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CTBC Financial Holding Co., Ltd.Address: 27 & 29F., No. 168, Jingmao 2nd Rd., Nangang Dist., Taipei City 115, Taiwan (R.O.C.)Tel: +886-2-3327-7777Website: http://www.ctbcholding.com

SpokesmanName: Ya-Ling ChiuPosition: Executive vice president Tel: +886-2-3327-7777Email: [email protected]

Acting SpokesmanName: Roger KaoPosition: Senior executive vice president Tel: +886-2-3327-7777Email: [email protected]

Stock Transfer AgencyAgency: Corporate Trust Operation and Service Department, CTBC Bank Co., Ltd.Address: 5F., No. 83, Sec. 1, Chongqing S. Rd., Zhongzheng Dist., Taipei City 100, Taiwan (R.O.C.) Tel: +886-2-6636-5566Website: https://www.ctbcbank.com

Certified Public AccountantsLin Wu, Kuo-Yang TzangOffice: KPMG Certified Public AccountantsAddress: 68F., No. 7, Sec. 5, Xinyi Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.)Tel: +886-2-8101-6666Website: http://www.kpmg.com.tw

Credit Rating Institutions

Taiwan Ratings Corp.Address: 2F., No. 167, Dunhua N. Rd., Taipei City 105, Taiwan (R.O.C.)Tel: +886-2-2175-6800Website: https://www.taiwanratings.com

S&P Global RatingsAddress: Unit 1, Level 69, International Commerce Centre, 1 Austin Road West, Kowloon, Hong KongTel: +852-2533-3500Website: https://www.standardandpoors.com

Moody’s Investors Service Hong Kong Ltd.Address: 24/F., One Pacific Place, 88 Queensway, Admiralty, Hong KongTel: +852-3758-1300Website: https://www.moodys.com

CTBC Bank Co., Ltd.Address: No. 166, 168, 170, 186, 188, Jingmao 2nd Rd., Nangang Dist., Taipei City 115, Taiwan (R.O.C.)Tel: +886-2-3327-7777Website: https://www.ctbcbank.com

Taiwan Life Insurance Co., Ltd.Address: 8F., No. 188, Jingmao 2nd Rd., Nangang Dist., Taipei City 115, Taiwan (R.O.C.) Tel: +886-2-8170-9888Website: https://www.taiwanlife.com

CTBC Securities Co., Ltd.Address: 3F., No. 168, Jingmao 2nd Rd., Nangang Dist., Taipei City 115, Taiwan (R.O.C.)Tel: +886-2-6639-2000Website: https://www.ctbcsec.com

CTBC Venture Capital Co., Ltd.Address: 21F., No. 168, Jingmao 2nd Rd., Nangang Dist., Taipei City 115, Taiwan (R.O.C.)Tel: +886-2-2652-2277Website: http://www.ctbcholding.com/content/twhoo/en_tw/ctbc-bank/ctbc-investment.html

CTBC Asset Management Co., Ltd.Address: 19F., No. 168, Jingmao 2nd Rd., Nangang Dist., Taipei City 115, Taiwan (R.O.C.)Tel: +886-2-8170-5377Website: http://www.ctbcholding.com/content/twhoo/en_tw/ctbc-bank/ctbc-management.html

CTBC Investments Co., Ltd.Address: 12F., No. 188, Jingmao 2nd Rd., Nangang Dist., Taipei City 115, Taiwan (R.O.C.)Tel: +866-2-2652-6688Website: http://www.ctbcholding.com/content/twhoo/en_tw/ctbc-bank/ctbc-investmenttrust.html

CTBC Security Co., Ltd.Address: 5F., No. 188, Jingmao 2nd Rd., Nangang Dist., Taipei City 115, Taiwan (R.O.C.)Tel: +886-2-2653-0355Website: http://www.ctbcholding.com/content/twhoo/en_tw/ctbc-bank/ctbc-safe.html

Taiwan Lottery Co., Ltd.Address: 15F., No. 188, Jingmao 2nd Rd., Nangang Dist., Taipei City 115, Taiwan (R.O.C.)Tel: +886-2-8170-5228Website: https://www.taiwanlottery.com.tw

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CONTENTS

1 Letter to Shareholders 4

2 CompanyProfile 9

3 Corporate Governance Report 213.1 Organization 213.2 Directors, supervisors, and senior managers 263.3 Corporate governance practices 523.4 Information on CPAs 943.5 Disclosures of changes in the shareholding (equity transfers and pledges) of directors, supervisors, managers and shareholders as required by Article 11 of the Regulations Governing the Holding by a Person or a Related Party of Voting Shares Over Certain Ratio in a Financial

Holding Company 963.6 Information on top 10 shareholders by shareholding ratio who among themselves are related parties, spouses, or within the second degree of kinship 983.7 Shares and total shareholding ratios in one business held by the Company; directors,

supervisors, and managers of the Company; and businesses controlled directly or indirectly by the Company 100

4 Capital Overview 1024.1 Capital and shares 1024.2 Bonds, preferred shares, global depository receipts, employee stock warrants, new restrictive shares issued to employees, and mergers and acquisitions 1114.3 Capital utilizations 121

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5 Operational Overview 1225.1 Business activities 1225.2 Cross-industryandcross-sellingbenefits 1525.3 Market and business overview 1525.4 Human resources 1745.5 Corporate responsibility and ethical conduct 1785.6 Number of full-time non-managerial employees, their average and median salary, and the difference from the previous year 1865.7 IT facilities 1875.8 Labor relations 1955.9 Material contracts 200

6 Financial Information 2066.1 Condensed balance sheets and statements of comprehensive income for the past fiveyears 2066.2 Financialanalysisforthepastfiveyears 2116.3 Key performance indicators 2136.4 AuditCommitteeReportforthepastyear’sfinancialreport 2146.5 Consolidatedfinancialstatementsoftheparentcompanyandthesubsidiariesauditedby CPAs for the past year 2146.6 ImpactonthefinancialstatusoffinancialturnoverdifficultiesoftheCompanyanditsaffiliated

enterprises from 2020 through April 13, 2021 214

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CONTENTS

7 Review and Analysis of Financial Conditions, Financial Performance, and Risk Management 215

7.1 Financial conditions 2157.2 Financial performance 2157.3 Cashflow 2167.4 Impactofsignificantcapitalexpendituresonfinancialandoperationalconditionsin2021 2167.5 2020reinvestmentpolicy,mainreasonsforprofitsorlosses,improvementplan,and investment plan for the coming year 2167.6 Risk management 2177.7 Crisis management mechanism 2357.8 Othersignificantmatters 235

8 Special Disclosures 2368.1 Affiliatedenterpriseinformation 2368.2 Private placement of securities by CTBC Holding from 2020 through April 13, 2021 247 8.3 Shares of the Company held or disposed of by its subsidiaries from 2020 through April 13, 2021 2478.4 Other supplementary information 247

9 MattersAffectingShareholderEquityorSecuritiesPricesFrom2020 Through April 13, 2021 247

Appendix 1: Audit Committee Resolutions Made in Accordance With Article 14-5oftheSecuritiesandExchangeAct 248

Appendix 2: Consolidated Financial Reports for 2020 257

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1. Letter to Shareholders

Dear Fellow Shareholders,In 2020, global political and economic developments centered around several major issues, including the

Covid-19 pandemic, the U.S.–China trade war, the U.S. presidential election, and monetary policy. The global economyexperiencedtremendouschallengesduetothepandemicinparticular,withmanycountriessufferingthe immense impacts. In Taiwan, however, the virus was successfully contained thus far and the economy enjoyed relative stable growth, surpassing those of all developed countries. The Directorate-General of Budget, Accounting and Statistics recorded GDP growth of 3.11% for the year, while the Taiwan stock market reached a 30-year high.

In the early stages of the pandemic, CTBC Holding, as Taiwan’s leading financial institution, established various response measures, including remote backup offices, work-from-home policy, and reduced in-person contact, to ensure the health of employees and customers. We also stepped up and fulfilled our corporate social responsibility (CSR) by supporting the government’s relief loan policy, helping the public overcome the economicdifficultiesanduncertaintiesbroughtbythepandemic.

Evenunderthischallengingenvironment,CTBCHoldingcontinuedtoexceeditsperformanceexpectations.Lookingforward,evenwithCovid-19lingering,wewillcontinuetoexpandourbusinessesdomesticallyandinternationallywhileenforcingthepandemicpreventivemeasurestoprovidethemostcomprehensivefinancialservicesandmaximizesynergyamongoursubsidiaries.Furthermore,wewillstrengthenourriskmanagement,legal compliance, and corporate governance to lay a solid foundation for stable operations, creating mutual benefitsforourcustomers,employees,shareholders,andcommunityandcontinuingtobethebestgovernedandmosttrustworthyfinancialinstitutioninthemindsofcustomersandshareholders.

2020 business plans, strategies, and resultsWe have subsidiaries in banking, securities, insurance, venture capital, asset management, securities

investment trusts, security, and the national lottery. In terms of our 2020 profits, 99.75% of our recognized investment gains using the equity method came from our banking and insurance subsidiaries, with the remaining 0.25%comingfromourotherbusinesses.Our2020consolidatedafter-taxnetprofit totaledNT$42.9billionwhileourconsolidatedafter-taxreturnoncommonshareholders’equitywas11.53%.

In addition, we made substantial progress in the following areas in 2020:(1) Accelerate overseas markets operations

Wearecommittedtodevelopingcross-borderfinancialservices.Tothisendin2020,despitegreatfluctuationsinoverseasmarketsduetothepandemic,wemadegoodprogressinouroperationsaswereapedthebenefitsboth of our long-running efforts to cultivate overseas markets and of our dense international network. Moving forward,wewillcontinuetoexpandintooverseasmarkets, takeadvantageofsupplychainnetworks,expandour cross-border services, seize capital market international business opportunities, build a comprehensive cross-border financial platform, and continue to evaluate opportunities for M&As and strategic partners in various markets. Regarding the banking’s subsidiary, The Tokyo Star Bank, its private equity fund investments, which started in 2012, the bank held 12 funds totaling JPY 6.95 billion as of Dec. 31, 2020, bringing the overall cumulative investment return to 72.5%.

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Letter to Shareholders

(2) Ensure stable insurance profits Ever since CTBC Holding entered into the insurance business by acquiring Taiwan Life, the subsidiary

hasbeenanimportantprofitengineforthegroup.IthasbenefittedfromtheCompany’sdiversechannelsandrich resources. In addition, its continuous product development which reflected customers’ needs as well as itsflexibleinvestmentandhedgingstrategieshavecontributedtoitsstrongperformance.TaiwanLife’safter-taxnetprofitreachedNT$16.5billionin2020—anewrecordhighforthecompany.Furthermore,toenhanceitsoperationalefficiency,TaiwanLifeisintegratingnewtechnologyaccordingtomarketneedsandisactivelyimplementing a digital transformation to enable its agency channel to provide policyholders with faster and more comprehensive services.

Also in 2020, the Financial Supervisory Commission (FSC) announced that Taiwan would implement International Financial Reporting Standard 17 (IFRS 17) in 2026. As such, Taiwan Life formed a special task force to ensure seamless IFRS 17 adoption and compliance as well as IT system readiness.(3) Strengthen digital transformation and innovation

CTBC Holding is a pioneer in digital finance development in Taiwan and has drawn a solid blueprint for its digital transformation. In addition to launching business process digitalization, we are actively developing innovative digital financial services, such as optimizing our new-generation ATMs, developing AI and voice assistantsfinancialservices.Ourgoal is toprovideabettercustomerexperienceandamoreheartwarming,moreconvenientfinancialservices.Insysteminfrastructure,wearecontinuingtomodernizeourcoresystemsandintroducespecializedteams,utilizingourstrengthsindigitalconvergenceandAItodrivedigitalfinanceapplicationbreakthroughsandexpandourdigitaltransformation.

Moreover,wereceivedsubstantialacclaimin2020forexcellence inbrandvalue,businessdevelopment,digital innovation, corporate governance, and CSR, winning 230 major national and international awards. With anestimatedbrandvalueofUS$549million,ourCompanyrankedNo.1forthefifthconsecutiveyearamongallTaiwanfinancialinstitutionsintheBestTaiwanGlobalBrands2020.CTBCBankwasranked155thamongtheworld’stop1,000banksbytheBanker,takingfirstplaceinTaiwanforthefourthconsecutiveyear.TheBankwastheonlyfinancialinstitutioninTaiwantobenamedoneofthe20BestBanksinAsiaPacificandtoreceiveaBestBank in Taiwan award from IDC. It was also selected as the Best Bank in Taiwan by Euromoney, Asiamoney, FinanceAsia, and The Asset. In addition, The Asian Banker ranked CTBC Bank No. 1 in Taiwan among the Most HelpfulBanksinAsiaPacificduringCovid-19.AllofthesedemonstratedCTBCBank’sexcellentperformancein stabilizing business, promoting digital innovation, and working with the government to grant relief loans during the pandemic. Meanwhile, Taiwan Life was selected as the Best Life Insurance Brand in Taiwan for the thirdconsecutiveyearbyGlobalBrandsMagazine,andreceivedanExcellenceawardinboththePopularityandBest Salesperson categories in Risk Management, Insurance & Finance’s Insurance Quality Awards. In addition for the recognition in business performance, CTBC Holding and its subsidiaries were highly commended last year for its efforts in integrating sustainable economic, environmental, and social development into its operating model, including receiving nine Taiwan Corporate Sustainability Awards 2020.

Our sustainability policy is guided by the three pillars which include sustainable growth, responsible operations,andconnectedsocietyaswellasbyTRUST—anacronymwecoinedtoemphasizetheimportanceof corporate governance (Transparency), environmental sustainability (Responsibility), employee welfare

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(Understanding), customer service (Satisfaction), and community engagement (Together). We strive to honor our commitment to corporate sustainability and create value for our employees, customers, investors, government, community,partnersandsuppliers,positioningourselvesasafinancialholdingcompanythathasasignificantpositiveinfluenceonthetransitionandtransformationoftheindustryandtheoveralleconomicenvironment.

Latest credit ratings and effective dates

Rating agencyCredit rating

Outlook Publication dateLong-term Short-term

Moody's Baa1 Stable Dec. 16, 2020

S&P Global Ratings BBB A-2 Stable Nov. 17, 2020

Taiwan Ratings twAA- twA-1+ Stable Nov. 17, 2020

Impact from the competitive environment, regulatory environment, and overall business environment

Faced with domestic, long-term, low interest rate environment as well as monetary easing and low interest rate policies of governments worldwide in response to the pandemic, banks have encountered greater challenges. Furthermore,thekeenmarketcompetitionfollowingtheentryofonline-onlybanksanddigitalfinancialservicecompanies amid the fintech boom is driving the financial industry to accelerate its digital transformation. As such,CTBCBankhaslaunchedITsystemmodernizationeffortstoguideafundamentaltransitionofitsfinancialservice capabilities. Having a more streamlined and nimble IT core system will enable us to respond faster to customers’ needs and maintain our leading position in the industry.

Operating costs have risen in recent years due to the emphasis and stringency in compliance of anti-money launderingandotherfinancial lawsandregulationshaveincreased.Thecompetentauthorityhasalsopushedfor strengthened corporate governance. We already have a strong track record in this regard; notably, we were thefirstfinancialholdingcompanyinTaiwanwithover50%ofitsboardseatsfilledbyindependentdirectors.In addition, to align ourselves with the regulator’s policies and for sustainable business development, we had established the Corporate Sustainability Office in 2020 and also the Sustainability Committee as one of the functional committees under the Board of Directors. We will continue to fine-tune our management to stay current with international corporate governance trends and to build sustainability into our operations.

As of writing, there is no clear end in sight to the Covid-19 crisis and the eventual global economic recovery remains shrouded in uncertainty. However, we will continue to focus our efforts in prioritizing the health of our employees and providing our customers with the utmost service. Accordingly, we will strive to ensure business continuity and minimize impacts from the pandemic and shall remain cautious yet hopeful in pushing forth our business strategies.

2021 business overview and strategiesCTBC Holding is committed to pursuing stable growth, taking into consideration of capital allocation and

sound financial structure. We will continue to prioritize our customers and to offer market-leading financial services. Our future plans are as follows:

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Letter to Shareholders

(1)2021 operational guidelines(1)Expandingoverseasbusinessandstrengtheningcross-bordercross-sellingplatforms TheCompanywillcontinue itsoverseasbusinessdevelopment,expanding itscross-borderplatform

linkages, growing its core customer base, and enhancing its cross-border cross-selling. In addition to businessdevelopment,wewillcontinuetostrengthenourmiddle-andback-officeinfrastructuretoimproveouroperatingefficiency.Newriskcontroltechnologyandsystemswillbeimplementedtostrengthenriskmanagement. We will also continue to evaluate investment opportunities in overseas markets and actively searchfortargetssuitableforM&Aandequityinvestmenttofurtherexpandnewbusiness.

(2)Transformingourinsurancebusinessandbuildingastablefoundationforprofitability We have grown rapidly since launching the insurance business, which has since become an important

profit engine. Faced with challenges including market fluctuations and adoption of new international standards, we are working to develop the most suitable investment strategies, focus on value-added products, dynamically adjust asset–liability matching, increase our income from stable sources, and reduce equityfluctuations.Furthermore,wewilltransformoursalesapproachbylinkingandintegratingservicesto provide the best customer service, develop products that meet customers’ needs, and achieve stable profitability.

(3)Strengtheningdigitalfinancedevelopmentandbuildinganinnovativemodel CTBC Holding and its subsidiaries, through digital transformation, have grown into a leading digital

financeinstitutioninAsiawithcustomers’needsastheircore.Inaddition,ourinnovativeeffortsmovingforwardwillenableourbusinessunits tousefintechtodevelopnewproductsandservicesandbuildanew generation of information system reengineering for the foundation of long-term digital development. In addition, we will continue to reinforce the culture of innovation within CTBC Holding to maintain our positionasaleaderindigitalfinance.

(2)Operational goalsCTBC Holding: Strengthen collaboration and cross-selling efforts between subsidiaries to enhance group synergy and provide comprehensive products as one-stop shop service to satisfy customers’ needs.CTBC Bank: Maintain its leading position in innovative and digital services in the domestic market, actively expanditsinternationalbusiness,andbuildacomprehensivecross-borderplatform.Taiwan Life: Focus on value-added products, dynamically adjust its investment profile, reduce the impact frommarketfluctuations,buildstableprofitability,andprepareforcompliancewithnewregulations.CTBCSecurities:Buildasmart,automateddigitalplatformandexpanditsinternationalbusinessopportunitiesby using diverse products such as offshore trading to increase our competitiveness.CTBC Investments: Design products based on the needs of investors in response to regulatory and environmental considerations and drive business efficiency by establishing a new IT system and making changes in its operating processes.CTBCVentureCapital: Identify companieswith stronggrowthpotential, expandacademia–industrycooperationprojects,seekinvestmentopportunitiesinemergingbiotechanddigital industries,andexpandoverseasinvestmentchannelstoincreaseprofits.

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CTBC Asset Management: Actively dispose or rent out invested properties, continue to build its real estate investmentportfoliowithgrowthpotentialorrentalbenefitprojects,andexpanditsbusinessinurbanrenewalprojects.CTBC Security: Enhance its management quality and continue to offer reliable services.Taiwan Lottery: Continue to develop new products with creative marketing strategies, enhance its synergy andcustomerexperiencebypartneringwithdifferent industries,repositionitsbrand,andcreatevaluebypromoting public welfare.

(3)Key operational policies(1)Reinforcelifeinsuranceoperationsandstabilizelifeinsuranceprofits.(2)Expanddigitalfinanceandimproveonlinefinancialservices.(3) Broaden international operations and strengthen the group’s overseas structure.(4) Cultivate international talent and enhance the brand’s international visibility.(5) Ensure transparent disclosure and continue to improve corporate governance.(6)ActivelyparticipateinpublicwelfareandfulfilCSR.(7) Implement corporate sustainability and move toward the goal of becoming a sustainable financial

company.(4) Future corporate development strategy

With the rapidly changing U.S.–China trade relationship and the unpredictable path of the pandemic despite the vaccine, myriad political and economic uncertainties remain. Operated by our teams of professionals, CTBC Holding will continue to pay close attention to the global economy and the pandemic while prioritizing stable businessoperations,employees’health,andcustomers’needsintoexpanditsdomesticandoverseasbusiness,capture digital finance opportunities, and satisfy customers through innovative services. In addition, we will maintainourcommitmenttoenvironmental,social,andcorporategovernanceinordertofulfillourCSRandensure corporate sustainability.

In a world moving toward contactless services and more stringent regulations, we are committed to providing our customers with heartwarming and convenient services. Although uncertainty will continue to cloud the political and economic outlook, we are certain that the worst is behind us. Going forward, we will continue to uphold our “We are family” brand spirit, engage with our community, and stand together to overcome these difficulties.Weaspiretohavethemostrobustcorporategovernancesysteminplaceandmaintainthecompletetrustofourcustomersandshareholders.Together,weareconfident theseeffortswillcementourCompany’sstatus as the “Taiwan Champion, Asia Leader”.

Wen-Long Yen Chairman CTBC Holding

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2.CompanyProfile

2.1 Date of establishment: May 17, 2002

2.2 Company history

2.2.1 CTBC Financial Holding Co., Ltd.CTBC Holding was established in 2002. Our headquarters are in Taiwan’s capital, Taipei, but our workforce

of 27,000 spans the country, region, and globe. The Company has eight subsidiaries: CTBC Bank, Taiwan Life, CTBC Securities, CTBC Venture Capital, CTBC Asset Management, CTBC Investments, CTBC Security, and Taiwan Lottery.

Driven by a spirit of innovation, we maintain a comprehensive suite of products and services and, to this end, proactively invest in our digital transformation. In addition to digitizing business processes, we have established blockchain and artificial intelligence labs as well as a Big Data research and development center. These efforts have helped us surpass our financial industry counterparts to develop business innovations that meet the needs of the market and our customers.

Spanning 14 countries and regions, our subsidiary CTBC Bank has 268 service outlets worldwide, giving it the most extensive international presence of any Taiwanese bank. The Bank’s overseas service network is fo-cused around Greater China, Japan, North America, and Southeast Asia. With a Japanese subsidiary, The Tokyo Star Bank, and CTBC Bank subsidiaries in the U.S., Canada, the Philippines, and Indonesia, the Bank has a strong foundation for regional business, providing international enterprises with comprehensive transnational fi-nancial services.

Furthermore, in support of the Taiwanese government’s New Southbound Policy, the Bank has proactively expanded its South and Southeast Asian business in recent years by leveraging its existing branches in Vietnam, India, and Singapore. It is also the first financial institution in Taiwan to have acquired a stake in a local Thai operator, LH Financial Group. In Greater China, the Bank is cultivating business in the Yangtze River Delta Economic Zone and the Guangdong–Hong Kong–Macau Greater Bay Area, with Shanghai at the heart of its ex-pansion into the Chinese market. Also across the strait, subsidiary Taiwan Life has invested in King Dragon Life Insurance. By integrating banking and life insurance, we are further diversifying our services and locations while making the most of our co-branding synergy across Greater China.

Looking ahead, we plan to continue optimizing our international service network and to provide our custom-ers with even more convenient global services. These are just some of the ways we’re striving to always follow through on our “We are family” motto. We will also continue to expand our efforts in operational performance, corporate governance, corporate social responsibility, and environmental sustainability as we cement our status as “Taiwan Champion, Asia Leader.”

Domestic awards● TaiwanInstituteforSustainableEnergy,TaiwanCorporateSustainabilityAwards

Top 10 Domestic Companies Sustainability Model Award (Service Industry) Corporate Sustainability Report – Financial and Insurance Industry - Platinum Award Growth through Innovation Award (LINE Pay Card)Social Inclusion Award (Love and Arts for Dreams Initiatives)Creativity in Communication Award (human–robot collaboration)People Development Award (Comprehensive Career Development Program)

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● TaiwanInstituteforSustainableEnergy,TaipeiGoldenEagleMicro-MovieFestivalGeneral Category - Best Film (“Homerun, 2gether”)Audio/Video Category - Best Planning (“Homerun, 2gether”)Outstanding Cinematographic Techniques (“Homerun, 2gether”)Excellent Creativity (“Homerun, 2gether”)Personal Category - Best Adapted Screenplay (“Homerun, 2gether”)Sustainability Category - Excellent Social Inclusion (“Homerun, 2gether”)Sustainability Category - Excellent Operation Governance (“Homerun, 2gether”)

● RiskManagement,Insurance,andFinanceFoundationAwards,SurveyofMostPreferredFinancialHoldingCompaniesAmongFinanceandInsuranceGraduates-Excellence

● BusinessNextMagazineTop 100 High Value Enterprises - No. 15, ranked No. 3 in Taiwan’s financial sector

● GlobalViewsMonthly,CorporateSocialResponsibilityAwardsFinancial Industry Category - ExcellenceEducational Promotion Category - No. 1Public Welfare Promotion Category - No. 1.

● WealthMagazine,TaiwanFinancialAwardsBest Financial Holding Sustainability - Excellence Award

● SportsAdministration,MinistryofEducationTaiwan i Sports (Certificate of Corporate Wellness)

● IndustrialDevelopmentBureauandInterbrand2020 Best Taiwan Global Brands – No. 6, ranked No. 1 in Taiwan’s financial sector

International awards● CorporateGovernanceAsia

Asia’s Best CSRBest Investor Relations CompanyAsia’s Best CEO - Daniel I. Wu Asia’s Best CFO - Ya-Ling Chiu Best Investor Relations Professional - Justine Shen

● S&PDowJonesIndices,DJSIWorld IndexEmerging Markets Index

● ForbesForbes Global 2000 - No. 398

● HRAsiaBest Companies to Work for in Asia, Taiwan

● InstitutionalInvestorBest IR Team under Banks sector by Sell-Side, Asia - No. 2

● RetailBankerInternationalHighly Commended: Best CSR Initiative in Asia

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Company Profile

● TheAssetCorporate Awards Excellence in ESG - Jade Award WinnerBest Investor Relations TeamBest Chief Executive Officer of the Year 2020 - Daniel I. Wu

● UniversumTaiwan’s Most Attractive Employers - No. 19, ranked No. 1 in Taiwan’s financial sector

● UNIDO(UnitedNationsIndustrialDevelopmentOrganization)2020 CEM Award of Excellence in Energy Management

2.2.2 CTBC Bank Co., Ltd.Established in 1966, CTBC Bank has been building customers’ wealth and Taiwan’s economy for over half a

century now. In that time, it has grown into an international force offering a comprehensive suite of financial ser-vices.

Guided by the business principles of integrity and caring, our Bank has a proud history punctuated by regular achievements and innovative services. From issuing the first credit card in Taiwan to setting up the first customer service center of any bank in the country, we have led the way in the financial industry’s transformation, particu-larly by promoting the digitalization of business processes. As of the end of 2020, the Bank’s consolidated assets totaled NT$4.51 trillion, the most among all privately owned banks in Taiwan. It is also the best-performing bank in other indicators, such as profits, tier 1 capital, and client base.

In addition to its 152 branches nationwide, CTBC Bank has the most extensive international presence of any Taiwanese bank, with 116 overseas branches across 14 countries and regions. With a subsidiary, The Tokyo Star Bank, purchased in Japan and CTBC Bank subsidiaries established in the U.S., Canada, the Philippines, and Indonesia, the Bank has laid a strong foundation for regional business, providing international enterprises with comprehensive transnational financial services.

Furthermore, in support of the Taiwanese government’s New Southbound Policy, the Bank has proactively expanded its South and Southeast Asian business in recent years by leveraging its existing branches in Vietnam, India, and Singapore. It is also the first financial institution in Taiwan to have acquired a stake in a local Thai op-erator, LH Financial Group. In Greater China, meanwhile, the Bank is cultivating business in the Yangtze River Delta Economic Zone and the Guangdong–Hong Kong–Macau Greater Bay Area, with Shanghai at the heart of its expansion into the Chinese market. Together, these advances abroad are providing our customers with a more convenient and comprehensive service network.

Looking ahead, we’re determined to continue leading the industry in digitalization, leveraging fintech and Big Data to drive innovation and create entirely new and engaging digital experiences for our customers. We will also continue to expand our efforts in operational performance, corporate governance, corporate social responsibility, and environmental sustainability as we cement our status as “Taiwan Champion, Asia Leader.”

Domestic awards● FinancialSupervisoryCommission,ExcellentBankinExpeditingReliefandEconomicStimulusLoanbyDomesticBanksNumber of Cases Category - Government-Run Relief - No. 1Efficiency Category - Efficiency A (Self-Run Relief - Existing Loan Extension) - No. 1Efficiency Category - Efficiency D (Government-Run Relief - New Loan) - No. 1

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Efficiency Category - Efficiency E (Government-Run Relief - Percentage of Electronic Cases to Total Relief Cases) - No. 1Number of Cases Category - Self-Run Relief - No. 3Efficiency Category - Efficiency E (Self-Run Relief - Percentage of Electronic Cases to Total Relief Cases) - No. 3.

● FinancialSupervisoryCommission,InsuranceContestMicro Insurance Contest Insurance Broker/Agent Category - No. 3

● TaiwanAcademyforBankingandFinance,TaiwanBankingandFinanceBestPracticeAwardsBest Trust Finance Award - High DistinctionBest Wealth Management Award - ExcellenceBest Consumer Finance Award - ExcellenceBest Digital Finance Award - ExcellenceBest Risk Management Award - ExcellenceBest Project Finance Award - Excellence

● TaiwanInstituteforSustainableEnergy,TaiwanCorporateSustainabilityAwardsSocial Inclusion Award (Light Up a Life)Growth through Innovation Award (CTBC Brain)

● MinistryofEconomicAffairs’SmallandMediumEnterpriseCreditGuaranteeFundofTaiwan,ManagersandBanksOutstandinginImplementingGuaranteedFinancingCredit Guarantee Gold AwardBatch Credit Guarantee Excellent Award100 Billion Guarantee Project Certificate of AppreciationGovernment Policy Promotion AwardTwo Credit Guarantee Gold Awards

● OverseasCreditGuaranteeFund,ExcellentFinancialInstitutionsTotal Guarantee Finance Amount Excellent Award Excellent Performance in Guarantee Cases and Finance Amount by Branches

● TaiwanFuturesExchange,FuturesDiamondAwardsFutures Industry - Futures Proprietary Merchants Transaction Volume Growth Diamond Award - No. 1Banking Industry - Banking Industry Transaction Volume Diamond Award - No. 1Market Maker-Market Making Performance Diamond Award - No. 2

● WealthMagazine,WealthManagementSurveyBest Domestic Wealth ManagementBest Domestic Financial Advisory Team Best Domestic Digital FinanceBest Creative Marketing Audio/Video

● WealthMagazine,TaiwanFinancialAwardsBest Domestic Bank Image Gold Award Best Banking Service Gold Award Best Digital Banking Gold AwardBest Fintech Banking Excellence Award

● BusinessNextMagazine,BusinessInnovationAwardsBest Technology Innovation Gold Award

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Company Profile

Best Technology Innovation Silver Award Best Product Innovation Bronze AwardBest Management Innovation Bronze Award

● BusinessToday,WealthManagementBankingAwardsBest Wealth Management Bank - No. 1Best Financial Advisory Team - No. 1Best Robo-Advisor - No. 1Best Product - No. 2Best Wealth Appreciation - No. 2Best Digital Experience - No. 3Ministry of Education, Reading Rock AwardsReading Promotion Activist Group

● SportsAdministration,MinistryofEducation,SportsActivistAwardsSponsorship Category - Gold AwardSponsorship Category - Long-Term Sponsorship AwardPromotion Category - Bronze Award

● MinistryofCulture,PublicArtsAwardsCivil-Run Public Arts Award

● DepartmentofSocialWelfare,TaipeiCityGovernment,ExcellentVolunteerTeamAwardsGold Diamond Award

International awards● Asiamoney

Best Domestic Bank in TaiwanBest Private Bank in TaiwanBest for HNW in TaiwanBest Corporate & Investment Bank in TaiwanWomen employees as percentage of total staff in Taiwan - No. 2Best Service in Taiwan among domestic banks in Taiwan - No. 2Market Leaders in Taiwan among domestic banks in Taiwan - No. 1

● AsianBanking&FinanceTaiwan Domestic Trade Finance Bank of the YearMergers and Acquisitions Deal of the Year, TaiwanProject Infrastructure Finance Deal of the Year, Taiwan

● AsiaRiskHouse of the Year, Taiwan

● CorporateTreasurerBest Trade and Supply Chain House in Taiwan

● CampaignPR Awards Asia 2020, Sports category - Silver Award

● EuromoneyBest Bank in TaiwanPrivate Banking Services Overall, Taiwan

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14

Net-worth-specific Services - High Net Worth Clients, TaiwanNet-worth-specific Services - Ultra High Net Worth Clients, TaiwanNet-worth-specific Services - Mega High Net Worth Clients, TaiwanNet-worth-specific Services - Super Affluent Clients, TaiwanESG/Impact InvestingCapital Markets and Advisory, TaiwanFamily Office Services, TaiwanInternational Clients, TaiwanInvestment Management, TaiwanNext Generation, TaiwanPhilanthropic Advice, TaiwanResearch and Asset Allocation Advice, TaiwanServing Business Owners, TaiwanTechnology - Data Management and Security in Private Banking and Wealth ManagementTechnology - Innovative or Emerging Technology Adoption

● EnergyRiskDeal of the year, Asia-Pacific

● FianceAsiaProject Finance Deal of the Year, AsiaBest Bank in TaiwanBest Private Bank in TaiwanBest Managed Company in TaiwanMost Committed to Social Causes in TaiwanGlobal Business OutlookBest Investment Bank, TaiwanMost Innovative Digital Bank, Taiwan

● GlobalFinanceBest in Social Media Marketing and Services in Asia-Pacific Best Integrated Corporate Banking Site in Asia-Pacific Best Treasury & Cash Management Bank in Taiwan Best Investment Bank in Taiwan

● InternationalDataCorporationOne of 20 Best Banks in Asia Pacific Best Bank in Taiwan Omni-Experience Innovator in Taiwan

● RetailBankerInternationalDynamic Third-Party Collaboration, Asia Highly Commended: Best Mortgage Offering, AsiaHighly Commended: Excellence in Loan Origination, Asia Highly Commended: Excellence in Mass Affluent Banking, Asia Highly Commended: Best Mobile Wallet Initiative, Asia

● TheBankerData category for Innovation in Digital Banking, Global

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15

Company Profile

Top 1000 World Banks - No. 155● TheAsianBanker

Best Social Media Campaign in Asia PacificBest Home Loan Product in Asia PacificAnti-Money Laundering Technology Implementation of the Year in Asia PacificMost Recommended Retail Banks in Asia Pacific - No. 8Main Retail Banks in Asia Pacific - No. 18Most Helpful Banks in Asia Pacific During Covid-19 - No. 6Best Retail Bank in TaiwanCustodian Bank of the Year in TaiwanBest CEO in Taiwan - Chairman, Morris LiBest Managed Bank in TaiwanBest FX Bank in TaiwanBest Trade Finance Bank in Taiwan

● TheAssetRenewable Energy Deal of the Year, Asia-PacificBest Bank, TaiwanBest Private Bank, TaiwanDigital Bank of the Year, TaiwanBest Retail ATM Experience, TaiwanBest Retail Online Banking Experience, TaiwanBest Retail Social Media Banking Experience, TaiwanBest API Project, TaiwanBest Cloud Based Project, TaiwanBest Digital Collaboration, TaiwanBest Digital Financial Inclusion Project, TaiwanBest Digital Upgrade, TaiwanBest Service Provider - Transaction Bank, TaiwanBest Service Provider - Trade Finance, TaiwanBest Service Provider - Supply Chain, TaiwanBest Domestic Custodian, TaiwanBest Bank for Investment Solutions, TaiwanBest Bank for Investment Solutions - Rates, TaiwanBest Bank for Investment Solutions - Commodities, TaiwanBest Structured Investment and Financing Solutions, TaiwanBest Loan Adviser, TaiwanRenewable Energy Deal of the Year -Wind, Taiwan

● WorldBrandingForumBrand of the Year, Taiwan

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Latest credit ratings and effective dates



Moody's A2 P-1 Stable Dec. 16, 2020

S&P Global Ratings A A-1 Stable Nov. 17, 2020

Taiwan Ratings twAA+ twA-1+ Stable Nov. 17, 2020

2.2.3 Taiwan Life Insurance Co., Ltd.Early this decade, to expand the breadth and diversity of financial services offered to our customers, CTBC Hold-

ing made entering the insurance business a priority. This was acted upon in November 2011 with the 100% acquisi-tion of MetLife‘s local subsidiary. In January 2012, MetLife Taiwan was renamed CTBC Life, marking our point of entry into the insurance sector.

CTBC Life acquired Manulife Taiwan on Jan. 1, 2014, making it stronger in terms of human resources, distribu-tion coverage, and service scope, with a team of close to 1,000 dedicated employees. Bolstering its scale in the in-surance business further, CTBC Holding’s Board of Directors gave approval on May 12, 2015, for a stock exchange with Taiwan Life, which was completed on Oct. 15 that year. Subsequently, with CTBC Holding having acquired 100% of its shares, Taiwan Life officially became a subsidiary. At the beginning of 2016, the integration of Taiwan Life’s resources into CTBC Life was completed, successfully creating consolidated synergies and expanding our life insurance business.

Taiwan Life, the oldest life insurance company in Taiwan, was established in 1947 and privatized in 1998. Con-necting deeply with the local community, Taiwan Life started off by offering a comprehensive range of insurance services and paid continual attention to market changes to develop flexible, creative commodity strategies that help improve company performance and provide a comprehensive protective network that ensures the health, wealth, and safety of the insured. Moreover, valuable commodities are promoted to maintain the company’s stable long-term profitability so that both the insured and the company can enjoy steady, tangible sources of protection.

Going forward, Taiwan Life will uphold CTBC Holding’s service belief that, as our “We are family” brand spirit suggests, customers should be treated like family. It will work hand in hand with the group’s members to offer more thoughtful financial services and innovative products to every customer. In addition, it will support CTBC Holding in pursuing our mission to “Protect and Build” value for our customers, employees, shareholders, and community.

Domestic awards● FinancialSupervisoryCommission,InsuranceContest

Micro Insurance Contest Insurance Company Category - No. 2Micro Insurance Contest Sprint AwardMicro Insurance Contest Excellent Performance AwardMicro Insurance Contest Caring for the Physically and Mentally Challenged AwardSmall Amount Whole Life Insurance Excellent Performance Award

● TaiwanInstituteforSustainableEnergy,TaiwanCorporateSustainabilityAwardsSocial Inclusion Award (Intergenerational Co-creation for a Better Society: solving aging issues with new perspec-tives)

● RepublicofChinaNationalEnterpriseCompetitivenessDevelopmentAssociation,NationalBrandYushan AwardsBest Product-National - No. 1

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Company Profile

Outstanding Enterprise- National Brand Yushan AwardBest Product (eClaim Blockchain)Best Product (Taiwan Life Substandard Diabetes Term Health Insurance)Best Product (iKash)

● RepublicofChinaNationalEnterpriseCompetitivenessDevelopmentAssociation,NationalArchitectureGold AwardsPlanning and Design Category - National No. 1Construction Quality Category - National No. 1Planning and Design Category - National Architecture Gold AwardConstruction Quality Category - National Architecture Gold Award

International awards● AsianBanking&Finance

New Insurance Product of the Year, Taiwan Claims Initiative of the Year, Taiwan

● GlobalBrandsMagazineBest Life Insurance Brand, Taiwan

● InternationalDataCorp.One of 20 Best Insurers in Asia PacificOmni-Experience Innovator

● TheAssetInvestor of the Year - Insurance Company, Asia Pacific Green Project of the Year, Asia Pacific Green Project of the Year, Taiwan ESG Investor of the Year for Insurers, Taiwan Insurance Investor of the Year, Taiwan Editors’ Triple Star Digital Insurer of the Year, Taiwan Best Digital Insurance Experience, Taiwan

Latest credit rating and effective date


Outlook Publication dateFinancial capability

S&P Global Ratings BBB+ Stable March 29, 2021

Taiwan Ratings twAA Stable March 29, 2021

2.2.4 CTBC Securities Co., Ltd.CTBC Securities was founded as Pou Chen Securities in 1989. It grew rapidly to become the largest broker in

Kaohsiung, southern Taiwan’s largest city. In 2000, CTBC Bank became an investor in the company, which later changed its name to CTBC Securities and in 2018 became a 100% fully owned subsidiary of CTBC Holding. In addition to assisting with corporate financing in capital markets, the firm is constantly expanding its securities and futures business in order to provide its customers with the most diverse range of trading services in Taiwan.

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To this end, in 2019, CTBC Securities launched the trading app CTBC Spark, whose three major features were patented and named Best Product of the Year by the National Brand Yushan Award.

At CTBC Securities, we’re keenly aware of the growing appetite among local investors for more diverse fi-nancial products. We’re meeting this demand for high-quality product planning and comprehensive wealth man-agement services by offering reconsignment services for overseas equity and debt products. In doing so, we’re also satisfying customers’ growing demand for one-stop shopping and asset profile allocation.

Currently, in addition to CTBC Securities’ headquarters, we maintain 10 branches in cities across Taiwan as well as an offshore securities unit, providing customers with services relating to publicly traded securities and investment opportunities in emerging stocks and futures trading. In addition, to expand our international business and elevate the diversity of our products, we have established CTBC Securities Venture Capital, CTBC Securi-ties Investment Service, and, in Hong Kong, CTBC Asia, giving our customers more in-depth industrial reports and actionable insights.

Looking ahead, CTBC Securities will continue conducting business with integrity and innovation. Guided by CTBC Holding’s “We are family” spirit, we will further enhance both our digital and physical channels in or-der to provide domestic and overseas equity and debt products for every customer group. We will also leverage group resources to deliver more thoughtful and innovative products, fund-raising, and investment services.

Domestic awards● TaiwanFuturesExchange,FuturesDiamondAwards

Futures Industry - Futures Proprietary Merchants Transaction Volume Growth Diamond Award - No. 3 ● TaiwanStockExchange,ElectronicTradingContestImprovementAward-No.5● CommercialTimes,TWKC,BestMomentumAward● TaiwanStockExchange,EconomyAcceleratorAward

IPO Funding - No. 2IPO Market Value - No. 2




Taiwan Ratings twAA- twA-1+ Stable Sept. 28, 2020

2.2.5 CTBC Venture Capital Co., Ltd.Founded in March 2003, CTBC Venture Capital is CTBC Holding’s first venture capital company. CTBC

Venture Capital invests in potential businesses in the ICT, biotech and healthcare, cultural and creative, fintech, and green energy industries as well as in strongly performing industries with growth potential. Leveraging CTBC Holding’s vast pool of financial resources and services, CTBC Venture Capital’s industry-leading management professionals are well positioned to help enterprises develop and to be entrepreneurs’ most valued partners.

In March 2021, CTBC Venture Capital acquired CTBC International Co., Ltd., which owns 100% of the shares of CTBC Financial Leasing Co., Ltd. Moving forward, the subsidiary will integrate and leverage CTBC Holding’s resources to further enhance its synergy and profitability.

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Company Profile

2.2.6 CTBC Asset Management Co., Ltd.CTBC Asset Management was founded in May 2003 mainly to take advantage of the large quantities of non-

performing assets arising from Taiwan’s domestic financial reform. A team of professionals was assembled to seek business opportunities and help companies improve their finances. The company manages debt trading for financial institutions as well as invests in the real estate and leasing industry.

Since its establishment, it has steadily increased its investment in non-performing liabilities as well as actively assessed the real estate and chattels from court auctions and government agencies public bidding, and complied with financial holding policies to assist with the handling and activation of CTBC Holding’s idle assets. CTBC Asset Management intends to support the government’s urban renewal policy, actively engage in the provision of funds injection for urban renewal projects, and help provide the owners and redevelopers of old buildings with the funds required for urban renewal projects.




Taiwan Ratings twA+ twA-1 Stable Aug. 3, 2020

2.2.7 CTBC Investments Co., Ltd.To diversify its product and service range, CTBC Holding obtained a 98.6% stake in Truswell Securities

Investment Trust Co., Ltd. in November 2012. In January 2013, its name was officially changed to CTBC In-vestments. In June that year, it obtained the remaining 1.4% to become the sole shareholder. CTBC Investments’ principal responsibilities span securities investment trusts, discretionary investment services, offshore fund master agent services, and other government-sanctioned business. To further develop the business, CTBC In-vestments formed a partnership with Natixis Investment Managers on March 31, 2018, to act as the master agent of Natixis funds, of which 10 funds from three affiliate—Loomis Sayles, Natixis, and Harris Associates—are distributed in Taiwan. In February 2020, it established a Taichung Branch to further cultivate the market and pro-vide a full range of investment management services.

Domestic awards● Securities&FuturesInstitute,BestS&FPaperAwards

Research & Advise Award Institution Category - Honorable Mention

International awards● AsiaAssetManagement

Best Investor Education, Taiwan● TheAsset

Best ETF Provider, Taiwan - Rising Star Most Innovative ETF, Taiwan (won by CTBC U.S. High Grade Municipal Bond ETF)

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2.2.8 CTBC Security Co., Ltd.Founded in 1995, CTBC Security became a subsidiary of CTBC Holding in December 2005. CTBC Security

is principally engaged in helping corporate entities protect their property and personnel. Chosen through a metic-ulous screening process, its highly trained workforce of over 300 employees stands out as one of the finest in the industry.

CTBC Security’s business scope includes planning and design for fire safety and disaster prevention, security systems consulting, security courier services, stationed guards, and personnel protection. Financial institutions constitute the majority of its clientele. CTBC Security is committed to a security-based, service-oriented business philosophy that ensures customer satisfaction.

2.2.9 Taiwan Lottery Co., Ltd.Taiwan Lottery was founded on July 10, 2006. It is a 100% subsidiary of CTBC Holding and is the CTBC

Bank-delegated operator of Taiwan’s public welfare lottery. Taiwan Lottery’s main duties include selling lottery tickets, marketing the lottery, conducting the draw games drawings, and paying out prize winners. After winning the right to run the third term of the government lottery franchise from 2007 to 2013, CTBC Bank was awarded the rights again for the fourth term of 2014–2023 by the Ministry of Finance.

We strive for the right to run the public welfare lottery largely because it provides employment opportunities for underprivileged people. In addition, the average annual operation surplus of around NT$26 billion (plus an extra of NT$2.7 billion we donate each year) goes directly into the government welfare coffers to fund crucial social welfare programs. By successfully running the lottery, CTBC Holding is able to achieve our goals of giv-ing back to the community and fulfilling our corporate social responsibility.

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3. Corporate Governance Report

3.1Organization

3.1.1CTBCHoldingorganizationchartAs of April 13, 2021

OfficeofChairman CorporateGovernanceOfficer

Vice Chairman

Credit Approval Committee

Ethics and Integrity Committee

Corporate Sustainability Committee

OfficeofPresident

Chief Auditor

CorporateSustainabilityOffice

Stockholders’ Meeting

Risk Management Committee

Nomination Committee

ExecutiveCommittee

Remuneration Committee

Audit Committee

OfficeofChiefAuditor

Investment Advisory Department

Corporate Relations Department

Investor Relations Department

President

Financial Technology Department

Investment Management Department

Risk Management Department

Compliance Department

FinancialOfficer Accounting Officer

Legal Department

Chief Financial Officer

Financial Management Department

General Administration

Department

Strategic Development Department

Corporate Planning

Department

Chairman

Board of Directors

Cross-BorderStrategyOfficer,Japan

ChiefTechnologyOfficer

ChiefInvestmentOfficer

ChiefRiskOfficer

ChiefComplianceOfficer

General Counsel

ChiefAdministrationOfficer

ChiefStrategyOfficer

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3.1.2 Duties of key departments1) Committees

(1) Audit CommitteeComposed entirely of independent directors, the Audit Committee is responsible for assisting the Board of Directors in performing its supervisory duties. Matters for which it is responsible include formulating or modifying internal control systems; assessing the effectiveness of internal control systems; formulating or modifying procedures for asset acquisition or disposal, derivatives transactions, and major financial business actions; auditing matters involving stakes of directors; legally auditing deals made with stake-holders; auditing deals of major assets or derivatives; auditing the offering, issuance, or private placement of equity-type securities; auditing the appointment, dismissal, and remuneration of CPAs; assessing the independence and performance of CPAs; auditing the appointment and dismissal of the Financial Officer, Accounting Officer, and internal audit head; auditing annual financial reports and semi-annual financial reports; examining M&As; and auditing other major issues stipulated by the Company or the competent authorities.

(2) Remuneration CommitteeMembers of this committee are appointed by resolution of the Board of Directors. The committee must comprise no fewer than three members, with at least half of them independent directors, and an indepen-dent director must be elected by all members to act as its convener and chair. The committee is responsi-ble for formulating and regularly reviewing the performance assessment and remuneration policy, system, standards, and structures for directors, senior executives, and managers, and regularly assessing and deter-mining the remuneration of directors, senior executives, and managers.

(3) Risk Management CommitteeMembers of this committee are appointed by resolution of the Board of Directors. The committee must comprise no fewer than three directors, with at least one of them an independent director. The committee is responsible for assisting the Board of Directors in communications, reporting, and recommendations re-lating to risk management in order to foster a healthy culture of risk management and managerial support among all employees throughout the organization.

(4) Nomination CommitteeMembers of this committee are appointed by resolution of the Board of Directors. The committee must comprise no fewer than three members, with at least half of them independent directors. The committee assists the Board of Directors to (1) define the diversity requirements (e.g., profession, technical skills, experience, and gender) and independence criteria for seeking, assessing, and nominating the candidates for directors and supervisors of the Company and its subsidiaries; (2) construct and develop the organiza-tional structure of the boards of directors and committees of the Company and its subsidiaries and assess the performance of these boards of directors; (3) devise and review the continuing education plans for di-rectors; (4) formulate corporate governance best practices for the Company; and (5) conduct matters to be handled by the committee as resolved by the Board of Directors.

(5) Ethics and Integrity CommitteeMembers of this committee are appointed by resolution of the Board of Directors. The committee must comprise no fewer than three members, with at least one of them an independent director, and an inde-pendent director must be elected by all members to act as its convener. The committee is responsible for

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Corporate Governance Report

formulating and monitoring integrity management policies and prevention programs. It regularly reports the status of compliance to the Board of Directors to assist the Board and senior management in ensuring the effectiveness of the preventative measures. In addition, in accordance with the Procedures for Han-dling Illegal and Unethical or Dishonest Behavior, the committee reviews relevant cases submitted by the Company and its subsidiaries on a regular basis to ensure the effectiveness of the offense-reporting sys-tem. It also regularly reviews confirmed cases of unethical employee behavior submitted by the internal employee incentives and discipline committees of the Company and its subsidiaries.

(6) Corporate Sustainability CommitteeMembers of this committee are appointed by resolution of the Board of Directors. The committee must comprise no fewer than three members, with at least one independent director. The committee assists the Board of Directors to (1) establish annual corporate sustainability plans and strategies; (2) examine or reference corporate sustainability implementation plans; (3) supervise and examine the enforcement of the implementation plans and review the results; (4) review the structure of the Sustainability Report; and (5) examine or reference other matters relating to corporate sustainability.

(7)ExecutiveCommitteeThis committee is responsible for advising the Chairman on management and policymaking for matters relating to major business, strategy, risk, investment, administration, and information of the Company and its subsidiaries.

(8) Credit Approval CommitteeThis committee is responsible for approving major credit risk cases of the Company and its subsidiaries.

2) Offices,divisions,anddepartments(1)OfficeofChiefAuditor

This office, directly supervised by the Chief Auditor, is responsible for auditing and supervising all busi-ness of the Company and its subsidiaries and developing relevant audit policies and measures.

(2)OfficeofChairmanThis office, directly supervised by the Chairman, is responsible for secretarial affairs and affairs of the boards of directors of the Company and its subsidiaries as well as other relevant corporate governance work.

(3)OfficeofPresidentThis office, directly supervised by the President, is responsible for integrating and promoting the business of the Company and its subsidiaries.

(4) Investment Advisory DepartmentThis department, directly supervised by the President, is responsible for studying and analyzing macro-economic trends.

(5) Investor Relations DepartmentThis department, directly supervised by the President, is responsible for maintaining communications and relationships with investors in Taiwan and overseas.

(6) Corporate Relations DepartmentThis department, directly supervised by the President, is responsible for matters relating to relationships and interactions with business organizations and associations.

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(7)CorporateSustainabilityOfficeThis office, directly supervised by the President, is responsible for overseeing and handling the corporate sustainability affairs of the Company and its subsidiaries.

(8) Corporate Planning DepartmentThis department, directly supervised by the Chief Strategy Officer, is responsible for coordinating and promoting the strategy of the Company and its subsidiaries as well as cross-business coordination and im-plementation monitoring.

(9) Strategic Development DepartmentThis department, directly supervised by the Chief Strategy Officer, is responsible for evaluating and im-plementing the M&A and critical investments of the Company and its subsidiaries and serving as the con-tact window for the competent authorities.

(10) General Administration DepartmentThis department, directly supervised by the Chief Administration Officer, is responsible for developing back-office management policies for the Company and its subsidiaries as well as facilitating the logistics for human resources, public relations, and general affairs operations.

(11) Financial Management DepartmentThis department, directly supervised by the Chief Financial Officer, is responsible for managing the business performance of the Company and its subsidiaries, carrying out capital management and fundraising planning, collecting subsidiaries’ financial information, and preparing CTBC Holding’s financial statements.

(12) Legal DepartmentThis department, directly supervised by the General Counsel, is responsible for legal duties such as han-dling lawsuits and providing professional legal advice for the Company and its subsidiaries.

(13) Compliance DepartmentThis department, directly supervised by the Chief Compliance Officer, is responsible for developing, managing, and implementing the compliance policies of the Company and its subsidiaries, supervising the prevention of money laundering and terrorist financing of the subsidiaries, and strengthening the group’s enforcement of compliance plans and policies.

(14) Risk Management DepartmentThis department, directly supervised by the Chief Risk Officer, is responsible for developing risk man-agement policies of the Company and its subsidiaries and conducting comprehensive risk assessment and control.

(15) Investment Management DepartmentThis department, directly supervised by the Chief Investment Officer, is responsible for supervising the Company’s post-investment management-related matters.

(16) Financial Technology DepartmentThis department, directly supervised by the Chief Technology Officer, is responsible for developing the digital strategies, data strategies and governance, and IT transformation and strategy-related business of the Company and its subsidiaries.

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100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

99%

99.72%

100%

100%

100%

100%

100%

100%

100%

100%

CTBC Bank Corp. (USA)Common shares: 3 thousandPreferred shares: 100 thousandInvestmentamount:US$404,341thousand

Tokyo Star Business Finance, Ltd.Common shares: 1,936 thousandInvestment amount: JPY4,669,792 thousand

CTBC Financial Leasing Co., Ltd.Investmentamount:NT$2,071,728thousand

CTBC Securities Investment Service Co., Ltd.Common shares: 5,000 thousandInvestmentamount:NT$50,000thousand

CTBC (Mauritius) Holding Co., Ltd. (in liquidation) Common shares: 17,363 thousandInvestmentamount:US$17,363thousand

CTBC Asia Ltd. Common shares: 134,526 thousandInvestmentamount:HK$134,526thousand

CTBC Securities Venture Capital Co., Ltd.Common shares: 30,000 thousandInvestmentamount:NT$300,000thousand

CTBC Financial Holding Co., Ltd.

CTBC Asset Management Co., Ltd.Common shares: 535,882 thousandInvestmentamount:NT$5,000,000thousand

CTBC Venture Capital Co., Ltd.Common shares: 366,685 thousand Investmentamount:NT$3,000,000thousand

CTBC Investments Co., Ltd.Common shares: 30,600 thousandInvestmentamount:NT$891,488thousand

Taiwan Life Insurance Co., Ltd. Common shares: 5,588,071 thousand Investmentamount:NT$31,981,109thousand

CTBC Securities Co., Ltd.Common shares: 644,104 thousandInvestmentamount:NT$7,138,807thousand

CTBC Bank Co., Ltd. Common shares: 14,796,218 thousand Investmentamount:NT$103,412,356thousand

Taiwan Lottery Co., Ltd.Common shares: 50,000 thousandInvestmentamount:NT$500,000thousand

CTBC Security Co., Ltd.Common shares: 4,770 thousandInvestmentamount:NT$58,839thousand

CTBC International Co., Ltd.Common shares: 70,000 thousandInvestmentamount:NT$1,375,231thousand

CTBC Insurance Co., Ltd.Common shares: 200,000 thousandInvestmentamount:NT$3,000,000thousand

CTBC Finance Co., Ltd.Common shares: 100,294 thousand Investmentamount:NT$200,000thousand

CTBC Bank Corp. (Canada)Common shares: 2,746 thousandInvestmentamount:NT$917,766thousand

PT Bank CTBC IndonesiaCommon shares: 1 thousandInvestmentamount:NT$1,691,023thousand

CTBC Bank (Philippines) Corp.Common shares: 347,319 thousandInvestmentamount:NT$3,957,259thousand

CTBC Capital Corp.Common shares: 6 thousandInvestmentamount:NT$17,617,979thousand

The Tokyo Star Bank, Ltd.Common shares: 700 thousandInvestmentamount:NT$15,665,085thousand

3.1.3GrouporganizationchartAs of April 13, 2021

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3.2Directors,supervisors,andseniormanagers

3.2.1Directorandsupervisorinformation1) Basicinformationofdirectors(includingindependentdirectors)

Title Nationality Name Gender Date appointed

Term ofoffice(Note1)

Datefirstappointed

Shares held when appointed Shares currently held

Shares held by shareholder, spouse, and

minor children

Shares held in another person’sname

Significantexperience Positions concurrently held atthis and other companies

Managers who are spouses or within thesecond degree of kinship of each other

Notes

Commonshares % Common

shares % Common shares % Common

shares %

Title Name RelationshipPreferredsharesB % Preferred

sharesB % Preferred sharesB % Preferred

sharesB %

Preferredshares C % Preferred

shares C % Preferred shares C % Preferred

shares C %

Chairman Republic of China

Wei Fu Investment Co., Ltd.Representative: Wen-Long Yen

Male June 14, 2019

3years

June 20, 2014

86,366,551 0.44% 86,366,551 0.44% 80,304,109 0.41% - - Chairman, Kainan UniversityDirector, Wei Guo Real Estate Development Co., Ltd.Director, Wei Fu Investment Co., Ltd. Director, Long-Rih Real Estate Development Co., Ltd.Director, K & Y Investment Co., Ltd. Director, United Asset Management Co., Ltd. Supervisor, United Real Estate Development Co., Ltd.B.A. in Economic, Dept. of Economics, Soochow University

Director, CTBC Bank Co., Ltd.Chairman, Taipei Kai-Nan High SchoolDirector, Ho-Wei Investment Co., Ltd.Director, Feng Luh Investment Co., Ltd. Director, United Real Estate Management Co., Ltd.Director, Sung Hung Investment Co., Ltd. Director, Wei Hung Investment Co., Ltd. Director, Jeffrey Koo Cultural and Educational Foundation

- - - (Note 2)

1,182,215 0.35% 1,182,215 0.35% - - - -

- - - - - - - -

ViceChairman

Republic of China

Chung Yuan Investment Co., Ltd. Representative: Chao-Chin Tung

Male June 14, 2019

3years

June 20, 2014

44,572,626 0.23% 99,572,626 0.51% 276,787 0.00% - - Chairman, CTBC Bank Co., Ltd. Director, CTBC Life Insurance Co., Ltd.Chairman, CTBC Venture Capital Co., Ltd. Chairman, CTBC Asset Management Co., Ltd. Chairman, CTBC Capital Corp.Chairman, CTBC Bank Corp. (USA) Director, The Tokyo Star Bank, Ltd.Director, The Bankers Association of the R.O.C. Supervisor, The Bankers Association of Taipei Director,StraitsExchangeFoundationMaster’s in Materials Science, University of Rochester, New York, USA

Vice Chairman, Showa Denko HD Trace Corp.ExecutiveSupervisor,ChineseNationalAssociation of Industry and Commerce, Taiwan

- - - -

- - - - 3,790 0.00% - -

299,681 0.18% 299,681 0.18% 1,886 0.00% - -

Director Republic of China

Yi Chuan InvestmentCo., Ltd.Representative:Thomas K.S. Chen

Male June 14, 2019

3years

June 20, 2014

65,344,869 0.34% 98,344,869 0.50% 1,676,667 0.01% - - Vice Chairman, CTBC Bank Co., Ltd. Chairman, CTBC Asset Management Co., Ltd. Chairman, CTBC Bank Corp. (USA)General Secretary, CTBC Financial Holding Co., Ltd.Director, National Credit Card Center of the Republic of ChinaDirector, Taipei International Community Cultural FoundationBachelors, Department of Public Finance and Taxation,NationalChengchiUniversity

Director, CTBC Bank Co., Ltd. Chairman, CTBC Investments Co., Ltd. Director, CTBC International Co., Ltd.Chairman, CTBC Financial Leasing Co., Ltd. Director, Ho-Yeh Investment Co., Ltd.Director, Taipei Financial Center Corp. Director, Changhua County Lukang Folk Arts MuseumDirector, Jeffrey Koo Cultural and Educational FoundationVice Chairman, CTBC Charity Foundation Director, CTBC Anti-Drug Educational Foundation

- - - -

1,505,459 0.45% 1,505,459 0.45% - - - -

449,464 0.27% 449,464 0.27% - - - -

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As of April 13, 2021

3.2Directors,supervisors,andseniormanagers

3.2.1Directorandsupervisorinformation1) Basicinformationofdirectors(includingindependentdirectors)



Datefirstappointed



minor children




Notes



shares %



sharesB %



shares C %

Chairman Republic of China

Wei Fu Investment Co., Ltd.Representative: Wen-Long Yen

Male June 14, 2019

3years

June 20, 2014

86,366,551 0.44% 86,366,551 0.44% 80,304,109 0.41% - - Chairman, Kainan UniversityDirector, Wei Guo Real Estate Development Co., Ltd.Director, Wei Fu Investment Co., Ltd. Director, Long-Rih Real Estate Development Co., Ltd.Director, K & Y Investment Co., Ltd. Director, United Asset Management Co., Ltd. Supervisor, United Real Estate Development Co., Ltd.B.A. in Economic, Dept. of Economics, Soochow University

Director, CTBC Bank Co., Ltd.Chairman, Taipei Kai-Nan High SchoolDirector, Ho-Wei Investment Co., Ltd.Director, Feng Luh Investment Co., Ltd. Director, United Real Estate Management Co., Ltd.Director, Sung Hung Investment Co., Ltd. Director, Wei Hung Investment Co., Ltd. Director, Jeffrey Koo Cultural and Educational Foundation

- - - (Note 2)

1,182,215 0.35% 1,182,215 0.35% - - - -

- - - - - - - -

ViceChairman

Republic of China

Chung Yuan Investment Co., Ltd. Representative: Chao-Chin Tung

Male June 14, 2019

3years

June 20, 2014

44,572,626 0.23% 99,572,626 0.51% 276,787 0.00% - - Chairman, CTBC Bank Co., Ltd. Director, CTBC Life Insurance Co., Ltd.Chairman, CTBC Venture Capital Co., Ltd. Chairman, CTBC Asset Management Co., Ltd. Chairman, CTBC Capital Corp.Chairman, CTBC Bank Corp. (USA) Director, The Tokyo Star Bank, Ltd.Director, The Bankers Association of the R.O.C. Supervisor, The Bankers Association of Taipei Director,StraitsExchangeFoundationMaster’s in Materials Science, University of Rochester, New York, USA

Vice Chairman, Showa Denko HD Trace Corp.ExecutiveSupervisor,ChineseNationalAssociation of Industry and Commerce, Taiwan

- - - -

- - - - 3,790 0.00% - -

299,681 0.18% 299,681 0.18% 1,886 0.00% - -

Director Republic of China

Yi Chuan InvestmentCo., Ltd.Representative:Thomas K.S. Chen

Male June 14, 2019

3years

June 20, 2014

65,344,869 0.34% 98,344,869 0.50% 1,676,667 0.01% - - Vice Chairman, CTBC Bank Co., Ltd. Chairman, CTBC Asset Management Co., Ltd. Chairman, CTBC Bank Corp. (USA)General Secretary, CTBC Financial Holding Co., Ltd.Director, National Credit Card Center of the Republic of ChinaDirector, Taipei International Community Cultural FoundationBachelors, Department of Public Finance and Taxation,NationalChengchiUniversity

Director, CTBC Bank Co., Ltd. Chairman, CTBC Investments Co., Ltd. Director, CTBC International Co., Ltd.Chairman, CTBC Financial Leasing Co., Ltd. Director, Ho-Yeh Investment Co., Ltd.Director, Taipei Financial Center Corp. Director, Changhua County Lukang Folk Arts MuseumDirector, Jeffrey Koo Cultural and Educational FoundationVice Chairman, CTBC Charity Foundation Director, CTBC Anti-Drug Educational Foundation

- - - -

1,505,459 0.45% 1,505,459 0.45% - - - -

449,464 0.27% 449,464 0.27% - - - -

0510_中信金控英文編排.indd 27 2021/5/10 下午7:26

28



Datefirstappointed



minor children




Notes



shares %



sharesB %



shares C %

Independent director

Republic of China

Shih-Chieh Chang Male June 14,2019

3 years

Dec. 8, 2016 133,844 0.00% 133,844 0.00% - - - - Independent Director, Taiwan Life Insurance Co., Ltd.Independent Director, TLG Insurance Co., Ltd. Director, CTBC Business SchoolIndependent Director, CTBC Life Insurance Co., Ltd.Member, Financial Supervisory Commission Non-member director, Securities Investment Trust & Consulting Association of the R.O.C. Member, Financial Ombudsman Institution Director, Taiwan Insurance InstituteDirector, Taiwan Insurance Guaranty Fund Chairman, Insurance Anti-Fraud Institute Member, Labor Funds Supervisory Committee, Ministry of LaborChairman, Pan-Asia Risk and Insurance Management AssociationCEO, EMBA, College of Commerce, National Chengchi UniversityDirector, Department of Risk Management and Insurance, National Chengchi University Consultant, Financial White Papers, Taiwan Financial Services Roundtable Co., Ltd.Consultant, Securities Investment Trust & Consulting Association of The R.O.C.Ph.D., Department of Statistics, University of Wisconsin-Madison, USA

Independent Director, CTBC Bank Co., Ltd. Member, Labor Fund Supervisory CommitteeDirector, Risk Management Society of TaiwanProfessor, Department of Risk Management and Insurance, National Chengchi UniversityAdvisory Committee Member, Risk Management Committee, Chunghwa Post Co., Ltd.Consultant, Public Service Pension Fund Supervisory BoardMember, Futures Trust Fund Risk Management Committee, Chinese National Futures Association

- - - -

- - - - - - - -

- - - - - - - -


UK Cheung-Chun Lau Male June 14,2019

3years

June 14,2019

- - - - - - - - IndependentNon-executiveDirector,HongLeong Insurance (Asia) Ltd.Managing Director, The Bank of Nova Scotia Senior Vice President, ABN Amro Bank N.V. Director, Citigroup Global Markets Asia Ltd. ExecutiveDirector,UBSAGVice President, Bankers Trust Company MBA, The University of Michigan, Ann Arbor

IndependentNon-executiveDirector,HongLeong Insurance (Asia) Ltd.Managing Director, The Bank of Nova Scotia Senior Vice President, ABN Amro Bank N.V. Director, Citigroup Global Markets Asia Ltd. ExecutiveDirector,UBSAGVice President, Bankers Trust Company MBA, The University of Michigan, Ann Arbor

- - - -

- - - - - - - -

- - - - - - - -

0510_中信金控英文編排.indd 28 2021/5/10 下午7:26

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Datefirstappointed



minor children




Notes



shares %



sharesB %



shares C %


Republic of China

Shih-Chieh Chang Male June 14,2019

3 years

Dec. 8, 2016 133,844 0.00% 133,844 0.00% - - - - Independent Director, Taiwan Life Insurance Co., Ltd.Independent Director, TLG Insurance Co., Ltd. Director, CTBC Business SchoolIndependent Director, CTBC Life Insurance Co., Ltd.Member, Financial Supervisory Commission Non-member director, Securities Investment Trust & Consulting Association of the R.O.C. Member, Financial Ombudsman Institution Director, Taiwan Insurance InstituteDirector, Taiwan Insurance Guaranty Fund Chairman, Insurance Anti-Fraud Institute Member, Labor Funds Supervisory Committee, Ministry of LaborChairman, Pan-Asia Risk and Insurance Management AssociationCEO, EMBA, College of Commerce, National Chengchi UniversityDirector, Department of Risk Management and Insurance, National Chengchi University Consultant, Financial White Papers, Taiwan Financial Services Roundtable Co., Ltd.Consultant, Securities Investment Trust & Consulting Association of The R.O.C.Ph.D., Department of Statistics, University of Wisconsin-Madison, USA

Independent Director, CTBC Bank Co., Ltd. Member, Labor Fund Supervisory CommitteeDirector, Risk Management Society of TaiwanProfessor, Department of Risk Management and Insurance, National Chengchi UniversityAdvisory Committee Member, Risk Management Committee, Chunghwa Post Co., Ltd.Consultant, Public Service Pension Fund Supervisory BoardMember, Futures Trust Fund Risk Management Committee, Chinese National Futures Association

- - - -

- - - - - - - -

- - - - - - - -


UK Cheung-Chun Lau Male June 14,2019

3years

June 14,2019

- - - - - - - - IndependentNon-executiveDirector,HongLeong Insurance (Asia) Ltd.Managing Director, The Bank of Nova Scotia Senior Vice President, ABN Amro Bank N.V. Director, Citigroup Global Markets Asia Ltd. ExecutiveDirector,UBSAGVice President, Bankers Trust Company MBA, The University of Michigan, Ann Arbor

IndependentNon-executiveDirector,HongLeong Insurance (Asia) Ltd.Managing Director, The Bank of Nova Scotia Senior Vice President, ABN Amro Bank N.V. Director, Citigroup Global Markets Asia Ltd. ExecutiveDirector,UBSAGVice President, Bankers Trust Company MBA, The University of Michigan, Ann Arbor

- - - -

- - - - - - - -

- - - - - - - -

0510_中信金控英文編排.indd 29 2021/5/10 下午7:26

30



Datefirstappointed



minor children




Notes



shares %



sharesB %



shares C %


Republic of China

Chih-Cheng Wang Male June 14,2019

3years

June 14,2019

- - - - - - - - Independent Director, CTBC Bank Co., Ltd. Independent Director, CTBC Life Insurance Co., Ltd.Independent Director, CTBC Securities Co., Ltd.Independent Director, Taiwan Life Insurance Co., Ltd.Director, Financial Ombudsman Institution Commissioner, Financial Research and Development FundDistinguished Professor, Department of Financial and Economic Law, College of Law, National Chung Cheng UniversityAdjunct Professor, The Graduate Institute for Legal Sciences, Department of Law, National Cheng Kung UniversityAdjunct Professor, School of Management, National Taiwan University of Science and TechnologySecretary & General Reviewer, Banking Bureau, Financial Supervisory BoardDirector, Securities and Futures Investors Protection CenterPh.D. of Law, National Chengchi University, College of Law

Independent Director, Dyaco International Co., Ltd.Independent Director, Lucky Cement Co., Ltd. Consultative Commissioner, Central Deposit Insurance Co.Arbitrator, Chinese Arbitration Association TaipeiDean, Law School, Chinese Culture UniversityAdjunct Professor, Soochow University School of LawDirector, CTBC International AcademyDirector, Huagang Law Foundation

- - - -

- - - - - - - -

- - - - - - - -


Republic of China

Sheng-Yung Yang Male June 14,2019

3years

June 14,2019

21,674 0.00% 21,674 0.00% - - - - Head of Finance Department, National Chung Hsing UniversityAdjunct Professor of International Business, National Taiwan UniversityDean of College of Management, Asia UniversityVice President for International Affairs & Dean of International College, Providence University Secretary-General, Financial Engineering Association of TaiwanCEO, EMBA Program Alliance of Taiwan Member of Investment Committee, National Development FundMember of Operating Fund Committee, Bureau of Science ParkLecturer, Training Institute, Ministry of Finance Independent Director, Grand Bills Finance Corp.Ph.D.inFinance,DrexelUniversity,USA

Independent Director, CTBC Bank Co., Ltd. Distinguished Professor of Finance, National Chung Hsing UniversityIndependent Director, Nova Technology Corp. Independent Director, JMicron Technology Corp.Supervisor, Financial Engineering Association of TaiwanDirector, Chinese Robo-Advisor Association Strategic Mentor, New Generation College, National Association of Small & Medium EnterprisesDirector, CTBC Business SchoolExecutiveSupervisor,TaiwanAssociationofBoard Governance

- - - -

- - - - - - - -

- - - - - - - -

Note 1: The seventh term of the Company’s Board of Directors was from June 14, 2019, to June 13, 2022. The Audit Committee was established on June 26, 2009, to take on the role of supervisors.

Note 2: The Chairman and the President or the person of the equivalent position (the official with the highest managerial position in the Company) are not the same person, spouses, or first-degree relatives.

0510_中信金控英文編排.indd 30 2021/5/10 下午7:26

31




Datefirstappointed



minor children




Notes



shares %



sharesB %



shares C %


Republic of China

Chih-Cheng Wang Male June 14,2019

3years

June 14,2019

- - - - - - - - Independent Director, CTBC Bank Co., Ltd. Independent Director, CTBC Life Insurance Co., Ltd.Independent Director, CTBC Securities Co., Ltd.Independent Director, Taiwan Life Insurance Co., Ltd.Director, Financial Ombudsman Institution Commissioner, Financial Research and Development FundDistinguished Professor, Department of Financial and Economic Law, College of Law, National Chung Cheng UniversityAdjunct Professor, The Graduate Institute for Legal Sciences, Department of Law, National Cheng Kung UniversityAdjunct Professor, School of Management, National Taiwan University of Science and TechnologySecretary & General Reviewer, Banking Bureau, Financial Supervisory BoardDirector, Securities and Futures Investors Protection CenterPh.D. of Law, National Chengchi University, College of Law

Independent Director, Dyaco International Co., Ltd.Independent Director, Lucky Cement Co., Ltd. Consultative Commissioner, Central Deposit Insurance Co.Arbitrator, Chinese Arbitration Association TaipeiDean, Law School, Chinese Culture UniversityAdjunct Professor, Soochow University School of LawDirector, CTBC International AcademyDirector, Huagang Law Foundation

- - - -

- - - - - - - -

- - - - - - - -


Republic of China

Sheng-Yung Yang Male June 14,2019

3years

June 14,2019

21,674 0.00% 21,674 0.00% - - - - Head of Finance Department, National Chung Hsing UniversityAdjunct Professor of International Business, National Taiwan UniversityDean of College of Management, Asia UniversityVice President for International Affairs & Dean of International College, Providence University Secretary-General, Financial Engineering Association of TaiwanCEO, EMBA Program Alliance of Taiwan Member of Investment Committee, National Development FundMember of Operating Fund Committee, Bureau of Science ParkLecturer, Training Institute, Ministry of Finance Independent Director, Grand Bills Finance Corp.Ph.D.inFinance,DrexelUniversity,USA

Independent Director, CTBC Bank Co., Ltd. Distinguished Professor of Finance, National Chung Hsing UniversityIndependent Director, Nova Technology Corp. Independent Director, JMicron Technology Corp.Supervisor, Financial Engineering Association of TaiwanDirector, Chinese Robo-Advisor Association Strategic Mentor, New Generation College, National Association of Small & Medium EnterprisesDirector, CTBC Business SchoolExecutiveSupervisor,TaiwanAssociationofBoard Governance

- - - -

- - - - - - - -

- - - - - - - -

Note 1: The seventh term of the Company’s Board of Directors was from June 14, 2019, to June 13, 2022. The Audit Committee was established on June 26, 2009, to take on the role of supervisors.

Note 2: The Chairman and the President or the person of the equivalent position (the official with the highest managerial position in the Company) are not the same person, spouses, or first-degree relatives.

0510_中信金控英文編排.indd 31 2021/5/10 下午7:26

32

2) Mainshareholdersofinstitutionalshareholders As of April 13, 2021

Institutional shareholder Main shareholders

Wei Fu Investment Co., Ltd.

Wen-Long Yen 37.61%

Chen Li-Chin Yen 29.25%

Chih-Kuang Yen 8.96%

Chih-Yu Yen 8.96%

Wei Guo Real Estate Development Co., Ltd. 8.66%

Wen-Tse Yen 3.58%

Tai-Hsuan Hsia 1.49%

United Asset Management Co., Ltd. 1.19%

Shieh-Er Chang 0.30%

Chung Yuan Investment Co., Ltd.Yi Kao Investment Co., Ltd. 70.24%

Yi Chuan Investment Co., Ltd. 29.76%

Yi Chuan Investment Co., Ltd. Yi Kao Investment Co., Ltd. 100.00%

3) Fortheabovemainshareholdersthatareinstitutions,theirmainshareholdersAs of April 13, 2021

Institutional shareholder Main shareholders

Wei Guo Real Estate Development Co., Ltd.


Wei Fu Investment Co., Ltd. 22.86%

Wen-Long Yen 9.43%

Wen-Tse Yen 0.14%

United Asset Management Co., Ltd.

Wei Fu Investment Co., Ltd. 75.02%

Wei Guo Real Estate Development Co., Ltd. 23.67%

Chiau-Chih Chen 0.99%

Wen-Tse Yen 0.14%

Wen-Long Yen 0.08%

Wen-Si Yen 0.07%


Chih-Kuang Yen 0.01%

Chih-Yu Yen 0.01%

Yi Chuan Investment Co., Ltd. Yi Kao Investment Co., Ltd. 100.00%

Yi Kao Investment Co., Ltd. Bo Yu Investment Co., Ltd. 100.00%

0510_中信金控英文編排.indd 32 2021/5/10 下午7:26

33


4) DirectorinformationAs of April 13, 2021

Criteria

Name

Hasprofessionalqualificationsandfiveormoreyears’experience Independencestatus(Note)

No.ofotherpublic

companies at which they are

serving as an independent

director

as a lecturer or in a higher position in a commerce, law,finance,accounting,

or other department

related to the Company’s

business needs at a public or

private tertiary educational institution

as a judge, prosecutor,

lawyer, accountant,

or other professional or technical

specialist who has passed a national

examination and received certificationin

a profession related to the Company’s

business needs

in commerce, law,finance,accounting, orotherfieldrelated to the Company’s

business needs

1 2 3 4 5 6 7 8 9 10 11 12

Wen-Long Yen V V V V V V V V V V V 0Chao-Chin Tung V V V V V V V V V V V V 0Thomas K.S. Chen V V V V V V V V V V V 0Shih-Chieh Chang V V V V V V V V V V V V V V 0Cheung-Chun Lau V V V V V V V V V V V V V 0Chih-Cheng Wang V V V V V V V V V V V V V V 2Sheng-Yung Yang V V V V V V V V V V V V V V 2Note: A “V” marked in a field indicates that a director fulfilled the specific criterion as described below during the two years before being

elected and during their term of office.(1) Not an employee of the Company or any of its affiliates(2) Not a director or supervisor of the Company or any of its affiliates (not applicable in the event that the director or supervisor

is concurrently an independent director of the Company, its parent company, a subsidiary, or a subsidiary of the same parent company established in accordance with the Securities and Exchange Act or local laws)

(3) Not a natural-person shareholder who holds shares that, together with those held by their spouse or minor children or held under other names, total 1% or more of the total number of issued and outstanding shares of the Company or rank them among the top 10 largest shareholders

(4) Not a manager of (1) or the spouse, second-degree relative, or third-degree relative by blood of an individual described in (2) or (3)(5) Not in direct possession of 5% or more of the total number of issued and outstanding shares of the Company, not one of the top

five largest shareholders of the Company or a director, supervisor, or employee of an institutional shareholder of the Company that designates its representatives to act as the directors or supervisors of the Company in accordance with paragraph 1 or 2 of Article 27 of the Company Act (not applicable in the event that the director or supervisor is concurrently an independent director of the Company, its parent company, a subsidiary, or a subsidiary of the same parent company established in accordance with the Securities and Exchange Act or local laws)

(6) Not a director, supervisor, or employee of a company that controls the seats of the directors or over half of the shares with voting rights of the Company (not applicable in the event that the director or supervisor is concurrently an independent director of the Company, its parent company, a subsidiary, or a subsidiary of the same parent company established in accordance with the Securities and Exchange Act or local laws)

(7) Not a director, supervisor, or employee of another company or institution who is the same person as or the spouse of the Chairman, President, or such other person in the equivalent position of the Company (not applicable in the event that the director or supervisor is concurrently an independent director of the Company, its parent company, a subsidiary, or a subsidiary of the same parent company established in accordance with the Securities and Exchange Act or local laws)

(8) Not a director, supervisor, manager, or shareholder holding 5% or more of the shares of a company or institution that has a financial or business relationship with the Company (not applicable in the event that the company or institution holds 20% or more but less than 50% of the total number of issued and outstanding shares of the Company, and the director or supervisor is concurrently an independent director of the Company, its parent company, a subsidiary, or a subsidiary of the same parent company established in accordance with the Securities and Exchange Act or local laws)

(9) Not an owner, partner, director, supervisor, manager, or spouse of a professional individual, sole proprietorship, partnership, company, or institution providing auditing to the Company or its affiliates or providing business, legal, financial, or accounting services that received in the past two years total payments of NT$500,000 or less for services rendered (not applicable for members of the Remuneration Committee, public offering committee, or special committee for mergers and acquisitions who exercise powers pursuant to the Securities and Exchange Act, the Business Mergers and Acquisitions Act, or relevant laws and regulations)

(10) Not a spouse or second-degree relative of another director(11) Not a person who satisfies any condition specified in Article 30 of the Company Act(12) Not a governmental or judicial person or a representative thereof in accordance with Article 27 of the Company Act

0510_中信金控英文編排.indd 33 2021/5/10 下午7:26

34

3.2.2 Information on the President, vice presidents, associates, departments, and branch directors As of April 13, 2021

Position Nationality Name Gender Effective date

Shares held when appointed

Shares held by spouse and minor children

Shares held in another person’s name

Education and experience

Positions concurrently held at this and other

companies

Managers who are spouses or within the second degree of kinship of each other

Note

Common shares % Common

shares % Common shares %

Preferred B shares % Preferred

B shares % Preferred B shares %

Title Name RelationshipPreferred C shares % Preferred

C shares % Preferred C shares %

President Republic of China Daniel I. Wu Male March 18, 2010

4,687,924 0.02% 5,155,242 0.03% - - Education:MBA, University of Rochester, USA

Experience:Director, CTBC Financial Holding Co., Ltd.CEO, Investment Business of CTBC Financial Holding Co., Ltd. CEO, Insurance Business of CTBC Financial Holding Co., Ltd. SeniorExecutiveVicePresident,CTBCBankCo.,Ltd.Director, CTBC Capital Corp. Director, GCB Finance (HK) Ltd. Chairman, CTBC Securities Co., Ltd.Director, CTBC Asset Management Co., Ltd. Director, CTBC Venture Capital Co., Ltd. Director, CTBC Asia Ltd.

None - - - Note

225,251 0.07% 70,607 0.02% - -

- - - - - -

Chief Administration Officer

Republic of China Roger Kao Male Jan. 20, 2017

2,467,527 0.01% 81,723 0.00% - - Education:MS in Broadcast Journalism, Boston University, USA

Experience:General Secretary, CTBC Financial Holding Co., Ltd. Director, CTBC Bank Co., Ltd.ExecutiveVicePresident,CTBCBankCo.,Ltd.Chairman,CTBC Insurance Brokers Co., Ltd.Director, CTBC Security Co., Ltd.

SeniorExecutiveVicePresident,CTBCBank Co., Ltd.Acting Spokesman, CTBC Bank Co., Ltd. Director, Taiwan Lottery Co., Ltd.Director, CTBC Asset Management Co., Ltd.

- - - -

- - - - - -

- - - - - -

Chief Compliance Officer

Republic of China Aaron King Male Jan. 1, 2016

1,526,866 0.01% - - - - Education:Master of Law, Georgetown University, USA

Experience:SeniorExecutiveVicePresident,CTBCBankCo.,Ltd.Partner,LotusInternationalLawOffices,TaipeiVice President (Legal), Hannspree, Inc.VicePresident(Legal),TaiwanFixedNetworkCo.,Ltd.(TaiwanTelecom Group), TaipeiGeneral Counsel, TECO Electric & Machinery Co., Ltd., Taipei Partner,TaiwanCommercialLawOffices,TaipeiProsecutor,ShilinDistrictProsecutorsOffice

None - - - -

- - - - - -

- - - - - -

General Counsel Republic of China Y.D. Deng Male Jan. 1, 2020

1,954 0.00% - - - - Education:Bachelor of Law, National Taiwan University

ExperienceExecutiveVicePresident,CTBCBankCo.,Ltd.Counselor,Leeand Li, Attorneys-at-Law

None - - - -

- - - - - -

- - - - - -

Acting Chief Risk Officer

Republic of China C.C. Huang Male Jan. 1, 2020

433,286 0.00% 6,651 0.00% - - Education:MBA, Indiana University at Bloomington, USA

ExperienceEVP, ABN AMRO Bank

ExecutiveVicePresident,CTBCBankCo., Ltd.Director, CTBC Bank(Philippines) Corp.Director, PT Bank CTBC Indonesia

- - - -

- - - - - -

- - - - - -

0510_中信金控英文編排.indd 34 2021/5/10 下午7:26

35


3.2.2 Information on the President, vice presidents, associates, departments, and branch directors As of April 13, 2021







companies


Note







President Republic of China Daniel I. Wu Male March 18, 2010

4,687,924 0.02% 5,155,242 0.03% - - Education:MBA, University of Rochester, USA

Experience:Director, CTBC Financial Holding Co., Ltd.CEO, Investment Business of CTBC Financial Holding Co., Ltd. CEO, Insurance Business of CTBC Financial Holding Co., Ltd. SeniorExecutiveVicePresident,CTBCBankCo.,Ltd.Director, CTBC Capital Corp. Director, GCB Finance (HK) Ltd. Chairman, CTBC Securities Co., Ltd.Director, CTBC Asset Management Co., Ltd. Director, CTBC Venture Capital Co., Ltd. Director, CTBC Asia Ltd.

None - - - Note

225,251 0.07% 70,607 0.02% - -

- - - - - -


Republic of China Roger Kao Male Jan. 20, 2017

2,467,527 0.01% 81,723 0.00% - - Education:MS in Broadcast Journalism, Boston University, USA

Experience:General Secretary, CTBC Financial Holding Co., Ltd. Director, CTBC Bank Co., Ltd.ExecutiveVicePresident,CTBCBankCo.,Ltd.Chairman,CTBC Insurance Brokers Co., Ltd.Director, CTBC Security Co., Ltd.

SeniorExecutiveVicePresident,CTBCBank Co., Ltd.Acting Spokesman, CTBC Bank Co., Ltd. Director, Taiwan Lottery Co., Ltd.Director, CTBC Asset Management Co., Ltd.

- - - -

- - - - - -

- - - - - -


Republic of China Aaron King Male Jan. 1, 2016

1,526,866 0.01% - - - - Education:Master of Law, Georgetown University, USA

Experience:SeniorExecutiveVicePresident,CTBCBankCo.,Ltd.Partner,LotusInternationalLawOffices,TaipeiVice President (Legal), Hannspree, Inc.VicePresident(Legal),TaiwanFixedNetworkCo.,Ltd.(TaiwanTelecom Group), TaipeiGeneral Counsel, TECO Electric & Machinery Co., Ltd., Taipei Partner,TaiwanCommercialLawOffices,TaipeiProsecutor,ShilinDistrictProsecutorsOffice

None - - - -

- - - - - -

- - - - - -

General Counsel Republic of China Y.D. Deng Male Jan. 1, 2020

1,954 0.00% - - - - Education:Bachelor of Law, National Taiwan University

ExperienceExecutiveVicePresident,CTBCBankCo.,Ltd.Counselor,Leeand Li, Attorneys-at-Law

None - - - -

- - - - - -

- - - - - -


Republic of China C.C. Huang Male Jan. 1, 2020

433,286 0.00% 6,651 0.00% - - Education:MBA, Indiana University at Bloomington, USA

ExperienceEVP, ABN AMRO Bank

ExecutiveVicePresident,CTBCBankCo., Ltd.Director, CTBC Bank(Philippines) Corp.Director, PT Bank CTBC Indonesia

- - - -

- - - - - -

- - - - - -

0510_中信金控英文編排.indd 35 2021/5/10 下午7:26

36







companies


Note







Chief Investment OfficerHead of Investment Management Department

USA Winston Hsia Male Sept. 1,2015

March 1,2021

1,304,822 0.01% - - - - Education:MBA, Wharton School, University of Pennsylvania, USA

Experience:ExecutiveVicePresident,CTBCBankCo.,Ltd.CEO,ShopNetCo., Ltd.President, CTBC Asset Management Co., Ltd. President, CTBC Venture Capital Co., Ltd. Director, GCB Finance (HK) Ltd.Director, Mandarin Vision Inc.

Chairman, CTBC Capital Corp.Chairman, CTBC Bank Corp. (USA)

- - - -

- - - - - -

- - - - - -

Chief Technology OfficerHead of Financial Technology Department

Republic of China Titan Chia Male April 20, 2018

Jan. 1, 2020

- - - - - - Education:IMBA, National Chengchi University

Experience:Taiwan Country Leader, Global Business Service, IBM Taiwan

ExecutiveVicePresident,CTBCBankCo., Ltd.

- - - -

- - - - - -

- - - - - -

Cross-Border StrategyOfficer,Japan

Singapore Chung-Mao Hsiao Male Jan. 1, 2016

- - - - - - Education:Bachelor of Economics, Keio University, Japan

Experience:ExecutiveVicePresident,CTBCBankCo.,Ltd.SeniorVicePresident, RZB Austria, Beijing Branch President, Bank Boston Securities Co., Ltd. JapanSeniorVicePresident,PeregrineFixedIncomeLtd.,HongKongSenior Vice President, Lehman Brothers Hong Kong

Director, AZ-Star Co., Ltd. - - - -

- - - - - -

- - - - - -

General SecretaryCorporate Governance Officer

Republic of China Chang-HsingCho

Male Jan. 1, 2018

571,825 0.00% - - - - Education:Bachelor of Business Administration, Chinese Culture University

Experience:ExecutiveVicePresident,TaiwanLifeInsuranceCo.,Ltd.Director, King Dragon Life Insurance Co., Ltd.

Director, CTBC Venture Capital Co., Ltd. - - - -

- - - - - -

- - - - - -

Chief Auditor Republic of China Albert Hu Male April 7,2014

346,777 0.00% - - - - Education:MBA, George Washington University, USA

Experience:ExecutiveVicePresident,CTBCBankCo.,Ltd.VicePresident,AIG Credit Card Co. (Taiwan), Ltd. Vice President, Standard Chartered Bank, Taipei Manager, Citibank Taiwan

None - - - -

- - - - - -

- - - - - -

HeadofOfficeofChief Auditor

Republic of China Richie Chen Male May 25, 2020

695,319 0.00% - - - - Education:Secretarial Science, Tamsui Institute of Business Administration

Experience:Senior Vice President, CTBC Bank Co., Ltd.

None - - - -

12,113 0.00% - - - -

11,176 0.01% - - - -

Head of General AdministrationDepartment

Republic of China Derek Lo Male Jan. 20,2017

633,800 0.00% - - - - Education:MBA, Madonna University, USA


ExecutiveVicePresident,CTBCBankCo., Ltd.Director, CTBC Security Co., Ltd.

- - - -

- - - - - -

- - - - - -

0510_中信金控英文編排.indd 36 2021/5/10 下午7:26

37








companies


Note







Chief Investment OfficerHead of Investment Management Department

USA Winston Hsia Male Sept. 1,2015

March 1,2021

1,304,822 0.01% - - - - Education:MBA, Wharton School, University of Pennsylvania, USA

Experience:ExecutiveVicePresident,CTBCBankCo.,Ltd.CEO,ShopNetCo., Ltd.President, CTBC Asset Management Co., Ltd. President, CTBC Venture Capital Co., Ltd. Director, GCB Finance (HK) Ltd.Director, Mandarin Vision Inc.

Chairman, CTBC Capital Corp.Chairman, CTBC Bank Corp. (USA)

- - - -

- - - - - -

- - - - - -

Chief Technology OfficerHead of Financial Technology Department

Republic of China Titan Chia Male April 20, 2018

Jan. 1, 2020

- - - - - - Education:IMBA, National Chengchi University

Experience:Taiwan Country Leader, Global Business Service, IBM Taiwan


- - - -

- - - - - -

- - - - - -


Singapore Chung-Mao Hsiao Male Jan. 1, 2016

- - - - - - Education:Bachelor of Economics, Keio University, Japan

Experience:ExecutiveVicePresident,CTBCBankCo.,Ltd.SeniorVicePresident, RZB Austria, Beijing Branch President, Bank Boston Securities Co., Ltd. JapanSeniorVicePresident,PeregrineFixedIncomeLtd.,HongKongSenior Vice President, Lehman Brothers Hong Kong

Director, AZ-Star Co., Ltd. - - - -

- - - - - -

- - - - - -

General SecretaryCorporate Governance Officer

Republic of China Chang-HsingCho

Male Jan. 1, 2018

571,825 0.00% - - - - Education:Bachelor of Business Administration, Chinese Culture University

Experience:ExecutiveVicePresident,TaiwanLifeInsuranceCo.,Ltd.Director, King Dragon Life Insurance Co., Ltd.

Director, CTBC Venture Capital Co., Ltd. - - - -

- - - - - -

- - - - - -

Chief Auditor Republic of China Albert Hu Male April 7,2014

346,777 0.00% - - - - Education:MBA, George Washington University, USA

Experience:ExecutiveVicePresident,CTBCBankCo.,Ltd.VicePresident,AIG Credit Card Co. (Taiwan), Ltd. Vice President, Standard Chartered Bank, Taipei Manager, Citibank Taiwan

None - - - -

- - - - - -

- - - - - -

HeadofOfficeofChief Auditor

Republic of China Richie Chen Male May 25, 2020

695,319 0.00% - - - - Education:Secretarial Science, Tamsui Institute of Business Administration


None - - - -

12,113 0.00% - - - -

11,176 0.01% - - - -

Head of General AdministrationDepartment

Republic of China Derek Lo Male Jan. 20,2017

633,800 0.00% - - - - Education:MBA, Madonna University, USA


ExecutiveVicePresident,CTBCBankCo., Ltd.Director, CTBC Security Co., Ltd.

- - - -

- - - - - -

- - - - - -

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companies


Note







Chief Financial OfficerHead of Financial Management Department

Republic of China Ya-Ling Chiu Female Jan. 1,2021

Jan. 20,2017

976,473 0.01% - - - - Education:MBA, University of Minnesota Twin Cities, USA

Experience:Senior Vice President, CTBC Bank Co., Ltd. Assistant Vice President, Citibank Taiwan Vice President, ABN AMRO

ExecutiveVicePresident,CTBCBankCo., Ltd.Spokesman, CTBC Bank Co., Ltd. Supervisor, Taiwan Lottery Co., Ltd. Supervisor, CTBC Asset Management Co., Ltd.Supervisor, CTBC Financial Leasing Co., Ltd. Supervisor, Xiamen JMX Consumer Finance Co., Ltd.

- - - -

- - - - - -

- - - - - -

Accounting Officer

Republic of China Sting Yang Male July 1,2008

519,106 0.00% - - - - Education:Bachelor of Accounting, Fu Jen Catholic University

Experience:Vice President, CTBC Financial Holding Co., Ltd. Supervisor, CTBC Security Co., Ltd.Supervisor, CTBC Venture Capital Investment Management (Shanghai) Co., Ltd.

Senior Vice President, CTBC Bank Co., Ltd.Supervisor, CTBC Investment Co., Ltd. Supervisor, CTBC Venture Capital Co., Ltd.Supervisor, Taiwan Lottery Co., Ltd. Supervisor, CTBC Securities Venture Capital Co., Ltd.

- - - -

- - - - - -

- - - - - -

Head of Compliance Department

Republic of China Yung-Chi Wang Female Aug. 1, 2018

- - - - - - Education:L.L.M, Boston University, USA

Experience:Vice President, CDIB Capital GroupVice President, KGI Commercial Bank Co., Ltd.

None - - - -

- - - - - -

- - - - - -

Head of Legal Department

Republic of China Sean Tang Male Oct. 1, 2017

- - - - - - Education:Master of Laws, National Chengchi University

Experience:Counselor and Associate Partner, Lee and Li, Attorneys-at-LawStaff Member, Ministry of JusticeProsecutor,ShilinDistrictProsecutorsOffice


- - - -

- - - - - -

- - - - - -

Head of Risk Management Department

Republic of China Sophie You Female June 15,2015

856 0.00% - - - - Education:MBA, National Taiwan University

Experience:Manager, CTBC Bank Co., Ltd.

None - - - -

- - - - - -

- - - - - -

Acting Chief StrategyOfficer

Republic of China Monica Chu Female Jan. 1,2021

237,391 0.00% - - - - Education:MBA, National Taipei University

Experience:Senior Vice President, CTBC Financial Holding Co., Ltd.

Director, LINE Bank Taiwan Ltd. - - - -

- - - - - -

- - - - - -

Head of Strategic Planning Department

Republic of China Patrick Lin Male Jan. 1,2019

- - 1,888 0.00% - - Education:MBA, University of Rochester, USA

Experience:Manager, CTBC Financial Holding Co., Ltd.

None - - - -

- - - - - -

- - - - - -

Head of Corporate Planning Department

Republic of China Wenchieh Wu Male Jan. 1,2017

4,642 0.00% - - - - Education:MBA, National Sun Yat-sen University


None - - - -

- - - - - -

- - - - - -

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companies


Note







Chief Financial OfficerHead of Financial Management Department

Republic of China Ya-Ling Chiu Female Jan. 1,2021

Jan. 20,2017

976,473 0.01% - - - - Education:MBA, University of Minnesota Twin Cities, USA

Experience:Senior Vice President, CTBC Bank Co., Ltd. Assistant Vice President, Citibank Taiwan Vice President, ABN AMRO

ExecutiveVicePresident,CTBCBankCo., Ltd.Spokesman, CTBC Bank Co., Ltd. Supervisor, Taiwan Lottery Co., Ltd. Supervisor, CTBC Asset Management Co., Ltd.Supervisor, CTBC Financial Leasing Co., Ltd. Supervisor, Xiamen JMX Consumer Finance Co., Ltd.

- - - -

- - - - - -

- - - - - -

Accounting Officer

Republic of China Sting Yang Male July 1,2008

519,106 0.00% - - - - Education:Bachelor of Accounting, Fu Jen Catholic University

Experience:Vice President, CTBC Financial Holding Co., Ltd. Supervisor, CTBC Security Co., Ltd.Supervisor, CTBC Venture Capital Investment Management (Shanghai) Co., Ltd.

Senior Vice President, CTBC Bank Co., Ltd.Supervisor, CTBC Investment Co., Ltd. Supervisor, CTBC Venture Capital Co., Ltd.Supervisor, Taiwan Lottery Co., Ltd. Supervisor, CTBC Securities Venture Capital Co., Ltd.

- - - -

- - - - - -

- - - - - -

Head of Compliance Department

Republic of China Yung-Chi Wang Female Aug. 1, 2018

- - - - - - Education:L.L.M, Boston University, USA

Experience:Vice President, CDIB Capital GroupVice President, KGI Commercial Bank Co., Ltd.

None - - - -

- - - - - -

- - - - - -

Head of Legal Department

Republic of China Sean Tang Male Oct. 1, 2017

- - - - - - Education:Master of Laws, National Chengchi University

Experience:Counselor and Associate Partner, Lee and Li, Attorneys-at-LawStaff Member, Ministry of JusticeProsecutor,ShilinDistrictProsecutorsOffice


- - - -

- - - - - -

- - - - - -

Head of Risk Management Department

Republic of China Sophie You Female June 15,2015

856 0.00% - - - - Education:MBA, National Taiwan University


None - - - -

- - - - - -

- - - - - -

Acting Chief StrategyOfficer

Republic of China Monica Chu Female Jan. 1,2021

237,391 0.00% - - - - Education:MBA, National Taipei University

Experience:Senior Vice President, CTBC Financial Holding Co., Ltd.

Director, LINE Bank Taiwan Ltd. - - - -

- - - - - -

- - - - - -

Head of Strategic Planning Department

Republic of China Patrick Lin Male Jan. 1,2019

- - 1,888 0.00% - - Education:MBA, University of Rochester, USA

Experience:Manager, CTBC Financial Holding Co., Ltd.

None - - - -

- - - - - -

- - - - - -

Head of Corporate Planning Department

Republic of China Wenchieh Wu Male Jan. 1,2017

4,642 0.00% - - - - Education:MBA, National Sun Yat-sen University


None - - - -

- - - - - -

- - - - - -

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companies


Note







Head of Investment Advisory Department

Republic of China Alan Liao Male Feb. 1,2018

527 0.00% - - - - Education:Master of Political Economy, National Cheng Kung University


None - - - -

- - - - - -

3,936 0.00% - - - -

Head of Investor RelationsDepartment

Republic of China Justine Shen Female Jan. 1, 2017

6,541 0.00% - - - - Education:Master of Commerce, University of New South Wales, Australia

Experience:Vice President, CTBC Financial Holding Co., Ltd.

None - - - -

- - - - - -

- - - - - -

Head of Corporate Relations Department

Republic of China Joseph Huang Male April 1, 2019

1,438 0.00% - - - - Education:MBA, Meiji University, Japan

Experience:Senior Vice President, CTBC Bank Co., Ltd. Director, Yiquan Investment Co., Ltd.

Director, Taiwan Relo Co., Ltd. Chairman, Relo Tours Taiwan

- - - -

- - - - - -

- - - - - -

Head of Corporate Governance Department

Republic of China Sean Chan Male Jan. 1,2019

1,000 0.00% - - - - Education:European Master of Law and Economics, University of Manchester, UK

Experience:Vice President, CTBC Bank Co., Ltd.SeniorAssociate,LotusInternationalLawOffice

None - - - -

- - - - - -

- - - - - -

Head of Secretariat to the Board of Directors

Republic of China Ricky Ren Male Jan. 1, 2019

146 0.00% - - - - Education:Electronic Engineering Department, Kun Shan Junior College of Technology

Experience:Vice President, CTBC Bank Co., Ltd.

None - - - -

- - - - - -

- - - - - -

Head of Corporate Sustainability Office

Republic of China Stephanie Kao Female May 4,2020

7 0.00% - - - - Education:Education MA, University of Bath, UK

Experience:Vice President, China Development Financial Holding Corp.

None - - - -

- - - - - -

- - - - - -

Note: The President or person of equivalent capacity (top-level manager) and the Chairman are not the same person, spouses, or first-degree relatives.

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companies


Note







Head of Investment Advisory Department

Republic of China Alan Liao Male Feb. 1,2018

527 0.00% - - - - Education:Master of Political Economy, National Cheng Kung University


None - - - -

- - - - - -

3,936 0.00% - - - -

Head of Investor RelationsDepartment

Republic of China Justine Shen Female Jan. 1, 2017

6,541 0.00% - - - - Education:Master of Commerce, University of New South Wales, Australia

Experience:Vice President, CTBC Financial Holding Co., Ltd.

None - - - -

- - - - - -

- - - - - -

Head of Corporate Relations Department

Republic of China Joseph Huang Male April 1, 2019

1,438 0.00% - - - - Education:MBA, Meiji University, Japan

Experience:Senior Vice President, CTBC Bank Co., Ltd. Director, Yiquan Investment Co., Ltd.

Director, Taiwan Relo Co., Ltd. Chairman, Relo Tours Taiwan

- - - -

- - - - - -

- - - - - -

Head of Corporate Governance Department

Republic of China Sean Chan Male Jan. 1,2019

1,000 0.00% - - - - Education:European Master of Law and Economics, University of Manchester, UK

Experience:Vice President, CTBC Bank Co., Ltd.SeniorAssociate,LotusInternationalLawOffice

None - - - -

- - - - - -

- - - - - -

Head of Secretariat to the Board of Directors

Republic of China Ricky Ren Male Jan. 1, 2019

146 0.00% - - - - Education:Electronic Engineering Department, Kun Shan Junior College of Technology

Experience:Vice President, CTBC Bank Co., Ltd.

None - - - -

- - - - - -

- - - - - -

Head of Corporate Sustainability Office

Republic of China Stephanie Kao Female May 4,2020

7 0.00% - - - - Education:Education MA, University of Bath, UK

Experience:Vice President, China Development Financial Holding Corp.

None - - - -

- - - - - -

- - - - - -

Note: The President or person of equivalent capacity (top-level manager) and the Chairman are not the same person, spouses, or first-degree relatives.

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3.2.3 Retired chairmen or presidents hired as consultants in 2020: None

3.2.4 Remuneration of directors, supervisors, the President, vice presidents, and consultants in 20201) Remunerationofdirectors(includingindependentdirectors)

Title

Remuneration of directors

Remuneration(A)Severance pay and

pension(B)

Compensation for directors

(C)

Allowance for businessexpenses(D)

From CTBC

Holding

From all companies

in the consolidated financialstatement

From CTBC

Holding

From all companies


From CTBC

Holding

From all companies


From CTBC

Holding

From all companies


Director Wei Fu Investment Co., Ltd.

83,381 113,989 108 108 299,806 299,806 3,614 3,956

Director Chung Yuan Investment Co., Ltd.

Director Yi Chuan Investment Co., Ltd.

Representative (Chairman) Wen-Long Yen

Representative (Vice Chairman) Chao-Chin Tung

Representative Thomas K.S. Chen

Independent director Shih-Chieh Chang

17,132 28,037 - - - - 1,585 2,678 Independent director Cheung-Chun Lau

Independent director Chih-Cheng Wang

Independent director Sheng-Yung Yang

Note 1: The above figures do not include the remuneration made to drivers by the Company (NT$2,285 thousand) or by all companies in the consolidated financial statement (NT$2,285 thousand).

Note 2: The above allowances for business expenses include directors’ car rental and gasoline expenses paid by the Company (NT$2,894 thousand) and by all companies in the consolidated financial statement (NT$2,894 thousand).

Note 3: The above remuneration is not the same as “income” categorized under income tax law; as such, this information is for disclosure only and not for tax purposes.

Note 4: During the book closure period, stock appreciation rights shall be measured at the fair value of the stocks with which they are linked, and the change in price shall be recognized as current profit or loss. After the book closure period, stock appreciation rights shall be exercised at the last month’s highest closing price of the stock with which they are linked. Therefore, during the book closure period, the change in the cost of stock appreciation rights is not what the employee actually receives. The previously recognized stock appreciation right cost of 2019 was reversed due to the change in fair price being recognized as a loss in 2020. Given that stock appreciation rights have not been exercised and in order to reasonably express other actually payable remuneration, the reversed stock appreciation right cost for 2020 is expressed as zero.

Note 5: The data disclosed herein is for the period of Jan. 1, 2020, to Dec. 31, 2020.Note 6: The Company’s independent director remuneration policy is formulated based on the Measures for the Remuneration of Independent

Directors. Independent directors’ remuneration is based on market remuneration survey data and the packages provided by financial sector peers, with the market standard adopted as a benchmark. The relations between the individuals and the Company’s operating performance and risk management are also taken into consideration by assessing their personal performance, the time they have invested in the Company, the responsibilities they have undertaken, and their contribution to the accomplishment of the Company’s short- and long-term business objectives as well as to its financial position. The remuneration of directors as described above is reviewed by the Board of Directors. Such reviews are conducted in a timely manner as determined by the Company’s actual operating conditions and relevant laws and regulations, and seek to strike a balance between sustainable operation and risk management.

Note 7: Except as disclosed above, the Company’s directors did not receive any additional pay in 2020 for serving at any company in the financial statement (e.g., for acting as a non-employee consultant).

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Unit:NT$thousand

TotalofA,B,C,andDas a percentage of net

incomeafter tax

Remuneration received by directors who are employees TotalofA,B,C,D,E,F,and G as a percentage of net

incomeafter tax

Remuneration from invested

companies other than

subsidiaries or the parent

company

Salary, bonuses, and special

allowances(E)

Severance pay and pension(F)

Profitdistributableasemployeecompensation

(G)

From CTBC

Holding

From all companies


From CTBC

Holding

From all companies


From CTBC

Holding

From all companies


FromCTBCHolding

From all companies in the consolidatedfinancialstatement

From CTBC

Holding

From all companies in

the consolidated financialstatementCash Shares Cash Shares

0.90% 0.98% - - - - - - - - 0.90% 0.98% None

0.04% 0.07% - - - - - - - - 0.04% 0.07% None

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2) Directors’remunerationbrackets

Director remuneration bracket

Director(s)

Sumofthefirstfouritems(A+B+C+D)

FromCTBCHolding From all companies in the consolidated financialstatement

UnderNT$1,000,000 Thomas K.S. Chen

NT$1,000,000(inclusive)–NT$2,000,000

(exclusive)

NT$2,000,000(inclusive)–NT$3,500,000

(exclusive)

NT$3,500,000(inclusive)–NT$5,000,000

(exclusive)

Shih-Chieh Chang, Chih-Cheng Wang,

Cheung-Chun Lau, Sheng-Yung YangChih-Cheng Wang

NT$5,000,000(inclusive)–

NT$10,000,000(exclusive)

Cheung-Chun Lau, Sheng-Yung Yang,

Shih-Chieh Chang




NT$30,000,000(exclusive)Chao-Chin Tung Chao-Chin Tung


NT$50,000,000(exclusive)Thomas K.S. Chen



Wen-Long Yen,

Wei Fu Investment Co., Ltd.,

Chung Yuan Investment Co., Ltd.,

Yi Chuan Investment Co., Ltd.

Wen-Long Yen,

Wei Fu Investment Co., Ltd.,

Chung Yuan Investment Co., Ltd.,

Yi Chuan Investment Co., Ltd.

NT$100,000,000(inclusive)ormore

Total 10 10

Note: The above remuneration is not the same as “income” categorized under income tax law; as such, this information is for disclosure only and not for tax purposes.

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Director(s)

Totalofallsevenitems(A+B+C+D+E+F+G)

FromCTBCHolding Fromallcompaniesintheconsolidatedfinancialstatement

Thomas K.S. Chen

Shih-Chieh Chang, Chih-Cheng Wang, Cheung-Chun Lau, Sheng-Yung Yang

Chih-Cheng Wang

Cheung-Chun Lau, Sheng-Yung Yang, Shih-Chieh Chang

Chao-Chin Tung Chao-Chin Tung

Thomas K.S. Chen

Wen-Long Yen,Wei Fu Investment Co., Ltd.,

Chung Yuan Investment Co., Ltd., Yi Chuan Investment Co., Ltd.

Wen-Long Yen,Wei Fu Investment Co., Ltd.,

Chung Yuan Investment Co., Ltd., Yi Chuan Investment Co., Ltd.

10 10

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3) RemunerationofthePresidentandvicepresidents

Title Name

Salary(A) Severancepayandpension(B) Bonusesandspecialallowances(C)

FromCTBCHolding

From all companies


FromCTBCHolding

From all companies


FromCTBCHolding

From all companies


President Daniel I. Wu

78,335 116,029 2,823 4,458 86,481 205,887

ChiefInvestmentOfficer Winston HsiaCross-Border Strategy

Officer,JapanChung-Mao Hsiao

ChiefComplianceOfficer Aaron King

ChiefAdministrationOfficer Roger Kao

ActingChiefRiskOfficer C.C. Huang

General Counsel Y.D. Deng

ChiefTechnologyOfficer Titan ChiaGeneral Secretary

Corporate Governance

Officer

Chang-Hsing Cho

Chief Auditor Albert HuHead of Corporate Planning

DivisionMonica Chu

Note 1: The remuneration of drivers was NT$0 thousand.Note 2: The above remuneration is not the same as “income” categorized under income tax law; as such, this information is for disclosure

only and not for tax purposes.Note 3: During the book closure period, stock appreciation rights shall be measured at the fair value of the stocks with which they are linked,

and the change in price shall be recognized as current profit or loss. After the book closure period, stock appreciation rights will be exercised at the last month’s highest closing price of the stock with which they are linked. Therefore, during the book closure period, the change in the cost of stock appreciation rights is not what the employee actually receives. The previously recognized stock appreciation right cost of 2019 was reversed due to the change in fair price being recognized as loss in 2020. Given that stock appreciation rights have not been exercised and in order to reasonably express other actually payable remuneration, the reversed stock appreciation right cost for 2020 is expressed as zero.

Note 4: The data disclosed herein is for the period of Jan. 1, 2020, to Dec. 31, 2020.

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Unit:NT$thousand

Profitdistributableasemployeecompensation(D) TotalofA,B,C,andDasapercentageofnet income after tax

Remuneration from invested companies other than

subsidiaries or the parent company

FromCTBCHolding From all companies in the consolidated financialstatement FromCTBC

Holding

From all companies in the consolidated

financialstatementCash Shares Cash Shares

21,313 - 21,313 - 0.44% 0.81% None

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4) Presidentandvicepresidents’remunerationbracketsName(s)

Remuneration bracket FromCTBCHolding From all companies in the consolidated financialstatement

UnderNT$1,000,000NT$1,000,000(inclusive)–

NT$2,000,000(exclusive)NT$2,000,000(inclusive)–

NT$3,500,000(exclusive)NT$3,500,000(inclusive)–

NT$5,000,000(exclusive)Roger Kao


NT$10,000,000(exclusive)Titan Chia


NT$15,000,000(exclusive)Monica Chu, C.C. Huang, Albert Hu Monica Chu, Albert Hu, Titan Chia



Chang-Hsing Cho, Winston Hsia,

Chung-Mao Hsiao, Y.D. Deng, Aaron King

Chang-Hsing Cho, C.C. Huang, Y.D. Deng,

Aaron KingNT$30,000,000(inclusive)–

NT$50,000,000(exclusive)Daniel I. Wu Winston Hsia, Roger Kao, Chung-Mao Hsiao


NT$100,000,000(exclusive)Daniel I. Wu

NT$100,000,000(inclusive)ormore

Total 11 11

Note 1: The above remuneration is not the same as “income” categorized under income tax law; as such, this information is for disclosure only and not for tax purposes.

Note 2: For the remuneration of non-manager senior-level employees, please refer to 3. Corporate Governance Report, 3.3 Corporate governance practices, (3.3.9).

5) EmployeecompensationdistributedtomanagersUnit:Thousandshares;NT$thousand

As of Dec. 31, 2020

Title Name Shares Cash Total Percentage of total income after tax

Manager


- 21,313 21,313 0.05%

ChiefInvestmentOfficer Winston Hsia

Cross-BorderStrategyOfficer,Japan Chung-Mao Hsiao





ChiefTechnologyOfficer Titan ChiaGeneral Secretary

CorporateGovernanceOfficerChang-Hsing Cho

Chief Auditor Albert Hu

Head of Corporate Planning Division Monica Chu

Note 1: The data disclosed herein is for the period of Jan. 1, 2020, to Dec. 31, 2020.Note 2: The compensation distributed to these employees in 2020 was an estimated NT$22,713 thousand. The actual distribution was

determined based on the list approved by the Company’s Board of Directors.

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6) Employeesamongthetop10compensationpackage(1) 2020

Unit:Thousandshares;NT$thousandAs of Dec. 31, 2020

Title NameTotal compensation

Shares Cash


- 21,313






ChiefTechnologyOfficer Titan ChiaGeneral SecretaryCorporateGovernanceOfficer

Chang-Hsing Cho



Note: The compensation distributed to these employees in 2020 was an estimated NT$22,713 thousand. The actual distribution was determined based on the list approved by the Company’s Board of Directors.

(2) 2019Unit:Thousandshares;NT$thousand

As of Dec. 31, 2019

Title NameTotal compensation

Shares Cash


- 21,956



ChiefAdministrationOfficer Roger KaoGeneral SecretaryCorporateGovernanceOfficer

Chang-Hsing Cho


FinancialOfficer Ya-Ling Chiu


ChiefTechnologyOfficer Titan Chia

Note: The bonuses distributed to these employees in 2019 totaled NT$21,956 thousand.

7) Remunerationforretiredchairmenandpresidentshiredasconsultants:None.

8) Comparisonoftheremunerationofdirectors(includingindependentdirectors),thePresident,andvicepresidents as a percentage of net income after tax

The remuneration paid by CTBC Holding and all companies in the consolidated financial statement to CTBC Holding’s directors, President, and vice presidents in 2020 totaled NT$796,261 thousand (accounting for approximately 1.86% of the net income after tax in 2020).

The total remuneration paid in 2020 decrease 39.91% from that paid in 2019, which was NT$1,325,045 thousand; this decrease was mainly caused by a fall in the estimated market value of stock appreciation rights.

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9) Remunerationpolicy(1) Employee remuneration policy

CTBC Holding has an overall remuneration policy for itself and its subsidiaries, applying to its global operation locations and comprising three main goals, namely maintaining market competitiveness and achieving pay based on job duties and on performance. Overall remuneration includes fixed pay and vari-able pay. The fixed pay comprises 12 moths’ salary, fixed allowance, and fixed bonus. The variable pay comprises a performance bonus, incentive bonus, and long-term incentives. A: Fixed pay The 12 months of salary is determined based on the experience, abilities, and position of the employee

and is adjusted annually according to domestic and overseas economic trends, market standards, and individual performance. In 2020, there was a 2%–3% salary increase for CTBC Holding employees in Taiwan, Japan, and North America, and a 5%–8% increase for those in Southeast Asia and China. The average monthly income of entry-level employees of CTBC Holding in its major domestic operation location, Taiwan, was 2.4 times the minimum wage, with male and female employees making 2.3 and 2.5 times the minimum wage, respectively, reflecting the Company’s competitive remuneration policy.

The fixed allowance may be tailored by individual operation locations based on the characteristics and duties of particular positions in order to flexibly reimburse employees. The fixed bonus is made in addition to the 12 months’ salary in some areas depending on market standards, including in Taiwan, Greater China, and Southeast Asia, and range from 1 to 3 months’ salary.

B: Variable pay The variable pay includes a performance bonus and incentive bonus. The performance bonus is

determined based on individual companies’ overall operating performance and characteristics, the employee’s personal performance, their unit’s performance, and job responsibilities; an additional motivation is thus added by having employees share in the operating results. The incentive bonus is a reward that front-line sales employees are entitled to immediately upon reaching a certain sales goal; however, for risk management and long-term strategic management purposes, some incentive bonuses are subject to a deferral and return mechanism.

(2) Manager, Director, and Supervisor remuneration policy CTBC Holding and its subsidiaries have established the Manager Remuneration Policy. The remuneration structure for managers was designed with reference to market remuneration survey data, and a market competitiveness analysis is conducted annually to ensure that our remuneration standard is both in line with our market positioning and above market averages. To integrate the personal goals of managers with the short- and long-term business objectives of the Company and the interests of shareholders, the Company’s managerial remuneration policy is based on the principle of offering competitive fixed pay as well as variable pay determined according to the operating performance of the Company and the personal performance of individual managers. The variable pay generally accounts for a higher percentage of total remuneration than the fixed pay does, and particular weight is given to long-term incentives.In accordance with both legal and practical requirements, the remuneration of managers is determined ac-cording to their experience, professional abilities, management capabilities, and position. It is also closely

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connected to financial and nonfinancial performance objectives. Financial indicators include revenue and profit, whereas nonfinancial indicators comprise mid- and long-term indicators, such as sound legal com-pliance, risk management, successor cultivation, corporate social image improvement, and company rep-utation maintenance. These are intended to encourage senior operations and managerial-level managers to pay attention to the Company’s long-term operation goals and to cultivate outstanding talents. Managers’ remuneration shall be submitted to the Remuneration Committee and the Board of Directors for approv-al according to the aforementioned Manager Remuneration Policy. The Remuneration Committee also assists the Board of Directors in assessing annually the Company’s overall remuneration policy and in formulating and implementing various remuneration regulations and systems to safeguard the rights and interests of our shareholders.The Company’s director and supervisor remuneration policy is formulated based on the Measures for the Remuneration of Non-Independent Directors, Measures for the Remuneration of Independent Directors, and Measures for the Remuneration of Directors and Supervisors. Directors’ remuneration is based on market remuneration survey data, referencing the packages provided by financial sector peers, with the market standard adopted as a benchmark. The connection between individual performance and the Com-pany’s operating performance and risk management is also taken into consideration by assessing their per-sonal performance, the time they have invested in the Company, the responsibilities they have undertaken, and their contribution to the accomplishment of the Company’s short- and long-term business objectives as well as to its financial position.The remuneration of directors and supervisors, as described above, is reviewed by the Company’s Board of Directors. Such reviews are conducted in a timely manner as determined by the Company’s actual op-erating conditions, in addition to relevant laws and regulations, and seek to strike a balance between sus-tainable operation and risk management.The remuneration payable by CTBC Holding to its directors, President, and vice presidents include long-term incentives in the form of stocks or stock appreciation rights, which are not paid out in full at the end of the current fiscal year and are tied to the Company’s current and future share price, thereby ensuring that the management shares a common interest in the Company’s continued performance success.

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3.3 Corporate governance practices

3.3.1 Board of Directors meeting attendance

As part of its seventh term, the Board of Directors convened 15 meetings (A) between Jan. 1, 2020, and Dec. 31, 2020, with its

attendance as follows:

Title NameMeetings

attended in person(B)

Meetings attended by

proxy

In-person attendance rate(B/A)

Notes

Chairman Wei Fu Investment Co., Ltd. Representative: Wen-Long Yen 15 - 100.00% -

Vice Chairman

Chung Yuan Investment Co., Ltd.

Representative: Chao-Chin Tung

15 - 100.00% -

Director Yi Chuan Investment Co., Ltd.Representative: Thomas K.S. Chen

15 - 100.00% -


Shih-Chieh Chang 15 - 100.00% -


Cheung-Chun Lau 15 - 100.00% -


Chih-Cheng Wang 15 - 100.00% -


Sheng-Yung Yang 15 - 100.00% -

Other matters required to be disclosed:

1)IntheeventthataBoardmeetingfulfillsanyofthefollowingconditions,themeetingdate,motioncontent,independent

directors’opinions,andCompany’sresponsearespecified:

(1)MatterslistedinArticle14-3oftheSecuritiesandExchangeAct:TheCompanyhasestablishedanAuditCommittee.

MatterslistedinArticle14-5oftheSecuritiesandExchangeActareincludedamongthematterslistedinArticle14-3ofthe

Act;pleaserefertoAppendix1.

(2)Excludingtheaforementionedmatters,anyBoardresolutiontowhichanindependentdirectorhadadissentingorqualified

opinion noted on the record or submitted in writing: All Board resolutions were passed by all attending directors.

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2) Intheeventthataconflictofinterestrequiredtheavoidanceofadirector,thedirector,motioncontent,reasonforrecusal,

andvotingresultarespecified:Term and meeting Motion content Name Reason(S)foravoidance Votingresult

Jan. 17,2020;7th term, 12th meeting of the Board of Directors

To strengthen the remuneration management system, it was proposed that the Rules of Remuneration for Non-Independent Directors be amended. (The motion was passed at the ninth meeting ofthefifthtermoftheRemunerationCommittee on Jan. 16, 2020.)

Wen-Long Yen

Chao-Chin Tung

Acting concurrently as CTBC Holding’s Chairman

Acting concurrently as CTBC Holding’s Vice Chairman

The stakeholders did not participate in the discussion or voting, in accordance with the law, and the proposal was unanimously approved by the rest of the attending directors.

A proposal was introduced for the 2019 year-end bonus and stock appreciation rights of Chairman Wen-Long Yen. (The motion was passed at the ninth meeting ofthefifthtermoftheRemunerationCommittee on Jan. 16, 2020.)

Wen-Long Yen Acting concurrently as CTBC Holding’s Chairman

The stakeholder did not participate in the discussion or voting, in accordance with the law, and the proposal was unanimously approved by the rest of the attending directors.

A proposal was introduced for the 2019 year-end bonus and stock appreciation rights of Vice Chairman Chao-Chin Tung. (The motion was passed at the ninthmeetingofthefifthtermoftheRemuneration Committee on Jan. 16, 2020.)

Chao-Chin Tung Acting concurrently as CTBC Holding’s Vice Chairman


A proposal was introduced for the 2019 year-end bonuses and stock appreciation rights of the four independent directors of the Company, namely Shih-Chieh Chang, Cheung-Chun Lau, Chih-Cheng Wang, and Sheng-Yung Yan.

Shih-Chieh Chang

Cheung-Chun Lau

Chih-Cheng Wang

Sheng-Yung Yang

Acting concurrently as a CTBC Holding independent director Acting concurrently as a CTBC Holding independent directorActing concurrently as a CTBC Holding independent directorActing concurrently as a CTBC Holding independent director


Feb. 26,2020;7th term, 13th meeting of the Board of Directors

In response to business development needs, it was proposed that permission be granted toleaseadditionalofficespaceonthe26thfloorofBuildingAofCTBCFinancialPark from CTBC Bank for the period of March 1, 2020, to Dec. 31, 2021, with a totalestimatedrentofNT$1,054,570,andtodiscontinuetheleaseoftheofficespaceofthe12thfloorandonthe19thfloorofBuilding A as well as four parking spaces (originally to end on March 1, 2020). (The motion was passed at the 10th meeting of thefifthtermoftheAuditCommitteeonFeb. 25, 2020.)

Wen-Long Yen

Thomas K.S. Chen

Shih-Chieh Chang

Cheung-Chun Lau

Sheng-Yung Yang

Acting concurrently as a CTBC Bank directorActing concurrently as a CTBC Bank directorActing concurrently as a CTBC Bank independent directorActing concurrently as a CTBC Bank independent directorActing concurrently as a CTBC Bank independent director


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Term and meeting Motion content Name Reason(S)foravoidance Votingresult

April 29,2020;7th term, 16th meeting of the Board of Directors

A proposal was introduced for the Company todistributeNT$296,403,029indirectorremuneration for 2019 in accordance with its Articles of Incorporation. (The motion waspassedatthe11thmeetingofthefifthterm of the Remuneration Committee on April 28, 2020.)

Wen-Long Yen

Chao-Chin Tung

Thomas K.S. Chen

Acting concurrently as a CTBC Holding representative Acting concurrently as a CTBC Holding representativeActing concurrently as a CTBC Holding representative


May 8,2020;7th term, 17th meeting of the Board of Directors

A proposal was introduced for the Company to mandate CTBC Bank as the lead underwriter for its unsecured corporate bond issuance within the amount ofNT$45billion.(Themotionwaspassedatthe13thmeetingofthefifthtermoftheRemuneration Committee on May 8, 2020.)

Wen-Long Yen

Thomas K.S. Chen

Shih-Chieh Chang

Cheung-Chun Lau

Sheng-Yung Yang

Acting concurrently as a CTBC Bank directorActing concurrently as a CTBC Bank directorActing concurrently as a CTBC Bank independent directorActing concurrently as a CTBC Bank independent directorActing concurrently as a CTBC Bank independent director


June 24,2020;7th term, 19th meeting of the Board of Directors

To implement corporate sustainability, strengthen the management and review of the Board over relevant corporate sustainability initiatives, and keep pace with international developments, it was proposed that a Sustainability Committee be created under the Board of Directors and that members of the Sustainability Committee be appointed. (The motion was passed at the 14th meeting of the second term of the Nomination Committee on June 23, 2020.)

Shih-Chieh Chang

Cheung-Chun Lau

Chih-Cheng Wang

Sheng-Yung Yang

Amemberofthefirstterm of the Sustainability CommitteeAmemberofthefirstterm of the Sustainability CommitteeAmemberofthefirstterm of the Sustainability CommitteeAmemberofthefirstterm of the Sustainability Committee


July 29,2020;7th term, 20th meeting of the Board of Directors

To meet business needs, it was proposed that the Board appoint L. Ting Dan as a director of Taiwan Life and Jin-Lung Peng and Wen-Yen Hsu as independent directors of Taiwan Life, and for the above three people to be appointed as a director and independent directors of TLG Insurance. (The motion was passed at the 15th meeting of the second term of the Nomination Committee on July 28, 2020.)

Shih-Chieh Chang

Acting concurrently as a Taiwan Life indepen-dent director

The stakeholder did not participate in the discussion or voting, in accordance with the law, and the proposal was unani-mously approved by the rest of the attend-ing directors.

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Term and meeting Motion content Name Reason(S)foravoidance Votingresult

Oct 29,2020;7th term, 24th meeting of the Board of Directors

In order to increase the capital utilization efficiencyofthegroup,itwasproposedthat CTBC Asset Management sell its long-term equity investment position in CTBC International to CTBC Venture CapitalforNT$1,375,231,063(Code:Project Legend). (The motion was passed atthe20thmeetingofthefifthtermoftheAudit Committee on Oct. 28, 2020.)

Thomas K.S. Chen

Acting concurrently as a CTBC International director


In order to increase the capital utilization efficiencyofthegroup,itwasproposedthat CTBC Venture Capital purchase CTBC Asset Management subsidiary CTBCInternationalforNT$1,375,231,063and indirectly invest in CTBC Financial Leasing (Code: Project Legend). (The motion was passed at the 20th meeting of thefifthtermoftheAuditCommitteeonOct. 28, 2020.)

Thomas K.S. Chen

Acting concurrently as a CTBC International director


(3) Disclosure of the frequency, period, scope, methods, and criteria of Board self- or peer assessments, as required of TWSE/TPExlistedfinancialholdingcompanies3.Disclosure of the frequency, period, scope, methods, and criteria of Board self- or peerassessments,asrequiredofTWSE/TPExlistedfinancialholdingcompanies

Frequency Period Scope Methods CriteriaOnce every year

Nov. 1, 2019,to Oct. 31,2020

1. Board of Directors

2. Individual directors

3. Functional committees

1. Internal evaluation of the Board

2. Self-evaluation by Board members

3. Self-evaluation by functional committee members

1. The criteria for evaluating the performance of the Board of Directors, which should cover, at aminimum,thefollowingfiveaspects:1) participation in the Company’s operations2) improvement of the quality of the Board’s decision-making3) the organization and structure of the Board4) the election and continuing education of directors5) internal control

2. The criteria for evaluating the performance of Board members (themselves or peers) shall coveratleastthefollowingsixmajorcriteria:1) understanding of the Company’s goals and mission2) understanding of directors’ duties and responsibilities3) participation in the Company’s operations4) internal relations maintenance and communications5) professionalism and continuing education6) internal control

3. The criteria for evaluating the performance of functional committees shall cover at least the followingfivemajorcriteria:1) participation in the Company’s operations2) understanding of the duties of functional committees3) improvement of the decision-making quality of the functional committees4) organization and election of functional committee members5) internal control

Once every three years

Nov. 1,2017, toMarch 31,2019

Three main areas:1. structure2. people3. process and

information

Conducted by anexternalandindependentprofessional institution

EightkeyelementswereidentifiedforassessingtheBoard’seffectiveness:1. Board structure and processes2. Board composition3. legal entity and group structure4. roles and responsibilities5. behavior and culture6. director training and development7. oversight of risk control functions8. oversight of reporting disclosure and performance

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4. Evaluation of targets for strengthening of the functions of the Board (such as establishing an audit committee and enhancing informationtransparency)duringthecurrentandimmediatelyprecedingfiscalyears,andmeasurestakentowardachievementthereof:(1) The Company established the Audit Committee and the Remuneration Committee in 2009 and stipulated the Audit Com-

mittee Charter and the Remuneration Committee Charter, respectively. (2) To improve its risk management, the Company established the Risk Management Committee on June 29, 2011, and stipu-

lated the Risk Management Committee Charter. (3) To improve the functions of the Board, the Company established the Nomination Committee on Dec. 23, 2016, and stipu-

lated the Nomination Committee Charter. (4) To promote ethical management, the Company established the Ethics and Integrity Committee on April 27, 2018, and

stipulated the Ethics and Integrity Committee Charter. (5) To promote corporate sustainability and conform to global corporate sustainability initiatives, the Company established the

Sustainability Committee on June 24, 2020, and stipulated the Sustainability Committee Charter.

3.3.2AuditCommitteeoperations

1) The Audit Committee is composed completely of independent directors. Its purpose is to assist the Board of Directors in carrying out its supervisory duties. Its functions and powers are as follows:(1) Formulate and amend the internal control system pursuant to the provisions of Article 14-1 of the

SecuritiesandExchangeAct.(2) Assess the effectiveness of the internal control system.(3) Formulate and amend the handling procedures for the acquisition or disposal of assets and engagement

inderivativestransactionsorsignificantfinancialbusinessactionspursuanttotheprovisionsofArticle36-1oftheSecuritiesandExchangeAct.

(4) Review matters involving a director’s own interest.(5) Review transactions involving interested parties pursuant to the law.(6) Review major asset or derivative transactions.(7) Review the public offering, issuing, and private placement of negotiable equity-type securities.(8) Review the appointment, dismissal, and remuneration of CPAs and assess their independence and

performance.(9) Reviewtheappointmentanddismissaloffinancial,accounting,andinternalauditsupervisors.(10)Reviewtheannualandsemiannualfinancialreports.(11) Deliberate on matters relating to mergers and acquisitions.(12)ReviewanyothersignificantmattersasstipulatedbytheCompanyorthecompetentauthority.

Initsfifthterm,theAuditCommitteeconvened14meetings(A)betweenJan.1,2020,andDec.31,2020,with its independent director attendance as follows:

Title Name Meetings attended inperson(B)

Meetings attended by proxy

In-person attendance rate

(B/A)Notes

Independent director Sheng-Yung Yang 14 - 100.00% -

Independent director Shih-Chieh Chang 14 - 100.00% -

Independent director Cheung-Chun Lau 14 - 100.00% -

Independent director Chih-Cheng Wang 14 - 100.00% -Other matters required to be disclosed:1) IntheeventthatanAuditCommitteemeetingfulfillsanyofthefollowingconditions, themeetingdate,motioncontent,

resolutionoutcome,andCompany’sresponsearespecified:(1)MatterslistedinArticle14-5oftheSecuritiesandExchangeAct:PleaserefertoAppendix1.(2)Excludingtheaforementionedmatters,anyotherresolutionsthatwerepassedbytwo-thirdsormoreofthedirectorsbut

yettobeapprovedbytheAuditCommittee:PleaserefertoAppendix1.2) In the event that a conflict of interest required the avoidance of an independent director, the name of the independent

director,motioncontent,reason(s)forrecusal,andvotingresultarespecifiedbelow:

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Term andmeeting Motion content Name Reason(s)for

avoidance Votingresult

Feb. 25, 2020; 5th term, 10th meeting of the Audit Committee

In response to business development needs, it was proposed that permission begrantedtoleaseadditionalofficespaceonthe26thfloorofBuildingAofCTBC Financial Park from CTBC Bank for the period of March 1, 2020, to Dec. 31, 2021, with a total estimated rent of NT$1,054,570,andtodiscontinuetheleaseoftheofficespaceofthe12thfloorandonthe19thfloorofBuildingAaswellas four parking spaces (originally to end on March 1, 2020).

Shih-Chieh ChangCheung-Chun LauSheng-Yung Yang

Acting concurrently as CTBC Bank independent directors

The stakeholders did not participate in the discussion or voting, in accordance with the law, and the proposal was unanimously approved by the rest of the attending commissioners.

May 8, 2020; 5th term, 13th meeting of the Audit Committee

It was proposed that the Company mandate CTBC Bank as the lead underwriter for its unsecured corporate bond issuance within theamountofNT$45billion.

Shih-Chieh ChangCheung-Chun LauSheng-Yung Yang

Acting concurrently as CTBC Bank independent directors

The stakeholders did not participate in the discussion or voting, in accordance with the law, and the proposal was unanimously approved by the rest of the attending commissioner.

3) Communication of independent directors with the Chief Auditor and the CPAs: The Chief Auditor and the CPAs report onandprovideinformationregardingauditingandfinancestotheAuditCommitteeonaregularbasis.(1) Communication between independent directors and the CPAs:

A. Legal basisa. Statements of Auditing Standards No. 62, “Communication with those Charged with Governance”; No. 58,

“Communicating Key Audit Matters in the Independent Auditor’s Report”; No. 72, “Consideration of Laws and Regulations in an Audit of Financial Statements”; and No. 43, “The Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements”.

b. Communication of independent directors with the Chief Auditor and the CPAs that requires disclosure in the annual report to shareholders in accordance with the Regulations Governing Information to be Published in the Annual Reports of Financial Holding Companies.

B. In 2020 through the publication date of this annual report, the Company’s CPAs communicated with the Company’s independent directors and Chief Auditor on the following occasions:

Date Communication with Content OutcomeMarch 20,2020

Independent directors (separate meeting with CPAs)

1. The scope of the 2019 audit was not restricted, and the audit report fully disclosed relevantauditconclusions,withtheauditorsexpressinganunqualifiedopinion.

2. Audit plan for 2020.

No dissenting opinions

Independent directors and Chief Auditor

Auditfindingsfrominspectionofthe2019financialreports,andkeypointsoftheinternal control audit and related results.

June 24,2020

Independent directors Determinationofareasrequiringsignificantauditattentionandkeyauditmattersforthefirsthalfof2020.

Aug. 17, 2020


Thescopeofthefirst-half2020auditwasnotrestricted,andtheauditreportfullydisclosedrelevantauditconclusions,withtheauditorsexpressinganunqualifiedopinion.

Independent directors and Chief Auditor

Auditfindingsfrominspectionofthefirst-half2020financialreports,andkeypointsof the internal control audit and related results.

Jan. 7,2021

Independent directors Determinationofareasrequiringsignificantauditattentionandkeyauditmattersfor2020.

March 16,2021


1. The scope of the 2020 audit was not restricted, and the audit report fully disclosed relevantauditconclusions,withtheauditorsexpressinganunqualifiedopinion.

2. Audit plan for 2021.Independent directors and Chief Auditor

Auditfindingsfrominspectionofthe2020financialreports,andkeypointsoftheinternal control audit and related results.

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(2) Communication between independent directors and the Chief AuditorA. Legal basis

a. Article 16 of the Regulations Governing the Establishment of Internal Control Systems by Public Companies stipulates that the internal audit supervisor shall attend and deliver a report to meetings of the Board of Directors.

b. Article 10 of the Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries stipulates that an internal audit unit shall report its audit work to the Board ofDirectorsandtheAuditCommitteeatleastonceeverysixmonths.

c. Article 7 of the Corporate Governance Best Practice Principles for Financial Holding Companies stipulates that it is advisable to establish channels and mechanisms of communication between such companies’ independent directors, audit committee or supervisors, and chief internal auditor. The responsible persons of a holding company (directors and supervisors) shall hold regular panel discussions with internal auditors regardinginternalcontrolsystemdeficiencies.Arecordofthediscussionsshallbekept,theresolutionsshallbe followed up on, and the corrective actions shall be implemented.

B. The Chief Auditor of CTBC Holding, in addition to attending meetings of the Audit Committee and the Board of Directors, shall report on a semi-annual basis to the Audit Committee and the Board of Directors on the recommendationsordeficienciesdiscoveredbyfinancialexaminationauthorities,accountants, internalauditunits, and self-inspection of other internal units as well as on the corrective actions listed in the internal control statement.TheChiefAuditorshallalsoreportothersignificantmatters,ifany,onacase-by-casebasis.Relevantreports in 2020 through to the publication date of the annual report were listed as follows:

Date Channel Matters communicated ResultJan. 16, 2020 Audit Committee 1. Report on the implementation of the annual internal audit plan for 2019

2. Review results on the 2020 annual audit plan for subsidiaries3. The internal audit reports for the fourth quarter of 2019

NotedNotedNoted

Feb. 25, 2020 Audit Committee Report on the implementation of the internal control system for the second half of 2019 Noted

Feb. 26, 2020 Panel discussion with internal auditors

Discussiononthedeficienciesoftheinternalcontrolsystemforthesecondhalfof2019 Noted

April 28, 2020 Audit Committee Theinternalauditreportsforthefirstquarterof2020 Noted

July 28, 2020 Audit Committee The internal audit reports for the second quarter of 2020 Noted

Aug. 18, 2020 Panel discussion with internal auditors

Discussiononthedeficienciesoftheinternalcontrolsystemforthefirsthalfof2020 Noted

Aug. 20, 2020 Audit Committee Reportontheimplementationoftheinternalcontrolsystemforthefirsthalfof2020 Noted

Oct. 28, 2020 Audit Committee The internal audit reports for the third quarter of 2020 Noted

Nov. 19, 2020 Audit Committee 1. Performance evaluation of CTBC Holding and its subsidiaries on the implementation of the internal control system for 2020

2. Annual performance appraisal on the internal audit function of subsidiaries for 2020

Approved as proposedNoted

Dec. 24, 2020 Audit Committee Annual internal audit plan for 2021 Approved as proposed

Jan. 28, 2021 Audit Committee 1. Report on the implementation of the annual internal audit plan for 20202. Review results on the 2021 annual audit plan for subsidiaries3. The internal audit reports for the fourth quarter of 2020

NotedNotedNoted

Feb. 23, 2021 Panel discussion with internal auditors

1. Independent communication between the independent directors and internal auditors.2.Discussiononthedeficienciesoftheinternalcontrolsystemforthesecondhalfof2020

NotedNoted

Feb. 25, 2021 Audit Committee Report on the implementation of the internal control system for the second half of 2020 Noted

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3.3.3 Status of corporate governance implementation and deviations from the Corporate Governance Best Practice Principles for Financial Holding Companies

Assessment item

ExecutionstatusDeviations from the Corporate Governance BestPracticePrinciples for

Financial Holding Companies and reasons thereof

Yes No Summary

1. Shareholding structure and shareholder equity within the Company1) Has the Company implemented

internal operating procedures for processing shareholders’ suggestions, queries, disputes, and litigation, and are the procedures implemented accordingly?

2) Does the Company maintain a list of major shareholders that have actual control over the Company and a list of the ultimate controllers of those major shareholders?

3) Has the Company implemented risk management mechanisms andfirewallsbetweenitselfandaffiliatedcompanies?

V 1) The Company values the opinions of its shareholders. It maintains a Contact IR page on its Investor Relations website’s Investor Services section, on which it discloses online, phone, and email channels through which shareholders can submit suggestions or queries. The Company designatesaspecificmanagerialdepartmenttoprocesseachsuggestionorquery.

2) The Company maintains lists of major shareholders based on the shareholder list after the date on which share transfers are suspended and on the information regarding the equity changes of insiders and major shareholders submitted to the Company per relevant regulations. The Company publishes this information in its annual report and on its website.

3) TheCompanyengagesincredittransactionsandnon-credit-relatedtransactionswithaffiliatedcompanies in accordance with the Financial Holding Company Act, the Banking Act, and related regulations.

(1) No deviation

(2) No deviation

(3) No deviation

2. Constitution and obligations of the Board of Directors1) In addition to the remuneration

and audit committees required by law, has the Company assembled any other functional committees at its own discretion?

V 1) In addition to maintaining its Remuneration Committee and Audit Committee as required by law, the Company has a Risk Management Committee, Nomination Committee, Ethics and Integrity Committee, and Sustainability Committee.(1) Audit Committee: The Audit Committee is composed of all independent directors It must comprise no fewer

thanthreemembers,withatleastoneofthemhavingexpertiseinaccountingorfinance.One director must be elected by the members to act as its convener. The committee assists theBoardofDirectorsinexecutingitssupervisorydutiesandfulfillingitsmissionsasstatedintheCompanyAct,SecuritiesandExchangeAct,andotherrelevantlawsandregulations.Thecommittee’sauditresponsibilitiesincludethe(1)fairpresentationoffinancialreports;(2) evaluation of the hiring, dismissal, and independence and performance of attesting CPAs; (3) effective implementation of the internal control system; (4) adequacy of internal legal complianceproceduresandplanning;(5)managementofexistingorpotentialrisks;and(6)examinationofmergersandacquisitions.

(2) Remuneration Committee: The Remuneration Committee’s members are appointed by the Board of Directors. It must

comprise no fewer than three members, with at least half of them independent directors, and an independent director must be elected by the members to act as its convener. The Committee shallexercisetheduecareofagoodadministratorandfaithfullyperformitsduties.Itshallsubmit its recommendations to the Board for discussion (1) formulating and regularly reviewing the performance assessment and the policy, system, standards, and structures of remuneration for directors and managers, and (2) regularly assessing and determining the remuneration of directors and managers.

(3) Risk Management Committee: The Risk Management Committee’s members are appointed by the Board of Directors. It

must comprise no fewer than three members, with at least one independent director and one director must be elected by the members to act as its convener. At least one member shall haveexperienceinidentifying,assessing,andmanagingtheriskexposureoflarge,complexcompanies. The committee was established to aid the Board of Directors in communication, reporting, and recommendations relating to risk management in order to foster a healthy culture of risk management and managerial support among all employees throughout the organization.

1) No deviation

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Assessment item



Yes No Summary

(4) Nomination Committee: The Nomination Committee’s members are appointed by the Board of Directors. It must

comprise no fewer than three members, with at least half of them independent directors, and one director must be elected by the members to act as its convener. The Committee shall, basedontheauthorizationoftheBoard,exercisetheduecareofagoodadministratorandfaithfully perform its duties. It shall submit its recommendations to the Board of Directors for discussion(1)definingthediversityrequirements(e.g.,profession,technicalskills,experience,and gender) and independence criteria for seeking, assessing, and nominating director and supervisor candidates for the Company and its subsidiaries; (2) constructing and developing the organizational structure of the boards of the directors and committees of the Company and its subsidiaries, and assessing the performance of the boards; (3) devising and reviewing continuing education plans for directors; (4) formulating Corporate Governance Best Practice Principles for the Company; and (5) conducting other matters as resolved by the Board.

(5) Ethics and Integrity Committee: The Ethics and Integrity Committee is comprised of Board directors. It must consist of no

fewer than three members, with at least one of them being an independent director. One independent director must be elected by the members to act as its convener. The Committee is responsible for formulating ethical management policies and prevention programs, monitoring the following, and regularly reports the status of these efforts to the Board of Directors (1) assisting in integrating integrity and ethics into the Company’s operating strategies and establishing prevention methods in accordance with laws and regulations; (2) establishing prevention programs that include relevant business standard operating procedures and code of conduct; (3) planning the internal structure, personnel establishment, and duties of personnel and setting up checks and balances for business activities within business scope that involve higher ethical risks; (4) promoting and coordinating ethical policy awareness programs; (5) regularly reviewing the cases and results submitted by the Company and its subsidiaries in accordance with the Procedures for Handling Illegal and Unethical or Dishonest Behavior toensuretheeffectivenessofthewhistleblowingsystem;(6)regularlyreviewingthefinaldisciplinary cases submitted by the Employee Incentives and Punishment Committees of the Company and its subsidiaries for unethical employee behavior; (7) assisting the Board and the management to implement the ethical management prevention measures; and (8) assisting in other matters relating to the establishment and implementation of ethical management policies.

(6) Sustainability Committee: The Sustainability Committee’s members are appointed by the Board of Directors. It must

comprise no fewer than three members, with at least one independent director, and an independent director must be elected by the members to act as its convener. The committee shallexercisetheduecareofagoodadministratorandfaithfullyperformthefollowingduties:(1)establishinganannualcorporatesustainabilityplanandstrategies;(2)examiningor referencing corporate sustainability implementation plans; (3) monitoring the enforcement oftheimplementationplansandreviewingtheresults;(4)examiningthestructureofthecorporatesocialresponsibilityreport;and(5)examiningorreferencingothermattersrelatingto corporate sustainability.

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Assessment item



Yes No Summary

2) Does the Company have Board of Directors performance assessment guidelines and methods in place and perform such assessment on a yearly basis? Does the Company present the results of these assessment to the Board of Directors? Does the Company reference the assessments in deciding the compensation and nomination for re-election of individual directors?

V The Company has established Regulations Governing Board Performance Evaluations in accordance withtheCorporateGovernanceBestPracticePrinciplesforTWSE/TPExListedCompanies,andthese regulations have been approved by the Board. The Board is required to conduct annual internal Boardperformanceevaluationsandbeevaluatedbyexternalprofessionalindependentinstitutionsorprofessionalexpertteamsatleastonceeverythreeyears.TherelevantinternalandexternalBoardperformanceevaluationsforeachyearshallbecompletedbytheendofthefirstseasonofthefollowing year. The abovementioned regulations are disclosed on our website (http://ir.ctbcholding.com/html/gov_board.php#c6 ) and the Market Observation Post System (https://mops.twse.com.tw/mops/web/t100sb04_1).The Company conducts evaluations of the Board, individual directors, and functional committees. Evaluationitemsarespecifiedasfollows.TheitemsusedforoverallBoardperformanceevaluationsshallcoveratleastthefollowingfivemajorcriteria:(1) participation in the Company’s operations;(2) improvement of the quality of Board decision-making;(3) the organization and structure of the Board;(4) the election and continuing education of directors; and(5) internal control.Boarddirectors’performance(selforpeers)evaluationsshallcoveratleastthefollowingsixmajorcriteria:(1) understanding of the Company’s goals and mission;(2) understanding director duties and responsibilities;(3) participation in the Company’s operations;(4) internal relations maintenance and communications;(5) professionalism and continuing education; and(6) internal control.Thefunctionalcommitteeperformanceevaluationsshallcoveratleastthefollowingfivemajorcriteria:(1) participation in the Company’s operations;(2) understanding of the duties of functional committees;(3) improvement of the quality of functional committee decision-making;(4) organization and election of functional committee members; and(5) internal control.The results of 2020 Board Evaluations were approved by the Board in December 2020. The evaluations of the Board, individual directors, and functional committees all found performances “remarkablyexceedingstandards”(thehighestlevel).Theseresultswerealsoreferencedindetermining the remuneration and re-election of directors.

2) No deviation

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Assessment item



Yes No Summary

3) Does the Company regularly assess the independence of its financialstatementauditors?

V 3) The Company implements quality evaluation procedures annually to evaluate the independence andcompetenceofcertifiedpublicaccountants.Theevaluationcoversanassessmentoftheindependence of the CPAs and their tenure and rotation. The results of the 2021 assessment were reported to the Audit Committee on March 18, 2021, and were approved by the Board of Directors on March 19, 2021. After an evaluation, CPAs Lin Wu and Kuo-Yang Tzang, of KPMG were determined to not be in violation of the standards of independence (see Note) and as therefore able to act as CPAs for the Company.

In addition, statements to that effect were obtained from the above CPAs. According to the requirements of the CTBC Holding Corporate Governance Best Practice Principles, the Company did not need to consider replacing its CPAs, given that there had not been a non-replacement of its CPAs for seven consecutive years, no disciplinary actions had been taken against the CPAs, and the independence of the CPAs had not been compromised.

Note: Summary of auditor independence assessment:

Assessment item Assessment result

Fulfillsindependencerequirements

1. TheCPAdoesnothaveadirectorsignificantindirectfinancialrelationshipwiththeCompany.

Yes V

2. TheCPAdoesnothaveafinancingorguarantee relationship with the Company or a Company director.

Yes V

3. The CPA does not have a close business relationship or potential employment relationship with the Company.

Yes V

4. Within the past two years, neither the CPA nor any member of the CPA’s auditing team has served as a Company director, manager, or other staffwhocouldsignificantlyaffectthe

Company’s audit.

Yes V

5. The CPA does not provide any non-auditing services that could affect the auditing service provided to the Company.

Yes V

6. The CPA has not previously brokered shares of the Company or other securities it offers.

Yes V

7. The CPA has never served as a defender or mediator on behalf of the Company in disputes with a third party.

Yes V

8. The CPA has no kinship with a director, manager, or other staff member of the Company who can significantlyaffecttheCompany'saudit.

Yes V

9. A statement of independence has been obtained from the CPA.

Yes V

10. The CPA is not a related party of the Company. Yes V

3) No deviation

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Assessment item



Yes No Summary

3. Has the Company appointed an appropriate number of competent corporate governance personnel and appointed corporate governance officerstobeinchargeofcorporategovernance affairs (including but not limited to furnishing information requiredforbusinessexecutionbydirectors and supervisors, assisting directors and supervisors with legal compliance, handling matters relating to Board meetings and shareholders’ meetings according to the law, and producing minutes of Board meetings and shareholders’ meetings)?

V TheCompanyhasappointedaCorporateGovernanceOfficerandanappropriatenumberof competent corporate governance personnel. The main duties of the Corporate Gover-nanceOfficerareasfollows:(1) handling matters related to Board and shareholder meetings in accordance with the

law;(2) producing Board and shareholder meeting minutes;(3) assistingdirectorsintakingofficeandtheircontinuingeducation;(4) providing information required by the directors to conduct business;(5) assisting the directors in legal compliance; and(6) other matters stipulated in the Company’s Articles of Incorporation or contracts.The Corporate Governance Department is responsible for the planning, amendment, and executionofthesystemandrelevantrulesandoperatingproceduresaswellascoordi-natingwithinternalandexternalunitsoncorporategovernanceimprovementplans.TheBoard Secretariat is responsible for administering matters relating to the Board and share-holder meetings and assisting relevant units in procedures such as company registration amendment, information disclosure, and document safekeeping. The Corporate Gover-nanceOfficerisresponsibleforsupervisingtheCorporateGovernanceDepartmentandthe Board Secretariat, providing relevant information and other assistance necessary for directors to perform their duties, and continuing to strengthen the corporate governance of CTBC Holding and its subsidiaries.Tasks performed in 2020 were as follows:1) Assisted the directors in performing their duties, providing required information, and arranging

education and training courses for the directors:(1) Provided directors with information needed to perform their duties and assisted them in

maintaining good communication with the Company’s management.(2) Provided information on the Company’s business and the latest regulations and developments

pertaining to the Company’s governance.(3) Assisted the independent directors in communicating with the internal audit supervisors and

the CPAs.(4) Implemented the 2020 annual training program for directors.(5) Supervised the subsidiaries in providing new directors with an introduction of company

structure, a director manual, and understanding of legal compliance.2) Conducted matters relating to the convening and meeting of the Board, functional committees,

and shareholder meetings:(1) In accordance with the Rules of Procedure for the Board of Directors and the charters of the

functional committees, ensured that the operations of the Board of Directors and the functional committees complied with relevant laws and regulations, that the directors were informed in advanceforanyrecusal,andthatalldirectorshadsufficientandcompletemeetinginformation.

(2) Held the 2020 annual shareholder meeting and completed the announcement and reporting of the minutes within 20 days after the meeting.

3) Ensured that the Board members were immediately informed of important Company messages.4) Supervised the Company’s governance system and the planning, revision, and implementation of

relevant procedures.5) Renewed the liability insurance of directors and reported and announced the information in

accordance with laws and regulations. 6) Conducted the 2020 annual group training courses for directors and supervisors.7)Conductedtheannualtrainingofcorporategovernanceofficers;fordetails,referto"8.Others".

No deviation

4. Has the Company established a communication channel for its stakeholders (including but not limited to shareholders, employees, and customers) and a special stakeholders section on its website, and has the Company adequately responded to the important corporate social responsibility issues of interest to its stakeholders?

V (1) TheCompanymaintainsadesignatedunittaskedwithannuallyconfirmingdataaccuracywithits stakeholders in writing.

(2) The Company has a Contact IR page in the Investor Relations website’s Investor Service section to disclose contact details, including those of the spokesperson, acting spokesperson, Audit Com-mittee convener, institutional investor relations personnel, and shareholder service personnel in order to handles issues of interest to its stakeholders.

(3) The Company has a stakeholders page on its website to facilitate direct communication with its employees, investors, customers, and suppliers.

(4) Stakeholders can also interact with the Company regarding its corporate, environmental, and social governance through a stakeholder survey on the Company’s website. In addition, the Company makes disclosures regarding major stakeholder concerns and its corresponding goals in its annual Sustainability Report.

No deviation

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Assessment item



Yes No Summary

5. Information disclosure1) Has the Company established

awebsitedisclosingfinancial,business, and corporate governance-related information?

2) Does the Company have other information disclosure channels (e.g., an English-language website, a responsible person for handling information collection and disclosure, a spokesperson system, and investor conference webcasts on the Company’s website)?

3) Does the Company publicly announce and report its annual financialreportwithintherequired period after the end of thefiscalyear,andpublishandreportitsfinancialreportsforthefirst,second,andthirdquartersas well as its operating status for eachmonthbeforethespecifieddeadline in accordance with the Financial Holding Company Act, theSecuritiesandExchangeAct,and other relevant laws?

V

V

V

5.1) TheCompany’swebsitedisclosesfinancial,business,corporategovernance,andother

important information.

2) The Company’s primary website is in Chinese, and an English version is also available. There are relevant business units in charge of collecting information and disclosing the same on the website. The Company also has designated a spokesperson and an acting spokesperson.

In addition, slideshow presentations from and audio recordings of investor conferences are uploaded to the Company’s Investor Relations website, on the Events & Filings section’s Events Calendar page.

3) TheCompanypublishesandfilesitsfinancialstatementswithintheprescribedperiodinaccordancewithArticle36oftheSecuritiesandExchangeActandLetterNo.Jin-Guan-Yin-Fa-Zi-10110002230.Thepublicationandfilingdatesofthe2020quarterlyfinancialstatementsare as follows:

Reporting period Statutory period Publication

date Filing date

Q1 2020 Within 45 days of the end of each quarter, exceptwhenextendedoperationtimeisneeded,inwhichcasethefinancialstate-mentsshallbefiledwithin60daysoftheend of each quarter

May 22, 2020 May 26, 2020

Q2 2020 Within two months of the end of each half year

Aug. 21, 2020 Aug. 25, 2020

Q3 2020 Within 45 days of the end of each quarter, exceptwhenextendedoperationtimeisneeded,inwhichcasethefinancialstate-mentsshallbefiledwithin60daysoftheend of each quarter

Nov. 20, 2020 Nov. 24, 2020

Q4 2020 Withinthreemonthsoftheendofeachfiscalyear

March 19, 2021 March 23, 2021

Additionally,theCompanypublishesandfilesitsoperatingreportforthepreviousmonthwithintheprescribedperiodinaccordancewithArticle36oftheSecuritiesandExchangeAct.

1) No deviation

2) No deviation

3) No deviation

6. Does the Company have other information crucial to understanding its corporate governance (including but not limited to information regarding employee rights and interests, employee care, investor relations, the rights and interests of stakeholders, the continuing education of directors and supervisors, the implementation status of risk management policies and risk measurement standards, the implementation status of customer policies, situations concerning the purchase of liability insurance for directors and supervisors, and donations made to political parties, interested parties, and public interest groups)?

V Fordetails,pleasereferto"8.Others". No deviation

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Assessment item



Yes No Summary

7. Describe improvements that have been made based on the latest corporate governance evaluation results issued by the Corporate Governance Center of the Taiwan Stock Exchange.Ifnoimprovementshavebeenmade,proposeprioritiesforchangeandrelevantmeasures:1)TheCompanywasratedinthetop6%–20%oflistedcompaniesevaluatedintheSixthCorporateGovernanceEvaluation.2) Improvements made:(1)TheCompanylookedformethodstomakeimprovementsonitemsfailingtoscoreaftertheresultsoftheSixthCorporateGovernanceEvaluation.(2) The corporate governance improvements made as of now include, but are not limited to the following:

A.ACorporateGovernanceOfficerwasofficiallyappointedbytheBoard.B. A Sustainability Committee was established.C. The 2020 Board Performance Evaluation Results were disclosed on the Company website.D. The Guidelines for Holding Concurrent Jobs by the Chairman and the President were established.E. The Corporate Governance Best Practice Principles were amended.F. The Code of Corporate Social Responsibility was amended.G. The Rules of Procedure for Shareholder Meetings were amended.H. The Rules of Procedure for the Board of Directors were amended.I. The Audit Committee Charter was amended.J. The Guidelines for the Proposal of the Board and Functional Committees were amended.K. The Regulations Governing Board Performance Evaluation were amended.L. The Nomination Committee Charter was amended.M. The Procedures for Ethical Management and Guidelines for Conduct were amended.N. The Code of Ethical Conduct was amended.

8. Others1)DeviationsfromCorporateGovernanceBestPracticePrinciplesforTWSE/TPExListedCompaniesandreasonsthereof

Assessment item

Executionstatus

Deviations from Corporate Gover-nanceBestPractice

Principles for TWSE/TPExListed

Companies and reasons thereof

Yes No Summa-ry

1. Has the Company established and disclosed its corporate governance best practice principles in accordance with the Corporate Governance Best Practice Principles forTWSE/TPExListedCompanies?

V The Company has established the CTBC Holding Corporate Governance Best Practice Princi-ples and made revisions as necessary to strengthen its corporate governance. The principles and their updated versions are disclosed on the Company’s website and the Market Observation Post System.

No deviation

2. Does the Company have internal regulations in place to prevent insider trading?

V To this end, the Company has a Policy for Preventing Insider Trading, Code of Ethical Conduct, Ethical Corporate Management Best Practice Principles, Procedures for Ethical Management and Guidelines for Conduct,andaCodeofConductforemployees,allofwhicharepostedontheCompany’sexternalandinternal websites.

No deviation

3. Has the Board of Directors establishedandexecutedadiversitypolicy for its members?

V The Company uses a candidate nomination system to elect its directors, who then serve for a term of three years. The Board of Directors comprises seven directors, of whom four are indepen-dent directors and three are general directors. Candidates for director are selected based on the nominations of the Nomination Committee in consideration of the Board’s overall composition. The diversity of Board members is stipulated in the Rules for Director Elections, the Nomination Committee Charter, and the Corporate Governance Best Practice Principles. The duties of the BoardofDirectorsarespecifiedintheCompany’sArticlesofIncorporation.TheCompanyheldthe election of directors (including independent directors) for the seventh term of its Board on June 14, 2019.Of the current directors, three are over 70 years old and four are aged 50–60. Each ofthefourindependentdirectorshasexperienceinbankingindustrydecision-making,accountingandfinance,riskmanagement, or law. The diverse professional backgrounds of the Company’s directors are disclosed on its website (http://ir.ctbcholding.com/html/gov_board.php#c2).

No deviation

4. Has the Company designated a professional shareholder services agent to handle shareholder affairs?

V The Company tasks CTBC Bank with handling shareholder affairs. No deviation

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2) Training of directors and independent directors (Jan. 1, 2020, to Dec. 31, 2020)

Title NameTraining period

Organizingagency CourseTotal

training hoursFrom To

Chairman Wei Fu Investment Co., Ltd.Representative:Wen-Long Yen

Sept. 2, 2020 Sept. 2, 2020 Taiwan Academy of Banking and Finance

Practices and Corporate Governance for Boards of DirectorsandSupervisors:ReflectionsonandForecastsforAnti-Money Laundering Risk Management

3 hours


Practices and Corporate Governance for Boards of Directors and Supervisors: Corporate Governance Practice Development and Corporate Intellectual Property Management Strategies

3 hours

Vice Chairman Chung YuanInvestment Co., Ltd.Representative:Chao-Chin Tung



3 hours



3 hours

Director Yi Chuan InvestmentCo., Ltd.Representative:Thomas K.S. Chen



3 hours



3 hours

Sept. 21, 2020

Sept. 21, 2020

Taiwan Stock ExchangeCorp.,TaipeiExchange

Corporate Governance 3.0: Sustainable Development Blueprint Forum

3 hours

Independent Director

Shih-Chieh Chang Sept. 2, 2020 Sept. 2, 2020 Taiwan Academy of Banking and Finance


3 hours



3 hours


Cheung-Chun Lau Sept. 2, 2020 Sept. 2, 2020 Taiwan Academy of Banking and Finance


3 hours



3 hours


Chih-Cheng Wang Aug. 21, 2020

Aug. 21, 2020

Institute of Financial Law and Crime Prevention

Stakeholder Transaction Risk Management 1 hour



3 hours



3 hours

Nov. 11, 2020 Nov. 11, 2020 Taiwan Corporate Governance Association

How Directors and Supervisors Can Assist Companies in Promoting Multinational Enterprise Group Risk Management

3 hours

Nov. 12, 2020

Nov. 12, 2020

Taiwan Corporate Governance Association

ESG Risk Management from the Perspective of Corporate Governance

3 hours

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Title NameTraining period

Organizingagency CourseTotal

training hoursFrom To


Sheng-Yung Yang Sept. 2, 2020 Sept. 2, 2020 Taiwan Academy of Banking and Finance


3 hours



3 hours

3) The Company has established relevant handling procedures for risk management policies, consumer or customer protection policies, and the recusal of directors from proposals in which they have an interest.

4) The liability insurance that the Company purchased for its directors are disclosed in the Market Observation Post System’s Directors and Supervisors Liability Insurance zone (https://mops.twse.com.tw/mops/web/t135sb03).

5) Donations to political parties, stakeholders, and public interest groups (Jan. 1, 2020, to Dec. 31, 2020): None.6) Investor relations and stakeholder interests: The Company strives to ensure that it discloses information in a fair, transparent, and timely manner. The Company’s website

has a stakeholders section that provides information for multi-directional communication among all parties. An Investor Relations site is also maintained, providing shareholderswithreal-timeCompanyinformation,includingcorporategovernancedisclosures,financialinformation,creditratings,eventsandannouncements,stockinformation, and investor services.

7) Employee rights and interests and employee care: Please refer to 5. Operational Highlights, 5.8. Labor relations”.8) Other important information (e.g., corporate governance regulations and disclosure) that may enhance understanding of the Company’s corporate governance operations

can be found in the Corporate Governance section of the corporate website (http://ir.ctbcholding.com/html/gov.php).9) TrainingofCorporateGovernanceOfficer(Jan.1,2020,toDec.31,2020)

Training periodOrganizingagency Course

Total training

hoursFrom ToFeb. 21, 2020 Feb. 21, 2020 Taiwan Corporate Governance

AssociationTrendinandRiskManagementofDigitalTechnologyandArtificialIntelligence

3 hours

March 17, 2020 March 17, 2020 Taiwan Corporate Governance Association

(CGP-Advanced) Corporate Control Contest from the Perspective of Corporate Governance

3 hours

March 24, 2020 March 24, 2020 Independent Director Association Taiwan

How Do the Institutional Investors Evaluate Corporate ESG Performance and Investment?

3 hours

June 30, 2020 June 30, 2020 Independent Director Association Taiwan

Practice and Rules of Anti-Money Laundering and Countering Financing of Terrorism

3 hours

Aug. 12, 2020 Aug. 12, 2020 Independent Director Association Taiwan

The Role of Independent Director in Corporate Governance and the Contest of Corporate Control

3 hours


Practices and Corporate Governance for Boards of Directors and Supervisors:ReflectionsonandForecastsforAnti-MoneyLaunderingRisk Management

3 hours



3 hours

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3.3.4 Remuneration Committee operations1) TheRemunerationCommitteeshall,inaccordancewithArticle4ofitscharter,exercisetheduecareof

agoodadministratorinperformingthefollowingdutiesandsubmititsrecommendationstotheBoardof Directors for discussion:(1) formulate and regularly review the policy, system, standards, and structure of the performance evaluation

and remuneration of the directors and managers; and(2) regularly evaluate and formulate the remuneration of the directors and managers.

2) RemunerationCommitteemembers

Title(Note1) CriteriaName

Hasprofessionalqualificationsandworkexperienceoffiveyearsormore Independencestatus(Note2)

No.ofotherpublic companies

at which is the director is serving as a remuneration committee member

Notes

as a lecturer or in a higher position

in a business, law,finance,

accounting, or other department

relating to the Company’s

business needs at a public or

private tertiary educational institution

as a judge, prosecutor, lawyer,

accountant, or other professional

or technical specialist who has passed a national examination and

receivedcertificationin a profession relating to the

Company’sbusinessneeds

In business, law,finance,accounting, orotherfieldrelating to the

Company's business needs

1 2 3 4 5 6 7 8 9 10


Cheung-Chun Lau V V V V V V V V V V V 0 -


Shih-Chieh Chang V V V V V V V V V V V V 0 -


Sheng-Yung Yang V V V V V V V V V V V V 2 -

Note 1: Title denotes whether the member is a director or independent director or is in another position.Note 2: A “V” marked in a field indicates that a director fulfilled the specific criterion as described below during the two years before being

elected and during their term of office:(1) NotanemployeeoftheCompanyoranyofitsaffiliates(2) NotadirectororsupervisoroftheCompanyoranyofitsaffiliates(notapplicableintheeventthatthedirectororsupervisor

is concurrently an independent director of the Company, its parent company, a subsidiary, or a subsidiary of the same parent companyestablishedinaccordancewiththeSecuritiesandExchangeActorlocallaws)

(3) Not a natural-person shareholder who holds shares that, together with those held by their spouse or minor children or held under other names, total 1% or more of the total number of issued and outstanding shares of the Company or rank them among the top 10 largest shareholders

(4) Not a manager of (1) or the spouse, second-degree relative, or third-degree direct relative by blood of an individual described in (2) or (3)

(5) Not in direct possession of 5% or more of the total number of issued and outstanding shares of the Company, not one of the top fivelargestshareholdersoftheCompanyoradirector,supervisor,oremployeeofaninstitutionalshareholderoftheCompanythat designates its representatives to act as the directors or supervisors of the Company in accordance with paragraph 1 or 2 of Article 27 of the Company Act (not applicable in the event that the director or supervisor is concurrently an independent director of the Company, its parent company, a subsidiary, or a subsidiary of the same parent company established in accordance with the SecuritiesandExchangeActorlocallaws)

(6) Not a director, supervisor, or employee of a company that controls the seats of the directors or over half of the shares with voting rights of the Company (not applicable in the event where the director or supervisor is concurrently an independent director of the Company, its parent company, a subsidiary or a subsidiary of the same parent company established in accordance with the SecuritiesandExchangeActorlocallaws)

(7) Not a director, supervisor, or employee of another company or institution who is the same person as or the spouse of the Chairman, President, or such other person in the equivalent position of the Company (not applicable in the event that the director or supervisor is concurrently an independent director of the Company, its parent company, a subsidiary, or a subsidiary of the sameparentcompanyestablishedinaccordancewiththeSecuritiesandExchangeActorlocallaws)

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(8) Not a director, supervisor, manager, or shareholder holding 5% or more of the shares of a company or institution that has a financialorbusinessrelationshipwiththeCompany(notapplicableintheeventthatthecompanyorinstitutionholds20%ormore but less than 50% of the total number of issued and outstanding shares of the Company, and the director or supervisor is concurrently an independent director of the Company, its parent company, a subsidiary, or a subsidiary of the same parent companyestablishedinaccordancewiththeSecuritiesandExchangeActorlocallaws)

(9) Not an owner, partner, director, supervisor, manager, or spouse of a professional individual, sole proprietorship, partnership, company,orinstitutionprovidingauditingtotheCompanyoritsaffiliatesorprovidingbusiness,legal,financial,oraccountingservicesthatreceivedinthepasttwoyearstotalpaymentsofNT$500,000orlessforservicesrendered(notapplicableformembers of the Remuneration Committee, public offering committee, or special committee for mergers and acquisitions who exercisepowerspursuanttotheSecuritiesandExchangeAct,theBusinessMergersandAcquisitionsAct,orrelevantlawsandregulations)

(10)Notapersonwhosatisfies any condition specified in Article 30 of the Company Act

3) RemunerationCommitteemeetingattendance(1)Thefifthtermofthecommitteecomprisesthreemembers.(2)ThefifthtermofthecommitteeextendedfromJune14,2019,toJune13,2022.Aspartofthisterm,the

committee convened eight meetings (A) between Jan. 1, 2020, and Dec. 31, 2020, with its attendance as follows:

Title Name Meetings attended in person(B)

Meetings attended by proxy

In-person attendance rate(B/A) Notes

Convener Cheung-Chun Lau 8 - 100.00% -

Committee member Shih-Chieh Chang 8 - 100.00% -

Committee member Sheng-Yung Yang 8 - 100.00% -

Other matters required to be disclosed:A. IntheeventthattheBoardofDirectorsdeclinesormodifiesarecommendationoftheRemunerationCommittee,themeeting

date, motion content, Board resolution, and the Company’s handling of the opinions of the Remuneration Committee (if the remunerationapprovedbytheBoardofDirectorsexceedsthatrecommendedbytheRemunerationCommittee,thedifferenceand reasons thereof): None.

B. If any member has a dissenting or qualified opinion noted on the record or in writing regarding any resolution of the Remuneration Committee, the committee meeting date, motion content, the opinions of all committee members, and the handling of their opinions: None.

4) RemunerationCommitteepracticesTerm and meeting Motion content and result

Jan. 17, 2020; 7th term, 12th meeting of the Board of Directors

1. A proposal regarding the total amount and distribution principle of year-end bonuses paid by CTBC Holding and its subsidiaries in 2019, and the amount of bonuses paid to managers, personnel of level S (senior vice president) and above, and business consultants

2. A proposal regarding the total amount of stock appreciation rights distributed by CTBC Holding and its subsidiaries, the distribution principle of the Company, and the distribution among personnel of level S (senior vice president) and above

3. A proposal regarding amending the Company’s Rules of Remuneration for Non-Independent Directors to strengthen the remuneration management system

4. A proposal regarding the 2019 year-end bonus and stock appreciation rights of Chairman Wen-Long Yen

5. A proposal regarding the 2019 year-end bonus and stock appreciation rights of Vice Chairman Chao-Chin Tung

6. A proposal regarding the year-end bonuses of former independent directors Chung-Yu Wang, Peter Tuen-Ho Yang,andWen-ChihLeefortheirtermofofficein2019

Remuneration Committee resolutions (Jan. 16, 2020): Unanimously passed by all attending committee members.

Handling of Remuneration Committee proposals by the Company (Board of Directors): Unanimously passed by all attending directors.

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Term and meeting Motion content and result

March 27, 2020; 7th term, 14th meeting of the Board of Directors

1. The principle and cost of 2020 remuneration adjustments for the Company and remuneration adjustments for managers and personnel of level S (senior vice president) and above

2. A proposal to revise the Company’s Remuneration Committee Charter in response to the FSC’s amendment oftheRegulationsGoverningtheAppointmentandExerciseofPowersbytheRemunerationCommitteeofaCompanyWhoseStockisListedontheTaiwanStockExchangeortheTaipeiExchange

Remuneration Committee resolutions (March 26, 2020): Unanimously passed by all attending committee members.Handling of Remuneration Committee proposals by the Company (Board of Directors): Unanimously passed by all attending directors.

April 29, 2020; 7th term, 16th meeting of the Board of Directors

1. A proposal to pay all of the 2019 remuneration of the Company’s employees in the form of cash2. AproposalfortheCompanytodistributeNT$296,403,029indirectorremunerationfor2019inaccordancewith

its Articles of IncorporationRemuneration Committee resolutions (April 28, 2020): Unanimously passed by all attending committee members.


July 29, 2020; 7th term, 20th meeting of the Board of Directors

1. A proposal to amend the Regulations Governing Board Performance Evaluations

Remuneration Committee resolutions (July 28, 2020): Unanimously passed by all attending committee members.


Sept. 25, 2020; 7th term, 23rd meeting of the Board of Directors

1. A proposal to amend the Company’s remuneration-related measures to improve its overall remuneration system

2. The 2019 employee remuneration for the managers of the Company

Remuneration Committee resolutions (Sept. 24, 2020): Unanimously passed by all attending committee members.


Nov. 20, 2020; 7th term, 25th meeting of the Board of Directors

1. Approval of amendments to the Rules for Employee Year-End Bonuses and Rules of Manager Remuneration

Remuneration Committee resolutions (Nov. 19, 2020): Unanimously passed by all attending committee members.


Dec. 25, 2020; 7th term, 26th meeting of the Board of Directors

1. Approval of amendments to the Regulations Governing Stock Appreciation Rights2. ApprovalforrespondingtotheFinancialExaminationBureauoftheFSC’sopinionontheCompany’semployee

litigation prevention mechanism and response measuresRemuneration Committee resolutions (Dec. 24, 2020): Unanimously passed by all attending committee members.


3.3.5InquiriesintocorporategovernanceprinciplesandrelatedregulationsPlease refer to the CTBC Holding website (http://ir.ctbcholding.com/html/gov.php).

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3.3.6ImplementationofcorporatesocialresponsibilityanddeviationfromtheCorporateSocialResponsibilityBestPracticesforTWSE/TPExandreasonsthereof

Assessment item

ExecutionstatusDeviation from the Corporate Social ResponsibilityBestPracticesforTWSE/TPExandreasons

thereofYes No Summary

1. Does the Company follow the materiality principle when conducting risk assessments of environmental, social, and corporate governance issues related to the Company’s operations, and when formulating risk management policies and strategies?

V TheCompanyconductsinternalandexternalsurveysonESGissues.Accordingtostakeholders’degreeofconcern,theimpactoftheissueonoperations,andexternalimpacts,weidentifymaterialissuestofocusonin developing sustainable management, formulating strategies, setting targets, and engaging stakeholders. These material issues are also integrated into the Company’s daily risk assessment and management in line withitsfive-yearoperatingplan.

No deviation

Issues Risk assessment item Risk management policies or strategies

Environment Climate governance policy

TheChiefRiskOfficerisresponsibleforsupervisingclimaterisk governance and enhancing the implementation of the TCFD recommendations. Through its cross-subsidiary project team, the Company establishes a structure for climate change risk governance, integrates climate change risks into its Risk Governance Policy, formulates its Guidelines for Climate Change Risk Management, and implements identificationandsupervisioninitsdailybusinessprocesses.Inthefuture,wewillcontinuetoimprovethroughexternalcooperationandinternalmanagement. In addition, in October 2020, we signed on the Partnership for Carbon Accounting Financials in order to maintain an inventory of the carbonemissionsofourfinancialproductsandtoexpandourinfluenceinsustainability,becomingTaiwan’sfirstfinancialinstitutiontojointheindustry-led initiative.In its daily operations, the Company actively promotes energy conservation and carbon reduction through its environmental and energy management systems.

Social Social investment andfinancialinclusion

Adhering to the brand spirit of “We are family”, CTBC Holding invests in socialwelfarethroughfiveavenues—charity,anti-drugawareness,sports,education,andartsandculture—whilesimultaneouslypursuingprofitablegrowth. Through the process of identifying needs, inspiring people, and participating to form a cycle of kindness. The Company looks forward toutilizingtheinfluenceofthefinancialindustrytohelpfinanciallydisadvantaged families and children in Taiwan break their dependency on social welfare assistance.CTBC Holding and its subsidiaries are committed to providing a variety ofmicrofinanceproductsandservicesasameansoftacklingpoverty.Throughfivemajordimensions,namelyloans,insurance,creditcards,trusts,andfriendlyservices,theCompanyexpectstocontributemoretotheachievementoffinancialinclusion.Meanwhile, CTBC Bank’s overseas branches and subsidiaries continue to offer microloan services as they strive to eliminate poverty and promote sustainable development by establishing wide-ranging partnerships with localmicrofinanceorganizations.

Corporate governance

Integrity management and corporate governance

Continually improving its corporate governance is a strategic goal of the Company. By focusing on the effective performance of our Board of Directors, we have established various functional committees. In addition,wehavecorporategovernanceexecutiveswhoprovidesupportto the Board and supervise various improvement activities. Through selfandexternalperformanceevaluations,theeffectivenessoftheBoard is well assessed. Furthermore, to ensure compliance with the competent authority’s requirements for corporate governance and integrity management, we formulate relevant policies and operating procedures, which are then implemented by various units. Legal changes and news bulletins are tracked on a monthly basis, with attention also paid to domestic and foreign corporate governance trends.

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2. Has the Company established a dedicated or part-time unit to promote CSR, and has senior management been authorized by the Board to take charge of proposing CSR policies and reporting to the Board?

V 2. Since 2011, the Company has tasked designated staff with CSR-related strategy planning and promotional activities.InMarch2020,anewCorporateSustainabilityOfficewassetupwithsixdesignatedstaffmembers.Thisoffice,directlyunderthePresident’ssupervision,isresponsibleforplanningandintegrating the corporate sustainability strategies of the Company and its subsidiaries. In June 2020, the Company upgraded the Sustainability Committee to a functional committee directly under the Board of Directors. Composed of four independent directors from CTBC Holding and one independent director from subsidiary Taiwan Life, the Committee is responsible for approving annual corporate sustainability plans,strategies,andprogramsandsupervisingandexaminingtheeffectivenessoftheirimplementation.In addition, the Company has established an ESG Taskforce, with the President of CTBC Holding acting as chairperson, management teams of subsidiaries as taskforce members, and the Corporate Sustainability Officeastaskforcesecretariat.Thetaskforceischargedwithcarryingoutdailysustainability-relatedwork.Issues and policies related to the CSR of CTBC Holding are compiled by the taskforce, which regularly identifiesstakeholdersthattheCompanymaydealwithinthecourseofbusiness.Inaddition,itdiscussesand allocates resources regarding aspects such as corporate governance, environmental sustainability, employeewelfare,sustainablefinance,communityengagement,andcustomercare,withdecisionsmadeby the taskforce chairperson. Any key issues or material proposals are submitted to CTBC Holding’s ExecutiveCommitteebeforebeingescalatedtotheSustainabilityCommitteeandtheBoardofDirectors.ThefinalamendmentsanddecisionsaremadebytheBoardofDirectors.

The Company has obtained Board approval for all its CSR policy planning, such as for the Code of Corporate Social Responsibility, Ethical Corporate Management Best Practice Principles, Sustainability Management Policy, and Sustainable Finance Policy, as well as for other CSR-related policies and regulations,fortherelevantdepartmentstoactaccordingly.ForspecificCSR-relatedcases,priorBoardapprovalmustbeobtainedtoensuremanagementefficiency.

CSR cases reported to the Board of Directors in 2020:

Field Date Frequency Content Boardresolution

Social Jan. 17 Annual CTBC Bank donation to CTBC Business School (NT$101millionin2020)

Approved

March 24

Once Taiwan Lottery donation to the CTBC Anti-Drug EducationalFoundation(NT$12.95millionin2020)

Approved

March 24

Once Taiwan Lottery donation to the CTBC International Academy(NT$10millionin2020)

Approved

April 29 Annual CTBC Bank donation to the CTBC Anti-Drug Educa-tionalFoundation(NT$26.9millionin2020)

Approved

April 29 Annual CTBC Bank donation to CTBC Business School (NT$11.6millionin2020)

Approved

May 22 Annual CTBC Bank donation to the CTBC Foundation for ArtsandCulture(NT$31millionin2020)

Approved

May 26 Annual Taiwan Lottery donation to CTBC Business School forcampusconstruction(NT$22millionin2020)andscholarship(aroundNT$5.241millionin2020)

Approved

June 24 Annual CTBC Bank donation to the CTBC Charity Foundation (NT$50millionin2020)

Approved

Nov. 20 Annual CTBC Bank Charity Fund Charitable Trust donation to theCTBCCharityFoundation(NT$2millionin2020)

Approved

No deviation

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Field Date Frequency Content Boardresolution

Corporate governance

Jan. 17 Once Guidelines Governing the Remuneration of Non-inde-pendent Directors Approved

April 29 Annual The Company's annual emerging risk mechanism and identificationresults Approved

April 29 Once CTBC Holding amended its Corporate Governance Best Practice Principles Approved

April 29 Once CTBC Holding amended its Code of Corporate Social Responsibility Approved

June 24 Once CTBC Holding amended its Responsibilities and Authorities of the Board of Directors, Chairman, and President

Approved

July 29 Once CTBC Holding amended its Nomination Committee Charter Approved

July 29 Once CTBC Holding amended its Code of Conduct ApprovedJuly 29 Once CTBC Holding amended its Procedures for Ethical

Management and Guidelines for Conduct Approved

July 29 Once CTBC Holding amended its Regulations Governing Board Performance Evaluations Approved

July 29 Once CTBC Holding amended its Regulations Governing AuthorityfortheDisbursementofOperatingExpensesandCapitalExpenditures

Approved

Dec. 25 Once CTBC Holding formulated its Sustainability Manage-ment Policy and Sustainable Finance Policy Approved

3. Environmental issues1) Has the Company

developed an environmental management system that is appropriate to its industry?

2) Is the Company committed to achieving the efficientuseofresources and to using renewable materials that have less impact on the environment?

V

V

1) The Company assembled an Environmental Sustainability Task Force. The task force regularly holds management meetings and management review meetings to work toward environmental targets. In 2017, all 151 business locations in Taiwan earned ISO 50001 Energy Management, ISO 14001 Environmental Management,andISO14064-1QuantificationandReportingforGreenhouseGasEmissions&Removalcertification.

Since 2018, the application scope of the three international standards ISO 14064-1, ISO 14001, andISO50001havebeencontinuallyexpanded,covering194businesslocationsacrossTaiwanin2019. In the same year, the subsidiaries of CTBC Holding continued to obtain their ISO 14064-1 certification.Furthermore,theyallobtainedbothISO50001EnergyManagementSystemsandISO14001EnvironmentalManagementSystemscertification.TheCompany’senvironmentalmeasureshavebeenhonoredwitha2020CEMAwardofExcellenceinEnergyManagementattheU.N.IndustrialDevelopmentOrganization’sEnergyManagementLeadershipAwards,makingittheworld’sfirstfinancialinstitute to receive the accolade. It also received the R.O.C. Enterprise Environmental Protection Award andGreenActionAwardfromTaiwan’sEnvironmentalProtectionAdministration,andbecamethefirstfinancialinstitutioninTaiwantoobtainrenewableenergycertificationfromtheMinistryofEconomicAffairs.

2) At its headquarters, CTBC Financial Park, the Company is committed to improving its resource utilization efficiencyandusingrecycledmaterialsthathavealowenvironmentalimpact.Theheadquartersmeetthe eight major standards of the Taiwan government’s Ecology, Energy Saving, Waste Reduction and Health(EEWH)greenbuildingcertificationscheme,namelyGreenery,SoilWaterRetention,DailyEnergy Saving, CO2 Reduction, Construction Waste Reduction, Indoor Environment, Water Resource, andSewage&GarbageImprovement,anditobtainedDiamond-levelcertificationunderthescheme.Furthermore, CTBC Financial Park uses the most recent version of the U.S. Green Building Council’s buildingperformancetrackingsystemtocollectandstoresixtypesofactualperformancedata,namelyenergyconservation,waterconservation,wastemanagement,transportation,anduserexperience(indoorair quality and overall satisfaction), in order to assess its green building performance. The headquarters obtainedLEEDO+Mv4.1PlatinumcertificationfromthecouncilandwasthefirstTaiwaneserecipientofthe LEED Dynamic Plaque.

1) No deviation

2) No deviation

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3) Does the Company assess current and future risks and opportunities posed by climate change as well as take measures to respond to climate issues?

4) Over the past two years, has the Company maintained data on its greenhouse gas emissions, water usage, and total weight of waste, and has it formulated policies to conserve energy, reduce CO2 emissions, save water, and manage waste?

V

V

3) In 2020, we signed on to the Task Force on Climate-related Financial Disclosures (TCFD). Accordingly, the Company has established a structure for climate change risk governance, integrated climate change risks into its Risk Governance Policy, formulated its Guidelines for Climate Change Risk Management, andimplementedidentificationandsupervisionindailybusinessprocesses.Inaddition,inOctober2020,we signed on the Partnership for Carbon Accounting Financials in order to maintain an inventory of thecarbonemissionsofourfinancialproductsandtoexpandourinfluenceinsustainability,becomingTaiwan’sfirstfinancialinstitutiontojointheindustry-ledinitiative.

As for their daily operations, the Company and its subsidiaries actively reduce energy use and carbon emissions through the established environmental and energy management systems.

4)(1). The Company has installed an environmental and energy management system in accordance with the

ISO 50001 and ISO 14001 standards. It states its environment and energy policy as follows:A.Engageinself-compliancewithlawsandregulationsandtheextensivepurchaseofproductswith

energy-saving labels.B. Regularly hold training programs and promote environmental protection and energy management.C. Integrate relevant resources and enforce environmental and energy management programs.D. Continue to implement environmental energy improvement and conduct regular reviews to achieve

the goal of sustainability.E.Leveragecorporateinfluenceandlinkwithsurroundingenterprisestoformagreenenergycycle.

(2). CTBC Holding has been promoting diverse resource integration projects every year. It successfully achieveditsfirst-stagethree-yearenergytarget(2015–2017)byreducingelectricityconsumptionby6%. Taking 2017 as the new base year, another three-year plan was launched, this one with the target of reducing electricity consumption by 2% every year for a cumulative reduction of 6%. For 2020, electricity was reduced by 1.73 million kwh, representing 882 tons of greenhouse gas emissions and a 2.46% reduction from 2017.

(3). The Company’s greenhouse gas emissions in 2019 totaled 58,881 tons of CO2e (scopes 1 and 2); theamountemittedin2020isbeinginventoriedandwillbeverifiedbyathirdpartybeforebeingdisclosed in CTBC Holding’s Sustainability Report 2020 and on the Company’s sustainability website. The Company’s water consumption was reduced from 2019 to 2020, with totals of 411,344 m3 and 403,000 m3, respectively. Regarding waste, the amount generated in 2019 was 752 tons while the2020amountisalsobeinginventoriedandincludedinthegreenhousegasverification(scope3)tobe disclosed in the aforementioned Sustainability Report and website.

(4).CTBCHolding’sgreenhousegasemissionshavebeenverifiedbyathird-partycertificationbody.Forthe boundary and details of the environmental data above, please see the Company’s Sustainability Report and website.

3) No deviation

4) No deviation

4. Social issues1) Has the Company

developed its policies and procedures in accordance with the law and the International Bill of Human Rights?

V 1) The Company’s Code of Corporate Social Responsibility mandates that the Company adhere to the International Bill of Human Rights and relevant laws and regulations. In 2018, the Company established the CTBC Human Rights Policy and the procedures for human rights risks assessment and management. In the future, the human rights risks will be assessed on a regular basis and the improvement and strengthening methods will be enforced to reach the goal of zero human rights risks in employment. The Company established a policy to support human rights in its Code of Conduct and devised work rules in accordance with the regulations of the Labor Standards Act. Furthermore, based on the provisions oftheActofGenderEqualityinEmploymentaswellastheSexualHarassmentPreventionAct,theCompanyestablishedtheRegulationsforPrevention,Complaint,andPunishmentofSexualHarassmentin the Workplace to ensure workplace rights and a harassment-free environment. The Company and its subsidiaries regularly select labor representatives in accordance with the law and convene periodic labor meetings to discuss issues regarding employee rights and welfare.

The Company established a Code of Conduct for the employees stipulating the conduct for business ethics and the obligations that the employees shall bear, the performance of which will be included in theemployee’sannualperformancereview.Inaddition,anyspecificincidentwillbepraisedorpunishedthrough the rules and committee regulating employee incentives and discipline.

1) No deviation

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2) Has the Company formulated and implemented reasonable employee welfare measures (including compensation, leave, andotherbenefits),and are its operating performance and outcomes appropriately reflectedinemployeecompensation?

3) Does the Company provide employees with a safe and healthy work environment? Additionally, does the Company offer regular training in health and safety measures?

4) Does the Company offer its employees effective occupational empowerment training programs?

V

V

V

2) The Company has a comprehensive performance management system that ties employee remuneration to the Company’s strategic goals, operating performance, and individual performance. Employees are offered opportunities for professional advancement based on their performance; those with outstanding results and potential are offered bonuses and training. Through an open and transparent promotion mechanism, the Company enables outstanding talent to rise through the ranks, offering them greater responsibilities and favorable remuneration to drive the positive overall development of the organization.

In most cases, the annual remuneration of a Company employee comprises 12 months’ salary and a duty bonus, along with a year-end bonus based on the Company’s operating performance and the individual employee’s performance. There was virtually no gender pay gap at the managerial or general level at the Company’s Taiwan sites in 2019. The Company’s average annual pay raise was 3.0%; the highest raise was 11.0%, which included a promotional increase.

All leave is handled in accordance with the Labor Standards Act, Act of Gender Equality in Employment, and Regulations of Leave-Taking of Workers. We offer employees who miscarry before the third month of pregnancy10daysofpaidmaternityleave,whichexceedsstatutoryrequirements.Ourwelfaremeasurescomprisetwosystems,corewelfareandflexiblewelfare,aswellasothercaremeasuresthatenableouremployees to achieve a healthy work–life balance.

In2015,TaiwanLife’slaborunionsignedacollectiveagreement,markingthefirstsuchagreementeversigned in Taiwan’s life insurance industry.

3)(1). The Company provides employees with a comfortable, safe, and healthy work environment through a

comprehensive range of facilities and programs, including cafeterias, breastfeeding rooms, a library, a stafflounge,andfitnesscenters.

(2).Softmeasuresincluderegularoccupationalhealthandsafetyeducationandtrainingaswellasfiredrills, all elevating awareness among the staff regarding unsafe environments and behavior and familiarizingthemwithfireemergencyprotocols.Ourapproachisaimedateliminatingpotentialhazards at their source. We have also implemented a smoking ban as well as entry access control at our work locations. Every quarter, our Occupational Health and Safety Committee evaluates workplace health and safety protection provisions, reviews the results from periodical monitoring of workenvironments(e.g.,officeCO2concentrationsanddesklighting),andoffersemployeehealthexaminationstoestablishasafeandsecureworkenvironmentforallstaff.

(3). In 2018 and 2019, CTBC Bank and Taiwan Life received ISO 45001 Occupational Health and Safety ManagementSystemscertificationrespectively,demonstratingouraspirationandcommitmenttooccupational health and safety.

4) Depending on its business needs and work requirements, the Company sends employees to participate ininternalorexternaltrainingprogramsortoattendoverseasseminars.Thetrainingcoursesincludeprofessional competency and skills training, management skills training, practical operations, language, andexperiencesharing.Basedonemployeedevelopmentandorganizationalneeds,jobrotationsaregranted as necessary.

2) No deviation

3) No deviation

4) No deviation

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5) Regarding the health, safety, and privacy of its customers as well as the marketing and labeling of its products and services, does the Company comply with laws and regulations and international standards in formulating its consumer protection policies and grievance procedures?

6) Has the Company formulated and implemented a supplier management policy that requires suppliers to comply with relevant laws and regulations regarding environmental

protection, occupational health

and safety, and labor rights?

V

V

5) The Company’s marketing and labeling of products and services are handled in accordance with the FinancialHoldingCompanyAct,BankingAct,andotherregulationsasspecifiedbythecompetentauthorities of various industries. We also employ strict internal controls as well as consumer protection policies and grievance procedures. Our subsidiary Taiwan Life offers insurance products and services guided by the concept of sustainable business, upholding the principle of fair treatment of customers andimplementingacustomer-firstcorporateculturewiththecustomerexperienceatitscoreinordertomeetthediversedemandsofcustomers.Theseinsuranceproductsandservicesfollowrelevantexternalconsumer protection laws and internal regulations, such as the internal Insurance Product Design Procedure and the Guidelines for Advertising Management, and whether the various indicators are implemented are regularly checked.

6)Inordertoadvanceenvironmentalsustainabilityandfulfillitscorporatesocialresponsibility,theCompanymaintains its Principles for Supplier Management as the basis for screening and managing suppliers. In addition, all its supply vendors have signed its Supplier Human Rights and Environmental Sustainability Commitment, pledging to comply with standards relating to environmental protection, occupational health and safety, labor rights, and ethical conduct. Moving forward, we will further enhance the sustainability-related understanding, awareness, and actions of suppliers through training and risk surveys.

5) No deviation

6) No deviation

5. Does the Company use the internationally accepted reporting standards or guidelines in reference when compiling reports on CSR for disclosing non-financialbankinformation? Have these previous disclosure reports obtained the assuranceorconfirmingopinion of a third- partyverificationorganization?

V In May 2020, the Company received an Independent Assurance Opinion Statement, issued by the British Standards Institution (BSI), for its most recent sustainability report, namely the 2019 CTBC Sustainability Report.BSIverifiedthemateriality,inclusiveness,andresponsivenessofthereportbasedontheAA1000Assurance Standard and that the disclosed contents were in accordance with the Global Reporting Initiative Standards: Core option. Moreover, our Sustainability Report embraces the integrated reporting spirit of the International Integrated Reporting Council. The disclosures therein are also partly based on the Sustainability Accounting Standards Board’s standards for commercial banks.

No deviation

6. IftheCompanyhasestablishedthecorporatesocialresponsibilityprinciplesbasedontheCorporateSocialResponsibilityBestPracticePrinciplesforTWSE/TPExListedCompanies, please describe any discrepancy between the principles and their implementation: No deviation.

7. Other important information to facilitate a better understanding of the Company's corporate social responsibility practices:1)TheCompanypublisheditsfirstCSRreportin2007.Thisyearmarksthe14thyearofthereport,whichprimarilycoverstheCompany'seffortsintheareasofcorporate

sustainability, corporate governance, environmental sustainability, employee care, product service, and social investment. Through its CSR reports, the Company aims to fulfillitsresponsibilitytoallstakeholders,includingemployees,customers,shareholders,andthepublicandtoprovidethemwiththebestcare.

2) For information regarding other aspects of CTBC Holding's CSR efforts, please refer to the CSR section of the Company's website: http://www.ctbcholding.com/content/dam/twhoo/file/csr/en/index.html.

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3.3.7 Implementation of business integrity management, and deviations from the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies and reasons thereof

Assessment item

ExecutionstatusDeviations from the EthicalCorporateManagementBestPractice Principles forTWSE/TPEx

Listed Companies and reasons thereof

Yes No Summary

1. Establishment of integrity policies and solutions(1) Has the Company established

integrity policies approved by the Board of Directors and disclosed, inamemorandumorexternalcorrespondence, the policies and practices it has in place to maintain business integrity? Are its Board of Directors and senior management actively implementing these policies and practices?

(2) Has the Company established an evaluation mechanism to periodically analyze and evaluate business activities that have a relatively higher risk of unethical conduct and thus taken steps to prevent the unethical occurrences listed in Paragraph 2 of Article 7 of the Ethical Corporate Management Best Practice PrinciplesforTWSE/TPExListed Companies?

(3) Has the Company established and implemented measures against dishonest conduct, and does it periodically review and amend them? Are these measures supported by proper procedures, behavioral guidelines, disciplinary actions, and compliance systems?

V

V

V

(1) The Company established Ethical Corporate Management Best Practice Principles and Procedures for Ethical Management and Guidelines for Conduct, which were approved by theBoardandaredisclosedonitswebsiteandinexternalcorrespondence.TheBoardofDirectors,executives,andallemployeesarestrictlyrequiredtocomplywiththeseregulations.Directorsandexecutivesarerequiredtoissuestatementsofethicalmanagementcompliance.

(2) The Company has a Risk Governance Policy as its supreme guide for daily risk management. It regularly assesses the risks arising from business activities based on business type and management needs. The Company also maintains relevant rules to prevent unethical conduct in its business activities covering at least those listed in paragraph 2 of Article 7 of the EthicalCorporateManagementBestPracticePrinciplesforTWSE/TPExListedCompanies,includingbribery,conflictsofinterest,andtheofferingorreceivingofimproperbenefits,inorder to ensure the Company’s ethical corporate management.

(3) TheCompanyforbidsdishonestconduct,thescopeofwhichisdefinedintheCodeofConduct (for employees), Code of Ethical Conduct (for directors, managers, and other personnel authorized to manage and sign for the Company), Ethical Corporate Management Best Practice Principles, Procedures for Ethical Management and Guidelines for Conduct, Procedures for Handling Illegal and Unethical or Dishonest Behavior, and Policy for the Prevention of Insider Trading. Integrity policies are implemented through education and training and relevant internal control measures. Relevant policies and regulations are examinedandamendedregularly.

No deviation

No deviation

No deviation

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Yes No Summary

2. Implementation of ethical corporate management(1) Does the Company evaluate the

integrity of all counterparties with which it has business relationships? Are integrity clauses included in the agreements it signs with business partners?

(2) Does the Company have a unit under its Board of Directors handling business integrity-related matters? Does this unit report its integrity policies and unethical conduct prevention programs, as well as their implementation, to the Board of Directors on a regular basis (at least once a year)?

(3) Does the Company have any policypreventingconflictsofinterest and channels facilitating thereportingofsuchconflicts?

(4) Has the Company implemented effective accounting and internal control systems for maintaining business integrity? Are relevant audit plans made by the internal auditors based on unethical conductassessmentstoexaminecompliance with unethical conduct prevention or are these audit done by the Company’s CPAs?

(5) Does the Company organize internalorexternaltrainingonaregular basis to maintain business integrity?

V

V

V

V

V

(1) The Company avoids transacting with any party that has a record of dishonest business conduct. When dealing with a transaction party, the Company adopts a know-your-customer (KYC) approach and checks their names with the sanctions list under the Counter-Terrorism Financing Act. In addition, the Company has a contract management policy, which requires transaction agreements to be reviewed by the legal unit in advance to ensure the rights and obligations of the Company and the legality of the transaction. It is recommended that the contracts signed with agents, suppliers, customers, and other business-transaction parties include clauses mandating compliance with the ethical management policy of the Company and effectuating termination by either party at any time without condition if the counterparty is involved in dishonest conduct.

(2) Integrity is one of CTBC Holding’s core values. The Company established the Ethics and Integrity Committee under the Board of Directors as a designated unit charged with implementing business integrity policies and prevention methods and supervising the enforcement of business integrity in the Company. The committee sets an annual plan at the beginning of every year. In addition, the Company tasks the Corporate Governance Department with enforcing business integrity and the education training thereof. The implementation status of ethical management is reported to the Ethics and Integrity CommitteeandtheBoardofDirectorseverysixmonths.TheCompanyutilizesarollingapproach to review and adjust its ethical management policies and to advance prevention actions so as to ensure transparency, integrity, and compliance with laws and regulations.

(3) TheCompanyhaspoliciesandregulationspreventingconflictsofinterestintheSpecificationof Procedure for the Board of Directors (for directors), Code of Conduct (for employees), and Procedures for Ethical Management and Guidelines for Conduct. These policies and regulationshavebeeneffectivelyimplemented.Article16oftheSpecificationofProcedurefortheBoardofDirectorsspecifiesthepolicyfordirectorrecusaloverconflictsofinterest.If any director or juristic person represented by a director is an interested party regarding any agenda item, and when such a relationship is likely to prejudice the interests of the Company or when the director deems it necessary or the Board resolves for the director to recusehimselforherself,thedirectorshallexplaintheimportantcontentoftheconflictsandmay not participate in discussion or voting. Furthermore, the director shall recuse himself or herselfduringdiscussionandvotingonthatitemandmaynotactasanotherdirector’sproxytoexercisevotingrightsonthatmatter.PertheCodeofConduct,theCompanyrequiresitsemployeestobeawareofsupplementalemploymentthatmayinfluencetheirjobperformanceoranysituationthatmayconstituteaconflictofinterest,avoidanypersonalactionorpecuniaryadvantagethatmayconflictwiththeCompany’sinterests,andpreventanyabuseofpowerforpersonalgainortheinappropriatebenefitofothers.

(4) The Company's accounting system is based on generally accepted accounting principles and its internal control system is developed in accordance with the Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries. The annual audit plan integrates integrity and ethics values into the control environment through internal audits and self-inspection systems. Each unit of the Company ensures that all systems and schemes aimed at preventing dishonesty are implemented. The accountantsoftheCompanyalsoperiodicallyexaminetheimplementationofitsinternalcontrol.

(5) The Company tasks its Corporate Governance Department with producing educational materials on ethical management and regularly providing training to directors, supervisors, managers,andemployees(excludingdispatchedworkers)oftheCompanyanditssubsidiariesthrough printed materials, online courses, or emails. The courses cover the Company's ethical management policies, prevention programs, operating procedures, and content regarding anti-corruption and insider trading prevention. The total number of personnel trained in 2020 was 22,466. Educational materials on ethical management are provided to newly elected directors whentheytakeofficeandtraininginethicalmanagementisincludedintheorientationprovided for newly recruited employees.

No deviation

No deviation

No deviation

No deviation

No deviation

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Assessment item



Yes No Summary

3. Operation of the Company's whistleblowing system(1) Does the Company provide

incentives and means for employees to report malpractice? Does the Company assign dedicated personnel to investigate malpractice reports?

(2) Has the Company implemented any standard procedures or confidentialitymeasuresforhandling malpractice reports?

(3) Does the Company provide proper whistleblower protection?

V

V

V

(1) The Company has in place Procedures for Handling Illegal and Unethical or Dishonest Behavior. Whistleblowers may report any illegal, unethical, or dishonest behavior to the Companybyphone,email,orpostbyprovidingsufficientinformationfortheCompanyto properly follow up on the matter, in which case the Company will assign a designated unittohandlethereports.TheCompanyhasacompletesetofspecificationsforaccepting,investigating, and handling such matters.

(2) TheCompanyincorporatesstandardprocedures,includingconfidentialitymeasures,intotheProcedures for Handling Illegal and Unethical or Dishonest Behavior and Procedures for Ethical Management and Guidelines for Conduct to guide the handling of reports of dishonest employee conduct. The procedures include public reporting channels, a designated unit to investigatesuchreports,themaintainingoftheconfidentialityofthehandlingprocessandrelevant information, the opportunity for those accused of wrongdoing to defend themselves during the investigation, and protection of the whistleblowers and investigators. If an employeeisconfirmedtohaveviolatedtheprinciplesofethicalmanagement,theywillbepenalized in accordance with relevant regulations and the integrity business procedures or managementsystemwillbeexamined.TheCompanyshalltaketheinitiativetoinformorfileareportorcomplaintwithrelevantauthoritiesifaninvestigationdiscoversanymaterialcontingency or legal violation.

(3) Personnel who accept, investigate, or otherwise participate in the handling of reports shall ensuretheconfidentialityofwhistleblowers’identitiesandthecontentoftheirreports.Foranyviolationoftheabovementionedconfidentialityobligation,theComplaintInvestigationand Review Committee may terminate the violator’s participation in the case and, depending on the situation, refer the violator to the human resources unit to face penalties and relevant liabilities. The Company may not unfairly or unfavorably treat whistleblowers or anyone who assists them in whistleblowing, as stipulated by the relevant regulations. Such treatment excludesactionsthatarenotaimedatthewhistleblowerbutratheraretheresultofanorganizational restructuring, merger, dissolution, or transfer of personnel due to business needs or situations where the whistleblower is penalized after being found by the Company to have violated the law or engaged in other misconduct. If a whistleblower’s report is verifiedandresultsinasignificantcontributionandeconomicbenefittotheCompany,thewhistleblower may be commended or properly awarded after approval by the Complaint Investigation and Review Committee and the Audit Committee.

No deviation

No deviation

No deviation

4. Enhancement of information disclosure

Does the Company disclose its integrity principles and related progress on its website and the Market Observation Post System?

V The Company has both Chinese and English versions of its website to disclose integrity management-related regulations and information. The site’s content is updated as necessary by various units depending on the nature of the information. The Company also discloses its Ethical Corporate Management Best Practice Principles and Code of Ethical Conduct on the Market Observation Post System and announces related information in accordance with the Taiwan Stock ExchangeCorporationProceduresforVerificationandDisclosureofMaterialInformationofCompanies with Listed Securities.

No deviation

5. If the Company has established Ethical Corporate Management Best Practice Principles in accordance with the Ethical Corporate Management Best Practice Principles for TWSE/TPExListedCompanies,describeanydiscrepancybetweentheprinciplesandtheirimplementation:

TheCompanyusedtheEthicalCorporateManagementBestPracticePrinciplesforTWSE/TPExListedCompaniesasthemodelforitsEthicalCorporateManagementBestPracticePrinciples.TheCompanymodifiesthecontentoftheprinciplesasnecessarytoalignthemwithlegalandpracticalrequirements,anditprovidesregularreportson the status of ethical management in the Company to the Ethics and Integrity Committee and the Board of Directors. All Company operations are in accordance with the Company's Ethical Corporate Management Best Practice Principles.

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Assessment item



Yes No Summary

6. Other important information that facilitates a better understanding of the Company's implementation of ethical corporate management (e.g., details about the evaluation and amendment of its ethical management rules):(1) The Company has an Ethics and Integrity Committee under its Board of Directors as a designated unit charged with making business integrity policies and prevention

plans and supervising the compliance thereof, strengthening the functions of the Board, and implementing business integrity in the Company’s culture and management.(2) The Company established relevant ethical management rules such as Code of Ethical Conduct and Ethical Corporate Management Best Practice Principles for all units

tofollowandtoimplementethicalmanagement.Inaddition,inaccordancewiththeEthicalCorporateManagementBestPracticePrinciples,directorsandexecutivesarerequired to issue statements of ethical management compliance.

(3) The Company established Procedures for Handling Illegal and Unethical or Dishonest Behavior. It also maintains whistleblowing channels, namely a phone line, email inbox,andmailbox,thecontactdetailsforwhicharepublishedonthe“Legaldisclosure”pageofitswebsiteandwereannouncedinternally.

(4) In accordance with the Procedures for Ethical Management and Guidelines for Conduct, before engaging in a business transaction, the Company investigates any potential agent, supplier, customer, or other business-transaction partner to determine its legality, ethical management policies, and whether it was involved in dishonest conduct, thus ensuring that it operates in an ethical and transparent way and will not ask for, offer, or accept bribes. During the abovementioned investigation, proper examinationmeasuresmaybetakentoexaminesuchtransactionpartner’sownbusinesspartnerstounderstandtheconditionofitsethicalmanagement.

(5) The Company regularly arranges for its directors to attend corporate governance and ethical management courses to improve their supervisory and corporate managementcapabilities.In2020,thedirectorsattendedmultiplecoursesspecificallyaimedatfurtheringtheirprofessionalknowledgeofcorporategovernanceandethicalmanagement,namelyReflectionsandProspectsonAnti-MoneyLaunderingRiskManagement,andCorporateGovernancePracticeDevelopmentandCorporateIntellectualPropertyManagementStrategies.Inaddition,theCompanyrequiresallitsdirectorsandemployees(excludingdispatchedworkers)tocompleteannualethical management training.

3.3.8MattersrequiredtobedisclosedbytheCorporateGovernanceBestPracticePrinciplesforFinancialHolding CompaniesPlease refer to the CTBC Holding website (http://ir.ctbcholding.com/html/gov_practice.php).

3.3.9Othermaterialinformationregardingcorporategovernance

1) Please refer to the CTBC Holding website (http://ir.ctbcholding.com/html/gov_practice.php).

2) The remuneration brackets of non-manager senior-level employees for 2020 are disclosed as follows.Theremunerationincludesannualsalary,accruedterminationbenefits,bonuses,specialallowances,andprofitdistributableasemployees’compensation.PerryChang:NT$20,000,000–NT$35,000,000Chien-FuLin:NT$5,000,000–NT$10,000,000MarkChen:NT$10,000,000–NT$20,000,000

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3.3.10MattersrequiredtobedisclosedbytheCorporateGovernanceBestPracticePrinciplesforFinancial Holding Companies:

1) InternalControlStatement

Internal Control StatementTo: Financial Supervisory Commission,

On behalf of CTBC Financial Holding Co., Ltd., we hereby certify that for the fiscal year of 2020, the Company has duly complied with the Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries in establishing our internal control system, enforcing risk management, auditing the same by an independent audit unit, and reporting the results thereof to the Board of Directors and Audit Committee on a periodic basis.

Uponprudentevaluation,we,theundersigned,herebycertifythat,withtheexceptionoftheitemslistedintheattachment, the Company’s internal control and compliance with relevant laws and regulations were effectively implemented in 2020.

This statement shall form part of the Company’s annual report and prospectus to be disclosed to the public, and we are liable for false information or omissions in its material contents under Articles 20, 32, 171, and 174 oftheSecuritiesandExchangeAct.

Sincerely yours,

Chairman

President

Chief Auditor

ChiefComplianceOfficer

Taipei, Taiwan, R.O.C.

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2) IssuesandcorrectiveactionsforCTBCHolding’sinternalcontrolstatementAs of Dec. 31, 2020

Issue for improvement Corrective actionsTarget

completion date

1.The2020FSClimited-scopeexaminationofCTBCBank’sOverseasBranchandSubsidiaryManagementfoundthattheHeadOfficeshallstrengthenitssupervisionoftheNewYorkBranchinreviewingtherootcausesandcorrectiveactionsofauthority’sexaminationfindings.

(1)CTBCBank’sHeadOfficehasestablishedinternalguidelines to stipulate the supervisory roles and responsibilities for overseas units and enhanced the monitoring of the root causes and corrective actions of theNewYorkBranch’sexaminationfindings.

(2) The New York Branch has updated relevant transaction-monitoring procedures for compliance. Moreover, the HeadOfficewillamenditsproceduresformanagingtheAML/CFTexaminationfindingsofoverseasbranchesand subsidiaries.

(1) Completed

(2) March 31, 2021

2.The2020FSClimited-scopeexaminationofCTBCBank’sAML/CFTandCounteringtheProliferationofWeaponsProgramfounddeficienciesinthefollowingareas:(1) TheHeadOffice’ssupervisionofoverseasbranchesandsubsidiariesinreportingmajor

incidents/events(2) Thereviewofname-screeningdatabaselistsandsystemconfiguration

(3) The operation of the cash collection service

(1) The monitoring mechanism for reporting and tracking of major incidents/events was reinforced.

(2) Relevant guidelines were amended and the review of the name-screening database lists was completed. Effectivenesstuningandbenchmarkingwereexecutedforthesystemconfigurationofoverseasbranchesandsubsidiaries. In addition, for the Philippine subsidiary, a third-party consultant will be engaged to assess the compliance and effectiveness of the name-screening process.

(3) The relevant cash collection process was enhanced.

(1) Completed

(2) March 31, 2021

(3) Completed 3.The2019FSClimited-scopeexaminationofTaiwanLife’ssecuritiesinvestmentfounddeficienciesinthefollowingareasandimposedfourreprimands:(1) Procedure and approval levels for the evaluation of foreign stocks after suspended trading

were not stipulated.(2) The control mechanism for bond ETF investment and trading was not established.(3) The control mechanism for market liquidity and concentration risk management was

inadequate.(4) Therewasnocheckingmechanismoranalysisofvariancesforproxyhedgetrading.

Relevant guidelines were amended. Completed

4.The2019FSClimited-scopeexaminationofCTBCHolding’srelatedpartytransactionmanagementfoundthattheprocessofTaiwanLife’sidentificationofrelatedpartiesengagedin real estate transactions was inadequate. As a result, the FSC imposed one reprimand.

Relevant guidelines were amended to strengthen the procedure for identifying related parties.

Completed

5. The FSC found a Taiwan Life real estate investment did not meet the requirements of immediate usage and derived earning rate. As a result, the FSC imposed an administrative fineofNT$1,000,000andorderedTaiwanLifetoleasetherealestateinconcernbeforeJune30, 2021.

(1) The lease will be made within the prescribed period.(2) Quarterly progress reports are submitted to the Board

and then forwarded to the FSC.

June 30, 2021

6.The2020FSClimited-scopeexaminationofTaiwanLife’sfinancialconsumerprotectionfounddeficienciesinthefollowingareasandimposedanadministrativefineofNT$1,800,000and two reprimands:(1) The underwriting process for people with a mental or physical disability did not conform

with the law. (2) ① There were mistakes in the calculations for reducing the guaranteed renewal rate for

personal injury insurance. ② There was no checking and control mechanism for funds from policy loans added

ontoexistinginvestment-linkedproducts.(3) Sales personnel were not informed through a bank insurance broker/agent of new policy

telephone interviews.

(4) The declined underwriting notice for mental and physical disability products did not include the reason for declination.

(5) Policyholders were not fully informed of old policies for the same product that could be reinstated when purchasing a new policy; the control mechanism was inadequate for checking the IP and email addresses of sales representatives and policyholders.

(1) The underwriting process was restated and the case will bere-examinedbytheseniorunderwriter.

(2) ① Relevant cases were checked and the overcharges will be returned.

② A control mechanism was established.

(3) Procedures for informing sales personnel through bank insurance brokers/agents of unusual cases arising from phone solicitation were implemented.

(4) System settings and checking mechanisms were adjusted.

(5) Relevant checking and control mechanisms were established.

Therectificationaction was submitted to the competent authority on Nov. 23, 2020

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Issue for improvement Corrective actionsTarget

completion date

7.The2019FSCfull-scopeexaminationofTaiwanLifefoundthatthecompletenessoftheproject evaluation and decision management for the new core system should be strengthened:(1) The potential risks of the project were not prudently assessed and discussed.

(2) The project management team lacked a clear internal control oversight mechanism of the second line of defense.

(3) There was a lack of a prudent contracting process.

(4) Thepricenegotiationprocessforaccountingfirmselectionwasinappropriate.

(1) TaiwanLifereassessedandreportedtherectificationaction to the Board of Taiwan Life.

(2) Taiwan Life adjusted the project management organization to incorporate a monitoring mechanism of the second line of defense.

(3) Taiwan Life revised the internal control process for contractingandspecifiedwhichdocumentsshouldbeattached.

(4) Taiwan Life revised the procurement guidelines to strengthen vendor selection.

(1), (2),and (4) The follow-up rectificationaction was submitted to the competent authority on Dec. 31, 2020

(3) Completed

8.The2020FSClimited-scopeexaminationofTaiwanLife’sriskmanagementfoundthefollowingdeficienciesinrisklimitsetting:(1) The content of risk limit setting proposal submitted to the Board of directors was

incomplete.(2) The setting and approval of risk limits were not recorded with proper documentation.(3) The setting of minimum traditional hedge ratios was inconsistent with internal procedures

and business planning.

Relevant guidelines will be amended, the content submitted to the Board will be improved, and the approval and calculation documents will be kept.

Therectificationaction was submitted to the competent authority on Feb. 19, 2021, and will be completed by March 31, 2021

9.TheFSC2019full-scopeexaminationofCTBCInsurancefoundthatthecompanyhadidentifiedirregularpremiumpaymentsmadeviacreditcardbuthadnotestablishedacontrolmechanism for reasonableness evaluation and record keeping. As a result, the FSC imposed anadministrativefineofNT$600,000.

The checking mechanism for irregular payments made via credit card was adjusted.

Completed

10.TheFSC2020full-scopeexaminationofCTBCSecuritiesfoundthattheidentificationofbeneficialownersforprivatefundcustomersandtheperiodicreviewofcustomerswerenotwellconducted.Asaresult,theFSCimposedanadministrativefineofNT$500,000.

Personneltrainingwasstrengthened.Customernotification,follow-up, and transaction control for overdue reviews were improved.Furthermore,anautomaticnotificationfeatureisunder development.

April 30, 2021

3) CPAauditreportsrequiredtobedisclosedincaseswhereCPAisentrustedtoauditoninternalcontrolsystem:None.

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3.3.11 Inthepasttwoyearsasofthedateofpublication,penaltiesforunlawfulpracticeshandedtotheCompanyanditssubsidiariesandactionstakentocorrectmajordeficiencies

Disclosure Cause and amount Corrective actions

Indictments of managers or employees relating to unlawful conduct performed in the course of doing business (Note)

CTBC Bank1. On Aug. 26, 2019, CTBC Bank employees surnamed Chang and

Lin were indicted over multiple alleged violations of the Banking ActandSecuritiesandExchangeActrelatingtosuspectedinvolvement in related-party transactions and their failure to disclose these related- party transactions as regulations demand.

2. On Sept. 12, 2019, CTBC Bank employees surnamed Chang, Hung, Ke, and Chen were indicted over alleged violation of the SecuritiesandExchangeActandBankingAct.

All cases listed on the left have entered the trial phase and are currently awaiting hearing. According to internal information from CTBC Bank, neither the Bank nor the Company have suffered any losses from the aforementioned transactions. Therefore, the current assessment is that thesecasesdonothaveanysignificantimpactontheoperationsofCTBCBank or the Company or on shareholders' equity.

Unlawful practices penalized by the FSC, corrective actions ordered by the FSC, or disciplinary actions taken by the FSC in accordance with paragraph 1 of Article 54 of the Financial Holding Company Act, or the punishment of internal personnel for the violation of internal control policies, which may substantially impact shareholder equity or the price of the Company’s securities or is subject to Article 2 of the Regulations Governing Public Disclosure by the Financial Supervisory Commission of Material Enforcement Actions for Violations of Financial Legislation

CTBC Bank1. On March 15, 2019, CTBC Bank received a penalty letter from theFSCstatingthatitwasfinedNT$240,000forviolationsoftheSecuritiesandExchangeActandotherregulationsduetothe failure of “the special trust account opened for the National Development Fund managed by CTBC Bank to strengthen investments in strategic services” to transfer the shares it held in accordance with relevant regulations.

<Letter No. Jin- Guan- Zheng-Jiao- Fa-Zi-1080307016, dated March 12, 2019>

2.AformerfinancialadviseratCTBCBank'sLimingBranchwasinvolved in the misappropriation of customers’ funds as well as abnormalfundtransactionswithcustomers.TheFSCfinedCTBCBankNT$4millioninaccordancewithparagraph7ofArticle129 of the Banking Act, ordered corrections in accordance with paragraph 1 of Article 61-1 of the Banking Act, and ordered that it dismiss the concerned personnel in accordance with subparagraph 3 of the same provision.

<Letter No. Jin- Guan-Yin-Kong-Zi-10802721968, dated Aug. 7, 2019>

3.RegardingthedeficienciesidentifiedintheFSC’sexaminationreport on CTBC Bank's concurrent insurance agency business, the FSC found violations of the Insurance Act and ordered two improvementstobemadewithinonemonth,inadditiontoafineofNT$300,000,inaccordancewithArticles167-2and167-3ofthe Insurance Act, and it ordered three corrections in accordance with paragraph 1 of Article 164-1 of the Insurance Act.

<Letter No. Jin- Guan-Bao-Zong-Zi-10804950931, dated Sept. 16, 2019>

1.1) Strengthened the review system implemented before and after

trading.2) Continued to enhance the education and training of relevant

personnel.

2.1) Corrected the threshold for abnormal account activity monitoring

reports.2) Added a monitoring mechanism for the associated accounts of financialadvisers.

3) Conducted regular communication on matters warranting attention regardingfinancialadvisers'handlingofover-the-countertransactionson behalf of customers.

4)Strengthenedthetrackingmechanismsofunderwritingnotificationsforinsurancecasesandaddedanotificationprocessfornon-underwriting cases.

5) Implemented regular communication on risk awareness.3.1)Addedasystemcheckmechanismandexpandedself-inspection

coverage.2) Strengthened the inspection of record keeping for insurance

solicitation documents.3) Implemented a system mechanism for cross-checking recently

approved mortgage or credit applications when a customer applies for insurance, strengthened the implementation of KYC procedures, andmodifiedtheinformationsystemandtheprocessthroughwhichsolicitorsfilloutreports.

4) Conducted regular communication on compliance with telemarketing-related laws.

5) Implemented a system control to ensure that all licenses of former solicitorsoftheBankhavebeencancelledinordertofulfillthecompletion of relevant cancellation processes.

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Taiwan Life1. The FSC inspected the real estate investment business of Taiwan Life(ReportNo.107F139)andfounddeficienciesthatviolatedthe Insurance Act and relevant regulations. In accordance with paragraph 4 of Article 171-1 and paragraph 1 of Article 149 of the InsuranceAct,afineofNT$600,000wasimposed.

<Letter No. Jin- Guan-Bao-Shou- Zi-10804963612, dated Dec. 30, 2019>

2. The FSC inspected the business of AML, CFT, and prevention of proliferation of weapons of Taiwan Life in 2018 and found certain defects (Report No. 107F114). The FSC therefore ordered Taiwan Life to take four corrective actions in accordance with paragraph 1, Article 149 of the Insurance Act.

<Letter No. Jin- Guan-Bao-Shou- Zi- 10704283162, dated Jan. 11, 2019>

1.1) Taiwan Life, per the FSC’s instruction, presented the processes ofprocurementandfinalbidsinrelationtothesaidrealestateinvestmenttotheBoardofDirectorsforratification.

2) Taiwan Life amended its Real Estate Investment and Construction Management Regulations on July 26, 2019, stipulating that the ProcurementDepartmentshallexaminefirms’qualificationsandthat a log of such reviews shall be documented for every important construction project.

3)Goingforward,TaiwanLifeshallparticipatewiththeExecutionandManagement Committee in the manner reported to the Insurance Bureau.Relatedopinionsshallbeexpressedthroughthecommittee,but shall not be involved directly in the management or operation of the invested company, to avoid concerns of intervention in the invested company’s management.

4)Toregulatetheselectionofpartnerfirms/vendors,theamendmentofReal Estate Investment and Construction Management Regulations was approved by the President of Taiwan Life on July 26, 2019, in whichtheperformancecapacityofthepartnerfirms/vendorswouldbetakenintoaccountduringthequalificationreviewprocess.InJuly 2019, the Real Estate Investment Assessment Acquisition and Handling Guidelines were amended to prescribe that a mandate agreementshouldbeexecutedbeforeanagentisengaged.Goingforward, Taiwan Life will strictly follow these guidelines.

5) Taiwan Life instructed, according to the opinion of the competent authority, the invested company to review and amend the Rules GoverningtheOperationofExecutionandManagementCommitteeandtheauthorizationchartthereoftoexcludeitemsnotrelatedtotheresponsibility of the committee.

6) The invested company of Taiwan Life amended the authorization chart clearly specifying the approval levels and process of related-partytransactions.TaiwanLifewillalsoexerciseitssupervisoryrighttotheinvestedcompanythroughtheExecutionandManagementCommittee.

7) Taiwan Life will make efforts to ensure that the invested company dulyfollowsthesigningandchop-affixingprocess.

2.1)TaiwanLifemodifiedandlauncheditssystemparametersperthe

inspection opinions and also uploaded the relevant cases to the tradinglogfileofthesystem.

2)① Taiwan Life developed relevant training materials regarding the

review of corporate client by citing the defective case founded.② Corporate clients’ review levels were escalated to enhance the case

review mechanism.③Newsystemcheckpointsweresettofacilitatetheidentificationprocessofbeneficialownerofcorporateclients.

④Whentheinformationofbeneficialowner(s)holding25%(ormore)shares of corporate client is not available, Taiwan Life will raise the client risk level in the system and enhance customer due diligence upon establishing new business relations.

3)① Taiwan Life regularly reviews the rationality of the risk values and

makes adjustments in accordance with the rules if overestimated risks areidentified.

② Taiwan Life conducted a comprehensive review of its risk calculation,especiallyforthoseexceptionalcircumstances,andcarried out double checks to ensure the risk factors are reasonable.

4) Taiwan Life reiterated its advocacy and provided relevant training by ways of case study in order to enhance the money- laundering review skills of operating personnel.

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3.TheFSCconductedexaminationonAML/CFTandcounteringthe spread of weapons operations among high-risk businesses and products of the Taiwan Life (Report No. 108F111), and found deficienciesthatweredeemedobstructivetosoundmanagement.As a result, a corrective action was ordered.

<Letter No. Jin- Guan-Bao-Shou- Zi-10804310612, dated Oct. 1, 2019>

4. Taiwan Life violated the Insurance Act and relevant regulations in the “CTBC Holding Taichung Financial Building” real estate investmentproject.AfineofNT$1millionwasimposedbytheFSC accordingly.

<Letter No. Jin-Guan-Bao-Shou-Zi-10904936682, dated Sept. 15, 2020>

5.TheFSCinspectedthefinancialconsumerprotection(ReportNo.109F118)ofTaiwanLifeandfounddeficienciesthatviolatedthe Insurance Act and relevant regulations. In accordance with paragraph5ofArticle171-1oftheInsuranceAct,afineofNT$1.8millionwasimposedandtwocorrectiveactionswereordered according to paragraph 1 of Article 149 of the same law.

<Letter No. Jin- Guan-Bao-Shou-Zi-11004902542, dated Jan. 22, 2021>

3. Taiwan Life has amended its Customer Transaction Monitoring Guidelines addressing the typology that “when a client pays a large amount of insurance premiums (including for international transactions), and later applies for a large insurance loan or terminates the insurance policywithinashortperiodoftimewithoutreasonableexplanations”,and the threshold amount for insurance fees thereof.

4.Taiwan Life has been actively attracting investment and soliciting businesses. Calculated using the method provided by law, the rental rate was 70.24% as of Dec. 31, 2020, and the annualized rate of return was 1.831%. It is estimated that the building “can be used immediately and with a reasonable rate of return” by June 30, 2021.

5.1) The following improvements have been made:① The underwriter shall clearly specify on the underwriting checklist

the basis of determination. For policies involving people with a mental or physical disability, the policy shall be further reviewed by a senior underwriter of authorization level 5 or above. A relevant system was set accordingly for checking.

②Forpoliciessolicitedviatelemarketingandnotedasanexceptionon the underwriting assessment, the sales channel shall either be notifiedtochangethepolicyto“proposedbysalespersonnel”orbeforwarded to an in-person sales channel.

2) A system audit mechanism was completed on Oct. 6, 2020; accordingly, for policies determined to be postponed, denied, or cancelled, the case can be closed only if the reasons for not underwriting stated in the Notice of Denied Underwriting have been input into the system for the record.

3) A notice was issued to the business units of all channels on Oct. 12, 2020, that if a policyholder has lapsed policies of the same insurance type,aphonecallshallbemadeforconfirmation.Thesystemchecking mechanism was completed: upon purchasing new policies, if the insured has lapsed Taiwan Life policies that have quotas or number of policy limits under relevant laws, the salesperson shall assist the policyholder to reinstate the policies and the new polices will be denied underwriting.

4) A checklist for identifying irregular IP addresses was established on Sept. 25, 2020.

5) The Product Department I provided the correct rate conversion calculation method. The Planning Department, based on the refund list provided by Product Department I and the IT Department, completed the refund for policies without contract change records on Dec. 31, 2020, and the refund for policies with contract change records on Jan. 31, 2021.

6) For policyholders who would like to make a payment for an investment-linkedpolicyunscheduledexcesspremium,andwherethesourceofthefundisaloanorpolicyloan,relevantexaminationprocedures shall be conducted. In addition, Taiwan Life shall check whether the policyholder applied for a loan or policy loan with Taiwan Life in the last three months.

7) Taiwan Life established a phone interview transmission system for new policy contracts and requested that cooperating banks, insurance agents, and broker channels follow the relevant phone interview procedures.

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6. The FSC inspected Taiwan Life’s general business (Report No. 108F133) and securities investment business (Report No. 108S047)andfounddeficienciesthatviolatedtheInsuranceActand relevant regulations. In accordance with paragraph 8 of Article 168andparagraph5ofArticle171-1oftheInsuranceAct,afineofNT$3.2millionwasimposedandsevencorrectiveactionswereordered according to paragraph 1 of Article 149 of the same law.

<Letter No. Jin-Guan-Bao-Shou-Zi-11004911602, dated March 23, 2021>

61) Taiwan Life amended on Feb. 20, 2020, its checklist for related-party

transactions to require that public utility service charges and building management fees be included as part of the transaction terms for comparisonintheeventthatTaiwanLifeprovidesofficespaceleasedfrom a third party to a related party for use in telemarketing business. Relevant checklist supporting information shall be submitted to the designated level for approval.

2) Taiwan Life amended relevant customer acceptance rules and adjusted its system checking as follows:

① Starting June 17, 2019, Taiwan Life rejects policy applications if the fund source of the premium payment is a loan or policy loan.

② For customers who applied for loans or policy loans or who rescinded or terminated contracts within three months before purchasing a policy, relevant underwriting procedures must be completed for such policy application to be further processed and the system checking thereof was launched on June 28, 2019.

3)① For Taiwan Life’s manager performance reviews in 2019 and

thereafter, the “annual FVOCI capital gains target amount and rate” were the only standard for capital gains performance evaluations, thusexplicitlyexcludingACsalecapitalgainsfromperformancereviews.

② The Investment Product Operation Model Guidelines stipulate the approval and authorization procedures for the amortized cost of ACselling.MonthlyinvestmentexecutionreportingtotheBoardof Directors shall include the accumulated AC disposal and the adjustment review thereof.

4) Starting Feb. 12, 2020, the recording guidelines include the illustration of the types, characteristics, and investment risks of the linked investment targets to avoid the three major disputes of investment-linked product solicitation in the past two years.

5) ① Starting March 2020, Taiwan Life requires that provisions to the

effect that “account management fees be calculated starting the actual investment date for the discretionary investment account” be included in contracts with investment trust companies.

② Taiwan Life established a product memo checklist to ensure the completion and accuracy of the content of product memos.

6) An address-screening feature was launched on Feb. 20, 2020. In addition, Taiwan Life compared the information of policyholders and sales personnel for the period of April to July 2020, with a scope covering cases solicited by the sales personnel and including data on policyholders’ new password requests and other information changes applied for online.

7)① In risk consolidation reports, Taiwan Life now further distinguishes

risks by country and industry for each linked investment target in order to identify relevant risks.

② Taiwan Life amended its Principles of Review and Principles of Real Estate Loan Products to require that evaluations in connection with the collateral sales of unsold housing loan cases be addressed in case review reports for approval.

8) The parent company of debtors and persons designated by the competent authority are now included as quasi-related parties, as requested.

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9)① The information security unit conducted a vulnerability scan of seven IPsonNov.8,2019,inordertoensurethattheweaknessesidentifiedonthefirstscanhadbeenresolved,andtheRulesofISMS-208Operation Security Management were amended on Nov. 20, 2019, for follow-up assessment compliance.

②IssuesinvolvingplaintextpasswordstoragewereresolvedonSept.12, 2019, and a hash function (SHA256) was adopted to encrypt the information and store it in the database.

③ The operating system and application system of all servers as well as the database system password parameter check items were reexamined,andtheexaminationproceduresforsystemparameterswere rechecked based on the parameter checklist of the hosts.

④TheITDepartmentcompletedthereexaminationoftheauthorityanduse of all accounts.

CTBC Insurance The FSC inspected the general business of CTBC Insurance (Report No.108F139),andfounddeficienciesthatviolatedtheInsuranceActand relevant regulations. In accordance with paragraph 4 of Article 171-1oftheInsuranceAct,afineofNT$600,000wasimposed.<Letter No. Jin- Guan-Bao-Chan-Zi-10904928402, dated July 27, 2020>

CTBC Insurance has established and implemented handling procedures for the sale and payment collection of insurance products. The following improvements have been made:

1) Twelve months’ worth of data were captured to screen for irregular cards.

2) The channel unit shall check for irregular card activities every month according to checklists, and the records thereof shall be signed by the unit head and handed over to the Financial Department for it to update the control list database and keep track for comparison.

3)Thereviewbythesecondlineonthefirstline(systemreview)hasbeen strengthened by continual random checks of the white list andbyexpandingthedata-capturingperiodfromonequartertoawhole year to reinforce the second-line credit card checking and management.

4) There is zero tolerance for any violation of the abovementioned credit card check system and relevant credit card payment collection rules. Any violation shall be sent to the human resources and administration units for disciplinary action.

5) Follow-ups:① New procedures for credit card transactions in paper form were

implemented on May 11, 2020. Random inspections were carried out of cases in which payments were not made by the credit card holder (neither the proposer nor the insured), and the results showed that the cases made by credit card payment authorization attached with proofofidentityhadbeendulyexaminedbythepaymentcollectionpersonnel and reviewed by the unit head.

② For the credit card check mechanism, the credit card payment records sent by the Financial Department in April and May 2020 and categorized by branches (branch institutions) were used for checking the irregular credit cards and the “control card reply form”. The executionofthemechanismwasdeemedappropriate.

③ The Financial Department has set up system controls based on the control cards reported by the units.

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CTBC Securities1. In the concurrent operations in the futures brokerage business

conducted by CTBC Securities, it failed to properly review customers’qualificationsinthecourseofitsuseoftheStandardPortfolio Analysis of Risk (SPAN), thus violating CTBC Securities’internalcontrolpolicies.AfineofNT$240,000wasimposed in accordance with subparagraph 2, paragraph 1, Article 119 of the Futures Trading Act.

<Letter No. Jin-Guan-Zheng- Chi-Fa-Zi-1080306466, dated March 7, 2019>

2. The FSC inspected the general business of CTBC Securities (ReportNo.109S008),andfounddeficienciesthatviolatedrelevant securities regulations. In accordance with paragraph 5ofArticle7oftheMoneyLaunderingControlAct,afineofNT$500,000wasimposedfordeficienciesinvolvingAML/CFTbusiness.

<Letter No. Jin- Guan-Zheng-Quan-Zi-10903654401, dated Nov. 17, 2020>

<Letter No. Jin- Guan-Zheng-Quan-Fa-Zi-1090365440, dated Nov. 17, 2020>

1. 1) CTBC Securities abolished the use of SPAN on April 16, 2018, and

revised its discretionary offsetting procedure.2)CTBCSecuritiesmodifiedtraders’incentiveprogramstolinktraders’bonuseswiththeirreviewofclients’creditandqualifications,therebyimproving the quality of KYC.

2.1) On March 13, 2020, the warrant-issuing system was amended to

comply with the regulations.2) On Aug. 18, 2020, CTBC Securities implemented the Key Points

on the Establishment and Adjustment of Warrant Quote Volatility and Manual Trading Management (further amended based on theFinancialExaminationBureau’sopinionsonNov.23,2020)to regulate relevant procedures regarding price quote volatility adjustments.

3) Since May 5, 2020, CTBC Securities added relevant check items to bond product inquiry forms. For bonds that are below the BBB credit rating and clients who are not professional institutional investors, recorded phone messages on risk disclosure shall be sent upon the client’s consignment to buy. The abovementioned control procedures were made in writing on Aug. 26, 2020; in addition, amendments to monthly statements were completed on July 8, 2020, adding disclosure on relevant investment risks.

4) On Aug. 21, 2020, CTBC Securities added a feature for managing expirationdatesthatconductsafter-hoursexaminationsandautomaticallyissuesnoticesforinvestmentanalysisreportsexpiringinfivedays.

5) On Oct. 6, 2020, CTBC Securities amended its Principles of Centralized Market Futures and Options Products, adding regulations as follows: where the dealer unit receives a notice from the Risk ManagementDepartmentofexceedingthelimitoflossbyatrader,the dealer unit shall notify the broker to clear the bond balance in the trader’s strategic proprietary trading subaccount, so as to strengthen the management of the newly added risk position that the limit-exceedingtraderposed.

6) On June 11, 2020, CTBC Securities completed a check on the beneficialownersoftheprivatefundsmanagedbytheinvestmentcompany which it failed to check previously, and it has strengthened the education and promotion regarding this matter.

7)ThefollowingproceduresweresetonNov.26,2020,andexecutedstarting Dec. 1, 2020: Monthly checklists of risk level change in each branch (high-risk clients becoming medium- or low-risk clients) shall beproduced;salespersonnelshallfilloutthereasonforsuchchangefor the branch manager to review, and the checklists shall be sent to the head of the business unit for approval.

8)Automaticnotificationandcontrolmechanismswereaddedtothesystem. Starting Nov. 5, 2020, automatic trading control based on client ID will be made daily on those failing to complete the periodic examinationwithinthetimespecified;thesystemwillproducedailyalistofclientsdueforcompletionoftheirperiodicexaminationwithinthenexttwomonths.Theclientswillbeinformedviatextmessages, emails, and the CTBC Spark App, and the sales personnel andmanageroftherelevantbranchwillbenotifiedtoconductthecontinualexaminationoftheclients.Itisestimatedtobecompletedby the end of April 2021.

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Individual or total actual annual losses of more than NT$50million,thenatureof the losses, and the loss amounts resulting from fraud, major incidents (e.g., fraud, theft, misappropriation and theft of assets, sham transactions, forged documents and securities, acceptance of kickbacks, losses from natural disasters, lossesfromexternalforces,cyberattacks, and the theft anddisclosureofconfidentialbusiness and customer data), or security incidents caused by failure to comply with safety maintenance regulations.

CTBC BankInJanuary2021,CTBCBankincurredalossamountaboveNT$50millionduetoaformeremployeeinvolvedinfinancialdisputeswithcustomers.

CTBC Bank has taken the necessary actions to strengthen the relevant control mechanism. (It is estimated to be completed by the end of June, 30, 2021)

Other matters required to be disclosed by the FSC

CTBC Bank1.The2020FSClimited-scopeexaminationofCTBCBank’s

Overseas Branch and Subsidiary Management found that the Head OfficeshallstrengthenitssupervisionoftheNewYorkBranchin reviewing the root causes and corrective actions of authority’s examinationfindings.

2.The2020FSClimited-scopeexaminationofCTBCBank’sAML/CFT and Countering the Proliferation of Weapons Program found deficienciesinthefollowingareas:1)TheHeadOffice’ssupervisionofoverseasbranchesand

subsidiaries in reporting major incidents/events2) The review of name-screening database lists and system configuration

3) The operation of the cash collection service

1.1)CTBCBank’sHeadOfficehasestablishedinternalguidelinesto

stipulate the supervisory roles and responsibilities for overseas units and enhanced the monitoring of the root causes and corrective actions oftheNewYorkBranch’sexaminationfindings.

2) The New York Branch has updated relevant transaction-monitoring proceduresforcompliance.Moreover,theHeadOfficewillamenditsproceduresformanagingtheAML/CFTexaminationfindingsofoverseas branches and subsidiaries. (Completed by March 31, 2021.)

2.

1) The monitoring mechanism for reporting and tracking of major incidents/events was reinforced.

2) Relevant guidelines were amended and the review of the name-screening database lists was completed. Effectiveness tuning and benchmarkingwereexecutedforthesystemconfigurationofoverseasbranches and subsidiaries. In addition, for the Philippine subsidiary, a third-party consultant will be engaged to assess the compliance and effectiveness of the name-screening process. (Completed by March 31, 2021.)

3) The relevant cash collection process was enhanced.

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Taiwan Life1.The2019FSCfull-scopeexaminationofTaiwanLifefound

that the completeness of the project evaluation and decision management for the new core system should be strengthened:1) The potential risks of the project were not prudently assessed

and discussed.

2) The project management team lacked a clear internal control oversight mechanism of the second line of defense.

3) There was a lack of a prudent contracting process.

4)Thepricenegotiationprocessforaccountingfirmselectionwasinappropriate.

2.The2020FSClimited-scopeexaminationofTaiwanLife’sriskmanagementfoundthefollowingdeficienciesinrisklimitsetting:1) The content of risk limit setting proposal submitted to the

Board of directors was incomplete.2) The setting and approval of risk limits were not recorded with

proper documentation. 3) The setting of minimum traditional hedge ratios was

inconsistent with internal procedures and business planning.

1.

1)TaiwanLifereassessedandreportedtherectificationactiontotheBoardofTaiwanLife.Thefollow-uprectificationactionwassubmitted to the competent authority on Dec. 31, 2020.

2) Taiwan Life adjusted the project management organization to incorporate a monitoring mechanism of the second line of defense. Thefollow-uprectificationactionwassubmittedtothecompetentauthority on Dec. 31, 2020.

3) Taiwan Life revised the internal control process for contracting and specifiedwhichdocumentsshouldbeattached.

4) Taiwan Life revised the procurement guidelines to strengthen vendor selection.Thefollow-uprectificationactionwassubmittedtothecompetent authority on Dec. 31, 2020.

2. Relevant guidelines will be amended, the content submitted to the Board will be improved, and the approval and calculation documents will be kept.Therectificationactionwassubmittedtothecompetentauthorityon Feb. 19, 2021. (Completed by March 31, 2021.)

Note: The cases disclosed herein refer to those in which managers or employees of the Company and its subsidiaries were indicted for unlawful action performed in the course of doing business from 2019 to April 13, 2021; cases with indictment dates outside this period are not disclosed herein.

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3.3.12 ResolutionsmadeatshareholdermeetingsandmaterialresolutionsmadeatBoardmeetings1) Materialresolutionsmadeatthe2020AnnualGeneralShareholderMeetingandtheirexecutionstatus

Resolution Executionstatus

1. Approval of 2019 Business Report, Independent Auditors’ Report, and Financial Statements

SubmittedonJuly2,2020,totheBankingBureauoftheFSCforapprovalandfiling.

2. Approval of distribution of earnings for 2019 The resolution was passed at the 2020 Annual General Shareholders' Meeting. The cash dividends for 2019 for the allotmentofpreferredsharesBandCwereNT$749,992,500andNT$239,332,892,respectively,andthecashdividendfortheallotmentofcommonshareswasNT$1pershare,amountingtoNT$19,496,989,569.Therecorddateforthedistribution of cash dividends for common and preferred shares was Aug. 7, 2020.

3. Approval of amendments to the Articles of Incorporation

The amended clauses have taken effect.

4. Approval of amendments to the Regulations for Shareholders’ Meetings

The amended clauses have taken effect.

2) MaterialresolutionspassedbytheBoardofDirectorsin2020throughApril13,2021:(1) 12th meeting of the seventh term of the Board of Directors on Jan. 17, 2020※ Approval of the Company’s 2020 operations plan※Approvalof theCompany’s2020annualoperatingbudget,operatingexpensebudget,andcapital

expenditurebudget※Approvalof thesigningofasponsoragreementbyCTBCBankwithChina’sGuangdongHuaxing

BankCo.,Ltd.tojointlyestablishafinancialmanagementsubsidiary(2) 14th meeting of the seventh term of the Board of Directors on March 27, 2020※ Approval to appoint the accounting firm KPMG to be the CPA for the Company’s 2020 financial

statementsandtaxreports※ Approval of the Company’s 2019 Internal Control Statement and Projects to be Strengthened and

Improved Plan※ Approval of some clauses of the Company’s Articles of Incorporation※ Approval of some clauses of the Company’s Regulations for Shareholders’ Meetings※ Approval of the main proposal for the date, venue, and agenda of the Company’s 2020 Annual General

Shareholders’ Meeting(3) 15th meeting of the seventh term of the Board of Directors on March 27, 2020※ Approval of the consolidated financial statement prepared by the Company for 2019 and the audit

reportissuedbytheaccountingfirm(4) 16th meeting of the seventh term of the Board of Directors on April 29, 2020※ Approval of the Company’s 2019 business report compiled in accordance with Article 228 of the

Company Act and Article 66 of the Business Entity Accounting Act※ Approval of distributing all of the 2019 employee remuneration of the Company in the form of cash

(5) 17th meeting of the seventh term of the Board of Directors on May 8, 2020※ Approval of the 2019 earnings distribution plan※ApprovaloftheCompany’sissuanceofunsecuredcorporatebondswithintheamountofNT$45billion

(6) 19th meeting of the seventh term of the Board of Directors on June 24, 2020※ Approval to establish a Sustainability Committee under the Board of Directors and appoint the

members thereof in order to implement corporate sustainability, strengthen the management and review of the Board regarding relevant corporate sustainability initiatives, and to stay current with international trends

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※ Approval of the record date for the distribution of cash dividends for common shares and dividends for preferred shares being set on July 19, 2020

(7) 22nd meeting of the seventh term of the Board of Directors on Aug. 21, 2020※ApprovaloftheconsolidatedfinancialstatementpreparedbytheCompanyforthesecondquarterof

2020andtheauditreportissuedbytheaccountingfirm(8) 23rd meeting of the seventh term of the Board of Directors on Sept. 25, 2020※ Approval of amending the Company’s Administrative Measures for Budget Management

(9) 24th meeting of the seventh term of the Board of Directors on Oct. 29, 2020※ Approval of the remuneration to the accounting firm for the certification service provided for the

Company’s2020annualfinancialstatementsandtaxreturn※ Approval for CTBC Asset Management to sell its long-term equity investment position in CTBC

InternationalCo.,Ltd.toCTBCVentureCapitalforNT$1,375,231,063inordertoincreasethecapitalutilizationefficiencyofthegroup

※ Approval for CTBC Venture Capital to purchase CTBC Asset Management subsidiary CTBC InternationalCo.,Ltd.fromCTBCAssetManagementforNT$1,375,231,063andtoindirectlyinvestinCTBCFinancialLeasingCo.,Ltd.inordertoincreasethecapitalutilizationefficiencyofthegroup

(10) 26th meeting of the seventh term of the Board of Directors on Dec. 25, 2020※Approvalof replying to theopinionof theFSC’sFinancialExaminationBureauregarding the

Company’s prevention mechanism and response measures for employees involved in litigation(11) 27th meeting of the seventh term of the Board of Directors on Jan. 29, 2021

※ Approval of the Company’s 2021 operations plan※ApprovaloftheCompany’s2021annualoperatingbudget,operatingexpensebudget,andcapital

expenditure budget(12) 28th meeting of the seventh term of the Board of Directors on Feb. 26, 2021

※ Approval of CTBC Venture Capital’s investment in Contour Pte. Ltd.’s (“Contour Pte.”) A+ round fundraisingfornotmorethanUS$2.57millioninwhichCTBCVentureCapitalisestimatedtohold11.48% of the shares of Contour Pte. after its capital increase

(13) 29th meeting of the seventh term of the Board of Directors on March 19, 2021※Approval toappoint theaccountingfirmKPMGtobetheCPAfor theCompany’s2021financial

statementsandtaxreports※ Approval of the Company’s 2020 Internal Control Statement and Projects to be Strengthened and

Improved Plan※ Approval of some clauses of the Company’s Regulations for Shareholders’ Meetings※ Approval of the main proposal for the date, venue, and agenda of the Company’s 2021 Annual

General Shareholder Meeting(14) 30th meeting of the seventh term of the Board of Directors on March 19, 2021

※ApprovaloftheconsolidatedfinancialstatementpreparedbytheCompanyfor2020andtheauditreport issued bytheaccountingfirm

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(15) 31st meeting of the seventh term of the Board of Directors on March 31, 2021※ Approval of CTBC Bank’s purchasing of LH Financial Group Public Co., Ltd.’s shares from two of

its individual shareholders, Piengjai Hanpanich and Pairoj Paisarnsrisomsuk, with shareholdings of 10.43%and0.56%,respectively,forthepriceof4.2billionTHB(approximatelyNT$3.9billion)and of CTBC Bank’s signing of share purchase agreements with the abovementioned shareholders.

3.3.13 MaincontentofanymaterialresolutionspassedbytheBoardofDirectorsbetweenJan.1,2020,and April 13, 2021, that are noted on the record or in writing for which any director or independent directorhadadissentingopinion:None.

3.3.14 Personnelinvolvedinfinancialstatements(e.g.,chairmen,presidents,financialheads,accountingheads, internalauditheadsandcorporategovernanceheads)whoresignedorweredismissedbetweenJan.1,2020,andApril13,2021:None.

3.4 Information on CPAs

3.4.1. CPA fees 1)

Unit:NT$thousand

Accountingfirm CPA Audit fee

Non-auditfeeAudit period NotesPolicy

designBusiness

registrationHuman

resources Other Subtotal

KPMG Lin Wu 2,368 - - - 4,649 4,649 Jan. 1, 2020, to Dec. 31,

2020

Other fees: advisory and consultation services fees paid to KPMG Sustainability Consulting Co., Ltd.

Kuo-Yang Tzang

2) Informationregardingthereplacementofanaccountingfirmwheretheauditfeesforthereplacementyeardecreasedfromthoseofthepreviousyear,therebyrequiringdisclosureofthereasonandtheauditfeesbeforeandafterthereplacement:Notapplicable.

3) Informationregardingauditingfees thatdecreased10%ormorefromthepreviousyear, therebyrequiringdisclosureofthereductionamount,percentage,andreason:Notapplicable.

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3.4.2 Matters requiring disclosure regarding the replacement of the CPAs 1) RegardingformerCPAsDate of replacement Approved by the Board of Directors on March 27, 2020

Reason for and description of replacement

Internalstaffreassignmentwithintheaccountingfirm.

Terminated by the principal or declined by the CPA

PartyCircumstances CPA Principal

Proactive termination of the mandate N/A N/A

Non-acceptance of (continuous) mandate N/A N/A

The opinion and reason for any auditreportexpressinganythingotherthananunqualifiedopinionin the past two years

TheCPAsexpressedanunqualifiedopinionin2019and2018.TheCPAs’opinionwasnotmodifiedduetojudicialcases.

Dissenting opinions with the Company

Yes

Accounting principle or practice

Financial report disclosure

Audit scope or steps

Other

None V

Explanation:None

Additional disclosures None

2) RegardingsucceedingCPAsAccountingfirm KPMG

Names of CPAs Lin Wu, Kuo-Yang Tzang

Date of mandate Approved by the Board of Directors on March 27, 2020

Consultation opinions and results of any inquiries made to the former CPAs before its mandate regarding accounting treatment or principles for specifictransactionsanditsopiniononafinancialreport

None

Written opinions of succeeding CPAs that differ from those of former CPAs

None

3) ResponseofformerCPAsregardingtheprovisionsofArticles10.6.1and10.6.2.3oftheRegulationsGoverningInformation tobePublished inAnnualReportsofFinancialHoldingCompanies:Notapplicable;thechangeofCPAswasbecauseofinternalstaffreassignmentwithintheaccountingfirm.

3.4.3 Information regarding any Chairman, President, or financial or accounting manager who worked for the CPA or an affiliated enterprise in the past year: None.

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3.5 Disclosures of changes in the shareholding (equity transfers and pledges) of directors, supervisors, managers and shareholders as required by Article 11 of the Regulations Governing the Holding by a Person or a Related Party of Voting Shares Over Certain Ratio in a Financial Holding Company

3.5.1 Changes in equityUnit: Share

Title Name

2020 2021, as of April 13Shares held

Increase (decrease)

Pledged shares Increase (decrease)

Shares held Increase (decrease)


ChairmanWei Fu Investment Co., Ltd.

--

--

--

--

Representative: Wen-Long Yen

--

10,500,000 (7,150,000)

--

--

Vice ChairmanChung Yuan Investment Co., Ltd.

--

--

--

--

Representative: Chao-Chin Tung

--

--

--

--

DirectorYi Chuan Investment Co., Ltd.

--

3,900,000-

--

--

Representative: Thomas K.S. Chen--

--

--

--

Independent director Shih-Chieh Chang--

--

--

--

Independent director Cheung-Chun Lau --

--

--

--

Independent director Chih-Cheng Wang --

--

--

--

Independent director Sheng-Yung Yang --

--

--

--

President Daniel I. Wu--

--

--

--


Roger Kao--

--

--

--


Aaron King--

--

--

--

General Counsel Y.D. Deng --

--

--

--


C.C. Huang--

--

--

--

Chief Investment Officer

Winston Hsia--

--

--

--

Chief Technology Officer

Titan Chia--

--

--

--

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Title Name

2020 2021, as of April 13Shares held

Increase (decrease)


Shares held Increase (decrease)



Chung Mao Hsiao--

--

--

--

General Secretary Corporate GovernanceOfficer

Chang-Hsing Cho--

--

--

--

Chief Auditor Albert Hu--

--

--

--

Head of General Administration Department

Derek Lo--

--

--

--

FinancialOfficer Ya-Ling Chiu--

--

--

--

AccountingOfficer Sting Yang132,137

---

--

--

Acting Chief Strategy Officer

Monica Chu--

--

--

--

ExecutiveVicePresident

Eric Hsin--

--

--

--


Chien-Fu Lin --

--

--

--


Sean Tang--

--

--

--


Friedman Wang(tookofficeonJan.10,2020)

-(45,000)

--

--

--


CC Hong(resigned on Jan. 1, 2021)

--

--

--

--


Ryan Hsieh(tookofficeonFeb.1,2020)(resigned on Jan. 1, 2021)

-(176,808)

--

--

--


Kevin Huang (tookofficeonMay1,2020) (resigned on Jan. 1, 2021)

--

--

--

--

Note: The calculation of changes in equity includes common and preferred shares.

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3.5.2 Equity transfer information (transaction counterparty is a related person)

NameReason forequitytransfer

Transaction date

Transaction counterparty

The relationship between the transaction counterparty andtheCompany’sdirectors,supervisors, and shareholders

whose shareholding ratio is more than 10%

SharesTransaction price(NT$)

Note(s)

Sting Yang InheritanceAug. 28, 2020

Ching-Chang Yang

Relative (father) 32,137 20.05 Common shares

Ryan Hsieh GiftJune 11, 2020

Ching-Chun Hsu

Spouse 156,128 20.65 Common shares


Ching-Chun Hsu

Spouse 15,652 66.40Preferred shares B


Ching-Chun Hsu

Spouse 5,028 63.10Preferred shares C

3.5.3 Equity pledge information (transaction counterparty is a related person): N/A

3.6 Information on top 10 shareholders by shareholding ratio who among themselves are related parties, spouses, or within the second degree of kinship: None.

Unit: Share; % As of April 13, 2021

NameShares held by the

shareholderShares held by spouse

and minor childrenTotal shares held in the name of others

Top 10 shareholders who among

themselves, are related person or spouse,

second degree relative, their name and

relationship(Note4)

Note(s)

SharesShareholding

ratioShares

Shareholding ratio

SharesShareholding

ratioName Relationship

1

Fubon Life Insurance Co., Ltd. Representative: Richard M. Tsai

740,000,000 3.70% - - - - - - -

2

Yi Kao Investment Co., Ltd. Representative: Feng-Fu Wu

479,580,574 2.40% - - - - - - -

3 Labor Pension Fund 429,608,717 2.15% - - - - - - -

4

CTBC Bank Trust Account for the CTBC Holding Employee Welfare Savings Committee

374,491,142 1.87% - - - - - - -

5

China Life Insurance Co., Ltd.Representative: Stephanie Hwang

362,676,303 1.81% - - - - - - -

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NameShares held by the

shareholderShares held by spouse

and minor childrenTotal shares held in the name of others

Top 10 shareholders who among

themselves, are related person or spouse,

second degree relative, their name and

relationship(Note4)

Note(s)

SharesShareholding

ratioShares

Shareholding ratio

SharesShareholding

ratioName Relationship

6Hejia Investment Ltd.Representative: Chen-Hai Lin

340,252,389 1.70% - - - - - - -

7

Nan Shan Life Insurance Co., LtdRepresentative: Tang Chen

318,209,773 1.59% - - - - - - -

8

CTBC Bank Trust Account for CTBC Financial Holding and the Subsidiaries Employee Stock Ownership Trust

306,276,275 1.53% - - - - - - -

9

Cathay Life Insurance Co., Ltd.Representative: Tiao Kuei Huang

303,573,930 1.52% - - - - - - -

10Bank of Taiwan Co., Ltd.Representative: Joseph Jye-Cherng Lyu

303,032,426 1.52% - - - - - - -

Note 1: All top 10 shareholders are listed. For institutional shareholders, the name of the institution and the name of the representative are listed separately.

Note 2: The shareholding ratio includes those held in the name of the shareholder, spouse, minor children, or another individual.Note 3: If any of the shareholders listed above refers to a legal person and natural person, their relationship shall be disclosed in accordance

with the Regulations Governing the Preparation of Financial Reports by Financial Holding Companies.Note 4: Common shares and preferred shares are included in the calculation of the numbers of shares and shareholding ratio.

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3.7 Shares and total shareholding ratios in a business held by the Company; directors, supervisors, and managers of the Company; and businesses controlled directly or

indirectly by the CompanyUnit: Thousand shares; %

Dec. 31, 2020

Investeebusiness(Note1)

Company investment (Note2)

Directors, supervisors, and managers of the Company and businesses directly or

indirectly controlled by the Company

Comprehensive investment

SharesShareholding

ratioShares

Shareholding ratio

SharesShareholding

ratioCTBC Bank Co., Ltd. 14,796,218 100.00% - - 14,796,219 100.00%

CTBC Securities Co., Ltd. 644,104 100.00% - - 644,104 100.00%

CTBC Venture Capital Co., Ltd. 366,685 100.00% - - 366,685 100.00%

CTBC Asset Management Co., Ltd. 535,882 100.00% - - 535,882 100.00%

CTBC Security Co., Ltd. 4,770 100.00% - - 4,770 100.00%

Taiwan Lottery Co., Ltd. 50,000 100.00% - - 50,000 100.00%

CTBC Investments Co., Ltd. 30,600 100.00% - - 30,600 100.00%

Taiwan Life Insurance Co., Ltd. 5,588,071 100.00% - - 5,588,071 100.00%

CTBC Bank (Philippines) Corp. - - 374,319 99.72% 374,319 99.72%

PT Bank CTBC Indonesia - - 1 99.00% 1 99.00%

CTBC Bank Corp. (Canada) - - 2,746 100.00% 2,746 100.00%

CTBC Capital Corp. - - 6 100.00% 6 100.00%

Grand Bills Finance Corp. - - 114,399 21.1536% 114,399 21.1536%

CTBC Bank Corp. (USA) - -

Common shares: 3 Preferred

shares: 100

100.00%

Common shares: 3 Preferred

shares: 100

100.00%

The Tokyo Star Bank, Ltd. - - 700 100.00% 700 100.00%

Tokyo Star Business Finance, Ltd. - - 1,936 100.00% 1,936 100.00%

TSB Servicer, Ltd. - - 0.4 100.00% 0.4 100.00%

CTBC (Mauritius) Holding Co., Ltd. - - 17,363 100.00% 17,363 100.00%CTBC Securities Investment Service Co., Ltd.

- - 5,000 100.00% 5,000 100.00%

CTBC Securities Venture Capital Co., Ltd.

- - 30,000 100.00% 30,000 100.00%

CTBC Asia Ltd. - - 134,526 100.00% 134,526 100.00%

CTBC International Co., Ltd. - - 70,000 100.00% 70,000 100.00%

CTBC Financial Leasing Co., Ltd. - - - 100.00% - 100.00%

CTBC Insurance Co., Ltd. - - 200,000 100.00% 200,000 100.00%

CTBC Finance Co., Ltd. - - 100,294 100.00% 100,294 100.00%

King Dragon Life Insurance Co. - - - 50.00% - 50.00%Top Taiwan IX Venture Capital Co., Ltd.

- - 20,000 25% 20,000 25%

AZStar Co., Ltd. - - 0.2 40.00% 0.2 40.00%

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Investeebusiness(Note1)

Company investment (Note2)

Directors, supervisors, and managers of the Company and businesses directly or

indirectly controlled by the Company

Comprehensive investment

SharesShareholding

ratioShares

Shareholding ratio

SharesShareholding

ratioAZStar First Investment Ltd. Partnership

- - 3 43.98% 3 43.98%

AZStar Third Investment Ltd. Partnership

- - 3 23.56% 3 23.56%

LH Financial Group Public Co., Ltd. - - 7,544,961 36.07% 7,544,961 36.07%XiamenJinmeixinConsumerFinanceCo., Ltd.

- - - 34.00% - 34.00%

Hofa Land Development Co., Ltd. - - 340,488 90.00% 340,488 90.00%

Wu Tzu Development Co., Ltd. - - 241,560 99.00% 241,560 99.00%

Star Shining Energy Co., Ltd. - - 150,000 30.00% 150,000 30.00%

Giga Green Energy Co., Ltd. - - 32,700 30.00% 32,700 30.00%

Taiwan Wind Investment Co., Ltd. 183,626 42.86% 183,626 42.86%

Solarbright Energy Co., Ltd. 3,500 35% 3,500 35%

Star Power Energy Co., Ltd. 17,500 35% 17,500 35%

Li-Wei Energy Co., Ltd. 42,500 28.33% 42,500 28.33%

Note 1: Investees of CTBC Holding and its subsidiaries.Note 2: Investments made by CTBC Holding in accordance with Article 36 of the Financial Holding Company Act.

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4. Capital Overview

4.1 Capital and shares

4.1.1 Capital sourcesUnit:Thousandshares;NT$thousand


Month, year Issue price

Authorizedcapital Paid-in capital Notes

Shares Amount Shares Amount Capital source Other

May 2019 60 23,000,000 230,000,000 19,996,980 199,969,796CapitalincreaseofNT$1,666,600thousand due to the issuance of preferred shares C

Note

Note: Approved per letter No. Jin-Guan-Zheng-Fa-Zi-1070348778, dated Jan. 17, 2019, for the issuance of 166,660 thousand preferred shares in a cash capital increase.

Unit: Thousand shares As of April 13, 2021

Share typeAuthorizedcapital

NotesIssued shares Unissuedshares Total shares

Common shares 19,496,9903,003,020 23,000,000 Listed shares

Preferred shares 499,990

4.1.2Shareholdercomposition1)Compositionofcommonshareholders

Unit: Share As of April 13, 2021

Shareholders type

Quantity

Government agencies

Financial institutions

Other institutional

investorsIndividuals

Foreign institutional

and individual investors

Treasury stock Total

Shareholders 8 100 1,055 520,530 1,986 0 523,679

Shares held 3,012 3,287,255,042 3,788,092,603 5,436,263,658 6,985,375,254 0 19,496,989,569

Percentage 0.00% 16.86% 19.43% 27.88% 35.83% 0.00% 100.00%

2) CompositionofpreferredshareBholdersUnit: Share


Shareholders type

Quantity

Government agencies


Other institutional





Shareholders 0 27 97 33,582 74 0 33,780

Shares held 0 232,151,688 80,162,572 19,838,033 1,177,707 0 333,330,000

Percentage 0.00% 69.65% 24.05% 5.95% 0.35% 0.00% 100.00%

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Capital Overview

3) CompositionofpreferredshareCholders Unit: Share


Shareholders type

Quantity

Government agencies


Other institutional





Shareholders 0 22 98 34,045 62 0 34,227

Shares held 0 96,914,406 58,971,990 10,705,044 68,560 0 166,660,000

Percentage 0.00% 58.16% 35.38% 6.42% 0.04% 0.00% 100.00%

4.1.3Distributionprofileofshareholders1)Commonshares

TheparvalueforeachshareisNT$10As of April 13, 2021

Share range Numberofshareholders Shares held Percentage

1 － 999 155,252 30,682,542 0.16%

1,000 － 5,000 220,501 496,206,750 2.55%

5,001 － 10,000 60,714 463,639,102 2.38%

10,001 － 15,000 25,545 315,853,399 1.62%

15,001 － 20,000 16,321 292,413,053 1.50%

20,001 － 30,000 15,504 382,483,951 1.96%

30,001 － 50,000 12,705 497,284,786 2.55%

50,001 － 100,000 9,320 652,439,731 3.35%

100,001 － 200,000 4,152 569,508,818 2.92%

200,001 － 400,000 1,803 496,655,137 2.55%

400,001 － 600,000 530 258,157,929 1.32%

600,001 － 800,000 270 186,648,224 0.96%

800,001 － 1,000,000 162 145,054,228 0.74%

1,000,001 － 1,200,000 107 116,737,739 0.60%

1,200,001 － 1,400,000 62 80,261,499 0.41%

1,400,001 － 1,600,000 58 87,773,538 0.45%

1,600,001 － 1,800,000 51 86,014,507 0.44%

1,800,001 － 2,000,000 55 104,533,571 0.54%

2,000,001 or more 567 14,234,641,065 73.00%

Total 523,679 19,496,989,569 100.00%

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2) PreferredsharesBTheparvalueforeachshareisNT$10



1 － 999 29,600 2,867,999 0.86%

1,000 － 5,000 3,763 5,506,704 1.65%

5,001 － 10,000 212 1,552,167 0.47%

10,001 － 15,000 59 732,119 0.22%

15,001 － 20,000 36 637,784 0.19%

20,001 － 30,000 18 420,601 0.13%

30,001 － 50,000 23 919,067 0.27%

50,001 － 100,000 23 1,733,940 0.52%

100,001 － 200,000 3 433,388 0.13%

200,001 － 400,000 7 1,876,794 0.56%

400,001 － 600,000 6 2,894,916 0.87%

600,001 － 800,000 4 2,817,412 0.85%

800,001 － 1,000,000 2 1,710,035 0.51%

1,000,001 － 1,200,000 3 3,454,215 1.04%

1,200,001 － 1,400,000 2 2,653,000 0.80%

1,400,001 － 1,600,000 2 2,956,459 0.89%

1,600,001 － 1,800,000 2 3,242,000 0.97%

1,800,001 － 2,000,000 0 0 0.00%

2,000,001 or more 15 296,921,400 89.07%

Total 33,780 333,330,000 100.00%

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Capital Overview

3) PreferredsharesCTheparvalueforeachshareisNT$10



1 － 999 28,919 1,680,116 1.01%

1,000 － 5,000 5,075 6,242,490 3.75%

5,001 － 10,000 125 915,826 0.55%

10,001 － 15,000 23 276,017 0.17%

15,001 － 20,000 13 245,383 0.15%

20,001 － 30,000 21 524,675 0.31%

30,001 － 50,000 12 481,077 0.29%

50,001 － 100,000 9 580,422 0.35%

100,001 － 200,000 1 166,031 0.10%

200,001 － 400,000 3 903,070 0.54%

400,001 － 600,000 2 949,464 0.57%

600,001 － 800,000 0 0 0.00%

800,001 － 1,000,000 4 3,840,000 2.30%

1,000,001 － 1,200,000 3 4,021,121 2.41%

1,200,001 － 1,400,000 0 0 0.00%

1,400,001 － 1,600,000 3 4,518,925 2.71%

1,600,001 － 1,800,000 2 3,445,000 2.07%

1,800,001 － 2,000,000 0 0 0.00%

2,000,001 or more 12 137,870,383 82.72%

Total 34,227 166,660,000 100.00%

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4.1.4MajorshareholdersTheparvalueforeachshareisNT$10


Shareholder(Note) Shares held Percentage

Fubon Life Insurance Co., Ltd. 740,000,000 3.70%

Yi Kao Investment Co., Ltd. 479,580,574 2.40%

Labor Pension Fund 429,608,717 2.15%CTBC Bank Trust Account for CTBC Financial Holding Employee Welfare Savings Committee 374,491,142 1.87%

China Life Insurance Co., Ltd. 362,676,303 1.81%

Hejia Investment Ltd. 340,252,389 1.70%

Nan Shan Life Insurance Co., Ltd 318,209,773 1.59%CTBC Bank Trust Account for CTBC Financial Holding and the Subsidiaries Employee Stock Ownership Trust 306,276,275 1.53%

Cathay Life Insurance Co., Ltd. 303,573,930 1.52%

Bank of Taiwan Co., Ltd. 303,032,426 1.52%

Citibank Taiwan in custody for the government of Singapore 297,446,281 1.49%

Citibank Taiwan in custody for Norges Bank 295,002,024 1.48%

Chuan Wei Investment Co., Ltd. 287,135,344 1.44%JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Emerging Markets StockIndexFund,ASeriesOfVanguardInternationalEquityIndexFunds 249,924,062 1.25%

PJ Asset Management Co., Ltd. 236,758,000 1.18%JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International StockIndexFund,aseriesofVanguardStarFunds 229,819,922 1.15%

Note: Shareholders accounting for the shareholding ratios more than 1% are listed; the calculation of shareholding ratio includes common and preferred shares.

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Capital Overview

4.1.5.MainshareholdersofthemajorshareholdersoftheCompanythatareinstitutionalshareholdersAs of April 13, 2021

Institutional shareholder Main shareholders and their shares held

Fubon Life Insurance Co., Ltd. Fubon Financial Holding Co., Ltd. 100.00%Yi Kao Investment Co., Ltd. Bo Yu Investment Co., Ltd. 100.00%

China Life Insurance Co., Ltd.

China Development Finance Holding Corp. 26.16%KGI Securities Co., Ltd. 8.66%Cathay Life Insurance Co., Ltd. 3.04%Videoland Inc. 2.42%Labor Pension Fund 1.61%Lin-Lang Chan 1.24%JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard TotalInternationalStockIndexFund,aseriesofVanguardStarFunds

1.21%

Citibank Taiwan in custody for the government of Singapore 1.17%Citibank Taiwan in custody for Norges Bank 1.12%Labor Funds 1.03%

Hejia Investment LimitedChen-Hai Lin 50.00%Shu-Qiong Zeng 50.00%

Nan Shan Life Insurance Co., Ltd

First Commercial Bank Trustee Account For Representative of Ruen Chen Investment Holding Co., Ltd. 60.01%

Runcheng Investment Holdings Co., Ltd. 29.54%Y. T. Du 2.90%RuentexXingCo.,Ltd. 0.30%Ruen Hua Dyeing & Weaving Co., Ltd. 0.27%RuentexDevelopmentCo.,Ltd. 0.23%RuentexIndustriesLimited 0.21%Taishin Bank Trust Account for the Stock of Nan Shan Life Insurance 0.21%YuanxinInvestmentCo.,Ltd. 0.16%RuentexLeasingCo.,Ltd. 0.13%

Cathay Life Insurance Co., Ltd. Cathay Financial Holding Co., Ltd. 100.00%Bank of Taiwan Co., Ltd. Taiwan Financial Holding Co., Ltd. 100.00%

Chuan Wei Investment Co., Ltd.Eagleright Management Co., Ltd. (BVI) 95.24%Chih-Kuang Yen 4.76%

PJ Asset Management Co., Ltd.He Yang Management Consulting Co., Ltd. 94.95%Others 5.05%

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4.1.6Marketprice,networth,earnings,anddividendspershareYear

Item 2019 2020 As of April 13, 2021

Market price per share (Note 1)

HighestBefore adjustment 22.50 23.45 22.15

After adjustment 22.50 23.45 -

LowestBefore adjustment 19.70 16.05 19.00


AverageBefore adjustment 20.96 19.79 20.57


Net asset value per share

Before distribution 18.01 19.25 19.41 (Note 2)

After distribution 16.96 (Note 3) N/A

Earnings per share

Weighted average shares 19,496,990 19,496,990 19,496,990 (Note 2)

Earnings per share (Note 1)Before adjustment 2.16 2.15 1.01 (Note 2)

After adjustment 2.16 (Note 3) N/A

Dividends per share

Cash dividends (Note 1)Before adjustment 1.00 (Note 3) -

After adjustment 1.00 (Note 3) -

Stock dividendsRetained earnings dividends - (Note 3) -

Capital surplus dividends - (Note 3) -

Accumulated undistributed dividends - - -

Return on investment

Price/earnings ratio (Note 4) 9.70 (Note 3) -

Price/dividend ratio (Note 5) 20.96 (Note 3) -

Cash dividend yield rate (Note 6) 4.77% (Note 3) -Note 1: Retrospective adjustment has been made according to the number of shares distributed from the earnings or capital surplus

transferred to capital.Note 2: Calculated based on internal financial data as of March 31, 2021.Note 3: Withheld as it had not been approved by a shareholder meeting resolution as of the publication date of this annual report. Note 4: The price/earnings ratio is the average market price (after adjustment) to the earnings (after adjustment) per share.Note 5: The price/dividend ratio is the average market price (after adjustment) to the cash dividends (after adjustment) per share. Note 6: The cash dividend yield rate is the cash dividends per share (after adjustment) to the average market price (after adjustment).

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Capital Overview

4.1.7 Dividend policy and implementation status1) Dividendpolicy

If the Company has fiscal year-end earnings, they shall be utilized in the following order: tax payment, adjustments per financial and accounting principles, deficit reduction, the legal reserve, the special statutory reserve or reversal, and preferred share dividends. If residual earnings exist, they are the annual undistributed earnings that become the accumulated distributable earnings after being combined with the beginning retained earnings. Earnings distribution shall be proposed by the Board for shareholder meeting approval before being distributed or changed.

The Company, in seeking sustained growth and increasing profitability while adhering to the provisions of all relevant laws, adopts a residual dividend policy. In accordance with the Company’s business plan, shareholder dividends and bonuses are distributed as follows:(1) The annual shareholder dividends and bonuses distributed shall constitute no less than 20% of the

distributable earnings for the current year; the distributable earnings for the current year referred to herein isthebalanceoftheannualundistributedearningsstatedinthefirstparagraphofthissubsection,4.1.71)minusadjustmentsincompliancewiththefinancialandaccountingprinciplesandreversalsofspecialstatutory reserve by law in the current year, which may be distributed to preferred shares but not yet distributed.

(2) The distribution of shareholder dividends and bonuses is based on cash and/or stock. The cash dividend shall constitute no less than 10% of the total distributable dividends.

The aforementioned dividend policy may be adjusted in view of the Company’s business operation, investment, and merger and acquisition funding needs as well as material law amendments and other circumstances by Board and shareholder meeting resolutions on the percentage of the cash dividend, but in no event shall the cash dividend be less than 1% of the total dividends. The Company may retain earningsforcashdividendslessthanNT$0.1pershare.

2) Dividenddistributionsproposedatthemostrecentshareholdermeeting(2021)(1)ItwasproposedthatacashdividendforpreferredsharesBofNT$749,993thousand,acashdividendfor

preferredsharesCofNT$319,987thousandandacashdividendforcommonsharesofNT$20,471,839thousand(NT$1.05pershare)bedistributedfromtheretainedearningsoffiscalyear2020accordingtothe record shown in the shareholder book on the record date of distribution.

(2) In the event that any of the following affects the number of outstanding shares on the record date for the distribution of cash dividends, which consequently changes the common share dividend payout ratio, the Board of Directors is authorized by a shareholder meeting to handle matters relating to the payout ratio change: capital increase or reduction; repurchase or sale of Company shares or the transfer, conversion, or cancellationthereof; thesubscriptionofsharesbyemployeeexercisingemployeestockwarrants;orthedisposal of shares by shareholders.

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4.1.8 Impact on 2021 business performance and EPS of the stock dividend distribution proposed at the 2021 shareholder meetingNot applicable because the Company did not publish a complete financial forecast for 2021.

4.1.9 Information relating to the compensation of employees and directors1) ProportionorrangeofemployeeanddirectorcompensationassetforthintheCompany’sArticlesof

Incorporation:0.05%ofthecurrentyear’sprofitasemployeecompensationandnomorethan0.7%asdirectorandsupervisorcompensation.

2) Thebasisforestimatingemployeeanddirectorcompensation,forcalculatingthenumberofsharesto be distributed as employee compensation, and the accounting treatment of the discrepancy, if any, betweentheactualdistributedamountandtheestimatedfigure,forthecurrentperiod:Employee and director compensation in 2020 is recognized as the current-period expenses based on the Company’s pre-tax income before the deduction of employee and director compensation at the end of the accounting period, after deducting accumulated losses, if it still has a balance, multiplied by the percentage set by the Company’s Articles of Incorporation. Differences between the actual amount, as approved by the Board of Directors, and the original estimate will be accounted for as changes in accounting estimates and recognized as a profit or loss in the following year.

3) DistributionofcompensationapprovedbytheBoardofDirectors(1) Employee and director compensation distributed in cash or stock: The cash compensation of employees

wasNT$22,713thousandwhereasthecashcompensationofdirectorswasNT$299,806thousand.(2) Discrepancies between the actual amount and the original estimates, and the reasons and handling thereof:

A. Compensation discrepancies: The accrued expenses for employee and director compensation in 2020 were NT$22,713 thousand and NT$317,977 thousand, respectively. The discrepancy between the actual distribution amount and the accrued expenses for director compensation was NT$18,171 thousand.

B. Reason and handling: The difference occurred because of a change in accounting estimates and was recognized as a profit for 2021.

(3)Thepercentageofemployeecompensationdistributedinstockofthesumofafter-taxnetincomestatedintheCompany’sfinancialreportforthecurrentperiodandoftotalemployeecompensation:Notapplicablebecause the Company did not distribute any employee compensation in stock.

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Capital Overview

4) Theactualdistributionofemployeeanddirectorcompensationfor2019(includingthenumberofshares,monetaryamount,andstockpriceof thesharesdistributed)andanydiscrepancybetweentheactualdistributionandtherecognizedemployee,ordirectorcompensation,andthereasonandhandling thereof:

2019

Compensation distributedwithBoard

approvalRecognizedexpense Difference Reason and handling

Distribution status(1) Employee

compensation distributed

in cash distributed in stock(2) Compensation to

directors

NT$21,956thousand

-

NT$296,403thousand

NT$22,324thousand

-

NT$312,537thousand

NT$368thousand

-

NT$16,134thousand

The difference occurred because of a change in accounting estimates and was recognized as aprofitfor2020.

4.1.10Buybackoftreasurystock:None.

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4.2 Bonds, preferred shares, global depository receipts, employee stock warrants, new restrictive shares issued to employees, and mergers and acquisitions

4.2.1 Corporate bonds1) Corporatebonds


Corporate bond type2012-1 domestic subordinated

unsecured corporate bond TrancheB

2015-1 senior unsecured corporate bond TranchesB&C

2018-1 subordinatedunsecured corporate bond

Issue date Feb. 20, 2012 Aug. 3, 2015 Jan. 16, 2019

Face value NT$10,000,000 NT$1,000,000 NT$10,000,000

Issuing and transaction location (Note)

N/A N/A N/A

Issueprice(NT$) At 100% of face value At 100% of face value At 100% of face value

Total NT$2,400,000,000 NT$5,500,000,000 NT$10,000,000,000TrancheA:NT$4,000,000,000TrancheB:NT$6,000,000,000

Coupon rate Fixedat1.80%perannum Fixedat1.65%perannum TrancheA:Fixedat1.30%perannumTrancheB:Fixedat1.55%perannum

Maturity 10 years; maturity: Feb. 20, 2022 7 years; maturity: Aug. 3, 2022

Tranche A: 7 years; maturity: Jan. 16, 2026 Tranche B: 12 years; maturity: Jan. 16, 2031

Seniority Subordinated Senior Subordinated

Guarantor N/A N/A N/A

Trustee Mega International Commercial Bank Co., Ltd.

Mega International Commercial Bank Co., Ltd.

Bank SinoPac Co., Ltd.

Underwriter N/A N/A CTBC Bank Co., Ltd.

Certifiedlawyer ModernLawOffice:Hui-ChiKuo True Honesty International LawOffice:Hui-ChiKuo

TrueHonestyInternationalLawOffice:Hui-ChiKuo

CPAs KPMG: Fu-Wei Chen, Leou-Fong Yang

KPMG: Chun-Kuang Chen, Leou-Fong Yang

KPMG: Chun-Kuang Chen, Lin Wu

Repayment method Lump sum upon maturity Lump sum upon maturity Lump sum upon maturity

Outstanding principal NT$2,400,000,000 NT$5,500,000,000 NT$10,000,000,000

Terms of redemption or early repayment

None None None

Restrictions If the payment of interest or the repayment of principal for the bond causes the Company's group capital adequacy ratio to fall below the minimum legal requirement, the payment of interest or the repayment of principal shall be temporarily suspended. Interest payments or principal repayments may be paid only when the aforementioned ratio meets the minimum requirement (interest may be accumulated; interest on interest and the repayment of principal rollovers are calculated at coupon rates).

Target investors are restricted to professional investorsasdefinedintheTaipeiExchangeRulesGoverningManagement of Foreign Currency Denominated International Bonds.

1. Target investors are restricted to professional investorsasdefinedintheTaipeiExchangeRules Governing Management of Foreign Currency Denominated International Bonds.

2. If the payment of interest or the repayment of principal for the bond causes the Company's group capital adequacy ratio to fall below the minimum legal requirement, the payment of interest or the repayment of principal shall be temporarily suspended. Interest payments or principal repayments may be paid only when the aforementioned ratio meets the minimum requirement (interest may be accumulated; interest on interest and the repayment of principal rollovers are calculated at coupon rates).

Included as eligible capital

Yes No Yes

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Capital Overview

Corporate bond type2012-1 domestic subordinated

unsecured corporate bond TrancheB

2015-1 senior unsecured corporate bond TranchesB&C

2018-1 subordinatedunsecured corporate bond

Credit rating agency, rating date, and corporate bond rating

Rating agency: Taiwan Ratings Corp.Credit rating: twAA- (issuer rating) Rating date: Sept. 28, 2020

Rating agency: Taiwan Ratings Corp.Credit rating: twAA- (issuer rating)Rating date: Sept. 28, 2020

Rating agency: Taiwan Ratings Corp. Credit rating: twAA- (issuer rating) Rating date: Sept. 28, 2020

Other rights attached

Common shares, global depository receipts,or other securities converted (exchangedor subscribed) up to the publication of this annual report

None None None

Terms of issuance and conversion (exchangeorsubscription)

None None None

Possible dilution of equity and impact on equity of existingshareholdersdue to subscription or issuance terms of issuance, conversion,andexchangeof corporate bonds

None None None

Custodianofexchangedassets

None None None

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Corporate bond type 2020-1 subordinated unsecured corporate bond

2020-2 senior unsecured corporate bond


Issue date June 24, 2020 Sept. 17, 2020 Jan. 21, 2021

Face value NT$10,000,000 NT$10,000,000 NT$10,000,000

Issuing and transaction location (Note)

N/A N/A N/A

Issueprice(NT$) At 100% of face value At 100% of face value At 100% of face value

Total NT$10,000,000,000TrancheA:NT$1,900,000,000TrancheB:NT$8,100,000,000

NT$23,500,000,000TrancheA:NT$6,400,000,000TrancheB:NT$5,300,000,000TrancheC:NT$4,400,000,000TrancheD:NT$7,400,000,000

NT$6,500,000,000TrancheA:NT$3,000,000,000TrancheB:NT$3,500,000,000

Coupon rate TrancheA:Fixedat0.90%perannumTrancheB:Fixedat1.05%perannum

TrancheA:Fixedat0.60%perannumTrancheB:Fixedat0.65%per annumTrancheC:Fixedat0.68%perannumTrancheD:Fixedat0.69%perannum

TrancheA:Fixedat0.40%perannumTrancheB:Fixedat0.44%perannum

Maturity Tranche A: 7 years; maturity: June 24, 2027Tranche B: 10 years; maturity: June 24, 2030

Tranche A: 5 years; maturity: Sept. 17, 2025Tranche B: 7 years; maturity: Sept. 17, 2027Tranche C: 9 years; maturity: Sept. 17, 2029Tranche D: 10 years; maturity: Sept. 17, 2030

Tranche A: 5 years; maturity: Jan. 21, 2026Tranche B: 7 years; maturity: Jan. 21, 2028

Seniority Subordinated Senior Senior

Guarantor N/A N/A N/A

Trustee Bank SinoPac Co., Ltd. Bank SinoPac Co., Ltd. Bank SinoPac Co., Ltd.

Underwriter CTBC Bank Co., Ltd. CTBC Bank Co., Ltd. CTBC Bank Co., Ltd.

Certifiedlawyer True Honesty International Law Office:Hui-ChiKuo

True Honesty International Law Office:Hui-ChiKuo

True Honesty International Law Office:Hui-ChiKuo

CPAs KPMG: Lin Wu, Kuo-Yang Tzang KPMG: Lin Wu, Kuo-Yang Tzang KPMG: Lin Wu, Kuo-Yang Tzang

Repayment method Lump sum upon maturity Lump sum upon maturity Lump sum upon maturity

Outstanding principal NT$10,000,000,000 NT$23,500,000,000 NT$6,500,000,000

Terms of redemption or early repayment

None None None

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Capital Overview

Corporate bond type 2020-1 subordinated unsecured corporate bond



Restrictions 1. Target investors are restricted to professional investors as definedintheTaipeiExchangeRules Governing Management of Foreign Currency Denominated International Bonds.

2. If the payment of interest or the repayment of principal for the bond causes the Company’s group capital adequacy ratio to fall below the minimum requirement by law, the payment of interest or the repayment of principal shall be temporarily deferred. Interest payments or principal repayments may be paid only when the aforementioned ratio meets the minimum requirement (interest may be accumulated; interest on interest and the repayment of principal rollovers are calculated at coupon rates).

Target investors are restricted to professionalinvestorsasdefinedintheTaipeiExchangeRulesGoverning Management of Foreign Currency Denominated International Bonds.

Target investors are restricted to professionalinvestorsasdefinedintheTaipeiExchangeRulesGoverning Management of Foreign Currency Denominated International Bonds.

Included as eligible capital Yes No No

Credit rating agency, rating date, and corporate bond rating



Rating agency: Taiwan Ratings Corp.Credit rating: twAA- (issuer rating) Rating date: Sept. 28, 2020

Other rights attached

Common shares, global depository receipts, or other securities converted (exchangedorsubscribed) up to the publication of this annual report

None None None

Terms of issuance and conversion (exchangeorsubscription)

None None None

Possible dilution of equity and impact on equity of existingshareholdersdueto subscription or issuance terms of issuance, conversionandexchangeof corporate bonds

None None None

Custodianofexchangedassets

None None None

Note: Corporate bonds are not overseas corporate bonds and are traded on OTC markets.

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2) Convertiblebonds:None.

3) Exchangeablebonds:None.

4) Shelfregistrationforissuingbonds:None.

5) Corporatebondswithwarrants:None.

4.2.2 Issuance of preferred shares1) Issuanceofpreferredshares


Issuedate(Note)Item Dec.25,2017 April3,2019

(CTBCHoldingpreferredsharesC)

Face value NT$10 NT$10

Issue price NT$60pershare NT$60pershare

Shares issued 333,330,000 166,660,000

Total NT$19,999,800,000 NT$9,999,600,000

Rights and obligations

Dividend and bonus distribution

1. The dividend yield is set at 3.75% per annum (equal to the sum of a 7-year interest rate swap (IRS) 1.0825% + 2.6675%) on the issue price. The 7-year IRS rate shall be reset every seven years onthenextbusinessdayfollowingtheexpiryofeach seven- year period; the record date for interest resetshallbetwobusinessdaysofTaipeifinancialindustry prior to the IRS reset date. The 7-year IRS rate is the arithmetic mean of the 7-year IRS rates appearing on the Reuters pages PYTWDFIX and COSMOS3 at 11:00 a.m. (Taipei time) on the record date for interest reset. If such a rate cannot be obtained, the Company will make a good-faith determination of the rate based on a reasonable market price.

2.IftheCompanyhasfiscalyear-endearnings,theyshallbeutilizedinthefollowingorder:taxpayment,adjustmentsperfinancialandaccountingprinciples,deficitreduction,thelegalreserve,andthe special statutory reserve or reversal; the balance shallfirstbeusedtopaythepreferredsharesBdividend for the current year.

3. The Company has discretion over the distribution of the preferred shares B dividend. The Company may decide not to distribute the dividend if there arenoearningsinafiscalyear,theearningsareinsufficienttodistributethedividend,distributingthe dividend would cause the capital adequacy ratio to fall below the regulatory requirement, or in other circumstances. Holders of preferred shares may not object to such a decision, which shall not constitute an event of default.

1. The dividend yield is set at 3.2% per annum (equal to the sum of a 7-year IRS 0.99% + 2.21%) on the issue price. The IRS rate shall be reset every seven years onthenextbusinessdayfollowingtheexpiryofeachseven-year period; the record date for pricing is one businessdayofTaipeifinancialindustrypriortothepricing date. The record date for interest reset is two businessdaysofTaipeifinancialindustrypriortotheIRS reset date. The 7-year IRS rate is the arithmetic mean of the 7-year IRS rates appearing on the Reuters pages TAIFXIRS and COSMOS3 at 11:00 a.m. (Taipei time) on the record date for pricing and the record date for interest reset. If such a rate cannot be obtained, the Company will make a good-faith determination of the rate based on a reasonable market price.

2.Exceptwheredividendsarenotdistributedorarecanceled in the circumstances of item 4 below, dividends shall be distributed annually in cash in alumpsum.Eachyearaftertheannualfinancialstatements are accepted at the shareholder meeting, the Board of Directors shall set the record date to paythedividendsoftheprecedingfiscalyear.Thedividends of the year of issuance and redemption year shall be calculated based on the actual number of days of issuance in the current year.

3.IftheCompanyhasfiscalyear-endearnings,theyshallbeutilizedinthefollowingorder:taxpayment,deficitreduction, the legal reserve, the special statutory reserve, and preferred share dividend.

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Capital Overview



4. Preferred shares B are noncumulative. Holders of preferred shares B do not have the right to claim any of the unpaid or omitted dividends in the future.

5.Exceptforthedividendsstipulatedinitem1,holders of preferred shares B are not entitled to cash or stock dividends of common shares derived from earnings or capital reserves.

4. The Company has discretion over the distribution of the preferred shares C dividend. The Company may decide not to distribute the dividend if there are no earningsinafiscalyear,theearningsareinsufficientto distribute the dividend, or distributing the dividend would cause the capital adequacy ratio to fall below the regulatory requirement, or in other circumstances. Holders of preferred shares C may not object to such a decision, which shall not constitute an event of default.

5. Preferred shares C are noncumulative. Holders of preferred shares C do not have the right to claim any of the unpaid or omitted dividends in the future.

6.Exceptforthedividendsstipulatedinitem1,holdersof preferred shares C are not entitled to common shares' cash or stock dividends derived from earnings or the capital reserve.

Liquidation claim priority

Holders of preferred shares B have a prior claim on the Company's assets over holders of common shares if the Company is liquidated; however, this claim shall be capped at the respective issuance amount of preferred shares B upon liquidation.

Holders of preferred shares C have a prior claim on the Company's assets over holders of common shares if the Company is liquidated, in the same order as for the compensation of the various preferred shares issued bythe Company; however, this claim shall be capped at the respective issuance amount of preferred shares C upon liquidation.

Voting and election rights

Holders of preferred shares B do not have voting rights or suffrage at common share shareholder meetings; however, they may be elected as directors. Holders of preferred shares B have voting rights at preferred shares B shareholder meetings and at such other shareholder meetings on agenda items related to the rights and obligations of preferred shares B.

Holders of preferred shares C do not have voting rights or suffrage at common share shareholder meetings; however, they may be elected as directors. Holders of preferred shares C have voting rights at preferred shares C shareholder meetings and at such other shareholder meetings on agenda items related to the rights and obligations of preferred shares C.

Other When new shares are issued, holders of preferred shares B have the same pre-emptive right as common shareholders to subscribe for new shares.

When new shares are issued, holders of preferred shares C have the same pre-emptive right as common shareholders to subscribe for new shares.

Outstanding preferred shares

Amount recalled or converted

NT$0 NT$0

Balance not yet recalled or converted

NT$19,999,800,000 NT$9,999,600,000

Terms of recall or conversion

1. Outstanding preferred shares B cannot be converted to common shares, and holders of preferred shares B do not have the right to request that the Company redeem these shares.

2. Preferred shares B are perpetual but may be redeemed in whole or in part at the issue price any time after seven years of issuance at the option of the Company. Unredeemed preferred shares shall retain the rights and obligations of the issuance terms prescribed above. If the Company decides to distribute dividends in the current year, the dividends to be distributed as of the redemption date shall be calculated based on the actual number of days of issuance in the current year.

1. Preferred shares C cannot be converted to common shares, and holders of preferred shares C do not have the right to request that the Company redeem these shares.

2. Preferred shares Care perpetual but may be redeemed in whole or in part at the issue price any time after seven years of issuance at the Company's discretion. Unredeemed preferred shares shall retain the rights and obligations of the issuance terms prescribed herein.

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Market price per share

2019 Highest 66.20 63.70

Lowest 62.90 60.80

Average 64.51 62.26

2020 Highest 68.00 64.40

Lowest 60.00 59.50

Average 65.40 62.82

Year-to- date April 13,2021

Highest 63.80 61.90

Lowest 62.70 60.80

Average 63.39 61.59

Other rights

Amount converted or subscribed as of the publication of this annual report

Preferred shares B cannot be converted to common shares.

Preferred shares C cannot be converted to common shares.

Terms of issuance and conversion/subscription

None None

The impact of issuance terms on preferred shareholders’ equity, the possible dilution of equity and the impactonexistingshareholders’equity

None None

Note 1: This cash capital increase for preferred shares B was issued on Dec. 25, 2017, which was set as the record date for the capital increase (i.e., the issue date). The capital increase shares were issued and listed on Jan. 26, 2018.

Note 2: This cash capital increase for preferred shares C was issued on April 3, 2019, which was set as the record date for the capital increase (i.e., the issue date). This cash capital increase was issued and listed on May 6, 2019.

2)Preferredshareswithwarrants:None

4.2.3 Issuance of global depository receipts: None.

4.2.4 Issuance of employee stock warrants: None.

4.2.5 Issuance of new restricted employee shares: None.

4.2.6 Mergers and acquisitions with other financial institutions1) Mergersandacquisitionswithotherfinancialinstitutionsin2019throughApril13,2020:None

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Capital Overview

2) Mergersandacquisitionswithfinancialinstitutionsinthepastfiveyears(1) Taiwan Life and CTBC Life were wholly owned subsidiaries of CTBC Holding. The merger and

acquisition of Taiwan Life and CTBC Life was approved by the Board of Directors on Oct. 15, 2015, as anefforttoeffectivelyintegrateresources,expandtheCompany’slifeinsurancebusiness,andmaximizegroup synergies to lead to an increased economy of scale. CTBC Life and Taiwan Life merged on Jan. 1,2016,withTaiwanLifethesurvivingcompany.Theshareexchangeratiowas1.23ofTaiwanLife’scommonsharesinexchangeforeachcommonshareofCTBCLife.ThepriceadequacyopinionofthisacquisitionwasproducedbyPwCTaiwan,whichprovidedthefollowingevaluation:“Theshareexchangeratio was evaluated by PwC Taiwan based on the premise that Taiwan Life is to become a wholly owned subsidiary of CTBC Holding. Considering the nature of this transaction and the merged target, PwC deemsthatcalculatingtheshareexchangeratioofthismergerandacquisitiononthebasisofembeddedvalueisreasonable.PwCTaiwanconductednecessaryreviewandevaluationanalysisonthefinancialstatement of the target, key assumptions of embedded value, calculation results, and relevant information based on relevant evaluation data. As a result of the aforementioned review and evaluation analysis, PwC isoftheopinionthatexchanging1.23commonsharesofTaiwanLifeforeachcommonshareofCTBCLife in the current M&A is reasonable and conforms to Article 45 of the Financial Holding Company Act and Article 4 of the Regulations Governing Transactions Other Than Loans between Insurance Enterprises and Interested Parties regarding the prohibition of offering terms that are more favorable than other comparable counterparties.”

(2) The Board of Directors of CTBC Holding subsidiary CTBC Bank passed a resolution on June 8, 2016. A share subscription contract was therefore signed with Thailand’s LH Financial Group for its newly issuedcommonstockandtoobtain35.6%ofitsexistingequity,totaling7.545billionshares,withatotaltransactionamountofapproximately16.6billionbaht.TheBanksubsequentlyappointedthreedirectorsand two independent directors to LHFG as well as to the board of its subsidiary, LH Bank, to facilitate the business development of both. The transaction was completed on July 27, 2017. The price adequacy opinion of this acquisition was produced by PwC Taiwan, which provided the following evaluation: “Necessary review and evaluation analysis were conducted by PwC Taiwan on the evaluation method, assumptions, and conclusions of the valuation as well as other key considerations adopted for determining thetransactionpriceandequityvalue.Moreover,variouslatentrisksthatmayinfluencethetransactionprice were evaluated and analyzed. As a result of the aforementioned review and evaluation analysis, PwC Taiwan considers the estimated transaction price of 16.6 billion Thai baht for the potential transaction reasonable.”

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(3)Toimprovethebusinessdecision-makingefficiencyofitssubsidiaryCTBCSecurities,CTBCHoldingsigned a share conversion contract with CTBC Securities in accordance with a resolution passed by the Board of Directors on Sept. 27, 2018. Under this contract, CTBC Holding, with cash consideration, acquired the minority share holdings of CTBC Securities, in the amount of 494,776 shares, accounting for 0.0821%ofthetotal.AtatransactionpricebasedontheNT$12.6BVPSdisclosedinCTBCSecurities’financialstatementforthesecondquarterof2018,thetotaltransactionpricewasapproximatelyNT$6.23million. The conversion was completed on Dec. 3, 2018, with CTBC Securities becoming a wholly owned subsidiary of CTBC Holding. The price adequacy opinion of this acquisition was produced by ASAM LLP, which provided the following evaluation: “Upon evaluation and analysis, ASAM LLP considers it reasonable that CTBC Holding acquired 0.0821% non-controlling equity of CTBC Securities at a price of NT$12.6pershare.”

3) Acquisitionsortransfersofnewsharesissuedbyfinancialinstitutionsin2020throughApril13,2021,uponresolutionoftheBoardofDirectors:To expand its business, the CTBC Bank board approved on March 31, 2021, the acquisition of 2.33 billion shares of LH Financial Group Public Co., Ltd. (LHFG) from its individual shareholders, accounting for 10.99% of LHFG’s shares with a total transaction amount of approximately THB 4.2 billion, making it the largest shareholder of LHFG. Relevant agreements were executed by the parties on March 31, 2021, after the resolution of the CTBC Bank board. The settlement will be finalized after approval from the competent authorities in Taiwan and Thailand.The basic information concerning the financial institution being merged with or transferring the shares.

Name LH Financial Group Public Co., Ltd. (Note 1)

Address

HeadOffice:1Q.HouseLumpiniBuilding,

5th Floor, South Sathon Rd.,

Thungmahamek, Sathon,

Bangkok 10120

Representative Chairman: Rutt Phanijphand

Paid-in capital THB 21.184 billion

Major business scope Deposits, loans, securities, investment trusts, and investment

Major products Deposits, loans, securities, investment trusts, and investment

Financial

information for the

most recent year

Assets THB 249.312 billion

Liabilities THB 210.681 billion

Shareholders’ equity THB 38.631 billion

Operating revenue Note 2

Grossprofit Note 2

Operating income/loss THB 7.747 billion (Note 3)

Currentprofit/loss THB 2.057 billion

Earnings per share 0.098

Note 1: The financial information for the most recent year is from the statement of Dec. 31, 2020.Note 2: According to local financial statement rules, operating revenue and gross profit are not required to be distinguished for banks. Note 3: Net revenue.

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Capital Overview

4.3 Capital utilizations

4.3.1 Public issues or private placements of securities that have not been completed as of the quarter preceding the publication of this annual report: None.

4.3.2 Projects completed in the past three years, the benefits of which are yet to materialize: None.

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5. Operational Overview

5.1 Business activities

5.1.1 Business scope1) CTBCHolding

(1) Business activitiesCTBC Holding is a financial holding company that may invest in banking enterprises, bills finance enter-prises, credit card enterprises, trust enterprises, insurance enterprises, securities enterprises, futures en-terprises, venture capital enterprises, securities investment trust enterprises, foreign financial institutions that have been approved by the competent authority for investment, and other finance-related enterprises determined by the competent authority.

(2) Primary subsidiariesThe subsidiaries of CTBC Holding are CTBC Bank, Taiwan Life, CTBC Securities, CTBC Venture Capi-tal, CTBC Asset Management, CTBC Investments, CTBC Security, and Taiwan Lottery.

(3) Revenue breakdownUnit:NT$million

Revenue source Amount Percentage

Investment income under equity method 46,833 99.75%

Other revenue 116 0.25%

Total 46,949 100.00%

(4)Plannedfinancialproductsandservices:Pleasereferto“5.1.4Researchanddevelopment”.

2) CTBCBank(1) Business activities

A. Institutional banking, capital markets, and overseas businessa. Taiwan business We provide diverse professional financial services, including loans, transaction financing, cash

management, trust and agent services, custodian bank services, and international trade financing. b. International business The Bank leverages its overseas reach and integrated platform to provide customers with complete

cross-border services while actively developing non-Taiwan customers. It continues to strengthen the infrastructure of its overseas branches and subsidiaries and complete its product line to refine its focus on the cross-border financial needs of the Greater China region, Southeast Asia, North America, and Japan.

c. Capital markets The Bank provides tailored solutions to meet its clients’ financial needs. These services include

syndication lending, structured finance, financial advisory services, and the issuance and underwriting of bonds. To fulfill clients’ hedging and financing needs, the Bank offers a wide range of foreign exchange and derivative products and services as well as the design and provision of structured products and proprietary trading.

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Operational Overview

B. Retail bankinga. Wealth management CTBC Bank offers personal and SME NT dollar and foreign currency deposits, financial planning,

asset allocation planning and consultation, and financial services for the purchase of various financial products.

b. Consumer banking The Bank provides a variety of financial products and services including unsecured and secured

loans for personal accounts and SMEs.c. Payment business The Bank provides issuance and acquiring services for credit cards, stored value cards, and debit

cards, and it is developing mobile payment, e-wallet, third-party payment, fee payment, and cross- border transaction platform services.


Revenue source Amount Percentage

Institutional banking, capital markets, and overseas business 44,632 45.12%

Retail banking 50,393 50.94%

Other business 3,893 3.94%

Total 98,918 100.00%

Note: For CTBC Bank on a consolidated basis


3) TaiwanLife(1) Business activities Taiwan Life provides life insurance products. Its products are primarily marketed through banking

insurance, sales personnel, insurance brokers, and direct means. Insurance applications are required to pass approval procedures before being underwritten.


Revenue source Amount Proportion

Life insurance 151,569 72.56%

Health insurance 18,901 9.05%

Injury insurance 1,616 0.77%

Annuity insurance 36,811 17.62%

Total 208,897 100.00%


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4) CTBCSecurities(1) Business activities

A. Underwriting CTBC Securities’ services mainly involve assisting domestic and overseas businesses in entering the

capital market; consulting them in TWSE, TPEx and TPEx Emerging Stock Board listings; and in issuing fundraising products for operating capital.

B. Financial consultation services The company’s professional planning and consulting advisers assist domestic and foreign clients with

M&A as well as foreign investment.C. Securities brokerage CTBC Securities is entrusted by investors with the sale and purchase of TWSE-, TPEx-, and TPEx

Emerging Stock Board-listed securities; margin financing operations; securities lending; and open-ended loan operations.

D. Reconsignment services In addition to the existing entrusted sale and purchase of securities business, the subsidiary further

introduced overseas bonds and structured notes to widely fulfill the needs of investors. E. Futures brokerage CTBC Securities accepts investors’ orders for trading futures and options on the futures market.F. Proprietary trading These business activities include securities trading in both the centralized market and the over-the-

counter market as well as the development and underwriting of conditional bond trading, the exchange of convertible/exchangeable corporate bonds, the operation of futures and options in domestic and foreign futures exchanges, and other proprietary business approved by the competent authorities.

G. Derivative products This comprises the issuance and hedging of call (put) options, market makers, and other authorities-

approved derivative transactions.H. Digital securities CTBC Securities adopts user-centered design thinking to develop digital platform products and serve

its customers with digital innovation and marketing services while managing its digital customers and listening to their voice and feedback.



Proprietary 930 39.03%

Underwriting 229 9.61%

Brokerage 1,224 51.36%

Total 2,383 100.00%


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5) CTBCVentureCapital(1) Business activities

CTBC Venture Capital seeks long-term equity holdings in companies yet to list on the TWSE or TPEx.(2) Revenue breakdown

In 2020, CTBC Venture Capital made 18 investments totaling NT$993 million. Of these, seven cases were in new investments and 11 were cash injections in existing investments, and they comprised six local investments and 12 foreign investments. Combined with its existing portfolio, CTBC Venture Capital had 85 cases on hand as of Dec. 31, 2020, with total invested capital at the fair value of NT$4.385 billion, of which 63.51% (NT$2.785 billion) was invested locally, with the remaining 36.49% (NT$1.6 billion) in-vested abroad. Its portfolio, classified by industry, is summarized below.

Unit:NT$million


Information technology software and hardware 853 19.45%

Cultural and creative industry 307 7.01%

Consumer products industry 778 17.73%

Biotech industry 474 10.81%

Traditional industry 756 17.23%

Green energy industry 52 1.19%

Precision machinery industry 74 1.70%

Other industries 1,091 24.88%

Total 4,385 100.00%


6) CTBCAssetManagement(1) Business activities

A. Domestic non-performing loan (NPL) purchasesB. Consulting services for NPLsC. Debt collections and management servicesD. Investing in real estate, movable property, and rights sold on the foreclosure market or at public

government auctionsE. Investing and activating idle assets of its parent and affiliate companiesF. Providing advance payments for urban renewal projects, and implementing urban renewal projects

or acting as the proprietor of accelerated reconstruction projects for potentially unsafe structures, for which projects it provides funding

G. Accepting consignments from affiliates to rent, sell, or manage and maintain real estate, and implementing urban renewal projects

H. Investing in the financial leasing business in China

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Gain on disposal of non-performing assets 319 37.10%

Interest revenue 558 64.97%

Other gains/losses (18) (2.07)%

Total 859 100.00%


7) CTBCInvestments(1) Business activities CTBC Investments’ main services include securities investment trusts, discretionary investments, offshore

master agent services, and other business activities approved by the competent authorities. As of Dec. 31, 2020,thecompanymanagedassetstotalingNT$324.7billion.Goingforward,CTBCInvestmentswillcontinue focusing on the dual engines of domestic and offshore funds, supplemented by discretionary and privateequityfundsfordiversifiedoperationsprimarilythroughcustodianbanksandchannelswithinthefinancialholdinggroup.



Management fee income 928 98.67%

Transaction fee income 13 1.33%

Total 941 100.00%


8) CTBCSecurity(1) Business activities

A. Stationed securitya. Banking security servicesb. Security services at office buildings, business premises, and residential communities

B. Consulting services on anti-theft, fire safety, and disaster prevention measures(2) Revenue breakdown

Unit:NT$million


Stationedsecurityatbusinessandresidentialcomplexes 75 30.64%

Banking security services 171 69.36%

Total 246 100.00%


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9) TaiwanLottery(1) Business activities

Taiwan Lottery’s main operations comprise the issuance, sale, marketing, prize claims, and management of Taiwan’s public welfare lottery on behalf of CTBC Bank.



Lottery service income 1,911 100.00%


5.1.2 Business plans for 20211) CTBCHolding

CTBC Holding will continue to provide customers with the same comprehensive and trustworthy services it has been offering for the past 50 years. Through proactive growth in recent years, self-initiated and otherwise, the Company’s financial territory is now relatively complete, and the most important task at hand is integrating the platforms and resources of its subsidiaries to maximize overall efficiency.Specific business plans for the future are as follows:(1)Enhanceoverseasmanagement,improveoperationalefficiency,deepencooperationwithinthegroup,and

createfinancialholdingsynergy.(2)MaintainthesteadyprofitoftheinsurancebusinessandseamlesslyintegrateIFRS17.(3) Accelerate digital transformation and strengthen digital competitiveness.(4)Integratethegroup’sresourcesandmaximizesynergywithinthegroup.(5)Emphasizefinancialdisciplineandenhancecapitalefficiency.(6)Cultivatetalentandbuildanexcellentworkenvironment.(7) Deepen corporate governance and improve the functions of directors.

2) CTBCBank(1) Institutional banking, capital markets, and overseas business

A. Expand and cultivate core the Taiwanese customer base, improve product cross-selling capabilities, meet the cross-border financial needs of customers, expand the customer base, and increase the commission-to-revenue ratio.

B. Address specific customer groups according to industrial characteristics and leverage the Bank’s product portfolio and customization capabilities to offer differentiated financial services.

C. Maintain the competitive edge of the Bank’s niche corporate financial and capital market products in Taiwan as well as its brand image as a leader and innovator.

D. Effectively utilize the Bank’s overseas branches and subsidiaries to enhance its profitability and develop itself as the best financial partner for Taiwanese businesses:a. Integrate resources at home and abroad, examine customer needs, and leverage the advantages of

CTBC Bank in order to provide a comprehensive and convenient cross-strait service platform for Taiwanese businesses.

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b. Extend the customer supply chain to further provide for the financial needs of overseas businesses. E. Actively develop overseas customers and seize the business opportunities of Chinese businesses

across the Greater China region. In Southeast Asian countries, select target industries to focus on, expand local customer bases, and continue business transformation and growth efforts, including cultivating local customers, grasping opportunities in China–U.S. competition, and leveraging the Bank’s region-wide presence to serve cross-border customers.

F. Continue to maintain the Bank’s leading position in the financial industry, strengthen its overseas operation, build upon its niche market advantages, and enhance the market positions of various overseas platforms.

G. Build an active risk management culture, enhance automation to perfect risk monitoring, and strengthen asset quality.

H. Improve overseas platforms for private banking and wealth management in order to meet customers’ overseas wealth management.

I. Develop upon the Bank’s competitive edge in derivatives, syndicated loans, and underwriting debt solutions; integrate cross-function services to provide a comprehensive solution platform for businesses; increase its visibility in Asia market; and diversify its investment portfolio to spread risk.

(2) Retail bankingA. Domestic business CTBC Bank’s retail banking goal is to become the preferred bank of individuals and SMEs alike, with

customer needs as its core.a. Expand the four customer bases by differentiating high net worth customers, wealthy customers,

potential customers, and SMEs. Promote customer-friendly operations using digital, data, and smart methods; adjust to customers’ needs; and provide professional and warm financial services.

b. Expand the operation scale of core products such as wealth management, loan, and payment services. Establish a diverse and fast smart product platform, leverage date precision marketing, and combine scenarios to build a one-stop financial experience.

c. Promote the digitalization of the customer journey and develop microservices/modulization platforms with customer needs at their core in order to enhance service efficiency and customer experience.

B. Overseas business Stabilize overseas market operations and develop niche business models in subsidiaries; in addition,

expand dealer business, strengthen risk control, and maintain the profitability of the consumer finance company that it co-founded in mainland China.

3) TaiwanLifeAdjust corporate structure, strengthen capital, and grow into the insurance company with the soundest corporate profile and best customer experience:(1) Plan an investment strategy most suited to operations, strengthen asset–liability matching, and minimize

the impact of IFRS 17 and ICS 2.0 compliance:

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A. Select new contract battlefield, eliminate burdens: Focus on protection type, riders, and foreign currency insurance products.

B. Maintain stable current interest-rate spread, strengthen asset–liability matching: Increase NT dollar asset investment positions, such as in green energy-related investments and real estate income.

C. Continue compliance preparation: Establish system tools and a dynamic asset–liability management mechanism.

(2)Usedigitalresourcestointegratesalesservicesandbuildthebestcustomerexperience:A. Ingrain customer-centered DNA and equal treatment in Taiwan Life.B. Optimize the customer journey: Focus on customer labeling, precision marketing through consultancy

services, developing customer demand-oriented products, selling digital empowerment, splitting customer flow across digital channels, and a customer voice-based feedback loop improvement mechanism.

C. Classify channels, enhance capacity: Improve the core human resources of sales channels, cultivate the sales capacity of the protection-type products of bank insurance channel strategic partners, and target younger adults through digital channels and divert them to physical channels.

(3) Continue with system establishment and combination and strengthen digital architecture: A. Continue to build the new core system; consolidate, decouple, and replace peripheral systems. B. Continue to accumulate and standardize customer databases and introduce digital technology as the

foundation of smart services.

4) CTBCSecurities(1) Business strategies

A. Integrate the underwriting business with the capital markets in Greater China and Southeast Asia and develop new markets using CTBC Holding’s resources to become a leading securities dealer.

B. For domestic stock products, launch comprehensive marketing, increase promotion frequency and exposure, attract new customers, maintain loyal investors, and enhance high net worth customers’ transaction amounts and asset scale.

C. For brokerage channels, leverage the CTBC Holding group’s advantages to create joint-marketing added value and profit.

D. By attracting digital flows and through bank co-marketing partnerships, expand brokerage market share through virtual and real channels, bring stable business with low capital assumptions, and drive up securities ROE.

E. Develop digital platforms through automation and smart operations. Gain market attention through product differentiation and marketing activities, and add digital investment advisory specialists to combine virtuality and reality and create profit.

F. Establish professional, highly efficient reconsignment business teams to provide complete support for the core systems of all products and diverse business channels, and to provide investors with a complete product line and professional after-sales service.

G. Enhance the study of macroeconomics and individual industries, establish a proprietary business profit model built on diverse investment strategies, and maximize profit within the set risk limits.

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H. Cultivate the warrants issuance market in combination with an active market-making strategy to enhance CTBC Securities’ brand image.

I. Supplement business development with Big Data and machine learning, implement data-driven business planning, and establish various types of forecasting models to better understand the default risks of stocks and individual investors and to facilitate the digital transformation of various departments.

J. Strengthen the business of the investment consulting subsidiary and the Hong Kong subsidiary in particular in order to build a business platform for Greater China. Assist the Hong Kong subsidiary in developing its licensed business under the FSC’s localization policy and seek overseas investment opportunities while meeting the group’s overseas investment needs and enhancing the parent company’s overall earnings.

K. Invest in quality targets through the venture capital subsidiary, provide diverse funding channels for investors, and deepen the investment banking business.

(2) Important policies for achieving business objectivesA. Continue to improve compliance with money-laundering prevention laws and other regulations and

fully exercise its risk management mechanism.B. Strengthen corporate governance and various management systems and implement an independent

director system.C. Deepen talent resources and continue learning from world-class investment banks.D. Build a foundation for consolidating existing strengths and for sustainable growth.E. Develop a stable and profitable trading model to expand revenue and profit.F. Firmly adhere to the principle of fairness for all customers and enhance customer service.

5) CTBCVentureCapitalAlong with other CTBC Holding subsidiaries, continue leveraging the synergy of the group’s resources in order to provide customers with a full range of solutions. The specific business plan is as follows:(1)Inlinewiththedevelopmentdirectionoftheindustry,pursuesuperiorfinancialinvestmentperformance

byexploringhigh-qualitycompanieswithsignificantgrowthpotentialandcapitalmarketrecognition.Inaccordance with the Taiwanese government’s industrial development policy, actively support its “5 plus 2” industrialinnovationplaninrelevantfieldsandprojectssuchassmartmachinery,theAsianSiliconValley,green energy technology, biotechnology and pharmaceuticals, defense, new agriculture, circular economy, AI,and5Gaswellas thesixcorestrategic industries,namely informationanddigital technology,cybersecurity, medical technology and precision health, green and renewable energy, national defense and strategic industries, and strategic stockpile industries. In addition, provide evaluations of venture capital projects’ key issues in light of the government’s active promotion of capital returns and industry upgrades and advocating of the necessity and urgency of technologies related to the fourth industrial revolution, artificial intelligence of things (AIOT), and circular economy. Furthermore, cultivate low-profile yet well-performingbusinessesandfacilitatetheindustrialupgradingofcompaniesinvariousfields,whilecontinuing to develop high-quality overseas-based Taiwanese businesses as well as actively identifying and reviewing potential IPO targets in China, Taiwan, Hong Kong, Macau, and Southeast Asia.

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(2)Furtherexpandinvestmentintheculturalandcreativeindustryandmaintainamarket-leadingposition.Continue to establish a complete investment team, search for potential targets with high commercial value, and assist cultural and creative industry entities to enter the capital market to become centralized market- or OTC-listed companies. Furthermore, engage with the industry to increase the company’s media exposure,fosterapositivepublicimageforit,andmaintainitspositionasaninvestmentindustryleader.

(3) Develop fintech and actively participate in fintech industry investment according to CTBC Holding’s strategy: Starting in the second half of 2017, CTBC Venture Capital has been actively participating in fintechindustryinvestment,targetingfintech-relatedfundsanddirectprojectinvestment.Inaddition,itis actively seeking co-investment opportunities with global private equity funds in order to strengthen its investment portfolio and enhance the capabilities and competitiveness of the CTBC Holding group in fintech.

(4)Workwithgovernmentfundstoexpandinvestmentscale,diversifyrisks,andincreaseincomesources:Themanagementteamwilluseitsownfundsandpolicyfundstoexpanditsinvestmentscale,spreaditsinvestment portfolio risk, and generate other venture capital investment sources as well as to increase managementfeeincomefromitsqualificationtomanagegovernmentfunds.

6) CTBCAssetManagementThe business focus for 2021 is to actively dispose of and activate invested real estate, continue to build a domestic real estate investment portfolio, expand urban renewal-related business, establish an urban renewal-related business control mechanism, and manage NPL business.(1) Actively dispose of and activate invested real estate CTBCAssetManagementhaspurchasedseveralpiecesofnon-businessuserealestatefromitsaffiliate

CTBC Bank and has obtained additional properties off the foreclosure market. In 2021, it will actively dispose of real estate with poor rental efficiency and residential real estate in order to accelerate the realizationofinvestmentincomeandmaximizetheappreciationbenefitsofitsrealestate.Furthermore,itwill continue to activate idle real estate and work to quickly achieve full occupancy of such idle real estate tocontributeastablenetcashflowforitselfandthegroup.

(2)Continuetobuildandexpanddomesticrealestateinvestments The company will continue to seek properties with development and appreciation potential or stable

profitabilityontheforeclosuremarketaswellaspublicauctionsheldbygovernmentagencies(includingreal estate, movable property, and property rights). It will also continue to develop its domestic real estate business into a stable source of the future earnings. In addition, as many local governments plan to attract investment by offering build–operate–transfer projects, CTBC Asset Management is also actively evaluating and investing in projects with development potential.

(3)Expandurbanrenewal-relatedbusiness In addition to identifying opportunities for urban renewal, promoting urban renewal plans, and acting

as an implementer for such cases, or promoting the accelerated reconstruction of potentially unsafe structures among the company’s real estate and that of the group, CTBC Asset Management will actively seek ongoing urban renewal projects administered by the government or non-government entities in Taipei and New Taipei cities to act as the project implementer, or seek accelerated reconstruction projects of potentially unsafe structures in Taipei and New Taipei to act as the proprietor. The company seeks to involve and integrate landowners into the urban renewal or the said accelerated reconstruction process to seekreasonabledevelopmentprofits.

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(4) Establish an urban renewal-related business control mechanism The company will establish relevant internal rules for urban renewal business in a timely manner, which

include pre-planning, progress control, and after-project building management. Cooperation will be established with companies of a certain business scale, such as real estate management companies, urban renewal consultancies, and construction companies.

(5) Steady management of NPL business ForNPLcasesthatwarrantcollection,thecompanywillcontinuetorefineandaccelerateitscollection

operationsinorder torealizeinvestmentgainsandreachmaximizationcollection.Inaddition, itwillcontinueseekingNPLinvestmentopportunitiesinnon-financialinstitutions,suchasleasingcompanybaddebts and company overdue accounts receivable.

(6) Leasing business in China It will continue to focus on the two development strategies of growing with target customer groups and

buildingcorecompetitiveness,engageinindustry-relatedcontactwithtargetcustomergroups,expandassetscale,enhanceprofitability, improveoperationalefficiency,andenhancecorecompetitivenessbyusing a leasing company-style business model. A. Efficiently operate across regions, focusing on industry and equipment.B. Continue to optimize direct leasing projects and raise the ratio of direct leasing and new item renewal.C. Promote credit investigation optimization and strict asset quality control. D. Enhance collection efficiency and collection rates.E. Strengthen operational efficiency.F. Improve and optimize system performance, build a diverse system structure, develop management

information system management reports, and examine WeChatWork transfers.

7) CTBCInvestmentsLooking ahead, considering changes in laws, government policies, and then overall environment, CTBC Investments will adopt strategic planning regarding products and sales while continuing to enhance its operating performance with regards to its systems. It will also continue to leverage the powerful resources of the CTBC Holding group, including subsidiaries CTBC Bank, Taiwan Life, and CTBC Securities, to build an internal ecosystem of comprehensive collaboration. Its main business development areas of focus are as follows:(1) The company will rely on stock ETFs, niche domestic funds, and special offshore funds as its core product

line and design products based on investor demand. Furthermore, in order to strengthen investment asset structure,itwillfocusoninnovativehigh-marginproductsanddiversifiedofferingstocustomers.

(2) In response to life insurance sales momentum moving from savings-type policies to investment-linked products, it will strengthen its collaborations with Taiwan Life on investment-linked products and attract more discretionary investment funds by designed new products.

(3)Inviewof the inflexibilityofCTBCInvestments’existingsystemsanditsfast-growingproduct line,its new core system will be quickly established, the operating performance of which will be enhanced through the digitalization of operating procedures.

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(4) In compliance with government policies, at suitable times, the company will apply for differential managementdiscountsaccording to thePlan toAdvanceExcellenceforSITEs inorder toaccelerateproduct development and enhance product design competitiveness.

(5) Leverage the strengths of the CTBC Holding group to design retirement products, the subsidiary will accumulateinvestmentexperience,establishcustomerserviceproceduresandschemes,andprepareforpolicy changes opening the door for more labor retirement pension investment choices.

8) CTBCSecurity(1) CTBC Security will improve the quality of its workforce, implement onboard training, strengthen the

practicaleducationandtrainingprovidedtotheemployees,and,whenappropriate,arrangeforexpertstoteach basic self-defense skills.

(2) The subsidiary will communicate and implement strategic cooperation programs with property management companiesand targetofficebuildingsand top-level customers in luxury residentialcomplexesinordertoprovidehigh-levelsecuritymanagementservicesattheselocations.

(3)Itwill targetmorebusinessfrombusinessheadquartersandlargecorporatecomplexes,andwillrecruitexceptionalsecuritypractitionersinordertoprovidestable,high-qualityservice.

(4) It will improve its operation and management quality and increase brand recognition of CTBC Security among consumers.

9) TaiwanLotteryDuring the third term of the public welfare lottery (2007–2013), the compound sales growth rate of lottery tickets was 11.53%. In 2014 and 2015, annual sales peaked at more than NT$130 billion, which marked the maturity of the market; thus, high double-digit growth is unlikely to be achieved again. In addition, the growth of private consumption has been low in recent years as the public’s real disposable income has not increased, resulting in spending habits tending to be more conservative and necessity-focused. Sales have been declining since 2016. Numerous additional factors have further limited the development of the lottery business, such as limitations on the prize payout rate, the stricter inspection of retailers’ management required by the competent authorities and legislators, the absence of funding allocated over the past seven years to promote the public welfare nature of the lottery, and the restriction against online sales, which runs in stark contrast to the consumption habits of younger people. In seeking to cultivate the lottery market, promote the charitable nature of the lottery, encourage ticket sales, and achieve steady growth, Taiwan Lottery’s main plans are as follows:(1) Develop innovative products

A. Draw games: Develop innovative models for increasing prize amounts in order to increase engagement.

B. Scratch cards: Enhance the lottery-winning experience, create innovative social interaction-based products using non-traditional materials and designs, upgrade environmental, social, and corporate governance, and take advantage of the latest higher-threshold policy of taxable prize money to create prize design flexibility.

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(2)StrengthendiversifiedmarketingA. Use version 2.0 of the Taiwan Lottery app to manage digital membership and for digital channel

marketing.B. Develop cross-industry alliances with companies that share our public welfare convictions in order to

expand customer base and marketing channels. (3) Highlight the lottery’s public welfare purpose

A. Use the new brand positioning of “Let good things happen” to promote the value of public welfare.B. Pursue channel transformation to turn Taiwan Lottery locations into community gathering places and

coach sales staff to cultivate warm relationships with customers.

5.1.3 Industry overview1) CTBCHolding

Regarding industry competition, there were 16 financial holding companies, 38 domestic banks, 29 branches of foreign and mainland Chinese banks, and 22 life insurance companies in Taiwan as of the end of 2020, according to Taiwan’s Central Bank. In general, the domestic financial market is still saturated and excessive market competition remains.Regarding the impact of new technologies, fintech is being used to develop more efficient financial services for application in various scenarios, providing practical solutions for everyday problems encountered by customers. Furthermore, because traditional financial players are severely challenged by the current industrial environment, heavy investment is being devoted to fintech. In November 2020, the FSC partnered with the Taiwan Financial Services Roundtable to establish the FinTech Co-Creation Platform, which marked a major milestone in Taiwan’s fintech development. Regarding supervision and legal compliance, relevant costs for financial institutions have significantly increased due to the rising standards of corporate governance and compliance. Therefore, CTBC Holding will continue to optimize its legal compliance system policies and relevant rules as well as establish legal compliance evaluation and reporting methods in order to ensure the consistency of its subsidiaries’ legal compliance risk evaluation methods. CTBC Holding’s Chief Compliance Officer is required to report to the Board and Audit Committee every six months to keep the Board and relevant executives informed on the implementation status of legal compliance. Regarding corporate governance, the Board has established a Corporate Governance Officer to strengthen its corporate governance performance; in addition, none of CTBC Holding’s directors acts concurrently as a manager. Moving forward, it will strengthen the functions of its independent directors, maintain the diverse background of its Board members, and keep information disclosure public and transparent in order to implement its integrity-first operating principle. Furthermore, to comply with IFRS 17, subsidiary Taiwan Life will strengthen its sources of basic earnings, maintain profitability, and continue to promote the sale of protection-type products in order to minimize the impact of compliance. As such, financial holding companies should pay closer attention to capital utilization efficiency.

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2) CTBCBankAs Covid-19 has severely disrupted the global economy. In October 2020, the IMF predicted a significant decline in global economic growth, from 2.8% in 2019 to -4.4% in 2020. The forecast growth rates of the U.S., euro area, and China fell from 2.2% to -4.3%, 1.3% to -8.3%, and 6.1% to 1.9%, respectively, while the growth of most emerging economies also contracted. Taiwan, however, had relatively good control of the pandemic, bringing new business opportunities. With the diverse planning of global supply chains and returning businesses’ investment in Taiwan supporting local investment demand, Taiwan is estimated by the Directorate-General of Budget, Accounting and Statistics to have had an economic growth rate of 3.11% in 2020—slightly above the 2019 rate of 2.96% and above the 2020 rates of all major countries and trade competitors. Overseas, the global economic slowdown has led to monetary policy changes in major countries. The Federal Reserve rapidly lowered interest rates to zero in 2020 and launched an unlimited debt-purchasing plan. Meanwhile, the European Central Bank, Bank of Japan, and People’s Bank of China moved their policies toward a relaxed direction. As to fiscal policy, many countries implemented unprecedented stimulation plans to assist individuals and businesses hit by the pandemic. Faced with the high uncertainty, Taiwan’s Central Bank reduced the rediscount rate by 0.25% to 1.125%. Overall in 2020, the world suffered from severe recession, with a larger scale of rate reductions and quantitative easing. Financial markets were in turn influenced by the interaction of abundant liquidity and high uncertainty, which resulted in drastic fluctuations, and the overall environment was unfavorable for the banking business. In terms of institutional banking, the capital market, and overseas business, risks of economic downturn from the Covid-19 pandemic remain. Countries with relative control over the pandemic, such as China and Vietnam, may have stronger growth momentum. Taiwanese business customers are an important customer group across Asia, while Chinese enterprises have increasing demand for capital and cross-border financial services due to their growing cross-border operations. The trend of shortening supply chains caused by recent geopolitical events and the pandemic is expected to spur a new wave of funding demand through supply chain restructuring. In addition, the participation of Southeast Asian countries in the Regional Comprehensive Economic Partnership will boost trade and investment confidence and drive relevant financing opportunities and generate capital market business opportunities. Meanwhile, the Taiwan government’s New Southbound Policy is encouraging enterprises to invest in Southeast Asia. In addition, as the global economy was affected by the U.S.–China trade war, resulting in many China-based Taiwanese businesses shifting manufacturing to Southeast Asian countries and some Taiwanese businesses returning to Taiwan, financial needs became increasingly significant, such as opportunities arising from changes in trade and capital and the needs for equity and real estate transaction escrows. Short-term demands for retail, tourism, and transportation will remain low and take time to recover. Local financial businesses will focus on maintaining stability. However, as capital scarcity increases, improvements in operating models and cross-selling abilities will be key to favorable operating performance, whereas adopting changes in international law in a timely and effective manner, implementing risk management, and maintaining quality assets will be critical for CTBC Bank.Taiwan’s retail banking business has seen steady growth in total household assets, deposit balances, number of SMEs, and loan balances. The financial demands of customers continued to rise, as did market scale. At the

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same time, existing retail banking business regulations became stricter, impacting profitability and control. Regulatory restrictions and sales control on wealth management businesses affected business development and profitability, while new policies and technological developments opened fresh business and development opportunities. In particular, policies encouraging open banking are driving the industry into a new era of consumer autonomy, while the application of several digital technological advances are maturing, greatly enhancing operating efficiencyInfluenced by fintech and online-only banks as well as non-financial players’ entrance into the market, specifically the introduction of new operating models and drawing away of customers, CTBC Bank will need to use fintech to provide more convenient services. Such new platform business operators are collaborating with, in, and via social media, external scenarios, ecospheres, and Big Data to drive innovation in financial service models, which underscores the Bank’s need for digitalization. Amid the trends described above, the international situation and digital technology are also substantially changing customer needs and behaviors. The Bank shall actively assist its customers in expanding globally, will promote digitalization, and will develop innovative service models through cross-industry cooperation.

3) TaiwanLifeThere are currently 22 life insurance companies in the market. As a result of preparing for compliance with IFRS 17 and ICS 2.0, starting 2026, and with policies implemented by the competent authorities to reduce the impact of compliance with these standards, the total new contract premiums of the life insurance industry fell from NT$1274.7 billion in 2019 to NT$916.8 billion in 2020, which led the industry to shift back to protection-type products. Regardless of the impact on sales volume for the short term, this will be beneficial for the life insurance industry in the long run given the more stable product portfolio. Also in 2020, the competent authorities launched the Corporate Governance 3.0 sustainable development blueprint, which aims to strengthen the functions of boards of directors, enhance the sustainable value of companies, improve information transparency, promote sustainable operations, enhance stakeholder communication, maintain excellent communication, comply with international rules and regulations, introduce stewardship, deepen sustainable governance culture, and provide diverse products. They also promoted compliance with the Principle for Financial Service Industries to Treat Clients Fairly, which is considered a major supervisory policy.Looking further ahead, in 2025, Taiwan will become a super-aged society, as defined when the percentage of the population aged 65 or older is 20% or more. As such, the needs for products suitable for the aging population as well as for appropriate client experience and digitalization are increasing, thus requiring more protection-type products and convenience-centered digitalization in order to improve customer satisfaction and competitiveness and to increase profits.

4) CTBCSecurities2020 saw drastic fluctuations in global politics and economic developments as a result of the pandemic. The U.S. Federal Reserve initiated an unusual, large scale rate cut during the period (for a cumulative 1.5% rate cut with a benchmark interest rate cut ranging from 0% to 0.25%) and reintroduced quantitative easing as

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panic led to a collapse of the global financial market. The Dow Jones, for example, plummeted 38% in less than two weeks, after peaking at 29,568 points in the beginning of the year. Major financial organizations substantially downgraded the global economic outlook (the OECD forecast a global GDP recession of 4.2% in 2020), with China barely maintaining a positive growth rate of 1.8%. However, as the panic began to recede, central banks worldwide released historic levels of liquidity (the balance sheet of the Federal Reserve doubled to reach nearly US$7 trillion); stock markets rapidly resurged and decoupled from fundamentals, with many indexes returning to high points during the pandemic and some even recording all-time highs. The Dow Jones broke through 30,000 points while the NASDAQ and the Philadelphia Semiconductor Index each rose more than 40%. Nevertheless, due to deeper connections with the continental economy and Brexit, Germany’s DAX and France’s CAC recorded annual growth rates of 3.55% and -7.87%, respectively. Britain’s FTSE also diverged from the global stock market prosperity, contracting by 14.3%. In the first quarter of 2020, the Taiwan Stock Exchange (TWSE) was not immune to the crisis caused by the pandemic and hit a trough of 8,523 points, with a decline range of 30%. However, as the National Stabilization Fund entered the market to maintain confidence and international markets recovered—along with the superb performance and strategic chip-manufacturing status of TSMC (2330), the TWSE weighting of which rose from 23.65% at the beginning of the year to 30.76%, with its market capitalization increasing by NT$5.6 trillion to NT$13.74 trillion)—the TWSE Weighted Index staged a V-shaped recovery and broke the 30-year record high of 12,682 points. In the third quarter, influenced by the U.S presidential election and foreign investors remaining bearish, the stock market fluctuated; however, given the swift return of Taiwanese business investment funds due to the global massive overflow of capital, the New Taiwan dollar experienced strong appreciation and reached NT$28 (approximately +6.54% YoY). In addition, the efforts of Chinese companies to “de-Americanize” led to order transferring to Taiwan. In the fourth quarter, the TWSE reached almost 15,000 points.The TWSE Weighted Index closed 2020 at 14, 732.53 points, for annual growth of 22.8% and a high–low range of 6,236 points. The performance of the over-the-counter market (TPEx) was also impressive. It recorded an annual accumulative increase of over 20%, which surpassed the performance of listed indexes. Examining this along with the neighboring stock markets of China’s SSE Composite Index, Japan’s Nikki 225, and South Korea’s KOSPI, which rose 13.87%, 16.01%, and 30.75%, respectively, it is apparent that stock markets with tech stocks as key players and with semiconductor industries were the biggest winners in 2020. Due to the market heating up and heavy day trading, the total trading volume of the TWSE and TPEx increased by 64.2% from 2019 and totaled NT$62.10 trillion (NT$49.18 trillion on the TWSE and NT$12.91 trillion on the TPEx, with a combined average daily turnover of NT$250.3 billion). In 2021, international events such as the pandemic and the U.S.–China trade conflict will likely dampen the market, contributing to the highly uncertain forecast of a strong recovery of the global economy after the pandemic. Furthermore, as stock markets worldwide are generally at historic highs, an optimistic but conservative view is advisable regarding the performance of the TWSE.In terms of profitability, in 2020, the earnings of listed and OTC companies in Taiwan totaled approximately NT$2.46 trillion, up 22.0% from NT$2.01 trillion in 2019, with rises of 21.9% and 22.5% for listed and OTC companies, respectively. Benefiting from the increased demand for electronics due to the pandemic and the

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effect of the abovementioned order transfers, listed and OTC companies are estimated to see 15%–20% profit growth in 2021. The cumulative export value for 2020 was NT$345.3 billion—a 4.9% increase from the previous year. In addition, export momentum saw double-digit increases in every month of the fourth quarter (11.19%, 12.03%, and 11.96%, respectively), exceeding market expectations. As Taiwan maintained effective control of the pandemic, it recorded economic growth of 3.11% for 2020, far above the 1.56% forecast earlier in the year by the Directorate-General of Budget, Accounting and Statistics, which has predicted 2021 growth of 3.8%–4.2%. Nevertheless, factors such as the pandemic and U.S.–China trade conflict remain key to global economic performance.According to Taiwan Securities Association data, the cumulative after-tax net profit of domestic securities firms was NT$57.34 billion in 2020, marking a significant increase of 43.9% from NT$39.86 billion in 2019. Furthermore, the total number of securities firms stood at 65, representing a decrease of two from 2019. However, looking at the fact that the number of securities accounts as of the end of 2020 was 20.76 million—an increase of 1.49 million from the 19.27 million at the end of 2019—the outlook for the Taiwan stock market is not pessimistic, but rather filled with potential.

5) CTBCVentureCapitalAccording to KPMG’s “Venture Pulse: Q4 2020 Global analysis of venture funding” report, despite the Covid-19 pandemic, global venture capital investment remained at a high level in the fourth quarter of 2020. The focus remained on late-stage companies, with funding for early-stage companies relatively difficult. Also according to the report, global venture capital investment in Q1 through Q4 of 2020 was US$61 billion, US$62.9 billion, US$73.2 billion, and US$80.8 billion, respectively. The increase in the third quarter was due to several major investment projects with amounts exceeding US$1 billion, including Weltmeister in China (US$1.5 billion), Space X in the U.S. (US$1.9 billion), and Flipkart in India (US$1.2 billion); the focus of global venture capital investment in the fourth quarter was on tech fields that were assisting enterprises to get through the pandemic, including the logistics and delivery, healthcare and biotech, fintech and business productivity sectors. The investment amount of the top three venture capital projects of the fourth quarter each exceeded US$1 billion, with one in the logistics and delivery industry and the other two in the educational software industry. By region in the fourth quarter, the U.S. market saw the largest venture capital investment amount of US$38.8 billion, while the investment amounts in Asia and Europe also grew. In addition, third- and fourth-quarter venture capital investment in China rose consecutively after declining for two seasons. In 2020, the focus of investors was on businesses that could adapt to the post-pandemic new normal, such as those in fintech, home learning, remote working, enhancing online service capabilities, health and biotech.Looking ahead, with the results of the U.S. presidential election and Brexit, the focus of venture capital investment will be on Covid-19-related developments. As subsequent waves of the pandemic appear in many areas, investors are anticipated to maintain focus on “new normal” businesses, including in fintech, health and biotech, B2B solutions, and edtech.

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6) CTBCAssetManagementThe domestic non-performing asset market is divided into NPL and court auction markets.(1) NPL market According to FSC data on NPLs sold by domestic financial institutions, the average amount of loans

releasedannuallypeakedintheperiodfrom2001to2007,duringwhichtheyaveragedapproximatelyNT$180billioneachyear.Theamounthasdecreasedsubstantiallysince2008;intheyearsfrom2015to2019,thenumberswereNT$500million,NT$1.64billion,NT$2.69billion,NT$0,andNT$3.81billion,respectively.In2020,atotalofonlyNT$12.6billionwasreleased.TheprimaryreasonsforthedeclinefromthepreviousdecadeandthecurrentflatmarketarethattheNPLratioofbanksremainedlowandthecompetent authorities raised the threshold for banks to sell NPLs.

(2) Court auction market The total number of items to be tendered in the court auction market fell from 319,729 in 2002 to137,371

in 2020. In recent years, the number of court auction cases has been declining. The decrease is believed to have been caused by the NPL ratio of banks remaining low, the housing market seeing more activities in recent years as prices remained relatively high, and the disposal time of collateral being shortened. Ifinterestratesremainlow,thecourtauctionmarketisnotexpectedtoseeasignificantincreaseinthenumber of auctions in the short term.

(3) Leasing industry in China Observing from the track and trend of market growth, after the rapid growth period of 2009–2017,

the growth of the balance of leasing contracts in China started to slow in 2018. It then increased at a compound annual growth rate of 34% in 2019, and in 2020 had a total volume of RMB 6.504 trillion. Despite the adverse impact on the leasing business of the Covid-19 pandemic in 2020, the leasing business reached the point at which it started to enter an internal adjustment period and move toward deeper change.

From a policy perspective, governments of all levels in China actively encourage leasing business in ordertoassistthedevelopmentofSMEsandspecificindustriesandtoaddresstheirfinancingproblems.To regulate financial leasing companies, improve the relevant supervisory rules, promote the orderly developmentofthefinancialleasingindustryand“reducequantity,increasequality”,onJune9,2020,theChinaBankingandInsuranceRegulatoryCommissionofficiallyissuedtheFinancialLeasingCompanySupervisory Administrative Provisional Measures (Yin-bao-jian-fa (2020) No. 22), which constitute a major measure for the commission in implementing China’s National Financial Work Conference and improvingthesupervisionofitsfinancialleasingindustry.Themeasuresaimtoensureproperoperationsbyfinancialleasingcompaniesandtoguidetheindustry’sorderlydevelopment.

7) CTBCInvestmentsAccording to the Securities Investment Trust & Consulting Association, overall market growth totaled NT$1.0023 trillion in 2020. This represented 10% annual growth from the previous year, with domestic funds increasing by NT$518.7 billion—a 13% increase from 2019. The growth was mainly from newly raised funds, with index-type, ETF-linked, and multi-asset type funds having the largest growth. Regarding offshore funds, the Covid-19 pandemic meant there was only a slight increase of NT$45.7 billion (1%). Discretionary funds, meanwhile, saw strong growth of NT$426.2 billion (21%) due to the great demand for investment-type products, while private equity funds saw growth of NT$8.7 billion.

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There were almost 70 new domestic funds raised in 2020. Taiwanese stocks, high dividends, and ESGs were three major types in terms of the number of funds and the scale of funds raised. For the past two years, bond ETFs and target maturity funds accounted for the majority of new funds raised; however, this trend has slowed under the influence of stricter regulations. Among ETFs, the growth of bond ETFs declined slightly due to the limitation on bond ETF diversification, whereas equity ETFs grew 43% thanks to the strong performance of Taiwanese stocks this year, with total growth of NT$142.8 billion for traditional and leveraged and inverse ETFs. Among all domestic funds, index-type funds were the best performer, as bond ETFs were transferred to index-type funds, with the performance of ETF-linked funds and multi-asset funds coming in second.Looking ahead in 2021, the competent authority’s relaxing of restrictions on the diversification of the number of bond ETF beneficiaries is expected to further drive overall ETF growth. However, in order to maintain growth momentum, it is still necessary to increase competitiveness in product differentiation and to expand the markets for retail investors.

8) CTBCSecurity(1) Security industry conditions

A. Security companies in Taiwan mainly engage in stationing security guards at fixed locations such as office buildings and residential communities, whereas less than 10% are specialized in or concurrently engage in system, cash-in-transit, or personal security.

B. The stationing of security guards is a highly competitive market in Taiwan, with relatively slim profits, uneven personnel quality, and unstable service quality. However, this service is the largest segment of Taiwan’s security industry, accounting for more than 90% of it.

C. An excessive number of new security companies have been using low pricing as their main means of competition, causing lower staff salaries and in turn higher turnover rates and problematic recruitment and training. Customers have become increasingly dissatisfied with the deteriorating service quality, spurring them to seek lower rates or to switch security providers. This has resulted in a vicious cycle and operational difficulties for many security companies.

(2) Future developmentA. Despite the aforementioned problems, the growing importance attached by people to their safety and

property means the popularity of security services will only grow. Home security is believed to hold the greatest market potential.

B. There are no obvious economies of scale in the stationed security market because the service requires few fixed costs. Furthermore, it is a labor-intensive field, so few companies have been made obsolete in the segment and, as a result, an oligopoly is unlikely to emerge.

C. Large-scale security operators will continue to pursue market share in order to maintain any small degree of economy of scale they have established; furthermore, in the face of competition, some small security operators may ultimately choose to close or become a specialized firm for specific markets or services (based on, for example, service type and geographical distinction) or to merge with or be purchased by another company.

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9) TaiwanLotteryThe growth of lottery sales has stagnated worldwide, primarily because of the disengagement of younger demographics. The best means of revitalizing and sustaining growth in the market is thus attracting younger customers by actively developing online gambling and digital payment methods. Taiwan’s public welfare lottery market is now mature after seeing its annual sales peak at approximately NT$130 billion in 2014 and 2015. As is the case for many lottery markets worldwide, sales in Taiwan are difficult to revive without regulatory loosening and adjustment. In addition, private consumption appears unlikely to grow substantially within the next few years, with the consumption of such non-necessities to be particularly conservative, further limiting the development space of the lottery industry.

5.1.4 Research and development1) CTBCHolding

CTBC Holding has continually invested group resources to develop various financial businesses that will help achieve its vision of becoming a truly Asia-wide financial institution. The recent rapid development of fintech has had a tremendous impact on the financial industry, and only constant innovation will enable the Company to maintain a sustained leadership position among the competition. As such, it has spared no effort in digitalization and has been proactively cultivating professional talent to respond to developments and changes in digital technology; providing customers with complete financial services by integrating deposits, loans, mortgages, credit cards, mutual funds, securities, futures, insurance policies, and other business plans; and creating differentiated, value-added services. CTBC Holding and its subsidiaries expended a total of NT$515 million on R&D consultant services in 2019 and NT$514 million in 2020, totaling some NT$1.03 billion over the two years. In the future, in line with CTBC Holding’s general strategy, more active investment will be made in relevant R&D. Furthermore, the Company has expedited its digital transformation in recent years, adopting a three-track digital transformation, digital innovation, and digital infrastructure strategy. Powered by the dual engines of banking and life insurance, the Company will continue its online and offline digitalization efforts to provide financial services through the most comprehensive range of channels.

2) CTBCBank(1) R&D progress in the past two years and future prospects

A. Institutional banking, capital markets, and overseas businessa. The Bank enhanced the connection of foreign exchange hedging and cross-border platform service

and continued to improve the completeness of its overseas financial service products and back-up services in order to meet the hedging and investment needs of customers and within the group and to effectively control risks.

b. The Bank strengthened the functions of its electronic network trading platform and banking transaction system at home and abroad in order to meet the demands for multinational fund procurement and payment and collection for customers and within the group.

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c. It also provided new trade financing products for various countries and strengthened its cross-border platform product lines to meet customer demands for trade financing in various markets domestically and internationally.

d. The Bank developed customized product services in accordance with the segmentation of the industry chain.

e. The employee welfare trust business led the industry in providing comprehensive services, including an innovative automatic investment function

B. Retail banking CTBC Bank moved from the high frequency “Life Finance” era to a “Scenario Finance” ecosphere,

in which it uses digitalization to provide customers with the most suitable financial products and services.a. Launched the Penny Piggy financial management service in November 2020: Integrating financial

management into daily life by combining credit card spending and investment, Penny Piggy sets aside a small amount of money for investment with each credit card payment the customer makes. This patented smart investment technology makes financial management easy for people with less capital.

b. Launched a LINE Pay loan service in November 2020: To further optimize customers’ financial experience, CTBC Bank identified the most popular everyday use scenarios and collaborated with the LINE Pay platform to start a fast online loan application service. The service allows loans to be disbursed in as little as three minutes from the start of the application process, further putting into practice our philosophy that “finance is life, and life is finance.”

c. Launched the Yahoo Fund Purchase service in May 2020: Developed based on customer experience feedback, a new fund purchasing feature was added to the Bank’s Yahoo Financial Management channel; it also added a home loan calculation tool to its Yahoo Real Estate channel. By connecting platform services, the Bank is broadening customers’ choices of financial service channels and thus meeting their needs in diverse everyday scenarios.

d. Launched the My Way Scented Debit Card in January 2020: The Bank issued these special edition debit cards, which give off a fragrant aroma when rubbed, as part of its My Way digital saving accounts.

e. Upgraded the CTBC Home Bank app in January 2020: The Bank pioneered a conversational account analysis feature and launched an all-new AI-powered chat service. With it, customers can easily check their account balance or transfer funds by conversating with the “Little B” voice assistant.

f. Launched the CPC Pay app in November 2019: Customers whose app is linked a CPC Corp. co-branded credit card can quickly pay at any of the 1,400 direct-managed/franchise CPC gas stations countrywide by scanning a QR code. The app also includes integrated features such as membership card, stored-value card, location of gas stations, and search engine for parking lots.

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(2) Future R&D plansA. Institutional banking, capital markets, and overseas business

a. Build an integrated transnational regional trading platform to resolve difficulties often faced by customers in opening accounts in different countries, deliver constant improvements to the security of online transactions, provide financial services for cross-border transactions, and move CTBC Bank closer to its goal of becoming a powerhouse regional bank.

b. Focus on market R&D and seize opportunities to provide innovative products.c. Optimize the customized product services offered in accordance with various industry chain

segments.d. Stay current with trends in international financial regulatory standards by strengthening the Bank’s

derivatives product management platform and system as well as its risk management mechanism.B. Retail banking

a. Establish an ecosystem of everyday use scenarios to provide customers with the most suitable products and services; in response to policies opening the door wider to digital finance, use third-party platform APIs to utilize external data to promote customer group management, optimize the customer journey experience, and provide warm and professional financial services.

b. Continue to invest in the Bank’s customer database system, establish a predictive model, and effectively use customers’ transaction records to identify service problems in advance, identify business opportunities, or obtain competitive information.

c. Invest further in the improvement of products and services in order to build capacity to meet the financial needs of individuals and SMEs of different scales and scopes. Furthermore, continue adopting new technologies to strengthen professional wealth management, consumer finance, and payment services and ensure the provision of high-quality, convenient, and tailored retail banking services.

3) TaiwanLife(1) R&D progress in the past two years and future prospects

A. Promoted R&D for protection-type and accident and health insurance products to meet customers’ estate planning and health protection needs, and developed innovative products such as a spillover policy for impaired life insurance.

B. Launched new discretionary investment products linked to volatility management in order to assist policyholders in controlling investment risks, and maintained a balance between risks and profits by entrusting investment to professionals.

C. Provided digital customer services through fast claims process, eClaim Service Blockchain Platform, and official LINE account.

D. Promoted salesperson transformation using tools such as iKASH, a policy checkup system, a proposal system, and mobile enrollment, thus enabling salespeople to provide quality services to customers.

E. Received 44 major awards across various fields and obtained several domestic patents, bringing the total number of which to 27.

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(2) Future R&D plansA. Prepare for compliance with IFRS 17 and ICS 2.0, and establish system tools and a dynamic asset–

liability management mechanism. B. Continue accumulating and standardizing the customer database and customer labeling to provide the

most appropriate product suggestions and lay a foundation for smart services.

4) CTBCSecurities(1) R&D progress in the past two years and future prospects In 2019, CTBC Securities launched its proprietary CTBC Spark App with the “You may also be interested

in” function, a stock selection model built using Big Data analysis that combines algorithms with digital securities. A new securities learning center was also set up to educate customers and enhance the customerexperience.Regardingoverseassecuritiesreconsignment, thecompanylaunchedanoverseasdebtbusinessandledtheindustryinprovidingreconsignmentQItaxservices.In2020,CTBCSecuritiesworked with CTBC Bank to launch a one-stop online account-opening service and introduced on its dollar cost averaging products on the app to meet the needs of investors.

(2) Future development plansA. To improve the user experience at every stage of the customer journey and satisfy the demand for

one-stop shopping, CTBC Securities has built the CTBC Spark App to integrate diverse functions, allowing customers to collect information, place orders, and track investment performance in one place. In the future, the company will continue to enhance the app’s functions and offer additional products on the platform, integrating digital intelligence-based recommendations in order to provide investors with superior investment tools and platforms in order to attract new customer groups and increase company revenue.

B. CTBC Securities will continue to develop its Big Data and machine-learning capabilities in internal risk monitoring and customer group analysis. This will help it manage internal operational risks while vigorously expanding its business. It will also continue to collaborate with the parent company to introduce digital technology with simplified processes in order to reduce operating costs, optimize processes, and enhance internal operating efficiency.

5) CTBCVentureCapital(1) R&D progress in the past two years and future prospects Throughexistinginvestments,CTBCVentureCapitaldeepeneditsconnectionwiththeupper,middle,and

lowerstreamsofspecificindustries,gaineddeeperinsightsintoindustrydynamics,enlargedthescopeofits industrial research, and enhanced its ability to conduct broad and in-depth industrial analysis.

(2) Future development plans Thesubsidiarywilldevelopnewcasesthroughinformationexchangewithitspeers,holdingcompanies,

banks,securitiescompanies,andCPAfirmsandbyactivelyparticipatinginexhibitionsandseminars.Itwill also improve its post-investment management, enhance its risk awareness, increase its success rate, andeffectivelyincreasetheprofitofitsinvestmentportfolio.

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6) CTBCAssetManagement(1) R&D progress in the past two years and future prospects

A. Domestic asset management business CTBC Asset Management deepened its employees’ professional skills and know-how in the fields of

real estate investment and financial analysis and organized relevant training on related regulations, including urban renewal and construction. It also accelerated the reconstruction of potentially unsafe structures in urban areas. Going forward, CTBC Asset Management will continue to increase the investment experience and skills of its employees, gradually building an industry-best business model and effectively improving the return rate of its investment portfolio in the process.

B. Leasing in Chinaa. Continued to simplify credit investigations and relevant procedures to enhance the efficiency of

case approval.b. Developed new regional focal businesses and deepened its connections with local businesses. c. Established a risk notification network to improve interaction among its peers and enhance their

ability to issue notifications to each other and customers. (2) Future R&D plans

A. Domestic asset management businessa. Conduct research on activating idle group assets in a diversified manner.b. Examine the market scale of urban renewal projects and accelerated reconstruction projects for

potentially unsafe structures in Taipei and New Taipei.c. Study and evaluate emerging trends in the domestic real estate market as well as the supply and

demand thereof.B. Leasing in China

a. Continue to optimize credit investigations, execute the prescreening mechanism, reduce invalid cases, and examine the credit investigation procedures for areas that can be improved.

b. Strictly control asset quality; establish internal declined customer list, industry information, and real-time policy databases; and enhance marketing risk identification awareness.

c. Targeting regional focal industries and equipment, deepen understanding of the market value of leasing properties in order to enhance risk management, and establish a leasing property assessment system based on new financial supervisory rules.

7) CTBCInvestments(1) R&D progress in the past two years and future prospects

A. Mutual funds: The core product line will feature stock ETFs, bond ETFs, and offshore funds. Products will be designed in accordance with the needs of the investors in order to strengthen investment asset structure, create innovative high-margin product designs, and diversify the rate and number of retail investors purchasing existing products.

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B. Discretionary accounts: The integration of life insurance investment-type products will be strengthened. The company will advance an efficient operation model based on existing strategies and seek cooperation opportunities with life insurance and sales channels. It will also establish a cyclical ecosystem in which it continues to invite capital into its own quality funds.

C. Improve operational efficiency: The core system will be reset to reduce expenses such as operational risks and labor costs, thereby accelerating operational efficiency. In addition, in response to changes in demand and product lines, a platform for back-end expense funds will be established, with electronic document and order-placement systems included to facilitate automated operations.

(2) Future R&D plansA. Retirement and fund repatriation planning: In response to government policies regarding retirement

planning mechanisms and the repatriation of offshore funds, CTBC Investments may plan for the design of related products (e.g., target maturity, target risk, and target dates) and establish portfolio strategies to meet the high demand for retirement finance planning in the future.

B. Integration of sales channels: The investment fund sales platform is highly convenient, attention-grabbing, and offers a variety of benefits. CTBC Investments will expand its domestic and offshore funds with an integrated sales platform, and will market the product via new media channels to accelerate retail operations.

8) CTBCSecurity(1) R&D progress in the past two years and future development plans

A. CTBC Security will focus on improving its damage prevention and risk management abilities in order to become a leader in bank-stationed security services.

B. It will also develop an effective security management model in a timely manner with reference to advanced urban building and residence security management measures in order to expand its clientele.

9) TaiwanLotteryTaiwan Lottery will continue to conduct market penetration, purchasing behavior, and case-based market research for specific products; strengthen its digital marketing model, actively explore new markets, and develop new customer bases; and participate in international lottery industry activities and communicate with peers to better understand industry trends, all with the ultimate aim of enhancing its sales performance.(1) R&D progress in the past two years and future prospects

A. To better understand the needs of target markets, the company invested in consumer surveys and case-based market research.

B. Taiwan Lottery networked with international lottery management organizations to learn the success stories of other lottery issuers and stay up to date with emerging trends, such as by going to Vietnam for the Asia Pacific Lottery Association Annual Summit in April 2019 and to the U.S. and Canada in July that year for a tour of the Michigan Lottery Bureau and the British Columbia Lottery Corp.

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(2) Future R&D plansA. Continue to plan new product offerings, expand access service projects, and strengthen cross-industry

alliances as well as e-marketing to expand the lottery market.B. In terms of lottery market research, study the qualitative and quantitative purchasing behavior and

attitudes of consumers while monitoring the latest developments in lottery markets worldwide in order to guide domestic product replacement and sales promotion activities.

C. Upgrade apps and manage digital memberships and digital marketing.

5.1.5 Short- and long-term business development plans1) CTBCHolding

(1) Short-term: Please refer to “5.1.2 Business plans for 2021”.(2) Long-term

A. Reinforce life insurance operations and stabilize life insurance profitsB. Expand digital finance and improve online financial services.C. Broaden international operations and strengthen the group’s overseas structure.D. Cultivate international talent and enhance the brand’s international visibility.E. Ensure transparent information disclosure and continue to improve corporate governance.F. Actively participate in public welfare activities and fulfill corporate social responsibility.G. Implement corporate sustainability and move toward the goal of becoming a sustainable finance

company.

2) CTBCBank(1) Short-term: Please refer to “5.1.2 Business plans for 2021”.(2) Long-term

A. Institutional banking, capital markets, and overseas businessa. Maintain a leading position in Taiwan’s financial industry and provide its customers with industry-

leading financial services while continually cooperating with internal and external parties to enhance the Bank’s product innovation capabilities, including for commercial banking products and capital market products.

b. Steadily expand into overseas banking markets and cultivate local niche markets to ensure stable profits: In accordance with the environmental and industrial development of each country, and based on the characteristics of local business, identify target customer groups and products. In addition, fully utilize the Bank’s cross-border platform and product capabilities to provide comprehensive regional financial services.

c. Continually improve its service process and enhance customer experience and production efficiency by adjusting processes, upgrading automation, and introducing digitalization in order to enhance productivity and cost-effectiveness.

d. Continue providing leading products and services to place the Bank among the leaders in the Asia-Pacific trade room and among investment banks.

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e. Diversify its products, upgrade its global infrastructure, enhance its level of automation to increase customer stickiness and income sources.

B. Retail bankinga. Promote customer group management through digital, data, and smart methods to provide warm

and professional financial services. b. Complete the digital infrastructure for virtual reality integration, optimize the customer journey

experience, and continue to establish scenario-based finance. c. Transform the abilities of staff, prepare them for key positions at all levels via multiple methods,

continue to establish retail banking innovative thinking, and cultivate digital hard skills. d. Actively expand overseas business operations.

3) TaiwanLife(1) Short-term: Please refer to “5.1.2 Business plans for 2021”.(2) Long-term

Prepare the company for IFRS 17 and ICS 2.0 compliance by being the insurance company with the soundest performance and the best customer experience: A. Optimize the suitability of operating and investment strategies under IFRS 17 and ICS 2.0

a. Shorten the maturity of products and continue to develop new protection-type products.b. Improve asset–liability management, prolong asset life, strengthen investment positions, enhance

currency matching, and balance capital utilization and future profits. c. Study and test relevant simulation scenarios to dynamically adjust strategies.

B. Digitally connect and integrate sales and services to build the best customer experience and promote social sustainabilitya. Build smart operations; establish flexible, highly efficient back-end operations; and provide

professional services that make sense to customers. b. Establish and integrate a customer database and build a consistent customer experience sold in all

channels. c. Continue to focus on the three areas of the aging society, disadvantaged people, and health in order

to build a healthy community and promote social sustainability. C. Build a smart “Taiwan Life Insurance IT City”

a. New core system- new contracts 2022, full function 2024. Upgrade and retire the old system to make sure there will be no mistakes.

b. Enhance data analysis capabilities and the scope of data applications, support smart operations, and establish relevant IFRS 17 systems.

D. Further strengthen the connection of the self-risk/repayment ability assessment mechanism with operation targets, investment business plans, capital management, and risk management in order to improve risk appetite management.

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4) CTBCSecurities(1) Short-term: Please refer to “5.1.2 Business plans for 2021”.(2) Long-term

A. Actively develop new types of financing and securities products, cultivate talent, and establish a cross-strait development platform to expand overseas business opportunities, striving toward the provision of comprehensive international investment banking and securities services for the Greater China region.

B. Continue to strive for large underwriting cases to expand market share. Actively participate in the fundraising projects of listed and OTC companies in the overseas capital market in order to provide customers with comprehensive capital market fundraising products.

C. Have physical and digital brokers work in parallel to provide diverse investment channels for investors, and improve CTBC’s investment ecosystem, linking together various business departments to generate revenue for the company.

D. Integrate the CTBC Holding group’s resources to work toward a digital securities platform offering investors a one-stop shop for products including securities, futures, and foreign securities.

E. Collaborate with CTBC Holding subsidiaries’ investment units and private professional academic institutions to increase financial literacy as well as to enhance the ability to respond to contingencies and improve profitability.

F. Study the characteristics and needs of customers from different business channels, enhance services for the reconsignment platform, and build a co-operative/win–win business model with relevant channels.

G. Continue to enhance investment portfolio, refine economic research and data analysis, and promote futures and warrants products to build a diverse cross-market investment strategy to increase sources of profit.

H. Strive to provide diverse warrants products and build a superior brand image for CTBC Securities’ warrants.

I. Manage existing customers and attract potential customer groups by combining Big Data analysis with machine learning, conduct model evaluations of customers and external investment risk, and strive to implement corporate risk control and offer portfolio risk assessment for investors.

5) CTBCVentureCapital(1) Short-term: Please refer to “5.1.2 Business plans for 2021”.(2) Long-term

A. Taking the Greater China region as the core development area, gradually establish an overseas investment platform and continue to manage the scale of asset management, driving the company’s growth into a venture capital fund with a presence across Asia Pacific.

B. Continue to seize opportunities for international cooperation, recruit and retain international talent, and accumulate foreign cooperation experience. Expand the scope of financial products and services in response to international business needs, effectively utilize CTBC Holding’s resources, and harness

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synergy with other group subsidiaries to provide customers with their required funds as well as with financial planning and business development strategies. With these practices, CTBC Venture Capital hopes to stand out from the general venture capital industry by offering more diverse, more professional financial services.

6) CTBCAssetManagement(1) Short-term: Please refer to “5.1.2 Business plans for 2021”.(2) Long-term

A. Domestic asset management business: CTBC Asset Management’s assistance in renting, managing, or activating the real estate positions of other group subsidiaries may be reviewed in order to maximize benefits for CTBC Holding. In addition, CTBC Asset Management will research old buildings in Taipei and New Taipei that are not part of existing urban renewal projects and evaluate the feasibility of assisting in their integration or acting as an implementer or proprietor of urban renewal projects for these buildings. Furthermore, where permitted by the law, the company will expand into overseas markets and continue to search for suitable investment targets domestically and regionally in Asia, as well as steadily improve profitability by expanding its investment scope in order to achieve the business objective of sustainable growth.

B. China leasing business a. Conduct differentiated regional operation and focus on industrial professionalism, comprehensively

establish a regional industrial information management and analytical system, develop differentiated operation models based on different regional characteristics, focus on the local key customer groups of core industries, establish a leading position among regional industries, and work toward the industrial professionalism operation model.

b. Deepen targeting operations of regional industries; enlarge extended online business opportunities, market share, and regional penetration; build a national marketing network; and strengthen leading competitive position.

c. Continue to establish and optimize systems, improve system databases, and conduct Big Data analysis.

d. Stabilize existing capital resources, optimize capital costs, and maintain diverse fundraising channels.

7) CTBCInvestments(1) Short-term: Please refer to “2. Business plans for 2021”.(2) Long-term With its founding, CTBC Investments took on the challenge of being a newcomer and moved aggressively

in the ETFs market, gradually turned a profit. Moving forward, the company will adjust its profit-takingstructureandcontinuetoexpanditsmarketshareinTaiwanwhileexpandingitsoverseasmarketfollowing CTBC Holding’s international structure. Its business development plans are as follows:

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A. Focus on the core product line and develop representational products: Continue to follow the strategy of the simultaneous development of domestic and international products. In response to different financial environments and customer investment and financing needs, design products in line with the latest market trends and create an attention-grabbing and representational product line.

B. Expand internet sales channels: Leveraging CTBC Holding subsidiaries’ sales channels, strengthen its internet platform sales capabilities in response to market trends, and devise long-term supplementary marketing plans to meet the diverse needs of retail customers.

C. Build an elite research team: In addition to passive management funds, continue to expand research team resources for active management funds in order to provide customers with stable long-term investment returns or to reach target returns. Set the establishment of an Asian investment research team as the primary goal, with the expectation of building asset management cooperative relationships through integration with CTBC Holding’s subsidiaries overseas.

D. Digital platform: To optimize customer service and the effectiveness of the internal system in response to market changes, actively improve internal and external digitalization processes and enhance interface user-friendliness for investors.

E. Rigorous risk control: Through the use of a high-quality, high-volume risk control process and supplementary system implemented by an independent, objective, and dedicated team, monitor each investment portfolio and periodically verify the process of investments. Strictly comply with regulations to reduce operational risks and protect the rights of investors.

8) CTBCSecurity(1) Short-term: Please refer to “2. Business plans for 2021”.(2) Long-term

A. In the face of fierce competition, evaluate potential M&A with small security operators.B. Research the cash transportation and replenishment security business.C. Continue to be guided by its principles of “Security First, Service First” and constant quality

improvement.

9) TaiwanLottery(1) Short-term: Please refer to “2. Business plans for 2021”.(2) Long-term Continue responding to changes in market trends, developing innovative products, and strengthening its

digitalmarketing toattractyoungercustomersandexpanditsmarketsize.Furthercommunicatewithand lobby the competent authority to loosen relevant regulations to help it maintain stable growth in the lotterymarketandachieveitsannualsalesandprofitstargets.Finally,continuehighlightingthepublicwelfare value of the lottery and maintaining the core concept of encouraging the public to partake in the lottery to support public welfare.

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5.2 Cross-industry and cross-selling benefitsSubsidiaries of CTBC Holding with cross-selling potential include CTBC Bank, Taiwan Life, CTBC Securi-

ties, CTBC Venture Capital, CTBC Asset Management, CTBC Investments, CTBC Security, and Taiwan Lottery. Through cross-selling, Taiwan Life can provide life insurance products to meet the insurance needs of CTBC Bank customers; CTBC Securities can provide securities-underwriting services for the Bank’s corporate clients and to meet the securities brokerage needs of the individual clients; and CTBC Investments can meet the invest-ment and financial management needs of the group’s banking and insurance customers. All such examples of cross-selling among subsidiaries share the aim of meeting the need of consumers for one-stop shopping, thereby enhancing the overall quality of the group’s financial services.

5.3 Market and business overview

5.3.1 Sales and provision areas of major products and services in the financial marketMajor products

and services Major sales and provision areas

Banking business

Institutional banking, capital markets, and overseas business

Taiwan is the main sales area for CTBC Holding’s various institutional banking products. For overseas markets in recent years, the Company has leveraged CTBC Bank’s international reach and integrated platform to provide customers with complete cross-border services while actively developing non-Taiwan customers. It is continuing to strengthen the infrastructure ofitsoverseasbranchesandsubsidiariesandtocompleteitsproductlineinordertorefineitsfocusonthecross-borderfinancialneedsoftheGreaterChinaregion,SoutheastAsia,NorthAmerica, and Japan.

Retail banking

Wealth management

Taiwan is the main sales area for the wealth management business. The Company has a comprehensive range of channels and product lines as well asonline/offlinecustomerservicesinthedomesticmarkettofullymeetlocalcustomers’financialneeds.

Loan business

Taiwan is the main sales area for the secured loan and unsecured lending business. The Company maintains comprehensive channels and complete product lines in the local market, combined with digital channels to optimize its capital lending process and fully meet customers’ lending needs.

Payment business

Taiwan is the main sales area for our credit card and emerging payment models business. CTBC Holding continues to develop new products while strengthening existingproductsandservicestodeepenrelationshipswithitsexistingcustomersand conduct business management and resource allocation. Furthermore, both independentlyandincooperationwithvariousindustries,weareexpandingpayment scenarios to deepen integration in customers’ lives.

Overseas retail business

In accordance with the phase of development in each market and the needs of targetcustomers,wearecontinuingtoexpandsavings,financing,payment,and wealth management services for customers in Japan, North America, and Southeast Asia.

Securities business Taiwan is the main sales area in this business segment.

Venture capital business

Taiwan is the main business area for the Company’s venture capital operations, supplemented by business in theU.S.andAsiaPacific.

Asset management business Taiwan, Europe, and the U.S. are the main sales areas. For the leasing business, China is the main sales area.

Security business Taiwan is the main sales area.

Lottery business Taiwan is the main sales area.

Insurance business Taiwan is the main sales area.

Investment trust business Taiwan is the main sales area.

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5.3.2 Future market supply and demand1) CTBCHolding

(1) Supply There is a great deal of uncertainty regarding a global economic recovery in 2021. However, with

the resumption of economic activities in many major countries and the implementation of monetary easing policy, industries in Taiwan are likely to gradually recover. In addition, due to the government’s continuousexpandingininvestment,drivingdigital transformationbusinessopportunities,acceleratingthe establishment of supply chains for emerging industries, and enhancing industrial competitiveness, Taiwan’s economic growth for 2021 is forecast to reach as high as 4.2%. Furthermore, backed by factors such as policies encouraging foreign investment, parts of production lines returning to Taiwan, the stay-at-homeeconomy,emerging technologies, thehighdemandsof remotebusiness, and theexcellentperformance of Taiwanese stocks, the domestic and overseas economy and trade outlook are both optimistic, and economic growth in 2021 is forecast to outpace that of 2020.

(2) Demand Regardingexternaldemand, therecoveryof theglobaleconomyisprovingfavorable forTaiwanese

exportsofsemiconductor,ICT,andAVproducts.Theexportgrowthoftraditionalindustriesisalsolikelytoreturntopositiveterritory,whichwilldrivethecontinuousgrowthofoverallexportmomentum.Interms of domestic demand, domestic private and the impact of the pandemic as well as the return of consumer confidence. Diverse domestic investment momentum will also further bolster the domestic economy.Thepandemicalsoexpedited thedigital transformationandsector rotationof industries.Thedemandsofindividualsandenterprisesfordigital,highlyefficientservicesareincreasingwiththematurationoftechnologyandindustrialchanges.Asmanycustomershavebeenusingfinancialservicesvia both physical and virtual or digital channels, our future success relies on providing consistent, real-time, and digital services that meet the needs of the digital generation in multi-screen and social media usescenarios,withoutconfiningourselvestotraditionalservicemodels.

2) CTBCBank(1) Supply

A. Institutional banking, capital markets, and overseas business In the domestic market, due to Taiwan’s effective control of the pandemic, the economy performed

relatively well. With major countries’ resumption of economic activities, domestic industries are expected to be gradually revived by increasing foreign demand. However, Taiwan’s Central Bank is expected to follow the financial easing policy of its counterparts in major countries to cope with possible changes in international financial markets, thus increasing the interest rate spreads for corporate deposits and loans will be difficult; furthermore, amid the global trend against tax avoidance and the implementation of Hong Kong’s National Security Law, global capital will shift greatly. The new financial management projects proposed and announced by the FSC will promote domestic wealth management business and attract a great amount of capital to Taiwan; as for external factors, international investors are placing increasing value on banks’ ESG performance, and the FSC is also guiding capital to support sustainable industries through new green finance projects. A new wave of

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business opportunities is expected to arise from such industrial transformation and the development of sustainable industries.

In overseas markets, as the pandemic has not been effectively controlled, there are still downward risks that call for the continual close monitoring of banks’ asset quality, even with the financial easing policies of many countries having seen the economy recover from its lows in early 2020. Regarding the outlook of the economy of Southeast Asia, the on-and-off nature of the Covid-19 outbreak brought challenges to the Southeastern Asia countries. However, the Regional Comprehensive Economic Partnership has been signed and will promote the trade and economic recovery for the region. Among the countries, Vietnam is of high development potential due to its control of the pandemic. The CTBC Holding group has a wide reach in Southeast Asia and is expected to benefit from the regional growth momentum. In the U.S., lockdowns and control measures have severely damaged the economy, though the Fed’s fast and effective monetary policy led to a recovery beyond that of market expectations. With subsequent waves of the pandemic, however, high economic uncertainty remains. In Japan, the pandemic caused a slump in import and exports and travel-related industries, while the limited room for interest rate adjustments by Bank of Japan makes it difficult to be optimistic about the overall market. In China, the economy rebounded quickly as a result of control of the pandemic, increasing infrastructure investment and exports. The monetary policy of the People’s Bank of China may move to a neutral position instead of continuous easing. As for the capital market, in response to the adverse macroeconomic impact brought by the pandemic, short-term interest rates will remain low and the effect of human intervention on monetary policy will continue; international political and economic uncertainties and the growing impact of non-economic factors on the financial market will complicate investment and transactions.

B. Retail banking The impact of the pandemic is expected to gradually fade in 2021 as the global economy recovery

takes hold. Meanwhile, with factors such as parts of production lines returning to Taiwan, the high demand for emerging technologies, the encouragement by the government of foreign investment, the sound fundamentals of Taiwanese stocks, the positive growth of employee salaries, and the retuning investment of Taiwanese businesses, internal and external demand will grow stronger. The annual growth of 2021 is forecast to outpace that of 2020.

Influenced by the U.S.–China trade conflict and Hong Kong National Security Law, over NT$200 trillion in capital from Taiwanese businesses returned to Taiwan; in the low interest rate environment resulting from financial easing policy, the investment market is experiencing heavy trade and volatility and diverse asset allocation, further increasing the investment needs of individuals and businesses. As financial laws and regulations continue to be loosened, online-only banks are entering the banking system, non-banking companies are entering the private wealth and wealth management business, e-payment options are being added to the retail channels, and competition is becoming more diverse.

There is high uncertainty regarding a recovery of the overseas retail banking market due to the pandemic. In Southeast Asia, the impact was deep and the recovery has been slow. Banks are making deposit growth and enhanced credit loan asset quality as their top priorities. In the North American

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market, the economic activity rate is expected to rebound. In addition, as the population of Chinese descent keeps growing, banks are actively improving their efforts to satisfy this customer segment.

(2) DemandA. Institutional banking, capital markets, and overseas business In the domestic market, traditional industries are likely to undergo a revival with increasing overseas

orders, whereas the electronic and information industries will benefit from the strong demand for remote technology-related business and emerging technology applications caused by the pandemic. The order transfer effect attributable to the U.S.–China trade war will also benefit the entire manufacturing industry. In addition, high net worth clients are expected to return to Taiwan due to anti-tax avoidance laws and the change of Hong Kong’s status, which call for the wealth management services of banks; in sustainable finance, led by international trends and policies, more financing business opportunities will emerge from the transformation of high carbon emission industries and the development of renewable energy and sustainable industries.

In overseas markets, as Southeast Asia recovers and the effects of geopolitical events continue, the supply chains of Taiwanese and Chinese businesses are moving to countries in the region. Financial businesses with more locations in Southeast Asia will be able to grasp business opportunities through cross-border platforms. In Europe, the U.S., and Japan, the pandemic has severely damaged the economy while short-term demand in retail, tourism, and transportation remain low and will take a longer time to recover. In the Greater China region, as China adopted highly efficient control measures and economic stimulus projects for the pandemic, the resumption of work and production was relatively smooth and its monetary policy has been effective. Amid the U.S.–China trade war, demand in China’s domestic market will remain strong.

B. Retail banking Even with the net worth of global high net worth individuals (HNWI) falling by 5% in 2020, the net

worth of Taiwanese HNWIs increased 13%, representing steady growth of high net worth clients; meanwhile, the low interest rates, capital returning to Taiwan, and the relief and stimulus projects brought by the pandemic increased the financing needs of individuals and SMEs, which resulted in overall home loan, credit loan, and SME loan balances increasing 7%, 10%, and 13%, respectively, over the same period the previous year.

As Taiwan moves toward becoming a super-aged society, there is strong demand for retirement planning and estate planning, which pose important opportunities for our business. With the innovation of fintech services and the pandemic-accelerated digital transformation and sector rotation of industries, the demands of individuals and enterprises for digital, highly efficient services are increasing with the maturation of technology and industrial changes. As many customers have been using financial services via both physical and virtual or digital channels, our future success relies on providing consistent, real-time, and digital services that meet the needs of the digital generation in multi-screen and social media use scenarios, without confining ourselves to traditional service models.

In Indonesia and the Philippines, more than half of the population does not have a bank account, which offers a great deal of development potential; in North America, interest rates remain low and the retail banking service needs of wealthy customers of Chinese descent remain high.

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3) TaiwanLife(1) Supply There are currently 22 life insurance companies in the market. In order to prepare life insurers for IFRS 17

and ICS 2.0 compliance, the competent authority has launched successive policies guiding them to gear their products back to protection-type ones, such as by reducing the rate for statutory reserves, increasing theprotectionelementsofproducts,andrequiringcompliancewiththeIFRS17profittest.

Impactedby theCovid-19pandemic, the investmentmarketexperienced turbulenceand interest ratedrops. Life insurance companies reduced the declared interest rate of interest-sensitive products several times accordingly, optimized product structure and continued to strengthen the sales of protection-type products. Furthermore, while hedging costs declined due to the narrowing of the spread between Taiwan and the U.S., life insurance companies further strengthened the sales of foreign currency commodities giventherecentcontinualappreciationoftheNewTaiwandollarinordertoreducecurrencyexchangeriskandtoincreasetheirrecurringinterestmargins.Inaddition,giventhefinancialeasingpolicyofmanycountries, investment-type products remain focal sales points despite increased limitations such as credit rating targets.

Following the increasedawarenessofhealthandphysicalexercise,ESG,and the fair treatmentofcustomers, as well as product innovation brought by digital technology and data accumulation, life insurance companies have launched new health promotion policies and impaired life policies to encourage policyholders to actively manage their health through premium reduction incentives. By doing so, insurers aimtotransforminsurancefromex-postcompensationtoex-anteriskpreventionandoffercoveragetopeoplewhowouldotherwisenotqualifytopurchaseinsurance,thusachievingbroaderfinancialinclusion.Theapplicationofsuchproductsareexpectedtogrowmorediverseandclosertocustomers’needsasmore customer data is accumulated.

(2) Demand Thepremiumsfornewcontractsforthewholemarketin2020totaledNT$916.8billion,representinga

28% decline from the previous year. Due to falling market interest rates, life insurance companies reduced their declared interest rates, which affected the sales volume of savings-type insurance policies. In the second half of 2020, as insurers responded to the requirement to increase products’ protection elements, thesalesvolumeofinterest-sensitiveproductsdeclined,withfull-yearvolumeofT$427.2billion,down38% from 2019. Regarding investment-type products, the return rate of target maturity-type products declined due to the investment target rating requirement. The sales niche shrank, with the premiums of newcontractsin2020totalingNT$340.2billion,representingan18%dropfrom2019.

Taiwanese people’s awareness of health risks grew as a result of the pandemic. In addition, Taiwan is facing increasingly serious population aging and fertility rate problems, with people aged 65 or above accounting for 16% of the population and people caring for older people reaching 23% of the population as of 2020. As a result, demand for health insurance, long-term care, retirement planning, and aging products as well as for health promotion and impaired life policies is forecast to increase.

Furthermore, given that the number of travelers going abroad fell sharply due to the pandemic, a great downturn was seen in travel insurance applications, which is a leading insurance product among those open toonlineenrollment. In2020,premiumsfromonline travel insuranceenrollment totaledNT$7billion, representing a 70% drop from 2019. However, with the prevalence of ecommerce and post-

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pandemic lifestylechanges,weexcept thatcustomerswillhavegreaterneeds topurchase insuranceproducts via online platforms and will more deeply value receiving consistent services across physical and virtual channels.

4) CTBCSecurities(1) Supply ThetotalnumberofsecuritiesfirmsinTaiwanhassteadilydecreasedfrom90in2010to68attheend

of 2020. As the minimum requirements for information security and money-laundering protection increase, the competent authority has been encouraging companies to merge as necessary in order to build economies of scale and enhance operating efficiency. In recent years, not only have securities firmsaffiliatedwith financialholdingcompaniesentered intoorexpanded theirsecuritiesbusinessthroughmergersandacquisitionsinordertoachievegreaterefficiencywhileintegratingcombinedgroupresources,butindependentlocalsecuritiesfirmshavealsosoughttoexpandtheirbusinessthroughM&A.Currently, various financial holding companies and major securities firms have completed strategic planning, and M&A will likely decrease in the future. Securities management strategy has developed into twopolarizedservicetypes—eitherdiversifiedservicesorlowprices—andcompetitioniscontinuingtoescalate. Finding a blue ocean market with an undeveloped customer base that is suitable for its market positioning is the top priority of securities brokers.

Corresponding to the market positioning of securities brokers, most physical brokerage locations have extended their sales tentacles to integratebrokerageproductsandservicesaswellasestablishedacomprehensive product portfolio and diverse channels, offering retail and institutional customers full securities service. In addition, harnessing the now-ubiquity of digital mediums, customer touch points have grown from physical channels to include digital channels and online marketing platforms. The internet has become a new battleground for sales and the cultivation of native customers. In addition, the competent authority’s easing of regulations concerning online-only banks has led to a rapid rise indigitalsecuritiesbusiness,offeringdiversifiedservicesandinvestmentexperiences throughout theinvestment journey. At the same time, various financial brokerages have also dived into the digital market by developing proprietary application platforms or collaborating with third-party innovators. Be it a direct order platform or a customer marketing platform, many brokerages have digitalized their businessoperationsandoptimizedtheirprocessflowsinordertobuilduptheirownplatformandofferdifferentiatedinvestmentserviceexperiences.

Intermsofbrokeragebusinessproducts,withintheexistingTaiwanstockstructureandinresponsetotheopening of regulations, several securities companies have launched dollar cost averaging stock purchasing services, which have attracted investment from microfinance customer groups and increased actual investment frequency. Many brokerages have also joined the reconsignment market, selling overseas securitiesproductsontopoftheexistingproductbaseofTaiwanstocks,futures,andoptionscommodities.Such services offer investors a convenient channel for purchasing overseas products while improving profitability.Regardingwarrants,currently19brokeragesareactivelyissuingwarrants;assuch,warrantmarketcompetitionisfierceandwillcontinuetobeso.

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Asfortheunderwritingbusiness,thenumberofdomesticbrokeragefirmshasincreasedsignificantlyduetotheboomingcapitalmarket, leadingtoexcesscompetitionintheunderwritingmarketandindirectlyreducing service quality. In recent years, in response to the government’s New Southbound Policy, many domesticandforeignbrokeragesbasedinTaiwanhaveexpandedtomarketsoverseas,branchingouttoChina and Southeast Asian countries and actively providing consulting services for Taiwanese businesses eager to return and become listed in Taiwan. However, international political and economic factors have stalled such plans, with many adopting a wait-and-see approach regarding the global and regional economy.Asaresult,thenumberofunderwritingcaseshasrecentlydeclined,thoughfiercecompetitionisstillexpectedintheindustrygoingforward.

(2) Demand To accelerate the development of the securities industry, the competent authority has gradually planned

andrelaxedseverallawsandregulations,includingwithregardtotheestablishmentofledgeraccounts,two-way securities lending, and unrestricted loans, in order to activate brokerage fund utilization. In 2020, continuoustradingandoddlottradingwereimplemented,whichisexpectedtoreducethethresholdforinvestors,increaseinvestors’transactioninclination,andadvancethegoaloffinancialinclusion.

Furthermore, the competent authority continues to amend regulations to promote capital market development. According to the capital market blueprints issued by the FSC, it plans to establish a new venture board and loosen restrictions on SPOs to stimulate the market and support the real economy. The Management,Utilization,andTaxationofRepatriatedOffshoreFundsAct,announcedbythecompetentauthority in 2019, has hastened the return of overseas capital from Taiwanese businesses, thus increasing the demand for securities investment and asset management. Looking ahead, even more capital is expectedtoflowinfromoverseas,whichwillalsoelevatethedemandforbrokerageservices.

As mobile network coverage rises and customers’ securities ordering habits evolve, a growing number of investors are choosing to conduct transactions online, with more than 70% of all transactions now conducted digitally. Internet access has also sharply increased the amount of investment-related information being shared and consumed by the public, resulting in the formation of native social media groupsofinvestorsexchangingsuchinformation.Furthermore,investorsareincreasinglyinclinedtorelyon integrated interfaces for transactions, as these enable them to simultaneously browse information from different sources. The sharply rising demand for service interfaces that cover all stages of the investment journeyispromptingbrokeragefirmstodevelopandpromoteonlineplatformsthatofferinvestmentdataintegration.

Asinvestorsaccumulateinvestmentexperience,theiracceptanceof,anddemandfor,diversifiedfinancialproducts and related commodities is increasing, driving the reconsignment market transaction amount tohitarecordhighofoverNT$3.8trillionin2020.ThisdemonstratesthehighlevelofacceptanceandinterestamongTaiwaneseinvestorsofoverseasfinancialproducts,withmanypotentialinvestorstobecultivatedinthereconsignmentmarket.Securitiesfirmsare,therefore,divingintothemarketinhopesofgreater opportunities.

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5) CTBCVentureCapital(1) Supply An innovative and vigorous entrepreneurial spirit is necessary for domestic economic development. In the

currentcircumstancesofincreasinglyfierceinternationalcompetition,rapidindustrialrestructuring,andthe rise of emerging economies, Taiwan must compete with other countries on the same stage in terms of entrepreneurial environment. In seeking to promote venture capital investment in Taiwan, the government has made indirect investments through the National Development Fund. These efforts are anticipated to promote Taiwan’s industrial innovation, drive the growth of the knowledge economy, improve the current investment environment, and increase international competitiveness through venture capital business combinedwithcapital,technology,interpersonalnetworks,talent,management,andinvestmentflexibilityin addition to other professional capacities.

(2) Demand Every year, as the economic environment changes, CTBC Venture Capital seeks out industries with

thepotentialforexplosivegrowth.In thepast, themostpopular investmentprojectshavebeenin thesemiconductor, new energy, and technology, media, and telecommunications sectors. However, because of the economic cycle, the internet, and consumer behavioral changes, core adjustments have been made to the venture capital industry’s conventional investment portfolios, with the addition of popular new targets such as biotech, traditional industry upgrading, the internet of things, the cultural and creative industry, AI,self-drivingvehicletechnology,andfintech.

6) CTBCAssetManagement(1) Supply

A. Investment and disposal of domestic non-performing asset-related industries The average NPL ratio in the domestic banking industry slightly increased due to the pandemic in

2020 but remained low (0.22% as of the end of the year). In addition, in accordance with an FSC amendment, banks were again requested to press for the payment of NPLs, and the sales conditions of NPLs were limited. Therefore, the number of cases in the NPL market was dramatically reduced. In 2020, NT$12.6 billion of NPL sales was recorded among domestic financial institutions, constituting a sharp contrast from the average sales figure of NT$189.16 billion recorded between 2001 and 2008. As the NPL ratios of domestic banks remain low, the number of court cases brought by banks seeking compulsory execution is not expected to rise significantly in the short term until the Central Bank raises interest rates considerably. Cases in the foreclosure market are also not expected to see any significant short-term growth.

B. Leasing industry in China According to the China Leasing Union, Joint Leasing Research and Development Center, and Tianjin

Binhai Leasing Research Institute, in China’s financial leasing, domestic leasing, and foreign leasing sectors, the total number of financial leasing companies increased 0.21% from 12,130 in 2019 to 12,156 in 2020. Among these companies, the number increased by 1 for financial leasing, 11 for domestic leasing, and 14 for foreign leasing companies, which grew from 11,657 to 11,671 to account for approximately 96% of the industry total.

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In contrast, the number of leasing companies established in China by Taiwanese holding or banking- based financial companies fell to 19 after the merger of IBT Leasing with IBT Tianjin International Leasing in January 2019, and such companies saw only limited increases in registered capital. As the capital scale of China’s financial leasing industry continues to rise, the market challenges will only grow in the future.

(2) DemandA. Investments and disposals in domestic non-performing asset-related industries Sources of public auction cases in the domestic NPL market have gradually declined and asset

management companies have disposed of their existing NPL positions over the same period. Therefore, asset management companies are turning to the foreclosure market and government agency public auctions to find suitable real estate investment targets. However, without a significant increase in market supply, the competition among tenders and auctions will intensify further and the transaction prices of such cases will gradually increase, thus raising the costs of asset management companies and reducing their profit. In addition, given the public expectation of urban renewal and accelerated reconstruction projects for potentially unsafe structures, asset management companies have been assessing and assisting in urban renewal and accelerated reconstruction projects, which is expected to create reasonable profit or bring in stable revenue for these companies.

B. Leasing industry in China Impacted by the pandemic, the total business volume of China’s financial leasing business declined in

2020. The financial leasing contract balance was approximately RMB 6.504 trillion as of the end of 2020, representing a decline of RMB 150 billion (2.25%) from the end of 2019. The total volume of global financial leasing business totaled US$3.98 trillion in 2020, a decline of US$180 billion (4.3%) from US$ 4.16 trillion in 2019. China’s total financial leasing business volume as of the end of 2020 was US$942.6 billion, accounting for 23.7% of the global volume.

7) CTBCInvestments(1) Supply According to the Securities Investment Trust & Consulting Association, as of the end of 2020, overall

marketgrowth totaledNT$1 trillion, representing10%annualgrowthfromthepreviousyear,withdomesticfunds increasingbyNT$518.7billionfor13%growthfrom2019.Thegrowthcamemainlyfromthenewlyraisedfunds,amongwhichindex-type,ETF-linked,andmulti-assetfundssawthehighestgrowth. Regarding offshore funds, the effects of the pandemic meant there was only a slight increase of NT$45.7billion(1%).DiscretionaryfundsgrewbyNT$426.2billion,foralargeincreaseof21%,duetothegreatdemandforinvestment-typeproducts,whileprivateequityfundssawgrowthofNT$8.7billion.

Almost 70 new domestic funds were raised in 2020. Taiwanese stock, high-dividend, and ESG funds were the three major types in terms of the number and scale of funds raised. For the past two years, bond ETFs and target maturity funds have accounted for the majority of new funds raised; however, this trend hasslowedundertheinfluenceofstricterregulations.AmongETFs,thegrowthofbondETFsdeclinedslightly due to the limitation on bond ETF diversification whereas equity ETFs grew 43% given the strongperformanceofTaiwanesestocksthisyear,withtotalgrowthofNT$142.8billionfortraditional

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andleveragedandinverseETFs.Amongalldomesticfunds,index-typefundswerethebestperformer,asbondETFsweretransferredtoindex-typefunds,withETF-linkedandmulti-assetfundsthenextbest.

(2) Demand Although the global market faced the effects of the pandemic in 2020, the major central banks’ easing

policies and financial stimulus programs supported the continuing strong performance of financial markets.Inaddition,drivenbyriskandlowinterestrates,fixed-incomefundswerestillfavored.Asoftheend of 2020, domestically approved domestic and overseas discretionary and private equity funds totaled NT$10.72trillion—anincreaseofNT$1trillion(10%)fromtheendof2019.Domesticfunds totaledNT$4.52trillion,continuingtosurpassoffshorefunds,whichtotaledNT$3.69trillion.

Offshorefunds,alsoimpactedbythepandemic,sawalargeroutflowofriskassets,especiallyhigh-yieldbonds and emerging market bond funds. However, as the stock market performed strongly, equity-type funds continued growing. As of the end of 2020, offshore funds had grown by 1% from the end of the previousyearandreachedNT$3.69trillion.

8) CTBCSecurityThe company will analyze the strengths, weaknesses, and potential countermeasures regarding the security market’s supply and demand, growth, market area and target market, competition strategy and niches, and development prospects.(1) Supply More than600domesticsecuritycompaniescurrentlyoperate inTaiwan,employingapproximately

85,000registeredemployees.Becauseofoversupplyandexcessivelylowmarketprices,profitabilityisdifficulttoachieve.However,basedonananalysisofthesecurityindustry’sdensitydomesticallyandinJapan, CTBC Security believes that there is room for growth in Taiwan’s security industry.

(2) Demand The challenges restraining the industry’s development are related to the low prices of public bids for

security guard services, the slow amendment of the laws and regulations on the security industry and management of apartment buildings, the frequent change of legally agreed upon working hours for all security employees, and the large number of vacant security positions.

Followingtheprivatizationofgovernment-ownedenterprises,moresecuritycompaniesareexpectedtoenter the market.

How the government and security companies ultimately choose to develop the industry remains an open question worthy of review.

9) TaiwanLottery(1) Supply Inresponsetothechangingneedsofthemarket,TaiwanLotteryisadjustingthestructureofitsexisting

lottery products as well as actively researching and developing innovative products that are more diverse, are more entertaining and engaging, and have higher winning rates. The company is also employing variousmarketingmodels toexpand its lotterychannels inorder to integrate lotteryproducts intoconsumers’ lives.

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(2) Demand In recent years, sales growth in most mature lottery markets around the world has stagnated. With

theexceptionofareasthathaveseenslightrisesasaresultof legal increasesintheprizepayoutrateor the promotion of online betting by lottery issuers, most lottery markets have had flat or negative growth. Taiwan’s public welfare lottery market entered a mature stage after its annual sales peaked at approximatelyNT$130billion in2014and2015.As is thecaseforoverseas lottery issuers,TaiwanLotteryfacesdifficultyrecapturinglotterysalesgrowthifitisunabletodeveloponlinebettingthatsuitsthe living and consumption habits of younger people. In addition, private consumption momentum in Taiwanisunlikelytogrowinthenextfewyears, thusconsumptionbehaviorregardingnon-necessitieswill tend to be conservative. Numerous factors further limit the development of the lottery industry, such as the statutory restrictions on the prize payout rate, the demand of the competent authority and legislators for stricter issuance management and review, the competent authority’s lack of funding to promote the image of the public welfare lottery for seven consecutive years, and the ban on online betting. Faced with these severe challenges, Taiwan Lottery is actively developing new products and employing innovative marketing techniques, including upgrading its app as well as better managing its digital membership and digital marketing measures.

5.3.3 Business objectives1) Long-term cultivation of brand value: CTBC Holding is committed to adhering to its principles of serving

customers with enthusiasm, cherishing customers’ trust, and—in line with its “We are family” brand spirit—practicing its brand values of being caring, professional, and trustworthy in order to cultivate strong customer relationships. Furthermore, the Company upholds its “TRUST” sustainability strategy through five key ar-eas—corporate governance (Transparency), environmental sustainability (Responsibility), employee welfare (Understanding), customer service (Satisfaction), and community engagement (Together)—as a means of demonstrating the great value it places on business partners, the environment, its employees, its customers, and the community as it works to cement its reputation as a financial brand that retains a warm human touch.

2) Expansion and transformation of overseas branches and subsidiaries: The Company will continue with its overseas development plans. Existing subsidiaries and branch offices will focus on expanding their customer base, online service points, and business while simultaneously seeking out complementary M&A targets or strategic partners, working toward the mission of becoming a leading financial institution in the region.

3) Refined and customized operations: We will adopt a customer-oriented business model that offers diverse products to meet customers’ wide-ranging demands in order to enhance customer satisfaction and stickiness.

4) Accelerate digitalization development: We will gradually implement the digital transformation of existing business models and channels while expanding the cultivation and recruitment of digital financial talent to facilitate our overall digital financial development.

5) Strengthen legal compliance and corporate governance: As legal compliance and corporate governance con-tinue to be a focus of the competent authority, we will continue to revise related operational specifications in accordance with government regulations, ensuring that our group’s internal operating mechanisms are consis-tent with external regulations. In terms of corporate governance, none of CTBC Holding’s Board directors are also serving as its managers. Furthermore, the Company also implements operating principles based on the

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TRUST strategy, including strengthening the functions of independent Board directors, maintaining a Board of Directors featuring diverse experience, and ensuring openness and transparency in its information disclo-sure.

5.3.4 Strengths and weaknesses of development prospects1) CTBCHolding

(1) StrengthsA. Brand value: Over its decades of operation, CTBC Holding has developed a highly favorable public

image built on its “We are family” brand spirit and its principles of being caring, professional, and trustworthy. A global brand value survey in 2020 ranked CTBC Holding as having the highest brand value in Taiwan’s financial industry. This public image, however, has been earned not only through its trusted financial services; the Company’s philanthropic efforts are also long-running and widely appreciated. Its annual Light Up a Life campaign, now in its 36th year, raises funds for use on the ground with vulnerable groups, including by investing in sports, anti-drug programs, arts and literature, and education.

B. Industry-leading financial and risk management: CTBC Holding has built a reputation for sound risk management. In addition to compliance with the Basel III international banking regulations, the Company will continue to research and develop new risk monitoring technologies and systems to actively enhance risk management efficiency. In recent years, CTBC Holding earnings have continued to rise, with an after-tax profit of NT$42.9 billion for 2020, placing the Company squarely in the leaders’ pack. It also fully satisfies the standards of various financial indicators as required by the competent authority.

C. Digital finance leading strategy: The Company is actively expanding its digital financial coverage. In addition to investing in the online-only LINE Bank, we have integrated the LINE messaging app’s diverse application scenarios and its large user population. Meanwhile, assisting in the government’s pandemic relief loan program, the company handled 95% of these loan applications online, at an average rate of 1.5 minutes per case, indicating the tangible effects of the group’s digitalization. Looking ahead, the Company will continue to provide warm, efficient financial services with customers’ needs at the core of its digitalization while earning more international digital financial awards to maintain its leading position in the digital field.

(2) WeaknessesA. Cross-border talent recruitment difficulties: CTBC Holding subsidiaries have established overseas

locations in North America, Japan, China, and Southeast Asia. Since the political, economic, and operating environments in these countries vary considerably, managing local labor forces requires cross-border managers who are well versed in local culture; however, such talent is difficult to come by.

B. Excessive market competition, high brand homogeneity: In Taiwan, there are too many financial institutions with high business homogeneity. Although the competent authority has implemented policies to encourage the consolidation of financial institutions, consolidation has proven difficult

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overall; in addition, the expected opening of three online-only banks in 2021 could worsen the operating environment. The situation is exacerbated as each financial institution adopts a price competition-based strategy, which limits earnings and increases operating difficulty.

C. Increased compliance with regulations and standards: The FSC has become increasingly stringent with its requirements for anti-money laundering, countering the financing of terrorism, and customer rights protection. In 2020, the financial industry was imposed a total fine of NT$300 million, which not only exceed the fine imposed in 2019 but was the highest in 12 years. Of the companies fined, most were insurance companies, with banks coming in second, with rigorous inspections conducted of the banking, insurance, and securities industries. Therefore, major financial companies have continually tightened their internal control measures for money-laundering and other standards-compliance programs, which also results in higher operational and management costs.

2) CTBCBank(1) Strengths

A. Institutional banking, capital markets, and overseas businessa. CTBC Bank is in the leading position among Taiwanese banks, with steady and solid Taiwanese

business clientele. It may leverage its strong domestic and overseas web presence and seize business opportunities arising from Taiwanese business clients’ cross-border development.

b. Demand in the Chinese domestic market has rebounded rapidly, and it is forecast to gradually increase its investment in the ASEAN region following the signing of RCEP, which will become a key engine of the global economy recovery. CTBC Bank has a presence in several major cities in China through which it can benefit from the development of domestic demand. In addition, CTBC Bank also has several branches and subsidiaries in many Southeast Asian countries, allowing it to leverage these cross-border platforms in order to expand its business among Chines cross-border clients.

c. After entering the RCEP, ASEAN nations’ demand for trade and infrastructure financing continues to rise. This is opportune for CTBC Bank, whose presence in Southeast Asia is more competitive than those of its Taiwan-based counterparts.

d. CTBC Bank offers diverse and comprehensive product lines that provide customers with a one-stop service, covering their funding, operating, and wealth management needs and more, effectively raising customer stickiness and growing its share of wallet.

e. CTBC Bank has long been in the leading position in the domestic derivatives market. Its bond underwriting business has also surpassed its Taiwanese counterparts in the Asian market.

B. Retail banking As the domestic and global economies are expected to recover steadily post pandemic, personal and

SME financial market demand should remain strong, and the continuing opening and development of digital financing and electronic payment services will drive the growth of financial management, payment, and lending businesses.

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CTBC Bank’s large and densely located physical and digital financial service points, coupled with its teams of financial management, payment, and lending service experts who continue to refine their skillsets, will continue to offer customers personalized, digitalized, diverse, and superior service. With the continual introduction of emerging technologies such as AI, Big Data, and mobile banking, the Bank will actively implement a smart transformation and further improve retail banking customers’ cross-channel experience.

In addition, at CTBC Bank’s domestic and overseas branches, retail banking is combined with institutional banking to manage and serve SME accounts together in order to fulfill customers’ needs and enhance their satisfaction.

(2) WeaknessesA. Institutional banking, capital markets, and overseas business

a. Interest rate cuts are a global trend not likely to change in the short term, which will influence the deposit and loan interest spread of the financial industry and reduce its overall profit.

b. Financial supervision is increasingly strict, with various countries attaching greater importance to compliance, such as internal control, anti-money laundering (AML), know your client (KYC), consumer protection, and information security issues. Compliance-related costs are growing accordingly.

c. The pandemic has not been controlled at a global scale, and the economy is still facing downward pressure.

d. Basel III has further increased the capital and liquidity requirements for banks and implemented other financial market reforms such as global financial transaction deposits, a centralized settlement mechanism, and LIBOR substitution, again increasing their capital and risk management costs.

e. For some subsidiaries that are smaller in scale, the introduction of more rigorous regulations has led to increases in compliance costs. Certain subsidiaries have been affected by the reduced financial liquidity of the market and the low interest rate environment. These circumstances are particularly challenging for the deposit and loan businesses.

B. Retail banking The competent authority tightened its control over the retail banking business and posed stricter

compliance requirements, such as KYC, AML, the fair treatment of customers, and sales risks, all of which affect existing earnings, with operating costs and compliance costs increasing every year. Thus, retail banking faces a critical challenge to determine how to address risk management and regulatory compliance while still expanding earnings.

Competition is high in various business lines, including from new operators entering the market due to the booming development of fintech as well as from active investment in products by industry competitors. In response to growth in complex and diverse customer demand, an important challenge for retail banking is understanding customer needs and addressing them through appropriate channels with consistent and timely service. Successfully doing so strengthens the overall depth and breadth of customer management and helps maintain momentum in innovation and profitability.

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In addition, there is high uncertainty in overseas markets regarding their post-pandemic recovery. We face critical challenges such as maintaining asset quality, steadily growing our customer base, increasing customer acquisition through digital channels, and optimizing digital platforms.

3) TaiwanLife(1) Strengths

A. The health risk awareness of Taiwanese people has increased due to the pandemic, increasing demand for medical insurance

B. Life insurance companies lowered their declared interest rates to reduce interest loss risks and strengthen their financial capacity.

C. With the development of digital applications, insurance and digital ecosystems are being combined to facilitate the collection of customers’ data.

D. The rapidly declining birthrate and aging population have increased the pressures involved in raising children. The public is gradually becoming aware of the importance of retirement planning and healthcare protection, which benefits protection-type product sales by life insurance operators.

(2) WeaknessesA. As a result of the competent authority’s reducing of the statutory reserve interest rate, premiums

increased, which will affect the sales of products in the short run. B. The number of travelers going abroad for business or pleasure fell due to the pandemic, affecting the

sales of travel insurance in the short run. C. The arrival of the low interest rate era has brought great turbulence in the equity and bond markets,

which makes it difficult to maintain domestic and overseas new money rates. D. Although hedging costs decreased in 2020 because of the narrowing of the U.S.–Taiwan interest

rate spread, life insurance companies suffered high foreign exchange losses due to the New Taiwan dollar’s appreciation against the U.S. dollar.

E. The scheduled IFRS 17/ICS 2.0 compliance in 2026 will complicate product sale transformation, asset allocation, system establishment, and talent cultivation.

4) CTBCSecurities(1) Strengths

A. CTBC Securities has long been cultivating overseas underwriting markets, gradually increasing the ratio of overseas cases. The government’s New Southbound Policy, which aims promotes Taiwan’s regional links and thus connect it with global development, also promotes regional exchanges, development, and cooperation. The competent authority is also encouraging Taiwanese businesses to return and list in Taiwan, all of which is beneficial to the underwriting business of securities firms.

B. The rise of international investment and wealth management has led to increased demand for overseas securities investment. Securities firms are establishing international financial businesses and cross-strait financial management platforms to profit by offering overseas securities investment and wealth management solutions.

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C. The Taiwan Stock Exchange continues to introduce new types of financial products and open up for new business categories. In 2020, it will introduce a trading mechanism enabling continuous trading, which will shorten the execution time and thereby stimulate investment momentum.

D. The competent authority continues to promote warrants products, hoping to drive transaction momentum by increasing the visibility of such products.

E. The FSC continues to promote its Digital Financial Environment 3.0 policy. As a result, securities firms are rushing to invest in digital financing platforms. In the future, the number of physical branch locations will no longer be a key operational factor; rather, the focus of operations will be digital competitiveness and service differentiation.

F. With the booming development of fintech and smart devices, a new financial ecosystem is forming and securities investment is becoming even more accessible to the public. Furthermore, with AI (smart customer service), digital platform development, and the lowering of securities investment thresholds, investors will more actively participate in the market, thus increasing profits for securities companies.

G. The development of the securities market is gradually becoming polarized between the low-cost leadership strategy and the service differentiation strategy, while opportunities for composite positioning strategies exist in the mid-range market.

H. Given the effect of the pandemic, governments worldwide are implementing currency easing and low interest rate policies, enabling further growth of the index and transaction volume across global securities markets and increasing brokerage, financing, reconsignment, and dealership income for securities companies.

(2) WeaknessesA. The financial market has experienced greater fluctuations as a result of global political and economic

turbulence, posing greater risks for the securities business. In addition, as dealership and brokerage business accounts for higher percentages of CTBC Securities’ revenue, the financial performance of the company is fluctuating due to the direct influence of market performance.

B. The pandemic affected the due diligence for the underwiring cases of listings by companies returning to Taiwan and delayed the scheduled filings with relevant authorities. The business continuity of securities companies was challenged by having to continually comply with relevant operating policies as well as evaluate pandemic-response measures such as teleworking, which will reduce operating efficiency and increase costs.

C. The large number of securities firms could spur vicious competition toward increasingly low fees. Many securities firms have adopted the low-cost leadership strategy due to the fierce competition in the domestic market, and their fee income is below the average market income level. Price competition among peers only erodes earnings for securities firms.

D. Securities firms, after achieving economies of scale, manifest the “large firms stay large” phenomenon, and their existing customer bases raise the entry barriers for new securities firms.

E. The company has fewer physical branch locations than its industry peers do, which makes it more difficult to conduct effective marketing and promotion of financial products such as warrants.

F. The company’s capital is much lower than that of large securities firms in the industry, resulting in relatively limited capital allocation and new business category development.

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5) CTBCVentureCapital(1) Strengths

A. With the substantial support of the government, emerging industries have become the focus of corporate investment. In recent years, the government has sought to revitalize the economy through mid- and long-term industrial restructuring, specifically through its “5 plus 2” industrial innovation plan focusing on smart machinery, the Asian Silicon Valley, green energy technology, biotechnology and pharmaceuticals, defense, new agriculture, and circular economy, as well as prioritizing AI and 5G. In 2020, the government further identified six core strategic industries, namely information and digital technology, cybersecurity, medical technology and precision health, green and renewable energy, national defense and strategic industries, and strategic stockpile industries. At the same time, while the U.S.–China trade war and regional politics posed risk factors, the government launched action plans to stimulate or encourage Taiwanese businesses to return to invest in the country, to accelerate investment by domestic corporations, and to accelerate investment by SMEs. These efforts advocate the necessity and urgency of technologies related to the fourth industrial revolution, AIOT, and circular economy, catalyzing the vigorous development of related industries. These industries have also become key investment areas for venture capitalists.

B. The government has devoted resources to strengthening the development of the cultural and creative industry, aiming to bolster Taiwan’s competitiveness by cultivating its soft power. Measures taken to support these efforts include helping develop software and hardware that enriches local cultural life by creating a “Spheres of Culture Project”, building a cultural industry ecosystem, better leveraging cultural practices, and promoting industrial development. In addition, to assist the industry in establishing a comprehensive ecosystem, the Ministry of Culture has launched policies targeting the creation, production, and funding and assistance of industrial upgrading and connecting with the international market through grants, investment, and finance. The government is continuing to build venues for exhibition and performance arts in order to connect the broken chains in the industry and build a healthy environment for it.

C. Changes in consumer behavior have led to more innovative investment opportunities. The development of the internet and financial communication platforms has changed the behavioral patterns of consumers. For example, in Taiwan, the conventional consumption habits surrounding music have fundamentally changed; rather than listening to pre-purchased music, be it on a physical or digital medium, many people now prefer experiential consumption, such as streaming music and attending live concerts. In the past three years, the market for concerts and related activities has grown significantly. Furthermore, the rise of electronic payment platforms will see them overtake traditional payment methods, with various online platforms dominating consumers’ online lives and spending, in turn creating a diverse network economy such e-sports and internet celebrities. These changes in consumer behavior will be more closely integrated with the development of industries online and offline and will also create more innovative investment opportunities.

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(2) WeaknessesA. Affected by the international economic and financial situation, Taiwan’s industrial structure has

changed and large-scale, high-quality cases are scarce. In the face of the decline in the number of investment projects but the same number of venture capitalists, in addition to the increased investment costs resulting from the competition, investment risk also increased

B. Lower corporate fundraising willingness and needs, resulting from the low interest rate environment and the active promotion of government incentives for investment programs, reduced the number of venture capital cases. The diversity of corporate fundraising channels (e.g., the emerging Asian family office culture and the prevailing corporate accelerator plus investment) could further intensify the competition for investment cases.

C. In addition to stock listings, companies are seeing a higher acceptance of renowned international private equity funds, M&As, and strategic investors, resulting in uncertainty in the exit mechanism and affecting investment evaluations and risk management.

D. The Covid-19 pandemic severely impacted the travel, airline, and experience industries, which in turn influenced the performance of relevant venture capital cases in the short turn. In addition, the pandemic affected the overseas due diligence procedures of venture capital cases, thus impacting the investment business.

E. Currently, due to restrictions placed by the competent authority, CTBC Venture Capital is still unable to play the role of a general partner, which makes it difficult to raise funds externally or to expand investment resources and increase management fee income.

6) CTBCAssetManagement(1) Strengths

A. Domestic asset management business: the buying demand in the real estate market remained strong in the past year due to sufficient capital in the domestic market. As such, property prices are not likely to dramatically drop and therefore would be beneficial to asset management companies in disposing their real estate positions in the future. In addition, the integration of CTBC Holding’s resources will help improve the efficiency of the subsidiary’s asset disposal. In addition, it will benefit from its experienced, stable, and united management teams, professional workforce, and performance-oriented corporate culture.

B. Leasing in Chinaa. The Chinese central government’s policies have contributed to the reshaping of its economic

structure, facilitated enterprises’ development in advanced high-end manufacturing and strategic emerging industries, and encouraged technological innovation, transformation, and enterprise upgrading. In China’s 14th Five-Year Plan, it states that the country must “We must adhere to making the real economy the focal point of economic development, resolutely build China into a manufacturing powerhouse, a quality powerhouse and a cyber powerhouse, build a digital China, promote industrial base upgrading and production chain modernization, and boost the economy’s quality, efficiency and core competitiveness”. By combining finance funds with assets, China’s financial leasing will leverage its manufacturing industry to empower “Made in China”.

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b. The General Office of the State Council’s Guiding Opinions on Accelerating the Development of Financial Leasing Industry identified the main tasks in four areas (i.e., reform and restrict the sys-tem and mechanism for the development of leasing, accelerate the development of leasing in key areas, support the development of leasing innovation, and strengthen the interim and ex-post super-vision of leasing) and policy measures in five areas (i.e., construct a legally based and compliant business environment, improve related fiscal and taxation policies, expand financing channels, im-prove public services, and strengthen the training of talent) with the intent to comprehensively and systematically accelerate the development of China’s leasing industry. The continual optimization of the operating environment of the leasing industry, the increasing market demand, and its closer connection with production capacity provide the leasing industry with excellent space for develop-ment.

c. Governments of all levels in China are actively encouraging the development of the leasing industry in order to assist in the development of SMEs and specific industries and to address their financing difficulties. Responding to the liberalization of the overall financial system, the governments is actively launching incentive policies and measures to systemize the operating environment for the industry. The laws and regulations are generally in the direction of benefiting the development of the leasing industry. The incentives from the central government and the subsidies from local gov-ernments are supporting the booming development of the leasing industry.

d. Improving the movable property mortgage registration and inquiry system is beneficial for securing leasing property rights. Leasing enterprises in China have become increasingly aware of the regis-tration of movable property. The awareness and discipline of the involved enterprises is proving to facilitate the healthy development of the entire industry.

(2) WeaknessesA. Domestic asset management business

a. In recent years in Taiwan, asset management companies have been actively participating in the bidding process of court auction real estate and public biddings held by government agencies. The imbalances in supply and demand have often driven market prices to record highs.

b. On Dec. 8, 2020, Taiwan’s Central Bank amended and implemented the Regulations Governing Real Estate Mortgage Loan by Financial Institutions. Accordingly, the Central Bank will implement credit control over housing loans applied by corporate institutions and investors, and land loans and loans for completed construction projects applied for by construction companies. This is expected to impact the domestic housing market and housing prices to a certain extent, thus lowering the profit margin from real estate investments. Should downward adjustments to the economic outlook occur, the risk of CTBC Asset Management is expected to increase.

B. Leasing in Chinaa. Overall condition: China’s GDP grew by 2.3% in 2020, likely making it the only major economy to

realize positive growth. However, due to the pandemic, the global economy saw a severe recession, supply chains were disrupted, and international trade contracted, thus internal momentum to drive economic growth takes time to recover. While some areas experienced a partial pandemic rebound,

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some provinces and cities along the Yangtze River valley suffered from severe flooding, which was detrimental to the economic revival.

b. Industrial environment: Currently, with Covid-19 still spreading, the global industry chain and supply chain are still obstructed. Economic globalization encountered a trend reversal, resulting in an apparent increase of uncertainty and destabilization. China is facing a complex and severe situation in foreign trade. Furthermore, due to the U.S.–China trade conflict, the global manufacturing industry is expected to have a slow recovery.

c. Leasing industry: The concentration of the leasing industry in Shanghai, Tianjin, and Shenzhen continued, extending the long-running imbalanced, insufficient supply of industry talent. The capital scale of Chinese-funded leasing companies is growing on the back of strong funding, high platform value, and an ability to attract talent. With the expanding of the platforms of Chinese-funded leasing companies, excellent salespeople and senior credit investigators will be recruited. Their Taiwan-funded peers will continue to experience pressure in recruiting local talent and establishing customer bases.

d. New financial supervisory rules require that leasing companies establish a sound leasing property evaluation and pricing system to determine rental prices based on the value of the leasing property, other costs, and reasonable profits.

e. Flaws remain in the leasing asset registration system and the used equipment market, affecting the rights of leasing assets and exit channels.

7) CTBCInvestment(1) Strengths

A. CTBC Holding subsidiaries may collaborate and offer products tailored to the needs of the customers or the timing of investments such as tailor-made public or private equity funds or discretionary-type products, making the most of the group’s synergy potential.

B. The competent authority promulgated related policies such as the Management, Utilization, and Taxation of Repatriated Offshore Funds Act and retirement planning regulations, which are facilitating the introduction of new products and the entrance of new capital into the domestic fund market. In recent years, retirement planning has been emphasized, and in 2019, the government is conducting a pilot experiment that allows members to define their contribution to their retirement plans. Going forward, further research and development will be conducted for retirement mechanisms and investment portfolio planning in order to provide more comprehensive investment services for Taiwan citizens.

(2) WeaknessesA. Low gross profit margin: The bond ETFs and target maturity funds with high market growth are low-

and medium-margin products, and new regulations on the remuneration of sales organization will be implemented in 2020. Sales channel costs are expected to increase as a result and the company will face further upward pressure going forward.

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B. Sales difficulties: Offshore fund product sales momentum has been slower than expected. CTBC Investments is actively seeking external channels and establishing communication channels. In addition, many domestic existing funds lack growth momentum, resulting in continuous reducing in scale that reaches the combination or liquidation threshold. There must be a breakthrough in the existing sales models.

C. Systems and operations: The core system entered the second phase of establishment, and it is estimated to be completed in the first half of 2022. In addition, EC account opening is not user-friendly, which has obstructed the management of customers.

8)CTBCSecurity(1) Strengths

A. CTBC Security is the only security company in Taiwan that is under a financial holding company. CTBC Holding has a large enterprise scale, stable and profitable business, and a strong brand image, and can be leveraged to expand CTBC Security’s customer base to include wealthier clients who can afford high-end security services.

B. In general, risk management is increasingly popular. Because of growing concern regarding public security and safety, private industry entities, such as property management committees and factory owners, have gradually changed their consumption habits from hiring independent security guards or strategically scheduling male employees to be on duty to instead obtaining security service products and services from professional companies that are able to deliver superior service quality and security

(2) WeaknessesA. CTBC Security is a subsidiary of CTBC Holding. The competent authority requires that more

than 50% of its total operating revenue must come from financial business; therefore, the security company’s development is somewhat limited.

B. According to Article 13 of the Labor Insurance Act, starting 2020, the employee labor insurance ordinary accident insurance premium rate will be 11%; fine-tuning of the rate is expected, with a cap of 13%. These developments seriously affect security guard deployment businesses, which rely heavily on their manpower.

C. The “one fixed day off and one flexible rest day” policy will have a considerable impact on special holidays and overtime pay.

D. Certain security companies still adopt improper strategies of low-cost contracting and management. As a result, unit prices for security services have not significantly improved, though the number of residential and business complexes that employ these services has increased.

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9)TaiwanLottery(1) Strengths

A. Draw gamesa. The draw games have a broad customer base. According to a market penetration survey, 69% of

consumers aged 18 or older (more than 11 million people) have purchased a lottery ticket in the past.

b. Taiwan Lottery has a comprehensive sales network; as of the end of 2020, it had 5,438 stores nationwide.

c. Marketing efforts can be aimed at deepening the existing cultural practice of purchasing lottery tickets to celebrate Chinese New Year, and larger prizes can be introduced and promoted to drive sales during the festival.

d. Donations by large-prize winners can be publicized to expand the public welfare benefit of the lottery.

B. Scratch cardsa. A more diverse range of instant lottery scratch cards will be released in order to attract more

consumer groups. According to a market penetration survey, 76% of Taiwanese consumers aged 18 and over (more than 12 million people) have purchased a scratch card in the past.

b. The company can constantly develop and innovate its product lines in order to attract consumers with more diverse and engaging playing methods and higher win rates.

c. Higher-priced products can be launched during festivals to stimulate sales.(2) Weaknesses

A. Draw gamesa. The inability to place online bets hampers sales growth.b. The rise of sports betting poses a threat to the public welfare lottery.c. The low winning rates of the lottery result in some consumers losing interest.d. So-called “jackpot fatigue” causes players to not buy lottery tickets until the top prize rolls over to

an amount so large that it becomes a topic of public discussion and news coverage.e. Sales have been affected by economic and social changes, including the government’s reform of

military personnel, public servant, and public school teacher pensions and its implementation of a new workweek policy.

f. Pervasive underground gambling affects sales.B. Scratch cards

a. The overall prize payout rate may not exceed 60% of lottery ticket sales; therefore, there is limited flexibility in how tickets are issued and draw prizes are structured.

b. In getting a product to market, the product design, printing, shipment, customs clearance, and warehouse entry declarations process requires approximately four to five months; thus, little room exists for making adjustments to products and their rollout schedule in response to market changes.

c. Sales have been affected substantially by the economic environment and social changes.d. By law, the run of each scratch card product is limited to six months. When a scratch card product

expires, any of its unsold cards must be destroyed in accordance with the relevant regulations, thus requiring extra time and cost expenditure.

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5.4 Human resources

5.4.1 CTBC Holding employees (Notes 1 and 2)As of Dec.31,2019 Dec.31,2020 April 13, 2021


Number of employees 161 144 144

Average age (years) 40.3 41.9 43.1

Average tenure of employment (years) 3.0 4.3 4.5

Education

Employee

countPercentage

Employee

countPercentage

Employee

countPercentage

Ph.D. 4 2.5% 4 2.8% 4 2.8%

Graduate school 101 62.7% 93 64.6% 90 62.5%

University/college 52 32.3% 43 29.9% 44 30.6%

Senior high school 4 2.5% 4 2.7% 5 3.5%

Below senior high school 0 0.0% 0 0.0% 1 0.6%

CTBC Bank Co., Ltd.

Number of employees 12,026 12,143 12,168



Education

Employee

countPercentage

Employee

countPercentage

Employee

countPercentage

Ph.D. 24 0.2% 29 0.2% 29 0.3%

Graduate school 2,777 23.1% 2,919 24.1% 2,910 23.9%

University/college 8,504 70.7% 8,542 70.4% 8,569 70.4%



Taiwan Life Insurance Co., Ltd.

Number of employees 3,338 3,352 3,316



Education

Employee

countPercentage

Employee

countPercentage

Employee

countPercentage

Ph.D. 9 0.3% 9 0.3% 9 0.3%

Graduate school 432 12.9% 472 14.1% 470 14.2%

University/college 2,131 63.8% 2,155 64.3% 2,138 64.5%



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As of Dec.31,2019 Dec.31,2020 April 13, 2021

CTBC Securities Co., Ltd.




Education

Employee

countPercentage

Employee

countPercentage

Employee

countPercentage

Ph.D. 4 0.8% 4 0.7% 4 0.7%

Graduate school 123 23.8% 134 24.5% 143 25.1%




CTBC Venture Capital Co., Ltd.




Education

Employee

countPercentage

Employee

countPercentage

Employee

countPercentage

Ph.D. 1 4.1% 1 4.0% 1 4.2%

Graduate school 19 79.2% 19 76.0% 18 75.0%


CTBC Asset Management Co., Ltd.




Education

Employee

countPercentage

Employee

countPercentage

Employee

countPercentage

Ph.D. 1 5.6% 1 5.9% 1 6.3%

Graduate school 8 44.4% 8 47.1% 8 50.0%


CTBC Securities Investment Trust Co., Ltd.




Education

Employee

countPercentage

Employee

countPercentage

Employee

countPercentage

Ph.D. 1 0.8% 1 0.7% 1 0.7%

Graduate school 47 36.7% 56 37.6% 58 39.2%



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As of Dec.31,2019 Dec.31,2020 April 13, 2021

CTBC Security Co., Ltd.




Education

Employee

countPercentage

Employee

countPercentage

Employee

countPercentage

Graduate school or higher

7 1.9% 8 2.2% 1 0.3%



Below senior high school

1 0.3% 0 0.0% 159 44.9%

Taiwan Lottery Co., Ltd.




Education

Employee

countPercentage

Employee

countPercentage

Employee

countPercentage

Ph.D. 4 1.7% 4 1.8% 4 1.8%Graduate school 33 14.5% 33 14.3% 29 13.1%



No. of employees holding professional licenses

Trust 4,742 Trust 4,826 Trust 4,805Life insurance 5,947 Life

insurance 5,744 Life insurance 5,658

Investment insurance 4,475 Investment

insurance 4,485 Investment insurance 4,457

Securities 2,586 Securities 2,634 Securities 2,619Equity securities 122 Equity

securities 134 Equity securities 137

Internal control 6,738 Internal

control 6,933 Internal control 6,955

Appointed actuary (Note 2)

1Appointed actuary (Note 2)

1Appointed actuary (Note 2)

1

Claim adjuster 114 Claim

adjuster 129 Claim adjuster 128

Insurance assessor 165 Insurance

assessor 124 Insurance assessor 171

Note 1: The employee counts do not include contractors.Note 2: Per letter No. Jin-Guan-Bao-Chan-Zi-10602023390

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5.4.2 Staff trainingCTBC Holding’s staff members are its most valuable asset and a key advantage in its pursuit of excellence and sustainable operations. To foster unique talent, the Company’s strategic development master plan includes the formulation of an overall talent development policy, a career development framework, and blueprints for various positions as well as supervisors at all levels. In recent years, the Company has more actively invested in cultivating overseas talent as part of the international component of its strategic development plan.The following is a summary of the various employee training programs provided by CTBC Holding, such as job training, self-development, and executive development:

1) Jobtrainingandself-developmentcourses(1) Job training: To deepen employees’ professional knowledge and skills, onboard training is held for new

recruits and professional training is provided for employees in various positions. This training includes coursesforallpositions(e.g.,corporatefinancerelationshipmanager,financialadviser,financialplanner,and customer service specialist), overseas talent training programs, regulation and compliance courses, and information security risk education.

(2) Personal development and improvement: Personal development classroom courses, language courses, online courses, and well-being lectures are held regularly to enhance employees’ work capabilities and personal development.

2) Executivedevelopmentandteambuilding(1) CTBC Holding’s Talent Development Committee was established to evaluate talent at all levels. These

efforts,combinedwiththeoverallstrategyoftheCompanyandregularreviews,facilitatetheexecutionof its managerial talent development plan. Accordingly, supervisors are selected to participate in domestic andoverseasexecutivetrainingcoursesandengageintrainingandexchangeswithnationalleadersandelites from across various sectors, helping them cultivate a global perspective and a cross-border approach to business operations and management. Furthermore, the managerial talent development plan undergoes regular internal review and improvement.

(2)TheexistingcooperationwiththeWhartonBusinessSchooloftheUniversityofPennsylvaniacontinuedin 2019. Professors from Wharton visited Taiwan and held customized courses at the Company for mid- andhigh-levelexecutives, includingaLeadershipDevelopmentProgramandanExecutiveProgram,respectively, enhancing the leadership and management capabilities of the heads of each Company subsidiary. The Wharton Master Forum was also jointly organized to provide insight on relevant internationaltrends,withdomesticandforeignindustryexpertsengagingindiscussionsexploringdiversetopics.

(3)Withreference tomanagementanalysisbasedon internalandexternalscientificdata, theCompanyarranges various training courses and programs every year to cultivate and retain the talent it requires to succeed.Theseefforts includemanagementdevelopment training forexecutivesacrossvariouslevels,executivelanguagetraining,traininginTaiwanforoverseassubsidiarysupervisors,andtrainingprograms for management associates. Through various activities such as training and team interaction, the Company shapes its cross-unit communication platform in order to encourage teamwork. In addition to

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the combination of physical and online courses, individual CTBC Holding cases are developed through interactive teaching methods so as to pass down the Company’s management thinking and train its executivesindecisionmakingandcriticalthinkinginpreparationforfutureoperationsandchallenges.

In 2020, CTBC Holding and its subsidiaries held 1,805 in-person classes, which were attended 25,318 times, and 1,397 online courses, which were attended 236,080 times. Employee training time totaled 612,660hours,withtrainingexpensesofNT$55.98million.

5.5 Corporate responsibility and ethical conduct

5.5.1 CSR implementationAs one of the leading financial institutions in Asia, CTBC Holding is actively implementing sustainable ESG

practices, guided by the spirit of the U.N.’s Sustainable Development Goals. In March 2020, we set up a Corpo-rate Sustainability Office, which reports to the CTBC Holding President. In April, we signed on to the Task Force on Climate-related Financial Disclosures (TCFD), establishing an assessment procedure and management mech-anism for climate risks and integrating such risks and opportunities into our decision-making process. In June, the Sustainability Committee was upgraded to a functional committee directly under the Board of Directors. Composed entirely of independent directors, the committee is charged with supervising sustainability-related practices and issues across the group. Additionally, CTBC Holding led its peers by becoming the first Taiwanese company to join the Partnership for Carbon Accounting Financials, in October, and the Global Impact Investing Network, in December.

Regarding group-level policies, CTBC Holding passed its Sustainability Management Policy and Sustainable Finance Policy at the end of 2020. Standing on the three pillars of Responsible Operations, Sustainable Growth, and a Connected Society, our sustainability strategy’s focuses include “Positive Impact Finance”, “Innovative Digital Applications”, “Empowered Employees”, “Ethical Governance”, “Sustainable Environmental Practices”, ”Strategic Community Investment”, and “Collaborative Value Chain Engagement”. Guided by TRUST—an ac-ronym we’ve coined for our commitment to corporate governance (Transparency), environmental sustainability (Responsibility), employee welfare (Understanding), customer service (Satisfaction), and community engage-ment (Together)—we set and implement sustainability targets and action plans through the regular identification of material issues of concern to stakeholders, through compliance with CTBC Holding’s sustainability policies and strategy, and through our ESG Taskforce, for which the President of CTBC Holding acts as chairperson, and the management teams of subsidiaries as taskforce members.

1) ResponsibleOperations● Transparency:Corporategovernance

To strengthen its corporate governance and enhance its business performance, CTBC Holding introduced an independent director system in 2008, and in 2016, it became the first company in Taiwan’s financial industry with independent directors occupying more than half of its board seats. With the diverse professional backgrounds of its directors and the principle of separation of ownership and management deeply rooted, the independence of the Board is highly valued and fosters sound corporate governance.

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In addition, to reinforce the Board’s management and supervisory functions, six committees have been established: the Audit Committee, Remuneration Committee, Risk Management Committee, Nomination Committee, Ethics and Integrity Committee, and Sustainability Committee. At the end of each year, all directors are invited to conduct a self-assessment of the Board’s operations and of their own individual performance.

Furthermore, CTBC Holding approved in February 2019 the establishment of a managerial-level corporate governance supervisor, who is charged with supervising the Corporate Governance Department and the Board of Directors’ Secretariat. The supervisor is responsible for providing the information and assistance that Board directors require in order to perform their duties, and are also responsible for continually advocating corporate governance within CTBC Holding and its subsidiaries.

To keep pace with international trends, meet the expectations of competent authorities, and enforce the Company’s own independent Board director requirement, the Corporate Governance Best Practice Principles were revised in 2018 to stipulate that the terms of office of independent directors must not exceed three. The change made CTBC Holding the first financial company in Taiwan to establish such a term limit. The Corporate Governance Best Practice Principles were again revised in 2019 to have CTBC Holding become the first in the industry to limit the number of company boards on which a director may serve simultaneously. Moving forward, CTBC Holding is committed to further improving its corporate governance and strengthening its information disclosure and transparency, balancing the rights and interests of all stakeholders so that the Company may continue to grow and develop sustainably.

CTBC Holding’s Articles of Incorporation clearly state that directors are to be elected based on the candidate nomination system. In addition, the Company’s Rules for Director Elections, the Nomination Committee Charter, and the Corporate Governance Best Practice Principles stipulate the Board’s structure, diversity policy, and overall competency requirements. The guidelines for the composition of the Board of Directors facilitate the arrangement of suitable director successors. Regarding the evaluation of director candidates, in addition to professional qualifications and experience, consideration is also given to the candidate’s familiarity with the corporate culture of CTBC Holding, as well as its business operations and subsidiaries. In cooperation with the Company’s development blueprint, the Board solicits professionals from the financial industry as well as the business, government, and academic sectors. If a candidate is currently a director of CTBC Holding or a subsidiary, their previous performance evaluations for these roles will be taken into consideration during the selection process.

In order to maintain the professionalism and experience of Board members, the Company uses the following means to build a database of director talent for reference in director succession planning:(1)seekssuitablecandidatesfromvariousfieldstoserveasCompanydirectors;(2) references independent talent pools;(3)appointscurrentdirectorsorappropriateexternalagenciesandconsultantstoproposesuitabledirector

candidates; and(4) references the results of the Board performance evaluations when considering the reappointment of

incumbent directors.

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● Responsibility:EnvironmentalsustainabilityClimate change is a tremendous global challenge. In line with its sustainable development policies,

CTBC Holding has built upon the foundations of energy efficiency, carbon reduction, resource management, and green buildings to expand its sustainability efforts further to include green services, green sourcing, and green consumption.

Indeed, environmental protection and energy conservation are at the core of the design of the Company’s headquarters, CTBC Financial Park, which boasts 29,752 square meters of park area and 264,463 square meters of gross floor area. Incorporating various environmental protection and energy-saving techniques, the complex is the largest financial institution building in Taiwan to receive a Diamond-grade Green Building label under Taiwan’s EEWH building certification system. At the end of 2019, CTBC Financial Park obtained LEED O+M v4.1 Platinum Certification and the LEED Dynamic Plaque, becoming Taiwan’s first recipient of either recognition.

In response to extreme weather patterns, the headquarters’ water facilities, fountains, and sprinkler equipment utilize rainwater reclamation and water-recycling technologies, while solar panels are installed to supply electricity for the financial park’s public spaces. Aligning with global conservation efforts, CTBC Holding has adopted carbon-footprint reduction measures, such as the purchasing of products that meet strict standards in environmental protection, energy efficiency, water conservation, and green construction. As a result, it has received the Outstanding Contribution to Green Purchasing by a Private Enterprise Award from Taipei City Government’s Department of Environmental Protection for 12 consecutive years.

CTBC Holding has a proud history of taking practical measures to realize its commitment to the planet. In 2012, it became one of the first Taiwanese financial institutions to sign on to the CDP. In the same year, the Company established an Environmental Sustainability Group, which holds management review meetings regularly to follow through with the implementation of environment-related policies. In 2018, CTBC Holding continued to grow the scope of its certification in the three major international certification standards of ISO 50001 (Energy Management System), ISO 14001 (Environmental Management System), and ISO 14064-1 (Quantification and Reporting of Greenhouse Gas Emissions and Removals). The following year, this expanded to cover 194 branches across Taiwan as well as all CTBC Holding subsidiaries.

The Company’s environmental measures have been honored with a 2020 CEM Award of Excellence in Energy Management at the U.N. Industrial Development Organization’s Energy Management Leadership Awards, making it the world’s first financial institute to receive the accolade. It also received an R.O.C. Enterprise Environmental Protection Award from Taiwan’s Environmental Protection Administration and became the first financial institution in Taiwan to obtain renewable energy certification from the Ministry of Economic Affairs.

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● Understanding:EmployeewelfareCTBC Holding firmly believes that its workforce is its most valuable asset. As such, it has for years

promoted a function-oriented talent strategy and has mapped out various professional and management training courses. In recent years, the Company has further integrated world-renowned leadership assessment tools to comprehensively review the leadership potential and qualities of management talent in various businesses and roles at all levels in order to elucidate the factors that motivate individuals to grow.

It also maintains talent development committees that examine the performance and potential of personnel at all levels, thereby facilitating the holistic discussion and planning of customized career development paths. The Company can accurately allocate resources to build a complete talent pool by providing employees with on-the-job training, project assignments, and rotations across different countries, businesses, and functions.

Moreover, the Company has cooperated with numerous leading international academic institutions to introduce top teachers and development resources and to provide global, diverse, and systematic development planning (e.g., courses, job rotations, project assignments, coaching feedback, and personal development). These measures are taken in order to enhance the strategic leadership structure, stimulate innovative thinking, and ensure that the Company has a steady stream of talent sufficient to maintain its leading position in the industry in response to the rapidly changing external operating environment.

CTBC Holding has always firmly believed that talented people are the key to an enterprise maintaining its competitive advantage. In addition to providing competitive remuneration, industry-leading benefits, education, training, and a fair promotions system, the Company also supports global human rights protections and basic rights through its Human Rights Policy and Human Rights Risk Assessment and Management Procedures.

The Company also understands the importance of providing a comfortable and friendly working environment. In doing so, it focuses on three aspects in particular: risk-based thinking, preventive health care, and a culture of safety. From 2018 to 2020, it passed ISO 45001 Occupational Safety and Health Management System certification, strengthening occupational safety management standards and overall performance. Moving forward, CTBC Holding will expand its corporate influence by working with suppliers and related enterprises to form an ecosystem that fosters occupational safety.

2) SustainableGrowth● Satisfaction:Customerservice

CTBC Holding also actively integrates CSR considerations into its own business practices and offerings. In 2017, for example, CTBC Bank launched the first qualified green bond in Taiwan, which was oversubscribed by investors. In 2018, it served as the financial adviser for the first cooperation between local banks and an offshore wind power developer, Copenhagen Infrastructure Partners of Denmark, while sparing no effort in supporting endeavors in green energy and environmental protection. And the Company again lent its support to domestic green energy development in 2019, participating in two offshore wind power financing projects and one solar power financing project. In the same year, the Company also signed the Equator Principles and became the 94th financial institution in the world to do

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so. In 2020, CTBC Bank became the first institution in Taiwan to issue a sustainability bond. Assured by a third-party institution, the bond had an issue size of NT$1 billion. In addition, the Bank is actively underwriting green and sustainability bonds domestically and overseas with a total amount of NT$7.2 billion.

CTBC Holding actively supports access to finance for all. Our Bank has ATMs in nearly all of Taiwan’s ubiquitous 7-Eleven locations. These stores, open 24 hours a day, often provide the only banking services available to communities in rural areas across Taiwan’s mountainous regions and offshore islands.

CTBC Bank also offers special branch office, ATM, and online banking services to ensure the access to finance of people with disabilities. Its branches feature barrier-free office space and ATM services, including a total of 6,400 barrier-free ATM’s and 161 ATMs tailored for users with impaired vision, which provided people with disabilities the most convenient financial services.

The Bank’s Home Bank app leads the industry in Taiwan with its use of responsive web design to make the app comfortably usable across all sizes and forms of mobile device. This ensures that all customers have access to the app’s myriad financial services, regardless of their device. In addition, to meet the financial needs of SMEs, an online SME financial service platform is provided, resulting in 6.6% annual growth in SME loans over the past three years. The Bank also provides life-changing microfinancing abroad through its overseas branches.

Taiwan Life is also actively offering insurance products that meet the needs of economically disadvantaged people and those from other disadvantaged or marginalized groups. By doing so, we hope to eventually ensure that everyone has access to affordable insurance, thus helping build a complete safety net for the public. For example, the design of Taiwan Life’s micro-insurance minimum coverage requirements and low premiums allow disadvantaged people to obtain basic protection; impaired life insurance provides individual medical protection for vulnerable groups; and small end-of-life insurance has low premiums, low threshold features, and a physical examination exemption that meets the basic insurance needs of older people.

In addition to the aforementioned financial initiatives, CTBC Bank and Taiwan Life have voluntarily adopted the U.N. Principles for Responsible Banking (PRB), Principles for Sustainable Insurance (PSI), and Principles for Responsible Investment (PRI) to facilitate sustainable development in the global financial sector. Taiwan Life published its first PRI and PSI reports in July and November 2020, respectively, both with external assurance. At the end of 2020, CTBC Holding’s Sustainable Finance Policy was approved by its Board of Directors. By focusing on “responding proactively and advocating for sustainable finance”, “creating positive SDG-related impacts”, and “integrating enterprise resources to expand business synergy”, the policy guides sustainable finance practices for CTBC Holding and its subsidiaries, aiming to continually explore business opportunities while creating significant environmental and social impacts.

In terms of digital finance, CTBC Holding is a pioneer in Taiwan. It has successively established blockchain and AI labs, a customer experience center, and a Data Intelligence R&D Division; recruited outstanding talent; and adopted a three-pronged strategy of digital transformation, digital innovation, and digital infrastructure while it continues to promote online and offline digital projects to provide customers

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with a consistent financial service experience across all channels. Due to the impact of the Covid-19 pandemic, more than 60% of customers have started using digital financial services or now use them more often. Regarding such services, CTBC Bank has long led its Taiwan counterparts by launch innovative, well-received services such as its Apple Business Chat financial service, AI-based voice command service, and Penny Piggy subscription-based investment service. It also partnered with Yuen Foong Yu Holdings to build the country’s first blockchain-based supply chain financial platform.

3) AConnectedSociety● Together:Communityengagement

“We are family” is more than a slogan—it is the spirit of the whole group’s brand, with CTBC Holding caring for its employees and customers in the way family members do each other. This care in turn spreads across the community and country, like ripples in a pond, as it continues to expand its efforts in five categories of charitable endeavors: charity, sports, anti-drug awareness, education, and arts and culture. CTBC Holding devotes its resources to creating virtuous cycles with the goal of encouraging public participation and contributing to a better world.

The Light Up a Life charity was established by CTBC Holding founder Jeffrey Koo Sr., who felt compelled to make a difference in the lives of disadvantaged children. Its launch in 1985 was also the starting point of CTBC Holding’s involvement in community engagement—an involvement that has persisted and grown stronger in the intervening 36 years. As the longest-running charitable activity of any private enterprises in Taiwan, Light Up a Life has become one of the most effective and most visible platforms for the public to help disadvantaged children. It has raised nearly NT$2.2billion in donations and helped more than 540,000 children by giving them a chance to escape poverty and realize their dreams.

Since 2005, the CTBC Charity Foundation has administered the Taiwan Dream Project, which provides educational and nutritional services for children in remote communities. The initiative, which has so far helped build 28 Taiwan Dream Project sites to provide children with a warm and loving second home.

Inspired by the microfinancing concept of Nobel Peace Prize winner Dr. Muhammad Yunus’s Grameen Bank, we introduced the first such initiative in Taiwan in 2011 with the CTBC Poverty Alleviation Program. It provides disadvantaged and marginalized families with the microloans and financial advice they need to meet their basic needs and beyond. Since its inception, the program has successfully funded the start-up businesses of 475 families and helped them escape poverty, with an accumulated amount of loans totaling NT$160 million.

In terms of overseas aid, the CTBC Charity Foundation embraces the philosophy that poverty can be overcome through education. As such, in China in 2013, it launched the Caring for China’s Next Generation on Campus program alongside the Caring for China’s Next Generation Working Committee and the Social Welfare Foundation for China’s Next Generation Fund. Priority has been given to underdeveloped, remote, and ethnic minority areas. A school has been selected as an educational demonstration site in each area, with funds provided to purchase teaching equipment. The project has been a concrete demonstration of cross-strait charitable and public welfare cooperation over the past eight

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years. As of publication, 51 pilot program sites had been set up, and over 60,000 underprivileged students now have access to more learning resources as a result. Learning and living conditions have been greatly improved in general, earning plaudits on both sides of the strait.

During events hosted by CTBC Holding as part of its long-term involvement with disadvantaged children and otherwise marginalized families, the blight of serious drug abuse continually reared its head. The Company saw first-hand the cause-and-effect relationships between drug abuse and other social issues. This spurred it to become involved in educating youngsters about the dangers of substance abuse, and it integrated human and material resources from across the CTBC Holding group to establish the CTBC Anti-Drug Educational Foundation in 2015. The foundation has had great success in highly effective awareness campaigns and in 2017 was recognized by Taiwan’s Cabinet as an exemplary anti-drug organization. Furthermore, in consideration of the global scale of the drug abuse problem, the foundation has partnered with the Ministry of Justice Investigation Bureau in Taiwan and the U.S. Drug Enforcement Administration Educational Foundation. Combining the experience and resources of the public sector and the U.S. anti-drug agency, the foundation has become an integral awareness platform for both the government and the private sector. It raises children’s awareness of the dangers of drugs in an engaging manner that breaks free of conventional, low-impact methods. For instance, it utilizes interactive 3D activities, interactive VR experiences, and drug-detection tools in one of its touring exhibitions, which to date has reached more than 600,000 people all around Taiwan.

We firmly believe that education provides people with opportunities to change their lives and is a priceless investment. In 2015, CTBC Holding made a donation to a struggling college and thus established CTBC Business School. The college, which helps both deserving and underprivileged students, offers grants and scholarships with diverse industry–academia cooperation to disadvantaged students who display outstanding academic performance. It has achieved a 100% student enrollment rate since its establishment, which the Ministry of Education lauded as a new model of corporate philanthropy in support for education. Since 2016, a Graduate School of Financial Management, Business and Economic Law, and Finance Technology has been established. We have also put down more roots in the educational sphere, founding CTBC International Academy in 2017 to provide a consistent, high-quality six-year middle school curriculum. In 2019, the first batch of graduates from CTBC Business School had a 100% employment rate and became an important talent pool for Taiwan’s finance industry.

Baseball is hailed as the national pastime of Taiwan, and long-term support is needed for it just as it is for education. CTBC Holding has become the first enterprise to invest in all five levels of the sport, from little league to the majors. In 2014, the Company began sponsoring the CTBC Brothers pro baseball team. That same year, to support the game at the grassroots level, it launched a sponsorship program for the little and junior leagues, giving the opportunity to play the sport to rural children who otherwise may not have been able to—despite them being among the country’s most passionate baseball fans. And, at the big league level, the Company began sponsoring the CTBC Cup Black Panther Flag High School Baseball Games in 2015. It also established a Taiwanese version of Japan’s famed Koshien Stadium in order to support and nurture talented high school players.

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In 2018, CTBC Bank evaluated the social return on investment of its sponsorship of the CTBC Brothers. The quantitative analysis, as certified by Social Value International, found that every NT$1 invested produced NT$17.59 in social value. This was not only the first social return on investment analysis ever conducted by Social Value International for a baseball team, but the return calculated was the highest it had ever certified for in the field of sports. CTBC Holding has also promoted the Reading × Baseball initiative. Since 2016, it has cooperated with the CTBC Brothers to organize the Home Run Readers project, which offers baseball tickets to incentivize reading. For these efforts, the Bank was recognized by the Ministry of Education in 2020, becoming the first in the financial industry to win a Reading Rock Award since the prize was introduced 12 years ago.

Elsewhere in sports, CTBC Bank has been nurturing a new generation of women golfers, supporting eight professional players and three amateur juniors—efforts for which we have received the Bronze Award in sports promotion. It also sponsors the CTBC Ladies Open, which attracted a crowd of more than 3,000 people as the first professional golf game open to the public since the emergence of the Covid-19 pandemic. The event was not only used to pay tribute to the sacrifices of medical personnel but also to promote Taiwan’s visibility.

The Company also has a proud history supporting Taiwan’s cultural and creative field, including by founding the CTBC Foundation for Arts and Culture. In its early years, the foundation focused on operating the Novel Hall performance arts venue. In 2015, it shifted to a new operating model with more emphasis on engagement with the wider community. Through efforts such as the CTBC Arts Festival, Love & Arts for Dreams Initiatives, Master Class Series, and CTBC Arts Award, along with support for independent music, the foundation has established a platform that is helping all members of the public engage with the arts. Of these programs, the Love & Arts for Dreams Initiatives Project has been especially effective in promoting rural art education. Through it, we work with art instructors to go into rural areas to broaden local students’ horizons, build their self-confidence, and encourage them to follow their dreams. The project was also the subject of the first ever social return on investment (SROI) evaluation in the field of arts and culture in Taiwan, which found that every NT$1 invested yielded an SROI of NT$4.18. In addition, this innovation collaboration among industry, government, and academia has received 20 domestic and foreign awards.

With a reputation built on the hard work of the diverse programs mentioned above, CTBC Holding rightfully views its brand value as its most important intangible asset. Indeed, in the 2020 Best Taiwan Global Brands survey conducted jointly by the Ministry of Economic Affairs’ Industrial Development Bureau and brand consultancy Interbrand, CTBC Holding was ranked as the most valuable brand in Taiwan’s financial sector for the fifth consecutive time and ranked sixth among the top 25 international brands in Taiwan, with a brand value of US$549 million. Also last year, CTBC Bank ranked 155th in British magazine The Banker’s Top World 1000 Banks, leading all other Taiwanese banks for the fourth consecutive year.

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Moving forward, CTBC Holding will continue to give ESG-related issues high priority in its decision- making and planning. It will further expand its capacity for sustainably minded corporate operations—and it will do so by upholding its “We are family” brand spirit, “protect and build” corporate mission, and “caring, professional, and trustworthy” brand values. It does this in order to create value for its customers, employees, shareholders, suppliers, and community, working to cement its status as the most trusted financial service institution in the minds of customers and shareholders alike.

5.5.2 Ethical conductCTBC Holding does its best to fulfill the responsibility that comes with its corporate citizenship. It has formu-

lated a Code of Ethical Conduct, which includes a nine-part framework comprising the avoidance of conflicts of interest, improper personal gain, and unethical conduct; confidentiality obligations; fair competition; protection and appropriate use of Company assets; compliance with laws and regulations; encouraging the reporting of ille-gal or unethical activities; and disciplinary measures. It functions jointly with related policies such as the Code of Conduct, Corporate Governance Best Practice Principles, and Ethical Corporate Management Best Practice Prin-ciples. These rules require all directors, managers, and employees to self-regulate, and directors and senior man-agement are required to issue a business integrity compliance statement. Moreover, training on business integrity is conducted every year to avoid any improper behavior that may harm the Company’s reputation. Personnel who violate any of the above regulations will face disciplinary action according to relevant Company measures.

5.6 Number of full-time non-managerial employees, their average and median salary, and the difference from the previous year

Item 2019 2020 Difference

Number of full-time non-managerial employees (annual average) 12,272 12,528 2.09%

Averagesalaryoffull-timenon-managerialemployees(NT$thousand) 1,438 1,437 -0.07%

Mediansalaryoffull-timenon-managerialemployees(NT$thousand) 1,154 1,165 0.95%Note 1: The scope of “managerial employees” is as follows, as defined by the competent authority in letter No. Tai-Tsai-Zheng-San- Zi-

920001301, dated March 27, 2003: general managers and other executives with equivalent job positions; vice presidents and other executives with equivalent positions; AVPs and other executives with equivalent positions; the head of the finance department; the head of the accounting department; and authorized signatories of the Company and other employees who manage the Company’s business.

Note 2: The scope of “full-time employees” is as follows, as defined in the Employee Salary Survey of the Taiwan Cabinet’s Directorate General of Budget, Accounting and Statistics: employees whose work hours reach the Company-specific minimum or statutory hours or, where minimum hours are not specified, employees whose average weekly work hours exceed 35 hours (including local and foreign nationals).

Note 3: Employee salary is recognized on an accrual basis in the current year, including regular earnings (salary and fixed allowances and bonuses paid monthly), overtime pay (whether taxable or nontaxable), and irregular earnings (allowances, bonuses, and employee compensation not paid monthly) but excluding termination benefits.

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5.7 IT facilities

5.7.1 CTBC HoldingWe plan and deploy information technology to optimize our investment efficiency by supporting business de-

velopment, reducing operating costs, and managing operational risks.To strengthen CTBC Holding’s information governance, the Board of Directors has approved the Guidelines

for the Management of Information Services and the Application System Resource Sharing Specifications, with which CTBC Holding and its subsidiaries must comply. In addition, the Board of Directors has established the Information Management Committee to enhance subsidiaries’ information governance and service sharing, opti-mize resource utilization efficiency, and maximize governance-related synergies.

In line with our overall information strategy, we constantly pursue system modernization, cloud-based appli-cation systems, and agile development in order to continually strengthen our information capabilities. We also continually promote digital innovation mechanisms to foster a culture of innovation across the CTBC Holding group.

5.7.2 CTBC BankCTBC Bank’s key information systems include trading systems that support banking products and services

such as deposits, loans, foreign exchange, credit cards, corporate financing, e-commerce, and payment transac-tions. The Bank’s hardware includes IBM mainframes and midrange Unix, small Windows, and VMware virtual servers. The hardware’s system configuration is optimized and meets service-level requirements. Maintenance contracts have been signed with the hardware and software suppliers to ensure compliance with business service standards.

Major IT projects in 2020 were as follows:1) Businesssupport

Business development support: CTBC Bank continued to develop and optimize its digital platforms and services and promote the application of emerging technologies and artificial intelligence in financial services. It strengthened its omni-channel integrated technology infrastructure to provide customers with a more consistent service experience. The Bank also actively expanded the application of cloud services in order to foster an agile management culture while initiating a core modernization project. In addition, the Bank integrated its platforms to enhance system efficiency while promoting the expansion and standardization of overseas information governance in support of stable business growth.

2) InformationsecurityCTBC Bank continued to enhance its information security governance, including reporting annually to the Bank’s Board of Directors on the effectiveness of information security management. The Bank has obtained two international standard certifications, namely ISO 27001, for information security management, and BS 10012, for personal information management. It has also introduced an international information security maturity assessment methodology to further strengthen its information security management. In addition to long maintaining an information security incident analysis mechanism and related contingency solutions. In recent years, the Bank has also deployed a new generation of smart analysis cybersecurity monitoring

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mechanisms in both its internal and external networks. This measure removes the blind spots of traditional cybersecurity systems to strengthen the Bank’s overall cyber protection capabilities. Furthermore, a team of international white-hat hackers was hired to perform live cyber offense/defense drills to verify the effectiveness of in-depth cyber defense measures. Moreover, the successive deployment of unconventional threat detection mechanisms was implemented to help ensure the timely detection of and response to abnormal network and user behavior.

3) EmergencymeasuresAs part of its efforts to ensure business continuity, CTBC Bank regularly practiced disaster recovery measures in order to verify the completeness and feasibility of its backup plans.The following improvements will be implemented in 2021:CTBC Bank, in the spirit of continuous improvement, will actively invest in the research and development of innovative digital financial technologies and use emerging technologies to develop comprehensive and diverse financial services. It will actively promote core system modernization and implement core system transformation while cultivating a core digital culture of agile development and continuing to improve its application infrastructure. It will also expand its anti-money laundering mechanisms and develop a culture of cybersecurity awareness to enhance CTBC Bank’s operational efficiency and service quality in order to protect the rights and interests of its customers and shareholders.

5.7.3 Taiwan LifeTaiwan Life’s main information application systems include core insurance, policy imaging, customer service

(policyholder service, online insuring service, and travel insurance), sales channel (iKASH intelligent assistant, mobile insurance app, and mobile security app), real estate, investment, Taiwan Life Brain (Enterprise Data Warehouse, robotic process automation, APIM) systems. The main server hardware consists of IBM RS/6000, IBM AS/400, and virtual host (VMware) servers. In addition, based on its system configuration and system ser-vice levels, maintenance contracts have been signed with software and hardware vendors to maintain profession-al service standards.

Major IT projects in 2020 were as follows:1) Firstmilestoneofnewcoresystem

The new core system project reached its first milestone with the transfer of CAS policies to VLife. In addition, implementation began for business process integration and optimization, as did the introduction of new policy functions into the new core system. Taiwan Life’s mid- to long-term goal is to migrate the LSP/Vlife core system data in stages and gradually integrate it into a single core system to enhance operational efficiency.

2) The Enterprise Data Warehouse went live in April, integrating the data of multiple core systems. After integration, the data warehouse now provides a one-stop policy consultation service as well as the information required for policy health-check service improvements.

3) InfrastructurestrengtheningTaiwan Life continued to retire outdated hardware and implement end-of-service software upgrades to enhance server and system performance.

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4) InsurancefinancedigitizationIn 2020, Taiwan Life launched several system services including an official LINE account and Convenience Claims, a one-stop claims application service accessible through the ibon interactive kiosks found in 7-Eleven convenience stores nationwide. Such measures promote Taiwan Life’s digital financial services, providing policyholders with more immediate and convenient quality services.

5) TechregulationcomplianceTaiwan Life renewed its ISO 27001 Information Security Management and BS 10012 Personal Information Management System certifications. To ensure operational effectiveness and the management of personal information safety, Taiwan Life organized regular seminars on information security and personal data management. A monitoring mechanism was also introduced to enhance awareness of personal information protection management.

6) InformationsecurityimplementationThe company conducted its annual information security health check, training, and personal information inventory; strengthened the information security of its PCs; conducted off-site redundancy drills; and implemented the second phase of its website anti-tampering mechanisms.

Planned projects for 2021:1) Systemunification

Taiwan Life will integrate its core and peripheral insurance systems to enhance resource utilization frequency and system service stability in order to minimize repetitive operations.

2) InfrastructureoptimizationandconsolidationTaiwan Life will introduce a new generation of backup mechanisms to improve backup efficiency by increasing the backup file compression ratio and shortening backup time. It will also establish a new generation of hyperconverged server infrastructure to provide the best platform expansion mechanism while reducing electricity usage and space in the server room, in turn lowering the risk of equipment malfunction and service interruption. Moreover, the company will optimize its network framework and monitoring mechanisms to increase network bandwidth and strengthen the security of network transmissions.

3) DigitalizationandbusinessdevelopmentThe company will promote the integration of innovative digital application functions. Examples include TeamWalk, a group insurance health management service platform that provides daily health management functions (steps walked daily, calories burned, and sleep data) to the company’s group insurance customers to enhance their customer experience and overall satisfaction. Another is the Group Advisory System, which helps policyholders verify and monitor their investment portfolios, effectively serving people with less disposable income and expanding the scale of investment-oriented policy investors.

4) ApplyinginsurtechframeworktoimprovebusinessprocessestransformationTaiwan Life’s Automatic Claim Processor will utilize insurtech to accelerate the processing of claims, thus raising the overall level of customer satisfaction. Furthermore, the DMP project will optimize the user experience of policyholders, thereby reducing the labor requirements for customer service and increasing new business opportunities. The text-based chatbot will enhance the customer service experience and customer satisfaction while the smart customer service system (a call-recording service for older customers) will

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implement online quality inspections, examining recorded audio files in real time to reduce the failure rate of customer and sales personal sound recordings. Meanwhile, the ecosystem project will establish a health management service platform through collaboration with a third-party platform. User health data will be shared to utilize omni-channel contexts, facilitate innovative product development, and serve as a reference for underwriting claims. The AI health risk score project, with the consent of policyholders, will recommend suitable products after obtaining their health risk score from their health statement.

5) ContinuousITgovernanceTaiwan Life will continue to maintain its ISO 27001 Information Security Management and BS 10012 Personal Information Management System certifications to ensure the safety of its operations and personal information processing. In addition, it will synchronize with CTBC Bank to strengthen the structure and development of its information governance.

6) InformationsecurityupgradeTaiwan Life will continue to perform annual information security check-ups, system weakness repair and management, and information security education and training. It also plans to build a security operations center to carry out the Company’s information security offense/defense drills, ensuring the effectiveness of its cybersecurity defense measures.

5.7.4 CTBC SecuritiesCTBC Securities’ key information application systems include trading and real-time market data access sys-

tems, which are for securities brokerages; domestic and foreign proprietary securities trading, bonds, and futures brokerages; sub-brokerages; futures brokerages; and electronic ordering, including 412 voice-ordering functions, the CTBC Dianfuwang App, the CTBC Spark App, an application for PCs (Zhifuwang), and a web portal. Also included are the CTBC eOpenAccount app for online account opening and risk disclosure statement signing, the CTBC Lijitong app for over-the-counter account opening, and office automation systems for administrative oper-ations.

The subsidiary’s hardware mainly consists of IBM AS/400 systems as well as midrange UNIX, small-size Windows, and virtual VMware servers. Major hardware suppliers include Dimerco Express Corp.; SysJust Co., Ltd.; Mitake Information Co., Ltd.; Systex Corp.; Syspower Co., Ltd.; Chunghwa Telecom Co., Ltd.; EasyUse Digital Technology Co., Ltd.; Chain Sea Information Integration Co., Ltd.; and IBM Corp.

Major IT projects in 2020 were as follows:1) Businesssupport

An Astar Printerlink automated/fax system was established, the automatic advance collection function was optimized, the encoding format was adjusted to follow Taiwan Depository & Clearing Corp. specifications, ETF investment consignments were systematized, measures were adopted in response to the Taiwan Securities Association’s amendment to include a list of suspicious behaviors in money laundering detection/prevention, Factor Ⅸ was added for iAccounts, new functions of the venture capital accounting system were added, the DSU bond system was established, intraday odd lot trading functions were established, a proprietary system was established for offshore debts with a debt maturity length of a fraction of a year, new business functions of the Taiwan Securities Association/Taiwan Stock Exchange/Taiwan Futures Exchange

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were added, the reporting system for Common Reporting Standards and Foreign Account Tax Compliance Act compliance was optimized, private financing account lending operations were set up, securities trade-by-trade transactions were integrated, a securities lending business system for securities firms was established, proprietary internal pricing orders were systematized, financial data convergence was integrated, a principal-guaranteed commodities system was established, an emerging stock market automated price-quoting system was established, new CTBC Spark app functions were added (i.e., sub-brokerage transactions/accounting/quotations, bond accounting, and the password section), new CTBC eOpenAccount app functions were added (i.e., account opening for unrestricted lending and geofence), the bank settlement account API interface (CTBC Bank) was updated, Hold Profit Nest (Holdliwo) membership marketing campaign was held, A Toast to Oneself marketing campaign was held, the CTBC Lijitong account-opening app was launched, the new half-year mechanism of Taiwan Futures Exchange was adjusted, the official website was updated, a sub-brokerage for quantity-based systematic investment plans was added, an electronic direct marketing newsletter was introduced, a new version of the co-marketing agreement sign-off function was added, the Dianfuwang App login control mechanism was updated, annual marketing campaigns were held, and OUS bond sub-brokerage inquiry functions were added.

2) OperationalefficiencyThe four-in-one router equipment for the Taiwan Stock Exchange, Taiwan Futures Exchange, Taipei Exchange, and Taiwan Depository & Clearing Corp. was replaced, the real-time market quotation system for intraday odd-lot trading disclosure was added, account opening via iPad planning and setup was added, a high-availability VMware system was set up, the outdated telephone recording system was replaced, the Nangang UPS room switchboard operations were improved, the performance of and bandwidth for electronic transactions were improved, independent and centralized backup was added for general and managed networks, anti-money laundering operations were optimized, online operations were optimized (changed from batch to real-time), process planning of programming changes was conducted, robotic process automation was introduced, paperless operational processes were adopted, the UI/UX of online investment adviser account-opening and periodic review of mid- to high-risk investments were optimized, the Dianfuwang App login control mechanism was updated, the CTBC Spark App advertisement placement function was optimized, QR codes were integrated into online account opening, the dual ISP redundancy of electronic transaction data lines was updated, the online account-opening process was optimized, and the system for customer phone-in orders (salespersons/corporates) was optimized.

3) InformationsecurityRecertification in ISO/IEC 27001 by Information Security Management Systems was completed, regular internal/external reviews were conducted, cybersecurity policy reviews and external advocacy operations were performed, (black-box) penetration testing and application system vulnerability strengthening were conducted (vulnerability scans), outdated firewall versions were upgraded and replaced (security maintenance), a virtual jump server mechanism was established, privilege access control was updated (identity and access management), system configurations were audited, shared-directory control was introduced, enterprise instant message software (M+ app) was introduced, Win10 PCs were upgraded (security maintenance), Win2008EOS was upgraded (security maintenance), NAS storage devices were introduced for

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the long-term storage of a large amount of log data archives, (weekly) personal computer anti-virus scans and improvements were made, (twice-a-year) network system vulnerability scans and enhancements were made, (monthly) updates the of HotFix system server were made (security maintenance), (twice-a-year) periodic verification of transaction codes and privilege levels was conducted (identity and access management), the length of passwords for the electronic trading platform was adjusted to 8–10 characters, mobile device IDs (UDIDs) were added for customer transaction messages, certification by the Mobile Application Security Alliance was received for various apps (i.e., CTBC Spark, Dianfuwang, CTBC eOpenAccount, and CTBC Lijitong), and a customer name fuzzy-matching system for anti-money laundering was added.Furthermore, to protect investors’ rights and interests and guarantee good business continuity management, CTBC Securities established remote backup data centers for transactions, thereby ensuring uninterrupted information security protection and management through the simultaneous operation of data centers in different locations. CTBC Securities also cooperates with stock and futures exchanges to conduct full-market, full-scale backup operations every six months. It also participates in the random backup drills that CTBC Holding holds to ensure data center backup availability and completeness.

The following projects will be implemented in 2021:1) Businesssupport

Branch offices (e.g., those in Yongkang and Hsinchu) will be remodeled, the server co-location room at the Chunghwa Telecom Integrated Data Center will be planned, the consolidation function of quantity-based systematic investment will be planned, the securities lending business of securities firms will be optimized, securities, futures and sub-brokerage reconciliation statements will be integrated, new business functions for the securities association, stock exchange, and futures exchange will be added, the automatic quotation system for the emerging stock market will be optimized, brokerage business and co-marketing customer relationship management will be established, financial holding data convergence will be conducted, the CTBC Spark App will be updated (smart ordering system, self-directed financial management function, bond trading), the CTBC Lijitong app will be updated (account opening process integration for a single sub-brokerage account and multi accounts), an app will be launched for account opening at the Hong Kong branch, a FamilyMart marketing campaign will be held, online single-purpose sub-brokerages and electronic transactions will be launched, an investment advisory review will be conducted, annual marketing campaigns will be held, a system for customer phone-in orders for sub-brokerages will be established, a bond sub-brokerage middle office will be established, and self-directed financial management transactions will be launched (Web).

2) OperationalefficiencyHyperconverged virtual servers will be introduced to enhance the high availability of the trading system, a dual-router fault-tolerant mechanism will be established between the servers and network equipment, the co-location of servers at the Taiwan Stock Exchange will be assessed, the cloud-based application service will be assessed, the intrusion-detection system will be upgraded to enhance performance and stability, self-maintenance procedures will be established for network equipment layer 3 switches and below, integrated centralized backup will be established for virtual servers, NAS storage equipment integration will be performed, securities S-trade overall risk controls will be established, a bond sub-brokerage function will be established, the equity sub-brokerage function will be enhanced, the process for unrestricted t+5 day lending

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will be improved, classification changes will be optimized, the reporting system for Common Reporting Standards and Foreign Account Tax Compliance Act compliance will be optimized, investment adviser account opening and periodic reviews will be optimized, paper contracts will be digitized, the process for programming changes will be planned, SDK will be optimized for OCR ID recognition, the new personal IDs issued by the Ministry of the Interior will be recognized and integrated, the speed of the electronic transaction data line will be upgraded, Google Map address input will be integrated, a mechanism for event notification through SMS, email, and app will be added, electronic transaction/accounting database storage equipment will be expanded, and the Win168 WEB platform will be updated/rebuilt.

3) InformationsecurityAnti-virus software will be introduced to the Linux platform to protect again virus intrusion threats (anti-virus), firewall versions will be upgraded and replaced (security maintenance), new Edge browser compatibility will be verified and tested, APT sandbox scanning efficiency will be optimized, multi-factor verification will be introduced in compliance with external regulations, VPN connections through a virtual jump server will be added, BI data analytical tools will be introduced, web isolation will be established (Menlo), DLP market products will be reassessed, emergency envelops for privileged accounts will be digitalized (identity and access management), (Weekly) PC anti-virus scans and improvements will be made, (twice-a-year) network system vulnerability scans and enhancements will be made, (monthly) the HotFix system server will be updated (security maintenance), (twice-a-year) periodic verification of transaction codes and privilege levels will be conducted (identity and access management), mobile app penetration testing will be implemented (TAF certification), subsidiary data will be uploaded for comparison in the customer name fuzzy-matching system for anti-money laundering, and (black box) penetration testing of application system vulnerability will be enhanced (vulnerability scans). In addition, CTBC Security will strengthen its personal data security protection and the stability of its trading systems, as well as its network and information security protection architecture. It will also compare fixed-line network operators, reduce operating costs, spread operational risks, and make timely adjustments to ensure that investors’ transactions are secure and efficient and that their rights and interests are protected.

5.7.5. CTBC InvestmentsThe main information system of CTBC Investments is its asset management (fund accounting) system, which

handles fund and discretionary investment decisions, investment risk control, investment regulations and internal regulation inspections, investment transactions, and net worth settlement processes. In addition, the subsidiary maintains a fund affairs (stock affairs) system, which mainly deals with transaction processing, such as for pur-chases, buybacks and regular quotas of fund investors as well as customer service functions.

Major IT projects in 2020 were as follows:1) Management

CTBC Investments cooperated with the competent authorities to revise its information security management policies, internal control system, and one management criterion, reinforcing its management in response to technological changes.

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2) Legalcomplianceandinformationsecurity(1)CTBCInvestmentscontinuedtostrengthenitsinformationsecuritymanagement(i.e.,completedexternal

penetration testingand internalvulnerability scanningandprogramblack-and-whiteboxscanning,promotedagradingsystemforinformationsecurity,andcontinuedtooptimizefirewall,internetcontrol,data leakage prevention, and USB use control rules, IoT management). Furthermore, DDoS defense management and F-ISAC cybersecurity information sharing procedures were implemented.

(2) The company completed its annual training on information security management, personal information leakage, cybersecurity, and redundancy drills.

(3)Itsapplicationfirewall(WAF)wascompletedanditsinternalnetworkconnectioncontrolsystem(SIP)went live.

3) Infrastructure(1) The subsidiary continued EOS system upgrades from Windows 7 and Windows 2008R2 to Windows10

and Windows2016.(2) Information infrastructure at the CTBC Investments branch in Taichung was completed.(3)InlightoftheCOVID-19pandemic,supportwasestablishedforemployeestoworkfromasecondoffice

and from home.4) Applicationsystems

(1)Thecompanyinitiatedtheintroductionanddevelopmentofthefirstphaseofanonlinesign-offsystem,and completed 23 items of electronic process forms.

(2)Systemspecificationswereprovidedandfilesweremigratedinlinewiththecompany’snewcoresystem.(3) An online ETF fund sales platform was launched.(4) The H2O fund side-pocket mechanism was launched.(5)Thecompany’saccountingbeneficiaryvouchertransactionaccountingsystemwaslaunched.(6) An AI stock-selection module was developed.

The following improvements will be implemented in 2021:1) Management

In response to technological changes, CTBC Investments will revise relevant policies regarding information security and the management of personal information, as well as those regarding internal control systems and corresponding supporting standards.2) Legalcomplianceandsecurity

(1) It will implement web isolation (using Menlo Security software) to reduce the chance of company employees being targeted by malicious web-borne viruses.

(2) It will establish an endpoint detection and response system, enabling the company’s cybersecurity management to use AI to more quickly detect irregular behavior.

(3) It will strengthen work-from-home cybersecurity by providing employees with corporate laptops, which may only connect with the company through a VPN, and by strengthening the phone recording mechanism.

(4) An electronic mail archiving mechanism (Mail Archive) will be established to maintain complete email records of correspondence between the company and other parties, thereby strengthening data security and reducing data leaks.

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3) Infrastructure(1) Hyperconverged infrastructure will be introduced to enhance the company’s server redundancy and

resourcedeploymentflexibility.(2)Mobileofficeinfrastructurewillbeintroducedthroughoutthecompany.

4) Applicationsystems(1)Thecompanywillintroduceanewgenerationofcoresystemtoenhancetheefficiencyandflexibilityof

investment decision-making, risk management, fund transactions, and fund-accounting procedures.(2) Robot process automation will be introduced to process systems requiring a large amount of labor.(3) AI-based stock selection mechanisms will continue to be developed to assist the company’s fund

investment decision-making.(4) The company will develop systems for newly added investment transactions, accounting modules, and

risk control regulations according to its product offerings in 2021.

5.7.6. Taiwan LotteryTaiwan Lottery’s key information systems include a system for processing lottery transactions, a lottery opera-

tion and management system that supports business analysis, and an administrative system for office automation. Its hardware includes midrange Unix servers, small Windows servers, PCs, and terminals for processing lottery transactions. Taiwan Lottery’s key system and maintenance vendors include Chunghwa Telecom; FarEasTone Telecommunications Co., Ltd.; IBM; Cisco Systems, Inc.; Microsoft Corp.; Oracle Corp.; Sysage Technology Co., Ltd.; Wen Wei Technology Co., Ltd.; HPI Corp.; Sampo Inc.; and LotRich Information Co., Ltd.

In addition to conducting regular software and hardware availability monitoring with its partners, Taiwan Lottery has signed contracts to ensure that its vendors provide comprehensive maintenance and support services. Furthermore, to ensure and strengthen the security and stability of its information systems, Taiwan Lottery has not only applied an incremental backup mechanism to its critical systems but also established a remote backup environment of the same scale for these systems in order to facilitate disaster recovery. It also conducts annual field tests to ensure the feasibility and effectiveness of such measures.

This year, the company purchased a 30TB SSD and transferred onto it the database on the traditional SATA hard drive. Doing so significantly improved overall system performance, with lottery redemption and report gen-eration processes now three to six times faster. The system continued to operate without interruption during the data transference process, and service was provided continuously. This rigorous real-time service represents the best demonstration of the system’s accuracy, stability, and operational flexibility.

5.8 Labor relations

5.8.1 Employee benefits, retirement programs, and their related implementation status, labor agreements, and employee rights protection measures

1) EmployeebenefitsCTBC Holding considers “We are family” more than a slogan. As part of its efforts to have employees feel the Company’s brand spirit in a tangible manner, CTBC Holding and its subsidiaries have two core benefit systems in place, namely core benefits and flexible benefits, as well as other measures intended to help employees achieve a healthy work–life balance.

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(1)Corebenefits:Inadditiontoprovidinglaborandhealthinsuranceforitsemployeesasrequiredbylaw,theCompanyaddressesotherkeyneedsforthembyproviding,amongotherbenefits,groupinsurance,marriage and funeral subsidies for family dependents, childbirth allowances, hospitalization subsidies for family dependents, and children’s education subsidies; it also organizes various events such as arts and sports activities, year-end banquets, and team dinners, and offers subsidies for department trips. Furthermore, the Company gives generous bonuses to employees on three of Taiwan’s most important holidays, namely Lunar New Year, Dragon Boat Festival, and Mid-Autumn Festival. It also shows it cares by providing employees annual rewards points on their birthday together with a greeting card from the Chairman. The Company also offers consolation funds and interest-free loans to employees who encounter a severe adversity.

(2)Flexiblebenefits:Continuing its legacyasapioneer inTaiwan’sbanking industry, theCompanyimplementedaflexiblebenefitssystemforfull-timeemployeesonJuly1,2003.Itextendsbeyondthescope of traditional benefits by taking the form of a points-based system, in which employees receive pointseveryyear.Byloggingontoadigitalplatform,employeescanexchangetheirpointsforproductsand services such as food, clothing, housing, travel, education, and entertainment. This approach means employeescanenjoybenefitsthataremorediverseandthatmorecloselymatchtheirwantsandneeds.

(3) Comprehensive group insurance: Comprehensive group insurance covers nine types of insurance: life insurance (including critical illness insurance), accident insurance, outpatient medical care for accidents, field accident insurance, income compensation insurance, hospitalization insurance, hospitalization insurance for spouses and children, hospitalization allowance for parents, and cancer medical insurance for employees, spouses, and children. Of these, the hospitalization allowance for parents has received the greatest accolades from employees.

(4) Group annuity insurance: To provide its employees with high-quality investment channels and help them prepare for retirement, the Company offers a group annuity insurance program, Monthly Savings for Yearly Prosperity, as a tool to grow their pensions.

(5) Discounted home loans: CTBC Holding’s management has a sincere hope that every employee can own theirownhomeandexperiencethewarmththatthisbrings.TheCompanythereforeoffersadiscountedhome loan policy for employees, with different loan parameters for different employee ranks.

(6) Employee assistance program: The Company recognizes the importance of a healthy mind–body balance. As such, it maintains a long-term partnership with the Taiwan Institute of Psychotherapy in order to provide employees with professional consultation and assistance through eight free psychological consultations every year. The Company also provides psychological wellness care through its Mind Rest Monthly internal e-newsletter, which shares ways to relieve workplace and home-life stress along with methodsofself-reflection.

2) RetirementsystemCTBC Holding and its subsidiaries’ retirement benefits for Taiwan-based employees comprise the following:(1) Retirement program based on the Labor Standards Act: Every month, the Company allocates pension

funds based on employee wages and deposits them in a special pension fund corporate account opened with the Bank of Taiwan.

(2) Labor pension regulations: Every month, the Company allocates 6% of employees’ salaries and deposits it in their individual Bureau of Labor Insurance pension accounts. For employees who voluntarily contribute

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additional funds to their pensions, the Company deducts a proportion of their monthly wages, as selected by the employee, and deposits it in their individual Bureau of Labor Insurance pension accounts.

3) Laboragreementsandemployeerightsprotectionmeasures:CTBC Holding and its subsidiaries provide diverse labor communication channels to coordinate labor relations and facilitate employee–employer cooperation:(1) Regular labor–management meeting in accordance with regulations: Labor–management meetings

comprise representatives from both sides. Management representatives are personnel who are familiar with business operations and labor affairs designated by the Company. Labor representatives are elected by the employees; when employees of a gender make up more than half of all employees, representatives of that gender shall constitute at least one-third of all representatives. Where a company has an enterprise union, such as Taiwan Life, the union shall handle the election of employee representatives in accordance with the law. Labor rights protected by the Labor Standards Act, such as overtime and female employees’ night shifts, are clearly stipulated in the work rules and publicly announced after being approved by the resolutions of the labor–management meetings.

(2) Regular surveys to solicit employees’ opinions: CTBC Holding attaches great importance to communication and interaction with its employees. As well as holding labor–management meetings to discuss matters involving employee rights and interests, it organizes regular motivational meetings and issues People and Events Monthly, an internal staff-centric newsletter. In addition, the Company’s HR unit circulates Employee Satisfaction Surveys and Organizational Climate Surveys to proactively identify and track employees’ needs.

(3) Strengthened communication mechanisms: CTBC Holding seeks to strengthen employees’ organizational commitment and cohesion by establishing clear channels of two-way communication, namely a staff mailboxandphone line.TheEmployeeHotlinewas introducedspecifically forstaff toshare theirfeedback directly and immediately so that the Company can help them resolve the problems promptly.

(4) Collective agreements: On Dec. 18, 2017, Taiwan Life completed a labor consultation with its enterprise union and signed a collective agreement.

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5.8.2 Labor disputes and estimated losses in 2020 through the publication date1) LaborStandardsActviolationsbyCTBCHoldinganditssubsidiariesidentifiedbylaborinspectionsin

2020 through the publication date:

Company Disciplinary action date Disciplinary letter Statutory

article violatedArticle contents

violated Fine Response measures

Taiwan Life Sept. 29, 2020 Letter No. Nan-shi-lao-an-zi-di-1091180376

Article 22 (2) of the Labor Standards Act

Failure to directly pay wages in full

A total fineofNT$60,000

Taiwan Life has paid thefineandfiledanadministrative appeal to clarify issues relating to the application of the law.

Oct. 27, 2020 Letter No. Fu-shou-lao-dong-zi-di-1090260643

Nov. 4, 2020 Letter No. Fu-lao-jian-zi-1090258460

Dec. 30, 2020 Letter No. Fu-shou-lao-dong-zi-di-1090320584

Article 27 of the Labor Standards Act

Failure to pay wages on schedule, thus ordered by the competent authority to pay within the prescribed period.

NT$20,000

CTBC Bank Oct. 27, 2020 Letter No. Bei-shi-lao-dong-zi-di-10960674582

Articles 24 (1) and 32 (2) of the Labor Standards Act

Failure to pay overtime wages and violation of working time regulations

NT$120,000 The violation occurred as CTBC Bank was preparing to support the government's pandemic relief loan policy. The Bank has paid thefineandhasproperlyrevised the use of human resource and developed an appropriate online application mechanism. The relevant operating procedures have also been refinedsufficientlytosupport high demand as quickly as possible.

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(2)Labordisputesandestimatedlossesin2020throughthepublicationdate.

Company Status of labor disputes Incurredlossamount/Estimatedpayoutamount(excludinginterest) Response measures

Taiwan Life Two disputes over the payment of partial work hours

0 Both cases closed due to a settlement between both parties

Two disputes over the payment of pension balance

The total requested amount is NT$1,856,515

Subject to a court judgment or negotiation results

Adisputeovertheconfirmationoftheexistenceofanemploymentrelationship



CTBC Bank A dispute over overtime pay The total requested amount is NT$450,000


Fourdisputesovertheconfirmationoftheexistenceofanemploymentrelationship



A dispute over damage compensation The total requested amount is NT$432,000


Three disputes over the payment of pension balance



5.8.3 For the employee Code of Conduct and the Procedures for Ethical Management and Guidelines for Conduct, please refer to the Company’s website: http://ir.ctbcholding.com/c/gov_other.php#c5

5.8.4 Work environment and personal safety protectionCTBC Holding has established occupational health and safety management procedures to improve its work environment and the personal safety of its employees. Specifically, the Company requires that all of its subsidiaries perform the following in accordance with all relevant laws and regulations:1) Protect our employees’ health by providing nursing staff, a clinic, and a breastfeeding room.2) Arrange for the measurement of workplace CO2 concentrations and lighting levels.3) Arrange orientation and regular follow-up training for occupational health and safety personnel, first-aid

practitioners,andfirepreventionstaff.4) Arrange for physicians to perform on-site health services, manage individual cases requiring different levels

of care, and provide health-related seminars for employees.5) Arrange three hours of general on-job health and safety education and training once every three years.6) Arrangeemployeegeneralhealthexaminations.7) Provide occupational accident reports on a monthly basis.8) Take out accident liability insurance and construction all-risk insurance for employees engaged in renovation

work,withmaximumcompensationforeachpersonal injuryordeathofNT$8million.Themaximumcompensationforasingleaccident isNT$20million,and thehighestcompensationamountduringaninsurancetermisNT$100million.

9) CTBCBankobtainedISO45001OccupationalHealthandSafetyManagementSystemscertificationinMay2018, further demonstrating the value CTBC Holding places on creating a safe and healthy work environment and on realizing this commitment.

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5.9 Material contracts As of April 13, 2021

Contract Party Start and end dates Main content RestrictionsSurface rights agreement Taiwan Fertilizer Co., Ltd. The contract was signed on May

16, 2006, with the surface rightsexistingfromJune12,2006,toJune 11, 2056.

CTBC Bank signed this contract to secure the surface rights for 50 years to the land in Nangang owned by Taiwan Fertilizer Co., Ltd. The land comprises lots 45, 45-1, 43, and 43-1 of the Jingmao section of Nangang District, Taipei City, with a total area of 9,284 ping.

The land may not be rented or lent to other parties for construction purposes.The surface rights to the land and the right to make improvements to buildings on the land may not betransferred to a thirdparty.

Master construction contract for CTBC Bank’s new headquarters

Party B: RSEA Engineering Corp.

The contract is valid from June 25, 2010, to the completion of the headquarters’ construction, the completion of its warranty term, and the day when all issues are resolved and there are no remaining items in dispute. (The project was completed and accepted on Aug. 25, 2016, and has entered into the construction warranty period.)

CTBC Bank signed this contract for the construction of its new headquarters in lots 45, 45-1, 43, and 43-1 of the Jingmao section of Nangang District, Taipei City. Three buildings are located on the above premises, with heights of 30, 20, and 14 stories.

None

Land purchase and sales contract and joint construction contract for CTBC Bank’s original Xinyi headquarters

Party A: Green Heaven Investments Ltd. (BVI) and Shuohe Development Co., Ltd.

Land purchase and sales contract: Signed on Nov. 6, 2015, and ending upon the completion of the review of Party A’s investment amount (the purchase/sale price) by the Investment Commission, the completion of the property rights transfer, and the crediting of all payments to the designated accounts. Joint construction contract: Signed on Nov. 6, 2015. Party A shall apply for a demolition permit within one month of the ownership transfer and approval by the Investment Commission.Party A shall apply for the construction permit within 12 months of the demolition permit being obtained, which maybeextendedforsixmonthsdepending on the process, and the occupancy permit shall be obtained within 55 months of the construction license being obtained.

Ninety-fivepercentoftheownership of lot 18 of subsection 4 of the Xinyi section of Xinyi District, Taipei City, was sold, with a land area of 1962.77 ping.

None

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Contract Party Start and end dates Main content RestrictionsIBM information resources supply

IBM Taiwan Corp. Sept. 1, 2017, to Dec. 31, 2022 CTBCBanksignedthisfive-year, four- month information resources supply contract.

None

Lottery information system software, hardware, and maintenance services for the fourth term of the public welfare lottery

LotRich Information Co., Ltd. May 31, 2013, to the redemption dateofthefinallotteryissuanceby the Bank in December 2023 and upon the completion of all settlements, transfers, and work

CTBC Bank signed this contract for a lottery information system, related equipment, and maintenance servicesfor the fourth term of the public welfare lottery.

None

Telecommunications internet services contract for the fourth term of the public welfare lottery

Chunghwa Telecom Co., Ltd., Enterprise Business Group

Sept. 30, 2013, to Dec. 31, 2023 CTBC Bank signed this contract for the establishment of the circuit and bandwidth of an ADSL network for the backbone and terminal transactions for the fourth term of the public welfare lottery as well as the lease and maintenance during the lottery’s operation.

None

Electromechanical engineering project for CTBC Bank’s Neihu Technology Park

Chunghwa Telecom Co., Ltd., Enterprise Business Group

July 21, 2017, to the completion oftheprojectandtheexpirationof the warranty period, with no unsettled issues or disputes

Electromechanical engineering project for CTBC Bank’s Neihu Technology Park

None

CTBC Bank signed this contract for the establishment of the network system for the Bank’s Neihu Technology Park.

Jetit Corp. June23,2017,totheexpirationof the warranty period, with no unsettled issues

CTBC Bank signed this contract for the establishment of the network system for CTBC Bank’s Neihu Technology Park.

None

Surface rights contract for Taiwan Life Poai Road site

Northern Region Branch, National Property Administration, Ministry of Finance

Dec. 25, 2012, to Dec. 24, 2062 1. Taiwan Life registered for 50-year surface rights for lots 436-3, 438-0, and 438-1 of the Nanhai section of Taipei’s Zhongzheng District.

2.ApremiumofNT$876millionis to be amortized averagely for 50 years.

None

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Contract Party Start and end dates Main content RestrictionsNew construction on the surface rights of Taiwan Life Poai Road site

Yuthong Construction Co., Ltd. The contract was entered into on Jan. 31, 2015, and the occupancy permit was obtained on Oct. 24, 2017. The building was handed over on Oct. 26, 2018.(Thewarrantyperiodexpiresthree year from the completion date of Oct. 26, 2018.)

1. A new construction project on the surface rights for Poai Road, located on lots 436-3, 438-0, and 438-1 of subsection 5 of Nanhai Section in Taipei’s Zhongzheng District.

2. A supplementary contract was signed on Dec. 19, 2017, stipulating that the occupancy permit be obtained before Sept. 22, 2017, with the electricity andwatertobeofficiallyreadyfor use on Oct. 8, 2017, and Oct. 23, 2017, respectively.

3. A second supplementary contract was entered into on Oct. 26, 2018, stipulating that the closing day shall be before Nov. 15, 2018.

4. The building was handed over on Oct. 26, 2018.

None

Surface rights contract for Taiwan Life and CTBC Life to invest in the C3 land in Taipei (Note)

Taiwan Fertilizer Co., Ltd. Sept. 15, 2015, to Sept. 14, 2060 1. Taiwan Life and CTBC Life co-invested in the 45- year surface rights of lot 15 of the Jingmao section of Taipei’s Nangang District.

2.Fromthesixthmonthoftheninth year to the 10th year during the contract period, there is an option for renewing the surface rights for an additional 40-year term. The premiumofNT$15billionisamortized averagely for 10 years.

None

CTBC Life project for the construction, operation, and transfer of Kaohsiung Main Public Library’s Conference,Exhibitionand Cultural Creation Hall (Note)

Kaohsiung City Government Nov. 9, 2015, to Nov. 8, 2065 This contract was signed for 50- year surface rights through a build–operate–transfer (BOT) agreement with Kaohsiung City Government for the constructionofcomplexstructuresincludinghotels, shopping malls, and bookstores.

None

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Contract Party Start and end dates Main content RestrictionsTaiwan Life BOT project for the Qingshui Area Natural Health, Tourism, and Recreation Park in Yilan County

Yilan County Government Jan. 28, 2016, to Jan. 27, 2066;according to a May 23, 2018, document from Yilan County Government, a total of 225 days forthedeterminationofexcludedevents shall not be included in theoriginalfive-yearconstructionperiod

This contract was signed for 50-year land development rights through a BOTagreement with Yilan County Government for a construction project including 250 rooms and a geothermal park.

None

Lease contract for Taiwan Life’s investment in Hanshin New Century Building

Hanshin Asset Management Co., Ltd.

July 27, 2016, to July 26, 2036 Leased back to Hanshin Asset Management.

None

Miscellaneous engineering in the BOT project of the Conference,Exhibitionand Cultural Creation Hall of Kaohsiung Main Public Library

DACIN Construction Co., Ltd. Nov. 24, 2016, to the date of completion acceptance, expirationofthewarrantyperiod,and with no outstanding matters or disputes to be resolved

Project contract (e.g., slurry walls and foundation piles)

None

Project management general consultant services for Taiwan Life’s surface rights project “surface rights of lot 15 of the Jingmao Section of Taipei’s Nangang District”

MAA Group Consulting Engineers

Jan. 9, 2017, to the acceptance and settlement of the entire construction part of the project

This contract was signed for the project management consultant for the surface rights of lot 15 of the Jingmao section of Taipei’s Nangang District (C3 project).

None

Scheduled lease contract for surface rights of lot 15 of the Jingmao Section of Taipei’s Nangang District

Mitsui Fudosan Taiwan Co., Ltd. Jan. 18, 2019, to the date the operatorofficiallystartedoperations for 20+10 years

This lease agreement was signed with Mitsui Fudosan Taiwan Co., Ltd. for the surface rights of lot 15 of the Jingmao section of Taipei’s Nangang District (C3 project).

None

Building design and supervision service contract for Taiwan Life’s “surface rights of lot 15 of the Jingmao Section of Taipei’s Nangang District”

C.Y. Lee & Partners June 22, 2017, to the date that the project is handed over to the user unit without outstanding matters to be resolved, written approval is acquired from Party A, or all warrantiesexpire,whichevercomesfirst

This contract was signed for the building design and supervision service for the surface rights of lot 15 of the Jinmao section of Taipei’s Nangang District.

None

Construction, operation, and transfer contract of the Conference,Exhibitionand Cultural Creation Hall of Kaohsiung Main Public Library

DACIN Construction Co., Ltd. June 12, 2017, to the date of completion acceptance, expirationofthewarrantyperiod,and with no outstanding matters or disputes to be resolved

Main project contract None

Real estate sales contract forthefourthandfifthfloorsofTaipeiCenturyPlaza in Taipei’s Xinyi District

Three natural persons surnamed Luo et al. and Xie Da Engineering Co., Ltd.

Contract signed on Dec. 26, 2019; building transfer completed on Jan. 13, 2020; and handed over on Jan. 17, 2020

Real estate sales contract None

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Contract Party Start and end dates Main content RestrictionsReal estate sales contract for the commercial property on Guangfu South Road in Taipei’s Da’an District

Two natural persons surnamed Liu et al.

Contract signed on Sept. 24, 2020; building transfer completed on Oct. 16, 2020; and handed over on Oct. 22, 2020


Real estate sales contract for the Jingguo commercial building in Taoyuan’s Taoyuan District

Two natural persons surnamed Hsu et al. and Guo Hao Co., Ltd.

Contract signed on Dec. 24, 2020; and handed over on Jan. 20, 2021


Real estate sales contract and lease contract for the eighth, ninth, and tenth floorsofthecommercialbuilding on Lequn Second Road in Taipei’s Zhongshan District

Run Long Construction Co., Ltd.Chyi Yuh Construction Co., Ltd.Highwealth Construction Co., Ltd.

Sales contract and lease contract signed on Dec. 24, 2020; building transfer completed on Jan. 20, 2021; and handed over on Feb. 2, 2021

Real estate sales contract.Leased back to Run Long Construction Co., Ltd.; Chyi Yuh Construction Co., Ltd.; and Highwealth Construction Co., Ltd.

None

General contractor agreement and material equipment supply contract for Taiwan Life’s new construction project for “the surface rights of lot 15 of the Jingmao Section of Taipei’s Nangang District”

RSEA Engineering Corp. May 22, 2019, to the date of completion acceptance, expirationofthewarrantyperiod,and with no outstanding matters or disputes to be resolved

New construction project for “the surface rights of lot 15 of the Jingmao Section of Taipei’s Nangang District”

This steel structure project was approved on Aug. 26, 2019, with China Steel Structure Co., Ltd.qualifiedasadesignatedprofessional subcontractor. The externalcurtainwallprojectandmulti-functionalroofingprojectwas approved on Nov. 1, 2019, with Shiny G&M Associated Co., Ltd.qualifiedasadesignatedprofessional subcontractor. Mechanical, electrical, plumbing, airconditioning,andfiresafetyprojects were approved on Dec. 26, 2019, with L&K Engineering Co.,Ltd.qualifiedasadesignatedprofessional subcontractor. These were incorporated into the general contractor agreement.Taiwan Mitsubishi Elevator Co., Ltd. was approved on July 2, 2020, as a designated professional subcontractor. It was incorporated into the general contractor agreement.Wande Construction Co., Ltd. was approved on Feb. 25, 2021, as a designated professional subcontractor. It was incorporated into the general contractor agreement.

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Contract Party Start and end dates Main content RestrictionsTaiwan Life new core information system contract

New Century InfoComm Tech Co., Ltd.

April 1, 2019, to the work completed according to schedule (estimated to be completed within 51 months), acceptance made in accordance with the methods and standards in Chapter 9 of the work manual, and until thewarrantyexpires.

The establishment of the new core system, the software licensing fee for the new overall insurance core system, customized development and project consulting services, etc., totalingapproximatelyNT$1.01billion

None

Individual life insurance reinsurance (including variable universal life insurance)

Central Reinsurance Corp. Munich Reinsurance Co. Swiss Reinsurance Co., Ltd. SCOR Reinsurance Co., Ltd. RGA Reinsurance Co.Hannover Rück SE General Reinsurance AG AXA France VIECCR REKorean Reinsurance Co. Partner Reinsurance Co., Ltd.The Toa Reinsurance Co., Ltd.

Oct. 31, 1968, to presentAug. 17, 1984, to presentJan. 1, 1969, to presentAug. 20, 1994, to presentJan. 1, 2001, to presentMay 25, 2006, to presentDec. 1, 2010, to presentApril 14, 2014, to presentJan. 1, 2015, to presentJan. 1, 2015, to presentOct. 26, 2018, to presentJan. 1, 2020, to present

Quota share reinsurance, Surplus line reinsurance

None

Group life insurance reinsurance

Central Reinsurance Corp. Hannover Rück SECCR REKorean Reinsurance Co. Best Meridian Insurance Co. The Toa Reinsurance Co.,Ltd.

Oct. 31, 1968, to presentJan. 1, 2008, to presentJan. 1, 2016, to presentJan. 1, 2020, to presentDec. 1, 2018, to Dec. 31, 2020Jan. 1, 2019, to present

Quota share reinsurance/working excessoflossreinsurance

None

Individual/group personal accident insurance reinsurance

Central Reinsurance Corp.Hannover Rück SE CCR REKorean Reinsurance Co. Best Meridian Insurance Co. The Toa Reinsurance Co., Ltd.

Oct. 31, 1968, to presentJan. 1, 2008, to presentJan. 1, 2016, to presentJan. 1, 2020, to presentDec. 1, 2018, to Dec. 31, 2020Jan. 1, 2019, to present

Quota share reinsurance/working excessoflossreinsurance

None

Individual health insurance reinsurance

Central Reinsurance Corp. Munich Reinsurance Co.RGA Reinsurance Co.Hannover Rück SEGeneral Reinsurance AG PacificLifeReLtd.CCR RE Best Meridian Insurance Co.

Oct. 31, 1968, to presentAug. 17, 1984, to presentAug. 9, 2004, to presentJan. 1, 2008, to presentDec. 1, 2010, to presentNov. 1, 2013, to presentJune 12, 2015, to presentDec. 1, 2018, to present

Surplus line/quota share reinsurance

None

Note: CTBC Life and Taiwan Life were merged on Jan. 1, 2016; Taiwan Life is the surviving company. Since the merger, the rights and obligations under the original contracts have been generally assumed by Taiwan Life.

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6. Financial Information

6.1Condensedbalancesheetsandstatementsofcomprehensiveincomeforthepastfiveyears

6.1.1CondensedconsolidatedbalancesheetUnits:NT$thousand

YearItem

Financialdataofthepastfiveyears(Note1)

2016 2017 2018 2019 2020

Cash and cash equivalents, due from the Central Bank and call loans to banks 394,032,781 435,276,226 381,228,400 387,966,319 500,005,921

Financialassetsmeasuredatfairvaluethroughprofitorloss 195,315,251 175,690,858 368,632,520 498,857,526 529,747,338

Available-for-salefinancialassets-net 808,810,459 478,234,096 - - -

Financial assets measured at fair value through other comprehensive income - - 463,855,794 575,846,436 644,711,761

Investment in debt instrument at amortized cost - - 1,627,683,522 1,721,282,552 1,826,984,725

Derivativefinancialassets-hedging-net/Financialinstruments-hedging 416,342 137,010 34,212 330,764 16,394

Securities purchased under resell agreements 25,510,984 24,658,803 24,656,572 16,583,359 3,953,395

Receivables - net 130,315,259 153,686,602 197,753,645 192,650,599 179,275,408

Currentincometaxassets 2,377,851 1,740,877 3,258,128 1,746,169 1,511,113

Assetsclassifiedasheldforsale-net - - 523,182 - -

Loans - net 2,112,661,940 2,194,551,195 2,364,345,480 2,471,532,195 2,528,287,216

Reinsurance contract assets - net 3,322,732 2,841,708 2,593,345 2,092,664 3,062,366

Held-to-maturityfinancialassets-net 216,315,007 737,471,741 - - -

Investments under equity method - net 17,885,709 33,735,935 35,353,449 28,708,210 31,438,820

Otherfinancialassets-net 739,955,696 911,595,514 75,939,497 94,369,618 127,858,688

Premises and equipment - net 60,463,447 52,650,171 53,985,880 50,698,386 49,310,211

Right-of-use assets - net - - - 16,025,100 16,209,281

Investment property - net 47,009,937 56,593,899 57,591,759 81,655,764 86,925,071

Intangible assets - net 23,383,294 23,406,249 24,487,733 24,425,065 24,603,501

Deferredincometaxassets 10,347,900 13,909,970 15,656,082 12,471,402 18,373,870

Other assets - net 51,126,665 44,552,690 55,668,346 42,192,408 44,392,100

Total assets 4,839,251,254 5,340,733,544 5,753,247,546 6,219,434,536 6,616,667,179

Deposits from central bank and other banks 63,498,683 74,874,783 74,498,692 53,200,298 55,993,946

Due to central bank and other banks 15,752,488 15,470,633 14,041,775 20,896,160 16,214,708

Financial liabilities measured at fair value throughprofitorloss 97,582,396 68,406,471 106,571,323 114,679,433 79,847,010

Derivativefinancialliabilities-hedging-net/Financialinstruments-hedging 303,599 16,865 184,195 37,437 211,672

Securities sold under repurchase agreements 49,491,084 74,118,226 70,524,205 105,266,092 94,461,164

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Financial Information

YearItem


2016 2017 2018 2019 2020

Commercial papers payable - net 28,248,099 51,777,524 38,638,067 44,423,053 17,005,163

Payables 78,876,776 87,184,528 96,119,060 97,461,845 95,998,453

Currentincometaxliabilities 2,435,981 6,230,722 3,713,312 3,635,360 8,415,865

Deposits and remittances 2,748,419,254 2,944,973,167 3,138,015,328 3,360,070,624 3,728,667,552

Bonds payable 99,355,898 112,212,447 98,724,952 98,177,908 125,380,870

Otherfinancialliabilities 199,621,926 189,540,151 193,255,451 178,775,585 176,691,031

Provisions 1,152,859,490 1,370,665,257 1,585,162,090 1,714,432,322 1,760,399,327

Lease liabilities - - - 14,924,727 15,442,031

Deferredtaxliabilities 1,506,995 4,198,632 2,383,652 7,875,692 11,555,649

Other liabilities 19,103,166 20,079,967 16,266,963 24,358,160 25,071,998

Total liabilitiesBefore distribution 4,557,055,835 5,019,749,373 5,438,099,065 5,838,214,696 6,211,356,439

After distribution 4,576,525,656 5,040,820,505 5,458,346,047 5,858,701,011 (Note 2)

Stockholders' equity-parent company 282,106,787 320,900,639 315,072,464 381,138,689 405,230,570

Capital stockBefore distribution 194,969,896 198,303,196 198,303,196 199,969,796 199,969,796

After distribution 194,969,896 198,303,196 198,303,196 199,969,796 (Note 2)

Capital surplusBefore distribution 36,637,717 50,366,018 50,368,539 58,688,782 58,754,923


Retained earningsBefore distribution 67,810,916 88,573,648 102,853,949 124,708,923 145,408,689


Other equity interests (16,728,988) (15,759,469) (36,453,220) (2,228,812) 1,097,162

Treasury stock (582,754) (582,754) - - -

Non-controlling interests 88,632 83,532 76,017 81,151 80,170

Total equityBefore distribution 282,195,419 320,984,171 315,148,481 381,219,840 405,310,740


Note 1: The financial data for 2016 to 2020 has been audited by the CPAs.Note 2: The 2020 earnings distribution has not yet been approved by a shareholder meeting resolution.

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6.1.2 Condensed consolidated statements of comprehensive incomeUnit:NT$thousand

YearItem

Financialdataforthepastfiveyears(Note1)

2016 2017 2018 2019 2020

Interest income 102,274,095 112,086,276 129,139,824 141,659,899 129,479,139

Less:Interestexpenses 18,806,920 20,481,110 26,864,903 31,022,593 20,425,471

Net income of interest 83,467,175 91,605,166 102,274,921 110,637,306 109,053,668

Net non-interest income 236,204,186 258,158,491 212,099,670 154,080,422 85,352,653

Net revenue 319,671,361 349,763,657 314,374,591 264,717,728 194,406,321

Provisionsforbaddebtexpenses,commitments,and guarantee liability provisions (5,896,362) (2,519,102) (4,903,326) (5,641,291) (9,258,231)

Net change provisions for insurance liabilities (220,215,855) (239,860,214) (205,361,796) (139,137,229) (68,870,986)

Operatingexpenses (59,606,969) (62,658,046) (61,719,970) (68,130,130) (64,700,047)

Netincomebeforetaxfromcontinuingoperations 33,952,175 44,726,295 42,389,499 51,809,078 51,577,057

Incometaxexpenses (6,019,301) (7,502,115) (6,354,288) (8,926,802) (8,721,902)

Net income from continuing operations 27,932,874 37,224,180 36,035,211 42,882,276 42,855,155

Net income 27,932,874 37,224,180 36,035,211 42,882,276 42,855,155

Other comprehensive income (losses) (net amountaftertax) (8,712,180) 1,052,317 (28,170,860) 33,464,443 1,628,895

Total comprehensive income 19,220,694 38,276,497 7,864,351 76,346,719 44,484,050

Net income attributable to parent company 27,928,977 37,222,217 36,032,425 42,879,806 42,853,406

Net income attributable to non-controlling interest 3,897 1,963 2,786 2,470 1,749

Comprehensive income attributable to parent company 19,219,055 38,281,597 7,864,640 76,346,177 44,487,441

Comprehensive income attributable to non-controlling interest 1,639 (5,100) (289) 542 (3,391)

Earnings per share (Note 2) 1.43 1.91 1.85 2.16 2.15

Note 1: The financial data for 2016 to 2020 has been audited by the CPAs.Note 2: The earnings per share is in New Taiwan dollars.

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6.1.3 Condensed standalone balance sheetsUnit:NT$thousand

YearItem

Financialdataforthepastfiveyears(Note1)2016 2017 2018 2019 2020

Cash and cash equivalents, due from the Central Bank and call loans to banks 755,937 18,680,129 148,138 276,513 103,047

Available-for-salefinancialassets-net 599,851 1,679,451 - - -

Financial assets measured at fair value through other comprehensive income - - 478,440 838,350 795,600

Receivables - net 70,688 9 12 8 5,511Currentincometaxassets 360,133 391,333 379,438 280,837 9,318Investments under equity method - net 333,729,060 373,126,916 372,444,351 439,854,276 466,203,628Otherfinancialassets-net 371,250 371,250 - 6,600 11,609Premises and equipment - net 79,652 82,087 78,127 73,497 60,202Right-of-use assets - net - - - 22,634 46,705Intangible assets - net - 1,632 3,328 6,383 4,544Deferredincometaxassets 1,301 2,984 5,885 15,316 17,671Other assets - net 49,085 18,916 26,175 21,775 27,608Total assets 336,016,957 394,354,707 373,563,894 441,396,189 467,285,443Commercial papers payable - net 25,778,927 44,756,966 31,668,251 31,724,064 7,099,144Payables 974,165 1,481,375 1,441,369 1,551,435 1,223,856Currentincometaxliabilities 35,529 35,529 1,354,931 914,799 2,215,608Bonds payable 27,000,000 27,000,000 23,800,000 24,200,000 51,400,000Otherfinancialliabilities 162 - - - -Provisions - 8,629 20,058 62,472 76,170Lease liabilities - - - 23,063 40,095Deferredtaxliabilities - - 9 - -Other liabilities 121,387 171,569 206,812 1,781,667 -

Total liabilitiesBefore distribution 53,910,170 73,454,068 58,491,430 60,257,500 62,054,873After distribution 73,379,991 94,525,200 78,738,412 80,743,815 (Note 2)

Capital stockBefore distribution 194,969,896 198,303,196 198,303,196 199,969,796 199,969,796After distribution 194,969,896 198,303,196 198,303,196 199,969,796 (Note 2)

Capital surplusBefore distribution 36,637,717 50,366,018 50,368,539 58,688,782 58,754,923After distribution 33,717,244 50,366,018 50,368,539 58,688,782 (Note 2)

Retained earningsBefore distribution 67,810,916 88,573,648 102,853,949 124,708,923 145,408,689After distribution 51,261,568 67,502,516 82,606,967 104,222,608 (Note 2)

Other equity interests (16,728,988) (15,759,469) (36,453,220) (2,228,812) 1,097,162Treasury stock (582,754) (582,754) - - -

Total equityBefore distribution 282,106,787 320,900,639 315,072,464 381,138,689 405,230,570After distribution 262,636,966 299,829,507 294,825,482 360,652,374 (Note 2)

Note 1: The financial data for 2016 to 2020 has been audited by the CPAs.Note 2: The 2020 earnings distribution has not yet been approved by a shareholder meeting resolution.

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6.1.4 Condensed standalone statement of comprehensive incomeUnit:NT$thousand

YearItem


2016 2017 2018 2019 2020

Proportion share of gains from associates or joint ventures under equity method 28,958,149 38,938,119 38,868,547 45,815,749 46,833,346

Other income 80,619 55,024 128,295 159,297 116,530

Operatingexpenses (911,117) (1,420,982) (1,399,382) (1,820,937) (1,308,565)

Otherexpensesandlosses (486,998) (594,243) (548,720) (577,410) (556,777)

Netincomebeforetax 27,640,653 36,977,918 37,048,740 43,576,699 45,084,534

Incometaxbenefits(expenses) 288,324 244,299 (1,016,315) (696,893) (2,231,128)

Net income 27,928,977 37,222,217 36,032,425 42,879,806 42,853,406

Othercomprehensiveincome(losses)(netamountaftertax) (8,709,922) 1,059,380 (28,167,785) 33,466,371 1,634,035

Total comprehensive income 19,219,055 38,281,597 7,864,640 76,346,177 44,487,441

Earnings per share (Note 2) 1.43 1.91 1.85 2.16 2.15Note 1: The financial data for 2016 to 2020 has been audited by the CPAs.Note 2: The earnings per share is in New Taiwan dollars.

6.1.5 CPA and audit opinions for the past five yearsYear NamesofCPAs Audit opinion

2016 Jeff Chen, Leou-Fong Yang Unqualifiedopinion(Note1)

2017 Jeff Chen, Lin Wu Unqualifiedopinion(Note1)



2020 Lin Wu, Kuo-Yang Tzang Unqualifiedopinion(Note2)Note 1: The judicial cases as stated in Note 9 (e) of the consolidated financial report are still under investigation by the judiciary, and the

results remain uncertain. The CPAs’ opinion is not modified in respect of this matter.Note 2: The judicial cases as stated in Note 9 (c) of the consolidated financial report. Part of judicial cases are still under investigation by the

judiciary, and the results remain uncertain. The CPAs’ opinion is not modified in respect of this matter.

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6.2 Financial analysis for the past five yearsYear

Item(Note1)Financialanalysisforthepastfiveyears

2016 2017 2018 2019 2020

Operating capability

Total asset turnover (times) 0.07 0.07 0.06 0.04 0.03

Ratio of loans to deposits of banking subsidiary 70.20 67.46 69.73 67.35 63.22

NPL ratio of banking subsidiary 0.33 0.21 0.22 0.17 0.23

Average operating revenue per employee 16,068 17,480 15,764 13,018 9,406

Averageprofitperemployee(aftertax) 1,404 1,860 1,807 2,109 2,074

Profitability

Return on assets ratio (%) 0.59 0.73 0.65 0.72 0.67

Return on equity ratio (%) (Note 3) 9.98 12.35 11.33 12.32 10.90

Net income ratio (%) 8.74 10.64 11.46 16.20 22.04

Earningspershare(NT$)(Note4) 1.43 1.91 1.85 2.16 2.15

Financial structure (%)

Ratio of debt to total assets 94.17 93.99 94.52 93.87 93.87

Ratio of liabilities to equity 1,614.86 1,563.86 1,725.57 1,531.46 1,532.49

Financial holding company's double leverage ratio 118.43 116.39 118.36 115.63 115.24

Financialholdingcompany'sfinancialratioinaccordancewithArticle 41 of the Financial Holding Company Act N/A N/A N/A N/A N/A

LeverageOperating leverage 1 1 1 1 1

Financialholdingcompany'sfinancialleverage 1.02 1.02 1.01 1.01 1.01

Growth rate (%)

Assets growth rate of assets 5.29 10.36 7.72 8.10 6.39

Profitgrowthrateofprofit (17.29) 31.73 (5.22) 22.22 (0.45)

Cashflow(%)

Cashflowratio Note 6 Note 6 8.75 Note 6 62.85

Cashflowadequacyratio 242.37 177.39 139.16 41.63 76.85

Cashflowreinvestmentratio Note 6 Note 6 Note 5 Note 6 1,560.45

Scale of operations (%)(Note 2)

Market share by assets 10.07 10.17 10.33 10.35 10.05

Market share by net equity 8.40 8.64 8.55 8.58 8.27

Market share by deposits of banking subsidiary 5.44 5.78 5.94 6.19 6.33

Market share by loans of banking subsidiary 5.19 5.31 5.50 5.61 5.59

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YearItem(Note1)

Financialanalysisforthepastfiveyears

2016 2017 2018 2019 2020

Capital adequacy

Subsidiary’s capital adequacy calculated based on its industry’s regulations (%)

CTBC Bank Co., Ltd. 15.17 16.18 15.16 14.17 14.93

CTBC Securities Co., Ltd. 464.68 420.99 606.68 364.90 359.61

Taiwan Life Insurance Co., Ltd. 281.42 339.79 267.70 298.30 309.41

Eligible capital of eachsubsidiary(NT$million)

CTBC Bank Co., Ltd. 240,947 256,184 263,318 265,569 268,440

CTBC Securities Co., Ltd. 6,444 6,520 6,353 6,654 7,533

CTBC Venture Capital Co., Ltd. 4,189 3,913 3,612 3,775 3,856

CTBC Asset Management Co., Ltd. 5,406 5,470 5,433 5,253 5,559

CTBC Security Co., Ltd. 55 57 59 58 62

Taiwan Lottery Co., Ltd. 965 1,077 763 1,229 1,373

Taiwan Life Insurance Co., Ltd. 58,572 82,568 89,049 113,527 123,456

CTBC Investments Co., Ltd. 526 500 482 534 672

Group’sneteligiblecapital(NT$million) 253,523 284,977 291,395 328,511 351,468

Statutory capital requirement of each subsidiary(NT$million)

CTBC Bank Co., Ltd. 137,017 146,502 171,537 196,720 188,810

CTBC Securities Co., Ltd. 2,080 2,323 1,571 2,735 3,142

CTBC Venture Capital Co., Ltd. 2,151 2,207 2,136 2,381 2,970

CTBC Asset Management Co., Ltd. 2,712 3,774 3,832 3,785 3,972

CTBC Security Co., Ltd. 59 59 57 55 57

Taiwan Lottery Co., Ltd. 574 681 518 792 941

Taiwan Life Insurance Co., Ltd. 41,626 48,600 66,529 76,117 79,802

CTBC Investments Co., Ltd. 287 302 309 347 463

Group’snetstatutorycapitalrequirement(NT$million) 187,078 204,920 247,071 283,894 281,106

Group’s capital adequacy ratio (%) 135.52 139.07 117.94 115.72 125.03

Afinancialholdingcompanymustdisclosetheaggregateamountofcreditextensions,endorsements,orothertransactionsconductedbyallsubsidiariestothesameperson,relatedparty,oraffiliateinaccordancewithArticle46oftheFinancialHoldingCompanyAct.(NT$million)

2,397,804 2,905,102 3,429,329 4,657,461 4,951,008

Reasons for variations exceeding 20% of the financial ratios for the past two fiscal years:1. The decline of total asset turnover was mainly due to a decrease of net revenue and an increase of total assets in 2020.2. The increase of the NPL ratio of the banking subsidiary was mainly due to an increase of non-performing loans in 2020.3. The decline of average operating revenue per employee and the increase of the net income ratio was mainly due to a decrease of net

revenue.4. The decline of the assets growth rate was mainly due to a decrease in the growth of total assets in 2020.5. The decline of the profit growth rate was mainly due to a decrease of net income before tax in 2020.6. The increase of the cash flow adequacy ratio was mainly due to an increase of net cash flows from operating activities in 2020.

Note 1: The formula of each financial analysis is following:1) Operating capability

(1) Total assets turnover = net revenue / average total assets(2) Ratio of loans to deposits of banking subsidiary = total loans of banking subsidiary / total deposits of banking subsidiary(3) NPL ratio of banking subsidiary = total non-performing loans of banking subsidiary / total loans of banking subsidiary(4) Average operating revenue per employee = net revenue / total number of employees(5)Averageprofitperemployee=netincomeaftertax/totalnumberofemployees

2) Profitability(1)Returnonassetsratio=[netincomeaftertax+interestexpense×(1-taxrate)]/averagetotalassets(2)Returnonequityratio=netincomeaftertax/averagetotalequity(3)Netincomeratio=netincomeaftertax/netrevenue(4)Earningspershare=(netincomeattributabletoparentcompany−preferredstockdividend)/weightedaveragenumberof

shares issued

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3) Financial structure(1) Ratio of debt to total assets = total liabilities / total assets(2) Ratio of liabilities to equity = total liabilities / total equity(3) Financial holding company’s double leverage ratio = equity investments in accordance with paragraph 2 of Article 36 and with

Article 37 of the Financial Holding Company Act / total equity4) Leverage

(1)Operatingleverage=(netrevenue−variablecost)/netincomebeforetax(2)Financialholdingcompany’sfinancialleverage=(netincomebeforetax+interestexpense)/netincomebeforetax

5) Growth rate(1)Assetsgrowthrate=(totalassets−totalassetsofpreviousyear)/totalassetsofpreviousyear(2)Profitgrowthrate=(netincomebeforetax−netincomebeforetaxofpreviousyear)/netincomebeforetaxofpreviousyear

6)Cashflow(1)Cashflowratio=netcashflowfromoperatingactivities/(callloansandoverdraftsfromotherbanks+commercialpapers

payable+financialliabilitiesmeasuredatfairvaluethroughprofitorloss+securitiessoldunderrepurchaseagreements+payables with maturity within one year)

(2)Cashflowadequacyratio=netcashflowfromoperatingactivitiesforthepastfiveyears/sumofcapitalexpendituresandcashdividendsforthepastfiveyears

(3)Cashflowreinvestmentratio=netcashflowfromoperatingactivities/netcashflowfrominvestingactivities7) Scale of operations

(1)Marketsharebyassets=totalassets/totalassetsofallfinancialholdingcompanies(2)Marketsharebynetequity=netequity/totalnetequityofallfinancialholdingcompanies(3)Marketsharebydepositsofbankingsubsidiary=totaldeposits/totaldepositsofallfinancialinstitutions(4)Marketsharebyloansofbankingsubsidiary=totalloans/totalloansofallfinancialinstitutions

8) Capital adequacy(1)Group’sneteligiblecapital=financialholdingcompany’seligiblecapital+(financialholdingcompany’sshareholdingratio×

subsidiary’seligiblecapital)−statutorydeductions(2)Group’snetstatutorycapitalrequirement=financialholdingcompany’sstatutorycapitalrequirement+financialholding

company’sshareholdingratio×subsidiary’sstatutorycapitalrequirement−statutorydeductions(3) Group’s capital adequacy ratio = group’s net eligible capital / group’s net statutory capital requirement

Note2:1) Marketsharebyassetsandmarketsharebynetequityfor2020werecalculatedbasedonthesummarydataoffinancialstatisticspublished by the FSC in 2021.

2) Market share by deposits of the banking subsidiary and market share by loans of the banking subsidiary for 2020 were calculated basedontheCTBCBankindividualfinancialstatementfor2020andthestatisticsforallfinancialinstitutionsprovidedonthewebsite of the FSC in December 2020.

Note 3: Return on common equity ratio = (net income after tax – preferred stock dividend) / average total common equity. As of Dec. 31, 2020 and 2019, the Company and its subsidiaries’ returns on common equity ratio were 11.53% and 13.04%, respectively.

Note 4: A retrospective adjustment for the 2016 earnings per share has been made according to the number of shares distributed from the earnings or capital surplus transferred to capital.

Note 5: The net cash flow from investing activities was inflow for 2018; therefore, the cash flow reinvestment ratio was not counted.Note 6: The net cash flow from operating activities was outflow for 2016, 2017, and 2019; therefore, the cash flow ratio and cash flow

reinvestment ratio were not counted.

6.3KeyperformanceindicatorsItem 2019 2020

CTBC Holding Capital adequacy ratio 115.72% 125.03%

CTBC Bank (consolidated)

BIS ratio 13.84% 14.61%

NPL ratio (Note 1) 0.34% 0.49%

NPL coverage ratio (Note 2) 386.64% 272.01%

CTBC Bank (standalone)

BIS ratio 14.17% 14.93%

NPL ratio (Note 1) 0.17% 0.23%

NPL coverage ratio (Note 2) 858.38% 594.23%

Note 1: NPL ratio = NPL amount / total loan amount Note 2: NPL coverage ratio = loan loss provisions / NPL amount

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6.4 Audit Committee Report for the past year’s financial report

CTBC Financial Holding Co., Ltd.2020 Audit Committee Report

The financial statements, business report, and earnings distribution plan submitted by the Board of Directors ofCTBCFinancialHoldingCo.,Ltd.,amongwhichthefinancialstatementshavebeenauditedbyexternalauditorsWu,LinandTseng,Kuo-YangofKPMG,havebeendulyexaminedandacceptedascorrectbytheAuditCommitteeinaccordancewithArticle14-4oftheSecuritiesandExchangeActandArticle219oftheCompanyAct, and the committee’s report is hereby submitted.

To:2021 Annual General Shareholders' Meeting of CTBC Financial Holding Co., Ltd

Audit Committee Convener Sheng-Yung Yang

Taipei, Taiwan, R.O.C. April 29, 2021

6.5Consolidated financial statementsof theparentcompanyand thesubsidiaries auditedbyCPAsforthepastyear:PleaserefertoAppendix2.

6.6 ImpactonthefinancialstatusoffinancialturnoverdifficultiesoftheCompanyanditsaffiliatedenterprisesfrom2020throughApril13,2021:None.

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7. Review and Analysis of Financial Conditions, Financial Performance, and Risk Management 7.1 Financial conditions

Unit:NT$thousand

2019 2020 Variation Variation(%)

Cash and cash equivalents 276,513 103,047 (173,466) (62.73)

Financial assets 844,950 807,209 (37,741) (4.47)

Receivables - net 8 5,511 5,503 68,787.50

Investments under equity method - net 439,854,276 466,203,628 26,349,352 5.99

Other assets 420,442 166,048 (254,394) (60.51)

Total assets 441,396,189 467,285,443 25,889,254 5.87

Payables 1,551,435 1,223,856 (327,579) (21.11)

Financial liabilities 24,200,000 51,400,000 27,200,000 112.40

Other liabilities 34,506,065 9,431,017 (25,075,048) (72.67)

Total liabilities 60,257,500 62,054,873 1,797,373 2.98

Capital stock 199,969,796 199,969,796 0 0.00

Capital surplus 58,688,782 58,754,923 66,141 0.11

Retained earnings 124,708,923 145,408,689 20,699,766 16.60

Other equity interests (2,228,812) 1,097,162 3,325,974 149.23

Total equity 381,138,689 405,230,570 24,091,881 6.32

Analysis on variation exceeding NT$100 million and variation percentage above 20%:1. The decrease in cash and cash equivalents was mainly due to a decrease of the savings accounts.2. The decrease in other assets was mainly due to a decrease of tax deduction receivables.3. The decrease in payables was mainly due to a decrease of salary payable.4. The increase in financial liabilities was mainly due to an increase of bonds payable.5. The decrease in other liabilities was mainly due to a decrease of commercial papers payable.6. The overall increase in other equity interests was mainly due to an increase of unrealized gains on financial assets measured at fair value

through other comprehensive income, an increase of other comprehensive income on reclassification under the overlay approach, and a decrease of exchange differences on translation of foreign financial statements.

7.2 Financial performanceUnit:NT$thousand

2019 2020 Variation Variation(%)Proportion share of gains from associates or joint ventures under equity method 45,815,749 46,833,346 1,017,597 2.22

Other income 159,297 116,530 (42,767) (26.85)

Operatingexpenses (1,820,937) (1,308,565) 512,372 (28.14)

Otherexpensesandlosses (577,410) (556,777) 20,633 (3.57)

Netincomebeforetax 43,576,699 45,084,534 1,507,835 3.46

Netincomeaftertax 42,879,806 42,853,406 (26,400) (0.06)

Analysis of variance exceeding NT$100 million and deviations above 20%:The decrease in operating expenses was mainly due to a decrease of employee benefit expenses.

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7.3 Cash flowCash liquidity analysis for 2020: Please refer to page 493. Cash liquidity analysis for 2021:

Unit:NT$thousand

Cash balance at beginning of period

Annual net cash flowfromoperating

activities

Annualnetcashflowfrom investment and financingactivities

Cash surplus (deficit) Remedialmeasuresforcashdeficit

Amount+- Investment plan Financial plan103,047 19,796,876 (19,741,979) 157,944 None None

Analysisofcashflowchangein2021:Operatingactivities:AnetcashinflowofNT$19,796,876thousandisestimatedfromtheoperatingactivitiesin2021.Investmentandfinancingactivities:AnetcashoutflowofNT$19,741,979thousandisestimatedfromtheinvestmentandfinancingactivities in 2021.Remedialmeasuresforestimatedcashdeficitandliquidityanalysis:None.

7.4 Impact of significant capital expenditures on financial and operational conditions in 2020: None.

7.5 2020 reinvestment policy, main reasons for profits or losses, improvement plan, and investment plan for the coming year

7.5.1 2020 Reinvestment policyCTBC Holding’s reinvestment policy is based on the investments stipulated in Articles 36 and 37 of the Finan-

cial Holding Company Act. In accordance with the regulations of the competent authority, the projected return rate of each investment, cross-selling gains, and strategic value of the subsidiaries of CTBC Holding were evalu-ated to ensure stable compensation for shareholders.

7.5.2 Main reasons for 2020 profitsThe main profit sources for CTBC Holding in 2020 were its subsidiaries CTBC Bank and Taiwan Life. In

2019, CTBC Bank’s pre-tax net profit was NT$32.3billion, accounting for 63% of CTBC Holding’s consolidated pre-tax profit. In 2020, Taiwan Life recorded consolidated pre-tax net profit of NT$17.7 billion, accounting for 34% of CTBC Holding’s consolidated pre-tax profit.

Please refer to “5. Operational Highlights, 5.3. Market and business overview” for the main reasons for profits or losses of each CTBC Holding subsidiary and the corrective actions taken.

7.5.3 2021 investment planIn 2020, the Company will continue to evaluate the investment targets of domestic and overseas financial in-

stitutions that have complementary businesses and potential synergies with CTBC Holding in order to increase the group’s market share and further build it into one of Asia’s strongest financial institutions.

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Review and Analysis of Financial Conditions, Financial Performance, and Risk Management

7.6 Risk management

7.6.1 Risk management framework and policy1) Riskmanagementframework

CTBC Holding adopts an integrated approach to risk management. The framework includes the Company’s Board of Directors, Chief Auditor, Risk Management Committee, Executive Committee, Credit Approval Committee, and Risk Management Department; in addition, each subsidiary has established its own risk units. The related responsibilities are described as follows:(1) The Board of Directors is the highest supervisory unit of the group’s risk management activities and is

responsible for approving, reviewing, and supervising risk strategies and policies; developing a healthy and independent risk culture; and ensuring the operations of the management framework and the risk control functions. It is also ultimately responsible for overall risk management.

(2)TheChiefAuditorisresponsiblefortheplanningandexecutionofallauditoperationsandreportsdirectlyto the Board of Directors.

(3) The Risk Management Committee operates according to the Risk Governance Policy, as approved by the Board of Directors, to set up independent risk management functions. The committee ensures that CTBC Holding and its subsidiaries’ operating activities, business development strategies, and risk appetite areinlinewiththeBoard’spolicies.ItalsoassiststheBoardofDirectorsinexecutingcommunication,oversight, and recommendations regarding risk management; establishing an appropriate risk authorization system; and supervising and ensuring that the system is functioning properly. The effective functioning of the committee is intended to foster a healthy culture of risk management and managerial support among all employees throughout the organization.

(4)TheExecutiveCommitteeisresponsibleforprovidingmanagementconsultingonmajorissues,includingCTBC Holding’s overall risk. Committee meetings are responsible for reviewing and consulting risk management related policies and various risk limits.

(5) The Credit Approval Committee is responsible for supervising, managing, and approving CTBC Holding and its subsidiaries’ major credit risk cases.

(6) The Risk Management Department is responsible for establishing and implementing various risk management policies for CTBC Holding and reporting related risk management information throughout the group.

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2) RiskmanagementpolicyThe goal of CTBC Holding’s risk management is to pursue optimal economic gains while using effective management methods to control the risks within the scope approved by the Board of Directors. CTBC Holding establishes risk management policies for the key risks faced by CTBC Holding, covering management objectives, risk framework, roles and accountability, and risk management processes. These policies are implemented to effectively identify, measure, and control the risks faced by CTBC Holding and its subsidiaries such that the risks arising from business activities are managed at an acceptable level.

7.6.2 Risk measurement and control methods and quantitative risk exposure informationCTBC Holding’s Risk Governance Policy is its supreme guide for risk management. The Company and its subsidiaries have risk management policies in place for key risks such as credit, market, liquidity, operational, insurance, and climate change risk. These policies include authorization and delegation mechanisms, risk limit management, monitoring indicators, and reporting processes, and serve as a basis for daily risk management. Each risk unit regularly prepares and reports on the monitoring indicators and implements early warning and stop-loss mechanisms.The risk management practices of each subsidiary are as follows:

1) CTBCBank(1) Credit risk

Credit risk is the risk that a borrower, guarantor, debtor, or counterparty of a transaction is unable to pay its interest, repay its principal, or otherwise perform its contractual obligations because of the deteriora-tion of its own financial condition or other reasons, resulting in potential financial losses.

CTBCHolding

Chairman

President

Chief Auditor

ExecutiveCommittee

Risk Management Committee

Credit Committee

ChiefRiskOfficer

Risk Management Department

SubsidiaryRiskUnit

CTBCHoldinggroupriskmanagementstructure

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To meet the various credit-related financial needs of large institutional clients, small- and medium-sized enterprises, and even individual consumers, CTBC Bank provides lending (including loans, overdraft, dis-counts, and guarantees), accounts receivable factoring and financing, credit cards, and other credit prod-ucts and services. To manage credit risk properly, the Bank formulates its core credit risk management policies and related procedures according to the government’s legal requirements and its own practical needs and risk preferences. In terms of credit initiation, CTBC Bank utilizes a credit officer mechanism in order to establish a professional, objective, and hierarchical review process. It also developed an internal rating system based on the historical data of its own customers as a framework for credit risk measure-ment, which is applied to credit line application, post-lending monitoring, and profitability performance analysis. In addition, considering the concentration risks of its portfolio, CTBC Bank refers to the risk appetite of business operations to establish various credit risk limits for specific industries, targets, and customers as well as credit risk limits for countries and groups. Utilizing these mechanisms together facil-itates the effective management of credit risks.

(2) Market riskMarket risk is the risk of a negative impact on the Bank’s overall revenue, capital, value or operating capacity due to changes in the level, volatility, or correlation of market risk factors, such as interest rates (including credit spread), foreign exchange rate, equity prices, and commodities prices, and changes in market liquidity. This risk is mainly classified into interest rate risk, exchange rate risk, equity risk, and commodity risk.Market risk management is performed through the following management processes for risk identifica-tion, measurement, control, and reporting.A risk-taking unit is tasked with clearly identifying the source of market risk for each type of transaction before the transaction is conducted, and for stating its findings in relevant product guideline documents. The market risk management unit independently performs these identification procedures.The market risk management unit uses appropriate and consistent measurement methodologies to cover key sources of risk based on business characteristics and sources of risk. The results of risk measurement are closely integrated with routine risk management to serve as a reference for planning, monitoring, and controlling market risk conditions.Market risk limit is a tool for authorizing and controlling CTBC Bank’s market risk to ensure that market risk exposure conforms to risk appetite. The procedures for the setting, approval, exceptions, and over-stepping of the limits are handled in accordance with the relevant policies of market risk management. The market risk management unit reports relevant risk management information to senior managers on a daily basis. It also regularly reports the overall market risk status of CTBC Bank to the senior manage-ment and the Board of Directors for reference in the development of risk adjustment strategies.

(3) Operational riskOperational risk is the risk of loss resulting from inadequate or failed internal processes, people, and sys-tems or from external events. This definition includes legal risk but excludes strategic and reputational risk.CTBC Bank applies the standard approach for the accrual of operational risk capital. It implements and

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continually strengthens its Operational Risk and Control Assessment, Operational Risk Event manage-ment, and Key Risk Indicators risk management mechanisms for identifying, evaluating, monitoring, and controlling operational risks.

(4) Liquidity riskLiquidity risk is the risk that funds cannot be obtained at a reasonable price within a reasonable period of time to fulfill a financial obligation, resulting in a bank surplus decrease or a decline in economic value.Based on its asset and liability management policy, CTBC Bank has established a sound liquidity risk management structure and procedures, clearly defined the rights and responsibilities of each related unit, and set the scope and procedures of liquidity risk identification, measurement, monitoring, and reporting as the basis for its liquidity risk management.CTBC Bank controls its risk exposure through various liquidity risk limits. The liquidity risk limit covers the maximum unstable borrowing and the maximum cumulative outflow, ensuring that the Bank’s risk ex-posure conforms to its risk appetite. CTBC Bank also uses a liquidity risk heat map to visualize changes in liquidity risk. This systematic monitoring facilities understanding of the changes, causes, and influences of various elements and facilitates the quick identification of liquidity risk. In addition, the fund manage-ment unit acts as CTBC Bank’s actual liquidity management unit to centralize risk control internally and coordinate any related external operations. The liquidity risk monitoring unit regularly compiles a risk report covering the use of limits and the analysis of liquidity risk indicators, supplemented by stress test results. It also regularly reports at relevant risk meetings. Important liquidity risk issues are reported to the senior management of the Bank or CTBC Holding for discussion, depending on each issue’s potential impact.

(5) Interest rate risk in the banking book Interest rate risk in the banking book refers to interest rate-sensitive assets and liabilities for non-trading

purposes, the interest rate change of which will affect earnings or shareholders’ equity. CTBCBankreliesonrepricinggapreports,interestraterisksensitivity,stresstesting,andtheprofitsand

lossesoffinancialinstruments(non-tradingpurposes)tomeasureinterestrateriskandcontroltheinterestrateriskexposureof thewholebank throughvarious interest raterisk limits.CTBCBankinternallyadjusts deposit allocations by means of a fund transfer pricing system and changes the allocation of bank fundsbyadjustingfundpositions.Interestrateriskisidentified,measured,monitored,andreportedbyanindependentinterestrateriskmanagementunit toachieveriskbalanceandtomaximizeshareholdervalue.

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(6)RiskexposurequantificationinformationA. Capital requirements

a. Exposure and capital requirements after risk mitigation per standardized methodUnit:NT$thousandAs of Dec. 31, 2020

Exposuretype Exposureafterriskmitigation Requiredcapital

Sovereign 1,096,605,166 3,773,854

Non-central government public sector 82,159,601 1,344,380

Banks (including multilateral development banks) 374,812,868 10,278,571

Enterprises (including securities and insurance companies) 810,722,732 58,903,857

Retail 429,916,699 24,984,306

Residential real estate 1,227,339,554 51,227,975

Equity securities investment 18,163,979 1,453,118

Other assets 131,602,456 8,359,694

Total 4,171,323,055 160,325,755

b. Securitization exposure and capital requirement by transaction typeUnit:NT$thousandAs of Dec. 31, 2020

Exposuretype

BooksBankroletype

Assets type

Traditionalsecuritization Syntheticsecuritization Total

ExposureatdefaultRequired

capital charge(2)

Exposureatdefault Capital

requirementcharge(4)

Exposureatdefault(5)=(1)+(3)

Requiredcapital charge

(6)=(2)+(4)

Requiredcapital

charge before securitization

Hold/purchase

Provide the liquidityfacilities

Provide the credit

enhancementSubtotal(1)

Hold/purchase

(3)

Non-originatingbank

Bankingbook

Residentialmortgage-backedsecurities

96,100,560 - - 96,100,560 1,539,993 - - 96,100,560 1,539,993

Asset-backedlending

553,829 - - 553,829 33,230 - - 553,829 33,230

Collateralizeddebtobligations

15,217,382 - - 15,217,382 261,094 - - 15,217,382 261,094

Collateralizedmortgageobligations

824,350 - - 824,350 13,190 - - 824,350 13,190

Commercialmortgage-backedsecurities

33,312,440 - - 33,312,440 2,664,995 - - 33,312,440 2,664,995

Other 4,969,245 - - 4,969,245 362,669 - - 4,969,245 362,669

Tradingbook - - - - - - - - -

Subtotal 150,977,806 - - 150,977,806 4,875,171 - - 150,977,806 4,875,171OriginatingBanks

Banking book

- - - - - - - - -

Trading book - - - - - - - - -

Subtotal - - - - - - - - -

Total 150,977,806 - - 150,977,806 4,875,171 - - 150,977,806 4,875,171

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c. Operational risk capital requirementUnit:NT$thousandAs of Dec. 31, 2020

Year Operatinggrossprofit Capitalrequirement

2017 90,953,813

2018 95,974,402

2019 101,823,028

Total 288,751,243 13,439,154

d. Market risk capital requirementUnit:NT$thousandAs of Dec. 31, 2020

Item Capitalrequirement

Interest rate risk 3,826,177

Foreignexchangerisk 6,721,055

Equity securities risk 166,134

Commodity risk 3,179

Optionsapplysimplifiedapproach -

Total 10,716,545

A. Liquidity risk exposurea. Structural analysis of NTD maturity gap

Unit:NT$millionAs of Dec. 31, 2020

TotalAmountintimebucket(remainingtomaturitydate)

0–10 days 11–30 days 31–90days 91–180days

181 days–1 year

Over 1 year

Cashinflowoftimebucket 2,896,344 391,967 324,672 168,131 240,464 266,330 1,504,780

Cashoutflowoftimebucket 3,377,399 148,079 260,173 389,235 415,751 753,021 1,411,140

Gap (481,055) 243,888 64,499 (221,104) (175,287) (486,691) 93,640

b. Structural analysis of USD maturity gap(a) Whole bank

Unit:US$thousandAs of Dec. 31, 2020


0–30 days 31–90days 91–180days 181 days –1 year Over 1 year

Cashinflowoftimebucket 81,382,875 30,884,826 16,060,672 10,829,878 9,889,628 13,717,871

Cashoutflowoftimebucket 115,756,006 30,063,001 16,769,459 16,630,500 18,799,403 33,493,643

Gap (34,373,131) 821,825 (708,787) (5,800,622) (8,909,775) (19,775,772)

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(b) Overseas branchesUnit:US$thousandAs of Dec. 31, 2020


0–30 days 31–90days 91–180days 181 days–1 year Over 1 year

Cashinflowoftimebucket 41,070,122 14,134,441 9,787,614 6,746,157 5,433,106 4,968,804

Cashoutflowoftimebucket 49,942,617 14,714,038 9,686,722 8,692,952 8,609,537 8,239,368

Gap (8,872,495) (579,597) 100,892 (1,946,795) (3,176,431) (3,270,564)

2) TaiwanLifeTo ensure compliance with laws and promote the healthy operation and development of Taiwan Life, the company has risk management policies in place. These include a Risk Governance Policy for overall business risk management and implementation compliance, details of which are as follows:(1) Asset risk Taiwan Life continues to strengthen its various asset risk controls and has relevant control mechanisms for

market, credit, and liquidity risk. It issues risk management reports on a regular basis in order to disclose theriskexposureof its investmentpositionsand thevaluechangesofeachasset, therebyeffectivelycontrolling asset risk.

(2) Market risk Market risk refers to the risk that asset value may be lost because of changes in market prices during a

certain period of time. Taiwan Life has a market risk management policy that involves periodic measuring, monitoring, and reporting VaR, sensitivity analysis, and situational analysis regarding market risk factors.

(3) Credit risk Credit risk refers to the risk that a debtor’s credit is downgraded or the debtor cannot repay its debts, or

thatthecounterpartyofatransactioncannotorrefusestofulfillitsobligations.TaiwanLifehasafinancialtransaction credit risk management policy and a loan credit risk management policy, as part of which credit assessment is conducted before transactions and credit risk is evaluated after transactions. A credit risklimit isalsoinplaceformonitoringpurposes,withregularreviewsofwhetherthecreditexposurelevel is within Taiwan Life’s credit risk limit.

(4) Liquidity risk Liquidityriskrefers totheriskofnothavingsufficientcashor liquidassets tomeetcashexpenditure

needs.Tomaintainsufficient liquidityandavoidhavinginsufficientcashor liquidassets tomeetcashexpenditureneeds,a liquidityassessment isconductedunderscenarioanalysis toensurecorrectandtimely liquidity risk management.

(5) Assets and liabilities risk Assetsandliabilitiesriskreferstotheriskoffinanciallosscausedbyinconsistentchangesinthevalueof

assets and liabilities. Taiwan Life maintains a risk management policy for the risk of assets and liabilities; the match of asset and liability is routinely reviewed, with its risk limit monitored to ensure alignment withthecompany’sobjectives.Ifrisklevelsexceedthetoleranceorifspecialcircumstancesarise,promptreports shall be made to senior management, followed by communication with relevant responsible units for improvement plans.

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(6) Insurance riskThe management mechanisms for insurance risks involving product design and pricing, underwriting, re-insurance, catastrophe insurance, insurance claims, and reserves are as follows:A. Product design and pricing risk management Product design and pricing risk refers to the risk resulting from factors such as errors, inconsistencies,

or unanticipated changes in the content of product design, the terms contained thereof, or price quotations. To ensure risk control before and after the sale of products, Taiwan Life has in place an insurance product design procedure to be followed before sales to ensure compliance with relevant regulations and strengthen the internal controls of insurance products. According to the type and specific details of each product, risk measurement is conducted through profit testing or sensitivity analysis. This approach ensures that Taiwan Life and its signatories fulfill their responsibility to review insurance products. After selling a product, the relevant departments prepare a post-sale inspection report for the biannual insurance product management conference.

B. Underwriting risk management Underwriting risk refers to the risk of unintended losses arising from insurance industry activities such

as cultivating insurance business, reviewing underwriting business, and related expenses. To control its underwriting risks, Taiwan Life has an underwriting insurance management system and procedures as well as guidelines for insurance operations and underwriting manuals.

C. Reinsurance risk management Reinsurance risk refers to the risk arising from reinsurance transactions, such as failure to arrange

appropriate reinsurance for the risk of exceeding limits or the inability of the reinsurer to fulfill its obligation, resulting in the inability to amortize premiums, indemnities, or other expenses.

Taiwan Life has a reinsurance risk management plan that includes retention risk management, ceded reinsurance risk management, and assumed reinsurance risk management. After risk characteristics are classified, risk-bearing capacity are evaluated and the retention amount considered. Taiwan Life chooses reinsurers to work with in accordance with the established reinsurer selection criteria and decision-making procedures. After reinsurance arrangements are completed, the reinsurer’s credit rating and related information are regularly monitored to avoid the risk of reinsurer default.

D. Catastrophe risk management Catastrophe risk refers to cases in which an accident or loss is sufficient to cause losses in a single or

multiple insurance categories, with a total loss that may affect the credit rating or liquidity of Taiwan Life. Taiwan Life measures and manages its catastrophe risk by using catastrophic loss records to estimate the possible losses in the case of the recurrence of such catastrophe.

E. Claims risk management Claims risk refers to the risk that Taiwan Life may bear because of deficiencies or negligence in the

claims-handling process. Taiwan Life has appropriate claims-processing procedures to reduce such risk.

F. Reserve-related risk management Reserve-related risk refers to the risk resulting from sales’ underestimation of liabilities, which

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renders the reserve provision insufficient for future obligations. Taiwan Life conducts regular reserve adequacy analyses to reduce risk in this area.

G. Operational risk Operational risk refers to the risk of direct or indirect damage arising from inappropriate or incorrect

internal operations, personnel, or systems, or from external events. Taiwan Life has an operational risk management policy and monitors operational risk by promoting three operational control tools: operational risk data collection, risk and control self-assessments, and key risk indicators.

H. Risk exposure quantification informationTaiwan Life Dec.31,2019 Dec.31,2020 Note

Capital adequacy ratio 298.30% 309.41% Both are above the legally required rate of 200%.

3) CTBCSecuritiesCTBC Securities has risk management mechanisms based on the following risk characteristics:(1) Market risk CTBC Securities has implemented market risk management policies. Quantitative methods used to

manage market risk include an evaluation process on the mark-to-market basis, sensitivity analysis, and VaRmeasurementstoassessriskprofilesonadailybasis.Ourpoliciesspecifytherisklimits,warnings,andlimit-exceedingmanagementprocessatallmanagementlevelsof thecompanyinordertocontrolthemarketriskwithindefinedtolerablescope.Inaddition,tostrengthenthemanagementoffattailrisks,stresstestssetatrelevantmarketfluctuationsofeachproductareregularlydeployed.

(2) Credit risk CTBC Securities has credit risk management policies in place. Our credit rating scheme for measuring

credit risk refers to the ratings of reputable third-party rating companies, such as the Taiwan Corporate CreditRiskIndexratingsoftheTaiwanEconomicJournal.Inthemanagementofcreditrisk,thesourceofthecreditriskofeachbusiness/transactionisidentifiedbeforeanysuchbusiness/transactionisenteredinto,andtheresultsaredescribed.CTBCSecuritiesalsocarefullyevaluatesandclarifiesthetypesandlimitsofcreditriskandmonitorstherelevantexposureconcentrationsandlargeexposureaccountstoensure that credit risk falls within the controllable scope.

(3) Operational risk CTBC Securities has operational risk policies and conducts relevant control based on the operating

proceduresandkeycontrolnodesspecifiedinitsinternalcontrolsystem.Ithasalsoestablishedqualitativeandquantitativetoolstoassistintheidentification,measurement,andmanagementofoperationalrisks.These operational risk management tools include but are not limited to the self-assessment of risk and control,keyriskindicators,anoperationalrisklossreportingsystem,andexternallosseventinspection.

(4) Liquidity risk CTBCSecuritieshasassetandliabilitymanagementpoliciesinplace.Thefinancialunitofthecompany

is responsible for the utilization of funds, while the Risk Management Department sets various liquidity risk indicators as well as target intervals for each indicator. The severity of liquidity risk warning (highest to lowest) is indicated by a light system, supplemented by the setting of Board level limits, facilitating the comprehensive monitoring of overall liquidity changes.

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(5) Other business risks The Compliance Department assists in reviewing the legality of each business field and in ensuring

statutory policies are complied with. The department also stipulates legal compliance policies and relevant rules and procedures to ensure the legal compliance of CTBC Securities’ operations. Regarding money launderingandthefinancingofterrorism,CTBCSecuritieshasestablishedtheGuidelinesforAnti-MoneyLaundering and Countering the Financing of Terrorism, the Money Laundering and the Financing of Terrorism Risk Assessment Management Policy, and related operational policies and procedures to ensure effective AML/CFT system compliance. Regarding customer complaints, a customer service line staffed by specialized employees is made available in order to improve the quality of service, safeguard customer rights, and reduce consumer disputes. In addition, for emergency circumstances that may negatively affect the company’s operations, Emergency Response Criteria for Operational Crisis Management regulates the response mechanisms for various operational crises, (e.g., transactional system disruption crises and personal data violations), which include the crisis reporting system, the authority and responsibilities of the members of the crisis management team, the implementation procedures of contingency plans, and the post-event reviews.

(6) Risk reporting frequencyA. The CTBC Securities Risk Management Department regularly consolidates risk management reports

and submits them to senior management for review.B. The department periodically prepares risk integration reports for the Board of Directors to review.

The reports cover information about market risk, credit risk, liquidity risk, operational risk, and other business risk.

(7)RiskexposurequantificationinformationDec.31,2019 Dec.31,2020 Note

Capital adequacy ratio 364.90% 359.61% Both are above the legally required rate of 150%.

VaR (99%, one day) 73,787 126,770 Unit:NT$thousand

4) CTBCVentureCapitalThe main financial risks of CTBC Venture Capital are investment risks arising from venture capital

business operations. It has established an Investment Business and Risk Policy for conducting venture capital investment business and risk management. All investment acquisition and disposal decisions must be approved by the Board of Directors or relevant authorized units or personnel prior to implementation. An investment committee has also been established to review major investment cases in order to collect various opinions for strengthening risk management. Prior to any investment acquisition and disposal, a detailed risk assessment and identification is conducted to form a specific evaluation report as a decision-making reference by the delegated approval authority. In addition to closely monitoring investee companies’ business operations, routine post-management reporting to the Board of Directors or authorized units or personnel is required in order to effectively monitor changes of investees’ operation and risks.

Other risks are less significant and are regularly reviewed and controlled in accordance with the relevant regulations of CTBC Venture Capital, CTBC Holding, and the competent authority.

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5) CTBCAssetManagementIn line with its business objectives, CTBC Asset Management’s main financial risks arise from equity

investment and real estate investment. The subsidiary has policies and guidelines—such as its Risk Management Policy, Investment Business and Risk Policy, and Subsidiary Management Procedures—to ensure investment assessment quality, risk management, and periodical reviews. In addition, the Subsidiary Management Procedure stipulates items to be escalated to the parent company and the process thereof to ensure the sound operation of subsidiaries’ businesses.

6) CTBCInvestmentsCTBC Investments’ business activities mainly comprise fund management assets and discretionary

assets. The position of its own assets is limited by the Regulations Governing Securities Investment Trust Enterprises, the usage of which can be only for bank deposits, bonds, short-term bills, and fund beneficiary certificates that meet a certain percentage, thereby reducing risk.

For managing fund assets and discretionary assets, the main risks and risk control methods are as follows: (1) Market risk Marketriskreferstofinancialandinvestmentcommoditytradinginwhichfunds,specialaccounts,etc.

aresubjecttochangesinexternalfinancialmarketriskfactors(suchasinterestratesandequity),resultingintheriskofpotentialfinanciallosses.Regardingthemaininvestmentproductsandtoolsoffundsandspecial accounts, CTBC Investments has relevant stop-loss control, rate reasonability review and tracking error management mechanisms in place and regularly performs monitoring operations to enhance the awarenessofpricefluctuation-relatedrisk.

(2) Credit risk Credit risk refers to the risk of loss arising when a borrower, guarantor, debtor, or transaction counterparty

fails to fulfill its contractual obligations because of a worsen financial condition or other factor. For fund and special account investment targets and counterparties, CTBC Investments has a relevant quota management mechanism and irregularly review counterparty credit. It also regularly performs transaction monitoring and post-investment management to effectively control the credit risk of investment targets and counterparties.

(3) Liquidity risk Liquidity risk refers to the risk of not being able to realize/convert assets or obtain sufficient funds,

resultinginfailuretofulfillfinancialobligations(fundingliquidityrisk)andtheriskofnotbeingabletorealize/convertspecificassetsatareasonablepriceinareasonableperiodoftimebecauseofinsufficientmarket depth or market disorders (market liquidity risk). Regarding the main investment products and tools of funds and special accounts, CTBC Investments has in place shareholding concentration, volumelimit,bid-askspread,andcashflowmanagementmechanismsandregularlyconductstransactionmonitoring operations.

(4) Operational risk Operationalriskreferstotheriskoflossesfromdeficient,inappropriate,orincorrectinternaloperations,

personnel,orsystems,orfromexternalevents.CTBCInvestmentshasestablishedanoperationalriskpolicyandanotificationmechanismforoperationalriskeventsinordertoenforceriskmanagementofthesecurities investment trust businesses and its daily business activities.

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7) CTBCSecurity(1)Internalfinancialmanagement CTBC Security’s time and demand deposits are designated to transact with CTBC Bank, and the company

is currently operating without liabilities. Its cashiers and accounting staff perform their duties, and the checkbooks, seals, passbooks, etc. are kept by two or more individuals in accordance with the internal control mechanism.

(2)Externalsecurityservices InaccordancewiththePrivateSecurityServiceAct,CTBCSecuritypurchasesNT$10millioninliability

insurance on a periodic basis. Other risks are less significant and are regularly reviewed and controlled in accordance with relevant

regulations of CTBC Security, CTBC Holding, and the competent authorities.

8) TaiwanLottery(1) Operational risk Taiwan Lottery has created a sound risk management system and culture by establishing appropriate risk

management policies and operational risk management procedures as a basis for implementing operational risk identification, assessment, measurement, monitoring, reporting, information disclosure, and prevention and improvement measures. Furthermore, in line with ISO quality management requirements, allbusinessoperationsrequirecompleteprocessplanningandproceduraldocumentsbeforeexecution,in order to restrict the risks of daily operations within an acceptable range as well as to maintain the company’s operating performance and protect the rights of its dealers and customers.

(2) Liquidity risk TaiwanLottery’sfinancialunitdevisesthecompany’sfundraisingandutilizationplanbasedspecifically

on the estimated funding needs of the business unit in order to maintain the balance of supply and demand as well as fund liquidity.

Given the operating characteristics of Taiwan Lottery, it does not make short-term use of idle funds or rely onshort-termbankborrowingtoobtainfunding.Becauseitisasubsidiarywithnon-significantliquidityrisk,itadoptssimplifiedriskmanagement;thereisnolimitcontrol,butchangesofthecurrentratiowillbe reviewed and included in the risk reports submitted to its President, its Board of Directors, and CTBC Holding’s Risk Management Department on a periodic basis.

(3) Credit risk The primary credit risk for Taiwan Lottery is retailers failing to pay back funds in cases where Taiwan

Lottery offers limited sales credits in advance, which is a practice aimed at ensuring retailers have sufficient funds to sell lottery tickets. The risk would occur when technical system problems prevent retailers from transferring money from their bank account to the lottery account via their betting terminal, or when, on some special occasions such as Lunar New Year holidays or other hot sales periods, retailers don’t have enough money to transfer the appropriate amount into the lottery account. If retailers don’t deposit the required funds into the lottery bank account before the due date designated by Taiwan Lottery, this may negatively affect Taiwan Lottery’s credit. However, under the current management scheme, providing limited sales credit to the retailers’ betting terminals as described is a viable practice and yields nosignificantcreditrisk.Aperiodicinspectionshallbeconductedtoidentifyanychangesincreditrisk.RiskexposureshallbeincludedintheriskreportsubmittedtothePresident,BoardofDirectors,andRiskManagement Department of CTBC Financial Holding.

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7.6.3 Impact of major domestic and overseas policies and legal changes on the Company’s finances and business, and countermeasuresTo provide TWSE/TPEx-listed companies with best practice principles in corporate governance, corporate social responsibility, and ethical management, Taiwan Stock Exchange Corp. amended in 2020 the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies, Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies, and Sample Template for XXX Co., Ltd. Procedures for Ethical Management and Guidelines for Conduct, incorporating control methods for securities transactions using information that has not been made public and rules and procedures for Board performance evaluations. The amendments also require that methods or strategies of environmental, social, and corporate governance be disclosed according to the principle of materiality, that corresponding methods be taken for potential risks and opportunities from climate change, that supplier management policies be made, and that the privacy of clients be highly valued. In addition, regarding the ethical management aspect, the amendments require that ethical management units report to boards at least once a year, that directors and executives issue ethical management compliance statements, and that anonymous reporting of illegal behavior be accepted. The Company has always been committed to promoting corporate governance, corporate social responsibility, and ethical management toward the goal of achieving best practices. As such, the abovementioned changes in laws and regulations were examined in a timely manner and our internal rules were amended accordingly.

7.6.4 Impact of technological and industrial changes on CTBC Holding’s finances and business, and countermeasuresAs businesses sought to adapt to the severe challenges brought by the Covid-19 pandemic, the use of new technologies such as telecommuting brought new challenges as well. Faced with the cybersecurity risks and threats arising as byproducts of various emerging applications, the Company and its core subsidiaries have already started integrating independent verification systems. The implementation of cybersecurity protection measures includes an intrusion prevention system, a web application firewall, data loss prevention, and defenses against denial-of-service attacks and advanced persistent threats. Recently, a new generation of smart analysis cybersecurity detection mechanisms was implemented across the Company’s internal and external networks, removing blind spots in traditional cybersecurity systems and enhancing its overall cybersecurity protection capabilities. Furthermore, we keep our employees up to date on the latest cybersecurity threats by regularly conducting social engineering drills and cybersecurity education and training. The group also periodically leads cross-subsidiary meetings of subsidiaries’ information security managers in order to track the progress in achieving information security benchmarks, to control various changes in information security risks, and to propose effective response measures.

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7.6.5 Impact on the Company of changes to the corporate image of the Company and its subsidiaries, and countermeasures CTBC Holding and its subsidiaries adhere to a “caring, professional, and trustworthy” brand identity, which they also utilize as a guideline for serving their customers. They follow a “We are family” brand spirit in striving to deepen their relationships with customers. In addition, they adopt “TRUST” as an acronym emphasizing their commitment to grow its brand value through the five major aspects of corporate governance (Transparency), environmental sustainability (Responsibility), employee welfare (Understanding), customer service (Satisfaction), and community engagement (Together). CTBC Holding’s various business operations are conducted in compliance with legal requirements and the regulations of the competent authorities. Along with developing a high-quality brand image, CTBC Holding will continue prioritizing the needs of customers and improving its service quality with a view to creating a financial landscape of sustainable growth and cementing its status as the most trusted financial institution. The CTBC Holding group is continuing to practice a business philosophy that prioritizes customers’ interests, insisting on creating win–win outcomes and maintaining a deeply rooted, high- quality public image. The Company currently has no public image crisis.

7.6.6 Projected benefits, possible risks, and countermeasures of M&A1) ProjectedbenefitsofCTBCHoldingM&A

(1)Expanditsscaleofoperationsandimproveitsoperationalefficiency.(2) Increase its number of business locations and the diversity of its business through mergers.(3) Create group synergies through joint marketing.(4)Enhanceitsmarketcompetitivenessbyprovidingacomprehensiverangeoffinancialservices.(5)Expanditsinternationalservicemaptoraiseitsinternationalmarketoperationcapacitiesandbusinessand

reduce the risk of business concentration, thereby improving its overall operational performance.2) PossiblerisksandcountermeasuresforM&A

(1) Where information asymmetry is a factor, the Company must bear the asset and liability risks of merged andacquiredfinancialinstitutions.

(2)Excessivemergerprices:Even financiallysoundM&Ainstitutioncandidatesoften failbecauseofexcessivemarketpremiums.

(3) Difficult integration after M&A: Integration after M&A involves human resources, organizational restructuring, and changes in management systems.CTBC Holding’s considerable professional knowledge and experience in M&As enable it to address such risks. In seeking to expand its business through M&As, CTBC Holding places great emphasis on corre-sponding risk control. Furthermore, the Company conducts prudent assessments before the process and formulates meticulous integration plans, supported by strong plan implementation capabilities and the most appropriate remedial measures. As a result, risks arising from M&As can be effectively managed, in turn improving the overall benefits of M&A integration.

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7.6.7 Business concentration risks and countermeasuresThe CTBC Holding group’s primary focuses are banking and life insurance. To avoid risks posed by excessive business concentration, the Company is committed to providing diverse financial services and strengthening its risk control. In addition, through active expansion into overseas markets, it is seeking to further reduce the impact of business concentration in specific areas.

7.6.8 Impact, risks, and countermeasures of material transfers or changes in the equity of directors, super-visors, or major shareholders holding more than 1% of sharesThe total shareholding ratio of CTBC Holding’s directors (including independent directors) and major shareholders holding more than 1% of shares is 29.21%; the equity is evenly distributed and they exhibit resounding trust in the Company’s management team. There is currently no consideration of the transfer or replacement of any large number of shares.

7.6.9 Impact, risks, and countermeasures of changes in managementCTBC Holding is governed by a solid operating authority, which is committed to enhancing the management team’s cohesion. The shareholdings of the directors are all in compliance with the Rules and Review Procedures for Director and Supervisor Share Ownership Ratios at Public Companies. No risks have arisen from changes in operating rights. Based on its solid business foundation, the Company pursues growth and the best interests of its shareholders.

7.6.10Materiallitigation,non-litigationproceedings,oradministrativedisputesthatweresettledin2020through the publication date, or that remain on trial and involve the Company, its subsidiaries, andtheirdirectors,supervisors,presidents,responsiblepersons,andmajorshareholders(holdingover1%ofshares)aswellastheiraffiliatedcompanies,theresultsofwhichmaymateriallyimpactstockholders’rightsandinterestsorthepricesoftheCompany’ssecurities.

1) CTBCHolding

Case Target amount Litigation commencement date Party Status

Overseas reinvestment by subsidiary CTBC Asset Management (Note)

Personnel were suspected of violating the Financial Holding Company Act and the Securities and ExchangeAct.TheTaipeiDistrictCourtfoundthesuspectedpersonnel,surnamedKooandChang,notguilty on Aug. 23, 2019. The prosecutor lodged an appeal and the case is currently being heard at the TaiwanHighCourt.ThecaseisnotexpectedtohaveasignificantimpactontheCompany’soperationsor shareholders’ equity.

Note: This suit involves the defendants in a personal capacity rather than having been filed against the Company.

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2) CTBCBank

Case Target amountLitigation

commencement date

Party Status

Overseas structured notes linked to Mega Financial Holdings stocks purchased and disposed by the Hong Kong branch (Notes 1 and 2)

– Employees surnamed Chang, Lin, and Deng were indicted on Feb. 15, 2007An employee surnamedKoo was indicted on Dec. 24, 2009

Employees surnamed Chang, Lin, Deng, and Koo

OnSept.12,2018,theTaiwanHighCourtmodifiedthefirstverdictandfound Chang, Lin, and Koo guilty, and sentenced them to varying terms of imprisonment. Deng was found not guilty.OnNov.14,2019,theSupremeCourtreversedtheverdictfromthefirstretrial of Koo and the guilty verdicts of Chang and Lin. The case was sent back to the Taiwan High Court for retrial, and the Supreme Court maintainedthenotguiltyverdictofthefirstretrialofChang,Lin,andDeng.Theresultofthiscaseisnotyetfinal.

As an assignee of the right of action for the recovery of damages caused to consumers by the closure of three companies limited by shares, namely Ya Li Shan Ta, Ya Chueh International Entertainment, and Chun Life, the Consumers’ Foundationfiledacivilsuitagainst CTBC Bank.

NT$907,607,204 Commenced on Jan. 22, 2008Additional suit commenced on Aug. 13, 2008

Plaintiff: Consumers’ Foundation Defendants: CTBC Bank, the National Credit Card Center, Citibank, First Commercial Bank, and three companies limited by shares, namely Ya Li Shan Ta, Ya Chueh International Entertainment, and Chun Life

This case is currently in preliminary proceedings at the Taipei District Court.In the written complaint submitted by the plaintiff on March 27, 2015, the targetamountwasreducedtoNT$66,834,064.

TBC Bank, as a trustee of a specifiedmoneytrust,hadpurchased 22 structured notes issued by Lehman Brothers Treasury Co. B.V. (LBT) and guaranteed by Lehman Brothers Holdings Inc. (LBHI). Because LBHI and LBT were in bankruptcy proceedings in the United States and the Netherlands, respectively, CTBC Bank entrusted lawyers in Taiwan and overseas to handle matters related to the declaration of creditor’s rights for the structured notes in the U.S. and the Netherlands.

US$515,776,372.89(Note 3)

Sept. 15, 2008 (LBHI)Oct. 8, 2008 (LBT)

Creditor declaration: CTBC Bank

Bankrupt parties: LBHI (U.S.)LBT (Netherlands)

1. About LBHI: CTBC Bank has completed creditor’s rights declaration procedures in

accordance with the law against the structured notes it held (22 in total). CTBC Bank has completed the acceleration notice.

LBHI has submitted the revised joint restructuring plan and public announcement.

CTBC Bank voted against the third revision of the restructuring plan as proposed by LBHI in November 2011.

The U.S. Bankruptcy Court issued a verdict on Dec. 6, 2011, approving the third revision of the restructuring plan proposed by LBHI.

CTBC Bank received allocations from LBHI in April and October 2012–2015; April, June, and October 2016; April, October, and December 2017; April and October 2018; April, July, and October 2019; April and October 2020; and April 2021, 22 times in total; at present, these account forapproximately29.18%oftherecognizedamountofcreditor’srights(Note 4).

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commencement date

Party Status

2. About LBT: CTBC Bank completed the acceleration notice. LBT’s bankruptcy trustee held discussions with LBHI regarding

creditor’s rights among relevant companies. LBT stated the acceleration notice deadline in its bankruptcy report; the

bankruptcy trustee planned to request that the Amsterdam District Court designate the declaration date and recognition date of creditor’s rights in the second or third quarter of 2012.

LBT released its reconciliation plan on Dec. 10, 2012. CTBC Bank agreed on the instructions stated in the reconciliation plan and declared its creditor’s rights using the International Clearing System.

LBT’s bankruptcy trustee proposed a bankruptcy plan on Dec. 10, 2012. In response, CTBC Bank agreed on the voting instructions stated in the bankruptcy plan and declared its creditor’s rights within the period stipulated in the plan (ending Jan. 25, 2013). The bankruptcy plan was accepted by a vote of LBT’s creditors on March 7, 2013, and approved by the Dutch bankruptcy court on March 22, 2013.

Asscheduledinthebankruptcyplan,LBThandledthefirstthrough14th allocations of its bankruptcy estates account in May and October 2013; April and October 2014; April and October 2015; April, July, and November 2016; May and October 2017; and January, May, and October 2018.InMay2019,thefinaldistributionfromLBTwasreceivedperthe solicitation process for creditors who do not receive substitute notes.Addingthefinaldistribution,theallocationsreceivedbyCTBCBankaccountforapproximately42.63%oftherecognizedamountofcreditor’s rights (Note 4).

LBT issued a partial liquidation notice on Jan. 24, 2019, stating that someQualifiedNoteholdersmaychoosetoeitherreplacetheirEligibleNotes with alternative notes or accept ultimate distribution and issuance. CTBCBankhadrepliedtoLBTwiththeamountthattheQualifiedNoteholder proposed to convert into alternative notes and the related information of such notes before the deadline (March 11, 2019) provided in the partial liquidation procedure.

In May, July, and October 2019; April and October 2020; and April 2021, the Bank received the distribution from LBT for holders of substitute notes. Currently, the inclusive rate of substitute notes distributed is 0.85% of the substitute notes’ total denomination (Note 4).

Transactions for an administrative building and data center (Note 1)

- Employees surnamed Chang and Chen, among other employees, were indicted on Jan. 12, 2017; an additional indictment was brought against Chang in January 2018

Employees surnamed Chang, Chen, et al.

Regarding the indictment initiated on Jan. 12, 2017, the Taipei District Court found the defendants guilty on Oct. 11, 2018. They lodged appeals and the case is currently being heard at the Taiwan High Court. Regarding the additional indictment, the Taipei District Court found Chang not guilty on June 4, 2019. The prosecutor appealed and the case is currently being heard at the Taiwan High Court.

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commencement date

Party Status

Real estate on Beimen Road, Tainan City (Note 1)

- Employees surnamed Chang and Hung, among others, were indicted on Sept. 12, 2019

Employees surnamed Chang, Hung, et al.

The case is currently being heard at the Taipei District Court.

Sale of NPLs and Transaction of Chengcing Lake Building (Note 1)

In this case, Koo, Chang, and Lin were allegedly involved in interested-party transactions that were not disclosed as required. They were thus suspectedofviolatingtheBankingAct,theSecuritiesandExchangeAct,etc.IndictmentswerefiledonAug.26,2019.ThiscaseisnotexpectedtohaveasignificantimpactonCTBCBank’sortheCompany’soperationsorshareholders’equity.

Note 1: This suit involves the defendants in a personal capacity rather than having been filed against the Company.Note 2: In this case, CTBC Holding participated in the confiscation proceedings as a third party, and its attorney presented its objections

against the confiscation proceedings and voiced relevant opinions. In the retrial of the first instance on Sept. 12, 2018, the Taiwan High Court pronounced that the properties of CTBC Holding would not be confiscated or pursued.

The Supreme Court reversed and sent back the aforementioned decision of non-confiscation on Nov. 14, 2019. To prevent contradictory judgments, the confiscation section of the case was also reversed and sent back to the High Court for retrial. A verdict is currently pending.

Note 3: This comprises US$515,667,102.07 of the notional amount of the 22 bonds and US$109,270.82 of accrued bond interest (ISIN No. XS0365192078).

Note 4: The allocation ratios in this column were calculated to three decimal places and rounded off to two decimal places.

3) TaiwanLife(formerlyCTBCLife,whichmergedwithTaiwanLifeonJan.1,2016,withthelattersurviving)

Case Target amount Litigation commencement date Party Status

Transaction of Gobo Group’s real estate (Note)

ThecaserelatedtosuspectedviolationoftheSecuritiesandExchangeActandtheInsuranceAct.TheTaipei District Court found the suspects, surnamed Koo and Chang, not guilty on Aug. 23, 2019. The prosecutor lodged an appeal and the case is currently being heard at the Taiwan High Court, which areongoing.ThiscaseisnotexpectedtohaveasignificantimpactonTaiwanLife’sortheCompany’soperations or shareholders’ equity.

Note: This suit involves the defendants in a personal capacity rather than having been filed against the Company.

4) CTBCSecurities:None.

5) CTBCVentureCapital:None.

6) CTBCAssetManagement:None.

7) CTBCInvestments:None.

8) CTBCSecurity:None.

9) TaiwanLottery:None.10)TheCompanyandsubsidiaries’ incometaxreturnassessmentsandapplicationforadministrative

remedies Year of assessment Explanationofassessment

CTBC Financial Holding Co., Ltd. 2015 None

CTBC Bank Co., Ltd. 2015 None

CTBC Securities Co., Ltd. 2015 None

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Year of assessment Explanationofassessment

CTBC Insurance Brokers Co., Ltd. (dissolved) 2015 None

CTBC Venture Capital Co., Ltd. 2015 None

CTBC Asset Management Co., Ltd. 2015 None

CTBC Security Co., Ltd. 2015 None

Taiwan Lottery Co., Ltd. 2015 None

Chinatrust Bills Finance Corp. (dissolved) 2008 None

Taiwan Life Insurance Co., Ltd. 2015 None

CTBC Life Insurance Co., Ltd. (dissolved) 2015 None

CTBC Investments Co., Ltd. 2015 None

Year of recheck Description of recheck

CTBC Financial Holding Co., Ltd. 2014 Other income

CTBC Bank Co., Ltd. 2014 Undistributed earnings

CTBC Venture Capital Co., Ltd. 2015 Foreigntaxcredits

CTBC Asset Management Co., Ltd. 2014Allocationofexpensesforexemptincome

CTBC Securities Co., Ltd.20142015

Undistributed earningsAllocationofexpensesforexemptincome

Year of litigation Description of litigation

CTBC Financial Holding Co., Ltd. 2010 Loss carryforward

7.6.11 Other significant risks and responding measures: None.

7.7 Crisis management mechanismCTBC Holding maintains a crisis management team. In the event of an emergency that may negatively affect

public confidence in the Company and its subsidiaries, the team will assess the circumstances and take effective countermeasures to neutralize or reduce the damage of the crisis as effectively and quickly as possible.

When a potential crisis occurs, the team’s executive secretary reports it to the team convener, who determines whether to set up a crisis management team; for particularly serious emergencies, the authorized acting manager may gather team members first before reporting to the team convener. After being notified, team members gather at the designated time and place to discuss the measures to be taken. All contingency measures are then taken as soon as possible.

In light of the Covid-19 pandemic, CTBC Holding established a pandemic control and response team to im-plement the pandemic prevention guidelines of the Taiwan Centers for Disease Control. The team also imme-diately drew up related measures to prevent the spread of Covid-19 and ensure business continuity, employee health, and the rights of customers and shareholders. These include dispersing staff among additional off-site workspaces, working from home, staggered rush-hour schedules, and health and safety management measures for all CTBC Holding and subsidiary premises.

7.8 Other significant matters: None.

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8. Special Disclosures

8.1 Affiliated enterprise information

8.1.1 Consolidated financial statement of affiliated enterprisesThe entities that are required to be included in the consolidated financial statements of CTBC Financial

Holding Co., Ltd. for the year ended Dec. 31, 2020, under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with International Financial Reporting Standard No. 10, “Consolidated Financial Statements”, endorsed by the Financial Supervisory Commission of the Republic of China (Appendix 2). Therefore, CTBC Holding and its subsidiaries do not prepare a separate set of consolidated financial statements of the affiliated enterprises.

8.1.2 Consolidated business report of affiliated enterprises1) Affiliateorganizationchart:Pleasereferto“3.CorporateGovernanceReport”.2) Businessoverviewofaffiliatedenterprises

Unit:NT$thousand As of Dec. 31, 2020

Nameofcompany Paid-in capital Total assets Total liabilities NetequityOperating

income

Operating (loss)income(Note6)

Netincomeand losses (aftertax)

Earningsper share

(aftertax;inNT$)

CTBC Bank Co., Ltd. 147,962,186 3,763,505,394 3,451,205,550 312,299,844 Note 5 81,623,273 27,266,986 1.84

Taiwan Life Insurance Co., Ltd. 55,880,707 2,057,425,561 1,918,797,749 138,627,812 277,744,429 17,564,903 16,533,596 2.96

CTBC Securities Co., Ltd. 6,441,039 34,586,215 25,748,880 8,837,335 2,382,605 868,488 856,976 1.33

CTBC Venture Capital Co., Ltd. 3,666,846 5,977,204 2,121,626 3,855,578 503,389 39,750 79,288 0.22

CTBC Asset Management Co., Ltd. 5,358,820 7,942,998 2,384,326 5,558,672 368,899 256,230 289,813 0.54

CTBC Investments Co., Ltd. 306,000 926,898 254,439 672,459 940,946 228,151 184,438 6.03

CTBC Security Co., Ltd. 47,695 113,136 51,346 61,790 245,874 6,887 6,063 1.27

Taiwan Lottery Co., Ltd. 500,000 1,882,596 509,726 1,372,870 1,910,654 907,460 737,974 14.76

CTBC Capital International Co., Ltd. Note 9 Note 9 Note 9 Note 9 13 (814) (814) N/A

CTBC International Co., Ltd. (Note 7)

USD 70,000 thousandExchangerateon

reporting date 28.508

TWD1,995,560 thousand

1,925,814 210 1,925,604 111 (172) (172) (0.0025)

CTBC Financial Leasing Co., Ltd. (Note 7)

RMB 433,802 thousandExchangerateon


TWD 1,900,790 thousand

8,603,434 7,194,001 1,409,433 821,444 103,287 76,036 N/A

CTBC Capital Corp. (Note 1)

USD 6.430 thousandExchangerateon


TWD 183 thousand

111,217,285 94,599,106 16,618,179 Note 5 3,592,072 1,028,944 160,022.46

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Special Disclosures


income



Earningsper share

(aftertax;inNT$)

CTBC Bank Corp. (USA) (Notes 1 and 2)

USD 771.108thousandExchange

rate on reporting date 28.508

TWD 21,983 thousand

111,204,987 95,265,062 15,939,925 Note 5 3,590,726 1,031,453 376,442.79

CTBC Bank Corp. (Canada) (Note 1)

CAD 37,000thousandExchange


TWD827,283 thousand

10,161,961 8,476,202 1,685,759 Note 5 301,710 81,697 29.75

CTBC Bank (Philippines) Corp. (Note 1)

PHP 3,483,072thousandExchange


TWD 2,067,900 thousand

30,507,334 24,028,759 6,478,575 Note 5 1,866,170 110,873 0.32

PT Bank CTBC Indonesia (Note 1)

IDR 150,000,000thousandExchange


TWD 304,350 thousand

35,411,363 29,208,348 6,203,015 Note 5 1,605,770 139,137 92,758.08

The Tokyo Star Bank, Ltd. (Note 1)

JPY 26,000,000thousandExchange


TWD7,189,000 thousand

647,457,766 603,013,698 44,444,068 Note 5 10,390,194 (924,102) (1,320.15)

TSB Servicer, Ltd. (Notes 1 and 3)

JPY 500,000thousandExchange



702,370 11,081 691,289 98,304 184,310 69,731 174,328.06

Tokyo Star Business Finance, Ltd. (Notes 1 and 3)

JPY 500,000thousandExchange



3,761,083 493,695 3,267,389 (27,134) 502,455 (21,674) (11.19)

CTBC (Mauritius) Holding Co., Ltd. (Note 4)

USD 17,363thousandExchangerateon



162,567 - 162,567 (15,775) (15,843) (15,951) (0.92)

CTBC Securities Investment Service Co., Ltd. (Note 4)

50,000 72,443 17,966 54,477 48,000 5,072 4,301 0.86

CTBC Securities Venture Capital Co., Ltd. (Note 4)

300,000 340,652 12,405 328,247 48,294 27,442 23,273 0.78

CTBC Asia Ltd. (Note 4)

HKD 134,526thousandExchangerateon



220,557 59,929 160,628 18,036 (19,266) (15,775) (0.12)

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income



Earningsper share

(aftertax;inNT$)

CTBC Insurance Co., Ltd. (Note 8) 2,000,000 3,937,277 2,109,578 1,827,699 1,674,367 16,482 (3,988) (0.02)

CTBC Finance Co., Ltd. (Note 8) 1,002,937 9,612,640 8,476,453 1,136,187 4,897,497 5,913 43,840 0.44

Note 1: The company’s net income and losses are already reflected in CTBC Bank Co., Ltd. Note 2: The company’s net income and losses are already reflected in CTBC Capital Corp.Note 3: The company’s net income and losses are already reflected in The Tokyo Star Bank, Ltd. Note 4: The company’s net income and losses are already reflected in CTBC Securities Co., Ltd.Note 5: The banking industry is subjected to the Regulations Governing the Preparation of Financial Reports by Public Banks; therefore,

operating income was not categorized.Note 6: Banking subsidiaries are expressed in terms of net revenue.Note 7: The company’s net income and losses are already reflected in CTBC Asset Management Co., Ltd. Note 8: The company’s net income and losses are already reflected in Taiwan Life Insurance Co., Ltd. Note 9: The company was liquidated on Dec. 4, 2020.

3) Informationonthedirectors,supervisors,andpresidentsofaffiliatedenterprisesAs of Dec. 31, 2020

Company Position Name Sharesheld(Unit:thousandshares) %

CTBC Bank Co., Ltd.


14,796,219 100.00%

Chairman Ming-Shieh Li

Vice Chairman Ting-Jeng Chan

President James Chen

Director Wen-Long Yen

Director Thomas K.S. Chen

Director Su-Kuo Huang

Director Mao-Lin Shih

Director Yen-Pao Chen

Director Chun-Te Chiang

Independent Director Shih-Chieh Chang

Independent Director Cheung-Chun Lau

Independent Director Sheng-Yung Yang

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Special Disclosures




5,588,071 100.00%

Chairman Su-Kuo Huang

Vice Chairman Shu-Po Hsu

President Tony Chuang

Director L. Ting Dan

Director Chin-Miao Lin

Director Mao-Lin Shih

Director Chu-Sheng Fu

Independent Director Sin-Hui Yen

Independent Director Ching-Chieh Lin

Independent Director Jun-Juy Lin

Independent Director Jin-Lung Peng

Independent Director Wen-Yen Hsu



644,104 100.00%

Chairman Tzu-Yuan Lu

President Vincent Lin

Director Su-Kuo Huang

Director Chao-Jung Tsai


Independent Director Kuan-Nan Chou

Independent Director Christine Jih

Independent Director Jun-Juy Lin



366,685 100.00%

Chairman Chih-Kang Wang

President Boshan Hsu

Director Wen-Hung Lee


Director Jen-Te Shen

Director Chun-Ko Chen

Director Chang-Hsing Cho

Supervisor Sting Yang

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535,882 100.00%

Chairman Chuen-Tai Wu

Vice Chairman Chih-Yi Huang

President Jaulin Chen

Director Ming-Sing Shieh

Director Roger Kao


Supervisor Ya-Ling Chiu

CTBC Investments Co., Ltd.


30,600 100.00%

Chairman Thomas K.S. Chen

President Eric Chang

Director Ming-Sing Shieh

Director Chun-Ko Chen

Director Ju-Huei Yang


CTBC Security Co., Ltd.


4,770 100.00%

Chairman Cho-Chiun Wang

President Kun-Huang Lin

Director Derek Lo

Director Roger Kao (*1)

Supervisor An-Chin Lee

Taiwan Lottery Co., Ltd.


50,000 100.00%

Chairman H. Steve Hsieh

Vice Chairman Chuen-Tai Wu

President Eric Tsai

Director Wen-Hsiang Lin


Director Chun-Te Chiang

Director Roger Kao

Director Chih-Yi Huang

Director Chin-Jung Chen



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Special Disclosures


CTBC International Co., Ltd.

CTBC Asset Management Co., Ltd. (*2)

70,000 100.00%

President Darren Chin

Director Thomas K.S. Chen


Director Shu-Jen Chen

CTBC Financial Leasing Co., Ltd.


N/A 100.00%

Chairman Thomas K.S. Chen

President Darren Chin


Director Shu-Jen Chen


CTBC Capital Corp.

CTBC Bank Co., Ltd.

6 100.00%

Chairman Winston Hsia

Director/President Noor Menai

Director Jack T.K. Cheng

Director Terrence J. Grasmick

Independent Director Joseph H. Tseng

CTBC Bank Corp. (USA)

CTBC Capital Corp.

Common shares: 3Preferred shares: 100 100.00%

Chairman Winston Hsia

Director/President Noor Menai


Director Terrence J. Grasmick

Director Andy Lee

Independent Director William Walbrecher

Independent Director Joseph H. Tseng

Independent Director Lisa Colacurcio

CTBC Bank Corp. (Canada)

CTBC Bank Co., Ltd.

2,746 100.00%

Chairman Yu-Chou Lee

Director/President Chia-Lin Shih

Director Noor Menai

Independent Director Anthony Barke

Independent Director Clive Schindler

Independent Director Leigh L.C. Pan

Independent Director Yin-Lun Wu

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242


CTBC Bank (Philippines) Corp.

CTBC Bank Co., Ltd.

374,319 99.72%

Chairman Wen-Hung Lee

Vice Chairman William B. Go

Director/President Oliver D. Jimeno

Director C. C. Huang

Director Li-Hsuan Juan

Independent Director Edwin B. Villanueva

Independent Director AlexanderA.Patricio

Independent Director Stephen D. Sy

PT Bank CTBC Indonesia

CTBC Bank Co., Ltd.

1 99.00%

President Commissioner Teck-Chiang Liang

President Iwan Satawidinata

Commissioner (*3)

Independent Commissioner Imbang Jaya Mangkuto

Independent Commissioner Zairyanto Poedjiaty

The Tokyo Star Bank, Ltd.

CTBC Bank Co., Ltd.

700 100.00%

Chairman Tsing-Yuan Hwang

Director/CEO Masami Tada

Director James Chen


Director Larry Hsu

Director Shinji Sakai

Director` Kazuhisa Tanaka

TSB Servicer, Ltd.(*4)The Tokyo Star Bank, Ltd.

0.4 100.00%Liquidator Masataka Ikeguchi

Tokyo Star Business Finance, Ltd.

The Tokyo Star Bank, Ltd.

1,936 100.00%

Chairman/CEO Osamu Kanamori

Director Junichi Muramatsu

Director Yoshiaki Ohba

Director Yoshihumi Terai

Supervisor Chika Kobayashi

Supervisor Ken Jinguji

CTBC (Mauritius) Holding Co., Ltd.(*5)

CTBC Securities Co., Ltd.17,363 100.00%

Director Tzu-Yuan Lu

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Special Disclosures


CTBC Securities Investment Service Co., Ltd.


5,000 100.00%

Chairman Wen-Hung Lee

President Darren Chen

Director Chuang-Kun Hsieh


Supervisor Lun Kuo



30,000 100.00%

Chairman Ming-Sing Shieh

President Mori Chen


Director Chuang-Kun Hsieh


CTBC Asia Ltd.

CTBC (Mauritius) Holding Co., Ltd. (*5)

134,526 100.00%

Director/Managing Director Allen Cheng

President Allen Cheng

Director Chun-Hsien Yen

Director Yu-Hwa Chang

Director Ying-Chi Yiu

CTBC Insurance Co., Ltd.


200,000 100.00%

Chairman Chin-Miao Lin

President William Hou

Director L. Ting Dan

Director Shu-Po Hsu

Director Ning-Hai Jin


Independent Director Sin-Hui Yen

Independent Director Kuan-Nan Chou

Independent Director Ching-Chieh Lin

Independent Director Jin-Lung Peng

Independent Director Wen-Yen Hsu

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244


CTBC Finance Co., Ltd.


100,294 100.00%

Chairman Jack T.K. Cheng

Vice Chairman Shin-Yang Chen (*6)

President Roy Kuo

Director Mo-Na Chien

Director Ta-Wen Chiu


Supervisor Min-Ching Hsu

Note 1: CTBC Holding appointed Sophia Wang on Jan. 29, 2021, as the director of CTBC Security, which took effect on Jan. 29, 2021.Note 2: The Ministry of Economic Affairs’ Investment Commission approved the transfer of CTBC International Co., Ltd.’s common shares

between CTBC Asset Management Co., Ltd. and CTBC Venture Capital Co., Ltd. on March 16, 2021.Note 3: Nick Y Huang resigned as the commissioner of PT Bank CTBC Indonesia on Sept. 21, 2020, effective the same date. CTBC Holding

recommended C.C. Huang on Sept. 25, 2020, to become the commissioner of PT Bank CTBC Indonesia, which was accepted by the board of CTBC Bank on Sept. 25, 2020. A special meeting of shareholders of PT Bank CTBC Indonesia appointed C.C. Huang on Oct. 8, 2020, as the commissioner, which was approved by the local authority to take effect on Feb. 15, 2021.

Note 4: TSB Servicer, Ltd. was liquidated on March 16, 2021.Note 5: The board of directors of CTBC (Mauritius) Holding Co., Ltd. resolved to dissolve the company on Nov. 27, 2020. The board of

directors of CTBC (Mauritius) Holding Co., Ltd. resolved on Feb. 2, 2021, to transfer its equity to CTBC Securities Co., Ltd.; all common shares held by CTBC (Mauritius) Holding Co., Ltd. were transferred to CTBC Securities Co., Ltd. on Feb. 11, 2021, effective the same date.

Note 6: Shin-Yang Chen resigned as a director and the Vice Chairman of CTBC Capital Co., Ltd. on Feb. 3, 2021, which took effect on March 1, 2021.

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Special Disclosures

4) ProfilesofaffiliatedenterprisesUnit:NT$thousand As of Dec. 31, 2020

NameofcompanyDate of

establishmentAddress Paid-in capital Main business scope

CTBC Bank Co., Ltd. March 14, 1966 No. 166, 168, 170, 186, and 188, Jingmao 2nd Rd., Taipei

147,962,186 Commercial banking and financingbusiness


Dec. 1, 1947 8F., No. 188, Jingmao 2nd Rd., Taipei

55,880,707 Insurance business

CTBC Securities Co., Ltd. July 5, 1989 3F., No. 168, Jingmao 2nd Rd., Taipei

6,441,039 Securities and futures business


March 11, 2003 21F., No. 168, Jingmao 2nd Rd., Taipei

3,666,846 Venture capital investment center


May 20, 2003 19F., No. 168, Jingmao 2nd Rd., Taipei

5,358,820 Asset management business

CTBC Investments Co., Ltd.

March 3, 1998 12F., No. 188, Jingmao 2nd Rd., Taipei

306,000 Investment and trust business

CTBC Security Co., Ltd. Feb. 15, 1995 5F., No. 188, Jingmao 2nd Rd., Taipei

47,695 Theft,fire,anddisasterprevention and personal safety services

Taiwan Lottery Co., Ltd. July 10, 2006 15F., No. 188, Jingmao 2nd Rd., Taipei

500,000 Operate the public welfare lottery for the issuing, sale, promotion, drawing, payment of prize and management.

CTBC Capital International Co., Ltd.

April 30, 2012 Room 511, 5F, Tower 1Silvercord CentreNo. 30 Canton Rd.Tsim Sha Tsui, Hong Kong

Note Holding company


April 24, 2012 Room 511, 5F, Tower 1Silvercord CentreNo. 30 Canton Rd.Tsim Sha Tsui, Hong Kong

USD 70,000 thousand Exchangerateon

reporting date 28.508TWD 1,995,560 thousand

Holding company

CTBC Financial Leasing Co., Ltd.

July 3, 2012 12F., No. 1386, Wenguang Building, Hongqiao Rd., Changning Dist., Shanghai

RMB 433,802 thousand Exchangerateon


Financial leasing

CTBC Capital Corp. Feb. 27, 1989 801 S. Figueroa St., Suite 2300, Los Angeles, CA 90017, USA

USD 6.430 thousand Exchangerateon

reporting date 28.508TWD183 thousand

Investment business

CTBC Bank Corp. (USA) Feb. 27, 1995 801 S. Figueroa St., Suite 2300(22-23F), Los Angeles, CA 90017, USA

USD 771.108 thousandExchangerateon

reporting date 28.508TWD 21,983 thousand

Commercial banking and financingbusiness

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246



CTBC Bank Corp. (Canada)

Nov. 12, 1998 Suite #350-2608 Granville St., Vancouver, B.C., V6H 3V3, Canada

CAD 37,000 thousand Exchangerateon

reporting date 22.359TWD827,283 thousand


CTBC Bank (Philippines) Corp.

Sept. 7, 1995 16th-19th Floor, Fort Legend Towers, 31st St. Corner 3rd Avenue, Bonifacio Global City, Taguig City, 1634 Philippines

PHP 3,483,072 thousand Exchangerateon



PT Bank CTBC Indonesia Oct. 15, 1996 Tamara Center, 15th-17th Floor, Jl Jenderal Sudirman Kav. 24, Jakarta, 12920, Indonesia

IDR 150,000,000 thousand

Exchangerateonreporting date 0.002029TWD 304,350 thousand


The Tokyo Star Bank, Ltd. June 11, 2001 2-3-5 Akasaka, Minato-Ku, Tokyo, 107-8480, Japan

JPY 26,000,000 thousand Exchangerateon

reporting date 0.2765TWD 7,189,000thousand


TSB Servicer, Ltd. Jan. 17, 1997 10F, Seiseki C, Sekido1-7-5, Tamashi, Tokyo, 206-0011, Japan

JPY 500,000 thousandExchangerateon


Debt management business

Tokyo Star Business Finance, Ltd.

Sept. 10, 2010 2-7-1 Nishi Shinjyuku, Shinjyuku-Ku, Tokyo, 163-0710, Japan

JPY 500,000 thousandExchangerateon


Financing and assurance business

CTBC (Mauritius) Holding Co., Ltd.

Dec. 19, 2002 3rdFloor,RafflesTower,19Cybercity, Ebene, Republic of Mauritius

USD 17,363 thousand Exchangerateon

reporting date 28.508TWD494,984 thousand

Investment

CTBC Securities Investment Service Co., Ltd.

May 21, 2015 14F., No. 188, Jingmao 2nd Rd., Taipei

50,000 Securities investment consultant company


Oct. 19, 2018 14F., No. 188, Jingmao 2nd Rd., Taipei

300,000 Venture capital investment

CTBC Asia Ltd. April 4, 2003 Suite 2809, 28F., Two International Finance Centre, No. 8, Finance St., Central, Hong Kong

HKD 134,526 thousand Exchangerateon


Securities company

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Special Disclosures



CTBC Insurance Co., Ltd. May 8, 2006 18F.-1, No. 17, Xuchang St., Taipei

2,000,000 Property insurance business

CTBC Finance Co., Ltd. Aug. 1, 2003 17F., No. 17, Xuchang St., Taipei

1,002,937 Installment, leasing, and account receivable factoring

Note: The company was liquidated on Dec. 4, 2020.

8.1.3 Affiliation report: CTBC Holding is not an affiliate of any company as defined in the Company Act; therefore, it is not required to compile an affiliation report.

8.2 Private placement of securities by CTBC Holding from 2020 through April 13, 2021: None.

8.3 Shares of the Company held or disposed of by its subsidiaries from 2020 through April 13, 2021: None.

8.4 Other supplementary information: Please refer to the CTBC Holding website (http://ir.ctbcholding.com/html/gov_practice.php) for information regarding the Company’s Code of Ethical Conduct.

9 Matters Affecting Shareholder Equity or Securities Prices From 2020 Through April 13, 2021:

Please refer to “4. Capital Overview, 6. Mergers and acquisitions with other financial institutions”. Appendix 1

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Appendix1.AuditCommitteeResolutionsMadeinAccordanceWithArticle14-5oftheSecuritiesandExchangeAct

Term and meeting Motion content and resultItems listed in Article 14-5 of the Securities andExchangeAct

Items not passed by the Audit Committee but passed by at least

two-thirds of the Board

Jan. 17, 2020; 7th

term, 12th meeting of

the Board of Directors

1. Approval of the Company's 2020 operating plan. V -

2. Approval of the Company's 2020 annual operating

budget,operatingexpensebudget,andcapital

expenditurebudget.

V -

3. Approval of the signing of a sponsor agreement with

China’sGuangdongHuaxingBankCo.,Ltd.tojointly

establishafinancialmanagementsubsidiary.

V -

Audit Committee resolutions (Jan. 16, 2020): Unanimously passed by all attending committee members.

Handling of Audit Committee proposals by the Company (Board of Directors): Unanimously passed by all

attending directors.

Feb. 26, 2020; 7th



1. Approval of abolishing the CTBC Financial

Holding Group Management Rules of Sharing Audit

ManagementSystemestablishedbytheOfficeofChief

Auditor.

V -

2. Approval of retiring the outdated CTBC Bank AML

system and purchasing of a new system with the budget

ofNT$351.5million.

V -

3. In response to business development needs, a proposal

is presented for granting permission to lease additional

officespaceofpartial26F,BuildingAofCTBC

Financial Park from CTBC Bank for the period of

March 1, 2020, to Dec. 31, 2021, with a total estimated

rentofNT$1,054,570andtodiscontinuetheleaseof

theofficespaceof12Fandpartial19FofBuildingA

and 4 parking spaces (originally to end on March 1,

2020)

V -

4.Approvalofthesix-yearleasingofTokyoStarBank’s

Akasaka headquarters for total rent of JPY 6.775 billion

(approximatelyNT$1.844billion),orJPY6.139billion

(approximatelyNT$1.670billion)afterrecognizinga

right-of-use asset by IFRS16, plus the brokerage fee

ofJPY13million(approximatelyNT$3.5million),

foratotalamountofJPY6.788billion(approximately

NT$1.847billion).

V -

Audit Committee resolutions (Feb. 25, 2020): Unanimously passed by all attending committee members.



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AuditCommitteeResolutionsMadeinAccordanceWithArticle14-5oftheSecuritiesandExchangeAct




March 27, 2020; 7th



1. Approval to amend the Company’s Capital

Management Policy in accordance with the revision of

laws and regulations.

V -

2.ApprovaltoappointtheaccountingfirmKPMGtobe

theCPAfortheCompany's2020financialstatements

andtaxreports.

V -

3. Approval of the Company's 2019 Internal Control

Statement and Projects to be Strengthened and

Improved Plan.

V -

4. Approval to amend the CTBC Holding Resolution

Plan Management Policy in response to relevant U.S.

resolution plan regulations.

V -

5. Approval of subsidiary CTBC Venture Capital’s

strategic investment in Moneybook Co., Ltd. for

obtaining no more than 15% of its shareholding and

with the total investment amount of no more than

NT$22.5million.

V -

6. Approval to establish the CTBC Holding Management

Policy of Real Estate Transactions Among Subsidiaries

in response to an FSC request.

V -

7. Approval to amend the Taiwan Life Management Rules

of Investing in Insurance-Related Businesses.

V -

8. Approval to amend the Company’s Audit Committee

Charter.

V -

9. Approval to amend the Company's Articles of

Incorporation.

V -

Audit Committee resolutions (March 26, 2020): Unanimously passed by all attending committee members.



March 27, 2020; 7th



1.Approvaloftheconsolidatedfinancialstatement

prepared by the Company for 2019 and the audit report

issuedbytheaccountingfirm.

V -

Audit Committee resolutions (March 26, 2020): Unanimously passed by all attending committee members.



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April 29, 2020; 7th



1. Approval to amend the annual internal audit plan for

2020.

V -

2. Approval of the amended 2020 Hierarchical Table from

theOfficeofChiefAuditor.

V -

3. Approval of the Company’s 2019 business report

compiled in accordance with Article 228 of the

Company Act and Article 66 of the Business Entity

Accounting Act.

V -

4. The lease of CTBC Bank’s Hong Kong branch on

Level 28 and level 21 of Two International Finance

CentrewillexpireonJuly31,2020.Itisproposed

to renew the lease for three years until July 31, 2023

withatotalrentofHK$173,699,000(approximately

NT$677million).

V -

5. Approval to amend some provisions of the CTBC

Holding Code of Corporate Social Responsibility

in response to the revision of Corporate Social

Responsibility Best Practice Principles for TWSE/

GTSMListedCompaniesbyTaiwanStockExchange

Corp.

V -

Audit Committee resolutions (April 28, 2020): Unanimously passed by all attending committee members.



May 8, 2020; 7th



1. Approval of the 2019 earning distribution plan. V -

2. Approval of the Company’s issuance of the unsecured

corporatebondwithintheamountofNT$45billion.

V -

3. Approval to mandate CTBC Bank as the lead

underwriter for its unsecured corporate bond issuance

withintheamountofNT$45billion.

V -

Audit Committee resolutions (May 8, 2020): Unanimously passed by all attending committee members.



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Audit Committee Resolutions Made in Accordance With Article 14-5 of the Securities and Exchange Act




May 22, 2020;

7th term, 18th

meeting of the Board

of Directors

1. Approval to amend the CTBC Holding Management

Policy for Preventing Insider Trading to keep pace with

the Company’s practices and the Corporate Governance

BestPracticePrinciplesforTWSE/TPExListed

Companies.

V -

2. Approval to amend the Company’s Volcker Rule

compliance policy in response to the revision of the

Volcker Rule by the U.S. competent authority.

V -

3. Approval to amend the CTBC Holding Regulations

Governing Aid in Litigations involved for Performing

Duties by Employees to clarify the eligible personnel,

conditions and procedures regarding aid in litigations

involved for performing duties.

V -

4. As the current bank core system maintenance

agreementofTheTokyoStarBankwillexpireinApril

2023,itwasproposedthattheexistinghardwareand

software update and maintenance agreement with the

current supplier, NEC, be re-signed to continue the use

ofBankingWeb21asthenext-generationbankcore

system.

V -

Audit Committee resolutions (May 21, 2020): Unanimously passed by all attending committee members.



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June 24, 2020; 7th



1.ApprovaltoamendtheCompany’staxgovernance

policy.

V -

2. Approval of the Taiwan Life IFRS 17 Project, with the

budgetofNT$1.177billion.

V -

3. Approval to coordinate all marketing agency price

inquiries and negotiations under the CTBC Holding

name in order to foster group synergy and obtain better

offers.

V -

4. Approval of the 2020 group BIS ratio planning and

evaluation report prepared by CTBC Holding for the

public welfare lottery business.

V -

5. Approval to amend the Company’s Standards for

Division of Powers and Responsibilities of the Board

of Directors, Chairman, and President in response to

business needs.

V -

6. For CTBC Venture Capital’s long-term development,

and to strengthen its capital structure and enlarge its

future investment, it was proposed that CTBC Venture

CapitalcarryoutacapitalincreaseofNT$1.1billion

for110millioncommonsharesatNT$10pershare.

ItwasalsoproposedthatCTBCHoldingnotexercise

its preemptive right and that CTBC Venture Capital

contactTaiwanLifeasthespecificpersonforthe

subscription of the new shares.

V -

Audit Committee resolutions (June 23, 2020): Unanimously passed by all attending committee members.



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July 29, 2020; 7th



1. Approval for adding relevant provisions of capital

usageefficiencymanagementinCapitalManagement

Policy in response to management needs.

V -

2. Approval of the review of the Internal Audit Charter

and Internal Audit Policy.

V -

3. For global talent management, integrating global talent

data,enhancingexecutiveefficiency,andimproving

global process standardization, it was proposed that

CTBC Bank introduce a global human resource cloud

system and upgrade its current Peoplesoft system salary

moduleatanestimatedtotalcostofNT$404million

overafive-yearperiod.

V -

4. Approval to amend the CTBC Holding Regulations

Governing Authority for the Disbursement of Operating

ExpensesandCapitalExpenditures.

V -

5. Approval to amend the Guidelines for the Proposal of

the Board and Functional Committees in response to the

Company’s adopting of a Board proposal and meeting

management system and relevant practices.

V -

Audit Committee resolutions (July 28, 2020): Unanimously passed by all attending committee members.



Aug. 21, 2020; 7th

term, 21st meeting of


1. As the Trade Finance and Remittance systems used

by CTBC Bank’s Philippine subsidiary bank requires

updating for local compliance (SWIFT2020), it was

proposed that a project of core update and system

integration be activated at an estimated total cost of

US$13.083million(approximatelyNT$393,301,146)

over a seven-year period.

V -

2. Approval to amend the Company’s Independent

Director Responsibility Scope Criterion.

V -

Audit Committee resolutions (Aug. 20, 2020): Unanimously passed by all attending committee members.



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Aug. 21, 2020; 7th

term, 22nd meeting

of the Board of

Directors

1.Approvaloftheconsolidatedfinancialstatement

prepared by the Company for the second quarter of

2020andtheauditreportissuedbytheaccountingfirm.

V -

Audit Committee resolutions (Aug. 20, 2020): Unanimously passed by all attending committee members.



Sept. 25, 2020; 7th

term, 23rd meeting of


1. Approval to amend the CTBC Holding Administrative

Measures for Budget Management to enhance

managementefficiency.

V -

2. Approval to amend the Company’s Compliance Policy

for the purpose of group management and practical

needs.

V -

3. Approval to amend the Company’s Volcker Rule

compliance policy in response to the revision of the

Volcker Rule by the U.S. competent authority.

V -

Audit Committee resolutions (Sept. 26, 2020): Unanimously passed by all attending committee members.



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Oct. 29, 2020; 7th



1. Approval of the accountant auditing service fees for the

2020financialstatementoftheCompany.

V -

2. As the offshore private banking system of CTBC

Bank had not been upgraded since 2010, resulting in it

failing to meet business needs and legal requirements,

it was proposed that the original upgrade project be

terminated and a replacement system be installed at an

estimatedtotalcostofnomorethanNT$360million

overafive-yearperiod.

V -

3. Approval for CTBC Asset Management Co., Ltd. to

sell its long-term equity investment position CTBC

International Co., Ltd. to CTBC Venture Capital Co.,

Ltd.forNT$1,375,231,063(Code:ProjectLegend)in

ordertoincreasecapitalutilizationefficiencyofthe

group.

V -

4. Approval for CTBC Venture Capital Co., Ltd. to

purchase CTBC Asset Management Co., Ltd.’s (CTBC

AMC) subsidiary, CTBC International Co., Ltd., from

CTBCAMCforNT$1,375,231,063,andindirectly

invest in CTBC Financial Leasing Co., Ltd. (Code:

Project Legend) in order to increase capital utilization

efficiencyofthegroup.

V -

Audit Committee resolutions (Oct. 28, 2020): Unanimously passed by all attending committee members.



Nov. 20, 2020; 7th



1. Approval of the 2020 internal control implementation

performance review and rating and important post-

matters of the Company and its subsidiaries.

V -

2. For the information transformation of CTBC Bank,

it was proposed that a project of core modernization

establishment be proceeded with in order to reach the

goal of core modernization at an estimated total cost of

NT$17.53billion(taxincluded).

V -

3. Approval for CTBC Securities subsidiary CTBC

(Mauritius)HoldingCo.,Ltd.tofilefordissolution

with local authorities.

V -

Audit Committee resolutions (Nov. 19, 2020): Unanimously passed by all attending committee members.



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Dec. 25, 2020; 7th



1. Approval of 2020 Risk Evaluation and Annual internal

audit plan for 2021

V -

2. Approval of the amended Division Standards of

Authority and Responsibility of the Board of Directors,

Chairman and President and the Hierarchical Table from

theOfficeofChiefAuditor.

V -

3. Approval to amend the Company’s Self-inspection and

Assessment Guidelines for Internal Control System

V -

4. Approval to amend the Company’s Internal Audit

Rating Guidelines for the Performance Evaluation on the

Implementation of Internal Control System

V -

5. In response to the competent authority’s target

examination(108H074),itwasproposedthattheCTBC

HoldingPolicyofCreditExtensionorNon-Credit

ExtensionTransactionswithRelatedPartiesandthe

CTBC Holding Internal Guidelines Governing Non-

CreditExtensionTransactionswithRelatedPartiesbe

amended with effective dates of March 29, 2021.

V -

6. Approval of CTBC Bank’s renegotiating of automated

equipment outsourcing security service fees for an

estimatedcostofnomorethanNT$1.192billionovera

three-year period.

V -

7.ApprovalofanadditionalbudgetofNT$260million

for Taiwan Life’s new core system in response to business

needs.

V -

Audit Committee resolutions (Dec. 24, 2020): Unanimously passed by all attending committee members.



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3

Representation Letter

The entities that are required to be included in the consolidated financial statements of CTBC Financial HoldingCo., Ltd. for the year ended December 31, 2020 under the Criteria Governing the Preparation of AffiliationReports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises arethe same as those included in the consolidated financial statements prepared in conformity with InternationalFinancial Reporting Standards No. 10 “ Consolidated Financial Statements” , endorsed by the FinancialSupervisory Commission of the Republic of China. In addition, the information required to be disclosed in theconsolidated financial statements of the affiliates is fully included in the consolidated financial statements.Consequently, CTBC Financial Holding Co., Ltd. and Subsidiaries do not prepare a separate set of consolidatedfinancial statements of the affiliated enterprises.

Company name: CTBC Financial Holding Co., Ltd.Chairman: Yen, Wen-LongDate: March 19, 2021

2

Consolidated Financial Reports for 2020

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258

4

Independent Auditors’ Report

To the Board of Directors of CTBC Financial Holding Co., Ltd.:

Opinion

We have audited the consolidated financial statements of CTBC Financial Holding Co., Ltd.(“the Company”)and its subsidiaries, which comprise the consolidated balance sheets as of December 31, 2020 and 2019, and theconsolidated statement of comprehensive income, changes in stockholders’ equity and cash flows for the yearsended December 31, 2020 and 2019, and notes to the consolidated financial statements, including a summary ofsignificant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, theconsolidated financial position of the Company and its subsidiaries as of December 31, 2020 and 2019, alongwith consolidated financial performanceand its consolidated cash flows for the years ended December 31, 2020and 2019 in accordance with the Regulations Governing the Preparation of Financial Reports by FinancialHolding Companies, the Regulations Governing the Preparation of Financial Reports by Public Banks, theRegulations Governing the Preparation of Financial Reports by Securities Firms, the Regulations Governing thePreparation of Financial Reports by Futures Commission Merchants, the Regulations Governing the Preparationof Financial Reports by Insurance Companies, International Financial Reporting Standards (IFRSs), andInternational Accounting Standards (IASs), interpretations and pronouncements as accepted by the FinancialSupervisory Commission of the Republic of China (“FSC”).

Basis for Opinion

We conducted our audit of the consolidated financial statements in accordance with the Regulations GoverningAuditing and Certification of Financial Statements by Certified Public Accountants, Jin Kuan YinNo.10802731571 issued by the Financial Supervisory Commission, and the auditing standards generallyaccepted in the Republic of China. Our responsibilities under those standards are further described in theAuditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We areindependent of the Company and its subsidiaries in accordance with the Certified Public Accountants Code ofProfessional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities inaccordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis of our opinion.

Emphasis of Matter

The judicial cases as stated in Note 9(c). Part of judical cases are still under investigation by the judiciary, andthe results remain uncertain. Our opinion is not modified in respect of this matter.

Telephone + 886 (2) 8101 6666Fax + 886 (2) 8101 6667Internet kpmg.com/tw

KPMG110 5 7 68 ( 101 )

68F., TAIPEI 101 TOWER, No. 7, Sec. 5, Xinyi Road, Taipei City 110 , Taiwan (R.O.C.)

259

4-1

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit ofthe consolidated interim financial statements for the years ended December 31, 2020. These matters wereaddressed in the context of our audit of the consolidated financial statements as a whole, and in forming ouropinion thereon, and we do not provide a separate opinion on these matters.

1. Assessment of the fair value of financial instruments

Please refer to Note 4 (f) for the related accounting policies of the assessment of the fair value of financialinstruments, Note 5 for the accounting assumptions and estimation uncertainty, and Note 6 (au) for the otherdetails.

Description of key audit matter:

Parts of the financial instruments owned by the Company and its subsidiaries as of December 31, 2020 werevalued via evaluation model due to the lack of public transaction prices, and parts of the referred input valuescould not be obtained from the public market. Thus, it demands significant professional judgments from themanagement by using different valuation techniques and assumptions for input values. Therefore, theassessment of fair value of financial instruments is one of the key audit matters.

How the matter was addressed in our audit:

Our principal audit procedures included: testing the management’s control procedures over the classification,measurement and disclosure of fair value of financial instruments, including evaluating how the managementdetermines the classification of financial instruments and chooses the appropriate evaluation method and theprime parameter hypothesis, and confirming that the presentation and disclosure of financial instruments arein accordance with the International Financial Reporting Standards (IFRSs). For financial instruments withactive market prices, we used sampling test to assess the appropriateness of public quoted prices. As tofinancial instruments using evaluation model to measure their fair value, we used sampling test to confirmthe appropriateness of the evaluation method and the prime input values used by the management.

2. Impairment of loans and receivables

Please refer to Note 4 (f) for the related accounting policies of impairment of loans and receivables, Note 5for the accounting assumptions and estimation uncertainty, and Note 6 (h), (i), (j) and (au) for the otherdetails.


The management assessed the expected credit loss (ECL) of loans and receivables by identifying whether thecredit risk of credit assets has significantly increased since initial recognition, then dividing ECL into 12-month ECL and lifetime ECL, and dividing them into collective assessment and individual assessment tomeasure them by using different impairment methods. For collective assessment, the impairment iscalculated by establishing an impairment model and using the past loss experience, current market conditionsand forward-looking estimation on assets with similar credit risk characteristic to form basic estimation. Forindividual assessment, the measurement is based on expected future recoverable cash flows. Theaforementioned measurement methods involved significant professional judgments and estimation by themanagement; therefore, the impairment of loans and receivables is one of the key audit matters.


Our principal audit procedures included: understanding the methodology and related control procedures onhow the management assesses and measures the impairment amount of loans and receivables. For collectiveassessment, we assessed the impairment model adopted by the management and reviewed theappropriateness of the calculation of the impairment parameters (including probability of default, loss givendefault, exposure at default and recovery rate) via sampling. For individual assessment, we used samplingtest to assess the appropriateness of the estimation of future recoverable amounts and the value of collateral.Meanwhile, we assessed whether the allowance for loans and receivables meets the regulation requirements.

260

4-2

3. Provision of insurance liability

Please refer to Note 4 (s) for the related accounting policies of insurance liability, Note 5 for the accountingassumptions and estimation uncertainty, and Note 6 (z) and (ae) for the other details of the provision ofinsurance liability.


The estimation of the Company and its subsidiaries’ insurance liability is subject to future uncertainties. Theassumption of life insurance reserve adopts a fixed cost basis, that is to say, the provision is calculated by areserve rate upon the issuance of insurance policy. Provision of unearned premiums is calculated by actuariesaccording to each product’ s characteristic and its undue risk. The main assumptions of claim reserve areclaim development factors and expected claims rates. To evaluate the adequacy of insurance liabilities,estimating the discounted future cash flows should take into consideration the future insurance payments,insurance income and related expenses. The aforementioned evaluation involved the professional judgmentsof the management which will affect the recognition amount of insurance liabilities. Therefore, evaluatingthe provision of insurance liabilities is one of the key audit matters.


Our principal audit procedures included: reviewing the analysis of movements in insurance liabilities,adopting the audit of insurance liabilities performed by our actuarial specialists, and inspecting whether thecalculation and applied parameters are in accordance with the related ordinances, administrativeinterpretations and code of conduct announced by the Actuarial Institute of the Republic of China. Also, theassessment on the reasonableness of actuarial assumptions should be in conformity with the empirical dataand product specification in order to build the model of evaluation of insurance liability, as well as theestimation on the reasonableness of the actuarial result adopted by the management should be based on ourunderstanding of industry and market to make sure that the final provision of insurance liability has beenproperly recorded.

Responsibilities of Management and Those Charged with Governance for the Consolidated FinancialStatements

Management is responsible for the preparation and fair presentation of the consolidated financial statements inaccordance with the Regulations Governing the Preparation of Financial Reports by Financial HoldingCompanies, the Regulations Governing the Preparation of Financial Reports by Public Banks, the RegulationsGoverning the Preparation of Financial Reports by Securities Firms, the Regulations Governing the Preparationof Financial Reports by Futures Commission Merchants, the Regulations Governing the Preparation of FinancialReports by Insurance Companies, International Financial Reporting Standards (IFRSs), InternationalAccounting Standards (IASs), interpretations and pronouncements as accepted by the FSC and for such internalcontrol as management determines is necessary to enable the preparation of consolidated financial statementsthat are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company and itssubsidiaries ability to continue as a going concern, disclosing, as applicable, matters related to going concernand using the going concern basis of accounting unless management either intends to liquidate the Company andits subsidiaries or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including audit committee) are responsible for overseeing the Company and itssubsidiaries financial reporting process.

261

4-3

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as awhole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report thatincludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an auditconducted in accordance with the auditing standards generally accepted in the Republic of China will alwaysdetect a material misstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence the economicdecisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with auditing standards generally accepted in the Republic of China, weexercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether dueto fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidencethat is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theCompany and its subsidiaries internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates andrelated disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, basedon the audit evidence obtained, whether a material uncertainty exists related to events or conditions that maycast significant doubt on the Company and its subsidiaries’ ability to continue as a going concern. If weconclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to therelated disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modifyour opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.However, future events or conditions may cause the Company and its subsidiaries to cease to continue as agoing concern.

5. Evaluate the overall presentation, structure and content of the consolidated financial statements, includingthe disclosures, and whether the consolidated financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or businessactivities within the Company and its subsidiaries to express an opinion on the consolidated financialstatements. We are responsible for the direction, supervision, performance of the Group audit and developingthe Group audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope andtiming of the audit and significant audit findings, including any significant deficiencies in internal control thatwe identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethicalrequirements regarding independence, and to communicate with them all relationships and other matters thatmay reasonably be thought to bear on our independence, and where applicable, related safeguards.

262

4-4

From the matters communicated with those charged with governance, we determine those matters that were ofmost significance in the audit of the consolidated financial statements of the current period and are therefore thekey audit matters. We describe these matters in our auditors’ report unless law or regulation precludes publicdisclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonably be expected tooutweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Wu, Lin and Tseng,Kuo-Yang.

KPMG

Taipei, Taiwan (Republic of China)March 19, 2021

Notes to Readers

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

The independent auditors’ audit report and the accompanying consolidated financial statements are the English translation of the Chineseversion prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the Englishand Chinese language independent auditors’ audit report and consolidated financial statements, the Chinese version shall prevail.

263

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6

(English Translation of Consolidated Financial Statements Originally Issued in Chinese)CTBC FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive IncomeFor the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Share)

2020 2019 ChangeAmount % Amount % %

41000 Interest income (Note 6(ak) and 7) $ 129,479,139 67 141,659,899 54 (9)51000 Less: Interest expenses (Note 6(ak) and 7) (20,425,471) (11) (31,022,593) (12) (34)

Net income of interest (Note 6(ak)) 109,053,668 56 110,637,306 42 (1)　　Net non-interest income (loss)

49800 Service fee and commissions income (Note 6(al) and 7) 23,032,223 12 24,462,174 9 (6)49810 Net insurance income (Note 6(am)) 33,371,291 17 101,870,778 38 (67)49820 Gains on financial assets measured at fair value through profit or loss (Note 6(an)) 41,472,612 21 36,037,331 14 1549825 Gains on investment properties 1,266,342 1 870,073 - 4649835 Realized gains on financial assets measured at fair value through other comprehensive income 15,416,442 8 14,339,258 6 849850 Gains on derecognition of financial assets measured at amortized cost (Note 6(e)) 3,653,420 2 1,421,155 1 15749870 Foreign exchange losses (31,597,649) (16) (12,069,187) (5) (162)49880 (Provision for) reversal of impairment loss on assets (127,468) - 609,040 - (121)49890 Proportionate share of gains from associates or joint ventures under equity method (Note 6(l)) 1,209,857 1 1,515,214 1 (20)49898 Losses on reclassification under the overlay approach (Note 6(c)) (570,802) - (12,130,912) (5) 9549900 Net other non-interest income (losses) 926,385 - (144,502) - 74158099 Public-welfare lottery payment (2,700,000) (2) (2,700,000) (1) -

　　　　Net revenue 194,406,321 100 264,717,728 100 (27)58100 Provisions for bad debt expenses, commitment and guarantee liability provision (Note 6(j)) (9,258,231) (5) (5,641,291) (2) 6458300 Net change in provisions for insurance liabilities (Note 6(ap)) (68,870,986) (35) (139,137,229) (53) (51)

Operating expenses: 58501 Employee benefits expenses (Note 6(aq)) (36,186,621) (18) (38,908,863) (15) (7)58503 Depreciation and amortization expenses (Note 6(ar)) (7,255,624) (4) (6,930,687) (3) 558599 Other general and administrative expenses (Note 6(at)) (21,257,802) (11) (22,290,580) (8) (5)

　　　　Total operating expenses (64,700,047) (33) (68,130,130) (26) (5)Profit from continuing operations before tax 51,577,057 27 51,809,078 19 -

61003 Less: Income tax expenses(Note 6(af)) 8,721,902 5 8,926,802 3 (2)Profit 42,855,155 22 42,882,276 16 -

69500 Other comprehensive income (losses) : 69560 Components of other comprehensive (losses) income that will not be reclassified to profit or loss69561 (Losses) gains on remeasurement of defined benefit plans (184,587) - 24,343 - (858)69565 Change in fair value of financial liability attributable to change in credit risk of liability (1,176,748) (1) 1,396,988 1 (184)69567 Unrealized (losses) gains from investments in equity instruments measured at fair value through other comprehensive income (711,119) - 8,240,344 3 (109)69563 Share of other comprehensive losses of associates and joint ventures accounted for using equity method, components of other

comprehensive income that will not be reclassified to profit or loss(1,571,450) (1) (4,526) - (34,621)

69569 Less: Income tax related to items that will not be reclassified to profit or loss (1,112,315) (1) 284,351 - (491)Components of other comprehensive (losses) income that will not be reclassified to profit or loss (2,531,589) (1) 9,372,798 4 (127)

69570 Components of other comprehensive (losses) income that will be reclassified to profit or loss69571 Exchange differences on translation of foreign financial statements (3,396,221) (2) (664,238) - (411)69583 Unrealized gains from debt instruments measured at fair value through other comprehensive income 6,519,704 4 16,834,699 6 (61)69575 Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other

comprehensive income that will be reclassified to profit or loss681,661 - 14,515 - 4,596

69590 Other comprehensive income on reclassification under the overlay approach 570,802 - 12,130,912 5 (95)69579 Less: Income tax related to items that are or may be reclassified to profit or loss 215,462 - 4,224,243 2 (95)

Components of other comprehensive income that will be reclassified to profit or loss 4,160,484 2 24,091,645 9 (83)69500 Other comprehensive income 1,628,895 1 33,464,443 13 (95)

Total comprehensive income $ 44,484,050 23 76,346,719 29 (42)Net income attributable to: Parent company $ 42,853,406 22 42,879,806 16 - Non-controlling interest 1,749 - 2,470 - (29)

$ 42,855,155 22 42,882,276 16Comprehensive income attributable to:

Parent company $ 44,487,441 23 76,346,177 29 (42)Non-controlling interest (3,391) - 542 - (726)

$ 44,484,050 23 76,346,719 29Earnings per share (unit: NT Dollars) (Note 6(aj)) $ 2.15 2.16

See accompanying notes to financial statements.

8


Consolidated Statements of Cash FlowsFor the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

2020 2019Cash Flows from Operating Activities:

Net Income Before Tax $ 51,577,057 51,809,078Adjustments:

Income and expenses items with no effect on cash flow:Depreciation expense 6,195,891 5,929,261Amortization expense 1,647,763 1,532,403Impairment losses on expected credit loss/ Provisions for bad debt expenses, commitments and

guarantee reserve9,258,231 5,641,291

Net gains on financial assets or liabilities measured at fair value through profit (10,325,974) (35,615,582)Interest expense 20,425,471 31,022,593Interest income (129,479,139) (141,659,899)Dividend income (8,170,671) (8,640,044)Net change in insurance liabilities 68,870,986 139,137,229Net change in other provisions 50,192 1,013,339Share-based payments - 2,328Proportionate share of gains from associates or joint ventures under the equity method (1,211,404) (1,515,103)Losses on reclassification by applying overlay approach 570,802 12,130,912Losses (gains) on disposal and retirement of premises and equipment 4,557 (846,441)Gains on disposal of investment properties (253,818) (3,827)Losses on disposal and retirement of intangible assets 1,759 57,385Gains on disposal of assets classified as held for sale - (319,878)Losses on disposal of investments accounted for using equity method 1,547 -Provision for (reversal of) impairment losses on financial assets 1,715 (614,442)Provision for impairment losses on non-financial assets 125,753 5,402Losses (gains) on disposal of foreclosed properties 1,331 (7,894)Unrealized foreign exchange gains on insurance liabilities (23,789,519) (10,749,830)Other adjustments 98,787 (627,435)

Subtotal of income and expense items with no effect on cash flows (65,975,740) (4,128,232)Changes in Operating Assets and Liabilities:

Net Changes in Operating Assets:Decrease (increase) in due from the central bank and call loans to banks 7,958,944 (16,806,951)Increase in financial assets measured at fair value through profit or loss (18,661,629) (89,170,170)Increase in financial assets measured at fair value through other comprehensive income (63,947,175) (86,761,232)Increase in investments in debt instruments measured at amortized cost (105,695,449) (93,138,956)Decrease (increase) in hedging financial assets 314,370 (296,552)Decrease in receivables 13,125,406 5,362,772Increase in loans (66,055,471) (112,728,722)(Increase) decrease in reinsurance contract assets (256,729) 467,770Increase in other financial assets (33,678,358) (18,198,710)Increase in other assets (4,303,547) (4,458,687)

Net Changes in Operating Assets (271,199,638) (415,729,438)Net Changes in Operating Liabilities:

Increase (decrease) in deposits from the central bank and other banks 2,793,648 (21,298,394)(Decrease) increase in financial liabilities measured at fair value through profit or loss (8,239,384) 4,969,978Increase (decrease) in hedging financial liabilities 174,235 (146,758)Increase (decrease) in payables 3,958,491 (778,879)Increase in deposits and remittances 368,596,928 222,055,296Decrease in employee benefits reserve (156,627) (168,556)Decrease in other financial liabilities (1,585,072) (13,541,429)Increase in other liabilities 713,838 8,091,100Net Changes in Operating Liabilities 366,256,057 199,182,358

Net Changes in Operating Assets and Liabilities 95,056,419 (216,547,080)Sum of Adjustments 29,080,679 (220,675,312)


265

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266

8


Consolidated Statements of Cash FlowsFor the years ended December 31, 2020 and 2019


2020 2019Cash Flows from Operating Activities:

Net Income Before Tax $ 51,577,057 51,809,078Adjustments:

Income and expenses items with no effect on cash flow:Depreciation expense 6,195,891 5,929,261Amortization expense 1,647,763 1,532,403Impairment losses on expected credit loss/ Provisions for bad debt expenses, commitments and

guarantee reserve9,258,231 5,641,291

Net gains on financial assets or liabilities measured at fair value through profit (10,325,974) (35,615,582)Interest expense 20,425,471 31,022,593Interest income (129,479,139) (141,659,899)Dividend income (8,170,671) (8,640,044)Net change in insurance liabilities 68,870,986 139,137,229Net change in other provisions 50,192 1,013,339Share-based payments - 2,328Proportionate share of gains from associates or joint ventures under the equity method (1,211,404) (1,515,103)Losses on reclassification by applying overlay approach 570,802 12,130,912Losses (gains) on disposal and retirement of premises and equipment 4,557 (846,441)Gains on disposal of investment properties (253,818) (3,827)Losses on disposal and retirement of intangible assets 1,759 57,385Gains on disposal of assets classified as held for sale - (319,878)Losses on disposal of investments accounted for using equity method 1,547 -Provision for (reversal of) impairment losses on financial assets 1,715 (614,442)Provision for impairment losses on non-financial assets 125,753 5,402Losses (gains) on disposal of foreclosed properties 1,331 (7,894)Unrealized foreign exchange gains on insurance liabilities (23,789,519) (10,749,830)Other adjustments 98,787 (627,435)

Subtotal of income and expense items with no effect on cash flows (65,975,740) (4,128,232)Changes in Operating Assets and Liabilities:

Net Changes in Operating Assets:Decrease (increase) in due from the central bank and call loans to banks 7,958,944 (16,806,951)Increase in financial assets measured at fair value through profit or loss (18,661,629) (89,170,170)Increase in financial assets measured at fair value through other comprehensive income (63,947,175) (86,761,232)Increase in investments in debt instruments measured at amortized cost (105,695,449) (93,138,956)Decrease (increase) in hedging financial assets 314,370 (296,552)Decrease in receivables 13,125,406 5,362,772Increase in loans (66,055,471) (112,728,722)(Increase) decrease in reinsurance contract assets (256,729) 467,770Increase in other financial assets (33,678,358) (18,198,710)Increase in other assets (4,303,547) (4,458,687)

Net Changes in Operating Assets (271,199,638) (415,729,438)Net Changes in Operating Liabilities:

Increase (decrease) in deposits from the central bank and other banks 2,793,648 (21,298,394)(Decrease) increase in financial liabilities measured at fair value through profit or loss (8,239,384) 4,969,978Increase (decrease) in hedging financial liabilities 174,235 (146,758)Increase (decrease) in payables 3,958,491 (778,879)Increase in deposits and remittances 368,596,928 222,055,296Decrease in employee benefits reserve (156,627) (168,556)Decrease in other financial liabilities (1,585,072) (13,541,429)Increase in other liabilities 713,838 8,091,100Net Changes in Operating Liabilities 366,256,057 199,182,358

Net Changes in Operating Assets and Liabilities 95,056,419 (216,547,080)Sum of Adjustments 29,080,679 (220,675,312)


267

8-1


Consolidated Statements Of Cash FlowsFor the years ended December 31, 2020 and 2019


For the years ended December 312020 2019

Cash Provided by (Used in) Operating Activities $ 80,657,736 (168,866,234)Interest received 129,914,798 141,303,860Dividends received 8,778,462 9,917,652Interest paid (23,142,663) (25,941,199)Income taxes paid (5,456,724) (3,510,811)

Net Cash Flows Provided by (Used in) Operating Activities 190,751,609 (47,096,732)Cash Flows from Investing Activities:

Purchase of financial assets under equity method (3,799,797) (14,626)Increase in prepayments for investments - (340,062)Proceeds from capital reduction of investments accounted for using equity method 22,221 7,856,503Proceeds from disposal of assets classified as held for sale - 843,060Purchase of premises and equipment (1,506,473) (3,303,050)Disposal of premises and equipment 89,993 1,337,323Purchase of intangible assets (1,557,095) (1,350,826)Disposal of intangible assets 4,481 574Proceed from disposal of foreclosed collateral 12,905 44,176Purchase of investment properties (6,221,763) (7,367,143)Proceeds from disposal of investment properties 731,372 788,222

Net Cash Flows Used in Investing Activities (12,224,156) (1,505,849)Cash Flows from Financing Activities:

(Decrease) increase in due to the central bank and banks (4,681,452) 6,854,385(Decrease ) increase in commercial papers payable (27,447,600) 5,781,500Proceeds from issuing bonds 33,500,000 10,000,000Repayments of bonds (6,300,000) (10,550,000)Issuance of financial debentures 1,000,000 -Repayments of financial debentures (28,927,720) -(Decrease) increase in securities sold under repurchase agreement (10,804,928) 34,741,887Payment of lease liabilities (2,939,487) (2,739,481)Cash dividends paid (20,486,315) (20,246,982)Proceeds from issuing shares - 9,981,737Interest paid (2,612,500) (2,898,072)

Net Cash Flows (Used in) Provided by Financing Activities (69,700,002) 30,924,974Effect of Exchange Rate Changes on Cash and Cash Equivalents (1,458,869) (464,638)Increase (decrease) in Cash and Cash Equivalents 107,368,582 (18,142,245)Cash and Cash Equivalents at the Beginning of the Period 342,323,069 360,465,314Cash and Cash Equivalents at the End of the Period $ 449,691,651 342,323,069Composition of Cash and Cash Equivalents:

Cash and cash equivalents recognized in balance sheet $ 142,085,440 137,215,261Due from the central bank and call loans to bank which meet IAS 7 definition of cash and cash equivalents 303,652,816 188,524,449Securities purchased under resell agreements which meet IAS 7 definition of cash and cash equivalents 3,953,395 16,583,359

Cash and Cash Equivalents at the End of the Period $ 449,691,651 342,323,069


268

9


Notes to the Consolidated Financial StatementsFor the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(1) Company history

CTBC FINANCIAL HOLDING CO., LTD. (the “Company”) was established on May 17, 2002, through astock conversion (conversion ratio: one to one) with CTBC Bank Co., Ltd. On the same date, followingthe approval from the Securities & Futures Bureau (the “ SFB” ) under the Financial SupervisoryCommission (the “FSC”), Executive Yuan, the shares of the Company started to be traded publicly, whileshares of CTBC Bank Co., Ltd. were delisted.

The Company conducts business in the following areas:

(a) The Company has been approved to invest in the following businesses:

(i) Banking;

(ii) Bills financing;

(iii) Credit cards;

(iv) Trusts;

(v) Insurance;

(vi) Securities;

(vii) Futures;

(viii) Venture capital;

(ix) Investments in overseas financial institutions as approved by the FSC;

(x) Other related financing as approved by the FSC; and

(xi) Other financial related business investments in accordance with the law.

(b) Management of invested businesses stipulated in item (a).

(c) Investments in businesses other than the ones stipulated in item (a) as approved by the FSC.

(d) Other related businesses as approved by the FSC.

(2) Approval date and procedures of the consolidated financial statements:

The consolidated financial reports were approved by the board of directors on March 19, 2021.

(Continued)

269

10

CTBC FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIESNotes to the Consolidated Financial Statements

(3) New standards, amendments and interpretations adopted:

(a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the FinancialSupervisory Commission, R.O.C. (“FSC”) which have already been adopted

The details of impact on the Company and its subsidiaries adoption of the new amendmentsbeginning January 1, 2020 are as follows:

(i) Amendments to IFRS 16 “Covid-19-Related Rent Concessions”

In response to the rent concessions which occurred as a direct consequence of the Covid-19pandemic, the Company and its subsidiaries elect to use the practical expedient withoutassessing the lease modifications. In accordance with the practical expedient, the effect of thechange in the lease liability is reflected in profit or loss in the period in which the event orcondition that triggers the rent concession occurs.

(ii) Other amendments

The new amendments, also effective January 1, 2020, are as follows:

● Amendments to IFRS 3 “Definition of a Business”

● Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate Benchmark Reform”

● Amendments to IAS 1 and IAS 8 “Definition of Material”

The Company and its subsidiaries assess that the adoption of the abovementioned standards wouldnot have any material impact on its consolidated financial statements.

(b) The impact of IFRS issued by the FSC but not yet effective

The Company and its subsidiaries adoption of the new amendments, effective for annual periodbeginning on January 1, 2021, are expected to have the following impacts:

(i) Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 “ Interest Rate BenchmarkReform－Phase 2”

The amendments address issues that might affect financial reporting as a result of the reform ofan interest rate benchmark, including the effects of changes to contractual cash flows orhedging relationships arising from the replacement of an interest rate benchmark with analternative benchmark rate. The amendments provide practical relief from certain requirementsin IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 relating to:

1) Change in basis for determining cash flows

Changes to contractual cash flows: the Company and its subsidiaries will not have toderecognize or adjust the carrying amount of financial instruments for changes requiredby the amendments, but will instead update the effective interest rate to reflect thechange on the alternative benchmark rate;

(Continued)

270

11


2) Disclosure

The Company and its subsidiaries will be required to disclose any information about newrisks arising from the amendments and information transition on how the Company andits subsidiaries manage to transition regarding the information on the transition ofanother benchmark rates.

3) Transition

The Company and its subsidiaries plan to apply the amendments from January 1, 2021.The application will not impact the amounts reported in 2020 or prior periods.

(ii) Other amendments

● Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9”

The amendments shown above are not expected to have a significant impact on the Company and itssubsidiaries consolidated financial statements.

(c) The impact of IFRS issued by IASB but not yet endorsed by the FSC

The following new and amended standards, which may be relevant to the Company and itssubsidiaries, have been issued by the International Accounting Standards Board (IASB), but have yetto be endorsed by the FSC:

Standards or Interpretations Content of amendmentEffective date per

IASBAmendments to IFRS 10 andIAS 28 “Sale or Contributionof Assets Between an Investorand Its Associate or JointVenture”

A full gain or loss is recognized inaccounting when sale or contribution ofassets between an investor and its associateor joint venture occurred, if it’ s consideredas the loss of control of a subsidiary thatconstitutes a business. A deferred unrealizedgain or loss computed by shareholding ratiois recognized when the transaction thatinvolves assets does not constitute abusiness.

Effective date to bedetermined by IASB

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IASBIFRS 17 “ Insurance Contracts” The new standard of accounting for

insurance contracts contain recognition,measurement, presentation and disclosure ofinsurance contracts issued, and the mainamendments are as follows: ● Recognition: the beginning of the

coverage period of the group of contracts,the date when the first payment from apolicyholder in the group becomes dueand when the group becomes onerousshall recognize a group of insurancecontracts it issues from the earliest.

● Measurement: on initial recognition, anentity shall measure a group of insurancecontracts at the total of the fulfilmentcash flows and the contractual servicemargin. For subsequent measurement, theentity shall estimate the cash flows,discount rates and the adjustment fornon-financial risk.

● Presentation and disclosure: thepresentation of insurance revenue isbased on the provision of service patternand investment components excludedfrom insurance revenue and service fee.

January 1, 2023

Amendments to IFRS 17 “Insurance Contracts”

The fundamental principles introduced whenthe Board first issued IFRS 17 in May 2017remain unaffected. The amendments aredesigned to:● reduce costs by simplifying some

requirements in the Standard;● make financial performance easier to

explain; and● ease transition by deferring the effective

date of the Standard to 2023 and byproviding additional relief to reduce theeffort required when applying IFRS 17for the first time.

Amendments to IAS 16“Property, Plant andEquipment－Proceeds beforeIntended Use”

The amendments prohibit a company fromdeducting amounts received from sellingitems produced while the company ispreparing the asset for its intended use fromthe cost of property, plant and equipment.Instead, a company will recognize such salesproceeds and related cost in profit or loss.

January 1, 2022

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IASBAmendments to IAS 37“Onerous Contracts－Cost ofFulfilling a Contract”

The amendments clarify that the “ costs offulfilling a contract” comprises the costs thatrelate directly to the contract as follows: ● the incremental costs; and● an allocation of other direct costs–e.g. an

allocation of the depreciation charge foran item of property, plant and equipmentused in fulfilling the contract.

January 1, 2022

Annual Improvements to IFRSStandards 2018-2020

● The amendments require a subsidiary thatelects to apply paragraph D16(a) of IFRS1 “ First-time Adoption of InternationalFinancial Reporting Standards” tomeasure the cumulative translationdifferences using the amounts reportedby the parent, based on the parent’s dateof transition to IFRSs.

● In determining whether to derecognize afinancial liability that has been modifiedor exchanged, an entity assesses whetherthe terms are substantially different inaccordance with IFRS 9 “ FinancialInstruments.” The amendments clarifythe fees that an entity includes whenassessing whether the terms of a new ormodified financial liability aresubstantially different from the terms ofthe original financial liability.

● The amendments remove the illustrationof payments from the lessor relating toleasehold improvements of IllustrativeExample 13 accompanying IFRS 16“ Leases” to avoid any potential forconfusion regarding the treatment oflease incentives applying IFRS 16.

January 1, 2022

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IASBAmendments to IFRS 3“Reference to the ConceptualFramework”

The amendments update references to theConceptual Framework and add exceptionsto the recognition for provisions, contingentliabilities:● the acquirer shall apply IAS 37 to

determine whether at the acquisition datea present obligation exists as a result ofpast events.

● the acquirer shall apply IFRIC 21 todetermine whether the obligating eventthat gives rise to a liability to pay thelevy has occurred by the acquisition date.

January 1, 2022

Amendments to IAS 1“Disclosure of AccountingPolicies”

The key amendments to IAS 1 include:● requiring companies to disclose their

material accounting policies rather thantheir significant accounting policies;

● clarifying that accounting policies relatedto immaterial transactions, other events orconditions are themselves immaterial andas such need not be disclosed; and

● clarifying that not all accounting policiesthat relate to material transactions, otherevents or conditions are themselvesmaterial to a company’ s financialstatements.

January 1, 2023

Amendments to IAS 8“Definition of AccountingEstimates”

The amendments introduce a new definitionfor accounting estimates: clarifying that theyare monetary amounts in the financialstatements that are subject to measurementuncertainty.The amendments also clarify the relationshipbetween accounting policies and accountingestimates by specifying that a companydevelops an accounting estimate to achievethe objective set out by an accounting policy.

January 1, 2023

The impact of applying new standards on the financial position and financial performance of theCompany and subsidiaries is under evaluation. Once the evaluation is completed, the Company andsubsidiaries will disclose the effect on the consolidated financial reports.

The Company and its subsidiaries do not expect the following other new and amended standards,which have yet to be endorsed by the FSC, to have a significant impact on its consolidated financialstatements:

● Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”

(Continued)

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(4) Summary of significant accounting policies:

This report was originally prepared in Chinese language. When conflicts or ambiguities arise ininterpretations between the two versions, the Chinese version shall prevail.

(a) Assertion of compliance

The consolidated financial reports were prepared in accordance with the Regulations Governing thePreparation of Financial Reports by Financial Holding Companies, Regulations Governing thePreparation of Financial Reports by Public Banks, the Regulations Governing the Preparation ofFinancial Reports by Securities Firms, the Regulations Governing the Preparation of FinancialReports by Futures Commission Merchants, the Regulations Governing the Preparation of FinancialReports by Insurance Companies, IFRSs, IAS, interpretations and pronouncements as accepted bythe FSC (“IFRSs as accepted by the FSC”).

(b) Basis of preparation

The consolidated financial reports have been prepared on a historical cost basis except for thefollowing material items in the statement of financial position:

(i) Financial instruments measured at fair value through profit or loss (including derivativefinancial instruments);

(ii) Financial instruments measured at fair value through other comprehensive income;

(iii) Hedging financial instruments measured at fair value;

(iv) Cash-settled share-based payment agreements liability measured at fair value;

(v) Defined benefit assets, which are recognized as the net amount of pension plan assets plusunrecognized prior service cost and unrecognized actuarial losses, minus unrecognizedactuarial gains and present value of defined benefits obligation; and

(vi) Reinsurance assets, insurance liabilities and reserve for financial insurance contracts, whichare recognized in compliance with the Regulations Governing the Provision of Reserves byInsurance Companies.

(c) Basis of consolidation

(i) Basis of compilation for consolidated financial reports

The consolidated financial reports encompass the Company itself and controlled entities. Allsignificant intra-group transactions are eliminated.

(Continued)

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(ii) The control of an entity by the Company and subsidiaries may be indicated if the followingcriteria are met simultaneously.

1) The Company and subsidiaries have powers to obtain the majority of the benefits of theentity’s activities through voting rights or other rights;

2) By having a right to the majority of the entity’s benefits, the Company and subsidiariesare exposed to the entity’s business risks;

3) The Company and subsidiaries are capable of using leverage over the entity to influencethe benefits of the entity.

(iii) Subsidiaries and special purpose entities are included in the consolidated financial reports:

Name of ShareholdingInvestor

Company Name of Subsidiary Primary BusinessDecember31, 2020

December31, 2019 Description

The Company CTBC Bank Co., Ltd. (“CTBC Bank”) Commercial banking andfinancing business

%100.00 %100.00

The Company CTBC Securities Co., Ltd. (“CTBC Securities”) Securities and futuresbusiness

%100.00 %100.00

The Company CTBC Venture Capital Co., Ltd. (“CTBC VentureCapital”)

Venture capital business %100.00 %100.00

The Company CTBC Asset Management Co., Ltd. (“CTBC AssetManagement”)

Asset managementbusiness

%100.00 %100.00

The Company Taiwan Lottery Co., Ltd. (“Taiwan Lottery”) Issuing, selling,promoting, drawing,redeeming, andmanaging kinds oflottery products

%100.00 %100.00

The Company Taiwan Life Insurance Co., Ltd. (“Taiwan Life”) Life insurance business %100.00 %100.00

The Company CTBC Investments Co., Ltd. (“CTBC Investments”) Investment andtrust business

%100.00 %100.00

CTBC Bank CTBC Bank (Philippines) Corp. Commercial banking andfinancing business

%99.72 %99.67 (Note 3)

CTBC Bank PT. Bank CTBC Indonesia Commercial banking andfinancing business

%99.00 %99.00

CTBC Bank CTBC Bank Corp. (Canada) Commercial banking andfinancing business

%100.00 %100.00

CTBC Bank The Tokyo Star Bank, Ltd. Commercial banking andfinancing business

%100.00 %100.00

CTBC Bank CTBC Capital Corp. Investment business %100.00 %100.00

The Tokyo Star Bank, Ltd. Tokyo Star Business Finance, Ltd. Financing and assurancebusiness

%100.00 %100.00

The Tokyo Star Bank, Ltd. TSB Servicer, Ltd. Debt managementbusiness

%100.00 %100.00 (Note 5)

The Tokyo Star Bank, Ltd. Pecuniary Trust Contract Mortgage management /Asset-backed securitythat is secured bymortgage /NPLCollection

%- %- (Note 1)

CTBC Capital Corp. CTBC Bank Corp. (USA) Commercial banking andfinancing business

%100.00 %100.00

CTBC Asset Management CTBC International Co., Limited Holding company %100.00 %100.00

(Continued)

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Name of ShareholdingInvestor

Company Name of Subsidiary Primary BusinessDecember31, 2020


CTBC International Co.,Limited

CTBC Financial Leasing Co., Ltd. (“CTBC Leasing(China)”)

Financial leasing %100.00 %100.00

CTBC Venture Capital CTBC Capital International Co., Limited Holding company %- %100.00 (Note 4)

CTBC Capital InternationalCo., Limited

CTBC Venture Capital Investment Management(Shanghai) Co., Ltd. (“CTBC Venture Capital(Shanghai)”)

Venture capitalmanagement andconsulting

%- %- (Note 2)

CTBC Securities Co., Ltd. CTBC (Mauritius) Holding Co., Ltd. Investment business %100.00 %100.00 (Note 6)

CTBC Securities Co., Ltd. CTBC Investment Service Co., Ltd. Securities investmentconsultant business

%100.00 %100.00

CTBC Securities Co., Ltd. CTBC Securities Venture Capital Co., Ltd. Venture capital business %100.00 %100.00

CTBC (Mauritius) HoldingCo., Ltd.

CTBC Asia Limited Securities business %100.00 %100.00

Taiwan Life CTBC Capital Co., Ltd. (used name: TLG CapitalCo., Ltd.)

Installment, leasing andaccount receivablefactoring business

%100.00 %100.00

Taiwan Life CTBC Insurance Co., Ltd. (used name: TLGInsurance Co., Ltd.)

Property insurancebusiness

%100.00 %100.00

(iv) Below are investees excluded in the consolidated financial reports while the Company has defacto control or over 50% holdings:

ShareholdingName of

Investor CompanyName of

Subsidiary Primary BusinessDecember31, 2020


The Company CTBC Security Co., Ltd. Protection, fire and lifesafety services

%100.00 %100.00 The total assets andoperating revenue ofthis investee companyare insignificant.

Taiwan Life InsuranceCo., Ltd.

HoFa Land DevelopmentCo., Ltd.

Premises developmentand transaction

%90.00 %90.00 Has no de facto controlover the entity.


Wu Tzu Development Co.,Ltd.

Athletics andrecreational sportsstadium

%99.00 %99.00 Has no de facto controlover the entity.

Note 1: The reason the listed entities are included in the consolidated financial reports isbecause the subsidiary CTBC Bank and its subsidiaries have leverage over theseentities through direct or indirect investment, voting rights of these entities, andrights to either benefit from the majority of subsidiary CTBC Bank and itssubsidiaries’ profits or sustain the risks. As of December 31, 2020, the subsidiaryCTBC Bank and its subsidiaries have not, either under the terms of any contractualor non-contractual arrangements, provided financial or other support to its specialpurpose entities. Pecuniary trust contract has been due in March 2019.

Note 2: The company had been liquidated on August 8, 2019.

Note 3: In September 2019 and March 2020, the subsidiary, CTBC Bank, increased itscapital contribution to CTBC Bank (Philippines) Corp., resulting in its percentage ofownership to increase from 99.60% to 99.67% and 99.72%, respectively.

Note 4: The company had been liquidated on December 14, 2020.

(Continued)

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Note 5: The company is still in the process of liquidation.

Note 6: The company is still in the process of liquidation; thereafter, the securities of CTBCAsia Limited will be owned directly by CTBC Securities Co., Ltd.

(d) Foreign currency

(i) A foreign currency transaction that is denominated or requires settlement in a foreign currency,shall be recorded on initial recognition in the functional currency by applying to the foreigncurrency spot exchange rate between the functional currency and the foreign currency on thedate of the transaction.

(ii) On each balance sheet date, foreign currency monetary items shall be translated using theclosing rate. Non-monetary items that are measured in terms of historical cost in a foreigncurrency shall be translated using the exchange rate on the date of the transaction; and non-monetary items that are measured at fair value in a foreign currency shall be translated usingthe exchange rates on the date when the fair value was determined.

(iii) Foreign currency differences arising on the settlement of a foreign currency transaction arerecognized in current profit or loss. Foreign currency differences arising on the retranslation ofmonetary items, except for differences arising on the retranslation of monetary itemsdesignated as the hedging instruments in a hedge of the net investments in foreign operation orin a qualifying cash flow hedge are recognized directly in other comprehensive income, othersare recognized in profit or loss when it incurred.

(iv) When a gain or loss on a non-monetary item is recognized in other comprehensive income, anyexchange difference of that gain or loss shall be recognized in other comprehensive income.Otherwise, when a gain or loss on a non-monetary item is recognized in profit or loss, anyexchange difference of that gain or loss shall be recognized in profit or loss.

(v) Functional currency and presentation currency

The functional currency of the Company and subsidiaries is the currency of the primaryeconomic environment in which they operate. The consolidated financial reports are presentedin New Taiwan dollars, the functional currency of the Company.

(e) Cash and cash equivalents

The statements of cash flows are compiled based upon cash and cash equivalents. Cash comprisescash on hand, savings accounts, checking accounts, and unrestricted time deposits or negotiablecertificates of deposit which may be terminated anytime without impairing the principal. Cashequivalents consist of short-term and highly liquid investments that are readily convertible to knownamounts of cash and will mature within a short period so that interest rate fluctuations have littleeffect on their values. Cash equivalents include short-term bills with maturities within three monthsfrom the investment date.

Cash and cash equivalents comprise time deposits that are used by the Company and subsidiaries inthe management of its short-term cash commitments and are not for investment or other purposes.Additionally, the aforementioned deposits are readily convertible to fixed amount of cash and aresubject to an insignificant risk of changes in their fair value.

(Continued)

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(f) Financial instruments

Financial assets held by the Company and subsidiaries are recorded on the trading date, the fairvalue is recorded at the time of initial recognition. Except for financial instruments classified as fairvalue through profit or loss (FVTPL), other financial instruments are initially recognized atacquiring or issuing cost plus transaction costs. However, if the handling fee arising from the saleand purchase does not reach the principle of materiality, it will be charged to current expenses. Upondisposition, the cost of sale of equity securities is determined by the moving-average method, and thecost of sale of debt securities is determined by the first-in, first-out (FIFO) method.

(i) Financial assets

Financial assets are classified into the following categories: fair value through profit or loss(FVTPL), fair value through other comprehensive income (FVOCI) and measured at amortizedcost.

1) Financial assets measured at fair value through profit or loss

Financial assets measured at fair value through profit or loss, if one of the followingconditions is met:

a) Financial assets held for trading.

i) Its main purpose is to sell or repurchase in the near future.

ii) When it was originally recognized, it was part of the identifiable financialcommodity investment of a group of merged management with evidenceshows the mode of operation in which this combination is actually a short-term profit in the near term.

b) Financial assets that are not measured at amortized cost or fair value through othercomprehensive income.

c) In addition to being designated as a hedged item by hedge accounting, financialassets designated as at fair value through profit or loss at initial recognition.

d) Derivative financial instrument.

At each balance sheet date, the fair value is remeasured, and the resulting gain or lossfrom such remeasurement is recognized in current profit or loss.

2) Financial assets measured at fair value through other comprehensive income

a) Financial assets measured at fair value through other comprehensive income, ifboth of the following conditions are met and financial assets were not designated asfinancial assets measured at fair value through profit or loss:

i) The financial assets are held within a business model whose objective isachieved by both collecting contractual cash flows and selling financialassets.

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ii) The contractual terms of the financial asset give rise on specified dates tocash flows that are solely payments of principal and interest on the principalamount outstanding.

1. Principal is the fair value of the financial asset at initial recognition.Interest consists of consideration for the time value of money, for thecredit risk associated with the principal amount outstanding during aparticular period of time and for other basic lending risks and costs, aswell as a profit.

2. However, in some cases, the time value of money element may bemodified (i.e., imperfect). In such cases, the Company and subsidiariesmust assess the modification to determine whether the contractual cashflows represent solely payments of principal and interest on theprincipal amount outstanding.

The fair value of debt instruments measured at fair value through othercomprehensive income shall be remeasured at each balance sheet date. Theresulting gain or loss from such remeasurement is recognized directly in othercomprehensive income. Interest on a debt instrument shall be recorded underthe accrual basis, with the relevant premium/discount amortized by using theeffective-interest-rate method. Credit losses on the financial instrument shallbe recognized as well. If, in a subsequent period, the impairment lossdecreases, and the decrease can be related objectively to an event occurringafter the impairment was recognized, the previously recognized impairmentloss is reversed through profit or loss. The balance of impaired adjustmentamount in other comprehensive income after the reversal shall not benegative. A gain or loss on financial assets is recognized directly in othercomprehensive income, except for foreign exchange gains or losses arisingfrom monetary financial assets, until the financial assets are derecognized, atwhich time the cumulative gain or loss previously recognized in othercomprehensive income is charged to profit or loss.

b) At initial recognition, an irrevocable election is made to present changes in the fairvalue of an equity instrument that is not held for trading in other comprehensiveincome. When the equity instrument is derecognized, the amounts presented inother comprehensive income shall not be subsequently transferred to profit or loss.However, the cumulative gain or loss may be transferred within equity or intoretained earnings directly. Dividends are recognized in profit or loss unless thedividend represents the recovery of part of the investment costs clearly.

3) Financial assets at amortized cost

Financial assets measured at amortized cost include cash and cash equivalents, debtinstruments measured at amortized cost, securities under repurchase/resell agreements,loans and receivables, deposits pledged and other financial assets that are not measuredat fair value, etc.

(Continued)

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Financial assets measured at amortized cost are initially recognized at whose fair valueplus transaction costs. After initial recognition, the amortized cost minus impairment lossis determined by using the effective-interest-rate method. The interest income andimpairment loss are recognized in profit or loss. Until the financial assets arederecognized, at which time the cumulative gain or loss is charged to profit or loss.

a) Debt instruments at amortized cost

The debt instrument investments held by the Company and subsidiaries shall bemeasured at amortized cost if both of the following conditions are met:

i) The financial assets are held within a business model whose objective isachieved by collecting contractual cash flows; and

ii) The contractual terms of the financial asset give rise on specified dates tocash flows that are solely payments of principal and interest on the principalamount outstanding.

The Company and subsidiaries, whose business model is to hold assets in order tocollect contractual cash flows, may sell financial assets when there is an increase inthe assets’ credit risk. Sales made for other reasons may be consistent with abusiness model whose objective is to hold financial assets in order to collectcontractual cash flows if those sales are infrequent (even if significant in value) orinsignificant in value both individually and in aggregate (even if frequent). For debtinstruments measured at amortized cost, the effective-interest-rate method shall beused to calculate amortized cost and interest revenue. Credit-impaired loss shall berecognized for assets measured at amortized cost. If, in a subsequent period, theimpairment loss decreases, and the decrease can be related objectively to an eventoccurring after the impairment was recognized, the previously recognizedimpairment loss is reversed through profit or loss. The carrying amount after thereversal shall not exceed the recoverable amount.

b) Securities under repurchase/resell agreements

Securities sold/purchased with a commitment to repurchase/resell at apredetermined price are treated as financing transactions. The difference betweenthe cost and the repurchase/resell price is treated as interest expenses/revenue andrecognized over the term of the agreement. On the selling/purchasing date, theseagreements are recognized as securities sold under repurchase agreements orsecurities purchased under resell agreements.

c) Loans and receivables

At initial recognition, loans and receivables include incremental direct transactioncosts. The subsequent measurement recognizes interest revenues through theeffective-interest-rate method on accrual basis, under which the loans andreceivables are carried at amortized cost less impairment losses. Loans arereclassified as a non-accrual account if either of the following conditions is met,and interest collected while accruing of interest has been suspended is included inearnings only to the extent of cash actually received.

(Continued)

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- Collection of payment of principal or interest accrued is considered highlyunlikely; or

- Payment of principal or interest accrued is over 3 or 6 months past due; or

- Payment of principal, interest accrued and other suspense account of credit card isover 90 days past due.

Loans and receivables are assessed on each reporting day and the credit risk ofloans and receivables have been significantly increased since the initial recognition.Comparing the risk of breach of contract on the reporting date and the original dateof recognition, and considering the credit risk from the original recognition , thesignificant increase of reasonable and verifiable information as a basis for theestimation of default risk and expected loss rate. In accordance with the expectedcredit losses and with reference to the “Regulations Governing the Procedures forBanking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans” and relevant regulations issued by the FSC. The provision will bedetermined based on the higher of the amount calculated in accordance withregulatory requirements.

Nonaccrual accounts deemed uncollectible are written off upon approval of theboard of directors. The recovery of written-off loans and accounts receivable isaccounted for under the reversal of the allowance for credit losses.

Off-balance-sheet loan commitments and financial guarantee contracts should beevaluated for the possibility of bad debts and the provisions of guarantee orfinancial commitments should be recognized.

4) Financial asset impairment

The Company and subsidiaries should consider the past events, the current situation andthe forecast of future economic conditions, to identify whether the credit risk of financialinstruments have been significantly increased since the initial recognition; After thecredit risk has increased significantly, the impairment loss should be measured as theexpected credit loss during the existence; if there is no significant increase in credit riskafter recognition, the impairment loss should be measured against the 12-month expectedcredit loss. For the judgment and forward-looking adjustment method after therecognition of whether the credit risk has increased significantly, please refer to Note6(au).

5) Derecognition of financial assets

The Company and subsidiaries shall derecognize a financial asset when the contractualrights to the cash flows from the financial asset expire or when the Company andsubsidiaries transfer substantially all the risks and rewards of ownership of the financialassets.

Securities lending agreement or repurchase transactions, where bonds or stocks are takenas collateral, shall not be derecognized, because the Company and subsidiaries haveretained substantially all the risks and rewards of ownership. The transaction of asset-backed securitization is applying to such situation when the Company and subsidiariesstill retained partial risks.

(Continued)

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6) Reclassification of financial assets

The Company and subsidiaries reclassify all affected financial assets in accordance withregulations only when changing the business model of managing financial assets.

7) Overlay approach

The Company’s subsidiary Taiwan Life Insurance Co., Ltd. and subsidiaries may electdesignated financial assets for the overlay approach. A financial asset is eligible fordesignation for the overlay approach if, and only if it is measured at fair value throughprofit or loss applying IFRS 9 but would not have been measured at fair value throughprofit or loss in its entirety applying IAS 39, and it is held in respect of an activity that isconnected with IFRS 17. The Company’s subsidiary Taiwan Life Insurance Co., Ltd. andits subsidiaries have to designate explicitly eligible financial assets for the overlayapproach when and only when they elect to apply the overlay approach. The financialassets should only be designated only when it first applies IFRS 9. Subsequently, theymay designate an eligible financial asset for the overlay approach when, and only whenthat asset is initially recognized or when that asset newly meets the criterion havingpreviously not met.

(ii) Financial liabilities

The financial liability held by the Company and subsidiaries includes a financial liabilitymeasured at fair value through profit or loss (including the instruments designated as at fairvalue through profit or loss), amortized cost of a financial liability and hedge derivatives.

1) Financial liabilities measured at fair value through profit or loss

Financial liability measured at fair value through profit or loss, if one of the followingconditions is met:

a) A financial liability is held for trading if it is acquired or incurred principally forthe purpose of selling or repurchasing it in the near term; on initial recognition it ispart of a portfolio of identified financial instruments that are managed together andfor which there is evidence of a recent actual pattern of short-term profit-taking. Aderivative, except for a derivative that is a financial guarantee contract or adesignated and effective hedging instrument, is classified as instrument held fortrading as well. Financial liabilities held for trading include obligations to deliverfinancial assets borrowed by a short seller.

b) Financial liability designated as measured at fair value through profit or loss at thetime of initial recognition, except that designated as a hedged item in accordancewith the hedge accounting.

Financial liabilities falling under this category are measured at fair value in the balancesheet at the balance sheet date. Moreover, the changes in fair value are recognized ascurrent profit or loss. While for financial liabilities designated at fair value through profitor loss, its fair value changed in the liability’s credit risk should be recognized underother comprehensive income, except for avoiding accounting mismatch or in thecircumstances of loan commitments and financial guarantee contract to provide a loanthat should be accounted as current profit or loss.

(Continued)

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Under certain circumstances, the Company and subsidiaries may not recognize profit orloss of a financial asset or financial liability at initial recognition, if a fair value is notderived from a quoted market price in an active market and is based on the evaluationmethod with data retrieved from unobservable market. In the above scenario, therecognition of the difference between fair value at initial recognition and transactionprice is deferred. After initial recognition, the entity shall recognize the aforesaiddeferred difference as a gain or loss only to the extent that it arises from a change in afactor that market participants would take into account when pricing the asset or liability.

2) Amortized cost of a financial liability

Financial liabilities are classified at amortized cost of a financial liability, except forfinancial liabilities measured at fair value through profit or loss, hedged derivativesfinancial liability, financial bonds payable, financial guarantee contracts, commitments toprovide a loan at a below-market interest rate and financial liabilities that arise when atransfer of a financial asset does not qualify for derecognition or when the continuinginvolvement approach applies.

3) Derecognition of a financial liability

The Company and subsidiaries shall remove a financial liability from its statement offinancial position when, and only when, it is extinguished.

4) Offsetting financial assets and financial liabilities

Financial assets and financial liabilities will be offset and recognized in the net amounton the balance sheet only when the Company and subsidiaries have statutory rights tooffset and intend to net settle or realize assets and to pay off liabilities at the same time.

5) The Company and subsidiaries shall not reclassify any financial liability.

(iii) Derivatives and Hedging Accounting

Derivatives instruments are initially recognized at fair value on contract date and aresubsequently measured at fair value. Fair value includes quoted price in an active market,occurring market transaction prices or model valuation techniques. All derivatives instrumentsare recognized as assets with positive fair value and as liability with negative fair value.

The Company and subsidiaries should accounts for an embedded derivative separately from thehost contract when the host contract is not itself carried at fair value through profit or loss, theterms of the embedded derivative would meet the definition that the economic characteristicsand risks of the embedded derivative are not closely related to the economic characteristics andrisks of the host contract, and the entire hybrid contract is not designated as at fair valuethrough profit or loss. In addition, the embedded derivative is recognized as financial liabilityas measured at fair value through profit or loss.

(Continued)

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When a fair value hedge, cash flow hedge, and hedge of a net investment in a foreign operationare in conformity with all the conditions for the application of hedge accounting, the affectedprofit or loss is recognized by offsetting the changes in the fair value of hedging instrumentsand hedged items. The related accounting treatments are as follows:

1) Fair value hedge

Changes in the fair value of derivatives that are designated and qualified as fair valuehedging instruments against the exposure to changes in fair value of a recognized asset orliability or an unrecognized firm commitment are recognized through profit or loss in thecurrent period.

2) Cash flow hedge

Where a derivative financial instrument is designated as a hedge of the variability in cashflow of a recognized asset or liability or a highly probable forecast transaction, theeffective portion of any gain or loss on remeasurement of the derivative financialinstrument to fair value is recognized directly under other comprehensive income. Whenthe hedged transaction actually affects the profit or loss, the gain or loss previouslyrecognized under other comprehensive income shall be recognized through current profitor loss. Any gain or loss from the change in fair value relating to an ineffective portion ofthe hedge transaction is recognized immediately through profit or loss in the currentperiod.

3) Hedge of a net investment in a foreign operation

The effective portion of any gain or loss on a hedging instrument relating to a hedgeagainst foreign currency fluctuation in a foreign operation is recognized directly in othercomprehensive income until the disposal of the foreign operation, at which time thecumulative gain or loss recognized directly under other comprehensive income isrecognized in profit or loss in the current period.

(iv) Financial guarantee contracts

The Company and subsidiaries recognize financial guarantee liabilities initially at their fairvalue at the date of providing guarantee. The Company and subsidiaries receive commissionincome with non-arm’s length transaction at contract date; this is, the income could representthe fair value of financial guarantee contract. The advanced service fee is recognized asdeferred item and amortized by straight-line method over the life of the financial guarantee.

Financial guarantee contracts shall be subsequently measured by the Company and subsidiariesat the higher of:

1) The amount determined in accordance with “ Provisions”; and

2) The amount initially recognized less, when appropriate, cumulative amortizationrecognized from deferred revenues.

(Continued)

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(g) Investment properties

Investment property could be recognized by the Company’s insurance subsidiary only to earn rentalsor for capital appreciation or both.

Some properties comprise a portion that is held to earn rentals or for capital appreciation and anotherportion that is held for use by the Company’s insurance subsidiary. If these portions could be soldseparately, the Company’ s insurance subsidiary accounts for the portions separately. The portionthat is held for use is treated following “Property and Equipment”, and another portion that is held toearn rentals or for capital appreciation or both is regarded as investment property. If the portionscould not be sold separately, and if an insignificant portion is held for use, then the whole property isregarded as investment property.

Investment property shall be recognized as an asset when, and only when it is probable that thefuture economic benefits that are associated with the investment property will flow to the Company’s insurance subsidiary, and the cost of the investment property can be measured reliably. Subsequentexpenditure is capitalized as cost only when it is probable that the future economic benefits that areassociated with the investment property will flow to the Company’s insurance subsidiary, and thecost of the investment property can be measured reliably. Regular repair costs are recognized asexpenses in the period they are incurred.

If the recognition criteria are met, the Company’ s insurance subsidiary recognizes the cost ofreplacement in the carrying amount of the replaced investment property at the time the cost isincurred. The carrying amount of the part that is replaced is derecognized.

After initial recognition, real estate property is subsequently measured by using cost model, andamortized by the depreciable amount. Its depreciation method, useful life and residual value can bereferred to the regulation of properties and equipment.

When the use of a property changes such that it is reclassified as property and equipment, the bookvalue at the date of reclassification become its cost for subsequent accounting.

(h) Non-financial asset impairment

At each balance sheet date, the recoverable amount of an asset is estimated and compared with thecarrying amount whenever there is an indication that the non-financial asset may be impaired. Animpairment loss is recognized when the recoverable amount, higher of fair market value or value inuse, is less than the carrying amount. For assets other than goodwill, reversal of impairment loss isrecognized when the recoverable amount of the asset has increased from its prior-period estimation.The carrying amount after the reversal shall not exceed the recoverable amount or the depreciated oramortized balance of the assets assuming no impairment loss was recognized in prior periods.

(i) Assets held for sale

For an asset or disposal group to be classified as held for sale, it needs to be disposed of through salerather than through continuing use to recover its carrying amount. Assets or disposal groups thatmeet the criteria to be classified as such must be subject only to terms that are usual and customaryand be available for immediate sale, which is highly probable, within one year of such classification.After being classified as held for sale, it is measured at the lower of carrying amount and fair valueless costs to sell.

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Amortization or depreciation on investment property, intangible assets, premises and equipmentceases once they are classified as held for sale.

(j) Investments in associates

Investments in associates in which the Company is able to exercise significant influence andsubsidiaries the Company has control over are accounted for under the equity method and initiallyrecognized at cost. Goodwill, with a deduction of accumulated impairment loss, relating to anassociate is included in the carrying amount of the investment. The equity method discontinues fromthe date when it ceases to have significant influence, and the book value is taken as the new cost ofthe investment.

The Company has significant influence if holding, directly or indirectly, 20% or more of the votingright of the investee. However, an exception will apply if the Company can specify that it has nosignificant influence over an investee.

After the date of acquisition, the Company and subsidiaries’ share of the profit or loss of theassociates is recognized in profit or loss. Distributions received from an associate reduce thecarrying amount of the investment. Adjustments to the carrying amount of the investment may alsobe necessary for changes in the Company or its subsidiaries’ proportionate interest in the associatesarising from changes in the associates’ other comprehensive income. If the Company or itssubsidiaries’ share of losses of an associate equals or exceeds their interest in the associate(including non-guarantee long-term receivables), the Company or its subsidiaries discontinuesrecognizing its share of further losses. Additional losses and liabilities are recognized, only to theextent that the Company or its subsidiaries has incurred legal or constructive obligations or madepayments on behalf of the associate.

Changes in ownership interest in a subsidiary that do not result in a loss of control are accounted foras equity transactions. In such circumstances, the carrying amounts of the parent’ s ownershipinterest and non-controlling interests shall be adjusted to reflect the changes in their relative interestsin the subsidiary. Any difference between the amount by which the non-controlling interests areadjusted and the fair value of the consideration paid or received shall be recognized directly inequity.

(k) Interest in joint ventures

The joint agreements include joint operations and joint ventures, and have the followingcharacteristics:

(i) The parties are bound by a contractual arrangement;

(ii) The contractual arrangement gives two or more of those parties joint control of thearrangement.

The Company or its subsidiaries distinguish between joint operations and joint ventures byconsidering the structure and legal form of the arrangement, the contractual terms agreed to by theparties to the arrangement and, when relevant, other facts and circumstances. In joint operations, theCompany or its subsidiaries accounts for its share of the joint assets, liabilities, revenues andexpenses in accordance with the contractual arrangement. In joint ventures, the Company or itssubsidiaries account for its investment using the equity method.

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(l) Cash surrender value of life insurance

The Company’s sub-subsidiary CTBC Bank Corp. (USA) purchased single premium life insuranceunder which the executive officers and directors are the insured, while CTBC Bank Corp. (USA) isthe owner and beneficiary thereof. The cash surrender value indicates the amount that would bereceived if the life insurance is terminated prior to the maturity date, and is accounted for underother assets.

(m) Reinsurance assets

In cases of reinsurance contracts that transfer significant insurance risk, unless the Company’ sinsurance subsidiary can independently measure the deposit component, the insurance componentand deposit component should be unbundled. That is, the consideration received or paid, afterdeducting the amount belonging to the insurance component, is recognized as a financial liability orasset, rather than as revenue or expense. That financial liability or asset is recognized or measured atfair value, which is based on the discount value of future cash flows.

The Company’s insurance subsidiary periodically assesses the impairment of the reinsurance reserveassets, claims recoverable from reinsurers, and amount due from reinsurers and ceding companies. Ifa cedant’s reinsurance asset is impaired, the cedant shall reduce its carrying amount accordingly andrecognize the impairment loss in profit or loss. A reinsurance asset is impaired if, and only if, thereis objective evidence, as a result of an event that occurred after initial recognition of the reinsuranceasset, that the cedant may not receive all amounts due to it under the terms of the contract, and thatevent has a reliably measurable impact on the amounts that the cedant will receive from thereinsurer.

(n) Premises and equipment

The Company and subsidiaries’ premises and equipment are recognized after deducting anyaccumulated depreciation and accumulated impairment losses from historical cost. The historicalcost includes any costs directly attributable to acquiring the assets.

Subsequent expenditure of premises and equipment shall be recognized as an asset or be included inthe carrying amount of assets, when, and only when it is probable that the future economic benefitsthat are associated with premises and equipment will flow to the Company and subsidiaries, and thecost of premises and equipment can be measured reliably. The carrying amount of those parts thatare replaced is derecognized. A major improvement or repair expense that can extend the benefitsover afterward period is regarded as capital expenditure; while frequent maintenance or repairs arecharged to current expenses.

If the Company and subsidiaries have obligations to dismantle, remove and restore the property andequipment, the obligation for which the Company and subsidiaries incurs either when the item isacquired or as a consequence of having used the item during a particular period shall be recognizedas the cost of the premises and equipment as well as liability.

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Depreciation is computed using the straight-line method; the useful lives are calculated based on thenormal economic lives. Each part of an item of premises and equipment with a cost that is significantin relation to the total cost of the item shall be depreciated separately. The residual value and theuseful life of an asset shall be reviewed or adequately adjusted at least at each fiscal year-end. Usefullives of major premises and equipment are as follows:

Buildings and premises 2 ~ 56 years

Transportation equipment 1 ~ 12 years

Miscellaneous equipment 2 ~ 20 years

The gain or loss arising from the disposition of an item of premises and equipment shall berecognized in current profit or loss and determined as the difference between the disposal proceedsand the carrying amount of an item.

A property is reclassified to investment property at its carrying amount when the use of the propertychanges from owner-occupied to investment property.

(o) Intangible assets

(i) Computer software system

Computer software system expenses, which are recorded on the basis of the actual cost ofacquisition, are amortized using a straight-line method over a period of 3 to 15 years. Itsamortization method, useful life and residual value are determined with reference to theregulation of properties and equipment. The Company and subsidiaries use the cost model toconduct subsequent measurements.

(ii) Goodwill

The Company and subsidiaries account a business combination by applying the acquisitionmethod. The consideration transferred in a business combination shall be measured at fairvalue, which shall be calculated as the sum of the acquisition-date fair values of the assetstransferred by the acquirer, the liabilities assumed by the acquirer and the equity interestsissued by the acquirer. In addition, other expense directly contributed to the acquisition isincluded. The acquirer shall measure the identifiable assets acquired from businesscombination and the liabilities or contingent liabilities assumed at their acquisition-date fairvalues without considering non-controlling interest. The acquirer shall recognize goodwill asof the acquisition date measured as the excess of the consideration transferred over the fairvalue of net identifiable assets held according to holding proportion. Adversely, the differencemay result in directly recognizing a gain on a purchase.

Goodwill relating to cash-generating units is tested for impairment periodically each year. Animpairment loss is recognized when the recoverable amount is less than the carrying amount.Impairment losses cannot be reversed once an impairment loss has been recognized.

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(iii) The acquisition value of insurance policies

The Company’ s insurance subsidiary should broadly accept the acquisition value of aninsurance policy. In accordance to IFRS 4, the acquisition value of general assumptioninsurance policies is the difference between the liability, which is determined by the insurerbased on the evaluation of accounting policies for the issued insurance policies, and the fairvalue of both the acquired contractual rights and commitment to insurance obligations. Whenamortizing, the amortizable amount would be the value of acquired insurance policies at thedate when general assumption incurs. Over the effective period of the insurance contracts, anamortization expense should be accounted based on the profit or loss of the acquired insurancepolicies. And the amortization expense should be recognized at current profit or loss.

(p) Lease

(i) Identifying a lease

At inception of a contract, the Company and subsidiaries assess whether a contract is, orcontains, a lease. A contract is, or contains, a lease, if the contract conveys the right to controlthe use of an identified asset for a period of time.

(ii) As a lessor

The leases are classified as finance leases, if the Company and subsidiaries transfersubstantially the entire risks and rewards incidental to the ownership of the assets. Otherwise,the leases are classified as operating leases.

1) Operating lease: Lease payments or receivables under an operating lease shall berecognized in current profit or loss using a straight-line method over the lease term.

2) Finance lease: As lessors, the Company and subsidiaries shall derecognize assets heldunder a finance lease at contract date and recognize them as lease payment receivable atan amount equal to the present value of lease payments. The difference between grossamount and present value of lease payment receivables is recognized as unrealizedinterest income and transferred to interest income of current period on an accrual basis.Lease revenue is calculated based on the interest rate implicit in the lease on theremaining balance of lease payment receivables and recognized in current profit or lossover the lease term.

(iii) As a lessee

The Company and subsidiaries recognize a right-of-use asset and a lease liability at the leasecommencement date. The initial amount of the right-of-use asset comprises the initial amountof the lease liability, adjusted for any lease payments made at or before the commencementdate, plus any initial direct costs incurred, and an estimate of costs to restore the underlyingasset, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from thecommencement date to the earlier of the end of the useful life of the underlying asset or theend of the lease term. Refer to “Premises and Equipment” for the review of useful life and theimpairment assessment policy.

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The lease liability is initially measured at the present value of the lease payments that are notpaid at the commencement date, discounted using the interest rate implicit in the lease, or theCompany and subsidiaries’ incremental borrowing rate. Lease payments included in themeasurement of the lease liability comprise the following:

1) Fixed payments, including payments that may, in form, contain variability but that, insubstance, are unavoidable.

2) Variable lease payments that depend on an index or a rate, initially measured using theindex or rate as at the commencement date;

3) Amounts expected to be payable under a residual value guarantee; and

4) Amounts expected for the exercise price under a purchase option, lease payments underan extension option, and penalties for early termination, if the Company and subsidiariesare reasonably certain to exercise or early terminate.

The lease liability is measured by the effective interest method to recognize the interestexpense, and remeasured to reflect the changes as follows:

1) The lease term changes;

2) The future lease payments change to reflect a change in an index or rate; or

3) If there is a change in the Company and subsidiaries estimate of the amount expected tobe payable under a residual value guarantee, or if the Company and subsidiaries changestheir assessment of whether it will exercise a purchase, extension or termination option.

When the lease liability is remeasured to reflect above changes, a corresponding adjustment ismade to the carrying amount of the right-of-use asset, or is recorded in profit or loss if thecarrying amount of the right-of-use asset has been reduced to zero.

The Company and subsidiaries do not recognize right-of-use assets and lease liabilities forshort-term leases that have a lease term of 1 year or less and leases of low-value assets. TheCompany and subsidiaries recognize the lease payments associated with these leases as anexpense on a straight-line basis over the lease term.

(q) Segregated account insurance product assets

When the Company’s insurance subsidiary sells a segregated account insurance product, premiumspaid by policyholders are deposited in a specifically designated account book, after deductingvariable expenses incurred by the insurer per the agreement, in ways that are agreed or required bypolicyholders. The account book asset values are calculated according to the market valuation of thevaluation date, while net asset value is calculated in accordance with regulations and IFRSs.

The assets and liabilities in the account book, whether or not they result from an insurance contractor an insurance contract that has the nature of a financial product, are recognized under “segregatedaccount insurance assets” and “segregated account insurance liabilities”, respectively.

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The revenue and expense in the account book refer to the accumulation of variable revenues andexpenses that meet the definition of an insurance contract under IFRS No. 4, and they are recognizedunder “ segregated account insurance revenue” and “ segregated account insurance expense” ,respectively. That is, for a segregated account insurance product that is classified as an insurancecontract, the premiums received are recognized as premium income, after deducting preliminaryexpenses and other expenses such as account management services fees, while the differencebetween the original cost and the disposal/ subsequent valuation is recognized as profit and loss.

For a segregated account insurance product that is classified as an investment contract, the receivedor paid consideration should be treated as financial assets and liabilities, rather than as an income orexpense. And the difference between the original cost and the disposal/ subsequent valuation of thefinancial asset is not recognized as profit and loss, but rather recognized under the account“segregated account insurance value reserve.”

(r) Foreclosed properties

Foreclosed properties received are stated at acquired cost, and the difference between it and thenominal value of the original claim is reflected as a credit loss. On the Balance sheet date, if theforeclosed properties received are still unsold, they shall be evaluated at the lower of carryingamount and net fair market value. If there is sufficient evidence indicating that the net fair marketvalue is lower than the carrying amount of foreclosed properties, the difference after reassessment isaccounted for under impairment loss on assets. Gain or loss on disposal of foreclosed properties isrecognized in current profit or loss as well.

(s) Provisions

The Company and subsidiaries recognize liability reserve only if all of the following conditions aremet:

(i) An entity has a present obligation, legal or constructive, as a result of a past event;

(ii) It is probable that an outflow of resources embodying economic benefits will be required tosettle the obligation; and

(iii) A reliable estimate can be made of the amount of the obligation.

The Company and subsidiaries shall not recognize liability reserve for future operating losses.

Where there are a number of similar obligations the probability that an outflow will be required insettlement is determined by considering the class of obligations as a whole. Although the likelihoodof outflow for any one item may be small, it may well be probable that some outflow of resourceswill be needed to settle the class of obligations as a whole. If that is the case, a provision isrecognized.

The amount of a provision is measured subsequently as the present value of the expendituresexpected to be required to settle the obligation. The discount rate is a pre-tax rate that reflectscurrent market assessments of the time value of money and the risks specific to the liability. Anydeficiency is recognized in current profit and loss.

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In line with each corresponding authority’s regulations, the Company’s insurance subsidiaries makereserves for unearned premiums, claims, liabilities, contingencies, underinsurance, liabilityadequacy, and insurance contracts with embedded derivatives. Except for catastrophe andequalization reserves provided by the Company’ s life insurance subsidiaries; whereas specialcatastrophe reserve, special risk-volatility reserve and partial provision over pool elevation on non-compulsory Automobile and Motorcycle Liability Insurance regulated by the authorities of R.O.C.are recognized under equity. Other provisions are recognized as expenses in the period they arise.

In accordance with Article 32 of the Regulations, if there is a revaluation increment when appraisingthe investment property at fair value, the increment shall be recognized as a special reserve underliability after offsetting the adverse effects of other accounting items resulting from the first-timeadoption of IFRSs. In addition, in accordance with Jin-Guan-Pao-Chai No. 10102515281 datedNovember 30, 2012, life insurance businesses shall determine the amount of policy reserve thatneeds to be strengthened in accordance with the fair value standards for effective contract stipulatedin Jin-Guan-Pao-Chai No.10102515285 dated November 27, 2012, and transfer the aforementionedspecial reserve to the “policy reserves – insurance contract liability fair value” on January 1, 2013. Ifthere is a remaining surplus subsequent to the transfer, the Company may reverse 80% of the surplusin the first year or reverse it on a straight-line basis over the following consecutive five years andrecognize the reversal as special earnings reserve. However, the annual reversal and the provision forthe special earnings reserve are limited to $10 billion.

The liability adequacy test of the Company’s insurance subsidiary is based on product type group (orthe overall company contracts) and is to compare on each Balance sheet date the net book value ofthe insurance liability (after deduction of the deferred acquisition costs and relevant intangibleassets) to the estimate of the present value of the future cash flow of the insurance contracts. If thenet book value is lower than the estimate, then the difference shall be recognized as current loss. Thetest also follows “ Code of Conduct of Actuarial Practice for IFRS 4 Contract Classification andLiability Adequacy Test” pronounced by the Actuarial Institute of the Republic of China.

(t) Foreign exchange rate fluctuation reserves

On March 1, 2012, the Company’ s insurance subsidiary transferred to be the opening balance offoreign exchange rate fluctuation reserves part of catastrophic special reserves and risk variationspecial reserves; the provision and charge off of foreign exchange rate fluctuation reserves followthe Guidelines on Foreign Exchange Rate Fluctuation Reserves in Life Insurance Companies. Theopening balance of foreign exchange rate fluctuation reserves will then be set aside as specialreserve within 3 years of 2012. The amount set aside in the first year shall not be less than one thirdof the opening balance after tax, and the amount set aside in the first 2 years shall not be less thantwo thirds of the opening balance after tax. Also, the amount saved on the cost of hedging shall betransferred to special reserve each year. If the earning of a particular year is not enough for thetransfer, it shall be done in later years when there are enough earnings. The special reservementioned herein will then be used to increase capital or make up for losses. According to article 9of the Guidelines on Life Insurance Foreign Exchange Rate Fluctuation Reserves, a life insurancecompany should after the shareholders’ meeting provide for special reserve equal to 10% of aftertax profit.

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(u) Treasury stock

The Company has repurchased the issued stocks and recognized them as treasury stock at the cost ofbuyback. The difference should be recognized as Capital surplus- treasury stock transaction if theprice of treasury stock disposal is greater than the book value. On the other hand, if the price oftreasury stock disposal is less than the book value, the difference should be offset against the capitalsurplus that is incurred due to the transaction of equivalent treasury stock. If the balance isinsufficient to absorb the loss, retained earnings should be debited. The book value of treasury stockis computed based on the weighted average method and should be calculated separately dependingon the repurchase reason.

When treasury stock is cancelled, Capital surplus- paid in capital and Capital stock should be debitedbased on the shareholding ratio. The difference should be offset against the capital surplus thatincurs due to the transaction of equivalent treasury stock, if the book value is greater than theaggregate amount of par value and capital premium. If the balance is insufficient to absorb thedifference, retained earnings should be debited. On the contrary, if the book value is less than theaggregate amount of par value and capital premium, capital surplus resulted from the transaction ofequivalent treasury stock should be credited.

(v) Revenue recognition

(i) The income of the Company and subsidiaries is recognized on the accrual basis.

(ii) Please refer to Note 4(f)(i)3. Loans and receivables for more information on the accountingpolicies of interest income from receivables and loans.

(iii) Life insurance business

1) Insurance income and contract acquisition cost

In terms of the insurance contracts and the financial instruments with a discretionaryparticipation feature, the first and the subsequent period premiums are recognized asrevenue when the insurance process is completed and the total payment is received. Thecontract acquisition costs such as commission expenses are recognized as currentexpenses when the insurance contracts become effective.

Financial instruments that are not regarded as insurance products with segregatedaccounts and are classified as not having discretionary participation features arerecognized as “reserves for insurance contract with the nature of financial products.” Theacquisition costs are used to write off “reserves for insurance contract with the nature offinancial products” when the insurance contracts become effective.

Financial instruments that are regarded as insurance products with segregated accountsand are classified as not having discretionary participation features are all recognized asliabilities on insurance product—segregated account after deducting the expenses, suchas the front-end load and investment administrative service charge.

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2) The recognized service income for the life insurance subsidiary’ s insurance productswith a segregated account is classified as financial products without a discretionaryparticipation feature.

The service fees on insurance products of segregated accounts classified as financialproducts without a discretionary participation feature include contract management fees,investment management fees, surrender charges, and others. The service fees arerecognized as income when received. When the service fees (e.g., preliminary cost) areattached with the obligation to provide future services, though, their recognition isdeferred under “deferred service fee and commission income”, and they are amortizedusing the straight line method at a constant proportion over the period during which theservice is provided. The amortized amount is recognized under “ service fee andcommission income”.

The paid acquisition costs of the investment management service for an insurance policyinclude commission expense and other incremental costs directly related to issuing a newcontract. Those costs’ recognition is deferred under “deferred cost of acquirement”, andthey are amortized using the straight line method at a constant proportion over the periodduring which the service is provided. The amortized amount is recognized under “othernon-interest net profit and loss”.

(iv) Property insurance

Premium income includes various insurance income generated from insurance contractsderived from insurance and reinsurance business. Premium income includes the entireinsurance premium generated from direct underwritten and revised premiums issued within theaccounting period, including premium received and temporarily held by solicitors andinsurance agents. Started from January 1, 2015, for automobile insurance business, theinsurance subsidiary should collect automobile insurance fees and sign and issue insurancepolicy or certification before the insurance agreement become effective. Income should berecognized once the underwriting process is done. Reinsurance premium income is recognizedbased on the billing schedule, and unbilled reinsurance premium income should be assessedand recognized based on a reasonable and systematic method at each balance sheet date.Corresponding expenses, including commissions, agency charges, and service fee charges, arerecognized as incurred.

(w) Employee benefit

(i) Short-term employee benefit: The Company and subsidiaries expect to settle all short-termnon-discounted benefits in 12 months after the end of annual financial reporting date in whichthe services are rendered by employees, and recognize them as current expenses.

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(ii) Post-employment benefit: The Company and subsidiaries’ pension plan comprises definedcontribution plan and defined benefit plan.

1) A defined contribution plan is a post-employment benefit plan under which a companypays fixed contributions into a separate entity and will have no legal or constructiveobligation to pay further amounts. Obligations for contributions to defined contributionpension plans are recognized as an employee benefit expense in profit or loss in theperiods during which services are rendered by employees. Prepaid contributions arerecognized as assets to the extent that a cash refund or a reduction in future payments isavailable. Contributions to a defined contribution plan that is due more than 12 monthsafter the end of the period in which the employees render the service are discounted totheir present value.

2) A defined benefit plan is a post-employment benefit plan under which benefit is paid toan employee on the basis of their ages, service periods and compensated salaries at thedate of retirement. The Company and subsidiaries recognize actuarial gains and losseswhich are incurred by the change of actual experience or actuarial assumption in othercomprehensive income, and recognize pension asset or liability in balance sheet in whichasset or liability is the amount of actuarial present value of defined benefit obligationdeducting fair value of plan assets. The calculation of defined benefit obligation isperformed annually by an actuary using the projected unit credit method. The actuarialpresent value of defined benefit obligation is calculated by discounting future cash flowat the yield rate on AA credit rated bonds or government bonds that have maturity datesapproximating the terms of the obligation and that are denominated in the same currencyin which the benefits are expected to be paid. In accordance with the article 30 of theRegulations Governing the Preparation of Financial Reports by Financial HoldingCompanies, when the interest incurred from retiree deposits with favorable rates exceedthe interest generated from market rate, it should be considered as the actuarial amountaccording to defined benefit plan regulated on IAS 19 “ Employee Benefits” since theemployee’ s retirement date. Otherwise, the parameter of actuarial assumption ofcompetent authority should be followed (if have). The interim amount of defined benefitplan is determined based on the pension cost rate, which is the actuarial rate at the end oflast fiscal year, and the amount, which is from the beginning of the year to the end ofcurrent period. In addition, an adjustment would be made if significant marketfluctuation, significant decrease, pay-off or other significant one-time event occurs afterthe end of period.

3) The defined contribution plan of overseas unit is in accordance with respectiveauthorities’ regulation.

(iii) Termination benefit: Termination benefits are incurred when the Company and subsidiariesterminate employment prior to qualifying for retirement, or the employees accepted voluntaryredundancy to get termination benefits in return. Termination benefits are recognized asliabilities when the Company and subsidiaries are committed demonstrably, without realisticpossibility of withdrawal, to a formal detailed plan to provide termination benefits or make anoffer of termination benefits to encourage voluntary redundancy. If termination benefits arepayable more than 12 months after the reporting period, then they are discounted to theirpresent value.

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(x) Share-based payment transactions

The accounting treatments of share-based payment are as follows.

(i) Equity-settled share-based payments are measured at fair value at the date of grant. The fairvalue determined at the grant date of the equity-settled share-based payments is expensed overthe vesting period, and the corresponding increase in owners’ equity is recognized. The vestingperiod is estimated based on the ultimate vesting conditions that must be satisfied. The vestingconditions include service conditions and performance conditions, including marketconditions. In valuing equity-settled payments, no account is taken of any vesting conditionsother than market conditions.

(ii) For cash-settled share-based payment transactions, a liability equal to the portion of the goodsor services received is recognized at its current fair value determined at each balance sheet dateand at the date of settlement, with any changes in the fair value recognized in profit or loss ofthe period.

(iii) Fair value of the share options at the grant date is measured with the use of an option pricingmodel based on management’s best estimate of the exercise price, expected term, underlyingshare price, expected volatility, expected dividend yield, risk-free interest rate, and any otherinputs to the model.

(y) Compensations of employees and directors

The Company and subsidiaries employees’ and directors’ (including independent directors)compensations are recognized as personnel expense. Any difference lies between the actualallocation amount and previously recognized in the financial report is considered as change inaccounting estimates which is then recognized as profit or loss in next year.

(z) Income taxes

Income tax expenses include both current taxes and deferred taxes. Except for expenses related tobusiness combinations or items recognized directly in equity or other comprehensive income, allcurrent and deferred taxes shall be recognized in profit or loss. Current taxes include tax payablesand tax deduction receivables on taxable gains (losses) for the year calculated using the statutory taxrate on the reporting date or the actual legislative tax rate, as well as tax adjustments related to prioryears. Income tax expense of the interim reporting period is measured by interim reporting periodnet income before tax multiplied by best estimate effective annual tax rate. And the best estimateeffective annual tax rate is determined by the management. Deferred taxes arise due to temporarydifferences between the carrying amounts of assets and liabilities for financial reporting purposesand their respective tax bases. Deferred tax assets and liabilities shall be measured at the tax ratesthat are expected to apply to the period when the asset is realized or the liability is settled, based ontax rates that have been enacted or substantively enacted by the end of the reporting period. Deferredtax assets and liabilities may be offset against each other if the following criteria are met by theCompany and subsidiaries:

(i) The entity has the legal right to settle tax assets and liabilities on a net basis; and

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(ii) The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the sametaxation authority on either:

1) Levied by the same taxing authority; or

2) Levied by different taxing authorities, but where each such authority intends to settle taxassets and liabilities where such amounts are significant on a net basis every year of theperiod of expected asset realization or debt liquidation, or where the timing of assetrealization and debt liquidation is matched.

A deferred tax asset should be recognized for the carry-forward of unused tax losses, unused taxcredits, and deductible temporary differences to the extent that it is probable that future taxableprofit will be available against which the unused tax losses, unused tax credits, and deductibletemporary differences can be utilized. Such unused tax losses, unused tax credits, and deductibletemporary differences shall also be re-evaluated every year on the financial reporting date, andadjusted based on the probability that future taxable profit will be available against which the unusedtax losses, unused tax credits, and deductible temporary differences can be utilized.

When the Company files a consolidated corporate income tax return with its domestic subsidiariespursuant to the regulations on consolidated taxation, it shall determine the income tax liability ofeach individual member of the Company. During the period of consolidation, the members of theCompany calculate and adjust deferred tax assets (liabilities) and current income tax payable (taxrefund receivable) accordingly based on a reasonable, consistent and systematic method, and suchadjustments are reflected in income tax recognition as other receivables (payables), which areeliminated in preparing the consolidated financial reports.

(aa) Contingent liability

A contingent liability is defined as a possible obligation that arises from past events and whoseexistence will be confirmed only by the occurrence or non-occurrence of one or more uncertainfuture events not wholly within the control of the Company and subsidiaries; or a present obligationthat arises from past events but is not recognized because it is not probable that an outflow ofresources embodying economic benefits will be required to settle the obligation or the amount of theobligation cannot be measured with sufficient reliability. The Company and subsidiaries shall notrecognize a contingent liability; instead, contingent liability shall be appropriately disclosed.

(ab) Insurance contract

An insurance contract is a “ contract under which the insurance subsidiary accepts significantinsurance risk from another party (the policyholder) by agreeing to compensate the policyholder if aspecified uncertain future event (the insured event) adversely affects the policyholder” . Insurancerisk refers to the risk transferred from the policyholder to the insurer that is not financial risk.Financial risk refers to the risk resulting from possible changes in one or more of the following inthe future: specified interest rate, financial instrument price, commodity price, foreign exchange rate,price index, tariff index, credit rating, credit index or other variables. Non-financial variables aresubject to contributing factors from the counterparty in a contract.

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The insurance subsidiary defines significant insurance risk as an event which might lead toadditional significant payment. But cases that lack commercial essences are excluded. When aninsurance policy was originally judged to meet the definition of an insurance contract, it remains aninsurance contract until its rights and obligations end or mature. Contracts that do not transfersignificant insurance risk are classified as insurance contracts with the nature of a financial product.When the significant risk of an insurance contract with the nature of a financial product istransferred to the Company’ s insurance subsidiary, the Company’ s insurance subsidiary willreclassify it as an insurance contract.

Insurance contracts and insurance contracts with financial instrument features can be furtherclassified as insurance with or without a discretionary participation feature. Except for guaranteedbenefits, a discretionary participation feature is a contractual right to receive additional payments.The right also has the features below:

(i) It is likely to be a significant portion of the total contractual benefits;

(ii) In accordance with the contract, the additional payments and timing of distribution are at thediscretion of the issuer; and

(iii) In accordance with the contract, the additional payments are contractually based on:

1) The performance of a specified pool of contracts or a specified type of contract;

2) Return on investment of a specific asset portfolio held by the insurance subsidiary, or

3) The profit or loss of the insurance subsidiary, fund or other entity.

An embedded derivative is accounted for separately from the host contract when its economiccharacteristics and risks are not closely related to the host contract, and the derivative is measured atfair value through profit or loss. If the embedded derivative conforms to the definition of aninsurance contract or the entire contract is measured at fair value through profit or loss, theCompany’s insurance subsidiary does not need to recognize it separately.

(ac) Operating segments

An operating segment is a component of the Company and subsidiaries that engages in businessactivities from which it may earn revenues and incur expenses (including revenues and expensesrelating to transactions with other components of the Company and subsidiaries). The segment’ soperating results are reviewed regularly by the Company’s chief operating decision maker to makedecisions about resources to be allocated to the segment and assess its performance for whichdiscrete financial information is available.

The prime responsibility of the Company is the management of its subsidiaries, whose operationalperformance and resource allocation are executed under board approval of the parent company. Thecomponents periodically report actual financial results to the Company’s Management Board, andthereby leading to its role as the chief operating decision maker.

(Continued)

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40


(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

When preparing for the consolidated financial statements in accordance with the Regulations Governingthe Preparation of Financial Reports by Financial Holding Companies, the Regulations Governing thePreparation of Financial Reports by Public Banks, the Regulations Governing the Preparation of FinancialReports by Securities Firms, the Regulations Governing the Preparation of Financial Reports by FuturesCommission Merchants, the Regulations Governing the Preparation of Financial Reports by InsuranceCompanies, International Financial Reporting Standards (IFRS) and International Accounting Standards(IAS), as accepted by Financial Supervisory Commission, the management needs to make judgments,estimates, and assumptions that affect the adoption of accounting policies, reported amounts of assets,liabilities, revenues, and expenses. Actual results could differ from the estimates.

The management should continuously evaluate the estimates and assumptions. Changes in accountingestimates are recognized at the occurrence and the impacted future periods.

Please refer to the following for accounting policies and management judgments which have significantimpacts on the consolidated financial statements.

(a) Impairment of financial assets

The impairment of financial assets of the Company and subsidiaries is recognized as the 12-monthexpected credit loss or the lifetime credit loss by identifying whether the credit risk of financialinstruments has been significantly increased since the initial recognition. To evaluate the expectedcredit losses for 12-month and lifetime, the Company and subsidiaries consider the defaultprobability (Probability of default, “ PD” ) of financial assets, issuers or counterparties, and lossgiven default rate (“ LGD” ) multiplying the exposure at default (“EAD”), taking into account thetime value of money as well evaluate 12-month and lifetime loss. The Company and subsidiariesconsider historical experiences, current market conditions and forward-looking estimates to decidethe assumptions and input values to be used in determining the impairment loss. For the details ofthe relevant assumptions and input values, please refer to Note 6(au).

(b) Assessment of goodwill impairment

Assessment of goodwill impairment depends on subjective judgment by the Company and itssubsidiaries, including identifying cash-generating units, allocating goodwill to related cashgenerating units, and deciding recoverable amount of related cash generating units. The managementof the Company and subsidiaries shall estimate the expected future cash flow from cash generatingunits and decide proper discount rate for calculating present value. If the actual cash flow is less thanexpected, significant impairment losses may incur.

(c) Assessment of the fair value of financial instruments

The Company and subsidiaries hold certain financial instruments without active markets, includingfinancial instruments lacking active market quotes and financial instruments that turned out to beinactive due to market conditions (e.g., low market liquidity). When a market is inactive, there areusually only a few or no observable market data available to measure the fair value of financialinstruments. Determination of the existence of an active market for a financial instrument requiresmanagement’ s judgment.

(Continued)

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If the market for an investment held by the Company and subsidiaries are not active, the fair value ofthe instrument is determined using valuation techniques. The Company and subsidiaries use quotesfrom independent third parties or prices derived from internally developed models to determine thefair value of those financial instruments. When the fair value may be publicly obtained fromindependent sources, it shall be adopted first. Overall, the Company and subsidiaries would decide asource or a technique as a fair value determination method that can reflect the price achievedbetween market participants through regular trading as of the reporting date. Valuation techniquesinclude adoption of recent arm’ s-length transactions, reference to other instruments with asubstantially identical basis and application of discounted cash flow analysis, etc., which may alsoinclude a number of assumptions related to each variable (such as credit risk and interest rate).Adoption of different valuation techniques or assumptions may lead to significant discrepancies infair value determination results.

Please refer to note 6(au) for the estimated fair value of the above financial instruments.

(d) Insurance contract classification and significant insurance risk transfer test

The Company and the its subsidiaries should identify whether it takes insurance risk and other riskcomponent for the written policies and judge whether the risk components can be separated andcalculated independently. The judgment will affect insurance contract classification. The Companyand its subsidiaries should also make a significant judgment on whether the written policies transferrisk, whether the risk transfer has commercial essence, and whether the transferred risk hassignificance, and should conduct significant insurance risk transfer test, the result of which willaffect insurance contract classification.

Identification and separation of insurance contract components and insurance contract classificationwill affect The Company and its subsidiaries’ income recognition, liability measurement, andfinancial reports presentation.

(e) Insurance liability and reserve for financial insurance contracts

The insurance subsidiary should follow Regulations For Provision of Reserves By InsuranceCompanies.

Provision of life insurance reserves adopts costs lock-in assumption, which means it uses the reserveprovision interest rate at the time policies are written, rather than current market interest rate.

Unearned premiums reserve is calculated based on the insured hazard, and the provision approach isdetermined by actuaries based on different insurance characteristics.

Claim reserve is estimated using loss triangle. Main assumptions of final claim costs calculation areloss development factor and expected claim ratio. The loss development factor and expected claimratio of different insurance are based on the insurance subsidiary’ s historical claim experience, andadjust for rate, claim management, and company policy.

The liability adequacy reserve calculation follows “ Code of Conduct of Actuarial Practice forInternational of Financial Accounting Standards No.4 - Contract Classification and LiabilityAdequacy Test” pronounced by the Actuarial Institute of the Republic of China. The estimate of thepresent value of the future cash flow of the insurance contracts in the insurance subsidiary’s liabilityadequacy reserve assessment is based on the insurance subsidiary’ s reasonable estimate of futureinsurance payment, premium income, and related expenses. Please refer to Note 6(ae).

(Continued)

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The professional judgment used in the above assessment will affect net changes in insuranceliability, net changes in reserve for financial insurance contracts, and the recognized amount ofinsurance liability and insurance contract reserve for financial insurance contracts in theconsolidated financial reports.

(f) Reinsurance reserve assets

Reinsurance reserve assets include unearned premiums provision, claim reserve, insurance reserve,premium deficiency reserve, and liability adequacy reserve. The calculation follows Regulations ForProvision of Reserves By Insurance Companies, and Regulations For Insurance Companies’ LifeInsurance Business With Insurance Term of More Than one year and Reinsurance Business ForWhich Insurance Reserve May Be Recognized in Balance Sheet. The calculation of such assets arebased on the actuaries’ assumptions and estimates which cover the evaluation on insurance features,historical claims recovered, loss development factors, expected loss ratio, and future cash flows. Theprofessional judgments used in the evaluation would result in net changes of related insuranceliabilities and reinsurance reserve assets recognized in the consolidated financial reports.

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

December 31,2020

December 31,2019

Cash on hand $ 29,398,807 33,529,909Petty cash and revolving fund 23,894 23,761Checks for clearance 2,039,159 1,820,385Cash in transit 3,513,291 3,020,210Due from other banks 106,736,450 98,202,483Cash equivalents 373,839 618,513Total $ 142,085,440 137,215,261

(b) Due from Central Bank and call loans to banks

December 31,2020

December 31,2019

Required reserve—Account A $ 106,708,570 50,558,617Required reserve—Account B 64,989,171 58,129,287Required reserve—Foreign Currency 840,986 316,113Due from Central Bank 133,389,143 90,901,828Call loans to banks 51,992,611 50,845,213Total $ 357,920,481 250,751,058

(Continued)

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The reserves for deposits are calculated at prescribed rates, using the average monthly balances ofvarious deposit accounts, and are appropriated and deposited in the reserve account of the CentralBank of the Republic of China (Taiwan). Deposits in “Required reserve－Account A” are interestfree and can be withdrawn at any time; deposits in “ Required reserve－Account B” are interestbearing and cannot be withdrawn except for the monthly adjustment to the required reservepermitted by relevant regulations.

Please refer to Note 8 for information with regard to the restrictions on the due from Central Bankand call loans to banks shown above.

(c) Financial instruments measured at fair value through profit or loss

December 31,2020

December 31,2019

Mandatorily measured at fair value through profit or lossCommercial papers $ 119,561,419 96,066,860Negotiable certificates of deposits 1,000,000 842,030Other securities and bonds 12,566,908 24,733,188Government bonds 4,738,963 1,570,932Corporate bonds 4,988,425 6,673,798Convertible bonds 3,372,220 1,635,253Financial debentures 57,447,345 51,197,805Asset-backed securities 17,456,969 15,918,074Stocks 64,030,164 64,614,222Beneficiary certificates 166,180,081 161,067,564Linked deposits 7,000,000 10,100,000Derivative financial assets 72,761,917 66,841,044Valuation adjustment of financial assets (1,357,073) (2,403,244)

Total $ 529,747,338 498,857,526

Please refer to Note 6(u) for information with regard to parts of the financial assets at fair valuethrough profit or loss are sold with conditions.

From January 1, 2018, the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. and itssubsidiaries adopted IFRS 9 and elected to apply the overlay approach under the IFRS 4 “InsuranceContracts” to recognize the profit and loss for the designated financial assets. As of December 31,2020 and 2019, among the financial assets relating to the investing activities under insurancecontracts, the amounts of financial assets at fair value through profit or loss designated to apply theoverlay approach were $305,165,013 and $305,104,836.

(Continued)

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For the years ended December 31, 2020 and 2019, the reclassification amounts of the Company’ssubsidiary Taiwan Life Insurance Co., Ltd. and its subsidiaries between profit or loss and othercomprehensive income for the aforementioned designated financial assets under the overlayapproach were as follows:


The amounts reported in profit for the designated financial assets asapplying IFRS 9

$ 18,053,781 29,051,108

Less: The amounts that would have been reported in profit for thedesignated financial assets as applying IAS 39

17,482,979 16,920,196

Gains of the reclassification to other comprehensive income under theoverlay approach

$ 570,802 12,130,912

Due to the adjustment of the overlay approach, the gains (losses) on financial assets measured at fairvalue through profit or loss of the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. and itssubsidiaries has decreased from gains $36,577,697 to gains $36,006,895 and decreased from gains$26,287,612 to gains $14,156,700, respectively, for the years ended December 31, 2020 and 2019.

The Company’ s subsidiary Taiwan Life Insurance Co., Ltd. and its subsidiaries did not designatefinancial products that are previously unqualified for the overlay approach but then qualified duringfor the years ended December 31, 2020 and 2019, or cancel the designated application.

Financial liabilities measured at fair value through profit or loss of the Company and subsidiarieswere as follows:

December 31,2020

December 31,2019

Derivative financial liabilities $ 65,218,734 73,611,120Financial liabilities designated at fair value through profit or

loss14,475,274 41,068,313

Borrowed listed and OTC securities 153,002 -Total $ 79,847,010 114,679,433

(Continued)

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The aforementioned financial liabilities designated at fair value through profit or losses were issuedby the Company’s subsidiary CTBC Bank Co., Ltd., with the related terms and conditions disclosedin Note 6(y). The amounts of fair value and its changes which are attributable to changes in marketconditions that give rise to credit risk were as follows:

December 31,2020

December 31,2019

Financial debentures at fair value $ 14,475,274 41,068,313Cumulative changes in fair value that are attributable to changes

in the credit risk90,364 (1,086,384)

The difference between book value and the amount payableupon maturity as specified in the contract

(734,418) 2,344,539

The Company’ s subsidiary CTBC Bank Co., Ltd. assesses changes in fair value that are notattributable to changes in market conditions that give rise to swing of market risk to evaluatechanges in fair value due to shift of credit risk. For the years ended December 31, 2020 and 2019,there is no transfer of cumulative gain or loss within equity.

The fair value of the callable financial liabilities issued by the Company’s subsidiary CTBC BankCo., Ltd., evaluated based on the internal evaluation method, with evaluation variables retrievedfrom parameters unobservable in the market. In consideration of the discrepancy between evaluatedprice and transaction price, CTBC Bank Co., Ltd. has recognized reserve for day one profits. Thechanges in reserve for day one profits were as follows:


Beginning balance $ 910,293 1,430,916Current decrease (840,894) (503,877)Foreign exchange losses (10,206) (16,746)Ending balance $ 59,193 910,293

(Continued)

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(d) Financial assets measured at fair value through other comprehensive income

December 31,2020

December 31,2019

Debt instruments measured at fair value through othercomprehensive incomeNegotiable certificates of deposits $ 4,030,282 3,730,735Treasury bills 2,425,241 2,708,389Government bonds 104,122,698 109,453,586Corporate bonds 137,984,210 108,703,559Financial debentures 195,712,973 177,116,853Asset-backed securities 64,108,042 51,716,667Other securities and bonds 12,230,343 3,220,502Valuation adjustment of financial assets 13,055,729 10,248,142

Subtotal 533,669,518 466,898,433Equity instruments measured at fair value through other

comprehensive incomeStocks 105,263,000 104,761,557Beneficiary certificates 1,695,515 2,002,451Asset-backed securities 1,866,091 1,143,233Valuation adjustment of financial assets 2,217,637 1,040,762

Subtotal 111,042,243 108,948,003Total $ 644,711,761 575,846,436

For the years ended December 31, 2020 and 2019, the dividends of the Company and subsidiariesrecognized dividend income were as follows:


Amounts derecognized during the reporting period $ 184,458 216,563Amounts held by the end of the reporting period 5,662,602 5,861,621Total $ 5,847,060 6,078,184

For the years ended December 31, 2020 and 2019, the Company and subsidiaries disposed equityinstruments designated at fair value through other comprehensive income due to the consideration ofinvestment strategy, risk management, sale for profit-making purpose and the capital reductionconducted by the investees.

(Continued)

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During the year ended December 31, 2020 and 2019, the gains or losses on disposal of the Companyand subsidiaries related to equity instruments measured at fair value through other comprehensiveincome were as follows. The gains or losses on disposal will be transferred from other equity interestto retained earnings.

The fair value at the date ofderecognition Loss on disposal(before tax)

For the years ended December 31 For the years ended December 312020 2019 2020 2019

Stocks $ 8,684,224 9,491,746 (1,907,088) (917,859)

The changes in allowance for credit losses attributed to the financial assets above were as follows:

For the year ended December 31, 2020

12-monthECL

LifetimeECL

(Collectivelyassessed)

LifetimeECL

(Individuallyassessed)

LifetimeECL(Not

purchasedor

originatedcredit-

impairedfinancialassets)

LifetimeECL

(Purchasedor originated

credit-impairedfinancialassets)

The provisionof impairmentin accordancewith IFRS 9

(Total)Beginning balance $ 123,581 - - - - 123,581Changes in financial instruments that have been identified

at the beginning of the period:　－The financial assets that have been derecognized (44,927) - - - - (44,927)New financial assets originated or purchased 57,155 - - - - 57,155Foreign exchange and other movement (5,791) - - - - (5,791)

Ending balance $ 130,018 - - - - 130,018


12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not

purchasedor

originatedcredit-


LifetimeECL




(Total)Beginning balance $ 171,339 - 108,089 - - 279,428Changes in financial instruments that have been identified

at the beginning of the period:　－The financial assets that have been derecognized (95,780) - (107,884) - - (203,664)New financial assets originated or purchased 71,858 - - - - 71,858Foreign exchange and other movement (23,836) - (205) - - (24,041)Ending balance $ 123,581 - - - - 123,581

Please refer to Notes 6(u) and 8 for information with regard to the resell conditions for, orrestrictions on, financial assets at fair value through other comprehensive income shown above.

(Continued)

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48


(e) Investment in debt instruments at amortized cost

December 31,2020

December 31,2019

Negotiable certificates of deposits $ 448,349,183 384,296,865Treasury bills 17,037,050 7,454,154Government bonds 355,976,110 339,450,568Corporate bonds 501,128,463 433,149,808Financial debentures 430,156,617 478,220,348Asset-backed securities 62,714,475 72,123,653Others 12,411,574 7,383,797Less: Loss allowance (788,747) (796,641)Total $1,826,984,725 1,721,282,552

The Company and its subsidiaries derecognized their investments in debt instruments measured atamortized cost for the mandatorily redemption of the bond issuers, purpose of fund management,sales for credit risk management and infrequent sales or nonsignificant value, both individually andin aggregate, for the year ended December 31, 2020 and 2019, with the information on disposalgains (losses) as follows:

Accumulated gains (losses) of disposalFor the years ended December 31

2020 2019Government bonds $ (270,648) 181,995Corporate bonds 3,073,545 533,978Financial debentures 850,523 705,538International bonds - (356)Total $ 3,653,420 1,421,155

(Continued)

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49


The changes in allowance for credit losses attributed to the above assets were as follows:


12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not

purchasedor

originatedcredit-


LifetimeECL



Theprovision

ofimpairment

inaccordancewith IFRS 9

Beginning balance $ 342,485 - 454,156 - - 796,641

Changes in financial instruments that have beenidentified at the beginning of the period:

－Transfer to Lifetime ECL(credit risk has beensignificantly increased) (1,308) 204 1,104 - - -

－Transfer to the credit-impairedfinancial assets - - (4,530) 4,530 - -

－The financial assets that have beenderecognized (29,045) - (98,781) - - (127,826)

New financial assets originated or purchased 73,403 - - - - 73,403

Foreign exchange and other movement (17,183) 2,725 58,625 2,362 - 46,529

Ending balance $ 368,352 2,929 410,574 6,892 - 788,747


12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not

purchasedor

originatedcredit-


LifetimeECL



Theprovision

ofimpairment

inaccordancewith IFRS 9

Beginning balance $ 444,393 - 812,748 - - 1,257,141

Changes in financial instruments that have beenidentified at the beginning of the period:

－Transfer to Lifetime ECL(credit risk has beensignificantly increased) (9,502) 3,988 5,514 - - -

－Transfer to 12-month ECL 992 - (992) - - -

－The financial assets that have beenderecognized (31,739) - (276,062) - - (307,801)

New financial assets originated or purchased 48,707 - - - - 48,707

Foreign exchange and other movement (110,366) (3,988) (87,052) - - (201,406)

Ending balance $ 342,485 - 454,156 - - 796,641

Please refer to Notes 6(u) and 8 for information with regard to the repurchase conditions for, orrestrictions on, Investments in debt instruments measured at amortized cost shown above.

(Continued)

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50


(f) Financial instruments－hedging

Hedging derivative financial assets of the Company’ s subsidiary CTBC Bank Co., Ltd. were asfollows:

December 31,2020

December 31,2019

Fair value hedge:Non-delivery forwards $ 16,394 33,196

Hedge of a net investment in a foreign operation:Currency swaps - 297,568

Total $ 16,394 330,764

Hedging derivative financial liabilities of the Company’s subsidiary CTBC Bank Co., Ltd. were asfollows:

December 31,2020

December 31,2019

Hedge of a net investment in a foreign operation:　Currency swaps $ 211,672 37,437

(i) For the years ended December 31, 2020 and 2019, the hedging derivative financial instrumentsof the Company’s subsidiary CTBC Bank Co., Ltd. have no ineffective portion of hedging.

(ii) Fair value hedge

The Company’s subsidiary CTBC Bank Co., Ltd. further entered into non-delivery forwards;these contracts are principally to hedge against the foreign exchange fluctuation of capital ofthe international banking department.

Designated hedging instrumentsFinancial instruments Fair value

Hedged itemsdesignated as hedging

instrumentsDecember31, 2020

December31, 2019

Capital of international banking departmentin USD

Non-delivery forwards $ 16,394 33,196

(Continued)

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51


The information of the Company’s subsidiary CTBC Bank Co., Ltd. designated as the hedgeditems on December 31, 2020 and 2019 was as follows:

The carrying amount of thehedged items

The cumulative amount ofadjustment

included in the carryingamount of the hedged

item at fair value hedge

The separate lineitems of the

hedgeditems included in

The changein the fair

value of theineffectiveportion ofhedging

Provision ofcash flow

Assets Liabilities Assets Liabilities the balance sheet items hedgeDecember 31, 2020Fair value hedge:

Foreign exchangerisk

$ 1,007,190 - (9,410) - Cash and cashequivalents

- -

December 31, 2019Fair value hedge:

Foreign exchangerisk

$ 1,094,470 - (40,760) - Cash and cashequivalents

- -

(iii) Hedge of a net investment in a foreign operation

In order to minimize the risk from overseas equity-method investments, the Company’ ssubsidiary CTBC Bank Co., Ltd. entered into currency swaps to hedge against foreignexchange fluctuation.

Designated hedging instrumentsFinancial

instruments Fair value

Hedged itemsdesignated as

hedging instrumentsDecember31, 2020

December31, 2019

CTBC Bank Co., Ltd.-Ho Chi Minh City Branch Currency swaps $ (317) 12,173CTBC Capital Corp. 〞 (38,745) 86,659CTBC Bank Corp. (Canada) 〞 (2,422) 143The Tokyo Star Bank, Ltd. 〞 (170,188) 161,156

(iv) The amounts applicable to the hedge accounting that affects the statement of comprehensiveincome statement for the years ended December 31, 2020 and 2019 were as follows:

Provision of hedge reclassified to profit or loss

Recognized inother

comprehensiveincome

Recognized inprofit or loss ofthe ineffective

portion ofhedging

The separate lineitems of the hedged

items included in thestatements of

comprehensiveincome

The hedgeditems no longer

expected tooccur andtransfer

The hedgeditems have

affected profitor loss andtransferred

The separateline items

affected byreclassification

December 31, 2020

Hedge of net investment

Foreign exchange risk

－Hedge of a netinvestment in a foreignoperations

$ 399,586 - - - - -

(Continued)

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52


Provision of hedge reclassified to profit or loss

Recognized inother

comprehensiveincome

Recognized inprofit or loss ofthe ineffective

portion ofhedging

The separate lineitems of the hedged

items included in thestatements of

comprehensiveincome

The hedgeditems no longer

expected tooccur andtransfer

The hedgeditems have

affected profitor loss andtransferred

The separateline items

affected byreclassification

December 31, 2019


Foreign exchange risk

－Hedge of a netinvestment in a foreignoperations

$ 228,897 - - - - -

(v) The amounts, timing and uncertainty of the aforementioned hedging instruments affecting theCompany’s subsidiary CTBC Bank Co., Ltd.’s future cash flow were as follows:

Maturity dateUp to 1month 1-3 months

3 months to1 year 1-5 years

Over 5years

December 31, 2020

Fair value hedge

Non-delivery forwards

Notional Amount USD 15,000 USD 20,000 - - -

Range of FX(TWD/USD) 28.679~28.892 28.797


Exchange transaction

Notional Amount USD 291,500 - - - -

Range of FX(TWD/USD) 29.275~29.507

Notional Amount CAD 10,000 - - - -

Range of FX(TWD/CAD) 22.120

Notional Amount JPY 52,970,726 - - - -

Range of FX(TWD/JPY) 0.2729~0.2733

Maturity dateUp to 1month 1-3 months

3 months to1 year 1-5 years

Over 5years

December 31, 2019

Fair value hedge

Non-delivery forwards

Notional Amount USD 15,000 USD 20,000 - - -

Range of FX(TWD/USD) 31.054~31.090 31.415


Exchange transaction

Notional Amount USD 291,500 - - - -

Range of FX(TWD/USD) 30.480~30.497

Notional Amount CAD 10,000 - - - -

Range of FX(TWD/CAD) 23.120

Notional Amount JPY 52,970,726 - - - -

Range of FX(TWD/JPY) 0.2782~0.2813

(Continued)

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53


(g) Securities purchased under resell agreements

December 31,2020

December 31,2019

Securities purchased under resell agreements $ 3,953,395 16,583,359

Face value of securities $ 3,868,600 15,985,440

(h) Receivables－net

December 31,2020

December 31,2019

Notes receivable $ 229,235 198,028Accounts receivable 88,171,524 90,620,567Accounts receivable factoring 22,255,471 16,424,280Interest receivable 22,678,933 23,034,461Acceptances receivable 13,692,006 11,592,297Accrued income 444,096 547,101Securities margin loan receivable 3,957,906 3,106,074Financial leasing receivable 10,870,913 10,130,249Interbank clearing receivable 2,583,849 2,560,302Premium receivable 4,038,537 20,254,105Separate account of investment products receivable 1,658,136 1,319,401Installment accounts receivable 5,730,490 4,842,551Financial trading receivable 2,577,264 4,736,238Other receivables 2,872,668 6,036,309Subtotal 181,761,028 195,401,963Less: Allowance for credit losses (2,485,620) (2,751,364)Total $ 179,275,408 192,650,599

The accounts receivable shown above included the receivables from credit card holders who wereinvolved in debt repayment negotiation with the Company’s subsidiary CTBC Bank Co., Ltd.

Please refer to Note 8 for information with regard to the restrictions on other receivables shownabove.

Please refer to Note 6(j) for changes in allowance for credit losses of receivables listed above.

Please refer to Note 6(au) for credit risk and the market risk information about parts of theaforementioned receivables.

Receivables of the Company and subsidiaries should be included in impairment assessment,excluding that of credit card receivables, which are accounted for under liability reserve. Totalreceivables do not encompass investments in security-related and other receivables whoseimpairment assessments are consistent with corresponding assets.

(Continued)

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54


(i) Loans－net

December 31,2020

December 31,2019

Corporate loans $ 601,440,442 596,089,317Micro business loans 16,849,743 13,620,629Mortgage loans 767,048,129 695,710,104Automobile loans 5,243,795 7,459,502Consumer loans 175,301,158 128,946,061Life insurance loans 19,947,382 20,390,467Automatic premium loans 3,765,273 3,590,099 Subtotal of NTD loans 1,589,595,922 1,465,806,179Foreign currency loans 962,737,119 1,031,290,599Non-accrual loans 11,285,923 8,259,657Subtotal 2,563,618,964 2,505,356,435Less: Allowance for credit losses (34,226,903) (32,799,526)Less: Adjustment of discount and premium (1,104,845) (1,024,714)Total $2,528,287,216 2,471,532,195

The loans shown above included the loans to cash card holders and fiduciary loans to clients whowere involved in debt repayment negotiation with the Company’s subsidiary CTBC Bank Co., Ltd.

Please refer to Note 6(au) for the industry information.

Non-performing loans of the Company’s subsidiary CTBC Bank Co., Ltd. and its subsidiaries wereas follows:

December 31,2020

December 31,2019

Non-performing loans $ 12,427,569 8,369,430

The Company’s subsidiary CTBC Bank Co., Ltd. and subsidiaries have suspended interests on non-accrual loans. The amounts of suspended interests were as follows:


Suspended interest on non-accrual loans $ 114,632 139,045

For the years ended December 31, 2020 and 2019, there were no loans written off without recourse.

Please refer to Note 6(j) for changes in allowance for credit losses of loans listed above.

Please refer to Note 6(au) for credit risk and market risk information of loans listed above.

(Continued)

314

55


(j) Allowance for credit losses

The changes in allowance for credit losses, attributed to loans, receivables, other financial assets,and financing guarantee, etc., were as follows:

(i) ReceivablesFor the year ended December 31, 2020

12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not

purchased ororiginated


LifetimeECL




Additionalprovision of

impairment inaccordance with

regulationsfor each industry

(Note) TotalBeginning balance $ 858,746 87,685 13,630 1,461,553 5 2,421,619 329,745 2,751,364Changes in financial instruments that

have been identified at thebeginning of the period:－Transfer to lifetime ECL (11,411) 8,954 3,642 (1,185) - - - -－Transfer to the credit-impaired

financial assets (41,259) (58,786) (1,172) 101,217 - - - -－Transfer to 12-month ECL 89,750 (19,724) - (70,026) - - - -－The financial assets that have

been derecognized (70,238) (3,307) (10,832) (55,960) (3) (140,340) - (140,340)New financial assets originated or

purchased 258,800 18,900 1,134 25,718 - 304,552 - 304,552Additional provision of impairment in

accordance with regulations foreach industry (Note) - - - - - - 114,735 114,735

Write-offs - - - (959,852) - (959,852) (6,171) (966,023)Recoveries of amounts previously

written off - - - 833,454 - 833,454 - 833,454Foreign exchange and other movement (254,745) 68,531 (940) (224,967) (1) (412,122) - (412,122)Ending balance $ 829,643 102,253 5,462 1,109,952 1 2,047,311 438,309 2,485,620


12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not



LifetimeECL







(Note) TotalBeginning balance $ 896,132 93,910 10,674 1,638,837 12 2,639,565 377,041 3,016,606Changes in financial instruments that

have been identified at thebeginning of the period:－Transfer to lifetime ECL (13,013) 6,940 6,681 (608) - - - -－Transfer to the credit-impaired

financial assets (39,079) (62,478) (7,321) 108,878 - - - -－Transfer to 12-month ECL 34,837 (24,521) (11) (10,305) - - - -－The financial assets that have

been derecognized (103,772) (4,063) (1,275) (313,176) (6) (422,292) - (422,292)New financial assets originated or

purchased 274,091 15,936 1,715 52,970 - 344,712 - 344,712Additional provision of impairment in

accordance with regulations foreach industry (Note) - - - - - - (47,004) (47,004)

Write-offs - - (364) (823,989) - (824,353) (292) (824,645)Recoveries of amounts previously

written off - - - 844,286 - 844,286 - 844,286Foreign exchange and other movement (190,450) 61,961 3,531 (35,340) (1) (160,299) - (160,299)Ending balance $ 858,746 87,685 13,630 1,461,553 5 2,421,619 329,745 2,751,364

(Continued)

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56


Note: Additional provisions of impairment were in accordance with “Regulations Governingthe Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans” and “ Regulations Governing the Procedures forInsurance Enterprises to Evaluate Assets and Deal with Non-performing/Non-accrualLoans”.

(ii) LoansFor the year ended December 31, 2020

12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not



LifetimeECL







(Note) TotalBeginning balance $ 5,036,020 533,670 330,610 8,895,618 145,535 14,941,453 17,858,073 32,799,526Changes in financial instruments that have

been identified at the beginning of theperiod:－Transfer to lifetime ECL (79,819) 96,762 14,407 (30,573) (777) - - -－Transfer to the credit-impaired

financial assets (135,928) (157,076) (110,840) 403,834 10 - - -－Transfer to 12-month ECL 237,600 (101,388) (890) (135,322) - - - -－The financial assets that have been

derecognized (1,440,122) (221,237) (198,567) (672,339) (5,786) (2,538,051) - (2,538,051)New financial assets originated or

purchased 2,146,978 268,529 31,068 1,540,885 6,735 3,994,195 - 3,994,195Additional provision of impairment in

accordance with regulations for eachindustry (Note) - - - - - - 1,083,572 1,083,572

Write-offs (850) (4,750) - (8,611,374) (100,964) (8,717,938) - (8,717,938)Recoveries of amounts previously written

off 1,083 - - 1,344,849 - 1,345,932 - 1,345,932Foreign exchange and other movement (277,343) 580,205 230,603 5,733,056 (6,854) 6,259,667 - 6,259,667Ending balance $ 5,487,619 994,715 296,391 8,468,634 37,899 15,285,258 18,941,645 34,226,903


12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not



LifetimeECL







(Note) TotalBeginning balance $ 5,535,971 706,108 10,869 7,834,007 55,056 14,142,011 16,258,437 30,400,448Changes in financial instruments that

have been identified at thebeginning of the period:－Transfer to lifetime ECL (63,234) 43,861 31,368 (9,343) (2,652) - - -－Transfer to the credit-impaired

financial assets (136,527) (192,139) (10,981) 339,536 111 - - -－Transfer to 12-month ECL 208,980 (144,614) (11) (64,355) - - - -－The financial assets that have

been derecognized (1,556,911) (267,743) (508) (782,680) (3,246) (2,611,088) - (2,611,088)New financial assets originated or

purchased 2,198,762 143,044 128,819 2,206,810 103,090 4,780,525 - 4,780,525Additional provision of impairment in

accordance with regulations foreach industry (Note) - - - - - - 1,599,636 1,599,636

Write-offs (20,438) (12,461) (3,085) (4,249,446) (240) (4,285,670) - (4,285,670)Recoveries of amounts previously

written off 1,647 - - 1,220,985 - 1,222,632 - 1,222,632Foreign exchange and other movement (1,132,230) 257,614 174,139 2,400,104 (6,584) 1,693,043 - 1,693,043Ending balance $ 5,036,020 533,670 330,610 8,895,618 145,535 14,941,453 17,858,073 32,799,526

(Continued)

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(iii) Short-term advances, non-accrual loans and othersFor the year ended December 31, 2020

12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not



LifetimeECL







(Note) TotalBeginning balance $ 12,743 3,863 - 269,237 - 285,843 39,060 324,903Changes in financial instruments that

have been identified at thebeginning of the period:－Transfer to lifetime ECL - 124 - (124) - - - -－Transfer to the credit-impaired

financial assets - (15) - 15 - - - -－Transfer to 12-month ECL 1,428 (2) - (1,426) - - - -－The financial assets that have

been derecognized (4,221) (35) - (47,039) - (51,295) - (51,295)New financial assets originated or

purchased 2,301 19 - 38,096 - 40,416 - 40,416Additional provision of impairment in


Write-offs - (24,585) - (190,949) - (215,534) - (215,534)Recoveries of amounts previously

written off - - - 354 - 354 - 354Foreign exchange and other movement (3,693) 25,471 - 98,900 - 120,678 - 120,678Ending balance $ 8,558 4,840 - 167,064 - 180,462 12,184 192,646


12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not



LifetimeECL







(Note) TotalBeginning balance $ 21,328 8,128 - 220,926 - 250,382 48,455 298,837Changes in financial instruments that

have been identified at thebeginning of the period:－Transfer to the credit-impaired

financial assets - (12) - 12 - - - -－Transfer to 12-month ECL 1,101 (3) - (1,098) - - - -－The financial assets that have

been derecognized (4,672) (23) - (8,231) - (12,926) - (12,926)New financial assets originated or



Write-offs - (11,418) - (84,055) - (95,473) - (95,473)Recoveries of amounts previously

written off - - - 2,183 - 2,183 - 2,183Foreign exchange and other movement (10,774) 7,178 - 92,128 - 88,532 - 88,532Ending balance $ 12,743 3,863 - 269,237 - 285,843 39,060 324,903


(Continued)

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(iv) Financing commitment and guarantee reserveFor the year ended December 31, 2020

12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not



LifetimeECL






“RegulationsGoverning theProcedures for

BankingInstitutions to

Evaluate Assetsand Deal with

Non-performing/Non-accrual

Loans” TotalBeginning balance $ 314,737 3,576 - 180,951 117 499,381 670,109 1,169,490Changes in financial instruments that have

been identified at the beginning of theperiod:－Transfer to lifetime ECL (1,087) 1,103 - (16) - - - -－Transfer to the credit-impaired

financial assets (2,229) (196) - 2,425 - - - -－Transfer to 12-month ECL 25,509 (1,434) - (24,075) - - - -－The financial assets that have been

derecognized (62,534) (1,050) - (13,765) - (77,349) - (77,349)New financial assets originated or

purchased 84,656 348 274 337 - 85,615 - 85,615Additional provision of impairment in

accordance with “RegulationsGoverning the Procedures for BankingInstitutions to Evaluate Assets andDeal with Non-performing/ Non-accrual Loans” - - - - - - 86,171 86,171

Write-offs - - - (188) - (188) - (188)Recoveries of amounts previously written

off - - - 575 - 575 - 575Foreign exchange and other movement (40,805) 4,849 (2) (2,997) (23) (38,978) - (38,978)Ending balance $ 318,247 7,196 272 143,247 94 469,056 756,280 1,225,336


12-monthECL

LifetimeECL


LifetimeECL


LifetimeECL(Not



LifetimeECL






“RegulationsGoverning theProcedures for

BankingInstitutions to

Evaluate Assetsand Deal with

Non-performing/Non-accrual

Loans” TotalBeginning balance $ 370,203 10,483 - 216,446 136 597,268 540,319 1,137,587Changes in financial instruments that have

been identified at the beginning of theperiod:－Transfer to lifetime ECL (1,007) 1,010 - (3) - - - -－Transfer to the credit-impaired

financial assets (2,597) (520) - 3,117 - - - -－Transfer to 12-month ECL 7,505 (6,677) - (828) - - - -－The financial assets that have been

derecognized (73,107) (1,649) - (30,844) - (105,600) - (105,600)New financial assets originated or


accordance with “RegulationsGoverning the Procedures for BankingInstitutions to Evaluate Assets andDeal with Non-performing/ Non-accrual Loans” - - - - - - 129,790 129,790

Write-offs - - - (175) - (175) - (175)Recoveries of amounts previously written

off - - - 4,011 - 4,011 - 4,011Foreign exchange and other movement (75,767) 821 - (16,174) (19) (91,139) - (91,139)Ending balance $ 314,737 3,576 - 180,951 117 499,381 670,109 1,169,490

(Continued)

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(k) Reinsurance assets－net

December 31,2020

December 31,2019

Claims recoverable from reinsurers $ 767,989 545,252Due from reinsurers and ceding companies 322,006 288,656Less: Allowance for credit losses (17,887) (18,447)　Subtotal 1,072,108 815,461Reinsurance reserve assets:　Ceded unearned premium reserve 1,180,804 861,864　Ceded claim reserve 809,426 415,339　Ceded premium deficiency reserve 28 -　　Subtotal 1,990,258 1,277,203Total $ 3,062,366 2,092,664

As of December 31, 2020 and 2019, non-performing loans of due from reinsures and cedingcompanies were $18,275 and $21,055, respectively, and the bad debts allowance were $17,887 and $18,447, respectively.

(Continued)

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60


(l) Investment under equity method－net

December 31, 2020% Book value

Investment in associates:Grand Bills Finance Corporation

(original investment at 1,010,880 thousand)21.15 $ 2,281,315

AZ-Star Co., Ltd.(original investment at JPY 12,000 thousand)

40.00 17,117

AZ-Star no. 1 Investment Limited Partnership(original investment at JPY 2,333,068 thousand)

43.98 264

AZ-Star no. 3 Investment Limited Partnership(original investment at JPY 580,866 thousand)

23.56 116,904

LH Financial Group Public Company Limited(original investment at THB 16,598,915 thousand)

36.07 16,362,979

CTBC Security Co., Ltd.(original investment at 58,839 thousand)

100.00 61,697

HoFa Land Development Co., Ltd.(original investment at 3,407,393 thousand)

90.00 3,744,132

Wu Tzu Development Co., Ltd.(original investment at 2,596,144 thousand)

99.00 2,416,827

Top Taiwan IX Venture Capital Co., Ltd.(original investment at 200,000 thousand)

25.00 291,317

Star Shining Energy Co., Ltd.(original investment at 1,500,000 thousand)

30.00 1,535,629

Giga Green Energy Co., Ltd.(original investment at 327,000 thousand)

30.00 343,681

Taiwan Wind Investment Co., Ltd.(original investment at 1,836,255 thousand)

42.86 1,822,576

Solarbright Energy Co., Ltd.(original investment at 35,000 thousand)

35.00 34,800

Star Power Energy Co., Ltd.(original investment at 175,000 thousand)

35.00 166,773

Li-Wei Energy Co., Ltd. (original investment at 425,000 thousand)

28.33 419,535

Investment in joint ventures:Xiamen Jinmeixin Consumer Finance Co., Ltd.

(original investment at RMB170,000 thousand)34.00 871,195

King Dragon Life Investment Co., Ltd.(original investment at 1,856,036 thousand)

50.00 952,079

Total $ 31,438,820

(Continued)

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61


December 31, 2019% Book value

Investment in associates:Grand Bills Finance Corporation

(original investment at 1,010,880 thousand)21.15 $ 2,061,092

AZ-Star Co., Ltd.(original investment at JPY 12,000 thousand)

40.00 26,753

AZ-Star no. 1 Investment Limited Partnership(original investment at JPY 2,333,068 thousand)

43.98 99,700

AZ-Star no. 3 Investment Limited Partnership(original investment at JPY 494,502 thousand)

23.56 115,473

LH Financial Group Public Company Limited(original investment at THB 16,598,915 thousand)

35.62 17,891,631

CTBC Security Co., Ltd.(original investment at 58,839 thousand)

100.00 58,495

HoFa Land Development Co., Ltd.(original investment at 3,407,393 thousand)

90.00 3,680,288

Wu Tzu Development Co., Ltd.(original investment at 2,101,144 thousand)

99.00 1,963,497

Top Taiwan IX Venture Capital Co., Ltd.(original investment at 200,000 thousand)

25.00 232,231

Star Shining Energy Co., Ltd. (original investment at 900,000 thousand)

30.00 923,192

Giga Green Energy Co., Ltd.(original investment at 327,000 thousand)

30.00 338,151

Investment in joint ventures:Xiamen Jinmeixin Consumer Finance Co., Ltd.

(original investment at RMB170,000 thousand)34.00 772,965

King Dragon Life Investment Co., Ltd.(original investment at 1,646,486 thousand)

50.00 544,742

Total $ 28,708,210

For the years ended December 31, 2020 and 2019, the amounts of profit and loss from associates andjoint ventures recognized under equity-method investments were as follows:


Investment in associates $ 1,097,316 1,437,406Investment in joint ventures 112,541 77,697Total $ 1,209,857 1,515,103

(Continued)

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(i) Investment in associates

1) Information of significant associates:

The relevant information about the associates which are material to the Company andsubsidiaries was as follows:

Nature of

Main operatinglocation/

Registered Percentage of ownership

Name of AssociatesRelationship with

the CompanyCountry of the

CompanyDecember 31,

2020December31, 2019

LH Financial Group Public CompanyLimited

Investment underequity method

Thailand %36.07 %35.62

LH Financial Group Public Company Limited successively increased its treasury stocksfrom January to March 2020, resulting in a decrease in the number of shares outstandingand an increase in the percentage of ownership held by the Company and subsidiaries.

The fair values of associates listed on the Stock Exchange (over the counter) which arematerial to the Company and subsidiaries were as follows:

December 31,2020

December 31,2019

LH Financial Group Public Company Limited $ 7,407,266 10,242,780

Summarized financial information of LH Financial Group Public Company Limited wasas follows:

December 31,2020

December 31,2019

Total assets $ 237,348,505 242,897,869Total liabilities (200,571,829) (201,364,625)Net assets $ 36,776,676 41,533,244


Net revenue $ 4,506,491 4,874,612Net income from continuing operations 1,951,375 3,198,845Other comprehensive losses (3,290,376) (65,883)Comprehensive (losses) income $ (1,339,001) 3,132,962

(Continued)

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63


December 31,2020

December 31,2019

Proportionate share of net assets of associates $ 13,264,243 14,792,895Add: Premium on the investment under equity

method3,098,736 3,098,736

Book value of associates $ 16,362,979 17,891,631

2) Information of insignificant associates:

The following is the collected prorated financial information of the associates that areindividually insignificant to the Company and subsidiaries. The financial information isderived from the consolidated financial report:


Net income from continuing operations $ 394,689 293,010Other comprehensive income 158,257 44,295Comprehensive income $ 552,946 337,305

3) Information of other associates:

As of December 31, 2020 and 2019, the Company’s subsidiary Taiwan Life InsuranceCo., Ltd. acquired 90% equity stake of HoFa Land Development Co., Ltd. In accordancewith Article 146-5 of the Insurance Act, where the insurance enterprise or itsrepresentative serves as director or supervisor of the invested enterprises, the number ofdirectors or supervisors appointed by the insurance enterprise shall not exceed one thirdof the total number of directors or supervisors of the invested enterprises and theinsurance enterprise shall not assign any person to act as manager of the investedenterprises. HoFa Land Development Co., Ltd. is set up for participating in the programof “ Kaohsiung City HoFa industrial park development, sell (bid) and management” .However, the final approval of practical operations, such as development plans,expenditures and the bid price of the land, were made by Kaohsiung City Government.As a result, the Company’s subsidiary Taiwan Life Insurance Co., Ltd. has no de factocontrol, but with significant influence, hence, HoFa Land Development Co., Ltd. isexcluded in the consolidated entities. On October 3, 2019, HoFa Land Development Co.,Ltd. refunded cash to shareholders by capital reduction. The Company’ s subsidiaryTaiwan Life Insurance Co., Ltd. acquired refund of shares amounting to $7,830,000 andreduced the book value of the investment under equity method.

As of December 31, 2020 and 2019, the Company’s subsidiary Taiwan Life InsuranceCo., Ltd. acquired 99% equity stake of Wu Tzu Development Co., Ltd. Wu TzuDevelopment Co., Ltd. was set up for the purpose of participating in “the Developmentand Operating Program of Taichung Intercontinental Baseball Stadium” , and wasauthorized by Taichung City Government to operate the Taichung IntercontinentalBaseball Stadium, build multiple functional sport center, parking lots, and other itemsraised by Wu Tzu Development Co., Ltd. The aforesaid items should be reviewed andapproved by Taichung City Government before operating. Furthermore, in accordancewith Article 146-5 of the Insurance Act, where the insurance enterprise or itsrepresentative serves as director or supervisor of the invested enterprises, the number ofdirectors or supervisors appointed by the insurance enterprise shall not exceed one third

(Continued)

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64


of the total number of directors or supervisors of the invested enterprises and theinsurance enterprise shall not assign any person to act as manager of the investedenterprises. As a result, the Company’s subsidiary Taiwan Life Insurance Co., Ltd. hasno de facto control but with significant influence, hence, Wu Tzu Development Co., Ltd.is excluded in the consolidated entities.

As of December 31, 2020, the Company’ s subsidiary Taiwan Life Insurance Co., Ltd.acquired 42.86% equity stake of Taiwan Wind Investment Co., Ltd. In accordance withArticle 146-5 of the Insurance Act, where the insurance enterprise or its representativeserves as director or supervisor of the invested enterprises, the number of directors orsupervisors appointed by the insurance enterprise shall not exceed one third of the totalnumber of directors or supervisors of the invested enterprises, and the insuranceenterprise shall not assign any person to act as manager of the invested enterprises. As aresult, the Company’s subsidiary Taiwan Life Insurance Co., Ltd. has no de facto controlbut with significant influence, hence, Taiwan Wind Investment Co., Ltd. is excluded inthe consolidated entities.

As of December 31, 2020, the Company’ s subsidiary Taiwan Life Insurance Co., Ltd.acquired 35% equity stake of Solarbright Energy Co., Ltd. In accordance with Article146-5 of the Insurance Act, where the insurance enterprise or its representative serves asdirector or supervisor of the invested enterprises, the number of directors or supervisorsappointed by the insurance enterprise shall not exceed one third of the total number ofdirectors or supervisors of the invested enterprises, and the insurance enterprise shall notassign any person to act as manager of the invested enterprises. As a result, theCompany’s subsidiary Taiwan Life Insurance Co., Ltd. has no de facto control but withsignificant influence, hence, Solarbright Energy Co., Ltd. is excluded in the consolidatedentities.

(ii) Investment in joint venture

Xiamen Jinmeixin Consumer Finance Co., Ltd. was jointly invested by the Company'ssubsidiary CTBC Bank Co., Ltd., GOME Holdings Group Co., Ltd. and Xiamen Jin YuanFinancial Holding Co., Ltd. The investment was a joint venture accounted for using the equitymethod. Please refer to Note 13(c) for information with regard to related information oninvestee companies in Mainland China.

The joint agreement between the Company’s subsidiary Taiwan Life Insurance Co., Ltd. andKing Dragon Life Insurance Co., Ltd. is a joint venture, hence accounted for under equitymethod. Please refer to Note 13(c) for information with regard to related information oninvestee companies in Mainland China.

The Company’ s subsidiary Taiwan Life Insurance Co., Ltd. was approved by the FinancialManagement Committee Jin Guan Bao Shou Zi No. 10804160440 to change the estimates inthe insurance liability of King Dragon Life Investment Co., Ltd. under equity methodinvestment in mainland china and recognize the investment gains and losses on June 21, 2019.

(Continued)

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65


The aforementioned financial information for investments in individually insignificant jointventure accounted for using equity method are shown below. The amount of these financialinformation included in the consolidated financial statement:


Net income from continuing operations $ 112,541 77,697Other comprehensive income (losses) 183,475 (40,762)Comprehensive income $ 296,016 36,935

The financial information for investments in joint venture accounted for using equity method ofTaiwan Life Insurance Co., Ltd. is individually insignificant. The financial information has reflectedthe adjustments of the difference of the accounting policy when the consolidated Company adoptedequity method. Moreover, due to the carrying amount of liabilities generating from the contractswithin the scope of IFRS 4 are considered significant compared to the total liabilities, the Companyis temporarily exempt from applying IFRS 9.

The fair value as of the end of financial reporting date and changes of the fair value during theperiod of King Dragon Life Insurance Co., Ltd.’s financial assets were as follows:

The Fair Value onDecember 31, 2020

Changes in FairValue for the yearended December

31, 2020Financial assets with the characteristic of solely

payments of principal and interest, but excluding anyfinancial assets meeting the definition of holding fortrading purpose under IFRS 9 or those weremanaging and evaluating on the basis of fair value

$ 1,583,619 (23,495)

Financial assets without the characteristic of paymentsof principal and interest, or meeting the definition ofholding for trading purpose under IFRS 9 or thosewere managing and evaluating on the basis of fairvalue

6,350,371 317,542

The Fair Value onDecember 31, 2019

Changes in FairValue for the yearended December

31, 2019Financial assets with the characteristic of solely

payments of principal and interest, but excluding anyfinancial assets meeting the definition of holding fortrading purpose under IFRS 9 or those weremanaging and evaluating on the basis of fair value

$ 2,737,442 4,455


1,917,588 14,106

(Continued)

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66


The carrying amounts of the financial assets under IAS 39 above were as follows:

December 31, 2020

Investmentgrade

Sub-investment

gradeHigh risk

gradeFinancial assets with the characteristic of solely

payments of principal and interest, butexcluding any financial assets meeting thedefinition of holding for trading purposeunder IFRS 9 or those were managing andevaluating on the basis of fair value

$ 1,102,305 - 719,961

Financial assets without the characteristic ofpayments of principal and interest, ormeeting the definition of holding for tradingpurpose under IFRS 9 or those weremanaging and evaluating on the basis of fairvalue

659,574 - 5,690,797

December 31, 2019

Investmentgrade

Sub-investment

gradeHigh risk

gradeFinancial assets with the characteristic of solely

payments of principal and interest, butexcluding any financial assets meeting thedefinition of holding for trading purposeunder IFRS 9 or those were managing andevaluating on the basis of fair value

$ 2,238,921 - 713,114

Financial assets without the characteristic ofpayments of principal and interest, ormeeting the definition of holding for tradingpurpose under IFRS 9 or those weremanaging and evaluating on the basis of fairvalue

395,592 - 1,521,996

Note: If the financial assets are measured at amortized cost, the carrying amount is measured beforeadjusting for any loss allowance.

(Continued)

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67


The fair value of the financial assets above which do not belong to low credit risk, and the carryingamount under IAS 39 as of the end of reporting date were as follows:

December 31, 2020The Carrying

Amount under IAS39 (Note) Fair Value

Financial assets with the characteristic of solelypayments of principal and interest, but excluding anyfinancial assets meeting the definition of holding fortrading purpose under IFRS 9 or those weremanaging and evaluating on the basis of fair value

$ 719,961 481,314


5,690,797 5,690,797

December 31, 2019The Carrying

Amount under IAS39 (Note) Fair Value

Financial assets with the characteristic of solelypayments of principal and interest, but excluding anyfinancial assets meeting the definition of holding fortrading purpose under IFRS 9 or those weremanaging and evaluating on the basis of fair value

$ 713,114 474,548


1,521,996 1,521,996

Note: If the financial assets are measured at amortized cost, the carrying amount is measured beforeadjusting for any credit loss allowance.

(Continued)

327

68


(m) Other financial assets－net

December 31,2020

December 31,2019

Short-term advances $ 742,171 664,809Less: Allowance for credit losses－short-term advances (74,528) (68,213)Deposits pledged 712,510 476,647Non-accrual loans transferred from non-loan financial assets 116,495 259,970Less: Allowance for credit losses—non-accrual loans transferred

from non-loan financial assets(77,137) (199,279)

Separate insurance products 125,640,620 91,886,404Customer margin deposit 386,865 416,208Prepayments for investments - 621,696Others 411,692 311,376Total $ 127,858,688 94,369,618

Please refer to Note 6(j) for information with regard to the changes of allowance for short-termadvances and allowance for credit losses— non-accrual loans transferred from non-loan financialassets shown above.

Please refer to Note 6(ao) for the information on separate insurance products.

Please refer to Note 8 for information with regard to the restrictions on the other financial assetsshown above.

(n) Investment property－net

December 31, 2020

Asset CostAccumulateddepreciation

Accumulatedimpairment Book value

Proprietary AssetsLand $ 48,126,025 - 163,267 47,962,758Buildings 21,567,072 2,623,446 61,405 18,882,221Construction in progress 5,412,320 - - 5,412,320Prepayment for land 135,230 - - 135,230Subtotal 75,240,647 2,623,446 224,672 72,392,529Right-of-Use AssetsSuperficies 15,255,941 723,399 - 14,532,542Total $ 90,496,588 3,346,845 224,672 86,925,071

Fair value $ 93,540,617

(Continued)

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69


December 31, 2019

Asset CostAccumulateddepreciation

Accumulatedimpairment Book value

Proprietary AssetsLand $ 47,064,215 - 245,972 46,818,243Buildings 17,600,150 2,088,128 100,013 15,412,009Construction in progress 4,471,976 - - 4,471,976Prepayment for land 96,557 - - 96,557Subtotal 69,232,898 2,088,128 345,985 66,798,785Right-of-Use AssetsSuperficies 15,218,219 361,240 - 14,856,979Total $ 84,451,117 2,449,368 345,985 81,655,764

Fair value $ 87,525,026

Changes in the cost were as follows:

January 1, 2020 Current increase Current decrease OthersDecember 31,

2020Proprietary Assets

Land $ 47,064,215 1,451,306 389,496 - 48,126,025

Buildings 17,600,150 4,082,318 115,396 - 21,567,072

Construction in progress 4,471,976 4,246,690 3,306,346 - 5,412,320

Prepayment for land 96,557 576,274 537,601 - 135,230

Subtotal 69,232,898 10,356,588 4,348,839 - 75,240,647

Right-of-Use Assets

Superficies 15,218,219 37,722 - - 15,255,941

Total $ 84,451,117 10,394,310 4,348,839 - 90,496,588



Land $ 41,224,972 6,891,623 1,052,380 - 47,064,215

Buildings 15,871,198 2,103,640 374,688 - 17,600,150

Construction in progress 2,034,736 2,479,794 42,554 - 4,471,976

Prepayment for land 85,683 1,103,079 1,092,205 - 96,557

Subtotal 59,216,589 12,578,136 2,561,827 - 69,232,898

Right-of-Use Assets

Superficies 15,218,219 - - - 15,218,219

Total $ 74,434,808 12,578,136 2,561,827 - 84,451,117

(Continued)

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Changes in accumulated depreciation were as follows:



Buildings $ 2,088,128 550,440 15,122 - 2,623,446

Right-of-Use Asset

Superficies 361,240 362,159 - - 723,399

Total $ 2,449,368 912,599 15,122 - 3,346,845



Buildings $ 1,278,845 838,725 29,442 - 2,088,128

Right-of-Use Asset

Superficies - 361,240 - - 361,240

Total $ 1,278,845 1,199,965 29,442 - 2,449,368

Changes in accumulated impairment were as follows:



Land $ 245,972 - 82,705 - 163,267

Buildings 100,013 - 38,608 - 61,405

Total $ 345,985 - 121,313 - 224,672



Land $ 245,972 - - - 245,972

Buildings 100,013 - - - 100,013

Total $ 345,985 - - - 345,985

The Company and its subsidiaries recognized the impairment losses and reversal of impairmentlosses due to the changes in market environment and adjustments in office-use plan for the yearended December 31, 2020.

On August 12, 2015, the Company’ s subsidiary, Taiwan Life Insurance Co., Ltd., acquired thesuperficies right of lot 15 of Jingmao Section, Nangang, Taipei, from Taipei Fertilizer Co., Ltd. for45 years, with the total royalty of $15 billion, wherein the Company’s subsidiary can decide (fromthe sixth month of the ninth year to the tenth year) whether to extend the superficies right period foranother 40 years, at an amount of $15 billion, with 15 years to pay off. On December 10, 2015, adecision had been made regarding the extension of superficies right mentioned above, which wasaccounted for as right of use assets under investment property. Please refer to Note 8 for informationon performance guarantee deposits.

Please refer to Note 13(a)(v)(vi) for information on the related significant transactions of investmentproperty.

(Continued)

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The fair value of investment property is based on a valuation by an external independent appraiserwho holds a recognized and relevant professional qualification and has recent experience in thelocation and category of the investment property being valued, and internal evaluation method. Thevalue of investment properties is estimated through application of market value method.

The rental income and direct operating expenses arising from investment properties under operatingleases of the Company and subsidiaries were as follows:


Rental income from investment property $ 1,520,848 1,278,110Direct operating expense arising from investment property that

generated rental income during the period$ 813,020 729,576

Direct operating expense arising from investment property that did notgenerate rental income during the period

$ 28,915 25,977

The Company and subsidiaries have no pledged investment properties.

The Company’ s subsidiary Taiwan Life Insurance Co., Ltd. and its subsidiaries and CTBC AssetManagement Co., Ltd. lease their investment property and rental assets under operating leases;please refer to Note 6(r) for information on rental assets. A maturity analysis of lease payments,showing the undiscounted lease payments to be received after the reporting date is as follows:

December 31,2020

December 31,2019

Less than 1 year $ 1,548,989 1,429,0141 year to 2 years 1,504,709 1,175,6982 year to 3 years 1,560,744 1,100,1923 year to 4 years 1,276,147 1,316,8014 year to 5 years 1,205,665 1,011,241More than 5 years 9,651,760 9,968,926Total undiscounted lease payments $ 16,748,014 16,001,872

(o) Premises and equipment－net

December 31, 2020 CostAccumulateddepreciation

Accumulatedimpairment Net

Land $ 18,275,002 - 41,383 18,233,619Buildings 34,976,252 8,801,981 136,743 26,037,528Transportation equipment 100,126 65,638 6 34,482Miscellaneous equipment 10,909,339 6,250,820 22,227 4,636,292Construction in progress 359,444 - - 359,444Prepayment for equipment 8,846 - - 8,846Total $ 64,629,009 15,118,439 200,359 49,310,211

(Continued)

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December 31, 2019 CostAccumulateddepreciation


Land $ 18,344,452 - 41,383 18,303,069Buildings 34,526,450 7,621,544 23,610 26,881,296Transportation equipment 98,136 66,861 - 31,275Miscellaneous equipment 10,739,680 5,598,680 - 5,141,000Construction in progress 293,737 - - 293,737Prepayment for equipment 48,009 - - 48,009Total $ 64,050,464 13,287,085 64,993 50,698,386


January 1, 2020 Current increase Current decrease Others (exchange

difference)December 31,

2020Land $ 18,344,452 11,749 76,106 (5,093) 18,275,002

Buildings 34,526,450 650,347 147,200 (53,345) 34,976,252

Transportation equipment 98,136 15,678 13,159 (529) 100,126

Miscellaneous equipment 10,739,680 992,975 770,297 (53,019) 10,909,339

Construction in progress 293,737 458,279 391,752 (820) 359,444

Prepayment for equipment 48,009 117,401 156,413 (151) 8,846

Total $ 64,050,464 2,246,429 1,554,927 (112,957) 64,629,009



2019Land $ 17,710,416 3,891,139 3,261,599 4,496 18,344,452

Buildings 32,840,537 3,098,176 1,338,932 (73,331) 34,526,450

Transportation equipment 91,304 19,986 14,019 865 98,136

Miscellaneous equipment 10,162,857 1,699,273 1,110,697 (11,753) 10,739,680

Construction in progress 76,320 1,221,763 1,003,136 (1,210) 293,737

Prepayment for equipment 192,598 571,344 715,929 (4) 48,009

Prepayment for land andbuildings

4,928,334 240,621 5,168,955 - -

Total $ 66,002,366 10,742,302 12,613,267 (80,937) 64,050,464




2020Buildings $ 7,621,544 1,311,250 75,783 (55,030) 8,801,981Transportation equipment 66,861 10,740 11,860 (103) 65,638Miscellaneous equipment 5,598,680 1,426,154 732,264 (41,750) 6,250,820Total $ 13,287,085 2,748,144 819,907 (96,883) 15,118,439



2019Buildings $ 7,145,610 1,208,889 714,095 (18,860) 7,621,544Transportation equipment 66,580 10,452 10,685 514 66,861Miscellaneous equipment 5,375,911 1,294,364 1,066,864 (4,731) 5,598,680Total $ 12,588,101 2,513,705 1,791,644 (23,077) 13,287,085

(Continued)

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73





2020Land $ 41,383 1,003 1,003 - 41,383

Buildings 23,610 113,665 - (532) 136,743

Transportation equipment - 6 - - 6

Miscellaneous equipment - 22,331 - (104) 22,227

Total $ 64,993 137,005 1,003 (636) 200,359



2019Land $ 41,383 - - - 41,383

Buildings 23,610 - - - 23,610

Total $ 64,993 - - - 64,993

Please refer to Note 6(n) for information on impairment loss recognized by premises and equipmentshown above.

(p) Right-of-use assets

December 31, 2020

CostAccumulateddepreciation


Superficies $ 9,685,207 515,376 - 9,169,831Buildings 10,656,976 3,957,799 109,545 6,589,632Transportation equipment 191,001 82,123 - 108,878Miscellaneous equipment 1,084,633 743,693 - 340,940Total $ 21,617,817 5,298,991 109,545 16,209,281

December 31, 2019

CostAccumulateddepreciation


Superficies $ 9,454,385 254,429 - 9,199,956Buildings 8,428,794 2,210,111 - 6,218,683Transportation equipment 171,207 58,976 - 112,231Miscellaneous equipment 1,086,788 592,558 - 494,230Total $ 19,141,174 3,116,074 - 16,025,100




2020Superficies $ 9,454,385 230,822 - - 9,685,207

Buildings 8,428,794 3,220,116 871,543 (120,391) 10,656,976



Total $ 19,141,174 3,535,633 936,036 (122,954) 21,617,817

(Continued)

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2019Superficies $ 9,453,760 625 - - 9,454,385

Buildings 6,815,272 1,949,415 266,587 (69,306) 8,428,794

Transportation equipment 127,343 81,551 37,965 278 171,207


Total $ 17,506,464 2,037,278 330,169 (72,399) 19,141,174




2020Superficies $ 254,429 260,947 - - 515,376

Buildings 2,210,111 2,603,945 802,352 (53,905) 3,957,799


Miscellaneous equipment 592,558 155,711 2,906 (1,670) 743,693

Total $ 3,116,074 3,097,403 858,387 (56,099) 5,298,991



2019Superficies $ - 254,429 - - 254,429

Buildings - 2,427,639 187,802 (29,726) 2,210,111

Transportation equipment 29,760 59,540 29,117 (1,207) 58,976

Miscellaneous equipment 464,054 157,570 25,617 (3,449) 592,558

Total $ 493,814 2,899,178 242,536 (34,382) 3,116,074




2020Buildings $ - 110,060 - (515) 109,545

Please refer to Note 6(n) for information on impairment loss recognized by right-of-use assets shownabove.

In May 2006, CTBC Bank acquired the superficies right of lots 43, 43-1, 45 and 45-1 of JingmaoSection, Nangang, Taipei, from Taiwan Fertilizer Co., Ltd. for 50 years through a public tender. Theacquisition cost amounted to $3,364,140 (including business taxes and other related expenses of thesuperficies). The rental is determined annually at the rate of 8% of the government assessed currentpresent value. Please refer to Note 8 for information on performance guarantee deposits.

(q) Intangible assets－net

December 31,2020

December 31,2019

Goodwill $ 18,015,340 18,015,340Computer software 5,920,814 5,726,704The acquisition value of insurance policies 605,132 619,419Others 62,215 63,602Total $ 24,603,501 24,425,065

(Continued)

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Goodwill of the Company and subsidiaries was acquired from business combination.

The acquisition value of insurance policies is the difference between the fair value of both theacquired contractual rights and commitment to insurance obligations, and the liability, which isdetermined by the insurer based on the evaluation of accounting policies for the issued insurancepolicies under general assumption.

Changes in intangible assets were as follows:



2020Goodwill $ 18,015,340 - - - 18,015,340

Computer software 5,726,704 2,167,160 1,959,249 (13,801) 5,920,814

The acquisition value ofinsurance policies

619,419 - 14,287 - 605,132

Others 63,602 - 1,387 - 62,215

Total $ 24,425,065 2,167,160 1,974,923 (13,801) 24,603,501



2019Goodwill $ 18,015,340 - - - 18,015,340

Computer software 5,770,393 1,770,103 1,808,207 (5,585) 5,726,704

The acquisition value ofinsurance policies

637,011 - 17,592 - 619,419

Others 64,989 - 1,387 - 63,602

Total $ 24,487,733 1,770,103 1,827,186 (5,585) 24,425,065

(r) Other assets－net

December 31,2020

December 31,2019

Prepayments $ 14,155,744 15,399,431Deferred charges 570,358 378,820Foreclosed properties received－net 159,782 168,132Temporary payments 111,345 185,311Refundable deposits－net 19,278,443 19,115,038Cash surrender value of life insurance 1,764,302 1,813,905Clients’ position-debit 5,302,451 2,198,944Rental assets 410,666 876,540Others 2,639,009 2,056,287Total $ 44,392,100 42,192,408

(Continued)

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In order to fulfill social responsibility of the Company’s subsidiary CTBC Bank Co., Ltd., improvethe image of the Company’s subsidiary CTBC Bank Co., Ltd. and receive a long term benefit fromadvertisements, the Company’s subsidiary CTBC Bank Co., Ltd. sponsored a professional baseballteam by signing a sponsorship and cooperative advertisement contract with Hua Yi Entertaining Co.Ltd. on December 5, 2013, amounting to $400,000 and accounted under prepaid expenses. Theduration of the name of the baseball team will last for 10 years, starting from the date the Company’ssubsidiary CTBC Bank Co., Ltd. appointed the team name. As of December 31, 2020, the accountbalance was $120,000.

Please refer to Note 8 for information on restrictions on other assets shown above.

(s) Deposits from Central Bank and other banks

December 31,2020

December 31,2019

Deposits from Central Bank $ 196,782 208,314Deposits from other banks 27,330,281 21,379,727Deposits from post offices 236,313 353,582Overdraft on banks 1,235,540 1,454,648Call loans from banks 26,995,030 29,804,027Total $ 55,993,946 53,200,298

(t) Due to Central Bank and other banks

December 31,2020

December 31,2019

Financing from Central Bank $ 3,069,094 11,960,095Financing from other banks 5,774,834 2,540,416Long-term borrowings 7,370,780 6,395,649Total $ 16,214,708 20,896,160

Financing from Central Bank:

(i) As of December 31, 2020, the Company’ s subsidiary CTBC Bank Co., Ltd. applied formarginal loans from the Central Bank amounting to $2,868,770 for providing loans to smalland medium enterprises affected by Covid-19 pandemic.

(Continued)

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(ii) The Tokyo Star Bank, Ltd.

December 31,2020

December 31,2019

Borrowings (JPY thousand) $ 724,500 43,177,240Interest rate 0.31%~0.57% 0.00%~2.04%Maturity date March 5, 2021 September 4,

2020Interest Payment Interest is

payableat the maturity

date

Interest ispayable

at the maturitydate

Financing from other banks:

(i) CTBC Bank Corp. (USA)

December 31,2020

December 31,2019

Inter bank borrowings (USD thousand) $ 55,000 -Interest rate 0.00%~0.96% -Maturity date April 30, 2025 -

(ii) PT. Bank CTBC Indonesia

December 31,2020

December 31,2019

Inter bank borrowings (IDR thousand) $ - 138,825,000Interest rate - 2.80%Maturity date - August 30, 2021

(iii) CTBC Bank (Philippines) Corp.

December 31,2020

December 31,2019

Inter bank borrowings (PESO thousand) $ 988,536 931,481Interest rate 1.11%~4.96% 7.38%Maturity date April 29, 2022 April 29, 2022

(Continued)

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(iv) CTBC Securities Co., Ltd.

December 31,2020

December 31,2019

Inter bank borrowings (NTD) $ - 3,866Interest rate - 3.60%Maturity date - January 3,

2020

(v) CTBC Capital Co., Ltd.

December 31,2020

December 31,2019

Inter bank borrowings (NTD) $ 2,860,000 1,205,000Interest rate 0.95%~1.20% 1.00%~1.50%Maturity date October 26,

2021March 28, 2020

(vi) CTBC Venture Capital Co., Ltd.

December 31,2020

December 31,2019

Inter bank borrowings (NTD) $ 760,000 450,000Interest rate 0.82%~0.87% 0.96%Maturity date February 5,

2021January 3,

2020

(vii) CTBC Asset Management Co., Ltd.

December 31,2020

December 31,2019

Inter bank borrowings (NTD) $ 1,013,000 -Interest rate 1.00%~1.10% -Maturity date January 14,

2021-

(Continued)

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Long-term borrowings:

(i) CTBC Leasing (China)

December 31,2020

December 31,2019

Borrowings (RMB thousand) $ 745,677 801,490Borrowings (USD thousand) 108,133 97,167Interest rate LIBOR+1.5%~

5.70%LIBOR+1.5%~

6.41%Maturity date August 18, 2023 July 26, 2022Interest Payment Interest is

payablemonthly,

quarterly and atthe maturity

date.

Interest ispayablemonthly,

quarterly and atthe maturity

date.

Please refer to Note 8 for information on assets pledged to the bank as collateral of the borrowingaforesaid.

(u) Securities sold under repurchase agreements

December 31, 2020

Assets Par valueSelling price

(Note)Designated

repurchase amountDesignated

repurchase dateFinancial assets measured at

fair value through profit orloss

$ 12,759,607 12,747,831 12,750,369 Prior to June 18,2021

Financial assets measured atfair value through othercomprehensive income

22,907,535 22,330,998 22,340,572 Prior to June 18,2021

Debt instruments at amortizedcost

64,166,970 59,382,335 59,395,267 Prior to March 12,2021

Total $ 99,834,112 94,461,164 94,486,208

December 31, 2019

Assets Par valueSelling price

(Note)Designated

repurchase amountDesignated

repurchase dateFinancial assets measured at

fair value through profit orloss

$ 18,569,550 18,395,989 18,403,649 Prior to June 30,2020

Financial assets measured atfair value through othercomprehensive income

62,119,914 60,263,956 60,351,066 Prior to June 30,2020

Debt instruments at amortizedcost

25,010,100 26,606,147 26,644,681 Prior to January 20,2020

Total $ 105,699,564 105,266,092 105,399,396

(Continued)

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(v) Commercial paper payable－net

The information of commercial paper payable issued by the Company and subsidiaries was asbelow:

December 31,2020

December 31,2019

Commercial paper payable $ 17,009,900 44,457,500Less: discount on commercial paper payable (4,737) (34,447)Total $ 17,005,163 44,423,053

Rate range 0.20%~1.08% 0.4%~1.18%Duration September 1,

2020~June 9,2021

August 8, 2019~June 15, 2020

The commercial paper payable aforementioned is guaranteed by financial institution and acceptanceinstitution.

(w) Payables

December 31,2020

December 31,2019

Accounts payable $ 7,334,190 6,668,663Accounts payable factoring 7,693,081 4,889,813Accrued expenses 21,529,423 23,577,341Interest payable 7,260,625 12,622,990Acceptances payable 13,357,577 11,497,859Collection payable 5,420,231 5,298,367Other tax payable 3,651,237 3,449,440Dividends and bonuses payable 29,694 30,095Checks for clearance 1,781,493 1,542,261Interbank clearing payable 1,660,909 1,490,304Miscellaneous lottery accounts payable 7,746,966 9,290,408Commission payable 2,560,206 1,889,475Claims payable 3,508,556 4,834,547Due to reinsurers and ceding companies 1,543,559 1,136,926Separate account of investment products payables 1,885,039 1,338,358Premium payable 3,918,314 3,898,586Financial trading payable 2,453,693 1,367,485Other payables 2,663,660 2,638,927Total $ 95,998,453 97,461,845

(Continued)

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(x) Deposits and remittances

December 31,2020

December 31,2019

NTD deposits Checking accounts $ 13,317,733 12,639,340 Demand deposits Demand deposits 292,599,253 214,928,229 Demand savings deposits 961,836,654 802,911,760 Public treasury deposits 11,504,170 8,849,902 Subtotal of demand deposits 1,265,940,077 1,026,689,891 Time deposits Time deposits 289,028,461 270,129,819 Time savings deposits 471,296,393 486,906,262 Negotiable certificates of deposit 1,110,300 1,272,600 Public treasury deposits 28,367,171 24,307,171 Others 16,953,500 12,020,500 Subtotal of time deposits 806,755,825 794,636,352Subtotal of NTD deposits 2,086,013,635 1,833,965,583Foreign currency deposits 1,640,906,124 1,524,867,961Stored value cards 167 166Remittances under custody 56,339 131,908Remittances outstanding 1,691,287 1,105,006Total $3,728,667,552 3,360,070,624

(Continued)

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(y) Bonds Payable

BondsDecember 31,

2020December 31,

20192008-1 $ 2,000,000 2,000,0002011-1 4,000,000 4,000,0002012-1 2,400,000 2,400,0002014-1 20,000,000 20,000,0002014-2 15,000,000 15,000,0002015-1(financial debentures) (Note 3) 7,326,556 7,737,2422015-1(unsecured ordinary corporate bonds) 5,500,000 11,800,0002015-2 12,000,000 12,000,0002015-3 5,000,000 5,000,0002016-1 (Note3) - 23,482,6802017-1 (financial debentures) (Note3) - 5,419,0802017-1 (subordinated corporate debentures) 15,000,000 15,000,0002017-2 - 1,000,0002018-1 (financial debentures) (Note 3) 6,414,300 6,773,8502018-1 (subordinated corporate debentures) 10,000,000 10,000,0002020-1 (subordinated corporate debentures) 10,000,000 -2020-1 (financial debentures) 1,000,000 -2020-2 23,500,000 -Unamortized discount (19,130) (22,092)Less: financial liability designated at fair value through profit or

loss (Note 3)(13,740,856) (43,412,852)

Total $ 125,380,870 98,177,908

(Continued)

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Terms of transactions Bond issuedBonds Issue date Maturity date Interest rate Type

2008-1 04/10/2008 04/10/2023 3.49% Unsecured subordinatedfinancial debentures

2011-1 09/27/2011 09/27/2021 B=1.95%. From the 4th year after the issue date, theinterest rate will be the prime rate plus 0.55% (Note1)

〞

2012-1 02/20/2012 02/20/2022 B=1.80%. Unsecured subordinatedcorporate bonds

2014-1 06/18/2014 N/A A=3.70%, B=4.00%. Perpetual non accumulatedsubordinated financialdebentures

2014-2 06/26/2014 06/26/2029 A=2.00%, B=The prime rate plus 0.45%. (Note 2) Unsecured subordinatedfinancial debentures

2015-1(financial debentures) 01/27/2015 01/27/2045 0% (Note 3) Unsecured financialdebentures

2015-1(unsecured ordinary corporatebonds)

08/03/2015 08/03/2022 B=1.35%, C=1.65% Unsecured ordinarycorporate bonds

2015-2 06/10/2015 N/A 3.60% Perpetual non accumulatedsubordinated financialdebentures

2015-3 06/18/2015 06/18/2025 A=1.83%, B=2.00%, C=2.05% Unsecured subordinatedfinancial debentures

2016-1 11/29/2016 11/29/2044 0% (Note 3) Unsecured financialdebentures

2017-1 (financial debentures) 03/29/2017 03/29/2047 0% (Note 3) 〞

2017-1(subordinated corporate bonds)

06/21/2017 N/A 3.45%, if redemption right is not exercised 10 years afterthe issue date, the interest rate will increase by 1.00%

Unsecured subordinatedcorporate bonds

2017-2 05/19/2017 05/19/2020 0.83% Unsecured financialdebentures

2018-1 (financial debentures) 03/29/2018 03/29/2048 0% (Note 3) 〞

2018-1 (subordinated corporate bonds)

01/16/2019 01/16/2031 A=1.30%, B=1.55% Unsecured subordinatedcorporate bonds

2020-1(subordinated corporate bonds)

06/24/2020 06/24/2030 A=0.90%, B=1.05% 〞

2020-1 (financial debentures) 11/06/2020 11/06/2025 0.43% Unsecured financialdebentures

2020-2 09/17/2020 09/17/2030 A=0.60%, B=0.65%, C=0.68%, D=0.69% Unsecured ordinarycorporate bonds

Note 1: The original prime rate is based on page code 6165 of Reuters, the fixed interest rate of 90-day CP/BA at 11:00 am on the interest reset date. With the consensus reached amongcreditors through forward rate agreement, the prime rate will be changed to the 3-monthTaipei Interbank Offered Rate (TAIBOR) from January 1, 2015.

Note 2: The prime rate is based on page code 6165 of Reuters, the fixed interest rate of 90-dayCP/BA at 11:00 am on the interest reset date. If no quotation is available on page code6165 of Reuters, no page is displayed, or no prime rate is retrievable from Reuters, theBank would change the resource of the rate. The Bank would set the prime rate asSecondary Market Fixing Rate of 90-day TAIBIR 02 from the “TAIBIR Section” in thewebpage of Taiwan Depository and Clearing Corporation.

Note 3: Financial debentures of 2015-1, 2016-1, 2017-1 and 2018-1 are recognized as financialliabilities designated at fair value through profit or loss. For more information, please referto Note 6(c).

(Continued)

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(z) Provisions

December 31,2020

December 31,2019

Settlement compensation provision $ 88,230 112,035Employee benefits provision 3,897,718 3,869,758Guarantee provision 995,566 923,996Insurance provision 1,746,219,622 1,700,153,706Reserve for insurance policies with financial instrument features 1,644 4,196FX rate fluctuation provision 3,251,865 3,331,629Financing commitment provision 229,770 245,494Other provision 505,882 347,920Fair value adjustment 5,209,030 5,443,588Total $1,760,399,327 1,714,432,322

Please refer to Note 6(ae) for more information on Insurance provision, reserve for insurancepolicies with financial instrument features and FX rate fluctuation provision.

(aa) Other financial liabilities

December 31,2020

December 31,2019

Futures trader’s equity $ 386,263 415,877Structured commodity principal 49,342,504 74,679,251Guarantee deposits received-securities lending transaction 1,277,114 11,794,013Separate insurance products 125,640,620 91,886,404Others 44,530 40Total $ 176,691,031 178,775,585

Please refer to Note 6(ao) for information on separate insurance products.

(ab) Lease liabilities

SummaryDecember 31,

2020December 31,

2019Superficies Lease for operation units $ 8,104,874 7,946,957Buildings Lease for operation units 6,867,410 6,352,008Transportation equipment Lease for official vehicles 113,149 114,186Miscellaneous equipment Leased office equipment 356,598 511,576Total $ 15,442,031 14,924,727

(Continued)

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Few real estate include lease extension options to extend the lease while some of them are notreasonably assured that options will be exercised, so the measurement of lease liabilities do notreflect the terms.

Maturity analysis of lease liabilities (undiscounted) was as follows:

December 31,2020

December 31,2019

Less than one year $ 2,875,252 2,912,523Between one and five years 5,965,977 5,657,419More than five years 13,490,494 13,038,137Total $ 22,331,723 21,608,079

The total cash outflow of leases was $3,835,404 and $3,782,428, for the year ended December 31,2020 and 2019, respectively.

(ac) Other liabilities

December 31,2020

December 31,2019

Amount received in advance $ 1,558,196 1,852,422Custody payable 688,954 468,181Deferred income 1,907,481 1,532,764Guarantee deposits 12,904,851 14,250,908Temporary receipt 2,107,245 3,851,179Credits recognized when accepting orders to trade 5,686,963 2,166,692Others 218,308 236,014Total $ 25,071,998 24,358,160

(ad) Employee benefits

(i) Defined contribution plan

The Company and subsidiaries’ defined contribution plan follows the Labor Pension Act of theR.O.C. and makes monthly cash contributions to the employees’individual pension accounts atthe Bureau of Labor Insurance at the rate of 6% of the employees’ monthly salary. Under thisplan, the Company and subsidiaries have no legal or constructive obligation to make otherpayments after the Company and subsidiaries make the fixed amount of contribution to theBureau of Labor Insurance.

For the years ended December 31, 2020 and 2019, the pension expenses under definedcontribution plan of the Company and subsidiaries amounted to $904,290 and $844,171,respectively, and were contributed to the Bureau of Labor Insurance or labor agenciesdesignated by local authorities in the case of overseas units.

(Continued)

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(ii) Employee benefits provision

Employee benefits provision reserves recognized by the Company and subsidiaries in theconsolidated balance sheet were as follows:

December 31,2020

December 31,2019

Defined benefits plan $ 2,854,557 2,947,316Retiree deposits with favorable rates and other post-

employment benefits518,447 468,746

Total $ 3,373,004 3,416,062

1) Defined benefits plan

December 31,2020

December 31,2019

Present value of defined benefits obligation $ 8,651,754 8,932,437Fair value of plan assets (5,803,469) (5,995,296)Net defined benefit liability $ 2,848,285 2,937,141

The Company and subsidiaries’ defined benefits plan contributes to designateddepository account with Bank of Taiwan. Payments of pension benefits to employeeswho are covered by the Labor Standards Act are calculated based on the employee’ saverage monthly salary for the last 6 months prior to approved retirement and base point(b.p.) entitlement based on years of service.

(a) Composition of plan assets

The Company and subsidiaries’ labor pension fund contributed in compliance withLabor Standard Act is managed by Bureau of Labor Funds, Ministry of Labor.According to Regulations for Revenues, Expenditures Safeguard and Utilization ofthe Labor Retirement Fund, with regard to the utilization of the Fund, its minimumearnings in the annual distributions on the final financial statement shall be no lessthan the earnings attainable from the amounts accrued from two-year time depositswith the interest rates offered by local banks. Please refer to the website of Bureauof Labor Funds, Ministry of Labor for information on labor pension fund assetsutilization including earnings rate and fund asset allocation.

(Continued)

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87


(b) Movements in present value of the defined benefits obligation

For the years ended December 31, 2020 and 2019, the movements in present valueof defined benefits obligation for the Company and subsidiaries were as follows:


Defined benefits obligation at January 1 $ 8,932,437 9,116,781Current service costs and interest 152,104 154,835Remeasurements of net defined benefit liability Actuarial gains and losses arising from changes in

financial assumption108,198 335

Actuarial gains and losses arising from experienceadjustments

130,168 144,672

Benefits paid by the plan (671,153) (484,186)Defined benefits obligation at December 31 $ 8,651,754 8,932,437

(c) Movements in fair value of defined benefit plan assets

For the years ended December 31, 2020 and 2019, the movements in fair value ofthe defined benefit plan assets for the Company and subsidiaries were as follows:


Fair value of plan assets at January 1 $ 5,995,296 5,858,978Interest income 44,965 43,983Remeasurements of net defined benefit liability　Return on plan assets (exclude current interest) 132,589 248,031Contribution plans made 301,772 328,490Benefits paid by the plan (671,153) (484,186)Fair value of plan assets at December 31 $ 5,803,469 5,995,296

(d) Expense recognized in profit or loss

For the years ended December 31, 2020 and 2019, the defails of the expenserecognized in profit or loss for the Company and subsidiaries were as follows:


Current service costs $ 85,803 87,266Net interest of net defined benefit liability 22,028 24,501

$ 107,831 111,767

(Continued)

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88


(e) Net remeasurement of defined benefit liability recognized in other comprehensiveincome

For the years ended December 31, 2020 and 2019, the net remeasurements ofdefined benefit liability recognized in other comprehensive income for theCompany and subsidiaries were as follows:


Cumulative amount at January 1 $ (820,789) (923,225)Recognized during the period (105,189) 102,436Cumulative amount at December 31 $ (925,978) (820,789)

(f) Primary actuarial assumptions

The following are the primary actuarial assumptions adopted by the Company andsubsidiaries at the reporting date:

December 31,2020

December 31,2019

Discount rate 0.25% 0.75%Increasing rate of future compensation levels 2.00%~3.00% 2.00%~3.00%

The Company and subsidiaries expected $84,652 in contributions to be paid todefined benefit plans within a year after report date of 2020.

Weighted average duration based on defined benefits plan was 3 to 9 years.

(g) Sensitivity analysis

When adopted primary actuarial assumption changes, the effects of present value ofthe benefits obligation as of December 31, 2020 and 2019 were as follows:

Present value of the benefitsobligation effects

Increase 0.25% Decrease 0.25%December 31, 2020Discount rate $ (54,704) 55,952

December 31, 2019Discount rate (65,428) 66,984

The sensitivity analysis above analyzing the effects of changes in singleassumptions is based on other assumptions remain unchanged. In practice, changesin many assumptions may link together. Sensitivity analysis and net pensionliability of balance sheet were calculated under the same approach.

The methodology for sensitivity analysis and assumptions adopted are the same asthe previous period.

(Continued)

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89


2) Retiree deposits with favorable rates and other post-employment benefits

The Company’s subsidiary CTBC Bank Co., Ltd.’s obligation to grant retirees, includingcurrent employees retiring in the future, fixed-amount deposits with favorable rates isbased on the Bank’s Regulations for Subsidizing the Retiree Benefits.

December 31,2020

December 31,2019

Present value of defined benefits obligation $ 518,447 468,746Fair value of plan assets - -Net defined benefit liability $ 518,447 468,746

The Company’s subsidiary CTBC Bank Co., Ltd.’s obligation to grant retirees, includingcurrent employees retiring in the future, fixed-amount deposits with favorable rates isaccording to “Regulations for subsidizing the Retiree Benefits” enacted by the Company’s subsidiary CTBC Bank Co., Ltd.

(a) Movements in present value of the defined benefits obligation

For the years ended December 31, 2020 and 2019, the movements in present valueof defined benefits obligation for the Company’s subsidiary CTBC Bank Co., Ltd.were as follows:


Defined benefits obligation at January 1 $ 468,746 423,560Current service costs and interest 20,130 19,169Past service costs 29,295 24,005Remeasurements of net defined benefit liability　Actuarial gains and losses arising from changes in

financial assumptions19,118 14,330

　Actuarial gains and losses arising from experience adjustments

6,039 9,087

Benefits paid by the plan (24,881) (21,405)Defined benefits obligation at December 31 $ 518,447 468,746

(b) Expense recognized in profit or loss

For the years ended December 31, 2020 and 2019, the details of the expenserecognized in profit or loss by the Company’ s subsidiary CTBC Bank Co., Ltd.were as follows:


Past service costs $ 29,295 24,005Current service costs 9,821 8,862Net interest of net defined benefit liability 10,309 10,307Total $ 49,425 43,174

(Continued)

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(c) Net remeasurement of defined benefit liability recognized in other comprehensiveincome

For the years ended December 31, 2020 and 2019, the net remeasurements ofdefined benefit liability recognized in other comprehensive income for theCompany’s subsidiary CTBC Bank Co., Ltd. were as follows:


Cumulative amount at January 1 $ (46,111) (22,694)Recognized during the period (25,157) (23,417)Cumulative amount at December 31 $ (71,268) (46,111)

(d) Primary actuarial assumptions

The following are the primary actuarial assumptions adopted by the Company’ ssubsidiary CTBC Bank Co., Ltd. at the reporting date:

December 31, 2020 December 31, 2019Favorable rates

for employeedeposits

Other post-employment

benefits

Favorable ratesfor employee

deposits

Other post-employment

benefitsDiscount rate 4.00% 0.5%~0.625% 4.00% 1.00%Expected rate of return on

deposited fund2.00% - 2.00% -

Yearly rate of decrease onaccount balance/utilizationrate on subsidy for healthexamination and socialnetworking

2.00% 32%~68% 2.00% 32%~69%

Probability of future changes infavorable rates depositsscheme

50.00% - 50.00% -

(e) Sensitivity analysis

When adopted primary actuarial assumption changes, the effects of present value ofthe defined benefits obligation as of December 31, 2020 and 2019 were as follows:

Present value of the benefits obligation effects

Favorable rates for employee deposits Increase 0.25% Decrease 0.25%December 31, 2020Discount rate $ (5,955) 6,232Yearly rate of decrease on account balance (6,327) 6,605

December 31, 2019Discount rate (5,344) 5,592Yearly rate of decrease on account balance (5,678) 5,927

(Continued)

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Present value of the benefits obligation effects

Other post-employment benefits Increase 0.25% Decrease 0.25%December 31, 2020Discount rate $ (10,989) 11,683

December 31, 2019Discount rate (9,722) 10,321

The sensitivity analysis above analyzing the effects of changes in singleassumptions is based on other assumptions remain unchanged. In practice, changesin many assumptions may link together. Sensitivity analysis and net pensionliability of balance sheet were calculated under the same approach.

The methodology for sensitivity analysis and assumptions adopted are the same asthe previous period.

3) Defined benefits plan of overseas branches and subsidiaries

Defined benefits plan of the Company’ s subsidiary CTBC Bank Co., Ltd.’ s overseasbranches and subsidiaries recognized in consolidated balance sheets was as follows:

December 31,2020

December 31,2019

Defined benefits plan $ 524,714 453,696

For the years ended December 31, 2020 and 2019, expenses recognized by overseasbranches and subsidiaries in profit and loss amounted to $183,326 and $175,263,respectively.

For the years ended December 31, 2020 and 2019, acturial loss recognized in othercomprehensive income by overseas branches and subsidiaries amounted to $54,241 and$54,676, respectively.

(Continued)

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(ae) Insurance liabilities, income, and expense

(i) Insurance liabilities

The details of the reserve for insurance contracts and financial instruments with discretionaryparticipation feature and its adjustment and the balances of the related accounts of theCompany’ s subsidiary Taiwan Life Insurance Co., Ltd. and sub-subsidiary CTBC Insurancewere as follows:

December 31,2020

December 31,2019

Reserve for unearned premiums $ 4,850,520 4,564,459Claim reserve 2,677,575 2,195,805Insurance reserve 1,735,297,584 1,688,361,251Special reserve 1,346,530 874,584Premium deficiency reserve 2,047,413 4,157,607

Total $1,746,219,622 1,700,153,706

Life Insurance Business:

1) The details of reserve for unearned premium were as follows:

December 31, 2020

Insurancecontracts

Financialinstruments with

discretionaryparticipation

feature TotalIndividual life $ 556,911 - 556,911Individual injury 755,895 - 755,895Individual health 2,225,912 - 2,225,912Group insurance 272,024 - 272,024Investment linked insurance 26,262 - 26,262Total 3,837,004 - 3,837,004Less: reserve for unearned premiumsIndividual life 241,129 - 241,129Individual injury 9,771 - 9,771Individual health 651,151 - 651,151Investment linked insurance 3,618 - 3,618Total 905,669 - 905,669Net value $ 2,931,335 - 2,931,335

(Continued)

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December 31, 2019

Insurancecontracts



feature TotalIndividual life $ 436,551 - 436,551Individual injury 700,265 - 700,265Individual health 2,005,846 - 2,005,846Annuity insurance 1 1 2Group insurance 261,111 - 261,111Investment linked insurance 26,082 - 26,082Total 3,429,856 1 3,429,857Less: reserve for unearned premiumsIndividual life 210,374 - 210,374Individual injury 30 - 30Individual health 353,979 - 353,979Total 564,383 - 564,383Net value $ 2,865,473 1 2,865,474

The changes and adjustments of the aforesaid reserve for unearned premiums were asfollows:


Insurancecontracts



feature TotalBeginning balance $ 3,429,856 1 3,429,857Current provision 2,557,603 - 2,557,603Reversal of provision (2,150,410) (1) (2,150,411)Foreign exchange gains (45) - (45)Ending balance 3,837,004 - 3,837,004

Less: reserve for unearned premiumsBeginning balance—net 564,383 - 564,383Current increase 343,159 - 343,159Foreign exchange losses (1,873) - (1,873)Ending balance—net 905,669 - 905,669Ending balance $ 2,931,335 - 2,931,335

(Continued)

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94



Insurancecontracts



feature TotalBeginning balance $ 2,992,485 - 2,992,485Current provision 1,868,007 1 1,868,008Reversal of provision (1,430,616) (1) (1,430,617)Foreign exchange losses (20) 1 (19)Ending balance 3,429,856 1 3,429,857

Less: reserve for unearned premiumsBeginning balance—net 628,635 - 628,635Current decrease (63,641) - (63,641)Foreign exchange losses (611) - (611)Ending balance—net 564,383 - 564,383Ending balance $ 2,865,473 1 2,865,474

(Continued)

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2) The details of claim reserve were as follows:

December 31, 2020

Insurancecontracts



feature TotalIndividual life

-reported but not paid $ 286,909 2,942 289,851-not reported and not paid 3,157 - 3,157

Individual injury-reported but not paid 16,881 - 16,881-not reported and not paid 310,728 - 310,728

Individual health-reported but not paid 666,416 - 666,416-not reported and not paid 504,659 - 504,659

Annuity insurance-reported but not paid - 7,796 7,796-not reported and not paid - - -

Group insurance-reported but not paid 55,329 - 55,329-not reported and not paid 99,486 - 99,486

Investment linked insurance-reported but not paid 7,011 - 7,011-not reported and not paid - - -

Total 1,950,576 10,738 1,961,314Less: reserve for claim reserveIndividual life 79,396 - 79,396Individual injury - - -Individual health 530,716 - 530,716Group insurance - - -Investment linked insurance - - -Total 610,112 - 610,112Net value $ 1,340,464 10,738 1,351,202

(Continued)

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96


December 31, 2019

Insurancecontracts



feature TotalIndividual life

-reported but not paid $ 248,636 - 248,636-not reported and not paid 3,732 - 3,732

Individual injury-reported but not paid 35,352 - 35,352-not reported and not paid 201,457 - 201,457

Individual health-reported but not paid 429,233 - 429,233-not reported and not paid 269,901 - 269,901

Annuity insurance-reported but not paid 135 3,946 4,081-not reported and not paid - - -

Group insurance-reported but not paid 53,399 - 53,399-not reported and not paid 83,480 - 83,480

Investment linked insurance-reported but not paid 7,085 - 7,085-not reported and not paid - - -

Total 1,332,410 3,946 1,336,356Less: reserve for claim reserveIndividual life 37,583 - 37,583Individual injury 515 - 515Individual health 130,129 - 130,129Group insurance - - -Investment linked insurance - - -Total 168,227 - 168,227Net value $ 1,164,183 3,946 1,168,129

(Continued)

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97


The changes and adjustments of the aforesaid claim reserve were as follows:


Insurancecontracts



feature TotalBeginning balance $ 1,332,410 3,946 1,336,356Current provision 1,952,402 10,742 1,963,144Reversal of provision (1,332,411) (3,946) (1,336,357)Foreign exchange losses (1,825) (4) (1,829)Ending balance 1,950,576 10,738 1,961,314Less: reserve for claim reserveBeginning balance－net 168,227 - 168,227Current increase 441,884 - 441,884Foreign exchange gains 1 - 1Ending balance—net 610,112 - 610,112Ending balance $ 1,340,464 10,738 1,351,202


Insurancecontracts



feature TotalBeginning balance $ 846,650 4,705 851,355Current provision 1,332,762 4,044 1,336,806Reversal of provision (846,650) (4,705) (851,355)Foreign exchange losses (352) (98) (450)Ending balance 1,332,410 3,946 1,336,356Less: reserve for claim reserveBeginning balance－net 70,290 - 70,290Current increase 97,933 - 97,933Foreign exchange gains 4 - 4Ending balance—net 168,227 - 168,227Ending balance $ 1,164,183 3,946 1,168,129

(Continued)

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3) Details of insurance reserves were as follows:

December 31, 2020

Insurancecontracts



feature TotalIndividual life $ 1,595,422,813 2,265,087 1,597,687,900Individual health 106,834,545 - 106,834,545Annuity insurance 4,962,157 24,197,590 29,159,747Group insurance 387,446 575,862 963,308Investment linked insurance 340,413 - 340,413Incremental reserve 35,833 - 35,833Transfer from operating loss reserve 43,665 - 43,665Recovery of special catastrophe

reserve7,252 - 7,252

Other 224,921 - 224,921Total $ 1,708,259,045 27,038,539 1,735,297,584

December 31, 2019

Insurancecontracts



feature TotalIndividual life $ 1,557,544,585 2,389,706 1,559,934,291Individual health 96,435,869 - 96,435,869Annuity insurance 4,951,216 25,764,559 30,715,775Group insurance 310,239 520,535 830,774Investment linked insurance 192,389 - 192,389Incremental reserve 35,833 - 35,833Transfer from operating loss reserve 43,665 - 43,665Recovery of special catastrophe

reserve7,252 - 7,252

Other 165,403 - 165,403Total $ 1,659,686,451 28,674,800 1,688,361,251

As the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. measured the insurancereserves on a discounted basis, the recognized amounts of cumulative interest over-timeeffects were as below:


Cumulative interest over-time effects of insurance reserves $ 58,009,187 58,805,245

(Continued)

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The changes and adjustments of the aforesaid insurance reserves were as follows:


Insurancecontracts



feature TotalBeginning balance $ 1,659,686,451 28,674,800 1,688,361,251Current provision 203,510,920 790,677 204,301,597Reversal of provision (131,485,894) (2,246,275) (133,732,169)Foreign exchange losses (23,511,950) (180,663) (23,692,613)Others 59,518 - 59,518Ending balance $ 1,708,259,045 27,038,539 1,735,297,584


Insurancecontracts



feature TotalBeginning balance $ 1,527,930,368 29,760,434 1,557,690,802Current provision 250,243,580 1,703,567 251,947,147Reversal of provision (107,902,065) (2,712,673) (110,614,738)Foreign exchange losses (10,640,648) (76,528) (10,717,176)Others 55,216 - 55,216Ending balance $ 1,659,686,451 28,674,800 1,688,361,251

4) Special reserve liabilities:

December 31, 2020

Insurancecontracts



feature TotalReserve for policyholder dividend $ 959,119 - 959,119Reserve for bonus risk 232,183 - 232,183Revaluation appreciation on real estate 57,891 - 57,891Total $ 1,249,193 - 1,249,193

December 31, 2019

Insurancecontracts



feature TotalReserve for policyholder dividend $ 438,024 - 438,024Reserve for bonus risk 248,071 - 248,071Revaluation appreciation on real estate 57,891 - 57,891Total $ 743,986 - 743,986

(Continued)

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The changes and adjustments of the aforesaid special reserve were as follows:

For the year ended December 31, 2020Reserve forpolicyholder

dividendReserve

for bonus risk

Revaluationappreciation on

real estate TotalBeginning balance $ 438,024 248,071 57,891 743,986Current provision 909,893 - - 909,893Current provision- gains from

disposal of equityinstruments measured at fairvalue through othercomprehensive income forpolicyholder

(26,327) - - (26,327)

Reversal of provision (313,709) (15,888) - (329,597)Reversal of provision- gains

from disposal of equityinstruments measured at fairvalue through othercomprehensive income

(697) - - (697)

Foreign exchange gains (48,065) - - (48,065)Ending balance $ 959,119 232,183 57,891 1,249,193

For the year ended December 31, 2019Reserve forpolicyholder

dividendReserve

for bonus risk

Revaluationappreciation on

real estate TotalBeginning balance $ 506,610 245,543 57,891 810,044Current provision 567,346 2,528 - 569,874Current provision- losses from

disposal of equityinstruments measured at fairvalue through othercomprehensive income forpolicyholder

2,326 - - 2,326

Reversal of provision (636,533) - - (636,533)Reversal of provision- losses

from disposal of equityinstruments measured at fairvalue through othercomprehensive income

10,122 - - 10,122

Foreign exchange gains (11,847) - - (11,847)Ending balance $ 438,024 248,071 57,891 743,986

(Continued)

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101


5) The details of premium deficiency reserve were as follows:

December 31, 2020

Insurancecontracts



feature TotalIndividual life $ 1,977,341 - 1,977,341Individual health 69,205 - 69,205Annuity insurance 59 - 59Total $ 2,046,605 - 2,046,605

December 31, 2019

Insurancecontracts



feature TotalIndividual life $ 4,068,427 - 4,068,427Individual health 88,029 - 88,029Annuity insurance 62 - 62Total $ 4,156,518 - 4,156,518

The changes and adjustments of the aforesaid premium deficiency reserve were asfollows:


Insurancecontracts



feature TotalBeginning balance $ 4,156,518 - 4,156,518Current provision 369,139 - 369,139Reversal of provision (2,432,124) - (2,432,124)Foreign exchange gains (46,928) - (46,928)Ending balance $ 2,046,605 - 2,046,605

(Continued)

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102



Insurancecontracts



feature TotalBeginning balance $ 6,844,260 - 6,844,260Current provision 168,071 - 168,071Reversal of provision (2,835,486) - (2,835,486)Foreign exchange losses (20,327) - (20,327)Ending balance $ 4,156,518 - 4,156,518

6) The details of liability adequacy reserve of the Company's subsidiary Taiwan LifeInsurance Co., Ltd. were as follows:

Insurance contracts and financial instrumentswith discretionary participation feature

December 31,2020

December 31,2019

Unearned premium reserve $ 3,837,004 3,429,857Claim reserve 1,961,314 1,336,356Insurance reserve 1,735,297,584 1,688,361,251Premium deficiency reserve 2,046,605 4,156,518　　Total 1,743,142,507 1,697,283,982Less: intangible asset (605,132) (619,419)Book value of related insurance liabilities $1,742,537,375 1,696,664,563

Current estimate of future cash flows under insuranceliabilities

$1,420,056,290 1,353,613,793

Liability adequacy reserve balance $ - -

The liability adequacy test method of the Company’s subsidiary Taiwan Life InsuranceCo., Ltd. was as follows:

December 31, 2020

Test Method Gross Premium Valuation (GPV)Group All insurance contractsSignificantAssumptions

(1) Insurance contract information: As of December 31, 2020, theinsurance contracts and financial instruments with adiscretionary participation feature were tested.

(2) Discount rate: For the asset allocation in the latest quarterlyreport as of valuation date, the rate of investment return underthe best-case scenario in the latest certified actuarial reportprovided to the regulator for the year 2019 is adopted. Theassumed rate beyond 30 years remains unchanged.

(Continued)

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103


December 31, 2019Test Method Gross Premium Valuation (GPV)Group All insurance contractsSignificantAssumptions

(1) Insurance contract information: As of December 31, 2019, theinsurance contracts and financial instruments with adiscretionary participation feature were tested.

(2) Discount rate: For the asset allocation in the latest quarterlyreport as of valuation date, the rate of investment return underthe best-case scenario in the latest certified actuarial reportprovided to the regulator for the year 2018 is adopted. Theassumed rate beyond 30 years remains unchanged.

7) Reserve for insurance policies with financial instrument features

The financial instruments, belonging to the Company’s subsidiary Taiwan Life InsuranceCo., Ltd. are segregated account insurance product and are classified as financialinstruments without discretionary participation feature. As of December 31, 2020 and2019 the details of reserves for insurance contract of the nature of financial products andtheir adjustments were as follows:

December 31,2020

December 31,2019

Annuities $ 1,644 4,196


Beginning balance $ 4,196 3,329Net provision for statutory reserve for the period 4,753 5,583Insurance claims payment for the period (7,266) (4,705)Exchange number (39) (11)Ending balance $ 1,644 4,196

(Continued)

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8) Foreign exchange rate fluctuation reserves

a) Hedging strategy and risk exposure:

When adjusting the foreign exchange rate hedge ratio, the Company’s subsidiaryTaiwan Life Insurance Co., Ltd. takes into consideration the dynamics of theinternational financial market and its own ability to take risks, so that thefluctuation in foreign exchange profit and loss can be reduced, and choosetraditional hedge instrument as its major hedge tools, and properly allocationdepending on the corresponded hedge cost ratio of each maturity. As of December31, 2020 and 2019, major risk exposure on foreign exchange are all from US dollarassets, amounted to USD16,063,000 and USD15,767,000 thousand, respectively,without hedge positions, and risk exposure of it are amounted to USD10,388,365and USD8,765,100 thousand, respectively.

b) As of December 31, 2020 and 2019, foreign exchange rate fluctuation reserves ofthe Company’s subsidiary Taiwan Life Insurance Co., Ltd. amounted to $3,251,865and $3,331,629, respectively.

The Company’ s subsidiary Taiwan Life Insurance Co., Ltd., applied for anincrement of foreign exchange rate fluctuation reserves amounting to $1,500,000on December 12, 2019, with the approval of the Insurance Bureau of the FSC. Allrelated procedures had been completed before the end of 2019.

The Company’ s subsidiary Taiwan Life Insurance Co., Ltd., applied for anincrement of foreign exchange rate fluctuation reserves amounting to $1,500,000on August 18 and December 17, 2020, with the approval of the Insurance Bureau ofthe FSC. All related procedures had been completed before the end of 2020.

Changes in foreign exchange rate fluctuation reserves:


Beginning balance $ 3,331,629 2,273,640Current provision　Mandatory provision 2,079,847 1,636,576　Extra provision 3,909,109 4,454,924　　Subtotal 5,988,956 6,091,500Current recovery (6,068,720) (5,033,511)Ending balance $ 3,251,865 3,331,629

(Continued)

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c) The effects of foreign exchange rate fluctuation reserves on the Company’ ssubsidiary Taiwan Life Insurance Co., Ltd. were as follows:

Items Not applicable Applicable EffectDecember 31, 2020　Foreign exchange rate

fluctuation reserves$ - 3,251,865 (3,251,865)

　Stockholders’ equity 140,354,589 138,627,812 1,726,777December 31, 2019　Foreign exchange rate fluctuation reserves

- 3,331,629 (3,331,629)

Stockholders’ equity 119,582,487 117,791,899 1,790,588

For the year ended December 31, 2020 For the year ended December 31, 2019

ItemsNot

applicable Applicable EffectNot

applicable Applicable EffectProfit after tax $ 16,469,785 16,533,596 (63,811) 13,955,478 13,109,087 846,391

Earnings per share 2.96 2.96 - 2.54 2.59 0.15

9) Special reserves on the Company’s subsidiary Taiwan Life Insurance Co., Ltd. were asfollows:

December 31,2020

December 31,2019

Recovery of special reserve for catastrophe $ 3,065,249 3,047,421Special reserves for significant incidents and

catastrophe2,151,149 1,930,777

Foreign exchange rate fluctuation reserves 4,431,333 3,189,045Recovery of revaluation appreciation reserves on real

estate231,566 231,566

Provision on profit testing of insurance products 9,514 30,475Provision on derecognition of unmatured debt 1,903,334 -Provision on deduction of other equity - 4,323,614Employees training and transfer program 108,301 111,267

$ 11,900,446 12,864,165

According to Tai-Tsai-Bao-Zi No. 0910074195, the Company’s subsidiary Taiwan LifeInsurance Co., Ltd. shall follow the “ Regulations Governing Insurance Enterprises forSetting Aside Various Reserves” since 2002 to set aside a special reserve by the net oftax amounts of recovery of special reserve for catastrophe after the approval ofshareholder meeting next year.

The Company’ s subsidiary Taiwan Life Insurance Co., Ltd. has recognized specialreserves for significant incidents and catastrophe in accordance with the “ RegulationsGoverning Insurance Enterprises for Setting Aside Various Reserves” . The provisionshould be made at after-tax amount at the end of each year, and should be placed inspecial reserve under “Equity.” Special reserve under “Equity” can be offset or recoveredby the aforementioned offset or recoverable amount at the after-tax amount.

(Continued)

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106


In addition, in accordance with the mechanism of the reserve for fluctuation of foreignexchange, under legal proceedings, the Company’ s subsidiary Taiwan Life InsuranceCo., Ltd. should contribute a special reserve by 10% of its after-tax income earnings.

According to FSC Jin-Guan-Bao-Shou-Zi No. 10302125060, the Company’ s subsidiaryTaiwan Life Insurance Co., Ltd. has recognized special reserve amounting to $9,514 inaccordance with the results of the insurance product profit testing on December 31, 2020.

According to FSC Jin-Guan-Bao-Tsai-Zi No.10804501381, 20% of the derecognitionprofits or losses of unmatured debt instruments after 2019 should be recognized inspecial reserve. As of December 31, 2020, the Company’ s subsidiary Taiwan LifeInsurance Co., Ltd., has recognized the special reserve amounting to $1,903,334.

According to FSC Jin-Guan-Bao-Tsai-Zi No. 10102508861, the Company’ s subsidiaryTaiwan Life Insurance Co., Ltd. recognizes the same amount of special reserve fromcurrent income and undistributed earnings from previous period as the deduction of otherequity incurred in the current year; the Company recognizes the same amount of non-distributable special reserve from undistributed earnings from previous period as thededuction of other equity accumulated from previous period. Once the deduction items ofother equity reverse in the future, the reversed amount could be deemed as distributableearnings.

According to FSC Jin-Guan-Bao-Tsai-Zi No. 10502066461, in order to response to thetrend of the development of FinTech, the Company’s subsidiary Taiwan Life InsuranceCo., Ltd., should recognize special reserve amounting to $108,301 to assist insuranceemployees to transform and protect their rights on December 31, 2020. However, inaccordance with Jin-Guan-Bao-Tsai-Zi No. 10804932431 issued by the FSC on July 30,2019, the special reserve is no longer needed to be appropriated beginning 2019, but theaforementioned special reserve can be reversed within an amount equal to theaforementioned expenditures stemming from employees’ training to protect employeesrights.

　　　　

According to FSC Jin-Guan-Bao-Tsai-Zi No. 10804501381, life insurance businessesshould disclosure their current movement in accumulated gains (losses) from disposal ofdebt instruments.

Gains (losses) from disposal of debt instrument Amount1.Prior year end (December 31, 2019) accumulated gains (losses) from

disposal of debt instrument1,903,334

2.Current year realized valuation gain before tax amounted to$ 5,357,006 , less net income tax of $ 1,071,401 equal after taxdisposal

4,285,605

3.Current net capital gain recognized 362,6914.Year end accumulated gains (losses) from disposal of debt

instrument5,826,248

(Continued)

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As of December 31, 2020, the balance of special earning reserve of the Company’ ssubsidiary Taiwan Life Insurance Co., Ltd. due to the above rule amounted to$1,903,334. The movement of $3,922,914, approved by shareholders, will beappropriated to special earning reserve, the appropriated special earning reserve amountsto $5,826,248.

Disclosed of the prior year end balance, current and future amortization movementsaccording to the regulation:

Year

Prior year end (December31,2019) accumulated gains

(losses) from disposalapprotioned for future

periods(1)

Current after taxappropriated to gains (losses)

from disposal (2)

Accumulated gains (losses)from disposal apportioned

for future periods at the endof the year(1)+(2)

2020 123,392 239,299 362,691

2021 123,342 237,195 360,537

2022 115,253 231,081 346,334

2023 117,564 227,849 345,413

2024 113,298 227,228 340,526

2025 111,481 213,191 324,672

2026 107,388 204,321 311,709

2027 102,530 193,687 296,217

2028 96,251 184,345 280,596

2029 68,987 177,865 246,852

2030 to 2039 625,731 1,380,014 2,005,745

2040 to 2049 193,170 658,235 851,405

2050 to 2059 4,947 95,784 100,731

2060 to 2069 - 15,511 15,511

Total 1,903,334 4,285,605 5,826,248

(Continued)

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Property insurance business:

a) Unearned premium reserve and ceded unearned premium reserve

i) As of December 31, 2020 and 2019, the reserves for unearned premiums ofthe Company’s sub-subsidiary CTBC insurance Co., Ltd. were as follows:

December 31, 2020

Unearned premium reserveCeded unearnedpremium reserve

Direct businessReinsurance

assumed businessReinsurance cede

businessRetainedbusiness

Fire insurance $ 246,868 21,634 149,980 118,522Marine insurance 9,983 422 8,285 2,120Miscellaneous casualty

insurance72,895 17,565 54,675 35,785

Personal accident andhealth insurance

93,028 1,595 18,238 76,385

Voluntary auto insurance 400,362 - 1,299 399,063Compulsory auto TPL

insurance71,094 78,070 42,658 106,506

Total $ 894,230 119,286 275,135 738,381

December 31, 2019

Unearned premium reserveCeded unearnedpremium reserve

Direct businessReinsurance

assumed businessReinsurance cede

businessRetainedbusiness

Fire insurance $ 234,590 14,625 139,483 109,732Marine insurance 5,449 433 4,654 1,228Miscellaneous casualty

insurance69,751 15,967 55,495 30,223


110,887 1,162 37,671 74,378

Voluntary auto insurance 500,917 1 1,364 499,554Compulsory auto TPL

insurance98,021 82,799 58,814 122,006

Total $ 1,019,615 114,987 297,481 837,121

ii) The movements in reserve for unearned premiums and reserve for cededunearned premiums were as follows:


Unearnedpremium reserve

Unearnedpremium

reserve cedeUnearned

premium reserve

Unearnedpremium

reserve cedeBeginning balance $ 1,134,602 297,481 1,199,136 292,890Current provision 1,014,044 275,135 1,134,602 297,481Current recovery (1,135,130) (297,481) (1,199,136) (292,890)Ending balance $ 1,013,516 275,135 1,134,602 297,481

(Continued)

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b) Claim reserve and ceded claim reserve

i) Liabilities for claims categorized by reported to be paid, reported but unpaid,and not reported.

December 31, 2020Notes payable

(claims)Claimspayable Claim reserve

Reported to be paidReported but

unpaid Not reported TotalFire insurance $ - - 34,074 2,288 36,362Marine insurance - - 13,141 2,195 15,336Miscellaneous casualty

insurance138 - 59,986 30,804 90,790


395 - 7,333 38,651 45,984

Voluntary auto insurance 85 - 224,138 72,170 296,308Compulsory auto TPL

insurance372 - 49,564 181,917 231,481

Total $ 990 - 388,236 328,025 716,261

December 31, 2019Notes payable

(claims)Claimspayable Claim reserve

Reported to be paidReported but

unpaid Not reported TotalFire insurance $ - - 38,481 1,833 40,314Marine insurance - - 10,189 2,342 12,531Miscellaneous casualty

insurance249 - 75,913 32,870 108,783


2,724 - 13,923 43,560 57,483

Voluntary auto insurance 1,406 - 288,260 87,836 376,096Compulsory auto TPL

insurance433 - 57,107 207,135 264,242

Total $ 4,812 - 483,873 375,576 859,449

(Continued)

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ii) Reinsurance assets－ the insurance ceded business for the policy holders withreported but unpaid or not reported claims.

December 31, 2020Reported but

unpaid Not reported TotalFire insurance $ 21,332 30 21,362Marine insurance 9,694 675 10,369Miscellaneous casualty insurance 40,570 9,390 49,960Personal accident and health

insurance2,499 10,373 12,872

Voluntary auto insurance 972 26,366 27,338Compulsory auto TPL insurance 14,809 62,611 77,420Less: Accumulated impairment (7) - (7)Total $ 89,869 109,445 199,314

December 31, 2019Reported but

unpaid Not reported TotalFire insurance $ 26,659 44 26,703Marine insurance 7,477 619 8,096Miscellaneous casualty insurance 45,966 9,442 55,408Personal accident and health

insurance8,555 13,392 21,947

Voluntary auto insurance 3,676 36,083 39,759Compulsory auto TPL insurance 19,692 75,596 95,288Less: Accumulated impairment (89) - (89)Total $ 111,936 135,176 247,112

iii) The movements in claim reserve and ceded claim reserve were as follows:


Claim reserveCeded claim

reserve Claim reserveCeded claim

reserveBeginning balance $ 859,449 247,112 912,376 287,020Current provision 716,261 199,321 859,449 247,201Current recovery (859,449) (247,201) (912,376) (287,112)Reversal of Impairment

loss - 82 - 3

Ending balance $ 716,261 199,314 859,449 247,112

(Continued)

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c) Special reserve

i) The special reserves of the Company’s sub-subsidiary CTBC insurance Co.,Ltd. were as follows:

December 31,2020

December 31,2019

Special reserve of compulsory auto liability insurance $ 413 32,047Special reserve of non-compulsory auto liability

insurance96,924 98,551

$ 97,337 130,598

ii) The movements in special reserve were as follows:

1. Special reserve－compulsory auto liability insurance


Beginning balance $ 32,047 61,502Current recovery (31,634) (29,455)Ending balance $ 413 32,047

2. Special reserve－non-compulsory auto liability insurance

For the year ended December 31, 2020Liability Special reserve

CatastropheDangerous

change Total CatastropheDangerous

change TotalBeginning balance $ 37,424 61,127 98,551 103,309 316,064 419,373Current provision - - - 15,358 58,172 73,530Current recovery (1,627) - (1,627) - (18,705) (18,705)Ending balance $ 35,797 61,127 96,924 118,667 355,531 474,198

For the year ended December 31, 2019Liability Special reserve

CatastropheDangerous

change Total CatastropheDangerous

change TotalBeginning balance $ 40,679 61,127 101,806 87,441 279,242 366,683Current provision - - - 15,868 51,587 67,455Current recovery (3,255) - (3,255) - (14,765) (14,765)Ending balance $ 37,424 61,127 98,551 103,309 316,064 419,373

(Continued)

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The amount of special reserve liabilities the Company’s sub-subsidiaryCTBC Insurance Co., Ltd. recognized as of December 31, 2012 was inaccordance with Jin Kuan Bao CAI Zi No. 10102515061 “ Notice toReserve Enforcement of Insurance Companies for Natural DisasterInsurance (Commercial Earthquake Insurance and Typhoon and FloodInsurance)” ,” Disclosure of the special reserve for resident earthquakeinsurance” , and “ Disclosure of the special reserve for nuclearinsurance”. Since the aforesaid amount was not achieved to the level asrequested by the regulator, the special reserve should be accounted forunder liabilities and the special catastrophe reserve and risk volatilityreserve should be reclassified into natural disaster insurance categorysince January 1, 2013.

The effects on income, liabilities, equity and earnings per share of theCompany’ s sub-subsidiary CTBC Insurance Co., Ltd. under thecircumstance of not adopting the aforesaid regulations were as follows:

December 31, 2020Amount

without theadoption of reserve

Amountwith the adoption

of reserve EffectSpecial reserve $ 413 97,337 (96,924)

Stockholders’ equity 1,919,622 1,842,083 77,539

December 31, 2019Amount

without theadoption of reserve

Amountwith the adoption

of reserve EffectSpecial reserve $ 32,047 130,598 (98,551)

Stockholders’ equity 1,871,238 1,792,397 78,841

For the year ended December 31, 2020 For the year ended December 31, 2019Amount

without theadoption of

reserve

Amount with the

adoption ofreserve Effect

Amountwithout theadoption of

reserve

Amount with the

adoption ofreserve Effect

Net income (losses) $ 9,094 10,396 (1,302) (2,800) (1,498) (1,302)

Earnings (losses) per share (after

tax)

0.05 0.05 - (0.01) (0.01) -

d) Premium deficiency reserve and ceded premium deficiency reserve:

i) Details of premium deficiency reserve and ceded premium deficiency reserveof the Company’s sub-subsidiary CTBC Insurance Co., Ltd. were as follows:

December 31, 2020 December 31, 2019

Premiumdeficiency

reserve

Cededpremiumdeficiency

reserve

Premiumdeficiency

reserve

Cededpremiumdeficiency

reserveMarine insurance $ 33 28 - -

Miscellaneous casualty insurance 775 - 1,089 -

Total $ 808 28 1,089 -

(Continued)

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113


ii) The movements of premium deficiency reserve were as follows:


Premiumdeficiency

reserve

Ceded premiumdeficiency

reserve

Premiumdeficiency

reserve

Ceded premiumdeficiency

reserveBeginning balance $ 1,089 - 35,855 31,276Current provision 808 28 5,073 3,982Current recovery (1,089) - (39,839) (35,258)Ending balance $ 808 28 1,089 -

(ii) Insurance revenue and expense

1) Retained earned premium:

Life insurance business:


Insurancecontracts



feature TotalDirect written premium $ 166,231,767 74,295 166,306,062Reinsurance premium - - -Insurance income 166,231,767 74,295 166,306,062Reinsurance expense 1,910,045 - 1,910,045Net changes in unearned

premium reserve64,034 (1) 64,033

1,974,079 (1) 1,974,078Retained earned premium $ 164,257,688 74,296 164,331,984


Insurancecontracts



feature TotalDirect written premium $ 209,362,244 896,447 210,258,691Reinsurance premium - - -Insurance income 209,362,244 896,447 210,258,691Reinsurance expense 1,459,496 - 1,459,496Net change in unearned

premium reserves501,032 - 501,032

1,960,528 - 1,960,528Retained earned premium $ 207,401,716 896,447 208,298,163

(Continued)

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Item

Claims(Contain claim

expense)(1)

Reinsuranceclaim

(2)

Claimrecovered

(3)

Retain claimspayment

(4)=(1)+(2)-(3)

The net changeof unearned

claims reserve (5)

Earned retainclaims

payment (6)=(4)-(5)

Non-compulsory insurance $ 1,544,628 81,350 503,945 1,122,033 (83,240) 1,205,273Compulsory insurance 167,198 131,666 69,623 229,241 (15,500) 244,741Total $ 1,711,826 213,016 573,568 1,351,274 (98,740) 1,450,014


Item


expense)(1)

Reinsuranceclaim

(2)

Claimrecovered

(3)


(4)=(1)+(2)-(3)

The net changeof unearned

claims reserve (5)

Earned retainclaims

payment (6)=(4)-(5)

Non-compulsory insurance $ 1,828,043 64,328 555,711 1,336,660 (60,016) 1,396,676Compulsory insurance 234,067 139,863 98,160 275,770 (9,109) 284,879Total $ 2,062,110 204,191 653,871 1,612,430 (69,125) 1,681,555

2) Retained claims payment:

Life insurance business:


Insurancecontracts



feature TotalClaims payment $ 129,913,411 2,220,362 132,133,773Reinsurance claims payment 325 - 325Insurance claims payment 129,913,736 2,220,362 132,134,098Less: recovery of reinsurance

claims payment 1,010,164 - 1,010,164

Retained claims payment $ 128,903,572 2,220,362 131,123,934


Insurancecontracts



feature TotalClaims payment $ 105,024,191 2,655,143 107,679,334Reinsurance claims payment 14 - 14Insurance claims payment 105,024,205 2,655,143 107,679,348Less: recovery of reinsurance

claims payment 619,693 - 619,693

Retained claims payment $ 104,404,512 2,655,143 107,059,655

(Continued)

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115




Item


expense)(1)

Reinsuranceclaim

(2)

Claimrecovered

(3)


(4)=(1)+(2)-(3)Non-compulsory insurance $ 785,189 17,102 122,225 680,066Compulsory insurance 218,844 148,441 126,915 240,370Total $ 1,004,033 165,543 249,140 920,436


Item


expense)(1)

Reinsuranceclaim

(2)

Claimrecovered

(3)


(4)=(1)+(2)-(3)Non-compulsory insurance $ 953,687 13,473 166,179 800,981Compulsory insurance 224,792 161,263 130,370 255,685Total $ 1,178,479 174,736 296,549 1,056,666

(af) Income tax

(i) Income tax expenses

For the years ended December 31, 2020 and 2019, the Company and subsidiaries’ income taxexpenses and related accounts were as follows:


Current income tax expenses $ 10,472,285 4,944,818Deferred income tax (benefits) expenses (1,750,383) 3,981,984Income tax expenses $ 8,721,902 8,926,802

For the years ended December 31, 2020 and 2019, the Company and subsidiaries’income tax(benefits) expenses recognized under other comprehensive income were as follows:


Items that will not be reclassified subsequently to profit or loss:Remeasurement gains related to defined benefit plans $ (41,628) (3,886)Proportionate share of other comprehensive income from

associates or joint ventures under the equity method(153,239) (2,807)

Unrealized (gains) losses from equity instruments measured atfair value through other comprehensive income

(899,375) 291,044

Change in fair value of financial liability attributable to changein credit risk of liability

(18,073) -

Total $ (1,112,315) 284,351

(Continued)

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116



Items that are or may be reclassified subsequently to profit or loss:Exchange differences of overseas subsidiaries’ financial reports

translation$ (353,353) 136,730

Unrealized losses from debt instruments measured at fair valuethrough other comprehensive income

726,018 3,109,781

Other comprehensive (income) losses on reclassification underthe overlay approach

(231,746) 990,310

Proportionate share of other comprehensive losses (income)from its subsidiaries, associates or joint ventures under theequity method

74,543 (12,578)

Total $ 215,462 4,224,243

For the years ended December 31, 2020 and 2019, the adjustments of the Company andsubsidiaries for the income tax expenses and pre-tax income were as follows:


Net income before income tax $ 51,577,057 51,809,078Straight income tax 19,617,530 21,029,405Effects of foreign and domestic tax rate spread 128,709 10,250Tax-exempt income (14,016,668) (14,404,597)Tax Incentive (52,407) -Adjustments of prior year’s income tax 187,754 175,812Undistributed earnings additional tax 2,581,496 -Income basic tax 14,424 15,175Others 261,064 2,100,757Total $ 8,721,902 8,926,802

(Continued)

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117


(ii) Deferred tax assets and liabilities

1) For the years ended December 31, 2020 and 2019, the movements of deferred tax assetsand liabilities were as follows:


BeginningBalance

Recognized inprofit and

loss

Recognized inother

comprehensiveincome Others

EndingBalance

Proportionate share of othercomprehensive income fromassociates or joint ventures underthe equity method

$ (530,572) (314,606) - (2,783) (847,961)

Unrealized losses (gains) on foreignexchange and financial instruments

901,359 1,475,709 - (1,918) 2,375,150

Allowance for credit losses 3,421,602 356,287 - (50,571) 3,727,318Guarantee provision 115,907 (8,144) - - 107,763Losses on impairment assets 22,943 44,186 - 3,079 70,208Employee benefits liabilities 539,459 (31,580) - 4,656 512,535Settlement compensation provision 17,666 (20) - - 17,646Exchange differences of overseas

subsidiaries’ financial reportstranslation

965,313 - 353,353 2,781 1,321,447

Defined benefit plan actuarial gainsand losses

185,510 - 41,628 (14,579) 212,559

Unrealized losses (gains) on financialassets measured at fair valuethrough other comprehensiveincome

(1,167,182) 128,811 405,103 (430,050) (1,063,318)

(Put) Call warrant transactions (8,640) (17,403) - - (26,043)Acquisition value of insurance

policies(112,325) 1,924 - - (110,401)

Change in fair value of financialliabilitiy attributable to change incredit risk of liability

- - 18,073 - 18,073

Losses carryforward and others 244,670 115,219 - 143,356 503,245Deferred income tax assets

(liabilities) - net$ 4,595,710 1,750,383 818,157 (346,029) 6,818,221

Information disclosed in balance sheet:Deferred income tax assets $ 12,471,402 18,373,870Deferred income tax liabilities (7,875,692) (11,555,649)Total $ 4,595,710 6,818,221

(Continued)

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118



BeginningBalance

Recognized inprofit and

loss

Recognized inother

comprehensiveincome Others (Note)

EndingBalance

Proportionate share of othercomprehensive income fromassociates or joint ventures underthe equity method

$ (210,884) (323,263) - 3,575 (530,572)

Unrealized losses (gains) on foreignexchange and financial instruments

4,052,999 (3,036,400) - (115,240) 901,359

Allowance for credit losses 3,221,505 192,206 - 7,891 3,421,602Guarantee provision 117,648 10,447 - (12,188) 115,907Losses (gains) on reversal of

impairment assets47,838 (117,547) - 92,652 22,943

Employee benefits liabilities 659,749 (27,499) - (92,791) 539,459Settlement compensation provision 17,846 (180) - - 17,666Exchange differences of overseas

subsidiaries’ financial reportstranslation

1,105,617 - (136,730) (3,574) 965,313

Defined benefit plan actuarial gainsand losses

100,867 - 3,886 80,757 185,510

Unrealized losses (gains) on financialassets measured at fair valuethrough other comprehensiveincome

3,156,062 - (4,391,135) 67,891 (1,167,182)

(Put) call warrant transactions 6,611 (15,251) - - (8,640)Acquisition value of insurance

policies(114,647) 2,322 - - (112,325)

Losses carryforward and others 1,111,219 (666,819) - (199,730) 244,670Deferred income tax assets

(liabilities) - net$ 13,272,430 (3,981,984) (4,523,979) (170,757) 4,595,710

Information disclosed in balance sheet:Deferred income tax assets $ 15,656,082 12,471,402Deferred income tax liabilities (2,383,652) (7,875,692)Total $ 13,272,430 4,595,710

2) Unrecognized deferred income tax asstes

As of December 31, 2020 and 2019, the unrecognized deferred income tax assets of theCompany and subsidiaries are as below:

December 31,2020

December 31,2019

Tax effect of deductible temporary differences $ 113,398 125,939The carryforward of unused tax losses - 1,453Total $ 113,398 127,392

The R.O.C. Income Tax Act allows net losses, as assessed by the tax authorities, to offsettaxable income over a period of ten years for local tax reporting purposes. Deferred taxassets have not been recognized in respect of these items because it is not probable thatfuture taxable profit will be available against which the Company and subsidiary canutilize the benefits therefrom.

(Continued)

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(iii) Uncertainty over income tax treatments

For all the Company and subsidiaries’ income tax returns which have already been returnedbut have not been assessed, the Company and subsidiaries evaluate some related factors, suchas relevant interpretations letter and previous experience, and consider it has already estimatedenough income tax liabilities.

(iv) The Company and subsidiaries’ income tax returns assessed and administrative remedies filedwere as follows:

Latest year ofassessment

The Company Until 2015CTBC Bank Co., Ltd. Until 2015CTBC Securities Co., Ltd. Until 2015CTBC Insurance Brokers Co., Ltd. (dissolved) Until 2015CTBC Venture Capital Co., Ltd. Until 2015CTBC Asset Management Co., Ltd. Until 2015CTBC Security Co., Ltd. Until 2015Taiwan Lottery Co., Ltd. Until 2015Chinatrust Bills Finance Corp. (dissolved) Until 2008Taiwan Life Insurance Co., Ltd. Until 2015CTBC Life Insurance Co., Ltd. (dissolved) Until 2015CTBC Investments Co., Ltd. Until 2015

Year ofRecheck Description of Recheck

The Company 2014 Other incomeCTBC Bank Co., Ltd. 2014 Undistributed earningsCTBC Venture Capital Co.,

Ltd.2015 Foreign tax credits

CTBC Asset ManagementCo., Ltd.

2014 Allocation of expenses for exempt income

CTBC Securities Co., Ltd. 2014 Undistributed earnings〃 2015 Allocation of expenses for exempt income

Year ofLitigation Description of Litigation

The Company 2010 Losses carry forward

(Continued)

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(ag) Capital stock, capital surplus, treasury stock, and other equity interest

(i) Capital stock

As of December 31, 2020, the Company’s authorized capital was $230,000,000 representing23,000,000 thousand shares with par value at NT$10 per share. The paid-in capital includescommon stock amounted to $194,969,896, preferred stock B amounted to $3,333,300 and ,preferred stock C amounted to $1,666,600 with 19,496,990 thousand shares, 333,330 thousandshares and 166,660 thousand shares issued, respectively.

On December 21, 2018, the Company’s board of directors resolved to issue 166,660 thousandshares of Series C Preferred Stock to increase capital by cash, with the subscription price atNT$60 per share, amounting to $9,999,600. The capital increase was approved by the FSC inaccordance with Ruling No.1070348778 on January 17, 2019. All issued shares were fully paidand expected to be recognized as equity on April 3, 2019, the subscription date.

The Company’s rights and obligations of issuing preferred stock were as follows:

1) Series B Preferred Stock

a) Dividends: The dividend yield is set at 3.75% per annum (equal to the sum of 7-year IRS 1.0825%+2.6675%) on the issue price. The IRS rate will be reset every 7years and the pricing date for reset is two business days prior to the IRS reset date.The IRS rate is the arithmetic mean of 7-year IRS rates appearing on Reuters pages“ PYTWDFIX” and “ COSMOS3” at 11:00 a.m. (Taipei time) on the relevantpricing date for reset. If such rate cannot be obtained, the Company will determinethe rate based on reasonable market price with good faith. The dividends will bedistributed annually in arrears.

b) Earnings distribution: The fiscal year-end earnings of the Company shall be appliedto the following uses in order: payments of taxes, adjustments per financial andaccounting principle, making-up of deficit, legal reserve, special reserve by law orreversal, and the remaining shall be paid to holders of preferred shares B as thecurrent year’s dividends.

c) Dividend distribution: The Company has discretion over the dividend distributionof preferred shares B. The Company may decide not to distribute dividends ofpreferred shares B in the following circumstances: (a) there are no earnings in afiscal year, (b) the earnings are insufficient to distribute dividends of preferredshares B, (c) the distribution of dividends of preferred shares B will cause thecapital adequacy ratio to be lower than the regulatory requirements, and (d) otherconsiderations. The cancellation of dividend payment should not constitute anevent of default.

d) The preferred shares B are noncumulative, and the preferred shareholders do nothave the right to claim any of the unpaid or omitted dividends in the future.

(Continued)

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121


e) Other than the receipt of dividends at the rate as a) mentioned above, holders ofSeries B Preferred Stock are not entitled to common shares’ cash or stock dividendsderived from earnings or capital reserve.

f) Holders of preferred shares B have prior claim on the Company’ s assets overcommon shareholders if it is liquidated. The repayment shall be capped atrespective issue amount of preferred shares B upon liquidation.

g) Voting right and election right: Preferred shareholders do not have voting rights orsuffrage. However, they have voting rights with respect to agendas related to therights and obligations of preferred shares B in shareholders’ meetings.

h) Conversion rights: Cannot be converted to common shares and Holders do not havethe right to request the Company to redeem preferred shares.

i) Due date: The preferred shares B is perpetual but may be redeemed in whole or inpart at issue price anytime after seven years of issuance at the option of theCompany. Unredeemed preferred shares shall continue to have the rights andobligations of issuance terms prescribed in this Article.

2) Series C Preferred Stock

a) Dividends: The dividend yield is set at 3.20% per annum (equal to the sum of 7-year IRS 0.99%+2.21%) on the issue price. The IRS rate will be reset every 7years, the reference date for pricing is one business day prior to the pricing dateand the reference date for reset is two business days prior to the interest rate resetdate. The IRS rate is the arithmetic mean of 7-year IRS rates appearing on Reuterspages “TAIFXIRS” and “COSMOS3” at 11:00 a.m. (Taipei time) on the relevantreference date. If such rate cannot be obtained, the Company will determine the ratebased on reasonable market price with good faith. The dividends will be distributedannually in arrears.

b) Earnings distribution: The fiscal year-end earnings of the Company shall be appliedto the following uses in order: payments of taxes, making-up of deficit, legalreserve, special reserve by law or reversal, and the remainders shall first be appliedto distribute the dividend of Preferred Shares.

c) Dividend distribution: The Company has discretion over the dividend distributionof preferred shares C. The Company may decide not to distribute dividends ofpreferred shares C in the following circumstances: (a) there are no earnings in afiscal year, (b) the earnings are insufficient to distribute dividends of preferredshares, (c) the distribution of dividends of preferred shares will cause the capitaladequacy ratio to be lower than the regulatory requirements, and (d) otherconsiderations. The preferred shareholders can not object to the decision.

d) The preferred shares C are non-cumulative, and the preferred shareholders do nothave the right to claim any of the unpaid or omitted dividends in the future.

(Continued)

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e) Other than the receipt of dividends at the rate as a) mentioned above, holders ofSeries C Preferred Stock are not entitled to common shares’ cash or stock dividendsderived from earnings or capital reserve.

f) Holders of preferred shares C have prior claim on the Company’ s assets overcommon shareholders if it is liquidated. The claims of all series of preferredshareholders are equal. The repayment shall be capped at respective issue amountof preferred shares C upon liquidation.

g) Voting right and election right: Holders of preferred shares C do not have votingright and election right in the Common Shareholders’ Meeting, but may be electedas directors, and have voting right in the Preferred Shareholders’ Meeting and theShareholders’ Meeting concerning the rights and obligations of shareholders ofPreferred Shares C.

h) Conversion Rights: Preferred shares C cannot be converted to common shares andholders do not have the right to request the Company to redeem preferred shares.

i) Due date: The preferred shares C is perpetual but may be redeemed in whole or inpart at issue price anytime after seven years of issuance at the option of theCompany. Unredeemed preferred shares shall continue to have the rights andobligations of issuance terms prescribed in this Article. If the Company decides todistribute the dividend in the current year, the distribution of the payable dividendsin the date of redemption shall be calculated based on the actual number of days thePreferred Shares remained outstanding in that year.

(ii) Capital surplus

The components and sources of capital surplus were as follows:

December 31,2020

December 31,2019

Additional paid-in capital－common stock $ 32,242,575 32,242,575Additional paid-in capital－preferred stock 24,963,768 24,963,768Share based payment transactions 1,501,496 1,501,496Others 47,084 (19,057)Total $ 58,754,923 58,688,782

In compliance with the Company Act, capital surplus can only be used to offset a deficit whensurplus reserve is not sufficient to offset losses or be distributed by issuing new shares or bycash pursuant to a resolution to be adopted by a shareholders’ meeting as required in Article241, Paragraph 1 of the Company Act. Furthermore, according to Article 72 1, Paragraph 1 ofthe Regulations Governing the offering and Issuance of Securities by Securities Issuers, theamount of capital surplus to be used to increase capital shall not exceed 10% of total paid incapital. The capital surplus arising from a capital increase can be capitalized only in thefollowing fiscal year after being registered by the Company with the competent authority forapproval.

(Continued)

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The share-based payment transactions are treasury stock and cash capital increase transferredto employees. The Company is reserving 10 percent of new shares for subscription byemployees of the Company and subsidiaries follows Article 267, Paragraph 1 of the CompanyAct.

(iii) Other equity interest

Changes in the Company’s other equity interests were as follows:

Exchangedifferences of

overseassubsidiaries’

financial reportstranslation

Unrealized gains(losses) on

financial assetsmeasured at fair

value throughother

comprehensiveincome

Changes infinancialliabilities

designated atfair value

through profitor loss

attributable tocredit risk

Othercomprehensive

income onreclassification

under theoverlay

approach Total

Balance at January 1, 2020 $ (7,642,509) 4,050,190 1,086,384 277,123 (2,228,812)

Exchange differences of overseas subsidiaries’financial reports translation

(3,437,825) - - - (3,437,825)

Gains on designated as hedging instruments in ahedge of the net investments in overseassubsidiaries

399,586 - - - 399,586

Proportionate share of other comprehensive lossesfrom associates under the equity method

- (960,620) - - (960,620)

Unrealized gains from financial assets measured atfair value through other comprehensiveincome

- 15,702,124 - - 15,702,124

Accumulated losses on disposals of debt instrumentsmeasured at fair value through othercomprehensive income reclassified to profit orloss

- (9,569,382) - - (9,569,382)

Disposals of equity instruments measured at fairvalue through other comprehensive income

- 1,548,218 - - 1,548,218

Valuation adjustment of other comprehensiveincome on reclassification under the overlayapproach

- - - 802,548 802,548

Change in designated as financial liabilitiesmeasured at fair value through profit or lossattributable to credit risk

- - (1,158,675) - (1,158,675)

December 31, 2020 $ (10,680,748) 10,770,530 (72,291) 1,079,671 1,097,162

(Continued)

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Exchangedifferences of

overseassubsidiaries’

financial reportstranslation

Unrealized gains(losses) on

financial assetsmeasured at fair

value throughother

comprehensiveincome

Changes infinancialliabilities

designated atfair value

through profitor loss

attributable tocredit risk

Othercomprehensive

income onreclassification

under theoverlay

approach Total

Balance at January 1, 2019 $ (6,844,471) (18,434,666) (310,604) (10,863,479) (36,453,220)

Exchange differences of overseas subsidiaries’financial reports translation

(1,026,935) - - - (1,026,935)

Gains on designated as hedging instruments in ahedge of the net investments in overseassubsidiaries

228,897 - - - 228,897

Proportionate share of other comprehensive gainsfrom associates under the equity method

- 36,343 - - 36,343

Unrealized gains from financial assets measured atfair value through other comprehensiveincome

- 29,934,140 - - 29,934,140

Accumulated losses on disposals of debt instrumentsmeasured at fair value through othercomprehensive income reclassified to profit orloss

- (8,261,074) - - (8,261,074)

Disposals of equity instruments measured at fairvalue through other comprehensive income

- 775,447 - - 775,447

Valuation adjustment of other comprehensiveincome on reclassification under the overlayapproach

- - - 11,140,602 11,140,602

Change in designated as financial liabilitiesmeasured at fair value through profit or lossattributable to credit risk

- - 1,396,988 - 1,396,988

December 31, 2019 $ (7,642,509) 4,050,190 1,086,384 277,123 (2,228,812)

(ah) Earnings distribution and dividend policy

Annual earnings, if any, are used to pay taxes, make adjustments in accordance with financialaccounting standards, offset deficits, appropriate legal reserve, and provision for or reversal ofspecial reserve. Then, preferred stock dividends are distributed prior to the distribution of theremaining earnings. The remaining earnings, if any, will be the undistributed earnings of the year,plus the beginning undistributed earnings, it will be the accumulated distributable earnings, andBoard of Directors will draft the proposal for earnings distribution and have it passed by theresolution of shareholders’ meeting before distribution or modification.

The Company, aiming to a continued growth and increase profitability as well as to be in line withthe provisions of laws, adopts a residual dividend policy.

(Continued)

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According to operational planning of the Company, shareholders dividend and bonus will bedistributed according to the following manners:

(i) In principle, the distribution of annual shareholders dividend and bonus shall not be lower than20% of the distributable earnings of the current year; the distributable earnings of the currentyear referred to in this subparagraph is the aforementioned undistributed earnings of the yearstated in Article 29-1, paragraph 1of the corporate charter after deducting the balance ofadjustments per accounting principle and reversals of special reserves by law in the currentyear, excluding distributable but not yet distributed Preferred Shares dividends for the currentyear;

(ii) Shareholders dividend and bonus may be distributed in cash and/or by stock, provided the cashdividend shall not be less than 10% of the total dividends;

For the above mentioned dividend distribution policy, Board of Directors may propose to aShareholders’ Meeting for resolution to an appropriate adjustment of the ratio in cash dividenddistribution according to the business operation of the Company, funds demand in reinvestments andacquisition, and major amendment of laws, provided it shall not be less than 1% of the totaldividends. The Company may retain the earnings if the cash dividend is less than NT$0.1(dollars)per share.

A resolution on 2019 earnings distribution of the Company was approved by the general shareholdermeeting on June 19, 2020 and the distribution of cash dividend for common stock and preferredstock were $19,496,990 and $989,325.

A resolution on 2018 earnings distribution of the Company was approved by the general shareholdermeeting on June 14, 2019 and the distribution of cash dividend for common stock and preferredstock were $19,496,990 and $749,992.

Relevant information about employee bonuses approved by the board of directors on behalf ofshareholders’ meeting was available on Market Observation Post System or other sites.

(ai) Share-based payment

For the years ended December 31, 2020 and 2019, the Company and subsidiaries had set out themeasurement principles and specific requirements for the share-based payment transactions whichwere as follows:

Management stock appreciation rights plan for the years2016 2017 2018 2019

Grant date 2017.01.25 2018.02.08 2019.01.31 2020.01.21

Grant number 231,283 241,881 308,951 358,402

Exercise period 2019.12.31 2020.12.31 2021.12.31 2022.12.31

Exercise price 17.82 21.39 20.24 22.44

The Company and subsidiaries implement the above plan via cash settlements, yet absentee andresigned employees’ stock appreciation rights will be deemed abandoned and forfeited.

(Continued)

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Disclosures for the Company and subsidiaries’ employee stock appreciation rights plan (SARs) wereas follows:

For the year ended December 31, 2020Management stock appreciation rights plan for the years

2017 2018 2019

Number

Weightedaverageexercise

price Number


price Number


priceOutstanding at the beginning

of the period258,228 18.45 321,172 18.38 358,402 21.37

Granted during the period 18,223 18.45 16,652 18.38 18,215 21.37Forfeited during the period 13,975 18.45 6,220 18.38 6,910 21.37Exercised during the period 262,476 18.45 2,685 18.38 897 21.37Expired during the period - 18.45 - 18.38 - 21.37Outstanding at the end of the

period- 18.45 328,919 18.38 368,810 21.37

Exercisable at the end of theperiod

- 18.45 - 18.38 - 21.37

For the year ended December 31, 2019Management stock appreciation rights plan for the years

2016 2017 2018

Number


price Number


price Number


priceOutstanding at the beginning

of the period245,390 15.36 249,343 19.37 308,951 19.30

Granted during the period 37,845 15.36 12,082 19.37 14,992 19.30Forfeited during the period 28,268 15.36 2,633 19.37 2,656 19.30Exercised during the period 254,967 15.36 564 19.37 115 19.30Expired during the period - 15.36 - 19.37 - 19.30Outstanding at the end of the

period- 15.36 258,228 19.37 321,172 19.30

Exercisable at the end of theperiod

- 15.36 - 19.37 - 19.30

For the year ended December 31, 2020, the weighted-average stock prices executed under SARs for2017, 2018 and 2019 were NT$19.74, $19.62 and $18.46 (in dollars), respectively.

As of December 31, 2020, the weighted-average remaining durations of outstanding shares underSARs for 2018 and 2019 were 1 and 2 years, respectively.

On January 29, 2021, the Company’ s board of directors has passed Management Stock AppreciationRights Plan for the Year 2020. 299,788 units of share based payment have been granted, with theexecution price of $19.35 (in dollars). On the execution date of December 31, 2023, the plan isintended to be settled through cash payments. The Company and subsidiaries recognized currentservice costs based on the proportion of vested period in 2020.

(Continued)

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(aj) EPS


Net income attributable to parent company $ 42,853,406 42,879,806Dividends on preferred stock (989,325) (749,992)Net income attributable to common stockholders $ 41,864,081 42,129,814Weighted average outstanding shares of common stock (in thousands) 19,496,990 19,496,990Basic EPS (in dollars) $ 2.15 2.16

Since the Company deals with share-based payment transactions via cash settlement, no impact isexpected to be on its weighted-average outstanding shares, nor does the diluted EPS need to becalculated.

(ak) Net interest income


Interest incomeLoan interest $ 57,062,444 64,234,395Revolving credit interest 2,918,404 3,065,557Securities interest 64,022,397 67,278,463Due from Central Bank 373,318 482,908Due from banks and call loans to banks 1,744,441 2,836,807Insurance policies loans 1,272,784 1,267,190Others 2,085,351 2,494,579Subtotal 129,479,139 141,659,899

Interest expenseDeposit 15,446,164 23,828,630Due to other banks 534,781 1,218,626Borrowings and other financing 3,246,217 4,325,278Lease liabilities 410,315 393,154Others 787,994 1,256,905Subtotal 20,425,471 31,022,593

Total $ 109,053,668 110,637,306

The above table does not include income from financial assets or liabilities measured at fair value.

(Continued)

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(al) Service fee and commission income


Commission incomeCredit card business $ 5,299,850 6,147,126Wealth management business 7,612,194 6,062,789Corporate business 4,434,073 5,423,374Banking business 5,628,121 5,362,641Insurance business 5,192,640 7,404,496Securities business 1,196,428 626,829Lottery business 5,367,258 5,146,476Others 947,020 585,371

Total commission income 35,677,584 36,759,102Service fee

Credit card business 501,592 705,597Wealth management business 255,272 225,445Corporate business 258,523 282,162Banking business 2,263,240 2,282,586Insurance business 8,811,350 8,320,513Securities business 113,313 71,138Lottery business 384,546 388,432Others 57,525 21,055

Total service fee 12,645,361 12,296,928Service fee and commission income $ 23,032,223 24,462,174

(Continued)

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(am) Net insurance income


Insurance incomeInsurance income $ 168,017,888 212,320,801Reinsurance premium income 213,016 204,191Recovery of reinsurance claims payment 1,259,304 916,242Separate account insurance product income 39,821,086 20,061,625

Total insurance income 209,311,294 233,502,859Insurance expense

Reinsurance expense 2,483,613 2,113,367Underwriting expense 11,748 20,217Claims payment 64,291,610 49,798,828Reinsurance claims payment 165,868 174,750Life insurance bonus payment 336,544 504,276Surrender value 68,509,652 58,554,709Guaranty fund expense 319,882 404,309Separate account insurance product expense 39,821,086 20,061,625

Total insurance expense 175,940,003 131,632,081Total net insurance income $ 33,371,291 101,870,778

(Continued)

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


Disposal gains (losses)Commercial paper $ 343 1,936Treasury bills 771 806Government bonds 68,696 42,085Corporate bonds 116,230 185,422Financial debentures 217,066 264,776Convertible bonds 36,948 25,999Stocks 7,606,997 2,631,051Beneficiary certificates 9,381,478 8,990,538Derivative financial instruments 9,939,814 (15,987,719)Margin purchase and short sale of securities (6,329) 1,266Other securities and bonds (357,990) 422,447

Subtotal 27,004,024 (3,421,393)Valuation gains (losses)

Commercial paper (20,492) (13,675)Government bonds 51,988 (3,490)Corporate bonds 2,696 176,249Financial debentures (1,235,919) (4,495,321)Convertible bonds 381,298 65,694Asset-backed securities (166,433) 4,348Stocks 115,244 9,199,709Beneficiary certificates (255,225) 3,864,451Other securities and bonds 594,467 669,683Derivative financial instruments 10,858,350 26,147,934

Subtotal 10,325,974 35,615,582Dividend income 2,323,611 2,561,860Interest income 3,525,321 3,283,273Interest expense (1,706,318) (2,001,991)Total $ 41,472,612 36,037,331

(Continued)

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(ao) Investment-linked assets, liabilities, incomes and expenses

Related account balances of the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. were asfollows:

December 31,2020

December 31,2019

Insurance product assets of segregated account:　Cash in bank $ 3,092,486 2,842,318　Securities 121,766,320 87,609,951　Receivables 781,814 1,434,051　Others - 84Total $ 125,640,620 91,886,404Insurance product liabilities of segregated account:　Insurance product reserve－insurance contract of segregated

account$ 103,835,717 70,143,275

　Insurance product reserve－investment contract of segregatedaccount

20,221,428 20,256,741

　Payables 1,583,475 1,486,388Total $ 125,640,620 91,886,404


Insurance product revenues of segregated account:　Premium income $ 40,404,189 16,636,626　(Losses) gains on financial assets or liabilities measured at fair value

through profit or loss(431,257) 3,746,549

　Foreign exchange losses (415,455) (741,901)　Interest income 263,609 420,351Total $ 39,821,086 20,061,625Insurance product expenses of segregated account:　Net changes in segregated account reserve－insurance contract $ 35,044,553 15,642,143　Surrender value 3,503,798 3,154,966　Insurance claims payment 127,853 130,591　Management fee expense 1,144,882 1,133,925Total $ 39,821,086 20,061,625

For the years ended December 31, 2020 and 2019, sales bonuses or discount of investment-orientedinsurance products from counterparties amounted to $389,279 and $596,094, respectively.

(Continued)

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(ap) Net changes in insurance liability reserve


Provision for liability reserve $ 70,569,428 141,332,409Provision for claim reserve 89,595 374,502Reversal of premium deficiency reserve (2,063,294) (2,670,905)Provision for (reversal of) special claim reserve 547,035 (99,369)(Reversal of) provision for unearned premium reserve (34,707) 431,907(Reversal of) provision for insurance policies with financial instrument

features(2,513) 878

Fair value adjustment (234,558) (232,193)Total $ 68,870,986 139,137,229

(aq) Employee benefits expenses


Salary expenses $ 31,692,902 32,287,378Insurance expenses 2,168,405 2,157,356Cash-settled share-based payment (97,649) 2,077,737Retirement expenses

Defined contribution plan 904,290 844,171Defined benefits plan 340,553 330,144

Other personnel expenses 1,178,120 1,212,077Total $ 36,186,621 38,908,863

As of December 31, 2020 and 2019, the numbers of the Company and subsidiaries’ employees were20,668 and 20,334, respectively.

The Company and subsidiaries recognized the changes in the fair value of share-based payments inprofit or loss over the vesting period. For the year ended December 31, 2020, the share-basedpayments were reversed due to the changes in fair value.

(Continued)

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(ar) Depreciation and amortization expenses


Housing $ 1,204,542 1,191,862General equipment 519,142 499,958Transportation equipment 10,740 10,941Information equipment 902,884 794,648

Subtotal of depreciation expenses from premises and equipment 2,637,308 2,497,409Superficies 260,947 254,429Buildings 2,490,859 2,428,656Transportation equipment 62,630 60,220Miscellaneous equipment 156,117 157,570

Subtotal of depreciation expenses from right-of-use assets 2,970,553 2,900,875Amortization of information software 1,642,401 1,528,284Other deferred expenses 5,362 4,119

Subtotal of amortization expenses 1,647,763 1,532,403Total $ 7,255,624 6,930,687

(as) Compensations of employees and the remunerations to directors

In accordance with the Company’ s article of incorporation, annual earnings, if any, should beappropriated 0.05% and 0.7% (not higher than) as compensations of employees and remunerations toboard of directors. However, if there is any cumulative loss, the Company should offset cumulativelosses in priority. Compensations of employees and the remunerations to directors which arerecognized as current period operating expenses based on the Company’ s net income before taxexcluding the amount of the compensations of employees and remunerations to directors, accordingto accounting period multiplied by the estimate of remuneration distribution set by the Company’sarticle of incorporation.

The estimated compensations of employees were $22,713 and $22,324 and the remunerations todirectors were $317,977 and $312,537 for the years ended December 31, 2020 and 2019,respectively.

The actual compensations of employees of 2019 and 2018 amounted to $21,956 and $18,664, with$(368) and $84 different from the amount recognized in the annual financial report. The actualcompensations of the directors’ of 2019 and 2018 amounted to $296,403 and $261,300, with$(16,134) and $0 different from the amount recognized in the annual financial report. The differenceis regarded as a change of accounting estimates and will be adjusted in profit or loss in the fiscalyear of 2020 and 2019. Relevant information is available on Market Observation Post System.

(Continued)

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(at) Other general and administrative expenses


Site usage and general equipment expenses $ 1,912,165 1,878,833Information equipment expenses 2,801,432 2,540,605General administration expenses 5,917,691 6,616,494Marketing and promotion expenses 3,042,582 3,620,736Other expenses 4,041,575 4,052,896Business tax 3,542,357 3,581,016Total $ 21,257,802 22,290,580

The total amount of rent expenses of short-term lease contracts and low-value assets of the Companyand subsidiaries for the years ended December 31, 2020 and 2019 were $484,242 and $649,793.

(au) The disclosure of financial instruments

(i) Methods and assumptions used by the Company and subsidiaries for fair value evaluation offinancial instruments were as follows:

1) Fair value of short-term financial instruments is estimated by their book value on theBalance sheet date. Since these instruments have short maturities, the book value isadopted as a reasonable basis in estimating the fair value. The method is applied to cashand cash equivalents, due from Central Bank and call loans to banks, securitiespurchased under resell agreements, receivables, reinsurance assets, other financial assets,deposits from Central Bank and other banks, due to Central Bank and other banks,securities sold under repurchase agreements, commercial paper payables, payables,remittances, and other financial liabilities.

2) If there is a quoted price in an active market for the financial asset, including financialinstruments measured at fair value through profit or loss, financial assets measured at fairvalue through other comprehensive income, financial assets measured at amortized cost,hedging financial instruments, the quoted price is regarded as its fair value. If there is noquoted price in an active market for the financial asset, its fair value is estimated on thebasis of the result of a valuation technique that refers to quoted prices provided byfinancial institutions. The discounted cash flow technique is used to estimate the fairvalue of a debt instrument where an active market does not exist. The estimates,hypotheses and discount rates for valuation refer to quoted prices, from financialinstitutions, of financial instruments having substantially the same terms andcharacteristics, including the credit quality of debtors, the remaining term over which thecontractual interest rate is fixed, the remaining term to repayment of the principal, andthe currency in which the payments are to be made. Fair value for an equity investment isdetermined based on either the price calculated using a valuation technique or its bookvalue.

(Continued)

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3) Loans and deposits are both classified as interest bearing financial assets; therefore, thebook value of financial assets is equivalent to their fair value. The net book value of thenon-accrual loan, after deducting provision for credit loss, is adopted as the fair value.

4) Fair value of long-term liabilities is estimated by the present value of expected futurecash flows. The discount rate is based on rates of similar loans available elsewhere; thatis, loans with similar maturity date and terms (close to the maturity date).

5) Derivatives usually adopt mark to model prices. The Discounted Cash Flow model isadopted for non-option derivatives, and the Black Scholes Model is adopted for optionderivatives.

6) The exchange price is used for financial instruments traded on an exchange. Over-the-counter (OTC) positions use independent price/ parameter quotes by reliable brokers ordata vendors, such as Reuters, Bloomberg, etc. In general, the closing price, settlementprice, mid-price at a fixed cut-off time, and the average price of several independentbrokers could be used as market data for valuation purposes.

7) The Company and subsidiaries would calculate credit valuation adjustment (CVA) byassessing probability of default (PD) and loss given default (LGD) of the counterpartybefore multiplying exposure at default (EAD) of the counterparty. On the contrary, debitvaluation adjustment (DVA) is computed by applying probability of default of theCompany and subsidiaries and considering loss given default of the Company andsubsidiaries before being multiplied by exposure at default of the Company andsubsidiaries.

The Company and subsidiaries adopt IFRS9 or take any observable data into account toevaluate the probability of impairment and loss rate of allowance for doubtful accountsas the estimates of PD and LGD. In addition, mark to market assessment of a derivativeinstrument from Over the Counter (OTC) is applied as EAD. For those accounts haveshowed significant increase in credit risk, would be the CVA assessment individually bytaking into account of the changes of exposures, conditions of collaterals and therecovery probabilities.

8) Except the following listed items, the book value is considered to be a reasonable basisof estimated fair value if the Company and subsidiaries do not measure a financialinstrument at fair value.

December 31, 2020Financial Assets Book value Fair value

Investment in debt instruments at amortized cost $1,826,984,725 1,990,513,091

December 31, 2019Financial Assets Book value Fair value

Investment in debt instruments at amortized cost $1,721,282,552 1,812,680,981

(Continued)

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(ii) Fair value hierarchy information on financial instruments and the statements of changes in fairvalue of Level 3

1) The definition of fair value hierarchy

a) Level 1

Fair value measurement for a financial instrument classified in Level 1 isdetermined as the quoted price for an identical financial instrument in an activemarket. The definition of active market has all of the following conditions: (1) theproducts traded in the market are homogeneous, (2) willing parties are availableanytime in the market, and (3) price information is available for the public.

b) Level 2

Fair value measurement for a financial instrument classified in Level 2 isdetermined as the observable price other than quoted price in an active market,including an observable input obtained in an active market, either directly (i.e., asprices) or indirectly (i.e., derived from prices). The examples of observable priceare as follows:

i) The quoted price for an identical financial instrument in an active marketmeans the fair value from the market transaction prices for an identicalfinancial instrument. An identical financial instrument should be determinedby its characteristics and terms of transaction. The fair value of a financialinstrument has to be adjusted according to the observable market price of theidentical financial instrument. The reasons for adjustments include time lagof the occurring market transaction prices for an identical financialinstrument (the quoted prices do not represent fair value at the measurementdate), the difference in transaction terms for financial instruments, transactionprices involving related parties, and the correlation between the observabletransaction prices of identical financial instruments and the market prices ofheld financial instruments.

ii) The quoted market price of the same or identical financial instruments in aninactive market.

iii) The fair value is estimated on the basis of the results of a valuation technique,and the market inputs used (i.e., interest rate, yield curve, and fluctuationrate) are based on obtainable data from the market (an observable inputmeans an input can be derived from market data and can reflect theexpectation of market participants when the inputs were used in evaluatingthe prices of financial instruments).

(iv) A majority of inputs are derived from observable market data, or the inputcorrelation can be tested based on observable market data.

(Continued)

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c) Level 3

Input for a fair value measurement for a financial instrument classified in Level 3 isnot based on obtainable data from the market (an unobservable input, such asvolatility for a share option derived from the share’s historical prices, as it does notgenerally represent current market expectations about future volatility).

2) Fair value hierarchy information on financial instruments

December 31, 2020Asset and Liability Items Total Level 1 Level 2 Level 3

Instruments measured at fair value

Instruments measured at fair value on a recurringbasis

Non-derivative financial instruments assets andliabilities

Assets:

Financial assets measured at fair value through profitor loss

Mandatorily measured at fair value through profitor loss

Investment in equity instruments $ 63,950,081 61,087,219 1,083,348 1,779,514

Investment in debt instruments 215,268,171 7,561,318 202,889,060 4,817,793

Others 177,767,169 134,974,414 - 42,792,755

Financial assets measured at fair value through othercomprehensive income

Investment in equity instruments 111,042,243 100,026,042 879,511 10,136,690

Investment in debt instruments 533,669,518 231,536,492 301,863,615 269,411

Liabilities:

Financial liabilities measured at fair value throughprofit or loss

Financial liabilities held for trading 153,002 153,002 - -

Designated as financial liabilities measured at fairvalue through profit or loss

14,475,274 - - 14,475,274

Derivative financial instruments assets andliabilities

Assets:


$ 72,761,917 2,243,343 68,971,815 1,546,759

Financial assets－hedging 16,394 - 16,394 -

Liabilities:


65,218,734 476,858 63,143,907 1,597,969

Financial liabilities－hedging 211,672 - 211,672 -

Instruments not measured at fair value

Investment in debt instruments at amortized cost 1,990,513,091 1,327,202,465 648,683,950 14,626,676

Investment property 93,540,617 - - 93,540,617

(Continued)

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December 31, 2019Asset and Liability Items Total Level 1 Level 2 Level 3

Instruments measured at fair value

Instruments measured at fair value on a recurringbasis

Non-derivative financial instruments assets andliabilities

Assets:


Mandatorily measured at fair value through profitor loss

Investment in equity instruments $ 63,105,014 60,756,894 540,989 1,807,131

Investment in debt instruments 195,856,341 5,785,771 184,800,067 5,270,503

Others 173,055,127 142,763,917 - 30,291,210


Investment in equity instruments 108,948,003 98,395,182 1,709,370 8,843,451

Investment in debt instruments 466,898,433 202,692,931 263,885,219 320,283

Liabilities:

Designated as financial liabilities measured at fairvalue through profit or loss

41,068,313 - - 41,068,313


Assets:

Financial assets measured at fair value throughprofit or loss

$ 66,841,044 87,918 66,634,838 118,288

Financial assets－hedging 330,764 - 330,764 -

Liabilities:


73,611,120 254,259 73,184,604 172,257

Financial liabilities－hedging 37,437 - 37,437 -

Instruments not measured at fair value

Investment in debt instruments at amortized cost 1,812,680,981 1,114,970,560 682,601,395 15,109,026

Investment property 87,525,026 - - 87,525,026

(Continued)

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3) Transferred between level 1 and level 2

For the year ended December 31, 2020From Level 1 to Level 2 From Level 2 to Level 1

Amount Reason Amount ReasonFinancial assets measured

at fair value throughprofit or loss

$ - - 124,423 the high frequency ofthe transaction andthe availability ofobservable ofinput parameters

Financial assets measuredat fair value throughother comprehensiveincome

7,080,778 the lack of activequote markers fordebt securities

4,639,861 the high frequency ofthe transaction andthe availability ofobservable ofinput parameters

For the year ended December 31, 2019From Level 1 to Level 2 From Level 2 to Level 1

Amount Reason Amount ReasonFinancial assets measured

at fair value throughprofit or loss

$ 119,336 the lack of activequote markers fordebt securities

318,999 the high frequency ofthe transaction andthe availability ofobservable ofinput parameters


3,554,290 the lack of activequote markers fordebt securities

3,138,092 the high frequency ofthe transaction andthe availability ofobservable ofinput parameters

4) Statements of changes in financial assets which were classified to Level 3 based on fairvalue measurement

For the year ended December 31, 2020Current increase Current decrease

ItemsBeginning

balance

The amountrecognized incurrent net

income

The amountrecognized in

othercomprehensive

incomePurchase or

issue

Transfer in toLevel 3 and outof other levels

Transfer in toLevel 3 of financial

assets and out ofLevel 3 of financial

liabilitiesSale, disposal,or settlement

Transfer in toother levels andout of Level 3

Transfer in toLevel 3 of financialliabilities and out

of Level 3 offinancial assets Ending balance

Financial assets measuredat fair value throughprofit or loss

Mandatorily measured atfair value throughprofit or loss

$ 37,487,132 134,831 1,129,792 16,215,982 - 333,058 3,307,346 646,300 410,328 50,936,821


9,163,734 - (89,053) 864,154 795,600 - 328,334 - - 10,406,101

Total $ 46,650,866 134,831 1,040,739 17,080,136 795,600 333,058 3,635,680 646,300 410,328 61,342,922

(Continued)

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140



ItemsBeginning

balance


income


othercomprehensive

incomePurchase or

issue




liabilitiesSale, disposal,or settlement



of Level 3 offinancial assets Ending balance

Financial assets measuredat fair value throughprofit or loss

Mandatorily measured atfair value throughprofit or loss

$ 45,753,891 (755,972) 75,584 21,426,726 - 38,930 8,728,729 20,278,336 44,962 37,487,132

Designated as financialassets measured at fairvalue through profit orloss

1,130,284 (17,379) (4,905) - - - 1,108,000 - - -


8,914,013 - 362,656 245,153 - 7,095 365,183 - - 9,163,734

Total $ 55,798,188 (773,351) 433,335 21,671,879 - 46,025 10,201,912 20,278,336 44,962 46,650,866

The policy for when to recognize the transfers in or out of Level 3 is according to theactual date of the event or change in circumstances. This transfer of financial assets fromLevel 3 to Level 2 was due to a switch of valuation approach.

Unrealized gains (losses) associated with assets as of December 31, 2020 and 2019which were recognized in current net income shown in the above table were $53,020 ofprofit and $365,742 of loss, respectively.

5) Statements of changes in financial liabilities which were classified to Level 3 based onfair value measurement


ItemsBeginning

balance


income


othercomprehensive

incomePurchase or

issue



of Level 3 offinancial assets

Sale, disposal,or settlement




liabilities Ending balanceFinancial liabilities at fair

value through profit orloss

Financial liabilities heldfor trading

$ 172,257 150,917 - 1,391,172 - 410,328 193,647 - 333,058 1,597,969

Designated as financialliabilities measured atfair value throughprofit or loss

41,068,313 (402,107) 1,176,748 - - - 27,367,680 - - 14,475,274

Total $ 41,240,570 (251,190) 1,176,748 1,391,172 - 410,328 27,561,327 - 333,058 16,073,243


ItemsBeginning

balance


income


othercomprehensive

incomePurchase or

issue



of Level 3 offinancial assets

Sale, disposal,or settlement




liabilities Ending balanceFinancial liabilities at fair

value through profit orlossFinancial liabilities held

for trading$ 415,963 (132,970) - - - 44,962 73,654 43,114 38,930 172,257

Designated as financialliabilities measured atfair value throughprofit or loss

37,930,181 4,535,120 (1,396,988) - - - - - - 41,068,313

Total $ 38,346,144 4,402,150 (1,396,988) - - 44,962 73,654 43,114 38,930 41,240,570

The policy for when to recognize the transfers in or out of Level 3 is according to theactual date of the event or change in circumstances. This transfer of financial liabilitiesfrom Level 3 to Level 2 was due to a switch of valuation approach.

(Continued)

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Unrealized gains (losses) associated with liabilities as of December 31, 2020 and 2019which were recognized current net income shown in the above table were $2,098,315 ofloss and $5,372,363 of loss, respectively.

6) Sensitivity analysis of Level 3 fair value if reasonably possible alternative assumptionsused

Valuation techniques used by the Company’ s subsidiary CTBC Bank Co., Ltd. and itssubsidiaries for fair value measurements of financial instruments are appropriate.However, the use of different valuation models or inputs could lead to different outcomesof fair value measurements. The following statement analyses Level 3 sensitivities forthose unobservable inputs in valuation models that have a material impact on thevaluation of Level 3 financial instrument. The Company’s subsidiary CTBC Bank Co.,Ltd. and its subsidiaries major Level 3 financial instruments include:

a) Back-to-back derivative transactions: the movements of fair value betweenfinancial assets and liabilities can be fully offset for back-to-back trades, so there isno material impact on the income statement.

b) Financial Debentures issued by the Company’s subsidiary CTBC Bank Co., Ltd.:the sensitivity analysis based on the assumption of one basis point change in theCompany’s subsidiary CTBC Bank Co., Ltd. credit spread which would have thefollowing effects on the statement of other comprehensive income.

Impacts on other comprehensiveincome as credit spread changes

Favorablechanges

Unfavorablechanges

December 31, 2020LiabilitiesFinancial liabilities measured at fair value through

profit or loss　Designated as financial liabilities measured at fair

value through profit or loss$ 3,327 (3,292)

December 31, 2019LiabilitiesFinancial liabilities measured at fair value through

profit or loss　Designated as financial liabilities measured at fair

value through profit or loss$ 46,901 (46,644)

(Continued)

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7) Quantitative information about the significant unobservable inputs used in the fair valuemeasurement (Level 3)

Quantitative information about the significant unobservable inputs was as follows:

December 31, 2020

Fair valueValuationtechniques

Keyunobservable

inputs Range of inputs

The relationbetween inputsand fair value

Recurring fair value measurementsNon-derivative financial instruments assetsand liabilities

　　　　Assets:Financial assets measured at fair value

through profit or lossMandatorily measured at fair value

through profit or loss$ 49,390,062 Net asset valuation

method/ internalevaluationmodel/ marketmodel

Net asset value/interest rate/value multiple

Not applicable/0%~100%/

not applicable

The higher netasset value, thehigher fair value/the higherinterest rate, thelower fair value/the higher valuemultiple, the higher fairvalue

Financial assets measured at fair valuethrough other comprehensive incomeInvestment in equity instruments 10,136,690 Net asset valuation

method/ discounted cashflow model/market model

Net asset value/dividenddistribution rate/price-to-earningratio, price bookratio, price-to-sales ratio


not applicable

The higher netasset value/ thedividenddistributionrate/price-to-earning ratio,price book ratio,price-to-salesratio, the higherfair value

Investment in debt instruments 269,411 Discounted cashflow model

Interest rate 0.64%~0.68% The higher interestrate, the lowerfair value

　　　　Liabilities:Designated as financial liabilities measured

at fair value through profit or loss14,475,274 Interest rate option

pricing modelCredit risk

parameter0.09%~2.85% The higher credit

risk parameter,the lower fairvalue



through profit or loss$ 1,546,759 Interest rate option

pricing modelInterest rate

correlationcoefficient

13%~97% The highercorrelationcoefficient, thelower fair value

　　　　Liabilities:Financial liabilities measured at fair value

through profit or loss1,597,969 Interest rate option



13%~97% The highercorrelationcoefficient, thehigher fair value

(Continued)

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December 31, 2019

Fair valueValuationtechniques

Keyunobservable

inputs Range of inputs

The relationbetween inputsand fair value

Recurring fair value measurementsNon-derivative financial instruments assetsand liabilities


through profit or lossMandatorily measured at fair value

through profit or loss$ 37,368,844 Net asset valuation

method/ internalevaluationmodel/ marketmodel

Net asset value/interest rate/value multiple


not applicable

The higher netasset value, thehigher fair value/the higherinterest rate, thelower fair value/the higher valuemultiple, thehigher fair value

Financial assets measured at fair valuethrough other comprehensive incomeInvestment in equity instruments 8,843,451 Net asset valuation

method/ discounted cashflow model/market model

Net asset value/dividenddistribution rate/price-to-earningratio, price bookratio, price-to-sales ratio


not applicable

The higher netasset value/ thedividenddistributionrate/price-to-earningratio, price bookratio, price-to-sales ratio, thehigher fair value

Investment in debt instruments 320,283 Discounted cashflow model

Interest rate 0.70% The higher interestrate, the lowerfair value

　　　　Liabilities:Designated as financial liabilities measured

at fair value through profit or loss41,068,313 Interest rate option

pricing modelCredit risk

parameter0.93%~1.44% The higher credit

risk parameter,the lower fairvalue



through profit or loss$ 118,288 Interest rate option



51%~97% The highercorrelationcoefficient, thelower fair value

　　　　Liabilities:Financial liabilities measured at fair value

through profit or loss172,257 Interest rate option



51%~97% The highercorrelationcoefficient, thehigher fair value

8) The valuation process used for fair value measurements categorized within Level 3

Market risk management unit of the Company and subsidiaries is in charge ofindependently testifying the fair value through applying independent data sources so thatthe information can be close to the current market status, making sure that the datasources are independent, reliable, consistent with other information and representable asan exercisable price. Additionally, periodically calibrating the pricing model, conductingretrospective testing, renewing inputs and information required for pricing model, andmaking any other necessary fair value adjustment are used to verify the reasonableness ofvaluation.

(Continued)

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(iii) Financial risk information

The risk management objectives of the Company and subsidiaries are to minimize the potentialfinancial losses through appropriate strategies, policies and procedures. The overall riskmanagement frameworks, which are transparent, systematic, professional and well-established,are rooted in their corporate governance to improve both business performance andshareholder’s equity.

The organization structure of risk management includes Board of Directors, General Auditor,Risk Management Committee, Executive Committee, Credit Committee and Risk ManagementDepartment. The Company’ s subsidiaries also have their own risk management units. Thescope of their authorities is illustrated as follows:

Board of directors, who is in charge of risk strategy approval, risk policies, risk managementframeworks, and creating a culture of risk management, serves as the primary guidance for allrisks and undertakes ultimate responsibility of overall risk management.

General Auditor is responsible for planning and carrying out all kind of audit business and isdirectly accountable to the Board. The internal auditing unit under the General Auditor mustregularly review and assess the integrity and the actual implementation on various kinds of riskmanagement mechanism, and provide timely suggestion for improvement so that the riskmanagement mechanism can be effectively implemented.

By communications, reporting, and advising the Board, Risk Management Committee assiststhe Board in risk governance. Risk Management committee also builds appropriate riskauthorization and monitors and ensures risk authorization system operate properly. We expectthe senior managers to support the Company’s risk culture, through decision-making processesand leader’ s supportive behavior, which could eventually influence all employees andorganization.

Executive Committee is accountable for overall risk control and holds executive meetings. Inthose meetings, risk management policies and risk limits are reviewed.

Credit Committee is in charge of supervising, approving and reviewing significant credit riskincidents of the Company and subsidiaries.

Risk Management Department is in charge of establishing and implementing appropriate riskmechanisms, and providing integrated risk report of the Company.

1) Credit Risk Management

a) Description of credit risk

Credit risk is the risk of financial loss if a client, guarantor, debtor or counterpartyfails to meet its contractual obligations due to financial problems or other factors.Credit risk arises from both on-balance-sheet items and off-balance-sheet items,including but not limited to lending risk, issuer’ s credit risk, counterparty creditrisk and credit risk of the underlying assets/ investments.

On/off-balance-sheet items of the Company and subsidiaries primarily includeloans, securities investment approved by regulators, and derivatives financialtransaction, etc.

(Continued)

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b) Management procedures of credit risk

i) Risk Identification:

By prudent credit review process, the Company and subsidiaries assesssources and degrees of default risks from lenders, issuers, counterparties, andissues. By considering both internal operations and external environment, theCompany and subsidiaries lay out risk factors to serve as the foundation forrisk measurement.

ii) Risk Measurement:

In order to appropriately evaluate and monitor obligor’ s credit risk, theinternal rating system or external rating is applied in accordance with theirrespective characteristics/ complexity of business, which improves themanagement and analysis of the credit approval, facility management andperformance evaluation. Please refer to (1) C, measurement of credit risk fordetailed explanation.

iii) Risk Monitoring:

The Company and subsidiaries develop proper and necessary guidelines inaccordance with their respective characteristics of credit portfolio, such as:

1. Before undertaking the business, comprehensive credit process aredeveloped, such as credit extension and annual review procedure, loanreview mechanism, guideline for early-warning and watch-list accounts,guideline for collateral appraisement and management, procedure fornon-performing loan management, guideline for limit management ofon/off-balance-sheet credit assets and so on.

2. After undertaking business, management information systems are usedto monitor the credit risk portfolio, changes of risk exposures, riskconcentration situation and large risk exposure, situation of limit usageand overrun, to ensure the risk is under control.

3. To ensure the effectiveness and appropriateness of credit riskmonitoring mechanism of subsidiaries, the Company has establishedcredit risk assurance review mechanism to assess, scrutinize orphysically observe the completeness/independence of the subsidiaries’credit risk organization structure, the effectiveness/improving status ofthe subsidiaries’ credit risk management, the portfolio risk of credit riskassets and management process of credit risk. These conducts wouldhelp the Company identify the current status of the subsidiaries’ creditrisk management, potential risk and the necessary monitoringmechanism that needs to be carried out. Consequently, a growth of thesubsidiaries’ long-term operation can be supported.

(Continued)

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iv) Risk Reporting:

Risk management units of the Company and subsidiaries periodically preparecredit risk portfolio/management reports which are regularly submitted tosenior managements or the board. The reports disclose credit risk profilesfrom various dimensions, such as credit exposure, portfolio mix (by product,industry sector, counterparty, rating, etc.) portfolio concentration, creditquality, credit line with major loss, stress testing and so on.

c) Measurement of credit risk

i) Internal Rating System:

The Company’ s subsidiary CTBC Bank Co., Ltd. develops internal ratingsystems based on its own internal historical data. The major risk componentsincluding Probability of Default (PD), Loss Given Default (LGD), andExposure at Default (EAD), which are used to measure the expected loss(EL) and unexpected loss (UL), assist the Company in their stable growth oflong-term operation.

1. Probability of default (PD)

Regarding the institutional banking business, various scorecard modelsare developed for Jumbo Enterprise, Middle Enterprise, SmallEnterprise, Real Estate Developer, and Personal, etc. based on obligor’scharacteristics, including exposure types, industrial characteristics,revenue scales, and the correspondent with banks. A master scale is alsodeveloped to segment the obligor’ s default risk; each segment of themaster scale is associated with a predefined one-year forward-lookingprobability of default. As for retail banking business, the risksegmentation with predefined one-year forward-looking probability ofdefault is also established, which is developed according to obligor’ srisk characteristics, credit score, and delinquency status, etc.

2. Loss given default (LGD)

Regarding the institutional banking business, the parameters of LGD,such as Collateral Recovery Rate, is calculated based on the productcharacteristics, collateral types, and guarantee forms, etc. Theparameters are used to estimate the LGD for each facility. As for retailbanking business, the risk segmentation with predefined loss givendefault is established, and the LGD parameter is developed according tothe product characteristics, such as loan-to-value, exposure, collateraltype, etc. and

(Continued)

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3. Exposure at default (EAD)

Exposure at default is calculated by current outstanding plus potentialextra outstanding at default. The credit conversion factor for potentialextra outstanding at default is calculated by taking the facilitycommitment, usage ratio, loan outstanding and headroom intoconsideration. For off-balance exposure, non-cash conversion factor isused to estimate the portion of off-balance-sheet exposure convertedinto on-balance-sheet if default.

ii) Stress Test:

Depending on subsidiaries' credit risk materiality and business scale, stresstesting of credit risk portfolios was implemented. Stress testing helps toaware the plausible change of subsidiaries risk component resulting fromstress event, assess the amount of capital needed to absorb losses or planremedial actions to mitigate the impact of exceptional loss when suchincident occurs.

d) Mitigation of credit risk

i) Collateral Management:

In assessing the credit extension, the business prospect, and future cash flowof an obligor are the main factors for determining the repayment capability.However, for the creditor’s sake, the obligor or a third party could be asked todeliver pledge of real estate, chattel, or securities as collateral which could bedisposed for recovering the creditor’s right if the obligor defaults. In order tomaintain the good standing value of collateral, the Company’ s subsidiarieswith loan business have established guidelines regarding collateralmanagement, which were as follows. By taking the volatility of market valueand the characteristic of collateral into account, the Company’s subsidiarieswith loan business set the type of collateral that can be pledged and considerthe historical recovery situation to draw up the highest loan to value. Toverify the fairness of the value of the collateral, the value is identified notonly through valuation reports issued by professional appraisers but alsomarket price and the actual registered price. With the periodic revaluation,the adequacy of the guarantee capability of an object which is highlyfluctuation can be timely monitored.

ii) External guarantee:

In order to enhance the credit for weak small and medium business borrowersand the risk mitigation for the unsecured exposure of small and mediumbusiness borrower, external guarantee provided by R.O.C. SMEG fundapproved by government is one of the eligible guarantees.

(Continued)

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iii) Pre-settlement risk mitigation:

The Company and subsidiaries might take mitigation actions such as call foradditional collateral (or margin), signing a netting agreement or signing anearly determination agreement so as to reduce the credit loss.

e) Maximum exposure to credit risk

Without taking collateral or other credit enhancement mitigation effect intoaccount, the maximum exposure to credit risk of on-consolidated-balance-sheetfinancial assets is equal to their carrying values.

Please refer to Note 6 (au)(iii)(2) F. for off-balance-sheet financial instruments’maximum exposure to credit risks maturity analysis.

f) Concentrations of credit risk

Significant concentrations of credit risk occur when there are significant exposuresto an individual counterparty of a transaction or a number of related counterpartiesengage in similar activities and have similar economic characteristics that wouldcause their ability to meet contractual obligations to be affected by changes ineconomic or other conditions. The Company and subsidiaries have a strategy tomanage the concentration of credit risk in terms of a single client or counterparty toa transaction or clients located in nearby regions or specific industries. Thefollowing table illustrates the diversification of financial assets among industrysectors, geographical regions.

i) By IndustryDecember 31, 2020

Individual Clients Service Public Sector High Tech Real Estate ManufacturingFinancialInstitution Others Total

On balance sheet

Receivables—Credit card $ 83,231,573 - - - - - - - 83,231,573

Receivables—Factoring - 3,871,628 - 15,051,345 9,499 2,044,850 1,278,149 - 22,255,471

Loans

-Consumer loans 947,593,082 - - - - - - - 947,593,082

-Corporate loans 92,111,080 77,372,758 154,282,794 62,954,342 104,194,821 103,965,787 6,502,428 56,432 601,440,442

-Micro-business loans 3,703,224 7,015,408 - 1,955,582 1,627,217 2,356,700 182,854 8,758 16,849,743

-Life insurance loans 19,947,382 - - - - - - - 19,947,382

-Premium advance loans 3,765,273 - - - - - - - 3,765,273

-Foreign currency loans 254,665,363 239,915,877 19,201,430 44,917,445 138,199,020 158,244,272 102,353,633 5,240,079 962,737,119

-Non-accrual loans 4,323,130 3,359,456 65 135,148 195,787 3,002,584 211,470 58,283 11,285,923

-Adjustment of discountand premium

(361,908) (315,360) - (31,489) (143,479) (160,104) (53,109) (39,396) (1,104,845)

Other financial assets 105,187 45,412 - - 202 639 - 11,479 162,919

Total $ 1,409,083,386 331,265,179 173,484,289 124,982,373 244,083,067 269,454,728 110,475,425 5,335,635 2,668,164,082

Off balance sheet

Guarantee and commitment $ 614,491,459 161,984,170 78,210,042 260,874,751 81,968,531 339,198,171 78,059,916 1,565,157 1,616,352,197

(Continued)

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December 31, 2020

Public Sector CorporateFinancialInstitution

IndividualClients Total

Financial assets measured at fair valuethrough other comprehensive income－Investment in debt instruments

$ 132,022,179 163,877,242 222,088,156 15,681,941 533,669,518

Financial assets for hedging - - 16,394 - 16,394

Reinsurance assets－Claims recoverable fromreinsurers

- - 767,989 - 767,989

Reinsurance assets－Due from reinsurers andceding companies

- - 322,006 - 322,006

Investment in debt instrument at amortizedcost

841,289,908 454,114,380 532,369,184 - 1,827,773,472

Total $ 973,312,087 617,991,622 755,563,729 15,681,941 2,362,549,379

December 31, 2019

Individual Clients Service Public Sector High Tech Real Estate ManufacturingFinancialInstitution Others Total

On balance sheet

Receivables—Credit card $ 85,031,076 - - - - - - - 85,031,076

Receivables—Factoring - 2,102,248 - 10,138,384 2,894 2,519,739 1,661,015 - 16,424,280

Loans

-Consumer loans 832,115,667 - - - - - - - 832,115,667

-Corporate loans 83,098,554 78,245,704 166,469,876 61,586,312 98,881,636 100,702,000 7,048,892 56,343 596,089,317

-Micro-business loans 3,533,222 4,926,288 - 1,749,280 1,167,745 2,056,327 163,814 23,953 13,620,629

-Life insurance loans 20,390,467 - - - - - - - 20,390,467

-Premium advance loans 3,590,099 - - - - - - - 3,590,099

-Foreign currency loans 267,020,534 259,726,999 17,778,867 40,144,294 144,385,662 180,631,937 111,009,979 10,592,327 1,031,290,599

-Non-accrual loans 4,176,849 1,924,909 - 456,724 281,332 1,099,469 211,540 108,834 8,259,657

-Adjustment of discountand premium

(246,508) (369,739) (145) (43,071) (167,537) (89,693) (59,712) (48,309) (1,024,714)

Other financial assets 205,380 33,064 - - - 3,040 - 17,506 258,990

Total $ 1,298,915,340 346,589,473 184,248,598 114,031,923 244,551,732 286,922,819 120,035,528 10,750,654 2,606,046,067

Off balance sheet

Guarantee and commitment $ 589,407,951 162,169,178 85,218,578 230,026,728 76,276,598 324,998,819 98,840,658 3,439,266 1,570,377,776

December 31, 2019

Public Sector CorporateFinancialInstitution

IndividualClients Total

Financial assets measured at fair valuethrough other comprehensive income－Investment in debt instruments

$ 136,744,414 120,632,187 191,664,141 17,857,691 466,898,433

Financial assets for hedging 172,046 - 158,718 - 330,764

Reinsurance assets－Claims recoverable fromreinsurers

- - 545,252 - 545,252

Reinsurance assets－Due from reinsurers andceding companies

- - 288,656 - 288,656

Investment in debt instrument at amortizedcost

767,101,658 371,237,148 583,740,387 - 1,722,079,193

Total $ 904,018,118 491,869,335 776,397,154 17,857,691 2,190,142,298

(Continued)

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ii) By Area

December 31, 2020

Taiwan North AmericaAsia (excluding

Taiwan) Others TotalOn balance sheet

Financial assets measured at fairvalue through othercomprehensive income－Investment in debt instruments

$ 100,296,303 128,471,887 240,325,495 64,575,833 533,669,518

Financial assets for hedging - - 16,394 - 16,394

Receivables－Credit card 83,231,573 - - - 83,231,573

Receivables－Factoring 8,097,656 1,052,238 12,134,002 971,575 22,255,471

Loans

Consumer finance

－Mortgage loans 767,048,129 - - - 767,048,129

－Automobile loans 5,243,795 - - - 5,243,795

－Consumer loans 175,301,158 - - - 175,301,158

Corporate finance

－Corporate loans 600,312,270 - 1,056,172 72,000 601,440,442

－Micro-business loans 16,841,454 - 8,289 - 16,849,743

Life insurance loans 19,947,382 - - - 19,947,382

Premium advance loans 3,765,273 - - - 3,765,273

Foreign currency loans 31,399,040 122,270,317 747,968,752 61,099,010 962,737,119

Non-accrual loans 1,269,583 424,983 8,867,384 723,973 11,285,923

Adjustment of discount andpremium

(567,267) (21,988) (467,234) (48,356) (1,104,845)

Reinsurance assets－Claimsrecoverable from reinsurers

111,032 366,067 269,284 21,606 767,989

Reinsurance assets－Due fromreinsurers and cedingcompanies

108,852 121,673 87,680 3,801 322,006

Investments in debt instruments atamortized cost

685,718,430 452,236,373 340,757,858 349,060,811 1,827,773,472

Other financial assets 115,263 - 47,656 - 162,919

Total $ 2,498,239,926 704,921,550 1,351,071,732 476,480,253 5,030,713,461

Off balance sheet

Guarantee and commitment $ 1,273,727,012 17,611,449 305,278,905 19,734,831 1,616,352,197

(Continued)

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December 31, 2019

Taiwan North AmericaAsia (excluding

Taiwan) Others TotalOn balance sheet

Financial assets measured at fairvalue through othercomprehensive income－Investment in debt instruments

$ 81,438,676 96,073,484 210,559,738 78,826,535 466,898,433

Financial assets for hedging 264,369 - 66,395 - 330,764

Receivables－Credit card 85,031,076 - - - 85,031,076

Receivables－Factoring 6,519,110 915,834 7,674,405 1,314,931 16,424,280

Loans

Consumer finance

－Mortgage loans 695,710,104 - - - 695,710,104

－Automobile loans 7,459,502 - - - 7,459,502

－Consumer loans 128,946,061 - - - 128,946,061

Corporate finance

－Corporate loans 595,685,673 - 337,144 66,500 596,089,317

－Micro-business loans 13,611,915 - 8,714 - 13,620,629

Life insurance loans 20,390,467 - - - 20,390,467

Premium advance loans 3,590,099 - - - 3,590,099

Foreign currency loans 24,008,515 129,441,336 812,891,675 64,949,073 1,031,290,599

Non-accrual loans 1,651,761 411,378 6,177,774 18,744 8,259,657

Adjustment of discount andpremium

(418,090) 27,409 (571,028) (63,005) (1,024,714)

Reinsurance assets－Claimsrecoverable from reinsurers

92,955 259,113 174,611 18,573 545,252

Reinsurance assets－Due fromreinsurers and cedingcompanies

86,807 133,349 57,088 11,412 288,656

Investments in debt instruments atamortized cost

604,115,044 444,602,617 317,661,896 355,699,636 1,722,079,193

Other financial assets 238,444 - 20,546 - 258,990

Total $ 2,268,422,488 671,864,520 1,355,058,958 500,842,399 4,796,188,365

Off balance sheet

Guarantee and commitment $ 1,187,850,344 22,058,562 341,728,026 18,740,844 1,570,377,776

(Continued)

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152


g) Credit quality and overdue loss analysis of financial assets of the Companyand subsidiaries

The measurement of credit risk of the Company and subsidiaries is based on threestage classification of credit risk status of financial assets and the estimation ofthree major credit risk components including Probability of Default, Loss GivenDefault and Exposure At Default, which are used to measure the 12-month andlifetime expected credit losses.

For Probability of Default, to evaluate the expected credit losses, the Companyand subsidiaries consider the internal history default experience and external creditrating default rate information of financial assets or issuers or counterparty, the risksegmentation is developed according to obligor’s risk characteristics, industry andcountry. For Loss Given Default, the risk segmentation depends on whether theasset is partially secured, fully secured, product characteristics or other else.Current exposure method or expected exposure approach is adopted for theestimation of exposure at default. The on-balance sheet exposure at default ismeasured by gross carrying amount or amortized cost; the off-balance sheetexposure at default is estimated by carrying amount multiplied by credit conversionfactor.

The Company and subsidiaries evaluate credit risk whether financial instrumentsincreased significantly that should be included in credit loss provisions. TheCompany and subsidiaries consider to disclose the information which can provethe significant increases in credit risk. The criteria for identifying the significantincreases in credit risk are set as below:

i) Obligor’ s risk rating or collateral value at the reporting date deterioratessignificantly compared to that at the initial recognition date.

ii) Past due information.

iii) Significant increases in credit risk on other financial instruments of the sameborrower.

iv) Credit quality status placed in early warning list due to the mechanism ofearly warning at reporting date.

(Continued)

412

153


The Company and subsidiaries’ definition of default on financial assets generallyincludes the items as below:

i) Significant financial difficulty of the issuer or the borrower;

ii) Potential breach of contract due to adverse changes in the repayment status ofborrower;

iii) Decease, dissolution, or it becoming probable that the borrower will enterbankruptcy or other financial reorganization;

iv) The disappearance of an active market for that financial asset because offinancial difficulties; or

v) Significant adverse news in the market, e.g. the fair value of the debtinstrument has been less than its amortized cost, causing the impairment ofthe financial asset.

The estimation of the expected credit loss includes forward-looking informationand primarily references to historically macroeconomic data and relevantmacroeconomic factors (e.g. economic growth rate, consumer price index, interestrate or unemployment rate, etc.) to develop internal forward-looking risk signals.The risk signals incorporate internal and external loss experiences and apply theforward-looking adjustments to credit risk position. Besides, the Company andsubsidiaries consider macroeconomic forecast derived from industry, publicagencies, and academic institutions to reflect the estimation of impairmentallowance.

There is no significant change on the methodology or assumptions for assessmentof expected credit losses during the year ended December 31, 2020.

(Continued)

413

154

CT

BC

FIN

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L H

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i)C

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of f

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(Con

tinue

d)

414

155

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ired

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l ass

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t the

repo

rting

dat

e.

(Con

tinue

d)

415

156


h) Foreclosed properties

Foreclosed properties of the Company and subsidiaries are classified under otherassets. Please refer to Note 6(r).

i) Disclosures required by the Regulations Governing the Preparation of FinancialReports by Financial Holding Companies

i) Asset quality of CTBC Bank Co., Ltd. and subsidiaries’ overdue loans andoverdue receivables

Unit: In Thousands of New Taiwan Dollars, %

Month / Year December 31, 2020

Categories / ItemsNon-performing

loans Total loansNon-performing

loans ratioAllowance forcredit losses Coverage ratio

Corporatefinance

Secured

Unsecured (Note 10)

2,196,506

5,983,095

477,289,093

834,953,548

%0.46

%0.72

17,212,060 %210.43

Residential mortgages 2,211,984 888,289,245 %0.25 8,920,700 %403.29

Cash cards 23,577 1,482,547 %1.59 55,053 %233.50

Consumer Micro credit Original 1,573,022 171,915,643 %0.91 5,673,539 %360.68

finance loans Purchase - 60 %- - %-

Others Secured 101,625 130,256,063 %0.08 1,942,350 %442.06

Unsecured 337,760 6,587,023 %5.13

Total loan business 12,427,569 2,510,773,222 %0.49 33,803,702 %272.01

Overduereceivables

Balance ofreceivables

Delinquencyratio

Allowance forcredit losses Coverage ratio

Credit cards business 91,705 83,326,320 %0.11 1,085,394 %1,183.57

Without recourse factoring - 22,255,471 %- 768,311 %-

Month / Year December 31, 2019

Categories / ItemsNon-performing

loans Total loansNon-performing

loans ratioAllowance forcredit losses Coverage ratio

Corporatefinance

Secured

Unsecured (Note 10)

1,384,396

2,857,292

464,844,676

893,081,772

%0.30

%0.32

18,053,925 %425.63

Residential mortgages 2,149,030 847,953,076 %0.25 8,246,359 %383.72

Cash cards 29,075 1,811,555 %1.60 68,505 %235.61

Consumer Micro credit Original 1,547,831 126,721,917 %1.22 4,797,851 %309.97

finance loans Purchase - 90 %- 1 %-

Others Secured 144,223 110,154,507 %0.13 1,192,853 %296.87

Unsecured 257,583 6,507,885 %3.96

Total loan business 8,369,430 2,451,075,478 %0.34 32,359,494 %386.64

Overduereceivables

Balance ofreceivables

Delinquencyratio

Allowance forcredit losses Coverage ratio

Credit cards business 106,454 85,141,266 %0.13 1,176,209 %1,104.90

Without recourse factoring - 16,424,280 %- 703,950 %-

(Continued)

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Note 1: Non-performing loans represent the amount of overdue loans as reported in accordancewith the “Regulations on the Procedures for Banking Institutions to Evaluate Assets andDeal with Past Due/Non-performing Loans.” The credit card overdue loans represent theamount of overdue loans as reported in accordance with Jin Kuan Yin (4) Zi No.0944000378, dated July 6, 2005.

Note 2: Non-performing loan ratio = non-performing loans ÷ total loans; credit card delinquencyratio = Overdue receivables ÷ balance of receivables.

Note 3: Coverage ratio for loans = allowance for credit losses ÷ non-performing loans; Coverageratio for credit card business = allowance for credit losses ÷ overdue receivables.

Note 4: For residential mortgage loans, a borrower provides his/her (or spouse’s or minor child’s)house as collateral in full and pledges it to the financial institution for the purpose ofobtaining funds to purchase property and to construct or repair a house.

Note 5: Microcredit loans are defined by Jin Kuan Yin (4) Zi No. 09440010950, dated December19, 2005, and do not include credit cards or cash cards.

Note 6: Others in consumer finance are secured and unsecured consumer loans other thanresidential mortgage loans, cash card loans, and microcredit loans, and do not includecredit cards.

Note 7: In accordance with Jin Kuan Yin (5) Zi No. 094000494, dated July 19, 2005, the amountsof without recourse factoring will be classified as overdue receivables within threemonths from the date that suppliers or insurance companies resolve not to compensate theloss.

Note 8: The balances of impairment allowance, as shown above, are calculated in accordancewith the IFRSs accepted by the FSC and “ Regulations Governing the Procedures forBanking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrualLoans,” and other related regulations. Additionally, the amounts exclude non-accrualloans arising from guarantees. Related allowance for credit losses is recognized underprovisions.

Note 9: Supplemental disclosures:

The information below shows supplemental disclosures of the Company’ s subsidiaryCTBC Bank Co., Ltd.’ s loans and receivables that may be exempted from reporting asnon-performing loans and overdue receivables, respectively.

(Continued)

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Unit: In Thousands of New Taiwan Dollars

December 31, 2020 December 31, 2019Loans that may be

exempted fromreporting as a non-

performing loan

Receivables thatmay be exemptedfrom reporting as

overdue receivables

Loans that may beexempted from

reporting as a non-performing loan

Receivables thatmay be exemptedfrom reporting as

overdue receivablesPursuant to a contract under a debtnegotiation plan (Note 1)

27,028 176,882 33,832 174,190

Pursuant to a contract under a debtliquidation plan and a debt reliefplan (Note 2)

676,199 64,292 677,733 66,125

Total 703,227 241,174 711,565 240,315

Note 1: In accordance with Jin Kuan Yin (1) Zi No. 09510001270, dated April 25, 2006,a bank is required to make supplemental disclosures of credit information whichwas approved under the “Debt Coordination Mechanism of Unsecured ConsumerDebts by the Bankers Association of the R.O.C.”

Note 2: In accordance with Jin Kuan Yin (1) Zi No. 09700318940, dated September 15,2008, and with Jin Kuan Yin No. 10500134790, dated September 20, 2016, abank is required to make supplemental disclosures of credit information oncedebtors apply for pre-negotiation, pre-meditation, relief and liquidation under the“Consumer Debt Clearance Act.”

Note 10:Those loans that are not 100% backed by collateral are classified as unsecured.

ii) The Company’ s subsidiary CTBC Bank Co., Ltd.’ s concentration of creditextensions


December 31, 2020

Ranking Enterprise group by industry sector Credit amount

Credit amount/stockholders’

equity (%)1 A group. Panel and components manufacturing 11,786,801 %3.77

2 B group. Spinning of yarn, man-made fibers 11,366,596 %3.64

3 C group. Iron and steel smelting 10,085,172 %3.23

4 D group. Panel and components manufacturing 9,457,103 %3.03

5 E group. Cable telecommunications 9,265,906 %2.97

6 F group. Printed circuit boards manufacturing 7,049,331 %2.26

7 G group. Electricity supply 7,037,820 %2.25

8 H group. Wires and cables manufacturing 5,796,127 %1.86

9 I group. Other unclassified financial service 5,699,350 %1.82

10 J group. Other telecommunications 5,684,364 %1.82

(Continued)

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December 31, 2019

Ranking Enterprise group by industry sector Credit amount

Credit amount/stockholders’

equity (%)1 B group. Cement manufacturing 17,228,644 %5.57

2 E group. Cable telecommunications 10,509,097 %3.40

3 A group. Panel and components manufacturing 10,282,020 %3.32

4 C group. Iron and steel smelting 9,686,775 %3.13

5 K group. Other unclassified financial service 8,495,786 %2.75

6 L group. Other unclassified financial service 8,320,438 %2.69

7 D group. Panel and components manufacturing 6,752,734 %2.18

8 M group. Cement manufacturing 6,507,279 %2.10

9 N group. Motor vehicle parts manufacturing 6,319,375 %2.04

10 O group. Metal Die Manufacturing 6,000,000 %1.94

Note 1: The top 10 enterprise groups other than government or state-ownedenterprises are ranked according to their total outstanding creditamount. If the borrowers belong to an enterprise group, theaggregate credit balance of the enterprise should be calculated anddisclosed as a code number for each such borrower together with anindication of the borrowers’ line of business. In addition, if theborrowers are enterprise groups, the enterprise group’ s industrysector with the maximum exposure to credit risk in its main industrysector should be disclosed, along with the “class” of the industry, incompliance with the Standard Industrial Classification System of theR.O.C. posted by the Directorate General of Budget, Accounting andStatistics, Executive Yuan, R.O.C.

Note 2: Enterprise group is as defined in Article 6 of the “ SupplementaryProvisions to the Taiwan Stock Exchange Corporation Rules forReview of Securities Listings.”

Note 3: The total outstanding credit amount is the sum of the balances of allloan types (including import and export bill negotiations, loans,overdrafts, short/medium/long term secured and unsecured loans,margin loans receivable, and non-accrual loans), bills purchased,without recourse factoring, acceptances receivable, and guaranteesreceivable.

(Continued)

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2) Liquidity Risk Management Mechanism

a) Description and origin of liquidity risk

Liquidity risk refers to the risk of inability to obtain funds at a reasonable costwithin a reasonable timeframe to meet the financial obligations and to cause theimpact on the Company’s earnings or stockholder’s equity value.

Liquidity risk may stem from external and internal factors, one of the external keyfactors could be undermined payment capability caused by financial marketvolatility, and one of the internal factors could be funding shortage caused bymismatch between the timing of capital inflow and outflow.

b) Management procedures of liquidity risk

Based on the Company’ s Financial Risk Management Policy, the Company andsubsidiaries set robust management procedures and risk measurement to identify,measure, monitor, and report the liquidity risk. To avoid liquidity crisis events, theCompany and subsidiaries continuously monitor liquidity status by applyingvarious assessment tools, coordinating responsible units to handle potentialliquidity risk issues and implementing necessary disposals. Moreover, the risk limitis set and monitored, in order to ensure the actual risk profile comply with the risktolerance requirements.

c) Measurement of liquidity risk

The measurement of liquidity risk includes:

i) Maturity gap analysis: The measure discloses cash flow gap by time bucket.

ii) Ratio of fund source to fund usage: The indicators are loan-to-deposit ratio,and current ratio, etc.

iii) Stress test: The test assesses the liquidity impact from extreme scenarios.

iv) Financial market liquidity: The information about changes of market liquidityis used for cross-check the appropriateness of its own liquidity position.

The Company and subsidiaries should adopt appropriate measurements to helpimplement management procedures in accordance with their respectivecharacteristics and complexity of assets and liabilities.

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d) Maturity analysis of non-derivative liabilities

Table below shows the analysis of cash outflows of non-derivative liabilities of theCompany and subsidiaries based on time remaining until the contractual maturitydate. The amount disclosed is based on contractual cash flows and may be differentfrom that included in the consolidated balance sheets.

December 31, 20200-30 days 31-90 days 91-180 days 181 days-1 year Over 1 year Total

Deposits from Central Bank andother banks

$ 35,774,383 16,165,098 2,001,373 2,053,092 - 55,993,946

Due to Central Bank and otherbanks

2,360,456 5,830,332 1,279,063 3,606,153 3,138,704 16,214,708

Non-derivative financial liabilitiesmeasured at fair value throughprofit and loss

7,352,987 - 153,002 - 7,122,287 14,628,276

Securities sold under repurchaseagreements

85,358,817 9,102,347 - - - 94,461,164

Commercial papers payable 12,649,900 2,525,000 1,185,000 650,000 - 17,009,900

Payables 34,405,599 14,365,994 11,776,541 16,050,193 46,035,393 122,633,720

Current income tax liabilities 3,215 2,267,394 5,867,884 140,538 136,834 8,415,865

Deposits and remittances 2,362,484,366 398,132,176 330,741,340 469,970,803 167,338,867 3,728,667,552

Bonds payable - - - 4,000,000 121,400,000 125,400,000

Other financial liabilities 7,849,237 8,773,374 11,014,508 15,297,858 8,070,904 51,005,881

December 31, 20190~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year Total

Deposits from Central Bank andother banks

$ 31,512,596 17,753,869 2,547,021 1,386,812 - 53,200,298

Due to Central Bank and otherbanks

11,955,882 1,543,641 600,722 3,194,162 3,601,753 20,896,160

Non-derivative financial liabilitiesmeasured at fair value throughprofit and loss

- - - - 41,068,313 41,068,313

Securities sold under repurchaseagreements

104,557,367 708,725 - - - 105,266,092

Commercial papers payable 8,758,125 33,291,250 1,069,375 1,338,750 - 44,457,500

Payables 34,101,560 14,491,176 11,846,803 15,651,689 133,098,046 209,189,274

Current income tax liabilities - 6,518 2,643,874 112,060 872,908 3,635,360

Deposits and remittances 2,066,656,206 396,728,469 337,821,279 406,795,278 152,069,392 3,360,070,624

Bonds payable - - 1,000,000 6,300,000 90,900,000 98,200,000

Other financial liabilities 16,582,756 9,072,434 16,971,302 21,063,323 23,199,366 86,889,181

Note: For demand deposits included in “Deposit and remittances”, the amount willbe disclosed in the earliest period since such deposits can be withdrawn atanytime.

(Continued)

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e) Maturity analysis of derivative liabilities

i) Net settled derivatives

Net settled derivatives engaged by the Company and subsidiaries include butnot limited to:

1. Foreign exchange derivatives: Non-delivery forwards and net settled FXoptions;

2. Interest rate derivatives: Forward rate agreements, interest rate swaps,and interest rate futures;

3. Other derivatives: Equity options and commodity futures.

For derivatives held by trading purpose, the amount will be disclosed in theearliest period with fair value to reflect the nature of short-term tradingbehavior; for hedging derivatives, the amount disclosed is based oncontractual cash flow and may be different from that included in theconsolidated balance sheets. The maturity analysis of net settled derivativesliabilities is as follows:


Derivative financial liabilities measuredat fair value through profit or loss

－Foreign exchange derivatives $ 2,364,689 10,820 21,993 38,582 - 2,436,084

－Interest rate derivatives 10,649,492 - - - - 10,649,492

－Other derivatives 215,695 10,119 230,546 45,557 107,080 608,997

Derivative financial liabilities for hedging

－Foreign exchange derivatives 427,567 570,089 - - - 997,656

Total $ 13,657,443 591,028 252,539 84,139 107,080 14,692,229


Derivative financial liabilities measuredat fair value through profit or loss

－Foreign exchange derivatives $ 2,312,197 - 2,148 13,254 - 2,327,599

－Interest rate derivatives 19,794,475 - - - - 19,794,475

－Other derivatives 77,910 - 171,729 63,929 117,594 431,162

Derivative financial liabilities for hedging

－Foreign exchange derivatives 451,603 602,137 - - - 1,053,740

Total $ 22,636,185 602,137 173,877 77,183 117,594 23,606,976

(Continued)

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ii) Gross settled derivatives

Gross settled derivatives engaged by the Company and subsidiaries include:

Foreign exchange derivatives: forwards, currency swaps, cross currencyswaps, and gross settled foreign currency options. For forwards, currencyswaps, and cross currency swaps, the amount disclosed is based oncontractual cash flow and may be different from that included in theconsolidated balance sheet; for gross settled foreign currency options, theamount will be disclosed in the earliest period with fair value, as currencyoptions are for trading purpose and can be disposed at anytime. The maturityanalysis of gross settled derivatives was as follows:


Derivative financial instrumentsmeasured at fair value through profitor loss－Foreign exchange derivatives－Cash outflow $ 1,020,341,233 764,775,876 580,099,447 608,450,221 95,811,781 3,069,478,558－Cash inflow 1,018,387,911 766,096,756 582,027,806 610,746,323 96,638,102 3,073,896,898

Derivative financial liabilities for hedging－Foreign exchange derivatives－Cash outflow 33,150,039 - - - - 33,150,039－Cash inflow 32,938,751 - - - - 32,938,751

Cash outflow subtotal 1,053,491,272 764,775,876 580,099,447 608,450,221 95,811,781 3,102,628,597

Cash inflow subtotal 1,051,326,662 766,096,756 582,027,806 610,746,323 96,638,102 3,106,835,649

Net cash flow $ (2,164,610) 1,320,880 1,928,359 2,296,102 826,321 4,207,052


Derivative financial instrumentsmeasured at fair value through profitor loss－Foreign exchange derivatives－Cash outflow $ 1,750,557,930 1,031,365,344 605,919,097 802,814,249 35,029,733 4,225,686,353－Cash inflow 1,742,676,732 1,029,535,553 603,464,351 795,394,547 34,364,265 4,205,435,448

Derivative financial liabilities for hedging－Foreign exchange derivatives

─ Cash outflow 34,186,814 - - - - 34,186,814─ Cash inflow 34,442,755 - - - - 34,442,755

Cash outflow subtotal 1,784,744,744 1,031,365,344 605,919,097 802,814,249 35,029,733 4,259,873,167

Cash inflow subtotal 1,777,119,487 1,029,535,553 603,464,351 795,394,547 34,364,265 4,239,878,203

Net cash flow $ (7,625,257) (1,829,791) (2,454,746) (7,419,702) (665,468) (19,994,964)

(Continued)

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f) Maturity analysis of off-balance-sheet items

Table below shows the maturity analysis of off-balance-sheet items for theCompany and subsidiaries. The amount of the guarantee and committed credit lineswill be allocated to the earliest period when such obligation can be exercised atanytime by clients. The amount disclosed is based on contractual cash flow andmay be different from that included in the consolidated balance sheets.


Financial guarantee contracts $ 81,386,781 - - - - 81,386,781Unused amount of irrevocable loan

commitments88,997,671 - - - 12,825,012 101,822,683

Unused amount of irrevocable letter ofcredit

20,759,866 - - - - 20,759,866

Unused amount of irrevocable creditcard commitments

556,172,464 - - - - 556,172,464

Total $ 747,316,782 - - - 12,825,012 760,141,794


Financial guarantee contracts $ 71,641,804 - - - - 71,641,804Unused amount of irrevocable loan

commitments117,736,406 - - - 6,316,333 124,052,739

Unused amount of irrevocable letter ofcredit

20,934,077 - - - - 20,934,077

Unused amount of irrevocable creditcard commitments

540,877,844 - - - - 540,877,844

Total $ 751,190,131 - - - 6,316,333 757,506,464

Note: The total refers to the maximum credit risk exposure.

g) Disclosures required by the Regulations Governing the Preparation of FinancialReports by Financial Holding Companies

i) Maturity analysis of the Company’s subsidiary CTBC Bank Co., Ltd.’s assetsand liabilities in New Taiwan Dollars

December 31, 2020

Unit: In Millions of New Taiwan Dollars

Amount remaining to maturity dateTotal 0~10 days 11~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year

Major cash inflow at maturity $ 2,896,344 391,967 324,672 168,131 240,464 266,330 1,504,780

Major cash outflow at maturity 3,377,399 148,079 260,173 389,235 415,751 753,021 1,411,140

Gap (481,055) 243,888 64,499 (221,104) (175,287) (486,691) 93,640

December 31, 2019

Unit: In Millions of New Taiwan Dollars

Amount remaining to maturity dateTotal 0~10 days 11~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year

Major cash inflow at maturity $ 2,630,774 317,532 227,847 274,879 239,253 219,148 1,352,115

Major cash outflow at maturity 3,077,277 139,283 224,317 414,561 427,227 674,143 1,197,746

Gap (446,503) 178,249 3,530 (139,682) (187,974) (454,995) 154,369

Note: Listed amount of the Company’s subsidiary CTBC Bank Co., Ltd. isdenominated in New Taiwan Dollars.

(Continued)

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ii) Maturity analysis of the Company’s subsidiary CTBC Bank Co., Ltd.’s assetsand liabilities in U.S. Dollars

December 31, 2020

Unit: In Thousands of U.S. Dollars

Amount remaining to maturity dateTotal 0~30 days 31~90 days 91~180 days 181 days~1 year Over 1 year

Major cash inflow at maturity $ 81,382,875 30,884,826 16,060,672 10,829,878 9,889,628 13,717,871

Major cash outflow at maturity 115,756,006 30,063,001 16,769,459 16,630,500 18,799,403 33,493,643

Gap (34,373,131) 821,825 (708,787) (5,800,622) (8,909,775) (19,775,772)

December 31, 2019





Gap (8,797,937) (3,544,019) (2,154,128) (3,310,836) (2,025,099) 2,236,145

Note: Listed amount of the Company’s subsidiary CTBC Bank Co., Ltd. isdenominated in U.S. Dollars.

iii) Maturity analysis of the Company’ s subsidiary CTBC Bank Co., Ltd.’ soverseas branches’ assets and liabilities in U.S. Dollars

December 31, 2020





Gap (8,872,495) (579,597) 100,892 (1,946,795) (3,176,431) (3,270,564)

December 31, 2019





Gap (4,426,765) (3,379,776) (1,120,022) (1,437,490) (378,779) 1,889,302

(Continued)

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3) Market Risk Management Mechanism

a) Description and origin of market risk

Market risk is the risk that the earnings, capital or its ability to meet businessobjectives adversely affects the Company and subsidiaries by having volatileinterest rate (including credit spread), foreign exchange rate, securities price andcommodity price. The market correlation and liquidity of these types of instrumentsare also covered.

The Company and subsidiaries’ market risk exposures come from trading and non-trading portfolios. The trading portfolio includes positions arising from tradingactivities, which aim at benefiting from short-term price movements, such asproprietary trading and market making. The non-trading portfolios are held forobtaining capital gain in the long term.

b) Management procedures of market risk

Based on the Company’ s Financial Risk Management Policy, the Company andsubsidiaries set robust management procedures, facilitate market riskcommunication within the Company and subsidiaries and provide propermanagement.

An effective market risk management process begins at risk identification. Theappropriate and consistent market risk measurement methodologies are defined inaccordance with the business characteristics and risk source. The measurementresults are applied to daily management and serve as the foundation of market riskplanning, monitoring, and control.

To ensure that the actual risk profile can comply with the risk appetiterequirements, the risk limit mechanism is established and further transmitted tooperational level and translated into various management indicators, which caneffectively help observe the risk profile changes, analyze the impacts, and form themanagement decisions promptly.

c) Measurement of market risk

i) Value at Risk (VaR)

Value at Risk measures the maximum potential loss under a particularconfidence interval and a given holding period.

ii) Stress Testing

Stress testing is used to calculate a range of trading exposures which resultfrom extreme market events or scenarios. Stress testing measures the impactof exceptional changes in market rate/price, volatility or correlation in the fairvalue of trading portfolios.

(Continued)

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iii) Factor Sensitivity

Factor sensitivity is a measurement for monitoring the cross-productexposures within each risk type, including but not limited to foreignexchange, interest rate and equity price.

1. Interest Rate Risk

Interest rate risk, mostly arising from bonds and interest ratederivatives, is measured in different yield curves and currencies. PVBP,the change in fair value as the yield curves parallel shifts up by 0.01%(1bp), is used to measure interest rate risk exposures.

PVBP for the trading portfolio is illustrated as follows, and for PVBPfor the non-trading one, please refer to (d) sensitivity analysis.


Yield curve parallel shift up by 1 b.p. CurrencyDecember31, 2020

December31, 2019

RMB $ (549) (752)

EUR 441 178

IDR (936) (841)

SGD 496 303

NTD (186) (4,075)

USD 4,885 (1,316)

Others (311) 3,016

(Continued)

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2. Foreign Exchange Risk

Foreign exchange risk, mostly arising from spots, FX derivatives andother positions denominated in foreign currency, is measured indifferent currencies or currency pairs. FX delta, the change in netpresent value as the foreign exchange rate moves up by one unit, 1%, isused to measure foreign exchange risk exposures.

FX delta for the trading portfolio is illustrated as follows, and for FXdelta for the non-trading one, please refer to (d) sensitivity analysis.


Underlying currency appreciate by 1% CurrencyDecember31, 2020

December31, 2019

AUD $ (356) (149)RMB 644 3,600EUR (508) 362HKD (2,469) (4,079)IDR 2,068 376PHP (449) 1,177USD (5,715) (4,191)VND 1,921 (1,357)

Others (50) (1,019)

3. Equity Price Risk

Equity price risk, mostly arising from stocks and related derivatives, ismeasured in equity delta, the change in fair value as the underlyingstock price or index price moves up by 1%.

Equity delta for the trading portfolio is illustrated as follows, and forequity delta for the non-trading one, please refer to (d) sensitivityanalysis.


Equity factor sensitivityCountry/

CommodityDecember31, 2020

December31, 2019

Sensitivity of equity price riskStock price upward movement by 1% Taiwan $ 22,236 20,737

US 18,932 (374)China 37 12,016Japan - (20)Others 60 31

Sensitivity of commodity riskCommodity price upward movement by 1% Gold 1 241

Sensitivity of credit risk premiumCredit spread upward shift by 0.01% (861) (1,437)

(Continued)

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d) Sensitivity analysis

Sensitivity analysis of risk factors of the Company and subsidiaries’ non-tradingpurpose investment portfolio is summarized as follows:

December 31, 2020

Risk Items Movement Amount

Profit and Loss Equity

Interest Rate Risk Interest Rate Curve shift up by 1 bp $ 112,972 (421,920)

Interest Rate Curve shift down by 1 bp (112,972) 421,920

Foreign Exchange Rate Risk Foreign Currency appreciate by 1% against NTD 1,933,877 1,017,509

Foreign Currency depreciate by 1% against NTD (1,933,877) (1,017,509)

Equity Price Risk Equity price appreciate by 1% 90,264 3,315,144

Equity price depreciate by 1% (90,264) (3,315,144)

December 31, 2019

Risk Items Movement Amount

Profit and Loss Equity

Interest Rate Risk Interest Rate Curve shift up by 1 bp $ 96,850 (349,649)

Interest Rate Curve shift down by 1 bp (96,850) 349,649

Foreign Exchange Rate Risk Foreign Currency appreciate by 1% against NTD 1,675,614 961,216

Foreign Currency depreciate by 1% against NTD (1,675,614) (961,216)

Equity Price Risk Equity price appreciate by 1% 81,137 3,237,082

Equity price depreciate by 1% (81,137) (3,237,082)

Note: For fair value hedges or hedges of a net investment in a foreign operation,changes in profit and loss would offset each other in hedge duration, leadingto little influence on the Company and subsidiaries’ overall profit and loss,and hence, were not incorporated in the above aggregate positions.

(Continued)

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e) Foreign exchange rate gap information

According to IFRS 7 “ Financial Instruments: Disclosures” 34(a), an entity shalldisclose summarized quantitative data about its exposure to that risk at the end ofthe reporting period. Significant foreign exchange rate risk exposure was asfollows:

December 31, 2020Foreign currency Spot rate NTD amount

Financial assetsMonetary items

USD $ 71,455,021 28.5080 2,037,039,698JPY 2,442,412,419 0.2765 675,327,034RMB 46,119,069 4.3817/4.3634 202,010,779AUD 5,353,962 21.9711 117,632,445HKD 11,240,649 3.6775 41,337,486

Non-monetary itemsUSD 2,805,290 28.5080 79,973,236RMB 2,083,404 4.3817/4.3634 9,091,104JPY 19,092,434 0.2765 5,279,057EUR 145,813 35.0506 5,110,830HKD 1,216,054 3.6775 4,472,038

Investments underequity methodTHB 17,195,228 0.9516 16,362,979RMB 417,023 4.3817/4.3634 1,823,274JPY 485,659 0.2765 134,285

Financial liabilities

Monetary itemsUSD $ 41,619,803 28.5080 1,186,497,320JPY 2,337,764,847 0.2765 646,391,980RMB 34,073,259 4.3817/4.3634 149,298,800IDR 13,815,472,503 0.0020 27,630,945PHP 37,532,307 0.5937 22,282,931

(Continued)

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December 31, 2019Foreign currency Spot rate NTD amount

Financial assetsMonetary items

USD $ 66,425,407 30.1060 1,999,803,306JPY 2,407,076,587 0.2770 666,760,265RMB 45,189,665 4.3233/4.3219 195,311,244AUD 4,476,167 21.1043 94,466,380HKD 12,986,383 3.8659 50,204,064

Non-monetary itemsUSD 2,463,028 30.1060 74,151,899HKD 2,253,322 3.8659 8,711,118RMB 1,489,710 4.3233/4.3219 6,437,650JPY 18,845,872 0.2770 5,220,307EUR 127,463 33.7308 4,299,441

Investments underequity methodTHB 17,730,285 1.0091 17,891,631RMB 304,890 4.3233/4.3219 1,317,707JPY 873,379 0.2770 241,926

Financial liabilities

Monetary itemsUSD $ 37,551,198 30.1060 1,130,516,402JPY 2,333,413,900 0.2770 646,355,650RMB 33,854,776 4.3233/4.3219 146,316,956AUD 1,836,899 21.1043 38,766,463IDR 13,242,634,275 0.0022 29,133,795

Note: Foreign currency amount of overseas subsidiaries is disclosed by theirfunctional currency.

(Continued)

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4) Asset and Liability Management Mechanism

a) Description and origin of ALM mismatch risk

ALM mismatch risk refers to the risk that the earnings or capital that is adverselyaffected by different sensitivity of assets and liabilities to interest rate change, suchas mismatches of reset timing and amount of asset and liability, varying magnitudeof changes in short-term and long-term interest rates, and various interest rateindexes to which asset and liability are linked, or embedded options.

b) Management procedures of ALM mismatch risk

Based on the Company’ s Financial Risk Management Policy, the Company andsubsidiaries set robust management procedures and clearly define authorities andresponsibilities, so that the Company and subsidiaries keep their finances andoperations sound.

The appropriate and consistent measurement methodologies are adopted inaccordance with the business characteristics and risk source. The measurementresults are embedded to management procedures and become the reference whenmonitoring and reporting risk status.

The Company and subsidiaries can adjust the structures of assets and liabilities bymeans of derivatives. Prior to executing an external hedge, the hedge plans withspecified hedged position, profit and loss analysis and detailed scheme are preparedand authorized. After executing hedge deals, the hedge effectiveness areperiodically reviewed.

c) Measurement of ALM mismatch risk

The measurement of ALM mismatch risk includes:

i) Re-pricing Gap Report: This report measures the re-pricing gap between assetand liability by time buckets in order to understand interest rate mismatch.

ii) Interest rate sensitivity: This measures the impact of 1 basis point change ininterest rate on net interest income (NII) and economic value of equity(EVE).

iii) Duration: This calculates the weighted-average term to maturity of rate-sensitive assets and liabilities.

iv) Stress Test: This evaluates the impact of a significant change in interest rateon economic value of equity.

The Company and subsidiaries should adopt appropriate measurements and applyproper management procedures by taking their respective characteristics/complexity of assets and liabilities into account.

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d) Disclosure items required by the “ Regulations Governing The Preparation ofFinancial Reports by Financial Holding Company”

i) The Company’ s subsidiary CTBC Bank Co., Ltd.’ s sensitivity analysis ofinterest rate for assets and liabilities (New Taiwan Dollars)

December 31, 2020


Items 1~90 days(inclusive)

91~180 days(inclusive)

181 days~1 year(inclusive) Over 1 year Total

Interest rate sensitiveassets

$ 1,925,734,151 202,652,638 57,026,384 181,074,708 2,366,487,881

Interest rate sensitiveliabilities

596,283,538 1,363,816,242 145,572,675 65,277,558 2,170,950,013

Interest rate sensitivitygap

1,329,450,613 (1,161,163,604) (88,546,291) 115,797,150 195,537,868

Net worth 312,299,844Ratio of interest rate sensitive assets to liabilities (%) 109.01Ratio of interest rate sensitivity gap to net worth (%) 62.61

December 31, 2019






$ 1,733,402,908 187,295,287 61,536,648 151,792,800 2,134,027,643


602,775,063 1,135,164,018 121,760,897 62,732,584 1,922,432,562


1,130,627,845 (947,868,731) (60,224,249) 89,060,216 211,595,081

Net worth 309,248,164Ratio of interest rate sensitive assets to liabilities (%) 111.01Ratio of interest rate sensitivity gap to net worth (%) 68.42

Note 1: Listed amount of the Company’s subsidiary CTBC Bank Co.,Ltd. is denominated in NTD, excluding contingent assets andliabilities.

Note 2: Interest-rate-sensitive assets and liabilities are the interest-earning assets or interest-bearing liabilities whose revenue orcosts are affected by interest rate change.

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(denominated in NTD).

(Continued)

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ii) The Company’s subsidiary CTBC Bank Co., Ltd’s sensitivity analysis of theinterest rate for assets and liabilities (U.S. Dollars)

December 31, 2020

Unit: In Thousands of U.S. Dollars, %





$ 13,135,202 624,932 203,716 7,991,356 21,955,206


7,871,899 17,941,452 2,612,849 492,431 28,918,631


5,263,303 (17,316,520) (2,409,133) 7,498,925 (6,963,425)

Net worth 10,954,814Ratio of interest rate sensitive assets to liabilities (%) 75.92Ratio of interest rate sensitivity gap to net worth (%) (63.56)

December 31, 2019

Unit: In Thousands of U.S. Dollars, %





$ 12,115,139 570,006 545,810 6,472,654 19,703,609


9,113,994 13,178,655 1,400,856 1,476,414 25,169,919


3,001,145 (12,608,649) (855,046) 4,996,240 (5,466,310)

Net worth 10,271,978

Ratio of interest rate sensitive assets to liabilities (%) 78.28

Ratio of interest rate sensitivity gap to net worth (%) (53.22)

Note 1: Listed amount of the Company’s subsidiary CTBC Bank Co.,Ltd. is denominated in U.S dollars, excluding contingent assetsand liabilities.

Note 2: Interest-rate-sensitive assets and liabilities are the interest-earning assets or interest-bearing liabilities whose revenue orcosts 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(denominated in U.S. dollars).

(Continued)

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(iv) Transferred financial assets that are not fully derecognized

The transactions, relating to transferred financial assets not qualifying for full derecognition,of the Company and subsidiaries conduct during daily operation mostly involve securitieslending in accordance to repurchase agreements. Since the right to receive contractual cashflow has been transferred to others and the Company and subsidiaries’obligation to repurchasethe transferred assets for a fixed price at a future date is recognized under liability, the saidtransferred assets are not fully derecognized.

December 31, 2020

Types of financial assets

Carryingamount of

transferredfinancial assets

Carryingamount ofassociatedfinancialliabilities

Fair value oftransferred

financial assets

Fair value ofassociatedfinancialliabilities Net fair value

Financial assets measured at fair valuethrough profit or lossRepurchase agreements $ 12,600,281 12,747,831 12,600,281 12,747,831 (147,550)

Financial assets measured at fair valuethrough other comprehensive incomeRepurchase agreements 22,139,962 22,330,998 22,139,962 22,330,998 (191,036)Securities lending agreements 1,329,831 1,277,114 1,329,831 1,277,114 52,717

Financial assets at amortized costRepurchase agreements 64,913,193 59,382,335 68,727,584 59,382,335 9,345,249

December 31, 2019

Types of financial assets

Carryingamount of

transferredfinancial assets

Carryingamount ofassociatedfinancialliabilities

Fair value oftransferred

financial assets

Fair value ofassociatedfinancialliabilities Net fair value

Financial assets measured at fair valuethrough profit or lossRepurchase agreements $ 18,702,160 18,395,989 18,702,160 18,395,989 306,171

Financial assets measured at fair valuethrough other comprehensive incomeRepurchase agreements 62,803,370 60,263,956 62,803,370 60,263,956 2,539,414Securities lending agreements 11,917,942 11,794,013 11,917,942 11,794,013 123,929

Financial assets at amortized costRepurchase agreements 25,521,147 26,606,147 26,943,522 26,606,147 337,375

(Continued)

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(v) Offsetting financial assets and financial liabilities

The Company and subsidiaries have an exercisable master netting arrangement or similaragreement in place with counterparties. When both parties reach a consensus regarding netsettlement, the aforesaid exercisable master netting arrangement or similar agreement can benet settled by offsetting financial assets and financial liabilities. If not, the transaction can besettled at total amount. In the event of default involving one of the parties, the other party canhave the transaction net settled.

The following tables present the aforementioned offsetting financial assets and financialliabilities.

December 31, 2020Financial assets that are offset, have an exercisable master netting arrangement or similar agreement

Gross amountGross amount

of financialNet amount offinancial assets

Amount not off set in the balancesheet (d)

of recognizedfinancial assets

(a)

liabilities offsetin the balance

sheet (b)

presented inthe balance

sheet (c)=(a)-(b)

Financialinstruments

(Note)Cash collateral

receivedNet amount(e)=(c)-(d)

Derivative financial assets $ 72,778,311 - 72,778,311 44,112,468 9,270,490 19,395,353

December 31, 2020Financial liabilities that are offset, have an exercisable master netting arrangement or similar agreement


of financial

Net amount offinancialliabilities


of recognizedfinancial

liabilities (a)

assets offset inthe balance

sheet (b)


sheet (c)=(a)-(b)



pledgedNet amount(e)=(c)-(d)

Derivative financial liabilities $ 65,430,406 - 65,430,406 43,809,814 7,140,711 14,479,881Securities lending agreements 1,277,114 - 1,277,114 1,277,114 - -Total $ 66,707,520 - 66,707,520 45,086,928 7,140,711 14,479,881

December 31, 2019Financial assets that are offset, have an exercisable master netting arrangement or similar agreement


of financialNet amount offinancial assets


of recognizedfinancial assets

(a)

liabilities offsetin the balance

sheet (b)


sheet (c)=(a)-(b)



receivedNet amount(e)=(c)-(d)

Derivative financial assets $ 67,171,808 - 67,171,808 32,251,135 11,373,087 23,547,586

December 31, 2019Financial liabilities that are offset, have an exercisable master netting arrangement or similar agreement


of financial

Net amount offinancialliabilities


of recognizedfinancial

liabilities (a)

assets offset inthe balance

sheet (b)


sheet (c)=(a)-(b)



pledgedNet amount(e)=(c)-(d)

Derivative financial liabilities $ 73,648,557 - 73,648,557 32,173,805 8,783,572 32,691,180

Securities lending agreements 11,794,013 - 11,794,013 11,794,013 - -

Total $ 85,442,570 - 85,442,570 43,967,818 8,783,572 32,691,180

Note: Master netting arrangements and non-cash financial collaterals are included.

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(vi) Capital management

1) Capital management goal and procedure

The goal of the Company’s capital management is to meet the regulatory requirement fordifferent businesses on capital adequacy of the Company and subsidiaries and theorganization’ s target of maximizing returns for shareholders by following capitalmanagement procedures and raising return on capital.

The Company’ s group capital planning accounts for short-term and long-term capitalrequirements. The Company makes yearly capital planning based on operation planning,current and forecast future capital requirement, and promised returns for shareholders.The Company also makes back-up plan to meet capital requirement not included in theplanning. The Company also regularly conducts stress tests and scenario simulationanalyses to calculate different capital ratios, fully taking into account of externalconditions and other factors, including potential risks, changes in financial markets, andother events impacting risk taking capabilities, to make sure that the Company canmaintain adequate capital in case of detrimental events and huge market changes.

Planning for yearly earnings distribution follows the principles and ratios mandated byarticles of incorporation and dividend policy, and are put into effect after being approvedby the board of directors and shareholders’ meeting. The Company’ s group capitaladequacy, potential investment needs, and dividend amount of previous years are takeninto account. The needs to maintain proper financial ratios and satisfy capitalrequirement of the parent company are also preconditions of the distribution.

2) Definition and regulation

The regulator of the Company is FSC of the Republic of China. FSC issued “RegulationsGoverning the Consolidated Capital Adequacy of Financial Holding Companies” andmonitors and manages the Company’ s group capital status on a consolidated basis.Subsidiaries in different businesses should also follow capital adequacy rules announcedby regulators of their businesses.

The Company’ s group capital adequacy ratio should not be lower than 100%. TheCompany capital adequacy ratio refers to the Company’s net eligible capital divided bythe Company’ s statutory capital requirement. The Company’ ‵ s net eligible capital andgroup’s statutory capital requirement refer to the combined total of the eligible capital ofa financial holding company and those of its subsidiaries calculated based on thefinancial holding company’ s shareholding in the subsidiary less the amounts of legaldeductions.

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3) Eligible capital

The Company’s eligible capital refers to the sum of the common stocks, preferred stocks,subordinated debts, capital collected in advance, capital surplus, retained earnings, andother equity less the sum of goodwill, other intangible assets, deferred assets, andtreasury stocks. Statutory capital requirement refers to total assets less cash (includingcash equivalents), tax receivable (including tax refund receivable), prepaid taxes, thebook value of the use of short-term funds set forth in Paragraph 1, Article 39 of FinancialHolding Company Act, goodwill, other intangible assets, and deferred assets.

To maintain the quality of financial holding companies’ capital, the regulator also hasrules in place regarding the terms and upper limit of hybrid capital instrument, preferredstocks, and subordinated debts that can be included in eligible capital.

4) Capital adequacy ratio of CTBC Group


December 31, 2020Items

CompanyPercentage of

OwnershipGroup’s Net

Eligible CapitalGroup’s Statutory

Capital RequirementCTBC Financial Holding Co., Ltd. %100.00 $ 425,688,355 467,150,864

CTBC Bank Co., Ltd. %100.00 268,440,034 188,810,475

CTBC Securities Co., Ltd. %100.00 7,533,412 3,142,326

Taiwan Life Insurance Co., Ltd. %100.00 123,455,832 79,802,072

CTBC Venture Capital Co., Ltd. %100.00 3,855,578 2,969,891

CTBC Security Co., Ltd. %100.00 61,697 56,580

CTBC Asset Management Co., Ltd. %100.00 5,558,672 3,972,332

Taiwan Lottery Co., Ltd. %100.00 1,372,870 941,298

CTBC Investments Co., Ltd. %100.00 672,460 463,449

Deduction (485,171,355) (466,203,628)

Subtotal 351,467,555 281,105,659

Capital adequacy ratio of CTBC Group %125.03

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December 31, 2019Items

CompanyPercentage of

OwnershipGroup’s Net

Eligible CapitalGroup’s Statutory

Capital RequirementCTBC Financial Holding Co., Ltd. %100.00 $ 392,076,990 440,817,140

CTBC Bank Co., Ltd. %100.00 265,568,639 196,719,672

CTBC Securities Co., Ltd. %100.00 6,653,738 2,735,193

Taiwan Life Insurance Co., Ltd. %100.00 113,527,203 76,116,998

CTBC Venture Capital Co., Ltd. %100.00 3,775,384 2,380,581

CTBC Security Co., Ltd. %100.00 58,495 54,574

CTBC Asset Management Co., Ltd. %100.00 5,252,910 3,784,725

Taiwan Lottery Co., Ltd. %100.00 1,229,374 792,465

CTBC Investments Co., Ltd. %100.00 534,401 346,721

Deduction (460,165,774) (439,854,276)

Subtotal 328,511,360 283,893,793

Capital adequacy ratio of CTBC Group %115.72

5) CTBC Financial Holding Co., Ltd.’s eligible capital


ItemsDecember 31,

2020December 31,

2019Common stock 194,969,896 194,969,896Capital surplus 58,754,923 58,688,782Legal reserve 32,003,213 27,793,018Special reserve 16,188,405 50,412,813Accumulated profit or loss 97,217,071 46,503,092Equity adjustments 1,097,162 (2,228,812)Preferred stock meet under Net additional Tier 1Capital of the Bank

4,999,900 4,999,900

Subordinated debentures 20,480,000 10,960,000Less: Goodwill and other intangible assets (4,544) (6,383)Less: Deferred assets (17,671) (15,316)Total eligible capital 425,688,355 392,076,990

(Continued)

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(av) Structured entities that are not included in consolidated financial reports

(i) The table below presents the types of structured entities that the Company and subsidiaries donot include in consolidated financial reports but in which they hold an interest.

The types of structured entities Nature and purposeInterests held by the Company and

subsidiariesAsset-backed Securities Securitizing financial or non-financial assets

and issuing them to raise funds.Investing or lending in securities issued by

these entities.Private funds Raising funds to create investment

opportunities in a variety of assets. Investing in funds and equity of limited

partnership issued by these entities.Special purpose entities Setting up for participating in the program

of “Kaohsiung City HoFa industrial parkdevelopment, sell (bid) andmanagement”, and for conducting theproject of “Taichung IntercontinentalBaseball Stadium extension, renovationand operation”

Investing in stocks issued by these entities.

(ii) The scales of structured entities not included in consolidated financial reports were as follows.

December 31,2020

December 31,2019

Asset-backed securities $ 184,881,749,032 174,202,096,461Private funds 11,501,642,918 10,155,092,991Special purpose entities 7,940,731 6,587,514

(iii) The carrying amounts of interests held by the Company and subsidiaries in these structuredentities were as follows.

December 31,2020

December 31,2019

Assets held by the Company and subsidiariesFinancial assets measured at fair value through profit or

loss$ 46,522,807 34,748,849


63,943,022 50,807,445

Financial assets at amortized cost 63,167,938 72,749,468Investments under equity method 6,278,127 5,858,958Total assets held by the Company and subsidiaries $ 179,911,894 164,164,720

The maximum amount of risk exposures the Company and subsidiaries endure to a lossincurred from special purpose entities that are not included in consolidated financial reports isthe carrying amount of interests held by the Company and subsidiaries.

(iv) As of December 31, 2020 and 2019, the Company and subsidiaries have not provided anyfinancial support to their special purpose entities that are not included in consolidated financialreports.

(Continued)

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(aw) Nature and scope of insurance contract risk

(i) Life insurance business

1) Evaluation and management of the scope of insurance risks from a corporate-wide pointof view

To properly manage the risks in different stages such as product design, pricing,issuance, policy approval, and payment for damage, the subsidiary CTBC Life InsuranceCo., Ltd. has management mechanism as follows:

a) Management of risks associated with product design and pricing

Management of risks associated with product design and pricing results frominappropriateness, inconsistency, or unexpected changes relating to product design,insurance covenants, and pricing sources. The subsidiary Taiwan Life InsuranceCo., Ltd. devises an “insurance product design standard process” before selling aproduct to make sure of the risk control before and after selling a product, to ensurecompliance with regulations, and to strengthen internal control. The subsidiaryTaiwan Life Insurance Co., Ltd. also adopts profit tests and sensitivity analyses tomeasure the risks for different product types and natures, and, at the same time,takes responsibility for auditing an insurance product. After selling a product, therelevant department will propose an inspection after selling report in the biannualinsurance product management conference.

b) Management of risks associated with insurance approval

Management of risks associated with insurance approval refers to unexpectedlosses resulting from product promotion and approval, and related expenses. Inorder to control those risks, the subsidiary Taiwan Life Insurance Co., Ltd. puts inplace standard approval procedures, guidelines, and manuals.

c) Management of risks associated with reinsurance

Management of risks associated with reinsurance results from the failure to arrangeappropriate reinsurance or the incapacity of the reinsurer to fulfill its obligationwhich makes it impossible for the premium, payment for damage, and otherexpenses to be recovered. The subsidiary Taiwan Life Insurance Co., Ltd. has putin place a management plan for reinsurance risks which covers the management ofretained risks, reinsured risks, and risks from selling reinsurance to other insurancecompanies. The subsidiary Taiwan Life Insurance Co., Ltd. will then evaluate itsretention risk limits based on classification of risks and its ability to cover thoserisks. Also, it devises a set of procedures and criteria on the choice of reinsurers,and, after purchasing the reinsurance, monitors the credit ratings of reinsurers toavoid a default on the part of reinsurers.

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d) Management of risks associated with catastrophe

Management of risks associated with catastrophe is associated with risk events thatare a magnitude significant enough to cause multiple losses for hazard units of asingle or several sorts of insurance, and thus can affect the credit ratings andsolvency of an insurance company. The subsidiary Taiwan Life Insurance Co., Ltd.measures and manages the catastrophe risks by means of catastrophic loss recordsto estimate possible amount of losses in cases of recurrence.

e) Management of risks associated with payment for damage

Management of risks associated with payment for damage results from the failureto properly process damage claims by the insured. The subsidiary Taiwan LifeInsurance Co., Ltd. puts in place a standard procedure to reduce the risks.

f) Management of risks associated with reserves

Management of risks associated with reserves results from sales’ underestimate ofliabilities, which renders the reserve provision insufficient for future obligationrisks. The subsidiary Taiwan Life Insurance Co., Ltd. puts in place a standardprocedure for reserve provision and conducts regular sufficiency analysis to reducethe risks.

2) Limits on and transfer of risk exposures, and prevention of inappropriate riskconcentration

The Company’s subsidiary Taiwan Life Insurance Co., Ltd. puts in place a managementplan for reinsurance risks which covers the management of retained risks, reinsured risks,risks from selling reinsurance to other insurance companies, and reinsurance risks withinthe Company and subsidiaries. The Company’ s subsidiary Taiwan Life Insurance Co.,Ltd. will then evaluate its retention risk limits based on classification of risks and itsability to cover those risks. Also, it devises a set of procedures and criteria on the choiceof reinsurers, and, after purchasing the reinsurance, periodically monitors the creditratings of reinsurers to avoid a default on the part of reinsurers and maintain the safety ofthe operation.

3) Asset and liability management

a) The Company’ s subsidiary Taiwan Life Insurance Co., Ltd. has its ownasset/liability management committee, which is responsible for reviewing andapproving the overall investment and liability management decisions.

b) In compliance with asset and liability matching regulations, the match of asset andliability is routinely reviewed with its risk limit monitored to ensure alignment withthe Company’ s subsidiary Taiwan Life Insurance Co., Ltd.’ s objectives. If risklevels exceed the tolerance or in special circumstances, prompt mitigation plans areescalated to senior levels, followed by communications with the people in charge topropose improvement plans.

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4) Administration and control policies on additional debts or equity commitments requiredto undertake when acquiring or providing assets under certain circumstances.

To comply with regulations and strengthen capital base, the Company’ s subsidiaryTaiwan Life Insurance Co., Ltd. routinely assesses its capital adequacy. If it falls belowminimum capital requirements, instant alerts with required timeframe and projectedamount will be reported to senior levels, followed by a capital strengthening proposal tofulfill regulatory requirements.

5) Information on insurance risk

a) Sensitivity of insurance risk-insurance contracts and financial instruments with adiscretionary feature

For the year ended December 31, 2020Change

in assumptionChange in income

before taxChange in

stockholders’ equityMortality/Morbidity Increase %5 Decrease 384,112 Decrease 307,290Rate of return Decrease %0.1 Decrease 1,818,737 Decrease 1,454,990Expense (fixed expense) Increase %5 Decrease 937,250 Decrease 749,800Decrement and lapse rate Increase %5 Increase 73,591 Increase 58,873

For the year ended December 31, 2019Change

in assumptionChange in income

before taxChange in

stockholders’ equityMortality/Morbidity Increase %5 Decrease 319,791 Decrease 255,832Rate of return Decrease %0.1 Decrease 1,691,289 Decrease 1,353,032Expense (fixed expense) Increase %5 Decrease 849,917 Decrease 679,933Decrement and lapse rate Increase %5 Increase 77,177 Increase 61,742

i) The above profit or loss changes are the influence of assumptions on theCompany’s subsidiary Taiwan Life Insurance Co., Ltd.’s pre-tax income forthe years ended December 31, 2020 and 2019. The influence on stockholders’equity assumes that income tax is calculated at 20% of pre-tax income.

ii) The sensitivity test does not take how market changes affect operations intoaccount.

iii) The underlying assumption is that the changes in each factor are notcorrelated.

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b) Concentration of insurance risks

The Company’ s subsidiary Taiwan Life Insurance Co., Ltd. only operates inTaiwan and thus incurs geographical risk concentration. The subsidiary TaiwanLife Insurance Co., Ltd. reduces risk concentration via reinsurance contracts. Toreduce the degree of risk concentration, the subsidiary Taiwan Life Insurance Co.,Ltd. regularly reviews its profit and loss on claims, monitors risks, and evaluatesthe need to make adjustments to catastrophe insurance and the amount of self-retention of reinsurance.

According to the “Regulations Governing Insurance Enterprises for Setting AsideVarious Reserves” starting from January 1, 2011, the Company’ s subsidiaryTaiwan Life Insurance Co., Ltd. should set aside a special reserve after deductingincome tax under stockholders’ equity each year for significant incidents andcatastrophe. The special reserve for significant incidents is the provision for hugeindemnity caused by future significant accidents. The special reserve forcatastrophe is the provision for abnormal changes in loss ratios for each line ofinsurance and claims. After deducting income tax pursuant to IAS 12, the specialreserves recognized under liabilities before December 31, 2012 shall be recognizedunder stockholders’ equity, starting from January 1, 2013, unless otherwisespecified by the competent authority for monitoring purposes.

c) Claim development trend

i) Claims development from direct business

As of December 31, 2020 and 2019, the accumulated compensation amountswhich were reconciled to the balance sheet over the past years were asfollows:

December 31, 2020Development year

Accidentyear 1 2 3 4 5 6 7 8

Claimsreserve

2013 1,654,614 1,745,643 1,766,078 1,768,485 1,770,801 1,781,532 1,782,678 1,784,115 -2014 1,734,136 1,848,736 1,899,471 1,899,345 1,909,745 1,915,888 1,925,154 1,926,738 1,5842015 1,863,300 2,007,352 2,019,715 2,024,455 2,029,935 2,035,519 2,041,378 2,043,206 7,6872016 1,888,033 2,058,040 2,074,841 2,092,978 2,121,249 2,129,525 2,136,038 2,138,023 16,7742017 2,210,427 2,402,323 2,464,964 2,481,326 2,496,308 2,505,555 2,513,227 2,515,643 34,3172018 2,320,786 2,928,805 2,999,066 3,013,302 3,030,106 3,040,302 3,049,104 3,052,050 52,9842019 3,152,097 3,900,562 3,962,722 3,981,301 4,003,491 4,017,509 4,029,312 4,033,391 132,8292020 3,811,854 4,332,829 4,399,093 4,419,195 4,443,578 4,458,120 4,471,436 4,476,283 671,429

Not reported and not paid claim reserve 917,604Add: Reported but not paid claims 1,043,284

Provision for not paid claims per other statutory requirement 426Claims reserve 1,961,314

(Continued)

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Accidentyear 1 2 3 4 5 6 7 8

Claimsreserve

2012 1,580,301 1,674,587 1,726,318 1,734,979 1,742,522 1,745,556 1,746,626 1,747,902 -

2013 1,654,614 1,745,643 1,766,078 1,768,485 1,770,801 1,781,532 1,782,669 1,784,052 1,383

2014 1,734,136 1,848,736 1,889,471 1,899,345 1,909,745 1,915,888 1,917,129 1,918,658 2,770

2015 1,857,400 1,998,452 2,009,815 2,014,455 2,019,769 2,025,991 2,027,335 2,028,999 9,230

2016 1,881,892 2,041,858 2,058,575 2,076,681 2,083,877 2,090,955 2,092,400 2,094,215 17,534

2017 2,203,416 2,389,001 2,451,620 2,462,867 2,471,402 2,479,224 2,480,956 2,483,147 31,527

2018 2,315,647 2,923,150 2,967,510 2,979,973 2,989,563 2,997,951 2,999,995 3,002,592 79,442

2019 3,119,467 3,439,854 3,489,153 3,502,479 3,513,262 3,523,153 3,525,655 3,528,852 416,385

Not reported and not paid claim reserve 558,271

Add: Reported but not paid claims 777,786

Provision for not paid claims per other statutory requirement 299

Claims reserve 1,336,356

The above tables demonstrate the development trend of claims. The verticalaxis represents the year in which the claim event occurred, and the horizontalaxis represents the development years. Each horizontal axis figure representsthe accumulated compensation amount at the end of each year. Thecompensation amount refers to the claims whether they are finalized or not.The tables explain how Taiwan Life Insurance Co., Ltd. estimates thecompensation amount for each year over time. The scenarios and trendswhich affect the provision of claims reserve may change in the future;therefore, the estimated future compensation amount is not able to bedetermined by the claim development trend.

ii) Claims development from retained business

The Company’s subsidiary Taiwan Life Insurance Co., Ltd. for the operatingbenchmark is balanced and conservative, and no longer gets on thereinsurance cede business, since July 2016. For the relevant developmenttrend information for non-reported insurance claims reserve loss please lookat the disclosure in claims development from direct business.

The Company’s subsidiary Taiwan Life Insurance Co., Ltd. provides a claimreserve based on the expected claims payment and relevant handling fee forRBNA and IBNR claims. Such provision involves vast uncertainty, estimatesand judgments; hence, it is highly complicated. Any change in estimate orjudgment is regarded as a change in accounting estimate; and the amount ofchange is recognized as current gains or losses. Some claimants may delaynotifying Taiwan Life Insurance Co., Ltd. In addition, when estimating thepotential IBNR claims, past loss experience and subjective judgment areinvolved; therefore, it is not certain that the estimated claims reserve on theBalance sheet date will be equal to the final compensation amount. Theestimate of claims reserve is based on the information currently available;however, the final result may deviate from the original estimate due tosubsequent developments.

(Continued)

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1) Objectives, policies, procedures, and methods for managing risks arising from insurancecontracts

In order to achieve the risk management objective to ensure solvency, enhance long-termcompetitiveness, and increase the value of equity, the sub-subsidiary CTBC InsuranceCo., Ltd. has established the “Risk Management Policy” as the prime guiding principle toproperly identify, measure, response, and control risks. Insurance risk is one of the majorrisks, and it originates from the risk transferred by the insured after the sub-subsidiaryCTBC Insurance Co., Ltd. receives premiums and thereby results in contractualobligations of insurance claim payments for damage caused by unforeseeable events. Thesub-subsidiary CTBC Insurance Co., Ltd. established effective management mechanismfor each insurance risk as follows:

a) Risk from product design and pricing

These risks arise from improper product design, inconsistency between contractterms and the information used in pricing, or unexpected changes. The sub-subsidiary CTBC Insurance Co., Ltd. has established the loss allocation model foreach homogeneous insurance risk to quantitatively measure the expected valueinsurance risk loss and possible losses under different confidence levels. In themeanwhile, the sub-subsidiary CTBC Insurance Co., Ltd. evaluates risks underqualitative basis and describes the possibility and the degree of influence. Thepossible controlling procedures according to each commodity characteristics are asfollows:

i) Risk-transfer strategies: Take approaches to transfer all or part of risksdepending on certain circumstances.

ii) Actuarial assumptions: The adopted actuarial assumptions for setting upexpense rates could add up proper safety coefficients in conformity withregulations depending on certain circumstances.

iii) After-sales experience tracking: Periodically analyzing each actuarialassumption after sales, applying profit testing or sensitivity analysis to testand adjust commodity and rate-setting.

b) Risk from insurance underwriting:

These risks arise from unexpected loss risk of business solicitation, insuranceunderwriting, and other operating processes. The sub-subsidiary CTBC InsuranceCo., Ltd. established proper management mechanism for risk from insuranceunderwriting as follows:

i) Establish internal underwriting systems and procedures for businesssolicitation, underwriting policy.

ii) Provide an insurance underwriting handbook to effectively maintain qualityand reduce potential risk from insurance underwriting.

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iii) Set indicators for insurance underwriting risk management and reportperiodically to management.

c) Risk from reinsurance:

These risks result from the failure to arrange appropriate reinsurance or theincapacity of the reinsurer to fulfill its obligation which makes it impossible for thepremium, payment for damage, and other expenses to be recovered. The sub-subsidiary CTBC Insurance Co., Ltd. established reinsurance risk managementmechanism in conformity with relative regulations, and after purchasing thereinsurance, monitors the credit ratings of reinsurers to avoid a default on the partof reinsurers.

d) Risk from catastrophes:

The sub-subsidiary CTBC Insurance Co., Ltd. identifies catastrophes that mightcause material loss based on the characteristics of the products, regularly reviewsthe relation between the effect of cumulative risks and limits of risks for eachinsurance product under different assumed catastrophes, and evaluates whether itscapital is sufficient to cover the capital requirement of catastrophe risk.

e) Risk of claim:

These risks result from the failure to properly process damage claims by theinsured. The sub-subsidiary CTBC Insurance Co., Ltd. has built a proper internalclaim-handling process including the qualifications, responsibilities, quota ofauthorizes and scopes of authority of claim adjuster.

f) Reserve-related risk:

These risks result from sales’ underestimate of liabilities, which renders the reserveprovision insufficient for future obligation risks. The sub-subsidiary CTBCInsurance Co., Ltd. puts in place a standard procedure for reserve provision andrisk controlling mechanism in accordance with different reserve-related riskincidences and the possible controlling procedures are as follows:

i) Risk-transfer strategies: Take approaches to transfer all or part of risksdepending on certain circumstances.

ii) Plans for increase in reserve: Increase reserve when it is overrun orinsufficient to cover the risk.

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2) Information on insurance risk

a) Sensitivity of insurance risk:

For the year ended December 31, 2020Effects to net income as the expectedloss rate increases (decreases) 5%

ItemInsurancePremium

Expectedloss rate

Beforereinsurance

Afterreinsurance

Fire insurance $ 476,453 %61.8 22,885 8,323

Marine insurance 37,213 %64.3 1,634 365

Miscellaneous casualty insurance 224,419 %70.1 12,489 5,721

Personal accident and healthinsurance

182,900 %68.3 10,089 7,280

Voluntary auto insurance 760,616 %68.8 43,058 42,960

Compulsory auto TPL insurance 298,864 Not applicable Not applicable Not applicable

For the year ended December 31, 2019Effects to net income as the expectedloss rate increases (decreases) 5%

ItemInsurancePremium

Expectedloss rate

Beforereinsurance

Afterreinsurance

Fire insurance $ 425,104 %61.4 21,351 8,143Marine insurance 44,269 %64.6 2,555 461Miscellaneous casualty insurance 249,798 %72.4 15,695 8,415Personal accident and health

insurance241,662 %68.1 12,605 8,214

Voluntary auto insurance 976,230 %69.5 50,875 50,805Compulsory auto TPL insurance 373,930 Not applicable Not applicable Not applicable

b) Description of insurance risk concentration

The sub-subsidiary CTBC Insurance Co., Ltd. establishes risk limits based on eachrisk unit and each insured event and transfers the over-limit risk by reinsurance toreduce the effect of insurance risk concentration.

i) Business concentration

For the year ended December 31, 2020Premium income Retained earned premiums

Item Amount % Amount %Fire insurance $ 476,453 %24.06 174,708 %12.42Marine insurance 37,213 %1.88 8,198 %0.58Miscellaneous casualty insurance 224,419 %11.33 89,891 %6.39Personal accident and health insurance 182,900 %9.23 146,160 %10.39Voluntary auto insurance 760,616 %38.41 758,699 %53.93Compulsory auto TPL insurance 298,864 %15.09 229,241 %16.29Total $ 1,980,465 %100.00 1,406,897 %100.00

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For the year ended December 31, 2019Premium income Retained earned premiums

Item Amount % Amount %Fire insurance $ 425,104 %18.39 151,665 %9.15Marine insurance 44,269 %1.92 9,173 %0.55Miscellaneous casualty insurance 249,798 %10.81 92,061 %5.56Personal accident and health insurance 241,662 %10.46 154,993 %9.35Voluntary auto insurance 976,230 %42.24 973,460 %58.75Compulsory auto TPL insurance 373,930 %16.18 275,770 %16.64Total $ 2,310,993 %100.00 1,657,122 %100.00

ii) Loss concentration

Self–claim as ofDecember 31, 2020

Self–claim as ofDecember 31, 2019

Item Amount % Amount %Fire insurance $ 15,000 %2.90 13,611 %2.22

Marine insurance 4,967 %0.96 4,435 %0.72

Miscellaneous casualty insurance 40,830 %7.90 53,375 %8.72

Personal accident and health insurance 33,119 %6.41 35,625 %5.81

Voluntary auto insurance 268,970 %52.03 336,337 %54.93

Compulsory auto TPL insurance 154,061 %29.80 168,954 %27.60

Total $ 516,947 %100.00 612,337 %100.00

iii) Trends in claim development

1. Claim development from direct business and arrange reinsurancebusiness

The sub-subsidiary CTBC Insurance Co., Ltd.’ s claim developmentfrom direct business and arrange reinsurance business, the cumulativeclaims over the past years were as follows:


Accidentyear 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Cumulativeclaims paid

Reportedbut unpaid Unpaid

Claimreserve

≦2011 11,457,980 3,964,866 3,999,114 3,989,607 3,999,138 3,998,050 4,006,038 4,000,434 4,001,465 3,999,362 3,997,226 2,136

2012 885,653 1,088,513 1,139,401 1,141,031 1,140,165 1,139,363 1,135,624 1,138,593 1,138,175 1,136,879 1,296

2013 815,688 994,571 1,043,050 1,050,437 1,054,039 1,048,848 1,051,923 1,052,787 1,047,023 5,764

2014 1,031,688 1,226,439 1,265,429 1,279,183 1,275,842 1,276,851 1,277,002 1,263,445 13,557

2015 1,081,950 1,198,254 1,205,616 1,202,002 1,211,814 1,212,436 1,211,068 1,368

2016 1,103,788 1,271,401 1,290,246 1,304,900 1,312,708 1,307,956 4,752

2017 993,289 1,197,458 1,274,745 1,292,331 1,267,889 24,442

2018 1,075,384 1,270,933 1,307,263 1,295,197 12,066

2019 1,006,073 1,215,164 1,159,095 56,069

2020 804,008 537,222 266,786

Total 388,236 328,025 716,261

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Accidentyear 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019



Claimreserve

≦2010 7,735,749 2,862,422 2,885,993 2,884,507 2,869,331 2,869,133 2,868,879 2,873,676 2,870,998 2,871,530 2,869,611 1,919

2011 859,809 1,078,873 1,114,607 1,120,276 1,130,005 1,129,171 1,132,362 1,129,436 1,129,935 1,123,876 6,059

2012 885,653 1,088,513 1,139,401 1,141,031 1,140,165 1,139,363 1,135,624 1,138,593 1,136,953 1,640

2013 815,688 994,571 1,043,050 1,050,437 1,054,039 1,048,848 1,051,923 1,045,859 6,064

2014 1,031,688 1,226,439 1,265,429 1,279,183 1,275,842 1,276,851 1,261,903 14,948

2015 1,081,950 1,198,254 1,205,616 1,202,002 1,211,814 1,209,506 2,308

2016 1,103,788 1,271,401 1,290,246 1,304,900 1,296,141 8,759

2017 993,289 1,197,458 1,274,745 1,239,435 35,310

2018 1,075,384 1,270,933 1,202,073 68,860

2019 1,006,073 668,067 338,006

Total 483,873 375,576 859,449

2. Claims development from retained business

The sub-subsidiary CTBC Insurance Co., Ltd.'s claims developmentfrom retained business, the cumulative claims over the past years wereas follows:


Accidentyear 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020



Claimreserve

≦2011 7,194,699 2,354,538 2,361,957 2,362,717 2,367,103 2,366,996 2,368,244 2,365,004 2,366,002 2,363,751 2,362,441 1,310

2012 322,156 430,261 463,422 461,614 460,802 462,417 458,929 460,730 460,551 460,019 532

2013 309,566 389,766 413,261 415,501 420,720 417,022 418,421 420,871 417,448 3,423

2014 339,270 405,799 428,001 443,771 440,224 443,032 441,481 439,470 2,011

2015 427,366 486,185 493,026 489,687 498,014 498,221 497,538 683

2016 664,691 755,956 785,122 797,747 805,915 803,352 2,563

2017 823,289 950,364 997,162 1,015,586 1,004,670 10,916

2018 868,689 990,605 1,011,240 1,004,843 6,397

2019 845,392 975,781 930,366 45,415

2020 670,657 445,547 225,110

Total 298,360 218,580 516,940

Cumulative impairment loss 7 - 7

$ 298,367 218,580 516,947

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Accidentyear 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019



Claimreserve

≦2010 4,976,831 1,898,380 1,920,483 1,909,416 1,906,071 1,906,580 1,906,819 1,905,371 1,905,003 1,905,476 1,904,139 1,337

2011 319,488 434,055 452,541 456,646 460,523 460,177 462,873 460,001 460,526 458,876 1,650

2012 322,156 430,261 463,422 461,614 460,802 462,417 458,929 460,730 459,916 814

2013 309,566 389,766 413,261 415,501 420,720 417,022 418,421 416,284 2,137

2014 339,270 405,799 428,001 443,771 440,224 443,032 438,303 4,729

2015 427,366 486,185 493,026 489,687 498,014 497,380 634

2016 664,691 755,956 785,122 797,747 792,673 5,074

2017 823,289 950,364 997,162 981,113 16,049

2018 868,689 990,605 939,145 51,460

2019 845,392 557,428 287,964

Total 371,848 240,400 612,248

Cumulative impairment loss 89 - 89

$ 371,937 240,400 612,337

The sub-subsidiary CTBC Insurance Co., Ltd. recognizes the claimreserve based on expected future claims, including both reported andunreported claims. Because the recognition of this kind of reserveinvolves many uncertainties, estimations, and judgments, it containshigh complexity. Any changes in estimations and judgments areregarded as changes in accounting estimates, and the effect of thechanges will be recognized in the net income of the current period.Some claims might have a delay in reporting to the sub-subsidiaryCTBC Insurance Co., Ltd. In addition, estimating the expected possibleclaims of unreported claims might involve previous claim experiencesand subjective judgments. Therefore, the claims reserve recognized atthe balance sheet date may not be the same as the final claim payments.Claim reserves recognized are estimated based on the currentlyavailable information. However, the final result may depart from theinitial estimation due to the subsequent development of claims.

(7) Related-party transactions:

(a) Names of related parties and relationship with the Company

Name of related party Relationship with the CompanyCTBC Security Co., Ltd. An investee company carried under the equity

method.King Dragon Life Insurance Co., Ltd. 〃

HoFa Land Development Co., Ltd. 〃

Wu Tzu Development Co., Ltd. 〃

Star Shining Energy Co., Ltd. 〃

Top Taiwan IX Venture Capital Co., Ltd. 〃

Giga Green Energy Co., Ltd. 〃

Taiwan Wind Investment Co., Ltd. 〃

(Continued)

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Name of related party Relationship with the CompanySolarbright Energy Co., Ltd. An investee company carried under the equity

method.Star Power Energy Co., Ltd. 〃

Grand Bills Finance Corporation 〃

LH Financial Group Public Company Limited 〃

Xiamen Jinmeixin Consumer Finance Co., Ltd. 〃

Li-Wei Energy Co., Ltd. 〃

LH Bank Public Company Limited Investee company carried under equity method byLH Financial Group Public Company Limited.

CTBC Investments Trust Funds A securities investment trust fund managed by theCompany’s subsidiary CTBC Investments Co.,Ltd.

Taiwan Institute of Economic Research The Company’s subsidiary contributed over 1/3 ofits total funds.

CTBC Charity Foundation 〃

CTBC Culture Foundation 〃

CTBC Anti-Drug Education Foundation 〃

CTBC Business School 〃

CTBC International Academy Foundation 〃

Taipei Kai-Nan High School The Chairman of the Company is its bodycorporate representative.

CTBC Financial Park Management authority(Note)

The Director of the Company’s subsidiary is itsbody corporate representative.

CTBC Technology Building Managementauthority (Note)

〃

CTBC Administration Building Managementauthority (Note)

〃

Pei sheng Culture Foundation 〃

Taipei Medical University (Note) The Director of the Company’s subsidiary’sinvestee company carried under equity methodis its body corporate representative.

Yi Chuan Investment Co., Ltd. The Institutional Director of the Company.Chung Yuan Investment Co., Ltd. 〃

Ho-Wei Investment Co., Ltd. The Chairman of the Company is its Director.Weihong Investment Co., Ltd. 〃

Fenglu Development & Investment Co., Ltd. 〃

Chuan Wei Investment Co., Ltd. Within the second-degree relative of the Chairmanof the Company is its Chairman.

(Continued)

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193


Name of related party Relationship with the CompanyTaiwan Relo Club, Ltd. The Chairman of the Company’s subsidiary is its

Chairman.Sungbo Co., Ltd. The Director of the Company’s subsidiary is its

Chairman.Yan Yuan Investment Co., Ltd. The Director of the Company’s subsidiary is its

President.Nan Ya Plastics Corporation The Chairman of the Company’s subsidiary is its

Director.Formosa Sumco Technology Corporation 〃

Showa Denko HD Trace Corp. 〃

Taipei Financial Center Corporation 〃

Financial Information Service Co., Ltd. 〃

Brothers Recreational Co., Ltd. 〃

Growww Media Co., Ltd. (Note) 〃

Hon Hai Precision Industry Co., Ltd. (Note) 〃

Sundia Meditech Group (Note) The Company’s Chairman is the second-degreerelative of the Director of the Company’ssubsidiary.

Deutsche Bank Taipei Branch (Note) The Company’s President is the second-degreerelative of the Director of the Company’ssubsidiary.

Chailease Finance Co., Ltd. Related party in substance.Taiwan Sports Lottery Co., Ltd. 〃

Chung Kwan Investment Co., Ltd. 〃

Kuan Ho Construction and Development Cor 〃

CTC Group Inc. 〃

Chung-Chie Property Management Co., Ltd. 〃

Chinatrust Real Estate Co., Ltd. 〃

APEX Credit Solution Inc. (Note) 〃

Kae Lee Investment Ltd. 〃

Harvest Investment Co., Ltd. 〃

Yi Hua Investment Co., Ltd. 〃

Yi Kao Investment Co., Ltd. 〃

Sung Young Investment Co., Ltd. 〃

Chailease Auto Rental Co., Ltd. 〃

Fina Finance & Trading Co., Ltd. 〃

Shin Wen investment Co., Ltd. 〃

Ronghua Investment Co., Ltd. 〃

(Continued)

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Name of related party Relationship with the CompanyChinese Taipei Baseball Association Related party in substance.Chung Cheng Investments and Development

Co., Ltd.〃

My Leasing (Mauritius) Corp. 〃

Other related parties Major executives of the Company and subsidiariesand their close relatives.

Note: The party is not related parties in the financial statement for the year ended December 31,2020.

(b) Significant transactions between related parties and the Company

(i) Lease

1) The Company’s subsidiary, CTBC Bank Co., Ltd. is as a lessor

For the years ended December 31, 2020 and 2019, the rental revenues that the Company’s subsidiary CTBC Bank Co., Ltd. received from related parties for the rental ofbuildings, parking spaces, and safe deposit boxes amounted to $48,056 and $38,687,respectively.

As of December 31, 2020 and 2019, deposits of the Company’s subsidiary CTBC BankCo., Ltd. for renting safe boxes to related parties amounted to $125 and $162,respectively. The rents received in advance from related parties amounted to $4,554 and $951, respectively. The guarantee deposit for the use of space and machinery receivedfrom related parties amounted to $12,104 and $9,124, respectively.

2) The Company’s subsidiary, CTBC Bank Co., Ltd. is as a lessee

Lease liabilities

Name of related party SummaryDecember 31,

2020December 31,

2019Chailease Finance Co., Ltd. Leasing of official vehicles and

offices$ - 92

Chailease Auto Rental Co.,Ltd.

Leasing of official vehicles 8,827 4,004

$ 8,827 4,096

Lease paymentFor the years ended December 31

Name of related party Summary 2020 2019Chailease Finance Co., Ltd. Leasing of official vehicles and offices $ 292 2,831

Chailease Auto Rental Co., Ltd. Leasing of official vehicles 4,658 2,687

$ 4,950 5,518

(Continued)

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The lease term and the collection of the rental are conducted with the contracts. Leasepayment amount includes payment amount which does not recognize lease liabilities dueto the application of IFRS 16 exemptions.

(ii) Donations

For the years ended December 31Related party 2020 2019

CTBC Culture Foundation $ 31,000 44,000CTBC Charity Foundation 50,000 54,000CTBC Anti-Drug Educational Foundation 39,850 47,000CTBC International Academy Foundation 10,000 -CTBC Business School 138,273 125,604Total $ 269,123 270,604

(iii) Loans

December 31, 2020Settlement status

CategoriesNumber/name of

related partiesMaximum

balanceEndingbalance

Normalloans

Overdueloans Collateral

Loanconditions

Consumer loan—employee 11 $ 5,195 2,650 2,650 - None NoneHome loan mortgage 319 2,077,294 1,860,010 1,860,010 - Real estate/ others 〃

Others Nan Ya Plastics Corporation 2,787,830 2,401,828 2,401,828 - Real estate/machine room

〃

〃 CTC Group Inc. 349,410 342,531 342,531 - Real estate 〃

〃 Chung Kwan InvestmentCo., Ltd.

350,000 350,000 350,000 - Real estate 〃

〃 Kuan Ho Construction andDevelopment Cor

245,000 245,000 245,000 - Real estate 〃

〃 Others 215,225 208,867 208,867 - Real estate/ smalland mediumenterprise creditguarantee fund

〃





Normalloans

Overdueloans Collateral

Loanconditions

Consumer loan—employee 43 $ 20,096 9,679 9,679 - None None

Home loan mortgage 578 2,949,732 2,626,696 2,626,696 - Real estate/ others 〃

Others Hon Hai Precision IndustryCo., Ltd.

10,903,680 3,000,000 3,000,000 - None 〃

〃 Nan Ya Plastics Corporation 2,808,570 1,550,792 1,550,792 - Real estate/machine room

〃


〃 Chung Kwan InvestmentCo., Ltd.

350,000 350,000 350,000 - Real estate 〃

〃 Kuan Ho Construction andDevelopment Cor

245,000 245,000 245,000 - Real estate 〃

〃 Others 341,835 164,683 164,683 - Real estate/ bill forcollection

〃

(Continued)

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196


(iv) Deposits

December 31, 2020

Related partyMaximum


Range ofinterest rates

Interestexpenses

(For the yearended

December 31)HoFa Land Development Co., Ltd. $ 1,512,571 1,494,093 0~0.44% 2,808Taiwan Sports Lottery Co., Ltd. 1,491,327 1,489,899 0~0.01% 88CTBC Charity Foundation 1,217,253 1,185,251 0~1.07% 4,888Financial Information Service Co., Ltd. 1,012,285 1,006,551 0.01~1.07% 8,517Yan Yuan Investment Co., Ltd. 2,580,308 916,984 0~0.06% 310Chuan Wei Investment Co., Ltd. 1,005,260 868,589 0~0.01% 87Wu Tzu Development Co., Ltd. 659,834 652,220 0~1.00% 768My Leasing (Mauritius) Corp. 2,934,737 638,937 0.03~0.20% 86Taiwan Institute of Economic Research 605,702 600,210 0~1.09% 2,017Taipei Kai-Nan High School 575,633 554,361 0~1.04% 1,371Taiwan Wind Investment Co., Ltd. 3,463,691 533,788 0~0.15% 217Shin Wen Investment Co., Ltd. 634,510 329,963 0~0.01% 22Ronghua Investment Co., Ltd. 318,791 317,864 0~0.01% 14Chinatrust Real Estate Co., Ltd. 297,820 295,032 0~2.15% 1,518Chung Cheng Investments and Development Co.,

Ltd.289,499 287,681 0~0.01% 27

Chung Yuan Investment Co., Ltd. 330,885 241,597 0.01% 23Sung Young Investment Co., Ltd. 669,879 230,560 0~0.01% 57Sundia Meditech Group 1,933,349 200,688 0~0.03% 37Weihong Investment Co., Ltd. 174,236 174,236 0.01% 9Yi Hua Investment Co., Ltd. 510,167 169,201 0~0.01% 15Brothers Recreational Co., Ltd. 210,479 166,796 0~0.01% 13Pei Sheng Culture Foundation 183,294 143,202 0~0.05% 50Ho-Wei Investment Co., Ltd. 130,784 125,330 0~0.01% 12Kae Lee Investment Co., Ltd. 119,884 118,179 0~0.01% 12CTBC Business School 178,105 111,872 0~1.09% 133Others 24,711,768 7,700,997 31,602Total $ 47,752,051 20,554,081 54,701

(Continued)

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December 31, 2019




Interestexpenses

(For the yearended

December 31)Showa Denko HD Trace Corp. $ 2,320,812 1,692,990 0~2.98% 24,439Yan Yuan Investment Co., Ltd. 1,853,257 1,347,286 0~0.06% 338HoFa Land Development Co., Ltd. 9,901,076 1,340,210 0~0.50% 10,763CTBC Charity Foundation 1,190,399 1,044,433 0~1.07% 5,942Financial Information Service Co., Ltd. 1,018,143 1,007,923 0.01~1.07% 10,427Chuan Wei Investment Co., Ltd. 1,199,249 913,771 0~0.01% 68Taiwan Sports Lottery Co., Ltd. 1,892,215 823,836 0~0.01% 101Sung Young Investment Co., Ltd. 1,281,449 669,831 0~0.01% 112Shin Wen investment Co., Ltd. 736,457 634,510 0~0.01% 37Yi Hua Investment Co., Ltd. 510,220 510,167 0~0.01% 36Taiwan Institute of Economic Research 511,440 466,448 0~1.09% 2,243Harvest Investment Co., Ltd. 392,336 367,456 0~0.01% 34Taipei Kai-Nan High School 366,010 345,949 0~1.04% 2,054Chinatrust Real Estate Co., Ltd. 254,003 250,417 0~2.15% 1,965Chung Cheng Investment Co., Ltd. 230,189 227,916 0~0.01% 17Wu Tzu Development Co., Ltd. 215,593 186,276 0~1.00% 760Ronghua Investment Co., Ltd. 254,926 185,579 0~0.01% 17Chung Yuan Investment Co., Ltd. 177,436 177,059 0.01% 14Pei Sheng Culture Foundation 453,088 174,247 0~0.13% 92Hon Hai Precision Industry Co., Ltd. 188,110 143,400 0~2.74% 1,239CTBC Business School 193,601 125,832 0~1.09% 159Ho-Wei Investment Co., Ltd. 127,784 122,744 0~0.01% 12Kae Lee Investment Co., Ltd. 121,724 119,884 0~0.01% 12Brothers Recreational Co., Ltd. 192,698 118,562 0~0.26% 10Yi Kao Investment Co., Ltd. 247,906 114,457 0.01% 10Fenglu Development & Investment Co., Ltd. 124,143 106,352 0~0.01% 9Yi Chuan Investment Co., Ltd. 169,113 105,487 0~0.01% 10Weihong Investment Co., Ltd. 103,913 102,480 0.01% 10Others 33,454,135 7,465,841 47,765Total $ 59,681,425 20,891,343 108,695

(Continued)

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(v) Call Loans to Banks


Related party Ending balanceRange of

interest rates Interest revenuesGrand Bills Finance Corporation $ - 0.20~0.53% 993


Related party Ending balanceRange of

interest rates Interest revenuesGrand Bills Finance Corporation $ - 0.38~0.65% 1,331

(vi) Due from banks:

Related partyDecember 31,

2020December 31,

2019LH Bank Public Company Limited $ - 587,067

(vii) Securities transactions


Related partyBills and bonds

purchasedBills and bonds

soldHon Hai Precision Industry Co., Ltd. $ 13,869,063 -

(viii) Derivative financial commodity trading

December 31, 2020Derivative Balance sheet

Related partyfinancial

instrumentsContract

periodNotionalprincipal

Unrealizedlosses Account

EndingBalance

CTBCInvestmentsTrust Funds

Foreign exchangeswap

12.02.2019~

08.16.2021

USD 136,590 $ (315,705) (Note 2) (315,705)



instrumentsContract


Unrealized(losses)gains Account

EndingBalance

Deutsche BankTaipei Branch

Interest rate swap 11.10.2010~06.29.2029

NTD 18,003,676 $ (30,666) (Note 2) (30,666)

〃 Cross currencyswap

02.01.2019~02.14.2022

NTD 1,685,820 9,475 (Note 1) 9,475

〃 Foreign exchangeswap

03.25.2019~06.30.2020

NTD 10,837,340 (170,180) (Note 2) (170,180)


12.31.2019~01.03.2020

NTD 60,024 (188) 〃 (188)

CTBCInvestmentsTrust Funds

Foreign exchangeswap

12.02.2019~03.04.2020

USD 108,590 (34,766) 〃 (34,766)

Note 1: Financial assets measured at fair value through profit or loss.

Note 2: Financial liabilities measured at fair value through profit or loss.

(Continued)

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199


(ix) Securities sold under repurchase agreements


Related partyEndingbalance

Interestpayable

Interestexpenses

Deutsche Bank Taipei Branch $ - - 3,337

(x) Funds

Related party ContentDecember 31,

2020December 31,

2019CTBC Securities Co., Ltd. CTBC Investments

Trust Funds$ 143,586 578,262

CTBC Investments Co., Ltd. 〞 41,001 28,892Taiwan Life Insurance Co., Ltd. 〞 17,207,105 13,002,771Total $ 17,391,692 13,609,925

(xi) Stocks issued by the related parties that are being held by the Company and subsidiaries:


2020December 31,

2019Nan Ya Plastics Corporation $ 1,211,875 1,227,044Growww Media Co., Ltd. - 49,433Hon Hai Precision Industry Co., Ltd. - 528Taipei Financial Center Corporation 1,591,200 1,676,700Formosa Sumco Technology Corporation 183,262 151,808Total $ 2,986,337 3,105,513

(Continued)

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200


(xii) Others

1) Income generated between the Company’s subsidiary CTBC Bank Co., Ltd. and relatedparties.

For the years ended December 31Trading Company Related party Summary 2020 2019

CTBC Bank Co., Ltd. Taipei Financial CenterCorporation

Commission income and theremunerations to directors andsupervisors

$ 86,412 126,877

〞 Sungbo Co., Ltd. Commission income 5,180 4,920

〞 Grand Bills FinanceCorporation

Commission income, theremunerations to directors andsupervisors, and transportationallowance

3,679 3,662

〞 CTBC Charity Foundation Commission income, income fromgroup catering , and allocationof information

1,598 1,940

〞 Brothers Recreational Co.,Ltd.

Commission income and incomefrom group catering

1,318 1,051

〞 HoFa Land DevelopmentCo., Ltd.

Commission income 969 200

〞 Financial InformationService Co., Ltd.

Remunerations to directors andsupervisors

751 -

〞 Chinatrust Real Estate Co.Ltd.

Business service income 732 637

〞. Chailease Finance Co., Ltd. Commission income of financialadvisory services

- 10,713

〞 Hon Hai Precision IndustryCo., Ltd.

Commission income - 1,130

〞 Individuals Commission income 3,563 6,775

CTBC Securities Co., Ltd. CTBC Investment TrustFunds

Brokerage handling fees revenue 751 1,270

CTBC Investments Co.,Ltd.

Funds managed by theCompany

Management fees and sales feesincome

914,099 571,607

Taiwan Life Insurance Co.,Ltd.

Taipei Medical University Insurance income - 4,670

$ 1,019,052 735,452

Foregoing transactions, accounts receivable balances were as follows:

Trading Company Related Party SummaryDecember 31,

2020December 31,

2019CTBC Bank Co., Ltd. Grand Bills Finance

CorporationCommission income, the

remunerations to directors andsupervisors, and transportationallowance

$ 50 -

〞 CTBC Charity Foundation Commission income, income fromgroup catering, andallocation of information

620 521

〞 HoFa Land DevelopmentCo., Ltd.

Commission income 30 -

CTBC Investments Co., Ltd. Funds managed by theCompany

Management fees and sales feesincome

102,039 57,995

$ 102,739 58,516

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2) Expenses generated between the Company’s subsidiary CTBC Bank Co., Ltd. and relatedparties.

For the years ended December 31Trading Company Related party Summary 2020 2019

CTBC Financial HoldingCo., Ltd.

CTBC Financial ParkManagement authority

Cleaning fees, security fees, andutility bill

$ - 6,571

CTBC Bank Co., Ltd. Brothers Recreational Co.,Ltd.

Sponsorship, marketing feedbackfund, and gift expenses

276,925 287,801

〞 Taipei Financial CenterCorporation

Sponsorship, joint-brand creditcard payment, ATM utility bill,consultant fees, and redeemedrewards points

105,718 121,137

〞 CTBC Security Co., Ltd. Security fees 91,860 142,788

〞 Taiwan Relo Club, Ltd. Gift expenses, marketing fees,and redeemed rewards points

43,844 34,545

〞 Taiwan Institute ofEconomic Research

Expenses for domestic economicsresearch and businessconsulting commissionedresearch

12,000 11,000

〞 APEX Credit Solutions Inc. Collection assistance fees 5,693 19,493

〞 Chinese Taipei BaseballAssociation

Naming rights sponsorship 5,000 5,000

〞 Chinatrust Real Estate Co.,Ltd.

Agency service fees 4,400 3,159

〞 Chung-Chie PropertyManagement Co., Ltd.

Outsourcing fees and repairexpenses

2,394 2,945

〞 Sungbo Co., Ltd. Gift expenses and managementfees

1,414 1,898

〞 Fina Finance & Trading Co.Ltd.

Business service fees 1,180 6,516

〞 CTBC Business School Expense for commissionedresearch

745 2,000

〞 Chailease Finance Co., Ltd. Business service fees 361 1,176

〞 CTBC Financial ParkManagement authority

The Bank’s headquartersmanagement fees

- 139,973

〞 CTBC AdministrationBuilding Managementauthority


- 16,582

〞 CTBC Technology BuildingManagement authority

Management fees - 4,177

〞 CTBC Culture Foundation Marketing fees - 1,833

CTBC Securities Co., Ltd. CTBC Financial ParkManagement authority


- 9,158

CTBC Venture Capital Co.,Ltd

CTBC Security Co., Ltd. Security fees 2,858 3,202


Utility bill and administration fees - 1,265




- 33,702

Taiwan Lottery Corporation CTBC Financial ParkManagement authority

Utility bill, management fees, andcleaning fees

- 3,995

$ 554,392 859,916

(Continued)

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Foregoing transactions, accounts payable balances were as follows:

Trading Company Related party SummaryDecember 31,

2020December 31,

2019CTBC Financial Holding

Co., Ltd.CTBC Financial Park

Management authorityCleaning fees, security fees, and

utility bill$ - 1,869

CTBC Bank Co., Ltd. Brothers Recreational Co.,Ltd.

Sponsorship, marketing feedbackfund, and gift expsneses

199 134

〞 Taipei Financial CenterCorporation

Sponsorship, joint-brand creditcard payments, ATM utilitybill, consultant fees, andredeemed rewards points

6,438 10,295

〞 CTBC Security Co., Ltd. Security fees 8,893 17,756

〞 Taiwan Relo Club, Ltd. Gift expenses, marketing fees,and redeemed rewards points

6,092 1,901

〞 Taiwan Institute ofEconomic Research

Expenses for domestic economicsresearch and businessconsulting commissionedresearch

3,000 2,750

〞 APEX Credit Solution Inc. Collection assistance fees - 4,963

〞 Chinatrust Real Estate Co.,Ltd.

Agency service fees 1,241 -

〞 Chung-Chie PropertyManagement Co., Ltd.

Outsourcing fees and repairexpenses

- 91

〞 Sungbo Co., Ltd. Gift expenses and managementfees

- 24

〞 Fina Finance & Trading Co.,Ltd.

Business service fees 41 387

〞 Chailease Finance Co., Ltd. Business service fees - 3



- 36,000



- 5,200


Management fees - 800

CTBC Securities Co., Ltd. CTBC Financial ParkManagement authority


- 2,421

Taiwan Lottery Corporation CTBC Financial ParkManagement authority

Utility bill, management fees, andcleaning fees

- 640

CTBC Venture Capital Co.,Ltd.

CTBC Security Co., Ltd. Security fees 29 35


Utility bill and management fees - 217

$ 25,933 85,486

3) Others

Trading Company Related party SummaryDecember 31,

2020December 31,

2019CTBC Bank Co., Ltd. Fina Finance & Trading

Co., Ltd.Released undue loans (Note) $ 6,493 35,952

〞 Other Affiliates Advances for utilities expenses, security fees,training, postage, allocation of the golfcompetition, and other expenses

6,211 9,740

CTBC Capital Co., Ltd. Chailease Finance Co.,Ltd

The income of selling official cars 162 2,829

$ 12,866 48,521

(Continued)

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Note: The Company’ s subsidiary CTBC Bank Co., Ltd. signed strategic allianceagreements with Fina Finance & Trading Co., Ltd. agreeing loans will be releaseddirectly to Fina’s clients, and Fina pledged to buyback and settle all debts once anydelay arises.

No significant discrepancy in transaction terms found between related partytransaction and non-related party transaction.

(c) Key management personnel compensation in total


Salary and other short-term employee benefits $ 2,467,498 2,402,982Post-employment benefits 30,315 29,474Share-based payment (140,904) 1,037,321Total $ 2,356,909 3,469,777

The Company and subsidiaries recognized the changes in the fair value of share-based payments inprofit or loss over the vesting period. For the year ended December 31, 2020, the share-basedpayments expenses were reversed due to the changes in fair value.

(8) Pledged assets:

Pledged assets of the Company and subsidiaries were as follows:


AssetsDecember 31,

2020December 31,

2019 Purpose of collateralCTBC Financial Holding Co., Ltd.

Time deposits $ 11,609 6,600 Bid for company card guaranteeSubsidiary—CTBC Bank Co., Ltd.

and its subsidiariesRequired reserve - Account B 6,000,000 - Project fund accommodations securedBonds 4,413,590 13,504,221 Guarantee amount of overdrafts, pledged assets, line of credit

of Federal Reserve Bank, repurchase agreement pledge,trust funds reserve, bond settlement reserves, deposit forlitigation, other guarantee deposits and other legal reserve,etc.

Negotiable certificates of deposit 30,241,000 30,251,000 Guarantee fulfillment of superficies, daytime overdrafts ofCentral Bank, deposits for bills, dealer deposits for callingloans in foreign currency, call loan liquidation account inU.S. dollars and call loan liquidation account in JPY.

Time deposits 670,410 369,580 Compliance guarantee deposits for futures dealer, CPCCorporation, Taiwan guarantee fulfillment and publicwelfare walkway guarantee fulfillment and joint-brandcredit card guarantee.

Receivables 1,300 1,300 Guarantee of deposit for litigationSubsidiary—CTBC Securities Co.,

Ltd. and its subsidiariesRestricted time deposits 756,000 780,304 Guarantee for all the debts

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AssetsDecember 31,

2020December 31,

2019 Purpose of collateralSubsidiary—CTBC Investments Co.,

Ltd.Restricted time deposits $ 115,000 95,000 Operation guarantee deposits and others

Subsidiary—Taiwan Life InsuranceCo., Ltd. and its subsidiaries Demand deposits - 3,000 Short-term borrowingsTime deposits 408,984 478,717 Compliance guarantee deposits and guarantee provisional

attachment claimed by courtAccounts Receivable 151,242 203,399 Short-term borrowingsGovernment bonds 10,997,259 9,361,412 Compliance guarantee deposits and other guarantee deposits

Subsidiary—CTBC AseetManagement Co., Ltd. and itssubsidiaries Demand deposits 186 358 Other guarantee depositsTime deposits 45,359 72,804 Compliance guarantee deposits

As of December 31, 2020 and 2019, the deposits for public welfare lottery issuance of the Company’ssubsidiary CTBC Bank Co., Ltd.’s irrevocable standby letter of credit were all $1,050,000.

(9) Commitments and contingencies:

(a) Major commitments and contingencies

December 31,2020

December 31,2019

CTBC Financial Holding Co., Ltd.Promissory notes of short-term borrowing and other financing $ 124,800,000 114,900,000

Subsidiary—CTBC Bank Co., Ltd. and its subsidiariesContingent liabilities from guarantee and letter of credit

business102,146,647 92,575,881

Promissory note to Central Bank for bank’s clearance 198,968 198,968Client notes in custody 85,066,494 93,860,776Marketable securities and debts in custody 3,242,510,510 2,994,741,293Consigned travelers’ checks in custody - 231,039Designated purpose trust accounts 1,325,313,127 1,210,661,512Other items in custody 368,161 353,120

$4,880,403,907 4,507,522,589

As of December 31, 2020 and 2019, the credit amounts of the cancellable loan commitments of theCompany’ s subsidiary CTBC Bank Co., Ltd. and its subsidiaries were $1,439,047,127 and $1,389,847,297, respectively.

The Company’ s subsidiary CTBC Bank Co., Ltd. renewed the services contract of informationresources with International Business Machines, authorizing a five years and four months contractterm commencing from September 1, 2017, and ending on December 31, 2022, in the amount of 2.67billion which comprised a host computer lease fee, an authorization fee, and an annual softwaremaintenance fee.

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The Company’ s subsidiary CTBC Bank Co., Ltd. was designated by the Ministry of Finance (the“MOF”) as the issuing institution for the fourth term of public welfare lottery. The period is fromJanuary 1, 2014 to December 31, 2023. The Company’ s subsidiary CTBC Bank Co., Ltd. wasauthorized to arrange and issue traditional lottery, scratch and win lottery, and computerized lotterytickets. For the fourth term of public welfare lottery, the Company’ s subsidiary CTBC Bank Co.,Ltd. receives a commission for issuing lottery tickets, representing 4.35% of the total lottery salesamount. The commission will be settled monthly. The Company’ s subsidiary CTBC Bank Co.,Ltd.’ s profit will be what remains after a fixed payment of $2,700,000 to the MOF per year.Furthermore, in order to ensure that the lottery prize payout rate is not greater than 60% of thelottery issuing amount, not only did the Company’ s subsidiary CTBC Bank Co., Ltd. created atransitional monitoring account-provision for the lottery prize, but also has already adoptedappropriate risk control strategies.

On May 31, 2013, the Company’s subsidiary CTBC Bank Co., Ltd. signed a renewed contract forlottery software, hardware purchase and establishment and maintenances services amounting to$2,322,756 (within which $1,633,851 was for maintenance service). The maintenance service startedfrom May 31, 2013 to the redemption date of the last lottery ticket issued in December 2023. Theservice will be finished as all the settlement, consignment and aftermath of the work have been done.

The Company’ s subsidiary CTBC Bank Co., Ltd. entrusted the Company’ s subsidiary TaiwanLottery Co., Ltd. to operate the public welfare lottery’ s ticket issuing, sales, promotion, drawing,payment of prize, and management, with a contract period from November 11, 2013, and ending onJune 30, 2024. The Company’ s subsidiary CTBC Bank Co., Ltd. will disburse 4.35% of the totallottery sales amount as commission to the Company’ s subsidiary Taiwan Lottery Co., Ltd. TheCompany’ s subsidiary CTBC Bank Co., Ltd. agreed that Taiwan Lottery Co., Ltd. can receive areward, amounting to the commission revenue after the deduction of value-added tax (VAT), rebatesand direct costs incurred for the lottery business, and the addition of marginal benefits, if the balanceis positive. Otherwise, the Company’ s subsidiary Taiwan Lottery Co., Ltd. should pay for thediscrepancy, if the balance is negative. An amendment regarding not adding marginal benefitstoward the said entrusted benefits has been made on May 20, 2015, with an effective date tracedback to January 1, 2015.

On November 6, 2015, the Company’ s subsidiary CTBC Bank Co., Ltd. signed with ZileDevelopment Co., Ltd. (BVI) and Shuohe Development Co., Ltd. a contract of joint construction fora building on the land, zone 18 at Xinyi section 4, Xinyi District, Taipei City. The Bank will retain5% of the rights of the land for joint construction, get 5% of the whole construction area of the newbuilding and the corresponding land, and burden 5% of the costs of construction based on purchasecontract and joint construction contract. The Bank expects to invest $530 million of the total costs ofthe construction. As of December 31, 2020, the Bank has paid $212,505.

As of December 31, 2020, due to the procurement contract and the storage contract for lotterytickets, the Company’s subsidiary Taiwan Lottery Co., Ltd. had requested contractors to create anddeposit the guarantee notes, which are accounted for under guarantee notes payable amounting to$23,000.

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As of December 31, 2020, the Taxation Administration Ministry of Finance entrusted the Company’ssubsidiary Taiwan Lottery Co., Ltd. to conduct the procurement of five-year-period depositinsurance and an allowance for computerized lottery agents to switch to another career. Theinsurance company that won the tender transferred and deposited unregistered central governmentbonds amounting to $5,000 in the Company’s subsidiary Taiwan Lottery Co., Ltd.

To help CTBC Financial Leasing Co., Ltd., the Company’ s sub-subsidiary obtaining financingfacility, a Letter of Comfort was issued to financial institutions to request a credit limit ofRMB$310,215 thousand as of December 31, 2020, in order to declare that the operation of thecompany is actively supported by the Company.

To help CTBC Financial Leasing Co., Ltd., the Company’ s sub-subsidiary obtaining financingfacility, a Letter of Comfort to financial institution was issued by CTBC Asset Management Co.,Ltd. to request a credit limit of USD820,000 thousand and RMB$400,000 thousand as of December31, 2020.

As of December 31, 2020, the outstanding balance of the signed contract and property acquisition ofthe Company’ s subsidiary Taiwan Life Insurance Co., Ltd. and its subsidiaries amounted to$15,317,960, and the outstanding balance of superficies were recognized under lease liabilities,please refer to Note 6(ab).

As of December 31, 2020, the outstanding balance of the new insurance information core systemcontract of the Company’s subsidiary Taiwan Life Insurance Co., Ltd. amounted to $1,320,704.

As of December 31, 2020, the outstanding balance of the committed investment facility of signedprivate fund contract of the Company and subsidiaries amounted to JPY$4,303,751 thousand,USD1,358,101 thousand, EUR$327,527 thousand, DKK$38,554 thousand, GBP$986 thousand and$540,000, respectively.

(Continued)

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(b) The below information is shown based on the disclosure requirements of Enforcement Rules of theTrust Enterprise Act, Article 17.

Balance Sheet of Trust Accounts

December 31, 2020 and 2019

Trust AssetsDecember 31,

2020December 31,

2019 Trust LiabilitiesDecember 31,

2020December 31,

2019Cash in bank $ 45,550,608 37,616,152 Payables $ 689,146 665,290Receivables 71,483 187,092 Securities in custody

payables684,962,529 590,019,684

Bonds 29,843,569 31,752,745 Other liabilities 53,692 39,873Stocks 197,281,883 187,125,806 Trust capital 548,468,044 549,258,699Mutual funds 292,840,454 293,258,206 Miscellaneous reserves

and accumulatedearnings

89,146,909 69,701,100

Structured products 26,868,216 21,418,559 Other investments 1,853,684 1,949,743 Real estates－net 44,018,843 46,325,871Securities in custody 684,962,529 590,019,684Other assets 29,051 30,788Total trust assets $1,323,320,320 1,209,684,646 Total trust liabilities $1,323,320,320 1,209,684,646

Note: As of December 31, 2020 and 2019, the Company’ s subsidiary CTBC Bank’ s OffshoreBanking Unit invested in foreign securities under specific purpose trust accounts amounting to$4,384,925 and $4,063,326, respectively.

(Continued)

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Properties Catalog of Trust Accounts

December 31, 2020 and 2019

Investments December 31, 2020 December 31, 2019Cash in bank $ 45,550,608 37,616,152Receivables 71,483 187,092Bonds 29,843,569 31,752,745Stocks 197,281,883 187,125,806Mutual funds 292,840,454 293,258,206Structured products 26,868,216 21,418,559Other investments 1,853,684 1,949,743Real estates－net　Lands 43,958,333 46,265,361　Buildings 60,510 60,510　Subtotal 44,018,843 46,325,871Securities in custody 684,962,529 590,019,684Other assets　Superficies 28,478 30,181　Prepaid other payments 573 607　Subtotal 29,051 30,788Total $ 1,323,320,320 1,209,684,646

Income Statement of Trust Accounts

For the years ended December 31, 2020 and 2019


Trust revenues $ 8,411,049 8,629,610Trust expenses (1,928,342) (1,053,300)Earnings before tax 6,482,707 7,576,310Less: Income tax expenses 8,789 9,253Net profits $ 6,473,918 7,567,057

(Continued)

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(c) Other significant legal matters

(i) Structured notes

From September to December in 2005, the Hong Kong branch CTBC Bank (“HK Branch”), asubsidiary of CTBC Financial Holding Co., Ltd. (“ this Company” or “ CTBC Holding” )purchased structured notes (“ Overseas Structured Notes” ) in a total par value of US$390million from Barclays Bank PLC with the approval of CTBC Bank’s board of directors. Whenthis Company intended to invest in Mega Financial Holding Company in 2006, the OverseasStructured Notes must be sold in order that CTBC Bank should not violate the 5%shareholding ceiling in another single company set on a commercial bank in the Banking Actof the Republic of China. The HK Branch thus sold the Overseas Structured Notes at themarket price to Red Fire, a special purpose vehicle acquired by the then president of CTBCBank’ s corporate banking department (i.e., Mr. xxx Chen). In the sale of the OverseasStructured Notes, CTBC Bank earned a profit of US$8.448 million. Through the redemption ofthe Overseas Structured Notes from Barclays Bank PLC, Red Fire had a profit of US$30.47million, among which an amount about US$9.50 million was, for certain unknown reasons,remitted into an account controlled by Mr. Chen, and the balance about US$20.90 million hadbeen remitted to this Company’s overseas subsidiary, CT Opportunity Investment Company.Pursuant to the request of Financial Supervisory Committee (“FSC”), this Company’s directorsadvanced US$30.47 million to CTBC Bank in September 2006 so as to allow a smoothdevelopment of business operations. Given that the amount so advanced is far more than theamount about US$9.50 million (which was not remitted to this Company’ s overseassubsidiary), CTBC Bank had thus suffered no losses.

Per a letter dated April 28, 2011 from two directors of this Company (i.e., Chung ChengInvestment and Kuan Ho Construction & Development), they realized that CTBC Banksuffered no losses in its sale of Overseas Structured Notes, based on the Analysis Report on theSale of Structured Notes to Red Fire by CTBC Bank’s Hong Kong Branch (“Analysis Report”)attached to this Company’s letter dated March 30, 2011 (with a reference number of ChungHsin Chin 1002243570005), and they further indicated that as stated in the Analysis Report,without the ground that CTBC Bank suffered losses pursuant to which an agreement datedFebruary 9, 2009 was signed between this Company and these two directors, CTBC Bank wasthus urged to negotiate with them for a reasonable solution. CTBC Bank sent a letter datedAugust 16, 2011 to Chung Cheng Investment and Kuan Ho Construction & Developmentasking them to waive their right of claim arising from the advancement of US$30.47 millionmade in September of 2006. These two directors responded and agreed to waive on August 18,2011, but they requested that CTBC Bank should apply the US$20.90 million proceeds toloans for emergency assistances and charities, and CTBC Bank should transfer US$9.57million to this Company so as to make up the losses recognized by this Company which arosefrom the investment made by this Company’s overseas subsidiary, CT Opportunity InvestmentCompany. In this regard, CTBC Bank and these two directors would have to further negotiate,as CTBC Bank has yet made the aforesaid applications about the US$20.90 million, but thesetwo directors still insisted so. Furthermore, Red Fire was deemed as this Company’s specialpurpose vehicle as Red Fire’s profits would ultimately belong to this Company based on theinvestigation conducted by this Company and the opinion of the legal counsel appointed bythis Company. As manifested in the fund flow, none of the ex-chairman of CTBC Bank, Mr.Koo and the other three employees involved in the litigation had acquired any gains personally.

(Continued)

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After this case was appealed for the third instance, the Supreme Court, in August of 2014,revoked the judgment made by the High Court and a re-trial by the High Court was ordered. Inthe judgment made by the High Court for the first re-trial on September 12, 2018, a defendantwas judged not guilty and the other were guilty. All of the defendants judged guilty and theTaiwan High Prosecutors Office had appealed against the judgment. On November 14, 2019,the Supreme Court revoked the guilty judgment made by the first retrial High Court on thedefendants (i.e., Koo, Chang and Lin) and a second re-trial by the High Court was ordered andthe non-guilty judgment on the defendants (i.e., Chang, Lin and Deng) was sustained. Giventhis, this case has yet been completely final and conclusive. According to the opinion of thelegal counsel retained by this Company, “The profits of US$20.90 million from the redemptionof the structured notes by Red Fire have been remitted to CT Opportunity InvestmentCompany, an overseas subsidiary of CTBC Holding. In addition, two directors of CTBCHolding have advanced US$30,474,717 to CTBC Bank. Given that the total of the aforesaidtwo amounts is far more than the profits realized by Red Fire from the redemption of thestructured notes, CTBC Holding has thus suffered no losses. Furthermore, as far as the legalliability is concerned, since this case is a criminal one, even if certain defendants were judgedguilty, such judgment would not apply to CTBC Holding as a corporate entity. Besides, theguilty judgment has yet been final. Hence, the judgment has no material adverse impact uponthe financial conditions or business operations of CTBC Holding, and would not affect the factthat CTBC Holding suffers no losses or damages.” It is thus assessed by this Company that thiscase has no material impact upon the operation and shareholders’ interests of CTBC Bank andthis Company.

The Taiwan High Prosecutors Office filed a petition to the High Court on July 6, 2016 againstthis Company trying to recover NT$261,696,000 illegal income arising from the stock pricemanipulation conducted by this Company. The High Court for the 1st retrial notified thisCompany to attend the court hearings as a third interested party. This Company is of theopinion that this case has no such act of stock price manipulation and there is no illegalincome. A legal counsel has been retained to claim so in the High Court for the 1st retrial. Inits judgment made by the High Court for the 1st retrial on September 12, 2018, this Company’sproperty should neither be confiscated nor pursued on the ground (among others) that this casehas no such act of stock price manipulation and there is thus no illegal income. Regarding thejudgment of no confiscation of this Company’s property made by the High Court for the 1stretrial on September 12, 2018, the Supreme Court revoked it and ordered a second retrial onthe ground that even the prosecutor did not appeal to the Supreme Court against the “ noconfiscation” judgment, the appeal nonetheless applies to this issue. In order to avoid a conflictof judgments respectively made by the 1st retrial court and the 2nd retrial court as far as the“ confiscation” issue is concerned, the Supreme Court thus revoked the “ no confiscation”judgment and ordered a 2nd retrial. Hence, the “no confiscation” judgment has yet been final.

(Continued)

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(ii) NPLs and Transaction of Chengcing Lake BuildingAs to the indictment brought by the prosecutor of the Taipei District Prosecutors Office onAugust 26, 2019 about the transaction of real property and non-performing loans betweenCTBC Bank and its related parties (i.e., Tectonics Laboratories Co., Ltd. and other companies)in 2005 and 2006, the legal counsel appointed by this Company opined that “Keshin Company,Lilin Company and Tectonics Laboratories Co., Ltd. were all special purpose vehiclesindirectly owned by CTBC Asset Management Co., Ltd., therefore the profits arising from thetransactions between the aforesaid three companies and CTBC Bank or CTBC First AssetManagement Co., Ltd., a subsidiary of CTBC Asset Management Co., Ltd. should ultimatelybelong to CTBC Holding. Because the non-performing loans of Fengshan Credit Union weresold by CTBC Bank within the appraise value range, there thus were no losses or damages.Given that the other three transactions of non-performing loans had been canceled and thepayments thereof had been returned to CTBC Bank, no losses or damages would have beenmade to CTBC Holding or CTBC Bank. According to the data provided by CTBC Holding, theprofits derived from the sale of Chenghu Building had been remitted to CT OpportunityInvestment, a subsidiary of CTBC Asset Management Co., Ltd. and had ultimately beenreturned to CTBC Holding. Given this, the transaction of Chenghu Building had caused nolosses or damages to CTBC Holding and CTBC Bank.” Based upon the aforesaid legalopinion, it is thus assessed by CTBC Holding that this case has no material impact on theoperations and shareholders’ interests of CTBC Holding or CTBC Bank.

(iii) US$300 million Overseas InvestmentsAccording to the press release of the Supreme Prosecutors Office on October 5, 2016, Mr. Koo(the ex-chairman of CTBC Bank) was involved in certain controversial overseas investmentsof US$300 million made in 2004 to 2007. The Taipei District Court rendered a judgment onAugust 23, 2019 judging that Mr. Koo and a current employee (Mr. Chang) were not guilty.The prosecutor has appealed against the judgment, and this case has been being tried by theHigh Court. The legal counsel retained by CTBC Holding opined: “ Pursuant to the 2016consolidated financial statement of CTBC Holding, the overseas investments made by CTOpportunity Investment Company (“ CTO” , a subsidiary of CTBC Asset Management Co.,Ltd.) at the end of 2015 were in total US$339,310,000; while by the end of 2016,US$304,988,000 were recovered and such recovered amount is more than the appropriatedUS$300 million as so accused in the aforesaid press release. Furthermore, when CTO wasliquidated, the amounts remitted for investment had all been recovered. Thus, CTBC Holdingand CTBC Asset Management Co., Ltd. had suffered no losses or damages, and there was nomaterial adverse impact to the financial conditions of these two companies.” The legal counselfurther opined: “According to two press releases about criminal judgment made by the TaipeiDistrict Court on August 23, 2019, an ex-employee of CTBC Holding was judged guilty ofembezzlement, but such judgment would not apply to CTBC Holding and CTBC AssetManagement Co., Ltd. In addition, even though Mr. Cheng was judged having embezzled theinvestment proceeds of CTO, CTBC Holding has recovered all investment funds together witha profit of US$41,154,896.72. Given this, CTBC Holding ultimately suffered no losses ordamages. Therefore, there would be no changes to our previous analysis and the aforesaidjudgment had no material adverse impact to the financial conditions and business operations ofCTBC Holding and CTBC Asset Management Co., Ltd.” Based upon the aforesaid legalopinion, it is thus assessed by CTBC Holding that this case has no material impact on theoperations and shareholders’ interests of CTBC Holding and CTBC Asset Management Co.,Ltd.

(Continued)

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(iv) CTBC Life Insurance & Gobo Group

In its press release made by the Supreme Prosecutors Office on October 5, 2016, CTBC LifeInsurance (before it was merged with Taiwan Life Insurance) was involved in a transaction inwhich it purchased a real property from Gobo Group at a price above the market price andsuffered losses and damages therefrom. The Taipei District Court, on August 23, 2019,rendered a judgment judging that Mr. Koo, (the ex-chairman of CTBC Bank) and a currentemployee (Mr. Chang) were not guilty. The prosecutor has appealed against such judgmentand the case is being tried by the High Court. The legal counsel retained by CTBC Holdingopined: “According to the data provided by CTBC Life Insurance (having been merged byTaiwan Life Insurance), CTBC Life Insurance purchased the real property from Gobo Group atthe price less than (1) the appraisal price given by two independent appraisal companies and(2) the ceiling set by the board of directors of CTBC Life Insurance. Given that (1) thepurchase price does not exceed the appraisal price and it is lack of concrete evidence to theeffect that the appraisal report is doubtful, (2) the transaction was made in due process, and (3)the purchase price is not unreasonable, the transaction in question had no impact of damagingthe interest of CTBC Life Insurance and CTBC Holding.” The legal counsel further opined:“According to two press releases made by the Taipei District Court on August 23, 2019, thecourt had judged that (1) the loan extended by CTBC Life Insurance to Gobo against a realproperty collateral (located at the 2nd floor of Asia Plaza Building) is an arms-lengthtransaction, (2) CTBC Life Insurance’ s bidding (to purchase the real property) was givensubject to a condition that Gobo should guarantee a two-year lease at the rental of NT$6,125per ping of up to a total of NT$2,000,268 per ping and in such event, the bidding was given inline with general practice, and (3) CTBC Life Insurance suffered no losses or damages. Sincethe court’s conclusion shares the same view as analyzed in our opinion, it can be proven thatCTBC Life Insurance suffered no losses in the loan transaction and the real propertytransaction.” Pursuant to the aforesaid legal opinion, it is thus assessed by CTBC Holding thatthis case has no material impact on the operations and shareholders’ interests of CTBC LifeInsurance and CTBC Holding.

(v) Neihu Land and Building

Regarding the transaction in which CTBC Bank purchased three lots of land in Neihu, Taipeiand the buildings thereon (consisting of administration building and computer facilities) andfrom which Mr. xxx Chang and others earned improper price differences, the Taipei DistrictProsecutors Office brought an indictment on January 12, 2017 and an additional indictmentagainst another employee on January 4, 2018. All defendants indicted on January 12, 2017were judged guilty and they have appealed. As to the additional indictment made on January 4,2018, the employee in question was judged not guilty by the Taipei District Court on June 4,2019, but this part has yet been final. In respect of the guilty judgment, the legal counselretained by CTBC Holding opined in writing: “CTBC Bank made the aforesaid purchase of theadministration building and computer facilities with the approval of its board of directors andit had in advance hired professional institutions to give an appraisal price for reference. Even ifthe court doubted that the appraisal institutions failed to appraise the real property objectively,it did not object the appraisal conclusion. Given that (1) the purchase prices were less than theappraisal prices and (2) the purchase prices did not exceed the ceilings set by the board ofdirectors of CTBC Bank, it could be proven that the purchase prices were comparable with thethen reasonable prices and the employees-in-charge had followed the resolution of the board ofdirectors without breaking the law. It may therefore be concluded that CTBC Bank suffered nolosses or damages from the said transaction. Furthermore, as far as the legal liability is

(Continued)

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concerned, since this case is a criminal one, even if defendants were judged guilty, suchjudgment would not apply to CTBC Bank as a corporate entity. In addition, this has yet beenfinal. Hence, the guilty judgment has no material adverse impact upon the present financialconditions or business operations of CTBC Bank or CTBC Holding.” Regarding the issueraised in the guilty judgment that Yongyue Development Co., Ltd. is a related party to CTBCBank and the transaction in question should be disclosed in the financial statement of CTBCBank and CTBC Holding, the board of directors of CTBC Holding requested the department-in-charge together with a legal counsel to analyze and report. The analysis report manifests:“In our opinion, Mr. Chang in substance is not a person-in-charge and he has no controllingpower over CTBC Bank’ s policies or operations. The process and price of the purchasetransactions in question had been made in accordance with the law. Besides, Mr. Chang didneither attend the board meeting in which the transaction in question was reviewed norparticipate in the formation of decision about purchasing the real property in question.” Thelegal counsel further opined: “ According to the Regulations Governing the Acquisition andDisposal of Assets by Public Companies, Article 45 of the Financial Holding Company Act,CTBC Bank’ s Regulations Governing Transactions (other than credit extensions) by Quasi-Related Parties of CTBC Bank as amended on July 31, 2013, Regulations Governing thePreparation of Financial Statements by Issuers of Securities, Regulations Governing thePreparation of Financial Statements by Banks, and IAS 24, Mr. Chang is not, in form or insubstance, a related party or quasi-related party of CTBC Bank.”

“Ms. Woo, a shareholder of Yongyue Development Co., Ltd (also the ultimate beneficiary) andthe spouse of Mr. Chang’s younger brother, has taken no position of decision making power asstipulated in the aforesaid regulations and has no such identity as stated in Para. 9 of IAS (PartA). Thus, Ms. Woo is not a related party or quasi-related party of CTBC Bank.” As stated inthe aforesaid analysis report and legal opinion, Mr. Chang is not a person-in-charge insubstance of CTBC Bank and is neither a related party nor a quasi-related party of CTBC Bankin form or in substance. Even if Mr. Chang is deemed as a person-in-charge in substance ofCTBC Bank, Ms. Woo, as a second-degree relative (in marriage) of Mr. Chang, should not bedeemed as a related party or a quasi-related party of CTBC Bank, in accordance with Para. 9 ofIAS (Part A).

The legal counsel concluded “Regardless the guilty judgment has yet been final, the evidencesas referred to in the judgment are not strong enough to support the point that Mr. Changmanaged Yongyue in substance. Besides, the profits earned by Yongyue are irrelevant to Mr.Chang. As such, the transaction between CTBC Bank and Yongyue is not a related-partytransaction as far as CTBC Bank or CTBC Holding is concerned and thus, there is no need todisclose such deal in the financial statement.”

“From the evidences as stated in the guilty judgment, (1) it cannot conclude that Mr. Chang isthe person managing Yongyue in substance, as mentioned above, and (2) neither Mr. Changnor Ms. Woo is a related party or quasi-related party of CTBC Bank. We may say thatYongyue is not a related party or quasi-related party of CTBC Bank, the transaction inquestion between Yongyue and CTBC Bank is not a related-party transaction and accordingly,there should be no need for CTBC Holding to disclose such transaction in its quarterly orannual financial statement as a related-party transaction. It may conclude that there is no suchillegal misstatements in the financial statement.” Based upon the aforesaid legal opinion, giventhat (1) the purchase prices were comparable with the then reasonable prices and theemployees-in-charge had followed the resolution of the board of directors without breaking thelaw. It may therefore be concluded that CTBC Bank suffered no losses or damages from the

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said transaction. In addition, neither Mr. Chang nor Yongyue is a related party or quasi-relatedparty of CTBC Bank. There should be no need for this Company to disclose such transaction inits quarterly or annual financial statement as a related-party transaction. It may conclude thatthere is no such illegal misstatements in the financial statement. It is thus assessed by CTBCHolding that this case has no material impact on the operations and shareholders’ interests ofCTBC Bank and CTBC Holding.

(vi) Tainan Real property

As stated in a press release on September 12, 2019, the Taipei District Prosecutors Officemade an indictment relating to a sale by CTBC Bank of a real property located in Tainan in2012. The legal counsel retained by CTBC Holding opined that since (1) CTBC Bank hadhired a professional appraisal company to appraise before the transaction, (2) the sale pricewas higher than (a)the appraisal price and (b)the book value shown in June 2012, (3) thetransaction in question was duly made in accordance with CTBC Bank’s approval process, thetransaction in question was made in due process following CTBC Bank’ s internal rules andrelevant laws and regulations and CTBC Bank had suffered no losses or damages. It is thusassessed by CTBC Holding that this case has no material impact on the operations andshareholders’ interests of CTBC Bank and CTBC Holding.

(vii) Ex-Xinyi Headquarter Building

Regarding the transaction in which CTBC Bank sold 95% of its holding in the land atSongshou building (i.e., Ex-Xinyi headquarter building) in Taipei on November 6, 2015, thelegal counsel retained by CTBC Holding opined that CTBC Bank sold the land by way ofpublic tender, Cushman & Walkfield was appointed to carry out the public tender, and Baker& McKenzie was also retained to monitor the whole process. CTBC Bank had hired twoprofessional appraisal companies to conduct appraisals in advance and the floor price for thepublic tender was set at the average of two appraisal prices. The transaction in question hadbeen approved by CTBC Bank’s audit committee and board of directors. The sale price washigher than the floor price set for the public tender. A public announcement about its boardapproval and the sale had been made by CTBC bank. The transaction in question had beenmade duly in accordance with relevant laws and regulations and CTBC Bank’s internal rules,and CTBC Bank suffered no losses or damages. All CTBC Holding and CTBC Bank’s relevantemployees were rendered the final ruling of non-prosecution on October 8, 2020.

(10) Losses Due to Major Disasters: None

(Continued)

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(11) Subsequent Events:

The board of directors of the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. had approved theamount of $1,588,000 as the upper limit to participate in the capital increase of Wu Tzu DevelopmentCo., Ltd. in 2021 on February 1, 2021.

The board of directors of the Company’ s subsidiary Taiwan Life Insurance Co., Ltd. had approved toparticipate in the capital increase of King Dragon Life Insurance Co., Ltd. for RMB$350,000 thousand inproportion to the percentage of ownership on March 18, 2021. The application for the approval of theabove transaction has not yet been approved by the competent authority.

(12) Other:

(a) Business segment financial information

For the year ended December 31, 2020Unit: In Thousands of New Taiwan Dollars

Business SegmentItems Banking Securities Insurance Others ConsolidationNet interest income $ 56,637,907 221,475 52,193,712 574 109,053,668

Non-interest income 36,497,068 2,010,731 45,468,095 1,376,759 85,352,653

Net revenue 93,134,975 2,232,206 97,661,807 1,377,333 194,406,321

Provisions for bad debt expenses,commitments, and guaranteereserve

(9,188,447) (585) 610 (69,809) (9,258,231)

Net changes in insurance liabilityreserve

- - (68,870,986) - (68,870,986)

Operating expenses (55,285,251) (1,286,328) (4,966,042) (3,162,426) (64,700,047)

Net income (loss) before tax 28,661,277 945,293 23,825,389 (1,854,902) 51,577,057

Less: Income tax expenses 4,999,142 106,281 1,118,902 2,497,577 8,721,902

Net income (loss) 23,662,135 839,012 22,706,487 (4,352,479) 42,855,155

For the year ended December 31, 2019Unit: In Thousands of New Taiwan Dollars

Business SegmentItems Banking Securities Insurance Others ConsolidationNet interest income $ 56,635,497 165,517 53,927,054 (90,762) 110,637,306

Non-interest income 42,788,127 1,455,862 108,801,644 1,034,789 154,080,422

Net revenue 99,423,624 1,621,379 162,728,698 944,027 264,717,728

(Provisions for) reversal of baddebt expenses, commitments,and guarantee reserve

(5,390,943) (833) (36,963) (212,552) (5,641,291)

Net changes in insurance liabilityreserve

- - (139,137,229) - (139,137,229)

Operating expenses (57,896,562) (1,062,724) (5,461,749) (3,709,095) (68,130,130)

Net income (loss) before tax 36,136,119 557,822 18,092,757 (2,977,620) 51,809,078

Less: Income tax expenses 7,557,363 56,813 522,290 790,336 8,926,802

Net income (loss) 28,578,756 501,009 17,570,467 (3,767,956) 42,882,276

(Continued)

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(b) Public notices pursuant to Financial Holding Company Law, Article 46

The aggregate amount of credit extended, guarantees given, or any other transactions conducted byall subsidiaries of the financial holding company to, for, or with the same person, same relatedperson, or same affiliate, disclosure of which is required under Article 46 of the Financial HoldingCompany ACT:

December 31, 2020

Unit: In Thousands of New Taiwan Dollars; %

Names or titles

Aggregate amountof credits,

guarantees or anyother transactions

Aggregatepercentage of thefinancial holding

company’s net worthA. The same person

CENTRAL BANK OF REPUBLIC OFCHINA(TAIWAN) $ 446,457,193 %110.17

TAIWAN GOVERNMENT 237,068,448 %58.50PERSONAL CLIENT OF THE TOKYO STAR

BANK, LTD. 231,637,000 %57.16GOVERNMENT AGENCIES CLIENT OF THE

TOKYO STAR BANK, LTD. 140,276,000 %34.62SERVICE INDUSTRY CLIENT OF THE

TOKYO STAR BANK, LTD. 121,075,000 %29.88TAIWAN POWER COMPANY 57,557,357 %14.20FANNIE MAE 52,771,858 %13.02REAL ESTATE INDUSTRY CLIENT OF THE

TOKYO STAR BANK, LTD. 51,347,000 %12.67FINANCIAL INSTITUTION CLIENT OF THE

TOKYO STAR BANK, LTD. 47,839,000 %11.81UBS AG 47,092,192 %11.62BANK OF AMERICA 45,328,936 %11.19REAL ESTATE INDUSTRY CLIENT OF THE

CTBC CAPITAL CORP. 45,005,000 %11.11US GOVERNMENT 40,801,808 %10.07TAIWAN RAILWAYS ADMINISTRATION 39,727,852 %9.80JP MORGAN CHASE & CO. 34,168,760 %8.43VERIZON COMMUNICATIONS INC. 33,831,940 %8.35PERSONAL CLIENT OF THE CTBC

CAPITAL CORP. 33,217,000 %8.20

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Names or titles




company’s net worthCENTRAL TAIWAN SCIENCE PARK

BUREAU $ 30,000,000 %7.40CITIGROUP INC. 28,546,607 %7.04GOVERNMENT NATIONAL MORTGAGE

ASSOCIATION 28,059,074 %6.92MORGAN STANLEY 26,666,677 %6.58AT&T INC. 24,500,803 %6.05SAUDI ARABIAN GOVERNMENT 23,709,275 %5.85BNP PARIBAS SA 22,704,740 %5.60COMISION FED DE ELECTRIC 20,830,887 %5.14CAPITAL INVESTMENT TRUST CORP. 20,522,705 %5.06FINANCE BUREAU OF KAOHSIUNG CITY

GOVERNMENT 20,500,000 %5.06RABOBANK NEDERLA 19,373,665 %4.78ELECTRICITE DE FRANCE S.A. 17,566,181 %4.33INDONESIAN GOVERNMENT 17,242,446 %4.25PEOPLES REPUBLIC OF CHINA

GOVERNMENT 16,786,629 %4.14BANK OF CHINA LIMITED 16,617,255 %4.10TAIPEI FUBON COMMERCIAL BANK CO.,

LTD. 16,384,465 %4.04GOLDMAN SACHS GROUP INC. 16,320,119 %4.03YUANTA FUNDS CO., LTD. 16,146,045 %3.98ADCB FINANCE CAYMAN LTD. 16,043,373 %3.96COMCAST CORP. 16,038,535 %3.96MANUFACTURING INDUSTRY CLIENT OF

THE PT. BANK CTBC INDONESIA 16,019,000 %3.95WELLS FARGO & CO. 15,955,801 %3.94OTHER INDUSTRY CLIENT OF THE

TOKYO STAR BANK, LTD. 15,814,000 %3.90CATHAY SECURITIES INVESTMENT

TRUST CO., LTD. 15,809,501 %3.90BANK OF TOKYO-MITSUBISHI UFJ 15,439,901 %3.81

(Continued)

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Names or titles




company’s net worthMANUFACTURING INDUSTRY CLIENT OF

THE TOKYO STAR BANK, LTD. $ 15,167,000 %3.74QNB FINANCE LTD. 15,025,892 %3.71CHINA DEVELOPMENT BANK 14,696,571 %3.63MEXICAN GOVERNMENT 14,663,752 %3.62COMMONWEALTH BANK OF AUSTRALIA 14,648,278 %3.61QATAR GOVERNMENT 14,448,072 %3.57DEUTSCHE BANK AG 13,954,119 %3.44HSBC HOLDINGS PLC. 13,379,960 %3.30REPUBLIC OF SINGAPORE 12,899,865 %3.18MANULIFE FINANCIAL CORP. 12,284,507 %3.03FIRST ABU DHABI BANK PJSC 12,159,686 %3.00CHUNGHWA TELECOM CO., LTD. 12,042,462 %2.97CITIC LTD. 11,935,912 %2.95HUA NAN COMMERCIAL BANK., LTD. 11,849,379 %2.92CREDIT AGRICOLE SA 11,808,037 %2.91TAIWAN BUSINESS BANK CO., LTD. 11,673,487 %2.88ANZ BANKING GROUP LTD. 11,311,616 %2.79BRAZIL GOVERNMENT 11,073,114 %2.73TAINAN CITY GOVERNMENT 10,990,000 %2.71TAIWAN CEMENT LTD. 10,853,009 %2.68WESTPAC BANKING CORP. 10,782,946 %2.66FUBON SECURITIES EQUITY

INVESTMENT CO., LTD. 10,731,733 %2.65SUMITOMO MITSUI BANKING

CORPORATION 10,594,125 %2.61NATIONAL AUSTRALIA BANK LIMITED 10,525,816 %2.60EXPORT-IMPORT BANK OF KOREA 10,395,458 %2.57SOCIETE GENERALE SA 10,392,070 %2.56HON HAI PRECISION INDUSTRY CO., LTD. 10,124,089 %2.50RUSSIAN GOVERNMENT 10,099,102 %2.49IL GOVERNMENT 9,920,063 %2.45

(Continued)

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Names or titles




company’s net worthSTATE OF CALIFORNIA $ 9,735,364 %2.40FORMOSA PLASTIC CORPORATION 9,446,240 %2.33COLOMBIA GOVERNMENT 9,343,653 %2.31BARCLAYS BANK PLC. 9,303,126 %2.30ROYAL BANK OF CANADA 9,147,931 %2.26ANHEUSER-BUSCH INBEV SA/NV 8,972,892 %2.21AU OPTRONICS CORP. 8,964,478 %2.21GOVERNMENT AGENCIES CLIENT OF THE

PT. BANK CTBC INDONESIA 8,781,000 %2.17CNOOC PETROLEUM NORTH AMERICA

ULC 8,671,702 %2.14CENTRAL AMERICAN BANK FOR

ECONOMIC INTEGRATION 8,631,068 %2.13BARCLAYS PLC. 8,617,445 %2.13TENCENT HOLDINGS LTD. 8,532,675 %2.11TAIWAN SEMICONDUCTOR

MANUFACTURING COMPANY LIMITED 8,505,250 %2.10TAIWAN MOBILE CO., LTD. 8,333,924 %2.06STANDARD CHARTERED PLC. 8,287,420 %2.05AGRICULTURAL DEVELOPMENT BANK

OF CHINA 8,281,291 %2.04FORMOSA CHEMICALS & FIBRE

CORPORATION 8,201,912 %2.02SERVICE INDUSTRY CLIENT OF THE

CTBC CAPITAL CORP. 8,158,000 %2.01CHANG HWA COMMERCIAL BANK LTD. 8,103,617 %2.00FUBON FINANCIAL HOLDING CO., LTD. 8,048,727 %1.99FIRST COMMERCIAL BANK CO., LTD. 7,997,688 %1.97BANK OF MONTREAL 7,965,432 %1.97CPC CORPORATION, TAIWAN 7,890,891 %1.95AMGEN INC. 7,833,094 %1.93CORP NACIONAL DEL COBRE 7,810,793 %1.93GRUPO TELEVISA SA-SPON ADR 7,739,112 %1.91MEGA FINANCIAL HOLDING CO., LTD. 7,696,258 %1.90

(Continued)

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Names or titles




company’s net worthENEL FINANCE INTERNATION NV $ 7,662,902 %1.89ARES CAPITAL CORP. 7,639,171 %1.89BANK SINOPAC CO., LTD. 7,613,100 %1.88BRISTOL-MYERS SQUIBB COMPANY 7,595,597 %1.87TAISHIN FINANCIAL HOLDING CO., LTD. 7,480,121 %1.85HONGKONG GOVERNMENT 7,272,418 %1.79QUANTA COMPUTER CO., LTD. 7,203,095 %1.78GOVERNMENT AGENCIES CLIENT OF

THE CTBC BANK (PHILIPPINES) CORP. 7,196,000 %1.78DP WORLD LTD. 7,164,428 %1.77HSBC BANK MIDDLE EAST LTD. 7,144,024 %1.76UNITED OVERSEAS BANK LTD. 7,131,176 %1.76CATHAY FINANCIAL HOLDING CO., LTD. 7,038,581 %1.74SOUTHERN TAIWAN SCIENCE PARK

BUREAU 7,000,000 %1.73SANTANDER INTERNATIONAL PRODUCT

PLC. 6,990,443 %1.73PETROLEOS MEXICANOS 6,981,051 %1.72INDUSTRIAL AND COMMERCIAL BANK

OF CHINA 6,973,525 %1.72BPCE SA 6,882,169 %1.70FUHUA TRUST CO., LTD. 6,819,456 %1.68SERVICE INDUSTRY CLIENT OF THE

CTBC BANK (PHILIPPINES) CORP. 6,653,000 %1.64INDUSTRIAL BANK CO., LTD. 6,631,823 %1.64PINGTUNG COUNTY GOVERNMENT 6,520,000 %1.61SOUTHERN POWER COMPANY 6,465,624 %1.60TAIWAN COOPERATIVE BANK CO., LTD. 6,384,376 %1.58AIG INC. 6,364,899 %1.57HSBC BANK PLC. 6,334,875 %1.56KOREA DEVELOPMENT BANK, THE,

SEOUL 6,316,643 %1.56LAND BANK OF TAIWAN CO., LTD. 6,266,847 %1.55

(Continued)

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Names or titles




company’s net worthNAN SHAN LIFE INSURANCE CO., LTD. $ 6,193,110 %1.53CREDIT SUISSE GROUP FUNDING 6,102,520 %1.51KGI SECURITIES INVESTMENT TRUST

CO., LTD. 6,082,656 %1.50BANK OF NOVA SCOTIA, TORONTO 6,020,300 %1.49AMERICA MOVIL SAB DE CV 5,968,996 %1.47SOUTHERN COPPER CORP. 5,910,705 %1.46ANHEUSER-BUSCH INBEV WORLDWIDE

INC. 5,872,877 %1.45FIRST FINANCIAL HOLDING CO., LTD. 5,840,688 %1.44CREDIT SUISSE GROUP AG 5,831,145 %1.44WALT DISNEY COMPANY 5,665,888 %1.40NATIXIS 5,650,587 %1.39MALAYAN BANKING BERHAD 5,572,075 %1.38ABN AMRO BANK NV 5,544,040 %1.37INNOLUX CORPORATION 5,517,798 %1.36THE EXPORT-IMPORT BANK OF CHINA 5,497,129 %1.36EMIRATES NBD PJSC 5,451,419 %1.35IBM CORP. 5,425,018 %1.34FOXWELL ENERGY CO., LTD. 5,400,000 %1.33SHELL INTERNATIONAL FIN. 5,348,083 %1.32SAUDI ARABIAN OIL COMPANY 5,318,920 %1.31CATCHER TECHNOLOGY CO., LTD. 5,301,090 %1.31HALLIBURTON CO. 5,288,841 %1.31SHIN KONG INTERNATIONAL SECURITIES

CO., LTD. 5,190,672 %1.28THE SHANGHAI COMMERCIAL &

SAVINGS BANK, LTD. 5,161,521 %1.27MORGAN STANLEY AND CO.

INTERNATIONAL PLC. (FOREIGN 5,157,174 %1.27FAR EAS TONE TELECOMMUICATIONS

CO., LTD. 5,130,436 %1.27BANK OF COMMUNICATIONS CO., LTD. 5,104,105 %1.26

(Continued)

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Names or titles




company’s net worthING GROEP NV $ 5,066,649 %1.25AIA GROUP LTD. (HK) 5,051,773 %1.25PETRONAS CAPITAL LTD. 5,036,265 %1.24NATIONAL TREASURY ADMINISTRAION,

MINISTRY OF FINANCE 5,000,000 %1.23FORMOSA HA TINH (CAYMAN) LIMITED 4,981,132 %1.23WOORI BANK GROUP 4,978,150 %1.23TAQA ABU DHABI NATL ENER 4,971,191 %1.23CHINA CONSTRUCTION BANK

CORPORATION 4,961,724 %1.22CHINA CINDA FINANCE 4,960,362 %1.22LLOYDS BANK PLC. 4,943,163 %1.22TAIWAN COOPERATIVE FINANCIAL

HOLDING CO., LTD. 4,900,144 %1.21THOMA BRAVO, LLC. 4,853,846 %1.20CORNING INC. 4,827,858 %1.19INTERNATIONAL BANK FOR

RECONSTRUCTION ANDDEVELOPMENT (THE WORLD BANK) 4,810,924 %1.19

SHIN KONG BANK CO., LTD. 4,800,000 %1.18GOLDMAN SACHS INTERNATIONAL 4,789,650 %1.18NB ALTERNATIVES ADVISERS LLC. 4,767,205 %1.18DBS GROUP HOLDINGS LIMITED 4,758,105 %1.17TAIWAN STAR TELECOM CORPORATION

LIMITED 4,718,508 %1.16FAR EASTERN NEW CENTURY

CORPORATION 4,685,609 %1.16SHINHAN BANK 4,684,522 %1.16SUNCOR ENERGY INC. 4,669,024 %1.15HUARONG FINANCE 2017 CO., LTD. 4,668,832 %1.15TELEFONICA EMISONES SAU 4,570,384 %1.13FINANCIAL INSTITUTION CLIENT OF THE

PT. BANK CTBC INDONESIA 4,398,000 %1.09LLOYDS BANKING GROUP PLC. 4,390,441 %1.08

(Continued)

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Names or titles




company’s net worthCIGNA CORPORATION $ 4,335,684 %1.07PERTAMINA PERSERO PT 4,311,040 %1.06HUALIEN COUNTY GOVERNMENT 4,300,000 %1.06REPUBLIC OF KOREA GOVERNMENT 4,285,943 %1.06BAYER US FINANCE II LLC. 4,271,786 %1.05HUAKU DEVELOPMENT CO., LTD. 4,212,328 %1.04CREDIT SUISSE 4,105,062 %1.01HSINCHU COUNTY GOVERNMENT 4,100,000 %1.01DA-FU MEDIA CORP. 4,096,362 %1.01PHILLIPS 66 4,094,181 %1.01SINOCHEM OVERSEAS CAPITA 4,093,160 %1.01MACQUARIE BANK LIMITED 4,092,922 %1.01UNIMICRON TECHNOLOGY CORP. 4,089,508 %1.01KEB HANA BANK 4,044,232 %1.00CHINA NATIONAL PETROLEUM

CORPORATION 4,034,331 %1.00CATHAY UNITED BANK., LTD. 4,003,309 %0.99JAPAN GOVERNMENT 3,998,605 %0.99CIMB BANK BERHAD 3,992,313 %0.99SANTANDER UK PLC. 3,972,621 %0.98PERSONAL CLIENT OF THE CTBC BANK

(PHILIPPINES) CORP. 3,946,000 %0.97SERVICE INDUSTRY CLIENT OF THE PT.

BANK CTBC INDONESIA 3,918,000 %0.97E.SUN COMMERCIAL BANK, LTD. 3,916,316 %0.97FU YU CONSTRUCTION CO., LTD. 3,766,000 %0.93APPLE INC. 3,750,328 %0.93CONS EDISION CO. OF NY 3,747,590 %0.92HOFA LAND DEVELOPMENT CO., LTD. 3,744,132 %0.92CHINA STATE GRID CORPORATION OF

CHINA 3,700,860 %0.91ALIBABA GROUP HOLDING LTD. 3,688,864 %0.91PERUSAHAAN LISTRIK NEGARA PT 3,680,324 %0.91

(Continued)

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Names or titles




company’s net worthCHINA OVERSEAS FINANCE CAYMAN $ 3,673,488 %0.91NEW TAIPEI CITY GOVERNMENT 3,672,189 %0.91FINANCIAL INSTITUTION CLIENT OF THE

CTBC BANK (PHILIPPINES) CORP. 3,672,000 %0.91MORGAN STANLEY FINANCE LLC. 3,669,203 %0.91MDC-GMTN BV 3,610,532 %0.89VODAFONE GROUP PLC. 3,588,733 %0.89NAN YA PLASTICS CORPORATION 3,586,905 %0.89SINOPAC SECURITIES INVESTMENT

TRUST CO., LTD. 3,586,215 %0.88AUSTRALIA GOVERNMENT 3,583,235 %0.88FINANCIAL INSTITUTION CLIENT OF THE

CTBC CAPITAL CORP. 3,575,000 %0.88VALE OVERSEAS LIMITED 3,545,991 %0.88NEW RESIDENTIAL INVESTMENT CORP. 3,538,665 %0.87HONGKONG ELECTRIC FINANCE LTD. 3,468,248 %0.86ROGERS COMMINICATIONS INC. 3,465,781 %0.86CHINA NETWORK SYSTEMS CO., LTD. 3,463,601 %0.85BANK RAKYAT INDONESIA 3,420,960 %0.84INFRAESTRUCTURA ENERGETICA NOVA

SAB DE CV 3,370,595 %0.83HUMANA INC. 3,364,733 %0.83STATE OF CALIFORNIA 3,341,109 %0.82PRUDENTIAL PLC. 3,309,331 %0.82GAZPROM VIA GAZ CAPITAL SA 3,297,089 %0.81CHINA STEEL CORPORATION 3,295,161 %0.81ANTHEM INC. 3,269,334 %0.81ASIAN DEVELOPMENT BANK 3,258,065 %0.80SINGAPORE AIRLINES LIMITED 3,258,048 %0.80SEASPAN HOLDCO III LTD. 3,241,408 %0.80REAL ESTATE CLIENT OF THE CTBC

BANK CORP. (CANADA) 3,239,000 %0.80MOROCCO GOVERNMENT 3,234,465 %0.80

(Continued)

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Names or titles




company’s net worthNORDEA BANK AB $ 3,227,026 %0.80PERSONAL CLIENT OF THE CTBC BANK

CORP. (CANADA) 3,207,000 %0.79THE HONGKONG AND SHANGHAI

BANKING CO. LTD.,HK(HEAD OFFICE) 3,203,348 %0.79ORIENTAL REPUBLIC OF URUGUAY 3,198,024 %0.79KAZMUNAYGAZ NATIONAL CO JSC 3,172,997 %0.78ANHEUSER-BUSCH COS LLC / ANH 3,170,297 %0.78NONGHYUP BANK (FORMERLY KNOWN

AS NATIONAL AGRICULTURALCOOPERATIVE FEDERATION) 3,161,812 %0.78

YAGEO CORPORATION 3,160,802 %0.78SHIN KONG LIFE INSURANCE CO., LTD. 3,150,000 %0.78FARGLORY LAND DEVELOPMENT CO.,

LTD. 3,141,329 %0.78LOWE S COS INC. 3,094,817 %0.76FREDDIE MAC 3,078,705 %0.76COASTAL EMERALD LTD. 3,068,407 %0.76ECOPETROL SA 3,062,696 %0.76KONINKLIJKE LUCHTVAART

MAATSCHAPPIJ N.V. 3,051,322 %0.75DE EN CONSTRUCTION CO., LTD. 3,037,880 %0.75CVS HEALTH CORP. 3,010,492 %0.74UNILEVER CAPITAL CORPORATION 3,005,015 %0.74AXA SA 3,001,401 %0.74

B. The same related personMr./Ms. Wang 14,385,743 %3.55Mr./Ms. Lu 10,303,309 %2.54Mr./Ms. Jhuang 6,741,284 %1.66Mr./Ms. Chen 4,914,378 %1.21Mr./Ms. Wu 4,311,723 %1.06Mr./Ms. Wu 4,308,764 %1.06Mr./Ms. Jhuang 4,296,798 %1.06

(Continued)

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226


Names or titles




company’s net worthMr./Ms. Lee $ 3,922,956 %0.97Mr./Ms. Chan 3,320,929 %0.82Mr./Ms. Chan 3,320,929 %0.82Mr./Ms. Chan 3,320,929 %0.82Mr./Ms. Lee 3,241,558 %0.80Mr./Ms. Lee 3,241,558 %0.80Mr./Ms. Yang 3,241,558 %0.80

C. The same affiliateAMERICA GROUP 83,909,637 %20.71UBS AG GROUP 47,432,117 %11.70MERRILL LYNCH GROUP 46,332,517 %11.43FUBON GROUP 40,801,250 %10.07SHIN KONG GROUP 38,034,325 %9.39JP MORGAN CHASE GROUP 37,895,723 %9.35MORGANSTANLEY GROUP 36,763,028 %9.07HSBC HOLDINGS GROUP 34,482,306 %8.51CITIGROUP GROUP 29,774,847 %7.35LINYUAN GROUP 28,194,423 %6.96THE FAR EASTERN GROUP 24,959,491 %6.16HON HAI FOXCONN GROUP 24,081,871 %5.94GOLDMAN SACHS GROUP INC. 21,942,143 %5.41CITIC GROUP 21,769,020 %5.37KAOHSIUNG CITY GOVERNMENT GROUP 20,600,073 %5.08THE CAPITAL SECURITIES GROUP 20,523,951 %5.06YUANTA FINANCIAL HOLDING GROUP 19,214,203 %4.74BANK OF CHINA GROUP 19,151,631 %4.73FCFC GROUP 18,791,831 %4.64ANHEUSER-BUSCH INBEV SA/NV GROUP 18,687,776 %4.61BARCLAYS BANK PLC. GROUP 17,920,571 %4.42COMCAST CORPORATION GROUP 16,801,315 %4.15CHINA DEVELOPMENT BANK GROUP 16,370,418 %4.04MITSUBISHI UFJ FG GROUP 16,309,851 %4.02

(Continued)

486

227


Names or titles




company’s net worthWELLS FARGO & CO. GROUP $ 16,233,147 %4.01CREDIT SUISSE A.G. GROUP 16,038,982 %3.96FIRST FINANCIAL HOLDING GROUP 14,043,473 %3.47TAIWAN CEMENT GROUP 13,906,045 %3.43HUA NAN GROUP 13,854,293 %3.42CREDIT AGRICOLE SA GROUP 13,796,788 %3.40TAIWAN TELECOM GROUP 13,533,046 %3.34BANCO SANTANDER GROUP 13,526,699 %3.34TAIWAN COOPERATIVE FINANCIAL

HOLDING GROUP 13,120,983 %3.24ANZ BANKING GROUP 12,920,736 %3.19SOUTHERN CO. GROUP 12,702,696 %3.13BPCE GROUP 12,532,756 %3.09MANULIFE FIN GROUP 12,289,780 %3.03CHINA CINDA GROUP 11,942,559 %2.95UMC GROUP 11,941,069 %2.95SINOPAC FINANCIAL HOLDING GROUP 11,698,246 %2.89AIG GROUP 11,419,347 %2.82AUO GROUP 11,388,867 %2.81FORMOSA PLASTIC CORPORATION 11,142,451 %2.75SINOPEC GROUP 10,913,511 %2.69HOTAI MOTOR SUBSIDIARIES GROUP 10,785,539 %2.66TSMC GROUP 10,617,500 %2.62MEGA HOLDING GROUP 10,603,964 %2.62INDUSTRIAL AND COMMERCIAL BANK

OF CHINA GROUP 10,313,600 %2.55STANDARD CHARTERED GROUP 10,207,352 %2.52CNOOC GROUP 10,085,253 %2.49HONTAI GROUP 9,380,368 %2.31LLOYDS BANKING GROUP 9,333,604 %2.30CHINA DEVELOPMENT BANK GROUP 8,949,595 %2.21TING HSIN INTERNATIONAL GROUP 8,537,710 %2.11

(Continued)

487

228


Names or titles




company’s net worthUNITED OVERSEAS BANK GROUP $ 8,333,329 %2.06CPC GROUP 8,290,891 %2.05DBS GROUP 8,064,234 %1.99BANK OF MONTREAL GROUP 8,019,317 %1.98ENEL SPA GROUP 8,016,468 %1.98VILC GROUP 7,837,563 %1.93QUANTA COMPUTER GROUP 7,695,567 %1.90SAUDI ARABIAN OIL COMPANY GROUP 7,504,214 %1.85RUENTEX GROUP 7,497,141 %1.85ING BANK GROUP 7,288,200 %1.80CHENG UEI GROUP 7,061,166 %1.74BANK OF COMMUNICATIONS GROUP 7,060,158 %1.74CHINA STEEL GROUP 6,875,785 %1.70PRUDENTIAL PLC. GROUP 6,554,359 %1.62KINGSTON GROUP 6,119,639 %1.51WALSIN LIHWA GROUP 5,996,649 %1.48WOORI BANK GROUP 5,833,390 %1.44GAW CAPITAL GROUP 5,699,352 %1.41ASE GROUP 5,678,114 %1.40ROYAL DUTCH SH-A GROUP 5,623,383 %1.39YULON GROUP 5,505,851 %1.36CNPC GROUP 5,388,258 %1.33THE SHANGHAI COMMERCIAL &

SAVINGS GROUP 5,227,251 %1.29PHOENIX PROPERTY INVESTORS GROUP 5,206,672 %1.28SAN MIGUEL GROUP 5,110,659 %1.26PERUSAHAAN LISTRIK NEGARA GROUP 5,051,575 %1.25CHINA HUARONG ASSET MANAGEMENT

GROUP 5,043,439 %1.24CHINA OVERSEAS LAND & INVESTMENT

LTD. GROUP 4,945,060 %1.22ENBRIDGE INC. GROUP 4,752,276 %1.17

(Continued)

488

229


Names or titles




company’s net worthTEMASEK HOLDINGS GROUP $ 4,638,446 %1.14SPORTS CITY INTERNATIONAL GROUP 4,547,295 %1.12ASUS GROUP 4,514,149 %1.11YAGEO GROUP 4,439,036 %1.10SINOCHEM GROUP 4,382,989 %1.08FARGLORY GROUP 4,382,959 %1.08BEIJING ENTERPRISES HOLDINGS GROUP 4,313,655 %1.06HFF GROUP 4,313,180 %1.06STRONGMAN CYCLES GROUP 4,181,938 %1.03OCBC BANK GROUP 4,179,763 %1.03GVL GROUP 4,031,072 %0.99SALIM GROUP 3,916,955 %0.97E.SUN FINANCIAL HOLDINGS CO., LTD.

GROUP 3,916,353 %0.97CKHH GROUP 3,882,941 %0.96CHINA STATE GRID CORP. GROUP 3,842,033 %0.95MIZUHO BANK LTD. GROUP 3,727,039 %0.92CHINA MERCHANTS BANK GROUP 3,696,660 %0.91NAN YA GROUP 3,686,932 %0.91SIA GROUP 3,657,160 %0.90BANK RAKYAT INDONESIA GROUP 3,651,020 %0.90RELIANCE INDUSTRIES LTD. GROUP 3,583,773 %0.88SPEASPAN GROUP 3,511,748 %0.87FCL GROUP 3,504,081 %0.86KEELUNG CITY GOVERNMENT GROUP 3,412,200 %0.84NOMURA HOLDINGS INC. GROUP 3,384,143 %0.84BP PLC. GROUP 3,351,462 %0.83SOUNDRISE CONSTRUCTION GROUP 3,311,989 %0.82UNI-PRESIDENT GROUP 3,278,054 %0.81KLM GROUP 3,199,626 %0.79

(Continued)

489

230


Names or titles




company’s net worthWINLINK FASTENERS CO., LTD. GROUP $ 3,069,519 %0.76AXA SA GROUP 3,001,426 %0.74

Note:

1. If the aggregate amount of credit extended, guarantees given, or any other transactions conductedby all subsidiaries of the financial holding company to, for, or with the same person, same relatedperson or same affiliate is greater than the lower of 5% of net worth of the financial holdingcompany or NT$3 billion, the related transaction information needs to be filed according to thetable refer above.

2. Credit includes loans, discounts, overdrafts, acceptances, guarantees and other lines of businessoperations designated by the Central Competent Authority.

3. Guarantees here are indicative of endorsements and guarantees of bills finance corporations.

4. Other transactions with the same person, same related person, or same affiliate (thereinafterreferred to as “the affiliates”) here are indicative of the transactions listed below:

(1) Investment in or purchase of securities issued by any of the affiliates mentioned in thepreceding paragraph;

(2) Purchase of real estate or other assets from any of the affiliates mentioned in the precedingparagraph;

(3) Sale of securities, real estate or other assets to any of the affiliates mentioned in thepreceding paragraph;

(4) Entering into agreements regarding payment of money or provision of services with any ofthe affiliates mentioned in the preceding paragraph;

(5) Arrangements involving any of the affiliates mentioned in the preceding paragraph acting asan agent or broker of a financial holding company or its subsidiaries or providing otherservices which charge commission or fees;

(6) Engaging in transactions with third parties having a relationship with any of the affiliatesmentioned in the preceding paragraph or engaging in transactions with third parties in whichthe affiliates mentioned in the preceding paragraph are involved; and

(7) The amount of the transactions with the affiliates mentioned in the preceding paragraph shallnot include negotiable certificates of deposit issued by a bank subsidiary.

(Continued)

490

231

CT

BC

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(Con

tinue

d)

491

232


CTBC FINANCIAL HOLDING CO., LTD.

STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, 2020 and 2019

(Expressed In Thousands of New Taiwan Dollars)

2020 2019Amount % Amount %

Income:

　Proportionate share of gains from associates or joint ventures under equity

method

$ 46,833,346 100 45,815,749 100

　Other income 116,530 - 159,297 -

Expenses and Losses:

　Operating expenses (1,308,565) (3) (1,820,937) (4)

　Other expenses and losses (556,777) (1) (577,410) (1)

Net Income before Tax 45,084,534 96 43,576,699 95

Less: Income tax expense 2,231,128 5 696,893 2

Net Income 42,853,406 91 42,879,806 93

Other comprehensive income (net amount after tax) 1,634,035 4 33,466,371 73

Total Comprehensive Income $ 44,487,441 95 76,346,177 166

Basic EPS (in NT dollars) $ 2.15 2.16

(Continued)

492

233

(Eng

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(Con

tinue

d)

493

234


CTBC FINANCIAL HOLDING CO., LTD.Statements of Cash Flows

For the years ended December 31, 2020 and 2019(Expressed in Thousands of New Taiwan Dollars)


Cash Flows from Operating Activities:　　Net Income before Tax $ 45,084,534 43,576,699　　Adjustments: Income and expenses items with no effect on cash flow: 　　Adjustments to reconcile profit (loss)　　　Depreciation expense 45,700 13,591　　　Amortization expense 1,141 2,166　　　Interest expenses 555,832 577,400　　　Interest income (8,042) (20,217)　　　Dividend income (60,674) (57,056)　　　Share based payment transactions - 51　　　Proportionate share of gains from associates or joint ventures under equity method (46,833,346) (45,815,749)　　　(Gains) losses on disposal and retirement of premises and equipment (284) 3　　　Gains on disposal of intangible assets (628) -　　　Others (65) -　　　　Subtotal of income and expense items with no effect on cash flows (46,300,366) (45,299,811)　　Changes in Operating Assets and Liabilities: 　　　　Net Changes in Operating Assets: 　　　　(Increase) decrease in receivables (5,503) 9　　　　Increase in other financial assets (5,009) (6,600)　　　　(Increase) decrease in other assets (5,833) 4,400　　　　　Net Changes in Operating Assets (16,345) (2,191)　　　Net Changes in Operating Liabilities: 　　　　(Decrease) increase in payables (390,614) 108,553　　　　Increase (decrease) in employee benefits liabilities 2,074 (3,958)　　　　(Decrease) increase in other liabilities (1,781,667) 1,574,855　　　　Net Changes in Operating Liabilities (2,170,207) 1,679,450　　　　　Net Changes in Operating Assets and Liabilities (2,186,552) 1,677,259　　　Total Adjustments (48,486,918) (43,622,552)　　Interest received 8,043 20,212　　Dividends received 22,321,505 21,591,282　　Interest paid (658) (338)　　Income tax paid (658,830) (1,038,590)　　　Net Cash Provided by Operating Activities 18,267,676 20,526,713Cash Flows from Investing Activities: 　Purchase of investment under equity method - (9,999,600)　Purchase of premises and equipment (1,385) (1,756)　Disposal of premises and equipment 9,769 28　Purchase of intangible assets (3,155) (5,221)　Disposal of intangible assets 4,481 -　　Net Cash Provided by (Used in) Investing Activities 9,710 (10,006,549)Cash Flows from Financing Activities: 　(Decrease) increase in commercial paper payable (24,650,000) 50,000　Issuance of corporate bonds 33,500,000 10,000,000　Repayments of corporate bonds (6,300,000) (9,600,000)　Repayments of lease liabilities principal (47,479) (6,807)　Cash dividends paid (20,486,315) (20,246,982)　Cash capital increase - 9,981,737　Interest paid (467,058) (569,737)　　Net Cash Used in Financing Activities (18,450,852) (10,391,789)Net Increase in Cash and Cash Equivalents (173,466) 128,375Cash and Cash Equivalents, at the Beginning of the Period 276,513 148,138Cash and Cash Equivalents, at the End of the Period $ 103,047 276,513

(Continued)

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(d) The condensed balance sheets and condensed comprehensive income statements of financial holdingcompany’s subsidiaries

(i) CTBC Bank Co., Ltd.

1) Condensed Balance Sheets


December 31,2020

December 31,2019

Cash and cash equivalents $ 50,514,395 61,185,120Due from Central Bank and call loans to banks 225,330,344 158,141,510Financial assets measured at fair value through profit or

loss179,608,277 153,571,292


290,266,157 246,622,394

Investments in debt instruments at amortized cost 769,948,317 682,309,098Financial assets－hedging－net 16,394 330,764Securities purchased under resell agreements 2,607,710 852,440Receivables－net 137,968,240 153,956,795Current income tax assets 953,065 646,294Loans－net 1,912,519,913 1,820,862,136Investments under equity method－net 95,097,976 96,254,688Other financial assets－net 1,372,834 1,972,738Premises and equipment－net 41,372,226 42,559,277Right-of-use assets－net 13,884,777 13,392,884Investment property－net 5,146,251 5,032,906Intangible assets－net 13,289,479 12,987,369Deferred income tax assets 5,423,258 4,345,721Other assets－net 18,185,781 19,387,370Total assets 3,763,505,394 3,474,410,796Deposits from Central Bank and other banks 51,047,357 46,967,241Due to Central Bank and other banks 2,868,770 -Financial liabilities measured at fair value through profit

or loss69,703,210 103,587,276

Financial liabilities－hedging－net 211,672 37,437Securities sold under repurchase agreements 79,988,373 92,542,347Payables 73,450,391 74,562,812Current income tax liabilities 2,947,650 2,288,233Deposits and remittances 3,070,235,293 2,744,809,949Financial debentures 58,999,999 58,999,992Other financial liabilities 9,519,839 10,980,798Provisions 4,393,268 4,469,878Lease liabilities 11,838,011 11,129,139Deferred income tax liabilities 4,799,121 2,765,346Other liabilities 11,202,596 12,022,184Total liabilities 3,451,205,550 3,165,162,632Common stock 147,962,186 144,098,754Capital surplus 29,859,205 29,793,064Retained earnings 140,869,031 139,357,470Other equity interest (6,390,578) (4,001,124)Total equity 312,299,844 309,248,164Total liabilities and equity 3,763,505,394 3,474,410,796

(Continued)

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2) Condensed Comprehensive Income Statement


For the years ended December 312020 % 2019 %

Interest revenues $ 57,393,730 70 65,422,458 75Less: Interest expenses (16,053,050) (19) (25,528,720) (29)Net interest income 41,340,680 51 39,893,738 46Non-interest income－net 40,282,593 49 46,934,891 54Net revenue 81,623,273 100 86,828,629 100Provisions for bad debt expenses,

commitments and guarantee reserve(6,150,068) (8) (4,514,556) (5)

Operating expenses (43,563,058) (53) (45,606,566) (52)Net income before tax from continuing

operations31,910,147 39 36,707,507 43

Less: Income tax expenses 4,643,161 6 5,808,272 7Net income 27,266,986 33 30,899,235 36Other comprehensive (losses) income (2,664,224) (3) 3,715,903 5Total comprehensive income 24,602,762 30 34,615,138 41EPS—net income (after tax) (in NT dollars) 1.84 2.09

(Continued)

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(ii) CTBC Securities Co., Ltd.



December 31,2020

December 31,2019

Current assets $ 33,183,776 28,209,612Financial assets measured at fair value through other

comprehensive income－non-current34,884 33,542

Investments under equity method－net 524,661 566,213Premises and equipment－net 107,909 90,060Right-of-use assets 66,340 16,443Investment property－net 47,486 47,888Intangible assets－net 67,102 58,964Deferred income tax assets 116,926 107,014Other non-current assets 437,131 432,917Total assets 34,586,215 29,562,653Current liabilities 25,565,108 21,567,657Provisions 89,283 46,837Lease liabilities 67,116 16,649Deferred income tax liabilities 27,373 8,640Total liabilities 25,748,880 21,639,783Common stock 6,441,039 6,027,140Capital surplus 796,261 796,261Retained earnings 1,361,476 1,066,876Other equity interest 238,559 32,593Total equity 8,837,335 7,922,870Total liabilities and equity 34,586,215 29,562,653

(Continued)

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Revenues $ 2,382,605 100 1,722,234 100Service fee expenses (107,811) (5) (66,865) (4)Employee benefits expenses (779,288) (33) (625,918) (36)Proportionate share of income from

associates or joint ventures under equitymethod

11,622 - 34,935 2

Operating expenses (550,252) (23) (492,716) (29)Net income before tax from continuing

operations956,876 40 571,670 33

Less: Income tax expenses 99,900 4 56,790 3Net income 856,976 36 514,880 30Other comprehensive income 57,489 2 85,331 5Total comprehensive income 914,465 38 600,211 35EPS—net income (after tax) (in NT dollars) 1.33 0.80

(Continued)

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(iii) CTBC Venture Capital Co., Ltd.



December 31,2020

December 31,2019

Current assets $ 1,535,339 228,094Financial assets measured at fair value through profit or

loss4,385,097 4,480,864

Investments under equity method－net - 23,447Premises and equipment－net 4,023 4,291Right-of-use assets 8,791 3,990Intangible assets 87 181Deferred income tax assets 42,306 33,938Other non-current assets 1,561 1,237Total assets 5,977,204 4,776,042Current liabilities 2,112,730 996,389Lease liabilities 8,896 4,095Deferred income tax liabilities - 174Total liabilities 2,121,626 1,000,658Common stock 3,666,846 3,519,581Capital surplus 1,085 1,085Retained earnings 187,647 255,624Other equity interest - (906)Total equity 3,855,578 3,775,384Total liabilities and equity 5,977,204 4,776,042




Operating revenues $ 503,389 100 472,413 100Operating costs (367,647) (73) (232,801) (49)Operating expenses (95,992) (19) (112,515) (24)Operating income 39,750 8 127,097 27Non-operating income and expense (4,989) - 2,966 1Net income before tax from continuing

operations34,761 8 130,063 28

Less: Income tax benefits (44,527) 9 (33,565) (7)Net income 79,288 17 163,628 35Other comprehensive income (losses) 906 - (659) -Total comprehensive income 80,194 17 162,969 35EPS－net income (after tax) (in NT dollars) 0.22 0.45

(Continued)

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(iv) CTBC Asset Management Co., Ltd.



December 31,2020

December 31,2019

Current assets $ 1,099,436 259,971Financial assets measured at fair value through profit or

loss278,787 310,771

Investments under equity method－net 1,423,011 1,300,966Premises and equipment－net 822 948Right-of-use assets 5,352 3,735Investment properties－net 5,058,027 5,615,388Intangible assets 165 138Deferred income tax assets 72,598 75,252Other non-current assets 4,800 1,209Total assets 7,942,998 7,568,378Current liabilities 1,327,993 2,269,495Lease liabilities 5,415 3,780Long-term borrowings 1,013,000 -Other non-current liabilities 37,918 42,194Total liabilities 2,384,326 2,315,469Common stock 5,358,820 5,358,820Capital surplus 451 451Retained earnings 282,209 (7,604)Other equity interest (82,808) (98,758)Total equity 5,558,672 5,252,909Total liabilities and equity 7,942,998 7,568,378

(Continued)

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Operating revenues $ 368,899 100 171,132 100Operating costs (48,723) (13) (38,065) (22)Operating expenses (63,946) (18) (86,922) (51)Operating income 256,230 69 46,145 27Non-operating income and expenses 81,064 22 (92,655) (55)Net income before tax from continuing

operations337,294 91 (46,510) (28)

Less: Income tax expenses 47,481 (12) 6,539 4Net income (losses) 289,813 79 (53,049) (32)Other comprehensive income (losses) 15,949 4 (36,583) (22)Total comprehensive income (losses) 305,762 83 (89,632) (54)EPS—net income (losses) (after tax) (in NT

dollars)0.54 (0.10)

(v) CTBC Security Co., Ltd.



December 31,2020

December 31,2019

Current assets $ 106,671 104,950Premises and equipment－net 1,464 1,763Right-of-use assets 3,944 948Other non-current assets 834 666Financial assets measured at fair value through other

comprehensive income103 103

Deferred income tax assets 120 551Total assets 113,136 108,981Current liabilities 42,105 39,786Lease liabilities 3,944 948Other non-current liabilities 5,297 9,082Total liabilities 51,346 49,816Common stock 47,695 47,695Capital surplus 743 743Retained earnings 13,352 10,727Total equity 61,790 59,165Total liabilities and equity 113,136 108,981

(Continued)

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Operating revenues $ 245,874 100 235,407 100Operating costs (218,594) (89) (210,403) (89)Operating expenses (20,393) (8) (18,996) (8)Operating income 6,887 3 6,008 3Non-operating income and expenses 400 - 468 -Net income before tax from continuing

operations7,287 3 6,476 3

Less: Income tax expense 1,224 - 1,413 1Net income 6,063 3 5,063 2Other comprehensive income 1,722 1 670 -Total comprehensive income 7,785 4 5,733 2EPS－net income (after tax) (in NT dollars) 1.27 1.06

(vi) Taiwan Lottery Co., Ltd.



December 31,2020

December 31,2019

Current assets $ 1,735,759 1,444,245Premises and equipment－net 68,230 82,730Intangible assets－net 25,672 23,379Right-of-use assets 28,851 9,546Deferred income tax assets 8,147 7,519Other non-current assets 15,937 17,510Total assets 1,882,596 1,584,929Current liabilities 479,922 345,167Lease liabilities 28,995 9,619Other non-current liabilities 809 770Total liabilities 509,726 355,556Common stock 500,000 500,000Capital surplus 9,895 9,895Retained earnings 862,975 719,478Total equity 1,372,870 1,229,373Total liabilities and equity 1,882,596 1,584,929

(Continued)

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Operating revenues $ 1,910,654 100 1,768,439 100Operating expenses (1,003,194) (53) (1,051,249) (59)Operating income 907,460 47 717,190 41Non-operating income and expenses 15,185 1 10,535 1Net income before tax from continuing

operations922,645 48 727,725 42

Less: Income tax expense 184,671 10 146,091 8Net income 737,974 38 581,634 34Total comprehensive income 737,974 38 581,634 34EPS－net income (after tax) (in NT dollars) 14.76 11.63

(vii) Taiwan Life Insurance Co., Ltd.



December 31,2020

December 31,2019

Cash and cash equivalents $ 95,282,013 97,244,359Receivables 17,782,395 16,067,579Current income tax assets 334,206 3,074,844Financial assets measured at fair value through profit or

loss323,364,851 318,284,421


275,337,133 239,813,816

Financial assets at amortized cost 1,034,372,565 1,016,770,576Investments under equity method－net 14,633,050 10,505,149Other financial assets－net 462,132 358,977Investment properties 79,553,433 74,491,964Loans 52,349,139 53,841,015Reinsurance assets 2,512,619 1,453,309Premises and equipment 4,652,230 4,683,271

(Continued)

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December 31,2020

December 31,2019

Right-of-use assets $ 198,521 25,675Intangible assets 7,390,801 7,194,726Deferred income tax assets 9,938,494 5,295,352Other assets 13,621,359 11,439,208Separated account insurance product assets 125,640,620 91,886,404Total assets 2,057,425,561 1,952,430,645Payables 13,145,218 12,835,607Current income tax liabilities 2,691,605 135,552Financial liabilities measured at fair value through profit or

loss1,587,517 405,174

Bonds payables 14,980,871 14,977,916Other financial liabilities 3,468,283 3,457,072Lease liabilities 1,329,340 1,128,817Insurance liabilities 1,744,391,700 1,698,027,968Reserve for insurance policies with financial instrument

features1,644 4,196

Foreign exchange rate fluctuation reserves 3,251,865 3,331,629Provisions 130,601 139,419Deferred income tax liabilities 6,729,155 5,092,409Other liabilities 1,449,330 3,216,583Separated account insurance product liabilities 125,640,620 91,886,404Total liabilities 1,918,797,749 1,834,638,746Common stock 55,880,707 45,124,335Capital surplus 33,946,149 33,946,149Retained earnings 34,469,392 29,925,207Other equity interest 14,331,564 8,796,208Total equity 138,627,812 117,791,899Total liabilities and equity 2,057,425,561 1,952,430,645

(Continued)

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Operating revenues $ 277,744,429 100 297,899,941 100Operating costs (255,744,279) (92) (279,471,084) (94)Operating expenses (4,435,247) (2) (4,926,780) (2)Operating income 17,564,903 6 13,502,077 4Non-operating revenues and expenses 59,501 - 104,694 -Net income before tax from continuing

operations17,624,404 6 13,606,771 4

Less: Income tax expenses 1,090,808 - 497,684 -Net Income 16,533,596 6 13,109,087 4Other comprehensive income 4,275,293 1 29,381,105 10Total comprehensive income 20,808,889 7 42,490,192 14EPS—net income (after tax) (in NT dollars) 2.96 2.39

(viii) CTBC Investments Co., Ltd.



December 31,2020

December 31,2019

Current assets $ 702,588 517,167Financial assets measured at fair value through profit or

loss41,001 28,892

Premises and equipment－net 26,824 20,924Right-of-use assets 20,907 4,107Intangible assets 15,572 17,540Deferred income tax assets 381 6,215Other non-current assets 119,625 98,751Total assets 926,898 693,596Current liabilities 237,887 155,044Lease liabilities 16,552 4,151Total liabilities 254,439 159,195Common stock 306,000 306,000Capital surplus 155,967 155,967Retained earnings 210,492 72,434Total equity 672,459 534,401Total liabilities and equity 926,898 693,596

(Continued)

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Operating revenues $ 940,946 100 601,697 100Operating expenses (712,795) (76) (550,223) (91)Operating income 228,151 24 51,474 9Non-operating revenues and expenses (251) - 1,504 -Net income before tax from continuing

operations227,900 24 52,978 9

Less: Income tax expenses 43,462 5 1,071 -Net income 184,438 19 51,907 9Total comprehensive income 184,438 19 51,907 9EPS—net income (after tax) (in NT dollars) 6.03 1.70

(e) Profitability of the Company

Unit: %

Items December 31, 2020 December 31, 2019Return on assets ratio (annual) Before income tax 9.92 10.69

After income tax 9.43 10.52Return on equity ratio (annual) Before income tax 11.47 12.52

After income tax 10.90 12.32Net income ratio 92.37 94.45

Note 1: Return on assets ratio = Net income before/after income tax ÷ average total assets.

Note 2: Return on equity ratio = Net income before/after income tax ÷ average total equity.

Note 3: Return on common equity ratio = (Net income before/after income tax－preferred stockdividend) ÷ average total common equity. As of December 31, 2020, the Company’ sreturn on common equity ratio (annual) before and after income tax were 12.14% and11.53%, respectively. As of December 31, 2019, the Company’ s return on commonequity ratio (annual) before and after income tax were 13.25% and 13.04%, respectively.

Note 4: Net income ratio = Net income after income tax ÷ Net revenue.

(Continued)

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(f) Profitability of the Company and subsidiaries

Unit: %






Note 3: Return on common equity ratio = (Net income before/after income tax－preferred stockdividend) ÷ average total common equity. As of December 31, 2020, the Company’ sreturn on common equity ratio (annual) before and after income tax was 13.93% and11.53%, respectively. As of December 31, 2019, the Company’ s return on commonequity ratio (annual) before and after income tax was 15.80% and 13.04%, respectively.


(g) Profitability of the Company’s subsidiaries

(i) Profitability of CTBC Bank Co., Ltd. and subsidiaries

Unit: %







Note 4: Net income before/after tax represented accumulated income of the current year.

Note 5: Tthe profitability ratios above are calculated by the amount audited (reviewed) of theCompany’s subsidiaries.

(Continued)

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(ii) Profitability of CTBC Securities Co., Ltd. and subsidiaries

Unit: %






Note 3: Net income ratio = Net income after income tax ÷ revenue.


Note 5: The profitability ratios above are calculated by the amount audited (reviewed) of theCompany’s subsidiaries.

(iii) Profitability of Taiwan Life Insurance Co., Ltd. and subsidiaries

Unit: %




Note 1: Return on assets ratio = (Net income before/after income tax + interest expenses) ÷average total assets.


Note 3: Net income ratio = Net income after income tax ÷ operating revenue.


Note 5: The profitability ratios above are calculated by the amount audited (reviewed) of theCompany’s subsidiaries.

(Continued)

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(h) Related information of its subsidiaries’ investments in Mainland China: Please refer to Note 13(c).

(i) Significant commitments and contingencies of its subsidiaries: Please refer to Note 9.

(j) Significant catastrophic losses of its subsidiaries: None.

(k) Significant subsequent events of its subsidiaries: Please refer to Note 11.

(l) Related party transactions of the Company’s subsidiaries of $100 million or more are summarized asfollow:

(i) CTBC Bank Co., Ltd.

1) Names of related parties and their relationship

Name of related party Relationship with the BankCTBC Financial Holding Co., Ltd. Parent company of the Bank.CTBC Bank (Philippines) Corp. Investee company carried under equity method by

the Bank.PT Bank CTBC Indonesia 〃

CTBC Bank Corp. (Canada) 〃

CTBC Capital Corp. 〃

The Tokyo Star Bank, Ltd. 〃

LH Financial Group Public Company Limited 〃

Grand Bills Finance Corporation 〃

Xiamen Jinmeixin Consumer Finance Co., Ltd. 〃

LH Bank Public Company Limited Investee company carried under equity method byLH Financial Group Public Company Limited.

CTBC Bank Corp. (USA) Investee company carried under equity method byCTBC Capital Corp.

Tokyo Star Business Finance, Ltd. Investee company carried under equity method byThe Tokyo Star Bank, Ltd.

TSB Servicer, Ltd. 〃

Taiwan Institute of Economic Research The Bank contributed over 1/3 of its total funds.CTBC Charity Foundation 〃

CTBC Culture Foundation 〃

CTBC Business School The company which is controlled by the samecompany as the Bank contributed over 1/3 of itstotal funds.

CTBC Anti-Drug Education Foundation 〃

Showa Denko HD Trace Corp. (Note) The Chairman of the Bank is its Director.Finance Information Service Co., Ltd. 〃

Deutsche Bank Taipei Branch (Note) The Company’s General Manager is the second-degree relative of the Director of the Bank.

(Continued)

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Name of related party Relationship with the BankCTBC Securities Co., Ltd. Controlled by the same company as the Bank.CTBC Asia Limited 〃

CTBC Securities Venture Capital Co., Ltd. 〃

CTBC Venture Capital Co., Ltd. 〃

CTBC Asset Management Co., Ltd. 〃

CTBC Security Co., Ltd. 〃

Taiwan Lottery Co., Ltd. 〃

CTBC Investments Co., Ltd. 〃

Taiwan Life Insurance Co., Ltd. 〃

CTBC Capital Co., Ltd. (used name: TLGCapital Co., Ltd.)

〃

CTBC Insurance Co., Ltd. (used name: TLGInsurance Co., Ltd.)

〃

Wu Tzu Development Co., Ltd. Investee company carried under equity method ofthe Company which is controlled by the samecompany as the Bank.

HoFa Land Development Co., Ltd. 〃


CTBC Investments Trust Funds Securities investment trust funds managed by the company which is controlled by the samecompany as the Bank.

Chung Yuan Investment Co., Ltd. The Director of the Bank's parent company.Yi Chuan Investment Co., Ltd. 〃

Ho-Wei Investment Co., Ltd. The Chairman of the Bank's parent company is itsDirector.

Weihong Investment Co., Ltd. 〃

Fenglu Development & Investment Co., Ltd. 〃

Chuan Wei Investment Co., Ltd. The company’s Chairman is the second-degreerelative of the Chairman of the Bank’s parentcompany.

Taipei Kai-Nan High School The Chairman of the Bank’s parent company is itsbody corporate representative.

CTBC Technology Building Managementauthority (Note)

The Director of the company which is controlledby the same company as the Bank is its bodycorporate representative.

CTBC Administration Building Managementauthority (Note)

〃

Pei Sheng Culture Foundation 〃

CTBC Financial Park Management authority(Note)

〃

(Continued)

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Name of related party Relationship with the BankTaipei Financial Center Corporation The Chairman of the company which is controlled

by the same company as the Bank is its Director.Nan Ya Plastics Corporation 〃

Brothers Recreational Co., Ltd. 〃

Hon Hai Precision Industry Co., Ltd. (Note) The Chairman of the Bank’s subsidiary is itsDirector.

Sundia Meditech Group (Note) The second-degree relative of the Director of theBank's subsidiary is its Chairman.

Taiwan Relo Club, Limited The Chairman of the company which is controlledby the same company as the Bank is itsChairman.

Sungbo Co., Ltd. The Director of the company which is controlledby the same company as the Bank is itsChairman.

Yan Yuan Investment Co., Ltd. The company’s General Manager is the Director ofthe company which is controlled by the samecompany as the Bank.

Chailease Finance Co., Ltd. Related party in substance.Shin Wen Investment Co., Ltd. 〃

Fina Finance & Trading Co., Ltd. 〃

Sung Young Investment Co., Ltd. 〃


Kuan Ho Construction and Development Cor 〃

Taiwan Sports Lottery Co., Ltd. 〃

CTC Group Inc. 〃

APEX Credit Solution Inc. (Note) 〃

Chinese Taipei Baseball Association 〃

Yi Hua Investment Co., Ltd. 〃

Yi Kao Investment Co., Ltd. 〃

Chinatrust Real Estate Co., Ltd. 〃

Harvest Investment Co., Ltd. 〃

Kae Lee Investment Ltd. 〃

Ronghua Investment Co., Ltd. 〃

Chung-Chie Property Management Co.,Ltd.

〃

Chailease Auto Rental Co., Ltd. 〃

Chung Cheng Investments and Development Co., Ltd.

〃

My Leasing (Mauritius) Corp. 〃

(Continued)

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Name of related party Relationship with the BankOther related parties Major executives of the Company and subsidiaries,

and their close relatives.Note: The party is not related parties in the financial statement for the year ended

December 31, 2020.

2) Significant transactions between related parties and the Bank

a) As a lessor

For the years ended December 31, 2020 and 2019, the rental revenue that the Bankreceived from Taiwan Life Insurance Co., Ltd. for the rental of buildings andparking spaces amounted to $180,094 and $143,262, respectively.

b) As a lessee

Lease liabilities

Name of related party SummaryDecember 31,

2020December 31,

2019Taiwan Life Insurance Co.,

Ltd.Leased office $ 105,002 72,352

Lease payment amountFor the years ended December

31Name of related party Summary 2020 2019


Leased office $ 11,855 11,802

c) Donations


CTBC Business School $ 112,259 47,104

d) Loans





Normalloans Overdue loans Collateral

Loanconditions

Home loan mortgage 319 $ 2,077,294 1,860,010 1,860,010 - Real estate/others

None

Others Nan Ya PlasticsCorporation

2,787,830 2,401,828 2,401,828 - Real estate/machine room

〃

〃 CTBC Bank(Philippines)Corp.

2,138,100 1,140,320 1,140,320 - None 〃

〃 Chung KwanInvestment Co., Ltd.

350,000 350,000 350,000 - Real estate 〃


〃 Kuan HoConstruction andDevelopment Cor

245,000 245,000 245,000 - Real estate 〃

(Continued)

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Normalloans Overdue loans Collateral

Loanconditions

Home loan mortgage 578 $ 2,949,732 2,626,696 2,626,696 - Real estate/others

None

Others Hon Hai PrecisionIndustry Co., Ltd.

10,903,680 3,000,000 3,000,000 - None 〃

〃 CTBC Bank(Philippines)Corp.

2,257,950 2,257,950 2,257,950 - None 〃

〃 Nan Ya PlasticsCorporation

2,808,570 1,550,792 1,550,792 - Real estate/machine room

〃

〃 PT Bank CTBCIndonesia

2,257,950 842,968 842,968 - None 〃


〃 Chung KwanInvestment Co., Ltd.

350,000 350,000 350,000 - Real estate 〃

〃 Kuan HoConstruction andDevelopment Cor

245,000 245,000 245,000 - Real estate 〃

(Continued)

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e) Deposits

December 31, 2020


balance Ending balanceRange of

interest rates

Interestexpenses

(For the yearended

December 31)Taiwan Life Insurance Co., Ltd. $ 54,038,870 21,448,561 0~0.50% 10,388CTBC Securities Co., Ltd. 7,017,813 2,579,228 0~1.60% 9,603

- - -HoFa Land Development Co., Ltd. 1,512,571 1,494,093 0~0.44% 2,808Taiwan Sports Lottery Co., Ltd. 1,491,327 1,489,899 0~0.01% 88CTBC Venture Capital Co., Ltd 1,564,015 1,483,156 0~0.15% 50CTBC Charity Foundation 1,217,253 1,185,251 0~1.07% 4,888Financial Information Service Co., Ltd. 1,012,285 1,006,551 0.01~1.07% 8,517Yan Yuan Investment Co., Ltd. 2,580,308 916,984 0~0.06% 310Chuan Wei Investment Co., Ltd. 1,005,260 868,589 0~0.01% 87Taiwan Lottery Co., Ltd. 1,296,671 767,882 0~0.12% 459CTBC Investments Co., Ltd. 722,412 653,510 0~0.49% 1,577Wu Tzu Development Co., Ltd. 659,834 652,220 0~1.00% 768My Leasing (Mauritius) Corp. 2,934,737 638,937 0.03~0.20% 86Taiwan Institute of Economic Research 605,702 600,210 0~1.09% 2,017Taipei Kai-Nan High School 575,633 554,361 0~1.04% 1,371Taiwan Wind Investment Co., Ltd. 3,463,691 533,788 0~0.15% 217Shin Wen Investment Co., Ltd. 634,510 329,963 0~0.01% 22Ronghua Investment Co., Ltd. 318,791 317,864 0~0.01% 14Chinatrust Real Estate Co., Ltd. 297,820 295,032 0~2.15% 1,518Chung Cheng Investments and Development Co.,

Ltd.289,499 287,681 0~0.01% 27

Chung Yuan Investment Co., Ltd. 330,885 241,597 0.01% 23Sung Young Investment Co., Ltd. 669,879 230,560 0~0.01% 57CTBC Asia Limited 436,122 201,703 0~3.20% 691Sundia Meditech Group 1,933,349 200,688 0.~0.03% 37Weihong Investment Co., Ltd. 174,236 174,236 0.01% 9Yi Hua Investment Co., Ltd. 510,167 169,201 0~0.01% 15Brothers Recreational Co., Ltd. 210,479 166,796 0~0.01% 13Pei Sheng Culture Foundation 183,294 143,202 0~0.05% 50Ho-Wei Investment Co., Ltd. 130,784 125,330 0~0.01% 12Kae Lee Investment Co., Ltd. 119,884 118,179 0~0.01% 12CTBC Financial Holding Co., Ltd. 25,352,847 114,489 0~0.15% 162CTBC Business School 178,105 111,872 0~1.09% 133Total $ 113,469,033 40,101,613 46,029

(Continued)

514

255


December 31, 2019


balance Ending balanceRange of

interest rates

Interestexpenses

(For the yearended

December 31)Taiwan Life Insurance Co., Ltd. $ 52,036,506 20,604,185 0~0.50% 23,822CTBC Securities Co., Ltd. 4,584,249 2,141,160 0~1.60% 13,067Showa Denko HD Trace Corp. 2,320,812 1,692,990 0~2.98% 24,439Yan Yuan Investment Co., Ltd. 1,853,257 1,347,286 0~0.06% 338HoFa Land Development Co., Ltd. 9,901,076 1,340,210 0~0.50% 10,763CTBC Charity Foundation 1,190,399 1,044,433 0~0.01% 5,942Financial Information Service Co., Ltd. 1,018,143 1,007,923 0~1.07% 10,427Chuan Wei Investment Co., Limited 1,199,249 913,771 0.01~1.07% 68Taiwan Sports Lottery Co., Ltd. 1,892,215 823,836 0~0.01% 101Sung Young Investment Co., Ltd. 1,281,449 669,831 0~0.01% 112Taiwan Lottery Co., Ltd. 747,275 643,664 0~0.12% 519Shin Wen Investment Co., Ltd. 736,457 634,510 0~0.01% 37Yi Hua Investment Co., Ltd. 510,220 510,167 0~0.01% 36CTBC Investments Co., Ltd. 543,736 495,142 0~0.49% 1,635Taiwan Institute of Economic Research 511,440 466,448 0~1.09% 2,243Harvest Investment Co., Ltd. 392,336 367,456 0~0.01% 34Taipei Kai-Nan High School 366,010 345,949 0~1.04% 2,054CTBC Financial Holding Co., Ltd. 21,762,985 282,947 0~0.26% 140Chinatrust Real Estate Co., Ltd. 254,003 250,417 0~2.15% 1,965Chung Cheng Investment Ltd. 230,189 227,916 0~0.01% 17CTBC Venture Capital Co., Ltd. 454,859 196,739 0~0.26% 103Wu Tzu Development Co., Ltd. 215,593 186,276 0~1.00% 760Ronghua Investment Co., Ltd. 254,926 185,579 0~0.01% 17CTBC Asia Limited 396,208 181,317 0~3.20% 2,985Chung Yuan Investment Co., Ltd. 177,436 177,059 0~0.01% 14Pei Sheng Culture Foundation 453,088 174,247 0~0.13% 92Hon Hai Precision Industry Co., Ltd. 188,110 143,400 0~2.74% 1,239CTBC Securities Venture Capital Co., Ltd. 298,647 135,756 0~1.07% 2,037CTBC Business School 193,601 125,832 0~1.09% 159Ho-Wei Investment Co., Ltd. 127,784 122,744 0~0.01% 12Kae Lee Investment Co., Ltd. 121,724 119,884 0~0.01% 12Brothers Recreational Co., Ltd. 192,698 118,562 0~0.26% 10Yi Kao Investment Co., Ltd. 247,906 114,457 0.01% 10Fenglu Development & Investment Co., Ltd. 124,143 106,352 0~0.01% 9Yi Chuan Investment Co., Ltd. 169,113 105,487 0~0.01% 10Weihong Investment Co., Ltd. 103,913 102,480 0.01% 10Total $ 107,051,755 38,106,412 105,238

(Continued)

515

256


f) Call loans to banks




Interestrevenues

The Tokyo Star Bank, Ltd. $ 8,552,400 0.37~2.49% 85,419




Interestrevenues


g) Call loans from banks




Interestrevenues


h) Due from other banks


2020December 31,

2019CTBC Bank Corp. (USA) $ 26,098 2,990,658CTBC Bank Corp. (Canada) 40,061 136,426LH Bank Public Company Limited - 587,067

$ 66,159 3,714,151

i) Derivative financial instruments



instrumentsContract


Unrealizedprofit Account

EndingBalance

CTBC InvestmentsTrust Funds

Money marketswap

12.02.2019~08.16.2021

USD 136,590 $ (315,705) (Note 2) (315,705)



instrumentsContract


Unrealizedprofit Account

EndingBalance

Deutsche BankTaipei Branch

Interest rate swaps 11.10.2010~06.29.2029

USD 18,003,676 (30,666) (Note2) (30,666)


02.01.2019~02.14.2022

USD 1,685,820 9,475 (Note 1) 9,475

〃 Money marketswap

03.25.2019~06.30.2020

NTD 10,837,340 (170,180) (Note2) (170,180)

CTBC InvestmentsTrust Funds

Money marketswap

12.02.2019~03.04.2020

NTD 108,590 (34,766) 〃 (34,766)

(Continued)

516

257


Note 1: Financial assets measured at fair value through profit or loss.

Note 2: Financial liabilities measured at fair value through profit or loss.

j) Securities transactions




soldCTBC Financial Holding Co., Ltd. $ 22,600,000 -

For the years ended December 31, 2019



soldCTBC Financial Holding Co., Ltd. $ 7,200,000 -Hon Hai Precision Industry Co., Ltd. 13,869,063 -

$ 21,069,063 -

k) Stocks issued by the related parties that are being held by the Company andsubsidiaries


2020December 31,

2019Taipei Financial Center Corporation $ 795,600 838,350

l) Others

i) Commission and other income

For the years ended December 31Related party Summary 2020 2019


Commission for joint sales,income from group catering,commission income, andallocation of information

$ 5,874,590 4,303,164

Taipei Financial CenterCorporation

Commission income and theremunerations to directorsand supervisors

86,412 126,877

$ 5,961,002 4,430,041

The balances of accounts receivable for foregoing transactions were asfollows:

Related party SummaryDecember31, 2020

December31, 2019


Commission for joint sales, income fromgroup catering, commission income, andallocation of information

$ 688,114 361,124

(Continued)

517

258


ii) Handling fees and other general administration expenses

For the years ended December 31Related party Summary 2020 2019

Taiwan Lottery Co., Ltd. Lottery service fees $ 1,998,030 1,804,931

Brothers Recreational Co.,Ltd.

Sponsorship, marketing feedbackfund, and gift expenses

276,925 287,801


Group insurance fees andbonus for joint sales campaigns

132,629 110,185


Sponsorship, joint-brand creditcard payments, ATM utilities,consultant fees, and redeemedrewards points

105,718 121,137

CTBC Security Co., Ltd. Security fees 91,860 142,788CTBC Financial Park

Management authorityHead office general administration

expenses- 139,973

$ 2,605,162 2,606,815

The balances of accounts payable for foregoing transactions were as follows:

Related party SummaryDecember 31,

2020December 31,

2019Taiwan Lottery Co., Ltd. Lottery service fees $ 863,035 699,868

Brothers Recreational Co.,Ltd.

Sponsorship, marketing feedbackfund and gift expenses

199 134


Group insurance fees and bonusfor joint sales campaigns

14,455 11,327


Sponsorship, joint-brand creditcard payment, ATM utilities,consultant fees, and redeemedrewards points

6,438 10,295

CTBC Security Co., Ltd. Security fees 8,893 17,756


Head office general administrationexpenses

- 36,000

$ 893,020 775,380

iii) Others

Related party SummaryDecember 31,

2020December 31,

2019CTBC Bank (Philippines)

Corp.Prepayments for investment $ - 854,169

No significant discrepancy in transaction terms found between related partytransaction and non-related party transaction.

(Continued)

518

259


(ii) CTBC Securities Co., Ltd.

1) Names of related parties and relationship

Name of related party Relationship with the CompanyCTBC Financial Holding Co., Ltd. Parent company of the Company.CTBC Bank Co., Ltd. Controlled by the same parent company as the

Company.CTBC Venture Capital Co., Ltd. 〃






CTBC Insurance Co., Ltd. (used name:TLG Insurance Co., Ltd.)

〃

CTBC Capital Co., Ltd. (used name:TLG Capital Co., Ltd.)

〃

CTBC Investments Trust Funds A securities investment trust fund managed by thecompany which is controlled by the same companyas the Company.

CTBC (Mauritius) Holding Co., Ltd. An investee company carried under equity method.CTBC Investment Service Co., Ltd. 〃

CTBC Securities Venture Capital Co.,Ltd.

〃

CTBC Asia Limited An investee company carried under equity method byCTBC (Mauritius) Holding Co., Ltd.

CTBC Financial Park Managementauthority (Note)

The Director of the company which is controlled bythe same company as the Company is its bodycorporate representative.

CTBC Technology BuildingManagement authority (Note)

〃


Note: The party is not related parties in the financial statement for the year endedDecember 31, 2020.

2) Significant transactions with related parties

Please refer to Note 12(l)(i) for transactions with CTBC Bank Co., Ltd.

Please refer to Note 7(b)(x) for transactions with CTBC Investments Co., Ltd.

(Continued)

519

260


(iii) CTBC Venture Capital Co., Ltd.

1) Names of the related parties and relationship

Name of related party Relationship with the CompanyCTBC Financial Holding Co., Ltd. Parent company of the Company.CTBC Bank Co., Ltd. Controlled by the same company as the Company.CTBC Securities Co., Ltd. 〃

CTBC Securities Venture Capital Co.,Ltd.

〃







〃


〃

CTBC Capital International Co.,Limited (Note 1)

An investee company carried under equity method.

CTBC Financial Park Managementauthority (Note 2)



Note 1: The party’s liquidation was completed in December 2020.

Note 2: The party is not related parties in the financial statement for the year ended December31, 2020.


(Continued)

520

261


(iv) CTBC Asset Management Co., Ltd.









〃

CTBC International Co., Limited An investee company carried under equity method.CTBC Financial Leasing Co., Ltd. An investee company carried under equity method by

CTBC International Co., Limited.CTBC Financial Park Management

authority (Note)The Director of the company which is controlled by

the same company as the company is its bodycorporate representative.

Chailease Auto Rental Co., Ltd. Related party in substance.Other related parties Major executives of the Company and subsidiaries

and their close relatives.

Note: The party is not related parties in the financial statement for the year ended December31, 2020.



(Continued)

521

262


(v) CTBC Security Co., Ltd.


Name of related party Relationship with the CompanyCTBC Financial Holding Co., Ltd. Parent company of the Company.CTBC Bank Co., Ltd. Controlled by the same company as the Company.CTBC Securuties Co., Ltd. 〃






Brothers Entertaining Co., Ltd. The Chairman of the company which is controlled bythe same company as the Company is its Director.

CTBC Charity Foundation The company which is controlled by the samecompany as the Company contributed over 1/3 ofits total funds.

Chuan Wei Investment Co., Ltd. The second-degree relative of the Chairman of theparent company is its chairman.

Chung Yuan Investment Co., Ltd. The Institutional Director of the parent company.Yi Chuan Investment Co., Ltd. 〃

Changchi Investment Ltd. 〃

CTBC Administration BuildingManagement authority (Note)

The Director of the Company is its body corporaterepresentative.

CTBC Technology BuildingManagement authority (Note)

〃

Yi Kao Investment Co., Ltd. Related party in substance.Bo Yu Investment Co., Ltd. 〃


Kuan Ho Construction and DevelopmentCor

〃

Chung-Chie Property Management Co.,Ltd.

〃





(Continued)

522

263


(vi) Taiwan Lottery Co., Ltd.









〃


〃

CTBC Business School The Company contributed over 1/3 of its total funds.CTBC Anti-Drug Educational

Foundation〃

CTBC International AcademyFoundation

〃


The Chairman of the company which is controlled bythe same company as the Company is its bodycorporate representative.





(Continued)

523

264


(vii) Taiwan Life Insurance Co., Ltd.








CTBC Investments Trust Funds A securities investment trust fund managed by thecompany which is controlled by the same companyas the Company.


A subsidiary company of the Company.


〃

HoFa Land Development Co., Ltd. An investee company carried under equity method bythe Company.

Wu Tzu Development Co., Ltd. 〃

Star Shining Energy Co., Ltd. 〃

Top Taiwan IX Venture Capital Co., Ltd. 〃

King Dragon Life Insurance Co., Ltd. 〃

Giga Green Energy Co., Ltd. 〃


Solarbright Energy Co., Ltd. 〃

Star Power Energy Co., Ltd. 〃

Li-Wei Energy Co., Ltd. 〃



Nan Ya Plastics Corporation The Chairman of the company which is controlled bythe same company as the Company is its Director.

Formosa Sumco Technology Corporation 〃

Growww Media Co., Ltd. (Note) 〃

Chailease Finance Co., Ltd. Related party in substance.Other related parties Major executives of the Company and subsidiaries

and their close relatives.


(Continued)

524

265



a) The following table presents the commission by the Company and its relatedparties:


CTBC Investments Co., Ltd. $ 163,046 125,439

b) The following table presents the handling fee by the Company and its relatedparties:


CTBC Investments Co., Ltd. $ 84,745 100,770

c) The following table presents the ending balance of the discretionary accountinvested by the related parties:


2020December 31,

2019CTBC Investments Co., Ltd. $ 46,235,976 40,474,535

d) The following table presents information regarding stocks issued by the relatedparty that are being held by the Company:


2020December 31,

2019Nan Ya Plastics Corporation $ 1,199,292 1,214,304Formosa Sumco Technology Corporation 164,362 142,448Total $ 1,363,654 1,356,752


Please refer to Note 7(b)(x) for transactions with CTBC Investments Co., Ltd.

(Continued)

525

266


(viii) CTBC Investments Co., Ltd.









〃

CTBC Investments Trust Funds A securities investment trust fund managed by theCompany.




Please refer to Note 12(l)(vii) for transactions with Taiwan Life Insurance Co., Ltd.

Please refer to Note 7(b)(x) for funds investment transactions with CTBC InvestmentsCo., Ltd.

(m) Significant contracts: Please refer to Note 9(a).

(n) The income and expenses arising from the joint marketing operation and information interoperabilityamongst the Financial Holding Company’s subsidiaries were allocated as follows:

The Company’s subsidiary CTBC Bank Co., Ltd. (“CTBC Bank”) and Taiwan Life Insurance Co.,Ltd.(“Taiwan Life”) have gained from the joint business promotion. The bonus for joint marketingwith CTBC Bank and Taiwan Life shared based on annual commission rate agreed between allparties for each insurance product.

(Continued)

526

267


(o) The movement of compulsory auto and motorcycle insurance reserves (retained business) for theCompany’s sub-subsidiary CTBC insurance Co., Ltd.:


Compulsory auto insuranceBeginningbalance

Currentprovision

Currentrecovery

Endingbalance

Unearned premium reserve $ 60,931 51,514 60,931 51,514Claim reserve 118,890 102,588 118,890 102,588Special reserve (211,450) - 3,481 (214,931)Total $ (31,629) 154,102 183,302 (60,829)


Compulsory auto insuranceBeginning

balanceCurrent

provisionCurrentrecovery

Endingbalance

Unearned premium reserve $ 67,703 60,931 67,703 60,931Claim reserve 127,723 118,890 127,723 118,890Special reserve (195,043) - 16,407 (211,450)Total $ 383 179,821 211,833 (31,629)


Compulsory motor insuranceBeginningbalance

Currentprovision

Currentrecovery

Endingbalance

Unearned premium reserve $ 61,075 54,992 61,075 54,992Claim reserve 50,064 51,473 50,064 51,473Special reserve 243,497 - 28,153 215,344Total $ 354,636 106,465 139,292 321,809


Compulsory motor insuranceBeginning

balanceCurrent

provisionCurrentrecovery

Endingbalance

Unearned premium reserve $ 63,412 61,075 63,412 61,075Claim reserve 52,414 50,064 52,414 50,064Special reserve 256,545 - 13,048 243,497Total $ 372,371 111,139 128,874 354,636

(Continued)

527

268


(p) The information of segmentation of specific assets of the Company’ s sub-subsidiary CTBCInsurance Co., Ltd.:

(i) The Company’s sub-subsidiary CTBC Insurance Co., Ltd. is engaged in compulsory auto TPLinsurance (hereinafter referred to as “ this insurance” ), in accordance with “ CompulsoryAutomobile Liability Insurance Law” , The Company’ s sub-subsidiary CTBC Insurance Co.,Ltd. build an independent account to record the operation and financial activities of theinsurance. As of December 31, 2020 and 2019, assets and liabilities of the Company’s sub-subsidiary CTBC Insurance Co., Ltd. operated on this insurance were as below:

December 31,2020

December 31,2019

AssetsCash and cash equivalents $ 239,875 300,358Notes receivable 536 1,250Premiums receivable 2,036 2,296Claims recoverable from reinsurers 8,116 9,407Due from reinsurers and ceding companies 16,269 15,062Ceded unearned premiums reserve 42,658 58,814Ceded claim reserve 77,420 95,288Temporary payments and suspense accounts 63 1,890Total Assets $ 386,973 484,365

LiabilitiesNotes payable $ 372 433Due to reinsurers and ceding companies 5,537 6,787Unearned premium reserve 149,164 180,820Claim reserve 231,481 264,242Special reserve 413 32,047Temporary receipts and suspense accounts - 14Other liabilities 6 22Total liabilities $ 386,973 484,365

(Continued)

528

269


According to the Article 5 of the Regulations for Deposit and Management of the Reserve ofCompulsory Automobile Liability Insurance Article, special reserves provided shall deposit infinancial institutions as time deposits, once insurer has reported and gotten the approval of thecompetent authority, it may purchase domestic securities. As of December 31, 2020 and 2019,the amounts of time deposits the Company’s sub-subsidiary CTBC Insurance Co., Ltd. placedin financial institutions described in preceding paragraph were $413 and $32,047, respectively.Additionally, according to article 6 of “ Regulations for Deposit and Management of theReserve of Compulsory Automobile Liability Insurance” , except for the aforesaid specialreserve provided, funds (including reserves, payables, and suspense accounts to carry forward)shall be deposited in financial institutions in the form of demand deposits and time deposits,but as funds provided that with the approval of the competent authority, an insurer maypurchase domestic securities. The Company’s sub-subsidiary CTBC Insurance Co., Ltd. placeddeposits in financial institutions to support the expenditures of the insurance, as of December31, 2020 and 2019, the amounts of demand deposits were $62,375 and $44,208, respectively,note deposits were $0 and $150, respectively, and time deposits were $177,087 and $223,953,respectively.

(ii) The information of the Company’s sub-subsidiary CTBC Insurance Co., Ltd. for the insurancerevenue and cost:


Operating revenue

Premium (containing reinsurance premium) $ 247,702 303,461

Less: Reinsurance expense (69,623) (98,160)

Net change in unearned premiums reserve 15,500 9,109

　Retained earned premium 193,579 214,410

　Interest income 264 637

$ 193,843 215,047

Operating costs

Insurance claim payment (contain reinsurance indemnity) 367,285 386,055

Less: Claims recoverable from reinsurers (126,915) (130,370)

Retained claim payment 240,370 255,685

Net change in claim reserve (14,893) (11,183)

Net change in special claim reserve (31,634) (29,455)

$ 193,843 215,047

(iii) According to the Article 11 of the Regulations for the Management of the Various Reserve forCompulsory Automobile Liability Insurance, when an insurer suspends or terminates itsoperations, reserves of the insurance shall transfer into the reserves provided by the otherinsurer that assume the business. If in a situation that there is no any insurer to assume theinsurance business and the balance of the special reserve is positive, it shall transfer the assetscorresponding to the special reserve to the Motor Vehicle Accident Compensation Fund.

(Continued)

529

270


When an insurer has been duly ordered to suspend business and undergo rehabilitation,ordered to dissolve, or its permission to operate the insurance business has been revoked, andno other insurer is to assume this insurance business, and there is no outstanding liability underthe insurance and the balance of the special reserve is positive, the assets corresponding to thespecial reserve shall be transferred to the Motor Vehicle Accident Compensation Fund.

(q) Unauthorized Reinsurance Reserve

The Company’s sub-subsidiary CTBC Insurance Co., Ltd.’s arrangements of reinsurances are basedon the “ Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and OtherRisk Spreading Mechanisms” , stipulated to evaluate ceded reinsurers’ qualification with creditratings and periodically track the changes of their credit ratings. The unauthorized reinsurers’transactions, in accordance with the “ Reservation of Unauthorized Reinsurance Reserve (e)” , aredisclosed as follows:

(i) The summary and the sorts of unauthorized reinsurances:

December 31, 2020

Ceded Reinsurers SummaryBest RE(L) Limited contracts of marine insurances and

engineering facultative reinsurancesTrust International Insurance and Reinsurance

Co., B.S.C(C)Trust Re, Labuancontracts of marine insurances, contracts of

casualty insurances, and contracts ofengineering facultative reinsurances

Asia Capital Reinsurance Group Pte Ltd.Singapore

contracts of casualty insurances, contracts ofmarine insurances, contracts ofengineering facultative reinsurances, andaviation facultative reinsurances

December 31, 2019

Ceded Reinsurers SummaryBest RE(L) Limited contracts of marine insurances and

engineering facultative reinsurancesTrust International Insurance and Reinsurance

Co., B.S.C(C)Trust Re, Labuancontracts of marine insurances and

commercial fire facultative reinsurancesAsia Capital Reinsurance Group Pte Ltd.

Singaporecontracts of casualty insurances, contracts of

marine insurances, contracts ofcatastrophe excess of loss reinsurances,contracts of aviation facultativereinsurances, contracts of engineeringfacultative reinsurances, and commercialfire facultative reinsurances

(Continued)

530

271


(ii) The reinsurance expense and reinsurance commission income of the Company’s sub-subsidiaryCTBC Insurance Co., Ltd. were as follows:

For the years ended December 31,2020 2019

Reinsurance expense $ 369 2,197Reinsurance commission income 65 445

(iii) As of December 31, 2020 and 2019, the unauthorized reinsurance reserves of the Company’ssub-subsidiary CTBC Insurance Co., Ltd. were as follows:

December 31,2020

December 31,2019

Ceded unearned premium reserve $ 184 1,295Reported but unpaid ceded claim reserve 103 1,346Overdue in nine months and paid claims recovered from

reinsurers833 151

Total unauthorized reinsurance reserve $ 1,120 2,792

(Continued)

531

272


(13) Other disclosures:

(a) Information on significant transactions:

For the year ended December 31, 2020, according to the Regulations Governing the Preparation of Financial Reports by FinancialHolding Companies, the related information on significant transactions by the Company and subsidiaries that should be furtherdisclosed as follows:

(i) Loans to other businesses or individuals:

Unit: In Thousands of New Taiwan DollarsCollateral

Number(Note 1) Creditor Debtor

Interactionaccount

Relatedparty

The highestbalance inthe period

Endingbalance(Note 2)

Actual Loanbalance

Interest ratefluctuation

Nature ofthe loan(Note 3)

Amount ofbusinesscontact

The reasonfor short-

termborrowing

Provision forbad debt

allowance Item Value

The limitamount ofindividual

loan(Note 4)

Total limit ofloan

(Note 5)1 CTBC

FinancialLeasing Co.,Ltd.

Buynow StoryElectronic Ltd.,Shanghai

Entrustedloans/otherincome

No 17,778 - - 6.5% 1 43,820 Actualbusinesscontact

- - 266,341 532,682

Note 1: Serial number is determined as follows:

(1) 0 represents parent company.

(2) Subsidiaries are numbered in a sequence of Arabic numerals from 1 based on company category.

Note 2: Those ending balances are effective credit/amount as of the reporting date.

Note 3: The natures of loans are determined as follows:

(1) Please fill 1 if the category belongs to business relation.

(2) Please fill 2 if the category belongs to short-term loan.

(3) The natures of the leasing of the sub-subsidiary.

Note 4: The limit to the individual borrower: 10% of the creditor’s net worth.

Note 5: The total limit of the loan: 40% of the creditor’s net worth.

(ii) Endorsements and guarantees for others:


Counter-party of guarantee and endorsement Limitation on Highest Balance of Amount of

Ratio ofaccumulatedamounts of

guarantees and Parent

companySubsidiary

endorsements/ Endorsements/guarantees to

No. Name ofguarantor Name

Reason(Note 2)

amount ofguarantees and endorsementsfor a specific

enterprise

balance forguarantees andendorsements

during the period

guaranteesand

endorsementsas of

reporting date

Actual usageamount

during theperiod

propertypledged forguarantees

andendorsements

endorsements tonet worth of the

latestfinancial

statements

Maximum amount for

guarantees andendorsements

endorsements/ guarantees to

third parties onbehalf of

subsidiary

guaranteesto third parties

on behalf ofparent

company

third partieson behalf ofcompanies in

MainlandChina

1 CTBCSecuritiesCo., Ltd.

CTBC AsiaLimited

5 420,456 100,000 100,000 - - %1.20 3,363,644 Y N N

Note 1: Serial number is determined as follows:

(1) 0 represents parent company.

(2) Subsidiaries are numbered in a sequence of Arabic numerals from 1 based on company category.

Note 2: The reasons recognized between the securities-industry subsidiaries and endorsees or guarantees are as follow:

(1) Overseas subsidiary of securities firm is required to perform underwriting business.

(2) Overseas subsidiary issues call (put) warrants overseas.

(3) Overseas subsidiary acting as the offshore structured product issuing institution or guarantor sells the products inside the ROC in accordance with theRegulations Governing Offshore Structured Products, and its domestic parent company acts as the general agent.

(4) Overseas subsidiary is required for the issuance of corporate bonds.

(5) Overseas subsidiary is financed from local financial institutions for the business needs.

(6) Endorsements and guarantees between the overseas subsidiaries of securities firms.

(7) Others (please indicate the reasons).

(Continued)

532

273


(iii) Marketable securities held as of December 31, 2020 (the associates of invested subsidiaries and joint controlledorganizations are excluded): Not applicable to bank, securities, and insurance subsidiaries; others:

Unit: In Thousands of New Taiwan Dollars/Thousands of SharesMarketable Relationship Ending balance

Name of companyholding securities

securities typeand name

with the securitiesissuer Account Number of shares Carrying amount Shareholding ratio

Fair value(Note 1) Note

CTBC Venture CapitalCo., Ltd.

EirGenic, Inc. - Financial assets measuredat fair value through profitor loss

6,255 293,964 %3.03 293,964

〃 Yuen Foong Yu ConsumerProducts Co., Ltd.

- 〃 12,000 476,400 %4.90 476,400

〃 Others (Note 2) - 〃 - 3,614,733 %- 3,614,733CTBC AssetManagement Co., Ltd.

Privately Offered Fund –CVICredit Value Fund B III

- 〃 - 228,787 %- 228,787

〃 Beneficiary Certificate – Taishin 1699 Money MarketFund

- 〃 3,664 50,000 %- 50,000


Beneficiary Certificate –CTBC Hwa-win MoneyMarket Fund

Securitiesinvestment trustfund managed byCTBC InvestmentsCo., Ltd.

〃 1,806 20,066 %0.04 20,066

〃 Beneficiary Certificate –CTBC Vietnam Equity Fund- NTD

〃〃 1,107 12,277 %0.35 12,277

〃 Beneficiary Certificate –CTBC Taiwan Small-capFund

〃〃 257 4,192 %0.95 4,192

〃 Others (Note 2) 〃〃 - 4,466 %- 4,466CTBC Capital Co., Ltd. Union Bank of Taiwan

(2838A)- 〃 4,000 207,200 %2.00 207,200

〃 Formosa Plastic Corporation - Financial assets measuredat fair value through othercomprehensive income

760 73,264 %0.01 73,264

〃 Mega Finance Holding Co.,Ltd.

- 〃 3,088 92,022 %0.02 92,022

〃 Quanta Computer Co., Ltd. - 〃 1,315 106,384 %0.03 106,384〃 Taishin Holdings Preferred

Stock(2887E)- 〃 1,511 79,479 %0.19 79,479

〃 Taiwan Cement Co., Ltd. - 〃 1,676 72,409 %0.03 72,409〃 Asia Cement Corporation - 〃 1,500 64,800 %0.04 64,800〃 Others (Note 2) - 〃 - 125,737 %- 125,737

Note 1: Listed/OTC companies are measured at fair value. The net worth for a non-listed/ OTC company is calculated based on the proportion of total stockholders’equity on hand. The net value of listed/ OTC companies’ preferred shares is based on the liquidation price plus dividends in arrears.

Note 2: Those account balances held by companies are less than 5% of ending balance.

(iv) Accumulative purchases or sales of the same securities/ investee’ s capital stock up to $300,000 or over 10% of paid-incapital:

Unit: In Thousands of New Taiwan Dollars/Thousands SharesMarketable Beginning Acquisition Disposition Ending

Acquiring/selling

company

securitiestype and

name Account Counterparty RelationshipNumber of

shares AmountNumber of

shares AmountNumber of

shares Sell price Book valueGain/loss

on disposalNumber of

shares AmountCTBC BankCo., Ltd.

securities Investmentunder equitymethod-net

CTBC Bank(Philippines)Corporation

Investmentunder equitymethod

299,012 5,783,563 48,307 854,169 - - - - 347,319 6,687,352(Note)

〃 securities Financial assetsmeasured atfair valuethrough othercomprehensiveincome

Line BankTaiwanLimited

- - 50,000 500,000 - - - - 50,000 500,000

CTBCVentureCapital Co.,Ltd.

securities ofYuen FoongYuConsumerProductsCo., Ltd.

Financial assetsmeasured atfair valuethrough profitor loss

- - 12,000 476,400 - - - - 12,000 476,400

CTBC AssetManagementCo., Ltd.

BeneficiaryCertificate–Taishin 1699MoneyMarket

Financial assetsmeasured atfair valuethrough profitor loss

- - 49,996 680,500 46,332 630,540 630,500 40 3,664 50,000

Taiwan LifeInsuranceCo., Ltd.

securities Investmentunder equitymethod-net

Li-WeiEnergy Co.,Ltd.

Investmentunder equitymethod

- - 42,500 425,000 - - - - 42,500 419,535(Note)

Note: The ending balance includes recognition of investment income or loss.

(Continued)

533

274


(v) Acquisition of real estate up to $300,000 or 10% of paid-in capital:


Previous transfer of related partyPrice

determination

Company ofacquisition Property

Triggeringdate

Transactionprice

Status ofpayment Counter-party Relationship Owner

Relationshipwith theissuer

Date oftransfer Amount

andsupportingreferencematerials

Purpose ofacquisition

Othercommitment

Taiwan LifeInsurance Co.,Ltd.

Land: Lot No. 872at 1st subsectionSanxing Section,Xinyi District,Taipei City;Building: 4F., 4F-1.,5F. and 5F-1., No.456 and 4F., 5F.and 5F.underground 15parking spaces, No.458 at 4th SectionXinyi Road, XinyiDistrict, Taipei City

Thesubsidiarysigned thecontract inDecember2019, andgained theownership inJanuary 2020.

692,889 The totalamount of thecontract pricehas beenpaid.

Three peopleand Xie DaHydropowerEngineeringCo., Ltd.

Non-relatedparties

Notapplicable

Notapplicable

Notapplicable

- Appraisalreport of realestateappraisers

Real estateinvestment inaccordancewith theInsurance Law

None


Land: Lot No. 22 at1st subsectionRenai Section, Da’an District, TaipeiCity; Building: No.302, No.304, 1F.,2F., 2F-1., 2F-2.,2F-3., 2F-4., 2F-5.,No. 306 at 4thSection Guangfu S.Road, Da’anDistrict, Taipei City

Thesubsidiarysigned thecontract inSeptember2020, andgained theownership inOctober2020.

536,889 The totalamount of thecontract pricehas beenpaid.

Two people Non-relatedparties

Notapplicable

Notapplicable

Notapplicable



None


Land: Lot No. 32-2at Jintai Section,Zhongshan District,Taipei City;Building: 8F., 8F-1.,8F-2., 8F-3., 8F-5.,8F-6., 8F-7., 8F-8.,8F-9., 8F-10., 9F.,9F-1., 9F-2., 9F-3.,9F-5., 9F-6., 9F-7.,9F-8., 9F-9., 9F-10., 10F., 10F-1.,10F-2., 10F-3.,10F-4., 10F-5.,10F-6., 10F-7.,10F-8., 10F-9., and10F-10., and 72parking spaces, No.267 at Lequn 2ndRd., ZhongshanDistrict, Taipei City


3,688,880 The downpayment$922,220 hasbeen paid,but yet thesecond andthirdinstallment$737,776 and$2,028,884.

HighwealthConstructionCo., Ltd.,Run LongConstructionCo., Ltd., andChyi YuhConstructionCo., Ltd.

Non-relatedparties

Notapplicable

Notapplicable

Notapplicable



None


Land: Lot No. 57 atShuibiantouSection, TaoyuanDistrict, TaoyuanCity ; Building: Thewhole building atNo. 36, Jingguo 2ndRoad., TaoyuanDistrict, TaoyuanCity


819,889 The downpayment$163,978 hasbeen paid,but yet thesecond andthirdinstallment$163,978 &491,933.

Two peopleand GuahaoCo., Ltd.

Non-relatedparties

Notapplicable

Notapplicable

Notapplicable



None

(vi) Disposal of real estate up to $300,000 or 10% of paid-in capital:

Units: In Thousands of New Taiwan DollarsName of company

Type of property

Transaction date

Acquisition date

Carryingamount

Transaction price Status of receipt

Gain ondisposal (note) Counter-party

Nature of relationship

Purpose of disposal Price reference Other terms


16F., No. 11 and16F., No. 9, Songgao Rd.,Xinyi Dist.,Taipei City 110(Include 10parking spaces)

The Subsidiary’sboard of directorsapproved in August2020, andtransferred theownership inSeptember 2020.

August 30,2017

998,041 1,240,880 The total amountof the contractprice has beenreceived.

234,673 Ying JanDevelopmentCo., Ltd.

Non-relatedparties

Main operatingactivities

Appraisalreport

None


The wholebuilding at No.142, AnkangRoad, NeihuDistrict, TaipeiCity

The Subsidiary’sboard of directorsapproved inDecember 2020, andtransferred theownership in March2021.

May 7, 2018 324,514 395,000 The downpayment andsecondinstallment$79,000 havebeen received.

62,000 DediprogTechnologyCo., Ltd.

Non-relatedparties

Main operatingactivities

Appraisalreport

None

(Continued)

534

275


Note: Gain from disposal for real estate is deducting related expenses.

(vii) Discount on commission fees for transaction with related parties up to $5,000: None.

(viii) Receivables from related parties up to $300,000 or over 10% of paid-in capital:


Account receivable Balance due from Turnover Overdue from related partySubsequentcollections provision for

creditor Counterparty Relationship related party rate Amount Disposal from related party bad debtsTaiwan Lottery Co., Ltd. CTBC Bank Co., Ltd. Controlled by the

same company asTaiwan Lottery Co.,Ltd.

863,035 %- - - The total amount hasbeen received.

-

CTBC Bank Co., Ltd. Taiwan LifeInsurance Co., Ltd.

Controlled by thesame company asCTBC Bank Co., Ltd.

688,114 %- - - The total amount hasbeen received.

-

(ix) Financial derivative transactions: Not applicable to bank subsidiaries; others: Please refer to Note 6(au).

(x) Information on NPL disposal transaction:

1) Summary table of NPL disposal:

Unit: In Thousands of JPY

Trade date Counterparty Debt component Book value Sale priceGains (losses)

on disposal Additional term RelationshipMay 26, 2020 Yamada Servicer

Synthetic Office Co., Ltd.Secured loan JPY 24,264 JPY 24,082 JPY (182)None Non-related party

May 26, 2020 Abilio Servicer Co., Ltd. Secured loan JPY 31,585 JPY 30,394 JPY (1,191)None Non-related partySeptember 8, 2020 HS Servicer Co., Ltd. Non-Secured loan JPY 83,760 JPY 9,327 JPY (74,433)None Non-related partySeptember 8, 2020 Japan Collection Service

Co., Ltd.Non-Secured loan JPY 188,270 JPY 77,207 JPY (111,063)None Non-related party

November 20, 2020 Aozora Servicing. Ltd. Secured loan JPY 80,344 JPY 78,773 JPY (1,571)None Non-related partyNovember 20, 2020 Abilio Servicer Co., Ltd. Non-secured loan JPY 360 JPY 1,160 JPY 800 None Non-related party

2) Disposal of a single batch of NPL up to $1,000,000 and information on each transaction: None.

(xi) Types of securitization instruments approved to be issued pursuant to financial assets securitization rules or real estatesecuritization rules and other relevant information: None.

(xii) Business relationships and material transaction between the parent company and subsidiaries:

Unit: In Thousands of New Taiwan DollarsTransaction status for the year ended December 31, 2020

No.(Note) Party Counterparty Relationship Account Amount Terms

Percentage ofconsolidated net

revenue or consolidatedtotal assets

0 CTBC FinancialHolding Co., Ltd.

CTBC Bank Co., Ltd. Parent companyto subsidiary

Cash and cashequivalents/Deposits andremittances

102,881 The terms of loans betweenrelated and non-relatedparties are identical.

-%

1 CTBC Bank Co.,Ltd.

CTBC Securities Co.,Ltd.

Subsidiary tosubsidiary

Deposits andremittances/Other asset


-%




Deposits andremittances/Other financialasset


0.01%




Deposits andremittances/Cash and cashequivalents


0.01%






0.01%


Taiwan Lottery Co., Ltd. Subsidiary tosubsidiary



0.01%



Payables/Receivables


0.01%

(Continued)

535

276


Transaction status for the year ended December 31, 2020

No.(Note) Party Counterparty Relationship Account Amount Terms

Percentage ofconsolidated net

revenue or consolidatedtotal assets



Other general andadministrativeexpenses/ Serviceincome

1,910,654 The terms of loans betweenrelated and non-relatedparties are identical.

0.98%


CTBC Venture CapitalCo., Ltd.




0.02%






0.26%




Receivables/Payables


0.01%




Right-of-use assets/ Lease liabilities


-%




Service fee andcommissionincome/ Servicefee andcommissionexpenses


3.07%




Net other non-interest income/Depreciation andamortizationexpenses


0.09%




Other general andadministrativeexpenses/ Net othernon-interestincome


0.06%

1 Taiwan LifeInsurance Co., Ltd.



Service fee andcommissionincome/ Servicefee andcommissionexpenses


0.07%


The Tokyo Star Bank, Ltd. Subsidiary to sub-subsidiary

Deposits fromCentral Bank andother banks/ Duefrom Central Bankand other banks


0.04%


The Tokyo Star Bank, Ltd. Subsidiary to sub-subsidiary

Due from CentralBank and otherbanks/ Depositsfrom Central Bankand other banks


0.13%


PT Bank (Philippines)Corp.

Subsidiary to sub-subsidiary

Loans/ Due toCentral Bank andother banks


0.02%


CTBC Asia Limited Subsidiary to sub-subsidiary

Deposits andremittances/ Cashand cashequivalents


-%

Note: Serial number is determined as follows:

1. 0 represents parent company.

2. Subsidiaries are numbered in a sequence of Arabic numerals from 1 based on company category.

(xiii) Other significant transactions that may have substantial influence upon the decisions made by financial report users: None.

(Continued)

536

277


(b) Information on investees:

The following is the information on investees for the year ended December 31, 2020 (excluding information on investees in Mainland China):

Unit: In Thousands of New Taiwan Dollars/Thousands SharesAggregate shareholding of the Company and subsidiaries

Name of Main Investment Number of Totalinvesteecompany Address

businessscope

Shareholdingratio

Carryingamount

gain(loss)recognized

Number ofshares

pro formashares

Number ofshares

Shareholdingratio Note

CTBC BankCo., Ltd.

No. 166, 168, 170,186, 188 Jingmao2nd Road, Taipei City

Commercial bankingand financingbusiness

100.00% 310,744,083 27,909,537 14,796,218 - 14,796,218 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBC SecuritiesCo., Ltd.

3F., No. 168, Jingmao2nd Road, Taipei City

Securities and futuresbusiness

100.00% 8,855,850 856,976 644,104 - 644,104 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBC VentureCapital Co., Ltd.

21F., No. 168,Jingmao 2nd Road,Taipei City

Venture capitalinvestment




Asset managementbusiness


CTBC SecurityCo., Ltd.


Protection, fire andlife safety services

100.00% 61,697 7,692 4,770 - 4,770 100.00%

Taiwan LotteryCo., Ltd.


Issuing, selling,promoting, drawing,redeeming, andmanaging kinds oflottery products


CTBCInvestments Co.,Ltd.


Investment and trustbusiness

100.00% 852,515 184,438 30,600 - 30,600 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.



Life insurancebusiness

100.00% 134,902,363 16,767,628 5,588,071 - 5,588,071 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBC Bank(Philippines)Corp.

16th to 19th Floors,Fort Legend Towers31st Street corner 3rdAvenue BonifacioGlobal City, TaguigCity, 1634 Philippines



PT Bank CTBCIndonesia

Tamara Center,15th~17th F1, JIJenderal SudirmanKev. 24 Jakarta12920 Indonesia


99.00% 6,147,128 137,246 1 - 1 99.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBC BankCorp. (Canada)

Suite #350-2608Granville Street,Vancouver, B.C.,V6H 3V3, Canada



CTBC CapitalCorp.

801 S. FigueroaStreet, Suite 2300,Los Angeles, CA90017, USA

Investment business 100.00% 16,618,179 1,057,309 6 - 6 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

Grand BillsFinanceCorporation

11F., No. 560, Sec. 4,Jhongsiao E. Rd.,Taipei City

Proprietary trading ofshort-term bills andsecurities

21.15% 2,281,315 153,485 114,399 - 114,399 21.15%

CTBC BankCorp. (USA)

801 S. FigueroaStreet, Suite 2300,Los Angeles, CA90017, USA


100.00% 15,939,925 1,031,453 Common shares-3

Preferred shares-100

- Common shares-3

Preferred shares-100

100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

(Continued)

537

278


Aggregate shareholding of the Company and subsidiariesName of Main Investment Number of Totalinvesteecompany Address

businessscope

Shareholdingratio

Carryingamount


Number ofshares

pro formashares

Number ofshares


The Tokyo StarBank, Ltd.

2-3-5, Akasaka,Minato-Ku, Tokyo,107-8480, Japan


100.00% 44,444,069 (924,102) 700 - 700 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

Tokyo StarBusinessFinance, Ltd.

2-7-1, Nishi Shinjuku,Shinjuku, Tokyo

Financing andassurance business

100.00% 3,267,389 (21,776) 1,936 - 1,936 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

TSB Servicer,Ltd.

1-7-5, Sekido,Tamashi, Tokyo

Debts managementbusiness

100.00% 691,289 70,059 - - - 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements. (Note2)

CTBC(Mauritius)Holding Co.,Ltd.

3rd Floor, RafflesTower, 19 CybercityEbene, Republic ofMauritius.

Investment business 100.00% 162,567 (15,951) 17,363 - 17,363 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements. (Note 1,Note 3)

CTBC SecuritiesInvestmentService Co., Ltd.


Security investmentconsultant business


CTBC SecuritiesVenture CapitalCo., Ltd.


Venture capitalinvestment business


CTBC AsiaLimited

Suite 2809, 28F., TwoInternational FinanceCentre, 8 FinanceStreet, Central,Hong Kong

Securities business 100.00% 160,628 (15,775) 134,526 - 134,526 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBC CapitalInternational Co., Limited

Romm 511, 5F,Tower 1 SilvercordCentre No. 30 CantonRoad, Tsim Sha Tsui,Hong Kong

Holding company -% - (2,358) - - - -% The Company’sliquidation iscompleted in 2020.

CTBCInternationalCo., Limited

Romm 511, 5F,Tower 1 SilvercordCentre No.30 CantonRoad, Tsim Sha Tsui,Hong Kong

Holding company 100.00% 1,423,011 102,109 70,000 - 70,000 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBC FinancialLeasing Co.,Ltd.

12F., No. 1386Wenguang Building,Hongqiao Road,Changning District,Shanghai

Financial leasing 100.00% 1,398,328 102,280 - - - 100.00% The investment hasbeen eliminatedwhen preparing theconsolidatedfinancialstatements.

CTBC InsuranceCo., Ltd. (usedname: TLGInsurance Co.,Ltd.)

18F-1, No. 17,Xuchang St.,Zhongzheng Dist.,Taipei City

Property insurancebusiness


CTBC CapitalCo., Ltd. (usedname: TLGCapital Co.,Ltd.)

17F., No. 17,Xuchang St.,Zhongzheng Dist.,Taipei City

Installment, leasing,and accountreceivable factoringbusiness


King DragonLife InsuranceCompany

27F., Xiamen LixinSquare Lake RoadNo. 90 in FujianProvince

Insurance business 50.00% 952,079 26,752 - - - 50.00%

Top Taiwan IXVenture CapitalCo., Ltd.

8F., No. 99, Sec.1,Xinsheng S. Rd., Daan Dist., Taipei City

Venture CapitalInvestment

25.00% 291,317 62,025 20,000 - 20,000 25.00%

AZ-Star Co.,Ltd.

5-2-7, Gobancho,Chiyodaku, Tokyo

Fund managementbusiness

40.00% 17,117 1,501 - - - 40.00%

AZ-Star FirstInvestmentLimitedPartnership


Equity investmentbusiness

43.98% 264 9,135 3 - 3 43.98%

(Continued)

538

279


Aggregate shareholding of the Company and subsidiariesName of Main Investment Number of Totalinvesteecompany Address

businessscope

Shareholdingratio

Carryingamount


Number ofshares

pro formashares

Number ofshares


AZ-Star ThirdInvestmentLimitedPartnership


Equity investmentbusiness

23.56% 116,904 (22,345) 3 - 3 23.56%

LH FinancialGroup PublicCompanyLimited

1Q. House LuminiBuilding, 5th Floor,South Sathon Road,Thungmahamek,Sathon, Bangkok10120

Investment business 36.07% 16,362,979 697,294 7,544,961 - 7,544,961 36.07%

XiamenJinmeixinConsumerFinance Co.,Ltd.

Xiamen InternationalFinancial Central 6thFloor, No. 82,Hongzhan Load,SimingDist.,XiamenCity,China(P.R.C)

Consumer financialbusiness

34.00% 871,195 85,789 - - - 34.00%

HoFa LandDevelopmentCo., Ltd.

4F-2, No. 80, Szu Wei3rd, Kaohsiung City

Premises developmentand transaction

90.00% 3,744,132 211,943 340,488 - 340,488 90.00%

Wu TzuDevelopmentCo., Ltd.

3F., No. 2-7, LuchuanW. St., WestDist.,Taichung City

Athletics andrecreational sportsstadium

99.00% 2,416,827 (41,670) 241,560 - 241,560 99.00%

Star ShiningEnergy Co., Ltd.

4F., No. 20-1,Guangfu N. Rd.,Hukou Township,Hsinchu County

Energy ServicesCompany

30.00% 1,535,629 32,257 150,000 - 150,000 30.00%

Giga GreenEnergy Co., Ltd.

1F., No. 3, Gongye1st Rd., HukouTownship, HsinchuCounty


30.00% 343,681 15,929 32,700 - 32,700 30.00%

Taiwan WindInvestment Co.,Ltd.

26F., No. 68, Sec. 5,Zhongxiao E. Rd.,Xinyi Dist., TaipeiCity

General investmentindustry

42.86% 1,822,576 (13,679) 183,626 - 183,626 42.86%

SolarbrightEnergy Co., Ltd.

9F., No. 295, Sec. 2,Tiding Blvd., NeihuDist., Taipei City


35.00% 34,800 (200) 3,500 - 3,500 35.00%

Star PowerEnergy Co., Ltd.

28F-2., 28F-3., No.213, Chaofu Rd.,Xitun Dist., TaichungCity


35.00% 166,773 (8,227) 17,500 - 17,500 35.00%

Li-Wei EnergyCo., Ltd.

3F-1., No. 2, Sec. 2,Dunhua S. Rd., DaanDist., Taipei City

Offshore wind powerIndustry

28.33% 419,535 (5,465) 42,500 - 42,500 28.33%

Note 1: The carrying amount includes accumulated impairment loss amounted to $20,629.

Note 2: The company is in liquidation.

Note 3: The company is still in the process of liquidation; thereafter, the securities of CTBC Asia Limited will be owned directlyby CTBC Securities Co., Ltd.

(c) Information on investment in mainland China:

(i) Related information on investee companies in Mainland China:Unit: In Thousands of New Taiwan Dollars/In Thousands of US Dollars/In Thousands of Chinese Yuan

Accumulated Investment flows Accumulated

Name of investeecompany in Mainland

China Main businessesTotal amount

of paid-in capital

Method ofinvestment(Note 1)

outflow ofinvestment from

Taiwan as of January 1, 2020 Outflow Inflow


Taiwan as of December 31, 2020

Investment gains(losses) by an

investee

Percentage ofownership for direct or

indirect investment

Investmentgains (losses)

(Note 2)

Book value as ofDecember 31,

2020

Accumulatedinward remittanceof earnings as of

December 31, 2020CTBC Bank Co., Ltd.,Shanghai Branch

Commercialbanking

6,194,068USD 206,045

( 3 ) 6,194,068USD 206,045

- - 6,194,068USD 206,045

710,031RMB 164,802

A branch in Shanghai;not an investee

710,031 7,480,744 None

CTBC Bank Co., Ltd.,Guangzhou Branch

Commercialbanking

4,114,056USD 130,531

( 3 ) 4,114,056USD 130,531

- - 4,114,056USD 130,531

196,151RMB 45,850

A branch inGuangzhou; not aninvestee

196,151 4,855,087 None

CTBC Bank Co., Ltd.,Xiamen Branch

Commercialbanking

4,081,960RMB 800,000

( 3 ) 4,081,960RMB 800,000

- - 4,081,960RMB 800,000

198,954RMB 46,145

A branch in Xiamen;not an investee

198,954 4,228,024 None

CTBC Bank Co., Ltd.Shenzhen Branch

Commercialbanking

1,351,890RMB 100,000USD 29,395

( 3 ) 1,351,890RMB 100,000USD 29,395

- - 1,351,890RMB 100,000USD 29,395

(75,108)RMB (17,577)

A branch inShenzhen; not aninvestee

(75,108) 1,227,753 None

Xiamen JinmeixinConsumer Finance Co.,Ltd.

Financing business 795,471RMB 170,000

( 1 ) 795,471RMB 170,000

- - 795,471RMB 170,000

252,321RMB 58,850

34.00% 85,789 871,195 None

CTBC FinancialLeasing Co., Ltd.

Financial leasing 2,071,728USD 69,110

( 2 ) 2,071,728USD 69,110

- - 2,071,728USD 69,110

102,280RMB 23,860

100.00% 102,280 1,398,328 None

CTBC Venture CapitalInvestmentManagement(Shanghai) Co., Ltd.(Note 3)

Venture capitalmanagementand consulting

-USD -

( 2 ) 58,612USD 2,000

- 22,221USD 768

36,391USD 1,232

-USD -

-% - - None

(Continued)

539

280


Accumulated Investment flows Accumulated

Name of investeecompany in Mainland

China Main businessesTotal amount

of paid-in capital

Method ofinvestment(Note 1)


Taiwan as of January 1, 2020 Outflow Inflow


Taiwan as of December 31, 2020

Investment gains(losses) by an

investee

Percentage ofownership for direct or

indirect investment

Investmentgains (losses)

(Note 2)

Book value as ofDecember 31,

2020

Accumulatedinward remittanceof earnings as of

December 31, 2020King Dragon LifeInsurance Co., Ltd.

Life insurancebusiness

3,948,990RMB 800,000

( 1 ) 1,646,486USD 26,724RMB 170,000

209,550RMB 50,000

- 1,856,036USD 26,724RMB 220,000

53,503RMB 12,320

50.00% 26,752 952,079 None

Note 1: Three methods of investment are as below:

1. Invest in Mainland China companies directly.

2. Re-invest in Mainland China companies through another investee in a third area (The investees in the third areaare as follows: CTBC International Co., Limited and CTBC Capital International Co., Limited).

3. Other method: set up new overseas branches.

Note 2: For the column of “Investment gains (losses)”:

1. If the company is still in the preparation process, and does not have any investment gain or loss, please specify.

2. The bases for recognition of investment income or loss.

a. The audited financial reports that are issued by an international accounting firm which is connected to anaccounting firm in Taiwan: CTBC Financial Leasing Co., Ltd. and King Dragon Life Insurance Co., Ltd.

b. The audited financial reports that are issued by the Taiwanese parent company’s designated accounting firm:None.

c. Others: Individual gains (losses) from overseas branches of CTBC Bank Co., Ltd.

3. Please specify if information regarding current gains or losses of an investee is not accessible.

Note 3: The liquidation of CTBC Venture Capital Investment Management (Shanghai) Co., Ltd. had been completed onAugust 8, 2019. As of October 8, 2020, the accumulated investment amount has yet to be remitted.

(ii) Upper limit on investment in Mainland China:

Unit: In Thousands of New Taiwan Dollars/In Thousands of US Dollars/In Thousands of Chinese Yuan

Name of investor company

Accumulated outflow of investmentfrom Taiwan to Mainland China as of

December 31, 2020

Investment amounts authorizedby Investment Commission,

MOEA

Upper limit on investmentauthorized by Investment

Commission, MOEACTBC Bank Co., Ltd. 16,537,445

(USD 365,971 )(RMB 1,070,000 )

15,491,898(RMB 3,370,000 )

187,428,008

CTBC Asset Management Co., Ltd. 2,071,728(USD 69,110 )

2,071,728(USD 69,110 )

3,335,203

CTBC Venture Capital Co., Ltd. 36,391(USD 1,232 )

36,391(USD 1,232 )

2,313,347

Taiwan Life Insurance Co., Ltd. 1,856,036(USD 26,724 )(RMB 220,000 )

1,856,036(USD 26,724 )(RMB 220,000 )

83,176,687

(iii) Significant transactions with investee companies in Mainland China: None.

(d) Major shareholders: No shareholders have over 5% shareholding

(Continued)

540

281


(14) Segment information:

The Company and subsidiaries provide their chief operating decision maker with necessary informationaccording to the characteristics of the business, to facilitate the assessment of performance and allocationof operational resources. The disclosures of assets, profits and losses are the same as the summary ofsignificant accounting policies described in Note 4.

According to IFRS 8 “Operating Segments”, reportable segments are as follows:

The major operating activities of Institutional Banking are commercial banking and capital marketactivities which provide clients with flexible and tailor-made financing services and the design, supply,and propriety trading of various financial products.

The major operating activity of Retail Banking is providing target clients with relevant financial services,including wealth management, credit cards, secured loans, and unsecured individual loans, etc.

The major operating activity of Life Insurance is providing various sorts of life insurance services.

The major operating activities of other segments are investing and general administration. The aboveoperating segments did not meet the criteria for reportable segments when applying quantitativethresholds.

(a) Segment information: For the year ended December 31, 2020 Institutional banking Retail banking Life insurance Others Total

Net interest income $ 33,040,633 23,786,745 52,204,291 21,999 109,053,668Net non-interest income 11,591,841 26,606,671 39,740,773 7,413,368 85,352,653

Net revenue 44,632,474 50,393,416 91,945,064 7,435,367 194,406,321

Net Income before Tax $ 10,754,111 20,600,044 17,652,499 2,570,403 51,577,057

Total assets $ 3,214,277,376 1,213,579,695 2,067,930,142 120,879,966 6,616,667,179

For the year ended December 31, 2019 Institutional banking Retail banking Life insurance Others TotalNet interest income $ 35,411,008 20,916,321 53,951,193 358,784 110,637,306Net non-interest income 17,875,228 25,328,089 104,717,579 6,159,526 154,080,422

Net revenue 53,286,236 46,244,410 158,668,772 6,518,310 264,717,728

Net Income (losses) before Tax $ 20,536,179 19,576,006 13,631,905 (1,935,012) 51,809,078

Total assets $ 3,096,523,566 1,051,542,206 1,962,867,494 108,501,270 6,219,434,536

(b) Geographic segment information:

The Company and subsidiaries are classified by the geographic locations of overseas operatingsegments, and the geographic segment information is as below:

Net revenue:

For the years ended December 31　　Area 2020 2019

Taiwan $ 165,159,897 229,559,084Asia 24,874,791 30,343,339North America 4,371,633 4,815,305Total $ 194,406,321 264,717,728

(Continued)

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Non-current assets:

For the years ended December 31Area 2020 2019

Taiwan $ 200,975,444 192,512,730Asia 21,403,639 22,117,115North America 2,835,957 2,936,187Total $ 225,215,040 217,566,032

(c) Information on major customers:

No individual customer of the Company and subsidiaries accounted for 10% or more of theCompany and subsidiaries’ revenues in the statements of income.

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