bank.sinopac the integrated service network of bank sinopac and its affiliates intoction oraniation...

Bank SinoPac

No. 36, Nanking East Road, Sec. 3, Taipei 104, Taiwan (R.O.C.)Telephone: 886-2-2506-3333https://bank.SinoPac.comTelex: 479901Swift Address: SINOTWTP

Executive Offices

bank.sinopac.com

ContentsContentsThe Integrated Service Network of

Bank SinoPac and its Affiliates

The Integrated Service Network of


Introduction

Organization

Human Resources

Global Overview

Business Overview

Business plan of the year

Research and Development

Short-term and Long-term Business Development Plans

Office Locations

Financial Highlights

Letter to Shareholders

Corporate Profile

I.

II.

III.

Economic and Financial Review

I.

Operating Report

I.

II.

III.

IV.

Financial Reports

Domestic Major Economic Indicators

04

07

08

10

15

22

47

252

2

ContentsContentsThe Integrated Service Network of


The Integrated Service Network of


Introduction

Organization

Human Resources

Global Overview

Business Overview

Business plan of the year

Research and Development

Short-term and Long-term Business Development Plans

Office Locations

Financial Highlights

Letter to Shareholders

Corporate Profile

I.

II.

III.


I.

Operating Report

I.

II.

III.

IV.

Financial Reports

Domestic Major Economic Indicators

04

07

08

10

15

22

47

252

3

Dep. / Branch Name Address Telephone No.Dep. / Branch Name Address Telephone No.Dep. / Branch Name Address Telephone No.

Headquarters

Banking Division

Trust Division

International Division

Offshore Banking Unit

Sungchiang Branch

Taipei Branch

Chunglun Branch

Chungshan Branch

Lungchiang Branch

Tehui Branch

Chungcheng Branch

Tungmen Branch

Nanmen Branch

Chengchung Branch

Tingchou Branch

Chinan Road Branch

Chiencheng Branch

Yenping Branch

Chungching North Road Branch

Tunpei Branch

Hsisung Branch

Sungshan Branch

Hsimen Branch

Wanhua Branch

Shuangyuan Branch

Shihmao Branch

Yungchun Branch

Sanhsing Branch

Sungte Branch

Chunghsiao Branch

Tunnan Branch

Xingda Branch

Chunghsiao E. Road Branch

Chang An Branch

Hsinyi Branch

Jenai Branch

Hoping Branch

Tienmu Branch

Zhubei Ziqiang Branch

Shihlin Branch

Shihtung Branch

Shetzu Branch

Lanya Branch

Peitou Branch

Hsihu Branch

Neihu Branch

(02)2506-3333

(02)2506-3333

(02)2506-3333

(02)2506-3333

(02)2508-2288

(02)2567-9911

(02)2508-2288

(02)8161-8000

(02)2571-7221

(02)2509-5570

(02)2585-4880

(02)2367-2888

(02)2392-6611

(02)2391-7565

(02)2381-7777

(02)2337-8728

(02)2396-3001

(02)2555-3261

(02)2558-0091

(02)2598-2463

(02)2712-7899

(02)2746-9888

(02)2761-1331

(02)2381-8255

(02)2302-3485

(02)2303-8222

(02)2345-1177

(02)2769-5323

(02)2723-2955

(02)8788-2688

(02)2778-8811

(02)2378-0707

(04)2285-5577

(02)2771-7011

(02)2516-5777

(02)2705-8322

(02)2704-5711

(02)2735-4533

(02)2872-1177

(03)550-1133

(02)2886-8877

(02)2872-7155

(02)2812-9477

(02)2833-7222

(02)2891-2127

(02)8797-6633

(02)2797-1600

No. 36, Sec. 3, Nanking E. Rd., Chungshan District, Taipei City 104, Taiwan (R.O.C.)




11F.,No.9-1,Sec.2, Chienkuo N.Rd.,Chungshan District,Taipei City 104,Taiwan (R.O.C.)

No. 192, Sungchiang Rd., Chungshan District, Taipei City 104, Taiwan (R.O.C.)

No. 9-1, Sec. 2, Chienkuo N. Rd., Chungshan District, Taipei City 104, Taiwan (R.O.C.)

No. 306, Sec. 2, Bade Rd., Chungshan District, Taipei City 104, Taiwan (R.O.C.)

No. 79, Sec. 2, Chungshan N. Rd., Chungshan District, Taipei City 104, Taiwan (R.O.C.)

No. 409, Lungchiang Rd., Chungshan District, Taipei City 104, Taiwan (R.O.C.)

No. 16-5, Tehui St., Chungshan District, Taipei City 104, Taiwan (R.O.C.)

No. 172, Sec. 2, Roosevelt Rd., Chungcheng District, Taipei City 106, Taiwan (R.O.C.)

No.154-1 & 156 & 158, Sec. 2, Hsinyi Rd., Taan District, Taipei City 106, Taiwan (R.O.C.)

No. 110, Sec. 1, Nanchang Rd., Chungcheng District, Taipei City 100, Taiwan (R.O.C.)

No. 17, Poai Rd., Chungcheng District, Taipei City 100, Taiwan (R.O.C.)

No. 217, Sanyuan St., Chungcheng District, Taipei City 100, Taiwan (R.O.C.)

No. 39, Sec. 2, Chinan Rd., Chungcheng District, Taipei City 100, Taiwan (R.O.C.)

No. 43, Changan W. Rd., Tatung District, Taipei City 103, Taiwan (R.O.C.)

No. 286, Minsheng W. Rd., Tatung District, Taipei City 103, Taiwan (R.O.C.)

No. 139, Sec. 3, Chungching N. Rd., Tatung District, Taipei City 103, Taiwan (R.O.C.)

No. 209, Tunhua N. Rd., Sungshan District, Taipei City 105, Taiwan (R.O.C.)

No. 12, Tunghsing Rd., Sungshan District, Taipei City 105, Taiwan (R.O.C.)

No. 680, Sec. 4, Bade Rd., Sungshan District, Taipei City 105, Taiwan (R.O.C.)

No. 75, Chengtu Rd., Wanhua District, Taipei City 108, Taiwan (R.O.C.)

No. 280, Kangting Rd., Wanhua District, Taipei City 108, Taiwan (R.O.C.)

No. 58, Tungyuan St., Wanhua District, Taipei City 108, Taiwan (R.O.C.)

No. 46, Sec. 4, Xinyi Rd., Taan District, Taipei City 106, Taiwan (R.O.C.)

No. 352, Yungchi Rd., Hsinyi District, Taipei City 110, Taiwan (R.O.C.)

No. 296, Chuangching Rd., Hsinyi District, Taipei City 110, Taiwan (R.O.C.)

No. 132, Sungte Rd., Hsinyi District, Taipei City 110, Taiwan (R.O.C.)

No. 1, Lane 236, Sec. 1, Tunhua S. Rd., Taan District, Taipei City 106, Taiwan (R.O.C.)

No. 187, Sec. 2, Anho Rd., Taan District, Taipei City 106, Taiwan (R.O.C.)

No.250, Guoguang Rd., South Dist., Taichung City 402, Taiwan (R.O.C.)

No. 48, Sec. 4, Chunghsiao E. Rd., Taan District, Taipei City 106, Taiwan (R.O.C.)

No. 39, 41, 43, 43-1, 43-2, Songjiang Rd., Chungshan District, Taipei City 104, Taiwan (R.O.C.)

No. 252, Sec. 4, Hsinyi Rd., Taan District, Taipei City 106, Taiwan (R.O.C.)

No. 316-2, Sec. 4, Jenai Rd., Taan District, Taipei City 106, Taiwan (R.O.C.)

No. 260, Sec. 3, Hoping E. Rd., Taan District, Taipei City 106, Taiwan (R.O.C.)

No. 249, Sec. 2, Chungcheng Rd., Shihlin District, Taipei City 111, Taiwan (R.O.C.)

No.25,27, Ziqiang S. Rd., Zhubei City, Hsinchu County 302, Taiwan (R.O.C.)

No. 85, Sec. 4, Chengte Rd., Shihlin District, Taipei City 111, Taiwan (R.O.C.)

No. 423, Sec. 6, Chungshan N. Rd., Shihlin District, Taipei City 111, Taiwan (R.O.C.)

No. 111, Sec. 6, Yenping N. Rd., Shihlin District, Taipei City 111, Taiwan (R.O.C.)

No. 183, Tehsing E. Rd., Shihlin District, Taipei City 111, Taiwan (R.O.C.)

No. 166-6, Kuangming Rd., Peitou District, Taipei City 112, Taiwan (R.O.C.)

No.412, Ruiguang Rd., Neihu Dist., Taipei City 114, Taiwan (R.O.C.)

No. 723, Sec. 1, Neihu Rd., Neihu District, Taipei City 114, Taiwan (R.O.C.)

Tunghu Branch

Hsinhu Branch

Nankang Branch

Hsinglung Branch

Chingmei Branch

Panhsin Branch

East Panchiao Branch

Panchiao Branch

Panchiao Chunghsiao Branch

Huachiang Branch

Chiangtzutsui Branch

Banqiao Minzu Branch

Hsichih Branch

Hsichih Changshu Branch

Shenkeng Branch

Peihsin Branch

Hsintien Branch

Yungho Branch

Chungho Branch

Kuangfu Branch

Chisui Branch

Hsuehfu Branch

Tucheng Branch

Haishan Branch

Shulin Branch

Huilung Branch

Yingke Branch

Linkou Chunghsiao Branch

Taishan Branch

Luchou Branch

South Luchou Branch

Sanchung Branch

Kinmen Branch

Sanho Branch

Chengyi Branch

South Sanchung Branch

North Sanchung Branch

Chunghsin Branch

Chunghsing Branch

Hsintai Branch

Hsinchuang Branch

Chungkang Branch

Hsisheng Branch

Suyuan Branch

Minan Branch

Wuku Branch

Tanshui Branch

(02)2633-5555

(02)8792-6888

(02)2788-5265

(02)2933-9831

(02)2932-8540

(02)2968-1616

(02)8952-2200

(02)2967-1112

(02)2955-3678

(02)2257-2199

(02)8252-8999

(02)2958-3958

(02)2642-1561

(02)2694-9898

(02)2664-2626

(02)2912-7799

(02)2917-2202

(02)2927-4000

(02)8668-9393

(02)8227-5058

(02)2223-4077

(02)2266-2000

(02)2260-8122

(02)2270-3800

(02)2683-8668

(02)2688-9030

(02)2678-6000

(02)2608-8286

(02)2903-0903

(02)2281-8966

(02)2289-6186

(02)2983-3008

(082)32-3300

(02)2972-8787

(02)2981-1335

(02)2982-0711

(02)2982-6239

(02)2999-1418

(02)2976-2159

(02)2992-9898

(02)2201-6123

(02)2992-3123

(02)2202-7700

(02)2996-8840

(02)2205-8170

(02)2291-7333

(02)2622-1788

No. 23, Tunghu Rd., Neihu District, Taipei City 114, Taiwan (R.O.C.)

No. 8, Juikuang Rd., Neihu District, Taipei City 114, Taiwan (R.O.C.)

1F., No.19-12, Sanchong Rd., Nankang District, Taipei City 115, Taiwan (R.O.C.)

No. 49, Sec. 2, Hsinglung Rd., Wenshan District, Taipei City 116, Taiwan (R.O.C.)

No. 12, Chechien Rd., Wenshan District, Taipei City 116, Taiwan (R.O.C.)

No. 186, Minchuan Rd., Panchiao District, New Taipei City 220, Taiwan (R.O.C.)

No. 147, Sec. 2, Chungshan Rd., Panchiao District, New Taipei City 220, Taiwan (R.O.C.)

No. 23, Fuchung Rd., Panchiao District, New Taipei City 220, Taiwan (R.O.C.)

No.198, Chongqing Rd., Panchiao Dist., New Taipei City 220, Taiwan (R.O.C.)

No. 82, Hsinhai Rd., Panchiao District, New Taipei City 220, Taiwan (R.O.C.)

No. 6-12, Sec. 2, Shuangshih Rd., Panchiao District, New Taipei City 22043, Taiwan (R.O.C.)

No.183, Minzu Rd., Banqiao Dist., New Taipei City 220, Taiwan (R.O.C.)

No.508~510, Sec. 2, Datong Rd., Xizhi Dist., New Taipei City 221, Taiwan (R.O.C.)

No. 89, Chunghsing Rd., Hsichih District, New Taipei City 221, Taiwan (R.O.C.)

No. 156, Sec. 3, Peishen Rd., Shenkeng District, New Taipei City 222, Taiwan (R.O.C.)

No. 260, Sec. 2, Peihsin Rd., Hsintien District, New Taipei City 231, Taiwan (R.O.C.)

No. 290, Chungcheng Rd., Hsintien District, New Taipei City 231, Taiwan (R.O.C.)

No. 47, Sec. 2, Yungho Rd., Yungho District, New Taipei City 234, Taiwan (R.O.C.)

No. 51, Chungcheng Rd., Yungho District, New Taipei City 234, Taiwan (R.O.C.)

No. 246, Liencheng Rd., Chungho District, New Taipei City 235, Taiwan (R.O.C.)


No. 124, Sec. 1, Hsuehfu Rd., Tucheng District, New Taipei City 236, Taiwan (R.O.C.)

No. 223-6, Sec. 2, Chungyang Rd., Tucheng District, New Taipei City 236, Taiwan (R.O.C.)

No. 200-12, Sec. 3, Chincheng Rd., Tucheng District, New Taipei City 236, Taiwan (R.O.C.)

No. 288, Sec. 1, Chungshan Rd., Shulin District, New Taipei City 238, Taiwan (R.O.C.)

No. 61, Sanchun St., Shulin District, New Taipei City 238, Taiwan (R.O.C.)

No. 212, Chienkuo Rd., Yingke District, New Taipei City 239, Taiwan (R.O.C.)

No. 403, Zhongxiao Rd., Linkou District, New Taipei City 244, Taiwan (R.O.C.)

No. 416, Sec. 2, Mingchih Rd., Taishan District, New Taipei City 243, Taiwan (R.O.C.)

No. 30, Sanmin Rd., Luchou District, New Taipei City 247, Taiwan (R.O.C.)

No. 203, Changan St., Luchou District, New Taipei City 247, Taiwan (R.O.C.)

No. 80, Sec. 2, Chunghsiao Rd., Sanchung District, New Taipei City 241, Taiwan (R.O.C.)

No. 236, Minquan Rd., Jincheng Township, Kinmen County 893, Taiwan (R.O.C.)

No. 18, Sec. 2, Chunghsin Rd., Sanchung District, New Taipei City 241, Taiwan (R.O.C.)

No. 343, Chengyi N. Rd., Sanchung District, New Taipei City 241, Taiwan (R.O.C.)

No. 400, Chungcheng N. Rd., Sanchung District, New Taipei City 241, Taiwan (R.O.C.)

No. 83, Sec. 4, Tzuchiang Rd., Sanchung District, New Taipei City 241, Taiwan (R.O.C.)

No. 527, Sec.5, Chunghsin Rd., Sanchung District, New Taipei City 241, Taiwan (R.O.C.)

No. 44, Hsinhsing Rd., Sanchung District, New Taipei City 241, Taiwan (R.O.C.)

No. 229, Hsintai Rd., Hsinchuang District, New Taipei City 242, Taiwan (R.O.C.)

No. 341, Chungcheng Rd., Hsinchuang District, New Taipei City 242, Taiwan (R.O.C.)

No. 399, Chungkang Rd., Hsinchuang District, New Taipei City 242, Taiwan (R.O.C.)

No. 61, Houkang 1st Rd., Hsinchuang District, New Taipei City 242, Taiwan (R.O.C.)

No. 540-1, Huacheng Rd., Hsinchuang District New Taipei City 242, Taiwan (R.O.C.)

No. 47, Minan E. Rd., Hsinchuang District, New Taipei City 242, Taiwan (R.O.C.)

No. 84, Kungshang Rd., Wuku District, New Taipei City 248, Taiwan (R.O.C.)

No. 77, Sec. 1, Chungshan N. Rd., Tanshui District, New Taipei City 251, Taiwan (R.O.C.)

Dep. / Branch Name Address Telephone No.

Chuwei Branch

Keelung Branch

Lotung Branch

Yilan Branch

Hsinchu Branch

Kuanghua Branch

Chuke Branch

Dali Branch

Chupei Kuangming Branch

Taoyuan Branch

Chungli Branch

North Taoyuan Branch

Nankan Branch

South Taoyuan Branch

Linkou Branch

Neili Branch

Tayuan Branch

Chunan Branch

Taichung Branch

North Taichung Branch

South Taichung Branch

Chungke Branch

Fengyuan Branch

Hsitun Branch

Changhua Branch

Yuanlin Branch

Chiayi Branch

Tainan Branch

East Tainan Branch

Yungkang Branch

North Tainan Branch

Sanmin Branch

North Kaohsiung Branch

Kaohsiung Branch

South Kaohsiung Branch

Lingya Branch

Kangshan Branch

Fengshan Branch

Pingtung Branch

Los Angeles Branch

Hong Kong Branch

Kowloon Branch

Macau Branch

Vietnam Representative Office

Ho Chi Minh Branch

(02)2808-7058

(02)2423-1161

(039)545-421

(039)324-511

(03)572-8866

(03)535-6688

(03)564-5555

(04)2407-3955

(03)553-0000

(03)333-9000

(03)427-8988

(03)317-8889

(03)321-4126

(03)369-2727

(03)397-5888

(03)435-8888

(03)384-0688

(037)47-9898

(04)2220-5766

(04)2293-8101

(04)2323-2468

(04)2465-1688

(04)2520-8966

(04)2255-9988

(04)726-3111

(04)837-8068

(05)235-7888

(06)223-2888

(06)200-5566

(06)202-8599

(06)282-3888

(07)392-8988

(07)557-5888

(07)224-3733

(07)535-1111

(07)725-6101

(07)622-6688

(07)710-8866

(08)732-3322

1-213-437-4800

852-2801-2801

852-3655-8688

853-2871-5175

84-8-3825-7612

84-8-3822-0566

No. 31-15, Mintsu Rd., Tanshui District, New Taipei City 251, Taiwan (R.O.C.)

No. 2, Yi 1st Rd., Chungcheng District, Keelung City 202, Taiwan (R.O.C.)

No. 205, Chungcheng Rd., Lotung Town, Yilan County 265, Taiwan (R.O.C.)

No. 33, Sec. 3, Chungshan Rd., Yilan City, Yilan County 260, Taiwan (R.O.C.)

No. 295, Sec. 2, Kuangfu Rd., Hsinchu City 300, Taiwan (R.O.C.)

No. 528, Sec. 1, Jingguo Rd., East Dist., Hsinchu City 300, Taiwan (R.O.C.)


No.503, Dongrong Rd., Dali Dist., Taichung City 412, Taiwan (R.O.C.)

No. 87-6,Kuangming 6th Rd.,Chupei City, Hsinchu County 30268, Taiwan (R.O.C.)

1F, No.51, Fuxing Rd., Taoyuan District, Taoyuan City 330, Taiwan (R.O.C.)

No. 160, Tzuhui 3rd St., Chungli District, Taoyuan City 320, Taiwan (R.O.C.)

No. 656, Chunjih Rd., Taoyuan District, Taoyuan City 330, Taiwan (R.O.C.)

No. 310, Chungcheng Rd., Luchu District, Taoyuan City 338, Taiwan (R.O.C.)

No. 839, Chungshan Rd., Taoyuan District, Taoyuan City 330, Taiwan (R.O.C.)

No. 53, Wenhua 1st Rd., Kueishan District, Taoyuan City 333, Taiwan (R.O.C.)

No. 321, Huanchung E. Rd., Chungli District, Taoyuan City 320, Taiwan (R.O.C.)

No. 102, Chungshan N. Rd., Tayuan District, Taoyuan City 337, Taiwan (R.O.C.)

No. 157, Kuangfu Rd., Chunan Town, Miaoli County 350, Taiwan (R.O.C.)

No. 101, Sec. 1, Tzuyu Rd., West District, Taichung City 403, Taiwan (R.O.C.)

No. 1027, Sec. 3, Wenhsin Rd., Peitun District, Taichung City 406, Taiwan (R.O.C.)

No. 66, Sec. 2, Kungyi Rd., Nantun District, Taichung City 408, Taiwan (R.O.C.)

No.1182, Sec. 4, Taiwan Blvd. Hsitun District, Taichung City 407, Taiwan (R.O.C.)

No. 245 , Chungcheng Rd., Fengyuan District, Taichung City 420, Taiwan (R.O.C.)

No.10, Sec. 3, Huichung Rd., Nantun District, Taichung City 408, Taiwan (R.O.C.)

No. 317, Mintsu Rd., Changhua City, Changhua County 500, Taiwan (R.O.C.)

No. 51, Sec. 2 , Chungshan Rd., Yuanlin Town, Changhua County 510, Taiwan (R.O.C.)

No. 338, Hsingyeh W. Rd., Chiayi City 600, Taiwan (R.O.C.)

No. 114, Sec. 2, Chienkang Rd., South District, Tainan City 702, Taiwan (R.O.C.)

No. 163, Sec. 2, Changjung Rd., East District, Tainan City 701, Taiwan (R.O.C.)

No. 725, Chunghua Rd., Yungkang District, Tainan City 710, Taiwan (R.O.C.)

No. 480, Sec. 4, Hsimen Rd., North District, Tainan City 704, Taiwan (R.O.C.)

No. 78, Mintsu 1st Rd., Sanmin District, Kaohsiung City 807, Taiwan (R.O.C.)

No. 441, Yucheng Rd., Tsoying District, Kaohsiung City 813, Taiwan (R.O.C.)

No. 143, Chungcheng 2nd Rd., Lingya District, Kaohsiung City 802, Taiwan (R.O.C.)

No. 100, Chunghua 4th Rd., Lingya District, Kaohsiung City 802, Taiwan (R.O.C.)

No. 90, Chienkuo 1st Rd., Lingya District, Kaohsiung City 802, Taiwan (R.O.C.)

No. 1, Tate 1st Rd., Kangshan District, Kaohsiung City 820, Taiwan (R.O.C.)

No. 366, Kuangyuan Rd., Fengshan District, Kaohsiung City 830, Taiwan (R.O.C.)

No. 14, Fuhsing N. Rd., Pingtung City, Pingtung County 900, Taiwan (R.O.C.)

Wells Fargo Center-South Tower 355 South Grand Avenue, Suite 4168, Los Angeles, California,USA.

26F, Central Tower, 28 Queen’s Rd., Central, Hong Kong

18F, One Peking, 1 Peking Rd., Tsim Sha Tsui, Kowloon, Hong Kong

Avenida Doutor Mario Soares, Finance and IT Center of Macao 9F, Macau

Saigon Riverside Office Center, 17F, 2A-4A Ton Duc Thang Street, District 1, Ho Chi Minh City,Vietnam

Saigon Riverside Office Center, 1F, 2A-4A Ton Duc Thang Street, District 1, Ho Chi Minh City, Vietnam

4

Dep. / Branch Name Address Telephone No.Dep. / Branch Name Address Telephone No.Dep. / Branch Name Address Telephone No.

Headquarters

Banking Division

Trust Division



Sungchiang Branch

Taipei Branch

Chunglun Branch

Chungshan Branch

Lungchiang Branch

Tehui Branch

Chungcheng Branch

Tungmen Branch

Nanmen Branch

Chengchung Branch

Tingchou Branch

Chinan Road Branch

Chiencheng Branch

Yenping Branch


Tunpei Branch

Hsisung Branch

Sungshan Branch

Hsimen Branch

Wanhua Branch

Shuangyuan Branch

Shihmao Branch

Yungchun Branch

Sanhsing Branch

Sungte Branch

Chunghsiao Branch

Tunnan Branch

Xingda Branch


Chang An Branch

Hsinyi Branch

Jenai Branch

Hoping Branch

Tienmu Branch


Shihlin Branch

Shihtung Branch

Shetzu Branch

Lanya Branch

Peitou Branch

Hsihu Branch

Neihu Branch

(02)2506-3333

(02)2506-3333

(02)2506-3333

(02)2506-3333

(02)2508-2288

(02)2567-9911

(02)2508-2288

(02)8161-8000

(02)2571-7221

(02)2509-5570

(02)2585-4880

(02)2367-2888

(02)2392-6611

(02)2391-7565

(02)2381-7777

(02)2337-8728

(02)2396-3001

(02)2555-3261

(02)2558-0091

(02)2598-2463

(02)2712-7899

(02)2746-9888

(02)2761-1331

(02)2381-8255

(02)2302-3485

(02)2303-8222

(02)2345-1177

(02)2769-5323

(02)2723-2955

(02)8788-2688

(02)2778-8811

(02)2378-0707

(04)2285-5577

(02)2771-7011

(02)2516-5777

(02)2705-8322

(02)2704-5711

(02)2735-4533

(02)2872-1177

(03)550-1133

(02)2886-8877

(02)2872-7155

(02)2812-9477

(02)2833-7222

(02)2891-2127

(02)8797-6633

(02)2797-1600
















































Tunghu Branch

Hsinhu Branch

Nankang Branch

Hsinglung Branch

Chingmei Branch

Panhsin Branch


Panchiao Branch


Huachiang Branch



Hsichih Branch


Shenkeng Branch

Peihsin Branch

Hsintien Branch

Yungho Branch

Chungho Branch

Kuangfu Branch

Chisui Branch

Hsuehfu Branch

Tucheng Branch

Haishan Branch

Shulin Branch

Huilung Branch

Yingke Branch


Taishan Branch

Luchou Branch

South Luchou Branch

Sanchung Branch

Kinmen Branch

Sanho Branch

Chengyi Branch



Chunghsin Branch

Chunghsing Branch

Hsintai Branch

Hsinchuang Branch

Chungkang Branch

Hsisheng Branch

Suyuan Branch

Minan Branch

Wuku Branch

Tanshui Branch

(02)2633-5555

(02)8792-6888

(02)2788-5265

(02)2933-9831

(02)2932-8540

(02)2968-1616

(02)8952-2200

(02)2967-1112

(02)2955-3678

(02)2257-2199

(02)8252-8999

(02)2958-3958

(02)2642-1561

(02)2694-9898

(02)2664-2626

(02)2912-7799

(02)2917-2202

(02)2927-4000

(02)8668-9393

(02)8227-5058

(02)2223-4077

(02)2266-2000

(02)2260-8122

(02)2270-3800

(02)2683-8668

(02)2688-9030

(02)2678-6000

(02)2608-8286

(02)2903-0903

(02)2281-8966

(02)2289-6186

(02)2983-3008

(082)32-3300

(02)2972-8787

(02)2981-1335

(02)2982-0711

(02)2982-6239

(02)2999-1418

(02)2976-2159

(02)2992-9898

(02)2201-6123

(02)2992-3123

(02)2202-7700

(02)2996-8840

(02)2205-8170

(02)2291-7333

(02)2622-1788
















































Dep. / Branch Name Address Telephone No.

Chuwei Branch

Keelung Branch

Lotung Branch

Yilan Branch

Hsinchu Branch

Kuanghua Branch

Chuke Branch

Dali Branch


Taoyuan Branch

Chungli Branch


Nankan Branch


Linkou Branch

Neili Branch

Tayuan Branch

Chunan Branch

Taichung Branch



Chungke Branch

Fengyuan Branch

Hsitun Branch

Changhua Branch

Yuanlin Branch

Chiayi Branch

Tainan Branch

East Tainan Branch

Yungkang Branch

North Tainan Branch

Sanmin Branch


Kaohsiung Branch


Lingya Branch

Kangshan Branch

Fengshan Branch

Pingtung Branch

Los Angeles Branch

Hong Kong Branch

Kowloon Branch

Macau Branch


Ho Chi Minh Branch

(02)2808-7058

(02)2423-1161

(039)545-421

(039)324-511

(03)572-8866

(03)535-6688

(03)564-5555

(04)2407-3955

(03)553-0000

(03)333-9000

(03)427-8988

(03)317-8889

(03)321-4126

(03)369-2727

(03)397-5888

(03)435-8888

(03)384-0688

(037)47-9898

(04)2220-5766

(04)2293-8101

(04)2323-2468

(04)2465-1688

(04)2520-8966

(04)2255-9988

(04)726-3111

(04)837-8068

(05)235-7888

(06)223-2888

(06)200-5566

(06)202-8599

(06)282-3888

(07)392-8988

(07)557-5888

(07)224-3733

(07)535-1111

(07)725-6101

(07)622-6688

(07)710-8866

(08)732-3322

1-213-437-4800

852-2801-2801

852-3655-8688

853-2871-5175

84-8-3825-7612

84-8-3822-0566














































5

Dep. / Branch Name Address Telephone No.Dep. / Branch Name Address Telephone No. (In millions, except per share data) 2015NT$

2014NT$

2015US$ (Note)(In millions, except per share data) 2015

NT$2014NT$

2015US$ (Note)

Headquarters

Banking Division

Trust Division



Sungchiang Branch

Taipei Branch

Chunglun Branch

Chungshan Branch

Lungchiang Branch

Tehui Branch

Chungcheng Branch

Tungmen Branch

Nanmen Branch

Chengchung Branch

Tingchou Branch

Chinan Road Branch

Chiencheng Branch

Yenping Branch


Tunpei Branch

Hsisung Branch

Sungshan Branch

Hsimen Branch

Wanhua Branch

Shuangyuan Branch

Shihmao Branch

Yungchun Branch

Sanhsing Branch

Sungte Branch

Chunghsiao Branch

Tunnan Branch

Xingda Branch


Chang An Branch

Hsinyi Branch

Jenai Branch

Hoping Branch

Tienmu Branch


Shihlin Branch

Shihtung Branch

Shetzu Branch

Lanya Branch

Peitou Branch

Hsihu Branch

Neihu Branch

(02)2506-3333

(02)2506-3333

(02)2506-3333

(02)2506-3333

(02)2508-2288

(02)2567-9911

(02)2508-2288

(02)8161-8000

(02)2571-7221

(02)2509-5570

(02)2585-4880

(02)2367-2888

(02)2392-6611

(02)2391-7565

(02)2381-7777

(02)2337-8728

(02)2396-3001

(02)2555-3261

(02)2558-0091

(02)2598-2463

(02)2712-7899

(02)2746-9888

(02)2761-1331

(02)2381-8255

(02)2302-3485

(02)2303-8222

(02)2345-1177

(02)2769-5323

(02)2723-2955

(02)8788-2688

(02)2778-8811

(02)2378-0707

(04)2285-5577

(02)2771-7011

(02)2516-5777

(02)2705-8322

(02)2704-5711

(02)2735-4533

(02)2872-1177

(03)550-1133

(02)2886-8877

(02)2872-7155

(02)2812-9477

(02)2833-7222

(02)2891-2127

(02)8797-6633

(02)2797-1600
















































Tunghu Branch

Hsinhu Branch

Nankang Branch

Hsinglung Branch

Chingmei Branch

Panhsin Branch


Panchiao Branch


Huachiang Branch



Hsichih Branch


Shenkeng Branch

Peihsin Branch

Hsintien Branch

Yungho Branch

Chungho Branch

Kuangfu Branch

Chisui Branch

Hsuehfu Branch

Tucheng Branch

Haishan Branch

Shulin Branch

Huilung Branch

Yingke Branch


Taishan Branch

Luchou Branch

South Luchou Branch

Sanchung Branch

Kinmen Branch

Sanho Branch

Chengyi Branch



Chunghsin Branch

Chunghsing Branch

Hsintai Branch

Hsinchuang Branch

Chungkang Branch

Hsisheng Branch

Suyuan Branch

Minan Branch

Wuku Branch

Tanshui Branch

(02)2633-5555

(02)8792-6888

(02)2788-5265

(02)2933-9831

(02)2932-8540

(02)2968-1616

(02)8952-2200

(02)2967-1112

(02)2955-3678

(02)2257-2199

(02)8252-8999

(02)2958-3958

(02)2642-1561

(02)2694-9898

(02)2664-2626

(02)2912-7799

(02)2917-2202

(02)2927-4000

(02)8668-9393

(02)8227-5058

(02)2223-4077

(02)2266-2000

(02)2260-8122

(02)2270-3800

(02)2683-8668

(02)2688-9030

(02)2678-6000

(02)2608-8286

(02)2903-0903

(02)2281-8966

(02)2289-6186

(02)2983-3008

(082)32-3300

(02)2972-8787

(02)2981-1335

(02)2982-0711

(02)2982-6239

(02)2999-1418

(02)2976-2159

(02)2992-9898

(02)2201-6123

(02)2992-3123

(02)2202-7700

(02)2996-8840

(02)2205-8170

(02)2291-7333

(02)2622-1788
















































Chuwei Branch

Keelung Branch

Lotung Branch

Yilan Branch

Hsinchu Branch

Kuanghua Branch

Chuke Branch

Dali Branch


Taoyuan Branch

Chungli Branch


Nankan Branch


Linkou Branch

Neili Branch

Tayuan Branch

Chunan Branch

Taichung Branch



Chungke Branch

Fengyuan Branch

Hsitun Branch

Changhua Branch

Yuanlin Branch

Chiayi Branch

Tainan Branch

East Tainan Branch

Yungkang Branch

North Tainan Branch

Sanmin Branch


Kaohsiung Branch


Lingya Branch

Kangshan Branch

Fengshan Branch

Pingtung Branch

Los Angeles Branch

Hong Kong Branch

Kowloon Branch

Macau Branch


Ho Chi Minh Branch

(02)2808-7058

(02)2423-1161

(039)545-421

(039)324-511

(03)572-8866

(03)535-6688

(03)564-5555

(04)2407-3955

(03)553-0000

(03)333-9000

(03)427-8988

(03)317-8889

(03)321-4126

(03)369-2727

(03)397-5888

(03)435-8888

(03)384-0688

(037)47-9898

(04)2220-5766

(04)2293-8101

(04)2323-2468

(04)2465-1688

(04)2520-8966

(04)2255-9988

(04)726-3111

(04)837-8068

(05)235-7888

(06)223-2888

(06)200-5566

(06)202-8599

(06)282-3888

(07)392-8988

(07)557-5888

(07)224-3733

(07)535-1111

(07)725-6101

(07)622-6688

(07)710-8866

(08)732-3322

1-213-437-4800

852-2801-2801

852-3655-8688

853-2871-5175

84-8-3825-7612

84-8-3822-0566














































13,055

11,383

1,125,438

791,801

1,415,619

99,528

1.53

14.99

-

1.2186

323.54

277.48

35048.99

26454.60

43577.67

3300.02

0.04

0.44

-

-

10,698

9,175

1,158,925

874,744

1,440,933

109,118

1.23

14.65

-

-

For the year

Pretax income (include cumulative effect

of accounting changes)

Net income

At year-end

Deposits and remittances

Discounts and loans

Total assets

Shareholders' equity

Per share

Earnings per share

Shareholders' equity per share

Dividends declared per share

- Cash dividend

- Stock dividend

Note 1: US dollar amounts are converted for convenience only at NT$33.06586 per dollar, the prevailing rate on Dec. 31, 2015.Note 2: Using the number of the outstanding issued shares at year end as the basis to calculate the shareholder's equity per share. Note 3: The above number of 2014 have been retroactively restated under the 2013 version of IFRS, IAS, IFRIC and SIC endorsed by the Financial Supervisory Commission.

6

Dep. / Branch Name Address Telephone No.Dep. / Branch Name Address Telephone No. (In millions, except per share data) 2015NT$

2014NT$

2015US$ (Note)(In millions, except per share data) 2015

NT$2014NT$

2015US$ (Note)

Headquarters

Banking Division

Trust Division



Sungchiang Branch

Taipei Branch

Chunglun Branch

Chungshan Branch

Lungchiang Branch

Tehui Branch

Chungcheng Branch

Tungmen Branch

Nanmen Branch

Chengchung Branch

Tingchou Branch

Chinan Road Branch

Chiencheng Branch

Yenping Branch


Tunpei Branch

Hsisung Branch

Sungshan Branch

Hsimen Branch

Wanhua Branch

Shuangyuan Branch

Shihmao Branch

Yungchun Branch

Sanhsing Branch

Sungte Branch

Chunghsiao Branch

Tunnan Branch

Xingda Branch


Chang An Branch

Hsinyi Branch

Jenai Branch

Hoping Branch

Tienmu Branch


Shihlin Branch

Shihtung Branch

Shetzu Branch

Lanya Branch

Peitou Branch

Hsihu Branch

Neihu Branch

(02)2506-3333

(02)2506-3333

(02)2506-3333

(02)2506-3333

(02)2508-2288

(02)2567-9911

(02)2508-2288

(02)8161-8000

(02)2571-7221

(02)2509-5570

(02)2585-4880

(02)2367-2888

(02)2392-6611

(02)2391-7565

(02)2381-7777

(02)2337-8728

(02)2396-3001

(02)2555-3261

(02)2558-0091

(02)2598-2463

(02)2712-7899

(02)2746-9888

(02)2761-1331

(02)2381-8255

(02)2302-3485

(02)2303-8222

(02)2345-1177

(02)2769-5323

(02)2723-2955

(02)8788-2688

(02)2778-8811

(02)2378-0707

(04)2285-5577

(02)2771-7011

(02)2516-5777

(02)2705-8322

(02)2704-5711

(02)2735-4533

(02)2872-1177

(03)550-1133

(02)2886-8877

(02)2872-7155

(02)2812-9477

(02)2833-7222

(02)2891-2127

(02)8797-6633

(02)2797-1600
















































Tunghu Branch

Hsinhu Branch

Nankang Branch

Hsinglung Branch

Chingmei Branch

Panhsin Branch


Panchiao Branch


Huachiang Branch



Hsichih Branch


Shenkeng Branch

Peihsin Branch

Hsintien Branch

Yungho Branch

Chungho Branch

Kuangfu Branch

Chisui Branch

Hsuehfu Branch

Tucheng Branch

Haishan Branch

Shulin Branch

Huilung Branch

Yingke Branch


Taishan Branch

Luchou Branch

South Luchou Branch

Sanchung Branch

Kinmen Branch

Sanho Branch

Chengyi Branch



Chunghsin Branch

Chunghsing Branch

Hsintai Branch

Hsinchuang Branch

Chungkang Branch

Hsisheng Branch

Suyuan Branch

Minan Branch

Wuku Branch

Tanshui Branch

(02)2633-5555

(02)8792-6888

(02)2788-5265

(02)2933-9831

(02)2932-8540

(02)2968-1616

(02)8952-2200

(02)2967-1112

(02)2955-3678

(02)2257-2199

(02)8252-8999

(02)2958-3958

(02)2642-1561

(02)2694-9898

(02)2664-2626

(02)2912-7799

(02)2917-2202

(02)2927-4000

(02)8668-9393

(02)8227-5058

(02)2223-4077

(02)2266-2000

(02)2260-8122

(02)2270-3800

(02)2683-8668

(02)2688-9030

(02)2678-6000

(02)2608-8286

(02)2903-0903

(02)2281-8966

(02)2289-6186

(02)2983-3008

(082)32-3300

(02)2972-8787

(02)2981-1335

(02)2982-0711

(02)2982-6239

(02)2999-1418

(02)2976-2159

(02)2992-9898

(02)2201-6123

(02)2992-3123

(02)2202-7700

(02)2996-8840

(02)2205-8170

(02)2291-7333

(02)2622-1788
















































Chuwei Branch

Keelung Branch

Lotung Branch

Yilan Branch

Hsinchu Branch

Kuanghua Branch

Chuke Branch

Dali Branch


Taoyuan Branch

Chungli Branch


Nankan Branch


Linkou Branch

Neili Branch

Tayuan Branch

Chunan Branch

Taichung Branch



Chungke Branch

Fengyuan Branch

Hsitun Branch

Changhua Branch

Yuanlin Branch

Chiayi Branch

Tainan Branch

East Tainan Branch

Yungkang Branch

North Tainan Branch

Sanmin Branch


Kaohsiung Branch


Lingya Branch

Kangshan Branch

Fengshan Branch

Pingtung Branch

Los Angeles Branch

Hong Kong Branch

Kowloon Branch

Macau Branch


Ho Chi Minh Branch

(02)2808-7058

(02)2423-1161

(039)545-421

(039)324-511

(03)572-8866

(03)535-6688

(03)564-5555

(04)2407-3955

(03)553-0000

(03)333-9000

(03)427-8988

(03)317-8889

(03)321-4126

(03)369-2727

(03)397-5888

(03)435-8888

(03)384-0688

(037)47-9898

(04)2220-5766

(04)2293-8101

(04)2323-2468

(04)2465-1688

(04)2520-8966

(04)2255-9988

(04)726-3111

(04)837-8068

(05)235-7888

(06)223-2888

(06)200-5566

(06)202-8599

(06)282-3888

(07)392-8988

(07)557-5888

(07)224-3733

(07)535-1111

(07)725-6101

(07)622-6688

(07)710-8866

(08)732-3322

1-213-437-4800

852-2801-2801

852-3655-8688

853-2871-5175

84-8-3825-7612

84-8-3822-0566














































13,055

11,383

1,125,438

791,801

1,415,619

99,528

1.53

14.99

-

1.2186

323.54

277.48

35048.99

26454.60

43577.67

3300.02

0.04

0.44

-

-

10,698

9,175

1,158,925

874,744

1,440,933

109,118

1.23

14.65

-

-

For the year

Pretax income (include cumulative effect

of accounting changes)

Net income

At year-end


Discounts and loans

Total assets

Shareholders' equity

Per share

Earnings per share

Shareholders' equity per share

Dividends declared per share

- Cash dividend

- Stock dividend

Note 1: US dollar amounts are converted for convenience only at NT$33.06586 per dollar, the prevailing rate on Dec. 31, 2015.Note 2: Using the number of the outstanding issued shares at year end as the basis to calculate the shareholder's equity per share. Note 3: The above number of 2014 have been retroactively restated under the 2013 version of IFRS, IAS, IFRIC and SIC endorsed by the Financial Supervisory Commission.

7

ANNUAL REPORT 2015

8

The pace of the global economic recovery in 2015 was staggering, due to a number of adverse factors, including extremely cold weather in the U.S., deflation in the euro region, slackening of the Chinese economy, and drop of oil price below US$30 per barrel. Insufficient effective demand drove down material prices further and Asian currencies rushed to devalue. Global stock markets tumbled amid jittery market mood, due to uncertainty caused by concern over whether U.S. Fed would hike interest rate and whether Greece would exit the euro region, plus the slowdown of the Chinese economy. As a result, the International Monetary Fund (IMF) revised downward its forecast for the global economic growth three times, to 3.1% at year end, down from 3.6% in early 2015 and 3.5-3.3% in midyear. Overall speaking, the global economic performance failed to meet expectation in 2015. Plus the impact from the emerging red supply chain, Taiwan's exports declined for 12 months in a row and the GDP dropped 0.8% year-on-year in the third quarter of 2015, the first negative growth since the third quarter of 2009. Its economic growth, therefore, fell below the 1% mark in 2015, reaching only 0.75%, a six-year low. At the end of 2015, the Fed hiked interest rate, arousing expectation for upward movement for the rate, at odds with the policy of the European Central Bank, the Bank of Japan, and People's Bank of China, which are likely to continue embracing a loose monetary policy. Outlook for 2016 remains uncertain, due to a number of risks, such as downward trend of the Chinese economy, further interest hikes by the Fed, continuing oil-price drop, and geopolitical instability. The year kicked off with a bad start, as sharp devaluation of RMB and Chinese stock market crash triggered global stock selloff, underscoring thin confidence in economic prospect among investors.

Bank SinoPac raked in consolidated after-tax net profit of NT$9.175 billion, or NT$1.23 of earnings per share, in 2015, with ROE (return on equity) reaching 8.79%. The bank's consolidated assets hit NT$1,440.9 billion in value at the end of 2015, NT$25.3 billion more than a year earlier, when total deposits reached NT$1,157.3 billion and total loans NT$887.4 billion, up 3% and 10%, respectively. Consolidated capital adequacy rate stood at 13.47%.

At the end of 2015, the outstanding balance of corporate loans and credit business was NT$455.1 billion. Of the total, some 38% was extended in foreign currencies. In addition, the volume of factoring was NT$61 billion, and the volume of foreign exchange was US$207.4 billion, and the

outstanding balance of SME loans was NT$131.7 billion, ranked 5th among domestic private banks. In 2015, Bank SinoPac secured loan guarantee for NT$73 billion from the "Small and Medium Enterprise Credit Guarantee Fund of Taiwan, SMEG", ranked 2nd among domestic private banks. Alongside its expansion of overseas business territory, the bank's cross-border banking services network has covered major spots where Taiwanese-invested enterprises. The network offers those businesses integrated cross-border services via FCI (Factors Chain International) platform and FBI (Factoring by Insurance) products. The bank introduced the credit insurance of the Export-Import Bank of the ROC to its FBI products to bring down its risks and costs for delivering such services overseas. While Taiwanese-invested enterprises have been building supply chains all over the world, Bank SinoPac offers complete professional financial services, the Bank not only enjoys leadership in the domestic banking industry but also expands its business scope globally.

For individual banking, during conservative housing-market outlook, the demand for own-use houses surfaced, thanks to selective loosening of the restriction on housing loans by the Central Bank of the Republic of China and the anticipation for the implementation of consolidated house-land tax, effective on Jan. 1, 2016. In line with the government policy, Bank SinoPac rolled out "SinoPac Home Loan for the Youth" program, with up to 40 years of term, helping young people bear housing loans without sacrificing their living quality. Under the circumstance of housing market slackening, the bank's housing loans still grew more significantly than that of 2014, as the outstanding housing loans hit NT$402,278 million at the end of 2015. Auto loans and other individual loans were also expanded, with outstanding amounts reaching NT$7,176 million and NT$3,125 million, respectively, at the end of the year.

The wealth-management market fluctuated more in 2015. Stock markets in Europe and Japan had better performances, thanks loose monetary policy of their central banks, while stock markets and forex markets in emerging countries staged lackluster showing, due to slowdown of the Chinese market and interest hike by the U.S. Fed. Under the fluctuating market, balanced-type products became more popular, as they can shift focus between stock and bond markets, in line with market changes. Defaults occurred on energy-related high-yield bonds, due to the impact of low oil prices on the issuing companies, putting a damper on the performance of the overall high-yield bond index. In 2015, sales of designated money trust for investments in domestic and overseas securities reached NT$75,870 million, with the outstanding amount standing at NT$124,966 million at the end of the year. The outstanding amount of common trust business (including realty trust, trust for employee-owned shares and employee-welfare savings, and securities trust) hit NT$25,076 million at the end of the year. As a custodian bank for domestic mutual funds, the bank had US$238,543 million worth of assets under its custody at the end of 2015 and it raked inNT$23,719 million of premiums for banking insurance business in the year.

For financial banking, in addition to proprietary trading, the bank also offered customers diversified services, including risk hedging, financial operation, investment and wealth-management instruments, and real-time market information. Meanwhile, the bank also actively took part in various financial operations in Taiwan and other Asian markets, putting in place a complete platform for foreign currencies and derivatives and thus becoming a major market maker. The bank was forging an overseas platform, positioned as an operating center for Asian currencies and derivatives and funding center for Taiwanese businesses, providing complete cross-Taiwan Strait cash-flow service to enterprises. Along with the growing globalization of RMB, the bank will dedicate to the development of RMB-denominated investments and risk-hedging products, to meet customers' need for diversified financial products and professional services. The bank will develop further customer-oriented product portfolios, to fully satisfy customers' needs in risk hedging and investments.

For consumer banking, the amount of gasoline indebted spending dropped in 2015 but that of other indebted spending still advanced 1%. In order to cut card-issuance costs and enhance the rate of effective cards, the bank actively sliced dormant ones leading to 1.5% decrease for cards in circulation. The share of effective cards, though, increased by one percentage. In 2015, the quality of bank's credit-card assets upheld stable as bad-debt expense stayed at record low. Due to decrease of new loans, the outstanding amount of unsecured loans at the end of the year dropped 3.8% from the year earlier, but income from the business remained unvarying, as the average interest rate equaled the 2014 level. Thanks to the

Chairman / CHIU Cheng Hsiung

Letter to Shareholders ″

″

bank.sinopac.com

9

increase of merchants, the acquiring-bank business grew 12% to NT$50 billion in value. At the end of 2015, the outstanding amount of credit-card accounts receivable stood at NT$16,259 million, with the outstanding amount of unsecured consumer loans reaching NT$14,046 million.

Bank SinoPac has 129 domestic branches, including 88 in greater Taipei, as well as major service outlets in central and southern Taiwan and Kinmen. It also establishes a powerful and comprehensive overseas service network consisting of 17 outlets, including Hong Kong Branch, Kowloon Branch, Macau Branch, Los Angeles Branch, Ho Chi Minh City Branch, Vietnam Representative Office, along with 2 subsidiaries, California-based Far East National Bank (with nine local branches and a representative office in Beijing), and Nanjing-based Bank SinoPac (China) Ltd.

With the need for and importance of online cash-flow ever increasing, in the wake of the rapid development of e-commerce, Bank SinoPac, on top of marketing via various virtual channels, has deployed in e-payment, Bank 3.0, and cross-border business. It has also embraced mobile payment, established digital financial platform, and accumulated and improved user experience, thereby actively expanding market share.

In 2015, Standard & Poor's gave Bank SinoPac a BBB long-term rating and A-2 short-term rating, with a stable outlook. For its part, Taiwan Ratings assigned the Bank ratings of twA+ and twA-1 respectively, also with a stable outlook. Alongside a stable outlook, Fitch Taiwan assigned Bank SinoPac a BBB Long Term Issuer Default Rating, F2 Short Term Issuer Default Rating, A+(twn) National Long Term Rating, and F1+(twn) National Short Term Rating.

To cope with the digital current triggered by data science and the need for the integration and innovation of cross-line financial technologies, Bank SinoPac has aspired to become "the most nimble and convenient brand in Greater China," via the strategy of "new market, new currency, and new channel," in order to fulfill the four major visions of "winning the favor of customers, the satisfaction of shareholders, the respect of the society, and the pride of staffers." It hopes to become a long-term partner of customers bringing them happiness, considerate services, and added value. Via plural business deployment in Greater China, the U.S., and Southeast Asia and close integration of physical and virtual channels by combining platforms and creative innovative products, the bank aims to provide customers the most complete and convenient financial services for cash flow, investments, and funding, giving them brand new experience for financial life.

Bank SinoPac has been a long-term participant in social events as a responsible corporate citizen, including endorsement of local culture and encouragement for youth founding startups in hometowns. It has been a title sponsor for the "Simple Life Festival" event for two years running, which is designed to help participants "do favored things and make favored things valuable." In the venue of the event, the bank enabled participants experiencing digital finance, displaying custom, convenient, and safe online financial services. It conveyed the "banking is simple" concept to young participants, inspiring them to found startups. In 2015, it sponsored, for the seventh year in a row, "Taipei Children's Art Festival," instilling artistic and wealth-management concepts in children in a fun manner. For the second straight year, it joined hands with the "Yuan T. Lee Science Foundation for All" in organizing the "SinoPact Wealth-Management Science Camp," for the popularization for wealth-management science. In the wake of the dust-blast incident at the Formosa Fund Coast theme park, Bank SinoPac donated NT$10 million to New Taipei City government to help the victims. It also pledged to provide long-term stable job vacancies to the burned victims after their recovery, helping the youth return to the society. Meanwhile, it has helped small and medium enterprises remain rooted in Taiwan and extend their reach worldwide, offering them, in line with the government's various policies for economic recovery, various financial products and services to meet their needs. It has made an all-out effort to help SMEs cut the bad-debt risk associated with foreign trade and provided them complete and comprehensive funding support in their overseas initiative, thereby boosting their export competitiveness. Bank SinoPac has painstakingly helped disseminating Taiwan's culture and beauty, winning more acclaim and applause.

In 2015, the bank was granted by the Ministry of Economic Affairs the "SMEs Credit Guarantee Partner Award", "Excellent Credit Manager Awaed" and "Supporting Regional Development Award," in acknowledgment of the bank's excellent performance in combining SME loans and the credit guarantee mechanism. Taiwan Futures Exchange granted the bank first place for the "award for excellent market maker for RMB-exchange rate futures," in view of the bank's excellent performance in the grasp, expertise, and trading capability for the RMB market. It won the runner-up in the first half and the champion in the second half in the contest for NT-dollar interest swap platform, organized by the Taipei Exchange (the GreTai Securities Market). Thanks to its quality customer service, it won the golden award for domestic banks in the evaluation of Taiwanese service industry by the Commercial Times, the best service award in the banking evaluation conducted by Excellence magazine, the best service award in the evaluation of wealth-management banks and securities by the Business Today magazine. In view of its remarkable performance in e-finance, the Financial Supervisory Commission awarded the bank the certificate of "move for micro enterprises in year one for e-payment." The bank's wealth-management team was granted by the TRFP (Taiwan Registered Financial Planner) the awards of "best financial plan" and "best assets deployment." The bank's call center passed the certification of SGS Qualicert, the first domestic bank to do so.

Looking ahead, the bank still faces multiple challenges on the road lying ahead. Bank SinoPac, however, will not waver in its service concept regarding customers highly and the quest for business scale and the magnitude and depth of service. In adherence to basic spirit of "putting oneself in customers' shoes," the bank will endeavor to enrich its resources of manpower, organization, and information and continue innovation of products and services, in the hope of becoming, via localized financial services, a valuable long-term partner of customers and forge the No. 1 financial brand in the Chinese society.

CHIU Cheng HsiungChairman

Michael CHANG President

President / Michael CHANG

ANNUAL REPORT 2015

10

I. IntroductionBank SinoPac is a wholly-owned subsidiary of SinoPac Holdings, and was formed in a merger between the

former Bank SinoPac under SinoPac Holdings and the International Bank of Taipei on November 13, 2006.

Bank SinoPac provides the best financial services and innovative product line to customers through its

intensive branch networks. With the pillars of New Currency, New Market, and New Channel, the Bank can

realize its vision of building a company that embraces" content shareholder, proud employees, happy customer

and public respect".

International Bank of Taipei's predecessor was Taipei Mutual Loans and Savings Co., which was set up

on May 4, 1948. Transformed into Taipei Business Bank in 1978, it was upgraded to a commercial bank

under the name of International Bank of Taipei on May 14, 1998. The subsequent decades of evolution

saw International Bank of Taipei focus on serving small and medium-sized enterprises and securing a solid

customer base. On December 26, 2005, International Bank of Taipei was merged into SinoPac Holdings via a

share swap and thus officially became the latter's wholly owned subsidiary.

Since its inception on January 28, 1992, Bank SinoPac has been devoting to product innovation and

integration. Starting 2000, the Bank took the initiative to launch such niche offerings as Money Management

Account, B-to-B Pay-Web, e-Factoring, and Factoring by Insurance (FBI). These and other services form

an efficient platform that allows customers to allocate their funds and manage their assets without any

restrictions in time or geography. On May 9, 2002, Bank SinoPac, together with its subsidiary SinoPac

Securities, merged with National Securities, thus giving birth to SinoPac Holdings. On June 20 of the same

year, Bank SinoPac was made a wholly owned subsidiary of SinoPac Holdings.

On July 20, 2006, SinoPac Holdings changed its Chinese name into Yuen Foong (永豐). To better integrate

banking resources and optimize their economies of scale, Bank SinoPac and International Bank of Taipei

were merged as of November 13 of the same year, with the former as the surviving entity. Reengineering

initiated subsequently, across the Bank's channels, products and operations, led to the establishment of a new

network of full function branches. Further, the Bank undertook an across-the-board initiative to flatten the

organization and reduce expenditure that proved effective in bringing down its overall cost structure.

As part of the SinoPac Group's organizational restructuring and adjustment in investment portfolios, Bank

SinoPac completed the dissolution and liquidation of SinoPac Financial Consulting Co. on March 13, 2009.

This was followed by Bank SinoPac's merger with SinoPac Card Services, another wholly owned subsidiary

of SinoPac Holdings, on June 1 of the same year. Also with Bank SinoPac as the surviving entity, the exercise

did not only raise the bank's BIS ratio but also help consolidate resources and enhance overall operational

efficiency without undermining shareholders' interests. In a similar vein, Bank SinoPac sold its stake in

SinoPac Leasing to its parent SinoPac Holdings on December 3, 2009 in a bid to help the SinoPac Group put

its assets to better use and enhance its overall operational efficiency.

Bank SinoPac (China), the bank's subsidiary, kicked off operation on Feb. 28, 2014. Headquartered in

Nanjing, Bank SinoPac (China) is the first Taiwanese-invested bank incorporated in China. It is preparing the

Corporate Profile ″

″

bank.sinopac.com

11

December 31, 2015General Corporate Data

January 28, 1992

June 29, 1998

May 9, 2002

NT$109,118 million

NT$74,464 million

7,446.4 million

5,713

Deloitte Touche Tohmatsu

BBB

A-2

Stable

BBB

F2

Stable

twA+

twA-1

Stable

setup of its Shanghai branch, which already got the preparatory establishment approval of the local regulator

in November 2015. Meanwhile, the name of Far East National Bank, Ho Chi Minh City Branch was changed

to Bank SinoPac, Ho Chi Minh City Branch, effective on November 1, 2015.

In order to enhance the bank's capital adequacy rate, the bank issued, in four phases, unsecured perpetual

non-cumulative subordinated financial debentures in 2015, totaling NT$2.06 billion in value, for use as a

medium- and long-term fund for meeting capital need and expanding business scale. As of the end of 2015,

Bank SinoPac and its subsidiaries had a total workforce of over 5,700, with paid-in capital topping NT$74.4

billion and assets totaling NT$1,440.9 billion, boasting 18 divisions and four offices. On top of 129 domestic

branches (including Banking Division), the bank has multiple overseas outlets, including Hong Kong Branch,

Kowloon Branch, Macau Branch, Los Angeles Branch, Ho Chi Minh City Branch, and Vietnam Representative

Office, along with 2 subsidiaries, California-based Far East National Bank (with nine local branches and a

representative office in Beijing), and Nanjing-based Bank SinoPac (China) Ltd. Bank SinoPac has also invested

in SinoPac Capital (Hong Kong), SinoPac Life Insurance Agent, and SinoPac Property Insurance Agent. Along

with those subsidiaries, Bank SinoPac has offered customers all-round services.

Date of incorporation:

Date of listing on Taiwan Stock Exchange:

Re-listing date of SinoPac Holdings:

Total shareholders' equity:

Paid-in capital:

Number of shares issued:

Number of employees:

Auditor:

S&P Ratings (Sep. 16, 2015)

Long-term issuer credit rating:

Short-term issuer credit rating:

Rating outlook:

Fitch Ratings (Sep. 25, 2015)

Long-term issuer default rating:

Short-term issuer default rating:

Rating outlook:

Taiwan Ratings (Sep. 16, 2015)

Long-term issuer credit rating:

Short-term issuer credit rating:

Rating outlook:

12

Credit Committee

Supervisors

Secretariat

Audit Division

President Office

General Shareholder Meeting

Board of DirectorsChairman

PresidentTrust Asset AssessmentCommittee

Risk Management Committee

Asset Liability Committee

Credit & InvestmentCommittee

Honor reward / PenaltyEvaluation Committee

Management Committee

Consumer Banking Division

Retail Banking Division

Wealth Management Division

Corporate Banking Division

Products GroupOffice

Legal & Compliance Division

I.T. Division

Human ResourcesDivision

Operations GroupOffice

Operations Division

Administration Division128 Branches

(Taiwan)

Chief Executive ofFinancial Product

Chief Executive ofChannels

Channels GroupOffice

Chief Executive ofOperation

Electronic BankingDivision

Integrated Marketing Division

Finance ManagementDivision

Corporate Credit Risk Management Division

Overseas Business Division

OBU

Risk ManagementDivision


Ho Chi Minh City Branch

Los Angeles Branch

Macau Branch

Hong Kong Branch

Kowloon Branch

Banking Division

Financial InstitutionDept

International Dept

Financial MarketsDivision

Credit Committee

Supervisors

Secretariat

Audit Division

President Office

General Shareholder Meeting

Board of DirectorsChairman

PresidentTrust Asset AssessmentCommittee

Risk Management Committee

Asset Liability Committee

Credit & InvestmentCommittee

Honor reward / PenaltyEvaluation Committee

Management Committee

Consumer Banking Division

Retail Banking Division

Wealth Management Division

Corporate Banking Division

Products GroupOffice

Legal & Compliance Division

I.T. Division

Human ResourcesDivision

Operations GroupOffice

Operations Division

Administration Division128 Branches

(Taiwan)

Chief Executive ofFinancial Product

Chief Executive ofChannels

Chief Executive ofOperation Integrated Marketing

Division

Finance ManagementDivision

Corporate Credit Risk Management Division

Overseas Business Division

OBU

Risk ManagementDivision


Ho Chi Minh City Branch

Los Angeles Branch

Macau Branch

Hong Kong Branch

Kowloon Branch

Channels GroupOffice

Electronic BankingDivision

Banking Division

Financial InstitutionDept

International Dept

Financial MarketsDivision

II. Organization(I) Organization Chart

February 29, 2016

Corporate Profile

bank.sinopac.com

13

(II) Board of Directors and Supervisors

February 29, 2016

＊ All directors and Supervisors are legal representatives of SinoPac Holdings.

Director of SinoPac Holdings

Chairman of SinoPac Bancorp

etc.

Chairman of SinoPac Holdings

Director of SinoPac Life Insurance Agent Co., Ltd.

Director of YFY Biotechnology Management Co., Ltd.

Director of China Color Printing Co., Ltd.

Director of Shin-Yi Enterprise Co., Ltd.

etc.

Chairman of Ever Trust Investment Co., Ltd.

Director of SinoPac Holdings

Director of E Ink Holdings Inc.

etc.

Chief Operation Officer of SinoPac Holdings

Director of SinoPac Property Insurance Agent Co., Ltd.

Supervisor of Financial Information Service Co., Ltd.

Director of Bank SinoPac (China) Ltd.

President & Director of SinoPac Holdings

President & Director of SinoPac Capital Ltd. (H.K.)

Director of SinoPac Capital (B.V.I.) Ltd.

etc.

Chief Financial Officer of SinoPac Holdings

Director of SinoPac Securities Corp.

Supervisor of HYDIS Technologies Co., Ltd.

Director of E Ink Holdings Inc.

Director of Bank SinoPac (China) Ltd.

etc.

─

Independent Director of SinoPac Holdings

Independent Director of Mirle Automation etc.

etc.

Supervisor of Y F Chemical Corp.

Director of Riken Taiwan Industrial Co., Ltd.

Title

Chairman

Director

Director

Director

Director

Director

Director

Independent

Director

Independent

Director

Supervisor

Supervisor

Name

CHIU Cheng-Hsiung

HO Show-Chung

LEE Liang-Chi

HO Yi-Da

Tina CHIANG

YU Kuo-Chi

Michael CHANG

MAI Chao-Cheng

TSAI Ying-Yi

Eli C. WANG

HO Tsung-Ta

Elected Date

2013.06.01

2013.06.01

2013.06.01

2014.08.01

2013.06.01

2013.06.01

2013.06.01

2013.06.01

2015.09.01

2013.06.01

2013.06.01

Positions Held ConcurrentlyNationality

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

14

(III) Executive Officers

February 29, 2016

● Michael CHANGPresident of Bank SinoPac

● Lupe CHUANG Senior Executive Vice President

● CHANG, Tse-MinSenior Executive Vice President

● Jenny HUANG Senior Executive Vice President & Chief Secretary

● CHUANG, Chien-FaSenior Executive Vice President & Chief Executive of Channel

● CHEN, Chia-HsingSenior Executive Vice President & Chief Executive of Operation

● Ting J. CHENSenior Executive Vice President & Chief Executive of Financial Product & Head of Electronic Banking Division & Spokesperson

● HSIEH Chun Senior Executive Vice President & Head of Risk Management Division

● Benjamin TIENSenior Executive Vice President & Head of Overseas Business Division

● Brian LINSenior Executive Vice President & Regional General Manager

● Philip J.WEISenior Executive Vice President & Regional General Manager

● Jocelyn KUOSenior Executive Vice President & Chief Compliance Officer and Head of Legal & Compliance Division

● KUAN, I-ChunSenior Executive Vice President & Head of Corporate Credit Risk Management Division

● Benjamin LINSenior Executive Vice President & Head of President Office & Acting Spokesperson

● Stephen OUYANGSenior Executive Vice President & Regional General Manager

● Martin LEESenior Executive Vice President & Regional General Manager

● Robert TSAISenior Executive Vice President & Head of Information Technology Division

● Joe LINSenior Executive Vice President & Head of Corporate Banking Division

● CHEN, Jih-TienChief Auditor

III. Human Resources

Number of staff

Average age

Average seniority

Education

Ph.D. degree

Master's degree

University and college

Junior college & others

Total

5,713

37.76

10.11

0.14%

17.89%

76.21%

5.76%

100.00%

5,434

37.56

10.20

0.17%

17.78%

75.54%

6.51%

100.00%

5,749

37.90

10.20

0.14%

17.92%

76.08%

5.86%

100.00%

2015 20142016/2/29Items

February 29, 2016Employee Statistics

Corporate Profile

bank.sinopac.com

15

I. Global Overview

(I) Overview of Major Markets for SinoPac Products and Services

SinoPac Holdings focuses on Pan-Pacific region for the provision of its services, including Taiwan, the

U.S., mainland China, Hong Kong, Macao, and Vietnam, whose economic statuses follow:

A. Taiwan

In 2015, due to several unfavorable factors such as weakening global economic recovery, high inventories

of electronic products, the crowding-out effect of China's red supply chain, and further price drop of

raw materials, plus tumultuous financial market, global stock selloff, and spreading unpaid leaves etc.,

these factors put a damper on market sentiment and also lead to a sluggish private consumption and

conservative investment. Therefore, both domestic and external demands failed to meet expectation

Taiwan's GDP growth nosedived, declining from 4.04% in the first quarter and 0.57% in the second

quarter to -0.8% in the third quarter, the lowest since 2009. The officially released number of 2015's GDP

is estimated to decrease from 2014's 3.92% to 0.75%.

Economic outlook for 2016 is lackluster, owing to the slowdown of Chinese economy and the uncertainty

of its economic transformation, further oil-price drop, interest-rate upward movement in the U.S. that

might trigger flowing back of capital and inhibit growth of emerging markets and developing nations as

well. In addition, Taiwan's industry is insufficient in competitiveness in facing regional trading changes

by virtue of its weak structure. These unfavorable factors will more than offset benefits from a number of

favorable factors, including steady recovery of the U.S. economy, loose monetary policy in the Euro region

and other major economies that might sustain global economic recovery. Taiwan's GDP growth is expected

to slightly upturn to 1.27% in 2016.

As a result of further drop in oil price and higher comparison base period of electricity bills in 2014,

average CPI in 2015 dropped 0.31%, which is the lowest since financial crisis in 2009, with average

core CPI increased only 0.79%. However, the downward pressure will persist in oil prices because OPEC

failed to reach the agreement of production cut and the return of Iran to the global oil market. Moreover,

the U.S. government lifts the ban on crude-oil export also aggravate oil glut. From the abovementioned

reasons, Taiwan's CPI might pick up slightly around 0.62% in 2016.

In 2015, the pace of global economic recovery is staggered. Considering the fact that Chinese economic

growth is slowing down and the subsequent negative spill-over effect of RMB's devaluation, and sluggish

exports of most Asian nations as well as expanding shortfall of domestic output and real interest rates

remaining relatively high, the Central Bank of China (CBC) cut discount rate from original 1.875% to

1.625%. The CBC might continuously cut interest rates due to insufficient effective demand and weak

foreign trade performance.

Economic and Financial Review ″

″

16

B. Mainland China, Hong Kong, and Macau

In 2015, China's exports declined 2.8%, the worst performance since 2009, due to worse-than-expectation

growth of the global economy, low oil prices, and financial tumult. Imports plunged 14.1%, due to

overcapacity and sharp drop in demand for raw materials. Retail sales advanced 10.7%, a nine-year low.

Investment willingness was weak on overcapacity and continuous price drop for finished products, as a

result of which growth of fixed investments hit 15-year low. China's GDP growth in 2015 reached 6.9%,

the lowest in 25 years, compared with the government's growth target of 7.0%. The economies of Hong

Kong and Macao also tumbled, with the former's GDP growing 2.4%, down from 2014's 2.6%, and that of

the latter even plunging to -20.3%, compared with -0.9% in 2014.

RMB made a stride in internationalization in 2015, when the International Monetary Fund (IMF) included

it into the basket of currencies for SDR (special drawing right), making it a reserve currency worldwide.

The exchange rate of RMB fluctuated. People's Bank of China (PBOC) slashed the yuan midpoint by 2,848

points in three days starting Aug. 11, 2015. Plus expectation for devaluation of RMB, in the wake of U.S.

triggering upward movement for interest rates, CNY dropped to the nadir of US$6.4948, a four-year low.

The government embraced a nimble monetary policy, providing multiple-currency adjustment and control

vehicles for structural reform, cutting funding cost, and maintaining sufficient liquidity. In 2015, the

PBOC continued to carried out open-market operations to adjust the level of funding pool, supplemented

with MLF, SLO, and other vehicles, in addition to lowering SLF rates, to cap the interest-rate corridor.

Meanwhile, it cut interest rates five times and required deposit reserves ratio four times in 2015, to

alleviate downward risk of the economy, a move expected to be continued in 2016.

In line with the 13th five-year development plan, the central economic working meeting called for

expansion of demand and reform of supply via the five strategies of "trimming capacity, cutting cost,

deleveraging, lowering inventories, and making up shortfalls." Meanwhile, it insisted on stable progress,

steady growth, structural adjustment, benefit people's well-being, and risk prevention, highlighting

stability in macro policy, precision in industrial policy, nimbleness in micro policy, and substance in reform,

so as to keep economic growth in a reasonable range. With the Chinese economy undergoing structural

adjustment, the economic growth is expected to slip further to 6.6% in 2016. Dragged by China's sluggish

domestic demand, Hong Kong's GDP growth will dip to 2.3%, while that of Macao will decline 10%, due to

impact of China's economic slowdown on the casino business.

C. U.S.

The U.S. GDP grew 2.4% steadily in 2015, as private consumption expanded 3.1%, up from 2014's 2.7%,

thanks to 30% oil-price drop and increase of non-agriculture employment by 230,000 a month on average.

In 2016, the job market will remain robust, with the unemployment expected to drop below the 5%

market, to 4.6%, which, plus low oil prices, will sustain private consumption. In addition, the latest study

of ISM (Institute for Supply Management) shows that the service sector, for 88% of the GDP, will score


bank.sinopac.com

17

investment growth of 7.5%, up from 2015's 2.6%. The U.S. GDP will expand by 2.0% in robust private

consumption and service investments. With the job market improving markedly, the U.S. Fed started to

normalize interest rates in December 2015, announcing raising, for the first time in 10 years, interest

rate by 0.25%. To alleviate market concern for a tight monetary policy, the Fed stressed that it will hike

interest rates in a gradual manner. The Fed is expected to further raise the federal fund rate moderately.

D. Vietnam

In 2015, with the Chinese economy undergoing structural adjustment, Vietnam geared

up to take over the role of the "world's factory." Plus the stimulation of the government's

state-enterprise reform and a number of new measures, Vietnam's GDP jumped to 6.68%

in 2015, up from 2014's 5.98% growth, higher than the government's target of 6.20%.

Industry and construction staged the best performance, scoring 9.64% growth in output,

compared with 2.41% of agriculture (including forest and fishing) and 6.33% of the

service sector. Exports grew 8.l0% to US$162.439 billion, lower than 12% import

growth, to US$165.606 billion, leading to a trade deficit of US$3.167 billion. Inflationary

pressure, disappeared, due to price drop of oil prices and bulk commodities, with CPI

inching up 0.66%. With low oil prices stimulating consumption and lowering business

cost, retail sales rose 9.5% and industrial output 9.8%, including 10.6% growth for

manufacturing output. The robust performance attracted foreign capital, as foreign direct

investments jumped 12.9% to US$22.760 billion.

In 2016, the Vietnamese economy is expected to continue performing robustly, thanks to:

(1) structural reform: In order to join TPP and RCEP, the Vietnamese government will

have to carry out political and economic reform, for the purpose of creating a quality trade

environment and boosting its trade competitiveness. (2) stable growth of domestic demand:

The ANZ Vietnamese consumer sentiment index hit new high in 2015, which, plus the

government's pay-hike plan, will further stimulate domestic consumption in 2016. (3)

exchange-rate reform: The State Bank of Vietnam plans to publicize the median exchange

rate for Vietnamese Dong daily, allowing the rate to fluctuate within a range, which will

be conducive to a stable exchange rate, influx of foreign capital, and trade development.

The stable growth of domestic demand and export will offset the adverse effect of China's

economic slowdown, enabling Vietnam's economy to grow 6.7% in 2016.

(II) Future Market Supply and Demand

Similar to sales of insurance policies and orders for securities investment, banking loan business hinges

on the status of economy. During an expansion stage, demand for loans will be strong, to meet the

need for increased outlays, as people will tend to take out insurance policies on sufficient funds and job

security and investors will be more willing to invest in securities amid a bullish market. Consequently,

18

banks, insurance firms, and securities companies will enjoy good profit performance. On the contrary,

during a stage of contraction and decline, financial institutions will have lackluster performance or even

suffer red inks, due the appearance of bad debts and investment loss.

Over the past 30 years, Taiwan's economy has undergone structural changes, with the share of exports

in GDP plunging to 70% in 2015, a far cry from 30% initially. Taiwan's economic outlook hinges on

the economic performances of its three major export outlets, namely mainland China (including Hong

Kong), Europe, and the U.S. With the correlation coefficient between domestic banking loans and GDP

growth topping 65%, growth of domestic banking loans is expected to hit 1%-3% in 2016, based on the

forecast of 1.47% GDP growth made by the Cabinet-level Directorate General of Budget, Accounting, and

Statistics.

1015

10

5

0

-5

-10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

8

6

4

2

0

-2

-4Year

(%)(%) Annual Growth Rates of GDP (L) Annual Growth Rates of Loans and Investment (R)

Source: TEJ; Compiled by SinoPac HoldingsAnnual Growth Rates of GDP, Loans and Investments

After September 2011, the CBC stopped interest-rate hike, on global economic slowdown and reduced

expectation for inflation. Moreover, in September and December the CBC announced raising discount

rate, accommodation for secured loans, and short-term accommodation, by 0.125 of a percentage

point each time, totaling 0.25 of a percentage point, after keeping interest rates unchanged for 16

quarters running. The purpose is stimulation of the sluggish economy, at a time when there was no

inflationary concern. Induced by foreign currencies, nominal interest spread at domestic banks trended

upward, reaching 1.44% in the fourth quarter, jup from 1.42% in the first quarter. With the global

economy still shrouded in uncertainty, it cannot be ruled out for the CBC to make the third interest

cut in 2016.


bank.sinopac.com

19

(III) Positive and Negative Factors for Future Development

A. Favorable Factors

1. Mainland operations of domestic banks gradually on track

With the cross-Strait service agreement still in limbo, the Chinese regulator, however, has selectively

opened up for business expansion for domestic banks in mainland China. As of the end of 2015, Chang

Hwa Bank, Taiwan Cooperative Bank, Hua Nan Bank, and First Bank had launched their third branch

in China. Taipei Fubon Bank and Fubon Holdings acquired 80% stake in First Sino Bank in Jan. 2014

and renamed it Fubon First Sino Bank. With the approval of Chinese regulator in Dec. 2013, Bank

SinoPac (China), subsidiary of Bank SinoPac kicked off operation on Feb. 28 2014, becoming the first

Taiwanese-invested bank incorporated in China a milestone in cross-Strait financial cooperation.

2. Further expansion of Formosa Bond market facilitates formation of offshore RMB center

RMB deposits at the DBUs (domestic banking units) topped 100 billion yuan in October 2013. To

find outlet for the huge funds, the Financial Supervisory Commission announced permission for

issuance of Formosa Bonds by domestic Chinese banks and their overseas branches or subsidiaries,

mainland Chinese branches of domestic banks, and mainland subsidiaries of domestic firms listed on

the centralized or OTC markets. As of the end of 2015, the issuance amount of Formosa Bond hit 61.6

billion yuan, double a year earlier, with terms ranging 2-15 years and paper rate 2.45-5.25%. With total

RMB deposits of local people nearing 320 billion yuan, expected to rise further, Taiwan will become

an offshore RMB center, so long as the regulator further loosen the conditions for issuance of Formosa

Bond and permit common investors to subscribe to Formosa Bond floated by mainland Chinese banks.

4.012.0

10.0

8.0

6.0

4.0

2.0

0.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(%)(%)

Year

Deposit Rate (L) Loan Rate (L) Nominal Spread (R)

Source: TEJ; Compiled by SinoPac HoldingsNominal Interest Spread

20

3. Fed triggers movement of interest-rate hike

The U.S. Fed announced in mid-December hike of federal fund rate by 0.25 of a percentage point

to 0.5%, boosting the target zone for interest rates to 0.25-0.5 of a percentage point, citing stable

unemployment rate, in the neighborhood of 5% on average, upturn of inflation rate, towards the target

of 2%, and rosy economic outlook. This is the first adjustment of the federal fund rate since 2006. In

a post-meeting statement, the Federal Open Market Committee pointed out that the Fed will embrace

the principle of gradualism in raising the federal fund rate. Interest hike in the U.S. will increase the

foreign-current interest spread at domestic banks, boosting their net interest income.

4. End of turmoil caused by capital gains tax

On Nov. 17, 2015, the Legislative Yuan passed revision to the "Income Tax Law," removing income

tax on capital gains from securities investments altogether, including big investors, effective Jan. 1,

2016. According to the revision to the "Income Tax Law" passed by the legislature in June 2013,

investors selling stocks worth more than NT$1 billion in value yearly will be subject to a 0.1% tax on

their capital gains from securities investment for the part in excess of the NT$1 billion market, unlike

common investors who would be exempt from the tax. The clause was blamed for the poor market

performance, although a three-year moratorium was put in place for its implementation. With the

removal of the uncertain factor, trading volume at local bourse is expected to pick up, facilitating stable

business growth for securities brokers in medium and long term.

B. Unfavorable Factors

1. Banking idle funds persist

Taiwanese banks have been haunted by huge idle funds since 2002, as the loan/deposit ratio had

dropped to 75% in 2009, down from 79-83% in 2002-2008, and to 74% further in 2015. The opening

of mainland branches by some banks will make little contribution to the solution of the problem in the

near future.

2. The CBC cuts interest rate

The CBC cut discount rate, accommodation for secured loans, and short-term accommodation twice

in 2015, in September and December, at 0.125 of a percentage point each time, totaling 0.25 of a

percentage point, on sluggish economy and lackluster outlook, plus absence of concern for inflation.

The move, aimed to stimulate the economy, came on the heels of 16 quarters running when interest

rates were kept unchanged. It has triggered shrinkage of interest spread at domestic banks starting the

fourth quarter of 2105. Should the CBC make another interest-rate cut, the spread will decrease further,

dampening yield from NT dollar-denominated assets.


bank.sinopac.com

21

3. Securities firms still unable to enter the Chinese market

During a Cross-Strait financial meeting in 2013, the Chinese regulator promised to open up the

mainland securities market, allowing Taiwanese securities firms to set up (1) one whole-licensed

securities firm with up to 51% stake, with mainland or other foreign partners, in Shanghai, Shenzhen,

and Fujian; and (2) whole-licensed securities firms with controlling stake, but less than 49%, in the

six special zones of Haixi, Wenzhou, Qianhai of Shenzhen, Pudong of Shanghai, Binghai of Tianjin, and

Liangjiang of Chongqing. Afterwards, domestic securities have been actively seeking the establishment

of such whole-licensed securities firms in mainland China, in order to undertake A share-related

businesses. Their applications have been shelved, however, due to the stalling of the cross-Strait service

trade agreement.

ANNUAL REPORT 2015

22

I. Business Overview

(I) Business scope and overview

A. Retail Banking

1. Business Scope:

(1) Provide collateralized personal loans and related retail lending products, such as mortgage loans, auto

loans, second mortgages, securities-backed loans, and other collateralized loans.

(2) Build on the products listed above to provide customers with fully integrated services that meet

their needs.

2. Business Overview:

During conservative housing-market outlook, the demand for own-use houses surfaced, thanks to

selective loosening of the restriction on housing loans by the Central Bank of the Republic of China and

the anticipation for the implementation of consolidated house-land tax, effective on Jan. 1, 2016. In line

with the government policy, Bank SinoPac rolled out "SinoPac Home Loan for the Youth" program, with

up to 40 years of term, helping young people bear housing loans without sacrificing their living quality.

Different from the U.S. which started to hike interest rates at the end of 2015, the Central Bank of the

Republic of China cut interest rates for two quarters in a row starting September due to the unstable

economic situation in Taiwan. In order to uphold the quality of housing-loan assets, Bank SinoPac will

continue developing the high-asset customer group, while providing preferential loans to first-time

housing buyers, under the auspices of "SinoPac Home Loan for the Youth" program.

Under the circumstance of housing market slackening, the bank's housing loans still grew more

significantly than that of 2014, as the outstanding housing loans hit NT$402,278 million at the end

of 2015. By managing high interest-spread products, auto loans and other individual loans were also

expanded, with outstanding amounts reaching NT$7,176 million and NT$3,125 million, respectively, at

the end of the year.

B. Wealth Management

1. Business Scope:

A wide array of products and services that meet every customer need, including investment products,

trust and custody services, and bancassurance.

(1) Asset Management: Domestic and foreign mutual funds, overseas bonds, ETFs, offshore structured

products, etc.

(2) General Trust and Custody: Acting as custodian bank for securities investment and trust companies

that offer mutual fund services in Taiwan, foreign institutions investing in local securities, and

the special investment accounts designated for local companies' foreign and/or mainland Chinese

employees; custody of discretionary accounts; custody of securities; trust of employee bonuses

and benefits; custody of employee pensions and severance pays; trust of new restricted shares for

Operating Report ″

″

bank.sinopac.com

23

subscription by employees; realty trust; securities trust; trust of payments for transactions; trust of

advance payments; public welfare trust; insurance trust; Trust services for elderly and disabled、

trust services for elderly and disabled、custom-made trust; securities certification; acting as trustee

for corporate bonds and as depositary bank for TDRs.

(3) Bancassurance: Joining SinoPac Life Insurance Agent, SinoPac Property Insurance Agent and

insurance companies to provide savings insurance, mortgage life insurance, protection insurance and

investment insurance as well as accident insurance, fire insurance, business insurance, auto/motorbike

insurance and health insurance.


In 2015, market swing expanded on China's stock market crash, devaluation of RMB, possible exit of

Greece from the euro region, and interest hike by the U.S. Fed. Induced by loose monetary policy of

their central banks, European and Japanese stock markets performed better than other mature markets.

Most emerging countries performed poorly in both stock and currency markets, due to the effect of

China's economic slowdown and interest hike by the U.S. Fed. Balanced-type products continued to be

popular among investments amid increased market swing, as they can shift investment focus along

with changes in stock and bond markets. Defaults on energy-related high-yield bonds surfaced, due to

the impact of low oil prices on the issuers, dragging down the overall performance of high-yield bond

indices.

For its part, Bank SinoPac channeled NT$75.870 billion under specified-purpose pecuniary trusts

toward domestic and overseas securities last year, pushing the outstanding balance to NT$124.966

billion. Further, the Bank's trust department had NT$25.076 billion under trust (including realty trust,

employee stock and savings trust and securities trust) at the end of 2015. As the custodian bank for

securities investment and trust companies that deal in mutual fund businesses in Taiwan as well as

other entities, Bank SinoPac had NT$238.543 billion under its custody at the end of 2015. In terms of

bancassurance, the Bank took in premiums totaling NT$23.719 billion last year.

C. Consumer Banking

1. Business Scope:

(1) Issuing credit cards; providing cardholders revolving credit and installment plan for their unpaid

balance

(2) Offering cash advances; signing up merchants accepting credit cards to process their credit card

sales and to credit them to their accounts

(3) Providing personal unsecured loans


The value of gasoline indebted spending dropped in 2015 but that of other indebted spending still

advanced 1%. In order to cut card-issuance costs and enhance the rate of effective cards, the bank

24

actively sliced dormant ones leading to 1.5% decrease for cards in circulation. The share of effective

cards, though, increased by one percentage. In addition, assets quality of card portfolio kept invariable

bad loan charge-off record low, and profitability sound.

Due to decrease of new loans, the outstanding amount of unsecured loans at the end of the year dropped

3.8% from a year earlier, but income from the business remained stable, as the average interest rate

equaled the 2014 level.

Thanks to the increase of merchants, the acquiring-bank business grew 12%.

At the end of 2015, the outstanding amount of credit-card accounts receivable stood at NT$16,259

million, with the outstanding amount of unsecured consumer loans reaching NT$14,046 million. Interest

income accounted for 59% of total business income and the share of fee income stood at 41%.

D. Corporate Banking

1. Business Scope:

(1) Acceptance of corporate deposits

(2) Short-term working capital;term loans; guarantee and acceptance services

(3) Domestic and International Factoring

(4) Trade finance services, including foreign exchange payments and receipts as well as guarantee for

foreign currency payments

(5) International banking services meant for offshore enterprises and individuals

2. Business Overview

At the end of 2015, the outstanding balance of corporate loans and credit business was NT$455.1

billion. Of the total, some 38% was extended in foreign currencies, reflecting a slight decrease in

overseas lending. In addition, the volume of factoring was NT$61 billion, and the volume of foreign

exchange was US$207.4 billion, both account for significant market share among the banking industry

in Taiwan. Meanwhile, the outstanding balance of SME loans was NT$131.7 billion, ranked 5th among

domestic private banks.

In 2015, Bank SinoPac secured loan guarantees for a total of NT$73 billion from the "Small and

Medium Enterprise Credit Guarantee Fund of Taiwan, SMEG", Credit Guarantee Fund, ranked 2nd among

domestic private banks. The Bank also supported the Financial Supervisory Commission's program of

"Project for Strengthening Domestic Bank Lending to SMEs-the tenth phase". In turn, the Small and

Medium Enterprise Administration, Ministry of Economic Affairs, accorded Bank SinoPac 3 special

awards for "SMEs Credit Guarantee Partner Award" , "Excellent Credit Manager Award" and "Supporting

Regional Development Award" in July of the year.

Operating Report

bank.sinopac.com

25

In 2015, the bank achieved record-high as a Mandated Lead Arranger in 30 syndicated loans providing

mid- to long-term funding solutions to domestic and overseas enterprises.

Alongside its expansion of overseas business territory, the bank's cross-border banking services network

has covered major spots where Taiwanese-invested enterprise. The network offers those businesses

integrated cross-border services via FCI (Factors Chain International) platform and FBI (Factoring

by Insurance) products. The bank introduced the credit insurance of the Export-Import Bank of the

ROC to its FBI products to bring down its risks and costs for delivering such services overseas. While

Taiwanese-invested enterprises have been building supply chains all over the world, Bank SinoPac offers

complete professional financial services, the Bank not only enjoys leadership in the domestic banking

industry but also expands its business scope globally.

E. Financial Markets

1. Business Scope:

(1) Proprietary Trading: Foreign exchange, interest rates, equities, derivatives, etc. For financial

derivatives, a new department was established to develop structured products and engage in risk

hedging.

(2) Treasury Marketing Unit: Providing customers with optimized hedging plans, financial exercises,

financial investment instruments, and timely market information.


Always an avid market participant in Taiwan and across Asia, Bank SinoPac has built a solid track

record particularly on the forex and derivatives fronts. It won the runner-up in the first half and the

champion in the second half in the contest for NT-dollar interest rate swap platform, organized by the

Taipei Exchange (the GreTai Securities Market) in 2015. Moreover, the Bank's overseas platform for

financial trading is positioned as a center for trading Asian currencies and their derivatives as well as a

base for Taiwanese businesses to conduct offshore allocations of their capital. Taiwanese companies that

operate across the Taiwan Strait are thus accorded better-rounded cash flow services.

In the Treasury Marketing Business, the Bank needs to adapt to an ever-changing external environment,

reexamine the composition of its clientele regularly, and persistently optimize the process of reviewing

Pre-settlement Risk Limit and systematic control and management of KYC (Know Your Customer)

evaluation. Equal emphasis is to be placed on enforcing risk control of overall investment holdings,

monitoring the latest market prices, strengthening training of salespeople, and deepening customer

relationships.

As the RMB increasingly becomes an international currency and grows steadily, the Bank is ready

to focus on the development of investment and hedging products denominated in the RMB and other

26

foreign currencies. The objective is to provide local customers with a greater variety of financial

markets products and services. In the days ahead, priority will be given to developing a customer-

oriented product mix that can fully meet customer needs for hedging and investment.

F. Electronic Banking

1. Business Scope:

(1) Planning and operating the Bank's digital banking platform

(2) Promoting marketing via electronic channels

(3) Provide corporate clients with cash management solutions, including receivable / payable

products, liquidity management and automatic teller machine service to address the needs of our

clients.


The bank dedicates to the innovation and improvement of the Internet, mobile platform, and cash-flow

service in e-finance. In 2015, three major e-finance platforms, namely MMA financial trading network,

Global eBanking, and SinoPac mobile banking, underwent renovation before re-launch. SinoPac mobile

banking boasts the innovative services of "speech recognition" and "key-word search." SinoPac will

continue developing multiple digital financial services, helping customers create value as a long-term

partner.

In May 2015, it pioneered the service of "cloud-end account opening."

In June 2015, it rolled out exclusive "custom temple program," featuring list of divinations and the

function of "blessing light," which has enjoyed good reception.

In December 2015, it launched "Visa Direct" outward small-amount remittance service, which can be

completed in one day.

G. SinoPac Life Insurance Agent

1. Business Scope:

The principal business is the selecting insurance companies in good standing, introducting secure

insurance products and wealth management products with long-term stability, and satisfying the long-

term saving and wealth management needs of customers targeted by the group through appropriate

group channels.


In addition to introducing appropriate general insurance and packaged products that cater to target

customers, SinoPac Life Insurance Agent is also proactive to usher in mortgage insurance offerings in

combination with banking services. Meanwhile, an investment management platform is to be established

Operating Report

bank.sinopac.com

27

for working with reputable insurers to jointly introduce pension and investment management products

meant specifically to meet customer needs for the accumulation, protection, withdrawal, and transfer

of assets. At present, SinoPac Life Insurance Agent operates a complete line of insurance products and

services-mortgage insurance, family security, savings insurance, and investment-linked insurance to

satisfy the needs of all SinoPac Holdings customers.

H. SinoPac Property Insurance Agent

1. Business Scope:

(1) Residential fire insurance, earthquake basic insurance and residential comprehensive insurance.

(2) Accident insurance and Health insurance

(3) Auto mobile insurance.

(4) Commercial insurance: including business fire insurance, accounts receivable insurance, electronic

equipment insurance, public accident liability insurance, directors and officers liability insurance

(D&O) and marine insurance.

2. Business Overview

Currently, the insurance business primarily comprises "commercial insurance", "residential fire

insurance", and "accident insurance". Since corporate risk planning encompasses both physical assets

and human beings, clients are given a full range of insurance coverage options for protection against all

contingencies.

1.52%

21.59%

22.65%

45.76%

31.02%

0.86%

22.36%

54.24%

100.00%

Demand Deposits

Checking Deposits

Demand Deposits

Savings Deposits

Subtotal

Time Deposits

Time Deposits

Negotiable Certificates of Deposit

Savings Deposits

Subtotal

Total

Dec. 31, 2014Dec. 31, 2015

Amount %Items

17,870

238,248

257,908

514,026

369,721

972

239,957

610,650

1,124,676

1.59%

21.18%

22.93%

45.70%

32.87%

0.09%

21.34%

54.30%

100.00%

Amount %

17,588

249,808

262,153

529,549

358,917

9,993

258,807

627,717

1,157,266

In NT$ millionsDeposits (Consolidated)

28

20142015Items

27,364

11,797

15,567

6,021

1,804

10

-

861

56

(5)

-

478

24,792

(92)

14,186

10,698

1,523

9,175

415

9,590

28,542

12,053

16,489

6,004

2,927

33

(12)

911

234

-

3,787

724

31,097

3,966

14,076

13,055

1,672

11,383

683

12,066

Interest revenue

Interest expense

Net interest

Net revenues other than interest

Commission and fee revenues, net

Gains on financial assets and liabilities at fair value through profit

or loss

Realized gains from available-for-sale financial assets

Realized losses on held-to-maturity financial assets

Foreign exchange gains, net

Reversal of Impairment losses on assets

Share of loss of associates

Other revenue

Other non interest net revenues

Total net revenues

Allowance for (reversal of)doubtful accounts and guarantees

Operating expenses

Income before income tax

Income tax expense

Net income

Other comprehensive income, net of tax

Total comprehensive income

In NT$ millionsSummary of Consolidated Income and Expenses

0.08%

0.03%

0.18%

29.74%

23.05%

46.73%

0.19%

100.00%

Import and Export Negotiations

Overdrafts

Accounts Receivable Financing

Short-Term Loans

Mid-Term Loans

Long-Term Loans

NPLs Transferred from Loans

Total

Dec. 31, 2014Dec. 31, 2015

Amount %Items

728

324

2,287

220,433

204,905

375,061

1,596

805,334

0.09%

0.04%

0.29%

27.37%

25.44%

46.57%

0.20%

100.00%

Amount %

747

266

1,624

263,915

204,516

414,660

1,694

887,422

In NT$ millionsLoans (Consolidated)

Note：Above short-term medium-term and long-term loans are included secured and non-secured loans .

Operating Report

bank.sinopac.com

29

II. Business plan of the year

(I) Retail Banking

1. Readjust personal collateralized loan portfolio to ensure stable growth of earnings while complying

with the policies of the Authority and the optimal resource allocation.

(1) In order to boost the overall development of the housing market, the Central Bank of the Republic

of China has adjusted several policies such as selective credit-control measures for realty and the

Financial Supervisory Commission towards financial institutions about the realty self-management.

Accordingly, the bank has dynamically adjusted peripheral measures for product development,

balancing profit seeking and risk hedging.

(2) Form dynamic counteractions in accord with the Authority's tightened control over realty and

mortgage loans to ensure the effective risk management.

2. Commit in soliciting the target segments as well as retain the premium loan quality.

(1) Encourage the channels to deliver the products to the target customers by way of the risk control

policy and pricing differentials.

(2) Be in line with branch customer management, and leverage the system to reinforce pre- and post-

lending assets risk management.

3. Provide customer-oriented integrated sales to cement the stickiness with customers.

(1) Coordinate internal resources, keep track of the needs of premium clients, and provide differential

services.

(2) Conduct analysis of the database for marketing accompanies by the upraised added-value attributed

to strategic alliances to reinforce customer loyalty and increase fee income.

(II) Wealth Management1. Develop SinoPac as a premier brand in wealth management by adhering to a customer-first business

model

(1) Know the customers-both their needs and risk tolerance; offer asset allocation services that pay

equal attention to risk and return.

(2) Seek stable growth for customers' assets and provide them long-term trustworthy consulting

service.

2. In line with the digital-finance current, provide integrated e-finance services and establish digital

wealth-management platform

(1) Continue installing and improving e-trading platforms, such as e-banking and mobile banking, so as

to provide abundant, real-time, convenient, and active wealth-management services.

(2) Integrate physical and virtual channels for branches and establish rich, complete, and all-round

wealth-management service platform.

30

3. Develop innovative products and services to meet customer needs to intensify customer dealings and

boost customer satisfaction

(1) Establish business model integrating customer needs, R&D, product portfolios, and assets risk

management, thereby providing customers complete and multiple investment-management planning.

(2) Provide, via R&D of professional service-channel team, differentiated and sophisticated products, as

well as wealth-management information and services, thereby enhancing overall service quality.

4. Strengthen discipline in the sale process to protect consumer rights and interests

(1) Persist with salespeople training, giving priority to enhancing professional competence and risk

management.

(2) Ensure statutory compliance, risk management, and protection of personal information with regard

to all products and services; win customer trust by effectively upholding customer rights and

interests.

5. Expand offshore wealth management services to explore high net worth clients

Based in Hong Kong branch, as an Asian financial center and a vibrant market for investment and

wealth management, Bank SinoPac will explore high net worth clients from Hong Kong to the

neighboring areas to develop offshore wealth management services and then increase non-interest

income.

6. Integrate domestic and overseas products and services while developing three main wealth management

offerings: mutual funds, insurance, and structured products. Draw on competitive products and quality

services to provide optimal asset allocation that effectively meets customer needs. Upgrade all the

relevant systems to formulate a better-rounded wealth management platform.

(III) Consumer Banking1. Adjust existing product structure and remove inadequate products, so as to augment the performance of

credit-card business.

2. Focus on banking card, develop new products, and create product value.

3. Grasp trend of technological development and conduct R&D on cloud end, electronics, mobile device, and

O2O, thereby integrating related payment and acquiring-bank solutions.

4. Effectively allocate marketing resources for the management of high-contribution customer groups,

boosting profits.

5. Conduct precision pricing for unsecured loans according to risks of individual customers and raise the

ratio of cases for autonomous review.

6. Develop the unsecured-loan performance evaluation mechanism featuring the customer transfer function

of branches, so as to boost the contribution of branches in soliciting business cases.

7. Intensify risk alert and strengthen post-loan management mechanism.

8. Abide by marketing norms and enforce and intensify marketing discipline.

Operating Report

bank.sinopac.com

31

(IV) Corporate Banking

1. Offer comprehensive corporate banking services in domestic branches

With a far-reaching service network of 129 full function branches, Bank SinoPac is well-

positioned to provide customers with all sorts of financial services. In particular, a great

variety of corporate banking products go a long way toward deepening customer relationship.

Moreover, Bank SinoPac joins other SinoPac Holdings affiliates in delivering more consolidated,

value-added services to corporate clients, to fulfill all their financial needs.

2. Build the most flexible, accessible brand name for financial services across Greater China

On Feb. 28, 2014, Bank SinoPac's mainland China subsidiary bank, Bank SinoPac(China),

officially operated, thereby ushering in a new era for financial services across the Taiwan Strait.

Headquartered in Nanjing, it was the first subsidiary set up by a Taiwanese bank. Via a global

network, including its domestic and overseas branches, Bank SinoPac (China), other subsidiaries

of SinoPac Holdings, Bank SinoPac has been actively developing cross-border business, helping

Taiwanese enterprises break their predicament and marches to the world, by drawing on

these shared advantages and synergies, Bank SinoPac is poised to establish the most flexible,

accessible brand name for financial services in Greater China.

3. Cater to specific needs of niche markets while serving global supply chains

Bank SinoPac proactively seizes new business opportunities arising from emerging industry

trends. The Bank also creates a profile of its clients, including their financial needs and cash flows

business model, so it can customerize services and offer self-liquidated loans. The advantages are

getting more business opportunities and minimizing the credit risk.

4. Act as mandated lead arranger of the syndicated loans and satisfy customers' diversified financial

needs

Focus on specific industries for the provision of tailor-made syndicated loans. Take advantage of

business opportunities arising from M&A activities by utilizing the resources of SinoPac Holdings

to provide integrated financial services. Grasp business opportunities associated with China's " the

Belt and Road" project by providing syndicated loans via overseas branches and other alliance

banks to countries along the route of the project.

5. Strengthen SME services to expand the Bank's SME loans and market share

Having operated in Taiwan for over six decades, Bank SinoPac has witnessed the country's

economic development in different business cycles. Besides its own endeavors on this front, Bank

SinoPac is proactive to work with SMEG. The Bank also extends support to the government's

various economic policies by providing SMEs with all kinds of financial services they need.

32

6. Strengthen collaboration of onshore and offshore platforms to attain synergies of regional

consolidation

The integration of SinoPac Holdings resources with domestic branches, OBU, and overseas

branches in Hong Kong, Macau, Los Angeles, and Ho Chi Minh City deepens and broadens the

collaboration across onshore and overseas platforms of the Bank.

Teaming up with the Bank's strategic partner, it is also proactive to make further inroads into

corporate banking, wealth management, financial markets, and interbank businesses. By effectively

accommodating the capital flow of ethnic Chinese businesses across Greater China and ASEAN,

and providing them with cross-strait capital planning and one-stop financial services, the Bank

is set to attain synergies of regional consolidation, thereby enhancing product penetration and

growing earnings.

7. Coordinate with the Bank's overseas branches and OBU to arrange more international syndications

Through the integration of resources from onshore and offshore channels and strategic partner,

Bank SinoPac continues pursue cross-strait trade finance business, seizes the opportunities arising

from "the Belt and Road", strives for participations in international syndications, and aims to

evolve into lead arranger with support from middle and back office, thereby the Bank is able to

widen yield spread and boost capital utilization.

8. Cooperate with strategic partner to develop new markets and enhance regional competitiveness

Besides cooperation with the subsidiary, Bank SinoPac (China) Ltd., Bank SinoPac will give

priority to working with the Bank's strategic partner so as to fully utilize the latter's extensive

global reach. Fully taking into account risk management and statutory compliance, the Bank is

proactive in capturing the flow of commerce on the mainland. Moreover, efforts will be made

to develop the ASEAN market and strengthen competitiveness in this area. The ultimate goal is

to reduce concentration in individual markets and craft new overseas earnings drivers, thereby

increasing earnings going forward.

(V) Financial Markets1. Proprietary Trading: Enhance core competence and grow earnings by upgrading the "Structured

Products Calculation System" and diversifying structured offerings.

Further consolidate financial markets trading systems, boost risk management capacity, and build

a better-rounded mechanism for managing investment portfolios to facilitate cross-instrument

hedging and increase market-making capability. Build on the Bank's proven track record in forex

trading to deal in the RMB. Introduce and promote RMB services overseas as the RMB increasingly

becomes an international currency and local regulations are gradually relaxed.

Operating Report

bank.sinopac.com

33

2. Treasury Marketing: Identify market trends and customer features and make available a full variety

of multicurrency structured offerings to ensure stable income.

In tandem with clientele adjustment at retail outlets, provide different customer segments with

the most fitting financial planning and derivative products. Persistently optimize the process

of reviewing Pre-settlement Risk Limit and systematic control and management of KYC (Know

Your Customer) evaluation. Equal emphasis is to be placed on enforcing risk control of overall

investment holdings, monitoring the latest market prices, strengthening the training of salespeople,

and deepening customer relationships. Develop core-value customers and provide them with

professional services.

3. Given equal consideration of risk and return, the Bank proactively develops multicurrency business.

Besides adjusting assets and liabilities position in line with currency strength, the Bank also offers

a wild variety of investment products, closely tracks market trends and explores new funding and

business sources to stabilize cash positions and enhance forex income.

4. Hong Kong platform is a hub for coordinating and assisting other overseas branches to develop

financial market business. Team up with corporate banking group to provide customers with

financial market products embedding hedge solutions, and enhance relationships, thereby achieving

higher earnings and penetration.

(VI) Electronic Banking 1. Make an all-out effort in the development of Bank3.0 digital financial service

In line with the effort of the regulator in creating a digital-finance environment via revision or

enactment of related legislations, continue developing innovative online financial functions and

services.

2. Increase the income and earnings contribution of virtual channels

Attract customers to access digital financial services customers marketing events and social-media

management aimed to boost customer interaction, so as enhance income of platforms and cut

operating cost for physical services.

3. Increased the usage of Electronic Banking

Simplified the application process and introduced readily accessible personal banking services to

increase customer's willingness to use Electronic Banking.

4. Deep cultivation of e-payment business

In line with enactment of legislations for market opening, continue improve the functions of

systems and expand market share via strategic cooperation and marketing effort.

34

5. Develop cross-border receipt and disbursement services for online trading

Further bolster cross-border receipt and disbursement services, in step with the progress of

deregulation, for online trading to keep up with rapidly growing market demand. Grasp market

opportunities ahead of most rivals.

6. Strengthen cash management services

Continuously enhance and provide corporate clients with most comprehensive and convenient cash

management products / services, covering local and overseas outlets.

7. Develop Automated Teller Machine solutions

We are eyeing our alliance ATM networks for opportunities to provide more banking service

channels. Also, we continuously to strengthen our automatic solutions while optimizing cash

management efficiency for our clients.

(VII) SinoPac Life Insurance Agent 1. Develop multipronged marketing by drawing on SinoPac Holdings outlets

Continue to familiarize the staff of Bank SinoPac with insurance sales and services and encourage

them to refer customers. Professional salespeople, in turn, will proceed with product introduction

and conclude sales. All available resources will be integrated to provide comprehensive service

information. Moreover, the successful business model of bancassurance will be introduced to the

securities outlets of SinoPac Holdings where training and assistance in management are to be

offered for further promoting the insurance business.

2. Develop an auxiliary marketing mechanism to attain segmented marketing

Assist salespeople in closing sales over the course of their interaction with customers in a properly

segmented marketplace. Attain communication in marketing that makes it possible to understand

customers and grasp the key to adding value.

3. Create a demand focus effect through adding value to the product platform

Guide the sales personnel in developing demand-oriented marketing concepts, and highlight the

selection of products, performance assessment, information in statements, and insurance benefits

and related value adding functions on different platforms. In addition, research and develop a

complete product line of insurance and demonstrate the functions of long-term saving, asset

preservation, and income guarantee among the variety of products of the Bank.

4. Build on outlet diversification to maximize synergies

In line with the regional business features of channels, dispatch Insurance Consultant to assist the

development of life-insurance business with proper method. Make the best use of human resources

Operating Report

bank.sinopac.com

35

support dispatched from life insurance companies in insurance consultation, training, Integrate

the upper and lower stream operation of financial holdings to increase added value through the

promotion of insurance business.

(VIII) SinoPac Property Insurance Agent1. Bolster statutory compliance and internal audit systems

After the Financial Consumer Protection Act was put into force and as insurance-related laws and

regulations increasingly become better-rounded and more stringent, SinoPac Property Insurance

Agent shall act accordingly to further advance statutory compliance and internal audit systems.

2. Continue to study on the customers and the market for offering better products

To further the promotion of the running items, the firm will duly observe the needs in the market

and applicable legal rules of the government for undertaking brokerage of the most attractive

products, and prepare special offer packages to provide stronger incentive for the customers in

taking insurance protection.

3. Make full effort in increasing product channels for more sources of profits

In addition to the development of channels on hand, the firm will seek suitable strategic partners

for the formation of strategic alliance and launch suitable products depending on the attributes of

the partners for thicker profits.

4. Launch competitive and differentiated marketing projects or products in supporting business

operation

To further the launch of new products, the firm also works in cooperation with other direct and

indirect subsidiaries of SinoPac Holdings for offering property insurance as dictated by their

business operation.

5. Fortify the function of education and training

SinoPac Property Insurance Agent will intensify its internal education and training to meet the

requirement and the attention of the competent authority on the banking and insurance industry,

and seek to ensure all employees of the SinoPac Holdings become knowledgeable about different

insurances types and help them to obtain relevant insurance licenses.

6. Strengthen internal operational procedures and salespeople's competence

In tandem with the requirements over bancassurance operations and management, SinoPac

Property Insurance Agent has mapped out and faithfully enforced a set of regulations with

regard to internal control. This commitment to strengthening internal operational procedures and

personnel management is subject to regular review in order to ensure utmost customer satisfaction.

36

III. Research and Development

(I) R&D on Financial Products In February 2013, banking authority approved the deregulation of RMB business and allowed domestic

banking units of local banks to provide various RMB services. Besides over the counter services, banks

could offer online services for RMB exchanges, term-deposits and remittances, which has helped the Bank

to gain significant RMB deposit market share.

(II) R&D Expenses and Results; Future R&D Plans1. R&D Expenses and Results

(1) SinoPac e-wallet continues offering multiple digital-finance services. In July 2015, it rolled out a

new version containing preferential-treatment information of business circles, which, in conjunction

with the localized services of branches, enables customers to grasp instantly preferential treatments

offered by stores and actively provides customers such information, via the LBS function, so as meet

consumers' needs in the digital era.

(2) In line with the advent of connected era, the bank launched the "online loaning contract" function

for unsecured loans in November 2015, enabling existing depositors to use PC or mobile devices in

completing application for unsecured loans via the bank's e-banking or APP, including the uploading

of financial standing and signed application without any printed document, greatly streamlining

loan-application flow and meeting customers' need for "securing loans upon application."

(3) On top of "Fun cashier" online third-party payment service, the bank rolled out "Changguidai" e-loan

service in November 2015, enabling subscribers to "Fun cashier" to use online-trading specifications

in applying for unsecured loans.

(4) Launched a business model for serving high net worth customers, offering them an exclusive team

of professionals for provision of financial planning, tax consultation, and tailor-made products.

(5) In line with the current of Bank3.0, launch the functions of account opening for MMA e-banking

trust and KYC (know your customer) evaluation for new customers, thereby offering real-time

convenient wealth-management service.

(6) Offer customers nimble and convenient wealth-management vehicles, roll out series of NT$100

products, and continue improving mobile-banking APP for fund investments.

(7) The "structured products calculation system," developed by the bank's structured product

development department, passed the certification of external and in-house models in 2015. The

external certification was carried out by Ernst & Young Hong Kong, setting a precedent for

domestic banking system. The system features the parallel calculation technology of high-speed

graphic cards, capable providing real-time calculation for massive trading and emulation for profits

or loss, facilitating trading, marketing, and risk management for structured products.

(8) To safeguard the privacy and security of customer information, Bank SinoPac actively keeps

promoting and enhancing information security. As a result, Bank SinoPac has passed the

Operating Report

bank.sinopac.com

37

certification of ISO 27001:2013 for Information Security Management System, the first among

domestic financial institutions.

(9) Roll out "cloud-end account opening" service in May 2015, sparing customers the need of visiting

counters at branches.

(10) Pioneer the rollout of "speech recognition" and "key-word search" service in June 2015, offering

customers rapid and convenient e-banking service, which is especially appealing to young

customers.

2. Future R&D Plans

(1) Persist with the innovation of products and services and provide customers with fully

integrated investment management and planning. Introduce integrated investment instruments

for consolidation of customer needs, investment research and analysis, product mix, and risk

management. Refine wealth management consultation services and assist customers in seizing

investment opportunities.

(2) Deeply cultivate potential customers for wealth-management service and interact and communicate

with new-generation customers via social media and audio-visual applications.

(3) Integrate system platform functions and professional service-channel teams, thereby providing

customers real-time, convenient, and complete information and service.

(4) Continue strengthening the function of trading systems and utilization systems, including MMA

financial-trading network, wealth-management system, customer-relations management system,

custodian banking system, SinoPac trust network, and rear-end trust operation system.

(5) The bank applied response prediction model to tel-marketing for unsecured loans, enabling precise-

targeting potential customers and greatly boosting income at lower cost. In the future, in addition to

further enhancing model effectiveness leverage big-data to find potential customer groups, so as to

set up customer-centric marketing model for unsecured loans.

(6) To enhance the efficacy and service quality for the bank's credit-card acquiring-bank business and

to cut the cost for system maintenance, the bank will set up in-house credit-card acquiring-bank

system, to meet the need for new payment-collection instruments. The first-stage system will come

online in 2017 before the completion for the installation of the second-stage system.

(7) In order to push the "Bank3.0 digital-finance environment plan," the bank rolled online credit-card

application in early October 2015, enabling the bank's e-banking customers, existing card holders,

and members of credit-card network to complete application for credit cards online after identify

certification, greatly simplifying the application flow and shortening application time and boosting

willingness of customers to apply for credit cards. In 2016, the bank will further upgrade Bank 3.0

and allow non-customers (those who are not the bank's depositors, loan recipients, or credit-card

holders) to apply for credit cards online, thereby offering customers complete digital-finance service

and forge a complete digital-finance environment.

38

(8) Apply the experiences and successes of Factors Chain International (FCI) and draw on mutual

assistance and cooperation available on the FCI platform to learn more about clients around the

world while integrating the Bank's ongoing endeavors to expand its exposure to supply chains and

establish a cross-industry service platform.

(9) Continue to grow the Factoring by Insurance (FBI) business and bolster cooperation with

international insurers; set up a factoring platform and assist customers in developing businesses

globally.

(10) Strengthen the internal grading model for corporate loans, taking into account risk evaluation,

pricing strategies and performance management, undertake risk-based pricing, thereby enhancing

returns and keeping up asset quality.

(11) Bank SinoPac will take proactive actions to integrate the resources of SinoPac Holdings and

strategic partner to provide customers with comprehensive services including corporate banking,

financial markets, wealth management, and capital market. Furthermore, Bank SinoPac will extend

its service footprint to build up Chinese corporate business in mainland China, North America,

and ASEAN countries. In addition, the Bank will provide customers with comprehensive financial

services by expending across-continent business.

(12) Through integration within the Holdings and the cooperation among the Bank, SinoPac Securities,

SinoPac Securities Investment Trust, and the Bank's strategic partner, the Bank will persistently

introduce and develop diversified investment products, broaden product lines and provide customers

with various and customized wealth management services. Given the increase of business in RMB

for cross-strait trade and funding requirement for capacity expansion in mainland China and

offshore, Bank SinoPac provides customers with various funding channels and tracks market

fluctuations closely to increase profit from financial market gradually.

(13) In response to the opening up of regulations related to E-Payment, Bank 3.0 and Cross border

business, Bank SinoPac will continue to develop a variety of digital finance services and become the

long term partner that creates value for customers.

(14) Introduce more structured products linked to interest and exchange rate. Provide and develop

principal guaranteed products linked to interest rate. Improve quoting competence and dynamic

hedging by developing product pricing model.

(15) To assure the effective operation of ISMS, Information Security Management System, Bank

SinoPac will further improve the system on the P-D-C-A (Plan-Do-Check-Action) basis, to boost

the Confidentiality, Integrity, and Availability, assure the continuity of information operation, and

mitigate the risk of information security.

IV. Short-term and Long-term Business Development Plans

(I) Retail BankingA. Short-term Business Development Plans

1. Develop diversified products to meet the needs of potential target customers.

2. Deepen customer relations, broaden the scope of offerings, and enhance fee income.

Operating Report

bank.sinopac.com

39

3. Taking "SinoPac Home Loan for the Youth" as the brand concept in order to occupy the first-time buyer

market and therefore help young customers fulfill the dream of "home making".

4. Focus on family banking by providing them with a full range of financial services, thereby extending

the Bank's clientele from one generation to the next.

5. Forge more strategic alliances and provide customers with more preferential services, thereby

enhancing customer satisfaction.

B. Long-term Business Development Plans

1. Be in line with the Authority's policies; follow the principles of "staying prudent, diversifying risks,

keeping up asset returns, and upholding asset quality"; lead retail channels toward serving prime

and high net worth customers.

2. Provide customer-orientated, convenient, comprehensive financial services and added value, thereby

maintaining customer loyalty and building a long-term relationship.

3. Maintain a below-average NPL ratio and keep bad debt losses to a minimum, thereby enhancing

product profit.

(II) Wealth ManagementA. Short-term Business Development Plans

1. Develop a business model that centers on customer needs so as to make an preferred brand name for

wealth accumulation and retirement planning. Build a thorough understanding of customers-both their

needs and risk tolerance; offer asset allocation services that pay equal attention to risk and return.

2. Strengthen customer management, deepen customer relations, and develop pension and wealth

management products and services to meet customer needs for wealth management in different stages

of their lives.

3. Establish a team of service professionals to provide differentiated wealth management products and

services and enhance service quality across the board.

4. Continue to improve the Bank's electronic trading platform so as to provide diverse, timely, and

convenient services.

5. Persist with the innovation of products and services and provide customers with fully integrated

investment management and planning. Introduce integrated investment instruments for consolidation

of customer needs, investment research and analysis, product mix, and risk management. Refine wealth

management consultation services and assist customers in seizing investment opportunities.

40

6. Retire or upgrade major systems and platforms, such as the OBU fund trading platform, MMA trading

platform, wealth management system, custodian bank system, and trust platform as well as back office

operating system. Complete installation of the Bank's bond trading system.

7. Cooperate with onshore and offshore product teams and the Bank's strategic partner to develop a

variety of wealth management services, provide customers with tailor-made investment products, and

render all-encompassing financial services through diversified channels.

B. Long-term Business Development Planss

Satisfy customer needs for diverse, convenient wealth management and provide reliable services to

make a trusted wealth management bank:

1. Provide quality products and consolidated, value-added services.

2. Build convenient retail channels and a high-performance trading system/platform for wealth

management.

3. Put in place a well-rounded wealth management team capable of delivering suitable and professional

consultation services.

4. Develop quality operations and services and set up a well-rounded mechanism for risk control and

management.

5. Having Hong Kong as the Bank's wealth management hub with focus on mutual funds, insurance, and

structured products, and through the integration of onshore and offshore products and services, Bank

SinoPac persistently drives business momentum from private banking sector aiming at Chinese high net

worth clients.

(III) Consumer BankingA. Short-term Business Development Plans

1. Set up the credit-card promotion evaluation system focusing on new subscribers and banking cards, to

enhance the dynamism for pushing credit-card business and cut card-issuance cost.

2. Develop data mining technology to gain insight into customer behaviors and boost the odds for cross

sales.

3. Establish proprietary acquiring-bank system to cut operating cost and enhance competitiveness.

4. Upgrade the capability of online and mobile platforms for handling the booking or application for

unsecured loans. Offer an optimized customer experience by providing online users with a simpler,

friendlier interface.

Operating Report

bank.sinopac.com

41

5. Consolidate marketing resources and provide cardholders with fully integrated products and services,

thereby broadening the scope of customer relations.


1. Further expand business scope and build on the strength of retail channels to enhance customer value

and contribution, thereby growing earnings and upgrading operational efficiency.

2. Promote products and undertake other publicity events on conventional media and the Web, enhancing

Bank SinoPac's visibility as a leading brand name for consumer banking.

3. Provide differentiated products and services to highlight a flexible, convenient and trustworthy brand

name for consumer banking.

4. Adopt a precise, complete grading model to undertake risk segmentation; build on sound asset quality as

the basis for cross-selling in conjunction with other banks.

5. Apply card issuance and customer management experiences to the Bank's new outlets in mainland China,

paving the way for making inroads into the consumer banking market there in the future.

(IV) Corporate BankingA. Short-term Business Development Plans

1. Maximize the strengths of the Bank's 129 full function branches throughout Taiwan to deepen

relationship with existing customers and secure new ones; manage asset quality properly while striving

for lending expansion to ensure profitable growth.

2. Enlarge Bank SinoPac's deposit and loan scales both at domestic and abroad steadily to further

enhance its market share; accept deposits from new clients, in particular demand deposits from

corporate accounts, to lower funding costs; adopt a target-oriented approach toward asset and liability

management to minimize the structural funding risks.

3. Grasp the demands for refinancing to increase the number of syndicated loans arranged by the bank.

Intensify collection of market information on countries along the routes of "the Belt and Road" project

and develop, via overseas branches, cross-border syndicated loans for Taiwanese businesses or participate

in international syndicated loans for local enterprises with high credit rating. Selectively take part

in syndicated financing for infrastructure projects guaranteed and participated by the governments,

international financial institutions, or international multilateral organizations (IMF/ADB/AIIB)

4. Continue to expand the Bank's factoring platform that spans the broadly defined Greater China market.

Collaborate with world-renowned credit guarantee agencies and Factors Chain International (FCI)

to help corporate clients cope with business risks associated with domestic or overseas transactions

42

and provide them with financing. Promote trade-based factoring services to help small and medium

enterprises enhance export competitiveness and foster earnings growth. Draw on the electronic

banking platform to consolidate information on a global basis, thereby providing customers with more

convenient, efficient financial management services.

5. Adjust the lending policy in tandem with fundamental changes unique to the relevant industry; enforce

lending risk management faithfully and devise tailor-made measures for customers of distinctively

different characteristics. Upgrade the credit approval process and management systems. Strengthen

internal control throughout the authorization/approval process. Integrate the credit approval process

systems of corporate banking, retail banking, and consumer banking via the unification of interface,

function, and information, so as to formulate the optimal credit-extension operating flow for the entire

bank and continue upgrading software and hardware and improving the stability and accuracy of

systems, to as to enhance work efficiency and risk-management quality.

6. Conforming to the Financial Supervisory Commission's plan to help Taiwan's financial institutions to

accelerate their presence in Asia, Bank SinoPac plans to make Ho Chi Minh City, the economic hub of

Vietnam, as its base for soliciting more clients among ethnic Chinese and Vietnamese businesses. The

Bank is also ready to team up with its strategic partner to further penetrate the ASEAN market and

provide customers with fully integrated cross-border services.

7. Bolster the capability of Onshore and Offshore Collaboration Platform. Integrate close cooperation

among branches and subsidiaries in Taiwan and abroad to provide group customers with financial

services across Greater China and ASEAN, thereby deepening and broadening customers relations;

meanwhile maximize the Platform value and synergy of cross-selling to boost earnings from overseas

corporate banking.

8. Further extend the scope of client base to the interior of mainland China, and seek out target customers.

Undertake various projects, particularly by seizing the international syndication opportunities arising

from "the Belt and Road" to further expand the achievement of overseas business.

9. Provide continuous training and recruit talents with international standing to support upcoming

overseas expansion and enhance overall competitiveness.


1. Integrate resources, expand both domestically and internationally, and continue to strengthen

operational efficiency to make Bank SinoPac the best financial institution in Asia and a leading brand

name for RMB services in Taiwan. The Bank also sees itself as a new "Silk Road" for the financial world

of the 21st century that serves all enterprises and individuals having business transaction in Greater

China.

Operating Report

bank.sinopac.com

43

2. Establish better-rounded overseas platforms and turn SinoPac into a cross-continental international

bank.

3. Build on internal resources to consolidate all business lines under a customer-centric organizational

structure. Provide corporate customers with one-stop, tailor-made solutions, and fulfill all their financial

needs, such as capital expenditure of plant construction and working capital.

4. Combine corporate banking business and risk management to develop advanced risk quantification

technology and install a credit database applicable to pricing, dynamic risk control, decision-making and

performance management.

5. Consolidate resources of domestic and overseas retail channels, and competitive advantages with the

cross-selling platform and upgraded electronic banking system to provide Chinese businesses around the

world with more localized and globalized financial services.

(V) Financial MarketsA. Short-term Business Development Plans

1. Strengthen teamwork between the Treasury Marketing Unit's sales team and other departments in

developing customer-oriented, differentiated portfolios and services. Help branches create synergies by

providing different segments of customers with tailor-made asset and liability investment and hedging

products. Increase the stability of earnings sources by deepening and broadening partnerships with

customers.

2. Enhance self-sufficiency by increasing the weighting of in-house products. Adopt dynamic hedging

throughout transactions as part of across-the-board risk control and management. Further strengthen

the capabilities of the proprietary "Structured Products Calculation System," thereby growing core

competence and boosting market prestige.

3. Provide fully integrated information with regard to investment holdings in a timely fashion and put

in place a well-rounded risk management mechanism, enabling traders to engage in cross-instrument

hedging while boosting market-making capability.

4. Diversify investment targets to adjust the earnings structure and increase proprietary income. Further

improve overall performance by deepening collaboration between domestic and overseas financial and

business operations.

5. Modify and implement trading regulations in tandem with statutory revisions. Strengthen risk control

and management by enhancing the capability for in-house product assessment.

44

6. Benefit from Hong Kong's status as international financial center to develop innovative financial

instruments that take account of both risk and return. Understand the fluctuations in cash flows,

thereby maximizing the Bank's capital utilization and deepening customer relationships through

fulfilling their requirements for hedge.

7. Continuously build up onshore and offshore RMB investment portfolio, make optimal use of the position,

and increase yield. Consistently increase exposure in international primary and secondary bond markets

to diversify country risk.


1. Develop a wide variety of products and platforms that come with meticulously differentiated packaging

to fully satisfy customer needs for hedging and investment.

2. Optimize trading systems, develop systematic financial analysis models, and devise a better-rounded

straight through processing (STP) mechanism, thereby driving high value-added trades that make

a more significant contribution to earnings as well as enhancing the competitiveness of the Bank's

financial products.

3. Upgrade the Financial Markets Division's expertise and capacity for effectively getting hold of the latest

developments across regional markets to facilitate the Bank's continuous expansion on this front.

4. Develop a richer mix of financial products to help target clients hedge against risks; enter into strategic

alliances with quality banks in Hong Kong and China to take advantage of the fast-growing RMB

business.

5. Strengthen the innovation of structured products and expand transactions and dealings with industry

peers, thereby increasing sources of earnings.

6. Enhance the professional training for marketing personnel on financial products. Continue to take

proactive stance in setting up the offshore trading platform for RMB and develop multicurrency

business to increase revenue from exchange gain and fee income. Integrate the resources of the Bank in

joint business development and broaden the bases of existing customers, and new customers in financial

transaction service for more business opportunities.

(VI) Electronic BankingA. Short-term Business Development Plans

1. Continue developing and improving system, so as to provide safe and convenient digital financial

services.

2. Capitalize on the rapidly growing popularity of handheld devices to further promote the capabilities and

services of mobile banking.

Operating Report

bank.sinopac.com

45

3. Apply data analysis to the profiles and behavior of online customers, based on which marketing

campaigns are to be devised to deepen customer relations.

4. Maintain and expand partnerships with vendors of the Funcashier platform, providing customers with

online cash flow solutions and increase transaction volume by working closely with other platform

partners.

5. Retrace cash flows while building a platform for corporate information and services to reach out to

more small and medium-sized enterprises, thereby enhancing customer satisfaction through provision of

financing and wealth management products and services.

6. Strengthen and consolidate cash management products to enhance service efficiency via corporate

e-banking platform, fulfilling liquidity management requirements of multinational group.


1. Capitalize on business opportunities emerging from cross-border deregulation by introducing online cash

flow services and taking up strategic partners.

2. Take advantage of the growing popularity of smart handheld devices by devising mobile services for

collections and payments as well as wealth management.

3. Assist microbusinesses in seeking expansion by means of online marketing and provide them with

specialized, well-rounded financial planning and micro financing, thereby fostering their development

and growth. The objective is to enable microbusinesses to create value and secure opportunities in the

increasingly vibrant online market where ecommerce is now thriving globally.

4. Enhance our product value by differentiating customer sectors with specified solutions. These efforts are

aimed to help us to strengthen relationship with clients as main operating bank.

(VII) Life Insurance AgentA. Short-term Business Development Plans

1. Improve the administrative efficiency of insurance policies and design an effective communication

system.

2. Materialize the work model for the assistance and training for channels and establish the model for

cooperation with insurance firms.

3. Establish the model for issue-oriented marketing, take advantage of existing customer resources, and

combine product design, business training, and packaged business supporting events, so as to effective

push business development.

46

4. Continue to assist the channels in transformation, and guide sales personnel to transform from product

selling mode to wealth management design marketing mode. Help the wealth managers in bringing their

clients' core assets and long-term saving to SinoPac and keep them at SinoPac.


1. Create a reliable long-term source of income that centers on savings and pension as well as wealth

management products. Build a comprehensive platform for mortgage insurance, family security, savings

insurance, and investment-linked insurance that provides customers with a full gamut of product

offerings and well-rounded services.

2. Continue joint development of investment management with insurance companies to satisfy the needs of

customers in asset accumulation, protection, withdrawal, and transfer. In addition, SinoPac will continue

to introduce suitable products from insurance companies in good standing in the market of general

insurance, and hope to highlight the functions of insurance in long-term saving, asset protection, and

income guarantee among the wide array of products from the Bank.

3. Design and establish a model of workplace marketing aiming at the large middle class and wealth

management service at the workplace in order to bring in additional income from stable sources of

personal policies in the long run.

(VIII) Property Insurance AgentA. Short-term Business Development Plans

Further to the brokerage service of general property insurance products, the firm will also provide specific

customized property insurance products to the customers of financial holding for satisfying their needs.

With the support of the densely developed marketing channels, the service team will be nurtured with the

idea of party marketing to satisfy the customers.


Explore the attributes of the customers of SinoPac Holdings, their needs, and the market trend in depth,

and work in conjunction with the partner property insurers to tailor insurance protection they need.

Provide individualized insurance products or projects that meet market needs so customers can feel the

strength and flexibility of the Company's services. This will ensure full protection of customers' properties

and enhance the Company's business prospects.

Operating Report

www.banksinopac.com.tw

Financial Reportsbank.sinopac.com

ANNUAL REPORT 2015

48

I. Condensed Five-year Financial Statements

Consolidated Balance Sheets-IFRSs In NT$ millions

Ex-dividends

Post-dividends

Ex-dividends

Post-dividends

Ex-dividends

Post-dividends

Ex-dividends

Post-dividends

Total liabilities

Share capital

Capital surplus

Retained earnings

Other equity

Total equity

Note1：The financial statements for each year were audited by CPA, except for February 29, 2016. Rule No. 1030010325 and 10310006010 issued by the Financial Supervisory Commission (FSC), stipulated

that the Bank and its subsidiaries should apply the 2013 version of IFRS, IAS, IFRIC and SIC endorsed by the FSC and the related amendments to the Regulations Governing the Preparation of

Financial Reports by Public Bank since 2015. The above audited balance sheet of 2014 has been retroactively restated.

Note2：The appropriation of the 2015 earings is subject to the approval of the board of directors which execute the rights and functions of the stockholders' meeting in 2016.

Cash and due from banks

Financial assets at fair value through profit or loss

Available-for-sale financial assets

Derivative financial assets for hedging

Securities purchased under agreement to resell

Receivables, net

Current tax assets

Discounts and loans, net

Held-to-maturity financial assets

Investment accounted for using the equity method, net

Other financial assets, net

Property and equipment, net

Investment property, net

Intangible assets, net

Deferred tax assets, net

Other assets

Total assets

Deposits from the central bank and banks

Financial liabilities at fair value through profit or loss

Derivative financial liabilities for hedging

Securities sold under agreements to repurchase

Payables

Current tax liabilities


Bonds Payable

Other financial liabilities

Provisions

Deferred tax liabilities

Other liabilities

139,046

65,218

208,866

-

6,562

61,732

1,294

866,991

72,529

39

12,755

9,490

1,146

1,940

2,498

3,231

1,453,337

60,873

22,572

1

659

25,055

313

1,167,662

44,928

14,767

2,984

1,092

1,703

1,342,609

74,464

10,481

24,541

1,242

110,728

119,193

67,364

195,688

-

4,295

76,057

1,345

874,744

69,119

39

13,423

9,470

1,175

1,958

2,649

4,414

1,440,933

61,330

27,055

43

5,174

15,734

187

1,158,925

43,428

13,955

3,021

1,143

1,820

1,331,815

Note2

74,464

Note2

10,481

23,080

Note2

1,093

109,118

Note2

2015

131,471

48,002

207,761

-

12,894

140,751

1,190

791,801

46,114

-

13,533

10,873

-

2,010

2,996

6,223

1,415,619

69,606

21,599

33

7,104

18,676

1,143

1,125,438

48,566

16,150

3,040

976

3,760

1,316,091

1,316,091

66,375

74,464

10,481

22,124

14,035

548

99,528

99,528

2014ItemsThe annual financial

statement as of February 29 2016

95,363

25,969

59,756

-

-

118,269

1,290

808,898

214,418

-

16,030

11,003

-

1,982

2,570

1,485

1,357,033

87,589

11,832

6

452

17,233

856

1,092,092

45,087

7,944

2,880

898

2,612

1,269,481

1,269,481

59,616

66,375

10,413

17,650

10,891

(127)

87,552

87,552

106,804

27,631

55,788

16

236

61,880

1,240

770,309

219,844

-

4,459

11,099

-

2,047

2,813

2,277

1,266,443

70,454

8,672

23

1,201

22,252

383

1,029,885

43,002

6,588

2,860

1,002

1,870

1,188,192

1,188,192

53,862

59,616

10,413

13,844

8,090

132

78,251

78,251

20132012

Financial Reports ″

″

bank.sinopac.com

49

Consolidated Statements Of Comprehensive Income-IFRSs In NT$ millions

Interest revenue

Less：Interest expense

Net interest


Total net revenues

Allowance for doubtful accounts and guarantees

Operating expenses

Income (loss) from continuing operations before income tax

Tax income (expense)

Income from continuing operations after income tax

Profit (loss)



Profit (loss), attributable to owners of parent

Comprehensive income, attributable to owners of parent

EPS (in NT$ dollar)(Note2)

4,172

1,777

2,395

1,619

4,014

(98)

2,358

1,754

(293)

1,461

1,461

149

1,610

1,461

1,610

0.20

27,364

11,797

15,567

9,225

24,792

(92)

14,186

10,698

(1,523)

9,175

9,175

415

9,590

9,175

9,590

1.23



2014

28,542

12,053

16,489

14,608

31,097

3,966

14,076

13,055

(1,672)

11,383

11,383

683

12,066

11,383

12,066

1.53


that the Bank and its subsidiaries should apply the 2013 version of IFRS, IAS, IFRIC and SIC endorsed by the FSC and the related amendments to the Regulations Governing the Preparation of

Financial Reports by Public Bank since 2015. The above audited comprehensive income statement of 2014 has been retroactively restated.

Note2：Earnings per share are retroactively adjusted with earnings recapitalization.

20132012

24,994

10,120

14,874

11,504

26,378

1,950

13,429

10,999

(1,396)

9,603

9,603

(302)

9,301

9,603

9,301

1.29

23,663

9,401

14,262

7,636

21,898

(597)

12,573

9,922

(1,574)

8,348

8,348

227

8,575

8,348

8,575

1.13

50

Consolidated Balance Sheets-R.O.C GAAP In NT$ millions

Note1：The financial statements for each year were audited by CPA.

Note2：The Bank revalued its land, which approved by the board of directors on October 21, 2011 and resulted in total revaluation increments of $867,127.

106,804

27,681

236

55,788

770,309

62,354

219,844

9,419

2,045

5,533

6,359

1,266,372

70,454

1,029,885

8,672

1,201

43,002

1,433

6,880

25,881

1,187,408

1,187,408

53,862

59,616

10,413

13,738

7,984

343

(212)

820

78,964

78,964



Securities purchased under agreements to resell

Available-for-sale financial assets, net


Accounts Interest and other receivables, net

Held-to-maturity investments, net

Properties, net (Note2)

Intangible assets


Other assets

Total assets

Call loans and due to banks




Bank debentures and bonds payable

Accrued pension cost


Other liabilities

Total liabilities

Capital stock

Capital surplus

Retained Earnings

Unrealized gains or losses on financial instruments

Cumulative translation adjustments

Others

Total Stockholder's equity

Items 2011 2012

100,766

33,438

3,080

37,085

732,364

51,939

233,698

9,602

1,457

5,264

6,842

1,215,535

66,375

994,056

7,309

7,072

37,028

1,456

8,747

22,947

1,144,990

1,146,715

52,574

52,574

9,963

7,242

5,517

111

(215)

870

70,545

68,820

Ex-dividends

Post-dividends

Ex-dividends

Post-dividends

Ex-dividends

Post-dividends

Ex-dividends

Post-dividends

Financial Reports

bank.sinopac.com

51

Consolidated Statements of Income-R.O.C GAAP In NT$ millions



Net interest


Provision for bad debts

Operating expenses

Income from continuing operations before income tax

Income from continuing operations, net of tax

Net income


13,757

5,409

3,423

11,999

3,744

2,464

2,464

-

0.35

14,449

7,712

(36)

12,428

9,769

8,220

8,220

-

1.12

Items 2011 2012

attributable to owners of parent

attributable to non-controline interests

52

Balance Sheets-IFRSs In NT$ millions



Available-for-sale financial assets

Derivative financial assets for hedging


Receivables, net

Current tax assets


Held-to-maturity financial assets

Investment accounted for using the equity method


Property and equipment, net

Investment properties, net

Intangible assets, net

Deferred tax assets, net

Other assets

Total assets

Deposits from the central bank and banks


Derivative financial liabilities for hedging


Payables

Current tax liabilities


Bonds Payable


Provisions

Deferred tax liabilities

Other liabilities

2015

119,419

64,596

206,304

-

6,562

61,515

1,273

836,006

70,257

23,928

8,823

9,224

1,193

1,313

1,801

3,174

1,415,388

58,757

22,528

1

659

24,734

114

1,133,631

44,928

13,728

2,844

1,076

1,660

1,304,660

74,464

10,481

24,541

1,242

110,728

101,563

66,708

193,124

-

4,295

75,886

1,319

844,413

66,836

23,326

9,585

9,203

1,223

1,337

1,857

4,360

1,405,035

60,219

27,053

-

5,174

14,968

50

1,126,510

43,428

12,814

2,883

1,030

1,788

1,295,917

Note2

74,464

Note2

10,481

23,080

Note2

1,093

109,118

Note2

ItemsThe annual financial


2014

119,264

47,418

204,774

-

12,894

140,609

1,176

762,007

43,502

21,822

6,239

10,625

-

1,427

2,160

6,170

1,380,087

67,209

21,598

-

7,104

17,724

973

1,094,663

48,566

15,198

2,907

912

3,705

1,280,559

1,280,559

66,375

74,464

10,481

22,124

14,035

548

99,528

99,528

Ex-dividends

Post-dividends

Ex-dividends

Post-dividends

Ex-dividends

Post-dividends

Ex-dividends

Post-dividends


that the Bank should apply the 2013 version of IFRS, IAS, IFRIC and SIC endorsed by the FSC and the related amendments to the Regulations Governing the Preparation of Financial Reports by Public

Bank since 2015. The above audited balance sheet of 2014 has been retroactively restated.

Note2：The appropriation of the 2015 earings is subject to the approval of the board of directors which execute the rights and functions of the stockholders' meeting in 2016.

2012 2013

104,250

27,011

51,062

16

236

61,702

1,169

750,309

217,319

5,418

8,312

10,895

-

1,565

1,789

1,624

1,242,677

69,989

8,671

23

1,201

21,377

272

1,008,786

43,002

5,685

2,738

826

1,856

1,164,426

1,164,426

53,862

59,616

10,413

13,844

8,090

132

78,251

78,251

82,500

25,370

56,309

-

-

118,433

1,271

781,919

211,578

15,517

19,925

10,742

-

1,490

1,650

1,103

1,327,807

87,282

11,832

4

452

16,631

725

1,065,373

45,087

6,722

2,754

828

2,565

1,240,255

1,240,255

59,616

66,375

10,413

17,650

10,891

(127)

87,552

87,552

Total liabilities

Share capital

Capital surplus

Retained earnings

Other equity

Total equity

Financial Reports

bank.sinopac.com

53

Statements Of Comprehensive Income-IFRSs In NT$ millions

Interest revenue

Less：Interest expense

Net interest


Total net revenues

Allowance for doubtful accounts and guarantees

Operating expenses

Income (loss) from continuing operations before income tax

Tax income (expense)

Income from continuing operations after income tax

Profit (loss)



Profit (loss), attributable to owners of parent

Comprehensive income, attributable to owners of parent


3,877

1,731

2,146

1,568

3,714

(98)

2,121

1,691

(230)

1,461

1,461

149

1,610

1,461

1,610

0.20

25,741

11,515

14,226

9,016

23,242

52

12,874

10,316

(1,141)

9,175

9,175

415

9,590

9,175

9,590

1.23



26,941

11,808

15,133

14,198

29,331

3,886

12,794

12,651

(1,268)

11,383

11,383

683

12,066

11,383

12,066

1.53


that the Bank should apply the 2013 version of IFRS, IAS, IFRIC and SIC endorsed by the FSC and the related amendments to the Regulations Governing the Preparation of Financial Reports by Public

Bank since 2015. The above audited comprehensive income statement of 2014 has been retroactively restated.

Note2：Earnings per share are retroactively adjusted with earnings recapitalizatio.

20132012

23,789

9,994

13,795

11,298

25,093

2,092

12,310

10,691

(1,088)

9,603

9,603

(302)

9,301

9,603

9,301

1.29

22,403

9,243

13,160

7,960

21,120

395

11,308

9,417

(1,069)

8,348

8,348

227

8,575

8,348

8,575

1.13

54

Balance Sheets-R.O.C GAAP In NT$ millions

Statements of Income-R.O.C GAAP In NT$ millions

104,250

27,060

236

51,062

750,310

62,175

217,319

5,424

9,214

1,565

9,370

4,802

1,242,787

69,989

1,008,786

8,671

1,201

43,002

1,433

5,978

24,763

1,163,823

1,163,823

53,862

59,616

10,413

13,738

7,984

343

(212)

820

78,964

78,964




Available-for-sale financial assets, net


Accounts Interest and other receivables, net

Held-to-maturity investments, net

Equity investments - equity method

Properties, net(Note2)

Intangible assets


Other assets

Total assets

Call loans and due to banks




Bank debentures and bonds payable

Accrued pension cost


Other liabilities

Total liabilities

Capital stock

Capital surplus

Retained Earnings

Unrealized gains or losses on financial instruments

Cumulative translation adjustments

Others

Total Stockholder's equity

Items 2011 2012

91,462

32,791

3,080

32,601

712,006

51,656

229,880

4,570

9,377

952

8,919

4,834

1,182,128

66,167

963,100

7,310

7,072

37,028

1,456

7,847

21,603

1,111,583

1,113,308

52,574

52,574

9,963

7,242

5,517

111

(215)

870

70,545

68,820


Note2：The Bank revalued its land, which approved by the board of directors on October 21, 2011 and resulted in total revaluation increments of $867,127.

Ex-dividends

Post-dividends

Ex-dividends

Post-dividends

Ex-dividends

Post-dividends

Ex-dividends

Post-dividends

Items

Net interest


Provision for bad debts

Operating expenses

Pretax income

Net income


12,584

3,465

2,625

10,716

2,708

2,464

0.35

13,315

8,069

956

11,165

9,263

8,220

1.12



2011 2012

Financial Reports

55

bank.sinopac.com

II. Auditors' Report

INDEPENDENT AUDITORS' REPORT

Notice to Readers

The Board of Directors and StockholdersBank SinoPac

We have audited the accompanying balance sheets of Bank SinoPac (the “Bank”) as of December 31, 2015 and 2014, and the related statements of comprehensive income, changes in equity and cash flows for the years then ended. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Bank as of December 31, 2015 and 2014, and its financial performance and its cash flows for the years then ended, in conformity with Regulations Governing the Preparation of Financial Reports by Public Banks and related guidelines issued by the authorities.

March 16, 2016

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

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

bank.sinopac.com

56

Financial Reports

December 31, 2014(Retrospective Application)

January 1, 2014(Retrospective Application)

December 31, 2015

AmountAmountAmount ％％％

$ 23,545,074

58,955,096

25,370,342

-

118,432,710

1,271,286

781,918,923

56,309,091

211,578,290

15,516,534

19,924,558

10,742,005

-

1,490,433

1,682,046

1,103,212

$ 1,327,839,600

$ 39,614,377

79,649,683

47,418,153

12,894,149

140,608,907

1,175,944

762,007,556

204,773,740

43,501,740

21,822,134

6,239,440

10,625,187

-

1,426,660

2,159,835

6,169,585

$ 1,380,087,090

$ 25,699,312

75,864,044

66,707,995

4,294,597

75,886,264

1,318,754

844,412,954

193,124,339

66,835,971

23,325,658

9,585,267

9,202,435

1,222,866

1,337,012

1,857,190

4,360,368

$ 1,405,035,026

2

4

2

-

9

-

59

4

16

1

2

1

-

-

-

-

100

3

6

3

1

10

-

55

15

3

2

1

1

-

-

-

-

100

2

5

5

-

5

-

60

14

5

2

1

1

-

-

-

-

100

ASSETS

CASH AND CASH EQUIVALENTS (Notes 4, 6 and 41)

DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS (Notes 7 and 41)

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4, 5, 8, 41 and 42)

SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL (Notes 4 and 9)

RECEIVABLES, NET (Notes 4, 5, 10 and 41)

CURRENT TAX ASSETS (Notes 4, 29 and 41)

DISCOUNTS AND LOANS, NET (Notes 4, 5, 11, 14, 41 and 42)

AVAILABLE-FOR-SALE FINANCIAL ASSETS (Notes 4, 5, 12, 13, 42 and 47)

HELD-TO-MATURITY FINANCIAL ASSETS (Notes 4, 13, 42 and 47)

INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (Notes 4 and 14)

OTHER FINANCIAL ASSETS, NET (Notes 4, 5, 15, 41 and 42)

PROPERTY AND EQUIPMENT, NET (Notes 4, 14, 16 and 41)

INVESTMENT PROPERTIES, NET (Notes 4 and 17)

INTANGIBLE ASSETS, NET (Notes 4, 5, 14 and 18)

DEFERRED TAX ASSETS (Notes 4, 5 and 29)

OTHER ASSETS, NET (Notes 4, 19 and 41)

TOTAL

BANK SINOPAC

(In Thousands of New Taiwan Dollars)BALANCE SHEETS

The accompanying notes are an integral part of the financial statements.

57

bank.sinopac.com

LIABILITIES AND EQUITY

DEPOSITS FROM THE CENTRAL BANK AND OTHER BANKS (Notes 20 and 41)

FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4, 5, 8 and 41)

DERIVATIVE FINANCIAL LIABILITIES FOR HEDGING (Note 4)

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (Notes 4, 8, 12, 13, 21 and 41)

PAYABLES (Notes 22, 27 and 41)

CURRENT TAX LIABILITIES (Notes 4, 29 and 41)

DEPOSITS AND REMITTANCES (Notes 23 and 41)

BANK DEBENTURES (Notes 4 and 24)

OTHER FINANCIAL LIABILITIES (Note 25)

PROVISIONS (Notes 4, 5, 26 and 27)

DEFERRED TAX LIABILITIES (Notes 4, 6 and 29)

OTHER LIABILITIES (Notes 28 and 41)

Total liabilities

EQUITYShare capital

Common sharesCapital surplus

Additional paid-in capital in excess of parCapital surplus from business combinationOthers

Total capital surplusRetained earnings

Legal reserveSpecial reserveUnappropriated earnings

Total retained earningsOther equity

Total equity

TOTAL

$ 87,282,453

11,831,968

3,789

451,771

16,631,252

724,735

1,065,373,051

45,087,336

6,721,787

2,944,518

827,807

2,564,895

1,240,445,362

59,616,160

2,335,2058,076,524

1,73310,413,462

7,616,601367,188

9,508,16017,491,949

( 127,333)

87,394,238

$ 1,327,839,600

$ 67,209,325

21,597,828 -

7,103,953

17,724,022

972,837

1,094,663,361

48,565,756

15,198,214

2,907,136

912,157

3,704,937

1,280,559,526

66,374,857

2,335,2058,076,524

69,24410,480,973

10,497,474393,452

11,232,72922,123,655

548,079

99,527,564

$ 1,380,087,090

$ 60,218,623

27,052,941

-

5,174,182

14,968,593

50,372

1,126,509,949

43,428,046

12,813,869

2,882,594

1,030,254

1,787,629

1,295,917,052

74,463,604

2,335,2058,076,524

69,24410,480,973

13,903,936266,120

8,910,09323,080,1491,093,248

109,117,974

$ 1,405,035,026

7

1

-

-

1

-

80

3

1

-

-

-

93

5

-1-1

--11-

7

100

5

2

-

1

1

-

79

4

1

-

-

-

93

5

-1-1

--11-

7

100

4

2

-

1

1

-

80

3

1

-

-

-

92

5

-1-1

1-12-

8

100


December 31, 2015



58

Financial Reports

BALANCE AT JANUARY 1, 2014

Effect of retrospective application and retrospective restatement

BALANCE AT JANUARY 1, 2014 AS RESTATED

Appropriation and distribution of retained earnings generated in 2013

Legal reserve

Special reserve

Stock dividends - common shares

Share-based payment transactions

Net profit for the year ended December 31, 2014

Other comprehensive income for the year ended December 31, 2014, net of

income tax

Total comprehensive income for the year ended December 31, 2014

BALANCE AT DECEMBER 31, 2014 AS RESTATED


Legal reserve

Reversal of special reserve




income tax


BALANCE AT DECEMBER 31, 2015

Capital Surplus (Notes 4 and 30)

Common Shares(Note 30) Unappropriated

EarningsTotal

$ 59,616,160

-

59,616,160

-

-

6,758,697

-

-

-

-

66,374,857

-

-

8,088,747

-

-

-

$ 74,463,604

$ 10,413,462

-

10,413,462

-

-

-

67,511

-

-

-

10,480,973

-

-

-

-

-

-

$ 10,480,973

$ 7,616,601

-

7,616,601

2,880,873

-

-

-

-

-

-

10,497,474

3,406,462

-

-

-

-

-

$ 13,903,936

$ 367,188

-

367,188

-

26,264

-

-

-

-

-

393,452

-

( 127,332)

-

-

-

-

$ 266,120

$ 9,665,834

( 157,674)

9,508,160

( 2,880,873)

( 26,264)

( 6,758,697)

-

11,382,820

7,583

11,390,403

11,232,729

( 3,406,462)

127,332

( 8,088,747)

9,174,863

( 129,622)

9,045,241

$ 8,910,093

$ 17,649,623

( 157,674)

17,491,949

-

-

( 6,758,697)

-

11,382,820

7,583

11,390,403

22,123,655

-

-

( 8,088,747)

9,174,863

( 129,622)

9,045,241

$ 23,080,149


Legal Reserve Special Reserve

Retained Earnings (Notes 3 and 30)

BANK SINOPAC

(In Thousands of New Taiwan Dollars)STATEMENTS OF CHANGES IN EQUITY

59

bank.sinopac.com

Unrealized Gain (Loss) on Available-for-

sale Financial Assets (Notes 4 and 30)

Cash FlowHedges

(Notes 4 and 30)

$ 88,587

-

88,587

-

-

-

-

-

79,379

79,379

167,966

-

-

-

-

( 101,953)

( 101,953)

$ 66,013

Other Equity

Exchange Differences on Translating Foreign

Operations (Notes 4 and 30)

$( 212,775)

-

( 212,775)

-

-

-

-

-

592,888

592,888

380,113

-

-

-

-

647,122

647,122

$ 1,027,235

Total Total Equity

$( 127,333)

-

( 127,333)

-

-

-

-

-

675,412

675,412

548,079

-

-

-

-

545,169

545,169

$ 1,093,248

$( 3,145)

-

( 3,145)

-

-

-

-

-

3,145

3,145

-

-

-

-

-

-

-

$ -

$ 87,551,912

( 157,674)

87,394,238

-

-

-

67,511

11,382,820

682,995

12,065,815

99,527,564

-

-

-

9,174,863

415,547

9,590,410

$ 109,117,974

60

Financial Reports

(Continued)

(In Thousands of New Taiwan Dollars)STATEMENTS OF CASH FLOWS

BANK SINOPAC

$ 12,651,458

438,293

179,714

5,162,138

11,807,468

( 26,940,823)

( 83,354)

114,258

8,084

66,102

( 1,653,612)

( 53,030)

10,679

( 199,123)

-

( 36,071)

13,071

( 424,678)

( 22,047,811)

( 22,348,908)

15,196,808

( 20,073,128)

9,765,860

477,405

29,290,310

( 151,567)

( 8,830,457)

27,205,614

957,764

( 11,575,200)

( 1,238,497)

6,519,224

( 589,871,077)

441,474,511

-

( 1,622,857,397)

14,553

1,790,814,638

( 6,000)

6,206,621

( 6,114,623)

1,542,766

( 411,243)

$ 10,316,009

433,585

202,660

726,594

11,515,284

( 25,741,510)

( 66,504)

( 19,768)

12,157

-

( 1,574,491)

( 139,861)

1,100

( 63,923)

7,860

-

-

( 3,287,483)

( 19,289,842)

62,777,338

( 81,906,634)

( 6,990,702)

5,455,113

( 2,000,785)

31,846,588

( 173,752)

( 17,960,967)

26,466,631

1,019,600

( 11,701,770)

( 1,935,782)

( 4,112,288)

( 2,045,271,974)

2,056,663,246

( 1,746,142)

( 29,620,852)

-

5,818,397

-

-

-

-

( 507,846)

CASH FLOWS FROM OPERATING ACTIVITIES


Adjustments for:

Depreciation expenses

Amortization expenses

Allowance for doubtful accounts

Interest expenses

Interest revenues

Dividend revenues

Net change in provisions for guarantee liabilities

Net change in other provisions

Share-based payment

Share of profit of subsidiaries

Gains on disposal or retirement of property and equipment

Losses on disposal of investments

Reversal of impairment loss on financial assets

Impairment loss on non-financial assets

Reversal of impairment loss on non-financial assets

Losses on disposal of collaterals assumed

Changes in operating assets and liabilities

Increase in due from the Central Bank and call loans to other banks

Increase in financial assets at fair value through profit or loss

Decrease (increase) in receivables

(Increase) decrease in discounts and loans

Decrease in deposits from the Central Bank and banks

Increase in financial liabilities at fair value through profit or loss

(Decrease) increase in payables

Increase in deposits and remittances

Decrease in provision for employee benefits

Net cash used in operations

Interest received

Dividend received

Interest paid

Income tax paid

Net cash (used in) generated from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of available-for-sale financial assets

Proceeds from disposal of available-for-sale financial assets

Acquisition of non-active market debt instruments

Acquisition of held-to-maturity financial assets

Proceeds from disposal of held-to-maturity financial assets

Proceeds from repayments of held-to-maturity financial assets

Acquisition of unquoted equity instruments

Proceeds from capital reduction of financial assets measured at cost

Acquisition of investment accounted for using the equity method

Proceeds from capital reduction of equity investment

Acquisition of property and equipment

20152014

(Retrospective Application)

For the Years Ended December 31

61

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2015 2014

December 31

Cash and cash equivalents in balance sheets

Due from the Central Bank and call loans to other banks reclassified as cash and cash equivalents under

IAS 7 “Statement of Cash Flows”

Securities purchased under agreements to resell reclassified as cash and cash equivalents under IAS 7

“Statement of Cash Flows”

Cash and cash equivalents in consolidated statements of cash flows

Reconciliation of the amounts in the statement of cash flows with the equivalent items reported in the balance sheets as of December 31, 2015 and 2014:

$ 25,699,312

40,677,214

4,294,597

$ 70,671,123

$ 39,614,377

47,750,336

12,884,142

$ 100,248,855

Proceeds from disposal of property and equipment

Decrease (increase) in guarantee deposits

Proceeds from disposal of collaterals accused

Decrease (increase) in securities purchased under agreement to resell

(Increase) decrease in other financial assets

Increase in other assets

Net cash (used in) generated from investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Bank debentures issued

Repayment of bank debentures on maturity

(Decrease) increase in securities sold under agreements to repurchase

(Decrease) increase in other financial liabilities

(Decrease) increase in other liabilities

Net cash (used in) generated from financing activities

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

$ 93,184

( 4,990,996)

20,700

( 10,007)

7,734,491

( 475,719)

23,164,402

7,074,819

( 3,600,000)

6,652,182

8,476,427

1,142,342

19,745,770

( 206,042)

49,223,354

51,025,501

$ 100,248,855

$ 349,448

1,805,099

-

10,007

( 1,545,134)

( 129,660)

( 14,175,411)

2,060,000

( 7,200,000)

( 1,929,771)

( 2,384,345)

( 1,917,308)

( 11,371,424)

81,391

( 29,577,732)

100,248,855

$ 70,671,123

20152014



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111

50

61

198--4-7-1

39

100

-

323

21

56

44

5

39

---

3--

-

( 1)

22

41

INTEREST REVENUE

INTEREST EXPENSE

NET INTEREST (Notes 4, 31 and 41)

NET REVENUES OTHER THAN INTEREST (Note 4)Commission and fee revenues, net (Notes 32 and 41)Gains on financial assets and liabilities at fair value through profit or loss (Notes 33 and 41)Realized (losses) gains on available-for-sale financial assets (Note 34)Realized losses on held-to-maturity financial assets (Note 13)Foreign exchange gains, netReversal of impairment losses on assets (Notes 5 and 35)Share of profit of subsidiaries (Note 14)Other revenue (Note 36)Other noninterest net revenues (Notes 36 and 41)

Total net revenues other than interest

TOTAL NET REVENUES

ALLOWANCE FOR DOUBTFUL ACCOUNTS AND GUARANTEES (Notes 4, 10, 11 and 15)OPERATING EXPENSES

Employee benefits (Notes 4, 5, 27, 30 and 37)Depreciation and amortization (Notes 4 and 38)Others (Notes 39 and 41)

Total operating expenses

INCOME BEFORE INCOME TAX

INCOME TAX EXPENSE (Notes 4, 5 and 29)

NET INCOME

OTHER COMPREHENSIVE (LOSS) INCOMEItems that will not be reclassified subsequently to profit or loss:

Remeasurement of defined benefit plansIncome tax relating to items that will not be reclassified subsequently to profit or loss

Items that will not be reclassified subsequently to profit or lossItems that may be reclassified subsequently to profit or loss:

Exchange differences on translating foreign operationsUnrealized (losses) gains on available-for-sale financial assetsCash flow hedgesShare of the other comprehensive income (loss) of subsidiaries accounted for using the equity methodIncome tax relating to items that may be reclassified subsequently to profit or loss (Notes 4, 5 and 29)

Items that may be reclassified subsequently to profit or lossOther comprehensive income for the year, net of income tax

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

EARNINGS PER SHARE (NEW TAIWAN DOLLARS) (Note 40)Basic

BANK SINOPAC

Amount Amount％％

PercentageIncrease

(Decrease)

$ 25,741,510

11,515,284

14,226,226

4,375,5521,753,997

( 1,100) -

901,06956,063

1,574,491 -

356,050

9,016,122

23,242,348

52,249

7,425,141636,245

4,812,704

12,874,090

10,316,009

1,141,146

9,174,863

( 156,171)26,549

(129,622)

779,684( 83,589)

-

( 22,144)

( 128,782)545,169415,547

$ 9,590,410

$ 1.23

$ 26,940,823

11,807,468

15,133,355

4,584,5262,893,546

14,513( 11,619)

883,337235,194

1,653,6123,390,116

554,679

14,197,904

29,331,259

3,886,127

7,588,123618,007

4,587,544

12,793,674

12,651,458

1,268,638

11,382,820

9,136( 1,553)

7,583

714,30053,144

3,789

31,631

( 127,452)675,412682,995

$ 12,065,815

$ 1.53

( 4) ( 2) ( 6) ( 5)( 39)( 108)

1002

( 76)( 5)( 100)( 36)

( 36)

( 21)

( 99)

( 2)35

1

( 18)

( 10)

( 19)

(1,809)1,810(1,809)

9( 257)( 100) ( 170)

1( 19)( 39)

( 21)

92

40

52

1510

--316

112

48

100

13

262

16

44

43

4

39

---

2--

-

-22

41


2015



％

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)STATEMENTS OF COMPREHENSIVE INCOME

63

1. ORGANIZATION

August 8, 1991 Bank SinoPac (the “Bank”) obtained government approval to incorporate. January 28, 1992 The Bank started operations. May 9, 2002 The Bank swap shares with SinoPac Securities Corporation and SinoPac Securities Co., Ltd. (the

“SPS”) to establish SinoPac Financial Holdings Company Limited (the “SPH”), a financial holding company, resulting in the Bank becoming an unlisted wholly owned subsidiary of SPH, the ultimate parent company of SPH.

December 26, 2005 SPH finished the merger with International Bank of Taipei Co., Ltd. (IBT), through a 100% share

swap. May 8, 2006 The boards of directors of IBT resolved to transfer credit card business and related assets and

liabilities to SinoPac Card Services Co., Ltd. (“SinoPac Card”). The transaction has been approved by the authorities on June 22, 2006 and the assets have been transferred at the book value of $5,171,080 on August 4, 2006.

November 13, 2006 The preliminary effective date of the share swap and merger. The Bank acquired the assets and

liabilities of IBT through a share swap at ratio of 1.175 shares of the Bank to swap for 1 share of IBT.

June 1, 2009 The Bank’s cash merger with SinoPac Card took effect, with this merger amounting to $3,873,675.

Under this merger, the Bank was the surviving entity. November 1, 2015 The Bank assumed all of the assets and liabilities of the Ho Chi Minh City Branch of Far East

National Bank and renamed this branch Bank SinoPac, Ho Chi Minh City Branch. The transaction price was US$28,540 thousand.

The Bank’s ultimate parent and controller is SinoPac Holdings, which holds 100% common shares of the Bank. The functional currency of the Bank is the New Taiwan dollar. The financial statements are presented in New Taiwan dollars.

2. APPROVAL OF FINANCIAL STATEMENTS The financial statements were approved by the board of directors on March 16, 2016.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS a. Initial application of new accounting policies

Rule No. 1030010325 and 10310006010 issued by the Financial Supervisory Commission (FSC), stipulated that the Bank should apply the 2013 version of IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) endorsed by the FSC and the related amendments to the Regulations Governing the Preparation of Financial Reports by Public Bank since 2015. Except for the following, the initial application of the above 2013 IFRSs version and the related amendments to the Regulations Governing the Preparation of Financial Reports by Public Bank have not had any material impact on the Bank’s accounting policies: 1) IFRS 13 “Fair Value Measurement”

IFRS 13 establishes a single source of guidance for fair value measurements. It defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The disclosure requirements in IFRS 13 are more extensive than those required in the prior version of standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only will be extended by IFRS 13 to cover all assets and liabilities within its scope.

BANK SINOPAC

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014(In Thousands of New Taiwan Dollars, Unless Otherwise Stated)NOTES TO FINANCIAL STATEMENTS

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The fair value measurements under IFRS 13 had applied prospectively since 2015. Please refer to Note 44 for related disclosures.

2) Amendments to IAS 1 “Presentation of Items of Other Comprehensive Income”

The amendments to IAS 1 requires items of other comprehensive income to be grouped into those items that (1) will not be reclassified subsequently to profit or loss; and (2) may be reclassified subsequently to profit or loss. Income taxes on related items of other comprehensive income are grouped on the same basis. Under prior version of IAS 1, there were no such requirements. The Bank retrospectively applied the above amendments starting in 2015. Items not reclassified to profit or loss include remeasurement of defined benefit plans and expected to be reclassified to profit or loss are the exchange differences on translating foreign operations, unrealized gain (loss) on available-for-sale financial assets, cash flow hedges and share of the other comprehensive income of associates or joint ventures accounted for using the equity method. However, the application of the above amendments will not have any impact on the net profit for the period, other comprehensive income for the period (net of income tax), and total comprehensive income for the period.

3) Revision to IAS 19 “Employee Benefits”

Revised IAS 19 requires the recognition of changes in defined benefit obligations and in the fair value of plan assets when they occur, and hence eliminates the “corridor approach” permitted under prior IAS 19 and accelerate the recognition of past service costs. The revision requires all remeasurements of the defined benefit plans to be recognized immediately through other comprehensive income in order for the net pension asset or liability to reflect the full value of the plan deficit or surplus. All actuarial gains and losses of the Bank, which happened during the period, had immediately recognized in other comprehensive profit and loss. As a result, this does not cause any changes in accounting treatment after excluding “corridor approach”. Furthermore, the interest cost and expected return on plan assets used in prior IAS 19 are replaced with a “net interest” amount, which is calculated by applying the discount rate to the net defined benefit liability or asset. In addition, the revised IAS 19 introduces certain changes in the presentation of the defined benefit cost, and also includes more extensive disclosures. On initial application of the revised IAS 19, the changes in cumulative employee benefit costs as of and before December 31, 2013 resulting from the retrospective application are adjusted to provisions, deferred tax assets and retained earnings. The Bank’s current period financial statements are prepared according to the revised IAS 19. The impact on the different versions of IAS 19 is set out below:

Impact on Assets, Liabilities and Equity December 31, 2015 Decrease in deferred tax assets $ 5,742 Decrease in provisions $ 33,781 Increase in retained earnings $ 28,039

Impact on Total Comprehensive Income December 31, 2015 Decrease in operating expenses $ 33,781 Increase in income tax expense (5,742) Increase in net income $ 28,039 Increase in total comprehensive income $ 28,039 Impact on earnings per share (NT$):

Earnings per share - basic $ -

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The impact on the prior reporting periods is set out below:

Impact on Assets, Liabilities and Equity As Originally

Stated

Adjustments Arising from

Initial Application Retrospective Application

December 31, 2014 Deferred tax assets $ 2,132,154 $ 27,681 $ 2,159,835 Provisions $ 2,744,306 $ 162,830 $ 2,907,136 Retained earnings $ 22,258,804 $ (135,149) $ 22,123,655 January 1, 2014 Deferred tax assets $ 1,649,751 $ 32,295 $ 1,682,046 Provisions $ 2,754,549 $ 189,969 $ 2,944,518 Retained earnings $ 17,649,623 $ (157,674) $ 17,491,949

Impact on Total Comprehensive Income As Originally

Stated

Adjustments Arising from

Initial Application Retrospective Application

For the year ended December 31, 2014 Operating expense $ 12,827,342 $ (33,668) $ 12,793,674 Income tax expense $ 1,262,915 $ 5,723 $ 1,268,638 Net income for the year $ 11,354,875 $ 27,945 $ 11,382,820 Other comprehensive income for the year, net of

income tax $ 688,415 $ (5,420) $ 682,995 Total comprehensive income for the year $ 12,043,290 $ 22,525 $ 12,065,815 Earnings per share (NT$)

Basic earnings per share $ 1.53 $ - $ 1.53 4) Amendments to IAS 32 “Offsetting Financial Assets and Financial Liabilities”

The amendments to IAS 32 clarify the requirements relating to the offset of financial assets and financial liabilities. Specifically, the amendments clarify the meaning of “currently has a legally enforceable right of set-off” and “simultaneous realization and settlement”. Please refer to Note 45 for related disclosure.

5) Amendments to IFRS 7 “Disclosure - Offsetting Financial Assets and Financial Liabilities”

The amendments to IFRS 7 require disclosure of information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under enforceable master netting arrangements and similar arrangements. Please refer to Note 45 for related disclosure.

b. New IFRSs in issue but not yet endorsed by the FSC

On March 10, 2016, the FSC announced the scope of the 2016 version of IFRSs to be endorsed and will take effect from January 1, 2017. The scope includes all IFRSs that were issued by the IASB before January 1, 2016 and have effective dates on or before January 1, 2017, which means the scope excludes those that are not yet effective as of January 1, 2017 such as IFRS 9 “Financial Instruments” and IFRS 15 “Revenue from Contracts with Customers” and those with undetermined effective date. In addition, the FSC announced that the Bank should apply IFRS 15 starting January 1, 2018. As of the date the financial statements were authorized for issue, the FSC has not announced the effective dates of other new, amended and revised standards and interpretations.

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The Bank has not applied the following New IFRSs issued by the IASB but not yet endorsed by the FSC.

New IFRSs Effective Date

Announced by IASB (Note 1) Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014 Annual Improvements to IFRSs 2012-2014 Cycle January 1, 2016 (Note 3) IFRS 9 “Financial Instruments” January 1, 2018 Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of IFRS 9 and

Transition Disclosures” January 1, 2018

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

To be determined by IASB

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

January 1, 2016

Amendment to IFRS 11 “Accounting for Acquisitions of Interests in Joint Operations”

January 1, 2016

IFRS 15 “Revenue from Contracts with Customers” January 1, 2018 IFRS 16 “Leases” January 1, 2019 Amendment to IAS 1 “Disclosure Initiative” January 1, 2016 Amendments to IAS 7 “Disclosure Initiative” January 1, 2017 Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized

Losses” January 1, 2017

Amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and Amortization”

January 1, 2016

Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants” January 1, 2016 Amendment to IAS 19 “Defined Benefit Plans: Employee Contributions” July 1, 2014 Amendment to IAS 27 “Equity Method in Separate Financial Statements” January 1, 2016 Amendment to IAS 36 “Impairment of Assets: Recoverable Amount Disclosures

for Non-financial Assets” January 1, 2014

Amendment to IAS 39 “Novation of Derivatives and Continuation of Hedge Accounting”

January 1, 2014

IFRIC 21 “Levies” January 1, 2014

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the

amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.

Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods

beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

The initial application of the above New IFRSs, whenever applied, would not have any material impact on the Bank’s accounting policies, except for the following:

1) IFRS 9 “Financial Instruments”

Recognition and measurement of financial assets With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below. For the Bank’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:

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For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method. For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for above, all other financial assets are measured at fair value through profit or loss. However, the Bank may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss. The impairment of financial assets IFRS 9 requires that impairment loss on financial assets is recognized by using the “Expected Credit Losses Model”. The credit loss allowance is required for financial assets measured at amortized cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction. For purchased or originated credit-impaired financial assets, the Bank takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss. Hedge accounting The main changes in hedge accounting amended the application requirements for hedge accounting to better reflect the entity’s risk management activities. Compared with IAS 39, the main changes include: (1) enhancing types of transactions eligible for hedge accounting, specifically broadening the risk eligible for hedge accounting of non-financial items; (2) changing the way hedging derivative instruments are accounted for to reduce profit or loss volatility; and (3) replacing retrospective effectiveness assessment with the principle of economic relationship between the hedging instrument and the hedged item.

2) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”

In issuing IFRS 13 “Fair Value Measurement”, the IASB made consequential amendment to the disclosure requirements in IAS 36 “Impairment of Assets”, introducing a requirement to disclose in every reporting period the recoverable amount of an asset or each cash-generating unit. The amendment clarifies that such disclosure of recoverable amounts is required only when an impairment loss has been recognized or reversed during the period. Furthermore, the Bank is required to disclose the discount rate used in measurements of the recoverable amount based on fair value less costs of disposal measured using a present value technique.

3) Annual Improvements to IFRSs: 2010-2012 Cycle

IFRS 13 was amended to clarify that the issuance of IFRS 13 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting, if the effect of not discounting is immaterial. IAS 24 was amended to clarify that a management entity providing key management personnel services to the Bank is a related party of the Bank. Consequently, the Bank is required to disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. However, disclosure of the components of such compensation is not required.

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The scope in IFRS 13 of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis was amended to clarify that it includes all contracts that are within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, even if those contracts do not meet the definitions of financial assets or financial liabilities within IAS 32. IAS 40 was amended to clarify that IAS 40 and IFRS 3 are not mutually exclusive and application of both standards may be required to determine whether the investment property acquired is acquisition of an asset or a business combination.


The amendments to IFRS 7 provide additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset.

6) IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations. Under IFRS 16, if the Bank is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the balance sheets except for low-value and short-term leases. The Bank may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. On the statements of comprehensive income, the Bank should present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the statements of cash flows, cash payments for the principal portion of the lease liability are classified within financing activities; cash payments for interest portion are classified within operating activities. The application of IFRS 16 is not expected to have a material impact on the accounting of the Bank as lessor. When IFRS 16 becomes effective, the Bank may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this Standard recognized at the date of initial application.

7) Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”

The amendment clarifies that the difference between the carrying amount of the debt instrument measured at fair value and its tax base gives rise to a temporary difference, even though there are unrealized losses on that asset, irrespective of whether the Bank expects to recover the carrying amount of the debt instrument by sale or by holding it and collecting contractual cash flows. In addition, in determining whether to recognize a deferred tax asset, the Bank should assess a deductible temporary difference in combination with all of its other deductible temporary differences, unless the tax law restricts the utilization of losses to deduction against income of a specific type, in which case, a deductible temporary difference is assessed in combination only with other deductible temporary differences of the appropriate type. The amendment also stipulates that, when determining whether to recognize a deferred tax asset, the estimate of probable future taxable profit may include some of the Bank’s assets for more than their carrying amount if there is sufficient evidence that it is probable that the Bank will achieve this, and that the estimate for future taxable profit should exclude tax deductions resulting from the reversal of deductible temporary differences.

Except for the above impact, as of the date the financial statements were authorized for issue, the Bank is continuingly assessing the possible impact that the application of other standards and interpretations will have on the Bank’s financial position and financial performance, and will disclose the relevant impact when the assessment is complete.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance The financial statements have been prepared in accordance with Regulations Governing the Preparation of Financial Reports by Public Banks, Criteria Governing the Preparation of Financial Reports by Securities Firms and the guidelines issued by the authority (the “Regulations”).

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Basis of Preparation The financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair value, and properties and equipment that are chosen the deemed cost as exemptions by IFRS 1 through Regulations Governing the Preparation of Financial Reports by Public Banks on the IFRS transition date. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: a. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; b. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either

directly (i.e. as prices) or indirectly (i.e. derived from prices); and c. Level 3 inputs are unobservable inputs for the asset or liability. When preparing its financial statements, the Bank used equity method to account for its investment in subsidiaries. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in the financial statements to be the same with the amounts attributable to the owner of the Bank in its financial statements, adjustments arising from the differences in accounting treatment between basis and basis were made to equity investment - equity method, share of profit or loss of subsidiaries and share of other comprehensive income of subsidiaries and related equity items, as appropriate, in the financial statements. The accompanying financial statements include the accounts of the Head Office, OBU, all branches and the representative office. All interoffice transactions and balances have been eliminated. Classification of Current and Non-Current Assets and Liabilities Since the operating cycle in the Banking industry cannot be reasonably identified, the accounts included in the Bank financial statements were not classified as current or noncurrent. Nevertheless, accounts were properly categorized in accordance with the nature of each account and sequenced by their liquidity. Please refer to Note 45 for the maturity analysis of assets and liabilities. Foreign Currencies a. Foreign currencies

In preparing the financial statements of the Bank, transactions in currencies other than the Bank’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arise from settlement or translation are recognized in profit or loss in the period in which they arise. Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income. Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

b. Exchange differences on translating foreign operations

For the purposes of presenting financial statements, the assets and liabilities of the Bank’s foreign operations are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognized in other comprehensive income.

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Cash and Cash Equivalents Cash and cash equivalent in financial statements includes cash on hand, demand deposits and investments with original maturities within three months from the date of acquisition, highly liquid, readily convertible to a known amount of cash and be subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments. For the purposes of presenting cash flows, the cash and cash equivalent includes cash and cash equivalents in balance sheets, due from the Central Bank and call loans to other banks and securities purchased under agreements to resell under IAS 7. Investments Accounted for Using the Equity Method The Bank uses the equity method of accounting on investment of subsidiaries. The subsidiaries are the entities controlled by the Bank. Under the equity method, the investment is initially recognized at cost and the carrying amount is increased or decreased to recognize the Bank’s share of the profit or loss and other comprehensive income of the subsidiary after the date of acquisition. Besides, the Bank also recognizes the Bank’s share of the change in other equity of the subsidiary. When the Bank’s share of losses of a subsidiary equals or exceeds its interest in that subsidiary (which includes any carrying amount of the investment in subsidiary accounted for by the equity method and long-term interests that, in substance, form part of the Bank’s net investment in the subsidiary), the Bank continues recognizing its share of further losses. The acquisition cost in excess of the acquisition-date fair value of the identifiable net assets acquired is recognized as goodwill. Goodwill is not amortized. Profits and losses from downstream transactions with a subsidiary are eliminated in full. Profits and losses from upstream with a subsidiary and side stream transactions between subsidiaries are recognized in the financial statements only to the extent of interests in the subsidiary that are not related to the Bank. The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases. Financial Instruments Financial assets and financial liabilities are recognized when the Bank entity becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss. Financial assets All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. a. Measurement category

Financial assets have four categories: Financial assets at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets and loans and receivables.

1) Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or designated as at fair value through profit or loss.

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A financial asset is designated as at fair value through profit or loss upon initial recognition if:

a) This designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise without this designation; or

b) The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its

performance is evaluated on a fair value basis, in accordance with the Bank’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

c) The contract contains one or more embedded derivatives so that the entire hybrid (combined) contract can be designated

as at fair value through profit or loss.

Fair value is determined in the manner described in Note 44.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in Note 44.

2) Available-for-sale financial assets

Available-for-sale financial assets are nonderivatives that either are designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Fair value is determined in the manner described in Note 44. Available-for-sale financial assets are measured at fair value. Changes in the carrying amounts of available-for-sale monetary financial assets pertaining to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amounts of available-for-sale financial assets are recognized in other comprehensive income. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss that previously accumulated in the investments revaluation reserve is reclassified to profit or loss. The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts on financial instrument acquisition or issue) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Dividends on available-for-sale equity instruments are recognized in profit or loss when the Bank’s right to receive the dividends are established. Available-for-sale equity investments that have no quoted market prices in an active market and have fair values that cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are recognized in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets cannot be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

3) Held-to-maturity investments

Corporate bonds and foreign government bonds, which are above certain credit ratings and on which the Bank has positive intent and ability to hold to maturity, are classified as held-to-maturity investments. Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.

4) Loans and receivables

Loans and receivables (including receivables, discounts and loans, debt investments with no active market) are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial.

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b. Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. In determining the allowance for credit losses and provision for losses on guarantees, the Bank assesses the collectability of discounts and loans, receivables, and other financial assets, as well as guarantees and acceptances as of the balance sheet date. Loans and receivables are assessed for impairment at the end of each reporting period and considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the foregoing discounts and loans, receivables, and other financial assets, the estimated future cash flows of the asset have been affected. Objective evidence of impairment could include:

� Significant financial difficulty of the debtor; � The foregoing discounts and loans, receivables, and other financial assets becoming overdue; or � Probability that the debtor will enter into bankruptcy or undergo financial reorganization.

Discounts and loans, receivables, and other financial assets that are assessed as not impaired individually are further assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of discounts and loans, receivables, and other financial assets could include the Bank’s past experience of collecting payments and an increase in the number of delayed payments, as well as observable changes in national or local economic conditions that correlate with defaults on loans and receivables.

The amount of the impairment loss recognized is the difference between the asset carrying amount and the present value of estimated future cash flows, after taking into account the related collaterals and guarantees, discounted at the original effective interest rates. The carrying amount of the discounts and loans, receivables, and other financial assets is reduced through the use of an allowance account. Under the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Nonaccrual Loans” (the “Regulations”), the Bank evaluates credit losses on the basis of the estimated collectability. In accordance with the Regulations, credit assets are classified as normal assets, assets that require special mentioned, assets with substandard, assets with doubtful collectability, and assets on which there is loss. The Bank evaluates value of collaterals of specified loans and assesses recoverablities of nonperforming loans. Based on the above Regulations, the minimum allowance for credit losses and provision for losses on guarantees for assets that are normal excluding claims against ROC government agencies that require special mentioned, assets that are substandard, assets with doubtful collectability, and assets on which there is loss were 1%, 2%, 10%, 50% and 100%, respectively of outstanding. In addition, under Financial Supervisory Commission (FSC) guidelines No. 10010006830 there should be a provision at more than 1% of sum of a minimum allowance for credit losses and the provision for losses on guarantees. For enhanced risk management by banks, FSC issued Letter No. 10300329440, which requires domestic banks to allocate an allowance of at least 1.5% of repair loans and construction loans before 2016. In addition, under FSC Letter No. 10410001840, Category 1 credits granted to enterprises in the China region should be covered by an allowance of at least 1.5% of the balance of these credits. For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered an objective evidence of impairment. When an available-for-sale financial asset is considered impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period. In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income and accumulated under the heading of investments revaluation reserve. In respect of available-for-sale debt securities, impairment loss are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

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For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods. The carrying amount of the financial asset is reduced through the use of an allowance account, accumulated impairment account, or book value. When those financial assets are considered uncollectible, they are written off against the allowance account and accumulated impairment account. Subsequent recoveries of amounts previously written off are debited against the bad debt expense or credited against the allowance account in according with Criteria Governing the Preparation of Financial Reports by Public Banks.

c. Derecognition of financial assets

The Bank derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.

Financial liabilities and equity instruments Debt and equity instruments issued by the Bank are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Equity and debt instruments are recognized at the proceeds received, net of direct issue costs. a. Measurement and recognition

Except the following situation, all the financial liabilities are measured at amortized cost using the effective interest method: Financial liabilities are classified as at fair value through profit or loss when the financial liability is either held for trading or it is designated as at fair value through profit or loss. Financial liabilities held for trading are stated at fair value, with any gain or loss arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest or dividend paid on the financial liability. Fair value is determined in the manner described in Note 44. A financial liability may be designated as at fair value through profit or loss upon initial recognition when doing so results in more relevant information and if:

1) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise

arise; or 2) The financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its

performance is evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

3) The contract contains one or more embedded derivatives so that the entire combined contract (asset or liability) can be

designated as at fair value through profit or loss.

For a financial liability designated as at fair value through profit or loss, the amount of changes in fair value attributable to changes in the credit risk of the liability is presented in other comprehensive income, and it will not be subsequently reclassified to profit or loss. The remaining amount of changes in the fair value of that liability which incorporates any interest or dividend paid on the financial liability is presented in profit or loss. The gain or loss accumulated in other comprehensive income will be transferred to retained earnings when the financial liabilities are derecognized. If this accounting treatment related to credit risk would create or enlarge an accounting mismatch, all changes in fair value of the liability are presented in profit or loss. Fair value is determined in the manner described in Note 44.

b. Derecognition of financial liabilities

The difference between the carrying amount of the financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

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Financial Guarantee Contracts Financial guarantee contracts issued by the Bank are initially recognized at their fair values and, if not designated as at fair value through profit or loss, are subsequently measured at the higher of the best estimate of the obligation under the contract or the amount initially recognized less cumulative amortization recognized. Derivative Financial Instruments Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. When the fair value of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instruments is negative, the derivative is recognized as a financial liability. Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the contracts are not measured at fair value through profit or loss. Repurchase and Reverse Repurchase Transactions Securities purchased under agreements to resell (reverse repurchase) agreements and securities sold under agreements to repurchase are generally treated as collateralized financing transactions. Interest earned on reverse repurchase agreements or interest incurred on repurchase agreements is recognized as interest income or interest expense over the life of each agreement. Property and Equipment Property and equipment are stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment loss. Depreciation on property and equipment is recognized using the straight-line method. Each significant part is depreciated separately. If the lease term is shorter than the useful lives, assets are depreciated over the lease term. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss. Investment Properties Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties also include land held for a currently undetermined future use. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method. On derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount of the asset is included in profit or loss. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. a. The Bank as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease unless another system could be more representative of the effectiveness of time consumption of lease assets.

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b. The Bank as lessee

Operating lease payments are recognized as an expense on a straight-line basis over the lease term unless another system could be more representative of the effectiveness of time consumption of lease assets.

Intangible Assets a. Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

b. Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date. Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately.

c. Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset are recognized in profit or loss.

Goodwill Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Goodwill arising from the acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss. For the purposes of impairment testing, goodwill is allocated to each of the Bank’s cash-generating units or groups of cash-generating units (referred to as cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributed goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods. If goodwill has been allocated to a cash-generating unit and the entity disposes of an operation within that unit, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal, and is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained. Impairment of Tangible and Intangible Assets Other Than Goodwill At the end of each reporting period, the Bank reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Bank estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to the individual cash-generating units; otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

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Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss. Provisions Provisions, including those arising from the contractual obligation specified in the service concession arrangement to maintain or restore the infrastructure before it is handed over to the grantor, are measured at the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Employee Benefits a. Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

b. Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions. Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur. Remeasurement, comprising actuarial gains and losses, and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

c. Preferential interest on employees’ deposits

The Bank offers preferential interest rate to its current employees for their deposits within a prescribed amount. Under Article 28 of the Regulation Governing the Preparation of Financial Reports by Public Bank, if the Bank’s preferential deposit interest rate for as stated in the employment contract exceeds the market interest rate, the excess will be subject to IAS 19 “Employee Benefits” upon the employee’s retirement. The actuarial valuation assumptions and parameters are based on those announced by authority, if any.

d. Termination benefits

A liability for a termination benefit is recognized at the earlier of when the Bank can no longer withdraw the offer of the termination benefit and when the Bank recognizes any related restructuring costs.

Share-based Payment Arrangements The fair value at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Bank’s best estimates of the number of shares or options that are expected to ultimately vest, with a corresponding increase in capital surplus - employee share options. It is recognized as an expense in full at the grant date if vesting immediately.

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The shares of the capital increased by cash of SPH was reserved for the Bank’s employees. The grand date was the date that the employees subscription and the fair value determined at the grant date of the equity-settled share-based payments is recognized as an expense and paid-in capital. Revenue Recognition a. Interest income and expense

Except for financial assets and liabilities at fair value through profit or loss, all interest-earning financial assets and interest-bearing financial liabilities are accrued using the effective interest rate method and are accounted for as interest revenue and interest expense in the consolidated statement of comprehensive income. Transaction costs and all other premium or discounts associated with the loans and receivables are adjusted to the carrying amount of the loans and receivables. The calculation of effective interest rate includes transaction costs and all other premium or discounts paid or received by the Bank that is an integral part of the effective interest rate. Interest should not be accrued for loans that are transferred to nonperforming loans. The interest revenue on those loans/credits is recognized upon collection. Under Ministry of Finance (MOF) regulations, the interest revenue on structured loans is recognized upon collection. Interest income on revolving credit card receivables and cash advance is recognized on an accrual basis.

b. Commission revenue

Commission fee revenue and expenses are recognized when loans or other services are provided. Service fees on significant projects are recognized when the project has been completed, for instance, loans syndicated fees are recognized over the period during which the service is performed, or as an adjustment to the effective interest rate on the loan and receivables. Annual fee income is the membership fee received from card members and is recognized when card members fail to meet the criteria for annual fee exemption; an allowance is estimated using past experience and is recognized as a deduction from annual fee income within the year the annual fee income is recognized. Revenue from rendering services is recognized at the amount corresponding to the percentage of services completed as of the balance sheet date.

c. Dividend income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established provided that it is probable that the economic benefits will flow to the Bank and the amount of income can be measured reliably.

Income Tax Income tax expense represents the sum of the current tax and deferred tax. a. Current tax

According to the Income Tax Act, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings. Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

b. Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are generally recognized for deductible temporary differences, unused loss carry forward and unused tax credits to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

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Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, except where the Bank is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Bank expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

c. Current and deferred tax for the period

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively.

d. Linked-tax system

SPH adopted the linked-tax system for income tax filings with its qualified subsidiaries, including the Bank. The different amounts between tax expense and deferred tax liabilities and assets based on consolidation and SPH with its qualified subsidiaries are adjusted on SPH; related amounts are recognized as current tax assets or current tax liabilities.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Bank’s accounting policies, which are described in Note 4, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. a. Impairment losses on loans and receivables

The Bank reviews loan portfolios to assess impairment periodically. In determining whether an impairment loss should be recorded, the Bank makes judgments on whether there are any observable data indicating that impairment. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers (e.g., payment delinquency or default), or economic conditions that correlate with defaults on assets. To assess impairment, the management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when estimating expected future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to decrease the difference between estimated loss and actual loss. Impairment losses on loans and receivables are shown in Notes 10, 11, 15 and 45.

b. Mmeasurement and evaluation process of fair value

As described in Note 44, the Bank’s management uses its judgment in selecting an appropriate valuation technique for financial instruments with no quoted market prices in an active market. Valuation techniques commonly used by market practitioners are applied. For derivative financial instruments, assumptions are based on quoted market rates adjusted for specific features of the instruments. Other financial instruments were valued using a discounted cash flow analysis that includes assumptions based on quoted market prices or rates (if available). The measurement of the fair value of unlisted equity investments includes assumptions not based on observable market prices or rates. Note 44 provides information on the key assumptions used determining the fair value of financial instruments. The Bank’s management believes that the chosen valuation techniques and assumption used are appropriate in determining the fair value of financial instruments.

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c. Impairment of goodwill

Determining goodwill impairment requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires management to estimate the future cash flows expected to arise from the cash-generating unit and to use a suitable discount rate to calculate the present value of these cash flows. When the actual future cash flows are less than expected, a material impairment loss may arise. Impairment of goodwill is shown in Note 18.

d. Income tax

As of December 31, 2015 and 2014, the carrying amounts of deferred income tax assets were $1,857,190 and $2,159,835, respectively. As of December 31, 2015 and 2014, deferred income tax assets amounting to $26,500 had not been recognized because of the unpredictability of future profit streams. The realizability of the deferred income tax assets mainly depend on whether sufficient future profits or taxable temporary differences will be available in the future. If the actual future profits generated are less than expected, a material reversal of deferred income tax assets may arise, which would be recognized in profit or loss for the period in which reversal takes place.

e. Employee benefit obligation reserve

The present value of defined benefit obligation and preferential interest on employees’ deposits are based on several actuarial assumptions. Any changes on these assumptions will influence the fair value of the employee benefit obligations. One of the assumptions used to determine net pension cost (income) pertains to the discount rate. The Bank determines the appropriate discount rate at the end of each year, and uses the rate to calculate the present value of future cash flows on the estimated payment of employee benefit obligation. The employee benefit obligation reserve is shown in Note 27.

6. CASH AND CASH EQUIVALENTS

December 31 2015 2014 Cash on hand $ 6,982,832 $ 7,523,780 Due from other banks 15,345,279 28,431,334 Checks for clearing 3,371,201 3,659,263 $ 25,699,312 $ 39,614,377 Cash and cash equivalents as of December 31, 2015 and 2014 as shown in the statements of cash flows can be reconciled to the related items in the balance sheets as follows: December 31 2015 2014 Cash and cash equivalents in balance sheets $ 25,699,312 $ 39,614,377 Due from the Central Bank and call loans to other banks that meet the definition

of cash and cash equivalents under IAS 7 “Statement of Cash Flows” 40,677,214 47,750,336 Securities purchased under agreement to resell that meet the definition of cash

and cash equivalents under IAS 7 “Statement of Cash Flows” 4,294,597 12,884,142 Cash and cash equivalents in statements of cash flows $ 70,671,123 $ 100,248,855

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7. DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS, NET

December 31 2015 2014 Call loans to banks $ 41,515,579 $ 37,525,481 Trade finance advance - interbank 832,487 4,656,114 Deposit reserve - checking accounts 6,735,093 12,594,809 Due from the Central Bank - interbank settlement funds 2,000,963 840,614 Deposit reserve - demand accounts 24,525,315 23,804,301 Deposit reserve - foreign currencies 254,607 228,364 $ 75,864,044 $ 79,649,683 Under a directive issued by the Central Bank of the ROC, New Taiwan dollar (NTD)-denominated deposit reserves are determined monthly at prescribed rates based on average balances of customers’ NTD-denominated deposits. Deposit reserve - demand account should not be used, except for adjusting the deposit reserve account monthly. In addition, the foreign-currency deposit reserves are determined at prescribed rates based on the balances of foreign-currency deposits. These reserves can be withdrawn momentarily anytime at no interest.

8. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

December 31 2015 2014 Held-for-trading financial assets

Government bonds $ 27,951,987 $ 19,196,723 Bank debentures 5,072,423 1,722,123 Corporate bonds 4,984,652 2,504,072 Currency swap contracts and hybrid FX swap structured instruments 19,812,586 9,248,771 Interest rate swap contracts 2,199,756 1,034,073 Forward contracts 2,079,308 947,030 Option contracts 2,064,922 10,089,919 Others 989,539 559,781 Adjustment for change in value of held-for-trading financial assets 287,793 82,570 65,442,966 45,385,062

Financial assets designated at fair value through profit or loss Convertible bonds 1,283,590 2,031,646 Adjustment for change in value of financial assets designated at fair value

through profit or loss (18,561) 1,445 1,265,029 2,033,091

$ 66,707,995 $ 47,418,153 Held-for-trading financial liabilities

Securities purchased under agreement to resell - short sales $ 249,502 $ - Currency swap contracts and hybrid FX swap structured instruments 18,940,117 9,005,178 Option contracts 2,570,813 10,156,299 Interest rate swap contracts 2,428,932 1,063,319 Forward contracts 1,892,806 968,203 Others 970,756 404,829 Adjustment for change in value of held-for-trading financial liabilities 15 - $ 27,052,941 $ 21,597,828

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a. The Bank designated hybrid instruments as financial assets and liabilities at FVTPL. b. Please refer to Note 42 for information relating to financial assets pledged as security at FVTPL. c. The Bank engages in derivative transactions mainly to accommodate customers’ needs and manage its own exposure

positions. Outstanding derivative contracts (nominal) on December 31, 2015 and 2014 are shown as follows:

Contract Amount December 31 2015 2014 Currency swap contracts and hybrid FX swap structured instruments $ 1,338,673,413 $ 948,367,379 Interest rate swap contracts 531,952,543 387,905,682 Forward contracts

Long position 76,810,991 104,042,656 Short position 77,336,709 81,779,834

Option contracts Long position 43,977,419 246,015,386 Short position 46,767,144 248,790,152

Cross-currency swap contracts 31,965,122 28,371,856 Futures contracts 10,745,082 834,881 Assets swap contracts 1,283,590 2,031,646 Equity-linked swap contracts 1,132,539 1,292,787 Commodity-linked swap contracts 69,734 208,628

9. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL

December 31 2015 2014 Commercial paper $ 4,294,597 $ 11,833,820 Negotiable certificates of deposit - 1,060,329 $ 4,294,597 $ 12,894,149 Agreed-upon resell amount $ 4,295,735 $ 12,900,949 Expiry January 2016 April 2015 Securities purchased under agreement to resell are not underlying for agreements to repurchase.

10. RECEIVABLES, NET

December 31 2015 2014 Accounts receivable - forfaiting $ 40,333,745 $ 82,160,394 Credit card receivables 16,535,329 17,327,213 Accounts receivable - factoring 7,454,474 10,296,684 Acceptances - forfaiting 6,652,451 25,756,268 Interest and revenue receivables 2,574,142 2,104,968 Acceptances 1,529,933 2,095,801 Trust administration fee revenue receivables 618,224 597,011 Accounts receivable - sale of securities 506,900 5,545 Others 1,357,029 966,635 77,562,227 141,310,519 Less: Allowance for credit losses 1,675,963 701,612 Net amount $ 75,886,264 $ 140,608,907

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The Bank assessed the collectability of receivables to determine the allowance. Movements in the allowance of receivables were shown as follows: For the Year Ended December 31 2015 2014 Balance, January 1 $ 701,612 $ 501,307 Provision 1,274,493 538,201 Write-off (306,058) (353,961) Effect of exchange rate changes 5,916 16,065 Balance, December 31 $ 1,675,963 $ 701,612 Please refer to Note 45 for the analysis of receivable impairment loss. The recovery of receivables write-off as deduction of provision for the years ended December 31, 2015 and 2014 were $246,482 and $278,048, respectively.

11. DISCOUNTS AND LOANS, NET

December 31 2015 2014 Export negotiation $ 746,750 $ 727,827 Overdrafts 1,387 2,097 Secured overdrafts 264,899 322,392 Accounts receivable - financing 1,600,541 2,245,383 Short-term loans 167,682,963 112,840,418 Secured short-term loans 88,873,493 99,217,470 Medium-term loans 117,650,298 110,150,888 Secured medium-term loans 66,417,743 76,010,660 Long-term loans 4,504,000 9,503,937 Secured long-term loans 406,720,659 362,101,260 Nonperforming loans transferred from loans 1,694,171 1,596,465 856,156,904 774,718,797 Less: Allowance for credit losses 11,517,875 12,469,687 Less: Premium or discount on discounts and loans 226,075 241,554 Net amount $ 844,412,954 $ 762,007,556 Please refer to Note 45 for the analysis of impairment loss on discounts and loans, Note 42 for information relating to discounts and loans pledged as security. The Bank assessed the collectability of discounts and loans to determine the allowance. Movements in the allowance of discounts and loans were shown as follows: For the Year Ended December 31 2015 2014 Balance, January 1 $ 12,469,687 $ 8,546,558 (Reversal of provisions) provisions (558,503) 4,614,243 Write-off (462,986) (791,430) Effect of exchange rate changes 59,739 100,316 Others (Note) 9,938 - Balance, December 31 $ 11,517,875 $ 12,469,687 Note: The Bank assumed the assets, liabilities and operations of the Ho Chi Minh City Branch of Far East National Bank.

Please refer to Note 14 for the related information. The Bank received loans previous written-off $408,094 and $1,112,221 for the years ended December 31, 2015 and 2014, respectively, which recognized as a deduction on provision expenses.

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12. AVAILABLE-FOR-SALE FINANCIAL ASSETS

December 31 2015 2014 Certificates of deposits $ 130,090,314 $ 142,373,059 Corporate bonds 23,945,238 18,024,169 Commercial paper 18,972,974 21,996,592 Bank debentures 12,190,857 4,791,896 Government bonds 7,767,858 16,400,675 Stocks 20,983 20,983 Agency bonds - 940,674 192,988,224 204,548,048 Adjustments for change in value of available-for-sale financial assets 136,115 225,692 $ 193,124,339 $ 204,773,740 As of December 31, 2015 and 2014, the par value of available-for-sale financial assets under agreements to repurchase were $2,071,500 and $7,102,100, respectively. Please refer to Note 42 for information relating to available-for-sale financial assets pledged as security.

13. HELD-TO-MATURITY FINANCIAL ASSETS

December 31 2015 2014 Government bonds $ 41,158,862 $ 28,815,794 Certificates of deposit 23,925,329 12,933,586 Corporate bonds 1,751,780 1,752,360 Net amount $ 66,835,971 $ 43,501,740 As of December 31, 2015, the par value of held-to-maturity financial assets under agreements to repurchase was $3,100,000 (December 31, 2014: None). A change of intention the Bank to reclassify available-for-sale financial assets (government bonds $8,410,928 and corporate bonds $1,753,088) into held-to-maturity financial assets on September 25, 2013. Please refer to Note 47 for the related information. The operations of the Bank that had issued debentures and the Bank’s restructuring was uncertain, which could result in the Bank’s inability to pay interest during the third quarter of 2014. Since the Bank evaluated that its recovery rate for the debentures was low, it disposed one of the Bank debentures before the maturity date amounted to US$857 thousand, with impairment reversal gain and loss on disposal amounted to $10,213 and $11,619, respectively, and the percentage of cumulative amounts of the debentures disposed of in the year ended December 31, 2014 and prior two years to total amounts of held-to-maturity investments as of September 30, 2014 was 0.01%. Please refer to Note 42 for information relating to held-to-maturity financial assets pledged as security.

14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

December 31 2015 2014

Investments in subsidiaries - unlisted companies

Bank SinoPac (China) Ltd. $ 10,948,098 $ 10,439,047 SinoPac Bancorp 9,339,102 8,613,964 SinoPac Capital Limited (H.K.) 1,902,064 1,803,395 SinoPac Life Insurance Agent Co., Ltd. 1,098,746 929,469 SinoPac Property Insurance Agent Co., Ltd. 37,648 36,259

$ 23,325,658 $ 21,822,134

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As the end of the reporting period, the proportion of ownership and voting rights in subsidiaries held by the Bank were all 100%. For expansion of the market and the operating synergies of Vietnamese overseas branches, the Bank assumed, under the approval of its board, the assets, liabilities and operations of the Ho Chi Minh City branch of the U.S. Far East National Bank on April 25, 2014. This case has been approved by the FSC and the State Bank of Vietnam with November 1, 2015 as the transfer date. The transaction cost of this case is US$28,540 thousand. The Bank received the approval of Financial Supervisory Commission and Investment Commission, MOEA for its investment in the subsidiary - SinoPac Bank (China) and then obtained the local operating license in January 2014. In October 2014, SinoPac Bancorp’s board of directors approved its capital increase of US$195,000 thousand, the redemption of preferred shares amounting to US$195,000 thousand and a return to the Bank of capital of US$50,000 thousand. The shares issued for SinoPac Bancorp’s capital increase were all subscribed for by the Bank. The Bank’s share of profit and other comprehensive income of subsidiaries for the years ended December 31, 2015 and 2014 was based on the subsidiaries’ financial statements audited by the accountants for the same period. The investments share of profit of subsidiaries were as follows: For the Year Ended December 31 2015 2014 Bank SinoPac (China) Ltd. $ 62,910 $ 98,357 SinoPac Bancorp 349,294 257,724 SinoPac Capital Limited (H.K.) 38,525 354,507 SinoPac Life Insurance Agent Co., Ltd. 1,092,381 913,032 SinoPac Property Insurance Agent Co., Ltd. 31,381 29,992 $ 1,574,491 $ 1,653,612

15. OTHER FINANCIAL ASSETS, NET

December 31 2015 2014

Unquoted equity instruments

Unlisted equity investments $ 364,092 $ 364,092 Debt investments with no active market

Certificate of deposit 1,746,142 - Purchase of the PEM Group’s instruments 4,668,629 4,458,015 Time deposits not belong to cash and cash equivalent 3,019,458 3,573,430 Call loans to security corporations 1,653,293 - Excess margin of futures and options 521,228 204,601 Short-term loan advance 26,315 18,209 Nonperforming receivables transferred from other than loans 549 6,933 Exchange bills negotiated 509 285 12,000,215 8,625,565 Less: Allowance for credit loss 6,270 10,268 Less: Accumulated impairment 2,408,678 2,375,857 $ 9,585,267 $ 6,239,440 The board of directors of the Bank and SinoPac Bancorp resolved the redemption of preferred stocks by US$195,000 thousand (listed in unquoted equity instruments) in October 2014. And the capital was used for the capital increase of the common stocks by the Bank. In 2015, the Bank bought from a bank in China - through SinoPac Securities (Asia) - certificates of deposits with a face value of RMB50,000 thousand and recognized these instruments as debt investments with no active market - certificates of deposits. The purchase terms and conditions were the same as those in the market. Above time deposits not belong to cash and cash equivalent include over three months, no advanced termination or pledged time deposits.

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Please refer to Note 42 for information relating to other financial assets pledged as security. The Bank was delegated by professional investors to sell the PEM Group’s investment products amounting to US$146,000 thousand through private placement. A court appointed a receiver for all assets that belonged to, were being managed by, or were in the possession of or control of the PEM Group. To protect the client’s interests, the Bank bought back the products at the price of the initial payment net of the distribution and redemption costs. On December 24, 2010, the Bank’s board of directors resolved to abide by a court’s appointment of a PEM Group receiver to take the PEM Group’s insurance policies at the price of approximately US$40.4 million, and the Bank thus recognized impairment losses of US$11,152 thousand. On March 7, 2011, the receiver transferred a portion of the insurance policies to a trustee established jointly by certain banks to hold insurance policies. And the Bank had submitted to the authorities the results of this policy transfer. As of December 31, 2015, a reserve of US$72,845 thousand (NT$2,408,678) had been set aside to cover the accumulated impairment losses.

The Bank assessed the collectability of other financial assets to determine the allowance. Movements in the allowance of other financial assets were shown as follows: For the Year Ended December 31 2015 2014 Balance, January 1 $ 10,268 $ 11,184 Provisions 9,343 9,649 Write-off (13,370) (11,291) Effect of exchange rate changes 29 726 Balance, December 31 $ 6,270 $ 10,268

16. PROPERTY AND EQUIPMENT, NET The movements of property and equipment for the years ended December 31, 2015 and 2014 are summarized as follows: For the Year Ended December 31, 2015

Land Buildings

Machinery and Computer Equipment

Transportation Equipment

Other Equipment

Leasehold Improvements

Prepayments for Equipment

and Construction in

Progress Total Cost Balance, January 1 $ 6,543,033 $ 5,903,964 $ 1,789,989 $ 1,227 $ 1,236,060 $ 1,390,824 $ 108,273 $16,973,370 Addition - 28,830 169,063 - 77,010 57,747 174,920 507,570 Deduction 145,000 125,990 194,345 - 30,483 7,700 140 503,658 Reclassifications (834,969 ) (776,498 ) 3,379 - 10,043 60,699 (138,824 ) (1,676,170 ) Effect of exchange rate

changes - - 6,728 53 1,154 3,899 - 11,834 Others (Note) - - 20,864 - - 5,561 - 26,425 Balance, December 31 5,563,064 5,030,306 1,795,678 1,280 1,293,784 1,511,030 144,229 15,339,371 Accumulated

depreciation Balance, January 1 - 2,916,981 1,390,175 1,227 974,513 1,065,287 - 6,348,183 Depreciation - 142,553 143,667 - 62,046 83,752 - 432,018 Deduction - 67,737 190,910 - 29,646 5,775 - 294,068 Reclassifications - (386,668 ) - - - - - (386,668 ) Effect of exchange rate

changes - - 6,389 53 1,029 3,851 - 11,322 Others (Note) - - 20,588 - - 5,561 - 26,149 Balance, December 31 - 2,605,129 1,369,909 1,280 1,007,942 1,152,676 - 6,136,936 Accumulated

impairment Balance, January 1 - - - - - - - - Addition - 7,860 - - - - - 7,860 Deduction - - - - - - - - Reclassifications - (7,860 ) - - - - - (7,860 ) Others (Note) - - - - - - - - Balance, December 31 - - - - - - - - Net amount Balance, December 31 $ 5,563,064 $ 2,425,177 $ 425,769 $ - $ 285,842 $ 358,354 $ 144,229 $ 9,202,435

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For the Year Ended December 31, 2014

Land Buildings

Machinery and Computer Equipment


Other Equipment

Leasehold Improvements


and Construction in

Progress Total Cost Balance, January 1 $ 6,561,105 $ 5,811,794 $ 2,111,306 $ 1,159 $ 1,187,140 $ 1,375,645 $ 116,800 $17,164,949 Addition - 29,453 101,249 - 81,947 32,159 166,435 411,243 Deduction 18,072 7,947 434,347 - 46,899 59,701 - 566,966 Reclassifications - 70,664 3,610 - 12,408 37,770 (174,962 ) (50,510 ) Effect of exchange rate

changes - - 8,171 68 1,464 4,951 - 14,654 Balance, December 31 6,543,033 5,903,964 1,789,989 1,227 1,236,060 1,390,824 108,273 16,973,370 Accumulated

depreciation Balance, January 1 - 2,768,332 1,658,277 1,159 963,563 1,031,613 - 6,422,944 Depreciation - 150,984 151,130 - 54,750 81,429 - 438,293 Deduction - 2,335 426,963 - 45,051 52,466 - 526,815 Effect of exchange rate

changes - - 7,731 68 1,251 4,711 - 13,761 Balance, December 31 - 2,916,981 1,390,175 1,227 974,513 1,065,287 - 6,348,183 Net amount Balance, December 31 $ 6,543,033 $ 2,986,983 $ 399,814 $ - $ 261,547 $ 325,537 $ 108,273 $10,625,187 Note: The Bank assumed the assets, liabilities and operations of the Ho Chi Minh City Branch of Far East National Bank.

Please refer to Note 14 for the related information. Reclassifications were mainly (a) from prepayments for equipment and construction in progress to buildings, computers and machinery and equipment, other equipment, leasehold improvements and computer software (listed under intangible assets); and (b) from land and buildings to investment property. The above items of property and equipment were depreciated at the following estimated useful lives:

Items Years Buildings 2-60 years Computer and machinery equipment 3-15 years Transportation equipment 5 years Other equipment 3-15 years Leasehold improvements 5 years There are no property and equipment pledged as security.

17. INVESTMENT PROPERTY, NET The movements of investment property are summarized as follow: For the Year Ended December 31, 2015 Land Buildings Total Cost Balance, January 1 $ - $ - $ - Addition - - - Deduction - - - Transfer from property and equipment 834,969 783,992 1,618,961 Balance, December 31 834,969 783,992 1,618,961

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For the Year Ended December 31, 2015 Land Buildings Total Accumulated depreciation Balance, January 1 $ - $ - $ - Addition - 1,567 1,567 Deduction - - - Transfer from property and equipment - 386,668 386,668 Balance, December 31 - 388,235 388,235 Accumulated impairment Balance, January 1 - - - Addition - - - Deduction - - - Transfer from property and equipment - 7,860 7,860 Balance, December 31 - 7,860 7,860 Net amount Balance, December 31 $ 834,969 $ 387,897 $ 1,222,866 The above items of investment property were depreciated at the following estimated useful lives:

Category Useful Lives Buildings 8-60 years Buildings were property held for earning rentals and/or for capital appreciation. On the transfer of these buildings from property and equipment, their book value was calculated on the basis of their area. If the Bank entirely owned a building, the calculation of book value was based on the entire area of the building; if the Bank used only a certain section of a building, the area of that section only was used for the calculation. The fair values of investment property as of December 31, 2015 totaled $16,850,688. The fair values, which were based on an internal valuation report instead of an assessment by an independent professional valuer, were unobservable inputs (Level 3). There is no investment property pledged as security.

18. INTANGIBLE ASSETS, NET

December 31, 2015

Items Original Cost Accumulated Amortization Carrying Amount

Goodwill $ 876,717 $ - $ 876,717 Computer software 1,048,982 588,687 460,295 $ 1,925,699 $ 588,687 $ 1,337,012

December 31, 2014


Goodwill $ 876,717 $ - $ 876,717 Computer software 948,487 398,544 549,943 $ 1,825,204 $ 398,544 $ 1,426,660

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Movements in the Bank’s intangible assets are shown as follows: For the Year Ended December 31 2015 2014 Costs

Balance, January 1 $ 1,825,204 $ 1,728,894

Addition 55,429 65,426 Deduction 27,376 19,638 Reclassifications 57,209 50,510 Effect of exchange rate changes 131 12 Others (Note) 15,102 - Balance, December 31 1,925,699 1,825,204 Accumulated amortization Balance, January 1 398,544 238,461 Amortization 202,660 179,714 Deduction 27,376 19,638 Effect of exchange rate changes 128 7 Others (Note) 14,731 - Balance, December 31 588,687 398,544 Net amount $ 1,337,012 $ 1,426,660 Note: The Bank assumed the assets, liabilities and operations of the Ho Chi Minh City Branch of Far East National Bank.

Please refer to Note 14 for the related information. The above intangible assets were amortized on a straight-line basis over the following estimated useful lives:

Item Years Computer software 5 years Goodwill includes referred to $876,717, resulted from the Bank’s cash merger with SinoPac Card Services, and this merger was treated as a reorganized of SPH. The Bank takes impairment review of goodwill annually or more frequently if events or changes in circumstance indicate goodwill impairment. In assessing whether goodwill is impaired, the Bank considers the credit card department as a cash generating unit and estimates the recoverable amount by its value in use. The Bank uses the department’s or investee’s actual profitability in making key assumption to predict future cash flows and thus calculates its value in use. Under a going-concern assumption, the Bank predicted the net cash flows generated from the investee’s operating activities in the next 5 years and estimated salvage value and used the Bank’s weighted average cost of capital to calculate the value in use. After assessment, the Bank found no objective evidence that goodwill had been impaired.

19. OTHER ASSETS, NET

December 31 2015 2014 Guarantee deposits $ 3,754,850 $ 5,559,949 Temporary payment and suspense accounts 293,026 260,045 Prepayment 277,965 312,000 Others 43,986 45,966 4,369,827 6,177,960 Less: Allowance for reduction of inventory to market - gold 1,129 1,306 Less: Allowance for credit losses 8,330 7,069 $ 4,360,368 $ 6,169,585

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20. DEPOSITS FROM THE CENTRAL BANK AND OTHER BANKS

December 31 2015 2014 Call loans from banks $ 56,516,206 $ 62,668,241 Redeposits from Chunghwa Post 3,528,768 4,422,239 Due to banks 173,649 118,845 $ 60,218,623 $ 67,209,325

21. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

December 31 2015 2014 Government bonds $ 5,174,182 $ 7,103,953 Agreed-upon repurchase price $ 5,175,436 $ 7,105,725 Maturity date March 2016 March 2015

22. PAYABLES

December 31 2015 2014 Notes and checks in clearing $ 3,371,201 $ 3,659,263 Accrued expenses 2,788,465 2,985,665 Accounts payable - factoring 2,510,886 3,929,771 Interest payables 1,763,718 1,952,494 Acceptance payables 1,529,933 2,095,801 Dividends payables to SPH 1,435,025 1,435,025 Others 1,569,365 1,666,003 $ 14,968,593 $ 17,724,022

23. DEPOSITS AND REMITTANCES

December 31 2015 2014 Checking $ 13,547,679 $ 14,712,775 Demand 241,925,581 231,388,347 Savings - demand 260,837,782 256,423,001 Time deposits 339,740,344 350,446,955 Negotiable certificates of deposit 9,992,500 972,200 Savings - time 258,807,391 239,957,440 Inward remittances 1,619,886 607,613 Outward remittances 38,786 155,030 $ 1,126,509,949 $ 1,094,663,361

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24. BANK DEBENTURES To raise capital for its financial operation and increase its capital adequacy ratio, the Bank obtained approval from FSC to issue bank debentures, as follows:

December 31 2015 2014 Maturity Date Rates Second subordinated bank

debentures issued in 2008 (A)

$ - $ 4,499,909 2008.03.25-2015.03.25 Principal is repayable on maturity

date.

Index rate plus 1%. Interest rate is reset quarterly since the issuance date and paid annually.

Second subordinated bank debentures issued in 2008 (B)

- 499,990 2008.03.25-2015.03.25 Principal is repayable on maturity

date.

Fixed interest rate of 3.2%, interest is paid annually.

First subordinated bank debentures issued in 2009

5,599,846 5,599,392 2009.04.29-2016.04.29 Principal is repayable on maturity

date.


Second subordinated bank debentures issued in 2009 (A)

- 2,199,898 2009.06.23-2015.06.23 Principal is repayable on maturity

date.




date.


First subordinated bank debentures issued in 2010 (A)


date.


First subordinated bank debentures issued in 2010 (B)


date.

Index rate plus 0.35%. Interest rate is reset quarterly since the issuance date and paid annually.


999,784 999,689 2011.03.11-2018.03.11 Principal is repayable on maturity

date.




date.




date.


Third subordinated bank debentures issued in 2011


date.




date.




date.




date.


Second subordinated bank debentures issued in 2013


date.




date

Fixed interest rate of 1.70%, interest is paid annually



date.


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December 31 2015 2014 Maturity Date Rates Third subordinated bank


$ 1,878,944 $ 1,878,708 2014.09.30-2020.03.30 Principal is repayable on maturity

date.


Third subordinated bank debentures issued in 2014 (B)


date.



749,547 - 2015.07.22, no maturity date (Note 1)

Fixed interest rate of 3.90% (Note 3)







Fourth subordinated bank debentures issued in 2015

139,924

-

2015.12.15, no maturity date (Note 2)


$ 43,428,046 $ 48,565,756 Note 1: The bond has neither a maturity date nor a callable date. The Bank has the right to call or buy back the bond from

the market after five years of its issuance if one of the conditions listed below is met, and bank debenture issuance has been approved by regulatory authorities.

a. The Bank’s ratio of regulatory capital to risk-weighted assets will still meet the minimum requirement prescribed in

Article 5 of Section 1 of the Regulations Governing the Capital Adequacy and Capital Category of Banks after bond repayment.

b. The Bank replaces the bond with another capital market instrument that offers interest equal to or higher than that

on the bond that has been called.

Note 2: The bond has neither a maturity date nor a callable date. The Bank has the right to call or buy back the bond from the market after five years of its issuance if both of the conditions listed below are met, and bank debenture issuance has been approved by regulatory authorities.

a. The Bank’s ratio of regulatory capital to risk-weighted assets will still meet the minimum requirement prescribed in

Article 5 of Section 1 of the Regulations Governing the Capital Adequacy and Capital Category of Banks after bond repayment.

b. The Bank replaces the bond with another capital instrument that offers interest equal to or higher than that on the

bond that has been called. Note 3: Interest payment amount on the bond will be based on the Bank’s calculation. Calculation of the interest starts on

the issuance date, accrues on the basis of actual days, and is payable annually. The Bank is not obligated to pay interest when the Bank has no profit from the prior year and does not distribute any dividends (both cash and stock dividends). However, this does not apply when accumulated undistributed earnings less the proceeds on unamortized nonperforming loans losses is larger than the interest payment amount while the condition for interest payment has not been modified. Interest payments that were not issued due to the reason described previously shall not be accumulated nor deferred. If the Bank’s regulatory capital to risk-weighted assets ratio does not meet the minimum requirement prescribed in Article 5, Section 1 of the Regulations Governing the Capital Adequacy and Capital Category of Banks on an interest payment date, the bond shall defer interest payments. Accrued interest on the bond shall be deferred till the next interest payment date that conforms to the condition of an interest payment date described above. Deferred interest does not incur additional interest.

To raise the BIS capital adequacy ratio and to acquire the capital needed for medium- and long-term expansion, the board approved on December 25, 2015 the Bank’s issuance of bank debentures with a principal amount of $7 billion. The issuance is pending approval by regulatory authorities, and may issue separately.

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On February 5, 2016, the board approved the Bank’s issuance in 2016 of 1st unsecured perpetual noncumulative subordinated bank debentures with a principal amount of $1.5 billion. Subject to the approval of regulatory authorities, the Bank will call back the debentures if the ratio of the Bank’s regulatory capital to its risk-weighted assets meets the minimum requirement prescribed by regulatory authorities, and is able to substitute the original capital instrument with an equal or higher quality capital instrument, after the first interest payment date when the bond is issued for more than or equal to five years. The Bank shall announce the repayment of the bond 30 days prior to the call date and recognize interest payable based on the face value of the bonds.

25. OTHER FINANCIAL LIABILITIES

December 31 2015 2014 Principal of structured products $ 11,629,004 $ 12,960,079 Certificate of deposits issued by a foreign bank 1,171,974 2,219,280 Payments collected for share subscriptions 12,891 18,855 $ 12,813,869 $ 15,198,214

26. PROVISIONS

December 31 2015 2014 Provisions for employee benefits $ 2,580,668 $ 2,598,249 Provisions for guarantee liabilities 220,464 239,582 Provisions for decommissioning liabilities 81,462 69,305 $ 2,882,594 $ 2,907,136

27. PROVISIONS FOR EMPLOYEE BENEFITS

December 31 2015 2014

Recognized in balance sheets (listed in account payables and provisions)

Defined contribution plans $ 33,529 $ 31,057 Defined benefit plans 2,298,512 2,294,041 Preferential interest on employees’ deposits 228,828 239,120 Deferred annual leave and termination benefit 53,328 65,088 $ 2,614,197 $ 2,629,306

a. Defined contribution plans

The Bank adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Based on the LPA, the Bank makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages. The total expense recognized in profit or loss for the years ended December 31, 2015 and 2014 was $204,971 and $194,324, respectively, represents contributions payable to these plans by the Bank at rates specified in the rules of the plans.

b. Defined benefit plans

For the Bank employees who adopt for defined benefit plans regulated by the Labor Standards Act, the retirement benefits are paid to employees as follow: (i) a lump sum payment equal to two base units for each year of service; (ii) that each year of service exceeding 15 years is entitled to only one base unit of wage; and (iii) that the maximum payment is for up to 45 base units. Any fraction of a year that is equal to six months or more is counted as one year of service, and any fraction of a year that is less than six months is counted as half a year of service.

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Pension contributions are deposited in the Trust department of Bank of Taiwan and Bank SinoPac in the Organization of Supervisory Committee of Business Entities’ Labor Retirement Reserve’s name. Before the end of each year, the Bank assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Bank is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund deposited in the Trust department of Bank of Taiwan is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Bank has no right to influence the investment policy and strategy. The amounts included in the balance sheets in respect of the Bank’s defined benefit plans were as follows:

December 31 2015 2014 Present value of defined benefit obligation $ 5,009,581 $ 4,899,064 Fair value of plan assets (2,711,069) (2,605,023) Deficit 2,298,512 2,294,041 Asset ceiling - - Net defined benefit liability $ 2,298,512 $ 2,294,041

Movements in net defined benefit liability (asset) were as follows:

Present Value of the Defined Benefit

Obligation Fair Value of the

Plan Assets

Net Defined Benefit Liability

(Asset) Balance at January 1, 2014 $ 5,030,429 $ (2,550,324) $ 2,480,105 Service cost

Current service cost 96,139 - 96,139 Net interest expense (income) 86,947 (45,707) 41,240 Recognized in (profit) or loss 183,086 (45,707) 137,379 Remeasurement

Return on plan assets (excluding amounts included in net interest) - 8,201 8,201

Actuarial (gain) loss - changes in demographic assumptions 1,639 - 1,639

Actuarial (gain) loss - experience adjustments (20,848) - (20,848) Recognized in other comprehensive income (19,209) 8,201 (11,008) Contributions from the employer - (312,435) (312,435) Benefits paid (295,242) 295,242 - Balance at December 31, 2014 $ 4,899,064 $ (2,605,023) $ 2,294,041 Balance at January 1, 2015 $ 4,899,064 $ (2,605,023) $ 2,294,041 Service cost



Actuarial (gain) loss - changes in demographic assumptions (762) - (762)

Actuarial (gain) loss - changes in financial assumptions 155,036 - 155,036

Actuarial (gain) loss - experience adjustments 16,560 - 16,560 Recognized in other comprehensive income 170,834 8,572 179,406 Contributions from the employer - (304,262) (304,262) Benefits paid (236,146) 236,146 - Balance at December 31, 2015 $ 5,009,581 $ (2,711,069) $ 2,298,512

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The plan assets actual return are $37,930 and $37,506 for the years ended December 31, 2015 and 2014. Through the defined benefit plans under the Labor Standards Law, the Bank is exposed to the following risks:

1) Investment risk: The plan assets are invested in domestic/and foreign/equity and debt securities, bank deposits, etc. The

investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

2) Interest risk: A decrease in the government or corporate bond interest rate will increase the present value of the defined

benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments. 3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan

participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

December 31 2015 2014 Discount rate 1.50% 1.75% Expected rate of salary increase 1.75% 1.75% Turnover rate 0.82% 0.86%

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would decrease or increase as follows:

December 31 2015 2014 Discount rate (2015: 1.50%; 2014: 1.75%)

0.25% increase $ (155,002) $ (155,412) 0.25% decrease $ 161,879 $ 162,514

Expected rate of salary increase (1.75%) 0.25% increase $ 161,052 $ 162,081 0.25% decrease $ (154,986) $ (155,762)

Turnover rate (2015: 0.82%; 2014: 0.86%) 110% of expected turnover rate $ (1,975) $ (2,643) 90% of expected turnover rate $ 1,982 $ 2,653

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

December 31 2015 2014 The expected contributions to the plan for the next year $ 232,736 $ 236,917 The average duration of the defined benefit obligation 13 years 13 years

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The Bank offers preferential interest on employees’ deposits to both current and retired employees. The principal assumptions used for the purposes of the actuarial valuations were as follows:

Valuation at December 31 2015 2014

Discount rate 4.00% 4.00% Expected interest rate on preferential interest on employees’ deposits

Manager 7.30% 7.38% Staff 13.00% 13.00%

Normal deposit interest rate 1.30% 1.38% Return on deposits 2.00% 2.00% Excess preferential interest

Manager 4.00% 4.00% Staff 9.70% 9.62%

The probability of preferential interest on employees’ deposits is canceled within ten years 50.00% 50.00%

The amounts included in the balance sheets arising from the Bank’s obligation in respect of its preferential interest on employee’s deposits were as follows:

December 31 2015 2014 Present value of defined benefit obligation $ 228,828 $ 239,120 Fair value of plan assets - - Deficit 228,828 239,120 Asset ceiling - - Net defined benefit liability $ 228,828 $ 239,120




Plan Assets


(Asset) Balance at January 1, 2014 $ 230,214 $ - $ 230,214 Service cost

Prior service cost 18,931 - 18,931 Net interest expense 8,745 - 8,745 Recognized in (profit) or loss 27,676 - 27,676 Remeasurement

Actuarial loss - experience adjustments 1,872 - 1,872 Recognized in other comprehensive income 1,872 - 1,872 Benefits paid (20,642) - (20,642) Balance at December 31, 2014 $ 239,120 $ - $ 239,120

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Plan Assets



Prior service cost 25,473 - 25,473 Net interest expense 9,156 - 9,156 Recognized in profit or loss 34,629 - 34,629 Remeasurement

Actuarial gain - experience adjustments (24,733) - (24,733) Actuarial loss - changes in assumptions 1,498 - 1,498

Recognized in other comprehensive income (23,235) - (23,235) Benefits paid (21,686) - (21,686) Balance at December 31, 2015 $ 228,828 $ - $ 228,828

28. OTHER LIABILITIES

December 31 2015 2014 Temporary receipt and suspense accounts $ 873,584 $ 1,256,837 Advance receipts 509,858 2,018,070 Guarantee deposits received 281,166 293,036 Deferred revenue 103,574 117,516 Others 19,447 19,478 $ 1,787,629 $ 3,704,937

29. INCOME TAX

Under Article 49 of the Financial Holding Company Act and related directives issued by the Ministry of Finance, a financial holding company and its domestic subsidiaries that held over 90% of shares issued by the financial holding company for 12 months within the same tax year may choose to adopt the linked-tax system for income tax filings. Thus, SPH adopted the linked-tax system for income tax and unappropriated earnings tax filings with its qualified subsidiaries since 2003. a. Income tax recognized in profit or loss

The major components of tax expense were as follows:

For the Year Ended December 31 2015 2014 Current tax

Current period $ 821,523 $ 1,728,917 Adjustments for prior periods 3,850 (11,534)

825,373 1,717,383 Deferred tax

Temporary difference 315,773 (448,745) Income tax expenses recognized in profit or loss $ 1,141,146 $ 1,268,638

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A reconciliation of accounting profit and income tax expenses is as follows:

For the Year Ended December 31 2015 2014 Profit before tax $ 10,316,009 $ 12,651,458 Income tax expense calculated at the statutory rate (17%) $ 1,753,722 $ 2,150,747 Permanent difference (686,292) (1,042,636) Tax-exempt income (124,747) (38,277) Additional income tax under the Alternative minimum Tax Act 199,416 184,235 Adjustments for prior years’ tax 3,850 (11,534) Others (4,803) 26,103 Income tax expense recognized in profit or loss $ 1,141,146 $ 1,268,638

As the status of 2016 appropriation of earnings is uncertain, the potential income tax consequences of 2015 unappropriated earnings are not reliably determinable.

b. Income tax recognized in other comprehensive income

For the Year Ended December 31 2015 2014 Deferred tax Recognized in other comprehensive income

Cash flow hedges $ - $ (644) Exchange difference on translating foreign operations (132,547) (121,431) Share of the comprehensive income of subsidiaries accounted for using the

equity method 3,765 (5,377) Actuarial gains and loss arising from defined benefit plans 26,549 (1,553)

Income tax recognized in other comprehensive income $ (102,233) $ (129,005)

c. Current tax assets and liabilities

December 31 2015 2014 Current tax assets Receivables from adopting the linked-tax system $ 1,202,576 $ 1,155,938 Others 116,178 20,006 $ 1,318,754 $ 1,175,944 Current tax liabilities Payables form adopting the linked-tax system $ 6,438 $ 948,384 Others 43,934 24,453 $ 50,372 $ 972,837

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d. Deferred tax assets and liabilities

December 31 2015 2014 Deferred tax assets Loss carryforwards $ 674,200 $ 698,345 Allowance for doubtful accounts 502,115 820,607 Provision for employee benefits 388,915 395,239 Exchange and derivative products unrealized losses 108,436 - Investments accounts for using the equity method 108,071 167,451 Others 75,453 78,193 $ 1,857,190 $ 2,159,835 Deferred tax liabilities Land value increment tax $ 591,416 $ 591,416 Investments accounts for using the equity method 204,683 76,166 Exchange differences on translating foreign operations 187,599 170,356 Others 46,556 74,219 $ 1,030,254 $ 912,157

Deferred tax expenses recognized in profit or loss are shown as follows:

Year Ended December 31 2015 2014 Investments accounts for using the equity method $ 76,624 $ 120,802 Defined benefit plan 29,739 30,662 Provisions 318,492 (660,171) Unrealized gains or losses on exchanges and derivative instruments (113,491) 27,928 Others 4,409 32,034 $ 315,773 $ (448,745)

The unused loss carryforwards as of December 31, 2015 were as follows:

Amount The Last Year of Claiming Deductible Loss

$ 2,443,805 2018 1,522,078 2019 $ 3,965,883

e. The information on the Integrated Income Tax System was as follows:

December 31 2015 2014 Balances of the imputation tax credit account (ICA) The Bank $ 478 $ 1,216

Creditable Tax Ratio for Distribution of

Earnings 2015 (Estimate) 2014 (Actual) The Bank 2.58% 1.99% Under the Income Tax Act, for distribution of earnings generated after 1998, the imputation credits allocated to ROC resident shareholders of the Bank was calculated based on the creditable ratio as of the date of dividend distribution. The actual

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imputation credits allocated to shareholders of the Bank was based on the balance of the imputation credit accounts as of the date of dividend distribution. Therefore, the expected creditable ratio for the 2015 earnings may differ from the actual creditable ratio to be used in allocating imputation credits to the shareholders.

As of December 31, 2015, the unappropriated earnings generated before 1998 was $8,758, which was recorded as capital surplus resulting from a merger.

d. The Bank’s tax returns through 2010 had been assessed by the tax authorities. However, the tax authorities had a different

opinion about recognizing the interest expenses as the deduction of the income from trading of domestic securities which is tax-exempt temporarily. Thus, the tax authorities canceled the interest expenses deduction and increased taxable income by about $21,245 from year 2009 to 2010. The Bank applied for 2009 to 2010 of administrative remedy for above event.

30. EQUITY

Common Shares The Bank’s authorized capital is $80,000,000. And the Bank issued 8,000,000 thousand common shares with each par value of NT$10. On October 24, 2014, the Bank’s board of directors which executed the rights and functions of the stockholders’ meeting resolved to issue 675,870 thousand ordinary shares by earnings reallocated as capital, with a par value of NT$10 each, which increased the share capital issued and fully paid to $66,374,857. The above transaction was approved by authorities, and the record date of earnings capitalization was December 10, 2014. On June 26, 2015, the Bank’s board of directors which executed the rights and functions of the stockholders’ meeting resolved to issue 808,874 thousand ordinary shares by earnings reallocated as capital, with a par value of NT$10 each, which increased the share capital issued and fully paid to $74,463,604. The above transaction was approved by the authorities, and the record date of earnings capitalization was September 1, 2015. To increase the Bank’s Tier 1 capital and to meet capital demand for expanded operations, the Bank’s board of directors approved on February 26, 2016 the private placement of 333,333 thousand common shares - with par value of NT$10 - at NT$15 per share, for a total placement amount of NT$5 billion, and set March 31, 2016 as the record date. The approval of this transaction is pending with the authorities. Capital Surplus The capital surplus from the issuance of new shares at a premium (additional paid-in capital from issuance of common shares, conversion of bonds and treasury stock transactions) and endowments received by the Bank may be used to offset a deficit; in addition, when the Bank has no deficit, such capital surplus may be distributed as cash dividends or transferred to capital (limited to a certain percentage of the Company’s paid-in capital every year). On July 25, 2014, the board of directors of the parent company of the Bank, SPH, approved a capital increase and retained 10% of shares for subscription by the Bank’s employees. The criteria for the employee entitlement to the employee share options were in accordance with IFRS 2 “Share-based Payment”. Under IFRS 2 share options granted by a parent company to a subsidiary’s employees should be treated as equity-settled share-based payments that match the services provided by employees and are recognized as equity increase due to parent’s contribution. The Bank’s capital surplus - employee share options, which was determined on the basis of the grant-date fair value of the employee share options, was $67,511 in 2014. Options were priced using the Black-Scholes pricing model. The inputs into the model were as follows: October 16, 2014 Grant date share price NT$12.85 Exercise price NT$11 Volatility 14.49% Duration 0.0384 year Risk-free interest rate 0.35% The volatility was based on the historical annualized standard deviation of return rates from October 16, 2013 to October 16, 2014. The return rates over time were measured using natural logarithm of daily restored closing stock price.

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The capital surplus from investments accounted for using the equity method and from employee share options may not be used for any purpose. Other Equity Items

Exchange Differences Arising on

Translating Foreign

Operations

Unrealized Gain (Loss) on

Available-for- sale Financial

Assets Cash Flow

Hedges Total Balance January 1, 2015 $ 380,113 $ 167,966 $ - $ 548,079 Exchange differences on translating

foreign operations Exchange differences arising on

translating foreign operations 779,684 - - 779,684 Income tax (132,547) - - (132,547)

Available-for-sale financial assets Unrealized gain (loss) on

available-for-sale financial assets - (84,689) - (84,689) Reclassification adjustment for

realized in income - 1,100 - 1,100 Share of the other comprehensive income

of subsidiaries accounted for using the equity method Change during the year (18) (22,126) - (22,144) Income tax 3 3,762 - 3,765

Balance December 31, 2015 $ 1,027,235 $ 66,013 $ - $ 1,093,248 Balance January 1, 2014 $ (212,775) $ 88,587 $ (3,145) $ (127,333) Exchange differences on translating



Available-for-sale financial assets Unrealized gain on available-for-sale

financial assets - 54,084 - 54,084 Reclassification adjustment for

realized in income - (940) - (940) Cash flow hedges

Reclassification on gain arising on changes in the fair value of hedging instruments - - 3,789 3,789

Income tax - - (644) (644) Share of the other comprehensive income

of subsidiaries accounted for using the equity method Change during the year 22 31,609 - 31,631 Income tax (3) (5,374) - (5,377)

Balance December 31, 2014 $ 380,113 $ 167,966 $ - $ 548,079 Earnings Distribution and Dividend Policy The Bank’s Articles of Incorporation provide that annual net income should be appropriated after it has: a. Deducted any deficit of prior years; b. Paid all outstanding taxes; c. Set aside 30% of remaining earnings as legal reserve;

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d. Set aside any special reserve or retained earnings allocated at its option; e. Allocated stockholders’ dividends; The Banking Act provides that, before the balance of the reserve reaches the aggregate par value of the outstanding capital stock, above allocation should not exceed 15% of the aggregate par value of the outstanding capital stock of the Bank. The Bank meets well financial position as standard and setting aside legal reserve under Company Act is not limited to the restriction. To comply with the Bank’s globalization strategy, strengthen its market position, integrate its diversified business operation and be a major local bank, the Bank has adopted the “Balanced Dividend Policy”. Under this policy, dividends available for distribution are determined by referring to its capital adequacy ratio (CAR). Cash dividends may be declared if the Bank’s CAR is above 10% and stock dividends may be declared if the CAR is equal to or less than 10%. However, the Bank may make discretionary cash distribution even if the CAR is below 10%, if approved at the stockholders’ meeting, for the purpose of maintaining the cash dividends at a certain level in any given year. Cash dividends and cash bonus are paid after the approval of the stockholders, while the distribution of stock dividends requires the additional approval of the authorities. Based on the May 2015 amendments to the Company Act, the recipients of dividends and bonuses are limited to shareholders and do not include employees. To comply with this requirement, the Bank’s board of directors proposed in board meeting on December 25, 2015 the amendment of the Bank’s Articles of Incorporation. Under an authorization to exercise the rights and functions of stockholders meetings, the board approved this proposal. For the employee benefit expenses, please see Note 37. Under the Company Act, legal reserve shall be appropriated until it has reached the Company’s paid-in capital. This reserve may be used to offset a deficit. When the legal reserve has exceeded 25% of the Bank’s paid-in capital, the excess may be transferred to capital or distributed in cash. In addition, the Banking Act provides that, before the balance of the reserve reaches the aggregate par value of the outstanding capital stock, allocation should not exceed 15% of the aggregate par value of the outstanding capital stock of the Bank. Under Article 50-2 of the Banking Act revised on December 30, 2008, when legal reserve meet the total capital reserve or well financial position and setting aside legal reserve under Company Act is not limited to the restriction of setting aside 30% of remaining earnings as legal reserve, and the appropriation of the remainder and retained earnings from previous year was limited to 15% of total capital reserve when legal reserve has not meet the total capital reserve. The requirements for financial positions of banks to be established in accordance with this Act revised on April 30, 2012 shall be as prescribed by the FSC, Executive Yuan, ROC. According to FSC Rule No. 1010012865 and the rule of “Questions and Answers on Special Reserves Appropriated Following the Adoption of IFRSs”, of amount of equal to the net debit balance of shareholders’ other equity items shall be transferred from unappropriated earnings to a special reserve before any appropriation of earnings generated. Under the Financial Holding Company Act, the board of directors is empowered to execute the authority of the stockholders’ meeting, which is under no jurisdiction in the related regulations in the Company Act. The 2013 earnings appropriation which the board of directors execute the rights and functions of the stockholders’ meeting resolved on March 21, 2014, had revised under the resolution which board of directors execute the rights and functions of the stockholders’ meeting on October 24, 2014. The 2013 earnings appropriation and cash dividends per share were as follow: Appropriation of Earnings Dividends Per Share (NT$) Revised Original Revised Original Legal reserve $ 2,880,873 $ 2,880,873 Special reserve 26,264 26,264 Share dividends 6,758,697 - $ 1.13370206 $ - Cash dividends - - - - The 2014 earnings appropriation which the board of directors execute the rights and functions of the stockholders’ meeting resolved on March 11, 2015, had revised under the resolution which board of directors execute the rights and functions of the stockholders’ meeting on June 26, 2015. The 2014 earnings appropriation and cash dividends per share were as follow:

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Appropriation of

Earnings Dividends Per Share (NT$)

Legal reserve $ 3,406,462 Reversal of special reserve (127,332) Share dividends 8,088,747 $ 1.21864633 Cash dividends - - The appropriations of earnings for 2015 based on 7,446,360,426 outstanding common shares as of February 29, 2016 are as follows:

Appropriation of


Legal reserve $ 2,752,459 Share dividends 6,157,633 $ 0.82693199 Cash dividends - - On its eighth meeting held on February 26, 2016, the Bank’s board of directors approved a cash capital increase of $5,000,000 through the issuance of 333,333,334 common shares, with all the shares to be for by the parent company (SPH). If the authorities approve this issuance, the common stock outstanding will be 7,779,693,760 shares. In the same meeting, the board of directors also approved the appropriation of earnings - based on the planned share increase - and will present this appropriation, shown below, for approval in the stockholders’ meeting (with the rights and functions of the stockholders’ meeting to be executed by the board of directors) if the capital increase process is completed before the stockholders’ meeting.

Appropriation of


Legal reserve $ 2,752,459 Share dividends 6,157,633 $ 0.79150077 Cash dividends - -

The board of director approved the 2015 appropriation of earnings on March 16, 2016, that will be resolved by shareholders’ resolution in 2016. In accordance with FSC guideline No. 09900146911, cash dividends and bonus to stockholders for 2009 amounting to $1,435,025 shall not be remitted to the parent company until the land transferred to SPL from the Bank is disposed and the gain is realized.

31. INTEREST REVENUE, NET

For the Year Ended December 31 2015 2014 Interest income

Loans $ 17,683,382 $ 18,000,985 Account receivables - forfaiting 2,784,212 2,887,542 Available-for-sale financial assets 2,072,092 912,392 Due from the Central Bank and other banks 1,011,399 1,880,437 Credit card 702,262 748,352 Acceptance-forfaiting 609,449 630,138 Held-to-maturity financial assets 542,462 1,491,678 Others 336,252 389,299 25,741,510 26,940,823

Interest expense Deposits 9,730,519 9,693,860 Bank debentures 884,646 922,136 Deposits from banks 466,084 663,045 Others 434,035 528,427

11,515,284 11,807,468 $ 14,226,226 $ 15,133,355

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32. COMMISSION AND FEE REVENUE, NET

For the Year Ended December 31 2015 2014 Commissions and fees revenue

Trust and related services $ 1,851,609 $ 2,107,664 Credit card services 1,215,153 1,232,600 Loan services 702,895 645,443 Insurance services 588,468 502,917 Others 950,417 910,827

5,308,542 5,399,451 Commissions and fees expense

Credit card services 486,090 422,896 Interbank services 140,718 126,422 Foreign exchange transaction 54,554 56,424 Trust services 51,822 49,909 Others 199,806 159,274

932,990 814,925 $ 4,375,552 $ 4,584,526

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

For the Year Ended December 31 2015 2014 Realized gain on financial assets and liabilities at fair value through profit or loss

Non-derivative financial instruments Government bonds $ 470,958 $ 177,044 Bank debentures 114,231 32,756 Corporate bonds 59,119 47,330 Convertible bonds 42,365 77,646 Listed stock 23,066 22,212 Others 15 1,655

Derivative financial instruments Currency swap contracts and hybrid FX swap structured instruments 1,743,951 647,502 Option contracts 749,183 902,320 Future contracts 68,120 28,516 Interest rate swap contracts (15,717) 61,673 Forward contracts (499,267) 326,523 Others 6,603 5,262

2,762,627 2,330,439 Unrealized gain on financial assets and liabilities at fair value through profit or

loss Non-derivative financial instruments

Government bonds 207,404 40,167 Corporate bonds 17,822 11,497 Convertible bonds (19,796) (3,261) Bank debentures (22,563) (1,217) Others 2,788 (2,898)

Derivative financial instruments Forward contracts 220,455 (230,564) Futures contracts (88,863) 6,494 Interest rate swap contracts (201,281) (69,791) Currency swap contracts and mixed FX swap structured instruments (554,407) 528,987 Option contracts (581,249) 281,911 Others 11,060 1,782 (1,008,630) 563,107 $ 1,753,997 $ 2,893,546

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a. Disposal gain or loss including in realized gain or loss on financial assets and liabilities at fair value through profit or loss were $2,332,178 and $2,025,242 for the years ended December 31, 2015 and 2014, respectively. Related interest revenues and dividend incomes were $430,449 and $305,197 for the years ended December 31, 2015 and 2014, respectively.

b. When the Bank designates financial instruments as at fair value through profit or loss, fair value change in derivate

instruments is included in “gains on financial assets and liabilities at fair value through profit or loss”. 34. REALIZED (LOSSES) GAINS ON AVAILABLE-FOR-SALE FINANCIAL ASSETS

For the Year Ended December 31 2015 2014 Dividends $ - $ 13,573 Gains from disposal of corporate bonds - 943 Loss from disposal of bank debentures (1,258) - Others 158 (3) $ (1,100) $ 14,513

35. REVERSAL OF IMPAIRMENT LOSSES ON ASSETS

For the Year Ended December 31 2015 2014 Gain on the reversal of loss on other financial assets $ 63,923 $ 188,910 Gain on the reversal of loss on other assets - 36,071 Gain on the reversal of loss on held-to-maturity financial assets - 10,213 Impairment loss on property and equipment (7,860) - $ 56,063 $ 235,194

36. OTHER REVENUE AND OTHER NONINTEREST NET REVENUES

For the Year Ended December 31 2015 2014 Gain on sales of property and equipment $ 146,058 $ 68,488 Rental income 92,587 92,898 Net gains on unquoted equity instruments 56,755 59,586 Operating assets rental income 29,498 26,727 Overdue revenue 2,388 9,345 Gain on sales of derecognized SIV assets - 292,023 Net losses on sales of foreclosed collaterals - (13,071) Loss on retirement of property (6,197) (15,458) Others 34,961 34,141 $ 356,050 $ 554,679 Other revenues $ - $ 3,390,116

The ending balance of loans of the Bank US$46,681 as of March 31, 2014 which was collateralized by the convertible bonds provided by the subsidiary of borrower. According to the loan agreements with collateral holder, the repayment net of tax and related expense from disposal of the convertible bond should be distributed. The aforementioned has been disposed for the six months ended June 2014. And the Bank received $3,390,116. The aforementioned loans and interest receivables were repaid, and SPCL are also repaid $396,738 as other revenues.

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37. EMPLOYEE BENEFIT EXPENSE

For the Year Ended December 31 2015 2014 Salaries and wages $ 6,079,183 $ 6,215,637 Labor insurance and national health insurance 430,748 419,351 Pension costs 334,298 331,703 Share-based payment arrangement - 66,102 Others 580,912 555,330 $ 7,425,141 $ 7,588,123

Please refer to Note 30 for the related information on the share-based payments of the Bank. Under the Company Act as amended in May 2015, the Bank’s Articles of Incorporation should stipulate a fixed amount or ratio of annual profit to be distributed as employees’ compensation. To comply with this requirement, the Bank’s board of directors proposed in board meeting on December 25, 2015 to amend the Bank’s Articles of Incorporation. The board approved this proposal in the same meeting under an authorization to exercise the rights and functions of the stockholders’ meeting. The Bank’s Articles of Incorporation provide that the Bank allocate from annual profit more than 0.5% as employees’ compensation and not more than 1% as remuneration of directors and supervisors. But if there are accumulated losses, the Bank should make up the losses firstly. The compensation to employees and the remuneration to directors and supervisors recognized were estimated on the basis of the Bank’s Articles of Incorporation and past experience. The Bank accrued compensation to employees and supervisors of $56,000 and $24,000 for the year ended December 31, 2015. Material differences between these estimates and the amounts proposed by the board of directors on or before the annual financial statements are authorized for issue are adjusted in the year the bonus and compensation are recognized. If there is a change in the proposed amounts after the annual financial statements are authorized for issue, the differences are recorded as a change in accounting estimate. The board of directors proposed $56,000 as compensation to employees and $24,000 as remuneration of directors and supervisors on January 29, 2016 and March 16, 2016, respectively. These amounts were the same as those recognized in the financial statements. Under an authorization to exercise the rights and functions of a stockholders’ meeting, the board of directors approved on June 26, 2015 the appropriation of $119,250 as bonus to employees and $30,438 as remuneration of directors and supervisors. The amounts of bonus to employees and the remuneration to directors and supervisors recognized in the 2014 financial statements were $202,219 and $30,438, respectively. The differences between the board of directors’ approved amounts and the amounts shown in the 2014 financial statements were recorded in 2015 as a change in accounting estimate. The reason of bonus to employees amendment, please refer to in Note 30. The 2013 earnings appropriation, as approved by the board of directors on the exercise of the rights and functions of the stockholders’ meeting on March 21, 2014, was revised on October 24, 2014 under a resolution by the board of directors on the exercise of the rights and functions of the stockholders’ meeting. As a result, the actual bonus to employees and the remuneration to directors and supervisors were $94,447 and $35,000, respectively, and the amounts recognized in the 2013 financial statements were $168,967 and $35,000, respectively. The difference between the board of directors executed the rights and functions of the stockholders’ meeting on October 24, 2014 was recorded in 2014 as a change in accounting estimate. The information on the proposed and approved compensations to employees and the remuneration to directors and supervisor is available on the Market Observation Post System (M.O.P.S.) website of the Taiwan Stock Exchange.

38. DEPRECIATION AND AMORTIZATION EXPENSE

For the Year Ended December 31 2015 2014 Depreciation expense

Buildings $ 144,120 $ 150,984 Computers and machinery equipment 143,667 151,130 Other equipment 62,046 54,750 Leasehold improvements 83,752 81,429

433,585 438,293 Amortization expense 202,660 179,714 $ 636,245 $ 618,007

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39. OTHER OPERATING EXPENSES

For the Year Ended December 31 2015 2014 Taxation and fees $ 1,181,864 $ 946,317 Marketing 705,249 796,070 Rent 642,714 627,083 Professional advisory 561,919 533,552 Location fee 389,746 387,425 Insurance 287,784 289,873 Automated equipment 283,911 244,858 Others 759,517 762,366 $ 4,812,704 $ 4,587,544

40. EARNINGS PER SHARE

Basic earnings per share is calculated by gain or loss on the Bank’s stockholders divide by the weighted-average number of common shares outstanding. The numerators and denominators used in computing earnings per shares (EPS) are summarized as follows: For the Year Ended December 31 2015 2014

Amounts Shares in Thousand EPS (NT$) Amounts

Shares in Thousand EPS (NT$)

Basic EPS $ 9,174,863 7,446,360 $ 1.23 $ 11,382,820 7,446,360 $ 1.53 The 2014 EPS was retrospectively adjusted for the effects of the bonus stock issuance on September 1, 2015. Thus, the basic EPS for 2014 retrospectively decreased from NT$1.71 to NT$1.53.

41. RELATED-PARTY TRANSACTIONS In addition to the disclosed in other notes to the financial statement, relationships with the Bank and significant transactions, as well as the Bank and related party are summarized as follows: a. Related parties

Name Relationship with the Bank SinoPac Financial Holdings Company Limited (SPH) Parent company of the Bank SinoPac Securities Corporation (“SinoPac Securities”) Subsidiary of SPH SinoPac Call Center Co., Ltd. (“SinoPac Call Center”) Subsidiary of SPH SinoPac Leasing Corporation (SPL) Subsidiary of SPH SinoPac Securities Investment Trust Co., Ltd. (“SinoPac Securities

Investment Trust”) Subsidiary of SPH

SinoPac Property Insurance Agent Co., Ltd. (SPPIA) Subsidiary of the Bank SinoPac Life Insurance Agent Co., Ltd. (SPLIA) Subsidiary of the Bank Bank SinoPac (China) Ltd. Subsidiary of the Bank SinoPac Capital Limited (SPCL) Subsidiary of the Bank SinoPac Bancorp Subsidiary of the Bank Far East National Bank (FENB) Overseas affiliate of the Bank SinoPac Insurance Brokers Limited Overseas affiliate of the Bank SinoPac Futures Corporation (“SinoPac Futures”) Subsidiary of SinoPac Securities SinoPac Securities (Asia) Ltd. Affiliate of SinoPac Securities Grand Capital International Limited (“Grand Capital”) Subsidiary of SPL SinoPac International Leasing Corp. (SPIL) Subsidiary of SPL E Ink Holdings Co., Ltd. (“E Ink Holdings”) Affiliate of SPH’s chairman Foundation of Fire Fighting Development Affiliate of SPH’s chairman

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Name Relationship with the Bank YFY International BVI Corp. Affiliate of SPH’s chairman Yung An Leasing Corporation (“Yung An Leasing”) Affiliate of SPH’s chairman Taiwan Genome Sciences, Inc. (“Taiwan Genome Sciences”) Affiliate of SPH’s chairman Liver Disease Prevention & Treatment Research Foundation Affiliate of SPH’s chairman Chung Hwa Pulp Corporation (CHP) Affiliate of SPH’s chairman Shin Yi Recreation Enterprise Co., Ltd. (“Shin Yi”) Affiliate of SPH’s chairman Yong Feng Energy Tech Company Limited (“Yong Feng Energy

Tech”) Affiliate of SPH’s chairman

MiCareo Taiwan Co., Ltd. (“MiCareo Taiwan”) Affiliate of SinoPac Venture Capital’s chairman (before February 2015)

Taiwan Futures Exchange (TAIFEX) Affiliate of SPH’s director Adimmune Corporation Affiliate of SPH’s independent director Unique Homes Taiwan Affiliate of SinoPac Securities’ director 3S Silicon Tech., Inc. (“3S Silicon”) SinoPac Venture Capital is 3S Silicon's corporate

director Financial Information Services Co., Ltd. (Financial Information) Affiliate of the key management personnel of SPH Taipei Foreign Exchange Inc. (“Taipei Foreign Exchange”) Affiliate of the key management personnel of SPH Nang Kuang Pharmaceutical Co., Ltd. (“Nang Kuang”) Affiliate of Bank Sinopac managers’ spouse. Mechema Chemicals International Corp. (“Mechema”) Affiliate of Bank Sinopac managers’ spouse. Cheng Da Industrial Co., Ltd. (“Cheng Da”) Affiliate of Bank Sinopac managers’ spouse. Chailease Auto Rental Co., Ltd. (“Chailease Auto Rental”) Affiliate of Bank Sinopac managers’ spouse. Wafer Works Corporation (“Wafer Works”) Affiliate of Bank Sinopac managers’ spouse. Foongtone Technology Co., Ltd. (“Foongtone Technology”) Related party YFY Inc. Related party Union Paper Corporation (“UPCPaper”) Related party Yong Yu Investment Company Limited (“Yong Yu”) Related party Aero Win Technology Corporation (“Aero Win”) Related party (before July 2015) Ho, Show Chung Chairman of SPH Others The Bank’s directors, supervisors, managers and

their relatives, department chiefs, investments accounted for using the equity method and their subsidiaries, and investees of SPH’s other subsidiaries, etc.

b. Significant transactions with related parties

1) Cash and cash equivalents

December 31 2015 2014 Due from banks - FENB $ 713,807 $ 1,576,718

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


Ending Balance Interest (%) Interest Revenue

Call loans to banks - Bank SinoPac (China) Ltd. $ 760,515 0.16-0.71 $ 37


Ending Balance Interest (%) Interest Revenue

Call loans to banks - Bank SinoPac (China) Ltd. - 0.3 1

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3) Derivative financial instruments

December 31, 2015

Contract (Notional) Amount

Contract Period

Valuation Gains or Losses Account Balance

Interest rate swap contracts

SinoPac Securities $ 4,400,000 2011.6.10- 2020.8.26

$ 14,500 Financial assets at fair value through profit or loss

$ 28,597

SinoPac Securities 5,600,000 2011.1.21- 2020.9.1

(8,385) Financial liabilities at fair value through profit or loss

19,675

Asset exchange contracts

SinoPac Securities 15,000 2015.12.23- 2017.12.22

12 Financial assets at fair value through profit or loss

12

December 31, 2014


Contract Period


Currency swap

contracts

E Ink Holdings $ 777,073 2014.10.27- 2015.3.26

$ (22,227) Financial liabilities at fair value through profit or loss

$ 22,227



(30,484) Financial assets at fair value through profit or loss

27,898


28,170 Financial liabilities at fair value through profit or loss

22,815

Asset exchange contracts

SinoPac Securities 40,000 2013.7.17- 2015.7.17

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

8

Forward contracts YFY International

BVI Corp. 2,686 2014.12.29-

2015.1.30 (10) Financial liabilities at fair

value through profit or loss

10

4) Receivables

December 31 2015 2014 Accounts receivable

SinoPac Insurance Brokers Limited $ - $ 1,578 Interest receivable

Bank SinoPac (China) Ltd. 4,055 - SPL 669 394 SinoPac Securities 797 208 Grand Capital - 1,338

Other notes receivable SPLIA 133,220 70,625 Bank SinoPac (China) Ltd. 104,956 105,899 Other relatives 14,896 11,579

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5) Current income tax assets and liabilities

December 31 2015 2014 Receivables from adopting the linked-tax system $ 1,198,448 $ 1,151,810 Payables from adopting the linked-tax system $ 2,309 $ 944,255

6) Loans


Ending Balance Highest Balance

Interest/ Fee Rates (%) Interest Revenue

Loans $ 7,443,308 $ 9,030,254 0-6.89 $ 117,602

Category

December 31, 2015

Account Volume or Name of

Related Party

Highest Balance

Ending Balance

Normal

Overdue

Type of Collaterals

Is the Transaction

at Arm’s Length

Commercial Term

Employees’ consumer loans

79 $ 29,408 $ 21,630 V - None Yes

Household mortgage loans

466 3,077,763 2,622,404 V - Real estate Yes

Others: V SPL 1,514,000 1,402,000 V - Real estate and

ships Yes

Bank SinoPac (China) Ltd.

2,980,595 2,975,927 V - None Yes

Grand Capital 621,375 - V - Ships Yes Yung An

Leasing 187,800 176,500 V - Real estate Yes

Adimmune Corporation

180,004 - V - Real estate Yes

Unique Homes Taiwan

120,000 118,000 V - Real estate Yes

Mechema 100,000 100,000 V - None Yes Wafer Works 80,000 - V - Equipment Yes SinoPac

Securities 80,000 - V - Certificates of

deposit and real estate

Yes

Nang Kuang 21,629 20,781 V - Equipment Yes 3S Silicon 6,303 3,802 V - None Yes Cheng Da 333 233 V - Vehicles Yes Others 31,044 2,031 V - Vehicles and

certificates of deposit

Yes

Others subtotal 5,923,083 4,799,274 Total 9,030,254 7,443,308




Loans $ 4,402,073 $ 5,870,694 0-4 $ 81,441

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Category

December 31, 2014

Account Volume or Name of

Related Party

Highest Balance

Ending Balance

Normal

Overdue

Type of Collaterals

Is the Transaction

at Arm’s Length

Commercial Term


52 $ 18,841 $ 14,267 V - None Yes


280 1,995,484 1,768,367 V - Real estate Yes

Others: SPL 1,654,000 1,514,000 V - Real estate and

ships Yes

Grand Capital 984,974 621,375 V - Ships Yes SinoPac

Securities 535,000 - V - Certificates of

deposit Yes


264,613 180,004 V - Real estate and equipment

Yes

Yung An Leasing


Liver Disease Prevention & Treatment Research Foundation


Taiwan Genome Sciences


Aero Win 26,250 25,000 V - None Yes Others 10,732 4,260 V - Vehicles and

certificates of deposit

Yes

Others subtotal 3,856,369 2,619,439 Total 5,870,694 4,402,073

Note: Debtor of related party loans are all normal credit ranking. The Bank estimated the provision of doubtful debt

periodically in accordance with the guidelines issued by the authority and IFRSs.

7) Guarantees

December 31, 2015

Related Party Highest

Balance in Current Year

Ending Balance Provision Rates Type of Collaterals Note

Wafer Works Corporation

$ 101,003 $ 101,003 $ - 0.75% Equipment

SinoPac Securities 2,000 2,000 - 0.30% Certificates of deposit and real estate

December 31, 2014




MiCareo Taiwan $ 11,980 $ - $ - 1.25% Certificates of deposit SinoPac Securities 2,000 2,000 - 0.30% Certificates of deposit

and real estate

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8) Other financial assets

December 31 2015 2014 Unquoted equity instruments

Financial Information $ 91,000 $ 91,000 TAIFEX 21,490 21,490 Taipei Foreign Exchange 6,800 6,800

Call loans to security corporations SinoPac Securities 1,653,293 -

Excess margin of futures and options SinoPac Securities (Asia) Ltd. 216,497 19,704 SinoPac Futures 90,278 29,948

The Bank had interest revenue from call loans to security corporations for the year ended December 31, 2015 in the amount of $8,891. The Bank had interest revenue from excess margin of futures and options for the years ended December 31, 2015 and 2014 in the amount of $50 and $56, respectively.

9) Property and equipment

For the year ended December 31, 2015, the Bank purchased machinery and computer equipment from its related parties with a total of $7,861 prepayment, recognized in property and equipment. In March 2014, the Bank sold property and equipment with book value of $34 and $141 in the price of $34 and $157 to SPIL and Bank SinoPac (China) Ltd., respectively. In August 2014, the Bank sold property with a book value of $6,357 in the price of $25,489 to other related party. The related gains were $19,132.

10) Intangible assets

For the year ended December 31, 2015, the Bank purchased computer software from its related parties for a total of $2,020, recognized under intangible assets.

11) Other assets

December 31 2015 2014 Guarantee deposits

SPL $ 9,564 $ 9,364 Others 780 -

The Bank signed an agreement with Foongtone Technology for the purchase of a debit card with a second-generation chip. The Bank paid Foongtone Technology $30,833 in 2015 and $35,434 in 2014, which were recorded as prepayments (other assets) on the Bank’s acquisition of the debit cards or as other operating expenses on the issuance of the debit cards to bank clients.

12) Notes and bonds transaction


Purchase of Notes

and Bonds Sell of Notes and

Bonds SinoPac Securities $ 200,005 $ - Chailease Auto Rental 189,881 219,968

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13) Deposits from the Central Bank and other banks

For the Year Ended December 31, 2015 Ending Balance Interest Rate Interest Expense Call loans from banks

FENB $ - 0.1768%-0.3% $ 2,468 Bank SinoPac (China) Ltd. - 0.08%-0.12% 21

Due to banks FENB 3,356 0.05% 6

For the Year Ended December 31, 2014 Ending Balance Interest Rate Interest Expense Call loans from banks

Bank SinoPac (China) Ltd. $ - 0.07%-0.35% $ 142 Due to banks

FENB 9,219 0.05% 346

14) Securities sold under agreement to repurchase

2015 Balance, December 31, 2015 Face Amount Carrying Amount Interest Expense Ho, Show Chung $ 217,300 $ 219,301 $ 1,398 SPH - - 4,631 SinoPac Securities - - 2

2014

Balance, December 31, 2014 Face Amount Carrying Amount Interest Expense SPH $ 1,600,000 $ 1,600,606 $ 1,208 Ho, Show Chung 295,000 296,042 1,902 SinoPac Securities - - 4

15) Payables

December 31 2015 2014 Accounts payable

SinoPac Call Center $ 13,945 $ 12,676 Interest payables

Grand Capital 1,945 1 SinoPac Securities 1,177 2,028 SPH 974 4,880 SinoPac Securities Investment Trust 481 415 SinoPac Insurance Brokers Limited 387 265 Others 581 488

Dividends payables to SPH SPH 1,435,025 1,435,025

Others payable Others 3,483 647

16) Bank debentures

The Bank issued the second to the fourth subordinated bank debentures in 2015 underwritten by SinoPac Securities and paid 665 commissions and fees expense (listed in deduction of bank debentures). At December 31, 2015, the Bank issued bank debentures subscribed by related party for the following details.

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Transaction Company Transaction

Amount Description CHP $ 170,000 Third subordinated bank debentures issued in 2015 YFY Inc. 160,000 Third subordinated bank debentures issued in 2015 Shin Yi 100,000 Third subordinated bank debentures issued in 2015 Yong Feng Energy Tech 50,000 Third subordinated bank debentures issued in 2015 UPCPaper 20,000 Third subordinated bank debentures issued in 2015 Others 130,000 Third subordinated bank debentures issued in 2015

17) Deposits

2015

For the Year Ended December 31 Ending Balance Interest Rates (%) Interest Expense $ 28,880,744 0-13 $ 252,313

Ending Balance Interest Rate (%) SPH $ 5,060,640 0-1.65 SinoPac Securities 4,019,252 0-4.25 Yong Yu 2,335,277 0.05-0.13 SinoPac Life Insurance Agent Co., Ltd. 1,240,852 0.13 Foundations of Fire Fighting Development 756,740 0-1.255 Others 15,467,983 0-13 $ 28,880,744

2014


Ending Balance Interest Rate (%) SPH $ 5,034,261 0-0.65 SinoPac Securities 4,739,832 0-1.35 SPCL 1,529,309 0-0.475 SinoPac Life Insurance Agent Co., Ltd. 1,057,650 0.17 Foundations of Fire Fighting Development 760,890 0-1.39 Others 11,373,980 0-13 $ 24,495,922

18) Other liabilities

December 31 2015 2014 Guarantee deposits received $ 12,337 $ 8,175 Advance receipts 4 1

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19) Revenues and expenses

For the Year Ended December 31 2015 2014

Commissions and fee revenues (Note 1) $ 672,702 $ 565,338 Commissions and fee expenses 179,066 106,369 Gains from unquoted equity instruments 35,410 36,881 Other revenues 18,569 12,278 Other operating expense (Note 2) 344,748 280,032

Note 1: The Bank had entered into several co-sell insurance contracts with SPLIA and SPPIA. The revenues for the

years ended December 31, 2015 and 2014 were $588,468 and $502,971, respectively; which were recorded as commission and fee revenues.

Note 2: Other operating expenses are mainly for professional advisory charges and marketing expense. The Bank

entered into professional advisory contracts with SinoPac Call Center, and the professional advisory charges and other operating expenses paid for 2015 and 2014 were $158,491 and $155,484, respectively.

20) Lease

a) The Bank as a lessee

Other Operating Expense

For the Year Ended

December 31 Payment Lessor 2015 2014 Lease Term Frequency SPL $ 127,537 $ 125,048 February 2020 Rentals paid monthly

b) The Bank as a lessor Rental Income

For the Year Ended

December 31 Receiving Lessee 2015 2014 Lease Term Frequency

SinoPac Securities $ 26,723 $ 24,718 March 2019 Rentals received

monthly SinoPac Securities

Investment Trust 14,588 14,600 January 2019 Rentals received

monthly SPL 5,964 5,965 July 2016 Rentals received

monthly SPLIA 4,426 4,426 December 2015 Rentals received

monthly SinoPac Call Center 3,326 3,353 September 2018 Rentals received

monthly Others 11,165 11,900 October 2020 Rentals received

monthly

Transactions between the Bank and the related parties are at arm’s length commercial terms except for the preferential interest rates offered to employees for savings and loans up to prescribed limits. Under the Banking Act, except for government and consumer loans, credit extended by the Bank to any related party should be fully secured, and the credit terms for related parties should be similar to those for unrelated parties.

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21) Other transaction The Bank assumed, under the approval of its board, the assets, liabilities and operations of the Ho Chi Minh City branch of Far East National Bank on April 25, 2014. This case has been approved by the FSC and the State Bank of Vietnam with November 1, 2015 as the record date. The transaction price of this case is US$28,540 thousand.

c. Compensation of directors, supervisors and management personnel

For the Year Ended December 31 2015 2014 Short-term employee benefits $ 208,285 $ 176,236 Post-employment benefits 4,303 2,374 Share-based payment - 346 $ 212,588 $ 178,956

The management personnel are composed of general manager, vice general manager and other employee whose job grade is higher than the former.

42. PLEDGED OR MORTGAGED ASSETS

In addition to those disclosed in other notes, pledged or restricted assets of the Bank are summarized as follows:

December 31 Restricted Assets Object 2015 2014 Purposes

Financial assets at fair value through

profit or loss Convertible bonds $ - $ 1,046,194 Note 1

Discounts and loans Loans 2,345,626 2,698,664 Note 2 Available-for-sale financial assets Government bonds 261,483 1,126,278 Note 3 Held-to-maturity financial assets Negotiable certificate of deposits 8,165,329 8,158,586 Note 4 Held-to-maturity financial assets Government bonds 3,004,370 1,085,871 Note 5 Other financial assets Certificates of deposits 2,012,972 2,041,960 Note 6 Note 1: Pledged by LA branch of the Bank. The object is a part of corporate convertible bond asset swap and designated as

financial assets at fair value through profit or loss by the hybrid contracts. Note 2: Pledged with the Federal Reserve Bank under the discount window program. Note 3: Pledged to court as collaterals for filing provisional seizure, reserve for payment of VISA international card, mortgage

of derivative instrument outstanding. Note 4: Pledged in accordance with requirements of the California Department of Financial Institutions, with the Central Bank

for foreign-exchange transactions, and with the Mega Bank for USD foreign-exchange settlement. Note 5: Guarantees of brokerage dealing and underwriting business, a trust reserve fund, guarantees of bills financial service,

reserve for payment of VISA international card, pledged to court as collaterals for filing provisional seizure and Hong Kong branch’s clearing system of real - time gross settlement mortgage of derivative instrument outstanding.

Note 6: Pledged with intraday overdraft of settlement banks.

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43. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS a. In addition to those disclosed in other notes, significant unrecognized commitments of the Bank as of December 31, 2015 and

2014 were as follows:

December 31 2015 2014 Trust assets $ 269,124,625 $ 239,954,266 Securities under custody 119,568,539 100,633,450 Agent for government bonds 68,591,800 55,863,400 Receipts under custody 43,482,745 45,827,720 Guarantee notes payable 13,004,401 13,224,616 Agent for marketable securities under custody 8,725,500 3,057,329 Appointment of investment 7,998,414 6,109,103 Goods under custody 1,137,998 1,217,168 Travelers’ checks consigned-in 328,465 339,138 Others 8,099 154,986

b. The Bank entered into contracts to buy computer equipment and office equipment for $300,349 of which $144,229 had been

paid as of December 31, 2015. c. Contingencies

1) The Securities and Futures Investors Protection Center (SFIPC) filed a lawsuit against the Bank and SinoPac Leasing

Corporation’s (SPL) subsidiary, Grand Capital, on the ground that Procomp Informatics Ltd. (“Procomp”) deposited US$10,000 in the Bank’s Shisung Branch (formally Sungshan Branch) and placed a restriction on the use of this deposit as a condition for a short-term loan to Addie International Limited granted by SPL and for allegedly helping Yeh, Sue-Fei and Procomp do irregular trading but, at the same time, Procomp used the restricted deposit for fictitious sale transactions. Later, when problems on Procomp’s account arose, the Bank and Grand Cathay demanded compensation, which was taken from Procomp’s account, resulting in damage to Procomp. The Bank was suspected of misleading investors by concealing the restricted status of Procomp’s deposit and window dressing Procomp’s financial statements. On behalf of investors, the SFIPC filed a lawsuit against the Bank, SPL and all other parties related to Procomp. Both the court of the first instance and the second instance ruled in favor of the Bank and SinoPac Leasing. However, the SFIPC decided to file an appeal on January 20, 2016.

2) The SFIPC filed a lawsuit against the Bank on the ground that the Bank’s Tunpei Branch provided National Aerospace

Fasteners Corporation (NAFC) with its accounts receivable factoring services. NAFC recorded this significant-amount loan transaction as an accounts receivable financing to window-dress its financial position in order to attract investments. The SFIPC filed a lawsuit against the Bank and other parties and demanded compensation approximately $543,233 the court of the first instance ruled in favor of the Bank. However, the SFIPC decided to file an appeal to the second instance and stated to reduce the amount of compensation to $293,940 on November 13, 2015, the case is in the progress by Taiwan High Court.

d. The Bank abided by “Notice of the China Banking Regulatory Commission on Issuing the Guidelines on the Corporate Governance of Commercial Banks” regulation, promising to keep Bank SinoPac (China) Ltd. capital maintenance. If Bank SinoPac (China) Ltd.’s capital is not sufficient to maintain the operation or request by the regulation. The Bank will promptly raise the proposal of expansion capital to the board of directors, in order to satisfy the corporate governance and regulation.

e. In line with the subsidiary of SPCL, FENB, and Bank SinoPac (China) Ltd.’s financing needs, the Bank issued letter of

comfort to financial institutions, disclaiming that the Bank will actively support companies’ operations.

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44. HIERARCHY AND FAIR VALUE INFORMATION OF FINANCIAL INSTRUMENTS a. The definition of the hierarchy:

1) Level one Level 1 financial instruments are traded in active market and have the identical price for the same financial instruments. “Active market” should fit the following characteristics:

a) All financial instruments in the market are homogeneous; b) Willing buyers and sellers exist in the market all the time; c) The public can access the price information easily.

2) Level two

The products categorized in this level have the prices that can be inferred from either direct or indirect observable inputs other than the active market’s prices. Examples of these inputs are:

a) Quoted prices from the similar products in the active market. This means the fair value can be derived from the current

trading prices of similar products. It is also noted that whether they are similar products should be judged by the characteristics and trading rules. The fair value valuation in this circumstance may make some adjustment due to time lags, trading rule’s differences, related parties’ prices, and the correlation of price between itself and the similar goods.

b) Quoted prices for identical or similar financial instruments in inactive markets. c) When marking-to-model, the input of model in this level should be observable (such as interest rates, yield curves and

volatilities). The observable inputs mean that they can be attained from market and can reflect the expectation of market participants.

d) Inputs which can be derived from other observable prices or whose correlation can be verified through other observable

market data.

3) Level three The fair prices of the products in this level are based on the inputs other than the direct market data. For example, historical volatility used in valuing options is an unobservable input, because it cannot represent the entire market participants’ expectation for future volatility.

b. Financial instrument measured at fair value

1) Hierarchy information of fair value of financial instruments

Financial Instruments Measured at Fair Value December 31, 2015 Total Level 1 Level 2 Level 3

Measured on a recurring basis Non-derivative financial instruments Assets Financial assets at fair value through profit or loss

Held-for-trading financial assets Stocks $ 110,302 $ 110,302 $ - $ - Bonds 38,283,696 34,996,428 3,287,268 - Others 8,089 - 8,089 -

Financial assets designated at fair value through profit or loss 1,265,029 - 1,265,029 -

Available-for-sale financial assets Stocks 114,554 - - 114,554 Bonds 43,943,177 29,691,115 14,252,062 - Negotiable certificates of deposits and others 149,066,608 - 149,066,608 -

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Liabilities Financial liabilities at fair value through profit or

loss Held-for-trading financial liabilities $ 249,517 $ 249,517 $ - $ -

Derivative financial instruments Assets Financial assets at fair value through profit or loss

Held-for-trading financial assets 27,040,879 13,469 22,744,725 4,282,685 Liabilities Financial liabilities at fair value through profit or

loss Held-for-trading financial liabilities 26,803,424 101,677 22,421,695 4,280,052



Held-for-trading financial assets Stocks $ 252,537 $ 252,537 $ - $ - Bonds 23,495,923 21,538,859 1,957,064 -


Available-for-sale financial assets Stocks 137,173 - - 137,173 Bonds 40,264,313 24,372,857 13,445,958 2,445,498 Negotiable certificates of deposits and others 164,372,254 51,972 164,320,282 -



loss Held-for-trading financial liabilities 21,597,828 497 13,775,051 7,822,280

2) Fair value measurement technique

Financial instruments at fair value, available-for-sale financial assets and hedging derivative financial instruments with quoted price in an active market are using market price as fair value; financial instruments above with no quoted price in an active market are estimated by valuation methods. The estimation and assumption of valuation method the Bank used is the same as market participants’. The Bank can obtain this information. The basis of fair value estimation used by the Bank is shown as follows: The fair value of forward contract, interest rate swap contracts and currency swap contracts is measured by the discounted cash flow method; the fair value of option is measured by Black & Scholes Model.

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Fair values of forward contracts are estimated on the basis of the foreign exchange rates provided by Reuters. Structured product is measured by opponents’ price based on match basis. This method diminished market risk to zero. Fair value of interest rate swap contracts and cross currency swap contracts are estimated on the basis of market quotation provided by Reuters. Fair value are determined as follows: (a) listed stocks and Taipei Exchange stocks - closing prices as of the balance sheet date; (b) beneficial certificates (open-end funds), net asset values as of the balance sheet date; (c) bonds - period-end reference prices published by the Taipei Exchange; (d) bank debentures issued overseas and the overseas bonds-period-end reference prices published by Bloomberg, calculated through an internal model or provided by a counter-party. The Bank assessed the active level of market and the adequacy of fair value of emerging stocks and measured the investments at fair value.

3) Credit risk valuation adjustment is set out below:

Credit risk valuation consists of credit valuation adjustment and debit valuation adjustment. Credit valuation adjustment adopts for derivative contracts trading in other than exchange market, over-the-counter, and reflects the non-performance risk of counter party on fair value. Debit valuation adjustment adopts for derivative contracts trading in other than exchange market, over-the-counter, and reflects the non-performance risk of the Bank on fair value. The Bank calculated debit and credit valuation adjustment based on models with inputs of Probability of Default (PD) and Loss Given Default (LGD) multiplying Exposure at Default (EAD). The Bank calculate EAD based on mark-to-market fair value of OTC derivative instruments. The Bank takes 60% as the PD of counter parties, and subject to change under the risk nature and data feasibility. The Bank take credit risk valuation adjustment into valuation of the fair value of financial instruments, thus reflect the credit quality of counter parties and the Bank.

4) Transfer between Level 1 and Level 2

The Bank transferred part of the NTD government bonds, corporate bonds and foreign bank debentures from Level 1 to Level 2 because the Bank determined these investments were not in an active market.

5) Reconciliation of Level 3 items of financial instruments

a) Reconciliation of Level 3 items of financial assets


Items Beginning Balance

Gains (Losses) on Valuation Increase Decrease Effects of

Changes in Exchange

Rate

Ending Balance Profit and

Loss

Other Comprehensive Income

Purchase/ Issued

Transfer to Level 3

Disposed/ Sold

Transfer Out of Level 3

Non-derivative financial instruments Available-for-sale

financial assets $2,582,671 $ (6,775 ) $ (25,475 ) $ 99,944 $100,649 $251,622 $2,350,162 $ (34,676 ) $114,554 Derivative financial

instruments Financial assets at fair

value through profit or loss Held-for-trading

financial assets 7,830,501 (3,445,714) - 1,455 - 108,251 - 4,694 4,282,685

Note: Items transferring to Level 3 are lack of observable price (due to the inactive transaction in the securities market); items transferring out of Level 3 is because the price can be attained from the securities market.

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Changes in Exchange

Rate


Loss

Other Comprehensive Income

Purchase/ Issued

Transfer to Level 3

Disposed/ Sold


Non-derivative financial instruments Financial assets at fair


financial assets $ 98,122 $ 1,730 $ - $ - $ - $103,119 $ - $ 3,267 $ - Available-for-sale

financial assets 2,482,097 8,270 26,951 1,166,853 510,490 1,438,185 255,245 81,440 2,582,671 Derivative financial



financial assets 1,237,894 6,586,701 - 96,715 - 96,974 - 6,165 7,830,501

For the years ended December 31, 2015 and 2014, the gain and losses on valuation included in net income with assets still held were loss $1,353,608 and gain $7,444,095, respectively. For the years ended December 31, 2015 and 2014, the gain and losses on valuation included in other comprehensive income with assets still held were loss $22,619 and gain $15,874, respectively.

b) Reconciliation of Level 3 items of financial liabilities



Valuation Gain/Loss

Reflected on Profit or Loss

Increase Decrease Effects of Changes in Exchange

Rate

Ending Balance Purchase/

Issued Transfer to

Level 3 Disposed/

Sold


Derivative financial instruments


Held-for-trading financial liabilities $7,822,280 $(2,976,526) $ 2,430 $ - $ 611,962 $ - $ 43,830 $4,280,052



Valuation Gain/Loss



Rate


Issued Transfer to

Level 3 Disposed/

Sold


Derivative financial instruments


Held-for-trading financial liabilities $1,229,687 $6,549,478 $1,173,952 $ - $1,183,323 $ - $ 52,486 $7,822,280

For the years ended December 31, 2015 and 2014, the valuation results included in net income from liabilities still being held were a gain of $1,369,406 and a loss $6,427,851, respectively.

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

Quantitative information about the significant unobservable inputs is set out below: December 31, 2015

Financial Instruments Measured at Fair Value

Financial Assets

Financial Liabilities Valuation Techniques

Significant Unobservable

Inputs

Interval (Weighted-

average) Derivative financial instruments

Financial instruments at fair


Held-for-trading financial instruments

Hybrid foreign exchange option

$ 1,487,584 $ 1,496,341 1. Sellers’ quote 2. Self-built option pricing

model (Note 1) (Heston Model)

Variance, correlation of exchange rate and variance

0%-5% (Note 1)

Hybrid FX swap structured instruments

2,614,827 2,611,846 Sellers’ quote (Note 2) -

Others 180,274 171,865 Sellers’ quote (Note 2) - $ 4,282,685 $ 4,280,052 Non-derivative financial instruments

Available-for-sale financial

instruments

Emerging stocks $ 114,554 $ - Market value with liquidity valuation discount

Discount factor of liquidity

0%-20%

Note 1: Hybrid foreign exchange options: These instruments are structured option products, fair values consist of option premium, valuation and valuation adjustment (CVA/DVA), booked as financial instruments at fair value through profit or loss. In consideration of main participants in the market, book are kept based on sellers’ reference quotes, the Bank exam the reasonability by the valuation data generated from the internal built model of foreign exchange option. Except for observable market input, other unobservable inputs of the internal built model foreign exchange option include initial variance, velocity of mean-variance, long-term variance, volatility of variance, error correlation of random walk from foreign exchange and its variance, and so on. As of the valuation date, December 31, 2015, the differences between the valuation results using the internally built model and seller’s quotes are between 0%-10% over 94% of all transactions, which indicates the seller’s quote are reasonable to some extents.

Note 2: As pairs of back-to-back transaction, consequences of significant unobservable inputs and fair values are not fully

captured in practice. Therefore both inputs are not disclosed by the Bank.

7) Valuation processes for fair value measurements categorized within Level 3

The Bank assess fair values according to the quote by counter parties, related assessment are compiled as risk-control reports and inform the manager by month and report to the board of directors by quarter.

c. Financial instruments not carried at fair value

1) Fair value information of financial instruments

Financial instruments not carried at fair value excluding the table below are reasonably close to their fair value, therefore no additional disclosure, for example: Cash and cash equivalents, due from the Central Bank and other banks, securities purchased under agreements to resell, receivables, discounts and loans, some other financial assets, deposits from the Central Bank and other banks, securities sold under agreement to repurchased, payables, deposits and remittances and other financial liabilities.

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December 31, 2015 Items Carrying Amount Fair Value

Held-to-maturity financial assets, net $ 66,835,971 $ 67,385,953 Debt investments without active market 1,746,142 1,749,864 Bank debentures 43,428,046 43,982,232

December 31, 2014

Items Carrying Amount Fair Value Held-to-maturity financial assets, net $ 43,501,740 $ 43,600,557 Bank debentures 48,565,756 48,986,536


Assets and Liabilities Item December 31, 2015 Total Level 1 Level 2 Level 3

Held-to-maturity financial assets $ 67,385,953 $ 34,292,809 $ 32,927,815 $ 165,329 Debt investments without active market 1,749,864 - 1,749,864 - Bank debentures 43,982,232 2,537,308 39,374,521 2,070,403

3) Methods and assumptions applied in estimating the fair values of financial instruments not carried at fair value are as follows:

a) The carrying amounts of financial instruments such as cash and cash equivalents, due from the Central Bank and other

banks, securities purchased under agreements to resell, receivables, some of other financial assets, deposits from the Central Bank and other banks, securities sold under agreement to repurchased, payables and other financial liabilities approximate their fair value because of the short maturity or the similarity of the carrying amount and future price.

b) Discounts and loans (including nonperforming loans): The Bank usually uses base rate (floating rate) as loan rate

because it can reflect market rate. Thus, using its carrying amount to consider the probability of repossession and estimate its fair value is reasonable. Long-term loans with fixed rate should estimate its fair value by its discounted value of expected cash flow. Because this kind of loans is not significant in this item, using its carrying amount to consider the probability of repossession and estimate its fair value should be reasonable.

c) Held-to-maturity financial assets: Held-to-maturity financial assets with quoted price in an active market are using

market price as fair value; held-to-maturity financial assets with no quoted price in an active market are estimated by valuation methods or opponent’s price.

d) Debt investments without active market: Discounted cash flows from debt investments with no quoted price in an

active market is estimated by using discount rate plus credit premium. e) Deposits and remittances: Considering banking industry’s characteristic, since deposits have one year maturity and

measured by market rate (market value), using carrying value to assess fair value is reasonable. For deposits with three years maturity are measured by discounted cash flow, using carrying value to assess fair value is reasonable.

f) Bank debentures: Bank debentures with quoted price in an active market are using market price as fair value; bank

debentures with no quoted price in an active market are estimated by valuation methods or quotes from counterparties. g) Investments accounted for using the equity method and unquoted equity investments: The fair value of unquoted

equity investments cannot be reliably measured because it has no quoted price in an active market, the variability interval of fair value measurements is significant or the probability of the estimations in the variability interval cannot be reasonably assessed. Hence, the fair value is not disclosed.

45. FINANCIAL RISK MANAGEMENT

a. Overview

The Bank documents the risk management policies, including overall operating strategies and risks control philosophy. The Bank’s overall risk management policies are to minimize the possibility of potential unfavorable factors. The board of directors approves the documentation of overall risk management policies and specific risk management policies; including credit risk, liquidity risk, market risk, operational risk, derivative instruments transactions and managements. The board of directors reviews the policies regularly, and reviews the operation to make sure the Bank’s policies are executed properly.

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b. Risk management framework

The board of directors is the top risk supervisor of the Bank. The board not only reviewed risk management policies and rules but also authorized management to be in charge of daily risk management work. The Bank has set up a risk management committee to be responsible for the services above; the Bank has also set up a credit committee to review the policies and supervise the abnormal cases. The credit committee also helps the board of directors approve cases over general manager’s authority under the board’s authorization. The board of directors authorized the Bank’s management to supervise risk management activities, evaluate the performance and confirm every risk management agent having essential code of ethic and professional skills. Internal audit is responsible for the periodic review of risk management and the control environment, then reports the results directly to the board of directors.

The Bank has set up a risk management department to control risk management policies, establish rules, plan and set up risk management system. The risk management department executes these policies based on the board’s approval, then reports the results and performance reviews to the authority or the board.

c. Credit risk

1) Sources and definitions of credit risk

Credit risk is the risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. It arises principally from lending, trade finance, treasury and credit derivatives. The issuer’s credit risk should be considered as part of the market risk when the investment target is securities in an active market.

2) Policies and strategies

The Bank established policies based on operating goals and strategies, business plans and risk management goals authorized by the board of directors. These policies were established to lower potential financial losses, minimize risks and rewards to raise the performance and protect shareholders’ equity through appropriate managing policies and procedures based on risk-diversification principle. The Bank’s risk strategy is to strengthen the credit risk management framework, establish complete credit verification system and procedure, develop and use efficient and scientific credit risk managing instruments to identify, measure, manage and supervise credit risks. These strategies transparentize, systematize, specialize and formalize credit risk management to manage loans, nonperforming assets and every kind of assets’ credit risk. The Bank has set up policies of main risks as prime direction based on legislations and operational goals. These policies include risk appetite, management goals, organization structure of responsibility and accountability, measurement, evaluation, supervision and report procedure of risks. These policies are established to reach the purposes of consistency and centralized management and are put into practice in corporate government.

Credit risk management procedures and measurements are as follows:

a) Loan business (includes loan commitment and guarantee)

Loan business classification and qualities are shown as follows:

i. Classification

Under the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Nonaccrual Loans” (the “Regulations”) issued by the Banking Bureau, the Bank evaluates credit losses on the basis of the estimated collectability. In accordance with the Regulations, credit assets are classified as normal assets, assets that require special mentioned, assets with substandard, assets with doubtful collectability, and assets on which there is loss.

ii. Credit quality level

The Bank sets up credit quality level (ex. internal credit risk assessment model, credit assessment rules) based on business characteristic and scale to manage risks.

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In order to measure clients’ credit risks, the Bank established credit risk assessment model for corporate banking, personal banking and consumer banking through statistic methods, professional judgment and clients’ information. Every model should be reviewed regularly to examine whether the calculations match to the actual conditions or not, then the Bank will adjust parameters to optimize the results. For personal banking and consumer banking customers, every case will be reviewed individually to assess default risks except that micro-credit and credit card business should be assessed by internal credit assessment model. The Bank’s customers’ credit qualities are classified as excellent, good, acceptable, weak and no ratings. Customers’ credit quality should be evaluated annually to make sure the valuation results are accurate.

b) Debt investment and derivative financial instruments

The Bank manages and identifies credit risks of debt investment through credit ratings by outsiders, credit qualities of the debt, regional conditions and counterparties’ risks. The Bank carry out derivative instrument transactions with counterparties in financial industry which are over the investment level. The Bank would control credit risks based on counterparties’ credit lines; counterparties with no credit ratings or investment level should be reviewed individually. Normal customers’ credit exposure positions should be controlled by approved derivative instrument credit line and condition based on normal credit procedure. The Bank classifies credit qualities of debt investment and derivative financial instruments as excellent, good, acceptable, weak and no ratings.

3) Credit risk hedge or mitigation policies

a) Collateral

For credit exposures and collaterals requirements, the Bank has set up several standards such as disposal of collateral, acceptance of real estate disposal, real estate appraisal and credit policies for every commodity to regulate collaterals’ categories, appraisals, procedures, deduction percentages, loan rate, loan-to-value and maturity, control, management and disposal to confirm these standards can mitigate credit risks and maintain creditor’s right. To maintain collateral’s effectiveness, the Bank supervises and manage it based on after-loan management and review policies examines through examining the usage, custody and maintenance of collaterals regularly and irregularly to avoid selling, leasing, pledging, moving and disposing collaterals without authorization. Once the case is due and willing to extend the contract, it should be seen as a new case and the collateral should be revalued.

b) Credit risk limits and credit risk concentration control

The Bank manages credit line and concentration of all credit assets through appropriate information managing system to gather information, credit exposure centralized conditions and large credit exposure of every credit assets combination, including national risk, large credit exposure, credit line of single corporation, group and industry. For cases approaching credit line, the Bank should report to related management and make control strategies; for cases over credit line, the Bank should enhance authorization level based on credit review authority.

c) Agreement of net settlement

The Bank often makes gross settlement on transactions, sign net settlement contract with other counterparties or cancel every transactions and make net settlement when default occurs to mitigate credit risk.

4) The maximum credit exposure of the financial instruments held by the Bank

Maximum credit exposures of assets on balance sheet (excluding collaterals and other credit enhancement instruments) are almost equivalent to its carrying value. The maximum credit exposures (excluding collaterals, other credit enhancement instruments and undrawn maximum exposure) off balance sheet are shown as follows:

Off-Balance Sheet Items The Maximum Credit Exposure December 31, 2015 December 31, 2014

Undrawn credit card commitments $ 164,035,079 $ 162,551,739 Undrawn loan commitments 14,184,261 13,325,686 Guarantees 16,659,769 17,124,775 Standby letter of credit 4,591,448 6,303,268

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The Bank adopt a strict evaluate procedure and review the result regularly to control and minimize off-balance sheet credit risk exposures continuously. The payment of this kind credit business and financial instruments may not be fully paid before the maturity, therefore the contract amount is not deemed as the amount of future cash outflow. In other words, the future cash demand is lower than contract amount. If the credit limit is out and collaterals or other collaterals lose their value, the amount of credit risk is equal to the contract amount which is the possible maximum loss.

5) Credit risk concentration of the Bank

When financial instruments transactions concentrated on counter-party, which engaged in similar business activities, had similar economic characteristics and abilities to execute contracts, the credit risk concentration arises.

Credit risk concentrations can arise in the Bank’s assets, liabilities or off-balance sheet items through the execution or processing of transactions (either product or service) or through a combination of exposures across these broad categories. It includes credit, loan and deposits, call loan to banks, investment, receivables and derivatives. The Bank maintains a diversified portfolio to limit its exposure to any one geographic region, country or individual creditor and monitor its exposures continually. The Bank’s most significant concentrations of credit risk are summarized by industry, region and collateral as follows:

a) By industry

Industries December 31, 2015 December 31, 2014 Amount % Amount %

Private enterprise $ 327,496,645 38.25 $ 340,034,853 43.89 Public enterprise 58,228,016 6.80 27,468,908 3.55 Government sponsored enterprise and

business 10,000,000 1.17 - - Nonprofit organization 46,054 0.01 213,159 0.03 Private 428,398,142 50.04 390,566,491 50.41 Financial institutions 31,988,047 3.73 16,435,386 2.12 Total $ 856,156,904 100.00 $ 774,718,797 100.00

b) By region

Regions December 31, 2015 December 31, 2014 Amount % Amount %

Domestic $ 750,543,299 87.66 $ 657,879,783 84.92 Asia 50,986,746 5.96 65,321,018 8.43 North America 39,675,437 4.63 39,905,627 5.15 Others 14,951,422 1.75 11,612,369 1.50 Total $ 856,156,904 100.00 $ 774,718,797 100.00

c) By collateral

Collaterals December 31, 2015 December 31, 2014 Amount % Amount %

Credit $ 289,239,059 33.78 $ 232,449,586 30.00 Secured

Stocks 1,999,915 0.23 1,404,937 0.18 Bonds 10,065,036 1.18 11,755,068 1.52 Real estate 492,714,719 57.55 441,324,475 56.97 Movable collaterals 22,281,753 2.60 24,164,495 3.12 Guarantees 15,116,743 1.77 30,210,058 3.90 Others 24,739,679 2.89 33,410,178 4.31

Total $ 856,156,904 100.00 $ 774,718,797 100.00

6) Credit quality and impairment assessment

Some financial assets such as cash and cash equivalents, due from Central Bank and call loan to banks, financial asset at fair value through profit or loss, and securities purchased under agreements to resell are regarded as very low credit risk owing to the good credit rating of counterparties.

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Except for the analysis above, other financial assets’ analyses are summarized as follows:

a) Discounts, loans and receivables

December 31, 2015

Neither Overdue Nor Impaired Overdue But Not

Impaired (B)

Impaired Amount (C)

Total (A)+(B)+(C)

Loss Recognized (D) Net Total (A)+(B)+ (C)-(D) Excellent Good Acceptable Weak No Ratings Subtotal (A)

With Objective

Evidence of Impairment

With No Objective


Receivables Accounts receivable -

forfaiting $11,250,955 $ 6,462,074 $ 15,212,396 $ - $7,408,320 $40,333,745 $ - $ - $40,333,745 $ - $ 605,379 $39,728,366 Credit card receivables 8,260,463 2,510,460 3,894,477 305,401 276,688 15,247,489 108,534 1,179,306 16,535,329 129,967 151,780 16,253,582 Acceptances - forfaiting - 366,255 6,286,196 - - 6,652,451 - - 6,652,451 - 99,787 6,552,664 Accounts receivable -

factoring 481,679 1,532,553 3,897,359 227,448 521,262 6,660,301 694,203 99,970 7,454,474 19,527 61,860 7,373,087 Others 1,601,403 732,461 1,931,594 134,160 1,527,201 5,926,819 25,438 633,971 6,586,228 591,137 16,526 5,978,565

Discounts and loans 272,273,679 143,248,250 369,063,286 51,887,778 5,879,861 842,352,854 8,567,758 5,236,292 856,156,904 1,647,715 9,870,160 844,639,029 Other financial asset

Call loans to security corporations - 1,653,693 - - - 1,653,693 - - 1,653,693 - - 1,653,693

Nonperforming receivables transferred other than loan - - - - - - - 549 549 170 - 379

December 31, 2014

Neither Overdue Nor Impaired Overdue But Not

Impaired (B)

Impaired Amount (C)

Total (A)+(B)+(C)

Loss Recognized (D) Net Total (A)+(B)+ (C)-(D) Excellent Good Acceptable Weak No Ratings Subtotal (A)

With Objective


With No Objective



forfaiting $ 38,460,203 $ 19,999,889 $ 15,050,644 $ - $ 8,649,658 $ 82,160,394 $ - $ - $ 82,160,394 $ - $ 26,075 $82,134,319 Credit card receivables 8,051,391 3,343,069 4,050,694 142,984 287,206 15,875,344 73,789 1,378,080 17,327,213 147,855 179,478 16,999,880 Acceptances - forfaiting - 13,416,739 11,594,490 - 745,039 25,756,268 - - 25,756,268 - - 25,756,268 Accounts receivable -

factoring 1,379,739 927,301 4,593,321 2,279,663 466,751 9,646,775 649,909 - 10,296,684 - 103,961 10,192,723 Others 944,372 726,863 2,136,335 263,388 1,420,115 5,491,073 19,092 259,795 5,769,960 222,668 21,575 5,525,717

Discounts and loans 141,025,165 146,458,711 398,560,490 68,081,097 5,831,647 759,957,110 6,379,580 8,382,107 774,718,797 1,286,964 11,182,723 762,249,110 Other financial asset -

nonperforming receivables transferred other than loan - - - - - - - 6,933 6,933 6,933 - -

b) Credit analysis by customer type for discounts and loans neither overdue nor impaired are as follows:

December 31, 2015 Neither Overdue Nor Impaired

Excellent Good Acceptable Weak No Ratings Total Consumer banking

Mortgage $116,757,316 $ 51,891,731 $ 62,085,714 $ 6,483,307 $ 23 $237,218,091 Cash card - - - - 33 33 Micro credit 5,089,550 4,079,488 3,747,270 79,122 57,022 13,052,452 Others 79,950,174 37,477,052 39,379,569 4,474,584 5,822,783 167,104,162

Corporate banking Secured 570,200 4,787,594 129,181,453 17,128,129 - 151,667,376 Unsecured 69,906,439 45,012,385 134,669,280 23,722,636 - 273,310,740

Total $272,273,679 $143,248,250 $369,063,286 $ 51,887,778 $ 5,879,861 $842,352,854

December 31, 2014 Neither Overdue Nor Impaired

Excellent Good Acceptable Weak No Ratings Total Consumer banking

Mortgage $ 59,058,572 $ 52,689,169 $ 81,262,666 $ 13,795,865 $ 3,223 $206,809,495 Cash card - - - - 73 73 Micro credit 3,918,988 4,265,474 5,006,657 355,701 59,825 13,606,645 Others 51,170,798 40,296,153 54,048,839 7,824,448 5,768,526 159,108,764

Corporate banking Secured 929,018 6,506,975 135,734,432 21,464,273 - 164,634,698 Unsecured 25,947,789 42,700,940 122,507,896 24,640,810 - 215,797,435

Total $141,025,165 $146,458,711 $398,560,490 $ 68,081,097 $ 5,831,647 $759,957,110

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c) Credit analysis for marketable securities

December 31, 2015 Neither Overdue Nor Impaired Overdue But

Not Impaired (B)

Impaired Amount (C)

Total (A)+(B)+(C)

Loss Recognized

(D)

Net Total (A)+(B)+(C)-

(D) Excellent Good Acceptable Weak No Ratings Subtotal (A) Available-for-sale financial assets

Investment in bonds $165,872,448 $ 16,574,908 $ 7,924,129 $ - $ 2,638,300 $193,009,785 $ - $ - $193,009,785 $ - $ 193,009,785 Investment in stocks - - - - 114,554 114,554 - - 114,554 - 114,554

Held-to-maturity financial assets Investment in bonds 66,835,971 - - - - 66,835,971 - - 66,835,971 - 66,835,971

Other financial assets Investment in stocks - - 81,499 - 282,593 364,092 - - 364,092 - 364,092 Investment in bonds 1,746,142 - - - - 1,746,142 - - 1,746,142 - 1,746,142 Others (Note) 3,019,458 - - - - 3,019,458 - 4,668,629 7,688,087 2,408,678 5,279,409


Not Impaired (B)

Impaired Amount (C)

Total (A)+(B)+(C)

Loss Recognized

(D)

Net Total (A)+(B)+(C)-

(D) Excellent Good Acceptable Weak No Ratings Subtotal (A)

Available-for-sale financial assets Investment in bonds $171,566,770 $ 23,414,471 $ 7,482,660 $ - $ 2,172,666 $204,636,567 $ - $ - $204,636,567 $ - $204,636,567 Investment in stocks - - - - 137,173 137,173 - - 137,173 - 137,173

Held-to-maturity financial assets Investment in bonds 43,501,740 - - - - 43,501,740 - - 43,501,740 - 43,501,740

Other financial assets Investment in stocks - - 81,499 - 282,593 364,092 - - 364,092 - 364,092 Others (Note) 3,573,430 - - - - 3,573,430 - 4,458,015 8,031,445 2,375,857 5,655,588

Note: Other financial assets include time deposits not belong to cash and cash equivalent and purchase of PEM

instruments.

7) Aging analysis for overdue but unimpaired financial assets

Delayed performance of certain procedures by borrowers and other administrative reasons could result in financial assets becoming overdue without being impaired. According to the Bank’s internal risk management policies, financial assets overdue within 90 days are not considered impaired (accounts receivable - factoring without advancement will also not be considered impaired) unless other evidences show otherwise. Aging analysis for overdue but unimpaired financial assets is as follows:

Items

December 31, 2015

Overdue by Less Than One Month

Overdue by One to Three Months

Overdue by More Than

Three Months Total

Accounts receivable Credit card $ 70,997 $ 37,537 $ - $ 108,534 Accounts receivable - factoring 437,878 23,779 232,546 694,203 Others 19,619 5,819 - 25,438

Discounts and loans Mortgage 4,404,357 291,264 - 4,695,621 Micro credit 467,601 33,171 - 500,772 Corporate banking 6,066 394,568 - 400,634 Others 2,844,930 125,801 - 2,970,731

Items

December 31, 2014

Overdue by Less Than One Month



Three Months Total

Accounts receivable Credit card $ 44,630 $ 29,159 $ - $ 73,789 Accounts receivable - factoring 601,571 46,891 1,447 649,909 Others 16,716 2,376 - 19,092


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8) Analysis of financial asset impairment

Analysis of the impairment of bond investments is summarized in Note 45,c,6),c). Analysis of the impairment of discounts, loans and receivables is summarized as follows:

Items Discounts and Loans Allowance for Credit Losses

December 31, 2015

December 31, 2014

December 31, 2015

December 31, 2014

With objective evidence of impairment

Individually assessed $ 1,711,979 $ 5,561,737 $ 532,534 $ 481,325 Collectively assessed 3,524,313 2,820,370 1,115,181 805,639

With no objective evidence of impairment

Collectively assessed 850,920,612 766,336,690 9,870,160 11,182,723

Items Receivables Allowance for Credit Losses

December 31, 2015

December 31, 2014

December 31, 2015

December 31, 2014

With objective evidence of impairment (Note 2)

Individually assessed $ 625,334 $ 255,146 $ 591,137 $ 222,668

Collectively assessed 1,288,462 1,389,662 149,664 154,788



Note 1: The loans and receivables exclude the amount of the allowance for credit losses and adjustments for discount

(premium). Note 2: Nonperforming receivables transferred other than loan is included.

9) Management policies of collaterals assumed

Collaterals assumed are classified as other assets. According to regulations, the Bank should dispose of collaterals within four years. There are no assumed collaterals of the Bank for the years ended December 31, 2015 and 2014.

10) Disclosures prepared in conformity with Regulations Governing the Preparation of Financial Reports by Public Banks

a) Overdue loans and receivables

Date December 31, 2015

Items Nonperforming

Loan (NPL) (Note 1)

Total Loans NPL Ratio (Note 2)

Loan Loss Reserves

(LLR)

Coverage Ratio

(Note 3)

Corporate loan Secured $ 858,002 $154,320,128 0.56% $ 2,039,089 237.66% Unsecured 674,062 275,212,080 0.24% 4,037,857 599.03%

Consumer loan

Mortgage (Note 4) 302,541 242,239,854 0.12% 3,677,387 1,215.50% Cash card 72 14,162 0.51% 14,324 19,894.44% Micro credit (Note 5) 66,818 14,031,848 0.48% 264,228 395.44% Others (Note 6)

Secured 241,870 170,338,832 0.14% 1,484,990 613.96%

Unsecured Total 2,143,365 856,156,904 0.25% 11,517,875 537.37%

Overdue Receivables

Account Receivables

Delinquency Ratio

Allowance for Credit

Losses

Coverage Ratio

Credit card 51,183 16,535,329 0.31% 281,747 550.47% Account receivables - factoring with no

recourse (Notes 7 and 8)

- 7,454,474 - 81,387 -

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Items Nonperforming

Loan (NPL) (Note 1)

Total Loans NPL Ratio (Note 2)

Loan Loss Reserves

(LLR)

Coverage Ratio

(Note 3)

Corporate loan Secured $ 1,097,128 $170,629,428 0.64% $ 3,543,106 322.94% Unsecured 358,444 217,244,462 0.16% 3,515,194 980.68%

Consumer loan


Secured 229,315 161,491,415 0.14% 1,853,174 808.13%

Unsecured Total 1,862,776 774,718,797 0.24% 12,469,687 669.41%

Overdue Receivables

Account Receivables

Delinquency Ratio

Allowance for Credit

Losses

Coverage Ratio


recourse (Notes 7 and 8)

7,106 10,303,616 0.07% 110,894 1,560.57%

Note 1: For loan business: Overdue loans represent the amounts of overdue loans reported in accordance with

“Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Non-accrual Loans”.

For Credit card business: Overdue receivables are regulated by the Banking Bureau letter dated July 6, 2005 (Ref. No. 0944000378).

Note 2: For loan business: NPL ratio = NPL/Total loans.

For Credit card business: Delinquency ratio = Overdue receivable/Account receivables.

Note 3: For loan business: Coverage ratio = LLR/NPL

For credit card business: Coverage ratio = Allowance for credit losses/Overdue receivables.

Note 4: Household mortgage loan is a financing to be used by a borrower to buy, build, or fix a dwelling, and the

dwelling owned by the borrower, spouse, or children is used to fully secure the loan. Note 5: Micro credit is regulated by the Banking Bureau letter dated December 19, 2005 (Ref. No. 09440010950). Note 6: Others in consumer loans refers to secured or unsecured loans excluding mortgage, cash card, micro credit,

and credit cards.

Note 7: For account receivables - factoring with no recourse, as required by the Banking Bureau letter dated July 19, 2005 (Ref. No. 094000494), and allowance for bad debts is recognized once no compensation is made from factoring or insurance within three months.

Note 8: Part of nonperforming receivables transferred from other than loans was included.

b) Excluded NPLs and excluded overdue receivables

Date December 31, 2015 December 31, 2014

Items Excluded NPL Excluded Overdue

Receivables Excluded NPL

Excluded Overdue

Receivables As a result of debt negotiation and loan

agreements (Note 1) $ 4,094 $ 166,940 $ 6,011 $ 234,117 As a result of consumer debt clearance

(Note 2) 7,569 748,719 7,485 804,628 Total 11,663 915,659 13,496 1,038,745

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Note 1: The disclosure of excluded NPLs and excluded overdue receivables resulting from debt negotiations and loan agreements is based on the Banking Bureau letter dated April 25, 2006 (Ref. No. 09510001270).

Note 2: The disclosure of excluded NPLs and excluded overdue receivables resulting from consumer debt clearance is

based on the Banking Bureau’s letter dated September 15, 2008 (Ref. No. 09700318940).

c) Concentration of credit extensions Year December 31, 2015

Rank (Note 1) Industry Category (Note 2)

Total Credit Consists of Loans

(Note 3)

Percentage of Net Worth

(%) 1 A Group (manufacture of liquid crystal panel and components) $ 6,054,609 5.55 2 B Group (manufacture of computers) 5,932,660 5.44 3 C Group (manufacture of computers) 5,929,347 5.43 4 D Group (cable and other subscription programming) 4,993,000 4.58 5 E Group (banks) 4,391,947 4.02 6 F Group (manufacture of computers) 4,068,544 3.73 7 G Group (manufacture of computer and other peripheral equipment) 3,873,769 3.55 8 H Group (mechanics, telecommunications and electricity facilities

installation) 3,839,677 3.52

9 I Group (manufacture of computers) 3,731,271 3.42 10 J Group (water transportation) 3,208,042 2.94

Year December 31, 2014



(Note 3)


(%) 1 A Group (manufacture of liquid crystal panel and components) $ 10,861,857 10.91 2 B Group (manufacture of liquid crystal panel and components) 8,779,007 8.82 3 C Group (manufacture of computers) 5,926,460 5.95 4 D Group (water transportation) 5,174,212 5.20 5 E Group (manufacture of computers) 4,546,967 4.57 6 F Group (manufacture of computer and other peripheral equipment) 4,408,609 4.43 7 G Group (manufacture of computers) 3,865,130 3.88 8 H Group (cable and other subscription programming) 3,801,431 3.82 9 I Group (manufacture of computers) 3,477,036 3.49

10 J Group (mechanics, telecommunications and electricity facilities installation)

3,465,861 3.48

Note 1: Ranking of top 10 groups (excluding government or state - owned utilities) whose total credit consists of loans. Note 2: Groups were those as defined in Articles 6 of the Supplementary Provisions to the Taiwan Stock Exchange

Corporation’s Rules for Review of Securities Listings Law. Note 3: Total credit is the sum of all loans (including import and export bills negotiated, discounts, overdrafts,

short-term loans, short-term secured loans, marginal receivables, medium-term loans, medium-term secured loans, long-term loans, long-term secured loans, and nonperforming loans), exchange bills negotiated, account receivables factored without recourse, acceptances receivable, and guarantee deposit issued.

d. Liquidity risk management

1) Definition of liquidity risk

Liquidity is the Bank’s ability to provide sufficient funding for asset growth and matured liabilities. Liquidity risk means the risk banks cannot obtain sufficient fund with reasonable cost and correct timing, and then suffer losses on earnings or capital. The measures of enhancing cash liquidity are holding sufficient cash and highly liquid able securities, adjusting maturities differences, savings absorption or arranging borrowings, etc.

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a) Strategies

The Bank established a sound liquidity risk managing system based on business’ scale and characteristic, assets and liabilities’ structure, funding strategies and diversity of funding sources to ensure it would have sufficient funding for obligations in normal or worst scenario.

b) Risk measurement

The Bank uses quantitative analysis to manage liquidity risk. Cash flow deficit and liquidity management goals are used as measure instruments to report monthly the analysis results to the assets and liabilities managing committee. Stress testing is done to ensure the Bank would have sufficient funding for asset growth and matured liabilities despite any internal operating problems or adverse changes in the financial environment.

c) Risk monitoring

The Bank established a liquidity deficit limit and an early warning system to detect liquidity risk and take appropriate action at the right time. The Bank has formed a crisis management team to handle any liquidity crisis. The general manager is the team convener, and the managers of the financial obligation department and the risk management department are the team members. The general manager can also assign the managers of related departments to join the team, depending on the situation. Members’ rights and responsibilities are listed in “Bank SinoPac’s Liquidity Risk Emergency Response Rule”.

2) Maturity analysis of financial liabilities held to manage liquidity risk

a) Maturity analysis of non-derivative financial liabilities

Cash outflow analyses of nonderivative financial liabilities of the Bank are summarized in the following tables. The amounts are provided on a contract cash flow basis so some of the amounts will not match the amounts in the balance sheets.

December 31, 2015 0-30 Days 31-90 Days 91-180 Days 181 Days to

1 Year Over 1 Year Total

Deposits from the Central Bank and other banks $ 47,933,654 $ 9,014,815 $ 627,252 $ 2,721,703 $ - $ 60,297,424

Financial liabilities at fair value though profit or loss 249,517 - - - - 249,517

Securities sold under agreements to repurchase 4,596,131 579,305 - - - 5,175,436

Payables 7,421,097 695,295 666,422 119,000 1,754,785 10,656,599 Deposits and remittances 626,060,127 169,562,090 132,401,232 180,914,360 22,298,631 1,131,236,440 Bank debentures 28,608 132,129 213,991 5,926,701 39,928,113 46,229,542 Other financial liabilities -

certificates of deposit 511,767 660,207 - - - 1,171,974





Payables 7,956,375 1,757,789 331,677 60,941 1,768,413 11,875,195 Deposits and remittances 625,565,390 165,641,784 122,313,630 168,955,715 16,958,941 1,099,435,460 Bank debentures 140,384 5,119,442 123,592 2,751,178 43,778,981 51,913,577 Other financial liabilities -

certificates of deposit - 641,105 1,275,588 321,939 - 2,238,632

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b) Maturity analysis of derivative financial liabilities

A hedging derivative financial instrument is managed within the contract period and it is disclosed as undiscounted cash flow based on its maturity. The Bank uses derivative financial liabilities at fair value through profit or loss mainly to accommodate customers’ needs and manage their own exposure positions, and disclosed at fair value based on shortest period.

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

Derivative financial liabilities at fair value through profit or loss $26,803,424 $ - $ - $ - $ - $26,803,424



Note: Derivative interest rate instrument is settled at net amount.

3) Maturity analysis of off-balance sheet items

Maturity analysis of off-balance sheet items are summarized in the following tables. Financial guarantee contracts of the Bank that assume full amount are available or require to execute at the earliest time. The amounts are provided on a contract cash flow basis so some of the amounts will not match the amounts in the balance sheets.


Undrawn loan commitments $ 315,502 $ 284,538 $1,964,241 $1,558,788 $10,061,192 $14,184,261 Guarantees 2,216,877 1,280,638 1,731,936 3,966,134 7,464,184 16,659,769 Standby letter of credit 1,434,608 2,824,360 315,116 17,364 - 4,591,448


Undrawn loan commitments $ 529,983 $ 234,292 $ 752,005 $3,022,547 $ 8,786,859 $13,325,686 Guarantees 1,492,035 2,203,881 2,294,261 1,618,522 9,516,076 17,124,775 Standby letter of credit 1,560,942 3,864,394 686,485 69,649 121,798 6,303,268

4) Maturity analysis of operating lease commitments

Operating lease commitment is the minimum lease payment when the Bank is lessee or lessor with non-cancelling condition. Maturity analysis of operating lease commitments is summarized as follows:

December 31, 2015 Less than 1 Year 1-5 Years Over 5 Years Total

Operating lease commitments Operating lease expense (lessee) $ 498,899 $ 1,000,277 $ 142,742 $ 1,641,918 Operating lease income (lessor) 81,337 85,366 2,189 168,892

December 31, 2014 Less than 1 Year 1-5 Years Over 5 Years Total

Operating lease commitments Operating lease expense (lessee) $ 447,919 $ 825,100 $ 115,415 $ 1,388,434 Operating lease income (lessor) 88,307 123,793 2,970 215,070

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a) Maturity analysis of assets and liabilities of the Bank (New Taiwan dollars)

December 31, 2015

Total 0-10 Days 11-30 Days 31-90 Days 91-180 Days 181 Days to 1 Year Over 1 Year

Main capital inflow on maturity

$1,304,708,533 $ 169,859,348 $ 195,236,589 $ 195,538,333 $ 163,968,525 $ 153,250,507 $ 426,855,231

Main capital outflow on maturity 1,608,927,456 91,788,920 154,439,907 269,847,121 240,954,852 300,591,441 551,305,215

Gap (304,218,923 ) 78,070,428 40,796,682 (74,308,788 ) (76,986,327 ) (147,340,934 ) (124,449,984 )

December 31, 2014


Main capital inflow on maturity

$1,171,776,759 $ 155,175,170 $ 197,806,145 $ 159,019,830 $ 52,149,074 $ 58,085,004 $ 549,541,536


Gap (309,943,244 ) 54,955,870 86,056,181 (50,991,831 ) (158,666,327 ) (232,201,810 ) (9,095,327 )

Note: The amounts shown in this table are the Bank’s position denominated in NTD.

b) Maturity analysis of assets and liabilities of the Bank (U.S. dollars) (In Thousands of U.S. Dollars)

December 31, 2015

Total 0-30 Days 31-90 Days 91-180 Days 181 Days to 1 Year Over 1 Year

Main capital inflow on maturity $ 30,943,200 $ 9,625,884 $ 7,739,483 $ 6,641,735 $ 4,466,740 $ 2,469,358

Main capital outflow on maturity 31,166,281 8,575,105 7,835,295 6,162,148 5,342,036 3,251,697

Gap (223,081) 1,050,779 (95,812) 479,587 (875,296) (782,339)

(In Thousands of U.S. Dollars)

December 31, 2014




Gap (958,685) (88,179) (1,035,322) 589,801 (180,900) (244,085)

Note: The amounts shown in this table are the Bank’s position denominated in USD.

e. Market risk

1) Definition of market risk

Market risk arises from market changes (such as those referring to interest rates, exchange rates, equity securities and commodity prices) which may cause the fluctuation of a financial instrument’s fair value or future cash flow. The Bank’s net revenue and investment portfolio value may fluctuate when risk factors above change. The main market risks the Bank should overcome pertain to interest rate, exchange rate and equity securities. Interest rate risks primarily refer to bonds and interest rate related derivative instruments such as fixed rate and floating rate interest rate swaps and bond options; the exchange rate risk refers to foreign currency investments the Bank holds such as exchange rate related derivative instruments and foreign currency bonds; equity securities risk includes listed stocks and equity related derivative financial instruments.

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2) Management strategies and procedures

To follow the “Market Risk Management Rule” and other regulations, the Bank established standards for risk identification, measurement, supervision and reporting to set up appropriate risk management framework for every kind of market risk. In accordance with the risk management limit approved by the board of directors, the Bank supervises every loss limit and position at risk such as interest rate, exchange rate, equity security, spot trading and forward contract, option, future, swap, and related sensitivity information derived from spot trading to confirm that market risk exposure is accepted to the Bank. The Bank separates its transactions into hedge and non-hedge on the basis of trading purposes. For hedge transactions, the Bank should measure hedge relations, risk management goals and hedge strategies. The Bank should also perform hedge testing for hedging effectiveness.

3) Organization and framework

The board of directors is the top supervision and decision making level of the Bank; it determines every risk management procedure and limit on the basis of its operating strategy and the business environment. The Bank also set up a risk management department headed by a general manager to establish risk managing principles, regulate risk managing policies, and plan and set up a risk management system. Following the internal control and segregation of duties principles, the Bank had certain related functions with market risk exposures transformed into three independent departments: Trading, risk control and settlement departments, usually called front office, middle office and back office. Nevertheless the risk management department remains in charge of market risk control, i.e., it is responsible for identifying measuring, controlling and reporting market risk.

4) Market risk control procedure

a) Identification and measurement

Risk measurement includes exposures changes in the market of interest rates, exchange rates, and equity securities, which affect spot trading and forward exchange, option, futures, and swap transactions or related combined transactions derived from spot trading. The Bank set up appropriate market risk limits based on commodity category, characteristic and complexity. The limits are the nominal exposure limit, the risk factor sensitivity limit of options as measured by Delta/Vega/DV01 and the loss control limit. These limits are calculated by the risk control department through measurements (such as those of the Black & Scholes Model) provided by financial data and company information providers (e.g., Murex and Bloomberg) based on market prices.

b) Supervision and reporting

The Bank’s market risk management department prepares risk management reports such as those on daily market valuations, value at risk and risk limits. If the risk is over the limit, the department should report this situation to the transaction department and appropriate managers in the risk management department. The department should also collect and organize bank market risk exposure information, risk value, risk limit rules, and information on situations in which limits are exceeded, analyze security investments, and submit regularly to the board of directors reports on the collected information and security investment analysis.

5) Trading book risk management policies

a) Definitions

The trading book is an accounting book of the financial instruments and physical commodities held for trading or hedged by the Bank. Held-for-trading position refers to revenues earned from practical or impractical trading differences. Positions that should not be recorded in the trading book are recorded in the banking book.

b) Strategies

The Bank earns revenues from trading spreads or fixed arbitrage debt and equity instruments are held for short periods of time, purchased with the intention of profiting from short-term price changes through properly control short-term fluctuation of market risk factors (interest rate, exchange rate and stock price). It executes hedge transactions as needed.

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c) Policies and procedures

The Bank carries out “Market Risk Management Policy” to control market risk. Under the above policy, traders may autonomously operate and manage positions within the range of authorized limits and the approved trading strategy. The market risk management department supervises trading positions (including limit, liquidity, the ability to establish hedge positions and investment portfolio risk) based on market information and evaluates market information quality, acquirability, liquidity and scale which are calculated into the pricing model.

d) Assessment policies

The Bank assesses financial instruments once a day on the basis of information obtained from independent sources if market prices are acquirable. If the Bank assesses financial instruments using a pricing model, it should be careful in making mathematical calculations and should review the pricing model’s assumptions and parameters regularly.

e) Measurements

i. The risk valuation and calculation methods are described in Note 45,e,10). ii. The calculation of the nominal exposure amount and the risk factor sensitivity value Delta/Vega/DV01 is done

through the trading systems. iii. The Bank makes stress tests using a light scenario (change in interest rate ± 100 bp, change in securities ± 15%

and change in exchange rate ± 3%) and serious scenario (change in interest rate ± 200 bp, change in securities ± 30% and change in exchange rate ± 6%) and reports the stress test results to the board of directors.

6) Trading book interest rate risk management

a) Definitions

Interest rate risk refers to a decrease in earnings and value of financial instruments due to adverse interest rate fluctuations. Major instruments with interest rate risk include securities and derivative instruments.

b) Procedures

The Bank has a trading limit and a stop-loss limit (which should be applied to trading instrument by the dealing room and dealers) based on management strategy and market conditions; limits have been approved by the board of directors.

c) Measurements

i. The risk valuation assumptions and calculation methods are described in Note 45,e,10). ii. DV01 is used daily to measure the impact of interest rate changes on investment portfolios.

7) Trading book exchange rate risk management

a) Definitions

Exchange rate risk refers to the incurrence of loss from the exchange of currencies in different timing. The Bank’s major financial instruments exposed to exchange rate risk spot contract, forward contracts, and FX option.

b) Policies and procedures

To control the exchange rate risk, the Bank sets trading limit and stop-loss limit and requires the dealing room, dealers, etc., to observe these limits.

c) Measurements

i. The risk valuation assumptions and calculation methods are described in Note 45,e),10). ii. Exposure positions are measured daily for the impact of exchange rate changes on investment portfolio value.

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8) Trading book equity risk management

a) Definitions

Market risk of equity securities is the risk that stock or stock index prices and/or their implied volatility will change (specific risk) or that the general market will give rise to conditions that will negatively affect security prices.

b) Procedures

To control equity risk, the Bank sets investment position limits and stop-loss limits. The limits are approved by the board of directors. Within the limit of authority, The Bank sets investment position limits and stop-loss limits for each dealer.

c) Measurements

i. The risk valuation assumptions and calculation methods are described in Note 45,e),10). ii. Exposure positions are measured daily to measure the impact of equity risk on investment portfolio value due from

equity risk.

9) Banking book interest rate risk management

Banking book interest rate risk refers to the decrease in the value of the banking book portfolio due to unfavorable interest rate changes. The banking book interest rate risk is not related to the interest rate position shown in the trading book. Through managing the banking book interest rate risk, the Bank can measure and manage the risk to earnings and financial position caused by interest rate fluctuations.

a) Strategies

To reduce the negative effect of interest rate changes on of net interest revenue and economic value, the Bank adjusts positions within certain limits for better performance. It reviews the interest rate sensitivity regularly to create maximum profit and manage interest rate risk.

b) Risk measurement

Risk measurement refers to the interest rate risk of assets, liabilities, and off-balance-sheet positions. The Bank periodically reports interest rate sensitivity positions and measures the impact of interest rate fluctuations on interest rate-sensitive assets and net interest revenue.

c) Risk monitoring

The asset and liability management committee examines and monitors exposure to interest rate risk on the basis of the measurement provided by the risk management sector. If the risk exposure condition exceeds the limit or target value, the risk management sector should investigate how this condition arose and notify the executive division accordingly. The executive division coordinates with relevant divisions to find solutions to problems. The asset and liability management committee will evaluate solutions for effectiveness. If evaluation results are positive, the relevant division will apply the solutions.

10) Market risk measurement technique

Value at Risk (VaR)

The Bank uses the Risk Manager system and stress testing to measure its investment portfolio risk and uses several hypotheses about market conditions to measure market risk and expected maximum loss of holding positions. The Bank’s board of directors has set a VaR limit. The VaR is controlled daily by the market risk management sector and is a widely used risk measure of the risk of loss on a specific portfolio of financial assets. VaR is the statistical

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estimate of the potential loss of holding positions due to unfavorable market conditions. For the Bank, VaR refers to a fall in value of its holding position in a day, with a 99% confidence level. The Bank uses VaR and the Monte Carlo simulation method to derive quantitative measures for the market risks of the holding positions under normal conditions. The calculated result is used to test and monitor the validity of parameters and hypotheses periodically. However, the use of the VaR cannot prevent loss caused by huge unfavorable changes in market conditions. The Bank considers the expected maximum loss, target profit, and operating strategy in setting the VaR, which is proposed by the market risk management sector and approved by the board of directors. The Bank’s trading book VaR overview.


Average Maximum Minimum Exchange rate risk 14,583 76,349 4,466 Interest rate risk 65,604 118,476 12,867 Equity risk 6,457 15,334 1,054 Total VaR 70,608 129,168 19,724

Note 1: Estimated VaR: Time frame = 1 day, confidence level = 99%, decay factor = 0.94. Note 2: Historical data period: 2015.1.5 - 2015.12.31


Average Maximum Minimum Exchange rate risk 8,971 29,348 3,536 Interest rate risk 17,042 30,221 7,621 Equity risk 5,079 7,162 1,929 Total VaR 20,717 35,002 9,879


11) Exchange rate risks

Exchange rate risks of holding net positions in foreign currencies are shown as below:

December 31, 2015

Foreign Currency

(In Thousands) Exchange Rate Converted to NTD Financial assets

Monetary items

USD $ 6,498,390 33.06586 $ 214,874,850 CNY 15,311,262 5.03243 77,052,854

Nonmonetary items USD 704,022 33.06586 23,279,093

Financial liabilities Monetary items

USD 8,218,442 33.06586 271,749,845 CNY 17,107,005 5.03243 86,089,805

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December 31, 2014

Foreign Currency


Monetary items

USD $ 8,807,278 31.71727 $ 279,342,812 CNY 20,727,535 5.1049 105,811,993



USD 8,673,549 31.71727 275,101,303 CNY 19,365,161 5.1049 98,857,210

12) Compliance with the Regulations Governing the Preparation of Financial Reports by Public Banks

a) Interest rate sensitivity information (New Taiwan dollars)

December 31, 2015

Items 1 to 90 Days 91 to 180 Days 181 Days to 1 Year

Over 1 Year Total

Interest rate-sensitive assets $ 802,947,676 $ 33,999,193 $ 58,639,962 $ 124,172,322 $1,019,759,153 Interest rate-sensitive liabilities 317,284,299 425,188,107 95,172,745 47,332,660 884,977,811 Interest rate-sensitive gap 485,663,377 (391,188,914) (36,532,783) 76,839,662 134,781,342 Net worth 109,993,755 Ratio of interest rate-sensitive assets to liabilities (%) 115.23% Ratio of interest rate-sensitive gap to net worth (%) 122.54%

December 31, 2014

Items 1 to 90 Days 91 to 180 Days 181 Days to 1 Year

Over 1 Year Total

Interest rate-sensitive assets $ 774,388,594 $ 7,178,344 $ 39,894,851 $ 106,724,929 $ 928,186,718 Interest rate-sensitive liabilities 307,718,512 416,496,375 75,421,867 47,522,248 847,159,002 Interest rate-sensitive gap 466,670,082 (409,318,031) (35,527,016) 59,202,681 81,027,716 Net worth 99,320,822 Ratio of interest rate-sensitive assets to liabilities (%) 109.56% Ratio of interest rate-sensitive gap to net worth (%) 81.58%

Note 1: The above amounts include only New Taiwan dollars held by the Bank, and exclude contingent assets and

contingent liabilities. Note 2: Interest rate-sensitive assets and liabilities mean the revenues or costs of interest-earning assets and

interest-bearing liabilities are affected by interest rate changes. Note 3: Interest rate-sensitivity gap = Interest rate-sensitive assets - Interest rate-sensitive liabilities. Note 4: Ratio of interest rate-sensitive assets to liabilities = Interest rate-sensitive assets/Interest rate-sensitive liabilities

(in New Taiwan dollars).

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b) Interest rate sensitivity information (U.S. dollars)

December 31, 2015

Items 1 to 90 Days 91 to 180 Days 181 Days to 1 Year Over 1 Year Total

Interest rate-sensitive assets $ 5,138,228 $ 423,935 $ 121,685 $ 243,925 $ 5,927,773 Interest rate-sensitive liabilities 2,913,810 4,051,006 502,418 27,790 7,495,024 Interest rate-sensitive gap 2,224,418 (3,627,071) (380,733) 216,135 (1,567,251) Net worth (21,138) Ratio of interest rate-sensitive assets to liabilities (%) 79.09% Ratio of interest rate-sensitive gap to net worth (%) (7,414.38%)

December 31, 2014


Interest rate-sensitive assets $ 6,524,081 $ 807,297 $ 362,979 $ 266,170 $ 7,960,527 Interest rate-sensitive liabilities 3,201,944 4,086,851 384,051 26,622 7,699,468 Interest rate-sensitive gap 3,322,137 (3,279,554) (21,072) 239,548 261,059 Net worth 109,431 Ratio of interest rate-sensitive assets to liabilities (%) 103.39% Ratio of interest rate-sensitive gap to net worth (%) 238.56%

Note 1: The above amounts include only USD held by the Bank and exclude contingent assets and contingent liabilities. Note 2: Interest rate-sensitive assets and liabilities mean the revenues or costs of interest-earnings assets and

interest-bearing liabilities are affected by interest-rate changes. Note 3: Interest rate-sensitive gap = Interest rate-sensitive assets - Interest rate-sensitive liabilities. Note 4: Ratio of interest rate-sensitive assets to liabilities = Interest rate-sensitive assets/Interest rate-sensitive liabilities

(in U.S. dollars).

13) Transfers of financial assets

The Bank’s financial assets that had been transferred but did not qualify for derecognition were mainly securities sold under agreement to repurchase. The transaction counterparties acquired the contractual rights to receive the cash flows on the transferred financial assets and the Bank retained the liability to repurchase the transferred financial assets at fixed price in the future period. The Bank may not use, sell, or pledge these transferred financial assets within the validity period of the transaction. In addition, since the Bank still bore the interest rate risk and credit risk on the transferred financial assets, the Bank could not derecognize them. The analysis of financial assets and related liabilities that did not completely meet the derecognition condition is shown in the following table:

Category of Financial Asset

December 31, 2015 Transferred

Financial Assets - Book

Value

Related Financial

Liabilities - Book Value

Transferred Financial

Assets - Fair Value

Related Financial

Liabilities - Fair Value

Net Position - Fair Value

Transactions under agreements to repurchase Available-for-sale financial assets $ 604,802 $ 600,000 $ 604,802 $ 600,000 $ 4,802 Held-to-maturity financial assets 3,102,583 3,100,000 3,130,012 3,100,000 30,012

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Value

Related Financial



Assets - Fair Value

Related Financial



Transactions under agreements to repurchase Available-for-sale financial assets $ 5,030,716 $ 5,000,000 $ 5,030,716 $ 5,000,000 $ 30,716

14) Offsetting of financial assets and financial liabilities

The Bank did not hold financial instruments covered by Section 42 of the IAS 32 “Financial Instruments: Presentation” endorsed by the Financial Supervisory Commission; thus, it made an offset of financial assets and liabilities and reported the net amount in the balance sheet. The Bank engages in transactions on the following financial assets and liabilities that are not subject to balance sheet offsetting based on IAS 32 but are under master netting arrangements or similar agreements: Global master repurchase agreements, global securities lending agreements and similar repurchasing agreements as well as reverse-repurchasing agreements. These agreements allow both the Bank and its counterparties to opt for the net settlement of financial assets and financial liabilities. If one party defaults, the other one may choose net settlement. The netting information of financial assets and financial liabilities is set out below:

December 31, 2015

Recognized

Netted Financial Liabilities

Recognized on Recognized Related Amount Not Netted on

the Balance Sheet

Financial Assets

Financial Assets - Gross

Amount

the Balance Sheet - Gross

Amount

Financial Assets - Net

Amount

Financial Instruments

(Note) Cash Received as Collaterals Net Amount

Derivative

instruments $ 24,259,003 $ - $ 24,259,003 $ 14,727,760 $ 362,704 $ 9,168,539 Securities purchased

under agreements to resell 4,294,597 - 4,294,597 4,294,597 - -

$ 28,553,600 $ - $ 28,553,600 $ 19,022,357 $ 362,704 $ 9,168,539

Recognized

Netted Financial

Assets Recognized on Recognized

Related Amount Not Netted on the Balance Sheet

Financial Liabilities

Financial Liabilities -

Gross Amount


Amount

Financial Liabilities - Net Amount


Cash Collaterals

Pledged Net Amount Derivative

instruments $ 26,794,825 $ - $ 26,794,825 $ 16,571,391 $ 3,199,615 $ 7,023,819 Securities sold

under agreements to repurchase 5,174,182 - 5,174,182 5,174,182 - -

$ 31,969,007 $ - $ 31,969,007 $ 21,745,573 $ 3,199,615 $ 7,023,819

Note: Including netting settlement agreement and non-cash financial collaterals.

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December 31, 2014

Recognized



the Balance Sheet

Financial Assets


Amount


Amount


Amount


(Note)

Cash Received as Collaterals Net Amount

Derivative

instruments $ 20,818,280 $ - $ 20,818,280 $ 8,108,104 $ 1,010,859 $ 11,699,317 Securities

purchased under agreements to resell 12,894,149 - 12,894,149 12,894,149 - -

$ 33,712,429 $ - $ 33,712,429 $ 21,002,253 $ 1,010,859 $ 11,699,317

Recognized Financial

Netted Financial




Liabilities - Gross

Amount


Amount



Cash Collaterals




$ 28,681,384 $ - $ 28,681,384 $ 15,187,192 $ 4,814,847 $ 8,679,345


46. CAPITAL MANAGEMENT

a. Overview

The Bank’s capital management goals are as follows: As a basic target, the Bank’s eligible capital should be sufficient to meet their operation need, and higher than minimum requirements of the capital adequacy ratio. Eligible capital and legal capital are calculated under the regulations announced by the authority. The Bank should have adequacy capital to bear the risks, measure capital demand according to risk combination and risk characteristics, fulfill the optimization of resource and capital allocation by risk management.

b. Capital management procedure

The Bank’s capital adequacy ratio should meet the regulations announced by the authority. Also, the Bank should maintain capital adequacy ratio by considering the Bank’s business scale, major operating strategy, risk condition, eligible capital structure, and future capital increase plan, etc. The Bank reported to the authority regularly. Overseas subsidiaries’ capital management is in accordance with local regulations.

The Bank’s capital maintenance is in accordance with “Regulations Governing the Capital Adequacy and Capital Category of Banks”, etc., and is managed by the Bank’s risk management and accounting divisions.

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c. Statement of capital adequacy

Year Analysis Items

December 31 2015 2014

Standalone Consolidation Standalone Consolidation

Eligible capital

Ordinary shares equity $ 92,678,117 $100,817,213 $ 81,825,690 $ 91,108,497 Other Tier 1 capital - 1,809,618 - - Tier 2 capital 14,365,116 26,526,087 20,581,520 31,995,842 Eligible capital 107,043,233 129,152,918 102,407,210 123,104,339

Risk-weighted assets

Credit risk

Standardized approach 820,893,441 879,195,881 811,352,567 860,205,273 Internal rating - based

approach - - - -

Securitization - 753,950 - -

Operational risk

Basic indicator approach 48,348,781 51,208,004 47,477,488 49,866,188

Standardized approach/alternative standardized approach

- - - -

Advanced measurement approach - - - -

Market risk Standardized approach 25,993,720 28,000,257 20,230,650 23,718,500 Internal model

approach - - - -

Total risk-weighted assets 895,235,942 959,158,092 879,060,705 933,789,961 Capital adequacy ratio 11.96% 13.47% 11.65% 13.18% Ordinary shares equity risk - based capital ratio 10.35% 10.51% 9.31% 9.76% Tier 1 risk - based capital ratio 10.35% 10.70% 9.31% 9.76% Leverage ratio 6.27% 6.59% 4.54% 4.95%

Note 1: These tables were filled according to “Regulations Governing the Capital Adequacy Ratio of Banks” and related

calculation tables. Note 2: The Bank shall disclose the capital adequacy ratio for the current and previous period in annual financial reports.

For semiannual financial report, the Bank shall disclose the capital adequacy ratio for the current period, previous period, and previous year end.

Note 3: The formula is as follows:

1) Eligible capital = Common shares equity + Other Tier 1 capital + Tier 2 capital. 2) Total risk - weighted assets = Risk-weighted assets for credit risk + (Capital requirements for operational risk +

Capital requirement for market risk) x 12.5. 3) Ratio of capital adequacy = Eligible capital/Total risk - weighted assets. 4) Common shares equity risk - based capital ratio = Common shares equity/Total risk - weighted assets. 5) Tier 1 risk - based capital ratio = (Common shares equity + Other Tier 1 capital)/Total risk - weighted assets. 6) Leverage ratio = Tier 1 capital/Total exposure risk.

Note 4: Based on the Financial Supervisory Commission’s Statement No. 09900146911, gains from the sale of idle assets

should not be included in Bank SinoPac’s capital adequacy ratio calculation.

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47. RECLASSIFICATION Financial assets have been reclassified on September 25, 2013. The fair value on the reclassification day were as follows:

Before

Reclassification After

Reclassification Available-for-sale securities $ 10,164,016 $ - Held-to-maturity securities - 10,164,016 $ 10,164,016 $ 10,164,016 The effective interest rate of reclassified financial assets on the reclassification day was between 0.9795% and 2.0696%, and the estimated recoverable cash flow was $10,879,405. The book value and fair value of financial assets reclassified:

December 31 2015 2014 Held-to-maturity securities Book value $ 10,066,306 $ 10,109,702 Fair value 10,231,384 10,174,314 The gains recorded for the reclassified financial assets (excluding those that had been derecognized) for the years ended December 31, 2015 and 2014 and the pro forma gains assuming no reclassifications had been made were as follows:

For the Year Ended December 31 2015 2014 Held-to-maturity securities Recognized in profit (included in interest revenue) $ 111,887 $ 112,326 Assumed equity adjustment without such reclassification 178,706 72,252

48. CROSS-SELLING INFORMATION

For the years ended December 31, 2015 and 2014, the Bank charged SinoPac Securities for $1,913 and $2,378, respectively, as marketing and opening accounts. The rental fee the Bank charged SinoPac Securities for the years ended December 31, 2015 and 2014 were $3,462 and $3,526, respectively. The rental fee the Bank paid to SinoPac Securities were all $678 for the years ended December 31, 2015 and 2014. The Bank paid to SinoPac Securities $3,519 and $4,076 for the years ended December 31, 2015 and 2014 for bonus as part of the cross-selling agreement. For other transactions between SPH and its subsidiaries, please refer to Note 41.

49. PROFITABILITY

Items December 31 2015 2014

Return on total assets Before income tax 0.74% 0.93% After income tax 0.66% 0.84%

Return on net worth Before income tax 9.89% 13.54% After income tax 8.79% 12.18%

Profit margin 39.47% 38.81% Note 1: Return on total assets = Income before (after) income tax/Average total assets.

Note 2: Return on net worth = Income before (after) income tax/Average net worth.

Note 3: Profit margin = Income after income tax/Total net revenues.

Note 4: Income before (after) income tax represents income for the years ended December 31, 2015 and 2014.

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144

50. TRUST BUSINESS UNDER THE TRUST LAW a. Balance sheets, income statement and trust properties of trust accounts

These statements were managed by the Bank’s Trust Department. However, these items were not included in the Bank’s financial statements.

Balance Sheets of Trust Accounts December 31, 2015 and 2014

December 31, 2015

Other Trust

Business

Financial Assets and Real Estate

Trust Plan Total Trust assets Bank deposits $ 4,083,737 $ - $ 4,083,737 Bonds 4,437,560 - 4,437,560 Stocks 11,623,025 - 11,623,025 Funds 120,728,823 - 120,728,823 Securities lent 1,878,648 - 1,878,648 Receivables 35,035 - 35,035 Prepayments 13,076 - 13,076 Real estate

Land 6,334,957 - 6,334,957 Buildings 96,266 - 96,266 Construction in progress 814,169 - 814,169

Securities under custody 119,082,668 - 119,082,668 Total trust assets $ 269,127,964 $ - $ 269,127,964 Trust liabilities Payables $ 3,339 $ - $ 3,339 Payable on securities under custody 119,082,668 - 119,082,668 Trust capital 150,196,328 - 150,196,328 Reserves and cumulative earnings

Net loss (2,313,076) - (2,313,076) Cumulative earnings 2,844,488 - 2,844,488 Deferred amount (685,783) - (685,783)

Total trust liabilities $ 269,127,964 $ - $ 269,127,964

December 31, 2014

Other Trust

Business


Trust Plan Total Trust assets Bank deposits $ 4,444,321 $ - $ 4,444,321 Bonds 3,198,721 - 3,198,721 Stocks 13,133,923 - 13,133,923 Funds 125,610,804 - 125,610,804 Securities lent 1,428,662 - 1,428,662 Receivables 23,107 - 23,107 Prepayments 12,742 - 12,742 Real estate

Land 6,235,568 - 6,235,568 Buildings 109,261 - 109,261 Construction in progress 2,626,574 - 2,626,574

Securities under custody 83,133,775 - 83,133,775 Total trust assets $ 239,957,458 $ - $ 239,957,458

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145

December 31, 2014

Other Trust

Business


Trust Plan Total Trust liabilities Payables $ 3,191 $ - $ 3,191 Payable on securities under custody 83,133,775 - 83,133,775 Trust capital 153,976,004 - 153,976,004 Reserves and cumulative earnings

Net income 1,602,062 - 1,602,062 Cumulative earnings 1,688,248 - 1,688,248 Deferred amount (445,822) - (445,822)

Total trust liabilities $ 239,957,458 $ - $ 239,957,458

Trust Properties of Trust Accounts

December 31, 2015 and 2014

December 31 Investment Portfolio 2015 2014 Bank deposits $ 4,083,737 $ 4,444,321 Bonds 4,437,560 3,198,721 Stocks 11,623,025 13,133,923 Funds 120,728,823 125,610,804 Securities lent 1,878,648 1,428,662 Real estate

Land 6,334,957 6,235,568 Buildings 96,266 109,261 Construction in progress 814,169 2,626,574

Securities under custody 119,082,668 83,133,775 $ 269,079,853 $ 239,921,609

Income Statements of Trust Account

Years Ended December 31, 2015 and 2014

Year Ended December 31, 2015

Other Trust

Business


Trust Plan Total Trust income

Interest income $ 19,654 $ - $ 19,654 Borrowed Securities income 32,743 - 32,743 Cash dividends 559,212 - 559,212 Gains from beneficial certificates 3,007 - 3,007 Realized investment income 66,801 - 66,801 Unrealized investment income - - - Others 2,438 - 2,438 Total trust income 683,855 - 683,855

Trust expense Trust administrative expenses 8,862 - 8,862 Tax expenses 9 - 9 Realized investment loss 31,548 - 31,548 Unrealized investment loss 2,953,818 - 2,953,818 Others 2,694 - 2,694 Total trust expense 2,996,931 - 2,996,931

Income before income tax (2,313,076) - (2,313,076) Income tax expense - - - Net income $ (2,313,076) $ - $ (2,313,076)

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146

Year Ended December 31, 2014

Other Trust

Business


Trust Plan Total Trust income

Interest income $ 19,564 $ - $ 19,564 Borrowed Securities income 45,703 - 45,703 Cash dividends 464,605 - 464,605 Gains from beneficial certificates 4,162 - 4,162 Realized investment income 99,165 - 99,165 Unrealized investment income 2,007,434 - 2,007,434 Total trust income 2,640,633 - 2,640,633

Trust expense Trust administrative expenses 11,357 - 11,357 Tax expenses 6 - 6 Realized investment loss 21,916 - 21,916 Unrealized investment loss 1,004,020 - 1,004,020 Others 1,272 - 1,272 Total trust expense 1,038,571 - 1,038,571

Income before income tax 1,602,062 - 1,602,062 Income tax expense - - - Net income $ 1,602,062 $ - $ 1,602,062

b. The operations of the Bank’s Trust Department consist of planning, managing and operating of trust business and affiliated

business. These operations are governed by the Banking Law and the Trust Law. c. IBT, a trustee acting in behalf of its corporate customers, purchased CDOs (collateralized debt obligations) issued by Lehman

Brothers for US$20 million in 2005. Later, a civil case was brought against the CDO issuer, custodians and bond holders (the Bank based on trust deed) by the insolvency administrator of Lehman Brothers Special Financing Inc. “Lehman Brothers”) before the United States Bankruptcy Court in New York. On November 4, 2014, the plaintiff, Lehman Brothers, signed a settlement agreement with the Bank, which paid US$7,500 as settlement. The plaintiff thus withdrew all litigation and claims against the Bank and no longer filed related lawsuits.

51. ADDITIONAL DISCLOSURES

a. Disclosures prepared in conformity with Regulations Governing the Preparation of Financial Reports by Public Banks 18:

No. Item Explanation 1 Marketable securities acquired and disposed at costs or prices of at least NT$300 million or 10% of

the issued capital None

2 Acquisition of individual real estates at costs of at least NT$300 million or 10% of the issued capital None 3 Disposal of individual real estates at prices of at least NT$300 million or 10% of the issued capital None 4 Allowance for service fee to related parties amounting to at least NT$5 million None 5 Receivables from related parties amounting to at least NT$300 million or 10% of the issued capital Table 1 6 Trading information - sale of nonperforming loans None 7 Financial asset securitization None 8 Other significant transactions which may affect the decisions of financial report users None

b. Information related to subsidiary:

No. Item Explanation 1 Financing provided None

(Note) 2 Endorsements/guarantees provided None

(Note) 3 Marketable securities held Table 3

(Note) 4 Acquisition and disposal of marketable securities at costs or prices of at least NT$300 million or 10%

of the issued capital None

5 Derivative transactions of the subsidiary None 6 Acquisition of individual real estates at costs of at least NT$300 million or 10% of the issued capital None

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147

No. Item Explanation 7 Disposal of individual real estates at prices of at least NT$300 million or 10% of the issued capital None 8 Allowance for service fee to related parties amounting to at least NT$5 million None 9 Receivables from related parties amounting to at least NT$300 million or 10% of the issued capital None

10 Trading information - sale of nonperforming loans Table 2 11 Financial asset securitization None 12 Other significant transactions which may affect the decisions of financial report users None

Note: Subsidiaries which belong to financial, insurance, securities industries and its main business registration include financing provided, endorsements/guarantees provided, acquisition and disposal of marketable securities do not need to disclose above information.

c. The related information and proportionate share in investees: Table 4. d. Information on investment in Mainland China: Table 5.

TABLE 1 BANK SINOPAC AND INVESTEES RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$300 MILLION OR 10% OF THE ISSUED CAPITAL DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars)

Company Name Related Party Relationship Ending

Balance Turnover

Rate

Overdue Amounts Received in Subsequent

Period

Allowance for

Bad Debts Amount Action Taken

Bank

SinoPac SinoPac Financial

Holdings Company Limited

The parent company of the Bank

$ 1,198,619 (Note)

- $ - - $ - $ -

Note: Most of receivables resulted from the use of the linked-tax system (recognized in current tax assets) and related parties.

TABLE 2 BANK SINOPAC AND INVESTEES TRADING INFORMATION - SALE OF NONPERFORMING LOANS FOR THE YEAR ENDED DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars)

Date Counter-parties Loans Carrying Amount (Note)

Selling Price (Note)

Gain or (Loss) on Disposal

Attachment Relation

FENB February 23, 2015 Cottonwood Cajon

ES, LLC Secured commercial

loan $ - $ 140,256 $ 140,256 - None

Note: Carrying amount is original credit amount. Foreign-currency amounts were translated to New Taiwan dollars at the exchange

rate as of the balance sheet date.

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148

TABLE 3 BANK SINOPAC AND INVESTEES MARKETABLE SECURITIES HELD DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars or Shares)

Name of Holding

Company

Type and Issuer of

Marketable Securities

Relationship Financial Statement Account

December 31, 2015

Note Shares/Units/ Face Amount

Carrying Amount (Note 1)

Percentage of

Ownership

Market Value or Net Asset

Value (Note 1)

SinoPac Stock

Bancorp GS Series A - Financial assets at FVTPL

58.55 $ 38,432 - $ 38,432 Note 2

GS Series C - Financial assets at FVTPL

24.41 16,938 - 16,938 Note 2

GS Series D - Financial assets at FVTPL

117.04 78,949 - 78,949 Note 2

BAC Series E - Financial assets at FVTPL

200.00 148,069 - 148,069 Note 2

HSBC Series F - Financial assets at FVTPL

25.30 18,469 - 18,469 Note 2

HSBC Series G - Financial assets at FVTPL

374.70 297,233 - 297,233 Note 2

SinoPac Stock

Capital Limited

MeiTa Industrial Co., Ltd.

- Unquoted equity investments

212 14,188 0.49 14,188 Note 2

(H.K.) Fund SinoPac China

IPO Fund - Available-for-sale

financial assets 3,001 151,413 6.95 151,413 Note 3

China Enterprise Capital Ltd.

- Available-for-sale financial assets

0.02 20,055 0.85 20,055 Note 3

SinoPac Bond

Property Insurance Agent Co., Ltd.

Government bond 88-3

- Held-to-maturity financial assets

600 613 - 685 Pledge

SinoPac Life Bond

Insurance Agent Co., Ltd.

Government bond 88-3

- Held-to-maturity financial assets

600 613 - 685 Pledge

Note 1: Foreign-currency amounts were translated to New Taiwan dollars at the exchange rate as of the balance sheet date. Note 2: Fair values or net asset values were based on the carrying amounts. Note 3: Fair values were based on the closing prices of the underlying assets of the beneficial certificates as of December 31, 2015.

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149

TABLE 4 BANK SINOPAC AND INVESTEES INFORMATION ON INVESTED ENTERPRISES FOR THE YEAR ENDED DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars or Shares)

Investee Company Location Main Businesses and Products

Percentage of

Ownership

Carrying Amount

Investment Gains

Consolidated Investment

Note Shares (In

Thousands)

Imitated Shares

Total

Shares Percentage

of Ownership

Financial related enterprise Bank SinoPac (China) Ltd. China Commercial Bank 100.00 $10,948,098 $ 62,910 - - - 100.00 Subsidiary

and Note 1 SinoPac Bancorp United

States Holding company 100.00 9,339,102 349,294 68 - 68 100.00 Subsidiary

and Note 1 SinoPac Capital Limited (H.K.) Hong Kong Credit and investment service 100.00 1,902,064 38,525 229,998 - 229,998 100.00 Subsidiary

and Note 1 SinoPac Life Insurance Agent Co., Ltd.

Taiwan Life insurance agent 100.00 1,098,746 1,092,381 300 - 300 100.00 Subsidiary

SinoPac Property Insurance Agent Co., Ltd.

Taiwan Property insurance agent 100.00 37,648 31,381 300 - 300 100.00 Subsidiary

Global Securities Finance Corporation

Taiwan Securities financing 2.63 81,499 2,635 11,494 - 11,494 2.87 Note 2

Taipei Foreign Exchange Inc. Taiwan Foreign exchange market maker

3.43 6,800 2,720 680 - 680 3.43 Note 2

Taiwan Futures Exchange Taiwan Futures exchange and settlement

1.07 21,490 6,073 6,193 - 6,193 2.08 Note 2

Fuh Hwa Securities Investment Trust Co., Ltd.

Taiwan Securities investment trust and consultant

4.63 15,000 15,000 1,500 - 1,500 4.63 Note 2

Financial Information Service Co., Ltd.

Taiwan Planning and developing the information system of across banking institution and managing the information web system

2.28 91,000 26,617 11,876 - 11,876 2.28 Note 2

Taiwan Asset Management Corporation

Taiwan Evaluating, auctioning, and managing for financial institutions’ loan

0.28 37,500 3,042 3,750 - 3,750 0.28 Note 2

Taiwan Financial Asset Service Co.

Taiwan Auction 5.88 100,000 - 10,000 - 10,000 5.88 Note 2

Sunny Asset Management Corp. Taiwan Purchasing for financial institutions’ loan assets

1.42 164 93 85 - 85 1.42 Note 2

Taiwan Depository and Clearing Co.

Taiwan Computerizing book-entry operation for securities

0.08 4,639 418 3,164 - 3,164 0.92 Note 2

Taiwan Mobile Payment Corporation

Taiwan Promoting E-commerce and developing E-billing

1.00 6,000 - 600 - 600 1.00 Note 2

Nonfinancial related enterprise Taiwan Television Enterprise, Ltd.

Taiwan Wireless television Company 4.84 114,554 - 13,889 - 13,889 4.95 Note 2

Victor Taichung Machinery Works Co., Ltd.

Taiwan Manufacturer and seller of tool machine, plastic machine and other precise equipment

0.14 - 157 157 - 157 0.14 Note 2

Note 1: Foreign-currency amounts were translated at the exchange rate as of the balance sheet date, except for

foreign-currency-denominated income and expenses, which were translated to New Taiwan dollars at the average exchange rate for the year ended December 31, 2015.

Note 2: Investment gains are dividend income. Note 3: Above shares are in thousands of shares.

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150

TABLE 5 BANK SINOPAC INFORMATION ON INVESTMENT IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars)

Investee Company

Main Businesses

and Products

Total Amount of

Paid-in Capital

Method of Investment

Accumulated Outflow of Investment

from Taiwan as of January

1, 2015

Investment Flows Accumulated Outflow of

Investment from Taiwan as of December 31,

2015

Earnings (Losses) of

Investee (Notes 2 and

3)

Percentage of

Ownership

Equity in the

Earnings (Losses)

(Notes 2 and 3)

Carrying Value (Notes

2 and 3)

Accumulated Inward

Remittance of Earnings

Outflow Inflow

Bank SinoPac

(China) Ltd. Commercial

Bank $ 10,709,070 Investment in Mainland

China directly $ 10,709,070 $ - $ - $ 10,709,070 $ 66,667 100 $ 62,910 $ 10,948,098 $ -

Accumulated Investment in Mainland

China as of December 31, 2015 (Notes 1 and 4)

Investment Amounts Authorized by Investment Commission, MOEA Limit on Investment

$10,709,070 $10,709,070 $65,470,784

Note 1: The accumulated investment amounts in Mainland China as of December 31, 2015 are US$323,871 thousand and had been

authorized by the Investment Commission, MOEA are US$323,871 thousand. Note 2: Earnings of investee, the gain on investment recognized and the value of investment presented for the year ended December

31, 2015 have been reviewed independent certified public accountants. Note 3: Foreign currencies are translated to N.T. dollars with current rate of the date of balance sheet, only the gains or losses

investments are translated with current period average rate. Note 4: Information related to investment please refer to Note 14.

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Financial Reports

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151

III. Auditors' Report - Consolidated

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The Bank and its subsidiaries required to be included in the consolidated financial statements

of affiliates in accordance with the "Criteria Governing Preparation of Affiliation Reports,

Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises"

for the year ended December 31, 2015 are all the same as the Companies required to be included

in the consolidated financial statements of parent and subsidiary companies as provided in

International Financial Reporting Standard 10 "Consolidated Financial Statements". Relevant

information that should be disclosed in the consolidated financial statements of affiliates has

all been disclosed in the consolidated financial statements of parent and subsidiary companies.

Hence, we do not prepare a separate set of consolidated financial statements of affiliates.

Very truly yours,

BANK SINOPAC

March 16, 2016

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Financial Reports

INDEPENDENT AUDITORS' REPORT

Notice to Readers

The Board of Directors and StockholdersBank SinoPac

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

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2015 and 2014, and their consolidated financial performance and their consolidated cash flows for the years then ended, in conformity with Regulations Governing the Preparation of Financial Reports by Public Banks, the guidelines issued by the authority, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed by the Financial Supervisory Commission of the Republic of China.

We have also audited the parent company only financial statements of Bank SinoPac as of and for the years ended December 31, 2015 and 2014 on which we have issued an unqualified report.

March 16, 2016

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

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

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11047

63

247--4---2

37

100

-

33321

57

43

6

37

-

--

3--

(1)22

39

INTEREST REVENUE

INTEREST EXPENSE

NET INTEREST (Notes 4, 32 and 42)

NET REVENUES OTHER THAN INTEREST (Note 4)Commission and fee revenues, net (Notes 33 and 42)Gains on financial assets and liabilities at fair value through profit or loss (Notes 34 and 42)Realized gains on available-for-sale financial assets (Note 35)Realized losses on held-to-maturity financial assets (Note 14)Foreign exchange gains, netReversal of impairment losses on assets (Notes 5 and 36)Share of loss of associates (Notes 4 and 15)Other revenue (Note 37)Other noninterest net revenues (Notes 37 and 42)

Total net revenues other than interest

TOTAL NET REVENUES

(REVERSAL OF) ALLOWANCE FOR DOUBTFUL ACCOUNTS AND GUARANTEES (Notes 4, 6, 7, 11, 12, 16 and 20)

OPERATING EXPENSESEmployee benefits (Notes 4, 5, 28, 31 and 38)Depreciation and amortization (Notes 4 and 39)Others (Notes 40 and 42)

Total operating expenses

INCOME BEFORE INCOME TAX

INCOME TAX EXPENSE (Notes 4, 5 and 30)

NET INCOME

OTHER COMPREHENSIVE (LOSS) INCOMEItems that will not be reclassified subsequently to profit or loss:

Remeasurement of defined benefit plansIncome tax relating to items that will not be reclassified subsequently to profit or loss (Notes 4, 5 and 30)

Items that will not be reclassified subsequently to profit or lossItems that may be reclassified subsequently to profit or loss:

Exchange differences on translating foreign operationsUnrealized (losses) gains on available-for-sale financial assetsCash flow hedgesIncome tax relating to items that may be reclassified subsequently to profit or loss (Notes 4, 5 and 30)

Items that may be reclassified subsequently to profit or lossOther comprehensive income for the year, net of income tax

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

EARNINGS PER SHARE (NEW TAIWAN DOLLARS) (Note 41)Basic

Amount Amount％％

PercentageIncrease

(Decrease)

$27,364,130

11,797,152

15,566,978

6,020,9031,804,493

9,645 -

860,64856,063

(4,961) -

478,137

9,224,928

24,791,906 (92,164)

8,207,556696,5425,281,939

14,186,037

10,698,033

1,523,170

9,174,863

(156,171)

26,549(129,622)

779,666(107,887)

-

(126,610)545,169415,547

$9,590,410

$1.23

$ 28,542,001

12,053,075

16,488,926

6,004,3612,927,000

33,167( 11,568)

910,930233,675

-3,786,854

723,844

14,608,263

31,097,189

3,965,608

8,317,107

673,0535,086,723

14,076,883

13,054,698

1,671,878

11,382,820

9,136

( 1,553) 7,583

714,322112,544

3,789 ( 155,243)

675,412682,995

$ 12,065,815

$ 1.53

( 4) ( 2) ( 6)

-( 38)( 71)

100( 6)( 76)

-( 100)( 34) ( 37) ( 20) ( 102) ( 1)

34

1

( 18)

( 9) ( 19)

(1,809)

1,810(1,809)

9( 196)( 100)

( 18)( 19)( 39)

( 21)

92

39

53

1910

--31-

122

47

100

13

272

16

45

42

5

37

-

--

2--

-22

39

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

2015



％

BANK SINOPAC AND SUBSIDIARIES

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

154

Financial Reports



December 31, 2015


$ 34,215,330

61,147,642

25,969,402

-

118,269,246

1,290,258

808,898,242

59,755,506

214,417,922

-

16,029,799

11,002,439

-

1,981,735

2,602,487

1,484,973

$ 1,357,064,981

$ 41,312,348

90,158,380

48,002,228

12,894,149

140,750,572

1,190,442

791,800,940

207,760,712

46,114,048

-

13,532,602

10,872,814

-

2,009,903

2,996,218

6,222,991

$ 1,415,618,347

$26,295,169

92,897,887

67,363,738

4,294,597

76,056,992

1,345,512

874,744,125

195,687,562

69,118,675

38,633

13,423,377

9,470,124

1,175,425

1,958,233

2,648,911

4,413,801

$1,440,932,761

3

4

2

-

9

-

60

4

16

-

1

1

-

-

-

-

100

3

6

3

1

10

-

56

15

3

-

1

1

-

-

-

1

100

2

6

5

-

5

-

61

14

5

-

1

1

-

-

-

-

100

ASSETS

CASH AND CASH EQUIVALENTS, NET (Notes 4 and 6)

DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS, NET (Note 7)

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 3, 4, 5, 8 and 42)

SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL (Notes 4 and 10)

RECEIVABLES, NET (Notes 4, 5, 11 and 42)

CURRENT TAX ASSETS (Notes 4, 30 and 42)

DISCOUNTS AND LOANS, NET (Notes 4, 5, 12, 42 and 43)

AVAILABLE-FOR-SALE FINANCIAL ASSETS (Notes 4, 5, 13, 14, 43 and 48)

HELD-TO-MATURITY FINANCIAL ASSETS, NET (Notes 4, 14, 43 and 48)

INVESTMENT ACCOUNTED FOR USING THE EQUITY METHOD, NET (Notes 4 and 15)

OTHER FINANCIAL ASSETS, NET (Notes 4, 5, 16, 42 and 43)

PROPERTY AND EQUIPMENT, NET (Notes 4, 17, 18, 19 and 42)

INVESTMENT PROPERTY, NET (Notes 4, 17 and 18)

INTANGIBLE ASSETS, NET (Notes 4, 5 and 19)

DEFERRED TAX ASSETS (Notes 3, 4, 5 and 30)

OTHER ASSETS, NET (Notes 4, 20 and 42)

TOTAL


(In Thousands of New Taiwan Dollars)CONSOLIDATED BALANCE SHEETS


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155

LIABILITIES AND EQUITY

DEPOSITS FROM THE CENTRAL BANK AND BANKS (Note 21)

FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 3, 4, 5, 8 and 42)

DERIVATIVE FINANCIAL LIABILITIES FOR HEDGING (Notes 4 and 9)

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (Notes 4, 10, 13, 14, 22 and 42)

PAYABLES (Notes 23, 28, 31 and 42)

CURRENT TAX LIABILITIES (Notes 4, 30 and 42)

DEPOSITS AND REMITTANCES (Notes 24 and 42)

BANK DEBENTURES (Notes 4 and 25)

OTHER FINANCIAL LIABILITIES (Note 26)

PROVISIONS (Notes 3, 4, 5, 27 and 28)

DEFERRED TAX LIABILITIES (Notes 4, 5 and 30)

OTHER LIABILITIES (Notes 29 and 42)

Total liabilities

EQUITYShare capital

Common sharesCapital surplus

Additional paid-in capital in excess of parCapital surplus from business combinationOthers

Total capital surplusRetained earnings

Legal reserveSpecial reserveUnappropriated earnings

Total retained earningsOther equity

Total equity

TOTAL

$ 87,589,163

11,831,968

6,095

451,771

17,233,408

855,547

1,092,091,840

45,087,336

7,943,869

3,070,105

897,440

2,612,201

1,269,670,743

59,616,160

2,335,2058,076,524

1,73310,413,462

7,616,601367,188

9,508,16017,491,949

( 127,333)

87,394,238

$ 1,357,064,981

$ 69,606,337

21,598,935

32,887

7,103,953

18,676,313

1,142,479

1,125,438,187

48,565,756

16,149,732

3,040,121

975,906

3,760,177

1,316,090,783

66,374,857

2,335,2058,076,524

69,24410,480,973

10,497,474393,452

11,232,72922,123,655

548,079

99,527,564

$ 1,415,618,347

$61,329,958

27,054,519

42,569

5,174,182

15,733,809

186,789 1,158,925,389

43,428,046

13,954,641

3,021,233

1,143,478

1,820,174

1,331,814,787

74,463,604

2,335,2058,076,52469,244

10,480,973

13,903,936266,1208,910,09323,080,1491,093,248

109,117,974

$1,440,932,761

7

1

-

-

1

-

81

3

1

-

-

-

94

4

-1-1

--11-

6

100

5

2

-

1

1

-

80

3

1

-

-

-

93

5

-1-1

--11-

7

100

4

2

-

-

1

-

813

1

-

-

-

92

5

-1-1

1-12-

8

100


December 31, 2015



156

Financial Reports

BALANCE AT JANUARY 1, 2014

Effect of retrospective application and retrospective restatement

BALANCE AT JANUARY 1, 2014 AS RESTATED


Legal reserve

Special reserve


Share-based payment transactions



income tax


BALANCE AT DECEMBER 31, 2014 AS RESTATED


Legal reserve

Reversal of special reserve




income tax


BALANCE AT DECEMBER 31, 2015

Capital Surplus (Notes 4 and 31)

Common Shares(Note 31) Unappropriated

Earnings Total

$ 59,616,160

-

59,616,160

-

-

6,758,697

-

-

-

-

66,374,857

-

-

8,088,747

-

-

-

$ 74,463,604

$ 10,413,462

-

10,413,462

-

-

-

67,511

-

-

-

10,480,973

-

-

-

-

-

-

$ 10,480,973

$ 7,616,601

-

7,616,601

2,880,873

-

-

-

-

-

-

10,497,474

3,406,462

-

-

-

-

-

$ 13,903,936

$ 367,188

-

367,188

-

26,264

-

-

-

-

-

393,452

-

( 127,332)

-

-

-

-

$ 266,120

$ 9,665,834

( 157,674)

9,508,160

( 2,880,873)

( 26,264)

( 6,758,697)

-

11,382,820

7,583

11,390,403

11,232,729

( 3,406,462)

127,332

( 8,088,747)

9,174,863

( 129,622)

9,045,241

$ 8,910,093

$ 17,649,623

( 157,674)

17,491,949

-

-

( 6,758,697)

-

11,382,820

7,583

11,390,403

22,123,655

-

-

(8,088,747)

9,174,863

( 129,622)

9,045,241

$ 23,080,149


Legal Reserve Special Reserve

Retained Earnings (Notes 3 and 31)


(In Thousands of New Taiwan Dollars)CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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157

Unrealized Gain (Loss) on Available-for-

sale Financial Assets (Notes 4 and 31)

Cash FlowHedges

(Notes 4 and 31)

$ 88,587

-

88,587

-

-

-

-

-

79,379

79,379

167,966

-

-

-

-

( 101,953)

( 101,953)

$ 66,013

Other Equity

Exchange Differences on Translating Foreign

Operations (Notes 4 and 31)

$( 212,775)

-

( 212,775)

-

-

-

-

-

592,888

592,888

380,113

-

-

-

-

647,122

647,122

$ 1,027,235

Total Total Equity

$( 127,333)

-

( 127,333)

-

-

-

-

-

675,412

675,412

548,079

-

-

-

-

545,169

545,169

$ 1,093,248

$( 3,145)

-

( 3,145)

-

-

-

-

-

3,145

3,145

-

-

-

-

-

-

-

$ -

$ 87,551,912

( 157,674)

87,394,238

-

-

-

67,511

11,382,820

682,995

12,065,815

99,527,564

-

-

-

9,174,863

415,547

9,590,410

$ 109,117,974

158

Financial Reports

(Continued)

$ 13,054,698

481,420

191,633

5,240,387

12,053,075

( 28,542,001)

( 131,535)

114,258

9,112

67,511

-

( 52,897)

( 42,094)

1,518

( 199,122)

-

( 36,071)

6,842

( 5,041,775)

( 22,032,826)

( 22,549,143)

13,929,846

( 17,982,826)

9,766,967

781,812

31,697,773

( 151,567)

( 9,365,005)

28,462,120

131,535

( 11,773,940)

( 1,428,359)

6,026,351

( 589,871,077)

441,939,911

-

( 1,622,867,177)

14,553

1,791,145,052

( 15,780)

104,902

91,997

-

( 450,141)

20152014


$10,698,033

476,687

219,855

579,188

11,797,152

(27,364,130)

(157,382)

(19,768)

12,941

-

4,961

(139,772)

(16,546)

-

(63,923)

7,860

-

-

(11,703,595)

(19,361,510)

62,777,029

(80,918,790)

(8,276,379)

5,455,584

(2,240,480)

32,105,528

(173,752)

(26,301,209)

28,161,061

157,382

(11,992,891)

(2,242,638)

(12,218,295)

(2,045,595,960)

2,057,392,660

(1,746,142)

(29,620,852)

-

6,127,464

(257,742)

204,211

-

(43,774)

(530,727)

CASH FLOWS FROM OPERATING ACTIVITIES


Adjustments for:

Depreciation expenses

Amortization expenses

Allowance for doubtful accounts

Interest expenses

Interest revenues

Dividend revenues

Net change in provisions for guarantee liabilities

Net change in other provisions

Share-based payment

Share of loss of associates

Gains on disposal or retirement of property and equipment

Gains on disposal of investments

Impairment loss on financial assets

Reversal of impairment loss on financial assets

Impairment loss on non-financial assets

Reversal of impairment loss on non-financial assets

Losses on disposal of collaterals assumed

Changes in operating assets and liabilities

Increase in due from the Central Bank and call loans to other banks

Increase in financial assets at fair value through profit or loss

Decrease (increase) in receivables

(Increase) decrease in discounts and loans

Decrease in deposits from the Central Bank and banks

Increase in financial liabilities at fair value through profit or loss

(Decrease) increase in payables

Increase in deposits and remittances

Decrease in provision for employee benefits

Net cash used in operations

Interest received

Dividend received

Interest paid

Income tax paid

Net cash (used in) generated from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of available-for-sale financial assets

Proceeds from disposal of available-for-sale financial assets

Acquisition of non-active market debt instruments

Acquisition of held-to-maturity financial assets

Proceeds from disposal of held-to-maturity financial assets

Proceeds from repayments of held-to-maturity financial assets

Acquisition of unquoted equity instruments

Proceeds from disposal of unquoted equity instruments

Proceeds from capital reduction of unquoted equity instruments

Acquisition of investment accounted for using the equity method

Acquisition of property and equipment


(In Thousands of New Taiwan Dollars)CONSOLIDATED STATEMENTS OF CASH FLOWS


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159


2015 2014

December 31

Cash and cash equivalents in consolidated balance sheets

Due from the Central Bank and call loans to other banks reclassified as cash and cash equivalents under

IAS 7 “Statement of Cash Flows”

Securities purchased under agreements to resell reclassified as cash and cash equivalents under IAS 7

“Statement of Cash Flows”

Cash and cash equivalents in consolidated statements of cash flows

$26,295,169

42,451,502

4,294,597

$73,041,268

$ 41,312,348

51,969,018

12,884,142

$ 106,165,508

Reconciliation of the amounts in the consolidated statements of cash flows with the equivalent items reported in the consolidated balance sheets as of December 31, 2015 and 2014:

Proceeds from disposal of property and equipment

Decrease (increase) in guarantee deposits

Proceeds from disposal of collaterals assumed

Decrease (increase) in securities purchased under agreement to resell

Increase in other financial assets

Increase in other assets

Net cash (used in) generated from investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Increase (decrease) in short-term borrowings

Bank debentures issued

Repayment of bank debentures on maturity

(Decrease) increase in securities sold under agreements to repurchase

(Decrease) increase in other financial liabilities

(Decrease) increase in other liabilities

Net cash (used in) generated from financing activities

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

$ 114,860

( 4,991,284)

117,191

( 10,007)

2,859,733

( 180,933)

18,001,800

( 323,492)

7,074,819

( 3,600,000)

6,652,182

8,529,355

1,150,276

19,483,140

83,846

43,595,137

62,570,371

$ 106,165,508

$349,455

1,803,565

-

10,007

2,042,930

65,231

(9,799,674)

148,796

2,060,000

(7,200,000)

(1,929,771)

(2,343,887)

(1,940,003)

(11,204,865)

98,594

(33,124,240)

106,165,508

$73,041,268

2014(Retrospective Application)


2015

160

1. ORGANIZATION

August 8, 1991 Bank SinoPac (the “Bank”) obtained government approval to incorporate. January 28, 1992 The Bank started operations. May 9, 2002 The Bank swap shares with SinoPac Securities Corporation and SinoPac Securities Co., Ltd. (the

“SPS”) to establish SinoPac Financial Holdings Company Limited (the “SPH”), a financial holding company, resulting in the Bank becoming an unlisted wholly owned subsidiary of SPH, the ultimate parent company of SPH.

December 26, 2005 SPH finished the merger with International Bank of Taipei Co., Ltd. (IBT), through a 100% share

swap. May 8, 2006 The boards of directors of IBT resolved to transfer credit card business and related assets and

liabilities to SinoPac Card Services Co., Ltd. (“SinoPac Card”). The transaction has been approved by the authorities on June 22, 2006 and the assets have been transferred at the book value of $5,171,080 on August 4, 2006.

November 13, 2006 The preliminary effective date of the share swap and merger. The Bank acquired the assets and

liabilities of IBT through a share swap at ratio of 1.175 shares of the Bank to swap for 1 share of IBT.

June 1, 2009 The Bank’s cash merger with SinoPac Card took effect, with this merger amounting to $3,873,675.

Under this merger, the Bank was the surviving entity. November 11, 2015 The Bank assumed all of the assets and liabilities of the Ho Chi Minh City Branch of Far East

National and renamed this branch Bank SinoPac, Ho Chi Minh City Branch. The transaction price was US$28,540 thousand.

The Bank’s ultimate parent and controller is SinoPac Holdings, which holds 100% common shares of the Bank. The functional currency of the Bank is the New Taiwan dollar. The financial statements are presented in New Taiwan dollars. For the information of consolidated entities, please refer to Note 4.

2. APPROVAL OF FINANCIAL STATEMENTS The consolidated financial statements were approved by the board of directors on March 16, 2016.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS a. Initial application of new accounting policies

Rule No. 1030010325 and 10310006010 issued by the Financial Supervisory Commission (FSC), stipulated that the Bank and its subsidiary (collectively, the “Group”) should apply the 2013 version of IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) endorsed by the FSC and the related amendments to the Regulations Governing the Preparation of Financial Reports by Public Bank since 2015. Except for the following, the initial application of the above 2013 IFRSs version and the related amendments to the Regulations Governing the Preparation of Financial Reports by Public Bank have not had any material impact on the Group’s accounting policies:


FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

160

Financial Reports

161

1) IFRS 13 “Fair Value Measurement”

IFRS 13 establishes a single source of guidance for fair value measurements. It defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The disclosure requirements in IFRS 13 are more extensive than those required in the prior version of standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only will be extended by IFRS 13 to cover all assets and liabilities within its scope.

The fair value measurements under IFRS 13 had applied prospectively since 2015. Please refer to Note 45 for related disclosures.

2) Amendments to IAS 1 “Presentation of Items of Other Comprehensive Income” The amendments to IAS 1 requires items of other comprehensive income to be grouped into those items that (1) will not be reclassified subsequently to profit or loss; and (2) may be reclassified subsequently to profit or loss. Income taxes on related items of other comprehensive income are grouped on the same basis. Under prior version of IAS 1, there were no such requirements. The Group retrospectively applied the above amendments starting in 2015. Items not reclassified to profit or loss include remeasurement of defined benefit plans expected to be reclassified to profit or loss are the exchange differences on translating foreign operations, unrealized gain (loss) on available-for-sale financial assets, cash flow hedges and share of the other comprehensive income of associates or joint ventures accounted for using the equity method. However, the application of the above amendments will not have any impact on the net profit for the period, other comprehensive income for the period (net of income tax), and total comprehensive income for the period.

3) Revision to IAS 19 “Employee Benefits” Revised IAS 19 requires the recognition of changes in defined benefit obligations and in the fair value of plan assets when they occur, and hence eliminates the “corridor approach” permitted under prior IAS 19 and accelerate the recognition of past service costs. The revision requires all remeasurements of the defined benefit plans to be recognized immediately through other comprehensive income in order for the net pension asset or liability to reflect the full value of the plan deficit or surplus. All actuarial gains and losses of the Bank, which happened during the period, had immediately recognized in other comprehensive profit and loss. As a result, this does not cause any changes in accounting treatment after excluding “corridor approach”. Furthermore, the interest cost and expected return on plan assets used in prior IAS 19 are replaced with a “net interest” amount, which is calculated by applying the discount rate to the net defined benefit liability or asset. In addition, the revised IAS 19 introduces certain changes in the presentation of the defined benefit cost, and also includes more extensive disclosures. On initial application of the revised IAS 19, the changes in cumulative employee benefit costs as of and before December 31, 2013 resulting from the retrospective application are adjusted to provisions, deferred tax assets and retained earnings. The current period consolidated financial statements are prepared according to the revised IAS 19. The impact on the different version of IAS 19 is set out below:

Impact on Assets, Liabilities and Equity December 31, 2015 Decrease in deferred tax assets $ 5,742 Decrease in provisions $ 33,781 Increase in retained earnings $ 28,039

bank.sinopac.com

161

162

Impact on Total Comprehensive Income

For the Year Ended

December 31, 2015 Decrease in operating expenses $ 33,781 Increase in income tax expense (5,742) Increase in net income $ 28,039 Increase in total comprehensive income $ 28,039 Impact on earnings per share (NT$):




Stated

Adjustments Arising from Initial

Application Retrospective Application



Stated





Basic earnings per share $ 1.53 $ - $ 1.53

4) Amendments to IAS 32 “Offsetting Financial Assets and Financial Liabilities”




162

Financial Reports

162

Impact on Total Comprehensive Income

For the Year Ended

December 31, 2015 Decrease in operating expenses $ 33,781 Increase in income tax expense (5,742) Increase in net income $ 28,039 Increase in total comprehensive income $ 28,039 Impact on earnings per share (NT$):




Stated





Stated





Basic earnings per share $ 1.53 $ - $ 1.53

4) Amendments to IAS 32 “Offsetting Financial Assets and Financial Liabilities”




163

b. New IFRSs in issue but not yet endorsed by the FSC

On March 10, 2016, the FSC announced the scope of the 2016 version of IFRSs to be endorsed and will take effect from January 1, 2017. The scope includes all IFRSs that were issued by the IASB before January 1, 2016 and have effective dates on or before January 1, 2017, which means the scope excludes those that are not yet effective as of January 1, 2017 such as IFRS 9 “Financial Instruments” and IFRS 15 “Revenue from Contracts with Customers” and those with undetermined effective date. In addition, the FSC announced that the Group should apply IFRS 15 starting January 1, 2018. As of the date the consolidated financial statements were authorized for issue, the FSC has not announced the effective dates of other new, amended and revised standards and interpretations. The Group has not applied the following New IFRSs issued by the IASB but not yet endorsed by the FSC.

New IFRSs Effective Date

Announced by IASB (Note 1) Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014 Annual Improvements to IFRSs 2012-2014 Cycle January 1, 2016 (Note 3) IFRS 9 “Financial Instruments” January 1, 2018 Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of IFRS 9 and

Transition Disclosures” January 1, 2018

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

To be determined by IASB

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

January 1, 2016

Amendment to IFRS 11 “Accounting for Acquisitions of Interests in Joint Operations”

January 1, 2016

IFRS 15 “Revenue from Contracts with Customers” January 1, 2018 IFRS 16 “Leases” January 1, 2019 Amendment to IAS 1 “Disclosure Initiative” January 1, 2016 Amendments to IAS 7 “Disclosure Initiative” January 1, 2017 Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized

Losses” January 1, 2017

Amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and Amortization”

January 1, 2016

Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants” January 1, 2016 Amendment to IAS 19 “Defined Benefit Plans: Employee Contributions” July 1, 2014 Amendment to IAS 27 “Equity Method in Separate Financial Statements” January 1, 2016 Amendment to IAS 36 “Impairment of Assets: Recoverable Amount Disclosures

for Non-financial Assets” January 1, 2014

Amendment to IAS 39 “Novation of Derivatives and Continuation of Hedge Accounting”

January 1, 2014

IFRIC 21 “Levies” January 1, 2014 Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective

effective dates. Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the

amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.

Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods

beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

bank.sinopac.com

163

164

The initial application of the above New IFRSs, whenever applied, would not have any material impact on the Group’s accounting policies, except for the following:


Recognition and measurement of financial assets With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below. For the Group’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows: For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method. For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for above, all other financial assets are measured at fair value through profit or loss. However, the Group may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss. The impairment of financial assets IFRS 9 requires that impairment loss on financial assets is recognized by using the “Expected Credit Losses Model”. The credit loss allowance is required for financial assets measured at amortized cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction. For purchased or originated credit-impaired financial assets, the Group takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss. Hedge accounting The main changes in hedge accounting amended the application requirements for hedge accounting to better reflect the entity’s risk management activities. Compared with IAS 39, the main changes include: (1) enhancing types of transactions eligible for hedge accounting, specifically broadening the risk eligible for hedge accounting of non-financial items; (2) changing the way hedging derivative instruments are accounted for to reduce profit or loss volatility; and (3) replacing retrospective effectiveness assessment with the principle of economic relationship between the hedging instrument and the hedged item.


In issuing IFRS 13 “Fair Value Measurement”, the IASB made consequential amendment to the disclosure requirements in IAS 36 “Impairment of Assets”, introducing a requirement to disclose in every reporting period the recoverable amount of an asset or each cash-generating unit. The amendment clarifies that such disclosure of recoverable amounts is required only when an impairment loss has been recognized or reversed during the period. Furthermore, the Group is required to disclose the discount rate used in measurements of the recoverable amount based on fair value less costs of disposal measured using a present value technique.

164

Financial Reports

164

The initial application of the above New IFRSs, whenever applied, would not have any material impact on the Group’s accounting policies, except for the following:


Recognition and measurement of financial assets With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below. For the Group’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows: For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method. For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for above, all other financial assets are measured at fair value through profit or loss. However, the Group may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss. The impairment of financial assets IFRS 9 requires that impairment loss on financial assets is recognized by using the “Expected Credit Losses Model”. The credit loss allowance is required for financial assets measured at amortized cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction. For purchased or originated credit-impaired financial assets, the Group takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss. Hedge accounting The main changes in hedge accounting amended the application requirements for hedge accounting to better reflect the entity’s risk management activities. Compared with IAS 39, the main changes include: (1) enhancing types of transactions eligible for hedge accounting, specifically broadening the risk eligible for hedge accounting of non-financial items; (2) changing the way hedging derivative instruments are accounted for to reduce profit or loss volatility; and (3) replacing retrospective effectiveness assessment with the principle of economic relationship between the hedging instrument and the hedged item.


In issuing IFRS 13 “Fair Value Measurement”, the IASB made consequential amendment to the disclosure requirements in IAS 36 “Impairment of Assets”, introducing a requirement to disclose in every reporting period the recoverable amount of an asset or each cash-generating unit. The amendment clarifies that such disclosure of recoverable amounts is required only when an impairment loss has been recognized or reversed during the period. Furthermore, the Group is required to disclose the discount rate used in measurements of the recoverable amount based on fair value less costs of disposal measured using a present value technique.

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IFRS 13 was amended to clarify that the issuance of IFRS 13 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting, if the effect of not discounting is immaterial. IAS 24 was amended to clarify that a management entity providing key management personnel services to the Group is a related party of the Group. Consequently, the Group is required to disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. However, disclosure of the components of such compensation is not required.


The scope in IFRS 13 of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis was amended to clarify that it includes all contracts that are within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, even if those contracts do not meet the definitions of financial assets or financial liabilities within IAS 32. IAS 40 was amended to clarify that IAS 40 and IFRS 3 are not mutually exclusive and application of both standards may be required to determine whether the investment property acquired is acquisition of an asset or a business combination.


The amendments to IFRS 7 provide additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset.

6) IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations. Under IFRS 16, if the Group is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value and short-term leases. The Group may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. On the consolidated statements of comprehensive income, the Group should present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of the lease liability are classified within financing activities; cash payments for interest portion are classified within operating activities. The application of IFRS 16 is not expected to have a material impact on the accounting of the Group as lessor. When IFRS 16 becomes effective, the Group may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this Standard recognized at the date of initial application.

7) Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”

The amendment clarifies that the difference between the carrying amount of the debt instrument measured at fair value and its tax base gives rise to a temporary difference, even though there are unrealized losses on that asset, irrespective of whether the Group expects to recover the carrying amount of the debt instrument by sale or by holding it and collecting contractual cash flows. In addition, in determining whether to recognize a deferred tax asset, the Group should assess a deductible temporary difference in combination with all of its other deductible temporary differences, unless the tax law restricts the utilization of losses to deduction against income of a specific type, in which case, a deductible temporary difference is assessed in combination only with other deductible temporary differences of the appropriate type. The amendment also stipulates that, when determining whether to recognize a deferred tax asset, the estimate of probable future taxable profit may include some of the Group’s assets for more than their carrying amount if there is sufficient evidence that it is probable that the Group will achieve this, and that the estimate for future taxable profit should exclude tax deductions resulting from the reversal of deductible temporary differences.

Except for the above impact, as of the date the financial statements were authorized for issue, the Group is continuingly assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance, and will disclose the relevant impact when the assessment is complete.

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Statement of Compliance The consolidated financial statements have been prepared in accordance with Regulations Governing the Preparation of Financial Reports by Public Banks, the guidelines issued by the authority, and IFRSs as endorsed by the FSC. Basis of Preparation The financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair value, and properties and equipment that are chosen the deemed cost as exemptions by IFRS 1 through Regulations Governing the Preparation of Financial Reports by Public Banks on the IFRS transition date. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: a. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; b. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either

directly (i.e. as prices) or indirectly (i.e. derived from prices); and c. Level 3 inputs are unobservable inputs for the asset or liability. Classification of Current and Non-current Assets and Liabilities Since the operating cycle in the Grouping industry cannot be reasonably identified, the accounts included in the Group financial statements were not classified as current or noncurrent. Nevertheless, accounts were properly categorized in accordance with the nature of each account and sequenced by their liquidity. Please refer to Note 46 for the maturity analysis of assets and liabilities. Basis of Consolidation All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation related information please refer to Table 5. The consolidated entities were as follows:

% of Ownership December 31

Investor Investee Main Business 2015 2014 Remark Bank SinoPac SinoPac Bancorp Holding company 100 100 Note 1 SinoPac Capital Limited (H.K.) Credit and investment

service 100 100

SinoPac Life Insurance Agent Co., Ltd.

Life insurance agent 100 100


Property insurance agent 100 100

Bank SinoPac (China) Ltd. Commercial bank 100 100 Note 2 SinoPac Bancorp Far East National Bank Commercial bank 100 100 Notes 3

and 4 SinoPac Capital Limited SinoPac Capital (B.V.I.) Ltd. Financial advisory 100 100 (H.K.) SinoPac Insurance Brokers Ltd. Insurance brokerage 100 100 SinoPac Capital (B.V.I.)

Ltd. RSP Information Service

Company Limited General trading and internet

service 100 100

Note 1: In October 2014, SinoPac Bancorp’s board of directors approved its capital increase of US$195,000 thousand, the

redemption of preferred shares amounting to US$195,000 thousand and a return to the Bank of capital of US$50,000 thousand. The shares issued for SinoPac Bancorp’s capital increase were all subscribed for by the Bank.

Note 2: The Bank received the approval of FSC and Investment Commission, MOEA for its investment in the subsidiary -

Bank SinoPac (China), and then obtained the local operating license in January 2014.

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Statement of Compliance The consolidated financial statements have been prepared in accordance with Regulations Governing the Preparation of Financial Reports by Public Banks, the guidelines issued by the authority, and IFRSs as endorsed by the FSC. Basis of Preparation The financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair value, and properties and equipment that are chosen the deemed cost as exemptions by IFRS 1 through Regulations Governing the Preparation of Financial Reports by Public Banks on the IFRS transition date. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: a. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; b. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either

directly (i.e. as prices) or indirectly (i.e. derived from prices); and c. Level 3 inputs are unobservable inputs for the asset or liability. Classification of Current and Non-current Assets and Liabilities Since the operating cycle in the Grouping industry cannot be reasonably identified, the accounts included in the Group financial statements were not classified as current or noncurrent. Nevertheless, accounts were properly categorized in accordance with the nature of each account and sequenced by their liquidity. Please refer to Note 46 for the maturity analysis of assets and liabilities. Basis of Consolidation All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation related information please refer to Table 5. The consolidated entities were as follows:

% of Ownership December 31

Investor Investee Main Business 2015 2014 Remark Bank SinoPac SinoPac Bancorp Holding company 100 100 Note 1 SinoPac Capital Limited (H.K.) Credit and investment

service 100 100

SinoPac Life Insurance Agent Co., Ltd.

Life insurance agent 100 100


Property insurance agent 100 100

Bank SinoPac (China) Ltd. Commercial bank 100 100 Note 2 SinoPac Bancorp Far East National Bank Commercial bank 100 100 Notes 3

and 4 SinoPac Capital Limited SinoPac Capital (B.V.I.) Ltd. Financial advisory 100 100 (H.K.) SinoPac Insurance Brokers Ltd. Insurance brokerage 100 100 SinoPac Capital (B.V.I.)

Ltd. RSP Information Service

Company Limited General trading and internet

service 100 100

Note 1: In October 2014, SinoPac Bancorp’s board of directors approved its capital increase of US$195,000 thousand, the

redemption of preferred shares amounting to US$195,000 thousand and a return to the Bank of capital of US$50,000 thousand. The shares issued for SinoPac Bancorp’s capital increase were all subscribed for by the Bank.

Note 2: The Bank received the approval of FSC and Investment Commission, MOEA for its investment in the subsidiary -

Bank SinoPac (China), and then obtained the local operating license in January 2014.

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Note 3: For expansion of the market and the operating synergies of Vietnamese overseas branches, the Bank assumed, under the approval of its board, the assets, liabilities and operations of the Ho Chi Minh City branch of the U.S. Far East National Bank on April 25, 2014. This case has been approved by the FSC and the State Bank of Vietnam with November 1, 2015 as the record date.

Note 4: The board of directors of Far East National Bank approved capital returns to its parent, SinoPac Bancorp, of

US$17,795 thousand in June 2014 and US$50,000 thousand in October 2014, respectively. Also in October 2014, SinoPac Bancorp’s board of directors approved a capital increase of US$178,205 thousand and the redemption of preferred shares amounting to US$178,205 thousand. All of these shares were approved and subscribed for by SinoPac Bancorp.

Foreign Currencies a. Foreign currencies

In preparing the financial statements of the Group, transactions in currencies other than the Group’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arise from settlement or translation are recognized in profit or loss in the period in which they arise. Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

b. Exchange differences on translating foreign operations

For the purposes of presenting financial statements, the assets and liabilities of the Group’s foreign operations are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognized in other comprehensive income.

Cash and Cash Equivalents Cash and cash equivalent in financial statements includes cash on hand, demand deposits and investments with original maturities within three months from the date of acquisition, highly liquid, readily convertible to a known amount of cash and be subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments. For the purposes of presenting cash flows, the cash and cash equivalent includes cash and cash equivalents in balance sheets, due from the Central Bank and call loans to other banks and securities purchased under agreements to resell under IAS 7. Investments Accounted for Using the Equity Method The Group uses the equity method of accounting on investment of associates. An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor on interest in a joint venture. Under the equity method, the investment is initially recognized at cost and the carrying amount is increased or decreased to recognize the Group’s share of the profit or loss and other comprehensive income of the associate after the date of acquisition. Besides, the Group also recognizes the Group’s share of the change in other equity of the associate. The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

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Financial Instruments Financial assets and financial liabilities are recognized when the Group entity becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss. Financial assets All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. a. Measurement category

Financial assets have four categories: Financial assets at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets and loans and receivables.

1) Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or designated as at fair value through profit or loss.

A financial asset is designated as at fair value through profit or loss upon initial recognition if:

a) This designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise

without this designation; or b) The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its

performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

c) The contract contains one or more embedded derivatives so that the entire hybrid (combined) contract can be


Fair value is determined in the manner described in Note 45.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in Note 45.

2) Available-for-sale financial assets

Available-for-sale financial assets are nonderivatives that either are designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Fair value is determined in the manner described in Note 45. Available-for-sale financial assets are measured at fair value. Changes in the carrying amounts of available-for-sale monetary financial assets pertaining to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amounts of available-for-sale financial assets are recognized in other comprehensive income. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss that previously accumulated in the investments revaluation reserve is reclassified to profit or loss. The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts on financial instrument acquisition or issue) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

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Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group’s right to receive the dividends are established. Available-for-sale equity investments that have no quoted market prices in an active market and have fair values that cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are recognized in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets cannot be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

3) Held-to-maturity investments

Corporate bonds and foreign government bonds, which are above certain credit ratings and on which the Group has positive intent and ability to hold to maturity, are classified as held-to-maturity investments. Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.

4) Loans and receivables

Loans and receivables (including receivables, discounts and loans, debt investments with no active market) are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial.

b. Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. In determining the allowance for credit losses and provision for losses on guarantees, the Group assesses the collectability of discounts and loans, receivables, and other financial assets, as well as guarantees and acceptances as of the balance sheet date. Loans and receivables are assessed for impairment at the end of each reporting period and considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the foregoing discounts and loans, receivables, and other financial assets, the estimated future cash flows of the asset have been affected. Objective evidence of impairment could include:

� Significant financial difficulty of the debtor; � The foregoing discounts and loans, receivables, and other financial assets becoming overdue; or � Probability that the debtor will enter into bankruptcy or undergo financial reorganization.

Discounts and loans, receivables, and other financial assets that are assessed as not impaired individually are further assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of discounts and loans, receivables, and other financial assets could include the Group’s past experience of collecting payments and an increase in the number of delayed payments, as well as observable changes in national or local economic conditions that correlate with defaults on loans and receivables. The amount of the impairment loss recognized is the difference between the asset carrying amount and the present value of estimated future cash flows, after taking into account the related collaterals and guarantees, discounted at the original effective interest rates. The carrying amount of the discounts and loans, receivables, and other financial assets is reduced through the use of an allowance account. Under the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Nonaccrual Loans” (the “Regulations”), the Group evaluates credit losses on the basis of the estimated collectability. In accordance with the Regulations, credit assets are classified as normal assets, assets that require special mentioned, assets with substandard, assets with doubtful collectability, and assets on which there is loss. The Group evaluates value of collaterals of specified loans and assesses recoverablities of nonperforming loans.

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Based on the above Regulations, the minimum allowance for credit losses and provision for losses on guarantees for assets that are normal excluding claims against ROC government agencies that require special mentioned, assets that are substandard, assets with doubtful collectability, and assets on which there is loss were 1%, 2%, 10%, 50% and 100%, respectively of outstanding. In addition, under Financial Supervisory Commission (FSC) guidelines No. 10010006830 there should be a provision at more than 1% of sum of a minimum allowance for credit losses and the provision for losses on guarantees. For enhanced risk management by banks, FSC issued Letter No. 10300329440, which requires domestic banks to allocate an allowance of at least 1.5% of repair loans and construction loans before 2016. In addition, under FSC Letter No. 10410001840, Category 1 credits granted to enterprises in the China region should be covered by an allowance of at least 1.5% of the balance of these credits. For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered an objective evidence of impairment. When an available-for-sale financial asset is considered impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period. In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income and accumulated under the heading of investments revaluation reserve. In respect of available-for-sale debt securities, impairment loss are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods. The carrying amount of the financial asset is reduced through the use of an allowance account, accumulated impairment account, or book value. When those financial assets are considered uncollectible, they are written off against the allowance account, accumulated impairment account or deduction of cost. Subsequent recoveries of amounts previously written off are debited against the bad debt expense or credited against the allowance account in according with Criteria Governing the Preparation of Financial Reports by Public Banks.

c. Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.

Financial liabilities and equity instruments Debt and equity instruments issued by the Group are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Equity and debt instruments are recognized at the proceeds received, net of direct issue costs. a. Measurement and recognition

Except the following situation, all the financial liabilities are measured at amortized cost using the effective interest method: Financial liabilities are classified as at fair value through profit or loss when the financial liability is either held for trading or it is designated as at fair value through profit or loss. Financial liabilities held for trading are stated at fair value, with any gain or loss arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest or dividend paid on the financial liability. Fair value is determined in the manner described in Note 45.

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A financial liability may be designated as at fair value through profit or loss upon initial recognition when doing so results in more relevant information and if:

1) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise

arise; or 2) The financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its

performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

3) The contract contains one or more embedded derivatives so that the entire combined contract (asset or liability) can be


For a financial liability designated as at fair value through profit or loss, the amount of changes in fair value attributable to changes in the credit risk of the liability is presented in other comprehensive income, and it will not be subsequently reclassified to profit or loss. The remaining amount of changes in the fair value of that liability which incorporates any interest or dividend paid on the financial liability is presented in profit or loss. The gain or loss accumulated in other comprehensive income will be transferred to retained earnings when the financial liabilities are derecognized. If this accounting treatment related to credit risk would create or enlarge an accounting mismatch, all changes in fair value of the liability are presented in profit or loss. Fair value is determined in the manner described in Note 45.

b. Derecognition of financial liabilities

The difference between the carrying amount of the financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

Financial Guarantee Contracts Financial guarantee contracts issued by the Group are initially recognized at their fair values and, if not designated as at fair value through profit or loss, are subsequently measured at the higher of the best estimate of the obligation under the contract or the amount initially recognized less cumulative amortization recognized. Derivative Financial Instruments Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. When the fair value of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instruments is negative, the derivative is recognized as a financial liability. Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the contracts are not measured at fair value through profit or loss. Repurchase and Reverse Repurchase Transactions Securities purchased under agreements to resell (reverse repurchase) agreements and securities sold under agreements to repurchase are generally treated as collateralized financing transactions. Interest earned on reverse repurchase agreements or interest incurred on repurchase agreements is recognized as interest income or interest expense over the life of each agreement. Property and Equipment Property and equipment are stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment loss. Depreciation on property and equipment is recognized using the straight-line method. Each significant part is depreciated separately. If the lease term is shorter than the useful lives, assets are depreciated over the lease term. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

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Investment Properties Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties also include land held for a currently undetermined future use. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method. On derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount of the asset is included in profit or loss. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. a. The Group as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease unless another system could be more representative of the effectiveness of time consumption of lease assets.

b. The Group as lessee

Operating lease payments are recognized as an expense on a straight-line basis over the lease term unless another system could be more representative of the effectiveness of time consumption of lease assets.

Intangible Assets a. Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

b. Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately.

c. Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset are recognized in profit or loss.

Goodwill Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Goodwill arising from the acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss. For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units or groups of cash-generating units (referred to as cash-generating units) that is expected to benefit from the synergies of the combination.

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A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributed goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods. If goodwill has been allocated to a cash-generating unit and the entity disposes of an operation within that unit, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal, and is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained. Impairment of Tangible and Intangible Assets Other Than Goodwill At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to the individual cash-generating units; otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss. Provisions Provisions, including those arising from the contractual obligation specified in the service concession arrangement to maintain or restore the infrastructure before it is handed over to the grantor, are measured at the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Employee Benefits a. Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

b. Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions. Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur. Remeasurement, comprising actuarial gains and losses, and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in

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which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.


The Group offers preferential interest rate to its current employees for their deposits within a prescribed amount. Under Article 28 of the Regulations Governing the Preparation of Financial Reports by Public Bank, if the Group’s preferential deposit interest rate for as stated in the employment contract exceeds the market interest rate, the excess will be subject to IAS 19 “Employee Benefits” upon the employee’s retirement. The actuarial valuation assumptions and parameters are based on those announced by authority, if any.

d. Termination benefits

A liability for a termination benefit is recognized at the earlier of when the Group can no longer withdraw the offer of the termination benefit and when the Group recognizes any related restructuring costs.

Share-based Payment Arrangements The fair value at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Group’s best estimates of the number of shares or options that are expected to ultimately vest, with a corresponding increase in capital surplus - employee share options. It is recognized as an expense in full at the grant date if vesting immediately. The shares of the capital increased by cash of SPH was reserved for the Group’s employees. The grand date was the date that the employees subscription and the fair value determined at the grant date of the equity-settled share-based payments is recognized as an expense and paid-in capital. Revenue Recognition a. Interest income and expense

Except for financial assets and liabilities at fair value through profit or loss, all interest-earning financial assets and interest-bearing financial liabilities are accrued using the effective interest rate method and are accounted for as interest revenue and interest expense in the consolidated statement of comprehensive income. Transaction costs and all other premium or discounts associated with the loans and receivables are adjusted to the carrying amount of the loans and receivables. The calculation of effective interest rate includes transaction costs and all other premium or discounts paid or received by the Group that is an integral part of the effective interest rate. Interest should not be accrued for loans that are transferred to nonperforming loans. The interest revenue on those loans/credits is recognized upon collection. Under Ministry of Finance (MOF) regulations, the interest revenue on structured loans is recognized upon collection. Interest income on revolving credit card receivables and cash advance is recognized on an accrual basis.

b. Commission revenue

Commission fee revenue and expenses are recognized when loans or other services are provided. Service fees on significant projects are recognized when the project has been completed, for instance, loans syndicated fees are recognized over the period during which the service is performed, or as an adjustment to the effective interest rate on the loan and receivables. Annual fee income is the membership fee received from card members and is recognized when card members fail to meet the criteria for annual fee exemption; an allowance is estimated using past experience and is recognized as a deduction from annual fee income within the year the annual fee income is recognized. Revenue from rendering services is recognized at the amount corresponding to the percentage of services completed as of the balance sheet date.

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c. Dividend income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably.

Income Tax Income tax expense represents the sum of the current tax and deferred tax. a. Current tax

According to the Income Tax Act, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings. Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

b. Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are generally recognized for deductible temporary differences, unused loss carry forward and unused tax credits to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

c. Current and deferred tax for the period

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively.

d. Linked-tax system

SPH adopted the linked-tax system for income tax filings with its qualified subsidiaries, including the Group. The different amounts between tax expense and deferred tax liabilities and assets based on consolidation and SPH with its qualified subsidiaries are adjusted on SPH; related amounts are recognized as current tax assets or current tax liabilities.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group’s accounting policies, which are described in Note 4, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

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The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. a. Impairment losses on loans and receivables

The Group reviews loan portfolios to assess impairment periodically. In determining whether an impairment loss should be recorded, the Group makes judgments on whether there are any observable data indicating that impairment. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers (e.g., payment delinquency or default), or economic conditions that correlate with defaults on assets. To assess impairment, the management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when estimating expected future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to decrease the difference between estimated loss and actual loss. For Far East National Bank, the allowance for loan losses is maintained at a level considered adequate to provide for losses on the loan portfolio at the balance sheet date. The adequacy of the allowance is determined by management on the basis of a periodic review of the loan portfolio, historical loan loss experience, current economic conditions, changes in the composition of the loan portfolio, analysis of collateral values and pertinent factors. Although management believes the level of the allowance is adequate to absorb losses inherent in the loan portfolio, it cannot be reasonably predicted if additional declines in the local economy or rising interest rates may result in increases in losses. Bank SinoPac (China) periodically evaluates loan portfolio. Provision is calculated based on impairment indication of each transaction in the portfolio. Impairment of individual assessment is the net decreased amount of expected future discounted cash flow. Bank SinoPac (China) periodically reviews future cash flow and timing for the methodologies and assumptions used, thus reduce the difference between estimated loss and actual loss. Impairment losses on loans and receivables are shown in Notes 11, 12, 16 and 46.

b. Measurement and evaluation process of fair value

As described in Note 45, the Group’s management uses its judgment in selecting an appropriate valuation technique for financial instruments with no quoted market prices in an active market. Valuation techniques commonly used by market practitioners are applied. For derivative financial instruments, assumptions are based on quoted market rates adjusted for specific features of the instruments. Other financial instruments were valued using a discounted cash flow analysis that includes assumptions based on quoted market prices or rates (if available). The measurement of the fair value of unlisted equity investments includes assumptions not based on observable market prices or rates. Note 45 provides information on the key assumptions used determining the fair value of financial instruments. The Group’s management believes that the chosen valuation techniques and assumption used are appropriate in determining the fair value of financial instruments.

c. Impairment of goodwill

Determining goodwill impairment requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires management to estimate the future cash flows expected to arise from the cash-generating unit and to use a suitable discount rate to calculate the present value of these cash flows. When the actual future cash flows are less than expected, a material impairment loss may arise. Impairment of goodwill is shown in Note 19.

d. Income tax

As of December 31, 2015 and 2014, the carrying amounts of deferred income tax assets were $2,648,911 and $2,996,218, respectively. As of December 31, 2015 and 2014, deferred income tax assets amounting to $1,889,156 and $1,825,529 had not been recognized because of the unpredictability of future profit streams respectively. The realizability of the deferred income tax assets mainly depend on whether sufficient future profits or taxable temporary differences will be available in the future. If the actual future profits generated are less than expected, a material reversal of deferred income tax assets may arise, which would be recognized in profit or loss for the period in which reversal takes place.

e. Employee benefit obligation reserve

The present value of defined benefit obligation and preferential interest on employees’ deposits are based on several actuarial assumptions. Any changes on these assumptions will influence the fair value of the employee benefit obligations.

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One of the assumptions used to determine net pension cost (income) pertains to the discount rate. The Group determines the appropriate discount rate at the end of each year, and uses the rate to calculate the present value of future cash flows on the estimated payment of employee benefit obligation. The employee benefit obligation reserve is shown in Note 28.

6. CASH AND CASH EQUIVALENTS, NET

December 31 2015 2014 Cash on hand $ 7,065,541 $ 7,607,477 Due from other banks 15,862,865 30,046,895 Checks for clearing 3,371,201 3,659,263 26,299,607 41,313,635 Less: Allowance for credit loss 4,438 1,287 $ 26,295,169 $ 41,312,348

Under the Guidelines on the Management of Country Risk by Banking Financial Institutions issued by the China Banking Regulatory Commission for countries or regions with low risks, Bank SinoPac (China) recognized the country risk provisions at 0.5% of the due from other banks and call loans to other banks (Note 7). Cash and cash equivalents as of December 31, 2015 and 2014 as shown in the consolidated statements of cash flows can be reconciled to the related items in the consolidated balance sheets as follows: December 31 2015 2014 Cash and cash equivalents in consolidated balance sheets $ 26,295,169 $ 41,312,348 Due from the Central Bank and call loans to other banks that meet the definition

of cash and cash equivalents under IAS 7 “Statement of Cash Flows” 42,451,502 51,969,018 Securities purchased under agreements to resell that meet the definition of cash

and cash equivalents under IAS 7 “Statement of Cash Flows” 4,294,597 12,884,142 Cash and cash equivalents in consolidated statements of cash flows $ 73,041,268 $ 106,165,508

7. DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS, NET

December 31 2015 2014 Call loans to banks $ 55,494,145 $ 45,556,953 Trade finance advance - interbank 832,487 4,656,114 Deposit reserve - checking accounts 6,735,093 12,594,809 Due from the Central Bank - interbank settlement funds 2,000,963 840,614 Deposit reserve - demand accounts 24,525,315 23,804,301 Deposit reserve - foreign currencies 537,909 465,628 Due from Federal Reserve Bank 2,773,959 2,242,023 92,899,871 90,160,442 Less: Allowance for credit loss 1,984 2,062 $ 92,897,887 $ 90,158,380

Under a directive issued by the Central Bank of the ROC, New Taiwan dollar (NTD)-denominated deposit reserves are determined monthly at prescribed rates based on average balances of customers’ NTD-denominated deposits. Deposit reserve - demand account should not be used, except for adjusting the deposit reserve account monthly. In addition, the foreign-currency deposit reserves are determined at prescribed rates based on the balances of foreign-currency deposits. These reserves can be withdrawn momentarily anytime at no interest. Under the relevant provisions issued by the People’s Bank of China, Bank SinoPac (China) showed deposit reserves in proportion on the basis of deposit and margin account balances at the end of the months.

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8. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

December 31 2015 2014 Held-for-trading financial assets

Government bonds $ 27,951,987 $ 19,196,723 Bank debentures 5,072,423 1,722,123 Corporate bonds 4,984,652 2,504,072 Currency swap contracts and hybrid FX swap structured instruments 19,814,775 9,249,236 Interest rate swap contracts 2,199,756 1,034,073 Forward contracts 2,079,546 947,442 Option contracts 2,064,922 10,089,919 Others 1,679,980 566,640 Adjustment for change in value of held-for-trading financial assets 250,668 82,570 66,098,709 45,392,798

Financial assets designated at fair value through profit or loss Convertible bonds 1,283,590 2,031,646 Auction-rate securities - 634,345 Adjustment for change in value of financial assets designated at fair value

through profit or loss (18,561) (56,561) 1,265,029 2,609,430 $ 67,363,738 $ 48,002,228 Held-for-trading financial liabilities

Securities purchased under agreements to resell - short sales $ 249,502 $ - Currency swap contracts and hybrid FX swap structured instruments 18,941,499 9,006,285 Option contracts 2,570,813 10,156,299 Interest rate swap contracts 2,428,932 1,063,319 Forward contracts 1,893,002 968,203 Others 970,756 404,829 Adjustment for change in value of held-for-trading financial liabilities 15 - $ 27,054,519 $ 21,598,935

a. The Group designated hybrid instruments as financial assets and liabilities at FVTPL. b. The Group engages in derivative transactions mainly to accommodate customers’ needs and manage its own exposure

positions. Outstanding derivative contracts (nominal) on December 31, 2015 and 2014 are shown as follows:

Contract Amount December 31 2015 2014 Currency swap contracts and hybrid FX swap structured instruments $ 1,339,160,126 $ 948,621,116 Interest rate swap contracts 531,952,543 387,905,682 Forward contracts

Long position 76,861,318 104,097,241 Short position 77,379,741 81,779,834

Option contracts Long position 43,977,419 246,015,386 Short position 46,767,144 248,790,152

Cross-currency swap contracts 31,965,122 28,371,856 Futures contracts 10,745,082 834,881 Assets swap contracts 1,283,590 2,031,646 Equity-linked swap contracts 1,132,539 1,292,787 Commodity-linked swap contracts 69,734 208,628

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9. DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGING The Group’s management had established related risk management policy. December 31 2015 2014 Derivative financial liabilities under hedge accounting Fair value hedge - interest rate swap $ 42,569 $ 32,887 The fair value risk on the interest of the fixed rate loans may fluctuate as market rates change. The Group used interest rate swap contracts as fair value hedging instruments. For the year ended December 31, 2015

Hedged Item Hedging Instrument Notional Amount Fair Value

Adjustments for Change in Value

of Derivative Financial

Instruments under Hedge Accounting

Adjustments for Change in Value of Hedged Items

Fixed rate loans Interest rate swap $ 1,820,309 $ (42,569) $ (7,994) $ 7,994 For the year ended December 31, 2014

Hedged Item Hedging Instruments Notional Amount Fair Value

Adjustments for Change in Value

of Derivative Financial

Instruments under Hedge Accounting

Adjustments for Change in Value of Hedged Items

Fixed rate loans Interest rate swap $ 1,695,291 $ (32,887) $ (29,152) $ 29,152 10. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL

December 31 2015 2014 Commercial paper $ 4,294,597 $ 11,833,820 Negotiable certificates of deposit - 1,060,329 $ 4,294,597 $ 12,894,149 Agreed-upon resell amount $ 4,295,735 $ 12,900,949 Expiry January 2016 April 2015

Securities purchased under agreements to resell are not underlying for agreements to repurchase.

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11. RECEIVABLES, NET

December 31 2015 2014 Account receivables - forfaiting $ 40,333,745 $ 82,160,394 Credit card receivables 16,535,329 17,327,213 Account receivables - factoring 7,454,474 10,296,684 Acceptances - forfaiting 6,652,451 25,756,268 Interest and revenue receivables 2,758,378 2,322,322 Acceptances 1,595,036 2,099,031 Trust administration fee revenue receivables 618,224 597,011 Account receivables - sale of securities 506,900 5,545 Others 1,278,418 887,716 77,732,955 141,452,184 Less: Allowance for credit losses 1,675,963 701,612 Net amount $ 76,056,992 $ 140,750,572

The Group assessed the collectability of receivables to determine the allowance. Movements in the allowance of receivables were shown as follows: For the Year Ended December 31 2015 2014 Balance, January 1 $ 701,612 $ 501,307 Provision 1,274,493 538,201 Write-off (306,058) (353,961) Effect of exchange rate changes 5,916 16,065 Balance, December 31 $ 1,675,963 $ 701,612 Please refer to Note 46 for the analysis of receivable impairment loss. The recovery of receivables write-off as deduction of provision for the years ended December 31, 2015 and 2014 were $246,482 and $278,048, respectively.

12. DISCOUNTS AND LOANS, NET

December 31 2015 2014 Export negotiation $ 746,750 $ 727,827 Overdrafts 1,692 2,140 Secured overdrafts 264,899 322,392 Account receivables - financing 1,624,340 2,287,423 Short-term loans 171,235,996 115,622,806 Secured short-term loans 92,678,748 104,809,779 Medium-term loans 116,293,308 110,489,414 Secured medium-term loans 88,222,279 94,415,671 Long-term loans 4,504,000 9,503,937 Secured long-term loans 410,155,969 365,556,605 Nonperforming loans transferred from loans 1,694,171 1,596,465 887,422,152 805,334,459 Less: Allowance for credit losses 12,439,007 13,277,328 Less: Premium or discount on discounts and loans 281,589 289,078 Add: Adjustment of hedge valuation 42,569 32,887 Net amount $ 874,744,125 $ 791,800,940

Please refer to Note 46 for the analysis of impairment loss on discounts and loans, Note 43 for information relating to discounts and loans pledged as security.

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The Group assessed the collectability of discounts and loans to determine the allowance. Movements in the allowance of discounts and loans were shown as follows: For the Year Ended December 31 2015 2014 Balance, January 1 $ 13,277,328 $ 9,129,564 (Reversal of) provisions (705,749) 4,690,518 Write-off (462,986) (796,668) Recovery of written-off credits 241,767 115,873 Effect of exchange rate changes 88,647 138,041 Balance, December 31 $ 12,439,007 $ 13,277,328 The Group received loans previous written-off $408,094 and $1,112,221 for the years ended December 31, 2015 and 2014, respectively, which recognized as a deduction on provision expenses.

13. AVAILABLE-FOR-SALE FINANCIAL ASSETS

December 31 2015 2014 Certificates of deposits $ 130,090,314 $ 142,373,059 Corporate bonds 24,441,333 18,499,410 Commercial papers 18,972,974 21,996,592 Bank debentures 12,190,857 4,791,896 Government bonds 7,767,858 16,400,675 Agency bonds 1,888,244 3,421,017 Others 224,488 52,694 195,576,068 207,535,343 Adjustments for change in value of available-for-sale financial assets 111,494 225,369 $ 195,687,562 $ 207,760,712 As of December 31, 2015 and 2014, the par value of available-for-sale financial assets under agreements to repurchase were $2,071,500 and $7,102,100, respectively. Please refer to Note 43 for information relating to available-for-sale financial assets pledged as security.

14. HELD-TO-MATURITY FINANCIAL ASSETS, NET

December 31 2015 2014 Government bonds $ 41,160,088 $ 28,817,028 Certificates of deposit 23,925,329 12,933,586 Corporate bonds 1,751,780 1,752,360 Agency bonds 1,735,826 2,046,516 Asset backed securities 330,659 317,173 U.S. municipal bonds 214,993 247,385 Net amount $ 69,118,675 $ 46,114,048 As of December 31, 2015, the par value of held-to-maturity financial assets under agreements to repurchase was $3,100,000 (December 31, 2014: None). A change of intention let Bank to reclassify available-for-sale financial assets (government bonds $8,410,928 and corporate bonds $1,753,088) into held-to-maturity financial assets. Please refer to Note 48 for the related information.

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The operations of the bank that had issued debentures and the bank’s restructuring was uncertain, which could result in the bank’s inability to pay interest. Since the Bank evaluated that its recovery rate for the debentures was low, it disposed one of the bank debentures before the maturity date in third quarter of 2014. As of December 31, 2014, the cumulative amount of the debentures disposed of in 2014 was US$857 thousand, with a gain of $10,213 on impairment loss reversal and a loss of $11,619 on disposal; the percentage of cumulative amounts disposed of over the prior two years to total amounts of held-to-maturity investments as of September 30, 2014 was 0.01%. Please refer to Note 43 for information relating to held-to-maturity financial assets pledged as security.

15. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD December 31 2015 2014 DBL Partners III-A, L.P. $ 38,633 $ -

Principal Proportion of Ownership and Voting

Rights Nature of Place of December 31

Name of Associate Activities Business 2015 2014 DBL Partners III-A, L.P. Venture capital USA 44%/- - To conform with the provisions of the local community act - Community Reinvestment Act, Far East National Bank invested in the DBL Partners III-A, L.P. venture capital. As of December 31, 2015, Far East National Bank has invested a total of US$1,324 thousand and obtained 44% of the ownership in the Company. This investment is recognized using the equity method. For the Year Ended December 31 2015 2014 The Group’s share of:

Net income $ (4,961) $ - Other comprehensive income - - Total comprehensive income for the year $ (4,961) $ -

16. OTHER FINANCIAL ASSETS, NET


Unlisted equity investments $ 1,017,132 $ 828,489 Beneficial certificates 270,980 385,810

Debt investments with no active market Certificates of deposits 1,746,142 -

Purchase of the PEM Group’s instruments 4,668,629 4,458,015 Time deposits not belong to cash and cash equivalent 4,470,974 8,652,617 Call loans to security corporations 1,653,293 - Cash surrender value of managers’ life insurance 1,462,574 1,363,768 Excess margin of futures and options 521,228 204,601 Short-term loan advance 26,315 18,209 Nonperforming receivables transferred from other than loans 549 6,933 Exchange bills negotiated 509 285 15,838,325 15,918,727 Less: Allowance for credit loss 6,270 10,268 Less: Accumulated impairment 2,408,678 2,375,857 Net amount $ 13,423,377 $ 13,532,602

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In 2015, the Group bought from a bank in China - through SinoPac Securities (Asia) - certificates of deposits with a face value of RMB50,000 thousand and recognized these instruments as debt investments with no active market - certificates of deposits. The purchase terms and conditions were the same as those in the market. Above time deposits not belong to cash and cash equivalent included over three months, no advanced termination time deposits and pledged time deposits. Please refer to Note 43 for information relating to other financial assets pledged as security. The Bank was delegated by professional investors to sell the PEM Group’s investment products amounting to US$146,000 thousand through private placement. A Court appointed a receiver for all assets that belonged to, were being managed by, or were in the possession of or control of the PEM Group. To protect the client’s interests, the Bank bought back the products at the price of the initial payment net of the distribution and redemption costs. On December 24, 2010, the Bank’s board of directors resolved to abide by a Court’s appointment of a PEM Group receiver to take the PEM Group’s insurance policies at the price of approximately US$40.4 million, and the Bank thus recognized impairment losses of US$11,152 thousand. On March 7, 2011, the receiver transferred a portion of the insurance policies to a trustee established jointly by certain banks to hold insurance policies. And the Bank had submitted to the authorities the results of this policy transfer. As of December 31, 2015, a reserve of US$72,845 thousand (NT$2,408,678) had been set aside to cover the accumulated impairment losses. The Group assessed the collectability of other financial assets to determine the required allowance. Movements in the allowance of other financial assets were shown as follows: For the Year Ended December 31 2015 2014 Balance, January 1 $ 10,268 $ 11,184 Provision 9,343 9,649 Write-off (13,370) (11,291) Effect of exchange rate changes 29 726 Balance, December 31 $ 6,270 $ 10,268

17. PROPERTY AND EQUIPMENT, NET

The movements of property and equipment for the years ended December 31, 2015 and 2014 are summarized as follows: For the Year Ended December 31, 2015

Land Buildings

Computer and Machinery Equipment


Other Equipment

Leasehold Improvement


and Construction in

Progress Total Cost Balance, January 1 $ 6,598,341 $ 5,984,804 $ 1,899,387 $ 5,171 $ 1,385,841 $ 1,708,764 $ 132,749 $ 17,715,057 Addition - 28,831 172,374 - 79,365 58,210 191,947 530,727 Deduction 145,000 125,990 202,176 - 32,822 7,700 140 513,828 Reclassifications (797,236 ) (745,846 ) 13,970 - 10,863 60,699 (169,692 ) (1,627,242 ) Effect of exchange rate

changes 2,352

3,438

11,047

220

7,373

17,141

1,021

42,592

Balance, December 31 5,658,457 5,145,237 1,894,602 5,391 1,450,620 1,837,114 155,885 16,147,306 Accumulated depreciation Balance, January 1 $ - $ 2,961,788 $ 1,464,663 $ 4,686 $ 1,108,107 $ 1,302,999 $ - $ 6,842,243 Depreciation - 145,195 155,115 488 67,900 106,483 - 475,181 Deduction - 67,736 198,741 - 31,893 5,775 - 304,145 Reclassifications - (365,748 ) 4,372 - (8,093 ) - - (369,469 ) Effect of exchange rate

changes - 2,000 9,685 217 6,796 14,674 - 33,372 Balance, December 31 - 2,675,499 1,435,094 5,391 1,142,817 1,418,381 - 6,677,182 Accumulated impairment Balance, January 1 - - - - - - - - Addition - 7,860 - - - - - 7,860 Deduction - - - - - - - - Reclassifications - (7,860 ) - - - - - (7,860 ) Balance, December 31 - - - - - - - - Net amount Balance, December 31 $ 5,658,457 $ 2,469,738 $ 459,508 $ - $ 307,803 $ 418,733 $ 155,885 $ 9,470,124

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Land Buildings

Computer and Machinery Equipment


Other Equipment

Leasehold Improvement


and Construction in

Progress Total Cost Balance, January 1 $ 6,613,337 $ 5,888,138 $ 2,207,847 $ 5,942 $ 1,328,813 $ 1,672,402 $ 146,511 $ 17,862,990 Addition - 29,453 119,346 - 84,259 36,191 180,892 450,141 Deduction 18,072 7,947 444,988 1,121 49,310 59,701 14,738 595,877 Reclassifications - 70,664 3,610 - 12,408 37,770 (181,516 ) (57,064 ) Effect of exchange rate

changes 3,076 4,496 13,572 350 9,671 22,102 1,600 54,867 Balance, December 31 6,598,341 5,984,804 1,899,387 5,171 1,385,841 1,708,764 132,749 17,715,057 Accumulated depreciation

Balance, January 1 - 2,808,223 1,728,234 4,903 1,085,014 1,234,177 - 6,860,551 Depreciation - 153,441 161,748 590 61,912 103,729 - 481,420 Deduction - 2,336 437,449 1,121 47,462 52,466 - 540,834 Effect of exchange rate

changes - 2,460 12,130 314 8,643 17,559 - 41,106 Balance, December 31

-

2,961,788

1,464,663

4,686

1,108,107

1,302,999

-

6,842,243

Net amount Balance, December 31 $ 6,598,341 $ 3,023,016 $ 434,724 $ 485 $ 277,734 $ 405,765 $ 132,749 $ 10,872,814 Reclassifications were mainly (a) from prepayments for equipment and construction in progress to buildings, computers and machinery equipment, other equipment, leasehold improvement and computer software (listed under intangible assets); and (b) from land and buildings to investment property. The above items of property and equipment were depreciated at the following estimated useful lives:

Items Years Buildings 2-60 years Computer and machinery equipment 3-15 years Transportation equipment 5 years Other equipment 3-15 years Leasehold improvement 19 months - 15 years There are no property and equipment pledged as security.

18. INVESTMENT PROPERTY, NET

The movements of investment property are summarized as follow: For the Year Ended December 31, 2015 Land Buildings Total Cost Balance, January 1 $ - $ - $ - Addition - - - Deduction - - - Transfer from property and equipment 797,236 753,339 1,550,575 Balance, December 31 797,236 753,339 1,550,575 Accumulated depreciation Balance, January 1 - - - Addition - 1,506 1,506 Deduction - - - Transfer from property and equipment - 365,784 365,784 Balance, December 31 - 367,290 367,290

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For the Year Ended December 31, 2015 Land Buildings Total Accumulated impairment Balance, January 1 $ - $ - $ - Addition - - - Deduction - - - Transfer from property and equipment - 7,860 7,860 Balance, December 31 - 7,860 7,860 Net amount Balance, December 31 $ 797,236 $ 378,189 $ 1,175,425

The above items of investment property were depreciated at the following rates per annum:

Category Useful Lives

Buildings 8-60 years Buildings were property held for earning rentals and/or for capital appreciation. On the transfer of these buildings from property and equipment, their book value was calculated on the basis of their owned proportion of the building. The fair values of investment property as of December 31, 2015 totaled $16,850,688. The fair values, which were based on an internal valuation report instead of an assessment by an independent professional valuer, were unobservable inputs (Level 3). There is no investment property pledged as security.

19. INTANGIBLE ASSETS, NET

December 31, 2015


Goodwill $ 1,409,851 $ - $ 1,409,851 Computer software 1,230,142 681,760 548,382 $ 2,639,993 $ 681,760 $ 1,958,233

December 31, 2014


Goodwill $ 1,388,107 $ - $ 1,388,107 Computer software 1,111,727 489,931 621,796 $ 2,499,834 $ 489,931 $ 2,009,903

Movements in the Group’s intangible assets are shown as follows: For the Year Ended December 31 2015 2014 Costs

Balance, January 1 $ 2,499,834 $ 2,313,883

Addition 71,056 136,692 Deduction 32,360 39,679 Reclassifications 73,113 54,700 Effect of exchange rate changes 28,350 34,238 Balance, December 31 2,639,993 2,499,834

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For the Year Ended December 31 2015 2014 Accumulated amortization Balance, January 1 $ 489,931 $ 332,148 Amortization 219,855 191,633 Deduction 32,360 39,679 Effect of exchange rate changes 4,334 5,829 Balance, December 31 681,760 489,931 Net amount $ 1,958,233 $ 2,009,903 The above intangible assets were amortized on a straight-line basis over the following estimated useful lives:

Item Years Computer software 3-10 years Goodwill includes referred to (1) $876,717, resulted from the Bank’s cash merger with SinoPac Card Services, and this merger was treated as a reorganized of SPH, and (2) the Bank’s acquisition of Far East National Bank (FENB) through SinoPac Bancorp on August 15, 1997, which was accounted for using the purchase method. The assets and liabilities of FENB were revalued to estimate its fair market value as of the date of acquisition. The purchase price in excess of the fair market value of the net tangible assets acquired was US$16,123 thousand, which was recorded as goodwill. The Bank takes impairment review of goodwill annually or more frequently if events or changes in circumstance indicate goodwill impairment. In assessing whether goodwill is impaired, the Bank considers the credit card department as a cash generating unit and estimates the recoverable amount by its value in use. The Bank uses the department’s or investee’s actual profitability in making key assumption to predict future cash flows and thus calculates its value in use. Under a going-concern assumption, the Bank predicted the net cash flows generated from the investee’s operating activities in the next 5 years and estimated salvage value and used the Bank’s weighted average cost of capital to calculate the value in use. After assessment, the Group found no objective evidence that goodwill had been impaired.

20. OTHER ASSETS, NET

December 31 2015 2014 Guarantee deposits $ 3,784,008 $ 5,587,573 Prepayment 315,966 284,418 Temporary payment and suspense accounts 278,831 313,279 Others 44,455 46,096 4,423,260 6,231,366 Less: Allowance for reduction of inventory to market - gold 1,129 1,306 Less: Allowance for credit losses 8,330 7,069 $ 4,413,801 $ 6,222,991

21. DEPOSITS FROM THE CENTRAL BANK AND OTHER BANKS

December 31 2015 2014 Call loans from banks $ 56,846,866 $ 63,283,985 Redeposits from Chunghwa Post 3,528,768 4,422,239 Due to banks 954,324 1,900,113 $ 61,329,958 $ 69,606,337

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22. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

December 31 2015 2014 Government bonds $ 5,174,182 $ 7,103,953 Agreed-upon repurchase price $ 5,175,436 $ 7,105,725 Maturity date March 2016 March 2015

23. PAYABLES

December 31 2015 2014 Notes and checks in clearing $ 3,776,684 $ 4,239,389 Accrued expenses 2,982,341 3,239,545 Accounts payable - factoring 2,510,886 3,929,771 Interest payables 1,830,124 2,028,153 Acceptance payables 1,595,036 2,099,031 Dividends payables to SPH 1,435,025 1,435,025 Others 1,603,713 1,705,399 $ 15,733,809 $ 18,676,313

24. DEPOSITS AND REMITTANCES

December 31 2015 2014 Checking $ 17,588,521 $ 17,870,182 Demand 249,807,943 238,247,598 Savings - demand 262,152,996 257,907,626 Time deposits 358,916,737 369,720,498 Negotiable certificates of deposit 9,992,500 972,200 Savings - time 258,807,391 239,957,440 Inward remittances 1,620,515 607,613 Outward remittances 38,786 155,030 $ 1,158,925,389 $ 1,125,438,187

25. BANK DEBENTURES

To raise capital for its financial operation and increase its capital adequacy ratio, the Group obtained approval from FSC to issue bank debentures, as follows:



$ - $ 4,499,909 2008.03.25-2015.03.25 Principal is repayable on maturity

date.

Index rate plus 1%. Interest rate is reset quarterly since the issuance date and paid annually.


- 499,990 2008.03.25-2015.03.25 Principal is repayable on maturity

date.




date.



- 2,199,898 2009.06.23-2015.06.23 Principal is repayable on maturity

date.


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debentures issued in 2009 (B)

$ 2,199,984 $ 2,199,973 2009.06.23-2017.06.23 Principal is repayable on maturity

date.




date.




date.

Index rate plus 0.35%. Interest rate is reset quarterly since the issuance date and paid annually.



date.




date.




date.




date.




date.




date.




date.




date.




date

Fixed interest rate of 1.70%, interest is paid annually



date.


Third subordinated bank debentures issued in 2014 (A)


date.


Third subordinated bank debentures issued in 2014 (B)


date.











Fourth subordinated bank debentures issued in 2015

139,924

-

2015.12.15, no maturity date (Note 2)


$ 43,428,046 $ 48,565,756

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Note 1: The bond has neither a maturity date nor a callable date. The Group has the right to call or buy back the bond from the market after five years of its issuance if one of the conditions listed below is met, and bank debenture issuance has been approved by regulatory authorities.

a. The Group’s ratio of regulatory capital to risk-weighted assets will still meet the minimum requirement

prescribed in Article 5 of Section 1 of the Regulations Governing the Capital Adequacy and Capital Category of Banks after bond repayment.

b. The Group replaces the bond with another capital market instrument that offers interest equal to or higher than

that on the bond that has been called.

Note 2: The bond has neither a maturity date nor a callable date. The Group has the right to call or buy back the bond from the market after five years of its issuance if both of the conditions listed below are met, and bank debenture issuance has been approved by regulatory authorities.

a. The Group’s ratio of regulatory capital to risk-weighted assets will still meet the minimum requirement

prescribed in Article 5 of Section 1 of the Regulations Governing the Capital Adequacy and Capital Category of Banks after bond repayment.

b. The Group replaces the bond with another capital instrument t that offers interest equal to or higher than that on

the bond that has been called. Note 3: Interest payment amount on the bond will be based on the Group’s calculation. Calculation of the interest starts on

the issuance date, accrues on the basis of actual days, and is payable annually. The Group is not obligated to pay interest when the Group has no profit from the prior year and does not distribute any dividends (both cash and stock dividends). However, this does not apply when accumulated undistributed earnings less the proceeds on unamortized nonperforming loans losses is larger than the interest payment amount while the condition for interest payment has not been modified. Interest payments that were not issued due to the reason described previously shall not be accumulated nor deferred. If the Group’s regulatory capital to risk-weighted assets ratio does not meet the minimum requirement prescribed in Article 5, Section 1 of the Regulations Governing the Capital Adequacy and Capital Category of Banks on an interest payment date, the bond shall defer interest payments. Accrued interest on the bond shall be deferred till the next interest payment date that conforms to the condition of an interest payment date described above. Deferred interest does not incur additional interest.

To raise the BIS capital adequacy ratio and to acquire the capital needed for medium- and long-term expansion, the board approved on December 25, 2015 the Group’s issuance of bank debentures with a principal amount of $7 billion. The issuance is pending approval by regulatory authorities, and may issue separately. On February 5, 2016, the board approved the Group’s issuance in 2016 of 1st unsecured perpetual noncumulative subordinated bank debentures with a principal amount of $1.5 billion. Subject to the approval of regulatory authorities, the Group will call back the debentures if the ratio of the Group’s regulatory capital to its risk-weighted assets meets the minimum requirement prescribed by regulatory authorities, and is able to substitute the original capital instrument with an equal or higher quality capital instrument, after the first interest payment date when the bond is issued for more than or equal to five years. The Group shall announce the repayment of the bond 30 days prior to the call date and recognize interest payable based on the face value of the bonds.

26. OTHER FINANCIAL LIABILITIES

December 31 2015 2014 Principal of structured products $ 11,629,004 $ 12,960,079 Oversea certificate of deposits 1,171,974 2,219,280 Federal Home Loan Banks Fund 991,976 951,518 Short-term borrowings 148,796 - Payments collected for share subscriptions 12,891 18,855 $ 13,954,641 $ 16,149,732

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27. PROVISIONS

December 31 2015 2014 Provisions for employee benefits $ 2,580,668 $ 2,598,249 Provisions for guarantee liabilities 339,863 354,111 Provisions for decommissioning liabilities 100,702 87,761 $ 3,021,233 $ 3,040,121

28. PROVISIONS FOR EMPLOYEE BENEFITS

December 31 2015 2014 Recognized in consolidated balance sheets (listed in account payables and

provisions) Defined contribution plans $ 33,938 $ 31,490 Defined benefit plans 2,298,512 2,294,041 Preferential interest on employees’ deposits plan 228,828 239,120 Deferred annual leave and termination benefit 53,328 65,088 $ 2,614,606 $ 2,629,739

a. Defined contribution plans

The Bank, SinoPac Life Insurance Agent Co., Ltd. and SinoPac Property Insurance Agent Co., Ltd. adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Based on the LPA, the Group makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages. Overseas branches and overseas subsidiaries’ defined contribution plans is in accordance with local regulations. The total expense recognized in profit or loss for the years ended December 31, 2015 and 2014 was $215,718 and $207,649, respectively, represents contributions payable to these plans by the Bank at rates specified in the rules of the plans.

b. Defined benefit plans

For the Bank and SinoPac Life Insurance Agent Co., Ltd. employees who adopt for defined benefit plans regulated by the Labor Standards Act, the retirement benefits are paid to employees as follow: (i) a lump sum payment equal to two base units for each year of service; (ii) that each year of service exceeding 15 years is entitled to only one base unit of wage; and (iii) that the maximum payment is for up to 45 base units. Any fraction of a year that is equal to six months or more is counted as one year of service, and any fraction of a year that is less than six months is counted as half a year of service. Pension contributions are deposited in the Trust department of Bank of Taiwan and Bank SinoPac in the Organization of Supervisory Committee of Business Entities’ Labor Retirement Reserve’s name. Before the end of each year, the Bank and SinoPac Life Insurance Agent Co., Ltd. assess the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Bank and SinoPac Life Insurance Agent Co., Ltd. are required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund deposited in the Trust department of Bank of Taiwan is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Group has no right to influence the investment policy and strategy. The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans were as follows: December 31 2015 2014 Present value of defined benefit obligation $ 5,009,581 $ 4,899,064 Fair value of plan assets (2,711,069) (2,605,023) Deficit 2,298,512 2,294,041 Asset ceiling - - Net defined benefit liability $ 2,298,512 $ 2,294,041

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Plan Assets


(Asset) Balance at January 1, 2014 $ 5,030,429 $ (2,550,324) $ 2,480,105 Service cost



Actuarial (gain) loss - changes in demographic assumptions 1,639 - 1,639

Actuarial (gain) loss - experience adjustments (20,848) - (20,848) Recognized in other comprehensive income (19,209) 8,201 (11,008) Contributions from the employer - (312,435) (312,435) Benefits paid (295,242) 295,242 - Balance at December 31, 2014 $ 4,899,064 $ (2,605,023) $ 2,294,041 Balance at January 1, 2015 $ 4,899,064 $ (2,605,023) $ 2,294,041 Service cost



Actuarial (gain) loss - changes in demographic assumptions (762) - (762)

Actuarial (gain) loss - changes in financial assumptions 155,036 - 155,036

Actuarial (gain) loss - experience adjustments 16,560 - 16,560 Recognized in other comprehensive income 170,834 8,572 179,406 Contributions from the employer - (304,262) (304,262) Benefits paid (236,146) 236,146 - Balance at December 31, 2015 $ 5,009,581 $ (2,711,069) $ 2,298,512

The plan assets actual return are $37,930 and $37,506 for the year ended December 31, 2015 and 2014. Through the defined benefit plans under the Labor Standards Law, the Bank is exposed to the following risks:

1) Investment risk: The plan assets are invested in domestic/and foreign/equity and debt securities, bank deposits, etc. The

investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

2) Interest risk: A decrease in the government or corporate bond interest rate will increase the present value of the defined

benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments. 3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan

participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

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The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

December 31 2015 2014 Discount rate 1.50% 1.75% Expected rate of salary increase 1.75% 1.75% Turnover rate 0.82% 0.86%

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would (decrease) or increase as follows:

December 31 2015 2014 Discount rate (2015: 1.50%; 2014: 1.75%)

0.25% increase $ (155,002) $ (155,412) 0.25% decrease $ 161,879 $ 162,514

Expected rate of salary increase 0.25% increase $ 161,052 $ 162,081 0.25% decrease $ (154,986) $ (155,762)

Turnover rate (2015: 0.82%; 2014: 0.86%) 110% of expected turnover rate $ (1,975) $ (2,643) 90% of expected turnover rate $ 1,982 $ 2,653

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

December 31 2015 2014 The expected contributions to the plan for the next year $ 232,736 $ 236,917 The average duration of the defined benefit obligation 13 years 13 years


The Bank offers preferential interest on employees’ deposits to both current and retired employees. The principal assumptions used for the purposes of the actuarial valuations were as follows:

Valuation at December 31 2015 2014

Discount rate 4.00% 4.00% Expected interest rate on preferential interest on employees’ deposits

Manager 7.30% 7.38% Staff 13.00% 13.00%

Normal deposit interest rate 1.30% 1.38% Return on deposits 2.00% 2.00% Excess preferential interest

Manager 4.00% 4.00% Staff 9.70% 9.62%

The probability of preferential interest on employees’ deposits is canceled within ten years 50.00% 50.00%

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The amounts included in the balance sheets arising from the Bank’s obligation in respect of its preferential interest on employee’s deposits were as follows:

December 31 2015 2014 Present value of defined benefit obligation $ 228,828 $ 239,120 Fair value of plan assets - - Deficit 228,828 239,120 Asset ceiling - - Net defined benefit liability $ 228,828 $ 239,120




Plan Assets




Actuarial loss - experience adjustments 1,872 - 1,872 Recognized in other comprehensive income 1,872 - 1,872 Benefits paid (20,642) - (20,642) Balance at December 31, 2014 $ 239,120 $ - $ 239,120 Balance at January 1, 2015 $ 239,120 $ - $ 239,120 Service cost


Actuarial gain - experience adjustments (24,733) - (24,733) Actuarial loss - changes in assumptions 1,498 - 1,498

Recognized in other comprehensive income (23,235) - (23,235) Benefits paid (21,686) - (21,686) Balance at December 31, 2015 $ 228,828 $ - $ 228,828

29. OTHER LIABILITIES

December 31 2015 2014 Temporary receipt and suspense accounts $ 874,895 $ 1,284,823 Advance receipts 519,778 2,027,585 Guarantee deposits received 280,921 292,449 Deferred revenue 103,574 117,516 Others 41,006 37,804 $ 1,820,174 $ 3,760,177

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30. INCOME TAX Under Article 49 of the Financial Holding Company Act and related directives issued by the Ministry of Finance, a financial holding company and its domestic subsidiaries that held over 90% of shares issued by the financial holding company for 12 months within the same tax year may choose to adopt the linked-tax system for income tax filings. Thus, SPH adopted the linked-tax system for income tax and unappropriated earnings tax filings with its qualified subsidiaries since 2003. a. Income tax recognized in profit or loss

The major components of tax expense were as follows:

For the Year Ended December 31 2015 2014 Current tax

Current period $ 1,090,968 $ 2,038,234 Adjustments for prior periods (8,267) (15,609)

1,082,701 2,022,625 Deferred tax

Temporary difference 440,469 (350,747) Income tax expenses recognized in profit or loss $ 1,523,170 $ 1,671,878

A reconciliation of accounting profit and income tax expenses is as follows:

For the Year Ended December 31 2015 2014 Profit before tax $ 10,698,033 $ 13,054,698 Income tax expense calculated at the statutory rate (17%) $ 1,818,666 $ 2,219,298 Permanent difference (446,222) (880,917) Tax-exempt income (153,433) (75,601) Additional income tax under the Alternative minimum Tax Act 199,415 184,235 Unrecognized temporary difference 18,628 140,183 Effect number of different tax rates in several other operating subsidiaries 95,915 74,186 Others (1,532) 26,103 Adjustments for prior years’ tax (8,267) (15,609) Income tax expense recognized in profit or loss $ 1,523,170 $ 1,671,878

As the status of 2016 appropriation of earnings is uncertain, the potential income tax consequences of 2015 unappropriated earnings are not reliably determinable.

b. Income tax recognized in other comprehensive income

For the Year Ended December 31 2015 2014 Deferred tax Recognized in other comprehensive income

Exchange difference on translating foreign operations $ (132,544) $ (121,434) Unrealized gain (loss) on available-for-sale financial assets 5,934 (33,165) Cash flow hedges - (644) Actuarial gains and loss arising from defined benefit plans 26,549 (1,553)

Income tax recognized in other comprehensive income $ (100,061) $ (156,796)

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c. Current tax assets and liabilities

December 31 2015 2014 Current tax assets Receivables from adopting the linked-tax system $ 1,202,576 $ 1,155,938 Subsidiary tax receivable 26,758 14,498 Others 116,178 20,006 $ 1,345,512 $ 1,190,442 Current tax liabilities Payables form adopting the linked-tax system $ 6,438 $ 948,384 Subsidiary tax payable 136,417 169,642 Others 43,934 24,453 $ 186,789 $ 1,142,479

d. Deferred tax assets and liabilities

December 31 2015 2014 Deferred tax assets Loss carryforwards $ 674,200 $ 698,345 Loss carryforwards from subsidiaries 61,897 301,709 Provisions 981,039 1,147,840 Provision for employee benefits 388,915 395,239 Investments accounts for using the equity method 108,071 167,451 Others 434,789 285,634 $ 2,648,911 $ 2,996,218 Deferred tax liabilities Land value increment tax $ 591,416 $ 591,416 Unrealized commission revenue 18,813 21,497 Investments accounts for using the equity method 187,599 170,356 Franchise tax 60,234 22,655 Exchange differences on translating foreign operations 204,683 76,166 Others 80,733 93,816 $ 1,143,478 $ 975,906

Deferred tax expenses recognized in profit or loss are shown as follows:

Year Ended December 31 2015 2014 Loss carryforwards $ 179,763 $ (87,339) Investments accounts for using the equity method 76,624 120,802 Defined benefit plan 29,739 30,662 Provisions 288,625 (716,903) Others (134,282) 302,031 $ 440,469 $ (350,747)

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The unused loss carryforwards as of December 31, 2015 were as follows:

Amount The Last Year of Claiming Deductible Loss $ 2,443,805 2018 1,522,078 2019 $ 3,965,883

e. The information on the Integrated Income Tax System was as follows:

December 31 2015 2014 Balances of the imputation tax credit account (ICA) The Bank $ 478 $ 1,216 SinoPac Life Insurance Agent Co., Ltd. 114,421 108,147 SinoPac Property Insurance Agent Co., Ltd. 3,373 2,958

Creditable Tax Ratio for Distribution of Earnings

2015 (Estimate) 2014 (Actual) The Bank 2.58% 1.99% SinoPac Life Insurance Agent Co., Ltd. 20.48% 20.48% SinoPac Property Insurance Agent Co., Ltd. 20.48% 20.48%

Under the Income Tax Act, for distribution of earnings generated after 1998, the imputation credits allocated to ROC resident shareholders of the Bank was calculated based on the creditable ratio as of the date of dividend distribution. As of December 31, 2015, the unappropriated earnings generated before 1998 was $8,758, which was recorded as capital surplus resulting from a merger.

f. The Bank’s tax returns through 2010 had been assessed by the tax authorities. However, the tax authorities had a different

opinion about recognizing the interest expenses as the deduction of the income from trading of domestic securities which is tax-exempt temporarily. Thus, the tax authorities canceled the interest expenses deduction and increased taxable income by about $21,245 from year 2009 to 2010. The Bank applied for 2009 to 2010 of administrative remedy for above event.

The tax returns of SinoPac Life Insurance Agent Co., Ltd. and SinoPac Property Insurance Agent Co., Ltd. had been assessed by the tax authorities through 2013 and 2014, respectively.

31. EQUITY

Common Shares The Bank’s authorized capital is $80,000,000. And the Bank issued 8,000,000 thousand common shares with each par value of NT$10. On October 24, 2014, the Bank’s board of directors which executed the rights and functions of the stockholders’ meeting resolved to issue 675,870 thousand ordinary shares by earnings reallocated as capital, with a par value of NT$10 each, which increased the share capital issued and fully paid to $66,374,857. The above transaction was approved by authorities, and the record date of earnings capitalization was December 10, 2014.

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On June 26, 2015, the Bank’s board of directors which executed the rights and functions of the stockholders’ meeting resolved to issue 808,874 thousand ordinary shares by earnings reallocated as capital, with a par value of NT$10 each, which increased the share capital issued and fully paid to $74,463,604. The above transaction was approved by the authorities, and the record date of earnings capitalization was September 1, 2015. To increase the Bank’s Tier 1 capital and to meet capital demand for expanded operations, the Bank’s board of directors approved on February 26, 2016 the private placement of 333,333 thousand common shares - with par value of NT$10 - at NT$15 per share, for a total placement amount of NT$5 billion, and set March 31, 2016 as the record date. The approval of this transaction is pending with the authorities.

Capital Surplus The capital surplus from the issuance of new shares at a premium (additional paid-in capital from issuance of common shares, conversion of bonds and treasury stock transactions) and endowments received by the Bank may be used to offset a deficit; in addition, when the Bank has no deficit, such capital surplus may be distributed as cash dividends or transferred to capital (limited to a certain percentage of the Company’s paid-in capital every year). On July 25, 2014, the board of directors of the parent company of the Bank, SPH, approved a capital increase and retained 10% of shares for subscription by the Bank’s employees. The criteria for the employee entitlement to the employee share options were in accordance with IFRS 2 “Share-based Payment”. Under IFRS 2 share options granted by a parent company to a subsidiary’s employees should be treated as equity-settled share-based payments that match the services provided by employees and are recognized as equity increase due to parent’s contribution. The Bank’s capital surplus - employee share options, which was determined on the basis of the grant-date fair value of the employee share options, was $67,511 in 2014. Options were priced using the Black-Scholes pricing model. The inputs into the model were as follows: October 16, 2014 Grant date share price NT$12.85 Exercise price NT$11 Volatility 14.49% Duration 0.0384 year Risk-free interest rate 0.35% The volatility was based on the historical annualized standard deviation of return rates from October 16, 2013 to October 16, 2014. The return rates over time were measured using natural logarithm of daily restored closing stock price. The capital surplus from investments accounted for using the equity method and from employee share options may not be used for any purpose. Other Equity Items


Translating Foreign

Operations



Assets Cash Flow

Hedges Total Balance January 1, 2015 $ 380,113 $ 167,966 $ - $ 548,079 Exchange differences on translating



Available-for-sale financial assets Unrealized gain (loss) on

available-for-sale financial assets - (100,427) - (100,427) Reclassification adjustment for

realized in income - (7,460) - (7,460) Income tax - 5,934 - 5,934

Balance December 31, 2015 $ 1,027,235 $ 66,013 $ - $ 1,093,248

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Translating Foreign

Operations



Assets Cash Flow

Hedges Total Balance January 1, 2014 $ (212,775) $ 88,587 $ (3,145) $ (127,333) Exchange differences on translating



Available-for-sale financial assets Unrealized gain on available-for-sale

financial assets - 118,123 - 118,123 Reclassification adjustment for

realized in income - (5,579) - (5,579) Income tax - (33,165) - (33,165)

Cash flow hedges Reclassification on gain arising on

changes in the fair value of hedging instruments - - 3,789 3,789

Income tax - - (644) (644)

Balance December 31, 2014 $ 380,113 $ 167,966 $ - $ 548,079 Earnings Distribution and Dividend Policy The Bank’s Articles of Incorporation provide that annual net income should be appropriated after it has: a. Deducted any deficit of prior years; b. Paid all outstanding taxes; c. Set aside 30% of remaining earnings as legal reserve; d. Set aside any special reserve or retained earnings allocated at its option; e. Allocated stockholders’ dividends; The Banking Act provides that, before the balance of the reserve reaches the aggregate par value of the outstanding capital stock, above allocation should not exceed 15% of the aggregate par value of the outstanding capital stock of the Bank. The Bank meets well financial position as standard and setting aside legal reserve under Company Act is not limited to the restriction. To comply with the Bank’s globalization strategy, strengthen its market position, integrate its diversified business operation and be a major local bank, the Bank has adopted the “Balanced Dividend Policy”. Under this policy, dividends available for distribution are determined by referring to its capital adequacy ratio (CAR). Cash dividends may be declared if the Bank’s CAR is above 10% and stock dividends may be declared if the CAR is equal to or less than 10%. However, the Bank may make discretionary cash distribution even if the CAR is below 10%, if approved at the stockholders’ meeting, for the purpose of maintaining the cash dividends at a certain level in any given year. Cash dividends and cash bonus are paid after the approval of the stockholders, while the distribution of stock dividends requires the additional approval of the authorities. Based on the May 2015 amendments to the Company Act, the recipients of dividends and bonuses are limited to shareholders and do not include employees. To comply with this requirement, the Bank’s board of directors proposed in their meeting on December 25, 2015 the amendment of the Bank’s Articles of Incorporation. Under an authorization to exercise the rights and functions of stockholders meetings, the board approved this proposal. For the employee benefit expenses, please see Note 38.

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Under the Company Act, legal reserve shall be appropriated until it has reached the Company’s paid-in capital. This reserve may be used to offset a deficit. When the legal reserve has exceeded 25% of the Bank’s paid-in capital, the excess may be transferred to capital or distributed in cash. In addition, the Banking Act provides that, before the balance of the reserve reaches the aggregate par value of the outstanding capital stock, allocation should not exceed 15% of the aggregate par value of the outstanding capital stock of the Bank. Under Article 50-2 of the Banking Act revised on December 30, 2008, when legal reserve meet the total capital reserve or well financial position and setting aside legal reserve under Company Act is not limited to the restriction of setting aside 30% of remaining earnings as legal reserve, and the appropriation of the remainder and retained earnings from previous year was limited to 15% of total capital reserve when legal reserve has not meet the total capital reserve. The requirements for financial positions of banks to be established in accordance with this Act revised on April 30, 2012 shall be as prescribed by the FSC, Executive Yuan, ROC. According to FSC Rule No. 1010012865 and the rule of “Questions and Answers on Special Reserves Appropriated Following the Adoption of IFRSs”, of amount of equal to the net debit balance of shareholders’ other equity items shall be transferred from unappropriated earnings to a special reserve before any appropriation of earnings generated. Under the Financial Holding Company Act, the board of directors is empowered to execute the authority of the stockholders’ meeting, which is under no jurisdiction in the related regulations in the Company Act. The 2013 earnings appropriation which the board of directors execute the rights and functions of the stockholders’ meeting resolved on March 21, 2014, had revised under the resolution which board of directors execute the rights and functions of the stockholders’ meeting on October 24, 2014. The 2013 earnings appropriation and cash dividends per share were as follow: Appropriation of Earnings Dividends Per Share (NT$) Revised Original Revised Original Legal reserve $ 2,880,873 $ 2,880,873 Special reserve 26,264 26,264 Share dividends 6,758,697 - $ 1.13370206 $ - Cash dividends - - - - The 2014 earnings appropriation which the board of directors execute the rights and functions of the stockholders’ meeting resolved on March 11, 2015, had revised under the resolution which board of directors execute the rights and functions of the stockholders’ meeting on June 26, 2015. The 2014 earnings appropriation and cash dividends per share were as follow:

Appropriation

of Earnings Dividends Per Share (NT$)

Legal reserve $ 3,406,462 Reversal of special reserve (127,332) Share dividends 8,088,747 $ 1.21864633 Cash dividends - - The appropriation of earnings for 2015 based on 7,446,360,426 outstanding common shares as of February 29, 2016 are as follows:

Appropriation


Legal reserve $ 2,752,459 Share dividends 6,157,633 $ 0.82693199 Cash dividends - - On its eighth meeting held on February 26, 2016, the Bank’s board of directors approved a cash capital increase of $5,000,000 through the issuance of 333,333,334 common shares, with all the shares to be for by the parent company (SPH). If the authorities approve this issuance, the common stock outstanding will be 7,779,693,760 shares. In the same meeting, the board of directors also approved the appropriation of earnings-based on the planned share increase-and will present this appropriation, shown below, for approval in the stockholders’ meeting (with the rights and functions of the stockholders’ meeting to be executed by the board of directors) if the capital increase process is completed before the stockholders’ meeting.

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Appropriation


Legal reserve $ 2,752,459 Share dividends 6,157,633 $ 0.79150077 Cash dividends - -

The board of director approved the 2015 appropriation of earnings on March 16, 2016, that will be resolved by shareholders’ resolution in 2016. In accordance with FSC guideline No. 09900146911, cash dividends and bonus to stockholders for 2009 amounting to $1,435,025 shall not be remitted to the parent company until the land transferred to SPL from the Bank is disposed and the gain is realized.

32. INTEREST REVENUE, NET

For the Year Ended December 31 2015 2014 Interest income

Loans $ 18,857,315 $ 19,049,212 Account receivables - forfaiting 2,784,212 2,887,542 Available-for-sale financial assets 2,105,474 958,378 Due from the Central Bank and other banks 1,372,171 2,318,061 Credit card revolving interest rates 702,262 748,352 Acceptance-forfaiting 609,449 630,138 Held-to-maturity financial assets 596,920 1,558,544 Others 336,327 391,774 27,364,130 28,542,001

Interest expense Deposits 9,991,631 9,914,260 Bank debentures 884,646 922,136 Deposits from banks 466,224 665,705 Interest expense of structured products 338,283 380,005 Others 116,368 170,969 11,797,152 12,053,075

$ 15,566,978 $ 16,488,926

33. COMMISSION AND FEE REVENUE, NET

For the Year Ended December 31 2015 2014 Commissions and fees revenue

Insurance services $ 2,167,388 $ 1,869,053 Trust and related services 1,851,609 2,107,664 Credit card services 1,215,155 1,232,600 Loan services 751,005 668,376 Others 1,002,832 946,693

6,987,989 6,824,386 Commissions and fees expense

Credit card services 486,090 422,955 Interbank services 140,880 126,564 Foreign exchange transaction 54,554 56,424 Trust services 51,822 49,909 Others 233,740 164,173

967,086 820,025 $ 6,020,903 $ 6,004,361

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34. GAINS ON FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

For the Year Ended December 31 2015 2014 Realized gain or loss on financial assets and liabilities at fair value through profit

or loss Non-derivative financial instruments

Government bonds $ 470,958 $ 177,044 Bank debentures 114,231 32,756 Corporate bonds 59,119 47,330 Convertible bonds 42,365 77,646 Listed stock 23,066 22,212 Others 27,333 90,651

Derivative financial instruments Currency swap contracts and hybrid FX swap structured instrument 1,743,951 647,502 Option contracts 749,183 902,320 Future contracts 68,120 28,516 Interest rate swap contracts (15,717) 61,673 Forward contracts (499,267) 326,523 Others 6,603 5,262

2,789,945 2,419,435 Unrealized gain or loss on financial assets and liabilities at fair value through

profit or loss Non-derivative financial instruments

Government bonds 207,404 40,167 Corporate bonds 17,822 11,497 Bank debentures (22,563) (1,217) Others 5,524 (61,701)

Derivative financial instruments Forward contracts 220,455 (230,564) Futures contracts (88,863) 6,494 Interest rate swap contracts (201,281) (69,791) Currency swap contracts and hybrid FX swap structured instrument (554,407) 528,987 Option contracts (581,249) 281,911 Others 11,706 1,782

(985,452) 507,565 $ 1,804,493 $ 2,927,000

a. Capital gain or loss including in realized gain or loss on financial assets and liabilities at fair value through profit or loss were

$2,332,178 and $2,085,590 for the years ended December 31, 2015 and 2014, respectively. Related interest revenues and dividend incomes were $457,767 and $333,845 for the years ended December 31, 2015 and 2014, respectively.

b. When the Group designates financial instruments as at fair value through profit or loss, fair value change in derivate

instruments is included in “gains on financial assets and liabilities at fair value through profit or loss”. 35. REALIZED GAINS (LOSSES) ON AVAILABLE-FOR-SALE FINANCIAL ASSETS

For the Year Ended December 31 2015 2014 Gains (losses) from disposal of agency bonds $ 8,560 $ (170) Dividends 2,185 27,588 Gains from disposal of guaranteed secured debt - 4,809 Gains from disposal of corporate bonds - 943 Losses from disposal of bank debentures (1,258) - Others 158 (3) $ 9,645 $ 33,167

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36. REVERSAL OF IMPAIRMENT LOSSES ON ASSETS For the Year Ended December 31 2015 2014 Gain on the reversal of loss on other financial assets $ 63,923 $ 187,391 Gain on the reversal of loss on other assets - 36,071 Gain on the reversal of loss on held-to-maturity financial assets - 10,213 Impairment loss on property and equipment (7,860) - $ 56,063 $ 233,675

37. OTHER NONINTEREST REVENUES

For the Year Ended December 31 2015 2014 Net gains on unquoted equity instruments $ 154,534 $ 141,835 Gain on sales of property and equipment 145,969 68,355 Rental income 87,274 87,584 Life insurance cash surrender revenue 39,393 66,906 Operating assets rental income 29,498 26,727 Overseas operating grants income 24,972 49,972 Gain on sales of derecognized SIV assets - 292,023 Loss on retirement of property (6,197) (15,458) Others 2,694 5,900 $ 478,137 $ 723,844 Other revenues $ - $ 3,786,854 The ending balance of loans of US$46,681 thousand as of March 31, 2014 which was collateralized by the convertible bonds provided by the subsidiary of a borrower. According to the loan agreements with the collateral holder, the repayment net of tax and related expense from disposal of the convertible bond should be distributed. The aforementioned collateral has been disposed for the six months ended June 2014. The aforementioned loans and interest receivables were repaid, and the Group received $3,786,854 listed in other revenues.

38. EMPLOYEE BENEFITS EXPENSE

For the Year Ended December 31 2015 2014 Salaries and wages $ 4,632,130 $ 4,492,973 Bonus 2,158,882 2,382,367 Labor insurance and national health insurance 464,853 451,582 Pension costs 345,183 345,119 Share-based payment arrangement - 67,511 Others 606,508 577,555 $ 8,207,556 $ 8,317,107 Please refer to Note 31 for the related information on the share-based payments of the Group. Under the Company Act as amended in May 2015, the Bank’s Articles of Incorporation should stipulate a fixed amount or ratio of annual profit to be distributed as employees’ compensation. To comply with this requirement, the Bank’s board of directors proposed in board meeting on December 25, 2015 to amend the Bank’s Articles of Incorporation. The board approved this proposal in the same meeting under an authorization to exercise the rights and functions of the stockholders’ meeting. The Bank’s Articles of Incorporation provide that the Bank allocate from annual profit more than 0.5% as employees’ compensation and not more than 1% as remuneration of directors and supervisors. But if there are accumulated losses, the Bank should make up the losses firstly.

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The compensation to employees and the remuneration to directors and supervisors recognized were estimated on the basis of the Bank’s Articles of Incorporation and past experience. The Bank accrued compensation to employees and supervisors of $56,000 and $24,000 for the year ended December 31, 2015. Material differences between these estimates and the amounts proposed by the board of directors on or before the annual consolidated financial statements are authorized for issue are adjusted in the year the bonus and compensation are recognized. If there is a change in the proposed amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in accounting estimate. The board of directors proposed $56,000 as compensation to employees and $24,000 as remuneration of directors and supervisors on January 29, 2016 and March 16, 2016, respectively. These amounts were the same as those recognized in the financial statements. Under an authorization to exercise the rights and functions of a stockholders’ meeting, the board of directors approved on June 26, 2015 the appropriation of $119,250 as bonus to employees and $30,438 as remuneration of directors and supervisors. The amounts of bonus to employees and the remuneration to directors and supervisors recognized in the 2014 financial statements were $202,219 and $30,438, respectively. The differences between the board of directors’ approved amounts and the amounts shown in the 2014 financial statements were recorded in 2015 as a change in accounting estimate. The reason of bonus to employees amendment, please refer to in Note 31. The 2013 earnings appropriation, as approved by the board of directors on the exercise of the rights and functions of the stockholders’ meeting on March 21, 2014, was revised on October 24, 2014 under a resolution by the board of directors on the exercise of the rights and functions of the stockholders’ meeting. As a result, the actual bonus to employees and the remuneration to directors and supervisors were $94,447 and $35,000, respectively, and the amounts recognized in the 2013 financial statements were $168,967 and $35,000, respectively. The difference between the board of directors executed the rights and functions of the stockholders’ meeting on October 24, 2014 was recorded in 2014 as a change in accounting estimate. The information on the proposed and approved compensations to employees and the remunerations to directors and supervisor is available on the Market Observation Post System (M.O.P.S.) website of the Taiwan Stock Exchange.

39. DEPRECIATION AND AMORTIZATION EXPENSE For the Year Ended December 31 2015 2014 Depreciation expense

Buildings $ 146,701 $ 153,441 Computers and machinery equipment 155,115 161,748 Transportation equipment 488 590 Other equipment 67,900 61,912 Leasehold improvement 106,483 103,729

476,687 481,420 Amortization expense 219,855 191,633 $ 696,542 $ 673,053

40. OTHER OPERATING EXPENSES

For the Year Ended December 31 2015 2014 Taxation and fees $ 1,252,612 $ 1,031,602 Marketing 728,830 816,352 Rent 724,703 696,486 Professional advisory 652,005 668,409 Location fee 415,287 410,622 Automated equipment 338,550 295,115 Insurance 299,842 302,553 Communications expense 273,516 267,967 Others 596,594 597,617 $ 5,281,939 $ 5,086,723

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41. EARNINGS PER SHARE Basic earnings per share is calculated by gain or loss on the Bank’s stockholders divide by the weighted-average number of common shares outstanding. The numerators and denominators used in computing earnings per shares (EPS) are summarized as follows: For the Year Ended December 31 2015 2014

Amounts Shares in Thousand EPS (NT$) Amounts

Shares in Thousand EPS (NT$)

Basic EPS $ 9,174,863 7,446,360 $ 1.23 $ 11,382,820 7,446,360 $ 1.53 The 2014 EPS was retrospectively adjusted for the effects of the bonus stock issuance on September 1, 2015. Thus, the basic EPS for 2014 retrospectively decreased from NT$1.71 to NT$1.53.

42. RELATED-PARTY TRANSACTIONS In addition to the disclosed in other notes to the financial statement, relationships with the Group and significant transactions, as well as the Bank and related party are summarized as follows: a. Related parties

Name Relationship with the Bank SinoPac Financial Holdings Company Limited (SPH) Parent company of the Bank SinoPac Securities Corporation (“SinoPac Securities”) Subsidiary of SPH SinoPac Call Center Co., Ltd. (“SinoPac Call Center”) Subsidiary of SPH SinoPac Venture Capital Co., Ltd. (“SinoPac Venture Capital”) Subsidiary of SPH SinoPac Leasing Corporation (SPL) Subsidiary of SPH SinoPac Securities Investment Trust Co., Ltd. (“SinoPac Securities

Investment Trust”) Subsidiary of SPH

SinoPac Futures Corporation (“SinoPac Futures”) Subsidiary of SinoPac Securities SinoPac Securities (Asia) Ltd. Affiliate of SinoPac Securities Grand Capital International Limited (“Grand Capital”) Subsidiary of SPL SinoPac International Leasing Corp. (SPIL) Subsidiary of SPL SinoPac Leasing (Tianjin) Limited (SPLT) Subsidiary of SPL Yung An Leasing Corporation (“Yung An Leasing”) Affiliate of SPH’s chairman Taiwan Genome Sciences, Inc. (“Taiwan Genome Sciences”) Affiliate of SPH’s chairman E Ink Holdings Co., Ltd. (“E Ink Holdings”) Affiliate of SPH’s chairman Foundation of Fire Fighting Development Affiliate of SPH’s chairman Liver Disease Prevention & Treatment Research Foundation Affiliate of SPH’s chairman YFY International BVI Corp. Affiliate of SPH’s chairman Chung Hwa Pulp Corporation (CHP) Affiliate of SPH’s chairman Shin Yi Recreation Enterprise Co., Ltd. (“Shin Yi”) Affiliate of SPH’s chairman Yong Feng Energy Tech Company Limited (“Yong Feng Energy Tech”) Affiliate of SPH’s chairman MiCareo Taiwan Co., Ltd. (“MiCareo Taiwan”) Affiliate of SinoPac Venture Capital’s chairman

(before February 2015) Taiwan Futures Exchange (TAIFEX) Affiliate of SPH’s director Adimmune Corporation Affiliate of SPH’s independent director Unique Homes Taiwan Affiliate of SinoPac Securities’ director 3S Silicon Tech., Inc. (“3S Silicon”) SinoPac Venture Capital is 3S Silicon's corporate

director Financial Information Services Co., Ltd. (Financial Information) Affiliate of the key management personnel of

SPH Taipei Foreign Exchange Inc. (“Taipei Foreign Exchange”) Affiliate of the key management personnel of

SPH Nang Kuang Pharmaceutical Co., Ltd. (“Nang Kuang”) Affiliate of Bank SinoPac managers’ spouse Mechema Chemicals International Corp. (“Mechema”) Affiliate of Bank SinoPac managers’ spouse Cheng Da Industrial Co., Ltd. (“Cheng Da”) Affiliate of Bank SinoPac managers’ spouse Chailease Auto Rental Co., Ltd. (“Chailease Auto Rental”) Affiliate of Bank SinoPac managers’ spouse

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Name Relationship with the Bank

Wafer Works Corporation (“Wafer Works”) Affiliate of Bank SinoPac managers’ spouse Foongtone Technology Co., Ltd. (“Foongtone Technology”) Related party YFY Inc. Related party Union Paper Corporation (“UPC Paper”) Related party Yong Yu Investment Company Limited (Yong Yu) Related party Aero Win Technology Corporation (“Aero Win”) Related party (before July 2015) Ho, Show Chung Chairman of SPH Others The Group’s directors, supervisors, managers

and their relatives, department chiefs, investments accounted for using the equity method and their subsidiaries, and investees of SPH’s other subsidiaries, etc.

b. Significant transactions with related parties

1) Derivative financial instruments

December 31, 2015


Contract Period


Interest rate swap

contracts

SinoPac Securities $ 4,400,000 2011.6.10- 2020.8.26

$ 14,500 Financial assets at fair value through profit or loss

$ 28,597


(8,385) Financial liabilities at fair value through profit or loss

19,675

Asset swap contracts SinoPac Securities 15,000 2015.12.23-

2017.12.22 12 Financial assets at fair


12

December 31, 2014


Contract Period


Currency swap

contracts

E Ink Holdings $ 777,073 2014.10.27- 2015.3.26

$ (22,227) Financial liabilities at fair value through profit or loss

$ 22,227



(30,484) Financial assets at fair value through profit or loss

27,898


28,170 Financial liabilities at fair value through profit or loss

22,815

Asset swap contracts SinoPac Securities 40,000 2013.7.17-

2015.7.17 (135) Financial assets at fair


8

Forward contracts YFY International

BVI Corp. 2,686 2014.12.29-

2015.1.30 (10) Financial liabilities at fair


10

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2) Receivables and payables

December 31 2015 2014 Receivables $ 12,141 $ 7,796 Payables $ 33,950 $ 23,447 Cash dividends payable to SPH $ 1,435,025 $ 1,435,025

3) Current income tax assets and liabilities

December 31 2015 2014 Receivables from adopting the linked-tax system $ 1,210,277 $ 1,151,810 Payables from adopting the linked-tax system $ 2,309 $ 944,255

4) Loans


Ending Balance

Highest Balance

Interest/ Fee Rates (%)

Interest Revenue

Loans $ 5,895,940 $ 7,577,198 0-6.89 $ 122,534

Category

December 31, 2015

Account Volume or Name of Related

Party

Highest Balance

Ending Balance Normal Overdue Type of Collaterals

Is the Transaction at Arm’s Length Commercial

Term


79 $ 29,408 $ 21,630 V - None Yes


467 3,078,026 2,622,404 V - Real estate Yes

Others:

SPL 1,514,000 1,402,000 V - Real estate and ships Yes

SPIL 1,025,872 728,110 V - Receivables and equipments

Yes

Grand Capital 728,818 330,659 V - Ships Yes

SPLT 393,961 369,790 V None Yes

Yung An Leasing 187,800 176,500 V - Real estate Yes



Unique Homes Taiwan


Mechema 100,000 100,000 V None Yes

Wafer Works 80,000 - V - Equipment Yes

SinoPac Securities 80,000 - V - Certificates of deposit and real estate

Yes

Nang Kuang 21,629 20,781 V - Equipment Yes

3S Silicon 6,303 3,802 V None Yes

Cheng Da 333 233 V - Vehicles Yes

Others 31,044 2,031 V - Vehicles and certificates of deposit

Yes

Others subtotal 4,469,764 3,251,906

Total $ 7,577,198 $ 5,895,940

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Loans $ 5,020,812 $ 6,502,278 0-4.5 $ 88,093

Category

December 31, 2014

Account Volume or Name of Related

Party

Highest Balance

Ending Balance Normal Overdue Type of Collaterals

Is the Transaction at Arm’s Length Commercial

Term


52 $ 18,841 $ 14,267 V - None Yes


283 2,008,582 1,768,620 V - Real estate Yes

Others:

SPL 1,654,000 1,514,000 V - Real estate and ships Yes

Grand Capital 984,974 621,375 V - Ships Yes

SPIL 618,486 618,486 V - Receivables and equipment

Yes

SinoPac Securities 535,000 - V - Certificates of deposit Yes


264,613 180,004 V - Real estate and equipment

Yes

Yung An Leasing 193,800 187,800 V - Real estate Yes

Liver Disease Prevention & Treatment Research Foundation


Taiwan Genome Sciences


Aero Win 26,250 25,000 V - None Yes

Others 10,732 4,260 V - Vehicles and certificates of deposit

Yes

Others subtotal 4,474,855 3,237,925

Total 6,502,278 5,020,812

Note: Debtor of related party loans are all normal credit ranking. The Bank estimated the provision of doubtful debt periodically in accordance with the guidelines issued by the authority and IFRSs.

5) Guarantees

December 31, 2015




Wafer Works Corporation

$ 101,003 $ 101,003 $ - 0.75% Equipment

SinoPac Securities 2,000 2,000 - 0.30% Certificates of deposit and real estate

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MiCareo Taiwan $ 11,980 $ - $ - 1.25% Certificates of deposit SinoPac Securities 2,000 2,000 - 0.30% Certificates of deposit

and real estate

6) Other financial assets


Financial Information $ 91,000 $ 91,000 TAIFEX 21,490 21,490 Taipei Foreign Exchange 6,800 6,800

Call loans to security corporations SinoPac Securities 1,653,293 -

Excess margin of futures and options SinoPac Securities (Asia) Ltd. 216,497 19,704 SinoPac Futures 90,278 29,948

The Bank had interest revenue from call loans to security corporations for the year ended December 31, 2015 in the amount of $8,891. The Bank had interest revenue from excess margin of futures and options for the years ended December 31, 2015 and 2014 in the amount of $50 and $56, respectively.

7) Property and equipment

For the year ended December 31, 2015, the Bank purchased machinery and computer equipment from its related parties with a total of $7,861, recognized in property and equipment. In March 2014, the Bank sold property and equipment with book value of $34 in the price of $34 to SPIL. The SinoPac Financial Holdings Company deferred the recognition of the related gains or losses. In August 2014, the Bank sold property with a book value of $6,357 in the price of $25,489 to other related party. The related gains were $19,132.

8) Intangible assets

For the year ended December 31, 2015, the Bank purchased computer software from its related parties for a total of $2,020, recognized under intangible assets.

9) Other assets

December 31 2015 2014 Guarantee deposits

SPL $ 9,564 $ 9,364 Others 780 -

The Bank signed an agreement with Foongtone Technology for the purchase of a debit card with a second-generation chip. The Bank paid Foongtone Technology $30,833 in 2015 and $35,434 in 2014, which were recorded as prepayments (other assets) on the Bank’s acquisition of the debit cards or as other operating expenses on the issuance of the debit cards to bank clients.

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10) Notes and bonds transaction


Purchase of Notes

and Bonds Sell of Notes and

Bonds SinoPac Securities $ 200,005 $ - Chailease Auto Rental 189,881 219,968

11) Securities sold under agreement to repurchase

2015

Balance, December 31, 2015 Face Amount Carrying Amount Interest Expense Ho, Show Chung $ 217,300 $ 219,301 $ 1,398 SPH - - 4,631 SinoPac Securities - - 2

2014

Balance, December 31, 2014 Face Amount Carrying Amount Interest Expense SPH $ 1,600,000 $ 1,600,606 $ 1,208 Ho, Show Chung 295,000 296,042 1,902 SinoPac Securities - - 4

12) Deposits

2015


Ending Balance Interest Rate (%) SPH $ 5,060,640 0-1.65 SinoPac Securities 4,019,252 0-4.25 Yong Yu 2,335,277 0.05-0.13 Foundations of Fire Fighting Development 756,740 0-1.255 SPL 697,324 0-3.95 Others 15,313,077 $ 28,182,310

2014


Ending Balance Interest Rate (%) SPH $ 5,034,261 0-0.65 SinoPac Securities 4,739,832 0-1.35 Foundations of Fire Fighting Development 760,890 0-1.395 E Ink Holdings 819,390 0.02-1.35 SinoPac Venture Capital 707,263 0.02-0.65 Others 10,537,343 0-13 $ 22,598,979

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13) Bank debentures

The Bank issued the second to the fourth subordinated bank debentures in 2015 underwritten by SinoPac Securities and paid $665 commission fee (listed in discount of bank debentures). As of December 31, 2015, the Bank issued bank debentures subscribed by related parties as following details.

Transaction Company Transaction

Amount Description CHP $ 170,000 Third subordinated bank debentures issued in 2015 YFY Inc. 160,000 Third subordinated bank debentures issued in 2015 Shin Yi 100,000 Third subordinated bank debentures issued in 2015 Yong Feng Energy Tech 50,000 Third subordinated bank debentures issued in 2015 UPC Paper 20,000 Third subordinated bank debentures issued in 2015 Others 130,000 Third subordinated bank debentures issued in 2015

14) Other liabilities

December 31 2015 2014 Guarantee deposits received $ 11,451 $ 7,289 Advance receipts 4 1

15) Revenues and expenses

For the Year Ended December 31 2015 2014

Commissions and fee revenues $ 68,970 $ 53,281 Commissions and fee expenses 192,987 108,060 Gains from unquoted equity instruments 35,410 36,881 Other revenues 6,899 5,608 Other operating expense (Note) 335,641 271,704

Note: Other operating expenses are mainly for professional advisory charges and marketing expense. The Bank

entered into professional advisory contracts with SinoPac Call Center, and the professional advisory charges and other operating expenses paid for 2015 and 2014 were $158,491 and $155,484, respectively.

16) Lease

a) The Group as a lessee

Other Operating Expense

For the Year Ended

December 31 Lessor 2015 2014 Lease Term Payment Frequency SPL $ 127,825 $ 125,408 February 2020 Rentals paid monthly

b) The Bank as a lessor

Rental Income

For the Year Ended

December 31 Lessee 2015 2014 Lease Term Receiving Frequency

SinoPac Securities $ 26,723 $ 24,718 March 2019 Rentals received monthly SinoPac Securities

Investment Trust 14,588 14,600 January 2019 Rentals received monthly

SPL 5,964 5,965 July 2016 Rentals received monthly SinoPac Call Center 3,326 3,353 September 2018 Rentals received monthly Others 10,277 11,012 October 2020 Rentals received monthly

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Transactions between the Bank and the related parties are at arm’s length commercial terms except for the preferential interest rates offered to employees for savings and loans up to prescribed limits. Under the Banking Act, except for government and consumer loans, credit extended by the Bank to any related party should be fully secured, and the credit terms for related parties should be similar to those for unrelated parties. For transactions between related parties with SinoPac Bancorp and its subsidiaries, SinoPac Capital Limited and its subsidiaries, SPLIA, SPPIA and Bank SinoPac (China) the terms are similar to those transacted with unrelated parties.

c. Compensation of directors, supervisors and management personnel

For the Year Ended December 31 2015 2014 Short-term employee benefits $ 212,759 $ 212,126 Post-employment benefits 4,303 2,374 Share-based payment - 381 $ 217,062 $ 214,881

The management personnel are composed of general manager, vice general manager and other employee whose job grade is higher than the former.

43. PLEDGED OR MORTGAGED ASSETS

In addition to those disclosed in other notes, pledged or restricted assets of the Group are summarized as follows:

December 31 Restricted Assets Object 2015 2014 Purposes

Discounts and loans Loans $ 15,700,704 $ 14,294,184 Note 1 Available-for-sale financial

assets Government bonds 261,483 1,126,278 Note 2 Held-to-maturity financial assets Negotiable certificate of deposits 8,165,329 8,158,586 Note 3 Held-to-maturity financial assets Agency bonds and U.S. municipal bonds 1,931,030 2,293,901 Note 4 Held-to-maturity financial assets Government bonds 3,005,596 1,087,105 Note 5 Other financial assets Certificates of deposits 2,012,972 2,041,960 Note 6 Note 1: Pledged with the Federal Reserve Bank and the Federal Home Loan Bank under the discount window program. Note 2: Pledged to court as collaterals for filing provisional seizure, reserve for payment of VISA international card, mortgage

of derivative instrument outstanding. Note 3: Pledged in accordance with requirements of the California Department of Financial Institutions, with the Central Bank

for foreign-exchange transactions, and with the Mega Bank for USD foreign-exchange settlement. Note 4: Pledged with the Federal Reserve Bank and Federal Home Loan Bank as loans, foreign-exchange, and deposits

guarantees. Note 5: Guarantees of brokerage dealing and underwriting business, a trust reserve fund, guarantees of bills financial service,

reserve for payment of VISA international card, pledged to court as collaterals for filing provisional seizure and Hong Kong branch’s clearing system of real - time gross settlement and mortgage of derivative instrument outstanding.

Note 6: Pledged with intraday overdraft of settlement banks.

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44. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS a. In addition to those disclosed in other notes, significant unrecognized commitments of the Bank as of December 31, 2015 and

2014 were as follows:

December 31 2015 2014 Trust assets $ 269,124,625 $ 239,954,266 Securities under custody 122,310,741 103,909,150 Agent for government bonds 68,591,800 55,863,400 Receipts under custody 43,482,745 45,827,720 Guarantee notes payable 13,004,401 13,224,616 Appointment of investment 8,725,500 3,057,329 Agent for marketable securities under custody 7,998,414 6,109,103 Goods under custody 1,137,998 1,217,168 Travelers’ checks consigned-in 328,465 339,138 Others 8,099 154,986

b. The Group entered into contracts to buy computer equipment and office equipment for $629,965 of which $155,885 had been

paid as of December 31, 2015. The above contract price of $314,845 was for Bank SinoPac (China) to buy the property and equipment for operation, which was approved by the board of directors on April 24, 2015.

c. Contingencies

1) The Securities and Futures Investors Protection Center (SFIPC) filed a lawsuit against the Bank and SinoPac Leasing

Corporation’s (SPL) subsidiary, Grand Capital, on the ground that Procomp Informatics Ltd. (“Procomp”) deposited US$10,000 in the Bank’s Shisung Branch (formally Sungshan Branch) and placed a restriction on the use of this deposit as a condition for a short-term loan to Addie International Limited granted by SPL and for allegedly helping Yeh, Sue-Fei and Procomp do irregular trading but, at the same time, Procomp used the restricted deposit for fictitious sale transactions. Later, when problems on Procomp’s account arose, the Bank and Grand Cathay demanded compensation, which was taken from Procomp’s account, resulting in damage to Procomp. The Bank was suspected of misleading investors by concealing the restricted status of Procomp’s deposit and window dressing Procomp’s financial statements. On behalf of investors, the SFIPC filed a lawsuit against the Bank, SPL and all other parties related to Procomp. Both the court of the first instance and the second instance ruled in favor of the Bank and SinoPac Leasing. However, the SFIPC decided to file an appeal on January 20, 2016.

2) The SFIPC filed a lawsuit against the Bank on the ground that the Bank’s Tunpei Branch provided National Aerospace

Fasteners Corporation (NAFC) with its accounts receivable factoring services. NAFC recorded this significant-amount loan transaction as an accounts receivable financing to window-dress its financial position in order to attract investments. The SFIPC filed a lawsuit against the Bank and other parties and demanded compensation approximately $543,233 the court of the first instance ruled in favor of the Bank. However, the SFIPC decided to file an appeal to the second instance and stated to reduce the amount of compensation to $293,940 on November 13, 2015, the case is in the progress by Taiwan High Court.

45. HIERARCHY AND FAIR VALUE INFORMATION OF FINANCIAL INSTRUMENTS

a. The definition of the hierarchy:

1) Level one Level 1 financial instruments are traded in active market and have the identical price for the same financial instruments. “Active market” should fit the following characteristics:

a) All financial instruments in the market are homogeneous;

b) Willing buyers and sellers exist in the market all the time;

c) The public can access the price information easily.

2) Level two The products categorized in this level have the prices that can be inferred from either direct or indirect observable inputs other than the active market’s prices. Examples of these inputs are:

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a) Quoted prices from the similar products in the active market. This means the fair value can be derived from the current trading prices of similar products. It is also noted that whether they are similar products should be judged by the characteristics and trading rules. The fair value valuation in this circumstance may make some adjustment due to time lags, trading rule’s differences, related parties’ prices, and the correlation of price between itself and the similar goods.

b) Quoted prices for identical or similar financial instruments in inactive markets. c) When marking-to-model, the input of model in this level should be observable (such as interest rates, yield curves and

volatilities). The observable inputs mean that they can be attained from market and can reflect the expectation of market participants.

d) Inputs which can be derived from other observable prices or whose correlation can be verified through other observable

market data.

3) Level three The fair prices of the products in this level are based on the inputs other than the direct market data. For example, historical volatility used in valuing options is an unobservable input, because it cannot represent the entire market participants’ expectation for future volatility.

b. Financial instrument measured at fair value




Held-for-trading financial assets Stocks $ 110,302 $ 110,302 $ - $ - Bonds 38,283,696 34,996,428 3,287,268 - Others 632,281 - 632,281 -


Available-for-sale financial assets Stocks 114,554 - - 114,554 Bonds 46,334,931 29,691,115 16,643,816 - Others 149,238,077 - 149,238,077 -

Liabilities Financial liabilities at fair value through profit or

loss Held-for-trading financial liabilities 249,517 249,517 - -



loss Held-for-trading financial liabilities 26,805,002 101,677 22,423,273 4,280,052

Derivative financial liabilities for hedging 42,569 - 42,569 -

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Held-for-trading financial assets Stocks $ 252,537 $ 252,537 $ - $ - Bonds 23,495,923 21,538,859 1,957,064 -


Available-for-sale financial assets Stocks 137,173 - - 137,173 Bonds 43,222,841 24,372,857 16,404,486 2,445,498 Others 164,400,698 51,972 164,348,726 -



loss Held-for-trading financial liabilities 21,598,935 497 13,776,158 7,822,280

Derivative financial liabilities for hedging 32,887 - 32,887 -

2) Fair value measurement technique

Financial instruments at fair value, available-for-sale financial assets and hedging derivative financial instruments with quoted price in an active market are using market price as fair value; financial instruments above with no quoted price in an active market are estimated by valuation methods. The estimation and assumption of valuation method the Group used is the same as market participants’. The Group can obtain this information. The basis of fair value estimation used by the Group is shown as follows: The fair value of forward contract, interest rate swap contracts and currency swap contracts is measured by the discounted cash flow method; the fair value of option is measured by Black & Scholes Model. Fair values of forward contracts are estimated on the basis of the foreign exchange rates provided by Reuters. Structured product is measured by opponents’ price based on match basis. This method diminished market risk to zero. Fair value of interest rate swap contracts and cross currency swap contracts are estimated on the basis of market quotation provided by Reuters. Fair value are determined as follows: (a) listed stocks and Taipei Exchange stocks - closing prices as of the balance sheet date; (b) beneficial certificates (open-end funds), net asset values as of the balance sheet date; (c) bonds - period-end reference prices published by the Taipei Exchange; (d) bank debentures issued overseas and the overseas bonds-period-end reference prices published by Bloomberg, calculated through an internal model or provided by a counter-party.

The Bank assessed the active level of market and the adequacy of fair value of emerging stocks and measured the investments at fair value.

3) Credit risk valuation adjustment is set out below: Credit risk valuation consists of credit valuation adjustment and debit valuation adjustment. Credit valuation adjustment adopts for derivative contracts trading in other than exchange market, over-the-counter, and reflects the non-performance risk of counter party on fair value.

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Debit valuation adjustment adopts for derivative contracts trading in other than exchange market, over-the-counter, and reflects the non-performance risk of the Group on fair value. The Group calculated debit and credit valuation adjustment based on models with inputs of Probability of Default (PD) and Loss Given Default (LGD) multiplying Exposure at Default (EAD). The Group calculate EAD based on mark-to-market fair value of OTC derivative instruments. The Group takes 60% as the PD of counter parties, and subject to change under the risk nature and data feasibility. The Group take credit risk valuation adjustment into valuation of the fair value of financial instruments, thus reflect the credit quality of counter parties and the Group.

4) Transfer between Level 1 and Level 2

The Group transferred part of the NTD government bonds, corporate bonds and foreign bank debentures from Level 1 to Level 2 because the Group determined these investments were not in an active market.

5) Reconciliation of Level 3 items of financial instruments

a) Reconciliation of Level 3 items of financial assets




Changes in Exchange

Rate


Loss

Other Comprehensive

Income

Purchase/ Issued

Transfer to Level 3

Disposed/ Sold

Transfer Out of

Level 3 Non-derivative financial instruments Available-for-sale

financial assets $2,582,671 $ (6,775 ) $ (25,475 ) $ 99,944 $100,649 $251,622 $2,350,162 $ (34,676 ) $114,554 Derivative financial



financial assets 7,830,501 (3,445,714) - 1,455 - 108,251 - 4,694 4,282,685

Note: Items transferring to Level 3 are lack of observable price (due to the inactive transaction in the securities market); items transferring out of Level 3 is because the price can be attained from the securities market.




Changes in Exchange

Rate


Loss

Other Comprehensive

Income

Purchase/ Issued

Transfer to Level 3

Disposed/ Sold

Transfer Out of

Level 3 Non-derivative financial instruments Financial assets at fair


financial assets $ 98,122 $ 1,730 $ - $ - $ - $103,119 $ - $ 3,267 $ - Available-for-sale

financial assets 2,482,097 8,270 26,951 1,166,853 510,490 1,438,185 255,245 81,440 2,582,671 Derivative financial



financial assets 1,237,894 6,586,701 - 96,715 - 96,974 - 6,165 7,830,501

For the years ended December 31, 2015 and 2014, the gain and losses on valuation included in net income with assets still held were loss $1,353,608 and gain $7,444,095, respectively.

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For the years ended December 31, 2015 and 2014, the gain and losses on valuation included in other comprehensive income with assets still being held were loss $22,619 and gain $15,874, respectively.

b) Reconciliation of Level 3 items of financial liabilities



Valuation Gain/Loss



Rate


Issued Transfer to

Level 3 Disposed/

Sold


Derivative financial instruments Financial liabilities at fair value

through profit or loss Held-for-trading financial

liabilities $7,822,280 $(2,976,526) $ 2,430 $ - $ 611,962 $ - $ 43,830 $4,280,052



Valuation Gain/Loss



Rate


Issued Transfer to

Level 3 Disposed/

Sold


Derivative financial instruments Financial liabilities at fair value

through profit or loss Held-for-trading financial

liabilities $1,229,687 $6,549,478 $1,173,952 $ - $1,183,323 $ - $ 52,486 $7,822,280 Derivative financial liabilities -

hedging 2,306 (2,306 ) - - - - - -

For the years ended December 31, 2015 and 2014, the gain and losses on valuation included in net income from liabilities still held were gain $1,369,406 and loss $6,427,851, respectively.

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

Quantitative information about the significant unobservable inputs is set out below:

December 31, 2015

Financial Instruments Measured at Fair Value

Financial Assets

Financial Liabilities Valuation Techniques

Significant Unobservable

Inputs

Interval (Weighted-

average) Derivative financial instruments

Financial instruments at fair


Held-for-trading financial instruments

Hybrid foreign exchange option

$ 1,487,584 $ 1,496,341 1. Sellers’ quote 2. Self-built option pricing

model (Note 1) (Heston Model)

Variance, correlation of exchange rate and variance

0%-5% (Note 1)

Hybrid FX swap structured instruments

2,614,827 2,611,846 Sellers’ quote (Note 2) -

Others 180,274 171,865 Sellers’ quote (Note 2) - $ 4,282,685 $ 4,280,052 Non-derivative financial instruments

Available-for-sale financial

instruments

Emerging stocks $ 114,554 $ - Market value with liquidity valuation discount

Discount factor of liquidity

0%-20%

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Note 1: Hybrid foreign exchange options: These instruments are structured option products, fair values consist of

option premium, valuation and valuation adjustment (CVA/DVA), booked as financial instruments at fair value through profit or loss. In consideration of main participants in the market, book are kept based on sellers’ reference quotes, the Bank exam the reasonability by the valuation data generated from the internal built model of foreign exchange option. Except for observable market input, other unobservable inputs of the internal built model foreign exchange option include initial variance, velocity of mean-variance, long-term variance, volatility of variance, error correlation of random walk from foreign exchange and its variance, and so on. As of the valuation date, December 31, 2015, the differences between the valuation results using the internally built model and seller’s quotes are between 0%-10% over 94% of all transactions, which indicates the seller’s quote are reasonable to some extents.

Note 2: As pairs of back-to-back transaction, consequences of significant unobservable inputs and fair values are not

fully captured in practice. Therefore both inputs are not disclosed by the Bank.

7) Valuation processes for fair value measurements categorized within Level 3

The Group assess fair values according to the quote by counter parties, related assessment are compiled as risk-control reports and inform the manager by month and report to the board of directors by quarter.

c. Financial instruments not carried at fair value

1) Fair value information of financial instruments

Financial instruments not carried at fair value excluding the table below are reasonably close to their fair value, therefore no additional disclosure, for example: Cash and cash equivalents, due from the Central Bank and other banks, securities purchased under agreements to resell, receivables, discounts and loans, some other financial assets, deposits from the Central Bank and other banks, securities sold under agreement to repurchased, payables, deposits and remittances and other financial liabilities.

December 31, 2015 Items Carrying Amount Fair Value

Held-to-maturity financial assets, net $ 69,118,675 $ 69,702,930 Debt instrument investments without active market 1,746,142 1,749,864 Bank debentures 43,428,046 43,982,232

December 31, 2014

Items Carrying Amount Fair Value Held-to-maturity financial assets, net $ 46,114,048 $ 46,266,163 Bank debentures 48,565,756 48,986,536


Assets and Liabilities Item December 31, 2015 Total Level 1 Level 2 Level 3

Held-to-maturity financial assets $ 69,702,930 $ 34,294,178 $ 35,243,423 $ 165,329 Debt investments without active market 1,749,864 - 1,749,864 - Bank debentures 43,982,232 2,537,308 39,374,521 2,070,403

3) Methods and assumptions applied in estimating the fair values of financial instruments not carried at fair value are as follows:

a) The carrying amounts of financial instruments such as cash and cash equivalents, due from the Central Bank and other

banks, securities purchased under agreements to resell, receivables, some of other financial assets, deposits from the Central Bank and other banks, securities sold under agreement to repurchased, payables and other financial liabilities approximate their fair value because of the short maturity or the similarity of the carrying amount and future price.

b) Discounts and loans (including nonperforming loans): The Group usually uses base rate (floating rate) as loan rate

because it can reflect market rate. Thus, using its carrying amount to consider the probability of repossession and estimate its fair value is reasonable. Long-term loans with fixed rate should estimate its fair value by its discounted value of expected cash flow. Because this kind of loans is not significant in this item, using its carrying amount to consider the probability of repossession and estimate its fair value should be reasonable.

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c) Held-to-maturity financial assets: Held-to-maturity financial assets with quoted price in an active market are using market price as fair value; held-to-maturity financial assets with no quoted price in an active market are estimated by valuation methods or opponent’s price.

d) Debt investments without active market: Discounted cash flows from debt investments with no quoted price in an

active market is estimated by using discount rate plus credit premium.

e) Deposits and remittances: Considering banking industry’s characteristic, since deposits have one year maturity and measured by market rate (market value), using carrying value to assess fair value is reasonable. For deposits with three years maturity are measured by discounted cash flow, using carrying value to assess fair value is reasonable.

f) Bank debentures: Bank debentures with quoted price in an active market are using market price as fair value; bank

debentures with no quoted price in an active market are estimated by valuation methods or quotes from counterparties. g) Investment accounted for using the equity method unquoted equity investments: The fair value of unquoted equity

investments cannot be reliably measured because it has no quoted price in an active market, the variability interval of fair value measurements is significant or the probability of the estimations in the variability interval cannot be reasonably assessed. Hence, the fair value is not disclosed.

46. FINANCIAL RISK MANAGEMENT

a. Overview

The Group documents the risk management policies, including overall operating strategies and risks control philosophy. The Group’s overall risk management policies are to minimize the possibility of potential unfavorable factors. The board of directors approves the documentation of overall risk management policies and specific risk management policies; including credit risk, liquidity risk, market risk, operational risk, derivative instruments transactions and managements. The board of directors reviews the policies regularly, and reviews the operation to make sure the Group’s policies are executed properly.

b. Risk management framework

The board of directors is the top risk supervisor of the Group. The board not only reviewed risk management policies and rules but also authorized management to be in charge of daily risk management work. The Bank has set up a risk management committee to be responsible for the services above; the Bank has also set up a credit committee to review the policies and supervise the abnormal cases. The credit committee also helps the board of directors approve cases over general manager’s authority under the board’s authorization. The board of directors authorized the Group’s management to supervise risk management activities, evaluate the performance and confirm every risk management agent having essential code of ethic and professional skills. Internal audit is responsible for the periodic review of risk management and the control environment, then reports the results directly to the board of directors. The Bank has set up a risk management department to control risk management policies, establish rules, plan and set up risk management system. The risk management department executes these policies based on the board’s approval, then reports the results and performance reviews to the authority or the board.

c. Credit risk

1) Sources and definitions of credit risk

Credit risk is the risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. It arises principally from lending, trade finance, treasury and credit derivatives. The issuer’s credit risk should be considered as part of the market risk when the investment target is securities in an active market.

2) Policies and strategies

The Group established policies based on operating goals and strategies, business plans and risk management goals authorized by the board of directors. These policies were established to lower potential financial losses, minimize risks and rewards to raise the performance and protect shareholders’ equity through appropriate managing policies and procedures based on risk-diversification principle.

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The Group’s risk strategy is to strengthen the credit risk management framework, establish complete credit verification system and procedure, develop and use efficient and scientific credit risk managing instruments to identify, measure, manage and supervise credit risks. These strategies transparentize, systematize, specialize and formalize credit risk management to manage loans, nonperforming assets and every kind of assets’ credit risk. The Group has set up policies of main risks as prime direction based on legislations and operational goals. These policies include risk appetite, management goals, organization structure of responsibility and accountability, measurement, evaluation, supervision and report procedure of risks. These policies are established to reach the purposes of consistency and centralized management and are put into practice in corporate government.

Credit risk management procedures and measurements are as follows:

a) Loan business (includes loan commitment and guarantee)

Loan business classification and qualities are shown as follows:

i. Classification

Under the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Nonaccrual Loans” (the “Regulations”) issued by the Banking Bureau, the Bank evaluates credit losses on the basis of the estimated collectability. In accordance with the Regulations, credit assets are classified as normal assets, assets that require special mentioned, assets with substandard, assets with doubtful collectability, and assets on which there is loss. FENB evaluates credit losses on the basis of the estimated collectability. Credit assets are classified as pass, and rest of assets were evaluate by mortgages and overdue period then classified as assets that require special mentioned, assets with substandard, assets with doubtful collectability. Bank SinoPac (China) Ltd. strictly follows the “Guidance for the Risk-Based Loan Categorization” established by the China Banking Regulatory Commission. It divides its loans into five categories based on a debtor’s ability to repay the full principal and interest on time. The five categories are normal, special mention, substandard, doubtful, and loss. The last three categories are considered nonperforming loans.

ii. Credit quality level

The Group sets up credit quality level (ex. internal credit risk assessment model, credit assessment rules) based on business characteristic and scale to manage risks. In order to measure clients’ credit risks, the Group established credit risk assessment model for corporate banking, personal banking and consumer banking through statistic methods, professional judgment and clients’ information. Every model should be reviewed regularly to examine whether the calculations match to the actual conditions or not, then the Bank will adjust parameters to optimize the results. For personal banking and consumer banking customers, every case will be reviewed individually to assess default risks except that micro-credit and credit card business should be assessed by internal credit assessment model. The Group’s customers’ credit qualities are classified as excellent, good, acceptable, weak and no ratings. Customers’ credit quality should be evaluated annually to make sure the valuation results are accurate.

b) Debt investment and derivative financial instruments

The Group manages and identifies credit risks of debt investment through credit ratings by outsiders, credit qualities of the debt, regional conditions and counterparties’ risks. The Group carry out derivative instrument transactions with counterparties in financial industry which are over the investment level. The Bank would control credit risks based on counterparties’ credit lines; counterparties with no credit ratings or investment level should be reviewed individually. Normal customers’ credit exposure positions should be controlled by approved derivative instrument credit line and condition based on normal credit procedure. The Group classifies credit qualities of debt investment and derivative financial instruments as excellent, good, acceptable, weak and no ratings.

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3) Credit risk hedge or mitigation policies

a) Collateral

For credit exposures and collaterals requirements, the Group has set up several standards such as disposal of collateral, acceptance of real estate disposal, real estate appraisal and credit policies for every commodity to regulate collaterals’ categories, appraisals, procedures, deduction percentages, loan rate, loan-to-value and maturity, control, management and disposal to confirm these standards can mitigate credit risks and maintain creditor’s right. To maintain collateral’s effectiveness, the Group supervises and manage it based on after-loan management and review policies examines through examining the usage, custody and maintenance of collaterals regularly and irregularly to avoid selling, leasing, pledging, moving and disposing collaterals without authorization. Once the case is due and willing to extend the contract, it should be seen as a new case and the collateral should be revalued.

b) Credit risk limits and credit risk concentration control

The Group manages credit line and concentration of all credit assets through appropriate information managing system to gather information, credit exposure centralized conditions and large credit exposure of every credit assets combination, including national risk, large credit exposure, credit line of single corporation, group and industry. For cases approaching credit line, the Group should report to related management and make control strategies; for cases over credit line, the Group should enhance authorization level based on credit review authority.

c) Agreement of net settlement

The Group often makes gross settlement on transactions, sign net settlement contract with other counterparties or cancel every transactions and make net settlement when default occurs to mitigate credit risk.

4) The maximum credit exposure of the financial instruments held by the Bank, FENB and Bank SinoPac (China) Ltd.

Maximum credit exposures of assets on balance sheet (excluding collaterals and other credit enhancement instruments) are almost equivalent to its carrying value. The maximum credit exposures (excluding collaterals, other credit enhancement instruments and undrawn maximum exposure) off balance sheet are shown as follows:

Off-Balance Sheet Items The Maximum Credit Exposure December 31, 2015 December 31, 2014

Undrawn credit card commitments $ 164,035,079 $ 162,551,739 Undrawn loan commitments 20,495,959 19,914,058 Guarantees 17,962,564 17,283,361 Standby letter of credit 5,343,386 7,004,249

The Bank, FENB and Bank SinoPac (China) Ltd. adopt a strict evaluate procedure and review the result regularly to control and minimize off-balance sheet credit risk exposures continuously. The payment of this kind credit business and financial instruments may not be fully paid before the maturity, therefore the contract amount is not deemed as the amount of future cash outflow. In other words, the future cash demand is lower than contract amount. If the credit limit is out and collaterals or other collaterals lose their value, the amount of credit risk is equal to the contract amount which is the possible maximum loss.

5) Credit risk concentration of the Group

When financial instruments transactions concentrated on counter-party, which engaged in similar business activities, had similar economic characteristics and abilities to execute contracts, the credit risk concentration arises. Credit risk concentrations can arise in the Group’s assets, liabilities or off-balance sheet items through the execution or processing of transactions (either product or service) or through a combination of exposures across these broad categories. It includes credit, loan and deposits, call loan to banks, investment, receivables and derivatives. The Group maintains a diversified portfolio to limit its exposure to any one geographic region, country or individual creditor and monitor its exposures continually. The Group’s most significant concentrations of credit risk are summarized by industry, region and collateral as follows:

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a) By industry

Industries December 31, 2015 December 31, 2014 Amount % Amount %

Private enterprise $ 356,682,239 40.19 $ 364,507,811 45.26 Public enterprise 58,228,016 6.56 27,468,908 3.41 Government sponsored enterprise and

business 10,000,000 1.13 - - Nonprofit organization 46,054 0.01 213,159 0.03 Private 429,883,971 48.44 392,145,072 48.69 Financial institutions 32,581,872 3.67 20,999,509 2.61 Total $ 887,422,152 100.00 $ 805,334,459 100.00

b) By region

Regions December 31, 2015 December 31, 2014 Amount % Amount %

Domestic $ 750,583,411 84.58 $ 657,937,620 81.70 Asia 53,586,176 6.04 69,703,174 8.65 North America 66,099,771 7.45 61,569,147 7.65 Others 17,152,794 1.93 16,124,518 2.00 Total $ 887,422,152 100.00 $ 805,334,459 100.00

c) By collateral

Collaterals December 31, 2015 December 31, 2014 Amount % Amount %

Credit $ 291,727,149 32.87 $ 237,669,747 29.51 Secured

Stocks 2,003,280 0.23 1,404,937 0.17 Bonds 10,065,036 1.13 11,755,068 1.46 Real estate 514,081,276 57.93 458,731,989 56.96 Movable collaterals 27,314,189 3.08 26,947,725 3.35 Guarantees 17,275,954 1.95 34,796,329 4.32 Others 24,955,268 2.81 34,028,664 4.23

Total $ 887,422,152 100.00 $ 805,334,459 100.00

6) Credit quality and impairment assessment

Some financial assets such as cash and cash equivalents, due from Central Bank and call loan to banks, financial asset at fair value through profit or loss, and securities purchased under agreements to resell are regarded as very low credit risk owing to the good credit rating of counterparties. Except for the analysis above, other financial assets’ analyses are summarized as follows:

a) Discounts, loans and receivables

December 31, 2015

Neither Overdue Nor Impaired Overdue But

Not Yet Impaired (B)

Impaired Amount (C)

Total (A)+(B)+(C)

Loss Recognized (D) Net Total (A)+(B)

+(C)-(D) Excellent Good Acceptable Weak No Ratings Subtotal (A)

With Objective


With No Objective



forfaiting $ ,,11,250,955 $ ,6,462,074 $, 15,212,396 $ - $ ,7,408,320 $ ,40,333,745 $ - $ - $ ,40,333,745 $ - $ ,, 605,379 $ ,39,728,366

Credit card receivables 8,260,463 2,510,460 3,894,477 305,401 276,688 15,247,489 108,534 1,179,306 16,535,329 129,967 151,780 16,253,582 Acceptances - forfaiting - 366,255 6,286,196 - - 6,652,451 - - 6,652,451 - 99,787 6,552,664 Accounts receivable -

factoring 481,679 1,532,553 3,897,359 227,448 521,262 6,660,301 694,203 99,970 7,454,474 19,527 61,860 7,373,087 Others 1,750,733 783,498 2,061,729 134,893 1,362,023 6,092,876 28,521 635,559 6,756,956 591,137 16,526 6,149,293

Discounts and loans 272,315,995 143,268,304 397,368,134 52,135,948 7,356,650 872,445,031 9,220,163 5,756,958 887,422,152 1,672,092 10,766,915 874,983,145

Other financial asset Call loans to security

corporations - 1,653,693 - - - 1,653,693 - - 1,653,693 - - 1,653,693

Nonperforming receivables transferred other than loan - - - - - - - 549 549 170 - 379

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December 31, 2014

Neither Overdue Nor Impaired Overdue But


Impaired Amount (C)

Total

(A)+(B)+(C)

Loss Recognized (D) Net Total (A)+(B)

+(C)-(D) Excellent Good Acceptable Weak No Ratings Subtotal (A)

With Objective


With No Objective



forfaiting $ ,,38,460,203 $ ,,19,999,889 $ ,15,050,644 $ - $ , 8,649,658 $ ,82,160,394 $ - $ - $ ,82,160,394 $ - $ ,,26,075 $ ,82,134,319

Credit card receivables 8,051,391 3,343,069 4,050,694 142,984 287,206 15,875,344 73,789 1,378,080 17,327,213 147,855 179,478 16,999,880 Acceptances - forfaiting - 13,416,739 11,594,490 - 745,039 25,756,268 - - 25,756,268 - - 25,756,268 Accounts receivable -

factoring 1,379,739 927,301 4,593,321 2,279,663 466,751 9,646,775 649,909 - 10,296,684 - 103,961 10,192,723 Others 1,060,504 813,062 2,248,197 264,660 1,240,822 5,627,245 22,621 261,759 5,911,625 222,668 21,575 5,667,382

Discounts and loans 141,031,500 146,514,460 426,997,114 68,553,693 5,917,593 789,014,360 7,203,540 9,116,559 805,334,459 1,327,017 11,950,311 792,057,131

Other financial asset - nonperforming receivables transferred other than loan - - - - - - - 6,933 6,933 6,933 - -

b) Credit analysis by customer type for discounts and loans neither overdue nor impaired are as follows:

December 31, 2015 Neither Overdue Nor Impaired Excellent Good Acceptable Weak No Ratings Total

Consumer banking Mortgage $116,757,316 $ 51,897,613 $ 63,536,994 $ 6,483,307 $ 23 $238,675,253 Cash card - - - - 33 33 Micro credit 5,089,550 4,079,488 3,747,270 79,122 57,022 13,052,452 Others 79,950,175 37,477,051 39,379,569 4,474,583 5,822,785 167,104,163

Corporate banking Secured 612,515 4,801,767 155,023,415 17,376,300 - 177,813,997 Unsecured 69,906,439 45,012,385 135,680,886 23,722,636 1,476,787 275,799,133

Total $272,315,995 $143,268,304 $397,368,134 $ 52,135,948 $ 7,356,650 $872,445,031

December 31, 2014 Neither Overdue Nor Impaired Excellent Good Acceptable Weak No Ratings Total

Consumer banking Mortgage $ 59,058,572 $ 52,695,033 $ 82,766,442 $ 13,803,176 $ 3,224 $208,326,447 Cash card - - - - 73 73 Micro credit 3,918,988 4,265,474 5,006,657 355,701 59,825 13,606,645 Others 51,170,798 40,296,153 54,048,839 7,824,448 5,768,531 159,108,769

Corporate banking Secured 935,353 6,556,859 159,446,157 21,929,558 - 188,867,927 Unsecured 25,947,789 42,700,941 125,729,019 24,640,810 85,940 219,104,499

Total 141,031,500 146,514,460 426,997,114 68,553,693 5,917,593 789,014,360

c) Credit analysis for marketable securities



Impaired Amount (C)

Total (A)+(B)+(C)

Loss Recognized

(D)

Net Total (A)+(B)+ (C)-(D) Excellent Good Acceptable Weak No Ratings Subtotal (A)

Available-for-sale financial assets Investment in bonds $ 168,264,202 $ 16,574,908 $ 7,924,129 $ - $ 2,638,300 $ 195,401,539 $ - $ - $ 195,401,539 $ - $ 195,401,539 Investment in stocks and beneficial

certificates - - - - 286,023 286,023 - - 286,023 - 286,023 Held-to-maturity financial assets

Investment in bonds 69,118,675 - - - - 69,118,675 - - 69,118,675 - 69,118,675 Other financial assets

Investment in stocks 637,437 - 81,499 - 298,196 1,017,132 - - 1,017,132 - 1,017,132 Investment in bonds 1,746,142 - - - - 1,746,142 - - 1,746,142 - 1,746,142 Others (Note) 3,019,458 763,810 687,705 - 270,981 4,741,954 - 4,668,629 9,410,583 2,408,678 7,001,905



Impaired Amount (C)

Total (A)+(B)+(C)

Loss Recognized

(D)

Net Total (A)+(B)+ (C)-(D) Excellent Good Acceptable Weak No Ratings Subtotal (A)

Available-for-sale financial assets Investment in bonds $ 174,525,297 $ 23,414,471 $ 7,482,660 $ - $ 2,172,667 $ 207,595,095 $ - $ - $ 207,595,095 $ - $ 207,595,095 Investment in stocks and beneficial

certificates - - - - 165,617 165,617 - - 165,617 - 165,617 Held-to-maturity financial assets

Investment in bonds 46,114,048 - - - - 46,114,048 - - 46,114,048 - 46,114,048 Other financial assets

Investment in stocks 449,438 - 81,499 - 297,552 828,489 - - 828,489 - 828,489 Others (Note) 4,540,807 3,099,215 1,012,595 - 385,810 9,038,427 - 4,458,015 13,496,442 2,375,857 11,120,585

Note: Other financial assets include unquoted beneficial certificates, time deposits not belong to cash and cash

equivalent and purchase of PEM instruments.

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7) Aging analysis for overdue but umimpaired financial assets

Delayed performance of certain procedures by borrowers and other administrative reasons could result in financial assets becoming overdue without being impaired. According to the Group’s internal risk management policies, financial assets overdue within 90 days are not considered impaired (accounts receivable - factoring without advancement will also not be considered impaired) unless other evidences show otherwise.

Aging analysis for overdue but unimpaired financial assets is as follows:

Items

December 31, 2015 Overdue by Less

Than One Month



Three Months Total

Account receivables Credit card $ 70,997 $ 37,537 $ - $ 108,534 Account receivables - factoring 437,878 23,779 232,546 694,203 Others 22,702 5,819 - 28,521

Discounts and loans Mortgage 4,434,743 291,264 - 4,726,007 Micro credit 467,601 33,171 - 500,772 Corporate banking 628,085 394,568 - 1,022,653 Others 2,844,930 125,801 - 2,970,731

Items

December 31, 2014 Overdue by Less

Than One Month



Three Months Total

Account receivables Credit card $ 44,630 $ 29,159 $ - $ 73,789 Account receivables - factoring 601,571 46,891 1,447 649,909 Others 20,246 2,375 - 22,621


8) Analysis of financial assets impairment

Analysis of the impairment of bond investments is summarized in Note 46,c,6),c). Analysis of the impairment of discounts, loans and receivables is summarized as follows:

Items Discounts and Loans Allowance for Credit Losses

December 31, 2015

December 31, 2014

December 31, 2015

December 31, 2014


Individually assessed $ 2,214,187 $ 6,098,727 $ 556,386 $ 517,159 Collectively assessed 3,542,771 3,017,832 1,115,706 809,858


Collectively assessed 881,665,194 796,217,900 10,766,915 11,950,311

Items Receivables Allowance for Credit Losses

December 31, 2015

December 31, 2014

December 31, 2015

December 31, 2014


(Note 2)

Individually assessed $ 625,334 $ 255,146 $ 591,137 $ 222,668




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Note 1: The loans and receivables exclude the amount of the allowance for credit losses and adjustments for discount (premium).

Note 2: Nonperforming receivables transferred other than loan is included.

9) Management policies of collaterals assumed

Collaterals assumed are classified as other assets. According to regulations, the Group should dispose of collaterals within four years and FENB, within five years. There are no assumed collaterals of the Group for the years ended December 31, 2015 and 2014.


a) Overdue loans and receivables


Items Nonperforming

Loan (NPL) (Note 1)

Total Loans NPL Ratio

(Note 2)

Loan Loss Reserves

(LLR)

Coverage Ratio

(Note 3)

Corporate loan Secured $ ,858,002 $154,320,128 0.56% $ 2,039,089 237.66% Unsecured 674,062 275,212,080 0.24% 4,037,857 599.03%

Consumer loan


Secured 241,870 170,338,832 0.14% 1,484,990 613.96%

Unsecured Total 2,143,365 856,156,904 0.25% 11,517,875 537.37%

Overdue Receivables

Account Receivables

Delinquency Ratio

Allowance for Credit Losses

Coverage Ratio


recourse (Notes 7 and 8) - 7,454,474 - 81,387 -


Items Nonperforming

Loan (NPL) (Note 1)

Total Loans NPL Ratio

(Note 2)

Loan Loss Reserves

(LLR)

Coverage Ratio

(Note 3)

Corporate loan Secured $ 1,097,128 $170,629,428 0.64% $ 3,543,106 322.94% Unsecured 358,444 217,244,462 0.16% 3,515,194 980.68%

Consumer loan


Secured 229,315 161,491,415 0.14% 1,853,174 808.13%

Unsecured Total 1,862,776 774,718,797 0.24% 12,469,687 669.41%

Overdue Receivables

Account Receivables

Delinquency Ratio

Allowance for Credit Losses

Coverage Ratio


recourse (Notes 7 and 8) 7,106 10,303,616 0.07% 110,894 1,560.57%

Note 1: For loan business: Overdue loans represent the amounts of overdue loans reported in accordance with

“Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Non-accrual Loans”.

For Credit card business: Overdue receivables are regulated by the Banking Bureau letter dated July 6, 2005 (Ref. No. 0944000378).

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Note 2: For loan business: NPL ratio = NPL/Total loans.

For Credit card business: Delinquency ratio = Overdue receivable/Account receivables.

Note 3: For loan business: Coverage ratio = LLR/NPL

For credit card business: Coverage ratio = Allowance for credit losses/Overdue receivables.

Note 4: Household mortgage loan is a financing to be used by a borrower to buy, build, or fix a dwelling, and the dwelling owned by the borrower, spouse, or children is used to fully secure the loan.

Note 5: Micro credit is regulated by the Banking Bureau letter dated December 19, 2005 (Ref. No. 09440010950). Note 6: Others in consumer loans refers to secured or unsecured loans excluding mortgage, cash card, micro credit,

and credit cards. Note 7: For account receivables - factoring with no recourse, as required by the Banking Bureau letter dated July 19,

2005 (Ref. No. 094000494), and allowance for bad debts is recognized once no compensation is made from factoring or insurance within three months.

Note 8: Part of nonperforming receivables transferred from other than loans was included.

b) Excluded NPLs and excluded overdue receivables

Date December 31, 2015 December 31, 2014

Items Excluded NPL Excluded Overdue

Receivables Excluded NPL

Excluded Overdue

Receivables As a result of debt negotiation and loan

agreements (Note 1) $ 4,094 $ 166,940 $ 6,011 $ 234,117 As a result of consumer debt clearance

(Note 2) 7,569 748,719 7,485 804,628 Total 11,663 915,659 13,496 1,038,745

Note 1: The disclosure of excluded NPLs and excluded overdue receivables resulting from debt negotiations and

loan agreements is based on the Banking Bureau letter dated April 25, 2006 (Ref. No. 09510001270). Note 2: The disclosure of excluded NPLs and excluded overdue receivables resulting from consumer debt clearance

is based on the Banking Bureau’s letter dated September 15, 2008 (Ref. No. 09700318940).

c) Concentration of credit extensions




(Note 3)


(%) 1 A Group (manufacture of liquid crystal panel and components) $ 6,054,609 5.55 2 B Group (manufacture of computers) 5,932,660 5.44 3 C Group (manufacture of computers) 5,929,347 5.43 4 D Group (cable and other subscription programming) 4,993,000 4.58 5 E Group (banks) 4,391,947 4.02 6 F Group (manufacture of computers) 4,068,544 3.73 7 G Group (manufacture of computer and other peripheral equipment) 3,873,769 3.55 8 H Group (mechanics, telecommunications and electricity facilities

installation) 3,839,677 3.52

9 I Group (manufacture of computers) 3,731,271 3.42 10 J Group (water transportation) 3,208,042 2.94

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(Note 3)


(%) 1 A Group (manufacture of liquid crystal panel and components) $ 10,861,857 10.91 2 B Group (manufacture of liquid crystal panel and components) 8,779,007 8.82 3 C Group (manufacture of computers) 5,926,460 5.95 4 D Group (water transportation) 5,174,212 5.20 5 E Group (manufacture of computers) 4,546,967 4.57 6 F Group (manufacture of computer and other peripheral equipment) 4,408,609 4.43 7 G Group (manufacture of computers) 3,865,130 3.88 8 H Group (cable and other subscription programming) 3,801,431 3.82 9 I Group (manufacture of computers) 3,477,036 3.49

10 J Group (mechanics, telecommunications and electricity facilities installation)

3,465,861 3.48

Note 1: Ranking of top 10 groups (excluding government or state - owned utilities) whose total credit consists of

loans. Note 2: Groups were those as defined in Articles 6 of the Supplementary Provisions to the Taiwan Stock Exchange

Corporation’s Rules for Review of Securities Listings Law. Note 3: Total credit is the sum of all loans (including import and export bills negotiated, discounts, overdrafts,

short-term loans, short-term secured loans, marginal receivables, medium-term loans, medium-term secured loans, long-term loans, long-term secured loans, and nonperforming loans), exchange bills negotiated, account receivables factored without recourse, acceptances receivable, and guarantee deposit issued.

d. Liquidity risk management

1) Definition of liquidity risk

Liquidity is the Bank’s ability to provide sufficient funding for asset growth and matured liabilities. Liquidity risk means the risk banks cannot obtain sufficient fund with reasonable cost and correct timing, and then suffer losses on earnings or capital. The measures of enhancing cash liquidity are holding sufficient cash and highly liquid able securities, adjusting maturities differences, savings absorption or arranging borrowings, etc. a) Strategies

The Bank established a sound liquidity risk managing system based on business’ scale and characteristic, assets and liabilities’ structure, funding strategies and diversity of funding sources to ensure it would have sufficient funding for obligations in normal or worst scenario.

b) Risk measurement

The Bank uses quantitative analysis to manage liquidity risk. Cash flow deficit and liquidity management goals are used as measure instruments to report monthly the analysis results to the assets and liabilities managing committee. Stress testing is done to ensure the Bank would have sufficient funding for asset growth and matured liabilities despite any internal operating problems or adverse changes in the financial environment.

c) Risk monitoring

The Bank established a liquidity deficit limit and an early warning system to detect liquidity risk and take appropriate action at the right time. The Bank has formed a crisis management team to handle any liquidity crisis. The general manager is the team convener, and the managers of the financial obligation department and the risk management department are the team members. The general manager can also assign the managers of related departments to join the team, depending on the situation. Members’ rights and responsibilities are listed in “Bank SinoPac’s Liquidity Risk Emergency Response Rule”.

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2) Maturity analysis of financial liabilities held to manage liquidity risk

a) Maturity analysis of non-derivative financial liabilities

Cash outflow analyses of nonderivative financial liabilities of the Bank, FENB and Bank SinoPac (China) are summarized in the following tables. The amounts are provided on a contract cash flow basis so some of the amounts will not match the amounts in the consolidated balance sheets. The Bank




Financial liabilities at fair value through profit or loss 249,517 - - - - 249,517


Payables 7,421,097 695,295 666,422 119,000 1,754,785 10,656,599 Deposits and remittances 626,060,127 169,562,090 132,401,232 180,914,360 22,298,631 1,131,236,440 Bank debentures 28,608 132,129 213,991 5,926,701 39,928,113 46,229,542 Other financial liabilities -

certificates of deposit 511,767 660,207 - - - 1,171,974





Payables 7,956,375 1,757,789 331,677 60,941 1,768,413 11,875,195 Deposits and remittances 625,565,390 165,641,784 122,313,630 168,955,715 16,958,941 1,099,435,460 Bank debentures 140,384 5,119,442 123,592 2,751,178 43,778,981 51,913,577 Other financial liabilities -

certificates of deposit - 641,105 1,275,588 321,939 - 2,238,632

FENB




Deposits from the Central Bank and other banks $ 23,711 $ - $ - $ - $ - $ 23,711

Payables 15,310 1 2 2 2 15,317 Deposits and remittances 472,872 57,323 57,181 207,774 107,914 903,064 Federal Home Loan Banks

Fund 24 48 73 145 30,400 30,690




Deposits from the Central Bank and other banks $ 65,865 $ - $ - $ - $ - $ 65,865

Payables 24,123 49 12 2 6 24,192 Deposits and remittances 491,780 126,038 109,083 108,734 120,051 955,686 Federal Home Loan Banks

Fund - - - - 30,000 30,000

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Bank SinoPac (China)




Deposits from the Central Bank and other banks $ 23,013 $ 446 $ - $ 10,000 $ 90,000 $ 123,459

Payables 4,311 2,978 179 12 - 7,480 Deposits and remittances 28,330 78,951 24,457 23,045 1,667 156,450




Deposits from the Central Bank and other banks $ - $ 10,023 $ - $ - $ - $ 10,023

Payables 4,258 1,639 6 2 1 5,906 Deposits and remittances 41,804 35,201 67,018 16,532 1,422 161,977

b) Maturity analysis of derivative financial liabilities

A hedging derivative financial instrument is managed within the contract period and it is disclosed as undiscounted cash flow based on its maturity. The Bank and FENB use derivative financial liabilities at fair value through profit or loss mainly to accommodate customers’ needs and manage their own exposure positions, and disclosed at fair value based on shortest period.

The Bank







FENB




Derivative financial liabilities at fair value through profit or loss $ 47 $ 1 $ - $ - $ - $ 48

Derivatives financial liabilities - hedging Derivative interest rate

instrument 71 152 232 474 2,880 3,809

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Derivative financial liabilities at fair value through profit or loss $ 4 $ 16 $ 15 $ - $ - $ 35

Derivatives financial liabilities - hedging Derivative interest rate

instrument 74 164 232 487 3,876 4,833

Note: Derivative interest rate instrument is settled at net amount.

3) Maturity analysis of off-balance sheet items

Maturity analysis of off-balance sheet items are summarized in the following tables. Financial guarantee contracts of the Bank that assume full amount are available or require to execute at the earliest time. The amounts are provided on a contract cash flow basis so some of the amounts will not match the amounts in the consolidated balance sheets.


Undrawn loan commitments $ 315,502 $ 284,538 $1,964,241 $1,558,788 $10,061,192 $ 14,184,261 Guarantees 2,216,877 1,280,638 1,731,936 3,966,134 7,464,184 16,659,769 Standby letter of credit 1,434,608 2,824,360 315,116 17,364 - 4,591,448


Undrawn loan commitments $ 529,983 $ 234,292 $ 752,005 $3,022,547 $8,786,859 $ 13,325,686 Guarantees 1,492,035 2,203,881 2,294,261 1,618,522 9,516,076 17,124,775 Standby letter of credit 1,560,942 3,864,394 686,485 69,649 121,798 6,303,268

4) Maturity analysis of operating lease commitments

Operating lease commitment is the minimum lease payment when the Group is lessee or lessor with non-cancelling condition.

Maturity analysis of operating lease commitments is summarized as follows:

December 31, 2015 Less than

1 Year 1-5 Years Over 5 Years Total

Operating lease commitments Operating lease expense (lessee) $ 554,000 $ 1,045,818 $ 142,742 $ 1,742,560 Operating lease income (lessor) 76,023 74,739 2,189 152,951

December 31, 2014 Less than

1 Year 1-5 Years Over 5 Years Total

Operating lease commitments Operating lease expense (lessee) $ 507,864 $ 915,262 $ 115,415 $ 1,538,541 Operating lease income (lessor) 83,932 123,793 2,970 210,695

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a) Maturity analysis of assets and liabilities of the Bank (New Taiwan dollars)

December 31, 2015


Main capital inflow on maturity $1,304,708,533 $ 169,859,348 $ 195,236,589 $ 195,538,333 $ 163,968,525 $ 153,250,507 $ 426,855,231


Gap (304,218,923 ) 78,070,428 40,796,682 (74,308,788 ) (76,986,327 ) (147,340,934 ) (124,449,984 )

December 31, 2014


Main capital inflow on maturity $1,171,776,759 $ 155,175,170 $ 197,806,145 $ 159,019,830 $ 52,149,074 $ 58,085,004 $ 549,541,536


Gap (309,943,244 ) 54,955,870 86,056,181 (50,991,831 ) (158,666,327 ) (232,201,810 ) (9,095,327 )

Note: The amounts shown in this table are the Bank’s position denominated in NTD.

b) Maturity analysis of assets and liabilities of the Bank (U.S. dollars) (In Thousands of U.S. Dollars)

December 31, 2015




Gap (223,081) 1,050,779 (95,812) 479,587 (875,296) (782,339)


December 31, 2014




Gap (958,685) (88,179) (1,035,322) 589,801 (180,900) (244,085)

Note: The amounts shown in this table are the Bank’s position denominated in USD.

e. Market risk

1) Definition of market risk

Market risk arises from market changes (such as those referring to interest rates, exchange rates, equity securities and commodity prices) which may cause the fluctuation of a financial instrument’s fair value or future cash flow. The Bank’s net revenue and investment portfolio value may fluctuate when risk factors above change. The main market risks the Bank should overcome pertain to interest rate, exchange rate and equity securities. Interest rate risks primarily refer to bonds and interest rate related derivative instruments such as fixed rate and floating rate interest rate swaps and bond options; the exchange rate risk refers to foreign currency investments the Bank holds such as exchange rate related derivative instruments and foreign currency bonds; equity securities risk includes listed stocks and equity related derivative financial instruments.

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2) Management strategies and procedures

To follow the “Market Risk Management Rule” and other regulations, the Bank established standards for risk identification, measurement, supervision and reporting to set up appropriate risk management framework for every kind of market risk. In accordance with the risk management limit approved by the board of directors, the Bank supervises every loss limit and position at risk such as interest rate, exchange rate, equity security, spot trading and forward contract, option, future, swap, and related sensitivity information derived from spot trading to confirm that market risk exposure is accepted to the Bank. The Bank separates its transactions into hedge and non-hedge on the basis of trading purposes. For hedge transactions, the Bank should measure hedge relations, risk management goals and hedge strategies. The Bank should also perform hedge testing for hedging effectiveness.

3) Organization and framework

The board of directors is the top supervision and decision making level of the Bank; it determines every risk management procedure and limit on the basis of its operating strategy and the business environment. The Bank also set up a risk management department headed by a general manager to establish risk managing principles, regulate risk managing policies, and plan and set up a risk management system. Following the internal control and segregation of duties principles, the Bank had certain related functions with market risk exposures transformed into three independent departments: Trading, risk control and settlement departments, usually called front office, middle office and back office. Nevertheless the risk management department remains in charge of market risk control, i.e., it is responsible for identifying measuring, controlling and reporting market risk.

4) Market risk control procedure

a) Identification and measurement

Risk measurement includes exposures changes in the market of interest rates, exchange rates, and equity securities, which affect spot trading and forward exchange, option, futures, and swap transactions or related combined transactions derived from spot trading. The Bank set up appropriate market risk limits based on commodity category, characteristic and complexity. The limits are the nominal exposure limit, the risk factor sensitivity limit of options as measured by Delta/Vega/DV01 and the loss control limit. These limits are calculated by the risk control department through measurements (such as those of the Black & Scholes Model) provided by financial data and company information providers (e.g., Murex and Bloomberg) based on market prices.

b) Supervision and reporting

The Bank’s market risk management department prepares risk management reports such as those on daily market valuations, value at risk and risk limits. If the risk is over the limit, the department should report this situation to the transaction department and appropriate managers in the risk management department. The department should also collect and organize bank market risk exposure information, risk value, risk limit rules, and information on situations in which limits are exceeded, analyze security investments, and submit regularly to the board of directors reports on the collected information and security investment analysis.

5) Trading book risk management policies

a) Definitions

The trading book is an accounting book of the financial instruments and physical commodities held for trading or hedged by the Bank. Held-for-trading position refers to revenues earned from practical or impractical trading differences. Positions that should not be recorded in the trading book are recorded in the banking book.

b) Strategies

The Bank earns revenues from trading spreads or fixed arbitrage debt and equity instruments are held for short periods of time, purchased with the intention of profiting from short-term price changes through properly control short-term fluctuation of market risk factors (interest rate, exchange rate and stock price). It executes hedge transactions as needed.

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c) Policies and procedures

The Bank carries out “Market Risk Management Policy” to control market risk. Under the above policy, traders may autonomously operate and manage positions within the range of authorized limits and the approved trading strategy. The market risk management department supervises trading positions (including limit, liquidity, the ability to establish hedge positions and investment portfolio risk) based on market information and evaluates market information quality, acquirability, liquidity and scale which are calculated into the pricing model.

d) Assessment policies

The Bank assesses financial instruments once a day on the basis of information obtained from independent sources if market prices are acquirable. If the Bank assesses financial instruments using a pricing model, it should be careful in making mathematical calculations and should review the pricing model’s assumptions and parameters regularly.

e) Measurements

i. The risk valuation and calculation methods are described in Note 46,e,10). ii. The calculation of the nominal exposure amount and the risk factor sensitivity value Delta/Vega/DV01 is done

through the trading systems. iii. The Bank makes stress tests using a light scenario (change in interest rate ± 100 bp, change in securities ± 15% and

change in exchange rate ± 3%) and serious scenario (change in interest rate ± 200 bp, change in securities ± 30% and change in exchange rate ± 6%) and reports the stress test results to the board of directors.

6) Trading book interest rate risk management

a) Definitions

Interest rate risk refers to a decrease in earnings and value of financial instruments due to adverse interest rate fluctuations. Major instruments with interest rate risk include securities and derivative instruments.

b) Procedures

The Bank has a trading limit and a stop-loss limit (which should be applied to trading instrument by the dealing room and dealers) based on management strategy and market conditions; limits have been approved by the board of directors.

c) Measurements

i. The risk valuation assumptions and calculation methods are described in Note 46,e,10). ii. DV01 is used daily to measure the impact of interest rate changes on investment portfolios.

7) Trading book exchange rate risk management

a) Definitions

Exchange rate risk refers to the incurrence of loss from the exchange of currencies in different timing. The Bank’s major financial instruments exposed to exchange rate risk spot contract, forward contracts, and FX option.

b) Policies and procedures

To control the exchange rate risk, the Bank sets trading limit and stop-loss limit and requires the dealing room, dealers, etc., to observe these limits.

c) Measurements

i. The risk valuation assumptions and calculation methods are described in Note 46,e),10). ii. Exposure positions are measured daily for the impact of exchange rate changes on investment portfolio value.

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8) Trading book equity risk management

a) Definitions

Market risk of equity securities is the risk that stock or stock index prices and/or their implied volatility will change (specific risk) or that the general market will give rise to conditions that will negatively affect security prices.

b) Procedures

To control equity risk, the Bank sets investment position limits and stop-loss limits. The limits are approved by the board of directors. Within the limit of authority, The Bank sets investment position limits and stop-loss limits for each dealer.

c) Measurements

i. The risk valuation assumptions and calculation methods are described in Note 46,e),10). ii. Exposure positions are measured daily to measure the impact of equity risk on investment portfolio value due from

equity risk.

9) Banking book interest rate risk management

Banking book interest rate risk refers to the decrease in the value of the banking book portfolio due to unfavorable interest rate changes. The banking book interest rate risk is not related to the interest rate position shown in the trading book. Through managing the banking book interest rate risk, the Bank can measure and manage the risk to earnings and financial position caused by interest rate fluctuations.

a) Strategies

To reduce the negative effect of interest rate changes on of net interest revenue and economic value, the Bank adjusts positions within certain limits for better performance. It reviews the interest rate sensitivity regularly to create maximum profit and manage interest rate risk.

b) Risk measurement

Risk measurement refers to the interest rate risk of assets, liabilities, and off-balance-sheet positions. The Bank periodically reports interest rate sensitivity positions and measures the impact of interest rate fluctuations on interest rate-sensitive assets and net interest revenue.

c) Risk monitoring

The asset and liability management committee examines and monitors exposure to interest rate risk on the basis of the measurement provided by the risk management sector. If the risk exposure condition exceeds the limit or target value, the risk management sector should investigate how this condition arose and notify the executive division accordingly. The executive division coordinates with relevant divisions to find solutions to problems. The asset and liability management committee will evaluate solutions for effectiveness. If evaluation results are positive, the relevant division will apply the solutions.

10) Market risk measurement technique

Value at Risk (VaR) The Bank uses the Risk Manager system and stress testing to measure its investment portfolio risk and uses several hypotheses about market conditions to measure market risk and expected maximum loss of holding positions. The Bank’s board of directors has set a VaR limit. The VaR is controlled daily by the market risk management sector and is a widely used risk measure of the risk of loss on a specific portfolio of financial assets. VaR is the statistical estimate of the potential loss of holding positions due to unfavorable market conditions. For the Bank, VaR refers to a fall in value of its holding position in a day, with a 99% confidence level. The Bank uses VaR and the Monte Carlo simulation method to derive quantitative measures for the market risks of the holding positions under normal conditions. The calculated result is used to test and monitor the validity of parameters and hypotheses periodically. However, the use of the VaR cannot prevent loss caused by huge unfavorable changes in market conditions.

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The Bank considers the expected maximum loss, target profit, and operating strategy in setting the VaR, which is proposed by the market risk management sector and approved by the board of directors. The Bank’s trading book VaR overview.

For the Year Ended December 31, 2015 Average Maximum Minimum

Exchange rate risk 14,583 76,349 4,466 Interest rate risk 65,604 118,476 12,867 Equity risk 6,457 15,334 1,054 Total VaR 70,608 129,168 19,724


For the Year Ended December 31, 2014 Average Maximum Minimum

Exchange rate risk 8,971 29,348 3,536 Interest rate risk 17,042 30,221 7,621 Equity risk 5,079 7,162 1,929 Total VaR 20,717 35,002 9,879


11) Exchange rate risks

Exchange rate risks of holding net positions in foreign currencies are shown as below:

December 31, 2015

Foreign Currency


Monetary items

USD $ 8,242,203 33.06586 $ 272,535,528 CNY 15,510,592 5.03243 78,055,967



USD 9,449,287 33.06586 312,448,801 CNY 17,111,024 5.03243 86,110,031

December 31, 2014

Foreign Currency


Monetary items

USD $ 10,502,490 31.71727 $ 333,110,312 CNY 20,917,703 5.1049 106,782,782


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December 31, 2014

Foreign Currency

(In Thousands) Exchange Rate Converted to NTD Financial liabilities Monetary items

USD 9,871,261 31.71727 313,089,450 CNY 19,367,444 5.1049 98,868,865

12) Compliance with the Regulations Governing the Preparation of Financial Reports by Public Banks

a) Interest rate sensitivity information (New Taiwan dollars)

December 31, 2015


Interest rate-sensitive assets $ 802,947,676 $ 33,999,193 $ 58,639,962 $ 124,172,322

$1,019,759,153 Interest rate-sensitive liabilities 317,284,299 425,188,107 95,172,745 47,332,660 884,977,811 Interest rate-sensitive gap 485,663,377 (391,188,914) (36,532,783) 76,839,662 134,781,342 Net worth 109,993,755 Ratio of interest rate-sensitive assets to liabilities (%) 115.23% Ratio of interest rate-sensitive gap to net worth (%) 122.54%

December 31, 2014


Interest rate-sensitive assets $774,388,594 $ 7,178,344 $ 39,894,851 $106,724,929 $ ,928,186,718 Interest rate-sensitive liabilities 307,718,512 416,496,375 75,421,867 47,522,248 847,159,002 Interest rate-sensitive gap 466,670,082 (409,318,031) (35,527,016) 59,202,681 81,027,716 Net worth 99,320,822 Ratio of interest rate-sensitive assets to liabilities (%) 109.56% Ratio of interest rate-sensitive gap to net worth (%) 81.58%

Note 1: The above amounts include only New Taiwan dollars held by the Bank, and exclude contingent assets and

contingent liabilities. Note 2: Interest rate-sensitive assets and liabilities mean the revenues or costs of interest-earning assets and

interest-bearing liabilities are affected by interest rate changes. Note 3: Interest rate-sensitivity gap = Interest rate-sensitive assets - Interest rate-sensitive liabilities. Note 4: Ratio of interest rate-sensitive assets to liabilities = Interest rate-sensitive assets/Interest rate-sensitive

liabilities (in New Taiwan dollars).

b) Interest rate sensitivity information (U.S. dollars)

December 31, 2015


Interest rate-sensitive assets $ 5,138,228 $ 423,935 $ 121,685 $ 243,925 $ 5,927,773 Interest rate-sensitive liabilities 2,913,810 4,051,006 502,418 27,790 7,495,024 Interest rate-sensitive gap 2,224,418 (3,627,071) (380,733) 216,135 (1,567,251) Net worth (21,138) Ratio of interest rate-sensitive assets to liabilities (%) 79.09% Ratio of interest rate-sensitive gap to net worth (%) (7,414.38%)

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December 31, 2014


Interest rate-sensitive assets $ 6,524,081 $ 807,297 $ 362,979 $ 266,170 $ 7,960,527 Interest rate-sensitive liabilities 3,201,944 4,086,851 384,051 26,622 7,699,468 Interest rate-sensitive gap 3,322,137 (3,279,554) (21,072) 239,548 261,059 Net worth 109,431 Ratio of interest rate-sensitive assets to liabilities (%) 103.39% Ratio of interest rate-sensitive gap to net worth (%) 238.56%

Note 1: The above amounts include only USD held by the Bank and exclude contingent assets and contingent

liabilities. Note 2: Interest rate-sensitive assets and liabilities mean the revenues or costs of interest-earnings assets and

interest-bearing liabilities are affected by interest-rate changes. Note 3: Interest rate-sensitive gap = Interest rate-sensitive assets - Interest rate-sensitive liabilities. Note 4: Ratio of interest rate-sensitive assets to liabilities = Interest rate-sensitive assets/Interest rate-sensitive

liabilities (in U.S. dollars).

13) Transfers of Financial Assets

The transferred financial assets of the Group that do not qualify for derecognition in the daily operation are mainly securities sold under agreement to repurchase. The transaction transfers the contractual rights to receive the cash flows of the financial assets but the Group retains the liabilities to repurchase the transferred financial assets at fixed price in the future period. The Group can not use, sell, or pledge these transferred financial assets within the validity period of the transaction. However, the Group still bear the interest rate risk and credit risk thus, the Group do not derecognize it. Analysis of financial assets and related liabilities not completely meet derecognizing condition is shown in following table:




Value

Related Financial



Assets - Fair Value

Related Financial



Transactions under agreements to repurchase Available-for-sale financial assets $ 604,802 $ 600,000 $ 604,802 $ 600,000 $ 4,802 Held-to-maturity financial assets 3,102,583 3,100,000 3,130,012 3,100,000 30,012




Value

Related Financial



Assets - Fair Value

Related Financial



Transactions under agreements to repurchase Available-for-sale financial assets $ 5,030,716 $ 5,000,000 $ 5,030,716 $ 5,000,000 $ 30,716

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14) Offsetting of financial assets and financial liabilities

The Group did not hold financial instruments covered by Section 42 of the IAS 32 “Financial Instruments: Presentation” endorsed by the Financial Supervisory Commission; thus, it made an offset of financial assets and liabilities and reported the net amount in the balance sheet. The Group engages in transactions on the following financial assets and liabilities that are not subject to balance sheet offsetting based on IAS 32 but are under master netting arrangements or similar agreements: Global master repurchase agreements, global securities lending agreements and similar repurchasing agreements as well as reverse-repurchasing agreements. These agreements allow both the Group and its counterparties to opt for the net settlement of financial assets and financial liabilities. If one party defaults, the other one may choose net settlement. The netting information of financial assets and financial liabilities is set out below: December 31, 2015

Recognized



the Balance Sheet

Financial Assets


Amount


Amount


Amount


(Note)


Derivative

instruments $ 24,259,003 $ - $ 24,259,003 $ 14,727,760 $ 362,704 $ 9,168,539 Securities


$ 28,553,600 $ - $ 28,553,600 $ 19,022,357 $ 362,704 $ 9,168,539


Netted Financial




Liabilities - Gross

Amount


Amount



Cash Collaterals




$ 31,969,007 $ - $ 31,969,007 $ 21,745,573 $ 3,199,615 $ 7,023,819


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December 31, 2014

Recognized



the Balance Sheet

Financial Assets


Amount


Amount


Amount


(Note)


Derivative

instruments $ 20,818,280 $ - $ 20,818,280 $ 8,108,104 $ 1,010,859 $ 11,699,317 Securities


$ 33,712,429 $ - $ 33,712,429 $ 21,002,253 $ 1,010,859 $ 11,699,317


Netted Financial




Liabilities - Gross

Amount


Amount



Cash Collaterals




$ 28,681,384 $ - $ 28,681,384 $ 15,187,192 $ 4,814,847 $ 8,679,345


47. CAPITAL MANAGEMENT

a. Overview The Group’s capital management goals are as follows: As a basic target, the Group’s eligible capital should be sufficient to meet their operation need, and higher than minimum requirements of the capital adequacy ratio. Eligible capital and legal capital are calculated under the regulations announced by the authority. The Group should have adequacy capital to bear the risks, measure capital demand according to risk combination and risk characteristics, fulfill the optimization of resource and capital allocation by risk management.

b. Capital management procedure

The Group’s capital adequacy ratio should meet the regulations announced by the authority. Also, the Group should maintain capital adequacy ratio by considering the Group’s business scale, major operating strategy, risk condition, eligible capital structure, and future capital increase plan, etc. The Group reported to the authority regularly. Overseas subsidiaries’ capital management is in accordance with local regulations. The Group’s capital maintenance is in accordance with “Regulations Governing the Capital Adequacy and Capital Category of Banks”, etc., and is managed by the Bank’s risk management and accounting divisions.

c. Statement of capital adequacy

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Year

Analysis Items December 31, 2015 December 31, 2014

Standalone Consolidation Standalone Consolidation

Eligible capital

Ordinary shares equity $ 92,678,117 $100,817,213 $ 81,825,690 $ 91,108,497 Other Tier 1 capital - 1,809,618 - - Tier 2 capital 14,365,116 26,526,087 20,581,520 31,995,842 Eligible capital 107,043,233 129,152,918 102,407,210 123,104,339

Risk-weighted assets

Credit risk

Standardized approach 820,893,441 879,195,881 811,352,567 860,205,273 Internal rating - based

approach - - - -

Securitization - 753,950 - -

Operational risk

Basic indicator approach 48,348,781 51,208,004 47,477,488 49,866,188 Standardized

approach/alternative standardized approach

- - - -

Advanced measurement approach - - - -

Market risk Standardized approach 25,993,720 28,000,257 20,230,650 23,718,500 Internal model approach - - - -

Total risk-weighted assets 895,235,942 959,158,092 879,060,705 933,789,961 Capital adequacy ratio 11.96% 13.47% 11.65% 13.18% Ordinary shares equity risk-based capital ratio 10.35% 10.51% 9.31% 9.76% Tier 1 risk-based capital ratio 10.35% 10.70% 9.31% 9.76% Leverage ratio 6.27% 6.59% 4.54% 4.95%

Note 1: These tables were filled according to “Regulations Governing the Capital Adequacy Ratio of Banks” and related

calculation tables. Note 2: The Bank shall disclose the capital adequacy ratio for the current and previous period in annual financial reports.

For semiannual financial report, the Bank shall disclose the capital adequacy ratio for the current period, previous period, and previous year end.

Note 3: The formula is as follows:

1) Eligible capital = Ordinary shares equity + Other Tier 1 capital + Tier 2 capital. 2) Total risk - weighted assets = Risk-weighted assets for credit risk + (Capital requirements for operational risk +

Capital requirement for market risk) x 12.5. 3) Ratio of capital adequacy = Eligible capital/Total risk - weighted assets. 4) Ordinary shares equity risk - based capital ratio = Common shares equity/Total risk - weighted assets. 5) Tier 1 risk - based capital ratio = (Common shares equity + Other Tier 1 capital)/Total risk - weighted assets. 6) Leverage ratio = Tier 1 capital/Total exposure risk.

Note 4: Based on the Supervisory Commission’s Statement No. 09900146911, gains from the sale of idle assets should not

be included in Bank’s capital adequacy ratio calculation. 48. RECLASSIFICATION

Financial assets have been reclassified on September 25, 2013. The fair value on the reclassification day were as follows:

Before

Reclassification After

Reclassification Available-for-sale securities $ 10,164,016 $ - Held-to-maturity securities - 10,164,016 $ 10,164,016 $ 10,164,016 The effective interest rate of reclassified financial assets on the reclassification day was between 0.9795% and 2.0696%, and

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the estimated recoverable cash flow was $10,879,405. The book value and fair value of financial assets reclassified: December 31 2015 2014 Held-to-maturity securities Book value $ 10,066,306 $ 10,109,702 Fair value 10,231,384 10,174,314 The gains or losses recorded for the reclassified financial assets (excluding those that had been derecognized) for the years ended December 31, 2015 and 2014 and the pro forma gains or losses assuming no reclassifications had been made were as follows: For the Year Ended December 31 2015 2014 Held-to-maturity securities Recognition in profit (included in interest revenue) $ 111,887 $ 112,326 Assumed equity adjustment without such reclassification 178,706 72,252

49. CROSS-SELLING INFORMATION

For the years ended December 31, 2015 and 2014, the Bank charged SinoPac Securities for $1,913 and $2,378, respectively, as marketing and opening accounts. The rental fee the Bank charged SinoPac Securities for the years ended December 31, 2015 and 2014 were $3,462 and $3,526, respectively. The rental fee the Bank paid to SinoPac Securities were all $678 for the years ended December 31, 2015 and 2014. The Bank paid to SinoPac Securities $3,519 and $4,076 for the years ended December 31, 2015 and 2014 for bonus as part of the cross-selling agreement. For other transactions between SPH and its subsidiaries, please refer to Note 42 and Table 5.

50. PROFITABILITY

Items December 31, 2015 December 31, 2014

Return on total assets Before income tax 0.75% 0.94% After income tax 0.64% 0.82%

Return on net worth Before income tax 10.25% 13.97% After income tax 8.79% 12.18%

Profit margin 37.01% 36.60% Note 1: Return on total assets = Income before (after) income tax/Average total assets. Note 2: Return on net worth = Income before (after) income tax/Average net worth. Note 3: Profit margin = Income after income tax/Total net revenues. Note 4: Income before (after) income tax represents income for the years ended December 31, 2015 and 2014.

51. TRUST BUSINESS UNDER THE TRUST LAW

a. Balance sheets, income statement and trust properties of trust accounts

These statements were managed by the Bank’s Trust Department. However, these items were not included in the Bank’s financial statements.

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Balance Sheets of Trust Accounts December 31, 2015 and 2014

2015 2014

Other Trust

Business

Financial Assets and Real Estate Trust Plan Total

Other Trust Business


Trust assets Bank deposits $ 4,083,737 $ - $ 4,083,737 $ 4,444,321 $ - $ 4,444,321 Bonds 4,437,560 - 4,437,560 3,198,721 - 3,198,721 Stocks 11,623,025 - 11,623,025 13,133,923 - 13,133,923 Funds 120,728,823 - 120,728,823 125,610,804 - 125,610,804 Securities lent 1,878,648 - 1,878,648 1,428,662 - 1,428,662 Receivables 35,035 - 35,035 23,107 - 23,107 Prepayments 13,076 - 13,076 12,742 - 12,742 Real estate

Land 6,334,957 - 6,334,957 6,235,568 - 6,235,568 Buildings 96,266 - 96,266 109,261 - 109,261 Construction in

process 814,169 - 814,169 2,626,574 - 2,626,574 Securities under

custody 119,082,668 - 119,082,668 83,133,775 - 83,133,775 Total trust assets $269,127,964 $ - $269,127,964 $239,957,458 $ - $239,957,458 Trust liabilities Payables $ 3,339 $ - $ 3,339 $ 3,191 $ - $ 3,191 Payable on

securities under custody 119,082,668 - 119,082,668 83,133,775 - 83,133,775

Trust capital 150,196,328 - 150,196,328 153,976,004 - 153,976,004 Reserves and

cumulative earnings Net income

(loss) (2,313,076) - (2,313,076) 1,602,062 - 1,602,062 Cumulative

earnings 2,844,488 - 2,844,488 1,688,248 - 1,688,248 Deferred

amount (685,783) - (685,783) (445,822) - (445,822) Total trust

liabilities $269,127,964 $ - $269,127,964 $239,957,458 $ - $239,957,458

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Trust Properties of Trust Accounts December 31, 2015 and 2014

December 31 Investment Portfolio 2015 2014 Bank deposits $ 4,083,737 $ 4,444,321 Bonds 4,437,560 3,198,721 Stocks 11,623,025 13,133,923 Funds 120,728,823 125,610,804 Securities lent 1,878,648 1,428,662 Real estate

Land 6,334,957 6,235,568 Buildings 96,266 109,261 Construction in process 814,169 2,626,574

Securities under custody 119,082,668 83,133,775 $ 269,079,853 $ 239,921,609

Income Statement of Trust Account

Years Ended December 31, 2015 and 2014

2015 2014

Other Trust

Business


Other Trust Business


Trust income

Interest income $ 19,654 $ - $ 19,654 $ 19,564 $ - $ 19,564

Borrowed Securities income 32,743 - 32,743 45,703 - 45,703

Cash dividends 559,212 - 559,212 464,605 - 464,605

Gains from beneficial certificates 3,007 - 3,007 4,162 - 4,162

Realized investment income 66,801 - 66,801 99,165 - 99,165

Unrealized investment income - - - 2,007,434 - 2,007,434

Others 2,438 - 2,438 - - -

Total trust income 683,855 - 683,855 2,640,633 - 2,640,633

Trust expense

Trust administrative expenses 8,862 - 8,862 11,357 - 11,357

Tax expenses 9 - 9 6 - 6

Realized investment loss 31,548 - 31,548 21,916 - 21,916

Unrealized investment loss 2,953,818 - 2,953,818 1,004,020 - 1,004,020

Others 2,694 - 2,694 1,272 - 1,272

Total trust expense 2,996,931 - 2,996,931 1,038,571 - 1,038,571

Income before income tax (2,313,076 ) - (2,313,076 ) 1,602,062 - 1,602,062

Income tax expense - - - - - -

Net income $(2,313,076) $ - $(2,313,076) $ 1,602,062 $ - $ 1,602,062

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b. The operations of the Bank’s Trust Department consist of planning, managing and operating of trust business and affiliated business. These operations are governed by the Banking Law and the Trust Law.

c. IBT, a trustee acting in behalf of its corporate customers, purchased CDOs (collateralized debt obligations) issued by Lehman

Brothers for US$20 million in 2005. Later, a civil case was brought against the CDO issuer, custodians and bond holders (the Bank based on trust deed) by the insolvency administrator of Lehman Brothers Special Financing Inc. “Lehman Brothers”) before the United States Bankruptcy Court in New York. On November 4, 2014, the plaintiff, Lehman Brothers, signed a settlement agreement with the Bank, which paid US$7,500 as settlement. The plaintiff thus withdrew all litigation and claims against the Bank and no longer filed related lawsuits.

52. ADDITIONAL DISCLOSURES

a. Disclosures prepared in conformity with Regulations Governing the Preparation of Financial Reports by Public Banks 18:

No. Item Explanation 1 Marketable securities acquired and disposed at costs or prices of at least NT$300 million or 10% of

the issued capital None

2 Acquisition of individual real estates at costs of at least NT$300 million or 10% of the issued capital None 3 Disposal of individual real estates at prices of at least NT$300 million or 10% of the issued capital None 4 Allowance for service fee to related parties amounting to at least NT$5 million None 5 Receivables from related parties amounting to at least NT$300 million or 10% of the issued capital Table 1 6 Trading information - sale of nonperforming loans None 7 Financial asset securitization None 8 Related parties transaction Table 5 9 Other significant transactions which may affect the decisions of financial report users None

b. Information related to subsidiary:

No. Item Explanation 1 Financing provided None

(Note) 2 Endorsements/guarantees provided None

(Note) 3 Marketable securities held Table 3

(Note) 4 Acquisition and disposal of marketable securities at costs or prices of at least NT$300 million or 10%

of the issued capital None

5 Derivative transactions of the subsidiary None 6 Acquisition of individual real estates at costs of at least NT$300 million or 10% of the issued capital None 7 Disposal of individual real estates at prices of at least NT$300 million or 10% of the issued capital None 8 Allowance for service fee to related parties amounting to at least NT$5 million None 9 Receivables from related parties amounting to at least NT$300 million or 10% of the issued capital None

10 Trading information - sale of nonperforming loans Table 2 11 Financial asset securitization None 12 Related parties transaction Table 5 13 Other significant transactions which may affect the decisions of financial report users None

Note: Subsidiaries which belong to financial, insurance, securities industries and its main business registration include financing provided, endorsements/guarantees provided, acquisition and disposal of marketable securities do not need to disclose above information.

c. The related information and proportionate share in investees: Table 4. d. Information on investment in Mainland China: Table 6.

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53. OPERATING SEGMENT INFORMATION

Based on chief of decision maker’s resource allocation and department performance review, the Bank has divided the business segments based on the services and products provided, excluding subsidiary accounted under the equity method.

The accounting standards and policies apply to all of the business segments in accordance to IFRS 8 “Operating Segments”, the Bank’s operating segments for the years ended December 31, 2015 and 2014 are without change. The Bank reports the following.

Domestic branches: Provides service and products through 128 branches and Banking Division of the Head Office.

Oversea branches: Provides service and products for oversea customers through oversea branches.

Financial transaction: Provides investment, and bonds transaction services through financial operation units.

Other business segments: Includes consumer finance, automobile loan the US subsidiary, SPCL - the Bank’s subsidiary - financing business and SinoPac (China) - the Bank’s subsidiary, were not identified to disclose as on individual segment.

a. The Group’s reporting segments revenue and operating result are shown in the following table.

b. The Group’s net revenue from external clients are shown in the following table.

Segment revenues and results


Domestic Branches

Financial Transaction

Oversea Branches Others Operating

Segments Non-operating

Segments Total

Income (loss)

Net interest $10,369,836 $ (235,003) $ 2,485,055 $ 2,263,941 $14,883,829 $ 683,149 $15,566,978

Interest revenue 15,677,321 18,419 5,632,354 2,988,351 24,316,445 3,047,685 27,364,130

Revenue amount segments 3,672,590 70,634 (2,201,172) (403,051) 1,139,001 (1,139,001) -

Interest expense 8,980,075 324,056 946,127 321,359 10,571,617 1,225,535 11,797,152

Commission and fee revenues, net 4,774,422 (41,750) 385,306 824,375 5,942,353 78,550 6,020,903

Others 538,208 1,458,373 247,159 169,328 2,413,068 790,957 3,204,025

Net revenue 15,682,466 1,181,620 3,117,520 3,257,644 23,239,250 1,552,656 24,791,906

Allowance for (reversal of) doubtful accounts and guarantees 197,368 182,677 334,642 (461,738) 252,949 (345,113) (92,164)

Operating expense 9,909,403 348,402 1,186,267 2,763,538 14,207,610 (21,573) 14,186,037

Income before income tax 5,575,695 650,541 1,596,611 955,844 8,778,691 1,919,342 10,698,033

Income tax expense (738,560) (86,996) (216,453) (217,104) (1,259,113) (264,057) (1,523,170)

Net income 4,837,135 563,545 1,380,158 738,740 7,519,578 1,655,285 9,174,863

Area segment


Taiwan America Asia Total

Net revenue $ 20,739,884 $ 1,581,960 $ 2,470,062 $ 24,791,906

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Segment revenues and results


Domestic Branches

Financial Transaction

Oversea Branches Others Operating

Segments Non-operating

Segments Total

Income (loss)

Net interest $10,282,715 $ (294,538) $ 2,930,889 $ 2,364,816 $15,283,882 $ 1,205,044 $16,488,926

Interest revenue 15,657,040 19,599 6,430,629 3,017,252 25,124,520 3,417,481 28,542,001

Revenue amount segments 3,538,649 38,046 (2,286,539) (399,072) 891,084 (891,084) -

Interest expense 8,912,974 352,183 1,213,201 253,364 10,731,722 1,321,353 12,053,075

Commission and fee revenues, net 4,798,236 (38,421) 326,341 857,110 5,943,266 61,095 6,004,361

Others 1,107,224 1,765,416 532,280 287,791 3,692,711 4,911,191 8,603,902

Net revenue 16,188,175 1,432,457 3,789,510 3,509,717 24,919,859 6,177,330 31,097,189

Allowance for (reversal of) doubtful accounts and guarantees 4,266,228 118,645 655,651 (209,761) 4,830,763 (865,155) 3,965,608

Operating expense 9,788,241

426,848 1,194,648 2,728,269 14,138,006 (61,123) 14,076,883

Income before income tax 2,133,706 886,964 1,939,211 991,209 5,951,090 7,103,608 13,054,698

Income tax expense (250,706) (104,216) (228,230) (265,443) (848,595) (823,283) (1,671,878)

Net income 1,883,000

782,748 1,710,981 725,766 5,102,495 6,280,325 11,382,820

Area segment


Taiwan America Asia Total

Net revenue $ 22,535,238 $ 1,542,859 $ 7,019,092 $ 31,097,189

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TABLE 1 BANK SINOPAC AND INVESTEES RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$300 MILLION OR 10% OF THE ISSUED CAPITAL DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars)

Company Name Related Party Relationship Ending

Balance Turnover

Rate

Overdue Amounts Received in Subsequent

Period

Allowance for

Bad Debts Amount Action Taken

Bank

SinoPac SinoPac Financial

Holdings Company Limited

The parent company of the Bank

$ 1,198,619 (Note)

- $ - - $ - $ -

Note: Most of receivables resulted from the use of the linked-tax system (recognized in current tax assets) and related parties.

TABLE 2 BANK SINOPAC AND INVESTEES TRADING INFORMATION - SALE OF NONPERFORMING LOANS FOR THE YEAR ENDED DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars)

Date Counter-parties Loans Carrying Amount (Note)

Selling Price (Note)

Gain or (Loss) on Disposal

Attachment Relation

FENB February 23, 2015 Cottonwood Cajon

ES, LLC Secured commercial

loan $ - $ 140,256 $ 140,256 - None

Note: Carrying amount is original credit amount. Foreign-currency amounts were translated to New Taiwan dollars at the exchange

rate as of the balance sheet date.

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TABLE 3 BANK SINOPAC AND INVESTEES MARKETABLE SECURITIES HELD DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars or Shares)

Name of Holding

Company

Type and Issuer of

Marketable Securities

Relationship Financial Statement Account

December 31, 2015

Note Shares/Units/ Face Amount

Carrying Amount (Note 1)

Percentage of

Ownership

Market Value or Net Asset

Value (Note 1)

SinoPac

Bancorp Stock

GS Series A - Financial assets at

FVTPL 58.55 $ 38,432 - $ 38,432 Note 2

GS Series C - Financial assets at

FVTPL 24.41 16,938 - 16,938 Note 2

GS Series D - Financial assets at

FVTPL 117.04 78,949 - 78,949 Note 2

BAC Series E - Financial assets at

FVTPL 200.00 148,069 - 148,069 Note 2

HSBC Series F - Financial assets at

FVTPL 25.30 18,469 - 18,469 Note 2

HSBC Series G - Financial assets at

FVTPL 374.70 297,233 - 297,233 Note 2

SinoPac

Capital Limited (H.K.) Stock

MeiTa Industrial

Co., Ltd. - Unquoted equity

investments 212 14,188 0.49 14,188 Note 2

Fund

SinoPac China

IPO Fund - Available-for-sale

financial assets 3,001 151,413 6.95 151,413 Note 3

China Enterprise

Capital Ltd. - Available-for-sale

financial assets 0.02 20,055 0.85 20,055 Note 3

SinoPac

Property Insurance Agent Co., Ltd. Bond

Government

bond 88-3 - Held-to-maturity

financial assets 600 613 - 685 Pledge

SinoPac Life

Insurance Agent Co., Ltd. Bond

Government

bond 88-3 - Held-to-maturity

financial assets 600 613 - 685 Pledge

Note 1: Foreign-currency amounts were translated to New Taiwan dollars at the exchange rate as of the balance sheet date. Note 2: Fair values or net asset values were based on the carrying amounts. Note 3: Fair values were based on the closing prices of the underlying assets of the beneficial certificates as of December 31, 2015.

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TABLE 4 BANK SINOPAC AND INVESTEES INFORMATION ON INVESTED ENTERPRISES FOR THE YEAR ENDED DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars or Shares)

Investee Company Location Main Businesses and Products

Percentage of

Ownership

Carrying Amount

Investment Gains

Consolidated Investment

Note Shares (In

Thousands)

Imitated Shares

Total

Shares Percentage

of Ownership

Financial related enterprise Bank SinoPac (China) Ltd. China Commercial Bank 100.00 $10,948,098 $ 62,910 - - - 100.00 Subsidiary

and Note 1 SinoPac Bancorp United

States Holding company 100.00 9,339,102 349,294 68 - 68 100.00 Subsidiary

and Note 1 SinoPac Capital Limited (H.K.) Hong Kong Credit and investment service 100.00 1,902,064 38,525 229,998 -

229,998 100.00 Subsidiary

and Note 1 SinoPac Life Insurance Agent Co., Ltd.

Taiwan Life insurance agent 100.00 1,098,746 1,092,381 300 - 300 100.00 Subsidiary


Taiwan Property insurance agent 100.00 37,648 31,381 300 - 300 100.00 Subsidiary

Global Securities Finance Corporation

Taiwan Securities financing 2.63 81,499 2,635 11,494 - 11,494 2.87 Note 2

Taipei Foreign Exchange Inc. Taiwan Foreign exchange market maker

3.43 6,800 2,720 680 - 680 3.43 Note 2

Taiwan Futures Exchange Taiwan Futures exchange and settlement

1.07 21,490 6,073 6,193 - 6,193 2.08 Note 2

Fuh Hwa Securities Investment Trust Co., Ltd.

Taiwan Securities investment trust and consultant

4.63 15,000 15,000 1,500 - 1,500 4.63 Note 2

Financial Information Service Co., Ltd.

Taiwan Planning and developing the information system of across banking institution and managing the information web system

2.28 91,000 26,617 11,876 - 11,876 2.28 Note 2

Taiwan Asset Management Corporation

Taiwan Evaluating, auctioning, and managing for financial institutions’ loan

0.28 37,500 3,042 3,750 - 3,750 0.28 Note 2

Taiwan Financial Asset Service Co.

Taiwan Auction 5.88 100,000 - 10,000 - 10,000 5.88 Note 2

Sunny Asset Management Corp. Taiwan Purchasing for financial institutions’ loan assets

1.42 164 93 85 - 85 1.42 Note 2

Taiwan Depository and Clearing Co.

Taiwan Computerizing book-entry operation for securities

0.08 4,639 418 3,164 - 3,164 0.92 Note 2

Taiwan Mobile Payment Corporation

Taiwan Promoting E-commerce and developing E-billing

1.00 6,000 - 600 - 600 1.00 Note 2

Nonfinancial related enterprise Taiwan Television Enterprise, Ltd.

Taiwan Wireless television Company 4.84 114,554 - 13,889 - 13,889 4.95 Note 2

Victor Taichung Machinery Works Co., Ltd.

Taiwan Manufacturer and seller of tool machine, plastic machine and other precise equipment

0.14 - 157 157 - 157 0.14 Note 2

Note 1: Foreign-currency amounts were translated at the exchange rate as of the balance sheet date, except for

foreign-currency-denominated income and expenses, which were translated to New Taiwan dollars at the average exchange rate for the year ended December 31, 2015.

Note 2: Investment gains are dividend income. Note 3: Above shares are in thousands of shares.

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249

TABLE 5 BANK SINOPAC AND INVESTEES RELATED PARTIES TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars)

No. (Note

1) Transaction Company Counterparty

Nature of Relationship

(Note 2)

Description of Transactions

Financial Statement Account Transaction Amount

Transaction Item

Percentage of Consolidated

Revenue/Assets (Note 3)

0 Bank SinoPac Far East National Bank a Cash and cash equivalents, net $ 713,807 Note 4 0.05 SinoPac Capital (H.K.) Limited a Deposits and remittances 141,830 Note 4 0.01 SinoPac Capital (B.V.I.) Ltd. a Deposits and remittances 50,868 Note 4 -

RSP Information Service

Company Limited a Deposits and remittances 14,004 Note 4 - SinoPac Insurance Brokers Ltd. a Receivables, net 4,004 Note 4 - SinoPac Insurance Brokers Ltd. a Deposits and remittances 205,538 Note 4 0.01 SinoPac Insurance Brokers Ltd. a Commission and fee revenues, net 15,276 Note 4 0.06 SinoPac Life Insurance Agent a Receivables, net 133,220 Note 4 0.01 SinoPac Life Insurance Agent a Deposits and remittances 1,240,852 Note 4 0.09 SinoPac Life Insurance Agent a Commission and fee revenues, net 574,893 Note 4 2.32 SinoPac Life Insurance Agent a Other noninterest net revenues 11,776 Note 4 0.05

SinoPac Property Insurance

Agent a Deposits and remittances 31,446 Note 4 -


Agent a Commission and fee revenues, net 13,575 Note 4 0.05


Agent a Other noninterest net revenues 2,008 Note 4 0.01

Bank SinoPac (China) Ltd. a Due from the Central Bank and call loans

to other banks, net 760,515 Note 4 0.05 Bank SinoPac (China) Ltd. a Receivables, net 105,567 Note 4 0.01 Bank SinoPac (China) Ltd. a Discounts and loans, net 2,975,927 Note 4 0.21 Bank SinoPac (China) Ltd. a Interest revenues 32,821 Note 4 0.13 Bank SinoPac (China) Ltd. a Interest expenses 21 Note 4 -

1 SinoPac Bancorp Far East National Bank c-1 Cash and cash equivalents, net 65,683 Note 4 -

2 Far East National Bank Bank SinoPac b Deposits and remittances 713,807 Note 4 0.05 SinoPac Bancorp c-2 Deposits and remittances 65,683 Note 4 -

3 SinoPac Capital (H.K.) Limited Bank SinoPac b Cash and cash equivalents, net 141,830 Note 4 0.01

4 SinoPac Capital (B.V.I.) Ltd. Bank SinoPac b Cash and cash equivalents, net 2,125 Note 4 - Bank SinoPac b Other financial assets, net 48,743 Note 4 -

5 RSP Information Service Company

Limited Bank SinoPac b Cash and cash equivalents, net 14,004 Note 4 -

6 SinoPac Insurance Brokers Ltd. Bank SinoPac b Cash and cash equivalents, net 22,090 Note 4 - Bank SinoPac b Other financial assets, net 183,448 Note 4 0.01 Bank SinoPac b Payables 4,004 Note 4 - Bank SinoPac b Commission and fee revenues, net 15,276 Note 4 0.06

7 SinoPac Life Insurance Agent Bank SinoPac b Cash and cash equivalents, net 1,240,852 Note 4 0.09 Bank SinoPac b Payables 133,220 Note 4 0.01 Bank SinoPac b Commission and fee revenues, net 574,893 Note 4 2.32 Bank SinoPac b Other operating expense 11,776 Note 4 0.05

8 SinoPac Property Insurance Agent Bank SinoPac b Cash and cash equivalents, net 31,446 Note 4 - Bank SinoPac b Commission and fee revenues, net 13,575 Note 4 0.05 Bank SinoPac b Other operating expense 2,008 Note 4 0.01

9 Bank SinoPac (China) Ltd. Bank SinoPac b Deposits from the Central Bank and

banks, net 3,736,442 Note 4 0.26 Bank SinoPac b Payables 105,567 Note 4 0.01 Bank SinoPac b Interest revenues 21 Note 4 - Bank SinoPac b Interest expenses 32,821 Note 4 0.13

bank.sinopac.com

249

250

Note 1: Transactions between parent company and subsidiaries should be distinguished as follows:

a. Parent company: 0. b. Subsidiaries are numbered in sequence from 1.

Note 2: Types of transactions with related parties were classified as follows:

a. Parent company to subsidiaries. b. Subsidiaries to parent company. c-1. Subsidiaries A to B. c-2. Subsidiaries B to A. Types of transactions with related parties classified as category a and category c-1, in the trading relationship and material intercompany transactions between parent company and subsidiaries above, are XBRL reporting items which are based on the Taiwan Stock Exchange letter (Ref. No. 1030005380).

Note 3: In the computation of percentage of consolidated revenue/assets, if the amount is the ending balance of assets or liabilities, the accounts percentage will be calculated by dividing the consolidated assets or liabilities; if the amount is the amount of income or expense, the accounts percentage will be cumulated by dividing the consolidated revenues in the same period.

Note 4: For the transactions between the Bank and related parties, the terms are similar to those transacted with unrelated parties. Note 5: For expansion of the market and the operating synergies of Vietnamese overseas branches, the Bank assumed, under the

approval of its board, the assets, liabilities and operations of the Ho Chi Minh City branch of the U.S. Far East National Bank on April 25, 2014. This case has been approved by the FSC and the State Bank of Vietnam with November 1, 2015 as the record date. The transaction cost of this case is US$28,540 thousand.

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TABLE 6 BANK SINOPAC AND SUBSIDIARIES INFORMATION ON INVESTMENT IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2015 (In Thousands of New Taiwan Dollars)

Investee Company

Main Businesses

and Products

Total Amount of

Paid-in Capital

Method of Investment

Accumulated Outflow of Investment

from Taiwan as of January

1, 2015

Investment Flows Accumulated Outflow of

Investment from Taiwan as of

December 31, 2015

Earnings (Losses) of

Investee

(Notes 2 and 3)

Percentage of

Ownership

Equity in the

Earnings (Losses)

(Notes 2 and 3)

Carrying Value (Notes

2 and 3)

Accumulated Inward

Remittance of Earnings

Outflow Inflow

Bank SinoPac (China) Ltd.

Commercial Bank

$ 10,709,070 Investment in Mainland China directly

$ 10,709,070 $ - $ - $ 10,709,070 $ 66,667 100 $ 62,910 $ 10,948,098 $ -

Accumulated Investment in Mainland China as of December 31, 2015

Investment Amounts Authorized by Investment Commission, MOEA

Limit on Investment

$10,709,070 $10,709,070 $65,470,784

Note 1: The accumulated investment amounts in Mainland China as of December 31, 2015 are US$323,871 thousand and had been

authorized by the Investment Commission, MOEA are US$323,871 thousand. Note 2: Earnings of investee, the gain on investment recognized and the value of investment presented for the year ended December

31, 2015 have been reviewed independent certified public accountants. Note 3: Foreign currencies are translated to N.T. dollars with current rate of the date of balance sheet, only the gains or losses

investments are translated with current period average rate. Note 4: Information related to investment please refer to Note 4.

bank.sinopac.com

251

ANNUAL REPORT 2015

252

In US$ millions

National income

GDP

GDP per capital (in US$)

Economic growth rate (GDP)

Foreign trade

Export

Import

Trade surplus

Price indexes

Consumer price Index

Wholesale price Index

Money supply

Annual growth in M2

Annual growth in M1b

Annual growth in M1a

Key interest rates (end of period)

Rates of central bank

Discounted rate

Rate on accommodations with collateral

Interbank call loan market

Weighted average of overnight

Stock market

Weighted Stock Index (TAIEX)

Average

Year-end

Daily average trading value*

Foreign exchange

Foreign exchange reserve

Exchange rate (NT$/US$) Average

Year-end

Balance of payment

Others

Industrial production index

Unemployment rate

Growth rate of investment in private sector

Population

2015 2014

523,567

22,317

0.75%

　

285,334

237,219

48,124

　

-0.31%

-8.84%

　

6.34%

6.09%

6.53%

1.63%

2.00%

　

0.36%

　

8,979.99

8,338.06

83.66

　

421,454

31.927

33.066

15,011

　

-1.45%

3.78%

3.11%

23,492,074

530,043

22,648

3.92%

　

320,092

281,850

38,242

　

1.20%

-0.57%

　

5.67%

7.98%

9.25%

1.88%

2.25%

　

0.39%

　

8092.77

7,699.50

88.3

　

418,980

30.37

31.718

13,015

　

6.37%

3.96%

3.17%

23,433,753

2013

511,614

21,916

2.20%

　

311,428

278,010

33,418

　

0.79%

-2.43%

　

4.78%

7.27%

9.15%

1.88%

2.25%

　

0.39%

　

7,481.34

7,072.08

77

　

416,811

29.77

29.136

11,318

　

0.65%

4.18%

7.09%

23,373,517

2012

495,845

21,308

2.06%

　

306,409

277,324

29,085

　

1.93%

-1.16%

　

4.17%

3.45%

3.55%

1.88%

2.25%

　

0.43%

　

8,155.79

8,972.50

80.95

　

403,169

29.62

30.29

15,484

　

-0.25%

4.24%

-0.35%

23,315,822

2011

485,653

20,939

3.80%

　

312,923

288,062

24,861

　

1.42%

4.32%

　

5.83%

7.16%

8.08%

1.88%

2.25%

　

0.34%

　

8,155.79

8,972.50

106.06

　

385,547

29.47

30.368

6,239

　

4.44%

4.39%

1.20%

23,224,912

Items

* (In NT$ billions)

Domestic Major Economic Indicators ″

″

SinoPac BancorpAddress : 977 N. Broadway, Los Angeles, CA 90012, U.S.A.Telephone：1-886-336-2872

Far East National BankAddress : 977 N. Broadway, Los Angeles, CA 90012, U.S.A.Telephone：1-866-336-2872

Bank SinoPac (China) Ltd. Address : Unit 2, Level 2, Building 3, GuoRui Mansion, 359 Jiangdong Middle Road, Jianye District, Nanjing, 210019 Jiangsu Province , ChinaTelephone：86-25-8886-6000 SinoPac Life Insurance Agent Co., Ltd.Address : 10F, No. 36, Nanking East Road, Sec. 3, Taipei 104, Taiwan (R.O.C.)Telephone：886-2-2506-3333

SinoPac Property Insurance Agent Co., Ltd.Address : 6F, No. 36, Nanking East Road, Sec. 3, Taipei 104, Taiwan (R.O.C.)Telephone：886-2-2506-3333

SinoPac Capital Ltd.Address : Units 03-06, 12A Floor, One Peking, 1 Peking Road, Tsim Sha Tsui, Kowloon, Hong KongTelephone：852-3655-8688

SinoPac Capital (B.V.I) Ltd.Address : P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin IslandsTelephone: 852-3655-8688

SinoPac Insurance Brokers Ltd.Address : Units 03-06, 12A Floor, One Peking, 1 Peking Road, Tsim Sha Tsui, Kowloon, Hong KongTelephone: 852-3655-8688

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