loss) recognized by	the Company for	current period
		Carrying value	of investment		$ 601,023				943,014				128,052		644,623			USD9,416	thousand	717,581					717,545
Percentage of	ownership (%) at the	end of current	period		100				100				100		100			100		100					100
	Major	operating	activities		Note 5				Note 5				Note 5		Note 5			Note 2�5		Note 5					Note 5
			Address		Rm. 1008, Jianwu Building, No.	188, Wangdun Rd., Suzhou,	China		20-21F., Huli Building,	Wuyuanwan Business	Operations Center, Huli District,	Xiamen City	7F,29,AnHoRoad,Sec.1,Taipei,	Taiwan	P.O. BOX 659, ROAD	TOWN,TORTOLA BRITISH,	VIRGIN ISLANDS	Hong Kong		7F,94, ChungHsiaoE.Road.,	Sec.2, Taipei, Taiwan				Fl. 18, No. 7, Xinguanghua St.,	Jingjiang, Chengdu, China
	Name of	investee	company	(B.V.I) Ltd.	FCB	International	Leasing Co.,	Ltd.	FCB Leasing	(Xiamen) Ltd.			FCMI		FTSL			FWSL		First Financial	Assets	Management	(B.V.I)Co.,	Ltd	FCB Leasing	(Chengdu)	Co., Ltd.
	Name of	investee	company		FCBL Capital	International	(B.V.I) Ltd.		�				FS		�			FTSL		FFAM					First Financial	Assets	Management	(B.V.I)Co.,	Ltd

240 • FIRST FINANCIAL HOLDING CO., LTD.

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2015 ANNUAL REPORT • 241

	Equity in the Earnings (Losses) (Note 2)	$ 187,416 (2)A
	Percentage of Ownership	N/A
	Net income of investee	$ 187,416
Accumulated	Outflow of Investment from Taiwan As of December 31, 2015	$ 4,676,508 USD 157,440
Investment Flows	Inflow	-
	Outflow	$ -
	Accumulated Outflow of Investment from Taiwan as of January 1, 2014	$ 4,676,508 USD 157,440
	Method of Investment (Note 1)	(1)
	Total Amount of Paid-in Capital	$ 4,676,508 USD 157,440
	Major Businesses and Products	Banking businesses approved by local government
	Investee Company	First Commercial Bank shanghai branch

242 • FIRST FINANCIAL HOLDING CO., LTD.

	Equity in the Earnings (Losses) (Note 2)	($62,208) (2)A
	Percentage of Ownership	N/A
	Net income of investee	($62,208)
Accumulated	Outflow of Investment from Taiwan As of December 31, 2015	$ 4,896,697 USD 162,269
Investment Flows	Inflow	-
	Outflow	$ -
	Accumulated Outflow of Investment from Taiwan as of January 1, 2014	$ 4,896,697 USD 162,269
	Method of Investment (Note 1)	(1)
	Total Amount of Paid-in Capital	$ 4,896,697 USD 162,269
	Major Businesses and Products	Banking businesses approved by local government
	Investee Company	First Commercial Bank chengdu branch

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2015 ANNUAL REPORT • 243

	Equity in the Earnings (Losses) (Note 2)	($104,335) (2)A
	Percentage of Ownership	N/A
			Upper Limit on Investment	$ 110,090,432
	Net income of investee	($104,335)
Accumulated	Outflow of Investment from Taiwan As of December 31, 2015	$ 5,132,801 USD 162,946
			Investment Amounts Authorized by Investment Commission, MOEA	$ 5,132,801 USD 162,946
Investment Flows	Inflow	-
			Accumulated Investments in Mainland China As of December 31, 2015	$ 5,132,801 USD 162,946
	Outflow	$ 5,132,801 USD 162,946
Accumulated	Outflow of Investment from Taiwan as of January 1, 2014	$ -
			Accumulated Inward Remittance of Earnings As of December 31, 2015	-
	Method of Investment (Note 1)	(1)
	Total Amount of Paid-in Capital	$ 5,132,801 USD 162,946
	Major Businesses and Products	Banking businesses approved by local government
			Carrying Value As of December 31, 2015	$ 5,253,332
	Investee Company	First Commercial Bank Xiamen branch

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244 • FIRST FINANCIAL HOLDING CO., LTD.

D. Investments on FCB’s investment in FCB International Leasing Ltd. through the indirect subsidiary, FCBL Capital International	(B.V.I.) Ltd., are as follows:	(Expressed In Thousands Of New Taiwan Dollars/ Thousands Of US Dollars)	Investment Flows Accumulated	Accumulated Outflow of Equity in	Outflow of Investment from the	Major Total Amount Method of Investment from Taiwan As of Percentage Earnings	Investee Businesses of Paid-in Investment Taiwan as of December 31, Net income of (Losses)	Company and Products Capital (Note 1) January 1, 2014 2015 of investee Ownership (Note 2) Outflow Inflow	FCB International Leasing Ltd. Financial Leasing $ 886,103 USD 30,000 (2) $ 886,103 USD 30,000 - - $ 886,103 USD 30,000 ($273,868) 100% ($273,868) (2)A		Carrying Value As of December 31, 2015 Accumulated Inward Remittance of Earnings As of December 31, 2015 Accumulated Investments in Mainland China As of December 31, 2015 Investment Amounts Authorized by Investment Commission, MOEA Upper Limit on Investment	$ 601,023 - $ 886,103 USD 30,000 $ 886,103 USD 30,000 $ 1,892,035

2015 ANNUAL REPORT • 245

Information on FCB’s investment in FCB Leasing (Xiamen) Ltd. through the indirect subsidiary-FCBL Capital International	(B.V.I) Ltd.	(Expressed In Thousands Of New Taiwan Dollars/ Thousands Of US Dollars)	Investment Flows Accumulated	Accumulated Outflow of Equity in	Outflow of Investment from the	Major Total Amount Method of Investment from Taiwan As of Percentage Earnings	Investee Businesses of Paid-in Investment Taiwan as of December 31, Net income of (Losses)	Company and Products Capital (Note 1) January 1, 2015 2015 of investee Ownership (Note 2) Outflow Inflow	FCB Leasing (Xiamen) Ltd Financial Leasing $ 903,495 USD 30,000 (2) $ 903,495 USD30,000 - - $ 903,495 USD30,000 $ 16,177 100% $ 16,177 (2)A		Carrying Value As of December 31, 2015 Accumulated Inward Remittance of Earnings As of December 31, 2015 Accumulated Investments in Mainland China As of December 31, 2015 Investment Amounts Authorized by Investment Commission, MOEA Upper Limit on Investment	$ 943,014 - $ 903,495 USD 30,000 $ 903,495 USD 30,000 $ 1,892,035	FVC’s investments in the People’s Republic of China for year ended December 31, 2015 were as follows:	�n �u�ust �� in�ested in t�e �ayman �s�and� �ritis� ��erseas Territory �o�din� �ompany��u��ent �un �nternationa�	(Holding) Co., Limited (Fulgent Sun), by acquiring 0.03% of its equity and indirectly acquiring 0.03% of its investee, Hubei	Xiang Cheng Footwear Company Limited. Fulgent Sun was listed in the Taipei Exchange in 2013. On July 28, 2015, FVC	completed the disposal of all its owned Fulgent Sun shares.
E.													F.

246 • FIRST FINANCIAL HOLDING CO., LTD.

G. FFAM’s investments in People’s Republic of China for the year ended December 31, 2014 were as follows:	(Expressed In Thousands Of New Taiwan Dollars/ Thousands Of US Dollars)	Accumulated Investment Flows Accumulated Equity in	Major Outflow of Outflow of the	Businesses Method of Investment from Investment from Percentage Earnings	Investee and Total Amount of Investment Taiwan as of Taiwan As of of Net income (Losses)	Company Products Paid-in Capital (Note 1) January 1, 2015 December 31, 2015 Ownership of investee (Note 2) Outflow Inflow	First Financial Leasing (Chengdu) Ltd. Financial Leasing $ 908,634 USD 30,000 (2) $ 908,634 USD 30,000 - - $ 908,634 USD 30,000 ($339,623) 100.00% ($ 339,623) (2)A		Carrying Value As of December 31, 2015 Accumulated Inward Remittance of Earnings As of December 31, 2015 Accumulated Investments in Mainland China as of December 31, 2015 Investment Amounts Authorized by Investment Commission, MOEA Upper Limit on Investment	$ 717,545 - $ 908,634 USD 30,000 $ 908,634 USD 30,000 $ 912,930	Note 1: Investment methods are classified into the following three categories; fill in the number of category each case belongs to:	(1) Directly invest in a company in Mainland China.	(2) Through investing in an existing company in the third area, which then invested in the investee in Mainland China.	1.FCB International Leasing Ltd: FCBL Capital International (B.V.I.) Ltd.	2.FCB’s investment in FCB Leasing (Xiamen) Ltd: FCBL Capital International (B.V.I) Ltd.	3.First Financial Leasing (Chengdu) Ltd: First Financial Assets Management (BVI) Ltd.	(3) Others	Note 2: In the ‘Investment income (loss) recognised by the Company for the year ended September 30, 2015’ column:	(1)It should be indicated if the investee was still in the incorporation arrangements and had not yet any profit during this period.	(2)Indicate the basis for investment income (loss) recognition in the number of one of the following three categories:	A.The financial statements that are audited and attested by international accounting firm which has cooperative relationship with accounting firm in R.O.C.(For	interim and annual financial reports. For quarterly financial reports, they are financial statements that are reviewed by international accounting firm which has	cooperative relationship with accounting firm in R.O.C..)	B.The financial statements that are audited and attested by R.O.C. parent company’s CPA.(For interim and annual financial reports. For quarterly financial	reports, they are financial statements that are reviewed by R.O.C. parent company’s CPA.)	C.Others.	Note 3: Expressed in Thousands of NT Dollars / thousands of US Dollars.

2015 ANNUAL REPORT • 247

14. Disclosure of financial information by segments

(1) General information

The First Group’s operation segment reports are consistent with the internal reports provided to chief operating decision-maker (“CODM”). The CODM is a team that allocates resources to operating segments and evaluates their performance.

Inter-segmental transactions are arm’s length transactions, and gain and loss arising from such transactions are eliminated by the parent company upon the preparation of the consolidated financial statements. Profit and loss directly attributable to various segments have been considered when segment performance is being evaluated.

The operating segments of the First Group comprise banking, securities, insurance and other businesses. The operating results are reviewed by the CODM regularly and are referenced when allocating resources and evaluating operating performance.

The First Group has a global market, comprising three major business segments; there was no change in the reporting segments during the period.

The operating results have different income items due to different nature of the operating segments, and the First Group evaluates segment performance based on the net profit before tax of various segments. Therefore, performance of all reporting segments is presented by the net value of operating net profit less various operating expenses. Income from external clients provided for the CODM to review is measured on the same basis of the statement of comprehensive income.

Adjustments of internal pricing and transfer pricing are reflected in segment performance evaluation. Income from external clients has been allocated based on the regulated allocation standard between segments.

The internal management’s operating reports are prepared based on net operating profit, including net interest income, net service fee income, recovered bad debts (provision), and loan impairment loss, net gain (loss) on financial instruments and other operating gain (loss). Measurement basis does not include non-recurring items, e.g. litigation expenses.

Segment information is mainly based on the internal management reports provided by various operating segments to the CODM, including segmental gain (loss), segmental assets, segmental liabilities and other related information.

248 • FIRST FINANCIAL HOLDING CO., LTD.

		Consolidated	28,452,473	12,395,760	40,848,233	518,155)	539,599	21,893,934)	18,975,743	3,013,512)	15,962,231		Consolidated	28,277,594	5,908,861	34,186,455	4,015,000)	7,100,719	20,789,129)	16,483,045	2,405,399)	14,077,646
			$			(		(		(	$			$			(		(		(	$
Financial information of the First Group by business for the years ended December 31, 2015 and 2014 were as follows:	Securities Insurance Reconciliation and	For the year ended December 31, 2015 Banking businesses businesses businesses Other businesses elimination	Net interest income 28,115,451 $ 348,806 $ 169,766 $ 181,550) ($ - $	Net non-interest income 10,939,218 1,293,798 283,123) ( 17,160,607 16,714,740) (	Net revenue 39,054,669 1,642,604 113,357) ( 16,979,057 16,714,740) (	Provision for credit losses 506,456) ( - 2,131) ( 9,567) ( 1) (	Recovered insurance reserves - - 539,599 - -	Operating expenses 19,365,772) ( 1,476,403) ( 513,455) ( 936,143) ( 397,839	Net profit (loss) from continuing operations before tax 19,182,441 166,201 89,344) ( 16,033,347 16,316,902) (	Income tax (expense) benefit 3,082,350) ( 7,366 160) ( 61,631 1	Net profit (loss) from continuing operations after tax 16,100,091 $ 173,567 $ 89,504) ($ 16,094,978 $ 16,316,901) ($	Securities Insurance Reconciliation and	For the year ended December 31, 2014 Banking businesses businesses businesses Other businesses elimination	Net interest income 27,791,674 $ 373,648 $ 239,198 $ 126,926) ($ - $	Net non-interest income 10,425,907 1,248,774 6,934,184) ( 15,372,911 14,204,547) (	Net revenue 38,217,581 1,622,422 6,694,986) ( 15,245,985 14,204,547) (	Provision for credit losses 3,933,456) ( - 9) ( 81,535) ( -	Recovered insurance reserves - - 7,100,719 - -	Operating expenses 18,284,896) ( 1,500,094) ( 420,133) ( 891,748) ( 307,742	Net profit (loss) from continuing operations before tax 15,999,229 122,328 14,409) ( 14,272,702 13,896,805) (	Income tax (expense) benefit 2,618,078) ( 47,900) ( 470) ( 261,050 1) (	Net profit (loss) from continuing operations after tax 13,381,151 $ 74,428 $ 14,879) ($ 14,533,752 $ 13,896,806) ($

2015 ANNUAL REPORT • 249

		Consolidated	2,500,095,812	2,312,108,826			Consolidated	2,355,708,683	2,201,332,129
			$					$
December 31, 2015	Banking Securities Insurance Reconciliation and	businesses businesses businesses Other businesses elimination	Segment assets $ 2,437,080,651 $ 20,486,581 $ 33,557,559 $ 208,688,425 ($ 199,717,404)	Segment liabilities 2,253,596,598 13,957,226 32,849,231 16,524,975 ( 4,819,204)	December 31, 2014	Banking Securities Insurance Reconciliation and	businesses businesses businesses Other businesses elimination	Segment assets $ 2,296,743,014 $ 21,104,866 $ 30,386,787 $ 179,712,387 ($ 172,238,371)	Segment liabilities 2,143,532,096 14,511,441 29,505,555 20,688,776 ( 6,905,739)	(3) Geographical information	Financial information of the First Group by area for the years ended December 31, 2015 and 2014 were as follows:	2015 2014	Taiwan $ 35,816,482 $ 29,061,448	Asia 2,831,670 3,198,579	North America 1,766,324 1,525,460	Others 433,757 400,968	Total $ 40,848,233 $ 34,186,455	(4) Information product	The First Group’s information on products is consistent with their segment, please refer to Note 14(2)	(5) Major customer information	None.

250 • FIRST FINANCIAL HOLDING CO., LTD.

General Information

Corporate Headquarters

First Financial Holding Co., Ltd.

18F, 30, Sec. 1, Chung King S. Rd., Taipei 100, Taiwan Phone (886 2) 2311 1111 www.firstholding.com.tw

First Commercial Bank

30, Sec. 1, Chung King S. Rd., Taipei 100, Taiwan Phone (886 2) 2348 1111 www.firstbank.com.tw

First Securities Inc.

6F, 29, Sec. 1, An He Rd., Taipei 106, Taiwan Phone (886 2) 2741 3434 www.ftsi.com.tw

First Securities Investment Trust Co., Ltd.

7F, 6, Sec. 3, Min Chuan E. Rd., Taipei 104, Taiwan Phone (886 2) 2504 1000 www.fsitc.com.tw

First-Aviva Life Insurance Co., Ltd.

13F, 456, Sec. 4, Xin Yi Rd., Taipei 110, Taiwan Phone (886 2) 8758 1000 www.first-aviva.com.tw

First Financial Asset Management Co., Ltd.

7F, 94, Sec. 2, Jhong Siao E Rd., Taipei 100, Taiwan Phone (886 2) 3343 7000

First Venture Capital Co., Ltd.

9F, 30 Chung King S. Rd., Sec. 1 Taipei 100, Taiwan Phone (886 2) 2348 4981

First Financial Management Consulting Co., Ltd. 9F, 30, Sec. 1, Chung King S. Rd., Taipei 100, Taiwan Phone (886 2) 2348 4982

First P&C Insurance Agency Co., Ltd.

9F, 30, Sec. 1, Chung King S. Rd., Taipei 100, Taiwan Phone (886 2) 2348 4277

Shareholder Information

Listing

The ordinary shares of First Financial Holding Co., Ltd. are listed on the Taiwan Stock Exchang under the ticker code 2892. The global deposit receipts (GDR) are listed on the Euro MTF market of the Luxembourg Stock Exchange with ISIN No. and ISIN code US32021V1098 and 017339818 respectively.

Ordinary Share Transfer Agent & Registrar

First Bank Personal Banking Business Unit Shareholder Service Department, Trust Division 42 Yen Ping S. Rd., Taipei 100, Taiwan Phone (886 2) 2348 1137

GDR Depositary, Transfer Agent & Registrar Citibank, N.A. 388 Greenwich Street, 14th Floor New York, NY 10013, U.S.A. Phone (1) 888 250 3985 wwss.citissb.com/adr/www

Independent Auditor

PricewaterhouseCoopers, Taiwan 27/F, International Trade Building, 333 Keelung Road, Sec.1, Taipei 110, Taiwan Phone (886 2) 2729 6666

2015 Annual Financial Statements

An annual financial statements in Englsih version is available on the FFHC website at www.ffhc.com.tw.

2016 Annual Shareholders’ Meeting When: Friday, June 24, 2016 Time: 9:00 a.m. Where: First Bank Headquarter Address: Auditorium Level, 30 Chung King S. Rd., Sec.1, Taipei 100, Taiwan

Contact Information

Spokesperson

Jennifer M.C. Liao / Executive Vice President Phone (886 2) 2348 4906 [email protected]

Deputy Spokesperson

Yao-Tien Shih / Executive Vice President Phone (886 2) 2348 4908 [email protected]

Investor Relations

Annie Lee / Head of IR / Deputy Head, Strategy Plan. Dept. Phone (886 2) 2348 4956 2348 4975 [email protected] [email protected]

Disclaimer: This shareholder report cannot be expected to provide as full understanding of the financial performance, financial position, operating, financing and investment activities of the First Financial Group as the 2015 FFHC annual report in Chinese and the full annual financial statements. This publication contains certain forward -looking statements and future expectations. These expec tations are based on management’s current views and assumptions and involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements. FFHC assumes no obligation to update any forward-looking information contained in this report.

2015 ANNUAL REPORT • 251

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本年報採用不含重金屬之環保紙張及環保油墨印製 FFHC 2015 ANNUAL REPORT is printed on post-consumer-waste recycled paper, using vegetable-based inks.

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AI assistant

First Financial Holding Co. Ltd. — Annual Report 2015

52222_rns_2016-07-06_40e07d98-0cf9-4272-be06-dc85b989d606.pdf

First Financial Holding

Contents

Financial Highlights

2015 Net Income Breakdown by Subsidiaries

FFHC at a Glance

Net Income

Letter To Shareholders

Dear Shareholders,

2015: Expansion of Scale and Capabilities

Local Root, Regional Reach

First Bank

First Securities

First Securities Investment Trust

First-Aviva Life Insurance

First Financial AMC, First Venture Capital, First Consulting & First P&C Insurance Agency

2016 Strategic Goals: Driving Growth through Innovation and Making Sustained Progress

The ratings of various rating agencies in 2015 are as follows:

First Financial Holding

A Foundation of Enduring Values and Trustworthy Management

Company Profile

Our Businesses

First Bank

First Securities

First Securities Investment

Trust

First-Aviva Life Insurance

First Financial AMC

First Venture Capital

First Consulting

First P&C Insurance Agency

Corporate Governance

Group Structure

FFHC Subsidiaries & Affiliates

FFHC Operational Structure

Board Structure and Composition

Board of Directors

Delegate of MOF

Chairman Ching-Nain Tsai

Delegate of MOF

Director & President Grace M.L. Jeng

Delegate of MOF

Director Po-Chiao Chou

Delegate of MOF

Director Yi-Hsin Wang

Delegate of MOF

Director Hung-Chi Huang

Delegate of MOF

Director Hsien-Feng Lee

Delegate of MOF

Director Feng-Ming Hao

Delegate of Bank of Taiwan

Director Hsiao-Ling Chen

Delegate of Bank of Taiwan

Director Shing-Rong Lo

Delegate of Golden Garden Investment Co. Director Tien-Yuan Chen

Independent Directors:

Independent Director Hau-Min Chu

Independent Director Hui-Ya Shen

Director Chi-Hsun Chang

Delegate of Global Investment Co., Ltd Director An-Fu Chen

Shares Holding of Directors

Professional Qualification and Independence Analysis of Directors

Board Meeting

Independence & Transparency

Attendance at Board Meetings

Directors Meeting Attendance

Audit Committee, Remuneration Committee & Ethical Management Committee

Audit Committee Meeting Attendance

Remuneration Committee Meeting Attendance

Elements of Compensation of Directors

Remuneration

Directors’ Annual Remuneration at First Financial Holding and Group

Comparison of Remuneration for Directors in the Most Recent Two Fiscal Years

FFHC Management Team

FFHC Management Team

President

Grace M.L. Jeng

First Financial Holding Co. Ltd. Annual Report 2015