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T.C.C.B. Annual Report 2014

Jun 18, 2015

52197_rns_2015-06-18_2a5e2029-c7e3-45eb-9fdc-244ffdb9de4a.pdf

Annual Report

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2014

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Taichung Commercial Bank Company Limited

No. 87, Min Chuan Road, Taichung, Taiwan, R.O.C. Tel.:(04)2223-6021 Website: http://www.tcbbank.com.tw

Company Spokesman

Name: Chih-Chuan Fang Job title: Executive Vice President Tel.:(04)2223-6021 Email:[email protected]

Acting Spokesman

Name: Hsueh-Hsien Liao Job title: Executive Vice President Tel.:(04)2223-6021 Email:[email protected]

Shares Registrar

Name: by internal function

Address:11F., No. 50, Sec. 1, XinSheng South Road, ZhongZheng District, Taipei, Taiwan, R.O.C.

Website: http://www.tcbbank.com.tw Tel.:(02)2395-7388

Credit Rating Agency

Name: Fitch Australia Pty Ltd, Taiwan Branch Address: Suite 1306, 13F., No. 205, Tun Hwa N. Road, Taipei, Tawian, R.O.C. Tel.:(02)8175-7600

External Auditors in the Most Recent Year

Name of CPA firm: Deloitte & Touche

Name of CPA: Min-Xian Yang & Kuan-Chung Lai Address:12F., No. 156, MinSheng East Road, Sec. 3, Song Shan District, Taipei, Taiwan, R.O.C. Website: http://www.deloitte.com.tw Tel.:(02)2545-9988

Name of any exchanges where the Company's securities are traded overseas, and the method by which to access information on said offshore securities : None

Index

ONE. LETTER TO SHAREHOLDERS...............................................................................................................1 ONE. LETTER TO SHAREHOLDERS...............................................................................................................1
TWO. A PROFILE OF TAICHUNG BANK........................................................................................................6
THREE. CORPORATE GOVERNANCE REPORT..........................................................................................8
I. ORGANIZATION...........................................................................................................................................................8
II. PROFILES OFDIRECTORS, PRESIDENT, EXECUTIVEVICEPRESIDENTS, ASST. VP,ANDMANAGERS OF THE VARIOUS
DEPARTMENTS AND BRANCHES.................................................................................................................................11
III. STATUS OFCORPORATEGOVERNANCE.....................................................................................................................29
IV. DISCLOSURE OF THE ACCOUNTANT’S FEE.................................................................................................................44
V. CHANGES OFACCOUNTANTS: THE REPLACEMENT OF ACCOUNTANT IN THE LAST TWO YEARS WAS DUE TO THE
INTERNAL ROTATION OF THECPAFIRM....................................................................................................................45
VI. THE CHAIRMAN,PRESIDENT,CHIEF FINANCIAL OR ACCOUNTING MANAGER OF THEBANK WHO HOLDS POSITION IN
THE BUSINESS UNDER THE COMMISSIONEDCPAFIRM OR ITS AFFILIATES..................................................................45
VII. CHANGES IN SHAREHOLDINGS BY DIRECTORS,SUPERVISORS,AND MANAGERS THROUGH TRANSFER AND PLEDGED
UNDER LIEN AND THOSE REQUIRED TO BE DECLARED PURSUANT TOARTICLE25-3OF THEBANKINGACT FROM THE
RECENT YEAR UNTIL THE DATE THEANNUALREPORT WAS PRINTED.........................................................................45
VIII.THE TOP10SHAREHOLDERS BY PROPORTION OF SHAREHOLDING AND INFORMATION ON THEIR AFFILIATIONS..........49
IX. QUANTITY OF SHAREHOLDINGS OF THE SAME INVESTEE BY THEBANK AND DIRECTORS,SUPERVISORS,PRESIDENTS,
EXECUTIVEVICEPRESIDENTS, ASST. EXECUTIVEVICEPRESIDENTS,SUPERVISORS OF THE VARIOUS DEPARTMENTS
AND BRANCHES,AND DIRECT OR INDIRECT SUBSIDIARIES IN PROPORTION TO THE COMBINED HOLDINGS OF ALL......50
FOUR. STATUS OF CAPITAL PLANNING...........................................................................................................51
I. SHARES ANDDIVIDENDS..........................................................................................................................................51
II. ISSUANCE OFFINANCIALBONDS..............................................................................................................................55
III. ISSUANCE OFPREFERREDSTOCKS............................................................................................................................60
IV. ISSUANCE OFOVERSEASDEPOSITORYRECEIPTS......................................................................................................60
V. EMPLOYEESTOCKOPTIONS.....................................................................................................................................60
VI. ACQUISITION ORASSIGNMENT OFOTHERFINANCIALINSTITUTIONS.......................................................................60
VII. IMPLEMENTATION OFFUND UTILIZATION PLAN........................................................................................................60
FIVE. OPERATION PROFILE................................................................................................................................63
I. BUSINESSCONTENTS................................................................................................................................................63
II. EMPLOYEES..............................................................................................................................................................73
III. ENTERPRISERESPONSIBILITIES ANDETHICALBEHAVIOR.........................................................................................77
IV. IT EQUIPMENT..........................................................................................................................................................77
V. LABOR-MANAGEMENTRELATIONS..........................................................................................................................80
VI. IMPORTANT CONTRACTS...........................................................................................................................................81
VII. SECURITIZED PRODUCTS AND RELATED INFORMATION.............................................................................................81
SIX. FINANCIAL STATUS......................................................................................................................................82
I. THE CONSOLIDATED BALANCE SHEET AND COMPREHENSIVE INCOME STATEMENT WITHIN THE LAST FIVE YEARS-
INTERNATIONALFINANCIALREPORTINGSTANDARDS(IFRS)...................................................................................82
II. BALANCESHEET ANDINCOMESTATEMENT FROM THE MOST RECENT YEARS– R.O.C. GAAP..................................85
III. FINANCIALANALYSIS FOR THE MOST RECENT YEARS................................................................................................88
IV. AUDITCOMMITTEE’ REVIEWREPORT ON THEFINANCIALSTATEMENT OF2014......................................................97
V. CONSOLIDATED FINANCIAL STATEMENTS2014........................................................................................................97
VI. FINANCIAL STATEMENTS2014..................................................................................................................................97
VII. IN THE CASE OF ANY INSOLVENCY OF THEBANK AND ITS AFFILIATES,SPECIFY ITS EFFECT ON THEFINANCIAL
STATUS OF THEBANK...............................................................................................................................................97
SEVEN. REVIEW AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS, AND RISK MANAGEMENT
MATTERS...................................................................................................................................................98
I. FINANCIALANALYSIS...............................................................................................................................................98
II. OPERATION RESULT ANALYSIS...............................................................................................................................100
III. CASH FLOWS...........................................................................................................................................................101
IV. THE MATERIAL EFFECT ON FINANCIAL STRUCTURE FROM SUBSTANTIAL CAPITAL EXPENDITURE IN THE LAST FEW
YEARS.....................................................................................................................................................................102
V. DIRECT INVESTMENT POLICY,THE MAIN REASONS FOR PROFIT OR LOSS,AND CORRECTIVE ACTION PLAN IN THE MOST
RECENT YEAR,AND INVESTMENT PLAN IN THE NEXT YEAR......................................................................................105
VI. RISKMANAGEMENT...............................................................................................................................................105
VII. CRISIS MANAGEMENT MECHANISM.........................................................................................................................113
VIII. THE FOLLOWING METHODS AND HYPOTHESES FOR THE VALUATION OF FAIR VALUE OF FINANCIAL INSTRUMENTS ARE
APPLIED..................................................................................................................................................................113
IX. OTHER IMPORTANT NOTES......................................................................................................................................115
EIGHT. SPECIAL NOTES.....................................................................................................................................116
I. INFORMATION REGARDING THE BANK’S SUBSIDIARIES...........................................................................................116
II. PRIVATE PLACEMENT OF SECURITIES ANDBANK DEBENTURES...............................................................................122
III. IN THE MOST RECENT YEAR TO THE DATE THIS REPORT WAS PRINTED,THE HOLDING OR DISPOSITION OF THE SHARES
OF THEBANK HELD BY THE SUBSIDIARIES..............................................................................................................122
IV. OTHERSUPPLEMENTARYDISCLOSURE...................................................................................................................122
V. CONDITIONS THAT WILL MATERIALLY AFFECT SHAREHOLDERS’EQUITY OR PRICE OF SECURITIES.........................122
VI. PROCEDURES FORHANDLINGMATERIALINSIDEINFORMATION OF THEBANK.......................................................122
NINE. BRANCHES OF TAICHUNG COMMERCIAL BANK AT A GLANCE....................................................123

One. Letter to Shareholders

  • I. Operating Performance in 2014

  • (I) Domestic and foreign financial environment

    • The global economic environment in 2014 was clouded by unfavorable factors. Economic recovery in the USA continued its momentum. Yet, the policy control in China, the ineffective internal demand in Japan, the inefficient job market and debt crisis in the Euro Zone hampered the economic growth in major economies of China, Japan, and Europe in 2015. The Directorate-General of Budget, Accounting and Statistics, Executive Yuan, R.O.C.(Taiwan) projected economic growth of 3.78% in 2015 despite the domestic financial environment. Taiwan Institute of Economic Research also forecasted the booming in the banking and finance industry of Taiwan with the expectation that global economic recovery is in place and will drive the economic growth in Taiwan. Enterprises tend to have strong demand for capital. With the continued amendment of applicable legal rules by the competent authority to buttress the competitiveness of the industry and the advocacy of the transformation of the banks and diversification of financial products, banks are expected to achieve sustained profitability.

  • (II) Changes in organization

    1. We established the “Regulatory of Compliance Dept.” in January 2014 for implementation of the compliance system for the effective and appropriate operation of the internal control system.

    2. The establishment of the “Auditing Committee” for fortifying the function of the Board and vitalizing companywide corporate governance for the protection of the rights of the shareholders, employees and customers.

  • (III) Operating result of business plans and strategies

    1. The overall restructuring of the operation with a proper balance of quality and quantity in FY2014 gave way to stronger profitability. The profit position of wealth management business and foreign exchange contributed to the consolidated corporate earnings for FY2014 amounted to NTD3,719 million with earnings per share of NTD1.32. These figures indicated growth of 21.53% and 13.79% from the same period of the previous year, respectively, and are record highs in the last 10 years.

    2. The Bank earned the title as the third national outstanding bank in the “Encouragement of Lending to Small and Medium Enterprises by Domestic Banks Scheme” (Phase VIII) thereby adjusted all existing channels and established Zhong Shan Branch. The Bank has 10 branches in Greater Taipei since then with a brand new deployment in operation.

    3. For the vitalization of risk management, the ratio of reserve for Class I loan assets, NPL rate, and capital adequacy ratio met the standards of the competent authority. For strengthening the capital adequacy capacity in withstanding the economic cycle, the Bank has recognized provision for doubtful mortgage loans account at 1.52%. In so doing, the Bank has accomplished the standard required by the Financial Supervisory

1 1

Commission for capital adequacy ahead of the schedule of December 2016.

  1. The Bank has accomplished the personal information management system and was accredited by BSI at international standard. Personal information has been protected in every detail of the operation. This is the demonstration of the determination of the Bank in protecting the rights of the customers under due diligence.

  2. The Bank spares no effort in the development of diversified corporate value in finance and banking, and worked in conjunction with insurance brokers, financing and leasing, securities dealing and investment trust subsidiaries for reinforcing the business organization and yielding synergy in operation and product portfolios.

  3. Taichung Commercial Bank Financing and Leasing (Suzhou) Co., Ltd. has established its branches in Xiamen and Chengdu.

  4. Taichung Commercial Bank Securities Co., Ltd has established branches in Fengyuan and Taoyuan.

  5. (IV) Budget execution in 2014

  6. Average deposit balance (including foreign currency) amounted to NTD 452.836 billion. The budget achievement rate was 101.30%, representing 5.94% growth from the NTD 427.464 billion in 2013.

  7. Average loan balance (including foreign currencies but excluding guarantee and acceptance) amounted to NTD386.239 billion. The budget achievement rate was 102.20%, representing 6.42% growth from the NTD362.926 billion in 2013.

  8. Foreign exchange amounted to US$14.234 billion. The budget achievement rate was 111.90%, representing 15.64% growth from the US$12.309 billion in 2013.

  9. Wealth management service fees amounted to NTD1,041 million. The budget achievement rate was 122.08%, representing 27.11% growth from the NTD819 million in 2013.

  10. (V) Financial income and expenditure, and profitability analysis

  11. Consolidated earnings before taxation in FY2014 amounted to NTD4,200.24 million or growth of 18.75% from NTD3,536.98 million in the same period of FY2013. Consolidated corporate earnings in the same year amounted to NTD3,719.26 million or growth of 21.53% from NTD3,060.27 million in the same period of FY2013.

  12. KPI: Key Performance Indicator

Indicators 2014
Capital adequacy ratio (BIS) 10.84�
Return on Assets (ROA) 0.73�
Return on Equity (ROE) 11.11�
Earnings Per Share (EPS) $1.32
NPL ratio 0.34�
Coverage ratio 423.62�

2 2

  1. Information about the most recent credit rating
Rating agency Date of
rating		 Credit rating Credit rating
Long-term Short-term Outlook
Fitch Australia Pty Ltd,
Taiwan Branch		 2014.10.1 A-(twn) F2(twn) Negative

(VI) Research & Development status

The Bank has builded the new generation of E-banking and mobile banking APP for keeping abreast of the trend of “digital banking environment 3.0) through the establishment of the “smart banking advocacy team” for accelerating the online transaction application of the virtual channels and business data analysis for exploring business opportunity in finance and banking and upgrading its competiveness.

II. Effect of external competitive environment, laws & regulations and entire business environment

  • (I) In the wake of the innovation in the digitization and electronic payment of the banking and finance sector, the positioning of banks, deployment of channels, customer relation, sources of profit, marketing strategy and risk management will be affected. The finance and banking industry, which is already in keen competition, will have to confront the upside-down change of the operation environment. Banks will make the best of their efforts to upgrade and transform. As such, the proper control of the digital technology and development of smart banks will be critical for maintaining the competitive advantage of the commercial banks.

  • (II) The Financial Supervisory Commission demands the banks to establish anti-money laundering and prevention of the risk of financial terrorism program and conduct overall assessment of risk at regular intervals. Banks shall also take effective countermeasures based on the risk assessment findings.

III. Future development strategies

The gravity of operation in FY2015 will be “diversification in business” and “diversification of risk” in line with the 4 major business strategies of “surpass the goal of earnings”, “synergy of parent and subsidiaries”, “Increase of profit in foreign exchange” and “risk control of lending”. The Bank will continue the adjustment of its business structure and the mode of profit-making with equal balance in improving the interest spread in lending and deposit and revenue, integrated marketing in the financial group, optimizing the quality of loan assets, enhancement of the efficiency in the use of foreign capital and the development of electronic capital flow operation.

3 3

IV. Summary of business plan 2015

  • (I) Follow the principle of stable volume of business with increased profit with an emphasis in broadening the base of low-cost deposit and reasonable pricing of loan, enhancing the efficient use of foreign currency and the proportion of wealth management so as to achieve strategic objective of “surpassing the profit goal”.

  • (II) Bolster the market of small and medium enterprises in corporate banking with the pursuit of the market segmentation strategy. Keep a proper balance between financing and supervision to assist the micro enterprise accounts. In addition, engage in integrated marketing with the rest of the financial group for developing the financial holding business model of synergy between “parent and subsidiaries”.

  • (III) Make additional effort in absorbing a larger share of deposits in foreign currencies and expansion into international banking through OBU for upgrading the contribution of offshore business so as to pursue the “increase in profit from foreign exchange” business strategy.

  • (IV) Adjust the assets and liabilities structure and adopt the mindset of risk reduction, monitoring the change in market risk, reasonable return on the use of capital and adjustment of lending policy to materialize the multiple preventive measures of “lending risk control”.

  • (V) Keep abreast of the change in the trend of the transaction mode of the new generation of customers and materialize the intermingling of banking service into the lives of the consumers, plan to develop the business of “third-party payment”, “Co-branded EasyCard”, and “mobile payment” to cultivate customer relation in better value.

  • (VI) Continue to make the application for deposit, loans, credit cards, and wealth management business online more available with proper balance of information security and protection of consumer rights. Enhance the expandability and scope of application for the virtual channels and make proactive effort in the development of digital banking service.

(VII) Expected business objectives

Scope of business Objective by the end of 2015
Deposits
(including foreign currencies)		 Average balance amounted to
NTD 467,657 million
Lending
(including foreign currencies)		 Average balance amounted to
NTD 396,645 million.
Foreign Exchanges Annual amount
USD14,232 million
Trust Operations The average balance of trust assets
amounted to NTD 45,136 million

4 4

We will persist with the idea of “We Do Our Best For You” in 2015 through the integration of the banking, securities, insurance brokerage, leasing, and investment trust operations in stable but firm paces for further development, and to protect the rights of the customers, shareholders, and employees so as to achieve the vision as a regional bank in Greater China.

Best regards,

  • To All Shareholders

May I wish you all good health and good luck.

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President____ Chairman____
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Two. A profile of Taichung Bank:

Formerly a cooperative savings company in Taichung established in April 1953, the predecessor of Taichung Bank started its operation in savings and loans in August 1st of the same year. The scope of business then covered Taichung City, Taichung County, Chang Hwa County and Nantou County. In 1978, the Bank was reorganized as the “Taichung Small and Medium Business Bank” in responding to the promulgation of the Banking Act and business development needs. On May 15 1984, the Bank publicly offered its shares at the centralized market for broaden the base of operation and public participation in equity. Since then, the Bank has laid down a solid foundation for development in the future.

In September 1995, the Taipei Branch was established with business covering different districts, which set a new milestone of the operation of the Bank. The Bank continued to relocate its branches, which were previously located in central Taiwan, to northern and southern Taiwan. After this process of expansion, the Bank has banking locations across western Taiwan. With the effort of all, the Bank prospered in business, and has officially reorganized as “Taichung Business Bank” on December 9 1998. Since then, the Bank has emerged as a national commercial bank. The Zhongshan Branch was established in October 2014, which was the tenth business station in Taipei Metropolitan. The branch operates in Taipei City, the economic hub of Taiwan that helps make the financial core services market even more comprehensive and improve the operational value of channels.

The capital of the Bank has increased from NTD 500,000 at its initial stage of operation to NTD 28,515 million as of December 31 2014. The Bank also expanded to 80 branches and 1 OBU from 5 branches at the time of its establishment. The Bank has invested to establish “Taichung Commercial Bank Insurance Broker Co., Ltd.,”, “Taichung Commercial Bank Lease Enterprise”, “Taichung Commercial Bank Financing and Leasing (Suzhou) Co., Ltd.”, “Taichung Commercial Bank Securities Co., Ltd.” , and “Reliance Securities Investment Trust Co., Ltd.” so as to bolster its competitive advantage in “local banking service”, “financing for small and medium enterprises”, and “variety of financial services”. These establishments help to fortify the organizational structure of financial holding, realization of the mission of sustainable development, and the vision of successfully overseas development. The scope and volume of business of the Bank multiplied over the years. The variety and size of the operation far exceeded that at the time of its establishment as a cooperative saving company. The achievement was the feedback of the whole-hearted operation of the Bank. The growth and the excellence in operation of Taichung Commercial Bank have been witnessed by the public.

6 6

  • �� Massive transactions or changes in equity shares by Directors, Supervisors, or shareholders holding more than 1% of the total outstanding shares in the most recent year:

  • The 22[nd] term of the Board of Directors was elected in a regular session of the General Meeting of Shareholders held on June 19 2014. The new institutional director is Hsu Tian Investment Co., Ltd.

  • �� Changes in the management in the most recent year:

  • Despite Hsu Tian Investment Co., Ltd. having acquired more than half of the seats of the Board, there has been no change in its appointment of representatives and there is no change in the management.

  • �� Major events affecting the rights and privileges of the investors and the effect on the Bank: None.

  • Reinvested affiliate:

Taichung Commercial Bank Insurance Broker Co., Ltd., Reliance Securities Investment Trust Co., Ltd., Taichung Commercial Bank Lease Enterprise, and Taichung Commercial Bank Securities Co. Ltd.

7 7

Three. Corporate Governance Report

  • I. Organization

  • (I) Organizational Structure

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

Office of the Board of
Directors
Audit Office of the Board
Business Development Dept.
International Banking Dept.
Trust Dept.
Information Dept.
Risk Management Dept.
Treasury Dept.
General Affairs Dept.
Human Resource Dept.
Accounting Dept.
Corporate Finance Dept.
Wealth Management Dept.
Department of Debt
Collection and Asset
Recovery
Regulatory of Compliance
Dept.
Loan Administration Dept, District Center
Chief Auditor
Committee
Investment Committee
Asset and Liability Management Loan Supervision Committee Personal Evaluation Committee NPL Management Committee
Trust Assess Assessment Committee Financial Products Review Committee
Directors Chairman President
Assistant VP
Vice Chairman
Board of Directors Board of Managing
Shareholder's Meeting
Executive Vice Presidents
Business units (include Business Dept.), OBU
Audit Committee
Remuneration Committee
Risk Management Committee
----- End of picture text -----

8 8

  • (II) Operations & Functions

  • Audit Office of the Board:

Administer the general auditing of the Bank, including operation audit, computer information audit, internal self-audit, internal audit, corrective actions as per the requests of competent authority, and related reporting.

  1. Office of the Board of Directors:

Call for sessions and elections of the Standing Committee of the Board, the Board of Directors and Audit Committee, General Meeting of the Shareholders, shares registration and related matters, public relations, press release.

  1. Business Development Dept.:

Administer the study and development of the operational strategies and the overall business development plan, the planning and development of the deposits and remittances, e-banking and credit card business, and customer telephone service, phone collection, marketing, and customer relationship management.

  1. International Banking Dept.:

Administer the planning, promotion, management and operation of foreign exchanges.

  1. Trust Dept.:

Administer the planning, management and operation of trust business.

  1. Information Dept.:

Administer the planning, configuration and operation of IT system and banking information package software.

  1. Risk Management Dept.:

Administer the draft of the Bank’s overall risk management policies, the planning of risk strategies and risk control mechanism, the monitoring and control of the business risk exposures and other risk management related matters.

  1. Treasury Dept.:

Administer the appropriation of funds and investments of the whole bank and other financial matters.

  1. General Affairs Dept.:

Administer the articles of incorporation, organization, important documents and corporate seals, business affairs, cashier service, general purchase, custody of assets, procurement and lease of real properties, improvement and repair of properties, and labor safety & health issues, security protection drill and management and supervision, property insurance, and any matters other than those administered by the other departments/offices.

  1. Human Resource Dept.:

Administer human resources management and review, and employee welfare, and also administer employee continuing education and training.

  1. Accounting Dept.:

Administer accounting affairs, management accounting, annual budget settlement, and

9 9

inter-branch transactions.

  1. Corporate Finance Dept.:

  2. Administer the planning, formulation, supervision and assessment of the all forms of corporate financing, account receivables, syndicated loans, and financing of Taiwan enterprises in overseas investment.

  3. Wealth Management Dept.:

  4. Wealth Management Dept.: Administer the planning and execution of the financial planning businesses throughout the nation, management of financial planning staff, preparation and revision of the wealth management policy and operating procedure, and promotion, supervision and management of wealth management customers’ investment in the financial planning business.

  5. Loan Administration Dept.:

  6. Administer the planning, review, management, research, analysis and consultation service of the various credit extensions, investigations and consumer banking.

  7. Department of Debt Collection and Asset Recovery:

  8. Administer the precautionary and review after granting loan, and planning, executing, supervision and statistic analysis of the collection of delinquent accounts, performance appraisal of the collection, review of writing off non-performing loans, examination and management of Collaterals Assumed, participation and cooperation in the process of resolving legal issues, retaining of external attorneys-at-law.

  9. Regulatory of Compliance Dept.:

  10. Handle the drafting, promotion, supervision, and performance appraisal of the compliance system; maintain an effective and adequate internal control system; confirm the Bank’s operations and management rules are updated in accordance with the relevant laws and regulations in a timely manner. When the business units in executing business operation or daily transactions are in doubt, the Department of Compliance is the inquiry and communication window of the Bank to give interpretations and to provide the personnel of each unit with appropriate and expedient regulatory training.

  11. Business Dept.:

  12. Administer the operation of different types of deposits, loans, foreign exchange settlements and banking matters.

  13. District Center:

Administer the lending (except consumer loans, cash card, and credit card), review and approval of foreign exchange financing, banking supervision.

  1. Overseas Banking Branch:

Administer the planning, promotion, management and operation of international banking.

10 10

Feb. 28, 2015
Other Chief,
Supervisors or
Directors with a
Spousal or Other
Immediate Relative		 Relation - - - - None None
Name - - - - None None
Title - - - - None























None
Current Bank & Other positions - - - -


None


Director, Tai Yi Investment Co., Ltd.;
Director,
Chou
Chin
Industrial
Co.,
Ltd.;
Chairman,
Rai
Yen
Investment Co., Ltd.; Chairman, Rui
Yu Investment Co., Ltd.; Director,
Chung Chien Investment Co., Ltd.;
Director, Nan Chung Petrochemical
Corp.; Director, Sheng Jen Knitted
Textiles Co., Ltd.; Director, Ta Yi
Development Co.,
Ltd.; Director,
Ge Ling Co., Ltd.; Chairman, Pan Asia
Chemical Corporation; Chairman, Deh
Hsing
Investment
Co.,
Ltd.;
Chairman,
Pan
Feng
Investment
Co., Ltd; Director, Chou Chang
Co., Ltd.; Supervisor, Hsu Tian
Investment Co., Ltd.; Director, Pan
Asia Investment Co., Ltd.; Director, Je
Mi Fang Corporation; Director, Deh
Hsing Investment Co., Ltd.; Chairman,
Taichung Commercial Bank Insurance
Agency
Co.,
Ltd.;
Director
and President, China Man-Made Fiber
Corporation;
Ta
Fa
Investment
Co.,
Ltd.;
Chairman,
Pan
Hsu
Investment Co., Ltd.
Major (academic degree)
experience		 - - - - Chairman
of
Taiwan
Business Bank; MBA of
New York Institute of
Technology		 VP, Corporate Financing
Dept.,
BNP
Paribas
Hong Kong; MBA of
NYU
Shareholding under
the title of a third party		 Ratio of
Shareholding		 0 0 0 0 0 0
Quantity 0 0 0 0 0 0
Current Shares Held by
Spouse & Dependents		 Ratio of
Shareholding		 0 0 0 0 0 0
Quantity 0 0 0 0 0 0
Current shareholding Ratio of
Shareholding		 0.79 5.86 0.59 0.06 0 0.01
Quantity 22,515,562 167,076,750 16,932,959 1,589,338 0 294,000

Shares at Election		 Ratio of
Shareholding		 0.33 5.86 0.59 0.06 0 0.01
Quantity 8,944,236 157,823,593 15,995,167 1,501,317 0 277,718
Inauguration
date		 2014/6/19 2002/5/17 2008/6/13 2011/6/22 2000/2/2 2005/8/31
Duration 3 years 3 years 3 years 3 years 3 years 3 years
Election
(Appointment)
Date		 2014/6/19
2014/6/19
2014/6/19
2014/6/19		 2014/6/19
2014/6/19
Name Hsu Tian Investment
Co., Ltd.		 Pan
Asia
Chemical
Corporation		 I
Joung
Investment
Co., Ltd.		 Ho
Yang
Management
Consultant Co., Ltd.		 Hsu Tian Investment
Co., Ltd.
Representative:
Jin-Fong Soo		 Hsu
Tian
Investment
Co., Ltd.
Representative:
Kuei-Fong Wang
Nationality
or place of
registration		 Taiwan
R.O.C.		 Taiwan
R.O.C.		 Taiwan
R.O.C.		 Taiwan
R.O.C.		 Taiwan
R.O.C.		 Taiwan
R.O.C.
Title Institutional
Director		 Institutional
Director		 Institutional
Director		 Institutional
Director		 Chairman Vice Chairman

11

Other Chief,
Supervisors or
Directors with a
Spousal or Other
Immediate Relative		 Relation None None None None None None
Name None None None None None None
Title None





None		 None None
None		 None
Current Bank & Other positions





President, Taichung Commercial Bank



Supervisor,
Huang
Hsiang
Construction Corporation; Chairman,
Hanshin
Management
Consultant
Co.,
Ltd.;
Director,
Taichung
Commercial Bank Lease Enterprise;
Director,
Guo
Yang
Co.,
Ltd.;
Director, Hi-Lai Foods Co., Ltd.





None







None






CEO
of
Cathay
International
Holdings Ltd.



Supervisor of Chaio-Wu Co., Ltd.
Major (academic degree)
experience		 Vice President, Taiwan
Business
Bank;
Independent Director of
Taichung
Commercial
Bank; MBA, National
Taiwan
University
College of Management		 Chairman
of
Taiwan
Financial
Holdings;
Dept
of
International
Trade,
National
Chengchi University		 Representative of TC
Bank,
Taipei
Representative
Office;
National Chung Hsing
University, Department
of
Agricultural
Economics		 Vice General Manager
of Cooperative Bank;
Chairman
of
Cooperative
Bank
Insurance
Agency
Co., Ltd.; Department of
Transportation
and
Communication
Management
Science,
NCKU		 Responsible person of JP
Morgan Chase in China;
Co-responsible person of
BNP in Asia; CEO of
Fubon
Bank
(Hong
Kong)
Limited;
and
graduated from Harvard
Business School		 V.P., Taichung Business
Bank;
Kainan
High
School
of
Commerce
and
Industry,
Senior
Class, Business
Shareholding under
the title of a third party		 Ratio of
Shareholding		 0 0 0 0 0 0
Quantity 0 0 0 0 0 0
Current Shares Held by
Spouse & Dependents		 Ratio of
Shareholding		 0.00 0 0 0 0 0
Quantity 20,552 0 0 0 0 0
Current shareholding Ratio of
Shareholding		 0.02 0 0 0 0 0.00
Quantity 546,053 0 0 0 0 74,841

Shares at Election		 Ratio of
Shareholding		 0.02 0 0 0 0 0.00
Quantity 515,812 0 0 0 0 70,697
Inauguration
date		 2000/6/15 2008/7/31 2008/6/13 2000/6/15 2011/6/22 2006/1/2
Duration 3 years 3 years 3 years 3 years 3 years 3 years
Election
(Appointment)
Date
2014/6/19
2014/6/19		 2014/6/19 2014/6/19 2014/6/19
2014/6/19
Name Hsu
Tian
Investment
Co., Ltd.
Representative:
Chun-Sheng Lee		 Hsu
Tian
Investment
Co., Ltd.
Representative:
Jer-Shyong Tsai		 Hsi-Rong Huang Chen-Le Liu Jin-Yi Lee I
Joung
Investment
Co., Ltd.
Representative:
Ching-Hsin Chang
Nationality
or place of
registration		 Taiwan
R.O.C.		 Taiwan
R.O.C.		 Taiwan
R.O.C.		 Taiwan
R.O.C.		 Hong Kong Taiwan
R.O.C.
Title Managing
Director		 Managing
Director		 Managing
Director
(Independent
Director)		 Independent
director		 Independent
director		 Director

12

Other Chief,
Supervisors or
Directors with a
Spousal or Other
Immediate Relative		 Relation None None None None None None None
Name None None None None None None None
Title


None
None		 None None
None





None		 None
Current Bank & Other positions




Vice Chairman, China Man-Made
Fiber Co., Ltd.; Director, Taichung
Commercial Bank Securities Co., Ltd.;
Chairman, Je Mi Fang Corporation



Supervisor of Taichung Commercial
Bank Lease Enterprise



Chairman of Taichung Commercial
Bank Lease Enterprise





Chairman, Taichung Commercial
Bank Securities Co., Ltd.; Supervisor,
United Integrated Services Co., Ltd.






Chairman, Chun Fu Development
Co., Ltd.; Director, Yu Hui Limited

Director,
Sakura
Development
Co., Ltd.; Chairman, Bao Jia Property
Management
Co.,
Ltd;
Director,
Hong-Wei Development Co., Ltd.;
Chairman,
Pau
Jar
Real
Estate
Co,
Ltd.;
Chairman,
Chu
Ho
Construction Co. Ltd.


None
Major (academic degree)
experience		 Director
of
Itochu
Corporation,
Taipei
Branch;
Department
of
Political
Science,
National
Taiwan
University
Chief
Auditor,
Land
Bank of Taiwan; Master
in Land Administration,
National Chung Hsing
University
President, Chang Hwa
Bank,
Department
of
Accounting
and
Statistics,
Tamkang
University
SEVP
of
Capital
Securities, Chairman of
Taiwan
International
Securities
Co.,Ltd,
President
of
Capital
Securities
(HK) Limited, DBA of
Tamkang University
Reliance
Securities
Investment
Trust
Co., Ltd., Graduate from
Deh Ming Commercial
School,
Special
Assistant,
China
Man-Made
Fiber
Corporation.		 Legislator,
Institute
of Law, Chinese Culture
University		 Senior
Professional
Staff, Pau Jar Group,
Department of Law, Fu
Jen Catholic University
Shareholding under
the title of a third party		 Ratio of
Shareholding		 0 0 0 0 0 0 0
Quantity 0 0 0 0 0 0 0
Current Shares Held by
Spouse & Dependents		 Ratio of
Shareholding		 0.00 0 0 0 0.02 0 0
Quantity 65,379 0 0 0 669,818 0 0
Current shareholding Ratio of
Shareholding		 0 0 0 0 0 0 0
Quantity 0 0 0 0 0 0 0

Shares at Election		 Ratio of
Shareholding		 0 0 0 0 0 0 0
Quantity 0 0 0 0 0 0 0
Inauguration
date		 2002/7/16 2005/5/25 2012/6/8 2014/2/6 2012/10/1 2014/6/19 20151/6
Duration 3 years 3 years 3 years 3 years 3 years 3 years 3 years
Election
(Appointment)
Date

2014/6/19

2014/6/19
2014/6/19
2014/6/19
2014/6/19

2014/6/19

2014/6/19
Name Hsu
Tian
Investment
Co., Ltd.
Representative: Ming-Shan
Chuang		 Hsu
Tian
Investment
Co., Ltd.
Representative: Hsin-Ching
Chang		 Hsu
Tian
Investment
Co., Ltd.
Representative:
Wei-Liang Lin		 Hsu
Tian
Investment
Co., Ltd.
Representative:
Shu-Yuan Lin		 Pan
Asia
Chemical
Corporation
Representative:
Meng-Liang Chang		 Ho
Yang
Management
Consultant Co., Ltd.
Representative: Chien-Hui
Huang		 Ho
Yang
Management
Consultant Co., Ltd.
Representative:
Yu-Chun
Chen
Nationality
or place of
registration		 Taiwan
R.O.C.		 Taiwan
R.O.C.		 Taiwan
R.O.C.		 Taiwan
R.O.C.		 Taiwan
R.O.C.		 Taiwan
R.O.C.		 Taiwan
R.O.C.
Title Director Director Director Director Director Director Director

13

2. Major Shareholders of Corporate Shareholders

Feb. 28, 2015


Feb. 28,2015
Corporate shareholder Name Major shareholder of corporate shareholder and shareholding Ratio of
Shareholding thereof
Hsu Tian Investment Co., Ltd. Chia-Chun Chiang 43.56%, Kuei-Fong Wang 43.56%, You-Ciang Yang 7.94%,
Ying-Huei Liou 4.17%, Kai-Yu Lin 0.77%.
Pan Asia Chemical Corporation China Man-Made Fiber Co., Ltd. 44.34%; Sheng Jen Knitted Textiles Co., Ltd.
6.19%; Chung Chien Investment Co., Ltd. 5.12%; Deh Hsing Investment
Co., Ltd. 4.68%; Tai Yi Investment Co., Ltd. 2.36%; Ke Yi Bao Investment
Co., Ltd 0.76%;Ya-Ying Jhu 0.74%; Pan Asia Investment Co., Ltd. 0.64%; Pan
Asia Employee Welfare Committee 0.62%; Kuei-Hsien Wang 0.43%.
I Joung Investment Co., Ltd. Yi-Jen Chen 22.82%, Chi Chen Investment Co., Ltd. 18.69%, Yee-Fan Chen
17.42%, Chen Yi-Fen 12.47%, Lee Lor Investment Co., Ltd. 10.35%,
Ching-Shuan Chen Ting 6.47%, Hsiun-Fan Lo 5.51%, Yee-Chen Chen 4.7%,
Ming-Yuan Yeh 0.56%, Feng-Nian Chiang 0.56%.
Ho Yang Management Consultant
Co., Ltd.		 Shu-Cyong Zen 81%, Chen-Hai Lin 19%.

3. The major shareholder of the juristic person shareholder is a juristic person

Feb. 28, 2015


Feb. 28,2015
Corporate shareholder Name Major shareholder of corporate shareholder and shareholding Ratio of
Shareholdingthereof
China Man-Made Fiber Co., Ltd. Pan Asia Chemical Corporation 15.39%; Sheng Jen Knitted Texiles 4.33%;
Formosa Imperial Wineseller Corp 3.62%; Pan Asia Investment Co., Ltd. 3.08%;
Chung Chien Investment Co., Ltd. 2.59%; Netherlands Pension Robert Bacal
Investment Account at Citibank (Taiwan) 1.51%; Tsai-Su-Ching Lu 1.24%;
Huan-Ting Cho 1.22%; Central Bank of Norway Investment Account at JP
Morgan Chase Taipei 1.13%; Hong Da Investment Co., Ltd.0.93%.
Sheng Jen Knitted Textiles Co., Ltd. CMFC Investment Co., Ltd. 93.87%, Chao-Chang Wang 5.57%, Wang
Kuei-Hsien 0.25%, Shang-Jr Chiang 0.15%, Shi-Yi Chiang 0.10%, Chao-Ching
Wang 0.05%.
Chung Chien Investment Co., Ltd. Ta Fa Investment Co., Ltd. 28.08%; Pan Asia Investment Co., Ltd. 17.67%;
Tung Hao Enterprises Corp. 15.06%; Chin-Yuan Huang 14.72%; Hsuan Deh
Consultants Co., Ltd. 9.41%; Chun Foo Development Co., Ltd. 7.20%; Hsu Tian
Investment Co., Ltd. 2.37%, Yu Hui Limited 1.70%; Kuei-Hsien Wang 1.70%;
Kuei-Fong Wang 1.55%.
Deh Hsing Investment Co., Ltd. China Man-Made Fiber Corporation 100%.
Tai Yi Investment Co., Ltd. Pan Asia Investment Co., Ltd. 41.80%, Ta Fa Investment Co., Ltd. 38.17%,
Tsung Hao Enterprise Co., Ltd. 9.93%, Chao-Jia Lee 6.31%, Sian-Jhang Syu
2.53%, Guei-Lian Jheng 1.26%.
Ke Yi Bao Investment Co., Ltd. Yun-Jyun Deng 99.99%; Chih-Ping Wang 0.01%.
Pan Asia Investment Co., Ltd. Tai Yi Investment Co., Ltd. 47.42%, Ta Fa Investment Co., Ltd. 42.63%, Tsung
Hao Enterprise Co., Ltd. 9.44%, Kuei-Hsien Wang 0.51%.
Pan Asia Chemical Corporation
Employee Welfare Committee		 Not applicable.
Chi Chen Investment Co., Ltd. Yee-Chen Chen 0.14%.
Lee Lor Investment Co., Ltd. Yee-Fan Chen 100%.

14 14

4. Information on Directors in professionalism and impartiality

Conditions
Name		 Have more than 5 years of experience and the
following professionalqualifications		 Have more than 5 years of experience and the
following professionalqualifications		 Have more than 5 years of experience and the
following professionalqualifications		 Status of independence (note) Status of independence (note) Status of independence (note) Status of independence (note) Status of independence (note) Status of independence (note) Status of independence (note) Status of independence (note) Status of independence (note) Status of independence (note) Number of
public
companies
where the
person holds
the title as
independent
director

Lecturer
or
above
in
commerce, law,
finance,
accounting
or
subjects
required by the
business of the
bank in pubic
or
private
colleges
or
universities








Passed
the
qualification
examination
with
proper licensing by
the
national
Government
Apparatus as court
judge,
prosecutor,
lawyers,
certified
public accountant or
other
professional
designations
required
by
the
business of the Bank








Required
Work
experience in
commerce,
law, finance,
accounting
or
others
required
by
the Bank



1		 2 3 4 5 6 7 8 9 10
Jin-Fong Soo � � � � � � � � � � 0
Kuei-Fong Wang � � � � � � � 0
Jer-Shyong Tsai � � � � � � � � � 0
Chun-Sheng Lee � � � � � � � � � � 0
Hsi-Rong Huang � � � � � � � � � � � 0
Chen-Le Liu � � � � � � � � � � � 0
Jin-Yi Lee � � � � � � � � � � � 0
Ching-Hsin Chang � � � � � � � � � � 0
Hsin-Ching Chang � � � � � � � � � 0
Ming-Shan Chuang � � � � � � � � 0
Wei-Liang Lin � � � � � � � � � 0
Shu-Yuan Lin � � � � � � � � � � � 0
Meng-Liang Chang � � � � � � � � 0
Chien-Hui Huang � � � � � � � � � � 0
Yu-Chun Chen � � � � � � � � � � 0

  • Note: Respective director who meet the following qualifications 2 years before assumption of office and at the time of assumption office shall put a “ � ” in the appropriate space.

  • (1) Not an employee of the Bank or its affiliates.

  • (2) Not a director or supervisor of the Bank or its affiliates (excluding the capacity of independent director of the Bank or its parents, or a subsidiary directly or indirectly held by the Bank with more than 50% of the stakes).

  • (3) Not a natural person, spouse, underage children, or under the title of a third party who holds more than 1% of the outstanding shares issued by the Bank or among the top 10 natural person shareholders.

  • (4) Not a spouse, kin at the second pillar under the Civil Code, or the lineal blood relatives within the fifth pillar under the Civil Code as specified in (1) through (3).

  • (5) Not a director, supervisor or employee of an institutional shareholder who holds more than 5% of the outstanding shares issued by the Bank, or a director, supervisor or employee of an institutional shareholder who is among the top 5 shareholders.

  • (6) Not a director, supervisor, manager or shareholder holding more than 5% of the outstanding shares of specific company or institution in business or financial relation with the Bank.

  • (7) Not a professional, owner, partner, director, supervisor, manager of proprietorship, partnership, company or institution that provide business, legal, financial and accounting services to the Bank or a spouse to the aforementioned persons. Except the members of the Remuneration Committee in exercising their authority within the scope of empowerment pursuant to Article 7 of the Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter.

  • (8) Not a spouse to or kin at the second pillar under the Civil Code to any other director.

  • (9) Not under any of the categories stated in Article 30 of the Company Act.

  • (10) No Government Apparatus agency, juristic person or its representative is elected under Article 27 of the Company Act.

15 15

Feb. 28, 2015
Spouse or kin within the
second pillar under the Civil
Code and who is a manager
Relation		 None None None None None None None None None None None None None None

Name		 None None None None None None None None None None None None None None

Title
None




None
None

None

None		 None




None		 None

None

None



None		 None None None
Positions with other
companies

Director
of
Taichung
Commercial Bank Co., Ltd.

Director,
Taichung
Commercial Bank Insurance
Broker Co., Ltd.; Director,
Rai
Chia
Investment
Co., Ltd.; Director, Hsiang
Feng Development Co., Ltd.


Director, Reliance Securities
Investment Trust Co., Ltd.
Director,
Taichung
Commercial
Bank
Lease
Enterprise
Director,
Taichung
Commercial Bank Securities
Co., Ltd.

None

Director,
Taichung
Commercial Bank Insurance
Broker Co., Ltd.; Director,
Rai
Chia
Investment
Co., Ltd.; Director, Hsiang
Feng Development Co., Ltd.


None

Director,
Taichung
Commercial Bank Securities
Co., Ltd.

Director,
Taichung
Commercial
Bank
Lease
Enterprise

Supervisor,
Taichung
Commercial Bank Insurance
Broker Co., Ltd.; Director,
Rai
Chia
Investment
Co., Ltd.


None

None

None

Major (academic degree) experience
Vice President of Taiwan Business Bank;
Finance
Master,
of
National
Taiwan
University College of Management		 Chief
Secretary,
Office
of
the
Board;
Department of Law, National Chengchi
University		 Manager,
Business
Development
Dept.;
Finance Master, National Chung Hsing
University College of Management		 Manager, IT Department; Department of
Statistics, National Cheng Kung University		 Manager,
HR
Dept.;
Department
of
Accounting; Fu Jen Catholic University		 Chief
Auditor
and
Director-General
of
Cosmos Bank; Graduate Institute of Finance,
Tamkang University		 Director of General Affairs Department;
Department of Law, National Chengchi
University		 Deputy
Director
of
General
Affairs
Department; Department of Fiber, Ming Chi
College		 Manager,
Erlin
Branch;
Department
of
Technology
Management,
Chung
Hua
University		 Taichung Regional Center Manager; Taichung
Institute
of
Technology
(Open
Education Program), Banking and Insurance		 Deputy Manager, HR Dept.; School of
Chemistry, Stellenbosch University of South
Africa		 Deputy Manager, Accounting Dept.; Graduate
Institute of Accounting, National Chengchi
University		 Deputy
Manager,
Business
Department;
Department of Information Science, Fengchia
University		 Deputy
Manager,
International
Business
Dept.; Department of Accounting, Feng Chia
University
Shareholding under the
title of a third party		 Ratio of
Shareholding
0		 0 0 0 0 0 0 0 0 0 0 0 0 0
Quantity 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Shares Held by Spouse
& Dependents		 Ratio of
Shareholding		 0.00 0 0.00 0.00 0.01 0 0 0 0 0 0 0 0.00 0
Quantity 20,552 0 37,688 345 169,380 0 0 0 0 0 0 0 32,096 0
Status of shareholding Ratio of
Shareholding		 0.02 0.00 0.02 0.00 0.01 0.01 0.00 0.01 0.02 0.01 0 0.00 0.01 0.00
Quantity 546,053 1,422 479,972 69,975 360,844 233,284 1,422 180,604 414,314 216,179 0 20,000 220,095 21,307
Election
(Appointme
nt) Date		 2000.10.13 2000.7.30 2000.8.4 2013.3.13 2014.3.12 2009.9.14
2007.11.19		 2008.6.10 2011.11.24 2013.1.25 2014.3.12 2009.11.9 2013.1.25 2006.5.4
Name Chun-Sheng Lee Kai-Yu Lin Hsueh-Hsien Lia
o		 Te-Wei Chia Chih-Chuan Fang Min-Chin Shen Kai-Yu
Lin
(concurrent post)		 Ching-hu Hsieh Chun-Ying Wang Yi-Yuan Tung Chung-Ping Yang Yi-Ying Chung Chun-Sheng Lin Cheng-Yu Lai
Nationality Taiwan R.O.C. Taiwan R.O.C. Taiwan R.O.C. Taiwan R.O.C.
Taiwan R.O.C.		 Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.		 Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Title President Vice President Vice President Vice President Chief
Compliance
Officer		 Chief Auditor Office of the Board of
Directors
Chief Secretary		 Manager,
General
Affairs Dept.		 Manager,
Business
development Dept.		 Manager,
Loan
Administration Dept.		 Manager, HR Dept. Manager,
Accounting
Dept.		 Manager,
Information
Dept.		 Manager, International
Banking Dept.

16

Spouse or kin within the
second pillar under the Civil
Code and who is a manager
Relation		 None None None None None None None None None None None None None None None None None None

Name		 None None None None None None None None None None None None None None None None None None

Title
None		 None None

None		 None None
None		 None None None None None None None None None None None
Positions with other
companies


Director, Reliance Securities
Investment Trust Co., Ltd.

None
None
Director,
Taichung
Commercial Bank Securities
Co., Ltd.


None

None


Director, Reliance Securities
Investment Trust Co., Ltd.


None

None

None
None

None
None

None

None


None

None
None

Major (academic degree) experience
Deputy Manager, Loan Administration Dept.;
Graduate
Institute
of
Information
Management,
National
Sun
Yat-Sen
University
Deputy Manager, Dept of Debt Collection and
Asset
Recovery;
Department
of
Law,
Soochow University		 Manager, Shalu Branch; Department of
Accounting, National Cheng Kung University		 Manager,
HR
Dept.;
Department
of
Accounting; Fu Jen Catholic University		 Deputy
Manager,
Risk
Management
Department; Department of Finance and
Banking, National Taiwan University
Deputy
Manager,
Treasury
Department;
National
Taiwan
University
College
of
Management
Deputy Manager, Loan Administration Dept.;
Graduate
Institute
of
Information
Management,
National
Sun
Yat-Sen
University
Deputy
Manager,
International
Business
Dept.; Department of Banking and Finance,
Takming
University
of
Science
and
Technology
Manager, Puli Branch; Graduate Institute of
Industrial Management, National Cheng Kung
University
Deputy Manager, Taichung Regional center;
Accounting and Statistics, Tamsui Institute of
Business Administration		 Manager,
Tanzi
Branch;
International
Trade, Ling Tung College
Manager, Shejioujia Branch; Banking and
Insurance, Taichung Institute of Technology
(Open Education Program)		 Manager, Pitou Branch; School of Humanity
Studies, National Sun Yat-Sun University		 Manager, Nantou Branch; Department of
Applied Commerce, Taichung Institute of
Technology (Open Education Program)
Manager, Taichungkang Branch; International
Trade,
Overseas
Chinese
College
of
Commerce		 Deputy Manager, W. Taichung Branch;
Department of Applied Commerce, Taichung
Institute
of
Technology
(Open
Education Program)
Deputy Manager, Taichung Regional Center;
Business Administration, Taichung College of
Business		 Manager,
Trust
Dept.;
Department
of
Cooperative Economics, Feng Chia University
Shareholding under the
title of a third party		 Ratio of
Shareholding
0		 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Quantity 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Shares Held by Spouse
& Dependents		 Ratio of
Shareholding		 0 0 0 0.01 0 0.00 0 0 0 0 0.00 0.00 0 0 0 0.00 0 0
Quantity 0 0 0 169,380 0 1,878 0 0 0 0 2,331 80,490 0 0 0 1,592 0 0
Status of shareholding Ratio of
Shareholding		 0.01 0.00 0.01 0.01 0.00 0.01 0.00 0.001 0.01 0.00 0.00 0.00 0.01 0.00 0.01 0.00 0.01 0.01
Quantity 97,962 27,453 387,933 360,844 89,214 194,414 97,962 18,166 210,947 2,745 17,112 83,214 237,297 18,105 367,152 1,257 229,718 189,336
Election
(Appointme
nt) Date		 2010.8.4 2009.9.1 2014.3.14
2014.1.20		 2011.7.12 2011.4.1
2013.1.25		 2012.12.17 2009.8.28 2011.3.2 2014.3.14 2009.8.28 2013.1.25 2010.5.4 2011.3.2 2013.1.25 2013.1.25 2009.12.31
Name Yu-Chung Lin Mei-Li Wu Shu-Chen Chen Chih-Chuan Fang
(concurrent post)		 Chen-Ying Wu Kuang-Chung
Hsiao		 Yu-Chung
Lin
(concurrent post)		 Chih-Hung Lu Chien-Min Chou Tung-Hsu Liu Yu-Chen Yang Han-Ching Tsai Kwei-Ching Ho Yu-Ying Chen Ching-Kun Lin Chung-Rong Lin Hsin-Ru Kao Chiung-Teng
Hung
Nationality Taiwan R.O.C.

Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.		 Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.		 Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.		 Taiwan R.O.C.
Title Manager, Trust Dept. Manager, Dept of Debt
Collection and Asset
Recovery		 Manager,
Corporate
Finance Dept.		 Manager,
Legislation
Dept.		 Manager,
Risk
Management Dept.		 Manager,
Treasury
Dept.		 Manager,
Wealth
Management Dept.		 Manager,
Overseas
Banking Branch		 Manager,
Business
Dept.		 Manager, W. Taichung
Branch		 Manager, Zhong Zheng
Branch		 Manager, Xitun Branch Manager,
Nantun
Branch		 Manager,
Neixin
Branch		 Manager, Dadu Branch Manager, N. Taiping
Branch		 Manager, Taichungkang
Branch		 Manager, Simin Branch

17

Spouse or kin within the
second pillar under the Civil
Code and who is a manager
Relation		 None None None None None None None None None None None None None None None None None None None None 18

Name		 None None None None None None None None None None None None None None None None None None None None

Title		 None None None None None None
None		 None None None None None None None None

None		 None None None None
Positions with other
companies
None

None

None

None

None

None

Shareholder,
Huan
Lin
Co., Ltd.

None
None
None

None

None
None

None
None
Director
of
Zhi
Sen
Compound
Materials
Co., Ltd.


None

None
None

None

Major (academic degree) experience
 Deputy
Manager,
Qingshui
Branch;
Master, Providence University
Deputy Manager, Taiping Branch; Applied
Foreign Language, Taichung College of
Business		 Deputy Manager, Dajia Branch; Department
of International Trade, Overseas Chinese
College of Commerce		 Manager, Neixin Branch; Commerce, Shin
Min Commercial & Industrial Vocational High
School		 Manager, Chingsui Branch; Department of
Applied Commerce, Taichung Institute of
Technology (Open Education Program)		 Manager, N. Taiping Branch; Institute of
Business and Management, Asia University,
Taiwan		 Manager,
Junkong
Branch;
Institute
of
Business
and
Management,
Feng
Chia
University		 Deputy Manager, Nanyang Branch; MBA,
Banking and Finance, Chaoyang University of
Technology		 Manager,
Xihu
Branch;
Department
of
Statistics, Tung Hai University		 Manager,
Datu
Branch;
International
Trade, Ling Tung College
Manager, Zhunan Branch; Department of
Insurance Management, Chao Yang University
of Technology
Deputy Manager, Loan Administration Dept.;
International Trade, Tamsui Institute of
Business Administration		 Deputy Manager, Lukang Branch; MBA,
Institute of Health and Management
Manager, Lungjing Branch; Department of
Cooperative Economics, National Chung
Hsing University		 Manager, Xihu Branch; Institute of Business
and Management, Feng Chia University
Manager, Shui Li Branch; Department of
Business Administration, Ling Tung College		 Deputy Manager, Hsinchu Branch; Graduate
School
of
Statistics,
National
Taipei
University
Manager,
Shenkang
Branch;
Finance,
Taichung Institute of Technology (Open
Education Program)		 Deputy Manager, Erlin Branch; Department
of Law, National Taiwan University
Deputy Manager, Puli Branch; Department of
International Trade, University of Chinese
Culture.
Shareholding under the
title of a third party		 Ratio of
Shareholding		 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Quantity 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Shares Held by Spouse
& Dependents		 Ratio of
Shareholding		 0 0.00 0 0 0.00 0 0 0.00 0 0.00 0 0 0.00 0.00 0 0.00 0 0 0 0
Quantity 0 3,264 0 0 3,246 0 0 3,519 0 55,734 0 0 134 664 0 700 0 0 0 0
Status of shareholding Ratio of
Shareholding		 0.00 0 0.00 0.01 0.00 0.00 0.00 0.00 0.01 0.01 0.01 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0
Quantity 5,293 0 63 400,513 4,542 73,419 2,366 11,784 242,348 363,905 153,452 14,111 837 249,601 988 760 22,929 1,353 91,927 0
Election
(Appointme
nt) Date		 2014.3.14 2014.3.14 2013.1.25 2010.5.4 2009.12.31 2009.8.28 2014.3.14 2013.1.25 2013.1.25 2011.3.2 2013.1.25 2014.3.14 2013.1.25 2013.1.25 2009.8.28 2013.1.25 2009.2.27 2009.8.28 2000.5.4 2013.1.25
Name Yao-Pin Chen Wen-Hsin Chiu Min-Hsuan
Chiang .		 Tsung-Hsien Lee Pi-Hua Chang Chia-Wei Tsai Hui-Chin Lu Yi-Cheng Liao Pao-Yuan Chen Tung-Po Yang Ming-Ren Hsu Zai-Hong Yang Chao-Chi Tseng Chang-Chi Liu Chien-Hao Chen Chien-ting Lin Chih-Hung Wu Chun-Chun Yu Tsung-Yi Liu Shin-Hsiung
Huang
Nationality
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.		 Taiwan R.O.C. Taiwan R.O.C. Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.		 Taiwan R.O.C.
Taiwan R.O.C.		 Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.		 Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Title Manager,
Junkong
Branch		 Manager, S. Taichung
Branch		 Manager, N. Taichung
Branch		 Manager,
Taiping
Branch		 Manager, Houli Branch Manager, Daya Branch Manager, Tanzi Branch Manager,
Shengang
Branch		 Manager,
Fongyuan
Branch		 Manager, Dajia Branch Manager,
Qingshui
Branch		 Manager, Shalu Branch Manager,
Wufong
Branch		 Manager,
Dongshi
Branch		 Manager, E. Fongyuan
Branch		 Manager, Wuri Branch Manager, S. Fongyuan
Branch		 Manager,
Nanyang
Branch		 Manager,
Nantou
Branch		 Manager,
Zhushan
Branch

18

Spouse or kin within the
second pillar under the Civil
Code and who is a manager
Relation		 None None None None None
Brothers		 None None None None None None None None None Brothers None None None None

Name		 None None None None None Cheng-Wen
Ni		 None None None None None None None None None Cheng-Hsie
n Ni		 None None None None

Title		 None None None None None Manage
r		 None None None None None None None None None Manage
r		 None None None None
Positions with other
companies
None

None
None

None

None

None
None
None

None

None

None

None

None
None


None
None

None
None
None

None

Major (academic degree) experience
Manager, Min Hsiung Branch; Business
Administration, Taichung College of Business
(Open education program)		 Manager,
Yuanli
Branch;
Business
Administration,
Taitung
Institute
of
Technology		 Deputy Manager Nantou Branch; MBA of
Chaoyang University of Technology
Manager, Xiushui Branch; Department of
Business Administration, Tamsui Institute of
Business Administration		 Manager, Nantun Branch; Department of
Business
Administration,
Ming
Dao
University		 Manager, Puxin Branch; Department of
Business
Administration,
Feng
Chia
University		 Manager, Peitun Branch; Department of Law,
Fu Jen Catholic University		 Manager, Huatan Branch; Business, Holy
Savior High School
Deputy
Manager,
Shengang
Branch;
Department
of
Business
Administration,
Chung Hua University
Manager, Zhong Zheng Branch; Department
of
Business
Administration,
Mingshin
University of Science and Technology
Manager, Yongjing Branch; Institute of
Business
and
Management,
Feng
Chia
University
Manager, Zhong Zheng Branch; Graduate
Institute of Finance, National Chung Hsing
University
Deputy Manager, Shalu Branch; Graduate
Institute of Agricultural Economics, National
Chung Hsing University		 Manager, Fongyuan Branch; Department of
Accounting, National Chung Hsing University
Manager,
Peitou
Branch;
Enterprise
Information
Management,
Chung
Chou
Institute of Technology, Affiliated College of
Continuing Education		 Manager, Homei Branch; Department of
Business Administration, Ling Tung College
Deputy Manager, Huatan Branch; Department
of Business Administration, National Chung
Hsing University		 Manager, Wuri Branch; Tourism Department,
Tamsui Institute of Business Administration		 Manager, Caotun Branch; Department of
Accounting, Feng Chia University
Deputy Manager, Chunan Branch; Applied
Foreign Language, Continuing Education of
Taichung Commercial School
Shareholding under the
title of a third party		 Ratio of
Shareholding
0		 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
19
Quantity 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Shares Held by Spouse
& Dependents		 Ratio of
Shareholding		 0 0.00 0.00 0 0 0 0 0.00 0 0 0 0.00 0 0 0 0 0 0 0.00 0
Quantity 0 2 1,178 0 0 0 0 73,196 0 0 0 16,054 0 0 0 0 0 0 1,190 0
Status of shareholding Ratio of
Shareholding		 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.01 0.00 0.02 0.01 0 0.00 0.00 0.00 0.00 0.00 0.00
Quantity 4,871 116,568 490 38,888 404 370 100,933 179,446 8,995 307,788 2,082 599,890 272,195 0 97,254 26,389 1,283 33,252 8,082 12,100
Election
(Appointme
nt) Date		 2012.4.30 2014.3.14 2013.1.25 2010.8.4 2013.1.25 2011.11.24 2014.3.14 2009.8.28 2009.8.28 2014.3.14 2010.8.4 2009.8.28 2010.5.10 2013.1.25 2014.3.14 2014.3.14 2013.1.25 2013.1.25 2014.3.14 2011.11.24
Name Ming-Yu Chiu Kuang-Chih
Chen		 Yung-Sung Chien Chung-Cheng Wu Hung-Ping Chen Cheng-Hsien Ni Yi-Pin Lin Hsin-Hsin Lee Ching-Yuan Lin Jui-Cheng Yang Tsung-Chang
Tseng		 Chi-Hsien Lee Chih-Hua Yao Wei-Huang You Ming-Cheng Wu Cheng-Wen Ni Chun-Min Huang Shih-Huei Wang Yung-Chang Lai Chih-Hao Liang
Nationality Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.		 Taiwan R.O.C. Taiwan R.O.C. Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.		 Taiwan R.O.C. Taiwan R.O.C. Taiwan R.O.C.
Title Manager, Puli Branch Manager,
Caotun
Branch		 Manager,
Changhua
Branch		 Manager,
Lukang
Branch		 Manager, Xihu Branch Manager, Erlin Branch Manager, Peitou Branch Manager,
Tianzhong
Branch		 Manager,
Yuanlin
Branch		 Manager,
Homei
Branch		 Manager,
Shetou
Branch		 Manager,
Huatan
Branch		 Manager,
Yongjing
Branch		 Manager,
Xiushui
Branch		 Manager,
Shenkang
Branch		 Manager,
Dazhu
Branch		 Manager, N. Yuanlin
Branch		 Manager, Pitou Branch Manager, Peitun Branch Manager, Puxin Branch

19

Spouse or kin within the
second pillar under the Civil
Code and who is a manager
Relation		 None None None None None None None None None None None None None None None None None None None None

Name		 None None None None None None None None None None None None None None None None None None None None

Title		 None None None None None None None None None None None None None None None None None None None None
Positions with other
companies
None
None

None

None


None

None
None
None
None

None
None
None


None
None


None

None

None


None
None

None

Major (academic degree) experience
 Manager, Songshan Branch; Graduate Institute
of Law, Soochow University		 Manager,
Wufong
Branch;
Business
Administration, Ling Tung College
Manager,
Sanzhong
Branch;
Business
Administration,
National
Taipei
Junior
College of Business on Air education program
Manager, North Regional Center, Department
of
Economics,
National
Chung
Hsing
University
Corporate banking manager, Cosmos Bank,
Hsin Hsing Branch; Graduate Institute of
Financial Operations, National Kaohsiung
First University of Science and Technology
Deputy
Manager,
Tucheng
Branch;
Department of International Trade, Tamkang
University		 Manager, Dounan Branch; Department of
Commerce, National Open University		 Deputy Manager, Jhongli Branch; Department
of Accounting, Tung Hai University		 Manager, Jhongli Branch; Department of
Economics, Tung Hai University
Manager, Huwei Branch, Erlin Branch; Bank
Management, Tamsui Institute of Business
Administration		 Manager, Wuri Branch; Graduate Institute of
Finance, Tamkang University		 Manager, Kueishan Branch; University of
Tennessee School of Business Administration		 Assistant
Manager,
CitiBank
(Taiwan);
Graduate Institute of Financial Operations,
National Kaohsiung First University of
Science and Technology		 Manager, Tayuan Branch; Department of
Banking, National Chengchi University
Deputy
Manager,
Songshan
Branch;
Department
of
Industrial
Management,
National Taiwan University of Science and
Technology
Deputy
Manager,
Lukang
Branch;
International Trade, Tamsui Institute of
Business Administration		 Manager, Neili Branch; Graduate Institute of
Finance and Banking, National Central
University
Manager,
Citibank
Fu
Cheng
Branch;
Comprehensive
Commerce
Depertment,
National
Tainan
Commercial
Vocational
Senior High School		 Manager, Hsinchu Branch; Department of
Banking Insurance, Feng Chia University
Manager,
Xinzhuang
Branch;
Graduate
Institute of Management Science, National
Chiao Tung University
Shareholding under the
title of a third party		 Ratio of
Shareholding		 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
20
Quantity 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Shares Held by Spouse
& Dependents		 Ratio of
Shareholding		 0 0.00 0 0 0 0 0.00 0.00 0.00 0 0 0 0 0 0 0 0 0 0 0
Quantity 0 5,686 0 0 0 0 136 5,293 15,280 0 0 0 0 0 0 0 0 0 0 0
Status of shareholding Ratio of
Shareholding		 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0 0.01 0.00 0.00 0.00 0.00 0.00 0 0 0.00 0.00 0.01 0.00
Quantity 152,536 147,342 35,355 508 74,893 1,725 106,466 0 158,956 37,240 2,361 24,203 24,483 5,478 0 0 126,499 230 140,787 574
Election
(Appointme
nt) Date		 2009.9.2 2013.1.25 2013.6.24 2013.6.24 2009.3.11 2013.1.25 2014.3.14 2014.3.14 2013.1.25 2014.3.14 2010.8.4 2013.5.13 2008.4.25 2013.1.25 2013.1.25 2012.4.30 2014.11.11 2010.6.1 2014.8.15 2013.1.25
Name Rung-Kuo Cheng Kuo-Chin Chi Jui-Chang Lee Kuo-Liang Ho Chiang-Kai Liu Yin-Ta Tsai Shun-Chi Ke Yu-Jui Liu Cheng-Huan
Huang
Chen-Hsiang
Chuang		 Chiung-Wen
Chang		 Chen-Hung
Cheng
Wen-Kai Tsai		 Chun-wen Chen Chien-Min Feng Ching-Tang Tsai Pei-Miao Jan Tsung-Hsien Lee Cheng-Hua Lee Hsin-Fa Wang
Nationality Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.		 Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.		 Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.		 Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Title Manager, Taipei Branch Manager,
Lungjing
Branch		 Manager,
Songshan
Branch		 Manager,
Sanzhong
Branch		 Manager,
Kaohsiung
Branch		 Manager, Linko Branch Manager,
Huwei
Branch		 Manager,
Yuanli
Branch		 Manager,
Zhunan
Branch		 Manager,
Dounan
Branch		 Manager, Neihu Branch Manager, Ban Chiao
Branch		 Manager, Feng Shan
Branch		 Manager,
Xinzhuang
Branch		 Manager,
Pizgzhen
Branch		 Manager, Min Hsiung
Branch		 Manager,
Taoyuan
Branch		 Manager, Yung Kung
Branch		 Manager,
Chu
Pei
Branch		 Manager,
Nan
Kang
Branch

20

Spouse or kin within the
second pillar under the Civil
Code and who is a manager
Relation		 None None None None None None None None None None None None

Name		 None None None None None None None None None None None None

Title		 None None None None None None None None None None None
None
Positions with other
companies
None


None

None

None

None

None
None

None
None

None
None

Director, Reliance Securities
Investment Trust Co., Ltd.

Major (academic degree) experience
 Deputy Manager, Neili Branch; National
Taiwan University College of Management
Deputy
Manager,
Chu
Pei
Branch;
Department of Shipping & Transportation
Management,
National
Taiwan
Ocean
University
Manager,
Sunny
Bank;
Department
of
Business Administration, Taoyuan Innovation
Institute of Technology
Manager,
Neili
Branch;
Department
of
Applied
Business,
Taipei
Institute
of
Commerce and Technology
Manager, Chu Pei Branch; Department of
Taxation and Public Finance, National Chung
Hsing University
Manager, Cosmos Bank, Corporate Banking
Center of Taoyung District; Graduate School
of Management, Yuan Ze University		 Manager, Pizgzhen Branch; Department of
Cooperative Economics, Feng Chia University
Manager, Cosmos Bank, Corporate Banking
Center of North 1st District; Graduate School
of Management, Yuan Ze University		 Manager, Songshan Branch; Department of
Banking, National Chengchi University
Manager, Kueishan Branch; Graduate Institute
of Industrial Economics, National Central
University		 Manager, S. Fongyuan Branch; Department of
International Trade, Feng Chia University
Manager,
Loan
Administration
Dept.;
Department
of
Business
Administration,
National Taipei University
Shareholding under the
title of a third party		 Ratio of
Shareholding		 0 0 0 0 0 0 0 0 0 0 0 0
Quantity 0 0 0 0 0 0 0 0 0 0 0 0
Shares Held by Spouse
& Dependents		 Ratio of
Shareholding		 0.00 0 0 0 0 0 0 0 0 0 0.00 0
Quantity 55,087 0 0 0 0 0 0 0 0 0 19,188 0
Status of shareholding Ratio of
Shareholding		 0.00 0.00 0 0.00 0.00 0 0.00 0.00 0.00 0.00 0.01 0.01
Quantity 36,415 606 0 115,568 22,872 0 414 4,714 78,531 5,892 354,735 286,889
Election
(Appointme
nt) Date		 2014.11.11 2014.8.15 2014.8.1 2013.1.25 2014.8.15 2009.5.25 2009.6.16 2011.5.3 2013.9.24 2014.10.28 2009.2.27
2013.6.24
Name Hua-Hsing Wen Yueh-Ching Ti Yi-Tang Chang Jr-Hsin Lee Chien-Hung Lin Yu-Hui Tseng Ting-Kuang
Huang
Shu-Lan Huang		 Tien-Hou Tsai Huo-Yan Wang Kuo-Chi Lin Kuo-Chun
Liu
(concurrent post)
Nationality
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Title Manager,
Nei
Li
Branch		 Manager,
Hsinchu
Branch		 Manager,
Kueishan
Branch		 Manager,
Jhongli
Branch		 Manager, Hsin Feng
Branch		 Manager,
Ta
Yuan
Branch		 Manager,
Yangmei
Branch		 Manager,
Tucheng
Branch		 Manager,
Fuxing
Branch		 Manager,
Zhongshan
Branch		 Manager,
Changhua
Regional Center
Manager,
North
Regional Center

21

d Remuneration paid to directions from an investe
company other than the company’s subsidiary		 Remuneration paid to directions from an investe
company other than the company’s subsidiary		 Remuneration paid to directions from an investe
company other than the company’s subsidiary		 36 36 36 36 36 0 0 0 22
Note 1: The employee bonus and remuneration to directors are allocated according to the earnings allocation motion in the most recent year. The proportion of allocation this year is
imputed based on the proportion of allocation in the most recent year.
Note 2: The pledge ratio of I Joung Investment Co., Ltd. is more than 50%.
Note 3: Taiching Bank has elected the 22ndterm of the Board of Directors in a regular session of the General Meeting of Shareholders held on June 19 2014.
The sum of A,
B, C, D, E, F
and G in
proportion to
Earnings (%)		 entioned
atements		 All companies m
in the financial st		 1.13 0.02 0.02 0
The Bank 0.92 0.02 0.02 0
Remuneration in the capacity as employees Number of new
restricted
employee
shares acquired		 entioned
atements		 All companies m
in the financial st		 0 0 0 0
The Bank 0 0 0 0
Quantity of
shares
entitled
under
employee
stock option
(H)		 entioned
atements		 All companies m
in the financial st		 0 0 0 0
The Bank 0 0 0 0
Employee bonus from earnings
(G) (Note 1)		 All companies
mentioned in
the financial
statements		 Free-Gratis
Dividends		 0 0 0 0
Cash Dividends 2 0 0 0
The Bank Free-Gratis
Dividends		 0 0 0 0
Cash Dividends 2 0 0 0
Pension (F) entioned
atements		 All companies m
in the financial st		 0 0 0 0
The Bank 0 0 0 0

Salaries, bonus
and special
subsidies (E)		 entioned
atements		 All companies m
in the financial st
5,440		 0 0 0
The Bank 5,440 0 0 0
The sum of A, B, C
and D in
proportion to
Earnings (%)		 entioned
atements		 All companies m
in the financial st		 0.98 0.02 0.02 0
The Bank 0.77 0.02 0.02 0
Remuneration to Directors For services (D) entioned
atements		 All companies m
in the financial st		 2,906 82 45 0
The Bank 2,454 82 45 0
Retained Shares
Distribution (C)
(Note 1)		 entioned
atements		 All companies m
in the financial st		 111 0 0 16
The Bank 111 0 0 16
Pension (B) entioned
atements		 All companies m
in the financial st		 0 0 0 0
The Bank 0 0 0 0
Director fees (A) entioned
atements		 All companies m
in the financial st		 33,409 600 840 0
The Bank 26,334 600 840 0
Name Jin-Fong Soo Kuei-Fong Wang
Jer-Shyong Tsai
Chun-Sheng Lee
Hsi-Rong Huang
(independent director)		 Chen-Le Liu
Jin-Yi Lee		 Hsin-Ching Chang
Ming-Shan Chuang
Meng-Liang Chang
Shu-Yuan Lin
Wei-Liang Lin
Chia-Hung Lin
Chien-Hui Huang		 Pan Asia Chemical Corporation Ho Yang Management Consultant
Co., Ltd.		 Chou Chang Co., Ltd. Hsu Tian Investment Co., Ltd. Director Yi-Der Chen (Note 2) Director Ching-Hsin Chang (Note 2) I Joung Investment Co., Ltd. (Note 2)
Title Chairman Managing
Director		 Independent
director		 Director

22

Name of Directors Total (A+B+C+D+E+F+G) All companies mentioned in the
financial statements J		 Yi-Der Chen, Chen-Le Liu,
Jin-Yi Lee, Hsin-Ching Chang,
Ming-Shan Chuang,
Chia-Hung Lin, Ching-Hsin
Chang, Meng-Liang Chang,
Wei-Liang Lin, I Jong
Investment Co., Ltd., Ho Yang
Management Consultant
Co., Ltd., Chou Chang
Co., Ltd..		 Hsi-Rong Huang, Kuei-Fong
Wang, Shu-Yuan Lin,
Wei-Liang Lin, Pan Asia
Chemical Corporation, Hsu
Tian Investment Co., Ltd.
Jin-Fong Soo, Jer-Shyong Tsai,
Chun-Sheng Lee		 - - - - - 21 persons Note: Chairman Jin-Fong Soo and President Chun-Sheng Lee have each been assigned a chauffeur. The compensation to the chauffeurs in FY 2014 amounted to NTD1,349
thousand.

The Bank		 Yi-Der Chen, Chen-Le Liu,
Jin-Yi Lee, Hsin-Ching Chang,
Ming-Shan Chuang,
Shu-Yuan Lin, Chia-Hung Lin,
Ching-Hsin Chang,
Meng-Liang Chang,
Wei-Liang Lin, Chien-Hui
Huang, I Jong Investment
Co., Ltd., Ho Yang
Management Consultant
Co., Ltd., Chou Chang
Co., Ltd..		 Hsi-Rong Huang, Kuei-Fong
Wang, Pan Asia Chemical
Corporation, Hsu Tian
Investment Co., Ltd.		 Jin-Fong Soo, Jer-Shyong Tsai,
Chun-Sheng Lee		 - - - - - 21 persons
Total (A+B+C+D) All companies mentioned in the
financial statements I		 Yi-Der Chen, Chen-Le Liu,
Jin-Yi Lee, Hsin-Ching Chang,
Ming-Shan Chuang,
Chun-Sheng Lee,
Chia-Hung Lin, Ching-Hsin
Chang, Meng-Liang Chang,
Wei-Liang Lin, I Jong
Investment Co., Ltd., Ho Yang
Management Consultant
Co., Ltd., Chou Chang
Co., Ltd..		 Hsi-Rong Huang, Kuei-Fong
Wang, Shu-Yuan Lin,
Wei-Liang Lin, Pan Asia
Chemical Corporation, Hsu
Tian Investment Co., Ltd.		 Jin-Fong Soo, Jer-Shyong Tsai - - - - - 21 persons
The Bank Yi-Der Chen, Chen-Le Liu,
Jin-Yi Lee, Hsin-Ching Chang,
Ming-Shan Chuang,
Chun-Sheng Lee,
Shu-Yuan Lin, Chia-Hung Lin,
Ching-Hsin Chang,
Meng-Liang Chang,
Wei-Liang Lin, Chien-Hui
Huang, I Jong Investment
Co., Ltd., Ho Yang
Management Consultant
Co., Ltd., Chou Chang
Co., Ltd..
Hsi-Rong Huang, Kuei-Fong
Wang, Pan Asia Chemical
Corporation, Hsu Tian
Investment Co., Ltd.		 Jin-Fong Soo, Jer-Shyong Tsai - - - - - 21 persons
Classification of remuneration paid to directors Less than 2,000,000 2,000,000(inclusive)~5,000,000 (exclusive) 5,000,000(inclusive)~ 10,000,000 (exclusive) 10,000,000(inclusive)~15,000,000 (exclusive) 15,000,000(inclusive)~30,000,000 (exclusive) 30,000,000(inclusive)~50,000,000 (exclusive) 50,000,000(inclusive)~100,000,000 (exclusive) 100,000,000 and above Total

23

Unit: NTD thousand; %
Remuneration
paid to
directions
from an
invested
company
other than the
company’s
subsidiary
Remuneration
paid to
directions
from an
invested
company
other than the
company’s
subsidiary
Remuneration
paid to
directions
from an
invested
company
other than the
company’s
subsidiary		 0 0 0 Note 1: The employee bonus and remuneration to directors/supervisors are allocated according to the earnings allocation motion in the most recent year. The proportion of allocation
this year is imputed based on the proportion of allocation in the most recent year.
Classification of remuneration
Name of Supervisors Total (A+B+C+D) All companies contained in the consolidated financial
statements		 Jiann-Ell Huang, Ching-Huang Tsai, Shu-Li Huang,
Chian-Hwa Lee Fu, Chao-Nan Hsieh, Xin Rui Investment
Co., Ltd. and Tai Jiunn Enterprise Co., Ltd.		 - - - - - - - 7 persons
The sum of A, B, C and
D in proportion to
Earnings (%)		 All
companies
mentioned
in the
financial
statements		 0.06
The Bank 0.06
Remuneration to Supervisors For services (D) All
companies
mentioned
in the
financial
statements		 100
The Bank 100
The Bank Jiann-Ell Huang, Ching-Huang Tsai, Shu-Li Huang,
Chian-Hwa Lee Fu, Chao-Nan Hsieh, Xin Rui Investment
Co., Ltd. and Tai Jiunn Enterprise Co., Ltd.		 - - - - - - - 7 persons

Retained Shares
Distribution (C)
(Note 1)
All
companies
mentioned
in the
financial
statements		 0

The Bank		 0
24

Pension (B)		 All
companies
mentioned
in the
financial
statements		 0
The Bank 0
Director fees (A) All
companies
mentioned
in the
financial
statements		 2,070
Classification of remuneration paid to supervisors Less than 2,000,000 2,000,000(inclusive)~5,000,000 (exclusive) 5,000,000(inclusive)~ 10,000,000 (exclusive) 10,000,000(inclusive)~15,000,000 (exclusive) 15,000,000(inclusive)~30,000,000 (exclusive) 30,000,000(inclusive)~50,000,000 (exclusive) 50,000,000(inclusive)~100,000,000 (exclusive) 100,000,000 and above Total
The Bank 2,070
Name Jiann-Ell Huang Ching-Huang Tsai
Shu-Li Huang
Chao-Nan Hsieh
Chien-Hwa Lee Fu		 Xin Rui Investment Co., Ltd. Tai Jiunn Enterprise Co., Ltd.
Title Supervisor Resident Supervisor

24

Unit: NTD thousand; % President
Chun-Sheng Lee
16,120
16,480
0
0
8,558
8,723
8
0
8
0
0.66
0.68
0
0
0
0
0
Executive Vice President Chih-Chuan Fang
Executive Vice President
Kai-Yu Lin
Executive Vice President
Te-Wei Chia
Executive Vice President Hsueh-Hsien Liao
Chief Auditor
Min-Chin Shen
Note: The employee bonus and remuneration to directors/supervisors are allocated according to the earnings allocation motion in the most recent year. The proportion of allocation
this year is imputed based on the proportion of allocation in the most recent year.
Classification of remuneration		 President
Chun-Sheng Lee
16,120
16,480
0
0
8,558
8,723
8
0
8
0
0.66
0.68
0
0
0
0
0
Executive Vice President Chih-Chuan Fang
Executive Vice President
Kai-Yu Lin
Executive Vice President
Te-Wei Chia
Executive Vice President Hsueh-Hsien Liao
Chief Auditor
Min-Chin Shen
Note: The employee bonus and remuneration to directors/supervisors are allocated according to the earnings allocation motion in the most recent year. The proportion of allocation
this year is imputed based on the proportion of allocation in the most recent year.
Classification of remuneration		 President
Chun-Sheng Lee
16,120
16,480
0
0
8,558
8,723
8
0
8
0
0.66
0.68
0
0
0
0
0
Executive Vice President Chih-Chuan Fang
Executive Vice President
Kai-Yu Lin
Executive Vice President
Te-Wei Chia
Executive Vice President Hsueh-Hsien Liao
Chief Auditor
Min-Chin Shen
Note: The employee bonus and remuneration to directors/supervisors are allocated according to the earnings allocation motion in the most recent year. The proportion of allocation
this year is imputed based on the proportion of allocation in the most recent year.
Classification of remuneration		 President
Chun-Sheng Lee
16,120
16,480
0
0
8,558
8,723
8
0
8
0
0.66
0.68
0
0
0
0
0
Executive Vice President Chih-Chuan Fang
Executive Vice President
Kai-Yu Lin
Executive Vice President
Te-Wei Chia
Executive Vice President Hsueh-Hsien Liao
Chief Auditor
Min-Chin Shen
Note: The employee bonus and remuneration to directors/supervisors are allocated according to the earnings allocation motion in the most recent year. The proportion of allocation
this year is imputed based on the proportion of allocation in the most recent year.
Classification of remuneration		 President
Chun-Sheng Lee
16,120
16,480
0
0
8,558
8,723
8
0
8
0
0.66
0.68
0
0
0
0
0
Executive Vice President Chih-Chuan Fang
Executive Vice President
Kai-Yu Lin
Executive Vice President
Te-Wei Chia
Executive Vice President Hsueh-Hsien Liao
Chief Auditor
Min-Chin Shen
Note: The employee bonus and remuneration to directors/supervisors are allocated according to the earnings allocation motion in the most recent year. The proportion of allocation
this year is imputed based on the proportion of allocation in the most recent year.
Classification of remuneration		 President
Chun-Sheng Lee
16,120
16,480
0
0
8,558
8,723
8
0
8
0
0.66
0.68
0
0
0
0
0
Executive Vice President Chih-Chuan Fang
Executive Vice President
Kai-Yu Lin
Executive Vice President
Te-Wei Chia
Executive Vice President Hsueh-Hsien Liao
Chief Auditor
Min-Chin Shen
Note: The employee bonus and remuneration to directors/supervisors are allocated according to the earnings allocation motion in the most recent year. The proportion of allocation
this year is imputed based on the proportion of allocation in the most recent year.
Classification of remuneration		 Name of Presidents and Executive Vice Presidents Consolidation None Chih-Chuan Fang, Kai-Yu Lin, Te-Wei Chia,
Hsueh-Hsien Liao, Min-Chin Shen		 Chun-Sheng Lee - - - - - 6 persons

Remuneration
paid to
directions
from an
invested
company
other than the
company’s
subsidiary

 0
Number of new
restricted
employee shares
acquired		 All
companies
mentioned		 in the
financial
statements		 0


The		 Bank 0
Employee share
subscription
warrants		 All
companies
mentioned		 in the
financial
statements		 0


The		 Bank 0
The sum of A, B,
C and D in
proportion to
Earnings (%)
All
companies
mentioned		 in the
financial
statements		 0.68

The		 Bank
 0.66
Employee bonus of earning distribution(D)
(Note )		 All companies
mentioned in the
financial statements		 Free-Gratis
Dividends		 0
The Bank None Chih-Chuan Fang, Kai-Yu Lin, Te-Wei Chia,
Hsueh-Hsien Liao, Min-Chin Shen		 Chun-Sheng Lee - - - - - 6 persons

Cash
Dividends		 8


The Bank		 Free-Gratis
Dividends		 0
Cash
Dividends		 8
Bonus and special
Disbursement (C)		 All
companies
mentioned		 in the
financial
statements		 8,723


The Bank		 8,558
Pension (B) All
companies
mentioned
in the
financial
statements		 0


The
Bank		 0 Classification of Remuneration paid to presidents and
Executive Vice Presidents		 Less than 2,000,000 2,000,000(inclusive)~5,000,000 (exclusive) 5,000,000(inclusive)~ 10,000,000 (exclusive) 10,000,000(inclusive)~15,000,000 (exclusive) 15,000,000(inclusive)~30,000,000 (exclusive) 30,000,000(inclusive)~50,000,000 (exclusive) 50,000,000(inclusive)~100,000,000 (exclusive) 100,000,000 and above Total
Salary (A)
All
companies
mentioned
in the
financial
statements		 16,480
The Bank 16,120
Name Chun-Sheng Lee Chih-Chuan Fang Kai-Yu Lin Te-Wei Chia Hsueh-Hsien Liao Min-Chin Shen
Title President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Chief Auditor

25

Note: Imputed house rent provided to Chairman, President and Executive Vice Presidents in 2014.

Unit: NTD thousand


Unit: NTD thousand
Unit: NTD thousand
Unit: NTD thousand
Title Name House and the land value Imputed monthly
rent		 Remarks
Chairman Jin-Fong Soo The
dormitory
as
provided was owned by
the Bank itself. The house
cost was based on the
information of the land
Vice Chairman Kuei-Fong Wang
President Chun-Sheng Lee
Executive
VicePresident		 Chih-Chuan Fang cost and the price of
acquisition less allowance
Chief Auditor Min-Chin Shen 14,642 74 for depreciation of the
buildings
thereon
(exclusive
of
the
accessory
equipment,
additions and renovation
of the buildings) specified
in
the
catalogue
of
property at the end of
December 2014.
4. Members of management team receiving employee bonus and bonus distribution in 2014
Unit: NTD thousand;%
Title Name Free-Gratis
Dividends		 Cash
Dividends		 Total Total/after-tax
profit
President Chun-ShengLee
Executive
VicePresident		 Hsueh-Hsien Liao, Chih-Chuan Fang,
Kai-YuLin,Te-WeiChia
Chief Auditor Min-Chin Shen 0


























 87 87 0
Manager Ching-hu Hsieh, Chun-Ying Wang, Yi-Yuan Tung,
Chung-Ping Yang, Yu-Chung Lin, Kuo-Chun Liu, Yi-Ying
Chung, Chun-Sheng Lin, Mei-Li Wu, Chen-Ying Wu,
Kuang-Chung Hsiao, Shu-Chen Chen, Chien-Min Chou,
Tung-Hsu
Liu,
Yu-Chen
Yang,
Han-Ching
Tsai,
Kwei-Ching Ho, Yu-Ying Chen, Chung-Rong Lin,
Hsin-Ru Kao, Chiung-Teng Hung, Yao-Pin Chen,
Wen-Hsin
Chiu,
Min-Hsuan
Chiang
,
Tsung-Hsien
Lee,
Pi-Hua
Chang,
Chia-Wei
Tsai,
Hui-Chin Lu, Yi-Cheng Liao, Pao-Yuan Chen, Tung-Po
Yang, Ming-Ren Hsu, Zai-Hong Yang, Chao-Chi Tseng,
Chang-Chi Liu, Chien-Hao Chen, Chien-ting Lin,
Chih-Hung
Wu,
Chun-Chun
Yu,
Tsung-Yi
Liu,
Shin-Hsiung Huang, Ming-Yu Chiu, Kuang-Chih Chen,
Yung-Sung Chien, Chung-Cheng Wu, Hung-Ping Chen,
Cheng-Hsien
Ni,
Yi-Pin
Lin,
Hsin-Hsin
Lee,
Ching-Yuan Lin, Jui-Cheng Yang, Chi-Hsien Lee,
Chih-Hua Yao, Ming-Cheng Wu, Shih-Huei Wang,
Yung-Chang Lai, Chih-Hao Liang, Cheng-Yu Lai,
Rung-Kuo Cheng, Kuo-Chin Chi, Jui-Chang Lee,
Kuo-Liang Ho, Chiang-Kai Liu, Yin-Ta Tsai, Shun-Chi
Ke, Chih-Hung Lu, Yu-Jui Liu, Cheng-Huan Huang,
Chen-Hsiang Chuang, Chiung-Wen Chang, Chen-Hung
Cheng, Wen-Kai Tsai, Chun-wen Chen, Ching-Tang
Tsai, Pei-Miao Jan, Tsung-Hsien Lee, Cheng-Hua Lee,
Hua-Hsing
Wen,
Yueh-Ching
Ti,
Jr-Hsin
Lee,
Chien-Hung Lin, Yu-Hui Tseng, Ting-Kuang Huang,
Shu-Lan Huang, Tien-Hou Tsai, Huo-Yan Wang

26 26

  1. The name, job position, and total bonuses of the top-10 employees who received the “2013 bonus to employees” in 2014

Unit: NTD thousand


3 bonus to employees”
in 2014
Unit: NTD thousand
Title Name Free-Gratis Dividends
Cash Dividends
President Chun-ShengLee
Executive Vice President Kai-Yu Lin
Executive Vice President Te-Wei Chia
Executive Vice President Chih-Chuan Fang
Chief Auditor Min-Chin Shen
Manager Rung-Kuo Cheng 0 32
Manager Wen-Kai Tsai
Manager Pei-Miao Jan
Manager Ting-KuangHuang
DeputyManager Yu-Yen Tsai

  • (IV) Individually explain and compare the analysis of the total compensation paid out to Directors, Supervisors, President and Executive Vice President in the past two years as a percentage of net profit after tax for each financial statement at our bank and all companies referred to in the consolidated financial statements. In addition, explain the compensation policy, standard, combination of compensation items, and codify the procedures of compensation determination and the linkage between compensation and operating performance as well as future risks.

  • Analysis on Proportion to Earnings

Unit: NTD thousand Unit: NTD thousand Unit: NTD thousand Unit: NTD thousand
2014 2013
The Bank Consolidation The Bank Consolidation
Director 30,482 38,009 24,914 28,940
Supervisor 2,170 2,170 5,029 5,029
President/Executive
VicePresidents		 24,686 25,211 21,965 22,545
Total 57,338 65,390 51,908 56,514
Total/after-tax profit 1.54% 1.76% 1.70% 1.85%

Note: The remuneration to directors less the salary received by President for assuming employees concurrently.

  1. The compensation policy, standard, combination of compensation items, and codify the procedures of compensation determination and the linkage between compensation and operating performance as well as future risks.

  2. (1) The Bank’s remuneration policy and standard portfolio, payment procedure, and operating performance correlation for the directors is based on Article 27-1 of the Bank’s Articles of Incorporation: “The remuneration to Chairman is based on the total income of the President times 1.25.” The compensation for the Vice Chairman of the Board, Executive Director, and Independent Directors is at the discretion of the board, taking into consideration compensation at the industry level. Said compensation is based on the total compensation of the President but may not exceed 1.1 times that amount. Independent Directors are not eligible for our bank’s earnings distribution. Our bank may pay for liability insurance policies that cover the liabilities for damages as defined by statutes or court ruling within the scope of the business of Directors and Supervisors. Article 35: “Any profit from settlement of the year shall be subject to applicable taxes as the top seniority, followed by the offsetting of losses carried forward from previous years and thirty percent of the

27

27

remainder of such profit shall be allocated as legal reserve, and special reserve shall be provided pursuant to laws. The balance, if any, 0.01% shall be allocated for employee bonus, remuneration to directors/supervisors granted based on 50% of the allocated employee bonus. The balance, if any, plus the unallocated retained earnings for the previous years shall be allocated as proposed. The Board shall retain the required fund subject to the change of operating environment, operation and investment needs before proposing the proportion between cash and Stock Dividends for the approval of the shareholders’ meeting: 1. The cash dividends shall be no less than 10% of the Dividends and bonus allocated to shareholders. 2. Notwithstanding, if the Dividends are allocated at less than or equal to NTD 0.3 per share, the earnings may be allocated in the form of Stock Dividends in full. If the capital adequacy ratio fails to reach the legal ratio, the earnings shall be allocated in accordance with the Banking Act and the competent authority’s requirements. " and the resolution of the compensation committee. In the event of illegality of the directors to the effect that damage is inflicted on the Bank, the Auditing Committee shall exercise its control over existing or potential illegality and take appropriate action as required by law.

  • (2) The bonus for the President and Executive Vice President is based on our bank’s regulations on bonus pay as ratified by the Board or the Executive Board, using factors such as profit and operational result evaluation in various business lines for the calculation of bonus and adjusted for the bank’s operational outcome.

  • (3) The remuneration to the President and the Vice Presidents shall commensurate with their individual professional standing and experience with reference to industry standard subject to the review of the Remuneration Committee and the final approval of the Board. Further to the fixed monthly salaries, a performance bonus and special bonus will be released based on the overall operation performance of the year in accordance with the regulation governing rewards to the employees. For linking with possible risk in the future, the performance bonus of personnel at the level of manger or higher shall be retained in part for deferred payment pending on no involvement of misconduct in business operation and no violation of law that may cause significant loss and risk to the Bank.

  • (4) The remuneration to directors/supervisors includes the attendance fee, remuneration, and compensation allocated from earnings. The remuneration to President/Executive Vice Presidents includes salary, bonus and special subsidies, and employee bonus allocated from earnings.

28 28

III. Status of Corporate Governance (I) The function of the Board

The Board called 10 (A) meetings in 2014. The attendance of directors/supervisors is specified as follows:

Title Name Actual
number of
attendance
(B)		 Attend
throug
h proxy		 Attendance
rate
(%)(B/A)		 Remarks
Chairman Jin-Fong Soo
[Representative of Hsu Tian Investment
Co.,Ltd.]		 10 0 100
Vice
Chairman		 Kuei-Fong Wang
[Representative of Hsu Tian Investment
Co., Ltd.]		 10 0 100
Managing
Director		 Jer-Shyong Tsai
[Representative of Hsu Tian Investment
Co.,Ltd.]		 7 3 70
Director Yi-Der Chen
(Representative of I Joung Investment
Co., Ltd.)		 4 0 100 Institutional
Director
I
Jeoung
Investment Co., Ltd. appointed Chang
Ching-Hsin as the representative on
2014.7.14: attendance to meeting for
4 instances is required.
Managing
Director
(Independent
Director)		 Hsi-Rong Huang 10 0 100
Independent
director		 Chen-Le Liu 10 0 100
Independent
director		 Jin-Yi Lee 8 1 80
Director Hsin-Ching Chang
[Representative of Hsu Tian Investment
Co.,Ltd.]		 10 0 100
Director Ching-Hsin Chang
(Representative of I Joung Investment
Co., Ltd.)		 8 0 89 nine meetings should be attended.
Managing
Director		 Chun-Sheng Lee
[Representative of Hsu Tian Investment
Co.,Ltd.]		 10 0 100
Director Ming-Shan Chuang
[Representative of Hsu Tian Investment
Co.,Ltd.]		 10 0 100
Director Meng-Liang Chang
(Representative of Pan Asia Chemical
Corporation)		 10 0 100
Director Chia-Hung Lin
(Representative
of
Ho
Yang
Management Consultant Co.,Ltd.)		 8 1 80
Director Wei-Liang Lin
[Representative of Hsu Tian Investment
Co.,Ltd.]		 10 0 100
Director Shu-Yuan Lin
[Representative of Hsu Tian Investment
Co., Ltd.]		 9 0 100 Institutional
Director
Pan
Asia
Chemical Corporation appointed new
representatives
on
2014.2.6;
the
General Meeting of Shareholders held
election
on
2014.6.19,
the
representatives
to
institutional
Director
Hsu
Tian
Investment
Co., Ltd.: Attendance to the meetings
for 9 instances is required.
Director Chien-Hui Huang (Representative of Ho
Yang Management Consultant Co., Ltd.)		 6 0 86 The General Meeting of Shareholders
held
its
election
on
2014.6.19,
attendance to the meeting for 7
instances is required.
Supervisor
Resident		 Jiann-Ell Huang
(Representative of Xin Rui Investment
Co., Ltd.)		 0 0 0 The General Meeting of Shareholders
resolved to establish the Auditing
Committee to replace the seats of
supervisors on 2014.6.19; presence in
the meeting as observer for 3
instances is required.

29 29

  • The General Meeting of Shareholders resolved to establish the Auditing

  • Ching-Huang Tsai Committee to replace the seats of

  • Supervisor (Representative of Xin Rui Investment 3 0 100 supervisors on 2014.6.19; presence in

  • Co., Ltd.) the meeting as observer for 3 instances is required. The General Meeting of Shareholders resolved to establish the Auditing

  • Shu-Li Huang Committee to replace the seats of

  • Supervisor (Representative of Xin Rui Investment 3 0 100 supervisors on 2014.6.19; presence in

  • Co., Ltd.) the meeting as observer for 3 instances is required. The General Meeting of Shareholders resolved to establish the Auditing

  • Chien-Hwa Lee Fu Committee to replace the seats of

  • Supervisor (Representative of Xin Rui Investment 3 0 100 supervisors on 2014.6.19; presence in

  • Co., Ltd.) the meeting as observer for 3 instances is required. The General Meeting of Shareholders resolved to establish the Auditing

  • Chao-Nan Hsieh Committee to replace the seats of

  • Supervisor (Representative of Tai Jiunn Enterprise 3 0 100 supervisors on 2014.6.19; presence in

  • Co., Ltd.) the meeting as observer for 3 instances is required.

  • Other notes: I. The content of the particulars inscribed in Article14-III of the Securities and Exchange Act, and of the adverse opinions or qualified opinions of the independent directors with record or declaration in writing shall be stated with the date of the Board meeting, the session, the content of the motions, the opinions of all independent directors, and the response to such opinions: none.

  • II. The avoidance of the conflict of interest by the Directors on related motions, specify the names of the Directors, the content of the motions, the principle of the avoidance of the conflict of interest, and the participation in casting the ballots: (I) In the 18th session of the 21st Board dated 2014.1.8. The point of discussion, “the Bank acts as the principal settlement bank for TCB Securities and as per the request of TCB Securities and with reference to market practice, the Bank shall pay a finder fee for the deposits of the customers of TCB Securities for FY2013”. Director Ming-Shan Chuang was excused from discussion of the aforementioned motion to avoid conflict of interest. Other Directors in the meeting passed the motion as stated.

  • (II) In the 19th session of the 21st Board dated 2014.3.12, the point of discussion, “the Bank plans to engage in joint business development with TCB Securities”. Director Ming-Shan Chuang and Director Shu-Yuan Lin were excused from discussion of the aforementioned motion to avoid conflict of interest. Other Directors in the meeting passed the motion as stated.

  • (III) In the 20th session of the 21st Board of Directors dated 2014.5.7, the point of discussion, “the shareholders each holding more than 1% of the outstanding shares of the Bank nominated the candidates for the seats of the 22nd term of independent directors of the Bank”. Independent Director Hsi-Rong Huang, Independent Director Chen-Le Liu, and Independent Director Jin-Yi Lee were excused from discussion of the aforementioned motion to avoid conflict of interest. Other Directors in the meeting passed the motion as stated.

  • (IV) In the 1st session of the 22nd term of the Board dated 2014.7.16, point of discussion, “the Bank plans and assesses to take over Reliance Securities Investment Trust”. Vice Chairman Kuei-Fong Wang was excused from the discussion of the aforementioned motion to avoid conflict of interest. Other Directors in the meeting passed the motion as stated.

  • (V) In the 1st session of the 22nd term of the Board dated 2014.7.16, point of discussion, “the Bank acts as the principal settlement bank for TCB Securities and as per the request of TCB Securities and with reference to market practice, the Bank shall pay a finder fee for the deposits of the customers of TCB Securities for the first half of FY2014”. Director Ming-Shan Chuang and Director Shu-Yuan Lin were excused from discussion of the aforementioned motion to avoid conflict of interest. Other Directors in the meeting passed the motion as stated.

  • (VI) In the 1st session of the 22nd term of the Board dated 2014.7.16, point of discussion, “the appointment of the members of the 2nd term of the Remuneration Committee of the Bank”. Independent Director Hsi-Rong Huang and Independent Director Chen-Le Liu were excused from discussion of the aforementioned motion to avoid conflict of interest. Other Directors in the meeting passed the motion as stated.

  • (VII) In the 1st session of the 22nd term of the Board dated 2014.7.16, point of discussion, “the appointment of the managers of the Bank”. Executive Director Chun-Sheng Lee was excused from the discussion of the aforementioned motion to avoid conflict of interest. Other Directors in the meeting passed the motion as stated.

  • (VIII)In the 2[nd] session of the 22[nd] Board dated 2014.8.12, point of discussion, Vice Chairman Kuei-Fong Wang was excused from the discussion of the aforementioned motion to avoid conflict of interest. Other Directors in the meeting passed the motion as stated.

  • (IX) In the 2nd session of the 22nd Board dated 2014.8.12, point of discussion, “determination of the remuneration to the Independent Directors”. Independent Director Hsi-Rong Huang, Independent Director Chen-Le Liu, and Independent Director Jin-Yi Lee were excused from discussion of the aforementioned motion to avoid conflict of interest. Other Directors in the meeting passed the motion as stated.

  • (X) In the 2nd session of the 22nd Board dated 2014.8.12, point of discussion, “determination of the fees for attendance to meetings for the Directors and the Auditing Committee members”. Independent Director Hsi-Rong Huang, Independent Director Chen-Le Liu, and Independent Director Jin-Yi Lee were excused from discussion of the aforementioned motion to avoid conflict of interest. Other Directors in the meeting passed the motion as stated.

  • (XI) In the 3rd session of the 22nd Board dated 2014.9.25, point of discussion, “the Bank plans to enter into a MOU on investment assessment through shares swap and related authorization”. Vice Chairman Kuei-Fong Wang was excused from the discussion

30

30

  • of the aforementioned motion to avoid conflict of interest. Other Directors in the meeting passed the motion as stated.

  • (XII) In the 4th session of the 22nd Boar dated 2014.11.5, point of discussion, “proposal for the sharing of return on joint marketing of insurance products between the Bank and TCB Insurance Brokerage Co., Ltd”. Vice Chairman Kuei-Fong Wang was excused from the discussion of the aforementioned motion to avoid conflict of interest. Other Directors in the meeting passed the motion as stated.

  • (XIII)In the 4th session of the 22nd Boar dated 2014.11.5, point of discussion, “the Bank plans to establish the (draft)regulation governing the employee shareholding trust of the Bank for assisting employees in long-term saving and investment and the accumulation of wealth so as to enjoy a stable life after retirement, and plans to amend the ranks and files of the employees, the payroll scale and the subsidy for management personnel as dictated by their duties, and the amendment to the regulation governing the release of operation performance bonus”. Chairman Jin-Fong Soo, Vice Chairman Kuei-Fong Wang, Executive Director Jer-Shyong Tsai, and Executive Director Chun-Sheng Lee were excused from discussion of the aforementioned motion to avoid conflict of interest. Other Directors in the meeting passed the motion as stated.

  • (XIV)In the 5th session of the 22nd Board dated 2014.12.4, point of discussion, “the Bank acts as the principal settlement bank for TCB Securities and as per the request of TCB Securities and with reference to market practice, the Bank shall pay a finder fee for the deposits of the customers of TCB Securities for the second half of FY2014”. Director Ming-Shan Chuang and Director Shu-Yuan Lin were excused from discussion of the aforementioned motion to avoid conflict of interest. Other Directors in the meeting passed the motion as stated.

  • III. The objective of fortifying the functions of the Board in current year and the most recent year (e.g., the establishment of the Auditing Committee, and enhancement of the transparency of information) and the assessment of the result of execution: (I) In the 3rd special session of the 21st Board of Directors dated 2011.8.18, the Board resolved to establish the Remuneration Committee for the routine review of the policies, systems, standards, and structures of the evaluation of the performance of the Directors, Supervisors, and mangers, and their remunerations.

  • (II) The Auditing Committee was established to substitute the system of Supervisors after the regular session of the General Meeting of Shareholders in FY2014.

  • (III) According to the rating of the Disclosure by TWSE-GTSM-listed companies for the 11[th] instance by Securities and Futures Institute, enterprises rated as A+ sustained their transparency of information as compared with those rated A in the 10[th] rating.

  • [Note] Continuing education of the Directors in FY2014:

  • On January 10, Managing Director Jer-Shyong Tsai and Director Chun-Sheng Lee took the “Strategy and KPI” course held by the Securities and Futures Institute for 3 hours.

  • On January 17, Director Wei-Liang Lin took the “The Practice of the Prevention of Corruption Risk of the Employees” course held by the Securities and Futures Institute for 3 hours.

  • On February 13, Executive Director Jer-Shyong Tsai took the “Risk Management Mechanism Necessary for the Operation of Enterprises” course held by the Securities and Futures Institute for 3 hours.

  • On April 22, Executive Director Jer-Shyong Tsai and Independent Director Chen-Le Liu took the “The performance of positive function by the functional committees of the Board of Directors” course held by the Securities and Futures Institute for 3 hours.

  • On August 15, Executive Director Jer-Shyong Tsai took the “The framework for the operation of parent firm and subsidiaries and the segregation of duties and authorities among the Directors and the Supervisors” course held by the Securities and Futures Institute for 3 hours.

  • On August 20, Independent Director Chen-Le Liu took the “Corporate Governance and the Practice of the Operation of Independent Directors” held by the Securities and Futures Institute for 3 hours.

  • On September 23, Director Meng-Liang Chang joined the “Rights and Obligations of Directors and Supervisors and the Operation of the Board” held by the Corporate Governance Association for 3 hours.

  • On October 13, Independent Director Hsi-Rong Huang took the “Advanced Seminar on the duties of Directors and Supervisors – the positive function of the functional committees of the Board” held by the Securities and Futures Institute for 3 hours.

  • On November 13, Executive Director Jer-Shyong Tsai took the “Development of the Competitive Power of Enterprises in the future – Corporate Social Responsibility” held by China National Association of Industry and Commerce for 3 hours.

  • On November 14, Director Chia-Hung Lin took the “Tax Planning from the Perspective of Corporate Governance – Technology Share and the Application of the Corporate Mergers and Acquisition Act”, and the “Capital Market and Corporate Governance” courses held by China National Association of Industry and Commerce for 6 hours.

  • On November 20: Director Kuei-Fong Wang attended the “10th Taipei Forum of Corporate Governance” held by Financial Supervisory Commission for 3 hours.

  • On November 25, Director Chien-Huei Huang took the “Advanced Seminar on the Practice of the Duties of Directors and Supervisors (including independent)- the positive function of the functional committees of the Board” held by the Securities and Futures Institute for 3 hours.

  • On December 5, Director Ming-Shan Chuang took the “The Practice, Development, and Operation of the Auditing Committee and the Remuneration Committee” held by the Corporate Governance Association for 3 hours.

  • On December 19, Director Jin-Fong Soo took the “Advanced Seminar on the Practice of the Duties of Directors and Supervisors (including independent)-Case Study on Corporate Mergers and Acquisitions-from the Perspective of Corporate Governance” held by the Securities and Futures Institute for 3 hours.

31 31

(II) The function of Audit Committee

The Auditing Committee convened for 5 times (A) in FY2014. The attendance of the independent directors is shown below:

Title Name Actual number of
attendance (B)		 Attend through
proxy		 Attendance rate
(%)
(B/A)		 Remarks
Independent
director(a)		 Hsi-Rong
Huang		 5 0 100 A new Board of
Directors
was
Independent
director(b)		 Chen-Le Liu 5 0 100 elected in a regular
session
of
the
Independent
director (c)		 Jin-Yi Lee 4 1 80 General Meeting of
Shareholders
on
2014.6.19 with the
establishment
of
the 1stterm of
Auditing
Committee.
Other notes:
I.
For issues as stated in Paragraph 5 in Article 14 of the Securities and Exchange Act not yet passed by the Auditing
Committee but passed by a two-third majority of the Board of Directors, specify the date and the series of the
session, the content of the motions, the resolution of the Auditing Committee, and the response to the opinions
prescribed by the Auditing Committee: none.
II.
The avoidance of the conflict of interest by the Independent Directors on related motions, specify the names of the
Independent Directors, the content of the motions, the principle of the avoidance of the conflict of interest, and the
participation in casting the ballots:
III. Communication between Independent Directors and internal audit officers and CPA:
(I)
The Chief Internal Auditor of the Bank liaises with the members of the Auditing Committee on the audit
findings regularly, and present audit reports in the quarterly meeting of the Auditing Committee. In case of
special situation, report to the members of the Auditing Committee. No such event occurred in FY2014 and
communication with the Chief Internal Auditor is positive.
(II)
The certified public accountants commissioned as external auditors of the Bank report to the Auditing
Committee on the audit opinions or results of the interim and annual financial reports on current period
semi-annually and annually. Is there any materiality that worth the attention of the Bank in the audit period as
compared with the previous period, such as the change in the quality of assets showing signs of impairment
with objective evidence, the analysis of aging account receivables, and evaluation of financial assets? Is there
any proper communication with the Auditing Committee on their review of financial statements for fair
presentation?

  • (III) Items to be disclosed according to the Corporate Governance Best-Practice Principles for the Banking Industry

  • Please refer to the Bank’s website (www.tcbbank.com.tw) About Taichung Bank � Disclosure of Information

32 32

(IV) Status of Corporate Governance as required for banks, and any nonconformity to the Corporate Governance Best-Practice Principles for Banking Industry and reasons thereof

Items for evaluation Implementation Status Implementation Status Implementation Status Deviation from the
Corporate Governance
Best-Practice Principles
for the Banking
Industryand reasons
Yes No Summary
I.
Equity structure and shareholders’ equity
(I)
Has the Bank instituted an internal procedure for
handling recommendations, queries, disputes of
the shareholders and legal actions, and comply
with the procedure properly?
(II)
Has the Bank kept track on the dominant
shareholders of the Bank and the parties
controlling these shareholders?
(III) Has the Bank established and implemented the
risk control mechanism and firewall between the
corporate headquarters and the affiliates?






�
�		 � The Bank has built the hotline and email dedicated to handling the suggestions
from shareholders and disputes, and published them in the Bank’s official
website.
The Bank pays attention to the increase/ decrease in or mortgage/ pledge of the
equity of shareholders holding more than 5% of the total outstanding shares or
shareholders assuming directors/ supervisors, and disclose such information on
the “MOPS site” as required.
The transactions between the Bank and the subsidiaries have been conducted in
accordance with applicable legal rules. As such, it is necessary to monitor,
control and handle. There are also the criteria for the “monitoring and handling
of subsidiaries” inplace.







no difference
II. The organization of the Board and their duties
(I)
Further to the establishment of the Remuneration
Committee and the Auditing Committee, has the
Bank voluntarily established other functional
committees?
(II)
Has the Bank assessed the independence of the
commissioned
certified
public
accountants
regularly?




�
�		 Please refer to I. Organization System; (I) Organizational Structure on page 8.
Review the independence of the commissioned certified public accountants
annually. The last review was performed with record on the 6thsession of the
22ndBoard held on January28 2015.

no difference
III. Has
the
Bank
established
channels
for
communications with the stakeholders?
�		 (I) The Bank has already disclose it on the Bank’s intranet pursuant to the
Banking act and the competent authority’s requirements about limitation
on the credit extended to stakeholders, and also held the seminars for laws
and regulations irregularly to enable the persons-in-charge to comply with
and know the laws and regulations, and request completion of the
stakeholder information list immediately upon the stakeholder’s transfer.
The communication channel is considered uninterrupted.
(II) The Bank not only disclosed the message on the MOPS site as required but
alsopublished it on the Bank’s official website to helpinvestors’ search.





no difference
IV. Disclosures
(I)
Has the Bank established a website for the
disclosure of financial position, operation, and
corporate governance?
(II)
Has the Bank adopted other means of disclosures
(e.g., the installation of a website in English
language, appointment of designated persons for
the gathering and disclosure of information, the
proper implementation of the spokesman system,
and the minutes of the institutional investor’s
conference on record posted on the website)?







�
�		 The company has established a website for the disclosure of its Financial Status
and status of corporate governance.
(I) The Bank has established the spokesman system for release of information
to ensure investors accessible to accurate information.
(II) For the proper handling of materiality and disclosure, the Bank has
established the “Criteria for Handling Materiality” whereby relevant
departments shall appoint designated personnel to handle materiality.
(III)At the official website of Taichung Bank� disclosure of institutional
investors conference. There is also a website in the English language for
disclosure of information on financialposition and operation.




no difference
V. Any other vital information that helps to understand
the status of corporate governance at the Bank
(including but not limiting to the rights of employees,
concern for the employees, investor relation, the
rights of the stakeholders, continuing education of the
directors and the supervisors, risk management policy
and the implementation of risk assessment, the
pursuit of customer policy, the liability insurance
taken by the Bank for the protection of the Directors
and Supervisors, donations to political parties,
stakeholders, and social charity groups)?









�		 (I) For information on the rights and privileges of the employees, refer to (I)
Current important employees’ interest, Labor-Management Agreement and
the status of execution on page 80.
(II) For the protection of rights and obligations, stakeholders are regulated on
files in accordance with the Banking Act. In addition, there is also the
provision for the avoidance of the conflict of interest for Board meetings.
(III)The information on the continuing education of the Directors and
Supervisors, and their attendance to Board meetings are updated regularly
and disclosed at MOPS of TWSE.
(IV)For information on the pursuit of risk management policy and the standard
for risk assessment, refer to VI. Risk Management on Page 105.
(V) The Bank has established the “Consumer Protection Policy” for the
protection of consumer rights. In case of dispute in financial consumption,
proceed to the procedure for complaints of the Bank with follow-up
actions.
(VI)The Bank has established the “Criteria for Making Donation” to regulate
the donation to political parties, stakeholders, and charity groups. For
information on social charityin FY2014,refer to Page 37.











no difference
VI. Has the Bank prepared the corporate governance
self-assessment report, or has appointed a third party
professional institution to compile the corporate
governance assessment report? (If so, elaborate the
opinions of the Board, the findings of self-assessment
or
external
assessment,
major
shortcomings,
recommendations,and the state of corrective action)




� Until the date this report was printed, the Bank has not prepared any corporate
governance self-assessment report. However, the corporate governance system
of the Bank has been implemented in accordance with the “Corporate
Governance Best Practice Principles for Banking Industry”.


no difference

33 33

(V)Establishment, functions and operations of Remuneration committee

  1. Information on the members of the Remuneration Committee
By identity Conditions
Name		 Have more than 5 years of experience
and the following professional
qualifications		 Have more than 5 years of experience
and the following professional
qualifications		 Have more than 5 years of experience
and the following professional
qualifications		 Status of independence
(Note 1)		 Status of independence
(Note 1)		 Status of independence
(Note 1)		 Status of independence
(Note 1)		 Status of independence
(Note 1)		 Status of independence
(Note 1)		 Status of independence
(Note 1)		 Status of independence
(Note 1)		 Number of
public
companies
where the
members of
the
Remunerati
on
Committee
are also the
members of
the
remuneratio
n
committees
of these
companies		 Remarks
(Note 2)
Lecturer or
above
in
commerce,
law,
finance,
accounting
or subjects
required by
the business
of
the
company in
pubic
or
private
colleges or
universities








Passed
the
qualification
examination
with
proper
licensing
by
the
national
Government
Apparatus as
court
judge,
prosecutor,
lawyers,
certified
public
accountant or
other
professional
designations
required
by
the
business
of
the
Company









Required
Work
experience
in
commerce,
law,
finance,
accounting
or
others
required by
the
company

1		 2 3 4 5 6 7 8
Independent
Managing
Director		 Hsi-Rong
Huang		 � � � � � � � � � 0 Yes
Independent
director		 Chen-Le Liu � � � � � � � � � 0 Yes
Others Ying-Hui Wu � � � � � � � � � 0 -

Note 1: If any of the following conditions is applicable to the members within 2 years before office and during the term of office, please put the “ � ” sign in the appropriate box below

  • (1) Not an employee of the Company or its affiliates.

  • (2) Not a director or supervisor of the Company or its affiliates. Excluding the capacity of independent director of the Company or its parents, or a subsidiary directly or indirectly held by the Company with more than 50% of the stakes

  • (3) A third party and spouse, underage children, or under the title of a third party who holds more than 1% of the outstanding shares of the Bank or the top 10 shareholders who are natural persons.

  • (4) Not a spouse, kin at the second pillar under the Civil Code, or the lineal blood relatives within the third pillar under the Civil Code as specified in (1) through (3).

  • (5) The directors, supervisors or employees of institutional shareholders indirectly holding more than 5% of the outstanding shares of the Bank, or, the directors, supervisors, or employees of the top 5 institutional shareholders.

  • (6) The directors and supervisors, or shareholders, manager of proprietorship holding more than 5% of the shares of specific companies or institutions that do not have financial or business transactions with the Bank

  • (7) Not a professional, owner, partner, director, supervisor, manager of proprietorship, partnership, company or institution that provide business, legal, financial and accounting services to the Company or a spouse to the aforementioned persons.

  • (8) Not under any of the categories stated in Article 30 of the Company Act.

Note 2: if the member is a director, specify if it complies with Paragraph 5 in Article 6 of the “Regulation Governing the Establishment and Exercise of Rights of the Remuneration Committee of TWST/GTSM-listed Companies”.

34 34

  1. The operation of the Remuneration Committee

  2. (1) The Remuneration Committee of the Bank is consisted of 3 members.

  3. (2) Term of office of current committee members: July 16 2014 to June 18 2017. The Remuneration Committee has convened for 4 times in the most recent year (A). The qualifications of the members and their attendance to the meetings are shown below:

Title Name Actual
number of
attendance
(B)		 Attend
through
proxy		 Attendance rate
(%)
(B/A)		 Remarks
Convener Hsi-Rong
Huang		 4 0 100 2014.7.16 re-elected to office
Committee Chen-LeLiu 4 0 100 2014.7.16re-electedto office
Committee Ying-HuiWu 3 1 75 2014.7.16re-electedto office
Committee Kuei-Fong
Wang		 0 0 0 Discharged on March 12, 2014 (Note)
Other notes:
1.
Where the Board may not take or revise the advice of the Remuneration Committee, specify the date and the session of the
Board, the content of the motion, the resolution of the Board, and the response to the opinions of the Company towards the
advice of the Remuneration Committee (if the resolution of the Board suggested better position of remuneration than the advice
of the Remuneration Committee, specify the reasons and the variations).
2.
Where members of the Remuneration Committee may have adverse opinions or qualified opinions in their resolutions on record
or in written declaration, specify the date and session of the committee, the content of the motion, the opinions of all other
members,and the responses to the adverse opinions.

Note: According to Article 6 of the Regulation Governing the Establishment and Exercise of Rights of the Remuneration Committee of TWST/GTSM-listed Companies” promulgated by Financial Supervisory Commission on 2011.3.18, directors of the company who assume positions as members of the remuneration committee shall have the term ends on March 17 2014. As such, Remuneration Committee member Wan Kuei-Feng was replaced by Wu Ying-Huei.

35 35

(VI) Corporate Social Responsibility

Items for evaluation Implementation Status Implementation Status Implementation Status Deviations from
“Corporate Social
Responsibility
Best Practice Principl
Yes No Summary es for
TWSE/GTSM Listed
Companies” and
reasons
I.
Realization of corporate governance
(I)
Has the Bank established the policy or
system
of
corporate
social
responsibility, and reviewed the effect
of implementation?
(II) Has the Bank organized education and
training programs in corporate social
responsibility?
(III) Has the Bank established a designated
(part-time) body for the advocacy of
corporate social responsibility headed
by
a
senior
executive
at
the
authorization of the Board, and report
to the Board on the performance of
corporate social responsibility?
(IV) Has the Bank established reasonable
remuneration policy, and linked the
performance evaluation system of
employees to the corporate social
responsibility
policy,
and
has
explicitly specified the policy for
reward andpunishment?
















�
�
�
�		 (I)
The Bank has established the “Corporate Social Responsibility
Best Practice”. According to Article 6 of the Code, the Board
of Directors shall urge the Bank to fulfill the corporate social
responsibility with due diligence and shall examine the results
of the implementation and continue making improvement, to
ensure fulfillment of the corporate social responsibility
policies.
(II) The content of consumer protection, compliance of laws,
corporate ethics, and financial corruptions has been
incorporated into the curriculum for routine education.
(III) According to Article 7 of the ”Corporate Social Responsibility
Best Practice Principles” of The Bank, a corporate social
responsibility (concurrent) unit should be setup to propose and
implement the corporate social responsibility policy or system,
and to report it to the Board periodically for a sound corporate
social responsibilities management.
(IV) The Bank has established reasonable remuneration policy
through the institutionalization of relevant rules and
regulations. In addition, the Bank has also established the
system clearing specifying the punishment of employees in
accordance with the work regulations and the evaluation of
employees for corruption and fraud so as to bolster social
stabilityand realize business ethics and social responsibility.


















no difference
II.
Fostering a Sustainable Environment		 no difference
(I)
Has the Bank made effort to enhance
�		 (I)
Continue the streamlining of operation process with the
the efficient use of all resources and
used regenerated materials to mitigate
the impact on the environment?
(II) Has the Bank established a suitable
environment management system by
nature of the industry?
(III) Has the Bank paid attention to the
effect of climatic change on the
operation,
and
has
conducted
inspection on green house gas and
mapped out the strategy for energy
saving and the reduction of carbon
andgreenhousegas?









�
�		 reduced use of papers. The annual report was printed on
recycled paper. Dumps are classified and recycled with the use
of environmental friendly tableware and avoid the use of
disposable tableware.
(II) The Bank has established the “Corporate Headquarters
Building Management Guide” and the “Rules for Work Safety
and Health” for environmental management.
(III) The Bank has established the “Code of Corporate Social
Responsibility” for reducing the impact of business activities
on the natural environment. The statistics compiled by the
Bank indicated that the consumption of electricity, fuel oil and
gas in FY2014 generated 287.22 tons more of carbon as
compared with the same period of the previous year.








III. Preserving Public Welfare
(I)
Has the Bank established related
management policy and procedure in
accordance with applicable legal rules
and international conventions on
human rights?
(II) Has
the
Bank
established
the
mechanism and channels for the
employees in filing complaints and
properly responded to the complaints?
(III) Has the Bank provided a safe and
health work environment for the
employees, and provided education on
labor safety and health regularly?
(IV) Has
the
Bank
developed
the
mechanism for communication with
the employees at regular intervals and
informed the employees of any
change in the operation of the Bank
that may cause significant influence
on the employees through reasonable
means?
(V) Has the Bank established the training
program for the effective planning of
career
development
for
the
employees?




















�
�
�
�
�		 (I)
The Bank has established its “Best Practice Principles in
Corporate Social Responsibility” in accordance with the
“Corporate Social Responsibility Best Practice Principles for
TWSE/GTSM-listed Companies”.
(II) The Bank has opened a compliant hotline. Employees may file
their complaints through the hotline on any illegal practice,
sexual harassment, or any other complaints. The Bank will
respond to such complaints immediately and keep the identity
of the informants in strict confidence.
(III) Please refer to (V) Work environment and employees’ personal
safety protection measures on Page 76.
(IV) The Bank holds labor-management meeting quarterly to
coordinate
labor-management
relation
and
encourage
labor-management cooperation. In addition, the Bank also
discussed the issues of employee welfare and rights in full
detail.
(V) The Bank has mapped out the annual training plan in
accordance with the development strategy and the career
development roadmap of the employees, and provides
exclusive trainingfor relevant functions.














no difference

�36

36

Items for evaluation Implementation Status Implementation Status Implementation Status Deviations from
“Corporate Social
Responsibility
Best Practice Principl
es for
TWSE/GTSM Listed
Companies” and
reasons
Yes No Summary
(VI) Has the Bank mapped out the policy
for the protection of consumer rights
through
the
R&D,
procurement,
operation, and service process and the
procedure for handling consumer
complaints?
(VII) Has
the
Bank
duly
observed
applicable laws and international
standards in the marketing and
labeling of products and services?
(VIII)Before
the
engagement
with
suppliers in business, has the Bank
evaluated the suppliers on any record
showing
their
impact
on
the
environment and the society in the
past?
(IX) Are there provisions contained in
major agreements binding the Bank
and the suppliers specifying that if
the suppliers are allegedly involved
in the violation of its corporate
social responsibility policy and have
caused significant influence on the
environment and the society, the
Bank may terminate or discharge the
agreements at anytime?





















�
�
�
�		 (VI) The Bank has mapped out its “Consumer Protection Policy”
for the protection of consumer rights, and has established the
channels for customer opinions and complaints and the
procedure for the settlement of disputes.
(VII) Related financial products and services are offered in
accordance with the regulations of the competent authority
and the Bank.
(VIII)Check if specific supplier has a record of environmental and
social impact by nature of the content of procurement and the
industry. If the supplier has a negative record, the Bank shall
go for other suppliers.
(IX) In case the Bank discovers specific contractor or contractor
has negative social image in the course of procurement, the
Bank shall notify the contractor to give explanation and take
corrective action. If the situation is critical, terminate the
purchase or proceed to return of sales depending on the
content of the contracts.











IV. Enhancing Information Disclosure
Has the Bank disclosed relevant and
reliable information on corporate social
responsibility at its official website and
MOPS?


�		 The Bank has installed a website for the disclosure of information
on corporate social responsibility, and has disclosed such
information at MOPS as required.

no difference
V.
If the bank has established corporate social responsibility principles based on “Corporate Social Responsibility Best Practice Principles for
TWSE/GTSM Listed Companies”, please describe any discrepancy between the principles and their implementation:
The Bank has established the “Best Practice Principles for Corporate Social Responsibility” and practiced corporate social responsibility while
doingbusiness. The businessperformance of the Bank is congruent with theprinciples.
VI. Other information critical to the understanding of our bank’s corporate social responsibility and how it is put into practice:
(I)
The Bank is always dedicated to taking part in social welfare activities, and sponsoring the following activities:
1. Work with “Eden Social Welfare Foundation” in the charity petty cash donation activity and install petty cash donation boxes at the business
locations of the Bank’s branches.
2. Support the “Dream to infinity with hand-made biscuits” program of Maria Social Welfare Foundation by ordering the hand-made biscuits to
help the physically and mentally retarded people to create their future.
3. Issuance of the “Maria Social Charity Affinity Card” jointly with Maria Social Welfare Foundation and allocated 0.35% of the transaction
amount of the cards to help the severe physically and mentally impaired children in expanding their school campus.
4. The Bank allocates specific percentage of the transactions by using the Mazu Safety Card to Zheng Lang Temple at Da Jia for
commemoration of the blessing of Mazu. This move helps the advocacy of religious activities for contribution to the welfare of the local
community.
5. The Bank responded to the government relief effort after the “Kaohsiung Explosion”, and provided relief fund for the residents to rebuild
their homes.
6. The Bank rallies for the support of the public for their concern for rare diseases. Through the social charity donation of the “Challenge to Ice
Bucket” campaign, the Bank successfully supported the “Taiwan Motor Neuron Disease Association”.
7. The Bank donated to the “Taiwan Care Center” as performance of corporate social responsibility, and also supports social charity and helps
the social misfortunes.
8. The Bank donated to “Bo Chung Cultural and Educational Foundation” for the advocacy of charities for culture and education.
9. Support the “Thanksgiving Rice” purchase event advocated by St. Mary Hospital of Taitung to support the cause of the founding of Tai Yuan
Health and Vitality Station. In practice, this event aims at helping the senior citizen and children in their livelihood and meal services.
10. Sponsorship of the 2014 Ta Chia Mazu Cultural Season events, “Bike for Touring Taichung”, and “Ta Chia Marathon” organized by
Zhen Lan Temple of Ta Chia.
11. Broadcast the welfare commercial for “Quit Smoking Promoted by the John Tung Foundation” in the multi-media channels at the Bank’s
business units.
12. Broadcast the film for “Anti-Fraud – Kidnapping” in the multi-media channels at the Bank’s business locations.
13. Support the fund raising campaign launched by the “Child Welfare Foundation of ROC” in displaying posters and linkage of websites to
fetch the missing children and youths.
14. To help the “Dajiama Society Welfare Foundation Taichung City Private Zhen Lan Children Home” to raise invoices, and set up the invoice
box at the lobby of the Central Taiwan Branch.
15. Hold the “Jasmine rally for used books for the well-being of the children of Maria” campaign to encourage its employees and customers to
donate used books. Jasmine Book Store collected the books and matched an equal amount of the purchase price for donation to Maria
Foundation in supporting the “Severe Physical and Mentally Impaired Children in Expanding their School Campus” campaign.
16. Support the Little Giant Chinese Chamber Orchestra to help promotion of traditional Chinese musical arts.
17. Sponsorship for professional golfer Hsien-Wen Huang and triathlon athlete Yi-Wen Wang in order to promote sportsmanship in Taiwan as a
mean ofperformingcorporate social responsibility.

�37 37

Items for evaluation Implementation Status Implementation Status Implementation Status Deviations from
“Corporate Social
Responsibility
Best Practice Principl
es for
TWSE/GTSM Listed
Companies” and
reasons
Yes No Summary
18. Sponsor the Department of Finance at National Chung Hsing University to hold the “2014 Central Taiwan Financial Academic Union
Conference and the Financial Engineering Association of Taiwan Annual Conference”
19. Entered into a joint venture agreement with Feng Chia University in Cooperative Education.
20. Donation of graduation scholarship to Ta Deh Senior High School of Commerce and Industry and Wen Hsing Senior High School in
Changhua Country.
21. The Bank supported the Youth Development Administration and the National Universities Summer Job and Practical Training Programs in
offering 39 positions for the students in 2014 so that the schools and properly linked to banks in the education of practical work.
22. In 2014, the Bank organized 6 seminars in schools and local communities to educate the people in finance and help the students and the
public to develop a proper concept in finance and wealth management.
23. Organized the “Lightened by Moon” event for the celebration of Mid-Autumn Festival jointly with the City FM in supporting the energy
saving and safe the earth campaign.
24. Apply recycled paper to print the Bank’s annual report.
25. Support the Tourism Bureau of Taichung City Government in the “2014 Taichung Blue Belt Ocean Travelling Season” event and invite all
in Taiwan to experience the distinctive feature of the ocean in Taichung.
26. Sponsor “Chen Chung-Kuang Cultural and Educational Foundation” to hold the “6th Chung Kuang Cup Youth Baseball Match” for
encouragement of baseball game.
27. Support the Chinese Taipei Volleyball Association to hold the “17th U19 Volleyball Game in 2014” for the advocacy of sports nationwide.
28. Sponsor the Taiwan Aboriginal Baseball Development Association to hold the “21st Aboriginal Cup” baseball game for the concern of the
aboriginal groups and national sports development.
(II) The Bank has employed 17persons who arephysicallyor mentallydisordered until the end of February2015.
VII. If the corporate social responsibilityreports have received assurance from external institutions,theyshould state so below: None.

�38 38

(VII) The best-practice of business integrity and the policies

Items for evaluation Implementation Status Implementation Status Implementation Status Difference with other
companies listed in
TWSE/GTSM in
best-practice principles
of business integrity
Yes No Summary
I.
The policy and plan of business integrity
(I)
Has the Bank publicly declared its policy and
means in ethical corporate management in its
internal code and external documents, and the
Board and the management of the Bank has
made positive effort in the commitment of its
corporate policy?
(II) Has the Bank established the scheme for the
prevention
of
unethical
practices,
related
operation procedures, code of conduct, the
punishment of unethical practices, and the
system of complaints, and properly implemented
the systems?
(III) Has the Bank taken relevant preventive
measures against business activities as stated
in Paragraph 2 in Article 7 of the “Ethical
Corporate Management Best Practice Principles
for TWSE/GTSM-listed Companies” or within
the scope of business entailing higher risk of
unethicalpractices ?















�
�
�		 (I)
The Bank has made declaration at the website and in
the declaration of internal control that it shall duly
observe the regulation governing internal control and
internal audit system of financial holding companies
and banks, and announced the issues requiring
additional internal control and corrective action for
improvement.
(II) The Bank has set up the stop loss point for
transactions, investment, and lending by nature of the
operation or different levels of risk concentration, and
adjusts these standards with reference to relevant
economic indicators and the business development of
the Bank at regular intervals.
(III) The Bank has establishment the system of compliance
officer and related training to educate employees in
banking and finance in compliance with the principle
of integrity and applicable laws. The Bank has
instituted the criteria for external donations in
compliance with applicable laws thereby regulate the
recipients and amount of donations.
















no difference
II.
The Materialization of Business Integrity
(I)
Has the Bank evaluated the record on ethical
practices of its counterparties, and has specified
the clause of business ethic in the agreements
binding the Bank and its counterparties?
(II) Has
the
Bank
established
a
designated
(part-time) body for the advocacy of ethical
corporate management under the Board, and this
body
has
report
to
the
Board
of
the
implementation of ethical corporate management
regularly?
(III) Has the Bank mapped out the policy for the
avoidance of the conflict of interest and has
provided suitable channels for such purpose, and
properly pursued the policy?
(IV) Has the Bank established effective accounting
system, internal control system for purpose of
ethical corporate management, and the internal
audit function has conducted audit regularly, or
the Bank has appointed certified public
accountants to conduct internal audits?
(V) Has the Bank organized internal and external
training on ethical corporate management?
















�
�
�
�
�		 (I)
Has the Bank paid attention to the record of ethical
practices of contractors in procurement or tender
invitation, and has signed the clauses in the
agreements on the consequences of the violation of
ethical practices.
(II) Relevant functional departments advocate ethical
corporate management by their assigned duties. An
auditing office has been established under the Board
and present audit reports to the Board at regular
intervals.
(III)According to the “Regulation Governing the Control
of Information on the Financing of Stakeholders” of
the Bank, all stakeholders are subject to control with
record on file. In addition, the Bank has also
established the “Regulation Governing Transactions
with Stakeholders beyond Financing” to avoid the
conflict of interest. Related internal code has also
contained the clause of the avoidance of the conflict of
interest for the realization of ethical corporate
management.
(IV)The Bank has established the “Auditing Office of the
Board” and this office has conducted routine audits in
accordance with the “Regulation Governing the
Conduct of Internal Audit System” of the Bank. In
addition, the Bank has established the “Accounting
Department” and the “accounting system”. Deloitte
Taiwan has audited the financial statements of the
Bank at regular intervals.
(V) Issues within the scope of ethical corporate
management, such as case study on corruption,
consumer protection, and compliance, have been
included as an essential part of the teaching materials
for training. In addition, the Bank also sends its
personnel to receive training organized by external
institutions.





























no difference
III. The reporting system of the Bank in action
(I)
Has the Bank established a reporting and reward
system and the channels for facilitating the
report on unethical practices, and has appointed
designated personnel to handle the subject of
reporting?
(II) Has the Bank established the standard operation
procedure for handling report on unethical
practices and keep it confidential?





�
�		 (I)
The Bank has established the “Human Resources
Management Regulation” and “Employees Work
Regulation”, and a hotline for reporting. A designated
unit will respond to and keep track on the reports.
(II) The Bank has established the “Regulation for Human
Resources Evaluation and the Establishment of the
Evaluation
Committee”
and
the
“Regulation
Governing the Complaints of Sexual Harassment and
Related Punishment”, and also the review and
investigation procedure, provisions for the avoidance
of the conflict of interests bystakeholders,and









no difference

�39

39

Items for evaluation Implementation Status Implementation Status Implementation Status Difference with other
companies listed in
TWSE/GTSM in
best-practice principles
of business integrity
Yes No Summary
(III) Has the Bank taken protection measures to
protect the informant from improper treatment
after reporting on unethical practices?

�		 confidentiality and no-disclosure mechanism.
(III)According
to
the
“Regulation
Governing
the
Complaints
of
Sexual
Harassment
and
Related Punishment”, supervisors at all levels shall
not discriminates against, intimidate and transfer the
informants to other duties, or cause any inconvenience
to the informants.



IV. Enhancing Information Disclosure
Has the Bank disclosed the content of ethical
corporate management best practice principles and
the result at its official website and MOPS?

�		 The Bank revealed major internal information processing
operations guidelines on the website and MOPS, and the
audit committee of the Board of procedure standardized
organizational rules, norms directors, managers and
servants should pay attention to a good administrator and
faithful duty, of the principle of good faith execution of
business, the Board of Directors meeting for interested
persons matters, should be avoided, and the audit
committee should pay attention to a good administrator,
faithfully perform their duties ... and other related
provisions and credit management.









no difference
V.
If the bank has established performance of good-faith management best practice principles based on “Ethical Corporate Management
Best Practice Principles for TWSE/GTSM-Listed Companies”, please describe any discrepancy between the principles and their implementation:
The Bank runs its operation in accordance with the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM-Listed Companies”.
VI. Other vital information that helps to understand the practice of ethical corporate management of the Bank (e.g., the review and amendment to the ethical
corporate management bestpracticeprinciples of the Bank): no.

  • (VIII)Corporate Governance Practices and the relevant regulations: Please refer to http://mops.twse.com.tw/ corporate governance.

  • (IX) Other important information:

Please refer to http�//mops.twse.com.tw/ important information.

�40

40

  • (X)Status of Internal Control-Auditing Office of Board

  • Statement of Declaration of Internal Control System

Statement of Declaration of Internal Control System

of Taichung Commercial Bank

On behalf of Taichung Commercial Bank Co ., Ltd, we hereby certify that January 1 to December 31, 2014 , the Bank has duly complied with the “Implementation Rules of Internal Audit and Internal control System of Financial Holding Companies and Banking Industries” to establish its internal control system and implementing risk management procedures. The Bank has been audited by independent auditors who submit reports to the Board of Directors and the Audit Committee on a regular basis. After prudent evaluation, except for the items listed in the attached schedule, the Bank’s each department has implemented effective internal control and compliance systems during the year to which this statement relates. This statement constitutes the summary content of Taichung Commercial Bank Annual Report of current year and the Offering Prospectus, and shall be disclosed to the public. Any misrepresentation or concealment of the aforementioned disclosures shall be liable to violation of Articles 20, 32, 171 and 174 of the Securities and Exchanges Act and the legal consequences thereof.

To:

Financial Supervisory Commission

Declarant:

Chairman: Jin-Fong Soo (Signature) President: Chun-Sheng Lee (Signature) Chief Auditor: Min-Chin Shen (Signature) Chief Compliance Officer: Chih-Chuan Fang (Signature)

Date: March 11, 2015

41 �41

Improvement and Corrective Action of Internal Control System of Taichung Commercial Bank

(Record Date: December 31, 2014)


(Record Date: December 31,2014)
Improvement Corrective Action Scheduled to Complete
Corrective Action on
The Bank failed to declar the total
amount of lending pursuant to
Article 72-2 of the Banking Act.

1.
The Bank has made the detail of the total lending
amount complete pursuant to Article 72-2 of the
Banking Act on September 11, 2014.
2.
The Loan Administration Department has revised the
scope of credit limit for reporting pursuant to Article
72-2 of the Banking Act, and has established the system
of review at the stage of information check and the
stage of drawdown to enhance the accuracy of the
report on lending pursuant to Article 72-2 of the
Banking Act.
3.
The Compliance Department has properly supervised
the self-assessment pursuant to Article 72-2 of the
Banking Act to ensure the effectiveness of compliance.
4.
The Auditing Office of the Board has followed up and
reviewed the assessment. The audit findings have been
reported pursuant to Article 72-2 of the Bank Act on
“Residential Buildingand Commercial Building”.













Corrective
action
was
performed and completed
on September 11, 2014.
  1. Disclose the audit report by independent external auditors with a special audit on internal control system: None

(XI) Violations punishable under laws and major deficiencies of the past two years, and status of improvement:


improvement:
Item Case Status of corrective action
Processing officer or staff charged by
public prosecutors on professional
misconducts		 None None
Fined
by
Financial
Supervisory
Commission for violation of laws and
regulations		 Clerk �� Yen placed client’s passbook
in his custody and handled deposit
related business on behalf of the client
and
misappropriated
the
client’s
deposit. As a result, the Bank was
fined by the FSC on June 21, 2013
NTD 2 million for violating Article
45-1 of the Banking Act.		 The Bank has discussed the relevant
operating requirements and taken the
various corrective actions against the
internal
control,
and
has
also
continued urging the various units that
they shall fulfill the internal control
strictly,
enhance
the
internal
management, complete the compliance
training program, and enhance the
appraisal on the clerks’ compliance of
law and ethics.
Defects to be corrected upon request
of FinancialSupervisorCommission		 None None
Disciplined by FSC under Article 61-1
of the Banking Act		 The Bank was ordered to terminate the
employment of Clerk �� Yen who
misappropriated the client’s deposits
the FSC on June 21, 2013.		 The
Bank
has
terminated
the
employment with the clerk on January
29, 2013.
Casualty or accident due to corruption,
major incident or failure to comply
with the safety measures, which
caused damage exceeding NTD 50
million in a particular incident or in
particular fiscalyear		 None None
Other matters requiring disclosure
commanded byFSC		 None None

42 �42

  • (XII) Important resolutions of shareholders’ meetings and Board sessions

  • Important resolutions of general shareholders’ meeting 2014 (June 22 2014) and implementation

    • (1) Recognition of the Report on Operation and Financial Statements for FY2013: Ratified by the General Meeting of Shareholders.

    • (2) Recognition of the proposal for the distribution of earnings for FY2013: Ratified by the General Meeting of Shareholders for the distribution of earnings for FY2013 and proceeds to distribution.

    • (3) Passed the motion of the capitalization of retained earnings and capital surplus in FY2013 for issuing new shares.

      • Passed by the General Meeting of Shareholders and approved by Financial Supervisory Commission on August 8 2014 under Letter Chin-Kuan-Cheng-Fa Zi No. 1030029339, and made change in the registration under Ministry of Economic Affairs Letter Ching-Shou-Shang-Zi No. 10301197180 dated September 19 2014. The shares were issued and offered in the exchange on October 9 2014.

    • (4) Amendment to the provisions of the Procedure for the Acquisition and Disposition in part: passed by the General Meeting of Shareholders.

    • (5) Passed the amendment to the provisions of the Articles of Incorporation of the Bank in part: passed by the General Meeting of Shareholders.

    • (6) The election of the 22[nd] term of the Board and the Director are: Representative of Hsu Tian Investment Co., Ltd.: Jin-Fong Soo Representative of Hsu Tian Investment Co., Ltd.: Jer-Shyong Tsai Representative of Hsu Tian Investment Co., Ltd.: Kuei-Fong Wang Representative of Hsu Tian Investment Co., Ltd.: Ching-Yuan Lin Representative of Hsu Tian Investment Co., Ltd.: Ming-Shan Chuang Representative of Hsu Tian Investment Co., Ltd.: Chun-Sheng Lee Representative of Hsu Tian Investment Co., Ltd.: Hsin-Ching Chang Representative of Hsu Tian Investment Co., Ltd.: Wei-Liang Lin Representative of I Joung Investment Co., Ltd.: Yi-Der Chen Ho Yang Management Consultant Co., Ltd. Representative: Chia-Hung Lin Representative of Ho Yang Management Consultant Co., Ltd.: Chien-Hui Huang Representative of Pan Asia Chemical Corporation: Meng-Liang Chang Hsi-Rong Huang (independent director) Chen-Le Liu (Independent director)

Jin-Yi Lee (Independent director)

  1. Important resolutions of the Board sessions (from January 1, 2014 to February 28, 2015)

  2. (1) 19th Board session of 21st term of the Board on March 12, 2014

    • Ratify the motion for capital increase by recapitalization of earnings in 2013.

    • Ratify the date, location and cause of the general shareholders’ meeting 2014.

  3. (2) 20th Board session of 21st term of the Board on May 7, 2014

    • Passed the motion of the application for new functions of internet/mobile banking services.

    • Passed the motion of the application for the “QR CODE mobile payment” business.

    • Passed the motion of the investment in “Taiwan Mobile Payment Corporation”.

    • Passed the list of candidates to the seats of independent directors of the 22nd Board nominated by the shareholders holding more than 1 % of the total outstanding shares of the Bank.

  4. (3) Election of Executive Directors in the 1st special session of the 22nd Board on 2014.6.25

  5. (4) 1st Board session of 22nd term of the Board on July 16, 2014

    • Passed the ratio of dividend paid to shareholders as proposed in the plan for the

43

�43

distribution of earnings for FY2013 

     - Passed the “plan for the transformation of Da Qing Sub-Branch to Da Qing Branch and Relocation”. The subject of lease for relocation is a premise located at No. 28, Chang Chun Road, Zhong Shan District, Taipei.

     - Passed the motion of running the “Internet transactions and collection and payment services”

  - (5) 2nd Board session of 2nd term of the Board on August 12, 2014

     - Ratify defining the ex-right date, ex-dividend rate, and record date of the capital increase by recapitalization of earnings and cash dividend, stock transfer suspension period, and cash dividend allocation date in 2013.

  - (6) The 4[th] session of the 22[nd] Board passed the “Non-Deliverable Forwards in NTD” business.

  - (7) 5th Board session of 22nd term of the Board on December 4, 2014

     - Passed the motion of running the “Mobile Payment (credit card)” business.

     - Passed the motion of running the “Mobile Payment (mobile banking card and mobile value storage payment account)” business.

     - Planning for the acquisition of land for the new corporate headquarters building. The Board authorized the management function to negotiate the content of the agreement and determine the price.

  - (8) In the 2nd special session of the 22nd Board dated 2014.12.17, the motion for the acquisition of land for the corporate headquarters building has been resolved in favor of the decision of the management for paying NTD5.75 billion and the agreement after amendment. The Chairman was authorized to represent the Bank to sign the agreement with the seller and effect payment.

     - (Note: the Bank has entered into a buy-sell agreement with the seller on December 23 2014 as per the aforementioned resolution).

  • (XIII)Adverse opinions of the Directors or Supervisors against important resolutions of the Board with record or written declaration in the most recent year to the date this report was printed:

    • In the 2[nd] special session of the 22[nd] Board dated 2014.12.17 for confirmation of the minutes of the 5[th] session of the 22[nd] Board on record dated 2014.12.4, Director Chien-Huei Huang and Director Chia-Hung Lin expressed adverse opinions in the confirmation letter.

  • (XIV) In the most recent year to the date this report was printed, the information on the resignation and discharge of parties related to the Bank and parties related to financial reporting (including the Directors, Supervisors, Chairman, President, chief financial officer, chief accountant, chief internal auditor, and chief of R&D): None.

  • IV. Disclosure of the accountant’s fee:

Firm Name CPA Name CPA Name Duration of Audit Remarks
Deloitte & Touche Min-Xian Yang Kuan-Chung Lai 2014 -

44 �44

Fee items
Fee levels		 Fee items
Fee levels		 Auditing fee Non-Auditing
fee		 Total
1 Less than 2,000 thousand
2 2,000~3,999 thousand �
3 4,000~5,999 thousand �
4 6,000~7,999 thousand �
5 8,000~9,999 thousand
6 10,000 thousand above
  • (I) The fees for services to CPA, CPA firm and its affiliates beyond auditing services accounted for more than one-quarter of the auditing fee:

Unit: NTD thousand

Firm Name CPA Name CPA Name Auditin
g fee		 Non-Auditing fee Non-Auditing fee Non-Auditing fee Non-Auditing fee Non-Auditing fee The duration
of the audit		 Remarks
System
design		 Corpora
te
Registr
ation		 Human
Resourc
es		 Others
(Note)		 Subtota
l
Deloitte & Touche Min-Shen
Yang		 Kuan-Chu
ng Lai		 4,150 - - - 2,687 2,687 2014 -

Note: the content of service beyond auditing is the appointment of Deloitte Taiwan for the installation of personal data management system for a fee of NTD1.48 million. The other part of the service is the review of the capitalization of retained earnings in FY2013, information security management system, and the consulting fee on the “Foreign Account Tax Compliance Act”, which amounted to NTD1.207 million.

  • (II) Change of Accounting firm and the auditing fee of the year changing the Accounting firm less than that of the previous year: None.

  • (III) Auditing fee were 15% less than that of the previous year: None.

  • V. Changes of Accountants: The replacement of accountant in the last two years was due to the internal rotation of the CPA Firm.

  • VI. The chairman, president, chief financial or accounting manager of the Bank who holds position in the business under the commissioned CPA firm or its affiliates: None.

  • VII. Changes in shareholdings by directors, supervisors, and managers through transfer and pledged under lien and those required to be declared pursuant to Article 25-3 of the Banking Act from the recent year until the date the Annual Report was printed.

  • (I) Changes in shareholdings:

Title Name 2014 2014 January 1 ~ February 28, 2015 January 1 ~ February 28, 2015
Increase
(decrease) in
No. of Shares		 Increase
(decrease) in
No. of Pledged
Shares		 Increase
(decrease) in
No. of Shares		 Increase
(decrease) in
No. of Pledged
Shares
Managing Director Hsu Tian Investment Co., Ltd. 12,942,326 0 629,000 0
Director Pan Asia Chemical Corporation 9,253,157 0 0 0
Director I Joung Investment Co., Ltd. 937,792 0 0 0
Independent
Managing
Director
Hsi-Rong Huang		 0 0 0 0
Director Ho Yang Management Consultant
Co.,Ltd.
88,021		 0 0 0
Director Chou Chang Co., Ltd. 553,122 0 0 0
Independent director Chen-Le Liu 0 0 0 0
Independent director Jin-Yi Lee 0 0 0 0

45 �45

Title 2014 2014 January 1 ~ February 28, 2015 January 1 ~ February 28, 2015
Name Increase
(decrease) in
No. of Shares		 Increase
(decrease) in
No. of Pledged
Shares		 Increase
(decrease) in
No. of Shares		 Increase
(decrease) in
No. of Pledged
Shares
Supervisor Xin Rui Investment Co., Ltd. (8,470,802) 0 0 0
Supervisor Tai Jiunn Enterprise Co., Ltd. 49,577 0 0 0
President Chun-Sheng Lee 30,241 0 0 0
Executive Vice President Kai-Yu Lin 78 0 0 0
Executive Vice President Hsueh-Hsien Liao 26,582 0 0 0
Executive Vice President Te-Wei Chia 3,875 0 0 0
Chief Compliance Officer Chih-Chuan Fang 19,984 0 0 0
Chief Auditor Min-Chin Shen 12,919 0 0 0
Chief Secretary, Office of the
Board
Kai-Yu Lin (concurrent post)		 78 0 0 0
Manager,
General
Affairs
Dept.
Ching-hu Hsieh		 10,002 0 0 0
Manager,
Business
development Dept.
Chun-Ying Wang		 22,945 0 0 0
Manager,
Loan
Administration Dept.
Yi-Yuan Tung		 11,972 0 0 0
Manager, HR Dept. Chung-Ping Yang 0 0 0 0
Manager, Accounting Dept. Yi-Ying Chung (62,355) 0 0 0
Manager, Information Dept. Chun-Sheng Lin 12,189 0 0 0
Manager,
International
BankingDept.
Cheng-Yu Lai		 1,180 0 0 0
Manager, Trust Dept. Yu-Chung Lin (12,575) 0 0 0
Manager,
Dept
of
Debt
Collection
and
Asset
Recovery

Mei-Li Wu		 1,520 0 0 0
Manager, Corporate Finance
Dept.
Shu-Chen Chen		 21,484 0 0 0
Manager, Legislation Dept. Chih-Chuan Fang (concurrent post) 19,984 0 0 0
Manager, Risk Management
Dept.
Chen-Ying Wu		 4,940 0 0 0
Manager, Treasury Dept. Kuang-Chung Hsiao 10,767 0 0 0
Manager, Wealth Management
Dept.
Yu-Chung Lin (concurrent post)		 (12,575) 0 0 0
Manager, Overseas Banking
Branch
Chih-Hung Lu		 1,006 0 0 0
Manager, Business Dept. Chien-Min Chou 12,679 0 0 0
Manager, W. Taichung Branch Tung-Hsu Liu 152 0 0 0
Manager,
Zhong
Zheng
Branch
Yu-Chen Yang		 947 0 0 0
Manager, Xitun Branch Han-Ching Tsai 4,592 0 291 0
Manager, Nantun Branch Kwei-Ching Ho 13,142 0 0 0
Manager, Neixin Branch Yu-Ying Chen 1,002 0 0 0
Manager, Dadu Branch Ching-Kun Lin 20,333 0 0 0
Manager, N. Taiping Branch Chung-Rong Lin 69 0 0 0
Manager,
Taichungkang
Branch
Hsin-Ru Kao		 12,722 0 0 0
Manager, Simin Branch Chiung-Teng Hung 10,485 0 0 0
Manager, Junkong Branch Yao-Pin Chen 293 0 0 0
Manager, S. Taichung Branch Wen-Hsin Chiu 0 0 0 0
Manager, N. Taichung Branch Min-Hsuan Chiang 3 0 0 0

46 �46

Title 2014 2014 January 1 ~ February 28, 2015 January 1 ~ February 28, 2015
Name Increase
(decrease) in
No. of Shares		 Increase
(decrease) in
No. of Pledged
Shares		 Increase
(decrease) in
No. of Shares		 Increase
(decrease) in
No. of Pledged
Shares
Manager, Taiping Branch Tsung-Hsien Lee 22,181 0 0 0
Manager, Houli Branch Pi-Hua Chang 251 0 0 0
Manager, Daya Branch Chia-Wei Tsai 4,066 0 0 0
Manager, Tanzi Branch Hui-Chin Lu 131 0 0 0
Manager, Shengang Branch Yi-Cheng Liao 652 0 0 0
Manager, Fongyuan Branch Pao-Yuan Chen 13,421 0 0 0
Manager, Dajia Branch Tung-Po Yang (61,764) 0 (73,000) 0
Manager, Qingshui Branch Ming-Ren Hsu 8,498 0 0 0
Manager, Shalu Branch Zai-Hong Yang 781 0 0 0
Manager, Wufong Branch Chao-Chi Tseng 46 0 0 0
Manager, Dongshi Branch Chang-Chi Liu 13,823 0 0 0
Manager, E. Fongyuan Branch Chien-Hao Chen 54 0 0 0
Manager, Wuri Branch Chien-ting Lin 42 0 0 0
Manager, S. Fongyuan Branch Chih-Hung Wu 1,269 0 0 0
Manager, Nanyang Branch Chun-Chun Yu 628 0 (10,000) 0
Manager, Nantou Branch Tsung-Yi Liu 5,091 0 0 0
Manager, Zhushan Branch Shin-Hsiung Huang 0 0 0 0
Manager, Puli Branch Ming-Yu Chiu 26,731 0 0 0
Manager, Caotun Branch Kuang-Chih Chen 6,455 0 0 0
Manager, Changhua Branch Yung-Sung Chien 27 0 0 0
Manager, Lukang Branch Chung-Cheng Wu (86,850) 0 0 0
Manager, Xihu Branch Hung-Ping Chen 22 0 0 0
Manager, Erlin Branch Cheng-Hsien Ni 20 0 0 0
Manager, Peitou Branch Yi-Pin Lin 5,589 0 0 0
Manager, Tianzhong Branch Hsin-Hsin Lee 9,938 0 0 0
Manager, Yuanlin Branch Ching-Yuan Lin 498 0 0 0
Manager, Homei Branch Jui-Cheng Yang 17,046 0 0 0
Manager, Shetou Branch Tsung-Chang Tseng (17,885) 0 0 0
Manager, Huatan Branch Chi-Hsien Lee 33,223 0 0 0
Manager, Yongjing Branch Chih-Hua Yao 15,074 0 0 0
Manager, Xiushui Branch Wei-Huang You 0 0 0 0
Manager, Shenkang Branch Ming-Cheng Wu 5,386 0 0 0
Manager, Dazhu Branch Cheng-Wen Ni (22,548) 0 0 0
Manager, N. Yuanlin Branch Chun-Min Huang 71 0 0 0
Manager, Peitou Branch Shih-Huei Wang 1,841 0 0 0
Manager, Peitun Branch Yung-Chang Lai 447 0 0 0
Manager, Puxin Branch Chih-Hao Liang (8,330) 0 0 0
Manager, Taipei Branch Rung-Kuo Cheng 8,447 0 0 0
Manager, Lungjing Branch Kuo-Chin Chi 8,160 0 0 0
Manager, Songshan Branch Jui-Chang Lee 16,042 0 0 0
Manager, Sanzhong Branch Kuo-Liang Ho 17,972 0 0 0
Manager, Kaohsiung Branch Chiang-Kai Liu 4,147 0 0 0
Manager, Linko Branch Yin-Ta Tsai 95 0 0 0
Manager, Huwei Branch Shun-Chi Ke 5,896 0 0 0

47 �47

Title 2014 2014 January 1 ~ February 28, 2015 January 1 ~ February 28, 2015
Name Increase
(decrease) in
No. of Shares		 Increase
(decrease) in
No. of Pledged
Shares		 Increase
(decrease) in
No. of Shares		 Increase
(decrease) in
No. of Pledged
Shares
Manager, Yuanli Branch Yu-Jui Liu 0 0 0 0
Manager, Zhunan Branch Cheng-Huan Huang 8,803 0 0 0
Manager, Dounan Branch Chen-Hsiang Chuang 2,062 0 0 0
Manager, Neihu Branch Chiung-Wen Chang 130 0 0 0
Manager, Ban Chiao Branch Chen-Hung Cheng (16,660) 0 0 0
Manager, Feng Shan Branch Wen-Kai Tsai 1,355 0 0 0
Manager, Xinzhuang Branch Chun-wen Chen (8,697) 0 0 0
Manager, Pizgzhen Branch Chien-Min Feng 0 0 0 0
Manager, Min Hsiung Branch Ching-Tang Tsai 0 0 0 0
Manager, Taoyuan Branch Pei-Miao Jan 7,005 0 0 0
Manager, Yung Kung Branch Tsung-Hsien Lee 12 0 0 0
Manager, Chu Pei Branch Cheng-Hua Lee 7,797 0 0 0
Manager, Nan Kang Branch Hsin-Fa Wang 31 0 0 0
Manager, Nei Li Branch Hua-Hsing Wen 2,016 0 0 0
Manager, Hsinchu Branch Yueh-Ching Ti 33 0 0 0
Manager, Kueishan Branch Yi-Tang Chang 0 0 0 0
Manager, Jhongli Branch Jr-Hsin Lee 6,400 0 0 0
Manager, Hsin Feng Branch Chien-Hung Lin (133,734) 0 0 0
Manager, Ta Yuan Branch Yu-Hui Tseng 0 0 0 0
Manager, Yangmei Branch Ting-Kuang Huang 22 0 0 0
Manager, Tucheng Branch Shu-Lan Huang 261 0 0 0
Manager, Fuxing Branch Tien-Hou Tsai 4,349 0 0 0
Manager, Zhongshan Branch Huo-Yan Wang 326 0 0 0
Manager, Changhua Regional
Center
Kuo-Chi Lin		 19,646 0 0 0
Manager,
North
Regional
Center
Kuo-Chun Liu (concurrent post)		 15,888 0 0 0
Major Shareholder China Man-Made Fiber Co., Ltd. 34,160,302 0 0 0
Principle shareholder Chen-Hai Lin 14,488,703 95,700,000 0 0
Principle shareholder Far
Glory
Life
Insurance
Corporation Ltd.
6,165,192		 0 0 0
Principle shareholder Lin Yuan Investment Co., Ltd. 5,448,269 0 0 0
Principle shareholder Wan Bau Development Co., Ltd. 2,586,211 0 0 0
Principle shareholder Taiwan Fire & Marine Insurance
Co.,Ltd.
1,915,645		 0 0 0
Principle shareholder Netherlands Pension Robert Bacal
Investment Account at Citibank
2,813,671		 0 0 0
Principle shareholder Central Bank of Norway Investment
Account at JP Morgan Chase Taipei
6,656,392		 0 0 0

(II) Information of shares ownership transfer: Not applicable, because the counterparts of said shares ownership transfer are not stakeholders.

(III) Information of shares ownership pledge: Not applicable, because the counterparts of said shares ownership pledge are not stakeholders.

48

�48

February 28, 2015 Remarks
The top 10 shareholders are related to one
another as stated in SFAS No. 6, their
names and relation.		 Relation Brother of the
Chairman of
Board of its
parents		 Brothers None Brother of
the Chairman
of Board of its
subsidiary		 Brothers None None The same as
chairman		 None The same as
chairman		 None None None None None None
Name Pan Asia Chemical
Corporation		 Pan Asia Chemical
Corporation
Responsible person:
Kuei-Fong Wang		 None China Man-Made Fiber
Co., Ltd.		 China Man-Made Fiber
Co., Ltd.
Responsible person:
Kuei-Hsien Wang		 None None Wan Bau Development
Co., Ltd.		 None Lin Yuan Investment
Co., Ltd.		 None None None None None None
Shareholdings under the
title of a third party		 Ratio of
Shareholding		 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Quantity 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Shares Held by Spouse
& Dependents		 Ratio of
Shareholding		 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Quantity 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Own shareholdings Ratio of
Shareholding		 21.22% 0 9.17% 5.86% 0.01% 3.90% 0 3.45% 0 1.64% 0 1.21% 0.10% 1.11% 1.09% 0.69%
Quantity 604,994,014 0 261,610,741 167,076,750 294,000 111,319,869 0 98,374,971 0 46,697,117 0 34,589,250 2,838,451 31,736,849 31,027,611 19,781,555
Name China Man-Made Fiber Co., Ltd. China Man-Made Fiber Co., Ltd.
Responsible person: Kuei-Hsien Wang		 Chen-Hai Lin Pan Asia Chemical Corporation Pan Asia Chemical Corporation
Responsible person: Kuei-Fong Wang		 Far Glory Life Insurance Corporation Ltd. Far Glory Life Insurance Corporation Ltd.
Responsible Person: Chih-Chien Lu		 Lin Yuan Investment Co., Ltd. Lin Yuan Investment Co., Ltd.
Responsible person: Ong-Chuan Lin		 Wan Bau Development Co., Ltd. Wan Bau Development Co., Ltd.
Responsible person: Ong-Chuan Lin		 Taiwan Fire & Marine Insurance Co., Ltd. Taiwan Fire & Marine Insurance Co., Ltd.
Responsible person: Tai-Hung Lee		 Netherlands
Pension
Robert
Bacal
Investment
Account at Citibank (Taiwan)		 Central Bank of Norway Investment Account at JP
Morgan Chase Taipei		 Discretionary Investment Account of Cathay Life
Insurance at Cathay Investment Trust(Tai Gu III)

49

  • IX. Quantity of shareholdings of the same investee by the Bank and directors, presidents, Executive Vice Presidents, Asst. Executive Vice Presidents, supervisors of the various departments and branches, and direct or indirect subsidiaries in proportion to the combined holdings of all Proportion of overall shareholding

Unit: share; %

Unit: share;% Unit: share;%
Investee Investment made by the Bank Investment
made
by
directors,
presidents,
executive vice presidents,
assistant VPs, supervisors
of branches, and direct or
indirect subsidiaries




Combined investment
Quantity Ratio of
Shareholding		 Quantity Ratio of
Shareholding		 Quantity Ratio of
Shareholding
Taichung Commercial Bank
Insurance Agency Co., Ltd.		 28,436,000 100.00 - - 28,436,000 100.00
Reliance Securities Investment
Trust Co., Ltd.		 12,000,000 38.46 979,200 3.14 12,979,200 41.60
Taichung Commercial Bank
Lease Enterprise		 180,000,000 100.00 - - 180,000,00
0		 100.00
Taichung Commercial Bank
Securities Co., Ltd.		 150,000,000 100.00 - - 150,000,00
0		 100.00

50 �50

Four. Status of Capital Planning I. Shares and Dividends

(I) Sources of shares and dividends

Year and
month		 Issuing
price
(NTD/shar
e)		 Authorized shares capital Authorized shares capital Paid-in shares capital Paid-in shares capital Remarks Remarks
Quantity of Stock
(Shares)		 Amount (NTD) Quantity of Stock
(Shares)		 Amount (NTD) Sources of
shares and
dividends		 Others
2006 - 1,538,014,400 15,380,144,000 1,538,014,400 15,380,144,000 - None
March 2007 11.5 2,000,000,000 20,000,000,000 1,304,088,000 13,040,880,000 Issuance of
common
stock for
cash		 None
November
2008		 10 2,000,000,000 20,000,000,000 1,371,900,576 13,719,005,760 Recapitaliza
tion of
earnings		 None
December
2010		 10 2,000,000,000 20,000,000,000 1,731,900,576 17,319,005,760 Issuance of
common
stock for
cash		 None
September
2011		 10 2,000,000,000 20,000,000,000 1,783,857,594 17,838,575,940 Recapitaliza
tion of
earnings
and capital
surpus		 None
November
2011		 10 4,320,000,000 43,200,000,000 2,233,857,594 22,338,575,940 Issuance of
common
stock for
cash		 None
September
2012		 10 4,320,000,000 43,200,000,000 2,318,744,183 23,187,441,830 Recapitaliza
tion of
earnings		 None
September
2013		 10 4,320,000,000 43,200,000,000 2,486,853,137 24,868,531,370 Recapitaliza
tion of
earnings		 None
January 2014 10 4,320,000,000 43,200,000,000 2,534,533,874 25,345,338,740 Convertible
corporate
bonds
converted
into
common
stock shares		 None
March 2014 10 4,320,000,000 43,200,000,000 2,567,784,555 25,677,845,550 Convertible
corporate
bonds
converted
into
common
stock shares		 None
May 2014 10 4,320,000,000 43,200,000,000 2,693,582,244 26,935,822,440 Convertible
corporate
bonds
converted
into
common
stock shares		 None
September
2014		 10 4,320,000,000 43,200,000,000 2,851,506,309 28,515,063,090 Recapitaliza
tion of
earnings		 None

Npte: The Bank’s application filed for the conversion of bonds into common stock shares for a total of 33,250,681 shares in January~ February, 2013 has been reported to the Ministry of Economics and approved on March 31, 2014 under Jin-So-Sun No. 10301054710 confirmation letter. Note: The Bank’s application filed for the conversion of bonds into common stock shares for a total of 125,797,689 shares in March~ April, 2013 has been reported to the Ministry of Economics and approved on March 31, 2014 under Jin-So-Sun No. 10301091530 confirmation letter. The Company’s shareholders’ meeting resolved on June 19, 2014 to recapitalize the earnings amounting to NTD 1,579,240,650 by issuing new shares of common stock amounting to 157,924,065 shares at NTD 10 per share. The resolution has been reported to FSC on August 8, 2014 under Jin-Guan-Zheng-Fa-Zi No. 1030029339 confirmation letter.

5151

Stock Type Authorized shares capital Authorized shares capital Authorized shares capital k
Outstanding shares Unissued Shares Total Remars
Registered common
shares
2,851,506,309		 1,468,493,691 4,320,000,000 Listed

(II) Composition of Shareholders

(II) Composition of Shareholders (II) Composition of Shareholders (II) Composition of Shareholders (II) Composition of Shareholders (II) Composition of Shareholders (II) Composition of Shareholders (II) Composition of Shareholders
Feb. 28,2015
Composition of
Shareholders
Amount		 Government
Apparatus		 Financial
Institution		 Other Juridical Individual Foreign
Institution and
Foreigner		 Total
No. of Person 3 3 202 79,135 146 79,489
Shares 30 150,803,164 1,136,245,407 1,338,905,121 225,552,587 2,851,506,309
Ratio of
Shareholding (%)		 0.00 5.29 39.85 46.95 7.91 100.00

(III) Diversification of Shareholdings

NTD10/share

Feb. 28, 2015

Feb. 28,2015
Range of Shares No. of Shareholders Shares Ratio of
Shareholding (%)
1 to 999 31,428 8,094,533 0.28
1,000 to 5,000 24,044 55,600,770 1.95
5,001 to 10,000 8,844 60,517,989 2.12
10,001 to 15,000 4,844 57,661,751 2.02
15,001 to 20,000 1,800 30,961,055 1.09
20,001 to 30,000 2,623 62,384,469 2.19
30,001 to 50,000 2,163 82,087,640 2.88
50,001 to 100,000 1,777 120,154,985 4.21
100,001 to 200,000 1,020 136,141,490 4.77
200,001 to 400,000 506 136,171,106 4.78
400,001 to 600,000 146 71,697,279 2.51
600,001 to 800,000 72 49,862,144 1.75
800,001 to 1,000,000 40 36,025,702 1.26
1,000,001 to 1,200,000 29 31,815,507 1.12
1,200,001 to 1,400,000 20 26,047,924 0.91
1,400,001 to 1,600,000 20 30,606,716 1.07
1,600,001 to 1,800,000 5 8,610,447 0.30
1,800,001 to 2,000,000 8 15,048,186 0.53
2,000,001 and above 100 1,832,016,616 64.25
Total 79,489 2,851,506,309 100

5252

(IV) Name of Principle shareholder

ame of Principle shareholder ame of Principle shareholder ame of Principle shareholder
Feb. 28,2015
Stock
Name of Principle shareholder		 Shares Ratio of
Shareholding
China Man-Made Fiber Co.,Ltd. 604,994,014 21.22%
Chen-Hai Lin 261,610,741 9.17%
Pan Asia Chemical Corporation 167,076,750 5.86%
Far GloryLife Insurance Corporation Ltd. 111,319,869 3.90%
Lin Yuan Investment Co.,Ltd. 98,374,971 3.45%
Wan Bau Development Co.,Ltd. 46,697,117 1.64%
Taiwan Fire & Marine Insurance Co.,Ltd. 34,589,250 1.21%
Netherlands Pension Robert Bacal Investment Account at
Citibank
31,736,849		 1.11%
Central Bank of Norway Investment Account at JP Morgan
ChaseTaipei
31,027,611		 1.09%
Discretionary Investment Account of Cathay Life Insurance at
CathayInvestment Trust(Tai Gu III)
19,781,555		 0.69%
  • (V) Information on market price, net value, earnings and dividends per share in the most recent 2 years

2 years
Unit: NTD;Thousand shares,%
Item Year 2013 2014 Until February 28,
2015
Market Pric
e Per Share		 The Highest 11.25 11.10 10.50

The Lowest		 10.05 9.99 10.10

Average		 10.77 10.52 10.35
Net
Value Per
Share		 Before Distribution 12.25 12.59 12.95
After Distribution 11.34 - -
Earnings
per share		 Weighted average shares 2,492,871 2,815,153 2,851,506
EPS(before adjustment) 1.23 1.32 0.23
EPS(after adjustment) 1.16 - -
Dividend P
er Share		 Cash Dividends 0.191 - -
Free-Gratis Retained
Shares
Distribution
0.586		 - -
Dividends Capital
Reserve
Shares Distribution
-		 - -
Retained Dividends - - -
Return on
investment
Analysis		 P/E ratio(before the distribution) 8.74 7.94 -
P/E ratio(after the distribution) 9.27 - -
Dividend Yield 57 - -
Cash Dividend Yields 1.77 - -

  • (VI) Dividend Policy and the Status of Implementation

  • Dividend policy in the Bank’s Articles of Incorporation:

    • Refer to Note 29 to the consolidated financial statements, under the title of Shareholder’ Equity (III) Distribution of earnings and dividend policy.

  • The proposal of the distribution of earnings in current session of the General Meeting of Shareholders:

    • After the account settlement of the Bank in FY2014 and the requirement of the Articles of Incorporation, the Bank allocated legal reserve and reversal special reserve, and took the capital adequacy rate into consideration, and proposed to the Board for discussion on the distribution of earnings and presented before the General Meeting of Shareholders for

5353

ratification. The proposal specified stock dividend at NTD0.64/share and cash dividend at NTD0.25/share. This proposal is still pending on the resolution of the Board as of 2015.2.28

  • (VII) The effect of stock dividend proposed to the General Meeting of the Shareholders on the operation performance of the Bank and the earnings per share: The Bank did not disclose its financial projection for FY2015, and it is not applicable here.

  • (VIII)Employee bonus and remuneration paid to directors and supervisors:

  • Ratio of Shareholding or scope of employee bonus and Remuneration to Directors and supervisors as stated in the Bank’s Articles of Incorporation: Refer to Note 29 to the consolidated financial statements, under the title of Shareholder’ Equity (III) Distribution of earnings and dividend policy.

  • The difference between estimated and actual employee bonus and remuneration to directors and supervisors as well as stock dividends distributed shall be handled by accountants as follows:

    • (1) Accrued employee benefit and board compensation payable this year is the amount estimated according to the company’s Articles of Incorporation and other regulations. In 2014, after recognizing legal reserve at 30% of net profit after tax, recognizing the legally required special reserve, adding in the undistributed earnings from previous years, and the remainder is the basis for accrued employee benefit and board compensation at NTD 254 thousand and NTD 127 thousand respectively.

    • (2) These amounts will be paid in cash. In the case of material change in the allocation resolved by the Board session at the end of the fiscal year, the difference shall be adjusted by the expense of the original fiscal year.

    • (3) If the shareholders’ meeting resolves the actual allocated amount different from the estimate, it shall be handled as the “change in accounting estimates” in the year of the resolution made by the shareholders’ meeting.

  • Information on employee bonus: the amount as stated above pending on the resolution of the Board as of 2015.2.28

  • The distribution of earnings in the previous year for employee bonus and remuneration to the Directors and Supervisors: the General Meeting of Shareholders passed the motion of the distribution of NTD209,280 as employee bonus and NTD104,640 as remuneration to the Directors and Supervisors in a session dated June 19 2014. The amount stated is identical as the amount recognized in the financial statement of FY2013.

  • (IX) Repurchase of the Bank Shares: None.

5454

II. Issuance of Financial Bonds

II. Issuance of Financial Bonds
Type 1st term of 2009 Subordinated Financial
Bonds
2nd term of 2009 Subordinated Financial
Bonds
Date & Approval No. Ching-Kuan-Yin (4) Tze No. 09800104050
dated March 20,2009
Ching-Kuan-Yin (4) Tze No. 09800104050
dated March 20,2009
IssueDate June26,2009 December 10,2009
Face Value NTD 100,000 NTD 500,000
Place of Issue and Trading Taiwan R.O.C. Taiwan R.O.C.
Currency NTD NTD
Issuing price At Par Value At Par Value
Total amount NTD 1.8 billion NTD 0.1 billion
Interest rate Annual interest rate is index interest rate
plus 1.40%.
Index interest rate is the displayed floating
rates for one-year term deposits of
Chunghwa Post Co.,Ltd.

Coupon rate at 2.75% fixed rate.
Maturity 7years,matured on June 26,2016 7years,matured on December 10,2016
Seniority Prevail over the shareholders’ right to
allocate residual property, and follow the
Company’s depositorsand othercreditors

Prevail over the shareholders’ right to
allocate residual property, and follow the
Company’s depositorsand othercreditors
GuaranteeInstitution None None
Trustee None None
Consignee None None
Certified Lawyer None None
Certified CPA None None
Certifiedfinancial institution None None
Repayment Methods Repayment in lump sumupon maturity Repayment in lump sumupon maturity
Unredeemed balance NTD 1.8 billion NTD 0.1 billion
Paid-in shares capital in last
Fiscal Year
NTD 13,719,006 thousand		 NTD 13,719,006 thousand
After-tax Net Worth in last
Fiscal Year		 NTD 15,504,958 thousand NTD 15,504,958 thousand
Performance Normal Normal
Redemption
or
earlier
redemption
None		 None
Conversion
and
exchange
conditions		 None None
Limitation Article Subordinated bond Subordinated bond
Fund utilization plan Strengthen financial structure, upgrade
capital adequacy ratio and expand business
scale

Strengthen financial structure, upgrade
capital adequacy ratio and expand business
scale
Balance of Bonds as a Ratio
of Shareholding of After-tax
net worth(%)
27.09%		 27.73%
Whether it is accounted for
equitycapital and type		 Tier II Capital Tier II Capital
Name of credit rating agency,
date of rating and ratings		 Fitch Ratings Limited; September 30, 2014
BBB+ (twn), F2 (twn), with negative
outlook
Fitch Ratings Limited; September 30, 2014
BBB+ (twn), F2 (twn), with negative
outlook

5555

Type 3rd term of 2009 Subordinated Financial
Bonds
4th term of 2009 Subordinated Financial
Bonds
Date & Approval No. Ching-Kuan-Yin (4) Tze No. 09800104050
datedMarch 20,2009
Ching-Kuan-Yin (4) Tze No. 09800104050
datedMarch 20,2009
IssueDate December 18,2009 December 30,2009
Face Value NTD 500,000 NTD 500,000
Place of Issue and Trading Taiwan R.O.C. Taiwan R.O.C.
Currency NTD NTD
Issuing price At Par Value At Par Value
Total amount NTD 1.2billion NTD 1.1billion
Interest rate Annual interest rate is index interest rate
plus 1.50%.
Index interest rate is the displayed floating
rates for one-year term deposits of
Chunghwa Post Co.,Ltd.

Annual interest rate is index interest rate
plus 1.48%.
Index interest rate is the displayed floating
rates for one-year term deposits of
Chunghwa Post Co.,Ltd.
Maturity 7years,matured on December 18,2016 6.5years,matured on June 30,2016
Seniority Prevail over the shareholders’ right to
allocate residual property, and follow the
Company’s depositors and other creditors

Prevail over the shareholders’ right to
allocate residual property, and follow the
Company’s depositors and other creditors
Guarantee Institution None None
Trustee None None
Consignee None None
Certified Lawyer None None
Certified CPA None None
Certifiedfinancial institution None None
Repayment Methods Repayment in lumpsum upon maturity Repayment in lumpsum upon maturity
Unredeemed balance NTD 1.2 billion NTD 1.1 billion
Paid-in shares capital in last
Fiscal Year
NTD 13,719,006 thousand		 NTD 13,719,006 thousand
After-tax Net Worth in last
Fiscal Year		 NTD 15,504,958 thousand NTD 15,504,958 thousand
Performance Normal Normal
Redemption
or
earlier
redemption
None		 None
Conversion
and
exchange
conditions		 None None
Limitation Article Subordinated bond Subordinated bond
Fund utilization plan Strengthen financial structure, upgrade
capital adequacy ratio and expand business
scale

Strengthen financial structure, upgrade
capital adequacy ratio and expand business
scale
Balance of Bonds as a Ratio
of Shareholding of After-tax
net worth(%)
35.47%		 42.57%
Whether it is accounted for
equitycapital and type		 Tier II Capital Tier II Capital
Name of credit rating agency,
date of rating and ratings		 Fitch Ratings Limited; September 30, 2014
BBB+ (twn), F2 (twn), with negative
outlook
Fitch Ratings Limited; September 30, 2014
BBB+ (twn), F2 (twn), with negative
outlook

5656

Type 1st term of 2010 Subordinated Financial
Bonds
2nd term of 2010 Subordinated Financial
Bonds
Date & Approval No. Ching-Kuan-Yin (4) Tze No. 09800104050
dated March 20,2009
Ching-Kuan-Yin (4) Tze No. 09800104050
dated March 20,2009
IssueDate January28,2010 February 9,2010
Face Value NTD 500,000 NTD 10,000,000
Place of Issue and Trading Taiwan R.O.C. Taiwan R.O.C.
Currency NTD NTD
Issuing price At Par Value At Par Value
Total amount NTD 0.6 billion NTD 0.2 billion
Interest rate Annual interest rate is index interest rate
plus 1.50%.
Index interest rate is the displayed floating
rates for one-year term deposits of
Chunghwa Post Co.,Ltd.

Annual interest rate is index interest rate
plus 1.50%.
Index interest rate is the displayed floating
rates for one-year term deposits of
Chunghwa Post Co.,Ltd.
Maturity 7years,matured on January28,2017 6years,matured on February9,2016
Seniority Prevail over the shareholders’ right to
allocate residual property, and follow the
Company’s depositorsand othercreditors

Prevail over the shareholders’ right to
allocate residual property, and follow the
Company’s depositorsand othercreditors
Guarantee Institution None None
Trustee None None
Consignee None None
Certified Lawyer None None
Certified CPA None None
Certifiedfinancial institution None None
Repayment Methods Repayment in lump sumupon maturity Repayment in lump sumupon maturity
Unredeemed balance NTD 0.6 billion NTD 0.2 billion
Paid-in shares capital in last
Fiscal Year
NTD 13,719,006 thousand		 NTD 13,719,006 thousand
After-tax Net Worth in last
Fiscal Year		 NTD 15,361,003 thousand NTD 15,361,003 thousand
Performance Normal Normal
Redemption
or
earlier
redemption
None		 None
Conversion
and
exchange
conditions		 None None
Limitation Article Subordinated bond Subordinated bond
Fund utilization plan Strengthen financial structure, upgrade
capital adequacy ratio and expand business
scale

Strengthen financial structure, upgrade
capital adequacy ratio and expand business
scale
Balance of Bonds as a Ratio
of Shareholding of After-tax
net worth(%)
46.87%		 48.17%
Whether it is accounted for
equitycapital and type		 Tier II Capital Tier II Capital
Name of credit rating agency,
date of rating and ratings		 Fitch Ratings Limited; September 30, 2014
BBB+ (twn), F2 (twn), with negative
outlook
Fitch Ratings Limited; September 30, 2014
BBB+ (twn), F2 (twn), with negative
outlook

5757

Type 3rd term of 2010 Subordinated Financial
Bonds
1st term of 2012 Subordinated Financial
Bonds
Date & Approval No. Ching-Kuan-Yin (4) Tze No. 09900204230
dated June4,2010
Ching-Kuan-Yin-Piao
Tze
No.
10100305900dated September 24,2015
IssueDate June25,2010 November 13,2012
Face Value NTD 10,000,000 NTD 1,000,000
Place of Issue and Trading Taiwan R.O.C. Taiwan R.O.C.
Currency NTD NTD
Issuing price At Par Value At Par Value
Total amount NTD 0.9 billion NTD 3.0billion
Interest rate Annual interest rate is index interest rate
plus 1.75%.
Index interest rate is the displayed floating
rates for one-year term deposits of
Chunghwa Post Co.,Ltd.

Coupon rate at 2.10% fixed rate.
Maturity 7years,matured on June 25,2017 7years,matured on November 13,2019
Seniority Prevail over the shareholders’ right to
allocate residual property, and follow the
Company’s depositors and other creditors

Prevail over the shareholders’ right to
allocate residual property, and follow the
Company’s depositors and other creditors
Guarantee Institution None None
Trustee None None
Consignee None None
Certified Lawyer None None
Certified CPA None None
Certifiedfinancial institution None None
Repayment Methods Repayment in lumpsum upon maturity Repayment in lumpsum upon maturity
Unredeemed balance NTD 0.9 billion NTD 3.0 billion
Paid-in shares capital in last
Fiscal Year
NTD 13,719,006 thousand		 NTD 22,338,576 thousand
After-tax Net Worth in last
Fiscal Year		 NTD 15,361,003 thousand NTD 25,461,054 thousand
Performance Normal Normal
Redemption
or
earlier
redemption
None		 None
Conversion
and
exchange
conditions		 None None
Limitation Article Subordinated bond Subordinated bond
Fund utilization plan Strengthen financial structure, upgrade
capital adequacy ratio and expand business
scale

Strengthen financial structure, upgrade
capital adequacy ratio and expand business
scale
Balance of Bonds as a Ratio
of Shareholding of After-tax
net worth(%)
54.03%		 53.41%
Whether it is accounted for
equitycapital and type		 Tier II Capital Tier II Capital
Name of credit rating agency,
date of rating and ratings		 Fitch Ratings Limited; September 30, 2014
BBB+ (twn), F2 (twn), with negative
outlook
Fitch Ratings Limited; September 30, 2014
BBB+ (twn), F2 (twn), with negative
outlook

5858

Type 1st term of 2013 Subordinated Financial
Bonds
2nd term of 2013 Subordinated Financial
Bonds
Date & Approval No. Ching-Kuan-Yin-Piao
Tze
No.
10200089330datedApril 8,2013
Ching-Kuan-Yin-Piao
Tze
No.
10200089330datedApril 8,2013
IssueDate June25,2013 December 16,2013
Face Value NTD 500,000 NTD 500,000
Place of Issue and Trading Taiwan R.O.C. Taiwan R.O.C.
Currency NTD NTD
Issuing price At Par Value At Par Value
Total amount NTD 2.5billion NTD 3.0billion
Interest rate Coupon rateat 2.10%fixedrate Coupon rateat 2.10%fixedrate
Maturity 7 years,matured onJune25,2020 6years,matured on December 16,2019
Seniority Prevail over the shareholders’ right to
allocate residual property, and follow the
Company’s depositors and other creditors

Prevail over the shareholders’ right to
allocate residual property, and follow the
Company’s depositors and other creditors
Guarantee Institution None None
Trustee None None
Consignee None None
Certified Lawyer None None
Certified CPA None None
Certified financial institution None None
Repayment Methods Repayment in lumpsum upon maturity Repayment in lumpsum upon maturity
Unredeemed balance NTD 2.5 billion NTD 3.0 billion
Paid-in shares capital in last
Fiscal Year
NTD 23,187,442 thousand		 NTD 23,187,442 thousand
After-tax Net Worth in last
Fiscal Year		 NTD 28,081,100 thousand NTD 28,081,100 thousand
Performance Normal Normal
Redemption
or
earlier
redemption
None		 None
Conversion
and
exchange
conditions		 None None
Limitation Article Subordinated bond Subordinated bond
Fund utilization plan Strengthen financial structure, upgrade
capital adequacy ratio and expand business
scale

Strengthen financial structure, upgrade
capital adequacy ratio and expand business
scale
Balance of Bonds as a Ratio
of Shareholding of After-tax
net worth(%)
48.20%		 58.89%
Whether it is accounted for
equity capital andtype		 Tier II Capital Tier II Capital
Name of credit rating agency,
date of rating and ratings		 Fitch Ratings Limited; September 30, 2014
BBB+ (twn) (Compliance with the Basel
III),F2(twn),with negative outlook
Fitch Ratings Limited; September 30, 2014
BBB+ (twn) (Compliance with the Basel
III),F2(twn),with negative outlook

5959

III. Issuance of Preferred Stocks: None.

  • IV. Issuance of Overseas Depository Receipts: None.

  • V. Employee Stock Options: None.

  • VI. Acquisition or Assignment of Other Financial Institutions: None.

  • VII. Implementation of Fund utilization plan

  • (I) Contents of the plan:

    1. In order to strengthen the structure of capital and upgrade the capital adequacy ratio, the Bank applied with FSC for issuing the Subordinated Financial Bonds in 2008, 2010, 2012 and 2013 respectively:

      • (1) The FSC approved the Bank’s application in 2008 for issuance of Subordinated Financial Bonds in the amount of NTD 5 billion via its Letter under Ching-Kuan-Yin (4) Tze No. 09800104050 on March 20, 2009.
Term &
Financial
Bonds
Item		 1st term 2009 2nd term 2009 3rd term 2009 4th term 2009 1st term 2010 2nd term 2010
Bond No. G13002 G13003 G13004 G13005 G13006 G13007
Issue Date 98.6.26 98.12.10 98.12.18 98.12.30 99.1.28 99.2.9
Total Issued NTD 1.8
billion		 NTD 0.1
billion		 NTD 1.2
billion		 NTD 1.1
billion		 NTD 0.6 billion NTD 0.2
billion
Duration 7 years 7 years 7 years 6.5 years 7 years 6 years
Listing Date 2009.6.26 2009.12.10 2009.12.18 2009.12.30 2010.1.28 2010.2.9

  • (2) The FSC approved the Bank’s application in 2010 for issuance of Subordinated Financial Bonds in the amount of NTD 0.9 billion via its Letter under Ching-Kuan-Yin-Piao Tze No. 09900204230 on June 4, 2010. The Bank issued the “3rd term of 2010 Subordinated Financial Bonds of Taichung Commercial Bank” (Bond No. G13008) on June 25, 2010. The total issued amount was NTD 0.9 billion with the duration of 7 years. The bond was traded on GreTai markets on the same date.

  • (3) The FSC approved the Bank’s application in 2012 for issuance of Subordinated Financial Bonds in the amount of NTD 3.0 billion via its Letter under Ching-Kuan-Yin-Piao Tze No. 10100305900 on September 24, 2012. The Bank issued the “1st term of 2012 Subordinated Financial Bonds of Taichung Commercial Bank” (Bond No. G13009) on November 13, 2012. The total issued amount was NTD 3.0 billion with the duration of 7 years. The bond was traded on GreTai markets on the same date.

  • (4) The FSC approved the Bank’s application in 2013 for issuance of Subordinated Financial Bonds in the amount of NTD 6.0 billion via its Letter under Ching-Kuan-Yin-Piao Tze No. 10200089330 on April 8, 2013. The Bank issued the “1st term of 2013 Subordinated Financial Bonds of Taichung Commercial Bank” (Bond No. G13010) on June 25, 2013. The total issued amount was NTD 2.5 billion with the duration of 7 years. The Subordinated Financial Bonds were traded on GreTai markets on December 16, 2013. The Bank issued the “2nd term of 2013

6060

Subordinated Financial Bonds of Taichung Commercial Bank” (Bond No. G13011) on December 16, 2013. The total issued amount was NTD 3.0 billion with the duration of 6 years. The Subordinated Financial Bonds were traded on GreTai markets on December 16, 2013.

  1. Recapitalization through issuing common share in amount of NTD 3.6 billion in 2010: The Bank applied with the Securities and Futures Bureau of Financial Supervisory Commission on October 14, 2010 for raising capital of NTD 3.6 billion by issuing new shares. The application has been caused into effect under Letter Ching-Kuan-Zheng-Fa-Tze No. 0990058141 dated November 2, 2010. The Bank has raised capital amounting to NTD 3.6 billion by issuing new shares in 2010. Investment has been paid in full as of December 9, 2010 and the shares have been listed in TWSE for offering on December 15, 2010.

  2. 1st term of 2011 unsecured convertible Financial Bonds issued domestically in amount of NTD 2.3 billion:

  3. The Bank offered the 1st issue of unsecured financial debentures amounting to NTD 2.8 billion at the approval of Financial Supervisory Commission under Letter Ching-Kuan-Zheng-Fa-Tze No. 1000018296 dated May 16, 2011. The 20th Board of Directors resolved to adjust the total amount of the debt instruments to NTD2.3 billion in the 15th session. Each lot of the said instrument shall amount to NTD 100,000 and a total of 2,300 lots shall be issued. The conversion price was set at NTD11.89, with the duration of 3 years (from June 15, 2011 until June 15, 2014), at the time of issuance. The total of NTD 2.3 billion has been paid in full as of June 13, 2011. The instrument is listed in GTSM on June 15, 2011 for trading.

  4. Capital increase by recapitalization of earnings and capital surplus in amount of NTD 519,570,180 in 2010:

  5. The Bank applied with Securities and Futures Bureau of FSC for capital increase by recapitalization of earnings and capital surplus by NTD 519,570,180 on July 4, 2011 and the capital increase has been reported to FSC and approved on July 20, 2011 under Ching-Kuan-Zheng-Fa-Tze No. 1000032577 confirmation letter. The capital increase was registered on September 22, 2011, and the Bank’s paid-in capital became NTD 17,838,575,940, and the gross capital NTD 20,000,000,000.

  6. Recapitalization through issuing common share in amount of NTD 4.5 billion in 2011: The Bank applied with Securities and Futures Bureau of FSC for recapitalization through issuing common share in amount of NTD 4.5 billion on July 22, 2011 and the case approved on August 9, 2011 under Ching-Kuan-Zheng-Fa-Tze No. 1000035963 confirmation letter. The stock payment in the amount of NTD 4.5 billion has been fully collected on November 8, 2011, and the new shares were listed on November 11, 2011.

  7. In 2011, capitalization of retained earnings into news shares amounting to NTD 848,865,890:

  8. The Bank applied with Securities and Futures Bureau of FSC for capital increase by recapitalization of earnings by NTD 848,865,890 on July 10, 2012 and the capital increase has been reported to FSC and approved on July 26, 2012 under Ching-Kuan-Zheng-Fa-Tze No. 1010032195 confirmation letter. The capital increase was registered on September 25, 2012, and the Bank’s paid-in capital became NTD 23,187,441,830, and the gross capital NTD 43,200,000,000.

  9. In 2012, capitalization of retained earnings into news shares amounting to NTD 1,681,089,540:

  10. The Bank applied with Securities and Futures Bureau of FSC for capital increase by recapitalization of earnings by NTD 1,681,089,540 on July 9, 2013 and the capital increase has been reported to FSC and approved on July 29, 2013 under Ching-Kuan-Zheng-Fa-Tze No. 1020028488 confirmation letter. The capital increase was registered on September 27, 2012, and the Bank’s paid-in capital became NTD

6161

24,868,531,370, and the gross capital NTD 43,200,000,000.

  1. In 2013, capitalization of retained earnings into news shares amounting to NTD 1.58 billion:

  2. The Bank applied with Securities and Futures Bureau of FSC for capital increase by recapitalization of earnings by NTD 1,579,240,650 on July 22, 2014 and the capital increase has been reported to FSC and approved on August 8, 2014 under Ching-Kuan-Zheng-Fa-Tze No. 1030029339 confirmation letter. The capital increase was registered on September 19, 2014, and the Bank’s paid-in capital became NTD 28,515,063,090, and the gross capital NTD 43,200,000,000.

(II) Status of implementation:

The said plan had positive contribution to the Bank’s financial structure and financial ratios. The analysis of the change in the key financial ratios, capital adequacy rate, corporate earnings, and earnings per share is shown below:

Year
Financial ratio
2014		 2013 2012 Comparison
between 2014
and 2013		 Comparison
between 2013
and 2012		 Comparison
between 2012
and 2011
ROA (%) 0.73 0.65 0.67 0.08 (0.02) 0.27
ROE (%) 11.11 10.38 10.38 0.73 - 3.9
Capital adequacy ratio
(%)
10.84		 11.37 10.54 (0.53) 0.83 (1.09)
Net income
(Thousand NTD)		 3,768,119 2,884,440 2,777,958 883,679 106,482 1,323,958
Earnings
per
share
(NTD)
1.32		 1.23 1.20 0.09 0.03 0.41

6262

Five. Operation Profile

  • I. Business Contents

  • (I) Principal business of the Bank by business type:

    1. Deposit Operations:

Passbooks, check deposits, certificates of deposit, negotiable certificates of deposit.

  1. Loan Operations:

  2. Personal loans, corporate loans, syndicate loans, discounts of instruments, issuance of local L/C and local guarantee making.

  3. Foreign Exchanges Operations:

Import, export, foreign exchange settlements, deposits, and loans of foreign currency.

  1. Wealth Management:

    • Administer the planning and execution of the financial planning businesses throughout the nation, management of financial planning staff, preparation and revision of the wealth management policy and operating procedure, and promotion, supervision and management of wealth management customers’ investment in the financial planning business.

  2. Corporate Finance:

    • Promote corporate banking business related to corporate financing, corporate syndicate loans, domestic L/C issuing, domestic guarantee business, et al.

  3. E-Banking Operations:

    • Running the business of Internet banking, mobile banking, physical ATM, virtual ATM, online cash receiver, telephone voice service, package transfer/remittance, collection service (tuition fee, community management fee), ACH and note payable management.

  4. Trust Operations:

    • Running the business of custodian agent in special money trust for investment in domestic and overseas securities, certification of securities, real estate trust, prepayment trust, particular purpose money trust, and securities investment trust.

  5. Investments Operations:

    • Dispatch of funds in NTD and foreign currency, foreign exchange, marketable securities trading and long-term equity investment.

  6. (II) Assets under respective business units and/or their proportion to total assets and/or revenue, and the status of growth:

  7. Deposit:

Unit: NTD thousand; %

Unit: NTD thousand; % Unit: NTD thousand; %
Item Year Comparison between
2014 2013
2014 and 2013
Increase Increase
Amount Proportion Amount Proportion (decrease) in (decrease) in
amount proportion
Current
deposits		 Check deposits 6,943,768 1.51 6,515,160 1.50 428,608 6.58
Current deposits 112,020,389 24.45 100,480,079 23.23 11,540,310 11.49
Current saving
deposits		 103,338,662 22.55
96,755,054 22.37 6,583,608 6.80
Subtotal 222,302,819 48.51 203,750,293 47.10 18,552,526 9.11
Time
deposits		 Time deposits 101,102,031 22.06 94,241,622 21.78 6,860,409 7.28
Time saving deposits
133,802,848		 29.20 132,696,893 30.67 1,105,955 0.83
Subtotal 234,904,879 51.26 226,938,515 52.45 7,966,364 3.51
Others Accounts transfer
and deposits via post
office

1,045,021		 0.23 1,963,594 0.45 (918,573) (46.78)
Total 458,252,719 100.00 432,652,402 100.00 25,600,317 5.92

Note 1: Current deposits and Current deposits include deposits in foreign currencies and treasury deposits. Note 2: Accounts transfer and deposits via post office include the national development fund tied in with accounts transfer and deposits.

6363

2. Loan Operations:

Unit: NTD thousand; %

Unit: NTD thousand;% Unit: NTD thousand;%
Year
Item		 2014 2013 Comparison between
2014and2013
Amount Proportion Amount Proportion Increase
(decrease) in
amount		 Increase
(decrease)
in
proportion
Short-term secured
loans		 72,845,463 18.16 67,497,398 17.91 5,348,065 7.92
Short-term credit
loans		 36,397,942 9.07 37,155,514 9.86 (757,572) (2.04)
Mid-term secured
loans		 101,479,176 25.29 93,717,250 24.87 7,761,926 8.28
Mid-term credit
loans		 41,531,841 10.35 37,980,674 10.08 3,551,167 9.35
Long-term secured
loans		 131,552,236 32.79 124,828,290 33.12 6,723,946 5.39
Long-term credit
loans		 3,358,619 0.84 2,970,735 0.79 387,884 13.06
Others 14,053,446 3.50 12,707,606 3.37 1,345,840 10.59
Total 401,218,723 100.00 376,857,467 100.00 24,361,256 6.46

Note: Said table includes foreign currencies, OBU, delinquent accounts, Acceptances receivable and receivable security bonds

3. Foreign Exchanges Operations:

Unit: USD thousand; %

Unit: USD thousand;% Unit: USD thousand;% Unit: USD thousand;%
Year
Item		 2014 2013 Comparison between
2014and2013
Amount Proportion Amount Proportion Increase
(decrease) in
amount		 Increase
(decrease) in
proportion
Import 2,031,194 14.27 1,849,756 15.03 181,438 9.81
Export 749,677 5.27 639,655 5.20 110,022 17.20
Outward remittance 5,855,182 41.13 5,157,020 41.90 698,162 13.54
Inward remittance 5,597,868 39.33 4,662,143 37.87 935,725 20.07
Total 14,233,921 100.00 12,308,574 100.00 1,925,347 15.64
Balance of deposits at
the end ofthe year		 1,059,905 800,815 259,090 32.35
Balance of loans at the
end of theyear		 955,509 879,395 76,114 8.66
4. Wealth Management:
Unit: NTD thousand;%
Year
Item		 2014 2013 Comparison between
2014and2013
Amount Proportion Amount Proportion Increase
(decrease) in
amount		 Increase
(decrease) in
proportion
Trust service fee revenue 537,635 51.64 385,277 47.04 152,358 39.55
Insurance service fee
revenue		 502,604 48.28 433,710 52.96 68,894 15.88
Gold passbook service
feerevenue		 784 0.08 0 0.00 784 100.00
Total 1,041,023 100.00 818,987 100.00 222,036 27.11

6464

5. Corporate Finance:

Unit: NTD thousand; %

Unit: NTD thousand;% Unit: NTD thousand;%
Year
Item		 2014 2013 Comparison between
2014 and2013
Amount Proportion Amount Proportion Increase
(decrease) in
amount		 Increase
(decrease) in
proportion
Balance of loans to SMEs 152,586,305 73.05 141,799,766 72.27 10,786,539 7.61
Balance of loans to large-size
enterprises		 26,579,814 12.73 28,665,573 14.61 (2,085,759) (7.28)
Balance of corporate finance
loans in NTD		 179,166,119 85.78 170,465,339 86.88 8,700,780 5.10
Balance of loans in foreign
currency		 29,701,254 14.22 25,747,221 13.12 3,954,033 15.36
Total 208,867,373 100.00 196,212,560 100.00 12,654,813 6.45

6. E-banking Operations:

(1) Number of new network accounts

Unit: account; %

Unit: account;% Unit: account;%
Year
Item		 2014 2013 Comparison between
2014 and 2013

Number of active
accounts		 Number of new
accounts		 Number of active
accounts		 Number of new
accounts		 Increase
(decrease) in
number of active
accounts		 Increase
(decrease) in
proportion
Number of new
accounts		 158,169 24,928 146,506 24,070 11,663 7.96

(2) E-Banking trading ratio

Unit: transaction; %

Unit: transaction;% Unit: transaction;%
Year
Item		 2014 2013 Comparison between
2014 and 2013

Accumulative
transactions		 Proportion to
Total
Transactions		 Accumulative
transactions		 Proportion to
Total
Transactions		 Increase
(decrease) in
transactions		 Proportion to
increase (decrease)
in total
transactions
e-Banking
transaction		 6,905,190 50.36 6,594,278 50.60 310,912 (0.24)

Note: The transactions exclude those for inquiries.

6565

7. Trust Operations:

Unit: NTD thousand;% Unit: NTD thousand;% Unit: NTD thousand;% Unit: NTD thousand;% Unit: NTD thousand;% Unit: NTD thousand;%
Item Year 2014 2013 Comparison between
2014 and 2013
Amount Proportion Amount Proportion Increase
(decrease)
in amount		 Increase
(decrease) in
proportion
Investment
in domestic
and
overseas
marketable
securities
through
special
monetary
trustee
accounts		 Balance of trust in
domestic funds		 5,338,004 9.91 4,707,614 10.54 630,390 13.39
Service Fee 55,974 9.26 36,026 7.5 19,948 55.37
Balance of trust in
International funds		 37,673,672 69.96 32,230,957 72.17 5,442,715 16.89
Service Fee 477,503 79.01 325,675 67.8 151,828 46.62
ETF balance 33,657 0.06 26,229 0.06 7,428 28.32
Service Fee 998 0.17 578 0.12 420 72.66
Balance of structure
note		 602,989 1.12 611,118 1.37 (8,129) (1.33)
Service Fee 0 0 0 0 0 0
Balance of overseas
bonds		 843,694 1.57 830,737 1.86 12,957 1.56
Service Fee 3,160 0.52 22,998 4.78 (19,838) (86.26)
Custody of
securities		 Balance
of
securities
in
custody		 4,157,115 7.72 1,546,564 3.46 2,610,551 168.80
Service Fee 5,348 0.88 3,877 0.81 1,471 37.94
Certified
auditors of
marketable
securities		 Business volume 4,121,924 - 2,662,594 - 1,459,330 54.81
Service Fee 662 0.11 600 0.12 62 10.33
Real estate
related trust
business		 Balance of trust 2,863,475 5.32 1,002,600 2.25 1,860,875 185.60
Service Fee 13,695 2.27 37,850 7.88 (24,155) (63.82)
Specific
independent
money
management
and
utilization
trust		 Balance of trust 2,334,720 4.34 3,704,466 8.29 (1,369,746) (36.98)
Service Fee 47,014 7.78 52,782 10.99 (5,768) (10.93)
Balance of trust assets 53,847,326 100.00 44,660,285 100.00 9,187,041 20.57

8. Investments Operations:


and
utilization
trust
Service Fee
47,014
7.78
52,782
10.99
(5,768)
(10.93)
Balance of trust assets
53,847,326
100.00
44,660,285
100.00
9,187,041
20.57
8. Investments Operations:
and
utilization
trust
Service Fee
47,014
7.78
52,782
10.99
(5,768)
(10.93)
Balance of trust assets
53,847,326
100.00
44,660,285
100.00
9,187,041
20.57
8. Investments Operations:
and
utilization
trust
Service Fee
47,014
7.78
52,782
10.99
(5,768)
(10.93)
Balance of trust assets
53,847,326
100.00
44,660,285
100.00
9,187,041
20.57
8. Investments Operations:
and
utilization
trust
Service Fee
47,014
7.78
52,782
10.99
(5,768)
(10.93)
Balance of trust assets
53,847,326
100.00
44,660,285
100.00
9,187,041
20.57
8. Investments Operations:
and
utilization
trust
Service Fee
47,014
7.78
52,782
10.99
(5,768)
(10.93)
Balance of trust assets
53,847,326
100.00
44,660,285
100.00
9,187,041
20.57
8. Investments Operations:
and
utilization
trust
Service Fee
47,014
7.78
52,782
10.99
(5,768)
(10.93)
Balance of trust assets
53,847,326
100.00
44,660,285
100.00
9,187,041
20.57
8. Investments Operations:
and
utilization
trust
Service Fee
47,014
7.78
52,782
10.99
(5,768)
(10.93)
Balance of trust assets
53,847,326
100.00
44,660,285
100.00
9,187,041
20.57
8. Investments Operations:
Unit: NTD thousand;%
Year
Item		 2014 2013 Comparison between
2014and2013
Amount Proportion Amount Proportion Increase
(decrease) in
amount		 Growth rate
Long-term/short-term
investmentrevenue		 375,476 22.90 263,103 20.29 112,373 42.71
Interest income – NTD
currency		 841,679 51.34 776,095 59.86 65,584 8.45
Interest income – foreign
currency		 244,652 14.92 123,634 9.54 121,018 97.88
TMU operating revenue 15,981 0.98 9,881 0.76 61,00 61.73
Exchange revenue – spot 161,712 9.86 123,757 9.55 37,955 30.67
Total income
(exclusive of the reserve
fund and own reserves)		 1,639,500 100.00 1,296,470 100.00 343,030 26.46

6666

(III)Business plan for 2015

  1. Deposit Operations

  2. (1) Increase deposits and remittances business and increase risk-free service fee income.

  3. (2) Actively develop current deposits, improve current deposit structured ratio, and reduce capital cost.

  4. (3) Continue improving SOP, simplifying routine operating, reducing operating cost and upgrading the service quality.

  5. (4) Continue to strengthen e-banking services, actively promote the consumption of customers, increase service fee income, and improve processing efficiency.

  6. (5) Actively develop the number of customers, promote development of the source of relevant derivatives, and develop the Bank’s potential income.

  7. Loan Operations

  8. (1) Consumer banking:

    • A. House loans business:

      • a. In consideration of the economic condition in market and the credit limit set forth in Article 72-2 of the Banking Act, maintain the scale of operation in FY2014 will be the principle of operation. With the monthly installment payment for the mortgage loan taken into consideration for the control of the current balance of loan and the market situation for mobile adjustment of the policy. Aim at the home mortgage customers in good standing for cross marketing and promotion of trust business and insurance, and bring in more deposit and commission income for the Bank.

      • b. Process fire and earthquake insurance programs or preferential house loan life insurance programs of Taichung Commercial Bank Insurance Broker Co., Ltd. to increase the Bank’s revenue.

    • B. Personal banking: The Bank adheres to the stable management philosophy with respect to the Personal banking and strictly controls the quality of credit extension.

  9. (2) Credit service fee income:

    • A. Process construction loans in accordance with the principle of trust mechanism to control building development risk and increase service fee income.

    • B. Strengthen developing house loan life insurance business to increase the service fee income of the Bank.

  10. (3) Internal training and simplified process:

    • A. Review the credit regulations, amend the regulations, and improve the procedures.

    • B. Guide branches to arrange education training programs continuously: Enhance the whole colleagues’ concept about credit extension business and for review of guiding cases, upgrade the quality of credit extension and operating efficiency, enhance colleagues’ knowledge about credit guarantee fund, and avoid occurrence of illegal credit extension and non-repayment from credit guarantee fund.

  11. Foreign Exchanges Operations

  12. (1) Develop trade financing business, seek more opportunity for international syndicated loans in good quality for more income.

  13. (2) Promotion of derivative trade and offering customers of a wider array of choices.

  14. (3) Increase more deposit in USD for the abundance of working capital.

  15. (4) Upgrade and develop foreign exchange’s e-banking function.

  16. Wealth Management

  17. (1) Introduction of efficient investment and wealth management with the use of conservative parent fund matching with subordinated funds of higher risks in

6767

investment. To overcome the weakness of human nature and use the system to materialize the objective of harvesting when the market is high and purchasing when the market is low for satisfying the diversity of wealth management needs of the customers.

  • (2) Increase the quantity of investment target of the OBU accounts and motivate the customers to invest for a larger share of income from wealth management.

  • (3) Introduction of structured products to make the product line complete and avail a greater variety of choices for the customers.

  • (4) Provide customers with more convenient and in-time service with the introduction of phone banking, the designation of tele-financial advisors, combined with the instant ordering mechanism and phone interview.

  • (5) Continue the gold passbook business and avail a greater variety of choices for the asset portfolio of the customers.

  • (6) Continue to promote overseas bonds and offer the conservative customers the product line of stable stream of incomes.

  • (7) Continue the fixed amount of prepayment of service charge at regular intervals to reflect the performance of commission income up front.

  • (8) Organize dual-currency (FX options) training for licensed wealth management experts so that they could support the marketing of TMU when the system of Treasury Department is in place.

  • (9) Organize wealth management conferences for the regional customers for better opportunity in the marketing of wealth management products. Organize fund investment diagnosis conference to assist the branches and the wealth management experts to vitalize the assets of the customers.

  • Corporate Finance

  • (1) Spare no effort in the development of new accounts and perform the capacity of integrated corporate banking marketing. With flexible pricing strategy, seek more financing cases in good quality for more profit sources.

  • (2) Continue to develop the main market of small and medium enterprises in depth and targets at the micro enterprises. Provide financing for the needs of the enterprises at different stages of development with a proper balance of loan and asset quality, and emerge as the cornerstone of small and medium enterprises.

  • (3) Pay close attention to the moves of the big enterprises at home and abroad in financing, and follow the principle of a proper balance between quality and quantity, make positive effort for more syndicate loans and acting as the arranger so as to enhance the position of the Bank in the finance and banking sector.

  • (4) More referrals to the SMEG to assist enterprises for proper financing and fortify the protection of creditor rights, and provide solution for the enterprises in whole-plant financing.

  • Trust Operations

  • (1) General Trust Operations:

    • A. Prepayment trust: development of the prepayment trust business (gift voucher trust), protect consumer rights, and broaden the basis for regular trust for bringing in more commission incomes.

    • B. Escrow: It is promoted in real estate transaction and tied in with the trust mechanism to assist the community to ensure the security of real estate transactions and fight for housing loans business in order to expand the trust business service scope.

    • C. Pre-sale house performance trust: Work with the “pre-sale house performance bond mechanism” policy promoted by the competent authorities to actively promote the business of real estate development trust and pre-sale house price trust in order to protect the rights and interests of the homebuyers and enhance

6868

transaction security. 

     - D. Insurance trust business: Provide customers a dual service combining insurance and trust instruments to realize the effect of promoting the Bank’s business and fulfilling the corporate social responsibility.

     - E. Employee shareholding and welfare saving trust: the companies listed in TWSE or GTSM will be the target of promotion of this business. Provide pension fund as required by the Labor Standards Act and helps to create a sum of pension reserve for the fringe benefits of the employees and bring in more incomes for the Bank.

     - F. Securities trust: provide incentive of tax saving and lending of securities to develop accounts of securities trust, and develop business of regular trust and bring in more incomes.

  - (2) Financial business: A. Introduction of new products: upgrade the quality and competitiveness of funds, ETF, and overseas bonds already running, plan to development overseas subprime market bonds and offshore wealth management products exclusively for the OBU accounts.

     - B. Provide new breeds of investment: development efficient investment transaction strategy (parent-subordinate fund) and provide the customers disciplinary mode of investment for possible return on investment and brining in incomes for the Bank.

     - C. Development of telephone transaction section (non-voice service): development of telephone transaction service by service personnel. Customers may directly conduct their transactions in investment and wealth management over the phone. This mode of operation is secure and efficient, and can help to develop the wealth management business of the Bank.

  - (3) Custodian agent: move further in the development of custodian service for higher business volume so as to create stable income. This would help to bolster the deposit business and commission income from trust service and management.

  • (IV)Market Analysis

  • Territories of banking business

    • At present, the Bank has 80 branch locations and 1 Overseas Banking Branch to provide diversified business services, including personal banking, corporate banking, wealth management. The bank through business area characteristics has developed refined financial instruments, expanded business fields, and provided customers with better quality and convenient financial services through a professional business operation.

  • Supply and Demand of the market and growth in the future The Directorate-General of Budget, Accounting and Statistics, Executive Yuan, R.O.C.(Taiwan) projected economic growth of 3.78% in 2015 despite the domestic financial environment. Taiwan Institute of Economic Research also forecasted the booming in the banking and finance industry of Taiwan with the expectation that global economic recovery is in place and will drive the economic growth in Taiwan. Enterprises tend to have strong demand for capital. With the continued amendment of applicable legal rules by the competent authority to buttress the competitiveness of the industry and the advocacy of the transformation of the banks and diversification of financial products, banks are expected to achieve sustained profitability.

  • Transformation and challenge of market structure

    • In the wake of the innovation in the digitization and electronic payment of the banking and finance sector, the positioning of banks, deployment of channels, customer relation, sources of profit, marketing strategy and risk management will be affected. The finance and banking industry, which is already in keen competition, will have to confront the upside-down change of the operation environment. Banks will make the best of their

6969

efforts to upgrade and transform. As such, the proper control of the digital technology and development of smart banks will be critical for maintaining the competitive advantage of the commercial banks.

  1. Competitive niche, favorable and unfavorable factors for development in the future, and countermeasures.

(1) SWOT analysis on favorable and unfavorable factors

Strength Weakness
�The Bank has, for a long time, cultivated its
business relation with the small and medium
enterprises in central Taiwan and hence has the
distinctive advantage and a strong and stable
clientele base.
�The diversity of the banking service system is
beneficial
for
integrated
marketing
of
the
organization and will yield better result.
�The capacity and business scale grew in stable paces
and the profitability enhanced yearafteryear.		 �The innovation of financial products is far behind
the international big financial firms.
�As compared with the big financial firms in
economic efficiency, the scale of operation is yet to
be upgraded.
�The Bank still has not opened any overseas branch
and loses its opportunity in business with the
overseas Taiwan business firms and development.
Opportunity Threat
�In the wake of digitization of the financial and
banking sector and the emergence of new customer
groups compel the Bank to establish new mode of
customer service for buttressing its competitive
advantage.
�The experience of the Bank in servicing small and
medium enterprises helps to focus its customer
groups and develop differentiated mode of operation.
�The proper adjustment of the business structure and
the profitability strategy and the capacity in the
utilization of capital and absorption of loss are
expected to improve further.		 �The globalization of banking and finance and the
cross-industry competition of financial holding
companies narrow the space for the existing market
of small and medium banks in banking service.
�The high degree of homogeneity of products and the
keen competition in the financial and banking sector
make it difficult to broaden the interest spread.
�There are numerous factors for the sluggish global
economy and the financial environment is under the
pressure of adaptation in operation.

(2) Countermeasures

The gravity of operation in FY2015 will be “diversification in business” and “diversification of risk” in line with the 4 major business strategies of “surpass the goal of earnings”, “synergy of parent and subsidiaries”, “Increase of profit in foreign exchange” and “risk control of lending”. The Bank will continue the adjustment of its business structure and the mode of profit-making with equal balance in improving the interest spread in lending and deposit and revenue, integrated marketing in the financial group, optimizing the quality of loan assets, enhancement of the efficiency in the use of foreign capital and the development of electronic capital flow operation.

  • (V)Research and Development of financial products and status of business development

  • Primary financial products and new banking units, their sizes and income in the most recent two years

Unit: NTD thousand

Unit: NTD thousand Unit: NTD thousand
Item Until February28,2015 End of 2014 End of 2013
Trade value Operating Trade value
/volume		 Operating
revenue		 Trade value
/volume		 Operating
revenue
/volume revenue
Corporate Finance
Volume of corporate
loans		 179,166,119 4,732,625 170,465,339 4,393,766
174,763,421 775,332
Personal banking
Consumer loans 55,960,724 208,613 56,826,285 1,262,840 56,918,093 1,234,663
Non-Consumer loans 121,137,849 532,301 121,509,645 2,847,219 111,036,621 2,511,628

7070

Retail sales volume
of credit card		 4,626,320 114,896 4,439,260 114,121
722,915 17,454
Trust Operations
Balance of trust assets
54,251,882		 87,202 53,847,326 604,354 44,660,285 480,386
Financial management
Stock 489,823 20,112 2,662,170 18,315 1,904,478 29,689
Fund 6,095,604 25,638 33,980,263 65,857 46,006,586 65,454
Certificates of deposit
bought		 620,800,000 449,535 573,400,000 413,987

104,400,000		 72,837
Commercial
paper
bought		 193,134,941 95,410 115,048,189 74,593

41,282,252		 15,660
Bonds 0 3,178 0 25,027 0 32,843
Corporate bond 0 44,706 2,013,733 267,480 6,269,176 250,706

Note: Credit card business revenue includes the related service fee income and credit card revolving interest income.

  1. R&D expenditure and results in the most recent two years, and the future R&D plans (1) R&D contents and result in the last 2 years: R&D spending amounted to NTD 62.80 million.

million.
Name of R&D
product		 Descriptions of R&D R&D
expenditure		 Results
Income tax
processing
platform		 1.
Provide the platform for different kinds of services such
as automated file transfer and data input for upgrading
operation efficiency.
2.
Provide outward remittance function for all branches or
designated branches for simplification of the declaration
procedure.		 Self-developed Compress the time
for
authentication
and provide a wider
array of data search
function,
and
minimize
manual
processing
of
data. �
The worldwide
web accessibility		 1.
To assist people with disabilities to participate in
society, the Bank’s official website has been built as a
barrier-free web environment to facilitate the visually
impaired consumers an easy access to the relevant
information of the Bank’s financial services.
2.
It is a network service with the information of bank
interest rate and exchange rate provided.		 Self-research
and developed		 Accomplished
in
December 2014, and
has obtained the A+
label
from
the
Bankers Association
in January 2015.
Passbook saving
in gold system		 Provide customers with the financial transaction service of
gold trading, enhance the Bank’s competitiveness, and
improve the operating performance of the business.		 Outsourced
development		 Accomplished
in
April 2014.
“Smartphone
mobile banking
system”		 1.
The
functions
include:
Message
notification,
dashboards, account inquiries, collection and payment
services, investment banking, credit cards, financial
information, the Bank’s information, management
settings, caring service, promotional activities, and
Support the installation of iOS, Android, and WinPhone
simultaneously.
2.
Satisfy customer needs for mobile funding and large
corporate group’s needs for fund management and
funding.		 Outsourced
development		 Accomplished
in
June 2014
The new
generation of
e-Bank		 Provide the customers with quality e-banking services to
enhance the Bank’s competitiveness and improve the
operating performance of e-banking, reduce transaction
volumes, lower over-the-counter service cost, and complete
the automation system that helps improve the Bank’s
profitability.		 Outsourced
development		 Accomplished
in
June 2014
Barrier-free
Internet bank		 To assist people with disabilities to participate in society
and
provide
visually
impaired
consumers
with
a
comprehensive financial environment, the Bank’s official
website has been built as a barrier-free web environment to
facilitate the visually impaired consumers an easy access to
the relevant information of the Bank’s financial services.		 Outsourced
development		 Accomplished
in
June 2014
ESB Integrate the Bank’s backstage systems, such as, NTD
server system, foreign exchange system, trust system, credit
card system, overseas branch system, gold passbook,
customer service systems,
note management system,		 Outsourced
development		 Accomplished
in
June 2014

7171

Name of R&D
product		 Descriptions of R&D R&D
expenditure		 Results
accounts receivable system, and wealth management system
to improve the Bank’s ESB/EAI.
Financial XML
collection/payment
platform		 Provide customers with the 24-hour collection/payment
service with the financial XML collection/payment platform
constructed. The comprehensive funding function is more in
line with customer needs.		 Outsourced
development		 Accomplished
in
June 2014
Financial XML
(FXML)
Certificate System		 Customers can use FXML certificate to have significant
transactions conducted for transaction security.		 Outsourced
development		 Accomplished
in
June 2014
Construct the OTP
System		 Provide customers with a second security check mechanism
other than the authentication of user ID and password; also,
OTP includes hardware,software,and texting.		 Outsourced
development		 Accomplished
in
June 2014

(2) Development plan for the future: R&D spending amounted to NTD 21.60 million.

Recent annual plan Status Scheduled to
completein		 Key factors to success of future R&D
Customer Service
System Update		 The system
is in the
process of
installation		 April 2015 Accelerate the Bank’s customer service quality and continue
to moving towards a market-oriented, personalized, and
refined
service
direction,
and
introduce
high-quality
tele-marketingmanagement operation.
Automation equipment
monitoring and
e-journal centralized
management system		 104.1.16
Project
kick-off
meeting		 July 2015 Make improvement of the responses to account management
and machine problems at the branches and upgrade the overall
operation efficiency, optimize service quality for the
customers.
Mobile payment
project		 The system
is in the
process of
installation		 October 2015 Establish the system of mobile payment interfacing platform;
provide cell phone credit cards, mobile banking card, and
ACH accounts and other diversify of payment tools.
Easy card project The system
is in the
process of
installation		 July 2015 Provide a wide array of products and services with our credit
cards, and install the Easy Credit Cards, Easy Banking Card
systems.
Bank3.0-12 business
items		 20%
completed		 December
2015		 Provide a variety of channels for the customers in applying
for business services for upgrading the competitive power of
theBank.
Module for interfacing
with cyber shops		 10%
completed		 July 2015 Satisfy the needs of the customers in the integration with the
online shopping malls and the capital flow system of the
Bank; provide consumers WebATM, SmartPay, and online
credit card readingforpayment.

  • (VI) Long-term and short-term business development plans

  • Short-term business development plan: Please refer to (III) business plan for 2015.

  • Long-term business development plan: Please refer to Section III. Future Development Strategies of Letter to Shareholders.

7272

II. Employees

(I) Employees’ information

Employees
(I) Employees’ information		 Employees
(I) Employees’ information
Year 2013 2014 Until February 28,
2015
Employee No. Morethan 50years old 148 180 191
Morethan 40years old 885 890 878
Morethan 30years old 498 498 503
Morethan 20years old 492 502 487
Less than 20years old 6 4 3
Total 2,029 2,074 2,062
Averageage 37.7 38.0 38.2
Average seniority 11.2 11.4 11.5
Education
Background		 Master 10.4% 10.6% 10.7%
Bachelor 59.9% 61.0% 61.2%
College 23.5% 22.7% 22.6%
Senior High School 6.1% 5.6% 5.5%
Junior HighSchool 0% 0.1% 0.1%
Professional designation and licensing, and number of such employees Securities salestraders 295 305 304
Investment InsuranceProducts 982 993 1,002
Securities
investment
trust/investment
advice sales traders
145		 143 144
Initial
credit
extension
personnel’s
professional ability
827		 839 842
Advanced credit extension personnel’s
professional ability
36		 39 40
Futures salestraders 119 90 90
LifeInsuranceAgent 1,694 1,735 1,735
Bond sales qualified in professional ability
test
23		 18 18
Initial
foreign
exchange
personnel’s
professional ability
433		 462 470
Wealth
management
and
planning
personnel
491		 487 484
Trust Operations Personnel 1,527 1,609 1,615
Bank’sinternalcontrolbasictest 915 906 906
SeniorSecurities salestraders 172 169 169
PropertyInsuranceAgent 1,623 1,637 1,640
Notesand billstraders 22 21 22
Marketable
securities,
financing
and
financial instruments salestraders
8		 8 8
Internal auditor 3 3 3
Stock affairs personnel qualified in
professional abilitytest
15		 13 13
Foreignexchange professional ability 8 9 9
Financial personnel’s professional ability
in
appraising
collaterals
for
credit
extension

9		 9 9

Note: The employees include part-time student workers.

7373

(II) Personnel involved in the transparency of information licensed by the competent authority in designated area

) Personnel involved in the transparency of information licensed by the competent authority in
designated area		 ) Personnel involved in the transparency of information licensed by the competent authority in
designated area		 ) Personnel involved in the transparency of information licensed by the competent authority in
designated area		 ) Personnel involved in the transparency of information licensed by the competent authority in
designated area
Feb. 28,2015
License Bydepartment Total Total
Securities sales traders TreasuryDept. 5 304
AccountingDept. 2
Audit Office 8
Other entities 289
Investment Insurance Products TreasuryDept. 13 1,002
AccountingDept. 11
AuditOffice 21
Otherentities 957
Securities investment trust/investment advice sales
traders		 TreasuryDept. 8
AccountingDept. 2 144
Audit Office 4
Other entities 130
Initial credit extension personnel’s professional ability TreasuryDept. 13
AccountingDept. 4
Audit Office 20 842
Other entities 805
Advanced credit extension personnel’s professional
ability		 TreasuryDept. 0
AccountingDept. 0 40
Audit Office 0
Otherentities 40
Futures sales traders TreasuryDept. 9
AccountingDept. 1
Audit Office 0 90
Other entities 80
Life Insurance Agent TreasuryDept. 18 1,735
AccountingDept. 11
AuditOffice 29
Otherentities 1,677
Bond sales qualified in professional ability test TreasuryDept. 5
AccountingDept. 1
Audit Office 2 18
Other entities 10
Initial foreign exchange personnel’s professional ability TreasuryDept. 15
AccountingDept. 4
Audit Office 11 470
Other entities 440
Wealth management and planning personnel TreasuryDept. 14
AccountingDept. 3
Audit Office 16 484
Otherentities 451
Trust Operations Personnel TreasuryDept. 21
AccountingDept. 11
Audit Office 26 1,615
Other entities 1,557
Bank’s internal control basic test TreasuryDept. 12
AccountingDept. 5
AuditOffice 18 906
Otherentities 871
Senior Securities sales traders TreasuryDept. 12
AccountingDept. 2
Audit Office 4 169
Other entities 151
Property Insurance Agent TreasuryDept. 19 1,640
AccountingDept. 11
Audit Office 29

7474

License Bydepartment Total Total
Other entities 1,581
Notes and bills traders TreasuryDept. 10
AccountingDept. 2
AuditOffice 3 22
Otherentities 7
Marketable
securities,
financing
and
financial
instruments sales traders		 TreasuryDept. 0 8
AccountingDept. 0
Audit Office 0
Other entities 8
Internal auditor TreasuryDept. 0
AccountingDept. 1
AuditOffice 0 3
Other entities 2
Stock affairs personnel qualified in professional ability
test		 TreasuryDept. 2 13
AccountingDept. 1
Audit Office 1
Otherentities 9
Foreign exchange professional ability TreasuryDept. 3 9
AccountingDept. 1
Audit Office 0
Other entities 5
Financial personnel’s professional ability in appraising
collaterals for credit extension		 TreasuryDept. 0 9
AccountingDept. 0
AuditOffice 0
Other entities 9

  • (III) Employees’ advanced studies and training:

  • The Bank firmly holds that the good nature and willingness to learn of the employees are the corner stone for perpetual corporate development and improvement. For this, the Bank makes tremendous effort in the development of the employees. The Bank designs all education and training program pursuant to Chapter X of the Human Resources Management Regulation, on “Continuing Education and Training” and will be designed to meet the professional needs of respective functions of the Bank for upgrading its human capital and create competitive advantage.

  • Heritage and mentorship has always been the core value of our corporate culture. The Bank organizes different kinds of training programs for different banking functions (e.g.: deposit and remittance, lending, and wealth management), and appoint colleagues in professional standing in respective fields to act as the tutors in internal training for helping the employees in job design and career planning. In 2014, the Bank has organized 77 classes of trainings with 5,065 participants/participations. The spending on education and training amounted to NTD 1,523 thousand in the same period.

  • In attuning to the beats of the changeable market, the Bank requests all employees to get familiarized with the latest knowledge in banking and finance, product information, applicable laws and systems, and market trend in order to provide good qualify professional service to the customers. In practice, the Bank extensively dispatched its personnel to external training for new knowledge. In 2014, the Bank has sent 943 persons/time to participate in external training amounting to NTD 1,592 thousand.

  • The Bank upholds the philosophy of “whole-heartedness” and incorporated service courtesy and courteous languages in training. Through its internal operation procedure and education on the rule of law, the Bank allows for the internalization of benevolence into all employees, which will be manifested in their attitudes and behaviors in treating the customers and working. Employees with competence and integrity will be the foundation of the Bank in perpetual corporate development.

7575

  • (IV) Employees’ code of conduct or ethics: posted in the official website of the Bank for announcements for the inquiry and observance of the employees.

  • All employees shall be law abiding and perform their duties with utmost effort.

  • The principles of honesty, integrity, caution, diligence shall be duly observed by all and there shall be no arrogance, greed, luxury, unrestrained, loitering and gambling at the expense of the reputation of the Bank. Be humble and courteous in treating the customers and efficient at work.

  • All employees shall keep the information on the business of the Bank, the customers and their transactions with the Bank, and any other secretive activities in strict confidence, and shall not disclose to any third party. This code shall be applicable to employees who resigned or discharged from the Bank.

  • Employees shall not have transaction with current customers of the Bank in lending and borrowing, or shall not act as guarantor or the subject of guarantee.

  • Employees shall not act as guarantor under their occupational title.

  • Employees shall not undertake any part-time work beyond the duties of the Bank unless otherwise approved by the Bank.

  • Employees shall not run business homogenous to the operation of the Bank, and shall not engage in any speculative works privately.

  • Except in weekend and recognized holidays, employees shall report to duties in designated span of time, and shall be punctual and shall not leave their duties before the end of the working day. In addition, no employee may be absent from their duties without the approval of the supervisor.

(V) Work environment and employees’ personal safety protection measures:

Item Contents
Entrance guard
safety		 1.
Under the precision entrance guard control system all day.
2.
Contract with the security company to maintain the safety of the office premises at nighttime and
holidays.
3.
Access to the police authority hotline for caution.
Maintenance
and inspection
of equipment		 1.
According to the Building Public Safety Inspection and Declaration Rules, the Bank will
commission the profession service provider to conduct the public safety inspection and report per
two or four years.
2.
According to Fire Act, the Bank will outsource the fire inspection per year.
3.
According to the Labor Safety and Health Act, the Bank will conduct maintenance and inspection
on high-voltage/low-voltage electrical and mechanical equipment, lifters, air conditioners, water
dispensers and fire-protection equipment per month or six months.
Disaster
prevention
measures and
response actions		 The Bank has defined the instructions to rescue disasters and reporting procedure for occupational
accidents, such as “Disaster Urgent Response Action Manual”, “Guidelines for Dealing with Important
Contingencies”, “Instructions to Safety Protection and Organization of Relevant Business Units”,
“Labor Safety and Health Automatic Inspection Plan”, and “Instructions to Maintenance of Facility
Safety”, expressly defining the job responsibilities to be taken by the Bank’s staff before and after
important events, such as force majeure and robbery, and also requiring the various business units to
perform the robbery-proof drills for two timesperyear.
Physical/mental
health		 1.
The Bank provides the in-service staff with the health inspection service per two years.
2.
No smoking at the business locations pursuant to requirements; defining the complaining
requirements and relevant punishment rules against “Sexual Harassment Control”.
3.
Set up the inter-bank forum as the opinion exchange platform.
Insurance
Be enrolled in the labor insurance and health insurance programs pursuant to laws. In the case of any
casualty, it is necessary to designate the dedicated personnel to safeguard evidence, contact the
insurance company, work with the accidental liability insurance investigation conducted by the
employer, filing of the claims and report to the competent authority.

7676

  • III. Enterprise Responsibilities and Ethical Behavior

  • Refer to Three Corporate Governance Report � III Status of Corporate Governance �(VI) Corporate Social Responsibility � VI other information critical to the understanding of our bank’s corporate social responsibility and how it is put into practice.

  • IV. IT Equipment

  • (I) Main hardware equipment:

    1. Hardware facility for “3 centers in 2 locations” and “2 centers in one city”: Min Zu Mainframe Depot in Taichung, Min Quan Subordinate Depot in Taichung, Ban Qiao Backup Depot in New Taipei.

    2. Main hardware equipment:

      • Private cloud server group system, private cloud hard disk storage system, NTD main server system, server hard disk storage equipment, virtual tape reader of server, main server laser printer, FX account server, fund accounts server, hardware transaction security module (HSM), open system server group, open system disk storage equipment, Internet and information security equipment, general network equipment, and UPS.

  • (II) Main information systems:

    • NTD accounts, FX accounts, trust, customer service center, credit cards, collection of instruments, CRM application, Internet bank, mobile bank, Web-ATM, and gold passbook systems.

  • (III) Development plan for the future:

    1. Financial information inter-bank system distortion equipment update: maintain the Bank’s interbank service stability.

    2. Installation of the VISA EMV and UnionPay chip function: support VISA International and UnionPay International in the activation of the liability transfer of using fraudulent cards at ATM transactions.

    3. Development of 12 business systems in responding the advocacy of the Bank 3.0 policy of Financial Supervisory Commission: Financial Supervisory Commission eased the regulation for banks in business operation thereby launched the Bank 3.0 policy. The Bank developed related systems to facilitate the development of relevant business to provide customers more convenient channels for business application and upgrade the competitive position of the Bank.

    4. Third party payment service platform: upgrade the competitive power of the eCommerce system of the Bank and other banks, attract potential customers, develop extended business, and install the payment service system.

    5. Mobile payment project: Establish the system of mobile payment interfacing platform; provide cell phone credit cards, mobile banking card, and ACH accounts and other diversify of payment tools.

    6. Easy card project: Provide a wide array of products and services with our credit cards, and install the Easy Credit Cards, Easy Banking Card systems.

    7. Interfacing module with cyber shopping malls: Satisfy the needs of the customers in the integration with the online shopping malls and the capital flow system of the Bank; provide consumers WebATM, SmartPay, and online credit card reading for payment.

  • (IV) Plans for procurement in the future:

    1. Information security and security event management:

      • Continue the fortification and upgrade of the “information security and security event management system”, perpetual retention of firewall, intrusion prevention system, commissioned server, mail scanning equipment, antivirus server, Microsoft WSUS server, E-Mail server, web pages and program monitoring system, external service websites and weakness scanning server equipment or log books for subsequent review and identification of problems and served as evidence. Use the analysis result and the warning from the information security and security event analysis system for reducing the workload of information security staff.

7777

  1. Reinforcement and upgrade the message encryption equipment and the firewall at the center:

    • The TCP/IP end authentication and message encryption function, known as IPSEC, will be installed at the front end of the account security zone of the center (the two systems back up each other). This device features firewall function and authentication at TCP/IP end and encryption of messages. When the servers between the TCP/IP and the account zone are in transactions, authentication will take place and the message content will be encrypted to ensure privacy and security.

  2. Global sever balanced loading equipment:

    • The device for reinforcement and upgrade the balanced loading of server to meet the world standard of server balanced loading. Currently, the Bank leased 3 broadband lines from 2 ISP service providers for linking the Internet. Through the loading balance device, the traffic volume in the 3 lines is properly allocated.

  3. The monitoring of network operation, upgrade in the change in management capacity and system monitoring and control:

    • (1) Contains the update of the intrusion prevention system, web page security control, mail content security control systems.

    • (2) Upgrade the capacity for the monitoring and control of Internet, software, and hardware events.

  4. Reinforcement of the IT security:

    • Network security has been effectively protected with several layers of security technologies and measures for reducing the risk of the threat from virus, computer worms, BotNet and other Internet attacks, including the use of firewall, attack prevention system, antivirus portal, and server antivirus. These help to prevent different types of network attacks with accuracy and can respond in real-time to reduce possible damage to the system for overall information security protection.

  5. (V)Emergency and safety protection assessments:

  6. Various server backup at the Center:

    • (1) The backup facility of “3 centers in 2 locations” provides synchronized storage service. Data stores in the 2 centers will be back up for each other. Important system will be transmitted to the alternate backup site to prevent the impact from disasters.

    • (2) Server room: There are three sets of UPS (80KVA per set) with three battery packs installed in the main center, in addition, two sets of generators (300KW and 250KW) will keep the server computer in the main center operated normally in case of power failure.

    • (3) In addition to the two sub-centers, the Bank’s has a remote backup center constructed to have the important business well protected. If there is fire in the main center during business hours, the remote backup center can have the critical systems restored (such as: deposits, loans, exchange, ATM, foreign exchange, funds, etc.) within four hours to maintain the Bank’s important services.

    • (4) The remote backup service drill is performed twice a year to strengthen staff proficiency in operation and integrity of document verification.

  7. Business unit backup:

    • (1) Each business unit is with the backup network constructed.

    • (2) The business unit with the linking system failed can operate the process at the nearby branches.

    • (3) The Information Department is equipped with appropriate linking workstation equipment that is ready to support the business unit operation at any time.

  8. Data protection and security:

    • (1) The Bank introduced the digital copyright and document collaborative management platform for the prevention of data leak and undue use or theft of data. On this platform, sensitive data will be encrypted with file collaborative and sharing

7878

function to reduce the risk of data leak.

  • (2) Support the editing of different types of documents for work efficiency and real-time sharing of information and upgrade productivity.

  • Prevention of computer virus and hacker attack to the computer and network system of the Bank:

  • (1) The Bank’s Windows system (including Server and PC) are equipped with anti-virus software, always updated with the latest virus code, and automatically updated all connected PC.

  • (2) The Bank has multiple backup systems (including traditional backup and continuous snapshot protection) constructed to provide different levels of data protection.

  • (3) Established the network operations monitoring and management system, and implement the network operations monitoring, reports analysis, trend forecasting, performance bottleneck analysis, network setup automatic backup, LOG records and storage, auditing, and tracking.

  • (4) To strengthen the anti-virus and anti-hacking effort, equip the mail content filtering protection system is to screen and control personal information in order to effectively prevent leakage of personal information and enhance information security. With the filtering of junk mails and prohibition the use of external mail IP. Comply with the safety policies and laws and regulations to screen, test, change, produce logs, and archive messages in order to meet the requirement of data reservation.

  • (5) Filtering of webpages and mails: Filter the contents of webpages to reduce the access of harmful contents (such as malicious software, malicious websites and spam) to the Bank’s intranet, and also prohibit users from accessing live messengers, pornographic websites, illegal software, P2P file sharing, chatroom, streaming media and malicious websites to reduce the computer’s risk of being hacked.

  • (6) Prohibition of connection to external network, USB storage devices, and writing devices to reduce the risk of data leak.

  • (7) An events gathering and analysis system is constructed to manage the copies and filing of the day log collectively and extend the log reservation period in compliance with regulatory requirements. Day log in different formats (layout) can be integrated to collect and index information events, provide fast query and auditing information events, and define the risk level and severity of the information events with the responsible person informed immediately.

  • (8) AD directory service management, teller terminal, general PC and Server are added into AD directory service domain for centralized management and preventing unauthorized use.

  • (9) The Bank’s network connection of computer equipment is locked to prevent any unauthorized connection in order to enhance information security.

  • (10) Construct network protection and detection systems, filter Web virus and prevent website tamper, and strengthen network information security.

  • (11) Double firewall mechanisms: Construct firewall in the Internet terminal, internal server, and important area. Double firewalls are configured as thermo backup mode to enhance backup capability.

  • (12) Construct IPS, monitor connection to the DMZ area (such as, network banking, portals, etc.), server area (such as, applied servers, database servers, etc.), and teller’s external website, and may set the sealing and filtering rules according to the actual need and practice in order to initiate an active defense mechanism.

  • (13) The external applied software is programmed with initial code verification mechanism to prevent the occurrence of software vulnerabilities that give hackers chances to attack.

  • (14) Database audit system is to record the user’s accessing to the databases for

7979

authorization control and post-even audit. 

     - (15) Commission private information security vendors regularly to test the Bank’s network service and information security vulnerability and penetration, and set internal vulnerability scanning system to scan the business systems automatically, and enhance system security mechanism.

     - (16) Proceed with information safety propagation and education per year.

  • V. Labor-Management Relations

  • (I) Current important employees’ interest, Labor-Management Agreement and the status of execution:

    1. Staff fringe benefits

      • (1) Provide labor insurance, national health insurance, and group accident insurance.

      • (2) Staff bonus and Free-Gratis Dividends.

      • (3) Scholarships for the children of Staffs.

      • (4) Gifts for Spring Festival and Mid-Autumn Festival, subsidies for marriage, funeral and other celebrities, funds for travels, and staff birthdays.

      • (5) Periodic health inspection.

      • (6) Employee shareholding trust

    2. Retirement system:

      • (1) Pension will be disbursed to employees under the Retirement Regulation of the Company.

      • (2) The Bank contributed to the employee pension fund under the Statute for Labor Retirement.

      • (3) Traveling expenses, birthday celebration subsidy and gifts for employees about to retire.

    3. Other important benefits:

      • (1) At the end of the year, the unconsumed special leave of the employees that is less than one-third of the total days of the special leave in the current year will be compensated with salary paid in the following year.

      • (2) In 2014, 80 banking staff in 3 tiers were dispatched to Sanxia in China for training

      • (3) Rules for Reward & Compensation for the Acquisition of License and Certificate by Staff.

    4. Labor-management agreement: None

    5. Employees’ interest and right protection assessments:

      • (1) Personnel Review Committee’s functions: Review of in-service staff’s promotion and performance appraisal guidelines, review of in-service staff’s promotion and performance appraisal cases, and review of employees reward and punishment, review of applications, staff appraisal or reconsideration of the assessment, and other review related matters.

      • (2) The scope of labor-management meeting agenda: Development of labors, business plan and overview of business, mediation of labor-management relations, promotion of labor-management cooperation, labor terms and conditions, labor benefits planning, and enhancement of working efficiency.

8080

(II) Labor-management dispute:

Counterpart Descriptions Status Countermeasures and
anticipated loss
oo Lin 1. Incomplete
remuneration,
including deferred payment.
2. Pension for pacifying.		 Action has been
ruled in favor of
the Bank in the
first trial.		 Action has been ruled in
favor of the Bank in the first
trial. The Bank has no loss or
damage so far.

VI. Important contracts

Major
Agreements		 Nature of Agreement Contracting Parties Term of Agreement Summary
Content
Limitation
Article
Labor service
contracts		 Leebao Security Co., Ltd. 2014.6.1-2017.5.31 Outsourced
fund
delivery
services
None
Labor service
contracts		 Goyun Security Co., Ltd. 2012.9.1-2015.8.31 Security guard on-site services None
Lease agreement NEC Taiwan Ltd. 2012.9.15-2015.9.14 NEC
mainframe
system
maintenance service
None
Lease agreement NEC Taiwan Ltd. 2012.9.1-2015.8.31 Remote backup support for
foreign exchange server
None
Lease agreement Ares International Corporation 2015.2.1-2018.1.31 SWIFT software professional
consultation service
None
Lease agreement CHT 2010.11.12-2018.10.31 Lease of telephone switching
system
None
Purchase
contracts		 Deloitte & Touche Sep. 30
2013-Configuration
Completed		 Personal
Information
Management
System
and
BS10012 Validation Project
None
Purchase
contracts		 Deloitte & Touche Sep. 30
2013-Configuration
Completed		 Foreign
Account
Tax
Compliance Act Project
None
Purchase
contracts		 Acer Inc. 2014.11.4-2015.1.4 PC
equipment
update
procurementproject
None
Purchase
contracts		 NEC Taiwan Ltd. Apr. 8 2013-Configuration
Completed		 Gold
Passbook
procurement
project
None
Purchase
contracts		 IBM Dec. 27
2012-Configuration
Completed		 2nd
generation
e-Banking
system
None
Outsourcing
agreement		 Chunghwa Post Co., Ltd. 2014.5.1-2015.4.30 Outsourced works on mutual
funds transactions statements
None
Outsourcing
agreement		 Yuen Foong Paper Co., Ltd. 2014.4.14-2015.4.13 Statement of accounts or notice
sent periodically or irregularly in
accordance
with
the
requirements of the competent
authorityor the Bank



None
Outsourcing
agreement		 TWNCH 2014.8.15-2015.8.14 Processing
of
non-MICR
instruments
None
Outsourcing
agreement		 Transnational
Group
of
Companies		 2014.6.21-2016.6.20 Delivery service of financial
instrumentsand documents
None
Outsourcing
agreement		 Well
Long
Information
Co., Ltd.
2014.7.1-2015.6.30		 Exclusive check books provided
to
customers
to
facilitate
branches

None
Maintenance
agreement		 Acer Inc. 2015.1.1-2015.12.31 PC equipment maintenance None
Maintenance
agreement		 Harmonation Inc. 2013.10.1-2016.9.30 Maintenance of high speed draft
machine
None

VII. Securitized products and related information: None

8181

Six. Financial Status

  • I. The consolidated balance sheet and comprehensive income statement within the last five years - International Financial Reporting Standards (IFRS)

Brief Balance Sheet (Consolidated)

Unit: NTD thousand

Year
Item		 Year
Item		 Financial information from the past years Financial information from the past years Financial information from the past years Financial data of the
year up to February
2012 2013 2014
28,2015
Cash and cash equivalent, Due from Central
Bank of China and lend to Banks		 77,067,387 81,087,462 91,867,062 91,635,833
Financial liabilities at fair value through profit
and loss		 6,545,279 12,195,016 13,011,606 21,164,103
Available-for-Sale Financial Assets 18,519,719 19,197,158 20,711,997 20,735,496
Bonds and securities sold under repurchase
agreements		 - 4,550,801 1,545,361 3,371,463
Receivable, net 3,910,270 6,485,651 8,118,751 7,601,162
Current income tax asset 57,466 57,372 1,021 15,118
Notes discounted and loans – net 324,029,419 362,916,674 384,382,280 379,440,152
Held-to-maturity financial assets 8,782,945 3,340,584 1,418,003 3,522,524
Investment by equity method - net 132,769 142,654 140,282 147,987
Restricted assets 24,122 164,290 341,093 434,786
Other financial assets – net 905,934 1,158,259 1,206,142 1,169,806
Property, plant, and equipment – net 3,445,166 3,416,335 5,103,786 9,056,860
Intangible assets – net 64,696 97,380 143,759 150,769
Deferred tax assets – net 308,454 391,478 552,103 554,161
Other assets 1,147,646 1,011,621 1,479,607 1,479,003
Total assets 444,941,272 496,212,735 530,022,853 540,479,223
Due to Central Bank of China and banks 5,151,548 8,341,508 10,697,387 16,476,189
Funds borrowed from CBC and other banks 2,414,205 4,968,239 3,499,960 3,714,892
Financial liabilities at fair value through profit
and loss		 91,591 74,800 133,360 160,793
Bills
and
bonds
sold
under
repurchase
agreements		 264,045 358,769 273,573 264,663
Payables 9,148,347 4,420,341 7,363,659 9,321,762
Current Tax Liability 274,962 292,018 218,945 212,238
Customer deposits and remittances 385,510,895 429,704,469 455,966,124 457,731,855
Financial bonds payable 13,548,277 16,042,869 14,400,000 14,400,000
Other financial liabilities 17,208 111,741 340,296 340,200
Liability reserve 261,451 348,829 615,521 751,682
Deferred tax liabilities 111,021 111,021 111,021 111,021
Other liabilities 239,403 400,541 512,056 492,987
Total liabilities Before Distribution 417,032,953 465,175,145 494,131,902 503,978,282
After Distribution 417,264,827 465,688,702 - -
Equityof theparent company
Capital stock Before Distribution 23,187,442 25,345,339 28,515,063 28,515,063
After Distribution 24,868,532 26,924,580 - -
Capital surplus 675,537 675,435 683,751 683,751
Retained earnings Before Distribution 3,952,998 5,050,993 6,537,277 7,249,192
After Distribution 2,040,034 2,958,195 - -
Other equity 92,342 (34,177) 154,860 52,935
Total equity Before Distribution 27,908,319 31,037,590 35,890,951 36,500,941
After Distribution 27,676,445 30,524,033 - -

Note 1: The financial information for the most recent years has been audited by accountant. Note 2: Current year financial information up to February 28 2015 is prepared by us.

8282

Brief balance sheet (individual)

Unit: NTD thousand

Year
Item		 Year
Item		 Financial information from the past years Financial information from the past years Financial information from the past years Financial data of the
2012 2013 2014 year up to February
28,2015
Cash and cash equivalent, Due from Centra
Bank of China and lend to Banks		 76,652,227 80,856,904 91,009,735 90,849,341
Financial liabilities at fair value through profi
and loss		 6,545,279 12,057,223 12,989,306 21,119,319
Available-for-Sale Financial Assets 18,519,719 19,008,479 20,595,620 20,623,919
Bonds and securities sold under repurchas
agreements		 e
-		 4,550,801 1,545,361 3,371,463
Receivable, net 2,899,507 2,769,426 3,206,796 2,379,231
Current income tax asset 56,589 56,589 - 14,097
Notes discounted and loans – net 324,029,419 362,450,039 383,570,399 378,572,089
Held-to-maturity financial assets 8,782,945 3,340,584 1,418,003 3,522,524
Investment by equity method - net 1,301,748 2,694,057 4,106,028 4,113,733
Other financial assets – net 905,934 1,158,259 1,206,142 1,169,806
Property, plant, and equipment – net 3,440,175 3,371,423 5,050,610 9,006,320
Intangible assets – net 64,398 90,231 98,797 106,601
Deferred tax assets – net 308,454 389,465 537,994 537,994
Other assets 1,134,008 770,353 1,185,689 1,102,057
Total assets 444,640,402 493,563,833 526,520,480 536,488,494
Due to Central Bank of China and banks 5,151,548 8,341,508 10,697,387 16,476,189
Funds borrowed from CBC and other banks 1,887,600 2,086,000 - -
Financial liabilities at fair value through profi
and loss		 91,591 74,800 133,360 160,793
Bills
and
bonds
sold
under
repurchas
agreements		 e
264,045		 358,769 273,573 264,663
Payables 9,059,246 3,964,393 6,775,222 8,453,257
Current Tax Liability 263,278 266,823 162,662 162,662
Customer deposits and remittances 385,862,841 430,698,048 457,207,953 458,973,683
Financial bonds payable 13,548,277 16,042,869 14,400,000 14,400,000
Other financial liabilities 17,208 7,605 1,620 1,328
Liability reserve 261,451 348,829 615,521 751,682
Deferred tax liabilities 111,021 111,021 111,021 111,021
Other liabilities 213,977 225,578 251,210 235,628
Total liabilities Before Distribution 416,732,083 462,526,243 490,629,529 499,990,906
After Distribution 416,963,957 463,039,800 - -
Equityof theparent company
Capital stock Before Distribution 23,187,442 25,345,339 28,515,063 28,515,063
After Distribution 24,868,532 26,924,580 - -
Capital surplus 675,537 675,435 683,751 683,751
Retained earnings Before Distribution 3,952,998 5,050,993 6,537,277 7,180,515
After Distribution 2,040,034 2,958,195 - -
Other equity 92,342 (34,177) 154,860 118,259
Total equity Before Distribution 27,908,319 31,037,590 35,890,951 36,497,588
After Distribution 27,676,445 30,524,033 - -

Note 1: The financial information for the most recent years has been audited by accountant. Note 2: Current year financial information up to February 28 2015 is prepared by us.

8383

Brief Income Statement (Consolidated)

Unit: NTD thousand; Earnings Per Share: NTD

Year
Item		 Financial information from thepastyears Financial information from thepastyears Financial information from thepastyears Financial data of the
2012 2013 2014 year up to February
28, 2015
Interest revenue 8,615,114 9,917,145 11,116,277 1,912,615
Less: interest expense 3,132,380 3,606,878 3,954,300 699,813
Net interest income 5,482,734 6,310,267 7,161,977 1,212,802
Net income other than interest income 1,572,073 2,953,985 3,553,022 430,302
Net revenue 7,054,807 9,264,252 10,714,999 1,643,104
Bad debt expense andguarantyreserve (248,661) (1,864,173) (1,982,816) (60,677)
Operatingexpenses (3,449,898) (3,863,100) (4,531,940) (801,592)
Income before taxation of continued
operations		 3,356,248 3,536,979 4,200,243 780,835
Income tax(expense) gain (552,078) (476,708) (480,987) (120,037)
Current
year
profit
of
continuing
business units		 2,804,170 3,060,271 3,719,256 660,798
Income from discontinued operations - - - -
Currentyear netprofit(net loss) 2,804,170 3,060,271 3,719,256 660,798
Current
year
other
comprehensive
income (net, after tax)		 (36,786) (175,831) 48,863 (40,944)
Current
year
other
comprehensive
income (Gross)		 2,767,384 2,884,440 3,768,119 619,854
Netprofit attributable toparent company 2,804,170 3,060,271 3,719,256 660,798
Net profit attributable to non-controlling
interest		 - - - -
Comprehensive income, gross, and net
profit attributable to parent company		 2,767,384 2,884,440 3,768,119 619,854

Comprehensive
income,
gross,
attributable to non-controlling interest		 - - - -
Earningsper share 1.13 1.16 1.32 0.23

Note 1: The financial information for the most recent years has been audited by accountant.

Note 2: Current year financial information up to February 28 2015 is prepared by us.

Note 3: Due to the Bank’s capital increase by recapitalization of earnings in 2012, the 2012 weighted average number of shares outstanding and “earnings per share" is adjusted retrospectively.

Brief Income Statement (Individual)

Unit: NTD thousand� Earnings Per Share: NTD

Year
Item		 Financial information from thepastyears Financial information from thepastyears Financial information from thepastyears Financial data of the
year up to February
28, 2015
2012 2013 2014
Interest revenue 8,595,438 9,748,834 10,790,389 1,851,390
Less: interest expense 3,133,655 3,577,160 3,890,334 688,995
Net interest income 5,461,783 6,171,674 6,900,055 1,162,395
Net income other than interest income 1,407,175 2,663,824 3,085,127 334,255
Net revenue 6,868,958 8,835,498 9,985,182 1,496,650
Bad debt expense andguarantyreserve (238,244) (1,834,591) (1,889,937) (46,815)
Operatingexpenses (3,294,891) (3,498,586) (3,960,383) (672,104)
Income before taxation of continued
operations		 3,335,823 3,502,321 4,134,862 777,731
Income tax(expense) gain (531,653) (442,050) (415,606) 116,933
Current
year
profit
of
continuing
business units		 2,804,170 3,060,271 3,719,256 660,798
Income from discontinued operations - - - -
Currentyear netprofit(net loss) 2,804,170 3,060,271 3,719,256 660,798
Current
year
other
comprehensive
income (net, after tax)		 (36,786) (175,831) 48,863 (40,943)

Current
year
other
comprehensive
income (Gross)		 2,767,384 2,884,440 3,768,119 619,855
Netprofit attributable toparent company - - - -
Net profit attributable to non-controlling
interest		 - - - -
Comprehensive income, gross, and net
profit attributable to parent company		 - - - -
Comprehensive
income,
gross,
attributable to non-controlling interest		 - - - -
Earningsper share 1.13 1.16 1.32 0.23

Note 1: The financial information for the most recent years has been audited by accountant. Note 2: Current year financial information up to February 28 2015 is prepared by us.

Note 3: Due to the Bank’s capital increase by recapitalization of earnings in 2012, the 2012 weighted average number of shares outstanding and “earnings per share" is adjusted retrospectively.

8484

II. Balance Sheet and Income Statement from the most recent years – R.O.C. GAAP Brief Balance Sheet (Consolidated)

Unit: NTD thousand

Year
Item		 Year
Item		 Financial information from the past years Financial information from the past years Financial information from the past years
2010 2011 2012
Cash and cash equivalent, Due from Central Bank of
China and lend to Banks		 73,281,791 82,617,629 77,017,387
Financial assets at fair value through profit or loss 1,646,562 1,096,769 6,545,279
Available-for-Sale Financial Assets 1,099,035 4,211,580 18,519,719
Discounts and loans 244,463,233 277,756,366 324,029,419
Accounts receivable 3,373,510 2,868,589 3,564,983
Held-to-maturity financial assets 10,382,868 9,439,040 8,782,945
Stocks- equity method 144,073 127,811 126,683
Assets held for sale 150,763 41,639 -
Fixed assets 3,232,898 3,339,207 3,349,941
Other financial assets 144,453 850,396 905,934
Other assets 2,337,446 1,894,542 1,830,648
Total assets 340,256,632 384,243,568 444,672,938
Due to Central Bank of China and banks 2,306,957 3,439,998 5,151,548
Customer deposits and remittances 302,604,873 333,691,650 385,510,895
Financial liabilities at fair value through profit or loss 110,069 51,804 91,591
Bills and bonds sold under repurchase agreements 1,477,800 - 264,045
Funds borrowed from CBC and other banks, Financial
bondspayable		 9,902,150 13,390,109 15,962,482
Payables 3,908,419 7,721,427 8,997,553
Accruable pension liabilities 122,602 136,764 223,704
Other financial liabilities - 22,521 17,208
Other liabilities 408,742 328,241 372,812
Total liabilities Before Distribution 320,841,612 358,782,514 416,591,838
After Distribution 320,841,612 358,894,207 416,823,712
Capital stock Before Distribution 17,319,006 22,338,576 23,187,442
After Distribution 17,613,429 23,187,442 24,868,532
Capital surplus 792,069 675,537 675,537
Retained earnings Before Distribution 1,029,293 2,212,377 4,029,776
After Distribution 734,870 1,251,818 2,116,812
Unrealized revaluation increment 283,744 283,744 283,744
Unrealized gains on financial instruments (9,092) 10,960 91,865
Cumulative translation adjustments - - 477
Other shareholders’ equity - (60,140) (187,741)
Total shareholders’ equity Before Distribution 19,415,020 25,461,054 28,081,100
After Distribution 19,415,020 25,349,361 27,849,226

Note: The financial information for the most recent years has been audited by accountant.

8585

Brief balance sheet (individual)

Unit: NTD thousand

Year
Item		 Year
Item		 Financial information from the past years Financial information from the past years Financial information from the past years
2010 2011 2012
Cash and cash equivalent, Due from Central Bank of
China and lend to Banks
73,281,789		 82,617,614 76,602,227
Financial assets at fair value through profit or loss 1,646,562 1,096,769 6,545,279
Available-for-Sale Financial Assets 1,099,035 4,211,580 18,519,719
Discounts and loans 244,463,233 277,756,366 324,029,419
Accounts receivable 3,389,297 2,888,283 2,553,343
Held-to-maturity financial assets 10,382,868 9,439,040 8,782,945
Stocks- equity method 337,561 216,970 1,295,662
Assets held for sale 150,763 41,639 -
Fixed assets 3,230,721 3,335,981 3,325,763
Other financial assets 144,453 850,396 905,934
Other assets 2,338,643 1,892,043 1,811,777
Total assets 340,464,925 384,346,681 444,372,068
Due to Central Bank of China and banks 2,306,957 3,439,998 5,151,548
Customer deposits and remittances 302,849,512 333,832,631 385,862,841
Financial liabilities at fair value through profit or loss 110,069 51,804 91,591
Bills and bonds sold under repurchase agreements 1,477,800 - 264,045
Funds borrowed from CBC and other banks, Financial
bondspayable
9,902,150		 13,390,109 15,435,877
Payables 3,872,015 7,683,501 8,896,768
Accruable pension liabilities 122,602 136,764 223,704
Other financial liabilities - 22,521 17,208
Other liabilities 408,800 328,299 347,386
Total liabilities Before Distribution 321,049,905 358,885,627 416,290,968
After Distribution 321,049,905 358,997,320 416,522,842
Capital stock Before Distribution 17,319,006 22,338,576 23,187,442
After Distribution 17,613,429 23,187,442 24,868,532
Capital surplus 792,069 675,537 675,537
Retained earnings Before Distribution 1,029,293 2,212,377 4,029,776
After Distribution 734,870 1,251,818 2,116,812
Unrealized revaluation increment 283,744 283,744 283,744
Unrealized gains on financial instruments (9,092) 10,960 91,865
Cumulative translation adjustments - - 477
Other shareholders’ equity - (60,140) (187,741)
Total shareholders’ equity Before Distribution 19,415,020 25,461,054 28,081,100
After Distribution 19,415,020 25,349,361 27,849,226

Note: The financial information for the most recent years has been audited by accountant.

8686

Brief Income Statement (Consolidated)

Unit: NTD thousand, Earnings Per Share: NTD


Unit: NTD thousand,Earnings Per Share: NTD
Unit: NTD thousand,Earnings Per Share: NTD
Unit: NTD thousand,Earnings Per Share: NTD
Year
Item		 Financial information from thepastyears
2010 2011 2012
Net interest income 4,383,614 4,943,924 5,480,061
Net income other than interest income 212,753 835,828 1,559,615
Bad debt expenses (933,359) (664,948) (248,661)
Operatingexpenses (2,787,014) (3,181,517) (3,466,328)
Income before taxation of continued operations 875,994 1,933,287 3,324,687
Income after taxation of continued operations 411,956 1,454,000 2,777,958
Profit and loss from discontinued operations
(after tax)		 - - -
Extraordinary profit and loss(after tax) - - -
Cumulative effect of change in accounting
principle(after tax)		 - - -
Net income 411,956 1,454,000 2,777,958
Earningsper share 0.29 0.76 1.2

Note 1: The financial information for the most recent years has been audited by accountant. Note 2: Per board resolutions dated 2010.11.4 and 2011.7.7, respectively, our bank has decided to increase paid-in capital by issuing and selling 360 million and 450 million shares of common stock, respectively, for cash. Taking into consideration the retained earnings appropriated for capital increase in 2010 and 2012, and the capital reserve appropriated for capital increase in 2010, the weighted average number of shares outstanding and earnings per share from 2009 to 2012 should be adjusted retrospectively.

Brief income statement (individual)

Unit: NTD thousand, Earnings Per Share: NTD


Unit: NTD thousand,Earnings Per Share: NTD
Unit: NTD thousand,Earnings Per Share: NTD
Unit: NTD thousand,Earnings Per Share: NTD
Yea
Item		 r
Financial information from thepastyears
2010 2011 2012
Net interest income 4,383,460 4,943,296 5,459,110
Net income other than interest income 154,137 769,561 1,394,607
Bad debt expenses (933,359) (664,948) (238,244)
Operatingexpenses (2,765,417) (3,133,733) (3,311,211)
Income before taxation of continued operations 838,821 1,914,176 3,304,262
Income after taxation of continued operations 411,956 1,454,000 2,777,958
Profit and loss from discontinued operations
(after tax)
-		 - -
Extraordinary profit and loss(after tax) - - -
Cumulative effect of change in accounting
principle(after tax)
-		 - -
Net income 411,956 1,454,000 2,777,958
Earningsper share 0.29 0.76 1.20

Note 1: The financial information for the most recent years has been audited by accountant. Note 2: Per board resolutions dated 2010.11.4 and 2011.7.7, respectively, our bank has decided to increase paid-in capital by issuing and selling 360 million and 450 million shares of common stock, respectively, for cash. Taking into consideration the retained earnings appropriated for capital increase in 2010 and 2012, and the capital reserve appropriated for capital increase in 2010, the weighted average number of shares outstanding and earnings per share from 2009 to 2012 should be adjusted retrospectively.

The names of CPA conducting financial audits in the most recent five years and their audit opinions

Year
Audit		 2010 2011 2012 2013 2014
Deloitte & Touche Wen-Ya Hsu
Tzu-ChunWang		 Wen-Ya Hsu
Tzu-ChunWang		 Wen-Ya Hsu
Tzu-ChunWang		 Min-Shen Yang
Tzu-ChunWang		 Min-Shen Yang
Kuan-ChungLai
Audit opinions Modified
unqualified
opinions(Note)		 Modified
unqualified
opinions(Note)		 Modified
unqualified
opinions(Note)		 Standard
unqualified
opinion		 Standard
unqualified
opinion

Note: The CPA audited the equity investment of Reliance Securities Investment Trust Co., Ltd. and Taichung Commercial Bank Lease Enterprise under equity method in the financial statements 2009, 2010, 2011 and 2012 based on the audit report issued by the other CPA, and the modified unqualified opinions were issued therefore.

8787

III. Financial Analysis for the most recent years

Financial Analysis - International Financial Reporting Standards (consolidated)

Year
Analytical items		 Year
Analytical items		 Financial Analysis for the most recent threeyears Financial Analysis for the most recent threeyears Financial Analysis for the most recent threeyears
2012 2013 2014
Operating
ability		 Loans to deposits ratio(%) 84.90 85.47 85.49
NPL ratio(%) 0.37 0.58 0.34
Interest expenses to annual average deposit
ratio(%)
0.87
0.88 0.89
Interest income to annual average loan
ratio(%)
2.77
2.78 2.85
Total assets turnover(times) 0.02 0.02 0.02
Average operation revenue per employee
(thousand)
3,361
4,171 4,513
Employee averageprofit rate(thousand) 1,336 1,378 1,567
Profitability Return on Tier I Capital(%) 13.07 12.31 12.78
ROA(%) 0.68 0.65 0.72
ROE(%) 10.55 10.38 11.11
Netprofit rate(%) 39.75 33.03 34.71
Earningsper share(NTD) 1.13 1.23 1.32
Financial
structure		 Liabilities to total assets ratio(%) 93.67 93.67 93.11
Ratio of real estate and equipment to
equity (%)
12.34
11.01 14.22
Growth rate Asset Growth Rate(%) 15.79 11.52 6.81
Profit Growth Rate(%) 73.60 5.38 18.75
Cash flows Cash flow ratio(%) 63.00 - 39.76
Cash flow adequacyratio(%) 1,331.29 1,021.91 693.72
Cash flow for operating to cash flow from
investingratio(%)		 (66.40)
- (1,341.35)
LiquidityReserve Ratio(%) 19.74 20.76 20.3
Relatedpartysecured loans(NTD thousand) 1,869,324 1,596,200 1,662,958
Relatedpartysecured loans to total loan ratio(%) 0.56 0.42 0.41
Operating
Scale		 Asset market share(%) 0.94 0.97 0.95
Market share of net worth(%) 0.99 1.02 1.07
Market share of deposits(%) 1.18 1.25 1.25
Market share of loans(%) 1.51 1.64 1.66
Explanation for the reason of changes in financial ratios in the past two years:
I.
The NPL rate fell from the level of FY2013: mainly because of the amount of overdue loans in FY2014 reduced by
NTD0.821 billion as compared with the same period of FY2013.
II.
The ratio of real properties and equipment to equity increased from the level of FY2013: mainly because the net
value of real properties and equipment in FY2014 increased by NTD1.687 billion as compared with the same
period of FY2013.
III.
Asset growth rate fell from the level of FY2013: mainly because the total assets in FY2014 increased by
NTD33.81 billion as compared with the same period of FY2013. However, total assets in FY2013 indicated growth
of NTD51.271 billion from the same period of FY2012.
IV.
Profitability growth rose from the level of FY2013: mainly because the earnings before taxation in FY2014
increased by NTD0.663 billion from the same period of FY2013, while the earnings before taxation in FY2013
increased by NTD0.181 billion from the same period of FY2012.
V.
Cash flow adequacy ratio fell from the level of FY2013: mainly because the capital expenditures in FY2014 and
theprevious 5years increased byNTD1.717 billion from the sameperiod FY2013 and theprevious 5years.

8888

Financial Analysis - International Financial Reporting Standards (individual)

Year
Analytical items		 Year
Analytical items		 Financial Analysis for the most recent threeyears Financial Analysis for the most recent threeyears Financial Analysis for the most recent threeyears
2012 2013 2014
Operating
ability		 Loans to deposits ratio(%) 84.82 85.17 85.08
NPL ratio(%) 0.37 0.58 0.34
Interest expenses to annual average
deposit ratio(%)		 0.87
0.88 0.88
Interest income to annual average loan
ratio(%)		 2.77
2.74 2.77
Total assets turnover(times) 0.02 0.02 0.02
Average operation revenue per employee
(thousand)		 3,384
4,355 4,814
Employee averageprofit rate(thousand) 1,381 1,508 1,793
Profitability Return on Tier I Capital(%) 13.15 12.60 13.23
ROA(%) 0.68 0.65 0.73
ROE(%) 10.55 10.38 11.11
Netprofit rate(%) 40.82 34.64 37.25
Earningsper share(NTD) 1.13 1.23 1.32
Financial
structure		 Liabilities to total assets ratio(%) 93.66 93.64 93.07
Ratio of real estate and equipment to
equity (%)		 12.33
10.86 14.07
Growth rate Asset Growth Rate(%) 15.68 11.00 6.68
Profit Growth Rate(%) 74.27 4.99 18.06
Cash flows Cash flow ratio(%) 73.43 - 58.28
Cash flow adequacyratio(%) 1,402.89 1,404.64 877.02
Cash flow for operating to cash flow from
investingratio(%)		 (69.34)
- (527.19)
LiquidityReserve Ratio(%) 19.74 20.76 20.3
Relatedparty secured loans(NTD thousand) 1,869,324 1,596,200 1,662,958
Relatedparty secured loans to total loan ratio(%) 0.56 0.42 0.41
Operating
Scale		 Asset market share(%) 0.94 0.96 0.95
Market share of net worth(%) 0.99 1.02 1.07
Market share of deposits(%) 1.18 1.25 1.25
Market share of loans(%) 1.51 1.64 1.66
Explanation for the reason of changes in financial ratios in the past two years:
I.
The NPL rate fell from the level of FY2013: mainly because of the amount of overdue loans in FY2014 reduced by
NTD0.821 billion as compared with the same period of FY2013.
II.
The ratio of real properties and equipment to equity increased from the level of FY2013: mainly because the net
value of real properties and equipment in FY2014 increased by NTD1.679 billion as compared with the same period
of FY2013.
III.
Asset growth rate fell from the level of FY2013: mainly because the total assets in FY2014 increased by NTD32.957
billion as compared with the same period of FY2013. However, total assets in FY2013 indicated growth of
NTD48.923 billion from the same period of FY2012.
IV.
Profitability growth rose from the level of FY2013: mainly because the earnings before taxation in FY2014 increased
by NTD0.633 billion from the same period of FY2013, while the earnings before taxation in FY2013 increased by
NTD0.166 billion from the same period of FY2012.
V.
Cash flow adequacy ratio fell from the level of FY2013: mainly because the capital expenditures in FY2014 and the
previous 5years increased byNTD1.695 billion from the sameperiod FY2013 and theprevious 5years.

  • I. The NPL rate fell from the level of FY2013: mainly because of the amount of overdue loans in FY2014 reduced by NTD0.821 billion as compared with the same period of FY2013.

  • II. The ratio of real properties and equipment to equity increased from the level of FY2013: mainly because the net value of real properties and equipment in FY2014 increased by NTD1.679 billion as compared with the same period of FY2013.

  • IV. Profitability growth rose from the level of FY2013: mainly because the earnings before taxation in FY2014 increased by NTD0.633 billion from the same period of FY2013, while the earnings before taxation in FY2013 increased by NTD0.166 billion from the same period of FY2012.

  • V. Cash flow adequacy ratio fell from the level of FY2013: mainly because the capital expenditures in FY2014 and the previous 5 years increased by NTD1.695 billion from the same period FY2013 and the previous 5 years.

  • Note 1: The financial information for the most recent five years and the consolidated financial information have been audited.

Note 2: Equations for financial analysis:

8989

  1. Operating ability (1) Loans/deposits ratio = Total amount/total deposits.

    • (2) NPL rate = Total non-performing loans/Total amount.

    • (3) Interest expense to average annual deposit balance ratio = total interest expenses/average annual deposit balance

    • (4) Interest income to average annual loan balance ratio = total interest incomes/average annual loan balance (5) Total assets turnover rate = Earnings/Average total assets

    • (6) Employee average return (Note 6) = Earning/Total Employee No.

    • (7) Employee average profit rate = Earnings/Total Employee No.

  2. Profitability (1) Return on Tier I Capital = EBT/Average total amount of Tier I capital.

    • (2) ROA = Income after taxation/Average total assets.

    • (3) ROE = Income after taxation/Average net equity.

    • (4) Profit rate = Income after taxation/income-net

    • (5) Earnings Per Share = (Income attributable to parent company – dividends from preferred shares)/weighed average quantity of outstanding shares. (Note 4)

  3. Financial structure

    • (1) Liabilities to total assets =Total liabilities/total assets.

    • (2) Real estate and equipment / equity ratio = Net real estate and equipment / net equity.

  4. Growth rate

    • (1) Asset growth rate = (Total assets of current year – total assets of previous year)/total assets of previous year.

    • (2) Profit growth rate = (EBT of current year – EBT of previous year)/EBT of previous year.

  5. Cash flow (Note 7)

    • (1) Cash flow ratio= net cash flow from operation /(Call loans and overdraft from banks + payable CP + Financial liabilities at fair value through profit and loss + R/P and bond liabilities + current portion of payables.

    • (2) Net cash flow adequacy rate= net cash flow from operation in the last 5 years/ (capital spending + Cash Dividends) in the last 5 years.

    • (3) Cash flow satisfied rate = Cash flow from operation/ cash flow from investments.

  6. Liquidity Reserve Ratio = Central Bank Required Current Assets/Allowance for liquidity of liabilities.

  7. Operating Scale

    • (1) Asset market share rate = Total assets/Total assets of all financial institutions available for making deposits and loans. (Note 5)

    • (2) Net worth market share rate = Net worth/total net worth of all financial institutions available for making deposits and loans.

    • (3) Deposit market share rate = Total deposits/Total deposits of all financial institutions available for making deposits and loans

    • (4) Loan market share rate = Total amount/Total amount of all financial institutions available for making deposits and loans

  8. Note 3: The total liabilities amount is net of guarantees reserve and accidental losses reserve.

  9. Note 4: The following shall be considered in assessing the equation for EARNINGS PER SHARE as aforementioned:

  10. Weighted average quantity of shares is on the basis of common stock, not the outstanding shares as of the end of the year.

  11. The quantity of new shares for raising new capital or treasury stock trade shall be included in the weighted average quantity of shares during their effective term.

  12. Where the shares may be issued through the capitalization of retained earnings or capital surplus, make adjustment in proportion to the quantity of shares issued in calculating the semi-annual or annual EARNINGS PER SHARE of the year. The period for the release of such new shares may be omitted.

  13. If the preferred stock is non-convertible cumulative preferred stocks, dividend for the year (issued or not) shall be subtracted from earnings or added to earnings.

  14. If the preferred stock is non-cumulative preferred stocks, dividend on the preferred stock shall be subtracted from earnings after income tax, if any. If there are no earnings after income tax, no adjustment shall be made.

  15. Note 5: Financial institutions that can undertake deposits and withdrawals included domestic banks, branches of foreign banks in Taiwan, Credit Unions, Credit Departments of Farmers and Fishermen Associations, and investment trust firms. Note 6: Return rate refers to the total of incomes from interests and other sources.

  16. Note 7: Consider the followings in conducting cash flow analysis:

  17. Net cash flow from operation refers to net cash inflow from operation as stated in the Statement of Cash Flow.

  18. Capital spending refers to the cash outflow to annual capital investments.

  19. Cash Dividends includes the dividends in cash paid to holders of common shares and preferred shares.

  20. Property and plant refer to total fixed assets before subtracting by accumulated depreciation.

9090

Financial analysis - ROC Financial Accounting Standards (individual)

Year
Analytical items		 Year
Analytical items		 Financial Analysis for the most recent three years Financial Analysis for the most recent three years Financial Analysis for the most recent three years
2010 2011
2012
Operating
ability		 Loans to deposits ratio (%) 81.60 84.08
84.82
NPL ratio (%) 0.60 0.30
0.37
Interest expenses to annual average
deposit ratio(%)
0.60		 0.78
0.87
Interest income to annual average loan
ratio(%)
2.57		 2.76
2.77
Total assets turnover (%) 0.01 0.01
0.02
Average operation revenue per employee
(thousand)
2,481		 2,893
3,376
Employee average profit rate (thousand) 225 736
1,368
Profitability Return on Tier I Capital (%) 5.04 8.95
13.03
ROA (%) 0.13 0.40
0.67
ROE (%) 2.37 6.48
10.38
Net profit rate (%) 9.08 25.45
40.53
Earnings per share (NTD) 0.29 0.76
1.20
Financial
structure		 Liabilities to total assets ratio (%) 94.28 93.37
93.67
Fixed assets to shareholders’ equity ratio
(%)
16.64		 13.10
11.84
Growth rate Asset Growth Rate (%) 10.00 12.89
15.62
Profit Growth Rate (%) 189.43 128.20
72.62
Cash flows Cash flow ratio (%) 32.51 58.59
-
Cash flow adequacy ratio (%) 311.62 744.94
704.58
Cash flow for operating to cash flow from
investingratio(%)
(7.29)		 (16.56)
-
Liquidity Reserve Ratio (%) 19.03 19.63
19.74
Related party secured loans (NTD thousand) 1,377,605
1,219,243 1,869,324
Related party secured loans to total loan ratio (%) 0.49 0.48
0.56
Operating
Scale		 Asset market share (%) 0.79 0.84
0.94
Market share of net worth (%) 0.78 0.98
1.00
Market share of deposits (%) 1.00 1.06
1.18
Market share of loans (%) 1.25 1.34
1.51

Note 1: The financial information for the most recent five years and the consolidated financial information have been audited.

Note 2: Equations for financial analysis:

  1. Operating ability

(1) Loans/deposits ratio = Total amount/total deposits.

(2) NPL rate = Total non-performing loans/Total amount.

(3) Interest expense to average annual deposit balance ratio = total interest expenses/average annual deposit balance

(4) Interest income to average annual loan balance ratio = total interest incomes/average annual loan balance

  • (5) Total assets turnover rate = Earnings/Average total assets

9191 

  - (6) Employee average return (Note 6) = Earning/Total Employee No.

  - (7) Employee average profit rate = Earnings/Total Employee No.

  1. Profitability

    • (1) Return on Tier I Capital = EBT/Average total amount of Tier I capital.

    • (2) ROA = Income after taxation/Average total assets.

    • (3) ROE = Income after taxation/Average net shareholders equity.

    • (4) Profit rate = Income after taxation/income-net

    • (5) Earnings Per Share = (earnings – dividends from preferred shares)/weighed average quantity of outstanding shares. (Note 4)

  2. Financial structure

    • (1) Liabilities to total assets =Total liabilities/total assets.

    • (2) Fixed assets to net worth =net total assets/net shareholders’ equity.

  3. Growth rate

    • (1) Asset growth rate = (Total assets of current year – total assets of previous year)/total assets of previous year.

    • (2) Profit growth rate = (EBT of current year – EBT of previous year)/EBT of previous year.

  4. Cash flow (Note 7)

    • (1) Cash flow ratio= net cash flow from operation /(Call loans and overdraft from banks + payable CP + financial liabilities which change in fair value is recognized as gain (loss) + R/P and bond liabilities + current portion of payables).

    • (2) Net cash flow adequacy rate= net cash flow from operation in the last 5 years/ (capital spending + Cash Dividends) in the last 5 years.

    • (3) Cash flow satisfied rate = Cash flow from operation/ cash flow from investments.

  5. Liquidity Reserve Ratio = Central Bank Required Current Assets/Allowance for liquidity of liabilities. 7. Operating Scale

    • (1) Asset market share rate = Total assets/Total assets of all financial institutions available for making deposits and loans. (Note 5)

    • (2) Net worth market share rate = Net worth/total net worth of all financial institutions available for making deposits and loans.

    • (3) Deposit market share rate = Total deposits/Total deposits of all financial institutions available for making deposits and loans

    • (4) Loan market share rate = Total amount/Total amount of all financial institutions available for making deposits and loans.

  6. Note 3: Total liabilities net of reserve, allowance for loss from bill trade, allowance for default, and allowance for contingency.

  7. Note 4: The following shall be considered in assessing the equation for EARNINGS PER SHARE as aforementioned:

  8. Weighted average quantity of shares is on the basis of common stock, not the outstanding shares as of the end of the year.

  9. The quantity of new shares for raising new capital or treasury stock trade shall be included in the weighted average quantity of shares during their effective term.

  10. Where the shares may be issued through the capitalization of retained earnings or capital surplus, make adjustment in proportion to the quantity of shares issued in calculating the semi-annual or annual EARNINGS PER SHARE of the year. The period for the release of such new shares may be omitted.

  11. If the preferred stock is non-convertible cumulative preferred stocks, dividend for the year (issued or not) shall be subtracted from earnings or added to earnings.

  12. If the preferred stock is non-cumulative preferred stocks, dividend on the preferred stock shall be subtracted from earnings after income tax, if any. If there are no earnings after income tax, no adjustment shall be made.

Note 5: Financial institutions that can undertake deposits and withdrawals included domestic banks, branches of foreign banks in Taiwan, Credit Unions, Credit Departments of Farmers and Fishermen Associations, and investment trust firms. Note 6: Return rate refers to the total of incomes from interests and other sources.

Note 7: Consider the followings in conducting cash flow analysis:

  1. Net cash flow from operation refers to net cash inflow from operation as stated in the Statement of Cash Flow.

  2. Capital spending refers to the cash outflow to annual capital investments.

  3. Cash Dividends includes the dividends in cash paid to holders of common shares and preferred shares.

  4. Gross fixed assets refer to total fixed assets before subtracting by accumulated depreciation.

9292

Consolidated Capital Adequacy Ratio

Unit: NTD thousand

Unit: NTD thousand Unit: NTD thousand
Year
Analytical items		 Consolidated capital adequacy ratio
2013 2014
Self-owned
Capital		 Common stock equity 30,473,315 35,259,138
Additional Tier 1 capital - -
Tier II Capital 11,507,948 9,847,617
Self-owned Capital 41,981,263 45,106,755
risk-weighted assets Credit Risk Standardised Approach 335,983,142 368,631,467
Internal Ratings-Based Approach - -
Asset Securitization - -
Operational Risk Basic Indicator Approach 11,659,675 13,340,988

Standardised Approach/Alternative
StandardisedApproach
-		 -
Advanced Measurement Approach - -
Market Risk Standardised Approach 4,724,850 5,442,150
Internal Models Approach - -
Total risk-weighted assets 352,367,667 387,414,605
Capital adequacy ratio 11.91% 11.64%
Tier I capital to risk weighted assets ratio 8.65% 9.10%
Common stock equity to risk weighted assets ratio 8.65% 9.10%
Leverage ratio 4.82% 5.34%
Explain the changes of capital adequacy ratio in the last 2 years.
Causal analysis is not necessary for the change below 20%.

Note:

  1. The aforementioned 2 fiscal years have been reviewed by certified public accountants with the issuance or review reports.

  2. The self-owned capital, risk assets, and total exposure in this table should be calculated according to the regulations in “Regulation on Bank Capital Adequacy and Capital Tiers” and “Clarification on Bank Equity Capital and Risk Capital Calculation Methods and Forms.”

  3. The capital adequacy calculation formula is as follows:

  4. (1) Self-owned capital = Common stock equity + Additional Tier I capital + Tier II Capital.

  5. (2) Total risk-weighted assets = Credit risk-weighted assets + Capital charge of (operational risk + market risk) x 12.5.

  6. (3) Capital Adequacy ratio = Total self-owned capital / Total risk-weighted assets.

  7. (4) Tier I capital to risk-weighted Assets ratio = (Common stock equity +Additional Tier 1 capital)/risk-weighted assets.

  8. (5) Common stock equity to risk-weighted assets ratio = common stock equity / risk weighted assets.

  9. (6) Leverage ratio = Tier I capital / Total risk exposure.

9393

Unit: NTD thousand Unit: NTD thousand Unit: NTD thousand Unit: NTD thousand Unit: NTD thousand Unit: NTD thousand Unit: NTD thousand
Year
Analytical items		 Consolidated capital adequacyratio in 2010~2012
2010 2011 2012
Self-owned Capital Common stock 17,319,006 22,338,576 23,187,442
Perpetual non-cumulativepreferred shares 0 0 0
Non-cumulative subordinated debt without maturitydate 0 0 0
Capital collected in advance 0 0 0
Capital reserves(except the value appreciation of fixed assets) 792,069 675,537 675,537
Tie Legal reserve 600,350 723,937 1,160,137
r I Capital Special reserve 16,987 32,599 83,647
Accumulatedprofit or loss 411,956 1,455,841 2,785,992
Minorityequity 0 0 0
Other shareholders’ equity (20,903) (65,005) (187,505)
Less:goodwill 0 0 0
Less: unamortized loss from sale of NPL 0 0 0
Less: capital deductions 573,425 797,919 715,888
Total Tier I capital 18,546,040 24,363,566 26,989,362
Perpetual cumulativepreferred shares 0 0 0
Cumulative subordinated debt without maturitydate 0 0 0
Tier II Cap Fixed asset revaluation increment surplus(includingappreciations) 283,744 283,744 283,744
45% of unrealizedgain on available-for-sale financial 5,138 4,492 32,409
Convertible Bonds 0 0 0
Operatingreserve andprovisions for bad debts 0 0 0
Long-term subordinated bond 6,860,000 5,500,000 6,840,000
ital Non-perpetualpreferred stock 0 0 0
The sum of Perpetual non-cumulative preferred stocks and non-cumulative
subordinated debt without maturitydate exceeding15% of total Tier I Capital
0		 0 0
Less: capital deductions 381,549 496,989 495,997
Total Tier II capital 6,767,333 5,291,247 6,660,156
Tier I
Capit		 Short-term subordinated bond 0 0 0
Non-perpetualpreferred stock 0 0 0
II
al		 Total Tier III capital 0 0 0
Self-owned Capital 25,313,373 29,654,813 33,649,518
risk-weighted assets Credit Risk Standardised Approach 214,173,049 244,284,117 298,765,919
Internal Ratings-Based Approach - - -
Asset Securitization - - -
Operational
 Basic Indicator Approach 10,010,975 9,340,762 9,686,638
Standardised Approach /Alternative Standardised Approach - - -
Risk Advanced Measurement Approach - - -
Market Risk Standardised Approach 2,180,938 782,175 1,481,200
Internal Models Approach - - -
Total risk-weighted assets 226,364,962 254,407,054 309,933,757
Capital adequacyratio 11.18% 11.66% 10.86%
Tier I capital to risk weighted assets ratio 8.19% 9.58% 8.71%
Tier II capital to risk weighted assets ratio 2.99% 2.08% 2.15%
Tier III capital to risk weighted assets ratio 0% 0% 0%
Common stock to total assets ratio 5.09% 5.81% 5.21%

Note 1: the aforementioned 3 fiscal years have been reviewed by certified public accountants with the issuance or review reports.

Note 2: The Shares and dividends and the amount of weighed average risk assets shall be filled in as required in “Regulation for Banks in the Management of Capital Adequacy”, and “Explanation and Forms for the Calculation of Shares and dividends and Risk Assets by Banks”. Note 3: The capital adequacy calculation formula is as follows:

  1. Self-owned Capital = Tier I Capital + Tier II Capital + Tier III Capital.

  2. Total risk-weighed assets = Credit risk-weighed assets + Capital charge of (operational risk + market risk) x 12.5.

  3. Capital Adequacy ratio = Total self-owned capital / Total risk-weighed assets.

  4. Tier I capital to risk weighted assets ratio = Tier I Capital / Total risk-weighted asset.

  5. Tier II capital to risk weighted assets ratio = Tier II Capital / Total risk-weighted asset.

  6. Tier III capital to risk weighted assets ratio = Tier III Capital / Total risk-weighted asset.

  7. Common stock to total assets ratio = Common stock/ Total assets.

9494

Individual capital Adequacy Ratio

Unit: NTD thousand

Unit: NTD thousand Unit: NTD thousand
Year
Analytical items		 Capital adequacy ratio
2013 2014
Self-owned
Capital		 Common stock equity 29,204,762 33,321,226
Additional Tier 1 capital - -
Tier II Capital 10,232,246 7,794,370
Total Self-owned Capital 39,437,008 41,115,596
risk-weighted assets Credit Risk Standardised Approach 331,126,416 361,365,256
Internal Ratings-Based
Approach		 - -
Asset Securitization - -
Operational Risk Basic Indicator Approach 11,464,900 12,915,750
Standardised Approach /Alternative
Standardised Approach		 - -
Advanced Measurement
Approach		 - -
Market Risk Standardised Approach 4,311,475 5,045,538
Internal Models Approach - -
Total risk-weighted assets 346,902,791 379,326,544
Capital adequacy ratio 11.37% 10.84%
Tier I capital to risk weighted assets ratio 8.42% 8.78%
Common stock equity to risk weighted assets ratio 8.42% 8.78%
Leverage ratio 4.63% 5.07%
Explain the changes of capital adequacy ratio in the last 2 years.
Causal analysis is not necessary for the change below 20%.

Note:

  1. The aforementioned 2 fiscal years have been reviewed by certified public accountants with the issuance or review reports.

  2. The self-owned capital, risk assets, and total exposure in this table should be calculated according to the regulations in “Regulation on Bank Capital Adequacy and Capital Tiers” and “Clarification on Bank Equity Capital and Risk Capital Calculation Methods and Forms.”

  3. The capital adequacy calculation formula is as follows:

  4. (1) Self-owned capital = Common stock equity + Additional Tier I capital + Tier II Capital.

  5. (2) Total risk-weighted assets = Credit risk-weighted assets + Capital charge of (operational risk + market risk) x 12.5.

  6. (3) Capital Adequacy ratio = Total self-owned capital / Total risk-weighted assets.

  7. (4) Tier I capital to Risk-Weighted Assets ratio = (Common stock equity + Additional Tier 1 capital)/ riskweighted assets.

(5) Common stock equity to risk-weighted assets ratio= common stock equity / Total risk weighted assets.

  • (6) Leverage ratio = Net Tier I capital / Total risk exposure.

9595

Unit: NTD thousand

Unit: NTD thousand Unit: NTD thousand Unit: NTD thousand
Year
Analytical items		 Capital adequacyratio in 2010~2012
2010 2011 2012
Self-owned Capital Common stock 17,319,006 22,338,576 23,187,442
Perpetual non-cumulativepreferred shares 0 0 0
Non-cumulative subordinated debt without maturitydate 0 0 0
Capital collected in advance 0 0 0
Tier I Cap Capital reserves(except the value appreciation of fixed assets) 792,069 675,537 675,537
Legal reserve 600,350 723,937 1,160,137
Special reserve 16,987 32,599 83,647
Accumulatedprofit or loss 411,956 1,455,841 2,785,992
ital Minorityequity 0 0 0
Other shareholders’ equity (20,903) (65,005) (187,505)
Less:goodwill 0 0 0
Less: unamortized loss from sale of NPL 0 0 0
Less: capital deductions 670,169 842,498 1,300,377
Total Tier I capital 18,449,296 24,318,987 26,404,873
Perpetual cumulativepreferred shares 0 0 0
Cumulative subordinated debt without maturitydate 0 0 0
Fixed asset revaluation increment surplus(includingappreciations) 283,744 283,744 283,744
45% of unrealizedgain on available-for-sale financial 5,138 4,492 32,409
Tie Convertible Bonds 0 0 0
r II Operatingreserve andprovisions for bad debts 0 0 0
Capital Long-term subordinated bond 6,860,000 5,500,000 6,840,000
Non-perpetualpreferred stock 0 0 0
The sum of Perpetual non-cumulative preferred stocks and non-cumulative
subordinated debt without maturitydate exceeding15% of total Tier I Capital
0		 0 0
Less: capital deductions 478,293 541,568 1,080,486
Total Tier II capital 6,670,589 5,246,668 6,075,667
T
C		 Short-term subordinated bond 0 0 0
ier III
apital		 Non-perpetualpreferred stock 0 0 0
Total Tier III capital 0 0 0
Self-owned Capital 25,119,885 29,565,655 32,480,540
risk-weighted assets Credit Risk Standardised Approach 214,191,716 244,298,087 297,177,443
Internal Ratings-Based Approach - - -
Asset Securitization - - -
Operational Risk Basic Indicator Approach 9,921,300 9,243,025 9,572,388
Standardised Approach /Alternative Standardised Approach - - -
Advanced Measurement Approach - - -
Market Risk Standardised Approach 2,180,938 782,175 1,481,200
Internal Models Approach - - -
Total risk-weighted assets 226,293,954 254,323,287 308,231,031
Capital adequacyratio 11.10% 11.63% 10.54%
Tier I capital to risk weighted assets ratio 8.15% 9.56% 8.57%
Tier II capital to risk weighted assets ratio 2.95% 2.07% 1.97%
Tier III capital to risk weighted assets ratio 0% 0% 0%
Common stock to total assets ratio 5.09% 5.81% 5.22%

Note 1: the aforementioned 3 fiscal years have been reviewed by certified public accountants with the issuance or review reports.

Note 2: The Shares and dividends and the amount of weighed average risk assets shall be filled in as required in “Regulation for Banks in the Management of Capital Adequacy”, and “Explanation and Forms for the Calculation of Shares and dividends and Risk Assets by Banks”. Note 3: The capital adequacy calculation formula is as follows:

  1. Self-owned Capital = Tier I Capital + Tier II Capital + Tier III Capital.

  2. Total risk-weighed assets = Credit risk-weighed assets + Capital charge of (operational risk + market risk) x 12.5.

  3. Capital Adequacy ratio = Total self-owned capital / Total risk-weighed assets.

  4. Tier I capital to risk weighted assets ratio= Tier I Capital / Total risk-weighted asset.

  5. Tier II capital to risk weighted assets ratio = Tier II Capital / Total risk-weighted asset.

  6. Tier III capital to risk weighted assets ratio = Tier III Capital / Total risk-weighted asset.

  7. Common stock to total assets ratio= Common stock/ Total assets.

9696

IV. Audit Committee’ Review Report on the Financial Statement of 2014

Taichung Commercial Bank Co., Ltd. Audit Committee’ Review Report

The financial statements of the parent company only and consolidated financial statements in FY2014 of the Bank have been audited by the certified public accountants of Deloitte Taiwan with the issuance of auditors’ reports, which were released together with the report on operation and proposal for distribution of earnings. The Auditing Committee has review the aforementioned reports and statements and determined that they are presented fairly. Pursuant to Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act, we hereby present the report for your reference.

To:

2015 Shareholders’ meeting, Taichung Commercial Bank Co. Ltd.

Audit Committee

Independent director Hsi-Rong Huang

Independent director Chen-Le Liu

Independent director Jin-Yi Lee

March 9, 2015

  • V. Consolidated financial statements 2014: See Appendix 1.

  • VI. Financial statements 2014: See Appendix2.

  • VII. In the case of any insolvency of the Bank and its affiliates, specify its effect on the Financial Status of the Bank: N/A.

9797

Seven. Review and analysis of financial condition and results, and Risk management matters I. Financial Analysis

Unit: NTD thousand


I.
Financial Analysis
Unit: NTD thousand
Unit: NTD thousand
Year
Item		 2014 2013 Variation
Amount %
Cash and cash equivalent, Due from Central Bank
of China and lend to Banks
91,867,062		 81,087,462 10,779,600 13
Financial assets at fair value throughprofit and loss 13,011,606 12,195,016 816,590 7
Bonds and securities sold under repurchase
agreements
1,545,361		 4,550,801 (3,005,440) (66)
Receivable,net 8,118,751 6,485,651 1,633,100 25
Current income tax asset 1,021 57,372 (56,351) (98)
Notes discounted and loans – net 384,382,280 362,916,674 21,465,606 6
Available-for-Sale Financial Assets 20,711,997 19,197,158 1,514,839 8
Financial assets held to maturity 1,418,003 3,340,584 (1,922,581) (58)
Stocks- equitymethod-net 140,282 142,654 (2,372) (2)
Restricted assets – net 341,093 164,290 176,803 108
Other financial assets – net 1,206,142 1,158,259 47,883 4
Property, plant,and equipment – net 5,103,786 3,416,335 1,687,451 49
Intangible assets – net 143,759 97,380 46,379 48
Deferred tax assets – net 552,103 391,478 160,625 41
Other assets 1,479,607 1,011,621 467,986 46
Total assets 530,022,853 496,212,735 33,810,118 7
Due to Central Bank of China and banks 10,697,387 8,341,508 2,355,879 28
Funds borrowed from CBC and other banks 3,499,960 4,968,239 (1,468,279) (30)
Financial liabilities at fair value through profit and
loss
133,360		 74,800 58,560 78
Bills and bonds sold under repurchase agreements 273,573 358,769 (85,196) (24)
Payables 7,363,659 4,420,341 2,943,318 67
Current Tax Liability 218,945 292,018 (73,073) (25)
Customer deposits and remittances 455,966,124 429,704,469 26,261,655 6
Financial bondspayable 14,400,000 16,042,869 (1,642,869) (10)
Other financial liabilities 340,296 111,741 228,555 205
Liabilityreserve 615,521 348,829 266,692 76
Deferred tax liabilities 111,021 111,021 - -
Other liabilities 512,056 400,541 111,515 28
Total liabilities 494,131,902 465,175,145 28,956,757 6
Capital stock 28,515,063 25,345,339 3,169,724 13
Capital surplus 683,751 675,435 8,316 1
Retained earnings 6,537,277 5,050,993 1,486,284 29
Other equity 154,860 (34,177) 189,037 553
Total equity 35,890,951 31,037,590 4,853,361 16

9898

Analysis of variance:

  • (I) The decrease of bills and bonds with R/P feature was mainly caused by the appropriation of fund to the extent that the balance of bills and bonds with R/P feature as of the end of FY2014 fell by NTD3,005 million as compared with the end of FY2013.

  • (II) Receivables increased mainly because of the amount of note receivables and proceeds for settlement of spot trade in foreign exchange receivable at the end of FY2014 increased by NTD1,136 million and NTD494 million as compared with the end of FY2013, respectively.

  • (III) The decrease in held-to-maturity financial assets is a result of the 12 foreign bonds redeemed by the issuer in 2014 for an amount of US$16 million and EUR 60 million.

  • (IV) Restricted assets increased mainly because of the bank deposits for leasing of equipment for the subsidiaries at the end of FY2014 increased by NTD80 million as compared with the end of FY2013. In addition, time deposit of the securities dealer subsidiary pledged as collaterals increased by NTD125 million and the collection of investment for underwriting of stock decreased by NTD28 million at the end of FY2014 as compared with the end of FY2013.

  • (V) Real properties and equipment increased mainly because of the increase of prepayment for lands in FY2014 by NTD1,725 million.

  • (VI) The increase in intangible assets is a result of the increase in the capital expenditures for computer software in 2014 from the year of 2013.

  • (VII) Other assets increased mainly because the bond from overdraft of the USD settlement account for government bonds increased by NTD450 million at the end of FY2014 as compared with the end of FY2013.

  • (VIII) Due to banks and the Central Bank increased mainly because of the call loans from banks as of the end of FY2014 increased by NTD3,275 million as compared with the end of FY2013. In addition, deposit transferred from Postal Savings as of the end of FY2014 decreased by NTD919 million as compared with the end of FY2013.

  • (IX) Loans from the Central Bank and Interbank Loans decreased due to fund management. As a result, at the end of 2014, Interbank Loans decreased by NTD 2,086 million from 2013 levels.

  • (X) Financial liabilities at fair value through income statement increased mainly because of the forwards contracts of SWAP position and FX options undertaken at the end of FY2014 increased by NTD68 million as compared with the end of FY2013.

  • (XI) The decrease in RP (debt) is a result of the decrease in the Bank’s bond with RP and bond balance due to funding at the end of 2014 by NTD 85 million from the end of 2013.

  • (XII) Payables increased mainly because of the balance of payable notes for exchange and payable for the settlement of foreign exchange spot trade as of the end of FY2014 increased by NTD1,997 million and NTD493 million as compared with the end of FY2013, respectively.

  • (XIII) Payable bank debentures decreased mainly because of the maturity of convertible bank debentures on June 15 2014.

  • (XIV) Other financial liabilities increased mainly because of the commercial paper issued by the leasing subsidiary in FY2014 increased by NTD235 million as compared with the same period of FY2013.

  • (XV) The increase in liabilities reserve is a result of the employee benefits liabilities reserve recognized by the Bank for NTD 239 million in 2014 in accordance with the actuarial losses of the defined benefit plan actuarial report.

  • (XVI) The increase in retained earnings is a result of the net income NTD 3,719 million in 2014 injected in the unappropriated earnings. In addition, the unappropriated earnings is decreased by NTD 2,093 million due to the stock dividend of NTD 0.59/share and cash dividend of NTD 0.19/share distributed in 2013. Moreover, the defined benefit plan is decreased by NTD 140 million.

  • (XVII) Other equity increased mainly because of the unrealized gain/loss of financial assets available for sales as of the end of FY2014 increased by NTD100 million as compared with the end of FY2013. In addition, the exchange difference deriving from the conversion of financial statements of overseas operations at the end of FY2014 increased by NTD89 million as compared with the end of FY2013.

9999

II. Operation result analysis

Operation result analysis Operation result analysis Operation result analysis Operation result analysis Operation result analysis
Unit: NTD thousand
Item 2014 2013 Variation Variation Ratio
%
Net interest income 7,161,977 6,310,267 851,710 13
Net income other than interest income 3,553,022 2,953,985 599,037 20
Bad debt expense and guaranty reserve (1,982,816) (1,864,173) 118,643 6
Operating expenses (4,531,940) (3,863,100) 668,840 17
Income before taxation of continued
operations
4,200,243		 3,536,979 663,264 19
Income after taxation of continued
operations
3,719,256		 3,060,271 658,985 22
Net income 3,719,256 3,060,271 658,985 22
Earnings per share 1.32 1.16 0.16 14

Difference Analysis:

  • (I) The increase in net income is a result of the following reasons:

  • Interest income in FY 2014 increased by NTD1,199 million from the same period of FY2013 mainly because of the increase of the average balance of discount and loans by NTD32,341 million and the upward adjustment of average interest rate by 0.03%, to the extent that interest income from lending increased by NTD910 million. In addition, the average balance of due from banks and call loans to banks increased by NTD10,287 million, to the extent that interest income increased by NTD178 million. The interest income of the leasing subsidiary also increased by NTD136 million.

  • Interest expense increased by NTD347 million mainly because of the average balance of time deposits and saving deposit increased by NTD9,079 million, current account deposit increased by NTD26,876 million, to the extent that interest expense increased by NTD279 million. In addition, interest expense for call loans from banks and the Central Bank also increased by NTD53 million.

  • (II) The increase in net revenue other than interest is due to the following:

  • The service fee income amounted to NTD 2,077 million in 2014, representing an increase of NTD 302 million from the year of 2013 as a result of the increase in trust service fee income by NTD 279 million and the NTD 20 million increase in loan application fees.

  • The capital gain from reversal of asset impairment in FY2014 increased by NTD136 million as compared with the same period of FY2013 main because of the capital gain for reversal of bonds denominated in foreign currencies increased by NTD238 million. In addition, the capital gain from the reversal of impairment from the disposal of secured assets decreased by NTD181 million.

  • Capital gain from the disposal of non-performance loans in FY2014 increased by NTD69 million. Exchange gain in FY2014 increased by NTD65 million.

  • (III) Provision for bad debts recognized in FY2014 amounted to NTD1,983 million, which was an increase of NTD119 million from NTD1,864 million in the same period of FY2013. The increase was caused by the rise of 1.5% in the provision for bad debts and guaranteed liability reserve for Category I of normal loans for domestic banks.

  • (IV) The increase in net income and EPS is a result of the increase in net interest income by NTD 852 million, the increase in net income other than interest income by NTD 599 million, increase in bad debt expenses by NTD 119 million and the increase in operating expenses by NTD 669 million.

100100

III. Cash flows

  • (I) Analysis on liquidity in the most recent two years (Consolidated)

Unit: %

Unit: %
Year
Item		 2014 2013 Increase/Decrease Ratio
Cash flow ratio 39.76 - -
Cash flow adequacy ratio 693.72 1,021.91 (328.19)
Cash flow for operating to cash
flow from investingratio		 (1,341.35) - -

Analysis of variance in increase/decrease:

Cash flow adequacy ratio in FY2014 decreased from the same period of FY2013 mainly because of the capital expenditures in FY2014 and the last 5 years increased by NTD1.717 billion as compared with the same period of FY2013 and the last 5 years.

  • (II) Analysis on liquidity in the most recent two years (individual)

Unit: %

Year
Item		 2014 2013 Increase/Decrease Ratio
Cash flow ratio 58.28 - -
Cash flow adequacy ratio 877.02 1,404.64 (527.62)
Cash flow for operating to cash
flow from investingratio		 (527.19) - -

Analysis of variance in increase/decrease:

Cash flow adequacy ratio in FY2014 decreased from the same period of FY2013 mainly because of the capital expenditures in FY2014 and the last 5 years increased by NTD1.695 billion as compared with the same period of FY2013 and the last 5 years.

(III) Cash flows: Most recent year cash flow fluctuation analysis, improvement plan for lack of liquidity, and future cash flow analysis (Consolidated)

Unit: NTD thousand

Unit: NTD thousand Unit: NTD thousand
Beginning of year
cash balance
�		 Expected net
operating cash flow		 Expected net cash
flow of investing and		 Cash surplus
dfiit		 Remediation measures against
expected cash flow deficit

for the whole year
�		 financing activities
for the wholeyear�		 (ec)
���+�		 Investment Wealth
management
9,552,955 2,949,188 (3,175,183) 9,326,960 - -

Analysis of variance in cash flows:

1. Operating activities:

Expecting that the economic growth rate will recover in Taiwan in 2015, the Bank will work hard to develop its business and upgrade the fund utilization effect. It is expected that earnings will be generated in the year to contribute to the net cash inflow from operating activities.

2. Investing activities:

The investment under the equity method, available-for-sale financial assets, and held-to-maturity financial assets is expected to be increased, resulting in a net cash outflow from investing activities.

  1. Financing activities:

It is mainly due to the subordinated debt and leasing subsidiaries borrowing from financial institutions causing cash inflow from financing activities. The net cash flow from investing activities and financing activities will be cash outflow in the year.

101101

(IV) Cash Flow: Analysis and explanation of changes in cash flow in recent year, improvement plan for the insufficient liquidity, and cash flow analysis of the coming year (individual)

Unit: NTD thousand


Unit: NTD thousand
Unit: NTD thousand
Beginning of year
cash balance
�
 Expected net
operating cash flow
for the whole year
�		 Expected net cash
flow of investing and
financing activities
for the wholeyear�		 Cash surplus
(deficit)
���+�		 Remediation measures against
expected cash flow deficit
Investment Wealth
management
8,695,628 4,361,950 (3,798,896) 9,258,682 - -

Analysis of variance in cash flows:

1. Operating activities:

Expecting that the economic growth rate will recover in Taiwan in 2015, the Bank will work hard to develop its business and upgrade the fund utilization effect. It is expected that earnings will be generated in the year to contribute to the net cash inflow from operating activities.

  1. Investing activities:

The investment under the equity method, available-for-sale financial assets, and held-to-maturity financial assets is expected to be increased, resulting in a net cash outflow from investing activities.

  1. Financing activities:

The issuance of subordinated debt and increase in inter-bank loan of the Central Bank will contribute to the net cash inflow from financing activities. The net cash flow from investing activities and financing activities will be cash outflow in the year.

  • (V)The impact of changes in domestic and foreign policies and regulations on the Bank’s financial business and the corrective action for the inadequate measures: Not applicable.

  • IV. The material effect on financial structure from substantial capital expenditure in the last few years

  • (I) Major capital expenditure and funding sources

Unit: NTD thousand

Plans Actual and
expected
fundingsource		 Actual and
expected
completion date		 Actual and expected capital utilization expected capital utilization
2012 2013 2014 2015 2016
Purchase of land for the
new corporate
headquarters building		 Self-owned
Capital		 2019.12 108,800 67,566 1,741,482 4,126,502 29,162
Update of main server
NX7700i		 Self-owned
Capital		 2012.3
Data warehouse and
relations with customers
management application
system		 Self-owned
Capital		 2013.3
The new generation of
e-Bank System		 Self-owned
Capital		 2014.6
Microsoft
Enterprise Licensing
preferentialproject		 Self-owned
Capital		 2015.2
Min-Chuan Server
Room construction
project		 Self-owned
Capital		 2015.2
Virtual server
Update and expansion		 Self-owned
Capital		 2015.4
Additional storage
devices		 Self-owned
Capital		 2015.6
Message encryption and
decryption device and
core firewall		 Self-owned
Capital		 2015.6
Update of the network
security protection
system		 Self-owned
Capital		 2015.12
The SFA system Self-owned
Capital		 2015.12

102102

Plans Actual and
expected
fundingsource		 Actual and
expected
completion date		 Actual and expected capital utilization expected capital utilization
2012 2013 2014 2015 2016
The acquirer banking
EMV chips and
equipment update in
credit card operation		 Self-owned
Capital		 2015.12
Passbook saving in gold
system		 Self-owned
Capital		 2014.4

  • (II) Projected potential benefits

  • Land purchase for the new corporate headquarters building: the land is located at the reclassification zone phase VII. This zone gives potential for commercial development and internationalization. The erection of the corporate headquarters here will be symbolic, professional, benchmarking and symbolizing the vision of sustainability, and will create a reputable corporate brand for perpetual development of the business group.

  • Next generation internet banking system: With current internet banking functions as the foundation, we will construct and add the following functions: multi-level authorization, multilingual, group account management, trans-system multi-browser financial XML, installation of RA/CA, global internet banking embedded interface, cloud enterprise service platform, online customer service / wealth management specialist. These functions would be connected to personalized internet banking and form a multi-layer security certification mechanism.

  • Microsoft Enterprise Licensing preferential project: The FSC has made the protection of information a top priority due to the implementation of the Personal Information Protection Act to strengthen information security and computer management as an important project to the Bank (including e-mail server upgrade, information security and file protection, Microsoft AD directory service management enhancement, etc.). The Bank’s computers are mostly Microsoft products; therefore, Microsoft products are the main solution to have information security enhanced and personal data protected. Therefore, it is necessary to purchase the right to use for each personal computer. The EA purchase will help reduce the cost of software upgrade (the Bank had purchased the products without buying the upgrade service; therefore, a new purchase is necessary for any product upgrade) and lower the overall cost.

  • Min-Chuan Server Room construction project: The existing Min-Chuan Server Room for backup has become saturated. In response to future expansion needs, information security protection, information security certification, and green energy of the server room should be substantiated through the planning and construction project in order to minimize the energy consumption (air-conditioning and UPS) of the server room. Significantly reduce the operation and maintenance expense of the server room in conformity with ISO27001 Information Security Certification requirements, and provide environmental monitoring and systematic maintenance and operation management.

  • The update and expansion of the virtual server: the introduction of different new systems for responding to the needs of the launch of different projects by the Bank, such as the new generation customer service system, the mobile payment system, the module for interfacing with the cyber shopping malls, network operation and change management system, that dictate for the expansion of the virtual equipment resources. In consideration of the high performance and backup, testing and development needs in the formal

103103

environment that the expansion of fundamental resources will be necessary.

  1. Additional storage devices: Currently there are two sets of storage devices to provide important storage service; however, there are many new systems (such as, next-generation network banking, customer service, collections, gold passbook, and other new systems), virtual environment expansion, information security enhancement requirements (Personal Information Protection Act), and internal i-cloud needs to be fulfilled but the existing storage space and speed is insufficient to meet demand; also, the outdated fiber optic switch is replaced. The said project expansion, in addition to provide adequate physical resources, will help strengthen the management, expansion, and reliability of i-cloud.

  2. Message encryption and decryption device and core firewall: The equipment is run 24-hours a day and has been in service for a long time (nearly eight years), plus the equipment vendor stopped providing maintenance service and the equipment experienced a failure with unknown reasons. The said renovation project will help enhance the stable operation and service of the servers at the Center and the centralized management is in conformity with ISO 27001 Derivative.

  3. Update of the network security protection system: the statistical data from random sampling indicated that the webpage content security control device could help to block about more than 4,459 MB of improper webpage traffic in a month. Likewise, the mail content security control device can help to screen out at least 74% of malicious software and junk mails in a month. These devices contributed to the network bandwidth management and the prevention of malicious software efficiently. Since the operation of the control of webpage and mail content, the Bank has made proper adjustment based on the feedback from the intranet users. Effort has also been made to achieve program compatibility, service efficiency optimization, and prevention of network attack in good balance. As such, the Bank plans to upgrade the specification of the equipment and continue warranty service for 3 years. Through the detection and behavioral analysis of the network packing, the intrusion prevention system helps to block the latest malicious software, real-time attack, BotNet, and DoS attack effectively.

  4. The SFA: integration of the mobile equipment and the application management of the information system of the Bank with the integration of wealth management platform by role and authority with suitable function available for the upgrading of active, instantaneous, and interactive marketing of products by the banking staff. This system helps the banking staff to develop potential business opportunities and actively present the products to the customers. Through the dialogue, the system provides timely support and assistance to upgrade the competitive power of the Bank, reinforce the performance of the banking staff in business promotion, and reduce the cost of development effectively.

  5. Update the acquirer banking service EMV chip and equipment for credit card operation: in supporting the VMJ international and EMV chip of UnionPay acquirer service, the Bank updates its ATM software to avoid the liability of transactions with forged cards.

  6. Gold passbook system: Broaden the product line of the Bank and the content of customer service, improve the corporate image of the Bank and bring in more commission incomes.

104104

  • V. Direct investment policy, the main reasons for profit or loss, and corrective action plan in the most recent year, and investment plan in the next year.

  • (I) Direct investment policy in the most recent year:

    • The Bank engaged in the internal direct investment to meet the business development demand for the purpose of establishing the complete financial product transaction platform and ensuring the Bank’s sustainable operation and business growth. The external direct investment made by the Bank complied with the Government’s financial and economic policies, and assessed the ideal investment objects to upgrade the service quality in the entire financial market.

  • (II) Root cause of investment gains or loss in the most recent year: The Bank is used to adhering to the stable management philosophy. The performance of businesses invested by the Bank appears to be fair in risk control, business development and cooperative promotion of business. The entire performance of the investment by the Bank appears to continue earning profit for the time being.

  • (III) Corrective action plan:

    • In addition to continuing enhancing the risk control and cooperative promotion of business in the invested companies, the Bank will carefully review the performance and business expansion of the invested companies.

  • (IV) Investment plan in the year ahead:

The Bank has no new investment plan in FY2015.

VI. Risk Management

  • (I) Qualitative and quantitative information about the various risks

  • Credit risk management system and capital requirement:

Credit risk management system

2014

Credit risk management system
2014
Item Contents
1.
Credit risk strategies,
objectives,
policies
and processes

1.
Credit risk strategies and objectives:
(1)
Comply with The New Basel Capital Accord and upgrade the Bank’s risk
management ability.
(2)
Develop well-founded risk management mechanisms and execute them strictly.
(3)
Strengthen the loan asset portfolio quality, risk management information integration,
analysis, control and precautionary effect, and play the role of risk management.
2.
Credit risk policies:
(1)
Establish the business strategies and organizational culture valuing credit risk
management and provide the qualitative and quantitative management method as the
reference for enactment of business strategies.
(2)
Establish the entire credit risk management system to be executed by the Bank’s
Board, the management and employees jointly, and control the various business risks
to the tolerable extent through identification, assessment, control and report of risks
in the qualitative and quantitative management manner, so as to achieve the Bank’s
credit risk objectives.
(3)
Establish the effective method and control procedure to control the adequacy of the
deposits/withdrawals to ensure the shareholders’ equity as the first priority.
3.
Credit risk management process:
Risk identification, risk assessment, risk control and risk report include:
(1)
Define the credit risk management related regulations.
(2)
Establish credit risk SMEs Application Scorecard rating model.
(3)
Establish the control mechanism and define the limit for the various large-sum
exposures.
(4)
Upgrade the entire asset quality and establish the proper management mechanism.
(5)
Continue developing and executing the stress tests for credit risks.
(6)
Review and report periodically.

105105

Item Contents
2.
Credit
risk
management
organization
and
structure

1.
Board of Directors:
The supreme decision-making entity in credit risk management of the bank, and takes the
ultimate responsibility for the Bank's credit risk management.
2.
Risk Management Committee:
Risk Management Committee takes charge of the Bank’s credit risk management
mechanism, review of the credit risk regulations and the multi-departmental
communication and coordination of credit risk management, and continuous supervision
of the performance, according to the risk management policy authorized by the Board.
3.
Loan Review Committee and Credit Review Committee of the business department:
Review the credit extension applications in accordance with the credit extension policies,
credit extension authorization rules and the relevant requirements.
4.
Delinquent Accounts Review Committee:
The Committee processes the delinquent accounts, receivables on demand and bad debt in
accordance with the Rules for Establishment of Delinquent Accounts Review Committee,
Rules for Allowance for Loss of Asset Evaluation and Collection of Delinquent Account,
Receivable on Demand and Bad Debt, and the relevant requirements.
5.
Risk Management Dept.:
(1)
Credit Risk Management Department is the Bank’s unit dedicated to the risk
management, responsible for planning, establishing and integrating the Bank’s credit
risk management operation and executing the Bank’s entire credit risk management
control.
(2)
Be responsible for the study, design, or recommendation for revising the credit risk
management policy and related regulations of the Bank, and report to relevant level
of management or the Board for final approval.
(3)
Summarize the Bank’s credit risk information periodically and report it to the Risk
Management Committee and Board.
(4)
Establish the Bank’s entire framework of assess, control and qualitative and
quantitative management method.
6.
Business supervisory departments of head office:
Fully understand the credit risk of the underlying business according to the Bank’s risk
management policies and norms in order to substantiate the risk management tasks and
help the Risk Management Department complete risk monitoring of the Bank taking as a
whole.
7.
Regional centers and business units:
(1)
Comply with the Bank’s rules for credit investigation, credit extension and credit risk
management, fulfill the routine jobs and risk management, and report the risk to the
various business supervisory departments.
(2)
Routine work integrated with the risk control, and identify the accuracy and integrity
of the operation information.
8.
Audit Office of the Board:
Audit Office of the Board will periodically audit the execution of the Bank’s credit risk
management system impartially and independently, and provide the suggestions about
corrective actions.
3.
Scope
and
characteristics
of
credit risk report and
measurement system


1.
Scope and characteristics of credit risk report:
(1)
The Board’s report (Comprehensive risk report).
(2)
Risk Management Committee report (Comprehensive risk report).
(3)
Asset quality report.
(4)
Report for the individual limit in the various countries.
(5)
Stress test report.
2.
Credit risk assessment system includes:
(1)
Capital requirement calculation platform information system.
(2)
Credit investigation and extension system.
(3)
Debt collection management system.
(4)
Credit review and precaution management system.
(5)
SMEs Application Scorecard System.
(6)
Country Risk Management System
4.
Credit risk hedging or
mitigation
policies,
and effective strategies
and
process
for
controlling
risk
hedging and mitigation
tools





1.
Establish the risk control mechanism to control the credit risk of individual credit
extension and credit extension portfolio; the control mechanism includes the limit
management, post-loaning management, collateral management and asset quality
management.
2.
Continue to enhance the credit account guarantee by demanding collaterals, guarantors, or
transfer of SME credit guarantee fund in order to execute credit risk hedging or offset.
3.
Cope with the domestic and foreign economic conditions and industrial development,
control industrial risk and adjust the limit on the credit extension rate of the industry to
disperse risk.
5.
Approach
for
regulatory
Capital
Charge

Standardised Approach

106106

Exposure and capital requirement under the credit risk standardised approach after risk mitigation

December 31, 2014


December 31, 2014
December 31, 2014
Unit: NTDthousand
Type of exposure Exposure after risk mitigation Capital requirement
Sovereigns 1,424,498 0
Non-central government public
sectorentities (PSEs)
0		 0
Banks (including multilateral
development banks-MDBs)
11,924,558		 498,423
Corporates (including securities
and insurance companies)
184,222,946		 13,973,433
Retail 176,582,197 11,641,358
Residential mortgage 46,328,185 2,076,853
Equity securitiesinvestments 29,000 9,280
Otherassets 107,385,565 709,324
Total 527,896,949 28,908,671

  1. Risk management system, exposure amount, and capital requirement of securitization: The Bank does not handle securitization business.

  2. Operational risk management system and capital requirement:

Operational risk management system

2014

Operational risk management system
2014
Item Contents
1.
Operational
risk
management strategies
and processes

1.
Operational risk management strategies: By establishing and executing the sound
operational risk management mechanism, the Bank manages the operational risk actively,
generally evaluates the frequency and effect of the various potential risks in routines and
management and takes the appropriate counter-assessments to avoid, transfer or write off,
control and bear the risk to reduce the substantial loss and frequencies.
2.
Operational risk management process:
(1)
Risk identification
The risk identification approaches include Loss Data Collection (LDC), Key Risk
Indicators (KRIs), Risk and Control Self Assessment (RCSA), audit report and
external loss event.
(2)
Risk assessment and measurement
Assess such factors as possibility and effect of the risks as identified. The loss events
collected are classified in accordance with the 7 major categories of loss and 8 major
categories of businesses defined by the competent authorities. Define the risk
assessment matrix of different risk areas and risk values in accordance with the
impact or severity of risk and the possibility of risk; classify risk as extremely high
risk, high risk, moderate risk, and low risk for quantitative analysis.
(3)
Risk control
Control the operational risk events, KRIs and risk control exposure, quality of risk
write-off and control actions, and the effect of other cases.
(4)
Risk report
Report the information about operational risk exposure to Risk Management
Committee and theBoard periodically.

107107

Item Contents 2. Operational risk The operational risk management organization includes the Board, Risk Management management Committee, Risk Management Dept., the business management units, units of the Bank, all organization and staff and Audit Office of the Board. The authorities and responsibilities of the organizations structure are specified below: 1. Board of Directors The Bank’s highest decision-making unit of operational risk management is responsible for the review and approval of operational risk management significant events. 2. Risk Management Committee Administer operational risk management mechanism, as well as review the operational risk of the Banks’ products, activities, procedures, and system and the operational risk management of the business units within the head office, and continue to monitor the execution and performance. 3. Risk Management Dept. Responsible for researching and drafting the Bank’s operational risk management policies and procedures, establishing and centrally managing the Bank’s operational risk loss database, collecting, summarizing and analyzing the information about loss, and reporting it to Risk Management Committee and the Board periodically. 4. Business management units of Head Office Understand the risks confronting the business administered by the Bank to its entirety. Institution of regulations for the management of different business operations including risk management. Proper supervision of the execution of the regulations and assistance to the Risk Management Department to monitor and control various risks. 5. Units of the Bank Comply with and implement the operational risk management rules, and report the risk events pursuant to the requirements. 6. Whole staff The whole staff shall be responsible for dealing with the operational risk jointly, and shall implement the operational risk management tasks within their functions. 7. Auditing Office of the Board Audit Office of the Board shall conduct the audit independently, assess and audit the effectiveness of the Bank’s operational risk management structure and processes, and provide the suggestions for corrective action in a timely manner. 3. Scope and When measuring the Operational risk, each unit of the Bank shall analyze the cause, characteristics of consequence, frequency and effect thereof and conclude the degree of individual risk to verify operational risk report the exposure of the Bank’s Operational risk. The Bank also made record of various exposures. and measurement By introducing the Operational risk identification, assessment and measurement, control and system report management mechanism, the Bank establishes and centrally manages the database for the Bank’s Operational risk losses and summarizes the Operational risk information and implementation status, and submit the report and suggestions to Risk Management Committee and reporting them to the Board for approval. 4. Operational risk For intensifying the monitoring and control of operational risk, the Bank established Key Risk hedging or mitigation Indicators and Risk Control Self Assessments according to the four dimensions of operational policies, and effective risk, i.e. internal procedure, people, systems, and external events. In addition, the Bank will strategies and process observe the changes in the said indicators, and can transfer or write off the loss and impact of for controlling risk incidents caused by operational risk through insurance and outsourcing in part or in whole for hedging and mitigation the effective reduction of loss deriving from operational risk. tools 5. Approach for Basic Indicator Approach regulatory Capital Charge

108108

Capital requirement for operational risk

December 31, 2014

Unit: NTDthousand
Year Gross profit Capital requirement
2012 6,894,827
2013 8,009,146
2014 8,940,414
Total 23,844,387 1,192,219

4. Market risk management system and capital requirement:

Market risk management system

2014

Market risk management system
2014
Item Contents
1.
Market
risk
management strategies
and processes

1.
The Bank’s market risk management strategy is to develop the sound and effective market
risk management mechanism. The mechanism shall correspond to the Bank’s business
scale, nature and complexity to ensure the proper management of the market risk to be
borne by the Bank and seek the balance between the tolerable risk level and expect return
level.
2.
The Bank’s market risk management process covers the risk identification, evaluation,
assessment, control and report. The contents thereof cover the market risk related to the
Bank’s major traded products, trading activities, process and system.
(1)
Risk identification:
The Bank’s relevant units identified the source of market risk by means of business
analysis or product analysis to define the market risk factors of the various financial
products (the market risk factors were categorized as interest rate risk, foreign,
equity securities price risk and commodity price risk) and the relevant requirements.
(2)
Risk evaluation and assessment:
Establish an effective valuation mechanism to evaluate the income of position
precisely, and conduct the independent market price evaluation procedure with
respect to the short-term investment position for which the reference market price is
available. Establish the quantitative model step by step to assess the market risk in
such manners as sensitivity analysis, VaR calculation, scenario drill and stress
testing, and integrated with the routine risk management.
(3)
Risk control:
Define the relevant rules governing excess of limit, stop-loss mechanism and
operating procedure for excess of limit in order to control the market risk effectively.
(4)
Risk report:
Report to the Risk Management Committee and the Board on the status of overall
market risk management of the Bank at regular intervals. In case of significant
change in the market, related functional units shall report immediately to reduce
market risk. Disclose the Bank’s market risk information to the public periodically
pursuant to the competent authority’srequirements.

109109

Item Contents
2.
Market
risk
management
organization
and
structure

The Bank’s market risk management organization and structure includes the Board, Risk
Management Committee, Risk Management Dept., business supervisory units, business
trading units and Audit Office of the Board. The authorities and responsibilities of the
organizations are specified below:
1.
Board of Directors:
The Board is the supreme decision-making unit in market risk management of the bank,
and takes the ultimate responsibility for the Bank's market risk management.
2.
Risk Management Committee:
Control the risk management mechanism according to the market risk management
policies approved by the Board.
3.
Risk Management Dept.:
Risk Management Dept. is the unit dedicated to the Bank’s market risk management,
responsible for consolidating and executing the Bank’s entire market risk management.
4.
Business supervisory departments of head office:
Business supervisory departments of head office are responsible for managing and
supervising the necessary risk management tasks to be executed by business trading units
and working with Risk Management Department to complete the control of the Bank’s
risks. Meanwhile, they are also responsible for defining the proper limit control, stop-loss
mechanism and operating procedure for excess of limit with respect to the products and
process of transaction.
5.
Business trading units:
Business trading units are responsible for executing the risk identification, assessment and
measurement, and taking appropriate countermeasures in accordance with the Bank’s
market risk management rules. Take positive action in monitoring the enforcement of
different limits, and report to the supervisors or notify Risk Management Department as
required.
6.
Audit Office of the Board:
Audit Office of the Board executes the market risk management auditing business
independently and provides the suggestions for corrective action.
3.
Scope
and
characteristics
of
market risk report and
measurement system


Each business trading unit shall submit trading information related to the market risk to the
business supervisory unit and Risk Management Dept. Risk Management Dept., shall
consolidate and summarize the information and present the report to Risk Management
Committee and the Board. The contents of said report cover all market risk positions and
ensure that the various transactions are conducted under authorization and the specific
limitation.
4.
Market risk hedging or
mitigation
policies,
and effective strategies
and
processes
for
controlling
risk
hedging and mitigation
tools





The Bank’s transactions subject to market risk have defined the limits of the various
investment objects in the relevant rules. The specific limit is also set against the trading
counterpart based on its credit rating and financial status to prevent the operation of fund from
being highly concentrated. Each business trading unit shall adjust the operational position
according to the change in the relevant market environments under the authority granted to it,
and adopt any available derivative product to hedge risk in a timely manner and execute the
relevant stop-loss mechanism whenever necessary. Said relevant requirements shall be
reviewed and revised subject to the operation plan, business development and changes in the
entirefinancialenvironment.
5.
Approach
for
regulatory
Capital
Charge

Standardised Approach

Capital requirements for market risk

December 31, 2014

Unit: NTD thousand
Type of risk Capital requirement
Interest rate risk 42,009
Equitysecurities risk 315,262
Foreign Exchange risk 46,372
Commodityrisk 0
Total 403,643

110110

  1. Liquidity risk includes the analysis of maturity of assets and liabilities, and the management method for asset liquidity and capital gap liquidity. Liquidity risk refers to the risk arising from the maturity date or scale on the maturity date of assets and liabilities not compatible that causes the obtained fund insufficient to pay for the assets acquired or liabilities due for payment. The liquidity risk management model adopted by the Bank is divided into the daily risk management and strategic assessment; also, it is processed in accordance with the Bank’s “Asset-liability management policy,” “Liquidity Risk Management Policy,” and “Liquidity Risk Management Enforcement Rules.” For daily risk management, the Finance Department collects the operating conditions and related management reports daily for the review of the risk management personnel. The relevant measurement indictors include Loans to deposits ratio, Liquidity Reserve Ratio, excess liquidity reserve ratio, and matured capital gap ratio. For the strategic assessment, the “analysis of maturity structure of NTD and foreign currency” is prepared monthly to conduct liquidity scenario analysis. In addition, the Bank conducts the stress test on liquidity risk quarterly with the assumptions that the overall market environment is in crisis and the operation of particular bank is also in crisis that the Bank monitor the situations by the number of days covered by realizable value of assets, and report to the Assets and Liabilities Management Committee, the Risk Management Committee, and the Board.

Analysis of maturity structure of NTD

December 31, 2014

Unit: NTD thousand

Analysis of maturity structure of NTD
December 31, 2014
Unit: NTD thousand		 Analysis of maturity structure of NTD
December 31, 2014
Unit: NTD thousand		 Analysis of maturity structure of NTD
December 31, 2014
Unit: NTD thousand		 Analysis of maturity structure of NTD
December 31, 2014
Unit: NTD thousand		 Analysis of maturity structure of NTD
December 31, 2014
Unit: NTD thousand		 Analysis of maturity structure of NTD
December 31, 2014
Unit: NTD thousand
Total Remaining balance to maturity
0 to 10 days 11 to 30 days 31 to 90 days 91 to 180 days 181 days to 1
year		 More than 1
year
Main capital
inflow upon
maturity		 493,675,003 55,083,853 46,319,260 27,067,725 41,535,625 69,315,886 254,352,654
Main capital
outflow upon
maturity
587,784,812		 30,536,411 33,300,849 85,640,168 98,988,947 133,751,213 205,567,224
Gap (94,109,809) 24,547,442 13,018,411 (58,572,443) (57,453,322) (64,435,327) 48,785,430

Analysis of maturity structure of USD December 31, 2014

Unit: US thousand

Analysis of maturity structure of USD
December 31, 2014
Unit: US thousand		 Analysis of maturity structure of USD
December 31, 2014
Unit: US thousand		 Analysis of maturity structure of USD
December 31, 2014
Unit: US thousand		 Analysis of maturity structure of USD
December 31, 2014
Unit: US thousand		 Analysis of maturity structure of USD
December 31, 2014
Unit: US thousand
Total Remaining balance to maturity
0 to 30 days 31 to 90 days 91 to 180 days 181 days to 1
year		 More than 1 year
Main capital
inflow upon
maturity		 1,143,814 195,249 240,421 260,304 26,806 421,034
Main capital
outflow
upon
maturity		 1,632,471 360,330 390,920 238,107 522,075 121,039
Gap (488,657) (165,081) (150,499) 22,197 (495,269) 299,995

Note 1: Refers to the amount in USD of the whole Bank.

Note 2: Where offshore assets account for more than 10% of the Bank’s total assets, it is necessary to provide supplementary disclosure.

111111

  • (II) The influence of domestic and foreign major policies and law amendment exerting on the bank’s financial structure and responding measures

  • Financial Supervisory Commission amended the “Regulations Governing the Capital Adequacy and Capital Category of Banks” on 2014.1.9 thereby required that the subsequent measurements of real properties for investment by public offered banks are not confined to the cost model but also the fair value model. The Bank complies with this regulation and considers the nature of the appreciations of investment in real properties and the unrealized gains from the disposal of financial assets available for sales, and adopted the fair value models for subsequent measurements of the real properties for investment purpose with 45% of the appreciations classified as Category II Capital.

  • In responding to the easing of policy for the operation of OBU by banks at the free economic pilot zone, the Financial Supervisory Commission amended the “Regulations Governing Offshore Structured Products” on 2014.7.18:

    • (1) The issuers or general agents of offshore structured products shall comply with Article 16 of the “Regulations Governing Offshore Structured Products” thereby enter into tripartite agreement with banks for providing products and sell the products at OBU. This mode of business joint venture shall within the scope of business of the branches and subsidiaries of foreign securities firms and banks in Taiwan.

    • (2) It is not necessary for a second product review if the internal code of operation complies with the internal operation procedure of the OBU. Under the classification of the issuers of offshore structured products that only professional investors will be the target. This implies that the products are highly risky and are not suitable for amateur investors. OBU shall duly follow the internal operation procedure and understand the customers, product suitability analysis, and the review procedures of the products properly to ensure the products meet the needs of the customers to their risk tolerance.

  • Financial Supervisory Commission amended the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans” on 2014.1.28. In response, the Bank increased the rate for provision of bad debts on special loan assets and guaranteed liabilities to ensure sufficient capacity to assume loss in case of rapid and abrupt economic change.

  • Financial Supervisory Commission promulgated the “Guide for Banks in Providing Information and Consulting Services of Offshore Derivative Financial Products” on 2014.7.30 thereby deregulated banks to provide related information and consulting service on offshore derivative financial products. This business allows the Bank to assist professional domestic institutional investors in trading with foreign financial institutions and makes asset management more manageable. Through the products and trainings availed by foreign financial institutions, the Bank can understand the diversity of the international market for the issuance of financial products better, and lay down a solid foundation for the development of financial products.

  • (III) The effect of technological and industrial changes on the Financial Status and operation of the Bank and countermeasures: None.

  • (IV) The effect of the change in the corporate image of the Bank and countermeasures: As of 2009 until now, the Bank has promoted the “branch demonstration and learning system”. In addition to establishing the various standardized service requirements and upgrading the customer service quality, the Bank also introduced the “CIS” (Corporate Identity System) to strengthen the Bank’s corporate identity by integrated planning and communication of idea discrimination, vision discrimination and activity discrimination.

112112

  • (V) Expected result and possible risks of mergers and acquisitions and Counter assessments: None.

  • (VI) Expected result for establishing more business locations, possible risk and countermeasures: None.

  • (VII) The risk confronting the over concentration of business, and countermeasures: None.

  • (VIII)The effect of change in the management produced to the Bank, possible risk and countermeasures: None.

  • (IX) The massive transfer of equity shares by directors, supervisors, or dominant shareholders holding more than 1% of the outstanding shares of the Bank, the risk and countermeasure: None.

  • (X) Contentious matters and non-contentious matters: Department of Debt Collection and Asset Recovery

  • The Kuang San Group’s illegal and excessive borrowing and the improper investment and default in the delivery of stocks issued by Shun Ta Yu were uncovered in November 1998. Taichung District Attorney Office prosecuted the case in point. After several instances of the trials, the case was returned for retrial. The Supreme Court of Taiwan made the final judgment that the appeal of the 3[rd] trial is overruled without further appeal. The illicit incomes of Tseng X Jen from money laundering amounted to NTD2,491,623 thousand and shall be returned to respective securities dealers in proportion to the loss of default in settlement. The Bank demanded for damage against Tseng X Jen from default in settlement amounted to NTD1,776,578 thousand and has been ruled by Taichung District Court with action favorable to the Bank. However, the amount forfeited is still pending on the disbursement by the prosecutor and the amount and time of disbursement cannot be determined so far.

  • The Bank has laid charges against the core members and important members, and the Bank’s employees, directors and supervisors in the illegal loans, improper investment and default stock delivery of the Kuang San Group Case to claim damages. In claiming for compensation against Defendant Tseng X Jen, Taichung District Court ruled on June 24 2013 that Tseng X Jen shall compensate the Bank the amount of NTD9,484,758 thousand and shall pay the interest at the interest rate of 5 % per annum from October 1 2000 until full settlement. The case has been finalized on June 13 2014.

(XI) Other major risks and counter-assessments: None.

  • VII. Crisis management mechanism

  • For the rapid settlement of unusual withdrawal and deposits, massive draining of capital, severe damage to the good will of the Bank and other crisis in operation, or the handicap of solvency and ability to repay debts, due to unanticipated factors, the Bank has established the “Emergency Response Handbook” as guideline. For fortifying the security measures and functions of all banking units and for the upgrading of security protection, the Bank has established the “Regulation for Security Management”. In addition, the “Emergency Response Team” and the “Security Supervision Team” have also been set up to deal with emergency and take appropriate actions. For the preservation of the information system in an emergency, the Bank has established the “Guideline for Response and Backup of the Information System in Emergency” so that the personnel of the Bank can maintain normal operation of the information system in case of emergency.

  • VIII.The following methods and hypotheses for the valuation of fair value of financial instruments are applied

  • (I) Short-term financial instruments:

Short-term financial instrument is short-term surplus use with a short maturity date; therefore, the book value is the fair value. This evaluation method is applied to the due

113113

from Central Bank of China and banks, bonds and securities purchased under resale agreements, bonds and securities issued under repurchase agreements, etc.

  • (II) Financial instruments at fair value through profit and loss: Financial assets measured at fair value through profit or loss include financial assets or financial liabilities held for trading and those designated as at FVTPL on initial recognition. The Bank recognizes a financial asset or a financial liability on its balance sheet when the Bank becomes a party to the contractual provisions of the financial instrument. A financial asset is derecognized when the Bank has lost control of its contractual rights over the financial asset. A financial liability is derecognized when the obligation specified in the relevant contract is discharged, cancelled or expired. FVTPL is initially measured at fair value plus transaction costs, and at each balance sheet date subsequent to issue of initial recognition, it is measured at fair value, with changes in fair value recognized directly in profit or loss in the period in which it arises. On de-recognition of a financial instrument, the difference between its carrying amount and the sum of the consideration received and receivable or consideration paid and payable is recognized in profit or loss. The purchase or disposal of financial assets in customary transactions shall be subject to accounting on the date of transaction.

A derivative that does not meet the criteria for hedge accounting is classified as a financial asset or a financial liability held for trading. If the fair value of the derivative is positive, the derivative is recognized as a financial asset; otherwise, the derivative is recognized as a financial liability.

(III) Basis of fair value: The fair value of stocks traded on the TSEC (GreTai) market and depository receipt is based on the closing price on the balance sheet. The fair value of open-ended funds is based on the net asset value on the balance sheet date. The fair value of bonds is based on the reference price on the balance sheet date in the GreTai Securities Market. The fair value of financial products for which no market price is available shall be evaluated based on the evaluation method. FVTPL which are mixed instruments, or for the reason of elimination or material reduction of the difference in accounting practices, can be designated as financial instruments at fair value through profit or loss at the initial recognition. Financial instruments portfolios, based on the Bank’s risk-management or investment policy, may also be designated as financial instruments at fair value through profit or loss.

  • (IV) Available-for-Sale Financial Assets:

  • Assets at fair value through income statement and the changes in value are recognized under the title of adjustment of shareholders’ equity. The stocks and beneficiary securities of the Bank will be entered into book on a daily basis for accounting purpose. At the time of initial recognition, the financial products shall be evaluated at fair value with the addition of the cost of acquisition or transaction cost at the time of issuance.

Where there is evidence showing impairment, it shall be stated as the loss of impairment. In case of impairment in the duration of holding, the impairment of financial products available for sales shall be recognized as adjustments of shareholders’ equity. If the amount of impairment of financial assets available for sales is obviously related to specific event occurred after the recognition for impairment, such amount shall be reversed and recognized as income in current period.

  • (V) Held-to-maturity financial assets:

  • The interest rate in effect shall be used to calculate the amortization cost and other interest incomes. All debt securities of the Bank are entered in book on a daily basis for accounting purpose. At the time of initial recognition, evaluation will be made on the basis of fair value of the financial instruments plus the cost of acquisition or the transaction cost at the time of issuance.

Where there is evidence showing impairment, it shall be stated as the loss of impairment.

114114

In case of impairment in the duration of holding, the impairment shall be recognized as adjustments of shareholders’ equity. If the amount of impairment is obviously related to specific event occurred after the recognition for impairment, such amount shall be reversed and recognized as income in current period. However, the reversal shall not cause the book value in excess of the amortization cost before the recognition of impairment.

  • (VI) Investment under the equity method:

The investment under equity method refers to the equity of unlisted (non-OTC) companies and no open market price thereof is available. Besides, it is impossible to evaluate the possibility of various estimates in the variance interval and it is impossible to measure the fair value. Therefore, the fair value of such investment shall be the book value thereof. The valuation by equity method shall be applicable to investees where the Bank and subsidiaries included in the consolidated financial statement jointly hold 20% or more of their equity shares or less than 20% but are influential in the investees.

For the disposal of investment recognized under the equity method, the difference between the sale price and the book value as of the day of disposal shall be recognized as gain or loss from disposition of equity. In case of a balance of capital surplus in book deriving from long-term equity investment, recognize for income in current period in proportion the sold equity.

  • (VII) Investment in financial assets at cost:

The financial assets at cost which are the stocks other than those traded on the TSEC (GreTai) market will have no public market price available, and the fair value thereof can be sought only at the price exceeding the reasonable cost. Therefore, it is impossible to measure the fair value of such investment. For investment in equity products that cannot be assessed on the basis of reliable fair value, evaluate on the basis of the cost initially recognized. If there is objective evidence implicating impairment, recognize for impairment loss and such amount shall not be reversed.

  • (VIII)Financial derivatives:

The foreign exchange rate indicated in the Reuters quotation system is used as a parameter to calculate the fair value of each individual contract with the foreign exchange swap, forward exchange rate on the forward exchange contract maturity date, and cash flow discount method.

The foreign exchange rate, interest rate, and volatility indicated in the Reuters quotation system are used as parameters. The fair value of each Options contract is calculated with Black-Scholes model. A derivative that does not meet the criteria for hedge accounting is classified as a financial asset or a financial liability held for trading. If the fair value of the derivative is positive, the derivative is recognized as a financial asset; otherwise, the derivative is recognized as a financial liability.

  • (IX) Hedge accounting of financial products (including derivatives):

    • N/A; the Bank does not adopt hedge accounting for financial product trade (including derivative trade).

  • IX. Other important notes

  • Settlement of disputes

Subsequent negotiations for Lehman Brothers structured notes dispute: In order to settle the dispute over Lehman Brothers structured notes effectively, the Bank has complied with the competent authorities’ instruction to settle the dispute with customers. Until December 31, 2014, the Bank has filed a total of 727 cases over the dispute with the “Banking Dispute Review Board”, and settled 715 cases amicably, the settlement ratio of 98.35%, after 66 review meetings for the Lehman Brothers case were called.

115115

Eight. Special Notes

  • I. Information regarding the bank’s subsidiaries (I) Consolidated Report on business operations:

  • Chart showing the bank’s subsidiaries

    • (1) The controlling Company and subsidiary companies

==> picture [438 x 229] intentionally omitted <==

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

Taichung Commercial Bank
Co., Ltd.
100% 100% 100%
Taichung Commercial Bank Taichung Commercial Bank Taichung Commercial
Securities Co., Ltd. Insurance Broker Co., Ltd. Bank Lease Enterprise
100%
TCCBL Co., Ltd.
100%
Taichung Commercial
Bank Leasing (Suzhou) Ltd.
----- End of picture text -----

  • (2) Cross-investment: None.

  • (3) Subsidiaries and subsidiaries: None.

  • Profiles of the bank’s subsidiaries

Unit: NTD thousand

Name of enterprise Date of
establishm
ent		 Address Paid-in shares
Capital		 Major operations
Controlling company:
Taichung
Commercial
Bank
Co., Ltd.
Subsidiary companies:
Taichung
Commercial
Bank
Insurance Broker Co., Ltd.
Taichung Commercial Bank Lease
Enterprise
TCCBL Co., LTD.
Taichung
Commercial
Bank Leasing (Suzhou) Ltd.
Taichung
Commercial
Bank
Securities Co., Ltd.
1953.08.26		 No. 87, Min Chuan Road, West District,
Taichung
28,515,063		 Banking business as
permitted under the
Banking Act.

2007.09.26		 8F, No. 87, Min Chuan Road, West
District, Taichung
284,360		 Insurance
brokerage.

2012.01.13
2012.06.13

2012.12.11

2013.05.02		 5F., No.55, Sec. 1, Zhongxiao E. Rd.,
Zhongzheng Dist., Taipei City
P.O. Box 957,Offshore Incorporations
Centre, Road Town, Tortola, British
Virgin Islands.
Room 402, Property Business Plaza,
No.158, Wangdun Road, Industrial Park
of Suzhou, Jiangsu
1, 2F, No. 45, Min Zu Rd., Central Dist.,
Taichung
1,800,000


893,373


893,373

1,500,000		 Leasing Operation.
Leasing and
investments.
Leasing.
Securities and
futures business

  1. Entities presumed in control-subsidiary relations and information on identical: None.

  2. The industries housed in the same business location of the whole business group: Same as the information listed in the business knowledge of affiliated businesses section, disclosed in previous pages.

116116

5. The division of labor of the business group:

The business group started with banking through Taichung Commercial Bank. Taichung Commercial Bank Insurance Broker acted as brokerage for personal and property insurance business and developed the business through employees of Taichung Commercial Bank.

Taichung Commercial Bank Lease Enterprise operates a full range of leasing business, offering diverse services and financial products, including leasing, installment management, accounts receivable factoring, and financing loans to our clients.

TCCBL Co., Ltd is a foreign holding subsidiary 100% owned by Taichung Commercial Bank Lease Enterprise. Its main business purpose is acting as an investor in Taichung Commercial Bank Leasing (Suzhou) Ltd.; additionally, it also runs leasing operations.

The business purpose of Taichung Commercial Bank Leasing (Suzhou) Ltd. is providing Taiwanese businesses in China leasing and other related services.

Taichung Commercial Bank Securities Co., Ltd., is mainly engaged in securities brokerage, proprietary trading of securities, Margin Purchase and Short Sale of marketable securities trading, and futures introducing broker (IB) business.

Through joint marketing efforts between the bank, leasing, insurance brokerage companies and securities ,we can implement well-rounded service to small and medium enterprises, increase the ratio of non-interest revenue, boost our competitiveness, and strengthen our service quality.

117117

6. Profiles of Directors, Supervisors and Presidents of the bank’s subsidiaries

Unit: Thousand shares


Unit: Thousand shares
Unit: Thousand shares
Name of enterprise Status of shareholding
Title Company name or representative Quantity Ratio of Shareholding
Controlling company:
Taichung Commercial
Bank Co., Ltd.
Subsidiary companies:
Taichung Commercial
Bank Insurance Broker
Co., Ltd.
Taichung Commercial
Bank Lease Enterprise
TCCBL Co., Ltd.
Taichung Commercial
Bank Leasing
(Suzhou) Ltd.
Taichung Commercial
Bank Securities
Co., Ltd.		 Chairman Representative to Hsu Tian Investment Co., Ltd.:
Jin-Fong Soo		 21,887
-		 0.77%
-
Vice
Chairman		 Representative to Hsu Tian Investment Co., Ltd.: 21,887 0.77%
Managing
Director		 Kuei-Fong Wang
Representative to Hsu Tian Investment Co., Ltd.:
Jer-Shyong Tsai		 294
21,887
-		 0.01%
0.77%
-
Chun-Sheng Lee 546 0.02%
Director Representative to Hsu Tian Investment Co., Ltd.:
Ming-Shan Chuang
Wei-Liang Lin		 21,887
-
-		 0.77%
-
-
Hsin-Ching Chang - -
Director
Director		 Shu-Yuan Lin
Representative to I Joung Investment Co., Ltd.:
Ching-Hsin Chang
Representative to Ho Yang Management Consultant Co., Ltd.:
Chien-Hui Huang
Chia-Hung Lin		 -
16,933
75
1,589
-
-		 -
0.59%
-
0.06%
-
-
Director Representative of Pan Asia Chemical Corporation: 167,077 5.86%
Independent
director
Independent
director
Independent
director
President
Chairman
Director
Supervisor
Chairman
Director
Supervisor
Chairman
Chairman
Director
Supervisor
Chairman
Director
Supervisor		 Meng-Liang Chang
Chen-Le Liu
Jin-Yi Lee
Hsi-Rong Huang
Chun-Sheng Lee
Taichung Commercial Bank Co., Ltd. Representative:
Kuei-Fong Wang
Taichung Commercial Bank Co., Ltd. Representative:
Huan-Te Wang
Kai-Yu Lin
Taichung Commercial Bank Co., Ltd. Representative:
Chung-Ping Yang
Taichung Commercial Bank Co., Ltd. Representative:
Wei-Liang Lin
Taichung Commercial Bank Co., Ltd. Representative:
Jer-Shyong Tsai
Te-Wei Chia
Yi-Yuan Tung
Yao-Hsiang Shih
Taichung Commercial Bank Co., Ltd. Representative:
Hsin-Ching Chang
Taichung Commercial Bank Co., Ltd. Representative:
Hsin-Ching Chang
Taichung Commercial Bank Co., Ltd. Representative:
Hsin-Ching Chang
Taichung Commercial Bank Co., Ltd. Representative:
Wei-Liang Lin
Kuo-Ming Lo
Taichung Commercial Bank Co., Ltd. Representative:
Yao-Hsiang Shih
Taichung Commercial Bank Co., Ltd. Representative:
Shu-Yuan Lin
Taichung Commercial Bank Co., Ltd. Representative:
Chih-Chuan Fang
Kuo-Hui Nin
Gon-Bi Chang
Ming-Shan Chuang
Taichung Commercial Bank Co., Ltd. Representative:
Chun-YingWang		 -
-
-
-
546
28,436
-
28,436
-
-
28,436
-
180,000
-
180,000
-
-
-
-
180,000
-
30,000
-
-
-
-
-
-
-
-
150,000
-
150,000
-
-
-
-
150,000
-		 -
-
-
-
0.02%
100.00%
-
100.00%
-
-
100.00%
-
100.00%
-
100.00%
-
-
-
-
100.00%
-
100.00%
-
100.00%
-
100.00%
-
-
100.00%
-
100.00%
-
100.00%
-
-
-
-
100.00%
-

118118

7. Operation overview of the bank’s subsidiaries

Unit: in NTD thousand unless otherwise specified

Name of enterprise Capital Total assets Total liabilities Equity Net income
(loss)		 Income (loss)
before taxation		 Income (loss)
after taxation		 Earnings Per
Share (NTD)
(After
taxation)
Controlling company:
Taichung
Commercial
Bank
Co., Ltd.
Subsidiary companies:
Taichung
Commercial
Bank
Insurance
Broker
Co., Ltd.
Taichung
Commercial
Bank
Lease
Enterprise
TCCBL Co., Ltd.
Taichung
Commercial
Bank
Leasing
(Suzhou) Ltd.
Taichung
Commercial
Bank
Securities Co.,Ltd.





28,515,063
284,360
1,800,000
893,373
893,373
1,500,000		 526,520,480
782,255
5,447,983
1,278,851
1,279,059
1,888,929		 490,629,529
210,364
3,534,004
304,209
335,647
409,053		 35,890,951
571,891
1,913,979
974,642
943,412
1,479,876		 9,985,182
638,199
221,831
25,279
52,671
131,112		 4,134,862
310,216
50,522
26,430
12,386
(21,840)		 3,719,256
252,149
45,140
26,430
10,838
(22,224)		 1.32
8.87
0.32
-
-
(0.15)

  • (II) Consolidated financial statement of subsidiaries

  • The Bank is required to prepare consolidated financial statements with its subsidiaries under the “Standards for the Preparation of Consolidated Report on Operation, Consolidated Financial Statements, and Report on Affiliations between Parent and Subsidiaries”. Subsidiaries of the Bank under the aforementioned legal rule are identical with the subsidiaries defined under Financial Accounting Standard No. 27 on “Consolidated Financial Statements”. Information on Financial Status and operation performance of such subsidiaries has been included in the disclosure of the aforementioned consolidated financial statement between parent and subsidiaries and therefore will not be prepared separately. For further information, please refer to the aforementioned consolidated statement.

(III) Affiliation Report

1. Relations between parent and subsidiaries

Name of holding
company		 Reason of holding Status of shareholding and lien of stock by holding company Status of shareholding and lien of stock by holding company Status of shareholding and lien of stock by holding company Directors, Supervisors or
managers appointed by holding
company		 Directors, Supervisors or
managers appointed by holding
company
Shares Ratio of
Shareholding		 Shares under lien Title Name
Hsu Tian Investment
Co., Ltd.
China
Man-Made
Fiber Co., Ltd.
Chung
Chien
Investment Co., Ltd.		 Win a majority of
director seats of the
Bank

21,886,562		 0.77% - Chairman
Vice Chairman
Managing
Director
Managing
Director
Director
Director
Director
Director		 Jin-Fong Soo
Kuei-Fong Wang
Jer-Shyong Tsai
Chun-Sheng Lee
Ming-Shan
Chuang
Wei-Liang Lin
Hsin-Ching
Chang
Shu-Yuan Lin

Indirectly
control
over the HR, finance
or operation of the
Bank


604,994,014		 21.22% 106,000,000 - -

Indirectly
control
over the HR, finance
or operation of the
Bank


-		 - - - -

  1. Transactions between subsidiaries and Parent Name of enterprise: None.

  2. Guarantees/endorsements between subsidiaries and Parent Name of enterprise: None.

119119

Statement of Declaration

The Bank Affiliation Report 2014 (from January 1, 2014 to December 31, 2014) was prepared in accordance with the “Criteria Governing Preparation of Report on Affiliations, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises”, and the information disclosed herein is materially consistent with that disclosed in the notes to the financial statement for the previous period.

Company name: Taichung Commercial Bank Co., Ltd.

Responsible Person: Jin-Fong Soo

Date: March 11, 2015

120120

CPA’s Review Comments

To: Taichung Commercial Bank Co., Ltd.

We conducted the audit on the financial statements of Taichung Commercial Bank Company Limited for 2014 in accordance with the “Standards on the Audit of Financial Statements” and the audit principle generally accepted in the Republic of China, and we have issued unqualified opinions dated March 11, 2015. The purpose of the audit is to give an opinion on the fair presentation of the said financial statements. The Affiliation Report for 2014 prepared by Taichung Commercial Bank was attached. The 2014 Affiliation Report prepared by the Taichung Commercial Bank is attached. Such report was prepared in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises.” An audit review requires us to proceed with the necessary procedures, including the acquisition of customer’s declaration and the confirmation on related information. The review has been successfully accomplished.

In our opinion, the Affiliation Report for 2014 prepared by Taichung Commercial Bank is in compliance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” and the contents of financial information are identical with those presented in the financial statements. No material amendments to the information shall be required.

Deloitte & Touche Min-Shen Yang, CPA

Kuan-Chung Lai, CPA

Securities and Futures Bureau Approval Securities and Futures Bureau Approval Document No. Document No. Tai-Cai-Jheng (6) No. 0920123784 Tai-Cai-Jheng (6) No. 0920123784

Date: March 11, 2015

121121

  • II. Private placement of securities and Bank debentures: None.

  • III. In the most recent year to the date this report was printed, the holding or disposition of the shares of the Bank held by the subsidiaries: None.

  • IV. Other Supplementary Disclosure: None.

  • V. Conditions that will materially affect shareholders’ equity or price of securities:

Private placement of securities and Bank debentures: None.
In the most recent year to the date this report was printed, the holding or disposition of the
shares of the Bank held by the subsidiaries: None.
Other Supplementary Disclosure: None.
Conditions that will materially affect shareholders’ equity or price of securities:		 Private placement of securities and Bank debentures: None.
In the most recent year to the date this report was printed, the holding or disposition of the
shares of the Bank held by the subsidiaries: None.
Other Supplementary Disclosure: None.
Conditions that will materially affect shareholders’ equity or price of securities:
Record date: February28,2015
Date Conditions
2014.3.13 Announcement of the deadline for the conversion of the 1stissue of domestic unsecured
convertible bonds by Taichung Commercial Bank Co., Ltd. (known as: Taichung I, security
code: 28121) being moved earlier to 2014.4.17
2014.3.13 Acting on behalf of the subsidiary TCB Securities for acceptance of the equity of “Feng
Hsing Securities Co., Ltd.” from assignment.
2014.3.27 Announcement of TCB Leasing Co. Ltd. meets the criteria of guarantee and endorsement
of Pan Asia Chemical Corporation for announcement.
2014.7.16 Announcement of the change in the ratio of the distribution of earnings for FY2013 by the
Bank.
2014.8.21 Acting on behalf of subsidiary TCB Leasing Co., Ltd. in the announcement of applying for
increasing the stake in “TCB Financing and Leasing (Suzhou) Co., Ltd.” amounted to
USD13,500 thousand with approval of the Board of Investment of MOEA on record.
2014.12.5 The Board of the Bank resolved to purchase the land at Huei Min Section, Xi Tun District of
Taichung City.
2015.1.28 Announcement of the resolution of the Board of Taichung Commercial Bank in entering the
“Bond Trade Clearing Agency Service Agreement” with China Construction Bank in bond
market trade among banks.

VI. Procedures for Handling Material Inside Information of the Bank:

The Bank has defined the “Procedures for Handling Material Inside Information of Taichung Commercial Bank Co., Ltd.”

122122

Nine. Branches of Taichung Commercial Bank at a Glance

Name Tel. No. Fax No. Postal code Address
Head Office
Min Chuan Building 04-22236021 04-22240748 40341 No. 87, Min Chuan Road, West District,
Taichung
Min Zu Building 04-22236023 04-22278584 40041 No. 45,Min Zu Rd.,Central Dist.,Taichung
Trust Dept. 04-22236021 04-22202327 40341 8F, No. 87, Min Chuan Road, West District,
Taichung
International Banking
Dept.		 04-22212933 04-22202046 40341 2F, No. 87, Min Chuan Road, West District,
Taichung
Taipei City
Taipei Branch 02-23211819 02-23212659 10049 No. 85, Jhongsiao E. Rd., Sec. 1, Zhongzheng
Dist.,Taipei
Songshan Branch 02-27658666 02-27658368 11072 No. 176, Keelung Rd., Sec. 1, Xin Yi Dist.,
Taipei
Neihu Branch 02-26579899 02-26578887 11492 No. 306,Ruei GuangRd.,Neihu Dist.,Taipei
FuxingBranch 02-27735556 02-27739828 10595 No.59,FuxingN. Rd.,Songshan Dist.,Taipei
Zhongshan Branch 02-25417700 02-25415050 10450 No.28, Changchun Rd., Zhongshan Dist., Taipei
City
Overseas
Banking
Branch		 02-23219858 02-23216358 10049 8F-4, No.85, Jhongsiao E. Rd., Sec. 1,
ZhongzhengDist.,Taipei
New Taipei City
Banchiao Branch 02-29563456 02-29581616 22067 No. 28-2, Min Sheng Rd., Sec. 1, Banchiao Dist.,
NewTaipei
Sanzhong Branch 02-29877878 02-29872411 24141 No. 2, Jhongzhen Rd., Sanzhong Dist., New
Taipei
Xinzhuang Branch 02-29017888 02-29013040 24257 No. 651, Zhong Zheng Rd., Xinzhuang Dist.,
NewTaipei
Linkou Branch 02-26021888 02-26014522 24443 No. 8,Chu Lin Rd.,Linkou Dist.,New Taipei
TuchengBranch 02-82603158 02-82601658 23659 No. 56,MingDe Rd.,TuchengDist.,New Taipei
Taoyuan City
Neili Branch 03-4610566 03-4620277 32067 No. 24, Zhong Xiao Rd., Zhongli Dist., Taoyuan
City
Jhongli Branch 03-4228828 03-4228826 32085 No. 326, Yanping Rd., Zhongli Dist., Taoyuan
City
Pingzhen Branch 03-4915688 03-4912789 32441 No. 18, Jhongfong Rd., Pingzhen Dist., Taoyuan
City
Taoyuan Branch 03-3333389 03-3331599 33058 1&2F, No. 324, Zhong Shan Rd., Taoyuan Dist.,
TaoyuanCity
Yangmei Branch 03-4855288 03-4855859 32645 No. 337-1, Xin Nong Street, Yangmei Dist.,
TaoyuanCity
Nankang Branch 03-3216611 03-2223311 33859 No. 288, Nan Kang Rd., Sec. 1, Lu Zhu Dist.,
TaoyuanCity
Kueishan Branch 03-3590005 03-3592166 33342 No. 1185, Wan Shou Rd., Sec. 2, Kueishan Dist.,
TaoyuanCity
Tayuan Branch 03-3857001 03-3859033 33753 No. 47, Da Guan Rd., Tayuan Dist., Taoyuan
City
Hsinchu City
Hsinchu Branch 03-5257288 03-5233566 30046 No. 128,Si Wei Rd.,Hsinchu
Hsinchu County
Zhupei Branch 03-6675188 03-6675168 30264 No. 276, Kuang Ming 6th Rd., East Sec. 1,
ZhuPei,Hsinchu
Hsinfeng Branch 03-5590929 03-5590788 30442 No. 155-12, Chien Hsing Rd., Sec. 1, Hsinfeng,
Hsinchu
Miaoli County
Zhunan Branch 037-481148 037-480465 35041 No. 66, Ho Ping Street, Zhu Nan Township,
Miaoli
Yuanli Branch 037-866366 037-866316 35844 No. 79,Xin Yi Rd.,YuanNan Li,Yuan Li

123123

Name Tel. No. Fax No. Postal code Address
Township,Miaoli
Taichung City
Zhong Zheng Branch 04-22245181 04-22251969 40044 No.333, Sec. 1, Taiwan Blvd., Central Dist.,
Taichung City
N. TaipingBranch 04-22121298 04-22120800 40147 No. 66,Jingwu E. Rd.,East Dist.,Taichung
S. Taichung Branch 04-22244187 04-22253055 40247 No. 355, Fu Xin Rd., Sec. 3, South Dist.,
Taichung
Business Dept. 04-22274567 04-22232926 40341 1F, No. 87, Min Chuan Rd., West Dist.,
Taichung
W. TaichungBranch 04-23212501 04-23211847 40356 No. 369,GongYi Rd.,West Dist.,Taichung
N. Taichung Branch 04-22920832 04-22957526 40462 No.822, Sec. 1, Zhongqing Rd., North Dist.,
Taichung City
Peitun Branch 04-22316266 04-22316168 40646 No. 80, Ching Hua N. Rd., Peitun Dist.,
Taichung
Junkong Branch 04-24371151 04-24367374 40663 No. 222, Tung Shan Rd, Sec. 1, Peitun Dist.,
Taichung
Simin Branch 04-24226165 04-24226567 40673 No. 199, Chong De Rd., Sec. 3, Peitun Dist.,
Taichung
Xitun Branch 04-27060696 04-27010309 40744 No. 436, Sec. 2, Ho-Nan Rd., Xitun Dist.,
Taichung
Nantun Branch 04-23824358 04-23828070 40869 1F & 2F No. 663, Wu Chuan W. Rd., Sec.2,
Nantun Dist.,Taichung
Taiping Branch 04-22700756 04-22708629 41142 No. 115, Zhong Xing Rd, Taiping Dist.,
Taichung
Neixin Branch 04-24830345 04-24838958 41254 No. 339, Zhong Xing Rd., Sec. 2, Dali Dist.,
Taichung
Wufong Branch 04-23391165 04-23326083 41341 No. 829, Zhong-Zheng Rd., Wufong Dist.,
Taichung
Wuri Branch 04-23373176 04-23373180 41442 No. 107,San Min St.,Wuri Dist.,Taichung
S. Fongyuan Branch 04-25261195 04-25284637 42050 No. 232, Zhong Shan Rd., Fongyuan Dist.,
Taichung
Nanyang Branch 04-25244426 04-25284638 42051 No. 338, Yuan Wan E. Rd, Fongyuan Dist.,
Taichung
Fongyuan Branch 04-25244171 04-25244178 42056 No. 302-1, Zhong-Zheng Rd., Fongyuan Dist.,
Taichung
E. Fongyuan Branch 04-25260175 04-25279944 42060 No. 203, Shan Min Rd., Fongyuan Dist.,
Taichung
Houli Branch 04-25571180 04-25573081 42151 No. 95, Min Sheng Rd., Houli Dist., Taichung
City
Dongshi Branch 04-25872185 04-25875203 42343 No. 61, Zhong Shan Rd., Dongshi Dist.,
Taichung
Tanzi Branch 04-25323121 04-25338460 42751 No. 76, Tan Xing Rd., Sec. 3, Tanzi Dist.,
Taichung
Daya Branch 04-25668161 04-25671143 42878 1&2F, No. 3, Zhongqing Rd., Daya Dist.,
Taichung
Shengang Branch 04-25621501 04-25627404 42944 No.325, Sec. 5, Changping Rd., Shengang Dist.,
Taichung City
Dadu Branch 04-26991166 04-26991170 43242 No. 778, Sha Tian Rd., Sec. 2, Dadu Dist.,
Taichung
Shalu Branch 04-26621101 04-26622467 43350 1&2F, No. 298, Zhong Shan Rd., Shalu Dist.,
Taichung
Lungjing Branch 04-26326788 04-26323566 43448 No. 77, You Yuan S. Rd., Lungjing Dist.,
Taichung
TaichungkangBranch 04-26571191 04-26571517 43542 No. 36,Ba De Rd.,Wuqin Dist.,Taichung
Qingshui Branch 04-26226106 04-26227587 43653 No. 104, Zhong Shan Rd., Qingshui Dist.,
Taichung
Dajia Branch 04-26862151 04-26875838 43746 No. 42,CKS Route,Dajia Dist.,Taichung
Changhua County

124124

Name Tel. No. Fax No. Postal code Address
Changhua Branch 04-7224641 04-7221431 50061 No. 126,Guang-Fu Rd.,Changhua
Dazhu Branch 04-7387648 04-7386907 50078 No. 364,JangNan Rd.,Sec. 1,Changhua
Huatan Branch 04-7868775 04-7869067 50343 No. 446, Zhong Shan Rd., Sec. 1, Hua Tan
Township, Changhua
Xiushui Branch 04-7693525 04-7698148 50448 1&2F, No. 597, Jang Shui Rd., Sec. 2, Xiu Shui
Township, Changhua
Lukang Branch 04-7780545 04-7762275 50563 No. 266, Zhong Shan Rd., Lu Kang Township,
Changhua
Homei Branch 04-7562171 04-7562175 50846 No. 393, Lu Ho Rd., Sec. 6, Ho Mei Township,
Changhua
Shenkang Branch 04-7983171 04-7988403 50941 No. 111, Zhong Shan E. Rd., Shen Kang
Township, Changhua
Yuanlin Branch 04-8326141 04-8332927 51046 No. 27, Zhong Shan S. Rd., Yuan Lin Township,
Changhua
N. Yuanlin Branch 04-8322141 04-8354844 51050 No. 116, Da Tung Rd., Sec. 2, Yuan Lin
Township, Changhua
Shetou Branch 04-8731466 04-8720427 51141 No. 311, Yuan Jing Rd., Sec. 2, She Tou
Township, Changhua
Yongjing Branch 04-8232363 04-8232549 51247 No. 71, Xi Men Rd., Yong Jing Township,
Changhua
Puxin Branch 04-8281437 04-8281442 51347 No. 217, Zhong Zheng Rd., Sec. 1, Pu Xin
Township, Changhua
Xihu Branch 04-8853311 04-8814498 51452 No. 290, Jang Shui Rd., Sec. 3, Xi Hu Township,
Changhua
Tianzhong Branch 04-8742206 04-8741514 52042 No. 197, Zhong Zhou Rd., Sec. 1, Tian Zhong
Township, Changhua
Peitou Branch 04-8884146 04-8885331 52146 No. 180, Tou Yuan Rd., Sec. 1, Pei Tou
Township, Changhua
Pitou Branch 04-8924606 04-8924335 52341 No. 163, Tou Yuan W. Rd., Pi Tou Township,
Changhua
Erlin Branch 04-8962125 04-8962677 52662 No. 496,Jen Ai Rd.,Er Lin Township,Changhua
Nantou County
Nantou Branch 049-2222146 049-2222481 54058 No. 52,Min ShengSt.,Nantou City,Nantou
Caotun Branch 049-2334146 049-2303149 54263 No. 141, Pi Shan Rd., Cao Tun Township,
Nantou
Puli Branch 049-2984001 049-2901265 54555 No. 62,Xi KangRd.,Pu Li Township,Nantou
Zhushan Branch 049-2643181 049-2653081 55747 No. 148, Zhu Shan Rd., Zhu Shan Township,
Nantou
Yunlin County
Dounan Branch 05-5954879 05-5954891 63041 No. 151-9, Zhong Shan Rd., Dou Nan Township,
Yunlin
Huwei Branch 05-6313788 05-6310599 63246 No. 57-2, Lin Sen Rd., Sec. 2, Hu Wei Township,
Yunlin
Chiayi County
Minghsiung Branch 05-2208833 05-2205533 62159 No. 78, Jien Kuo Rd., Sec. 2, Ming Hsiung
Township, Chiayi
Tainan City
Yongkang Branch 06-3026678 06-3035659 71049 No. 760, Zhong Hua Rd., Yong Kang Dist.,
Tainan
Kaohsiung City
Kaohsiung Branch 07-3355275 07-3346981 80251 1&2F, No. 11, Min Chuan 1st Rd., Ling Ya Dist.,
Kaohsiung
Feng Shan Branch 07-7216719 07-7211423 83081 1&2F, No. 172, Wu Qing 2nd Rd., Fong Shan
Dist.,Kaohsiung

125125

Stock No: 2812

Taichung Commercial Bank Co., Ltd. and subsidiaries

Consolidated Financial Statements and Independent Auditor’s Report 2014 and 2013

Address: No. 87, Min Chuan Road, West District, Taichung

Tel. No.: (04)22236021

126- 1 -

Statement of Affiliate’s Consolidated Financial Report

The companies to be included by the Bank in the consolidated financial statements of affiliates in accordance with the “Rules Governing the Preparation of Affiliated Company’s Consolidated Business Report, Affiliated Company’s Consolidated Financial Statements and Relationship Report” in 2014 (from January 1 to December 31, 2014) are identical to those to be included in the consolidated financial statements of the Parent Company and subsidiaries in accordance with the Statement of Financial Accounting Standards No. 27. Also, the information to be disclosed in the consolidated financial statements of the affiliated companies has been disclosed in said consolidated financial statements of the Parent Company and subsidiaries. Therefore, the Bank will not separately prepare the consolidated financial statements of the affiliated companies.

Hereby declare

Company name: Taichung Commercial Bank Co., Ltd.

Responsible Person: Jin-Fong Soo

Date: March 11, 2015

127- 2 -

Auditor’s Report

To: Taichung Commercial Bank Co., Ltd.

We have audited the accompanying consolidated balance sheet of Taichung Commercial Bank Co., Ltd. and subsidiary as of December 31, 2014 and 2013, and the related consolidated statement of income, consolidated statement of changes in shareholders equity and consolidated statement of cash flows for the years then ended. Said consolidated financial statement is the responsibility of the management. Our responsibility is to express an opinion on the consolidated financial statement based on our audits.

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

In our opinion, the financial statements as referred to in the 1[st] paragraph present fairly, in all material aspects the financial position of the Bank as of December 31 2014 and 2013, and the results of its operations and cash flows for the periods then ended in conformity with the Criteria for the Compilation of Financial Statements by Public Banks, the Criteria for the Compilation of Financial Statements by Securities Dealers, the IFRSs, IAS, related interpretation and announcements as recognized by the Financial Supervisory Commission.

We have also audited the individual financial statements of the Bank for 2014 and 2013, and have expressed modified unqualified opinions on such financial statements.

Deloitte & Touche
Min-Xian Yang, CPA Kuan-Chung Lai, CPA
Securities and Futures Bureau Approval Securities and Futures Bureau Approval
Document No. Document No.
Tai-Cai-Jheng (6) No. 0920123784 Tai-Cai-Jheng (6) No. 0920123784

Date: March 11, 2015

128- 3 -

Taichung Commercial Bank Co., Ltd. and subsidiaries

Consolidated Balance Sheet

December 31, 2014 and 2013

Unit: NTD thousand

Code
11000

11500

12000

12500

13000

13200

13500

14000

14500

15000

15100

15500

18500

19000

19300

19500

10000

Code
21000

21500

22000

22500

23000

23200

23500

24000

25500

25600

29300

29500

20000

31100
31500
32001
32003
32011
32500
31000
30000
 Assets
Cash and cash equivalents (Note 4 & 6)
Due from the Central Bank and lend to banks (Note 7)
Financial assets at fair value through income statement (Note 4 and 8)
Bonds and securities sold under repurchase agreements (Note 4 and 9)
Receivables - net (Notes 4, 10, 11 & 35)
Current income tax asset (Notes 4 & 31)
Discounts and loans – net (Notes 4, 11 & 34)
Available-for-sale financial assets, net (Notes 4, 12 and 35)
Held-to-maturity financial assets - net (Notes 4, 13, 35)
Investment by equity method – net (Notes 4, and 14)
Restricted assets - net (Notes 15 and 35)
Other financial assets, net (Notes 4 & 16)
Property, plant, and equipment – net (Notes 4 & 17)
Intangible assets – net (Notes 4 & 18)
Deferred income tax asset (Notes 4 & 31)
Other assets (Notes 4, 19 & 35)
Total assets
Liabilities and equity
Due to Central Bank and other banks (Note 20)
Funds borrowed from CBC and other banks (Notes 21 and 35)
Financial liabilities at fair value through profit and loss (Note 4 and 8)
Bills and bonds sold under repurchase agreements (Notes 4 &22)
Payables (Note 23)
Current income tax liability (Notes 4 & 31)
Deposits and remittances (Notes 24 and 34)
Financial bonds payable (Note 4 & 25)
Other financial liabilities (Note 26)
Liability reserve (Notes 4 & 27)
Deferred tax liabilities (Notes 4 & 31)
Other liabilities (Note 28)
Total liabilities
Equity of the parent company (Note 29)
Capital stock
Capital surplus
Retained earnings
Legal reserve
Special reserve
Undistributed earnings
Other equity
Total shareholder’s equity in the parent company
Total equity
Total Liabilities and Equity		 December31,201 4
�
2
16
2
-
2
-
73
4
-
-
-
-
1
-
-

-
100
2
1
-
-
1
-
86
3
-
-
-

-

93
5
-
1
-
1

-

7

7
100		 December31,201 3
Amount
$ 9,552,955
82,314,107
13,011,606
1,545,361
8,118,751
1,021
384,382,280
20,711,997
1,418,003
140,282
341,093
1,206,142
5,103,786
143,759
552,103
1,479,607
$ 530,022,853
$ 10,697,387
3,499,960
133,360
273,573
7,363,659
218,945
455,966,124
14,400,000
340,296
615,521
111,021
512,056
494,131,902
28,515,063
683,751
2,885,334
72,861
3,579,082
154,860
35,890,951
35,890,951
$ 530,022,853		 Amount
$ 5,590,728
75,496,734
12,195,016
4,550,801
6,485,651
57,372
362,916,674
19,197,158
3,340,584
142,654
164,290
1,158,259
3,416,335
97,380
391,478
1,011,621
$ 496,212,735
$ 8,341,508
4,968,239
74,800
358,769
4,420,341
292,018
429,704,469
16,042,869
111,741
348,829
111,021
400,541
465,175,145
25,345,339
675,435
1,993,524
134,085
2,923,384

34,177)
31,037,590
31,037,590
$ 496,212,735		 �



















(


 1
15
3
1
1
-
73
4
1
-
-
-
1
-
-

-
100
2
1
-
-
1
-
87
3
-
-
-

-

94
5
-
-
-
1

-

6

6
100

The notes attached shall constitute an integral part of this Consolidated financial statement.

Chairman: Jin-Fong Soo

Manager: Chun-Sheng Lee

Chief accountant: Yi-Ying Chung

129

  • 4 -

Taichung Commercial Bank Co., Ltd. and subsidiaries

Consolidated Income Statement

January 1, to December 31, 2014 and 2013

Unit: NTD thousands, except Earnings Per Share (NTD)

Code
41000 Interest revenues (Notes 4, 30 and
34)
51000 Interest expenses (Notes 30 and 34)
49010 Net interest income
Net income (loss) other than interest
income
49100
Net income from service fees
(Notes 30 and 34)
49200
Gain (loss) on financial assets
and liabilities at fair value
through profit and loss
(Notes 4 and 30)
49300
Net
realized
loss
of
the
available-for-sale financial
assets
49600
Exchange gain (Note 4)
49700
Net gain (loss) on reversal of
asset impairment (Notes 4,
13, 16, 19 and 30)
49750
Profit or loss of affiliated
companies
and
joint
ventures under the equity
method (Notes 4 and 14)
49821
Net gain or loss from the sale
of delinquent loans
48000
Net income other than interest
income (Notes 27, 30 and
36)
4xxxx Net revenue

58200 Bad debt expense and guaranty
reserve (Notes 4, 11 and 27)		 2014 �
104
37)
67
19
1
-
2
10
-
1
-
100
19)		 2013 �
107
39)
68
19
2

-
2
10
-
-
1)
100
20)		 Percentage
of
Variation
(%)
Amount
$ 11,116,277
3,954,300)
7,161,977
2,077,184
96,948
-
261,036
1,028,264
423
68,712
20,455
10,714,999
1,982,816)		 Amount
$ 9,917,145

3,606,878)

6,310,267
1,774,903
150,726

4,846 )
195,797
892,735
9,708
-
65,038)

9,264,252

1,864,173)

(


(
(


(
(
(
(

(
(

(

(		 12
10
13
17
(
36 )
100
33
15
(
96 )
-
131
16
6

(Continued on next page)

130- 5 -

(Continued from previous page)

(Continued from previous page)
Code
Operating expenses
58500
Employee benefits expenses
(Notes 4, and 30)
59000
Depreciation and amortization
expenses (Notes 4, and 30)
59500
Business and administrative
expenses (Notes 4, 30, and
34)
58400
Total operating expenses
61001 Income before tax from continuing
operations
61003 Income tax expenses (Notes 4 & 31)
64000 Current year net income after tax

Other comprehensive income
65001
Exchange differences from the
translation
of
financial
statements
of
foreign
operations
65011
Unrealized
valuation
gains
(losses) of available-for-sale
financial assets
65031
Defined benefit plan actuarial
gains and losses
65041
Other comprehensive profit or
loss
of
the
affiliated
company under the equity
method
65091
Income
tax
related
to
components
of
other
comprehensive
income
(Notes 4 & 31)
65000
Other
comprehensive
income-net (after tax)
66000 Current period other comprehensive
income (after tax)
Consolidated EPS (Note 32)
Business units in continuing
operation
67501
Basic

67701
Diluted
 2014 �

25 )

2 )
15)
42)
39
4)
35
1
1

2 )
-
-
-
35		 2013 �

26 )

2 )
14)
42)
38
5)
33
-

1 )

1 )
-
-
2)
31		 Percentage
of
Variation
(%)
Amount
$ 2,689,795 )

186,318 )
1,655,827)
4,531,940)
4,200,243
480,987)
3,719,256
88,781
102,721

169,131 )
205
26,287
48,863
$ 3,768,119
$ 1.32
$ 1.31		 Amount
$ 2,350,543 )

185,328 )
1,327,229)

3,863,100)

3,536,979
476,708)

3,060,271

24,265

142,309 )

59,627 )
177
1,663

175,831)

$ 2,884,440

$ 1.16
$ 1.08
(
(
(
(
(

(




 (
(
(
(
(

(


 (
(
(
(
(

(
(

(


 (
(
(
(
(

(
(

(
 14
1
25
17
19
1
22
266
172
184
16
1,481
128
31

The notes attached shall constitute an integral part of this Consolidated financial statement.

Manager: Chun-Sheng Lee

Chief accountant: Yi-Ying Chung

Chairman: Jin-Fong Soo

131- 6 -

Total equity $ 27,908,319 - - - (
231,874 )		 - 3,060,271 (
175,831 )		 2,884,440 2,884,440 476,705 476,705 31,037,590 - (
513,557 )		 - - 3,719,256 48,863 48,863 3,768,119 3,768,119 1,598,799 1,598,799 $ 35,890,951 $ 35,890,951
Equity of the company Other equity Exchange differences
Unrealized gain		 from the translation
(loss) on
Capital stock
Retained earnings		 of financial
available-for-sale
Common stock
Capital surplus
Legal reserve
Special reserve
Accumulated		 statements of foreign
financial assets
earnings		 operations $ 23,187,442
$ 675,537
$ 1,160,137
$ 88,647
$ 2,704,214
$ 477
$ 91,865		 -
-
-
10,178
(
10,178 )
-
-		 -
-
833,387
-
(
833,387 )
-
-		 -
-
-
35,260
(
35,260 )
-
-		 -
-
-
-
(
231,874 )
-
-		 1,681,090
-
-
-
( 1,681,090 )
-
-		 -
-
-
-
3,060,271
-
-		 -
-
-
-
(
49,312 )
24,265
(
150,784 )		 -
-
-
-
3,010,959
24,265
(
150,784 )
476,807
(
102 )
-
-
-
-
-		 25,345,339
675,435
1,993,524
134,085
2,923,384
24,742
(
58,919 )		 -
-
891,810
-
(
891,810 )
-
-		 -
-
-
-
(
513,557 )
-
-		 1,579,241
-
-
-
( 1,579,241 )
-
-		 -
-
-
(
61,224 )
61,224
-
-		 -
-
-
-
3,719,256
-
-		 -
-
-
-
(
140,174 )
88,781
100,256		 -
-
-
-
3,579,082
88,781
100,256
1,590,483
8,316
-
-
-
-
-		 $28,515,063
$ 683,751
$ 2,885,334
$ 72,861
$3,579,082
$ 113,523
$ 41,337		 The notes attached shall constitute an integral part of this Consolidated financial statement. Manager: Chun-Sheng Lee
Chief accountant: Yi-Ying Chung
Code A1
Balance as of January 1, 2013		 B3
Allocation of special reserve in accordance with		 Financial
Supervisory
Commission
Order		 Chin-Kuan-Cheng-Zi No. 1010012865. The 2012 appropriation and distribution of earnings B1
Legal reserve		 B3
Special reserve		 B5
Cash Dividends		 B9
Stock dividends		 D1
2013 net income		 D3
Other comprehensive net income in 2013 (after tax)		 D5
Other comprehensive income in 2013		 I1
Conversion of convertible financial bonds		 Z1
Balance as of December 31, 2013		 The 2013 appropriation and distribution of earnings B1
Legal reserve		 B5
Cash Dividends		 B9
Stock dividends		 B17
Reversal of special reserve		 D1
2014 net income		 D3
Other comprehensive net income in 2014 (after tax)		 D5
Other comprehensive income in 2014		 I1
Conversion of convertible financial bonds		 Z1
Balance as of December 31, 2014		 Chairman: Jin-Fong Soo
132

Taichung Commercial Bank Co., Ltd. and subsidiaries

Consolidated Statements of Cash Flow

January 1, to December 31, 2014 and 2013

Unit: NTD thousand

Code
Cash flow from operating activities
A10000
Current year net profit before taxation
Revenue, expense and losses that do not
affect the cash flows
A20100
Depreciation expenses
A20200
Amortization expenses
A20300
Bad debt expense and reserve for
guarantee liability
A20400
Gain (loss) on financial assets and
liabilities at fair value through
profit and loss
A22500
Disposal and obsolescence loss of
property and equipment
A20900
Interest expenses
A21200
Interest revenue
A21300
Dividend income
A21800
Net change in other provisions for
liabilities
A22300
Profit of the affiliated company
under the equity method
A23100
Loss on disposal of investments
A23500
Financial assets impairment loss
(reversal gain)
A23800
Non-financial
assets
impairment
loss (reversal gain)
A24100
Unrealized
foreign
currency
exchange gain
A24300
Gain on sale of NPL
A24400
Loss on disposal of collateral
A20010
Total income, expense and loss
that do not affect the cash
flows
Changes in operating activities related
assets/liabilities
A41110
Due from Central Bank of China
and lend to Banks
A41120
Financial assets at fair value through
income statement
A41150
Accounts receivable
A41160
Discounts and loans
A41190
Other financial assets
A41990
Other assets
A42110
Due to Central Bank and other
banks

(Continued on next page)

133- 8 -

(Continued from previous page)

(Continued from previous page)
Code
A42120
Financial liabilities at fair value
through income statement
A42140
Bills
and
bonds
sold
under
repurchase agreements
A42150
Payables
A42160
Customer deposits and remittances
A42170
Other financial liabilities
A42180
Employee benefit liabilities reserve
A42990
Other liabilities
A40000
Total changes in operating
activities
related
assets/liabilities
A33000
Cash inflow (outflow) from operating
activities
A33100
Interest received
A33200
Dividends received
A33300
Interest payment
A33500
Income tax payment
AAAA
Net cash inflow (outflow) from
operating activities
Cash flow from investing activities
B00300
Acquisition of available-for-sale financial
assets
B00400
Disposition of available-for-sale financial
assets
B00900
Acquisition of held-to-maturity financial
assets
B01000
Disposition of held-to-maturity financial
assets
B01100
Return of capital from
held-to-maturity
financial assets
B01200
Acquisition of financial assets measured
at cost
B01400
Stock capital returned from decrease of
capital for financial assets measured at
cost
B02700
Acquisition of Property, plant, and
equipment
B02800
Disposal
of
Property,
plant,
and
equipment
B03700
Increase in refundable deposits
B04500
Acquisition of Intangible assets
B04700
Disposal of Collateral accepted
B06300
Cash Collected from NPL sold
BBBB
Net cash inflow (outflow) from
investing activities
Cash flow from financing activities
C00300
Increase (decrease) in Funds borrowed
from CBC and other banks
C00700
Increase in commercial papers payable
C01400
Issuance of financial bonds		 2014
$ 290,744 )

85,196 )
2,922,447

26,261,655

5,985 )

69,797

111,515

3,851,338
1,839,414

11,068,298
22,437
3,927,599 )

632,047)
8,370,503
2,109,022 )

667,600
812,943 )
2,942,200
300,000
3,000 )
757
1,838,149 )

963
42,407 )

74,337 )

808
343,494

624,036)

1,468,279 )
234,540
-		 2013
(
(
(
(
(
(
(
(
(
(
(
(
(		 (
(

(
(

(
(
(
(
(
(
(
(
(

 $ 436,659 )
94,724

4,662,238 )
44,193,574

9,603 )

27,490 )
161,138
8,278,341)
10,075,636 )
9,951,168
18,379

3,639,685 )
540,919)
4,286,693)

3,545,627 )
2,842,748
-
5,802,240
550,000
-
1,090

124,208 )
2,190

98,891 )

62,600 )
102,281
-
5,469,223
2,554,034
104,136
5,500,000

(Continued on next page)

134- 9 -

(Continued from previous page)

(Continued from previous page)
Code
C01500
Repayment of financial bonds
C04500
Cash dividend released
CCCC
Net cash inflow (outflow) from
financing activities
DDDD Impact of changes in exchange rate on cash
and cash equivalents
EEEE
Current cash and cash equivalents increase
E00100 Balance of cash and cash equivalents,
beginning of period
E00200 Balance of cash and cash equivalent, end of
period
Ending cash and cash equivalents adjustment
Code
E00210 Cash and cash equivalents on the balance sheet
E00220
The “Due from Central Bank and Banks”that
meet the definition of cash and cash
equivalents under IAS 7
E00230 The
“bonds
and
securities
sold
under
repurchase agreements”
that meet the
definition of cash and cash equivalents
under IAS 7
E00200 Balance of cash and cash equivalent, end of
period		 2014
( $ 49,900 )

(
513,557)

(
1,797,196)


88,781

6,038,052
72,438,282

$ 78,476,334

December31,2014
$ 9,552,955

67,378,018


1,545,361

$ 78,476,334
 2013
( $ 2,561,664 )
(
231,874)

5,364,632

24,265
6,571,427
65,866,855
$ 72,438,282
December31,2013






$ 5,590,728
62,296,753
4,550,801
$ 72,438,282

The notes attached shall constitute an integral part of this Consolidated financial statement.

Chairman: Jin-Fong Soo Manager: Chun-Sheng Lee Chief accountant: Yi-Ying Chung

135- 10 -

Taichung Commercial Bank Co., Ltd. and subsidiaries

Consolidated Notes to financial statements

January 1, to December 31, 2014 and 2013

(In Thousands of New Taiwan Dollars, unless otherwise specified)

1. Organization and operations

Formerly a cooperative savings company in central Taiwan (known as Central Taiwan Cooperative Company” established on September 27 1952, Taichung Commercial Bank Co., Ltd. (hereinafter, the “Bank” or “Taichung Bank”) was approved to establish in April 1953 as a commercial bank and started its operation since August of the same year. The amended Banking Act was promulgated in July 1975 on which Central Taiwan Cooperative Company was approved to reorganize as “Taichung Small and Medium Business Bank Co., Ltd.” in January 1, 1978 (hereinafter, Taichung business bank”). On May 15 1984, the Bank was approved to list its stocks in TWSE.

In order to cope with national financial policy, provide the pubic with financial services and support economic construction and develop industrial and commercial business, the Taichung Small and Medium Business Bank Company Limited was renamed Taichung Commercial Bank Co., Ltd. in Dec. 1998. As of December 31, 2014, it had established a Business Department, Trust Department, International Banking Department and 80 local branches, and an International Banking Branch. It is engaged mainly in financial operations regulated by Banking Law, trust business, offshore banking business and others approved by the competent authority.

The Taichung Bank’s capital was NTD 500 thousand when the Bank was incorporated. In order to found its capital structure and comply with the Government Apparatus's order and decree, the Bank has increased/reduced its capital over the past years. As of December 31, 2014, its paid-in capital was NTD 28,515,063 thousand.

This consolidated financial statement is denominated in the functional currency of Taichung Bank, which is NTD.

2. Financial reporting date and procedures

The consolidated financial statements were approved for publication by the board of directors on March 11, 2015.

3. Application of new and revised standards and interpretation

  • (1) The 2013 edition of IFRS, IAS, IFRIC, and SIC recognized by Financial Supervisory Commission (hereinafter referred to as the “FSC”), which will be come into effect.

According to FSC Letter Chin-Kuan-Cheng-Shen-Zi No. 1030029342 and Letter Chin-Kuan-Cheng-Shen-Zi No. 1030010325, consolidated operations shall adopt the 2013 edition of IFRS, IAS, IFRIC and SIC (hereinafter collectively known as “IFRSs”) released by IASB and recognized by FSC from 2015 onwards

136- 11 -

and related amendment to the Criteria for the Compilation of Financial Statements by Public Banks.

The new / amended / revised standards or IASB publication effective interpretation date (Note) The amendment “IFRSs amendment – January 1, 2009 or January Amendments to IAS 39 (2009)” to the IFRSs 1, 2010 Amendments to the IAS 39 “Embedded Effective in the years after Derivatives” June 30, 2009 “IFRSs improvements (2010)” July 1, 2010 or January 1, 2011 “The annual improvement plan for the periods of January 1, 2013 2009-2011” Amendments to the IFRS 1 “IFRS 7 Limited July 1, 2010 exemption of comparative disclosures for first-time adoption” Amendments to IFRS 1 “Severe hyperinflation July 1, 2011 and first-time adoption deadline cancellation” Amendments to IFRS 1 “Government loans” January 1, 2013 Amendments to IFRS 7 “Disclosures - Financial January 1, 2013 assets and financial liabilities offsetting” Amendments to IFRS 7 “Disclosures - financial July 1, 2011 assets transfer” IFRS 10 “Consolidated Financial Statements” January 1, 2013 IFRS 11 “Collective Agreement” January 1, 2013 IFRS 12 “Disclosure of interests in other entities” January 1, 2013 Amendments to the IFRS 10, IFRS 11, and IFRS January 1, 2013 12 “Consolidated Financial Statements, the collective agreement and disclosure of interests in other entities: the transitional provisions guidelines” Amendments to the IFRS 10, IFRS 12, and IAS 27 January 1, 2014 “Investment Entity” IFRS 13 “Fair Value Measurement” January 1, 2013 Amendments to the IAS 1 “The expression of July 1, 2012 other comprehensive profit or loss” Amendments to the IAS 12 “Deferred income tax: January 1, 2012 Recovery of underlying assets” Amendments to the IAS 19 “Employee Benefits” January 1, 2013 Amendments to the IAS 27 “Individual Financial January 1, 2013 Statements” Amendments to the IAS 28 “Investments in January 1, 2013 affiliated companies and joint ventures” Amendments to the IAS 32 “Financial assets and January 1, 2014 financial liabilities offsetting” IFRIC 20 “Stripping Costs in the production stage January 1, 2013 of an open-pit mine”

Note: Unless otherwise stated, the aforementioned new / amended / revised standards or interpretation are effective in the years after the respective date.

137- 12 -

Except for the following explanations, the application of these new / amended / revised standards or interpretations will not result in significant changes in the consolidated company’s accounting policies:

IAS 19 “Employees benefits”

According to the standard, the cost incurred in previous period shall be recognized as expenses in full amount at the time of realization so as to allow the recognized net pension liabilities or assets to fully reflect the amount short of the plan or the overall value of the surplus. In addition, the “net interest” will replace the expected return of the interest cost and the plan assets prior to the application of the amendments and the net interest is derived by having the defined benefit liability (asset) multiplied by the discount rate.

The Bank estimated the recognition of the cost of services not being recognized in previous periods after the adoption of the new standard in FY2015 with the addition of accruable pension liabilities amounted to NTD188,211 thousand, deferred income tax assets amounted to NTD31,996 thousand, and adjustment for deduction of retained earnings amounted to NTD156,215 thousand on January 1 2014. On December 31 2014, the Bank added accruable pension liabilities amounted to NTD162,041 thousand, deferred income tax assets amounted to NTD27,547 thousand, and deducted retained earnings amounted to NTD134,494 thousand. The downward adjustment of operating expenses in FY2014 by NTD26,170 thousand and upward adjustment of income tax expense amounted to NTD4,449 thousand.

Further to the aforementioned influence, the Bank continues to evaluate the effect of the 2013 edition of IFRSs and the amended Criteria for the Compilation of Financial Statements by Public Banks on the financial positions and financial performance of relevant periods to the date this parent company only financial statement was approved. Related effect will be disclosed after evaluation.

(2) IFRSs released by IASB pending on the approval of FSC

IFRSs released by IASB pending on the approval of FSC IFRSs released by IASB pending on the approval of FSC are not applicable to the Bank.

138- 13 -

The new / amended / revised standards or IASB publication effective interpretation date (Note 1) “The annual improvement plan for the periods of July 1, 2014 (Note 2) 2010-2012” “The annual improvement plan for the periods of July 1, 2014 2011-2013” “The annual improvement plan for the periods of January 1, 2016 (Note 4) 2012-2014” IFRS 9 “Financial Instruments” January 1, 2018 Amendments to the IFRS 9 and IFRS 7 January 1, 2018 “Mandatory Effective Date and Transitional Disclosures” Amendment to IFRS 10 and IAS 28, January 1, 2016 (Note 3) “Consolidated Financial Statements and Investment in Associates”. Amendments to IFRS 10, IFRS 12, and IAS 28, January 1, 2016 “Interests in other Entities, Consolidated Financial Statements, and Investment in Associates”. Amendment to IFRS 11, “Joint Arrangement” January 1, 2016 IFRS 14 “Restricted Deferred Account” January 1, 2016 IFRS 15, “Revenue from Contracts with Customers” January 1, 2017 Amendment to IAS 1, “Presentation of Financial January 1, 2016 Statements” Amendments to IAS 16, and IAS 38, “Property, Plant, and Equipment, and Intangible Assets, acceptable depreciations and amortizations” January 1, 2016 Amendments to IAS 16, IAS 41, “Agriculture: Productive Plants” January 1, 2016 Amendments to the IAS 19 “Defined benefit July 1, 2014 plans: employees contribution” Amendment to IAS 27, “ Consolidated and Separate Financial Statements, the equity method adopted” January 1, 2016 Amendments to the IAS 36 “Disclosure of January 1, 2014 recoverable amount of non-financial assets” Amendments to the IAS 39 “Derivatives contract January 1, 2014 replacement and hedge accounting continuity” IFRIC 21, “Levies” January 1, 2014

“The annual improvement plan for the periods of 2010-2012”

  • Note 1: Unless otherwise stated, the aforementioned new / amended / revised standards or interpretation are effective in the years after the respective date.

  • Note 2: Amendments to the IFRS 2 are applicable to the share-based transactions after the payment date of July 1, 2014. Amendments to the IFRS 3 are applicable to the business merger after the acquisition date of July 1, 2014.

139- 14 -

Amendments to the IFRS 13 shall enter into force immediately. The remaining amendments are applicable in the years after July 1, 2014.

  • Note 3: Application will be deferred to transactions occur on January 1 2016 and beyond.

  • Note 4: Further to the deferred application of the amended IFRS 5, all other amendments are applicable with effect on January 1 2016.

Further to the notes specified below, the aforementioned announcement/amendment/revision of standards and interpretations shall not cause significant change in the accounting policies:

IFRS 9 “Financial Instruments”

Recognition and measurement of financial assets

In terms of financial assets, the subsequent measurement of financial assets within the scope of the IAS 39 “Financial Instruments: Recognition and Measurement” is measured at cost after amortization or fair value.

The debt instruments in invested by the companies in the consolidated financial statements are classified and measured as follows if the contract cash flows are fully for the settlement of principal and the interests of the outstanding amount of principal:

  1. The holding of financial assets is for purpose of collecting the contract cash flow volume shall be measured amortized cost of the financial assets. This category of financial assets shall be recognized as profit or loss on the interest calculated under the effective interest rate with continued assessment of impairment. Any gains or loss from impairment shall also be recognized as profits or loss.

  2. The holding of financial assets is for purpose of collecting the contract cash flow volume and for selling the financial assets shall be measured at fair value through consolidated income statements. This category of financial assets shall be recognized as profit or loss on the interest calculated under the effective interest rate with continued assessment of impairment. Any gains or loss from impairment or exchange shall also be recognized as profits or loss. The change in fair value shall be recognized through consolidated income statement. For removal of the financial assets from book listing or reclassification, the change in fair value previously accumulated in the consolidated financial statement shall be reclassified as profits or loss.

140- 15 -

For the investment of financial assets by the companies in the consolidated financial statements beyond the aforementioned terms and conditions, they shall be measured at fair value and the change in fair value shall be recognized through income statement. If the companies in the consolidated financial statements are discrete in initial recognition, the equity investment not available for sales shall be measured at fair value through consolidated financial statement. With the exception of dividend income, which shall be recognized as profit or loss, any other related benefits and profit or loss from this category of financial assets shall be recognized as other comprehensive income without being assessed for impairment, and accumulated as change in fair value of other comprehensive income and not classified as profit or loss.

Impairment of financial assets

IFRS 9 adopts the “expected credit losses model” in the recognition of the impairment of financial assets. Financial assets based on cost after amortization, financial assets at fair value through consolidated income state under compulsion, receivable rents, assets from contracts under IFRS 15, “Revenue from Contracts of Customers”, or commitment of financing and financial guarantee contracts shall be recognized as provision for credit loss. If the credit risk of the aforementioned financial assets has no significant deterioration after initial recognition, the provision for credit loss shall be measured based on the expected credit loss in the 12 months ahead. If the credit risk of the aforementioned financial assets turned severe after the initial recognition and credit risk is not low, the provision for credit loss shall be measured based on the expected credit loss before the maturity of the assets. However, this does not include account receivables that contain material financial components, which shall be subject to assessment for the provision of expected credit loss before the perpetuity of the account receivables.

For financial assets already showed credit impairment at the initial recognition, the companies in the consolidated financial statements shall consider the expected credit loss at the time of initial recognition and the effective interest rate after adjustment. Subsequent provision for credit loss shall be recognized based on accumulated changes of expected credit loss.

Further to the aforementioned influence, the companies in the consolidated financial statements will continue to evaluate the effect of the amendment to other IFRSs on the financial positions and performance of the companies in the

141- 16 -

consolidated financial statements to the date this parent company only financial statement approved and released, and will make appropriate disclosure after the evaluation.

4. Summary of significant accounting policies

  • (1) Compliance Statement

The consolidated financial statements are prepared in accordance with the “Rules Governing the Preparation of Financial Statements of Publicly Issued Banks,” “Rules Governing the Preparation of Financial Statements of Securities Firms” and the IFRSs accredited by the FSC.

  • (2) Basis of preparation

Further to financial instruments measured at fair value, the content contained in this consolidated financial statement is compiled based on historical data. Historical cost is generally determined according to the fair value of the consideration paid for the asset acquired.

  • (3) Standards in differentiating current and non-current assets and liabilities.

Because it was difficult to ascertain the business cycle due to the operational characteristics of a consolidated bank, it was not necessary for the Bank to categorize assets and liabilities into current or non-current items. However, the assets and liabilities have been categorized by nature and in the order subject to the equivalent liquidity. The analysis on maturity is also disclosed in Note 38.

  • (4) Basis of consolidation

  • Principle of consolidated financial statements preparation

This consolidated financial statement contains the information of the financial statements of the Bank and its controlled entities (subsidiaries).

The subsidiaries’ financial statements have been properly adjusted to make the accounting policies consistent with the accounting policies of the consolidated company.

In preparing these consolidated financial statements, the transactions, account balances, incomes and loss and expenses among the individual entities are written off in full amount.

  1. Subsidiaries included in the consolidated financial statements

The business entities of the consolidated financial statements are as follows:

Percentage of

142- 17 -

Investor
Taichung
Commercial Bank
Co.

Taichung
Commercial Bank
Co.

Taichung
Commercial Bank
Co.

Taichung
Commercial
Bank
Lease
Enterprise

TCCBL Co., Ltd.
 Subsidiaryname
Taichung
Commercial
Bank Insurance Broker
Co., Ltd.
Taichung
Commercial
Bank Lease Enterprise
Taichung
Commercial
Bank Securities Co.,
Ltd.
TCCBL Co., Ltd.
Taichung
Commercial
Bank Leasing (Suzhou)
Ltd.		 Nature of the operation
Insurance brokerage
Leasing
Securities Brokerage
Financing, leasing and
investments.
Financing Leasing and
investments		 shareholdings shareholdings

December
31,2014
100
100
100
100
100		 December
31,2013
100
100
100
100
100

Taichung Commercial Bank Securities Co., Ltd. (hereinafter referred to as the “Taichung Bank Securities”) was spin-off from the Company with the operating assets and liabilities of the Security Department assigned on May 2, 2013. The Taichung Commercial Bank Securities Co., Ltd. issued stock shares wholly owned by the Company. The major business operations include: (1) engaging in brokerage trading of marketable securities; (2) trading of marketable securities; (3) marketable securities lending or borrowing; (4) business contributed to futures transactions; and (5) other approved activities. Assets and liabilities are assigned to Taichung Commercial Bank Securities Co., Ltd. as follows:

Co., Ltd. as follows:
Assets
Cash and cash equivalents
Receivable, net
Discounts and loans, net
Available-for-Sale
Financial
Assets-net
Property, plant, and equipment –
net
Intangible assets
Other assets
Liabilities
Payables
Other liabilities
Net operating assets and liabilities
spin-off and assigned		 Amount
$ 166,429
493,007
315,888
352,656
31,258
5,799
29,968
( 542,334 )
(
2,671)
$ 850,000
  1. The subsidiaries not included in the consolidated financial statements: None

143- 18 -

(5) Foreign currency

When preparing the financial statements of each business entity of the consolidated company, the transactions in currencies other than the functional currency (the currency of the primary economic environment in which the entity operates) of the respective business entity (foreign currency) should be translated into the functional currency in accordance with the exchange rate on the transaction day.

Foreign currency monetary items are translated at the closing rate on each balance sheet date. The exchange differences arising from the settlement of monetary items or translating monetary items are recognized in the current profit or loss.

The foreign non-currency items measured at fair value are translated in accordance with the exchange rate on the fair value determination date and the exchange difference is booked as current profit or loss. However, for the changes in fair value recognized in the other comprehensive profit or loss, the exchange difference is recognized in the other comprehensive profit or loss.

The foreign non-currency items measured at historical cost are translated in accordance with the exchange rate on the transaction date without the need for a translation again.

When preparing the consolidated financial statements, the assets and liabilities of the consolidated company’s foreign operations should be translated into New Taiwan dollars in accordance with the exchange rate on the balance sheet date. Income and expense items are translated in accordance with the current average exchange rates and the exchange differences are booked in the other comprehensive profit or loss.

(6) Cash and cash equivalents

The “cash and cash equivalents” account on the consolidated balance sheet includes cash on hand, savings deposit, and short-term highly liquidating investments that are readily convertible to known amounts of cash with a small risk of changes in value.

  • (7) Bonds Purchased under Resell/Notes Issued under Repurchase Agreements

For underwritten bonds and securities that are sold under RP and RS agreements, recognize interest expense and interest income on the accrual basis between the purchase and sale dates and agreed RP and RS date; also, recognize

144- 19 -

RP (Debt) and bonds and securities sold under resell agreements between the sale and purchase dates.

(8) Investments in the affiliated company

The consolidated company has a significant influence on an affiliated company that is not a subsidiary or joint venture.

Consolidated company has the investment in an affiliated company handled in accordance with the equity method. Under the equity method, investments in the affiliated companies were originally recognized at cost; the book value after the acquisition date fluctuates along with the distribution of profit or loss from the affiliated company and other comprehensive profit or loss by the consolidated company. In addition, for changes in the affiliated company’s equity, the consolidated company may be entitled to have it recognized proportionally to the shareholding.

When assessing impairment, the consolidated company has the overall book value (including goodwill) of the investment deemed as a single asset when comparing the recoverable amount and the book amount in order to conduct impairment testing. The recognized impairment loss is an integral part of the book amount of the investment. Any reversal of the impairment loss can be recognized within the range of the recoverable amount of the subsequently increased investment.

The profit or loss resulting from the countercurrent, downstream and side-stream transactions between the consolidated company and the affiliated company is recognized in the consolidated financial statement within the range that is irrelevant to the consolidated company’s interest in the affiliated company.

  • (9) Property, plant, and equipment

Real properties and equipment shall be recognized based on cost. Subsequent costing shall be measured on the cost net of accumulated depreciations and accumulated impairments.

Proprietary land is not depreciated.

Real properties and equipment are depreciated under the straight-line method. Particular portion shall be individually singled out for depreciation. The companies in the consolidated financial statements review the methods for assessment of life span, residual value and depreciation method on the ending day

145- 20 -

� of each fiscal year. The impact of changes in accounting estimates is processed in accordance with the put-off method.

The de-recognized profit or loss arising from the property, plant and equipment is the difference between the net disposal proceeds and the book amount of the asset and it is recognized in profit or loss.

  • (10) Intangible assets

  • Acquired separately

The intangible asset with limited useful life acquired separately was originally measured at cost and subsequently measured at cost, net of accumulated amortization and accumulated impairment losses. The consolidated company has depreciation appropriated in accordance with the straight-line method and, at least at the end of each year, has the estimated useful lives, residual values and depreciation method reviewed. Unless the consolidated company is expected to have the intangible assets disposed of before the end of their economic life, the residual value of the intangible asset with limited useful lives is estimated at zero. The impact of changes in accounting estimates is processed in accordance with the put-off method. Intangible asset with indefinite useful lives is measured at cost net of accumulated impairment losses.

  1. de-recognition

The de-recognized profit or loss arising from the intangible assets is the difference between the net disposal proceeds and the book amount of the asset and it is recognized in the profit or loss.

  • (11) Impairment of tangible and intangible assets (except for goodwill).

The consolidated company at each balance sheet date is to assess whether there is any indication of the impairment occurring to the tangible and intangible assets (except for goodwill). If there is any indication of impairment occurring, the recoverable amount of the asset should be estimated. If the recoverable amount of an individual asset cannot be estimated, the consolidated company is to estimate the recoverable amount of the respective cash-generating unit. If the community assets can be amortized to the cash-generating units on a reasonable and consistent basis, it is allocated to individual cash-generating unit or it is allocated to the smallest cash-generating cluster on a reasonable and consistent basis.

146- 21 -

The intangible asset with indefinite useful lives and not yet available for use should be tested for impairment at least annually or should be tested when there is an indication of impairment.

The recoverable amount is the fair value net of cost or the value in use whichever is higher. When the recoverable amount of an individual asset or cash-generating unit is less than its book amount, the book amount of the asset or cash-generating unit should be reduced to its recoverable amount.

When the impairment loss was reversed subsequently, the book amount of the asset or cash-generating unit is increased to the adjusted recoverable amount, but the increased book amount may not exceed the book amount of the asset or cash-generating unit without recognizing the impairment loss in prior periods (net of amortization or depreciation). The reversed impairment loss is recognized in the profit or loss.

  • (12) Financial instruments

When the consolidated company has become a party to the instrument contract, the financial assets and financial liabilities are to be recognized in the consolidated balance sheet.

For the initial recognition of the financial assets and financial liabilities, if the financial assets or financial liabilities are not measured at fair value through profit or loss, it is measured at fair value plus transaction cost that is directly attributable to the acquisition or issuance of financial assets or financial liabilities. The transaction cost directly attributable to the acquisition or issuance of financial assets or financial liabilities that are measured at fair value through profit or loss is immediately recognized in the profit or loss.

  1. Financial assets

The customary transaction of financial assets is recognized and de-recognized in accordance with the trade date accounting. A customary transaction refers to the purchase or sale of financial assets and the delivery period is within the period prescribed by the regulations or customary market practice:

(1) Classification of measurement

The financial assets held by the companies in the consolidated statements are financial assets at fair value through income statement,

147- 22 -

financial assets held to maturity, financial assets available for sale, and loans and receivables.

  • A. Financial assets at fair value through profit and loss

Financial assets measured at fair value through profit or loss includes held-for-sale and designated financial assets measured at fair value through profit or loss.

Financial asset measured at fair value through profit or loss is measured at fair value and the profit or loss generated from the secondary measurement is recognized as profit or loss (not includes any dividend or interest arising from the financial asset). Please refer to Note 37 for the determination of fair value.

If the financial asset measured at fair value through profit or loss is an equity investment no public market price available and the fair value cannot be reliably measured and the derivatives that are linked to the equity instrument without a market quote and the settlement must be completed with the equity instrument delivered, it is measured subsequently at cost, net of the impairment loss and it is individually booked as “Financial assets measured at cost.” If these financial assets can be measured subsequently at fair value reliably, it is measured again at fair value and the difference between the book amount and fair value is recognized in the profit or loss.

  • B. Held-to-maturity investments

The government bonds and domestic and international corporate bonds and foreign government bonds with specific credit ratings that are invested by the consolidated company and the consolidated company has the positive intention and ability to hold it to maturity are classified as held-to-maturity investments.

The held-to-maturity financial assets after the initial recognition are measured at the amortized cost after deducting impairment losses in accordance with the effective interest method. C. Available-for-Sale Financial Assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified as

148- 23 -

loans and receivables, held-to-maturity investments or financial assets measured at fair value through profit or loss.

Financial assets available for sale are measured at fair value. If the change in book value of financial assets available for sale is exchange gain/loss from foreign currencies, recognize as profit or loss based on the interest income calculated under the effective interest rate. The same principle is applicable to the dividend of equity investment available for sale. The changes in the book value of the other available-for-sale financial assets are recognized in the other comprehensive profit or loss and are reclassified to the profit or loss upon disposal of the investment or when the impairment is confirmed.

The dividend of available-for-sale equity investments is recognized when the right to collection of the consolidated company is established.

If the available-for-sale financial asset is an equity investment without a market quote in an active market and the fair value cannot be reliably measured and the derivatives that are linked to the equity instrument without a market quote and the settlement must be completed with the equity instrument delivered, it is measured subsequently at cost, net of impairment loss, and it is individually booked as “Financial assets measured at cost.” If such financial assets could be subsequently measured at fair value, measure based on fair value and the difference between the book value and the fair value shall be recognized under other comprehensive profit or loss. In case of impairment, recognize as profit or loss.

D. Loans and accounts receivable

Loans and receivables (including accounts receivable, cash and cash equivalents, and bond investments without an active market) are measured at the amortized cost after deducting the impairment losses in accordance with the effective interest method, except for the interest of short-term accounts receivable that is insignificant.

149- 24 -

Cash equivalents are time deposits within 3 months from the date of acquisition, with high liquidity, can be converted into cash with marginal risk on the change in value, and are used for the fulfillment of short-term commitment in cash settlement.

(2) Impairment of financial assets

Except for the financial assets measured at fair value through profit or loss, the consolidated company examines whether there is an evidence of impairment occurring on the other financial assets at each balance sheet date. When there is objective evidence of one or more events occurring after the initial recognition of financial assets with a resulting loss to the future cash flow of the financial asset, the impairment of financial assets had already occurred.

For financial assets measured at the amortized cost, such as loans, discounts, exchange purchased and accounts receivable, the assets that are individually assessed without any impairment identified are collectively reassessed for impairment. The collective objective evidence of the impairment of receivables may include the consolidated company’s experience of collection, the increase in collective deferred payment and the observable changes in national or local economic conditions related to receivables arrearages. Objective evidence for impairment may include:

  • A. Significant financial difficulty of the issuer or debtors:

  • B. Breach of contract, such as, interest or principal payment delays or defaults;

  • C. The possibility of debtor’s entering bankruptcy or other financial reorganization is greatly increased; or

  • D. Financial difficulties may cause the active market for financial asset to disappear.

Furthermore, according to the Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans, the Bank evaluates the collectability of loaned assets according to the borrower’s financial condition and the repayment of principal and interest and also based on the evaluated value of the collateral provided for specific credit.

150- 25 -

According to the aforementioned requirement, non-performing loans shall be recognized as assets under the categories of loss, doubtful, substandard, special mention, and normal depending on the collaterals and overdue period. Accordingly, provision for loss at 100%, 50%, 10%, 2% and 1% shall be recognized as per the requirement of Financial Supervisory Commission Letter Chin-Kuan-Yin-Fa-Zi No. 10010006830. If the provision for bad debts accounted for more than 1% of the total lending, the proportion for the provision for bad debts for real properties shall not fall below 1.5% pursuant to Letter Chin-Kuang-Yin-Kuo-Zi No. 10300329440.

The impairment amount of the financial assets measured at amortized cost is the difference between the book value of the assets and the present value of the future cash flows discounted at the financial asset’s original effective interest rate.

If the financial assets being recognized after the amortization of the cost showed a decrease of the amount of impairment in subsequent periods, and the decreased amount of impairment is related to the events after the recognition for impairment, the impairment so recognized previously shall be directly reversed or via the adjustment of provision of accounts and recognized as profit or loss. However, the amount of such reversal shall not exceed the cost after amortization before the recognition of impairment on the day of recognition.

When the fair value of the available-for-sale equity investments below cost and the decline is significant or persistent, it will be deemed as an objective evidence of impairment.

When available-for-sale financial asset is impaired, the cumulative loss previously recognized in the other comprehensive profit or loss will be reclassified into profit or loss.

The impairment loss of the available-for-sale equity instruments that is already recognized in the profit or loss may not be reversed through the profit or loss. The fair value reversed amount after recognizing the impairment losses is recognized in the other comprehensive profit or loss. If the fair value of the available-for-sale financial assets increased in the subsequent period and the increase is

151- 26 -

objectively linked to an event occurring after the impairment is recognized, the impairment loss is reversed and recognized in the profit or loss.

For the objective evidence of impairment of other financial assets, please refer to the note on financial assets booked at the amortized cost.

The impairment amount of the financial assets measured at cost is the difference between the book value of the assets and the present value of the future cash flows discounted at the financial asset’s current market rate of return. The said impairment loss shall not be reversed in subsequent periods.

The impairment loss of all financial assets is directly deducted from the book amount of the financial asset. However, the book value of the accounts receivable and loans is adjusted down by the allowance for bad debt. The accounts receivable and loans that are concluded to be uncollectible are written off against the allowance account. The amount previously written off and collected subsequently is credited to the allowance account. Changes in the book amount of the allowance account are recognized in the profit or loss.

  • (3) The de-recognition of financial assets

The consolidated company has financial assets de-recognized only when the contractual rights from the cash flows of a financial asset becomes invalid or when the financial assets are transferred and almost all the risks and rewards of the asset ownership have been transferred to other enterprises.

When de-recognizing a financial asset, the difference between the book amount and the consideration received plus any cumulative profit or loss recognized in the other comprehensive profit or loss is recognized in the profit or loss.

  1. Equity instruments

The debt and equity instruments issued by the consolidated company are classified as financial liabilities or equity pursuant to the contractual agreements and the definition of financial liabilities and equity instruments.

152- 27 -

Equity instruments issued by the consolidated company are recognized for an amount after deducting the direct issuing cost from the proceeds collected.

The Company’s equity retrieved is debited or credited to the equity. The Company’s equity purchased, sold, issued, or cancelled is not recognized in the profit or loss.

  1. Financial liabilities

  2. (1) Subsequent measurement

All financial assets shall be measured under the effective interest rate method on the cost after amortization except under the following circumstances:

  • A. Financial liabilities at fair value through profit and loss

Financial liabilities measured at fair value through profit or loss includes held-for-sale and designated financial liabilities measured at fair value through profit or loss.

Financial liability measured at fair value through the profit or loss is measured at fair value and the profit or loss generated from the secondary measurement is recognized as a profit or loss. The gain or loss recognized in the profit or loss does not include any dividends or interest paid for the financial liability. Please refer to Note 37 for the determination of fair value.

If the financial liability measured at fair value through the profit or loss is: (a) the sale of an equity whose fair value cannot be reliably measured and has no market quote, and the settlement of the equity must be completed with the equity delivered; or (b) a derivative liability that is linked to an equity that cannot be reliably measured and has no market quote, and the settlement of the equity must be completed with the equity delivered, it is measured at cost on the balance sheet date and it is individually booked as “Financial assets measured at cost.” If these financial liabilities can subsequently be reliably measured at fair value, it is measured again at fair value and the difference between the book amount and the fair value is recognized in the profit or loss.

B. Financial guarantee contract

153- 28 -

The financial guarantee contracts that are not measured at fair value through the profit or loss issued by the consolidated Company, after the initial recognition, are measured at cost after amortization. If specific amount shall be payable under contractual obligation under assessment, the optimal estimated amount and the amount after amortization under contractual obligation shall be measured, whichever is higher.

  • (2) De-recognition of financial liabilities

When de-recognizing financial liabilities, the difference between the book amount and the consideration paid (including any transferred non-cash assets or assumed liabilities) is recognized as profit or loss.

  1. Convertible corporate bonds

Convertible bonds issued by the consolidated company include both liabilities and convertible rights and are classified to the respective category at the initial recognition. Convertible rights that are not using a fixed amount of cash or other financial assets in exchange for the settlement of the consolidated company’s equity instruments are classified as convertible rights derivatives. The liability and convertible right is recognized at fair value on the date of issuance.

In subsequent periods, the liability component of the convertible bonds using the effective interest method department carried at amortized cost Convertible right derivative is measured at fair value and the change in fair value is recognized in the profit or loss.

Transaction cost associated with the issuance of convertible bonds is amortized to the liabilities and convertible rights of the instrument proportionately to the fair value. Transaction cost associated with the convertible rights derivative is recognized directly in the profit or loss; transaction cost associated with the liability will be included in the book amount of the liability and it will be amortized over the duration of the convertible bond in accordance with the effective interest method.

  1. Derivatives

The derivative instruments signed by the consolidated company include forward foreign exchange contracts, currency swap contracts, and convertible

154- 29 -

bond asset swap contracts that are used to manage the interest rate and exchange rate risk of the consolidated company.

Upon signing the contracts, derivatives are recognized at fair value initially and then subsequently measured at fair value on the balance sheet date. The profit or loss resulting from the subsequent measurement is directly booked under the profit or loss. Then, the timing of recognizing the designated and effective hedging derivatives depends on the nature of the hedging relationship. When the fair value of the derivatives is positive, it is classified as a financial asset; when the fair value is negative, it is classified as a financial liability.

The risk and features of an embedded derivative instrument and the main contract are not closely related and if the main contract is a financial asset or a financial liability measured at fair value through profit or loss, the derivatives are deemed as a separate derivative.

(13) Liability reserve

The recognized liability reserve amount is with the risk and uncertainty of the obligation considered, and it is the optimum estimate of the expenditure required to settle the obligations on the balance sheet date. Provision for liabilities shall be measured based on the discount value of the estimated cash flow for the settlement of obligation.

If part or all of the expenditure needed for liquidating liability reserve is expected to be reimbursed by the other party, when the reimbursement is almost certain to be received and the amount can be reliably measured, the reimbursement is recognized as an asset.

(14) Recognition of revenue

Income refers to the total economic effect inflows due to the increase of equity resulting from normal operating activities, but does not include the increase of equity resulting from the input of equity participants. The main income of the consolidated company:

1. Interest revenue

For the interest income from financial assets, when the economic benefits are likely to flow into the consolidated company and the amount of revenues can be measured reliably, all interest income generated from

155- 30 -

interest-bearing financial instruments should be recognized on an accrual basis in accordance with the effective interest rate.

For a single or a group of similar financial asset that is reduced due to impairment losses, the subsequently recognized interest income is calculated in accordance with the interest rate that is used for the discounting of future cash flow when measuring the impairment loss.

  1. Service fees and commission income

Service fee income and expense are recognized in a lump sum when the loan or other service is provided. If the service fees are earned for completing major projects, they are recognized on the completion of the major projects, such as, the syndicated loan service fee charged collected by the organizing bank. If the service fees income and expenses are earned or paid for the subsequent loan service, they are to be amortized over the service period depending on the materiality, or included for the calculation of loans and receivables’ effective interest rate.

  1. Free-Gratis Dividends revenue

Dividend income from investments is recognized when the shareholders’ right to receive payment is established; however, it is under the preconditions that the economic benefits associated with the transaction system are likely to flow into the consolidated company and the amount of revenues can be measured reliably.

(15) Lease

When the lease term is to have all risks and returns attached to the ownership of assets transferred to the lessee, it is classified as a financing lease. All other leases are classified as operating leases.

  1. The consolidated company is the lessor.

Under a financial lease, the amount to be collected from the lessee is recognized as lease receivables in accordance with the net lease investment of the consolidated company. Financial revenue is amortized into each accounting period to reflect the consolidated company’s fixed rate of return available for each respective period from the outstanding net lease investment.

An operating lease rent is recognized as income on a straight-line basis over the lease period, unless another systematic basis is more representative of the leased asset’s efficiency in use and time consumption pattern. The original

156- 31 -

direct cost arising from negotiating and arranging an operating lease is included in the book value of the leased asset and it is recognized as an expense on a straight-line basis over the lease period. Under an operating lease, the contingent rent is recognized as income in the current period.

Lease incentives given when signing an operating lease are recognized as assets. The total incentive cost is credited to the rent income on a straight-line basis, unless another systematic basis is more representative of the leased asset’s efficiency in use and time consumption pattern.

  1. The consolidated company is the lessee

An operating lease payment is recognized as an expense on a straight-line basis over the lease period, unless another systematic basis is more representative of the user’s efficiency in use and time consumption pattern. Under an operating lease, a contingent rent is recognized as an expense in the current period.

Lease incentives acquired from an operating lease are recognized as liability. The total incentive earning is credited to the rent expenses on a straight line basis, unless another systematic basis is more representative of the user’s efficiency in use and time consumption pattern.

  • (16) Employee benefits

  • Retirement benefits

Under the defined contribution pension plan, the pension amount appropriated during the service years of the employees is recognized as a current expense.

Under the defined benefit pension plan, the actuarial valuation of the benefits cost is conducted in accordance with the projected unit credit method. All actuarial gains and losses arising from defined benefit obligations are immediately recognized upon occurrence under the “other comprehensive profit or loss.” Prior service cost is recognized immediately in the range of benefits already vested and the non-vested amount is amortized on a straight line basis within the average period before the benefits become vested.

Accrued pension liabilities are for an amount including the present value of the defined benefit obligation, unrecognized prior service cost adjusted and fair value of plan assets deducted. The assets derived under these circumstances shall not exceed the cumulative unrecognized prior service cost,

157- 32 -

plus the present value of the refundable amount of the plan and deductible future appropriation.

  1. Employees preferential deposit benefit

The companies of the consolidated financial statements provide preferred deposit for the employees, including the offering of fixed amount preferred deposit at special rate for the employees currently in employment and for the payment to the retired employees and current employees at their retirement. The difference between the interest rate for the aforementioned preferred deposits and market rate shall fall within the scope of employee welfare.

According to the “Criteria for the Compilation of Financial Statements by Public Banks”, the interest from the preferred deposit for employees prearranged after retirement in excess of the interest under regular market rate shall be subject to actuarial calculation at the time of the retirement of the employees pursuant to IAS 19, “Employee Benefits” as recognized by FSC. However, the parameters for the assumptions in the actuarial calculation may be regulated by the competent authority, comply accordingly, if applicable.

  1. Other long-term employee benefits

The accounting process of the other long-term employee benefits is same as the accounting process of retirement interests. However, the relevant actuarial gains and losses and prior period service cost are recognized immediately in the profit or loss.

  • (17) Income tax

Income tax expense is the sum of the current income tax and deferred income

tax.

  1. Income tax expenses in the current period

The 10% additional income tax levied on Accumulated earnings calculated according to the Income Tax Law is stated as income tax expenses in the year of the resolution made by the shareholders’ meeting.

The adjustment to prior period income tax payable is booked as current income tax.

  1. Deferred tax

Deferred income tax is recognized in accordance with the temporary differences arising from the book amount of the assets and liabilities in the

158- 33 -

consolidated financial statements and the tax base for the computation of taxable income. Deferred income tax liabilities are generally recognized for all taxable temporary differences. Deferred income tax assets are recognized when there is a likelihood to have taxable income available for income tax credit resulting from the expenses of deductable temporary differences and tax loss carryforwards. If the temporary differences are the results of goodwill or the initial recognition of other assets and liabilities (excluding a business merger), and they do not affect the taxable income and accounting profit at the time of transaction, they are not recognized as deferred income tax assets or liabilities.

Deferred income tax liabilities are recognized for all taxable temporary differences related to the subsidiary, unless the consolidated company can control the timing of reversal of the temporary differences and that the temporary differences are unlikely to be reversed in the foreseeable future. The deferred income tax asset arising from deductible temporary differences associated with such investment and equity is recognized within the range of earnings that are with sufficient taxable income to realize temporary differences and are expected to be reversed in the foreseeable future.

The book amount of deferred income tax asset must be reviewed at each balance sheet date. The book amount of those that no longer have any sufficient taxable income to recover all or part of the asset, should be adjusted down. Those that are not originally recognized as deferred income tax assets should also be reexamined at each balance sheet date. The book amount of those that are likely to generate taxable income in the future for the recovery of all or part of its assets should be adjusted up.

Deferred income tax assets and liabilities are measured in accordance with the expected liability liquidation or the tax rate in the period when the asset is realized. The tax rate is based on the tax rate and tax laws that are legislated or substantively legislated at the balance sheet date. The measurement of deferred income tax liabilities and assets reflects the tax effect resulting from the book amount of the assets and liabilities expected to be recovered or liquidated at the balance sheet date.

  1. Current and deferred income tax for the year

Current and deferred income taxes are recognized in the profit or loss, except for the current and deferred income taxes related to the items

159- 34 -

recognized in other comprehensive profit or loss or directly included in the equity are recognized in the other comprehensive profit or loss or directly included in the equity.

5. Main source of significant accounting judgment, estimates and assumptions uncertainty

When the accounting policies stated in Note 4 adopted by the consolidated company, for the information that is hard to collect from other sources, the management should have the relevant judgments, estimates, and assumptions made in accordance with the historical experience and other relevant factors. Actual results may differ from the estimates.

The management will continue to review the estimates and basic assumptions. If the amendment affects only the current estimates, it is recognized in the current period. If the amendment of accounting estimates affects both current and future periods, it is recognized in the respective current and future periods. Significant accounting judgments, estimates, and assumptions made by the consolidated company are described as follows:

  • (1) Held-to-maturity financial assets

The Company’s management has performed a secondary review on the consolidated company’s held-to-maturity financial assets in accordance with the requirements of capital maintained and liquidity, and confirmed the positive intentions and ability of the consolidated company in holding these assets up to the maturity date.

  • (2) Income tax

Due to the unpredictability of future profits, the realization of deferred income tax assets will depend mainly on whether there is sufficient future profit or taxable temporary differences. If the actual future profits generated are less than expected, may have significant deferred income tax assets reversed. The reversed amount is recognized in the profit or loss upon its occurrence.

  • (3) Estimated impairment of loans and receivables

When there is objective evidence indicating impairment, the consolidated company will consider the estimation of future cash flows. The amount of impairment loss is measured in accordance with the difference between the book amount of the asset and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s initial effective interest rate. If the actual future cash flows are less than expected, a material impairment loss may have resulted.

160- 35 -

As of December 31 2014 and 2013, the book value of loans and account receivables and the amount recognized for provision for bad debts are explained in Note 10 and Note 11.

  • (4) The fair value of derivatives and other derivative financial instruments

As described in Note 37, the management of the consolidated company applies judgment to select appropriate evaluation techniques in order to assess the financial instrument that is without a market price quoted in an active market. Consolidated company adopted the commonly used evaluation techniques of market participants. The assumptions made on the derivatives are adjusted in accordance with the market prices or interest rates and the features of the instruments. Debt instrument is estimated using the discounted cash flow approach and the assumption is made in accordance with the observable market prices or interest rates (if available). The fair value of the emerging and not listed (OTC) equity instruments is estimated in accordance with the investee’s financial position and results of operations analysis, the recent trading prices, the quotations of similar equity instruments in an inactive market, quotation of similar instruments in an active market and the comparable companies’ valuation multipliers, including the assumptions not supported by the observable market prices or interest rates.

The management of the consolidated company believes that the selected evaluation techniques and assumptions used are appropriate to determine the fair value of financial instruments.

(5) Recognition of Provision for employee welfare liabilities

If the present value of determined welfare retirement plan, employee preferred deposit plan, and other welfare obligation for long-term employees is calculated on the basis of a number of actuarial assumptions, and the estimate under such assumptions may vary with the change in the market and economic environment, and may cause significant influence on the expenses and amount of liabilities being recognized.

The estimate of provision for employee welfare liabilities is stated in Note 27 6. Cash and cash equivalents


Cash and cash equivalents
Cash on hand
Notes and checks for clearing
Deposits of CBC and other banks		 December31,2014
$ 3,409,807
3,187,587
2,955,561
$ 9,552,955		 December31,2013






$ 3,180,663
1,190,949
1,219,116
$ 5,590,728

161- 36 -

The cash and cash equivalent balance on the consolidated Statement of Cash Flow as of December 31, 2014 and 2013, respectively, and the related adjustments of the consolidated balance sheet are as follows:

consolidated balance sheet are as follows: consolidated balance sheet are as follows:
December 31, 2014
Cash and cash equivalents on the
consolidated balance sheet
$ 9,552,955
The “Due from Central Bank and
other banks” that meet the
definitions of IAS 7 “Definition
of Cash and cash equivalents”
which was approved by the
FSC.
67,378,018
The “Bonds and securities sold
under re-purchase agreements”
hat meet the definitions of IAS
7 “Definition of Cash and cash
equivalents”
which
was
approved by the FSC.

1,545,361
Cash and cash equivalents on the
Consolidated Statement of Cash
Flow
$ 78,476,334
Due from the Central Bank and lend to Banks
December31,2014
Reserve for deposits
Reserve
for
deposits –checking account
$ 10,456,744
Reserve
for
deposits –demand account
13,643,472
Financial
Information
Service
Co.,
Ltd.
–
liquidated account
1,174,500
Reserve for deposits in
foreign currency
37,960
Certificate of deposit of the
Central Bank
52,200,000
Call loans to banks
4,751,431
Reserve
for
trust
funds
compensation

50,000
$ 82,314,107		 December 31, 2013
$ 5,590,728
62,296,753

4,550,801
$ 72,438,282
December31,2013
Reserve for deposits
Reserve
for
deposits –checking account
Reserve
for
deposits –demand account
Financial
Information
Service
Co.,
Ltd.
–
liquidated account
Reserve for deposits in
foreign currency
Certificate of deposit of the
Central Bank
Call loans to banks
Reserve
for
trust
funds
compensation








$ 9,798,719
12,682,676
592,568
29,800
50,200,000
2,142,971
50,000
$ 75,496,734

7. Due from the Central Bank and lend to Banks

(1) The deposit reserves in the CBC are calculated by multiplying the average monthly balances of all deposit accounts by the legally required ratio The demand account reserve can be used only for the monthly adjustment of the deposit reserve.

162- 37 -

  • (2) The Reserve for trust funds compensation by Government bonds held to maturity on December 31, 2014 and 2013 is stated at the par value of NTD 50,000 thousand. Please refer to Note 35 for details.

  • Financial instruments measured at fair value through income statement

Held-for-sale financial assets
Commercial papers
Listed stocks - domestic
Beneficiary certificate
Assets swap agreement
Foreign exchange contracts
Forward contracts
FX options contracts
Held-for-sale financial liabilities
Foreign exchange contracts
Forward contracts
FX options contracts		 December 31, 2014
$ 10,756,922
863,301
815,106
494,826
12,748
18,680
50,023
$ 13,011,606
$ 36,413
46,375
50,572
$ 133,360		 December 31, 2013 December 31, 2013





$ 10,528,040
971,487
583,096
63,863
27,688
3,455
17,387
$ 12,195,016
$ 45,881
12,368
16,551
$ 74,800

  • (1) The consolidated company financial derivative contract related to a foreign exchange rate is a non-trading operation performed for the purpose of providing customers with a hedging tool for the foreign exchange position generated from import/export and foreign exchange and hedging the risk from business and meeting the need for foreign exchange funds.

  • (2) The foreign exchange contracts which have not yet matured before December 31, 2014 and 2013 are specified as follows:

2014 and 2013 are specified as follows:
December 31,2014
Contract amount (NTD
1,000)
Date of maturity
Sold
AUD
6,000
2015/01/06-2015/01/09
CNY
10,135
2015/01/08
HKD
170,155
2015/01/12-2015/02/02
JPY
311,394
2015/01/06
USD
28,278
2015/01/09-2015/01/13
Bought AUD
16,200
2015/01/08-2015/02/02
CAD
3,722
2015/01/13
GBP
1,300
2015/01/12
NZD
7,000
2015/01/13-2015/01/20
SGD
1,590
2015/01/12
USD
74,000
2015/01/05-2015/03/23
ZAR
86,723
2015/01/06-2015/01/09
EUR
4,000
2015/01/12		 December 31,2013
Contract amount (NTD
1,000)
Sold
AUD
6,000
CNY
10,135
HKD
170,155
JPY
311,394
USD
28,278
Bought AUD
16,200
CAD
3,722
GBP
1,300
NZD
7,000
SGD
1,590
USD
74,000
ZAR
86,723
EUR
4,000		 Contract amount (NTD
1,000)
Sold
EUR
61,412
USD
80,000
JPY
782,834
HKD
174,441
Bought AUD
12,791
CAD
4,519
GBP
1,600
NZD
7,237
SGD
1,745
USD
80,657
ZAR
100,874		 Date of maturity
2014/01/03-2014/01/16
2014/01/27-2014/03/10
2014/01/06
2014/01/09-2014/02/12
2014/01/06
2014/01/06-2014/01/10
2014/01/06
2014/01/07
2014/01/10
2014/01/03-2014/03/31
2014/01/03-2014/01/07

163- 38 -

  • (3) The forward contracts which have not yet matured before December 31, 2014 and 2013 are specified as follows:
December 31, 2014
Forward
exchange
sold

Forward
exchange
sold
Forward
exchange
bought
Forward
exchange
bought
Forward
exchange
bought

December 31, 2013
Forward
exchange
sold
Forward
exchange
sold

Forward
exchange
bought
Forward
exchange
bought
Forward
exchange
bought		 Currency
JPY translated into
NTD
USD translated
into NTD
NTD translated
into JPY
NTD translated
into USD
JPY translated into
USD
USD translated
into NTD
JPY translated into
NTD
NTD translated
into USD
NTD translated
into JPY
HKD translated
into USD		 Date of maturity
2015/03/17-2015/04/07
2015/01/05-2015/07/15
2015/04/20-2015/06/03
2015/01/20-2015/05/22
2015/03/23
2014/01/06-2014/08/15
2014/01/28-2014/05/30
2014/01/06-2014/04/08
2014/02/04-2014/03/04
2014/01/09		 Contract amount (Thousands of
dollars)
JPY27,332/NTD7,407
USD40,995/NTD1,250,171
NTD9,723/JPY37,300
NTD402,238/USD13,300
JPY20,900/USD175
USD43,960/NTD 1,297,804
JPY130,157/NTD 38,514
NTD 282,387/USD9,522
NTD 5,961/JPY20,655
HKD4,265/USD550

  • (4) As of December 31, 2014, the consolidated Company undertook assets swap contracts amounting to NTD 494,100 thousand and NTD 63,700 thousand respectively, at interest range of 1.00%~1.60%and 1.30%~1.65%.

  • (5) The foreign currency option contracts underwritten by the consolidated Company amounted to NTD 120,417 thousand (US$ 3,807 thousand) and NTD 67,236 thousand (US$2,256 thousand) as of December 31, 2014 and 2013, respectively.

9. Bonds and securities sold under repurchase agreements

As of December 31, 2014 and 2013, the consolidated Company’s bonds securing RP were NTD 1,545,361 thousand and NTD 4,550,801 thousand, respectively. The redemption price as agreed were NTD 1,545,582 thousand and NTD 4,551,626, respectively.

  1. Receivable, net
respectively.
Receivable, net
Notes receivable
repurchase agreements
Acceptances receivable
Interests receivable
Receivable
spot
exchange
settlement payment
Rent receivables		 December31,2014
$ 3,994,703
573,390
758,101
730,993
1,082,704
941,656		 December31,2013
$ 2,858,428
525,194
695,684
645,032
589,087
856,689

(Continued on next page)

164- 39 -

(Continued from previous page)

December 31, 2014 December 31, 2013

Receivable out-of-pocket
expenses for attorney fees and
cost of action $
27,242		 $
42,244
Other receivables 510,388 650,577
8,619,177 6,862,935
Less: Unrealized interest income ( 260,563 ) ( 210,420 )
Less: allowance for bad debt
(Note 11) ( 239,863) ( 166,864)
$ 8,118,751 $ 6,485,651
  • (1) The consolidated company classifies receivables based on credit risk features of products as follows:
Item Total receivables Allowance for
bad debt		 Total receivables Allowance for
bad debt
December 31,
2014		 December 31,
2014		 December 31,
2013		 December 31,
2013
With
individual
objective
evidence of
impairment		 Individual
evaluation
of
impairment		 Corporate
banking		 $ 264,094 $ 53,051 $ 225,483 $ 22,922
Personal
banking		 4,147 117 2,941
83
Others 298,149 121,468 71,343
71,343

Portfolio
evaluation
of
impairment		 Corporate
banking		 8,617 2,930 4,938
1,156
Personal
banking		 31,548 15,018 25,905
12,065
Without
individual
objective
evidence of
impairment
Portfolio
evaluation
of
impairment		 Corporate
banking		 980,419 16,482 897,410
11,437
Personal
banking		 740,635 3,415 687,321
3,537
Others 93,367,255 63,666 86,484,019
30,590
Total 95,694,864 276,147 88,399,360
153,133

The aforementioned receivables of the Bank as of December 31 2014 and 2013 covered due from banks, due from the Central Bank and call loans to banks, note receivables, credit card proceeds receivables, interest receivables, acceptance receivables, non-loan recognized as accounts for collection, and refundable security deposits.

The aforementioned provision for bad debts is disclosed is calculated by the specific feature of the risk pursuant to IAS 39. The Bank has recognized provision for bad debts for Category 1 loan assets of more than 1% in accordance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans” and Letter Chin-Kuan-Yin-Fa-Zi No. 10010006830 as of December 31 2014 and 2013, with the additional amount of recognition by NTD23,056 thousand and NTD38,722 thousand, respectively.

165- 40 -

  • (2) Please refer to Note 35 for the notes receivable used as collateral of interbank financing.

  • Discounts and loans, net

financing.
Discounts and loans, net
Bills negotiated and discounts
Overdraft
Secured overdraft
Accounts receivable financing
Securities receivable financing
Short-term loan
Short-term secured loans
Mid-term loans
Mid-term secured loans
Long-term loans
Long-term secured loans
Delinquent loans
Add:
Adjustment
of
premium/discount
Less: allowance for bad debt		 December 31, 2014
$ 524,364
1,327
36,700
59,010
811,881
36,338,932
72,845,463
41,531,841
101,479,176
3,358,619
131,552,236

1,266,424
389,805,973
102,661
(
5,526,354)
$ 384,382,280		 December 31, 2013





(



(
 $ 458,754
963
16,450
305,259
466,635
36,850,255
67,497,398
37,980,674
93,717,250
2,970,735
124,828,290
2,191,487
367,284,150
90,667

4,458,143)
$ 362,916,674

  • (1) The balances of loans and other loans on which no interest has accrued by the Bank on December 31, 2014 and 2013 were NTD 1,254,832 and NTD 2,169,787 thousand, respectively. The interest receivable on which no interest has accrued internally were NTD 34,040 thousand and NTD 48,648 thousand, respectively.

  • (2) There was no credit loan written off without pursuit in 2014 and 2013.

  • (3) The consolidated company classifies discounts and loans based on credit risk features of products as follows:

Discounts and loans

Discounts and loans
Item Total amount Allowance for
bad debt		 Total amount Allowance for
bad debt
December 31,
2014		 December 31,
2014		 December 31,
2013		 December 31,
2013
With
individual
objective
evidence of
impairment		 Individual
evaluation
of
impairment		 Corporate
banking		 $ 5,891,001 $ 1,318,941 $ 5,844,463 $ 1,521,311
Personal
banking		 1,426,142 114,453 908,291
69,884

Portfolio
evaluation
of
impairment		 Corporate
banking		 615,132 175,182 448,612
153,696
Personal
banking		 1,658,917 172,336 1,191,188
150,699
Without
individual
objective
evidence of
impairment
Portfolio
evaluation
of
impairment		 Corporate
banking		 203,853,151 1,830,761 192,171,865
1,358,593
Personal
banking		 176,361,630 185,455 166,719,731
138,334
Total 389,805,973 3,797,128 367,284,150
3,392,517

166- 41 -

The aforementioned provision for bad debts is disclosed is calculated by the specific feature of the risk pursuant to IAS 39. The Bank has recognized provision for bad debts for Category 1 loan assets of more than 1% in accordance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans” and Letter Chin-Kuan-Yin-Fa-Zi No. 10010006830 and the proportion for the provision for bad debts for real properties shall not fall below 1.5% pursuant to Letter Chin-Kuang-Kuo-Zi No. 10300329440. Accordingly, the additional provision for bad debts for FY2014 and December 31 2013 was recognized at NTD1,729,226 thousand and NTD1,065,626 thousand, respectively.

(4) Details and changes of allowance for bad debts for receivables and discounts and loans for 2014 and 2013 are summarized as follows:

Balance, beginning
Provided
in
the
current period
Write-off
of
non-performing
loans
Collection of written
off bad debt
Exchange effects
Reclassification
Balance, ending
Balance, beginning
Provided
in
the
current period
Write-off
of
non-performing
loans
Collection of written
off bad debt
Exchange effects
Reclassification
Balance, ending		 2014
Accounts
receivable
$ 191,855
127,991
(
22,655)
18,186
760
(
16,934)
$ 299,203		 Discounts and
loans
$ 4,458,143

1,828,040

(
1,111,860 )
315,152
19,945
16,934

$ 5,526,354

2013		 Total
$ 4,649,998
1,956,031
( 1,134,515)
333,338
20,705

-
$ 5,825,557
Discounts and
loans
$ 3,318,621

1,742,709

(
832,983)
225,933
3,863
-

$ 4,458,143
 Total
$ 3,443,735
1,808,521
(
853,074)
246,327

4,089

400
$ 4,649,998

Allowance for bad debts for above-mentioned receivables includes allowance

for bad debts for delinquent loans other than loans transferred from loans. Please refer to Note 16 for details.

167- 42 -

12. Available-for-Sale Financial Assets

Available-for-Sale Financial Assets
Corporate bond
Overseas bond
Government bonds
Listed stocks - overseas
Listed stocks - domestic
Bonds and depository receipts		 December31,2014
$ 20,137,037
361,322
6,474
97,261
109,903

-
$ 20,711,997		 December31,2013




$ 18,042,574
885,052
188,679
80,853
-
-
$ 19,197,158
  • (1) Foreign bonds, listed stocks and depository receipts are valued in foreign currencies as follows:
currencies as follows:
USD
AUD		 December 31, 2014
$ 14,497
-		 December 31, 2013
$ 14,532
20,040

  • (2) As of December 31 2014 and 2013, bonds and depository receipts of the companies in the consolidated financial statements available for sale are recognized as impairment loss in full amount after evaluation.

  • (3) As of December 31, 2014 and 2013, the book value of available-for-sale overseas bonds securing funds borrowed from banks were NTD 63,266 thousand (USD2,000 thousand) and NTD 591,400 thousand (USD2,000 thousand and AUD20,000 thousand). Please refer to Note 35 for details.

  • (4) The consolidated company’s available-for-sale government bond on December 31, 2014 and 2013 used as business security bond of Taichung Commercial Bank Consolidated Securities Co., Ltd. for the denomination of NTD 195,000 thousand and NTD 165,000 thousand are classified under the “Guarantee deposit and margin paid.” Please refer to Note 19.

  • Held to maturity investments, net

paid.” Please refer to Note 19.
Held to maturity investments, net
Overseas bond
Government bonds
Financial bonds
Less: accumulated impairment		 December 31, 2014
$ 985,505
432,498

-
1,418,003

-
$ 1,418,003		 December 31, 2013








(
 $ 3,091,200
1,175,351

100,000
4,366,551
1,025,967)
$ 3,340,584
  • (1) Foreign bonds are valued in foreign currencies as follows:
USD
RMB
EUR		 December31,2014
$ 5,000
162,750
-		 December31,2013
$ 21,000
-
60,000

168- 43 -

  • (2) As of December 31, 2014 and 2013, the book values of the held-to-maturity government bonds securing RP were NTD 0 thousand,and NTD 100,000 thousand, respectively. The book values of the held-to-maturity overseas bonds securing RP were NTD 284,697 thousand (US$9,000 thousand), and NTD 268,200 thousand (US$9,000 thousand), respectively.

  • (3) The consolidated Company had recognized an asset impairment reversal gain of NTD 982,923 thousand and 744,460 thousand for the foreign bonds assessed in 2014 and 2013, respectively.

  • (4) As of December 31, 2014 and 2013, the book value of held-to-maturity overseas bonds securing the funds borrowed from banks was NTD 158,165 thousand (USD5,000 thousand) and NTD 2,614,400 thousand (USD5,000 thousand and EUR60,000 thousand). Please refer to Note 35 for details.

  • Investment under the equity method

Domestic
non-listed
(OTC)
company
Reliance
Securities
Investment
Trust
Co., Ltd.		 December31,2014
Amount
Shareholding
$ 140,282
38.46		 December31,2013 December31,2013
Amount
$ 140,282		 Amount

$ 142,654
 Shareholding
38.46

The 2014 and 2013 investment profit (loss) of the consolidated company in the affiliated company recognized under the equity method is as follows:

Investee
Reliance
Securities
Investment
Trust Co., Ltd.		 2014
$ 423		 2013
$ 9,708

The consolidated financial information of the affiliated company of the consolidated company is as follows:

consolidated company is as follows:
Total assets
Total Liabilities
Operating income - current
Net income
Current year other comprehensive
income		 December31,2014
$ 376,799
$ 12,065
2014
$ 49,379
$ 1,099
$ 535		 December31,2013


$ 382,704
$ 11,804
2013




$ 58,077
$ 25,240
$ 461

The 2014 and 2013 profit or loss and other comprehensive profit or loss of the affiliated company under the equity method was recognized in accordance with the audited financial statements during the same period of the affiliated company.

169- 44 -

15. Restricted assets

Restricted assets
Restricted assets – bank deposits
Pending settlement payments
Underwriting money collected		 December31,2014
$ 340,614
479

-
$ 341,093		 December31,2013




$ 135,954
26
28,310
$ 164,290

The consolidated company’s restricted bank deposit as the collateral for the interbank financing of the consolidated company. Please refer to Note 35.

16. Other financial assets - net

Other financial assets-net
Financial assets at cost
Other financial assets - others
Other Delinquent loans, net		 December 31, 2014
$ 145,684
861,899

198,559
$ 1,206,142		 December 31, 2013




$ 143,484
835,604
179,171
$ 1,158,259
  • (1) Details of the financial assets carried at cost are summarized as follows:
Common stock other than
publicly
offering
of
domestic common stock		 December31,2014
$ 145,684		 December31,2013 December31,2013
$ 143,484

The unlisted/OTC equity investment referred to above of the consolidated company is measured at cost less impairment losses on the balance sheet date, because a reasonable estimate of the fair value range is significant and the probability of a variety of estimates cannot be reasonably assessed, causing the consolidated company’s management to believe that the fair value cannot be reliably measured.

  • (2) Other financial assets - others
reliably measured.
Other financial assets - others
Repurchase products issued
by PEM Group.
Less:
accumulated
impairment		 December31,2014
$ 2,107,358
(1,245,459)
$ 861,899		 December31,2013

(
(
 $ 2,036,144
1,200,540)
$ 835,604

The consolidated company according to the resolution reached in the board meeting on May 6, 2009 has the “Private Equity Management Group (PEM Group) Structured Note Customer Interests Protection Program” defined for repurchasing PEM Group structured notes entirely from the investors with the insurance assets accepted in February, 2011.

170- 45 -

After evaluating the value of insurance policy assets issued by PEM Group, the consolidated company recognized a gain on reversal of impairment loss of NTD 43,098 thousand and NTD (34,666) thousand respectively for the year ended December 31, 2014 and 2013.

  • (3) Details of other delinquent accounts, net are summarized as follows:
Non-delinquent
loans
restated from loans
Less: Allowance for bad debt
(Note 10 and 11)		 December31,2014
$ 257,899
(59,340)
$ 198,559		 December31,2013 December31,2013

(
 $ 204,162
24,991)
$ 179,171

17. Property, plant, and equipment

Property, plant, and equipment
The book amount of each category
Land
Buildings and structures
Transportation
and
communication equipment
Miscellaneous equipment
Leasehold improvement
Prepayments for real properties
Prepayments for equipment		 December 31, 2014
$ 2,029,800
970,616
13,769
357,193
1,808
1,725,000

5,600
$ 5,103,786		 December 31, 2013



$ 2,029,800
1,004,638
11,269
368,228
-
-
2,400
$ 3,416,335
Cos t
ance, beginning
ease
rease
lassified in the
current period

exchange
differences
ance, ending

umulated
depreciation
ance, beginning
ease
rease
lassified in the
current period

exchange
differences
ance, ending

umulated
impairment
ance, beginning
vided
in
the
current period
rease
lassified in the
current period
ance, ending

, ending
 2 01 4
Land Buildings and
structures		 Transportation and
communication
equipment		 Miscellaneous
equipment		 Leasehold
improvement		 Prepayments for
realproperties
Prepayments for
equipment		 Total









$ 2,106,800
-
-
-
-
2,106,800


-
-
-
-
-
-


77,000
-
-
-
77,000

$ 2,029,800













$ 1,992,863

-

-
-
-
1,992,863

988,225

34,022

-
-
-
1,022,247

-
-

-
-
-
$ 970,616
(


(




 $ 32,679
6,919

3,834 )
11
-
35,775
21,410
3,599

3,003 )
-
-
22,006
-
-
-
-
-
$ 13,769
(


(




 $ 1,226,107
97,416

45,695 )
4,942
275
1,283,045
857,879
113,260

45,405 )
-
118
925,852
-
-
-
-
-
$ 357,193






$ -
1,764
-
197
-
1,961
-
153
-
-
-
153
-
-
-
-
-
$ 1,808






$ -

1,725,000
-
-
1,725,000

-
-
-
-
-
-

-
-
-
-
-

$ 1,725,000
(






 $ 2,400
7,050
-

3,850 )
-
5,600
-
-
-
-
-
-
-
-
-
-
-
$ 5,600
(


(




 $ 5,360,849
1,838,149

49,529 )
1,300
275
7,151,044
1,867,514
151,034

48,408 )
-
118
1,970,258
77,000
-
-
-
77,000
$ 5,103,786
Bal
Incr
Dec
Rec
Net
Bal
Acc
Bal
Incr
Dec
Rec
Net
Bal
Acc
Bal
Pro
Dec
Rec
Bal
Net

171- 46 -

Cos t
ance, beginning
ease
rease
lassified in the
current period

exchange
differences
ance, ending

umulated
depreciation
ance, beginning
ease
rease
lassified in the
current period

exchange
differences
ance, ending

umulated
impairment
ance, beginning
vided
in
the
current period
rease
lassified in the
current period
ance, ending

, ending
 2 01 3
Land Buildings and
structures		 Transportation and
communication
equipment		 Miscellaneous
equipment		 Leasehold
improvement		 Prepayments for
realproperties
P		 repayments for
equipment		 Total









$ 2,106,800
-
-
-
-
2,106,800


-
-
-
-
-
-


77,000
-
-
-
77,000

$ 2,029,800













$ 1,992,863

-

-
-
-
1,992,863

953,338

34,887

-
-
-
988,225

-
-

-
-
-
$ 1,004,638
(


(




 $ 38,820
1,442

7,583 )
-
-
32,679
23,681
3,678

5,949 )
-
-
21,410
-
-
-
-
-
$ 11,269
(


(




 $ 1,141,644
115,501

58,680 )
27,272
370
1,226,107
793,029
122,037

57,212 )
-
25
857,879
-
-
-
-
-
$ 368,228






$ -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$ -






$ -

-
-
-
-
-

-
-
-
-
-
-

-
-
-
-
-

$ -
(






 $ 12,087
7,265
-

16,952 )
-
2,400
-
-
-
-
-
-
-
-
-
-
-
$ 2,400
(


(




 $ 5,292,214
124,208

66,263 )
10,320
370
5,360,849
1,770,048
160,602

63,161 )
-
25
1,867,514
77,000
-
-
-
77,000
$ 3,416,335
Bal
Incr
Dec
Rec
Net
Bal
Acc
Bal
Incr
Dec
Rec
Net
Bal
Acc
Bal
Pro
Dec
Rec
Bal
Net
  • (1) Property and equipment of the consolidated company are appreciated in accordance with the straight line method over the useful years as follows:
Buildings and structures
Buildings 30 to 60 years
Renovation engineering 10 to 29 years
Transportation and
communication equipment 3 to 5 years
Miscellaneous equipment 2 to 15 years
Leasehold improvement 5 years

(2) As resolved by the Board on December 4 2014, the Bank will buy the land located at Huei Min Section of Xi Tun District in Taichung City for NTD5,750,000 thousand for the construction of the new corporate headquarters. As of December 31 2014, the Bank has paid 30% of the proceeds as prepayment amounting to NTD1,725,000 thousand. The balance will be settled upon the successful transfer of land title on February 6 2015.

18. Intangible assets

Change of Intangible assets are as follows:

Balance, beginning
Increase
Amortization in the current period
Reclassified in the current period
Net exchange differences
Balance, ending		 2014
$ 97,380
74,337
( 35,284 )
7,316

10
$ 143,759		 2013
$ 64,696
62,600
( 24,726 )
(
5,190 )

-
$ 97,380

172- 47 -

19. Other assets

Other assets
Refundable deposits
Prepayments
Collateral accepted, net
Others		 December31,2014
$ 1,411,016
66,447
-

2,144
$ 1,479,607		 December31,2013




$ 925,509
85,221
-

891
$ 1,011,621

  • (1) The Government bonds held to maturity deposited by the consolidated company as the security bond for provisional seizure at court and for business guarantee on December 31, 2014 and 2013 were NTD 1,137,000 thousand and NTD 693,900 thousand, which are stated as refundable deposits. Please refer to Note 35 for details.

  • (2) Collateral accepted – net:

details.
Collateral accepted – net:
Land
Buildings and structures
Less: allowance for loss
from price declination		 December 31, 2014
$ -
-

-
$ -		 December 31, 2013



(
 $ 2,243
-

2,243)
$ -

The consolidated company sold some assumed collateral which have been impaired in 2014 and 2013. The cause of initial impairment has been extinguished, and gains on reversal of impairment were recognized for NTD 2,243 thousand and NTD 182,941 thousand, respectively.

  1. Due to Central Bank of China and banks

Due to Central Bank of China and banks
Call loans to banks
Due to Chunghwa Post Co., Ltd.
Deposits of other banks		 December31,2014
$ 9,652,118
1,045,021

248
$ 10,697,387		 December31,2013




$ 6,377,400
1,963,594
514
$ 8,341,508
  1. Funds borrowed from CBC and other banks
Funds borrowed from banks
Interbank financing rate (%)		 December 31, 2014
$ 3,499,960
1.63~2.74		 December 31, 2013 December 31, 2013


$ 4,968,239
1.06~2.55

Please refer to Note 35 for the collateral of the interbank loans.

  1. Bills and bonds sold under repurchase agreements
Overseas bond
Government bonds		 December 31, 2014
$ 273,573

-
$ 273,573		 December 31, 2013 December 31, 2013




$ 258,769
100,000
$ 358,769

173- 48 -

Post-period re-purchase amount and interest rate are as follows:

23.
24.
25.		 December31,2014
Overseas bond
$ 273,898
Government bonds

-
$ 273,898
Overseas bond
0.70%
Government bonds
-
Foreign bonds are valued in foreign currencies as follows:
December31,2014
USD
$ 8,648
Payables
December 31, 2014
Notes and checks in clearing
$ 3,187,587
Payable spot exchange settlement
payment
1,081,845
Acceptances payable
760,788
Interest payable
365,749
Accrued expenses
971,193
Collection payable
57,188
Payable structured note indemnity
(Note 36)
4,625
Receivable
accounts
for
settlement
299,330
Other payables

635,354
$ 7,363,659
Customer deposits and remittances
December31,2014
Check deposits
$ 6,943,768
Current deposits
110,928,560
Current saving deposits
103,338,662
Time deposits
100,952,031
Time saving deposits
133,802,848
Remittances

255
$ 455,966,124
Financial bonds payable
December 31, 2014
Subordinate financial bonds
$ 14,400,000
Convertible financial bonds

-
$ 14,400,000		 December31,2013 December31,2013
$ 259,000
100,029
$ 359,029
0.50%
0.56%
December31,2013
$ 8,684
December 31, 2013
$ 1,190,949
588,686
708,225
344,878
794,558
49,971
6,000
259,154

477,920
$ 4,420,341
December31,2013
$ 6,515,160
99,731,500
96,755,054
93,996,622
132,696,893

9,240
$ 429,704,469
December 31, 2013


$ 14,400,000
1,642,869
$ 16,042,869

174- 49 -

  • (1) Subordinate financial bonds

  • As approved by FSC’s Letter under Jin-Guan-Yin (4) Zi No. 09800104050 dated March 20, 2009, the Taichung Bank issued 1[st] term to 4[th] term subordinate financial bonds for 2009 on June 26, December 10, December 18, and December 30, 2009 and 1[st] term to 2[nd] term subordinate financial bonds for 2010 on January 28 and February 9, 2010 upon the following terms and conditions:

    • (1) Approved: NTD 5,000,000 thousand.

    • (2) Issued:

      • A. 1[st] term 2009: 1,800,000 thousand.

      • B. 2[nd] term 2009: 100,000 thousand.

      • C. 3[rd] term 2009: 1,200,000 thousand.

      • D. 4[th] term 2009: 1,100,000 thousand.

      • E. 1[st] term 2010: 600,000 thousand.

      • F. 2[nd] term 2010: 200,000 thousand.

    • (3) Book value:

      • A. 1[st] term 2009: NTD 100 thousand, issued at par value.

      • B. 2[nd] term 2009: NTD 500 thousand, issued at par value.

      • C. 3[rd ] term 2009: NTD 500 thousand, issued at par value.

      • D. 4[th] term 2009: NTD 500 thousand, issued at par value.

      • E. 1[st] term 2010: NTD 500 thousand, issued at par value.

      • F. 2[nd] term 2010: NTD 10,000 thousand, issued at par value.

    • (4) Duration:

      • A. 1[st] term 2009: 7 years, matured on June 26, 2016.

      • B. 2[nd] term 2009: 7 years, matured on December 10, 2016.

      • C. 3[rd] term 2009: 7 years, matured on December 18, 2016.

      • D. 4[th] term 2009: 6.5 years, matured on June 30, 2016.

      • E. 1[st] term 2010: 7 years, matured on January 28, 2017.

      • F. 2[nd] term 2010: 6 years, matured on February 9, 2016.

    • (5) Bond interest rate:

      • A. 1[st] term 2009: the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 1.40%.

      • B. 2nd term 2009: the fixed annual rate of 2.75%.

175- 50 - 

  - C. 3[rd ] term 2009: the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 1.50%.

  - D. 4[th] term 2009: the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 1.48%.

  - E. 1[st] term 2010: the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 1.50%.

  - F. 2[nd] term 2010: the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 1.50%.

  • (6) Repayment Methods: repayment in lump sum upon maturity.

  • (7) Payment of interest: interest paid per six months as of the date of issuance.

  • As approved by FSC’s Letter under Jin-Guan-Yin-Piao-Zi No. 09900204230 dated June 4, 2010, the Taichung Bank issued 3[rd] term subordinate financial bonds on June 25, 2010 upon the following terms and conditions:

  • (1) Approved: NTD 900,000 thousand.

  • (2) Issued: NTD 900,000 thousand.

  • (3) Denomination: NTD 10,000 thousand, issued at par value.

  • (4) Duration: 7 years, matured on June 25, 2017.

  • (5) Bond interest rate is the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 1.75%.

  • (6) Repayment Methods: repayment in lump sum upon maturity.

  • (7) Payment of interest: interest paid per six months as of the date of issuance.

  • As approved by FSC’s Letter under Jin-Guan-Yin-Piao-Zi No. 10100305900 dated September 24, 2012, the Taichung Bank issued 1[st] term subordinate financial bonds November 13, 2012 upon the following terms and conditions:

  • (1) Approved: NTD 3,000,000 thousand.

  • (2) Issued: NTD 3,000,000 thousand.

  • (3) Denomination: NTD 1,000 thousand, issued at par value.

  • (4) Duration: 7 years, matured on November 13, 2019.

  • (5) Coupon rate: Fixed annual interest rate 2.1%.

  • (6) Repayment Methods: repayment in lump sum upon maturity.

  • (7) Payment of interest: interest paid per six months as of the date of issuance.

176- 51 -

  1. As approved by FSC’s Letter under Jin-Guan-Yin-Piao-Zi No. 10200089330 dated April 8, 2013, the Taichung Bank issued 1[st] term and 2[nd] term subordinate financial bonds June 25 and December 16, 2013 upon the following terms and conditions:

    • (1) Approved: NTD 6,000,000 thousand.

    • (2) Issued:

      • A. 1[st] term 2013: 2,500,000 thousand.

      • B. 2[nd] term 2013: 3,000,000 thousand.

    • (3) Book value:

      • A. 1[st] term 2013: NTD 500 thousand, issued at par value.

      • B. 2[nd] term 2013: NTD 500 thousand, issued at par value.

    • (4) Duration:

      • A. 1[st] term 2013: 7 years, matured on June 25, 2020.

      • B. 2[nd] term 2013: 6 years, matured on December 16, 2019.

    • (5) Bond interest rate:

      • A. 1st term 2013: the fixed annual rate of 2.1%.

      • B. 2nd term 2013: the fixed annual rate of 2.1%.

    • (6) Repayment Methods: repayment in lump sum upon maturity.

    • (7) Payment of interest: interest paid per six months as of the date of issuance.

  2. (2) Convertible financial bonds

issuance.
Convertible financial bonds
1st
unsecured
convertible
financial bonds
Less: Discount on financial
bond discount		 December 31, 2014
$ -

-
$ -		 December 31, 2013



(
 $ 1,654,700

11,831)
$ 1,642,869
  1. As approved by FSC’s Letter under Jin-Guan-Zheng-Fa-Zi No. 1000018296 dated May 16, 2011, the Taichung Bank issued first unsecured convertible financial bonds of NTD 2,300,000 thousand with the coupon rate of 0% on June 15, 2011. In accordance with SFAS No.39, the convertible rights and liabilities were separately recognized as equity and liabilities. The components of liabilities are recognized as embedded derivatives and non-derivative liabilities. The embedded derivative was matured on June 15 2013 of which the amount of NTD164,200 thousand were redeemed at

177- 52 -

maturity. The Bank recognized capital loss for redemption of bonds amounted to NTD 7,495 thousand, and gave up the redemption right for the remainder of the instrument. On the maturity date, NTD 2,085,900 thousand worth of bonds in book value were converted into NTD 206,729 thousand shares of common stock. The remainder of NTD 49,900 thousand were redeemed at maturity on June 15 2014.

  1. Issuance terms for the Taichung Bank’s first domestic unsecured convertible financial bonds are summarized as follows:

  2. (1) Approved: NTD 2,800,000 thousand.

  3. (2) Issued: NTD 2,300,000 thousand.

  4. (3) Denomination: NTD 100 thousand, issued at par value.

  5. (4) Duration: 3 years, matured on June 15, 2014.

  6. (5) Coupon rate: coupon rate 0%.

  7. (6) Repayment: A single payment in cash is made for unconverted bonds or for exercise of put options.

  8. (7) Interest payment: Nil.

  9. (8) Conversion price: NTD 11.89.

  10. (9) Put options: Bondholders may ask the Taichung Bank to redeem the financial bonds at the par value plus a yield rate of 1.5% in cash within forty days before the date as of which the convertible financial bonds have been issued for two years (June 15, 2013).

  11. (10) Call option: From the date after six months from the issuance date to forty days before the expiration date of the convertible financial bonds, if the amount of unconverted bonds is lower than 10% of total issuance amount and the closing prices of common shares of Taichung Bank exceed 30% of the current conversion price for consecutive thirty business days, the Taichung Bank may recall outstanding bonds at the denomination of the bonds in cash.

  12. The conversion procedure for the Taichung Bank’s first domestic unsecured convertible financial bonds is summarized as follows:

  13. (1) Underlying stock:

Common shares of the Taichung Bank. The conversion is made by issuance of new shares.

  • (2) Conversion period:

178- 53 -

Bondholders may from time to time ask the Bank to convert their bonds into common shares from July 16, 2011 (the next date after one month from the issuance date of the bonds) to April 17, 2014 except to stock dividend transfer suspension day, from fifteen business days before cash dividend transfer suspension day or suspension day for subscription of common shares for cash capital increase to base day for right distribution, from base day for capital decrease to the day before the share replacement date for capital decrease and other common stock transfer suspension period upon laws and regulations.

  • (3) Procedures to ask for conversion:

  • A. Bondholders complete the “Conversion/Redemption/Put Back Application for Convertible Financial Bond Book Entry” (please mark “Conversion”) at their original securities company to make the application through Taiwan Depository & Clearing Corporation (hereinafter referred to as "TDCC"). TDCC submits the application to the Taichung Bank’s stock transfer agent after receiving it. The application becomes effective upon receipt of application and cannot be cancelled. The conversion procedure will be completed within 5 business days after delivery and stocks will be directly transferred into bondholders’ central depository accounts.

  • B. When overseas Chinese or foreigners apply to convert the bonds they hold into shares of the Taichung Bank, shares are distributed through book entry by TDCC.

  • (4) The conversion price at issuance is NTD 11.89. After issuance of financial bonds, the conversion price should be adjusted in accordance with the prescribed formula for any increase in issued common shares except for replacement of common shares due to issuance of various securities with common share convertible rights or stock options. The conversion deadline was on April 17 2014. The conversion price under the set equation was NTD10.09.

179- 54 -

  1. Changes in accounts relevant to convertible financial bonds payable are summarized as follows:
Balance, beginning
Discount
amortization of
financial bonds
Mature in current
period.
Current conversion
Balance, ending

Balance, beginning
Discount
amortization of
financial bonds
Current resale
Current conversion
Evaluation
adjustments
Balance, ending
 2014 2014
Financial
liabilities at fair
value through
profit and loss
$ -
-
-

-
$ -		 Financial bonds
payable
$ 1,642,869

5,830
(
49,900 )
(
1,598,799)
(
$ -

2013		 Other capital
surplus
$ 65,664

-

-

57,935)

$ 7,729

 Benefit (loss)
from effects of
profit and loss
accounts



(
(
(

(		 $ -

5,830 )
-
-
$ 5,830)
Financial
liabilities at fair
value through
profit and loss
$ 21,850
-
-

-
(
21,850)
$ -		 Financial bonds
payable
$ 2,248,277
32,961
(
161,664 )
(
476,705 )

-
$ 1,642,869		 Other capital
surplus
$ 83,039

-

-


17,375 )
-

$ 65,664
 Benefit (loss)
from effects of
profit and loss
accounts


(
(
(
(
(
(


(		 $ -

32,961 )

7,495 )

-
21,850
$ 18,606)

26. Other financial liabilities

Other financial liabilities
Allocated to lending fund
Commercial papers payable
Liability reserve
Employee
benefit
liabilities
reserve
Reserve for guarantee liability
Allowance for contingency
(1) Employee benefit liabilities reserve
Defined benefit liabilities
Employees
preferential
deposit plan
Other long-term employee
benefit liabilities		 December31,2014
$ 1,620
338,676
$ 340,296
December31,2014
$ 495,679
119,042

800
$ 615,521
is detailed as follows:
December 31, 2014
$ 414,552
65,568
15,559
$ 495,679		 December31,2013
$ 7,605
104,136
$ 111,741
December31,2013
$ 256,751
92,078

-
$ 348,829
December 31, 2013





$ 241,038
-
15,713
$ 256,751

27. Liability reserve

180- 55 -

1. Defined contribution pension plan

The pension system of the “Labor Pension Act” that is applicable to the Company and its subsidiaries of the consolidated company is a defined contribution pension plan subject to government management with an amount equivalent to 6% of the monthly salary appropriated and contributed to the personal account with the Bureau of Labor Insurance.

The amount to be appropriated in accordance with the defined contribution plan by the consolidated company on the comprehensive income statement in 2014 and 2013 were NTD 62,433 thousand and NTD 59,750 thousand, respectively.

2. Defined benefit plan

The consolidated company’s pension system under the “Labor Standards Law” of the R.O.C. is a defined benefit pension plan. Pension payment is calculated in accordance with the years of service and the average salary six months prior to the authorized retirement date. The consolidated company makes monthly contributions to a pension fund, administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the Bank of Taiwan. The Bureau of Labor Funds, Ministry of Labor has plan assets invested in domestic (foreign) equity securities, debt securities, bank deposits and other targets by trading and commissioned operation, but according to the Regulations Governing Labor Pension Fund Income and Expense, Safekeeping and Utilization, for the implementation of the labor pension fund, the distributed minimum earnings of the annual settlement may not be lower than the earnings from the local bank’s 2-year time deposit interest.

The present value of the consolidated company’s plan assets and defined benefit obligations is calculated by a qualified actuary. Main assumptions of actuarial valuation on the measurement date are as follows:

Discounted rate
The expected rate of
return on plan assets
The expected rate of
increase in salaries		 December 31, 2014
1.63%
2.00%
1.50%		 December 31, 2013
1.63%
2.00%
1.50%

181- 56 -

The overall expected rate of return on plan assets is based on the asset’s historical return trends and the actuary’s market forecast of the asset, the implementation of the aforementioned plan assets and the impact of the lowest gains throughout the duration of the related obligations.

The amount of the gain or loss recognized for the defined benefit plans are as follows:

are as follows:
Current service cost
Interest costs
Expected return on plan
assets
Service
costs
from
previous period		 2014
$ 21,395
20,407
( 17,041 )
26,170
$ 50,931		 2013
$ 22,279
17,143
( 15,917 )
26,170
$ 49,675

The 2014 and 2013 related pension expense are included in the following items:

items:
Operating expenses 2014
$ 50,931		 2013
$ 49,675

The consolidated company recognized actuarial losses for NTD 140,379 thousand and NTD 49,489 thousand in the “Other comprehensive profit or loss” in 2014 and 2013, respectively. Actuarial gains and losses recognized in the other comprehensive profit of loss amounted to NTD 308,036 thousand and NTD 167,657 thousand as of December 31, 2014 and 2013, respectively.

The obligation amount derived from the defined benefit plan of the consolidated company included in the consolidated balance sheet is as follows:

follows:
The present value of the
appropriated defined
benefit obligations
The fair value of plan
assets
Appropriation shortage
Unrecognized
service
costs from previous
period
Accruable
pension
liabilities		 December 31, 2014
( $ 1,415,357 )

838,764
(
576,593 )

162,041
($ 414,552)		 December 31, 2013
( $ 1,255,854 )

826,605
(
429,249 )

188,211
($ 241,038)

182- 57 -

Changes in the present value of the defined benefit obligation are as follows:

follows:
Defined
benefit
obligation
-
beginning
Current service cost
Interest costs
Actuarial loss
Benefits paid
Accrued
pension
liabilities - ending		 2014
$ 1,255,854
21,395
20,407
171,418

53,717)
$ 1,415,357		 2013

(
(
 $ 1,246,733
22,279
17,143
54,015

84,316)
$ 1,255,854

Changes in the present value of the plan assets are as follows:

The fair value of the
plan
assets
-
beginning
Expected return on plan
assets
Actuarial gain (loss)
Contributions
of
employer
Benefits paid
The fair value of the
plan assets - ending		 2014
$ 826,605
17,042
2,286
41,428
48,597)
$ 838,764		 2013



(
 $ 824,084
15,917
(
5,612 )
51,650
(59,434)
$ 826,605

In FY2014 and FY2013, the return on planned assets amounted to NTD19,328 thousand and NTD10,305 thousand, respectively.

The percentage of the fair value of the major plan assets on the balance

sheet date is based on the fund assets configuration information published on the website of the Bureau of Labor Funds, Ministry of Labor.

Equity instruments
Cash
Fixed income
Bonds
Short term bills
Others		 December 31, 2014
48
19
15
12
3

3
100		 December 31, 2013 December 31, 2013










44
22
19
10
4
1
100

The consolidated company chooses to disclose the historical data adjusted by experience for the amount put-off in each accounting period from the date adopting the IFRSs:

183- 58 -

Present value of
the
defined
benefit
obligations

The fair value of
plan assets

Appropriation
shortage

Experience
adjustments
on
plan
liabilities

Experience
adjustments
on plan assets		 December 31,
2014
($ 1,415,357)
$ 838,764
($ 576,593)
($ 171,279)
$ 2,286		 December 31,
2013
($ 1,255,854)
$ 826,605
($ 429,249)
($ 86,580)
($ 5,612)		 December 31,
2012

($ 1,246,733)

$ 824,084

($ 422,649)

($ 133,535)

($ 8,836)
 January1,2012 January1,2012
(

(
(
(

(
(
(		 (

(
(
(		 (

(

$ 1,127,375)
$ 795,025
$ 332,350)
$ -
$ -

3. Employees preferential deposit plan

With effect on December 21 2014, the companies in the financial statements adjusted the interest rate for the deposit of the banking staff. According to Order Chin-Kuan-Yin-Fa-Zi No. 10110000850 and the Criteria for the Compilation of Financial Statements by Public Banks, the employee preferred deposit plan liabilities recognized in FY2014 shall be subject to the actuarial calculation of a qualified actuary professional.

The companies in the financial statements pay fixed amount of preferred deposit to the retired employees in accordance with the “Employee Welfare Regulation”.

Main assumptions of actuarial valuation on the measurement date are as follows:

follows:
Discounted rate
Return on deposited fund
Excessive interest rate
The withdrawal rate of
preferred deposits		 December 31, 2014
4.00%
2.00%
2.00%
6.25%

The amount of the gain or loss recognized for the employees preferential deposit plan are as follows:

deposit plan are as follows:
Service
costs
from
previous period
Interest costs		 2014


$ 65,568
-
$ 65,568

184- 59 -

The obligation amount derived from the employees preferential deposit plan of the consolidated company included in the consolidated balance sheet is as follows:

December 31, 2014 Present value of the defined benefit obligations $ 65,568 The fair value of plan assets - Welfare obligation liabilities after retirement $ 65,568

The change in the present value of employee preferred deposit obligation is shown below:

2014 Defined benefit obligation - beginning $ - Influence on change in regulation in current period 65,568 Welfare obligation liabilities after retirement at the end of period $ 65,568

The consolidated company chooses to disclose the historical data adjusted by experience for the amount put-off in each accounting period from the date adopting the IFRSs:

he date adopting the IFRSs:
Present value of preferred
deposit obligation
The fair value of plan
assets
Appropriation shortage
Experience
adjustments
on plan liabilities
Experience
adjustments
on plan assets		 December 31, 2014
(

(

 $ 65,568)
$ -
$ 65,568)
$ -
$ -

4. Other long-term employee benefits

The other long-term employee benefits of the consolidated company meant for the long-term disability benefits. The Company will issue pensions

185- 60 -

to the employees who die of sickness or accidents at work for reasons other than occupational hazards.

The consolidated company recognized long-term employee benefits in the consolidated comprehensive income statement for an amount of NTD (154) thousand and NTD 633 thousand in 2014 and 2013, respectively. The Other long-term employee benefit liabilities reserve amounted to NTD 15,559 thousand and NTD 15,713 thousand as of December 31, 2014 and 2013 respectively.

  • (2) The breakdown and change of the secured collateral:
Balance, beginning
Deposit in the current period
Reclassified in the current
period
Exchange differences
Balance, ending		 2014
$ 92,078
26,785
-
179
$ 119,042		 2013



$ 36,837
55,652
(
400 )
(
11)
$ 92,078

Current appropriation recorded as bad debt expenses.

  • (3) The breakdown and change of the allowance for contingency:
Balance, beginning
Deposit in the current period
Balance, ending		 2014
$ -
800
$ 800		 2013




$ -
-
$ -

Recognized as other net loss of other interest in book in current period. 28. Other liabilities


Other liabilities
Deposits received
Advances
Others		 December31,2014
$ 321,079
181,050

9,927
$ 512,056		 December31,2013






$ 252,542
147,999
-
$ 400,541

29. Shareholders’ equity

  • (1) Capital stock

Common stock

holders’equity
Capital stock
Common stock
Authorized number of shares
(thousand shares)
Authorized capital
Number of shares issued
with fully paid-in capital
(thousand shares)
Outstanding capital		 December31,2014

4,320,000
$ 43,200,000

2,851,506
$ 28,515,063		 December31,2013






4,320,000
$ 43,200,000
2,534,534
$ 25,345,339

186- 61 -

Common stock shares issued at NTD 10 Par and each share is entitled to one voting right and dividends.

The Taichung Commercial Bank in September 2013 had undistributed earnings of NTD 1,681,090 thousand re-capitalized. In addition, convertible financial bonds for NTD 481,100 thousand were converted into 47,681 thousand common stock shares on October 15, 2013. Therefore, the Taichung Commercial Bank’s additional paid-in capital on December 31, 2013 amounted to NTD 25,345,339 thousand, divided into 2,534,534 thousand shares and offered as common stock in whole.

The Taichung Commercial Bank in September 2014 had undistributed earnings of NTD 1,579,241 thousand re-capitalized. In addition, convertible financial bonds for NTD 1,604,800 thousand were converted into 159,048 thousand common stock shares in 2014. Therefore, the Taichung Commercial Bank’s additional paid-in capital on December 31, 2014 amounted to NTD 28,515,063 thousand, divided into 2,851,506 thousand shares and offered as common stock in whole.

(2) Capital surplus

The 2014 and 2013 additional paid-in capitals are adjusted as follows:

Balance as of January
1, 2013
Convertible financial
bonds converted to
common
stock
shares
Balance
as
of
December 31, 2013
Convertible financial
bonds converted to
common
stock
shares
Balance
as
of
December 31, 2014		 Other capital
surplus of
shares		 Other capital
surplus of
shares		 Premium on
issuance of
shares and
employee
stock option		 Employee
stock option		 Recognized
the changes in
additional
paid-in capital
of the
affiliated
company and
joint venture
under the
equity
method.
Equity
component of
convertible
financial
bonds		 Recognized
the changes in
additional
paid-in capital
of the
affiliated
company and
joint venture
under the
equity
method.
Equity
component of
convertible
financial
bonds		 Recognized
the changes in
additional
paid-in capital
of the
affiliated
company and
joint venture
under the
equity
method.
Equity
component of
convertible
financial
bonds		 Total



$ 550,109
17,273
567,382
66,251
$ 633,633


$ 18,949
-
18,949
-
$ 18,949


$ 6,627
-
6,627
-
$ 6,627


$ 16,813

-
(
16,813
-
(
$ 16,813
 $ 83,039


17,375)

65,664

57,935)

$ 7,729
(

 $ 675,537

102)
675,435
8,316
$ 683,751

Stock premium (including common stock premium and financial bond conversion premium) of the additional paid-in capital and donations can be used to offset losses; also, when there are no losses, the Company may apply it to

187- 62 -

distribute cash or for capitalization, but capitalization is limited to a certain percentage of the paid-in capital every year.

The investment under the equity method, employee stock options and stock options additional paid-in capital may not be used for any other purpose.

  • (3) Earnings allocation and dividend policy

According to the Taichung Commercial Bank’s Articles of Incorporation, any profit from settlement of the year shall be subject to applicable taxes as the top seniority, followed by the offsetting of losses carried forward from the previous years and 30% of the remainder of such profits shall be allocated as legal reserve and a special reserve shall be provided pursuant to the laws. Appropriate 0.0001% of the remaining amount as bonus to employees in 2014 and 2013, respectively, and remuneration to directors and supervisors based on 50% of the allocated employee bonus. If there is any balance, plus accumulated undistributed earnings in previous years, draft up an earnings distribution proposal.

The Board shall retain the required fund subject to the change of operating environment, operation and investment needs before proposing the proportion between cash and stock Dividends for the approval of the shareholders’ meeting:

  1. The cash dividends shall be no less than 10% of the Dividends and bonus allocated to shareholders.

  2. Notwithstanding, if the Dividends are allocated at less than or equal to NTD 0.3 per share, the earnings may be allocated in the form of stock Dividends in full.

Free-Gratis Dividends for the approval of the shareholders’ meeting. Before the legal reserve amounts to the total Paid-in capital, the maximum allocation of earnings in cash shall be no more than 15% of total capital. Where the rates of Shares and dividends and risk-based assets fail to meet the standard required by the business competent authority, allocation of earnings in cash or with other property shall be restricted or prohibited by the relevant requirements provided by the business competent authority.

When allocating earnings, the Taichung Bank shall provide equivalent special reserve for the difference between loss on sale of NPL and amortized loss, and also provide special reserve from Earnings or Accumulated earnings for the previous period with respect to the amount under the “less” item of shareholders’ equity for the current year and previous years. Where the amount under the “less” item of shareholders’ equity is collected afterwards, earnings may be allocated from the reversal.

Employees’ bonuses and remuneration to directors/supervisors payable by the Taichung Bank were estimated in accordance with the Taichung Bank’s Articles of

188- 63 -

Incorporation. After the Taichung Commercial Bank provided legal reserve at 30% of the earnings in 2014 and 2013, and employees’ bonus and remuneration to directors/supervisors as provided totaled NTD 375 thousand and NTD 296 thousand, respectively. The change in the allocated amount resolved by board session at the end of FY, if any, shall apply to adjustment of the annual expenses initially provided. If the shareholders’ meeting resolves an actual allocated amount different from the estimate, it shall be stated as a change in accounting valuation in the year of the resolution made by the shareholders’ meeting; If the shareholders’ meeting resolves to allocate stock as the employee bonus, the quantity of stock shall be determined based on the amount of the employee bonus divided by fair value of the stock. The fair value of the stock is based on the closing price on the day prior to the day of resolution made by the shareholders' meeting and takes the effect of ex-right and After Distribution into consideration.

The Bank shall recognize and reverse special reserve in accordance with FSC Letter Chin-Kuan-Cheng-Zi No. 1010012865, Letter Chin-Kuan-Cheng-Fa-Zi No. 1010047490, and the “FAQ on the applicability of the recognition of special reserve after the adoption of IFRSs” by the Bank. If the amount debited to the other shareholders’ equity is reversed subsequently, the reversed amount can be distributed.

The Taichung Commercial Bank had the earnings distribution, employee bonus, remuneration to directors/supervisors of 2013 and 2012 resolved in the shareholders’ meeting held on June 19, 2014 and June 13, 2013, respectively, as follows:

follows:
Legal reserve
Reversal of special
(reserve)
Cash Dividends
Stock dividends
Employee bonus

Remuneration
to
directors/
supervisors
Distributionof retained earnings
DividendPerShare (NTD)
2013
2012
2013
2012
$ 891,810
$ 833,387
$ - $ -
(
61,224 )
35,260
-
-
513,557
231,874
0.191
0.100
1,579,241
1,681,090
0.586
0.725
2013
2012
Cashbonus
Shareholder
bonus
Cashbonus
Shareholder
bonus
$ 209
$ -
$ 219
$ -
105
-
110
-		 DividendPerShare (NTD)
2013
$ 891,810
(
61,224 )
513,557
1,579,241
2013		 2013
$ -
-
0.191
0.586
2012		 2012
$ -
-
0.100
0.725
Cashbonus
$ 209
105		 Cashbonus
$ 219

110		 Shareholder
bonus
$ -
-

The difference between the bonus to employees and remuneration to directors and supervisors resolved in the shareholders’ meeting and the bonus to employees and remuneration to directors and supervisors booked in the 2013 and 2012

189- 64 -

consolidated financial statements is mainly due to changes in estimates; also, it is adjusted to the profit or loss of 2014 and 2013.

Taichung Commercial Bank had resolved in the board meeting the earnings distribution and dividend per share of 2014 on March 11, 2015 as follows:

Legal reserve
Reversal of special reserve
Cash Dividends
Stock dividends		 Distribution of
retained earnings
$ 1,073,725
(
34,177 )
712,877
1,824,964		 Dividend Per Share
(NTD)
$ -
-
0.25
0.64

The 2014 earnings distribution, bonus to employees and remuneration to directors and supervisors are yet to be resolved in the shareholder’s meeting scheduled on June 2, 2015.

For the bonus to employee and remuneration to directors and shareholders proposed by the Board of Directors and resolved in the shareholder’s meeting of Taichung Commercial Bank, please visit the Taiwan Stock Exchange “Market Observation Post System” (MOPS) for details.

(4) Other equity


Other equity
January 1, 2014
Available-for-Sale
Financial Assets-net
- Current valuation
adjustment
Foreign
currency
translation differences
- Current exchange
differences
Income tax related to the
other
comprehensive
profit or loss
December 31, 2014		 Unrealized gain
on
available-for-sale
financialassets
( $ 58,919 )
102,721
-
(
2,465)
$ 41,337		 Exchange
differences from
the translation of
financial
statements of
foreignoperations
$ 24,742

-
88,781

-

$ 113,523
 Total


( $ 34,177 )
102,721
88,781
(
2,465)
$ 154,860

190- 65 -

January 1, 2013
Available-for-Sale
Financial Assets-net
- Current valuation
adjustment
- Current transfer
realized amount
Foreign
currency
translation differences
- Current exchange
differences
Income tax related to the
other
comprehensive
profit or loss
December 31, 2013		 Unrealized gain
on
available-for-sale
financial assets
$ 91,865
(
137,463 )
(
4,846 )
-
(
8,475)
($ 58,919)		 Exchange
differences from
the translation of
financial
statements of
foreign operations
$ 477

-

-

24,265
-

$ 24,742
 Total
(
(
(
(
(
(
(
(		 $ 92,342

137,463 )

4,846 )
24,265
8,475)
$ 34,177)

30. Business units in continuing operation income

Income from continuing operations department includes the following items:

(1) Net interest income

Net interest income
2014 2013
Interest revenue
Discount
and
loan
interest
income $ 9,654,646 $ 8,764,863
Due from bank and interbank
offered interest income 705,347 521,392
Security
investment
interest
income 373,346 385,033
Credit card revolving interest
income 39,650 41,269
Interest income on installment 226,647 121,926
Lease interest income 57,629 26,352
Receivable
factoring
interest
income 6,174 11,021
Bonds and securities sold under
re-purchase
agreements
interest income 19,237 27,929
Other interest incomes 33,601 17,360
11,116,277 9,917,145
Interest expenses
Deposits Interest expenses ( 3,426,914 ) ( 3,162,427 )
Central Bank of China and
banks deposit interest expense ( 26,177 ) ( 27,000 )
Central Bank of China and
interbank interest expense ( 147,601 ) ( 94,915 )
RP (Debt) interest expense ( 1,519 ) ( 1,622 )
Bond issuance interest expense ( 352,030 ) ( 320,475 )
Other Interest expenses ( 59) ( 439)
( 3,954,300) ( 3,606,878)
$ 7,161,977 $ 6,310,267

191- 66 -

(2) Service Fee, Net

Service Fee, Net
2014 2013
Service Fee
Loan service fee income $ 268,031 $ 254,734
Brokerage fee revenue 1,222,596 918,207
Trust business income 603,692 479,787
Commission income for bank
guarantee		 71,564 56,206
Other service fee revenue 318,150 309,817
2,484,033 2,018,751
Service fee expenses
Commission expense (
307,351 )		 (
148,124 )
Inter-bank service fee (
23,975 )		 (
24,949 )
Other service fee expenses ( 75,523) ( 70,775)
( 406,849) ( 243,848)
$ 2,077,184 $ 1,774,903

The consolidated company provides custody, trust, investment management and advisory services to third parties; therefore, the consolidated company engages in the planning, management and trading decision of financial instruments. For a trust fund or investment portfolio that is commissioned for management and utilization, a separate bookkeeping is arranged and financial statements are prepared for internal management purposes, excluding the financial statements of the consolidated company.

(3) Gain (loss) on financial assets and liabilities at fair value through profit and loss

2014 2013
The realized gain (loss) of
financial
assets		 and
liabilities measured at fair
value through profit or loss
Commercial papers $ 95,408 $ 70,560
Stock 44,423 ( 55,356 )
Beneficiary certificate 118,575 30,689
Derivatives ( 52,980) (42,932)
205,426
2,961
The valuation gain (loss) of
financial
assets		 and
liabilities measured at fair
value through profit or loss
Commercial papers 529 4,033
Stock ( 38,667 ) 86,327
Beneficiary certificate ( 52,670 ) 36,401
Derivatives ( 17,670) 21,004
( 108,478) 147,765
$ 96,948 $ 150,726

192- 67 -

  1. The realized gains and losses of the financial assets and liabilities measured at fair value through profit or loss in 2014 and 2013 included disposal gain (loss) 82,452 thousand and (NTD 96,242 thousand), dividend income NTD 24,653 thousand and NTD 27,167 thousand, and interest income NTD 98,321 thousand and NTD 72,036 thousand, respectively.

  2. Net income of the exchange rate instrument includes realized and unrealized gains and losses of forward exchange contracts, exchange rate options and currency swaps. For the foreign currency financial assets and liabilities that are not designated as a hedging relationship and are measured at fair value through profit or loss, the translation gains and losses are included in the net income of the exchange rate instrument.

  3. (4) Asset impairment loss reversal gain (loss)

Held-to-maturity
financial
assets impairment reversal
gain
Other
financial
assets
impairment loss reversal
gain (loss)
Collateral
impairment
reversal gain		 2014
$ 982,923
43,098
2,243
$ 1,028,264		 2013


$ 744,460
(
34,666 )

182,941
$ 892,735
  • (5) Other net income (loss) other than interest
Asset trade loss
Net
gain
from
financial
assets carried at cost
Net loss on disposal of
collateral accepted
Other provision (Notes 27
and 36)
Other net profit (loss)		 2014
( $ 158 )
19,394
(
1,435 )
(
1,979 )

4,633
$ 20,455		 2013
( $ 912 )
19,467
( 80,660 )
(
1,900 )
(
1,033)
($ 65,038)
  • (6) Employee benefits expenses
Employee benefits expenses
Salaries and wages
Labor insurance and national
health insurance
Pension expenses
Other
employee
benefits
expenses		 2014
$ 2,257,405
162,783
113,364
156,243
$ 2,689,795		 2013




$ 2,024,093
144,457
109,425
72,568
$ 2,350,543

193- 68 -

(7) Depreciation and amortization expenses

Property,
plant,
and
equipment expenses
Intangible
assets
amortization expenses		 2014
$ 151,034
35,284
$ 186,318		 2013




$ 160,602
24,726
$ 185,328

(8) Business and administrative expenses

Taxation
Professional labor service
fee
Advertising expenses
Insurance expenses
Rental expense
Entertainment expense
Donations
Postal
and
telephone
expenses
Others		 2014
$ 491,281
146,610
126,713
148,941
161,232
130,404
64,339
50,595
335,712
$ 1,655,827		 2013




$ 296,214
146,453
123,736
138,537
123,829
88,645
48,823
46,994
313,998
$ 1,327,229

31. Continuing department income tax

(1) Income tax recognized in profit or loss

The major components of income tax expense are as follows:

Income tax expenses in the
current period
Accrued in current
year
Additional
levy
on
undistributed earnings
Prior year adjustment
Deferred tax
Accrued in current
year
Income
tax
expense
recognized in the profit or
loss		 2014
$ 592,934
1,286
21,105
134,338)
$ 480,987		 2013


(
(
 $ 556,471
-
1,598
81,361)
$ 476,708

194- 69 -

Adjustment of accounting income and income tax expense are as follows:

2014 2013
Income before taxation of
continued operations $ 4,200,243 $ 3,536,979
Income tax expense of net
income before tax at the
statutory tax rate $ 715,262 $ 601,286
Non-deductible expenses and
losses for tax purposes 7,102 3,227
Non-taxable income (
257,583 )		 (
153,985 )
Additional
levy		 on
undistributed earnings 1,286 -
Income tax expense of prior
years
adjusted
in		 the
current year 21,105 1,598
Unrecognized
deductible
temporary differences ( 6,185) 24,582
Income
tax
expense
recognized in the profit or
loss $ 480,987 $ 476,708

The combined company is entitled to the 17% tax rate of the R.O.C. Income Tax Act applicable to business entities. The subsidiaries in China are entitled to the 25% tax rate. The tax amount arising in other jurisdictions is calculated at the rate applicable to each relevant jurisdiction.

As the earnings distribution to be resolved in the 2014 shareholders’ meeting remains uncertain, the potential income tax consequence of levying an additional 10% income tax on the 2014 undistributed earnings cannot be reliably determined.

  • (2) Income tax recognized in the other comprehensive profit or loss
Deferred tax
Accrued in current year
- Unrealized gain or
loss
on
available-for-sale
financial assets
- Actuarial gains and
losses of the defined
benefits
Income
tax
benefits
recognized in the other
comprehensive profit or
loss		 2014
$ 2,465

28,752)
$ 26,287)		 2013
(
(
(
(		 $ 8,475
10,138)
$ 1,663)
  • (3) Current income tax asset and liability
Current income tax asset
Tax refund receivable
Current Tax Liability
Payable income tax		 December31,2014
$ 1,021
$ 218,945		 December31,2013 December31,2013


$ 57,372
$ 292,018

195- 70 -

(4) Deferred income tax assets and liabilities

Changes in the deferred income tax assets and liabilities are as follows:

2014

2014
Deferredincome taxassets
Temporary difference
Property, plant, and
equipment
Unrealized loss from
structured
note
indemnity
Defined
benefit
pension plans
Allowance for bad
debt
Others
Deferred tax liabilities
Temporary difference
Reserve for land
revaluation increment
tax (“LRIT”)
2013
Deferredincome taxassets
Temporary difference
Property, plant, and
equipment
Unrealized loss from
structured
note
indemnity
Defined
benefit
pension plans
Allowance for bad
debt
Others
Deferred tax liabilities
Temporary difference
Reserve
for
land
revaluation increment
tax (“LRIT”)		 Balance,
beginning of
year
$ 3,097
216,222
40,977
133,151
1,969)
$ 391,478
$ 111,021
Balance,
beginning of
year
$ 3,097
210,393
35,405
6,249
53,310
$ 308,454
$ 111,021		 Recognized in
the profit or
loss
$ -
(
7,560 )
745
136,347

4,806
$ 134,338
$ -
Recognized in
the profit or
loss
$ -
5,829
(
4,566 )
126,902
(
46,804)
$ 81,361
$ -		 Recognized in
the other
comprehensive
profit of loss
$ -
-
28,752
-
(
2,465)

$ 26,287

$ -

Recognized in
the other
comprehensive
profit of loss
$ -
-
10,138
-
(
8,475)

$ 1,663

$ -
 Balance, end
ofyear

(





$ 3,097

208,662

70,474

269,498
372
$ 552,103
$ 111,021
Balance, end
ofyear




(
(
(



(

 $ 3,097

216,222

40,977

133,151
1,969)
$ 391,478
$ 111,021

196- 71 -

(5) Two-in-one tax information

Two-in-one tax information
Accumulated earnings
Unappropriated
earnings before 1997
Unappropriated
earnings after 1998
Shareholders’ deductible tax
account-Balance		 December31,2014
$ -
3,579,082
$ 3,579,082
$ 679,251		 December31,2013






$ -
2,923,384
$ 2,923,384
$ 603,993

The annual earnings tax credit ratio was 20.48% (estimated) and 20.50% in 2014 and 2013, respectively.

According to the Income Tax Act, when the Taichung Commercial Bank allocates the earnings retained after 1998 (inclusive), domestic shareholders may have the respective shareholders deductible tax calculated in accordance with the deductible rate of earnings on the dividend distribution date. Since the actual deductible tax distributed to shareholders shall be based on the shareholders deductible tax account balance on dividend distribution date, the Company’s 2013 projected deductible rate of earnings allocation may differ from the deductible rate of earnings actually distributed to the shareholders.

According to the Tax Code after the amendment on June 4 2014 effective on January 1 2015, domestic natural person shareholders are entitled to 50% of the tax deduction ratio as of the dividend day for the calculation of the deductible amount of tax for shareholders if the Bank paid the earnings in FY1998 and beyond.

According to Tai-Tsai-Shay Zi No. 10204562810, for the calculation of the tax credit ratio in the year of adopting the IFRSs for the first time, the booked cumulative unappropriated earnings should include the net increase of decrease of retained earnings resulting from the first-time adoption of the IFRSs.

(6) Income tax audit

  1. The Taichung Commercial Bank was audited up to the year 2012.

  2. The Taichung Commercial Bank Insurance Broker Co., Ltd. was audited up to the year of 2012.

  3. The Taichung Commercial Bank Lease Enterprise was audited up to the year of 2012.

  4. The Taichung Commercial Bank Securities Co., Ltd. was established in the year 2013. Therefore, the corporate income tax returns have not yet been audited or authorized.

197- 72 -

32. Earnings per share

Unit: NTD per share

Basic earnings per share
Diluted earnings per share		 2014
$ 1.32
$ 1.31		 2013


$ 1.16
$ 1.08

When calculating earnings per share, the impact of the stock dividend had been retroactively adjusted and the stock dividend record date was September 3, 2014. The adjustment of the duration in retrospect caused the change in the basic and diluted earnings per share for FY2013 as follows:

Basic earnings per share
Diluted earnings per share		 Cum-dividend
$ 1.23
$ 1.14		 Unit: NTD per share
Ex-dividend
$ 1.16
$ 1.08


The earnings and weighted average common stock shares used in calculating the earnings per share are as follows:

earnings per share are as follows:
Net income
Net profit attributable to the
company
Effect
of
dilutive
potential
common stock:
Net interest on convertible
financial bonds
Earnings used to calculate diluted
earnings per share of the
continuing department
Quantity
Weighted average common stock
shares used to calculate basic
earnings per share
Effect
of
dilutive
potential
common stock:
Convertible financial bonds
Employee bonus
Weighted average common stock
shares used to calculate diluted
earnings per share		 2014
$ 3,719,256

4,734

$ 3,723,990

Unit:
2014
2,815,153

35,782
33

2,850,968
 2013
$ 3,060,271
27,359
$ 3,087,630
Thousand shares
2013
2,639,027
214,472
27
2,853,526






198- 73 -

If the consolidated company may choose to have the bonus for employees distributed via a stock or cash dividend, calculate the diluted earnings per share, assuming that the bonus to employees is with a stock dividend distributed, with the weighted average number of shares outstanding included when the potential common stock has a diluted effect. When diluted EPS is calculated in the next year before the Board of Directors resolves the number of share distribution for employee bonus, the dilution effect is also considered for such potential common shares.

33. Non-cash transactions

Convertible financial bondholders of the consolidated company exercised conversion rights in the year 2014. The bond amount NTD 1,604,800 thousand was converted to 159,048 thousand common stock shares. Please refer to Note 29 (1) and (2).

34. Important transactions with stakeholders

  • Name Affiliation

  • Jin-Fong Soo (Representative to Hsu The management Tian Investment Co., Ltd.)

  • Kuei-Fong Wang (Representative to Hsu The management Tian Investment Co., Ltd.)

  • Hsu Tian Investment Co., Ltd., I Joung Director of the Bank Investment Co., Ltd., Pan Asia Chemical Corporation, and He Yang Management Consultant Co., Ltd.

  • Hsi-Rong Huang, Jin-Yi Lee, Chen-Le Legal representative to Director of the Liu, Ming-Shan Chuang, Hsin-Ching Bank Chang, Jer-Shyong Tsai, Kuei-Fong Wang, Ching-Hsin Chang (Note 2, 3), Wei-Liang Lin, Meng-Liang Chang, Jin-Fong Soo, Chun-Sheng Lee, Yi-Der Chen (Note 3), Chia-Hung Lin, Shu-Yuan Lin and Chien-Hui Huang (Note 2)

  • Xin Rui Investment Co., Ltd. and Tai Supervisor of the Bank Jiunn Enterprise Co., Ltd. (Note 1)

  • Jiann-Ell Huang, Shu-Li Huang, Legal representative to Supervisor of the Ching-Huang Tsai, Chian-Hwa Lee Fu, Bank and Chao-Nan Hsieh (Note 1)

  • 100 people including Chih-Chuan Fang The management

(Continued on next page)

199- 74 -

(Continued from previous page)

Name
41 people including the Chairman’s
spouse
Taichung Commercial Bank Cultural and
Educational
Foundation,
Taichung
Commercial Bank Workers’ Welfare
Commission
Reliance Securities Investment Trust Co.,
Ltd.
China Man-Made Fiber Co., Ltd.
Chung Chien Investment Co., Ltd.
Pan Asia Investment Co., Ltd.
Deh Hsing Investment Co., Ltd.
Greencol Taiwan Corporation
Chou Chin Industrial Co., Ltd.
Ge Ling Co., Ltd.
Nan Chung Petrochemical Corp.
Je Mi Fang Corporation
Rai Yu Investment Co., Ltd.
Rai Yen Investment Co., Ltd.
Rai Chia Investment Co., Ltd.
Pan Hsu Investment Co., Ltd.
Pan Feng Investment Co., Ltd
Hsiang Feng Development Co., Ltd.
Reliance Securities Co., Ltd.
Sheng Jen Knitted Textiles Co., Ltd.
Tai Yi Investment Co., Ltd.
Tai Yi Investment Co., Ltd.
Formosa Imperial Wineseller Corp.
Tou-Min Industrial Co., Ltd.
Jin
Bang
Ge
Industrial
Company
Limited.		 Affiliation
Spouses and kin at the second tier under
the Civil Code of directors, supervisors,
Chairman of the Board and President of
the Taichung Commercial Bank
Corporations
receiving
donation
amounted to more than one-thirds of
the
Taichung
Commercial
Bank’s
Paid-in capital
Affiliated company under the equity
method
Ultimate parent company
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party
Substantial related party

  • Note 1: The previous representatives to Institutional Supervisors Xin Rui Investment Co., Ltd. and Tai Jiunn Enterprise Co., Ltd., Jiann-Ell Huang, Shu-Li Huang, Ching-Huang Tsai, Chien-Hwa Lee Fu, and Chao-Nan Hsieh have their term of office expired on June 19 2014.

  • Note 2: The term of office for representative Chang Ching-Hsin to Institutional Director I Joung Investment Co., Ltd. expired on June 19 2014. In a session of the General Meeting of Shareholders in FY2014, Huang Chien-Huei was elected the representative to Institutional Shareholder, He Yang Management Consultant Co., Ltd.

200- 75 -

Note 3: Institutional Director I Joung Investment Co., Ltd. appointed Chen Yi-Deh as the representative to replace Chang Ching-Hsin on July 14, 2014.

Summarization of important transactions between the consolidated company and stakeholders:

  • (1) Loans
Loans
Type
Customer loans to
Employees

Residential
mortgage loans

Other loans















 Number of
accounts or
name of
stakeholder
18 accounts
25 accounts
Lu OO
Ni OO
Ni OO
You OO
Yang OO
Yang OO
Tsai OO
Liang OO
Wu OO
Zhuang OO
Chiu OO
Lee OO
Chang OO
Lin OO
Chung OO
Meng OO		 Maximum
balance –
current
period
$ 5,796

54,298
1,000
2,614
2,200
10,600
3,031
3,618
7,500
4,505
3,908

2,341
4,935
4,000
11,800
19,000
10,000
35,000		 Balance,
ending
$ 2,709
50,648
-
2,395
1,200
4,300
2,609
1,719
5,000
2,995
2,670
2,203
4,668
1,000
11,609
18,814
10,000
34,881		 2014
Perfor		 mance
No-
performing
loans
$ -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-		 Interest
revenue
$ 82
767
-
30
16
66
50
32
130
52
59
36
85
7
122
103
-
58		 Unit: N
Collateral
Contents
Credit
loasns
Real estate
Certificate
of deposit
Real estate

�

�

�

�

�

�

�

�

�

�

�

�

�

�
Unit: N		 TD thousand
Difference
in trading
conditions
and terms
with non-
stakeholders
Normal
laons
$ 2,709
50,648
-
2,395
1,200
4,300
2,609
1,719
5,000
2,995
2,670
2,203
4,668
1,000
11,609
18,814
10,000
34,881
2013
None
�
None
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
TD thousand
2013 Unit: NTD thousand
Type
Customer loans to
Employees

Residential
mortgage loans

Other loans









 Number of
accounts or
name of
stakeholder
27 accounts
24 accounts
Ni OO
Ni OO
You OO
Yang OO
Yang OO
You OO
Liang OO
Wu OO
Zhuang OO
Chiu OO		 Maximum
balance –
current
period
$ 10,842

49,369
829
1,000
5,800
3,786
2,356
1,263
4,512
4,700

2,478
5,077		 Balance,
ending
$ 5,652
36,165
614
1,000
2,300
3,031
1,818
-
3,005
3,908
2,341
4,935		 Perfor mance
No-
performing
loans
$ -
-
-
-
-
-
-
-
-
-
-
-		 Interest
revenue
$ 143
546
16
1
44
19
17
16
54
76
38
51		 Collateral
Contents
Credit
loasns
Real estate

�

�

�

�

�

�

�

�

�

�		 Difference in
trading
conditions
and terms
with non-
stakeholders
Normal
laons
$ 5,652
36,165
614
1,000
2,300
3,031
1,818
-
3,005
3,908
2,341
4,935
None
�
�
�
�
�
�
�
�
�
�
�

According to Articles 32 and 33 of the Banking Act, no non-secured credit loans shall be granted to any party interested with the Bank’s staff, unless they are consumer loans and loans extended to the Government Apparatus; secured credit loans shall be granted under sufficient collateral and the terms of such credit extension shall not be more favorable than those offered to other customers in the same category.

201- 76 -

(2) Deposits

Deposits
Reliance
Securities
Investment Trust Co., Ltd.
Taichung Commercial Bank
Workers’
Welfare
Commission
China Man-Made Fiber Co.,
Ltd.
Reliance Securities Co., Ltd.
Taichung Commercial Bank
Cultural and Educational
Foundation
Formosa Imperial Wineseller
Corp.
Ge Ling Co., Ltd.
Pan
Asia
Chemical
Corporation
Chou Chin Industrial Co.,
Ltd.
Chou Chang Co., Ltd.
Je Mi Fang Corporation
Others
Reliance
Securities
Investment Trust Co., Ltd.
Taichung Commercial Bank
Workers’
Welfare
Commission
China Man-Made Fiber Co.,
Ltd.
Reliance Securities Co., Ltd.
Taichung Commercial Bank
Cultural and Educational
Foundation
Pan
Asia
Chemical
Corporation
Ge Ling Co., Ltd.
Chou Chang Co., Ltd.
Formosa Imperial Wineseller
Corp.
Chou Chin Industrial Co.,
Ltd.
Je Mi Fang Corporation
Others		 2014
Balance, ending
$ 189,624
134,023
52,859
15,272
8,171
305
2,229
13,651
513
3,103
27

218,446
$ 638,223		 Interest rate
collars %

0.00�3.20
0.02�5.38
0.13
0.13�1.09
0.02�1.37
0.13
0.13
0.02�0.13
0.13
0.02
0.13
0.00�5.38

2013		 Interest expenses








$ 2,436

3,060
55

165

110
-
2

9
-
-
-
2,325
$ 8,162
Balance, ending
$ 162,625
132,193
47,456
17,069
8,149
6,854
2,047
1,304
677
552
21

208,901
$ 587,848		 Interest rate
collars %

0.00�1.35
0.02�2.38
0.13
0.13�1.09
0.02�1.37
0.02�0.13
0.13
0.02
0.13
0.13
0.13
0.00�2.38		 Interest expenses










$ 1,788
3,108
53
165
110
4
1
1
-
-
-
2,017
$ 7,247

202- 77 -

With the exception of the interest rate for bank clerks’ deposits on December 31, 2014 and 2013 were 5.38% and 2.38% respectively, the other interest rates are not materially different from those offered to general customers.

  • (3) Service Fee
Service Fee
Reliance
Securities
Investment Trust Co., Ltd.		 2014
$ 6,934		 2013
$ 3,133

Said amount refers to the revenue from promotion, sale and channels. The trading price between the consolidated company and stakeholders is similar to that between the Bank and non-stakeholders

  • (4) Other business expenses Amount
Other business expenses Amount
Ge Ling Co., Ltd.
Je Mi Fang Corporation
Formosa Imperial Wineseller
Corp.		 2014
$ 1,115
264
5
$ 1,384		 2013




$ 671
269
30
$ 970

The aforementioned amount is recognized as other business expenses. The transaction prices between the consolidated company and its related parties are the same as with unrelated parties.

  • (5) Rewards to management

The 2014 and 2013 total remuneration to directors and the other management are as follows:

are as follows:
Short-term
employee
benefits
Retirement benefits
Other long-term employee
benefits		 2014
$ 84,106
751
16
$ 84,873		 2013




$ 67,624
381
-
$ 68,005

The performance evaluation and salary compensation of directors and the management are conducted by referring to the general payment level of the industry, personal performance, business operating performance and reasonableness of related future risks. As for the short-term performance bonus percentage of the directors and management and the timing for partial variable

203- 78 -

salary compensation payment, the features of the industry and the business nature of the Company should be included for consideration.

35. Pledged assets

The pledged assets are stated as follows:

Restricted assets – bank deposits
Notes receivable
Available-for-sale
Financial
Assets-overseas bond
Available-for-sale
Financial
Assets - Government bond
Held-to-maturity
financial
assets-government bond
Held-to-maturity
financial
assets-overseas bond		 December 31, 2014
$ 340,614
2,606,619
63,266
195,000
992,000

158,165
$ 4,355,664		 December 31, 2013 December 31, 2013






$ 135,954
2,700,416
591,400
165,000
578,900
2,614,400
$ 6,786,070

Overseas bonds and restricted assets – bank deposits are pledged as collaterals for financing. Government bonds are pledges to the court for provisional seizure, security for the overdraft account for clearing, and as bond for securities dealers and trust. The detail is shown below:

detail is shown below:
Security bond for provisional
seizure at court
Security for the overdraft limit of
the clearing account
Securities
Brokerage
business
security bond
Reserve
for
trust
funds
compensation		 December31,2014
$ 492,000
450,000
195,000

50,000
$ 1,187,000		 December31,2013




$ 528,900
-
165,000
50,000
$ 743,900

36. Significant undertaking or contingent liabilities

In addition to the undertaking for financial products specified in Notes 8, 9 and 22, the consolidated company have had the following undertakings or contingent liabilities until December 31, 2014 and 2013:

204- 79 -

(1) Undertaking:

Undertaking:
Undisbursed credit
committee (exclusive of
credit cards)
Credit card committee
Guarantee payments
Trust liabilities
Balance of application for
L/C
Lease contract commitments		 December31,2014
$ 125,625,404
13,220,995
11,215,267
53,847,326
3,633,117
1,248,697		 December31,2013
$ 114,395,694
11,608,548
9,141,991
44,660,285
3,894,760
739,615

(2) The Taichung Bank engaged in investing in the structured notes issued and secured by Lehman Brothers Holdings Inc. through the special monetary trustee accounts upon investors’ request. However, Lehman Brothers Holdings Inc. petitioned for bankruptcy with U.S. courts on September 15, 2008. The quotation and redemption of the structured notes issued and secured by it were suspended. Afterwards, it petitioned for an extension and submitted a reorganization plan with a U.S. courts for approval in December 2008, and further petitioned for an extension and submitted two motions in the duration of debt clearance. The U.S. court approved its petition later.

The Taichung Bank defined the “Regulations for Settlement of Dispute over Lehman Brothers Structured Notes” and policy for settlement according to the resolution made by the temporary directors’ meeting on May 6, 2009, and indemnified investors at the ratio assessed by the “Banking Dispute Review Board” of the Bankers Association of the Republic of China. After assessment, the Bank recognized loss amounting to NTD223,217 thousand from FY2009 to FY2013, and recognized loss amounting to NTD1,179 thousand in FY2014 stated as others for lodgment. As of December 31 2014, the Bank has made compensation amounted to NTD219,771 thousand with unsettled portion amounted to NTD4,625 thousand, which was booked as payables

(3) The balance sheet and trust property catalogue of the trust account is disclosed pursuant to Article 17 of the “Enforcement Rules of Trust Enterprise Act” as follows:

205- 80 -

Trust assets
Bank deposits

Short-term
investment

Structured
product
investment
Real estate
Land
Buildings and
structures
Securities
in
custody

Total trust assets
 Balance Sheet of Trust Accounts
December 31, 2014
Amount
Trustliabilities
$ 2,334,720
Payable securities in
custody

43,889,027
Trust capital
602,989
Money trust

Real estate trust
2,849,240
Net income
14,235
Deferred carry-over

4,157,115
$ 53,847,326
Total trust liabilities


(
 Amount



$ 4,157,115
46,826,736

2,863,475
939,664

939,664)
$ 53,847,326

Property Catalogue of Trust Accounts December 31, 2014

Property Catalogue of Trust Accounts
December 31, 2014
Investment
Bank deposits
Short-term investment
Structured product
investment
Real estate
Land
Buildings
and
structures
Securities in custody		 Amount



$ 2,334,720
43,889,027
602,989
2,849,240
14,235
4,157,115
$ 53,847,326
Income Statement of Trust Accounts
2014
Amount
Interest revenue
Trust expenses
Administration
expenses
Taxation
Income before taxation
Income tax expenses
Income after taxation		 Amount
$ 1,543,500
(
603,692 )
(
144)
939,664

-
$ 939,664

206- 81 -

Balance Sheet of Trust Accounts December 31, 2013

Trust assets
Bank deposits

Short-term
investment

Structured
product
investment
Real estate
Land
Buildings and
structures
Securities in custody
Total trust assets
 Amount
$ 3,644,466
37,855,537
611,118
984,364
18,236
1,546,564
$ 44,660,285		 Trustliabilities
Payable securities in
custody
Trust capital
Money trust

Real estate trust
Net income
Deferred carry-over

Total trust liabilities
 Amount






(
 $ 1,546,564
42,111,121

1,002,600
683,705

683,705)
$ 44,660,285

Property Catalogue of Trust Accounts December 31, 2013

Property Catalogue of Trust Accounts
December 31, 2013
Investment
Bank deposits
Short-term investment
Structured
product
investment
Real estate
Land
Buildings
and
structures
Securities in custody		 Amount



$ 3,644,466
37,855,537
611,118
984,364
18,236
1,546,564
$ 44,660,285

Income Statement of Trust Accounts

2013

Income Statement of Trust Accounts
2013
Amount
Interest revenue
Trust expenses
Administration
expenses
Taxation
Income before taxation
Income tax expenses
Income after taxation		 Amount
$ 1,163,775
(
479,787 )
(
283)
683,705

-
$ 683,705

207- 82 -

(4) Leasing contracts and capital expenditure commitments maturity analysis

The consolidated company’s leasing contract commitments include operating leases and financing leases.

The operating lease commitment meant for the minimum lease payment of the consolidated company as a lessee or lessor under the irrevocable operating lease.

The financing lease commitment meant for the future total lease payment and its present value of the consolidated company as a lessee under the financing lease conditions or the total lease investment amount or the present value of the minimum lease receivable of the lessor under the financing lease condition.

Capital expenditure commitment refers to the contract signed for the capital expenditures paid to receive architecture and equipment.

The maturity of the commitments of the lease agreements and capital expenditure of the companies in the consolidated financial statements are analyzed below:

December 31, 2014

below:
December 31, 2014

Lease contract
commitments
Operating lease
expense (lessor)
Operating lease
income (lessor)
Gross financial
lease income
(lessor)
Present value of
financial lease
income (lessor)
Capital expenditure
commitments

Total
 Less than 1year
$ 156,043

961
427,901

385,726

4,123,910
$ 5,094,541		 1 ~5years
$ 256,730
-
186,903
175,171
-
$ 618,804		 More than 5year
$ -
-
-
-

-
$ -
 Total













$ 412,773

961

614,804

560,897
4,123,910
$ 5,713,345

December 31, 2013

December 31, 2013

Lease
contract
commitments
Operating
lease
expense (lessor)
Operating
lease
income (lessor)
Gross
financial
lease
income
(lessor)
Present value of
financial
lease
income (lessor)
Capital
expenditure
commitments

Total
 Less than 1year
$ 133,994

1,179
254,225

225,286

64,152
$ 678,836		 1 ~5years
$ 231,464
648
178,720
167,552
22,839
$ 601,223		 More than 5year
$ 357

-
-
-

-

$ 357
 Total










$ 365,815
1,827
432,945
392,838
86,991
$ 1,280,416

208- 83 -

37. Disclosure of information about financial instruments

(1) Information about fair value

Financial assets
Cash and cash equivalents
Due from Central Bank of
China and lend to Banks
Financial assets at fair value
through profit and loss
Bonds and securities sold
under
repurchase
agreements
Receivable, net
Discounts and loans, net
Available-for-Sale
Financial
Assets-net
Held to maturity investments,
net
Investment under the equity
method
Restricted assets
Other financial assets - net
Financial liabilities
Due to Central Bank of China
and banks
Funds borrowed from CBC
and other banks
Financial liabilities at fair
value through profit and loss
Bills and bonds sold under
repurchase agreements
Payables
Customer
deposits
and
remittances
Financial bonds payable
Other financial liabilities		 December 31,2014
Book value
Fair value
$ 9,552,955
$ 9,552,955
82,314,107
82,314,107
13,011,606
13,011,606
1,545,361
1,545,361
8,118,751
8,118,751
384,382,280
384,382,280
20,711,997
20,711,997
1,418,003
1,399,208
140,282
140,282
341,093
341,093
1,206,142
1,206,142
10,697,387
10,697,387
3,499,960
3,499,960
133,360
133,360
273,573
273,573
7,363,659
7,363,659
455,966,124
455,966,124
14,400,000
14,350,922
340,296
340,296		 December 31,2013 December 31,2013
Book value
$ 9,552,955
82,314,107
13,011,606
1,545,361
8,118,751
384,382,280
20,711,997
1,418,003
140,282
341,093
1,206,142
10,697,387
3,499,960
133,360
273,573
7,363,659
455,966,124
14,400,000
340,296		 Book value
$ 5,590,728
75,496,734
12,195,016
4,550,801
6,485,651
362,916,674
19,197,158
3,340,584
142,654
164,290
1,158,259
8,341,508
4,968,239
74,800
358,769
4,420,341
429,704,469
16,042,869
111,741		 Fair value
$ 5,590,728

75,496,734

12,195,016

4,550,801

6,485,651
362,916,674

19,197,158

3,332,948

142,654

164,290

1,158,259

8,341,508

4,968,239

74,800

358,769

4,420,341
429,704,469

16,026,480

111,741

  • (2) The following methods and hypotheses for the valuation of fair value of financial instruments of the consolidated company are applied:

  • The Book Value of short-term financial instruments stated in the balance sheet shall be the fair value of such instruments. The reason is that the maturity date of these instruments is close and it would be reasonable to use the Book Value in the valuation of fair value. This method is applied to the valuation of cash and cash equivalents, due from the Central Bank and call loans to banks, bonds and securities sold under repurchase agreements, receivables, due to the Central Bank of China and banks, the central bank and interbank deposits, RP (Debt), accounts payables and remittances.

  • The fair value of the financial assets and financial liabilities associated with the standard terms and conditions and traded in an active market is determined by referring to market prices, including domestic and foreign

209- 84 -

corporate bonds, government bonds, stocks, commercial papers, beneficiary certificates, financial bond payables, convertible financial bonds ... etc. When market prices are not available, it is assessed using the valuation method. The estimates and assumptions used in the evaluation methods by the consolidated company are consistent with the estimates and assumptions that are used by market participants to price financial instruments.

  1. When derivative instruments, such as, forward exchange contracts, currency swap contracts and foreign exchange options transactions are with a quote in an active market, the market price is the fair value. If the market price is not available for reference, the fair value of a non-option derivative is calculated using the applicable yield curve in the derivatives duration with cash flow discount analysis; also, the fair value of the option derivative is calculated using an option pricing model. The estimates and assumptions used in the evaluation methods by the consolidated company are consistent with the estimates and assumptions that are used by market participants to price financial instruments.

  2. The fair value of other financial assets and financial liabilities (other than the aforementioned) is calculated in accordance with the generally accepted pricing models based on the cash flow discount analysis.

  3. The investments under the equity method refer to the equity of unlisted (non-OTC) companies and no open market price thereof is available. Besides, it is impossible to evaluate the possibility of various estimates in the variance interval.

  4. Discounts and loans, funds borrowed from CBC and banks, and deposits, are all financial instruments with interest accruing thereon. Therefore, their Book Value is similar to the current fair value. The Book Value of Delinquent loans refers to the projected collected amount less allowance for bad debt. Therefore, the Book Value is also the fair value.

  5. The financial instrument measured at cost refers to the financial instrument of unlisted (non-OTC) companies held without significant influence and no open market price available. Moreover, the fair value estimate is with a significant variation interval or it is impossible to evaluate the possibility of various estimates in the variance interval.

210- 85 -

  • (3) The fair value of financial assets and financial liabilities of the consolidated company is determined by the open market quotation and evaluated under the evaluation method:
evaluation method:
Financial assets
Financial assets at fair value
through profit and loss
Available-for-Sale
Financial
Assets
Held-to-maturity
financial
assets
Stocks- equity method
Financial liabilities
Financial liabilities at fair value
through profit and loss
Financial bonds payable		 Determined by open market
quotation
December 31,
2014
December 31,
2013
$ 12,435,329
$ 12,082,623
20,711,997
19,197,158
413,703
1,167,715
-
-
-
-
14,350,922
16,026,480		 Evaluated under evaluation method
December 31,
2014
$ 12,435,329
20,711,997
413,703
-
-
14,350,922		 December 31,
2014
$ 576,277
-
985,505
140,282
133,360
-		 December 31,
2013
$ 112,393

-

2,165,233

142,654

74,800

-
  • (4) Information on levels of fair value of financial instruments

An analysis of the financial instruments measured at fair value after initial recognition is provided in the table below. The measurement is classified into Level 1~3 depending on the observation extent of the fair value.

  1. Level 1

It refers to the quote of similar financial instruments in an active market. An active market means a market meeting all of the following conditions: Homogeneous instruments traded in the market; buyer and the seller readily available to trade with price information available to the general public. The fair value of the Company’s listed/OTC stocks investment, beneficiary certificates, popular Taiwan central government bond investments and derivative instruments with a quote in an active market is classified as Level 1.

  1. Level 2

It refers to the observable prices other than the quote in an active market, including the observable input parameters directly (as prices) or indirectly ( e.g. derived from prices) acquired from an active market. It includes the Company’s investments in non-popular government bonds, corporate bonds, financial bonds, convertible bonds, most derivatives and the financial bonds issued by the Company.

  1. Level 3

211- 86 -

It refers to the input parameters for measuring the fair value that are not based on obtainable market data. It includes some of the derivative instruments invested by the Company and equity instruments that are without active market investments.

Financial instruments at
fair value through profit
or loss
Non-derivative
financial
instruments
Assets
Financial assets at
fair value through
profit and loss
Stock
investment
Others
Available-for-Sale
Financial Assets
Stock
investment
Bond
investment
Derivatives
Assets
Financial assets at
fair value through
profit and loss
Liabilities
Financial liabilities
at
fair
value
through profit and
loss
Total
Financial instruments at
fair value through profit
or loss
Non-derivative
financial
instruments
Assets
Financial assets at
fair value through
profit and loss
Stock
investment
Others
Available-for-Sale
Financial Assets
Stock
investment
Bond
investment
Derivatives
Assets
Financial assets at
fair value through
profit and loss
Liabilities
Financial liabilities
at
fair
value		 December 31,2014 December 31,2014 December 31,2014
Total
$ 863,301
11,572,028
207,164
20,504,833
576,277

133,360)
$ 33,590,243		 Level 1
Level 2
$ 863,301
$ -
11,572,028
-
207,164
-
20,504,833
-
-
576,277
-
(
133,360)

$ 33,147,326
$ 442,917

December 31,2013		 Level 3


(








$ -

-

-

-

-
-
$ -
Total
$ 971,487
11,111,136
80,853
19,116,305
112,393

74,800)		 Level 1
$ 971,487
11,111,136
80,853
19,116,305
-
-		 Level 2
$ -
-
-
-
112,393

74,800)
 Level 3

(

(




$ -

-

-

-

-
-

212- 87 -

through profit and loss Total $ 31,317,374 $ 31,279,781 $ 37,593 $ -

38. Financial risk management objectives and strategy

Overview

The consolidated company’s financial risk management objective is to achieve business objectives, the overall risk tolerance and legal restrictions in order to reach the balance of risks and returns. The main operating risks faced by the consolidated company include the credit risk on and off the financial statements, market risks (including interest rates, foreign exchange rates, equity securities and instrument price risks) and liquidity risks.

The consolidated company have the related risk management policies defined and approved by the Board in order to effectively identify, measure, monitor, and control credit risk, market risk and liquidity risk.

Risk management organizational structure

The Board of Directors is the highest decision-making unit of the Company and assumes the ultimate responsibility for risk management. The Bank has established a Risk Management Commission and Risk Management Dept. responsible for granting risk authority and the relevant authorities to the relevant departments to ensure the successful operation of risk management. The Committee’s functions are specified as follows:

  • (1) Review of risk management projects.

  • (2) Measure various risk management scopes.

  • (3) Review of motions for institutionalization of risk management.

  • (4) Periodical report to the Board.

The commissioners of the Risk Management Committee shall set the various risk management indicators by nature of business and functions of departments and report them to the Risk Management Committee for high-ranking supervisors’ reference in decision making.

  1. Market Risk

  2. (1) Source and definition of market risk

Market risk refers to the unfavorable changes in market price causing possible losses on and off the Bank’s balance sheet. The

213- 88 -

so-called market price refers to interest rates, exchange rates, equity security prices and instrument prices.

(2) Market risk management policy

The Company’s market risk management objective is to develop a sound and effective market risk management mechanism that is compatible with the Company’s business scale, nature and complexity in order to ensure that the Company’s risks can be properly managed and effectively identify, measure, monitor, control market risks; also, establish a balance between the tolerable risk level and the expected rate of return.

  • (3) Market risk management process

  • A. Identification and Measurement

Before the promotion and operation of new products, business activities, processes and systems, the relevant market risk should be assessed through appropriate procedures and determine whether the risk exposure is within the range of risk tolerance included for consideration. The Company’s responsible business units shall use business analysis or product analysis to verify the source of market risk and define market risk factors for each financial instrument as appropriate specifications.

Market risk measurement can be processed with a variety of effective measurement methods in order to properly measure risk, including but not limited to the following methods: statistical basis measurement method, sensitivity analysis, and scenario analysis. The Risk Management Department should measure the risk position daily and regularly; also, conduct stress tests regularly to measure the possible extraordinary loss amount of current positions under the simulated extreme situations or historically extreme situations.

B. Monitoring and reporting

The Risk Management Department should regularly report and make suggestions to the Risk Management Committee and the Board of Directors on the Bank’s overall market risk management, including the Bank’s market risk positions, risk level, profit and loss, using excess of limit and market risk management related

214- 89 -

compliance. The Business Department has defined the relevant rules governing excess of limit, stop-loss mechanism and operating procedure for excess of limit in order to effectively control the market risk. The excess of limit or exception occurring shall be reported immediately in order to exercise responsive measures.

  • (4) Interest rate risk

  • A. Definition of interest rate risk

Interest rate risk refers to the changes in interest rates that cause changes in the fair value of the consolidated company’s interest rate or losses. The main sources of risk include deposit and loan and interest-rate related marketable securities.

  • B. Measurement methods and management procedures

The Company adopts a gap management mechanism for interest rate risk with the target range set for monitoring and with the monitoring results periodically presented to the Asset and Liability Management Committee and the Board of Directors; also, makes timely adjustments in accordance with the Company’s overall operating conditions. In addition, the Company assumes the degree of impact when applying DV01 to measure interest rate risk and the interest rate curve shifted 100BP in parallel on earnings and equity in order to control interest rate risks.

  • (5) Exchange rate risk

  • A. Definition of exchange rate risk

Exchange rate risk refers to the gains and losses resulting from the conversion of two different currencies at different times. The consolidated company’s exchange rate risk mainly arises from the spot and forward foreign exchange business. Since the Company’s engages in foreign exchange trading mostly to meet the need for customer’s position daily; therefore, the exchange rate risk is relatively low.

  • B. Measurement methods and management procedures

The Bank manages its exchange risk by limit control whereby the limits of respective currencies during daytime trade and nighttime trade were set with the upper limit of the maximum

215- 90 -

exposure in foreign exchange authorized to personnel of different ranks for control. The upper limit for particular counterparty has also been set. The result of the monitoring and control was reported to the Risk Management Committee and the Board for discussion.

In addition, the Company assumes the degree of impact when the USD/NTD, EUR/NTD, CNY/NTD and HKD/NTD exchange rates are relatively valued/devalued by 3% on earnings and equity in order to control the exchange rate risks.

  • (6) Equity securities price risk

  • A. Definition of equity securities price risk

The market risk of the consolidated company’s equity securities includes individual risks arising from changes in equity securities market prices and general market risks arising from changes in the overall market prices. The main sources of risk includes listed/OTC stocks and beneficiary certificates.

  • B. Measurement methods and management procedures

The consolidated company have the equity security price risk controlled with the specific limitation mechanism to ensure that the transactions are carried out at all levels within the authorized limits, set the stop-loss control mechanisms and report the monitoring results regularly to the Risk Management Committee and the Board of Directors for discussion.

In addition, the consolidated company assumes the degree of impact when equity securities prices go up/down by 15% on earnings and equity in order to control the equity securities price risks.

  • (7) Market risk sensitivity analysis

Interest rate risk

Assuming that the other variables remain constant, if the yield curve goes up/down by 100 points, the consolidated company’s net income before tax as of December 31, 2014 and 2013 increased/decreased by NTD 639,617 thousand and NTD 548,078 thousand; the equity decreased/increased by NTD 676,356 thousand and NTD 834,547 thousand, respectively.

216- 91 -

Exchange rate risk

Assuming that the other variables remain constant, if the USD/NTD, EUR/NTD, CNY/NTD and HKD/NTD exchange rate was relatively valued/devalued by 3%, the consolidated company’s net income before tax as of December 31, 2014 and 2013 decreased/increased by NTD 16,755 thousand and NTD 118,100 thousand; the equity increased/decreased by NTD 56,190 thousand and NTD 31,494 thousand, respectively.

Equity securities price risk

Assuming that the other variables remain constant, if the equity securities price up/down by 15%, the consolidated company’s net income before tax as of December 31, 2014 and 2013 increased/decreased by NTD 91,603 thousand and NTD 233,187 thousand; the equity decreased/increased by NTD 30,441 thousand and NTD 12,128 thousand, respectively.

Sensitivity analysis is compiled as follows:

NTD 12,128 thousand, respectively.
Sensitivityanalysis is compiled as follows:		 NTD 12,128 thousand, respectively.
Sensitivityanalysis is compiled as follows:		 NTD 12,128 thousand, respectively.
Sensitivityanalysis is compiled as follows:		 NTD 12,128 thousand, respectively.
Sensitivityanalysis is compiled as follows:
December31,2014
The main risk Magnitude changes Affected amount
Equity Profit andloss
Interest rate risk Interest
rate
curve
rises
100BPS
Interest
rate
curve
drops
100BPS

( $ 676,356 )
676,356		 $ 639,617
(
639,617 )
Foreign Exchange
risk
USD/NTD,
EUR/NTD,
CNY/NTD and HKD/NTD
valued by 3%, respectively.
USD/NTD,
EUR/NTD,
CNY/NTD and HKD/NTD
decreased by 3%,respectively.

56,190


(
56,190 )		 (
16,755 )

16,755
Equity
securities
price risk
Equity
securities
price
increased by 15 %.
Equity
securities
price
decreased by15%.		 30,441
(
30,441 )		 91,603
(
91,603 )
December31,2013 December31,2013 December31,2013 December31,2013
The main risk Magnitude changes Affected amount
Equity Profitandloss
Interest rate risk Interest
rate
curve
rises
100BPS
Interest
rate
curve
drops
100BPS

( $ 834,547 )
834,547		 $ 548,078
(
548,078 )
Foreign Exchange
risk
USD/NTD,
EUR/NTD,
CNY/NTD and HKD/NTD
valued by 3%, respectively.
USD/NTD,
EUR/NTD,
CNY/NTD and HKD/NTD
decreased by 3%,respectively.

31,494


(
31,494 )		 (
118,100 )

118,100
Equity
securities
price risk
Equity
securities
price
increased by 15 %.
Equity
securities
price		 12,128
(
12,128 )		 233,187
(
233,187 )

217- 92 -

decreased by 15%.

2. Credit Risk

The financial instruments held or issued by the consolidated company might suffer loss due to the trading counterpart’s or the other party’s failure to perform contractual obligations. The consolidated company will evaluate credit carefully to grant loans and guarantees. The loans secured by collateral accounted for about 79% of the total loans on December 31, 2014. The proportion of financing guarantee and collateral held by commercial L/C was approximately 21%, because the collateral required by loans, loaning commitments or guarantees usually referred to cash, inventory, marketable securities or other property. In the event of the trading counterpart’s or the other party’s default, the consolidated company was entitled to perform compulsory execution against the collateral or other guarantees to effectively reduce the credit risk, provided that the fair value of collateral would not be taken into consideration when the maximum credit exposure was disclosed. The consolidated company evaluated the contract bearing positive fair value on the balance sheet date as the counterpart. The maximum credit exposures on December 31, 2014 and 2013 were NTD 368,631,467 thousand and NTD 335,983,142 thousand. Further, the maximum exposures of undertakings and contracts based on credit risk on the off-balance sheet are specified as following:

December 31, 2014 December 31, 2013 Credit commitment (exclusive of credit cards) $ 125,625,404 $ 114,395,694 Credit card committee 13,220,995 11,608,548

Where financial instrument transactions are apparently concentrated on one person, or most of the multiple trading counterparts of financial instruments are engaged in similar business activities and possess similar economic characteristics and thereby the effects of economic or other conditions to their ability to perform the contracts are similar, the concentration of credit risk arises accordingly. The characteristics of credit risk concentration include the nature of business activities conducted by debtors. The consolidated company did not concentrate any transactions on

218- 93 -

one single customer or trading counterpart, other than similar counterparts, industrial type, and regions. The amount of contract based on concentrated credit risk:

credit risk:
Counterpart

Private enterprise
Natural person
Others
Industrialtype

Private party
Manufacturer
Commerce
Real estate
Construction industry
Commercial
and
industrial
service
business
Warehousing
and
information
Others
Region

Domestic
Territory of Asia
Territory of America
Others
By collateral

Non-secured
Secured
Secured by property
Secured by Letter
of Guarantee
Secured by Chattel
Secured by bonds
Secured by stocks
Notes receivable
Others		 December 31, 2014
$ 226,032,333
180,026,714

1,313,056
$ 407,372,103
December31,2014
$ 180,026,714
79,372,798
58,570,739
47,367,466
13,580,254
9,517,968
8,174,828

10,761,336
$ 407,372,103
December31,2014
$ 387,136,056
13,720,976
5,321,307

1,193,764
$ 407,372,103
December31,2014
$ 76,835,568
291,663,458
20,466,859
4,523,290
5,884,021
2,587,322
1,846,918

3,564,667
$ 407,372,103		 December 31, 2013
$ 211,189,377
169,346,288

862,349
$ 381,398,014
December31,2013
$ 169,346,288
79,562,175
58,154,153
34,927,317
11,625,547
9,678,942
8,624,755

9,478,837
$ 381,398,014
December31,2013
$ 363,079,444
9,277,443
7,434,038

1,607,089
$ 381,398,014
December31,2013






$ 75,353,595
266,693,133
21,367,647
6,087,745
4,526,517
1,660,211
2,105,755
3,603,411
$ 381,398,014

The consolidated company concludes that certain financial assets held by the consolidated company, such as cash and cash equivalents, due from the Central Bank and other banks, financial assets measured at fair value through

219- 94 -

profit or loss, bonds and securities sold under repurchase agreements, refundable deposits, operating bond, and settlement and clearing funds, because the counterparties are with good credit rating, are with low credit risks. In addition to the above, the credit quality analysis of financial assets is as follows:

220- 95 -

Net
(A)+(B)+(C)-(D)		 Net
(A)+(B)+(C)-(D)		 $ 563,640
94,855,077
386,008,845		 Net
(A)+(B)+(C)-(D)		 Net
(A)+(B)+(C)-(D)		 $ 511,585
87,734,642
363,891,633
Appropriated loss amount (D)
Without
individual
objective
evidence of
impairment
$ 3,206
80,357
2,016,216		 Appropriated loss amount (D)
Without
individual
objective
evidence of
impairment
$ 3,371
42,193
1,496,927

With individual
objective
evidence of
impairment		 $ 14,116
178,468
1,780,912
With individual
objective
evidence of
impairment		 $ 11,246
96,323
1,895,590
Total
(A)+(B)+(C)		 $ 580,962
95,113,902
389,805,973		 Total
(A)+(B)+(C)		 $ 526,202
87,873,158
367,284,150
Impaired position
amount (C)		 $ 23,582
582,973
9,591,192		 Impaired position
amount (C)		 $ 19,829
310,781
8,392,554
Overdue
unimpaired
position amount
(B)		 $ 34,617
118,318
5,337,512		 Overdue
unimpaired
position amount
(B)		 $ 29,631
89,406
6,317,429
Not-overdue impaired-free position amount Subtotal (A) $ 522,763
94,412,611
374,877,269		 Not-overdue impaired-free position amount Subtotal (A) $ 476,742
87,472,971
352,574,167

Level 4		 $ 213,054
5,106,666
20,854,719
Level 4		 $ 215,559
4,332,800
23,602,102

Level 3		 $ 99,858
98,853
50,767,768
Level 3		 $ 86,693
110,073
50,451,283

Level 2		 $ 103,569
319,498
126,757,058
Level 2		 $ 95,178
535,792
118,399,909
Level 1 $ 106,282
88,887,594
176,497,724		 Level 1 $ 79,312
82,494,306
160,120,873
December 31, 2014 Items on the statement
Receivable
Credit card
Others
Discounts and loans		 December 31, 2013 Items on the statement
Receivable
Credit card
Others
Discounts and loans

221

credit quality of customers. Not-overdue impaired-free position amount December 31, 2014
Level 1
Level 2
Level 3
Level 4
Total		 Consumer banking Residential mortgage loans
$ 15,624,283
$ 19,004,267
$ 13,298,465
$ 5,611,740
$ 53,538,755		 Cash card
-
-
30
529
559		 Small credit loans
52,878
136,540
149,208
115,090
453,716		 Others (secured)
64,326,003
33,886,480
12,464,402
4,196,170
114,873,055		 Others (non-secured)
2,821,579
1,286,652
584,015
232,663
4,924,909		 82,824,743
54,313,939
26,496,120
10,156,192
173,790,994		 Corporate Finance Secured
58,910,332
48,765,814
16,215,035
3,361,256
127,252,437		 Non-secured
34,762,649
23,677,305
8,056,613
7,337,271
73,833,838		 93,672,981
72,443,119
24,271,648
10,698,527
201,086,275		 Total
$ 176,497,724
$ 126,757,058
$ 50,767,768
$ 20,854,719
$ 374,877,269		 Not-overdue impaired-free position amount December 31, 2013
Level 1
Level 2
Level 3
Level 4
Total		 Consumer banking Residential mortgage loans
$ 14,534,146
$ 19,604,715
$ 13,573,832
$ 6,085,364
$ 53,798,057		 Cash card
-
4
40
1,092
1,136		 Small credit loans
48,538
109,349
143,631
158,908
460,426		 Others (secured)
56,510,074
30,836,200
12,446,035
4,428,347
104,220,656		 Others (non-secured)
2,797,970

1,083,311

680,744

267,290

4,829,315
73,890,728

51,633,579

26,844,282

10,941,001
163,309,590		 Corporate Finance Secured
52,144,495
44,491,426
17,787,587
3,944,207
118,367,715		 Non-secured

34,085,650

22,274,904

5,819,414

8,716,894

70,896,862
86,230,145

66,766,330

23,607,001

12,661,101
189,264,577		 Total
$ 160,120,873
$118,399,909
$50,451,283
$23,602,102
$352,574,167

222

Net
(A)+(B)+(C)-
(D)		 Net
(A)+(B)+(C)-
(D)		 $ 20,504,833
207,164
-
1,418,003
145,684
861,899		 Net
(A)+(B)+(C)-
(D)		 Net
(A)+(B)+(C)-
(D)		 $ 19,116,305
80,853
-
3,340,584
143,484
835,604
Appropriated
loss amount
(D)		 $ 66,884
-
15,318
-
-
1,245,459		 Appropriated
loss amount
(D)		 $ 63,009
-
14,431
1,025,967
-
1,200,540
Total
(A)+(B)+(C)		 $ 20,571,717
207,164
15,318
1,418,003
145,684
2,107,358		 Total
(A)+(B)+(C)		 $ 19,179,314
80,853
14,431
4,366,551
143,484
2,036,144
Impaired
position
amount
(C)		 $ 66,884
-
15,318
-
-
2,107,358		 Impaired
position
amount
(C)		 $ 63,009
-
14,431
3,042,200
-
2,036,144
Overdue unimpaired
position
amount (B)
$ -
-
-
-
-
-		 Overdue unimpaired
position
amount (B)
$ -
-
-
-
-
-
Not-overdue impaired-free position amount
Subtotal (A)		 $ 20,504,833
207,164
-
1,418,003
145,684
-		 Not-overdue impaired-free position amount
Subtotal (A)		 $ 19,116,305
80,853
-
1,324,351
143,484
-

Level 3		 $ -
-
-
-
145,684
-
Level 3		 $ -
-
-
-
143,484
-

Level 2		 $ 361,322
-
-
-
-
-
Level 2		 $ 352,196
-
-
-
-
-

Level 1		 $ 20,143,511
207,164
-

1,418,003
-
-
Level 1		 $ 18,764,109
80,853
-

1,324,351
-
-
December 31, 2014 Available-for-Sale
Financial Assets
Bond investment
Equity investment
Others
Held-to-maturity financial
assets
Bond investment
Other financial assets
Equity investment
Others		 December 31, 2013 Available-for-Sale
Financial Assets
Bond investment
Equity investment
Others
Held-to-maturity financial
assets
Bond investment
Other financial assets
Equity investment
Others

223

(4) Overdue impairment-free financial assets but aging analysis

Borrower’s processing delays and other administrative reasons may cause financial assets to become overdue but not impaired. According to the consolidated company’s internal risk management rules, financial assets that are overdue for less than 90 days are usually not considered impaired, unless it is evidenced.

The aging analysis on the consolidated company’s overdue impairment-free financial assets:

impairment-free financial assets: assets: assets: assets:
Item
Receivable
Credit card
Others
Discounts and loans
Consumer banking
Residential
mortgage loans
Cash card
Small credit loans
Others (secured)
Others
(non-secured)
Corporate Finance
Secured
Non-secured		 December31,2014
Less than one
monthoverdue
$ 25,315

17,602
$ 42,917
$ 801,647
9
8,432
1,643,236

93,505

2,546,829
2,187,349

574,368

2,761,717
$ 5,308,546		 1~3 months
overdue
$ 9,302

100,716

$ 110,018

$ 17,808

2
111
5,144
742

23,807

3,737
1,422

5,159

$ 28,966
 Total
























$ 34,617
118,318
$ 152,935
$ 819,455
11
8,543
1,648,380
94,247
2,570,636
2,191,086
575,790
2,766,876
$ 5,337,512
Item
Receivable
Credit card
Others
Discounts and loans
Consumer banking
Residential
mortgage loans
Cash card
Small credit loans
Others (secured)
Others
(non-secured)
Corporate Finance
Secured
Non-secured		 December31,2013 December31,2013 December31,2013 December31,2013
Less than one
monthoverdue
$ 21,804

31,035
$ 52,839
$ 914,908
30
9,587
2,295,783

148,806

3,369,114
2,282,223

621,389

2,903,612
$ 6,272,726		 1~3 months
overdue
$ 7,827

58,371

$ 66,198

$ 32,191
13
969
6,984
869
41,026

2,866
811

3,677

$ 44,703
 Total
























$ 29,631
89,406
$ 119,037
$ 947,099
43
10,556
2,302,767
149,675
3,410,140
2,285,089
622,200
2,907,289
$ 6,317,429

224- 99 -

3. Liquidity Risk

The Taichung Commercial Bank’s Liquidity Ratios on December 31, 2014 and 2013 were both 20% and 21%. The Bank’s capital and working funds are sufficient to perform all contractual obligations. Therefore, there is no liquidity risk arising from the failure to raise funds to perform contractual obligations. It is very unlikely that the financial derivatives held by the Bank could not be sold at a reasonable price on the market. Therefore, there is low liquidity risk for realization. The Taichung Bank’s basic management policy is to coordinate the maturity date of assets and liabilities and interest rates and to control gaps.

The Taichung Commercial Bank’s basic operating management policy is to match up assets and liabilities maturity and interest rate and control the unmatched gap. Due to the uncertainty and classification of trade conditions, the maturity date of assets and liabilities and interest rate are usually not fully matched up; this gap may cause a potential gain or loss.

Non-derivative financial liabilities maturity analysis

The analysis on the cash outflow of the consolidated company’s non-derivative liabilities is based on the remaining period from the consolidated balance sheet date to the contract maturity date as follows: The amount in the statements is based on the contractual cash flows; therefore, the amount of some items disclosed is not consistent with the respective items on the consolidated balance sheet.

December 31,2014 0 to 30 days 31 to 90 days 91 to 180 days 181 days to 1year More than 1year Total
Due to Central Bank of
China and banks
Funds
borrowed
from
CBC and other banks
Financial liabilities at fair
value through profit
and loss
Bills and bonds sold
under
repurchase
agreements
Payables
Current Tax Liability
Customer deposits and
remittances
Financial bonds payable
Other
matured
capital
outflow items
$ 7,411,457

480,977


44,025


273,898
5,577,025
-

44,059,866

-

123,784		 $ 2,144,675
1,116,871
30,768
-
967,920
-
68,122,909
-
172,641		 $ 317,060
709,962
27,135
-
412,111
218,945
64,678,822
-
132,342		 $ 824,195
747,680
24,500
-
197,859
-
120,485,483
-
86,448		 $ -
444,470
6,932
-
208,744
-
158,619,044
14,400,000
147,484		 $ 10,697,387
3,499,960
133,360
273,898
7,363,659
218,945
455,966,124
14,400,000
662,699
December 31,2013 0 to 30 days 31 to 90 days 91 to 180 days 181 days to 1year More than 1year Total
Due to Central Bank of
China and banks
Funds
borrowed
from
CBC and other banks
Financial liabilities at fair
value through profit
and loss
Bills and bonds sold
under
repurchase
agreements
Payables
Current Tax Liability
Customer deposits and
remittances
Financial bonds payable
Other
matured
capital
outflow items
$ 5,196,447

1,263,340


39,879


100,029
3,363,395
-

41,432,648

-

10,957		 $ 1,510,657
2,227,816
12,779
259,000
278,326
-
56,819,905
-
19,998		 $ 167,380
252,917
9,204
-
365,670
292,018
68,142,773
1,654,700
105,617		 $ 1,467,024
515,833
12,938
-
195,921
-
115,820,316
-
16,520		 $ -
708,333
-
-
217,029
-
147,488,827
14,400,000
211,955		 $ 8,341,508
4,968,239
74,800
359,029
4,420,341
292,018
429,704,469
16,054,700
365,047
  • 100 - 225

Derivative financial liabilities maturity analysis

(1) Derivative instruments cleared and settled at net value

The consolidated company’s derivatives that are settled and cleared at net value include:

Foreign exchange derivatives: Exchange rate options

It is concluded that the contractual maturity is the essential element to understand all derivative financial instruments listed on the consolidated balance sheet. The amount in the statements is based on the contractual cash flows; therefore, the amount of some items disclosed is not consistent with the respective items on the consolidated balance sheet. Financial liabilities cleared and settled at net amount maturity analysis:

analysis:
December 31,2014 0 to 30 days 31 to 90 days 91 to 180 days 181 days to 1year More than 1year Total
Financial
liabilities
measured at fair value
through profit or loss
case
Foreign exchange
derivatives
$ 5,952		 $ 8,283 $ 16,966 $ 27,796 $ 7,312 $ 66,309
Total $ 5,952 $ 8,283 $ 16,966 $ 27,796 $ 7,312 $ 66,309
December 31,2013 0 to 30 days 31 to 90 days 91 to 180 days 181 days to 1year More than 1year Total
Financial
liabilities
measured at fair value
through profit or loss
case
Foreign exchange
derivatives
$ 2,163		 $ 3,183 $ 6,704 $ 23,965 $ - $ 36,015
Total $ 2,163 $ 3,183 $ 6,704 $ 23,965 $ - $ 36,015

(2) Derivatives cleared and settled at total value

The consolidated company’s derivatives that are settled at total value include:

Foreign exchange derivatives: Forward foreign exchange and foreign exchange swaps.

Illustrate the consolidated company’s derivatives that are settled at total value in accordance with the remaining period from the consolidated balance sheet date to the contract maturity date. It is concluded that the contractual maturity is the essential element to understand all derivative financial instruments listed on the consolidated balance sheet. The amount in the statements is based on the contractual cash flows; therefore, the amount of some items disclosed is not

  • 101 - 226

consistent with the respective items on the consolidated balance sheet. Financial liabilities cleared and settled at total value maturity analysis:

December 31,2014 0 to 30 days 31 to 90 days 91 to 180 days 181 days to 1year More than 1year Total
Financial
liabilities
measured at fair value
through profit or loss
case
Foreign exchange
derivatives
-
Cash
outflow
- Cash inflow

$ 3,743,201

3,688,145		 $ 2,572,780
2,539,481		 $ 822,806
797,193		 $ 21,824
21,576		 $ -
-		 $ 7,160,611
7,046,395
Subtotal of cash outflow
Subtotal of cash inflow
3,743,201
3,688,145		 2,572,780
2,539,481		 822,806
797,193		 21,824
21,576		 -
-		 7,160,611
7,046,395
Net cash flow ( $ 55,056) ( $ 33,299) ( $ 25,613) ( $ 248) $ - ( $ 114,216)
December 31,2013 0 to 30 days 31 to 90 days 91 to 180 days 181 days to 1year More than 1year Total
Financial liabilities
measured at fair value
through profit or loss
case
Foreign exchange
derivatives
- Cash
outflow
- Cash inflow
$ 3,730,096

3,690,765		 $ 1,237,228
1,169,400		 $ 544,457
537,695		 $ 11,911
11,730		 $ -
-		 $ 5,523,692
5,409,590
Subtotal of cash outflow
Subtotal of cash inflow
3,730,096
3,690,765		 1,237,228
1,169,400		 544,457
537,695		 11,911
11,730		 -
-		 5,523,692
5,409,590
Net cash flow ( $ 39,331) ( $ 67,828) ( $ 6,762) ( $ 181) $ - ( $ 114,102)
  1. The maturity analysis of items not on the statement

The analysis on the maturity date of the items not on the consolidated company’s balance sheet in accordance with the remaining period from the consolidated balance sheet date to the contract maturity date. For financial guarantee contracts issued, the earliest time period that maximum amounts of the guarantee may be requested for guarantee performance. The amount in the statements is based on the contractual cash flows; therefore, the amount of some items disclosed is not consistent with the respective items on the consolidated balance sheet.

December 31,2014 0 to 30 days 31 to 90 days 91 to 180 days 181 days to 1year More than 1year Total
Customer’s
developed
and irrevocable loan
commitments
Customer’s
irrevocable
credit
card
credit
commitments
Customer’s outstanding
letters
of
credit
amount
Guarantee payments
Lease
contract
commitments

$ 7,742,113


13,592


849,187
3,143,990

1,248,697		 $ 12,026,802
134,734
2,626,617
1,872,985
-		 $ 27,783,008
307,851
98,900
890,493
-		 $ 56,516,334
1,019,260
58,413
3,141,334
-		 $ 21,557,147
11,745,558
-
2,166,465
-		 $ 125,625,404
13,220,995
3,633,117
11,215,267
1,248,697
Total $12,997,579 $16,661,138 $29,080,252 $60,735,341 $35,469,170 $154,943,480
December 31,2013 0 to 30 days 31 to 90 days 91 to 180 days 181 days to 1year More than 1year Total
Customer’s
developed
and irrevocable loan
commitments
Customer’s irrevocable
credit
card
credit
commitments
Customer’s outstanding
letters
of
credit
amount
Guarantee payments
Lease
contract
commitments

$ 4,036,857


2,630


1,040,435
1,880,427

739,615		 $ 11,185,706
650
2,722,631
1,128,051
-		 $ 27,433,921
11,250
65,688
831,924
-		 $ 47,514,103
422,345
66,006
2,447,813
-		 $ 24,225,107
11,171,673
-
2,853,776
-		 $ 114,395,694
11,608,548
3,894,760
9,141,991
739,615
Total $ 7,699,964 $15,037,038 $28,342,783 $50,450,267 $38,250,556 $139,780,608

  • 102 - 227

  • Cash flow risk estimated under interest rate changes

The future cash flow of assets or liabilities estimated based on floating interest rates held or borne by the Taichung Bank might fluctuate and even generate risk due to market interest rate changes. However, upon evaluation, the Taichung Bank, in practice, tends to control the net liquidity gap to reduce cash flow risk resulting from interest rate changes.

  • 103 - 228
December 31, 2013 Allowance for
bad debt
coverage rate
(Note 3)		 102.89% 490.19% 254.93% 2,470.62% 799.90% 194.33% 367.80% 209.71% December 31, 2013 Allowance for
bad debt
coverage rate		 724.68% - NPL or non-performing receivable accounts exempted from report December 31, 2013 Total non-performing receivable
accounts exempted from report		 5,222 11,986 17,208
Allowance for
bad debt		 1,339,821 2,265,130 241,004 10,006 47,970 452,783 101,429 4,458,143 Allowance for
bad debt		 27,632 -
Total NPL exempted from
report		 41,187 21,520 62,707
NPL rate
(Note 2)		 1.04% 0.63% 0.17% 2.67% 1.15% 0.22% 0.53% 0.58% NPL rate 0.72% -
Total amount 124,975,571 73,489,370 55,556,709 15,148 521,461 107,101,984 5,157,272 366,817,515 Balance of
receivable
accounts		 527,079 -
NPL amount
(Note 1)		 1,302,221 462,096 94,536 405 5,997 232,999 27,577 2,125,831 NPL amount 3,813 -
December 31, 2014		 Total non-performing receivable
accounts exempted from report		 3,926 12,216 16,142
December 31, 2014 Allowance for
bad debt
coverage rate
(Note 3)		 183.36% 1,115.13% 475.97% 4,963.97% 1,328.25% 569.36% 1,835.12% 423.62% December 31, 2014 Allowance for
bad debt
coverage rate		 388.72% -
Allowance for
bad debt		 1,428,061 2,385,366 877,290 6,751 45,041 670,728 113,117 5,526,354 Allowance for
bad debt		 32,808 - Total NPL exempted from report 26,673
16,396		 43,069
NPL rate
(Note 2)		 0.58% 0.28% 0.33% 1.32% 0.67% 0.10% 0.10% 0.34% NPL rate 1.46% -
Total amount 134,677,719 75,681,566 55,680,577 10,296 502,458 116,506,577 5,934,899 388,994,092 Balance of
receivable
accounts		 580,025 - Amount exempted from report upon debt negotiation and
performance (Note 8)		 Performance of debt clearance program and rehabilitation program
(Note 9)		 Total
NPL amount
(Note 1)		 778,843 213,910
184,315		 136
3,391		 117,803 6,164 1,304,562 NPL amount 8,440
-
Item
Type		 Secured Non-secured Residential
mortgage
loans
(Note 4)		 Cash card Small credit loans
(Note 5)		 Secured Non-secur
ed		 Total amount Item
Type		 Credit card Factoring
without
recourse
(Note 7)
Others
(Note 6)
Corporate
banking		 Personal
banking

229

  • Note 1: The NPL amount is recognized according to "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing Non-accrual Loans". The credit card NPL is recognized based on that provided under the Letter Jin-Guan-Yin (4) Zi No. 0944000378 dated July 6 2005.

  • Note 2: NPL rate=NPL/Total amount; Credit card NPL rate = NPL/balance of receivable accounts.

  • Note 3: Allowance for bad debt coverage rate = allowance for bad debt provided for loans/NPL amount; allowance for bad debt coverage rate for receivable accounts of credit cards = allowance for bad debt provided for receivable accounts of credit cards/NPL amount.

  • Note 4: Borrowers apply for residential mortgage loans for the purpose of purchasing or building residences or decorating houses. The loans shall be secured by the residence purchased (owned) by the borrower himself/herself, or his/her spouse or minor children in full, and the mortgage shall be pledged to the financial institution.

  • Note 5: Small credit loans mean those provided in the Letter under Jin-Guan-Yin (4) Zi No. 09440010950 dated December 19, 2005 and those other than small loans by credit cards/cash cards.

  • Note 6: “Others” for Personal banking refer to the secured or non-secured consumer loans other than “residential mortgage loans”, “cash card loans” and “small credit loans”, exclusive of credit cards loans.

  • Note 7: According to the Letter under Jin-Guan-Yin (5) Zi No. 094000494 dated July 19, 2005, factoring without recourse shall be recognized as NPL within three months after the factoring Consignee or insurance company confirms that no compensation should be granted.

  • Note 8: Total NPL exempted from report upon debt negotiation and performance and the balance of total non-performing receivable accounts exempted from report upon debt negotiation and performance were disclosed pursuant to the Letter under Jin-Guan-Yin (1) Zi No. 09510001270 dated April 25, 2006.

  • Note 9: The balance of total NPL exempted from report upon performance of debt clearance program and rehabilitation program and balance of total non-performing receivable accounts exempted from report upon performance of debt clearance

  • 105 - 230

program and rehabilitation program were disclosed pursuant to the Letter under Jin-Guan-Yin (1) Zi No. 09700318940 dated September 15, 2008.

(2) Status of credit risk concentration

December 31, 2014

Unit: NTD thousand

Rank
(Note 1)		 Business type of company or group
(Note 2)		 Total balance of
loan
(Note 3)		 Percentage of
net value as of
December 31,
2014
1 Group A
016700
Real
estate
development
industry
$ 3,817,745		 10.64%
2 Group B
015510 Short-term accommodation
service
3,240,455		 9.03%
3 Group C
012411 Iron and steel Manufacturing		 2,753,118 7.67%
4 Group D
015510 Other accommodation service		 2,363,780 6.59%
5 Group E
011810 Manufacturer of Chemical
materials
2,000,000		 5.57%
6 Group F
010892
Noodle
products
manufacturing
1,833,993		 5.11%
7 Group G
015101 Civil air transportation		 1,520,670 4.24%
8 Group H
012630 Manufacturer of PCB		 1,471,373 4.10%
9 Group I
014100 Construction Engineering		 1,454,905 4.05%
10 Group J
015101 Civil air transportation		 1,339,124 3.73%

December 31, 2013

Unit: NTD thousand

Rank
(Note 1)		 Business type of company or group
(Note 2)		 Total balance of
loan
(Note 3)		 Percentage of
net value as of
December 31,
2013
1 Group K
012612
Electronic
parts
and
components manufacturing industry
$ 3,778,240		 12.17%
2 Group B
015510 Short-term accommodation
service
3,046,191		 9.81%
3 Group C
012411 Iron and steel Manufacturing		 2,879,013 9.28%
4 Group D
015510 Other accommodation service		 2,543,505 8.19%

(Continued on next page)

  • 106 - 231

(Continued from previous page)

Rank
(Note 1)		 Business type of company or group
(Note 2)		 Total balance of
loan
(Note 3)		 Percentage of
net value as of
December 31,
2013
5 Group F
010892
Noodle
products
manufacturing
2,289,673		 7.38%
6 Group L
015101 Civil air transportation		 2,258,553 7.28%
7 Group M
016811 Realestatelease and sale		 1,641,724 5.29%
8 Group N
012641 LCD and parts manufacturing		 1,605,975 5.17%
9 Group A
016700
Real
estate
development
industry
1,492,964		 4.81%
10 Group O
011000
Real
estate
development
industry
1,154,700		 3.72%

Note 1: The top ten enterprises other than public or state enterprises were identified according to rank of the total balance of loans to these enterprises. If the account refers to a group, the loan to the group should be identified and summed up, and disclosed in the form of “code” and “business type”. In the case of group, the business type of the group with the maximum exposure should be disclosed. The business type shall be specified in “detailed item” according to the business classification defined by Directorate General of Budget, Accounting and Statistics (e.g. Company (Group) A, real estate development).

  • Note 2: The enterprises mean those defined in Article 6 of “Supplementary Rules of TSEC’s Criteria for Reviewing Listing of Marketable Securities”.

  • Note 3: The balance of total credit extension means the total balance of the various loans (including import negotiation, export negotiation, discount, overdraft, short-term loans, short-term secured loans, receivable securities financing, mid-term loans, mid-term secured loans, long-term loans, long-term secured loans, Delinquent loans), inward remittances, factoring without recourse, Acceptances receivable and guarantee payments.

  • 107 - 232

(3) Interest rate sensitivity information

Interest rate sensitivity assets and liabilities analysis data (NTD)

December 31, 2014

Unit: NTD thousand, %

Item 1 to 90 days
(inclusive)		 91 to 180 days
(inclusive)		 181 days to 1
year(inclusive)		 Over 1 year Total
Interest
rate
sensitivityassets
369,733,338		 9,626,179 17,993,783 60,922,473 458,275,773
Interest
rate
sensitivity
liabilities
128,285,297		 241,745,207 55,944,892 12,705,808 438,681,204
Interest
rate
sensitivity gap
241,448,041		 ( 232,119,028 ) (
37,951,109 )
48,216,665
19,594,569
Equity 35,890,951
Interest rate sensitivityassets and liabilities rate 104.47%
Interest rate sensitivity gapand net worth rate 54.59%

December 31, 2013

Unit: NTD thousand, %

Item 1 to 90 days
(inclusive)		 91 to 180 days
(inclusive)		 181 days to 1
year(inclusive)		 Over 1 year Total
Interest
rate
sensitivityassets
343,868,789		 15,330,782 16,593,199 60,923,624 436,716,394
Interest
rate
sensitivityliabilities
121,810,863		 233,172,000 55,698,603 12,234,870 422,916,336
Interest
rate
sensitivity gap
222,057,926		 ( 217,841,218 ) (
39,105,404 )
48,688,754
13,800,058
Equity 31,037,590
Interest rate sensitivityassets and liabilities rate 103.26%
Interest rate sensitivity gapand net worth rate 44.46%

Note: 1. The table specifies the amount in NTD (exclusive of foreign currencies) of Taichung Bank Head Office and local branches.

  1. Interest rate sensitivity assets and liabilities mean the assets and liabilities with interest of which the income or cost varies depending on the interest rate.

  2. Interest rate sensitivity gap = Interest rate sensitivity assets - Interest rate sensitivity liabilities.

  3. Interest rate sensitivity assets and liabilities rate = Interest rate sensitivity assets ÷ interest rate sensitivity liabilities (i.e. interest rate sensitivity assets and interest rate sensitivity liabilities in NTD)

  4. 108 - 233

Interest rate sensitivity assets and liabilities analysis data (USD)

December 31, 2014

Unit: USD thousand; %

Item 1 to 90 days
(inclusive)		 91 to 180 days
(inclusive)		 181 days to 1
year(inclusive)		 Over 1 year Total
Interest
rate
sensitivityassets
674,902		 264,987 - 16,178
956,067
Interest
rate
sensitivityliabilities
380,066		 390,829 140,727 -
911,622
Interest
rate
sensitivity gap
294,836		 (
125,842 )		 (
140,727 )
16,178
44,445
Equity 1,134,605
Interest rate sensitivityassets and liabilities rate 104.88%
Interest rate sensitivity gapand net worth rate 3.92%

December 31, 2013

Unit: USD thousand; %

Item 1 to 90 days
(inclusive)		 91 to 180 days
(inclusive)		 181 days to 1
year(inclusive)		 Over 1 year Total
Interest
rate
sensitivityassets
630,183		 209,136 - 33,358 872,677
Interest
rate
sensitivityliabilities
260,775		 364,681 152,943 - 778,399
Interest
rate
sensitivity gap
369,408		 (
155,545 )		 (
152,943 )
33,358		 94,278
Equity 1,041,530
Interest rate sensitivityassets and liabilities rate 112.11%
Interest rate sensitivity gapand net worth rate 9.05%

  • Note: 1. The table specifies the total amount in USD of Taichung Bank Head Office and local branches, International Banking Branch and offshore branches, exclusive of contingent assets or liabilities.

  • Interest rate sensitivity assets and liabilities mean the assets and liabilities with interest of which the income or cost varies depending on the interest rate.

  • Interest rate sensitivity gap=Interest rate sensitivity assets - Interest rate sensitivity liabilities.

  • Interest rate sensitivity assets and liabilities rate=Interest rate sensitivity assets ÷ interest rate sensitivity liabilities (i.e. interest rate sensitivity assets and interest rate sensitivity liabilities in USD)

  • 109 - 234

(4) Profitability

Unit: %

Profitability Unit: %
Item December31,2014 December31,2013
ROA Before
taxation		 0.81 0.75
After
taxation		 0.73 0.65
ROE Before
taxation		 12.36 11.88
After
taxation		 11.11 10.38
Net profit rate 37.25 34.64

Note: 1. ROA = Income before (after) taxation/Average total assets

  1. ROE=Income before (after) taxation / Average net worth

  2. Profit (loss) rate = Income after taxation/income-net

  3. Income before (after) taxation means the income accumulated from January of the current year until the current quarter

  4. (5) Analysis on maturity of assets and liabilities

Table of analysis of maturity structure of NTD

December 31, 2014

Unit: NTD thousand

Total Remainingbala nce to maturity
0 to 10 days 11 to 30 days 31 to 90 days 91 to 180 days 181 days to 1
year		 More than 1
year
Main
capital
inflow
upon
maturity

493,675,003
55,083,853
46,319,260		 27,067,725 41,535,625
69,315,886		 254,352,654
Main
capital
outflow
upon
maturity

587,784,812
30,536,411
33,300,849		 85,640,168 98,988,947 133,751,213 205,567,224
Gap (
94,109,809)		 24,547,442
13,018,411		 (
58,572,443)		 (
57,453,322)		 (
64,435,327)		 48,785,430

December 31, 2013

Unit: NTD thousand

Total Remainingbala nce to maturity
0 to 10 days 11 to 30 days 31 to 90 days 91 to 180 days 181 days to 1
year		 More than 1
year
Main
capital
inflow
upon
maturity

465,937,882
50,994,339
43,601,968		 28,063,173 38,798,231
65,520,823		 238,959,348
Main
capital
outflow
upon
maturity

554,613,050
23,588,621
32,043,970		 76,164,510 102,837,219 129,367,875 190,610,855
Gap (
88,675,168)		 27,405,718
11,557,998		 (
48,101,337)		 (
64,038,988)		 (
63,847,052)		 48,348,493

Note: The table only specifies the amount in NTD (exclusive of foreign currencies)

of Taichung Bank Head Office and local branches.

  • 110 - 235

Analysis of maturity structure of USD

December 31, 2014

Unit: USD thousand

Total Remainingbalance to Remainingbalance to maturity
0 to 30 days 31 to 90 days 91 to 180
days		 181 days to 1
year		 More than 1
year
Main capital inflow
upon maturity
1,143,814		 195,249 240,421 260,304
26,806
421,034
Main capital outflow
upon maturity
1,632,471		 360,330 390,920 238,107
522,075
121,039
Gap (
488,657)		 (
165,081)		 (
150,499)
22,197		 (
495,269)		 299,995

December 31, 2013

Unit: USD thousand

Total Remainingbalance to Remainingbalance to maturity
0 to 30 days 31 to 90 days 91 to 180
days		 181 days to 1
year		 More than 1
year
Main capital inflow
upon maturity
1,078,420		 238,243 188,762 209,622
18,823
422,970
Main capital outflow
upon maturity
1,373,447		 276,477 356,530 202,610
442,971
94,859
Gap (
295,027)		 (
38,234)		 (
167,768)
7,012		 (
424,148)		 328,111

  • Note: 1. The table specifies the total amount in USD of Taichung Bank Head Office, local branches and International Banking Branch. Unless otherwise provided, it shall be stated at the Book Value, and it is not necessary to include any accounts that are not stated in the table (e.g. negotiable certificates of deposit, bonds or stocks scheduled to be issued).

  • Where offshore assets account for more than 10% of the Bank’s total assets, it is necessary to provide supplementary disclosure.

40. Capital management

  • (1) The consolidated company’s eligible preparatory capital should be sufficient to meet the legal capital requirements, and achieve the minimum statutory capital adequacy ratio that is the basic objective of the Company’s capital management. The appropriation and calculation of the relevant eligible proprietary capital and statutory capital shall be handled in accordance with the requirements of the concerned authorities.

The consolidated company’s capital management structure is properly planned depending on the capital market conditions, capital instrument features, capital implementation efficiency and operating performance in order to maintain a ratio of preparatory capital to risk assets above the target level.

  • 111 - 236

  • (2) The consolidated company has the information of capital adequacy disclosed periodically in accordance with the relevant specifications of the competent authorities and the Company’s internal operating procedures; also, has reported it to the competent authorities quarterly

Proprietary capital is classified as Category I capital and Category II capital in accordance with the “Regulations Governing Bank’s Capital Adequacy and Capital Classification.”

  1. Tier I capital: It includes the other Tier I capital, including common stock equity and non-common stock equity.

  2. (1) The scope of common stock equity includes common stock and stock premium, advanced capital, additional paid-in capital, legal reserves, special reserves, the cumulative gain or loss, non-controlling equity and other equity items.

  3. (2) The other Tier I capital other than common stock equity includes perpetual non-cumulative preferred stock and its stock premium, non-cumulative subordinated bonds without maturity date, perpetual non-cumulative preferred stocks issued by the Bank’s subsidiary that are not directly or indirectly held by the Bank and its stock premium, and non-cumulative subordinated bonds without maturity date.

  4. Tier II capital:

The project scope includes perpetual cumulative preferred shares and its stock premium, cumulative subordinated bonds without maturity date, convertible subordinated bond, long-term subordinated bond, non-perpetual preferred stock and its stock premium, the retained earnings increased arising from the property measured at fair value or reappraisal price as cost for the first-time adoption of the IFRS, 45% of the available-for-sale financial assets unrealized gain, the operating reserve and allowance for bad debts, as well as the perpetual cumulative preferred stock issued by the Bank’s subsidiary that are not directly or indirectly held by the Bank and its stock premium, cumulative subordinated debts without a maturity date, convertible subordinated bonds, long-term subordinated bonds, and non-perpetual preferred stocks and its stock premium.

  • 112 - 237

(3) Capital Adequacy

Unit: NTD thousand; %

Capital Adequacy Capital Adequacy Capital Adequacy Unit: NTD thousand; %
Year
Analytical items		 December 31, 2014 December 31, 2013
Total
Self-owned
Capital		 Commonstockequity capital 35,259,138 30,473,315
OtherCategoryIcapital - -
CategoryIIcapital 9,847,617 11,507,948
Total Self-owned Capital 45,106,755 41,981,263
Total risk-
weighted
assets		 Credit
Risk		 Standardized
Approach		 368,631,467 335,983,142
Internal
Ratings-Based
Approach		 - -
Asset Securitization - -
Operation
Risk		 Basic
Indicator
Approach
13,340,988		 11,659,675
Standard
method/
optional
standard
method

-		 -
Advanced
Measurement
Approach		 - -
Market
Risk		 Standardized
Approach		 5,442,150 4,724,850
Internal
Models
Approach
-		 -
Total risk-weighted assets 387,414,605 352,367,667
Capitaladequacyratio 11.64% 11.91%
Common stock equity as a percentage of risk
assets
9.10%		 8.65%
ProportionofCategoryIcapitaltoriskassets 9.10% 8.65%
Leverageratio 5.34% 4.82%

  • Note 1: The self-owned capital, risk assets, and total exposure in this table should

  • be calculated according to the regulations in “Regulation on Bank Capital Adequacy and Capital Tiers” and “Clarification on Bank Equity Capital and Risk Capital Calculation Methods and Forms.”

  • Note 2: The annual financial statement shall specify the Capital adequacy ratios for the current period and the previous period. The semiannual financial statement shall also disclose the Capital adequacy ratio at the end of the previous year, in addition to those for the current period and previous period.

Note 3: Equations for financial analysis:

  1. Total self-owned capital = Common stock equity + Other Tier I capital + Tier II capital

  2. 113 - 238

  3. Total amount of risk-weighed-assets = Credit risk-weighed assets + Capital charge of (operational risk + market risk) x 12.5.

  4. Capital Adequacy ratio = Total self-owned capital / Total amount risk-weighed assets.

  5. Ratio of common stock equity to risk assets = Common stock equity / Total risk weighted assets.

  6. Proportion of Tier I capital to risk assets = (Common stock equity + Category I capital) / Total risk-weighted asset

  7. Leverage ratio = Net Category I capital / Total exposure.

  8. Information on exchange rates of financial assets and liabilities denominated in foreign

currencies

The information regarding assets and liabilities dominated by foreign currency in the consolidated company which might arouse material effect:

December 31,2014 USD AUD JPY HKD RMB Other foreign
currencies		 Total
Foreign
currency
financial assets
Cash
and
cash
equivalents
Due from Central Bank
of China and lend to
Banks
Financial assets at fair
value through profit
and loss
Available-for-Sale
Financial Assets
Discounts and loans
Accounts receivable
Held-to-maturity
financial assets
Other financial assets
Other assets
Foreign
currency
financial liabilities
Due to Central Bank of
China and banks
Funds borrowed from
CBC and other banks
Customer deposits and
remittances
Financial liabilities at
fair
value
through
profit and loss
Payables
Bills and bonds sold
under
repurchase
agreements
Liability reserve
Other liabilities
Taiwan Dollar exchange
rates		 $ 1,394,022
37,960
84,644
458,583
27,949,841
892,019
158,165
861,899
99,452
3,013,100
255,386
25,527,183
66,309
1,532,578
273,573
3,513
47,284
31.63		 $ 25,600
807,456
-
-
194,100
56,190
-
-
262,782
15,528
-
1,249,378
-
81,222
-
-
-
25.88		 $ 109,023
-
-
-
336,081
274,081
-
-
-
8,140
-
397,231
-
223,946
-
-
89,868
0.26		 $ 117,192
-
-
-
729,887
2,401
-
-
-
-
-
133,646
-
19,948
-
-
695,718
4.08		 $ 982,823
3,943,975
-
-
200,834
600,743
827,340
-
-
-
250,256
5,187,853
-
52,108
-
-
120,399
5.09		 $ 102,524
-
-
-
287,114

69,045

-
-
769,692

115,350
-
1,032,963
-
75,122

-
-
4,940		 $ 2,731,184
4,789,391
84,644
458,583
29,697,857
1,894,479
985,505
861,899
1,131,926
3,152,118
505,642
33,528,254
66,309
1,984,924
273,573
3,513
958,209
  • 114 - 239
December 31,2013 USD AUD JPY EUR RMB Other foreign
currencies		 Total
Foreign
currency
financial assets
Cash
and
cash
equivalents
Due from Central Bank
of China and lend to
Banks
Financial assets at fair
value through profit and
loss
Available-for-Sale
Financial Assets
Discounts and loans
Accounts receivable
Held-to-maturity
financial assets
Other financial assets
Other assets
Foreign
currency
financial liabilities
Due to Central Bank of
China and banks
Funds borrowed from
CBC and other banks
Customer deposits and
remittances
Financial liabilities at
fair value through profit
and loss
Payables
Bills and bonds sold
under
repurchase
agreements
Liability reserve
Other liabilities
Taiwan Dollar exchange
rates		 $ 654,895

178,800
48,076
433,049
23,905,619
1,061,682
491,197
835,604
85,824
1,870,006
2,408,239
18,983,280

16,551
1,189,116
258,769
1,848
1,293,598
29.80		 $ 14,360
106,360
-
532,856
199,425
22,072
-
-
338,394
-
-
1,160,347
-
51,873
-
-
183
26.59		 $ 134,141
-
-
-
353,963
68,400
-
-
-
5,647
-
239,124
-
32,151
-
-
279,582
0.28		 $ 25,920
-
-
-
307,697
36,395
1,674,036
-
-
1,354
-
277,493
-
13,851
-
-
2,542,713
41.09		 $ 294,588

1,879,058
-
-
269,593
260,506
-
-
4,470
-
-
2,281,123
-
12,613
-
-
18,938
4.92		 $ 125,118

8,553

-
-
806,935

23,171

-

-
710,816

393

-

932,161

-
52,573

-
-
689,466
 $ 1,249,022
2,172,771
48,076
965,905
25,843,232
1,472,226
2,165,233
835,604
1,139,504
1,877,400
2,408,239
23,873,528
16,551
1,352,177
258,769
1,848
4,824,480

42. Financial information for operating segments

Financial information for operating segments is provided for main decision makers to allocate resources and evaluate the performance of each segment. Such information focuses on each delivered or offered product or service. According to the International Financial Reporting Standards No. 8, “Operating Segments,” the consolidated company’s reportable segments are as follows:

Taichung Region

North District

Changhua Area

OBU

Head Office and other

(1) Revenues and operating results of segments

Revenues and operating results of the consolidated company’s continuing units are analyzed in accordance with segments to be reported, which are summarized as follows:

  • 115 - 240
Taichung
Region
 North District Changhua Area OBU Head Office
and other		 Adjustment and
Write off		 Total
$ 4,105,333

(
1,330,783)

2,774,550

679,960
-
18,890
(
683,952 )
(
1,046,819)

$ 1,742,629

$ 3,785,855

(
1,219,522)

2,566,333

569,277
-
16,136
(
298,330 )
(
962,307)

$ 1,891,109
 $ 3,092,044
(
1,215,525)
1,876,519
276,466
-
7,977
(
432,745 )
(
596,567)
$ 1,131,650
$ 2,856,278
(
1,222,709)
1,633,569
249,363
-
6,711
(
173,118 )
(
495,863)
$ 1,220,662		 $ 3,333,275
(
1,205,841)
2,127,434
494,614
-
20,239
(
255,985 )
(
859,084)
$ 1,527,218
$ 3,119,815
(
1,125,276)
1,994,539
412,748
-
19,343
(
358,155 )
(
802,424)
$ 1,266,051		 $ 656,815
(
203,230)
453,585
38,537
981,390
16,722
(
137,544 )
(
22,166)
$ 1,330,524
$ 459,196
(
160,321)
298,875
37,942
749,107
(
426 )
(
346,985 )
(
20,799)
$ 717,714		 $ 1,555,999

(
1,626,110)

(
70,111 )
587,607
161,396
349,273

(
472,590 )
(
2,087,353)

($ 1,531,778)

$ 1,294,826

(
1,477,875)

(
183,049 )
505,573
135,741
332,990

(
687,585 )
(
1,662,227)

($ 1,558,557)
 ( $ 1,627,189 )

1,627,189


-
-
-
(
80,049 )

-


80,049

$ -

( $ 1,598,825 )

1,598,825


-
-
-
(
80,520 )

-


80,520

$ -
 $ 11,116,277
(
3,954,300)
7,161,977
2,077,184
1,142,786

333,052
(
1,982,816 )
(
4,531,940)
$ 4,200,243
$ 9,917,145
(
3,606,878)
6,310,267
1,774,903
884,848

294,234
(
1,864,173 )
(
3,863,100)
$ 3,536,979

The measured figures are provided for main decision makers to allocate resources to segments and evaluate the performance of each segment.

  • (2) Segment assets
Segment assets
Segment assets
Taichung Region
North District
Changhua Area
OBU
Head Office and other
Total segment assets		 December 31, 2014
$ 153,153,068
131,893,136
107,929,300
20,637,936
116,409,413
$ 530,022,853		 December 31, 2013



$ 142,345,873
120,869,265
99,432,503
20,994,300
112,570,794
$ 496,212,735

(3) Main revenues from products and service

The consolidated company’s main business is interest revenue. There is no information by products and by service.

(4) Information by areas

The consolidated company’s net income is as follows:

Region
Taiwan
Asia
America		 2014
$ 10,647,887
52,671
14,441
$ 10,714,999		 2013


$ 9,239,435
7,531
17,286
$ 9,264,252

(5) Information on key customers

Interest revenue from a single customer of the consolidated company does not exceed 10% of total interest revenues. Therefore, there is no information on key customers.

  • 116 - 241

43. Notes of disclosure

(1) Information about important transactions:

Information to be disclosed pursuant to Article 18 of the “Rules Governing the Preparation of Financial Statements of Public Issued Banks”:

No. Item Remark
1 Cumulative amount of the stock of the same investee purchased or
sold reaching NTD 300 million or more than 10% of the Paid-in
shares capital.

Attached
table 1
2 Acquisition amount of real estate reaching NTD 300 million or
more than 10% of the Paid-in shares capital.
Attached
table 2
3 Amount on disposal of real estate reaching NTD 300 million or
more than 10% of the Paid-in shares capital.
None
4 Discount of service charges in transaction with related party
reaching more than NTD 5 million.
None
5 Accounts receivable-related party reaching NTD300 million or
more than 10% of the Paid-in shares capital.
None
6 Information regarding sale of NPL. Attached
table 3
7 Securitization of financial assets or real estate. None
8 Other important transactions sufficient to affect the policy to use
financial statements.
None

(2) Information regarding investees:

No. Item Remark
1 Information regarding investees and total shareholdings. Attached
table 4
2 Loans to others. Attached
table 5
3 Endorsements/guarantees to others. Attached
table 6
4 Marketable securities – end. Attached
table 7
5 Cumulative amount of the same marketable securities purchased
or sold reaching NTD 300 million or more than 10% of the
Paid-in shares capital.

Attached
table 1
6 Acquisition amount of real estate reaching NTD 300 million or
more than 10% of the Paid-in shares capital.
None
7 Amount on disposal of real estate reaching NTD 300 million or
more than 10% of the Paid-in shares capital.
None
8 Discount of service charges in transaction with related party
reaching more than NTD 5 million.
None
9 Accounts receivable-related party reaching NTD300 million or
more than 10% of the Paid-in shares capital.
None
10 Disposal of non-performing loans amounted to NTD 5 billion or
more.
None
11 Securitization of financial assets or real estate. None
12 Engaged in derivative transactions None
13 Other important transactions sufficient to affect the policy to use
financial statements.
None
  • 117 - 242

Note: No disclosure of such information is required, if the investee is a financial

  • business, insurance business, and securities business.

  • (3) Information regarding investment in the territory of mainland china: Attached table 8.

  • (4) Inter-company relationships and significant intercompany transactions between the parent company and subsidiaries: Table 9.

  • 118 - 243

Unit: NTD thousand / thousand units
At ending
Amount		 $ 1,479,876
1,913,979
974,642
943,412

Quantity		 150,000
180,000
30,000
-
Sell Capital
gain/loss from
disposition
$ -
-
-
-
Cost in book $ -
-
-
-
Sale price $ -
-
-
-
Quantity -
-
-
-
Buy
Amount		 $ 276,598
879,030
526,424
541,272

Quantity		 30,000
80,000
16,500
-
At beginning
Amount		 $ 1,203,278
1,034,949
448,218
402,140

Quantity
120,000

100,000

13,500

-
Relation Subsidiary of the
Bank
Subsidiary of the
Bank
Subsidiary of the
Bank
Subsidiary of the
Bank
Counterparties

-


-


-


-
Account titles in
book

Investment
under
the
equity
method


Investment
under
the
equity
method

Investment
under
the
equity
method


Investment
under
the
equity
method
Types and names of
securities		 Taichung
Commercial
Bank
Consolidated
Securities Co., Ltd.
Taichung
Commercial
Bank
Lease
Enterprise

TCCBL
Co.,
Ltd.
(B.V.I.)

Taichung
Commercial
Bank
Leasing
(Suzhou) Ltd.
Buyer and sellers Taichung
Commercial
Bank Co., Ltd.
Taichung
Commercial
Bank Co., Ltd.
Taichung
Commercial
Bank
Lease
Enterprise
TCCBL Co., Ltd.
(B.V.I.)

244


Other
stipulations
of the
transaction
Other
stipulations
of the
transaction


-

Purpose of
acquisition and
the state of use


For
the
construction of
the
new
corporate
headquarters


Reference for		 price
determination		 Consult
the
appraisal
report
issued
by
the
professional
appraisal
institution
If the counterparty is a related party, the information on
previous transaction		 Amount $ -

Date of
transfer		 -

Relationship
with the
issuer		 -
Owner -
Relation Unrelated
party
Counterparties Highwealth
Construction
Co., Ltd.
Payment status $ 1,725,000
Trade value $ 5,750,000
Date of
event



2014/12/04
Asset title Lot
No.
145,
Huei
Min
Section,
Xi
Tun
District,
Taichung
District
Companies
acquiring real
properties		 Taichung
Commercial
Bank Co., Ltd.

245

Attached table 3. Information regarding sale of NPL:

  1. Master list for disposition of non-performing loans

Unit: NTD thousand

Date of
transaction		 Counterparties Content of the
creditor rights		 Book Value
(Note 1)		 Sale price Capital gain/loss
from disposition
(note 2)

Conditions
attached		 Relation of
the
counterparties
to the Bank
103.01.29 JP
MORGAN
CHASE
BANK
NATIONAL
ASSOCIATION

Corporate
secured loans		 $ 221,979 $ 343,494 $ 121,515 None None

Note 1: the book value is the balance of the initial amount of the loan net of the provision for bad debts.

Note 2: recognized as the capital gain from the disposal of non-performance assets amounted to NTD68,712 thousand net of the expenses incurred from bad debts amounted to NTD52,803 thousand.

  • 121 - 246
Investor
Investee’s name
(Note 1)
Location
Principal business
Proportion
of
shareholding
% - end
Book value of
investment
Investment
profit (loss)
recognized in
the current
period
Consolidated shareholding of the Bank and affiliated enterprises
(note 1)
Remarks
Quantity -
current
Scheduled
quantity
(Note 2)
Total
Quantity
Ratio of
Shareholding		 Taichung
Reliance
Securities
Taipei City
Reliance
Securities
38.46
$ 140,282
$ 423
18,643
-
18,643
59.75		 Commercial Bank
Investment Trust
Investment Trust Co.,		 Co., Ltd.
Co., Ltd.
Ltd.		 Note 1: Any current shares or scheduled shares held by the Bank, directors, supervisors, President, Executive Vice President, and investees that are defined as affiliated enterprises under Company Law shall be included. Note 2: (1)
Scheduled shares mean swapped shares under the assumption that the equity securities purchased or derivative product contract as concluded (not yet converted into equity) are converted according to the agreed		 trading conditions and the bank’s intent to link with the equity of investee for the purpose of the reinvestment referred to in Article 74 of the Banking Act. (2)
Said “equity securities” mean the marketable securities, convertible corporate bonds, and stock warrants provided in Paragraph 1 of Article 11 of the Enforcement Rules of Securities and Exchange Act.		 (3)
The “Derivatives Contract” referred to above meant for those in compliance with the definition of derivatives in IAS No. 39, such as, stock options.		 Note 3: This table may not be disclosed in the financial statements for Q1 and January 1 to September 30.

247

Unit: in NTD thousand unless otherwise specified Remarks Limited to the
net worth of
Taichung
Leasing
Co., Ltd.		 Note 1: The column for numbering is elaborated below:
(1) Fill in 0 for the issuer.
(2) The investees are sequentially numbered from 1 and so forth.
Note 2: The receivables-affiliates, receivables-related parties, shareholders accounts, prepayments, temporary payments and others as stated in book shall be filled in here if they are classified as financing.
Note 3: Maximum balance of financing a third party in current period.
Note 4: Specify if the nature of financing is for business transactions or short-term financing is necessary.
Note 5: If the nature of financing is for business transactions, specify the amount of business transactions. The amount of business transactions shall be the amount of business conducted between the lender and the beneficiary of financing.
Note 6: If it is necessary for short-term financing, specify the reasons and the beneficiary of financing and the use of the fund, such as: retirement of loans, procurement of equipment, and working capital.
Note 7: Specify the Procedure for Financing Third Parties and the upper limit of financing in favor of particular beneficiary and the total limit of financing, and also the method for the calculation of the upper limit of financing in favor of particular beneficiary and the total limit
of financing in the space provided in this field.
Note 8: For public companies proposed the lending of funds before the Board for resolution case by case pursuant to Article 14-1 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies”, the amount approved by the
Board but not yet being drawn shall still be included in the amount for announcement for the disclosure of risk being assumed. If the loans are being retired in the future, disclose the outstanding balance to reflect the adjustment of risk. For public companies proposed
the lending of funds before the Board for resolution case by case pursuant to Article 14-2 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies” whereby the Board resolved to authorize the Chairman to effect
the drawdown or in revolving credit in tranches within specific limit and in the year, the amount and the limit approved by the Board shall still be announced as the outstanding balance. In subsequent retirement of loans, repeated drawdown shall still be considered and
the amount and the limit approved by the Board shall still be announced as the outstanding balance.
Total limit of
financing
(Note 7)		 $ 1,913,979
Limit of financing
particular
beneficiary
(Note 7)
$ 1,913,979
Collateral Value -
Name -
Amount of
provision for
bad debts		 $ -
The reasons
for
short-term
financing
(Note 6)
Working
capital
Amount of
business
transactions
(Note 5)
$ -
Nature of
financing
(Note 4)		 The necessity
of
short-term
financing
Interest
rate
collars		 2%
The actual
amounts
disbursed		 $ 28,257
Balance, ending
(Note 8)		 $ 28,257

Maximum
balance –
current period
(Note 3)		 $ 32,110
Are they
related
parties		 Yes
Transaction
title
(Note 2)		 Other
receivables
The borrower of
fund
TCCBL Co.,
Ltd. (B.V.I.)
The lender of
fund		 Taichung
Commercial
Bank
Lease
Enterprise
No.
(Note 1)		 1

248

Unit: NTD thousand Guarantee
and
endorsement
in Mainland
China
(Note 3)		 Guarantee
and
endorsement
in Mainland
China
(Note 3)		 �
Y
Guarantee
and
endorsement
by
subsidiary to
parent
company
(Note 3)
�
�
Guarantee
and
endorsement
by parent
company to
subsidiaries
(Note 3)		 �
�
The upper limit
of an
endorsement
and/or guarantee
(Note 1)		 $ 19,139,792
19,139,792

Total
endorsements
and guarantees
as a percentage
of equity in the
most recent
financial
statement		 60.61
36.17
The endorsements
and/or guarantees
secured with
property		 $ -
-
The actual
amounts disbursed		 $ 255,386
253,064
The ending
balance of
endorsements
and/or guarantees		 $ 1,160,000
692,356
The highest
balance of
endorsements
and/or guarantees
in the current
period
(Note 2)		 $ 2,152,356
2,152,356
The limit of endorsements
and/or guarantees
to a single
business entity
(Note 1)
$ 11,483,875

11,483,875
The party receiving the endorsement and/or
guarantee
Relation
100%
and
directly
owned subsidiary


100% and indirectly
owned subsidiary

Company name

TCCBL
Co.,
Ltd.
(B.V.I.)


Taichung Commercial
Bank
Leasing
(Suzhou) Ltd.
The company
providing the
endorsement and/or
guarantee		 Taichung Commercial
Bank
Lease
Enterprise
Taichung Commercial
Bank
Lease
Enterprise
No. 1
2

249

Remarks Note: No disclosure of such information is required, if is a financial business, insurance business, and securities business.
At ending Market price $ 1,913,979
571,891
1,479,876
140,282
974,642
943,412

Ratio of
Shareholding		 100
100
100
38
100
100

Book value		 $ 1,913,979
571,891
1,479,876
140,282
974,642
943,412
Quantity
180,000
28,436
150,000
12,000
30,000
-
Account titles in book Investment
under
the
equity method
�
�
�
�
�
Relationship with the
securities issuer

Subsidiaries


�
�

Affiliate business

Sub-subsidiary


Sub-subsidiary
Types and names of
securities		 Domestic non-listed (OTC)
stocks
Taichung Commercial Bank
Lease Enterprise
Taichung Commercial Bank
Insurance Agency Co.,
Ltd.
Taichung Commercial Bank
Securities Co., Ltd.
Reliance
Securities
Investment Trust Co., Ltd.
Foreign non-listed (OTC)

stocks
TCCBL Co., Ltd. (B.V.I.)

Foreign non-listed (OTC)

stocks
Taichung Commercial Bank
Leasing (Suzhou) Ltd.
Holding company Taichung
Commercial
Bank Co., Ltd.
Taichung
Commercial
Bank
Lease
Enterprise
TCCBL Co., Ltd.
(B.V.I.)

250

Names of investees in
China
Principal business
Paid-in shares
Captial
Mode of investments
Accumulated
amount of
investment
remitted from
Taiwan at
beginning
Amount of investment remitted or
recovered in current period
Accumulated
amount of
investment
remitted from
Taiwan at ending
Ratio of
shareholding of
investment
directly or
indirectly made
by the Company
Investment profit
recognized in
current period
(Note 1)
Book value of
investment at
ending
ROI remitted to
Taiwan at ending
Outward
remittance
Recover
Taichung
Commercial
Bank Leasing (Suzhou)
Ltd.
Financing Leasing and
investments
$ 893,373
( CNY
186,329
thousand
)
Investment
in
Mainland China via
a
company
in
existence in a third
country/territory
$ 395,159
( CNY
84,901
thousand
)
$ 498,214
( CNY
101,428
thousand)
$ -
$ 893,373
( CNY
186,329
thousand
)
100%
$ 10,838
( CNY
2,202 thousand
)
$ 943,412
( CNY
185,383
thousand
)
$ -		 Names of investees in
China
Principal business
Paid-in shares
Captial
Mode of investments
Accumulated
amount of
investment
remitted from
Taiwan at
beginning
Amount of investment remitted or
recovered in current period
Accumulated
amount of
investment
remitted from
Taiwan at ending
Ratio of
shareholding of
investment
directly or
indirectly made
by the Company
Investment profit
recognized in
current period
(Note 1)
Book value of
investment at
ending
ROI remitted to
Taiwan at ending
Outward
remittance
Recover
Taichung
Commercial
Bank Leasing (Suzhou)
Ltd.
Financing Leasing and
investments
$ 893,373
( CNY
186,329
thousand
)
Investment
in
Mainland China via
a
company
in
existence in a third
country/territory
$ 395,159
( CNY
84,901
thousand
)
$ 498,214
( CNY
101,428
thousand)
$ -
$ 893,373
( CNY
186,329
thousand
)
100%
$ 10,838
( CNY
2,202 thousand
)
$ 943,412
( CNY
185,383
thousand
)
$ -		 Names of investees in
China
Principal business
Paid-in shares
Captial
Mode of investments
Accumulated
amount of
investment
remitted from
Taiwan at
beginning
Amount of investment remitted or
recovered in current period
Accumulated
amount of
investment
remitted from
Taiwan at ending
Ratio of
shareholding of
investment
directly or
indirectly made
by the Company
Investment profit
recognized in
current period
(Note 1)
Book value of
investment at
ending
ROI remitted to
Taiwan at ending
Outward
remittance
Recover
Taichung
Commercial
Bank Leasing (Suzhou)
Ltd.
Financing Leasing and
investments
$ 893,373
( CNY
186,329
thousand
)
Investment
in
Mainland China via
a
company
in
existence in a third
country/territory
$ 395,159
( CNY
84,901
thousand
)
$ 498,214
( CNY
101,428
thousand)
$ -
$ 893,373
( CNY
186,329
thousand
)
100%
$ 10,838
( CNY
2,202 thousand
)
$ 943,412
( CNY
185,383
thousand
)
$ -		 $ 893,373
$ 893,373
$ 1,148,388
Note 1: Investment return/loss has been recognized by parent company on the basis of the audited financial statements
Note 2: It is the limit calculated by the applicant – Taichung Commercial Bank Lease Enterprise in accordance with requirements set forth in “Principle of Review of Investment or Technology Joint Venture in Mainland China”
of Investment Commission of MOEA.
Note 3: All foreign currencies involved were converted into NTD on the basis of the exchange rate applicable at the end of the period and the average exchange rate applicable in the period as of the financial reporting date
(CNY1=NTD 5.09, CNY1=NTD 4.92).
ROI remitted to
Taiwan at ending		 $ - Compliance with the limit of investment in Mainland China set forth by Investment
Commission of MOEA (Note 2)		 $ 1,148,388
Book value of
investment at
ending		 $ 943,412
( CNY
185,383
thousand
)
Investment profit
recognized in
current period
(Note 1)		 $ 10,838
( CNY
2,202 thousand
)
Ratio of
shareholding of
investment
directly or
indirectly made
by the Company
100%
Accumulated
amount of
investment
remitted from
Taiwan at ending		 $ 893,373
( CNY
186,329
thousand
)
Amount of investment approved by Investment Commission of MOEA $ 893,373
Amount of investment remitted or
recovered in current period
Recover		 $ -

Outward
remittance		 $ 498,214
( CNY
101,428
thousand)
Accumulated
amount of		 investment
remitted from
Taiwan at
beginning




$ 395,159
( CNY
84,901
thousand
)
Mode of investments Investment
in
Mainland China via
a
company
in
existence in a third
country/territory
Accumulated investment from Taiwan to Mainland China at ending $ 893,373
Paid-in shares
Captial
$ 893,373
( CNY
186,329
thousand
)
Principal business

Financing Leasing and
investments
Names of investees in
China		 Taichung
Commercial
Bank Leasing (Suzhou)
Ltd.

251

Transactions Percentage of
consolidated net income
or total assets
(Note 4)
-
2%
-
-
-
-
-
2%
-
-
-
-
-
4%
-
-
-
-
-
Terms and conditions No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
Amount
(Note 3)
$ 636,405
200,000
16,663

225,833

22,400

379,187
636,405
200,000
16,663
225,833
22,400
379,187

435,751
331,405
34,853

374,973

211,140
12,640

12,640
Title Customer
deposits
and
remittances
Service Fee
Accounts receivable
Customer
deposits
and
remittances
Other
business
expensesAmount
Customer
deposits
and
remittances
Cash and cash equivalents
Service fee expenses
Payables
Cash and cash equivalents
Non-operating revenue
Cash and cash equivalents
Customer
deposits
and
remittances
Service Fee
Accounts receivable
Customer
deposits
and
remittances
Customer
deposits
and
remittances
Payables
Other
business
expensesAmount
Relationship with trader
(Note 2)
1

1

1
1
1

1

2

2

2

2

2

2

1

1

1

1
1
1
1
Counterparty
Taichung Commercial Bank
Insurance Broker Co., Ltd.

Taichung Commercial Bank
Insurance Broker Co., Ltd.

Taichung Commercial Bank
Insurance Broker Co., Ltd.

Taichung Commercial Bank
Securities Co., Ltd.

Taichung Commercial Bank
Securities Co., Ltd.

Taichung Commercial Bank
Lease Enterprise

Taichung Commercial Bank
Co.

Taichung Commercial Bank
Co.

Taichung Commercial Bank
Co.
Taichung Commercial Bank
Co.
Taichung Commercial Bank
Co.

Taichung Commercial Bank
Co.

Taichung Commercial Bank
Insurance Broker Co., Ltd.

Taichung Commercial Bank
Insurance Broker Co., Ltd.

Taichung Commercial Bank
Insurance Broker Co., Ltd.

Taichung Commercial Bank
Lease Enterprise

Taichung Commercial Bank
Securities Co., Ltd.

Taichung Commercial Bank
Securities Co., Ltd.

Taichung Commercial Bank
Securities Co., Ltd.
Trader’s name 2014
Taichung
Commercial Bank
Co.
Taichung
Commercial Bank
Co.
Taichung
Commercial Bank
Co.
Taichung
Commercial Bank
Co.
Taichung
Commercial Bank
Co.
Taichung
Commercial Bank
Co.
Taichung Commercial Bank
Insurance Broker Co., Ltd.
Taichung Commercial Bank
Insurance Broker Co., Ltd.
Taichung Commercial Bank
Insurance Broker Co., Ltd.
Taichung
Commercial Bank
Securities Co., Ltd.
Taichung
Commercial Bank
Securities Co., Ltd.
Taichung Commercial Bank
Lease Enterprise
2013
Taichung
Commercial Bank
Co.
Taichung
Commercial Bank
Co.
Taichung
Commercial Bank
Co.
Taichung
Commercial Bank
Co.
Taichung
Commercial Bank
Co.
Taichung
Commercial Bank
Co.
Taichung
Commercial Bank
Co.
No.
(Note 1)		 0
0
0
0
0
0
1
1
1
2
2
3
0
0
0
0
0
0
0

252

No.
(Note 1)
Trader’s name
Counterparty
Relationship with trader
(Note 2)
Title
Amount
(Note 3)
Terms and conditions
Percentage of
consolidated net income
or total assets
(Note 4)
1
Taichung Commercial Bank
Insurance Broker Co., Ltd.
Taichung Commercial Bank
Co.
2
Cash and cash equivalents
$ 435,751
No significant difference from the
general customer
-
1
Taichung Commercial Bank
Insurance Broker Co., Ltd.
Taichung Commercial Bank
Co.
2
Service fee expenses
331,405
No significant difference from the
general customer
4%
1
Taichung Commercial Bank
Insurance Broker Co., Ltd.
Taichung Commercial Bank
Co.
2
Payables
34,853
No significant difference from the
general customer
-
2
Taichung Commercial Bank
Securities Co., Ltd.
Taichung Commercial Bank
Co.
2
Cash and cash equivalents
211,140
No significant difference from the
general customer
-
2
Taichung Commercial Bank
Securities Co., Ltd.
Taichung Commercial Bank
Co.
2
Accounts receivable
12,640
No significant difference from the
general customer
-
2
Taichung Commercial Bank
Securities Co., Ltd.
Taichung Commercial Bank
Co.
2
Non-operating revenue
12,640
No significant difference from the
general customer
-
3
Taichung Commercial Bank
Lease Enterprise
Taichung Commercial Bank
Co.
2
Cash and cash equivalents
374,973
No significant difference from the
general customer
-
Note 1: The information of business operation between the parent company and its subsidiaries should be documented in the respectively numbered column as
follows:
1. Fill in “0” for parent company.
2. The subsidiaries are sequentially numbered from 1 and so forth.
Note 2: The relationship with the traders is classified into three categories as follows:
1. The Bank to the Subsidiary.
2. The Subsidiary to the Bank.
3. The Subsidiary to the Subsidiary.
Note 3: Written-off upon consolidation
Note 4: Calculate the ratio of the transaction amount to consolidate the total income or total assets. For the assets and liabilities account, calculate the ratio of the
ending balance to the consolidated total assets. For the profits and losses account, calculate the ratio of the interim cumulated amount to the consolidated
total income.
Note 5: Major transactions refer to transactions with amount of NTD10,000 thousand and shall be subject to disclosure		 No.
(Note 1)
Trader’s name
Counterparty
Relationship with trader
(Note 2)
Title
Amount
(Note 3)
Terms and conditions
Percentage of
consolidated net income
or total assets
(Note 4)
1
Taichung Commercial Bank
Insurance Broker Co., Ltd.
Taichung Commercial Bank
Co.
2
Cash and cash equivalents
$ 435,751
No significant difference from the
general customer
-
1
Taichung Commercial Bank
Insurance Broker Co., Ltd.
Taichung Commercial Bank
Co.
2
Service fee expenses
331,405
No significant difference from the
general customer
4%
1
Taichung Commercial Bank
Insurance Broker Co., Ltd.
Taichung Commercial Bank
Co.
2
Payables
34,853
No significant difference from the
general customer
-
2
Taichung Commercial Bank
Securities Co., Ltd.
Taichung Commercial Bank
Co.
2
Cash and cash equivalents
211,140
No significant difference from the
general customer
-
2
Taichung Commercial Bank
Securities Co., Ltd.
Taichung Commercial Bank
Co.
2
Accounts receivable
12,640
No significant difference from the
general customer
-
2
Taichung Commercial Bank
Securities Co., Ltd.
Taichung Commercial Bank
Co.
2
Non-operating revenue
12,640
No significant difference from the
general customer
-
3
Taichung Commercial Bank
Lease Enterprise
Taichung Commercial Bank
Co.
2
Cash and cash equivalents
374,973
No significant difference from the
general customer
-
Note 1: The information of business operation between the parent company and its subsidiaries should be documented in the respectively numbered column as
follows:
1. Fill in “0” for parent company.
2. The subsidiaries are sequentially numbered from 1 and so forth.
Note 2: The relationship with the traders is classified into three categories as follows:
1. The Bank to the Subsidiary.
2. The Subsidiary to the Bank.
3. The Subsidiary to the Subsidiary.
Note 3: Written-off upon consolidation
Note 4: Calculate the ratio of the transaction amount to consolidate the total income or total assets. For the assets and liabilities account, calculate the ratio of the
ending balance to the consolidated total assets. For the profits and losses account, calculate the ratio of the interim cumulated amount to the consolidated
total income.
Note 5: Major transactions refer to transactions with amount of NTD10,000 thousand and shall be subject to disclosure
Transactions Percentage of
consolidated net income
or total assets
(Note 4)
-
4%
-
-
-
-
-
Terms and conditions No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
No significant difference from the
general customer
Amount
(Note 3)		 $ 435,751
331,405
34,853
211,140
12,640
12,640
374,973
Title Cash and cash equivalents
Service fee expenses
Payables
Cash and cash equivalents
Accounts receivable
Non-operating revenue
Cash and cash equivalents
Relationship with trader
(Note 2)
2

2

2

2

2

2

2
Counterparty
Taichung Commercial Bank
Co.
Taichung Commercial Bank
Co.
Taichung Commercial Bank
Co.
Taichung Commercial Bank
Co.
Taichung Commercial Bank
Co.
Taichung Commercial Bank
Co.

Taichung Commercial Bank
Co.
Trader’s name Taichung Commercial Bank
Insurance Broker Co., Ltd.
Taichung Commercial Bank
Insurance Broker Co., Ltd.
Taichung Commercial Bank
Insurance Broker Co., Ltd.
Taichung Commercial Bank
Securities Co., Ltd.
Taichung Commercial Bank
Securities Co., Ltd.
Taichung Commercial Bank
Securities Co., Ltd.
Taichung Commercial Bank
Lease Enterprise
No.
(Note 1)		 1
1
1
2
2
2
3

253

Taichung Commercial Bank Co., Ltd.

Individual Financial Statements and Independent Auditor’s Report 2014 and 2013

Address: No. 87, Min Chuan Road, West District, Taichung

Tel. No.: (04)22236021

254- 1 -

Auditor’s Report

To: Taichung Commercial Bank Co., Ltd.

We have audited the accompanying individual balance sheet of Taichung Commercial Bank Co., Ltd. as of December 31, 2014 and 2013, and the related individual statement of income, individual statement of changes in shareholders equity and individual statement of cash flows for the years then ended. Said Individual financial statement is the responsibility of the management. Our responsibility is to express an opinion on the consolidated financial statement based on our audits.

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

In our opinion, the individual financial statements referred to in the first paragraph present fairly, in all material respects, the Financial Status of the Bank as of December 31, 2014 and 2013, and its financial performance and cash flows of December 31, 2014 and 2013 in conformity with the generally accepted accounting principles in the Republic of China.

The statement of important accounting titles of the individual financial statement for 2014 was provided to supplement the analysis only, and has been audited by us in accordance with the procedure referred to in Paragraph 2 herein. In our opinion, the statement of such titles is consistent with the relevant information provided in the financial statement referred to in Paragraph 1 herein in all material respects.

Deloitte & Touche Min-Xian Yang, CPA Kuan-Chung Lai, CPA Securities and Futures Bureau Approval Securities and Futures Bureau Approval Document No. Document No. Tai-Cai-Jheng (6) No. 0920123784 Tai-Cai-Jheng (6) No. 0920123784

Date: March 11, 2015

255- 2 -

Taichung Commercial Bank Co., Ltd. Individual Balance Sheet

December 31, 2014 and 2013

Unit: NTD thousand

Code
11000

11500

12000

12500

13000

13200

13500

14000

14500

15000

15500

18500

19000

19300

19500

10000

Code
21000

21500

22000

22500

23000

23200

23500

24000

25500

25600

29300

29500

20000

31100
31500
32001
32003
32011
32500
30000
 Assets
Cash and cash equivalents (Note 4 & 6)
Due from the Central Bank and lend to banks (Note 7)
Financial assets at fair value through income statement (Note 4 and 8)
Bonds and securities sold under repurchase agreements (Note 4 and 9)
Receivables - net (Notes 4, 10, 11 & 32)
Current income tax asset (Notes 4 & 29)
Discounts and loans – net (Notes 4, 11 & 32)
Available-for-sale financial assets– net (Notes 4, 12 and 33)
Held-to-maturity financial assets - net (Notes 4, 13, 33)
Investment by equity method – net (Notes 4, and 14)
Other financial assets, net (Notes 4 & 15)
Property, plant, and equipment – net (Notes 4 & 16)
Intangible assets – net (Notes 4 & 17)
Deferred income tax assets (Notes 4 & 29)
Other assets (Notes 4, 18 & 33)
Total assets
Liabilities and equity
Due to Central Bank and other banks (Note 19)
Funds borrowed from CBC and other banks (Notes 20 and 33)
Financial liabilities at fair value through profit and loss (Note 4 and 8)
Bills and bonds sold under repurchase agreements (Notes 4 &21)
Payables (Note 22)
Current income tax liability (Notes 4 & 29)
Deposits and remittances (Notes 23 and 32)
Financial bonds payable (Note 4 & 24)
Other financial liabilities
Liability reserve (Notes 4 & 25)
Deferred tax liabilities (Notes 4 & 29)
Other liabilities (Note 26)
Total liabilities
Equity (Notes 27)
Capital stock
Capital surplus
Retained earnings
Legal reserve
Special reserve
Undistributed earnings
Other equity
Total equity
Total Liabilities and Equity		 December31,20 14
%
2
16
2
-
1
-
73
4
-
1
-
1
-
-

-
100
2
-
-
-
1
-
87
3
-
-
-

-

93
5
-
1
-
1

-

7
100		 December31,20 13
Amount
$ 8,695,628
82,314,107
12,989,306
1,545,361
3,206,796
-
383,570,399
20,595,620
1,418,003
4,106,028
1,206,142
5,050,610
98,797
537,994
1,185,689
$ 526,520,480
$ 10,697,387
-
133,360
273,573
6,775,222
162,662
457,207,953
14,400,000
1,620
615,521
111,021
251,210
490,629,529
28,515,063
683,751
2,885,334
72,861
3,579,082
154,860
35,890,951
$ 526,520,480		 Amount
$ 5,360,170
75,496,734
12,057,223
4,550,801
2,769,426
56,589
362,450,039
19,008,479
3,340,584
2,694,057
1,158,259
3,371,423
90,231
389,465
770,353
$ 493,563,833
$ 8,341,508
2,086,000
74,800
358,769
3,964,393
266,823
430,698,048
16,042,869
7,605
348,829
111,021
225,578
462,526,243
25,345,339
675,435
1,993,524
134,085
2,923,384

34,177)
31,037,590
$ 493,563,833		 %


















(

 1
15
2
1
1
-
73
4
1
1
-
1
-
-

-
100
2
1
-
-
1
-
87
3
-
-
-

-

94
5
-
-
-
1

-

6
100

Chairman: Jin-Fong Soo

Manager: Chun-Sheng Lee

Chief accountant: Yi-Ying Chung

256

  • 3 -

Taichung Commercial Bank Co., Ltd.

Individual Income Statement

January 1, to December 31, 2014 and 2013

Unit: NTD thousands, except Earnings Per Share (NTD)

Code
41000 Interest revenues (Notes 4, 28
and 32)
51000 Interest expenses (Notes 28 and
32)
49010 Net interest income
Net income (loss) other than
interest income
49100
Net income from service
fees (Notes 4, 28 and
32)
49200
Gain (loss) on financial
assets and liabilities at
fair value through profit
and loss (Notes 4 and
28)
49300
Realized
net
loss
on
available-for-sale
financial assets (Note 4
and 28)
49600
Exchange gain (Note 4)
49700
Net gain (loss) on reversal
of
asset
impairment
(Notes 4, 13, 15, 18 and
28)
49750
Profit
or
loss
of
the
subsidiary,
affiliated
company
and
joint
ventures
under
the
equity method (Notes 4
and 14)
49821
Net gain or loss from the
sale of delinquent loans
58000
Net income (loss) other
than
interest
income
(Notes 25, 28 and 34)
4xxxx Net revenue

58200 Bad debt expense and guaranty
reserve (Notes 4, 11 and 25)		 2014 %
108
39)
69
13
1
-
3
10
3
1
-
100
19)		 2013 %
110
40)
70
15
2

-
2
10
2
-
1)

100
21)		 Percentage
of Variation
�%�
Amount
$ 10,790,389
3,890,334)
6,900,055
1,320,191
109,459
-
256,246
1,028,264
275,488
68,712
26,767
9,985,182
1,889,937)		 Amount
$ 9,748,834

3,577,160)

6,171,674
1,313,067
149,444

4,846 )
207,718
892,735
168,978
-
63,272)

8,835,498

1,834,591)

(


(
(


(
(
(
(

(
(

(

(
11
9

12

1
(
27 )
100

23

15

63

-
142
13
3

(Continued on next page)

  • 4 -257

(Continued from previous page)

(Continued from previous page)
Code
Operating expenses
58500
Employee
benefits
expenses (Notes 4 and
28)
59000
Depreciation
and
amortization
expenses
(Notes 4, and 28)
59500
Business
and
administrative expenses
(Notes 28, and 32)
58400
Total
operating
expenses
61001 Income
before
tax
from
continuing operations
61003 Income tax expenses (Notes 4 &
29)
64000 Current year net income after
tax
Other comprehensive income
65001
Exchange differences from
the
translation
of
financial statements of
foreign operations
65011
Unrealized valuation gains
(losses)
of
available-for-sale
financial assets
65031
Defined
benefit
plan
actuarial
gains
and
losses
65043
Other
comprehensive
profit or loss of the
subsidiary and affiliated
company
under
the
equity method
65091
Income
tax
related
to
components
of
other
comprehensive income
(Notes 4 & 29)
65000
Other comprehensive
income-net (after
tax)
66000 Current
period
other
comprehensive income (after
tax)
EPS (Note 30)
Business
units
in
continuing operation
67501
Basic

67701
Diluted
 2014 %
25 )
2 )
13)
40)
41
4)
37
1
1
2 )
1
-
1
38		 2013 %


25 )

2 )
12)
39)
40
5)
35
-

1 )

1 )
-
-

2)
33		 Percentage
of Variation
�
%
�
Amount
$ 2,447,983 )

166,797 )
1,345,603)
3,960,383)
4,134,862
415,606)
3,719,256
54,891
97,045

169,131 )
39,771
26,287
48,863
$ 3,768,119
$ 1.32
$ 1.31		 Amount
$ 2,193,557 )
173,538 )
1,131,491)
3,498,586)
3,502,321
442,050)
3,060,271

2,653
144,313 )
59,627 )
23,793
1,663

175,831)
$ 2,884,440

$ 1.16
$ 1.08
(
(
(
(
(

(




 (
(
(
(
(
(		 (
(
(
(
(
(
(
(		 (
(
(
(
(

(
(

(
12
(
4 )
19
13

18
(
6 )
22
1,969

167

184

67
1,481
128
31

Chairman: Jin-Fong Soo

Manager: Chun-Sheng Lee

Chief accountant: Yi-Ying Chung

  • 5 -258
Total equity $ 27,908,319 - - - (
231,874 )		 - 3,060,271 (
175,831 )		 (
175,831 )		 2,884,440 2,884,440 476,705 476,705 31,037,590 - (
513,557 )		 - - 3,719,256 48,863 48,863 3,768,119 3,768,119 1,598,799 1,598,799 $ 35,890,951
Other equity Exchange differences from the translation of
Unrealized gain (loss)		 financial statements of
on available-for-sale		 foreign operations
financial assets		 $ 477
$ 91,865		 -
-		 -
-		 -
-		 -
-		 -
-		 -
-		 24,265
(
150,784 )		 24,265
(
150,784 )		 -

-		 24,742
(
58,919 )		 -
-		 -
-		 -
-		 -
-		 -
-		 88,781

100,256		 88,781

100,256		 -

-		 $ 113,523
$ 41,337
Retained earnings Legal reserve
Special reserve
Accumulated earnings		 $ 1,160,137
$ 88,647
$ 2,704,214		 -
10,178
(
10,178 )		 833,387
-
(
833,387 )		 -
35,260
(
35,260 )		 -
-
(
231,874 )		 -
-
(
1,681,090 )		 -
-
3,060,271		 -
-
(
49,312 )		 -
-
3,010,959		 -
-
-		 1,993,524
134,085
2,923,384		 891,810
-
(
891,810 )		 -
-
(
513,557 )		 -
-
(
1,579,241 )		 -
(
61,224 )
61,224		 -
-
3,719,256		 -
-
(
140,174 )		 -
-
3,579,082		 -
-
-		 $ 2,885,334
$ 72,861
$ 3,579,082
Capital surplus $ 675,537 - - - - - -
-
-		 (
102 )		 675,435 - - - - -
-
-
8,316		 $ 683,751
Capital stock Common stock $ 23,187,442 - - - - 1,681,090 - - -
476,807		 25,345,339 - - 1,579,241 - - - - 1,590,483 $ 28,515,063
Code A1
Balance as of January 1, 2013		 B3
Allocation of special reserve in		 accordance
with
Financial		 Supervisory
Commission
Order		 Chin-Kuan-Cheng-Zi
No.		 1010012865. The
2012
appropriation
and		 distribution of earnings B1
Legal reserve		 B3
Special reserve		 B5
Cash Dividends		 B9
Stock dividends		 D1
2013 net income		 D3
Other comprehensive net income in		 2013 (after tax) D5
Other comprehensive income in 2013		 I1
Conversion of convertible financial		 bonds Z1
Balance as of December 31, 2013		 The
2013
appropriation
and		 distribution of earnings B1
Legal reserve		 B5
Cash Dividends		 B9
Stock dividends		 B17
Reversal of special reserve		 D1
2014 net income		 D3
Other comprehensive net income in		 2014 (after tax) D5
Other comprehensive income in 2014		 I1
Conversion of convertible financial		 bonds Z1
Balance as of December 31, 2014

259

Taichung Commercial Bank Co., Ltd.

Individual Statements of Cash Flow

January 1, to December 31, 2014 and 2013

Unit: NTD thousand

Code
Cash flow from operating activities
A10000
Current year net profit before taxation
Revenue, expense and losses that do not
affect the cash flows
A20100
Depreciation expenses
A20200
Amortization expenses
A20300
Appropriation of bad debt expense
A20400
Gain (loss) on financial assets and
liabilities at fair value through
profit and loss
A22500
Disposal
and
obsolescence
loss
(gain) of property and equipment
A20900
Interest expenses
A21200
Interest revenue
A21300
Dividend income
A21800
Net change in other provisions for
liabilities
A22400
The profit or loss in the subsidiary,
affiliated
company
and
joint
ventures recognized under the
equity method
A23100
Loss on disposal of investments
A23500
Financial assets impairment loss
(reversal gain)
A23700
Non-financial assets impairment loss
(reversal gain)
A24100
Unrealized
foreign
currency
exchange gain
A24300
Gain on sale of NPL
A24400
Loss on disposal of collateral
A20010
Total income, expense and loss
that do not affect the cash
flows
Changes in operating activities related
assets/liabilities
A41110
Due from Central Bank of China and
lend to Banks
A41120
Financial assets at fair value through
income statement
A41150
Accounts receivable
A41160
Discounts and loans
A41190
Other financial assets
A41990
Other assets
A42110
Due to Central Bank and other
banks

(Continued on next page)

260- 7 -

(Continued from previous page)

(Continued from previous page)
Code
A42120
Financial liabilities at fair value
through���������������
A42140
Bills
and
bonds
sold
under
repurchase agreements
A42150
Payables
A42160
Customer deposits and remittances
A42170
Other financial liabilities
A42180
Employee benefit liabilities reserve
A42990
Other liabilities
A40000
Total changes in operating
activities
related
assets/liabilities
A33000
Cash inflow (outflow) from operating
activities
A33100
Interest received
A33200
Dividends received
A33300
Interest payment
A33500
Income tax payment
AAAA
Net cash inflow (outflow) from
operating activities
Cash flow from investing activities
B00300
Acquisition of available-for-sale financial
assets
B00400
Disposition of available-for-sale financial
assets
B00900
Acquisition of held-to-maturity financial
assets
B01000
Disposition of held-to-maturity financial
assets
B01100
Return of capital from held-to-maturity
financial assets
B01200
Acquisition of financial assets measured at
cost
B01400
Stock capital returned from decrease of
capital for financial assets measured at
cost
B01800
Acquisition of investment under the equity
method
B02700
Acquisition
of
Property,
plant,
and
equipment
B02800
Disposal of Property, plant, and equipment
B03700
Increase in refundable deposits
B04500
Acquisition of Intangible assets
B04700
Disposal of Collateral accepted
B06300
Cash Collected from NPL sold
BBBB
Net cash inflow (outflow) from
investing activities
Cash flow from financing activities
C00300
Increase (decrease) in Funds borrowed
from CBC and other banks
C01400
Issuance of financial bonds		 2014
$ 290,744 )


85,196 )
2,790,410

26,509,905


5,985 )

69,797

25,632

5,583,531

3,367,561

10,748,827
22,725

3,864,085 )

585,420)

9,689,608


2,005,973 )

517,600

812,943 )
2,942,200
300,000

3,000 )
757

1,100,000 )


1,815,274 )

928

12,250 )


40,106 )

808
343,494

1,683,759)


2,086,000 )
-		 2013
(
(

(



(
(

(
(
(
(
(
(
(

(
(		 ( $ 436,659 )
94,724
(
4,485,714 )
44,835,207
(
9,603 )
(
27,490 )

14,272
(
4,938,201)
(
6,830,658 )
9,784,261
18,841
(
3,611,995 )
(
517,853)
(
1,157,404)
(
3,545,627 )
2,842,748
-
5,802,240
550,000
-
1,090
(
516,429 )
(
105,729 )
2,190
(
66,973 )
(
59,873 )
102,281

-

5,005,918
198,400
5,500,000

(Continued on next page)

261- 8 -

(Continued from previous page)

(Continued from previous page)
Code
C01500
Repayment of financial bonds
C04500
Cash dividend released
CCCC
Net cash inflow (outflow) from
financing activities
DDDD Impact of changes in exchange rate on cash
and cash equivalents
EEEE
Current cash and cash equivalents increase
E00100 Balance of cash and cash equivalents,
beginning of period
E00200 Balance of cash and cash equivalent, end of
period
Ending cash and cash equivalents adjustment
Code
E00210 Cash and cash equivalents on the balance
sheet
E00220 The “Due from Central Bank and Banks”
that meet the definition of cash and cash
equivalents under IAS 7
E00230 The “bonds and securities sold under
repurchase agreements” that meet the
definition of cash and cash equivalents
under IAS 7
E00200 Balance of cash and cash equivalent, end of
period		 2014
( $ 49,900 )

(
513,557)

(2,649,457)


54,891

5,411,283

72,207,724

$77,619,007

December 31,
2014
$ 8,695,628

67,378,018

1,545,361

$77,619,007
 2013
( $ 2,561,664 )
(
231,874)
2,904,862

2,653
6,756,029
65,451,695
$72,207,724
December 31,
2013






$ 5,360,170
62,296,753
4,550,801
$72,207,724

Chairman: Jin-Fong Soo Manager: Chun-Sheng Lee Chief accountant: Yi-Ying Chung

262- 9 -

Taichung Commercial Bank

==> picture [134 x 182] intentionally omitted <==

Chairman : Jin-Fong Soo

==> picture [44 x 50] intentionally omitted <==

==> picture [60 x 43] intentionally omitted <==

==> picture [46 x 46] intentionally omitted <==

總行

==> picture [47 x 47] intentionally omitted <==

臺中市西區民權路8 7 號 電話：0 4 - 2 2 2 3 6 0 2 1 No.87, Min-Chuan Road, Taichung, Taiwan, R.O.C.

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