First Financial Holding Co. Ltd. - Annual Report 2017

Stock Code: 2892

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2017 ANNUAL REPORT
Date：Feb. 28, 2018
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
Company Profle	11
Corporate Governance	16
• Group Structure, Board and Remuneration
• FFHC Management Team
Capital Overview	34
Subsidiaries Overview	37
• First Bank
• First Securities
• First Securities Investment Trust
• First Life Insurance
Corporate Social Responsibilities	56
Financial Information	63
General Information	269

FINANCIAL HIGHLIGHTS

2017 Net Income Breakdown by Subsidiaries

in NT$ mn

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2017 Net Income % of Group1
First Bank 15,142 98.1
First Securities 272 1.8
FSIC 70 0.5
First Life [2] (103) (0.7)
First Financial AMC 144 0.9
Others [3] (93) (0.6)
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Estimated by sum-of-the-parts method.
Starting from Jan.19, 2018, First Life (also known as First-Aviva) has become 100% owned subsidiary by FFHC. For 2017’s operating results, FFHC recognized loss of NT$ 53 mn accordingly.

98.1% First Bank First Securities FSIC First Life First Financial AMC Others

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1.8%
0.5% 0.9%
(0.7%) (0.6%)
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Including other subsidiaries and Financial Holding standalone.

FFHC at a Glance

Consolidated basis, data as of December 31, 2015, 2016 and 2017

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2017 2016 2015
Income statements (in NT$ mn)
Net Revenue 50,827 45,091 40,848
Expenses (32,679) (24,893) (21,872)
Income before tax 18,148 20,198 18,976
Net income 15,432 17,284 15,962
EPS (in NT$) 1.27 1.45 1.55
Adjusted EPS (in NT$) [1] 1.27 1.42 1.45
Balance sheets (in NT$ mn)
Total assets 2,634,059 2,541,156 2,500,096
Total liabilities 2,442,008 2,349,127 2,312,109
Total shareholders’ equity 192,051 192,029 187,987
Shares issued (in mn shares) 12,216 11,977 11,461
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Net Income EPS ROAE ROAA
Consolidated Consolidated Consolidated basis, Consolidated basis,
basis, in NT$ mn basis, in NT$ in % in %
17,284
0.69
15,962 15,432 1.45 1.42 9.32 9.10 0.66 0.60
8.04
1.27
2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017
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2017 2016 2015
Dividends (in NT$)
Cash dividends [2] 0.90 1.20 0.95
Stock dividends [2] 0.10 0.20 0.45
Total dividends [2] 1.00 1.40 1.40
Ratios (%)
ROAE 8.04 9.10 9.32
ROAA 0.60 0.69 0.66
Double Leverage Ratio [3] 107.40 106.29 105.23
Group CAR 131.31 139.14 153.43
Credit Ratings
S&P BBB/A-2/Stable
Moody’s A3/Stable
Taiwan Ratings TwAA-/twA-1+/Stable
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EPS is adjusted retroactively for stock dividends.
Double Leverage Ratio = Long-term equity investment/Shareholders’ equity

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LETTER TO
SHAREHOLDERS
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Chairperson, First Financial Ray B. Dawn

and investor sentiment. Overall, the global economy grew at a faster rate than expected to end the year on a solid footing. The U.S. continued to show moderate growth, supported by solid jobs gain and a pick-up in private sector investment. The eurozone saw stronger foreign demand, business investment as

Dear Shareholders,

The global economy emerged from periods of sluggishness and entered an upward phase in 2017. A recovery in developed economies, coupled with improving growth in emerging markets, accelerated investment, trade and industrial activity worldwide. These positive developments in turn boosted

well as household spending on the back of a tightening labor market and tamed inflation. In Japan, the economy showed signs of revival after an expansion in manufacturing and export activity driven by higher demand for semiconductors and automobiles. The pace of a China-led recovery in developing economies picked up against a backdrop of stable commodity prices and infrastructure-stimulated capital investments.

On the domestic front, higher global commodity prices and increased shipments of electronic goods led to strong export growth and moderate consumption growth. The Directorate General of Budget, Accounting, and Statistics, in a report published in February 2018, estimated annual growth rates for gross domestic product (GDP) and exports of goods and services in 2017 at 2.86% and 7.43%, respectively. Foreign demand’s contribution in GDP growth amounted to 2.03 percentage points, reflecting Taiwan’s dependence on global demand. We expect growth momentum in exports to continue through 2018 due to growing trade activity and business opportunities arising from new technologies and applications. Domestic demand will likely be the main engine of growth, though, as semiconductor companies migrate into advanced

chip-fabrication processes and the government implements a number of key initiatives to clear investment hurdles, stimulate infrastructure spending and foster promising, strategically-important sectors.

Global growth is likely to continue through 2018. Risk events, including the normalization of monetary policy, movement of international hot money, the resurgence of U.S. protectionism, anti-establishment sentiment washing over much of Europe, turmoil in the Middle East and on the Korean Peninsula and China’s debt problem, could nevertheless derail global growth. In this time of rapid change, increased competitive pressure, tightened rules to curb money laundering and terrorist financing and the evolution of FinTech are presenting unprecedented challenges for us. To address this new operating environment, we will uphold a riskfocused culture in our day-to-day operations and continue to offer premium services that blend a global perspective with detailed insight into local markets.

2017: a year of sustained transformation

We delivered a solid set of results in 2017. We made further progress toward becoming a

Asia, a goal aligned with the government’s New Southbound Policy. We had 39 overseas locations by the end of 2017, 15 of which are situated in Southeast Asia. As part of our ongoing digital transformation, we increased investment in areas such as FinTech, novel payment methods, artificial intelligence and big-data analytics to facilitate the migration of transactions to digital channels and to make the customer experience more seamless. As of 2017, we held two FinTechrelated invention patents and 31 utility model patents. Our subsidiaries introduced a number of new products and services during the year to address the specific financial needs of their customers. Our banking subsidiary launched a “green” consumer loan program and a “green” credit card for environmentally-conscious consumers, a new mobile payment option, and a POS terminal with multi-payment solutions. Our insurance subsidiary offered a mini whole life insurance policy, a long-term care plan and a microinsurance program designed to provide accidental coverage.

In May 2017, the Digital

Technology Security Division was formed within our banking subsidiary with the responsibility to plan, implement and manage an organization-wide digital security strategy. On January 19, 2018, we concluded the acquisition of the entire stake owned by Aviva International Holdings in First-Aviva Life Insurance, an insurance joint venture we had created with our British partner. The deal made First Life Insurance, our fullyowned subsidiary. Going forward, our commitment to our insurance subsidiary, as well as the safety and security of our policyholders, remains steadfast.

We delivered another year of strong performance with growth across all of our businesses, underpinned by the strength of our banking operations. We ended 2017 with NT$2.63 trillion in total assets. Our consolidated net revenue increased 12.72% to NT$50.827 billion from the prior year. Our net profit crossed the NT$15 billion mark for a third straight year, reaching NT$15.432 billion, or NT$1.27 per share.

As we pursue excellence in all areas of our operations, we recognize our obligation to act as a responsible corporate citizen. In 2017, we were named to the DJSI Emerging

Markets Index for a second straight year and included in the FTSE4Good Emerging Index for the first time. Inclusion in global sustainability benchmarks represents an acknowledgement of our progress on governance and social responsibility issues. Domestically, we were ranked in the top 5% in an annual corporate governance ranking conducted by the Taiwan Stock Exchange for the third consecutive year. Our sound corporate practices have positioned us well to attract, recruit and retain talent.

Aspiration to become a regional champion

operational highlights of our banking, securities brokerage, asset management, insurance and other subsidiaries for the year of 2017.

First Bank

In 2017 First Bank continued organization-wide operational improvements in digitalization, services, marketing and talent development, drawing upon the strengths of its regional service network and electronic transaction capabilities. It grew its presence in foreign markets by serving multinational

corporations with valueadded services and through its cross-border value chain financing and transactional solutions. First Bank also strengthened its services to Taiwanese businesses operating overseas in a bid to enlarge scale and deepen penetration into local financial markets. The bank continued to integrate online and offline channels as part of a larger omnichannel strategy that merges the physical familiarity of traditional bank branches with the convenience and immediacy that digital banking can provide. To that end, it upgraded its infrastructure, deployed new technologies, improved existing processes, and integrated various services to achieve enhanced quality and efficiency. Moreover, First Bank increased volumes of loans to high-quality clients that operate in industries with promising prospects, explored opportunities to originate and service value chain financing and syndicated loans, and used transaction banking as a key lever for cross-selling other products.

First Bank saw its pre-tax profit decline by 14.2% in 2017 due to higher loan-loss

provisions. Its pre-provision operating profit rose 8.3% to NT$24.448 billion, an indication that the bank’s earnings momentum remained intact. Other highlights of the year included: a sustained expansion in net interest income; strong trading and investment gains; a higher proportion of loans and profits originated from foreign branches (including Offshore Banking Unit), at 18.39% and 48.36%, respectively; and market-leading position in SME loans for the eighth year running. First Bank reported net profit of NT$15.142 billion, or NT$1.7 per share.

First Securities

Recovered global growth prospects and an influx of foreign funds sent Taiwan’s benchmark index higher in 2017, alongside higher trading volume and margin loans outstanding. Favorable market conditions enabled First Securities to post its best earnings in five years. The company gained its market share of margin loans to 2.94% in 2017, up from 1.98% in 2012. It also looked for alternative sources of growth by drawing on the strengths and resources of the group. First Securities leadarranged seven issues and coarranged 32 issues in the year. It sped up its transition to electronic

trading and online investing tools in response to a switch in customer engagement to online channels. Its market share of electronic trading rose to 0.85% in 2017, up from 0.68% in 2015. First Securities reported net profit of NT$272 million, or NT$0.44 per share.

First Securities Investment Trust

First Securities Investment Trust’s total assets under management were NT$101.1 billion as of 2017 year-end. It had NT$98.8 billion in assets of publicly-offered funds, up 6.4% from a year ago and ranking eighth in the local fund industry. It moved up two spots to No. 15 in the ranking of Taiwan’s asset managers by assets under management of nonmoney market funds ended at 32.4 billion. First Securities Investment Trust achieved significant success in efforts to expand distribution channels outside of the group. The assets of mutual funds sold through external partners reached NT$18.1 billion as of the end of 2017, up 72% from a year earlier. Of that amount, nonmoney market funds represented NT$10.1 billion, up 84% from a year ago. First Securities Investment Trust reported net profit of NT$70 million, or NT$1.17 per share, for 2017.

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President, First Financial Chien-Hao Lin

First Life Insurance

Premium income contributed by bank partners excluding First Bank jumped 137%, while that from telemarketing increased 29%. In response to consumers’ migration to online channels, First Life Insurance launched online travel insurance plans in late 2016 and allowed online applications for interest-sensitive annuities in January 2017. It generated premium income of around NT$9 million from online insurance sales for the whole of 2017. First Life Insurance reported a net loss

In 2017, First Life Insurance’s efforts to serve every single customer with adequate and sufficient coverage were recognized by the regulator for the 19th time. First Life Insurance’s premium income totaled NT$11.684 billion for the year. Its first-year premium income rose 69% to NT$10.748 billion from the prior year, benefiting from broadbased growth across distribution channels in particular the distribution network of First Bank.

of NT$103 million, or -NT$0.46 per share, for the year.

First AMC, First Venture Capital & First Consulting

First AMC’s core activities involve the collection of nonperforming loans remained intact. The company saw a recovery in profits in 2017, aided by sustained core earnings growth and improvements in the operations of affiliate First Leasing (Chengdu), which expanded its direct leasing business and strengthened its asset quality during the year. First Venture Capital achieved its annual targets for investment and dividend income due primarily to favorable market conditions. First Consulting continued to support the group’s integrated marketing efforts and offered consultation and advisory services in financing, investment and IPOs. First AMC, First Venture Capital and First Consulting reported net profit of NT$144 million, NT$57 million and NT$7 million, respectively.

2018 priorities:

maximizing collaborative synergies and creating shared value

Looking into 2018, we plan to capitalize on the ongoing

economic recovery to accelerate our expansion into foreign markets. New sources of revenue by driving collaboration across products, segments and geography and gaining deep penetration within our existing customer base would be the key. One of our priorities in the year ahead is to maximize collaborative synergies, utilizing targeted marketing aided by big data and artificial intelligence to cross-sell the core products and services offered by each of our businesses. This will enable us to integrate and optimize the multiple distribution networks within the group and to encourage a collaborative culture that shares revenue and other benefits generated from crossselling activities.

Another priority for us is to create shared value – that is, a meaningful benefit for society that is also valuable to our business. We will accomplish this by embedding corporate social responsibility into the core of our business to ensure that our operations produce clear economic, environmental and social benefits to individuals, communities and society all together.

The strategies and actions for 2018 are discussed below.

A commitment to riskinformed growth and development

We will look for ways to expand in Southeast Asia in the year ahead. The options we are exploring to increase our local presence as well as our ability to compete effectively include: setting up representative offices in Jakarta and Kuala Lumpur through our banking subsidiary; upgrading an existing office in Yangon to a bank branch; and creating new lines of business such as mortgages for the Southeast Asian market. We remain committed to the developed markets of the U.S. and Europe, where we plan to establish a loan office in Texas and a branch in the continental Europe and seek opportunities to lead syndicated loans in major financial hubs. Meanwhile, the Greater China region continues to be our priority market, where we will leverage our deep customer relationships and extensive geographic coverage to facilitate cross-border transactions. In order to drive additional profits from foreign markets, the Hong Kong office of our securities subsidiary will be the springboard into ASEAN member states. We plan to expand our sub-brokerage trading and wealth management operations there by drawing upon

our capabilities and experience in banking, stock brokerage and venture capital.

Our efforts on collaborative marketing are progressing well, with our distribution and sale channels centered around our banking subsidiary. Going forward, we will increase collaboration between subsidiaries, especially non-banking units, with the goals of: better identifying and anticipating customers’ financial needs; achieving a balanced mix of consumer and institutional clients; retaining existing customers and acquiring new ones; enhancing business tie-ups among subsidiaries to drive synergies; creating niche products; and optimizing channel efficiencies. These actions will help boost sales momentum group-wide, increase penetration into customer accounts, and maximize customers’ intrinsic value for all affiliate companies. We have identified wealth management and trust-related investment services to be alternative sources of profit driver for our securities subsidiary. As for our insurance subsidiary, fresh capital will be injected into it to enhance its ongoing relationships with bank partners, and diversify its distribution strategy and investment portfolio in our

followed by expansion on asset and earnings growth which may lead to maximum synergy for the group.

A new wave of FinTech has swept the globe, transforming the industry as well as the talent pool landscape. Digital transformation has been a centerpiece of our strategy in recent years as we integrate digital and physical channels into a single, seamless experience and innovate with digital and mobile solutions to respond to new trends in customer engagement. Looking ahead, digitalization will remain our strategic priority as we apply predictive analytics to implement artificial intelligence applications and solutions. Our digital channels and innovation will be enhanced through external partnerships in order to enable a banking experience based on a digitalized, datadriven and intelligent technology infrastructure. As we seek business breakthrough and explore new possibilities, cyber security remains an important bedrock of our business. All our digital and experimental efforts will be supported by a network security system constantly adapted to address

new cyber threats. We shall continue to safeguard security over information system and enhance privacy protection which providing a competitive edge over peers.

We will put performance appraisal into clearer focus by holding each business accountable for their product and distribution strategies as well as for their profit objectives. The quantitative indicators of performance management will be in place to measure each of our businesses against predefined and required objectives. In response to a tightened regulatory environment, we are strengthening the roles of compliance and control in our day-to-day operations, as well as the implementation of risk management procedures, to ensure that our organization is well-positioned to address the risks of money laundering and terrorist financing, to raise employees’ awareness to identify and combat such risks, and to construct a more transparent, stable and robust financial system.

In corporate governance, we will strengthen the skills and competencies of the directors of each subsidiary to equip them with legal knowledge and

of governance. In addition, we also introduce external experts to review the performance of board members in order to enhance the effectiveness of the boards. On the front of corporate responsibility, we will align our corporate social responsibility strategy with our business plans and core competence in order to produce social value alongside economic value. As part of our call for sustainability, we are promoting green finance with the aim of assisting our peers and customers in their transition to a low-carbon economy. We are also actively engaged in a business matching platform created by the Alliance for Sustainable Development Goals, which connects companies with opportunities to deliver positive change to communities, the environment and society as a whole.

Ratings affirmed, reflecting sound asset quality and stable outlook

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.

The latest ratings of various rating agencies are as follows:

First Financial Holding

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ST LT Outlook
S&P A-2 BBB Stable
Moody’s -- A3 Stable
Taiwan ratings twA-1+ twAA- Stable
First Bank
ST LT Outlook
S&P A-2 A- Stable
Moody’s P-1 A2 Stable
Taiwan ratings twA-1+ twAA+ Stable
First Securities
ST LT Outlook
Taiwan ratings twA-1+ twAA- Stable
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In the year ahead, our actions will be guided by our strategic priorities of maximizing collaborative synergies and creating shared value. The actions include developing niche products, integrating distribution channels, and generating additional revenue opportunities from our existing customer base. Meanwhile, we will continue to enhance our compliance, internal control, risk management, cyber security and antimoney laundering programs to support operations and innovations planned for the future. By practicing green finance in our management decision-making, we are laying a foundation for sustainable growth as well as for social and environmental progress.

Sincerely,

Ray B. Dawn Chairperson, First Financial

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Company Profile
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First Financial Holding Co., Ltd.(“FFHC”) 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, mutual-fund distribution, trade finance, deposit and lending. It currently owns 188 branches at home along with 35 overseas branches and representative offices including the U.S. subsidiary of First Commercial Bank (USA).

With the historical groundwork well laid by First Bank, FFHC 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, FFHC 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. On July 1, 2016, First P&C was dissolved and merged into First Bank as a newly established Insurance Agency Division to further consolidate group’s resources.

First- Aviva Life, a 51:49 joint venture with U.K’s largest insurer Aviva, established in 2007. On January 19, 2018, FFHC acquired entire shareholding of JV, First-Aviva Life -Aviva’s 49% ownership, renamed as First Life Insurance, and injected fresh capital of NT1.5 bn to First Life in March, 2018. After the injection, First Life will continue to serve existing clients and explore more market opportunities.

FFHC also focuses on resource deployment in emerging markets in the Asia Pacific region and assisting its bank subsidiary to expand overseas businesses. In 2017, First Bank Cambodia sub-branch opened in the 4[th] quarter, expanding overseas presence up to 39 offices, with 15 located in Southeast Asia. The regional coverage over South-East Asia remains intact, 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. In 2016 and 2017, FFHC was honorably selected by the Dow Jones Sustainability Indices (DJSI) as an index component of the DJSI Emerging Markets Indices for consecutive 2 years, which no doubt illustrates our endless efforts on CSR practices.

Sticking to the commitment of “Customer First, Service Foremost”, First Financial Holding will proactively tap the opportunities arisen from emerging Asia with NT$2.63 trillion by assets, over five million clientele base and long-lasting 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 long-term value for clients, shareholders and employees.

Our Businesses

FFHC currently owns seven 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, in which 188 bank branches affiliated with insurance sales or bancassurance counters, 130 bank branches equipped with securities counters and 24 securities houses equipped with bank and insurance services.

First Bank

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Net Income in NT$ mn
2017 15,142
2016 17,699
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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. In Asean countries, Yangon Representative office (Myanmar) has re-started operations in April, 2013 and two sub-branches 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 Branch at Manila in Philippines opened in December of 2016. In 2017, another sub-branch located in Cambodia started its business in the 4th quarter. First Bank now owns 188 branches at Taiwan and 35 overseas business spots.

First Securities

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Net Income in NT$ mn
2017 272
2016 (229)
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First Securities Investment Trust

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Net Income in NT$ mn
2017 70
2016 64
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First Life Insurance

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Net Income in NT$ mn
2017 (103)
2016 (147)
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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 24 branches and 130 bank 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.

First Securities Investment Trust, formerly known as National Investment Trust, was incorporated on February 15, 1986. Currently, FSITC manages a total assets of NT$101.1 bn under management. 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 for FFHC 51%, Aviva 49%, the first joint venture of a local financial holding company and a leading foreign insurance group. On Jan. 19, 2018, FFHC acquired Aviva’s 49% ownership and renamed as First Life Insurance. Mainly focusing on life insurance business, through First Bank’s 188 domestic branches and affiliated IC staffs, First Life now offers customers specially-designed retirement plans and comprehensive insurance products, tailoring customer’s portfolio allocation to satisfy different customers’ needs.

First Financial AMC

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Net Income in NT$ mn
2017 144
2016 44
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First Venture Capital

First Consulting

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 non-performing 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 2017, First Venture Capital engaged in 64 cases with a total of NT$159.6 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 2017, total consulting revenue reached NT$28.3 million, down by 7.7% comparing with prior year.

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Corporate Governance
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Group Structure

FFHC Subsidiaries & Affiliates

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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 FCB International Leasing 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 Life Insurance Co., Ltd*. 100% owned

Note: Starting from January 19, 2018, First Life Insurance has become 100% owned subsidiary of FFHC.

FFHC Operational Structure

Data as of Feb. 28, 2018

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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
Committee
Audit Remuneration
Committee Committee
Corporate Social
Responsibility Committee
Business Decisions
President
Committee
IT Development
Committee
Marketing Integration
Executive Vice President Executive Vice Presidents Committee
Chief Compliance Officer
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 the board composition and improve the efficiency of the board, 6 current board members are female, representing 40% of participation and gender diversification.

First Financial Holding’s “Rules Governing the Performance Review & Measurement of the Board of Directors” was deliberated and reviewed at the 15th meeting of the 5th Board of Directors on August 26, 2016. Based on the rules, the performance review of the Board of Directors for 2016 was conducted and disclosed accordingly. On top of that, the rules also require that the evaluation must be conducted via an external professional institution/expert once every three years at least. In order to make it more objective, FFHC decided to initiate this external appraisal project in the year of 2017 through EY professional service. As a result, the external appraisal report indicates that FFHC’s Corporate Governance not only has reached the highest level of top-5% among domestic corporates, but also the board of directors has exceeded common standards. Furthermore, all directors’ self-assessment questionnaire surveys, interviews and eight-way comprehensive assessments, justified that FFHC board members have fulfilled legal compliance required by authority and regulators, and established effective or proactive practices towards their meeting operations. In the end, EY concluded a number of proposals for ongoing improvements for the board of directors of FFHC. The end report of external performance review for the board of directors have been submitted to the 33rd meeting of the 5th board of directors on February 23, 2018.

Board of Directors

Data as of April 24, 2018, term until June 25, 2018

Directors:

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Delegate of MOF

Chairperson Ray B. Dawn

Male, Nationality: Taiwan, R.O.C.

2017/11/21 on board, now serves as Chairperson of First Commercial Bank & First Education Foundation; Supervisor of Taiwan Stock Exchange Co; Director of National Credit Card Center.

Ph.D., Economics, Vanderbilt University, Tennessee, USA.
Chairperson, EasyCard Investment Holding;
Dean, College of Business, China University of Technology;
President, Mega Financial Holding;
Chairperson, Mega Bill Financing Co.;
Chairperson, Central Deposit Insurance Co.;
President, First Financial Holding;
Chairperson, Bank of Kaohsiung

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Delegate of MOF

Director & President Chien-Hao Lin

Male, Nationality: Taiwan, R.O.C.

2018/02/23 on board, now serves as Director of FCB; Director of Taiwan Asset Management Corp and Supervisor of First Securities.

Bachelor of Laws, National Taiwan University
Executive Vice President and Head of Strategy Planning Department, First Financial Holding;
Chief Auditor, First Financial Holding;
G.M. of HK Branch and Shih-Mao Branch, First Bank;
SVP and Head of Business Planning & Admin. Division.

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Delegate of MOF

Director & President Grace M.L. Jeng

Female, Nationality: Taiwan, R.O.C.

2014/12/25 on board, now serves as Managing Director & President of First Commercial Bank; Chairperson of First Commercial Bank (USA); Vice Chairperson of First Education Foundation.

B.S., Business Management, National Taiwan University.
President, First Financial;
EVP, First Commercial Bank;
Chairman, FCB (USA); G.M. of Yuan-Shan Branch, First Bank;
S.V.P. and Head of Wealth Management Business Dept., First Bank

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Delegate of MOF

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.
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.

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Delegate of MOF

Director Yi-Hsin Wang

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

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

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Delegate of MOF

Director Hung-Chi Huang

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

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.

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Delegate of MOF

Director Director Li-Chiung Su

Female, Nationality: Taiwan, R.O.C. 2017/12/01 on board.

Ph. D., in Social Work, Tunghai University.
Secretary-General, Taipei City Government;
Deputy Secretary-General, Kaohsiung City Government;
Director-General of Social Affairs, Ministry of the Interior;
Current as Deputy Minister of Ministry of Labor

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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.
Deputy Director of National Treasury Administration, M.O.F.; Deputy Head of Finance Dept., New Taipei City Government.
Current as Director, National Treasury Administration, M.O.F.

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Delegate of Bank of Taiwan

Director Shiou-Jsu Yeh

Female, Nationality: Taiwan, R.O.C. 2016/09/09 on board, now serves as Director of United Taiwan Bank.

B.A. National Taiwan University.
SVP, Taiwan Financial Holding;
SVP & Head of Treasury Department, Bank of Taiwan;
G.M. of New York Branch, Bank of Taiwan.
Current as EVP & Head of Planning Division, Bank of Taiwan.

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

Male, Nationality: Taiwan, R.O.C.

2003/01/02 on board, now serves as Managing Director of FCB; Chairperson, Golden Garden Investment Co & Golden Gate Motor Co; Director of First Education Foundation.

B.A., Foreign Languages and Literature, Tamkang University.
Chairperson, Taiwan Coca-Cola Co.

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Director Chi-Hsun Chang

Male, Nationality: Taiwan, R.O.C.

2006/01/02 on board, now serves as Chairperson and President, Magna Central Company.

B.S., International Trade, Tamkang University.
Supervisor, Optimum Care International Tech. Inc.

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Delegate of Global Investment Co., Ltd

Director An-Fu Chen

Male, Nationality: Taiwan, R.O.C.

2009/05/22 on board, now serves as Chairperson, Global Investment Co., Ltd.

B.S., Pharmacy, Taipei Medical University.
EVP, Transamerica Occidental Life Insurance Co;
EVP, TransGlobe Life Insurance Inc.,
Director, Mintai Fire & Marine Insurance Company.

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 of Global Tek Fabrication Co., Ltd.

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 & Gamma Optical Co., Ltd.

Ph.D. Economics, Brown University, U.S.A.
Dean, 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 and Chair Professor of Takming University of Science and Technology.

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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 & Formosa Advanced Technologies Co., Ltd.

Master of Law, National Chung Hsing University.
Consultant of Public Service Pension Fund Management Board, Ministry of Civil Service, Examination Yuan; Lawyer of Chang Chun Law Office.
Current as Lawyer of Lian Yung Law Office.

Shares Holding of Directors

April 24, 2018

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Shareholding Current Spouse & Minor
When Elected Shareholding Shareholding
Title Name
Shares % Shares % Shares %
Ray B. Dawn
Chairman 1,236,294,144 13.35 1,403,420,712 11.49 0 0.00
(Delegate of MOF)
Director & Chien-Hao Lin
1,236,294,144 13.35 1,403,420,712 11.49 175,837 0.00
President (Delegate of MOF)
Grace M. L. Jeng
Director 1,236,294,144 13.35 1,403,420,712 11.49 235,592 0.00
(Delegate of MOF)
Hsien-Feng Lee
Director 1,236,294,144 13.35 1,403,420,712 11.49 0 0.00
(Delegate of MOF)
Yi-Hsin Wang
Director 1,236,294,144 13.35 1,403,420,712 11.49 0 0.00
(Delegate of MOF)
Hung-Chi Huang
Director 1,236,294,144 13.35 1,403,420,712 11.49 0 0.00
(Delegate of MOF)
Li-Chiung Su
Director 1,236,294,144 13.35 1,403,420,712 11.49 0 0.00
(Delegate of MOF)
Shing-Rong Lo
Director (Delegate of Bank of 715,223,724 7.72 910,711,679 7.45 0 0.00
Taiwan)
Shiou-Jsu Yeh
Director (Delegate of Bank of 715,223,724 7.72 910,711,679 7.45 0 0.00
Taiwan)
Tien-Yuan Chen
Director (Delegate of Golden Garden 2,437,680 0.03 3,103,955 0.03 765,491 0.01
Investment Co.,)
Director Chi-Hsun Chang 1,177,046 0.01 1,285,579 0.01 1,285,579 0.01
An-Fu Chen
Director (Delegate of Global 4,486,351 0.05 5,712,577 0.05 12,613,478 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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Professional Qualification and Independence Analysis of Directors

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Meet one of the Following Professional
Qualification requirements, Together with at Independence Criteria
Least five Years Work Experience (Note)
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 other or other
in which the
or other professional necessary for
individual is
academic or technical the business
dept. related specialist who of the Co. Concurrently
to the has passed 1 2 3 4 5 6 7 8 9 10 Serving as an
business a national Independent
Director
Name of the Co., exam. And
at public or been awarded
private junior a certificate in
college, a professional
college or necessary for
university. the business of
the Co.
Ray B. Dawn � � � �� [�]
Chien-Hao Lin � �� [�]
Grace M. L. Jeng � �� [�]
Hsien-Feng Lee � � � �� [�] -
Yi-Hsin Wang � � � [�] �� [�] 2
Hung-Chi Huang � � � �� [�] -
Li-Chiung Su � � [�] �� [�] -
Shing-Rong Lo � � [�] �� [�] -
Shiou-Jsu- Yeh � �� [�] �� [�] -
Tien-Yuan Chen � � � �� [�] -
Chi-Hsun Chang � � [�] �� [�] -
An-Fu Chen � � [�] �� [�] -
Shyan-Yuan Lee � � �� [�] 1
Hau-Min Chu � � �� [�] 2
Hui-Ya Shen � � � �� [�] 2
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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.
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 Chairperson 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, Diversity & Transparency

Since the year of 2009, 3 independent directors are appointed at board and these delegates are specialized in financial, economic and legal fields, with their expertise, they serve the roles of assisting the board and shareholders in carrying out the internal and external auditing and advise top management. Currently, FFHC Board includes 6 female members, including 1 independent director and 5 general directors, approximately 40% of the board members are female.

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 adopted from 2013, casting group’s commitment for the best practice of corporate governance among peers.

Attendance at Board Meetings

During 2017, there were 17 board of director meetings (A) held. The number of meetings attended by each director was as follows:

Directors Meeting Attendance

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Attendance Attendance by Attendance
Name Notes
in Person (B) Proxy Rate (%)(B/A)
Ching-Nain Tsai, Chairperson Before discharged on 11/03/2017,
13 0 100.00
Delegate of Ministry of Finance total 13 meetings were held. (A)
Ray B. Dawn, Chairperson Newly assigned on 11/21/2017,
3 0 100.00
Delegate of Ministry of Finance total 3 meetings were held. (A)
Grace Y. Wu, Director Newly assigned on 08/28/2017,
9 0 100.00
Delegate of Ministry of Finance total 9 meetings were held. (A)
Grace M.L. Jeng, Director
17 0 100.00
Delegate of Ministry of Finance
Before discharged on
Po-Chiao Chou, Director
8 0 100.00 08/28/2017, total 8 meetings
Delegate of Ministry of Finance
were held. (A)
Hsien-Feng Lee, Director
17 0 100.00
Delegate of Ministry of Finance
Yi-Hsin Wang, Director
16 1 94.12
Delegate of Ministry of Finance
Hung-Chi Huang, Director
16 1 94.12
Delegate of Ministry of Finance
Huey-Fang, Liau, Director Before discharged on 11/27/2017,
12 2 75.00
Delegate of Ministry of Finance total 16 meetings were held. (A)
Li-Chiung Su, Director Delegate of Newly assigned on 12/01/2017,
1 0 100.00
Ministry of Finance total 1 meeting was held. (A)
Shing-Rong Lo, Director
17 0 100.00
Delegate of Bank of Taiwan
Shiou-Jsu Yeh, Director
15 2 88.24
Delegate of Bank of Taiwan
Tien-Yuan Chen, Director
Delegate of Golden Garden 16 1 94.12
Investment Co.
Chi-Hsun Chang, Director 17 0 100.00
An-Fu Chen, Director
Delegate of Global Investment 17 0 100.00
Co., Ltd
Shyan-Yuan Lee, Independent
17 0 100.00
Director
Hau-Min Chu, Independent
17 0 100.00
Director
Hui-Ya Shen, Independent Director 16 1 94.12
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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 None. directors’ opinion should be specified:

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, economics and legal 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 2017, 9 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. Effective from 2016, Ethical Management Committee was organized by independent directors to build and review the ethical policy. Only one meeting was held as of end 2017. To better facilitate Corporate Governance practice, “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” was amended on Sep. 30, 2016 by TWSE, FFHC soon published updated “FFHC Corporate Governance Best Practice Principles” in November, ensuring the latest guidelines to follow up.

Audit Committee Meeting Attendance

Total 9 meetings (A) were held in 2017

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Attendance Attendance Attendance Rate
Name Notes
in Person (B) by Proxy (%)(B/A)
Shyan-Yuan Lee, Convener
9 0 100.00
Independent Director
Hau-Min Chu, Independent
9 0 100.00
Director
Hui-Ya Shen, Independent
9 0 100.00
Director
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Remuneration Committee Meeting Attendance

Total 4 meetings (A) were held in 2017

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Attendance Attendance Attendance Rate
Name Notes
in Person (B) by Proxy (%)(B/A)
Hau-Min Chu, Convener
4 0 100.00
Independent Director
Shyan-Yuan Lee,
4 0 100.00
Independent Director
Hui-Ya Shen, Independent
4 0 100.00
Director
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Elements of Compensation of Directors

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Items Delivery Policy
Base • Cash • Each director of First Financial Holding receives a monthly cash
Compensation • Monthly retainer of NT$20,000. The FHC’s Chairperson receives a cash
retainer 1.25 times that paid to the president.
• Traditionally, Chairperson of First Financial Holding acts as
Chairperson of subsidiary First Bank. As is the common practice,
the Chairperson receives compensation for his/her service at
First Bank, but waives receipt of the monthly cash retainer for
his/her service as Chairperson of First Financial Holding.
• Total monthly cash paid to directors is capped at NT$ 2,400,000.
• Effective from September 1, 2011, independent directors receive
a monthly cash retainer of NT$60,000 per month for the
operation of Remuneration & Audit Committees.
Remuneration • Cash • Directors also receive annual remuneration based on the profit
• Annually and subject of the current year.
to Shareholder • In compliance with Article 34-1 of the Company Charter, if there
meeting’s approval is any surplus profit concluded in a fiscal year, First Financial
Holding 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 • Severance pay • First Financial Holding reimburses its directors for
kind • Reimbursed as per transportation expenses incurred in attending board meetings
actual and health check 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.
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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, 2017, in NT$ and %

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Remuneration Ratio of
(A+B+C+D) to
Delegates Base Severance Pay(B) Remuneration(C) Reimbursed net income (%)
Compensation(A) Pay(D)
FHC FHC FHC
FHC FHC Group FHC FHC FHC Group FHC FHC
Group Group Group
Total
Directors
(including 4,140,000 11,598,234 0 6,418,755 137,262,600 137,262,600 0 1,780,217 0.9133 1.0144
Independent
Directors)
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(to be continued)

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Relevant remuneration received by directors who are also
employees Ratio of
Salary, (A+B+C+D+E+F+G) Compensation
Remuneration and Severance Profit-sharing from to net income (%) paid to
Allowance(E) Pay(F) Employee Compensation(G) directors from
Delegates
invested co.,
other than
FHC FHC Group
FHC FHC group
FHC FHC FHC Group FHC
Group Group
Cash Stock Cash Stock
Total
Directors
(including 5,706,82011,684,589 0 12,110,000 0 0 277,272 0 0.9501 1.1699 212,745
Independent
Directors)
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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
Grace M.L. Jeng, Po- Ray B. Dawn, Grace Grace Y. Wu, Po- Ray B. Dawn, Hsien-
Chiao Chou, Yi-Hsin Y. Wu, Grace M.L. Chiao Chou, Yi-Hsin Feng Lee, Yi-Hsin
Wang, Hung -Chi Jeng, Po-Chiao Chou, Wang, Hung-Chi Wang, Hung-Chi
Huang, Li-Chiung Hsien-Feng Lee, Yi- Huang, Li-Chiung Huang, Li-Chiung
Su, Huey-Fang Liau, Hsin Wang, Hung- Su, Huey-Fang Liau, Su, Huey-Fang Liau,
Under 2,000,000 Shyan-Yuan Lee, Chi Huang, Li-Chiung Shyan-Yuan Lee, Shyan- Yuan Lee,
Hau-Min Chu, Hui-Ya Su, Huey-Fang Liau, Hau-Min Chu, Hui-Ya Hau-Min Chu, Hui-
Shen. Shyan-Yuan Lee, Shen. Ya Shen, Tien-Yuan
Hau-Min Chu, Hui- Chen.
Ya Shen, Tien- Yuan
Chen.
2,000,000 ∼ 5,000,000 — — Grace M. L. Jeng Grace Y. Wu
5,000,000 ∼ 10,000,000 — — — Grace M. L. Jeng
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., Ching-Nain Co., Ltd., Chi-Hsun Co., Ltd., Ching-Nain
Chang Tsai, Chi-Hsun Chang Chang Tsai, Chi-Hsun Chang
Bank of Taiwan, Po-
15,000,000 ∼ 30,000,000 Bank of Taiwan Bank of Taiwan Bank of Taiwan
Chiao Chou
30,000,000 ∼ 50,000,000 — — — —
50,000,000 ∼ 100,000,000 MOF MOF MOF MOF
— — — —
Over 100,000,000
Total 14 19 15 19
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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
2017 0.9501% 1.1699%
2016 0.9699% 1.0714%
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For 2017, First Financial Holding alone and Group awarded to its directors a total compensation of 0.9501% and 1.1699%, respectively. The ratio for FHC was lower than prior year mainly due to reduced earnings result, whereas the retirement costs of directors caused a higher ratio for Group, which proved that our remuneration system was not unreasonably connected to the company’s performance, and most of the profit margin was distributed to shareholders.

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FFHC Management Team
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FFHC Management Team

Data as of April 24, 2018

President

Chien-Hao Lin

Male, Nationality: Taiwan, R.O.C. 2018/02/23 on board, now serves as Director of FCB; Director of Taiwan Asset Management Corp and Supervisor of First Securities.

Bachelor of Laws, National Taiwan University
Executive Vice President and Head of Strategy Planning Department, First Financial Holding; Chief Auditor, First Financial Holding;

EVP & Head of Admin. Mgt. Dept.

Chao-Chung Chou

Male, Nationality: Taiwan, R.O.C.

2018/03/31 on board, now serves as Chairperson of First AMC and First Financial Leasing (Chengdu).

M.B.A., Dayeh University.
EVP, First Bank;
SVP & GM, Phnom Penh Branch, First Bank;
VP & Chief of Human Resource Planning Dept., First Bank.
G.M. of HK Branch, First Bank;
Head of Business Planning & Admin. Division, First Bank.

EVP & Chief Compliance Officer

- Shang Shing Jiang

Male, Nationality: Taiwan, R.O.C.

2016/11/01 on board, now serves as EVP & Chief Legal Compliance Officer of FCB.

B.A., Department of International Business, Tamkang University.
EVP & Head of International Banking Division, First Bank;
SVP & GM, Singapore Branch, First Bank.

EVP & Spokesperson

Jason C.H. Lee

Male, Nationality: Taiwan, R.O.C. 2018/03/22 on board, now serves as EVP of First Bank, Director of First Bank USA.

Chief Auditor

Yurij Y. H. Hsieh

Female, Nationality: Taiwan, R.O.C. 2017/11/08 on board, now serves as Supervisor of FSIT.

B.A. Soochow University.
SVP & GM, Hong Kong Branch, First Bank;
VP & Chief, Consumer Banking Division, First Bank.

Advisor & Head of Risk Mgt. Dept.

Shuen-Rong Huang

Female, Nationality: Taiwan, R.O.C. 2017/09/08 on board, now serves as EVP of FCB and Director of Taiwan Asset Management Corp.

B.S., Finance and Information, National Kaohsung University of Science and Technology.
SVP & Division Chief of Kaohsiung Regional Center, First Bank;
SVP & Chief of Credit Approval Division, First Bank.
M.B.A., University of Dallas, USA.
EVP & Head of International Banking Division, First Bank;
SVP & GM, New York Branch, First Bank.

Head of Auditing Dept.

Chen-Tang Wang

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

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

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 & Acting Head of Business Planning & Admin. Division, First Bank;
VP & Acting Head of Business Development Dept, First Financial.

Head of Strategy Planning Dept.

Annie Lee

Female, Nationality: Taiwan, R.O.C. 2018/03/22 on board, now serves as Director of First Life.

B.A., National Taiwan University.
VP of SME Business Division, First Bank;

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Head of Investor Relations, First Financial;
VP & Deputy Head of Strategy Planning Dept, First Financial.

VP & Acting Head of Compliance & Legal Department

Fen-Ying Wu

Female, Nationality: Taiwan, R.O.C. 2017/03/23 on board, now serves as VP & Head of Compliance & Legal Division of FCB.

Bachelor of Laws, National Taiwan University.
VP &Deputy Head of Taipei Regional Center 2, First Bank;
VP & Deputy Head of Credit Approval Division, First Bank.

VP & Acting Head of IT Dept.

Hsiu-Chen Hsieh

Female, Nationality: Taiwan, R.O.C.

2017/09/01 on board, now serves as Head of IT Division, First Bank and Supervisor of TurnCloud Tech Co.

B.S., IT, Chung Yuan University.
SVP and Chief of IT division, FCB;
Manager of IT Planning Dept., FCB.

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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, 2017, in NT$ and %

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Compensation and Profit-sharing Employee
Salary(A) Severance 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
& Chief Auditor [10,596,934 14,325,181] 0 7,937,930 5,128,778 8,070,833 643,661 0 883,770 0
(to be continued)
Exercisable
Ratio of (A+B+C+D)
Employee Stock
to net income(%) Any compensation
Title Option from an invested Co.
FHC FHC other than group
FHC FHC
Group Group
President & EVP & Chief Auditor 0.1057 0.2016 0 0 60,000
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Name of President and Executive Officers
Bracket
FHC FHC Group
Grace Y. Wu, Shang-Shing Jiang,
Under 2,000,000 Yurij Y. H. Hsieh
Yurij Y. H. Hsieh
Grace M. L. Jeng, Jennifer M.C.
Grace Y. Wu, Grace M. L. Jeng,
2,000,000 ∼ 5,000,000 Liao, Chien- Hao Lin, Teng-Yao
Jennifer M.C. Liao, Chien- Hao Lin
Hsu
5,000,000 ∼ 10,000,000 Shang-Shing Jiang
10,000,000 ∼ 15,000,000 — Teng-Yao Hsu
15,000,000 ∼ 30,000,000 — —
30,000,000 ∼ 50,000,000 — —
50,000,000 ∼ 100,000,000 — —
— —
Over 100,000,000
Total 7 7
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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
2017 0.1057% 0.2016%
2016 0.1006% 0.1810%
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For 2017, First Financial Holding Group awarded its executives a total compensation of 0.2016% of the net income of company. The compensation ratio awarded to First Financial Holding’s executives on FHC was 0.0206% higher than prior year mainly due to the retirement cost of one EVP, which caused a higher ratio but as a whole, parent company still delivered a better earnings result comparing with 2016.

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Capital Overview
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Share Capital

As of April 24, 2018, First Financial Holding’s paid-in capital totaled NT$122,163,932,910 with 12,216,393,291 shares outstanding issued at a par value of NT$10. For the year of 2017, NT$2,395,371,230 of 2016 earnings were capitalized simultaneously with the issue of 239,537,123 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 24, 2018, Top 10 shareholders at First Financial Holding are listed below.

Shareholders Breakdown by Owners Type

Data as of April 24, 2018

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Shareholders Number Share-held Holding %
Government Agencies 6 1,780,193,462 14.57
Financial Institutions 18 1,693,138,850 13.86
Other Institutions 935 938,696,814 7.68
Individuals 339,758 4,476,845,631 36.65
Foreign Institutions & Foreigners 890 3,327,518,534 27.24
Total 341,607 12,216,393,291 100.00
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Major Shareholders

Top 10 Shareholders at First Financial Holding Data as of April 24, 2018

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Shareholders Share-held Holding %
Ministry of Finance 1,403,420,712 11.49
Bank of Taiwan 910,711,679 7.45
Hua Nan Bank 345,590,316 2.83
Civil Servants’ Retirement Fund 272,277,609 2.23
China Life Insurance Co., Ltd. 184,032,333 1.51
Chunghwa Post Co., Ltd. 172,611,802 1.41
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Shareholders Share-held Holding %
Vanguard Emerging Markets Stock Index Fund 162,233,919 1.33
Taiwan Tobacco & Liquor Corporation 136,598,687 1.12
Norges Bank, Norway 132,342,002 1.08
Vanguard Total International Stock Index Fund 130,951,646 1.07
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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. 28 2018, 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 28, 2018 and in NT$

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2013 2014 2015 2016 2017 2018
High 19.40 20.90 19.85 17.80 20.75 20.20
Low 16.80 17.70 14.85 14.15 17.10 19.30
Average 17.98 18.66 17.37 16.31 19.13 19.83
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GDR Price Information on the Luxembourg Stock Exchange

*Data as of February 28, 2018 and in US$

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2013 2014 2015 2016 2017 2018
High 12.96 13.87 12.80 11.25 13.73 13.83
Low 11.29 11.49 9.07 8.38 10.63 13.20
Average 12.13 12.18 11.00 10.10 12.54 13.52
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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.

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 2015 and 2016, First Financial Holding’s dividend payout ratio was 94.59% and 98.59%, respectively. Retroactively adjusted for cash dividend payout ratio would be 64.19% and 84.51%.

Dividend Payout History

in NT$ or %

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2013 2014 2015 2016 2017
EPS 1.18 1.43 1.48 1.42 1.27
Cash dividends 0.50 0.70 0.95 1.20 0.90
Stock dividends 0.70 0.65 0.45 0.20 0.10
Total dividends 1.20 1.35 1.40 1.40 1.00
Cash dividend payout ratio 42.37% 48.95% 64.19% 84.51% 70.87%
Dividend payout ratio 101.69% 94.41% 94.59% 98.59% 78.74%
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Subsidiaries Overview
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First Bank Overview

The world economy stayed on course in 2017, despite the political and economic headwinds on the horizon. Ample liquidity in financial markets, a recovery in global crude and commodity prices, and higher import demand amid broad-based growth from around the world led to an acceleration of trade. The International Monetary Fund estimated growth in world merchandise trade volume in 2017 at 4.7%, up from 2.5% in 2016. The U.S. economy continued to recover, with its pace of growth increasing quarter after quarter throughout the year. The Eurozone experienced a moderate growth, supported by the European Central Bank’s quantitative easing monetary policy stance. Japan’s economy continued to recover as an increase in exports, driven by the global recovery, more than offset the fading impact of Japanese Prime Minister Shinzo Abe’s massive stimulus plan. China’s economy expanded, recording its first accelerated growth since 2010 and beating Beijing’s own official target, in a year of continued economic rebalancing, accelerated deleveraging, and tightened risk control.

Domestically, Taiwan’s economy grew 2.86% in 2017, its fastest growth in three years and up from a pace of 1.41% in 2016, on the back of a 13.17% increase in exports. Within the financial services industry, pre-tax profit of all banks totaled NT$305.9 billion for 2017, up 1.96% from the prior year. Total outstanding loan balances amounted to NT$27.0563 trillion, up 3.41% from a year ago. The average non-performing loan ratio and the loan-loss coverage ratio of all banks were at 0.28% and 492.92% as of December 2017, up 0.01 percentage point and down 10.01 percentage points from a year earlier, respectively.

First Bank’s net profit declined by NT$2.557 billion, or 14.5%, to NT$15.142 billion, or NT$1.7 per share, in 2017. The earnings contraction was attributable to higher loan-loss provisions to account for loans made to ChingFu Shipbuilding. First Bank’s capital adequacy ratio and tier 1 capital ratio stood at 13.42% and 11.25% as of 2017 year-end, respectively.

2017 Net Revenue Breakdown

in NT$ mn

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Net interest income Net fee income Other income
28,843 7,457 6,614
67.2% 17.4% 15.4%
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Financial Highlights First Bank

Non-consolidated basis, data as of December 31, 2016 and 2017

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2016 2017
Income statements (in NT$ mn)
Net interest income 27,798 28,843
Net fee income 8,035 7,457
Other income 5,704 6,614
Net revenue 41,537 42,914
Provision expenses (2,050) (6,839)
Operating expenses (18,963) (18,466)
Income before tax 20,524 17,609
Income tax expenses (2,825) (2,467)
Cumulative effect of change in accounting
0 0
principles
Net income 17,699 15,142
Balance sheets (in NT$ mn)
Total assets 2,469,290 2,554,288
Total liabilities 2,278,659 2,362,029
Total shareholders’ equity 190,631 192,259
Ratios (%)
ROAE 9.46 7.91
ROAA 0.72 0.60
Tier-1 ratio 10.95 11.25
Capital adequacy ratio 13.27 13.42
Credit Ratings
S&P A-/A-2/Stable
Moody’s A2/P-1/Stable
Taiwan Ratings twAA+/twA-1+/Stable
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*Figures may not match due to rounding.

*There are currently seven subsidiaries under the First Financial Holding umbrella. In this section, only four primary subsidiaries are introduced as their combined net income for 2017 constituting the major portion of the First Group’s profits.

Guided by its annual theme, “Going Digital with First Bank: Leading Through Transformation,” First Bank continued its Asian expansion in 2017 as part of a broader effort to become a regional player. It also made progress towards its goal of being the preferred partner for cross-border financing and transaction services in order to capture the demographic dividend, complete industry value chains and high interest spread Southeast Asia has on offer. First Bank increased the number of locations in Cambodia to eight with the opening of a new sub-branch in Siem Reap. It saw its net interest income grow by NT$1.045 billion, or 3.76%, and income from treasury businesses rise by NT$1.078 billion, or 20.36%. Meanwhile, its average deposit and lending balances expanded by 1.78% and 3.86%, separately. In particular, its average foreign currencydenominated deposit and lending balances, which allowed it a wider spread in interest rates, rose by 3.95% and 4.93%. These indicators of operational performance demonstrated that First Bank’s earnings momentum remained intact. Currently, First Bank has 35 overseas locations, including 16 locations (seven branches, seven sub-branches and two representative offices) situated in eight of the target countries of the Taiwan government’s New Southbound Policy – Cambodia, Vietnam, Laos, Myanmar, Thailand, Singapore, the Philippines and Australia.

In 2017, First Bank’s average balance of deposits was at NT$1,948,670 million, an increase of NT$34,127 million, or 1.78%, compared with the prior year. Its average balance of loans was at NT$1,546,339 million, an increase of NT$57,418 million, or 3.86%, compared with the prior year. First Bank remained Taiwan’s top SME lender for the eighth consecutive year with a market share of 10.78% and a SME loan book valued at NT$657.8 billion at the end of 2017.

First Bank established the Anti-Money Laundering Department under the Compliance Division in March 2017. In May 2017, the Cyber Security Division was formed with the responsibility to plan, implement and manage an organization-wide digital security strategy. There were two departments operating under the division, the Security Operation Management Department and the Security Technology Control Department. In November of the same year, the Digital Banking Division undertook several naming changes, with its Digital Application Department renamed Digital Innovation Department and Client Marketing Division renamed Data Application Department. The Information Technology Division added a new unit, the Emerging Technology Development Department. In order to address the threats of money laundering and terrorist financing and to assure more proactive monitoring and reporting of suspicious transactions, First Bank created the Anti-Money Laundering and Counter-Terrorist Financing Committee in December 2017.

First Bank Business Units & Functional Centers

Data as of April, 2018

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First Bank
President
Compliance Affairs Compliance Division
Corporate Banking Business Administration Division
Corporate Banking BU
Operation Planning & Admin. Division
International Banking Division
International Business BU
Overseas Business Admin. Division
Consumer Banking Business Admin. Division
Credit Card Division
Personal Banking BU Trust Division
Personal Banking Business Admin. Division
Insurance Agency Division
Treasury Division
Financial Markets BU
Financial Markets Business Admin. Division
Credit Approval Division
Risk Management Division
Risk Management Center Credit Analysis Division
Special Asset Management Division
Regional Center
Information Technology Division
Information Technology Administration
Digital Technology Security Division
Center
Digital Banking Division
Accounting Division
General Affairs Division
General Administration Center Human Resource Division
Public Relations Office
Legal Affairs Office
Regional Center
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The Taiwan government is making a strong commitment to fostering seven sectors of the economy as the key to upgrading Taiwan’s industry including green energy, the Internet of Things (also referred to as Asia Silicon Valley), biomedical, national defense, smart machinery, high-value agriculture and the recycle economy. In response of the government’s policy actions, loans made by First Bank to support these seven strategic sectors reached NT$398.9 billion as of the end of 2017.

First Bank Capital Adequacy

Data as of December 31, 2016 and 2017; in NT$ mn or %

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2016 2017
Tier-1 capital 172,197 172,853
Tier-2 capital 36,384 33,365
Total capital 208,581 206,218
Total risk-weighted assets 1,572,069 1,536,696
Tier-1 capital ratio 10.95 11.25
Capital adequacy ratio 13.27 13.42
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First Bank, in 2017, launched a program to offer preferential-rate loans for the reconstruction and rehabilitation of buildings that are in a derelict condition or considered too dangerous to live in. By the end of 2017, the bank granted NT$7.664 billion in such loans to the participants of 29 urban renewal projects.

For upgrading and optimizing many of its banking services during 2017, First Bank began offering a digitized account opening process by integrating photo-taking, identification of optical character recognition for identity documents and the verification of identity into one seamless process. Among its other new offerings that combine digital services with access to the physical branch was a customer service chatbot powered by machine learning capabilities and language processing; an application for branch/ATM search with augmented reality technology; and an online scheduling app for booking appointments for financial advisory services. First Bank applied chatbots and Pepper, a humanoid robot built to perform services, as tools for customer service so that its customers could get personalized assistance, as well as product recommendations tailored to their needs, upon every interaction.

Another highlight of the year was the launch of a multifunction point-of-sale (POS) cash register on June 28, 2017. Developed jointly with FinTech partner Turn Cloud Tech, this system is packed with features and functions from processing credit cards, accepting cash, tracking customer data to managing E-receipts all in a single compact unit. In celebration of the United Nations World Oceans Day, a day designated on June 8, First Bank introduced Living Green Card, a green credit card scheme designed to encourage consumers to adopt more sustainable spending habits and recognized by Visa as an Excellent Green Environment Protection Product. In response to the rapid ageing of the population, First Bank installed four aging-friendly branches and remodeled its headquarter and two existing branches in the southern city of Chiayi to include easy-to-

access digital tools and services. These locations are all equipped with move-free facilities to better serve the elders and to enhance their banking experience.

266 events were organized in 2017 for charitable, environmental and educational purposes. It united the resources available from customers, shareholders and employees to advocate social responsibility and to contribute toward a sustainable society where individuals, businesses and the environment could coexist in harmony.

First Bank made strong headway on its sustainability goals in 2017. After extensive remodeling, 17 office buildings owned by First Bank obtained the highest “Diamond” grade under a locally recognized green building rating system. In its push for paperless and energy-efficient operations, First Bank reduced carbon emissions by approximately the annual amount of carbon held by green space equivalent to 136 Da-an Forest Parks over the past four years. It was named a Gold winner, the highest honor for all award winners, for the third straight time at the 2017 ROC Enterprises Environmental Protection Award.

Looking forward, First Bank has set out its annual theme as “Going Digital with First Bank, Your Partner for Transformation and Growth.” It will drive sustained growth and profitability by building on the progress it has made in the past two years, a period when it transformed its business and realigned certain areas such as talent development, distribution channels, operations and systems. First Bank will also continue its digitalization efforts to keep abreast with the latest technology trends and developments. In sum, the five strategic actions it is to implement in the year ahead are: creating value propositions that reflect its core competitive edges; accelerating digital transformation; combining a global network with local knowledge; strengthening governance and control; and embedding the organization with a culture of happiness. These actions will position First Bank well to achieve its goal as a regional bank with an Asia-wide presence; a niche bank with unique competitive advantages; a digital bank with advanced technology expertise; and a “happy” bank with a culture of well-being.

First Securities Overview

The gross domestic product of Taiwan increased at a 2.42% annual rate in 2017, the fastest pace in three years and beating the government’s own estimate, as stronger than expected exports and domestic consumption fueled growth. Exports, in particular, were driven by demand from the technology sector and a broad global economic recovery that picked up pace substantially in the second half of the year. The rally across global equity markets, led by a U.S. bull market, propelled Taiwan’s stock market on volume and value. The TAIEX surged toward the 10,000 level on May 11, 2017 and set a 27-year closing high at 10,882 on November 22, 2017. Though shares pulled back later on profit-taking, the index managed to stay above the 10,000 mark to end the year with a 15.01% gain. Benefiting from the stock market boom, First Securities returned to profitability in 2017 with net profit of NT$271.52 million, or NT$0.44 per share. Its return on equity and return on assets reached 1.55% and 4.41%, respectively.

2017 Net Revenue Breakdown

in NT$ mn

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Net brokerage commissions Net principle transaction gains Net interest income Other income
849 227 306 145
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Financial Highlights First Securities

Consolidated basis, data as of December 31, 2016 and 2017

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2016 2017
Income statements (inNT$ mn)
Net brokerage commissions 645 849
Net interest income 292 306
Net underwriting commissions 23 38
Net principle transaction gains (12) 227
Other net operating income 93 107
Operating income 1,041 1,527
Operating expenses (1,288) (1,301)
Non-operating income 42 72
Income before tax (205) 298
Income tax expenses (24) (26)
Cumulative effect of change in accounting
0 0
principles
Net income (229) 272
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Balance sheets (in NT$ mn)

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Total assets 16,209 18,730
Total liabilities 10,211 12,401
Total shareholders’ equity 5,998 6,329
Ratios (%)
ROAE (3.66) 4.41
ROAA (1.32) 1.55
Credit Ratings
Taiwan Ratings twAA-/twA-1+/Stable
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*Figures may not match due to rounding.

The global economic recovery continued to gain steam in 2017 after picking up considerably in 2016 thanks to policy stimulus measures implemented across the world. Trade activity also increased. For the U.S., 2017 was a year marked by low unemployment rates, stable domestic spending and strengthened manufacturing sectors. Growth in corporate profit and private-sector investment amidst upbeat business sentiment served as key drivers of the country’s economic expansion. The U.S. economy grew by 2.3% in 2017, an acceleration from the 1.6% logged in 2016. U.S. President Donald Trump signed a sweeping tax overhaul bill into law, and the U.S. Fed followed suit to raise interest rates three times during the year.

The Eurozone’s 2.3% annual economic growth rate outstripped that of the U.S. in 2017. Upbeat PMI readings indicated an ongoing expansion in the bloc’s economic activity. Amid this favorable backdrop, European stocks rallied but with added volatility.

China’s economy advanced by 6.9% in 2017. The Shanghai Composite rallied to around 3,300 on forecast-beating economic data in the first quarter of the year, before being pummeled down by Beijing’s deleveraging reforms. The benchmark index later rebounded to 3,400 amid restored investor optimism following MSCI’s decision, announced in June 2017, to incorporate A-shares in the MSCI Emerging Markets Index. The index, however, weakened towards the end of the year to consolidate at the 3,260 level as investors took profit and the Chinese regulator tightened controls over the markets. The Shanghai Composite closed 6.56% higher for 2017.

healthy U.S. fundamental and a series of policies proposed around the world to gather momentum. Despite a projection for three interest rate hikes for the U.S., the U.S. economy is forecast to grow by 2.6% in 2018 thanks to tax reforms implemented by the Trump Administration to bolster the U.S. economy.

Below is a discussion of 2017 highlights for First Securities.

◆ Retail Brokerage

Taiwan’s average daily stock trading volumes increased 39% to NT$138 billion in 2017. Stock trades handled

by First Securities rose by NT$311.5 billion for the year, the 13th fastest pace of growth among Taiwan’s top 25 brokers and translating into a 1.8 percentage points of market share growth. First Securities saw its market share in retail brokerage grow to 1.53% in 2017 from 1.51% in 2016. Its market share in margin loans, meanwhile, rose to 2.94% from 2.86% in the prior year, as its total margin loans outstanding climbed up to NT$6.339 billion, up by NT$964 million from NT$5.375 billion a year earlier. First Securities, in 2017, executed 0.85% of the Taiwan market’s electronic trading volumes, up from 0.74% in 2016. In response to investors’ migration to digital application, First Securities enhanced its mobile trading app and improved the features and functions of its trading platform to boost trading turnover. It continued to offer an all-in-one integrated solution for clients, in a bid to drive profit via connecting and integrating sales and marketing resources across its parent group.

◆ Investment Banking

For the whole of 2017, First Securities lead-arranged seven IPOs and five SPOs, including the IPOs of Transart Graphics on the Taiwan Stock Exchange and Gseven on the Taipei Exchange. It also advised Kenturn Nano. Tec., which filed an IPO application to the Taipei Exchange in November 2017, in the listing process. In addition to providing IPO advisory services for domestic firms, First Securities is partnering with the overseas branches of First Bank to identify and serve foreign-domiciled companies with plans to list shares in Taiwan. In 2017, First Securities entered into agreements with eight companies to provide them with stock transfer agency services, with the size of agency services reaching 60 by the end of 2017.

◆ Asset Management

In 2017, the U.S. Fed began reducing its balance sheet and raised the federal funds rate three times. Although bond yields ticked up as a result of U.S. President Donald Trump’s tax reform bill, the dollar index’s decline and a spike in global crude prices in the latter half of the year, the slope of the long-term yield curve became flatter. In Taiwan, bond yields were much lower than their international counterparts. In light of the risk on the horizon, First Securities grew its corporate bond assets at a slow, discreet pace in 2017. The trading of convertible bond positions held in its proprietary trading accounts generated significantly higher gains than expected thanks to a buoyant stock market.

Taiwan’s warrant market boomed in 2017 amid a stock rally, with total trading volumes soaring 37.35% higher than in 2016. First Securities looks to grasp the potential of the local warrant market through sales campaign and market-making activity and by developing a wide range of hedging tools and trading strategies to help investors reduce their hedging costs and maximize their trading gains.

sale of portfolio securities. The core of First Securities’ proprietary portfolio comprises primarily stocks in the sectors with relatively strong growth prospects, reflecting the firm’s continued focus on stock picking. In 2017, First Securities added U.S., China and Hong Kong stocks to its investment portfolio in order to diversify its geographic exposure with broadened investment pool. Going forward, the firm will continue to boost profits from proprietary trading under a balanced risk/return profile.

◆ Proprietary Trading and Research

The research department of First Capital Management provides clients of First Securities with marketleading insights and ideas informed by its deep expertise across industries, sectors and asset classes. It produced 2,729 pieces of research, analysis and forecasts during 2017, along with reports on the latest market events and macroeconomic developments. Exchange traded funds, or ETFs, have grown popular in recent years, with increases seen in ETF trading volumes as well as in ETF share listings. Their importance is gaining momentum and will become more profound when MSCI officially includes China A- shares into its key Emerging Markets and World indices in 2018. The research department of First Capital Management is focused on enhancing the breadth and depth of its equity research coverage in order to respond to ETF investing trends, meet the demand of investors for global asset allocation, and capitalize on the opportunities being created through robot trading.

stability of the markets by implementing a trade-by-trade mechanism, tightening the safety of cyber security, addressing the threat of money laundering, and IT infrastructure revamp and talent development. In the year ahead, First Securities aims to keep up with changing regulations as it adapts to FinTech trends and anti-money laundering requirements by putting compliance and controls into centered pieces. It also will renew its commitment to an optimal capital structure. Another priority for First Securities is to increase collaboration with First Bank, as part of initiatives to better utilize capital, capture synergies and leverage resources that exist within its parent group. These actions are paving the way for First Securities to achieve its goals of helping individuals reach their financial objectives and facilitating corporations’ access to capital through its comprehensive investing, trading and funding platforms.

First Securities Investment Trust Overview

Global equities enjoyed an across-the-board rally in 2017, backed by steady economic growth, solid corporate earnings and ample liquidity in financial markets. The new funds launched in Taiwan last year were concentrated in two areas, stock ETFs and fixed-income funds that feature regular cash distribution, reflecting investors’ increased appetite for income and the popularity of ETF investing. In the onshore fund market, assets of funds invested in international equity markets took the lead of any fund type, rising by NT$99.7 billion, or 32.3%. Trailing behind were fixed-income funds and stock ETFs, rising by NT$75.1 billion and NT$73.1 billion, or 32.7% and 28.1%, respectively. Once the darling of investors, money market funds saw their assets decline for a second straight year as persistently low interest rates drove investments into funds with higher returns potential. As the markets enter 2018 with positive outlook, equity and income-yielding funds should continue to dominate as investors chase enhanced return and high-yield assets. For the year ended December 31, 2017, First Securities Investment Trust (abbreviated as “FSIT” hereafter in this report) reported net profit of NT$70 million, up by NT$6 million, or 9.4%, from the prior year. Its earnings per share were NT$1.17.

Financial Highlights First Securities Investment Trust

Non-consolidated basis, data as of December 31, 2016 and 2017

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2016 2017
Income statements (in NT$ mn)
Management fee 440 501
Sales service fee 5 7
Operating income 445 508
Operating expenses (380) (440)
Non-operating income 11 15
Income before tax 76 82
Income tax expenses (12) (12)
Cumulative effect of change in accounting principles 0 0
Net income 64 70
Balance sheets (in NT$ mn)
Total assets 1,078 1,124
Total liabilities 110 138
Total shareholders’ equity 968 985
Asset under management
AUM(in NT$ mn) 94,461 101,095
AUM rank 8 8
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*Figures may not match due to rounding.

There were 39 asset management companies operating in Taiwan up to the end of 2017. Assets under management in publicly-offered mutual funds amounted to NT$2.3185 trillion as of December 31, 2017, up by NT$195 billion, or 9.2%, from a year earlier. The number of new fund offers increased by 75 to 800 in the year, led by the launches of 36 stock ETFs and 22 fixed-income funds. Assets of equity funds totaled NT$581.9 billion as of December 31, 2017, up by NT$96.5 billion, or 19.9%, from a year earlier. Assets of balanced funds totaled NT$93.2 billion, down by NT$15.4 billion, or 14.2%. Assets of money market funds totaled NT$796.1 billion, down by NT$66.8 billion, or 7.7%. Assets of other types of funds – among them are fixed-income funds, fund of funds, principal protected funds, real estate investment funds, stock ETFs, index funds and multi-asset funds – reached NT$847.3 billion, up by NT$180.7 billion, or 27.1%. The number of private equity funds increased to 52 from 50 in the prior year with NT$33.8 billion in assets, up by NT$400 million, or 1.2%. Assets managed on a discretionary basis and/or under investment management contracts came to NT$1.7547 trillion, up by NT$322.7 billion, or 22.5%.

Domestic Mutual Fund Market

In NT$100 mn and %

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Type 2016 2017 Change
Equity funds [1] 4,854 5,819 19.9%
Bond funds 9,715 8,893 (8.5%)
Others [2] 6,666 8,473 27.1%
Total public-offering funds 21,235 23,185 9.2%
Private-placement funds 334 338 1.2%
Funds under discretionary management 14,320 17,547 22.5%
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Including balanced funds
Including fund of funds, index funds and securitization funds

FSIT reported NT$101.1 billion in assets under management as of December 31, 2017, an increase of NT$6.6 billion, or 7.0%, from a year earlier. It moved up one spot in 2017 to the eighth place in the industry with NT$98.8 billion in assets of publicly-offered funds. When ranked by fund type, FSIT emerged to the 15th place with assets of non-money market funds (including equity funds, balanced funds and others) totaling NT$32.4 billion, grew by NT$7.9 billion, or 32.2%, from a year earlier. It ranked third with NT$66.4 billion in assets of money market funds, shrank by NT$2 billion, or 2.9%, from a year ago. Client assets managed on a discretionary basis were NT$1.4 billion, an increase of NT$700 million, or 100.0%. Assets of private equity funds were NT$900 million, a marginal growth of NT$40 million, or 4.7%.

First Securities Investment Trust’s Assets under Management

in NT$100 mn and %

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Type 2016 2017 Change
Equity funds [1] 245 324 32.2%
Bond funds 684 664 (2.9%)
Total public-offering funds 929 988 6.4%
Private-placement funds 9 9 0.0%
Funds under discretionary management 7 14 100.0%
Total assets under management 945 1,011 7.0%
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1. Including balanced funds

In the past year, FSIT continued raising new funds, relaunching existing funds and maintaining third-party channels. It also extended the reach to clients with personal finance information via investment forum, seminars and other activities, to tap new customer groups and promoted its dollar-cost averaging investment programs. The company significantly boost its brand recognition through increased media coverage, commercials and social media marketing. In response to a migration of financial transactions to online and mobile channels, FSIT upgraded its IT infrastructure, strengthened its digital marketing capability and enhanced the efficiency of service delivery.

Below is a description of FSIT’s 2017 business highlights:

◆ New fund offers:

FSIT launched the FSITC Global Quattro Focus Income Fund of Fund in May 2017, advised by quantitative asset manager QS Investors LLC. This fund invests in four fixed-income asset classes with an aim to provide regular income and capital gain potential. It uses a selection of dynamic hedging strategies to smoothen out price movements.
The FSITC Global Utilities and Infrastructure Fund, launched in September 2017, provides investors with a new investment option other than the traditional investments in equity and bond funds. This fund is appropriate for investors looking to gain exposure to the utilities and infrastructure sectors and to earn monthly distributions from the fund’s portfolio assets that generate a predictable stream of cash flow.

◆ Fund performance:

Domestic equity funds: The FSITC Small Capital Fund and the FSITC High-Tech Fund were first-quartile performers relative to their 161 and 157 peers, respectively, over the prior year. The FSITC Innovation Fund and the FSITC Small Capital Fund were in the first quartile of 153 comparable domestic equity funds.
International equity funds: The FSITC Global Robotics and Smart Automation Fund, the FSITC Global FinTech Fund, the FSITC Asian Technology Fund, the FSITC Global REITs Fund and the FSITC Asian Emerging Market Fund, Asian Tech Fund all ranked in the first quartile of peer universe for the one-year period.

Money market funds: The FSITC Taiwan Money Market Fund and FSITC Money Market Fund ranked in the first quartile of their category over one year. The FSITC RMB Money Market Fund finished in the top onethird of its peer group for the year ended December 31, 2017.

◆ Discretionary investment management

FSIT made substantial progress in the fields of asset allocation with unique investment strategy in 2017. It managed to improve the performance of its discretionary account mandates and strengthened relationships and communication with clients to ensure appropriate asset build-up and allocation for client portfolios. It won an NT$1 billion investment mandate from a large life insurance company during the year.
Teaming up with First Capital Management, FSIT continued to distribute offshore fund on behalf of Eurizon Capital. The company also sought opportunities to sign distribution deals with other foreign investment managers and to introduce new funds which help expand its product offerings.

◆ Direct sales and marketing

Through investment seminars and other activities, FSIT provided clients with the updated information on popular topics of personal finance, including future growth trends, robotics and FinTech. It successfully positioned itself as a premier provider of investment solutions for investors looking for exposure to thematic investments, such as the emerging technologies of robotics and FinTech.
The direct sales and marketing team of FSIT handled more than 4,973 requests from existing and prospective clients, nearly three times as many as there had been a year earlier, resulting in the acquisition of 3,928 new clients.

◆ Third-party distribution

By the end of 2017, FSIT had 56 third-party distribution partners including 33 banks, 15 brokerage houses and eight life insurers. As of December 31, 2017, assets under management sourced from third-party partners increased 72% from a year ago. In particular, contribution from third-party channels over assets under management in non-money market funds jumped 84% from prior year.

◆ Dollar-cost averaging investment programs

FSIT’s dollar-cost averaging investment programs showed great success thanks to its broad and innovative fund line-up and highly effective sales campaigns. In 2017, the company boasted the largest increase in the number of investors participating in dollar-cost averaging investment programs, as well as in the amount of funds contributed by investors to their investment accounts at regular monthly intervals.

FSIT plans to raise two fresh funds in 2018, including an umbrella ETF and a global equity fund that invests in the disruptive technology theme. Among other objectives, it looks to expand its direct sale and other channels, promote its dollar-cost averaging investment programs, enhance the performance of its funds and broaden its base of assets under management in a bid to drive profit growth. FSIT manages to boost sales from existing clients, acquire new clients and gain deeper market penetration through joint marketing efforts with its bank partners, particularly focusing on dollar-cost averaging investment programs, and by launching social media and telemarketing campaigns. Additionally, FSIT will place a renewed focus on performance management. Its portfolio managers will target at beating the benchmark index and apply quantitative modeling techniques to increase the deviation between their funds’ returns and those of the underlying indexes. The ultimate goal for them is to rank in the top onethird of their peer groups. FSIT also will continue its innovation on investment products and strategies while gathering and analyzing customer data to identify unmet needs in the market. The Financial Supervisory Commission is reported to soon reform compensation system for fund sales in proportion to assets under management instead of turnover volume. The proposed change in the regulation of incentive compensation arrangements calls upon FSIT to reinforce its commitment to putting its clients’ interests first, helping them achieve their financial objectives, and creating a mutually beneficial relationship between clients, partners and the company itself.

First Life Insurance Overview

First Life Insurance, formerly known as First-Aviva Life Insurance and now a fully-owned subsidiary of First Financial Holding, had its start in 2008 as a 51/49 joint venture between Aviva International Holdings and First Financial Holding. In 2017, Aviva International Holdings agreed to sell its entire shareholding in FirstAviva Life Insurance to First Financial Holding in line with its global strategy to focus on its core markets. The transaction was concluded on January 19, 2018 after securing all the necessary regulatory approvals. Over the past few years, First Life Insurance has captured growth opportunities on rising demands of bancassurance in Taiwan’s insurance market. Recognizing insurance as an indispensable financial planning tool for people of all ages, especially the elderly in today’s rapidly ageing population, it achieved sustained growth in sales of insurance and retirement products through a diverse range of channels, including banks. First Life Insurance reported a net loss of NT$103 million, or -NT$0.46 per share for the year of 2017.

Financial Highlights First Life Insurance

Non-consolidated basis, data as of December 31, 2016 and 2017

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2016 2017
Income statements (in NT$ mn)
Premium income 7,235 11,684
Other insurance income 244 277
Net investment income 41 1,337
Operating Cost (7,157) (12,861)
Gross Revenue 363 437
Operating Expenses (513) (566)
Non-operating income 0 0
Income before tax (150) (129)
Income tax expenses 3 26
Cumulative effect of change in accounting principles 0 0
Net income (147) (103)
Balance sheets (in NT$ mn)
Total assets 31,265 36,591
Total liabilities 30,747 36,043
Total shareholders’ equity 518 548
Ratios (%)
ROAE (23.91) (19.39)
ROAA (0.45) (0.30)
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*Figures may not match due to rounding.

The Long-Term Care Services Act, enacted on June 3, 2017, marks the government’s latest response to tackling the challenges of an ageing population. The role of private-sector insurance in supporting the long-term care of the elderly, as highlighted in the regulation, is creating immense opportunities for life insurers. The life insurance sector’s first-year premium income has been able to grow consistently, albeit at a modest pace, over the past five years amid an economic recovery. Sales of investment-linked products, another growth driver for the sector, have benefited from a shift in the strategic focus of Cathay Life Insurance, Taiwan’s largest insurer, from traditional to investment-related insurance products. The paradigm shift became even more evident in 2017 when regulatory changes and ultra-low levels of guaranteed yield negatively impacted sales of traditional insurance policies that offer fixed rates of return and prompted insurers to focus on variable-rate life insurance. Variable-rate life insurance policies, including endowment policies and return-ofpremium policies, expanded their market share as a percentage of total life insurance sales during the year. Their appeal of producing a higher rate of return than traditional whole life insurance may have overweighed the uncertainty associated with the adjustments of interest rates by life insurance companies for many consumers.

nine months of 2017, bancassurance generated 52.5% of total new business, followed by the agency force. The dominant product sold by Taiwan’s bancassurers is savings products. In 2017, the sector experienced strong growth in investment-linked insurance products – which are distributed primarily through bank channels – due to a recovery in the economy and the stock market. Bancassurance manufacturers such as the local branches of Cardif Assurance Vie and Allianz consequently enjoyed a stellar year in 2017.

financially troubled Chaoyang Life in 2016 – a year when the number of life insurers dropped to 23 from 27 in the prior year – and China Development Financial Holding’s purchase of a 25.33% stake in China Life Insurance and Aviva International Holdings’ exit from Taiwan in 2017. Larger players, especially those affiliated with financial conglomerates, are enjoying scale advantages than ever before. Sector consolidation will continue going forward as insurers pursue economies of scale with the backing of well-established, resource-rich parent companies.

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Amount (In NTD
First-Year Premiums 2017 2016 Change (%)
Thousands)
Life Insurance 4,763,137 3,220,435 1,542,702 48%
Personal Accident
31,350 29,762 1,588 5%
Insurance
Health Insurance 43,643 4,179 39,464 944%
Annuities 5,909,522 3,121,631 2,787,891 89%
Total 10,747,652 6,376,007 4,371,645 69%
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First Bank, with its telemarketing and in-branch insurance sales-desk, contributed NT$8.481 billion, or 78.9%, of the first-year premium income collected by First Life Insurance in 2017. First Life Insurance’s own call center generated first-year premiums of NT$111 million, up 29.9% from NT$90 million in the prior year and representing 1.0% of the insurer’s total first-year premiums. The channel of agents and brokers contributed NT$678 million, or 6.3%, of First Life Insurance’s new premiums, representing a 48% increase from NT$457 million in the prior year. In 2017, First Life Insurance’s third-party distributors numbered 12 including eight banks, three brokerage houses and the Agricultural Bank of Taiwan. Additionally, a team of 11 specialists who provide channel-related services in the main economic regions of Taiwan generated NT$1.469bn in new business, up 136.93% from NT$620 million in the prior year. A newly formed digital business unit back in 2016 exceeded its original target with NT$9 million in new premiums from online sales of travel insurance and variable-rate life insurance during 2017. In a world with internet and smartphones today, online and mobile channels are growing in importance due to the convenience, ease of use and around-the-clock access they provide to customers. Moreover, most insurance companies offer insurance policies at cheaper rates compared to offline sales because online policy purchase reduces the intermediary’s or agent’s commission costs.

Going into 2018, local insurance companies are expected to scale down their sales of traditional policies that provide a fixed interest rate for cash value growth due to the regulator’s tightened expense loading and reserve requirements and the financial risk associated with selling such policies. Variable-rate life and investment-linked insurance should continue to gain popularity, with some of the latest investment-linked products featuring capital protection, or the option of an investment portfolio invested in fixed income securities, or a guarantee mechanism. Meanwhile, the market may see an increased number of protection insurance products (such as long-term care plans, which saw renewed consumer interest and an uptick in sales following the passage of the Long-Term Care Services Act), policies that offer premium discounts to reward policyholders for meeting pre-determined wellness targets, and micro whole life insurance policies that cover funeral costs

First Life Insurance takes a client-centric approach to its marketing and customer satisfaction programs, leveraging the distribution capability and relationships that First Financial Holding offers. It promotes awareness of its brand name, increases its exposure to distributors, policyholders and society at large, and disseminates information about its news, events and products through a combination of news media, CRM platforms, marketing tools and digital channels. Seeing CSR as critical to building trust and confidence, improving brand image and raising awareness among the public, First Life Insurance draws upon the philanthropic resources of its parent group to implement its CSR program. Activities that it has planned and developed to engage the local communities include children’s safety painting competitions, family camps, blood donations, charity fundraising and employee volunteer events.

Protection products and retirement plans remain the key to First Life Insurance’s product strategy going forward. Below is a description of the company’s strategic priorities for 2018.

First Life Insurance will strengthen its lines of insurance products to address the ageing of population and care issues related to older adults. Its product offering will be focused on variable annuities, critical illness insurance, insurance that covers major illnesses and conditions designated by the National Health Insurance Program as critical, cancer insurance, mortgage insurance, long-term care plans, lifetime health cover and travel insurance. Some of these insurance policies can be integrated with existing banking or other financial products; for instance, financial advisors sometimes include variable annuities and longterm care plans as components of trusts for elderly parents and their families. First Life Insurance will continue to combine the resources and franchise of its bank partners to provide its customers with the most appropriate and comprehensive coverage.
Rising life expectancy has raised awareness about the importance of financial plans for retirement. Annuities that provide revenue stream post retirement are gaining popularity. To help its clients secure financial resources that meet the challenges of ageing, First Life Insurance has broadened its target customer base from the wealth management clientele to middle-class consumers. It also has shifted its focus from short-term allocation of assets to long-term financial objectives in the delivery of financial planning services. Going forward, First Life Insurance will continue to grow its investment-linked offerings with flexible options for types (life insurance versus annuity), timing of fee and expense charges (frontend load versus back-end load) and investment funds (the insurer’s discretionary funds, equity funds, bond funds, balanced funds or ETFs). First Life Insurance’s goal is to provide its policyholders with decent protection with the opportunity for cash value accumulation while helping them minimize risk and produce a reasonable return on their invested premium through a diversified portfolio of quality assets. For First Life Insurance, life insurance is a long-term asset as well as an integral part of financial security to address the risks associated with demographic issues and longevity.
More foreign currency policies which offer insured clients with a variety of flexible foreign currency solutions will be in place. In addition, First Life manages to provide more regular-premium plans and optional riders with the aim of educating the public about the importance of having adequate long-term insurance coverage.
Online offerings will be enhanced in order to support the regulator’s digital initiative targeted at the life insurance sector and to cater to the financial needs of today’s technology-savvy generations.

First Life Insurance kicked start 2018 as a fully-owned subsidiary of First Financial Holding. It plans to utilize its deep bancassurance knowledge and leverage its parent group’s extensive networks and strong brand presence to ensure that its customers gain protection from adequate insurance coverage. The vision of First Life Insurance is to become the insurer that operates the most profitable and sustainable bancassurance model in Taiwan – one that not only helps customers achieve success at all stages of life, but also gives them the peace of mind about their future financial plans.

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Corporate Social Responsibilities
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First Financial Holding Company (FFHC) was selected as an index component of the 2016 and 2017 Dow Jones Sustainability Indices (DJSI) Emerging Markets Indices. The honor of being certified and recognized by an international institution attests to the group’s deep commitment in carrying out corporate social responsibilities.

CSR Committee

FFHC’s CSR Committee was formed in 2011 and it outlined the “CSR Code of Conduct” and “CSR Policy” to be followed within the group. To ensure the responsibilities are in line with international trends and government regulations, the Board approved the amendment of the “CSR Code of Conduct” and “CSR Policy” in 2012, 2014 and 2016, ensuring that all group subsidiaries commit to business models and practices that continuously address social and environment issues and contributes to the advancement of our society. In addition, to promote CSR related work more efficiently, FFHC sets up Environment, Social & Corporate Governance (ESG) related goals and action plans each year and periodically reviews the outcomes, making sure all responsibilities are met.

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56
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Our Employees

Training and Working Environment

First Financial Holding provides equal opportunity in employment for all qualified persons and does not discriminate against any employee or applicant on the basis of race, class, language, creed, religion, political affiliation, ancestry, place of birth, gender, sexual orientation, age, marital status, appearance, facial features, disability or union membership. The “CSR Code of Conduct” states that FFHC and its subsidiaries must comply with international covenant on human rights and related regulations while protecting the legal rights of employees. The Company has laid out responsibilities for protecting human rights in its “HR Management Rules”, “Work Rules”, “Regulations on Sexual Harassment Prevention, Complaints and Investigation” and “Occupational Safety and Health Code of Conduct”, fostering a workplace where employees are safe from occupational hazards and sexual harassment. FFHC also assists in providing employee with labor insurance, national health insurance and labor pension in accordance with the laws.

Moreover, 781.45 hours of cross-selling training sessions with 57,381 participants, including on-line training or webcast training courses. We also encourage further education within staffs’ leisure time, where 870

participants joined with a total of subsidizing cost of NT$ 4,530,000. FFHC group charged NT$67,410,000 in 2017 total.

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$31.81 mn in the year of 2017, as well as an optional unpaid-leave for employees when family members caring is needed.

First Financial Holding, in 2017, started providing low-dose CT lung cancer screening to employees. During the same year, banking subsidiary First Bank offered lung cancer screening to employees located south of Chiayi County and aged below 55, plus three groups of employees who may have a higher risk of developing lung cancer – those aged 55 and over, or aged below 55 with managerial responsibility, or with a family history of lung cancer. The CT scans confirmed 4 cases of lung cancer among the 1,141 employees who received the screening. First Bank plans to extend its lung cancer screening program to cover employees in other parts of Taiwan with age under 55 in 2018.

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

Number of Employees

*Data as of February 28, 2018

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2018 2017 2016
First Financial Holding(Note) 52 53 52
First Bank 7,461 7,494 7,452
First Securities 795 796 828
First Securities Investment
147 141 148
Trust
First-Aviva Life Insurance 279 290 308
Other Subsidiaries# 82 82 75
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Note: Starting from 2017, only full-time employees are disclosed. #Including First AMC, First Venture Capital & First Consulting.

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First Financial Holding and banking subsidiary First Bank identify female employees during pregnancy as the group in need of special healthcare in their support of the government’s demographic policy on fertility. In 2017, 130 pregnant female workers and their supervisors were asked to assess their perceived risk during pregnancy as part of a new maternity wellness program, with the results of assessment used to identify, evaluate and monitor occupational hazards faced by pregnant employees. Contract doctors and nurse specialists were invited to provide employees during pregnancy and after childbirth with healthcare guidance and education. Moreover, First Financial Holding hiked its employee allowance for new born children to NT$50,000 for the first child, NT$80,000 for the second child, and NT$100,000 per child for all subsequent children. It also introduced a marriage allowance of NT$30,000 for newly-wed employees. The amount of the newborn and marriage allowance paid by First Financial Holding in 2017 exceeded NT$6.56 million.

The cafeteria at the headquarters of First Bank is a key example of the bank’s focus on employee health. Planned and developed by registered dieticians, the cafeteria menu features dishes low in fat and sodium and made with farm-direct fresh products from contracted organic farmers. A traceability system is in place to ensure the safety and quality of the products used in the menu. A lunch set including one entrée and three side dishes charges only NT$40, with the meal controlled at the 600-800 calorie level. As a result of these efforts, the company cafeteria is highly popular among employees as they can choose from a variety of delicious and nutritious menu options based on their food preferences and special dietary needs. In addition, First Bank offers employees a laundry room, a hair salon/barbershop and a grocery store that sells goods at preferential prices on-site to make their lives more convenient.

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.

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discipline” to ensure that each subsidiary disclose the privacy policy on the website page. A related training program is periodically conducted through 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.

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 carbon-emission plans on electricity, gas, water and lift waste and recycling program targets. Except for First Bank headquarter and IT buildings are both classified as green-buildings, we also have 17 Diamond-Green Buildings certifications, and our carbon emission CO2e in 2017 was less than prior year by 401 tons and we have 12 business spots certified as “ISO50001 Energy-Management System” and 7 units awarded as “ISO14001 Environmental Management Certifications”, respectively. Key takeaways on environmental protection include:

FFHC identifies the material impacts of climate change on its operations:

With the implementation of the “Intended Nationally Determined Contribution for Reduction in Carbon Emission” and “Greenhouse Gas Reduction and Management Act”, companies unable to control carbon emission within the regulated level will be faced with additional financial risks, having to purchase carbon rights and endure higher operational cost.
As extreme weather events become frequent, FFHC is faced with the risk of loss or damage to its properties and real estate collaterals held for securing loans.
Hazardous air pollutants may cause harm to employee health.

FFHC’s customers and vendors are also faced with the above risks. To avoid being indirectly affected, FFHC will actively pursue green finance and capture opportunities lying within climate change.

To mitigate the impacts of climate change, FFHC implemented policies to lower carbon emission in 2017. Related measures and outcomes are described below:

Refurbished old buildings to reduce carbon emissions.
Upgraded IT equipment to improve system efficiency.
Reduced carbon emission from front desk services.
Installed gray water reclamation system and water saving devices.
Enforced the zero waste basket policy to maximize resource recycling.
Responded to the Carbon Disclosure Project (CDP) survey.
Promoted low-carbon diet with meat-free meals two days a week.
Switched off lights at night for 1 hour on “Earth Hour” and “Earth Day”.
Provided environmental education and training to increase employees’ understanding of energy conservation.
Encouraged employees to engage in environmental conservation activities, including assisting individual farmers to sow and harvest, planting trees, participating in wetland rehabilitation initiatives by protecting the wetlands in Muzha and Rongxing Park and adopting rice paddies for toxin-free cultivation.

After carrying out the above measures, total carbon emission in 2017 decreased 401 tons from 2016. 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.

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.

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.

Corporate Governance

CSR Awards

Dow Jones Sustainability Indices

FFHC has been honorably selected by the Dow Jones Sustainability Indices (DJSI) as an index component of the 2016 & 2017 DJSI Emerging Markets Indices for consecutive 2 years.

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Subsidiary First Bank honored as “2017 Bank of the Year in Taiwan” by “The Banker” journal.

British Standards Institution (BSI)

for the 5th time.

Taiwan Stock Exchange Corporation

Awarded the “Corporate Governance Evaluation for Top 5 among Listed Companies” for consecutive 3 years.

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FIRST FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

-------------------------------------------------------------------------------------------------------------------------------------For the convenience of readers and for information purpose only, the auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

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

(Expressed in thousands of New Taiwan dollars)

ASSETS	December31,2017 Amount % $ 65,957,750 3 177,910,861 7 104,392,136 4 159,289,711 6 692,928 - 73,982,261 3 458,233 - 1,580,357,495 60 20,249 - 386,605,113 15 2,362,587 - 37,277,789 1 9,523,723 - 27,294,565 1 444,235 - 3,160,260 - 4,328,709 - $ 2,634,058,605 100	December31,2016	December31,2016
	Amount $ 65,957,750 177,910,861 104,392,136 159,289,711 692,928 73,982,261 458,233 1,580,357,495 20,249 386,605,113 2,362,587 37,277,789 9,523,723 27,294,565 444,235 3,160,260 4,328,709 $ 2,634,058,605	Amount $ 62,114,275 212,149,563 86,755,897 147,365,013 - 62,848,009 442,235 1,544,094,992 10,991 344,583,594 2,281,074 36,009,745 9,526,074 27,367,819 417,196 1,727,240 3,462,618 $ 2,541,156,335	%
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			3 8 3 6 - 3 - 61 - 14 - 1 - 1 - - -
			100

(Continued)

FIRST FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Expressed in thousands of New Taiwan dollars)

LIABILITIESAND EQUITY	December 31,2017 Amount % $ 153,890,754 6 82,364 - 34,284,380 1 13,423,337 1 22,968,835 1 83,516,583 3 2,849,800 - 2,016,862,287 77 29,300,000 1 1,300,000 - 11,799,681 1 5,274,180 - 879,639 - 7,437 - 53,247,326 2 6,376,202 - 5,944,833 - 2,442,007,638 93 122,163,933 5 25,916,221 1 14,099,804 - 4,121,166 - 19,798,613 1 5,682,906 - 268,324 - 192,050,967 7 $ 2,634,058,605 100	December 31,2016	December 31,2016
	Amount $ 153,890,754 82,364 34,284,380 13,423,337 22,968,835 83,516,583 2,849,800 2,016,862,287 29,300,000 1,300,000 11,799,681 5,274,180 879,639 7,437 53,247,326 6,376,202 5,944,833 2,442,007,638 122,163,933 25,916,221 14,099,804 4,121,166 19,798,613 5,682,906 268,324 192,050,967 $ 2,634,058,605	Amount $ 126,253,621 95,859 23,691,418 9,995,347 12,596,063 71,763,770 1,905,454 1,973,472,355 42,300,000 2,705,205 7,310,415 5,273,696 779,251 21,732 61,093,064 5,738,127 4,132,036 2,349,127,413 119,768,562 25,916,221 12,364,204 4,128,990 23,260,285 6,336,770 253,890 192,028,922 $ 2,541,156,335	%
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			5 - 1 - 1 3 - 78 2 - - - - - 2 - -
			92
			5 1 1 - 1 - -
			8
			100

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

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 gains from insurance operations Gains on financial assets (liabilities) at fair value through profit or loss Gains on investment property Realised gains on available-for-sale financial assets Foreign exchange (losses) gains Impairment loss on assets Share of profit (loss) of associates accounted for using equity method Gain on debts investment without active market Other non-interest income, net Net income Bad debt expense and guarantee liability provisions Net change in provisions for insurance liabilities Operating expenses Employee benefits expense Depreciation and amortisation expenses Other general and administrative expenses Income from continuing operations Income tax expense Profit	Notes ( 6(29) and 7 6(30) and 7 6(31) 6(3)(32) 6(33) ( 6(34) ( 6(10) 6(35) 6(36) 6(7)(23) ( 6(37) ( 6(38) ( 6(39) ( 6(40) and 7 ( 6(41) (	For theyears ended December 31,	For theyears ended December 31,	For theyears ended December 31,	Change Percentage % 92 6 ( 28) 9 64 4 19 ( 4) 3 280 6 116 - ( 43) 2 11 2 ( 118) - 17 - ( 284) 1 ( 100) 3 ( 35) 100 13 ( 5) 202 ( 2) 423 ( 32) ( 4) ( 2) ( 3) ( 14) 2 45 ( 10) ( 7) ( 7) 38 ( 11)
		2017	% 86 ( 27) 59 16 10 11 - 2 - - - - 2 100 ( 13) ( 9) ( 27) ( 2) ( 13) 36 ( 6) 30	2016
		Amount $ 43,954,511 13,961,470) 29,993,041 8,341,336 5,129,769 5,549,632 93,463 1,051,725 170,396) 45,516) 137,892 - 746,166 50,827,112 6,771,717) 4,559,675) 13,760,687) 1,079,723) 6,507,251) 18,148,059 2,715,668) 15,432,391		Amount $ 41,612,195 ( 12,811,044) 28,801,151 8,722,806 1,350,958 2,569,070 163,130 950,704 935,402 ( 38,826) ( 75,073) 559,726 1,151,550 45,090,598 ( 2,243,861) ( 871,064) ( 14,279,891) ( 1,114,658) ( 6,383,620) 20,197,504 ( 2,913,347) 17,284,157

(Continued)

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 Unrealised gains on valuation of available-for-sale financial assets Share of other comprehensive income (loss) of associates accounted for using equity method Income tax expense related to components of comprehensive income Other comprehensive loss, 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 gain (loss), attributable to non-controlling interests Earnings per share Basic and diluted earnings per share from continuing operations, net of income tax	Notes 6(28) 6(10) 6(42)	For theyears ended December 31,	For theyears ended December 31,
		2017	2016

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

									Total		187,986,986		-	10,888,051 )	-	17,284,157	2,354,170 )	192,028,922		192,028,922		-	-	14,372,227 )	-	15,432,391	1,038,119 )	192,050,967
								Non-controlling	interest		$ 347,081 $		-	- (	-	71,841)	21,350)(	$ 253,890 $		$ 253,890 $		-	-	- (	-	50,641)	65,075 (	$ 268,324 $
									Total		$ 187,639,905		-	10,888,051 )	-	17,355,998 (	2,332,820 ) (	$ 191,775,032		$ 191,775,032		-	-	14,372,227 )	-	15,483,032 (	1,103,194 )	$ 191,782,643
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 the parent	Retained Earnings Other equity	Exchange	difference on Unrealised gain or	translation of loss on available-	Unappropriated foreign financial for-sale financial	Common stock Capital surplus Legal reserve Special reserve earnings statements assets	For the year ended December 31, 2016	Balance at January 1, 2016 $ 114,611,064 $ 25,916,221 $ 10,763,595 $ 4,128,990 $ 23,568,431 $ 3,659,098 $ 4,992,506	Appropriation of prior year's earnings (Note)	Legal reserve appropriated - - 1,600,609 - ( 1,600,609) - -	Cash dividends of ordinary shares - - - - ( 10,888,051) - - (	Stock dividends of ordinary shares 5,157,498 - - - ( 5,157,498) - -	Net income for the period - - - - 17,355,998 - -	Other comprehensive income for the period - - - - ( 17,986)( 2,601,161 ) 286,327 (	Balance at December 31, 2016 $ 119,768,562 $ 25,916,221 $ 12,364,204 $ 4,128,990 $ 23,260,285 $ 1,057,937 $ 5,278,833	For the year ended December 31, 2017	Balance at January 1, 2017 $ 119,768,562 $ 25,916,221 $ 12,364,204 $ 4,128,990 $ 23,260,285 $ 1,057,937 $ 5,278,833	Appropriation of prior year's earnings (Note)	Legal reserve appropriated - - 1,735,600 - ( 1,735,600) - -	Special reserve - - - ( 7,824 ) 7,824 - -	Cash dividends of ordinary shares - - - - ( 14,372,227) - - (	Stock dividends of ordinary shares 2,395,371 - - - ( 2,395,371) - -	Net income for the period - - - - 15,483,032 - -	Other comprehensive income for the period - - - - ( 449,330)( 3,099,341 ) 2,445,477 (	Balance at December 31, 2017 $ 122,163,933 $ 25,916,221 $ 14,099,804 $ 4,121,166 $ 19,798,613 ($ 2,041,404 ) $ 7,724,310	Note Directors' remuneration and employees' bonus have been deducted from the consolidated statement of comprehensive income, please refer to Note 6(38).

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,
			2017		2016
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations before tax		$	18,148,059	$	20,197,504
Adjustments to reconcile income before tax to net cash (used in)
provided by operating activities
Income and expenses having no effect on cash flows
Depreciation of investment property			23,290		23,842
Depreciation of property and equipment			829,019		847,751
Amortisation expense			227,414		243,065
Provision for bad debt expense and guarantee liability			9,628,182		4,605,372
Interest income	(		43,954,511 )	(	41,612,195 )
Interest expense			13,961,470		12,811,044
Dividend income	(		973,039 )	(	999,142 )
Net change in insurance liability			4,586,966		897,705
Net change in provisions for foreign exchange price fluctuation	(		14,214 )	(	3,559 )
Share of (gain) loss associates accounted for using equity method	(		137,892 )		75,073
Gain on disposal of investment property	(		24,108 )	(	79,851 )
Loss on disposal of property and equipment			15,907		4,836
Impairment loss on assets			45,879		38,826
Changes in operating assets and liabilities
Changes in operating assets
Increase in due from the Central Bank	(		469,798 )	(	1,581,496 )
(Increase) decrease in financial assets at fair value through profit
or loss	(		17,636,239 )		5,199,446
Increase in available-for-sale financial assets	(		9,438,912 )	(	49,608,627 )
(Increase) decrease in receivables	(		11,083,191 )		12,557,519
Increase in loans discounted	(		45,349,548 )	(	68,083,171 )
(Increase) decrease in reinsurance assets	(		8,585 )		2,216
(Increase) decrease in held-to-maturity financial assets	(		42,021,519 )		12,233,556
(Increase) decrease in other financial assets	(		1,587,047 )		4,417,151
(Increase) decrease in other assets	(		54,038 )		761,437
Changes in operating liabilities
Increase (decrease) in deposits from the Central Bank and banks			27,637,133	(	2,920,870 )
Increase (decrease) in financial liabilities at fair value through
profit or loss			10,592,962	(	6,654,452 )
Increase in payables			11,317,553		2,426,333
Increase in deposits and remittances			43,389,932		26,274,431
Decrease in employee benefit liability	(		540,878 )	(	388,490 )
Decrease in provisions	(		81 )	(	3 )
(Decrease) increase in other financial liabilities	(		7,490,690 )		18,302,519
Increase (decrease) in other liabilities			1,812,797	(	1,826,469)
Cash flows used in operations activities	(		38,567,727 )	(	51,838,699 )
Interest received			43,582,661		41,981,336
Interest paid	(		13,526,210 )	(	12,818,474 )
Dividend received			973,039		999,142
Income tax paid	(		2,515,764 )	(	2,135,777 )
Net cash flows used in operating activities	(		10,054,001 )	(	23,812,472 )

(Continued)

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,
			2017		2016
CASH FLOWS FROM INVESTING ACTIVITIES
Disposal of investments using the equity method		$	13,388	$	-
Increase in investments using the equity method			-	(	20,000 )
Acquisition of investment property	(		35,597 )	(	57,132 )
Proceeds from disposal of investment property			39,196		469,716
Acquisition of property and equipment	(		801,404 )	(	559,903 )
Proceeds from disposal of property and equipment			298		5,693
Acquisition of intangible assets	(		248,176 )	(	251,766 )
(Increase) decrease in other assets	(		809,523 )		117,238
Net cash flows used in investing activities	(		1,841,818 )	(	296,154 )
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in due to the Central Bank and banks	(		13,495 )		32,771
Increase in bills and bonds sold under repurchase agreements			3,427,990		3,676,191
Increase in commercial papers payable			10,372,772		611,829
Decrease in financial bonds payable	(		13,000,000 )		-
(Decrease) increase in other borrowings	(		1,405,205 )		195,978
Distribution of cash dividends	(		14,372,227 )	(	10,888,051 )
Net cash flows used in financing activities	(		14,990,165 )	(	6,371,282 )
Effect of exchange rate changes on cash and cash equivalents	(		3,267,337 )	(	2,883,123 )
Net decrease in cash and cash equivalents	(		30,153,321 )	(	33,363,031 )
Cash and cash equivalents at beginning of period			222,668,896		256,031,927
Cash and cash equivalents at end of period		$	192,515,575	$	222,668,896
The components of cash and cash equivalents
Cash and cash equivalents as per consolidated balance sheet		$	65,957,750	$	62,114,275
Due from the Central Bank and call loans to banks qualified as cash and
cash equivalents as defined by IAS No. 7			125,864,897		160,554,621
Securities purchased under resell agreements qualified as cash and cash
equivalent as defined by IAS No. 7			692,928		-
Cash and cash equivalents at end of period		$	192,515,575	$	222,668,896

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

FIRST FINANCIAL HOLDING CO., LTD. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

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

1. Organisation 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.
(3) On July 27, 2017, FPCIA completed liquidation and income tax filing. On August 15, 2017, its residual value were allocated.
The date of authorisation for issuance of the consolidated financial statements and procedures for authorisation

These consolidated financial statements were authorised for issuance by the Board of Directors on March, 22, 2018.

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”)

New standards, interpretations and amendments endorsed by FSC effective from 2017 are as follows:

New Standards,Interpretations and Amendments 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’ Disclosure initiative (amendments to IAS 1)	Effective Date byIASB
	January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016

New Standards,Interpretations and Amendments 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, 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

New Standards,Interpretations and Amendments
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, 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 standards and interpretations have no significant impact on the Group’s financial condition and financial performance based on the Group’s assessment.

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

New standards, interpretations and amendments endorsed by FSC effective from 2018 are as follows:

follows:
New Standards,Interpretations and Amendments Classification and measurement of share-based payment transactions (amendments to IFRS 2) Applying IFRS 9 ‘Financial instruments’ with IFRS 4‘Insurance contracts’ (amendments to IFRS 4) IFRS 9, ‘Financial instruments' IFRS 15, ‘Revenue from contracts with customers’ Clarifications to IFRS 15, ‘Revenue from contracts with customers' (amendments to IFRS 15) Disclosure initiative (amendments to IAS 7) Recognition of deferred tax assets for unrealised losses (amendments to IAS 12) Transfers of investment property (amendments to IAS 40) IFRIC 22, ‘Foreign currency transactions and advance consideration’ Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 1, ‘First-time adoption of international financial reporting standards’ Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 12, ‘Disclosure of interests in other entities’ Annual improvements to IFRSs 2014-2016 cycle- Amendments to IAS 28, ‘Investments in associates and joint ventures’	Effective Date byIASB
	January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2017 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2018

follows:

New Standards,Interpretations and Amendments
Classification and measurement of share-based payment
transactions (amendments to IFRS 2)
Applying IFRS 9 ‘Financial instruments’ with IFRS 4‘Insurance
contracts’ (amendments to IFRS 4)
IFRS 9, ‘Financial instruments'
IFRS 15, ‘Revenue from contracts with customers’
Clarifications to IFRS 15, ‘Revenue from contracts with customers'
(amendments to IFRS 15)
Disclosure initiative (amendments to IAS 7)
Recognition of deferred tax assets for unrealised losses
(amendments to IAS 12)
Transfers of investment property (amendments to IAS 40)
IFRIC 22, ‘Foreign currency transactions and advance
consideration’
Annual improvements to IFRSs 2014-2016 cycle- Amendments to
IFRS 1, ‘First-time adoption of international financial reporting
standards’
Annual improvements to IFRSs 2014-2016 cycle- Amendments to
IFRS 12, ‘Disclosure of interests in other entities’
Annual improvements to IFRSs 2014-2016 cycle- Amendments to
IAS 28, ‘Investments in associates and joint ventures’

Effective Date byIASB

January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2018

Except for the followings, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment. The quantitative impact will be disclosed when the assessment is complete.

A.Amendments to IFRS 4, ‘Applying IFRS 9 Financial instruments with IFRS 4 Insurance contracts’

To address the concerns about the different effective dates of IFRS 9, ‘Financial instruments’, and the new standard IFRS 17, ‘Insurance contract’, which may result in different bases for measuring assets and liabilities, this amendment allows insurers who meet specific requirements as set out in IFRS 4, ‘Insurance contract’ to adopt temporary exemption from IFRS 9, ‘Financial instruments’, or to use overlay approach under IFRS 9, ‘Financial instruments’ alternatively.

B.IFRS 9, ‘Financial instruments’
(A)Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset measured at amortised cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading.
(B)The impairment losses of loans, receivables and debt instruments are assessed using an “expected credit loss” approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognise 12-month expected credit losses or lifetime expected credit losses (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Group shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component.
(C)The amended general hedge accounting requirements align hedge accounting more closely with an entity’s risk management strategy. Risk components of non-financial items and a group of items can be designated as hedged items. The standard relaxes the requirements for hedge effectiveness, removing the 80-125% bright line, and introduces the concept of ‘rebalancing’; while its risk management objective remains unchanged, an entity shall rebalance the hedged item or the hedging instrument for the purpose of maintaining the hedge ratio.

When adopting the new standards endorsed by the FSC effective from 2018, the adoption of IFRS 15 has no significant impact to the Group. The Group applied the new rules under IFRS 9 retrospectively from January 1, 2018, with the practical expedients permitted under the statement. The effects of applying the new standards as of January 1, 2018 are summarised below:

Consolidated balance sheet

Consolidated balance sheet
Affected items	Amount under IAS39	Effect of adoption of new standards	Amount under IFRS 9	Remark
January1,2018	73,982,261 1,580,357,495 3,160,260 288,993,840 2,634,058,605 $ 17,960,937 $ 6,376,202 2,417,670,499 2,442,007,638 122,163,933 25,916,221 38,019,583 5,682,906 268,324 192,050,967 104,392,136 $ - - 159,289,711 2,634,058,605 $ 386,605,113 37,277,789	14,874 2,141,000 264 - 7,482,636 $ 991,000 $ 5,998) ( - 985,002 - - 74,715) ( 6,614,059 41,710) ( 6,497,634 1,425,408) ($ 212,491,733 353,857,008 159,289,711) ( 7,482,636 $ 386,605,113) ( 13,702,011) (	73,997,135 1,582,498,495 3,160,524 288,993,840 2,641,541,241 $ 18,951,937 $ 6,370,204 2,417,670,499 2,442,992,640 122,163,933 25,916,221 37,944,868 12,296,965 226,614 198,548,601 102,966,728 $ 212,491,733 353,857,008 - 2,641,541,241 $ - 23,575,778	B, C, D G F G C B, C, D, E, F A, B, C, D, E C, F B, C, D A, D C, F A, B, C, D C, D A, B, C, G
Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Financial assets at amortised cost Available-for-sale financial assets Receivables, net Loans discounted, net Held-to-maturity financial assets Financial assets at amortised cost Deferred tax assets Other assets Total affected assets Provisions Deferred tax liabilities Other liabilities Total affected liabilities Capital Capital surplus Retained earnings Other equity interest Non-controlling interest Total affected equity Total affected liabilities and equity

A. In accordance with IFRS 9, the Group expects to reclassify “available-for-sale financial assets” and “other financial assets, net-financial assets at cost” in the amounts of $14,566,408 and $6,239,099, respectively, and make an irrevocable election at initial recognition on equity instruments not held for dealing or trading purpose, by increasing “financial assets at fair value” through other comprehensive income and other equity interest in the amounts of $26,620,000 and $5,814,493, respectively.
B. In accordance with IFRS 9, the Group expects to reclassify “available-for-sale financial assets” and “other financial assets, net-investments in debt instruments without active

market” of $2,507,079 and $448,400, respectively, by increasing “financial assets at fair value through profit or loss” and “other equity interest” in the amounts of $2,960,024 and $328, respectively, and by decreasing “receivables” and “retained earnings” in the amounts of $4,545 and $328, respectively.

C. In accordance with IFRS 9, the Group expects to reclassify “financial assets at fair value through profit or loss”, “available-for-sale financial assets”, “held-to-maturity financial assets” and “other financial assets, net-investments in debt instruments without active market” of $1,037,500, $2,277,998, $344,759,812 and $5,864,512, respectively, by increasing investments in debt instruments at “amortised cost”, “receivables” and “retained earnings” in the amount of $353,882,329, $3,943 and $34,923, respectively, and by decreasing “deferred tax liabilities”, “other equity interest” and “non-controlling interests” in the amounts of $5,998, $42,062 and $40,413, respectively.
D. In accordance with IFRS 9, the Group expects to reclassify “financial assets at fair value through profit or loss”, “available-for-sale financial assets” and “held-to-maturity financial assets” of $3,347,932, $139,938,226, and $41,845,301, respectively, by increasing “financial assets at fair value through other comprehensive income”, “receivables and other equity interest” in the amount of $185,871,733, $15,476 and $783,805, respectively, and by decreasing “retained earnings” in the amounts of $28,055.
E. To be in line with the regulations under IFRS 9 on provision for impairment, the Group expects to provide the “impairment loss on financial assets at fair value” through other comprehensive income. “Other equity interest” will be increased by $57,495 and “retained earnings” will be decreased by $57,495.
F. To be in line with the regulations under IFRS 9 on provision for impairment, financial assets at amortised cost will reduced by $25,321, “deferred tax assets” will be increased by $264, “retained earnings” will be decreased by $23,760 and “non-controlling interests” will be decreased by $1,297.
G. To be in line with the regulations under IFRS 9 on provision for impairment, “allowance for uncollectible accounts-discounts and loans, net” will be reduced by $2,141,000, “allowance for uncollectible accounts-other financial assets, net” will be increased by $1,150,000 and “provision” will be increased by $991,000.
H. To conclude, under IFRS 9, the Group expects to increase assets, liabilities and equity by $7,482,636, $985,002 and $6,497,634, respectively.

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

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs endorsed by the FSC are as follows:

endorsed by the FSC are as follows:
New Standards,Interpretations and Amendments Prepayment features with negative compensation (amendments to IFRS 9) Sale or contribution of assets between an investor and its associate or joint venture (amendments to IFRS 10 and IAS 28) IFRS 16, ‘Leases’ IFRS 17, ‘Insurance contracts’ Plan amendment, curtailment or settlement (amendments to IAS 19) Long-term interests in associates and joint ventures (amendments to	Effective Date byIASB
	January 1, 2019 To be determined by International Accounting Standards Board January 1, 2019 January 1, 2021 January 1, 2019 January 1, 2019

endorsed by the FSC are as follows:

New Standards,Interpretations and Amendments
Prepayment features with negative compensation (amendments to
IFRS 9)
Sale or contribution of assets between an investor and its associate
or joint venture (amendments to IFRS 10 and IAS 28)
IFRS 16, ‘Leases’
IFRS 17, ‘Insurance contracts’
Plan amendment, curtailment or settlement (amendments to IAS 19)
Long-term interests in associates and joint ventures (amendments to

Effective Date byIASB

January 1, 2019
To be determined by
International Accounting
Standards Board
January 1, 2019
January 1, 2021
January 1, 2019
January 1, 2019

New Standards, Interpretations and Amendments Effective Date by IASB Prepayment features with negative compensation (amendments to January 1, 2019 IFRS 9) IAS 28) IFRIC 23, ‘Uncertainty over income tax treatments’ January 1, 2019 Annual improvements to IFRSs 2015-2017 cycle January 1, 2019

Except for the followings, the above standards and interpretations have no significant impact on the Group’s financial condition and financial performance based on the Group’s assessment. The quantitative impact will be disclosed when the assessment is complete.

A.IFRS 16, ‘Leases’

IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognise a “right-of-use asset” and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

B.IFRS 17, ‘Insurance contracts’

IFRS 17 ‘Insurance Contracts’ replaces IFRS 4 and establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts issued. The standard applies to insurance contracts (including reinsurance contracts) issued, to reinsurance contracts held and to investment contracts with discretionary participation features issued, provided the entity also issues insurance contracts. Embedded derivatives, distinct investment components and distinct performance obligations shall be separated from the insurance contracts. An entity shall at initial recognition to disaggregate a portfolio into three groups of contracts: onerous, no significant risk of becoming onerous, and remaining contracts. IFRS 17 requires a current measurement model, where estimates are remeasured in each reporting period. The measurement is based on the building blocks of discounted, probability-weighted cash flows, a risk adjustment and a contractual service margin (‘CSM’) representing the unearned profit of the contract. An entity may apply a simplified measurement approach (the premium allocation approach) to some insurance contracts. An entity recognises the profit from a group of insurance contracts over the period the entity provides insurance coverage, and as the entity is released from risk. If a group of contracts is or becomes loss-making, an entity recognises the loss immediately. Entities are required to present separately insurance revenue, insurance service expenses and insurance finance income or expenses and to disclose information about amounts, judgements and risks arising from insurance contracts.

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 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”, and SIC Interpretations 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, defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation, 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 SIC Interpretations as endorsed by the FSC requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the 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 Group prepares the consolidated financial statements by aggregating the Group’s assets, liabilities, revenues and expenses, which have been eliminated versus owners’ equity during the consolidation. In addition, the consolidated financial statements of the Group are made in the same reporting period. (Items 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 Group has controlling power over. The 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.
(C) Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the 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 FS FS FTSL		Business activities Note (1) Note (2) Note (3) Note (4) Note (5) Note (6) Note (7) Note (8) Banking services Leasing(Note (9) Securities investment consulting service Securities investment holding Securities brokerage, investment consultancy	Percentage of holding shares(%) December 31, 2017 December 31, 2016 Note 100 100 Note (1) 100 100 Note (2) 100 100 Note (3) 51 51 Note (4) 100 100 Note (5) 100 100 Note (6) 100 100 Note (7) - 100 Note (8) 100 100 - 100 100 Note (9) 100 100 - 100 100 - 100 100 -
	Subsidiary
	FCB
	FS
	FSIT
	FALI
	FFAM
	FVC
	FFMC
	FPCIA
	First Commercial Bank (USA) FCBL First Capital Management Co., Ltd. (“FCMI”) First Taisec Securities (Asia) Limited (“FTSL”) First Worldsec Securities Limited (“FWSL”)

Note (1) FCB was established in 1899 and had been a listed company since February 9, 1962. It was privatised on January 22, 1998. On January 2, 2003, FCB became the subsidiary of First Financial Holding Co., Ltd. through a share swap and was delisted from the TSE, First Financial Holding Co., Ltd. become a public company in accordance with the related regulations set forth by the SFB. 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 authorised 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.
Note (2) FS was established on August 15, 1988 and became a subsidiary of FFHC on July 31, 2003. FS is authorised 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 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. On October 12, 2017, the FFHC’s Board of Directors approved the acquisiton of FALI’s shares from Aviva International Holdings Limited to FFHC. The Company’s ownership in FALI will reach 100% after the transfer of 110,250 thousand shares is completed.

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.
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. The Board of Directors of FPCIA resolved the company's dissolution on February 25, 2016, and resolved the date of dissolution was July 1, 2016 on June 24, 2016. It was approved by the Fu-Chan-Ye-Shang No. 10590346010 on August 8, 2016. On July 27, 2017, the current final report on income earned from liquidation was completed, and the residual assets has been allocated on August 15, 2017.
Note (9) FCBL was approved to establish in May 1998. The main business includes chattel secured and repo trade, lease business and receivable factoring.
C. Unconsolidated entities�

Investor FFAM FCBL Note 1: Note 2:	Investor FFAM FCBL Note 1: Note 2:	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 2) Note 3 100 Note 4 100	Note
	Note 1:



	Note 2:

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

The consolidated financial statements of the entities in the Group are presented by the currency of the primary economic environment in which the entities operate (namely the “functional currency”). The consolidated financial statements are presented in New Taiwan Dollars, which is the Group’s functional presentation 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 recognised or in previous consolidated 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 recognised in other comprehensive income.

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

C. Translation of foreign operations

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 Group;
(B) The profit and 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 and losses arising from translation are recognised in other comprehensive income.

The exchange difference is recognised in “exchange difference on translation of foreign consolidated 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 recognised 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.

(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 recognised 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 recognised at the date of sale or purchase.

(7) Financial assets and financial liabilities

The financial assets and liabilities of the Group including derivatives are recognised 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 Group are in compliance with IFRSs as endorsed by FSC, which are classified into the following 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 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 Group. The former originated directly from money, product or service that the 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 recognised 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 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 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 is 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.

The changes in fair value of financial assets held for trading and financial assets at fair value through profit or loss, designated as upon initial recognition are recognised under financial assets and liabilities at fair value through profit or loss in the consolidated statement 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, nonderivative financial assets such as loans and receivables. Equity or debt investments are initially recognised 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 recognised in other comprehensive income. When the financial asset is no longer recognised, the cumulative unrealised gain or loss that was previously recognised in other comprehensive income is recognised in profit or loss.

Impairment loss is recognised when there is objective evidence of impairment of availablefor-sale financial assets. If the financial asset has not been derecognised, cumulative loss is reclassified from ‘other comprehensive income’ to ‘profit or losses’. Impairment loss of an investment in an equity instrument recognised in profit or loss shall not be reversed through profit or loss and any subsequent change in equity is recognised 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 recognised, then such impairment loss is reversed through profit or loss.

Equity instruments with no quoted price in an active market are initially recognised 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 Group have positive intention and ability to hold to maturity, excluding loans and receivables, assets designated as availablefor-sale financial assets and financial assets designated as at fair value through profit and loss upon initial recognition which shall not be treated as held-to-maturity financial assets.

Held-to-maturity financial assets are initially recognised at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest method.

If there is any objective evidence of impairment, the impairment is recognised 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 recognised at fair value plus acquisition or issuance cost. Gains or losses are recognised when the investments are derecognised.

Bond investments with no active market shall be subsequently measured at amortised 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 arises from the sum of Investment-linked products revenue and expense, which is in line with the insurance contracts. They are presented as Investment-Linked Product Income and Investment-linked Product Expense.

c. Claims receivable purchased

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

The investments in equity instruments that do not have a quoted market price in an active market are initially recognised at fair value plus transaction costs incurred while acquisition or issuance and measured at cost on balance sheet date if a significant variance range exists in the reasonably estimated fair values and the odds of different estimated values cannot be assessed reasonably. When there is an objective evidence of impairment, the impairment loss on the financial assets measured at cost is recognised and is non-reversible subsequently.

(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 collateralised 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 “collateralised 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 collateralised 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 “collateralised proceeds payable from securities lending” (“Payables”) and “refinancing deposits receivable” (“Receivables-net”), respectively.

B. Financial liabilities

Financial liabilities held by the 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 and loss

These include 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 consolidated statement of comprehensive income.

(B) Financial liabilities carried at amortised cost

Financial liabilities carried at amortised 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 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 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 Group has not retained control of the financial asset.

(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 recognised amounts; and (2) there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

(9) Impairment evaluation, provision, and reversal of loans discounted and receivables

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

The impairment assessment of discounts, loans and receivables are processed through individual and group assessments. Individual assessment is based on the objective evidence of significant impairment or if the categorised amounts associated with significant regulated assets meet the Group’s materiality standard. If there is no objective evidence of impairment or if the categorised amounts meets the Group’s materiality standard of individually assessment, these assets into financial assets are grouped which have similar nature of credit risk, and is assessed impairment by group.

The criteria that the Group uses to determine whether there is objective evidence of an impairment 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 reorganised 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 Group.

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

With the aforementioned assessment process of discounts, loans and accounts receivable, and the provision of allowance for uncollectible accounts, the subsidiary company of the bank was deemed compliant with the "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans" issued by the Financial Supervisory Commission, and the related regulation of Jin-Guan-Yin-Fa-Zi No. 10410001840 on April 23, 2015, on strengthening the management of domestic banks risk exposure in Mainland China and the risk bearing capacity.

(10) Derivative instruments

Derivative instruments are initially recognised 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 recognised 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 recognised unless the overall hybrid contract is designated as assets or liabilities at fair value through profit and loss. The embedded derivatives are the financial assets or liabilities at fair value through profit and loss.

(11) Investments accounted for under the equity method

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

A. Associates are all entities over which the 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 under the equity method and are initially recognised at cost. The Group’s investments in associates include goodwill identified on acquisition, net of any accumulated

impairment loss arising through subsequent assessments.

B. The 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 Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the 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 Group and its associates are eliminated to the extent of the 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 Group.

(12) Property and equipment

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

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

Major renewals and improvements incurred to increase the future economic benefits of the assets are capitalised 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 and structures (including ancillary equipment)	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 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 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 proceeds on disposal, and be recognised in the “Other non-interest income, net” in the consolidated statement of comprehensive income.

(13) Investment property

The properties held by the 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 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 Group and another part generates rental income or capital increase. If the property held by the 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 Group and the costs can be reliably measured, the investment property shall be recognised 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 be capitalised. All maintenance cost are recognised as incurred in the consolidated statement of comprehensive income.

Investment property is subsequently measured by cost model. Depreciated cost is used to calculate amortisation 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 consolidated financial statements at the balance sheet date, of which the valuation should be carried out by the appraisal segment of the 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 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 Group’s subsidiaries includes operating leases and finance leases.

A. Operating lease

When the 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 recognised respectively as “other non-interest income, net” and “other business and administration expense”.

B. Finance lease

When the Group is the lessor, the asset is derecognised when the finance lease contract is signed and the present value of lease payment is recognised as lease payable. The difference between

the total lease payable and present value is recognised as unrealised 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 recognised as current gain and loss.

When the Group is the lessee, the lower of fair value of lease assets or the lowest present value of the lease payment is capitalised. Rental payment is amortised through financial leasing liabilities and recognised 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 recognised as current gain and loss. Financing lease liabilities are recognised 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 Group consist of computer software expenditures, which are recognised by cost and amortised over its economic useful life. The maximum estimated useful life is three years.

Subsequent measurements are based on the cost model.

(17) Impairment of non-financial assets

When there is any evidence indicating a possible impairment, the 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 recognised. Recoverable amount refers to the higher of an asset’s 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 recognised 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 amortised cost that would have been determined had no impairment loss been recognised in prior periods.

(18) Provisions, contingent liabilities and contingent assets

A. The Group recognises 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 are recognised 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 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 Group did not recognise 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 Group. The Group did not recognise 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 insurance contracts of FALI do have a participation discretion feature and guarantee element, FALI does not separately recognise but categorise 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 summarised 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-policyclaim-report basis for each type of insurance. Additionally, 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. For life insurance and health insurance, reserves are provisioned according to (2013)FALI-Zong-Jing-Qi-Zi Letter No. 00262 as approved by the FSC, submitted by FALI; for injury insurance, reserves are provisioned according to (2011)-FALI-Zong-Jing-Qi-Zi Letter No. 00693 as approved by the FSC, submitted by FALI, wherein required claim reserve provisions are calculated using the loss development triangle based on prior claim experiences and expenses.

c. As of 2015, in accordance with (2014)-FALI-Zong-Jing-Qi-Zi Letter No. 00787 as approved by the FSC, submitted by FALI, FALI has adjusted its calculation method of “Claims Incurred But Not Reported” reserves for injury insurance, life insurance, and health insurance.

(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 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 recognise 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 recognised 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,” for FALI’s held foreign investment assets (not including assets that are noninvestment-linked life insurance products settled under foreign currencies), starting from March 1, 2012, reserves for foreign exchange fluctuations are provisioned under liabilities. Limits, provisions, charge-offs, and other regulated items with regard to the reserve for foreign exchange fluctuations are conducted in compliance with “Guidelines Governing Reserve for Foreign Exchange Fluctuation of Life Insurance Enterprises”.

(20) Financial guarantee contract

A financial guarantee contract is a contract that requires The 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.

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The Group initially recognises financial guarantee contracts at fair value on the date of issuance granted. The 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 recognised in deferred accounts and amortised through straight-line method during the contract term.

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

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

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 recognised in “bad debt expenses and guaranty policy reserve”.

(21) Employee benefits

A. Short-term employee benefits

The Group recognises 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 recognised under “employee benefit expense”. According to Article 28 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 actualised 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 Group has made commitments in the formal detailed employment termination plan which is irrevocable, and recognises liabilities when providing termination benefit to employees who voluntarily resign. Termination benefit paid 12 months after the financial reporting date should be discounted.

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D. Post-employment benefit

The 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 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 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 recognised as pension cost in the period as incurred. Prepaid pension assets can only be recognised when there is a cash refund or deductible future pension payable.

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 recognised 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 unrecognised 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 durations that are approximate to the durations 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 categorise 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.

Pension cost for the interim period is calculated on a year-to-date basis by using the pension cost rate derived from the actuarial valuation at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant curtailments, settlements, or other significant one-off events. And, the related information is disclosed accordingly.

E. Employees’ and directors’ remuneration

Employees’ and directors’ 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.

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- (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 nonmarket 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 Group are recognised as incurred. Expense consists of employee benefit expense, depreciation and amortisation expense and other business and administration expenses. Dividends revenue is recognised in the consolidated statement of comprehensive income when the right to receive payment is established. However, interest income is recognised 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 recognised as interest income but recorded in the memo accounts.

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 recognised as “interest income” and “interest expense” in the consolidated statement of comprehensive income.
B. Handling fees and expenses are recognised when cash is received, or the earning process is substantially completed; service fee earned from performing significant items shall be recognised 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 amortised 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 unrealised 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 recognised when completing insurance procedures and when receiving payments. Costs incurred in acquiring a policy, such as commission expenses, are recognised as expenses in the period the insurance contracts become effective.

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

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E. Income and expenses of FS is recognised 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 recognised 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 recognised on an accrual basis during the transaction periods.
(C) Underwriting commission income or expenses: Subscription handling fees are recognised when the amounts are received and underwriting commission income and related commission expenses are recognised at the completion of such underwriting contracts.
(D) Service fee income from providing registration and transfer agency service for securities are recognised monthly according to the contracts.
(E) Futures contract gains or losses: The margin of futures trading is recognised at cost and measured through mark-to-market accounting. The gains or losses from mark-to-market, reversed futures trading or settled contracts are recognised as gains or losses in the current period; dealer handling fee expenditures is recognised on the transaction date of futures trading. The dealing handling fee expense is recognised based on the transaction amount on a monthly basis.
(F) Dividend income: Dividend income is recognised as “dividend income” under the consolidated statement of comprehensive income when the shareholder’s right to receive payment is established.
(G) Operating expenses: Operating expenses are expenses arising from operations. They are primarily classified as either employee benefits expense, depreciation and amortisation expenses or other general and administration expenses.

(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 recognised based on the reinsurance contracts signed with regular transactions.

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 recognised 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” and recognised allowance

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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.

FALI should identify whether to it is to endure insurance risks or other risk components for its engaged insurance contracts and determine whether components of such contracts can be separated and individually calculated. In addition, FALI should determine whether insurance risks of engaged insurance contracts have been transferred, whether the transfer of the insurance risks has commercial substance, and whether the transferred insurance risks are material. Thereon, FALI should conduct transfer testing for significant insurance risks. The conclusion of these determinations will affect the classification of insurance contracts.

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:
(A) the performance of a specified pool of contracts or a specified type of contract;
(B) realised and/or unrealised 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 recognised as profit or loss of the period. An embedded derivative needs be accounted separately if the

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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 recognised as profit or loss of the period.

The identification and separation of insurance contract components and the classifications of insurance contracts will affect FALI’s revenue recognition and liability measurement, as well as the presentation of consolidated financial statements.

(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 Group operates and generates taxable income. Except for transactions or other matters that are directly recognised in other comprehensive income or equity, all the other transactions should be recognised 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 realisation or the liabilities settlement requires, which is based on the effective or existing 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 recognised as deferred income tax. The temporary difference of the 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 recognised as deferred income tax.

Temporary difference related to the investees, branches and affiliated entities are recognised as deferred tax liabilities. However, when the 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 recognised.

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

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

Certain transactions of the Group are recognised in other comprehensive income. The tax effects on these kinds of transactions are also recognised 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 recognised amounts and there is an intention to settle on a net basis or realise 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 realise the asset and settle the liability simultaneously.

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The interim period income tax expense is recognised based on the estimated average annual effective income tax rate expected for the full financial year applied to the pretax income of the interim period, and the relaxed information is disclosed accordingly.

(27) Share capital and dividends

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds. Dividends are recorded in the Groups’ consolidated financial statements in the period in which they are resolved by the Groups’ shareholders. Cash dividends are recorded as liabilities, stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance. 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 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 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 consolidated 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 Group will continually monitor the estimates and assumptions.

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

(1) Evaluation on financial instruments (including derivatives)

The 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 Group are assessed and tested on a regular basis to ensure the output can reflect actual information and the market price. Note 12(1)3 provides the main assumptions used in determining the financial instruments at fair value. The management recognises that the valuation models and assumptions chosen can be appropriately used to determine the fair value of financial instruments.

(2) Impairment losses of loans discounted and receivables

Other than for the compliance with the regulation of the Competent Authority, the Group prepares models and evaluates cases based on the nature of customers' risk, and whether it is secured or not, and any other subjective and objective factors, for the impairment assessment method, and then, to

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monthly assess the cash flow and calculate the impairment amount using the effective discount rate. Recognition for impairment loss is determined by 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, impairment recovery rate and effective rate used in the portfolio assessment is estimated through different product types and historical data. The 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 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 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) 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.

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 FALI’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.

(5) Financial assets—impairment of equity investments

The Group follows the guidance of IAS 39 to determine whether a financial asset—equity investment is impaired. This determination requires significant judgement. In making this judgement, the Group evaluates, among other factors, the duration and extent to which the fair value of an equity investment is less than its cost and the financial health of and short-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

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6. Summary of significant accounts

(1) Cash and cash equivalents

(1)	Cash and cash equivalents
	Cash on hand Checks for clearance Short-term bills Due from other banks Total	December31,2017 $ 13,042,916 22,275,375 344,721 30,294,738 $ 65,957,750	December31,2016 $ 12,717,154 20,562,987 189,767 28,644,367 $ 62,114,275
(2)	Due from the Central Bank and call loans to banks
	December 31,2017 December 31,2016 Reserve for deposits-account A $ 17,290,422 $ 32,969,544 Reserve for deposits-account B 48,522,065 47,947,248 Inter-Bank clearing fund 5,428,014 6,028,438 Deposits of national treasury account 96,393 100,723 Deposits of overseas branches with foreign Central Banks 6,269,146 5,869,994 Reserve for deposits- foreign currency 463,898 393,084 Call loans and overdrafts to other banks 99,872,492 118,853,325 Subtotal 177,942,430 212,162,356 Less:Allowance for bad debt expense - call loans to banks ( 31,569) ( 12,793) Total $ 177,910,861 $ 212,149,563

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.

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

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	December31,2017 $ 125,864,897 48,522,065 3,555,468 $ 177,942,430	December31,2016
		$ 160,554,621 47,947,248 3,660,487
		$ 212,162,356

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

109

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

Financial assets held for trading
Short-term bills
Stocks
Bonds (government bonds, bank debentures, and
corporate bonds)
Beneficiary securities
Derivative financial instruments
Valuation adjustment for financial assets held for trading
Subtotal
Financial assets designated at fair value through profit or
loss upon initial recognition
Bonds
Convertible preferred share
Valuation adjustments for financial assets designated at
fair value through profit or loss upon initial
Subtotal
Total

December31,2017
December31,2016
$ 48,722,898
$ 23,439,935
2,186,667
1,224,108
14,692,869
22,352,420
152,347
200,445
4,857,702
9,652,198
44,811
(
84,847 )
70,657,294
56,784,259
33,376,941
29,862,383
-
108,241
357,901
1,014
33,734,842
29,971,638
$ 104,392,136
$ 86,755,897

A. Details of gains (losses) on financial assets and liabilities at fair value through profit or loss for the years ended December 31, 2017 and 2016, are as follows:

Net gain (loss) on financial assets and liabilities held for trading Net gain (loss) on financial assets designated at fair value through profit or loss Total	For theyears ended December 31,	For theyears ended December 31,
	2017 $ 5,530,419 19,213 $ 5,549,632	2016
		$ 1,669,514 899,556
		$ 2,569,070

B. The Group’s financial assets measured at fair value through profit or loss upon initial recognition were hybrid contracts that contain one or more embedded derivative instruments, and were designated to eliminate recognition inconsistency, that were designated as fair value through profit or loss in its entirety.

C. As of December 31, 2017 and 2016, the above financial assets for trading purposes undertaken for repurchase agreements were $886,265 and $765,049, respectively.

D. Please refer to Note 8 for details of the above financial assets at fair value through profit or loss pledged as collateral as of December 31, 2017 and 2016.

110

(4) Available-for-sale financial assets

Available-for-sale financial assets
		December31,2017		December31,2016
Stocks - listed		$	8,193,975	$	7,680,144
Stocks - unlisted			1,633,992		1,606,724
Short-term notes and bills			-		1,097,271
Bonds			140,657,442		130,955,125
Beneficiary certificates			59,126		466,044
Other marketable securities			1,483,629		805,500
Valuation adjustment for available-for-sale financial assets			7,824,191		5,282,826
Sub-total			159,852,355		147,893,634
Less: Refundable deposits	(		349,900 ) (		349,900 )
Accumulated impairment	(		212,744 ) (		178,721 )
Total		$	159,289,711	$	147,365,013

A. Please refer to Note 8 for details of the above available-for-sale financial assets pledged as collateral as of December 31, 2017 and 2016.
B. As of December 31, 2017 and 2016, the carrying value of the Group’s bonds investment classified as available-for-sale financial assets that were undertaken as trading purposes for repurchase agreements were $12,455,203 and $7,452,652, respectively.
(5) Securities purchased under resell agreements

Securities purchased under resell agreements
Government bonds Total	December31,2017 $ 692,928 $ 692,928	December31,2016
		$ -
		$ -

As of December 31, 2017 and 2016, the fair value of the government bonds which are acquired as security for bills with a reverse repo and bond investment amounted to $691,564 and $0, respectively.

(6) Receivables, net

Receivables, net
		December31,2017		December31,2016
Spot exchange receivable		$	35,499,101	$	26,380,333
Factoring receivable			5,228,477		5,727,798
Interest receivable			4,826,466		4,454,616
Acceptances receivable			5,895,523		6,286,176
Margin loans receivable			6,809,147		5,565,261
Credit card accounts receivable			6,703,742		6,518,479
Other receivables			9,765,642		8,655,362
Sub-total			74,728,098		63,588,025
Less: Allowance for doubtful accounts	(		745,837 ) (		740,016 )
Net amount		$	73,982,261	$	62,848,009

==> picture [488 x 112] intentionally omitted <==

111

(7) Loans discounted, net

		December31,2017	December31,2017	December31,2016	December31,2016
Bills discounted		$	2,984,819	$	3,369,797
Overdrafts			685,978		587,142
Short-term loans			484,130,361		453,420,880
Medium-term loans			458,391,121		452,490,993
Long-term loans			647,172,996		647,928,861
Import-export negotiations			965,690		1,577,834
Loans transferred to non-accrual loans			7,852,034		3,667,274
Insurance policy loans			277,649		219,391
Sub-total			1,602,460,648		1,563,262,172
Less: Allowance for doubtful accounts	(		22,103,153 ) (		19,167,180 )
Net amount		$	1,580,357,495	$	1,544,094,992

A. As of December 31, 2017 and 2016, please see Note 12(2) D (E) for the explanation on impaired financial assets of the Group for the loans discounted.
B. The 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, 2017 and 2016 were as follows:

			For the year ended	For the year ended	For the year ended
		December 31,2017		December 31,2016
Loans discounted (including other related receivable
derived from loans)
Beginning balance		$	19,313,194	$	21,107,132
Provision			9,203,723		4,275,569
Write-off	(		4,222,166 ) (		5,988,840 )
Foreign exchange and other movements	(		116,678) (		80,667 )
Ending balance		$	24,178,073	$	19,313,194
Receivables
Beginning balance		$	803,446	$	1,007,823
Provision			323,641		329,803
Write-off	(		277,124 ) (		218,751 )
Foreign exchange and other movements	(		20,484 ) (		315,429)
Ending balance		$	829,479	$	803,446

As of December 31, 2017 and 2016, the collection of bad debts recovery was $2,856,465 and $2,361,511 respectively, and was recognised as a reverse of bad debt expenses.

(8) Reinsurance contract assets – net

Claims recoverable from reinsurers Reinsurance reserve Assets Ceded unearned premium reserve Ceded claims reserve Total	December31,2017 $ 16,822 1,793 1,634 $ 20,249	December31,2016 $ 8,236 1,388 1,367 $ 10,991

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

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(9) Held-to-maturity financial assets

	December31,2017 $ 342,035,000 43,786,073 784,040 $ 386,605,113	December31,2016 $ 292,270,000 52,233,044 80,550 $ 344,583,594
Certificates of deposits purchased(Note)
Bonds
Short-term bills
Total

A. Please refer to Note 8 for details of the above held-to-maturity financial assets pledged as collateral as of December 31, 2017 and 2016.
B. As of December 31, 2017 and 2016, the carrying amount of the Group’s bonds investment classified as held-to-maturity financial assets that were undertaken as trading purposes for repurchase agreements were $0 and $1,610,805, respectively.
C. For the year ended December 31, 2017 and 2016, the interest income generated from held-tomaturity financial assets amounted to $2,628,266 and $3,056,051, respectively.
(10) Investments accounted for using equity method, net
A. Investments accounted for using equity method:

December 31,2017 Amount Percentage of ownership (%) $ 15,309 30% 15,773 40% 1,798,874 100% 532,631 100% $2,362,587	December	31,2016
Amount $ 15,309 15,773 1,798,874 532,631 $2,362,587	Amount	Percentage of ownership (%)
	$ 15,446 20,000 1,735,524 510,104	30% 40% 100% 100%
	$ 2,281,074

B. Share of the operating results of the Group’s immaterial associates recognised against shareholding was as follows:

(Gain) loss from continuing operations Other comprehensive income (loss) Total comprehensive income (loss)	For theyears ended December 31, 2017 2016 $ 137,892 ($ 75,073 ) 144,611 ( 106,102 ) $ 282,503 ($ 181,175 )

C. The affiliated enterprises invested by the 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.

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113

(11) Other financial assets – net

		December31,2017	December31,2017	December31,2016	December31,2016
Debt instruments with no active market
Bond investments		$	3,247,659	$	2,012,987
Investment in time deposits			2,729,400		3,976,640
Bills purchased			2,130		2,884
Claims receivable purchased			145,181		200,649
Financial assets carried at cost			6,239,099		6,239,589
Separate account product assets
Securities			22,031,026		21,809,619
Bank deposits			506,103		1,135,453
Other receivables			52,895		-
Non-accrual loans transferred from other accounts
(excluding loans)			3,733,220		85,130
Customer margin accounts			718,067		743,445
Other			2		-
Subtotal			39,404,782		36,206,396
Less: Allowance for doubtful accounts - overdue
receivable	(		2,029,930 ) (		63,180 )
Less: Allowance for doubtful accounts - claims
receivable purchased	(		97,063 ) (		133,471 )
Total		$	37,277,789	$	36,009,745

A. As the Group’s investments in unlisted stocks lack quoted market price and their fair values cannot be measured reliably, those financial assets are accounted 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. As of December 31, 2017 and 2016, details of the Group’s other financial assets pledged to others as collateral are provided in Note 8.

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114

(12) Investment property– net

Please see below table for the investment property of the Group for the years ended December 31, 2017 and 2016:

	Lands and land improvements Buildings and structures Total Cost At January 1, 2017 $ 8,579,781 $ 1,270,249 $ 9,850,030 Additions 23,543 12,054 35,597 Disposals ( 13,925 )( 4,873 ) ( 18,798 ) At December 31, 2017 8,589,399 1,277,430 9,866,829 Accumulated depreciation At January 1, 2017 - ( 312,284 ) ( 312,284 ) Depreciation - ( 23,290 ) ( 23,290 ) Disposals - 4,140 4,140 At December 31, 2017 - ( 331,434 ) ( 331,434 ) Accumulated impairment At January 1, 2017 ( 9,817 )( 1,855 ) ( 11,672 ) At December 31, 2017 ( 9,817 )( 1,855 ) ( 11,672 ) Investment property– net $ 8,579,582 $ 944,141 $ 9,523,723 Lands and land improvements Buildings and structures Total Cost At January 1, 2016 $ 8,817,320 $ 1,288,072 $ 10,105,392 Additions 41,074 16,058 57,132 Transfers 62,073 19,118 81,191 Disposals ( 340,686 )( 52,999) ( 393,685 ) At December 31, 2016 8,579,781 1,270,249 9,850,030 Accumulated depreciation At January 1, 2016 - ( 284,999 ) ( 284,999 ) Depreciation - ( 23,842 ) ( 23,842 ) Transfers - ( 7,138 ) ( 7,138 ) Disposals - 3,695 3,695 At December 31, 2016 - ( 312,284 ) ( 312,284 ) Accumulated impairment At January 1, 2016 ( 9,817 )( 1,855 ) ( 11,672 ) At December 31, 2016 ( 9,817 )( 1,855 ) ( 11,672 ) Investment property– net $ 8,569,964 $ 956,110 $ 9,526,074	Lands and land improvements Buildings and structures Total Cost At January 1, 2017 $ 8,579,781 $ 1,270,249 $ 9,850,030 Additions 23,543 12,054 35,597 Disposals ( 13,925 )( 4,873 ) ( 18,798 ) At December 31, 2017 8,589,399 1,277,430 9,866,829 Accumulated depreciation At January 1, 2017 - ( 312,284 ) ( 312,284 ) Depreciation - ( 23,290 ) ( 23,290 ) Disposals - 4,140 4,140 At December 31, 2017 - ( 331,434 ) ( 331,434 ) Accumulated impairment At January 1, 2017 ( 9,817 )( 1,855 ) ( 11,672 ) At December 31, 2017 ( 9,817 )( 1,855 ) ( 11,672 ) Investment property– net $ 8,579,582 $ 944,141 $ 9,523,723 Lands and land improvements Buildings and structures Total Cost At January 1, 2016 $ 8,817,320 $ 1,288,072 $ 10,105,392 Additions 41,074 16,058 57,132 Transfers 62,073 19,118 81,191 Disposals ( 340,686 )( 52,999) ( 393,685 ) At December 31, 2016 8,579,781 1,270,249 9,850,030 Accumulated depreciation At January 1, 2016 - ( 284,999 ) ( 284,999 ) Depreciation - ( 23,842 ) ( 23,842 ) Transfers - ( 7,138 ) ( 7,138 ) Disposals - 3,695 3,695 At December 31, 2016 - ( 312,284 ) ( 312,284 ) Accumulated impairment At January 1, 2016 ( 9,817 )( 1,855 ) ( 11,672 ) At December 31, 2016 ( 9,817 )( 1,855 ) ( 11,672 ) Investment property– net $ 8,569,964 $ 956,110 $ 9,526,074	Lands and land improvements Buildings and structures Total Cost At January 1, 2017 $ 8,579,781 $ 1,270,249 $ 9,850,030 Additions 23,543 12,054 35,597 Disposals ( 13,925 )( 4,873 ) ( 18,798 ) At December 31, 2017 8,589,399 1,277,430 9,866,829 Accumulated depreciation At January 1, 2017 - ( 312,284 ) ( 312,284 ) Depreciation - ( 23,290 ) ( 23,290 ) Disposals - 4,140 4,140 At December 31, 2017 - ( 331,434 ) ( 331,434 ) Accumulated impairment At January 1, 2017 ( 9,817 )( 1,855 ) ( 11,672 ) At December 31, 2017 ( 9,817 )( 1,855 ) ( 11,672 ) Investment property– net $ 8,579,582 $ 944,141 $ 9,523,723 Lands and land improvements Buildings and structures Total Cost At January 1, 2016 $ 8,817,320 $ 1,288,072 $ 10,105,392 Additions 41,074 16,058 57,132 Transfers 62,073 19,118 81,191 Disposals ( 340,686 )( 52,999) ( 393,685 ) At December 31, 2016 8,579,781 1,270,249 9,850,030 Accumulated depreciation At January 1, 2016 - ( 284,999 ) ( 284,999 ) Depreciation - ( 23,842 ) ( 23,842 ) Transfers - ( 7,138 ) ( 7,138 ) Disposals - 3,695 3,695 At December 31, 2016 - ( 312,284 ) ( 312,284 ) Accumulated impairment At January 1, 2016 ( 9,817 )( 1,855 ) ( 11,672 ) At December 31, 2016 ( 9,817 )( 1,855 ) ( 11,672 ) Investment property– net $ 8,569,964 $ 956,110 $ 9,526,074

A. As of December 31, 2017 and 2016, the investment property at fair value of the Group was $20,006,266 and $19,342,046, respectively. All the investment properties of the Group were assessed by the internal appraisal expert and independent appraiser. Assessments were made using the market approach and income approach. As of December 31, 2017 and 2016, the investment property was categorised within Level 2 in the fair value hierarchy amounting to $19,830,488 and $19,167,983, respectively, and categorised within Level 3 in the fair value hierarchy amounting to $175,778 and $174,063, respectively.

115

B. For the years ended December 31, 2017 and 2016, the rental income from investment property were $151,206 and $161,730, respectively, the operating expenses from investment property were $81,033 and $91,213, respectively.
C. As of December 31, 2017 and 2016, details of the Group’s Investment property pledged to others as collateral are provided in Note 8.

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116

			Total		39,409,496 $	801,404	-	3,310) (	694,253) (	57,116) (	39,456,221		12,041,677) (	829,019) (	678,046	30,994	12,161,656) (	27,294,565 $
Construction in	progress and	prepayments for	equipment		48,130 $	170,187	131,738) (	3,310) (	-	-	83,269		-	-	-	-	-	83,269 $
		Leasehold	improvements		1,251,762 $	15,051	23,171	-	69,708) (	23,837) (	1,196,439		1,046,899) (	66,001) (	67,882	18,378	1,026,640) (	169,799 $
			Other equipment		2,584,048 $	160,668	9,586	-	271,174) (	7,260) (	2,475,868		2,006,325) (	129,626) (	270,438	4,906	1,860,607) (	615,261 $
		Transportation	equipment		804,792 $	37,398	2,102	-	34,929) (	3,525) (	805,838		667,139) (	40,332) (	34,666	2,239	670,566) (	135,272 $
		Machinery and	equipment		3,021,957 $	338,511	56,203	-	217,247) (	7,358) (	3,192,066		2,394,572) (	273,352) (	213,811	4,868	2,449,245) (	742,821 $
		Buildings and	structures		12,342,069 $	56,869	40,676	-	100,912) (	10,483) (	12,328,219		5,926,742) (	319,708) (	91,249	603	6,154,598) (	6,173,621 $
		Land and	improvements		19,356,738 $	22,720	-	-	283) (	4,653) (	19,374,522		-	-	-	-	-	19,374,522 $
				Cost	At January 1, 2017	Additions	Transfers	Transfer out (Note)	Disposals	Foreign exchange	At December 31, 2017	Accumulated depreciation	At January 1, 2017	Depreciation	Disposals	Foreign exchange	At December 31, 2017	Net

117

			Total		39,733,891 $	559,903	-	83,231) (	772,838) (	28,229) (	39,409,496		11,984,061) (	847,751) (	7,138	762,309	20,688	12,041,677) (	27,367,819 $
Construction in	progress and	Land and Buildings and Machinery and Transportation Leasehold prepayments for	improvements structures equipment equipment Other equipment improvements equipment	Cost	At January 1, 2016 19,420,020 $ 12,225,851 $ 3,445,108 $ 828,652 $ 2,483,015 $ 1,273,902 $ 57,343 $	Additions - 54,085 173,684 33,987 131,572 31,705 134,870	Transfers - 91,874 8,593 1,858 17,134 22,584 142,043) (	Transfer out (Note) 62,073) ( 19,118) ( - - - - 2,040) (	Disposals - - 602,472) ( 58,570) ( 42,750) ( 69,046) ( -	Foreign exchange 1,209) ( 10,623) ( 2,956) ( 1,135) ( 4,923) ( 7,383) ( -	At December 31, 2016 19,356,738 12,342,069 3,021,957 804,792 2,584,048 1,251,762 48,130	Accumulated depreciation	At January 1, 2016 - 5,619,571) ( 2,715,040) ( 684,619) ( 1,914,752) ( 1,050,079) ( -	Depreciation - 315,269) ( 285,399) ( 41,323) ( 137,375) ( 68,385) ( -	Transfer out (Note) - 7,138 - - - - -	Disposals - - 600,267 58,182 41,715 62,145 -	Foreign exchange - 960 5,600 621 4,087 9,420 -	At December 31, 2016 - 5,926,742) ( 2,394,572) ( 667,139) ( 2,006,325) ( 1,046,899) ( -	Net 19,356,738 $ 6,415,327 $ 627,385 $ 137,653 $ 577,723 $ 204,863 $ 48,130 $	Note: Transfer into investment property, intangible assets and other assets.	A. There was no interest capitalised on property and equipment acquired for the year ended December 31, 2017 and 2016.	B. Please refer to Note 8 for details of the property and equipment pledged as collateral as of December 31, 2017 and 2016.

118

(14) Other assets - net

Other assets-net
		December	31,2017	December	31,2016
Leased assets		$	1,820,360	$	2,000,434
Less: Accumulated depreciation	(		735,291 ) (		754,279)
Leased assets - net			1,085,069		1,246,155
Foreclosed assets
Cost			61,731		68,548
Less: Accumulated impairment	(		61,731 ) (		68,548 )
Net foreclosed assets			-		-
Refundable deposits			1,684,807		452,626
Operating guarantee deposits and settlement clearing
funds			981,472		1,004,259
Prepayments			363,259		408,799
Others			214,102		350,779
Total		$	4,328,709	$	3,462,618

Please refer to Note 8 for details of other assets pledged as collateral as the Group of December 31, 2017 and 2016.

(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 31,2017 $ 152,108,877 539,327 819,393 383,188 39,969 $ 153,890,754	December 31,2016 $ 123,307,988 871,126 1,178,371 854,743 41,393 $ 126,253,621

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

Financial liabilities held for trading Derivative instruments Financial liabilities designated at fair value through profit or loss upon initial recognition Bonds Valuation adjustments for financial liabilities designated at fair value through profit or loss upon initial Total	December31,2017 $ 6,980,139 26,115,200 1,189,041 $ 34,284,380	December31,2016
		$ 7,824,842 15,765,800 100,776
		$ 23,691,418

A. The financial instruments of FCB designated at fair value through profit or loss upon initial recognition were designated to eliminate or reduce recognition inconsistency.

B. For the years ended December 31, 2017 and 2016, the changes in the credit risk of the fair value belonging to financial debentures designated at fair value through profit and loss by FCB were ($267,006) and ($134,017), respectively.

C. FCB issued the financial debentures at the face value. As of December 31, 2017 and 2016, the carrying amounts exclusive of valuation adjustment and the amounts payable to the creditors were identical.

119

(17) Securities sold under repurchase agreements

Government bonds Corporate bonds Bank debentures Total	December31,2017 $ 2,723,886 1,080,558 9,618,893 $ 13,423,337	December31,2016
		$ 3,130,158 2,200,403 4,664,786
		$ 9,995,347

The Group was 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 $13,456,320 and $10,015,544 as of December 31, 2017 and 2016, respectively.

(18) Commercial papers issued - net

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

Commercial papers issued Subtotal Less: discount on commercial papers issued Net commercial papers issued Interest rate (%)	Guarantor December31,2017 December31,2016 Mega Bills Finance Co., Ltd. $ 9,752,000 $ 4,000,000 International Bills Finance Corporation 7,356,000 2,300,000 China Bills Finance Corporation 1,200,000 1,465,000 Grand Bills Finance Corporation 987,000 965,000 Taching Bills Finance Co.,Ltd. 891,000 700,000 Dah Chung Bill Finance Corporation 761,000 513,000 Taiwan Finance Corporation 645,000 535,000 Taishin Bank 632,000 1,473,000 Union Bank of Taiwan Co., Ltd. 450,000 550,000 Taiwan Cooperative Bills Finance Corporation 300,000 100,000 22,974,000 12,601,000 ( 5,165 ) ( 4,937 ) $ 22,968,835 $12,596,063 0.382%~0.700% 0.330%~0.830%	Guarantor December31,2017 December31,2016 Mega Bills Finance Co., Ltd. $ 9,752,000 $ 4,000,000 International Bills Finance Corporation 7,356,000 2,300,000 China Bills Finance Corporation 1,200,000 1,465,000 Grand Bills Finance Corporation 987,000 965,000 Taching Bills Finance Co.,Ltd. 891,000 700,000 Dah Chung Bill Finance Corporation 761,000 513,000 Taiwan Finance Corporation 645,000 535,000 Taishin Bank 632,000 1,473,000 Union Bank of Taiwan Co., Ltd. 450,000 550,000 Taiwan Cooperative Bills Finance Corporation 300,000 100,000 22,974,000 12,601,000 ( 5,165 ) ( 4,937 ) $ 22,968,835 $12,596,063 0.382%~0.700% 0.330%~0.830%

120

(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 31,2017 $ 25,574,418 35,448,640 6,175,800 2,825,944 4,546,708 638,972 720,434 432,664 7,153,003 $ 83,516,583	December 31,2016
		$ 24,118,151 26,372,777 6,496,502 2,390,684 4,917,241 534,416 603,315 361,174 5,969,510
		$ 71,763,770

(20) Deposits and remittances

Checking accounts Demand deposits Time deposits Negotiable certificates of deposits Savings deposits Inward remittances Others Total	December 31,2017 $ 48,744,642 567,542,391 405,225,397 11,110,114 981,238,902 2,984,869 15,972 $ 2,016,862,287	December 31,2016
		$ 48,527,886 552,023,570 387,413,288 13,481,359 969,883,603 2,122,996 19,653
		$ 1,973,472,355

(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 subordinated 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 were 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
	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

As of December 31, 2017 and 2016, the above mentioned corporate bonds were unsecured subordinated bonds of $5 billion, and the interest-bearing coupon rate were both were 2.25%. As of December 31, 2017 and 2016, the outstanding balances of the above, mentioned financial bonds amounted to $0 billion, and $5 billion, respectively.

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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 authorised 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: $10 billion on February 25, 2011, $15 billion on February 24, 2012, $15 billion on February 27, 2014, USD $0.3 billion on October 16, 2014, $30 billion and USD $1.5 billion on February 26, 2015, $10 billion, USD $1 billion and equivalent to NT $10 billion equivalent foreign currency on February 26, 2016. 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 were as follows:

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 issues, 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

	First to Second issues, 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.
	Perpetual

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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	Second issue, 2014
	November 26, 2014
	US $300 million(US$140 million has been paid back)
	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
	First issue, 2015
	March 25, 2015
	NT$7 billion
	At par
	A: Fixed rate 1.83%
	B: Fixed rate 2.05%
	A: Interest is paid annually. The principal is to be paid pursuant to
	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.
	A:7 years ; B:10 years
	Second issue, 2015
	May 28, 2015
	US $230 million
	At par
	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% 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 three years from the issue date. The principal is to be paid pursuant to face value at maturity and interest is paid.
	20 years

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Issue date Issue amount Issue price Coupon rate Interest and repayment terms Maturity period	First issue, 2017
	February 15, 2017
	US $500 million
	At par
	A: This is a zero-coupon bond with the implicit interest rate at 4.05% B: This is a zero-coupon bond with the implicit interest rate at 4.00% 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 three years from the issue date. The principal is to be paid pursuant to face value at maturity and interest is paid.
	30 years

As of December 31, 2017 and 2016, the range of interest rates of the above mentioned corporate bonds was 1.43%~4.07% and 1.43%~4.10%, respectively.

As of December 31, 2017 and 2016, the outstanding balances of the above-mentioned financial bonds amounted to $55.715 billion and $53.366 billion, respectively. In addition, among the above-mentioned financial bonds, senior financial bonds with a face value of $26.415 billion and $12.566 billion and subordinate financial bonds with a face value of $0 billion and $3.5 billion were designated at fair value through profit or loss and hedged by interest rate swap contracts, respectively. As such interest rate swap contracts were valued at fair value with changes in fair value recognised through profit or loss, the above-mentioned financial bonds were designated as financial liabilities at fair value through profit or loss in order to eliminate or significantly reduce recognition inconsistency.

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(22) Other borrowings

	Credit borrowings Interest rate (%)	December31,2017 $ 1,300,000 0.890%~0.933%
(23)	Provisions

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, 2017 and 2016, 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 $102,449 and $89,673, respectively.

			Insurance Contracts	Insurance Contracts
			For theyears ended December 31,
			2017		2016
Beginning balance		$	7,195,278	$	6,362,503
Provision			5,057,652		1,921,786
Recovery	(		457,419 ) (		1,032,220 )
Income of surrender	(		56,065 ) (		37,521 )
Foreign currency exchange gains and
losses	(		97,821 ) (		19,270 )
Ending balance		$	11,641,625	$	7,195,278

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

			Insurance Contracts	Insurance Contracts
			For theyears ended December 31,
			2017		2016
Unearned premium reserve
Beginning balance		$	84,445	$	57,485
Provision			112,140		84,448
Recovery	(		84,445 ) (		57,485 )
Foreign currency exchange losses	(		13 ) (		3 )
Ending balance		$	112,127	$	84,445
Deduction of unearned premium reserve
Beginning balance		$	1,388	$	1,067
Change in the period			405		321
Ending balance		$	1,793	$	1,388

(C) Claim reserve fluctuation:

			Insurance Contracts	Insurance Contracts
			For theyears ended December 31,
			2017		2016
Claim reserve
Beginning balance		$	25,201	$	5,063
Provision			46,287		57,427
Recovery	(		51,926 ) (		37,289)
Ending balance		$	19,562	$	25,201
Deduction of claim reserve
Beginning balance		$	1,367	$	82
Change in the period			267		1,285
Ending balance		$	1,634	$	1,367

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 recognising unreported claim reserve used by FALI.

(D) Reserves for premium insufficiency fluctuation:

			Insurance Contracts	Insurance Contracts	Insurance Contracts
			For theyears ended		December 31,
			2017		2016
Beginning balance		$	5,491	$	5,434
Change in the period			21,415		165
Foreign currency exchange losses	(		539) (		108 )
Ending balance		$	26,367	$	5,491

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C. Reserves for foreign exchange price (listed under other reserves) fluctuation:

			For theyears ended	For theyears ended	December 31,
			2017		2016
Beginning balance		$	20,038	$	23,597
Withdrawal in the period
Compulsory deposits			2,005		1,161
Additional deposits			7,321		9,034
Subtotal			9,326		10,195
Recovered amount	(		23,540 ) (		13,754 )
Ending balance		$	5,824	$	20,038

D. Liability reserve for employee benefit of actuarial value was as follows:

Consolidated balance sheet: Defined benefit plans Preferential saving plan for employees Total	December31,2017 $ 4,217,480 805,764 $ 5,023,244	December31,2016 $ 4,385,815 759,199 $ 5,145,014

(A) Defined contribution plans

Effective from July 1, 2005, the 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, 2017 and 2016, the pension costs of the Group under the defined contribution plan were $218,426 and $223,196, respectively. For employees working overseas, pension expenses under defined contribution plans are recognised according to the local regulations, for the years ended December 31, 2017 and 2016, overseas pension expenses for the current period amounted to $16,175 and $17,240, respectively.

(B) Defined benefit plans

The 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 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 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

127

and wages. Also, the Group would assess the balance in the aforementioned labor 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 labors expected to be qualified for retirement next year, the Group will make contribution for the deficit by the end of next March. The net pension costs under defined contribution pension plans of the Group for the years ended December 31, 2017 and 2016, were $377,978 and $406,691, respectively. The aforementioned expenses are all recognised under “employee benefit expenses within the consolidated statement of comprehensive income”. The balance of the labor pension reserve account in the Bank of Taiwan amounted to $7,065,736 and $6,672,029, respectively.

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

		December 31,2017	December 31,2017	December 31,2016	December 31,2016
Present value of defined benefit
obligations		$	11,324,294	$	11,102,394
Fair value of plan assets	(		7,106,854 )(		6,716,726 )
Net defined benefit liability		$	4,217,440	$	4,385,668
Net asset in the balance sheet		$	40	$	147
Net liability in the balance sheet		$	4,217,480	$	4,385,815

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

		Present value
		of defined						Net defined
		benefit		Fair value of				benefit
		obligations			plan assets			liability
Year ended December 31, 2017
Balance at January 1		$ 11,102,394	(	$	6,716,726 )		$	4,385,668
Current service cost		313,912			-			313,912
Interest expense (income)		161,644	(		100,867 )			60,777
		11,577,950	(		6,817,593 )			4,760,357
Remeasurements:
Return on plan assets (excluding
amounts included in interest
income or expense)		-			20,108			20,108
Change in financial assumptions		349,220			-			349,220
Experience adjustments		169,000			-			169,000
		518,220			20,108			538,328
Pension fund contribution		-	(		1,077,934 )	(		1,077,934 )
Paid pension	(	771,876 )			768,565	(		3,311 )
Balance at December 31		$11,324,294	(	$	7,106,854 )		$	4,217,440

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		Present value
		of defined						Net defined
		benefit		Fair value of				benefit
		obligations			plan assets			liability
Year ended December 31, 2016
Balance at January 1		$ 11,415,352	(	$	6,556,165 )		$	4,859,187
Current service cost		342,415			-			342,415
Interest expense (income)		155,899	(		93,476 )			62,423
		11,913,666	(		6,649,641 )			5,264,025
Remeasurements:
Return on plan assets (excluding
amounts included in interest
income or expense)		-			45,918			45,918
Change in financial assumptions	(	115,036 )			-	(		115,036 )
Experience adjustments		89,496			-			89,496
	(	25,540 )			45,918			20,378
Pension fund contribution		-	(		897,972 )	(		897,972 )
Paid pension	(	785,732 )			784,969	(		763 )
Balance at December 31		$11,102,394	(	$	6,716,726 )		$	4,385,668

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, 2017 and 2016, the Company’s and its domestic subsidiaries’ actual return on plan assets were $80,759 and $47,558, respectively.

As of December 31, 2017 and 2016, defined benefit plan recognised through “other comprehensive income remeasurement” of ($541,362) and ($21,669), respectively, for net defined benefit liability.

d. The principal actuarial assumptions used were as follows:

Discount rate Future salary increases Future death rate	2017 1.00%~1.35% 1.50%~2.00% 4th~5th	2016
		1.10%~1.60% 1.50%~2.00% 4th~5th

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

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

December 31, 2017 Discount rate Future salary increases December 31, 2016 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% ($ 336,213 ) $ 349,990 ±0.25% $ 347,843 ($ 335,849) ±0.25% ($ 330,141 ) $ 343,888 ±0.25% $ 342,850 ($ 330,698 )

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, 2018 amounts to $533,852.
f. As of December 31, 2017 and 2016, the weighted average duration of the retirement plan is 8.59~18.75 years and 8.00~18.00 years, respectively.
(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”. For the years ended December 31, 2017 and 2016, the recognised pension costs for the above-mentioned employees subject to the preferential savings plan were $457,102 and $427,330, respectively. Please see Note 4(21) B for details.

a. As of December 31, 2017 and 2016, net liability in the balance sheet amounted to $805,764 and $759,199, respectively.

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b. Movement in net defined benefit liabilities are as follows:

		Present value	Present value
			of defined					Net defined
			benefit		Fair value of			benefit
			obligations		plan assets			liability
Year ended December 31, 2017
Balance at January 1		$	759,199		$	-	$	759,199
Interest expense			28,349			-		28,349
			787,548			-		787,548
Remeasurements:
Change in financial assumptions			-			-		-
Experience adjustments			242,018			-		242,018
			242,018			-		242,018
Pension fund contribution			-	(	223,802 ) (			223,802 )
Paid pension	(		223,802 )		223,802			-
Balance at December 31		$	805,764	$		-	$	805,764
		Present value
			of defined					Net defined
			benefit		Fair value of			benefit
			obligations		plan assets			liability
Year ended December 31, 2016
Balance at January 1		$	716,858		$	-	$ 716,858
Interest expense			26,755			-		26,755
			743,613			-		743,613
Remeasurements:
Change in financial assumptions			5,408			-		5,408
Experience adjustments			224,543			-		224,543
			229,951			-		229,951
Pension fund contribution			-	(	214,365 ) (			214,365 )
Paid pension	(		214,365 )		214,365			-
Balance at December 31		$	759,199		$	-	$	759,199

c. For the years ended December 31, 2017 and 2016, there are no actuarial loss, recognised 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	2017 4.00% 2.00% 1.00% 50.00%	2016
		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.

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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, 2017
Discount rate of
employee
preferential savings
Return rate of
capital deposited
Annual diminishing
rate of account
balance
Potential future
variable possibility
of employee
preferential saving
December 31, 2016
Discount rate of
employee
preferential savings
Return rate of
capital deposited
Annual diminishing
rate of account
balance
Potential future
variable possibility
of employee
preferential saving

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%
($ 12,290 )
$ 12,659
±0.25%
($ 103,926 )
$ 103,927

±0.25%
($ 11,930 )
$ 12,244
±10.00%
$ 161,153
($ 161,153 )

±0.25%
($ 11,481 )
$ 11,825
±0.25%
($ 94,328 )
$ 94,328

±0.25%
($ 11,137 )
$ 11,428
±10.00%
$ 151,840 ($ 151,840 )

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. FCB expects contributions to the employee preferential savings plan of FCB for the year ending December 31, 2018 amount to $106,033.

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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, 2017 2016 $ 779,251 $ 799,145 100,818 - 430 ) ( 19,894 ) $ 879,639 $779,251 December31,2017 December31,2016 $ 29,880,377 $ 37,402,635 22,590,024 22,611,057 - 334,015 776,925 745,357 $ 53,247,326 $ 61,093,064 December31,2017 December31,2016 $ 3,121,583 $ 2,672,381 1,352,821 1,210,448 1,470,429 249,207 $5,944,833 $ 4,132,036
(24)	Other financial liabilities
	Received principal of structured notes Insurance product liabilities for separate accounts Reserve for insurance value of separate account Other payables – insurance separate accounts Others Total	December31,2017 $ 29,880,377 22,590,024 - 776,925 $ 53,247,326
(25)	Other liabilities
	Deposits received Collections in advance Others Total	December31,2017 $ 3,121,583 1,352,821 1,470,429 $5,944,833

(26) Equity

A. Common stock

As of December 31, 2017, the Company’s authorised capital and paid-in capital were $200,000,000 and $122,163,933, respectively, consisting of 12,216,393 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 29, 2016, the stockholders at their stockholders’ meeting on June 24, 2016 adopted a resolution to capitalise unappropriated earnings amounting to $5,157,498 with the effective date set on August 13, 2016. After the capital was increased, the Company’s authorised capital and paid-in capital amounted to $200,000,000 and $119,768,562, respectively, consisting of 11,976,856 thousand shares of common stock outstanding with a par value of $10 (in dollars) per share.

On June 16, 2017, the shareholders’ meeting approved the capitalisation of the unappropriated earnings in the amount of $2,395,371 as resolved by the Board of Directors on April 28, 2017, and the record date for capital increase is August 12, 2017. The paid-in and authorised capital are $200,000,000 and $122,163,933, respectively, and the outstanding shares amounted to 12,216,393 thousand shares with par value of $10.

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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 Group.

(1)As of December 31, 2017, the Group’s share-based employee compensation was as follows:

Type of arrangement Re-Capitalised 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 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, 2017 and 2016, the details on the Company’s capital surplus were as follows:

December 31, 2017 Share premium $ 25,720,167 Share-based payments 196,054 Total $ 25,916,221	December 31, 2016
	$ 25,720,167 196,054
	$ 25,916,221

D. Legal reserve and special reserve

a. Legal reserve

According to the Company Law of the R.O.C., except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company’s paid-in capital.

b. Special reserve

Upon the first-time adoption of the IFRSs, the Company shall provision special reserve in accordance with Financial-Supervisory-Securities-Corporate Letter No. 1010012865 dated April 6, 2012. For subsequent consumptions, disposals or reclassifications of related assets, the Company shall reverse special reserve in proportion to such activities. If the aforementioned related assets are investment properties, for those that are land, special reserve reversals are performed when land is disposed or reclassified; for those other than land, special

134

reserve reversals are performed throughout the useful life of such investment properties. In addition, the requirement for security firms to provision “trading loss reserve” and “default loss reserve” was abolished by “Regulations Governing Securities Firms”. “Trading loss reserve” and “default loss reserve” provisioned prior to the end of December 2010 should be transferred to “special reserve” in accordance with Financial-Supervisory-Securities-Firms Letter No. 0990073857 dated January 11, 2011. Such transferred amounts to special reserve shall not be used for purposes other than covering an entity’s losses or, when accumulated special reserve reaches 50% of the amount of paid-in capital, half of special reserve may be used for capitalisation. Such transferred amounts to special reserve shall not be used for purposes other than covering an entity’s losses or, when accumulated special reserve reaches 50% of the amount of paid-in capital, half of special reserve may be used for capitalisation.

(27) Unappropriated earnings

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

B. The appropriation of 2016 and 2015 earnings were resolved by the stockholders at the stockholders’ meeting dated June 16, 2017 and June 24, 2016, respectively. Relevant information was as follows:

was as follows:
	2016		2015
	Earnings distribution $ 1,735,600 14,372,227 2,395,371 $ 18,503,198	Dividend per share(NT dollar) $ - 1.20 0.20 $ 1.40	Earnings distribution $ 1,600,609 10,888,051 5,157,498 $ 17,646,158	Dividend per
				share(NT dollar)
Legal reserve				$ - 0.95 0.45
Cash dividends on common
stock
Stock dividends on common
stock
				$ 1.40

C. For information on employees’ compensation (bonus) and directors’ remuneration, please refer to Note 6(38).

(Blank)

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(28) Other equity interest

		Exchange differences	Exchange differences	Exchange differences		Unrealised gain or
			on translation of		loss on available-for-
			foreign financial			sale
			statements			financial assets			Total
Balance, January 1, 2017		$	1,057,937		$	5,278,833		$	6,336,770
Available-for-sale financial assets
- Valuation adjustment				-		2,929,563			2,929,563
- Realised				- (		465,419 ) (			465,419 )
Exchange difference on the
financial statements of foreign
entities	(		3,243,952 )			-	(		3,243,952 )
Share of the profit or loss of
associates accounted for using
the equity method			144,611			-			144,611
Effect from income tax				- (		18,667 ) (			18,667 )
Balance, December 31, 2017	(	$	2,041,404 )		$	7,724,310		$	5,682,906
		Exchange difference				Unrealised gain or
			on translation of		loss on available-for-
			foreign financial			sale
			statements			financial assets			Total
Balance, January 1, 2016		$	3,659,098		$	4,992,506		$	8,651,604
Available-for-sale financial assets
- Valuation adjustment				-		721,676			721,676
- Realised				- (		432,253 ) (			432,253 )
Exchange difference on the
financial statements of foreign
entities	(		2,495,059 )			-	(		2,495,059 )
Share of the profit or loss of
associates accounted for using
the equity method	(		106,102 )			-	(		106,102 )
Effect from income tax				- (		3,096 ) (			3,096)
Balance, December 31, 2016		$	1,057,937		$	5,278,833		$	6,336,770

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(29) Net interest income

			For theyears ended	For theyears ended	December 31,
			2017		2016
Interest income
Interest income on loans discounted		$	34,595,265	$	33,323,861
Interest income on deposits and call loans			2,664,253		2,347,686
Interest income on securities investment			5,766,946		5,164,706
Revolving interest income on credit cards			165,570		163,384
Interest income on margin trading and short
selling			314,757		273,104
Interest income on repo trade			28,232		60,244
Other interest income			419,488		279,210
Subtotal			43,954,511		41,612,195
Interest expense
Interest expense for deposits	(		10,674,132 ) (		10,558,853 )
Interest expense for deposits of Central Banks
and others	(		2,276,828 ) (		1,250,387 )
Coupon payment on financial bonds	(		614,686 ) (		638,449 )
Coupon payment on corporate bonds	(		62,260 ) (		112,500 )
Interest expense of bonds payable under
repurchase agreements	(		112,879 ) (		62,257 )
Interest expense on structured notes	(		110,154 ) (		92,170 )
Other interest expense	(		110,531 ) (		96,428 )
Subtotal	(		13,961,470 ) (		12,811,044 )
Total		$	29,993,041	$	28,801,151

137

(30) Net service fee and commission income

For theyears ended December 31,
2017
2016
Service fee income
Trust business
$ 1,894,284
$ 1,380,711
Custodian business
509,181
496,815
Insurance agency
1,800,943
3,482,388
Foreign exchange
906,031
923,701
Credit extension
1,287,605
1,305,316
Credit card
821,341
835,773
Brokerage
924,463
706,475
Management fee and sales income
507,946
445,598
Other service fee income on deposits and
remittances
1,368,096
906,476
Subtotal
10,019,890
10,483,253
Service fee expense
Trust business
(
93,753 ) (
83,956 )
Custodian business
(
135,540 ) (
119,233 )
Insurance agency
(
353,818 ) (
510,991 )
Foreign exchange
(
38,117 ) (
38,315 )
Credit extension
(
60,419 ) (
58,231 )
Credit card
(
411,617 ) (
429,137 )
Brokerage
(
75,047 ) (
61,960 )
Other service fee expense on deposits and
remittances
(
510,243 ) (
458,624 )
Subtotal
(
1,678,554 ) (
1,760,447 )
Total
$ 8,341,336
$ 8,722,806

138

(31) Net income and expenses from insurance operations

			For theyears ended	For theyears ended	December 31,
			2017		2016
Income on insurance business
Direct premium		$	5,722,853	$	2,500,414
Reinsurance premium expense	(		40,697 ) (		33,822 )
Net change in unearned premium reserve	(		27,290 ) (		26,642 )
Self-retained matured premium income			5,654,866		2,439,950
Separate account products revenues			7,007,921		4,555,022
Subtotal			12,662,787		6,994,972
Expense on insurance business
Policy claims and payment	(		539,723 ) (		1,104,040 )
Claims recovered from reinsurers			25,469		19,094
Self-retained claims and payment	(		514,254 ) (		1,084,946 )
Underwriting expenses	(		512 ) (		318 )
Expense on insurance stabilisation fund	(		10,331 ) (		3,728 )
Separate account products expenses	(		7,007,921 ) (		4,555,022 )
Subtotal	(		7,533,018 ) (		5,644,014 )
Total		$	5,129,769	$	1,350,958

==> picture [488 x 45] intentionally omitted <==

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

		For theyears ended	For theyears ended	December 31,
		2017		2016
Gain and loss from disposal of financial assets
and liabilities at fair value through profit or
loss
Short-term bills	( $	65,236 )	( $	84,485 )
Bonds	(	37,317 )	(	125,800 )
Stocks		261,259		16,379
Beneficiary certificates		2,971	(	13,911 )
Interest rate		210,939		189,523
Exchange rate		3,703,618		1,512,407
Options		115,615		320,639
Futures	(	1,576 )	(	1,772 )
Other		34		2,620
Subtotal		4,190,307		1,815,600
Evaluation gain and loss on financial assets and
liabilities at fair value through profit or loss
Short-term bills	(	6,049 )		6,024
Bonds		303,091		819,018
Stocks	(	23,708 )	(	55,841 )
Beneficiary certificates	(	1,367 )		407
Interest rate		313,462	(	566,270 )
Exchange rate		512,858		58,466
Options		27,324	(	62,562 )
Futures		271	(	2,195 )
Credit risk valuation adjustment		7,382		14,228
Other	(	71,719)	(	17,704 )
Subtotal		1,061,545		193,571
Interest income on financial assets at fair value
through profit or loss		1,243,864		1,290,419
Interest expense on financial liabilities at fair
value through profit or loss	(	1,001,728 )	(	795,520 )
Coupon payment and bonus income on financial
assets at fair value through profit or loss		55,644		65,000
Total	$	5,549,632	$	2,569,070

Net income on exchange rate instruments are realised and unrealised gain and loss on spot and forward exchange contracts, FX options and FX futures.

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

When the 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 recognised in “gain and loss on financial assets and liabilities at fair value through profit and loss”.

140

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

			For theyears ended	For theyears ended	December 31,
			2017		2016
Dividends income		$	553,633	$	498,003
Gain on disposal
Bonds			199,659		334,591
Securities			293,374		187,107
Beneficiary certificate			12,607	(	13,694 )
Subtotal			505,640		508,004
Loss on disposal
Bonds	(		5,858 ) (		8,284 )
Securities	(		1,690 ) (		47,019 )
Beneficiary certificates			-		-
Subtotal	(		7,548 ) (		55,303 )
Total		$	1,051,725	$	950,704

(34) Impairment loss on assets

For theyears ended December 31, 2017 2016 Gain (loss) on reversal of impairment on foreclosed collaterals and other $ 6,818 ($ 251 ) Impairment losses of available-for-sale financial assets ( 52,334 ) ( 38,575 ) ($ 45,516 ) ($ 38,826 ) Net investment gains on bond investment without active market For theyears ended December 31, 2017 2016 Investment income on preferred shares-THSR $ - $ 559,726	For theyears ended December 31, 2017 2016 Gain (loss) on reversal of impairment on foreclosed collaterals and other $ 6,818 ($ 251 ) Impairment losses of available-for-sale financial assets ( 52,334 ) ( 38,575 ) ($ 45,516 ) ($ 38,826 ) Net investment gains on bond investment without active market For theyears ended December 31, 2017 2016 Investment income on preferred shares-THSR $ - $ 559,726
Investment income on preferred shares-THSR
	2017 $ -

(35) Net investment gains on bond investment without active market

The above investment income comes from Taiwan High Speed Rail (THSR) which owes cumulative preference shares dividends to First Commercial Bank (FCB), since FCB held Class A convertible preference shares for the period from January 5, 2007 to August 6, 2015.

Based on the resolution from the interim shareholders’ meeting on September 10, 2015, THSR agreed to pay the accumulative amount to FCB in order to perform the supplementary measure of the financial rescue plan of THSR. FCB has received the payment from THSR on January 20, 2016.

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(36) Other non-interest income, net

			For theyears ended	For theyears ended	December 31,
			2017		2016
Net gain on sale of foreclosed collaterals		$	2,852	$	-
Income from sale of non-performing loans			105,127		190,734
Net income and losses from rent			163,131		168,578
Gain on disposal of property			27,585		16,182
Loss on retired assets	(		15,611 ) (		4,836 )
Gain on financial asset measured at cost			363,399		436,139
Net change in provisions for foreign exchange
price fluctuation			14,214		3,559
Gain from overdue accounts and other			85,469		341,194
Total		$	746,166	$	1,151,550

(37) Net change on provisions for insurance liabilities

			For theyears ended	For theyears ended	December 31,
			2017		2016
Net change in claim reserve	( $		5,908)	$	18,854
Net change in liabilities reserve			4,544,168		852,045
Net change in insufficient premium reserve			21,415		165
Total		$	4,559,675	$	871,064

(38) Employee benefit expense

Salary expense Labor and health insurance expense Pension expense Other employee benefit Total	For theyears ended December 31,	For theyears ended December 31,
	2017 $ 11,739,246 660,817 1,069,681 290,943 $ 13,760,687	2016
		$ 12,282,845 650,747 1,074,457 271,842
		$ 14,279,891

A. The calculation for the employee benefit expense was based on the number of employees of 9,075 and 9,108 as of December 31, 2017 and 2016, respectively. The basis for calculation of number of employees was consistent with excluding pension expenses with preferential interest deposit for retired employees (Pension expenses included preferential interest deposit for retired employees amounted to $457,102 and $427,330 for the years ended December 31, 2017 and 2016, respectively.)
B. According to the articles of incorporation, a ratio of distributable profit of the current year shall be distributed as employees' compensation and directors’ remuneration. The ratio shall be 0.02%0.15% for employees’ compensation and shall not be higher than 1% for directors’ remuneration. However, the company’s accumulated losses shall be covered first.
C. As of December 31, 2017 and 2016, the Company’s estimated employees’ compensation and director’s remuneration were $163,779 and $183,608, respectively; the aforementioned amounts are accounted for under employee benefit expenses.

Current year earnings ( i.e. net income before tax less distributed employees’ compensation and

142

directors’ remuneration) for the years ended December 31, 2017 and 2016, shall cover cumulative deficits first, the balance, if any, apply a rate of 0.02% to 0.15% to determine employees’ compensation and applied a rate that does not exceed 1% as directors’ remuneration.

D. The actual distributed amount of employees’, directors’ and supervisors’ remuneration for 2016 resolved at the Board of Directors' annual meeting in 2017 was $164,508. As compared to the recognised amount $183,608 in the 2016 consolidated financial statement, there was a decrease of $19,100. The amount was due to estimated differences and is treated as a change in accounting estimate, where the difference was recognised as profit or loss in 2017.
E. Information about employees’ compensation and directors’ remuneration of the Company as resolved by the Board of Directors and shareholders’ meeting will be posted on “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(39) Depreciation and amortisation

Depreciation Amortisation Total	For theyears ended December 31,	For theyears ended December 31,
	2017 $ 852,309 227,414 $ 1,079,723	2016
		$ 871,593 243,065
		$ 1,114,658

(40) Business and administrative expenses

Taxes Rental Insurance premium Post and electricity Water, electricity and gas Stationery Maintenance Others Total	For theyears ended December 31,	For theyears ended December 31,
	2017 $ 2,156,553 1,195,274 567,153 320,905 154,946 123,697 236,445 1,752,278 $ 6,507,251	2016
		$ 2,200,763 1,195,975 551,023 313,677 163,402 122,959 233,992 1,601,829
		$ 6,383,620

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(41) Income tax

A. Income tax expense

(A)

			For theyears ended	For theyears ended	December 31,
			2017		2016
Current tax
Current tax on profit for the year		$	3,453,732	$	2,851,269
Adjustments for over provisions of prior
years’ income tax expense and others	(		1,213 ) (		80,275	)
Total current tax			3,452,519		2,770,994
Origination and reversal of temporary
differences	(		736,851 )		142,353
Income tax expense		$	2,715,668	$	2,913,347
The tax under other comprehensive income:
			For theyears ended		December 31,
			2017		2016
Changes in fair value of available-for-
sale financial assets	($		25,100 ) ($		2,732	)
Remeasurement of defined benefit
obligations			92,032		3,683

(B) The tax under other comprehensive income:

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

			For theyears ended	For theyears ended	December 31,
			2017		2016
Income tax from pretax income calculated at
regulated tax rate		$	3,446,847	$	3,581,667
Adjustments of items not recognised under
relevant regulations			2,261		52,255
Adjustments for over provisions of prior
years’ income tax expense and others	(		1,213 ) (		80,275 )
Adjusted effects on income tax exemption and
other income tax	(		732,227 ) (		640,300 )
Income tax expense		$	2,715,668	$	2,913,347

144

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

						2017	2017
							Recognised in
								other
				Recognised in			comprehensive
			January1		profit or loss			income		December 31
Deferred tax assets:
Temporary differences
The excess of allowance for
doubtful accounts		$	685,334	$	850,485		$	-	$	1,535,819
Impairment loss of
foreclosed assets			11,653 (		1,159	)		-		10,494
Unappropriated employee
benefit liabilities reserve			826,302 (		51,804	)		92,032		866,530
Others			198,652		569,988	(		24,381 )		744,259
Loss carryforwards			5,299(		2,141	)		-		3,158
Subtotal			1,727,240		1,365,369			67,651		3,160,260
Deferred tax liabilities:
Temporary differences
Increment tax on land value			5,707,995 (		4,862	)		-		5,703,133
Unrealised gain of available
-for-sale assets			4,926		639,884			12,061		656,871
Others			25,206 (		6,504	) (		2,504 )		16,198
Subtotal			5,738,127		628,518			9,557		6,376,202
Total	(	$	4,010,887 )	$	736,851		$	58,094 ( $		3,215,942 )
						2016
							Recognised in
								other
				Recognised in			comprehensive
			January1		profit or loss			income		December 31
Deferred tax assets:
Temporary differences
The excess of allowance for
doubtful accounts		$	1,096,765 (	$	411,431	)	$	-	$	685,334
Impairment loss of
foreclosed assets			19,467 (		7,814	)		-		11,653
Unappropriated employee
benefit liabilities reserve			845,383 (		22,764	)		3,683		826,302
Others	(		87,130 )		286,009	(		227 )		198,652
Loss carryforwards			6,557 (		1,258	)		-		5,299
Subtotal			1,881,042 (		157,258	)		3,456		1,727,240
Deferred tax liabilities:
Temporary differences
Increment tax on land value			5,710,999 (		3,004	)		-		5,707,995
Unrealised gain of available-
for-sale assets			-		4,210			716		4,926
Others			39,528 (		16,111	)		1,789		25,206
Subtotal			5,750,527 (		14,905	)		2,505		5,738,127
Total	(	$	3,869,485 ) (	$	142,353	)	$	951( $		4,010,887 )

145

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

		December 31,2017	December 31,2017
Year incurred	Amount filed/ assessed	Unused amount	Unrecognised deferred tax assets	Usable untilyear
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016	$ 122,530 629,211 258,853 139,289 204,350 161,036 89,816 110,495 130,550 120,735	$ 122,530 629,211 258,853 139,289 204,350 161,036 89,816 110,495 130,550 120,735	$ 122,530 629,211 258,853 139,289 204,350 161,036 89,816 110,495 130,550 120,735	2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

		December 31,2016
Year incurred	Amount filed/ assessed	Unused amount	Unrecognised deferred tax assets	Usable untilyear
2007 2008 2009 2010 2011 2012 2013 2014 2015	$ 122,530 629,211 258,853 139,289 204,350 161,036 89,816 110,495 130,550	$ 122,530 629,211 258,853 139,289 204,350 161,036 89,816 110,495 130,550	$ 122,530 629,211 258,853 139,289 204,350 161,036 89,816 110,495 130,550	2017 2018 2019 2020 2021 2022 2023 2024 2025

E. As of December 31, 2017, information on the Group’s income tax returns assessed by the Tax Authority were as follows:
(A) The Company’s income tax returns through 2012 have been assessed and approved by the Tax Authority.
(B) FCB’s filed income tax returns through 2012 have been assessed and approved by the Tax Authority. As 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 involved the use of loss deductions for subsequent years, which 2003’s loss deduction was exhausted (i.e. year of 2012), FCB has filed to rectify the loss deduction amount for the year. FCB has taken administrative remedy to contest the assessment result for 2012 by applying for a review of the administrative action with Tax Authority. The case is currently still in the assessment phase.
(C) FS’s income tax returns through 2012 have been assessed and approved by the Tax Authority. Based on conservatism principle, FS had adjusted and recognised the income tax expense amounting to $2,083 which was assessed by the Tax Authority in 2010. However, FS disagreed with the assessment and availed of administrative remedy by applying for a review of the administrative action with the Tax Authority. After negotiation with the Tax Authority,

146

FS was allowed to recognise operating cost which was previous disallowed amounting to $48,958. As a result, FS had adjusted and recognised the income tax benefit of $8,323 in 2016. In addition, FS’s income tax returns through 2011 have been assessed and the income tax expense was assessed to be $14,353 by the Tax Authority. However, FS disagreed with the assessment and availed of administrative remedy by applying for a review of the administrative action with the Tax Authority, and was settled by the Tax Authority. In 2017, in terms of the amount of $704 recognised as income tax benefit was adjusted on tax Authority’s review result, however, for those which FS disagreed with, FS has filed further appeal to Ministry of Finance thereof. As for the 2012’s business income tax, an amount of $7,081 tax expense has adjusted and recognised accordingly after Tax Authority’s review, however, FS will file for further review for this assessment result.

(D) FVC’s income tax returns through 2012 have been assessed and approved by the Tax Authority, of which the income tax returns through 2010, 2009, and 2008 have been reviewed by the Tax Authority which assessed additional duties amounting to $229 and $84, respectively, and the income tax returns through 2008 that have been reviewed by the Tax Authority who assessed tax refund amounting to $139 had been adjusted in 2016. However, the Company disagreed with the assessment of income tax returns through 2009 and subsequently availed of administrative remedy by applying for an appeal and an administrative lawsuit. The case was then dismissed by the court in September 2017. Later in October 2017, FVC once again brought the case to the administrative court to contend the dismissal order.
(E) FFAM’s income tax returns through 2010 have been assessed by the Tax Authority which assessed additional duties amounting to $7,793, which had been adjusted and recognised in the income tax expense in May 2016 based on conservatism principle. However, FFAM disagreed with the assessment and applied for a review, which was settled by the Tax Authority in October 2016. FFAM was allowed to recognise tax-exempted increment gain on sale of land which was previously disallowed. As a result, FFAM had adjusted and recognised the income tax benefit of $7,591 in 2016.
(F) The Tax Authority has assessed income tax returns of FSIT, FFMC and FPCIA through 2012.
(G) The Tax Authority has assessed income tax returns of FALI, FCBL and FCMI through 2015.
F. The balance of unappropriated earnings were as follows: As of December 31, 2017 and 2016, the balance of unappropriated earnings was generated on and after January 1, 1998.
G. The amendments to the Income Tax Act which were promulgated by the President of the Republic of China on February 7, 2018, the imputation tax system will be abolished, the imputation credit account will no longer be applicable and the Group’s applicable income tax rate will be raised from 17% to 20% effective from January 1, 2018. The amendments on Income Tax Act will increase the Group’s deferred tax assets and deferred tax liabilities by $442,030 and $114,241, respectively, which will be adjusted in the 2018 1[st] quarter financial statement. As of December 31, 2016, the balance of the Group’s imputation credit account amounted to $324,735.

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(42) Earnings per share

Basic

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

Gain and loss attributable to the common stock of the Group (in thousand dollars) Outstanding weighted average common stock (in thousand of shares)(Note) Basic earnings per share (in dollars)	For theyears ended December 31,	For theyears ended December 31,
	2017 $ 15,483,032 12,216,393 1.27	2016
		$ 17,355,998 12,216,393 1.42

Note: The amount was retrospectively adjusted due to the effect of share dividend appropriation on June 16, 2017, and recalculated the basic EPS for the year ended December 31, 2016. For the years ended December 31, 2017 and 2016, the basic EPS were the same with diluted EPS.

148

7. Related party transactions

(1) Details of the related parties

Names of related parties Relationship with the Company Ministry of Finance, R.O.C. Director of Company Bank of Taiwan Director of Company Jin Yuan Investment Co., Ltd Director of Company Global Investment Co., Ltd Director of Company First Commercial Bank Co., Ltd. (“FCB”) Subsidiary of Company FCB Leasing Co., Ltd. (“FCBL”) Subsidiary of FCB First Securities Inc. (“FS”) Subsidiary of Company First Taisec Securities (Asia) Limited Subsidiary of FS First Capital Management Co., Ltd. (“FCMI”) Subsidiary of FS First Securities Investment Trust Co., Ltd. Subsidiary of Company (“FSIT”) First Financial Asset Management Co., Ltd. Subsidiary of Company (“FFAM”) First Venture Capital Co., Ltd. (“FVC”) Subsidiary of Company First Financial Management Consulting Co., Subsidiary of Company Ltd. (“FFMC”) First P&C Insurance Agency Co., Ltd. Subsidiary of Company (“FPCIA”) (On July 27, 2017, FPCIA completed liquidation and income tax filing. On August 15, 2017, its residual was allocated.) First-Aviva Life Insurance Co., Ltd. (“FALI”) Subsidiary of Company FCBL Capital International (B.V.I.) Co., Ltd Subsidiary of FCBL FCB Leasing (Xiamen) Co., Ltd Subsidiary of FCBL Capital International (B.V.I.) Co., Ltd FCB International Leasing Co., Ltd Subsidiary of FCBL Capital International (B.V.I.) Co., Ltd First Financial AMC Capital International Subsidiary of First Financial AMC (“FFAMC”)

First Financial AMC Capital International (B.V.I) Ltd. First Financial of Leasing (Chengdu) Ltd.

First Financial of Leasing (Chengdu) Ltd. Subsidiary of FFAM Capital International (B.V.I.) Co., Ltd East-Asia Real Estate Management Co., Ltd. FCB’s investee accounted for under the equity (“EAREM”) method Turn Cloud Co., Ltd. FCB’s investee accounted for under the equity method Mutual Funds managed by First Securities Mutual funds managed by FSIT - subsidiary of Investment Trust Co., Ltd. (“MF”) the Company First Commercial Bank Education Foundation More than one-third of total fund was donated (“ FCBEF”) by FCB Waterland Financial Holding Co., Ltd. FCB is one of its Directors Taiwan Asset Management Corporation The Company is one of its Directors (TAMCO) Others

Spouses and relatives of the Group’s directors, supervisors, managers and related parties in substance.

149

(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 31,2017
	Highest balance $ 10,200,000	Endingbalance Annual interest rate(%) $ 1,200,000 0.168~0.184 December 31,2016	Annual interest rate(%)
	Highest balance $ 11,000,000	Endingbalance $ 2,700,000	Annual interest rate(%)
			0.170~0.440

For the years ended December 31, 2017 and 2016, the interest income on above related parties were $763 and $1,477, respectively.

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

B. Call loans from banks

Call loans from banks
Other related parties Bank of Taiwan Other related parties Bank of Taiwan		December 31,2017
	Highest balance	Endingbalance	Annual interest rate(%)
	$ 14,000,000	$ -
	Highest balance	Endingbalance	Annual interest rate(%)
	$ 10,000,000	$ -	0.171~0.230

For the years ended December 31, 2017 and 2016, the interest expense on above related parties were $3,335 and $1,191, respectively.

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

150

C. Due from other banks

Due from other banks
Other related parties Bank of Taiwan	December	31,2017
	Endingbalance $ 287,796	Percentage of total industry outstanding balance(%)
		0.95

Other related parties Bank of Taiwan	December	31,2016
	Endingbalance $ 198,629	Percentage of total industry outstanding balance(%)
		0.69

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)	December	31,2017
	Endingbalance $ 1,578,252	Percentage of total deposit balance(%)
		0.08

Other related parties Others (Note)	December	31,2016
	Endingbalance $ 1,599,847	Percentage of total deposit balance(%)
		0.08

For the years ended December 31, 2017 and 2016, the interest expense on above related parties were $26,967 and $24,932, 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.

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151

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 Demand deposit of credit guarantee fund (reserve)	December 31, 2016		Collateral	None	Real estate	Certificates of deposits of FCB real estate land
Status of performance	Non-performing loans	$ -	-	-		Status of performance	Non-performing loans	$ -	-	-
	Performing loans	$ 15,805	625,938	102,047			Performing loans	$ 14,317	442,097	84,352
	Ending balance	$ 15,805	625,938	102,047			Ending balance	$ 14,317	442,097	84,352
	Maximum balance for current period	$ 17,251	635,152	129,248			Maximum balance for current period	$ 14,628	483,502	102,473
Number or name	of related party (Note 2)	39	128	11		Number or name	of related party (Note 2)	33	119	5
	Category of related party (Note 1)	Other related parties	Other related parties	Other related parties			Category of related party (Note 1)	Other related parties	Other related parties	Other related parties
	Items	Consumer loans	Residential mortgage loans	Other loans			Items	Consumer loans	Residential mortgage loans	Other loans

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December 31, 2017	Title of derivative Gain (loss) on Period-end Balance Sheet balance	instrument Nominal valuation for Category of	Name of related party contract Contract period principal current period related party Item Balance	Other related parties A mutual fund managed by FSIT Foreign exchange contracts 2017/12/4~2018/3/6 $ 4,067,644 $ 36,086 Valuation adjustment for trading Assets– currency exchange rate $ 36,086	December 31, 2016	Title of derivative Loss on Period-end Balance Sheet balance	instrument Nominal valuation for Category of	Name of related party contract Contract period principal current period related party Item Balance	Other related parties A mutual fund managed by FSIT Foreign exchange contracts 2016/11/29-2017/2/2 $ 3,141,450 ( $ 22,473 ) Valuation adjustment for trading Liabilities – currency exchange rate $ 22,473	Other related parties Bank of Taiwan Foreign exchange contracts 2016/5/23-2017/5/23 2,255,400 ( 26,593 ) Valuation adjustment for trading Liabilities– currency exchange rate 26,593	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 assets or liabilities at fair value through profit or loss.

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G. Financial assets at fair value through profit or loss

Other related parties Mutual funds managed by FSIT	December	31,2017
	Endingbalance $ 209	Percentage(%)
		-

Other related parties Mutual funds managed by FSIT H. Available-for-sale financial assets Other related parties Mutual funds managed by FSIT	December	31,2016
	Endingbalance $ 215	Percentage(%)
		-


	December	31,2017
	Endingbalance $ 47,896	Percentage(%)
		0.03

December Endingbalance Other related parties Mutual funds managed by FSIT $ 234,645 I. Management fee and marketing service fee receivable December Endingbalance Other related parties Mutual funds managed by FSIT $ 51,751	December	31,2016
	Endingbalance $ 234,645	Percentage(%)
		0.16


	December	31,2017
	Endingbalance $ 51,751	Percentage(%)
		0.07

Other related parties Mutual funds managed by FSIT	December	31,2016
	Endingbalance $ 40,805	Percentage(%)
		0.06

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

Other related parties Mutual funds managed by FSIT (Note) Others	For theyears ended December 31,	For theyears ended December 31,
	2017	2016
	$ 497,626 5,393	$ 436,877 6,158
	$ 503,019	$ 443,035

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.

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K. Rental expense and other expenses

Rental expense and other expenses
Other related parties Others	For theyears ended December 31,
	2017	2016
	$ 9,631	$ 10,583

L. Property transactions

On September 20, 2017, FCB entered into a contract with Turn Cloud Co., Ltd to purchase 5,000 sets of multi-payment POS system amounting to $77,981. As of December 31, 2017, FCB has paid $31,192 for 2000 sets and prepaid $1,560 for 500 sets. In addition, Turn Cloud Co., Ltd deposited a performance guarantee of $4,094 in FCB. Terms and conditions of the related party transactions are not significantly different from those of transactions with third parties.

M.Information on salaries and remunerations to the Group’s management team:

Salaries and other short-term employee benefits Post-employment benefits Severance pay Other long-term employee benefits Total	For theyears ended December 31,	For theyears ended December 31,
	2017	2016
	$ 379,530 7,490 7,049 220	$ 424,694 11,562 234 3,721
	$ 394,289	$ 440,211

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8. Pledged assets

Pledged assets provided by the Group as of December 31, 2017 and 2016 were as follows:

Items Financial assets at fair value through profit or loss Available-for-sale financial assets – bonds Held-to-maturity financial assets Other financial assets- time deposits Investment property Property and equipment Land Buildings and structures Refundable deposits Operating guarantee deposits Items Available-for-sale financial assets – bonds Held-to-maturity financial assets Other financial assets- time deposits Investment property Property and equipment Land Buildings and structures Refundable deposits	December31,2017 $ 10,376 4,839,952 263,579 11,500 429,191 30,000 27,199 1,684,807 864,900 $ 8,161,504 December 31,2016 $ 2,529,414 121,363 11,500 429,191 30,000 27,199 452,626	Purpose of Pledge
		Bid bonds for operating guarantee deposits 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, operating guarantee deposits, Overdraft guarantee. Deposits with Federal Deposit Insurance Corporation (FDIC) and Federal Reserve Bank (FRB) Guarantees for line of settlement advance Short-term secured borrowings, however, there was no secured borrowing for the period. Overdraft loan guarantee, however, there was no overdraft loan for the period. Guarantee deposits with the court for the provisional seizure, deposits for the building lease, operating guarantee deposits of discretionary business, performance bond of discretionary business, operating guarantee deposits of offshore funds business, and so on. Operating guarantee deposits for securities, operating guarantee deposits for insurances, and so on. 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, operating guarantee deposits, Overdraft guarantee. Deposits with Federal Deposit Insurance Corporation (FDIC) and Federal Reserve Bank (FRB) Guarantees for line of settlement advance Short-term secured borrowings, however, there was no secured borrowing for the period. Overdraft loan guarantee, however, there was no overdraft loan for the period. Guarantee deposits with the court for the provisional seizure, deposits for the building lease, operating guarantee deposits of discretionary business, performance bond of discretionary business, operating guarantee deposits of offshore funds business, and so on.

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Items December 31, 2016 Purpose of Pledge Operating guarantee 814,900 Operating guarantee deposits for securities, operating deposits guarantee deposits for insurances, and so on. $ 4,416,193

9. Significant contingent liabilities and unrecognised contractual commitments

(1) FCB has the following commitments as of December 31, 2017 and 2016:

FCB has the following commitments as of December 31, 2017 and 2016:

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 31,2017

$ 131,137,328
67,426,775
32,847,998
69,166,023
131,321,992
265,798,431
280,494
47,178,790
673,826,470
512,371,420
196,062,400
80,456,450

December 31,2016

$ 130,148,898
66,917,079
32,338,366
76,583,755
138,284,060
272,463,199
325,018
61,404,207
752,112,799
422,629,544
211,708,500
80,106,646

(2) Significant litigation

Due to the collapse of the Tung Xin building caused by an earthquake on September 21, 1999, residents of the building filed a civil lawsuit for compensation of tort damages against Hong Cheng Building Co., Ltd., Hong Ku Construction Co., Ltd. (including the directors and supervisors of the aforementioned companies), and FCB. On October 2, 2014, FCB won a lawsuit in accordance with the judgement made by the court. As for criminal liability, the Supreme Court has ruled that the employees of FCB are not guilty. However, some of the residents transferred their compensation claims concerning tort damages by FCB to the Department of Urban Development, Taipei City Government. On September 21, 2016, the Taipei District Court ruled to repeal a portion of the Department of Urban Development, Taipei City Government’s claims. On January 5, 2017, FCB

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received a civil ruling from the Taiwan High Court that reversed the Taipei District Court’s civil ruling on September 21, 2016. FCB has filed an appeal. On October 27, 2017, the Supreme Court reversed the Taiwan High Court’s ruling, which was remanded to the Taiwan High Court. Currently, the case was still under the assessment of the Taiwan High Court.

(3) As of December 31, 2017, FS had entered into agreements to purchase properties and equipment amounting to $29,824, which has not been repaid.

10. Significant losses from disasters:

None.

11. Significant subsequent events:

On January 19, 2018, FSC has officially approved that the Company closed the deal with Aviva Int’l Holdings Ltd. to acquire Aviva’s entire 49% shareholding in joint venture, FALI, which makes it a fully-owned subsidiary of the Company (namely, FL). In addition, on January 25, 2018, the Company’s Board of Directors resolved to increase capital in the subsidiary, FALI, amounting to $1,500,000, in order to enhance the financial structure and expand the capital scale of the subsidiary.

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 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 Group’s financial instruments (e.g. cash and cash equivalents, due from Central Bank and call loans to other banks, securities purchased under resell agreements, receivables, loans discounted, refundable deposits, deposits from the Central Bank and banks, due to Central Bank and other banks, Securities sold under repurchase agreements, payables, deposits and remittances, bonds payable, other financial liabilities and guarantee deposits) was approximate to their fair value. (Please refer to Note 12 (1)D)

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		December 31,2017	December 31,2017	December 31,2017
Financial assets Held-to-maturity financial assets Bond instruments without active market	Book value	Fair value
		Level 1	Level 2	Level 3
	$ 386,605,113 5,977,059	$ 1,938,413 -	$ 385,418,902 5,922,342	$ - -

		December 31,2016
Financial assets Held-to-maturity financial assets Bond instruments without active market	Book value	Fair value
		Level 1	Level 2	Level 3
	$ 344,583,594 5,989,627	$ 1,808,675 -	$ 343,188,546 5,939,534	$ - -

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 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 Rated (Taibor) price curve).

When a financial instrument has no standardised evaluation and with less complexity involved, such as interest rate swap, currency swap and options. The 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

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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 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 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 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 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.
c. Securitisation 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:

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(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 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. Financial instruments not measured at fair value

The methods and assumption used by financial instruments not measured at fair value of the 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

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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.
(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.

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-therun Taiwan central government bonds and derivative instruments with quoted market prices is included in Level 1.

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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 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 Group is included in Level 3.

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(B) Hierarchy of fair value estimation of financial instrument

Financial instruments measured at fair value	December 31,2017	December 31,2017	December 31,2017	December 31,2017
	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 certificates Financial assets at fair value through profit or loss, designated as upon initial recognition Bond investments Available-for-sale financial assets Stock investments Bond investments Beneficiary certificates Others Liabilities Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss, designated as upon initial recognition Derivative financial instruments Assets Financial assets at fair value through profit or loss Liabilities Financial liabilities at fair value throughprofit or loss	$ 2,144,804 14,753,332 48,746,002 155,454 33,734,842 16,067,656 141,680,047 57,025 1,484,983 27,304,241 4,857,702 6,980,139	$ 2,144,804 605,731 - 155,454 26,055 15,117,591 1,725,022 57,025 - - 222,660 62,154	$ - 14,147,601 48,746,002 - 33,708,787 - 139,955,025 - 1,484,983 27,304,241 4,635,042 6,917,985	$ - - - - - 950,065 - - - - - -
Total	$297,966,227	$20,116,496	$276,899,666	$ 950,065

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Financial instruments measured at fair value	December 31,2016	December 31,2016	December 31,2016	December 31,2016
	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 certificates Financial assets at fair value through profit or loss, designated as upon initial recognition Stock investments Bond investments Available-for-sale financial assets Short-term bills Stock investments Bond investments Beneficiary certificates Others Liabilities Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss, designated as upon initial recognition Derivative financial instruments Assets Financial assets at fair value through profit or loss Liabilities Financial liabilities at fair value throughprofit or loss	$ 1,218,543 22,262,335 23,451,613 199,570 104,719 29,866,919 1,096,900 14,769,993 130,234,657 449,424 814,039 15,866,576 9,652,198 7,824,842	$ 1,202,762 754,908 - 199,570 104,719 - - 13,667,732 3,038,194 449,424 - - 213,780 19,995	$ 15,781 21,507,427 23,451,613 - - 29,866,919 1,096,900 - 127,196,463 - 814,039 15,866,576 9,438,418 7,804,847	$ - - - - - - - 1,102,261 - - - - - -
Total	$257,812,328	$19,651,084	$237,058,983	$ 1,102,261

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					Items Beginning balance Ending balance Amount recognised in gain and loss Amount recognised in other comprehensive income Purchased or issued Transferred to Level 3 Sold, disposed or settled Transferred from Level 3 (Note) Non-derivative financial instruments Available-for-sale financial assets $ 1,151,195 ($ 38,575) ($ 33,026) $ 102,008 $ 67,784 ($ 69,561) ($ 77,564) $ 1,102,261 Note1: Due to the valuation method adopting the significant unobservable parameters, therefore, transferred from level 2 to level 3. Note2: All financial assets at fair value through profit or loss have been provided the impairment loss after being assessed by FS. Note3: Stocks above were transferred from Level 3 due to their quoted market prices are available and can be used as basis for fair value measurement. b. Movements of financial liabilities classified into Level 3 of fair value� For the years ended December 31, 2017 and 2016, the Group did not hold any financial liabilities in Level 3.	Items Beginning balance Ending balance Amount recognised in gain and loss Amount recognised in other comprehensive income Purchased or issued Transferred to Level 3 Sold, disposed or settled Transferred from Level 3 (Note) Non-derivative financial instruments Available-for-sale financial assets $ 1,151,195 ($ 38,575) ($ 33,026) $ 102,008 $ 67,784 ($ 69,561) ($ 77,564) $ 1,102,261 Note1: Due to the valuation method adopting the significant unobservable parameters, therefore, transferred from level 2 to level 3. Note2: All financial assets at fair value through profit or loss have been provided the impairment loss after being assessed by FS. Note3: Stocks above were transferred from Level 3 due to their quoted market prices are available and can be used as basis for fair value measurement. b. Movements of financial liabilities classified into Level 3 of fair value� For the years ended December 31, 2017 and 2016, the Group did not hold any financial liabilities in Level 3.
	Ending balance	$ - 950,065			Ending balance	$ 1,102,261
ction	Transferred from Level 3 (Note)	$ - (131,588)		Reduction	Transferred from Level 3 (Note)	($ 77,564)
Redu	Sold, disposed or settled	($ 4,371) (8,422)			Sold, disposed or settled	($ 69,561)
ition	Transferred to Level 3	$ 4,371 49,990		ition	Transferred to Level 3	$ 67,784
Add	Purchased or issued	$ - 131,905		Add	Purchased or issued	$ 102,008
loss on valuation	Amount recognised in other comprehensive income	$ - (141,747)		Gain and loss on valuation	Amount recognised in other comprehensive income	($ 33,026)
Gain and	Amount recognised in gain and loss	$ - (52,334)			Amount recognised in gain and loss	($ 38,575)
	Beginning balance	$ - 1,102,261	December 31, 2016		Beginning balance	$ 1,151,195
	Items	Non-derivative financial instruments Financial liabilities at fair value through profit or loss Financial liabilities held for trading Available-for-sale financial assets			Items	Non-derivative financial instruments Available-for-sale financial assets

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(D) Transfers between Level 1 and Level 2

In 2017, as domestic convertible bonds of Kwong Lung Enterprise Co., Ltd and Rotam Global AgroSciences Co., Ltd had a quoted market price in an active market, FVC transferred its fair values from level 2 to level 1. In 2016, FS reassessed the government bonds and transferred them from level 2 to level 1 as they had an active market.

(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 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 31, 2017	Change in fair value recognised in profit and loss in theperiod	Change in fair value recognised in profit and loss in theperiod	Change in fair value recognised in other comprehensive income	Change in fair value recognised in other comprehensive income
	favorable	unfavorable	favorable	unfavorable
Assets Available-for-sale financial assets	$ -	$ -	$ 95,007	($ 95,007)

December 31, 2016	Change in fair value recognised in profit and loss in theperiod		Change in fair value recognised in other comprehensive income
	favorable	unfavorable	favorable	unfavorable
Assets Available-for-sale financial assets	$ -	$ -	$ 110,226	($ 110,226)

Favorable and unfavorable movements of the 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.

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

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

The multiple significant unobservable inputs of equity instrument investments without active market are independent from each other, thus, they are not correlative.

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Table below summarises quantitative information of significant unobservable inputs:

	Fair value as of December 31, 2017	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	$ 950,065	Market comparable method	Price-Earnings Ratio Price-To-Book Ratio Discount for lack of marketability	Price-Earnings Ratio between 14.30-23.15 Price-To-Book Ratio between 1.41-3.04 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.

	Fair value as of December 31, 2016	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	$ 1,102,261	Market comparable method	Price-Earnings Ratio Price-To-Book Ratio Discount for lack of marketability	Price-Earnings Ratio between 14.28-20.34 Price-To-Book Ratio between 1.21-2.65 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.

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(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 Market, 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.

(2)Management objective and policy for financial risk

A. Scope

The 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 the Group and accomplish the objective of maintaining a reasonable risk and return, to further increase shareholders’ value.

The primary risks arising from operations of the 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, the Group has established a risk management policy, system, process and method. The 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. Organisation 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 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.

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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 authorisation, 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 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.

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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 which 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 authorised 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 authorises FS’ risk management provisions and limits for investments in various business lines in order to ensure the effectiveness of FS’s risk management. The Board of Directors of FS holds the ultimate responsibility for FS’s risk management. In order to strengthen monitoring over various risks and effectively respond to the movements in the financial market, FS has established a “Risk Management Committee” under its Board of Directors to assist and enhance the supervisory, prevention, and control over its risk management.

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

When engaging in its various businesses, FSIT complies with regulations promulgated by the competent authority, subsidiary management provisions established by the Group, and provisions of its internal control system and related operational guidelines. When business units of FSIT establish their internal control system, they consider potential risks (including market risk, credit risk, and liquidity risk) that may occur in order to formulated feasible compliance procedures and management response measures. Aside from incorporating related risk factors into its considerations, FSIT sets the delegated authorisation and risk limits for its transactions to act as the basis for its operations.

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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 Group

In order to effectively evaluate the risks involved in various business of the subsidiaries within the 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 Holding 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 Group are as follows:

(A) Authorisation 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.

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D. Credit risk

(A) Source and definition of credit risk

Financial instruments held by the 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 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 Group. In addition, each significant subsidiary of the Group establishes credit risk controlling procedures and authorisation 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 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 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 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:

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No direct correlation between the internal rating of credit assets and external rating of debt instruments 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 Instruments
		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 BB- to level B+ (including the debt instruments 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 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:

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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 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

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credit rating results are classified into four levels, which are ‘low risk’, ‘medium risk’, ‘medium-high risk’ and ‘high risk’, respectively.

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 instruments 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 management securities is processed in accordance with “Controlling Practice for Credit Trading Risks”, in which the definition of management securities as well as the controlling and authorisation 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.

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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 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 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, 2017 and 2016, please see Note 9 for details.

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

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Loans discounted, and overdue receivable of FCB and its subsidiaries by sector were shown as follows:	December 31, 2017 December 31,2016	Industry Amount % Amount %	Private enterprises $ 823,798,533 51.42 $ 827,420,504 52.93	Private individual 535,658,841 33.43 514,147,428 32.89	Overseas and others 238,055,131 14.86 216,950,768 13.88	Non-profit organisations 4,354,109 0.27 4,188,370 0.26	Government institutions 316,385 0.02 665,712 0.04	Total $ 1,602,182,999 100.00 $ 1,563,372,782 100.00	Loans discounted, and overdue receivable of the FCB and its subsidiaries by location (Note) were shown as follows:	December 31, 2017 December 31, 2016	Amount % Amount %	Geographical location	Asia $ 1,480,359,151 92.40 $ 1,447,900,155 92.61	North America 78,450,433 4.90 77,384,403 4.95	Oceania 23,438,610 1.46 21,323,120 1.37	Europe 19,934,805 1.24 16,765,104 1.07	Total $ 1,602,182,999 100.00 $ 1,563,372,782 100.00	Note: the above geographical analysis was made on the basis of the branch of debtor.

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Loans discounted, and overdue receivable of FCB and its subsidiaries by collateral were shown as follows:	December 31,2017 December 31, 2016	Amount % Amount %	Collateral type	Unsecured loans $ 387,329,864 24.18 $ 385,666,687 24.67	Secured loans	-Real estate 837,146,899 52.25 809,718,336 51.79	-Guarantee 77,081,840 4.81 83,070,169 5.31	-Financial collateral 42,124,780 2.63 33,902,898 2.17	-Other collateral 34,320,747 2.14 42,798,672 2.74	Overseas and others 224,178,869 13.99 208,216,020 13.32	Total $ 1,602,182,999 100.00 $ 1,563,372,782 100.00

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The affected financials from collateral, net settled master netting arrangements and other credit enhancement for the Group’s assets exposed to credit risk were 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, 2017	Collateral	Net settled master nettingarrangements	Other credit enhancement	Total
Balance sheet items
Financial assets measured at fair value throughprofit or loss
Debt instruments	$ -	$ -	$ 3,676,992	$ 3,676,992
Derivative instruments	1,780,330	1,812,167	-	3,592,497
Others	-	-	296,800	296,800
Securities purchased under resell agreements	691,564	-	-	691,564
Receivables
Credit card business	4,663	-	-	4,663
Others	10,605,586	-	394,526	11,000,112
Loans discounted	1,053,498,045	-	84,266,130	1,137,764,175
Available-for-sale financial assets
Bond investments	-	-	8,152,272	8,152,272
Others	-	-	296,800	296,800
Held-to-maturityfinancial assets
Bond investments	-	-	4,996,800	4,996,800
Other financial assets
Others	120	-	-	120
Off-balance sheet items
Irrevocable loan commitments	5,355,109	-	957,720	6,312,829
Unused letters of credit issued	3,588,353	-	1,664,557	5,252,910
All types ofguarantees	12,112,851	-	4,335,247	16,448,098
Total	$ 1,087,636,621	$ 1,812,167	$ 109,037,844	$ 1,198,486,632
		Expressed: In t	housands of New Taiwan Dollars
December 31, 2016	Collateral	Net settled master nettingarrangements	Other credit enhancement	Total
Balance sheet items
Financial assets measured at fair value throughprofit or loss
Debt instruments	$ -	$ -	$ 3,221,286	$ 3,221,286
Derivative instruments	2,217,159	3,953,306	-	6,170,465
Others	-	-	322,200	322,200
Receivables
Credit card business	5,003	-	-	5,003
Others	8,763,551	-	472,232	9,235,783
Loans discounted	1,023,782,222	-	87,356,057	1,111,138,279
Available-for-sale financial assets
Bond investments	-	-	7,526,401	7,526,401
Others	-	-	322,200	322,200
Held-to-maturityfinancial assets
Bond investments	-	-	8,483,220	8,483,220
Other financial assets
Others	1,630	-	-	1,630
Off-balance sheet items
Irrevocable loan commitments	5,228,160	-	293,250	5,521,410
Unused letters of credit issued	3,037,769	-	1,408,256	4,446,025
All types ofguarantees	13,787,526	-	6,297,978	20,085,504
Total	$ 1,056,823,020	$ 3,953,306	$ 115,703,080	$ 1,176,479,406

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Note 1: 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).

(E) Analysis on quality and overdue impairment of financial assets of the Group:

Certain financial assets held by the Group such as cash and cash equivalents, financial assets at fair value through profit and loss, bills and bonds under resale agreement, refundable deposits, operating deposits, clearing and settlement fund and Interbank settlement fund and so on, while the counterparties have good credit rating, the credit risks are deemed extremely low. As a result, these financial assets are not included in the analysis on credit risk quality.

Other than the abovementioned items, credit quality analysis for the rest of financial assets was as follows:

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December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324	December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324	December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324	December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324	December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324	December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324	December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324	December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324	December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324	December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324	December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324	December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324	December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324	December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324	December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324	December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324	December 31, 2017 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 172,514,416 $ - $ - $ - $ 172,514,416 $ - $ - $ 172,514,416 $ - $ 31,569 $ 172,482,847 Other receivables 20,402,219 - - - 20,402,219 111,072 863,947 21,377,238 564,025 233,885 20,579,328 Loans discounted (Note2) 1,213,454,677 341,041,154 26,287,742 18,791,957 1,599,575,530 3,925,641 22,396,823 1,625,897,994 7,387,056 16,791,017 1,601,719,921 Available-for-sale financial assets -Bonds investment 141,680,047 - - - 141,680,047 - - 141,680,047 - - 141,680,047 -Beneficiary certificates 57,025 - - - 57,025 - - 57,025 - - 57,025 -Others 1,484,983 - - - 1,484,983 - - 1,484,983 - - 1,484,983 Held-to-maturity financial assets -Certificates of time deposit purchased 342,035,000 - - - 342,035,000 - - 342,035,000 - - 342,035,000 -Bonds investment 40,286,073 3,500,000 - - 43,786,073 - - 43,786,073 - - 43,786,073 -Others 784,040 - - - 784,040 - - 784,040 - - 784,040 Other financial assets -Bonds investment 2,947,660 300,000 - - 3,247,660 - - 3,247,660 - - 3,247,660 -Investment deposits 2,729,400 - - - 2,729,400 - - 2,729,400 - - 2,729,400 Total $ 1,938,375,540 $ 344,841,154 $ 26,287,742 $ 18,791,957 $ 2,328,296,393 $ 4,036,713 $ 23,260,770 $ 2,355,593,876 $ 7,951,081 $ 17,056,471 $ 2,330,586,324
Net	(A)+(B)+(C)-(D)	$ 172,482,847	20,579,328	1,601,719,921		141,680,047	57,025	1,484,983		342,035,000	43,786,073	784,040		3,247,660	2,729,400	$ 2,330,586,324
Recognised losses(D)	With no individual impaired evidence	$ 31,569	233,885	16,791,017		-	-	-		-	-	-		-	-	$ 17,056,471
	With individual impaired evidence	$ -	564,025	7,387,056		-	-	-		-	-	-		-	-	$ 7,951,081
Total	(A)+(B)+(C)	$ 172,514,416	21,377,238	1,625,897,994		141,680,047	57,025	1,484,983		342,035,000	43,786,073	784,040		3,247,660	2,729,400	$ 2,355,593,876
	Impaired amount (C)	$ -	863,947	22,396,823		-	-	-		-	-	-		-	-	$ 23,260,770
Positions that are past due but not impaired(B)		$ -	111,072	3,925,641		-	-	-		-	-	-		-	-	$ 4,036,713
	Subtotal (A)	$ 172,514,416	20,402,219	1,599,575,530		141,680,047	57,025	1,484,983		342,035,000	43,786,073	784,040		3,247,660	2,729,400	$ 2,328,296,393
Positions that are neither past due nor impaired	High risk	$ -	-	18,791,957		-	-	-		-	-	-		-	-	$ 18,791,957
	Medium-high risk	$ -	-	26,287,742		-	-	-		-	-	-		-	-	$ 26,287,742
	Medium risk	$ -	-	341,041,154		-	-	-		-	3,500,000	-		300,000	-	$ 344,841,154
	Low risk	$ 172,514,416	20,402,219	1,213,454,677		141,680,047	57,025	1,484,983		342,035,000	40,286,073	784,040		2,947,660	2,729,400	$ 1,938,375,540
	December 31, 2017	Due from the Central Bank and call loans to banks (Note1)	Other receivables	Loans discounted (Note2)	Available-for-sale financial assets	-Bonds investment	-Beneficiary certificates	-Others	Held-to-maturity financial assets	-Certificates of time deposit purchased	-Bonds investment	-Others	Other financial assets	-Bonds investment	-Investment deposits	Total

183

December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.	December 31, 2016 Positions that are neither past due nor impaired Positions that are past due but not impaired(B) Impaired amount (C) Total Recognised losses(D) Net Low risk Medium risk Medium-high risk High risk Subtotal (A) (A)+(B)+(C) With individual impaired evidence With no individual impaired evidence (A)+(B)+(C)-(D) Due from the Central Bank and call loans to banks (Note1) $ 206,133,918 $ - $ - $ - $ 206,133,918 $ - $ - $ 206,133,918$ - $ 12,793 $ 206,121,125 Other receivables 16,018,910 - - - 16,018,910 123,845 1,083,551 17,226,306 679,546 111,107 16,435,653 Loans discounted (Note2) 1,197,928,321 316,934,039 26,701,747 22,502,101 1,564,066,208 6,747,987 13,181,643 1,583,995,838 3,182,309 16,130,885 1,564,682,644 Available-for-sale financial assets -Bonds investment 130,234,657 - - - 130,234,657 - - 130,234,657 - - 130,234,657 -Short-term bills 1,096,900 - - - 1,096,900 - - 1,096,900 - - 1,096,900 -Beneficiary certificates 205,223 - - - 205,223 - - 205,223 - - 205,223 -Others 814,039 - - - 814,039 - - 814,039 - - 814,039 Held-to-maturity financial assets -Certificates of time deposit purchased 292,270,000 - - - 292,270,000 - - 292,270,000 - - 292,270,000 -Bonds investment 48,483,044 3,750,000 - - 52,233,044 - - 52,233,044 - - 52,233,044 -Others 80,550 - - - 80,550 - - 80,550 - - 80,550 Other financial assets -Bonds investment 1,712,987 300,000 - - 2,012,987 - - 2,012,987 - - 2,012,987 -Investment deposits 3,976,640 - - - 3,976,640 - - 3,976,640 - - 3,976,640 Total $ 1,898,955,189 $ 320,984,039 $ 26,701,747 $ 22,502,101 $ 2,269,143,076 $ 6,871,832 $ 14.265,194 $ 2,290,280,102 $ 3,861,855 $ 16,254,785 $ 2,270,163,462 Note1: Inter-bank clearing fund not included. Note2: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.
Net	(A)+(B)+(C)-(D)	$ 206,121,125	16,435,653	1,564,682,644		130,234,657	1,096,900	205,223	814,039		292,270,000	52,233,044	80,550		2,012,987	3,976,640	$ 2,270,163,462
Recognised losses(D)	With no individual impaired evidence	$ 12,793	111,107	16,130,885		-	-	-	-		-	-	-		-	-	$ 16,254,785
	With individual impaired evidence	$ -	679,546	3,182,309		-	-	-	-		-	-	-		-	-	$ 3,861,855
Total	(A)+(B)+(C)	$ 206,133,918	17,226,306	1,583,995,838		130,234,657	1,096,900	205,223	814,039		292,270,000	52,233,044	80,550		2,012,987	3,976,640	$ 2,290,280,102
	Impaired amount (C)	$ -	1,083,551	13,181,643		-	-	-	-		-	-	-		-	-	$ 14.265,194
Positions that are past due but not impaired(B)		$ -	123,845	6,747,987		-	-	-	-		-	-	-		-	-	$ 6,871,832
	Subtotal (A)	$ 206,133,918	16,018,910	1,564,066,208		130,234,657	1,096,900	205,223	814,039		292,270,000	52,233,044	80,550		2,012,987	3,976,640	$ 2,269,143,076
Positions that are neither past due nor impaired	High risk	$ -	-	22,502,101		-	-	-	-		-	-	-		-	-	$ 22,502,101
	Medium-high risk	$ -	-	26,701,747		-	-	-	-		-	-	-		-	-	$ 26,701,747
	Medium risk	$ -	-	316,934,039		-	-	-	-		-	3,750,000	-		300,000	-	$ 320,984,039
	Low risk	$ 206,133,918	16,018,910	1,197,928,321		130,234,657	1,096,900	205,223	814,039		292,270,000	48,483,044	80,550		1,712,987	3,976,640	$ 1,898,955,189
	December 31, 2016	Due from the Central Bank and call loans to banks (Note1)	Other receivables	Loans discounted (Note2)	Available-for-sale financial assets	-Bonds investment	-Short-term bills	-Beneficiary certificates	-Others	Held-to-maturity financial assets	-Certificates of time deposit purchased	-Bonds investment	-Others	Other financial assets	-Bonds investment	-Investment deposits	Total

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b. In relation to loans discounted of the Group that were neither past due nor impaired and loans and receivables (including amounts due from Central Bank and inter-bank lending), the credit quality analysis is based on the credit quality rating by client:

December 31, 2017	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
Other receivables(Note)	$192,916,635	$ -	$ -	$ -	$192,916,635
Credit card business	4,616,073	1,375,780	307,994	107,147	6,406,994
Consumer banking	435,160,570	4,973,898	965,348	111,515	441,211,331
Corporate banking	654,606,659	246,824,740	24,039,131	17,252,089	942,722,619
Overseas and others	119,071,375	87,866,736	975,269	1,321,206	209,234,586
Total	$ 1,406,371,312	$ 341,041,154	$ 26,287,742	$ 18,791,957	$ 1,792,492,165

December 31, 2016		Positions that a	re neitherpast due nor impaired
	Low risk	Medium risk	Medium-high risk	High risk	Total
Other receivables(Note)	$ 222,152,828	$ -	$ -	$ -	$ 222,152,828
Credit card business	4,490,295	1,362,509	322,666	114,952	6,290,422
Consumer banking	422,555,906	4,588,181	894,306	100,721	428,139,114
Corporate banking	646,297,293	246,905,940	22,950,276	19,585,138	935,738,647
Overseas and others	124,584,827	64,077,409	2,534,499	2,701,290	193,898,025
Total	$ 1,420,081,149	$ 316,934,039	$ 26,701,747	$ 22,502,101	$ 1,786,219,036

Note: The above other receivables included amounts due from the central bank and inter-bank lending.

c. Aging analysis of overdue financial assets with no impairment of the 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 Group, financial assets overdue for less than 90 days are usually not deemed impaired unless other evidence indicates otherwise.

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Aging analysis of the overdue financial assets with no impairment of the Group:

Items	December 31,2017	December 31,2017	December 31,2017
	Overdue for less than 1 month	Overdue for 1~3 months	Total
Other receivables Loans discounted(Note) Credit card business Consumer banking Corporate banking	$ - 12,675 2,129,924 828,739	$ 111,072 23,884 485,114 445,305	$ 111,072 36,559 2,615,038 1,274,044
Total	$ 2,971,338	$ 1,065,375	$4,036,713

Items	December 31,2016	December 31,2016	December 31,2016
	Overdue for less than 1 month	Overdue for 1~3 months	Total
Other receivables Loans discounted(Note) Credit card business Consumer banking Corporate banking	$ - 19,515 3,170,307 2,659,744	$ 123,845 33,520 490,941 373,960	$ 123,845 53,035 3,661,248 3,033,704
Total	$ 5,849,566	$ 1,022,266	$ 6,871,832

Note: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue receivables: guaranty, acceptances and accounts factoring included.

(Blank)

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	Items December 31, 2017 Loans discounted(Note1) Impaired amount	With individual objective evidence of impairment Individual assessment Corporate loans-secured $ 14,798,667 $ 6,021,756 Residential mortgage loans 167,515 28,256 Overseas and others (Note2) 3,712,152 364,222 Collective assessment Corporate loans-secured 1,412,285 467,080 Residential mortgage loans 1,956,241 374,205 Overseas and others (Note2) 349,963 131,537	Without individual objective evidence of impairment Collective assessment Corporate loans-secured 943,923,480 9,863,704 Residential mortgage loans 413,663,934 4,549,024 Overseas and others (Note2) 245,913,757 2,378,289	Total $ 1,625,897,994 $ 24,178,073		Items December 31, 2016 Loans discounted(Note1) Impaired amount	With individual objective evidence of impairment Individual assessment Corporate loans-secured $ 6,955,962 $ 1,444,755 Residential mortgage loans 64,175 13,597 Overseas and others (Note2) 3,307,493 951,135 Collective assessment Corporate loans-secured 1,147,581 366,581 Residential mortgage loans 1,440,294 283,970 Overseas and others (Note2) 266,138 122,271	Without individual objective evidence of impairment Collective assessment Corporate loans-secured 939,022,128 9,836,022 Residential mortgage loans 405,374,513 4,182,644 Overseas and others (Note2) 226,417,554 2,112,219	Total $ 1,583,995,838 $ 19,313,194	Note 1: Loans (including credit cards), interest receivable derived from loans, accounts unrelated to loans that are reclassified to overdue	receivables: guaranty, acceptances and accounts factoring included.	Note 2: Others refer to small amount of credit loans, consumer banking, cash card and credit card services and so on.

187

Items December 31, 2016 Total receivables(Note) Impaired amount(Note) With individual objective evidence of impairment Individual assessment Receivables $ 1,083,551 $ 679,546 Overseas and others - - Without individual objective evidence of impairment Collective assessment Receivables 149,085,090 67,992 Overseas and others 73,191,583 55,908 Total $ 223,360,224 $ 803,446 Note: Including amounts due from the central bank and inter-bank lending. (F) Policy for assumed collateral management The collaterals assumed by the Group on December 31, 2017 and 2016 were of the nature of land and property and the carrying amounts were all $0. 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. (G)Disclosures made in accordance with the Regulations Governing the Preparation of Financial Reports by Financial Holding Companies	Items December 31, 2016 Total receivables(Note) Impaired amount(Note) With individual objective evidence of impairment Individual assessment Receivables $ 1,083,551 $ 679,546 Overseas and others - - Without individual objective evidence of impairment Collective assessment Receivables 149,085,090 67,992 Overseas and others 73,191,583 55,908 Total $ 223,360,224 $ 803,446 Note: Including amounts due from the central bank and inter-bank lending. (F) Policy for assumed collateral management The collaterals assumed by the Group on December 31, 2017 and 2016 were of the nature of land and property and the carrying amounts were all $0. 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. (G)Disclosures made in accordance with the Regulations Governing the Preparation of Financial Reports by Financial Holding Companies	Items December 31, 2016 Total receivables(Note) Impaired amount(Note) With individual objective evidence of impairment Individual assessment Receivables $ 1,083,551 $ 679,546 Overseas and others - - Without individual objective evidence of impairment Collective assessment Receivables 149,085,090 67,992 Overseas and others 73,191,583 55,908 Total $ 223,360,224 $ 803,446 Note: Including amounts due from the central bank and inter-bank lending. (F) Policy for assumed collateral management The collaterals assumed by the Group on December 31, 2017 and 2016 were of the nature of land and property and the carrying amounts were all $0. 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. (G)Disclosures made in accordance with the Regulations Governing the Preparation of Financial Reports by Financial Holding Companies	Items December 31, 2016 Total receivables(Note) Impaired amount(Note) With individual objective evidence of impairment Individual assessment Receivables $ 1,083,551 $ 679,546 Overseas and others - - Without individual objective evidence of impairment Collective assessment Receivables 149,085,090 67,992 Overseas and others 73,191,583 55,908 Total $ 223,360,224 $ 803,446 Note: Including amounts due from the central bank and inter-bank lending. (F) Policy for assumed collateral management The collaterals assumed by the Group on December 31, 2017 and 2016 were of the nature of land and property and the carrying amounts were all $0. 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. (G)Disclosures made in accordance with the Regulations Governing the Preparation of Financial Reports by Financial Holding Companies	Items December 31, 2016 Total receivables(Note) Impaired amount(Note) With individual objective evidence of impairment Individual assessment Receivables $ 1,083,551 $ 679,546 Overseas and others - - Without individual objective evidence of impairment Collective assessment Receivables 149,085,090 67,992 Overseas and others 73,191,583 55,908 Total $ 223,360,224 $ 803,446 Note: Including amounts due from the central bank and inter-bank lending. (F) Policy for assumed collateral management The collaterals assumed by the Group on December 31, 2017 and 2016 were of the nature of land and property and the carrying amounts were all $0. 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. (G)Disclosures made in accordance with the Regulations Governing the Preparation of Financial Reports by Financial Holding Companies	Items December 31, 2016 Total receivables(Note) Impaired amount(Note) With individual objective evidence of impairment Individual assessment Receivables $ 1,083,551 $ 679,546 Overseas and others - - Without individual objective evidence of impairment Collective assessment Receivables 149,085,090 67,992 Overseas and others 73,191,583 55,908 Total $ 223,360,224 $ 803,446 Note: Including amounts due from the central bank and inter-bank lending. (F) Policy for assumed collateral management The collaterals assumed by the Group on December 31, 2017 and 2016 were of the nature of land and property and the carrying amounts were all $0. 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. (G)Disclosures made in accordance with the Regulations Governing the Preparation of Financial Reports by Financial Holding Companies	Items December 31, 2016 Total receivables(Note) Impaired amount(Note) With individual objective evidence of impairment Individual assessment Receivables $ 1,083,551 $ 679,546 Overseas and others - - Without individual objective evidence of impairment Collective assessment Receivables 149,085,090 67,992 Overseas and others 73,191,583 55,908 Total $ 223,360,224 $ 803,446 Note: Including amounts due from the central bank and inter-bank lending. (F) Policy for assumed collateral management The collaterals assumed by the Group on December 31, 2017 and 2016 were of the nature of land and property and the carrying amounts were all $0. 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. (G)Disclosures made in accordance with the Regulations Governing the Preparation of Financial Reports by Financial Holding Companies
December 31, 2016	Impaired amount(Note)	$ 679,546	-	67,992	55,908	$ 803,446
	Total receivables(Note)	$ 1,083,551	-	149,085,090	73,191,583	$ 223,360,224
Items		Receivables	Overseas and others	Receivables	Overseas and others
		Individual assessment		Collective assessment
		With individual objective evidence of impairment		Without individual objective evidence of impairment		Total

188


December 31, 2017	Coverage ratio (Note 3)	211.41%	712.31%	514.25%	-	550.45%	292.83%	-	358.56%	Coverage ratio	1196.22%	-		Coverage ratio (Note 3)	394.58%	1053.15%	839.65%	-	572.50%	6446.94%	-	625.14%	Coverage ratio	1214.39%	-
	Allowance for doubtful accounts	$ 7,816,566	6,852,351	6,893,109	149	52,909	306,124	422	21,921,630	Allowance for doubtful accounts	144,109	56,184		Allowance for doubtful accounts	$ 6,942,638	5,598,354	6,140,060	167	51,090	240,213	574	18,973,096	Allowance for doubtful accounts	144,051	63,979
	Non-performing loan ratio (%) (Note 2)	0.55%	0.21%	0.32%	-	0.25%	0.38%	-	0.38%	Non-performing loan ratio (%)	0.18%	-	December 31, 2016	Non-performing loan ratio (%) (Note 2)	0.27%	0.12%	0.18%	-	0.21%	0.02%	-	0.20%	Non-performing loan ratio (%)	0.18%	-
	Gross loans	$ 676,021,728	466,582,493	416,072,052	1,490	3,888,893	27,187,227	21,626	1,589,775,509	Balance of receivables	6,703,742	5,117,984		Gross loans	$ 657,603,798	458,892,596	406,657,059	2,284	4,250,587	23,296,776	27,941	1,550,731,041	Balance of receivables	6,518,479	5,618,669
	Non-performing loans (Note 1)	$ 3,697,279	961,994	1,340,423	-	9,612	104,540	-	6,113,848	Non-performing loans	12,047	-		Non-performing loans (Note 1)	$ 1,759,502	531,581	731,263	-	8,924	3,726	-	3,034,996	Non-performing loans	11,862	-
Date & year	Business / Items	Secured loans	Unsecured loans	Residential mortgage loans (Note 4)	Cash cards	Micro credit loans (Note 5)	Secured	Unsecured				Note 7)					tgage loans		ns (Note 5)	Secured	Unsecured				Note 7)
							Others (Note 6)		business		ervices	urse factoring (		ems	Secured loans	Unsecured loans	Residential mor (Note 4)	Cash cards	Micro credit loa	Others (Note 6)		business		ervices	urse factoring (
		Corporate Banking		Consumer Banking					Gross loans		Credit card s	Without reco	Date & year	Business / It	Corporate Banking		Consumer Banking					Gross loans		Credit card s	Without reco

189

The amount recognised 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.	dated July 6, 2005.	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.	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.	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.	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.	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.	Pursuant to the Jin-Guan-Yi (5) Letter No. 094000494 dated July 19, 2005 amount of without recourse factoring will be recognised as overdue accounts within three	Pursuant to the Jin-Guan-Yi (5) Letter No. 094000494 dated July 19, 2005 amount of without recourse factoring will be recognised as overdue accounts within three	months after the factor or insurance company resolves not to compensate the loss.
1.				2.		3.		4.		5.	6.		7.

190

						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)) $ 1,593 $ 25,399 Perform in accordance with debt liquidation program and restructuring program (Note (b)) 38,764 126,103 Total $ 40,357 $ 151,502 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 supplementary disclosure about credit reporting and information disclosure is pursuant to provisions relating to cases such as preliminary negotiation, preliminary conciliation, restructuring and liquidation led by banks under the “Customer Debt Clearance Act”, as regulated in Jin-Guan-Yin-(I)-Zi Letter No. 09700318940 on September 15, 2008 and Jin-Guan-Yin-Fa Letter No. 10500134790 on September 20, 2016.	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)) $ 1,593 $ 25,399 Perform in accordance with debt liquidation program and restructuring program (Note (b)) 38,764 126,103 Total $ 40,357 $ 151,502 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 supplementary disclosure about credit reporting and information disclosure is pursuant to provisions relating to cases such as preliminary negotiation, preliminary conciliation, restructuring and liquidation led by banks under the “Customer Debt Clearance Act”, as regulated in Jin-Guan-Yin-(I)-Zi Letter No. 09700318940 on September 15, 2008 and Jin-Guan-Yin-Fa Letter No. 10500134790 on September 20, 2016.	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)) $ 1,593 $ 25,399 Perform in accordance with debt liquidation program and restructuring program (Note (b)) 38,764 126,103 Total $ 40,357 $ 151,502 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 supplementary disclosure about credit reporting and information disclosure is pursuant to provisions relating to cases such as preliminary negotiation, preliminary conciliation, restructuring and liquidation led by banks under the “Customer Debt Clearance Act”, as regulated in Jin-Guan-Yin-(I)-Zi Letter No. 09700318940 on September 15, 2008 and Jin-Guan-Yin-Fa Letter No. 10500134790 on September 20, 2016.	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)) $ 1,593 $ 25,399 Perform in accordance with debt liquidation program and restructuring program (Note (b)) 38,764 126,103 Total $ 40,357 $ 151,502 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 supplementary disclosure about credit reporting and information disclosure is pursuant to provisions relating to cases such as preliminary negotiation, preliminary conciliation, restructuring and liquidation led by banks under the “Customer Debt Clearance Act”, as regulated in Jin-Guan-Yin-(I)-Zi Letter No. 09700318940 on September 15, 2008 and Jin-Guan-Yin-Fa Letter No. 10500134790 on September 20, 2016.
December 31, 2017	Total amount of overdue receivables exempted from reporting to the competent authority	$ 19,187	131,244	$ 150,431	December 31, 2016	Total amount of overdue receivables exempted from reporting to the competent authority	$ 25,399	126,103	$ 151,502
	Total amount of non-performing loans exempted from reporting to the competent authority	$ 1,069	34,128	$ 35,197		Total amount of non-performing loans exempted from reporting to the competent authority	$ 1,593	38,764	$ 40,357
		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

191

c. Profile of concentration of credit risk and credit extensions of the FCB

December31,2017	December31,2017	December31,2017	December31,2017
Ranking (NoteІ)	Type of industry (Note II)	Total outstanding loan amount (Note III)	Total outstanding loan amount/FCB net worth of the currentperiod(%)
1 2 3 4 5 6 7 8 9 10	A. Group Ocean Transportation B. Group Man-made Fiber Spinning C. Group Real Estate Development D. Group Iron and Steel Rolls over Extends and Crowding E. Group Property Leasing F. Group Man-made Fiber Woven Fabrics G. Group Investment Consultation H. Group Wireless Telecom I. Group Manufacture of Electric Wires and Cables J. Group Manufacturer of vessels and floatingequipment	$ 19,628,351 12,045,579 11,684,064 10,656,414 9,081,728 7,720,153 7,641,329 7,194,982 7,153,641 7,041,477	10.21% 6.27% 6.08% 5.54% 4.72% 4.02% 3.97% 3.74% 3.72% 3.66%

December 31,2016	December 31,2016	December 31,2016	December 31,2016
Ranking (NoteІ)	Type of industry (Note II)	Total outstanding loan amount (Note III)	Total outstanding loan amount/FCB net worth of the currentperiod(%)
1 2 3 4 5 6 7 8 9 10	A. Group Ocean Transportation B. Group Man-made Fiber Spinning C. Group Man-made Fiber Woven Fabrics D. Group Investment Consultation E. Group Iron and Steel Rolls over Extends and Crowding F. Group Real Estate Development G. Group Property Leasing H. Group Unclassified Other Financial Services I. Group Unclassified Other Financial Intermediation J. GroupManufacture ofComputer	$ 21,944,723 13,000,085 12,884,856 12,050,670 10,645,012 10,232,727 8,786,855 8,140,127 7,903,743 7,865,713	11.51% 6.82% 6.76% 6.32% 5.58% 5.37% 4.61% 4.27% 4.15% 4.13%
Note:

I. Ranking the top 10 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.

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.

192

E. Liquidity risk

(A) Resource and definition of liquidity risk

The liquidity risk of the 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 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 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.

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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 utilisation 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 Utilisation” 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.

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 responsible manager 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.

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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 event 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

Aside from utilising capital for long-term and short-term investment, FSIT needs to maintain proper operating capital for daily operations. The remaining capital should avoid overconcentration in particular positions and, in principle, should be utilised in holding liquid and superior interest-bearing assets in accordance with FSIT’s “Guideline Governing Capital Liquidity Risk”.

FSIT’s unit responsible for managing capital adjusts liquidity gaps according to changes in the daily capital movement volume and market conditions to ensure appropriate liquidity. In the event of a credit rating downgrade, financial crisis, natural disaster or other force majeure events that result in its capital being critically insufficient, FSIT’s responses are conducted according to its “Crisis Management Guideline”.

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. 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.

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(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 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 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.

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Total			132,357,039	100,354,153	692,928	659,170,975	1,602,459,813	5,655,704	78,966,344			1,616,474	51,421	608,332	47,621	89,025	2,222,169	222,660	2,584,541,658			153,840,969	1,283,778,061	730,836,366	3,021,427	22,968,835	13,423,337	27,304,240	29,300,000	126,545,133			3,840,843	1,940	400	573,632	47,717	239,466	2,054,216	62,089	66	159,770	2,397,998,507	186,516,151
1 year or above			28,847,981 $	-	-	206,336,034	919,306,045	82,399	6,559,126			62	-	-	-	6,382	2,112,384	94,515	1,163,344,928			-	1,013,316,700	16,610,084	36,272	-	-	20,916,036	25,150,000	35,419,783			-	-	-	-	-	7,433	1,934,025	-	-	112,418	1,113,502,751	49,842,177 $
91 - 180 days 181 days – 1 year			6,930,589 $ 7,785,825 $	2,392,069 1,642,590	- -	13,393,979 89,425,760	172,464,776 183,551,352	403,236 521,347	3,652,310 1,031,770			202,262 131,266	- -	161,531 268,765	- -	50,789 31,854	43,762 51,229	- -	199,695,303 284,441,758			5,270,080 1,369,923	62,803,810 89,075,612	142,413,814 237,896,631	447,404 265,789	- -	618,007 44,003	6,388,204 -	4,150,000 -	4,788,806 1,773,009			246,370 217,613	- -	- -	161,165 269,109	- -	68,619 55,133	45,968 56,638	6,209 -	- -	5,624 34,281	227,414,098 331,057,741	27,718,795) ($ 46,615,983) $
			$																																									($
31 - 90 days			7,030,353	19,107,751	-	29,998,512	168,638,448	603,207	8,121,375			519,294	26,082	124,235	25,071	-	8,999	40,548	234,243,875			30,806,575	60,427,455	200,097,324	481,109	479,828	915,421	-	-	4,608,582			1,454,455	316	400	88,507	25,071	108,281	15,622	18,627	-	1,150	299,528,723	65,284,848)
			$																																									($
0 - 30 days			81,762,291	77,211,743	692,928	320,016,690	158,499,192	4,045,515	59,601,763			763,590	25,339	53,801	22,550	-	5,795	87,597	702,788,794			116,394,391	58,154,484	133,818,513	1,790,853	22,489,007	11,845,906	-	-	79,954,953			1,922,405	1,624	-	54,851	22,646	-	1,963	37,253	66	6,279	426,495,194	276,293,600
			$																																									$
December 31, 2017	1.Primary capital inflow upon maturity	Non-derivative instrument	Cash and due from other banks	Call loans and overdrafts	Bonds (bills) purchased under a repurchase agreement	Securities investment	Loans discounted	Interest receivables and income	Other capital inflow upon maturity	Derivative instrument	Non-hedge	FX contracts (swaps and forwards)	FX margin trading	FX and involving stock options held	Commodity options held	Cross currency swap contracts (exclusive of notional principal)	Interest rate related contracts (interest rate swaps and asset swap excluding the principal of bonds)	Futures	Total	2.Primary capital outflow upon maturity	Non-derivative instrument	Call loans, overdrafts and due to other banks	Demand deposits	Time deposits	Interest payables	Commercial papers payables	Bonds (bills) purchased under a repurchase agreement	Financial liabilities at fair value through profit and loss – non-derivatives	Bonds payable	Other capital outflow upon maturity	Derivative instrument	Non-hedge	FX contracts (swaps and forwards)	FX margin trading	Non-delivery forwards	Issuing FX and stock options	Commodity options written	Cross currency swaps (excluding the notional principal)	Interest rate related contracts (interest rate swaps and asset swaps excluding the principal of bonds)	Liabilities for issuance of call (put) warrants	Put options-futures	Convertible bond asset swap options	Total	3.Gap upon maturity

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1 year or above Total			$ 28,534,839 $ 143,659,640	- 118,836,181	212,075,088 579,626,731	845,955,690 1,550,694,912	51,230 5,300,895	5,055,428 66,372,258			457 4,394,095	- 172,609	- 10,204	- 1,536,993	- 72,678	17,471 237,283	2,528,088 3,014,555	94,474 213,781	1,094,312,765 2,474,142,815			- 125,998,036	995,176,342 1,249,547,101	21,452,928 723,141,059	204,328 2,595,454	- 12,596,063	- 9,995,347	9,172,372 15,866,577	29,300,000 42,300,000	39,938,789 126,164,299			347 2,821,136	- 3,070	- 6,872	- 1,423,795	- 72,799	49,805 253,513	2,713,771 3,153,655	- 19,903	- 92	62,375 70,007	1,098,071,057 2,316,028,778	($ 3,758,292) $ 158,114,037
181 days – 1 year			$ 7,997,661	416,088	74,388,097	213,226,163	448,161	2,001,599			364,160	-	-	388,057	72,678	128,169	304,336	-	299,735,169			985,895	88,086,238	229,485,066	313,744	-	120,795	1,533,001	13,000,000	9,215,439			462,565	-	-	391,613	72,799	65,918	285,109	-	-	6,067	344,024,249	($ 44,289,080)
91 - 180 days			$ 5,706,339	3,690,924	7,211,888	179,493,632	322,298	4,120,241			1,107,472	9,722	-	506,158	-	91,643	25,497	-	202,285,814			4,989,368	54,577,838	136,835,573	254,359	-	492,287	3,466,612	-	4,586,820			852,984	45	-	507,182	-	38,299	29,718	1,989	-	414	206,633,488	($ 4,347,674)
0 - 30 days 31 - 90 days			$ 95,530,753 $ 5,890,048	92,315,658 22,413,511	257,932,804 28,018,854	147,297,665 164,721,762	3,960,854 518,352	47,299,335 7,895,655			1,606,428 1,315,578	153,354 9,533	215 9,989	188,636 454,142	- -	- -	4,687 151,947	93,386 25,921	646,383,775 231,425,292			92,308,589 27,714,184	53,008,054 58,698,629	145,227,393 190,140,099	1,377,190 445,833	10,632,964 1,963,099	5,425,899 3,956,366	- 1,694,592	- -	65,916,055 6,507,196			611,077 894,163	2,817 208	6,829 43	166,570 358,430	- -	48,989 50,502	3,679 121,378	11,942 5,972	92 -	882 269	374,749,021 292,550,963	$ 271,634,754 ($ 61,125,671)
December 31, 2016	1.Primary capital inflow upon maturity	Non-derivative instrument	Cash and due from other banks	Call loans and overdrafts	Securities investment	Loans discounted	Interest receivables and income	Other capital inflow upon maturity	Derivative instrument	Non-hedge	FX contracts (swaps and forwards)	FX margin trading	Non-delivery forwards	FX and involving stock options held	Commodity options held	Cross currency swap contracts (exclusive of notional principal)	Interest rate related contracts (interest rate swaps and asset swap excluding the principal of bonds)	Futures	Total	2.Primary capital outflow upon maturity	Non-derivative instrument	Call loans, overdrafts and due to other banks	Demand deposits	Time deposits	Interest payables	Commercial papers payables	Bonds (bills) purchased under a repurchase agreement	Financial liabilities at fair value through profit and loss – non-derivatives	Bonds payable	Other capital outflow upon maturity	Derivative instrument	Non-hedge	FX contracts (swaps and forwards)	FX margin trading	Non-delivery forwards	Issuing FX and stock options	Commodity options written	Cross currency swaps (excluding the notional principal)	Interest rate related contracts (interest rate swaps and asset swaps excluding the principal of bonds)	Liabilities for issuance of call (put) warrants	Options sold – futures	Convertible bond asset swap option	Total	3.Gap upon maturity

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Maturity analysis for above demand deposits are amortised 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, 2017 and 2016, the payment on period of 0-30 days will be increased by $1,225,623,577 and $1,196,539,047, respectively.

(D)Maturity analysis for items off the balance sheet

The banking subsidiary and its subsidiaries’ loans, credit commitments and the balance of letters of credit included the unused loan commitments and unused balance of letters of credit; the financial guarantee contracts are limited to those in which the subsidiaries are either guarantors or in another case, issuers of standby letters of credit.

The earliest execution timing of the off balance sheet financial instrument contracts of the banking subsidiary and its subsidiaries are most likely in less than one year:

Financial instruments contracts	December31,2017	December31,2017	December31,2017
	Within oneyear	More than oneyear	Total
Unused loan commitments (Note) Unused credit commitments for credit cards Unused letters of credit issued Variousguarantees	$ 5,277,928 67,426,775 30,746,610 35,055,785	$ 125,859,400 - 2,101,388 34,110,238	$ 131,137,328 67,426,775 32,847,998 69,166,023
Total	$ 138,507,098	$ 162,071,026	$ 300,578,124

Financial instruments contracts	December 31,2016
	Within oneyear	More than oneyear	Total
Unused loan commitments (Note) Unused credit commitments for credit cards Unused letters of credit issued Variousguarantees	$ 1,706,874 66,917,079 29,414,751 43,444,613	$ 128,442,024 - 2,923,615 33,139,142	$ 130,148,898 66,917,079 32,338,366 76,583,755
Total	$ 141,483,317	$ 164,504,781	$ 305,988,098

Note: Above unused loan commitments included irrevocable loan commitment except for the significant adverse movement.

(E)Maturity analysis on lease contract and capital expense commitment

Lease commitment of the Group includes operating lease and finance lease.

Operating lease commitment is the minimum rental that the Group should make as a lessee or lessor under the lease term not revocable.

Capital expenditure commitment of the 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 Group:

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		Expressed In Thousands of New Taiwan Dollars	Expressed In Thousands of New Taiwan Dollars	Expressed In Thousands of New Taiwan Dollars
December31,2017	Less than 1year	1 to5 years	More than5 years	Total
Lease commitment Operating lease expense (Lessee) Operating lease income (Lessor)	$ 681,698 ( 502,904)	$ 1,239,976 ( 1,136,576)	$ 766,454 (540,133)	$ 2,688,128 ( 2,179,613)
Total	$178,794	$103,400	$226,321	$ 508,515

December 31,2016	Less than 1year	1 to 5years	More than 5years	Total
Lease commitment Operating lease expense (Lessee) Operating lease income (Lessor)	$ 195,354 ( 546,859)	$ 1,413,210 ( 1,204,332)	$ 1,258,297 (291,371)	$ 2,866,861 ( 2,042,562)
Total	($ 351,505)	$208,878	$ 966,926	$824,299

The present value of finance lease had been recognised under finance lease liabilities. As the amount was immaterial and the liquidity risk was low, no analysis on its maturity value will be taken.

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(F)Disclosure required by Regulations Governing the Preparation of Financial Statements by Financial Holdings Companies
a. Structural analysis of NTD time to maturity (FCB)

			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	Expressed In Thousands of New Taiwan Dollars
			December 31,2017
	Total	0~10 days	11~30 days	31~90 days	91 ~ 180 days	181 days ~ 1year	Over 1year
Primary capital inflow upon maturity	$2,022,921,517	$314,377,095	$ 220,085,857	$175,560,051	$ 155,875,938	$ 247,051,064	$ 909,971,512
Primary capital outflow upon maturity	(2,623,598,815)	(141,716,655)	( 198,765,270)	(382,690,014)	( 342,265,125)	(422,343,341)	( 1,135,818,410)
Gap	($600,677,298)	$172,660,440	$ 21,320,587	($207,129,963)	($ 186,389,187)	($175,292,277)	($ 225,846,898)

			December 31,2016
	Total	0~10 days	11~30 days	31~90 days	91 ~ 180 days	181 days ~ 1year	Over 1year
Primary capital inflow upon maturity	$1,952,825,319	$264,393,645	$ 225,612,042	$184,248,272	$ 161,832,284	$ 270,568,239	$ 846,170,837
Primary capital outflow upon maturity	(2,681,615,546)	(139,668,254)	( 176,545,606)	(353,032,259)	(388,400,951)	(487,872,361)	( 1,136,096,115)
Gap	($728,790,227)	$124,725,391	$ 49,066,436	($168,783,987)	($226,568,667)	($217,304,122)	($ 289,925,278)

Note: The amounts listed above represent from subsidiary FCB denominated in New Taiwan dollars only.

b. Structural analysis of USD time to maturity (FCB)

b. Structural analysis of USD time to maturity (FCB)	b. Structural analysis of USD time to maturity (FCB)	b. Structural analysis of USD time to maturity (FCB)	b. Structural analysis of USD time to maturity (FCB)	b. Structural analysis of USD time to maturity (FCB)	b. Structural analysis of USD time to maturity (FCB)	b. Structural analysis of USD time to maturity (FCB)
Expressed In Thousands of US Dollars
December 31,2017
	Total	0~30 days	31~90 days	91~180 days	181 days ~ 1year	Over 1year
Primary capital inflow upon maturity Primary capital outflow upon maturity	$ 27,035,794 ( 32,695,895)	$ 10,958,597 ( 9,536,101)	$ 7,105,575 ( 6,393,517)	$ 2,066,356 ( 4,424,415)	$ 1,452,045 ( 5,505,000)	$ 5,453,221 (6,836,862)
Gap	($ 5,660,101)	$ 1,422,496	$712,058	($ 2,358,059)	($ 4,052,955)	($1,383,641)

December 31,2016
	Total	0~30 days	31~90 days	91~180 days	181 days ~ 1year	Over 1year
Primary capital inflow upon maturity Primary capital outflow upon maturity	$ 23,897,689 ( 29,968,028)	$ 10,222,339 ( 9,149,792)	$ 4,629,456 ( 5,459,269)	$ 2,791,439 ( 4,126,125)	$ 1,147,952 ( 5,007,342)	$ 5,106,503 ( 6,225,500)
Gap	($ 6,070,339)	$ 1,072,547	($ 829,813)	($ 1,334,686)	($ 3,859,390)	($ 1,118,997)

Note: The amounts listed above represent from subsidiary FCB denominated in U.S. dollars only.

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 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 Group.

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The market risks that the 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 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 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 Group.

Major subsidiaries of the Group have various market risk management policies, standards, key points and the regulations from competent authorities and the Company to comply.

a. FCB 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.

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In order to identify, evaluate, control and monitor market risks that the 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 authorisation. 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 authorisation, 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 FCB assesses various risk indicators regularly as required by the policies and monitors various risk indicators to be within the limits authorised by the Board of Directors. Any excess over the limits and the usage level of risk limits are summarised 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 derivative product, the authorisation 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 Group’s management procedure for market risk of interest rate risk, exchange risk and equity securities are as follows:

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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 (PV01, 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 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 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, FCB 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 (PV01, Delta, Vega, Gamma), stress losses and others.

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Definitions of various indicators:

PV01: It is the change in related amount of interest rate instrument when the interest rate moves by 1 bp (1bp = 0.01%).

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 points.

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 ±100bps 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.

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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.

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-toModel 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

FCB executes stress testing on ±100bps 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.

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d. Evaluation method

Evaluation is calculated based on the risk-sensitive index verified by system calculation. In addition, stress testing is performed based on +/-100bps annual interest rate movement and reported to the risk management committee regularly.

(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 FCB. Interest movement might change FCB’s net interest income and other interestsensitive incomes which further affects FCB’s earnings. Meanwhile, interest movement could also affect positions in and off FCB’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 FCB, 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 FCB 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 stabilise 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.

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(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.

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 Group 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

FCB executes stress testing on +/-15% weighted average index of Taiwan stock movement on a monthly basis and reports to the risk management committee regularly.

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(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.

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
	For theyear ended December 31,2017
	Average	Maximum	Minimum
Foreign exchange VaR	57,442	138,881	31,702
Interest VaR	29,268	45,307	11,046
Equitysecurities VaR	119,879	156,561	83,376
Total VaR	206,589	340,749	126,124

(L) Foreign exchange risk gap

As of December 31, 2017 and 2016, the following table summarises financial instruments of foreign denominated assets and liabilities by currency of which the foreign exchange exposure was presented by the carrying amount:

	Expressed In Thousands of New Taiwan Dollars December31,2017 USD RMB $ 10,980,161 $ 6,842,977 47,818,887 28,417,361 19,190,452 471,442 48,845,164 14,776,108 245,175,207 20,121,447 19,604,099 2,265,085 3,489,221 4,457,935 2,123,176 2,743,415 $ 397,226,367$ 80,095,770 $ 89,878,829 $ 3,791,784 421,288,904 60,332,426 28,946,330 691 14,219,844 237,462 34,107,341 3,156,241 $ 588,441,248 $ 67,518,604

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
	USD $ 10,980,161 47,818,887 19,190,452 48,845,164 245,175,207 19,604,099 3,489,221 2,123,176 $ 397,226,367 $ 89,878,829 421,288,904 28,946,330 14,219,844 34,107,341 $ 588,441,248

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	Expressed In Thousands of New Taiwan Dollars December31,2016 USD RMB $ 8,992,267 $ 4,714,932 72,362,038 16,334,264 21,470,589 235,204 38,775,599 16,440,932 233,181,109 21,730,266 19,715,735 2,234,189 6,378,289 5,504,237 1,315,094 3,976,702 $ 402,190,720 $ 71,170,726 $ 65,140,857 $ 5,818,294 380,786,272 62,186,310 15,014,785 444 11,169,610 71,216 25,064,770 3,461,112 $ 497,176,294 $ 71,537,376

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
	USD $ 8,992,267 72,362,038 21,470,589 38,775,599 233,181,109 19,715,735 6,378,289 1,315,094 $ 402,190,720 $ 65,140,857 380,786,272 15,014,785 11,169,610 25,064,770 $ 497,176,294

Note: As of December 31, 2017 and 2016, the exchange rate of USD to NTD was 29.680 and 32.220, respectively. In addition, as of December 31, 2017 and 2016, the exchange rate of RMB to NTD was 4.549 and 4.624, 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.

The 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, as of 2017, if NTD to USD depreciate / appreciate by 3%, NTD to AUD depreciate / appreciate by 3% or NTD to RMB and other currencies depreciate / appreciate by 4%; and as of 2016, if NTD to USD depreciate / appreciate by 3%, RMB depreciate / appreciate by 5%, AUD to other currencies depreciates/appreciates by 4%, the sensitivity of the gain and loss on the net foreign exchange position held by the Group is shown in the below table.

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c. Equity securities risk

Given that all the other variables remain constant, if the equity price rises/falls by 5% (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 Group are shown in the below table:

d. Sensitivity analysis is summarised as follows:

December31,2017 (Expressed In Thousands of New Taiwan Dollars)	December31,2017 (Expressed In Thousands of New Taiwan Dollars)	December31,2017 (Expressed In Thousands of New Taiwan Dollars)	December31,2017 (Expressed In Thousands of New Taiwan Dollars)
Major risk	Movements	Effects on gain and loss	Effects on equity
Foreign exchange risk	NTD to USD depreciate by 3%, NTD to AUD depreciate by 3%, NTD to RMB and other currencies depreciate by4%.(Note 1)	179,951	-
Foreign exchange risk	NTD to USD appreciate by 3%, NTD to AUD appreciate by 3%, NTD to RMB and other currencies appreciate by4%.(Note 2)	( 179,951)	-
Interest rate risk	Main interest rate curve increases by20bps	( 323,524)	( 984,777)
Interest rate risk	Main interest rate curve decreases by20bps	300,061	979,573
Equity securities risk	Weighted average index of Taiwan Stock Exchange Market rises by 5%.	327,911	277,816
Equity securities risk	Weighted average index of Taiwan Stock Exchange Market falls by 5%.	( 328,745)	( 277,816)
December 31,2016 (Expressed In Thousands of New Taiwan Dollars)
Major risk	Movements	Effects on gain and loss	Effects on equity
Foreign exchange risk	NTD to USD depreciate by 3%, NTD to RMB depreciate by 5%, NTD to AUD and other currencies depreciate by4%.(Note3)	119,848	( 3,053)
Foreign exchange risk	NTD to USD appreciate by 3%, NTD to RMB appreciate by 5%, NTD to AUD and other currencies appreciate by4%.(Note 4)	( 119,848)	3,053
Interest rate risk	Main interest rate curve increases by20 bps	( 251,600)	( 879,973)
Interest rate risk	Main interest rate curve decreases by20bps	259,415	909,414
Equity securities risk	Weighted average index of Taiwan Stock Exchange Market rises by 5%.	265,777	297,858
Equity securities risk	Weighted average index of Taiwan Stock Exchange Market falls by5%.	( 265,777)	( 297,858)

Note 1: If NTD to USD, AUD, RMB and other currencies respectively depreciate by 3%, 3%, 4% and 4%, the effects on profit (loss) will be $275,162, $4,198, ($125,760) and $22,500, the effect on equity is USD ($35).

Note 2: If NTD to USD, AUD, RMB and other currencies respectively appreciate by 3%, 3%, 4% and 4%, the effects on profit (loss) will be ($275,162), ($4,198), $125,760 and ($22,500), the effect on equity is USD $35.

Note 3: If NTD to USD, RMB, AUD and other currencies respectively depreciate by 3%, 5%, 4% and 4%, the effects on profit (loss) will be $231,460, ($119,194), $1,720

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and $5,862, the effect on equity is USD ($1,072) and ($1,981) in other currencies, respectively.

Note 4: If NTD to USD, RMB, AUD and other currencies respectively appreciate by 3%, 5%, 4% and 4%, the effects on profit (loss) will be ($231,460), $119,194, ($1,720)and ($5,862), the effect on equity is USD $1,072 and $1,981 in other currencies, respectively.
(N) Disclosure made in accordance with Regulations Governing the Preparation of Financial Reports by Public Banks

by Public Banks	by Public Banks	by Public Banks	by Public Banks	by Public Banks	by Public Banks
Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (NTD) December 31, 2017 (Expressed In Thousands of New Taiwan Dollars,%)
Item	1~90 days	91~180 days	181 days~1year	Over 1year	Total
Interest-rate-sensitive assets	1,534,536,605	16,126,034	89,441,199	156,779,207	1,796,883,045
Interest-rate-sensitive liabilities	344,733,926	1,004,874,847	99,243,992	32,862,473	1,481,715,238
Interest-rate-sensitivegap	1,189,802,679	(988,748,813)	(9,802,793)	123,916,734	315,167,807
Net					192,259,166
Ratio of interest-rate-sensitive assets to interest-rate-sensitive liabilities(%)					121.27%
Ratio of interest-rate-sensitivegapto stockholders’ equity (%)					163.93%

Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (NTD) December 31, 2016

Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (NTD) December 31, 2016	Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (NTD) December 31, 2016	Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (NTD) December 31, 2016	Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (NTD) December 31, 2016	Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (NTD) December 31, 2016	Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (NTD) December 31, 2016
(Expressed In Thousands of New Taiwan Dollars,%)
Item	1~90 days	91~180 days	181 days~1year	Over 1year	Total
Interest-rate-sensitive assets	1,463,251,750	13,779,281	79,596,827	164,204,087	1,720,831,945
Interest-rate-sensitive liabilities	357,717,601	986,827,936	109,629,416	40,689,116	1,494,864,069
Interest-rate-sensitivegap	1,105,534,149	(973,048,655)	(30,032,589)	123,514,971	225,967,876
Net					190,631,086
Ratio of interest-rate-sensitive assets to interest-rate-sensitive liabilities(%)					115.12%
Ratio of interest-rate-sensitivegapto stockholders’ equity (%)					118.54%

Note: The amounts listed above represent the items denominated in NTD for the Bank, excluding contingent assets and contingent liabilities.

Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2017

Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2017	Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2017	Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2017	Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2017	Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2017	Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2017
(Expressed In Thousands of USD,%)
Item	1~90 days	91~180 days	181 days~1year	Over 1year	Total
Interest-rate-sensitive assets	22,415,840	2,130,015	818,627	514,465	25,878,947
Interest-rate-sensitive liabilities	14,495,415	8,016,129	1,687,357	14,801	24,213,702
Interest-rate-sensitivegap	7,920,425	(5,886,114)	(868,730)	499,664	1,665,245
Net value					6,477,735
Ratio of interest-rate-sensitive assets to interest-rate-sensitive liabilities(%)					106.88%
Ratio of interest-rate-sensitivegapto stockholders’ equity (%)					25.71%

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Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2016

Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2016	Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2016	Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2016	Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2016	Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2016	Subsidiary FCB sensitivity analysis of interest rate for assets and liabilities (USD) December 31, 2016
(Expressed In Thousands of USD,%)
Item	1~90 days	91~180 days	181 days~1year	Over 1year	Total
Interest-rate-sensitive assets	18,773,131	3,019,806	945,680	487,446	23,226,063
Interest-rate-sensitive liabilities	13,047,829	7,209,526	1,485,334	65,195	21,807,884
Interest-rate-sensitivegap	5,725,302	(4,189,720)	(539,654)	422,251	1,418,179
Net					5,916,545
Ratio of interest-rate-sensitive assets to interest-rate-sensitive liabilities(%)					106.50%
Ratio of interest-rate-sensitivegapto stockholders’ equity (%)					23.97%

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 / interestrate-sensitive liabilities.

C.Interest-rate-sensitive gap = Interest-rate-sensitive assets interest-rate-sensitive liabilities.

G. 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 Group is still exposed to interest rate risk and credit risk.

December 31,2017	Unit: In thousands of New Taiwan Dollars	Unit: In thousands of New Taiwan Dollars
Financial assets category	Carrying amount of transferred financial assets	Carrying amount of related financial liabilities
Financial assets at fair value through profit or loss Repurchase agreement	$ 886,265	$ 884,561
Available-for-sale financial assets Repurchase agreement	10,244,303	9,969,419

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December 31,2016	Unit: In thousands of New Taiwan Dollars	Unit: In thousands of New Taiwan Dollars
Financial assets category	Carrying amount of transferred financial assets	Carrying amount of related financial liabilities
Financial assets at fair value through profit or loss Repurchase agreement	$ 765,049	$ 762,064
Available-for-sale financial assets Repurchase agreement	4,991,452	4,838,096
Held-to-maturity maturity Repurchase agreement	1,610,805	1,527,076

H. Offsetting financial assets and financial liabilities

The Group 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)

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Net amount (e)=(c)-(d)	Net amount (e)=(c)-(d)	$ 1,042,545	1,364	$ 1,043,909	Net amount (e)=(c)-(d)	Net amount (e)=(c)-(d)	$ 4,201,784	-	$ 4,201,784
Not set off in the balance sheet(d)	Cash collateral received	$ 1,780,330	691,564	$ 2,471,894	Not set off in the balance sheet(d)	Cash collateral received	$ 904,033	-	$ 904,033
	Financial instruments (Note)	$ 1,812,167	-	$ 1,812,167		Financial instruments (Note)	$ 1,812,167	9,018,893	$ 10,831,060
Net amounts of financial assets presented in the balance sheet (c)=(a)-(b)		$ 4,635,042	692,928	$ 5,327,970	Net amounts of financial liabilities presented in the balance sheet (c)=(a)-(b)		$ 6,917,984	9,018,893	$ 15,936,877
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)		$ 4,635,042	692,928	$ 5,327,970	Gross amounts of recognised financial liabilities (a)		$ 6,917,984	9,018,893	$ 15,936,877
Description		Derivative instrument	Reverse Repurchase Agreement	Total	Description		Derivative instrument	Repurchase agreement	Total

215

Net amount (e)=(c)-(d)	Net amount (e)=(c)-(d)	$ 3,267,952		ments	Net amount (e)=(c)-(d)	Net amount (e)=(c)-(d)	$ 3,702,395	-	$ 3,702,395
Not set off in the balance sheet(d)	Cash collateral received	$ 2,217,159	ements and non-cash collaterals.	t, or can be settled under agreements of net settled master netting arrangements or similar arrange	Not set off in the balance sheet(d)	Cash collateral received	$ 21,703	-	$ 21,703
	Financial instruments (Note)	$ 3,953,306				Financial instruments (Note)	$ 4,080,749	4,664,786	$ 8,745,535
Net amounts of financial assets presented in the balance sheet (c)=(a)-(b)		$ 9,438,417			Net amounts of financial liabilities presented in the balance sheet (c)=(a)-(b)		$ 7,804,847	4,664,786	$ 12,469,633
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)		$ 9,438,417	ed master netting arrang	bilities that are offse	Gross amounts of recognised financial liabilities (a)		$ 7,804,847	4,664,786	$ 12,469,633
Description		Derivative instrument	Note : Including net settl	Financial lia	Description		Derivative instrument	Repurchase agreement	Total

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H. 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 occurring 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 recognised 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 year ended December 31, 2017 and 2016 given that the death rate moves by 10%, insurance rate rises by 10%, assumed lapse rate moves by 10% or 30%, fluctuates by 1%.

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(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 31,2017 December 31,2016 $ 172,492 ( $ 166,469 ) 317,402 242,443 5,012,946 1,608,839 8,029,523 6,591,521 $13,532,363 $ 8,276,334

(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, when FALI conducts liability adequacy testing, its best estimate of the investment return rate is set as the discount rate. For the related effects of the discount rate to the adequacy of FALI’s current provisions for insurance, please refer to the explanations under sensitivity analysis on insurance risk.

(H) Regarding derivatives embedded in the main insurance contract not measured by fair value, information on market risk exposure is as follows:

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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 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 utilisation efficiency of the Group, through which the Risk Management Committee then sets up “Warning Indicators for Capital Adequacy ” for each subsidiary accordingly as authorised 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 Group, also to develop business and control risk on both sides for better improvement of capital utilisation, 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 Group are as follows:

A. Objective of capital management
(A) To ensure that the 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 Group shall not be lower than 100%, 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 150% 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 utilisation 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.

219

B. Capital management procedures

The Board of Directors of the Company is the highest authority of the Group. To maintain the capital adequacy, the Board authorises 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 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 Group’s capital adequacy and reports to the senior management in order to effectively monitor the capital adequacy of the 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 of capital adequacy, fund gap, responding measures that could impose an effect on risk assets or qualifying self-owned capital and so on.

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220

(A) Capital adequacy

December 31,2017(Expressed In Thousands of New Taiwan Dollars,%)	December 31,2017(Expressed In Thousands of New Taiwan Dollars,%)	December 31,2017(Expressed In Thousands of New Taiwan Dollars,%)	December 31,2017(Expressed In Thousands of New Taiwan Dollars,%)
Company	Ownership of financial holdings company	Qualifying capital	Legal capital demand
FFH	100%	$191,779,407	$205,977,344
FCB	100%	206,218,199	142,144,358
FS	100%	5,017,916	1,960,550
FALI	51%	177,077	153,336
FSIT	100%	985,296	561,865
FVC	100%	1,867,825	937,001
Other subsidiaries	100%	1,692,840	1,566,380
Deductible item	100%	(210,120,219)	(202,801,503)
Subtotal		197,618,341	150,499,331
Capital adequacy			131.31%

December 31,2016(Expressed In Thousands of New Taiwan Dollars,%)	December 31,2016(Expressed In Thousands of New Taiwan Dollars,%)	December 31,2016(Expressed In Thousands of New Taiwan Dollars,%)	December 31,2016(Expressed In Thousands of New Taiwan Dollars,%)
Company	Ownership of financial holdings company	Qualifying capital	Legal capital demand
FFH	100%	$ 191,773,486	$ 203,841,184
FCB	100%	208,581,091	135,590,910
FS	100%	4,639,249	1,668,738
FALI	51%	253,683	154,569
FSIT	100%	968,561	539,156
FVC	100%	1,846,372	918,777
Other subsidiaries	100%	1,569,743	1,583,495
Deductible item	100%	( 209,785,811)	( 200,665,911)
Subtotal		199,846,374	143,630,918
Capital adequacy			139.14%

Note 1: group capital adequacy ratio = group net eligible capital / group statutory capital requirement

221

(B) Qualifying capital of financial holdings company

December 31,2017(Expressed In Thousands of New Taiwan Dollars,%)	December 31,2017(Expressed In Thousands of New Taiwan Dollars,%)	December 31,2017(Expressed In Thousands of New Taiwan Dollars,%)
	Item	Amount
	Common stock	$122,163,933
	Capital instrument met regulation of other Tier I capital for bank	-
	Otherpreferred stock and subordinated bonds	-
	Capital collected in advance	-
	Additionalpaid-in capital	25,916,221
	Legal reserve	14,099,804
	Special reserve	4,121,166
	Retained earnings	19,798,613
	Adjustment of equity	5,682,906
	Less�capital deductible item	(3,236)
	Totalqualifyingcapital	$191,779,407

December 31,2016(Expressed In Thousands of New Taiwan Dollars,%)
	Item	Amount
	Common stock	$ 119,768,562
	Capital instrument met regulation of other Tier I capital for bank	-
	Otherpreferred stock and subordinated bonds	-
	Capital collected in advance	-
	Additionalpaid-in capital	25,916,221
	Legal reserve	12,364,204
	Special reserve	4,128,990
	Retained earnings	23,260,285
	Adjustment of equity	6,336,770
	Less�capital deductible item	( 1,546)
	Totalqualifyingcapital	$ 191,773,486

222

(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 31,2017	December 31,2017
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
		42.58 14.96 9.90 3.58 3.08 2.94 2.93 2.82 2.60 2.35 2.19 2.15 2.14 2.14 2.10 2.06 2.02 1.97 1.91 1.88 1.82 1.76 1.75 1.70 1.70 1.69 1.62 1.60 1.59 1.59

223

December 31,2017	December 31,2017
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
		1.56
	$243,582,617	126.72
	$ 8,392,609 8,285,109 5,897,016 5,792,887 4,151,915 3,190,435 3,082,340 3,016,649 3,010,000	4.38 4.32 3.07 3.02 2.16 1.66 1.61 1.57 1.57
	$44,818,960	23.37
	$ 21,285,600 18,865,815 15,456,527 11,684,031 10,713,191 9,340,740 9,337,333 8,272,015 8,057,688 7,881,165 7,813,752 7,163,064 7,064,015 7,041,475 6,901,398 6,723,696 6,519,688 6,271,375 6,213,712 6,178,922 6,033,001 6,023,220 5,897,016 5,792,887 5,521,310 5,056,208 4,976,475	11.10 9.84 8.06 6.09 5.59 4.87 4.87 4.31 4.20 4.11 4.07 3.73 3.68 3.67 3.60 3.51 3.40 3.27 3.24 3.22 3.15 3.14 3.07 3.02 2.88 2.64 2.59

224

December 31, 2017

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
MiTAC-SYNNEX Group Yulon Group Kindom Group Continental Engineering Group Lih Pao Construction Group Phoenix Resort Hotel Group Taiwan Cement Group Hungkuo Group YC Group L&K Group Yang Ming Marine Group Shang Shing Steel Group Chin hong Group Au Optronics Group Uni President Group Chiao Thai Hsing Group Shinkong Group Tycoons GROUP Phoenix Property Investors Group Cheng Loong Group Tongchuang Group Subtotal	$ 4,935,925 4,838,119 4,559,528 4,373,172 4,307,970 4,224,324 3,868,570 3,848,503 3,837,127 3,575,056 3,571,886 3,492,898 3,480,965 3,298,826 3,260,108 3,190,435 3,173,260 3,160,763 3,138,800 3,074,620 3,011,000	2.57 2.52 2.38 2.28 2.25 2.20 2.02 2.01 2.00 1.86 1.86 1.82 1.82 1.72 1.70 1.66 1.65 1.65 1.64 1.60 1.57
	$306,307,174	159.72
(Note) Net value in the above table is the amount that had not been audited As of December 31,
2017.

(4) Information with respect to the transferring of financial assets and extinguishing of liabilities: Please refer to Notes 12 (2) G.

(5) Adjustment of key organisation 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 (38).

225

(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 Group engagement in co marketing:
A. Transactions among the Group

Please refer to Notes 7 and 13(1)H.

B. Joint promotion of businesses

In order to create synergies within the Group and provide customers financial services in all aspects, FCB and FS have 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 the 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 cross-selling service desks cooperation and promotion desks, among which FCB has established an insurance agency area or insurance service desks in its 188 domestic branches, FS has set up securities trading service desks in 130 domestic branches of FCB. Besides, FS set up banking service desks and insurance service desks in the brokerage department of its 24 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.

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226

Consolidated	29,993,041 $	20,834,071	50,827,112		6,771,717) (	4,559,675) (	21,347,661) (		18,148,059	2,715,668) (		15,432,391 $	Consolidated	28,801,151 $	16,289,447	45,090,598		2,243,861) (	871,064) (	21,778,169) (		20,197,504	2,913,347) (		17,284,157 $
Other businesses	121,916) ($	530,772	408,856		36,408	-	452,224) (		6,960) (	9,945		2,985 $	Other businesses	152,404) ($	464,767	312,363		22,679) (	-	484,649) (		194,965) (	57,873		137,092) ($
Insurance business	243,846 $	5,398,175	5,642,021		3	4,559,675) (	561,575) (		520,774	25,653		546,427 $	Insurance business	177,375 $	1,588,591	1,765,966		4) (	871,064) (	478,297) (		416,601	3,740		420,341 $
Investment trust business	443 $	522,811	523,254		-	-	382,617) (		140,637	12,288) (		128,349 $	Investment trust business	209 $	456,020	456,229		-	-	332,675) (		123,554	12,263) (		111,291 $
Securities business	319,529 $	1,282,395	1,601,924		-	-	1,281,312) (		320,612	26,302) (		294,310 $	Securities business	309,267 $	811,541	1,120,808		-	-	1,275,403) (		154,595) (	22,010) (		176,605) ($
For the year ended December 31, 2017 Banking business	Net interest income (loss) 29,551,139 $	Net non-interest income 13,099,918	Net revenues 42,651,057	Provision for credit losses and recovery for	premiums reserve 6,808,128) (	Net change in insurance liabilities reserve -	Operating expenses 18,669,933) (	Net income (loss) from continuing operations	before income tax 17,172,996	Income tax (expense) benefit 2,712,676) (	Net income from continuing operations	after income tax 14,460,320 $	For the year ended December 31, 2016 Banking business	Net interest income (loss) 28,466,704 $	Net non-interest income 12,968,528	Net revenues 41,435,232	Provision for credit losses and recovery for	premiums reserve 2,221,178) (	Net change in insurance liabilities reserve -	Operating expenses 19,207,145) (	Net income (loss) from continuing operations	before income tax 20,006,909	Income tax (expense) benefit 2,940,687) (	Net income (loss) from continuing operations	after income tax 17,066,222 $

227

							2016	6,497,841	268,490	604,146	1,000,000	5,000,000	17,183	1,789	671	13,390,120			119,768,562	25,916,221		12,364,204	4,128,990	23,260,285	6,336,770	191,775,032	205,165,152
							2017	$ 15,596,368 $	200,779	1,348,021	-	-	21,855	-	1,364	17,168,387			122,163,933	25,916,221		14,099,804	4,121,166	19,798,613	5,682,906	191,782,643	$ 208,951,030 $
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 2017 2016 Liabilities	Cash and cash equivalents $ 1,893,285 $ 989,780 Commercial papers payable – net	Receivables – net 446 32 Payables	Current tax assets 1,077,165 332,642 Current tax liabilities	Investments accounted for Other borrowings	using equity method – net 202,801,503 200,665,911 Bonds payable	Other financial assets – net 3,168,107 3,168,105 Liabilities reserve	Property and equipment – net 3,738 4,497 Deferred tax liabilities	Intangible assets – net 3,236 1,546 Other liabilities	Deferred income tax assets – net 2,804 1,756 Total liabilities	Other assets – net 746 883 Equity		Common stock	Capital surplus	Retained earnings	Legal reserve	Special reserve	Unappropriated earnings	Other equity interest	Total equity	Total assets $ 208,951,030 $ 205,165,152 Total liabilities and equity

228

(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		2017		2016
Revenues
Share of profit of associates accounted for using
equity method		$ 15,692,747	$	17,856,552
Other revenues		246,157		242,091
Total revenues		15,938,904		18,098,643
Expenses and losses
Share of loss of associates accounted for using
equity method	(	52,708 ) (		303,852 )
Operating expenses	(	334,051 ) (		338,245 )
Other expenses and losses	(	117,901 ) (		144,834 )
Total expenses and losses	(	504,660 ) (		786,931 )
Income from continuing operations before income
tax		15,434,244		17,311,712
Income tax benefit		48,788		44,286
Income from continuing operations after income tax		15,483,032		17,355,998
Other comprehensive loss	(	1,103,194 ) (		2,332,820 )
Total comprehensive income for the period		$14,379,838	$	15,023,178
Earnings Per Share (in NT dollars)
Basic Earnings Per Share and Diluted Earnings Per
Share		$1.27	$	1.42

229

							Total	187,639,905 $		-	10,888,051) (	-	17,355,998		2,332,820) (	191,775,032 $		191,775,032 $		-	-	14,372,227) (	-	15,483,032		1,103,194) (	191,782,643 $
First Financial Holding Co., Ltd.	Individual Statement of Change in Equity	For the years ended December 31	(Expressed In Thousands of New Taiwan Dollars)	Retained earnings Other equity interest	Exchange difference on Unrealized gain and	Additional paid-in Unappropriated translation of foreign loss on available-for-	capital Legal reserve Special reserve earnings financial statements sale financial assets	25,916,221 $ 10,763,595 $ 4,128,990 $ 23,568,431 $ 3,659,098 $ 4,992,506 $		- 1,600,609 - 1,600,609) ( - -	- - - 10,888,051) ( - -	- - - 5,157,498) ( - -	- - - 17,355,998 - -		- - - 17,986) ( 2,601,161) ( 286,327	25,916,221 $ 12,364,204 $ 4,128,990 $ 23,260,285 $ 1,057,937 $ 5,278,833 $		25,916,221 $ 12,364,204 $ 4,128,990 $ 23,260,285 $ 1,057,937 $ 5,278,833 $		- 1,735,600 - 1,735,600) ( - -	- - 7,824) ( 7,824 - -	- - - 14,372,227) ( - -	- - - 2,395,371) ( - -	- - - 15,483,032 - -		- - - 449,330) ( 3,099,341) ( 2,445,477	25,916,221 $ 14,099,804 $ 4,121,166 $ 19,798,613 $ 2,041,404) ($ 7,724,310 $
				Capital			Common stock	114,611,064 $		-	-	5,157,498	-		-	119,768,562 $		119,768,562 $		-	-	-	2,395,371	-		-	122,163,933 $
(C)							For the year ended December 31, 2016	Balance, January 1, 2016	Appropriation of prior year's earnings	Legal reserve appropriated	Cash dividends of ordinary shares	Stock dividends of ordinary shares	Net income for the year	Other comprehensive (loss) income for	2016	Balance, December 31, 2016	For the year ended December 31, 2017	Balance, January 1, 2017	Appropriation of prior year's earnings	Legal reserve appropriated	Special reserve appropriated	Cash dividends of ordinary shares	Stock dividends of ordinary shares	Net income for the year	Other comprehensive (loss) income for	2017	Balance, December 31, 2017

230

(D)

First Financial Holding Co., Ltd. Individual Cash Flow Statement For the years ended December 31

(Expressed In Thousands of New Taiwan Dollars)

	First Financial Holding Co., Ltd. Individual Cash Flow Statement For the years ended December 31 (Expressed In Thousands of New Taiwan Dollars)	First Financial Holding Co., Ltd. Individual Cash Flow Statement For the years ended December 31 (Expressed In Thousands of New Taiwan Dollars)
	2017 2016 Cash Flows From Operating Activities Net income $ 15,434,244 $ 17,311,712 Adjustments to reconcile net income to net cash provided by operating activities: Income and expenses having no effect on cash flows Depreciation and other amortisation 2,595 2,175 Interest revenue ( 1,815 ) ( 4,306 ) Interest expense 111,769 139,319 Dividends revenue ( 220,279 ) ( 216,894 ) Loss on disposal of property and equipment 27 5 Share of profit of associates accounted for using the equity method ( 15,640,039 ) ( 17,552,700 ) Changes in assets and liabilities Changes in assets (Increase) decrease in other financial assets ( 2 ) 9 Increase in other assets ( 55 ) ( 37 ) Changes in liabilities (Decrease) increase in payables ( 17,230 ) 17,776 Decrease in provision ( 1,493 ) ( 342 ) Cash flows used in operations activities ( 332,278 ) ( 303,283 ) Interest received 1,801 4,357 Interest paid ( 162,250 ) ( 139,078 ) Dividends received 12,612,862 8,807,330 Income tax received (paid) 46,351 ( 20,710 ) Net cash provided by operating activities 12,166,486 8,348,616 Cash Flows from Investing Activities Decrease in investments using the equity method 13,388 250,000 Acquisition of property and equipment ( 808 ) ( 2,530 ) Acquisition of intangible assets ( 2,554 ) ( 1,095 ) Net cash flows provided by investing activities 10,026 246,375 Cash Flows from Financing Activities Increase (decrease) in commercial papers payable 9,098,527 ( 1,068 ) Decrease in bonds payable ( 5,000,000 ) - (Decrease) increase in other borrowings ( 1,000,000 ) 1,000,000 Increase in guarantee deposits 693 216 Distribution of cash dividends ( 14,372,227 ) ( 10,888,051 ) Net cash (used in) provided by financing activities ( 11,273,007 ) ( 9,888,903 ) Net increase (decrease) in cash and cash equivalents 903,505 ( 1,293,912 ) Beginning balance of cash and cash equivalents 989,780 2,283,692 Ending balance of cash and cash equivalents $1,893,285 $ 989,780 (Continued)
	(Continued)

231

First Financial Holding Co., Ltd. Individual Cash Flow Statement For the years ended December 31

(Expressed In Thousands of New Taiwan Dollars)

Components of cash and cash equivalents Cash and cash equivalents shown in the balance sheet Ending balance of cash and cash equivalents	2017 $1,893,285 $1,893,285	2016
		$ 989,780
		$ 989,780

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232

			2016		126,253,977		95,859		23,923,922		7,532,897	66,527,381	1,584,746	1,963,243,664	37,300,000	37,405,279	5,897,347	5,708,001	3,185,430	2,278,658,503			89,064,000	34,848,216	60,184,504	6,534,366	190,631,086	2,469,289,589
					$																							$
			2017		$ 153,891,049		82,364		34,398,308		11,588,250	76,298,979	2,529,886	2,007,810,178	29,300,000	29,933,504	5,995,387	6,331,031	3,870,070	2,362,029,006			89,064,000	34,848,216	62,587,008	5,759,942	192,259,166	$ 2,554,288,172
First Commercial Bank Individual balance sheet (A)	December 31	(Expressed In Thousands of New Taiwan Dollars)	Assets 2017 2016 Liabilities	Due to the Central Bank and other	Cash and cash equivalents $ 61,330,078 $ 59,206,858 banks	Due from the Central Bank and call Funds borrowed from Central Bank	loans to other banks 175,310,562 209,314,698 and other banks	Financial assets at fair value through Financial liabilities at fair value	profit or loss 100,249,302 83,253,379 through profit or loss	Receivables – net 59,818,878 51,348,689 Securities sold under repurchase	Current tax assets 428,701 415,046 agreements	Loans discounted, net 1,567,853,879 1,531,757,945 Payables	Available-for-sale financial assets 149,482,009 138,955,127 Current tax liabilities	Held-to-maturity financial assets – net 386,445,449 344,456,759 Deposits and remittances	Investments accounted for under the Financial bonds payable	equity method – net 6,665,615 6,760,097 Other financial liabilities	Other financial assets – net 8,115,659 7,682,304 Liabilities reserve	Property and equipment – net 26,531,962 26,563,033 Deferred tax liabilities	Investment property – net 6,942,132 6,960,837 Other liabilities	Intangible assets – net 392,146 357,803 Total liabilities	Deferred income tax assets 2,846,352 1,335,428	Other assets – net 1,875,448 921,586 Equity	Common stock	Capital surplus	Retained earnings	Other equity interest	Total equity	Total assets $ 2,554,288,172 $ 2,469,289,589 Total liabilities and equity

233

(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			2017		2016
Interest income		$	42,575,709	$	40,359,605
Interest expenses	(		13,732,522 ) (		12,561,786)
Net interest income			28,843,187		27,797,819
Net non-interest income			14,070,826		13,739,458
Net revenues			42,914,013		41,537,277
Provision for bad debt expense and premium reserve	(		6,839,495 ) (		2,050,028 )
Operating expenses	(		18,465,738) (		18,963,492 )
Income from continuing operations before income			17,608,780
tax					20,523,757
Income tax expense	(		2,466,896) (		2,825,221 )
Net income			15,141,884		17,698,536
Other comprehensive loss	(		1,213,804 ) (		2,099,071 )
Total comprehensive income for the period		$	13,928,080	$	15,599,465
Earnings Per Share (in NT dollars)
Basic Earnings Per Share and Diluted Earnings Per
Share		$	1.70	$	1.99

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234

					2016	10,134,972	76,331	10,211,303					6,150,000	40,365	16,012	208,482)	5,997,895	16,209,198
					2017	$ 12,319,456 $	81,832	12,401,288					6,150,000	34,765	290,397	( 146,063 ) (	6,329,099	$ 18,730,387 $
	First Securities	Individual Condensed Balance Sheets	December 31	(Expressed In Thousands of New Taiwan Dollars)	2017 2016 Liabilities	$ 15,892,265 $ 12,360,939 Current liabilities	Other liabilities – noncurrent	1,650,921 2,579,208 Total liabilities		380,466 421,639	97,983 118,263	28,441 40,184 Equity	13,163 12,636 Common stock	667,148 676,329 Capital surplus	Retained earnings	Other equity interest	Total equity	$ 18,730,387 $ 16,209,198 Total liabilities and equity
(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

235

(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			2017		2016
Revenues		$	1,722,969	$	1,215,009
Service fee expense	(		126,809 ) (		63,930 )
Employee benefit expense	(		741,784 ) (		757,329 )
Share of profit of associates accounted for using
equity method	(		13,913 ) (		38,611 )
Operating expenses	(		542,723 ) (		560,118 )
Income (loss) from continuing operations before
income tax			297,740 (		204,979 )
Income tax expense	(		26,225 ) (		24,100 )
Net income (loss)			271,515 (		229,079)
Other comprehensive income (loss)			59,689 (		52,381)
Total comprehensive income (loss) for the period		$	331,204 (	$	281,460 )
Earnings (loss) Per Share (in NT dollars)
Basic Earnings (loss) Per Share and Diluted
Earnings (loss) Per Share		$	0.44 (	$	0.37 )

(Blank)

236

						2016	92,711	17,040	109,751	600,000	6,629	365,488	3,556)	968,561	1,078,312
						2017	118,049 $	20,384	138,433	600,000	6,629	380,471	1,804 ) (	985,296	1,123,729 $
							$						(		$
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 2017 2016 Liabilities	Current assets $ 373,215 $ 154,411 Current liabilities	Available-for-sale financial Other liabilities – noncurrent	assets 28,196 205,223 Total liabilities	Property and equipment 491,172 495,944 Common stock	Investment property 151,874 152,894 Capital surplus	Deferred income tax assets 3,207 2,729 Retained earnings	Other assets– noncurrent 76,065 67,111 Other equity interest	Total equity	Total assets $ 1,123,729 $ 1,078,312 Total liabilities and equity

237

(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			2017		2016
Operating revenues		$	507,946	$	445,598
Operating expenses	(		440,251 ) (		379,651 )
Operating income			67,695		65,947
Non-operating income and gain			14,663		10,644
Income from continuing operations before income
tax			82,358		76,591
Income tax expense	(		12,288 ) (		12,263 )
Net income			70,070		64,328
Other comprehensive income	(		321 ) (		4,735 )
Total comprehensive income for the period		$	69,749	$	59,593
Earnings Per Share (in NT dollars)
Basic Earnings Per Share and Diluted Earnings Per
Share		$	1.17	$	1.07

(Blank)

238

						2016	272,967	-		26,865	7,362,519	125,166	13,914		22,945,072	30,746,503		2,250,000	1,752,166)	20,310	518,144			31,264,647
						2017	$ 334,847 $	1,744		-	11,835,272	1,262,008	19,472		22,590,024	36,043,367		2,250,000	( 1,855,516 ) (	153,116	547,600			$ 36,590,967 $
First-Aviva Life Insurance Co., Ltd.		Individual Condensed Balance Sheets	December 31		(Expressed In Thousands of New Taiwan Dollars)	Assets 2017 2016 Liabilities	Cash and cash equivalents $ 3,073,330 $ 834,691 Payables	Receivables 216,565 530,531 Current tax liabilities	Current tax assets 11,725 11,458 Financial liabilities at fair value	Financial assets at fair value through profit or loss	through profit or loss 51,898 191,887 Liabilities reserve	Available-for-sale financial Other liabilities	assets 6,315,892 3,734,754 Deferred tax liabilities	Bond instruments without Insurance product liabilities of	active market 3,583,511 2,363,324 separate accounts	Loans 277,646 219,386 Total liabilities	Reinsurance reserve assets 20,249 10,991 Equity	Property and equipment 37,634 34,920 Common stock	Intangible assets 15,989 11,377 Retained earnings	Deferred income tax assets 38,225 18,118 Other equity interest	Other assets 358,279 358,138 Total equity	Insurance product assets of	separate accounts 22,590,024 22,945,072	Total assets $ 36,590,967 $ 31,264,647 Total liabilities and equity

239

(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
2017
2016
Operating revenues
$ 13,262,865
$ 7,476,571
Operating costs
(
12,813,999 ) (
7,103,019 )
Operating expenses
(
577,908 ) (
523,888 )
Operating loss
(
129,042 ) (
150,336 )
Non-operating income and expense
39 (
18 )
Loss from continuing operations before income tax
(
129,003 ) (
150,354 )
Income tax benefit
25,653
3,740
Net loss
(
103,350 ) (
146,614 )
Other comprehensive (loss)
132,806 (
43,571 )
Total comprehensive (loss) for the period
$ 29,456 ( $ 190,185 )
Loss Per Share (in NT dollars)
Basic Earnings Per Share and Diluted Earnings Per
Share
($ 0.46 ) ( $ 0.65 )

(Blank)

240

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 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	2017 $ 108,304 532,631 2,126 2,356,063 1,850 82,790 6,716 $ 3,090,480	2016 $ 154,149 510,104 2,762 2,338,323 2,660 93,526 9,891 $ 3,111,415	Liabilities Current liabilities Other liabilities – noncurrent Total liabilities Equity Common stock Capital surplus Retained earnings Other equity interest Total equity Total liabilities and equity	2017 2016 $ 1,410,439 $ 1,559,901 23,549 30,958 1,433,988 1,590,859 1,450,000 1,450,000 3,203 3,203 213,369 69,046 (10,080 ) ( 1,693 ) 1,656,492 1,520,556 $ 3,090,480 $ 3,111,415	2016
					$ 1,559,901 30,958
					1,590,859
					1,520,556
					$ 3,111,415

(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			2017		2016
Operating revenues		$	246,552	$	385,989
Operating expenses	(		91,751 ) (		173,823 )
Operating income			154,801		212,166
Non-operating income and expense			20,004 (		178,473 )
Income from continuing operations before income tax			174,805		33,693
Income tax (expense) benefit	(		30,482 )		10,787
Net income			144,323		44,480
Other comprehensive income	(		8,387 ) (		45,474 )
Total comprehensive income (loss) for the period		$	135,936 (	$	994 )
Earnings Per Share (in NT dollars)
Basic Earnings Per Share and Diluted Earnings Per
Share		$	1.00	$	0.31

241

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 Current assets Available-for-sale financial assets Deferred income tax assets Total assets	2017 $ 372,753 1,501,249 - $1,847,002	2016 $ 284,099 1,552,477 10,628 $1,847,204	Liabilities Current liabilities Total liabilities Equity Common stock Retained earnings Other equity interest Total equity Total liabilities and equity	2017 $6,177 6,177 1,800,000 65,003 2,822 1,867,825 $ 1,847,002	2016
					$ 832
					832
					1,800,000 40,595 5,777
					1,846,372
					$ 1,847,204

(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					2016
Operating revenues		$	91,651	$	58,620
Operating expenses	(		28,156 ) (		28,456 )
Non-operating income (expense)			111 (		17 )
Income from continuing operations before income tax			63,606		30,147
Income tax (expense) benefit	(		6,897 )		5,742
Net income			56,709		35,889
Other comprehensive loss	(		2,955 ) (		109,015 )
Total comprehensive income (loss) for the period		$	53,754 (	$	73,126 )
Earnings Per Share (in NT dollars)
Basic Earnings Per Share and Diluted Earnings Per
Share		$	0.32	$	0.20

242

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 Current assets Property and equipment Deferred income tax assets Other assets Total assets	2017 $ 41,906 89 230 55 $ 42,280	2016 $ 41,550 139 149 50 $ 41,888	Liabilities Current liabilities Other liabilities – noncurrent Total liabilities Equity Common stock Capital surplus Retained earnings Total equity Total liabilities and equity	2017 $ 4,578 1,354 5,932 20,000 261 16,087 36,348 $ 42,280	2016
					$ 3,945 875
					4,820
					20,000 261 16,807
					37,068
					$ 41,888

(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
Operating revenues		$	28,344	$	30,697
Operating expenses	(		20,771 ) (		21,674 )
Operating income			7,573		9,023
Non-operating income and expense			470		501
Income from continuing operations before income tax			8,043		9,524
Income tax expense	(		1,464 ) (		1,791 )
Net income			6,579		7,733
Other comprehensive (loss) income	(		30 )		343
Total comprehensive income for the period		$	6,549	$	8,076
Earnings Per Share (in NT dollars)
Basic Earnings Per Share and Diluted Earnings Per
Share		$	3.29	$	3.87

I. First P&C Insurance Agency Co., Ltd.

FPCIA’s the effective date of dissolution was July 1, 2016. The current final report on income earned from liquidation have been completed on July 27, 2017, and the residual assets were allocated on August 15, 2017.

243

(18) Profitability, asset quality, management information, and liquidity and market risk sensitivity of subsidiaries:

A.Consolidated:

		For theyears ended December 31,	For theyears ended December 31,
		2017	2016
Return on total assets (%)	Before taxes	0.70	0.80
	After taxes	0.60	0.69
Return on stockholders’ equity (%)	Before taxes	9.45	10.63
	After taxes	8.04	9.10
Netprofit margin ratio(%)		30.36	38.33

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:

		For theyears ended December 31,	For theyears ended December 31,
		2017	2016
Return on total assets (%)	Before taxes	7.45	8.51
	After taxes	7.48	8.53
Return on stockholders’ equity (%)	Before taxes	8.05	9.13
	After taxes	8.07	9.15
Netprofit margin ratio(%)		98.19	98.33
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.

244

C. FCB and Its subsidiaries:
(A) Profitability

		For theyears ended December 31,	For theyears ended December 31,
		2017	2016
Return on total assets (%)	Before taxes	0.70	0.84
	After taxes	0.60	0.72
Return on stockholders’ equity (%)	Before taxes	9.20	10.97
	After taxes	7.91	9.46
Netprofit margin ratio(%)		35.28	42.61

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).

==> picture [421 x 63] intentionally omitted <==

245

D. Information for FS and its subsidiaries is stated below:

Profitability

		For theyears ended December 31,	For theyears ended December 31,
		2017	2016
Return on total assets (%)	Before taxes	1.70	(1.18)
	After taxes	1.55	(1.32)
Return on stockholders’ equity (%)	Before taxes	4.83	(3.27)
	After taxes	4.41	(3.66)
Netprofit margin ratio(%)		17.16	(20.59)

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 FALI is stated below:

Profitability

		For theyears ended December 31,	For theyears ended December 31,
		2017	2016
Return on total assets (%)	Before taxes	(0.38)	(0.46)
	After taxes	(0.30)	(0.45)
Return on stockholders’ equity (%)	Before taxes	(24.22)	(24.52)
	After taxes	(19.39)	(23.91)
Netprofit margin ratio(%)		(23.02)	(39.25)

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.

246

(19)Content and amount of investment trust business in accordance with Trust Enterprise Act

(Expressed In Thousands of New Taiwan Dollars) Balance Sheet of Trust Accounts	(Expressed In Thousands of New Taiwan Dollars) Balance Sheet of Trust Accounts	(Expressed In Thousands of New Taiwan Dollars) Balance Sheet of Trust Accounts
Trust assets December 31,2017 December 31,2016 Bank deposits $ 8,847,304 $ 13,861,264 Bonds 2,227,317 62,400,260 Stocks 91,668,549 90,305,858 Mutual funds 205,062,214 202,180,234 Beneficiary certificate � 100,059 Accounts receivable 781 - Structured notes 1,910,000 200,000 Real estate 23,007,723 20,573,932 Net assets under collective management accounts 219,182 224,740 Customers’ securities under custody 340,883,400 362,266,452 Total $ 673,826,470 $ 752,112,799 Trust liabilities Payables-customers securities under custody $ 340,883,400 $ 362,266,452 Payables 68 98 Trust capital 332,679,483 389,637,407 Various reserves and accumulated profit or loss 263,519 208,842 Total $ 673,826,470 $ 752,112,799 As of December 31, 2017 and 2016, the Offshore Banking Unit had book balance of $4,089,066 and $3,656,993 for designated money trust funds investing in foreign securities; the Offshore Banking Unit had book balance of $349,097 and $274,062 for designated money trust funds investing in local securities, respectively.	December 31,2017	December 31,2016
	$ 8,847,304 2,227,317 91,668,549 205,062,214 � 781 1,910,000 23,007,723 219,182 340,883,400	$ 13,861,264 62,400,260 90,305,858 202,180,234 100,059 - 200,000 20,573,932 224,740 362,266,452
	$ 673,826,470	$ 752,112,799
	$ 340,883,400 68 332,679,483 263,519	$ 362,266,452 98 389,637,407 208,842
	$ 673,826,470	$ 752,112,799

securities, respectively.	securities, respectively.	securities, respectively.
(Expressed In Thousands of New Taiwan Dollars) PropertyList of Trust Accounts
Investment items Bank deposits Bonds Stocks Mutual funds Beneficiary certificate Structured notes Real estate Net assets under collective management accounts Net assets under individual management accounts Customers’ securities under custody Total	December 31,2017 $ 8,847,304 2,227,317 91,668,549 205,062,214 - 781 1,910,000 23,007,723 219,182 340,883,400 $ 673,826,470	December 31,2016
		$ 13,861,264 62,400,260 90,305,858 202,180,234 100,059 - 200,000 20,573,932 224,740 362,266,452
		$ 752,112,799

247

(Expressed In Thousands of New Taiwan Dollars)

Income	Statement of Trust Accounts	Statement of Trust Accounts
	For theyears ended December 31
Trust revenues		2017		2016
Interest income	$	5,811,459	$	4,959,894
Cash dividend income		3,515		2,416
Realised gain on bonds		38		15,788
Realised gain on stocks		12,805		2,496
Realised gain on mutual funds		3,980,502		1,685,745
Gain on translation		2,920		2,912
Other income		246		5
Total trust revenues		9,811,485		6,669,256
Trust expenses
Management fee	(	1,030 ) (		4,072 )
Other expenses	(	52 ) (		4 )
Service fee	(	1,355 ) (		1,847 )
Realised loss on bonds	(	759,586 ) (		36,470 )
Realised loss on stocks	(	153 ) (		13,636 )
Realised loss on mutual funds	(	2,739,993 ) (		3,519,007 )
Loss on disposal of property	(	240 ) (		151 )
Loss on translation	(	2,484 ) (		601 )
Total trust expenses	(	3,504,893 ) (		3,575,788 )
Net income before tax		6,306,592		3,093,468
Income tax expense	(	9) (		171 )
Net income after tax	$	6,306,583	$	3,093,297

248

Relationship between counterparty and subsidiaries	Non-related parties	Non-related parties	Non-related parties
Additional terms	None	None	None
Gain (loss) on disposal	$ 486	111,611	22,180
Sale price	$ 486	111,611	22,180
Book value (Note)	$ -	-	-
Composition of creditor’s right	Unsecured	Unsecured	Unsecured
Counterparty	Asia Pacific Commercial Bank	Southern debt trading Joint-Stock Company(SDTC)	SC Lowy Primary Investments,Ltd
Transaction date (Date of contract)	2017.03.21	2017.04.14	2017.08.22

249

Percentage (%) of total consolidated net revenues or assets (Note 3)	0.07%	0.04%	0.07%	0.04%	0.02%	0.12%	0.13%	0.00%	0.08%	0.00%	1.14%	0.00%	0.01%	0.14%	0.01%	0.00%	0.02%	0.12%	0.13%	0.00%	0.08%	0.00%	1.14%
Conditions	No significant difference from general customers
Amount	$ 1,893,285	1,023,792	1,893,285	1,023,792	525,473	59,837	63,561	36,084	39,024	48,995	578,017	52,726	300,000	73,045	197,582	40,871	525,473	59,837	63,561	36,084	39,024	48,995	578,017
Account	Cash and cash equivalents	Current tax assets	Deposits and remittances	Current tax liabilities	Deposits and remittances	Net other non-interest income	Other general and administrative expenses	Cash and cash equivalents	Net service fee and commission	Deposits and remittances	Net service fee and commission	Receivables, net	Financial liabilities at fair value through profit or loss	Other general and administrative expenses	Deposits and remittances	Deposits and remittances	Cash and cash equivalents	Other general and administrative expenses	Net other non-interest income	Cash and cash equivalents	Other general and administrative expenses	Cash and cash equivalents	Net service fee and commission
Relationship (Note 2)	1	1	2	2	3	3	3	3	3	3	3	3	3	3	3	3	3	3	3	3	3	3	3
Counterparty	FCB	FCB	FFHC	FFHC	FS	FS	FS	FSIT	FSIT	FALI	FALI	FALI	FALI	FFAM	FVC	FFMC	FCB	FCB	FCB	FCB	FCB	FCB	FCB
Company	FFHC		FCB														FS			FSIT		FALI
No. (Note 1)	0		1														2			3		4

250

	No. (Note 1) Company Counterparty Relationship (Note 2) Account Amount Conditions Percentage (%) of total consolidated net revenues or assets (Note 3) 4 FALI FCB 3 Payables $ 52,726 No significant difference from general customers 0.00% FCB 3 Other financial assets – net 300,000 � 0.01% 5 FFAM FCB 3 Net service fee and commission 73,045 � 0.14% 6 FFMC FCB 3 Cash and cash equivalents 40,871 � 0.00% 7 FVC FCB 3 Cash and cash equivalents 197,582 � 0.01% Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows: (1)Parent company is ‘0’. (2)The subsidiaries are numbered in order starting from ‘1’. Note 2: Relationship between transaction company and counterparty is classified into the following three categories; fill in the number of category each case belongs to (If transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.): (1)Parent company to subsidiary. (2)Subsidiary to parent company. (3)Subsidiary to subsidiary. Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for consolidated income statement accounts. I. Other significant transactions that may affect the decisions made by consolidated financial statements users as of December 31, 2017: None (2) Information regarding reinvested business A. Funds lent to 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.	No. (Note 1) Company Counterparty Relationship (Note 2) Account Amount Conditions Percentage (%) of total consolidated net revenues or assets (Note 3) 4 FALI FCB 3 Payables $ 52,726 No significant difference from general customers 0.00% FCB 3 Other financial assets – net 300,000 � 0.01% 5 FFAM FCB 3 Net service fee and commission 73,045 � 0.14% 6 FFMC FCB 3 Cash and cash equivalents 40,871 � 0.00% 7 FVC FCB 3 Cash and cash equivalents 197,582 � 0.01% Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows: (1)Parent company is ‘0’. (2)The subsidiaries are numbered in order starting from ‘1’. Note 2: Relationship between transaction company and counterparty is classified into the following three categories; fill in the number of category each case belongs to (If transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.): (1)Parent company to subsidiary. (2)Subsidiary to parent company. (3)Subsidiary to subsidiary. Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for consolidated income statement accounts. I. Other significant transactions that may affect the decisions made by consolidated financial statements users as of December 31, 2017: None (2) Information regarding reinvested business A. Funds lent to 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.	No. (Note 1) Company Counterparty Relationship (Note 2) Account Amount Conditions Percentage (%) of total consolidated net revenues or assets (Note 3) 4 FALI FCB 3 Payables $ 52,726 No significant difference from general customers 0.00% FCB 3 Other financial assets – net 300,000 � 0.01% 5 FFAM FCB 3 Net service fee and commission 73,045 � 0.14% 6 FFMC FCB 3 Cash and cash equivalents 40,871 � 0.00% 7 FVC FCB 3 Cash and cash equivalents 197,582 � 0.01% Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows: (1)Parent company is ‘0’. (2)The subsidiaries are numbered in order starting from ‘1’. Note 2: Relationship between transaction company and counterparty is classified into the following three categories; fill in the number of category each case belongs to (If transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.): (1)Parent company to subsidiary. (2)Subsidiary to parent company. (3)Subsidiary to subsidiary. Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for consolidated income statement accounts. I. Other significant transactions that may affect the decisions made by consolidated financial statements users as of December 31, 2017: None (2) Information regarding reinvested business A. Funds lent to 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.	No. (Note 1) Company Counterparty Relationship (Note 2) Account Amount Conditions Percentage (%) of total consolidated net revenues or assets (Note 3) 4 FALI FCB 3 Payables $ 52,726 No significant difference from general customers 0.00% FCB 3 Other financial assets – net 300,000 � 0.01% 5 FFAM FCB 3 Net service fee and commission 73,045 � 0.14% 6 FFMC FCB 3 Cash and cash equivalents 40,871 � 0.00% 7 FVC FCB 3 Cash and cash equivalents 197,582 � 0.01% Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows: (1)Parent company is ‘0’. (2)The subsidiaries are numbered in order starting from ‘1’. Note 2: Relationship between transaction company and counterparty is classified into the following three categories; fill in the number of category each case belongs to (If transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.): (1)Parent company to subsidiary. (2)Subsidiary to parent company. (3)Subsidiary to subsidiary. Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for consolidated income statement accounts. I. Other significant transactions that may affect the decisions made by consolidated financial statements users as of December 31, 2017: None (2) Information regarding reinvested business A. Funds lent to 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.	No. (Note 1) Company Counterparty Relationship (Note 2) Account Amount Conditions Percentage (%) of total consolidated net revenues or assets (Note 3) 4 FALI FCB 3 Payables $ 52,726 No significant difference from general customers 0.00% FCB 3 Other financial assets – net 300,000 � 0.01% 5 FFAM FCB 3 Net service fee and commission 73,045 � 0.14% 6 FFMC FCB 3 Cash and cash equivalents 40,871 � 0.00% 7 FVC FCB 3 Cash and cash equivalents 197,582 � 0.01% Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows: (1)Parent company is ‘0’. (2)The subsidiaries are numbered in order starting from ‘1’. Note 2: Relationship between transaction company and counterparty is classified into the following three categories; fill in the number of category each case belongs to (If transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.): (1)Parent company to subsidiary. (2)Subsidiary to parent company. (3)Subsidiary to subsidiary. Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for consolidated income statement accounts. I. Other significant transactions that may affect the decisions made by consolidated financial statements users as of December 31, 2017: None (2) Information regarding reinvested business A. Funds lent to 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.	No. (Note 1) Company Counterparty Relationship (Note 2) Account Amount Conditions Percentage (%) of total consolidated net revenues or assets (Note 3) 4 FALI FCB 3 Payables $ 52,726 No significant difference from general customers 0.00% FCB 3 Other financial assets – net 300,000 � 0.01% 5 FFAM FCB 3 Net service fee and commission 73,045 � 0.14% 6 FFMC FCB 3 Cash and cash equivalents 40,871 � 0.00% 7 FVC FCB 3 Cash and cash equivalents 197,582 � 0.01% Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows: (1)Parent company is ‘0’. (2)The subsidiaries are numbered in order starting from ‘1’. Note 2: Relationship between transaction company and counterparty is classified into the following three categories; fill in the number of category each case belongs to (If transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.): (1)Parent company to subsidiary. (2)Subsidiary to parent company. (3)Subsidiary to subsidiary. Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for consolidated income statement accounts. I. Other significant transactions that may affect the decisions made by consolidated financial statements users as of December 31, 2017: None (2) Information regarding reinvested business A. Funds lent to 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.
Details of transactions	Percentage (%) of total consolidated net revenues or assets (Note 3)	0.00%	0.01%	0.14%	0.00%	0.01%
	Conditions	No significant difference from general customers	�	�	�	�
	Amount	$ 52,726	300,000	73,045	40,871	197,582
	Account	Payables	Other financial assets – net	Net service fee and commission	Cash and cash equivalents	Cash and cash equivalents
	Relationship (Note 2)	3	3	3	3	3
	Counterparty	FCB	FCB	FCB	FCB	FCB
	Company	FALI		FFAM	FFMC	FVC
	No. (Note 1)	4		5	6	7

251

Ceiling on total loans granted	Ceiling on total loans granted	$1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089
Limit on loans granted to a single party		$ 943,567	943,567	943,567	943,567	943,567	943,567	943,567	943,567	943,567	943,567	943,567	943,567	943,567	943,567	943,567	943,567	314,522
Collateral	Value	$1,500	240,000	96,000	72,000	3,000	600	39,687	-	9,600	74,513	15,710	21,408	24,194	34,619	50,406	24,000	5,800
	Item	Deposit	Real estate	Real estate	Real estate	Deposit	Deposit	Real estate	None	Real estate	Real estate	Real estate	Stock	Real estate	Real estate	Real estate	Real estate	Deposit
	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	Operation turnover	Operation turnover	Operation turnover	Operation turnover
	Amount of transactions with the borrower	$ -	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	20,000
	Nature of Loan (Note4)	2	2	2	2	2	2	2	2	2	2	2	2	2	2	2	2	1
	Interest Rate	5.80%	4.18%	4.51%	4.58%	6.04%	8.30%	5.73%	6.25%	6.30%	4.12%	4.15%	4.54%	4.45%	4.36%	4.75%	4.84%	8.75%
	Actual amount drawn down	$ 2,356	275,305	12,085	18,858	4,111	2,680	35,250	-	3,870	49,500	9,891	18,600	13,300	48,500	34,650	20,000	-
	Balance at December 31, 2017	$ 2,356	275,305	12,085	18,858	4,111	2,680	35,250	-	3,870	49,500	9,891	18,600	19,300	48,500	34,650	20,000	-
Maximum	outstanding balance during the year ended December 31, 2017	$ 16,034	283,782	58,800	37,274	25,119	4,539	44,650	10,000	6,996	50,000	10,000	20,000	20,000	50,000	35,000	20,000	19,808
	Related party (Y/N)	N	N	N	N	N	N	N	N	N	N	N	N	N	N	N	N	N
	General ledger account	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing
	Borrower	San Wen Co., Ltd.	HANKY Co., Ltd.	Kai Chu Aluminum Co., Ltd.	Che Cheng Industrial Co., Ltd.	Hlsc Logistics Co., Ltd.	Yuan Gji Medicines Co. Ltd.	Tendril Co. Ltd.	ACT Chemical Co., Ltd.	Chuangjian health cause Co., Ltd.	Jinhe Yu Le Industrial Co., Ltd.	Guxiang Binding Printing Co., Ltd	Fengxin Development Investment Co., Ltd	100 Mountain Enterprises Ltd.	Emerald Bay Biotechnology Co., Ltd.	Xin Yue Co., Ltd.	Chong Yu International Co., Ltd.	Super Vision International Trading 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.	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	14	15	16	17

252

Ceiling on total loans granted	Ceiling on total loans granted	$1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089	1,258,089
Limit on loans granted to a single party		$ 943,567	943,567	943,567	314,522	943,567	943,567	943,567	943,567	943,567	943,567	943,567	943,567	943,567	943,567	943,567	314,522
Collateral	Value	$ 4,018	14,400	6,900	2,869	11,906	5,347	18,886	15,123	2,048	2,000	1,600	1,200	-	3,000	$ 25,910	90,204
	Item	Tickets	Real estate	Personal Property	Real estate	Real estate	Real estate	Real estate	Real estate	Real estate	Deposit	Deposit	Deposit	None	Deposit	Real estate	Real estate
	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	Operation turnover	Operation turnover	Operation turnover
	Amount of transactions with the borrower	$ -	-	-	20,000	-	-	-	-	-	-	-	-	-	-	-	330,000
	Nature of Loan (Note4)	2	2	2	1	2	2	2	2	2	2	2	2	2	2	2	1
	Interest Rate	7.40%	8.11%	7.06%	8.65%	6.52%	4.52%	6.58%	4.50%	8.17%	4.74%	5.76%	7.35%	5.71%	5.95%	5.97%	3.81%
	Actual amount drawn down	$ -	9,103	1,992	10,617	10,179	2,312	5,164	3,041	4,231	10,000	8,000	-	289	17,846	19,596	32,143
	Balance at December 31, 2017	$ -	9,103	1,992	10,617	10,179	2,312	5,164	3,041	4,231	10,000	15,000	-	289	17,846	19,596	90,000
Maximum	outstanding balance during the year ended December 31, 2017	$ 3,355	20,181	9,621	15,387	18,417	2,865	14,746	10,586	8,000	10,000	15,000	7,391	9,995	20,000	20,000	90,000
	Related party (Y/N)	N	N	N	N	N	N	N	N	N	N	N	N	N	N	N	N
	General ledger account	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing	Other receivables- direct financing
	Borrower	Taiwan Newleader Co., Ltd.	Yuans of biological Science Technologies Co., Ltd.	Ever Spring Marine Aquaculture Co., Ltd.	Qian Jia Food Co., Ltd.	Xiang Wei Mao Yi Co., Ltd.	Songyuan Co., Ltd.	Long Life Tien Trading Co., Ltd.	Jun Gu Nian Mi Chang Corp.	Yu Chiun International Development Co. Ltd.	Zhen Hao Co. Ltd.	Zhen Wang Hang	Xuantai Food Co., Ltd.	World Way Marine Transportation & Logistic Co., Ltd.	Holmes Chez International Co., Ltd.	Zong Sheng Co., Ltd.	Tair Feng Yu Construction 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.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.	FCB Leasing Co. Ltd.
	Number	18	19	20	21	22	23	24	25	26	27	28	29	30	31	32	33

253

254

No. Endorsing and guarantee company Endorsed and guaranteed company Limit for endorsement and guarantee for single enterprise Maximum balance accumulated as of the period Ending balance of endorsement and guarantee Actually used amount Property- backed endorsement and guarantee The ratio of accumulated endorsement and guarantee amount and the net value of the latest financial statements Maximum limit Provision of endorsements/ guarantees by parent company to subsidiary Provision of endorsements/ guarantees by subsidiary to parent company Provision of endorsements/ guarantees to the party in Mainland China Name of company Relationship 1 FCB Leasing Co., Ltd. FCBL Capital International (B.V.I) Ltd. Subsidiary $ 9,435,669 $ 2,344,720 $ 2,344,720 $ 486,366 None 74.55% $31,452,230 N N N 2 FCB Leasing Co., Ltd. FCB International Leasing Ltd. Sub- subsidiary 9,435,669 2,832,070 2,531,274 873,281 None 80.48% 31,452,230 N N Y 3 FFAM First Financial Leasing (Chengdu) Ltd. Sub- subsidiary 3,041,112 54,588 54,588 54,588 None 3.59% 4,561,668 N N Y Note: The subsidiaries of FCB, and FFAM, for business needs, may resolve through its Board of Directors to provided guarantees for external parties. C. 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. (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.	No. Endorsing and guarantee company Endorsed and guaranteed company Limit for endorsement and guarantee for single enterprise Maximum balance accumulated as of the period Ending balance of endorsement and guarantee Actually used amount Property- backed endorsement and guarantee The ratio of accumulated endorsement and guarantee amount and the net value of the latest financial statements Maximum limit Provision of endorsements/ guarantees by parent company to subsidiary Provision of endorsements/ guarantees by subsidiary to parent company Provision of endorsements/ guarantees to the party in Mainland China Name of company Relationship 1 FCB Leasing Co., Ltd. FCBL Capital International (B.V.I) Ltd. Subsidiary $ 9,435,669 $ 2,344,720 $ 2,344,720 $ 486,366 None 74.55% $31,452,230 N N N 2 FCB Leasing Co., Ltd. FCB International Leasing Ltd. Sub- subsidiary 9,435,669 2,832,070 2,531,274 873,281 None 80.48% 31,452,230 N N Y 3 FFAM First Financial Leasing (Chengdu) Ltd. Sub- subsidiary 3,041,112 54,588 54,588 54,588 None 3.59% 4,561,668 N N Y Note: The subsidiaries of FCB, and FFAM, for business needs, may resolve through its Board of Directors to provided guarantees for external parties. C. 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. (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.	No. Endorsing and guarantee company Endorsed and guaranteed company Limit for endorsement and guarantee for single enterprise Maximum balance accumulated as of the period Ending balance of endorsement and guarantee Actually used amount Property- backed endorsement and guarantee The ratio of accumulated endorsement and guarantee amount and the net value of the latest financial statements Maximum limit Provision of endorsements/ guarantees by parent company to subsidiary Provision of endorsements/ guarantees by subsidiary to parent company Provision of endorsements/ guarantees to the party in Mainland China Name of company Relationship 1 FCB Leasing Co., Ltd. FCBL Capital International (B.V.I) Ltd. Subsidiary $ 9,435,669 $ 2,344,720 $ 2,344,720 $ 486,366 None 74.55% $31,452,230 N N N 2 FCB Leasing Co., Ltd. FCB International Leasing Ltd. Sub- subsidiary 9,435,669 2,832,070 2,531,274 873,281 None 80.48% 31,452,230 N N Y 3 FFAM First Financial Leasing (Chengdu) Ltd. Sub- subsidiary 3,041,112 54,588 54,588 54,588 None 3.59% 4,561,668 N N Y Note: The subsidiaries of FCB, and FFAM, for business needs, may resolve through its Board of Directors to provided guarantees for external parties. C. 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. (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.	No. Endorsing and guarantee company Endorsed and guaranteed company Limit for endorsement and guarantee for single enterprise Maximum balance accumulated as of the period Ending balance of endorsement and guarantee Actually used amount Property- backed endorsement and guarantee The ratio of accumulated endorsement and guarantee amount and the net value of the latest financial statements Maximum limit Provision of endorsements/ guarantees by parent company to subsidiary Provision of endorsements/ guarantees by subsidiary to parent company Provision of endorsements/ guarantees to the party in Mainland China Name of company Relationship 1 FCB Leasing Co., Ltd. FCBL Capital International (B.V.I) Ltd. Subsidiary $ 9,435,669 $ 2,344,720 $ 2,344,720 $ 486,366 None 74.55% $31,452,230 N N N 2 FCB Leasing Co., Ltd. FCB International Leasing Ltd. Sub- subsidiary 9,435,669 2,832,070 2,531,274 873,281 None 80.48% 31,452,230 N N Y 3 FFAM First Financial Leasing (Chengdu) Ltd. Sub- subsidiary 3,041,112 54,588 54,588 54,588 None 3.59% 4,561,668 N N Y Note: The subsidiaries of FCB, and FFAM, for business needs, may resolve through its Board of Directors to provided guarantees for external parties. C. 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. (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.	No. Endorsing and guarantee company Endorsed and guaranteed company Limit for endorsement and guarantee for single enterprise Maximum balance accumulated as of the period Ending balance of endorsement and guarantee Actually used amount Property- backed endorsement and guarantee The ratio of accumulated endorsement and guarantee amount and the net value of the latest financial statements Maximum limit Provision of endorsements/ guarantees by parent company to subsidiary Provision of endorsements/ guarantees by subsidiary to parent company Provision of endorsements/ guarantees to the party in Mainland China Name of company Relationship 1 FCB Leasing Co., Ltd. FCBL Capital International (B.V.I) Ltd. Subsidiary $ 9,435,669 $ 2,344,720 $ 2,344,720 $ 486,366 None 74.55% $31,452,230 N N N 2 FCB Leasing Co., Ltd. FCB International Leasing Ltd. Sub- subsidiary 9,435,669 2,832,070 2,531,274 873,281 None 80.48% 31,452,230 N N Y 3 FFAM First Financial Leasing (Chengdu) Ltd. Sub- subsidiary 3,041,112 54,588 54,588 54,588 None 3.59% 4,561,668 N N Y Note: The subsidiaries of FCB, and FFAM, for business needs, may resolve through its Board of Directors to provided guarantees for external parties. C. 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. (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.
Provision of endorsements/ guarantees to the party in Mainland China		N	Y	Y
Provision of endorsements/ guarantees by subsidiary to parent company		N	N	N
Provision of endorsements/ guarantees by parent company to subsidiary		N	N	N
Maximum limit		$31,452,230	31,452,230	4,561,668
The ratio of accumulated endorsement and guarantee amount and the net value of the latest financial statements		74.55%	80.48%	3.59%
Property- backed endorsement and guarantee		None	None	None
Actually used amount		$ 486,366	873,281	54,588
Ending balance of endorsement and guarantee		$ 2,344,720	2,531,274	54,588
Maximum balance accumulated as of the period		$ 2,344,720	2,832,070	54,588
Limit for endorsement and guarantee for single enterprise		$ 9,435,669	9,435,669	3,041,112
Endorsed and guaranteed company	Relationship	Subsidiary	Sub- subsidiary	Sub- subsidiary
	Name of company	FCBL Capital International (B.V.I) Ltd.	FCB International Leasing Ltd.	First Financial Leasing (Chengdu) Ltd.
	Endorsing and guarantee company	FCB Leasing Co., Ltd.	FCB Leasing Co., Ltd.	FFAM
	No.	1	2	3

255

(in thousands) Book value Percentage (%) (Note 1) Note	8,906,400 $ 191,647,166 100.00% $ 191,647,166	615,000 6,329,099 100.00% 6,329,099	60,000 985,296 100.00% 985,296	145,000 1,656,492 100.00% 1,656,492	180,000 1,867,825 100.00% 1,867,825	2,000 36,348 100.00% 36,348	114,750 279,277 51.00% 279,277		300 6,105 0.08% 6,105	30,000 300,000 2.04% 300,000	225,000 2,862,000 17.03% 2,862,000		60,050 1,798,874 100.00% 1,798,874 Note2		USD30,000 thousand 619,360 100.00% 619,360 Note2		USD30,000 thousand 905,107 100.00% 905,107 Note2	3,000 28,196 4.97% 28,196		114 1,137 0.19% 1,137		100 10,950 0.00% 10,950	150 15,105 0.00% 15,105	- 68,802 0.00% 68,802	- 40,146 0.00% 40,146	3,095 31,876 2.22% 31,876	1,115 143,278 1.74% 143,278		100 5,090 0.10% 5,090
Account	Equity investments accounted for under the equity method								Financial assets carried at cost			Equity investments accounted for under the equity method						Available-for-sale financial Assets-current		Financial assets carried at cost	Financial assets at fair value	through profit or loss			Available-for-sale financial Assets-current
Relationship	A subsidiary of FFHC							An investee of FFHC under	the cost method			An investee of FCBL	under the equity method	An investee of FCBL Capital	International (B.V.I) Ltd	under the equity method		A mutual fund managed by FSIT	An investee of FSIT under	the cost method						None
Name Of Investee And Type Of Securities	FCB Stocks	FS	FSIT	FFAM	FVC	FFMC	FALI		Taiwan Depository & Clearing Corporation	Taipei Financial Center Corp.	Taiwan Asset Management Corporation		FCBL Capital International (B.V.I) Ltd.		FCB International Leasing Ltd.		FCB Leasing (Xiamen) Ltd.	FSITC RMB High Yield Bond Fund Beneficiary certificates		Fundrich Securities Co., Ltd Stocks	Convertible	Kwong Lung Enterprise Co., Ltd bond	Rotam Taiwan Ltd	Polaris Group Taiwan	TPM Fund Beneficiary certificates	Space Shuttle Hi-Tech Co., Ltd Stocks	All Cosmos Bio-Tech Holding Corporation	(Cayman)	Shin Foong Specialty and Applied Materials Co., Ltd.
Investor	FFHC												FCBL	FCBL Capital	International	(B.V.I) Ltd		FSIT				FVC

256

		Note
Market Value	Ownership /Net Equity	Percentage (%) (Note 1)		4.19% $ 17,648	6.18% 40,017	2.59% 38,445	0.90% 36,421	3.12% 12,928	0.11% 8,998	3.57% 10,736	0.99% 18,653	1.64% 18,903	4.19% 24,915	4.17% 13,820	1.24% 36,084	3.76% 26,855	0.20% 12,012	0.36% 54,506	10.88% 13,441	0.98% -	4.74% 48,535	5.03% 33,665	1.66% 64,090	3.50% 25,158	2.50% 23,538	0.21% -	1.79% -	2.36% -	4.05% 17,221	3.63% -	12.63% 27,789	8.49% -	3.10% 110	7.85% 10,744	4.71% 2,024	8.70% -	15.06% -
	Shares / Units	(in thousands) Book value		2,792 $ 17,648	2,052 40,017	1,500 38,445	770 36,421	1,174 12,928	200 8,998	1,275 10,736	622 18,653	573 18,903	566 24,915	980 13,820	930 36,084	2,815 26,855	132 12,012	388 54,506	3,170 13,441	2,744 -	3,084 48,535	1,031 33,665	1,000 64,090	1,400 25,158	1,700 23,538	800 -	1,207 -	605 -	1,103 17,221	1,200 -	3,448 27,789	3,300 -	459 110	800 10,744	202 2,024	2,250 -	2,000 -
		Account	Available-for-sale financial	Assets-current
		Relationship	None
		Name Of Investee And Type Of Securities	Wieson Technologies Co., Ltd. Stocks		Jorjin Technologies Inc.	Genomics BioSci & Tech	TBI Motion Technology	Joy Industrial Co., Ltd	United BioPharma, Inc.	Tai Ling Biotech Inc.	Glac Biotech Co, Ltd.	Higgstec Inc.	Newsworldwu Co.	3S Silicon Tech., Inc.	SYNergy ScienTech Corp.,	Clientron Corp.	Heran Co., Ltd.	Nan Pao Resins Chemical Co., Ltd.	Weiya Technology Co., LTD	Eversol Corporation	Joyin Co., Ltd.	Advanced Flexible Circuits Co., Ltd.	SR SUNTOUR INC	Antero Biotechnology Co., Ltd.	Tong Bao Co., Ltd.	Cando Co., Ltd.	Power Source Energy Co., Ltd.	Tcst Tech Co., Ltd.	Caremed Supply, Inc	Mylight Technology Co., Ltd.	Gloria Special Steel Profile Corporation	Chuan Shih Industrial Co., Ltd.	ZOWIE Technology Corporation	Awin Diamond Technology Corporation	Applied Green Light Inc	Universal Peptide Corp	Sino Applied Materials Co., Ltd
		Investor		FVC

257

		Note
Market Value	Shares / Units Ownership /Net Equity	Investor Name Of Investee And Type Of Securities Relationship Account (in thousands) Book value Percentage (%) (Note 1)		FVC GreenRich Technology Co., Ltd. Stocks None Available-for- sale financial Assets 45 $ - 0.45% $ -	Entropy Precision System Inc. 892 16,059 9.01% 16,059	Utech Solar Corp 1,320 7,009 1.09% 7,009	Hero Movie 60 - 5.00% -	Golden Way Electronics Corp., Ltd 1,213 17,169 4.95% 17,169	Everready Precision Ind. Corp. 1,589 23,104 4.68% 23,104	Accutex Accuracy & Technology Leading Co. 668 19,423 2.66% 19,423	Formosa Microsemi Co., Ltd. 862 15,463 3.08% 15,463	Dai Yi Wistom Co., Ltd. 588 - 5.25% -	A Plus Biotechnology Co., Ltd 735 29,849 2.74% 29,849	Advanced Material Systems Co. 1,366 20,489 4.92% 20,489	Bravo Ideas 1,600 5,888 3.39% 5,888	Tair Jiuh Enterprise Co., Ltd. 1,000 37,950 3.17% 37,950	TJ enterprise co., Ltd 2,448 39,217 7.33% 39,217	Episonica Holdings Ltd.(Preferred Stock) 2,009 63,611 11.09% 63,611	Zhong Lin Capital Co., Ltd. 12,000 180,000 12.00% 180,000	Zhonglin Venture Capital Co., Ltd. 1,500 24,000 10.35% 24,000	Hyper Crystal Inc. (Preferred Stock) 500 8,000 0.00% 8,000	Amaryllo Inc. (samoa) 600 2,040 3.41% 2,040	iXensor Co., Ltd 1,221 33,424 2.94% 33,424	Chimeimotor Co., Ltd. 400 4,976 3.81% 4,976	MoBagel (USA) 313 15,790 2.46% 15,790	Luminescence Technology Corp. 1,500 30,000 5.96% 30,000	Keystone Pharmaceuticals Inc 2,000 20,000 9.09% 20,000	I-Serve Holdings Limited (Cayman) 100 30,142 1.09% 30,142	FFAM First Financial Assets Management (B.V.I) Ltd. An investee of FFAM under the equity method Equity investments accounted for under the equity method USD 30,000 thousand 532,631 100.00% 532,631	FFAM (B.V.I) First Financial Leasing (Chengdu) USD 30,000 thousand 532,598 100.00% 532,598	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.

258

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 are 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:	The combined ownership of the investee company’s common shares	held bythe Company and its related parties (Note 8)	Percentage of Investment income Total	Name of Name of Major ownership (%) at the (loss) recognised by Number of Number of pro Number of	investee investee operating end of current Carrying value the Company for owned shares forma shares shares Percentage of	company company Address activities period of investment current period (in thousands) (Note 8) (in thousands) ownership (%)	FFHC FCB 30, Chung-King S. Road, Sec. 1, Taipei, Taiwan Note 1 100 $ 191,647,166 $ 15,141,884 8,906,400 - 8,906,400 100	FS 6F, 27, An Ho Road, Sec. 1, Taipei, Taiwan Note 2 100 6,329,099 271,515 615,000 - 615,000 100	FSIT 7F, 6, Min Chuan E. Road Sec. 3, Taipei, Taiwan Note 2 100 985,296 70,070 60,000 - 60,000 100	FFAM 7F, 94, Chung Hsiao E. Road, Sec 2, Taipei, Taiwan Note 5 100 1,656,492 144,323 145,000 - 145,000 100	FVC 9F, 30, Chung-King S. Road, Sec.1, Taipei, Taiwan Note 4 100 1,867,825 56,709 180,000 - 180,000 100	FFMC 9F, 30, Chung-King S. Road, Sec.1, Taipei, Taiwan Note 5 100 36,348 6,579 2,000 - 2,000 100	FALI 13F, 456, Xin-Yi Road, Sec.4, Taipei, Taiwan Note 3 51 279,277 ( 52,708) 114,750 - 114,750 51	FCB FCBL 6F, 94, ChungHsiaoE.Road., Sec. 2, Taipei, Taiwan Note 5 100 3,149,042 - 300,000 - 300,000 100	First Commercial 200 East Main Street, Alhambra, CA91801, USA Note 1 100 3,485,491 - 7,000 - 7,000 100

259

Total	Number of Number of pro Number of	owned shares forma shares shares Percentage of	(in thousands) (Note 8) (in thousands) ownership (%)		1,500 - 1,500 30		2,000 - 2,000 40			60,050 - 60,050 100			USD 30,000 thousand - USD 30,000 thousand 100	USD 30,000 thousand - USD 30,000 thousand 100				USD 30,000 thousand - USD 30,000 thousand 100		10,000 - 10,000 100		1,000 - 1,000 100			66,000 - 66,000 100				USD 30,000 thousand - USD 30,000 thousand 100
Investment income	(loss) recognised by	the Company for	current period		$ -		-			-				-				-		-		-			-				-
		Carrying value	of investment		$ 15,309		15,773			1,798,874				619,360				905,107		119,594		260,872			234,268				532,631
Percentage of	ownership (%) at the	end of current	period		30		40			100				100				100		100		100			100				100
	Major	operating	activities		Note 6		Note 7			Note 5				Note 5				Note 5		Note 5		Note 5			Note 2 5				Note 5
			Address		9F, 94, ChungHsiaoE.Road., Sec.2, Taipei, Taiwan	11F.-11, No.99, Sec. 1, Xintai	5th Rd., Xizhi Dist., New Taipei	City 221, Taiwan	6F, 94, ChungHsiaoE.Road, Sec. 2, Taipei, Taiwan				Rm. 1008, Jianwu Building, No.	188, Wangdun Rd., Suzhou,	China		20-21F., Huli Building,	Wuyuanwan Business Operations Center, Huli District,	Xiamen City	6F, 27, AnHoRoad, Sec.1, Taipei, Taiwan	International Trust Building,	Wickhams Cay I, Road Town,	Tortola, British Virgin Islands	Room 1003, 10F, Infinity Plaza,	199 Des Voeux Road Central,	Central, Hong Kong			7F, 94, ChungHsiaoE.Road., Sec.2, Taipei, Taiwan
	Name of	investee	company	Bank(USA)	EAREM		Turn Cloud		FCBL Capital	International	(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
	Name of	investee	company		FCB					FCBL			FCBL Capital	International	(B.V.I) Ltd.					FS					FTSL				FFAM

260

The combined ownership of the investee company’s common shares	held bythe Company and its related parties (Note 8)	Percentage of Investment income Total	Percentage of Investment income Total	Name of Major ownership (%) at the (loss) recognised by Number of Number of pro Number of	investee operating end of current Carrying value the Company for owned shares forma shares shares Percentage of	company Address activities period of investment current period (in thousands) (Note 8) (in thousands) ownership (%)		FCB Leasing (Chengdu) Co., Ltd. Fl. 18, No. 7, Xinguanghua St., Jingjiang, Chengdu, China Note 5 100 $ 532,598 $ - USD 30,000 thousand - USD 30,000 thousand 100		Note 1 Banking industry	Note 2 Securities and futures industry and security investment trust industry	Note 3 Insurance industry	Note 4 Venture capital industry.	Note 5 Leasing, investment consulting, and business consulting industries and holding company.	Note 6 Construction proposal consulting and contract certification.	Note 7 Computer system integration services.	Note 8 Shares or pro forma shares of the investees held by the Bank, directors, supervisors, general manager, vice general manager, and companies satisfying	the definition of affiliated companies in the Company Act shall all be included.	Note 9 (1)Pro forma shares refer to shares that are assumed to be obtained with conversion by purchasing equity securities or entering into derivatives	contracts (to be converted into share ownership) that are connected to reinvestment business according to agreed terms of transaction and the	bank’s intent to underwrite, and are used for reinvestment purpose as stipulated in Article 36-2 and Article 37of the Financial Holding Company	Act.	(2)Above-mentioned “equity securities” refer to securities in Article11-1 of Securities and Exchange Act Enforcement Rules, such as convertible	bonds and call warrants.	(3)Above-mentioned “derivatives contracts” refer to those conforming to the definition of derivatives in IAS 39, such as stock options.
				Name of	investee	company	First Financial	Assets Management (B.V.I)Co.,	Ltd

261

	Investee Company Major Businesses and Products Total Amount of Paid-in Capital Method of Investment (Note 1) Accumulated Outflow of Investment from Taiwan as of January 1, 2017 Outflow of Investment from Taiwan as of December 31, 2017 Net income of investee Percentage of Ownership Equity in the Earnings (Losses) (Note 2) Outflow Inflow First Commercial Bank Shanghai Branch Banking businesses approved by local government $ 4,676,508 (CNY1,000,000) (1) $ 4,676,508 (USD157,440) $ - $ - $ 4,676,508 (USD157,440) $ 91,821 N/A $ 91,821 (2)A	Investee Company Major Businesses and Products Total Amount of Paid-in Capital Method of Investment (Note 1) Accumulated Outflow of Investment from Taiwan as of January 1, 2017 Outflow of Investment from Taiwan as of December 31, 2017 Net income of investee Percentage of Ownership Equity in the Earnings (Losses) (Note 2) Outflow Inflow First Commercial Bank Shanghai Branch Banking businesses approved by local government $ 4,676,508 (CNY1,000,000) (1) $ 4,676,508 (USD157,440) $ - $ - $ 4,676,508 (USD157,440) $ 91,821 N/A $ 91,821 (2)A
	Equity in the Earnings (Losses) (Note 2)	$ 91,821 (2)A
	Percentage of Ownership	N/A
	Net income of investee	$ 91,821
Accumulated	Outflow of Investment from Taiwan as of December 31, 2017	$ 4,676,508 (USD157,440)
Investment Flows	Inflow	$ -
	Outflow	$ -
	Accumulated Outflow of Investment from Taiwan as of January 1, 2017	$ 4,676,508 (USD157,440)
	Method of Investment (Note 1)	(1)
	Total Amount of Paid-in Capital	$ 4,676,508 (CNY1,000,000)
	Major Businesses and Products	Banking businesses approved by local government
	Investee Company	First Commercial Bank Shanghai Branch

262

	Investee Company Major Businesses and Products Total Amount of Paid-in Capital Method of Investment (Note 1) Accumulated Outflow of Investment from Taiwan as of January 1, 2017 Outflow of Investment from Taiwan as of December 31, 2017 Net income of investee Percentage of Ownership Equity in the Earnings (Losses) (Note 2) Outflow Inflow First Commercial Bank Chengdu Branch Banking businesses approved by local government $ 4,896,697 (CNY1,000,000) (1) $ 4,896,697 (USD162,269) $ - $ - $ 4,896,697 (USD162,269) $ 36,774 N/A $ 36,774 (2)A	Investee Company Major Businesses and Products Total Amount of Paid-in Capital Method of Investment (Note 1) Accumulated Outflow of Investment from Taiwan as of January 1, 2017 Outflow of Investment from Taiwan as of December 31, 2017 Net income of investee Percentage of Ownership Equity in the Earnings (Losses) (Note 2) Outflow Inflow First Commercial Bank Chengdu Branch Banking businesses approved by local government $ 4,896,697 (CNY1,000,000) (1) $ 4,896,697 (USD162,269) $ - $ - $ 4,896,697 (USD162,269) $ 36,774 N/A $ 36,774 (2)A		Investee Company Major Businesses and Products Total Amount of Paid-in Capital Method of Investment (Note 1) Accumulated Outflow of Investment from Taiwan as of January 1, 2017 Outflow of Investment from Taiwan as of December 31, 2017 Net income of investee Percentage of Ownership Equity in the Earnings (Losses) (Note 2) Outflow Inflow First Commercial Bank Xiamen Branch Banking businesses approved by local government $ 5,132,801 (CNY1,000,000) (1) $ 5,132,801 (USD162,946) $ - $ - $ 5,132,801 (USD162,946) $ 51,122 N/A $51,122 (2)A	Investee Company Major Businesses and Products Total Amount of Paid-in Capital Method of Investment (Note 1) Accumulated Outflow of Investment from Taiwan as of January 1, 2017 Outflow of Investment from Taiwan as of December 31, 2017 Net income of investee Percentage of Ownership Equity in the Earnings (Losses) (Note 2) Outflow Inflow First Commercial Bank Xiamen Branch Banking businesses approved by local government $ 5,132,801 (CNY1,000,000) (1) $ 5,132,801 (USD162,946) $ - $ - $ 5,132,801 (USD162,946) $ 51,122 N/A $51,122 (2)A
	Equity in the Earnings (Losses) (Note 2)	$ 36,774 (2)A		Equity in the Earnings (Losses) (Note 2)	$51,122 (2)A
				Percentage of Ownership	N/A
	Percentage of Ownership	N/A
						Upper Limit on Investment	$ 115,355,500
	Net income of investee	$ 36,774		Net income of investee	$ 51,122
Accumulated	Outflow of Investment from Taiwan as of December 31, 2017	$ 4,896,697 (USD162,269)	Accumulated	Outflow of Investment from Taiwan as of December 31, 2017	$ 5,132,801 (USD162,946)	Investment Amounts Authorised by Investment Commission, MOEA	$ 5,132,801 (USD162,946)
Investment Flows	Inflow	$ -	Investment Flows	Inflow	$ -
						Accumulated Investments in Mainland China as of December 31, 2017	$ 5,132,801 (USD162,946)
	Outflow	$ -		Outflow	$ -
	Accumulated Outflow of Investment from Taiwan as of January 1, 2017	$ 4,896,697 (USD162,269)		Accumulated Outflow of Investment from Taiwan as of January 1, 2017	$ 5,132,801 (USD162,946)
						Accumulated Inward Remittance of Earnings as of December 31, 2017	$ -
	Method of Investment (Note 1)	(1)		Method of Investment (Note 1)	(1)
	Total Amount of Paid-in Capital	$ 4,896,697 (CNY1,000,000)		Total Amount of Paid-in Capital	$ 5,132,801 (CNY1,000,000)
	Major Businesses and Products	Banking businesses approved by local government		Major Businesses and Products	Banking businesses approved by local government
						Carrying Value as of December 31, 2017	$4,968,743
	Investee Company	First Commercial Bank Chengdu Branch		Investee Company	First Commercial Bank Xiamen Branch

263

	Investee Company Major Businesses and Products Total Amount of Paid-in Capital Method of Investment (Note 1) Accumulated Outflow of Investment from Taiwan as of January 1, 2017 Outflow of Investment from Taiwan As of December 31, 2017 Net income of investee Percentage of Ownership Equity in the Earnings (Losses) (Note 2) Outflow Inflow FCB International Leasing Ltd. Financial Leasing $ 886,103 (USD30,000) (2) $ 886,103 (USD30,000) $ - $ - $ 886,103 (USD30,000) $39,137 100% $ 39,137 (2)A	Investee Company Major Businesses and Products Total Amount of Paid-in Capital Method of Investment (Note 1) Accumulated Outflow of Investment from Taiwan as of January 1, 2017 Outflow of Investment from Taiwan As of December 31, 2017 Net income of investee Percentage of Ownership Equity in the Earnings (Losses) (Note 2) Outflow Inflow FCB International Leasing Ltd. Financial Leasing $ 886,103 (USD30,000) (2) $ 886,103 (USD30,000) $ - $ - $ 886,103 (USD30,000) $39,137 100% $ 39,137 (2)A	Upper Limit on Investment $ 1,887,134 ternational (B.V.I) Ltd.: ollars/ Thousands Of US Dollars)	Upper Limit on Investment $ 1,887,134 ternational (B.V.I) Ltd.: ollars/ Thousands Of US Dollars)	Upper Limit on Investment $ 1,887,134 ternational (B.V.I) Ltd.: ollars/ Thousands Of US Dollars)	Upper Limit on Investment $ 1,887,134 ternational (B.V.I) Ltd.: ollars/ Thousands Of US Dollars)	ome stee Percentage of Ownership Equity in the Earnings (Losses) (Note 2) 708 100% $ 31,708 (2)A	ome stee Percentage of Ownership Equity in the Earnings (Losses) (Note 2) 708 100% $ 31,708 (2)A
	Equity in the Earnings (Losses) (Note 2)	$ 39,137 (2)A					Equity in the Earnings (Losses) (Note 2)	$ 31,708 (2)A
			Upper Limit on Investment	$ 1,887,134					Upper Limit on Investment	$ 1,887,134
	Percentage of Ownership	100%					Percentage of Ownership	100%
	Net income of investee	$39,137					ome stee	708
			Investment Amounts Authorised by Investment Commission, MOEA	$ 886,103 (USD30,000)	ect subsidiary-FCBL Capital In ssed In Thousands Of New Taiwan D		Net inc of inve	$ 31,	Investment Amounts Authorised by Investment Commission, MOEA	$ 903,495 (USD30,000)
Accumulated	Outflow of Investment from Taiwan As of December 31, 2017	$ 886,103 (USD30,000)				Accumulated	Outflow of Investment from Taiwan as of December 31, 2017	$ 903,495 (USD30,000)
Investment Flows	Inflow	$ -				t Flows	Inflow	$ -
			Accumulated Investments in Mainland China As of December 31, 2017	$ 886,103 (USD30,000)		Investmen			Accumulated Investments in Mainland China as of December 31, 2017	$ 903,495 (USD30,000)
	Outflow	$ -					Outflow	$ -
	Accumulated Outflow of Investment from Taiwan as of January 1, 2017	$ 886,103 (USD30,000)					Accumulated Outflow of Investment from Taiwan as of January 1, 2017	$ 903,495 (USD30,000)
	Method of Investment (Note 1)	(2)					Method of Investment (Note 1)	(2)
			Accumulated Inward Remittance of Earnings As of December 31, 2017	$ -					Accumulated Inward Remittance of Earnings as of December 31, 2017	$ -
	Total Amount of Paid-in Capital	$ 886,103 (USD30,000)					Total Amount of Paid-in Capital	$ 903,495 (USD30,000)
	Major Businesses and Products	Financial Leasing					Major Businesses and Products	Financial Leasing
			Carrying Value As of December 31, 2017	$619,360					Carrying Value as of December 31, 2017	$905,107
	Investee Company	FCB International Leasing Ltd.					Investee Company	FCB Leasing (Xiamen) Ltd.

264

	Investee Company Major Businesses and Products Total Amount of Paid-in Capital Method of Investment (Note 1) Accumulated Outflow of Investment from Taiwan as of January 1, 2017 Outflow of Investment from Taiwan as of December 31, 2017 Percentage of Ownership Net income of investee Equity in the Earnings (Losses) (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) $ 30,914 100.00% $ 30,914 (2)A	Investee Company Major Businesses and Products Total Amount of Paid-in Capital Method of Investment (Note 1) Accumulated Outflow of Investment from Taiwan as of January 1, 2017 Outflow of Investment from Taiwan as of December 31, 2017 Percentage of Ownership Net income of investee Equity in the Earnings (Losses) (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) $ 30,914 100.00% $ 30,914 (2)A
	Equity in the Earnings (Losses) (Note 2)	$ 30,914 (2)A
	Net income of investee	100.00%
	Percentage of Ownership	$ 30,914
Accumulated	Outflow of Investment from Taiwan as of December 31, 2017	$ 908,634 (USD 30,000)
Investment Flows	Inflow	$ -
	Outflow	$ -
	Accumulated Outflow of Investment from Taiwan as of January 1, 2017	$ 908,634 (USD 30,000)
	Method of Investment (Note 1)	(2)
	Total Amount of Paid-in Capital	$ 908,634 (USD 30,000)
	Major Businesses and Products	Financial Leasing
	Investee Company	First Financial Leasing (Chengdu) Ltd.

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14. Disclosure of financial information by segments

(1) General information

The 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 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 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 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 consolidated 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.

266

dated	3,041 4,071 7,112 1,717) 9,675) 7,661) 8,059 5,668) 2,391 dated	1,151 9,447 0,598 3,861) 1,064) 8,169) 7,504 3,347) 4,157
For the year ended December 31, 2017 Banking businesses Securities businesses Insurance businesses Other businesses Reconciliation and elimination Consoli Net interest income (loss) 29,547,384 $ 320,279 $ 259,027 $ 120,205) ($ 13,444) ($ 29,99 $ Net non-interest income (loss) 13,932,907 1,354,516 4,749,553 16,799,263 16,002,168) ( 20,83 Net revenue (loss) 43,480,291 1,674,795 5,008,580 16,679,058 16,015,612) ( 50,82 (Provision) reversal of bad debt expenses and guarantee liabilities 6,808,128) ( - 3 36,408 - 6,77 ( Recovered insurance reserves - - 4,559,675) ( - - 4,55 ( Operating expenses 18,817,603) ( 1,376,978) ( 577,911) ( 952,410) ( 377,241 21,34 ( Net profit (loss) from continuing operations before tax 17,854,560 297,817 129,003) ( 15,763,056 15,638,371) ( 18,14 Income tax (expense) benefit 2,712,676) ( 26,302) ( 25,653 2,343) ( - 2,71 ( Net profit (loss) from continuing operations after tax 15,141,884 $ 271,515 $ 103,350) ($ 15,760,713 $ 15,638,371) ($ 15,43 $ For the year ended December 31, 2016 Banking businesses Securities businesses Insurance businesses Other businesses Reconciliation and elimination Consoli Net interest income (loss) 28,449,287 $ 310,002 $ 192,071 $ 150,209) ($ - $ 28,80 $ Net non-interest income 13,743,171 858,009 1,052,527 18,564,874 17,929,134) ( 16,28 Net revenue 42,192,458 1,168,011 1,244,598 18,414,665 17,929,134) ( 45,09 Provision for credit losses 2,221,178) ( - 4) ( 22,679) ( - 2,24 ( Recovered insurance reserves - - 871,064) ( - - 87 ( Operating expenses 19,332,057) ( 1,375,080) ( 523,884) ( 923,581) ( 376,433 21,77 ( Net profit (loss) from continuing operations before tax 20,639,223 207,069) ( 150,354) ( 17,468,405 17,552,701) ( 20,19 Income tax (expense) benefit 2,940,687) ( 22,010) ( 3,740 45,609 1 2,91 ( Net profit (loss) from continuing operations after tax 17,698,536 $ 229,079) ($ 146,614) ($ 17,514,014 $ 17,552,700) ($ 17,28 $

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December 31, 2017	Banking Securities Insurance Reconciliation and	businesses businesses businesses Other businesses elimination Consolidated	Segment assets $2,569,915,507 $ 20,251,740 $ 36,590,967 $ 215,081,521 ($ 207,781,130) $ 2,634,058,605	Segment liabilities 2,377,656,341 13,922,641 36,043,367 18,752,917 ( 4,367,628) 2,442,007,638	December 31, 2016	Banking Securities Insurance Reconciliation and	businesses businesses businesses Other businesses elimination Consolidated	Segment assets $ 2,485,253,124 $ 17,819,577 $ 31,264,647 $ 211,257,657 ($ 204,438,670) $ 2,541,156,335	Segment liabilities 2,294,622,038 11,821,682 30,746,503 15,097,949 ( 3,160,759) 2,349,127,413	(3) Geographical information	Financial information of the Group by area for the years ended December 31, 2017 and 2016 were as follows:	2017 2016	Taiwan $ 44,839,083 $ 39,329,848	Asia 3,429,446 3,215,978	North America 2,029,250 2,011,183	Others 529,333 533,589	Total $ 50,827,112 $ 45,090,598	(4) Information product	The Group’s information on products is consistent with their segment, please refer to Note 14(2).	(5) Major customer information	The Group has no major customers with which the revenues from a single external customer accounting for more than 10% of net	income.

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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

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

First Securities Inc.

4F, 22, Sec. 1, Chang An E. Rd., Taipei 104, Taiwan Phone (886 2) 2563 6262 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 Life Insurance Co., Ltd.

13F, 456, Sec. 4, Xin Yi Rd., Taipei 110, Taiwan Phone (886 2) 8758 1000 www.firstlife.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

Shareholder Information

PricewaterhouseCoopers, Taiwan 27/F, International Trade Building, 333 Keelung Road, Sec.1, Taipei 110, Taiwan Phone (886 2) 2729 6666

2017 Annual Financial Statements

An annual financial statement in Englsih version is available on the FFHC website at www.ffhc.com.tw.

2018 Annual Shareholders’ Meeting

When: Friday, June 22, 2018 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

Jason C. H. Lee / Executive Vice President Phone (886 2) 2348 4908 [email protected]

Deputy Spokesperson

Chao-Chung Chou / Executive Vice President Phone (886 2) 2348 4906 [email protected]

Investor Relations

Annie Lee / Head of IR / Head, Strategy Plan. Dept. Phone (886 2) 2348 4956 2348 4975 [email protected] [email protected]

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.

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 2017 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.

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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 2017 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 2017

52222_rns_2018-07-06_e31243ed-c5d9-4f70-88cb-6dac5bc7a8d4.pdf

First Financial Holding

Contents

FINANCIAL HIGHLIGHTS

2017 Net Income Breakdown by Subsidiaries

FFHC at a Glance

Dear Shareholders,

2017: a year of sustained transformation

Aspiration to become a regional champion

First Bank

First Securities

First Securities Investment Trust

First Life Insurance

First AMC, First Venture Capital & First Consulting

2018 priorities:

maximizing collaborative synergies and creating shared value

A commitment to riskinformed growth and development

Ratings affirmed, reflecting sound asset quality and stable outlook

The latest ratings of various rating agencies are as follows:

First Financial Holding

Our Businesses

First Bank

First Securities

First Securities Investment Trust

First Life Insurance

First Financial AMC

First Venture Capital

First Consulting

Group Structure

FFHC Subsidiaries & Affiliates

First Financial Holding Co., Ltd.

FFHC Operational Structure

Board Structure and Composition

Board of Directors

Directors:

Delegate of MOF

Chairperson Ray B. Dawn

Delegate of MOF

Director & President Chien-Hao Lin

Delegate of MOF

Director & President Grace M.L. Jeng

Delegate of MOF

Director Hsien-Feng Lee

Delegate of MOF

Director Yi-Hsin Wang

Delegate of MOF

Director Hung-Chi Huang

Delegate of MOF

Director Director Li-Chiung Su

Delegate of Bank of Taiwan

Director Shing-Rong Lo

Delegate of Bank of Taiwan

Director Shiou-Jsu Yeh

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

Director Chi-Hsun Chang

Delegate of Global Investment Co., Ltd

Director An-Fu Chen

Independent Directors:

- Independent Director Shyan Yuan Lee

- Independent Director Hau Min Chu

Independent Director Hui-Ya Shen

Shares Holding of Directors

Professional Qualification and Independence Analysis of Directors

Board Meeting

Independence, Diversity & 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

President

Chien-Hao Lin

EVP & Head of Admin. Mgt. Dept.

First Financial Holding Co. Ltd. Annual Report 2017