Tsbc0077520.Pdf

Ⅰ.Names, titles, phone numbers, and e-mail addresses of spokesman and acting spokesman

Name of spokesman: Spike Wu Title: President Tel.: (02)5576-3701 e-mail address: [email protected]

Acting spokesman: Shawn Teng Title: Vice president Tel.: (02)25056966#450 e-mail address: [email protected]

Ⅱ.Addresses and phone number of headquarters and branches

Headquarters: 1st fl., and 1st basement, No. 44, Zhongshan N. Rd., Sec. 2, Zhongshan District, Taipei City Tel.: (02) 2568-3988 Addresses and telephones of branches: see the “domestic and overseas business points” section of the annual report.

Ⅲ.Name, address, website, and phone number of the institution for handling stock register

Name: Stock Affairs Agency Department of Taishin International commercial Bank Address: B1,No.96, Sec1, Jianguo N. Rd.,Zhonghsan Dist.,Taipei city. Website: http://www.taishinbank.com.tw Tel.: (02)2504-8125

Ⅳ.Names, addresses, and phone numbers of credit rating institutions

Name: Fitch Ratings Address: Room1306, 13th fl.,No.205, Dunhua N. Rd., Songshan Dist., Taipei City Tel.: 886-2-8175-7600

Name: Taiwan Ratings Address: 49th fl. Taipei 101 Tower, No. 7, Xinyi Rd., Sec. 5, Taipei City Tel: 886-2-8722-5800

Ⅴ.Name, address, website, and phone number of certified public accountant and accounting firm for the financial statement in the recent year

CPAs: Yang Qinzhen , Weng Rongsui Name of accounting firm: Deloitte & Touche Tax Consulting Co., Ltd. Address: 12th fl., No. 156, Minsheng E. Rd., Sec. 3, Taipei City Website: http://www.deloitte.com.tw Tel.: (02)2545-9988

Ⅵ.Name of exchange for trading in overseas listed securities and information inquiry for the securities: Nil

Ⅶ.Company website: http: //www.taishinbank.com.tw

I. Message to Shareholders

In 2010, strong global economic recovery induced robust upturn of Taiwan’s export, whose value hit record high. Consequently, investment and consumption demand staged a strong performance, enabling Taiwan’s economy to expand 10.8%, the highest in 30 years.

Thanks to healthy economic climate and the effort of the management team, the financial holding company, the parent company, raked in after-tax net profi t of NT$7.7 billion in 2010, or NT$1.06 of earnings per share (EPS), with book value reaching NT$12.04 per share, returns on equity (ROE) 9.57%, capital adequacy ratio (CAR)119.34%, and banking BIS (Bank of International Settlement) ratio 13.58%,which underscore the healthy state in assets quality and capital structure. In the aspect of operation, net interest income and net fee income both scored marked growth. The performance ranks among the tops among domestic peers. In 2011, the company has continued to maintain steady profi t growth, racking up NT$0.4 of EPS in the fi rst quarter, ranking fi fth place in the market.

The banking operation racked up proﬁ ts which were six-year high in 2010, with net-interest income reaching NT$11.7 billion and net fee income NT$6.6 billion, both up 17%. Thanks to hefty bad-debt collection, net provisions were negative and pre-provision pre-tax earnings grew 20% to NT$8.7 billion. Meanwhile, non-performing loan ratio dropped to 0.33%, NPL coverage jumped to 326%, and ROE hit 13.8%, which were among the tops in the domestic banking sector.

The remarkable financial structure and profit-making ability has won the bank awards from various international professional media, including Euromoney, Financial Insights, the Asset, and Asian Banker, as well as the honor of “Bank of the Year” from the Banker. In a domestic banking evaluation for the second quarter of 2010, released by the department of ﬁ nance of National Cheng Chi University in October 2010, Taishin Bank was one of the 17 A-class banks among the 34 domestic banks receiving the evaluation. Consequently, Fitch Rating upgraded its various ratings for Taishin Financial Holding and Bank by one notch in December 2010.

After the sellout of a subsidiary securities fi rm in 2009, the fi nancial holding fi rm took over another securities fi rm in 2010 and renamed it as Taishin Securities after capital increment and organizational reshuffl e. Meanwhile, Taishin Securities Investment Trust acquired Taiwan Industrial Bank Investment Trust, thereby boosting the scale of its managed funds to the 16th largest domestically and readying it to become a key platform of the fi nancial holding firm for the design and provision of investment products. The possession of the subsidiaries of securities, fund management, and investment trust consulting in the securities fi eld has made the functions and mechanism of the fi nancial holding fi rm even more complete.

In the mainland Chinese market, in 2010 the fi nancial holding company and the bank have signed memorandum of understanding for cooperation with Zijin Holding, Bank of Nanjing, East West Bank (China), and Chengdu Rural Commercial Bank. Among them, there have been actual business exchanges with the Bank of Nanjing, according to a mode which benefi ts both parties. After receiving a green light from the Financial Supervisory Commission (FSC), the company is applying for the establishment of a fi nancing fi rm in China, which, if successfully, will further expand the company’s deployment in China.

Currently, the two major functional business groups are adjusting their business strategies according to market trends, strengthening various risk management, and simultaneously deep-cultivating existing clients and developing quality new clients, thereby laying the cornerstone for long-term steady growth. Business status and development direction of consumer banking and corporate banking groups follow:

2 2010 Annual Report Consumer Banking

Thanks to the concerted effort of its team members, the consumer banking group rendered a remarkable performance in 2010.It was a leader in the auto-loan market, with market share reaching 23%, ranked fourth place in terms of effective credit-card number, and was the champion for the top-notch card sector, with market share of 28.5%. Credit- card spending value grew 21%, higher than the industry average, and the number for acquiring bank business jumped 44%, with market share of 14%, ranking third place. Overall assets quality was also better than market average.

Thanks to sustained business growth, decline in provisions, and cost control, proﬁ ts grew steadily in 2010. In the aspect of channel, since the group launched mobile banking in the second half last year, the number of customers has been expanding at an annual clip of 30%. In the future, the group will further strengthen the management of branches and automated channels, in the hope of providing customers even more convenient quality service.

Under the “customer-oriented” management concept, in addition to continued deep-cultivation of credit-card business, the group will also actively develop the two major businesses of private wealth management and personal loans. For the contents of service, it will materialize the new concepts of 3S (simple, sincere, and superior), to as to further upgrade service and give customers even more satisfactory ﬁ nancial experience.

Corporate Banking

Capitalizing on the overall economic recovery and continuing to strengthen core businesses, the corporate banking group also had an outstanding performance in 2010. Its factoring business ranked third place in the market, the trading volume of cash management, including FEDI (financial electronic data exchange) and ACH (automated clearing house), ranked the ﬁ fth market in the market and the number of stock-affairs agency ranked fourth place, and rollout of innovative assets-management ﬁ nancial products continued.

Along with the increasing cross-Taiwan fi nancial exchanges, the corporate banking group established an “overseas business department” in 2011, for the purpose of upgrading trade-related financial business for overseas clients, cultivating international fi nancial talents, and providing all-round fi nancial services to overseas Taiwanese-invested businesses, so as to carve out a presence in the greater Chinese market.

Amid acute competition of the financial market, the corporate banking group embraces a number of business strategies, including timely grasp of industrial development pulse, focus on rigorous risk management and pursuit of steady profits, effective integration of financial holding company’s resources, integration of the channels of corporate banking and consumer banking in the cultivation of new customers, and dedication to the deep cultivation of customers via more sophisticated segmentation. In the meantime, in line with the new 3S concept, the group will endeavor to provide even more quality professional services to corporate customers and wealth-management customers. Overall speaking, business will achieve another peak, so long as the group can upgrade its domestic market share and steadily develop overseas markets.

In 2011, the global economy is expected to expand further. The International Monetary Fund (IMF) predicts that the global economy will grow 4.4% this year, higher than average 4% growth in the past 10 years. Outlook for the U.S. and mainland Chinese economy, both with close linkage with Taiwan’s economy is promising. Under a sustained

2010 Annual Report 3 I. Message to Shareholders

expansionary policy, the U.S. economy is picking up and mainland China has targeted to achieve growth rates of 8% for both 2011 and 2012, along with its effort to transform its economic structure.

With a heavy reliance on export, Taiwan’s economy also has a promising outlook this year. The Directorate General of Budget, Accounting, and Statistics (DGBAS) forecast Taiwan’s economy will grow 4.9% this year (compared with 5.3% forecast by Taishin Investment Trust Consulting), higher than average 4.2% in the past 10 years.

In the mid- and long-term, Taishin Bank embraces the strategy of boosting domestic market share and cautiously pushing international business growth. In 2011, members of the corporate team will still adhere to the corporate core values of “integrity, commitment, innovation, and cooperation” and materialize the values in their services, thereby achieving the ﬁ nancial targets of the customers and shareholders.

Last but not least, we would like to express our sincere gratitude for the consistent patronage and acknowledgement of our shareholders and look forward to the continuing support and guidance from our shareholders. The management team will make utmost effort to pursue the maximum long-term beneﬁ ts of shareholders, customers, and employees.

Thomas T.L. Wu Chairman Taishin International Bank

4 2010 Annual Report II. Brief Introduction to The Bank

A. Introduction

Date of establishment: Feb. 25, 1992 Date of inauguration: March 23, 1992 Registered capital: NT$49,157,525,710 Paid-in capital: NT$49,157,525,710 Headquarters address: 1st, ﬂ ., and 1st basement, No. 44, Zhongshan N. Rd., Sec. 2, Taipei City Tel.: (02)2568-3988 Business units: 101 units, including 97 domestic and overseas branches (including Hong Kong branch), trust department, overseas department, offshore banking units (OBU), and representative’s ofﬁ ce in Ho Chi Minh City of Vietnam.

B. History

1. The bank was founded by Mr. Thomas T.L. Wu, his friends, and some noted entrepreneurs in 2000. It was formally inaugurated on March 23, 1992, after obtaining the approval of the Ministry of Finance for its establishment in Aug. 1991. According to the resolution of its provisional shareholders’ meeting on Dec. 7,2001, the bank merged with Taan Bank via share swap for the establishment of Taishin Financial Holding Co., Ltd. on Feb. 18, 2001, which further completed the acquisition of the Hsinchu Tenth Credit Cooperative on Oct. 18, 2004, according to the resolution of shareholders’ meeting on July 26, 2004.

2. The bank’s board of directors directly oversees Auditing Division and Secretariat; its headquarters consists of 21 business and management units, including such staff and management units as Human Resources Division, Financial Management Division, General Planning Division, Legal Affairs Division, Information Service Division, Administrative Service Division, Marketing and Communications Division, Risk Management Division, Performance Evaluation Division, as well as the business units of corporate banking, consumer banking, and wealth management.

3. Regarding business network, the bank has set up branches in major cities in Taiwan and has been actively establishing overseas units, in compliance with the trend of ﬁ nancial internationalization, including offshore banking unit, Hong Kong branch, which was inaugurated on June 25, 2003 after obtaining the license in Feb. 2003, representative’s ofﬁ ce in Ho Chi Minh City of Vietnam, which was set up in Jan. 2005. The bank boasts 101 domestic and overseas branches, testifying to extensiveness of its service network.

4. The bank’s major business items include deposit reception, loan extension, export/import foreign exchange, foreign-currency deposits, discount of negotiable instruments, currency conversion, guarantee, surrogate collection/payment, custody, trust, credit card, trading in derivatives, brokerage of short-term commercial paper, brokerage of short-term bills, securities dealer, certiﬁ cation and underwriting, factoring, securities investment and underwriting, offshore banking, and the issuance of ﬁ nancial bonds.

5. The bank’s afﬁ liates include PayEasy.com, Taishin Insurance Agency Co.,Ltd, Taishin Insurance Brokers Co.,Ltd, Dah An Leasing Co.,Ltd, Taishin Real Estate Management Co.,Ltd, and PayEasy Travel Service Co.,Ltd, Contact Digital Integration Co.,Ltd

2010 Annual Report 5 III. Corporate Governance Report

A.Organization System

a. Organizational Chart

Base date: March 31, 2011

Shareholders’Meeting Supervisor Secretariat Staff Conduct Review and Division Staff Performance Appraisal Committee Board of Directors(Chairman) Audit Division Trust Asset Evaluation Committee

Labor Safety & Health Committee President

Non Performing Asset Recovery Committee

Credit Approval Committee

Information Processing Risk Performance Human Corporate Compliance Finance Administration & Technology & Service Management Management Legal Division Resources Planning Division Division Services Division Services Division Division Division Division Division Division

Retail Banking Group Wholesale Banking Group

Consumer Financial Overseas Retail Banking Finance Market Business Credit Division Division Division Division

Wholesale Retail Banking Unsecured Corporate Credit Non Performing Product Banking Administration Asset Recovery Marketin Division Division Division Division

Strategic Wholesale Wholesale Branch Planning Banking Banking Management Division of Administration Product Division Retail Banking Division Division Business Global Trade Customer Financial Products Finance Relationship Division Management Division Division

Portfolio Credit Card Management Division Division

6 2010 Annual Report b. Responsibilities of the bank’s major units

1. Corporate Planning Division (1) In charge of strategic planning, execution and evaluation of major strategic projects. (2) In charge of capital planning of the bank, analysis and management of BIS ratio and each ﬁ nancial and business data (3) Long-term investment business planning and analysis evaluation (4) Negotiation and communication with regulator (5) Communications and coordination for operation- and management-related affairs among various managerial units (6) Organizational planning, establishment, execution and management.

2. Administration & Services Division (1) Drafting, formulation, and execution of common administrative and general-affairs regulations and system. (2) Acceptance and sending of external ofﬁ cial documents. (3) Evaluation and implememntation of operations related to major general affairs, construction and improvement, procurement, properties and ofﬁ ces. (4) Labor security and hygienic, as well as the supervision and implementation of guard and security system of the bank.

3. Information Technology Services Group (1) Management and maintenance of the bank’s computer systems, central equipment ofﬁ ce, and equipment. (2) The formulation and execution of information security system. (3) The pushing of information programs. (4) Evaluation of need, planning and analysis, and evaluation, change, and maintenance of programs for the information systems of consumer banking and corporate banking.

4. Performance Management Division (1) Planning, execution and management of the bank’s budget. (2) Planning and management of Performance-Management information system. (3) Planning and management of accounting and taxation affairs. (4) Compilation and analysis of ﬁ nancial information.

5. Legal Division (1) Draﬁ ng, formulation, and execution of legal affairs-related regulations and policy (2) In charge of whole bank legal consulting. (3) Inspection and supervision of various contracts and other legal documents.

2010 Annual Report 7 III. Corporate Governance Report

6. Compliance Division (1) Drafting, formulation, and execution of regulations and policy for compliance with law and regulation. (2) Study, transmission, inquiry, coordination, and communications for compliance with laws and regulations by the bank. (3) Execution, supervision, and evaluation for compliance with laws and regulations.

7. Human Resources Division (1) Drafting, formulation, and execution of human resourced-related regulations and policy. (2) Personal recruitment, appointment, management, ranking and performance evaluation. (3) Formulation and execution of employment conditions and welfare, and the establishment, pushing, and management of communications channels with employees. (4) Research,development, planning, revision , compilation and execution of employee-training courses and material, the establishment of teacher database, and evaluation and appointment of teachers.

8. Risk Management Division (1) Measurement and Monitoring of credit risk, market risk, and the liquidity risk (2) The evaluation of positions, report/table compilation, and risk disclosure

9. Finance Division (1) Planning and management of the bank’s liquidity risk and bankbook interest risk. (2) In charge of planning and management of asset/liabilities management, fund allocation (3) Planning and management of inter-branch interest calculation. (4) Planning, execution, and management of securitized assets business. (5) Execution of credit rating operation. (6) Planning, execution, and management of non-strategic long-term investment, and the execution and management of strategic long-term investment.

10. Processing & Service Division (1) Drafting, formulation, and execution of operation- and service-related regulations and policy. (2) Planning of operational workﬂ ow and establishment, execution and management of centralized operation system. (3) Launch workﬂ ow reformed project and execution, evaluation and review the result.

11. Wholesale Banking Product Division In charge of corporate-banking cash management, trade financing, planning and pushing of syndicated loans and structured funding.

8 2010 Annual Report 12. Corporate Banking Division (1) Formulation and strategic planning of short-, medium-, and long-term business goals of corporate banking. (2) In charge of the marketing and pushing of corporate-banking business, and the maintenance and management of the relations with corporate accounts.

13. Wholesale Banking Administration Division (1) The planning, execution and management of corporate-banking business goal and strategy plan. (2) Cross-unit integration and coordination. (3) Integration and performance management of budget goals of corporate banking. (4) Formulation and management of credit-extension fl ow. (5) The execution and management of international banking business. (6) Delivery and clearance of fi nancial products. (7) The planning and management of corporate-banking service system (8) Credit risk control. (9) Formulation of related business regulations and operating fl ow.

14. Financial Market Division (1) The design , operation, business plan and marketing promotion of financial products transaction including foreign exchanges, interest rates, credit, equity, commodities and derivatives. (2) Economic and industrial research, short-term Taiwan stock investment. (3) Bills transaction, underwriting and trading.

15. Global Trade Division In charge of trade ﬁ nancing of unlisted small and medium enterprises, marketing and pushing of common credit extension, the maintenance and management of account relations.

16. Overseas Business Division (1) Study, planning, execution, and management of the establishment, move, dismantling, and change of overseas branches. (2) Strategic planning, pushing, and management of the business of overseas business. (3) Oversee the operation, performance, and general-affairs management of overseas branches. (4) Informing of local laws/regulations, study, planning, and execution of countermeasures for overseas branches.

2010 Annual Report 9 III. Corporate Governance Report

17. Wholesale Credit Administration Division (1) Credit-extension policy and risk analysis and disclosure for corporate banking. (2) Inspection and review of corporate-banking credit-extension cases, and the management of the asset quality of corporate-banking credit extension, overdue loan and collection.

18. Branch Management Division (1) In charge of planning and management of the business and channel of branches. (2) Deployment and management of branches. (3) Financial plan, risk control and maintenance of branch clients. (4) The execution, pushing and management of the operation and service quality of branches.

19. Financial Products Division (1) Operation, management, maintenance, development, and adjustment of consumer-banking insurance products. (2) Development and management of consumer-banking wealth-management products and maintenance of the competitive edge of the bank’s wealth-management products (3) Management of various property trust business and afﬂ icted business (4) The development of new trust products and service (5) Planning and management of short-term securities and mutual-fund investments by subsidiaries.

20. Portfolio Management Division (1) The development, management and pushing of virtual channels. (2) The provision of all-round ﬁ nancial services to clients, including telephone communications platform, online platform, and ATM.

21. Consumer Finance Division In charge of development, management, sales promotion, credit-extension products, credit review and clients maintenance for consumer banking products.

22. Unsecured Product Marketing Division Development, operation management, sales promotion, cusomter retention and management for unsecured loans of consumer banking.

10 2010 Annual Report 23. Credit Card Division (1) In charge of development, business management, pushing, credit- investigation, credit-extension management, and customer maintenance of credit cards and products related to the cash ﬂ ow of business clients. (2) In charge of the bank’s marketing and communications resources.

24. Retail Banking Credit Division (1) In charge of the formulation of the credit policy to retail banking products. (2) Establishment and utilization of forecast model. (3) Risk management, estimate and management of bad debts and provisions. (4) Consumer banking joint credit investigation.

25. Retail Banking NonPerforming Asset Recovery Division The management of NPL ( non-performing loan) collection, protection of non-performing assets, write-off of bad debts, and outsourcing of debt collection.

26. Customer Relationship Management Division (1) In charge of the analysis of customer-group information. (2) The development, planning and trial execution of event marketing.

27. Strategic Planning Division of Retail Banking Business (1) Handling of fi rst- and second tier customer complaints. (2) Upgrade service quality and push overhaul of operating flow, so as to establish a continuously improving quality culture. (3) In charge of back-offi ce and planning affairs for chief executive offi er of consumer banking.

2010 Annual Report 11 III. Corporate Governance Report

B.Information on board directors, supervisors, president, vice presidents, assistant vice presidents, and chiefs of units and branches

a. Board directors and supervisors 1. Information on board directors and supervisors April 30, 2011

Shareholding upon Current shareholding election (including common and Date of ﬁ rst (including common Title Date of get- preferred shares) Name Term getting elected and preferred shares) （note 1） ting elected (note 2) Share Share Amount of Amount of of of shares shares stake stake Taishin Financial Holding Co., Ltd. 2002.01.28 Chairman 2010.06.18 Three years 4,915,752,571 100% 4,915,752,571 100% Representative： Thomas T.L. Wu 2002.01.28

Taishin Financial Holding Co., Ltd. 2002.01.28 Director 2010.06.18 Three years 4,915,752,571 100% 4,915,752,571 100% Representative: Jui-Sung Kuo 2008.06.13

Taishin Financial Holding Co., Ltd. 2002.01.28 Director 2010.06.18 Three years 4,915,752,571 100% 4,915,752,571 100% Representative: Teh-Nan Hsu 2008.08.14

Taishin Financial Holding Co., Ltd. 2002.01.28 Director 2010.06.18 Three years 4,915,752,571 100% 4,915,752,571 100% Representative:Sherman Lee 2010.06.18

Taishin Financial Holding Co., Ltd. 2002.01.28 Director 2010.06.18 Three years 4,915,752,571 100% 4,915,752,571 100% Representative:Chu-Chan Wang 2002.01.28

Taishin Financial Holding Co., Ltd. 2002.01.28 Director 2010.06.18 Three years 4,915,752,571 100% 4,915,752,571 100% Representative:Shang-Pin Wu 2002.01.28

Taishin Financial Holding Co., Ltd. 2002.01.28 Director 2010.06.18 Three years 4,915,752,571 100% 4,915,752,571 100% Representative:Lin, keh-hsiao 2011.02.01

Indepen- Taishin Financial Holding Co., Ltd. 2002.01.28 dent direc- 2010.06.18 Three years 4,915,752,571 100% 4,915,752,571 100% Representative:Chih-Kang Wang 2007.06.15 tor

Indepen- Taishin Financial Holding Co., Ltd. 2002.01.28 dent direc- 2010.06.18 Three years 4,915,752,571 100% 4,915,752,571 100% Representative: Neng-Pai Lin 2007.06.15 tor

Standing Taishin Financial Holding Co., Ltd. 2002.01.28 2010.06.18 Three years 4,915,752,571 100% 4,915,752,571 100% Supervisor Representative:Yang-Tzong Tsay 2010.06.18

Taishin Financial Holding Co., Ltd. 2002.01.28 Supervisor 2010.06.18 Three years 4,915,752,571 100% 4,915,752,571 100% Representative:Long-Su Lin 2002.01.28

Taishin Financial Holding Co., Ltd. 2002.01.28 Supervisor 2010.06.18 Three years 4,915,752,571 100% 4,915,752,571 100% Representative:Toney Chen 2006.08.24

12 2010 Annual Report Stake of spouse Shareholding and offspring Current in the name of Spouse or relatives within second-degree kin- before age of jobs others (including ship who serve managerial posts or seats of majority (including with the common and board directors/ supervisors of the bank common and （） bank preferred shares) Education and working experience note 3 preferred shares) and other Amount Amount Share Share compa- of sha- of sha- title name Relationship of stake of stake nies res res Director, First Bank, Supervisor, Hua Nan Bank Director Kuo Ruisong Brother-in-law 0 0 0 0 Note 1 MBA, University of California, LA supervisor Lin Longshi Brother-in-law Director, International Bank of Taipei Professor, department of information sci- Chairman Thomas T.L. Wu Brother-in-law 0 0 0 0 Note 2 ence, Business School, Soochow University Supervisor Long-Su Lin Brother-in-law Ph.D. in Physics, New Hampshire University Chairman, Taiwan Cooperative Bank, Bank of Taiwan 0 0 0 0 Note 3 Nil Nil Nil Banking department, National Chengchi University Vice president, Yabode Co., co-founder Decision 0 0 0 0 Analytics Consulting, Note 4 Nil Nil Nil MAB, U. of Pennsylvania Standing Supervisor, Taishin Financial Holdings, Taishin Bank 0 0 0 0 Note 5 Pharmaceutical department, Kaohsiung Medical Nil Nil Nil college Supervisor , Taishin Bank 0 0 0 0 Chairman, NSEnergy Note 6 Nil Nil Nil PhD in Applied Chemistry, Keio University (Japan) Director, Taishin Financial Holdings, Vice Chair- 0 0 0 0 man, TSC Securities. Note 7 Nil Nil Nil PhD in Economics, Washington University Minister of Ministry of Economic Affairs、Chairman 0 0 0 0 of TRITRA Note 8 Nil Nil Nil PhD in Marketing, Texas A&M University Chairman, Taiwan Poer Co. Dean, College of Management at National Taiwan 0 0 0 0 Note 9 Nil Nil Nil University PhD in Business, Ohio State University Standing director, Bank of Taiwan Director, graduate school of accounting, National 0 0 0 0 Note 10 Nil Nil Nil Taiwan University, Doctor of business management and commerce, U. of Maryland

Director, Taishin Financial Holdings, Taishin Bank. Chairman Thomas T.L. Wu Brother-in-law 0 0 0 0 Note 11 Ph.D. in Chemistry, Virginia State University Director Kuo Ruisong Brother-in-law

Standing Supervisor, Taishin Financial Holding、 Director, Chang Hwa Bank 0 0 0 0 Note 12 Nil Nil Nil Department of accounting, National Cheng Chi University

2010 Annual Report 13 III. Corporate Governance Report

Note 1：Representative Thomas Wu, is concurrently acting as Chairman of Taishin Financial Holdings, Chairman of Taishin Charity Foundation、Director of Taishin RealEstate Management, Director of AN-SIN Real Estate Management, Director of Shin Kong Mitsukoshi Department Store, Director of Shin Kong Lohas, Director of Shin Kong Construction and Development, Director of Wangtien Woolen Textile, Director of The Great Taipei Gas, Director of Taiwan Shin Kong Security, Director of Hsien-Shun Enterprise, Director of Shin-Yun Enterprise, Director of Jui-Siang Investment, Director of Kuei-Yuan Investment, Supervisor of Bo-Rui, Supervisor of Yung-Kuang, Supervisor of Shin Kong Agriculture & Animal husbandry, Supervisor of Shin Kong Hae-Yang, Supervisor of Shin-Shi Enterprise, Supervisor of Chin-Shan Investment, Supervisor of Beitou Hotel.

Note 2：Representative Jui-Sung Kuo, is concurrently acting as Chairman of Jui-Fang Co., Director of Taishin Financial Holdings, Director of An-Long Enterprise, Director of TECO Image Systems, Director of Pacifi c Capital Partners, Director of Cheng Xin Development, Director of Shi-Ho Digital Technology, Director of Century Development, Supervisor of Taiwan Shin Kong Security, Supervisor of SerComm, Supervisor of Chun-Hsiang Enterprise Consultants.

Note 3：Representative Hsu, The-Nan, no other job at the bank and other companies.

Note 4：Represebative Sherman Lee, also a director an interior décor company and supervisor of Telexpress Corp.

Note 5：Representative Chu-Chan Wang, is concurrently acting as Chairman of Pan City Co., Chairman of Hsien-Shun Enterprise, Director of Santo Arden Co., Director of Taishin Financial Holdings, Supervisor of The Great Taipei Gas, Supervisor of SKS Telecommunications, Supervisor of Tai-Wa Co.

Note 6：Representative Shang-Pin Wu, is concurrently acting as Chairman of NSEnergy, Director of TASCO Chemical, Director of EXCEL Chemical, Director of Ming- Xing Chemical, Director of Taiwan Fieldrich Co., Director of Da-Chan Investment Co., Director of Tai-Ho Technology, Director of Tai-Ho Investment, Director of Ho-Shin Co., Director of Tuntex Petrochemical Inc., Director of SAFEWAY GAS Co., Director of Grand Cathay Venture Capital Ⅲ, Director of Ho-Cheng Co., Director of Global Securities Finance, Director of Chang-Fong Transportation, Director of TNS Logistics International.

Note 7：Representative Lin, Keh-hsiao is currently acting as President of Taishin Financial Holdings, Vice Chairman of TSIT, Director of Taishin RealEstate Management, Director of Dah An Leasing, Director of PayEasy Digital Integration, Director of Juimeng Investment Co., Ltd, Director of Taiwan Asset Management Corp., Director of Taiwan Parking Co., Director of Miniature World, Director of VehGuider, Director of Pacific Music, Wisdom Technology, Supervisor of Taishin Asset Management, Supervisor of PQ international Co.

Note 8：Representative Chih-Kang Wang, is concurrently acting as Chairman of Taiwan External Trade Development Council, Chairman of Taipei Word Trade Center, Chairman of The Shiner Education Foundation, Independent director of Taishin Financial Holdings, Independent director of Nan Ya Plastics, Independent director of Formosa Sumco Technology, Director of Chilisin Electronics, Director of Straits Exchange Foundation.

Note 9：Neng-Pai Lin, is concurrently acting as Independent director of Taishin Financial Holdings, Independent director of Darfon Electronics, independent director RDC Semiconductor,、Director of TECO Image Systems, Director of Litek Opto-electronics.

Note 10：Representative Tsay, Yang-Tzon, also an independent director of Hua Nan Property Insurance, CastleNet, Inventec Appliances, Altek technology,、Standing Supervisor of Taishin Financial Holdings Co., and supervisor of Kingpak Technology, Cyberlink, Speed Tecj, and SZS.

Note 11：Representative Long-Su Lin, is concurrently acting as Chairman of Ennead Inc., Chairman of Ennead Leasing, Chairman of Ennead Investment, Chairman of Shi-Hong Enterprise, Chairman of MiTAC Construction and Development, Chairman of Chun-Ying Interior Design, Director of Shin Kong Chao Feng, Director of Cheng Xin Development, Director of Shi-Hong Investment, Director of Nica-Orient Development, Director of Virgin Enterprise, Director of Gyu-Kaku, Director of Toms World Amusement, Director of International Advanced Music , Supervisor of Taishin Financial Holdings, Supervisor of KONIG FOODS, Supervisor of Tai-Li-Ya Development.

Note 12：Representative Toney Chen is currenctly acting as Chairman of Taishin Leasing and Financing Co.,Ltd

2. Table 1 : Major shareholders of institutional shareholders April.26, 2011

Major shareholders of institutional shareholders Names of Institutional shareholders（note 1）（including common shares and preferred shares）（note 2）

TPG NEWBRIDGE TAISHIN HOLDINGS Ⅱ, LTD. 6.59% TPG NEWBRIDGE TAISHIN HOLDINGS Ｉ, LTD. 4.88% QE INTERNATIONAL (L) LIMITED 3.89% Nomura Asia Investment (Taiwan) Pte. Ltd. 3.08% Taishin Leasing & Financing Co., Ltd 2.62% Ⅱ Taishin Financial Holding Co., Ltd TAISHIN CO-INVESTOR HOLDINGS , LTD. 2.16% Taiwan Life Insurance Co.Ltd 1.88% TAISHIN CO-INVESTOR HOLDINGS Ｉ, LTD. 1.60% Management Committee for Pension Fund of Public Functionaries 1.28% Tong Shan Investment Co., Ltd 1.08%

Note 1: When directors and supervisors are representatives of institutional investors, names of the institutional investors should be specified. Note 2: Fill in names of institutional investors who are top 10 shareholders and the shares of their stakes. Fill in table 2, should institutional investors’ major shareholders are also legal entities.

14 2010 Annual Report 3. Table 2 : Major Shareholders of Major Institutional Shareholders April.26, 2011

Names of Institutional Shareholders (note) Major Shareholders of Institutional Shareholders TPG NEWBRIDGE TAISHIN HOLDINGS II , LTD. TPG NEWBRIDGE TAISHIN II, L.P. 100% TPG NEWBRIDGE TAISHIN HOLDINGS I, LTD. TPG NEWBRIDGE TAISHIN I, L.P. 100% QE INTERNATIONAL (L) LIMITED QUANTUM PARTNERS LTD. 100% Nomura Asia Investment (Taiwan) Pte. Ltd. NOMURA HOLDINGS, INC. 100% Pan Asia Polymer 30.00%, Yun-De 24.50%, Jui-Sin Enterprise 19.00%, Jui-Siang Investment Taishin Leasing & Financing Co., Ltd. 5.50%, Jia-Jia Investment 4.93%, Jia-Jia Investment 4.20%, Tong- Rong Investment 4.20%, Chang-Sheng Investment 4.20%, Yuan-Sheng Investment 3.47% TAISHIN CO-INVESTOR HOLDINGS II , LTD. TAISHIN CO-INVESTOR A, L.P. 100% Long Bon International 28.66%, Bank of Taiwan 20.75%, Bao-Sheng Investment 12.43%, BankTaiwan Life Insurance 2.91%, Kangchao Co., Ltd. 1.01%, Taiwan Fire and Marine Insur- Taiwan Life Insurance Co. Ltd. ance 0.4%, JPMorgan Chase Bank N.A. Taipei Branch in custody for Norges Bank 0.17%, Li Niang-ping 0.16%, Chen Hsiu-yueh, 0.14%、Chen Po-chia 0.13% TAISHIN CO-INVESTOR HOLDINGS I, LTD. TAISHIN CO-INVESTOR A, L.P. 100% Committee for Management of Pension Funds of Not applicable Public Functionaries Jui-Sin Enterprise 78.75%, Kuei-Lan Wu 3.125%, Eugene T.C. Wu 3.125%, An- thony T.S. Tong Shan Investment Co., Ltd. Wu 3.125%, Thomas T.L. Wu 3.125%, Sian-Sian Hsu 2.50%, Ruo-Nan Sun 2.50%, Hsing- Hua Ho 1.875%, Eric T.S. Wu 1.875% Note 1: When major shareholders are legal entities, their names should be specified. Note 2: Fill in names of major shareholders of major institutional shareholders (with shareholding among the top 10) and the shares of their stakes.

4. Information on Board directors and supervisors

Qualifi cations possession of over fi ve-year working experience and the following professional Compliance with Number of oth- qualifi cations independence ( Note 2) er companies Instructor or higher Judge, prosecutor, of public offer- teaching positions at lawyers, public certifi ed Working experience in ing where the college departments of accountant, or other commerce, legal affairs, board director commerce, legal affairs, professionals or fi nance, accounting, or 1 2 3 4 5 6 7 8 9 10 or supervi- fi nance, accounting, technicians with national other fi elds related to the sor serves as Name or others related to the licenses related to the company’s operation independent ( Note 1) company’s operation company’s operation director Thomas T.L. Wu √ √ √ √ √ 0 Jui-Sung Kuo √ √ √ √ √ √ 0 Teh-Nan Hsu √ √ √ √ √ √ √ √ √ √ 0 Sherman Lee √ √ √ √ √ √ √ √ √ √ 0 Chu-Chan Wang √ √ √ √ √ √ √ 0 Shang-Pin Wu √ √ √ √ √ √ √ √ √ 0 Lin, Keh-hsiao √ √ √ √ √ √ √ 0 Chih-Kang Wang √ √ √ √ √ √ √ √ √ √ √ √ 3 Neng-Pai Lin √ √ √ √ √ √ √ √ √ √ √ √ 3 Tasy,Yang-Tzong √ √ √ √ √ √ √ √ √ 4 Long-Su Lin √ √ √ √ √ 0 Toney Chen √ √ √ √ √ √ √ √ √ √ 0 Note 1: The number of columns can be adjusted according to actual need. Note 2: Mark with a check (v) under the code number for conformance to the following conditions: (1) not an employee of another bank or its affiliates; (2) not a director or supervisor of another bank or its affiliates; (3) not owning, along with his/her spouse and offspring before the age of majority or in others’ names, over 1% stake in another bank including stake in others’ names, or one of the 10 largest individual shareholders in the bank; (4) not a spouse, relative within second-degree kinship, or relative within fifth-degree kinship of direct lineage of the persons specified in the three items above. (5) not a director, supervisor, or employee of a institutional shareholder with over 5% stake in another bank or being one of the five largest institutional shareholders in the bank; (6) not a director, supervisor, manager, or shareholder with over 5% stake of a company or institution which has financial or business exchange with another bank; (7) not a professional, or owner, partner, director, supervisor, manager, or spouse of one with such position of companies or institutions offering business, legal, financial, accounting, or consulting services to another bank or its affiliates; (8) not a spouse or a relative within second-degree kinship of one of other directors; (9) not an offender of items stipulated in article 30 of the Company Law; (10) not a representative of government or corporate body elected via method specified in article 27 of Company Law.

2010 Annual Report 15 III. Corporate Governance Report

b. Information on president, vice presidents, assistant vice presidents, and chief of units and branches

April.15, 2011 Stake of spouse Spouse or relatives Shareholding and offspring within second-degree Shareholding in the name of Date of before age of Major education (expe- kinship who serve others Current jobs with Title Name election majority rience) managerial posts other companies (appointment) Amount Share Amount Share Amount Share (note 2) Rela- of of of of of of Title Name tion- shares Stake shares Stake shares Stake ship Chief Executive Offi cer, Wholesale President of Wholesale Banking Group, Banking Group, Taishin Director, Taishin President Justin Tsai 2011/1/1 0 0 0 0 0 0 Bank Securities, Direc- MBA, Indiana Univer- tor, Taishin Venture sity Capital Investment, Director,Dah An Leasing Chairman, Taishin Chief President of Retail Insurance Agency Executive Banking Group, Taishin Director, Taishin Offi cer, Spike,C. Bank Securities 2011/1/21 0 0 0 0 0 0 Retail W. Wu Department of Director, Taishin Banking Economics, National Insurance Brokers Group Taiwan University Director, Easy Card Corp Chief Senior Vice President, Executive Taishin Bank Director of Dah Offi cer , Larry 2011/3/1 0 0 0 0 0 0 Department of Electri- Chung Bills Finance Wholesale Chung cal Engineering Na- Co. Banking tional Taiwan University Group Vice President,Taishin Bank Chief Department of Elec- Y.H.Wang 2010/5/26 0 0 0 0 0 0 Auditor tronical Engineering National Taiwan Univer- sity Chief Financial Offi cer of Taishin Nil Financial Holdings、 Director of Taishin Insurance Agency, Director of Taishin Insurance Brokers, Director of Dah An Leasing, Director of Chinese New Ven- ture Capital, Hanhua Venture Capital, Senior President, ABN AMRO Tengfeng Venture Vice Welch Lin 2011/3/1 0 0 0 0 0 0 Taiwan Capital, and Yuanta President MBA, UCLA Foreign Exchange Brokerage, Supervi- sor of Taishin Securi- ties, Taishin Venture Capital Investment, Taishin Real Estate Management, PayEasy Digital Integration, Tehlin Investment, Tachung Venture Capital, Teh- lin Co., Ltd Chief Accounting Of- Vice President of The fi cer of Taishin hold- Senior Ann Royal Bank of Scotland ings Co., Supervisor Vice 2010/8/13 0 0 0 0 0 0 Cheng MBA, University of New of Taishin Marketing President Haven Consultant and Taishin Securities.

16 2010 Annual Report Stake of spouse Spouse or relatives Shareholding and offspring within second-degree Shareholding in the name of Date of before age of Major education (expe- kinship who serve others Current jobs with Title Name election majority rience) managerial posts other companies (appointment) Amount Share Amount Share Amount Share (note 2) Rela- of of of of of of Title Name tion- shares Stake shares Stake shares Stake ship Technology Manage- Senior 2008/9/16 Chief Risk-Manage- Loofei ment Consultants vice presi- 0 0 0 0 0 0 ment Ofﬁ cer, Taishin Huang MBA, Oregon Univer- dent Financial Holding sity Manager, First Trust Senior Chairman, Taishin Amy Department of Law, vice presi- 2006/4/17 0 0 0 0 0 0 Marketing Consult- Hsia Chinese Culture Uni- dent ing versity Assistant Vice Presi- Senior dent, China Trust Minna vice presi- 2008/12/11 0 0 0 0 0 0 Foreign Trade Depart- Chou dent ment, Tamkang Univer- sity Vice President, Citi Senior Bank Senior vice presi- vice presi- Ena Swei 2005/8/1 0 0 0 0 0 0 Master of Science, dent, Taishin Finan- dent United States Interna- cial Holding tional University Chief Financial Ofﬁ cer& Senior Senior Vice President, Senior vice presi- Melody vice presi- 2009/7/1 0 0 0 0 0 0 KBC dent, Taishin Finan- Chien dent MBA, National cial Holding Chengchi University Senior Vice President, Senior China Trust Director of Taishin vice presi- Sam Lin 2008/12/11 0 0 0 0 0 0 Graduate School of Investment Trust dent Accounting, Clarement Mckenna Senior Manager, HSBC Senior Graduate School William vice presi- 2006/12/11 0 0 0 0 0 0 of System Nil Yao dent Engineering,Shanghai Machinery College Vice President, China Senior Development Industrial Johnny vice presi- 2009/7/14 0 0 0 0 0 0 Bank Liu dent MBA,Massachusetts Institute of Technology Chairman of Taishin President of Taishin Senior Insurance Brokers, Insurance Agency vice presi- Jack Su 2011/1/1 0 0 0 0 0 0 Director of Taishin Department of BA, dent Marketing Consul- Soochow University tant Vice President, ABN Vice AMRO Helen Liu 2008/7/28 0 0 0 0 0 0 President MBA,University of Wisconsin-Madison Senior Vice President, Vice Brenda First Bank Director of PayEasy 2010/1/29 0 0 0 0 0 0 President Huang University of Southern Travel Service Queensland, MBA Vice President, OCBC Singapore Vice Alex Department of Math- 2007/1/29 0 0 0 0 0 0 President Chang ematics Queens Col- lege, City University of New York Vice President, JP Mor- Director, Taishin Se- Vice Charles gan Chase Bank Taipei 2009/4/1 0 0 0 0 0 0 curities Investment President Hsieh branch MBA, University Advisory of Iowa

2010 Annual Report 17 III. Corporate Governance Report

Stake of spouse Spouse or relatives Shareholding and offspring within second-degree Shareholding in the name of Date of before age of Major education (expe- kinship who serve others Current jobs with Title Name election majority rience) managerial posts other companies (appointment) Amount Share Amount Share Amount Share (note 2) Rela- of of of of of of Title Name tion- shares Stake shares Stake shares Stake ship Assistant Vice Presi- Vice Phyllis dent, Citi Bank 2006/9/21 0 0 0 0 0 0 President Wang Graduate School of Kansas University Vice President of ABN AMRO Vice Min-Hsing 2011/3/1 0 0 0 0 0 0 MBA, University of President Liu Illinois at Urbana- Champaign Vice President, Taishin Bank Vice Josephine 2009/2/1 0 0 0 0 0 0 Department of History, President Yang National Taiwan Univer- sity Vice President, Taishin Vice Sam Bank 2009/4/1 0 0 0 0 0 0 President Chiang Department of Cheng Kung University Vice President, Taishin Senior vice presi- Vice Bank Patrick Lin 2010/7/2 0 0 0 0 0 0 dent, Taishin Finan- President Department of BA, Fu cial Holding Jen Catholic University Vice President, Assistant Vice Presi- Taishin Financial dent, Vice Chris Holding 2009/11/18 0 0 0 0 0 0 MBA, University of President Chang Director, Ming Shi California Business Administra- ,Los Angeles tion Consultant Nil Vice President, Taishin Bank Vice Jerry Yang 2008/12/11 0 0 0 0 0 0 Department of Foreign President Trade, Tamkang Uni- versity Vice President, Taishin Vice David Bank 2009/11/18 0 0 0 0 0 0 President Chang MBA,National Chung Hsing University Vice President, Taishin Senior vice presi- Vice Chao-Min Bank 2011/3/1 0 0 0 0 0 0 dent, Taishin Finan- President Lin Department of Law, cial Holding Soochow University Vice President, Taishin Director of Tailspin Bank Investment Trust, Vice Shawn C.L 2011/3/1 0 0 0 0 0 0 Department of Eco- Taishin Venture President Teng nomics, National Chung Capital, Taishin Hosing University Insurance Agency Vice President of Vice Chen, Li- Taishin Bank 2011/3/1 0 0 0 0 0 0 President Tzu University of Texas at Dallas Accounting Assistant Manager,China Trust Yunnian vice presi- 2008/7/11 0 0 0 0 0 0 Department of Com- Chen dent merce, National Taiwan University

18 2010 Annual Report Branch Manager Spouse or rela- Stake of tives within second- spouse and Shareholding Concur- Date of Shareholding rent jobs degree kinship who offspring before in the name of Major education (experi- election with serve managerial Title Name age of majority others ence) (note 2) (appoint- other posts ment) Amount Share Amount Share Amount Share compa- Rela- of of of of of of nies Title Name tion- shares Stake shares Stake shares Stake ship Manager, Taishin Bank Branch Tsao, Shu- 2011/3/4 0 0 0 0 0 0 Department of Banking, Manager Ling National Cheng Chi U. Manager, Taishin Bank For- Branch Mei-O 2008/9/1 0 0 0 0 0 0 eign Trade Division, Taipei Manager Cheng Business College Branch Pai-Shih Manager, Taishin Bank MBA, 2008/12/5 0 0 0 0 0 0 Manager Lee Chinese Culture University Assistant Vice President, Branch Chen-Yuan ABN AMRO 2010/5/17 0 0 0 0 0 0 Manager Lee Industrial EconomisTamkang University Wen- Manager, Taishin Bank De- Branch Cheng 2007/11/2 0 0 0 0 0 0 partment of Business Admin- Manager Chang istration, Tamkang University Manager, Taishin Bank Branch Ya-FangYu 2008/6/1 0 0 0 0 0 0 Foreign Trade Division, Tak- Manager ming Commercial College Branch Tien-Hao Manager, Taishin Bank 2008/11/14 0 0 0 0 0 0 Manager Lin Keelung Senior High Manager, Taishin Bank Branch Fu-Chu Banking Management Divi- 2008/4/25 0 0 0 0 0 0 Manager Wang sion, Tamkang Business college Manager, Taishin Bank De- Branch Pei-Ming 2008/4/25 0 0 0 0 0 0 partment of Law, Soochow Manager Lee University Manager, China Trust Branch Shou- Nil 2008/12/5 0 0 0 0 0 0 Department of Finance, Manager TeWeng Tamkang University Manager, Taishin Bank Branch Institute of Mainland China Chien-Yi Ni 2010/2/1 0 0 0 0 0 0 Manager Studies, National Sun Yat- Sen University Manager, Taishin Bank Branch Shih-Yang 2009/8/1 0 0 0 0 0 0 Department of Banking and Manager Chien Finance, Tamkang University Manager, Taishin Bank Branch Yu-Fang Department of Cooperative 2008/4/25 0 0 0 0 0 0 Manager Huang Economy, Tamkang Univer- sity Manager, Taishin Bank Branch Banking & Insurance Yuh-Pei Lu 2008/2/22 0 0 0 0 0 0 Manager Division,Taipei Business Vocational High Manager, Taishin Bank Branch Hsin-Chan Department of Business 2009/6/1 0 0 0 0 0 0 Manager Wu Administration, Ming Chuan University Manager, Taishin Bank De- Branch Chien-Ping partment of Business Admin- 2010/2/1 0 0 0 0 0 0 Manager Sun istration, Chinese Culture University TSAO Manager, Taishin Bank Branch HUNG 2010/11/1 0 0 0 0 0 0 Department of tourism, Manager JUNG Chinese Culture U.

2010 Annual Report 19 III. Corporate Governance Report

Manager, Taishin Bank Branch Business Administration Li-Pan Su 2008/2/22 0 0 0 0 0 0 Manager Division, Takming Business College Manager, Taishin Bank Yung- Branch Department of Business Chieh 2009/8/1 0 0 0 0 0 0 Manager Administration, Feng Chia Chang University Manager, Taishin Bank Branch Chih-Chieh 2010/6/1 0 0 0 0 0 0 Department of Finance, Na- Manager Chang tional Chengchi University Manager, Taishin Bank Branch Jia-Hui Banking and Insurance 2008/4/25 0 0 0 0 0 0 Manager Pan Division, Taipei Business College Manager,Daan bank Branch Ronny Y.C. 2008/2/22 0 0 0 0 0 0 Englishg Department, Fu Manager Su Jen Catholic University Manager, Taishin Bank Branch BAI HUI 2010/7/30 0 0 0 0 0 0 Department of business Manager KAO management, Tung Hai U. Branch Manager, Taishin Bank Jack Chiu 2010/10/1 0 0 0 0 0 0 Manager MBA, National Cheng Chi U.

20 2010 Annual Report Spouse or rela- Stake of tives within second- spouse and Shareholding Concur- Date of Shareholding rent jobs degree kinship who offspring before in the name of Major education (experi- election with serve managerial Title Name age of majority others ence) (note 2) (appoint- other posts ment) Amount Share Amount Share Amount Share compa- Rela- of of of of of of nies Title Name tion- shares Stake shares Stake shares Stake ship Manager, Taishin Bank Gen- Branch Ping-Yung 2011/1/1 0 0 0 0 0 0 eral Commerce Division, Yu- Manager Hsu Da Business School Manager, Taishin Bank Branch Chun-Min Department of Business Ad- 2010/2/1 0 0 0 0 0 0 Manager Chang ministration, Chungyu Junior college Manager, Taishin Bank Branch TSENG YU 2010/9/1 0 0 0 0 0 0 Department of business Manager NHNG management, Soochow U. Manager, Taishin Bank Branch Hsin-Hung 2009/8/15 0 0 0 0 0 0 Foreign Trade Department, Manager Yeh Lunghua Business college Manager, Taishin Bank Branch Yu-Hui Hsu 2008/12/5 0 0 0 0 0 0 Accounting Department, Manager Tamkang University Manager, Taishin Bank Branch LIU CHAO Department of business 2011/1/1 0 0 0 0 0 0 Manager PENG management, Chinese Cul- ture U. Manager, Taishin Bank Branch Accounting and Statistics Li-Hua Li 2010/9/1 0 0 0 0 0 0 Manager Division, Hsinwu Commer- cial College Manager, Taishin Bank Branch Mei-Chao Graduate School of 2008/2/22 0 0 0 0 0 0 Manager Lin Economics,National Chengchi University Manager, Taishin Bank Branch Melody 2008/2/22 0 0 0 0 0 0 Department of ﬁ nance and Manager Wei moneh, Tamkang University Nil Branch Manager, Ta Chong Bank, Branch Sandy 2010/8/30 0 0 0 0 0 0 Department of statistica and Manager wang accounting, Ming Chuan University Manager, Taishin Bank Ma- Branch Chi-Cheng 2009/6/1 0 0 0 0 0 0 chinery Engineering Dvision, Manager Fan Minshin Technology College Senior Deputy Manager, Citi Branch Bank Yu-Ni Chen 2010/4/16 0 0 0 0 0 0 Manager General Commerce Division, Chutung Senior High Manager, Hsinchu Tenth Credit Cooperative Branch Jui-Chueh 2009/10/1 0 0 0 0 0 0 Accounting and Statistics Manager Tseng Division, Hsinchu Kuangfu Senior High Cheng- Manager, Taishin Bank De- Branch Hsing 2009/10/1 0 0 0 0 0 0 partment of Business Admin- Manager Peng istration, Tamkang University Manager, Taishin Bank Department of Applied Com- Branch Yi-Ting Lin 2009/3/1 0 0 0 0 0 0 merce, National Taichung Manager Institute of Technology ( correspondence class) Deputy Manager, The Tenth Credit Cooperative of Hsin- Branch Wei-Jye Chu 2010/4/16 0 0 0 0 0 0 Manager Chang Department of International Trade, Ta Hwa Institute of Technology

2010 Annual Report 21 III. Corporate Governance Report

Spouse or rela- Stake of tives within second- spouse and Shareholding Concur- Date of Shareholding rent jobs degree kinship who offspring before in the name of Major education (experi- election with serve managerial Title Name age of majority others ence) (note 2) (appoint- other posts ment) Amount Share Amount Share Amount Share compa- Rela- of of of of of of nies Title Name tion- shares Stake shares Stake shares Stake ship Manager, Taishin Bank Branch Department of agricultural M.H.Chou 2010/10/1 0 0 0 0 0 0 Manager economy, National Taiwan University Deputy Manager, Citi Bank Branch Pei-Shi Su 2009/10/1 0 0 0 0 0 0 Department of Economics, Manager Tunghai University Manager, Taishin Bank Department of business Branch Piao-Hsi- 2010/4/16 0 0 0 0 0 0 management, Manager ung Huang Minghsin University of Sci- ence and Technology Deputy Manager, Yuanta Branch Li-Hua Bank 2008/12/5 0 0 0 0 0 0 Manager Chen Department of Information Science,Tamkang University Manager, United National Bank Branch Hai-Feng 2008/2/22 0 0 0 0 0 0 Department of Business Ad- Manager Hsieh ministration, National Chung Hsing University Manager, Taishin Bank Branch Shu-Ling 2008/2/22 0 0 0 0 0 0 General Commerce Division, Manager Yang Nanshan Business School Assistant Vice President,, Jih Sun Bank Branch Yuan-Liang 2009/6/1 0 0 0 0 0 0 Department of Business Manager Liu Administration, Tamkang University Manager, Taishin Bank Nil Branch Yu-Chang 2007/10/12 0 0 0 0 0 0 Department of Mathematics, Manager Chang Tunghai University Manager, Taishin Bank Branch Shihta Shu 2009/6/1 0 0 0 0 0 0 MBA,Georgia State Univer- Manager sity Vice President, UBS AG Branch Graduate School of Finance, Kuo-Jen Li 2007/12/28 0 0 0 0 0 0 Manager Baruch College The City University of New York Manager, Standard Char- tered Bank Branch Hua-Nung 2008/12/5 0 0 0 0 0 0 Department of Business Manager Huang Administration, Ming Chuan University Manager, Taishin Bank Branch Steven Lin 2009/9/1 0 0 0 0 0 0 Department of Law, Fu Jen Manager Catholic University Manager, Taishin Bank Chun- Branch Department of Information Hsien 2009/8/1 0 0 0 0 0 0 Manager Management, Tamkang Chou University Manager, Taishin Bank Branch Chen-Jui Department of Accounting 2009/8/1 0 0 0 0 0 0 Manager Yu and Statistics, Ling Tung Business College Manager, Taishin Bank Branch Chun-Yu Graduate School of Finance 2008/5/16 0 0 0 0 0 0 Manager Yen , Chaoyang University of Technology

22 2010 Annual Report Spouse or rela- Stake of tives within second- spouse and Shareholding Concur- Date of Shareholding rent jobs degree kinship who offspring before in the name of Major education (experi- election with serve managerial Title Name age of majority others ence) (note 2) (appoint- other posts ment) Amount Share Amount Share Amount Share compa- Rela- of of of of of of nies Title Name tion- shares Stake shares Stake shares Stake ship Manager, Taishin Bank Branch Chang, Graduate school of inter- 2011/1/1 0 0 0 0 0 0 Manager Chin-tang national economy, National Chung Cheng University Manager, Taishin Bank Food Branch Shu-Chen 2007/11/2 0 0 0 0 0 0 Hygiene Division, Chia Nan Manager Lin College of Pharmacy Assistant Vice President, Tainan Securities Branch Kuan-Ta 2010/2/1 0 0 0 0 0 0 Banking and Insurance Manager Wang Department , Feng Chia Uni- versity Branch Chih-Yuan Manager, Taishin Bank 2008/12/5 0 0 0 0 0 0 Manager Kang National Chiayi University Assistant Vice President, Taishin Bank Bao-Huey Branch Accounting and Statistics Huang 2007/10/12 0 0 0 0 0 0 Manager Division,National Cheng- Kung University ( correspondence class) Manager, Taishin Bank Graduate School of Admin- Branch Yu-I Chin 2007/11/2 0 0 0 0 0 0 istration and Management Manager , Chang Jung Management College Manager, Taishin Bank De- Branch partment of Business Admin- Mei-I Tsai 2007/11/2 0 0 0 0 0 0 Manager istraion, Far East College of Technology Manager, Taishin Bank Branch Chyi-Jia General Commerce Division, 2007/11/2 0 0 0 0 0 0 Manager Chen Nanyin Vocational High Nil School Manager, Taishin Bank Branch Chen,Yu- Department of ﬁ nance and 2011/1/1 0 0 0 0 0 0 Manager ching money, Southern Taiwan University Manager, Taishin Bank Branch Chia- Department of International 2010/2/1 0 0 0 0 0 0 Manager Chuan Kuo Business, Providence Uni- versity Manager, Taishin Bank De- Branch Jui-Pei 2009/9/1 0 0 0 0 0 0 partment of Finance Bank- Manager Hung ing, Shih Chien University Branch Fai-Yean Manager, Taishin Bank Ming 2009/9/1 0 0 0 0 0 0 Manager Yu Chuan Business College Manager, Taishin Bank Department of Financial Branch Hsin-Hua 2009/9/1 0 0 0 0 0 0 Management, National Manager Hsieh Kaohsiung First University of Science and Technology Manager, Taishin Bank Ac- Branch Ming-Yi 2009/8/1 0 0 0 0 0 0 counting Department, I-Shou Manager Chou University Manager, Taishin Bank Fi- Branch Gung- 2008/11/14 0 0 0 0 0 0 nancial Department, Fortune Manager Hsiang He Institute of Technology Section Chief, Barclatys Bank Branch Chia-Yu 2010/2/1 0 0 0 0 0 0 Department of Agriculture Manager Lin marketing, National Chung Hsing University

2010 Annual Report 23 III. Corporate Governance Report

Spouse or rela- Stake of tives within second- spouse and Shareholding Concur- Date of Shareholding rent jobs degree kinship who offspring before in the name of Major education (experi- election with serve managerial Title Name age of majority others ence) (note 2) (appoint- other posts ment) Amount Share Amount Share Amount Share compa- Rela- of of of of of of nies Title Name tion- shares Stake shares Stake shares Stake ship Manager, Taishin Bank Department of Financial Branch Ya-Chi Ho 2010/7/1 0 0 0 0 0 0 Management, National Manager Kaohsiung First University of Science and Technology Manager, Taishin Bank Branch LING-LING 2010/8/1 0 0 0 0 0 0 Department of economics, Manager TUNG National Taiwan University Branch Su-Hung Manager, Taishin Bank Loyu 2007/12/28 0 0 0 0 0 0 Manager Liu Vocational High Manager, Taishin Bank Foe- Branch Li-Hung Liu 2008/4/25 0 0 0 0 0 0 ign Trade Division, Taichung Manager Business College Manager, Taishin Bank Branch Chin-Mei Department of Industrial 2010/3/5 0 0 0 0 0 0 Manager Chang Management, Kaohsiung College Manager, Taishin Bank Branch Chia-Jung Graduate School of Educa- 2010/2/1 0 0 0 0 0 0 Manager Liu tion, Southern California University Assistant Vice President, Branch Chung- Taishin Bank 2009/7/1 0 0 0 0 0 0 Manager Ming Chen Department of Economic, Fu Jen Catholic University Manager, Taishin Bank Branch Chen,Jin- 2010/7/1 0 0 0 0 0 0 Department of ﬁ nance and Manager Ci money, Shi Chien University Nil Manager, Taishin Bank Branch CHO YU 2011/4/1 0 0 0 0 0 0 Department of economy, Manager FEN Chinese Culture University Chih- Manager, Taishin Bank Branch Chiang 2011/4/1 0 0 0 0 0 0 Chemical Division, Tung Manager Chang Fang Business College Manager, Taishin Bank Branch Wang yi Department of business 2011/4/1 0 0 0 0 0 0 Manager fang management, Fu Jen Catho- lic University Manager, Taishin Bank Branch Chou shu Department of industrial ma- 2011/4/1 0 0 0 0 0 0 Manager fang nagement, Tamsui Industry and Commerce College Assistant Vice President, ABN AMRO Branch Hui-Mei Lin 2011/4/1 0 0 0 0 0 0 Graduate School of Finan- Manager ce, National Chung Hsing University Branch Chi-Hsiang Manager, Taishin Bank MBA, 2011/4/1 0 0 0 0 0 0 Manager Lai Feng Chia University Manager, Taishin Bank Branch Lin, Yu- 2011/4/1 0 0 0 0 0 0 Department of international Manager Wen trade, Chiao Kuang College Manager, Taishin Bank Branch HSU, 2011/4/1 0 0 0 0 0 0 Department of chemical Manager MING-CHU engineering, Shude College

24 2010 Annual Report c. Compensations for board directors, supervisors, president, and vice presidents

1. compensations for board director (including independent directors)

base date: Dec.31, 2010; Unit: NT$1,000

Compensations for directors compensations for other jobs with the company

Share of Share of combination combination Expense Job-leaving Amount of Compensa- Job-leaving Compensations of A, B, C, Employee of A, B, C, D, for Salary, bonus, and shares for tion and from and D in dividend- E, F and G in business and special retirement employee (A) retirement distribution of after-tax sharing after-tax net Compensation from invested fi rms other than subsidiaries execution allowance (E) payment warrants payment (B) earnings (C) net profi t (G) profi t (D) (F) (H) The company All companies in the consolidated fi nancial statement The company All companies in the consolidated fi nancial statement The company All companies in the consolidated fi nancial statement The company All companies in the consolidated fi nancial statement The company All companies in the consolidated fi nancial statement The company All companies in the consolidated fi nancial statement The company All companies in the consolidated fi nancial statement The company statement All companies in the consolidated fi nancial The company All companies in the consolidated fi nancial statement The company All companies in the consolidated fi nancial statement

title Name cash dividend Stock dividend cash dividend Stock dividend

Chairman Thomas T.L. Wu Director Jui-Sung Kuo Director Shang-Ping Wu Director Teh-Nan Hsu Director Chih-Kang Wang Director Neng-Pai Lin Steve S.F. Shieh Director (2010/11/30 resign ) Chen, Scott Yue ( 2010/6/18 relief of duty) 6,217 6,512 0 0 0 7 4,459 4,521 0.14% 0.14% 18,705 18,705 0 0 0 0 0 0 0 0 0.37% 0.37% Nii Director Sherman Lee （2010/6/18new appointment） Cheng, Chia-Chung (2010/6/18 new appointment Director ;2010/9/10 relief of duty) Chu-Chan Wang(2010/9/10 new appointment) Note 1: Earnings payment for directors and supervisors in the consolidated report of 2010 equaled to the amount approved by the board of directors before shareholders’meeting. Note 2: Compensation for chauffeurs reaches NT$2,823,000 Note 3: No actual collection of job-leaving or retirement payment

2010 Annual Report 25 III. Corporate Governance Report

Compensation brackets

Names of directors The combined compensation of (A+B+C+D) The combined compensation of (A+B+C+D+E+F+G) Compensation brackets of board directors All companies in the All companies in the The company consolidated ﬁ nancial The company consolidated ﬁ nancial statement statement Chu-Chan Wang/Chih-Kang Chu-Chan Wang/Chih-Kang Wang / Shang-Pin Wu / Wang / Shang-Pin Wu / Chu-Chan Wang/Chih-Kang Chu-Chan Wang/Chih-Kang Thomas T.L. Wu /Sherman Thomas T.L. Wu /Sherman Wang / Shang-Pin Wu / Wang / Shang-Pin Wu / Lower than NT$2 M. Lee/Neng-Pai Lin / Jui-Sung Lee /Neng-Pai Lin / Jui- Sherman Lee/Neng-Pai Lin Sherman Lee /Neng-Pai Lin Kuo/ Chen, Scott Yue / Sung Kuo/ Chen, Scott / Jui-Sung Kuo/ Chen, Scott / Jui-Sung Kuo/ Chen, Scott Cheng, Chia-Chung / Steve Yue / Cheng, Chia-Chung / Yue / Cheng, Chia-Chung Yue / Cheng, Chia-Chung S.F. Shieh Steve S.F. Shieh NT$2 M. (inclusive)-NT$5 Teh-Nan Hsu Teh-Nan Hsu Teh-Nan Hsu Teh-Nan Hsu M. (exclusive) NT$5 M. (inclusive)-NT$10 M. (exclusive) NT$10 M. (inclusive)-NT$15 Thomas T.L. Wu/ Steve S.F. Thomas T.L. Wu/ Steve S.F. M (exclusive) Shieh Shieh NT$15 M. (inclusive)-NT$30 M. (exclusive) NT$30 M. (inclusive)-NT$50 M. (exclusive) NT$50 M. (inclusive)- NT$100 M. (exclusive) Over NT$100 M. Total 11 11 11 11 Note 1: Compensations in the table are different from incomes for income tax law. Therefore, figures in the table are mainly for information disclosure and cannot be used as the basis for taxation.

2. Compensations for supervisors

compensations for supervisors Share of combination of Compensations from Job-leaving or retirement expense for business A, B, C and D in after-tax Compensation (A) distribution of earnings payment (B) execution (D) net profi t (C) Compensations All from invested Title Name All companies All companies All companies All companies companies companies other in the in the in the in the The The The in the The The than subsidiaries consolidated consolidated consolidated consolidated company company company consolidated company company fi nancial fi nancial fi nancial fi nancial fi nancial statement statement statement statement statement Chu-Chan Wang(2010/9/10 Standing relief of duty) supervisor Tsay,Yang-Tzong (2010/9/10 new appointment ) Supervisor Long-Su Lin Tsay, Yang-Tzong (2010/6/18 new appointment ； 2010/9/10 relief 3,287 3,287 0 0 0 0 930 930 0.05% 0.05% Nil ofduty) Cheng, Chia- Chung (2010/9/10 Supervisor new appointment ；2010/12/1 relief of duty) Toney Chen (2010/12/1 new appointment)

Note 1: Compensations in the table are different from incomes for income tax law and the figures are mainly for information disclosure and cannot ge used as the basis for taxation.

26 2010 Annual Report Compensation brackets

Names of supervisors

Compensation brackets for the company’s supervisors Combined amount of (A+B+C+ D) All companies in the consolidated ﬁ nancial The company statement Chu-Chan Wang / Long-Su Lin / Toney Chu-Chan Wang / Long-Su Lin / Toney Under NT$2 M. Chen/Cheng, Chia-Chung Chen/Cheng, Chia-Chung NT$2 M.(inclusive)-NT$5 M. (exclusive) Tsay, Yang-Tzong Tasy, Yang-Tzong

NT$5 M. (inclusive)-NT$10 M. (exclusive)

NT$10 M. (inclusive)-NT$15 M. (exclusive)

NT$15 M. (inclusive)-NT$30 M. (exclusive)

NT$30 M. (inclusive)-NT$50 (exclusive)

NT$50 M. (inclusive)-NT$100 M. (exclusive)

Over NT$100 M.

Total ５５

2010 Annual Report 27 III. Corporate Governance Report

3. Compensation for president and vice presidents

Base date: Dec.31, 2010; Unit: NT$1,000

Salary (A) Job-leaving or retirement payment (B)

Name title All companies in All companies in the consolidated The company The company the consolidated ﬁ nancial ﬁ nancial statement statement

Executive advisor Steve S.F. Shieh President Justin Tsai President Spike Wu Senior Vice President Loofei Huang Senior Vice President Ena Swei Senior Vice President Melody Chien Senior Vice President Sam Lin Senior Vice President Johnny Liu Senior Vice President Amy Hsia Senior Vice President Minna Chou Senior Vice President William Yao Vice President Shawn C.L. Teng Vice President Chao-Min Lin Vice President Chris Chang Vice President Josephine Yang Vice President David Chang Vice President Sam Chiang Vice president Monling Lee 93,748 94,158 1,601 1,601 Vice president Helen Liu Vice president Jack Chen Vice president Charles Hsieh Vice president Jerry Yang Vice president Peter Tseng Vice president Phyllis Wang Vice president Alex Chang Chief Auditor YH Wang ( appointed on May.26,2010) Howard Wu Chief Auditor (transferred to the ﬁ nancial holidng company on May.26, 2010) Senior Vice president Ann Shaw (appointed on Aug.13,2010) Senior Vice president Larry Chung (appointed on July.2,2010) Senior Vice president Mark Chiu ( Jan.28, 2010 relief of duty ) Brenda Huang ( appointed on Jan.29, Vice president 2010) Vice president Patrick Ling ( appointed on July.2, 2010) Vice president Kevin Huang( job change on July.2, 2010) Vice president Gloria Lee ( job change on Aug.13, 2010) Note 1: Compensation for chauffeurs reach NT$2,985,000 Note 2: No actual collection of job-leaving or retirement payment; the appropriation or provisions for job-leaving or retirement funds reached NT$1,601,000

28 2010 Annual Report Invested business Share of the combined value Salary, bonus and special Employee dividend-sharing (D) of A, B, C, and D (%) in after- Amount of employee warrants allowance (C) tax net proﬁ t

All companies in the The company consolidated ﬁ nancial All compa- All companies All companies statement nies in the in the in the

The com- dividend Cash dividend Stock dend Cash dividend Stock divi- The The consolidat- consolidated consolidated pany company company ed fi nancial fi nancial fi nancial statement statement statement

136,163 136,237 0 0 0 0 2.94% 2.92% 0 0 300

2010 Annual Report 29 III. Corporate Governance Report

Compensation brackets

Names of president and vice president Compensations brackets for presidents and vice presidents All companies in the consolidated ﬁ nancial The company statement Howard Wu/ Gloria Lee/ Mark Chiu/ Patrick Howard Wu/ Gloria Lee/ Mark Chiu/ Patrick Below NT$2,000,000 Ling / Kevin Huang/ Loofei Huang / Ann Ling / Kevin Huang/ Loofei Huang / Ann Shaw Shaw YH Wang/ Phyllis Wang/ Chao-Min,Lin/ YH Wang/ Phyllis Wang/ Chao-Min,Lin/ Chris Chang/ David Chang/ Peter Tseng/ Chris Chang/ David Chang/ Peter Tseng/ NT$2,000,000(inclusive ）∼5,000,000（exclusive） Brenda Huang / Jerry Yang/ Helen Liu/ Brenda Huang / Jerry Yang/ Helen Liu/ Shawn C.L. Teng Shawn C.L. Teng Monling Lee/ Amy Hsia/ Jack Chen/ Ena Monling Lee/ Amy Hsia/ Jack Chen/ Ena NT$5,000,000（inclusive）∼10,000,000（exclusive） Swei/ Josephine Yang/ Sam Chiang/ Swei/ Josephine Yang/ Sam Chiang/ Charles Hsieh/ Larry Chung / Minna Chou Charles Hsieh/ Larry Chung / Minna Chou Spike Wu/ Sam Lin/ Alex Chang/Melody Spike Wu/ Sam Lin/ Alex Chang/Melody NT$10,000,000（ inclusive）∼15,000,000（exclusive） Chien Chien William Yao/ Johnny Liu/ Justin Tsai/ Steve William Yao/ Johnny Liu/ Justin Tsai/ NT$15,000,000（inclusive）∼30,000,000（exclusive） S.F. Shieh Steve S.F. Shieh NT$30,000,000（inclusive）∼50,000,000（exclusive） NT$50,000,000（inclusive）∼100,000,000（exclusive） Over NT$100,000,000 Total 34 34 Note 1: Compensations disclosed in the table different from income for income tax law and therefore cannot be used as the basis for taxation.

4. Manager’s name and the distribution of employee bonus payout : Nil d. Analytical comparisons of the shares of company’s compensations for board directors, supervisors, president, and vice presidents in the after- tax net proﬁ ts in the recent two years, as listed in the company’s ﬁ nancial statement and the consolidated financial statement, and explanation of the compensation policy, standards, and makeup, the procedure for setting compensations, and their association with business performance and risk of future follow:

1. In 2010, total compensations for directors, supervisors, president, and vice presidents accounted for 3.24% of the after-tax net profi t t and the share listed in the consolidated fi nancial statement was 3.22%. In 2009, total compensations for directors, supervisors, president, and vice presidents accounted for 23.55% of the after-tax net profi t t and the share listed in the consolidated fi nancial statement was 23.25%

2. The company’s compensation policy (1) Compensations for managerial staffers are determined according to the company’s overall proﬁ t performance, the status of business divisions in achieving their goals, and personal performance evaluation.

(2) Actual compensations for directors are determined according to the compensations for managerial staffers, pay adjustments, and the extents of their participation in the company’s business and contributions, the level of risk responsibility, and change in the company’s business status and performance. The compensations are set by the board of directors after consulting the opinions of independent director. We will continuously consider the future risk and strengthen the principle of deferred payment on remuneration strategy.

30 2010 Annual Report C. Status of Corporate Governance

a. Information on the operation of the board of directors

In the recent ﬁ scal year, the board of directors convened 53 times and status of attendance by directors and supervisors follows: Dec.31, 2010 Actual number number of Actual rate of title Name note of attendance attendance by proxy attendance (%) Taishin Financial Holding Continued term (renewed Chairman 43 10 81.13% Representative: Thomas T.L. Wu appointment on June 18, 2010) Taishin Financial Holding Continued term (renewed Director 47 6 88.68% Representative: Jui-Sung Kuo appointment on June 18, 2010 ) Continued term (renewed Director Taishin Financial Holding 47 1 97.92% appointment on June 18, 2010) (already left the post) Representative: Steve S.F. Shieh Resigned on Nov. 30, 2010 Taishin Financial Holding Continued term (renewed Director 53 0 100.00% Representative: Teh-Nan Hsu applintment on June 18, 2010 Director Taishin Financial Holding Previous term (dismissal on 2 22 8.33% (already left the post) Representative: Chen,Scott Yue June 18, 2010 ) Taishin Financial Holding New term (appointment on June Director 23 6 79.31% Representative: Sherman Lee 18, 2010) New term (renewed appointment Director Taishin Financial Holding on June 18, 2010) 11 2 84.62% (already left the post) Representative: Cheng, Chia-Chung Succeeded by Wang Chu-chan on Sept. 10, 2010 Taishin Financial Holding New term (appointment on Sept. Director 14 2 87.50% Representative: Chu-Chan Wang 10, 2010 ) Taishin Financial Holding Continued term (renewed Director 48 5 90.57% Representative: Shang-Pin Wu appointment on June 18, 2010) Taishin Financial Holding Continued term (renewed Independent director 35 16 66.04% Representative: Chih-Kang Wang appointment on June 18, 2010 ) Taishin Financial Holding Continued term (renewed Independent director 50 1 94.34% Representative: Neng-Pai Lin appointment on June 18, 2010) Taishin Financial Holding New term (appointment on June Standing Supervisor Representative: 25 0 86.21% 18, 2010 ) Tsay, Yang-Tzong Supervisor Taishin Financial Holding Continued term (renewed 14 0 26.42% Representative: Long-Su Lin appointment on June 18, 2010) Continued term (renewed Standing Supervisor Taishin Financial Holding appointment on June 18, 2010) 36 0 97.30% (already left the post) Representative: Chu-Chan Wang Succeeded by Cheng Chia- chung on Sept. 10, 2010 New term (appointment on Sept. Supervisor (already Taishin Financial Holding 10, 2010) left the post) 11 0 100.00% Representative: Cheng,Chia-Chung Succeeded by Toney Chen on Dec. 1, 2010 Taishin Financial Holding New term (appointment on Dec. Supervisor 5 0 100.00% Representative: Toney Chen 1, 2010 ) Other items of mandatory registration: 1.For items listed in Article 14-3, Securities Transaction Law and resolutions passed by the board of directors for which independent directors have opposing or reserved opinions on record or in written form, specify the date and number of the meeting of the board of directors, the contents of the case, and opinions of independent directors, and response of the board of directors: nil 2.For avoidance by directors for cases involving the interests of them, specify the name of the board director, contents of the case, reason for avoidance, and the status of their participation in voting: The bank implements avoidance of interest for related cases according to related laws/ regulations. 3.Targets for strengthening the function of the board of directors in current year and the recent year (such as the setup of auditing committee and enhancement of information transparency) and the evaluation of their execution: In order to strengthen the governance of the board of directors, the company already formulated rules of order to the meeting of the board of directors, instituted independent directors since 2007, and took out liabilities insurance for board directors and key executives in the end of 2007. Due to the existence of supervisors , the company decides not to establish auditing committee for the time being.

Note: The attendance rate(%) of a directors/ supervisor is calculated by his/her actual number of attendance and the number of meetings of the board of directors during his/her team

2010 Annual Report 31 III. Corporate Governance Report

b. Operation of the auditing committee or the participation of supervisors in the operation of board of directors

1. Information on the operation of auditing committee: Not established yet.

2. Participation of supervisors in the operation of the board of directors: Attendance of supervisors in the 53 meetings of the board of directors in the recent year is listed below： Dec. 31, 2010 Actual Attendance Title Name number of Note rate (%) attendance Taishing Financial Holding Repre- Standing sentative: 25 86.21% New term (appointment on June 18, 2010) supervisor Tsay, Yang-Tzong Taishing Financial Holding Renewed term ( renewed appointment on Supervisor 14 26.42% Representative: Long-Su Lin June 18, 2010) Renewed term (renewed appointment on Standing Supervisor Taishing Financial Holding 36 97.30% June 18,2010), succeeded by Cheng Chia- (already left the post) Representative: Chu-Chan Wang chung on Sept. 10, 2010 Taishing Financial Holding Supervisor Representative: 11 100.00% New term (appointment on Sept. 10, 2010) (already left the post) Cheng, Chia-Chung succeeded by Toney Chen on Dec. 1, 2010 Taishing Financial Holding Supervisor Representative: 5 100.00% New term (appointment on Dec. 1, 2010) Toney Chen Other items which should be recorded：一、The makeup and responsibilities of supervisors: (一)、Communication between supervisors and employees/shareholders (such as communications channel and method) Supervisors can communicate with employees anytime in the exercise of their duties and employee can refl ect and express their opinions to the human resources division via the company’s internal website. (二)、Status of the communication of supervisors with in-house auditing chief and CPA (such as communication items, method, and results for the bank’s fi nance and business status) 1. Communication of supervisors with in-house auditing chief (1) The bank’s supervisors regularly hold communications meetings with the general auditor and minutes of the meeting are submitted to the board of directors. (2) Supervisors and chief auditor of the bank attend the meetings of the board of directors and communicate with directors during and before the meetings over various affairs of the bank. (3) The bank’s auditing division regularly submits “auditing report” in the meeting of the board of directors every month, with the contents of the report including the conducting of auditing operation and major audited items, both internal and external ones. Attending supervisors, therefore, can also understand the contents of the report. (4) The auditing reports for the bank and its subsidiaries of the bank’s auditing division are submitted to supervisors for inspection. (5) Investigation reports on major incidents of the bank (such as irregularities, natural disaster, and major losses) are all submitted to supervisors. (6) Supervisors can communicate and discuss with chief auditor over the aforementioned affairs or other affairs anytime. 2. Communications between supervisors and CPAs The bank’s supervisors can discuss with CPAs over the company’s fi nance, business status, and auditing fi ndings of CPAs. 二、Opinions expressed by supervisors in the meetings of the board of directors which should be put on record, including the date and number of the meeting, contents of the case, resolutions of the meeting, and response of the board to the opinions: Nil c. Determine disclosure items according to the guidelines for the practical corporate governance of the banking industry. However, for those already disclosed on the bank’s website, it was sufficient to indicate the availability of the related information on the website at : http://www. taishinbank.com.tw

32 2010 Annual Report d. Status of the bank’s corporate governance and its deviation from the guidelines for the practical corporate governance of the banking industry and reasons

Deviation from the guidelines of the practical Items Operating status corporate governance of the banking industry and reasons (1) The bank has only one shareholder, Taishin Financial Holding, whose stock-affairs unit handles shareholders’ suggestion or disputes and makes necessary disclosures on its website as a 1. Makeup of the bank’s shareholdings and shareholders’ interest channel of communications with shareholders. (1) The way the bank handles suggestions or disputes of shareholders (1) No deviation (2) The bank has only one shareholder, Taishin Financial Holding, (2) Grasp by the bank of the list of the bank’s major shareholders (2) No deviation which owns 100% stake in the bank. and the ultimate controllers of major shareholders (3) No deviation (3) The bank’s Risk Management Division is in charge of establishing (3) Risk management mechanism and fi rewall vis-a-vis affi liates the bank’s risk-management policy and mechanism, as well as the implementation of the risk-management and firewall mechanism according to the regulations of the Banking Law. 2. Makeup and responsibilities of the board of directors (1) The bank instituted two seats of independent board directors in 2007. (1) No deviation (1) The institution of independent board directors by the bank (2) The bank will evaluate the independence of certified public (2) No deviation (2) Periodic evaluation of the independence of certifi ed public accountants accountants before signing the letter of entrustment with them every year. (1) The bank’s parent company has instituted the “measures for the management of related parties and transactions” and its enforcement rules, specifying the regulations for the transactions between the bank and related parties. (2) The bank’s parent company has established an “integrated 3. The establishment of communications channel with related parties system for related parties,” for the use by the bank and its other No deviation subsidiaries as a communications channel with related parties. (3) The bank’s related business staffers can apply for authorization according to their needs and conduct cross inquisitives according the regulations of the Financial Holding Company Law and the Banking Law, to assure the legality of transactions with related parties. 4. Information publication (1) The bank has installed corporate website for the disclosure of (1) The bank has disclosed fi nance and business information on its the company’s fi nance and corporate governance. website and undertaken the disclosure of major information and (2) The bank has also embraced other information-disclosure methods the application for online information publication. (1) No deviation (such as the installation of English-language websites, the designation (2) The bank conducts major information disclosure and application for (2) No deviation of staffers to handle information collection and disclosure, the online information publication and implements spokesman’s system, implementation of spokesman’s system, and the posting of the according to the regulations of the Securities Transaction Law. videotaped process of investor conference on the website. No deviation The existing “guide lies for In 2010, Taishin Financial Holding’s shareholders’ meeting approved the corporate governance the establishment of various functional committees and set up of the banking industry” 5.The institution and operation of nomination or compensate “compensation committee” on Aug.19, 2010. In the future. In the doesn’t mandate the committee future, it will also evaluate the need of establishing compensation institution of the committee committee, according to the need of actual operation and legal and the bank will evaluate requirement. the feasibility of its institution at proper time. 6. Describe the bank’s corporate governance and its deviation from the “guidelines for the corporate governance of the banking industry” and reasons: The bank installed two seats of independent board directors in 2007 but yet to establish auditing committee, and has complied with the regulations of the “guidelines for the corporate governance of the banking industry” in all other aspects. 7. Other major information conducive to the understanding of the Bank's corporate governance (such as employee rights ,caring of employees ,investors relationship, stakeholder right ,the advanced study of directors and supervisors, attendance of the meetings of the board of directors by directors and supervisors , the execution of risk management policy and risk evaluation criteria, the execution of consumer protection and customer policy , and the avoidance of cases by board directors with related interest, and the taking out of liability insurance for directors and supervisors): (1) The bank has entrused Taiwan Corporate Governmetn Association to hold classes at home and directors and supervisors have undertaken suffi cient hours of courses. Status of the study has been posted at the website of Taiwan Stock Exchange according to the requirement. (2) The bank’s board directors and supervisors have avoided cases with related interests according to regulations. (3) The bank has instituted an independent risk-management unit and invested considerable resources in the establishment of risk-management mechanism, in order to implement risk-management policy and manage the bank’s overall credit, market, and operating risks according to a set method and set extent. (4) The bank properly handles customer complaints to uphold consumer interests. (5) The bank has taken out liability insurance for board directors and supervisors. 8. Description of results and major defi ciencies (or suggestions), as well as their improvement, included in the corporate-governance evaluation reports compiled by the bank itself or professional institutions under commission of the bank: The bank handles the operation related to corporate governance itself according to regulations, without taking part in the evaluation of corporate governance by professional institutions.

2010 Annual Report 33 III. Corporate Governance Report

e. The information of duty and component on the operation of salary committee:Nil f. Fulfillment of social responsibilities: Systems and measures embraced by the bank related to social responsibilities, including environmental protection, community participation, social service, social welfare, consumer interest,human right, security, and hygienic, and their environment.

Deviation from the guidelines Items Operating Status for the social responsibilities and reason

A. Implementation of corporate governance 1. Banks formulate corporate social-responsibility policy or system, and review the status of its implementation effect. 2. Status of banks pushing social responsibility The bank doesn’t establish set up a specialized unit for push- via specialized or part-time units. ing social-responsibility policy or system but various units of Not applicable 3. Banks regularly hold education, trading, and promo- the bank have been fulﬁ lling corporate social responsibility, as tion of corporate ethics for directors, supervisors, and description in the following table. employees, incorporate the events into the performance evaluation system for employees, and set up clear and effective rewarding and punitive system.

The bank’s labor-security section takes charge of the implementation of the law for preventing smoking hazard, promoting anti-smoking via labor-security education and training, and carries out semi-annual inspection of operating environment to uphold the quality of employees’ operating environment. Taishin Bank follows the planning of Taishin Financial Holding B. Development of sustainable environment in pushing environmental protection and energy conservation. 1. Banks dedicate to enhancing the utilization effi ciency for In summertime, push “Cool Biz” event for environmental various resources and utilized recycled products to lower protection and power conservation, having employees shed the impact on the environment. formal attire in favor of casual light dress and setting the tem- 2. Banks establish environmental management system perature of air conditioning at 26 degrees Celsius. suited to their industrial features. In line with Taipower’s program of suspending air conditioning not applicable 3. Set up specialized environmental management unit or irregularly during summertime, replace offi ce lighting with T5 personnel for the upholding of environment. energy-saving lighting and institute regional power circuit, so 4. Banks notice the effect of climate change on operation as to cut power consumption and achieve the goal of goal of and formulate the strategy for carbon abatement and environmental protection and power conservation. reduction of greenhouse gases. Push “paperless” offi ce and “using love as energy,” encourag- ing cycling, taking mass transportation system, and car pool- ing, to reduce carbon emission and strengthen health. Implement environmental-protection commitment, manifest re- spect and care for the nature, and actively urging employees, their families, and clients to “use love as energy and love the earth together.”

34 2010 Annual Report Deviation from the guidelines Items Operating Status for the social responsibilities and reason

C. Uphold public benefi ts 1. Banks comply with related labor laws/regulations, protect employee’s legal rights, and establish proper management method and procedure. 2. Banks provide employees a secure and healthy work- The bank has disclosed related inquiry and service phone place and conduct regular security and health education numbers at its corporate website, enabling consumers to re- for employees. fl ect any problem concerning the bank’s products or services: 3. Banks formulate and publicize consumer right policy and 1. The bank’s corporate website : http://www.taishinbank.com.tw/ Not applicable provide transparent and effective consumer complaint 2. Related inquiry and service phone numbers: procedure for its products and services. (1) dedicated around-the-clock customer service line: (02)2655-3355 4. Banks cooperate with suppliers in fulfi lling corporate (2) dedicated customer complaint line: (02)2700-3166 social responsibilities. (3) dedicated line of structured-note task force: (02) 2568-3990 5. Banks take part in events related to community development and charity/public benefi t groups via commercial activities, physical donation, corporate volunteer service, and other free professional services.

D. Intensiﬁ ed information disclosure 1. method of the bank for disclosing information related to relevant and reliable corporate social responsibility.

E. Description of deviation of the self-made guidelines for corporate social responsibilities from the “guidelines for corporate social responsibilities of listed ﬁ rms”: Not applicable

F. Other key information conducive to the understanding of the operation of corporate social responsibility (such as banks’ system, measures, and execution concerning the issues of environmental protection, communal engagement, social contribution, social services, public benefi ts, consumer right, human right, security and hygiene, and other social-responsibility event). 1. Labor security Under the recommendation and assistance of Daan-district health center of Taipei city, the headquarters building of thebank and Taishin Financial Holding obtained the certifi cates of healthy workplace and no-smoking workplace of the Taipei City government, as well as smoking- hazard prevention mark of the city government. 2. Environmental protection Taishin Bank follows the planning of Taishin Financial Holding in pushing environmental protection and energy conservation. In summertime, push “Cool Biz” event for environmental protection and power conservation, having employees shed formal attire in favor of casual light dress and setting the temperature of air conditioning at 26 degrees Celsius. 3. Public benefi ts and charity In addition to its core fi nancial business, Taishin Bank has been dedicating on a long-term basis to the causes of public benefi ts/charity, art/culture, and fi nancial academics. It has utilized its corporate strength to contribute to the betterment of the country and society by giving concrete payback to the society, community, and underprivileged groups. In the fi eld of social welfare, Taiwan Financial Holding and its affi liate PayEasy.com joined hands in pushing series care-for-Taiwan events from 2002, starting with the effort to revitalize the economy of the 921 earthquake-stricken regions in Nantou county. The event combined the clout of Taishin’s corporate image and the abundant resources of e-commerce in assisting the marketing and plantation of agricultural products, as well as the development of tourism business, in those regions, bringing fresh hope to villagers in those areas. The efforts have produced outstanding results, bringing new hope to the earthquake-stricken area. From 2005, the Caring Taiwan program has extended its reach to Kuohsing-village teenage karate team, in the hope of assisting the growth of the underprivileged children. The company has raised fund for the training expense of the young athletes via theme website, production of promotional literature, holding of various events and news coverage. The team has racked remarkable performance in international tournaments. In 2010, Taishin sponsored the team to take part in Asian karate tournament in Jakarta, in which the team won 34 medals, including eight gold medals, 10 silver medals, and 16 bronze medals, ranking 4th place among the 29 contesting teams. In 2008, in order to assure the sustainable existence of rice paddies and availability of Taiwanese rice for local people, the care-for-Taiwan movement organized the campaign for the sponsorship of rice-paddy operations by enterprises, dubbed “my one-acre rice paddy.” In addition to its own sponsorship, Taishin Bank also rallied the participation of over 100 enterprises. Professional farmers participating the program increased investments and the lease of idled farmland and the offspring of some rice farmers also returned to their village to engage in farming operation, injecting fresh vigor to the line.

2010 Annual Report 35 III. Corporate Governance Report

Deviation from the guidelines Items Operating Status for the social responsibilities and reason

Taishin Bank founded Taishin Bank public-beneﬁ t and charity foundation in 2010 and launched “your one vote determines the strength of love” event, which determines the donation receipients of the fund via online balloting. The event is meant to have small and medium social-welfare groups win the acknowledgement of the social pubic via online proposal and promotion, thereby solving their difﬁ culty to obtain donations, due to their low visibility. Near 200 Taishin employees served as volunteers for the program, inviting social-welfare groups to participate the pgram and assisting them to complete proposal, registration, and ballot solicitation. Of 204 participating groups, 36, including Yulin-county Xinyi orphanage, received donations ranging NT$100,000-500,000, which were presented during a ceremonty in December 2010. Process of the event was publicized online, for the knowledge of the public.

G. Description of banking products or corporate social responsibility report which have been certifi ed by international certifi cation bodies: The bank passed the ISMS certifi cation of ISO 27001, testifying to the capability of the bank’s information department to completely discern and effectively control potential threat and risk of various information application, assuring the security for various transactions of customers. Contents of the program follow: 1. Program period: Nov. 2009-Nov. 2010 2. Program scope: The bank’s information service division takes charge of the program, including ● Organizational aspect: The information service division consists of core system department, business ● operating system department, business analytical system department, forex system and corporate-banking product department, system supporting department, and fi nancial/monetary system department. Technological aspect: Information and communications environment or system overseen by the information service division. 3.Execution items: ● Information security system evaluation: status diagnosis, establishment of documentary management system ● Risk identifi cation: Categorize information assets and execute risk evaluation ● Establishment of information-security system: Design effective quantitative measurement standards ● Information security certifi cation: Internal auditing and drill for sustainable operation plan 4. Achievements of the program ● Strengthen the bank’s information security management: Strengthen the bank’s information operation fl ow and norm according to the framework of information security management standards ● Enhance customer confi dence and upgrade service quality: Conform to world-class information-security norms, so as to enhance information service quality and corporate image. ● Obtain ISO27001 certifi cation and the acknowledgement of the regulator: When domestic and external auditing units carry out auditing operation, use similar language to achieve consensus.

Note: unlisted banks need not fill the the column “deviation from the guidelines for corpoerate social responsibilities of listed companies and reason.” g. Status of the company in fulﬁ lling management of integrity and measures

Since its establishment, the company has been dedicating to the commitment of continuous innovation, in order to achieve the ﬁ nancial success of consumers and shareholders and make Taishin the cash cow for customers.

1. Materialize the management policy of integrity and forbid dishonest behaviors and interests on the part of employees:

(1) The bank’s employees comply with the “guidelines for behaviors of the employees of Taishin Financial Holding” formulated by the financial holding company, which upholds the core spirit of integrity, commitment, innovation, and cooperation.

(2) The guidelines cover the major contents of worth ethic, maintenance of employee relationship, ban on part-time job and avoidance of the conflict of interest, regulation on gift and treatment, upholding of customer privacy, upholding of the completeness and correctness of information, upholding of intellectual property, principle of fair trade, anti-money laundering, and duty and obligation of information, which are meant to prevent dishonest behaviors.

36 2010 Annual Report (3) The guidelines explicitly forbid employees to accept money, gift, or improper beneﬁ ts.

2. Setup of legal compliance division

Taishin Bank establishes legal compliance division, in charge of the drafting, formulation, and execution of the regulations and policy of legal compliance, to pave the way for the company to conduct monetary transactions in a fair and transparent manner and compliance with laws/regulations on the part of managerial staffers in carrying out their duties.

3. Establish an effective accounting and internal-control system

(1) Accounting system

The company’s accounting system follows “commercial accounting law,” “guidelines for the compilation of ﬁ nancial statement of securities issuers,” “guidelines for the compilation of banks with public share offering,” and common accounting criteria, as well as “sample for banking industry’s accounting system” issued by Bankers Association. It features faithful and complete chronicling of the company’s various operations, effectively manifests the function of international subversion, and mirror the company’s ﬁ nancial status and management results, so that it can serve as a reference for decision making.

(2) Internal control system

The company’s internal control system follows article 51 of the Financial Holding Company Law and article 6 of the measures governing internal control and auditing system of ﬁ nancial holding company and banking industry. The system covers the company’s business activities, formulation and proper revision of the corporate charter, and organizational charter and various business norms and handling manuals.

For major irregularities resulting from violation of the regulations of the system or coverage auditing results due to inadequate internal management, related persons should bear the responsibility or be penalized, in serious cases, according to proper procedure. h. Banks with corporate-governance guidelines and related regulations must disclose their methods for inquiry

Please refer to the explanation of item d “ status” of corporate governance and its deviation with the practical guidelines for the corporate governance of the banking industry and reasons. i. Other important information conducive to the understanding of the corporate governance of the bank

Please refer to the explanation of item d “ status” of corporate governance and its deviation with the practical guidelines for the corporate governance of the banking industry and reasons.”

2010 Annual Report 37 III. Corporate Governance Report

j. Status of the execution of internal control

1. Statement of internal control

Statement for the Internal-Control System of Taishin International Bank

We hereby declare, on behalf of Taishin International Bank, that the bank did set up internal control system, carry out risk management, and have an independent auditing department undertake auditing works with the results being reported to the board of directors and supervisors regularly, in compliance with “enforcement measures for internal control and auditing systems of banks,” during the period from January 1, 2010 to December 31, 2010. For sideline securities business, the bank also judged effectiveness in the design and execution of the international control system, according to items for judgment of effectiveness of internal control system included in the “guidelines for establishment of internal control system by service establishments in the securities and futures market,” promulgated by the Securities and Futures Bureau, the Financial Supervisory Commission. Except items listed on the attached tables, careful review and evaluation conﬁ rms effective execution by various business units of the bank in internal control and compliance with laws and regulations. The statement will become a major component of the company’s publicized annual report and proxy statement. Any falsehood, concealment, or other irregularities for the aforementioned statement will be liable to legal responsibilities stipulated in article 20, article 32, article 171, and article 174 of the Securities Transaction Law.

To ：

Financial Supervisory Commission:

Chairman

President

Chief Auditor

Executive Responsible for Legal Compliance

March.3,2011

38 2010 Annual Report Items needing improvement in the internal control system of Taishin Bank and improvement plan

Base date: Dec. 31, 2010 Schedule for completing the Items needing improvement Improvement measures improvement 1. Customer-information management for joint Already reviewed and adjusted the management mechanism for marketing the use of customer information for joint marketing. (1) Increase text-message reminding function for transaction exceeding NT$10 million (inclusive) in accumulated outlay. 2. Intensify the inspection of deposit withdrawal (2) Increase phone confi rming function for transaction of deposit by securities accounts withdrawal and transfer with accumulated value exceeding NT$10 million (inclusive) a week. Already formulate management mechanism and operating fl ow 3. Intensify management of transactions other for related transaction and submit such transctions to the board of Improvement completed. than credit extension by related parties. directors for approval. 4. Intensify management of the requirement of No need to require related guarantor for chattel secured by suf- related guarantors for auto loans. fi cient collateral. Already revised measures governing management of the bank’s subsidiaries and required the company to revise its corporate 5. Intensify management of subsiediary Taishin charter and measures for authorizing expenses and outlays, in Insurance Agency. order to uphold the operation of an effective and proper internal control system.

2. Auditing report of certiﬁ ed public accountant.

Inspection Report of Certiﬁ ed Public Accountant

Article 28 of the Enforcement Measures for Internal Control and Auditing System of the Financial Supervisory Commission, the Executive Yuan, stipulate that “When certified public accountant audits and certifies the annual ﬁ nancial statement of bank, the bank should entrust the CPA to inspect its internal-control system and express opinions on the accuracy of the information contained in the report/table submitted to the regulator, the execution of the internal control system and the the system for the executive responsible for legal compliance, and the propriety of the policy for bad-debt provision. Under the entrustment of Taishin International Bank Co.Ltd., the certified public accountant undertakes the aforementioned inspection work and checks the bank’s internal auditing report on internal-control improvement, which was conducted according to the instruction of the FSC (FSC No. 0960171481). The CPA submits the inspection scope, basis, inspection procedure, and inspection result, as attached, according to article 28 of Enforcement Measures for Internal Control and Auditing System. The inspection report is meant only for reference to Taishin International Bank Co., Ltd. and the regulator in carrying out its supervision duty, and cannot be used for other purposes or distributed to other persons.

Certiﬁ ed Public Accountant Deloitte & Touche Taiwan

April 6, 2011

2010 Annual Report 39 III. Corporate Governance Report

k. Penalties for violation of law, major defects, and improvement

Disclosure items Cases and values Status of improvement a. Indictment of executives or staffers Nil by prosecutors for job-related crimes. Already put forth measures intensifying customer- information protection in the four aspects of “precautionary measures,” “monitoring mechanism,” “employee management,” and “information-security policy,” as well measures strengthening system development, including: the introduction of “Thin Client” mechanism, 1.The Financial Supervisory Commission infl icted a fi ne of control of the linkage between the bank’s network and NT$4 million for leakage of customer information (FSC operating mainframe via internal fi rewall, No.09700511461, June 15, 2009) intensifi cation of the management mechanism of information input and retrieval management system for data warehousing analytical environment (FAM). cancellation of the setup of excluding specifi c mainframes for the auditing record of key information data-base mainframes. regular request for Microsoft to assist the bank in checking information-system security and online packing. When subscribing to or redeeming funds, frontline traders should calculate whether the fund has passed the threshold 2. The FSC infl icted fi ne of NT$240,000 on July 6, 2007 on the for mandatory reporting according to the book value of the company’s chief executive for failing to fi le report in time for fund on the previous trading session, while back-offi ce units Chienhung strategic balanced fund exceeding NT$300 million add the function warning the fund exceeding NT$300 million in scale (FSC No.0980039400, Aug. 19, 2009). in scale to their delivery and clearance system. The double control mechanism of manual works and system can assure the completion of report fi ling with the specifi ed period. 3. The FSC infl icted a fi ne of NT$500,000 on the bank for providing data on the deposits and loans of customers Already reviewed and adjusted the management mecha- without their agreement to the fi nancial holding companies nism for the use of customer information for joint marketing. and subsidiaries for the purpose of joint marketing (FSC, No. b. Fines infl icted by 09900053443, July 6, 2010). Financial Supervi- 4. The FSC infl icted fi ne of NT$2 million on the company for sory Commission Already formulated management mechanism and operat- engaging in transactions other than credit extension with (FSC) for violation ing fl ow for related transactions requiring the submission of parties specifi ed in item 1, article 45, Financial Holding of laws/regulations such transactions to the board of directors for approval in Company Law without obtaining the approval of the board of advance. directors in advance (FSC, No. 09960004101, Aug. 11, 2010). 5. The FSC infl icted NT$500,000 of fi ne on the company for requiring co-issuer of promissory notes for auto loans No need of related debtor with associated liabilities for already secured suffi cient chattel as collateral (FSC, No. loans already secured by suffi cient chattel as collateral. 09900177531, Aug. 17, 2010). 6. The FSC infl icted a fi ne of NT$6 million on the company and suspended some businesses of the company as the following for improper management of its subsidiary Taishin Insurance Agency (FSC, No. 09800575551, Aug. 27, 2010): (1) Suspend application for investments specifi ed in article 74, Banking Law, for one year, excluding ongoing investments already approved by the FSC. (2) Forbid mutual utilization of customer information with Taishin Insurance Agency and Taiwan Insurance Already revised the bank’s measures governing the Brokers, according to article 10, “measures governing management of subsidiaries and required the subsidiary joint marketing among subsidiaries of fi nancial holding to revise its corporate charter and measures governing au- company.” thorization of expenses and outlays, so as to maintain the (3) Stop signing new cooperative promotional contract or operation of an effective and proper internal control system. continued contract with Taishin Insurance Agency and Taishin Insurance Brokers according to “regulations on cooperation between banks, securities fi rms, and insurance fi rms for pushing products of other lines or providing related services.” (4) The restrictions of (2) and (3) can be removed only after the bank has owned 100% shares Taishin Insurance Agency and obtained the acknowledge of the FSC for rectifying related defects.

40 2010 Annual Report Disclosure items Cases and values Status of improvement c. Defects severely nil rectiﬁ ed by FSC

(1) Collection of the guaranteed fund for court provisional seizure can be conducted only in the form of registered negotiable instruments payable to Taishin International bank or remittance, rather than cash. 1. Dismiss legal specialist Chen for embezzling provisions of (2) regular rotation of persons in charge and cases under- guaranteed fund for court provisional seizure under the order taken, avoid monopoly of cases by the same person of the FSC (FSC, No. 09900086771, April 6, 2010). over a long term, to avoid irregularities. (3) regular check with the court in charge or custodian of provisions for long-term uncollected guaranteed fund, d. Penalties infl icted to ascertain the status the guaranteed fund for court by FSC for violat- provisional seizure and the progress of the case. ing item 1, article 61, Banking Law (1) Add an text-message function for transaction with ac- 2. The FSC rectifi ed the bank for incident, in which the deposit of cumulated value exceeding NT$10 million (inclusive). the bank’s customer was withdrawn by a staffer of a securities (2) Add a phone-confi rming function for transactions of fi rm with fake chop. deposit withdrawal or transfer exceeding NT$10 million (inclusive) in accumulated value in one week. 3. Infl icted NT$6 million of ine on the bank and suspended some businesses for inadequate management of subsidiary Taishin Similar to B-6 Insurance Agency (similar to B-6) e. Irregularities causing over NT$50 million of loss in one year or several years whose loss or nature should be disclosed, including malprac- tices of staffers, major occasional incidents (fraud, stealth, embezzle- ment or stealth of assets, forged trading, fake certifi cates and securities, collec- nil tion of kickbacks, natural disaster, loss infl icted by external forces, attack and stealth of information by hackers, and leakage of business secrets and client information), or security incidents caused by failure to comply with guidelines for the security maintenance of fi nancial institutions. f. Other items designated by FSC nil for mandatory disclosure

2010 Annual Report 41 III. Corporate Governance Report

l. Major resolutions of the shareholder’s meeting and the board of directors in the recent year and as of the date of the publication of the annual report.

2010.01.07 Passage of redeeming two issues of secondary-lien ﬁ nancial bonds, 90-1 and 93-1, at NT$5 billion each in advance

2010.01.28 Passage of overall compensation for previous pay cut

2010.01.28 Passage of the appointment of Huang Hsiu-hua as the chief of the credit-card department

2010.02.04 Passage of the adoption of book-entry form for ﬁ nancial bonds issued by the bank

2010.02.11 Passage of renaming the “Taishin Charity Foundation” as “Taishin Public Beneﬁ t and Charity Foundation

2010.03.11 Passage of applying for issuing NT$10 billion of unsecured secondary-lien ﬁ nancial bonds in 2010

2010.03.25 Passage of subscribing 576,000 shares, at NT$25 per share, totaling NT$14.4 million, to the cash capital increment of Easy Card Investment Holding in 2010

2010.05.27 Passage of acknowledging the bank’s 2009 business report, earnings allocation, ﬁ nancial statement, and consolidated ﬁ nancial statement

2010.05.27 Passage of installing a ﬁ rst-tier unit “Wealth-Management Product Division”

2010.08.05 Passage of moving the Tianmu branch to 1st and 2nd ﬂ ., No. 88, Zhongshan North Road. Sec. 6, Taipei City

2010.09.02 Passage of re-formulating the bank’s organizational charter and charter for the division of business right and obligation

2010.09.16 Passage of signing the letter of intent for cooperation with Bank of Nanjing

2010.09.23 Passage of revisions of the bank’s corporate charter, articles 26, 27,30,34,43, and addition of article 26-1 and article 34-1

2010.10.07 Passage of moving the bank;s Jianciao branch to 1st ﬂ . and 1st basement, No. 150, Nanjing East Road, Sec. 2, Taipei City

2010.10.14 Passage of acquisition of Taishin Bills Finance by the b bank according to the planning of the parent ﬁ nancial holding company

2010.12.02 Passage of signing memorandum of understanding for cooperation with East West Bank (China)

2010.12.23 Passage of revising articles 38 and 43 of the bank’s corporate charter and adding article 26-2

2010.12.23 Passage of removing the post of chief executive ofﬁ cer

2010.12.23 Passage of the switch to single-president system for the bank

42 2010 Annual Report 2010.12.23 Passage of changing the organization of some divisions of the bank

2010.12.30 Passage of singing the memorandum of understanding for cooperation with Chengdu Rural and Commercial Bank

2010.12.30 Passage of applying for the establish of Brisbane branch and appointing vice president Chiu Chih-hsing as the chief of the preparatory ofﬁ ce of the branch

2011.01.13 Passage of designating Jan. 22, 2011 as the base date for merger with Taishin Bills Finance

2011.02.24 Passage of installing ﬁ rst-tier managerial unit “Legal Compliance Division” and revising the organizational charter accordingly

2011.03.24 Passage of moving the bank’s Minzu branch to 1-4 ﬂ ., No. 91. Wenxing Road, Section 2, Taichung City and renaming it as “City Hall” branch

2011.03.31 Passage of moving the bank’s Donggang branch to 1-2 ﬂ ., No. 23,25, Baoqiang Road, Xindian District, New Taipei City and renaming it as “Beixindian” branch Passage of appointing Lin Chao-min as the the chief of the bank’s Legal Compliance Division m. Different opinions of directors or supervisors on record or in written statement on major resolutions passed by the board of directors in the recent year and as of the date of the publication of the annual report: Nil n. Statement (including chairman, president, accounting chief, and internal auditing chief) in the recent year and as of the date of the publication of the annual report:

Summary Table of the Resignation of Dismissal of Persons Related to Financial Statement April 15 , 2011 Title Name Date of assuming ofﬁ ce Date of the relief of post Reason for resignation or dismissal Chief Auditor Howard Wu 1999/9/1 2010/5/26 relief of duty President of Retail Spike C.W. Wu 2008/12/11 2011/1/1 job change Banking group Note: Persons related to financial statement refer to chairman, president, accounting chief, and internal auditing chief

2010 Annual Report 43 III. Corporate Governance Report

D. Information on CPA fee

a. Mandatory disclosure of the auditing and non-auditing fees and the contents of non-auditing service of CPAs,their accounting firms, and afﬁ liates whose non-auditing fee exceeds one fourth of the auditing fee

Whether the auditing covers Name of Non-auditing fee Auditing the entire fi scal accounting Name of CPA note fee year or not fi rm System Business Human Others Sub-total (note 1) design registration resources (note 2) Others include NT$6.94 million for installing information-security management system NT$1.2 million for the project of acquiring Chingfong Bank NT$1.15million for tracking and follow up auditing of internal- control defects NT$1million for surrogate payment NT$560,000 for BIS reauditing fee NT$550,000 for checking the Deloitte & Yang Weng 2010.01.01~ security level of electronic 7,630,000 348,000 13,318,482 13,666,482 Touche Qinzhen Rongsui 2010.12.31 certifi cate NT$300,000 for auditing impairment of assets NT$250,000 for CPA expense for checking subordinated bond HT1 NT$250,000 for the expense of checking major bad-debt accounts NT$ 190,000 for auditing the aadjustment table for the calculation of business tax NT$930,000 for other service expenses

Note 1: Should there be replacement of certified public account or accounting firm, list respective auditing periods and explain the replacement reason, in addition to disclosing the information on the payment of auditing and non-auditing fee. Note 2: List non-auditing fee according to service items and explain the contents of “other” service which accounts for 25% or more of non-auditing fee.

b. Replacement of accounting ﬁ rm and the auditing fee for the replacement year decreases from the previous year which requires mandatory disclosure of the auditing fees of the two years and provision of reasons: Not applicable.

c. Auditing fee decrease over 15% from the previous year which requires mandatory disclosure of the reduction amount, percentage, and reason: Not applicable.

E. Replacement of CPA: Nil

44 2010 Annual Report F. Chairman, presidents, and financial or accountant managers who served at the accounting ﬁ rm of the CPAs or its afﬁ liates within the recent year: Nil

G. Changes in shareholding transfer or shareholding pledge by directors,supervisors, or managers who are required to report their shareholdings according to item 3, article 25, Banking Law, in the recent year and as of the date of the publication of the annual report

a. Changes in shareholdings

2010 As of April 30, 2011 Changes Changes Title Name Changes in Changes in in pledged in pledged shareholding shareholding shareholding shareholding Director/ Supervisor Taishin Financial Holding Co., Ltd 0 0 0 0 (Major shareholder) Note 1: Persons in the table owning over 1% of the bank’s total shares should be specified as a major shareholder and listed respectively. Note 2: In case recipients of share transfer or share mortgage are related parties, fill in the following table. Note 3: Up to the publication date of the yearbook refers to the date when the contents of the yearbook are finalized after winning the approval of the board of directors.

b. Information of shareholding transfer : Nil c. Information of shareholding pledge: Nil

H. Information on the relationship of the 10 largest shareholders who are related parties according to Financial Accounting Criteria No.6

Information on the Relationship Between the 10 largest Shareholders （including common shares and preferred shares）

Names and relationship of the 10 largest Shareholding of shareholders who are related parties spouse and offspring Total shareholding in Own shareholding according to Financial Accounting Criteria before the age of the names of others No.6 or who are spouses or relatives with Name majority Note second-degree or closer kinship Number of Share of Number Share of Number of Share of Name Relationship shares stake of shares stake shares stake Taishin Financial Holding Co., Ltd 4,915,752,571 100% 0 0 0 0 Nil Nil Representative： Thomas T.L. Wu Note 1: Should list the top 10 shareholders and specify the names of institutional shareholders and their representatives. Note 2: Shareholding rates refer to the rates of shareholdings held under own name, the name of spouse, the names of offspring before the age of majority, or the names of others. Note 3: aforementioned shareholders include institutions and individuals and their relationship should be specified.

2010 Annual Report 45 III. Corporate Governance Report

I. The amount of shares and total share of stake in the same invested company owned by the company directly or indirectly controlled by the bank and the bank’s directors, supervisors, presidents, vice presidents, assistant vice presidents, and branch chiefs.

Base date: Dec.31, 2010 ;unit:share,％

Investment by the company directly or indirectly controlled by the bank Investment by the bank and the bank’s directors, supervisors, General investment Equity investment presidents, vice presidents,assistant vice presidents, and branch chiefs Amount of Share of Amount of Amount of Share of Share of stake shares stake shares shares stake Dah An Leasing 19,800,000 99.00% 0 0.00% 19,800,000 99.00% Taishin Insurance Agency 262,204 87.40% 0 0.00% 262,204 87.40% Payeasy Digital Integration 28,400,001 65.36% 0 0.00% 28,400,001 65.36% Chang Hwa Bank 16,500,000 0.27% 1,400,001,500 22.55% 1,416,501,500 22.82% Taishin Real Estate Management Co., Ltd 12,000,000 60.00% 0 0.00% 12,000,000 60.00% An-Sin Real Estate Management 3,300,000 30.00% 0 0.00% 3,300,000 30.00% Sunlight Asset Management 1,092,317 18.21% 0 0.00% 1,092,317 18.21% Dah Chung Bills Finance 79,182,224 18.29% 62,256 0.01% 79,244,480 18.30% Paciﬁ c Securities 11,537,469 2.77% 926,368 0.22% 12,463,837 2.99% Taiwan Future Exchange Company 2,572,269 0.96% 0 0.00% 2,572,269 0.96% Taipei Foreign Exchange Company 160,000 0.81% 0 0.00% 160,000 0.81% Financial Information Service 9,100,000 2.28% 0 0.00% 9,100,000 2.28% Taiwan Asset Management 10,000,000 0.57% 0 0.00% 10,000,000 0.57% Taiwan Financial Asset Service Corp. 5,000,000 2.94% 0 0.00% 5,000,000 2.94% Apex Venture Capital 2,196,262 4.67% 0 0.00% 2,196,262 4.67% Li Yu Venture Capital 314,991 1.49% 0 0.00% 314,991 1.49% Harbinger Venture Capital 5,527,500 3.35% 0 0.00% 5,527,500 3.35% United Venture Capital 1,920,000 4.52% 0 0.00% 1,920,000 4.52% Chinese New Venture 2,234,400 5.00% 0 0.00% 2,234,400 5.00% Han Bang Venture Capital 482,112 4.46% 0 0.00% 482,112 4.46% Han Chinese Venture Capital 2,905,000 4.73% 0 0.00% 2,905,000 4.73% Kun Chi Venture Capital 5,000,000 3.33% 0 0.00% 5,000,000 3.33% Asia Paciﬁ c Telecom 15,000,000 0.46% 0 0.00% 15,000,000 0.46% Easy Card Investment Holding 1,872,000 2.40% 0 0.00% 1,872,000 2.40% Kaohsiung Rapid Transit Co.Ltd 5,000,000 0.50% 0 0.00% 5,000,000 0.50% Da Chiang International 8,620,690 4.31% 0 0.00% 8,620,690 4.31% Lien An Service 125,000 5.00% 0 0.00% 125,000 5.00% MasterCard Incorporated( note 2) 10,316 0.01% 0 0.00% 10,316 0.01% Visa Incorporated(note 2) 584,124 0.07% 0 0.00% 584,124 0.07% Taiwan High-Speed Rail Corp.(note 1) 30,000,000 0.28% 10,000 0.00% 30,010,000 0.28% Note 1：The bank holds preferred shares of Taiwan High-Speed Rail Corp. Note 2：Endowed assets

46 2010 Annual Report IV. Fund Raising Activities

A. Shares and dividends

a. Sources of capital April.30 , 2011; Unit: share Registered capital Paid-in capital Month Issuing Source of Amount of Amount of Note year price Value Value Capital shares shares Cash capital MOEA No. 09601002050 2006.12 18 3,486,776,537 34,867,765,370 3,486,776,537 34,867,765,370 increment Jan.5,2007 (note 1) Cash capital MOEA No. 09601078460 2007.03 17 4,339,717,713 43,397,177,130 4,175,011,831 41,750,118,310 increment Apr.14,2007 (note 2) Cash capital MOEA No. 09901005390 2009.12 13.5 4,915,752,571 49,157,525,710 4,915,752,571 49,157,525,710 increment Jan.12,2010 (note 3) Note 1: Cash capital increment by issuing 305,555,555 new common shares via private placement at issuing price of NT$18 per share for face value of NT$10 Note 2: Cash capital increment by issuing 688,235,294 new shares (including 500,000,000 common shares and 188,235,294 C-type preferred shares) via private placement at the issuing price of NT$17 per share for face value of NT$10 Note 3: Cash capital increment by issuing 740,740,740 new common shares via private placement at issuing price of NT$13.5 per share for face value of NT$10

Registered capital Kinds of shares Note Shares in circulation (note) Share not issued Total

Common shares 4,727,517,277 shares 0 share 4,727,517,277 shares Not listed

C-type preferred shares 188,235,294 shares 0 share 188,235,294 shares Not listed

Total 4,915,752,571 shares 0 share 4,915,752,571 shares Not listed

Note: Specify whether the stock is listed on the centralized or over-the-counter market ( if the stock is restricted from trading in the centralized or over- the-counter market , give notice)

Information related to general application system: Not applicable

b. Makeup of Shareholders (common shares) April.30, 2011 Makeup of Foreign Government Other shareholders Financial institutions Individuals institutions and Total agencies institutions Amount foreigners

Number 0 1 0 0 0 1

Amount of shares 0 4,727,517,277 0 0 0 4,727,517,277

Share of stake 0 100% 0 0 0 100%

Makeup of Shareholders (C-type preferred shares) April.30, 2011 Makeup of Foreign Government Other shareholders Financial institutions Individuals institutions and Total agencies institutions Amount foreigners

Number 0 1 0 0 0 1

Amount of shares 0 188,235,294 0 0 0 188,235,294

Share of stake 0 100% 0 0 0 100%

2010 Annual Report 47 IV. Fund Raising Activities

c. Diversiﬁ cation of shareholding

Diversiﬁ cation of shareholding (common shares) Face value per share: NT$10; April.30, 2011 Grades of shareholding Number of shareholders Amount of shares owned Share of stake 1 to 999 0 0 0% 1,000 to 5,000 0 0 0% 5,001 to 10,000 0 0 0% 10,001 to 15,000 0 0 0% 15,001 to 20,000 0 0 0% 20,001 to 30,000 0 0 0% 30,001 to 50,000 0 0 0% 50,001 to 100,000 0 0 0% 100,001 to 200,000 0 0 0% 200,001 to 400,000 0 0 0% 400,001 to 600,000 0 0 0% 600,001 to 800,000 0 0 0% 800,001 to 1,000,000 0 0 0% Own grading for 1,000,001 and more shares 1 4,727,517,277 100% Total 1 4,727,517,277 100%

Diversiﬁ cation of shareholding (C-type preferred shares) Face value per share: NT$10; April.30, 2011 Grades of shareholding Number of shareholders Amount of shares owned Share of stake Own grading for 1,000,001and more shares 1 188,235,294 100% Total 1 188,235,294 100% d. List of major shareholders

Face value per share: NT$10; April.30, 2011

Shares Names of major shareholders Amount of shares owned (including common and preferred shares) Share of stake Taishin Financial Holding Co., Ltd. 4,915,752,571 100% Note: Specify top 10 shareholders or those with the share of stake exceeding 1% e. Information on share prices, book value, earnings, and dividend in the recent two years Unit: NT$ Year March 31, 2009 2010 Item 2011 Highest Note 1 Note 1 Note 1 Market price per share lowest Note 1 Note 1 Note 1 Average Note 1 Note 1 Note 1 Before dividend payout (NT$ ) (note 2) 10.60 12.14 12.63 Book value per share (note 2) After dividend payout (note 2) 10.49 12.14 12.63 Weighted average amount ofshares (1,000 shares) 3,990,835 4,727,517 4,727,517 Earnings per share Earning per share (NT$ ) 0.21 1.64 0.47 Cash dividend 0.11 Note 4 N/A Dividend Stock dividend from retained earnings 0 Note 4 N/A per share Stock dividend from legal reserves 0 Note 4 N/A Accumulated retained dividend (NT$1,000 ) (note 3) - 120,000 149,589 P/E ratio Note 1 Note 1 Note 1 Analysis of investment Price/earnings ratio Note 1 Note 1 Note 1 returns Yield rate of cash dividend Note 1 Note 1 Note 1 Note 1: Not applicable due to absence of market price for reference since the company is not listed on the centralized or over-the-counter market Note 2: On the basis of book value per share of common shares Note 3: Accumulated retained dividends for preferred shares Note 4: The board of directors has yet to approve, on behalf of shareholder’s meeting, the proposal for profit sharing for 2010

48 2010 Annual Report f. Dividend policy and the status of execution 1. Dividend policy

According to the company’s corporate charter, earnings in the ﬁnal accounts, should it exist, should be used to pay tax and duties, with the remainder being used to cover loss of previous year ﬁrst. If there is still surplus, 30% of the amount should be appropriated for legal reserves and special legal reserves according to law regulation. The balance should be used in priority for dividend and bonus payout for preferred shares according to actual issuing prices. 0.01% of the remainder should be used for bonus payout for employees before being appropriated for retained earnings. The balance then should be combined with the retained earnings at the beginning of the said period for dividend and bonus payout for shareholders of common shares. Before legal reserves have equaled capital, maximum cash dividend payout cannot exceed 15% of the paid-in capital. The restriction is lifted, should legal reserves have exceeded paid-in capital. Cash-dividend payout is also subject to legal restriction, should the BIS ratio (capital adequacy ratio) is lower than the minimum 8% required by the Ministry of Finance.

2. Status of execution

The board of directors will resolve, on behalf of the shareholders’ meeting, on May 5, 2011 to issue NT$120,000,000 of cash dividend for preferred shares, NT$5,393,488,000 of cash dividend for common shares, and NT$539,000 of employee bonus for 2010. g. Effect of resolution of the shareholders’ meeting to issue stock dividend on the bank’s business performance and earnings per share: nil h. Employee bonus and compensations for directors and supervisors

1. Percentages and scope of employee bonus and compensations for directors and supervisors speciﬁed in the bank’s corporate charter

According to the company’s corporate charter, earnings in the final accounts, should it exist, should be used to pay tax and duties, with the remainder being used to cover loss of previous year first. If there is still surplus, 30% of the amount should be appropriated for legal reserves and special legal reserves according to law regulation. The balance should be used in priority for dividend and bonus payout for preferred shares according to actual issuing prices. 0.01% of the remainder should be used for bonus payout for employees before being appropriated for retained earnings. The balance then should be combined with the retained earnings at the beginning of the said period for dividend and bonus payout for shareholders of common shares. The actual percentage for employee bonus payout should be determined within the aforementioned scope by the board of directors. Should the board decide to issue the bonus in the form of stock, the recipients can include employees of subsidiaries with qualifications specified in the Company Law.

2010 Annual Report 49 IV. Fund Raising Activities

2. Accounting treatment for the difference between accrual and actual payment for employee

bonus and compensations for directors and supervisors. If there is a difference between accrual and actual payment for employee bonus and compensations for board directors and supervisors, it will be treated as expense because of the change in an accounting estimate.

3. Information on proposal of the board of directors to issue employee bonus

(1) Payout of cash bonus for employees, stock dividend, and compensations for board directors and supervisors. If there is a difference between accrual and actual payment, please explain the reason. The amount of employee bonus is NT$539,000. There is no difference with the estimated value for annual expense. (2) Share of proposed stock bonus payout for employees in capital increment from retained earnings: N/A (3) Earnings per share after the proposed payout of employee bonus and compensations for board directors and and supervisors: NT$1.64 per share.

4. Use of the earnings of the previous year for payout of employee bonus and compensations for board directors and supervisors:

Earnings allocation for 2009 was already approved by the board of directors (on behalf of shareholders’ meeting) on May 27, 2010, with the the different between employee dividend-sharing and the amount of NT$44,000 listed in the ﬁ nancial statement reaching NT$10,000, mainly due to change in the estimate. The difference was listed under the category of beneﬁ t/loss for 2010. i. Buyback of the bank’s shares: nil

50 2010 Annual Report B. Issuance of ﬁ nancial bonds

Types of fi nancial First issuance of subordinated fi nancial bonds in 2005 Second issuance of subordinated fi nancial bonds in 2005 bonds(note 1) Date and Number of the approval document of FSC, No. 0930031635, Nov. 9, 2004 FSC No. 0930031635, No. 9, 2004 the central regulator Issuing date March 4, 2005 April 28, 2005 Face value NT$500,000, NT$1 M., NT$10 M. NT$10 M. Issuing and trading ROC ROC place (Note 2) Denomination currency New Taiwan dollar New Taiwan dollar Issuing price Same as face value Same as face value Total amount NT$1.508 B. NT$3.3 B. Bond A: Yea 1-7: fi xed rate of 2.70%. The bank’s posted fl oating rate of Year 8-12: one-year time savings deposit+0.30% for the fi rst fi ve years. Should bond holders waive right to execute put option in The bank’s posted fl oating rate of one-year time savings depos- the year;the bank will give them an interest markup of 0.8% Coupon it+0.50% from the sixth year. on its posted fi xed rate of one-year time savings deposit. Bond B: Should the bank waive its right to execute redemption op- Fixed 2.25% for the fi rst fi ve years. tion in the year, the bank will pay an interest markup of 0.95% The bank’s posted fl oating rate of one-year time savings depos- on its posted fi xed rate of one-year time savings deposit, it+0.75% from the sixth year. which should be reset per annum. 10 years from the issue date. Maturity 12 years from the issue date. Maturity on April 28, 2017 Maturity on March 4, 2015 Status Subordinated Subordinated Guarantee institution Nil Nil Trustee Nil Nil Underwriter Nil Nil Certifying lawyer - - Certifying CPA (Note 3) Peter Tsai Peter Tsai Certifying fi nancial Taishin Bills Finance Taishin Bills Finance institution Appropriation of budget from business revenue or issuance of appropriation of budget from business revenue or issuance Repayment method new bonds of new bonds Unpaid balance NT$1.508 B. NT$3.3 B. Paid-in capital in the NT$31,753,524,000 NT$31,753,524,000 previous year Post-fi nal accounts book value in the previ- NT$59,657,278,000 NT$59,657,278,000 ous year Status of contract per- Normal Normal formance

2010 Annual Report 51 IV. Fund Raising Activities

Types of fi nancial First issuance of subordinated fi nancial bonds in 2005 Second issuance of subordinated fi nancial bonds in 2005 bonds(note 1) 1. Upon the maturity of the bonds, carrying terms of seven, eight, nine, ten or eleven years, should bond holders execute put option or the bank executes call option according to the term sheet of “Put Option and Call Option”, the bank will repay the principals and interests to bond holders.

2. Conditions for the exercise of put and call option: The interest rate is based on the fi xed rate for one-year time savings deposit posted by the bank on the website of the Central Bank of China on 10:30 a.m. of March 10 of 2012, 2013, 2014, 2015, and 2016 (if it’s a non-business day, it will be postponed to the next business day). Should the interest rate stand at 1.85% or less, the bond holder may The bank can redeem the entirety or part of the bond by repay- exercise put option and should the interest rate higher ing the principal, and interest since fi ve years from the issue than 1.85%, the bank may exercise call option. Stipulations for redemp- date on March 4, 2010 and the information will be posted on tion or early liquidation the bank’s website or in major daily newspapers in the place of 3. Put option by bond holders: Should bond holders intend the bank’s headquarters one month ago. to exercise put option, they should inform the bank their intension with “notice for the exercise of put option” within 10 days following the fulfi llment of the conditions for the exercise of put option and the bank should make a public announcement about the call option notice in major daily newspapers in the site of its headquarters 30 days before the date for current interest payment.

4. Call option by the bank: Should the bank intend to exercise its call option, it should make a public announcement in major daily newspapers in the place of its headquarters 30 days before the interest payment date.

5. Even if only some bond holders exercise the above put option, the bond will be deﬁ ned as matured entirely and de-listed in OTC Conditions for conver- - - sion or exchange Restrictive stipulation - - (note 4) Fund utilization plan To support the actual need of medium- and long-term loan To support the actual need of medium- and long-term loan The total amount of the issuance and outstanding bonds in the 52.31 57.84 percentage of the book value of previous year (%)

Eligible capital and type Yes, Tier II Yes, Tier II

Nam Name e of rating agency, issue date, and - - the rating (note 5)

Note 1: The number of culumns is adjusted according to the actual number of issuance. Note 2: Fill in overseas corporate bonds (including those issued by offshore banking units). Note 3: Refer to certified public accounts for the issuance of the financial bond. Note 4: Such as second-lien bonds, restriction to the payout of cash dividend, overseas investment, and maintenance of adequate assets ratio. Note 5: If nothing, no need to fill in. Note 6: Mark up private placement in conspicuous manner. Note 7: List the outstanding amount of unrepaid financial bonds according to the same official document of the regulator.

52 2010 Annual Report Types of fi nancial bonds Third issuance of subordinated fi nancial bonds Fourth issuance of subordinated fi nancial bonds (note 1) in 2005 in 2005 Date and Number of the approval document of FSC No. 0930031635 Nov. 9, 2004 FSC No.0930031635 Nov. 9, 2004 the central regulator Issuing date May 18, 2005 June 6, 2005 Face value NT$100 M. NT$100 M., NT$10 M., NT$1 M. Issuing and trading place (Note 2) ROC ROC

Denomination currency New Taiwan dollar New Taiwan dollar Issuing price Same as face value Same as face value Total amount NT$5 B. NT$5.192 bn Year 1-7: The bank’s posted fi xed rate for one- Bond A、B：Fixed rate 2.70% for the fi rst year time savings deposit+0.80% seven years and fi xed rate 3.20% for the eighth Year 8-12: The bank’s posted fi xed rate for through the 12th one-year time savings deposit+1.10% year Coupon The face interest rate is re-set Bond C：The bank’s posted fl oating rate for every year. one-year time savings deposit + 0.65%. The face interest rate is re-set every year. Maturity 12 years, maturity date: May 18, 2017 12 years, maturity date: June 6, 2017 Status Subordinated Subordinated Guarantee institution Nil Nil Trustee Nil Nil Underwriter Nil Nil Certifying lawyer - - Certifying CPA (Note 3) Peter Tsai Peter Tsai Certifying fi nancial institution Taishin Bills Finance Taishin Bills Finance Appropriation of budget from business revenue Appropriation of budget from business revenue Repayment method or issuance of new bonds or issuance of new bonds Unpaid balance NT$5 B. NT$5.192 B. Paid-in capital in the previous year NT$31,753,524,000 NT$31,753,524,000 Post-fi nal accounts book value in the previous NT$59,657,278,000 NT$59,657,278,000 year Status of contract performance Normal Normal The bank can redeem the entirety of part of the The bank can redeem the entirety of part of the bond by repaying the principal, plus interest, bond by repaying the principal, plus interest, seven years after the issuance of the bond (on seven years after the issuance of the bond (on May 18, 2012) or on every interest payment date June 6, 2012) or on every interest payment date Stipulations for redemption or early liquidation afterwards with a written notice issued seven afterwards with a written notice issued seven business days before the date, on any other day business days before the date, on any other day with a written notice issued two months before with a written notice issued two months before the date. the date.

Conditions for conversion or exchange - - Restrictive stipulation (note 4) - - To support the actual need of medium- and long- To support the actual need of medium- and long- Fund utilization plan term loan term loan The total amount of the issuance and outstanding bonds in the percentage of the book value of 66.22 74.93 previous year (%) Eligible capital and type Yes, Tier II Yes, Tier II Nam Name e of rating agency, issue date, and - - the rating (note 5)

2010 Annual Report 53 IV. Fund Raising Activities

Types of ﬁ nancial bonds (note 1) First issuance of subordinated ﬁ nancial bonds in 2010 Date and Number of the approval document of the central regulator FSC No. 09900101150, Mar.23,2010 Issuing date April.12, 2010 Face value NT$ 50M Issuing and trading place (Note 2) ROC

Denomination currency New Taiwan dollar Issuing price Same as face value Total amount NT$10 bn Bond A: Fixed interest rate at 2.65% per annum Bond B: Interest rate is set at “the fl oating interest rate for one-year time savings deposit of Chunghwa Post Co., Ltd.” plus 1.5%. The paper rate will adjusted annually according to the following standard. Coupon “The fl oating rate for time savings deposit of Chunghwa Post Co., Ltd.” is based on the rate posted at the website of the Central Bank of China at 10:30 a.m., two days before the date for starting the calculation of interest. Maturity 7 years from the issue date. Maturity on April.12, 2017 Status Subordinated Guarantee institution Nil Trustee Nil Underwriter Nil Certifying lawyer - Certifying CPA (Note 3) Yang, Qinzhen Certifying fi nancial institution Not applicable Repayment method Appropriation of budget from business revenue or issuance of new bonds Unpaid balance NT$10 bn Paid-in capital in the previous year NT$49,157,525,000 Post-fi nal accounts book value in the previous year NT$53,433,376,000 Status of contract performance Normal Stipulations for redemption or early liquidation Nil Conditions for conversion or exchange - Restrictive stipulation (note 4) - Fund utilization plan Improve fi nancial structure and raise capital adequacy rate. The total amount of the issuance and outstanding bonds in the percent- 46.79 age of the book value of previous year (%) Eligible capital and type Yes, Tier II Nam Name e of rating agency, issue date, and the rating (note 5) “twA” set by Taiwan Ratings on April 6,2010.

54 2010 Annual Report C. Issuance of preferred shares

Issurance of Preferred Shares

Issuing (undertaking) date March 30, 2007 Item Preferred share C via private placement Face value NT$10 Issuing price NT$17 per share Amount of shares 188,235,294 shares Total value NT$3,199,999,998 Dividend and bonus payout 3.75% per annum (non-cumulative) Allocation of remaining property Preference over common shares

Right and obliga- No voting or election right at shareholders’ meeting but having tion Exercise of voting right the right of being elected and the voting right at the preferred C shareholders’ meeting. Entitled to subscription right for new shares at cash capital Others increment, same to common shares The amount of redemption or conversion 0 The amount of non-redemption or non- NT$3,199,999,998 conversion Preferred share C may be converted to common share at Outstanding Preferred shares 1:1 since March 22, 2009. Preferred share C is a perpetual security and the bank may redeem by earnings or issuing new Redemption or conversion stipulation shares since year 10 if and only if the bank’s capital adequacy ratio after redemption is above the regulator’s requirement and the bank receives an approval from the regulator Highest - 2008 Lowest - Average - Highest - 2009 Lowest -

Market price Average - per share Highest - 2010 Lowest - Average - Highest - Current year as of March.31, Lowest - 2011 (note 4) Average - The amount of conversion or subscription as of 2010 Other rights annual report printed. Nil Terms of conversion right or subscription Refer to the company’s corporate charter The impact on Preferred C shareholders, possibility on dilution and the Nil impact on current shareholders The impact on capital adequacy ratio after Reduced by 0.79% approximately redemption Note 1: Preferred shares being handled include those to be issued via public or private placement. Public-placement preferred shares being handled referred to those approved by the commission, while private-placement preferred shares being handled referred to those approved by the board of directors. Note 2: The number of columns can be adjusted according to the number of cases. Note 3: Mark cases of private placement conspicuously. Note 4: Shoulf fill in data of the current year until the date for the publication of the yearbook. Note 5: Preferred shares with share-subscription option should be filled in the following table.

2010 Annual Report 55 IV. Fund Raising Activities

D.Issuance of overseas depository certiﬁ cates: nil

E.Issuance of stock options for employees: nil

Names of managerial staffers with 10 largest stock options valued over NT$30 million: Nil.

F. Acquisition of or sell to other ﬁ nancial institutions

1. Mandatory disclosure of the opinions of certifi ed public accountant on the propriety of share-swap ratio for the acquisition of or sell to other fi nancial institutions in the recent one year: nil 2. Mandatory disclosure of the acquisition of or sell to other financial institutions by a bank listed on the centralized or over-the-counter market in the recent fi ve years and of the opinions of underwriting securities fi rms for the cases conducted via the issuance of new shares: no applicable 3. Mandatory disclosure of the execution of the acquisition of or sell to other fi nancial institutions via issuance of new shares by a bank not listed on the centralized or over-the-counter market and its effect on the interest of shareholders: nil 4. Mandatory disclosure of the execution of the resolution passed by the board of directors for acquiring or selling to other financial institutions via the issuance of new sharers and the basic information on the fi nancial institutions in the recent year and as of the date of the publication of the annual report: Disclosure of acquisition and merger, as well as acceptance of new shares issued by other financial institutions, in progress and the effect on shareholders’ interest

Basic information on ﬁ nancial institutions being acquired or bought into

Name of fi nancial institution (note) Taishin Bills Finance Address 9th-10th fl ., No. 118, Renai Road, Sec. 4, Daan District, Taipei City Chief Executive Helena Kuo Paid in capital 5,140,000 Major business items Certifi cation, underwriting, agency, dealership, guarantee, and endorsement of short-term bills, agent for call loans between fi nancial institutions, agent and dealer for government bonds, fi nancial bonds, and corporate bonds, and handling of derivatives approved by the regulator. Total assets 23,025,063 Total liabilities 17,167,061 Total equity 5,858,002 Interest income 266,048 Financial data for 2010 Net income 564,215 Business expense 134,623 After-tax net profi t 296,330 Earnings per share $ 0.80

56 2010 Annual Report G. Status of the execution of fund-utilization plan

As of the end of the quarter preceding the date of the publication of the annual report, the bank had completed the execution of the fund utilization plan for the issuance of securities or fi nancial bonds via public or private placement and there is no fund utilization plan in the recent three years whose execution has been completed but has yet to manifest its benefi ts or which fails to achieve the goal in execution schedule or benefi ts.

a. Contents of plan

1. Previous issuance of securities via public or private placement and issuance of ﬁnancial bonds which has yet to be completed: nil 2. Plan completed in recent three years which has yet to manifest its beneﬁts: nil 3. Changes in the contents of plan: nil 4. Source and utilization of fund: nil 5. Reasons for the changes: nil 6. Benefits before and after the changes and date for the submission of the change to shareholders’ meeting: nil 7. Posting of the information on the change on the designated website: nil

b. Status of execution

Fund utilization plan for the issuance of securities or financial bonds via public or private placement and issuance of financial bonds which had yet to be completed at the end of the quarter preceding the date of the publication of the annual report (end of March 2009) or fund utilization plan in the recent three years whose execution has been completed but has yet to manifest its benefits or which fails to achieve the goal in execution schedule or benefits: nil

1. Effect on shareholders’ interest and improvement plan: nil 2. Comparison and explanation for the items of fixed assets and net income for plan whose contents involve the acquisition of or sell to other companies or expansion or establishment of fixed assets: nil 3. Explanation of the effect of plan involving equity investment in other companies on thecompany’s business performance or investment gain/loss: nil 4. Comparison and explanation for changes in financial ratio, capital adequacy ratio, net income/loss, working capital, and earnings per share for plan involving the expansion of working capital and improvement of financial structure: nil

2010 Annual Report 57 V. Business Status

A. Business contents

a. Growth and change in various business items

1. Wealth Management

Our wealth management business is mainly focused with total assets exceeding NT$1 million or customers with contracted loans exceeding NT$8 million. For wealth management, the bank provides tailor-made ﬁnancial consulting service to wealth management customers. Via strong Financial Advisory system, we evaluate each client’s needs and preferences according to their lifecycle, ﬁnancial needs and risk tolerance to develop the custom recommendations.

The bank’s wealth management operation covers sound ﬁnancial planning, investment portfolio management, asset allocation recommendations and a broad range of ﬁ nancial products, like local and foreign currency deposits, derivatives, insurances and loans.

The bank’s wealth-management operation provides various preferential treatments to customers according to the different levels of entrusted assets. For customers with entrusted assets exceeding NT$10 million, the bank will provide them designated branch service and birthday treatment, as well as the treatment of world card. In adherence to the concept treating health as the utmost fortune, the bank provides free top-notch physical checkup service to NT$10 million-club customers who also apply to invest in products exceeding a certain level.

2. Consumer banking

The bank’s consumer-banking operation covers consumption loans (housing loan, auto loan, unsecured loan, and subordinated housing loan), credit card, e-cash flow and online payment service for small and medium enterprises. It provides various financial products developed according to market differentiation and the needs of various client groups, as well as various loaning programs to meet the financial needs of clients.

3. Corporate banking

The bank’s wholesale banking operation provides an array of fi nancial products and services to various institutional clients, including corporations, government-owned companies and fi nancial institutions. The business scope includes the businesses of commercial and investment bank, such as deposits, short- and long-term financing, guarantee, trade finance, syndicated loans, bond transaction, short-term paper, factoring, cash management, e-banking for corporate financial network, foreign exchange and interest- rate derivatives, financial advisory, asset securitization, and discretionary assets management, etc.

4. e-ﬁnancial business

In 2010, Taishin Internet bank made many improvements in its operating ﬂ ow, thereby greatly increasing

58 2010 Annual Report the usage convenience for customers and tailoring its services to the needs of customers, which greatly enhanced the satisfaction of customers. The effort has won the acknowledgement of the fi nancial fi eld. In 2010, such as the honor of excellent work for the “best e-fi nance award” under the “Taiwan excellent fi nancial business award,” held by Taiwan Academy of Banking and Finance.

Meanwhile, the Internet bank offers a complete payment platform, a simple and clear overall account- browsing picture, preferential currency-conversion rates, and the function for the purchase of portfolio products, constituting the most complete ﬁ nancial service for customers and allowing customers to self- manage their accounts, which leads to the materialization of one-stop ﬁ nancial-management service.

Meanwhile, to provide seamless ﬁ nancial services to customers, Taishin Bank launched mobile banking by capitalizing on the trend of smart phone and mobile life, in order to provide customers most convenient and timely services. In 2010, the mobile banking focused on two major development directions:

First is the “continuing rollout of diversifi ed services”: In the fi rst quarter of 2010, Taishin mobile banking launched application programs suited to both iPhone and Android smart phones, cashing in on the special function of smart phone to provide integrated abundant information in the various fields of fi nance, preferential program, and daily life. In the third quarter, it rolled out account trading function on iPhone platform, offering customers such functions as NT dollar-account inquiry, designated account transfer, check of credit-card bill, and overall browsing of mutual-fund account. Via constant innovation and tailor-made design, Taishin mobile banking has become a good smart partner of customers.

Second is pushing mobile-banking membership: Market data show that sales of smart phones will hit 5 million units in Taiwan in 2011, underscoring their popularity among local people. As a result, potential customers of mobile banking will also increase. Taishin mobile banking started to push various marketing events from the fourth quarter of 2010, highlighting the convenience of mobile banking resulting from the freedom from the restriction of area and time, in order to attract more customers to easily grasp their own smart life.

5. Trust (Financial Products Division)

In addition to continuing the promotion of “planned money trust” and assisting customers in dealing with the tax saving and share borrowing of “securities trus.

For planned trust business, the bank continued to push “money trust” and assist customers to undertake tax saving and lend stock holding via “securities trust.” In addition, to meet the diversiﬁ ed trust need of corporate customers, the bank plans to undertake “employee welfare trust” in the second half of 2011, so as to help enterprises achieve the goal of retaining talents via adequate compensation and incentives, as well as facilitate the effort to solicit the business related to selection of investment targets by laborers for their pension funds.

For collective management, the bank pioneered the rollout of “So Easy targeted wealth-management plan,” which covers targeted date-type collective management accounts (with the series consisting of Taishin 2015/2020/2030/2040/2050 collective management accounts) and global (right-payout type) collective management account featuring fixed yield, to as to provide customers complete life-target wealth management plan.

2010 Annual Report 59 V. Business Status

For custodian business, in response to the business opportunities related to share listing of overseas enterprises on the local bourse and permission for mainland Chinese employees to obtain stocks of listed parent ﬁ rms via custodian bank, the bank launched “collective investment account for foreign and overseas Chinese employees” custodian business in March 2011.

Regarding the mutual-fund business, Taishin bank will continue to expand the product lineup of domestic and offshore funds, modify self-developed products and plan tailor-made products, thereby meeting the various requirements of our clients.

The bank offers quality overseas corporate bonds and ﬁ nancial bonds, for customers favoring ﬁ xed yields in their assets allocation. In November 2010, the bank began to accept the entrustment of professional investors to invest in offshore structured notes, so as to provide high-assets professional investors more investment options.

Shares of the bank’s major income sources and their growth/ changes:

Net income share (%) 2010 2009 Retail banking 67% 68% wealth management 21% 21% consumption ﬁ nancing 24% 22% credit card 17% 18% cash card 5% 7% Corporate banking 33% 32% Total 100% 100%

Note: 2009 net income excludes loss deriving from Lehman Brothers

b. Business plan for the current year

1. Wealth Management

(1) Meet the client’s need for all-round wealth-management service by utilizing the platform of the nation- wide branch channel to provide client’s more superior and professional service to achieve the goal of actively enhancing wealth-management market share.

(2) Fully understand clients, know client’s needs, provide clients professional planning for assets allocation according to their different ﬁ nancial status and needs, conduct sophisticated client-group segmentation for the provision of custom services, and take good care of client’s entrusted assets. Launch smart diamond ﬁ nancial system and provide clients tailor-made asset allocation suggestion.

(3) Integrate various resources of Taishin Financial Holding to provide client’s one-stop-shopping service.

2. Consumer Banking

(1) Strengthen management of high-yield products，to increase market share and market segmentation.

(2) Utilize CRM database to strengthen client’s segmentation and deep-cultivate customer relationship.

(3) Strengthen the cooperative mechanism with channels and enhance the number of products held by clients.

60 2010 Annual Report (4) Strengthen the management of branch channel, materialize one-stop shopping service for clients, and enhance the extent of product penetration.

(5) Augment dynamic risk-management capability and strengthen assets quality.

(6) Further improve workﬂ ow, enhance service efﬁ ciency, and cut operating cost.

3. Corporate banking

(1) Provide customers one-stop ﬁ nancial services, via customer-segmentation deep-cultivation strategy and integrated marketing.

(2) Deepen cash management and credit-type loaning business, so as to fully grasp the fund flow of customers and cut credit-extension risk.

(3) Develop innovative assets-related financial products, so as to retain the leading status in the derivatives market for domestic corporate customers.

(4) In response to the gradual liberalization of cross-Taiwan Strait policy, integrate the resources of greater China and lay the foundation for tapping the mainland Chinese ﬁ nancial market and cultivate overseas talents to gradually expand overseas business bases.

(5) Grasp industrial trend, strengthen risk-management mechanism and improve credit-extension ﬂ ow, so as to maintain good assets quality.

(6) Continue upgrading and improvement of operating flow and system, so as to provide customers quality services.

4. e-ﬁ nancial business

Taishin Internet bank and online ATM will roll out new services for the products and functions of NT dollar, foreign currencies, and mutual funds, such as mutual-fund management network, online-banking deposit program for speciﬁ c foreign currencies, and the integration of the ofﬁ cial corporate website and online banks, in the hope of bringing more added value to customers in 2011.

Taishin mobile banking will continue to launch even more complete financial services, such as order placement for mutual funds, currency swap, and payment for various bills. Moreover, Taishin Bank will step up effort in developing mobile payment instrument, in order to enable consumers to make payment with mobile phone, without the need of cash or credit card.

5. Trust

(1) Integrate “So Easy” target wealth management plan, which features ﬁ xed yield and automatic proﬁ t- taking redemption plan via dollar-averaging fund investment and the innovative service of re- subscription.

(2) Push yield-type securities and actively engage in securities lending market, so as to create securities lending income for clients.

2010 Annual Report 61 V. Business Status

(3) Develop “employee welfare trust” business, so as to satisfy enterprises need for talent retention and strengthen the relationship with corporate customers.

(4) Push the custodian business of “Collective Investment Account for Mainland China or Overseas Foreign National Employees,” so as to tap the tremendous business potential connected with share listing of overseas enterprises on the local bourse and the growing internationalization of domestic listed companies.

(5) Provide differentiated fund products to different customer groups, so as to meet the needs of various customers.

(6) Provide tailor-made services to different kinds of customer groups.

(7) Establish fund wealth-management network, to provide one-stop online wealth-management service.

(8) Modify the product lineup of domestic and offshore funds, so as to satisfy the client’s needs about asset allocation planning.。

(9) Offer multi-theme overseas ETF (exchange traded fund)

(10) Offer quality corporate and ﬁ nancial bonds.

(11) In addition to offshore structured notes for professional investors, the bank also successfully accepts the ﬁ rst entrustment by non-professional investors for investing offshore structured notes and will work with various general agents in pushing structured notes among common investors.

C. Market analysis

1. Wealth Management

(1) Status of market demand and supply and growth potential:

■ In 2010, the number of rich persons in Taiwan jumped 42.3% and the total value of their wealth leapt 49.6% to US$264 billion, with both growth rates ranking third place in the Asia-Pacifi c region, trailing Hong Kong and India. ■ Taiwan was hurt the least in Asia by the global fi nancial tsunami. ■ The stable cross-Taiwan Strait relationship and the signing of cross-Strait Economic Cooperation Framework Agreement (ECFA) creates a good domestic political and economic climate and prompts Taiwanese fi nancial institutions to accelerate their cooperation with mainland Chinese counterparts. ■ With the stabilization of domestic and foreign fi nancial and stock markets, enterprises continuously render good business performance, which will lead to even more prosperous development of wealth- management business.

(2) The bank’s competitive niche：

■ Under the customer-centered principle, continue to listen to the opinions of customers so as to provide them optimal services, thereby consolidating customer relationship.

62 2010 Annual Report ■ Continuous innovation of products and operating fl ow, good capability for self-made products, rapid adjustment to changes in market environment and customer needs, and conversion of the core concept of “rendering the topmost service” into a built-in principle have won the bank acknowledgement from various domestic and foreign institutions in 2010. ■ Take advantage of the existence of numerous branches and automated channel, integrate the resources of the fi nancial holding company, and manifest the synergy of integrated marketing via cross selling. ■ Professional team, coupled with the capability of systematic risk assessment and monitoring, responds to market changes rapidly and provides customers solutions. ■ Cut resources waste via continuous inspection and improvement of operating fl ow. ■ Provide customers optimal products via database marketing, by analyzing the types of existing customers and understanding deeply the needs of different customers.

(3) Favorable factors for development outlook：

■ Thanks to stable cross-Taiwan Strait relationship, the signing of cross-Strait Economic Cooperation Framework Agreement, and the reduction of inheritance and gift tax, outﬂ ow funds begin to return to Taiwan. ■ Leeway for the development of wealth-management business in Taiwan is very large. ■ The government oversees the merger among financial institutions will further highlight the competitiveness of the bank.

(4) Unfavorable factors for development outlook：

■ The rigorous regulation and management of the regulator over structured notes and trust-type investment products runs counter to market opening. ■ Large-scale increase in the need for domestic and foreign ﬁ nancial talents will accelerate the turnover of talents. ■ Foreign ﬁ rms acquire domestic banks to expand their business scale and introduce their operational mode into the nation, thereby augmenting overall banking competitiveness.

(5) The bank’s countermeasures：

■ Provide optimal service in more effi cient manner via continuous inspection and improvement of operating fl ow. ■ Integration of resources of departments of Taishin Holding, maximizing the effi ciency of cross selling, and increase the number of products held by customers , in order to become the fi rst-priority bank for customers.

2. Consumer Banking

(1) Status of market demand and supply and growth potential： In 2010, thanks to the upturn of the global economy and the inducement of diversiﬁ ed economies, the Directorate General of Budget, Accounting, and Statistics (DGBAS) reports that Taiwan’s economy grew 10.88%, higher than the global average of 4.1% and the highest since 1987. The vigorous economic growth boosts conﬁ dence of consumers in the market, with the outstanding consumer loans growing 2.5% and credit-card spending value jumping 12.7%.

2010 Annual Report 63 V. Business Status

In 2011, along with the implementation the ECFA and early-harvest list, private investment is expected to increase further, in line with the gradual upturn of the global economy, and the vigorous growth rate will be coupled with lower unemployment and growth in people’s actual pays, which will boost consumer confident and spending and fuel the overall consumption market. The DGBAS predicts that Taiwan’s economy will grow 5.06% this year and private consumption will expand by 3.96% in 2011, when the consumer banking market will grow accordingly.

(2) The bank’s competitive niche

■ Extensive and profound client base, competent branches , and automated channel at substantial scale.

■ Complete product lineup, fulﬁ lling various ﬁ nancial needs of clients

■ Risk management-based pricing strategy，which takes care of business growth and assets quality simultaneously.

■ Further improve workﬂ ow, enhance service efﬁ ciency, and cut operating cost.

■ Marketing synergy via cross-selling overseen by the ﬁ nancial Holding company , stressing the provision of one-stop-shopping services.

(3) Favorable factors for development outlook：

■ Government policy gradually opening up cross-Taiwan Strait financial exchanges, conducive to the development of business opportunities associated with services for Taiwanese-invested business ■ Along with the improvement of the physical economy, the domestic consumption market has shown sign of an upturn. ■ Balanced emphasis on loan risk management and proﬁ t making in the banking industry , leading to a virtuous competition.

(4) Unfavorable factors for development outlook:

■ Similarity among domestic consumer-banking products leads to acute price competition, dampening proﬁ t scale. ■ International price hike of crude oil and agricultural/industrial materials will stimulate inﬂ ation, putting a damper on consumption force.

(5) The bank’s countermeasures：

■ Utilize more precise analytical technique and mode to continue development new products, services, and selling mode. ■ Utilize online resources and innovative marketing to develop new customers and strengthen marketing effi cacy. ■ Provide differentiated services and products to different client groups, so as to create service value. ■ In line with changes in market and assets quality, fl exibly adjust credit-extension strategy. ■ Continue carrying out workfl ow improvement, so as to augment service effi ciency and cut operating cost.

64 2010 Annual Report 3. Corporate Banking

(1) Status of market demand and supply and growth potential：

The domestic financial market is still plagued by overbanking, featuring overlapping and similar businesses and narrow interest spread, which dampens the profi t margin of domestic banks. In addition to continuously developing innovative fi nancial products, the bank will actively discover customer needs, provide diversifi ed, professional, and convenient fi nancial services, and maintain long-term close customer relationship, so as to achieve the effi cacy of differentiated management.

After the signing of cross-Strait memorandum of understanding for cooperation and ECFA, domestic fi nancial institutions have stepped up effort to establish business bases and business cooperative links across the Strait, so as to provide convenient fi nancial services in the greater Chinese market and grasp the need and direction of customers’ fund fl ow.

(2) The bank’s competitive niche：

■ Combine diversifi ed fi nancial products the fi nancial holding fi rm and the abundant professional talents and product lineup of corporate- and consumer-banking groups to provide customers one-stop fi nancial services. ■ Maintain good assets quality via excellent risk-management mechanism, to pursue steady profi t growth. ■ The bank has signed MOU with a number of mainland Chinese banks for the establish of cooperative link for trade fi nancing, paving the way for deployment and development in the mainland Chinese market. ■ Dedicate the innovation of fi nancial products and services, so as to meet customers’ diversifi ed fi nancial needs.

(3) Favorable factors for development outlook：

■ Recovering economy and job market leading to increasing funding demand, which is conducive to the expansion of credit-extension and underwriting business. ■ Along with the upturn of the domestic market, the Central Bank of China has been gradually raising interest rates, improving the domestic low-interest rate environment. ■ The government ‘s increasingly liberalized policy towards investments by the ﬁ nancial industry in the Chinese market. ■ Fast-growing demand for offshore banking in the wake of rapid development of Chinese and emerging Asian economics.

(4) Unfavorable factors for development outlook：

■ Over-banking status，homogeneous traditional fi nancial products are diffi cult to create high profi ts. ■ The bank cannot engage in direct banking business in mainland China, due to the absence of representative’s offi ce or business base. ■ Overseas income is limited, since there is only one overseas business base. ■ With the upturn of the domestic economy, the fi nancial industry has great demand for talents, often leading to talent poaching. Therefore, cultivation and retention of excellent talents has become a major challenge.

2010 Annual Report 65 V. Business Status

(5) The bank’s countermeasures:

■ Provide differentiated services and products to different client segments, so as to create service value ■ Deeply cultivate relationship with clients via single customer view approach. ■ Join forces with branches to develop small and medium business customers and augment credit- extension interest spread. ■ Continue signing ﬁ nancial MOU with mainland Chinese banks, so as to enhance cooperation link for trade ﬁ nancing. ■ Set up overseas business division to cultivate overseas business talents, in preparation for the establishment of overseas bases.

■ Adjust education and training mechanism to suffice corporate-banking talents via more quality and ﬂ exible manner. d. R&D of ﬁ nancial products and business development status

1. Major ﬁ nancial products and new business units of retail and consumer banking in recent two years

Item 2009 2010 Mortgage NT$235.3bn NT$252.6bn Credit card 2,318,000 cards 3,003,000 cards Cash card NT$14.43bn NT$10.87bn

(1) As of the end of 2010, outstanding mortgages (including book-value loans) reached NT$252.6 billion, with market share of 4.29%; outstanding auto loans amounted to NT$13.73 billion, with market share of 22.9%, ranking ﬁ rst place in the market; and outstanding amount of other consumer loans hit NT$15.83 billion, with market share of 2%.

(2) As of the end of 2010, the bank’s credit cards in circulation numbered 3.003 million cards, with market share of 9.8%, ranking third place in the market/ the number of effective cards amounted to 1.82 million cards, with 9.3% market share, ranking fourth place; the number of top-notch cards reached 302,000, with market share of 28.5%, ranking ﬁ rst place; the annual card-spending value amounted to NT$137 billion, with market share of 8.9%, ranking fourth place; and the number of acquiring-bank businesses reached 34,000, with market share of 13.6%, ranking third place.

(3) As of the end of 2010, the outstanding value of the bank’s cash cards reached NT$10.87 billion, with market share of 21%.

2. Major ﬁ nancial products of corporate and enterprise banking in recent two years

(1) Outstanding loans extended by domestic branches to state and private enterprises.

66 2010 Annual Report With equal emphasis on risk management and business development, the bank’s outstanding loans for state and private enterprises reached NT$158.3 billion at the end of 2010, up 2.36% over a year earlier, ranking 14th place among 37 domestic ﬁ nancial institutions, similar to the ranking a year earlier.

(2) Outstanding loans for small and medium businesses

In line with the government’s policy of providing the assistance of loaning to small and medium businesses and the purpose of expanding the bank’s customer group, the bank extended NT$45.7 billion of outstanding loans to small and medium businesses as of the end of 2010, up 64% over a year earlier, compared with the industry average of 15%, thereby boosting its market ranking to 17th place, up from 19th place.

(3) L/C and export negotiation

To grasp the fund flow of customers and strengthen trade financing business, issuance of L/Cs and undertaking of export negotiations topped US$947 million and US$1.21 billion, respectively, in 2010, up 52% and 10%.

(4) Factoring business

The bank was a market leader for factoring business in 2010 and undertook NT$336.7 billion of such business in 2010, up 38%, with equal emphasis on the maintenance of customer relationship and credit- extension quality.

3. Trust unit: NT$ million Year 2009 AUM 2010 AUM So Easy target wealth-management plan 6,020 6,614 Planned money trust 4,764 4,874 Securities trust 24,935 35,141 Structured notes 43,207 30,767 ETF offshore ETF 1,017 1,964 Overseas bonds 988 1,346 Domestic and overseas funds 103,798 102,922 Taishin money-market mutual trust fund 749 1,076 Designated collective management account 757 1,105

4. R&D achievements in recent two years

Launched China UnionPay Card merchant service. (promote China UnionPay Card acquiring-bank business for merchants frequented by Chinese tourists, such as Silks Palace at National Palace Museum and duty-free shops at Taoyuan International Airport) The bank had contracted with 2,000 merchants as of the end of 2010.

(1) Five major value-added services for visit to Shanghai World Expo successfully induced Taishin’s travel- related business, which accounted for 14% of card spending value in 2010, the second highest category. (2) Launch Fish co-branded Easy Card, giving 0.2% automated refund for common card spending.

2010 Annual Report 67 V. Business Status

(3) Launch titanium card, enhancing the benefit of concentrated consumption, step up the development of credit-card medium- and high-end consumer groups, and provide different payback to target customer groups, thereby augmenting profi ts. (4) Improve the fl ow of acquiring-bank system, shorting the time for acquiring bank operation to one day, from seven days originally. (5) Provide highly fl exible mortgages, granting customers new options for repayment of mortgages, so as to meet the different needs of consumers. (6) Provide secondary-lien mortgages, with collaterals located at primary areas.

5. Future R&D plan

(1) Retail and consumer banking

■ Capitalize on the popularity of cloud technology and mobile equipment to develop “mobile payment” business, offering consumers more options for payment. ■ Maintain cooperative relationship with strategic joint marketing，develop new channels to solicit new customers. ■ Continue carrying out differentiated strategy and customer group management and deepen customer relations, thereby becoming their major corresponding banks. ■ Further improve workflow , carrying out image platform and paperless process, enhance service efﬁ ciency, and cut operating cost.

(2) Corporate and enterprise banking

■ Strengthen development and price quoting capability for various derivative with linkage to credit , merchandise, energy and equity. ■ Expand pluralized treasury product lineup via combination of interest rate, exchange rate, bond, bulk commodities, and equity. ■ Integrate existing credit-line risk-management system and operating platform, so as to upgrade service effi ciency and quality and lower credit-extension and operating risk ■ Plan fi nancial trading system to accommodate the rollout of new diversifi ed products in the future and integrate credit-line management for derivatives, so as to upgrade trade fl ow and smoothness. ■ Push renminbi-related business via the Hong Kong platform. ■ Expand the services of offshore banking units and overseas bases and strengthen the function of e-network trading platform, so as to satisfy customers’ need for cross-border fund maneuvering. e. Short-and long-term business development plans

1. Wealth management

(1) Short-term business development plan：

68 2010 Annual Report ■ Manage customers via localization manner: Materialize the core concept of “utmost service” to enhance customer satisfaction and deep-cultivate the businesses of residents, stores, small and medium business owners, and salary-transfer companies in the neighborhood of branches. ■ Continue enhance the sales ration of self-developed products to enhance the overall proﬁ t margin. ■ Continue strengthening risk controlling mechanism and risk management and avoid improper sale, and provide clients professional planning of asset allocation. ■ Strengthen the wealth management team, enhance employee’s expertise

(2) Long-term business development plan ：

■ Forge the image of the best wealth-management bank among clients. ■ Become a leader of Taiwan’s ﬁ nancial industry. ■ Actively develop overseas markets to become one of the top 50 banks in Asia (excluding Japan, but including Australia).

2. Consumer banking

(1) Short-term business development plan

■ Develop different potential target customers via mobile banking, online marketing, and social-network transmission. ■ Strengthen unsecured business and loans for small and medium businesses and micro enterprises ■ Continue strengthen brand image, boost brand visibility and favorable image ■ Continue enhancing the expertise and product knowledge of staffers.

(2) Long-term business development plan

■ Strengthen channel value, so as to offer clients more complete and convenient ﬁ nancial service. ■ Develop pluralized differential products and services, so as to augment our value. ■ Continue materializing the bank’s core value, cultivate all-round ﬁ nancial elites, and consolidate the foundation for future development. ■ Strengthen service mechanism to create adequate customer experiences and to make service become one of our core competences. ■ Expand cross-border retail business scope to China to increase bank’s competition

3. Corporate Banking

(1) Short-term business development plan

■ Upgrade the strategy for deep cultivation of segmented customer groups, so as to achieve effective utilization of resources. ■ Emphasize transactional banking products to grasp client’s cash flows and integrated business opportunities from customer side.

2010 Annual Report 69 V. Business Status

■ Combine corporate and consumer banking channels and materialize cooperative mechanism, so as to materialize the diversiﬁ ed needs of customers and expand the management of customer groups. ■ Strengthen the function of the Hong Kong platform and develop it into the main offshore fund- maneuvering center for Taiwanese businesses. ■ Strengthen risk monitoring mechanism, simplify credit-extension flow, and enhance the quality and efﬁ ciency of credit-extension examination.

(2) Long-term business development plan

■ Strengthen and expand core business, continue deep-cultivation service for customer groups, establish long-term relationship with customers, and enhance the contribution of customers. ■ Grasp the fund fl ow of customers and provide integrated marketing opportunities via utilization of the fi nancial holding fi rm’s resources. ■ Plan to establish leading company in mainland China, step up cooperation with mainland Chinese cooperative banks, and apply for the setup of Nanjing representative’s office and its subsequent upgrading into a branch. ■ Plan to set up branches in the Asia-Pacifi c region to expand overseas business and partner with local banks in areas without business bases. ■ Continue recruitment and cultivation of overseas talents to support the medium- and long-term development of overseas business.

4. Trust Investment

(1) Short-term business development plan:

■ Expand the assets of “So Easy” target wealth-management plan by pushing salary-transfer accounts and the sales of dollar-averaging mutual fund. ■ Plan online marketing for “So Easy” target wealth-management plan, so as to develop massive online customer groups. ■ Actively strive for money and securities trust of corporate banking and the business of “ Collective Investment Account for Mainland China or Overseas Foreign Employees ,” so as to expand the channel for corporate banking. ■ Provide planning-type trust customers with systematized transaction and electronic service. ■ Develop “employee welfare trust” business and provide corporate-banking customers diversifi ed trust products, so as to develop personal wealth-management business for employees. ■ Provide more convenient e-trading service function. ■ Provide more diversifi ed online wealth-management information. ■ Expand the sales volume of fi nancial products and the scale of assets under management on the basis of asset allocation , so as to increase the fee income. ■ Exploit new platform of overseas ETF by share placement, and offer multi-theme underlying to meet client’s needs arising from market change. ■ Continue join forces with various general agents to push offshore structured notes suited to common investors, so as to enhance customer service and provide more attractive investment products.

70 2010 Annual Report (2) Long-term business development plan: ■ Develop various “securities trust” to satisfy the multiple needs of customers for tax savings and revenue creation, so as to increase market share and gain leadership in the market. ■ Set up the “So Easy target wealth management plan” to cash in on the business of the new labor- pension system which will let labors choose their own investments. Actively engage in the promotion of the retirement issues and build complete system platform, as to gain leadership in the market. ■ Establish system platform for self selection of investment targets for employee welfare trust, so as to tap the business opportunities related to self selection of investment targets by laborers for pension funds. ■ Continue concerning about change in regulations, so as to develop new trust business. ■ Continue to expand the sales volume of regular savings plan and the overall scale of assets under management, so as to increase the stability of the future fee Income. ■ Continue concerning about change in related regulations, so as to develop new trust business ■ Continue track and develop risk-management indices, so as to grasp product performance and risk for customers. ■ Continue introducing pluralized new products and business based on the concept of sustainable management and the objective of all-round wealth management, in order to bring steady returns to investors in both bullish and bearish markets.

B. Employee

1. Employee information in the recent two years and as of the date of the publication of the annual report.

Base date: March 31,2011 Current year as of Year 2009 2010 the March.31, 2011 Total 5,854 6,236 6,141 Average age 34.3 34.4 34.6 Average service years 6.5 6.5 6.7 Doctor 0.03% 0.05% 0.05% Master 13.38% 14.53% 14.33% Shares of educa- College 80.84% 80.03% 79.92% tion degrees Senior high 5.67% 5.31% 5.62% Under Senior high 0.08% 0.08% 0.08% Test for trust business 2,731 2,839 2,751 Basic test fro internal control 3,286 3,380 3,291 Qualiﬁ cation test for property insurance staffers 2,953 2,946 2,833 Investment-type insurance policy staffers. 1,503 1,532 1,476 Kinds of professional certiﬁ cates Life insurance staffers 3,407 3,500 3,368 owned by em- Future business staffers 504 501 479 ployees and their numbers Securities investment analysis 20 20 16 Senior securities staffers 402 414 398 Investment trust and consulting staffers 335 342 330 B-type laws and regulations for investment trust and 1,366 1,363 1,312 consulting (including professional ethical code)

2010 Annual Report 71 V. Business Status

2. Employee Training and development

To support continuous business growth , personal training and development has been the consistent insistence of Taishin Financial Holding. In 2010, the total number of trainees reached more than 170,000 people/attendances and the average annual training hours per person hit 45 hours. Measures for personnel training and development meant to enhance colleague’s overall competitive edge follow:

(1) Taishin University：

Complete the establishment of Taishin university platform in 2010, which consists of corporate-banking school, consumer-banking school, management school, general knowledge school, and elite school, so that staffers can engage in diversified learning of their own choice under a design of systematic and structured courses. The platform features “transparent learning information,” “diversified learning channel,” “and integrated learning resources.” In the future, the credit point system and certiﬁ cate system will link up with the career development of staffers.

(2) Talented Accumulation Program：

Choosing and recruiting different levels of colleagues by the 360 evaluation mechanism and the committee, and developing MA, AMA, and TSP three-stratum talented accumulation program. Planning training for different levels of talents to reach the destination by the core value and strategy.

(3) Individual Development Program：

Confirm the personal ability gap with unified MBO and the ultimate position by training , rotating, senior counselor’s assisting, attending meetings and participation in development projects. Being with superior is the most suitable way to advance the development and promote the organization’s overall competitive power.

C. Corporate responsibility and ethical code

For a long while, in addition to its core ﬁ nancial business, Taishin Bank has been dedicating to the causes of art/culture, social welfare, and environmental protection, due to its deep awareness of the responsibility and mission for an enterprise in the society. Via active participation in various activities, an enterprise can properly exercise its strength in bringing changes and inﬂ uence to the society. Therefore, Taishin Bank, under the lead of its parent company Taishin Financial Holding, has strived to play well its role as a corporate member of the society by giving concrete paybacks to the society, the community, and underprivileged groups.

To materialize the combination of art, enterprise, and community payback, Taishin International Bank has continuously joined hands with the artistic and cultural fieldin pushing Taiwanese contemporary art and boost the interaction with community. It founded the Taishin Bank Foundation for Arts and Culture in 2001 and initiated Taishin Arts Award in the following year, which grants topmost encouragement and honor to art workers in the two ﬁ elds of indigenous visual and performing arts annually. It chronicles the progress of

72 2010 Annual Report the Taiwanese contemporary art and establishes its everlasting historical status. In addition, the bank also frequently organized various artistic exhibitions and regular noontime musical concerts in the Yuan Hall on the second ﬂ oor of Taishin FHC headquarters building, inviting domestic artists in various ﬁ elds to display their works and musicians to stage performances for free enjoyment by citizens.

In 2008, Taishin Bank, along with its parent ﬁ rm Taishin Financial Holding, sponsored various high-class artistic exhibitions. In the aspect of performing art, it sponsored the performance of “Lion King,” a musical produced by Disney, enabling local people to enjoy the world-class show, including its changeful costumes, vivid settings, and the breathtaking rhythm of African music. Taipei Art Festival, sponsored by the company, consisted of 10 performances from Indonesia, Chile, France, Hong Kong, and Taiwan. Another Taishin-sponsored event is concert of singer Li Sheng-jieh. These events offered local audiences abundant feasts of sensual stimulation in various artistic and cultural forms.

In the field of academics, Taishin Bank, along with its parent firm Taishin Financial Holding, assisted or participated in the organization of various financial and business management academic seminars, such as Taiwan Finance Academic Seminar, 2008 Sustainability and Responsibility Investment (SRI) Seminar, Chinese Economic and Financial Summit Forum, the annual forum of Monte Jade Science and Technology Association of Taiwan, and the 16th Securities and Financial Theory Seminar organized by National Sun Yat- sen University.

In the ﬁ eld of social welfare, Taiwan Financial Holding and its afﬁ liate PayEasy.com joined hands in pushing series care-for-Taiwan events, starting with the effort to revitalize the economy of the 921 earthquake-stricken regions. The event combined the clout of Taishin’s corporate image and the abundant resources of e-commerce in assisting the marketing and plantation of agricultural products, as well as the development of tourism business, in those regions, bringing fresh hope to villagers in those areas.

From 2005, the Caring Taiwan program has extended its reach to Kuohsing-village teenage karate team, in the hope of assisting the growth of the underprivileged children. The company has raised fund for the training expense of the young athletes via theme website, production of promotional literature, and news coverage. The team has racked remarkable performance in international tournaments. In 2008, for instance, the team won 25 gold medals, 20 silver medals, and 23 bronze medals in various domestic and overseas contests, bringing great pride to Taishin staffers.

In 2008, in order to assure the sustainable existence of rice paddies and availability of Taiwanese rice for local people, with the blessing of the Cabinet-level Council of Agriculture, the care-for-Taiwan movement organized the campaign for the sponsorship of rice-paddy operations by enterprises, dubbed “my one-acre rice paddy.” The idea of the event is to increase the proﬁ ts of rice farmers by sidestepping the intermediate sale cost and enable the public to eat 100% pure Taiwanese rice. Taishin Bank sponsored 11 units of rice paddies, equivalent to 5.5 hectares in space, allowing its employees, clients, and corresponding companies to taste quality Taiwanese rice. In addition to the beneﬁ ts for farmers, the campaign also completes a remarkable marketing for good Taiwanese rice.

In the same vein, Taishin Financial Holding joined forces with the Council of Agricuture, its afﬁ liate PayEasy. com, Gukeng Village Farmers’ Association, and Yunlin-county agricultural-product logistics center in rolling out the “corporate sponsorship of orange trees in Gukeng village” program, with Taishin purchasing 40 metric

2010 Annual Report 73 V. Business Status

tons of orange from the village. In addition to sharing the fruit with its employees, clients, and corresponding companies, Taishin Financial Holding also sent the fruit to poor families via charity organizations under the arrangement of “Food Bank.” In addition, it rolled out mobile fruit-juice bar event at designated branches, allowing customers to enjoy fresh orange joice.

In the aspect of corporate responsibility for society, after the outbreak of the big Sichuan earthquake in 2008, Taishin Financial Holding donated NT$10 million to the Red Cross to help with the reconstruction of the earthquake-stricken regions. As a payback to the society, Taishin Bank has regularly organized blood-donating events every summer and winter vacation. In addition, Taishin Bank organizes money education seminars for Teacher Chang Foundation and other charity organizations, helping staffers of the organizations and the general public to form correct money concept. The bank and its affiliate Taishin Insurance Agency jointly donated to Teacher Chang Foundation to fund its program for assisting high-risk families.

In the green cause, Taishin FHC has dedicated to environmental protection and energy conservation. It pushes the “Cool Biz” program during summer, under which it encourages staffers to shed traditional formal attire, in favor of casual dress, and enhances the set temperature for air conditioners, in order to cut power consumption. Meanwhile, it has been promoting “paperless ofﬁ ce” and has encouraged cycling among local people for the sake of health and reduction of air pollution. Therefore, it sponsored various cycling events and rallied the participation of employees, families, and clients, thereby fulﬁ lling the concept of “using love as energy and loving the earth together.”

A stable and harmonious society is indispensable for an environment facilitating the sustainable development of an enterprise. In adherence to the “customer-oriented” principle, Taishin Bank bases its operation on consideration and satisfaction of customer needs, thereby creating customer value. For shareholders, its primary goal is to maximize investment returns for them. However, along with the pursuit of proﬁ t, the company also actively takes part in public services, in order to provide payback to the society and fulﬁ ll its corporate responsibility for the society.

D. Information equipment

a. Major information systems

Items Names of systems Hardware Software Business contents NT-dollar core ■ HP-UX ■ B@NCS NT-dollar application system 1 system ■ HP Superdome ■ ORACLE ■ B@NCS NT-dollar reporting system (B@NCS) Forex system ■ IBM OS400 ■ Import/Export forex deposit/loan 2 ■ IBM AS/400 (FITAS) ■ FITAS ■ SWIFT global banking ﬁ nancial system ■ IBM AIX ATM front-end ■ ATM front-end handling system 3 ■ IBM RS/6000 ■ IBM MQ system(FEP) ■ Financial clearance system ■ ORACLE Financial trading ■ MS Windows ■ Treasury ﬁ nancial and treasury trading 4 system ■ IBM X86 Server ■ SunGard ■ Trading risk management system (SUNGARD) ■ MS SQL

74 2010 Annual Report Items Names of systems Hardware Software Business contents Integrated data ■ HP-UX ■ Operating database system(ODS) 5 ■ HP Superdome system (DAI) ■ ORACLE ■ Informaion warehousing(DW/DM) Automated ■ HP-UX ■ Instant customer browsing system(SCV) 6 sales application ■ HP Superdome ■ ORACLE ■ Automated sales operation system(SFA) system(SFA) ■ SUN Solaris Consumer Internet ■ Transation services for NT-dollar, foreign exchange, funds and 7 ■ SUN E6900 ■ Weblogic banking trusts, credit cards, insurance and stocks ■ ORACLE ■ IBM AIX ■ Corporate Internet banking systemfor NT-dollar, foreign ex- 8 B2Bank ■ IBM RS/6000 ■ IBM Websphere change, e-collection and e-payment. ■ ORACLE Trust Investment 9 ■ MS Windows product system ■ IBM X86 Server ■ Trading system of funds, trust loans, US bonds and ADR ■ MS SQL (TIPS) Credit card acquire ■ SUN Solaris 10 frond-end system ■ SUN M5000 ■ Weblogic ■ Credit card transaction switch (CPS) ■ ORACLE New corporate ■ IBM AIX ■ Inquiry for NT dollar/foreign currency trading, credit-line man- 11 banking system ■ IBM RS/6000 ■ Weblogic agement, and the management of guarantors and collateral. (WBS) ■ Oracle b. Future development or installation plan

1. Expand the application of virtual server and cloud computing technology and fl exibly utilize information equipment to enhance service quality. 2. Improve and expand information central offi ce, and construct and manage the central offi ce according to international standards. 3. Implement new corporate core banking system. Multiple functions to support overseas branch corporate banking system. 4. Expand the development and application of mobile banking, including the application or Intranet and Internet for customer services.

C. Emergent backup and security protection system

1. Push keeping of complete trading record by application system and introduce database auditing and management instrument, so as to meet the requirement of personal data protection law. 2. Introduce virtual server platform, so as to enhance the backup capability of information with virtual cloud technology 3. Adopt DLP (Data Lost Prevention) system to ensure data security which includes back-end and internet DLP. 4. Conduct application system business impact analysis (BIA) and address the contingency plan, so as to establish a backup system capable of meeting business need. 5. Carry out complete security check of information central offi ce and strengthen the security measures for power, air conditioning, water consumption, fi re fi ghting, and environmental control. 6. Recruit consultancy to analyze current security and privacy posture, as well as to provide recommendations for improvement. Indentify the merits and weakness of current security practices and provide a repeatable methodology to conduct periodic security assessments. 7. Protect data and enable business innovation with advanced solutions for data security, access and compliance.

2010 Annual Report 75 V. Business Status

E. Labor-management relationship

a. Various employee welfare measures, retirement system and its execution, labor-management agreements, and various employee interest protection measures are listed in the following:

1. Employee Insurance:

■ Labor Insurance : The company bears 70% of the insurance premium; employee bears 20% ■ Health Insurance : The company bears 60% of insurance premium; employees bears 30% ■ Group Insurance : Employees are entitled to the coverage of association life insurance, accident insurance , medical insurance, surgery and injury medical service insurance, anti-cancer healthy insurance, and vocational disaster insurance, whose premiums are born by the company.

2. Employee Welfares:

The company has instituted “ employee welfare measures” and “ employee welfare committee” to facilitate the promotion of employee welfares. Employees may have the welfare of allowances listed in the following: ■ Marriage ■ Childbirth ■ Funeral ■ Hospitalization ■ A child education allowance

3. Employee Retirement System The company has instituted “employee retirement measures” according to which pensions for retirees are paid according to the labor pension system and related laws/regulations.

4. Annual Leaves Employees are entitled to 7 days of annual leave when he/she serves one full year and more.

5. There is no other important agreement.

b. Specify loss resulting from labor-management disputes in the recent year and as of date of the publication of the annual report and disclose the value of current and possible future loss and

76 2010 Annual Report countermeasures, as well as reasons for inability to estimate loss.

Thanks to the harmonious labor-management relationship, there has no loss resulting from labor- management dispute in recent years.

c. The company has formulated “guidelines for employee behavior,” covering reminders and operating standards concerning workplace behaviors and ethics of employees. For detailed contents of corporate spirit and service indices, please refer to the following hyperlink sites:

1. Corporate spirit：ICIC (Integrity, Commitment, Innovation, and Collaboration) 2. Service guidelines: 3S (Simple, Sincere, and Superior) Hyperlink website for corporate spirit and service guidelines： http://tshr.taishinholdings.com.tw/MainPage.aspx?Page=16

F. Important contract: Nil

G. Approval of applications for securitized products according to the statute for the securitization of ﬁ nancial assets or the statute for realty securitization in the recent year and related information: For details , refer to the description of the bank’s assets securitization business in point six, chapter seven.

2010 Annual Report 77 VI. Financial Status

A.Brief balance sheet and income statement in recent ﬁ ve years

Balance Sheet Unit: NT$1,000

Year Financial information in recent fi ve years Items 2010 2009 Cash and cash equivalent, Due from the Central Bank and call loans to 50,139,719 136,515,846 other banks Financial assets from changes at fair value through profi t or loss 22,263,352 24,907,554 Bonds and securities purchased under resell agreements 2,992,554 2,420,000 Reveivables, net 96,256,074 84,838,866 Loans, net 531,674,018 495,583,668 Available-for-sale fi nancial assets 172,426,842 36,484,764 Held-to-maturity fi nancial assets 3,312,094 6,214,140 Investments accounted for by the equity method, net 1,861,285 1,281,667 Other fi nancial assets, net 2,941,610 2,873,039 Property and equipment, net 17,404,571 17,898,096 Intangible assets 2,077,535 1,605,915 Other assets, net 7,796,760 22,134,089 Total assets 911,146,414 832,757,644 Due to banks and Central bank 56,332,391 54,181,462 Financial liabilities at fair value through profi t or loss 15,911,230 16,990,037 Bonds and securities sold under repurchase agreements. 17,040,348 7,239,422 Payables 21,106,394 18,956,708 Deposits 713,580,371 654,664,982 Bank debentures 25,000,000 25,000,000 Other fi nancial liabilities 113,796 151,200 Other liabilities 1,368,999 2,140,457 Pre-payout 850,453,529 779,324,268 Total liabilities Post-payout Note 4 779,985,137 Capital stock 49,157,526 49,157,526 Capital surplus 3,213,562 3,193,573 Pre-payout 8,159,642 944,099 Retained earnings Post-payout Note 4 283,230 Unrealized gain(loss) on fi nancial instruments 162,674 138,235 Treasury stocks 0 0 Cumulative translation adjustments (519) (57) Unrealized loss from price drop for long-term investment 0 0 Pre-payout 60,692,885 53,716,606 Total stockholder’s equity Post-payout Note 4 53,055,737 Certifying CPA Yang Qinzhen Yang Qinzhen Certifying CPA Weng Rongsui Weng Rongsui Type of CPA’s auditing report Standard without reservation Standard without reservation

Note 1：Proposal for the coverage of the company’s loss in 2005 was approved by the board of directors, on behalf of shareholder’s meeting, on April 27, 2006, along with the resolustion not to issue dividend. Note 2：Proposal for the coverage of the company’s loss in 2006 was approved by the board of directors, on behalf of shareholder’s meeting , on April 20, 2007, along with the resolution not to issue dividend. Note 3：Proposal for the coverage of the company’s loss in 2008 was approved by the board of directors, on behalf of shareholder’s meeting, on June.18, 2009, along with the resolution not to issue dividend. Note 4：Proposal for the dividend payout from earnings in 2010 has yet to be approved by the board of directors.

78 2010 Annual Report Financial information in recent ﬁ ve years Current year as of March.31.2011 2008 2007 2006

140,063,783 144,640,436 101,957,331 36,107,401

45,859,862 26,103,651 56,432,692 40,705,043 0 0 0 380,069 79,128,739 78,814,545 70,497,131 82,453,967 514,045,040 558,713,701 517,279,676 554,238,598 25,124,530 23,610,956 6,786,174 188,926,952 8,102,021 15,658,652 18,012,885 3,172,590 1,440,756 2,227,146 2,171,305 1,946,897 3,083,144 2,399,698 3,726,752 2,924,790 16,226,923 16,752,240 17,504,724 17,608,257 0 0 0 2,018,250 24,251,038 24,623,965 28,587,623 7,471,228 857,325,836 893,544,990 822,956,293 937,954,042 72,725,981 73,610,040 66,384,638 58,255,483 37,848,640 16,000,476 15,037,060 12,755,439 11,780,535 19,244,688 16,284,892 34,120,403 22,271,480 27,335,247 23,690,821 23,940,887 633,654,632 667,548,327 620,420,052 702,840,131 36,100,000 40,100,000 44,700,000 25,000,000 167,285 178,476 184,641 16,510,484 911,917 1,345,616 1,400,411 1,460,525 815,460,470 845,362,870 788,102,515 874,883,352 Note 3 847,184,166 Note 2 Note 4 41,750,118 41,750,118 34,867,765 49,157,526 3,806,630 3,806,630 13,254,298 3,136,132 (3,210,060) 2,709,441 (14,265,315) 10,635,961 Note 3 888,145 Note 2 Note 4 (481,283) (75,313) 1,004,095 141,421 0 0 0 0 (39) (8,717) (7,065) (350) 0 (39) 0 0 41,865,366 48,182,120 34,853,778 63,070,690 Note 3 46,360,824 Note 2 Note 4 Weng Rongsui Weng Rongsui Guo Rongfang Yang Qinzhen Yang Qinzhen Yang Qinzhen Weng Rongsui Peter Tsai Standard without reservation Standard without reservation Revision without reservation Revision without reservation

2010 Annual Report 79 VI. Financial Status

Brife Income Statement Unit: NT$1,000 Financial information in recent ﬁ ve years Current Year year as of Items 2010 2009 2008 2007 2006 March.31, 2011 Net Interest Income 11,686,198 10,002,148 14,138,465 16,586,530 25,887,383 3,054,280 Net income and gains (losses) other than 12,472,221 9,202,859 9,446,541 11,460,311 (2,856,204) 3,279,063 interest income Provision for Loan Losses (1,204,821) (4,265,429) (15,584,932) (11,496,635) (34,493,945) (548,366) Operating expenses (12,219,473) (11,476,422) (13,922,650) (13,844,276) (15,018,729) (3,096,262) Income (Loss) Before Income Tax 10,734,125 3,463,156 (5,922,576) 2,705,930 (26,481,495) 2,688,715 Income (Loss) Before Extraordinary Gain 7,876,412 821,279 (4,098,205) 2,719,653 (19,796,023) 2,267,616 Accumulated effect from change in accou- 0 0 0 0 146,393 0 ting principle (after tax) Extraordinary Gain ( after tax) 0 122,820 0 0 0 0 Net Income ( Loss) 7,876,412 944,099 (4,098,205) 2,719,653 (19,649,630) 2,267,616 Basic Earnings ( Loss ) per share ( New 1.64 0.21 (1.03) 0.68 (7.02) 0.47 Taiwan dollars )

B.Financial analysis for recent ﬁ ve years

Financial Analysis Unit:NT$1,000 Current Financial information in recent fi ve years year as Year of March Items 2010 2009 2008 2007 2006 31, 2011 (note 1) Deposit/loan ratio(%) 75.42 76.81 82.73 84.63 85.65 79.75 NPL ratio(%) 0.33 0.58 1.38 1.99 2.18 0.32 Interest income/average outstanding 0.71 1.18 2.61 2.44 2.23 0.20 loans ratio(%) Management Interest income/average outstanding ability 3.18 3.43 5.71 5.89 7.28 0.82 loans ratio(%) Turnover rate of total assets ( times ) 2.65 2.31 2.75 3.14 2.80 0.68 Revenue per employee (NT$1,000) 3,874 3,281 3,890 3,990 3,169 1,031 Profi t per employee (NT$1,000) 1,263 161 (676) 387 (2,704) 369 Returns on fi rst-tier capital(%) 20.06 7.59 (13.80) 6.97 (67.37) 4.74 Returns on assets(%) 0.90 0.11 (0.47) 0.32 (2.36) 0.24 Profi t-making Returns on shareholder’s equity(%) 13.80 1.98 (9.10) 6.55 (45.74) 3.66 Capability Net Profi t rate (%) 32.60 4.92 (17.38) 9.70 (85.32) 35.80 Earnings per share(NT$1) 1.64 0.21 (1.03) 0.68 (7.02) 0.47 Financial struc- Liabilities/assets ratio 93.34 93.58 95.12 94.61 95.76 93.28 ture % Fixed assets/shareholder’s equity ratio 28.68 33.50 38.76 34.77 50.22 27.92 Assets growth 9.41 (2.87) (4.05) 8.58 (2.42) 3.13 Growth rate Profi t growth 209.95 158.47 (318.87) 110.22 (332.21) 74.95 Cash fl ow ratio(%) 18.29 (0.10) 5.91 33.05 71.13 13.78 Cash fl ow Propriety of cash fl ow ratio(%) 2,315.00 1,115.21 553.53 504.69 246.19 1,783.17 Cash-fl ow satisfaction ratio(%) (23.59) (9.57) 21.16 (40.61) (105.26) (61.71) Liquid reserve ratio 26.04 22.75 20.25 18.98 18.44 26.04 Secured loans for related parties ( NT$1,000) 3,748,978 5,183,344 16,677,172 21,427,905 8,314,946 4,033,925 Share of outstanding secured loans for related parties in 0.61 0.91 2.83 3.40 1.41 0.64 total outstanding loans. Market share of assets 2.83% 2.73% 3.00% 3.31% 3.12% 2.91% Market share of book value 2.91% 2.75% 2.32% 2.70% 2.28% 2.97% Market share of deposit (in total fi nancial Business scale 2.36% 2.25% 2.31% 2.61% 2.46% 2.30% institutions) Market share of loans (in total fi nancial 2.55% 2.52% 2.62% 2.88% 2.78% 2.60% institutions) Reasons for changes in various fi nancial ratios in recent two years: 1.Profi t-making and growth rate: After maintain assets quality, the bank racked up increase in the profi ts, as well as ratios related to profi t-making capability, in the year than 2009. 2.Cash fl ow: Please refer to explanation for liquidity analysis for recent two years.

80 2010 Annual Report Calculation formula: 1. Management capability

(1) Deposit/loan ratio=total deposits/total loans (2) NPL ratio=Total NPL ratio/total loans (3) Ratio of interest outlay in average outstanding deposits=total interest outlay/annual average of outstanding deposits (4) Ratio of interest income in annual average of outstanding loans/Total interest income/annual average of outstanding loans (5) Turnover rate of assets=Net revenue/total assets value. (6) Revenue per employee (note 7)=net revenue/total number of employees (7) Proﬁ t per employee=After-tax net proﬁ t/total number of employees

2. Proﬁ t-making capability

(1) Returns on fi rst-category capital=pre-tax income/average value of fi rst-category capital (2) Returns on assets=after-tax income/average value of assets (3) Returns on shareholders’ equity=after-tax income/average value of net shareholders’ equity (4) Net profi t rate=after-tax income/net revenue (5) Earnings per share=(after-tax net profi t-dividend for preferred shares/weighted average of issued shares

3. Financial structure

(1) Ratio of liabilities in assets=total liabilities/total assets (2) Ratio of ﬁ xed assets in book value=net value of ﬁ xed assets/net shareholders’ equity

4. Growth rate

(1) Assets growth rate=(total assets in current year-total assets in previous year)/total assets in previous year (2) Proﬁ t growth=(Pre-tax income in current year-pre-tax income in previous year)/pre-tax income in previous year

5. Cash ﬂ ow

(1) Cash fl ow ratio=net cash fl ow for business activities/(call loans and overdraft of bank and peers + promissory notes payable +fi nancial liabilities from change in fair value + liabilities of repot bills and bonds + accounts payable due in one year) (2) Propriety ratio of net cash fl ow=net cash fl ow for business activities in recent fi ve years/(capital outlay + cash dividend) in recent fi ve years (3) Satisfactory rate for cash fl ow=net cash fl ow for business activities/net cash fl ow for investments

6. Liquid reserves ratio=liquid assets required by the Central Bank of China/required liquid reserves for various liabilities

7. Analysis of business scale

(1) Market share of assets=total assets/total assets of fi nancial institutions capable of undertaking deposit/loan business (2) Market share of book value=book value/total book value of fi nancial institutions capable of undertaking deposit/loan business (3) Market share of deposits=total deposits/total deposits of fi nancial institutions capable of undertaking deposit/loan business (4) Market share of loans=total loans/total loans of fi nancial institutions capable of undertaking deposit/loan business

2010 Annual Report 81 VI. Financial Status

Bis Ratio (Capital Adequacy Ratio)

Year (note 1) Analytical Items Eligible Capital Tier I Capital Common shares Perpetual non-accumulated preferred shares Perpetual Non-accumulated subordinated debts Capital collected in advance Capital surplus (except surplus deriving from value increment of fi xed assets) Legal reserves Special reserves Accumulated profi t/loss Minority shareholding right Other items of shareholders’ equity Minus: good will Minus: unamortized loss from the sale of NPL Minus: items for capital reduction Total tier I capital Toer II capital Perpetual accumulated preferred shares Perpetual non-accumulated subordinated debts Capital surplus from value increment of fi xed assets 45% of unrealized gain from available for sale Convertible bonds General provisions Long-term subordinated debts Non-perpetual preferred shoes Combination of perpetual non-accumulated preferred shares and subordinated debts which exceeds 15% of tier I capital Minus: items for capital reduction Total tier II capital Short-term subordinated debts tier III capital Non-perpetual preferred shares Total Tier III capital Eligible Capital Weighted risk assets Standard approach Credit risk Internal evaluation approach Securitized assets Basic indicator approach Operating risk Standard approach /selective standard apporach Advanced measurement approach Standard apporach Market risk Internal model approach Total risk assets BIS ratio Ratio of tier I capital in risk weighthed assets Ratio of tier II capital in risk weighted assets Ratio of tier III capital in risk weighted assets Ratio of common shares in total assets Explain reasons for changes in BIS ration in recent two phases (no need of analysis for change under 20%) No need of analysis, change in recent two phases is less than 20%.

82 2010 Annual Report BIS ratio in recent ﬁ ve years(note 2) BIS ratio in Current year as of March.31, 2010 2009 2008 2007 2006 2011(note5) 47,275 47,275 39,868 39,868 34,868 1,882 1,882 1,882 1,882

3,214 3,194 3,807 3,807 13,254 283 813 5,429 75 7,876 944 (2,049) 2,709 (19,694)

(157) (118) (797) (148) (9) 1,152 1,152 1,152 1,152 1,152

2,525 1,712 1,490 2,069 2,349 56,696 50,313 40,957 44,897 30,347

144 116 142 29 452 Note: BIS ratio should be 6,367 4,963 1,611 533 529 checked by CPA and disclosed in financial 22,058 19,939 20,478 22,448 16,348 statement every half a year. Therefore, only information as of the end of December 2,525 1,712 3,539 2,069 2,349 2010 is available 26,044 23,306 18,692 20,941 14,980

82,740 73,619 59,649 65,837 45,327 551,857 508,984 535,984 565,157 549,042

1,514 620 806 641

34,888 38,272 45,552 59,291

20,863 20,417 24,316 36,537 57,591

609,122 568,293 606,658 661,626 606,633 13.58% 12.95% 9.83% 9.95% 7.47% 9.31% 8.85% 6.75% 6.79% 5.00% 4.27% 4.10% 3.08% 3.16% 2.47% 0.00% 0.00% 0.00% 0.00% 0.00% 5.19% 5.68% 4.65% 4.46% 4.24%

* Should there be consolidated fi nancial statement, consolidated capital adequacy rate should be disclosed. Note 1: Specify year without re-auditing by CPA. Note 2: Fill in own capital and weighted risk-based assets according to “measures governing banking capital adequacy” and “explanation and table for the calculation method of banking own capital and risk-based assets.” Note 3: For banks calculating credit risk according to the regulations for transitional period, please fi le in risk-based assets calculated according to credit-risk standards. Note 4: Calculation formula: 1. Eligible capital= tier I capital + tier II capital + tier III capital 2. Total weighted risk assets=weighted credit-risk assets + capital provisions for (operating risk market risk) x 12.5 3. BIS ratio=Eligible capital/total weighted risk assets 4. Ratio of tier I capital in risk assets= tier I capital/total weighted risk assets 5. Ratio of tier II capital in risk assets= tier II capital/total weighted risk assets 6. Ratio of tier III capital in risk assets=tier IIIcapital/total weighted risk assets 7. Ratio of common-share equity capital in total assets=common-share equity capital/total assets Note 5: for listed companies or companies with stocks already traded at securities companies, include information until the previous quarter before the publication date of the yearbook. Specify whether fi nancial information has been certifi ed or perused by certifi ed public accountants. Note 6: For year with the implementation of Basel I, the table should be fi lled as the following: (1)List 50% of the reduction item for Basel I capital and the fi rst-category reduction items and the remaining 50% and the second-category reduction item. (2)List the need for Basel I credit risk capital as the capital need based on credit-risk standards.

2010 Annual Report 83 VI. Financial Status

Bis ratio ( combination )

Year (note 1) Analytical Items

Eligible Capital Tier 1 Capital Common shares Perpetual non-accumulated preferred shares Perpetual Non-accumulated subordinated debts Capital collected in advance Capital surplus (except surplus deriving from value increment of ﬁ xed assets) Legal reserves Special reserves Accumulated proﬁ t/loss Minority shareholding right Other items of shareholders’ equity Minus: good will Minus: unamortized loss from the sale of NPL Minus: items for capital reduction Total tier 1 capital

Toer II capital Perpetual accumulated preferred shares Perpetual non-accumulated subordinated debts Capital surplus from value increment of ﬁ xed assets 45% of unrealized gain from available for sale Convertible bonds General provisions Long-term subordinated debts Non-perpetual preferred shoes Combination of perpetual non-accumulated preferred shares and subordinated debts which exceeds 15% of tier I capital Minus: items for capital reduction Total tier II capital Short-term subordinated debts tier III capital Non-perpetual preferred shares Total Tier III capital Eligible Capital

Weighted risk assets Standard approach Credit risk Internal evaluation approach Securitized assets Basic indicator approach Operating risk Standard approach /selective standard approach Advanced measurement approach Standard apporach Market risk Internal model approach Total risk assets BIS ratio Ratio of tier I capital in risk weighthed assets Ratio of tier II capital in risk weighted assets Ratio of tier III capital in risk weighted assets Ratio of common shares in total assets Explain reasons for changes in BIS ration in recent two phases (no need of analysis for change under 20%) No need of analysis, s change in recent two phases is less than 20%.

84 2010 Annual Report BIS ratio in BIS ratio in recent ﬁ ve years(note 2) Current year as of March.31, 2010 2009 2008 2007 2006 2011(note5) 47,275 47,275 39,868 39,868 34,868 1,882 1,882 1,882 1,882

3,214 3,194 3,807 3,807 13,254 283 813 5,429 75 7,876 944 (2,049) 2,709 (19,694) 414 344 543 1,157 864 (157) (118) (797) (148) (7) 1,152 1,152 1,152 1,152 1,152

1,886 1,347 1,391 2,069 1,698 57,749 51,022 41,599 46,054 31,864

Note: BIS ratio should be 144 116 142 29 452 checked by CPA and disclosed 6,367 4,963 1,611 532 531 in financial 22,058 19,939 20,799 22,448 16,348 statement every half a year. Therefore, only 1,886 1,347 3,440 2,069 1,697 information as of the end 26,683 23,671 19,112 20,940 15,634 of December 2010 is available

84,432 74,693 60,711 66,994 47,498 553,501 510,883 535,050 564,926 550,477

1,514 620 806 641

34,888 38,272 45,552 59,291

20,881 20,452 24,415 36,537 57,634

610,784 570,227 605,823 661,395 608,111 13.82% 13.10% 10.02% 10.13% 7.81% 9.45% 8.95% 6.87% 6.96% 5.24% 4.37% 4.15% 3.15% 3.17% 2.57% 0.00% 0.00% 0.00% 0.00% 0.00% 5.19% 5.67% 4.65% 4.46% 4.23%

2010 Annual Report 85 VI. Financial Status

C. Inspection report on the ﬁ nancial statement of the latest year by supervisors

Inspection report of supervisor Taishin International Bank Co., Ltd

Attached please fi nd 2010 business report, fi nancial statement , and proposalfor profi t sharing, of which the fi nancial statement has been audited and certifi ed by CPAs Yang Qinchen and Weng Rongsui of Deloitte Tai- wan , as showing in the auditing report. The supervisor has viewed the aforementioned documents and found no major inadequacies, thereby deliver- ing this report to shareholder’s meeting, according to article 219, Company Law.

To Shareholder’s Meeting of Taishin International Bank:

Standing supervisor Tsay, Yang-Tzong

Supervisor Long-Su Lin

Supervisor Toney Chen

May 12, 2011

D. Financial statement of the latest year: refer to appendix 1.

E. Consolidated fi nancial statement of parent company and subsidiary for the recent year certifi ed by certifi ed public accountant: refer to index 2.

F. Should there occur financial insolvency of the bank and its afﬁ liates in the recent year and as of the date of the publication of the annual report, specify its effect on the bank’s ﬁ nance: nil

86 2010 Annual Report VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Evaluation

A. Financial status:

Main reasons for major changes in assets, liabilities, shareholders’ equity in recent years and effect Unit: NT$1,000

Year Change 2010 2009 Item Value % Asset Cash and cash equivalent, Due from the Central Bank and call loans 50,139,719 136,515,846 (86,376,127) -63.27% to other banks Financial assets at fair value through profi t or loss 22,263,352 24,907,554 (2,644,202) -10.62% Bonds and securities purchased under resell agreements 2,992,554 2,420,000 572,554 23.66% Available-for-sale fi nancial assets 172,426,842 36,484,764 135,942,078 372.60% Loan, net 531,674,018 495,583,668 36,090,350 7.28% Receivable , net 96,256,074 84,838,866 11,417,208 13.46% Hold-to-maturity fi nancial assets 3,312,094 6,214,140 (2,902,046) -46.70% Investments accounted for by the equity method, net 1,861,285 1,281,667 579,618 45.22% Property and equipment, net 17,404,571 17,898,096 (493,525) -2.76% Other fi nancial assets 2,941,610 2,873,039 68,571 2.39% Other assets, net 9,874,295 23,740,004 (13,865,709) -58.41% Total assets 911,146,414 832,757,644 78,388,770 9.41% Liabilities Due to banks and Central Bank 56,332,391 54,181,462 2,150,929 3.97% Deposit 713,580,371 654,664,982 58,915,389 9.00% Financial liabilities at fair value through profi t or loss 15,911,230 16,990,037 (1,078,807) -6.35% Bonds and securities sold under repurchase agreements 17,040,348 7,239,422 9,800,926 135.38% Payables 21,106,394 18,956,708 2,149,686 11.34% Bonds debentures 25,000,000 25,000,000 0 0.00% Other fi nancial liabilities 113,796 151,200 (37,404) -24.74% Other liabilities 1,368,999 2,140,457 (771,458) -36.04% Total liabilities 850,453,529 779,324,268 71,129,261 9.13% Capital stock 49,157,526 49,157,526 0 0.00% Capital surplus 3,213,562 3,193,573 19,989 0.63% Retained earnings 8,159,642 944,099 7,215,543 764.28% Unrealized gain (loss) on fi nancial instruments 162,674 138,235 24,439 17.68% Cumulative translation adjustments (519) (57) (462) 810.53% Other adjustment items in shareholders’ equity 0 0 0 Total shareholders’ equity 60,692,885 53,433,376 7,259,509 13.59%

1. Cash, cash equivalent, deposits with the Central Bank of China, and inter-bank call loans decreased, due to reduced deposits with the Central Bank of China. 2. Financial assets ready for sale increased, due to increased holding of bills, government bonds, and beneficiary certificates. 3. Financial assets held until maturity decreased, due to reduced investments in government bonds. 4. Other assets decreased, due to reduced refundable deposits. 5. Liabilities for repo bills and bonds increased, due to decrease of beneficiary certificates, corporate bonds, and financial bonds. 6. Retained earnings increased, due to increase in the current net profits in 2010.

2010 Annual Report 87 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Evaluation

B. Management outcome:

Main reasons for major changes in revenue, net business profi t, and pre-tax net profi t in recent years, business goal and basis, their possible effect on the bank’s future fi nance, and countermeasures: Unit: NT$1,000

Year Change 2010 2009 Item Value % Net interest income 11,686,198 10,002,148 1,684,050 16.84% Interest income 16,512,086 17,604,688 (1,092,602) -6.21% Interest expense (4,825,888) (7,602,540) 2,776,652 -36.52% Net Income and Gains ( Losses) other than interest income 12,472,221 9,202,859 3,269,362 35.53% Fee income, net 6,556,747 5,626,732 930,015 16.53% Gain on fi nancial assets and liabilities at fair value from profi t or loss 1,167,116 1,936,861 (769,745) -39.74% Realized gain (loss) on available-for-sale fi nancial assets 58,741 35,991 22,750 63.21% Investment income recognized under the equity method 453,641 55,369 398,272 719.31% Exchange gain, net 396,418 684,237 (287,819) -42.06% Loss from assets reduction 0 0 0 Gain ( loss) on fi nancial assets carried at cost 0 53,243 (53,243) -100.00% Income (loss) from sale of bad assets 0 0 0 Other miscellaneous net income 3,839,558 810,426 3,029,132 373.77% Provisions for loan losses (1,204,821) (4,265,429) 3,060,608 -71.75% Operating expense (12,219,473) (11,476,422) (743,051) 6.47% Income (Loss) before income tax 10,734,125 3,463,156 7,270,969 209.95% Income tax ( expenses) benefi t (2,857,713) (2,641,877) (215,836) 8.17% Income ( Loss) before extraordinary gain 7,876,412 821,279 7,055,133 859.04% Accumulated effect from change in accounting principle (after tax) 0 0 0 Extraordinary gain (after tax) 0 122,820 (122,820) -100.00% Net income ( loss) 7,876,412 944,099 6,932,313 734.28% 1. Net interest income decreased, mainly due to decrease in deposits interest rate 2. Net fee income increased, due to increase in fee income from credit cards, agency, trust, and loans. 3. Financial assets and liabilities benefits resulting from change in fair value listed in loss/benefit decreased from a year earlier, due to decreased benefits from disposal of derivatives. 4. Investment income recognized under the equity method increased, mainly due to increased investment returns resulting from increased stake in Taishin Insurance Agency. 5. Other miscellaneous net income increased, mainly due to to provisions of loss reserves for structured notes last year. 6. Bad-debt fee decreased, due mainly to sound quality of the bank’s overall assets.

C. Cash ﬂ ow

Liquidity analysis for the recent two years Unit: %

Year 2010 2009 Change Item Cash fl ow ratio(%) 18.29 (0.10) -18390.00% Propriety ratio for cash fl ow (%) 2315.00 1,115.21 107.58% Satisfaction ratio for cash fl ow (%) 23.59 (9.57) -346.50% 1. Cash flow ratio increased, mainly due to increase of cash flow for current business activities 2. Propriety ratio for cash flow rose,mainly due to increase of cash influx caused by current operating activities than past year 3. Satisfaction ratio for cash flow rose, mainly due to increase of cash influx caused by current investment activities.

88 2010 Annual Report Cash Flow Analysis for the Coming One Year Unit: NT$ 1 M Forecast net cash Anticipated cash Value of anticipated Remedies for anticipated cash shortfall Cash balance at the ﬂ ow from business inﬂ ux for the entire cash surplus start of the period A activities for the year C (shortfall) A+B+C entire year B Investment plan Funding plan 12,903 27,140 (3,771) 36,272 - - The company expects that increased deposits partly resulting from the rollout of new deposit products and cash inflow deriving from steady profit growth in the coming one year will be sufficient to fund new loans and investment for new equipment. . Therefore, there will be no cash shortfall.

D. The effect of major capital outlays in the recent year on ﬁ nance

Major Capital Outlays and Funding Sources Unit: NT$1,000 Actual or Actual or Actual or anticipated fund utilization planned scheduled Total funds Plan items funding completion needed 2006 2007 2008 2009 2010 2011 sources dates 2008 1,115 1,115 Buildings Own fund 2011 24,000 24,000 2006 616,153 616,153 2007 259,824 259,824 Machinery 2008 381,098 381,098 equipment 2009 200,798 200,798 2010 234,355 234,355 2011 353,129 353,129 2006 145,150 145,150 Transportation 2007 6,182 6,182 Equipment & 2008 1,202,900 1,202,900 Own fund Miscellaneous 2009 348,906 348,906 Equipment 2010 1,043,001 1,043,001 2011 10,075 10,075 2006 191,183 191,183 Leased assets Own fund 2007 5,300 5,300 2010 40,000 40,000

E. Long-term investment policy in the recent year , main reasons for their profit or loss, improvement plan, and ﬁ nance for investment plans in the coming one year.

Long-term investment policy and plan of Taishin Bank is being managed by the parent company Taishin Financial Holding, in line with the stipulation of article 36, Financial Holdings Company Law, Taishin Bank is a subsidiary of Taishin Financial Holding. Article 36 of Financial Holding Company Law stipulates that “Without approval, financial holding companies and affiliates under their direct or indirect control cannot carry out applied investments, except in various ﬁ nancial businesses according to related laws.” Consequently, the bank follows article 74 of the Banking Law in its equity-investment policy and plan.

2010 Annual Report 89 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Evaluation

F. Analysis and evaluation of risk management

a. A Series of Qualitative and Quantitative Requirements for Risk Management: 1.Credit Risk Management System and Accrued Capital

2010 Credit Risk Management System

Items Contents Credit Risk Management aims at protecting the interests of shareholders by maximizing profi ts at reasonable risk level. As the basis for adjustments in credit policy and collection policy, changes in net cash fl ow are regularly monitored to 1. Credit Risk Management Strategy, goal, catch up with the trend in asset qualities. policy and Process Credit risk management strategy follows pre-determined business goals, emphasizing cash fl ow as the main source of payments while earning appropriate returns on risk. In addition to the credit management units for 2 Banking Groups there is an independent credit risk management unit in charge of the credit portfolio management for the whole bank. Retail Banking Group. Retail business units evaluate and review cases based on the credit policy . Retail Asset Management Division is responsible for collection 2. Credit Risk Management Organization and and management of delinquent cases. Retail Credit Management Division and Structure other Retail business units are parallel units within the organization. Corporate Credit Management Division is the credit risk management unit for Corporate Banking Group. It consists of credit management , screening , global trade, and asset management departments. Screening and global trade departments evaluate cases. Asset management department is responsible for collection and management of delinquent cases and bad loans. For Retail Banking Group, set appropriate credit policy based on business goals, by utilizing Application Scoring System、Behavior Scoring System、Collection/ Recovery Scoring System and Credit Bureau Scoring System, and embrace multi-dimension risk grading for customers. Along with product profi t models, customers are divided into test and champion groups according to various credit criteria so as to strike optimal balance between risk and profi ts. Asset qualities and the characteristics of defaults are analyzed regularly to adjust risk management 3. Scope and features of credit risk report and indicators and achieve the business goals. evaluation system For Corporate Banking Group, internal rating systemic used for measurement and management of credit risk. All cases should be rated upon application, and tracked and reviewed afterwards. The internal rating system has two dimensions, Obligor Risk Rating (ORR) and Facility Risk Rating (FRR). ORR embraces statistical model and scorecards. FRR analyzes collaterals, claim priority and product types for limit settings. Internal rating system is re-assessed every year to test its stability. Migration analysis and scenario analysis are also conducted under a stress testing framework. Taking collaterals in the main credit risk mitigation technique. Collaterals include real estate, chattels, and securities. Each of them has its own appraisal method and 4. Policies for hedging and /or mitigating risk period. and strategies and processes for monitoring The continuing effectiveness of hedges/mitigations is monitored by applying the the continuing effectiveness of hedges/ internal credit rating system, credit portfolio management and review, coupled with mitigations. credit exposures diversifi cation and credit limit setting. Strategies and processes for hedging and /or mitigating risk are reviewed and adjusted according to changes in factors such as marco economy or fi nancial regime. 5. Regulatory Capital Requirement Methodology Standardized Approach

90 2010 Annual Report Credit Risk Exposure Value and Capital Requirement after Mitigation on Standardized Method

Dec. 31, 2010 /unit: NT$1,000 Type of Risk Exposure Risk Exposure after Mitigation Capital Requirement Sovereigns 182,712,898 81,468 Non-central government public sector entities 161,071 2,577 Banks (including multilateral development bank) 46,522,596 1,402,468 Corporate 293,576,124 23,496,521 Retails 139,964,742 8,769,485 Residential properties 222,578,880 8,020,642 Equities 767,822 221,269 Other Assets 34,074,313 2,154,103 Total 920,358,446 44,148,533

2. Risk management system for securitized assets, risk exposure, and capital requirement

2010 Risk Management System for Securitized Assets

Items Contents (1) Risk Management strategy The bank’s assets securitization business aims to achieve optimal deployment of the bank’s assets and liabilities , as well as diversify assets and risks. (2) Risk Management Process The bank’s fi nancial management division fi rst analyzes the deployment status of the bank’s assets 1. Risk Management and liabilities , before putting forth proposal for the securitization business according to the guidance Strategy and Process of the bank’s management strategy (including execution costs and benefits) set by the board of for Securitized Assets directors. (note) Securitized assets of non-originating bank are managed according to market risk management policy. In the enforcement of management fl ow, various business units should obtain approval and quota before trading , while independent management units evaluate the income of existing positions daily for regularly reporting the income and exposure status of the positions to executives.

Board of directors

President

2. Risk Management Information Organization Consumer Finance Retail Banking Finance Division Technology and Structure for Division Credit Division Services Group Securitized Assets

Planning,ﬁ nancial Provision of Risk management Provision of historical evaluation,and work-ﬂ ow information strategy and data for the targets of issuance of the for the targets of mechanism for the securitized assets and overall issuance securitized assets targets of securitized information needed by structure and accounting assets consigned institutions

Contents of regular risk management report include : 3. Scope and features 1. Detailed information on kind, value, credit rating, and evaluation of investment beneﬁ ciary certiﬁ cates of report on risk of and assets-backed securities securitized assets and 2. Trust report and report of custodian institution(should it exist) evaluation system 3. Performance of securitized assets 4. Policies for hedging and/or mitigating risk and strategies Consider industrial concentration, economic-cycle risk , and effective capital utilization of risk assets in and processes undertaking assets securitization business and carry out random review of cost-effectiveness, so as to for monitoring determine proper timing for continuing the securitization business. the continuing effectiveness of hedges/mitigations. 5. Regulatory Capital Requirement Standardized Approach Methodology

2010 Annual Report 91 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Evaluation

Status of Securitized Assets Business : Nil

(A) Risk Exposure for Securitized Assets and Captial Requriement Base date: Dec. 31, 2010/unit: NT$1,000 Non-originating bank Originating bank Risk exposure Risk exposure value Capital Kinds of risk value for secu- Non assets-backed commercial paper Capital requirement exposure ritized products Assets- requirement Traditional type Combination type before bought or held by backed com- Retained No retained Retained No retained mercial paper securitization the bank position position position position Bank Type 17,591 1,407 Housing loan 7,412,097 118,594 Enterprise type 28,042 1,122 Total 7,457,730 121,122

(B) Information on Securitized Products

(1) Summarized Information on Investment in Securitized Products

Base date: Dec. 31, 2010/unit: NT$1,000 Evaluated accumulated Accumulated Value on book Items Listed accounting items Original cost A income B reduction C D=A+(B+C) Financial assets ready for 1 3,944,051 -6,487 3,937,564 sale-benefi ciary certifi cates Financial assets ready for 2 27,749 269 28,018 sale-benefi ciary certifi cates Financial assets held until 3 17,591 17,591 maturity-benefi ciary certifi cates Total 3,989,391 -6,218 0 3,983,173 Note 1: This table contains domestic and foreign securitized products , which are registered according to the following categories and listed ) accounting items: (1) Mortgage-backed securities (MBS): including beneficiary certificate for securitized claims on housing-mortgaged loans or Assets- backed securities ( RMBS), beneficiary certificates for securitized claims on commercial property-mortgaged loans or Assets- backed securitized (CMBS), collateralized mortgage obligation (CMO), and other realty-mortgage securities (2) Beneficiary certificates or assets-backed securities (ABS): including beneficiary certificates for corporate-loan claims or assets- backed securitized (collateralized loan, obligation, or CLO) beneficiary certificates for securitized bond assets or assets-backed securities (collateralized bond obligation , or CBO) beneficiary certificates for securitized claims on credit-card debts or assets- backed securities, beneficiary certificates by securitized claims on auto loans or assets-backed securities, beneficiary certificates for securitized claims on consumption loans/cash-card debts or assets-backed securities, beneficiary certificates for securitized leasing claims or assets-backed securities, and other securitized beneficiary certificates or assets-backed securities (3) (ABCP) Short-term beneficiary certificates or short-term assets-backed securities (assets-backed commercial paper) (4) Collateralized debt obligation(CDO)。 (5) Realty securitization: It refers to real estate asset trust (REAT)。 (6) Bills and bonds issued as structured investment vehicles(SIV) (7) Other securitized products Note 2: The table includes benefi ciary certifi cates of asset-backed securities held by the bank with the bank serving as an originating institution.

92 2010 Annual Report (2) Mandatory information disclosure for investment in securitized products with original cost exceeding NT$300 M. (excluding those held for credit enhancement with the bank serving as an originator) Unit: NT$1,000 Payment method Names of Listed Credit Unrealized attachment Contents of assets Denomination Issuer and Purchase Maturity Coupon for Original Accumulated Book securities accounting rating profi t & point pool currency its location date date rate principal cost impairment value (note 2) item (note 3) Loss (note 4) (note 5) and interest Ginnie Mae Secured Available– GNR GNMA mortgage loan, for-sale Fixed 2010-25 USD MBS 2010/2/1 2025/2/1 S&P AAA Monthly 404,692 - 1,206 403,486 - Original cost= fi nancial 3% A H POOL USD 13,326,270.11, assets deals:10pools Freddie Mae Available– Secured mortgage FHR 3469 for-sale FREDDIE Fixed loan,Original USD 2010/9/20 2033/10/15 S&P AAA Monthly 315,460 - 3,429 312,031 - P C fi nancial MAC 5% cost= USD assets 10,387,914.18， deals:12pools Freddie Mac secured Available– mortgage loan, FHR 3200 for-sale FREDDIE Fixed USD 2010/10/20 2029/5/15 S&P AAA Monthly 483,237 2,625 485,862 - Original cost=USD A D fi nancial MAC 5.5% 15,912,702.68， assets deals:700pools Note 1: The table includes domestic and foreign products Note 2: Full names should be provided for same securities product in difference issuance Note 3: Provide result of the latest credit rating Note 4: Attachment point refers to share of sub-issuance value with compensation priority lower than that for securities held by the bank in the Local issuance value of the securitized product. Assuming, for example, a bank purchase A security of a certain CDO (collateralized debt obligation) , the security has sub-security BBB and sub-equity security with compensation priority lower than A security. The total issuance value of BBB and Sub-equity security amounts to 12% of the total value of the CDO. Then the attachment point for A security is 12% Note 5: Assets pool refers to assets portfolio handed by originating institution to trustee or other company with a special purpose. Specify kind of assets In the portfolio (denote primary lien or subordinated status), detail, value on book in original currency and number.

(3) Mandatory information disclosure for position of securitized products held by the bank for credit enhancement with the bank serving as an originator : Nil

(4) Mandatory information disclosure for the bank serving as buyer or position-squaring buyer of securitized assets with impaired credit: Nil

(5) Mandatory information disclosure for the bank serving as guarantor for securitized products or liquid credit line provided by the bank: nil

3. Operational risk Management system

2010 Operational Risk Management System

Items Contents Taishin Bank got the approval of FSC for the Standardized Approach in 2007. However, we are planning to 1. Operational Risk Management Strategy and Process adopt the Advanced Measurement Approach in the future. So far, we have developed systems and processes to comprehensively identify, monitor, measure, mitigate, manage and report operational risks. Taishin Bank has set up an operating-risk management framework including the following tools and mechanisms” The bank has set up independent operating-risk management unit, in charge of integrating the management 2. Operational Risk Management Organization and Structure. structure for the bank’s operating risks, so that staffers at various levels can follow consistent standards in identifying, evaluating, managing, monitoring and reporting various operating risks when carrying out their duties. The scope of operating risk is defi ned as “ risk triggered by improprieties or mistakes of internal fl ow , staffers, systems, or external incidents, including legal risk but excluding strategic risk and reputation risk.” Meanwhile, the 3. Scope and features of operational risk report and evaluation system ORM system has been set up to evaluate and monitor the action plan of operational loss event. The bank has also organized a number of seminars on scenario analysis for the operating risk related to fi nancial trading and consumer banking, in the hope of supplementing existing data analysis with the opinions of experts. 4. Policies for hedging and/or mitigating risk and strategies processes The bank has instituted business continuity planning (BCP) and/or taken out insurance as the hedging tools for monitoring the continuing effectiveness of hedges/mitigations. 5. Regulatory Capital Requirement Methodology Standardized Approach

2010 Annual Report 93 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Evaluation

Captial Requirement for Operational Risk Dec.31, 2010, unit:NT$1,000 Year Gross Income Captial Requirement 2008 22,256,271 - 2009 19,143,345 - 2010 21,243,176 - Total 62,642,792 2,791,056

4. Market risk management system and capital requirement

2010 Market Risk Management System

Items Contents Taishin market risk policy is meant to manage risk, in order to maximize shareholder’s value. We have established a risk management framework, including an independent risk management department to 1. Market Risk Strategy maintain integrity of the risk control processes, clearly defi ned market risk management policies and and Process procedures, and a set of risk limits, which are regularly reviewed to ensure that Taishin’s risk taking is consistent with its business strategy, capital structure and current market conditions. 2. Market Risk Our market risk team is responsible for daily management and control of our market risk exposures, en- Management suring our business activities adhere to our market risk policies. Duties are divided according to func- Organization and tion as follows: product control, system setup and maintenance by designated personnel,and quants. Structure Risk reporting is performed in a timely fashion and measurements are made at different levels, from products to trading desks. We seek to monitor and control our market risk exposures through a variety of separate but complementary fi nancial/trading management and reporting systems. Qualitative tools: Our major objective is to promote risk transparency and risk awareness. We accom- 3. Scope and features of plish this through an independent risk management function, alone with the setup of risk policies and market risk report and processes, including pricing verifi cations, benchmarking, model validation and a new product review/ evaluation system approval mechanism. Quantitative tools: We manage our market risk exposures using a number of quantitative tools, including risk limits, stress tests & scenario analysis, and Value-at-Risk( VaR). Our feature goal is to gain approval from the regulator to use our own internal VaR model in calculating regulatory market risk capital for our general and specifi c market risks. 4. Policies for hedging and/or mitigating Market risk is managed by diversifying exposures, controlling position sizes and establishing economic risk and strategies hedges in related securities or derivatives. The ability to actively manage risk is related to its hedge and processes strategy, and identifying adverse changes in the liquidity of an exposure or its related hedge instrument for monitoring the and in the correlation of price movements between the two is essential to effective hedging. We have continuing effectiveness policies and procedures in place to ensure active and effi cient hedges. of hedges/ mitigations 5. Regulatory Capital Requirement Standardized Approach Methodology

Capital Requirement for Market Risk Dec.31, 2010, unit:NT$1,000 Type of Risk Capital Requirement Interest rate risk 1,298,618 Equity price risk 201,229 Currency rate risk 169,219 Commodity price risk 0 Total 1,669,066

5. Liquidity risk includes analysis of maturity of assets and liabilities, as well as explanation of management method for assets liquidity and fund-shortfall liquidity.

94 2010 Annual Report (1) Analytical table for the structure of maturity dates for NT-dollar funds Dec.31,2010/unit:NT$1,000 Value for remaining period before maturity Total 181 days-one 1to 30 days 31to 90 days 91-180 days Over one year year Main fund inﬂ ow 770,074,334 237,483,195 89,050,617 26,826,242 25,910,246 390,804,034 upon maturity Main fund outﬂ ow 865,518,809 116,563,606 123,150,966 162,037,638 176,984,707 286,781,892 upon maturity Shortfall before (95,444,475) 120,919,589 (34,100,349) (135,211,396) (151,074,461) 104,022,142 maturity Note: The table contains only NT-dollar funds of headquarters and domestic branches ( excluding foreign currency)

(2) Analytical table for the structure of maturity dates for US-dollar funds. Dec.31, 2010/ unit: US$1,000

Value for remaining period before maturity Total 181 days-one 1to 30 days 31to 90 days 91-180 days Over one year year Main fund inﬂ ow 7,482,030 3,605,795 1,388,985 745,467 442,980 1,298,802 upon maturity Main fund outﬂ ow upon 7,415,920 2,263,327 843,026 2,652,663 191,945 1,464,958 maturity Shortfall before 66,110 1,342,468 545,959 (1,907,196) 251,035 (166,156) maturity Note 1: Fill the form with the combined U.S. dollar-denominated value of the headquarters, domestic branches, and offshore banking units, according to the paper amount. There is no need to fill in the amount not listed in the book (such as projected issuance of negotiable certificates of deposits, bonds, or stocks. Note 2: Supplementary information for disclosure should be provides for overseas assets accounting for over 10% of the bank’s total assets.

(3) Assets liquidity and the management of fund-shortfall liquidity Explanation: “Liquidity risk” refers to possible risk of loss deriving from inability to convert assets into cash or raise sufﬁ cient fund in reasonable time for performing contract obligation for fund repayment upon maturity or meet the ﬁ nancial need for assets growth, for which bank must adopt feasible liquidity- risk management plan.

■ Management objective and principles

For elimination of liquidity risk, the bank may have to raise fund cost comparatively. Therefore, for fund-liquidity risk management principle, the bank must also consider how to meet fund need in the most effective manner, taking into account the factor of tolerance, so as to balance objectives of earnings and risk management.

Consequently, to avoid the effect of liquidity risk, the bank endeavors to monitor liquidity risk, according to the risk-management quota and index set by the assets/liabilities management committee. Liquidity-risk quota and index management covers fund inflow and outflow, the concentration extent of deposit sources and deposit utilization, aiming to maintain to sufﬁ cient liquidity for the bank anytime and meet demand of liabilities upon maturity. Basic principles for liquidity-risk management include:

2010 Annual Report 95 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Evaluation

(a) Principle of diversiﬁ cation: The bank must avoid over-concentration in fund maneuvering, in terms of maturity date, maneuvering tools, currency, place, funding source, and trading partners.

(b) Principle of stability：The bank follows the strategy of fund stability, constantly grasping the liquidity status in the market and the bank and absorbing core deposits timely, so as to avoid the effect of market swing on funding sources and reduce the reliance on unstable funding sources.

(c) Principle of maintaining adequate assets liquidity: As the status of market liquidity will indirectly affect funding liquidity, the bank must assure that total assets are sufﬁ cient to cover total liabilities and keep a certain share of assets with good liquidity or good for use as collaterals, capable of meeting need of working capital in emergency and short-term liabilities.

(d) Principle of matching of assets and liabilities on maturity: The bank should keep an eye on the maturity date of liquid assets and liquidity spread and assure that short-term assets are sufﬁ cient to cover short-term liabilities.

■ Management strategy and plan

Via the internal fund transfer pricing system, the bank concentrates liquidity-risk management under the charge of the fund management unit. Moreover, the bank formulates assets-liabilities policy, specifying the responsibilities/ power of various units and the scope and procedure of risk recognition, appraisal, monitoring and report, as the basis of the bank’s liquidity-risk management.

Liquidity-risk appraisal aims to estimate the bank’s shortfall and accumulated shortfall of the bank’s cash ﬂ ow, the latter of which includes not only items in the table but also related items outside the table. The bank’s assets/liabilities management system undertakes regular analysis of change of the bank’s position monthly and calculates the maximum cash-ﬂ ow shortfall on maturity(MCO) in major currencies under the items of the table and related items outside the table.

■ Emergent contingency plan

For emergent or unexpected liquidity incident, the bank has formulated liquid-fund emergent contingency measures, as the guideline for response to emergent incidents, in order to effectively cope with such incidents with its resources and return its operation to normal status.

b. Effect of changes in major domestic policies and law/regulations on the bank’s ﬁ nance and countermeasures:

“Measures governing financial business dealings and investments between Taiwan and mainland China.” “Principles governing investments by banks, ﬁ nancial holding companies, and afﬁ liates in China.”

96 2010 Annual Report c. Effect of technological and industrial changes on the ﬁ nance of the ﬁ nancial holding company and countermeasures.

In the past, to cope with the new needs of various businesses, Taishin Bank must procure computer servers for handling massive amount of current trade information. It, however, is not easy to make the optimal investment, due to the difﬁ culty to estimate the actual demand, leading to either insufficient capacity or excess capacity. The introduction of the virtual platform for cutting-edge servers can lower initial investment cost for information systems, enabling the bank to focus on business development and service quality, thereby boosting the opportunity for proﬁ t making.

Taishin Bank started to embrace virtual platform in 2009, mainly for the introduction of testing environment, with remarkable achievement. The bank will continue accumulating its application experience and monitoring the stability of the system and flexibility for resources application, as reference for improving the operating environment of system, enhancing the usability of various application systems, and rapidly meeting the needs of new businesses for information resources.

The bank integrates various professional resources for further upgrading its industrial analytical technique, so as to grasp current industrial status and enhance the quality of credit investigation and extension. Meanwhile, to strengthen credit-extension risk management, the bank formulates maximum risk levels for various industries and business groups, so as to rigorously control the effect of industrial changes on the bank’s credit extension.

Taiwan has started to implement action programs for six emerging industries from April 2009, adding biotech, green energy, sophisticated agriculture, tourism and travel, medical care, and cultural innovation to the camp of the nation’s original cutting-edge industries, such as the ICT( information communications technology) industry(communications, information technology, optoelectronics, and semiconductor) . In addition, the Taiwanese government has been pushing 12 i-Taiwan ( love Taiwan) infrastructural projects, of which three, namely” civil aviation terminal and facilities,” harbor and facilities,” and “major tourism and leisure facilities,” aim to solicit the participation of foreign funds. In the next eight years, NT$2.65 trillion of government fund and NT$1.34 trillion from the private sector will be put into related investments, thereby greatly vitalizing the development of the emerging industries.

Meanwhile, the government has allowed mainland Chinese funds to invest in various sectors, including 64 items in the manufacturing industry, 117 in the service industry, and 11 for public infrastructure, amounting to 192 in total. It has also been actively soliciting mainland Chinese investments in the setup of logistics centers in Taiwan, which will be served as the stepping stone to enter the Asia-Pacifi c and global markets. Under the trend, the fi nancial industry can cash in on the fi nancial needs of foreign or mainland Chinese enterprises in setting up operations in Taiwan and establish business relationship with Taiwanese headquarters of foreign fi rms or Taiwanese-invested business in China. Moreover, the fi nancial industry can provide fi nancial services needed by major Chinese banks in their investments in mainland-Chinese invested fi rms in Taiwan.

2010 Annual Report 97 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Evaluation

d. Effect of change in the corporate images of the ﬁ nancial holding company and its subsidiaries and countermeasures.

Taishin Financial Holding obtained 1.4 billion preferred shares of Chang Hwa Bank in 2005 via open bidding and took part in the operation of the latter’s board of directors. The special investigation task force of the Ministry of Justice started to probe the second fi nancial reform in 2009 and searched the company’s offi ce in early February. The widespread publicity of the event by the media jeopardized the reputation of the company and the confi dence of customers, tarnishing the company’s image in the social public.

Alongside the dedication to core business by constantly developing various ﬁ nancial products and services to win the trust of customers, Taishin Financial Holding has also been fulfilling its social responsibility by actively taking part in various public-service and charity events and cultural and artistic promotion. In addition to the long-term engagement in “caring for Taiwan” series events, it holds Taishin artistic awards and sponsors various artistic and cultural performance annually. In 2010, it established “Taishin Bank charity and public-service foundation” for pushing the cause of public service and charity, so that people can do something good in the simplest manner. Moreover, Taishin has organized various free lectures, inviting celebrities to inspire and invigorate young people with their insight and experience. Such substantive payback and contribution to the society has considerably enhanced the company’s corporate image.

e. Anticipated benefits and possible risks from acquisition and countermeasures.

According to bank’s experience in fi nancial acquisitions, including Tainan First Credit Cooperation and HsinChu Tenth Credit Cooperative and the acquisition of Daan Bank, financial mergers can generate a number of benefi ts , including expansion of fi nancial scope. In March, 2010, we also acquired the credit card business from Good Bank., especially contributing to the enlargement of consumer banking business Via deep cultivation of abundant resource, economy of scale, the integration of various business resources, and product and client integration, financial mergers create concrete synergy effect and bring substantial benefi ts to shareholders.

1. Anticipated beneﬁ ts：

(1) Slash operating cost, via concentrated operation and the standardization of operating quality. (2) Integrate information system and unify operating platform, facilitating the provision of services with uniform quality in an even more economic and efﬁ cient manner. (3) Expand the channel for marketing financial products, bringing concrete contribution to the development of the bank’s business. (4) Expand business scope, offering pluralized ﬁ nancial products and services to existing clients and thereby augment revenue directly.

98 2010 Annual Report 2. Possible risks for acquisition

A number of factors will affect the achievement of acquisition synergy and realization of anticipated beneﬁ ts, including the blending of corporate cultures, change in management framework, and the development of existing clients and business.

3. Countermeasure：

To realize anticipated synergy, the bank will step up communications with staffers and constantly review the implementation of the acquisition plan.

f. Anticipated benefits from the expansion of business offices, possible risk, and countermeasures: There is no plan for the expansion of business ofﬁ ces in the recent year.

g. Risk associated with business concentration

Due to the sharing of resources and talents resulting from the concentrating of some of the bank’s business, the occurrence of incidents will create major impact on the bank. Therefore, in addition to the disaster recovery plan formulated by the information service division, the bank has set up “ business continuity planning” (BCP) and labor-hygiene and security-related policy and measures, so as to assure the continuation of the bank’s integrated operation, including back-up mechanism for site, system, and personnel, which would undergo regular testing every year. The bank also regularly prepares back-up copies for data which are stored at a different site. h. The effect of the change of management right on the bank, related risk and countermeasures: nil

2010 Annual Report 99 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Evaluation

i. Litigation and non-litigation incident:

Litigation Litigation parties Starting of Description of the incident Target value Status of handling incident litigation On Jan. 9, 2008, Taishin Bills Finance received a letter from Ms. Chang Chi-han The bank entrusted lawyer requesting 30% of compen- Cheng Yang-I to handle the sation for discovering and case in 2009, which is still giving back a lost promis- Plaintiff: Chng Chi-han undergoing the procedure sory note of NT$200 million Defendant: Taishin Bank of the ﬁ rst trial. According (No. 349, 2009) belonged to Taishin Bills NT$200 million 2009 (successor to Taishin Bills to past rulings, the plaintiff Finance. In 2009, she ﬁ led a Finance) has low chance to win the suit with Taipei district court case granting her NT$200 against Taishin Bill Finance million of compensation. for the payment of the compensation and raised the compensation amount to NT$200 million in 2010.

j. Other major risks and countermeasures: nil

G. Crisis response mechanism:

Taishin Bank has formulated the policy of “Business Continuity Management” (BCM) to assure the continuity of the company’s essential business activities. Based on the BCM policy, all units of Taishin set up their BCP to ensure that the essential operations can be maintained or recovered in a timely fashion should a disruption occurs.

Its purpose is to minimize the operational, ﬁ nancial , legal, reputational and other material consequences arising from a disruption.

H. Other important affairs: nil

100 2010 Annual Report VIII. Special Notes

A. Information of afﬁ liates

a. Consolidated ﬁ nancial statement with afﬁ liates

The bank did not produced consolidated fi nancial statement with affi liates in 2010, since affi liates which should be covered by the consolidated fi nancial statement, according to the “guidelines for the compilation of consolidated proxy statement, fi nancial statement, and affi liation report for affi liates.” are the same companies which should be covered by the consolidated fi nancial statement for parent company and subsidiaries, according to the No.7 fi nancial accounting criteria.

b. Consolidated proxy statement of afﬁ liates

1. Organizational chart of afﬁ liates

Taishin International Bank Organizational chart of afﬁ liates

(base date: Dec.31,2010)

Taishin International Bank

99.00% 65.36% 87.4% 60%

Dah An Leasing PayEasy Digital Taishin Insurance Taishin Real Estate

Co.,Ltd. Integration Agency Management

Co.,Ltd. Co.,Ltd. Co.,Ltd.

65.75% 100.00% 100.00%

Contect Digital PayEasy Travel Taishin Insurance

Integration Service Brokers

Co.,Ltd. Co.,Ltd. Co.,Ltd.

2010 Annual Report 101 VIII. Special Notes

2. Business status of affi liates Base date:Dec.31,2010, Unit: NT$1,000 After-tax Name of Total Total Book Operating Operating Current Capital Profi t/loss enterprises Assets Liabilities Value revenue profi t Profi t/loss(after tax) Per share Dah An Leasing 200,000 205,038 214 204,824 0 2,560 2,430 0.12 PayEasy Digital 434,500 1,184,064 651,174 532,890 2,988,636 17,306 5,325 0.12 Integration PayEasy Travel 13,000 35,414 20,307 15,107 254,916 1,726 1,459 1.12 Contect Digital 7,300 18,812 27,199 (8,387) 36,664 (12,182) (10,324) (14.14) Integration Taishin Insurance 3,000 1,105,003 250,283 854,720 1,876,954 378,285 453,321 1511.07 Agency Taishin Insurance 60,000 99,276 10,426 88,850 70,825 18,459 16,976 2.83 Brokers Taishin Real Estate 200,000 424,545 120,437 304,108 57,245 25,542 20,524 1.03 Management Note 1：All affiliates, whatever their business scales, must disclose information. Note 2 : In case an affi liate is a foreign company, related business fi gures should be converted to NT dollar to the exchange rate of the date of the report

3. Information on Affi liates base date: Dec.31, 2010, unit: NT$1,000 Name of Date of Paid-in Address Major business or product items enterprise establishment Capital 1. Investment consulting, 2. Management consulting, 3. Information software service, 4. Data processing, 5. E-information PayEasy Digital 13th fl ., No.11, provision, 6. Common advertisement, 7. Other general retail Integration Co., 2000.04.27 Zhongshan N. Road, 434,500 business, 8. Department store, 9. Brokerage, 10. Online Ltd Sec.1, Taipei city certifi cation 11. Wholesale for medical equipment, 12. Store less retail. 3th fl ., No.44, Taishin Insurance 1986.09.19 Zhongshan N. Road, 3,000 Agency for personal insurance. Agency Sec.2, Taipei city 3th fl ., No.44, Taishin Insurance 2002.07.24 Zhongshan N. Road, 60,000 Brokerage for property insurance Brokers Co., Ltd Sec.2, Taipei city 1. Leasing, 2. Wholesale of machinery, 3. Retail of machinery Dah An Leasing 2th fl ., No.9, Dehui and apparatus, 4. Wholesale of precision equipment, 5. Retail of 1997.10.13 200,000 Co.,Ltd Street, Taipei city precision equipment 6. Retail of auto, 7. Retail of ship and parts, 8. Retail of fl ying devices and parts 1. construction management industry 2.residence and office building development and leasing 3.development and leasing of industrial factories 4.specific professional zone development Taishin Real Es- 2th fl ., No.9, Dehui 5.investment and construction of public construction projects tate Management 1995.08.17 200,000 Street, Taipei city 6.new town and new community development 7.agency for area Co., Ltd expropriation and urban land rezoning 8.urban renewal 9.realty transaction 10.realty leasing 11.business credit investigation 12.other businesses not legally banned or restricted. 13th fl ., No.11, Zhong- PayEasy Travel 2005.06.06 shan N. Road, Sec.1, 13,000 Travel business Service Co., Ltd Taipei city 1. Investment consulting, 2. Management consulting, 3. Informa- 12th fl ., No.11, Zhong- tion software service, 4. Data processing 5. e-information provi- Contect Digital 2008.12.29 shan N. Road, Sec.1, 7,300 sion, 6. Common advertisement service, 7. Online certifi cation, Integration Taipei city 8. Department store, 9. Store less retail 10. Other general retail business 11. Brokerage.

102 2010 Annual Report 4. Information on directors, supervisors, and presidents of afﬁ liates

base date: Dec.31, 2010; Unit: share;%

Shareholding (note 2) (note 3) Name of enterprise Title (note 1) Name or representative Shareholding(share) Stake ( %) Dah An Leasing Representative Taishin International Bank 19,800,000 99% Chairman Jeffrey Wu Director Welch Lin Director Lin, Keh-hsiao Supervisor Justin Tsai PayEasy Digital Integration Representative Taishin International Bank 28,400,001 65.36% Chairman Daniel Tsai 53,000 12% Director Steve S.F. Shieh 52,000 12% Director Lin, Keh-hsiao Director Bill Lin 320,000 74% Supervisor Welch Lin Representative Yungho Co.,Ltd. 3,767,173 8.67% Director Jeffrey Wu Director Vincent Chen 85,000 20% Representative PC Home Online 5,437,762 12.51% Director Hung Tze Jan Representative President Bill Lin 320,000 0.74% PayEasy Travel Service Representative PayEasy Digital Integration 1,300,000 100% Chairman Bill Lin Director Steve S.F. Shieh Director Daniel Tsai Director Brenda Huang Supervisor Vincent Chen President Bill Lin - - Contect Digital Integration Representative PayEasy Digital Integration 480,000 65.75% Chairman Bill Lin Director Lu Jui-lu Director Wang Yu-hsiu Supervisor Daniel Tsai Representative Director/President Li Yi-teng 127,163 17.42% Taishin Insurance Agency Co.,Ltd Representative Taishin International Bank 262,204 87.4% Chairman Spike Wu Director Shawn C.L. Teng Director Welch Lin Director Temporarily vacant Supervisor Chen Chih-li President Jack Su - - Taishin Insurance Brokers Co.,Ltd Representative Taishin Insurance Agency 6,000,000 100% Chairman Jack Su Director Welch Lin Director Spike Wu Director Steve S.F. Shieh Supervisor Jeffrey Wu President Jack Su - - Taishin Real Estate Management Representative Taishin International Bank 12,000,000 60% Chairman Chen Lung-cheng Director Thomas T.L.Wu Director Lin, Keh-hsiao Supervisor Welch Lin Representative Taishin Asset Management 8,000,000 40% Director Jeffrey Wu President Lin Min-cheng - - Note 1 : In case the affiliate is a foreign company, list position with corresponding ranking Note 2: In case the invested company is a company limited by share, please fill in the number of shares and sharehoding ratio. For others, please fill in contributed capital and ratio, with proof. Note 3: In case director or supervisor is a legal entity, disclose information on its representative.

2010 Annual Report 103 VIII. Special Notes

c. Afﬁ liate report

Statement

Taishin International Bank Statement on Afﬁ liation Report

The company’s affi liation report for fi scal 2010 ( Jan.1,2010-Dec.31, 2010) was compiled according to “Guidelines for Compilation of Consolidated Business Report, Consolidated Financial Statement, and Affi liation Report of Affi liates”, whose disclosed information has no major differences from related information disclosed in the notes of the fi nancial statement for the same period

Taishin International Bank

Thomas T.L. Wu Chief Executive Ofﬁ cer

May10, 2011

104 2010 Annual Report CPA Inspection Opinion on Afﬁ liation Report

Deloitte No.10004432 May.23, 2011

Recipient: Taishin International Bank Co., Ltd

Theme: Confirmation of the absence of major inadequacies in information contained in the 2010 afﬁ liation report of your company

1. Your company issues a statement, as attached, expressing that your affiliation report for fiscal 2010(Jan.1, 2010-Dec.31, 2010) was compiled according to “Guidelines for the Compilation of Consolidated Business Report, Consolidated Financial Statement, and Affi liation Report of Affi liates,” whose disclosed information has no major differences from related information disclosed in the notes of the fi nancial statement for the same period.

2. After comparison, the CPA find no major differences between your affiliation report for fiscal 2010, compiled according to “Guidelines for the Compilation of Consolidated Business Report, Consolidated Financial Statement, and Affi liation Report of Affi liates,” and the notes of your 2010 fi nancial statement.

CPA Yang Qinzhen

Deloitte & Touche Taiwan

2010 Annual Report 105 VIII. Special Notes

d. Relationship between subordinated and controlling company

(Base date: Dec.31,2010) Unit: share;% Director, supervisor, or manager representat- Shareholding and lien obligation of controlling company Controlling Reason ing controlling company Shares owned Share of stake Shares with lien Title Name Chairman Thomas T.L.Wu Director Hsu Te-nan Director Sherman Lee Director Kuo, Jui-Sung Director Wu, Shang-pin Own 100% of the shares with Director Wang,Tzu-Chang 4,915,752,571 100.00% - voting right issued by the bank Director Tempory vacant Independent director Wang,Chih-kang Independent director Lin, Neng-bai Standing Supervisor Tasy, Yang-Tzong Supervisor Toney Chen Supervisor Lin, Lung-shih

e. Dealing between subordinated and controlling company

1. Dealing for purchase and sale：nil 2. Property dealing：nil 3. Fund lending：nil 4. Asset leading： Unit:NT$1,000 Method of Type of deal- Target Nature of Amount Basis for rental Comparison with Collection of Other agreed ing (renting Lease Period Lease of current rental collection common rental level current rental conditions(note 2) out or renting) Name Location (note 1) rental (payment) Business Monthly Similar to common Rental out Offi ce Taipei city 2010.11.01 2012.10.31 Negotiation 2,320 normal Deposit of $618 lease collection rental level Business Monthly Similar to common Rental out Offi ce Taipei city 2010.11.01 2015.10.31 Negotiation 6,876 normal Deposit of $1,832 lease collection rental level Business Monthly Similar to common Rental out Offi ce Taipei city 2010.03.01 2013.02.29 Negotiation 16,841 normal Deposit of $4,043 lease collection rental level Business Monthly Similar to common Rental out Offi ce Taipei city 2010.05.01 2013.02.29 Negotiation 88 normal Deposit of $88 lease collection rental level Business Monthly Similar to common Rental out Offi ce Taipei city 2010.06.01 2010.12.31 Negotiation 1,849 normal Deposit of $294 lease collection rental level Business Monthly Similar to common Rental out Offi ce Taipei city 2010.05.01 2015.04.30 Negotiation 2,713 normal Deposit of $1,017 lease collection rental level Business Monthly Similar to common Rental out Offi ce Taipei city 2010.12.01 2015.04.30 Negotiation 661 normal Deposit of $1,982 lease collection rental level Business Monthly Similar to common Rental out Offi ce Taipei city 2010.11.01 2012.11.30 Negotiation 186 normal Deposit of $279 lease collection rental level Business Monthly Similar to common Rental out Offi ce Taipei city 2010.11.01 2012.10.31 Negotiation 41 normal Deposit of $62 lease collection rental level Business Monthly Similar to common Rental out Offi ce Taipei city 2010.11.01 2011.10.31 Negotiation 32 normal Deposit of $49 lease collection rental level Business Monthly Similar to common Rental out Offi ce Taipei city 2010.01.01 2012.12.31 Negotiation 396 normal Deposit of $99 lease collection rental level Taichung Business Monthly Similar to common Rental out Offi ce 2010.06.01 2015.05.31 Negotiation 656 normal Deposit of $281 city lease collection rental level Taichung Business Monthly Similar to common Rental out Offi ce 2010.07.01 2115.05.31 Negotiation 111 normal Deposit of $56 city lease collection rental level Taoyuan Business Monthly Similar to common guarantee deposits & On lease Offi ce 2010.03.011 2012.2.28 Negotiation 359 normal County lease payment rental level margins paid $60 Business Monthly Similar to common guarantee deposits & On lease Offi ce Taipei city 2010.06.01 2011.5.31 Negotiation 3,291 normal lease payment rental level margins paid $507

106 2010 Annual Report 5. Other important dealings: As of Dec.31, 2010, the bank had NT$546,304,000 of collect- ible fund for linked taxation under consolidated ﬁ nal account.

f. Mutual endorsement or guarantee between subordinated company and controlling company: nil

B. Securities issuance via private placement in the recent year and as of the date of the publication of the annual report, which entails mandatory disclosure of information on the date and amount passed by shareholders’ meeting, basis and reasonableness for price setting , method for selecting speciﬁ c subscribers, and reason for private placement

Information on Private-Placement Securities-1

Fist issuance of private placement 2006(note 1) First issuance of private placement 2007(note 1) Items Issuance date: Dec.27, 2006 Issuance date: March.30, 2007 Type of security (note 2) Common share Common share Date and amount approved by shareholder’s Dec.21, 2006 March.27, 2007 meeting (note 3) Price rationale Price to Book Value Ratio Price to Book Value Ratio Method for selection of specifi c subscriber (note 4) Parent company which 100% owns the bank Parent company which 100% owns the bank Strengthen fi nancial structure and avoid causing impact on current Strengthen fi nancial structure and avoid causing impact on current Reason for private placement shareholders, in addition to time effi ciency, simplicity and cost shareholders, in addition to time effi ciency, simplicity and cost ef- effi ciency and so on. fi ciency and so on. Deadline for subscription payment Dec.27, 2006 March 30, 2007 Partici- Partic- Relation- Relation- Qualifi - pation Qualifi - ipation Target ship Target ship cations Amount In cations Amount In (note 5) With (note 5) With (note 6) The (note 6) The bank bank Information on subscribers bank bank Item 1-1,article Parent com- Item 1-1,article Parent com- Taishin Taishin 43, Securities 305,555,555 pany which 43, Securities 500,000,000 pany which Financial Yes Financial Yes and Exchange shares 100% owns and Exchange shares 100% owns Holding Holding e Act the bank e Act the bank Actual subscription NT$ 18 per share NT$ 17 per share ( or conversion) price (note 7) Difference between actual subscription (or In the reference price range (NT$15.32-19.91) In the reference price range (NT$14.71-17.96) conversion) price and reference price (note 7) Impact on shareholders (such as increase of Increase shareholder’s equity by NT$5.5bn Increase shareholder’s equity by NT$8.5bn accumulated loss) Utilization of fund from private placement and the Implementation completed in the fourth quarter 2006 Implementation completed in the fi rst quarter 2007 implementation of the plan Manifestation of the benefi ts of private placement Increase BIS ratio by 1.32% approximately Increase BIS ratio by 2.13% approximately Note 1: The number of columns can be adjusted according the number of private placements and a private placement undertaken in several issuances should be specified respectively Note 2: Specify kinds of private-placement securities, including common shares, preferred shares, convertible preferred shares, preferred shares with share right, common financial bonds, subordinated financial bonds, convertible financial bonds, financial bonds with share right, overseas convertible financial bonds, overseas depository certifications, and employee warrants. Note 3: For private placement financial bonds which don’t need the approval of shareholder’s meeting, fill in the date of approval by the board of directors and the value of the bonds Note 4: For undergoing private-placement cases with determined subscribers, specify the name of subscribers and their relationship with the bank. Note 5: The number of columns can be adjusted according to actual need. Note 6: Fill in the legal basis for the approval of the application for fund raising. Note 7: Actual subscription (or conversion) price refers to the subscription (or conversion) price set upon the issuance of private-placement securities.

2010 Annual Report 107 VIII. Special Notes

Information on Private-Placement Securities-2

Second issuance of private placement 2007 (note 1) First issuance of private placement 2009 (note 1) Items Issuance date: March.30 , 2007 Issuance date: December.30 , 2009 Type of security （note 2） C-type preferred shares Common shares Date and amount approved by shareholder’s March.27, 2007 November 12, 2009 meeting (note 3) Price rationale Price to Book Value Ratio Price to Book Value Ratio Method for selection of specifi c subscriber (note 4) Parent company which 100% owns the bank Parent company which 100% owns the bank Strengthen fi nancial structure and avoid causing impact on Strengthen fi nancial structure and avoid causing impact on current sharehold- Reason for private placement current shareholders, in addition to time effi ciency, simplicity and ers, in addition to time effi ciency, simplicity and cost effi ciency and so on. cost effi ciency and so on. Deadline for subscription payment March.30 ,2007 December, 30, 2009 Partici- Partici- Relation- Relation- Qualifi - pation Qualifi - pation Target ship Target ship cations Amount In cations Amount In (note 5) With (note 5) With (note 6) The (note 6) The bank bank bank bank Information on subscribers Item Parent Taishin Item 1-1,article Parent company Taishin 1-1,article 43, company Finan- 188,235,294 740,740,740 43, Securities and which 100% owns Yes Financial Securities which 100% Yes cial shares shares Exchang e Act the bank Holding and Exchang owns the Holding e Act bank Actual subscription( or conversion) price (note 7) NT$17 per share NT$ 13.5 per share Difference between actual subscription (or conver- In the reference price range (NT$14.71-17.96) Lower the reference price by NT$0.12 sion) price and reference price (note 7) Impact on shareholders (such as increase of ac- Increase shareholder’s equity by NT$3.2bn Increase shareholder’s equity by NT$10bn cumulated loss) Utiliztion of fund from private placement and the Implementation completed in the frist quarter 2007 Implementation completed in the fourth quarter 2009 implementation of the plan Manifestation of the benefi ts of private placement Increase BIS ratio by 0.8% approximately Increase BIS ratio by 1.76% approximately Note 1: The number of columns can be adjusted according the number of private placements and a private placement undertaken in several issuances should be specified respectively Note 2: Specify kinds of private-placement securities, including common shares, preferred shares, convertible preferred shares, preferred shares with share right, common financial bonds, subordinated financial bonds, convertible financial bonds, financial bonds with share right, overseas convertible financial bonds, overseas depository certifications, and employee warrants. Note 3. For private placement financial bonds which don’t need the approval of shareholder’s meeting, fill in the date of approval by the board of directors and the value of the bonds Note 4: For undergoing private-placement cases with determined subscribers, specify the name of subscribers and their relationship with the bank. Note 5: The number of columns can be adjusted according to actual need. Note 6: Fill in the legal basis for the approval of the application for fund raising. Note 7: Actual subscription (or conversion) price refers to the subscription (or conversion) price set upon the issuance of private-placement securities.

C. Holding or dispoal of the bank’s shares by subsidiaries in the recent year and as of the date of the publication of the annual report: Nil

D. Other necessary supplementary explanation: Nil

108 2010 Annual Report IX. Directory of Head Ofﬁce & Branches

Greater Taipei Area Business units Address Telephone Tienmou Branch 1F.2F No.88, Sec.6 ,Jhongshan N. Rd., Jhongshan District, Taipei City104, Taiwan (R.O.C.) (02) 2836-3988 Yanping Branch No.202, Sec. 2, Yanping N. Rd., Datong District, Taipei City 103, Taiwan (R.O.C.) (02) 2557-9155 Dunnan Branch No.118, Sec. 4, Ren-ai Rd., Da-an District, Taipei City 106, Taiwan (R.O.C.) (02) 2326-8899 Heping Branch No.238, Sec. 1, Heping E. Rd., Da-an District, Taipei City 106, Taiwan (R.O.C.) (02) 2368-5589 Peishih Branch No.347,Sec.2,HepingE.Rd.,Da-anDistrict,TaipeiCity106,Taiwan(R.O.C.) (02) 2705-8588 Jhongsiao Branch 1F., No.282, Sec. 4, Jhongsiao E. Rd., Da-an District, Taipei City 106, Taiwan (R.O.C.) (02) 6636-9999 Da-an Branch No.118, Sec. 3, Sinyi Rd., Da-an District, Taipei City 106, Taiwan (R.O.C.) (02) 2700-9388 Sinyi Branch No.89, Leli Rd., Da-an District, Taipei City 106, Taiwan (R.O.C.) (02) 2739-3988 Head Ofﬁce & Business No.44, Sec. 2, Jhongshan N. Rd., Jhongshan District, Taipei City 104, Taiwan (R.O.C.) (02) 2568-3988 Department Trust Department 5F.6F.13F., No.118, Sec. 4, Ren-ai Rd., Da-an District, Taipei City 106, Taiwan (R.O.C.) (02) 2326-8899 Dazhi Branch No.645, Bei-an Rd., Jhongshan District, Taipei City 104, Taiwan (R.O.C.) (02) 8509-6858 Jianciao Branch 1F, B1., No.150, Sec. 2, Nanjing E. Rd., Songshan District, Taipei City 105, Taiwan (R.O.C.) (02) 2508-1899 International Department 2F., No.17, Sec. 2, Jianguo N. Rd., Jhongshan District, Taipei City 104, Taiwan (R.O.C.) (02) 2505-6966 Offshore Banking Unit 2F., No.17, Sec. 2, Jianguo N. Rd., Jhongshan District, Taipei City 104, Taiwan (R.O.C.) (02) 2505-6966 Jianpei Branch 1F.3F.B1., No.17, Sec. 2, Jianguo N. Rd., Jhongshan District, Taipei City 104, Taiwan (R.O.C.) (02) 2505-6966 Fusing Branch No.150, Fusing N. Rd., Jhongshan District, Taipei City 104, Taiwan (R.O.C.) (02) 2713-7666 Nanmen Branch No.55, Sec. 1, Nanchang Rd., Jhongjheng District, Taipei City 100, Taiwan (R.O.C.) (02) 2397-2588 Simen Branch No.57, Sec. 1, Chongcing S. Rd., Jhongjheng District, Taipei City 100, Taiwan (R.O.C.) (02) 2371-7878 Sinsheng Branch No.62, Sec. 1, Sinsheng S. Rd., Jhongjheng District, Taipei City 100, Taiwan (R.O.C.) (02) 2395-2888 Kuting Branch No.28, Sec. 3, Roosevelt Rd., Jhongjheng District, Taipei City 100, Taiwan (R.O.C.) (02) 2364-6888 Neihu Branch No.358, Sec. 1, Neihu Rd., Neihu District, Taipei City 114, Taiwan (R.O.C.) (02) 2659-9966 Shihpai Branch No.49,51, Sec. 2, Shihpai Rd., Beitou District, Taipei City 112, Taiwan (R.O.C.) (02) 5581-5052 Taipei Branch No.208,210, Sec. 3, Bade Rd., Songshan District, Taipei City 105, Taiwan (R.O.C.) (02) 2579-8989 Dunbei Branch No.133, Sec. 3, Minsheng E. Rd., Songshan District, Taipei City 105, Taiwan (R.O.C.) (02) 2712-6666 Nantung Branch No.289, Sec. 3, Nanjing E. Rd., Songshan District, Taipei City 105, Taiwan (R.O.C.) (02) 2546-1068 South Songshan Branch No.92, Sec. 5, Nanjing E. Rd., Songshan District, Taipei City 105, Taiwan (R.O.C.) (02) 2528-6188 Minsheng Branch No.510, Fujin St., Songshan District, Taipei City 105, Taiwan (R.O.C.) (02) 8787-2680 Songde Branch No.493, Songshan Rd., Sinyi District, Taipei City 110, Taiwan (R.O.C.) (02) 2726-1688 Keelung Rd. Branch No.55, Sec. 2, Keelung Rd., Sinyi District, Taipei City 110, Taiwan (R.O.C.) (02) 2735-2567 Sanhe Branch No.183, Sec. 4, Sanhe Rd., Sanchong Dist., New Taipei City 241, Taiwan (R.O.C.) (02) 2287-7979 Sanchong Branch No.116, Jhengyi N. Rd., Sanchong Dist., New Taipei City 241, Taiwan (R.O.C.) (02) 2983-6100 Jingping Branch No.634-9, Jingping Rd., Jhonghe Dist., New Taipei City 235, Taiwan (R.O.C.) (02) 2242-8989 Jhonghe Branch No.341, Jhonghe Rd., Yonghe Dist., New Taipei City 234, Taiwan (R.O.C.) (02) 2232-7788 Yonghe Branch No.197, Jhulin Rd., Yonghe Dist., New Taipei City 234, Taiwan (R.O.C.) (02) 8928-0588 Sijhih Branch No.135, Jhongsing Rd., Sijhih Dist., New Taipei City 221, Taiwan (R.O.C.) (02) 2694-5133 Banciao Branch No.176, Jhongjheng Rd., Banciao Dist., New Taipei City 220, Taiwan (R.O.C.) (02) 2965-8888 Chiangtsui Branch No.79, Alley 3, Lane 182, Sec. 2, Wunhua Rd., Banciao Dist., New Taipei City 220, (R.O.C.) (02) 8252-9999 Bannan Branch No.41,43, Guancian E. Rd., Banciao Dist., New Taipei City 220, Taiwan (R.O.C.) (02) 2956-6789 Sindian Branch No.114,JianguoRd.,&No.66, Minzu Rd., Sindian Dist., New Taipei City 231, Taiwan (R.O. (02) 2915-7766 Sinjhuang Branch No.75, Sec. 2, Jhonghua Rd., Sinjhuang Dist., New Taipei City 242, Taiwan (R.O.C.) (02) 2998-0888 South Sinjhuang Branch No.58, Fuguo Rd., Sinjhuang Dist., New Taipei City 242, Taiwan (R.O.C.) (02) 2906-8868 Lujhou Branch No.265, Minzu Rd., Lujhou Dist., New Taipei City 247, Taiwan (R.O.C.) (02) 2848-5858 Danshui Branch No.76, Zhongshan Rd., Danshui Dist., New Taipei City 251, Taiwan (R.O.C.) (02) 2626-8689 Xinban Branch 1F.2F., No.98,102, Sec. 2, Xianmin Blvd., Banqiao Dist., New Taipei City 220, Taiwan (R. (02) 2957-1858

East Keelung Branch No.133-1, Sin 1st Rd., Jhongjheng District, Keelung City 202, Taiwan (R.O.C.) (02) 2424-9999

2010 Annual Report 109 IX. Directory of Head Ofﬁce & Branches

Taoyuan, Hsinchu, Miaoli Area Business units Address Telephone Nanli Branch No.369, Jhongfong Rd., Jhongli City, Taoyuan County 320, Taiwan (R.O.C.) (03) 427-3377

Jhongli Branch No.366, Yanping Rd., Jhongli City, Taoyuan County 320, Taiwan (R.O.C.) (03) 427-2345

Taoyuan Branch No.205, Fusing Rd., Taoyuan City, Taoyuan County 330, Taiwan (R.O.C.) (03) 339-6000

Sianfu Branch No.116, Sianfu Rd., Taoyuan City, Taoyuan County 330, Taiwan (R.O.C.) (03) 335-1955

Longtan Branch No.176, Jhongjheng Rd., Longtan Township, Taoyuan County 325, Taiwan (R.O.C.) (03) 499-3800

Bade Branch No.991,993, Sec. 1, Jieshou Rd., Bade City, Taoyuan County 334, Taiwan (R.O.C.) (03) 362-6668

Beida Branch No.457, Beida Rd., Hsinchu City 300, Taiwan (R.O.C.) (03) 521-8181

Minzu Branch No.196, Minzu Rd., Hsinchu City 300, Taiwan (03) 532-3171

Guandong Ciao Branch No.271, Sec. 1, Guangfu Rd.,Hsinchu City 300, Taiwan (R.O.C.) (03) 577-9292

Chuke Branch No.289, Sec. 2, Guangfu Rd., Hsinchu City 300, Taiwan (R.O.C.) (03) 516-3123

Hsinchu Branch No.83, Sec. 2, Dongda Rd., Hsinchu City 300, Taiwan (R.O.C.) (03) 535-1546

Nanliao Branch No.543, Sec. 3, Dongda Rd., Hsinchu City 300, Taiwan (R.O.C.) (03) 536-2611

Dongmen Branch No.129, Dongmen St., Hsinchu City 300, Taiwan (R.O.C.) (03) 523-4141

Jhubei Branch No.331, Jhongjheng E. Rd., Jhubei City, Hsinchu County 302, Taiwan (R.O.C.) (03) 551-8383

Toufen Branch No.41, Zihciang Rd., Toufen Township, Miaoli County 351, Taiwan (R.O.C.) (037) 696-188

Greater Taichung Area Business units Address Telephone

Wunsin Branch No.447, Sec. 3, Wunsin Rd., Beitun District, Taichung City 406, Taiwan (R.O.C.) (04) 2294-6888

North Taichung Branch No.55, Sec. 2, Chongde Rd., Beitun District, Taichung City 406, Taiwan (R.O.C.) (04) 2232-6886

Taichung Branch No.308, Sec. 1, Taichung Port Rd., North District, Taichung City 404, Taiwan (R.O.C.) (04) 2328-5577

Mincyuan Branch No.559, Mincyuan Rd., North District, Taichung City 404, Taiwan (R.O.C.) (04) 2205-1888

Fengchia Branch No.258, Sec. 2, Henan Rd., Situn District, Taichung City 407, Taiwan (R.O.C.) (04) 2451-7890

West Taichung Branch No.711, Dadun Rd., Situn District, Taichung City 407, Taiwan (R.O.C.) (04) 2327-4567

Nantun Branch No.187, Sec. 2, Dongsing Rd., Nantun District, Taichung City 408, Taiwan (R.O.C.) (04) 2472-0788

Dali Branch No.127, Sec. 2, Jhongsing Rd., Dali City, Taichung County 412, Taiwan (R.O.C.) (04) 2483-4088

Daya Branch No.198, Sec. 2, Jhongcing Rd., Daya Township, Taichung County 428, Taiwan (R.O.C.) (04) 2565-2299

Taiping Branch No.511, Yichang Rd., Taiping City, Taichung County 411, Taiwan (R.O.C.) (04) 2273-0588

Shalu Branch No.201-1, Jhongshan Rd., Shalu Township, Taichung County 433, Taiwan (R.O.C.) (04) 2665-6699

Fongyuan Branch No.129, Yuanhuan S. Rd., Fongyuan City, Taichung County 420, Taiwan (R.O.C.) (04) 2525-7999

Yuanlin Branch No.28, Yuying Rd., Yuanlin Township, Changhua County 510, Taiwan (R.O.C.) (04) 839-7899

Changhua Branch No.273, Sec. 1, Jhongjheng Rd., Changhua City, Changhua County 500, Taiwan (R.O.C.) (04) 722-7789

110 2010 Annual Report Chiayi-Tainan Area Business units Address Telephone

Fucheng Branch 1F., No.88, Jhongshan Rd., West Central District, Tainan City 700, Taiwan (R.O.C.) (06) 228-4400

Yongfu Branch No.150, Sec. 2, Yongfu Rd., West Central District, Tainan City 700, Taiwan (R.O.C.) (06) 220-4622

Tainan Branch No.389, Sec. 2, Simen Rd., West Central District, Tainan City 700, Taiwan (R.O.C.) (06) 223-3383

Haidian Branch No.130, Sec. 1, Haidian Rd., Annan District, Tainan City 709, Taiwan (R.O.C.) (06) 258-5015

Chongde Branch No.260, Chongde Rd., East District, Tainan City 701, Taiwan (R.O.C.) (06) 290-6901

Houchia Branch No.660, Yunong Rd., East District, Tainan City 701, Taiwan (R.O.C.) (06) 268-7412

Jinhua Branch No.195, Sec. 2, Jinhua Rd., South District, Tainan City 702, Taiwan (R.O.C.) (06) 263-9121

Yongkang Branch No.986, Jhonghua Rd., Yongkang City, Tainan County 710, Taiwan (R.O.C.) (06) 242-5788

Jiali Branch No.288-1, Yanping Rd., Jiali Township, Tainan County 722, Taiwan (R.O.C.) (06) 722-6655

Chiayi Branch No.620, Chueiyang Rd., Chiayi City 600, Taiwan (R.O.C.) (05) 222-2818

Kaohsiung-Pingtung Area Business units Address Telephone Kaohsiung Branch No.98, Jhonghua 3rd Rd., Cianjin District, Kaohsiung City 801, Taiwan (R.O.C.) (07) 282-4300

East Kaohsiung Branch No.309,311, Jiansing Rd., Sanmin District, Kaohsiung City 807, Taiwan (R.O.C.) (07) 380-1500

North Kaohsiung Branch No.360, Bo-ai 2nd Rd., Zuoying District, Kaohsiung City 813, Taiwan (R.O.C.) (07) 550-9900

Linya Branch No.260, Jhongshan 2nd Rd., Cianjhen District, Kaohsiung City 806, Taiwan (R.O.C.) (07) 537-5537

Cisian Branch No.386, Cisian 1st Rd., Sinsing District, Kaohsiung City 800, Taiwan (R.O.C.) (07) 238-8545

Wufu Branch No.116, Wufu 2nd Rd., Sinsing District, Kaohsiung City 800, Taiwan (R.O.C.) (07) 216-8855

Youchang Branch No.750, Houchang Rd., Nanzih District, Kaohsiung City 811, Taiwan (R.O.C.) (07) 365-2200

Gangshan Branch No.95, Weiren Rd., Gangshan Township, Kaohsiung County 820, Taiwan (R.O.C.) (07) 621-9677

Fongshan Branch No.105, Jhongshan W. Rd., Fongshan City, Kaohsiung County 830, Taiwan (R.O.C.) (07) 719-9999

Wujia Branch No.9, Wujia 3rd Rd., Fongshan City, Kaohsiung County 830, Taiwan (R.O.C.) (07) 813-1168

Donggang Branch No.135, Jhongjheng Rd., Donggang Township, Pingtung County 928, Taiwan (R.O.C.) (08) 833-1788

Nanping Branch No.75-2, 75-3, Ren-ai Rd., Pingtung City, Pingtung County 900, Taiwan (R.O.C.) (08) 733-7575

Pingtung Branch No.103, Guangdong Rd., Pingtung City, Pingtung County 900, Taiwan (R.O.C.) (08) 721-7777

Hualien-Taitung Area Business units Address Telephone Luodong Branch No.153, Gongjheng Rd., Luodong Township, Yilan County 265, Taiwan (R.O.C.) (03) 9533366

Hualien Branch No.183, Jhongjheng Rd., Hualien City, Hualien County 970, Taiwan (R.O.C.) (03) 834-5930

Overseas Business Ofﬁ ces

Overseas units Business units Address Telephone Hong Kong Branch 6/F, Sun Life Tower, The Gateway, 15 Canton Road, Tsimsbatsui, Kowloon, Hong Kong 852-22349009

HO CHI MINH CITY R.O. Osic Building 7Fl., No.8 , Nguyen Hue Street, District 1, Ho Chi Minh CityVietnam 84-8-38228375

2010 Annual Report 111 X. Notes To Financial Statements

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders Taishin International Bank Co., Ltd.

We have audited the accompanying balance sheets of Taishin International Bank Co., Ltd. (“Taishin Bank,” a subsidiary of Taishin Financial Holding Co., Ltd.) as of December 31, 2010 and 2009, and the related statements of income, changes in stockholders’ equity, and cash fl ows for the years then ended. These fi nancial statements are the responsibility of Taishin Bank’s management. Our responsibility is to express an opinion on these fi nancial statements based on our audits.

We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements of Financial Institutions by Certified Public Accountants and auditing standards generally accepted in the Republic of China (“ROC”). Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by management, as well as evaluating the overall fi nancial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of Taishin International Bank Co., Ltd. as of December 31, 2010 and 2009, and the results of its operations and its cash ﬂ ows for the years then ended, in conformity with the Regulations Governing the Preparation of Financial Reports by Public Banks, requirements of the Business Accounting Law and Guidelines Governing Business Accounting relevant to ﬁ nancial accounting standards, and accounting principles generally accepted in the ROC.

We have also audited Taishin Bank’s separately prepared consolidated financial statements for the years ended December 31, 2010 and 2009, on which we have issued an unqualiﬁ ed opinion in our report dated March 14, 2011.

March 14, 2011 Notice to Readers

The accompanying fi nancial statements are intended only to present the fi nancial position, results of operations and cash fl ows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such fi nancial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the auditors’ report and the accompanying fi nancial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any confl ict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language auditors’ report and fi nancial statements shall prevail.

112 2010 Annual Report TAISHIN INTERNATIONAL BANK CO., LTD. BALANCE SHEETS

DECEMBER 31, 2010 AND 2009 (In Thousands of New Taiwan Dollars)

Percentage 2010 2009 Increase (Decrease) ASSETS Amount Amount % Cash and cash equivalents (Note 3) $ 12,903,066 $ 8,136,786 59 Due from the Central Bank and call loans to other banks (Notes 4 and 30) 37,236,653 128,379,060 (71) Financial assets at fair value through proﬁ t or loss (Notes 2, 5 and 30) 22,263,352 24,907,554 (11)

Bonds and securities purchased under resell agreements (Note 2) 2,992,554 2,420,000 24

Receivables, net (Notes 2, 6 and 7) 96,256,074 84,838,866 13 Loans, net (Notes 2, 7 and 30) 531,674,018 495,583,668 7 Available-for-sale fi nancial assets (Notes 2, 8 and 24) 172,426,842 36,484,764 373 Held-to-maturity fi nancial assets (Notes 2 and 9) 3,312,094 6,214,140 (47) Investments accounted for by the equity method, net (Notes 2, 10 and 24) 1,861,285 1,281,667 45 OTHER FINANCIAL ASSETS, NET Financial assets carried at cost (Notes 2 and 11) 2,428,175 2,407,505 1 Other miscellaneous fi nancial assets (Notes 2, 7 and 12) 513,435 465,534 10 Other fi nancial assets, net 2,941,610 2,873,039 2

PROPERTY AND EQUIPMENT (Notes 2 and 13) Cost Land 10,390,248 10,390,248 - Buildings 8,482,951 8,472,209 - Machinery equipment 4,047,689 4,087,565 (1) Transportation equipment 295,246 292,417 1 Miscellaneous equipment 539,394 540,090 - Leased assets 337,017 974,368 (65) 24,092,545 24,756,897 (3) Accumulated depreciation (6,734,820) (6,891,017) (2) 17,357,725 17,865,880 (3) Prepayments for buildings and equipment 46,846 32,216 45 Property and equipment, net 17,404,571 17,898,096 (3)

GOODWILL AND INTANGIBLE ASSETS (Notes 2 and 14) 2,077,535 1,605,915 29 OTHER ASSETS Prepayments (Notes 2 and 25) 430,230 500,190 (14) Refundable deposits 1,062,541 13,089,457 (92) Deferred income tax assets (Notes 2 and 28) 6,217,789 8,424,753 (26) Other miscellaneous assets (Notes 2 and 15) 86,200 119,689 (28) Other assets, net 7,796,760 22,134,089 (65)

TOTAL $ 911,146,414 $ 832,757,644 9

2010 Annual Report 113 X. Notes To Financial Statements

Percentage 2010 2009 Increase (Decrease) LIABILITIES AND STOCKHOLDERS’ EQUITY Amount Amount %

LIABILITIES Due to banks and Central Bank (Notes 16 and 30) $ 56,332,391 $ 54,181,462 4 Financial liabilities at fair value through proﬁ t or loss (Notes 2, 5 and 30) 15,911,230 16,990,037 (6) Bonds and securities sold under repurchase agreements (Notes 2 and 30) 17,040,348 7,239,422 135 Payables (Notes 2 and 17 ) 21,106,394 18,956,708 11 Deposits (Notes 18 and 30) 713,580,371 654,664,982 9 Bank debentures (Note 19) 25,000,000 25,000,000 - Other ﬁ nancial liabilities 113,796 151,200 (25) Other liabilities (Notes 7 and 20) 1,368,999 2,140,457 (36)

Total liabilities 850,453,529 779,324,268 9

STOCKHOLDERS' EQUITY Capital stock (Note 21) Common stock-issued and outstanding 47,275,173 47,275,173 - Preferred stock-issued and outstanding 1,882,353 1,882,353 - Capital surplus Additional paid-in capital 3,189,162 3,189,162 - Other capital surplus (Notes 2 and 22) 24,400 4,411 453 Retained earnings (Note 23) Legal reserve 283,230 - - Unappropriated earnings 7,876,412 944,099 734 Cumulative translation adjustments (Note 2) (519) (57) 811

Unrealized gain (loss) on ﬁ nancial instruments (Notes 2 and 24) 162,674 138,235 18

Total stockholders' equity 60,692,885 53,433,376 14

TOTAL $ 911,146,414 $ 832,757,644 9 The accompanying notes are an integral part of the financial statements.

114 2010 Annual Report TAISHIN INTERNATIONAL BANK CO., LTD. STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2010 AND 2009 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Percentage 2010 2009 Increase (Decrease) Amount Amount %

INTEREST INCOME (Note 2) $ 16,512,086 $ 17,604,688 (6) INTEREST EXPENSE (4,825,888) (7,602,540) (37) NET INTEREST INCOME 11,686,198 10,002,148 17 NET INCOME AND GAINS (LOSSES) OTHER THAN INTEREST INCOME Fee income, net (Notes 2 and 26) 6,556,747 5,626,732 17 Gain on fi nancial assets and liabilities at fair value through profi t or loss (Notes 1,167,116 1,936,861 (40) 2 and 5) Realized gain on available-for-sale fi nancial assets 58,741 35,991 63 (Note 2) Investment income recognized under the equity method (Notes 2 and 10) 453,641 55,369 719 Exchange gain, net (Note 2) 396,418 684,237 (42) Other non-interest net income and gains (losses) Gain (loss) on fi nancial assets carried at cost -53,243 (100) Gain on collection of nonperforming loans (Notes 2 and 7) 3,118,331 2,473,111 26 Provision for other losses (Note 20) -(2,000,000) 100 Other miscellaneous net income (Note 2) 721,227 337,315 114 GROSS INCOME 24,158,419 19,205,007 26 PROVISION FOR LOAN LOSSES (Notes 2 and 7) (1,204,821) (4,265,429) (72) OPERATING EXPENSES (Note 27) Personnel expenses (6,493,661) (6,102,396) 6 Depreciation and amortization (1,160,043) (1,284,373) (10) Others (4,565,769) (4,089,653) 12 Total operating expenses (12,219,473) (11,476,422) 6 INCOME BEFORE INCOME TAX 10,734,125 3,463,156 210 INCOME TAX EXPENSE (Notes 2 and 28) (2,857,713) (2,641,877) 8 INCOME BEFORE EXTRAORDINARY GAIN 7,876,412 821,279 859 EXTRAORDINARY GAIN (NET OF INCOME TAX EXPENSE OF $40,940 - 122,820 (100) THOUSAND) (Notes 2 and 10) NET INCOME $ 7,876,412 $ 944,099 734

2010 2009 Pretax After-tax Pretax After-tax

BASIC EARNINGS PER SHARE (Note 29) Income before extraordinary gain $ 2.25 $ 1.64 $ 0.84 $ 0.18 Extraordinary gain - - 0.04 0.03 Net income $ 2.25 $ 1.64 $ 0.88 $ 0.21

DILUTED EARNINGS PER SHARE (Note 29) Income before extraordinary gain $ 2.18 $ 1.60 $ 0.84 $ 0.18 Extraordinary gain - - 0.04 0.03 Net income $ 2.18 $ 1.60 $ 0.88 $ 0.21 The accompanying notes are an integral part of the financial statements. (Concluded)

2010 Annual Report 115 X. Notes To Financial Statements

TAISHIN INTERNATIONAL BANK CO., LTD. STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

YEARS ENDED DECEMBER 31, 2010 AND 2009 (In Thousands of New Taiwan Dollars) Issued and Outstanding Capital Surplus Capital Stock

Additional Other Capital Common Stock Preferred Stock Paid-in Capital Surplus

BALANCE, JANUARY 1, 2009 $ 39,867,765 $ 1,882,353 $ 3,806,630 $ -

Offset of accumulated deﬁ cit against Legal reserve - - - - Capital surplus - - (3,210,060) - Special reserve - - - -

Cumulative translation adjustments - - - -

Changes in ownership of investments accounted for by - - - the equity method 4,411

Unrealized gain on available-for-sale ﬁ nancial assets - - - -

Capital infusion with cash (December 30, 2009) 7,407,408 - 2,592,592 -

Net income for the year ended December 31, 2009 - - - -

BALANCE, DECEMBER 31, 2009 47,275,173 1,882,353 3,189,162 4,411

Appropriation of the 2009 earnings Legal reserve - - - - Preferred cash dividends - - - - Cash dividends - - - -

Employee stock-based compensation - - - 19,989

Cumulative translation adjustments - - - -

Unrealized gain on available-for-sale ﬁ nancial assets - - - -

Net income for the year ended December 31, 2010 - - - -

BALANCE, DECEMBER 31, 2010 $ 47,275,173 $ 1,882,353 $ 3,189,162 $ 24,400

The accompanying notes are an integral part of the financial statements.

116 2010 Annual Report Retained Earnings

Unrealized Unappropriated Cumulative Gain (Loss) on Legal Reserve Special Reserve Earnings Translation Total Financial (AccumulatedDeﬁ cit) Adjustments Instruments

$ 812,832 $ 75,313 $ (4,098,205) $ (39) $ (481,283) $ 41,865,366

(812,832) -812,832 - - - - -3,210,060 - - - -(75,313) 75,313 - - -

- - - (18) - (18)

- - - - - 4,411

- - - - 619,518 619,518

- - - - -10,000,000

- - 944,099 - - 944,099

- -944,099 (57) 138,235 53,433,376

283,230 -(283,230) - - - - -(120,000) - - (120,000) - - (540,869) - - (540,869)

- - - - - 19,989

- - - (462) -(462)

- - - - 24,439 24,439

- - 7,876,412 - - 7,876,412

$ 283,230 $ - $ 7,876,412 $ (519) $ 162,674 $ 60,692,885

2010 Annual Report 117 X. Notes To Financial Statements

TAISHIN INTERNATIONAL BANK CO., LTD. STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2010 AND 2009 (In Thousands of New Taiwan Dollars)

2010 2009

CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 7,876,412 $ 944,099 Extraordinary gain -(163,760) Provision for loan loss 1,193,310 4,265,429 Provision for guarantees 11,511 - Compensation cost of employee stock options 19,498 - Provision reversal for other loss 4,623 (14,602) Provision for other losses -2,000,000 Recovery of loans written off 199,142 562,369 Depreciation and amortization 1,160,043 1,284,373 Valuation loss on fi nancial instruments 336,639 118,167 Amortization of premium or discount on investment in bonds 143,994 97,698 Provision for impairment loss on assumed collaterals and residuals (182) 129,996 Loss on disposal of investment (51,526) (89,609) Investment income recognized under the equity method, net (453,641) (55,369) Cash dividends received from equity-method investees 49,077 148,991 Deferred income tax benefi t 2,595,433 2,475,909 Others 3,430 (2,138) Net changes in operating assets and liabilities Financial assets held for trading 2,307,563 20,834,141 Accounts receivable (7,810,992) (3,961,291) Other fi nancial assets (826,763) (936,454) Other assets - others 13,824,829 (2,902,503) Financial liabilities held for trading (1,078,807) (20,858,603) Accounts payable 1,444,749 (3,314,772) Other fi nancial liabilities -(3,485) Other liabilities (761,497) (656,592)

Net cash provided by (used in) operating activities 20,186,845 (98,006)

CASH FLOWS FROM INVESTING ACTIVITIES Decrease in due from the Central Bank and call loans to other banks 91,142,407 1,185,891 Increase in bonds and securities purchased under resell agreements (572,554) (2,420,000) (Increase) decrease in loans (including delinquent loans) (36,869,699) 14,790,654 Acquisition of available-for-sale fi nancial assets (966,936,896) (31,207,604) Proceeds from disposal of available-for-sale fi nancial assets 829,557,950 18,259,776 Proceeds from capital reduction of fi nancial assets carried at cost 24,520 26,073 Proceeds from disposal of fi nancial assets carried at cost - 276,854 Acquisition of held-to-maturity fi nancial assets - (2,477,951) Proceeds from redemption of held-to-maturity fi nancial assets 2,518,601 4,190,878 Acquisition of investments accounted for by the equity method -(1,110) Proceeds from disposal of investments accounted for by the equity method -60,734 Acquisition of property and equipment (337,451) (1,909,934) (Continued)

118 2010 Annual Report TAISHIN INTERNATIONAL BANK CO., LTD. STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2010 AND 2009 (In Thousands of New Taiwan Dollars)

2010 2009

Proceeds from disposal of property and equipment $ 251 $ 249,846 Net payment for acquiring Chinfon credit card department (4,090,570) -

Net cash (used in) provided by investing activities (85,563,441) 1,024,107

CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in due to the Central Bank and other banks 2,150,929 (18,544,519) Increase in deposits 58,915,389 21,010,350 Decrease in guarantee deposits received (26,095) (100,265) Increase (decrease) in bonds and securities sold under repurchase agreements 9,800,926 (4,541,113) Capital infusion with cash -10,000,000 Cash dividends distributed (660,869) - Repayment of bank debentures (10,000,000) (11,100,000) Issue of bank debentures 10,000,000 - Others (37,404) (12,600)

Net cash provided by (used in) ﬁ nancing activities 70,142,876 (3,288,147)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,766,280 (2,362,046)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 8,136,786 10,498,832

CASH AND CASH EQUIVALENTS, END OF YEAR $ 12,903,066 $ 8,136,786

SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 4,624,152 $ 10,022,555 Income tax paid $ 144,507 $ 174,265

Taishin Bank acquired the credit card department of Chinfon Bank during the year ended December 31, 2010.The fair values of the assets and liabilities acquired were as follows:

Cash $ 7,430 Receivables 3,615,883 Other ﬁ nancial assets 47,202 Property and equipment 11,111 Intangible assets 672,969 Other assets 59,873 Payables (316,468) Total cost of acquisition 4,098,000 Less: Balance of cash (7,430) Net payment for the acquisition $ 4,090,570 The accompanying notes are an integral part of the financial statements.(Concluded)

2010 Annual Report 119 X. Notes To Financial Statements

TAISHIN INTERNATIONAL BANK CO., LTD. NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2010 AND 2009 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. ORGANIZATION AND OPERATIONS

Taishin International Bank Co., Ltd. (“Taishin Bank”) began preparations for its establishment as a commercial bank on October 4, 1990 and started its business operations on March 23, 1992. Taishin Bank provides customers with (a) general commercial banking services - commercial lending, foreign exchange transactions, installments and term loans, wire transfers, marketable security investments, receivable factoring, offshore banking business, etc.; and (b) various ﬁ nancial instruments - letters of credit, bankers’ acceptances, checking and savings accounts, credit cards, derivative instruments, etc.

As of December 31, 2010 and 2009, Taishin Bank had 6,236 and 5,854 employees, respectively.

Taishin Bank and Dah An Commercial Bank Co., Ltd. (“Dah An Bank”) decided to establish Taishin Financial Holding Co., Ltd. (“Taishin Financial Holding”) through a share swap, effective on February 18, 2002, with Taishin Bank as the survivor company.

For above merger, Taishin Bank issued new shares to acquire the total assets and liabilities of Dah An Bank. Total net assets acquired amounted to $5,682,428 thousand. The fair value of the new shares issued by Taishin Bank was $9,475,018 thousand, exceeding the net assets of Dah An Bank by $3,792,590 thousand. This excess was recognized as goodwill.

The parent company of Taishin Bank is Taishin Financial Holding, which had a 100% equity interest in Taishin Bank as of December 31, 2010 and 2009. In order to integrate corporate resources and enhance operation efﬁ ciency, Taishin Financial Holding plans to reorganize, including the acquisition plan of Taishin Bills Finance by Taishin Bank.

On October 14, 2010, on behalf of stockholders, the board of director of Taishin Bank acknowledged the merger with Taishin Bills Finance and Taishin Bank is the survivor company. The merger contract has been approved by the Financial Supervisory Commission (FSC) on December 31, 2010, and the base date of merger was January 21, 2011. The merger price would be the net equity value of Taishin Bills Finance on the base date of merger and will be paid in cash by Taishin Bank to acquire total assets, liabilities and operation of Taishin Bills Finance.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared in conformity with the Regulations Governing the Preparation of Financial Reports by Public Banks, Business Accounting Law, Guidelines Governing Business Accounting,

120 2010 Annual Report and accounting principles generally accepted in the Republic of China (ROC). Under these regulations, law and principles, certain estimates and assumptions have been used for the valuation of ﬁ nancial instruments, allowance for loan loss, depreciation of property and equipment, pension cost, tax expense or beneﬁ t, asset impairment, reserve for losses or guarantees, bonuses to employees, directors and supervisors, etc. Actual results may differ from these estimates.

Because of bank’s business characteristics, the assets and liabilities of Taishin Bank are classiﬁ ed according to their nature and in the sequence of liquidity rather than as current or noncurrent. The maturity analysis of assets and liabilities is shown in Note 33.

For readers’ convenience, the accompanying ﬁ nancial statements have been translated into English from the original Chinese version prepared and used in the ROC. If inconsistencies arise between the English version and the Chinese version or if differences arise in the interpretation between the two versions, the Chinese version of the ﬁ nancial statements shall prevail.

Signiﬁ cant accounting policies are summarized as follows:

Financial Assets and Liabilities at Fair Value through Proﬁ t or Loss

Financial instruments classified as financial assets or financial liabilities at fair value through profit or loss (FVTPL) include fi nancial assets or fi nancial liabilities held for trading and those designated as at FVTPL on initial recognition. Taishin Bank recognizes a fi nancial asset or a fi nancial liability on its balance sheet when it becomes a party to a fi nancial instrument contract. A fi nancial asset is derecognized when Taishin Bank has lost control of its contractual rights over the fi nancial instrument. A fi nancial liability is derecognized when the obligation specifi ed in the relevant contract is discharged or canceled or expired.

Financial instruments at FVTPL are initially measured at fair value plus transaction cost. At each balance sheet date subsequent to initial recognition, fi nancial assets or fi nancial liabilities at FVTPL are remeasured at fair value, with changes in fair value recognized directly in profit or loss in the year in which they arise. Cash dividends received subsequently (including those received in the year of investment) are recognized as income for the year. On derecognition of a financial asset or a financial liability, the difference between its carrying amount and the sum of the consideration received and receivable or consideration paid and payable is recognized in profi t or loss. Regular way purchases or sales of fi nancial assets are recognized and derecognized on a settlement date basis, except for stocks and benefi cial certifi cates, which are recognized and derecognized on a trade date basis.

A derivative that does not meet the criteria for hedge accounting is classifi ed as a fi nancial assets or a fi nancial liability held for trading. If the fair value of the derivative is positive, the derivative is recognized as a fi nancial asset; otherwise, the derivative is recognized as a fi nancial liability.

Fair values of financial assets and financial liabilities at the balance sheet date are determined as follows: Publicly traded stocks - at closing prices; open-end mutual funds - at net asset values; bonds - at prices quoted by the Taiwan GreTai Securities Market and Bloomberg; and financial assets and financial liabilities without quoted prices in an active market - at values determined using valuation techniques.

2010 Annual Report 121 X. Notes To Financial Statements

Bonds or Securities Purchased/Sold under Speciﬁ c Agreements

Bonds or securities purchased under resell agreements are recorded at purchase price and accounted for as ﬁ nancing transactions. Bonds or securities sold under repurchase agreement are recorded at the selling price. Interest revenue and expense are recorded on accrual basis.

Delinquent Loans

Overdue loans or other credit items including accrued interest are reclassified as delinquent loans when approved by the board of directors according to the Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing/ Non-accrual Loans.

The delinquent loans which are reclassiﬁ ed from loans are reported under loans, while others are reported as other miscellaneous ﬁ nancial assets.

Allowance for Loan Losses and Reserve for Guarantees

Allowance for bad debts and reserve for guarantees is estimated based on the uncollectibility of specific receivables, loans, delinquent loans, other financial assets and guarantees as well as the uncollectibility of overall credit portfolio referred to above.

Taishin Bank evaluates the collectibility of credit assets based on the borrowers’/clients’ delinquent status and ﬁ nancial condition in accordance with Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing/ Non-accrual Loans. Based on these regulations, there are four categories of unsound credit assets: Special mention, substandard, doubtful collectibility and uncollectible, and provisions should be made at 2%, 10%, 50%, and 100%, respectively, as the minimum standard of the allowance for bad loans and guarantee.

Unrecoverable portions of delinquent loans are written off upon approval of the board of directors. Recovery of written-off delinquent loans is recognized as recovery of allowance for loan losses and classiﬁ ed into other non- interest net income and loss.

Available-for-sale Financial Assets

Available-for-sale financial assets are initially measured at their fair value plus transaction costs and are measured at fair value subsequent to the initial recognition, with changes in fair value recognized in stockholders’ equity until fi nancial assets are disposal of, at which time, the cumulative gain or loss previously recognized in equity is included in profi t or loss for the year. The regular way purchases or sales of fi nancial assets are recognized and derecognized on a settlement date basis except for stocks and benefi cial certifi cates which are recognized and derecognized on a trade date basis.

The recognition, derecognition and the fair value bases of available-for-sale ﬁ nancial assets are the same with those of ﬁ nancial assets at FVTPL.

Cash dividends are recognized on the ex-dividend date, except for dividends distributed from the pre-acquisition profit of equity instrument, which are treated as a reduction of investment cost. Stock dividends are not

122 2010 Annual Report recognized as investment income but are recorded as an increase in the number of shares. The total number of shares subsequent to the increase is used for recalculation of cost per share. The difference between the initial cost of a debt instrument and its maturity amount is amortized using the effective interest method (if the difference is immaterial, the straight method is adopted), with the amortized interest recognized in proﬁ t or loss.

An impairment loss is recognized when there is objective evidence that the fi nancial asset is impaired. Any subsequent decrease in the impairment loss for an equity instrument classified as available-for-sale is recognized directly in equity. If the fair value of a debt instrument classifi ed as available-for-sale subsequently increases as a result of an event that occurred after the impairment loss was recognized, the decrease in impairment loss is reversed to profi t.

Held-to-maturity Financial Assets

Held-to-maturity financial assets are carried at amortized cost using the effective interest method. Held-to- maturity fi nancial assets are initially measured at fair value plus transaction costs that are directly attributable to the acquisition. Profi t or loss is recognized when the fi nancial assets are derecognized, impaired or amortized. The regular way purchases or sales of fi nancial assets are recognized and derecognized on a settlement date basis.

An impairment loss is recognized when there is objective evidence that the investment is impaired. The impairment loss is reversed if an increase in the investment recoverable amount is due to an event that occurred after the impairment loss was recognized. However, the adjusted carrying amount of the investment may not exceed the carrying amount that would have been determined had no impairment loss been recognized for the investment in prior years.

Investments Accounted for by the Equity Method

Investments in which Taishin Bank exercises signifi cant infl uence over the investees’ operating and fi nancial policy decisions are accounted for by the equity method.

Prior to January 1, 2006, the difference between the acquisition cost and Taishin Bank’s proportionate share in the investee’s equity was amortized by the straight-line method over 5 to 20 years. Effective January 1, 2006, pursuant to the revised Statement of Financial Accounting Standard No. 5 - “Long-term Investments under the Equity Method”, the acquisition cost is allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, and the excess of the acquisition cost over the fair value of the identiﬁ able net assets acquired is recognized as goodwill. Goodwill is not being amortized. The excess of the fair value of the net identiﬁ able assets acquired over the acquisition cost is used to reduce the fair value of each of the noncurrent assets acquired (except for financial assets other than investments accounted for by the equity method, noncurrent assets held for sale, deferred income tax assets, prepaid pension or other postretirement benefit) in proportion to the respective fair values of the noncurrent assets, with any excess recognized as an extraordinary gain. Effective January 1, 2006, the accounting treatment for the unamortized investment premium arising on acquisitions before January 1, 2006 is the same as that for goodwill and the premium is no longer being amortized. For any investment discount arising on acquisitions before January 1, 2006, the unamortized amount continues to be amortized over the remaining year.

2010 Annual Report 123 X. Notes To Financial Statements

When Taishin Bank subscribes for its investee’s newly issued shares at a percentage different from its current percentage of ownership in the investee, it records the change in its equity in the investee’s net assets as an adjustment to investments, with a corresponding amount credited or charged to capital surplus. When the adjustment is a debit to capital surplus but the capital surplus arising from long-term investments is insufﬁ cient, the shortage is debited to retained earnings. Besides, Taishin Bank should recognize changes in unrealized gain (loss) on ﬁ nancial investments, cumulative translation adjustments and other items of stockholders’ equity based on percentage of ownership interests of investees.

Under Article 36 of the Financial Holding Company Law, Taishin Bank, as a subsidiary of a fi nancial holding company, is allowed to make new investments only if the investments are made through the fi nancial holding company. It provides, however, that Taishin Bank may keep its equity investments made before Taishin Bank became a subsidiary of a fi nancial holding company but is prohibited from increasing these investments.

Other Financial Assets

Financial assets carried at cost are investments in equity instruments with no quoted prices in an active market and with fair values that cannot be reliably measured, such as non-publicly traded stocks and stocks traded in the Emerging Stock Market, are measured at their original cost. The accounting treatment for dividends on ﬁ nancial assets carried at cost is the same with that for dividends on available-for-sale ﬁ nancial assets. An impairment loss is recognized when there is objective evidence that the asset is impaired. A reversal of this impairment loss is disallowed.

Bond investments without active market are bond investments with ﬁ xed or determinable payments and with no quoted prices in an active market are carried at amortized cost using the effective interest method. The accounting treatment for such bond investments is similar to that for held-to-maturity ﬁ nancial assets, except for the absence of restriction on the timing of their disposal.

Financial Asset Securitization

According to the Statute for Financial Asset Securitization, mortgage loans, credit cards receivable and their related rights owned by original institution can be transferred to a specifi c purpose trust for issuing benefi ciary certificates and funds raised from such issuance should be transferred to the original institution. Under such structure, controls over contractual rights of such financial assets had been transferred to the buyers of the benefi ciary certifi cates, except for subordinated benefi ciary securities issued for the purpose of credit enhancement. Therefore, transferred financial assets are derecognized and any resulting gain or loss is recognized in the net income or loss.

The difference between carrying amount and sell price of loans is recognized as gain or loss. The carrying amount is allocated between the assets sold and the retained interests based on their fair market values on the date of transfer. Because there is no market price for the retained right, fair value is assessed by making the best estimate of loss rate on the creditor’s right, advanced principal repayment rate and discount rate of related risks to project the present value of future cash ﬂ ows.

124 2010 Annual Report There is no active market for subordinate asset-based securities; thus, interest received from trustee institutions is recognized as income for the year. The value of subordinate beneﬁ ciary securities is evaluated at the present value of future cash ﬂ ow on the balance sheet date.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Major additions and improvements to property, equipment and leased assets are capitalized, while costs of repairs and maintenance are expensed currently.

Depreciation is calculated using the straight-line method over useful lives based on guidelines prescribed by the government, and leasehold improvements are amortized over the lease terms.

The related cost (including revaluation increment), accumulated depreciation, accumulated impairment losses and any unrealized revaluation increment of an item of property and equipment are derecognized from the balance sheet upon its disposal. Any gain or loss on disposal of the asset is included in other non-interest net income and losses in the year of disposal.

If the recoverable amount of property and equipment is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is charged to earnings unless the asset is carried at a revalued amount, in which case the impairment loss is treated as a deduction to the unrealized revaluation increment.

If an impairment loss subsequently reverses, the carrying amount of the asset is increased accordingly, but the increased carrying amount may not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized as earnings, unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as an increase in the unrealized revaluation increment.

Goodwill

Goodwill arising on acquisition of companies was previously amortized over the estimated life of ﬁ ve to twenty years based on a straight-line basis. Effective January 1, 2006, based on a newly released SFAS No. 25 “Accounting for Business Combination under Purchase Method”, goodwill is no longer amortized and instead is tested for impairment annually.

Intangible Assets

Intangible assets acquired are initially recorded at cost and are amortized on a straight-line basis over their estimated useful lives.

If the recoverable amount of an intangible asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount.

2010 Annual Report 125 X. Notes To Financial Statements

Deferred Assets and Other Miscellaneous Assets

Deferred expense is amortized on a straight-line basis over ﬁ ve years.

Assumed collaterals and residuals are recorded at cost.

If the recoverable amount of assumed collaterals and residuals or other miscellaneous assets is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is charged to earnings unless the asset is carried at a revalued amount, in which case the impairment loss is treated as a deduction to the unrealized revaluation increment.

If an impairment loss subsequently reverses, the carrying amount of the asset is increased accordingly, but the increased carrying amount may not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized in earnings, unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as an increase in the unrealized revaluation increment.

Pensions

Pension cost under a defi ned benefi t plan is determined by actuarial valuations. Contributions made under a defi ned contribution plan are recognized as pension cost during the employees’ service periods.

Curtailment or settlement gains or losses on the deﬁ ned beneﬁ t plan are recognized as part of the net periodic pension cost for the year.

Stock-based Compensation

Employee stock options granted on or after January 1, 2008 are accounted for under SFAS No. 39, “Accounting for Share-based Payment.” Under the statement, the value of the stock options granted, which is equal to the best available estimate of the number of stock options expected to vest multiplied by the grant-date fair value, is expensed on a straight-line basis over the vesting period, with a corresponding adjustment to capital surplus - employee stock options. The estimate is revised if subsequent information indicates that the number of stock options expected to vest differs from previous estimates.

Foreign Currency Transactions

Non-derivative foreign-currency transactions are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. At the balance sheet date, foreign-currency monetary assets and liabilities are revalued using prevailing exchange rates, and the exchange differences are recognized in proﬁ t or loss.

At the balance sheet date, foreign-currency nonmonetary assets (such as equity instruments) and liabilities that are measured at fair value are revalued using prevailing exchange rates, with the exchange differences treated as follows:

a. Recognized in stockholders’ equity if the changes in fair value are recognized in stockholders’ equity; b. Recognized in proﬁ t and loss if the changes in fair value is recognized in proﬁ t or loss.

126 2010 Annual Report Interest Income and Fee Income Recognition

Interest income is recognized on an accrual basis. When the loans become past due and are considered uncollectible, the principal and interest receivable are transferred to delinquent loan accounts, and the accrual of interest income is ceased. Interest income shall be recognized when the delinquent interest is collected. According to the regulations issued by MOF, if the repayment of loan is extended under an agreement, the related interest should be recognized as deferred revenue and recognized as income when collected.

Fee income is recognized when the earning process has been completed and the economic beneﬁ ts associated with the transaction have been realized or are realizable.

Income Tax

Taishin Bank applies intra-year and inter-year allocation for its income tax, and deferred income tax assets and liabilities are recognized for the tax effect of temporary differences, unused loss carryforward and unused tax credits. Valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax will not be realized.

Adjustments of prior years’ tax liabilities are added or deducted from the current year’s tax provision.

Tax credits for purchases machinery, equipment and technology, research and development expenditures, and personnel training expenditures are recognized using the ﬂ ow-through method.

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the stockholders approve to retain the earnings.

Taishin Bank, its parent company, Taishin Financial Holding, and other subsidiaries adopt the linked-tax system for tax filing. Differences between current and deferred income tax expenses on consolidated basis and those on nonconsolidated basis are adjusted to Taishin Financial Holding’s income tax expenses. Related reimbursements and appropriations are recognized as receivables or payables.

Reclassiﬁ cations

Certain accounts in the financial statements as of and for the year ended December 31, 2009 have been reclassiﬁ ed to conform to the presentation of the ﬁ nancial statements as of and for the year ended December 31, 2010.

3. CASH AND CASH EQUIVALENTS

December 31 2010 2009 Cash on hand $ 4,936,840 $ 4,185,296 Checks for clearing 853,430 712,616 Due from other banks 5,809,986 1,437,708 Others 1,302,810 1,801,166 $ 12,903,066 $ 8,136,786

2010 Annual Report 127 X. Notes To Financial Statements

4. DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS

December 31 2010 2009 Reserve for checking account $ 7,321,104 $ 5,647,507 Reserve for demand account 15,997,400 14,966,954 Reserve for foreign deposit 45,221 145,178 Call loans to banks 13,672,425 7,519,086 Certiﬁ cate of deposits issued by the Central Bank - 99,900,000 Others 200,503 200,335 $ 37,236,653 $ 128,379,060

Taishin Bank is required to maintain reserve balances in the Central Bank. These reserves amounted to $23,363,725 thousand and $20,759,639 thousand as of December 31, 2010 and 2009, respectively.

5. FINANCIAL INSTRUMENTS AT FVTPL

December 31 2010 2009 Financial assets at FVTPL Quoted stocks and mutual funds $ 1,042,450 $ 370,161 Government bonds 1,394,431 3,907,150 Corporate bonds, ﬁ nancial debentures and other bonds 5,804,667 3,408,581 Futures 193,753 129,538 Forward exchange contracts 1,582,560 740,876 Currency swaps 2,107,760 1,244,406 Interest rate swaps 6,999,253 12,396,788 Cross-currency swaps 2,048,818 812,552 Equity-linked swaps 26,897 54,435 Currency options 651,890 387,108 Interest rate options 19,260 69,348 Equity-linked options 370,826 194,958 Credit default swaps 15,837 28,090 Commodity swaps 1,942 13,798 Future options 189 - Commodity options 2,819 1,149,765 $ 22,263,352 $ 24,907,554

Financial liabilities at FVTPL Stock borrowings $ 44,690 $ - Bond borrowings 52,486 - Forward exchange contracts 1,292,555 678,827 Currency swaps 3,730,813 989,453 Interest rate swaps 7,036,250 12,105,250 Cross-currency swaps 2,650,824 1,116,920 Equity-linked swaps 26,890 54,435 Credit default swaps 16,340 35,731 Commodity swaps 1,942 13,798 Currency options $ 473,222 $ 203,618 Interest rate options 30,596 77,643 Equity-linked options 550,461 561,940 Commodity options 2,819 1,149,765 Interest rate futures 1,053 2,657 Index futures 289 - $ 15,911,230 $ 16,990,037

128 2010 Annual Report Taishin Bank uses various derivative instruments to fulﬁ ll customers’ needs as well as to manage Taishin Bank’s asset and liability positions and risk.

The aggregate par values of bond investments classiﬁ ed as ﬁ nancial assets at FVTPL and used for transactions under repurchase agreements were $30,100 thousand and $491,100 thousand as of December 31, 2010 and 2009, respectively.

Net gains on ﬁ nancial assets for trading purposes were $12,916,162 thousand (including gains of $11,413,615 thousand on asset valuation and of $1,476,027 thousand on asset disposal and dividend revenue of $26,520 thousand) in 2010 and $30,183,135 thousand (including gains of $28,104,070 thousand on asset valuation and of $2,073,577 thousand on asset disposal and dividend revenue of $5,488 thousand) in 2009.

Net losses on financial liabilities for trading purposes were $11,749,046 thousand (including losses of $11,750,254 thousand on liability valuation and gain of $1,208 thousand on liability disposal) in 2010 and $28,246,274 thousand (including losses of $28,222,237 thousand on liability valuation and of $24,037 thousand on liability disposal) in 2009.

The nominal principal amounts of outstanding derivative contracts as of December 31, 2010 and 2009 were as follows:

2010 2009 Hold for trading Forward exchange contracts $ 120,320,200 $ 89,226,596 Currency swaps 201,643,129 185,232,237 Interest rate swaps 501,511,917 777,784,764 Cross-currency swaps 39,871,351 43,839,808 Futures 904,156 1,073,061 Future options 340,340 - Currency options 80,280,201 45,215,170 Interest rate options 10,990,000 21,582,700 Equity-linked options 5,060,912 4,874,510 Commodity options 679,326 33,322,699 Credit default swaps 2,607,197 10,644,566 Equity-linked swaps 2,230,893 2,324,609 Commodity swaps 76,920 35,345

The balance of interest rate swaps for trading purposes as of December 31, 2009 include the embedded interest rate swaps with notional amount of $600,000 thousand. The embedded interest rate swaps were separated from hybrid instruments by Taishin Bank according to SFAS No. 34 “Financial Instruments: Recognition and Measurement”.

6. RECEIVABLES, NET

December 31 2010 2009 Notes and accounts receivable $ 86,163,154 $ 73,503,741 Revenue receivable 60,926 238,234 Interest receivable 1,296,579 1,262,423 Acceptance receivable 2,094,535 2,466,219 Installment payment receivable 6,441,427 6,291,193 Other receivables 714,175 1,516,781 Less: Allowance for receivables (514,722) (439,725) $ 96,256,074 $ 84,838,866

2010 Annual Report 129 X. Notes To Financial Statements

7. LOANS, NET a. The details of loans are as follows:

December 31 2010 2009 Negotiated $ 869,768 $ 1,127,964 Overdraft 2,865,088 4,783,000 Short-term loans 123,477,799 109,722,621 Medium-term loans 139,799,381 126,243,828 Long-term loans 268,180,174 257,541,758 Delinquent loans 2,295,625 3,067,704 537,487,835 502,486,875 Less: Allowance for loan losses (5,813,817) (6,903,207) $ 531,674,018 $ 495,583,668

b. Allowances for receivables and loan losses were as follows:

Year Ended December 31, 2010 For Losses on For Losses on the Receivables Total Particular Loans Overall Loan Portfolio Balance, January 1, 2010 $ 439,725 $ 3,132,225 $ 3,770,982 $ 7,342,932 Reclassifi cation at the beginning of the period -482,574 - 482,574 Increase by acquiring Chinfon credit card department -540,576 - 540,576 Provision for loan losses 133,689 232,562 827,059 1,193,310 Loans written off (45,860) (3,064,058) - (3,109,918) Recovery of loans written off 3,680 195,462 - 199,142 Reclassifi cation (16,512) 164,580 (148,068) - Reclassifi ed to other fi nancial assets - (320,077) - (320,077) Balance, December 31, 2010 $ 514,722 $ 1,363,844 $ 4,449,973 $ 6,328,539

Year Ended December 31, 2009 For Losses on For Losses on the Receivables Total Particular Loans Overall Loan Portfolio Balance, January 1, 2009 $ 893,014 $ 5,847,571 $ 3,945,253 $ 10,685,838 Reclassifi cation at the beginning of -797,531 -797,531 the period Provision (reversal) for loan losses 102,064 4,337,636 (174,271) 4,265,429 Loans written off (373,982) (8,111,679) -(8,485,661) Recovery of loans written off 224,629 337,740 - 562,369 Reclassifi cation (406,000) 406,000 - - Reclassifi ed to other fi nancial - (482,574) - (482,574) assets Balance, December 31, 2009 $ 439,725 $ 3,132,225 $ 3,770,982 $ 7,342,932

c. The details of bed debt expenses are as follows:

December 31 2010 2009 Receivable and provision for loan losses $ 1,193,310 $ 4,265,429 Provision for guarantees 11,511 - $ 1,204,821 $ 4,265,429

130 2010 Annual Report 8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

December 31 2010 2009 Investment in bills $ 138,910,330 $ 5,012,859 Domestic quoted stock 795,614 64,014 Mutual funds 1,033,151 964,158 Government bonds 11,800,971 9,435,103 Corporate bonds 3,555,721 2,778,489 Financial debentures 8,904,725 15,651,131 Asset-based securities 7,426,330 2,579,010 $ 172,426,842 $ 36,484,764

Investment in bills placed as reserves for clearing at the Central Bank was $7,000,000 thousand as of December 31, 2010.

Bonds pledged as collaterals to court as of December 31, 2010 and 2009 amounted to $863,735 thousand and $931,418 thousand respectively. Please refer to Note 31 for relevant information regarding bonds pledged as collaterals as of December 31, 2010 and 2009.

The aggregate par values of the bonds classiﬁ ed as available-for-sale ﬁ nancial assets and used in transactions under repurchase agreements were $15,761,044 thousand and $5,510,400 thousand as of December 31, 2010 and 2009, respectively.

Asset-based securities were from the securitization transactions of mortgage loans and credit card receivables entrusted by Taishin Bank in the ﬁ rst quarter of 2004 and in the second quarter of 2005, respectively. In the two sales, Taishin Bank reserved D asset based securities with carrying value of $339,512 thousand and $400,000 thousand, respectively. In response to the drastic market change in credit card business, Taishin Bank entrusted more credit card receivables to the credit card trust accounts and subscribed for all the asset based securities “D” amounted to $1,600,000 thousand issued by the speciﬁ c trust for the year ended December 31, 2006.

Asset-based Securities of Entrusted Mortgage Loans

In the ﬁ rst quarter of 2004, Taishin Bank entrusted mortgage loans with a carrying value of $4,724,512 thousand to Deutsche Bank - Taipei Branch, which will issue asset-based securities on these loans, with terms from March 30, 2004 to June 21, 2026.

Security Features A B C

Issue amount $3,850,000 $350,000 $185,000

Issue price Face value Face value Face value

ARMS* rate on the interest- ARMS rate on the interest- de- ARMS rate on the interest- de- determination date plus 0.25%. If termination date plus 0.60%. If termination date plus 0.85%. If securities are not redeemed by securities are not redeemed by securities are not redeemed by Interest rate per annum the issuer on the first exercise the originator on the ﬁ rst exercise the originator on the ﬁ rst exercise date, the interest rate will plus date, the interest rate will plus ad- date, the interest rate will plus ad- additional 0.125%. ditional 0.30%. ditional 0.425%.

*Note:“ARMS” means adjustable rate mortgages.

2010 Annual Report 131 X. Notes To Financial Statements

Taishin Bank holds D securities, with face value of $339,512 thousand, and the right to claim residual interests after paying fixed interests of A, B, and C securities. If the borrowers are not able to repay the loans on maturity, investors and Deutsche Bank - Taipei Branch do not have recourse to Taishin Bank’s other assets. The right to claim loan principal follows the investors’ rights, and its value depends on the credit risks, advanced principal payments, and interest risks on the principal transferred. Taishin Bank made advance redemption of the residual outstanding asset based securities of entrusted mortgage loans in June 2009, which was totally paid off as of December 31, 2009.

Asset-based Securities of Entrusted Credit Card Receivables

In the second quarter of 2005, Taishin Bank entrusted credit card receivables with a carrying value of $11,752,793 thousand to HSBC - Taipei Branch, which will issue asset-based securities and seller’s equity securities on these receivables, with terms from May 31, 2005 to November 30, 2010.

Security Features A B C Issue amount $8,700,000 $500,000 $400,000 Issue price Face value Face value Face value Interest rate per annum Reference rate* Reference rate* plus 0.4%. Reference rate* plus 0.8%.

*Note:Reference rate is the 90-day commercial paper rate in the primary market, provided on page 51328 of the Moneyline Telerate at 11:30 a.m. on the date right before the interest-bearing period.

Taishin Bank holds D securities, with face value of $2,000,000 thousand (including additional issue of D securities with face value of $1,600,000 thousand), and the right to claim residual interests after paying ﬁ xed interests of A, B, and C securities. If the borrowers are not able to repay the loans on maturity, investors and HSBC - Taipei Branch do not have recourse to Taishin Bank’s other assets. The right to claim loan principal follows the investors’ rights, and its value depends on the credit risks, advanced principal payments, and interest risks on the principal transferred. In May, August and November of 2008 and February of 2009, Taishin Bank settled the all payment of A securities subsequently by paying $2,175,000 thousand each time. In May of 2009, Taishin Bank settled the payment of B, C, and D securities by paying $500,000 thousand, $400,000 thousand and $2,000,000 thousand, respectively. The asset based securities of entrusted credit card receivable were totally paid off as of December 31, 2009.

9. HELD-TO-MATURITY FINANCIAL ASSETS

December 31 2010 2009 Investment in bills $ 273,462 $ 289,111 Government bonds 643,954 1,500,551 Financial bonds 2,377,087 4,252,984 Corporate bonds -98,696 Asset-based securities 17,591 72,798 $ 3,312,094 $ 6,214,140

The aggregate par values of bonds classiﬁ ed as held-to maturity ﬁ nancial assets and used in transactions under repurchase agreements were $1,297,264 thousand and $624,100 thousand as of December 31, 2010 and 2009, respectively.

132 2010 Annual Report 10. INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD

December 31 2010 2009 Carrying Ownership Carrying Ownership Value Interest (%) Value Interest (%) Quoted stocks Chang Hwa Commercial Bank Co., Ltd. (“Chang Hwa Bank”) $ 321,358 0.27 $ 306,254 0.27 Unquoted stocks PayEasy Digital Integration Co., Ltd. (“PayEasy Digital”) 348,309 65.36 369,770 65.36 Taishin Real-Estate Management Co., Ltd. (“Taishin Real-Estate”) 182,466 60.00 184,551 60.00 Taishin Insurance Agency Co., Ltd. (“Taishin Insurance Agency”) 747,036 87.40 174,904 87.40 Dah An Leasing Co., Ltd. (“Dah An Leasing”) 202,776 99.00 200,369 99.00 An Hsin Real-Estate Management Co., Ltd. (“An Hsin Real-Estate”) 59,340 30.00 45,819 30.00 $ 1,861,285 $ 1,281,667

Fair values of the quoted stocks in which the investments were accounted for by the equity-method and which were calculated at their closing prices as of December 31, 2010 and 2009 were as follows: 2010 2009 Chang Hwa Bank $ 427,350 $ 251,625

Movements of the difference between the cost of investment and Taishin Bank’s share in investees’ net assets allocated to depreciable and non-depreciable assets for the years ended December 31, 2010 and 2009 were as follows: Depreciable Assets Non-depreciable Assets 2010 Balance, beginning of year $ (10) $ 15,545 Movements 10 (2) Balance, end of year $ - $ 15,543 2009 Balance, beginning of year $ (25) $ 15,545 Movements 15 - Balance, end of year $ (10) $ 15,545

Goodwill amounted to $75,438 thousand as of December 31, 2010 and 2009. Based on investees’ ﬁ nancial statements reviewed by the auditors for the years ended December 31, 2010 and 2009, the investment incomes recognized under the equity method were as follows:

2010 2009 Investment Income Investment Income Individual Net Income Individual Net Income Recognized Recognized PayEasy Digital $ 5,325 $ 3,480 $ 42,616 $ 28,521 Taishin Real-Estate 20,524 12,315 27,158 16,295 Taishin Insurance Agency 453,321 396,208 8,538 (12,242) An Hsin Real-Estate 60,592 18,178 27,371 8,211 Dah An Leasing 2,430 2,407 592 586 Chang Hwa Bank 7,940,600 21,053 3,088,898 8,120 Taiwan Futures - -95,512 5,878 $ 453,641 $ 55,369 The investment income (loss) for the years ended December 31, 2010 and 2009 was based on the investees’ ﬁ nancial statements reviewed by the auditors for the same year.

2010 Annual Report 133 X. Notes To Financial Statements

On July 23, 2009, Taishin Bank’s board of directors approved the sale of Taishin Bank’s holding in Taiwan Futures to Taishin Securities Co., Ltd. This sale was settled on July 24, 2009.

In December 2009, Taishin Bank acquired 37.01% interest ownership of Taishin Insurance Agency’s shares with voting rights. The fair value of the net identiﬁ able assets acquired in excess of the acquisition cost was used to reduce the fair value of each of the noncurrent assets acquired in proportion to the respective fair values of the noncurrent assets, with any excess recognized as an extraordinary gain of $122,820 thousand, net of an income tax expense of $40,940 thousand.

Taishin Insurance Agency may carry out an organizational restructuring plan in line with Taishin Bank’s undertaking to ultimately acquire 100% equity of Taishin Insurance Agency and recognized the discharge compensation and pension expense of $49,565 thousand based on actuarial assumptions in 2009 in accordance with the Guidelines for Settling Seniority Matters Arising from the Labor Pension Act. In addition, because of Taishin Insurance’s going concern considerations, no other liquidation revaluation or reclassiﬁ cation was made, and Taishin Bank recognized the related investment income and loss. The Board of Directors on behalf of the shareholders had met in December 2010 and planned to maintain current institutional framework and operation. Taishin Insurance Agency reversed compensation and pension expense of $49,565 thousand in 2010, and Taishin Bank recognized the related investment income and loss.

In the fourth quarter of 2005, Taishin Financial Holding paid $36,568,000 thousand to acquire 1,400,000 thousand shares of Preferred B Stock privately placed by Chang Hwa Bank (CHB). As a result, Taishin Financial Holding acquired 22.55% of CHB’s shares with voting rights and over half of the seats of CHB’s board of directors. Since this acquisition enabled Taishin Financial Holding to exercise signifi cant infl uence on CHB, Taishin Bank reclassifi ed its investment in CHB from bills and securities purchased into investment under the equity method. Taishin Bank recognized a realized loss of NT$31,439 thousand for the decline in market value of CHB’s shares.

Based on Statements of Financial Accounting Standards (SFAS) No. 5 - “Long-Term Investments under the Equity Method” and No. 25 - “Business Combinations”, the difference (goodwill) of $76,393 thousand between the reclassified investment cost of $276,375 thousand and fair value of $199,982 thousand of CHB’s net assets acquired by Taishin Bank will be amortized within 20 years by the straight-line method and tested for impairment. The amortization for 2005 amounted to $955 thousand, and the unamortized amount as of December 31, 2005 was $75,438 thousand.

Effective January 1, 2006, under the revised SFAS No. 5, Taishin Bank will no longer amortize goodwill arising from mergers and will instead test goodwill for impairment every year. In this test, CHB was taken as one cash-generating unit (CGU) on the basis of consolidated fi nancial statements. Thus, CHB’s operating assets, including Taishin Financial Holding’s goodwill from the merger, the investments accounted for by the equity method and other non-operating assets are evaluated using estimated recoverable amounts determined as the higher of the value in use and fair value less costs to sell. The major assumptions in estimating the value in use are based on the historical profi t performance and ability to generate cash fl ows in the future under normal operations. Under a going concern assumption, the estimated cash fl ows in the future are discounted at the rate of weighted average cost of capital to calculate the value in use. Based on the test, there was no material impairment as of December 31, 2010.

134 2010 Annual Report 11. FINANCIAL ASSETS CARRIED AT COST

December 31 2010 2009 Domestic unlisted common stocks $ 1,640,797 $ 1,667,330 Overseas unlisted common stocks - US$25,756 thousand and US$24,282 thousand as of December 31, 2010 and 2009, respectively 787,378 740,175 $ 2,428,175 $ 2,407,505

The above equity investments, which had no quoted prices in an active market and had fair values that could not be reliably measured, were carried at cost.

Financial assets carried at cost disposed of in 2009 were as follows:

Book Value at Disposal Disposal Gain (Loss) Taipei Financial Center Co., Ltd. $ 213,605 $ 63,249 Jisun Venture Fund Co., Ltd. 9,631 (9,631) $ 53,618

12. OTHER MISCELLANEOUS FINANCIAL ASSETS

December 31 2010 2009 Delinquent loans reclassiﬁ ed from other items (excluding loans) $ 533,352 $ 648,019 Less: Allowance for bad debts (320,077) (482,574) Bond investment without active market 300,000 300,000 Others 160 89 $ 513,435 $ 465,534

13. PROPERTY AND EQUIPMENT

December 31 2010 2009 Accumulated Carrying Carrying Cost Depreciation Value Value Land $ 10,390,248 $ - $ 10,390,248 $ 10,390,248 Buildings 8,482,951 (2,300,863) 6,182,088 6,482,003 Machinery equipment 4,047,689 (3,415,879) 631,810 830,053 Transportation equipment 295,246 (275,177) 20,069 20,912 Miscellaneous equipment 539,394 (485,901) 53,493 75,363 Leased asset 337,017 (257,000) 80,017 67,301 Prepayments for building and equipment 46,846 - 46,846 32,216 $ 24,139,391 $ (6,734,820) $ 17,404,571 $ 17,898,096

2010 Annual Report 135 X. Notes To Financial Statements

14. GOODWILL AND INTANGIBLE ASSETS

December 31 2010 2009 Goodwill (Note 1) $ 1,152,274 $ 1,152,274 Intangible assets - customer value 560,807 - Intangible assets - computer software 364,454 453,641 $ 2,077,535 $ 1,605,915

To increase the number of customers, credit card usage, revolving balance, and increase proﬁ ts by enhancing the operation efficiency, Taishin Bank acquired the net assets of Chinfon Bank’s credit card business amounted to $3,425,031 thousand and the related customer value amounted to $672,969 thousand as of the base date, March 6, 2010 for the price of $4,098,000 thousand. The Customer value recognized as intangible asset was amortized; the amount of amortization was $112,162 thousand and the unamortized amount was $560,807 thousand as of December 31, 2010.

15. OTHER MISCELLANEOUS ASSETS

December 31 2010 2009 Assumed collaterals and residuals, net $ 67,856 $ 99,814 Others 18,344 19,875 $ 86,200 $ 119,689

16. DUE TO THE CENTRAL BANK AND OTHER BANKS

December 31 2010 2009 Due to other banks $ 42,939,635 $ 47,852,471 Call loans from other banks 12,981,684 4,987,274 Bank overdraft 411,072 1,305,981 Due to the Central Bank - 35,736 $ 56,332,391 $ 54,181,462

17. PAYABLES

December 31 2010 2009 Notes and accounts payable $ 12,399,012 $ 10,869,635 Accrued expenses 2,704,467 2,591,943 Interest payable 1,490,864 1,289,128 Acceptance payable 2,094,535 2,466,219 Exchange note payable 826,862 686,898 Tax payable 761,890 267,960 Receipts under custody payable 297,457 261,583 Other payables 531,307 523,342 $ 21,106,394 $ 18,956,708

136 2010 Annual Report 18. DEPOSITS

December 31 2010 2009 Checking deposits $ 3,415,180 $ 3,603,609 Demand deposits 129,628,593 108,492,689 Time deposits 241,223,359 228,859,214 Negotiable certiﬁ cates of deposit 6,543,000 5,485,800 Savings deposits 331,878,745 307,713,309 Remittances and drafts issued 891,494 510,361 $ 713,580,371 $ 654,664,982

19. FINANCIAL DEBENTURES

Taishin Bank issued ﬁ nancial debentures to enhance its capital ratio and raise medium- to long-term operating funds. Details of the ﬁ nancial debentures were as follows:

December 31 2010 2009 Subordinated fi nancial debentures - 2001.10.02 $ - $ 5,000,000 Subordinated fi nancial debentures - 2004 (I) - 5,000,000 Subordinated fi nancial debentures - 2005 (I) 1,508,000 1,508,000 Subordinated fi nancial debentures - 2005 (II) 3,300,000 3,300,000 Subordinated fi nancial debentures - 2005 (III) 5,000,000 5,000,000 Subordinated fi nancial debentures - 2005 (IV) 5,192,000 5,192,000 Subordinated fi nancial debentures - 2010.04.12 10,000,000 - $ 25,000,000 $ 25,000,000

a. Ten-year fi nancial debentures amounting to $5 billion were issued on October 2, 2001. The interest rates are 4.05% for years one to five and 4.45% for years six to ten. Interests are payable annually. Taishin Bank has redemption right on these fi nancial debentures at par value plus accrued interest payable starting from the sixth year. Taishin Bank redeemed these fi nancial debentures on February 10, 2010.

b. Under the approval of the Financial Supervisory Commission, Executive Yuan in 2004, Taishin Bank was authorized to issue $20 billion ﬁ nancial debentures, as follows:

Taishin Bank made a ﬁ rst issue of ﬁ nancial debentures amounting to $5 billion in 2004, as follows:

2010 Annual Report 137 X. Notes To Financial Statements

Financial Maturity Issue Face Redemption Method and Issue Date Term Interest Rate Debentures Date Amount Value Interest Payment

Taishin Bank’s floating interest Interest is accruable at a rate for one-year time deposit simple rate and payable an- plus 0.85% from the first to the nually from the issue date. fifth year and Taishin Bank’s Additional interest is not 2004, 10 $100 2004.12.15 2014.12.15 $5 billion fl oating interest rate for one-year accruable if principal and in- fi rst issue years million time deposit plus 1.85% since terest are withdrawn after the the sixth year. The fl oating rate interest date. Debentures is provided by the Central Bank are redeemable at par value on the reset day at 10:30 a.m. in cash on the maturity date.

Redemption policy: Taishin Bank can redeem all or part of the debentures on each interest payment date at the principal value plus interest after the fi fth anniversary (December 15, 2009) by notifying the holders in written form seven days before redemption. Taishin Bank can also redeem all or part of the debentures on the noninterest date at the principal value plus the interest after the fi fth anniversary by notifying the holders in writing two months before redemption. Taishin Bank redeemed these fi nancial debentures on March 10, 2010.

Taishin Bank made a fi rst issue of fi nancial debentures amounting to $1,508 million in 2005, as follows: Financial Maturity Issue Redemption Method and Issue Date Term Interest Rate Face Value Debentures Date Amount Interest Payment Taishin Bank’s floating interest rate for one-year time deposit plus 0.30% from the first to the $1,287.5 A 2005.03.04 2015.03.04 fifth year and Taishin Bank’s million $500 Debentures are fl oating interest rate for one-year thousand, redeemable at par value 10 time deposit plus 0.50% since $10 million, in cash on the maturity years the sixth year. and date. Interest is accru- 2.25% fi xed interest rate from the $1 million, able and payable annu- fi rst to the fi fth year and Taishin respectively ally from the issue date. $220.5 B 2005.03.04 2015.03.04 Bank’s floating interest rate for million one-year time deposit plus 0.75% since the sixth year.

Redemption policy: Taishin Bank can redeem all of the debentures on each interest payment date at the principal value plus interest after the ﬁ fth anniversary (March 4, 2010) and notify the holders of redemption by posting it on Taishin Bank’s website or main newspapers one month before redemption.

Taishin Bank made a second issue of ﬁ nancial debentures amounting to $3,300 million in 2005, as follows: Financial Redemption Method Issue Date Maturity Date Term Issue Amount Interest Rate Face Value Debentures and Interest Payment Interest is accrued at a simple rate 2.70% ﬁ xed interest rate from the and paid annually first to the seventh year. From from the issue date. the eighth to twelfth year, if the Additional interest holder does not exercise the put is not accrued if option, the rate will be Taishin principal and inter- Bank’s interest rate for one- 2005, second est are withdrawn 2005.04.28 2017.04.28 12 years $3,300 million year time deposit plus 0.80%; if $10 million issue after the interest Taishin Bank does not exercise date. Debentures the redemption right, the rate will are redeemable at be Taishin Bank’s interest rate for par value in cash on one-year time deposit plus 0.95%. the maturity date, The interest rate is recalculated unless the redemp- annually. tion or put option is exercised.

138 2010 Annual Report 1) Put option and redemption policies: Upon the seventh, eighth, ninth, tenth and eleventh anniversaries of the note issue, if terms of exercising put option or redemption rights are satisﬁ ed, and if the noteholders exercise the put option or Taishin Bank exercises the redemption rights, the debentures will be expired on current interest payment date. Taishin Bank will repay the noteholders at the principal value plus accrued interests.

2) Terms of exercising put option or redemption rights: The rate is provided by the Central Bank on March 10, 2012, 2013, 2014, 2015, and 2016 at 10:30 a.m. If the rate is less than or equal to 1.85%, the holders can exercise the put option; if the rate is greater than 1.85%, Taishin Bank can exercise the redemption right.

3) Exercise of put option by the debenture holders: If terms of exercising put option are satisﬁ ed and the debenture holders plan to exercise the put option, holders should notify Taishin Bank in written form within ten days after the terms are satisﬁ ed.

4) Exercise of redemption right by Taishin Bank:

If terms of exercising redemption right are satisﬁ ed and Taishin Bank plans to exercise the right, Taishin Bank should post it on major local newspapers within thirty days before current interest payment date.

Taishin Bank made a third issue of ﬁ nancial debentures amounting to $5 billion in 2005, as follows: Financial Maturity Issue Face Redemption Method and Inter- Issue Date Term Interest Rate Debentures Date Amount Value est Payment Taishin Bank’s fixed inter- Interest is accrued at a simple est rate for one-year time rate and paid annually from the deposit plus 0.80% from the issue date. Additional interest ﬁ rst to the seventh year and is not accrued if principal and 2005, third 12 $5 $100 2005.05.18 2017.05.18 Taishin Bank’s fixed inter- interest are withdrawn after the issue years billion million est rate for one-year time interest date. Debentures are deposit plus 1.10% from the redeemable at par value in cash eighth year. The interest on the maturity date, unless the rate is recalculated annually. redemption is exercised.

Redemption policy: Taishin Bank can redeem all or part of the debentures on each interest payment date at the principal value plus interest after the seventh anniversary (May 18, 2012) by notifying the holders in written form seven days before redemption. Taishin Bank can also redeem all or part of the debentures on the noninterest payment date at the principal value plus interest after the seventh anniversary by notifying the holders in written form two months before redemption.

Taishin Bank made a fourth issue of ﬁ nancial debentures amounting to $5,192 million in 2005, as follows: Financial Maturity Issue Redemption Method and Issue Date Term Interest Rate Face Value Debentures Date Amount Interest Payment $2,950 A 2005.06.06 2017.06.06 2.70% fixed interest rate million Interest is accrued at a simple from the ﬁ rst to the seventh rate and paid annually from the year and 3.20% fixed issue date. Additional interest $1,442 B 2005.06.06 2017.06.06 interest rate from the eighth $100 million, is not accrued if principal and 12 million to the twelfth year. $10 million, interest are withdrawn after years and $1 million, the interest date. Debentures Taishin Bank’s floating respectively are redeemable at par value interest rate for one-year in cash on the maturity date, C 2005.06.06 2017.06.06 $800 million time deposit plus 0.65%. unless the redemption or put The interest rate is recal- option is exercised. culated annually.

2010 Annual Report 139 X. Notes To Financial Statements

Redemption policy: Taishin Bank can redeem all or part of the debentures on each interest payment date at the principal value plus interest after the seventh anniversary (June 6, 2012) by notifying the holders in written form seven days before redemption. Taishin Bank can also redeem all or part of the debentures on the noninterest date at the principal value plus interest after the ﬁ fth anniversary by notifying the holders in written form two months before redemption.

Taishin Bank made a fi rst issue of fi nancial debentures amounting to $10 billion on April 12, 2010, as follows: Financial Maturity Face Redemption Method and Issue Date Term Issue Amount Interest Rate Debentures Date Value Interest Payment $4,500 A 2010.04.12 2017.04.12 2.65% fi xed interest rate million Interest is accrued at a simple “Floating rate of one-year time rate and paid annually from the deposit of Chunghwa Post Co., Ltd.” issue date. Additional interest $50 7 posted on Central Bank’s website at is not accrued if principal and 10:30 am of two business days prior mil- years $5,500 interest are withdrawn after B 2010.04.12 2017.04.12 to the interest calculation period lion million the interest date. Debentures plus 1.5%. The interest rate is are redeemable at par value in recalculated annually. The floating cash on the maturity date. rate is provided by the Central Bank on the reset day at 10:30 a.m.

20. OTHER LIABILITIES

December 31 2010 2009 Unearned revenues $ 313,636 $ 261,091 Unearned interest revenues 84,127 84,194 Reserve for guarantee liabilities 59,488 48,193 Reserve for trading losses 140,771 136,148 Guarantee deposits 82,584 108,679 Deferred income 9,675 10,500 Reserve for other losses 451,583 1,144,911 Others 227,135 346,741 $ 1,368,999 $ 2,140,457

The Bankers’ Association of the Republic of China reviewed certain structured note and other transactions of Taishin Bank. As a result of this review, Taishin Bank has provided a reserve for compensation on consigned structured notes issued by international institutions. A loss reserve of $2,000,000 thousand was recognized in the income statements under “other non-interest income” for the year ended December 31, 2009.

21. CAPITAL STOCK

As of December 31, 2010, Taishin Bank’s authorized capital was $49,157,526 thousand (4,915,753 thousand shares); registered capital is $49,157,526 thousand, divided into 4,727,517 thousand common shares and 188,235 thousand preferred shares at NT$10.00 dollars par value.

Details of outstanding capital stock as of December 31, 2010 were as follows:

140 2010 Annual Report Common Stock Preferred Stock Total Initial capital contribution in cash $ 10,000,000 $ - $ 10,000,000 Capital infusion with cash 27,280,867 8,882,353 36,163,220 Unappropriated earnings and capital surplus transferred 9,521,440 -9,521,440 to common stock Redemption of Preferred Stock A -(3,000,000) (3,000,000) Preferred Stock B transferred to common stock 4,000,000 (4,000,000) - Less: Cancellation of treasury stock (985,820) -(985,820) Less: Cancellation of parent company’s stock (2,541,314) - (2,541,314) $ 47,275,173 $ 1,882,353 $ 49,157,526

As of December 31, 2010, the outstanding common and preferred shares of Taishin Bank were all held by the parent, Taishin Financial Holding, which was established through a share swap on February 18, 2002. Based on Article 15 of the Financial Holding Company Law, rights of the stockholders are executed by the board of directors. However, a certain company Law provision on stockholders’ meetings does not apply to Taishin Bank.

On March 27, 2007, Taishin Bank’s board of directors modiﬁ ed its Articles of Incorporation to raise authorized capital. On March 30, 2007, Taishin Bank issued 500,000 thousand common shares and 188,235 thousand preferred shares C totaling $11,700,000 thousand at NT$17.00 per share. The Department of Commerce under the Ministry of Economic Affairs approved this change on April 14, 2007.

Taishin Bank issued 188,235 thousand shares of non-cumulative, non-participating preferred stock - C with annual dividend rate at 3.75% on March 30, 2007. These shares have preference over common stock in dividend distribution. The stockholders of preferred stock - C may request to convert the preferred stock - C to common stock at a 1:1 ratio from March 22, 2009. Ten years after the issuance date, Taishin Bank has the right to redeem preferred stock - C at the issue price; otherwise, the dividend rate will increase to 4.75% per annum for the unredeemed part.

On November 12, 2009, Taishin Bank’s board of directors modified its Articles of Incorporation to raise authorized capital. On December 30, 2009, Taishin Bank issued 740,741 thousand common shares at NT$13.5 per share, amounting to approximately $10,000,000 thousand. The department of commerce under the Ministry of Economic Affairs approved this change on January 12, 2010.

22. OTHER PAID-IN CAPITAL

Taishin Financial Holding’s board of directors resolved the fourth stock options and warrants issue plan based on SFAS No. 39 and ARDF Interpretation 2008-017 on September 2, 2010. According to the plan, subsidiaries shall recognize the grant of equity instruments from Taishin Financial Holding to their employees as equity-settled shared-based payments transaction to measure the services provided by subsidiaries’ employees, the increase in equity as funding from Taishin Financial Holding, and the same amount of increase in equity as current expenses based on the fair value of the equity instrument and the percentage of service provided by Taishin Financial Holding to its subsidiaries over the vesting period, as well as adjust additional paid in capital - stock warrants. The estimate is revised if subsequent information indicates that the number of stock options expected to vest differs from previous estimates.

Compensation cost recognized was $19,989 thousand for the year ended December 31, 2010.

2010 Annual Report 141 X. Notes To Financial Statements

23. DISTRIBUTION OF EARNINGS AND DIVIDEND POLICY

Taishin Bank’s Articles of Incorporation provide that annual net income, after used to pay for taxes and offset any accumulated deﬁ cits should be appropriated in the following orders:

a. 30% as legal reserve, and special reserve if needed;

b. Dividends to holders of preferred stock;

c. 0.01% as bonuses to employees;

d. The remainder, together with the unappropriated retained earnings of previous years as dividends.

Items (c) and (d) above are to be proposed and approved by Taishin Bank’s Board of Directors.

Cash distributions in any given year can not exceed 15% of Taishin Bank’s paid-in capital. But if Taishin Bank’s legal reserve equals to or exceeds paid-in capital, this restriction does not apply. In addition, if the capital adequacy ratio is less than 8%, cash distribution will also be restricted, as required by the MOF.

For the years ended December 31, 2010 and 2009, the bonus to employees was $539 thousand and $44 thousand, respectively. The bonus to employees was based on the percentage described above of the net income (net of the bonus to employees) and based on past experiences. If the actual amounts subsequently resolved by the Board of Directors on behalf of the shareholders differ from the proposed amounts, the differences are recorded as a change in accounting estimate in the year the Board of Directors made the resolution on behalf of the shareholders. If bonus shares are resolved to be distributed to employees, the number of shares is determined by dividing the amount of bonus by the closing price (after considering the effect of cash and stock dividends) of the shares of the day preceding the shareholders’ meeting.

Based on a directive issued by the Securities and Futures Bureau, an amount equal to the net debit balance of certain stockholders’ equity accounts (including unrealized revaluation increment, unrealized gain or loss on financial instruments, net loss not recognized as pension cost, cumulative translation adjustments) shall be transferred from unappropriated earnings to a special reserve. Any special reserve appropriated may be reversed to the extent of the decrease in the net debit balance.

Legal reserve shall be appropriated until it has reached Taishin Bank’s paid-in capital. This reserve may be used to offset a deﬁ cit. When the legal reserve has reached 50% of Taishin Bank’s paid-in capital, up to 50% thereof may be transferred to paid-in capital.

The appropriations of earnings for 2010 have not been approved by the Board of Directors on behalf of the shareholders as of the date of the independent auditors’ report.

The appropriations of earnings for 2009 had been approved by the Board of Directors on behalf of the

142 2010 Annual Report shareholders on May 27, 2010. The appropriations were as follows: Dividends of preferred stock - $120,000 thousand, dividends of common stock - $540,869 thousand, and bonus to employees - $54 thousand.

The difference ($10 thousand) between the approved amount and the accrual amount of the bonus to employees refl ected in the fi nancial statements for the year ended December 31, 2009 which were primarily due to changes in estimates had been adjusted in profi t and loss for the year ended December 31, 2010.

Information about the earnings appropriation for bonus to employees, directors and supervisors is available on the Market Observation Post System website of the Taiwan Stock Exchange.

24. UNREALIZED GAIN OR LOSS ON FINANCIAL INSTRUMENTS

For the years ended December 31, 2010 and 2009, movements of unrealized gain or loss on financial instruments were as follows:

Available-for- Equity-method sale Financial Assets Investments Total 2010 Balance, January 1, 2010 $ 137,765 $ 470 $ 138,235 Recognized in stockholders’ equity 78,378 (401) 77,977 Transferred to proﬁ t or loss (53,538) - (53,538) Balance, December 31, 2010 $ 162,605 $ 69 $ 162,674 2009 Balance, January 1, 2009 $ (479,446) $ (1,837) $ (481,283) Recognized in stockholders’ equity 653,202 2,307 655,509 Transferred to proﬁ t or loss (35,991) - (35,991) Balance, December 31, 2009 $ 137,765 $ 470 $ 138,235

25. PENSION PLANS

The pension plan under the Labor Pension Act (LPA) is a deﬁ ned contribution plan. Based on the LPA, the rate of Taishin Bank’s monthly contributions to employees’ individual pension accounts is at 6% of monthly salaries and wages. Related pension costs were $249,675 thousand and $218,199 thousand for the years ended December 31, 2010 and 2009, respectively.

Based on the defi ned benefi t plan under the Labor Standards Law (LSL), pension benefi ts are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. Taishin Bank contributes amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. The pension fund is deposited in the Bank of Taiwan in the

2010 Annual Report 143 X. Notes To Financial Statements

committee’s name. Taishin Bank recognized pension costs of $77,925 thousand and $23,712 thousand for the years ended December 31, 2010 and 2009, respectively.

Other information on the deﬁ ned beneﬁ t plan is as follows:

a. Components of net pension cost: Years Ended December 31 2010 2009 Service cost $ 22,680 $ 25,889 Interest cost 25,524 34,610 Projected return on plan assets (26,425) (36,787) Amortization of net transitional obligation 56,146 - Net pension cost $ 77,925 $ 23,712

b. Reconciliation of funded status of the plan and accrued pension cost as of December 31, 2010 and 2009: 2010 2009 Benefi t obligation Vested benefi t obligation $ (78,339) $ (47,258) Non-vested benefi t obligation (771,945) (722,599) Accumulated benefi t obligation (850,284) (769,857) Additional benefi t based on future salaries (497,464) (506,381) Projected benefi t obligation (1,347,748) (1,276,238) Fair value of plan assets 1,322,512 1,321,280 Funded status (25,236) 45,042 Unrecognized net loss 49,579 57,225 Prepaid pension cost $ 24,343 $ 102,267 Vested benefi t $ (97,156) $ (59,635)

c. Actuarial assumptions as of December 31, 2010 and 2009:

2010 2009 Discount rate used in determining present values 2.00% 2.00% Future salary increase rate 3.00% 3.00% Expected rate of return on plan assets 2.00% 2.00%

2010 2009

d. Contributions to the fund $ - $ 29,335

e. Payments from the fund 20,345 $ 27,807

According to the order of Bei-Shi-Lao-Yi No. 09837119200 and No. 09940317000, the allocation of workers’ retirement reserve fund has been suspended from September 1, 2009 to August 31, 2011.

144 2010 Annual Report 26. FEE INCOME, NET

Years Ended December 31 2010 2009 Fee income Fees from imports and exports $ 161,765 $ 138,812 Interbank service fees 509,065 474,632 Fees from loans 610,063 418,217 Fees from guarantees 99,832 110,791 Acceptance fees 9,391 7,308 Factoring fees 394,964 296,754 Fees from the trustee business 1,781,949 1,589,130 Fees from the trustee associate business 31,671 32,043 Agency fees 1,380,095 1,149,137 Credit card fees 3,061,015 2,548,308 Cash card fees $ 11,912 $ 15,998 Others 256,537 376,151 8,308,259 7,157,281 Fee expense Credit card fees (815,033) (690,679) Interbank service fees (80,890) (61,888) Fees from the trustee business (63,083) (28,600) Fees from outsourcing collection service (158,796) (155,807) Custody fees (16,199) (22,157) Fees from marketing (409,903) (396,378) Others (207,608) (175,040) (1,751,512) (1,530,549) Fee income, net $ 6,556,747 $ 5,626,732

27. PERSONNEL, DEPRECIATION, DEPLETION AND AMOR- TIZATION EXPENSES

Years Ended December 31 2010 2009 Personnel expenses Salary $ 5,562,045 $ 5,321,488 Labor/health insurance 394,679 349,821 Pension 327,600 241,911 Others 209,337 189,176 Depreciation 832,531 879,812 Amortization 327,512 404,561

2010 Annual Report 145 X. Notes To Financial Statements

28. INCOME TAX

a. A reconciliation of income tax expense based on income before income tax at the 17% or 25% statutory rate and income tax expense was as follows:

Years Ended December 31 2010 2009 Income tax expense at the 17% or 25% statutory rate $ 1,824,801 $ 865,780 Tax effect of adjusting items: Permanent differences Tax-exempt income (282,590) (328,167) Others 60,940 (157,589) Temporary differences (343,092) (313,549) Loss carryforward used (994,787) Additional income tax under the Alternative Minimum Tax Act - 41,473 Current income tax expense 265,272 107,948 Deferred income tax expense Temporary differences $ 343,092 $ 313,549 Loss carryforwards 994,787 - Adjustments for valuation allowances - 33,258 Effect of tax law changes on deferred income tax 1,257,554 2,129,102 Tax separately levied on interest from short-term bills 122 2,396 Tax separately levied on interest from asset based securities - 11,633 Adjustment for prior year’s tax (3,114) 6,280 Offshore income tax expense - 37,711 $ 2,857,713 $ 2,641,877

In January 2009, the Legislative Yuan passed the amendment of Article 39 of the Income Tax Law, which extends the operating losses carryforward period from ﬁ ve years to ten years.

In March 2009, the Legislative Yuan passed the amendment of Article 24 of the Income Tax Law, which requires (a) the profi t-seeking enterprise that invests in short-term notes for which the issuance dates are on and after January 1, 2010 to include the interest income arising, which was taxed separately prior to January 1, 2010, in its taxable income; and (b) the profi t-seeking enterprise that invests in benefi ciary securities or asset-based securities issued under the Financial Asset Securitization Act or Real Estate Securitization Act to include from January 1, 2010 the interest income arising, which was taxed separately prior to January 1, 2010, in its taxable income.

In May 2009, the Legislative Yuan passed the amendment of Article 5 of the Income Tax Law, which reduces a proﬁ t-seeking enterprise’s income tax rate from 25% to 20%, effective 2010.

In May 2010, the Legislative Yuan passed the amendment of Article 5 of the Income Tax Law, which reduces a proﬁ t-seeking enterprise’s income tax rate from 20% to 17%, effective 2010.

b. Details of deferred income tax assets and liabilities were as follows: December 31 2010 2009 Assets Allowance for bad debts in excess of tax limit $ 878,878 $ 1,433,783 Loss carryforwards 5,258,898 6,900,254 Unrealized loss on ﬁ nancial instruments 175,842 64,925 Unrealized loss on assumed collaterals and residuals 23,144 27,264 Reserve for compensation on consigned structured notes 76,914 228,982 6,413,676 8,655,208 Liabilities Amortization of goodwill (195,887) (230,455) Deferred income tax assets, net $ 6,217,789 $ 8,424,753

146 2010 Annual Report The movements of deferred income tax assets (liabilities) were as follows:

Year Ended December 31, 2010 Receivables from Balance, January 1, Recognized in Balance, December Taishin Financial 2010 Income Statement 31, 2010 Holding Temporary differences Allowance for bad debts in excess of tax limit $ 1,433,783 $ (554,905) $ - $ 878,878 Loss carryforwards 6,900,254 (2,029,825) 388,469 5,258,898 Unrealized loss on assumed collaterals and 27,264 (4,120) -23,144 residuals Loss on compensation on consigned 228,982 (152,068) -76,914 structured notes Unrealized (gain) loss on ﬁ nancial instruments 64,925 110,917 -175,842 Amortization of goodwill (230,455) 34,568 - (195,887) $ 8,424,753 $ (2,595,433) $ 388,469 $ 6,217,789

Year Ended December 31, 2009 Receivables from Balance, January 1, Recognized in Balance, December Taishin Financial 2010 Income Statement 31, 2010 Holding Temporary differences Allowance for bad debts in excess of tax limit $ 2,797,602 $ (1,363,819) $ - $ 1,433,783 Loss carryforwards 8,120,848 (1,726,491) 505,897 6,900,254 Unrealized loss on assumed collaterals and 1,581 25,683 -27,264 residuals Loss on compensation on consigned -228,982 -228,982 structured notes Investment tax credits 33,258 (33,258) - - Amortization of goodwill (274,788) 44,333 - (230,455) Unrealized (gain) loss on ﬁ nancial instruments (283,736) 348,661 - 64,925 $ 10,394,765 $ (2,475,909) $ 505,897 $ 8,424,753

Information on loss carryforwards is as follows: Expiry Year December 31, 2010 2016 $ 4,409,317 2017 430,233 2018 419,348 $ 5,258,898

c. The estimated (payables) receivables from Taishin Financial Holding due to the adoption of the linked-tax system were as follows:

December 31 2010 2009 (Payables) receivables from Taishin Financial Holding $ (546,304) $ (8,164)

2010 Annual Report 147 X. Notes To Financial Statements

d. Information on the integrated income tax was as follows:

December 31 2010 2009 Balance of imputation credits accounts (ICA) $ 29,495 $ 281,761 Unappropriated earnings generated on and after January 1, 1998 $ 7,876,412 $ 944,099

The creditable ratio for distribution of earnings of 2010 and 2009 was 0.37% (estimate) and 31.22%, respectively.

For distribution of earnings generated on and after January 1, 1998, the ratio for the imputation credits allocated to stockholders of Taishin Bank is based on the balance of the ICA as of the date of dividend distribution. The expected creditable ratio for the 2010 earnings may be adjusted, depending on the ICA balance on the date of dividend distribution.

e. The income tax returns until 2005 had been examined and cleared by the tax authorities.

f. In regard to the goodwill amortization of $635,098 thousand, $758,768 thousand, $758,518 thousand and $758,518 thousand from the merger of Dah An Bank reported in the 2002, 2003, 2004 and 2005 income tax returns of Taishin Bank, the tax authority had disapproved the related expense due to the reason that the goodwill resulted from negotiations of the dealing parties rather than a purchase from open market. Taishin Bank is ﬁ ling an appeal to a high court.

g. In regard to the goodwill amortization $18,109 thousand and $71,577 thousand from the acquisition of the 10th Credit Cooperative of Hsin-Chu in the 2004 and 2005 income tax returns of Taishin Bank, the tax authority had disapproved the related expense due to the reason that the goodwill was not assessed by applying professional valuation procedures and the identiﬁ able assets and liabilities were not analyzed by fair value. Taishin Bank is ﬁ ling an appeal to a high court.

148 2010 Annual Report 29. EARNINGS (LOSS) PER SHARE (“EPS”)

Year Ended December 31, 2010 Shares Earnings Per Share Amounts (Numerator) (Denominator) (In Dollars) Pretax After-tax (In Thousands) Pretax After-tax

Net income $ 10,734,125 $ 7,876,412 Less: Preferred dividends (120,000) (120,000)

Net income $ 10,614,125 $ 7,756,412 Basic EPS Income for the year attributable to common $ 10,614,125 $ 7,756,412 4,727,517 $ 2.25 $ 1.64 stockholders Effect of dilutive potential common stock Convertible preferred shares 120,000 120,000 188,235 Bonus to employees - - 44

Diluted EPS Income for the year attributable to common stockholders plus effect of dilutive $ 10,734,125 $ 7,876,412 4,915,796 $ 2.18 $ 1.60 potential common stock

Year Ended December 31, 2009 Shares Earnings Per Share Amounts (Numerator) (Denominator) (In Dollars) Pretax After-tax (In Thousands) Pretax After-tax

Income before extraordinary gain $ 3,463,156 $ 821,279 Extraordinary gain 163,760 122,820 Net income 3,626,916 944,099 Less: Preferred dividends (120,000) (120,000)

Net income $ 3,506,916 $ 824,099

Basic EPS Income before extraordinary gain $ 3,343,156 $ 701,279 $ 0.84 $ 0.18

Extraordinary gain 163,760 122,820 0.04 0.03

Income for the year attributable to common 3,506,916 824,099 3,990,835 0.88 0.21 stockholders Effect of dilutive potential common stock - - 4

Diluted EPS Income for the year attributable to common stockholders plus effect of dilutive $ 3,506,916 $ 824,099 3,990,839 $ 0.88 $ 0.21 potential common stock

2010 Annual Report 149 X. Notes To Financial Statements

30. RELATED-PARTY TRANSACTIONS

Names and Relationships of Related Parties

Related Party Relationship with Taishin Bank Taishin Financial Holding Parent company Taishin Venture Capital Investment Co., Ltd. Wholly owned by the same parent company Taishin Securities A Co., Ltd. (“Taishin Securities”, merged with KGI Same as above Securities Co., Ltd. and dissolved on December 19, 2009) Taishin Marketing Consultant Co., Ltd. Same as above Taishin Bills Finance Co., Ltd. (“Taishin Bills Finance”) Same as above Taishin Asset Management Co., Ltd. (“Taishin AMC”) Same as above Taishin Securities B Co., Ltd. Under control by the same parent company Taishin Securities Investment Trust Co., Ltd. Wholly owned by the same parent company Taishin Securities Investment Advisory Co. Under control by the same parent company Chang Hwa Bank Under control by the same parent company Dah An Leasing Equity-method investee Taishin Insurance Agency Same as above Taishin Real-Estate Same as above An Hsin Real-Estate Same as above PayEasy Digital Same as above Shin Kong Recreation Co., Ltd. Its chairman is a relative within the ﬁ rst degree of Taishin Bank’s chairman Its chairman is a relative within the second degree of Taishin Shin Kong Life Insurance Co., Ltd. (“Shin Kong Life Insurance”) Bank’s chairman Shin Kong Synthetic Fibers Co., Ltd. (“Shin Kong Synthetic Fibers”) Same as above Shin Kong Financial Holding Co., Ltd. Same as above Shin Kong Engineering Co., Ltd. (“Shin Kong Engineering”) Same as above Jiouru Co., Ltd. (“Jiouru”) Same as above Jiouru Investment Co., Ltd. (“Jiouru Investment”) Same as above Shin Jui AMC Wholly owned by Taishin AMC UBright Optronics Corporation Same as above Taishin Futures Co., Ltd. (merged with KGI Securities Co., Ltd. and Wholly owned by Taishin Securities A Co., Ltd. dissolved on December 19, 2009) Taiwan Securities (Hong Kong) Co., Ltd. (merged with KGI Securi- Same as above ties Co., Ltd. and dissolved on December 19, 2009) PayEasy Travel Agency Co., Ltd. Wholly owned by PayEasy Digital Contect Digital Integration Co., Ltd. 65.75% owned by PayEasy Digital Taishin Insurance Broker Co., Ltd. Wholly owned by Taishin Insurance Agency CHB Life Insurance Agency Co., Ltd. Wholly owned by Chang Hwa Bank CHB Insurance Brokerage Co., Ltd. Same as above Shin Kong Commercial Bank Co., Ltd. (“Shin Kong Bank”) Wholly owned by Shin Kong Financial Holding Dah Chung Bills Finance Co., Ltd. (“Dah Chung Bills”) Taishin Bank serves as its corporate director Ming Huang International Property Co., Ltd. (“Ming Huang Interna- Taishin Financial Holding’s supervisor tional Property”) Taishin International Investment Development Co., Ltd. Taishin Financial Holding’s supervisor Peng Cheng Co., Ltd. (“Peng Cheng”) Taishin Financial Holding’s corporate director CyberSoft Digital Service Co., Ltd. (“CyberSoft Digital Service”) Related party in substance Parent company of Taishin International Investment Development Taishin Leasing & Financing Co., Ltd. (“Taishin Leasing & Financing”) Co., Ltd. Its chairman is a relative within the second degree of Taishin Fi- Miniatures Museum of Taiwan (“Miniatures Museum”) nancial Holding’s general manager Individual A A relative within the second degree of Taishin Bank’s chairman (Concluded)

150 2010 Annual Report Material Transactions with Related a.Loans, deposits and guaranteed loans

Percentage of Loans Interest Rate Loan to Related Parties Ending Balance Interest Revenue (%) (Per Annum %)

Year ended December 31, 2010 $ 1,228,386 0.23% 0-18.25 $ 20,179 Year ended December 31, 2009 1,204,235 0.22% 0.85-20 17,176

Year Ended December 31, 2010 Non- Loans to Related Parties Ending Balance Highest Amount Normal Loans performing Collateral Loans Consumer loans

52 accounts $ 71,651 $ 80,413 $ 71,651 $ - Land building chattels Self-used residence mortgage loans

70 accounts 389,235 443,609 389,235 -Land building

Other loans

Jiouru Investment 58,500 58,500 58,500 -Land building Jiouru 65,000 65,000 65,000 -Land building Ming Huang International Property 200,000 200,000 200,000 -Land building Peng Cheng 86,000 110,000 86,000 -Land building Shin Kong Engineering 13,000 43,000 13,000 -Stocks Shin Kong Synthetic Fibers 300,000 372,563 300,000 -Land building Miniatures Museum 45,000 45,000 45,000 -Land building

$ 1,228,386 $ 1,228,386

Year Ended December 31, 2009 Non- Loans to Related Parties Ending Balance Highest Amount Normal Loans performing Collateral Loans Consumer loans

39 accounts $ 65,979 $ 72,154 $ 65,979 $- Land, building, chattels Self-used residence mortgage loans

62 accounts 332,366 342,614 332,366 -Land, building

Other loans

Jiouru Investment 58,500 58,500 58,500 -Land, building Jiouru 65,000 65,000 65,000 -Land, building Ming Huang International Property 171,000 173,000 171,000 -Land, building Peng Cheng 110,000 110,000 110,000 -Land, building Shin Kong Engineering 42,000 62,000 42,000 -Stocks Shin Kong Synthetic Fibers 300,000 300,000 300,000 -Land, building Miniatures Museum 45,000 45,000 45,000 -Land, building Individual A 14,390 15,410 14,390 -Land, building

$ 1,204,235 $ 1,204,235

2010 Annual Report 151 X. Notes To Financial Statements

Year Ended December 31, 2010 Interest and Service Reserve for Ending Balance Highest Amount Charge Rate (Per Guarantee Collateral Annum %) Liabilities Guarantee for loans of related parties Shin Kong Synthetic Fibers $ 1,189 $ 6,156 0.05 $ - Stock and chattels PayEasy Digital 4,058 4,613 0.80 - Certiﬁ cate deposit

Year Ended December 31, 2009 Interest and Service Reserve for Highest Ending Balance Charge Rate (Per Guarantee Collateral Amount Annum %) Liabilities Guarantee for loans of related parties Shin Kong Synthetic Fibers $ 6,162 $ 300,000 0.60 $ - Stock and chattels PayEasy Digital 4,618 4,867 0.80 - Certiﬁ cate deposit

Year Ended December 31, 2010 Interest Rate (Per Ending Balance Interest Expense Annum %) Deposits from related parties Taishin Financial Holding $ 19,875,925 0.10-0.50 $ (80,651) Dah Chung Bills 422,862 0.00-0.60 (1,595) Taishin Bills Finance 523,343 0.00-0.85 (1,598) Taishin Insurance Agency 830,931 0.00-0.12 (619) Others 2,980,614 (11,749) $ 24,633,675 $ (96,212)

Year Ended December 31, 2009 Interest Rate (Per Ending Balance Annum %) Interest Expense Deposits from related parties Taishin Financial Holding $ 22,557,438 0.00-1.65 $ (27,686) Shin Kong Life Insurance 670,916 0.02-2.58 (10,661) Taishin Insurance Agency 467,145 0.00-0.10 (421) Dah Chung Bills 423,775 0.00-2.50 (7,197) Others 2,611,741 (21,551) $ 26,731,015 $ (67,516) All transactions with related parties are made under arm’s length terms in compliance with normal policies.

b.Call loans to banks and call loans from banks

Year Ended December 31, 2010 Interest Interest Revenue Related Party Item Balance Highest Amount Rate % (Expense) Dah Chung Bills Call loans to banks $ - $ 500,000 0.21 $ 14 Taishin Bills Finance Call loans to banks - 1,955,000 0.12-0.48 573 Call loans from banks -240,000 0.10-0.24 (6)

Year Ended December 31, 2009 Interest Interest Revenue Related Party Item Balance Highest Amount Rate % (Expense) Dah Chung Bills Call loans to banks $ - $ 1,405,000 0.10-0.13 $ 31 Taishin Bills Finance Call loans to banks 1,000,000 2,190,000 0.10-0.60 884 Call loans from banks - 450,000 0.11 (4) Chang Hwa Bank Call loans to banks -966,000 - 1,796 All transactions with related parties are made under arm’s length terms in compliance with normal policies.

152 2010 Annual Report c.Trading of securities Year Ended December 31, 2010 Repurchase Agreements Resell Agreements Purchase Price Sales Price Interest Rate Ending Interest Rate Related party (Accumulated (Accumulated Ending Balance (Per Annum %) Balance (Per Annum %) Amount) Amount) Taishin Bills Finance $ 1,587,273 $ 1,777,357 $ - - $ - - Chang Hwa Bank 2,122,309 4,016,982 -- - - Dah Chung Bills 3,380,475 3,953,508 -- - - Shin Kong Life Insurance - -200,000 0.30-0.44 - - Taishin Financial Holding - - 1,877,201 0.14-0.40 - - $ 7,090,057 $ 9,747,847 $ 2,077,201 $ -

Year Ended December 31, 2009 Repurchase Agreements Resell Agreements Purchase Price Sales Price Interest Rate Ending Interest Rate Related party (Accumulated (Accumulated Ending Balance (Per Annum %) Balance (Per Annum %) Amount) Amount) Taishin Bills Finance $ 1,912,727 $ 802,648 $ 52,682 (5.80)-0.10 $ - - Chang Hwa Bank 2,532,031 3,250,951 - - - - Dah Chung Bills 2,697,519 2,517,485 - - - - Taishin Securities A 12,040,232 13,344,281 - - - - Taishin Financial Holding - - 2,795,303 0.11-0.40 - - $ 19,182,509 $ 19,915,365 $ 2,847,985 $ - All transactions with related parties are made under arm’s length terms in compliance with normal policies. d.Derivative transactions Year Ended December 31, 2010 Derivative Nominal Principal Unrealized Gain Related Party Period Account Balance Contracts Amount (Loss) Interest rate 2006.12.18- Financial liabilities at Shin Kong Life Insurance $ 250,000 $ (3,567) $ (1,942) swaps 2011.06.18 FVTPL Interest rate 2008.04.17- Financial liabilities at Dah Chung Bills 600,000 (93) (11,116) swaps 2015.11.11 FVTPL Interest rate 2007.06.12- Financial assets at Taishin Bills Finance 4,200,000 20,677 32,890 swaps 2013.05.16 FVTPL

Year Ended December 31, 2009 Derivative Nominal Principal Unrealized Gain Related Party Period Account Balance Contracts Amount (Loss) Interest rate 2003.12.12- Financial liabilities at Taishin Financial Holding $ 250,000 $ 977 $ (4,582) swaps 2010.12.12 FVTPL Interest rate 2005.03.02- Financial assets at Shin Kong Life Insurance 250,000 (3,627) swaps 2011.06.18 FVTPL 1,624 2008.08.15- Financial liabilities at Swaps 640,600 (1,364) 2010.08.19 FVTPL (13,496) Interest rate 2005.01.05- Financial liabilities at Dah Chung Bills 1,500,000 (6,142) swaps 2013.04.22 FVTPL (11,210) Interest rate 2007.04.12- Financial assets at Taishin Bills Finance 8,100,000 15,337 swaps 2013.05.16 FVTPL 53,566 All transactions with related parties are made under arm’s length terms in compliance with normal policies.

e.Property transactions Taishin Bank had sold land and buildings to Taishin AMC and Taishin Real Estate in September 2009. The disposal prices of land and buildings were $187,850 thousand and $58,340 thousand with reference to professional appraiser reports. The gain on disposal of land and buildings were $116 thousand and $2,051 thousand, which had been received as of December 31, 2009.

2010 Annual Report 153 X. Notes To Financial Statements

f. Other material transactions Years Ended December 31 2010 2009 Item Amount Item Amount Taishin Insurance Agency Fee income $ 868,089 Fee income $ 796,420 Cybersoft Digital Service Operating expense 449,622 Operating expense 338,610 All transactions with related parties are made under arm’s length terms in compliance with normal policies.

Compensation of Directors, Supervisors and Management Personnel: Years Ended December 31 2010 2009 Salaries $ 108,660 $ 100,526 Pensions 1,601 1,364 Incentives 154,868 130,625 $ 265,129 $ 232,515

31. MORTGAGED OR PLEDGED ASSETS

December 31 Mortgaged Assets Description 2010 2009 Available for sale fi nancial assets Certifi cate of deposits and bonds $ 7,863,735 $ 931,418 Refundable deposits Cash and certifi cate of deposits 1,062,541 13,089,457

32. SIGNIFICANT COMMITMENTS AND CONTINGENCIES

a.In addition to those mentioned in Note 5, Taishin Bank had the following contingent liabilities and commitments as of December 31, 2010 and 2009: 2010 2009 Guarantees $ 13,045,427 $ 15,142,177 Letters of credit 6,487,169 6,290,363 Trust liabilities 222,627,730 226,267,357 Unpaid equipment purchase contracts 479,825 427,531 Unused loan commitments (excluding credit card) 95,911,601 69,945,082 Unused loan commitments (credit card only) 438,621,284 374,213,886

b.Under Article 17 of the implementation rules of the Trust Law, Taishin Bank disclosed its balance sheets and income statements of trust accounts and its asset items, as follows:

Trust Accounts Balance Sheets (In Thousands of New Taiwan Dollars) December 31 December 31 Trust assets 2010 2009 Trust liabilities 2010 2009

Deposit $ 4,664,055 $ 4,415,271 Payables $ 130,408 $ 104,088 Financial assets Self-valuation securities Bonds 32,112,327 44,194,475 under custody 28,035,267 28,081,132 Common stocks 40,443,832 41,129,332 Other liabilities 64,450 58,351 Mutual funds 111,355,611 103,149,334 Trust capital 190,909,474 184,906,908 Bonds and securities Reserves and Purchased under retained earnings 3,488,131 13,116,878 resell agreements 200,462 355,885 Structured notes - 300,000 Receivables 175,597 76,946 Real estate 4,926,868 4,208,972 Securities under custody 28,035,267 28,081,132 Others 713,711 356,010

$222,627,730 $226,267,357 $ 222,627,730 $ 226,267,357

154 2010 Annual Report Trust Income Statements (In Thousands of New Taiwan Dollars) Years Ended December 31 2010 2009

Revenues Interest $ 16,724 $ 45,678 Rent 181,318 175,899 Cash dividends 1,208,047 1,017,246 Fund distribution 70,735 82,948 Others 66,320 41,369 1,543,144 1,363,140 Expenses Administration fees (85,104) (78,182) Custodian fees (3,952) (5,129) Service fees (28,903) (23,424) Repair (4,711) (4,564) Interest (378) (613) Taxes (12,926) (10,520) Insurance (2,109) (2,211) Professional service fees (1,035) (1,098) Others (25,080) (23,546) (164,198) (149,287)

Net income $ 1,378,946 $ 1,213,853 Trust Asset Summary (In Thousands of New Taiwan Dollars) December 31 2010 2009 Deposit $ 4,664,055 $ 4,415,271 Financial assets Bonds 32,112,327 44,194,475 Common stocks 40,443,832 41,129,332 Mutual funds 111,355,611 103,149,334 Bonds and securities purchased under resell agreements 200,462 355,885 Structural notes - 300,000 Receivables 175,597 76,946 Real estate 4,926,868 4,208,972 Securities under custody 28,035,267 28,081,132 Others 713,711 356,010 $ 222,627,730 $ 226,267,357 According to the General Agreement, the net assets value denominated in U.S. dollar should be translated into New Taiwan dollar at the settlement rate of New Taiwan dollar against U.S. dollar announced by Taipei Forex Brokerage Co., Ltd. for the day on a net basis. If foreign exchange rates are not available, the last known rate should be used. c.Taishin Bank enters into operating leases for its domestic branches, and main provisions of the contracts are as follows: 1)The lease period ranges from one to ﬁ ve years. Rental payments are made annually. 2)As of December 31, 2010, the estimated future lease payments under the lease contracts are as follows: 2011 $ 318,886 2012 252,675 2013 202,568 2014 162,617 2015 107,886 Taishin Financial Holding has already appointed Lee and Li Attorney-at-Law to help Taishin Bank’s customers to declare to Lehman Brother their legal rights on the losses on their investments in Lehman Brother’s securities. The related law service charge will be paid by Taishin Bank. Because this case involves claims from all over the world, Taishin Bank couldn’t reasonably estimate the related litigation fee.

2010 Annual Report 155 X. Notes To Financial Statements

33. FINANCIAL INSTRUMENTS

a. Fair value December 31, 2010 Carrying Value Fair Value Financial assets Cash and cash equivalents $ 12,903,066 $ 12,903,066 Due from the Central Bank and call loans to other banks 37,236,653 37,236,653 Financial assets at FVTPL 22,263,352 22,263,352 Bonds and securities purchased under resell agreements 2,992,554 2,992,554 Receivables 96,256,074 96,256,074 Loans 531,674,018 531,674,018 Available-for-sale fi nancial assets 172,426,842 172,426,842 Held-to-maturity fi nancial assets 3,312,094 3,383,778 Bond investment without active market 300,000 300,000 Other fi nancial assets 213,435 213,435 Financial liabilities Due to banks and Central Bank 56,332,391 56,332,391 Financial liabilities at FVTPL 15,911,230 15,911,230 Bonds and securities sold under repurchase agreements 17,040,348 17,040,348 Payables 21,106,394 21,106,394 Deposits 713,580,371 713,580,371 Bank debentures 25,000,000 25,000,000 Other fi nancial liabilities 113,796 113,796

December 31, 2009 Carrying Value Fair Value Financial assets Cash and cash equivalents $ 8,136,786 $ 8,136,786 Due from the Central Bank and call loans to other banks 128,379,060 128,379,060 Financial assets at FVTPL 24,907,554 24,907,554 Bonds and securities purchased under resell agreements 2,420,000 2,420,000 Receivables 84,838,866 84,838,866 Loans 495,583,668 495,583,668 Available-for-sale fi nancial assets 36,484,764 36,484,764 Held-to-maturity fi nancial assets 6,214,140 6,269,180 Bond investment without active market 300,000 300,000 Other fi nancial assets 165,534 165,534 Financial liabilities Due to banks and Central Bank 54,181,462 54,181,462 Financial liabilities at FVTPL 16,990,037 16,990,037 Bonds and securities sold under repurchase agreements 7,239,422 7,239,422 Payables 18,956,708 18,956,708 Deposits 654,664,982 654,664,982 Bank debentures 25,000,000 25,000,000 Other fi nancial liabilities 151,200 151,200

b.Methods and assumptions used to estimate the fair values of ﬁ nancial instruments were as follows: 1) The carrying amounts of the following short-term financial instruments approximate their fair values because of their short maturities: Cash and cash equivalents, due from the Central Bank and call loans to other banks, bonds and securities purchased under resell agreements, receivables, due to banks and Central Bank, payables, remittances, and bonds and securities sold under repurchase agreements.

156 2010 Annual Report 2) Fair values of financial instruments at FVTPL and available-for-sale or held-to-maturity financial assets are based on their quoted prices in an active market. For those instruments with no quoted market prices, their fair values are determined using valuation techniques incorporating estimates and assumptions consistent with those generally used by other market participants to price ﬁ nancial instruments.

The fair value of debt investments not actively traded in the market is determined at their expected future cash ﬂ ow, the frequency of interest payments, the remaining contract period, the creditworthiness of borrowers and the discount rate, which is determined at the yield rate of the equivalent instruments in the market. The fair value of equity investments is determined at their market values.

The fair values of bond investments without active market are based on their transaction price or on quoted price made by market makers. For those investments with no transaction prices or quoted prices, their fair values are determined through certain valuation techniques.

The fair value of derivatives is determined (a) at the amount Taishin Bank expects to receive or pay on the derivative contracts or (b) by using a model generally used in the market to determine the fair values of derivative ﬁ nancial instruments.

3) Loans and deposits are interest-bearing financial assets and liabilities, and their carrying values approximate their fair values. The carrying amount of delinquent loans is the estimated collectable amount, which is the book value less allowance for bad debts. Thus, the fair value of delinquent loans and receivables is determined at their carrying value.

4) Financial assets carried at cost and investments under equity method, including non-public stocks and stocks traded in the Emerging Stock Market, are equity instruments with fair values that cannot be measured reliably, Fair values of these instruments, which are determined at their carrying values. Information of investments accounted for by the equity method is shown in Note 10. c. Fair values of fi nancial assets and liabilities estimated based on quoted market prices or by using valuation techniques were as follows: December 31, 2010 Quoted Market Prices Valuation Techniques Financial assets Financial assets at FVTPL $ 7,842,244 $ 14,421,108 Available-for-sale fi nancial assets 152,668,993 19,757,849 Held-to-maturity fi nancial assets - 3,383,778 Financial liabilities Financial liabilities at FVTPL 6,216 15,905,014

December 31, 2009 Quoted Market Prices Valuation Techniques Financial assets Financial assets at FVTPL $ 3,521,883 $ 21,385,671 Available-for-sale ﬁ nancial assets 997,813 35,486,951 Held-to-maturity ﬁ nancial assets - 6,269,180 Financial liabilities Financial liabilities at FVTPL - 16,990,037

2010 Annual Report 157 X. Notes To Financial Statements

d.Valuation gains (losses) arising from changes in fair value of financial instruments determined using quoted market prices were $70,636 thousand in 2010 and $707,814 thousand in 2009. On ﬁ nancial instruments with fair value determined using valuation techniques, there were valuation losses of $407,275 thousand in 2010 and $825,981 thousand in 2009.

e.The interest income (expense) associated with ﬁ nancial assets (liabilities) other than those at FVTPL were as follows:

Years Ended December 31 2010 2009 Total interest income $ 16,410,718 $ 17,563,629 Total interest expense 4,825,888 7,602,540

f. Financial risk 1) Market price risk

Taishin Bank entered into derivative contracts to meet customers’ and dealers’ needs and to manage market risks. While taking into account the CAR ratio, annual budget, and the anticipation on market ﬂ uctuations, the board of directors annually reviewed the measurement of risks and returns to determine whether they are appropriate, oversaw the assumed risks to ensure compliance with Taishin Bank’s requirement, approved the authorization limits on market risk, and ensured all trading engaged within authorization limits.

Taishin Bank uses the market risk factor sensitivity as the instrument for market risk controls. The market risk factor sensitivity refers to the change in value resulting from a unit change in a specific market risk factor. Market risk factors include interest rate, exchange rate, price of equity instruments and commodity prices. The market risk factor sensitivity of Taishin Bank discloses the market risks derived from different risk positions on the trading book.

Foreign exchange rate factor sensitivity, FX Delta, refers to the net risk positions of different currencies on balance sheet date. That is the effect of the change in present value due to 100% change in foreign exchange for each currency. The foreign exchange rate factor sensitivity not only includes those of foreign-currency derivatives, but also integrates the risk sensitivity of spot foreign rate positions for hedging purpose and spot position of different currencies.

Interest rate factor sensitivity refers to the effect (DV01 or PVBP) of change in present value of future cash ﬂ ows generated from spot rate positions and interest-rate derivative positions incurred by moving upwards the yield curves under evaluation by 0.01% (one b.p.) on the interest rate structure.

Risk sensitivity of equity instruments refers to the effect of price change in the value of derivative positions due to 100% price change in equity instruments and in underlying assets of derivative instruments. Taishin Bank trades equity instruments including stocks, convertible bonds, and stock- index options and stock options.

158 2010 Annual Report (In Thousands of Original Currencies) December 31 Market Risk Type Currency 2010 2009

Exchange rate risk value EUR $ 10,425 $ (17,183) JPY (2,580,520) (2,366,680) USD (62,425) 21,038 Others (Note) 1,836,282 942,290 Interest rate sensitivity DV01 Interest curve of bonds TWD (4,875) (4,472) USD (136) (93) Others (Note) (128) (153) Interest curve of IRS TWD 5,100 2,821 USD 5 (25) Others (Note) (101) (123) Equity securities risk value TWD 3,090,159 1,417,366 USD 2,079 1,071 Other USD 31,322 30,102 Note:Presented as New Taiwan dollars transactions from original currencies.

2) Credit risk Credit risks refer to the losses from ﬁ nancial instruments incurred by non-performance of the contracted obligations by Taishin Bank’s counterparties or others. Taishin Bank provides loans, loan commitments and guarantees services based on prudent credit evaluations. The collaterals that Taishin Bank demands to be pledged on loans, loan commitments or guarantees are normally cash, inventory, marketable securities or other property. The secured loans were 69.59% and 67.01% of the total loans as of December 31, 2010 and 2009, respectively. When the counterparties or others default, Taishin Bank has rights to enforce the collaterals or other guarantees and effectively reduce credit risks. In disclosures on the maximum amounts for credit risk exposures, the market values of the collaterals are not considered. Taishin Bank trades various derivatives with its peer ﬁ nancial institutions within trading limits authorized in accordance with world rankings and credit ratings. Taishin Bank anticipates that the probability of default by counterparties is very low.

The maximum credit risk exposures of various ﬁ nancial assets are the same as carrying values, please refer to accompanying ﬁ nancial statements.

The contract amounts of financial assets with off-balance-sheet credit risks held by the Bank as of December 31, 2010 and 2009 were as follows:

Financial Instrument Type 2010 2009 Guarantees $ 13,045,427 $ 15,142,177 Letters of credit 6,487,169 6,290,363 Unused loan commitments (excluding credit card) 95,911,601 69,945,082 Unused loan commitments (credit card only) 438,621,284 374,213,886

Prominent concentration of credit risks occurs when transaction parties for financial instruments prominently concentrate on one party, or on a few that are in similar business lines or exhibit similar economic characteristics. The characteristics for concentration of credit risks include the nature of business activities engaged by debtors. Taishin Bank has not engaged in transactions that involved a prominent concentration of one client or one transaction party, but has transaction parties of similar industry type or from similar region.

2010 Annual Report 159 X. Notes To Financial Statements

The prominent concentration of credit risk was as follows:

December 31 2010 2009 Percentage of Percentage of Carrying Value Carrying Value Industry Type Item Item

Manufacturing $ 99,166,069 18.45 $ 87,891,141 17.49 Wholesale and retailing 20,341,384 3.78 20,623,423 4.10 Finance and insurance 43,560,982 8.10 33,034,444 6.57 Real estate and leasing 19,595,577 3.65 20,746,858 4.13 Service 8,557,943 1.59 6,224,659 1.24 Individuals 326,911,197 60.82 308,387,557 61.37 Others 19,354,683 3.61 25,578,793 5.10 $ 537,487,835 $ 502,486,875

December 31 2010 2009 Percentage of Percentage of Geographic Location Carrying Value Carrying Value Item Item

Asia $ 510,463,098 94.97 $ 479,412,038 95.40 Europe 2,765,431 0.51 1,719,156 0.34 North America 472,037 0.09 1,139,358 0.23 Others 23,787,269 4.43 20,216,323 4.03 $ 537,487,835 $ 502,486,875

3) Liquidity risk

Taishin Bank’s ratios of liquidity reserves were 26.04% and 22.75% as of December 31, 2010 and 2009, respectively. Since the capital and operating funds are deemed suffi cient to meet the cash fl ow arising from the performance of all the contracted obligations. Therefore, liquidity risk is not considered to be signifi cant. The derivative instruments held by Taishin Bank, except for interest rate swaps with leveraging effects, have very little probabilities of failing to be sold with reasonable prices in the market, and thus have very low liquidity risks.

Basic management policies adopted by Taishin Bank for fi nancial instruments are to match maturity and interest rate of fi nancial assets and liabilities and to control unmatched gap. Because of uncertainty of transaction terms and different kinds, maturity and interest rate of fi nancial assets and liabilities always can not match perfectly, and this kind of gap may cause potential gain or loss. Taishin Bank does the maturity analysis of fi nancial assets and liabilities according to their characteristic in order to analyze its liquidity ability. The maturity analysis was as follows:

160 2010 Annual Report December 31, 2010 Over Three Over Six Less Than One One Month to Over One Year Over Five Financial Instrument Months to Six Months to A Other Total Month Three Months to Five Years Years Months Year Assets Cash and cash equivalents $ 12,960,039 $ - $ - $ - $ - $ - $ (56,973) $12,903,066 Due from the Central Bank and 23,610,780 2,304,823 2,416,744 4,027,105 5,220,721 - (343,520) 37,236,653 Call loans to other banks Financial assets at FVTPL 5,202,490 2,235,504 1,578,916 1,721,333 11,039,664 (137,817) 623,262 22,263,352 Bonds and securities purchased 2,992,554 ------2,992,554 under resell agreements Receivables (excluding 75,079,019 5,464,785 7,749,425 8,115,339 2,407,246 - (2,045,018) 96,770,796 allowance) Loans (including delinquent 86,404,290 58,106,045 13,585,802 14,635,808 85,619,051 281,197,982 (2,061,143) 537,487,835 loans) (excluding allowance) Available-for-sale fi nancial 115,490,672 21,573,408 5,248,372 2,402,870 21,072,744 7,406,484 (767,708) 172,426,842 assets Held-to-maturity fi nancial assets -151,976 130,764 976,480 2,172,293 - (119,419) 3,312,094 Investments under equity - - - - - 1,861,285 - 1,861,285 method Financial assets carried at cost - - - - -2,428,175 -2,428,175 Other miscellaneous fi nancial 167 - - - 300,000 533,352 (7) 833,512 assets (excluding allowance) Total assets 321,740,011 89,836,541 30,710,023 31,878,935 127,831,719 293,289,461 (4,770,526 ) 890,516,164

Liabilities Due to the Central Bank and 16,281,291 6,890,180 11,384,940 22,187,381 - -(411,401) 56,332,391 other banks Financial liabilities at FVTPL 1,362,557 2,307,258 1,572,428 1,830,236 6,824,341 179,747 1,834,663 15,911,230 Bonds and securities sold under 17,273,718 105,692 59,797 - - - (398,859) 17,040,348 repurchase agreements Payables 19,103,737 728,887 930,396 880,138 46,765 - (583,529) 21,106,394 Deposits 107,530,893 174,999,617 90,687,774 144,585,391 162,479,959 38,444,048 (5,147,311) 713,580,371 Bank debentures - - - - 1,508,000 23,492,000 - 25,000,000 Other ﬁ nancial liabilities - - - - - 113,796 - 113,796 Total liabilities 161,552,196 185,031,634 104,635,335 169,483,146 170,859,065 62,229,591 (4,706,437) 849,084,530 Net current gap $ 160,187,815 $ (95,195,093) $ (73,925,312) $(137,604,211) $ (43,027,346) $231,059,870 $ (64,089) $ 41,431,634

December 31, 2009 Over Three Less Than One One Month to Over Six Months Over One Year Financial Instrument Months to Six Over Five Years Total Month Three Months to A Year to Five Years Months Assets Cash and cash equivalents $ 8,136,786 $ - $ - $ - $ - $ - $ 8,136,786 Due from the Central Bank and Call loans to 111,100,482 9,149,691 1,991,794 4,063,771 2,073,322 -128,379,060 other banks Financial assets at FVTPL 8,322,414 1,346,767 1,045,706 2,706,820 11,389,693 96,154 24,907,554 Bonds and securities purchased under resell 2,420,000 - - - - -2,420,000 agreements Receivables (excluding allowance) 63,210,141 5,222,932 7,018,449 7,692,329 2,134,740 -85,278,591 Loans (including delinquent loans) (excluding 83,259,161 43,272,433 13,969,199 17,484,121 76,047,424 268,454,537 502,486,875 allowance) Available-for-sale fi nancial assets 6,138,812 380,772 2,845,214 2,937,341 22,547,267 1,635,358 36,484,764 Held-to-maturity fi nancial assets 499,937 - 1,621,075 398,559 3,694,569 -6,214,140 Investments under equity method - - - - -1,281,667 1,281,667 Financial assets carried at cost - - - - - 2,407,505 2,407,505 Other miscellaneous fi nancial assets 90 - - - 300,000 648,018 948,108 (excluding allowance) Total assets 283,087,823 59,372,595 28,491,437 35,282,941 118,187,015 274,523,239 798,945,050

Liabilities Due to the Central Bank and other banks 9,809,300 8,375,753 11,740,720 24,245,689 10,000 - 54,181,462 Financial liabilities at FVTPL 865,198 1,108,076 1,191,107 2,990,460 10,594,091 241,105 16,990,037 Bonds and securities sold under repurchase 7,152,755 78,667 8,000 - - -7,239,422 agreements Payables 15,465,840 685,882 529,821 2,224,689 50,476 -18,956,708 Deposits 139,693,827 204,963,709 81,753,746 148,263,864 74,399,066 5,590,770 654,664,982 Bank debentures - - - - 10,000,000 15,000,000 25,000,000 Other ﬁ nancial liabilities - - - - - 151,200 151,200 Total liabilities 172,986,920 215,212,087 95,223,394 177,724,702 95,053,633 20,983,075 777,183,811 Net current gap $ 110,100,903 $ (155,839,492) $ (66,731,957) $ (142,441,761) $ 23,133,382 $ 253,540,164 $ 21,761,239

2010 Annual Report 161 X. Notes To Financial Statements

4) Cash ﬂ ow risk and fair value from change in interest rates

Taishin Bank’s cash fl ow risks as a result of change in interest rates refer to cash fl ow fl uctuations in the future from its assets with fl oating rates and liabilities with fl oating rates. Taishin Bank evaluates interest rates risks in trends of interest rate and engages in trading of interest rates swaps in accordance with risk levels and operational needs to reduce cash fl ow risks as a result of change in interest rates.

a) Expected revaluation date and expected settlement date As of December 31, 2010 and 2009, expected revaluation date and expected settlement date are not affected by settlement date designed in the contract. Interest risks are presented with the carrying amounts of ﬁ nancial assets and liabilities according to its earliness of revaluation date and settlement date in the following table.

December 31, 2010 Over Three Over Six Over One Less Than One Month to Over Five Financial Instrument Months to Six Months to A Year to Five Other Total One Month Three Months Years Months Year Years Assets Due from the Central Bank and call loans $22,151,123 $2,304,823 $ 2,416,744 $ 4,027,105 $ 5,220,721 $ - $ (394,980) $ 35,725,536 to other banks Financial assets at 4,833,161 2,235,504 1,578,916 1,721,333 11,039,667 411,178 628,156 22,447,915 FVTPL Available-for-sale 114,539,472 21,573,408 5,248,372 2,402,870 21,072,746 7,406,484 (733,381) 171,509,971 ﬁ nancial assets Held-to-maturity - 151,976 130,764 976,480 2,172,293 - (119,419) 3,312,094 ﬁ nancial assets Loans 323,179,090 70,382,044 11,666,055 9,643,243 76,019,803 46,344,694 (2,042,719) 535,192,210 Others - - - - - 73,201,744 - 73,201,744 Total assets 464,702,846 96,647,755 21,040,851 18,771,031 115,525,230 127,364,100 (2,662,343) 841,389,470 Liabilities

Deposits $87,265,366 $144,585,391 $162,479,959 $ 38,444,048 (5,104,649) 709,273,698 $103,181,558 $178,422,025 Borrowings (including deposits from post 33,448,224 8,473,872 22,592,737 21,108,681 3,300,000 9,005,796 (810,261) 97,119,049 ofﬁ ce) Others 9,191,102 1,044,223 22,357,993 14,997,826 18,003,747 (143,658) 1,834,663 67,285,896

Total liabilities 132,216,096 180,691,898 47,306,186 (4,080,247) 873,678,643 145,820,884 187,940,120 183,783,706 Interest sensitivity gap $318,881,962 $(91,292,365) $(111,175,245) $(161,920,867) $(68,258,476) $ 80,057,914 $ 1,417,904 ($ 32,289,173)

December 31, 2009 Over Three Less Than One One Month to Months to Six Over Six Months Over One Year Financial Instrument Month Three Months Months to A Year to Five Years Over Five Years Total Assets Due from the Central Bank and call loans $ 106,890,682 $ 9,149,691 $ 1,991,794 $ 4,063,771 $ 2,073,322 $ - $ 124,169,260 to other banks Financial assets at 8,345,283 1,346,767 1,048,307 2,706,820 10,992,950 97,267 24,537,394 FVTPL Available-for-sale 5,110,640 380,772 2,845,214 2,937,341 22,547,267 1,635,358 35,456,592 ﬁ nancial assets Held-to-maturity 499,936 - 1,621,075 398,559 3,694,570 - 6,214,140 ﬁ nancial assets Loans 324,447,941 54,788,932 11,730,108 15,276,069 63,380,089 32,323,537 501,946,676 Others 12,000,000 - - - - 60,837,283 72,837,283 Total assets 457,294,482 65,666,162 19,236,498 25,382,560 102,688,198 94,893,445 765,161,345

Liabilities Deposits 393,902,524 146,856,846 47,834,889 89,375,136 7,170,845 5,590,770 690,731,010 Borrowings (including deposits from post 16,043,545 3,148,481 8,000 -10,000,000 15,151,200 44,351,226 ofﬁ ce)

Others 781,881 754,767 1,039,491 4,515,440 10,575,376 1,327,531 18,994,486

Total liabilities 410,727,950 150,760,094 48,882,380 93,890,576 27,746,221 22,069,501 754,076,722 Interest sensitivity gap $ 46,566,532 $ (85,093,932) $ (29,645,882) $ (68,508,016) $ 74,941,977 $ 72,823,944 $ 11,084,623

162 2010 Annual Report b) Effective interest rate (excluding ﬁ nancial assets at FVTPL) As of December 31, 2010 and 2009, the effective interest rate of ﬁ nancial instruments held or issued by the Bank grouping based on main currencies are as follows:

Effective Interest Rate (%) 2010 2009 NTD USD NTD USD Available-for-sale ﬁ nancial assets 0.32-4.62 0.37-6.00 0.28-5.75 0.30-6.50 Held-to-maturity ﬁ nancial assets - 0.53-7.38 1.88-3.78 0.39-7.38 Loans 0.08-20.00 0.65-6.20 0.08-20.00 0.50-6.00 Bonds and securities sold under repurchase agreements 0.22-0.55 - 0.00-0.45 - Deposits 0.00-4.00 0.01-4.20 0.00-4.00 0.01-4.95 Bank debentures 0.65-4.45 - 0.65-4.45 -

34. OTHER DISCLOSURES REQUIRED FOR OF FINANCIAL INSTITUTIONS

a. Asset quality

December 31, 2010 December 31, 2009 Items Item Non- Non- Non- Coverage Non- Coverage performing Allowance for performing Allowance for performing Loans Ratio performing Loans Ratio Loans Ratio Loan Losses Loans Ratio Loan Losses Business Type Loans (Note a) (Note c) Loans (Note a) (Note c) (Note b) (Note b)

Corporate Secured $ 492,591 $100,610,328 0.49% $ 1,217,497 247.16% $ 1,095,895 $ 81,161,518 1.35% $ 1,734,594 158.28% ﬁ nance Unsecured 484,347 128,152,874 0.38% 1,588,312 327.93% 227,998 122,346,240 0.19% 1,731,237 759.32%

Mortgage loans (Note d) 269,382 203,730,649 0.13% 709,909 263.53% 503,577 197,343,320 0.26% 271,347 53.88%

Cash cards 138,243 10,870,988 1.27% 975,749 705.82% 269,405 14,426,098 1.87% 1,508,548 559.96%

Consumer Credit loans (Note e) 236,009 21,637,759 1.09% 1,062,488 450.19% 525,422 24,518,866 2.14% 1,447,676 275.53% ﬁ nance Secured 78,645 70,833,163 0.11% 71,107 90.42% 142,268 57,865,683 0.25% 93,167 65.49% Others Unse- (Note f) 82,334 3,713,217 2.22% 200,498 243.52% 154,496 4,825,150 3.20% 116,638 75.50% cured

Subtotal 1,781,551 539,548,978 0.33% 5,825,560 326.99% 2,919,061 502,486,875 0.58% 6,903,027 236.49%

Others (Note h) - (2,061,143) - (11,743) ------

Total 1,781,551 537,487,835 0.33% 5,813,817 326.33% 2,919,061 502,486,875 0.58% 6,903,207 236.49%

Credit card 142,169 34,118,130 0.42% 662,455 465.96% 240,271 31,342,477 0.77% 684,832 285.02%

Accounts receivable factoring with no - 59,809,857 - - - 2,893 49,062,200 0.01% 2,893 100.00% recourse (Note g)

Note a：Nonperforming loans are in accordance with the Regulations of the Procedures for Banking Institutions to Evaluate Assets and Deal with Past Due/Non- performing Loans and Bad Debts issued by MOF. Non-performing loans of credit cards are defined in the Letter issued by the Banking Bureau on July 6, 2005 (Ref. No. Jin-Guan-Yin (4)0944000378). Note b：Nonperforming loans ratio = Nonperforming loan ÷ Loans Nonperforming loans of credit card ratio = Nonperforming loans of credit cards ÷ Accounts receivable Note c：Coverage ratio of allowances for loan losses = Allowances for loan losses ÷ Nonperforming loans Coverage ratio of allowance for loan losses of credit card = Allowance for loan losses of credit card ÷ Nonperforming loans of credit cards Note d：Mortgage loans are for borrowers to build or repair buildings, providing the borrowers, spouse or minor children to fully collaterize their buildings and install the right on mortgage to financial institutions. Note e：Credit loans are to fit in the Letter issued by the Banking Bureau on December 19, 2005 (Ref. No. Jin - Guan - Yi (4) 09440010950), excluding credit loans of credit cards and cash cards. Note f：The others of consumer financial business are defined as secured or unsecured consumer financial business, excluding mortgage loans, cash cards, credit loans and credit cards. Note g：In accordance with the Letter issued by the Banking Bureau on July 19, 2005 (Ref. No. Jin - Guan - Yin (5) 094000494) accounts receivable factoring with no recourse are defined as non-performing loans within three months from the date that factors or insurance companies ascertain not to compensate the loss. Note h：In accordance with the Letter issued on February 18, 2011 (Ref. No. Ji-Mi 46), the spot exchange rate on the balance sheet date should be used for foreign currency translation. The total loan amount and allowance for bad debt in U.S. dollars is translated by using the Central Bank’s closing spot exchange rate of NT$29.152 to US$1.00 at 15:30 on December 31, 2010.

2010 Annual Report 163 X. Notes To Financial Statements

December 31, 2010 December 31, 2009 Items Item Exempted from Exempted from Exempted from Exempted from Report as Non- Report as Non- Report as Non- Report as Non- performing performing Business Type performing Loans performing Loans Receivables Receivables Negotiated amount performed in accordance $ 6,944,337 $ 2,218,997 $ 8,913,397 $ 2,326,354 with the agreement (Note a) Loans executed in accordance with debt 2,262,556 1,356,840 2,246,863 1,039,724 clearing and renewal regulations (Note b) Total 9,206,893 3,575,837 11,160,260 3,366,078 Note a：Disclosed in accordance with the Letter issued by Banking Bureau on April 25, 2006 (Ref. No. Jin-Guan-Yin (1) 09510001270). Note b：Disclosed in accordance with the letter issued by the Banking Bureau on September 15, 2008 (Ref. No. Jin-Guan-Yin (1) 09700318940).

b.Concentration of credit risk

Year December 31, 2010 December 31, 2009 As As Propor- Rank Transaction Party Proportion Transaction Party Loans Loans (Note c) tion of Net (Note a) (Note b) of Net Equity (Note b) (Note c) Equity (%) (%) A Group (012641 liquid crystal K Corporation (014910 rail way 1 panel and components manu- $8,306,003 13.69% $ 9,708,129 18.17% transportation) facturing industry) B Group (014641 whole-sale A Group (012641 liquid crystal of computers and computer 2 7,195,589 11.86% panel and components manu- 8,391,213 15.70% peripheral equipment and facturing industry) software) C Group (012641 liquid crys- D Group (012711 computer 3 tal panel and components 6,928,369 11.42% 6,488,445 12.14% manufacturing industry) manufacturing industry) D Group (012712 monitors L Corporation (014644 whole 4 and terminals manufacturing 5,524,651 9.10% sale of office machinery and 5,749,798 10.76% industry) equipment) B Group (014641 whole sale E Group (012711 computer of computers and computer 5 4,196,167 6.91% 5,413,392 10.13% manufacturing industry) peripheral equipment and software) F Group (012641 liquid crystal M Corporation (021700 petro- 6 panel and components manu- 4,127,730 6.80% leum and coal product manu- 9.56% 5,108,439 facturing industry) facturing industry) G Group (015232 Ocean frei- C Group (012641 liquid crystal 7 ght transportation forwarding 3,902,886 6.43% panel and components manu- 9.46% 5,057,341 services) facturing industry) H Group (016499 other fi nan- H Group (016499 other fi nancial 8 cial intermediation not else- 3,610,172 5.95% intermediation not elsewhere 8.67% 4,633,647 where classifi ed) classifi ed) I Group (012613 semi-con- E Group (012641 liquid crystal 9 ductors packing and testing 3,583,027 5.90% panel and components manu- 8.62% 4,604,350 industry) facturing industry) J Group (011850 man-made G Group (015010 Ocean trans- 10 3,253,107 5.36% 4,136,484 7.74% fi bers manufacturing industry) portation) Note a：Sorted by the balance of loans on December 31, 2010 and 2009, excluding government or state-owned business. If the borrower belongs to the same business group, the aggregated credit amount of the business group is disclosed, and code and industry additionally disclosed. If the borrower is a business group, the industry with the largest risk exposures in the business group is disclosed. The industry disclosure should follow the guidelines of Directorate- General of Budget, Accounting and Statistics. Note b：Transaction party is in accordance with the article 6 of the Supplementary Provisions to the Taiwan Stock Exchange Corporation Criteria for Review of Securities Listings. Note c：Loans include import and export bill negotiations, bills discounted, overdraft, short-term loan, short-term secured loan, receivable financing, medium-term loan, medium-term secured loan, long-term loan, long-term secured loan, delinquent loans, inward remittances, factoring without recourse, acceptance, and guarantee.

164 2010 Annual Report c.Interest-earning assets and interest-bearing liabilities The average interest-earning assets, interest-bearing liabilities and average interest rates for the years ended December 31, 2010 and 2009 were as follows:

2010 Average Average Value Interest Rate % Assets Due from banks and call loans to banks $ 35,589,694 0.50 Financial assets at FVTPL 13,824,755 0.73 Bonds and securities purchased under resell agreements 1,021,451 0.44 Receivables 46,155,089 4.67 Loans 515,760,698 2.41 Available-for-sale fi nancial assets 144,631,169 0.94 Held-to-maturity fi nancial assets 4,303,545 2.96 Liabilities Due to banks and call loans from banks 55,186,130 0.94 Bonds and securities sold under repurchase agreements 14,777,889 0.36 Demand deposits 264,890,364 0.17 Time deposits 401,713,612 0.80 Other fi nancial liabilities 23,845,607 2.40

2009 Average Average Value Interest Rate % Assets Due from banks and call loans to banks $ 147,861,627 0.64 Financial assets at FVTPL 5,311,605 0.77 Bonds and securities purchased under resell agreements 149,775 (0.33) Receivables 35,397,894 6.24 Loans 501,008,036 2.68 Available-for-sale fi nancial assets 26,167,877 2.46 Held-to-maturity fi nancial assets 7,310,646 1.96 Liabilities Due to banks and call loans from banks 64,733,207 1.17 Bonds and securities sold under repurchase agreements 9,076,964 0.13 Demand deposits 213,967,267 0.16 Time deposits 421,574,363 1.35 Other fi nancial liabilities 26,707,240 2.97

2010 Annual Report 165 X. Notes To Financial Statements

d.Interest rate sensitivity

(In Thousands of New Taiwan Dollars)

December 31, 2010 Item 181 Days- More Than 1-90 Days 91-180 Days Total 1 Year 1 Year Interest-sensitive assets $ 526,221,728 $ 19,385,551 $ 16,365,261 $ 135,625,292 $ 697,597,832 Interest-sensitive liabilities 279,296,907 95,096,096 121,258,346 198,384,858 694,036,207 Interest sensitivity gap 246,924,821 (75,710,545) (104,893,085) (62,759,566) 3,561,625 Net equity 60,618,990 Ratio of interest-sensitive assets to liabilities 100.51% Ratio of interest sensitivity gap to net equity 5.88%

(In Thousands of New Taiwan Dollars) December 31, 2009 Item 181 Days- More Than 1-90 Days 91-180 Days Total 1 Year 1 Year Interest-sensitive assets $ 548,120,832 $ 13,818,359 $ 22,934,045 $ 119,682,335 $ 704,555,571 Interest-sensitive liabilities 492,904,925 65,774,275 96,508,549 49,547,156 704,734,905 Interest sensitivity gap 55,215,907 (51,955,916) (73,574,504) 70,135,179 (179,334) Net equity 52,159,311 Ratio of interest-sensitive assets to liabilities 99.97% Ratio of interest sensitivity gap to net equity (0.34%) Note a：The amounts listed above include amounts in N.T. dollars only (i.e., excluding foreign currency) for both head office and domestic branches.

Note b：Interest-sensitive assets and liabilities are interest-earning assets and interest-bearing liabilities with income or cost affected by interest rate fluctuations.

Note c：Interest sensitivity gap = Interest-sensitive assets – Interest – sensitive liabilities Interest-sensitive assets Note d：Ratio of interest-sensitive assets to interest-sensitive liabilities = (N.T. dollars only) Interest-sensitive liabilities

(In Thousands of U.S. Dollars) December 31, 2010 Item 181 Days- More Than 1-90 Days 91-180 Days Total 1 Year 1 Year Interest-sensitive assets $ 2,344,727 $ 631,153 $ 482,195 $ 1,585,462 $ 5,043,537 Interest-sensitive liabilities 2,669,341 2,684,371 248,514 544,467 6,146,693 Interest sensitivity gap (324,614) (2,053,218) 233,681 1,040,995 (1,103,156) Net equity 13,712 Ratio of interest-sensitive assets to liabilities 82.05% Ratio of interest sensitivity gap to net equity (8,045.19%)

December 31, 2009 Item 181 Days- More Than 1-90 Days 91-180 Days Total 1 Year 1 Year Interest-sensitive assets $ 2,748,860 $ 1,105,132 $ 532,912 $1,400,316 $ 5,787,220 Interest-sensitive liabilities 4,224,404 1,585,898 408,590 588,665 6,807,557 Interest sensitivity gap (1,475,544) (480,766) 124,322 811,651 (1,020,337) Net equity 33,177 Ratio of interest-sensitive assets to liabilities 85.01% Ratio of interest sensitivity gap to net equity (3,075.43%) Note a：The amounts listed above include amounts in U.S. dollars only for domestic branches, OBU, and overseas branches, excluding contingent assets and contingent liabilities.

Note b：Interest-sensitive assets and liabilities are interest-earning assets and interest-bearing liabilities with income or cost affected by interest rate fluctuations.

Note c：Interest sensitivity gap = Interest-sensitive assets - Interest-sensitive liabilities Interest-sensitive assets Note d：Ratio of interest-sensitive assets to interest-sensitive liabilities = (U.S. dollars only) Interest-sensitive liabilities

166 2010 Annual Report e.Profi tability December 31 Item 2010 2009 Pretax 1.23% 0.43% Return on total assets After tax 0.90% 0.11% Pretax 18.81% 7.61% Return on net equity After tax 13.80% 1.98% Profi t margin 32.60% 4.92% Income before (after) tax Note a：Return on total assets = Average assets Income before (after) tax Note b：Return on net equity = Average net equity Income after tax Note c：Profi t margin = Net revenue

Note d：Proﬁ tability presented above is cumulative from January 1 to December 31 of 2010 and 2009, respectively.

Note e：Income before tax includes income before extraordinary gain and pre-tax extraordinary gain. f. Maturity analysis of assets and liabilities (In Thousands of New Taiwan Dollars)

December 31, 2010 Period Remaining until Due Date and Amount Due Item Total 181 Days- More Than 1-30 Days 31-90 Days 91-180 Days 1 Year 1 Year Major maturity cash inﬂ ows $ 770,074,334 $ 237,483,195 $ 89,050,617 $ 26,826,242 $ 25,910,246 $ 390,804,034 Major maturity cash outﬂ ows 865,518,809 116,563,606 123,150,966 162,037,638 176,984,707 286,781,892 Gap (95,444,475) 120,919,589 (34,100,349) (135,211,396) (151,074,461) 104,022,142

December 31, 2009 Period Remaining until Due Date and Amount Due Item Total 181 Days- More Than 1-30 Days 31-90 Days 91-180 Days 1 Year 1 Year Major maturity cash inﬂ ows $ 772,755,894 $ 259,480,821 $ 87,119,165 $ 21,117,420 $ 31,702,299 $ 373,336,189 Major maturity cash outﬂ ows 841,663,797 154,392,511 180,045,169 139,105,901 182,919,680 185,200,536 Gap (68,907,903) 105,088,310 (92,926,004) (117,988,481) (151,217,381) 188,135,653 Note：The amounts listed above include accounts in N.T. dollars only (i.e., excluding foreign currency) for both head office and domestic branches.

(In Thousands of U.S. Dollars)

December 31, 2010 Period Remaining until Due Date and Amount Due Item Total 181 Days- More Than 1-30 Days 31-90 Days 91-180 Days 1 Year 1 Year Major maturity cash inﬂ ows $ 9,599,997 $ 4,346,156 $1,569,387 $907,250 $796,198 $1,981,006 Major maturity cash outﬂ ows 9,596,624 3,046,733 1,060,168 2,891,581 551,292 2,046,850 Gap 3,373 1,299,423 509,219 (1,984,331) 244,906 (65,844)

December 31, 2009 Period Remaining until Due Date and Amount Due Item Total 181 Days- More Than 1-30 Days 31-90 Days 91-180 Days 1 Year 1 Year Major maturity cash inﬂ ows $ 8,650,393 $ 3,366,353 $ 1,866,139 $ 1,354,307 $ 594,792 $ 1,468,802 Major maturity cash outﬂ ows 8,612,503 3,288,148 1,855,028 1,776,194 472,697 1,220,436 Gap 37,890 78,205 11,111 (421,887) 122,095 248,366 Note：The amounts listed above include accounts in U.S. dollars for head office, domestic branches, and OBU.

2010 Annual Report 167 X. Notes To Financial Statements

g. Capital adequacy

Year Consolidated Taishin Bank Item December 31, 2010 December 31, 2010 December 31, 2009 Tier I capital $ 57,749,072 $ 56,696,260 $ 50,312,782

Self-owned Tier II capital 26,682,592 26,043,686 23,305,936 capital Tier III capital - - - Self-owned capital 84,431,664 82,739,946 73,618,718 Standardized approach 553,500,571 551,856,662 508,983,721 Credit risk IRB - - - Securitization 1,514,031 1,514,031 620,353 Basic indicator approach - - - Risk-weighted Standardized approach/ Operation 34,888,200 34,888,200 38,272,075 assets optional standard risk Advanced internal-rating based - - - approach

Market Standardized approach 20,881,588 20,863,325 20,416,863 price risk Internal model approach - - - Total 610,784,390 609,122,218 568,293,012 Capital Adequacy ratio 13.82% 13.58% 12.95% Tier I capital to risk-weighted assets ratio 9.45% 9.31% 8.85% Tier II capital to risk-weighted assets ratio 4.37% 4.27% 4.10% Tier III capital to risk-weighted assets ratio - - - Common stock equity to total assets ratio 5.19% 5.19% 5.68% Leverage ratio 6.64% 6.53% 5.97% Note 1：The ratios are calculated in accordance with the Letters issued by the MOF on June 30, 2009 and January 4, 2007 (Ref. No. Jin-Guan-Yin 0981003110 and 09610000025). Note 2：Formula: a.Self-owned capital = Tier I capital + Tier II capital + Tier III capital b.Risk-weighted assets = Credit risk-weighted assets + (Operation risk capital + Market price risk capital) x 12.5 c.Capital Adequacy = Self-owned capital/Risk-weighted assets d.Tier I capital to risk-weighted assets ratio = Tier I capital/Risk-weighted assets e.Tier II capital to risk-weighted assets ratio = Tier II capital/Risk-weighted assets f.Tier III capital to risk-weighted assets ratio = Tier III capital/Risk-weighted assets g.Common stock equity to total assets ratio = Common stock equity/Total assets h.Leverage ratio = Tier I capital/Adjusted average assets

h. Trust accounts Under Article 3 of the Trust Law, Taishin Bank can offer trust services. The items and amounts of trust accounts as of December 31, 2010 and 2009 are as follows: 2010 2009 Special purpose trust accounts - foreign and domestic investments $ 137,737,804 $ 141,707,813 Special purpose monetary fund - master 7,013,808 7,119,886 Special purpose monetary fund - stand-alone 153,508 210,510 Special purpose cover fund - stand-alone 12,975,945 4,487,288 Speciﬁ c monetary fund - stand-alone 2,584,508 2,624,296 Speciﬁ c cover fund - stand-alone 27,467,453 36,143,393 Real estate securitization 4,749,333 4,355,232 Real estate trust 1,160,044 496,369 Monetary mutual trust fund 750,060 1,041,438 Securities under custody 28,035,267 28,081,132

$ 222,627,730 $ 226,267,357

168 2010 Annual Report i. Signiﬁ cant foreign-currency denominated ﬁ nancial assets and liabilities are summarized as follows: (In Foreign Currency/In Thousands of New Taiwan Dollars) 2010 2009 Foreign Exchange New Taiwan Foreign Exchange New Taiwan Currencies Rate Dollars Currencies Rate Dollars Financial assets Monetary items AUD $ 39,025 30.94 $ 1,207,519 $ 13,793 28.82 $ 397,484 EUR 262,762 40.58 10,662,265 39,381 46.18 1,818,437 GBP 81,466 47.05 3,833,014 6,304 51.70 325,887 HKD 696,186 3.91 2,719,723 677,166 4.13 2,796,803 JPY 15,962,397 0.37 5,959,497 17,564,070 0.35 6,105,675 USD 3,695,818 29.15 107,740,479 3,169,360 32.03 101,514,603 Nonmonetary items AUD 250,847 30.94 7,761,702 263,704 28.82 7,599,253 EUR 204,690 40.58 8,305,842 78,352 46.18 3,617,996 HKD 395,523 3.91 1,545,151 473,160 4.13 1,954,226 JPY 10,856,170 0.37 4,053,107 12,168,571 0.35 4,230,075 NZD 47,802 23.51 1,123,862 62,322 23.28 1,450,730 USD 1,916,467 29.15 55,868,837 3,879,291 32.03 124,253,677 ZAR 634,923 4.58 2,905,283 1,029,514 4.35 4,474,870 Financial liabilities Monetary items AUD 173,622 30.94 5,372,215 274,416 28.82 7,907,951 EUR 291,814 40.58 11,841,166 132,313 46.18 6,109,692 GBP 23,618 47.05 1,111,248 14,416 51.69 745,208 HKD 1,122,053 3.91 4,383,419 1,129,874 4.13 4,666,560 JPY 4,995,046 0.37 1,864,880 10,714,438 0.35 3,724,585 NZD 48,500 23.51 1,140,277 64,315 23.28 1,497,107 USD 5,051,007 29.15 147,246,964 3,887,332 32.03 124,511,257 ZAR 633,806 4.58 2,900,171 879,554 4.35 3,823,058 Nonmonetary items AUD 121,738 30.94 3,766,820 1,290 28.81 37,167 EUR 164,983 40.58 6,694,619 2,182 46.18 100,773 GBP 58,764 47.05 2,764,884 4,088 51.69 211,307 JPY 24,376,551 0.37 9,100,888 21,311,812 0.35 7,408,476 USD 518,712 29.15 15,121,502 3,081,390 32.03 98,696,922

2010 Annual Report 169 X. Notes To Financial Statements

35. DISCLOSURES UNDER STATUTORY REQUIREMENTS

a. Under Article 16 of the Regulations Governing the Preparation of Financial Reports by Public Banks, material transactions are summarized as follows:

No. Item Explanation

Marketable securities acquired or disposed of at costs or prices at least NT$300 million or 10% of the paid-in 1 None capital

2 Acquisition of real estate at cost of at least NT$300 million or 10% of the paid-in capital None

3 Disposal of real estate at cost of at least NT$300 million or 10% of the paid-in capital None

4 Discount on service fee for related parties of at least NT$5 million None

5 Receivables from related parties amounting to at least NT$300 million or 10% of the paid-in capital None

6 Sale of NPL None

Securitized instruments and related assets which are in accordance with the Statute for Financial Assets 7 Note 8 Securitization and the Statute for Real Estate Securitization

8 Other transactions which may have signiﬁ cant impact on the decisions made by the ﬁ nancial statement users None

b. Information on Taishin Bank’s Investees

No. Item Explanation

1 Names, locations, and related information of investees Table 1

2 Financings provided None

3 Endorsements/guarantees provided None

Table 2 4 Marketable securities held as of December 31, 2010 (Note)

5 Derivative transactions of investees None

Marketable securities acquired or disposed of at costs or prices at least NT$300 million or 10% of the paid-in 6 Table 3 capital by subsidiaries

7 Acquisition of real estate at cost at least NT$300 million or 10% of the paid-in capital None

8 Disposal of real estate at cost at least NT$300 million or 10% of the paid-in capital None

9 Discount on service fee for related parties at least NT$5 million None

10 Receivables from related parties at least NT$300 million or 10% of the paid-in capital None

11 Sale of NPL by subsidiaries None

Securitized instruments and related assets which are in accordance with the Statute for Financial Assets 12 None Securitization and the Statute for Real Estate Securitization

13 Other transactions which may have signiﬁ cant impact on the decisions made by the ﬁ nancial statement users None

Note:It’s not required to disclose if the investee is a bank, insurance or security company.

c. Information on the investment in Mainland China: None.

170 2010 Annual Report 36. SEGMENT INFORMATION

a. Industry segment

Taishin Bank only operates business in accordance with Article 3 of the Banking Act of the Republic of China. Therefore, Taishin Bank does not have industry segments for disclosure.

b.Geographical segments

The operating income of Taishin Bank’s overseas departments is not over 10% of consolidated operating income. In addition, their assets are not over 10% of total assets either. Thus, no ﬁ nancial information on geographical segments is disclosed.

c.Foreign sales

The revenue from foreign sales done by the domestic departments of Taishin Bank to individuals is not over 10% of total revenue on income statement.

d. Major customers

No customer contributed revenue of at least 10% of total revenue.

2010 Annual Report 171 X. Notes To Financial Statements

TAISHIN INTERNATIONAL BANK CO., LTD. INFORMATION OF INVESTEES’ NAMES, LOCATIONS, ETC.

YEAR ENDED DECEMBER 31, 2010 (In Thousands, Except for Percentages and Shares)

Uniﬁ ed Investees’ Names Business Investees’ Location Principal Business Activities No.

Financial business

Leasing and retailing of machinery, mobile, Dah An Leasing 16094812 2F1.-2, No. 9, Dehuei St., Taipei, Taiwan aircraft, marine and components

3F1., No. 236 and No. 238, Jianguo N. Taishin Insurance Agency 97125786 Life insurance agency Rd., Sec. 2, Taipei, Taiwan

Investment and enterprise operating 13Fl., No. 11, Jungshan N. Rd., Sec. 1, consultant, information software and PayEasy Digital 70553216 Taipei, Taiwan data processing, advertising, international trade, agency and network services

No. 38, Tsu Yu Rd., Sec. 2, Taichung, Commercial bank business, trust, and Chang Hwa Bank 51811609 Taiwan offshore banking

Nonﬁ nancial business

2Fl., No. 9 Dehuei St., Sec. 2, Taipei, Audit and consulting of construction plan, Taishin Real-Estate 89597170 Taiwan contract witness

9F1., No. 100, Sinyi Rd., Sec. 5, Taipei, Construction consultation, real estate ap- An Hsin Real-Estate 89458276 Taiwan praisement

Financial business

11F1., No. 116, Nanjing E. Rd., Sec. 2, Dah Chung Bills 89391748 Bills and ﬁ nance Taipei, Taiwan

13Fl., No. 200, Chung Shiao E. Rd., Sec. Paciﬁ c Security Co., Ltd. 22957533 Security and futures 4, Taipei, Taiwan

Taipei Foreign Exchange 8Fl., No. 400, Bade Rd., Sec. 2, Taipei, 84703601 Exchange trading, DEPOS, and swap Co., Ltd. Taiwan

6Fl., No. 99, Ren Ai Rd., Sec. 2, Taipei, Auction assets of the recognition of an Taiwan Financial Asset Service Co., Ltd. 70820924 Taiwan impartial third party

Taiwan Asset Management 11Fl. and 12Fl., No. 85 and No. 87, Nan- Acquisition of delinquent loans, evaluation, 70808864 Co., Ltd. jing E. Rd., Sec. 2, Taipei, Taiwan auction, and management

13Fl., No. 102, and 14Fl., No. 100, Lu- Taiwan Futures Exchange 16092130 Futures exchange and clearing mechanism ossu Fu. Rd., Sec. 2, Taipei, Taiwan

No. 81, Kang Ning Rd., Sec. 3, Taipei, Financial Information Service Co., Ltd. 16744111 Type II telecommunications business Taiwan

11Fl., No. 85 and No. 87, Nanjing E. Rd., Acquisition of delinquent loans, evaluation, Sunlight Asset Management Co., Ltd. 28008025 Sec. 2, Taipei, Taiwan auction, and management

MasterCard Incorporated

VISA Inc.

172 2010 Annual Report TABLE 1

Recognized Sum of Ownership Ownership Investment Interest (%) Investment Total Income (Loss) Note at Ending Book Value Current Imputed of Current Ownership Balance Shares Shares (Note) Shares Period Interest (%) Investments under equity method 99.00% $ 202,776 $ 2,407 19,800,000 - 19,800,000 99.00%

87.40% 747,036 396,208 262,204 - 262,204 87.40%

65.36% 348,309 3,480 28,400,001 -28,400,001 65.36%

0.27% 321,358 21,053 16,500,000 - 1,416,501,500 22.81%

60.00% 182,466 12,315 12,000,000 - 20,000,000 100.00%

30.00% 59,340 18,178 3,300,000 - 3,300,000 30.00%

Financial assets carried at cost 18.29% 913,641 - 79,182,224 - 81,444,480 18.81%

2.77% 112,030 - 11,537,469 - 12,463,837 2.99%

0.81% 1,600 -160,000 -860,000 4.34%

2.94% 50,000 -5,000,000 -10,000,000 5.88%

0.57% 100,000 -10,000,000 -210,000,000 11.92%

0.96% 19,250 -2,572,269 -5,645,629 2.11%

2.28% 91,000 -9,100,000 -13,734,000 3.43%

18.21% 10,923 -1,092,317 -1,134,085 18.90%

0.01% 10,345 -10,316 -13,517 0.01%

0.07% 777,033 -584,124 -609,144 0.07%

2010 Annual Report 173 X. Notes To Financial Statements

Uniﬁ ed Investees’ Names Business Investees’ Location Principal Business Activities No.

Nonﬁ nancial business

8Fl., No. 70, Nanjing E. Rd., Sec. 3, Universal Venture Fund Co., Ltd. 16446106 Investment start-up Taipei, Taiwan

15Fl., No. 109, Ren Ai Rd., Sec. 4, Taipei, Da Chiang International Co., Ltd. 97430717 Import and export trading Taiwan

6Fl., No. 236 Tun-Hua N. Rd., Taipei, IC card development & advance advertising EasyCard Investment Holdings Co., Ltd. 28988941 Taiwan service

16Fl., No. 277 Sung Ren Rd., Taipei, Asia Paciﬁ c Telecom Co., Ltd. 70771579 Type I & II telecommunications business Taiwan

10Fl., No. 76, Tun Hua S. Rd., Sec. 2, T.K Venture Capital Co., Ltd. 70789542 Investment start-up Taipei, Taiwan

Kaohsiung Rapid Transit Corp. 70798839 No. 1, Chung An. Rd., Kaohsiung, Taiwan Mass rapid transit operating

5Fl., No. 143 Min Sheng E. Rd., Sec. 2, Apex Venture Capital Co., Ltd. 97176200 Investment start-up Taipei, Taiwan

11Fl., No. 132 Min Sheng E. Rd., Sec. 3, Concord III Venture Capital Co., Ltd. 16084482 Investment start-up Taipei, Taiwan

11Fl., No. 132, Min Sheng E. Rd., Sec. 3, Concord VII Venture Capital Co., Ltd. 70767435 Investment start-up Taipei, Taiwan

11Fl., No. 132, Min Sheng E. Rd., Sec. 3, Concord IV Venture Capital Co., Ltd. 16442880 Investment start-up Taipei, Taiwan

4Fl., No. 9, Dehuei. St., Sec. 2, Taipei, United Venture Capital Co., Ltd. 70780113 Investment start-up Taiwan

5F1., No. 126, Jianguo N. Rd., Sec. 1, Lien An Co., Ltd. 97290477 Industrial and commercial services Taipei, Taiwan

Harbinger Venture Capital Investment 7F1., No. 187, Ti Titing Ta. Rd., Sec. 2, 70777004 Investment start-up Co., Ltd. Taipei, Taiwan

Note : Imputed shares are considered if equity securities such as convertible bond, warrant, etc., or derivative contract such as stock options, are converted to shares.

174 2010 Annual Report TABLE 1

1.49% $ 3,150 $ - 314,991 - 314,991 1.49%

4.31% -8,620,690 - 8,620,690 4.31% 70,625

2.40% 16,000 -1,872,000 -1,872,000 2.40%

0.46% -15,000,000 - 30,000,000 0.91% 15,000

3.33% -5,000,000 -5,000,000 3.33% 50,000

0.50% -5,000,000 -5,000,000 0.50% 50,000

4.67% -2,196,262 -2,196,262 4.67% 5,638 Financial assets carried at cost 4.46% -482,112 -482,112 4.46% 4,821

4.73% -2,905,000 -2,905,000 4.73% 29,050

5.00% -2,234,400 -2,793,000 6.25% 22,342

4.52% -1,920,000 -1,920,000 4.52% 19,200

5.00% 1,250 -125,000 -250,000 10.00%

3.35% 55,275 -5,527,500 -5,527,500 3.35%

Note : Imputed shares are considered if equity securities such as convertible bond, warrant, etc., or derivative contract such as stock options, are converted to shares.

2010 Annual Report 175 X. Notes To Financial Statements

TAISHIN INTERNATIONAL BANK CO., LTD. MARKETABLE SECURITIES HELD BY SUBSIDIARIES

DECEMBER 31, 2010 (In Thousands, Except for Percentage and Shares)

Owner Type and Issuer/Name of Marketable Security Issuer’s Relationship to the Owner

Taishin Insurance Stock Agency Taishin Insurance Brokers Parent and subsidiary Chi-Long Technology Co., Ltd. None

Taishin Insurance Funds Brokers Taishin Money Market Mutual Fund None

PayEasy Digital Stock PayEasy Travel Agency Co., Ltd. Parent and subsidiary Contect Digital Integration Co., Ltd. 〃

Dah An Leasing Stock Paciﬁ c Security Co., Ltd. None Yuan Tai Foreign Exchange Co., Ltd. 〃 Bon-Li International Tech Co., Ltd. 〃

Funds Shin Kong Chi-Shin Fund None

Taishin Real-Estate Stock Metro Consulting Service The supervisors of the corporation

Funds Taishin Selected China Small and Mid Cap Fund Issued by Taishin Investment Trust IBT 1699 Bond Fund 〃 IBT Ta Chong Bond Fund 〃 Hwa Nan Investment Grade Fund of Bond Funds None

176 2010 Annual Report TABLE 2 December 31, 2010 Accounts Recorded Note Shares (Units) Carrying Value Ownership Interest (%) Market Value

Investment under equity method 6,000,000.00 $ 88,850 100.00 $ 88,850 Financial assets carried at cost 950,000.00 4,275 4.13 4,275

Available for sale ﬁ nancial assets - noncurrent 4,992,660.80 50,226 - 50,226

Investment under equity method 1,300,000.00 15,107 100.00 15,107 〃 480,000.00 (8,387) 65.75 (8,387)

Financial assets carried at cost 926,368.00 6,374 0.22 5,321 〃 600,000.00 6,000 5.00 9,407 〃 125,000.00 - 1.50 -

Financial assets at FVTPL - current 1,114,173.02 16,556 - 16,556

Financial assets carried at cost 300,000.00 3,000 6.00 3,000

Financial assets at FVTPL 1,000,000.00 10,690 - 10,690 〃 389,292.89 5,039 - 5,039 〃 77,882.20 1,059 - 1,059 〃 150,000.00 1,478 - 1,478

2010 Annual Report 177 X. Notes To Financial Statements

TAISHIN INTERNATIONAL BANK CO., LTD. ACCUMULATED PURCHASES AND SALES OF SPECIFIC MARKETABLE SECURITIES OVER NT$300 MILLION OR 10% OF OUTSTANDING CAPITAL

YEAR ENDED DECEMBER 31, 2010 (In Thousands Except for Percentages and Shares)

Beginning of the Period Issuer’s Type and Name Account Transaction Relationship Buyer or Seller of Marketable Recorded Party to the Buyer or Security Shares Seller Amount (Units)

Taishin Real- Fund Estate

FSITC Taiwan Financial assets - - 684,926.80 $ 10,000 Bond Fund at FVTPL

178 2010 Annual Report TABLE 3

Purchases Sales End of the Period

Shares Shares Selling Carrying Disposal Shares Amount Amount (Units) (Units) Price Value Gain (Loss) (Units)

1,848,618.70 $ 27,000 2,533,545.50 $ 37,025 $ 37,000 $ 25 -$ -

2010 Annual Report 179